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Linda Wunder Del Piano, and Douglas B. v. Mortgage Electronic Registration Systems

February 24, 2012

LINDA WUNDER DEL PIANO, AND DOUGLAS B. HACKETT, AS TRUSTEE OF THE PAULEHIA STREET TRUST,
STREET TRUST,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., "MERS," ITS SUCCESSORS IN INTEREST AND/OR ASSIGNS,
INDYMAC FINANCIAL SERVICES, A
DIVISION OF ONEWEST BANK, ITS FSB,
SUCCESSORS IN INTEREST AND/OR ASSIGNS, ONEWEST BANK, FSB, ITS
SUCCESSORS IN INTEREST AND/OR
ASSIGNS, EXPRESS CAPITAL ; LENDING, ITS SUCCESSORS IN INTEREST AND/OR ASSIGNS, HSBC BANK USA, N.A., A NATIONAL
ASSOCIATION, AS TRUSTEE FOR BCAP 2008-IN1, ITS SUCCESSORS IN INTEREST AN/OR ASSIGNS, FIRST AMERICAN TITLE INSURANCE CO., ITS SUCCESSORS
IN INTEREST AND/OR ASSIGNS,
SUCHAN MURRAY, EMPLOYEE OF ONEWEST BANK, ROUTH CRABTREE OLSEN, P.S., PETER T. STONE, AND DOES 1 TO 10, DEFENDANTS.



The opinion of the court was delivered by: Susan Oki Mollway Chief United States District Judge

ORDER GRANTING (1) DEFENDANTS MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.'S, ONEWEST BANK, FSB'S, HSBC BANK USA, N.A., A NATIONAL ASSOCIATION, AS TRUSTEE FOR BCAP 2008-IN1'S, SUCHAN MURRAY'S, AND INDYMAC FINANCIAL SERVICES, INC.'S (INCORRECTLY NAMED IN THE AMENDED COMPLAINT AS INDYMAC FINANCIAL SERVICES) MOTION FOR SUMMARY JUDGMENT (RE: AMENDED COMPLAINT FOR VERIFICATION OF DEBT ELSE RELEASE OF CLAIM AND FOR DECLARATORY AND INJUNCTIVE RELIEF, FILED MAY 20, 2011); (2) DEFENDANT FIRST AMERICAN TITLE INSURANCE CO.'S JOINDER; AND (3) HSBC BANK USA, N.A., A NATIONAL ASSOCIATION, AS TRUSTEE FOR BCAP 2008-IN1'S MOTION FOR SUMMARY JUDGMENT (RE: HSBC'S BANK USA, N.A.'S COUNTERCLAIM FOR FORECLOSURE), AND FOR INTERLOCUTORY DECREE OF FORECLOSURE

I. INTRODUCTION.

On January 25, 2011, Plaintiff Linda Wunder Del Piano ("Del Piano") commenced this action in the Circuit Court of the Third Circuit, State of Hawaii, against Defendants Mortgage Electronic Registration Systems, Inc. ("MERS"), IndyMac Financial Services, Inc. ("IndyMac"), OneWest Bank, FSB ("OneWest"), Express Capital Lending ("Express Capital"), HSBC Bank USA, N.A. ("HSBC"), First American Title Insurance Co. ("First American"), Suchan Murray ("Murray"), Routh Crabtree Olsen, P.S. ("RCO"), and Peter T. Stone ("Stone") (collectively, "Defendants") in conjunction with pending foreclosure proceedings against her home. Del Piano asserts a variety of state and federal claims against Defendants, primarily alleging that Defendants lack standing to foreclose on her property because they allegedly cannot produce the original promissory note and mortgage.

MERS, OneWest, HSBC, Murray, and IndyMac (collectively, "MERS Defendants") now move for summary judgment on all counts.

First American joins in the motion. See Defs. Mortgage Electronic Registration Systems, Inc.'s, OneWest Bank, FSB's, HSBC Bank USA, N.A., a National Association, as Trustee for BCAP 2008-IN1's, Suchan Murray's and IndyMac Financial Services, Inc.'s (Incorrectly Named in the Am. Compl. as IndyMac Financial Services) Mot. for Summ. J. (Re: Am. Compl. for Verification of Debt Else Release of Claim and for Declaratory and Inj. Relief, Filed May 20, 2011), ECF No. 77; Mem. of Points of Authorities in Supp. of Mot. for Summ. J., ECF No. 78 ("MERS Motion"); Def. First American Title Insurance Co.'s Joinder in Mot. for Summ. J., ECF No. 83.

HSBC also moves for summary judgment on its Counterclaim, seeking judicial foreclosure against Del Piano. See Def. HSBC Bank USA, N.A., a National Association, as Trustee for BCAP 2008-IN1's Mot. for Summ. J. (Re: HSBC Bank USA, N.A.'s Counterclaim for Foreclosure), and for Interlocutory Decree of Foreclosure, ECF No. 75 ("HSBC Motion").

II. BACKGROUND.

In March 2007, in conjunction with the purchase of real property located at 75-6116 Paulehia Street, Kailua-Kona, Hawaii, 96740, Del Piano executed an adjustable rate note (the "Note") for the principal amount of $453,250.00 in favor of Express Capital. See Am. Compl. For Verification of Debt Else Release of Claim and for Declaratory and Injunctive Relief ("Am. Compl.") ¶ 4.2, ECF No. 45; MERS Motion at 4, ECF No. 78. The Note is secured by a first priority mortgage (the "Mortgage") in favor of MERS, solely as nominee for Express Capital. The Mortgage was assigned to HSBC pursuant to an assignment recorded on December 9, 2010. Am. Compl. ¶ 4.15, ECF No. 45; Assignment of Mortgage, attached as Exhibit "C" to MERS Motion, ECF No. 79. At some unspecified time, HSBC also took possession of the Note by mesne endorsement of the Note, including an endorsement in blank, which converted the Note to a bearer instrument. See Decl. of C. Boyle ¶ 6, ECF No. 79-1. OneWest represents that it currently holds the Note as HSBC's agent. Id.

In or around 2008, Del Piano began suffering financial hardship and successfully filed for bankruptcy protection. Am. Compl. ¶¶ 4.7, 4.9, ECF No. 45. In May 2009, Del Piano defaulted on her loan. Decl. of C. Boyle ¶ 9, ECF No. 79-1. MERS Defendants allege that although they made a demand for the principal and interest due under the Note, Del Piano failed to pay those amounts. Id. ¶¶ 9-10. Del Piano represents that the current market value of her property has dropped to approximately $350,000.00. Am. Compl. ¶ 4.6, ECF No. 45.

On or around April 28, 2010, Del Piano allegedly sent a document to Defendants with the heading "Qualified Written Request, Complaint, Dispute of Debt and Validation of Debt Letter, TILA Request," purportedly in compliance with 12 U.S.C. § 2605(e). See Letter from L. Del Piano to Express Capital Lending et al. (Apr. 28, 2010), attached as Exhibit "A" to Pl. Response to Def. Mot. for Summ. J. (Re: Am. Compl. for Verification of Claim and for Declaratory and Injunctive Relief, Filed May 20, 2011) ("Opposition"), ECF No. 93. Del Piano essentially questioned the validity of Defendants' ownership of the Note and demanded proof relating to various loan origination documents and the assignment of the Note. Id. This and other documents are not properly authenticated by Del Piano for purposes of the present motions. Although Del Piano does not present evidence in admissible form, this court considers Del Piano's exhibits and allegations with the thought that, if this case were tried, Del Piano would authenticate the documents herself and testify to certain factual allegations. See Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003).

Also on or around April 28, 2010, Del Piano purportedly sent Defendants a letter she refers to as a "Self-Executing Agreement." See Am. Compl. ¶ 4.11, ECF No. 45; Exhibit "D" to Compl., ECF No. 1-1. The Self-Executing Agreement purported to offer full payment on the Note in exchange for Defendants' surrender of the "Original unaltered instrument, or wet-ink Note." Am. Compl. ¶ 4.11.c, ECF No. 45. Del Piano also demanded copies of a number of mortgage documents verifying Defendants' standing to foreclose. Id. ¶ 4.11.d. The Self-Executing Agreement provided that Defendants' failure to respond within 15 days would be treated as an agreement "that they were committing illegal activities and participating in an illegal scheme to take from Plaintiff Del Piano her monies and property." Id. ¶ 4.12. Defendants did not respond to the Self-Executing Agreement or any subsequent correspondence regarding the same. Id. ¶¶ 4.12-4.14.

On December 9, 2010, HSBC commenced a non-judicial foreclosure of Del Piano's property by recording a Notice of Mortgagee's Intention to Foreclose Under Power of Sale. Id. ¶ 4.17. Shortly thereafter, on January 25, 2011, Del Piano filed suit in state court. It is that action that is now before this court pursuant to a removal by MERS. See Notice of Removal of Action to Federal Court Based on Federal Question Jurisdiction, ECF No. 1. On April 25, 2011, Del Piano recorded a Quitclaim Deed in the Bureau of Conveyances, purporting to convey Del Piano's interest in the property to the Paulehia Street Trust, with Douglas B. Hackett as trustee. See MERS Motion at 6, ECF No. 78; Quitclaim Deed, attached as Exhibit "F" to MERS Motion, ECF No. 79.

Plaintiff Douglas B. Hackett, as trustee of the Paulehia Street Trust, was previously prohibited from proceeding as a plaintiff, barring any real interest in this proceeding, or from representing Del Piano. See Mot. to Strike Douglas B. Hackett, as Trustee of The Paulehia Street Trust, as Pl., and for Award of Appropriate Sanctions, ECF No. 55; EP, ECF No. 62; Order Granting in Part and Denying in Part Defs. Mot. to Strike Douglas

B. Hackett, As Trustee of The Paulehia Street Trust, as Pl. and for Award of Appropriate Sanctions, ECF No. 70; Tr. of Proceedings Before the Honorable Susan Oki Mollway (June 13, 2011), ECF No. 72. Hackett has not subsequently asserted any interest in this action. At the hearing on the Motion to Strike, the court put on the record its findings as to Hackett's lack of any interest in the property and the legal authorities on which the court was relying. See Tr. of Proceedings, ECF No. 72.*fn1

Pursuant to this court's order dismissing the original complaint, see EP, ECF No. 19, Del Piano filed her Amended Complaint on May 20, 2011. See Am. Compl., ECF No. 45. The Amended Complaint contains a total of ten claims, each identified either as a "cause of action" ("COA") or a "claim for relief" ("CFR"). Id. Many of the claims duplicate each other and some assert multiple or incomplete claims within a single count:

(1) First Cause of Action: Violation of U.C.C. §§ 3-603 and 3-604 Discharging and Settling the Alleged Debt in Full;

(2) Second Cause of Action: Violation of Not Holding Possession of the Original Promissory Note; Possession is Necessary; Broken Chain of Title;

(3) Third Cause of Action: Violations of 28 U.S.C. § 2201 Create No Standing for Enforcement of Power of Sale of the Mortgage; Improper Assignment of Mortgage;

(4) Fourth Cause of Action: Violations of the Uniform Commercial Code;

(5) First Claim for Relief: Temporary and Permanent Injunctive Relief to Cancel and Enjoin Any Foreclosure Sale;

(6) Second Claim for Relief: Declaratory Relief;

(7) Third Claim for Relief: As a Violation of an Attempt to Foreclose Without Proof of Real Party in Interest, Defendants Have No Right to Foreclose; Foreclosure Sale Must be Stopped and Plaintiffs Given Sufficient Discovery to Prove Their Case;

(8) Fourth Claim for Relief: Breach of Contract (against MERS and HSBC);

(9) Fifth Claim for Relief: Violation of 12 U.S.C. § 2605(e) (against IndyMac);

(10) Sixth Claim for Relief: Due to Violations of Law by All Defendants, the Alleged Debt is Settled in Full; No Debt is Owed; Debt Must be Expunged and Reported as Such; Reconveyance of Deed; Reporting.

On June 3, 2011, HSBC filed a Counterclaim for Foreclosure and Tortious Interference with Contractual Relations (the "Counterclaim") against Del Piano. See Countercl., ECF No. 54-1. On or around June 9, 2011, HSBC cancelled the pending non-judicial foreclosure by recording a Notice of Rescission of Mortgagee's Intention to Foreclosure Under Power of Sale. MERS Motion at 6, ECF No. 78; Notice of Rescission, attached as Exhibit "G" to MERS Motion, ECF No. 79.

III. STANDARD OF REVIEW.

Summary judgment shall be granted when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) (2010). See Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). The movants must support their position that a material fact is or is not genuinely disputed by either "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motion only), admissions, interrogatory answers, or other materials"; or "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c). One of the principal purposes of summary judgment is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

Summary judgment must be granted against a party that fails to demonstrate facts to establish what will be an essential element at trial. See id. at 323. A moving party without the ultimate burden of persuasion at trial--usually, but not always, the defendant--has both the initial burden of production and the ultimate burden of persuasion on a motion for summary judgment. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000).

The burden initially falls upon the moving party to identify for the court those "portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp., 477 U.S. at 323). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (footnote omitted).

The nonmoving party may not rely on the mere allegations in the pleadings and instead must set forth specific facts showing that there is a genuine issue for trial. T.W. Elec. Serv., Inc., 809 F.2d at 630. At least some "'significant probative evidence tending to support the complaint'" must be produced. Id. (quoting First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 290 (1968)). See Addisu, 198 F.3d at 1134 ("A scintilla of evidence or evidence that is merely colorable or not significantly probative does not present a genuine issue of material fact."). "[I]f the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Cal. Arch'l Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987) (citing Matsushita Elec. Indus. Co., 475 U.S. at 587). Accord Addisu, 198 F.3d at 1134 ("There must be enough doubt for a 'reasonable trier of fact' to find for plaintiffs in order to defeat the summary judgment motion.").

All evidence and inferences must be construed in the light most favorable to the nonmoving party. T.W. Elec. Serv., Inc., 809 F.2d at 631. Inferences may be drawn from underlying facts not in dispute, as well as from disputed facts that the judge is required to resolve in favor of the nonmoving party. Id. When "direct evidence" produced by the moving party conflicts with "direct evidence" produced by the party opposing summary judgment, "the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact." Id.

IV. THE MERS MOTION FOR SUMMARY JUDGMENT.

Many of Del Piano's COAs and CFRs repeat allegations.

In the interest of addressing the claims efficiently, the court adopts MERS Defendants' grouping of similar claims.

A. Discharge Of Debt (First COA, Sixth CFR).

Del Piano seeks the discharge of her mortgage, arguing in her Sixth CFR that her debt was settled in full because "(1) Plaintiff tendered full payment with a third party escrow agent conditioned on Defendants producing verification of debt . . . ; (2) Conversion of the original Promissory Note to a 'check' by stamping it "Pay to the Order of (...) without Recourse" and have [sic] been paid in full; (3) there was misrepresentation, and/or misleading information, and/or false statements in the mortgage documents, which vitiates a contract, hence there is no debt[.]" Am. Compl. ¶ 14.2, ECF No. 45. None of these theories, also alleged in her First COA, entitles Del Piano to the relief she seeks.

The court begins by examining the Self-Executing Agreement that Del Piano sent to Defendants. Del Piano says the document was a tender of full payment entitling her to a discharge of her debt under U.C.C. section 3-603, codified in Hawaii as section 490:3-603 of the Hawaii Revised Statutes. That section states:

(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right ...


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