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Lac Hoilien v. Onewest Bank

April 19, 2012


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


GRANTING PLAINTIFF LEAVE TO AMEND On April 18, 2012, the Court heard Defendants' Motion to Dismiss. Richard E. Lehrfeld, Esq., appeared at the hearing on behalf of Plaintiff Lac Hoilien ("Plaintiff"); David B. Rosen, Esq., appeared at the hearing on behalf of Defendants OneWest Bank, FSB ("OneWest") and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively, "Moving Defendants"). After reviewing the motion and the supporting and opposing memoranda, the Court GRANTS Moving Defendants' Motion to Dismiss. (Doc. # 26.)


According to the First Amended Complaint ("FAC") and documents of which the Court takes judicial notice, on or about March 9, 2007, Plaintiff Lac Hoilien ("Plaintiff") entered into a loan transaction for $520,000 with IndyMac Bank, F.S.B. ("IndyMac"), which was secured by a mortgage encumbering real property located at 95 Wilikona Place, Wailuku, HI 96793 (the "Subject Property").*fn1 ("RJN," Doc. # 29, Ex. C; see also "FAC," Doc. # 24 ¶¶ 9--10.) The Mortgage was recorded in the State of Hawaii Bureau of Conveyances ("Bureau" or "Bureau of Conveyances") on April 13, 2007.*fn2 (RJN, Ex. C.) IndyMac is listed on the Mortgage as the lender, and MERS is listed as the mortgagee "acting solely as a nominee for Lender and Lender's successors and assigns." (Id.) Plaintiff alleges that she had the sole ownership interest in the Subject Property when an IndyMac representative offered to loan her money to pay off her "then existing loan of approximately $200,000.00 and provide her an additional sum of approximately $300,000.00." (FAC ¶ 7.) Plaintiff alleges that IndyMac told her that after it "paid off [her existing loan] she would receive the balance" of the $520,000 loan through an escrow account with Defendants Stewart Title Guaranty Co., Inc. ("Stewart"), and Richmond Title Services, Inc ("Richmond"), but that she never received the money. (Id. ¶ 9.)

MERS assigned the Mortgage to OneWest by an Assignment of Mortgage recorded in the Bureau of Conveyances ("Bureau") on January 11, 2010. (RJN, Ex. D.) On January 11, 2010, OneWest, as mortgagee, recorded in the Bureau a Notice of Mortgagee's Intention to Foreclose Under Power of Sale. (Id., Ex. E.) On March 24, 2010, OneWest recorded in the Bureau a Mortgagee's Affidavit of Foreclosure Under Power of Sale. (Id., Ex. F.) On July 12, 2010, a Quitclaim Deed naming OneWest as grantee was recorded in the Bureau. (Id., Ex. G.)

On July 27, 2010, OneWest commenced an ejectment action in the District Court of the Second Circuit of Hawaii ("Maui District Court"). (Id., Ex. H.) On January 13, 2011, the Maui District Court entered a Judgment for Possession and a Writ of Possession in favor of OneWest.*fn3 (Id., Exs. I--J.) According to Defendants, on February 9, 2011, Plaintiff appealed the ejectment action, which is currently pending in the Intermediate Court of Appeals of the State of Hawaii. (See Doc. # 26 at 6.)

On June 6, 2011, Plaintiff, proceeding pro se, filed a Complaint in this Court against Defendants OneWest and MERS. (Doc. # 1.) On November 20, 2011, Plaintiff, represented by counsel, filed the present First Amended Complaint against Defendants OneWest, MERS, Stewart, and Richmond. (Doc. # 24.) The FAC asserts the following claims:

! Count I: Injunctive Relief (FAC ¶¶ 44--52); ! Count II: Wrongful Sale of Subject Property (id. ¶¶ 53--54); ! Count III: Fraudulent Concealment--Tolling of Statute (id. ¶¶ 55--56); ! Count IV: Unfair or Deceptive Acts or Practices (id. ¶¶ 57--68); ! Count V: Truth in Lending Act Violations: Loan Rescission and Recoupment (id. ¶¶ 69--85); ! Count VI: Truth in Lending Act Violations: Loan Damages (id. ¶¶ 86--88); ! Count VII: Real Estate Settlement Procedures Act "RESPA"

Violations (id. ¶¶ 89--91); ! Count VIII: Fraud (id. ¶¶ 92--100); ! Count IX: Sherman Anti-Trust Act Violations (id. ¶¶ 101--113);

! Count X: Hawaii Anti-Trust/Anti-Monopoly Acts Violations (id. ¶¶ 114--117);

! ! Count XI: Failure to Act in Good Faith (id. ¶¶ 118--123); ! Count XII: Unjust Enrichment (id. ¶¶ 124--129); ! Count XIII: Mistake (id. ¶¶ 130--131); ! Count XIV: Hawaii Bureau of Conveyance Regulations Violations (id. ¶¶ 132--138); ! Count XV: Improper Restrictions Resulting from Securitization

Leaves Note and Mortgage Unenforceable (id.

¶¶ 139--146); ! Count XVI: Wrongful Conversion of Note -- Mortgagor Never Consented to Securitization (id. ¶¶ 147--152); ! Count XVII: Breach of Contract (id. ¶¶ 153--158); ! Count XVIII: Conversion (id. ¶¶ 159--162).

On December 23, 2011, Defendants OneWest and MERS filed the instant Motion to Dismiss First Amended Complaint. ("Mot.," Doc. # 26.) On February 13, 2012, Defendants entered a Notice of No Opposition Having Been Filed to their Motion to Dismiss after Plaintiff failed to submit an opposition by February 6, 2012, the filing deadline. (Doc. # 35.) On February 17, 2012, Plaintiff's counsel informed this Court that counsel's wife, who also acted as his sole legal assistant, had been in a car accident on February 6, 2012, and that consequently, counsel was unable to timely file an Opposition. In light of counsel's personal circumstances, the Court continued the hearing and gave Plaintiff until March 28, 2012 to file an Opposition.

On March 28, 2012, Plaintiff filed her Opposition to the Motion. ("Opp'n," Doc. # 38.) In the Opposition, Plaintiff's counsel explained that the FAC had been erroneously entwined with a filing from another case, "and the wrong Amended Complaint was filed in this case." (Id. at 4.) Plaintiff's counsel further explained that it was not until February 27, 2012 that he "was made aware by the Court that his pleadings were incorrect." (Id.) Plaintiff attached the "correct" FAC to the Opposition, requesting that the Court "allow and consider the pleading to be superseded by the attached FAC." (Id. at 5.)

The Court declines Plaintiff's request. A request for leave to amend should have been brought by a separation motion, not in an opposition to Defendants' motion to dismiss. Federal Rule of Civil Procedure 15(a)(1) allows a party to amend its pleading once as a matter of course within: (a) 21 days after serving it, or (B) 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier. However, where, as here, a party has already amended its pleading once as a matter of course, any subsequent amendment is permitted "only with the opposing party's written consent or the court's leave." Fed. R. Civ. P. 15(a)(2). Since Plaintiff has neither properly requested nor received leave from the Court to amend her Complaint, the FAC remains the operative complaint.

On March 4, 2012, Defendants submitted a Reply in further support of their Motion to Dismiss. (Doc. # 39.)


I. Federal Rule of Civil Procedure 12(b)(6)

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. Review is limited to the contents of the complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). 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). In providing grounds for relief, however, 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 Serv., 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 plaintiff must include enough facts to raise a reasonable expectation that discovery will reveal evidence and may not just provide a speculation of a right to relief. Id. at 586. 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

Federal Rule of Civil Procedure 8 mandates 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 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 the essential functions of a complaint."); Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 673 (9th Cir. 1981) ("A complaint which fails to comply with [Rule 8] may be dismissed with prejudice[.]").

Put slightly differently, a complaint may be dismissed for failure to comply with Rule 8 where it fails to provide the defendants fair notice of the wrongs they have allegedly committed. See McHenry, 84 F.3d at 1178--80 (affirming dismissal of complaint where "one cannot determine from the complaint who is being sued, for what relief, and on what theory, with enough detail to guide discovery"); cf. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1105 n. 4 (9th Cir. 2008) (finding dismissal under Rule 8 was in error where "the complaint provide[d] fair notice of the wrongs allegedly committed by defendants and [did] not qualify as overly verbose, confusing, or rambling"). Rule 8 requires more than "the-defendant-unlawfully-harmed-me accusation[s]" and "[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do." Iqbal, 129 S. Ct. at 1949 (citations and quotations omitted). "The propriety of dismissal for failure to comply with Rule 8 does not depend on whether the complaint is wholly without merit." McHenry, 84 F.3d at 1179.

The court may "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal, 129 S. Ct. at 1950. Legal conclusions must be supported by factual allegations. Id. "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id.

III. Federal Rule of Civil Procedure 9(b)

Federal Rule of Civil Procedure 9(b) requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). Under Ninth Circuit law, "Rule 9(b) requires particularized allegations of the circumstances constituting fraud." In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547--48 (9th Cir. 1994) (en banc), superseded on other grounds by 15 U.S.C. § 78u-4.

In their pleadings, plaintiffs must include the time, place, and nature of the alleged fraud; "mere conclusory allegations of fraud are insufficient" to satisfy this requirement. Id. at 1548 (quoting Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989)). "[T]he circumstances constituting the alleged fraud [must] 'be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.'" Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 10104, 1019 (9th Cir. 2001)); see also Moore, 885 F.2d at 540 (finding that Rule 9(b) requires a plaintiff to attribute particular fraudulent statements or acts to individual defendants). However, "[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P. 9(b); see also In re GlenFed, Inc. Sec. Litig., 42 F.3d at 1547 ("We conclude that plaintiffs may aver scienter . . . simply by saying that scienter existed."); Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir. 1973) (finding that Rule 9(b) "only requires the identification of the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations" (citations omitted)).

A motion to dismiss for failure to plead with particularity is the functional equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state a claim. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). In considering a motion to dismiss, the court is not deciding the issue of "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984).


Moving Defendants contend that the FAC is based on conclusory and unsupported allegations and therefore should be dismissed for failure to comply with Federal Rule of Civil Procedure 12(b)(6).*fn4 This Court agrees.

I. Role of MERS

It appears that Plaintiff's allegations are based in part on her misconception of MERS' role in the mortgage lending process. For example, Plaintiff alleges that IndyMac or OneWest "sold and/or transferred the Note and Mortgage to, or through 'MERS' without proper endorsement or assignments during the life of the loan, resulting in said Defendants not having the right and interest to foreclose upon the subject property." (FAC ¶ 33.) Plaintiff further alleges that "none of said Defendants [IndyMac, OneWest, or MERS] have Plaintiff's original Note and as a consequence, they have no authority to enforce the provisions of the Mortgage and Note against Plaintiff, or Plaintiff's property." (Id. ¶ 34.)

As a preliminary matter, the Court notes that MERS acted solely as a nominee for the Lenders. (See RJN, Ex. C.) Moreover, MERS assigned its interest in the Mortgage to OneWest prior to OneWest's initiation of foreclosure proceedings on January 10, 2010. (See id., Exs. D, E.) As such, MERS did not have any role in the foreclosure process, which was conducted solely by OneWest. (See id., Ex. F.) Therefore, Plaintiff's assertions that MERS attempted to enforce provisions of the Mortgage or Note are wholly without merit.

Further, insofar as Plaintiff's claims are based on allegations that MERS' involvement invalidity split the Note and Mortgage, the Court concludes that these contentions are not tenable in light of the Ninth Circuit's decision in Cervantes v. Countrywide Home Loans, which expressly rejected the "note-splitting" theory and upheld the MERS system. See 656 F.3d 1034, 1044 (9th Cir. 2011) ("Even if we were to accept the plaintiffs' premises that MERS is a sham beneficiary and the note is split from the deed, we would reject the plaintiffs' conclusion that, as a necessary consequence, no party has the power to foreclose."); see also Velasco v. Sec. Nat'l Mortg. Co., --- F. Supp. 2d ---, 2011 WL 4899935, at *11 (D. Haw. Oct. 14, 2011) ("[A]ny argument that MERS lacked the authority to assign its right to foreclose and sell the property based on its status as 'nominee' cannot stand in light of Cervantes."); Johnson v. Homecomings Fin., 2011 WL 4373975, at *7 (S.D. Cal. Sept. 20, 2011) (rejecting the note-splitting theory as a "discredited theory.").*fn5

Accordingly, Plaintiff's allegations that the foreclosure was improper solely because of MERS' involvement are not viable.

II. Count I: Injunctive Relief

Plaintiff seeks an injunction to enjoin OneWest from selling, transferring, or "denying Plaintiff possession" of the Subject Property during the pendency of the action. (FAC ¶ 45.)

As an initial matter, to the extent that Plaintiff seeks a preliminary injunction, she may not do so in a complaint. Pursuant to Local Rule 10.2, an "application for a temporary restraining order or preliminary injunction shall be made in a document separate from the complaint."

Moreover, the Court follows the well-settled rule that a claim for injunctive relief cannot stand as an independent cause of action. See, e.g., Long v. JP Morgan Chase Bank, Nat'l Ass'n, --- F. Supp. 2d ---, 2012 WL 220791, at * 10

(D. Haw. Jan. 25, 2012) (explaining that "injunctive relief standing alone is not a cause of action"); Jensen v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1201 (E.D. Cal. 2010) ("A request for injunctive relief by itself does not state a cause of action . . . . A pleading can . . . request injunctive relief in connection with a substantive claim, but a separately pled claim or cause of action for injunctive relief is inappropriate.") (internal quotations and citations omitted); Plan Pros, Inc. v. Zych, 2009 WL 928867, at *2 (D. Neb. Mar. 31, 2009) (stating that "no independent cause of action for injunction exists"); Motley v. Homecomings Fin., LLC, 557 F. Supp. 2d 1005, 1014 (D. Minn. 2008) (same); see also Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir. 2008). Injunctive relief may ...

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