DONNA M. RYU, Magistrate Judge.
Before the court is a motion to dismiss certain claims in Plaintiff Veomany Maomanivong's Second Amended Complaint
The factual allegations in the SAC are nearly identical to the allegations in Plaintiff's First Amended Complaint ("FAC"), see generally Docket No. 27. The court will note allegations that are new or changed in the SAC.
Plaintiff Veomany Maomanivong lives in and owns a residential property in Santa Rosa, California (the "Property"). SAC at ¶ 1. On November 13, 2006, Plaintiff took out a mortgage loan from National City Mortgage secured by the Deed of Trust on the Property, in the amount of $555,560. SAC at ¶ 10, Ex. A.
The Deed of Trust named "National City Mortgage a division of National City Bank" as the lender and beneficiary and "National City Bank" as the Trustee. Id., Ex. A at 1-2.
On April 9, 2007, "National City Mortgage, a division of National City Bank" executed an Assignment of Deed of Trust, granting, assigning, and transferring all beneficiary interest in the Deed of Trust to "National City Mortgage Co., a subsidiary of National City Bank." SAC at ¶ 14, Ex. B.
On July 12, 2011, Mortgage Electronic Registration Systems, Inc. ("MERS"), as the nominee for the lender ("National City Bank for National City Mortgage, a Division of National City Bank"), executed an Assignment of Deed of Trust that granted, assigned, and transferred all beneficiary interest in the Deed of Trust to Deutsche Bank. Id. at ¶ 16, Ex. C.
On January 24, 2012, Cal-Western Reconveyance Corporation ("Cal-Western Corporation") executed and recorded a Notice of Default on the Property. Id. at ¶ 22, Ex. D (Notice of Default recorded January 24, 2012). The Notice of Default states that Cal-Western Corporation is "either the original trustee, the duly appointed substituted trustee, or acting as agent for the trustee or beneficiary under [the] deed of trust." Id. at Ex. D. Plaintiff alleges that prior to January 24, 2012, no Substitution of Trustee was recorded substituting Cal-Western Corporation as the trustee of the Deed of Trust. Id. at ¶ 23.
On April 6, 2012, Deutsche Bank executed a Substitution of Trustee substituting Cal-Western Corporation in as trustee of the Deed of Trust on the Property. Id. at ¶ 31, Ex. F.
On September 26, 2013, Cal-Western LLC executed a Notice of Trustee's Sale on the Property, setting a trustee's sale date for October 13, 2013. Id. at ¶ 42, Ex. H. The Notice of Trustee's Sale was recorded on October 1, 2013. Id.
In July 2011, Plaintiff began experiencing financial difficulty. Id. at ¶ 15. Around August 2011, Plaintiff contacted National City Bank to request financial assistance, but was told by a loan agent that National City Bank's policy was to refrain from providing borrowers loan options unless the borrower was at least three months behind on her monthly payments and was therefore considered "delinquent." Id. at ¶ 17.
In October 2011, Plaintiff defaulted on her loan. Id. at ¶ 19. She again contacted National City Mortgage, who told Plaintiff that she could not be considered for loan assistance because her loan was not yet "delinquent." Id. at ¶ 20.
Between October 2011 and February 2012, Plaintiff pooled her extra funds, liquidated assets, and obtained financial commitments from family and friends in order to acquire the money necessary to pay her outstanding arrears and bring her loan current. Id. at ¶ 21.
On January 24, 2012, as stated above, Cal-Western Corporation executed a Notice of Default on the Property. Id. at ¶ 22, Ex. D.
In February 2012, Plaintiff contacted National City Mortgage to obtain an accounting of her arrears so that she would know what she needed to pay in order to bring her loan current. Id. at ¶ 24. She informed the loan agent (Ms. Williams) that she wanted to reinstate her loan and bring it current by tendering complete payment of her arrears. Id. at ¶ 24. However, Ms. Williams "urged Ms. Maomanivong to refrain from reinstating her loan and, instead, apply for a loan modification through Defendants, assuring Ms. Maomanivong that she qualified for a loan modification." Id. Ms. Williams told Plaintiff that modification was "her best option," because it would bring her loan current without requiring Plaintiff to pay a large lump-sum payment to reinstate the loan. Id. Ms. Williams explained that making such a reinstatement payment would require Plaintiff to continue making payments under the original interest rate of the loan. Id.
Later in February 2012, Plaintiff received a loan modification application from Defendants, which she opened immediately, completed, and submitted to Defendants for review, attaching all of the requested documentation. Id. at ¶ 25.
On April 2, 2012, Plaintiff contacted National City Mortgage to follow up on her loan modification application, and spoke to a "Loss Mitigation Specialist" named Ernie, who informed Plaintiff that "Defendants were currently reviewing her application and would likely make a decision within four to six weeks." Id. Ernie instructed Plaintiff to submit supplemental financial documentation within two weeks. Id. Plaintiff submitted the required documents that day. Id. at ¶ 26.
On April 6, 2012, Plaintiff received a letter from National City Mortgage dated April 4, 2012 informing Plaintiff that her loan modification application was incomplete, and requesting additional financial documents. Id. at ¶¶ 28-29, Ex. E. On the same day, Plaintiff submitted the requested documents in the manner requested by Defendants. Id. at ¶ 29. Plaintiff also contacted National City Mortgage again, and spoke with a Loss Mitigation Specialist named Rachael about the letter dated April 4, 2012. Id. at ¶ 30. Rachael informed Plaintiff that her application required additional documentation, and instructed Plaintiff to submit a supplemental loan modification application. Rachael also told Plaintiff that Rachael would send Plaintiff a supplemental loan modification application form. Id. at ¶ 30.
In late April 2012, Plaintiff received a loan modification package from National City Mortgage. She immediately completed the application and submitted it with the required documentation. Id. at ¶ 32. In May 2012, Plaintiff contacted National City Mortgage to inquire about the status of her application, and spoke with Ryan, a loan specialist who told Plaintiff that the application had been received and that PNC Bank would contact Plaintiff within six to eight weeks if it required additional financial information. Id. at ¶ 33. Ryan reassured Plaintiff that she was "pre-approved" for loan modification, and that she should "handle her finances accordingly." Id.
In September 2012, Plaintiff contacted National City Mortgage again about the status of her application. This time Plaintiff spoke with a loan specialist named Alex, who informed Plaintiff that Defendants currently were reviewing her application and expected to render a decision within six to eight weeks. Id. at ¶ 34. Alex then instructed Plaintiff to provide updated documentation to supplement her supplemental application. Id. Immediately after the conversation, Plaintiff submitted the requested documents. Id. at ¶ 35.
On October 15, 2012, National City Mortgage sent Plaintiff a letter stating, "The review of your hardship request assistance has been completed. Unfortunately, as of 10-15-12, we are unable to approve or finalize your request for assistance due to the following reason(s): We did not receive the completed Borrower Package as requested. If you would like to continue the review process, please forward the requested information immediately." Id. at ¶ 36, Ex. G. Upon receiving this letter, Plaintiff immediately contacted "Defendants" and spoke with a loan agent. Id. at ¶ 37. The loan agent initially told Plaintiff that the October 15 letter requested supplemental documentation, but then informed Plaintiff, based on his review of her file, that Plaintiff had in fact submitted the required documents and the October 15 letter had been sent by mistake. Id. Nonetheless, the loan agent instructed Plaintiff to submit a supplemental loan modification application, and told Plaintiff that she would receive an application package within six to eight weeks. Id. Plaintiff received the package in March 2013 and immediately completed and submitted it. Id. at ¶ 38.
In July 2013, Plaintiff again contacted Defendants and again spoke with a loan agent who instructed her to submit supplemental financial documents, which Plaintiff did immediately. Id. at ¶ 39.
In August 2013, Plaintiff contacted Defendants and spoke with a loan agent, who told Plaintiff that her application was still under review. Plaintiff asked why the application process was taking so long, and informed the loan agent that she was ready and willing to pursue other loan options, including reinstating her loan by either tendering payment of her arrears or filing for Chapter 13 bankruptcy protection.
On October 1, 2013, Cal-Western LLC recorded a Notice of Trustee's Sale on the Property, setting a trustee's sale date for October 13, 2013. Id. at ¶ 42, Ex. H. On October 2, 2013, Plaintiff received this Notice of Trustee's Sale on her front porch. Plaintiff contacted National City Mortgage immediately, and spoke with a Loan Mitigation Specialist named Donald, who informed Plaintiff that the notice was merely posted as a matter of company policy, but promised that Defendants would not proceed with any trustee's sale unless they first made a final decision on her pending loan modification application, and in the event that her application was denied, she would have at least thirty days to dispute Defendants' determination and/or pursue other non-foreclosure options. Id. at ¶ 43.
On October 22, 2013, Plaintiff's counsel obtained a temporary restraining order to prevent Defendants from executing the trustee's sale. Id. at ¶ 44, Ex. I.
In the FAC, Plaintiff brought seven causes of action against all Defendants: (1) violation of California Civil Code § 2924(a)(6); (2) violation of California Civil Code § 2934a(e); (3) violation of California Civil Code § 2923.6; (4) violation of California Civil Code § 2923.5; (5) promissory estoppel; (6) negligence and negligence per se; and (7) violation of the California Unfair Competition Law ("UCL"), codified at California Business and Professions Code § 17200, et seq. PNC Bank and Deutsche Bank moved to dismiss all seven claims against them. See Docket No. 35.
On September 15, 2014, the court issued an order dismissing Plaintiff's Section 2924(a)(6), Section 2934a(e), and UCL claims. See Order [Docket No. 42]. The order also dismissed Plaintiff's promissory estoppel and negligence claims, but granted Plaintiff leave to amend. The court denied the motion to dismiss as to the Section 2923.6 and Section 2923.5 claims.
In the SAC, Plaintiff realleges the two claims that were not dismissed in the court's order: (1) violation of California Civil Code § 2923.6 and (2) violation of California Civil Code § 2923.5. In addition, Plaintiff realleges her (3) promissory estoppel and (4) negligence claims. Plaintiff has also added a claim for violation of California Civil Code § 2924g, even though she styles her third cause of action as a single "Promissory Estoppel & Civil Code 2924g" claim.
Defendants PNC Bank and Deutsche Bank now move to dismiss Plaintiff's promissory estoppel and negligence claims.
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). A court may dismiss a claim "only where there is no cognizable legal theory" or there is an absence of "sufficient factual matter to state a facially plausible claim to relief." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).
Federal Rule of Civil Procedure 15(a) establishes that leave to amend "shall be freely given when justice so requires." However, "[w]hen a proposed amendment would be futile, there is no need to prolong the litigation by permitting further amendment." Gardner v. Martino, 563 F.3d 981, 990 (9th Cir. 2009).
Plaintiff's promissory estoppel claim is virtually unchanged between the FAC and the SAC. Just like the FAC, the SAC alleges that on two separate occasions, in August and October 2013, Defendants' loan agents clearly and unambiguously promised Plaintiff that Defendants would not foreclose on Plaintiff's home, and Plaintiff relied on these promises and refrained from pursuing her other non-foreclosure options (of tendering payment of her arrears or filing for Chapter 13 bankruptcy protection) that would have prevented the foreclosure process and brought her loan current.
"Promissory estoppel applies whenever a promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance would result in an injustice if the promise were not enforced." Aceves, supra n. 4, 192 Cal. App. 4th at 227. "The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3)[the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance." Id. at 225. A promise must "be clear and unambiguous," i.e., "definite enough that a court can determine the scope of the duty, and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages." Id. at 226.
In the September 15 Order, the court noted that "[a] mortgagor's decision to forbear a foreclosure alternative, such as filing for Chapter 13 bankruptcy, can constitute the detriment or injury required for a promissory estoppel claim. See Aceves, 192 Cal. App. 4th at 233 (appellate court reversed the trial court's dismissal of plaintiff's promissory estoppel claim where plaintiff defaulted on home loan and subsequently filed for Chapter 7 bankruptcy, and decided not to convert Chapter 7 proceeding into Chapter 13 proceeding because lender promised to work with her on a loan reinstatement and modification if she would forego further bankruptcy proceedings, but lender did not act as promised and instead completed foreclosure on the plaintiff's home)." Order at 19. The court also noted a specific deficiency in Plaintiff's theory for promissory estoppel:
Order at 19-20. The court then dismissed Plaintiff's promissory estoppel claim, but permitted Plaintiff to "amend the claim to the extent she can allege specific additional facts supporting the detrimental reliance element of the claim." Order at 20.
The SAC does not remedy the defect with Plaintiff's promissory estoppel claim. Plaintiff's new allegations amount to either rephrasings of what was previously alleged or argument about the meaning of the previously alleged facts. See, e.g., SAC at ¶ 75 (adding recitation of elements of promissory estoppel); ¶ 77 (changing the phrase "[Plaintiff]
This is Plaintiff's third attempt to allege a promissory estoppel claim, but it remains insufficient. For that reason, the court finds that permitting Plaintiff to amend this claim would be futile. Plaintiff's promissory estoppel claim is
Plaintiff also alleges that Defendants violated California Civil Code § 2924g, which provides that "[t]here may be a postponement or postponements of the sale proceedings . . . at any time prior to the completion of the sale. . . . (C) [b]y mutual agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and any mortgagee." Cal. Civ. Code § 2924g(c)(1). According to Plaintiff, Defendants violated Section 2924g when they failed to postpone the foreclosure sale despite Defendants' promises to do so in August and October 2013. SAC at ¶¶ 82-83.
The first problem with Plaintiff's claim is that Plaintiff's allegations do not state a violation of Section 2924g. The plain text of the statute only requires Defendants to give notice of that postponement on the date that the foreclosure sale was originally planned for. Cal. Civ. Code § 2924g(d) (if the sale is postponed, "[t]he notice of each postponement and the reason therefor shall be given by public declaration by the trustee
Another problem with Plaintiff's claim is that it is not clear that a plaintiff can bring an action to enforce Section 2924g(c) or 2924g(d) prior to an actual foreclosure sale. Plaintiff cites only two cases supposedly discussing claims under Section 2924g, but neither is on point. One case, Badame, actually does not involve a claim for violation of Section 2924g but rather one for violation of Section 2923.5 that only makes passing reference to Section 2924g without exploring the possibility of whether a plaintiff could bring a cause of action to enforce Section 2924g prior to a foreclosure sale. Badame v. JP Morgan Chase Bank, N.A., No. CV 13-5425 PA-FFMX, 2014 WL 585451, at *9 (C.D. Cal. Feb. 13, 2014). The other case also did not involve a plaintiff bringing a cause of action under Section 2924g; instead, it was an action to set aside a foreclosure sale that had already occurred. Melendrez v. D & I Inv., Inc., 127 Cal.App.4th 1238, 1248 (2005). The court conducted its own research and could find no cases in which Section 2924g provided a cause of action against a lender or beneficiary of a mortgage for failing to give notice of the agreed-upon postponement of a foreclosure sale prior to the date of the foreclosure sale.
Accordingly, because no amendment can cure the fundamental defects in Plaintiff's Section 2924g claim, the claim is
In the September 15 Order, the court dismissed Plaintiff's negligence claim. First, the court noted the governing legal principles:
Order at 21.
Then the court noted that "Plaintiff acknowledges that generally a financial institution owes no duty of care to a borrower," but "alleged that special circumstances exist to find a duty of care, i.e., that Defendants owed a duty of care because they `actively participated in [Plaintiff's] loan modification process for over two years and nine months, a process that was significantly delayed by Defendants' negligent, unfair, and unlawful conduct' and `assumed a duty of care when they took affirmative action to restrict the non-foreclosure options available to [Plaintiff] by repeatedly informing her that her best option was a loan modification through Defendants,' see FAC at ¶¶ 115-117." Order at 21.
The court then analyzed Plaintiff's contention that "Defendants' involvement in Plaintiff's loan modification process constitutes the special circumstances necessary to create a duty of care on the part of the financial institution." Order at 21. First the court noted that "the question of whether a lender owes a duty of care to a borrower in the loan modification process is relatively unsettled." Order at 22-27 (summarizing cases, including Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49 (2013), Jolley v. Chase Home Fin., LLC, 213 Cal.App.4th 872, 900 (2013), Ottolini v. Bank of Am., No. C-11-0477 EMC, 2011 WL 3652501 at *7 (N.D. Cal. Aug. 19, 2011), and others, and discussing the conflict in case law). Then the court described the factual allegations and holding in Lueras, which the court noted was "the most recently published case law from the California Court of Appeal" on the subject:
Order at 22-25. The court concluded that "although there appears to be some disagreement about whether a lender owes a borrower a duty of care during the loan modification process, the court will follow the California Court of Appeal's published opinion in Lueras, as it comports with this court's analysis of the Nymark factors in the present circumstances." Order at 26.
The court then analyzed the six Nymark factors as follows:
Order at 26-27.
Finally, the court found that the balance of Nymark factors did not support the conclusion that there were special circumstances did not exist to create a duty of care:
Order at 27 (emphasis in original).
Just like the FAC, the SAC alleges that Plaintiff sought a loan modification because she had defaulted on her mortgage, and fails to allege any indication that Plaintiff's loan modification application actually had been or would have been approved. The SAC adds no new factual allegations with respect to any special circumstances that could create a duty of care. Instead, the new text in the SAC amounts to legal argument. The SAC takes essentially the same factual allegations Plaintiff made in her FAC and argues that the balance of Nymark factors should lead to the conclusion that special circumstances exist to create a duty of care. See, e.g., SAC at ¶¶ 89-90 (first set
Because Plaintiff has already had an opportunity to amend her negligence claim but her allegations remain insufficient, further amendment would be futile. The negligence claim is
For the foregoing reasons, the motion is
IT IS SO ORDERED.
Plaintiff has had numerous previous opportunities to pin down her claims. The court's September 15, 2014 order granting in part Defendants' motion to dismiss the FAC did not give Plaintiff carte blanche to add new claims; instead, the court granted her leave to amend to cure specific deficiencies with specific claims. See Order at 20 ("Plaintiff's promissory estoppel claim is therefore dismissed. Plaintiff may amend the claim to the extent she can allege specific additional facts supporting the detrimental reliance element of the claim."); 27 ("Plaintiff's second theory of negligence is dismissed with leave to amend. Plaintiff may amend this theory only insofar as she can plead additional allegations that establish that Defendants owed her a duty of care."). Nonetheless, the court will consider the sufficiency of the allegations below.
