Kolbet v. Selene Finance LP et al, No. 2:2019cv00439 - Document 13 (W.D. Wash. 2019)
Court Description: ORDER granting Defendant Selene Finance LP's 5 Motion to Dismiss; granting Plaintiff Michael Kolbet's 7 Motion for Extension of Time; granting Plaintiff leave to file an amended complaint within 15 days of the date of this order. Signed by Judge James L. Robart. (SWT) (cc: Plaintiff via USPS)
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Kolbet v. Selene Finance LP et al Doc. 13 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 MICHAEL KOLBET, CASE NO. C19-0439JLR Plaintiff, 11 v. 12 13 SELENE FINANCE LP, et al., Defendants. 14 15 16 ORDER GRANTING MOTION FOR EXTENSION OF TIME AND GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND I. INTRODUCTION Before the court are: (1) Defendant Selene Finance LP’s (“Selene”) motion to 17 dismiss pro se Plaintiff Michael Kolbet’s complaint (MTD (Dkt. # 5); see also Compl. 18 (Dkt. # 1)); and (2) Mr. Kolbet’s motion for an extension of time to respond to Selene’s 19 motion to dismiss (MFE (Dkt. # 7)). Mr. Kolbet opposes Selene’s motion to dismiss 20 (Resp. (Dkt. # 8)), and Selene filed a reply (Reply (Dkt. # 10)). In Selene’s reply, Selene 21 opposes Mr. Kolbet’s motion for an extension of time. (See Reply at 1-2.) The court has 22 considered the motions, the parties’ submissions concerning the motions, the relevant ORDER - 1 Dockets.Justia.com 1 portions of the record, and the applicable law. Being fully advised, 1 the court GRANTS 2 Mr. Kolbet’s motion for an extension of time, GRANTS Selene’s motion to dismiss, and 3 GRANTS Mr. Kolbet leave to file an amended complaint within 15 days of the date of 4 this order. 5 6 II. BACKGROUND This dispute centers on Mr. Kolbet’s unsuccessful attempts to modify his loan for 7 the real property located at 15325 Cascadian Way, Lynnwood, WA 98087 (“the 8 Property”) and the related trustee’s sale of the Property. (See generally Compl.) 9 On or about March 20, 2003, Mr. Kolbet and Teresa Kolbet (“the Kolbets”) 10 executed a promissory note to Washington Mutual Bank, obligating the Kolbets to repay 11 $218,500.00, plus interest, in $1,292.51 monthly installments. (Id. ¶ 12, Ex. A (“Note”) 12 at 18. 2) Selene is the servicer of this promissory note, also known as a mortgage. (Id.) 13 That same day, the Kolbets granted a deed of trust encumbering the Property, and 14 recorded the deed with the Snohomish County Auditor on March 31, 2003. (See 15 McCormick Decl. (Dkt. # 10) 3 ¶ 1, Ex. 1 (“DOT”).) The deed of trust is currently 16 assigned to Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, not 17 1 18 19 20 Neither party requests oral argument on the motions (see MTD; MFE; Resp.; Reply), and the court concludes that oral argument is unnecessary to its disposition of the motions, see Local Rules W.D. Wash. LCR 7(b)(4). 2 Mr. Kolbet attached exhibits to his complaint. In citing to these exhibits, the court cites the page numbers provided by the CM/ECF electronic filing system. 3 21 22 Selene attached the declaration of its counsel, Joseph T. McCormick III, and the related exhibits to its motion to dismiss. (See Dkt. # 10 at 12.) In citing Mr. McCormick’s declaration, the court references “McCormick Decl.” Further, in citing to the attached exhibits, the court cites the page numbers provided by the CM/ECF electronic filing system. ORDER - 2 1 Individually but as Trustee for Pretium Mortgage Acquisition Trust. (McCormick Decl. 2 ¶ 2, Ex. 2 (“Assignment”).) On or about March 16, 2007, the Kolbets granted a 3 subordinate or junior deed of trust to Washington Mutual Bank, also encumbering the 4 Property, and recorded the junior deed on April 2, 2007. (McCormick Decl. ¶ 3, Ex. 3 5 (“JDOT”).) The junior deed is currently assigned to JPMorgan Chase Bank, NA 6 (“Chase”). (McCormick Decl. ¶ 4, Ex. 4 (“Junior Assignment”).) 7 Mr. Kolbet asserts that he has twice applied for loan modification since 2016, but 8 Selene has denied his applications. (Compl. ¶¶ 13, 15.) Selene first denied Mr. Kolbet’s 9 loan modification application on September 24, 2018, citing “excessive obligations in 10 relation to your income.” (Id. ¶ 15, Ex. B (“1st Denial”) at 23.) Mr. Kolbet called Selene 11 on September 27, 2018. (Id. ¶ 19.) According to Mr. Kolbet, Selene advised him on that 12 call that Mr. Kolbet “had only one option; that being liquidation of his home and to 13 vacate the property by October 25, 2018.” (Id.) Selene further advised that Mr. Kolbet 14 could sign a deed in lieu of foreclosure in exchange for a waiver of any future deficiency 15 mortgage balance. (Id.) Mr. Kolbet claims that Selene’s advice was “misleading, 16 deceptive and illogical” because Mr. Kolbet only owes approximately $300,000.00 on his 17 first and second mortgages, but the Property is valued at around $600,000.00. (Id. ¶ 20.) 18 In other words, because Mr. Kolbet has significant equity in the Property, Mr. Kolbet 19 would be better off selling than Property than signing a deed in lieu of foreclosure. (Id.) 20 On October 9, 2018, Mr. Kolbet appealed Selene’s denial. (Id. ¶ 16, Ex. C (“1st 21 Appeal”) at 27.) In his appeal, Mr. Kolbet stated that he did “not have any credit 22 obligations outside of [his] first mortgage and second mortgages,” that Chase recently ORDER - 3 1 modified his second mortgage, and that his mother-in-law was willing to gift the Kolbets 2 “$10,000.00 to $15,000.00, cash in order to be applied toward our outstanding balance of 3 $42,460.32.” (Id.) Selene denied Mr. Kolbet’s appeal, though Mr. Kolbet does not 4 specify on what date. (Id. ¶ 25.) 5 Mr. Kolbet claims that he reapplied for mortgage assistance with Selene, though 6 he does not specify on what date. (Id. ¶ 26.) Mr. Kolbet’s second application reflected 7 that he was receiving an additional $1,200.00 in monthly income from a tenant. (Id.) On 8 or about January 16, 2019, Selene advised Mr. Kolbet that no more documents were 9 needed by Selene’s underwriting team and that Mr. Kolbet had provided what Selene 10 “considered a full package.” (Id. ¶ 28.) According to Mr. Kolbet, at the same time 11 Selene represented that it was considering his second application, Selene started the home 12 foreclosure process with a sale date set for May 10, 2019. (Id. ¶ 29, Ex. E (“Notice”) at 13 51-56.) Mr. Kolbet alleges that this process is known as “dual tracking” whereby “banks 14 would simultaneously pursue a foreclosure while telling the borrower that his loan 15 modification application was still under consideration.” (See id. ¶¶ 11, 29.) Selene 16 eventually denied Mr. Kolbet’s second modification application, though Mr. Kolbet does 17 not specify on what date. (Id. ¶ 27.) 18 In addition, Mr. Kolbet claims that Selene mishandled a number of his loan 19 obligations, including: (1) stating “that escrow was short $1,055.58 when transfer from 20 Selene took place in 2014,” but “fail[ing] to provide accounting records to prove up the 21 shortage”; (2) stating that “escrow was short $2,839.23” when Mr. Kolbet was current on 22 all payments; (3) increasing Mr. Kolbet’s monthly payments from $1,296.27 to $1,444.50 ORDER - 4 1 “with no explanation of additional escrow charges”; and (4) claiming that “the loan 2 balance was $177,124.38 at the time of transfer,” but “refus[ing] to provide proper 3 accounting records to prove up the validity of the debt.” (Id. ¶¶ 30-33.) 4 Based on the foregoing, Mr. Kolbet brought suit against Selene on March 26, 5 2019, asserting fraud, misrepresentation, violation of the Washington Consumer 6 Protection Act (“CPA”), and negligence. 4 (Id. ¶¶ 35-61.) On April 17, 2019, Selene 7 filed the present motion to dismiss Mr. Kolbet’s complaint pursuant to Federal Rule of 8 Civil Procedure 12(b)(6). (See MTD.) Selene’s motion noted on May 10, 2019. (See id. 9 at 1.) Under the local rules, Mr. Kolbet’s response was due May 6, 2019, see Local Rules 10 W.D. Wash. LCR 7(d)(3), but Mr. Kolbet failed to respond on that date (see Dkt.). 11 Instead, on May 10, 2019, Mr. Kolbet moved for an extension of time to file his response. 12 (See MFE at 1-2.) Mr. Kolbet then filed his response on May 13, 2019. (See Resp.) On 13 May 16, 2019, Selene opposed Mr. Kolbet’s “untimely” response and filed its reply to 14 Mr. Kolbet’s response. (See Reply.) 15 III. 16 17 18 A. ANALYSIS Motion to Dismiss Standard Rule 12(b)(6) provides for dismissal for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When considering a motion to dismiss under 19 20 21 22 4 Mr. Kolbet also alleges that Selene violated the National Mortgage Settlement (“NMS”). (See, e.g., Compl. ¶ 20.) The NMS is a settlement involving numerous banks that, inter alia, “creates and implements uniform loan modification procedures.” (Id. ¶¶ 5-11.) Mr. Kolbet claims that Selene is “subject to the terms of the NMS as a result of purchasing servicing rights from” Chase. (Id. ¶ 7.) The parties agree, however, that the NMS does not provide a private right of action. (See MTD at 5; Resp. at 6-7.) ORDER - 5 1 Rule 12(b)(6), the court construes the complaint in the light most favorable to the 2 nonmoving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 3 (9th Cir. 2005). The court must accept all well-pleaded facts as true and draw all 4 reasonable inferences in favor of the plaintiff. Wyler Summit P’ship v. Turner Broad. 5 Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). The court, however, is not required “to 6 accept as true allegations that are merely conclusory, unwarranted deductions of fact, or 7 unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th 8 Cir. 2001). 9 “To survive a motion to dismiss, a complaint must contain sufficient factual 10 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft 11 v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 12 570 (2007)); see also Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 13 2010). “A claim has facial plausibility when the plaintiff pleads factual content that 14 allows the court to draw the reasonable inference that the defendant is liable for the 15 misconduct alleged.” Iqbal, 556 U.S. at 677-78. “A pleading that offers ‘labels and 16 conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ 17 . . . Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further 18 factual enhancement.’” Id. at 678 (quoting Twombly, 550 U.S. at 555, 557). Dismissal 19 under Rule 12(b)(6) can be based on the lack of a cognizable legal theory or the absence 20 of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police 21 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). 22 // ORDER - 6 1 Additionally, claims of fraud are subject to the heightened pleading requirements 2 of Federal Rule of Civil Procedure 9(b). See Fed. R. Civ. P. 9(b). Under Rule 9(b), “a 3 party must state with particularity the circumstances constituting fraud or mistake.” Fed. 4 R. Civ. P. 9(b). “Fraud can be averred by specifically alleging fraud, or by alleging facts 5 that necessarily constitute fraud (even if the word ‘fraud’ is not used).” Vess v. 6 Ciba-Geigy Corp. USA, 317 F.3d 1097, 1105 (9th Cir. 2003). Rule 9(b) requires that an 7 allegation of fraud be “specific enough to give defendants notice of the particular 8 misconduct . . . so that they can defend against the charge and not just deny that they 9 have done anything wrong.” Id. at 1106 (quoting Neubronner v. Milken, 6 F.3d 666, 672 10 (9th Cir. 1993)). In other words, an allegation of fraud “must be accompanied by ‘the 11 who, what, when, where, and how’ of the misconduct charged.’” Id. (citing Cooper v. 12 Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). The plaintiff must identify “what is false or 13 misleading about the statement, and why it is false.” Id. (quoting Decker v. GlenFed, 14 Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)). 15 B. Documents Attached to the Complaint and Judicial Notice of Publicly Filed Documents 16 When determining if a complaint states a claim for relief, the court may consider 17 facts contained in documents attached to the complaint. Nat’l Ass’n for the Advancement 18 of Psychoanalysis v. Cal. Bd. of Psychology, 228 F.3d 1043, 1049 (9th Cir. 2000). 19 Accordingly, the court considers the documents Mr. Kolbet attached to his complaint, 20 including: (1) the promissory note or mortgage (see Note); (2) Selene’s first denial of 21 Mr. Kolbet’s loan modification application (see 1st Denial); (3) Mr. Kolbet’s appeal of 22 ORDER - 7 1 Selene’s first denial (see 1st Appeal); (4) the $1,200.00 per month rental agreement that 2 Mr. Kolbet submitted with his second application for loan modification (see Compl. ¶ 26, 3 Ex. D (“Rent”)); and (5) Selene’s notice of trustee’s sale (see Notice). 4 In addition, “[a]lthough, as a general rule, a district court may not consider 5 materials not originally included in the pleadings in deciding a Rule 12 motion,” the court 6 “may take judicial notice of matters of public record and may consider them without 7 converting a Rule 12 motion into one for summary judgment.” United States v. 14.02 8 Acres of Land More or Less in Fresno Cty., 547 F.3d 943, 955 (9th Cir. 2008) (internal 9 quotation marks and citations omitted). Therefore, pursuant to Selene’s request (see 10 MTD at 2-3), the court takes judicial notice of the following publicly filed records: (1) 11 the deed of trust, recorded on March 31, 2003, under Snohomish County Auditor 12 instrument number 200303312416 (see DOT at 14); (2) the assignment of the deed of 13 trust to Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, not Individually 14 but as Trustee for Pretium Mortgage Acquisition Trust, recorded on January 10, 2013, 15 under Snohomish County Auditor instrument number 201805210300 (see Assignment at 16 32); (3) the junior deed of trust, recorded on April 2, 2007, under Snohomish County 17 Auditor instrument number 200704020168 (see JDOT at 34); (4) the assignment of the 18 junior deed of trust to Chase, recorded on February 19, 2014, under Snohomish County 19 Auditor instrument number 201402190031 (see Junior Assignment at 41); and (5) 20 Selene’s notice of trustee’s sale, recorded on January 9, 2019, under Snohomish County 21 // 22 // ORDER - 8 1 Auditor instrument number 201901090213 (see McCormick Decl. ¶ 5, Ex. 5 (“Recorded 2 Notice” 5)). 3 C. 4 Motion for an Extension of Time As explained, on May 10, 2019, Mr. Kolbet moved for an extension of time to file 5 his motion to dismiss response. (See MFE at 1-2.) Mr. Kolbet ultimately filed his 6 response on May 13, 2019, one week after his response was due. (See Resp.) 7 Under Federal Rule of Civil Procedure 6(b)(1)(B), when a party moves for an 8 extension of time after the relevant deadline has expired, the moving party must show 9 that he or she “failed to act because of excusable neglect.” See Fed. R. Civ. P. 10 6(b)(1)(B). To show excusable neglect, a party must show “good faith” and a 11 “reasonable basis” for not complying with a deadline. Silber v. Mabon, 18 F.3d 1449, 12 1455 (9th Cir. 1994) (citing In re Four Seasons Sec. Laws Litig., 493 F.2d 1288, 1290 13 (10th Cir. 1974)). 14 Mr. Kolbet represents that he “was not aware of the deadline date by which the 15 response needed to be submitted,” in part because he has “been under heavy pain 16 medication for ongoing chronic health issues, and somehow failed to check the Local 17 Court Rules to stay ahead of approaching deadlines.” (MFE at 1.) Further, Mr. Kolbet 18 requested the extension because it took him “longer than anticipated to prepare an 19 adequate response.” (Id.) In response, Selene explains that the parties conducted their 20 5 21 22 Exhibit 5 to the McCormick declaration is similar to the document that Mr. Kolbet filed as Exhibit E to his complaint. (Compare Notice, with Recorded Notice.) Exhibit 5, however, contains the recorded instrument number provided by the Snohomish County Auditor, whereas Exhibit E lacks this number. (Id.) ORDER - 9 1 Rule 26(f) conference on May 1, 2019, during which Mr. Kolbet did not discuss or 2 request an extension of time for his response, which violates Local Rule 7(j). (Reply at 3 1); see Local Rules W.D. Wash. LCR 7(j) (explaining that, when a party requests relief 4 from a deadline after the deadline has passed, “the party should contact the adverse party, 5 meet and confer regarding an extension, and file a stipulation and proposed order with the 6 court” or “use the procedure for telephonic motions in LCR 7(i).”). 7 Considering Mr. Kolbet’s pro se status, the court concludes that he acted in good 8 faith and with a reasonable basis for not complying with the motion to dismiss response 9 deadline. Silber, 18 F.3d at 1455. Mr. Kolbet was under “heavy pain medication” and 10 did not appreciate the deadlines imposed by the local rules. (MFE at 1.) Further, Selene 11 does not allege any prejudice from Mr. Kolbet’s one-week late filing, and the court does 12 not find any. Accordingly, the court GRANTS Mr. Kolbet’s motion for an extension of 13 time and considers his motion to dismiss response to be timely. Likewise, the court 14 considers Selene’s May 16, 2019, reply to be timely. 15 In addition, the court advises Mr. Kolbet that his pro se status does not relieve him 16 from following the same rules that govern other litigants. King v. Atiyeh, 814 F.2d 565, 17 567 (9th Cir. 1987) (“Pro se litigants must follow the same rules of procedure that govern 18 other litigants.”), overruled on other grounds by Lacey v. Maricopa Cty., 693 F.3d 896, 19 925 (9th Cir. 2012). Mr. Kolbet can locate materials that assist pro se litigants on the 20 Western District of Washington’s website. See Representing Yourself (“Pro Se”), W. 21 DIST. OF WASH., https://www.wawd.uscourts.gov/representing-yourself-pro-se. 22 // ORDER - 10 1 2 D. Fraud and Misrepresentation Selene moves to dismiss Mr. Kolbet’s fraud and misrepresentation claims. (See 3 MTD at 7.) Under Washington law, claims of fraud or intentional misrepresentation 4 involve nine elements: 5 6 7 (1) representation of an existing fact; (2) materiality; (3) falsity; (4) the speaker’s knowledge of its falsity; (5) intent of the speaker that it should be acted upon by the plaintiff; (6) plaintiff’s ignorance of its falsity; (7) plaintiff’s reliance on the truth of the representation; (8) plaintiff’s right to rely upon it; and (9) damages suffered by the plaintiff. 8 Adams v. King Cty., 193 P.3d 891, 902 (Wash. 2008) (quoting Stiley v. Block, 925 P.2d 9 194, 204 (Wash. 1996)); W. Coast, Inc. v. Snohomish Cty., 48 P.3d 997, 1000 (Wash. Ct. 10 App. 2002) (identifying “the nine elements of intentional misrepresentation, or fraud”). 6 11 In addition, as explained above, a fraud claim must be pleaded “with particularity.” See 12 Fed. R. Civ. P. 9(b); Vess, 317 F.3d at 1106. 13 Mr. Kolbet alleges three misrepresentations by Selene that underlie his fraud and 14 intentional misrepresentation claims: (1) advising Mr. Kolbet that his only option was to 15 sign a deed in lieu of foreclosure in exchange for a waiver of any future deficiency 16 17 18 19 20 21 22 6 Mr. Kolbet’s complaint recites a claim for “misrepresentation” without specifying whether it is intentional misrepresentation or negligent misrepresentation. (See Compl. ¶¶ 44-50 (“COUNT 2 (Misrepresentation)”).) The elements of intentional misrepresentation are different from the elements of negligent misrepresentation. See W. Coast, Inc., 48 P.3d at 1000-01. Here, the allegations in Mr. Kolbet’s fraud claim and misrepresentation claim are almost identical (see Compl. ¶¶ 35-50), and some of Mr. Kolbet’s allegations in his misrepresentation claim appear consistent with intentional misrepresentation, but not negligent misrepresentation (see, e.g., id. ¶ 46 (“These affirmative misrepresentations were made knowingly by Defendant”)). Selene also discusses these claims together under the same nine-element fraud and intentional misrepresentation standard (see MTD at 7), and Mr. Kolbet does not dispute this characterization (see Resp. at 7-8). The court therefore construes Mr. Kolbet’s “misrepresentation” claim as a claim for intentional misrepresentation. ORDER - 11 1 mortgage balance even though Mr. Kolbet had approximately $300,000.00 of equity in 2 the Property; (2) engaging in dual tracking by telling Mr. Kolbet that he did not need to 3 provide more documents for his second loan modification application while 4 simultaneously starting the home foreclosure process; and (3) claiming that Mr. Kolbet 5 owed certain sums of money on his loan without providing accounting records. (See 6 Compl. ¶¶ 38, 40(a)-(j), 45, 47(l)-(v).) 7 Selene argues that Mr. Kolbet has failed to state a claim because he did not plead 8 ignorance of the falsity of these representations or detrimental reliance on them. (MTD 9 at 7.) In fact, Selene claims, Mr. Kolbet’s complaint “asserts knowledge of the purported 10 falsity of the statements, which renders amendment of his claims futile.” (Id.) In 11 response, Mr. Kolbet points out that he alleged that he “justifiably relied on all of 12 Defendant’s misrepresentations and omissions,” which caused him to “avoid foreclosure 13 alternatives (e.g., refinancing, deed in lieu of foreclosure, short sale, etc.) given his false 14 belief that Defendant was processing his loan modification.” (Resp. at 7-8 (citing Compl. 15 ¶¶ 42, 49).) Mr. Kolbet additionally claims that, in the belief that Selene was processing 16 his application, he “made numerous mortgage payments towards a loan,” all while Selene 17 intended to initiate foreclosure. (Resp. at 8; Compl. ¶¶ 43, 50.) The court addresses the 18 alleged misrepresentations in turn. 19 Mr. Kolbet fails to state a fraud or intentional misrepresentation claim based on 20 Selene’s purported advice to sign a deed in lieu of foreclosure because he fails to 21 plausibly allege that he relied on this representation. Adams, 193 P.3d at 902; W. Coast, 22 Inc., 48 P.3d at 1000. First, by its express terms, Mr. Kolbet’s claim that he “avoided ORDER - 12 1 foreclosure alternatives . . . given his false belief that Defendant was processing his loan 2 modification” (see Compl. ¶¶ 42, 49), only applies to the dual tracking allegation. In 3 fact, one of the “foreclosure alternatives” Mr. Kolbet claims that he avoided is a “deed in 4 lieu of foreclosure.” (See id.) Even in the light most favorable to Mr. Kolbet, it is 5 unreasonable that, in reliance on Selene’s advice to sign a deed in lieu of foreclosure, Mr. 6 Kolbet avoided signing a deed in lieu of foreclosure. This allegation therefore does not 7 support that Mr. Kolbet relied on Selene’s advice. 8 9 Second, Mr. Kolbet never signed a deed in lieu of foreclosure. (See id. ¶¶ 20-23.) Rather, Mr. Kolbet explains that he understood Selene’s advice was “illogical” and 10 “ill-willed” because of his significant home equity. (Id.) In fact, after Selene advised 11 that signing the deed in lieu of foreclosure was Mr. Kolbet’s “only one option” (Id. ¶ 19), 12 Mr. Kolbet appealed the denial, evidencing that he knew that he had more options. (Id.) 13 Thus, Mr. Kolbet has failed to plead that he relied on Selene’s advice. 14 Mr. Kolbet also fails to state a fraud or intentional misrepresentation claim based 15 on Selene’s purported dual tracking. Mr. Kolbet claims that, on or about January 16, 16 2019, Selene “advised that as of January 10, 2019, no more documents were being 17 requested by Selene’s underwriting team and that Plaintiff had successfully responded to 18 Selene’s requests and they had what’s considered a full package as outlined by making 19 homes affordable . . . and the NMS.” (Compl. ¶¶ 40(e), 47(p).) In reliance on this 20 representation, Mr. Kolbet claims that he “avoided foreclosure alternatives.” (Id. ¶¶ 42, 21 49.) However, despite saying that it had a full package, Selene initiated foreclosure. (Id. 22 ¶¶ 40(f), 47(q); Notice; Recorded Notice.) ORDER - 13 1 There are numerous problems with this allegation, chief among them that Mr. 2 Kolbet has not explained what was false about Selene’s representations. See Adams, 193 3 P.3d at 902; W. Coast, Inc., 48 P.3d at 1000; see also Cafasso, U.S. ex rel. v. Gen. 4 Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (“To satisfy Rule 9(b), a 5 plead must identify the who, what, when, where, and how of the misconduct charged, as 6 well as what is false or misleading about [the purportedly fraudulent] statement, and why 7 it is false.” (internal quotation marks omitted)). According to Mr. Kolbet’s complaint and 8 the attached documents, on January 9, 2019—after Selene denied Mr. Kolbet’s first loan 9 modification application, his first appeal, and his second loan modification application— 10 Selene initiated the foreclosure process. (See Notice at 51-56.) Then, on January 16, 11 2019, Selene informed Mr. Kolbet that, “as of January 10, 2019,” he did not need to 12 provide additional materials because he had already submitted a full package. (Compl. 13 ¶¶ 40(e), 47(p).) Nothing about these representations are false. 14 Further, and more fundamentally, Mr. Kolbet has failed to “state with particularity 15 the circumstances constituting fraud” or misrepresentation arising from the alleged dual 16 tracking. Fed. R. Civ. P. 9(b). As discussed above, Mr. Kolbet neglected to plead a 17 number of important facts, including the date on which Selene denied his first loan 18 modification appeal, the date when he reapplied for loan modification, and the date on 19 which Selene denied his second appeal. See supra § II. Likewise, although the notice of 20 trustee’s sale was signed and recorded on January 9, 2019, it is not clear on what date Mr. 21 Kolbet received the Notice. See id.; (see also Compl. ¶ 29 (listing date of foreclosure 22 sale, but not the date that Mr. Kolbet received notice of the sale); Notice at 55 (signed ORDER - 14 1 “1/9/19”); Recorded Notice at 42 (recorded “01/09/2019”).) The court is thus unable to 2 consider the timeline of events and, consequently, whether dual tracking occurred. 3 Third, Mr. Kolbet fails to state a fraud or intentional misrepresentation claim 4 based on Selene’s representation that Mr. Kolbet owed certain sums of money on his loan 5 without providing accounting records. (See Compl. ¶¶ 38, 40(a)-(j), 45, 47(l)-(v).) Mr. 6 Kolbet does not allege that he relied in any way on these representations or that he 7 believed they were true. (See id.) 8 9 In sum, Mr. Kolbet has failed to plead at least one essential element for each purported instance of fraud or intentional misrepresentation. The court thus GRANTS 10 Selene’s motion to dismiss Mr. Kolbet’s claims for fraud and misrepresentation. 11 E. 12 Washington Consumer Protection Act Selene moves to dismiss Mr. Kolbet’s CPA claim. (See MTD at 8-10.) To prevail 13 on a CPA claim, a plaintiff must prove: “(1) an unfair or deceptive act or practice, (2) 14 occurring in trade or commerce, (3) affecting the public interest, (4) injury to a person’s 15 business or property, and (5) causation.” Panag v. Farmers Ins. Co. of Wash., 204 P.3d 16 885, 889 (Wash. 2009) (citing Hangman Ridge Stables, Inc. v. Safeco Title Ins. Co., 719 17 P.2d 531, 535 (Wash. 1986)). 18 Selene argues that Mr. Kolbet has failed to plausibly allege an unfair or deceptive 19 act, causation, or damages. (MTD at 8-10.) Selene points out that Mr. Kolbet never 20 alleges that the Kolbets continued to make their $1,292.51 monthly loan payment, that 21 Selene induced the Kolbets to stop making these payments, or that any of the parties lack 22 authority to commence the foreclosure. (Id. at 8.) Moreover, Mr. Kolbet does not allege ORDER - 15 1 that he is capable of curing the full amount of default or paying his required monthly 2 installments. (Id.) In addition, although Mr. Kolbet states that Selene did not provide 3 him certain accounting documents to support escrow amounts, Mr. Kolbet never alleges 4 that he asked Selene for those documents or that Selene has a duty to provide those 5 documents absent a request. (Id. at 9.) 6 In response, Mr. Kolbet argues that he alleged two specific unfair or deceptive acts 7 in his complaint, namely, Selene’s advice that he sign a deed in lieu of foreclosure and 8 Selene’s dual tracking. (Resp. at 8-9; see also Compl. ¶¶ 51-57.) Mr. Kolbet further 9 argues that he alleged sufficient causation and harm, namely, he continued to make 10 “mortgage payments towards a loan” that Selene intended to foreclose on, he has 11 “incurred court fees to enforce his legal rights,” and he has suffered slander of his 12 representation through reports to the credit reporting agencies and bureaus. (Resp. at 9; 13 see also Compl. ¶ 57.) 14 There is no precise definition of an “unfair or deceptive act or practice.” See Klem 15 v. Wash. Mut. Bank, 295 P.3d 1179, 1186-87 (Wash. 2013). What is considered an unfair 16 or deceptive act has “evolve[d] through a gradual process of judicial inclusion and 17 exclusion.” Id. at 1186 (quotations marks and citations omitted). Washington courts 18 explain that a CPA claim “may be predicated upon a per se violation of statute, an act or 19 practice that has the capacity to deceive substantial portions of the public, or an unfair or 20 deceptive act or practice not regulated by statute but in violation of public interest.” Id. at 21 1187. “Even accurate information may be deceptive ‘if there is a representation, 22 // ORDER - 16 1 omission or practice that is likely to mislead.’” State v. Kaiser, 254 P.3d 850, 858 (Wash. 2 Ct. Appl. 2011) (quoting Panag, 204 P.3d at 895). 3 Here, assuming that Selene’s advice to sign a deed in lieu of foreclosure is an 4 unfair or deceptive act that could form a CPA claim, 7 Mr. Kolbet’s claim fails because he 5 does not allege causation between this act and his alleged harms of continuing to make 6 mortgage payments, incurring court fees, or having his credit scores impacted. (See 7 generally Compl.); Deegan v. Windermere Real Estate/Ctr.-Isle, Inc., 391 P.3d 582, 587 8 (Wash. Ct. App. 2017) (explaining that a plaintiff asserting a CPA claim must make 9 “some demonstration of a causal link” between the alleged unfair or deceptive act and the 10 plaintiff’s injury). Therefore, Mr. Kolbet has failed to state a CPA claim in connection 11 with Selene’s advice to sign a deed in lieu of foreclosure. 12 The court also concludes that Mr. Kolbet fails to plausibly allege that Selene’s 13 purported dual tracking was an unfair or deceptive act under the CPA. Again, Mr. Kolbet 14 defines “dual tracking” as a practice “where banks would simultaneously pursue a 15 foreclosure while telling the borrower that his loan modification application was still 16 under consideration.” (See Compl. ¶ 11.) But according to Mr. Kolbet’s complaint, 17 Selene did not engage in dual tracking. Rather, Selene denied Mr. Kolbet’s first loan 18 modification application on September 24, 2018, as well as his appeal on an unspecified 19 20 21 22 7 The court clarifies that it is not deciding that Selene’s purported advice to sign the deed in lieu of foreclosure was an unfair or deceptive act under the CPA. The court notes, however, that there is support in the caselaw that a company commits an unfair and deceptive act, cognizable under the CPA, by “falsely offering” to help homeowners avoid foreclosure. See State v. Kaiser, 254 P.3d 850, 853, 859 (Wash. Ct. App. 2011). ORDER - 17 1 date. (See id. ¶¶ 15-16, 25.) Thereafter, Mr. Kolbet reapplied for a loan modification (on 2 an unspecified date, though it likely occurred near the end of December 2018 because 3 Mr. Kolbet claims he included “rent deposits for the months of November and December, 4 2018” with the second application). (Id. ¶ 26.) Mr. Kolbet alleges that he then reapplied 5 for mortgage assistance with Selene (on an unspecified date). (Id. ¶ 26.) Selene denied 6 his second application (on an unspecified date). (Id. ¶ 27.) Mr. Kolbet does not allege 7 that he appealed this denial. (See generally id.) Selene then recorded its notice of 8 trustee’s sale on January 9, 2019, which specified a foreclosure sale date of May 10, 9 2019. (See Recorded Notice.) According to Mr. Kolbet, on or about January 16, 2019, 10 Selene informed him that it was not requesting any more loan modification documents 11 because it had a “full package.” (Id. ¶ 28.) 12 In sum, Selene considered and denied Mr. Kolbet’s first loan modification 13 application, appeal, and second loan modification application. Selene then initiated the 14 foreclosure process. Immediately after initiating foreclosure, Selene told Mr. Kolbet to 15 stop sending application materials. Thus, Selene was never engaged in dual tracking 16 because at no time was Selene “simultaneously pursu[ing] a foreclosure while telling the 17 borrower that his loan modification application was still under consideration.” (See 18 Compl. ¶ 11.) Regardless of the title assigned to Selene’s alleged acts, they do not 19 constitute an unfair or deceptive act as pleaded: repeatedly denying an applicant a loan 20 modification, initiating a foreclosure process, and then telling the applicant to stop 21 sending loan modification materials is not “an act or practice that has the capacity to 22 // ORDER - 18 1 deceive substantial portions of the public, or an unfair or deceptive act or practice not 2 regulated by statute but in violation of public interest.” See Klem, 295 P.3d at 1187. 3 Even construing the complaint in light most favorable to Mr. Kolbet, Mr. Kolbet 4 has failed to allege a claim under the CPA. The court therefore GRANTS Selene’s 5 motion to dismiss Mr. Kolbet’s CPA claim. 6 F. 7 Negligence Finally, Selene moves to dismiss Mr. Kolbet’s negligence claim. (See MTD at 8 10-11.) The elements of negligence are duty, breach, causation, and damages. Keller v. 9 City of Spokane, 44 P.3d 845, 848 (Wash. 2002). 10 Mr. Kolbet asserts that Selene owes him an unspecified duty because of its role as 11 a mortgage loan servicer, its ability to implement foreclosure proceedings, and its 12 responsibility to manage the escrow payments associated with the mortgage. (Compl. 13 ¶ 59 (“. . . Defendant owed Plaintiff a duty.”).) Mr. Kolbet argues that Selene breached 14 its duty by “refusing to competently process [his] requests for mortgage assistance.” (Id. 15 ¶ 60.) In his motion to dismiss response, Mr. Kolbet clarifies that, although mortgage 16 servicers such as Selene do not owe a common law duty to modify a loan, they do owe “a 17 fiduciary duty to borrowers,” which includes a duty not to “deceive borrowers.” (See 18 Resp. at 9.) The court concludes that Mr. Kolbet has failed to plausibly allege that Selene 19 owed him a fiduciary duty as his mortgage loan servicer. 20 Neither party provided a case discussing whether a loan servicer like Selene owes 21 a fiduciary duty to the borrower. (See MTD; Resp. Reply.) However, “[t]he general rule 22 in Washington is that a lender is not a fiduciary of its borrower.” Miller v. U.S. Bank of ORDER - 19 1 Wash., N.A., 865 P.2d 536, 543-44 (Wash. Ct. App. 1994). Courts within the Ninth 2 Circuit have extended this logic to hold that loan servicers also do not owe borrowers a 3 fiduciary duty. See Tedder v. Deutsche Bank Nat. Tr. Co., 863 F. Supp. 2d 1020, 4 1031-32 (D. Haw. 2012) (citing cases, including Miller, 865 P.2d at 543) (holding that 5 neither the lender nor the loan servicer owed the borrower a fiduciary duty). Here, the 6 court concludes that Selene, as the loan servicer, does not owe a general fiduciary duty to 7 Mr. Kolbet, as the borrower. 8 9 That said, a “special relationship” may develop between a loan servicer and a borrower such that a fiduciary duty will exist. Cf. Miller, 865 P.2d at 543 (explaining 10 that a special relationship must develop between the lender and borrower for a fiduciary 11 duty to exist). In addition, “[a] quasi-fiduciary relationship may exist where the [loan 12 servicer] has superior knowledge and information, the borrower lacks such knowledge or 13 business experience, the borrower relies on the [loan servicer’s] advice, and the [loan 14 servicer] knew the borrower was relying on the advice.” Id. 15 Mr. Kolbet cites no facts or authority that could establish a “special relationship” 16 between him and Selene. (See generally Compl.; Resp.) Likewise, Mr. Kolbet does not 17 assert that a “quasi-fiduciary” relationship exists between him and Selene, or the basis for 18 such a relationship. (See generally id.) In total, Mr. Kolbet states in a conclusory fashion 19 that Selene “does have a fiduciary duty to borrowers.” (Resp. at 9.) But absent a special 20 or quasi-fiduciary relationship, neither of which has not been alleged, Mr. Kolbet is 21 incorrect. See Miller, 865 P.2d at 543-44; Tedder, 863 F. Supp. 2d at 1031-32. 22 // ORDER - 20 1 Mr. Kolbet further contends that, even absent a fiduciary duty, Selene has a duty 2 to “perform under a mortgage loan agreement in good faith.” (Resp. at 7; see also 3 Compl. at 16 (requesting that the court declare that Selene breached its “covenant of good 4 faith and fair dealing”).) Mr. Kolbet argues that Selene breached this duty of good faith 5 when it advised him to sign the deed in lieu of foreclosure and told him that it had a full 6 package of loan application material. (Resp. at 7.) In other words, Mr. Kolbet argues 7 that the loan contract imposes a duty on Selene to process Mr. Kolbet’s loan modification 8 application in good faith. (See id.) 9 “There is in every contract an implied duty of good faith and fair dealing.” 10 Badgett v. Sec. State Bank, 807 P.2d 356, 360 (Wash. 1991) (citations omitted). But this 11 duty “does not extend to obligate a party to accept a material change in the terms of its 12 contract.” Id. (citation omitted). Accordingly, the duty of good faith is not 13 “free-floating,” but “exists only in relation to the performance of a specific contract 14 term.” Id. Thus, in Badgett, the Washington Supreme Court held that a bank did not owe 15 borrowers “a good faith duty to affirmatively cooperate in their efforts to restructure the 16 loan agreement.” Id. 17 The principle articulated in Badgett applies here. Neither the complaint nor the 18 response identifies a contract term that gives rise to a duty by Selene to grant Mr. Kolbet 19 a loan modification. Thus, Mr. Kolbet has failed to allege that Selene breached any duty 20 of good faith and fair dealing that may exist under the loan. See Massey v. BAC Home 21 Loans Servicing LP, No. C12-1314JLR, 2012 WL 5295146, at *6 (W.D. Wash. Oct. 26, 22 2012) (dismissing a breach of good faith and fair dealing claim where the borrower failed ORDER - 21 1 to point to specific contractual terms giving rise to the lender’s duty to cooperate in the 2 loan modification process); Schanne v. Nationstar Mortg., LLC, No. C10–5753BHS, 3 2011 WL 5119262, at *4 (W.D. Wash. Oct. 27, 2011) (“Plaintiffs have failed to establish 4 that [defendant] has breached any provision of the contract between the parties in 5 foreclosing on the defaulted loan. Therefore, the Court grants [defendant’s] motion on 6 Plaintiffs’ claim for breach of good faith and fair dealing because Plaintiffs have failed to 7 state a cognizable legal theory.”); Gossen v. JPMorgan Chase Bank, No. C11–05506 8 RJB, 2011 WL 4939828, at *7 (W.D. Wash. Oct.18, 2011) (dismissing claim for breach 9 of duty of good faith and fair dealing because plaintiffs “fail[ed] to identify any contract 10 provision that [the bank] or [the trustee] failed to perform”). 11 In sum, Mr. Kolbet has failed to plausibly allege a duty that Selene owes him. The 12 court therefore GRANTS Selene’s motion to dismiss Mr. Kolbet’s negligence claim. 13 G. 14 Leave to Amend When a claim is dismissed pursuant to a Rule 12(b)(6) motion, “a district court 15 should grant leave to amend even if no request to amend the pleading was made, unless it 16 determines that the pleading could not possibly be cured by the allegation of other facts.” 17 Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). 18 Further, when a court dismisses a pro se plaintiff’s complaint, the court must give the 19 plaintiff leave to amend unless it is “absolutely clear” that amendment could not cure the 20 defects in the complaint. Lucas v. Dep’t of Corr., 66 F.3d 245, 248 (9th Cir. 1995). 21 // 22 // ORDER - 22 1 Here, Mr. Kolbet requests that he be afforded leave to amend if the court dismisses 2 his complaint. (Resp. at 10.) Because it is not “absolutely clear” that amendments would 3 be futile, the court GRANTS Mr. Kolbet leave to amend. See Lucas, 66 F.3d at 248. 4 The court further advises Mr. Kolbet that additional deficiencies may exist in his 5 complaint that the court did not address in this order. For example, Selene mentioned in 6 passing in both its motion to dismiss and reply that, in connection with the CPA claim, 7 Mr. Kolbet failed to plausibly allege that the unfair or deceptive act or practice affected 8 the public interest. (See MTD at 8; Reply at 6.) The court, however, did not address this 9 cursory argument because Selene did not cite any support and there were sufficient 10 independent grounds upon which to grant Selene’s motion. 11 12 IV. CONCLUSION For the foregoing reasons, the court GRANTS Mr. Kolbet’s motion for an 13 extension of time (Dkt. # 7), GRANTS Selene’s motion to dismiss (Dkt. # 5), and 14 GRANTS Mr. Kolbet leave to file an amended complaint within 15 days of the date of 15 this order. 16 Dated this 21st day of June, 2019. 17 18 A 19 JAMES L. ROBART United States District Judge 20 21 22 ORDER - 23
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