Kathleen Angel Einsenberg v. Citibank NA et al

Filing 89

MINUTES (IN CHAMBERS) - MOTION TO DISMISS CASE (Docket # 25 , filed May 29, 2013), APPLICATION TO REMAND (Docket # 14 , filed April 8, 2013) by Judge Christina A. Snyder: In accordance with the foregoing, defendants motion to dismiss is hereby gra nted in part and denied in part. Plaintiffs claims for rescission and plaintiffs UCL claim are hereby dismissed without prejudice. Otherwise, defendants motion is denied. Additionally, plaintiffs motion to remand the case is denied. IT IS SO ORDERED. (clee)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

Present: The Honorable

Date

June 15, 2016

CHRISTINA A. SNYDER

Catherine Jeang
Deputy Clerk

Not Present
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants

Not Present

Not Present

Proceedings:

(IN CHAMBERS) - MOTION TO DISMISS CASE (Docket #25,
filed May 29, 2013)
APPLICATION TO REMAND (Docket #14, filed April 8, 2013)

I.

INTRODUCTION

Plaintiff filed the instant action in Los Angeles County Superior Court, and on
March 13, 2013, defendants removed the case to this Court. Plaintiff’s complaint seeks
to recover damages and prevent the foreclosure of her home.
Before this case was removed, plaintiff requested a temporary restraining order and
preliminary injunction preventing defendants from foreclosing on plaintiff’s home. The
state court held a hearing on the requests on February 25, 2013, at which no appearance
was made on behalf of defendants. The state court issued the requested preliminary
injunction at the hearing, subject to plaintiff posting an undertaking in the amount of
$50,000 by March 11, 2013. Dkt. #1 at 62 – 63.
On April 15, 2013, the Court dismissed plaintiff’s complaint without prejudice
pursuant to Federal Rule of Civil Procedure 8. Dkt. #17. On May 28, 2013, plaintiff
filed a First Amended Complaint (“FAC”), which alleges claims for rescission, breach of
contract, unfair business practices pursuant to California’s Unfair Competition Law
(“UCL”), California Business and Professions Code § 17200, and declaratory relief.
Plaintiff’s FAC seeks damages in excess of $50,000, and an injunction preventing
defendants from continuing with a foreclosure of her home.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

On May 29, 2013, defendants filed a motion to dismiss the FAC. Plaintiff filed an
opposition on June 14, 2013, and defendants replied on June 18, 2013. The Court heard
oral argument on July 1, 2013. At that time, the parties agreed to attempt to mediate this
dispute. Those efforts were unsuccessful. Therefore, after considering the parties’
arguments, the Court finds and concludes as follows.
II.

BACKGROUND

This case arises out of defendants’ attempts to foreclose on real property located at
25431 Prado Las Fresas in Calabasas, California (“the property”). FAC ¶ 1. On July 27,
2006, plaintiff executed a note in favor of non-party American Home Mortgage
(“AHM”), which was secured by a deed of trust to the property. Id. ¶ 9. At some
subsequent point in time, Citibank, N.A. (“Citibank”) acquired AHM’s interest in the
note. Id.
Plaintiff alleges that prior to executing the note, none of AHM’s agents disclosed
certain material and misleading aspects of the note. Id. ¶¶ 11 – 12. Specifically, plaintiff
alleges that her note was a negative amortization loan with a variable interest rate, and
that none of AHM’s agents disclosed the fact that her monthly payments would therefore
increase drastically increase over the course of her loan. Id. ¶¶ 13 – 14. While plaintiff
admits that the terms of the loan documents disclosed information regarding the possible
fluctuations in her loan payments, she claims that due to the confusing, vague, and
contradictory language in the documents, she was unable to comprehend the documents
she executed. Id. ¶¶ 12 – 15. Plaintiff alleges that AHM’s agents intentionally failed to
disclose the changes in interest rates and monthly payments with intent to deceive
plaintiff and induce her to execute the note. Id. ¶ 15.
At some point before August 7, 2012, plaintiff defaulted on the note. On August 7,
2012, plaintiff and defendant Citibank entered into a Forbearance Agreement. FAC ¶ 20,
Ex. 3. The terms of this agreement provided that plaintiff would make three monthly
payments to Citibank in the amount of $14,033.38, and that in exchange, Citibank would
not initiate a trustee’s sale during the months covered by the agreement. Id. ¶ 21.
Additionally, the Forbearance Agreement provides that if plaintiff is unable to cure her
default prior to the expiration of the agreement, plaintiff will be considered for a loan
modification. FAC ¶ 21, Ex. 3. Plaintiff alleges that she timely made the first two
monthly payments under the Forbearance Agreement, but that contrary to the terms of the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

agreement, Citibank conducted a trustee’s sale in September 2012. Id. ¶ 23. After the
sale was conducted, Citibank allegedly refused to accept the third monthly payment due
under the Forbearance Agreement. Id. ¶ 24. While Citibank rescinded the trustee’s sale
on September 28, 2012, plaintiff alleges that they still refused to accept payment
following the rescission. Id. Additionally, plaintiff alleges that Citibank will not attempt
in good faith to offer her a reasonable loan modification. Id. ¶ 26.
III.

LEGAL STANDARD
A.

Motion to Dismiss

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a
complaint. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a
right to relief above the speculative level.” Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn
from them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be
read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51
F.3d 1480, 1484 (9th Cir. 1995). However, “[i]n keeping with these principles a court
considering a motion to dismiss can choose to begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950
(2009); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a
complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and
reasonable inferences from that content, must be plausibly suggestive of a claim entitling
the plaintiff to relief.”) (citing Twombly and Iqbal); Sprewell, 266 F.3d at 988; W.
Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Ultimately, “[d]etermining
whether a complaint states a plausible claim for relief will . . . be a context-specific task
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

that requires the reviewing court to draw on its judicial experience and common sense.”
Iqbal, 129 S.Ct. at 1950.
Furthermore, unless a court converts a Rule 12(b)(6) motion into a motion for
summary judgment, a court cannot consider material outside of the complaint (e.g., facts
presented in briefs, affidavits, or discovery materials). In re American Cont’l
Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on
other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523
U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the
complaint and matters that may be judicially noticed pursuant to Federal Rule of
Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999);
Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
For all of these reasons, it is only under extraordinary circumstances that dismissal
is proper under Rule 12(b)(6). United States v. City of Redwood City, 640 F.2d 963, 966
(9th Cir. 1981).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture
Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th
Cir. 2000).
B.

Rule 9(b)

Federal Rule of Civil Procedure 9(b) requires that the circumstances constituting a
claim for fraud be pled with particularity. Federal Rule of Civil Procedure 9(b) applies
not just where a complaint specifically alleges fraud as an essential element of a claim,
but also where the claim is “grounded in fraud” or “[sounds] in fraud.” Vess v. CibaGeigy Corp. U.S.A., 317 F.3d 1097, 1103–04 (9th Cir. 2003). A claim is said to be
“grounded in fraud” or “‘sounds in fraud’” where a plaintiff alleges that defendant
engaged in fraudulent conduct and relies on solely on that conduct to prove a claim. Id.
“In that event, . . . the pleading of that claim as a whole must satisfy the particularity
requirement of [Fed. R. Civ. P.] 9(b).” Id. However, where a plaintiff alleges claims
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

grounded in fraudulent and non fraudulent conduct, only the allegations of fraud are
subject to heightened pleading requirements. Id. at 1104.
A pleading is sufficient under Fed. R. Civ. P. 9(b) if it “[identifies] the
circumstances constituting fraud so that the defendant can prepare an adequate answer
from the allegations.” Walling v. Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973).
This requires that a false statement must be alleged, and that “circumstances indicating
falseness” must be set forth. In re GlenFed Sec. Litig., 42 F.3d 1541, 1548 (9th Cir.
1994). Thus, Rule 9(b) requires a plaintiff to “identify the ‘who, what, when, where and
how of the misconduct charged,’ as well as ‘what is false or misleading about [the
purportedly fraudulent conduct], and why it is false.” Cafasso, ex rel. United States v.
Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quoting Ebeid ex rel.
United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010)).
IV.

ANALYSIS
A.

Motion to Dismiss

The first claim in the FAC is plaintiff’s claim for rescission. A claim for rescission
seeks to extinguish a contract. Cal. Civ. Code § 1688. A party may rescind a contract
“[i]f the consent of the party rescinding, or of any party jointly contracting with him, was
given by mistake, or obtained through duress, menace, fraud, or undue influence,
exercised by or with the connivance of the party as to whom he rescinds, or of any other
party to the contract jointly interested with such party.” Cal. Civ. Code § 1689. Where,
as here, a party seeks to rescind a contract due to alleged fraud in the inducement, the
party must allege that he or she justifiably relied on misrepresentations made with the
intent to induce him or her to execute the contract. Wilke v. Coinway, Inc., 257 Cal.
App. 2d 126, 136 (1967). Additionally, the party must allege that but for his or her
reliance on the misrepresentations, the contract would not have been executed. Merced
County Mut. Fire Ins. Co. v. State of California, 233 Cal. App. 3d 765, 772 (1991).
Plaintiff’s claim for rescission seeks to extinguish the note and deed of trust on the
grounds that her consent was induced by fraudulent misrepresentations. Since this claim
sounds in fraud, the FAC must comply with the heightened pleading standard set out in
Rule 9(b). Plaintiff’s claim for rescission should be dismissed for failure to meet the
heightened pleading requirement. The FAC alleges that AHM presented plaintiff with an
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

artificially low “teaser” interest rate and monthly payment schedule, but that in actuality,
the payment schedule that would be required involved far higher monthly payments.
FAC ¶ 12. These general allegations are not sufficient. At a minimum, plaintiff must
allege what initial monthly payment rate she was offered in connection with closing, and
what payment schedule was necessary to pay off the loan.1
Plaintiff’s second claim is for breach of the Forbearance Agreement. “A cause of
action for damages for breach of contract is comprised of the following elements: (1) the
contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's
breach, and (4) the resulting damages to plaintiff.” Careau & Co. v. Security Pacific
Business Credit, Inc., 222 Cal. App. 3d 1371, 1388 (1990). Additionally, although legal
relief is the remedy typically available under California law for breach of contract,
specific performance of an obligation can also be ordered as a remedy, except in certain
circumstances enumerated by California law. See Cal. Civ. Code §§ 3274, 3384.
Plaintiff has alleged the elements of a claim for breach of contract. The FAC states
that she performed all of her responsibilities under the Forbearance Agreement, but that
defendant breached the agreement by selling the property at a trustee’s sale and failing to
consider plaintiff for a loan modification. FAC ¶¶ 21 – 26. Defendants assert three
reasons that plaintiff’s claim should nonetheless be dismissed, but all are unavailing.
First, defendants argue that this claim is not pled with the requisite specificity because
plaintiff did not allege the circumstances under which she attempted to make the third
payment due under the agreement. Plaintiff’s breach of contract claim does not,
however, sound in fraud, and therefore this level of specificity is not required.
Second, defendants argue that because plaintiff did not make the third payment due
under the Forbearance Agreement, she cannot state a claim for breach of contract because
she did not substantially perform. This argument is inconsistent with the pleading. The
FAC states that plaintiff attempted to make the third payment, but that her payment was
refused because a trustee’s sale had taken place, in breach of the agreement.

1

Plaintiff’s claim under the UCL appears to arise out of the alleged deceptive
conduct connected to the execution of the note. Consequently, this claim should be
dismissed pursuant to Rule 9(b) as well.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Date

June 15, 2016

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

Accordingly, plaintiff has pled that she substantially performed all of her duties under the
Forbearance Agreement.
Third, defendants argue that this claim should be dismissed because it seeks to
either prevent or temporarily delay a trustee’s sale of the property, but plaintiff has not
alleged tender. Here, however, tender is not required because the September 2012
trustee’s sale was rescinded, and a subsequent trustee’s sale has not yet taken place. “A
number of courts have explicitly held that the tender rule applies only in cases seeking to
set aside a completed sale, rather than an action seeking to prevent a sale in the first
place.” Pfeifer v. Countywide Home Loans, Inc., 211 Cal. App. 4th 1250, 1280 (2012).2
Accordingly, defendants’ arguments for dismissing plaintiff’s claim for breach of
contract are unavailing, and hence the motion to dismiss that claim is denied.
B.

Motion to Remand

Plaintiff’s motion to remand this case asserts that the amount in controversy is less
than $75,000, making diversity jurisdiction improper. Since plaintiff is seeking a
permanent injunction preventing defendants from executing a trustee’s sale on the
property, which was purchased in July 2006 for over two million dollars, the amount in
controversy requirement is plainly met. Chapman v. Deutsche Bank Nat. Trust Co., 651
F.3d 1039, 1045 (9th Cir. 2011) (“In actions seeking declaratory or injunctive relief, it is
well established that the amount in controversy is measured by the value of the object of
the litigation.”).

2

Additionally, since there is a controversy as to the meaning and effect of parties’
rights under the Forbearance Agreement, a claim for declaratory relief is proper. See,
e.g., Panhandle Eastern Pipe Line Co. v. Michigan Consol. Gas Co., 177 F.2d 942, 944
(6th Cir. 1949) (“That, where there is controversy as to the meaning and effect of a
written contract[,] interpretation may be sought from and made by the declaratory
judgment of a court having jurisdiction over the parties, there is no doubt.”).
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

‘O’

Case No.

2:13-CV-01814 -CAS(JPRx)

Title

KATHLEEN ANGEL EISENBERG v. CITIBANK N.A.; ET AL.

V.

Date

June 15, 2016

CONCLUSION

In accordance with the foregoing, defendants’ motion to dismiss is hereby granted
in part and denied in part. Plaintiff’s claims for rescission and plaintiff’s UCL claim are
hereby dismissed without prejudice. Otherwise, defendants’ motion is denied.
Additionally, plaintiff’s motion to remand the case is denied.
IT IS SO ORDERED.
00
Initials of Preparer

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CMJ

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