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Kawelo v. Nationstar Mortgage LLC

United States District Court, D. Hawaii

September 12, 2018

GEORGE KAULANA KAWELO, III, and RINA CECILY KAWELO, an individual, on behalf of themselves and all other similarly situated, Plaintiff,
NATIONSTAR MORTGAGE LLC, et al., Defendants.


          J. Michael Seabright Chief United States District Judge.


         By this action against numerous Defendants, pro se Plaintiffs George Kaulana Kawelo, III (“George”) and Rina Cecily Kawelo (“Rina”) (collectively, “Plaintiffs”) seek to vacate a state court judicial foreclosure and subsequent sale of real property located at 87-2093 Pakeke Street, Waianae, HI 96706 (the “subject property”). Compl., ECF No. 1. The Complaint names as Defendants: (1) Nationstar Mortgage LLC (“Nationstar”); Mortgage Electronic Registration Systems, Inc. (“MERS”); MTGLQ Investors, LP (“MTGLQ”) (collectively, “Nationstar Defendants”); Ocwen Loan Servicing, LLC (“Ocwen”); TMLF Hawaii, LLLC, a law corporation (“TMLF”) and TMLF attorneys Peter Stone (“Stone”), Derek W.C. Wong (“Wong), and Jason L. Cotton (“Cotton”) (collectively, the “TMLF Defendants”); Aldridge Pite, LLP, a limited law partnership (“AP”) and AP attorney Zachary K. Kondo (“Kondo”) (collectively the “AP Defendants”); “process server” Akoni Shannon (“Shannon”); and “All equity or persons unknown, claiming any legal or equitable right, title, estate, lien, or interest in the property described in the Complaint adverse to Plaintiffs' title, or any cloud on Plaintiffs' title thereto and all whose true names are unknown.” Compl. at 1 & ¶ 37.

         Before the court are three Motions to Dismiss, one of which includes a request for judicial notice, ECF Nos. 11, 22, 35; two additional “Requests for Judicial Notice, ”[1] ECF Nos. 13, 23; and multiple Joinders to one or more of the motions and requests, ECF Nos. 27, 37, 39, 41, 42. For the reasons discussed below, the Complaint is DISMISSED, with leave to amend as to certain claims. More specifically, the Requests for Judicial Notice are GRANTED, ECF Nos. 13, 23, 35; the Motions to Dismiss filed by Ocwen and the Nationstar Defendants are GRANTED, ECF Nos. 11, 35; and the Motion to Dismiss filed by the AP Defendants and the TMLF Defendants' Joinder to that motion are GRANTED in part and DENIED in part, ECF Nos. 22, 27. Ocwen's Joinder is GRANTED, ECF No. 37; the AP Defendants' Joinder is GRANTED in part and DENIED in part, ECF No. 39; and the Nationstar Defendants' Joinders are GRANTED, ECF Nos. 41, 42.


         A. Factual Background

         On or about February 26, 2007, Plaintiffs obtained a loan of $410, 856 from DHI Mortgage Company, that was secured by a mortgage on the subject property. ECF No. 1 ¶¶ 48, 133; ECF No. 35-3. Ocwen was the loan servicer for Plaintiffs' mortgage. ECF No. 1 ¶ 51. On November 25, 2014, the TMLF Defendants, on behalf of Nationstar, filed an action in the State of Hawaii Circuit Court of the First Circuit (“state court”) to foreclose on the mortgage and subject property (the “state foreclosure action”). Id. ¶ 50; ECF Nos. 13-1, 23-1.

         On March 28, 2016, the state court entered its “Findings of Fact, Conclusions of Law and Order Granting [Nationstar]'s Motion for Summary Judgment for Foreclosure Against [Plaintiffs] and for Interlocutory Decree of Foreclosure” (the “FOF/COL”).[2] ECF No. 13-2. The FOF/COL found that Plaintiffs executed a valid note to DHI Mortgage Company that required Plaintiff to make monthly payments. Id. at 2-3. The FOF/COL further found that the note was secured by a valid mortgage with MERS as the mortgagee “solely as nominee for DHI Mortgage Company, ” that MERS assigned the mortgage to Nationstar on July 31, 2014, and that after November 1, 2013, Plaintiffs failed to make the agreed-upon monthly payments on the note. Id. at 2-5. Thus, the FOF/COL determined that Nationstar was “entitled to foreclose upon the [subject] property” and to “judgment and an interlocutory decree of foreclosure as a matter of law, ” and appointed a Commissioner to sell the subject property. Id. at 4-6. On April 17, 2017, the state court issued an Order confirming the foreclosure sale to Nationstar or its nominee, a Writ of Possession, and Judgment (the “State Court Judgment”). ECF No. 23-1 at 4-5. On July 24, 2017, the Commissioner's Deed was recorded in the State of Hawaii Bureau of Conveyances, transferring title to the subject property to MTGLQ, Nationstar's nominee. See ECF Nos. 23-3, 35-4.

         Meanwhile, on May 12, 2017, Plaintiffs appealed the State Court Judgment. ECF Nos. 23-1, 23-4. The Hawaii Intermediate Court of Appeals (“ICA”) dismissed Plaintiffs' Appeal on October 27, 2017 for failure to prosecute. ECF Nos. 23-4, 35-7.

         On September 8, 2017, George filed a Chapter 7 bankruptcy action in the United States Bankruptcy Court for the District of Hawaii (the “bankruptcy action”). ECF No. 13-3. In his schedule to the bankruptcy action, George represented that he did not “own or have any legal or equitable interest in any residen[tial] . . . property.” ECF No. 13-4 at 1. George also indicated that Nationstar was a secured creditor with an interest in the subject property, and when asked if he had claims against third parties, answered “no.” Id. 8, 49. On February 5, 2018, the bankruptcy court issued an “Order of Discharge.” ECF No. 13-5.

         B. Procedural Background

         On March 14, 2018, Plaintiffs initiated the instant action. ECF No. 1.[3]The Complaint asserts the following claims against all Defendants: “Wrongful Sale of Subject Property” (Count I); “Fraud” (Counts II and IV); “Unfair or Deceptive Acts or Practices” (Count III); “Breach and Failure to Act in Good Faith” (Count V); “Unjust Enrichment” (Count VI); “Mistake” (Count VII); “Hawaii Bureau of Conveyance Regulations Violations” (Count VIII); “Improper Restrictions Resulting from Securitization Leaves Note and Mortgage Unenforceable” (Count IX); “Wrongful Conversion of Note - Violation of the Securitization Agreement” (Count X); “Breach of Contract” (Count XI); and “Quiet Title” (Count XII). Id. at 28-46. The Complaint references multiple federal laws and regulations, but fails to connect such references to any claims. In addition, the Complaint includes the following notation at the bottom of each page: “Complaint - Rights Action (42 U.S.C. Section 1983, Section 1985) Wrongful Foreclosure.” Id. at 1-48.

         Ocwen filed its Motion to Dismiss and Request for Judicial Notice on April 13, 2018. ECF Nos. 11, 13. The AP Defendants filed their Motion to Dismiss and Request for Judicial Notice on April 16, 2018. ECF Nos. 22, 23. On April 24, 2018, the TMLF Defendants filed a Joinder to the AP Defendants' Motion to Dismiss. ECF No. 27. On May 14, 2018, the Nationstar Defendants filed a Motion to Dismiss. ECF No. 35. On June 29, 2018, Ocwen filed a Joinder to the AP Defendants' Motion to Dismiss, and the AP Defendants filed a Joinder to Ocwen's and the Nationstar Defendants' Motions to Dismiss. ECF Nos. 37, 39. On July 2, 2018, the Nationstar Defendants filed Joinders to Ocwen's and the AP Defendants' Motions to Dismiss and Requests for Judicial Notice. ECF Nos. 41, 42. Plaintiffs did not file an Opposition to any of the Motions.

         On July 16, 2018, Ocwen, the Nationstar Defendants, and the AP Defendants filed Notices and a Statement of Plaintiffs' failure to file Oppositions to the Motions. ECF Nos. 45-48. A hearing was held on July 30, 2018, with George appearing by telephone. Rina did not appear. ECF No. 49.


         Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss for “failure to state a claim upon which relief can be granted[.]” A Rule 12(b)(6) dismissal is proper when there is either a “‘lack of a cognizable legal theory or the absence of sufficient facts alleged.'” UMG Recordings, Inc. v. Shelter Capital Partners, LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)).

         Although a plaintiff need not identify the legal theories that are the basis of a pleading, see Johnson v. City of Shelby, Mississippi, 135 S.Ct. 346, 346 (2014) (per curiam), a plaintiff must nonetheless allege “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This tenet - that the court must accept as true all of the allegations contained in the 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); see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”).

         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.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit the court to infer “the mere possibility of misconduct” do not show that the pleader is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.


         All three Motions to Dismiss argue that Plaintiffs' claims are barred by claim preclusion (or res judicata)[4] because of a prior final state court judgment, and each motion also includes one or more of the following additional arguments: (1) George is judicially estopped from asserting his claims; (2) George lacks standing to assert his claims; (3) the Complaint fails to state a plausible claim for relief; (4) Plaintiffs' claims are barred by the Rooker-Feldman doctrine; and (5) Plaintiffs are not adequate class representatives and therefore cannot assert class action claims. Although Plaintiffs did not file an Opposition, throughout the hearing, the court asked George for Plaintiffs' argument or position in response to Defendants' arguments.

         For the reasons discussed below, the court concludes as follows: (1) Ocwen and the Nationstar Defendants met their burden of establishing claim preclusion, but the AP and TMLF Defendants did not; thus the State Court Judgment precludes Plaintiffs from asserting their claims against Ocwen and the Nationstar Defendants; (2) George obtained a discharge of his bankruptcy action based in part on representations that he did not have any claims against Defendants and, therefore, he is judicially estopped from asserting his claims against all Defendants; (3) George's claims belong to his bankruptcy estate and, therefore, he lacks standing to assert his claims; (4) the Complaint fails to state a plausible claim against the AP and TMLF Defendants.

         The court addresses these issues in turn.[5]

         A. Claim Preclusion

         Defendants argue that each claim asserted by Plaintiffs relies upon the allegation that Nationstar was not entitled to enforce the note and foreclose the mortgage to the subject property. They further argue that the state foreclosure action adjudicated this precise issue in favor of Nationstar and against Plaintiffs. See ECF No. 13-2 at 5 (“[Nationstar] is the holder of the Note and Mortgage and is entitled to enforce them.”); ECF No. 23-1 at 5 (state foreclosure action docket showing entry of the State Court Judgment).

         Federal courts look to the forum state's law to determine the preclusive effect of a state court judgment. Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984) (“It is now settled that a federal court must give to a state-court judgment the same preclusive effect as would be given that judgment under the law of the State in which the judgment was rendered.”). To establish claim preclusion under Hawaii law, Defendant has “the burden of establishing that (1) there was a final judgment on the merits, (2) both parties are the same or in privity with the parties in the original suit, and (3) the claim decided in the original suit is identical with the one presented in the action in question.” Bremer v. Weeks, 104 Haw. 43, 54, 85 P.3d 150, 161 (2004). It includes not only “issues [that] were actually litigated in the first action, but also . . . all grounds of claim and defense which might have been properly litigated[.]” Id., ...

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