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Bendeck v. U.S. Bank National Association

United States District Court, D. Hawaii

June 23, 2017



          J. Michael Seabright, Chief United States District Judge


         On April 18, 2017, pro se Plaintiff Lizabeth-Emi Bendeck (“Plaintiff”) filed a document titled “Bill in Equity to Declare an Absolute Deed to be a Mortgage; Exoneration of Surety; To Construct a Trust upon the Grantee/Trustee; and Notice of Merger in the Equity Jurisdiction, ” which the court construed as a Complaint.[1] ECF No. 1. On May 4, 2017, the court dismissed the Complaint, with leave to amend, for lack of subject matter jurisdiction and failure to state a plausible claim for relief (“May 4 Order”). ECF No. 6; Bendeck v. Workman, 2017 WL 1758079, at *4-5 (D. Haw. May 4, 2017).

         On May 30, 2017, Plaintiff filed an “Amended Bill in Equity, ” which the court construes as a First Amended Complaint (“FAC”), against Defendants U.S. Bank National Association (“US Bank”) and JPMorgan Chase Bank N.A. (“Chase Bank”) (collectively, “Defendants”) asserting claims for breach of contract, breach of trust, and conversion based on allegations of mortgage and securities fraud in connection with Plaintiff's residential mortgage loan. ECF No. 7. Plaintiff seeks reimbursement of all loan payments, declaratory and injunctive relief, and an award of fees and costs.

         For the reasons set forth below, the court finds that the FAC fails to state a plausible claim for relief. Further, the court finds that the theories upon which Plaintiff's claims and allegations are based are frivolous, and therefore amendment would be futile. Accordingly, the FAC is DISMISSED without leave to amend. The court further finds that any appeal of this Order would not be taken in good faith and therefore, Plaintiff's IFP status is REVOKED.


         On January 12, 2006, Plaintiff executed a promissory note (“Note”) for a $302, 000 residential mortgage loan (“Mortgage”) from Home 123 Corporation (“Home 123”), secured by real property located at 43 Pakalana Street, Hilo, Hawaii (the “subject property”). FAC ¶¶ 19, 29, 30, 32; Pl.'s Exs. 1, 2. The Mortgage, recorded at the State of Hawaii Bureau of Conveyances on January 19, 2006, identifies “LIZABETH E. BENDECK” as the Borrower and Home 123 as the Lender. Pl.'s Ex. 1 at 1, 2. In addition to signing the Mortgage, Plaintiff also “granted [Home 123] a deed of trust on the [subject property].” FAC ¶ 20. The FAC alleges that the Note was sold to “[US Bank], as Trustee for Residential Asset Mortgage Products, Inc., Mortgage Asset Backed Pass-Through Certificates, Series 2006-NC3, ” and that Chase Bank is the current loan servicer. FAC ¶¶ 13, 15; Allonges, Pl.'s Exs. 3, 4.

         Initially believing that she had received a loan, Plaintiff allegedly made “numerous monthly payments” to Home 123 and Chase Bank. Id. ¶¶ 20, 22, 23, 30-31, 37. Sometime thereafter, Plaintiff was “informed of mortgage fraud, ” and now alleges that Home 123 did not actually loan her “the sum of $302, 000.00.” Id. ¶ 33. To establish this belief, the FAC first alleges that Plaintiff is neither the “Borrower” nor “LIZABETH E. BENDECK, ” and thus she is not the person who allegedly obtained a loan from Home 123. Id. ¶¶ 45, 52(c). Second, the FAC alleges that that “at no time did [Plaintiff] personally receive a check or deposit into [her] checking account in the amount of $302, 000.00 from Home 123.” Id. ¶ 52(f).

         Third, the FAC alleges in conclusory fashion that pursuant to federal banking law and accounting principles: (a) the “Note has cash value, ” id. ¶ 64; (b) Home 123 was required to deposit and record the Note in its books as a bank asset in the amount of $302, 000, id. ¶¶ 54-59; and (c) once recorded, Home 123 became the borrower and owed Plaintiff, the lender, payment of $302, 000, id. ¶¶ 54, 57, 60. Thus, the FAC alleges that “payment from a bank in exchange for a Promissory Note . . . is not a loan, but merely an asset swap.” Id. ¶ 64.

         Moreover, the FAC alleges that Home 123 was “not out any money on [the alleged asset swap] because it had no money in the deal in the first place.” Id. ¶ 84. Home 123 allegedly “took [Plaintiff's] Asset/[Note], converted it to [its] own use as a securities contract, ” made “huge profits, ” and returned the amount of the Note to Plaintiff “as a ‘loan.'” Id. ¶¶ 71-73. The loan from Home 123 was allegedly Plaintiff's “own funds being returned to her.” Id. ¶ 80.

         Based on the foregoing, the FAC alleges that the Note satisfied Plaintiff's loan payment obligations at the time of closing. Id. ¶ 148. Because the loan was “paid at closing, ” there was no need for a Mortgage, which was allegedly “obtained by fraud.” Id. ¶ 149. And by fraudulently “converting the [Note] into a securities contract and profiting thereby, ” Defendants committed “conversion of property . . . and a breach of trust.” Id. ¶ 153. Additionally, the FAC alleges that the securitization of the Note, by which the Note and Mortgage were separated, rendered the Mortgage invalid and unenforceable. Id. 90-96.

         At some point, U.S. Bank initiated foreclosure proceedings, claiming that Plaintiff defaulted on the loan. Id. ¶¶ 26, 38. But the FAC alleges that Defendants have “no standing or lawful authority to foreclose” because they did not “invest[] a dime to obtain” the subject property. Id. ¶¶ 86-88. This is because not only was the loan allegedly satisfied at closing, but that pursuant to federal banking law, Defendants were allegedly reimbursed from insurance for the face value of the Note 91 days after default. Id. ¶¶ 85, 104.

         Plaintiff seeks: (1) an order declaring that she holds equitable and legal title to the subject property; (2) injunctive relief preventing Defendants from foreclosing the subject property, and directing Defendants to reimburse Plaintiff for all payments she made on the loan and all profits obtained from Defendants' use of the Note; and (3) an award of court fees and costs. Id. ¶¶ 167, 198.

         The FAC asserts that this court has diversity jurisdiction over this action, contending that Plaintiff is “a Private American National born on Birth State, whose home is on private common law venue within a non-military occupied private estate on Hawaii county, on Hawaii state, ”[2] id. ¶ 2, Defendant Chase Bank “is located in Delaware . . . and is a citizen of . . . Delaware, ” id. ¶ 3, and Defendant U.S. Bank “is located [in] . . . Minneapolis, MN . . . and is a citizen of . . . Minnesota, ” id. ¶ 5. The FAC further alleges that “the amount in controversy is over $75, 000.” Id. ¶ 7.

         The FAC's attempt to assert diversity jurisdiction by alleging that U.S. Bank is located in Delaware, FAC ¶ 3, and Chase Bank is located in Minnesota, id. ¶ 5, is insufficient. “[A] national bank . . . is a citizen of the State in which its main office, as set forth in its articles of incorporation, is located.” Washovia Bank v. Schmidt, 546 U.S. 303, 306-07 (2006); see Rouse v. Wachovia Mortg., FSB, 747 F.3d 707, 709 (9th Cir. 2014) ...

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