LESLIE E. KOBAYASHI, District Judge.
Before the Court are: Plaintiff/Counterclaim Defendant Northern Trust, NA's ("Northern Trust") Motion to Dismiss Defendant Kenneth I. Wolfe's Counterclaim ("Motion to Dismiss"), filed on December 7, 2011; and Northern Trust's Motion for Summary Judgment as to the Complaint Filed Herein on August 30, 2011, Interlocutory Decree of Foreclosure, and Order of Sale ("Motion for Summary Judgment"), filed on January 26, 2011. Defendant/Counterclaimant Kenneth I. Wolfe ("Wolfe") filed a memorandum in opposition to each motion on April 16, 2012. Northern Trust filed a reply in support of each motion on April 23, 2012. These matters came on for hearing on May 7, 2012. Appearing on behalf of Northern Trust were Jonathan Lai, Esq., and Michael Bird, Esq., and appearing on behalf of Wolfe was John Harris Paer, Esq. After careful consideration of the motions, supporting and opposing memoranda, and the arguments of counsel, Norther Trust's Motion to Dismiss is HEREBY GRANTED and Northern Trust's Motion for Summary Judgment is HEREBY DENIED for the reasons set forth below.
Northern Trust filed the instant action on August 30, 2011 based on diversity jurisdiction. [Complaint at ¶ 3.] The Complaint seeks foreclosure of property securing a loan that Northern Trust made to Wolfe.
Wolfe filed his Answer to Complaint ("Answer"), with a Setoff and Counterclaim ("Counterclaim"), on November 17, 2011. [Dkt. no. 12.] The Counterclaim asserts the following claims: unfair and deceptive acts and practices ("UDAP") in violation of Haw. Rev. Stat. Chapter 480 ("Count I"); unconscionability ("Count II"); fraud and misrepresentation ("Count III"); negligence ("Count IV"); breach of contract ("Count V"); violation of the duty of good faith and fair dealing ("Count VI"); and promissory estoppel ("Count VII").
Wolfe executed a Promissory Note in favor of Northern Trust in the principal amount of $1,080,000.00, at an interest rate of 7.000% ("the Note"). The date of the Note is August 22, 2007.
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Northern Trust presented an affidavit from Shawn T. Roland, the Second Vice President for "The Northern Trust Company as successor by merger to Northern Trust, NA (`Northern Trust [Company]')." [Roland Aff. at ¶ 1.] Roland states that Wolfe is in default under the terms of the Note and Mortgage because Wolfe has refused to make his required full payment, in spite of "due and proper demand made upon Defendant Wolfe for payment of the amounts due and owing to Northern Trust [Company]" [
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Northern Trust filed a First Amended Notice of Pendency of Action ("Notice") on August 31, 2011. [Dkt. no. 5.] The Notice was recorded in the Bureau of Conveyances on September 1, 2011 as Document Number 2011-140442. [Motion for Summary Judgment, Decl. of Michael C. Bird ("Bird Decl.") at ¶ 8.] Northern Trust asserts that all parties to the foreclosure of the Mortgage have been named and served. [
In the Motion for Summary Judgment, Northern Trust argues that it served the Complaint on Wolfe via certified mail, postage prepaid, return receipt requested to Wolfe's address in New York, and there is no record that Wolfe is a servicemember to whom the Servicemembers Civil Relief Act of 2003 applies. [Mem. in Supp. of Motion for Summary Judgment at 6-7 (citing Bird Decl., Exhs. 2-3).] Further, Northern Trust does not need to name any other parties, and therefore,
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Northern Trust argues that Wolfe's failure to make the full payment required under the Note and Mortgage, and Wolfe's failure to respond to due and proper demand for the payment of the amounts owed, constitute default under the Note and Mortgage. [
Northern Trust argues that Haw. Rev. Stat. §§ 667-1 through 667-4 provide for judicial foreclosure of a mortgage and, based on the pleadings and submissions with the Motion for Summary Judgment, Northern Trust has an enforceable claim. Northern Trust also argues that there are no genuine issues of material fact, and therefore it is entitled to judgment as a matter of law. In addition, Northern Trust requests the entry of final judgment in its favor on the Complaint pursuant to Fed. R. Civ. P. 54(b), and the entry of a separate judgment on the Counterclaim pursuant to Fed. R. Civ. P. 58. [
In his memorandum in opposition, Wolfe states that Kurt Nielsen ("Nielsen"), the loan broker for the transaction at issue, led Wolfe to believe that Nielsen was a dual agent, representing both Northern Trust and Wolfe. Nielsen prepared Wolfe's loan application and other documents necessary for Wolfe's application and the closing of the transaction. [Def. Decl. at ¶ 3.] Nielsen also led Wolfe to believe that, when the loan matured, Wolfe would be able to obtain a "permanent financing" arrangement from Northern Trust without Wolfe having to qualify for a loan again. According to Wolfe, were it not for that understanding, he would have found a lender who could guarantee permanent financing. Thus, Wolfe entered into the loan in reliance on those representations. [
Wolfe made all monthly payments as they became due, until the final payment became due. When the loan became due in August 2010, Wolfe offered to continue making the mortgage payments as he had been doing. According to Wolfe, Northern Trust told him to send in his financial documents and that they would work out a new loan or other permanent financing plan. Northern Trust said that it did not intend to foreclose. [
Northern Trust subsequently informed Wolfe that the loan to value ratio had changed and that Wolfe would have to either pay $300,000 or offer new collateral for that amount to obtain a permanent financing arrangement. Wolfe protested, but Northern Trust refused to honor its prior representations that it would arrange for permanent financing. All Northern Trust offered was a loan extension in exchange for one percent of the loan amount. Wolfe objected to the amount, and Northern Trust never granted a loan extension or other permanent financing. [
According to Wolfe, at the time of the permanent financing dispute, the Property was worth approximately $1,000,000.00. The lot next to the Property, which Wolfe states was inferior to the Property, sold for $1,000,000.00. Wolfe offered to either give Northern Trust a deed in lieu of a foreclosure or allow a short sale, but Northern Trust refused. [
After September 2010, Wolfe did not hear from Northern Trust until Wolfe received service of a notice of non-judicial foreclosure in early May 2011. Wolfe did not oppose the non-judicial foreclosure and reiterated his offer to allow a short sale or to grant a deed in lieu of foreclosure, but Northern Trust continued to refuse. [
Wolfe asserts that he has suffered damages because of Northern Trust's actions. He is faced with losing the Property and a possible deficiency. In addition, he has incurred attorneys' fees and various charges, such as postage and travel costs, in responding to Wolfe's actions. [
Wolfe argues that the Court should deny the Motion for Summary Judgment because of the claims in the Counterclaim. As to the UDAP claim, Wolfe argues that the following representations by Northern Trust created a likelihood of confusion for a reasonable consumer: 1) in 2007, Northern Trust represented that Wolfe could obtain permanent financing without having to re-qualify; 2) in 2010, Northern Trust represented that it did not intend to foreclose; and 3) Northern Trust proceeded toward foreclosure while simultaneously evaluating Wolfe's request for modification. Northern Trust failed to honor its representations, which were material, and its actions constituted a "bait and switch". [Mem. in Opp. to Motion for Summary Judgment at 5-6.] Wolfe argues that allegations of a Chapter 480 violation similar to Count I of his Counterclaim were held to be sufficient to withstand motions to dismiss and motions for summary judgment in
Wolfe argues that, in light of Northern Trust's violations of § 480-2, the Note and Mortgage are void pursuant to Haw. Rev. Stat. § 480-12. Wolfe emphasizes that his UDAP claim is not based on fraud, but merely on the confusion created by Northern Trust's actions. Wolfe notes that a void obligation cannot be revived by an assignment. Wolfe urges this Court to deny the Motion for Summary Judgment because Northern Trust cannot foreclose upon a void obligation. [
As to the unconscionability claim, Wolfe states that this is a defense. The unconscionable term was the false promise to provide Wolfe with permanent financing without re-qualification. [
As to the fraud and misrepresentation claim, the fraudulent misrepresentations were the 2007 promise of permanent financing without re-qualification and the 2010 representation that Northern Trust was not going to foreclose. Wolfe argues that he justifiably relied on these representations and therefore his claims should survive a motion to dismiss or a motion for summary judgment as in
As to the negligence claim, Wolfe asserts that Northern Trust owed him a duty to be truthful when making representations to solicit his business. Wolfe argues that, when a bank makes false promises to its customers, it exceeds its role as a mere money lender. Northern Trust put him in an unreasonably risky position in which he faces losing the Property and a possible deficiency judgment. Wolfe emphasizes that he is not asserting a claim based on fiduciary duty. He also argues that courts have recognized a negligence claim based on a bank's failure to follow Home Affordable Modification Program ("HAMP") guidelines. [
The breach of contract claim is based upon Northern Trust's promise that Wolfe would be able to obtain permanent financing without additional qualification requirements. Northern Trust breached that agreement, and the breach constitutes a defense to the Motion for Summary Judgment. [
Wolfe argues that Northern Trust's actions were not in good faith, and he contends that there is a special relationship in this case because of the public interest and the fact that the loan agreement was a contract of adhesion. Wolfe argues that the Ninth Circuit has recognized, albeit in the context of a Truth-in-Lending Act ("TILA") violation, that all consumers are inherently at a disadvantage in loan and credit transactions. Wolfe contends that this principle applies even when the case does not involve a TILA violation. [
The promissory estoppel claim is based on Northern Trust's oral promises of that it would grant permanent financing and that it would not foreclose. Wolfe alleges that he justifiably relied on those promises to his detriment. Wolfe argues that the consideration was that he would not have entered into the transaction but for the promise of permanent financing without additional qualification requirements. Wolfe argues that his promissory estoppel claim is a defense to the Motion for Summary Judgment. [
Finally, Wolfe argues that the Roland Affidavit is defective. Roland is with Northern Trust Company, which Roland states is the successor by merger to Northern Trust, but there is no documentary support for this. Wolfe argues that Roland does not have personal knowledge of the loan at issue because he was not involved in the loan origination. Further, Roland did not produce the demand letter to support his claim that Northern Trust made a proper demand. Wolfe also argues that Exhibit B to the Roland Affidavit "was created for this litigation, and the underlying documents are not attached." [
Wolfe therefore urges the Court to deny Northern Trust's Motion for Summary Judgment.
In its reply in support of the Motion for Summary Judgment ("Summary Judgment Reply"), Northern Trust first notes that Wolfe's memorandum in opposition to the Motion for Summary Judgment asserts the same arguments as his memorandum in opposition to the Motion to Dismiss. Northern Trust therefore incorporates by reference the arguments it presented in its reply in support of the Motion to Dismiss. [Summary Judgment Reply at 2.]
Northern Trust reiterates that, as a matter of law, it is entitled to summary judgment, interlocutory decree of foreclosure, and a order of sale because: 1) all parties to the foreclosure have been served; 2) Wolfe defaulted under the terms of the Note and Mortgage; and 3) the default entitles Northern Trust to foreclose on the Mortgage. Northern Trust argues that Wolfe has not identified any genuine disputes of material fact in these areas. [
As to Wolfe's objections to the Roland Affidavit, Northern Trust points out that corporate officers are presumed to have personal knowledge of their corporation's acts, and employees who are familiar with a business's record-keeping practices can testify from personal knowledge about documents that are admissible business records. Roland therefore does not need to have been a first-hand witness to the transaction at issue in this case. [
Northern Trust argues that Wolfe has not presented any evidence that Nielsen was Northern Trust's agent. Generally, a mortgage broker is the borrower's agent, and a lender is not liable for the mortgage broker's actions unless there is an agency relationship between the lender and the broker. [
Northern Trust emphasizes that Wolfe does not dispute proper service of the Complaint or that he is in default under the Note and Mortgage. To the extent that Wolfe relies on an alleged agreement for a permanent loan modification, Wolfe has not identified any admissible evidence of a loan modification. There is no genuine issue of material fact regarding his default. Northern Trust reiterates that its claims are enforceable under the terms of the Note and Mortgage and pursuant to Haw. Rev. Stat. §§ 667-1 through 667-4. [
Northern Trust therefore urges the Court to grant the Motion for Summary Judgment, including issuing an interlocutory decree of foreclosure and order of sale. [
In the Motion to Dismiss, Northern Trust notes that the Property is a vacant lot in "an exclusive oceanfront residential community[.]" [Mem. in Supp. of Motion to Dismiss at 2.]
Northern Trust argues that Count I (UDAP) is not sufficiently pled. Wolfe has merely recited the elements of a UDAP claim without providing factual allegations to support any of the required elements. Further, Wolfe's UDAP claim sounds in fraud, and Count I does not satisfy the heightened pleading requirements of Fed. R. Civ. P. 9(b). The Court therefore cannot consider the allegations of fraudulent misrepresentations. Wolfe has not alleged the time, place, and specific content of the misrepresentations, or the identifies of the parties to the misrepresentations. Wolfe therefore has not provided Northern Trust with sufficient notice of the claim against it. Northern Trust urges the Court to dismiss Count I. [
Northern Trust emphasizes that unconscionability is not an affirmative claim for relief, but merely a defense to the enforcement of a contract or other legal claim. Even if Wolfe only asserts unconscionability as a defense, he has not identified the specific terms of an enforceable contract which are unconscionable. Wolfe has not identified the unconscionable contract or its specifically unconscionable terms. The Court should therefore dismiss Wolfe's claim/defense. [
Wolfe failed to plead Count III (fraud and misrepresentation) with particularity. Count III is presumably based on the same insufficient allegations of misrepresentations set forth in Count I. Count III also fails to plead the other elements of a fraud/fraudulent misrepresentation claim. Wolfe has not provided Northern Trust with fair notice of the grounds Count III is based on, and the Court should dismiss Count III. [
Northern Trust argues that Count IV (negligence) fails because Wolfe fails to establish that Northern Trust owed him a duty of care. Lenders generally do not owe their borrowers a duty of care because there is no fiduciary duty and no duty sounding in negligence, and the Counterclaim does not set forth any allegations establishing an exception to these general rules. Northern Trust and Wolfe merely had an arms-length business relationship. [
As to Count V (breach of contract), Northern Trust emphasizes that the claim is based on an alleged oral contract that Northern Trust would suspend foreclosure proceedings. Northern Trust argues that there is no oral contract because there was a lack of consideration. [
As to Count VI (breach of the duty of good faith and fair dealing), Northern Trust argues that there is no implied covenant of good faith and fair dealing without an enforceable contract. Further, there is no independent cause of action based on the implied covenant of good faith and fair dealing. [
As to Count VII (promissory estoppel), Wolfe has only alleged vague and indefinite promises regarding future refinancing and the lack of foreclosure proceedings. The promises for a promissory estoppel claim must be clear and unambiguous. Even if the Court assumes that a Northern Trust representative actually made the statements alleged in the Complaint, the statements must be clear and unambiguous to state a promissory estoppel claim. Wolfe has not identified clear and unambiguous statements. [
Thus, Northern Trust argues that the Court should dismiss the Counterclaim in its entirety.
Wolfe's memorandum in opposition to the Motion to Dismiss raises the same arguments as in his memorandum in opposition to the Motion for Summary Judgment.
In its reply in support of the Motion to Dismiss ("Dismissal Reply"), Northern Trust states that the core of Wolfe's Counterclaim is his allegation that he was promised a permanent loan modification. Northern Trust, however, argues that it never promised Wolfe a loan modification because Northern Trust is not responsible for the representations or omissions of the loan broker who allegedly made that promise to Wolfe. Wolfe has not pled any facts showing any agency relationship between Northern Trust and the broker. Northern Trust therefore argues that the Court should dismiss all claims based upon the loan broker's alleged representations or omissions. [Dismissal Reply at 3-4.]
As to the UDAP claim, Northern Trust argues that
As to the unconscionability claim, Northern Trust reiterates that it is a defense, not an independent claim. Northern Trust argues that it is not clear what contract term Wolfe alleges was unconscionable. If he is referring to the Mortgage, the Mortgage contains no promise of permanent financing. To the extent that Wolfe relies upon the oral promise of a permanent loan modification, that agreement is barred by the statute of frauds. [
Northern Trust argues that the fraud and misrepresentation claims fail because they are not pled with the requisite particularity. Wolfe's reliance on
As to the negligence claim, Northern Trust reiterates that it owed Wolfe no duty because generally lenders owe no duty to refrain from placing borrowers in loans that they cannot repay. Northern Trust also argues that Wolfe's reliance on
As to Count V, which alleges a breach of the oral contract for a permanent loan modification, Northern Trust reiterates its argument that the claim is barred by the statute of frauds. [
As to Count VI, alleging a violation of the duty of good faith and fair dealing, Northern Trust reiterates that, without a valid agreement to permanently modify the loan, there is no implied covenant of good faith and fair dealing. As to the Mortgage itself, Northern Trust contends that Wolfe has not identified any term of the Mortgage which Northern Trust allegedly breached. Northern Trust therefore argues that this Court must dismiss Count VI as a matter of law. [
Finally, as to the promissory estoppel claim, Northern Trust argues that Wolfe's memorandum in opposition does not address the defects in the claim that Northern Trust identified in the Motion to Dismiss, and therefore the Court should dismiss Count VII. [
Northern Trust urges the Court to grant the Motion to Dismiss.
In the Motion for Summary Judgment, Northern Trust argues that there are no genuine issues of material fact regarding: Wolfe's breach of the Note; Wolfe's breach of the Mortgage; and Northern Trust's entitlement to relief under the terms of those documents. Northern Trust therefore argues that it is entitled to judgment as a matter of law.
Before the Court addresses the merits of the Motion for Summary Judgment, it must address the issue of the sufficiency of Northern Trust's evidence regarding the merger of Northern Trust, N.A. and The Northern Trust Company. The primary evidence that Northern Trust relies upon in its Motion for Summary Judgment is the Roland Affidavit and the documents attached thereto. Roland asserts that he has personal knowledge and can testify as to these matters because he is the Second Vice President for "The Northern Trust Company as successor by merger to Northern Trust, NA. . . ." [Roland Aff. at ¶ 1.] Northern Trust, however, did not include any supporting documents regarding the merger.
This Court recognizes that Roland's "personal knowledge and competence to testify are reasonably inferred from [his] position[]. . . ."
In its Summary Judgment Reply, Northern Trust states:
[Summary Judgment Reply at 5-6 (emphasis in original) (some citations omitted).] First, to the extent that the Summary Judgment Reply contains factual representations which are not contained within the cited Roland Affidavit, the Court cannot consider those factual representations because Northern Trust did not provide the requisite support.
Northern Trust acknowledges that this Court, in its discretion, may order The Northern Trust Corporation to be substituted for, or joined with, Northern Trust, N.A. if its presence would facilitate the case. This Court, however, cannot determine whether the presence of The Northern Trust Company would facilitate the case without weighing evidence of the terms of the merger.
Although this Court can accept Roland's testimony about, and authentication of, the documents attached to his affidavit, in light of the issue regarding evidence of the merger, this Court cannot make a ruling at this time as to whether Northern Trust, N.A. is able to litigate the claims at issue in this case. The Court now turns to the merits of the Motion for Summary Judgment, to the extent that this Court is able to address the motion on the current record.
Wolfe apparently argues that the Court should deny the Motion for Summary Judgment because Northern Trust did not establish his default by presenting evidence that it issued a proper demand letter to him. Roland's unsupported statement that Northern Trust made a proper demand is not sufficient. [Mem. in Opp. to Motion for Summary Judgment at 15.]
Northern Trust responds that it mailed a NOTICE OF DEFAULT, FINAL DEMAND FOR PAYMENT AND NOTICE OF ACCELERATION — Promissory Note and Mortgage dated August 22, 2007; Northern Trust Loan No. (ending in) 743 to Wolfe, and his former counsel acknowledged receipt of the demand letter. [Lai Decl., Exh. A (demand letter), Exh. B (letter dated 12/6/10 to Jonathan W.Y. Lai, Esq., from Mark Van Pernis).] Local Rule 56.1(h), however, states: "Affidavits or declarations setting forth facts and/or authenticating exhibits, as well as exhibits themselves, shall only be attached to the concise statement. Supplemental affidavits and declarations may only be submitted with leave of court." Northern Trust did not obtain leave of court to submit the Lai Declaration, with its exhibits, in conjunction with the Summary Judgment Reply. This Court therefore declines to consider the demand letter and the letter acknowledging receipt thereof.
The lack of a demand letter, in and of itself, is not fatal to the Motion for Summary Judgment. Northern Trust submitted the Note and Mortgage with the Motion for Summary Judgment. [Roland Aff., Exhs. A, B.] Wolfe did not contest the authenticity of the copy of the Note that Northern Trust submitted. Wolfe's memorandum in opposition to the Motion for Summary Judgment does argue that Exhibit B to the Roland Affidavit "was created for this litigation, and the underlying documents are not attached." [Mem. in Opp. to Motion for Summary Judgment at 15 (citing
The Note states that the principal amount is $1,080,000.00, and the interest rate is 7.000%. [Roland Aff., Exh. A at 1.] It also states that the borrower, Wolfe,
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In his declaration attached to the memorandum in opposition to the Motion for Summary Judgment, Wolfe states that he "made all monthly payments on the mortgage as they became due until the final payment." [Def. Decl. at ¶ 9.] When the loan matured, Wolfe "offered to continue paying the mortgage as he had been[,]" i.e. to make interest-only payments. [
Thus, based on the record properly before the Court, there are no genuine issues of material fact as to Wolfe's default under the terms of the Note. The Court therefore FINDS that Wolfe is in default under the terms of the Note.
The relevant terms of the Mortgage vary slightly from the terms of the Note. The Mortgage states:
[Roland Aff., Exh. B at 4-5 (emphases added).]
Insofar as the Mortgage provides that Northern Trust may declare Wolfe in default, and may choose from its available remedies upon default, at its option, this Court cannot find that Wolfe is in default under the terms of the Mortgage without evidence that Northern Trust exercised its option by declaring default and electing its remedies. Although the most obvious evidence of these elections, the demand letter, is not properly before this Court, and although the document was available to Northern Trust at the time it filed the Motion for Summary Judgment, Northern Trust's failure to submit the demand letter is not fatal to the Motion for Summary Judgment. Roland states that Northern Trust made "due and proper demand . . . upon Defendant Wolfe for payment of the amounts due and owing to Northern Trust[.]" [Roland Aff. at ¶ 5.] Roland also states that Wolfe is in default under both the Note and the Mortgage. [
Thus, based on the record properly before the Court, there are no genuine issues of material fact as to Wolfe's default under the terms of the Mortgage. The Court therefore FINDS that Wolfe is in default under the terms of the Mortgage.
The Motion for Summary Judgment seeks judgment in favor of Northern Trust on all claims in the Complaint. [Motion for Summary Judgment at 2.] The Complaint seeks, inter alia: 1) a money judgment equal to "the total amount of all principal, interest, advances, costs, expenses, attorneys' fees, and late fees, pursuant to the Note and Mortgage[;]" [Complaint at pgs. 4-5;] and 2) an order directing the sale of the Property and directing the distribution of the proceeds of the sale, first to the reasonable and necessary expenses of the sale, and then to the payment of the amounts due to Northern Trust under the Note and Mortgage [
As evidence of the amount due, Northern Trust submits a Pay-off Statement, dated January 25, 2012 and signed by Roland. It states that:
[Roland Aff., Exh. C (footnotes omitted).] This amount excludes attorneys' fees and other costs. [
The Roland Affidavit states that the Pay-off Statement "reflects the current amount due to Northern Trust under the Note and Mortgage." [Roland Aff. at ¶ 10.] The Roland Affidavit does not identify the documents that the Pay-off Statement is based upon. The Roland Affidavit merely states:
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At the hearing and in his memorandum in opposition to the Motion for Summary Judgment, Wolfe argued that Roland's purported authentication of the Pay-off Statement was insufficient evidence of the amount outstanding under the Note and Mortgage. This Court agrees.
First, the Court notes that Wolfe relies primarily on
Fed. R. Civ. P. 56(c)(4) states: "An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." The Roland Affidavit does not explain why Roland is competent to testify as to the amounts outstanding under the Note and Mortgage. For example, Roland does not state that, in his position, he routinely prepares pay-off statements such as the one attached as Exhibit C, nor does he state that Wolfe's Pay-off Statement is a routinely kept business record, nor does he identify the records which he reviewed or relied upon in preparing the Pay-off Statement. This Court therefore concludes that Northern Trust has not established that Roland is competent to testify as to the amounts outstanding under the Note and Mortgage. This Court will not consider the Pay-off Statement or Roland's testimony in the Roland Affidavit about the amounts outstanding. The Court further concludes that Northern Trust has failed to establish the amounts outstanding under the Note and Mortgage.
In light of the unresolved issue regarding the proper plaintiff in this action and Northern Trust's failure to establish the amounts due under the Note and Mortgage, there are genuine issues of material fact which preclude summary judgment at this time. In addition, although this Order dismisses all of the counts in the Counterclaim, the Order dismisses most of the claims without prejudice. If Wolfe is able to successfully amend the counts that this Order dismisses without prejudice, such claim may constitute a defense to Northern Trust's claims in the Complaint. The Court therefore DENIES Northern Trust's Motion for Summary Judgment WITHOUT PREJUDICE.
In the Motion to Dismiss, Northern Trust urges the Court to dismiss each of the counts in the Counterclaim because each count fails to state a claim that is plausible on its face.
Count I alleges:
[Counterclaim at ¶ 19.
First, Count I alleges that the loan broker who Wolfe worked with was an agent of Northern Trust. The loan broker represented that, when the term of the instant loan terminated, Northern Trust would give Wolfe permanent financing without requiring Wolfe to re-qualify. [
Wolfe has not pled any facts "plausibly suggesting that any type of agency relationship existed between" Northern Trust and the loan broker.
The remainder of Count I is based upon Wolfe's attempt to modify the loan after the Note matured. According to Wolfe, Northern Trust told him that "they would work out a new loan or other payment plan as they did not intend to foreclose." [Counterclaim at ¶ 8.] The Counterclaim also alleges that Northern Trust demanded that Wolfe pay $300,000.00 or offer new collateral to obtain a new loan. [
In
Civil No. 10-00728 SOM/BMK, 2011 WL 1704100, at *12-13 (D. Hawai`i May 4, 2011).
Similarly, nothing in Wolfe's Counterclaim indicates that Northern Trust exceeded its conventional role as a money lender. Thus, the portions of Count I based on representations or demands that Northern Trust made when Wolfe sought to modify his loan also fail.
This Court therefore GRANTS the Motion to Dismiss as to Count I. The dismissal is WITHOUT PREJUDICE because it is arguably possible for Wolfe to cure the defects in Count I by amendment.
Northern Trust argues that unconscionability is a defense, not an affirmative claim for relief. Further, even if Wolfe is asserting unconscionability as a defense, he has not identified the specific term of a contract that is allegedly unconscionable. [Mem. in Supp. of Motion to Dismiss at 9-11.] This district court has recognized that:
Wolfe states in his memorandum in opposition to the Motion to Dismiss that he is asserting unconscionability as a defense. [Mem. in Opp. to Motion to Dismiss at 10.] Insofar as Wolfe asserted unconscionability as a separate count in the Counterclaim, as opposed to just a defense in his Answer, it appears that he is asserting unconscionability both as a defense to Northern Trust's attempt to enforce the Note and Mortgage and as an independent claim for relief. The issue before this Court in the Motion to Dismiss is whether Wolfe has alleged a plausible independent claim for relief based on unconscionability in Count II of the Counterclaim.
Wolfe merely alleges that Northern Trust obtained his mortgage under false pretenses and that Northern Trust made unreasonable demands when he tried to modify his loan. Pursuant to
Count III alleges:
[Counterclaim at pg. 7.] In spite of the allegation of "numerous" misrepresentations, the only allegedly false representations identified in the Counterclaim are: the loan broker's representation that Wolfe would receive permanent financing without having re-qualify; and Northern Trust's representation that it could work out a new loan with Wolfe because it did not intend to foreclose. [
In a pleading alleging fraud, a plaintiff "must allege the time, place, and content of the fraudulent representation; conclusory allegations do not suffice."
In addition, this Court has recognized that:
Finally, this Court notes that Wolfe's Counterclaim merely pled conclusory allegations, without supporting factual allegations, about the remaining elements of a fraud or fraudulent misrepresentation claim: the defendant's knowledge that the representations were false (or lack of knowledge whether the representations were true or false); the defendant's contemplation that the plaintiff would rely on the representations; and the plaintiff's detrimental reliance.
This Court therefore GRANTS the Motion to Dismiss as to Count III. The dismissal is WITHOUT PREJUDICE because it is arguably possible for Wolfe to cure the defects in Count III by amendment.
Count IV alleges that: Northern Trust was negligent in making the previously described representations; Northern Trust owed Wolfe a duty of ordinary care in processing his request for loan modification; and Northern Trust had a duty under HAMP guidelines not to go forward with foreclosure proceedings while it was evaluating Wolfe's loan for modification; and Northern Trust's breach of these duties cause Wolfe to suffer damages. [Counterclaim at ¶¶ 30, 32-35.]
This district court has recognized that:
As previously stated, Wolfe has not presented a plausible basis for his claim that the loan broker was Northern Trust's agent. He therefore cannot maintain a negligence claim against Northern Trust based on representations that the loan broker allegedly made. Further, Northern Trust's alleged representations that it would work out a new loan with Wolfe and that it did not intend to foreclose occurred in the course of Northern Trust's consideration of Wolfe's loan modification application, a transaction that occurred within the scope of Northern Trust's conventional role as a money lender. Wolfe's Counterclaim fails to sufficiently allege that Northern Trust owed him a duty of care as to the alleged negligent misrepresentations during the loan modification process.
Wolfe also argues that, under HAMP, Northern Trust owed him additional duties to process his application for loan modification with ordinary care and to forbear from any foreclosure proceedings while it was considering his application. This district court, however, has rejected UDAP claims based on alleged HAMP violations, ruling that "to the extent Plaintiff asserts that Defendants breached the HAMP guidelines, `there is no express or implied private right of action to sue lenders or loan servicers for violation of HAMP.'"
755 F. Supp. 2d at 311.
Hawai`i courts also recognize that violations of law may constitute evidence of negligence.
This Court therefore GRANTS the Motion to Dismiss as to Count IV. The dismissal is WITHOUT PREJUDICE because it is arguably possible for Wolfe to cure the defects in Count IV by amendment.
Count V alleges that Wolfe and Northern Trust "had an oral contract such that [Northern Trust] would suspend any attempts to foreclose upon [Wolfe]'s property and would not re-institute foreclosure proceedings without first notifying Plaintiff." [Counterclaim at ¶ 37.] Wolfe alleges that Northern Trust breached the oral agreement, causing Wolfe to suffer damages. [
Count V alleges that Northern Trust and Wolfe entered into an oral forbearance agreement. Hawaii's statute of frauds states:
Haw. Rev. Stat. § 656-1. Wolfe's Mortgage was an agreement concerning the transfer of an interest in land, and therefore the Mortgage was subject to the statute of frauds. The alleged agreement in which Northern Trust agreed not to exercise its right under the Mortgage to foreclose in light of Wolfe's default and to give Wolfe additional time to either make the final payment or secure other financing is an agreement concerning a further transfer of interest in land. Thus, the alleged forbearance agreement is also subject to the statute of frauds.
The alleged oral forbearance agreement between Northern Trust and Wolfe is unenforceable. Wolfe has not alleged a plausible claim for breach of the oral forbearance agreement,
Count VI alleges that every contract imposes an implied duty of good faith and fair dealing on the parties to the contract. Wolfe alleges that Northern Trust violated its duty of good faith and fair dealing, causing Wolfe to suffer damages. [Counterclaim at ¶¶ 41-43.] Count VI does not clearly state which of Northern Trust's actions constituted a breach of its duty of good faith and fair dealing.
This district court has characterized similar claims as attempts to allege claims for the tort of bad faith.
To the extent that Wolfe alleges that Northern Trust violated the duty of good faith and fair dealing implied in the oral forbearance agreement, Wolfe fails to state a claim because the oral agreement is not enforceable. Further, Wolfe cannot cure the defect in this claim by amendment.
The only other apparent basis for Count VI is Northern Trust's alleged failure to honor the loan broker's representation that, at the end of the term of the Note, Northern Trust would give Wolfe permanent financing without requiring him to re-qualify. As previously stated, however, Wolfe failed to plead a plausible basis for his claim that there was an agency relationship between the loan broker and Northern Trust. Thus, to the extent that Count VI is based on Northern Trust's failure to fulfill the loan broker's promise, Wolfe has failed to plead a plausible claim. In is, however, arguably possible for Wolfe to cure the defect in this claim by amendment.
Count VII alleges that Northern Trust "made numerous promises to [Wolfe], including, but not limited to, the promise that it would refinance his loan when it came due and would not institute foreclosure proceedings." [Counterclaim at ¶ 45.] Count VII alleges that Wolfe justifiably relied on these promises to his detriment and that Northern Trust failed to honor these promises, causing Wolfe to suffer damages. [
The alleged promises pled in the Counterclaim are: the loan broker's promise that Northern Trust would grant Wolfe permanent financing without requiring him to re-qualify; and Northern Trust's promise that it would work out a new loan with Wolfe because it did not intend to foreclose. As previously stated, however, Wolfe failed to plead a plausible basis for his claim that there was an agency relationship between the loan broker and Northern Trust. As to Northern Trust's alleged promise that it would modify Wolfe's loan and would not foreclose, the Counterclaim does not allege how Wolfe detrimentally relied on Northern Trust's promise. For all of these reasons, Wolfe's promissory estoppel claim fails.
This Court therefore GRANTS the Motion to Dismiss as to Count VII. The dismissal is WITHOUT PREJUDICE because it is arguably possible for Wolfe to cure the defects in Count VII by amendment.
Finally, to the extent that there are allegations in the Counterclaim which this Court has not specifically addressed, the Court finds that those allegations do not provide sufficient support for the counts in the Counterclaim to survive the Motion to Dismiss.
The Court has granted the Motion to Dismiss and dismissed all of the counts in the Counterclaim without prejudice, with the exception of Count V and the portion of Count VI based on the implied duty of good faith and fair dealing in the alleged oral forbearance agreement, which this Court has dismissed with prejudice. Wolfe is granted until
The Court emphasizes that Wolfe is not granted leave to add new parties, claims or theories of liability. If Wolfe wishes to add new parties, claims or theories of liability, Wolfe must either obtain a stipulation from Northern Trust or file a separate motion seeking leave to amend according to the deadlines in the Rule 16 Scheduling Order. The magistrate judge will rule upon such a motion in the normal course. The Court CAUTIONS Wolfe that, if he includes new parties, claims or theories of liability in the amended counterclaim without obtaining either a stipulation or leave from the magistrate judge, the new parties, claims, or theories of liability may be dismissed with prejudice.
On the basis of the foregoing, Northern Trust's Motion for Summary Judgment as to the Complaint Filed Herein on August 30, 2011, Interlocutory Decree of Foreclosure, and Order of Sale, filed January 26, 2011, is HEREBY DENIED WITHOUT PREJUDICE, and Northern Trust's Motion to Dismiss Defendant Kenneth I. Wolfe's Counterclaim, filed December 7, 2011, is HEREBY GRANTED. Specifically, this Court DISMISSES WITH PREJUDICE Count V and the portion of Count VI based on the implied duty of good faith and fair dealing in the alleged oral forbearance agreement. The Court DISMISSES all of the remaining counts in the Counterclaim WITHOUT PREJUDICE.
To the extent that the Court has dismissed some of the counts in the Counterclaim without prejudice, the Court GRANTS Wolfe leave to submit a motion to the magistrate judge seeking permission to file an amended counterclaim addressing those claims. This Court CAUTIONS Wolfe that, if he fails to file his motion by
IT IS SO ORDERED.
[Roland Aff., Exh. B at 7.]