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Edward Yuzon Abubo, and Saranne Kagel Abubo v. the Bank of New York Mellon; Countrywide Home Loans

June 4, 2012

EDWARD YUZON ABUBO, AND SARANNE KAGEL ABUBO, PLAINTIFFS,
v.
THE BANK OF NEW YORK MELLON; COUNTRYWIDE HOME LOANS, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; BANK OF AMERICA, N.A.; AND DOES 1-50. DEFENDANTS.



The opinion of the court was delivered by: J. Michael Seabright United States District Judge

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

I. INTRODUCTION

This action arises from a January 22, 2007 mortgage refinancing transaction in which Plaintiffs Edward Yuzon Abubo and Saranne Kagel Abubo (collectively, "Plaintiffs" or the "Abubos") borrowed $1,375,000 from Defendant Countrywide Home Loans, Inc. ("Countrywide"), secured by a promissory note and mortgage on real property located at 7297 Alealea Road, Hanalei, Hawaii 96714 (the "subject property"). On October 12, 2009, the note and mortgage were assigned to Defendant Bank of New York Mellon ("BONYM"), which instituted non-judicial foreclosure proceedings and subsequently foreclosed on the subject property. Plaintiffs filed this action on December 17, 2010 in the First Circuit Court for the State of Hawaii against Countrywide, BONYM, Mortgage Electronic Registration Systems, Inc. ("MERS"), and Bank of America, N.A., seeking declaratory and injunctive relief, damages, and rescission of the mortgage transaction. The action was then removed to this court on May 12, 2011.

After various motions practice, Plaintiffs filed their Third Amended Complaint ("TAC") asserting a single claim against BONYM, Countrywide, and MERS (collectively, "Defendants") seeking damages for violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., based on Defendants' alleged failure to rescind the mortgage loan upon Plaintiffs' request. Currently before the court is Defendants' Motion to Dismiss the TAC. Based on the following, the court GRANTS in part and DENIES in part Defendants' Motion to Dismiss.

II. BACKGROUND

A. Factual Background

The TAC alleges the following relevant facts, which the court assumes are true for purposes of this Motion. See, e.g., Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir. 2003).

In January 2007, a Countrywide loan officer solicited Plaintiffs to refinance their loan on the subject property. Doc. No. 29, TAC ¶ 8. On January 22, 2007, Countrywide loaned Plaintiffs $1,375,000 for that purpose. The loan was a "subprime," interest-only, adjustable rate loan with an initial annual interest rate of 6.25%, requiring initial monthly payments of $7,161.46. Id. ¶¶ 10-11. The mortgage provides that MERS "is acting solely as nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument." Id. Ex. 2.

Plaintiffs allege that they were not provided with two completed and signed copies of the Notice of Right to Cancel form as required under TILA. Id.

¶ 13. Instead, they were given a blank copy of the form. Id. Ex. 3. Plaintiffs were also given a TILA disclosure form that stated the wrong amount financed ($1,370,207.55, rather than $1,375,000). Id. ¶ 14.

The mortgage was assigned on October 12, 2009 by MERS, as nominee for Countrywide, to BONYM, "acting as Trustee of the Alternative Loan Trust 2007-HY3 Mortgage Pass-Through Certificates, Series 2007-HY3" ("2007 Loan Trust"), which is a "mortgage securitization trust and Pooling and Servicing Agreement." Id. ¶ 15.

After being assigned the Mortgage, BONYM initiated non-judicial foreclosure proceedings on the subject property. Specifically, on October 28, 2009, BONYM issued and recorded with the Hawaii Bureau of Conveyances a "Notice of Mortgagee's Intention to Foreclose Under Power of Sale," setting an auction date of December 18, 2009. Id. ¶ 16. On December 17, 2009, Plaintiffs attempted to cancel the January 22, 2007 loan transaction by sending a cancellation letter from their counsel, Gary Dubin, by certified mail to "all current and former parties to the mortgage loan contract." Id. ¶ 18 & Ex. 7. Although many of the Defendants received the letter after the auction was held, see id. Ex. 8, the letter indicates that a copy was hand delivered to the office of David Rosen, counsel for BONYM, on December 17, 2009. Id. Ex. 7.

Nevertheless, the foreclosure auction proceeded on December 18, 2009. Id. ¶ 19. At the auction, BONYM purchased the subject property for $1,021,500.00, id. Ex. 9 at 2, with "a credit bid." Id. ¶ 19. On March 10, 2010, BONYM recorded a quitclaim deed to obtain title to the subject property. Id. ¶ 20 & Ex. 10. BONYM subsequently filed an ejectment action in state court. The TAC alleges that the Abubos "have since ...


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