Opinion
Case No. CV 13-08411 DDP (MANx)
02-05-2015
ROBERT L. GOLDEN, an individual, EMMA M. GOLDEN, an individual, Plaintiffs, v. BANK OF AMERICA, N.A., a National Association; SELECT PORTFOLIO SERVICING, INC.; WELLS FARGO BANK, N.A., Defendants.
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS
[Dkt. Nos. 7, 13]
Presently before the court are two Motions to Dismiss filed by Defendants Select Portfolio Servicing, Inc. ("SPS"), Wells Fargo Bank, NA, and Bank of America, N.A ("BOA"). Having considered the submissions of the parties, the court grants the motions and adopts the following order.
I. Background
At some point, Plaintiffs purchased a parcel of real estate in Los Angeles located at 2013 West View Street. Plaintiffs appear to have refinanced the property, and in 2004 executed a Promissory Note for $475,000. The note was secured by a Deed of Trust for lender Argent Mortgage Company. (FAC ¶ 14.) Defendant BOA serviced the loan. (FAC ¶ 6.)
Plaintiffs' First Amended Complaint ("FAC") alleges that they purchased the property in 1998 and in 2002. (FAC ¶¶ 11, 13.)
In 2010 and 2011, Plaintiffs notified BOA that they were experiencing financial hardship and applied for a loan modification. (FAC ¶¶ 19, 21.) Plaintiffs submitted another modification application to BOA in May 2012. (FAC ¶ 24.)
At some point between May 29, 2012 and October 17, 2012, Defendant SPS appears to have taken over servicing duties as agent of the then beneficiary. (FAC ¶¶ 7, 24-45.) Plaintiffs allege that SPS sent them a Notice of Default on October 17, 2012. (Id. ¶ 25.) In March 2013, SPS offered Plaintiffs a loan modification, which Plaintiffs accepted. (Id. ¶ 27.) Plaintiffs appear to have attempted to obtain a further modification, but were unsuccessful. (Id. ¶ 28.)
Plaintiffs' First Amended Complaint brings fifteen causes of action against BOA, SPS, and Wells Fargo in connection with the 2004 loan and subsequent related proceedings. Defendants now move to dismiss the FAC.
II. Legal Standard
A complaint will survive a motion to dismiss when it contains "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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations," it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).
"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
III. Discussion
A. First, Fourth, and Twelfth Causes of Action
Plaintiffs' First, Fourth, and Twelfth Causes of Action appear to be based on California's Homeowner Bill of Rights ("HBOR"), which amended California Civil Code Section 2924. (Opposition, Dkt. 17 at 5.) Plaintiffs' allegations appear to refer to acts undertaken in 2012. (FAC ¶ 34.) The HBOR, however, did not go into effect until January 1, 2013. Morgan v. Aurora Loan Servs., Inc., No. CV 12-4350-CAS, 2013 WL 5539392 at *6 (C.D. Cal. Oct. 7, 2013). The HBOR does not apply retroactively, and therefore cannot apply to the acts described in the FAC. See id. Furthermore, to the extent Plaintiffs' claims are premised upon the securitization of their loan, Plaintiffs, as strangers to any agreements regarding transfer of the interest in their note, lack standing to bring such challenges. See, e.g., Zapata v. Wells Fargo Bank, N.A., No. C 13-4288 WHA, 2013 WL 6491377 at *2 (N.D. Cal. Dec. 10, 2013). Plaintiffs' First, Fourth, and Twelfth causes of action are therefore dismissed with prejudice.
B. Intentional Misrepresentation
Plaintiffs' Second Cause of Action for Intentional Misrepresentation is based on the allegation that an SPS representative told Plaintiffs that the loan modification they ultimately accepted was the only one that SPS would consider, but that after Plaintiffs accepted that modification, another SPS representative told them that they could not be considered for another, different loan modification under the Home Affordable Modification Program unless they rejected the first modification. (FAC ¶ 42.)
A claim for intentional misrepresentation requires "(1) a misrepresentation; (2) knowledge of falsity; (3) intent to induce reliance; (4) actual and justifiable reliance; and (5) resulting damage." Chapman v. Skype, Inc., 220 Cal.App.4th 217, 230-231 (2013). Here, SPS argues that there was no misrepresentation because SPS said it would not consider any other loan modification and followed through on that representation by refusing to consider a HAMP modification. The FAC alleges, however, that before Plaintiffs accepted the first modification, SPS represented that the first modification was the only one available to Plaintiffs. (FAC ¶ 28.) In light of SPS' subsequent alleged statement that Plaintiffs could, in fact, have been considered for a HAMP modification, the initial alleged statement may have been false.
Nevertheless, Plaintiffs' intentional misrepresentation claim must be dismissed for failure to adequately allege damages resulting from this supposed misrepresentation. Plaintiffs' reference to the "potential threat of loss of their home, exorbitant payments, and legal expenses" notwithstanding, it is unclear how SPS's agreement to one type of modification over another caused Plaintiffs any damage.
C. Negligent Misrepresentation
The elements of negligent misrepresentation are "(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage." Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226, 243 (2007). As discussed above, Plaintiffs have not adequately alleged damages.
Defendants SPS and Wells Fargo also contend that Plaintiffs have failed to allege that Defendants owed them a duty of care. (Motion at 11.) In response, Plaintiffs assert that no such duty is required. (Opp. at 9.) Plaintiffs are mistaken. To prevail on a claim for negligent misrepresentation, Plaintiffs must establish that Defendant owed them a duty of care. See Bily v. Arthur Young & Co., 3 Cal. 4th 370, 408-414 (1992); Nutmeg Sec., Ltd. v. McGladrey & Pullen, 92 Cal. App. 4th 1435, 1444 (2001); Eddy v. Sharp, 199 Cal. App. 3d 858, 864 (1988); Wilhelm v. Pray, Price, Williams, & Russell, 186 Cal. App. 3d 1324, 1332 (1986). Plaintiffs' negligent misrepresentation claim is dismissed with leave to amend.
D. Wrongful Foreclosure
Plaintiffs' Fifth Cause of Action alleges that all Defendants violated California Civil Code § 2923.5. A foreclosure sale cannot proceed without a valid Notice of Default. Mabry v. Superior Court, 185 Cal.App.4th 208, 223 (2010). California Civil Code section 2923.5 requires a lender or its agent to contact, or attempt to contact, a defaulting borrower prior to recording a notice of default. Cal. Civil Code § 2923.5(a)(1). Under Section 2923.5(a)(2), a "mortgagee, beneficiary or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." Cal. Civil Code § 2923.5(a)(2). However, a mortgage servicer need not necessarily make actual contact with a borrower, provided that the servicer exercises due diligence in its attempt to contact the borrower. Cal. Civil Code § 2923.5(e).
Here, Plaintiffs do not allege that BOA ever sent or recorded a Notice of Default. The Fifth Cause of Action is therefore dismissed as to BOA.
The FAC does allege that SPS "purportedly" sent Plaintiffs a Notice of Default. (FAC ¶ 25.) SPS contends that the FAC fails to allege a Section 2923.5 violation because SPS did, as is alleged, communicate with Plaintiffs regarding their financial situation and options to avoid foreclosure, going so far as to actually offer Plaintiffs a loan modification, which Plaintiffs accepted. Plaintiffs' only argument in opposition is that SPS "failed to explore foreclosure options with Plaintiffs that were more beneficial to Plaintiffs" than the loan modification ultimately offered and accepted. (Opp. at 11.) This argument is not persuasive. Plaintiffs cite no authority for the proposition that a lender or agent must offer a borrower whatever non-foreclosure option would be best for the borrower. Indeed, Section 2923.5 requires far less of lenders than what SPS undertook here. See, e.g., Newman v. Bank of New York Mellon, No. 12-CV-1629 AWI GSA, 2013 WL 5603316 at *12 (E.D. Cal. Oct. 11, 2013) (finding § 2923.5 satisfied where bank discussed, but declined to grant, a loan modification). The Fifth Cause of Action is dismissed with prejudice.
E. Breach of Contract
Plaintiffs do not oppose dismissal of the Seventh Cause of Action for Breach of Contract against Bank of America, beyond including a heading stating that the FAC adequately asserts a claim. (Opp. at 13). Plaintiffs' opposition does, however, seek leave to amend to plead additional facts regarding this claim. Similarly, with respect to SPS and Wells Fargo, Plaintiffs provide no substantive opposition. Instead, they state that "Plaintiffs oppose [Defendants' position] but if the court finds this cause of action is not specifically pled then Plaintiff (sic) requests leave to amend . . . ." The Seventh Cause of Action is therefore dismissed, with leave to amend.
F. Negligence
"The elements of a negligence cause of action are the existence of a legal duty of care, breach of that duty, and proximate cause resulting in injury." Castellon v. U.S. Bancorp., 220 Cal. App. 4th 994, 998 (2013). Defendants, relying on Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991), argue that "as a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark, 231 Cal. App. 3d at 1096. The Nymark rule, however, is not absolute. In California, courts employ a six factor test to determine whether a financial institution owes a duty of care to a borrower. The court must consider "[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm." Id. at 1098 (citing Biakanja v. Irving, 49 Ca.2d 647 (1958)). Under some circumstances, these factors may be met in the context of loan modification discussions between lenders and borrowers. See, e.g. Robinson v. Bank of Am., No. 12-CV-4 94-RMW, 2012 WL 1932842, at *7 (N.D. Cal. May 29, 2012); Ansanelli v. JP Morgan Chase Bank, N.A., No C 10-3892 WHA, 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011); Watkinson v. MortgageIT, Inc., No. 10-CV-327-IEG, 2010 WL 2196083 (S.D. Cal. June 1, 2010); Garcia v. Ocwen Loan Servicing, LLC, No. C 10-290 PVT, 2010 WL 1881098, at *1-3. (N.D. Cal. May 10, 2010).
Though the FAC here identifies the relevant factors, it does so somewhat conclusorily, and does not provide a sufficient factual basis, particularly regarding the third, fourth, and fifth factors, to allow this court to determine whether Defendants owed Plaintiffs a duty. As discussed above in conjunction with Plaintiffs' misrepresentation claims, damages resulting from Defendants' actions are particularly unclear. Indeed, in arguing that the elements are sufficiently alleged, Plaintiffs' opposition refers to paragraph 53 of the FAC, which includes precisely those allegations deemed insufficient to establish an intentional misrepresentation claim. The Eighth Cause of Action for Negligence is dismissed with leave to amend.
G. Unjust Enrichment
Plaintiffs' Ninth Cause of Action for Unjust Enrichment is not an independent cause of action under California law. Jogani v. Superior Court, 165 Cal.App.4th 901, 911 (2008); Serna v. Bank of America, N.A., No. CV 11-10595 CAS; 2012 WL 2030705 * 11 (C.D. Cal. June 4, 2012). Plaintiffs' unjust enrichment claim is therefore dismissed with prejudice.
H. Quiet Title
As an initial matter, the FAC does not appear to allege that BOA (or SPS) claims any interest in the West View Street property. In any event, a mortgagor generally cannot quiet title against a mortgagee without first tendering the amount due on the loan. See Kenery v. Wells Fargo, N.A., No. 13-CV-2411-EJD, 2014 WL 128262 at *5 (N.D. Cal. Jan. 14, 2014). There are exceptions to this tender requirement. See Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1158 (N.D. Cal. 2013); Subramani v. Wells Fargo, N.A., No. C 13-1605 SC, 2013 WL 5913789 at *4 (N.D. Cal. Oct. 31, 2013). Though Plaintiffs argue that several such exceptions apply, those arguments appear to be premised upon Plaintiffs' HBOR and Section 2923.5 claims, which, as described above, are dismissed with prejudice. Accordingly, Plaintiffs' quiet title claim is dismissed, with leave to amend.
I. Real Estate Settlement Procedures Act
Plaintiffs' Eleventh Cause of Action for Violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605(e), is brought only against SPS and Wells Fargo. Plaintiffs' opposition does not dispute SPS' contention that the FAC does not adequately allege that Plaintiffs sent SPS a "qualified written request" as defined by 12 U.S.C. § 2605(e)(1)(B). Accordingly, Plaintiffs' RESPA claim is dismissed with leave to amend.
IV. Conclusion
For the reasons stated above, Defendants' Motions to Dismiss are GRANTED. Plaintiffs' First, Fourth, Fifth, Ninth, and Twelfth Causes of Action are DISMISSED, with prejudice. All other claims are dismissed with leave to amend. Any amended complaint shall be filed within fourteen days of the date of this Order. IT IS SO ORDERED. Dated: February 5, 2015
The predicate for Plaintiffs' Sixth Cause of Action for unfair and fraudulent business practices in violation of California Business & Professions Code § 17200 is somewhat unclear, and rises or falls with Plaintiffs' other claims.
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/s/
DEAN D. PREGERSON
United States District Judge