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Chavez v. Deutsche Bank National Trust Co.

United States District Court, D. Hawaii

June 27, 2018

LUIS C. CHAVEZ, Individually and as Special Administrator of the Estate of Marcario Araujo Chavez, Plaintiffs,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, OCWEN LOAN SERVICING, LLC; American Home Mortgage Servicing, Inc., and John does 1-10; doe corporations 1-10; doe partnerships 1-10; doe entities 1-10; DOE GOVERNMENTAL UNITS 1-10, Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

          Leslie E. Kobayashi United States District Judge

         On September 13, 2017, Defendants Deutsche Bank National Trust Company, as Trustee for American Home Mortgage Assets Trust 2007-3, Mortgage-Backed Pass-Through Certificates Series 2007 (“Deutsche Bank as Trustee”); Ocwen Loan Servicing, LLC (“Ocwen”); and Homeward Residential, Inc., formerly known as American Home Mortgage Servicing, Inc. (“AHMSI, ” collectively, “Defendants”), filed their Motion to Dismiss (“Motion”). [Dkt. no. 5.] Pro se Plaintiff Luis C. Chavez, Individually and as Special Administrator of the Estate of Marcario Araujo Chavez (“Plaintiff”), filed his memorandum in opposition on January 29, 2018, and Defendants filed their reply on February 5, 2018. [Dkt. nos. 17, 20.] The Court finds this matter suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i (“Local Rules”). Defendants' Motion is hereby granted in part and denied in part for the reasons set forth below. The Motion is granted insofar as Plaintiff's First Amended Complaint is dismissed without prejudice, with the exception of his claim for punitive damages, which is dismissed with prejudice.

         BACKGROUND

         Plaintiff alleges he is the owner of certain real property in Makawao, Hawai`i (“the Property”), and Defendants wrongfully attempted to foreclose upon the Property in a state court action, Deutsche Bank v. Chavez, Civil No. 11-1-0849 (“Foreclosure Action”). [Notice of Removal of Civil Action (“Notice of Removal”), filed 9/6/17 (dkt. no. 1), Decl. of J. Blaine Rogers (“Rogers Removal Decl.”), Exh. C at 5-21 (First Amended Complaint, filed 7/6/17 in state court), [1] at ¶¶ 1, 7.] On April 8, 2015, the state court dismissed the Foreclosure Action, without prejudice, for lack of prosecution. [Id. at ¶ 7.] According to the First Amended Complaint, Plaintiff's mortgage loan on the Property was not in default at the time the Foreclosure Action commenced, but appeared that way because Defendants had misdirected Plaintiff's funds. Plaintiff alleges that, as of October 4, 2010, the loan was current. [Id. at ¶¶ 8-10.]

         Macario Araujo Chavez (“M.A. Chavez”) was Plaintiff's father, and Plaintiff became the administrator of the estate after M.A. Chavez's death on November 30, 2010. Until M.A. Chavez's death, he and Plaintiff worked with AHMSI to make sure that payments were being credited to the proper account. After M.A. Chavez's death, Plaintiff continued to work with AHMSI. According to Plaintiff, beginning in March 2010, Plaintiff began receiving significant payments on insurance claims, and these payments were made through AHMSI and M.A. Chavez. However, in spite of repeated instructions from Plaintiff, AHMSI did not properly credit the insurance payments to the mortgage loan on the Property. [Id. at ¶¶ 11-13.]

         According to Plaintiff, the November 2013 accounting for the mortgage loan was not correct and, by January 2014, Ocwen still had $1, 656.84 from a September 2010 insurance claim that it had been holding in a different loan account instead of applying it to the mortgage loan account. [Id. at ¶ 14.] In addition, Plaintiff alleges that, in 2010 and 2011, the escrow account “was consistently over-funded by $4, 000.00 or more (over $280 per month)” because of AHMSI's repeated failure to collect the correct property tax amounts. [Id. at ¶ 15.] Plaintiff repeatedly contacted AHMSI to address the over-collection problem, but the overages persisted for a two-year period. [Id. at ¶ 19.] Plaintiff alleges he “received promises that were broken as to payment amounts and applications of funds.” [Id. at ¶ 32.] Further, although Defendants asserted Plaintiff defaulted on the January 2011 payment for the mortgage loan, there was almost a $900 surplus in the escrow account at that time. [Id. at ¶ 16.] The First Amended Complaint includes various other examples of alleged over-collection and misapplication of funds. [Id. at ¶¶ 16-18, 20-22, 24-28.]

         Plaintiff alleges Ocwen “fabricated a misrepresentation to intentional [sic] hide funds that should have been applied to Plaintiffs [sic] loan, prior to bringing a foreclosure, ” while “AHMSI engaged in a pattern of negligent actions upon Plaintiff on how the funds would be applied.” [Id. at ¶ 14.] He also alleges “Defendants continually engaged in a willful misapplication and non-application of funds and improper time of when funds were applied, or not even applied.” [Id. at ¶ 20.]

         Plaintiff believes AHMSI held sufficient funds that should have been credited to the mortgage loan and that foreclosure was not warranted. [Id. at ¶ 29.] Further, a $4, 400.00 payment was sent to AHMSI on April 21, 2011, which should have covered the amounts that were due on April 1, 2011, but AHMSI refused the payment, which Plaintiff alleges “made it impossible to perform from that point forward.” [Id. at ¶ 30.] Plaintiff believes his mortgage loan was reinstated on August 7, 2013, but the payments still were not properly credited (assuming they were accepted at all), and he was still faced with improperly imposed interest and fees. [Id. at ¶ 38.]

         According to Plaintiff, in October and December 2013, Ocwen's counsel sent Plaintiff letters, even though the foreclosure case was still active and Plaintiff was represented by counsel. Further, Plaintiff alleges Defendants acted in bad faith and with malicious intent so that they could foreclose on the Property. [Id. at ¶¶ 39-40.]

         Plaintiff alleges the following claims: unfair and deceptive acts and practices (“UDAP”), under Haw. Rev. Stat. Chapters 480 and 481A (“Count I”); [id. at ¶¶ 41-53;] breach of the implied covenant of good faith and fair dealing (“Count II”); [id. at ¶¶ 54-56;] promissory estoppel (“Count III”); [id. at ¶¶ 57-62;] and a claim for punitive damages (“Count IV”), [id. at ¶¶ 63-64]. Plaintiff prays for: actual, treble, and punitive damages; a ruling that, if Defendants hold a valid mortgage, they must properly apply Plaintiff's funds; an order eliminating all of Plaintiff's interest, late fees, and other changes that resulted from Defendants' failure to determine the correct loan balance, if any; reasonable attorney's fees and costs; and any other appropriate relief. [Id. at pg. 15.]

         The Errata adds allegations that Ocwen has violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq., in particular, 15 U.S.C. §§ 1692(e) and 1692(f). [Rogers Removal Decl., Exh. C at 2-3.] The Errata also adds a prayer for relief stating that, if the Court concludes Deutsche Bank as Trustee held a valid assignment, this Court should either: issue an order requiring Deutsche Bank as Trustee to properly apply his funds and to eliminate his interest, late fees, and other charges caused by the wrongful assessments; or enter judgment in Plaintiff's favor for wrongful foreclosure. [Id. at 3.]

         Defendants were served with and/or received a copy of the First Amended Complaint on or around August 7, 2017. [Notice of Removal at ¶ 6 (citing Rogers Removal Decl. at ¶ 10).] The case was removed based on diversity jurisdiction and federal question jurisdiction, based on the claims under the FDCPA. [Id. at ¶¶ 7, 24-26.]

         While Plaintiff's original complaint was pending in the state court, Plaintiff, through counsel, filed Chavez v. Deutsche Bank National Trust Co., et al., CV 17-00141 DKW-RLP, in this district court (“First Federal Action”). The Complaint in the First Federal Action was based upon substantially the same factual allegations and theories as in the instant case. See Rogers Removal Decl., Exh. B (Complaint in First Federal Action). The First Federal Action alleged the following claims: UDAP violations; a claim for declaratory judgment; wrongful foreclosure; FDCPA violations; and promissory estoppel. [Id. at ¶¶ 40-56.] Plaintiff voluntarily dismissed the First Federal Action. [CV 17-141, Notice of Dismissal Without Prejudice Pursuant to Rule 41(a)(1)(A)(i), filed 8/4/17 (dkt. no. 10).]

         In the instant Motion, Defendants ask this Court to dismiss all of Plaintiff's claims in the First Amended Complaint and the Errata with prejudice because they fail to state a ...


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