CLAUDIA WILKEN, District Judge.
Plaintiffs Celedonia Amacker and Joseph Amacker assert various mortgage-related claims against Defendants Bank of America, N.A. (BOA) and Bank of New York Mellon (BNYM). Both Defendants move separately to dismiss Plaintiffs' first amended complaint (1AC) in its entirety. BNYM also moves to strike portions of the 1AC. Plaintiffs have filed an opposition to both motions to dismiss. Each Defendant has filed a reply. The Court took the motions under submission on the papers. Having considered the arguments presented by the parties, the Court GRANTS both Defendants' motions and GRANTS Plaintiffs leave to amend.
The following facts are taken from the 1AC and certain documents of which the Court takes judicial notice.
In October 2005, Plaintiffs obtained a loan funded by Countrywide Home Loans, Inc. in the amount of $624,000. Request for Judicial Notice (RFJN), Ex. B. This loan refinanced a prior loan secured by a deed of trust encumbering the real property located at 6589 Fountaine Avenue, Newark, California.
The deed of trust, which Plaintiffs signed, included an Adjustable Rate Rider. RFJN, Ex. B. The rider provided for an adjustable interest rate starting at two percent for approximately the first fifty days of the loan.
Plaintiffs allege that, in 2008, while current on their payments, they began to pursue a loan modification with Countrywide. 1AC ¶ 14. They claim that, during conversations with Countrywide, they were told that in order to obtain a loan modification, they must first default on their loan.
Because they felt they needed to modify their loan agreement, Plaintiffs stopped paying on their loan.
Plaintiffs allege that, around September 2009, BOA representatives advised them that their property was subject to imminent foreclosure.
According to Plaintiffs, soon after the news article was published, a BOA representative named Tammy Tipton contacted them to "personally assist with [their] account."
The proposed modification provided an initial interest rate of 3.5% for the first five years and a monthly payment of $2,981.58.
In November 2009, on behalf of the beneficiary, ReconTrust recorded a notice of rescission of declaration of default and demand for sale and notice of default. RFJN, Ex. C.
In April 2011, Plaintiffs contacted BOA to discuss modifying their loan.
In November 2011, MERS recorded an assignment of deed of trust to BNYM, assigning "all beneficial interest . . . together with the note(s) and obligations . . . and the money due and to become due." RFJN, Ex. D.
Plaintiffs allege that, in early 2012, Anita Lewis, a BOA representative, told them there was no record of Ms. Tipton's assurance that BOA would modify their loan. 1AC ¶ 23. At that time, Plaintiffs were notified that their loan modification application had expired and they were required to file a new application.
In March 2013, BYNM recorded a substitution of trustee, replacing CTC Foreclosure Services with ReconTrust. RFJN, Ex. E. On March 19, 2013, BYNM recorded a notice of default and election to sell under deed of trust. RFJN, Ex. F.
Plaintiffs filed suit in July 2013 and filed their amended complaint in September 2013. Plaintiffs' 1AC alleges claims for (1) fraud (against Defendant BOA); (2) promissory estoppel (against both Defendants); (3) negligent misrepresentation (against both Defendants); (4) violation of the Uniform Fraudulent Transfer Act (against both Defendants); and (5) violation of Business and Professions Code section 17200
A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). The plaintiff must proffer "enough facts to state a claim to relief that is plausible on its face."
In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff.
When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile.
Both Defendants seek to dismiss all claims against them.
Plaintiffs allege that BOA
BOA argues that Plaintiffs' cause of action for fraud should be dismissed for several reasons. First, BOA argues that the claim is time-barred. Second, BOA argues that Plaintiffs' claim is inadequately plead under Rule 9(b). Lastly, BOA argues that Plaintiffs' fraud claim is not actionable under the statute of frauds. The Court GRANTS BOA's motion to dismiss this cause of action for the reasons stated below.
In the case of fraud or mistake, the statute of limitations is three years after the fraud or mistake has been discovered. Cal. Civ. Proc. Code § 338(d). "The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake."
BOA argues that "Plaintiffs cannot rely on the delayed discovery rule to toll the applicable statute of limitations because they do not allege diligence." BOA's Reply Pls.' Opp. Mot. Dismiss 1. The Court disagrees. Plaintiffs allege that beginning in 2011 they repeatedly told BOA representatives about Ms. Tipton's statement. They further allege that, despite their repeated assertions, they were not told until 2012 that Ms. Tipton's statement promising a favorable 2011 loan modification was false. Plaintiffs filed this suit in July 2013. Plaintiffs have plead sufficient facts that, if true, would delay the running of the statute of limitations for fraud to the date of discovery in 2012. Accordingly, the Court declines to dismiss this claim based on the statute of limitations.
Plaintiffs allege that BOA defrauded them by "knowingly and recklessly mak[ing] false and misleading statements that Plaintiffs relied on to their detriment[.]" 1AC ¶ 33. Specifically, Plaintiffs allege Ms. Tipton, as a BOA representative, assured them that BOA would modify their 2009 loan again in two years. Plaintiffs allege that Ms. Tipton made those statements knowing they were false. They also allege that they relied on Ms. Tipton's assurance to their detriment.
"In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). "Therefore, in an action based on state law, while a district court will rely on state law to ascertain the elements of fraud that a party must plead, it will also follow Rule 9(b) in requiring that the circumstances of the fraud be pleaded with particularity."
Plaintiffs have not plead with particularity their fraud claim against BOA in regard to the 2009 future loan modification representation. "The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or `scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage."
Plaintiffs allege that, in September 2009, Ms. Tipton spoke to Joseph Amacker and told him, "Once the dust settles, we will definitely re-modify this for you and get you a better loan in the future, in about two years." They also allege that Ms. Tipton knew her statement was false when she made it and that she made the statement to induce Plaintiffs not to file suit or speak with the media. Plaintiffs further allege that they reasonably relied on Ms. Tipton's statement because she was a BOA representative. Plaintiffs have not alleged, however, that they have been damaged as a result of Ms. Tipton's statement. They do not allege that they could have obtained a more favorable loan modification in 2009 from another lender or by virtue of litigation or publicity. Instead they say they had to accept the proposed modification. They do not allege that BOA since has denied them another loan modification.
Plaintiffs' cause of action for fraud against BOA is not sufficiently plead under Rule 9(b). Accordingly, the Court GRANTS BOA's motion to dismiss this claim. Plaintiffs are granted leave to amend to remedy the deficiencies noted above if they can do so truthfully and without contradicting the allegations in their prior pleadings.
Although this claim is dismissed under Rule 9(b), BOA also argues that the claim should be dismissed due to the statute of frauds. Plaintiffs allege, albeit indirectly, that Ms. Tipton's statements guaranteeing a future, more favorable, loan modification constituted an oral agreement between Plaintiffs and BOA. According to Plaintiffs, this statement was made "with the intent to induce Plaintiffs into the modification agreement in order to prevent them from continuing to expose the bank's misconduct to the media and seeking to litigate for the misconduct[.]" 1AC ¶ 38. BOA argues that "even assuming
"An agreement for . . . the sale of real property, or of an interest therein" is "invalid, unless [it], or some note or memorandum thereof, [is] in writing and subscribed by the party to be charged or by the party's agent[.]" Cal. Civ. Code § 1624(a)(3). "A contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged or by the party's agent."
While "California courts have held that forbearance agreements altering a mortgage are covered by the statute of frauds,"
Accordingly, the Court's dismissal of this claim is not based on the statute of frauds.
Here, Plaintiffs rely on the same facts alleged under their fraud cause of action, namely that BOA failed to keep a 2009 promise to re-modify their loan favorably. As a result, Plaintiffs request that BNYM, as BOA's "successor-in-interest" be estopped from preventing Plaintiffs "from modifying their loan and from proceeding with a foreclosure against Plaintiffs[.]" 1AC ¶ 45. Defendants argue that Plaintiffs' allegations do not sufficiently plead the elements required under the doctrine of promissory estoppel. The Court GRANTS Defendants' motion to dismiss this cause of action for the reasons stated below.
"The purpose of [promissory estoppel] is to make a promise that lacks consideration (in the usual sense of something bargained for and given in exchange) binding under certain circumstances."
Plaintiffs' promissory estoppel claim fails for several reasons. First, it fails because the alleged promise was not clear and unambiguous. Plaintiffs allege that Ms. Tipton promised to "definitely re-modify" their loan and "get [them] a better loan in the future, in about two years." 1AC ¶¶ 19, 35. "Better" is ambiguous, and "about two years" is indefinite. The only part of Ms. Tipton's promise that is clear and unambiguous is that a loan modification would occur in the future.
Plaintiffs allege that they were injured due to their reliance on Ms. Tipton's promise because they ceased pursuing litigation and exercising their right to free speech, believing they would receive a "favorable" loan modification in the future. Plaintiffs allege that they were unhappy with the terms of the 2009 modification, and suggest that they would not have accepted the 2009 loan modification if not for Ms. Tipton's promise. But they also state that "they felt they had "no other option but to accept the modification for the time being[.]" Compl. ¶ 20. Plaintiffs cannot allege that accepting the 2009 modification was in reliance on Ms. Tipton's representations if Plaintiffs also allege they felt they had no other choice but to accept, no matter what Ms. Tipton had promised. Further, Plaintiffs do not allege that they could have obtained a better loan modification in 2009 through litigation or other means. Finally, Plaintiffs have not plead that Defendants have denied them a loan modification.
Accordingly the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiffs are granted leave to amend to remedy the deficiencies noted above if they can do so truthfully and without contradicting the allegations in their prior pleadings.
Plaintiffs rely on the same facts alleged under their fraud and promissory estoppel claims to contend, in the alternative, that Ms. Tipton's statements negligently misrepresented the likelihood of a loan modification in the future.
BOA argues that Plaintiffs' claim for negligent misrepresentation fails for three reasons. First, BOA argues that Plaintiffs' action for negligent misrepresentation is time-barred. Second, BOA argues that Plaintiffs fail to state a claim for negligent misrepresentation. Finally, BOA argues that Plaintiffs have not sufficiently alleged reliance or damages. The Court GRANTS BOA's motion to dismiss this cause of action for the reasons stated below.
When a cause of action alleges negligent misrepresentation, the statute of limitations is two years.
As in the fraud claim, Plaintiffs allege that beginning in 2011 they repeatedly told BOA representatives about Ms. Tipton's statement and were not told until 2012 that Ms. Tipton's statement regarding a promised loan modification was false. Plaintiffs filed this suit in July 2013. Plaintiffs have plead sufficient facts that, if true, would delay the running of the statute of limitations to the date of discovery in 2012. Accordingly, the Court declines to dismiss this claim based on the statute of limitations.
"The elements of negligent misrepresentation are similar to intentional fraud except for the requirement of scienter; in a claim for negligent misrepresentation, the plaintiff need not allege the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true."
"The Ninth Circuit has not yet decided whether Rule 9(b)'s heightened pleading standard applies to a claim for negligent misrepresentation, but most district courts in California hold that it does."
Because Plaintiffs' claim for negligent misrepresentation is based on the same circumstances as their fraud claim, they must meet the heightened pleading requirements of Rule 9(b).
Plaintiffs fail to allege facts to support a negligent misrepresentation claim for the same reasons they failed to do so in their claims for fraud and promissory estoppel. As discussed above, Plaintiffs do not allege that they could have obtained a more favorable loan modification in 2009 from another lender or by virtue of litigation or publicity. Instead, they say they had to accept the proposed modification. They also do not allege that BOA since has denied them another loan modification.
Accordingly, the Court dismisses this claim because Plaintiffs have failed to state, with particularity, facts to support reliance upon the negligent misrepresentation and resulting damages. Plaintiffs are granted leave to amend to remedy the deficiencies noted above if they can do so truthfully and without contradicting the allegations in their prior pleadings.
Plaintiffs allege that while they were creditors of BOA "by way of their pending allegations against [BOA] for damages," BOA "transferred Plaintiffs' Deed of Trust, and all benefits thereunder" to BNYM in violation of the Uniform Fraudulent Transfer Act (UTFA). 1AC ¶ 56. As a result, Plaintiffs allege that they were deprived of their "right to seek claims for specific performance and for damages against" BOA.
Defendants argue that this cause of action is time-barred. Defendants also argue that Plaintiffs fail to provide facts to support the claim that they were creditors of BOA based on a contingent claim for damages by way of pending allegations. The Court GRANTS Defendants' motion to dismiss this claim for the reasons stated below.
"A cause of action with respect to a fraudulent transfer or obligation under [UTFA] is extinguished . . . within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant." Cal. Civ. Code § 3439.09. According to judicially noticed documents, BOA transferred the note to BNYM in 2011. Plaintiffs filed this complaint in 2013. Plaintiffs have therefore plead sufficient facts to show that their UFTA claim is within the statute of limitations. Accordingly, the Court declines to dismiss this claim based on the statute of limitations.
The UFTA "permits defrauded creditors to reach property in the hands of a transferee."
Plaintiffs allege facts under only two of the eleven factors that would support that the loan transfer from BOA to BYNM was made with the intent to hinder, delay or defraud Plaintiffs. First, Plaintiffs allege that BOA retained control of the property because it remained the servicer of the debt after the transfer. Second, Plaintiffs allege BOA made the transfer to BNYM after BOA became aware that Plaintiffs had retained HERA counsel.
Plaintiffs fail to allege facts to support any of the remaining nine factors. Plaintiffs do not allege that the transfer from BOA to BNYM was to an insider. They do not allege that the transfer had been concealed, nor do they allege that the transfer included substantially all of BOA's assets. Plaintiffs do not allege that BOA absconded, nor do they allege that BOA removed or concealed assets. Plaintiffs do not allege that the value of the consideration received by BOA was not reasonably equivalent to the value of the asset transferred. They do not allege that the transfer happened shortly before or shortly after a substantial debt was incurred; indeed they allege that the transfer occurred approximately two years after BOA was allegedly put on notice that Plaintiffs might file a lawsuit. Plaintiffs do not allege that BOA transferred the essential assets of a business, nor do they allege that the transfer was to a lienholder who then transferred to an insider of BOA.
On balance, Plaintiffs have failed to allege sufficient facts to raise an inference that BOA had the intent to hinder, delay or defraud Plaintiffs through the transfer of their loan to BNYM. Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiffs are granted leave to amend to remedy the deficiencies noted above if they can do so truthfully and without contradicting the allegations in their prior pleadings.
Plaintiffs allege that "Defendants' fraud, inducement of Plaintiffs' detrimental reliance, and negligent misrepresentations to Plaintiffs constitute unfair business practices[.]" 1AC ¶ 63. They allege that Defendants' conduct was unfair in that it "induce[d] a borrower into a loan agreement through misrepresentations" and "then place[d] [Plaintiffs] into foreclosure based on the fraudulent loan agreement." 1AC ¶ 64. In their opposition, however, Plaintiffs disclaim allegations regarding their original loan and pursue only their claim related to the promised future modification.
Defendants argue that Plaintiffs' claim under the Unfair Competition Law (UCL) fails for several reasons. First, Defendants argue that it is time-barred. Second, Defendants argue that Plaintiffs lack standing under the UCL because they have not suffered an injury in fact and have not lost money or property as a result of the claimed violations. Lastly, Defendants argue that Plaintiffs have failed to differentiate between Defendants as to how each has caused Plaintiffs harm. The Court GRANTS Defendants' motions to dismiss this cause of action for the reasons stated below.
"Any action to enforce any cause of action pursuant to [the UCL] shall be commenced within four years after the cause of action accrued." However, as discussed above with respect to the fraud claim, the delayed discovery rule may apply.
The UCL prohibits "any unlawful, unfair or fraudulent business act." Cal. Bus. & Prof. Code § 17200
The California Supreme Court has not established a definitive test to determine whether a business practice is unfair under the UCL.
Under one test, a consumer must allege a "violation or incipient violation of any statutory or regulatory provision, or any significant harm to competition."
Under the second test, the "unfair prong" requires a consumer to plead that (1) a defendant's conduct "is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers" and (2) "the utility of the defendant's conduct" is outweighed by "the gravity of the harm to the alleged victim."
The third test, which is based on the Federal Trade Commission's definition of unfair business practices, requires that, as a result of unfair conduct, "(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided."
In
Under either the tethering test or the balancing test, Plaintiffs fail to plead sufficient facts to support a claim under the unfairness prong of the UCL. Plaintiffs have not sufficiently "tethered" their UCL claim to any "specific constitutional, statutory, or regulatory provisions." They have also failed to show how Defendants actions were "immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers," especially because, as discussed above, they have failed to allege sufficient facts to support the allegation that they were harmed due to reliance on Ms. Tipton's statements.
Accordingly, the Court GRANTS Defendants' motions to dismiss this cause of action. Plaintiffs are granted leave to amend to remedy the deficiencies noted above if they can do so truthfully and without contradicting the allegations in their prior pleadings.
"The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12. BNYM moves to strike three paragraphs from the 1AC, all of which reference punitive damages: 1AC ¶¶ 41, 60, and Prayer ¶ 7. Plaintiffs never stated a cause of action against BNYM for fraud and they abandoned their negligent misrepresentation cause of action against BNYM. Plaintiffs have not, therefore, brought any cause of action against BNYM for which punitive damages might be appropriate. Accordingly, the Court GRANTS BNYM's motion to strike without leave to amend.
For the reasons set forth above, the Court GRANTS Defendants' motions to dismiss. Within fourteen days of the date of this order, Plaintiffs may file an amended complaint to remedy the deficiencies identified above. Plaintiffs may not include punitive damages claims against BNYM nor should they allege facts relevant to punitive damages against BNYM. They may not add further claims or allegations not authorized by this order.
If Plaintiffs file an amended complaint, Defendants shall respond to it within fourteen days after it is filed. If Defendants file a motion to dismiss, Plaintiffs shall respond to the motion within fourteen days after it is filed. Plaintiffs must file a brief that responds only to the arguments raised in Defendants' motion. If Plaintiffs file an opposition that is inapplicable to this case or does not respond to Defendants' arguments, the Court will consider the motion to be unopposed and will grant it. Defendants' reply, if necessary, shall be due seven days thereafter. Any motion to dismiss will be decided on the papers.
