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Kuli Teaupa, An Individual, Salote Teaupa, An Individual v. U.S. National Bank N.A.

December 22, 2011


The opinion of the court was delivered by: J. Michael Seabright United States District Judge



On January 5, 2011, Plaintiffs Kuli Teaupa and Salote Teaupa ("Plaintiffs"), proceeding pro se, filed a Second Amended Complaint ("SAC") against Defendants "U.S. National Bank N.A." (which has appeared as "U.S. Bank, N.A., as Trustee for the Structured Asset Securities Corporation Mortgage Pass Through Certificates, Series 2006-BC5," and which the court will refer to as "U.S. Bank"); BNC Mortgage, Inc. ("BNC"); Infinity Mortgage Company ("Infinity"); and Mortgage Electronic Registration Systems ("MERS") (collectively, "Defendants"). The SAC alleges federal and state law claims stemming from an August 7, 2006 mortgage transaction concerning real property located at 74-5045 Huaala Street, Kailua-Kona, Hawaii (the "subject property"). It seeks declaratory and injunctive relief, as well as damages and rescission of the mortgage transaction.

U.S. Bank seeks dismissal of the SAC. No other party has appeared in the action. For the reasons set forth below, the court GRANTS the Motion. Given obvious deficiencies as to all Defendants, certain claims are dismissed as to all Defendants.*fn1


A. Factual Background

The court assumes the SAC's factual allegations are true for purposes of this Motion. See, e.g., Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir. 2003).

According to the SAC, on August 7, 2006, Plaintiffs entered into a loan repayment and security agreement with Infinity for $498,750. See Doc. No. 7, SAC ¶ 2. Plaintiffs' claims stem from the consummation of this transaction.

Plaintiffs assert, among other allegations, that (1) Infinity qualified Plaintiffs for a loan which it knew Plaintiffs were not qualified for and could not repay, and that Plaintiffs "should have been declined for this loan," id. ¶¶ 22, 28, 35; (2) Infinity failed to "adequately underwrite this loan," failed to verify that Plaintiffs could repay the loan, and "placed the Plaintiff[s] into a loan that had a significantly higher interest rate than what was qualified for," id. ¶¶ 24, 26, 28; (3) the terms of the transaction were not clear and Defendants never explained the transaction to them, id. ¶ 30; (4) the loan was more expensive than alternative financing arrangements for which Plaintiffs could have qualified, id. ¶ 22; and (5) Defendants charged excessive or illegal fees. Id. ¶ 32.

Plaintiffs assert that Defendants failed to provide forms and disclosures required under the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq.; the Equal Opportunity Credit Act; the "Fair Lending/Fair Debt Collection Act"; and the Real Estate Settlement Practices Act ("RESPA"), 12 U.S.C. § 2601 et seq. Id. ¶¶ 12, 14. Defendants allegedly "intentionally concealed the negative implications of the loan they were offering," id. ¶ 19, and "failed to perform their due diligence in investigat[ing] the legal requirements that this loan should have been processed within." Id. ¶ 21. The misconduct was such that Plaintiffs were sold "a deceptive loan product" and the acts of deception created an "illegal loan." Id. ¶¶ 27, 28. Defendants' acts allegedly were in violation of federal and state law, including bad faith, breach of fiduciary duty, and unfair and deceptive trade practices.

Although unclear, it appears the Note and Mortgage for the subject property were assigned by Infinity to BNC. Thereafter, according to an Assignment of Mortgage recorded on August 31, 2007, MERS, "solely as nominee for BNC," assigned the Mortgage to U.S. Bank on August 23, 2007. See Doc. No. 19-4, U.S. Bank Mot. Ex. B.*fn2 U.S. Bank then instituted judicial foreclosure proceedings against Plaintiffs on January 25, 2010 in the Circuit Court of the Third Circuit, State of Hawaii, and obtained a Foreclosure Judgment on November 16, 2010. See Doc. Nos. 19-5 & 19-6, U.S. Bank Mot. Exs. C & D. The property was purchased at auction by U.S. Bank on January 18, 2011. See Doc. No. 19-7, U.S. Bank Mot. Ex. E. It is unclear whether the sale has been confirmed in the state court, as Plaintiffs filed a Notice of Pendency of Action on January 5, 2011 in the current action. See Doc. No. 8.

B. Procedural Background

Plaintiffs filed suit on December 9, 2010. Doc. No. 1. The court dismissed the Complaint on December 10, 2010, with leave given to file an Amended Complaint. Doc. No. 4. An Amended Complaint was filed on December 22, 2010, which the court dismissed on December 27, 2010. Doc. No. 6. On January 5, 2011, Plaintiffs filed the SAC, which alleges twelve separate counts, entitled: (1) Declaratory Relief; (2) Injunctive Relief; (3) Contractual Breach of Implied Covenant of Good Faith and Fair Dealing; (4) Violations of TILA; (5) Violations of RESPA; (6) Rescission; (7) Unfair and Deceptive Acts and Practices (UDAP); (8) Breach of Fiduciary Duty; (9) "Unconscionability -- UCC-2-3202"; (10) Predatory Lending; (11) Quiet Title; and (12) "Lack of Standing; Improper Fictitious Entity." Doc. No. 7. U.S. Bank filed an Answer on February 16, 2011. Doc. No. 9.

On September 27, 2011, U.S. Bank filed its Motion for Judgment on the Pleadings, Doc. No. 19, seeking dismissal of all counts. The Motion was originally set for hearing on December 12, 2011, and Plaintiffs were specifically notified that an Opposition was due by November 21, 2011. Doc. No. 21. Plaintiffs did not file an Opposition. On December 2, 2011, however, Plaintiffs filed a one-sentence document entitled "Motion and/or Request to Extend Settlement Confrence (sic) and to Amend Complain (sic)," stating that they requested an "extension (sic) [d]ue to family emergency which will take us out of the country" from December 5, 2011 to January 9, 2012. Doc. No. 23. The Motions are appropriate for decision without a hearing under Local Rule 7.2(d).


A. Rule 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a claim for "failure to state a claim upon which relief can be granted[.]"

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, ---- , 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep't of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as true all of the allegations contained in the complaint -- "is inapplicable to legal conclusions." Iqbal, 129 S. Ct. at 1949. Accordingly, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 555). Rather, "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 556). Factual allegations that only permit the court to infer "the mere possibility of misconduct" do not show that the pleader is entitled to relief. Id. at 1950.

The court liberally construes pro se pleadings. See Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987). "Unless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the complaint's deficiencies and an opportunity to amend prior to dismissal of the action." Lucas v. Dep't of Corr., 66 F.3d 245, 248 (9th Cir. 1995).

The court may dismiss a complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on its own motion. See Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987) ("A trial court may dismiss a claim sua sponte under [Rule] 12(b)(6). Such a dismissal may be made without notice where the claimant cannot possibly win relief."); Ricotta v. California, 4 F. Supp. 2d 961, 968 n.7 (S.D. Cal. 1998) ("The Court can dismiss a claim sua sponte for a Defendant who has not filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6)."); see also Baker v. Dir., U.S. Parole Comm'n, 916 F.2d 725, 727 (D.C. Cir. 1990) (holding that a district court may dismiss cases sua sponte pursuant to Rule 12(b)(6) without notice where plaintiff could not prevail on complaint as alleged).

B. Federal Rule of Civil Procedure 9(b)

Federal Rule of Civil Procedure 9(b) requires that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." "Rule 9(b) requires particularized allegations of the circumstances constituting fraud." In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547-48 (9th Cir. 1994) (en banc) (emphasis in original), superseded on other grounds by 15 U.S.C. § 78u-4.

In their pleadings, Plaintiffs must include the time, place, and nature of the alleged fraud; "mere conclusory allegations of fraud are insufficient" to satisfy this requirement. Id. (citation and quotation signals omitted). Where there are multiple defendants, Plaintiffs cannot "lump multiple defendants together" and instead must "differentiate their allegations [between defendants]." Destfino v. Kennedy, 630 F.3d 952, 958 (9th Cir. 2011) (citation omitted). However, "[m]alice, intent, knowledge, and other condition of mind of a person may be averred generally." Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec. Litig, 42 F.3d at 1547 ("We conclude that plaintiffs may aver scienter . . . simply by saying that scienter existed."); Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir. 1973) (Rule 9(b) "only requires the identification of the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations." (citations omitted)).

A motion to dismiss for failure to plead with particularity is the functional equivalent of a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). In considering a motion to dismiss, the court is not deciding the issue of "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800 (1982).


Most, if not all, of the arguments raised by U.S. Bank were addressed in several of this court's recent Orders regarding similar complaints.*fn3 See, e.g., Ramos v. Chase Home Finance, --- F. Supp. 2d ----, 2011 WL 3793346 (D. Haw. Aug. 25, 2011); Hoilien v. Bank of Am., 2011 WL 2518731 (D. Haw. June 23, 2011); Kelly v. Bank of Am., 2011 WL 2493048 (D. Haw. June 22, 2011); Hoilien v. Bank of Am., 2011 WL 976699 (D. Haw. Mar. 17, 2011); and Marzan v. Bank of Am., 779 F. Supp. 2d 1140 (D. Haw. 2011). The court draws extensively from these earlier Orders.*fn4

A. Individual Counts of the SAC*fn5

1. Counts I and II -- Declaratory and Injunctive Relief

U.S. Bank argues, among other things, that Count I (Declaratory Relief) and Count II (Injunctive Relief) fail to state claims upon which relief can be granted because the claims are remedies, not independent causes of action. The court agrees that these Counts fail to state a claim.

The court follows the well-settled rule that a claim for "injunctive relief" standing alone is not a cause of action. See, e.g., Jensen v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1201 (E.D. Cal. 2010) ("A request for injunctive relief by itself does not state a cause of action."); Henke v. Arco Midcon, L.L.C., 750 F. Supp. 2d 1052, 1059-60 (E.D. Mo. 2010) ("Injunctive relief, however, is a remedy, not an independent cause of action."); Plan Pros, Inc. v. Zych, 2009 WL 928867, at *2 (D. Neb. Mar. 31, 2009) (stating that "no independent cause of action for injunction exists"); Motley v. Homecomings Fin., LLC, 557 F. Supp. 2d 1005, 1014 (D. Minn. 2008) (same). Injunctive relief may be available if Plaintiffs are entitled to such a remedy on an independent cause of action.

As for declaratory relief, Count I is apparently seeking relief under the Declaratory Judgment Act, 28 U.S.C. § 2201.*fn6 Count I alleges that "[a]n actual controversy has arisen and now exists between Plaintiffs and Defendants regarding their respective rights and duties, in that Plaintiffs contend[] that Defendants did not have the right to foreclose on the Subject Property[.]" Doc. No. 7, SAC ¶ 44. Plaintiffs ask the court to declare that "the purported power of sale contained in the Loan [is] of no force and effect at this time" because of "numerous violations of State and Federal laws designed to protect borrowers[.]" Id. ¶ 45. "As a result of Defendants' actions, Plaintiffs have suffered damages . . . and seek[] declaratory relief that Defendants' purported power of sale is void[.]" Id. ¶ 46.

Given these allegations, Plaintiffs' declaratory relief claim is not cognizable as an independent cause of action under the Declaratory Relief Act. See Seattle Audubon Soc. v. Moseley, 80 F.3d 1401, 1405 (9th Cir. 1996) ("A declaratory judgment offers a means by which rights and obligations may be adjudicated in cases brought by any interested party involving an actual controversy that has not reached a stage at which either party may seek a coercive remedy and in cases where a party who could sue for coercive relief has not yet done so." (citation and quotation signals omitted)). That is, because Plaintiffs' claims are based on allegations regarding Defendants' past wrongs, a claim under the Declaratory Relief Act is improper and in essence duplicates Plaintiffs' other causes of action. See, e.g., Ballard v. Chase Bank USA, NA, 2010 WL 5114952, at *8 (S.D. Cal. Dec. 9, 2010) ("A claim for declaratory relief 'rises or falls with [the] other claims.'") (citation omitted); Mangindin v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 707 (N.D. Cal. 2009) ("A claim for declaratory relief is unnecessary where an adequate remedy exists under some other cause of action."); Ruiz v. Mortg. Elec. Registration Sys., Inc., 2009 WL 2390824, at *6 (E.D. Cal. Aug. 3, 2009) (dismissing claim for declaratory judgment where foreclosure already occurred such that the plaintiff was seeking "to redress past wrongs"); Edejer v. DHI Mortg. Co., 2009 WL 1684714, at *11 (N.D. Cal. June 12, 2009) ("Plaintiff's declaratory relief cause of action fails because she seeks to redress past wrongs rather than a declaration as to future rights.").

Accordingly, the court DISMISSES Counts I and II without leave to amend. If Plaintiffs could prevail on an independent claim, the court would necessarily render a judgment setting forth (i.e., "declaring") as such and providing appropriate remedies. Similarly, if injunctive relief is proper, it will be because Plaintiffs prevail -- or have met the necessary test for such relief under Rule 65 of the Federal Rules of Civil Procedure -- on an independent cause of action. This dismissal is as to all Defendants because Plaintiffs cannot prevail on these Counts as to any Defendant.

2. Count III -- Covenant of Good Faith and Fair Dealing

Count III is entitled "Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing." Plaintiffs allege that every contract imposes a duty of good faith and fair dealing "in its performance and its enforcement," Doc. No. 7, SAC ¶ 53, and that Defendants "willfully breached their implied duty of good faith and fair dealing" by engaging in the acts alleged in the SAC (such as withholding disclosures or information, and "willfully plac[ing] Plaintiffs in a loan that [they] did not qualify for"). Id. ¶ 56.

This claim asserts the tort of "bad faith." See Best Place v. Penn Am. Ins. Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996) (adopting tort of bad faith for breach of implied covenant of good faith and fair dealing in an insurance contract). But, although bad faith is an accepted tort where the plaintiff is a party to an insurance contract, the tort has not been recognized in Hawaii based upon a mortgage loan contract. See Jou v. Nat'l Interstate Ins. Co. of Haw., 114 Haw. 122, 129, 157 P.3d 561, 568 (Haw. App. 2007) (explaining that "the Hawaii Supreme Court emphasized that the tort of bad faith, as adopted in [Best Place v. Penn Am. Ins. Co., 82 Haw. 120, 128, 920 P.2d 334, 342 (1996),] requires a contractual relationship between an insurer and an insured" (citations omitted)).

Moreover, although commercial contracts for "sale of goods" also contain an obligation of good faith in their performance and enforcement, this obligation does not create an independent cause of action. See Stoebner Motors, Inc. v. Automobili Lamborghini S.P.A., 459 F. Supp. 2d 1028, 1037-38 (D. Haw. 2006). And Hawaii courts have noted that "[o]ther jurisdictions recognizing the tort of bad faith . . . limit such claims to the insurance context or situations involving special relationships characterized by elements of fiduciary responsibility, public interest, and adhesion." Id. at 1037 (quoting Francis v. Lee Enters., 89 Haw. 234, 238, 971 P.2d 707, 711 (1999)).

Importantly, even assuming a bad faith tort exists outside the insurance context, it is well-settled that "[a] party cannot breach the covenant of good faith and fair dealing before a contract is formed." Contreras v. Master Fin., Inc., 2011 WL 32513, at *3 (D. Nev. Jan. 4, 2011) (citing Indep. Order of Foresters v. Donald, Lufkin & Jenrette, Inc., 157 F.3d 933, 941 (2d Cir. 1998) ("[A]n implied covenant relates only to the performance of obligations under an extant contract, and not to any pre-contract conduct.")). Hawaii follows this distinction. See Young v. Allstate Ins. Co., 119 Haw. 403, ...

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