Chung v. U.S. Bank, N.A.

250 F.Supp.3d 658

HEEJOON CHUNG, Plaintiff,

v.U.S. BANK, N.A., Trustee, under Securitization Servicing Agreement dated as of December 1, 2005, Structured Asset Investment Loan Trust Mortgage Pass-Through Certificates, Series 2005-11; and Ocwen Loan Servicing, LLC, Defendants.

Civ. No. 16-00017 ACK-RLP.

United States District Court, D. Hawai‘i.

Signed April 17, 2017

Mark T. Shklov, Mark T. Shklov, AAL, LLLC, Bruce F. Sherman, John Harris Paer, Honolulu, HI, for Plaintiff.

James B. Rogers, Lori K. Stibb, Miriah Eve Holden, Alston Hunt Floyd & Ing, Honolulu, HI, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION FOR JUDGMENT ON THE PLEADINGS ON COUNT II OF THE COMPLAINT AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Alan C. Kay, Sr. United States District Judge

TABLE OF CONTENTS

PROCEDURAL BACKGROUND...667

FACTUAL BACKGROUND...668

STANDARD...669

I. Judgment on the Pleadings...669

II. Summary Judgment...670

DISCUSSION...670

I. Defendants' Motion for Judgment on the Pleadings as to Count II of the Complaint...670

a. Whether the Claim is Time-Barred Under Haw. Rev. Stat. Chapter 480...670

b. Whether the SCRA Provides a Cognizable Basis for Plaintiff's UDAP Claim... 676

c. Whether Count II is Insufficiently Pled to the Extent it is Based on the 2015 Communications or Any Other Conduct...678

II. Plaintiff's Motion for Partial Summary Judgment...680

a. FDCPA Claim...680

i. Whether Plaintiff Establishes that the Loan was a Personal Debt...680

ii. Whether Ocwen is a "Debt Collector"...682

iii. Whether Defendants Violated the FDCPA...685

1. Whether Defendants Violated the FDCPA When they Demanded Different Amounts Owed on the Same Date...685

2. Whether Defendants' Alleged "Gamesmanship" in the Instant Litigation Violated the FDCPA...686

3. Whether Defendants Violated the FDCPA for Sending Plaintiff Letters After They Knew He was Represented by an Attorney...687

4. Whether Defendants Violated the FDCPA by Improperly Charging Late Fees, Insurance Charges, and Attorney's Fees...689

5. Whether Defendants Violated the FDCPA by Reporting False Credit Information...689

6. Whether Defendants Violated the FDCPA by Attempting to Collect on the Alleged Debt, Even Though They Knew it was Time-Barred...689

iv. Whether the Bona Fide Error Defense Applies...690

b. UDAP Claim...691

c. Negligence and Negligent Misrepresentation Claims...691

CONCLUSION...692

For the reasons set forth below, the Court GRANTS Defendants' Motion for Judgment on the Pleadings on Count II of the Complaint. The Court DISMISSES Count II of the Complaint WITHOUT PREJUDICE. The Court GRANTS IN PART and DENIES IN PART Plaintiff Heejoon Chung's Motion for Partial Summary Judgment.

PROCEDURAL BACKGROUND

On January 18, 2016, Plaintiff Heejoon Chung ("Plaintiff") filed a Complaint for Damages and Injunctive Relief ("Complaint") against Defendants U.S. Bank, N.A. Trustee, Under Securitization Servicing Agreement dated as of December 1, 2005, Structured Asset Investment Loan Trust Mortgage Pass-Through Certificates, Series 2005–11 ("U.S. Bank") and Ocwen Loan Servicing, LLC ("Ocwen," and together with U.S. Bank, "Defendants"). ECF No. 1. Plaintiff asserts that Defendants made false and misleading representations in connection with a non-judicial foreclosure on real property located at 91–743 Ihipehu Street, Ewa Beach, Hawaii 96706 ("Property"), and later attempted to collect a debt from him despite purporting to release him from such debt upon foreclosure. Id.¶¶ 12, 27, 30 63, 67. Plaintiff alleges: (1) violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 ; (2) unfair or deceptive acts or practices ("UDAP") in violation of the Hawaii Revised Statutes ("Haw. Rev. Stat."), Chapter 480 and the Servicemembers Civil Relief Act ("SCRA"); (3) negligent misrepresentation; and (4) negligence. Id.¶¶ 48–70.

In Count I of his Complaint, Plaintiff predicates his FDCPA claim on conduct occurring within the year prior to the filing of the case. Id.¶ 50. Plaintiff alleges violations of 15 U.S.C. §§ 1692c -g. Id.¶¶ 48–56. In Count II of his Complaint, Plaintiff alleges UDAP violations under provisions of Haw. Rev. Stat. Chapter 480 and the SCRA based on events in 2005 and 2010. Id.¶¶ 59–60. Plaintiff specifically predicates his UDAP claim on the following statutes: (1) 50 U.S.C. § 521 ; (2) Haw. Rev. Stat. § 667–1, et seq. ; (3) Haw. Rev. Stat. § 480D–1, et. seq. ; (4) Haw. Rev. Stat. § 443B–1, et. seq. ; (5) Haw. Rev. Stat. § 480–1, et seq. ; (6) Haw. Rev. Stat. § 480-2 ; and (7) Haw. Rev. Stat. § 480–12. Id.¶¶ 57–61. Defendants filed an Answer to the Complaint on February 23, 2016 responding to the allegations in the Complaint and asserting various affirmative defenses. ECF No. 13.

On July 11, 2016, Plaintiff filed a Motion for Judgment on the Pleadings and Memorandum in Support of Motion "based upon the failure of Defendants to truthfully respond to the allegations of the Complaint." ECF No. 24–1 at 1. The Court denied Plaintiff's Motion on September 6, 2016. ECF No. 32. On September 9, 2016, Defendants filed a Motion for Leave to file a First Amended Answer, Counterclaim, and Third Party Complaint. ECF No. 33. Plaintiff opposed Defendants' request. ECF No. 35. Defendants filed a First Amended Answer, Counterclaim, and Third Party Complaint on October 5, 2016. ECF No. 37. On November 1, 2016, the Magistrate Judge entered an order granting in part and denying in part Defendants' Motion for Leave to File a First Amended Answer, Counterclaim, and Third Party Complaint. ECF No. 43.

On November 9, 2016, Defendants filed a Motion for Judgment on the Pleadings on Count II of the Complaint ("Defendants' Motion"). ECF No. 48. On February 27, 2017, Plaintiff filed an Opposition to Defendants' Motion for Judgment on the Pleadings ("Plaintiff's Opposition"). ECF No. 66. On March 6, 2017, Defendants filed their Reply to Plaintiff's Opposition ("Defendants' Reply"). ECF No. 70.

On March 8, 2017, the Court ordered supplemental briefing on whether 50 U.S.C. § 3936 would apply to the statute of limitations issue raised in Defendants' Motion. ECF No. 71. On March 14, 2017, both parties filed Memorandum addressing this issue. ECF Nos. 73, 74.

Separately, on November 9, 2016, Plaintiff filed a Motion for Partial Summary Judgment ("Plaintiff's Motion") on all claims, reserving the damages determination (ECF No. 45), along with a Concise Statement of Facts in support of his Motion ("Pl.'s CSF in Supp."). ECF No. 46. On February 27, 2017, Defendants filed an Opposition to Plaintiff's Motion for Partial Summary Judgment ("Defendants' Opposition") (ECF No. 67), along with a Separate and Concise Statement of Facts ("Defs.' CSF in Opp'n"). ECF No. 68. On March 6, 2017, Plaintiff filed a Reply to Defendants' Opposition ("Plaintiff's Reply"). ECF No. 69.

The Court held a hearing on Defendants' and Plaintiff's Motions on March 20, 2017 at 11:00 a.m. At the hearing, the Court asked Defendants to file a full version of the Asset Purchase Agreement, which was Exhibit 1 of Defendants' Separate and Concise Counterstatement of Facts. Defendant thereafter filed the full agreement. ECF No. 76. The Court then gave Plaintiff an opportunity to respond. ECF No. 77. Plaintiff filed a Memorandum responding to the full document on March 24, 2017. ECF No. 78.

FACTUAL BACKGROUND

On October 4, 2005, Plaintiff purchased the Property. Complaint ¶ 12. The purchase was made with funds obtained from BNC Mortgage, Inc. ("BNC"), which was a loan secured by a first mortgage on the Property and later transferred to U.S. Bank on March 10, 2010. Complaint ¶ 13; Pl.'s CSF in Supp., Exs. B1, B2, D. Plaintiff alleges, upon information and belief, that there were various irregularities in the loan process with BNC, including failure to provide proper disclosures, an improper signing location, and failure to provide copies of the loan documents. Complaint ¶¶ 16–19, 22. Several days after closing, Plaintiff entered into a second mortgage loan on the Property. Id.¶ 21.

HomEq Servicing ("HomEq") originally handled the loan servicing. Pl.'s CSF in Supp., Ex. C. On April 15, 2009, HomEq sent Plaintiff a letter advising him of his default on the loan, which Plaintiff did not receive. Complaint ¶ 24; Pl.'s CSF in Supp., Chung Decl. ¶ 18.

Plaintiff alleges that the mortgage was non-judicially foreclosed through a public auction conducted on July 8, 2010. Complaint ¶ 27; Pl.'s CSF in Supp., Ex. E ¶ 5j. A Mortgagee's Affidavit of Foreclosure Under Power of Sale ("Affidavit") was recorded in the Land Court on August 3, 2010. Complaint ¶ 27; Pl.'s CSF in Supp., Ex. E. The Affidavit erroneously stated that Plaintiff was not on active military duty at the time of foreclosure when, in fact, a report attached as an exhibit to the affidavit indicates that he was on active military duty from November 3, 1995 with no end date. Complaint ¶¶ 31–32, Pl.'s CSF in Supp., Ex. E. Plaintiff was stationed in South Carolina in 2010 and alleges that he did not receive notice of the non-judicial foreclosure during that time. Complaint ¶ 28.

Due to a problem with recording the deed, however, title to the Property never passed to U.S. Bank but remained in Plaintiff's name. Pl.'s CSF in Supp., Chung Decl. ¶ 33; Defs.' CSF in Opp'n, Flannigan Decl. ¶ 14.

Ocwen began servicing the loan in 2010. Defs.' CSF in Opp'n, Ex. 1. In July 2015, Ocwen sent Plaintiff letters stating that the loan was delinquent as of March 2, 2009 and that the current amount due on the loan exceeded $216,000. Complaint ¶¶ 36–38; Pl.'s CSF in Supp., Exs. G, H. Shortly thereafter, Plaintiff contacted an attorney and first learned of the non-judicial foreclosure. Pl.'s CSF in Supp., Chung Decl. ¶ 23.

Plaintiff was on "Active Duty Status" in the U.S. Army from November 3, 1995 until November 2015. Complaint ¶¶ 3, 11; Plaintiff's Reply, Exhibit A (Plaintiff's Depo.) at 198.

STANDARD

I. Judgment on the Pleadings

Under Federal Rule of Civil Procedure 12(c), "[a]fter the pleadings are...