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Jose Haro and Silvia Velez v. the Bank of New York Mellon Corporation; Bank of America

March 16, 2012

JOSE HARO AND SILVIA VELEZ,
PLAINTIFFS,
v.
THE BANK OF NEW YORK MELLON CORPORATION; BANK OF AMERICA, N.A.; JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS 1-10; DOE CORPORATIONS 1-10; AND DOE ENTITIES 1-10, DEFENDANTS.



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

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT

Before the Court is Defendants The Bank of New York Mellon ("BONY") and Bank of America, N.A.'s ("BANA," collectively "Defendants"), Motion to Dismiss Plaintiffs' Complaint ("Motion"), filed November 8, 2011. Plaintiffs Jose Haro and Silvia Velez ("Plaintiffs") filed their memorandum in opposition on January 31, 2012, and Defendants filed their reply on February 13, 2012. The Court finds this matter suitable for disposition without a hearing pursuant to Local Rule 7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i ("Local Rules"). After careful consideration of the Motion, supporting and opposing memoranda, and the relevant legal authority, Defendants' Motion is HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

BACKGROUND

On August 22, 2006, Plaintiffs signed a mortgage agreement and note ("Mortgage") with non-party Countrywide Home Loans, Inc. ("Countrywide"), secured by their property located at 827 Kelawea Street, Lahaina, Hawaii 96761 ("the Property"). Plaintiffs allege that BANA is the servicer of the Mortgage and that BONY is the Mortgagee. Plaintiffs seek rescission of the Mortgage and damages. Plaintiffs filed the instant action on October 7, 2011. [Complaint at ¶¶ 8-10; Exh. 1 (Mortgage*fn1 ).]

Plaintiffs allege in Count I that, that they were not provided with notification that their Mortgage had been assigned from original lender, Countrywide, to BONY. They allege that BONY did not provide them with its identity as the new creditor, the date of the transfer, or where the transfer document was recorded, in violation of Regulation Z, section 131(g) of the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1641(g). [Id. at ¶¶ 14-20.]

Plaintiffs allege in Count II that, on an unspecified date, BANA purchased hazard insurance for the Property in excess over the market value of the insurance, and deducted the amount from Plaintiffs' escrow account. They claim that the Mortgage terms under which BANA procured insurance on their behalf are unconscionable. Plaintiffs seek a refund and credit for the amounts deducted, and punitive damages. [Id. at ¶¶ 21-24.]

I. Defendants' Motion

Defendants argue that the Complaint is devoid of factual allegations or cognizable causes of action, and asks the Court to dismiss the Complaint without leave to amend. [Mem. in Supp. of Motion at 1-2.]

As to Count I's TILA claims, Defendants argue that the claims fail because Plaintiffs fail to allege any facts or attach any exhibits indicating that the Mortgage was in fact assigned to BONY, or that BONY failed to supply Plaintiffs with notice. With respect to the claim for rescission, they argue that the claim is time-barred because it was not filed within three-years of August 22, 2006. [Id. at 5-8.]

As to the claim for damages under TILA, they argue that it is vague, conclusory and insufficiently pled. According to Defendants, Plaintiffs fail to allege that they have suffered any actual damage, such as a finance charge, due to the alleged lack of disclosure. Further, Defendants argue that Plaintiffs fail to show detrimental reliance on the inadequate disclosure. [Id. at 8-9.]

As to the Count II claim for unconscionability, Defendants argue that it is not an independent cause of action and that Defendants were not a party to the Mortgage. Defendants ask the Court to dismiss both counts with prejudice. [Id. at 10-15.]

II. Plaintiffs' Memorandum in Opposition

Plaintiffs argue in their memorandum in opposition that it would be premature to dismiss their claims at this stage. They also state that "Defendants' argument against PLAINTIFFS' TILA rescission claim is needless, as the PLAINTIFFS make no such claim for rescission and [BANA] constitutes a separate party and a separate cause of action to Count II." [Mem. in Opp. at 2.] They state that they made no attempt to bring a TILA rescission claim against either Defendant. [Id. at 6.]

Plaintiffs maintain that they have satisfied Fed. R. Civ. P. 8(a), and that they are likely to have evidentiary support for their claims after a reasonable opportunity for further investigation or discovery. Their opposition clarifies that they assert the following causes of action: (1) claims against BONY for violations of TILA § 1640(a)(1) and (g); (2) a claim against BANA for unconscionability based on the costs of property insurance. Plaintiffs seek "a refund and credit of the unconscionable insurance cost, punitive damages, consequential damages, attorney's fees and costs and rescission of the mortgage contract for the Defendants' unconscionable acts." [Id. at 5-6.]

With respect to the Count II for unconscionability against BANA, Plaintiffs argue that a loan servicer has "full independent decision making separate from the lender and they are deriving the benefit of the exorbitant fee, making the servicer the sole responsible party in Count II." [Id. at 6.] Plaintiffs also assert that BANA, as the servicer, has a fiduciary duty to the Plaintiffs. [Id. at 7.]

III. Defendants' Reply

In reply, Defendants reiterate that Plaintiffs' claims should be dismissed with prejudice because they are not based on actionable legal theories. First, the Count I claim for TILA damages fails to state a claim because Plaintiffs fail to allege that they suffered any actual damages, and instead relies on vague, conclusory allegations. They further argue that the opposition does not address the detrimental reliance requirement. [Reply at 3-4.] Next, Defendants argue that they were not parties to the Mortgage, and Plaintiffs cannot claim that they are liable for any allegedly unconscionable terms therein. They further note that Plaintiffs have not set forth any specific allegations concerning whether BANA actually procured and charged Plaintiffs for any hazard insurance, or what the unconscionable rate was comparted to a market rate. Last, they argue that BANA does not have a fiduciary relationship with Plaintiffs. [Id. at 6-7.]

STANDARD

Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a claim for "failure to state a claim upon ...


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