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Tilley v. Bank of New York Mellon

United States District Court, D. Hawaii

March 21, 2018

KIMBERLY TILLEY, Plaintiff,
v.
THE BANK OF NEW YORK MELLON; DOE DEFENDANTS 1-50, Defendant,
v.
SHIRLEY A. ESTES, as Trustee of the Survivor's Trust Created Under The Estes Living Trust Dated December 5, 1980, Intervenor Defendant. SHIRLEY A. ESTES, as Trustee of the Survivor's Trust Created Under The Estes Living Trust Dated December 5, 1980, Cross-Claimant,
v.
THE BANK OF NEW YORK MELLON, Cross-Defendant.

          ORDER GRANTING INTERVENING DEFENDANT SHIRLEY A. ESTES, AS TRUSTEE'S MOTION FOR JUDGMENT ON THE PLEADINGS (ECF No. 19)

         Plaintiff Kimberly Tilley has filed a Complaint against The Bank of New York Mellon (“BONY”) asserting claims of wrongful foreclosure, quiet title, and ejectment. After Plaintiff filed her Complaint against BONY, Shirley A. Estes intervened as a defendant in the action, seeking to protect her interest in the real property as a bona fide purchaser for value. There was no objection to her filing.

         Plaintiff claims that she and her now deceased husband executed a Note, in the amount of $817, 500 in favor of First Magnus Financial Corporation, to obtain a Loan to purchase real property (“Subject Property”) on the island of Lanai. The Loan was secured by a Mortgage in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”).

         On January 4, 2006, the Mortgage was recorded in the Office of the Assistant Registrar, Land Court for the State of Hawaii (“Land Court”).

         On December 29, 2010, the Mortgage assignment to Defendant BONY from MERS was recorded in Land Court. On the same day, BONY recorded a Notice of Mortgagee's Intention to Foreclose Under Power of Sale in the State of Hawaii Bureau of Conveyances.

         Plaintiff's Complaint alleges that on May 23, 2011, BONY acted under a power of sale in the Mortgage and initiated a nonjudicial foreclosure pursuant to Haw. Rev. Stat. 667 Part I (2008). Plaintiff asserts that BONY subsequently foreclosed on the Subject Property and conveyed the property to itself at auction.

         Following the nonjudicial foreclosure, Land Court issued a Transfer Certificate of Title on June 9, 2011, that certified BONY as the registered owner of the Subject Property.

         On March 1, 2012, BONY sold and conveyed the Subject Property to Intervening Defendant Shirley A. Estes, as Trustee of the Survivor's Trust Created Under the Estes Living Trust dated December 5, 1980. On March 9, 2012, Land Court issued a Transfer Certificate of Title that certified Shirley A. Estes, as Trustee, as the registered owner of the Subject Property.

         Plaintiff's Complaint seeks to challenge Defendant BONY's actions under the Hawaii nonjudicial foreclosure statute and the power of sale in the Mortgage.

         Intervening Defendant Estes filed a Motion for Judgment on the Pleadings on the basis that she is now the certified owner of the Subject Property. Intervening Defendant challenges Plaintiff's right to two forms of relief sought by Plaintiff in the Complaint.

         Specifically, the Intervening Defendant moves for judgment on the pleadings as to Plaintiff's requests for:

(1) “judgment compelling BONY to return title to and possession of the Property to Plaintiff” and
(2) “declaratory judgment that BONY's non-judicial foreclosure sale and transfer of the Property described herein was contrary to law and declaring that Plaintiff may pursue a further action for ejectment against Estes.”

         Intervening Defendant Shirley A. Estes, as Trustee's Motion for Judgment on the Pleadings (ECF No. 19) is GRANTED.

         PROCEDURAL HISTORY

         On February 17, 2017, Plaintiff filed her Complaint in the Circuit Court of the Second Circuit, State of Hawaii. (Complaint, attached as Ex. A to Def.'s Notice of Removal, ECF No 1-2).

         On October 13, 2017, the Hawaii State Court entered an ORDER GRANTING PROPOSED INTERVENOR SHIRLEY A. ESTES, AS TRUSTEE OF THE SURVIVOR'S TRUST CREATED UNDER THE ESTES LIVING TRUST DATED DECEMBER 5, 1980'S MOTION TO INTERVENE. (ECF No. 1-4).

         On October 17, 2017, Intervening Defendant filed a Notice of Removal to the United States District Court for the District of Hawaii. (ECF No. 1).

         On November 7, 2017, Intervening Defendant filed a Cross-Claim against Defendant The Bank of New York Mellon. (ECF No. 6-1).

         On December 7, 2017, Intervening Defendant filed a MOTION FOR JUDGMENT ON THE PLEADINGS. (ECF No. 19).

         On January 3, 2018, Plaintiff filed PLAINTIFF'S MEMORANDUM IN OPPOSITION TO INTERVENING DEFENDANT SHIRLEY A. ESTES, AS TRUSTEE'S MOTION FOR JUDGMENT ON THE PLEADINGS. (ECF No. 21).

         On January 9, 2018, Plaintiff filed PLAINTIFF'S SUBMISSION PURSUANT TO LR 7.8. (ECF No. 22). The submission attached previously uncited authorities of unpublished decisions in a case in the Circuit Court of the Third Circuit, State of Hawaii. (Id.)

         On January 17, 2018, Intervening Defendant filed her REPLY. (ECF No. 25).

         On February 5, 2018, the Court held a hearing on Intervening Defendant's Motion for Judgment on the Pleadings.

         BACKGROUND

         The Complaint alleges that on January 4, 2006, Plaintiff Kimberly Tilley and her now deceased husband executed a Note in the amount of $817, 500 to First Magnus Financial Corporation to purchase real property located at 15 Kukui Circle, Apartment 15-D, on the island of Lanai (“Subject Property”). (Complaint at ¶ 1, 12-13, ECF No. 1-2). A warranty deed was recorded in the Office of the Assistant Registrar, Land Court for the State of Hawaii (“Land Court”) conveying the Subject Property to Plaintiff and her now deceased husband. (Warranty Deed, recorded on Jan. 4, 2006 in Land Court, Doc. 3374599, attached as Ex. A to Pla.'s Complaint, ECF No. 19-11).

         The Complaint asserts that repayment of the Note was secured by a Mortgage in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for First Magnus Financial Corporation. (Complaint at ¶ 13, ECF No. 1-2). The Mortgage was recorded against the Subject Property in Land Court. (Mortgage, recorded on Jan. 4, 2006 in Land Court, Doc. 3374600, attached as Ex. A to Inter. Def.'s Motion, ECF No. 19-3).

         On December 4, 2010, the Mortgage was assigned to Defendant The Bank of New York Mellon (“BONY”). The Assignment of Mortgage was recorded in Land Court on December 29, 2010. (Complaint at ¶ 14, ECF No. 1-2; Assignment of Mortgage, recorded on Dec. 29, 2010 in Land Court, Doc. 4033870, attached as Ex. B to Inter. Def.'s Motion, ECF No. 19-4).

         On December 29, 2010, Defendant BONY recorded a Notice of Mortgagee's Intention to Foreclose Under Power of Sale in the State of Hawaii Bureau of Conveyances. (Complaint at ¶ 26, ECF No. 1-2; Notice of Sale, recorded on Dec. 29, 2010 in the Bureau of Conveyances, Doc. 2010-203162, attached as Ex. C to Inter. Def.'s Motion, ECF No. 19-5).

         On March 22, 2011, a Mortgagee's Affidavit of Foreclosure Under Power of Sale was recorded in Land Court. (Mortgagee's Affidavit of Foreclosure, recorded on Mar. 22, 2011, Doc. 4058653, attached as Ex. D to Inter. Def.'s Motion, ECF No. 19-6).

         The Complaint asserts that two months later, on May 23, 2011, Defendant BONY acted pursuant to a power of sale in the Mortgage to conduct a nonjudicial foreclosure sale as set forth in former Haw. Rev. Stat. § 667 Part I (2008). (Complaint at ¶¶ 15-16, ECF No. 1-2). Plaintiff claims that BONY conducted an auction pursuant to the power of sale and sold the Subject Property to itself. (Id. at ¶¶ 15-16, 36).

         On June 9, 2011, a Mortgagee's Quit Claim Deed was recorded in Land Court that conveyed the Subject Property from BONY to itself. (Mortgagee's Quit Claim Deed, recorded on June 9, 2011, Doc. 4078520, attached as Ex. E to Inter. Def.'s Motion, ECF No. 19-7).

         Also on June 9, 2011, Land Court issued a Transfer Certificate of Title certifying BONY as the new registered owner of the Subject Property. (Transfer Certificate of Title issued on June 9, 2011, Cert. No. 1025903, attached as Ex. F to Inter. Def.'s Motion, ECF No. 19-8).

         The Complaint alleges that on March 1, 2012, BONY sold the Subject Property to Intervening Defendant Shirley A. Estes, as Trustee of her living trust. (Complaint at ¶ 18, ECF No. 1-2).

         On March 9, 2012, a Special Warranty Deed was recorded in Land Court that conveyed the Subject Property from BONY to Shirley A. Estes, as Trustee. (Id.; Special Warranty Deed recorded on Mar. 9, 2012, Doc. T-8103065, attached as Ex. G to Inter. Def.'s Motion, ECF No. 19-9).

         Also on March 9, 2012, Land Court issued a Transfer Certificate of Title to Shirley A. Estes, as Trustee of the Survivor's Trust Created Under The Estes Living Trust dated December 5, 1980. (Transfer Certificate of Title issued on March 9, 2012, Cert. No. 1039409, attached as Ex. H to Inter. Def.'s Motion, ECF No. 19-10).

         Plaintiff's Complaint alleges that BONY did not strictly comply with the requirements of the nonjudicial foreclosure statute and the power of sale provision in the Mortgage. (Complaint at ¶¶ 15, 17, 20, 24-47, ECF No. 19-11).

         The Complaint states:

BONY failed to strictly comply with HRS §§ 667-5 et seq. (2008) and the power of sale in the Mortgage as set forth above, the non-judicial foreclosure sale and transfer of the Property to BONY was void as a matter of law, or at least voidable, and hence all subsequent transfers were likewise void or at the very least voidable as to non-bona fide purchasers. BONY should be compelled to return title to and possession of the Property to Plaintiff.
(Complaint at ¶ 47, ECF No. 19-11).

         Plaintiff seeks a judgment “compelling BONY to return title to and possession of the Property to Plaintiff” and a declaratory judgment that allows Plaintiff to “pursue a further action for ejectment against Estes.” (Complaint at p. 15, ECF No. 1-2).

         STANDARD OF REVIEW

         Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the pleadings after the pleadings are closed. Judgment on the pleadings “is properly granted when there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law.” Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009).

         For a Rule 12(c) motion, all material allegations contained in the nonmoving party's pleadings are accepted as true. Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989).

         The district court's review is generally limited to the contents of the complaint. The court may consider documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice without converting the Rule 12(c) motion into a motion for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

         When a Rule 12(c) motion raises the defense of failure to state a claim, the standard governing the motion is the same as that governing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). McGlinchy v. Shell Chemical Co., 845 F.2d 802, 810 (9th Cir. 1988).

         Rule 12(b)(6) allows dismissal where a complaint fails to state a claim upon which relief can be granted. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Conclusory allegations of law and unwarranted inferences are insufficient to defeat such a motion. Iqbal, 556 U.S. at 678-79. The Court need not accept as true allegations that contradict matters properly subject to judicial notice or allegations contradicting the exhibits attached to the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         ANALYSIS

         The Court may consider exhibits attached to the Complaint and documents whose contents are incorporated by reference in the Complaint without converting a motion to dismiss to a motion for summary judgment. Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 2012).

         The Court may also consider matters that are the proper subject of judicial notice pursuant to Federal Rule of Evidence 201. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). Federal Rule of Evidence 201 allows a court to take judicial notice of public documents. Barber v. Ohana Military Communities, LLC, 2014 WL 3529766, *4 (D. Haw. July 15, 2014).

         Here, the Court takes judicial notice of the following documents in evaluating Intervening Defendant's Motion for Judgment on the Pleadings:

(1) Plaintiff's Warranty Apartment Deed recorded on January 4, 2006 (attached as Ex. A to Pla.'s Complaint, ECF No. 19-11 at pp. 19-39);
(2) Mortgage recorded on January 4, 2006 (attached as Ex. A to Inter. Def.'s Motion, ECF ...

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