Lane et al v. Suntrust Mortgage, Inc. et al, No. 3:2014cv01367 - Document 9 (S.D. Cal. 2015)
Court Description: ORDER granting Defendant's 5 Motion to Dismiss. Dft's motion is granted, with leave to amend. If Plaintiffs choose to file an amended complaint, they must do so by 3/9/2015. Signed by Judge Cynthia Bashant on 1/28/2015. (jah)
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Lane et al v. Suntrust Mortgage, Inc. et al Doc. 9 1 2 3 4 5 6 7 8 9 10 UNITED STATES DISTRICT COURT 11 SOUTHERN DISTRICT OF CALIFORNIA 12 13 JUDY LANE, ET AL., Plaintiffs, 14 15 16 17 Case No. 14-cv-01367-BAS(WVG) ORDER GRANTING DEFENDANT’S MOTION TO DISMISS v. SUNTRUST MORTGAGE, INC., (ECF No. 5) Defendant. 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs Judy Lane and Pepper Lane (collectively “Plaintiffs”) commenced this action on May 5, 2014 by filing a complaint in San Diego Superior Court alleging Defendant Suntrust Mortgage, Inc. (“Defendant”) violated the California Homeowner’s Bill of Rights and California’s Unfair Competition Law (“UCL”), California Business and Professions Code §§ 17200, et seq., and seeking declaratory and injunctive relief. Defendant removed this action to federal court on June 4, 2014 on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. Defendant now moves to dismiss the Complaint in its entirety pursuant to Federal –1– 14cv1367 Dockets.Justia.com 1 Rule of Procedure 12(b)(6). 2 The Court finds this motion suitable for determination on the papers 3 submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the reasons set 4 forth below, this Court GRANTS Defendant’s motion to dismiss. 5 I. BACKGROUND 6 Plaintiffs fell behind in their mortgage payments on the subject property.1 7 (ECF No. 1-1 (“Compl.” at ¶ 8). They “made multiple attempts to secure a loan 8 modification [from Defendant] in or about the following dates: February 2013; 9 August 16, 2013” and November 7, 2013. (Id. at ¶¶ 31, 35.) “Defendant denied 10 Plaintiffs a loan modification after each attempt.” (Id. at ¶ 37.) On or about 11 January 14, 2014, Defendant recorded a Notice of Default. (Id. at ¶ 33.) On or 12 about January 16, 2014, Plaintiffs received a Notice of Trustee Sale, recorded on 13 April 17, 2014, with a sale date set for May 8, 2014. (Id. at ¶ 34.) Throughout the 14 proceedings, Plaintiffs dealt with Defendant’s employee, Marilyn Young. (Id. at ¶¶ 15 17, 21, 35, Exhs. B, C and H.) Ms. Young was designated as Defendant’s “point of 16 contact.” (Id.) “Independent review shows that Plaintiffs qualified for a loan 17 modification.” (Id. at ¶ 38.) 18 II. STATEMENT OF LAW 19 A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 20 Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. 21 Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court 22 must accept all allegations of material fact pleaded in the complaint as true and 23 must construe them and draw all reasonable inferences from them in favor of the 24 25 26 27 28 1 There appears to be some confusion about the “subject property” at issue. The Complaint initially states that the “subject property” is located at 11733 Treadwell Drive, Poway, CA, 92064-6112 (Compl. at ¶ 3), but then lists the subject property address as 11252 Willowwood Drive, San Diego, CA, 92127 (id. at ¶ 7). Since this latter address is the one listed in the accompanying exhibits, this Court assumes the Willowwood address is correct. –2– 14cv1367 1 nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 2 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed 3 factual allegations; rather, it must plead “enough facts to state a claim to relief that 4 is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A 5 claim has facial plausibility when the plaintiff pleads factual content that allows the 6 court to draw the reasonable inference that the defendant is liable for the 7 misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 8 550 U.S. at 556). “Where a complaint pleads facts that are merely consistent with a 9 defendant’s liability, it stops short of the line between possibility and plausibility of 10 entitlement to relief.” Id. at 678 (quoting Twombly, 550 U.S. at 557) (internal 11 quotations omitted). 12 “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to 13 relief’ requires more than labels and conclusions, and a formulaic recitation of the 14 elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (quoting 15 Papasan v. Allain, 478 U.S. 265, 286 (1986)). A court need not accept “legal 16 conclusions” as true. Iqbal, 556 U.S. at 678. Despite the deference the court must 17 pay to the plaintiff’s allegations, it is not proper for the court to assume that “the 18 [plaintiff] can prove facts that [he or she] has not alleged or that defendants have 19 violated the . . . laws in ways that have not been alleged.” 20 Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Associated Gen. 21 Generally, courts may not consider material outside the complaint when 22 ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 23 Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990); Branch v. Tunnell, 14 F.3d 449, 453 24 (9th Cir. 1994) (overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 25 307 F.3d 1119, 1121 (9th Cir. 2002)). “However, material which is properly 26 submitted as part of the complaint may be considered.” Hal Roach Studios, Inc., 27 896 F.2d at 1542 n.19. 28 identified in the complaint whose authenticity is not questioned by the parties. The court may also consider documents specifically –3– 14cv1367 1 Fecht v. Price Co., 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superseded by statute on 2 other grounds); see also Branch, 14 F.3d at 453–54. The court may consider such 3 documents so long as they are referenced in the complaint, even if they are not 4 physically attached to the pleading. Branch, 14 F.3d at 453–54; see also Parrino v. 5 FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998) (extending rule to documents upon 6 which the plaintiff’s complaint “necessarily relies” but which are not explicitly 7 incorporated in the complaint). Moreover, the court may consider the full text of 8 those documents even when the complaint quotes only selected portions. Fecht, 70 9 F.3d at 1080 n.1. The court also considers materials of which it takes judicial 10 notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). 11 As a general rule, a court freely grants leave to amend a complaint it 12 dismisses. Fed. R. Civ. P. 15(a); Schreiber Distrib. Co. v. Serv-Well Furniture Co., 13 806 F.2d 1393, 1401 (9th Cir. 1986). 14 however, when “[it] determines that the allegation of other facts consistent with the 15 challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. 16 Co., 806 F.2d at 1401 (citing Bonanno v. Thomas, 309 F.2d 320, 322 (9th Cir. 17 1962)). 18 III. 19 20 The court may deny leave to amend, DISCUSSION A. The California Homeowner Bill of Rights 1. Background 21 The California Homeowner Bill of Rights (“HBOR”) became effective in 22 California on January 1, 2013. Carroll v. Nationstar Mortg., LLC, No. 13cv4490, 23 2013 WL 3188725, at *2 (C.D. Cal. June 21, 2013). The purpose of the act was to 24 ensure that borrowers facing foreclosure “are considered for, and have a meaningful 25 opportunity to obtain, available loss mitigation options, if any, offered by or 26 through the borrower’s mortgage servicer, such as loan modifications or other 27 alternatives to foreclosure.” Cal. Civ. Code § 2923.4(a). It was the intent of the 28 Legislature in passing the HBOR “that the mortgage servicer offer the borrower a –4– 14cv1367 1 loan modification or workout plan if such a modification or plan is consistent with 2 its contractual or other authority.” 3 “[n]othing in the act…shall be interpreted to require a particular result of that 4 process.” Cal. Civ. Code § 2923.4(a). While California Civil Code section 2923.5 5 requires a mortgage servicer to contact a borrower “to assess the borrower’s 6 financial situation and explore options for the borrower to avoid foreclosure” prior 7 to recording a notice of default, “[t]here is nothing in section 2923.5 that requires 8 the lender to rewrite or modify the loan.” 9 13cv1613, 2013 WL 2285184, at * (N.D. Cal. May 23, 2013) (quoting Mabry v. 10 Cal. Civ. Code § 2923.6(b). However, Graham v. U.S. Bank, N.A., No. Superior Court, 185 Cal.App.4th 208, 214 (2010)). 11 In relevant part, the HBOR provides that “[i]f a borrower submits a complete 12 application for a…loan modification…, a mortgage servicer…shall not record a 13 notice of default or notice of sale, or conduct a trustee’s sale, while the 14 complete…loan modification application is pending.” Cal. Civ. Code § 2923.6(c). 15 In other words, the mortgagor may not engage in “dual-tracking” or proceeding 16 with foreclosure while simultaneously considering a lender’s eligibility for loan 17 modification. See Stiles v. Wells Fargo Bank, No. 14cv04169, 2014 WL 7146950, 18 at *7 (N.D. Cal. Dec. 15, 2014); Jolley v. Chase Home Finance, LLC, 213 19 Cal.App.4th 872, 904-05 (2013). For an application to be deemed “complete,” the 20 borrower must have “supplied the mortgage servicer with all documents required by 21 the mortgage servicer within the reasonable timeframes specified by the mortgage 22 servicer.” Cal. Civ. Code § 2923.6(h). 23 Furthermore, the HBOR provides: 24 In order to minimize the risk of borrowers submitting multiple applications for…loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated…unless there has been a material change in the borrower’s financial circumstances since the date of the borrower’s previous application and that change is documented by the 25 26 27 28 –5– 14cv1367 1 2 3 4 5 6 7 8 9 10 11 borrower and submitted to the mortgage servicer. Cal. Civ. Code § 2923.6(g). Finally, upon request from a borrower “who requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact” who “shall be responsible for… [c]ommunicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options,” and “[e]nsuring that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the mortgage servicer, if any.” Cal. Civ. Code § 2923.7(a) and (b). The single point of contact may be “an individual or team of personnel.” Cal. Civ. Code § 2923.7(e). 2. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Analysis Plaintiff’s first cause of action alleges a violation of the HBOR, claiming Defendant: (1) did not explore meaningful alternatives to foreclosure under California Civil Code section 2923.4(a); (2) engaged in dual-tracking when it noticed a trustee’s sale while an application for loan modification was pending in violation of California Civil Code section 2923.6(c); (3) failed to establish a single point of contact until after the Notice of Default was recorded in 2014 in violation of California Civil Code section 2923.7(a); and (4) failed to discuss alternatives to foreclosure in violation of California Civil Code section 2923.7(b). For the reasons set forth below, the Court finds that Plaintiff’s first cause of action must be dismissed. First, as pointed out in Defendant’s moving papers, section 2923.4 does not provide a specific right or impose a specific obligation. It merely states the general purpose of the HBOR. Since there can be no cause of action under section 2923.4, any cause of action based on this subsection must be dismissed with prejudice. Second, the allegations in the Complaint belie the claim that Defendant engaged in dual-tracking, as prohibited by section 2923.6(c). According to the –6– 14cv1367 1 Complaint, loan modifications were requested in February, August, and November 2 of 2013. (Compl. at ¶¶ 31, 35.) Defendant denied all of these requests. (Id. at ¶ 3 37.) Then, on or about January 14, 2014, Defendant recorded a Notice of Default 4 (id. at ¶ 33), and on or about January 16, 2014, Plaintiff received a Notice of 5 Trustee Sale, recorded on April 17, 2014, with a sale date set for May 5, 2014 (id. at 6 ¶ 34). Thus, according to the Complaint, Defendant denied the loan modification 7 requests before proceeding with the foreclosure. 8 In their Response to the Motion to Dismiss, Plaintiffs now claim that they 9 “also applied for a loan modification” on May 5, 2014, which incidentally is the 10 same day the present Complaint alleging dual-tracking was filed. (ECF No. 6 at pp. 11 1-2.) This allegation is noticeably absent from the Complaint. In addition, this 12 would be after the Notice of Default and the Notice of Trustee Sale were served and 13 recorded. (See Compl. at ¶¶ 33, 34.) Furthermore, there is no allegation that this 14 loan modification was “completed” as required under section 2923.6(h), and, 15 finally, to minimize just this type of situation, the HBOR does not require a 16 mortgage servicer to evaluate multiple loan modification requests “unless there has 17 been a material change in the borrower’s financial circumstances.” Cal. Civ. Code 18 § 2923.6(g). No such material change has been alleged. Accordingly, Plaintiffs fail 19 to state a claim of dual-tracking. 20 Third, the allegations in the Complaint support that Defendant did establish a 21 single point of contact prior to the Notice of Default being recorded in January 22 2014. Throughout the proceedings, Plaintiffs allege they dealt with Defendant’s 23 employee, Marilyn Young. (Compl. at ¶¶ 17, 21, 35, Exhs. B, C, E, and H.) Ms. 24 Young was officially designated as the “point of contact” no later than October 29, 25 2013. (Id. at Ex. C.) Moreover, nothing indicates Plaintiffs did not know who to 26 contact or had difficulty reaching this point of contact. In fact, all the allegations 27 are that Defendant responded to Plaintiffs’ inquiries and provided contact 28 information at every opportunity. Thus, the Court finds Plaintiffs fail to state a –7– 14cv1367 1 claim under the HBOR premised on Defendant failing to establish a single point of 2 contact in violation of California Civil Code section 2923.7(a). 3 Finally, Plaintiffs allege that Defendant’s point of contact failed to discuss 4 alternatives to foreclosure and that “[i]ndependent review shows that Plaintiffs 5 qualified for a loan modification.” (Compl. at ¶ 38 and pp. 5-6.) However, the 6 Complaint alleges that alternatives to foreclosure were discussed and pursued as 7 early as mid-2013. (See Compl. at ¶¶ 14-29, 35, Exs. C, E.) In addition, while 8 Section 2923.7 makes the “point of contact” responsible for “[e]nsuring that a 9 borrower is considered for all foreclosure prevention alternatives offered by, or 10 through, the mortgage servicer, if any,” there is no allegation to support the 11 contention that Defendant failed to ensure that Plaintiffs were considered for all 12 available foreclosure prevention alternatives. See Cal. Civ. Code § 2923.7(b)(4). 13 Simply alleging that “independent review” showed Plaintiffs were entitled to a loan 14 modification, without alleging by whom and what this independent review was or 15 how Defendant failed to follow it is not sufficient to pass muster under Rule 16 12(b)(6). Plaintiffs’ first cause of action alleging a violation of the HBOR is, 17 therefore, dismissed with leave to amend. 18 B. Unfair Competition Law and Declaratory and Injunctive Relief 19 Since Plaintiffs fail to state a cause of action under the HBOR, the second 20 and third causes of action for unfair business practices in violation of the UCL and 21 for declaratory and injunctive relief must also be dismissed. 22 Countrywide Home Loans, Inc., 98 Cal.App.4th 1158, 1170 (2002) (the UCL 23 “creates an independent action when a business practice violates some other law”); 24 Krantz v. BT Visual Images, LLC, 89 Cal.App.4th 164, 178 (2001) (a claim “for 25 relief under the unfair competition law…stand[s] or fall[s] depending on the fate of 26 the antecedent substantive cause[] of action.”); McDowell v. Watson, 59 27 Cal.App.4th 1155, 1159 (1997) (“Injunctive relief is a remedy and not, in itself, a 28 cause of action.”) (quotations and citation omitted). –8– See Walker v. 14cv1367 1 2 IV. CONCLUSION For the foregoing reasons, Defendant’s Motion to Dismiss (ECF No. 5) is 3 GRANTED, with leave to amend. 4 complaint, they must do so no later than March 9, 2015. 5 If Plaintiffs choose to file an amended IT IS SO ORDERED. 6 7 DATED: January 28, 2015 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 –9– 14cv1367
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