LAUREL BEELER, Magistrate Judge.
In this mortgage- and foreclosure-related action, the defendant Aurora Loan Services LLC ("Aurora") moves to dismiss the first amended complaint brought by the plaintiffs Jose Cruz and Blanca Cruz. (See First Amended Complaint ("FAC"), ECF No. 31; Motion, ECF No. 33.
Most of the allegations in the plaintiffs' First Amended Complaint are the same as those in their original Complaint. (Compare Complaint ¶¶ 1-70, 72-79, ECF No. 1 with FAC ¶¶ 1-51, 67-114, ECF No. 31.) Paragraphs 52 through 66 of the First Amended Complaint are new. (See FAC ¶¶ 52-66, ECF No. 31.)
In July 2006, the plaintiffs obtained a loan for $425,600 from SCME Mortgage Bankers, Inc. and purchased property located at 54 Puffin Circle, Oakley, California 94561 (the "Property"). (FAC ¶¶ 2, 8, 10, ECF No. 31; Request for Judicial Notice ("RJN"), Ex. 1, ECF No. 10-1.
In February 2010, after defaulting on their loan, the plaintiffs' loan payments increased from $1,532 per month to $3,353 per month. (FAC ¶ 11, ECF No. 31; RJN, Ex. 2, ECF No. 10-2.) After making the first increased payment, the plaintiffs contacted Aurora by telephone and told an Aurora representative that they would not be able to make the increased payments in the future. (FAC ¶ 11, ECF No. 31.) The Aurora representative said that Aurora would send the plaintiffs a loan modification application packet. (Id.) The Aurora representative also told the plaintiffs that they would have to "miss a few monthly payments in order to be considered for" a loan modification. (Id.)
The plaintiffs thereafter did in fact receive a loan modification application packet from Aurora. (Id. ¶ 12.) They filled out the application and submitted it, along with financial and other documents, to Aurora the next month, in March 2010. (Id.) They also missed "about two" monthly payments, as they were told to do. (Id. ¶¶ 11, 13.)
Sometime later, in connection with the plaintiffs' loan modification application, the "[p]laintiffs were told" that, if they qualified under Aurora's loan modification program, their monthly payments would be lowered "based on a lower interest rate." (Id. ¶ 14.) They were also told that the new interest rate and monthly payment "would become fixed." (Id.) "[F]rom the conversations," the plaintiffs "understood" that their new monthly payments would be "in the range of $1,500 to $1,800 per month." (Id.) In addition, the plaintiffs "were informed" that, if they qualified for a loan modification, the modification would be conditioned on their making an initial payment of $4,200 and then timely making three monthly payments of $1,508.67. (Id. ¶ 15.)
The plaintiffs say that they subsequently made the initial payment of $4,200 and then timely made three monthly payments of $1,508.67. (Id. ¶ 16.)
Nevertheless, after making these payments, Aurora told the plaintiffs "that in order to be considered," and "as a prerequisite," they "would again have to pay about $4,200 and again make three monthly payments." (Id. ¶ 17.) The plaintiffs made these payments too. (Id. ¶ 18.)
The plaintiffs allege that they then made "a third set of payments," but they do not allege why they did or how much the payments were. (Id.) They also allege that they "complied with all requests for personal and financial documents." (Id.)
After all this, the plaintiffs "were informed" in September 2011 that "they did not qualify for a [loan] modification and would not be given a permanent [loan] modification at a reduced monthly rate." (Id. ¶ 19.) At that time, the plaintiffs believed that Aurora's decision — to deny their application on the ground that they did not qualify for a loan modification — was legal, and they did not know, and they did not have any reason to know, that they actually qualified for a loan modification because they had no independent knowledge of the financial requirements for a modification. (Id. ¶¶ 20-21, 24, 55, 57-60.) It was not until the plaintiffs contacted counsel in response to a news story in December 2014 that they learned that they in fact qualified for a loan modification under both Aurora's own loan modification program and the federal Home Affordable Modification Program ("HAMP") and that the denial of their loan modification application may have been unlawful. (Id. ¶¶ 22, 24, 65-66.) "It is possible," however, that had they "checked with an attorney or other individuals knowledgeable about modifications and had received a second opinion that they may have discovered they should have received a modification." (Id. ¶ 54.) But the plaintiffs reasonably did not do this because they "believed Aurora when they were informed they did not qualify" and "had no independent knowledge or even suspicion that they did qualify." (Id. ¶¶ 55-57.)
After denying their loan modification, Aurora, through Quality Loan Service Corporation, foreclosed on the Property and took title to it pursuant to a trustee's deed dated October 3, 2011. (Id. ¶ 26; RJN, Ex. 3-5, ECF Nos. 10-3, 10-4, 10-5.) Aurora evicted the plaintiffs from the Property on December 22, 2011. (FAC ¶ 27, ECF No. 31.)
The plaintiffs filed their original Complaint in Contra Costa County Superior Court on December 19, 2014. (Complaint, ECF No. 1 at 7-21.) They brought the following claims: (1) intentional misrepresentation; (2) breach of contract; (3) promissory estoppel; (4) breach of the implied covenant of good faith and fair dealing; (5) negligence; (6) misrepresentation based on a false promise; and (7) unfair competition, Cal. Bus. & Prof. Code § 17200. (Id. ¶¶ 29-79.)
On February 6, 2015, Aurora removed the action to this court on the basis of diversity jurisdiction. (Notice of Removal, ECF No. 1.) Aurora thereafter filed a motion to dismiss the Complaint. (Motion, ECF No. 9.) On May 5, 2015, the court granted in part and denied in part Aurora's motion. (5/5/2015 Order, ECF No. 27.) Specifically, the court dismissed without prejudice the plaintiffs' first, sixth, and seventh claims and ruled that the plaintiffs' second, third, fourth, and fifth claims survived. (Id. at 17.) The court gave the plaintiffs leave to file a first amended complaint. (Id.)
The plaintiffs did so on May 26, 2015. (FAC, ECF No. 31.) They re-alleged all seven claims. (Id. ¶¶ 29-114.) On June 9, 2015, Aurora filed a motion to dismiss the plaintiffs first, sixth, and seventh claims only. (Motion, ECF No. 33.)
Federal Rule of Civil Procedure 8(a) requires that a complaint contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint must therefore provide a defendant with "fair notice" of the claims against it and the grounds for relief. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation and citation omitted).
A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it does not contain enough facts to state a claim to relief that is plausible on its face. See Twombly, 550 U.S. at 570. "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." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 557.). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (internal citations and parentheticals omitted).
In considering a motion to dismiss, a court must accept all of the plaintiff's allegations as true and construe them in the light most favorable to the plaintiff. See id. at 550; Erickson v. Pardus, 551 U.S. 89, 93-94 (2007); Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007).
If the court dismisses the complaint, it should grant leave to amend even if no request to amend is made "unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (internal quotation marks omitted). But when a party repeatedly fails to cure deficiencies, the court may order dismissal without leave to amend. See Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992) (affirming dismissal with prejudice where district court had instructed pro se plaintiff regarding deficiencies in prior order dismissing claim with leave to amend).
Aurora again moves to dismiss the plaintiffs' first and sixth claims. (Motion, ECF No. 33 at 6-10.) As in their original complaint, the first claim in the plaintiffs' First Amended Complaint is for intentional misrepresentation, and the sixth claim is for misrepresentation based on a false promise. (FAC ¶¶ 29-73, 99-108, ECF No. 31 at 5-9, 13-16.) These are both fraud-based claims, and the plaintiffs' allegations in support of them are virtually identical, so the court addresses them together.
As the court stated in its 5/5/2015 Order, under California law, "[t]he elements of intentional misrepresentation, or actual fraud, are: `(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.'" Anderson v. Deloitte & Touche, 56 Cal.App.4th 1468, 1474 (Cal. Ct. App. 1997) (quoting Molko v. Holy Spirit Ass'n, 46 Cal.3d 1092, 1108 (Cal. 1988)); see also Cal. Civ. Code § 1572. "The general rule for liability for non-disclosure is that even if material facts are known to one party and not the other, failure to disclose those facts is not actionable fraud unless there is some fiduciary or confidential relationship giving rise to a duty to disclose." La Jolla Village Homeowners' Ass'n v. Superior Court, 212 Cal.App.3d 1131, 1151 (Cal. Ct. App. 1989), disapproved on other grounds by Jimenez v. Superior Court, 29 Cal.4th 473, 479-80 (Cal. 2002).
The court also stated in its 5/5/2015 Order that under Federal Rule of Civil Procedure 9(b), a party alleging fraud or intentional misrepresentation must satisfy a heightened pleading standard by stating with particularity the circumstances constituting fraud. Fed. R. Civ. P. 9(b). Specifically, "[a]verments of fraud must be accompanied by `the who, what, when, where, and how' of the misconduct charged." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). Further, "`[a] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false.'" Id. (quoting Decker v. GlenFed, Inc. (In re GlenFed, Inc. Sec. Litig.), 42 F.3d 1541, 1548 (9th Cir. 1994) (italics in original)). A plaintiff must also differentiate his allegations when suing more than one defendant, especially in the context of fraud claims. See Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011).
In response to the plaintiffs' original Complaint, Aurora argued that the plaintiffs' first and sixth claims were barred by the applicable three-year statute of limitations. (Motion, ECF No. 9 at 11.) The court agreed. In its 5/5/2015 Order, the court stated as follows:
5/5/2015 Order, ECF No. 27 at 6-9.
Aurora once again argues that the plaintiffs' first and sixth claims are barred by the statute of limitations. It argues that the plaintiffs "do not allege (specifically) when or how they discovered they qualified for a loan modification or that they exercised reasonable diligence in trying to do so." (Motion, ECF No. 33 at 7.) The court does not agree. As described above, the plaintiffs now allege that, while they knew in September 2011 that Aurora denied their loan modification application, they did not know, and had no reason to know, that they actually qualified for a loan modification until they visited counsel in December 2014. The reason is that they believed Aurora when Aurora told them that they did not qualify for a loan modification and they had no reason to suspect that they qualified for one. They only learned that their understanding (which was based on Aurora's representations) was wrong and that they qualified for a loan modification after speaking to counsel in December 2014. Based on the plaintiffs' allegations, and at this stage of the proceedings, the court finds that the discovery rule applies and thus the plaintiffs' first and sixth claims were filed within the applicable three-year statute of limitations.
Aurora nonetheless argues that the plaintiffs' first and sixth claims fail because the plaintiffs do not allege facts to show that it made a misrepresentation or that the plaintiffs justifiably relied on that misrepresentation or suffered damage as a result of it. (Motion, ECF No. 8-10.) The court believes that the plaintiffs' first and sixth claims are sufficiently pleaded. First, as for the misrepresentation, Aurora says that "[t]he representation the application was denied was true," but the plaintiffs do not allege that it is false that Aurora denied their loan modification application. (Id. at 8.) Instead, the plaintiffs allege that Aurora's statement that they did not qualify for a loan modification was false and therefore should not have denied their application. Second, as for reliance, Aurora says the plaintiffs "fail to allege how their position changed based on the [mis]representation." (Id. at 9.) The plaintiffs, however, allege that they continued to try to obtain a loan modification and refrained from taking other actions, such as borrowing money from family and friends, that would have allowed them to cure their default. Third, as for damages, Aurora says that, while the plaintiffs allege that they lost the Property, the plaintiffs did not lose the Property because Aurora denied their loan modification application. (Id.) Instead, Aurora says that the plaintiffs lost the Property "because they were unable to afford the loan payments and were unable to obtain a loan modification." (Id.) But the plaintiffs allege that they did not obtain a loan modification because Aurora falsely told them that they did not qualify for one, when they actually did qualify for one. In other words, had Aurora properly determined that they qualified for a loan modification, Aurora would have been obligated to modify their loan, and they would have been able to make their mortgage payments and would not have lost the Property. This connection between the misrepresentation and the harm suffered distinguishes this situation from the cases Aurora cites. (See id. at 9-10 (citing Morgan v. Aurora Loan Servs., LLC, No. CV 12-4350-CAS (MRWx), 2013 WL 3448552, at *5-6 (C.D. Cal. July 9, 2013); Zierolf v. Wachovia Mortg., No. C-12-3461 EMC, 2012 WL 6161352, at *6 (N.D. Cal. Dec. 11, 2012); Newgent v. Wells Fargo Bank, N.A., No. 09cv1525 WQH (WMC), 2010 WL 761236, at *5, *7 (S.D. Cal. Mar. 2, 2010)).)
Accordingly, the court denies Aurora's motion to dismiss the plaintiffs' first and sixth claims.
The plaintiffs also re-alleged their seventh claim that Aurora engaged in "unlawful" and "unfair" business practices in violation of California's UCL. (FAC ¶¶ 109-114.) Aurora once again argues that their claims are insufficiently pleaded. (Motion, ECF No. 33 at 10-11.)
The court previously dismissed without prejudice the plaintiffs' "unlawful" and "unfair" claims. (5/5/2015 Order, ECF No. 27 at 15-16.) In doing so, the court stated as follows:
The plaintiffs made no changes or additions to the allegations in support of their UCL claim in the First Amended Complaint. (Compare Complaint ¶¶ 74-79, ECF No. 1 at 20-21 with FAC ¶¶ 109-114, ECF No. 31 at 16.) In their opposition, they say that the "totality" of the acts alleged in Paragraphs 14 through 28 of their First Amended Complaint plausibly constitute "unfair conduct," but these paragraphs are identical to Paragraphs 14 through 28 of the original Complaint, and the court previously found the plaintiffs' allegations in their original Complaint to be insufficient. In short, the plaintiffs have done nothing in their First Amended Complaint to address the deficiencies the court identified in its 5/5/2015 Order. For this reason, the court dismisses the plaintiffs' seventh claim with prejudice.
The court grants in part and denies in part Aurora's motion. The plaintiffs' first and sixth claims survive. The plaintiffs' seventh claim is dismissed with prejudice. Aurora shall answer the plaintiffs' First Amended Complaint within 14 days from the date of this order.
