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Lester Pascual, An Individual, and Ofelia v. Aurora Loan Services

June 18, 2012

LESTER PASCUAL, AN INDIVIDUAL, AND OFELIA PASCUAL, AN INDIVIDUAL, PLAINTIFFS,
v.
AURORA LOAN SERVICES, LLC AND DOES 1-100 INCLUSIVE, DEFENDANTS.



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

ORDER GRANTING DEFENDANT AURORA LOAN SERVICES, LLC'S MOTION FOR SUMMARY JUDGMENT (WHICH THE COURT CONSTRUES AS A MOTION TO DISMISS

I. INTRODUCTION

This action arises from a February 12, 2007 mortgage transaction in which Plaintiffs Lester and Ofelia Pascual ("Plaintiffs") borrowed $630,000 from Lehman Brothers Bank, F.S.B. ("Lehman Brothers"), secured by a promissory note and mortgage on real property located at 468 South Oahu Street, Kahului, Hawaii 96732 (the "subject property"). On September 20, 2009, the Hawaii Bureau of Conveyances recorded an assignment of the mortgage to Defendant Aurora Loan Services, LLC ("Defendant"), who subsequently foreclosed on the subject property. Plaintiffs' First Amended Complaint ("FAC") asserts that Defendant violated Hawaii's non-judicial foreclosure statute, Hawaii Revised Statutes ("HRS") § 667-5, by foreclosing on the subject property because the transfer of the mortgage to Defendant was improper.

Currently before the court is Defendant's Motion for Summary Judgment, arguing that Plaintiffs have failed to establish a genuine issue of material fact that the mortgage was improperly assigned to Defendant. Based on Plaintiffs' request and because the court can determine Defendant's Motion based on judicially-noticed evidence only, the court treats Defendant's Motion as a Motion to Dismiss. Based on the following, the court finds that the FAC fails to state a claim upon which relief can be granted and GRANTS Defendant's Motion to Dismiss. Because granting leave to amend would be futile, this dismissal is without leave to amend.

II. BACKGROUND

A. Factual Background

On February 12, 2007, Plaintiffs borrowed $630,000 from Lehman Brothers, secured via a mortgage on the subject property. Doc. Nos. 43-2, 43-3, Def.'s Exs. 1-2. The mortgage identifies Lehman Brothers as the lender, and states that Mortgage Electronic Registration Systems, Inc. ("MERS") "is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument." Doc. No. 43-3, Def.'s Ex. 2 at 2. The mortgage further provides:

Borrower does hereby mortgage, grant and convey to MERS (solely as nominee for Lender and Lender's successors and assigns) and to the successors and assigns of MERS, with power of sale [the subject property]. . . . Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrowers in this Security Instrument, but, if necessary to comply with the law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take and action required of the Lender.

Id. at 3. Finally, the mortgage notifies Plaintiffs that "[t]he Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower." Id. at 12.

On September 15, 2008, Lehman Brothers filed for voluntary Chapter 11 bankruptcy. See Doc. No. 55-3, Pls.' Ex. 8. On October 1, 2009, the State of Hawaii Bureau of Conveyances recorded an April 15, 2009 Assignment of Mortgage from MERS, solely as nominee for Lehman Brothers, to Defendant. See Doc. No. 43-4, Def.'s Ex. 3.

In early 2009, Plaintiffs defaulted on their loan, which resulted in Defendant filing a Notice of Mortgagee's Intention to Foreclose Under Power of Sale, recorded with the Hawaii Bureau of Conveyances on October 8, 2009. See Doc. No. 55-3, Pls.' Ex. 4. A public auction was held on October 1, 2010, with Defendant being the high bidder with a credit bid of $304,000. Doc. No. 43-5, Def.'s Ex. 4. On October 28, 2010, Defendant recorded a Mortgagee's Affidavit of Foreclosure Sale Under Power of Sale. Id.

B. Procedural Background

On December 21, 2010, Plaintiffs initiated this action, asserting a panoply of claims against Defendant, Nestor E. Segundo (Plaintiffs' mortgage broker), and MERS. After Defendant and MERS filed a motion for summary judgment, the parties stipulated to dismissal of most of the claims and to the filing of an amended complaint.

On September 12, 2011, Plaintiffs filed their FAC asserting a single claim that Defendant violated HRS § 667-5 by foreclosing on the subject property without a valid assignment of the mortgage. The FAC seeks a declaratory judgment that the assignment from Lehman Brothers (via MERS) to Defendant is invalid such that the non-judicial foreclosure is void.

Defendant filed the present Motion to Dismiss on February 29, 2012. Plaintiffs filed their Opposition on May 25, 2012, and Defendant filed its Reply on June 4, 2012. Plaintiffs filed a Supplemental Response ...


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