ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

JOHN A. MENDEZ, District Judge.

Defendants Aurora Loan Services LLC ("Aurora Services"); Aurora Bank, FSB; Citibank, N.A. ("Citibank"); Cal Western Reconveyance Corporation; and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively "Defendants") move to dismiss (Doc. #4) all seven causes of action in Plaintiffs Charles and Marlene Gabris' (collectively "Plaintiffs") Complaint (Doc. #1-1, Exh. 1).1 The action arises out of a dispute over the foreclosure and sale of a property previously belonging to Plaintiffs and the loan modification negotiations preceding that sale.

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

In September 2004, Plaintiffs obtained a loan in the amount of $226,000 ("the Loan"). Request for Judicial Notice, Exh. 1. The Loan was secured by a deed of trust recorded against property located at 11529 Mother Lode Circle, Rancho Cordova, California 95670 ("the Property"). The deed of trust indicates the Lender was Vitek Real Estate Industries Group, Inc. d/b/a Vitek Mortgage Group ("Vitek"), the Trustee was Chicago Title Company (CTC) and MERS was the beneficiary as well as the nominee for the lender and its successors and assigns.

Plaintiffs allege that in December 2009 they applied to Aurora Services for a Home Affordable Modification Program ("HAMP") loan modification through the Neighborhood Assistance Corporation of America ("NACA"). Comp. ¶ 19. Plaintiffs allege they sent in all required financial documentation, and Aurora Services acknowledged receipt of those documents and requested additional documents. By April 2010, Plaintiffs were approximately two months behind in their loan payments.

In May 2010, Plaintiffs enlisted an individual named Lou Dedier to negotiate with Aurora Services on their behalf. Comp ¶ 23. Shortly thereafter, Aurora Services acknowledged receipt of another package of financial documents regarding a HAMP modification request, but again requested more information, providing Plaintiffs thirty days to provide the aforementioned information. However, Plaintiffs received a letter five days later informing them their modification request was denied for failing to provide the documents requested.

Plaintiffs allege in June 2010 Aurora Services verbally agreed to extend Plaintiffs a trial payment plan thereby reducing their monthly payments from $1130 to $912. Comp. ¶ 24. While making these modified trial payments, Plaintiffs allege they continued to seek a permanent loan modification, but the attempts were repeatedly denied based on Aurora Services' false representations that Plaintiffs failed to provide necessary documents. Comp. ¶ 25. Plaintiffs allege they always provided Aurora Services the documents requested.

In October 2010, Aurora Services increased the monthly payment from $1130 to $1715.43, which was indicated on the monthly statements sent to Plaintiffs. Comp. ¶ 27. However, Plaintiffs continued to make the lower payments under the belief they were still performing under the trial payment plan. When they attempted a "normal unmodified payment" of $1130 in June 2011, the payment was returned to them. Comp. ¶ 32. Plaintiffs allege the loan was referred to foreclosure at this time.

In February 2011 and again in March 2011, Aurora Services denied Plaintiffs a HAMP modification on the grounds that a modification was not justified given the net present value ("NPV") calculations. Comp. ¶ 29.

After additional failed attempts to secure a loan modification, Aurora Services recorded a notice of default in June 2011 and notified Plaintiffs of a trustee's sale in July 2011. Comp. ¶¶ 35-36. After a failed short sale attempt and another failed application for a loan modification, the property was sold at a foreclosure sale in December 2011. Comp. ¶¶ 37-38, 40-42.

Plaintiffs plead seven causes of action in their Complaint: (1) Intentional Misrepresentation; (2) Negligent Misrepresentation; (3) Wrongful Foreclosure; (4) Conversion; (5) Violation of California Business and Professions Code § 17200 ("§17200"); (6) Equitable Accounting; and (7) Unjust Enrichment. Defendants removed the matter to this Court and filed the present motion.

II. OPINION

A. Request for Judicial Notice

Defendants request the Court take judicial notice (Doc. #5) of nine exhibits in support of their motion to dismiss.

Generally, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss for failure to state a claim. The exceptions are material attached to, or relied on by, the complaint so long as authenticity is not disputed, or matters of public record, provided that they are not subject to reasonable dispute. E.g., Sherman v. Stryker Corp., 2009 WL 2241664, at *2 (C.D. Cal. 2009) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) and Fed. R. Evid. 201).

The Court takes judicial notice of all nine exhibits as each is a public record not subject to reasonable dispute and is relied on by the Complaint. Each document is also relevant to either the ownership of the property or the status of the Loan underlying Plaintiffs' claims. Therefore, Defendants' request for judicial notice is GRANTED in its entirety.

B. Discussion

1. Initial Arguments

Defendants initially contend Plaintiffs cannot seek return of the property for failure to tender and based on the doctrine of laches. MTD at pp. 6-7. In their response, Plaintiffs have clarified the Complaint does not seek a return of the property, and so, the Court disregards these arguments.

2. Negligent and Intentional Misrepresentations

Defendants contend Plaintiffs' claims for negligent and intentional misrepresentation fail on the merits. MTD at pp. 9-10.

The essential elements of a claim for intentional misrepresentation are (1) a misrepresentation; (2) knowledge of falsity; (3) intent to induce reliance; (4) actual and justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638 (1996). "The essential elements of a count for negligent misrepresentation are the same except that it does not require knowledge of falsity, but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true." Chapman v. Skype Inc., 220 Cal.App.4th 217, 230-31 (2013). A plaintiff's claim for fraud must also satisfy the heightened requirements of Federal Rule of Civil Procedure 9(b):

Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

Plaintiffs base these two claims on allegations that Aurora Services continually denied them a loan modification on false grounds, had no intention of ever granting a loan modification, and were involved in a "conspiracy to deceive and victimize Plaintiffs" with the other Defendants. Comp. ¶¶ 63-66, 70-75. Plaintiffs allege they would have cured their default with the help of a friend if they knew they were not going to get a loan modification.

First, Plaintiffs' allegations regarding the involvement of all Defendants other than Aurora Services fail to meet the heightened pleading standard for fraud. The only allegations regarding the other Defendants is that they conspired with Aurora Services in a scheme to defraud Plaintiffs. These conclusory allegations are insufficient. As for the negligent misrepresentation claim, Plaintiffs have failed to properly plead facts which demonstrate how exactly the other Defendants are to be held responsible for the negligent representations allegedly made by Aurora Services. The Court grants the motion to dismiss the claims for intentional and negligent misrepresentations as to all Defendants other than Aurora Services on this ground.

As for Aurora Services, notwithstanding other possible defects in these claims, the Court finds Plaintiffs have failed to adequately allege justifiable reliance or damages as a result against this Defendant. There are no allegations that any Defendant ever promised Plaintiffs that they would receive a loan modification. Plaintiffs' Complaint makes clear that they had the ability to cure their arrearage but decided to continue to apply for loan modifications despite being repeatedly rejected by Aurora Services.

Plaintiffs were already contractually obligated to make loan payments and were aware of the consequences of failing to do so, default and foreclosure. Other courts facing similar claims have granted motions to dismiss on these grounds. See Newgent v. Wells Fargo Bank, N.A., 09CV1525 WQH, 2010 WL 761236, at *6-7 (S.D. Cal. 2010) (finding that because the "Plaintiff was already legally obligated to make payments on her mortgage . . . the payment in reliance on the promise that Wells Fargo would delay the trustee's sale was not detrimental).

In Morgan v. Aurora Loan Servs., LLC, CV 12-4350-CAS MRWX, 2013 WL 3448552, at *5-6 (C.D. Cal. 2013), the plaintiff brought a claim for intentional misrepresentation on the basis that the defendants represented to her that she would be reviewed for a loan modification but never intended to do so. The plaintiff alleged the defendants' true intention was to take more of her money before foreclosing on her property. Id. The plaintiff alleged that she relied on those statements by continuing to make payments under a payment plan agreement while seeking a modification. Id. The court found that, in addition to other deficiencies, the plaintiff was "unable to allege that she justifiably relied on defendants[`] statements to her detriment, as she was already contractually obligated to make loan payments." Id. The court reasoned that "[e]ven if defendants somehow fraudulently induced plaintiff to make additional payments with the promise of a potential permanent loan modification, these payments were made pursuant to preexisting contractual duties." Id.

Similarly, in Zierolf v. Wachovia Mortgage, C-12-3461 EMC, 2012 WL 6161352, at *5-7 (N.D. Cal. 2012), appeal dismissed (July 31, 2013), the court found that the plaintiff did not demonstrate that "any damages resulted from his apparent reliance on Wells Fargo's alleged promises to process his loan modification" because he "had an existing obligation to make his mortgage payments or risk default and foreclosure." The court reasoned that "[t]he risk that one's home loan could go into default and one's home be sold at a foreclosure auction for nonpayment is a remedy provided in the loan agreement itself, not a consequence of allegedly relying on promises to process a loan modification." Id.

The Court notes that Plaintiffs do allege that there was some "verbal agreement" to enter into a trial payment plan. Comp. ¶ 24. However, the claims brought in the Complaint sound in tort, and Plaintiffs have not alleged that Defendants were contractually obligated to provide a loan modification as a result of a verbal agreement. See generally, Sholiay v. Fed. Nat. Mortgage Ass'n, CIV 2:13-00958, 2013 WL 5569988, at *3-6 (E.D. Cal. 2013); Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 884 (9th Cir. 2013), as amended on reh'g in part (Sept. 23, 2013); see also Hoffman v. Bank of Am., N.A., C 10-2171 SI, 2010 WL 2635773, at *5 (N.D. Cal. 2010) (concluding that "lenders are not required to make loan modifications for borrowers that qualify under HAMP nor does the servicer's agreement confer an enforceable right on the borrower").

For all the reasons discussed above, the Court grants Defendants' motion to dismiss Plaintiffs' first and second causes of action for intentional and negligent misrepresentations. While leave to amend must be freely given, the Court is not required to allow futile amendments. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992); Dick v. Am. Home Mortgage Servicing, Inc., CIV. 2:13-00201 WBS, 2013 WL 5299180, at *6 (E.D. Cal. 2013). Because it is not clear to the Court that amendment of these claims would be futile, leave to amend is granted, but "plaintiffs are admonished that failure to cure the defects identified in this Order will be grounds for dismissal without further leave to amend." Dick, at *6.

Having granted the motion on these grounds, the Court need not, and does not, address the statute of limitations arguments proffered by Defendants.

3. Wrongful Foreclosure

Defendants contend Plaintiffs have failed to plead a valid cause of action for wrongful foreclosure in the third cause of action. MTD at pp. 11-13. The Complaint sets forth in detail the defects that Plaintiffs allege were involved in the securitization of the Loan and which serve as the basis for this claim. Comp. ¶¶ 43-49, 79-86. Defendants argue Plaintiffs have no standing to challenge the securitization or assignment of the Loan, and even if standing were established, Plaintiffs cannot prove any prejudice occurred as a result.

"Many courts have aborted homeowners' lawsuits following foreclosure, holding that the homeowners did not have standing to challenge a vast array of irregularities in the transfer of rights and obligations under assignments and substitutions." Mendoza v. JPMorgan Chase Bank, N.A., 228 Cal.App.4th 1020, 1030-31 (2014), review filed (Sept. 23, 2014); see also Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497, 513 (2013). Similarly, the position taken by many District Courts in the Ninth Circuit is that a homeowner plaintiff lacks standing to challenge the securitization of his or her loan. Mendoza, at 1031; Aniel v. GMAC Mortgage, LLC, C 12-04201 SBA, 2012 WL 5389706, at *4 (N.D. Cal. 2012).

The Court finds that Plaintiffs have not properly alleged a basis for standing to challenge the securitization of the Loan in their wrongful foreclosure claim. However, even if standing were found, Plaintiffs fail to properly allege prejudice as a result.

"[A] plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate the alleged imperfection in the foreclosure process was prejudicial to the plaintiff's interests." Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 272 (2011). "California courts find a lack of prejudice when a borrower is in default and cannot show that the allegedly improper assignment interfered with the borrower's ability to pay or that the original lender would not have foreclosed under the circumstances." Dick, 2013 WL 5299180, at *2-3.

The issues here are analogous to those in Siliga v. Mortgage Elec. Registration Sys., Inc., 219 Cal.App.4th 75, 85 (2013). The Siliga court found that despite the issue regarding standing, the plaintiffs failed "to allege any facts showing that they suffered prejudice as a result of any lack of authority of the parties participating in the foreclosure process." Id. The court reasoned:

Id.

The Court finds Plaintiffs have failed to properly allege any prejudice as a result of the securitization or foreclosure process, and so, the Court GRANTS Defendants' motion to dismiss the third cause of action for wrongful foreclosure. The motion is granted without leave to amend, as Plaintiffs cannot properly make out a wrongful foreclosure claim based on an improper securitization under the circumstances alleged.

4. Conversion and Unjust Enrichment

The fourth and seventh causes of action for conversion and unjust enrichment rely on allegations of a faulty securitization and misrepresentations regarding modification of the Loan that have been discussed and rejected above.

The alleged securitization deficiencies cannot serve as the basis for the conversion or unjust enrichment claims because Plaintiffs were under an obligation to make the payments underlying the claims as already discussed. Similarly, the alleged misrepresentations did not result in an unjust enrichment of Defendants. Again, Plaintiffs were under an obligation to make payments on the Loan provided and serviced by Defendants. The Court finds these claims are not viable, and so GRANTS Defendants' motion to dismiss the fourth and seventh causes of action. The dismissal of these claims is with leave to amend since it is not clear that further amendment would be futile. See generally, Reade v. CitiMortgage, Inc., 13CV404 L WVG, 2013 WL 5964611, at *4 (S.D. Cal. 2013) (finding a borrower's obligations are not excused because of an improper securitization); see also Marty v. Wells Fargo Bank, CIV S-10-0555 GEB, 2011 WL 1103405, at *7 (E.D. Cal. 2011).

5. Unfair Competition

Plaintiffs' fifth cause of action alleges a violation of §17200. Because the Court has found Plaintiffs have not adequately alleged damages or injury as a result of Defendants' conduct, the claim must fail. Cal. Bus. & Prof. Code § 17204; Kwikset Corporation v. Superior Court of Orange County, 51 Cal.4th 310, 320-21 (2011) (finding that private standing is limited to any person who has suffered injury in fact and has lost money or property as a result of alleged unfair or unlawful conduct). Defendants' motion to dismiss the fifth cause of action is GRANTED with leave to amend.

6. Equitable Accounting

Defendants contend Plaintiffs have failed to state a valid claim for equitable accounting. MTD at p. 15-16. Plaintiffs argue that because Defendants unjustly enriched themselves through a modification process tainted with fraud it is owed an accounting. Opp. at p. 19.

"An accounting cause of action is equitable and may be sought where the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable." Herrejon v. Ocwen Loan Servicing, LLC, 980 F.Supp.2d 1186, 1207 (E.D. Cal. 2013). "A right to an accounting is derivative; it must be based on other claims." Janis v. California State Lottery Com., 68 Cal.App.4th 824, 833 (1998).

Plaintiffs base their cause of action for an equitable accounting on Defendants' "indebtedness" arising from the payments made by Plaintiffs during the loan modification process. The court in Herrejon dismissed a similar claim finding:

Herrejon, 980 F. Supp. 2d at 1208; see also Janis, 68 Cal.App.4th at 833.

Applying Herrejon to the instant case, the Court GRANTS Defendants' motion to dismiss the sixth cause of action for an equitable accounting. As the Court is not convinced that amendment would be futile given that leave to amend other claims has been granted, the Court grants leave to amend this cause of action as well.

7. Defendants Aurora Bank FSB and Citibank

Defendants contend the complaint should be dismissed against Defendants Aurora Commercial Corp. (alleged to be the successor entity of Defendant Aurora Bank FSB) and Citibank as there are no direct allegations of their involvement in the conduct underlying Plaintiffs' claims. MTD at pp. 5-6. As the Court has already dismissed each of the causes of action in the Complaint as against all Defendants, the Court need not address these arguments specifically.

III. ORDER

For the reasons set forth above, the Court GRANTS Defendants' motion to dismiss the third cause of action for wrongful foreclosure WITHOUT LEAVE TO AMEND, and GRANTS the motion as to the other six counts WITH LEAVE TO AMEND. If Plaintiffs wish to submit an amended complaint, it must be filed within twenty (20) days from the date of this Order. Defendants' responsive pleading is due within twenty (20) days thereafter.

IT IS SO ORDERED.