United States District Court, D. Hawaii
ORDER (1) GRANTING DEFENDANTS' MOTION TO DISMISS
FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND; AND (2) DENYING
PLAINTIFF'S MOTION TO EXTEND BRIEFING DEADLINES
Derrick K. Watson, United States District Judge.
Donna Lynch, proceeding pro se, brings unspecified claims
against the lender, loan servicer, and assignee of a 2007
mortgage on her real property in Maui that was sold at a 2010
non-judicial foreclosure sale. Although her First Amended
Complaint lacks specific claims, Lynch appears to seek
rescission of the mortgage and invalidation of the
foreclosure sale, due to fraud in the origination of the loan
and during the foreclosure proceeding. The First Amended
Complaint, however, suffers from several of the same
deficiencies as Lynch's original Complaint, as described
in the Court's November 15, 2016 Order Granting
Defendants' Motion To Dismiss With Leave To Amend.
See Dkt. No. 40 (11/15/16 Order). Because
Lynch's indeterminate claims did not cure the
deficiencies previously identified by the Court, are not
alleged with the particularity required by Federal Rule of
Civil Procedure 9(b), are time-barred, or otherwise fail to
state a claim for relief, Defendants' Motion to Dismiss
is granted. For a second time, Lynch is granted leave to file
an amended complaint- no later than October 6, 2017-limited
by and consistent with the instructions below. The Court
denies Lynch's requests for a further extension of time
in which to file additional briefing.
brings claims against Defendants Federal National Mortgage
Association (“Fannie Mae”), Countrywide Home
Loans, Inc. (“Countrywide”), and Bank of America,
N.A. (“BANA”), in an effort to set aside the
non-judicial 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. First Amended
Complaint (“FAC”) ¶¶ 29-31, Dkt. No.
46; Defs.' Ex. A (2007 Mortgage), Dkt. No.
50-1. 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. Defs.' Ex. B (Quitclaim Deed)
and Ex. C (Complaint for Ejectment); Dkt. Nos. 50-2 and 50-3.
to Lynch, the 2010 foreclosure sale was “illegal and
fraudulent, ” due in part to a “forged Assignment
made in 2009 from MERS to BAC and a notice of Foreclosure
naming solely BAC Home Loans and [which] never mentioned
Fannie Mae who was the original investor from the inception
of the loan.” FAC ¶¶ 29, 35. Lynch alleges
47. The Lynch loan was sold by [Countrywide] to [Fannie Mae]
who had its own securitization pools not necessarily listed
in the Securities and Exchange Commission
48. Fannie was the investor and real party in interest from
the loan application process [in] 2007 forward.
49. However, Fannie was concealed during the foreclosure
process and did not appear in the Assignment of Mortgage,
Intent to Foreclose Notices, the Non-Judicial Foreclosure or
the Foreclosure Affidavit that were all filed and remain in
the Hawaii Bureau of Conveyances.
51. It appears that Fannie and BAC executed a scheme that
concealed the real party in interest owner/investor from
FAC ¶¶ 47-49, 51.
further alleges that the 2007 Mortgage was improperly
procured by employees of Countrywide and that she is a victim
of a nationwide mortgage fraud conspiracy known as the
“Hustle.” See FAC ¶¶ 43-179.
According to Lynch, Countrywide employees contacted her in
2007 to inform her that she needed to refinance her 2005
mortgage, also with Countrywide, because “an internal
[Countrywide] audit found that the 2005 loan was
‘invalid and/or illegal.'” FAC ¶ 68.
Lynch alleges that the 2007 loan application was
“crafted in Ventura, California by Steven Gillespie at
Countrywide, ” who was “Lynch's sole contact
via phone throughout the refinance process, ” and that
he “convinced Lynch that her 2005 loan was no longer
valid and without a refinance she would no longer own her
home or have homeowner's insurance.” FAC
¶¶ 76-78. According to Lynch, “[i]n addition
to escalating the appraisal market value again this time to
$850, 000, the first mortgage amount terms and interest
rates, [Countrywide] added a $77, 000 2nd mortgage in an
80/20 deal that Lynch was not expecting.” FAC ¶
74. Moreover, “[o]n the day of signing, since Lynch had
a medical disability and could not drive, a representative
from CHL came to her house.” FAC ¶ 82.
alleges that the following improper lending practices by
Countrywide were part of a larger scheme to defraud-
83. Gillespie informed Lynch that the property market value
had allegedly increased to $850, 000 which became a central
part of Gillespie's sale pitch.
84. Countrywide would later become well known for requiring
inflated appraisals to meet the parameters of the loan
85. Treating the inflated equity like stocks, Lynch was
encouraged to increase her mortgaged amount, roll in some
debt and take some cash out.
86. It was the standard [Countrywide] sales operating
87. No documentation needed, as the previous loan information
88. This was a high speed, fast and easy “Hustle”
loan. **** 91. The Lynch first mortgage loan dated May 1,
2007 was sold to Fannie upon origination.
92. It appears the 2007 2nd line of credit mortgage may not
have been fully disclosed to Fannie; specifically, loans sold
to Fannie must comply with its Single Family Selling Guide
and purchase contracts.
93. [Countrywide] was known for failing to follow the Fannie
Guidelines. . . .
94. By 2008 and the onset of the financial crisis it became
painfully obvious that these Adjustable Rate Mortgage loans
were intended to create defaults and not designed for long
term 30 year loans.
FAC ¶¶ 83-88, 91-94.
contends that the loan servicer, BAC, and Fannie Mae
“committed intrinsic fraud, such as filing materially
false [nonjudicial foreclosure] documents . . . in the Hawaii
Bureau of Conveyances [and] in Court . . . wherein they
knowingly concealed the real party in interest, the actual
mortgagee, owner and investor [Fannie Mae], throughout the
entire nonjudicial foreclosure process.” FAC ¶
173. Lynch asserts that “the documents [recorded] in
the Bureau of Conveyances [(“BOC”)] since 2007
have been fraudulent and have irreparably harmed
[her].” FAC ¶ 31.
filed her original Complaint in state court while the
ejectment action was pending. Defendants removed the
case to this Court on May 3, 2016. The Court dismissed
Lynch's original Complaint based on similar allegations
of fraud by unspecified agents of Countrywide and BANA and
granted her leave to amend. 11/15/16 Order. The FAC, filed on
February 2, 2017, eliminated several of the specific causes
of action alleged in the original Complaint, but otherwise
repeats many of the prior averments, while adding new
theories based on Countrywide's broader scheme to
defraud. Lynch seeks “an Order to set aside and vacate
the June 17, 2010 non-judicial foreclosure and following
judgments in this Court, not only to prevent further
irreparable harm to her, but as a matter of law to correct
any possible fraud, misrepresentation and circumvention used
to obtain the judgments and orders.” FAC ¶ 271.
move to dismiss the FAC with prejudice for failure to state a
claim upon which relief can be granted. Dkt. No. 49.
Following several extensions of time from the Court, Lynch
filed her opposition to Defendants' Motion on July 25,
2017 (Dkt. Nos. 60 and 61), and Defendants timely filed a
reply by the August 14, 2017 deadline (Dkt. No. 63). After
the close of briefing, on August 21 and 22, 2017, Lynch filed
additional requests to extend the briefing deadlines to allow
her to supplement her opposition and for leave to file an
amended complaint. See Dkt. Nos. 64 and 65. The
Court addresses each of the motions below.
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). A court
may, however, deny leave to amend where further amendment
would be futile. See, e.g., Leadsinger, Inc. v.
BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008)
(reiterating that a district court may deny leave to amend
for, among other reasons “repeated failure to cure
deficiencies by amendments previously allowed . . . [and]
futility of amendment”).
Defendants' Motion To Dismiss Is Granted
liberally construed, the allegations in the First Amended
Complaint are deficient for several reasons. First, the
allegations of fraudulent conduct once again fall short of
the particularity required by Federal Rule of Civil Procedure
9(b). 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. Moreover, many of the claims relating to the 2007
loan origination are time-barred. Defendants' Motion is
therefore granted, but with limited leave to amend consistent
with the instructions below.
preliminary matter, the FAC does not comply with Rule 8,
which mandates that a complaint include a “short and
plain statement of the claim, ” Fed.R.Civ.P. 8(a)(2),
and that “each allegation must be simple, concise, and
direct.” Fed.R.Civ.P. 8(d)(1). Because specific
claims are not identified in a coherent manner, the Court is
left to guess as to the causes of action that Lynch intended
to assert in the FAC. The sole evident remedy sought is an
order “set[ting] aside and vacat[ing] the June 17, 2010
non-judicial foreclosure and following judgments in this
Court.” FAC ¶ 271. To the extent the Court is able
to discern specific claims or causes of action, they are
organized below in order to provide guidance on the filing of
an amended complaint.
Claims Sounding In Fraud
Court first addresses the allegations of fraud throughout the
FAC. Lynch primarily alleges that the 2007 Mortgage was
fraudulently procured by Countrywide and that its recordation
on May 15, 2007 was likewise fraudulent. See FAC
¶¶ 31, 173-84, 226, 290.
Certain Fraud ...