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Jean-Francois Benoist and v. U.S. Bank National Association

August 2, 2012

JEAN-FRANCOIS BENOIST AND
JOYCE K. MARVEL-BENOIST, PLAINTIFFS,
v.
U.S. BANK NATIONAL ASSOCIATION, A NATIONAL BANK ASSOCIATION,
AS TRUSTEE FOR JPM ALT 2006-A6;
PHH MORTGAGE CORPORATION, A NEW JERSEY CORPORATION FORMERLY CENDANT MORTGAGE CORP.,
MERSCORP. INC., A DELAWARE CORPORATION;
MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC.; A NEW YORK CORPORATION, AND DOES 1- 100, INCLUSIVE, DEFENDANTS.



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

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR PHH MORTGAGE CORPORATION'S MOTION FOR SUMMARY JUDGMENT

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR PHH MORTGAGE CORPORATION'S MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This action arises from a July 2006 mortgage transaction in which Plaintiffs Jean-Francois Benoist and Joyce K. Marvel-Benoist ("Plaintiffs") borrowed $498,520 from Defendant PHH Mortgage Corporation, formerly Cendant Mortgage Corp. ("PHH"), secured by a promissory note and mortgage on real property located at 47-4505 Honokaa Waipio Road, Honokaa, Hawaii 96727 (the "subject property"). The mortgage loan was transferred to U.S. Bank National Association, as Trustee for JPM ALT 2006-A6 ("U.S. Bank"), who foreclosed on the subject property after Plaintiffs became delinquent in their payments. Plaintiffs' Second Amended Complaint ("SAC") asserts various state law claims against PHH, U.S. Bank, MERS Corp. and Mortgage Electronic Registration Systems ("MERS") (collectively, "Defendants") based on the transfer of the mortgage loans to U.S. Bank and U.S. Bank's foreclosure on the subject property.

Currently before the court is U.S. Bank and PHH's*fn1 Motion for Summary Judgment, arguing that Plaintiffs have failed to establish a genuine issue of material fact that the mortgage was improperly assigned to U.S. Bank and/or that the foreclosure did not comply with Hawaii state law. Based on the following, the court GRANTS in part and DENIES in part Defendants' Motion for Summary Judgment.

II. BACKGROUND

A. Factual Background

In July 2006, Plaintiffs executed an Adjustable Rate Note (the "note") for $498,520 and a mortgage on the subject property in favor of PHH.*fn2 Doc. No. 57-2, Defs.' Ex. 1 (mortgage); Doc. No. 92-4, Pls.' Ex. C (note).*fn3 The mortgage identifies PHH as the lender, and states that 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. 57-2, Defs.'

Ex. 1 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 Borrower 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 August 4, 2006, the State of Hawaii Bureau of Conveyances recorded the mortgage. Id. at 1.

In 2008, Plaintiffs began to struggle making their mortgage payments. Doc. No. 41, SAC ¶ 22.*fn4 Plaintiffs therefore contacted PHH's loss mitigation department to seek a loan modification, and continued to call PHH each week looking for a representative to handle their case. Id.

In March 2009, Plaintiffs stopped making payments on their mortgage. Id. ¶ 23. Although Plaintiffs submitted a loan modification application on April 30, 2009, id., Plaintiffs received notice on July 13, 2009 that U.S. Bank was commencing foreclosure proceedings. Id. ¶ 24. U.S. Bank assured Plaintiffs that foreclosure would not move forward until Plaintiffs' loan modification application was given proper consideration. Id.

On September 28, 2009, MERS, solely as nominee for PHH, executed an Assignment of Mortgage to U.S. Bank.*fn5 Doc. No. 92-3, Pls.' Ex. B.

On December 31, 2009, U.S. Bank recorded a Notice of Mortgagee's Intention to Foreclose Under Power of Sale ("Notice of Foreclosure") with the State of Hawaii Bureau of Conveyances. The Notice of Foreclosure identifies U.S. Bank as mortgagee and asserts that it will hold a public auction of the subject property on March 2, 2010. Doc. No. 57-3, Defs.' Ex. 2 at p. 7 of 13. The terms of the sale include that "[a]t the close of the auction Purchaser shall pay at least 10% of the highest successful bid price ("Bid") by cashier's or certified check and deliver it to the closing escrow and title company designated by the Mortgagee; provided, however, that Mortgagee may submit a credit bid up to the amount in writing of the secured indebtedness." Id. at p. 8 of 13. U.S. Bank published the Notice of Foreclosure in the Honolulu Advertiser on January 15, 22, and 29, 2010. Id. at 11 of 13.

On February 17, 2010, Plaintiffs received a loan modification proposal that would lower their interest rate only one percent and otherwise maintain the loan as an interest-only loan for the full amount plus an additional $42,701.04 for the unpaid interest and fees. Doc. No. 41, SAC ¶ 27. Plaintiffs rejected the offer and reapplied for a loan modification. Id.

In the meantime, the foreclosure auction was postponed until July 21, 2010. The Mortgagee's Affidavit of Foreclosure Under Power of Sale ("Mortgagee's Affidavit"), signed by Derek Wong on behalf of U.S. Bank and recorded in the State of Hawaii Bureau of Conveyances on August 5, 2010, asserts that "each postponement was publicly announced by crying out the postponement date at the time and place of the scheduled auction." Id. at 3 of 13. In comparison, Plaintiffs assert that "Defendants did not on each and every postponement announce the continued sale date [as required by HRS § 667-5(d)]." Doc. No. 41, SAC ¶ 87.

At the July 21, 2010 auction, U.S. Bank was the high bidder with a credit bid for $390,000. Doc. No. 57-3, Defs.' Ex. 2.

B. Procedural Background

On June 22, 2010, Plaintiffs filed this action, and their SAC asserts claims titled (1) Violation of Hawaii Revised Statutes [("HRS")] Chapter 667, Lack of Legal Right to Foreclose (Defendant U.S. Bank); (2) Violation of [HRS] Chapter 667, Failure to Comply with terms of HRS [§] 667:5-10*fn6 (Defendant U.S. Bank); (3) Wrongful Foreclosure (Defendant U.S. Bank and PHH); and (4) Quiet Title (Defendants Claiming Any Interest in the Subject Property). On January 25, 2012, PHH and U.S. Bank filed their Motion for Summary Judgment. ...


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