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Dr. Stephen M. Schwartz and Dr. Alma Schwartz v. Bank of Hawaii Corporation

September 4, 2012

DR. STEPHEN M. SCHWARTZ AND DR. ALMA SCHWARTZ, PLAINTIFFS,
v.
BANK OF HAWAII CORPORATION, ET AL., DEFENDANTS.



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

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS, AND DENYING PLAINTIFFS' MOTION FOR LEAVE OF COURT TO FILE SECOND AMENDED COMPLAINT

I. INTRODUCTION

On June 26, 2012, pro se Plaintiffs Stephen M. Schwartz and Alma Schwartz ("Plaintiffs") filed an Amended Complaint entitled "Amended Independent Action for Relief from Void Judgment Pursuant to Federal Rules of Court 60(B)(2)(3) and (4)." Doc. No. 23, Am. Compl. Defendants Bank of Hawaii Corporation, Bank of Hawaii, Peter S. Ho, Derek J. Norris, Mark Rossi, Mary E. Sellers, Mitzi A. Lee, Randy Muraoka, and Guy Sakamoto (collectively "BOH Defendants") have filed a Motion to Dismiss the Amended Complaint for lack of subject matter jurisdiction and/or for failure to state a claim.*fn1 Plaintiffs oppose the Motion to Dismiss and have filed a Motion for Leave of Court to File Second Amended Complaint ("Motion for Leave to Amend"). Doc. No. 33. Based on the following, the Motion to Dismiss is GRANTED, and the Motion for Leave to Amend is DENIED. The Clerk of Court shall close the case file.

II. BACKGROUND

A. Factual Background

Plaintiffs' 130-page Amended Complaint concerns a February 2010 state court judgment, decree of foreclosure, and corresponding foreclosure sale proceedings relating to a Promissory Note and Mortgage as to real property located at 72-4075 Alahee Place, Kailua-Kona, Hawaii 96740 ("the subject property").

The Amended Complaint attaches a copy of a Mortgage on the subject property recorded in the Hawaii Bureau of Conveyances on September 6, 2005. The Mortgage corresponds to a Promissory Note of $1,499,999 secured by the subject property. Doc. No. 23, Am. Compl. at 16 & Ex. A. The Amended Complaint also attaches a February 9, 2010 Judgment and Foreclosure Decree ("February 2010 State Court Judgment") from the Circuit Court of the Third Circuit, State of Hawaii. Id. Ex. B.*fn2 The Amended Complaint seeks, pursuant to provisions of Federal Rule of Civil Procedure 60(b) ("Rule 60(b)"), to void the February 2010 State Court Judgment, and to enjoin further proceedings related to the corresponding foreclosure sale.

The record confirms that a foreclosure action concerning the subject property was filed in August 2009 against Plaintiffs by Bank of Hawaii in the Circuit Court of the Third Circuit, State of Hawaii. Bank of Hawaii prevailed in that action and obtained an Interlocutory Decree of Foreclosure and Order of Sale on February 9, 2010. See Bank of Haw. v. Schwartz et al., Civ. No. 3CC09-1-00340K (Haw. Cir. Ct), docket available at http://hoohiki2.courts.state.hi.us/ main.htm) (last visited Sept. 4, 2012). After the February 2010 State Court Judgment was entered, Plaintiffs filed a counterclaim in that proceeding, raising similar claims that they assert in this action, in an attempt to prevent the foreclosure sale. See Doc. No. 28-2, Defs.' Opp'n to Pls.' Mot. for Temporary Restraining Order ("TRO"), Ex. A. The state court dismissed that counterclaim. Id. Ex. C.

Thereafter, Plaintiffs filed bankruptcy actions in Hawaii and Pennsylvania. On April 17, 2012, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania ("Pennsylvania Bankruptcy Court") dismissed Plaintiff Alma Schwartz's bankruptcy action, finding in part that pursuant to 11 U.S.C. § 362(d)(4), [Alma Schwartz] filed the petition in this case as part of a scheme to delay, hinder and defraud [Bank of Hawaii] that involved

(i) multiple transfers by Debtor and her spouse, Stephen

M. Schwartz, of all or part ownership of [the subject property] without the consent of [Bank of Hawaii], whose claim is secured by an interest in [the subject property], and without court approval, and (ii) multiple bankruptcy filings by [Alma Schwartz] and her spouse, Stephen M. Schwartz, affecting [the subject property].

Doc. No. 28-5, Defs.' Opp'n to Pls.' Mot. for TRO, Ex. 5 (Order of U.S. Bankruptcy Court for the Eastern District of Pennsylvania) at 2. The Pennsylvania Bankruptcy Court further found and ordered that:

[Bank of Hawaii] is hereby permitted to exercise its state law rights and remedies with respect to the [subject property] by commencing and/or continuing a state foreclosure proceeding, conducting a Sheriff's sale of [the subject property], taking possession of [the subject property], and/or exercising any other remedies to which it is entitled under the Existing Loan Documents . . . in order to recover the obligations and indebtedness due and owing to [Bank of Hawaii] by [Alma Schwartz] and Stephen M. Schwartz[.]

Id. at 2-3. As to timing, it found that "[Bank of Hawaii] may immediately enforce and implement this Order and pursue its state law remedies as it ...


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