The opinion of the court was delivered by: J. Michael Seabright United States District Judge
ORDER (1) GRANTING DEFENDANT RESIDENTIAL CREDIT SOLUTIONS, INC.'S MOTION FOR SUMMARY JUDGMENT, DOC. NO. 71; (2) GRANTING DEFENDANT OPTION ONE MORTGAGE CORPORATION'S, NOW KNOWN AS SAND CANYON CORPORATION, MOTION FOR SUMMARY JUDGMENT, DOC. NO. 76; (3) GRANTING THIRD-PARTY DEFENDANT OLD REPUBLIC TITLE & ESCROW OF HAWAII, LTD.'S MOTION FOR SUMMARY JUDGMENT, DOC. NO. 78; AND (4) GRANTING DEFENDANT H&R BLOCK BANK'S MOTION FOR SUMMARY JUDGMENT, DOC. NO. 80
This action arises from a November 2006 loan transaction in which Plaintiffs Reid and Nadine Tamayose (collectively, "Plaintiffs") borrowed $1,025,000 from Defendant Option One Mortgage Corporation ("Option One"),*fn1 to refinance their mortgages on real property located at 6789 B Kuamoo Road, Kapaa, Hawaii 96746 (the "subject property"), and to use the remaining loan proceeds to purchase a mini mart on Oahu. The resulting note and mortgage were subsequently transferred to Defendant H&R Block Bank ("Block Bank"), and then to Defendant Residential Credit Solutions, Inc. ("RCS"). While Block Bank still held the note and mortgage, Plaintiffs' mini mart failed and they got behind on their mortgage payments, which resulted in Block Bank instituting non-judicial foreclosure proceedings in December 2008. In response, Plaintiffs asserted to cancel the loan transaction pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq.
Plaintiffs subsequently filed this action in the First Circuit Court of the State of Hawaii, asserting claims against Defendants pursuant to TILA seeking damages and rescission. The action was subsequently removed to this court, and RCS brought a third-party complaint seeking indemnity and contribution against Old Republic Title ("ORT"), which handled the escrow for the mortgage transaction.
Currently before the court is Defendants' and Third-Party Defendant's Motions for Summary Judgment, in which they argue, among other things, that Plaintiffs are not entitled to rescission pursuant to TILA because they cannot tender the loan proceeds. Based on the following, the court agrees that there is no genuine issue of material fact that Plaintiffs are unable to tender the loan proceeds and GRANTS Defendants' and Third-Party Defendant's Motions for Summary Judgment.
In the fall of 2006, Plaintiffs decided to purchase Helen's Party Store in Honolulu and operate it as Tsuni's Mini Mart. Reid Tamayose explained that Plaintiffs were looking for a new "venture" that would take them off of Kauai:
Like every Kauai person, you get island fever and you get bored of what you're doing there, because it's so mundane. It's a beautiful place to live, but there's not much opportunity, and I guess I was bored in what I was doing and I guess because we had equity or something in the house, we were looking for another venture, and because my daughter was going to be coming to school here, we thought, hey, it might be a great time to jump in. . . .
Doc. No. 106-2, RCS Ex. V at 134-35. Reid Tamayose was familiar with the store from when he used to live in Honolulu, and "basically, we just spur of the moment said, Hey, we're tired of here, let's try something else . . . ." Id. at 135. To that end, on September 12, 2006, Nadine Tamayose signed a Deposit Receipt Offer and Acceptance to purchase Helen's Party Store for $175,000, Doc. No. 78-15, ORT Ex. J, and on November 13, 2006, Plaintiffs signed the Bill of Sale. Doc. No. 78-16, ORT Ex. K.
Plaintiffs obtained the funds to purchase Helen's Party Store by refinancing their mortgages on the subject property with Option One. Nadine Tamayose asserts that they entered into this loan transaction both to obtain the funds for Tsuni's Mini Mart as well as to obtain a better overall interest rate on their mortgage. See Doc. No. 101, Nadine Tamayose Decl. ¶ 3. Further, the Uniform Residential Loan Application, filled out by Option One, states that the purpose of this loan is to "refinance." See Doc. No. 101-1, Pls.' Ex. A; see also Doc. No. 101, N. Tamayose Decl. ¶ 7 (stating that "Option One considered the purpose of the loan was a 'refinance'").
On November 24, 2006, Reid Tamayose executed a promissory note (the
"Note") in the principal amount of $1.025 million in favor of Option
One, which was secured by a mortgage (the "Mortgage") executed by
Plaintiffs and recorded in the Bureau of Conveyances. Doc. No. 98,
Block Bank Concise Statement of Facts ("CSF") ¶¶ 2-3.*fn2
From the $1.025 million, Plaintiffs (1) paid off two
mortgages totaling $775,085.59; (2) sent $171,610.51 to First Hawaii
Title to fund the purchase of Helen's Party Store; and (3) received
$59,968.44 in cash, which also went to their new business. Doc. No.
98, Block Bank CSF ¶¶ 4-5; see also N. Tamayose Decl. ¶ 5.
The closing of the loan was handled through ORT's King Street branch office on Oahu. Doc. No. 79, ORT CSF ¶ 6. In entering into this loan transaction, Plaintiffs signed that they received the Good Faith Estimate, the Mortgage, the Federal Truth-in-Lending Disclosure Statement, and two copies of the Notice of Right to Cancel. Doc. No. 98, Block Bank CSF ¶ 6; see also Doc. No. 74, RCS CSF ¶ 6; Doc. No. 71-17, RCS Ex. M. During their depositions, Plaintiffs admitted that they signed the forms indicating that they received two copies of the Notice of the Right to Cancel, Doc. No. 77-18, Option One Ex. 14 at 72-74, Doc. No. 77-21, Option One Ex. 15 at 59-60, yet Reid Tamayose could not recall whether they actually received two copies. Doc. No. 77-18, Option One Ex. 14 at 74. Further, Nadine Tamayose now asserts that they received only one copy of the Notice of Right to Cancel during the loan closing. Doc. No. 101, N. Tamayose Decl. ¶ 21. In contrast, Dodie Haumea, a supervisor in the Quality Assurance Department for ORT, explained that it is ORT's custom and practice to, among other things, require the borrowers to sign four sets of the Notice of Right to Cancel such that two originals are given to the borrowers and ORT retains the other originals for the lender. Doc. No. 78-4, Haumea Decl. ¶ 18.
Nadine Tamayose asserts that at the time of closing, they were still living in the subject property and they maintained the subject property as their principal and primary residence by keeping all utilities in their name, paying the real estate taxes, and keeping all of their belongings there. Doc. No. 101, N. Tamayose Decl. ¶¶ 10-12; see also Doc. No. 101-1, Pls.' Ex. A (Uniform Residential Loan Application stating that the subject property will be Plaintiffs' primary residence). With that said, however, Plaintiffs ultimately lived in Honolulu for two years while they operated Tsuni's Mini Mart. Doc. No. 78-18, ORT Ex. M at 129.
The Note and Mortgage were subsequently assigned to Block Bank and on October 24, 2007, an Assignment of Mortgage and Note was recorded in the Bureau of Conveyances.*fn3 Doc. No. 80-16, Block Bank Ex. 13. Sometime in 2008, Plaintiffs defaulted on the loan (Tsuni's Mini Mart had failed), resulting in Block Bank issuing a Notice of Mortgagee's Foreclosure Under Power of Sale setting a public auction for December 5, 2008. See Doc. No. 1-2, Compl. Ex. D; see also Doc. No. 71-11, RCS Ex. G at N. Tamayose Depo. 106-09. On December 4, 2008, Plaintiffs, through their counsel, notified Block Bank and Option One that Plaintiffs were exercising their right to cancel the loan, based on various alleged TILA violations that had occurred. See Doc. No. 101-3, Pls.' Ex. C.
On June 16, 2009, Block Bank assigned the Mortgage and Note to RCS. See Doc. No. 81-17, Block Bank Ex. 14.
As to whether Plaintiffs could have returned to Block Bank the loan proceeds less any interest, finance charges, and other deductions either now or on December 4, 2008 when they demanded rescission, Plaintiffs testified that they could have possibly raised the funds from family and friends. For example, Reid Tamayose testified that although he did not ask his friends or family for a loan and he could not otherwise say how much they would loan him, he was "sure" that his family would loan him the funds:
Q: . . . Basically, you had a $1,025,000 loan. You're going to take off the settlement charges which in the HUD which we looked at, Exhibit 1, was about $18,335.46. That would bring the balance down to about 1,006,664.40 less approximately the interest. So on December 4, 2008, could you pay back to the lender about one million dollars?
Q. What family? What friends?
A. Well, I already mentioned my family, so I don't need to mention that again.
Q. So you're talking about your mother and your two aunts?
A. They would be able to help if I needed it. . . .
Q. And did you ask them to help you on ...