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Northern Trust, Na v. Kenneth I. Wolfe

May 31, 2012

NORTHERN TRUST, NA,
PLAINTIFF,
v.
KENNETH I. WOLFE, DEFENDANT.



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

ORDER GRANTING NORTHERN TRUST'S MOTION TO DISMISS DEFENDANT KENNETH I. WOLFE'S COUNTERCLAIM AND DENYING NORTHERN TRUST'S MOTION FOR SUMMARY JUDGMENT AS TO THE COMPLAINT FILED HEREIN ON AUGUST 30, 2011, INTERLOCUTORY DECREE OF FORECLOSURE, AND ORDER OF SALE

Before the Court are: Plaintiff/Counterclaim Defendant Northern Trust, NA's ("Northern Trust") Motion to Dismiss Defendant Kenneth I. Wolfe's Counterclaim ("Motion to Dismiss"), filed on December 7, 2011; and Northern Trust's Motion for Summary Judgment as to the Complaint Filed Herein on August 30, 2011, Interlocutory Decree of Foreclosure, and Order of Sale ("Motion for Summary Judgment"), filed on January 26, 2011. Defendant/Counterclaimant Kenneth I. Wolfe ("Wolfe") filed a memorandum in opposition to each motion on April 16, 2012. Northern Trust filed a reply in support of each motion on April 23, 2012. These matters came on for hearing on May 7, 2012. Appearing on behalf of Northern Trust were Jonathan Lai, Esq., and Michael Bird, Esq., and appearing on behalf of Wolfe was John Harris Paer, Esq. After careful consideration of the motions, supporting and opposing memoranda, and the arguments of counsel, Norther Trust's Motion to Dismiss is HEREBY GRANTED and Northern Trust's Motion for Summary Judgment is HEREBY DENIED for the reasons set forth below.

BACKGROUND

Northern Trust filed the instant action on August 30, 2011 based on diversity jurisdiction. [Complaint at ¶ 3.] The Complaint seeks foreclosure of property securing a loan that Northern Trust made to Wolfe.

Wolfe filed his Answer to Complaint ("Answer"), with a Setoff and Counterclaim ("Counterclaim"), on November 17, 2011. [Dkt. no. 12.] The Counterclaim asserts the following claims: unfair and deceptive acts and practices ("UDAP") in violation of Haw. Rev. Stat. Chapter 480 ("Count I"); unconscionability ("Count II"); fraud and misrepresentation ("Count III"); negligence ("Count IV"); breach of contract ("Count V"); violation of the duty of good faith and fair dealing ("Count VI"); and promissory estoppel ("Count VII").

I. Motion for Summary Judgment

Wolfe executed a Promissory Note in favor of Northern Trust in the principal amount of $1,080,000.00, at an interest rate of 7.000% ("the Note"). The date of the Note is August 22, 2007.*fn1 [Motion for Summary Judgment, Aff. of Shawn T. Roland ("Roland Aff."), Exh. A at 1.] The Note states, in pertinent part:

PAYMENT. I will pay this loan in one principal payment of $1,080,000.00 plus interest on August 22, 2010. This payment due on August 22, 2010, will be for all principal and all accrued interest not yet paid. In addition, I will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning September 22, 2007, with all subsequent interest payments to be due on the same day of each month after that. . . . [Id.] The Note is secured by a Mortgage on Maniniowali Phase II, Lot 17, Kailua Kona, Hawai`i ("the Property"). The Mortgage was recorded in the Bureau of Conveyances on September 7, 2007 as Document Number 2007-159365. [Roland Aff., Exh. B at 1.]

Northern Trust presented an affidavit from Shawn T. Roland, the Second Vice President for "The Northern Trust Company as successor by merger to Northern Trust, NA ('Northern Trust [Company]')." [Roland Aff. at ¶ 1.] Roland states that Wolfe is in default under the terms of the Note and Mortgage because Wolfe has refused to make his required full payment, in spite of "due and proper demand made upon Defendant Wolfe for payment of the amounts due and owing to Northern Trust [Company]" [Id. at ¶¶ 4-5.] Roland certifies that Northern Trust Company is still the holder of the Note and Mortgage and that, as of January 25, 2012, Wolfe owed Northern Trust Company the following amounts:

Principal Balance: $1,069,079.32 Interest to 08/30/11: $59,311.93438 Interest from 08/31/11 to 01/25/12: $34,444.857 Accumulated Late Charges: $27.63 TOTAL: $1,162,863.471

[Id. at ¶ 7, Exh. C (Pay-Off Statement dated 1/25/12).] Interest until August 30, 2011 accrued at 5.000% per annum, resulting in a per diem rate of $146.4492219. Effective August 31, 2011, the interest rate was 8.000% per annum, resulting in a per diem rate of $234.3187551. In addition, Northern Trust Company also continues to accrue attorneys' fees and costs, which are also secured by the Note and Mortgage. [Roland Aff. at ¶¶ 8-9.] Roland states that, under the terms of the Note and Mortgage, Northern Trust Company is entitled to foreclose upon its first mortgage lien. [Id. at ¶ 11.]

Northern Trust filed a First Amended Notice of Pendency of Action ("Notice") on August 31, 2011. [Dkt. no. 5.] The Notice was recorded in the Bureau of Conveyances on September 1, 2011 as Document Number 2011-140442. [Motion for Summary Judgment, Decl. of Michael C. Bird ("Bird Decl.") at ¶ 8.] Northern Trust asserts that all parties to the foreclosure of the Mortgage have been named and served. [Id. at ¶ 9.]

In the Motion for Summary Judgment, Northern Trust argues that it served the Complaint on Wolfe via certified mail, postage prepaid, return receipt requested to Wolfe's address in New York, and there is no record that Wolfe is a servicemember to whom the Servicemembers Civil Relief Act of 2003 applies. [Mem. in Supp. of Motion for Summary Judgment at 6-7 (citing Bird Decl., Exhs. 2-3).] Further, Northern Trust does not need to name any other parties, and therefore, any and all other or further encumbrances or purchasers of the Mortgaged Property, or any part thereof, whose interest arises by, through and under Defendant Wolf, and from and after the recording of Northern Trust's First Amended NOPA should be perpetually barred from all rights, title, and interest in the subject property, or any part thereof. [Id. at 8 (citing Haw. Rev. Stat. § 634-51).]

Northern Trust argues that Wolfe's failure to make the full payment required under the Note and Mortgage, and Wolfe's failure to respond to due and proper demand for the payment of the amounts owed, constitute default under the Note and Mortgage. [Id. at 8-9.] Northern Trust argues that it is entitled to foreclose upon its first mortgage lien and its interest in the Property and that it is entitled to its reasonable attorneys' fees and costs associated with the foreclosure. [Id. at 9 (citing Roland Aff., Exh. A (Note); Exh B. (Mortgage) at pg. 4, ¶ 16 ("Payment Default"), pg. 4, ¶ 18 ("Break Other Promises"), pg. 5 ¶ 14 ("Judicial Foreclosure"), pg. 5 ¶ 18 ("Other Remedies"), pg. 5 ¶ 19 ("Sale of the Property"), pg. 6 ¶ 3 ("Attorneys' Fees; Expenses")).]

Northern Trust argues that Haw. Rev. Stat. §§ 667-1 through 667-4 provide for judicial foreclosure of a mortgage and, based on the pleadings and submissions with the Motion for Summary Judgment, Northern Trust has an enforceable claim. Northern Trust also argues that there are no genuine issues of material fact, and therefore it is entitled to judgment as a matter of law. In addition, Northern Trust requests the entry of final judgment in its favor on the Complaint pursuant to Fed. R. Civ. P. 54(b), and the entry of a separate judgment on the Counterclaim pursuant to Fed. R. Civ. P. 58. [Id. at 10.]

A. Wolfe's Opposition

In his memorandum in opposition, Wolfe states that Kurt Nielsen ("Nielsen"), the loan broker for the transaction at issue, led Wolfe to believe that Nielsen was a dual agent, representing both Northern Trust and Wolfe. Nielsen prepared Wolfe's loan application and other documents necessary for Wolfe's application and the closing of the transaction. [Def. Decl. at ¶ 3.] Nielsen also led Wolfe to believe that, when the loan matured, Wolfe would be able to obtain a "permanent financing" arrangement from Northern Trust without Wolfe having to qualify for a loan again. According to Wolfe, were it not for that understanding, he would have found a lender who could guarantee permanent financing. Thus, Wolfe entered into the loan in reliance on those representations. [Id. at ¶¶ 5-6.]

Wolfe made all monthly payments as they became due, until the final payment became due. When the loan became due in August 2010, Wolfe offered to continue making the mortgage payments as he had been doing. According to Wolfe, Northern Trust told him to send in his financial documents and that they would work out a new loan or other permanent financing plan. Northern Trust said that it did not intend to foreclose. [Id. at ¶¶ 9-12.]

Northern Trust subsequently informed Wolfe that the loan to value ratio had changed and that Wolfe would have to either pay $300,000 or offer new collateral for that amount to obtain a permanent financing arrangement. Wolfe protested, but Northern Trust refused to honor its prior representations that it would arrange for permanent financing. All Northern Trust offered was a loan extension in exchange for one percent of the loan amount. Wolfe objected to the amount, and Northern Trust never granted a loan extension or other permanent financing. [Id. at ¶¶ 13-15.]

According to Wolfe, at the time of the permanent financing dispute, the Property was worth approximately $1,000,000.00. The lot next to the Property, which Wolfe states was inferior to the Property, sold for $1,000,000.00. Wolfe offered to either give Northern Trust a deed in lieu of a foreclosure or allow a short sale, but Northern Trust refused.

[Id. at ¶¶ 17-19.] Northern Trust also refused to accept continuing payments on the Mortgage. [Id. at ¶ 21.]

After September 2010, Wolfe did not hear from Northern Trust until Wolfe received service of a notice of non-judicial foreclosure in early May 2011. Wolfe did not oppose the non-judicial foreclosure and reiterated his offer to allow a short sale or to grant a deed in lieu of foreclosure, but Northern Trust continued to refuse. [Id. at ¶¶ 22-23.]

Wolfe asserts that he has suffered damages because of Northern Trust's actions. He is faced with losing the Property and a possible deficiency. In addition, he has incurred attorneys' fees and various charges, such as postage and travel costs, in responding to Wolfe's actions. [Id. at ¶¶ 24-25.]

Wolfe argues that the Court should deny the Motion for Summary Judgment because of the claims in the Counterclaim. As to the UDAP claim, Wolfe argues that the following representations by Northern Trust created a likelihood of confusion for a reasonable consumer: 1) in 2007, Northern Trust represented that Wolfe could obtain permanent financing without having to re-qualify; 2) in 2010, Northern Trust represented that it did not intend to foreclose; and 3) Northern Trust proceeded toward foreclosure while simultaneously evaluating Wolfe's request for modification. Northern Trust failed to honor its representations, which were material, and its actions constituted a "bait and switch". [Mem. in Opp. to Motion for Summary Judgment at 5-6.] Wolfe argues that allegations of a Chapter 480 violation similar to Count I of his Counterclaim were held to be sufficient to withstand motions to dismiss and motions for summary judgment in Tedder v. Deutsche Bank National Trust Co., Civ. No. 11-00083 LEK-KSC, 2012 WL 1028125 (D. Hawai`i Mar. 23, 2012), and Skaggs v. HSBC Bank, N.A., Civ. No. 10-00247 JMS-KSC, 2010 WL 5390127 (D. Hawai`i Dec. 22, 2010), and 2011 WL 3861373 (D. Hawai`i Aug. 31, 2011). Wolfe argues that Count I is viable and sufficiently pled.

Wolfe argues that, in light of Northern Trust's violations of § 480-2, the Note and Mortgage are void pursuant to Haw. Rev. Stat. § 480-12. Wolfe emphasizes that his UDAP claim is not based on fraud, but merely on the confusion created by Northern Trust's actions. Wolfe notes that a void obligation cannot be revived by an assignment. Wolfe urges this Court to deny the Motion for Summary Judgment because Northern Trust cannot foreclose upon a void obligation. [Id. at 7-10.]

As to the unconscionability claim, Wolfe states that this is a defense. The unconscionable term was the false promise to provide Wolfe with permanent financing without re-qualification. [Id. at 11.]

As to the fraud and misrepresentation claim, the fraudulent misrepresentations were the 2007 promise of permanent financing without re-qualification and the 2010 representation that Northern Trust was not going to foreclose. Wolfe argues that he justifiably relied on these representations and therefore his claims should survive a motion to dismiss or a motion for summary judgment as in Tedder and Skaggs. [Id.]

As to the negligence claim, Wolfe asserts that Northern Trust owed him a duty to be truthful when making representations to solicit his business. Wolfe argues that, when a bank makes false promises to its customers, it exceeds its role as a mere money lender. Northern Trust put him in an unreasonably risky position in which he faces losing the Property and a possible deficiency judgment. Wolfe emphasizes that he is not asserting a claim based on fiduciary duty. He also argues that courts have recognized a negligence claim based on a bank's failure to follow Home Affordable Modification Program ("HAMP") guidelines. [Id. at 11-12 (citing Speleos v. BAC Home Loans Servicing, LP, 755 F. Supp. 2d 304, 310-11 (D. Mass 2010)).*fn2 ] Wolfe therefore argues that he has asserted a valid defense to the foreclosure.

The breach of contract claim is based upon Northern Trust's promise that Wolfe would be able to obtain permanent financing without additional qualification requirements. Northern Trust breached that agreement, and the breach constitutes a defense to the Motion for Summary Judgment. [Id. at 12-13.]

Wolfe argues that Northern Trust's actions were not in good faith, and he contends that there is a special relationship in this case because of the public interest and the fact that the loan agreement was a contract of adhesion. Wolfe argues that the Ninth Circuit has recognized, albeit in the context of a Truth-in-Lending Act ("TILA") violation, that all consumers are inherently at a disadvantage in loan and credit transactions. Wolfe contends that this principle applies even when the case does not involve a TILA violation. [Id. at 13 (citing Semar v. Platte Valley Fed. Savings and Loan Ass'n, 791 F.2d 699, 705 (9th Cir. 1986)).] Wolfe contends that Northern Trust's breach of the covenant of good faith and fair dealing is a defense to the Motion for Summary Judgment. [Id. at 13-14.]

The promissory estoppel claim is based on Northern Trust's oral promises of that it would grant permanent financing and that it would not foreclose. Wolfe alleges that he justifiably relied on those promises to his detriment. Wolfe argues that the consideration was that he would not have entered into the transaction but for the promise of permanent financing without additional qualification requirements. Wolfe argues that his promissory estoppel claim is a defense to the Motion for Summary Judgment. [Id. at 14.]

Finally, Wolfe argues that the Roland Affidavit is defective. Roland is with Northern Trust Company, which Roland states is the successor by merger to Northern Trust, but there is no documentary support for this. Wolfe argues that Roland does not have personal knowledge of the loan at issue because he was not involved in the loan origination. Further, Roland did not produce the demand letter to support his claim that Northern Trust made a proper demand. Wolfe also argues that Exhibit B to the Roland Affidavit "was created for this litigation, and the underlying documents are not attached." [Id. at 15 (citations omitted).]

Wolfe therefore urges the Court to deny Northern Trust's Motion for Summary Judgment.

B. Northern Trust's Reply

In its reply in support of the Motion for Summary Judgment ("Summary Judgment Reply"), Northern Trust first notes that Wolfe's memorandum in opposition to the Motion for Summary Judgment asserts the same arguments as his memorandum in opposition to the Motion to Dismiss. Northern Trust therefore incorporates by reference the arguments it presented in its reply in support of the Motion to Dismiss. [Summary Judgment Reply at 2.]

Northern Trust reiterates that, as a matter of law, it is entitled to summary judgment, interlocutory decree of foreclosure, and a order of sale because: 1) all parties to the foreclosure have been served; 2) Wolfe defaulted under the terms of the Note and Mortgage; and 3) the default entitles Northern Trust to foreclose on the Mortgage. Northern Trust argues that Wolfe has not identified any genuine disputes of material fact in these areas. [Id. at 3.]

As to Wolfe's objections to the Roland Affidavit, Northern Trust points out that corporate officers are presumed to have personal knowledge of their corporation's acts, and employees who are familiar with a business's record-keeping practices can testify from personal knowledge about documents that are admissible business records. Roland therefore does not need to have been a first-hand witness to the transaction at issue in this case. [Id. at 4-5 (citing Barthelemy v. Air Lines Pilots Ass'n, 897 F.2d 999, 1018 (9th Cir. 1990); Nadir v. Blair, 549 F.3d 953, 963 (4th Cir. 2008)).] As to Wolfe's argument that Northern Trust Company is not a party in this action, Northern Trust notes that, because the merger occurred after the filing of the Complaint in this action, Fed. R. Civ. P. 25(c) does not require that Northern Trust be substituted by its successor-in-interest, unless the Court orders substitution in its discretion. [Id. at 5-6.] As to Wolfe's argument that there was no demand letter, Northern Trust states that a Notice of Default, Final Demand for Payment and Notice of Acceleration, dated November 19, 2010, was mailed to Wolfe, and Wolfe's former counsel acknowledged receipt thereof in a December 6, 2010 letter. [Id. at 6 (citing Decl. of Jonathan W.Y. Lai ("Lai Decl."), Exhs. A, B).]

Northern Trust argues that Wolfe has not presented any evidence that Nielsen was Northern Trust's agent. Generally, a mortgage broker is the borrower's agent, and a lender is not liable for the mortgage broker's actions unless there is an agency relationship between the lender and the broker. [Id. at 7 (some citations omitted) (citing Sandry v. First Franklin Financial Corp., 2011 WL 202285 (E.D. Cal. Jan. 20, 2011); Menashe v. Bank of New York, 2012 WL 397437, at *11 (D. Haw. Feb. 6, 2012)).] Wolfe has not alleged that Northern Trust manifested any express or implied intent that Nielsen act as its agent, nor does Wolfe allege that Northern Trust led Wolfe to believe Nielsen was its agent, nor does Wolfe allege that Northern Trust ratified Nielsen's actions, representations, or omissions. If Wolfe has any claims based on the alleged false representation of an agency relationship, they are against Nielsen, not against Northern Trust. Thus, Nielsen's alleged misrepresentations cannot be imputed to Northern Trust and cannot preclude summary judgment. [Id. at 8-9.]

Northern Trust emphasizes that Wolfe does not dispute proper service of the Complaint or that he is in default under the Note and Mortgage. To the extent that Wolfe relies on an alleged agreement for a permanent loan modification, Wolfe has not identified any admissible evidence of a loan modification. There is no genuine issue of material fact regarding his default. Northern Trust reiterates that its claims are enforceable under the terms of the Note and Mortgage and pursuant to Haw. Rev. Stat. §§ 667-1 through 667-4. [Id. at 10-13.]

Northern Trust therefore urges the Court to grant the Motion for Summary Judgment, including issuing an interlocutory decree of foreclosure and order of sale. [Id. at 13.]

II. Motion to Dismiss

In the Motion to Dismiss, Northern Trust notes that the Property is a vacant lot in "an exclusive oceanfront residential community[.]" [Mem. in Supp. of Motion to Dismiss at 2.]

Northern Trust argues that Count I (UDAP) is not sufficiently pled. Wolfe has merely recited the elements of a UDAP claim without providing factual allegations to support any of the required elements. Further, Wolfe's UDAP claim sounds in fraud, and Count I does not satisfy the heightened pleading requirements of Fed. R. Civ. P. 9(b). The Court therefore cannot consider the allegations of fraudulent misrepresentations. Wolfe has not alleged the time, place, and specific content of the misrepresentations, or the identifies of the parties to the misrepresentations. Wolfe therefore has not provided Northern Trust with sufficient notice of the claim against it. Northern Trust urges the Court to dismiss Count I. [Id. at 6-9.]

Northern Trust emphasizes that unconscionability is not an affirmative claim for relief, but merely a defense to the enforcement of a contract or other legal claim. Even if Wolfe only asserts unconscionability as a defense, he has not identified the specific terms of an enforceable contract which are unconscionable. Wolfe has not identified the unconscionable contract or its specifically unconscionable terms. The Court should therefore dismiss Wolfe's claim/defense. [Id. at 9-11.]

Wolfe failed to plead Count III (fraud and misrepresentation) with particularity. Count III is presumably based on the same insufficient allegations of misrepresentations set forth in Count I. Count III also fails to plead the other elements of a fraud/fraudulent misrepresentation claim. Wolfe has not provided Northern Trust with fair notice of the grounds Count III is based on, and the Court should dismiss Count III. [Id. at 11-13.]

Northern Trust argues that Count IV (negligence) fails because Wolfe fails to establish that Northern Trust owed him a duty of care. Lenders generally do not owe their borrowers a duty of care because there is no fiduciary duty and no duty sounding in negligence, and the Counterclaim does not set forth any allegations establishing an exception to these general rules. Northern Trust and Wolfe merely had an arms-length business relationship. [Id. at 14-15.] Although Wolfe contends that Northern Trust had a duty under HAMP not to proceed with foreclosure while evaluating him for loan modification, there is no express or implied private right of action for a violation of HAMP. [Id. at 15-16 (citing Cleveland v. Aurora Loan Services, LLC, No. C 11-0773 PJH, 2011 WL 2020565, at *4 (N.D. Cal. May 24, 2011); Singh v. Wells Fargo Bank, No. 1:10 CV 1659 AWI SMS, 2011 WL 66167, at *5 (E.D. Cal. Jan. 7, 2011)).] Moreover, even if there was a cause of action for a HAMP violation, the Counterclaim does not allege that Wolfe was eligible for a HAMP loan modification, that Northern Trust approved him for a HAMP modification, or that Northern Trust agreed to suspend foreclosure proceedings. [Id. at 16.] Northern Trust also argues that Wolfe failed to sufficiently plead the remaining requirements of a negligence claim. Northern Trust therefore urges the Court to dismiss Count IV. [Id. at 16-17.]

As to Count V (breach of contract), Northern Trust emphasizes that the claim is based on an alleged oral contract that Northern Trust would suspend foreclosure proceedings. Northern Trust argues that there is no oral contract because there was a lack of consideration. [Id. at 17-18.] Further, if there was such an agreement, it would be an agreement to modify the Mortgage. The Mortgage is subject to the statute of frauds and requires a writing. An agreement to modify the Mortgage therefore also requires a writing. [Id. at 18-19 (citing Secrest v. Security National Mortgage Loan Trust 2002-2, 167 Cal. App. 4th 544, 553, 84 Cal. Rptr. 3d 275, 282 (2008)).] The Counterclaim does not allege there was a writing to evidence the oral contract for a permanent loan modification, and the Counterclaim fails to sufficiently describe the alleged oral contract. In addition, Wolfe fails to sufficient plead the other requirements of a breach of contract claim. Count V merely recites the elements of breach of contract and does not provide Northern Trust with sufficient notice. Northern Trust urges the Court to dismiss Count V. [Id. at 19-20.]

As to Count VI (breach of the duty of good faith and fair dealing), Northern Trust argues that there is no implied covenant of good faith and fair dealing without an enforceable contract. Further, there is no independent cause of action based on the implied covenant of good faith and fair dealing. [Id. at 20 (citing Stoebner Motors, Inc. v. Automobili Lamborghini S.P.A., 459 F. Supp. 2d 1028, 1036--38 (D. Haw. 2006)).] Count VI is based on the alleged oral contract to modify the Mortgage alleged in Count V. Thus, insofar as Count V fails, Count VI should fail as well. Even assuming, arguendo, that Count V alleges a contract upon which Wolfe can state a breach of contract claim, Count VI still fails because Wolfe does not allege any facts showing that Northern Trust violated the duty of good faith and fair dealing. Northern Trust therefore urges the Court to dismiss Count VI. [Id. at 21-22.]

As to Count VII (promissory estoppel), Wolfe has only alleged vague and indefinite promises regarding future refinancing and the lack of foreclosure proceedings. The promises for a promissory estoppel claim must be clear and unambiguous. Even if the Court assumes that a Northern Trust representative actually made the statements alleged in the Complaint, the statements must be clear and unambiguous to state a promissory estoppel claim. Wolfe has not identified clear and unambiguous statements. [Id. at 22-23 (citing Aguilar v. International Longshoremen's Union Local #10, 966 F.2d 443, 446 (9th Cir. 1992)).] Wolfe has only recited the elements of a promissory estoppel claim, which is insufficient to state a claim upon which relief can be granted. Northern Trust therefore urges the Court to dismiss Count VII. [Id. at 24.]

Thus, Northern Trust argues that the Court should dismiss the Counterclaim in its entirety.

A. Wolfe's Opposition

Wolfe's memorandum in opposition to the Motion to Dismiss raises the same arguments as in his memorandum in opposition to the Motion for Summary Judgment.

B. Northern Trust's Reply

In its reply in support of the Motion to Dismiss ("Dismissal Reply"), Northern Trust states that the core of Wolfe's Counterclaim is his allegation that he was promised a permanent loan modification. Northern Trust, however, argues that it never promised Wolfe a loan modification because Northern Trust is not responsible for the representations or omissions of the loan broker who allegedly made that promise to Wolfe. Wolfe has not pled any facts showing any agency relationship between Northern Trust and the broker. Northern Trust therefore argues that the Court should dismiss all claims based upon the loan broker's alleged representations or omissions. [Dismissal Reply at 3-4.]

As to the UDAP claim, Northern Trust argues that Tedder, 2012 WL 1028125, does not support Wolfe's position. The plaintiff in Tedder raised similar allegations to those in the instant case, and this Court dismissed Tedder's UDAP claim without reaching the issue whether such a UDAP violation would render the note and mortgage void. Northern Trust also emphasizes that this district court, including this Court in Tedder, has repeatedly ruled that there is no private right of action for HAMP violations. [Id. at 5-6.] Northern Trust argues that the district court's orders in Skaggs, 2011 WL 3861373 and 2010 WL 5390127, are inapplicable because that case addressed whether a UDAP claim based on the borrower's alleged incapacity was a valid defense to a foreclosure by a holder in due course. In the instant case, Wolfe has not sufficiently pled a UDAP violation, so the issue whether Wolfe's Mortgage is void against a holder in due course is irrelevant. Although Wolfe recited the elements of UDAP claim, he failed to allege any supporting factual allegations. This is not enough to state a cognizable claim for relief. [Id. at 6 & n.3.] Northern Trust also points out that voiding a mortgage transaction under § 480-12 requires that the plaintiff place the parties in the positions that they held before the transaction in question. Wolfe has not alleged he can do that. [Id. at 7.]

As to the unconscionability claim, Northern Trust reiterates that it is a defense, not an independent claim. Northern Trust argues that it is not clear what contract term Wolfe alleges was unconscionable. If he is referring to the Mortgage, the Mortgage contains no promise of permanent financing. To the extent that Wolfe relies upon the oral promise of a permanent loan modification, that agreement is barred by the statute of frauds. [Id. at 7-8.]

Northern Trust argues that the fraud and misrepresentation claims fail because they are not pled with the requisite particularity. Wolfe's reliance on Tedder in support of this claim is also misplaced. This Court ruled in Tedder that the fraud claim based on alleged misrepresentations about the receipt of documents during the loan modification process was sufficient to survive dismissal. This Court dismissed Tedder's fraud claim based on an alleged promise of a loan modification because it was insufficiently pled. Further, a promise regarding a future event cannot support a fraud claim. [Id. at 8-10.]

As to the negligence claim, Northern Trust reiterates that it owed Wolfe no duty because generally lenders owe no duty to refrain from placing borrowers in loans that they cannot repay. Northern Trust also argues that Wolfe's reliance on Speleos, 755 F. Supp. 2d at 310-11, is misplaced. The court in that case recognized that a common law negligence claim cannot be based on a HAMP violation because there is no private right of action. Under Massachusetts law, however, evidence of a HAMP violation could constitute evidence of a negligence claim. Wolfe has not identified any Hawai`i statute or case law similarly recognizing that a HAMP violation constitutes evidence of negligence. [Id. at 10-11.]

As to Count V, which alleges a breach of the oral contract for a permanent loan modification, Northern Trust reiterates its argument that the claim is barred by the statute of frauds. [Id. at 11-13.]

As to Count VI, alleging a violation of the duty of good faith and fair dealing, Northern Trust reiterates that, without a valid agreement to permanently modify the loan, there is no implied covenant of good faith and fair dealing. As to the Mortgage itself, Northern Trust contends that Wolfe has not identified any term of the Mortgage which Northern Trust allegedly breached. Northern Trust therefore argues that this Court must dismiss Count VI as a matter of law. [Id. at 13-14.]

Finally, as to the promissory estoppel claim, Northern Trust argues that Wolfe's memorandum in opposition does not address the defects in the claim that Northern Trust identified in the Motion to Dismiss, and ...


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