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Warne Keahi Young, Individually and As v. the Bank of New York Mellon

January 30, 2012

WARNE KEAHI YOUNG, INDIVIDUALLY AND AS TRUSTEE UNDER THE DECLARATION OF REVOCABLE TRUST OF PRISCILLA YOUNG,
DECEASED,
PLAINTIFF,
v.
THE BANK OF NEW YORK MELLON, A NEW YORK CORPORATION, AS TRUSTEE FOR THE CERTIFICATE HOLDERS, CWALT, INC., MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2007-20; AMBER FINANCIAL GROUP, LLC; COUNTRYWIDE HOME LOANS; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; ET AL., DEFENDANTS.



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

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS BANK OF NEW YORK MELLON, COUNTRYWIDE HOME LOANS, AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.'S MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This action arises from a March 19, 2007 mortgage loan transaction on the residence of Plaintiff Warne Keahi Young, Individually and as Trustee Under the Declaration of Revocable Trust of Priscilla Young, Deceased ("Young" or "Plaintiff") located at 42 W. Kahaopea Street in Hilo, Hawaii ("the Hilo Property"). Plaintiff's First Amended Complaint ("FAC") alleges state and federal claims seeking damages and rescission of the mortgage transaction against (1) Bank of New York Mellon, as Trustee for the Certificate Holders, CWALT, Inc., Mortgage Pass-through Certificates Series 2007-20 ("BONYM"); (2) Amber Financial Group, LLC ("Amber"); (3) Countrywide Home Loans ("Countrywide"); and (4) Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively "Defendants"). BONYM, Countrywide, and MERS (collectively "Moving Defendants") have moved for summary judgment on all claims in the FAC.*fn1

Based on the following, the Motion for Summary Judgment is GRANTED in PART and DENIED in PART. Summary judgment is entered against Plaintiff on all Counts except that (1) Counts V and VII remain as to Amber, and (2) Count V remains as to Moving Defendants to the extent Plaintiff seeks rescission under Hawaii Revised Statutes ("HRS") § 480-12, and attorney fees under HRS § 480-13.

II. BACKGROUND

A. Factual Background

For purposes of this summary judgment motion, the court views the evidence in the light most favorable to Plaintiff. See, e.g., Sullivan v. Oracle Corp., 662 F.3d 1265, 1270 (9th Cir. 2011). Viewed in that light, the evidence indicates as follows.

On March 19, 2007, Priscilla Young ("Priscilla") executed mortgage documents on the Hilo Property. Doc. No. 15, FAC ¶ 16; Doc. No. 69-1, Pl.'s Decl. ¶ 4. The Hilo Property was previously unencumbered, and was financed for $430,482.01 along with closing costs and finance charges of $19,517.99, for a total loan amount of $450,000. Doc. No. 69-4, Pl.'s Ex. C. Amber was both the lender and mortgage broker. Doc. No. 69-2, Pl.'s Ex. A, at 3; Doc. No. 69-3, Pl.'s Ex. B. The loan application was taken by telephone by Amber employee Maryann Gambol ("Gambol"). Doc. No. 69-2, Pl.'s Ex. A, at 3. The mortgage identifies Amber as the originating lender, with MERS as the mortgagee and nominee for Amber. Doc. No. 69-22, Pl.'s Ex. 11. The mortgage was assigned to BONYM on October 5, 2009. Doc. No. 51-9, Moving Defs.' Ex. 7.

Priscilla was Plaintiff's grandmother. Doc. No. 69-1, Pl.'s Decl. ¶ 4. At the time of closing (or immediately before closing), the Hilo Property was owned, at least in part, by W.K. Young Partners, a Domestic Limited Partnership. Id. ¶¶ 16-19.*fn2 W.K. Young Partners was formed in 1999, with Priscilla as the sole partner. Id. ¶ 12; Doc. No. 69-7, Pl.'s Ex. G. After the partnership was formed, Priscilla transferred her residence -- the Hilo Property -- to the partnership as part of her capital contribution. Doc. No. 69-1, Pl.'s Decl. ¶16. Sometime before 2002, Plaintiff and his mother, Kawena Young, were added as partners. Id. ¶ 13; Doc. No. 69-6, Pl.'s Ex. F. Priscilla died on October 15, 2008. Doc. No. 69-1, Pl.'s Decl. ¶ 14.

Plaintiff attests that he is the "Successor Trustee Under the Declaration of the Revocable Trust of Priscilla Young." Id. ¶ 2. He lived with Priscilla for at least thirty five years, and still lives at the Hilo Property. Id. ¶ 4. In addition to being the successor trustee, he claims at all relevant times to have owned a portion of the Hilo Property through the "family limited partnership." Id. ¶ 3.

The W.K. Young Partners partnership agreement forbade withdrawal or return of partnership property except under specified circumstances. Id. ¶ 17.

But, as part of the March 19, 2007 closing transaction, ownership of the Hilo Property was transferred (by documents signed only by Priscilla) from W.K. Young Partners and the Priscilla Ching Young Revocable Trust, as grantors, to Priscilla, as grantee. Doc. No. 69-21, Pl.'s Ex. 10; Doc. No. 69-11, Wheeler Decl. at 4. The mortgage loan was made directly to Priscilla, and the mortgage lists Priscilla as the borrower. Doc. No. 69-22, Pl.'s Ex. 11. The Hilo Property was then conveyed from Priscilla, as grantor, back to W.K. Young Partners and the Priscilla Ching Young Revocable Trust, as grantees. Doc. No. 69-23, Pl.'s Ex. 12. The mortgage and transfer of ownership of the Hilo Property back and forth were all signed by Priscilla on March 19, 2007, and the documents were recorded simultaneously on March 27, 2007. The temporary transfer of ownership to Priscilla was apparently done to satisfy Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae) requirements, as such federally-backed loans may not be made to corporations or partnerships. See Doc. No. 69-11, Wheeler Decl. at 4.

Plaintiff attests that Priscilla executed the note and mortgage on the Hilo Property without authority or consent from any W.K. Young Partner. Doc. No. 69-1, Pl.'s Decl. ¶¶ 18-19. Instead, Plaintiff contends that "Gambol, an employee and agent of Amber" contacted Priscilla, "talked her into making this loan, and prepared all of the loan documents," including the transfer of ownership documents to and from Priscilla's name. Id. ¶ 25. "Gambol and Amber prepared all of the loan documents and told [Priscilla] where to sign." Id. ¶ 28.

Priscilla was ninety three years old on March 19, 2007 when she executed the mortgage documents. Id. ¶ 6. According to her doctor, at that time she was legally blind and almost deaf, and suffered from dementia. Doc. No. 69-31, Festerling Decl. ¶ 5. She was unmarried, unemployed, and living on Social Security and retirement benefits totaling approximately $1,700 per month. Doc. No. 69-1, Pl.'s Decl. ¶ 21. Moreover, shortly before she signed the documents, she had fallen in a care home and had sustained bleeding in her brain. Id. ¶ 23. She "was later diagnosed with long standing severe organic brain syndrome." Id. Plaintiff and Priscilla's doctor both attest that Priscilla would not have been able to understand the nature and terms of the closing documents she signed in March 2007. Id. ¶ 24; Doc. No. 69-31, Festerling Decl. ¶ 8.*fn3 Plaintiff contends that Gambol "knew or should have known that Priscilla Young did not have authority to withdraw the [Hilo Property] from the Partnership and also knew that Priscilla Young could not afford to make payments on this loan[.]" Doc. No. 69-1, Pl.'s Decl. ¶ 26.

Plaintiff points to several problems or inconsistencies with the loan documents that he alleges were violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., or are indications of fraud. The loan application indicates the loan was an "A30 Conforming Fixed" loan (possibly referring to an "Agency 30 year" fixed rate mortgage), at 6.75 percent. Doc. No. 69-11, Wheeler Decl. at 1. But the loan period on the application is also listed as 480 months (or 40 years).

Id.; Doc. No. 69-12, Pl.'s Ex. 1; Doc. No. 69-15, Pl.'s Ex. 4. The loan is indeed amortized over 480 months at an annual percentage rate of 7.127 percent, with monthly payments of $2,715.11. Doc. No. 69-3, Pl.'s Ex. B. The loan application also indicates Priscilla is married (she was unmarried), and that she was employed as "owner/property manager" (apparently referring to rental of rooms at the Hilo Property). Id.; Doc. No. 69-18, Pl.'s Ex. 7.

As part of the transaction, Priscilla signed a standard "notice of right to cancel" form on March 19, 2007. The form incorrectly lists the date of the transaction as March 16, 2007, so that the form reads as follows:

You have a legal right under federal law to cancel this transaction, without cost, within three business days from whichever of the following events occurs last:

1. the date of the transaction, which is March 16, 2007; or

2. the date you receive your Truth-in-Lending disclosures; or

3. the date you receive this notice of your right to cancel.

Doc. No. 69-5, Pl.'s Ex. D. In the "How to Cancel" section, the form states "[i]f you cancel by mail or telegram, you must send the notice no later than midnight of March 22, 2007 (or midnight of the third business day following the latest of the three events listed above)." Id. The date "March 22, 2007" was handwritten, and was initialed by Priscilla. Id.

Further, according to Charles Wheeler (Plaintiff's expert witness who reviewed relevant documents), Amber "charged and or received [$1,327.50] as additional 'back door' undisclosed compensation" from Countrywide as a "service release premium." Doc. No. 69-11, Wheeler Decl. at 7.*fn4 Countrywide apparently funded the loan through Amber. Id.

B. Procedural Background

BONYM sought to foreclose on the mortgage by filing a Notice of Intention to Foreclose Under Power of Sale on November 10, 2009, and an auction was set for January 14, 2010. Doc. No. 38-8. Plaintiff filed this action on January 11, 2010, Doc. No. 1, and the foreclosure proceedings were apparently held in abeyance.

Upon motion by Countrywide and MERS, Plaintiff's initial Complaint was dismissed on May 5, 2010, with leave to amend. Doc. No. 12. Plaintiff filed the FAC on June 1, 2010, alleging the following Counts:

* Count I (against Amber, Countrywide, and MERS): Violations of the Truth in Lending Act ("TILA") entitling Plaintiff to rescission of the mortgage and recoupment of expenses. Doc. No. 15, FAC ¶¶ 46-58;

* Count II (against Amber, Countrywide, and MERS): Violations of TILA entitling Plaintiff to "loan damages." Id. ¶¶ 59-60;

* Count III (against BONYM, Countrywide, and MERS): Violations of TILA resulting in "assignee [liability] for violations of originating ...


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