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William E. Newcomb, Also Known As Bill Newcomb v. Cambridge Home Loans

March 20, 2012


The opinion of the court was delivered by: David Alan Ezra United States District Judge


MOTION TO DISMISS On March 5, 2012, the Court heard Defendants Option One Mortgage Corporation, American Home Mortgage Servicing, Inc., and Deutsche Bank National Trust Company's (collectively "Moving Defendants") Motion to Dismiss. Terry G. Oppermann, Esq., appeared on behalf of Plaintiff William Newcomb ("Plaintiff"); Chanelle M. Fujimoto, Esq., appeared at the hearing on behalf of Moving Defendants. On March 13, 2012, the Court held a further hearing on the Motion. Mr. Oppermann appeared on behalf of Plaintiff; Ms. Fujimoto appeared on behalf of Moving Defendants. After reviewing the Motion and the supporting and opposing memoranda, the Court GRANTS IN PART AND DENIES IN PART Moving Defendants' Motion to Dismiss WITH LEAVE TO AMEND. (Doc. # 37.)


On or about October 2005, Plaintiff procured a mortgage loan from Defendant Cambridge Home Loans, Inc. ("Cambridge") in the approximate amount of $800,000 for real property located at 77-107 Queen Kalama Ave., Kailua-Kona, HI 96740. ("SAC," Doc. # 36, ¶ 2). Cambridge subsequently sold or assigned the loan to Option One Mortgage Corporation ("Option One"), American Home Mortgage Servicing, Inc. ("American"), and Deutsche Bank National Trust Company ("Deutsche Bank"). (Id. ¶ 3.)

On October 6, 2009, Plaintiff filed a complaint in the Third Circuit Court of the State of Hawaii. ("Compl.," Doc. # 1-1.) Plaintiff brought thirteen state and federal claims:

* Truth-In-Lending Act ("TILA") Violation (id. ¶ 8).

* Real Estate Settlement Procedures Act ("RESPA") Violation (id. ¶ 8).

* Home Ownership Equity Protection Act ("HOEPA") Violation (id. ¶ 9).

* Fair Credit Report Act ("FCRA") Violation (id. ¶ 10).

* Gramm-Leach-Bliley Act (GLBA) Violation (id. ¶ 11).

* Unfair and Deceptive Trade Practices Act ("UDAP") Violation (id.

¶ 12).

* Negligent or Intentional Concealment (id. ¶ 13).

* Breach of Contract (id. ¶ 14).

* Rescission (id. 15).

* Conversion (id. ¶ 16).

* Unjust Enrichment (id. ¶ 16).

* Breach of Implied Covenant of Fair Play and Good Faith (id. ¶ 17).

* Breach of Professional or Fiduciary Duty (id. ¶ 18).

On November 30, 2009, the complaint was removed to federal court.

(Doc. # 1.) On December 16, 2009, Moving Defendants filed a motion to dismiss the complaint for failure to state a claim. (Doc. # 6.) On April 16, 2010, the Court dismissed the complaint and granted Plaintiff leave to amend.*fn1 (Doc. # 21.) Plaintiff failed to timely file an amended complaint, and on May 20, 2010, the Clerk of Court entered judgment in favor of Defendants. (Doc. # 23.)

On May 10, 2011, Plaintiff filed a Motion to Set Aside Clerk's Judgment in a Civil Case, on the grounds that his attorney's death precluded him from timely filing an amended complaint. (Docs. # 25.) On June 23, 2011, the Court granted Plaintiff'smotion. (Doc. # 28.)

On August 24, 2011, Plaintiff filed his First Amended Complaint ("FAC"). (Doc. # 29.) Plaintiff's FAC was identical to Plaintiff's original Complaint except for a few typographical errors and the omission of the TILA claim. (See Id.) Moving Defendants moved to dismiss the FAC, and on October 27, 2011, the Court granted Moving Defendants' Motion pursuant to the law of the case doctrine. (Docs. # 30, 35.) In the Order, the Court stated

Plaintiff may not refile an amended complaint that is substantively identical to either the FAC or the original Complaint. The amended complaint must clearly state how each of the named defendants have injured Plaintiff, and it must also clearly identify the statutory provisions, if any, under which Plaintiff's claims are brought. All of this must be done clearly and coherently; the Court will not tolerate confused and unorganized pleadings. A failure to comply with any aspect of these directions will result in dismissal of these proceedings with prejudice. (Doc. # 35, at 9--10.)

On December 23, 2011, Plaintiff filed the present Second Amended Complaint ("SAC"). (Doc. # 36.) According to the SAC, on or about June or July of 2005, an agent from Cambridge Home Loans contacted Plaintiff and suggested that Cambridge could combine Plaintiff's existing first and second loans on the property. (Id. ¶ 16.) Plaintiff allowed the agent to pull his credit score, after which the agent called Plaintiff almost daily for 30 days trying to, and eventually succeeding in, convincing Plaintiff to enter into a new loan with Cambridge. (Id.) Plaintiff, over the phone, provided the agent with his financial information, including that his income was about $60,000 per year, that the major portion of the income was rental income, and that he was retired and disabled. (Id.) The SAC also alleges that the agent insisted that Plaintiff use a particular appraiser and that Plaintiff had to assume the expense of having that appraiser travel from Hilo to Plaintiff's Kailua-Kona property. (Id.) The appraiser valued Plaintiff's property at about $1.1 million, which Plaintiff now believes was inflated for the purpose of qualifying him for the $800,000 loan. (Id.) The fee for the appraisal was $2,000. (Id.)

The SAC also alleges that the agent stated the new loan would carry a lower interest rate, but that when Plaintiff received the loan documents to sign, the documents included an "interest only" rider for a period of five years. (Id.) Plaintiff asserts that the rider had not been discussed earlier and that he was not given adequate time to assess it. (Id.) The SAC also alleges that the loan application falsely stated Plaintiff's income at $120,000 per year, and when Plaintiff questioned the false statement, the agent assured him that that was common practice in the industry. (Id.) Plaintiff further asserts that he did not receive certain disclosures, such as a Good Faith Estimate. (Id.)

On January 6, 2012, Moving Defendants filed the instant Motion to Dismiss. (Doc. # 37.) Plaintiff filed an Opposition to the Motion on February 13, 2012. (Doc. # 45.) On February 17, 2012, Defendants filed a Reply. (Doc. # 46.)


I. Motion to Dismiss for Failure to State a Claim Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure

("Rule"), a motion to dismiss will be granted where the plaintiff fails to state a claim upon which relief can be granted. A complaint may be dismissed as a matter of law for one of two reasons: "(1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable legal claim." Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984) (citation omitted). "A trial court may dismiss a claim sua sponte under [Rule] 12(b)(6). Such a dismissal may be made without notice where the claimant cannot possibly win relief." Omar v. Sea--Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987). Allegations of fact in the complaint must be taken as true and construed in the light most favorable to the plaintiff. See Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).

A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555--56 (2007). However, in providing grounds for relief, a plaintiff must do more than recite the formulaic elements of a cause of action. See id. at 556--57; see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988) ("[C]onclusory allegations without more are insufficient to defeat a motion to dismiss for failure to state a claim.") (citation omitted). "The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions," and courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations and citations omitted). Thus, "bare assertions amounting to nothing more than a formulaic recitation of the elements" of a claim "are not entitled to an assumption of truth." Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[T]he non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.") (internal quotations and citations omitted).

A court looks at whether the facts in the complaint sufficiently state a "plausible" ground for relief. See Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949. When a complaint fails to adequately state a claim, such deficiency should be "exposed at the point of minimum expenditure of time and money by the parties and the court." Id. at 558 (citation omitted). If a court dismisses the complaint or portions thereof, it must consider whether to grant leave to amend. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (finding that leave to amend should be granted "if it appears at all possible that the plaintiff can correct the defect") (internal quotations and citations omitted).

II. Federal Rule of Civil Procedure 8 Rule 8 requires that a complaint include a "short and plain statement of the claim," Fed. R. Civ. P. 8(a)(2), and that each allegation "be simple, concise, and direct." Fed. R. Civ. P. 8(d)(1). A complaint that is so confusing that its "'true substance, if any, is well disguised'" may be dismissed sua sponte for failure to satisfy Rule 8. Hearns v. San Bernardino Police Dep't, 530 F.3d 1124, 1131 (9th Cir. 2008) (quoting Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir. 1969); see also McHenry v. Renne, 84 F.3d 1172, 1180 (9th Cir. 1996) ("Something labeled a complaint but written . . . , prolix in evidentiary detail, yet without simplicity, conciseness and clarity as to whom plaintiffs are suing for what wrongs, fails to perform ...

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