United States District Court, D. Hawaii
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS AND
GRANTING LEAVE TO AMEND
Derrick K. Watson, Judge
Donna Lynch, proceeding pro se, brings numerous claims
against the lender and loan servicer involved in the
nonjudicial foreclosure sale of her property. Lynch seeks
damages, rescission of a 2007 mortgage and to set aside the
foreclosure sale, based upon the fraudulent conduct of
unspecified agents acting on behalf of Defendants. Because
several of Lynch's claims are not alleged with the
particularity required by Federal Rule of Civil Procedure
9(b) and/or otherwise fail to state a claim for relief,
Defendants' Motion to Dismiss is granted. Lynch is
granted limited leave to file an amended complaint no later
than December 16, 2016, with instructions below.
brings claims against Defendants Federal National Mortgage
Association (“Fannie Mae”), Countrywide Home
Loans, Inc. (“Countrywide”), and Bank of America,
N.A. (“BANA”), arising from the nonjudicial
foreclosure sale of her real property located at 66 Haku Hale
Place, Lahaina, Hawaii 96761 (“Property”), which
took place on June 17, 2010 under a power of sale from a 2007
Mortgage. Complaint ¶¶ 7-15, 31. Fannie Mae gained
title to the Property through the foreclosure sale, and
thereafter initiated a Complaint for Ejectment in the Circuit
Court of the Second Circuit in the State of Hawaii to obtain
possession of the Property. Defendants' Ex. B (Quitclaim
Deed) and Ex. C (Complaint for Ejectment). Lynch filed the
instant Complaint in state court while the ejectment action
was pending. Defendants removed the case to this Court
on May 3, 2016.
Complaint alleges that during the course of refinancing her
mortgage with Countrywide, Lynch “was suffering from a
medical condition that affected her ability to think clearly,
” and notified Countrywide of this fact. Complaint
¶¶ 12-14. Because of her medical condition, she was
unable to leave her home. Therefore, “Countrywide sent
a representative to her house to force her to sign paperwork
for this second refinancing. Relying on representations made
by [Countrywide] or its agents, and for fear of the dire
consequences Defendant threatened her with, [Lynch]
reluctantly signed the new loan papers.” Complaint
¶ 15. According to Lynch, “when she became unable
to make payments on this second refinanced loan, [she] became
aware that she had been duped into signing a loan with
considerably worse terms than the first refinance
loan.” Complaint ¶ 16.
attempted to modify the terms of her mortgage, at times
communicating with Countrywide and BANA (as servicer of the
loan), “and receiving conflicting information from
each.” Complaint ¶ 22. At an unspecified date,
Lynch alleges that “agents of [BANA] told Plaintiff to
stop making mortgage payments, falsely explaining that she
had to be in default in order for her request for a loan
modification to be considered. Relying on the representations
of agents of [BANA], Plaintiff stopped making payments on her
mortgage.” Complaint ¶¶ 27-28. She contends
that the non-judicial foreclosure sale of the Property
occurred while loan modification negotiations were ongoing
and was wrongfully conducted because the “posting of
the intention to foreclose was never put in one of the
Plaintiff's local papers on Maui. It was apparently
posted in the paper on Honolulu. . . . And therefore, it is
not considered a ‘local newspaper.'”
Complaint ¶ 32.
alleges the following causes of action: (1) quiet title and
wrongful foreclosure (Count I); (2) fraud and rescission
(Count II); (3) violation of the Real Estate Settlement
Procedures Act, 12 U.S.C. § 2605(e)
(“RESPA”), and 12 C.F.R. § 226.36(c)(1)(iii)
(“Regulation Z”) (Count III); (4) violation of
the Equal Credit Opportunity Act, 15 U.S.C. §
1961(“ECOA”), and 12 C.F.R. § 202.9(c)(2)
(“Regulation B”) (Count IV); (5) unfair and
deceptive acts and practices (“UDAP”) under Haw.
Rev. Stat. (“HRS”) Chapter 480 (Count V); (6)
breach of the implied covenant of good faith and fair dealing
(Count VI); (7) breach of agreement to negotiate loan
modification contract in good faith (Count VII); (8)
negligent and/or intentional misrepresentation (Count VIII);
and (9) nullification and avoidance of note and mortgage due
to mental incapacity (Count IX). Defendants move to dismiss
the Complaint with prejudice for failure to state a claim
upon which relief can be granted.
Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
for failure to state a claim upon which relief can be
granted. Pursuant to Ashcroft v. Iqbal, “[t]o
survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet
that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal
conclusions.” Id. Accordingly,
“[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550
U.S. at 555). Rather, “[a] claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Id. (citing Twombly, 550 U.S. at 556).
Factual allegations that only permit the court to infer
“the mere possibility of misconduct” do not
constitute a short and plain statement of the claim showing
that the pleader is entitled to relief as required by Rule
8(a)(2). Id. at 679.
Lynch is proceeding pro se, the Court liberally construes her
filings. See Erickson v. Pardus, 551 U.S. 89, 94
(2007); Eldridge v. Block, 832 F.2d 1132, 1137 (9th
Cir. 1987) (“The Supreme Court has instructed the
federal courts to liberally construe the ‘inartful
pleading' of pro se litigants.”) (citing Boag
v. MacDougall, 454 U.S. 364, 365 (1982) (per curiam)).
The Court recognizes that “[u]nless it is absolutely
clear that no amendment can cure the defect . . . a pro se
litigant is entitled to notice of the complaint's
deficiencies and an opportunity to amend prior to dismissal
of the action.” Lucas v. Dep't of Corr.,
66 F.3d 245, 248 (9th Cir. 1995); see also Crowley v.
Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013). As
discussed more fully below, even liberally construed, the
allegations in the Complaint are deficient for several
reasons. First, the allegations of fraudulent conduct fall
short of the particularity required by Federal Rule of Civil
Procedure 9(b), including the time, place, party, and content
of the fraudulent representations. Second, the Complaint
fails to provide sufficient factual content to permit the
Court to draw the reasonable inference that any Defendant is
liable for the misconduct alleged. Defendants' Motion is
therefore granted, but with limited leave to amend consistent
with the instructions below.
Count I: Quiet Title
seeks “a judgment quieting title in [Lynch's]
favor, as the subject Note and Mortgage, and consequently the
nonjudicial foreclosure sale conducted on the subject
property and subsequent transfer of title to Defendant
[Fannie Mae], are void and unenforceable[.]” Complaint
¶ 34. The Court construes the claim as seeking relief
pursuant to HRS § 669-1(a), which provides that a quiet
title “[a]ction may be brought by any person against
another person who claims, or who may claim adversely to the
plaintiff, an estate or interest in real property, for the
purpose of determining the adverse claim.” Lynch,
however, has not alleged even the most basic facts regarding
the interests of various parties to make out a cognizable
“quiet title” claim.
a plaintiff bringing a statutory quiet title claim against a
mortgagee or purported servicer for the mortgagee is required
to allege that she is able to tender the amount of
indebtedness. See Nat'l Mortg. Ass'n v.
Kamakau, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012)
(“A basic requirement of an action to quiet title is an
allegation that plaintiffs are the rightful owners of the
property, i.e., that they have satisfied their
obligations under the [note and mortgage].”) (internal
quotation marks and citation omitted); Benoist v. U.S.
Bank Nat'l Ass'n, 2012 WL 3202180, at *10 (D.
Haw. Aug. 3, 2012) (“[T]ender is required, regardless
of whether the claim is based on common law or
statute.”); Caraang v. PNC Mortg., 795
F.Supp.2d 1098, 1126 (D. Haw. 2011) (“In order for
mortgagors to quiet title against the mortgagee, the
mortgagors must establish that they are the rightful owners
of the property and they have paid, or are able to pay, the
amount of their indebtedness.”). Cases from this
district and elsewhere rely on this rule requiring a
plaintiff “to establish his superior title by showing
the strength of his title as opposed to merely attacking the
title of the defendant.” Amina v. Bank of N.Y.
Mellon, 2012 WL 3283513, at *3 (D. Haw. Aug. 9, 2012).
Lynch does not allege that she has paid the outstanding loan
balance or that she is able to do so.
these reasons, Lynch fails to state a claim for quiet title,
and Count I is dismissed. Because amendment may be possible,
however, she is granted leave to attempt to cure the
deficiencies in this claim.
Count II: Fraud
alleges in Count II that the “Note and Mortgage are
void and unenforceable as procured by fraud, coercion, and
under duress. [Countrywide] made multiple misrepresentations
to [Lynch] . . . [she] was fraudulently induced and coerced
by these statements to sign the second refinance loan
documents without having time to review them or have them
reviewed.” Complaint ¶ 35.
Whether Fraud Claims Are Time-Barred
what the Court can discern, Lynch's fraud allegations
stem from the refinancing of her 2007 Mortgage. See
Defendants' Ex. A. Specifically, she claims that
Countrywide made misrepresentations that caused her to sign
refinance documents “to her detriment, ” and that
“she was physically intimidated by loan officers
showing up at her house, ” and as a result, “the
nonjudicial foreclosure sale must be set aside.”
Complaint ¶¶ 35-36. The only mortgage between Lynch
and Countrywide before the Court is the 2007 Mortgage, which
was also the basis for the nonjudicial foreclosure and
eventual state court ejectment action. In opposition to the
Motion, Lynch does not contest that the 2007 Mortgage is the
operative document. Accordingly, the Court construes Count II
as relating to fraudulent conduct arising from the
refinancing of the 2007 Mortgage.
move to dismiss the fraud claims as time-barred. Although the
Complaint does not allege the dates of these encounters with
Defendants' allegedly intimidating representatives, or
the specific circumstances that resulted in the signing of
the documents, these allegations appear to relate exclusively
to the origination of the Countrywide Mortgage recorded in
the State of Hawaii Bureau of Conveyances (“BOC”)
on May 15, 2007. See Defendants' Ex. A.
Lynch's fraud claims are subject to a limitations period
of six years under HRS § 657-1(4). Mroz v.
Hoaloha Na Eha, Inc., 360 F.Supp.2d 1122, 1135 (D. Haw.
2005) (citing Eastman v. McGowan, 86 Hawai‘i
21, 946 P.2d 1317, 1323 (1997)). As to when the statute of
limitations period for a fraud-based claim begins to run:
Under Hawai‘i law, constructive notice “arise[s]
as a legal inference, where circumstances are such that a
reasonably prudent person should make inquiries, [and,
therefore, ] the law charges a person with notice of facts
which inquiry would have disclosed.” SGM
Partnership v. Nelson, 5 Haw.App. 526, 529, 705 P.2d 49,
52 (1985) (citation omitted; brackets in original). Although
Hawai‘i courts have not addressed whether the recording
of a deed serves as constructive notice for purposes of a
fraud claim, courts in the state have recognized that the
recording of a document gives notice to the general public of
the conveyance. See Markham v. Markham, 80
Hawai‘i, 274, 281, 909 P.2d 602, 609 (App. 1996)
(noting that the “central purpose of recording a
conveyance of real property is to give notice to the general
public of the conveyance and to preserve the recorded
instrument as evidence”). . . . [A] publicly record[ed]
document . . . provides constructive notice where the
document itself constitutes evidence of the fraud.
Fields v. Nationstar Mortg. LLC, 2015 WL 5162469, at
*4 (D. Haw. Aug. 31, 2015) (citation omitted).
on Lynch's allegations, the Mortgage itself constitutes
evidence of the alleged fraud. See Complaint
¶¶ 14-19, 35-37. The Mortgage was recorded with the
BOC as Document Number 2007-086966. Defendants' Ex. A.
Thus, Lynch is charged with constructive knowledge of the
contents of the Mortgage on May 15, 2007. In fact, Lynch had
actual notice of the contents of the Mortgage when she signed
the document before a notary on May 3, 2007. Lynch filed her
Complaint in state court on April 4, 2016. In other words,
whether the statute of limitations began to run on May 3,
2007 or May 15, 2007, Lynch failed to file her Complaint
within the six-year limitations period.
Court finds, however, for purposes of the instant Motion,
that dismissal on statute of limitations grounds would not be
appropriate in light of Lynch's allegations that she was
under duress and “mentally incapable of making a
rational decision at that time.” Complaint ¶ 36.
Although the Court is not required to assume the truth of
these legal conclusions for the purpose of tolling the
statute of limitations, see Iqbal, 555 U.S. at 678,
liberally construed, there may be grounds to establish
equitable or statutory tolling. A claim may be dismissed under
Rule 12 as “barred by the applicable statute of
limitations only when ‘the running of the statute is
apparent on the face of the complaint.'” Von
Saher v. Norton Simon Museum of Art at Pasadena, 592
F.3d 954, 969 (9th Cir. 2010) (quoting Huynh v. Chase
Manhattan Bank, 465 F.3d 992, 997 (9th Cir. 2006)). Such
motion should be granted “only if the assertions of the
complaint, read with the required liberality, would not
permit the plaintiff to prove that the statute was
tolled.” Morales v. City of Los Angeles, 214
F.3d 1151, 1153 (9th Cir. 2000) (citation omitted); see
also Trost v. Embernate, 2011 WL 6101543, at *2 (D. Haw.
Dec. 7, 2011). Liberally construing her allegations, the
Court cannot determine at this preliminary stage of the
litigation whether the otherwise time-barred fraud claims
relating to the 2007 Mortgage are tolled. Accordingly, the
Motion is denied on this basis.
Failure To Allege Fraud With Particularity
event, Count II fails to satisfy the heightened pleading
requirements applicable to such claims.
Fraud and fraudulent misrepresentation share the same
elements. Compare Fisher v. Grove Farm Co., 123 Haw.
82, 103, 230 P.3d 382, 403 (Haw. Ct. App. 2009) (stating the
elements of a fraud claim) with Ass'n of Apartment
Owners, 115 Haw. at 263, 167 P.3d at 256 (stating the
elements of a fraudulent misrepresentation claim). Like
fraudulent misrepresentation, the elements of fraud are
“1) false representations made by the defendant, 2)
with knowledge of their falsity (or without knowledge of
their truth or falsity), 3) in contemplation of
plaintiff's reliance upon them, and 4) plaintiff's
detrimental reliance.” Fisher, 123 Haw. at
103, 230 P.3d at 403.
Prim Liab. Co. v. Pace-O-Matic, Inc., 2012 WL
263116, at *8 (D. Haw. Jan. 30, 2012).
9(b) requires that, when fraud or mistake is alleged,
“a party must state with particularity the
circumstances constituting fraud or mistake.”
Fed.R.Civ.P. 9(b). An allegation of fraud is sufficient if it
“identifies the circumstances constituting fraud so
that the defendant can prepare an adequate answer from the
allegations.” Neubronner v. Milken, 6 F.3d
666, 672 (9th Cir. 1993) (internal citations and quotations
omitted). “Averments of fraud must be accompanied by
the who, what, when, where, and how of the misconduct
charged.” Kearns v. Ford Motor Co., 567 F.3d
1120, 1124 (9th Cir. 2009) (quoting Vess v. Ciba-Geigy
Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)). A
plaintiff must also explain why the alleged conduct or
statements are fraudulent. In re GlenFed, Inc. Sec.
Litig., 42 F.3d 1541, 1548 n.7 (9th Cir. 1994) (en
banc), superseded by statute on other grounds by 15
U.S.C. § 78u-4.
does not sufficiently allege the circumstances that
constitute fraudulent conduct by Countrywide or its unnamed
“agents” in Count II. The Complaint does not
identify such facts as the times, dates, places, or other
details of the alleged fraudulent activity.
Neubronner, 6 F.3d at 672.
Count II fails to satisfy the particularity requirement of
Rule 9(b) and is dismissed. Because amendment may be
possible, however, Lynch is granted leave to attempt to cure
the deficiencies in this claim.
Count III: RESPA
alleges in Count III that BANA “acting as servicer . .
. [by] not responding within the statutory time limit and, in
fact, not responding at all . . . violated 12 U.S.C. §
2605(e) and [Regulation Z].” Complaint ¶ 38. She
contends that she “sent multiple written requests to
[BANA] disputing the amount of debt she allegedly owed and
requesting documentation. No written response addressing
these issues was ever given to [Lynch]. Failing to provide an