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Aguinaldo v. Deutsche Bank Nat'l Trust Co.

United States District Court, D. Hawaii

November 24, 2014

WILLIE AGUINALDO and MELINDA AGUINALDO, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, A NATIONAL BANKING ASSOCIATION; DEREK W.C. WONG; ROUTH CRABTREE OLSEN, P.S.; and DOE DEFENDANTS 1-50, Defendants

For Willie V. Aguinaldo, individually and on behalf of all others similarly situated, Melinda Aguinaldo, individually and on behalf of all others similarly situated, Plaintiffs: James J. Bickerton, LEAD ATTORNEY, Bickerton Lee Dang & Sullivan, Honolulu, HI; Raymond C. Cho, Van-Alan H. Shima, LEAD ATTORNEYS, Affinity Law Group, Honolulu, HI; Stanley H Roehrig, LEAD ATTORNEY, Law Office of Stanley H. Roehrig, Hilo, HI.

For Deutsche Bank National Trust Company, a national banking association, Defendant: Lindsay E. Orman, Sharon V. Lovejoy, LEAD ATTORNEYS, Andrew James Lautenbach, Starn O'Toole Marcus & Fisher, Honolulu, HI.

FINDINGS AND RECOMMENDATION TO GRANT IN PART AND DENY IN PART PLAINTIFFS' MOTION FOR REMAND

Barry M. Kurren, United States Magistrate Judge.

Before the Court is Plaintiffs Willie V. Aguinaldo and Melinda Aguinaldo's (collectively " Plaintiffs") Motion for Order of Remand, filed on September 26, 2014 (" Motion"). (Doc. 8.) Plaintiffs seek an order remanding this case to the Circuit Court of the First Circuit, State of Hawaii (" State Court") and an award of attorneys' fees and costs. (Id.) On October 22, 2014, Defendant Deutsche Bank National Trust Company (" Deutsche") filed a Memorandum in Opposition to Plaintiffs' Motion, and on October 29, 2014, Plaintiffs filed their Reply. (Docs. 15, 17.)

This matter came on for hearing on November 10, 2014. (Doc. 19.) Attorney James J. Bickerton appeared on behalf of Plaintiffs, and Attorney Sharon V. Lovejoy appeared on behalf of Defendant Deutsche. Upon careful consideration of the Motion, the supporting and opposing memoranda, declarations, and exhibits attached thereto, and the record established in this action, I find and recommend that Plaintiffs' Motion be GRANTED IN PART AND DENIED IN PART for the reasons set forth below.

FACTUAL BACKGROUND

Plaintiffs were the owners of fee simple property in Honolulu, Hawaii (" Property"), which they had acquired via warranty deed. (Doc. 8-2 at ¶ 19.) On or about June 29, 2006, Plaintiffs executed a mortgage in favor of New Century Mortgage Corporation (" New Century"), to be recorded against their Property (" Mortgage") as security for Plaintiffs' performance under an unrecorded promissory note in the amount of $589, 500.00 (" Note"). (Doc. 8-2 at ¶ 20.) The Mortgage contained a " power of sale" clause, which granted New Century the right to sell the Property upon Plaintiffs' default on the Mortgage. (Doc. 8-2 at ¶ 21.)

After Plaintiffs defaulted on the Mortgage, in 2009 and 2010, Deutsche sought to exercise its power of sale remedy, purporting to be the assignee of the Mortgage. (Doc. 8-2 at ¶ 22.) Pursuant to the power of sale, Deutsche commenced foreclosure proceedings against Plaintiffs and their Property under Hawaii Revised Statutes (" HRS") § § 667-5 et seq., (Doc. 8-2 at ¶ 25), which obligated Deutsche to act through a licensed Hawaii attorney when satisfying the statute's notice provisions and the mortgage's power of sale requirements. See HRS § 667-5(a) (Supp. 2008).[1] Deutsche retained Defendant Derek W.C. Wong (" Wong") and Routh Crabtree Olsen, P.S. (" RCO") to represent the bank in foreclosing on Plaintiffs' mortgage. (Doc. 8-2 at ¶ 26.)

In December 2009, Wong signed and recorded a " Notice of Mortgagee's Intention to Foreclose Under Power of Sale" (" Notice of Sale"), which advertised that Deutsche would sell Plaintiffs' home at a public auction, and stated the place, date, time, and terms of sale. (Doc. 8-2 at ¶ ¶ 26-27, 29-31.) An auction of the Property was subsequently held, at which Defendants accepted a bid of $562, 800. (Doc. 8-2 at ¶ 43.) Following the auction, RCO prepared a " Limited Warranty Deed, " which was executed by Deutsche on or about April 8, 2010. (Doc. 8-2 at ¶ 45-46.) The execution of the deed was contrary to the originally posted terms of sale. (See Doc. 8-2 at ¶ ¶ 33-34, 38, 45-46.)

On April 7, 2014, Plaintiffs filed their Complaint in State Court. (See Doc. 8-2.) Plaintiffs alleged that Defendants Deutsche, Wong, and RCO (collectively " Defendants") committed or participated in numerous unfair and deceptive acts and practices when foreclosing on their mortgage. (See Doc. 8-2, Doc. 8 at 8.) The Complaint alleges the following claims: (1) Wrongful, Unfair and/or Deceptive Exercise of the Power of Sale in Violation of HRS Chapter 667, [2] and HRS Chapter 480; [3] and (2) Wrongful Foreclosure and Unfair and/or Deceptive Acts or Practices in Violation of HRS Chapter 667 Part I and HRS Chapter 480, for Defendants' use of a false Assignment of Mortgage instrument to foreclose on Plaintiffs' Property. More specifically, the complaint alleges that Defendants " breached their duties to comply strictly with the terms of the power of sale, to act in good faith to sell the properties to Plaintiffs' best advantage, and to use reasonable diligence to secure the best possible price, " by adopting foreclosure policies and practices designed to deter public participation and " chill" bid prices at Plaintiffs' non-judicial auction. (Doc. 8-2 at 5, ¶ 16) Plaintiffs assert that the sale procedures implemented by Defendants violated the requirements of HRS Chapter 667 and constitute unfair and deceptive acts or practices under HRS Chapter 480. (Doc. 8-2 at 27, ¶ ¶ 87-88.) Plaintiffs sought a judgment against Defendants, jointly and severally, and an award of damages and attorneys' fees and costs. (Doc. 8-2 at 28.)

On August 29, 2014, Deutsche filed a Notice of Removal to this Court. (Doc. 1.) Deutsche argued that removal was proper pursuant to 28 U.S.C. § 1441, which provides, in relevant part, that " any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." Specifically, Deutsche argues that the case is properly removed to this Court pursuant to 28 U.S.C. § 1332, governing this Court's diversity jurisdiction, [4] and 28 U.S.C. § 1331, governing this Court's federal question jurisdiction.[5] (Doc. 1 at 3, ¶ 5.)

Deutsche first alleges that removal is proper because there is complete diversity between the Plaintiffs and Defendant Deutsche, and the amount in controversy exceeds $75, 000. (Doc. 1 at 7, ¶ 17.) Deutsche contends that Plaintiffs fraudulently joined Defendants Wong and RCO in order to defeat removal. (Doc. 1 at 5, ¶ 13.) In support of this contention, Deutsche argues that under Hawaii law, " an attorney is not liable to a third person who is not a client for actions arising out of that attorney's professional relationship with its actual client, absent exceptional circumstances, " and having failed to allege any exceptional circumstances, " Plaintiffs fail to state a claim against [Wong and RCO]." (Doc. 1 at 5, ¶ 14.)

Deutsche also alleges that removal is proper based on this Court's federal question jurisdiction because Plaintiffs allege violations of federal bankruptcy law by claiming that Deutsche failed to validly acquire its interest in Plaintiffs' Property. (Doc. 1 at 7-8, ΒΆ 18.) It appears from ...


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