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Laurie Ann Bass v. Ameriquest Mortgage Company; Amc Mortgage Services

December 27, 2011

LAURIE ANN BASS,
PLAINTIFF,
v.
AMERIQUEST MORTGAGE COMPANY; AMC MORTGAGE SERVICES, INC.;
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR ARGENT SECURITIES INC., ASSET-BACK PASSTHROUGH CERTIFICATES, SERIES 2006-M1, UNDER THE POOLING AND SERVICING AGREEMENT DATED JUNE 1, 2006; AND DOES 1-30, DEFENDANTS.



The opinion of the court was delivered by: Leslie E. Kobayashi United States District Judge

ORDER GRANTING DEFENDANT DEUTSCHE BANK'S MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART DEFENDANT AMC'S MOTION FOR SUMMARY JUDGMENT

On August 31, 2011, Defendant Deutsche Bank National Trust Company as Trustee for Argent Securities Inc. Asset-Back Passthrough Certificates, Series 2006-M1, Under the Pooling And Servicing Agreement Dated June 1, 2006 ("Deutsche Bank"), filed its Motion for Summary Judgment ("Deutsche Bank Motion"), and Defendant AMC Mortgage Services, Inc. ("AMC") filed its Motion for Summary Judgment ("AMC Motion"). Plaintiff filed her memorandum in opposition to the Deutsche Bank Motion and her memorandum in opposition to the AMC Motion on November 10, 2011; Deutsche Bank filed its reply on November 17, 2011; and AMC filed its reply on the same date. These matters came on for hearing on November 30, 2011. Appearing on behalf of AMC and Deutsche Bank were Jael Makagon, Esq., and Jade Ching, Esq., and appearing on behalf of Plaintiff was Gary Dubin, Esq. After careful consideration of the motions, supporting and opposing memoranda, and the arguments of counsel, the Deutsche Bank Motion is HEREBY GRANTED, and the AMC Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

Plaintiff filed this action on April 27, 2009 in state court. The original Defendants were AMC, Ameriquest Mortgage Company ("Ameriquest"), Citi Residential Lending ("Citi"), and American Home Mortgage Servicing, Inc. ("AHMSI").*fn1 Plaintiff's Complaint for Rescission, for Breach of Contract, for Unfair and Deceptive Acts and Practices, for Mortgage Fraud, for Punitive Damages, and for Negligent Infliction of Severe Emotional Distress ("Complaint") alleged the following claims:

*a claim against Ameriquest, AMC, Citi, and AHMSI for rescission and damages for violations of the Federal Truth-in-Lending Act ("TILA"), 15 U.S.C. §§ 1635(b), 1641(c);

*a claim against AMC, Citi, and AHMSI for rescission and damages for breach of contract;

*a claim against AMC, Citi, and AHMSI for rescission and damages for unfair and deceptive acts and practices ("UDAP") in violation of Haw. Rev. Stat. Chapter 480;

*a claim against AMC, Citi, and AHMSI for rescission and damages for mortgage fraud;

*a claim against AMC for punitive damages; and

*a intentional and/or negligent infliction of emotional distress claim against AMC, Citi, and AHMSI.

AHMSI removed the action on October 8, 2009 based on diversity jurisdiction. [Notice of Removal of Action to Federal Court Under 28 U.S.C. § 1441(a), (b) (Diversity) at ¶ 7.]

Ameriquest and AMC filed a Motion for Summary Judgment ("2010 Summary Judgment Motion") on May 5, 2010. [Dkt. no. 20.] Judge Seabright issued an order granting the 2010 Summary Judgment Motion in part and denying it in part on August 3, 2010 ("8/3/10 Summary Judgment Order"). Bass v. Ameriquest Mortg.

Co., Civil No. 09-00476 JMS/BMK, 2010 WL 3025167 (D. Hawai`i Aug. 3, 2010). The relevant factual background in this case is set forth in the 8/3/10 Summary Judgment Order.

In June 2005, Plaintiff refinanced her mortgages on the Subject Properties[*fn2 ] with Ameriquest. Specifically, Plaintiff obtained one loan for $350,000 secured by a mortgage on the Pepeekeo Property dated June 2, 2005 and recorded on June 14, 2005, and a second loan for $185,000 secured by a mortgage on the Hilo Property dated June 2, 2005 and recorded on June 17, 2005. Plaintiff asserts that at the time of closing for both these transactions, she "was provided with inaccurate and confusing good faith disclosures by Ameriquest and its representatives, who additionally without my knowledge falsified my gross monthly income" on the loan applications.

Plaintiff also asserts that Ameriquest induced her to take both loans by promising her "cheaper loans than what I eventually received, changing the terms on me at closing, while promising me that I could refinance later with better rates." As to the Pepeekeo loan transaction, Plaintiff further asserts that she did not receive at closing or at any time thereafter two completed copies of the Notice of Right To Cancel form, but instead received only three blank-dated copies. Plaintiff did, however, sign a Notice of Right To Cancel form as to the 2005 Pepeekeo loan.

In March 2006, Plaintiff refinanced the Subject Properties again, this time with AMC. Plaintiff obtained a loan for $405,000 secured by a mortgage on the Pepeekeo Property dated March 31, 2006 and recorded on May 3, 2006, and a second loan for $217,800 secured by a mortgage on the Hilo Property dated March 31, 2006 and recorded on May 3, 2006. The loan proceeds from the March 2006 refinancings were used to discharge the 2005 mortgages on the Subject Properties, as well as to pay off some of Plaintiff's other debts.

Plaintiff asserts that similar to the 2005 transactions, she again "was provided with inaccurate and confusing good faith disclosures, this time by AMC and its representatives, who additionally without my knowledge falsified my gross monthly income" on the loan applications. Plaintiff further asserts that AMC did not tell Plaintiff of less expensive options to secure these mortgages, resulting in Plaintiff receiving more expensive loans, which generated unnecessary commissions and fees. AMC also allegedly misrepresented to Plaintiff that these loans had fixed interest rates, but upon closing, the rates were switched to adjustable rates, causing Plaintiff to refuse to sign the majority of the loan documents. After Plaintiff refused to sign the closing documents, AMC allegedly forged Plaintiff's signature on the 2006 loan documents.

On April 4, 2006, Plaintiff attempted to cancel the 2006 refinancing loans by faxing to AMC formal written notices of cancellation on the forms that AMC had provided. AMC refused to recognize Plaintiff's cancellation, even though Plaintiff made subsequent written and oral demands.

In June 2006, AMC attempted to conduct non-judicial foreclosure auctions on the Subject Properties, which forced Plaintiff to sell the Hilo Property for a loss on February 22, 2007. On April 11, 2007, the Hilo loan was satisfied and the Hilo mortgage discharged, leaving the Pepeekeo mortgage as the only existing mortgage in this action. On February 27, 2009, AMC assigned the Pepeekeo Mortgage to Deutsche Bank National Trust Company . . . .

Plaintiff asserts that as a result of Defendants' failure to cancel the loans, Plaintiff has been harassed with constant collection calls and mailings, and has suffered irreparable harm of her credit being damaged, the loss of credit lines personally and for her business, humiliation in her office among her workers and in the local business community, having to pay new license bonding requirements due to the appearance of resulting financial instability, marital difficulties and related stress, headaches, loss of sleep, and severe emotional distress.

Id. at *1-2 (footnotes and citations omitted).

In the 8/3/10 Summary Judgment Order, Judge Seabright granted Ameriquest and AMC summary judgment as to Plaintiff's TILA rescission and damages claims. Id. at *5-7 & n.7. Judge Seabright denied summary judgment to AMC on Plaintiff's breach of contract claim, fraud claim, UDAP claim, negligent infliction of emotional distress ("NIED") claim, and intentional infliction of emotional distress ("IIED") claim. Further, he denied AMC summary judgment on the claim for punitive damages because it was derivative of the IIED claim, which survived summary judgment. Id. at *7-11.

Pursuant to the parties' stipulation, [filed 9/23/10 (dkt. no. 51),] Plaintiff filed her First Amended Complaint for Rescission, for Breach of Contract, for Unfair and Deceptive Acts and Practices, for Mortgage Fraud, for Punitive Damages, and for Negligent Infliction of Severe Emotional Distress ("First Amended Complaint") on October 1, 2010. [Dkt. no. 52.] AMC and Deutsche Bank are the only defendants in the First Amended Complaint. The First Amended Complaint alleges the following claims:

*a claim against AMC and Deutsche Bank for rescission and damages for breach of contract ("Count I");

*a UDAP claim against AMC and Deutsche Bank for rescission and damages ("Count II");

*a claim against AMC and Deutsche Bank for rescission and damages for mortgage fraud ("Count III");

*a claim against AMC for punitive damages ("Count IV"); and

*a intentional and/or negligent infliction of emotional distress claim against AMC ("Count V").

In addition to rescission and damages, the First Amended Complaint seeks attorneys' fees and costs, and any other relief the Court deems appropriate. [First Amended Complaint at pg. 9.]

I. Deutsche Bank Motion

Deutsche Bank notes that the Pepeekeo Mortgage was assigned to Deutsche Bank in an Assignment of Mortgage dated February 27, 2009. [Deutsche Bank's Concise Statement of Facts in Supp. of Its Motion for Summary Judgment ("Deutsche Bank CSOF"), filed 8/31/11 (dkt. no. 87), Exh. 6.] Plaintiff alleges Counts I, II, and III against Deutsche Bank, but Plaintiff only seeks rescission against Deutsche Bank in Count I (breach of contract) and Count III (mortgage fraud). [First Amended Complaint at ¶¶ 30, 32.] In Count II (UDAP), Plaintiff states that she seeks rescission and actual and treble damages from Deutsche Bank. [Id. at ¶ 31.]

Plaintiff, however, has admitted that she neither has nor had a contract with Deutsche Bank. Further, she could not identify any breaches of contract that Deutsche Bank allegedly committed. [Deutsche Bank CSOF, Exh. 7 ("Pltf.'s Interrog. Responses") at 3, 5.] Deutsche Bank therefore argues that it is entitled to summary judgment as to Count I. [Mem. in Supp. of Deutsche Bank Motion at 4.]

Deutsche Bank next argues that Count III fails because the First Amended Complaint does not identify any allegedly wrongful conduct by Deutsche Bank. AMC's alleged fraud cannot give rise to a fraud claim against Deutsche Bank. [Id. at 5.]

Deutsche Bank also contends that Count II (UDAP) fails as a matter of law. The First Amended Complaint does not allege that Deutsche Bank violated Haw. Rev. Stat. § 480-2, a required element of a UDAP claim under Haw. Rev. Stat. § 480-13(B)(1). Deutsche Bank argues that, because it was not the originating lender, it cannot be held liable for UDAPs that occurred during the origination of the loans. Section 480-2 liability does not attach merely because of Deutsche Bank's status as an assignee. [Id. at 6-7.]

Deutsche Bank acknowledges that, under Hawai`i law, rescission is available as a remedy in appropriate cases. [Id. (citing Golf Carts, Inc. v. Mid-Pacific Country Club, 53 Haw. 357, 359, 493 P.2d 1338, 1339 (1972)).] Deutsche Bank contends that rescission is not available in this case because Plaintiff has no contract with Deutsche Bank that she can rescind, and she cannot establish a substantive claim that would entitle her to rescission. Further, Plaintiff has not tendered, nor has she established that she is able to restore the parties to the status quo. [Id. at 8 & nn.3-4.] Deutsche Bank therefore urges the Court to grant summary judgment in its favor as to all claims against it.

II. Plaintiff's Opposition to the Deutsche Bank Motion

In her memorandum in opposition to the Deutsche Bank Motion, Plaintiff emphasizes that Deutsche Bank does not contest the material facts of Ameriquest's and AMC's fraud and abuse. Plaintiff argues that Deutsche Bank is named as a party because Plaintiff cannot obtain rescission without Deutsche Bank's presence because Deutsche Bank claims to be the current owner of Plaintiff's note and mortgage. Further, Deutsche Bank is liable for rescission because, when it acquired the note and mortgage, Plaintiff was disputing the validity of the instruments and the loan was purportedly in default. Plaintiff also argues that Deutsche Bank has not shown that it paid anything for the assignment. Plaintiff argues that, under Ocwen Federal Bank, FSB v. Russell, 99 Hawai`i 173, 53 P.3d 312 (Ct. App. 2002), even a holder in due course that exchanged valuable consideration for a note and mortgage is still subject to the obligor's claims and defenses under circumstances such as those in this case. [Mem. in Opp. to Deutsche Bank Motion at 2-3.]

In addition, Plaintiff asserts that Deutsche Bank's Assignment of Mortgage is fraudulent, having been executed by "robo signers", and because Deutsche Bank purchased Plaintiff's loan after the cut-off date for the trust. [Id. at 4.] Plaintiff emphasizes that she is not trying to enforce the terms of the Trust; she is merely "challenging Deutsche Bank's standing in this action[.]" [Id. at 5-6.] Plaintiff argues that Deutsche Bank is not a necessary party for Plaintiff to obtain rescission, and she urges this Court to hold Deutsche Bank in contempt and to order Deutsche Bank to pay for Plaintiff's fees and costs. Plaintiff emphasizes that signing, notarizing, and recording a false document in the Bureau of Conveyances are criminal offenses under Hawai`i law. [Id. at 6.]

Plaintiff therefore urges the Court to deny the Deutsche Bank Motion and to issue an order to show cause requiring Deutsche Bank to prove that it is the valid owner of Plaintiff's note and mortgage. If Deutsche Bank cannot do so, the Court should hold Deutsche Bank in contempt. [Id.]

III. Deutsche Bank's Reply

In its reply, Deutsche Bank argues that Plaintiff cannot demonstrate any genuine disputes of material fact and that Plaintiff's arguments are irrelevant and inflammatory. [Deutsche Bank Reply at 2.]

Deutsche Bank notes that Plaintiff's opposition appears to forego any claim to damages from Deutsche Bank, focusing only on rescission. Deutsche Bank argues that Ocwen does not support Plaintiff's rescission claim because that case involved rescission in the context of alleged TILA violations. Plaintiff only asserts a claim against Deutsche Bank for rescission of the 2006 Pepeekeo Loan, and Plaintiff has no TILA claim for rescission of that loan. Instead, her rescission claims are based on alleged breach of contract, fraud, and UDAPs. As noted in the Deutsche Bank Motion, Plaintiff cannot identify any facts to support her breach of contract and fraud claims against Deutsche Bank. [Id. at 3-4.]

The only facts that she alleges in support of her UDAP claim against Deutsche Bank is the purported invalidity of the Assignment of Mortgage. Deutsche Bank argues that this claim fails a matter of law. First, Deutsche Bank emphasizes that Plaintiff's allegations regarding robo signers are not contained in the First Amended Complaint, and therefore Deutsche Bank did not have fair notice of those allegations. The Court should not consider those allegations. [Id. at 4-6.] Even if the Court did address the argument, Deutsche Bank contends that courts routinely hold that a debtor does not have standing to challenge an assignment between a lender and its assignee. [Id. at 6-7 (some citations omitted) (citing Livonia Property Holdings, L.L.C. v. 12840-12976 Farmington Road Holdings, L.L.C., 717 F. Supp. 2d 724, 736-37 (E.D. Mich. 2010); Velasco v. Security Nat. Mortg. Co., CV. No. 10-00239 DAE KSC, 2011 WL 4899935, at *4 (D. Haw. Oct. 14, 2011)).]

Finally, Deutsche Bank notes that, insofar as Plaintiff now claims that Deutsche Bank is not needed as a defendant because she can secure rescission without Deutsche Bank, this Court should grant the Deutsche Bank Motion. [Id. at 8 n.4.]

IV. AMC Motion

AMC argues that it is entitled to summary judgment on all of Plaintiff's claims.

A. Count I - Breach of Contract

AMC first argues that it did not breach any contract with Plaintiff. Although Plaintiff contends that she timely submitted formal written notices of cancellation and that AMC acknowledged receipt thereof on April 4, 2006, the only evidence she submitted in support of this is a facsimile confirmation sheet. [AMC's Concise Stat. of Facts in Supp. of Its Motion for Summary Judgment ("AMC CSOF"), filed 8/31/11 (dkt. no. 90), Exh. 17.] It indicates that the transmission was sent from (808)935-9700 ("Plaintiff's Fax Number") and, in her deposition testimony, Plaintiff confirmed that this was the only fax number that she used for business or personal reasons. [Id., Exh. 3 (Excerpts of 5/17/11 Depo. of Plaintiff ("AMC Excerpts of Bass Depo.")) at 11.] AMC, however, argues that Plaintiff did not actually send this facsimile because, a long distance charge for a facsimile from Plaintiff's Fax Number to a 949 area code would have appeared on Plaintiff's Hawaiian Telcom, Inc. ("Hawaiian Telcom") billing statement for April 4, 2006 to May 3, 2006 ("April Billing Statement"), and there is no such charge. [AMC CSOF, Exh. 18 (April Billing Statement), Exh. 19 (Excerpts of 7/21/11 Depo. of Audrey Watson ("Watson Depo.")) at 11, 13-14, 16, 18-19.] At her deposition, Plaintiff could not identify any charge in the April Billing Statement that confirmed her purported transmission of the cancellation notices. [AMC Excerpts of Bass Depo. at 196.] Further, when Plaintiff sent a facsimile to AMC from Plaintiff's Fax Number in June 2006, the charge was reflected in her billing statement for June 4, 2006 to July 3, 2006 ("June Billing Statement"). [AMC CSOF, Exh. 20 (June Billing Statement).] AMC contends that Plaintiff fabricated the confirmation sheet. [Mem. in Supp. of AMC Motion at 9 (citing Exh. 21 (Summary Report of Computer Forensics Examination)).] AMC emphasizes that Plaintiff has the ability to fabricate such a document because of her extensive background with computers. [Id. at 9-10 (citing AMC Excerpts of Bass Depo. at 26:6-8; 50:3- 18; 52:10-12, 20-25; 53:1-4).] AMC contends that it is entitled to summary judgment on Count I because Plaintiff cannot prove that she timely submitted the cancellation notices. [Id. at 10.]

B. Count II - UDAP

AMC points out that, contradicting her claim that she signed the notes and mortgages and timely cancelled them, Plaintiff also argues that her signatures on the documents are forged and the forgery violates Haw. Rev. Stat. Chapter 480. The First Amended Complaint alleges that Plaintiff's signatures on the 2006 loan documents were forged using the 2005 loan paperwork. AMC argues that there is no evidence to support this claim. [Id. at 10-11.] Plaintiff cannot recall which loan documents she signed and which she did not. [AMC Excerpts of Bass Depo. at 74-75, 86-87, 91-93, 105-06, 112-13, 115, 118, 119-21, 123-33, 135-38, 140-45, 152-57, 163-73.] The First Amended Complaint concedes that Plaintiff cannot identify which 2005 document was used to forge the 2006 documents. [First Amended Complaint at ¶ 20.] Plaintiff also testified that she cannot remember signing the cancellation notices and, when presented with those documents, she did not know whether the signatures on them were hers. [AMC Excerpts of Bass Depo. at 190-91.]

AMC submits a forensic handwriting report by Howard Rile, who examined the original Pepeekeo Note and Pepeekeo Mortgage, as well as the Hilo Note and Hilo Mortgage, and compared Plaintiff's signatures on those documents to the undisputed examples of Plaintiff's signatures. He concluded that the signatures on the Pepeekeo Note and Pepeekeo Mortgage and Plaintiff's exemplars were written by the same individual and that the signatures on the Hilo Note and Hilo Mortgage and Plaintiff's exemplars "were very probably written by the same individual." [AMC CSOF, Exh. 22 at 4-5.] AMC argues that Plaintiff has no proof that her signatures on the 2006 loan documents were forged. [Mem. in Supp. of AMC Motion at 13.]

Plaintiff has testified that she stopped signing the loan documents, but she does not know at what point she stopped, nor does she know which documents she signed and which she did not. ...


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