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

August 16, 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 DENYING PLAINTIFFS' MOTION FOR RECONSIDERATION AND/OR CLARIFICATION OF THIS COURT'S ORDER GRANTING DEFENDANT AURORA LOAN SERVICES, LLC'S MOTION FOR SUMMARY JUDGMENT (WHICH THE COURT CONSTRUES AS A MOTION TO DISMISS) AND JUDGMENT, FILED JUNE 19, 2012 ORDER DENYING PLAINTIFFS' MOTION FOR RECONSIDERATION AND/OR CLARIFICATION OF THIS COURT'S ORDER GRANTING DEFENDANT AURORA LOAN SERVICES, LLC'S MOTION FOR SUMMARY JUDGMENT (WHICH THE COURT CONSTRUES AS A MOTION TO DISMISS) AND JUDGMENT, FILED JUNE 19, 2012

I. INTRODUCTION

In their First Amended Complaint ("FAC"), Plaintiffs Lester and Ofelia Pascual ("Plaintiffs") assert a single claim against Defendant Aurora Loan Services, LLC ("Defendant") for violation of Hawaii's non-judicial foreclosure statute, Hawaii Revised Statutes ("HRS") § 667-5. On June 19, 2012, the court entered its Order Granting Defendant's Motion to Dismiss without leave for Plaintiffs to amend. Pascual v. Aurora Loan Servs., 2012 WL 2355531 (D. Haw. June 19, 2012). The June 19 Order explained, among other things, that HRS § 667-5 places no affirmative obligation on a mortgagee to establish that it holds the note.

Currently before the court is Plaintiffs' Motion for Reconsideration and/or Clarification of the June 19 Order and Judgment, in which they argue that reconsideration is necessary to prevent manifest injustice and due to newly discovered evidence. Based on the following, the court DENIES Plaintiffs' Motion for Reconsideration.

II. BACKGROUND

This action arises from a February 12, 2007 mortgage transaction in which 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, who subsequently foreclosed on the subject property. The FAC asserts that Defendant was not a proper mortgagee because MERS, on behalf of Lehman Brothers, had transferred the mortgage loan to Defendant without authority.

On February 29, 2012, Defendant filed a Motion for Summary Judgment. On May 25, 2012, Plaintiffs filed an Opposition in which they (1) argued that Defendant's Motion should be construed as a Rule 12(b)(6) Motion; and (2) offered a number of alternative theories for relief that were not pled in the FAC. In their June 4, 2012 Reply, Defendant responded to Plaintiffs' new theories of relief.

On June 18, 2012, the court held a hearing on Defendant's Motion. The court explained that because it could determine Defendant's Motion based on judicially-noticed evidence only, it would treat Defendant's Motion as a Rule 12(b)(6) Motion to Dismiss. The court further explained that by treating Defendants' Motion as a Rule 12(b)(6) Motion, the court must consider whether Plaintiffs should be granted leave to amend if the Rule 12(b)(6) Motion is otherwise granted. In response, Plaintiffs represented at the June 18, 2012 hearing that their briefing included all theories that they wished to include in an amended pleading. See Pascual, 2012 WL 2355531, at *3. And because Defendant had responded to these new arguments in its Reply, Plaintiffs and Defendant concurred that the briefing was complete as to the claims Plaintiff would seek to include in a second amended complaint and on the issue of whether it would be futile to make these specific allegations. Id.

On June 19, 2012, the court entered its Order Granting Defendant's Motion to Dismiss without leave for Plaintiffs to amend. The June 19 Order found that the FAC's single claim that MERS did not have authority to transfer the mortgage loan from Lehman Brothers to Defendant failed in light of Cervantes v. Countrywide Home Loans, 656 F.3d 1034 (9th Cir. 2011), and in light of the express disclosures in the mortgage stating that MERS may transfer the mortgage loan. Id. at 4-5.

Turning next to whether Plaintiffs should be granted leave to amend, the June 19 Order rejected each of Plaintiffs' proffered additional theories attacking Defendant's ability to foreclose on the mortgage, including that:

(1) Lehman Brothers' bankruptcy prevented a valid transfer of the mortgage loan to Defendant; (2) Defendant failed to affirmatively demonstrate that it is a proper mortgagee; (3) Defendant failed to proffer evidence in its Mortgagee's Affidavit of Foreclosure Under Power of Sale that it was assigned the mortgage; and (4) Defendant failed to demonstrate that it was the proper holder of the note at the time of foreclosure. As to each of the latter three arguments, the court explained that HRS § 667-5 did not place an affirmative requirement on a mortgagee to establish its right to foreclose and/or produce the note, and that Plaintiffs had not asserted any basis to question that Defendant was not the proper mortgagee. Id. at 6-7. Because all of Plaintiffs' proffered theories of relief failed, the June 19 Order dismissed the FAC without leave to amend. Judgment was entered the same day.

On July 3, 2012, Plaintiffs filed their Motion for Reconsideration. Defendant filed an Opposition on July 17, 2012, and Plaintiffs filed a Reply on July 31, 2012. Pursuant to Local Rule 7.2(d), the court determines the Motion for Reconsideration without a hearing.

III. STANDARD OF REVIEW

A motion for reconsideration filed within twenty-eight days of entry of judgment is considered under Federal Rule of Civil Procedure 59(e); a later-filed motion is considered under Rule 60(b). United States v. Comprehensive Drug Testing, Inc., 513 F.3d 1085, 1098 (9th Cir. 2008) (quoting Am. Ironworks & Erectors, Inc. v. N. Am. Constr. Corp., 248 F.3d 892, 898-99 (9th Cir. 2001)). Because Plaintiffs filed their Motion for ...


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