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Federal Home Loan Mortgage Corp. v. Kama

United States District Court, D. Hawaii

March 9, 2016

FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff,
v.
ROBERT H.Y. KAMA, Defendant/Counterclaim Plaintiff/Third Party Plaintiff,
v.
FEDERAL HOME LOAN MORTGAGE CORPORATION, BANK OF AMERICA, N.A., AS SUCCESSOR-IN-INTEREST TO BAC HOME LOANS SERVICING, L.P., AND FHLMC S/A 3-DAY ARC-125949, Counterclaim Defendant and Third Party Defendants.

ORDER 1) DENYING IN PART AND SUA SPONTE STAYING IN PART COUNTERCLAIM DEFENDANT AND THIRD PARTY DEFENDANTS’ MOTION TO DISMISS COUNTS 1 AND 3 OF THE AMENDED THIRD PARTY COMPLAINT; AND 2) SUA SPONTE STAYING THE CASE

Alan C. Kay Sr. United States District Judge

For the reasons set forth below, the Court DENIES IN PART AND STAYS IN PART Counterclaim Defendant Federal Home Loan Mortgage Corporation (“Freddie Mac”), Third Party Defendant Bank of America N.A., as successor-in-interest to BAC Home Loan Servicing, L.P. (“BANA”), and Third Party Defendant FHLMC S/A 3 day ARCH-125949’s (“FHLM”) (collectively, “Third Party Defendants”) Motion to Dismiss Counts 1 and 3 of the Amended Third Party Complaint (“Motion to Dismiss” or “MTD”), ECF No. 35. The Court denies the Motion to Dismiss as to Count 3 (wrongful foreclosure) and stays consideration of the Motion to Dismiss as to Count 1 (violation of HRS Chapter 667). The Court additionally STAYS the proceedings as discussed below.

BACKGROUND

This matter arises from the foreclosure of residential property located on the Big Island of Hawaii. The relevant procedural and factual background is as follows.

On December 22, 2006, Defendant, Counterclaim Plaintiff, and Third Party Plaintiff Robert Kama (“Kama”) and non-party Lisa Kama[1] entered into a transaction with Finance Factors, Limited (“Finance Factors”), obtaining a $180, 000 loan secured by a mortgage (“Mortgage”) on their residence at 17-287 Volcano Road, Kurtistown/Keaau, [2] Hawaii (“Property”). MTD, Ex. A, ECF No. 35-3;[3] Am. Compl. ¶ 15, ECF No. 29. The Mortgage names Robert and Lisa Kama as “Borrower[s], ” Finance Factors as the “Lender, ” and non-party Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for Lender and as mortgagee under the Mortgage. Id. On September 22, 2010, MERS, as nominee for Finance Factors, executed an Assignment of Mortgage (“Assignment”), evidencing the assignment of all rights to BAC Home Loans Servicing, LP (BANA).[4] MTD, Ex. B, ECF No. 35-4. The State of Hawaii Bureau of Conveyances recorded the Assignment on October 7, 2010. Id. On October 21, 2010, BANA as record assignee of the Mortgage, recorded a Notice of Mortgagee’s Intention to Foreclose Under Power of Sale (“Notice of Sale”). Id. Ex. C, ECF No. 35-5.

Sometime in 2010, as a result of a workplace injury, Kama sought a loan modification from BANA through the federal Home Affordable Modification Program (“HAMP”). Am. Compl. ¶¶ 19, 22, ECF No. 29. A representative at BANA named “Bonita Black” told Kama “that it looked like he qualified for a HAMP loan modification” and “that as long as he complied with the terms of the paperwork . . . which was forthcoming in the mail, he would not be foreclosed on.” Id. ¶ 21. Kama complied with the requests for paperwork from BANA “and was told . . . in early April, 2011, that his HAMP application was complete and no further documentation was needed from him.” Id. ¶ 20. Kama also received a letter from BANA stating that he “would not lose his home during the loan modification evaluation.” Id. ¶ 38 (citing Am. Compl., Ex. B).

However, on April 21, 2011, the State of Hawaii Bureau of Conveyances recorded a Mortgagee’s Affidavit of Foreclosure Under Power of Sale (“Affidavit of Sale”), evidencing the sale of the Property on April 11, 2011 to BANA. MTD, Ex. D, ECF No. 35-6; Am. Compl. ¶ 23, ECF No. 29. On June 22, 2011, BANA executed a Mortgagee’s Quitclaim Deed Pursuant to Power of Sale, which granted the Property to Freddie Mac. MTD, Ex. E, ECF No. 35-6.

On October 18, 2012, Freddie Mac filed an Ejectment Complaint in the Circuit Court of the Third Circuit, State of Hawaii (“state circuit court”). See Notice of Removal at 2, ECF No. 1. On August 20, 2013, Kama filed an Answer, Counterclaim, and Third Party Complaint (Complaint) against Counterclaim Defendant Freddie Mac and Third Party Defendants BACHLS, [5] Federal Housing Finance Agency (“FHFA”), and FHLM. Id. Ex. A, ECF No. 1-2. The Complaint raised the following claims: 1) Violation of Hawaii Revised Statutes (“HRS”) Chapter 667[6] (Lack of Legal Right to Foreclose); 2) Violation of HRS Chapter 667 (Failure to Provide Public Announcement of Continued Date and to Follow Initial Terms of Sale); 3) Breach of Contract - Third Party Beneficiary of HAMP Contract; 4) Unfair and Deceptive Acts and Practices (“UDAP”) In Loss Mitigation; 5) Wrongful Foreclosure; 6) Promissory Estoppel; 7) Unconstitutional Deprivation of Kama’s Property Without Due Process of Law; and 8) Quiet Title. Id.

In the state circuit court, Freddie Mac filed a Motion for Summary Judgment on the Ejectment Complaint and prevailed on February 25, 2014. Notice of Removal, Ex. B, ECF No. 1-3. Freddie Mac filed a Notice of Removal to remove Kama’s Complaint to this Court on March 18, 2014, pursuant to 12 U.S.C. § 1452(f).[7] Notice of Removal at 1, ECF No. 1.

On April 1, 2014, Third Party Defendants filed a Motion to Dismiss the Complaint in its entirety with prejudice and without leave to amend. ECF No. 7.[8] The Court held a hearing regarding Third Party Defendants’ Motion to Dismiss on September 15, 2014. At the hearing, Kama orally moved to stay the proceedings. The Court directed Kama to file a written motion to stay the proceedings, which Kama filed on September 22, 2014. ECF No. 24.

On October 3, 2014, the Court denied Kama’s motion to stay and granted in part and denied in part Third Party Defendants’ Motion to Dismiss. Order at 1, ECF No. 28. Specifically, the Court dismissed without prejudice Kama’s violation of HRS Chapter 667 claims, breach of contract claim, wrongful foreclosure claim, due process claim, and quiet title claim. Id. at 22-33, 39-41, 44-50. The court denied Third Party Defendants’ Motion to Dismiss with respect to Kama’s UDAP claim and promissory estoppel claim. Id. at 33-38, 41-44. The Court granted Kama leave to file an amended complaint within 30 days. Id. at 51.

On October 31, 2014, Kama filed the Amended Complaint at issue. Am. Compl., ECF No. 29. The Amended Complaint asserts four “cause[s] of action” against Third Party Defendants: 1) Violations of HRS Chapter 667 (Count 1); 2) Unfair and Deceptive Acts and Practices pursuant to HRS § 480:2 (Count 2); 3) Wrongful Foreclosure (Count 3); and 4) Promissory Estoppel (Count 4). Id. ¶¶ 89-119.

On December 1, 2014, Third Party Defendants filed a Motion to Dismiss Counts 1 and 3 of the Amended Complaint. MTD, ECF No. 35. Between December 2014 and August 2015, the parties requested and received from the Court several continuances of the hearing date on the Motion to Dismiss, to allow for loan modification review in attempt to resolve the matter. See ECF Nos. 38-41, 46, 48. Accordingly, on August 11, 2015 the Court terminated the pending Motion to Dismiss and directed Third Party Defendants to inform the Court if they wished to reinstate the motion following the loan modification review process. Minute Order at 2, ECF No. 48. On November 19, 2015, the Motion to Dismiss was reinstated, and a hearing date set for February 8, 2016. ECF No. 56.

On January 19, 2016, Kama filed a Memorandum in Opposition to Third Party Defendants’ Motion to Dismiss (“Opposition”). ECF No. 59. On January 25, 2016, Third Party Defendants filed a Reply in support of their Motion to Dismiss (“Reply”). ECF No. 60.

A hearing on the Motion to Dismiss was held on February 8, 2016.[9] At the hearing, the Court requested that Third Party Defendants file information in response to questions posed by the Court. Accordingly, on February 12, 2016, Third Party Defendants filed a Supplemental Brief in Support of their Motion to Dismiss (“Supp. Brief”). ECF No. 66. Kama filed a Responsive Supplemental Brief in ...


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