Frederick H. Odle et al v. MGC Mortgage Inc et al

Filing 26

ORDER GRANTING DEFENDANTS MOTION TO DISMISS WITH LEAVE TO AMENDED. ANY AMENDED COMPLAINT SHALL BE FILED WITHIN 14 DAYS OF DATE OF THIS ORDER 8 AND DENYING PLAINTIFFS MOTION TO REMAND 10 by Judge Dean D. Pregerson . (lc). Modified on 5/16/2016 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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FREDERICK H. ODLE, an
individual and as Trustees
of the Frederick and Cynthia
Odle 2013 Trust, Cynthia I.
Odle, an individual and
Trustees of the Frederick
and Cynthia Odle 2013 Trust,

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Plaintiff,

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v.
MGC MORTGAGE INC.,

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Defendants.

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Case No. CV 15-05019 DDP (JCx)

ORDER GRANTING DEFENDANTS’ MOTION
TO DISMISS AND DENYING
PLAINTIFFS’ MOTION TO REMAND

Dkt Nos. 8, 10

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Presently before the court is Defendants MGC Mortgage, Inc.
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(“MGC”) and LLP Mortgage, Ltd., Lp (“LLP”)’s Motion to Dismiss.
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Having considered the submissions of the parties, the court grants
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the motion and adopts the following Order.
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I.

Background

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In 2005, Plaintiffs obtained a $560,000 refinance mortgage
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loan, secured by a Deed of Trust.

(Complaint ¶ 12.)

At some later

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time, Plaintiffs requested a loan modification from loan servicer
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MGC.

(Id. ¶ 16.)

Plaintiffs submitted a complete loan

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modification application by November 2014.

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have since “fallen behind on their monthly mortgage payments.”

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(Id. 22.)

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(Id. ¶ 18.)

Plaintiffs

Plaintiffs allege nine causes of action, including violation

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of California Civil Code §§ 2923.7 and 2924.10, breach of contract

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and the implied covenant of good faith and fair dealing, negligence

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and negligent misrepresentation, promissory estoppel, and unfair

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business practices.1

Plaintiffs allege that Defendants violated

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California Civil Code § 2923.7 by failing to update Plaintiffs

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about the status of their modification application and by providing

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“multiple and divergent points of contact.”

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Complaint alleges that Defendants violated California Civil Code §

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2924.10 by failing to provide written acknowledgment of receipt of

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Plaintiffs’ documents.

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that Defendants breached the terms of the promissory note and deed

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by failing to “modify the loan if the law interpreted that the

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interest or other charges exceeds the permitted limits [on variable

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rate loans].”

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promissory estoppel claims are premised upon allegations that MGC

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represented that it would “assist [Plaintiffs] to avoid

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foreclosure,” and that Defendants then failed to review Plaintiffs’

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modification application.

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dismiss the Complaint.

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II.

(Id. ¶ 37.)

(Id. ¶¶ 44, 47.)

(Compl. ¶ 32.)

The

Plaintiffs further alleges

Plaintiffs’ negligence and

(Id. ¶ 63-64.)

Defendants now move to

Legal Standard

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Plaintiffs also allege a cause of action for cancellation of
instruments, but do not oppose dismissal of that claim.
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A complaint will survive a motion to dismiss when it contains

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.”

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662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007)).

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“accept as true all allegations of material fact and must construe

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those facts in the light most favorable to the plaintiff.”

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v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).

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need not include “detailed factual allegations,” it must offer

Ashcroft v. Iqbal, 556 U.S.

When considering a Rule 12(b)(6) motion, a court must

Resnick

Although a complaint

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“more than an unadorned, the-defendant-unlawfully-harmed-me

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accusation.”

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allegations that are no more than a statement of a legal conclusion

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“are not entitled to the assumption of truth.” Id. at 679.

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other words, a pleading that merely offers “labels and

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conclusions,” a “formulaic recitation of the elements,” or “naked

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assertions” will not be sufficient to state a claim upon which

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relief can be granted.

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quotation marks omitted).

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Iqbal, 556 U.S. at 678.

Conclusory allegations or

In

Id. at 678 (citations and internal

“When there are well-pleaded factual allegations, a court should

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assume their veracity and then determine whether they plausibly

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give rise to an entitlement of relief.” Id. at 679.

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must allege “plausible grounds to infer” that their claims rise

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“above the speculative level.” Twombly, 550 U.S. at 555.

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“Determining whether a complaint states a plausible claim for

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relief” is a “context-specific task that requires the reviewing

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court to draw on its judicial experience and common sense.”

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556 U.S. at 679.

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III. Discussion
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Plaintiffs

Iqbal,

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A.

California Civil Code § 2923.7

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California Civil Code § 2923.7 requires mortgage services to

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establish a “single point of contact” (“SPOC”) for borrowers who

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request a “foreclosure prevention alternative,” such as a loan

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modification.

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can be a “team of personnel.”

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SPOC must communicate with the borrower about the application

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process, deadlines, missing documents, and the current status of

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the foreclosure alternative.

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Cal. Civil Code § 2923.7(a).

That point of contact

Cal. Civil Code § 2923.7(e).

The

Cal. Civil Code § 2923.7(b).

Plaintiffs have adequately alleged that MGC did not update

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them about the status of their loan modification application, and

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that no member of the SPOC team could give them a clear answer

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regarding their inquiries.

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2924.12(c) provides that a “mortgage servicer . . . shall not be

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liable for any violation that it has corrected and remedied prior

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to the recordation of a trustee’s deed upon sale . . . .”

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Civil Code § 2924.12(c).

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any foreclosure activity has taken place, let alone the recording

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of a trustee’s deed upon sale.

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Defendants’ representation to the court that no foreclosure

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activity, including the recording of a notice of default, has

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occurred.

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in this regard.

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is therefore dismissed. See Ellis v. Bank of America, N.A., No. CV

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13-5257 CAS, 2013 WL 5935412 *4 (C.D. Cal. Oct. 28, 2013).

However, California Civil Code §

”

Cal.

Here, the Complaint does not allege that

Nor have Plaintiffs disputed

Indeed, Plaintiffs do not address Defendants’ arguments
Plaintiff’s California Civil Code § 2923.7 claim

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B.

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The same logic applies to Plaintiffs’ claim under California

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Cal. Civil Code § 2924.10

Civil Code § 2924.10.

That statute requires mortgage servicers to
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provide written acknowledgment of a borrow’s modification

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application, as well as other information related to the

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modification application process.

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Plaintiffs allege that they submitted a complete loan application,

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and that an MGC representative confirmed on the phone that the

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application was complete.

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address California Civil Code § 2924.12(c).

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activity, Plaintiffs’

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dismissed.

Cal. Civil Code § 2924.10(a).

Once again, however, Plaintiff fails to
Absent any foreclosure

California Civil Code § 2924.10 claim is

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C.

Breach of Contract and Implied Covenant

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The elements of a breach of contract claim are (1) the

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existence of a contract, (2) performance or excuse for

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nonperformance, (3) defendant’s breach, and (4) damages.

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West Realty, LLC v. Goldman, 51 Cal.4th 811, 821 (2011); See also

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Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1141

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(N.D. Cal. 2013).

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allege all four of the required elements.

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Oasis

Defendants argue that Plaintiffs have failed to
The court agrees.

Although Plaintiffs’ references to the “legal effect” of the

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contract are not clear in this context, it appears Plaintiffs refer

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to the note and deed as the contract in question.

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12; Compl. ¶ 43.)

MGC, however, as servicer, was not a party to

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the note or deed.

Nor is LLP’s alleged breach clear to the court.

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Plaintiffs refer to “some agreement that Plaintiffs would receive a

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good faith loan modification review” and assert that Defendants

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“breached provisions within the note and deed of trust, in

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following applicable law & statute and simple common courtesy by

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misleading Plaintiffs into thinking they would be reviewed in good

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faith.”

(Opp. at 12.)

(Opposition at

At the same time, however, Plaintiffs
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acknowledge that Defendants had no obligation to issue a loan

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modification.

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breach of a contractual provision.2

(Opp. at 3.)

They do not, however, allege any other
Nor have Plaintiffs adequately

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identified any excuse for nonperformance, alleging vaguely and

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conclusorily that “LPP and/or MGC’s conduct prevented [Plaintiffs]

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from performing their obligation to the loan contract, thus they

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are excused from their own breach.”

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given the lack of any alleged breach, it is not apparent to the

(Compl. ¶ 49.)

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court how Plaintiffs were damaged.

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Lastly, and

Fourth and Fifth causes of action are dismissed.

For these reasons, Plaintiffs’

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D.

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The elements of a negligence claim are: (1) the existence of a

Negligence and Negligent Misrepresentation

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duty to exercise due care, (2) breach of that duty, (3) causation,

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and (4) damages.

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(2001).

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plaintiff is a prerequisite to establishing a claim for

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negligence.”

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Cal.App.3d 1089, 1095 (1991).

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institution owes no duty of care to a borrower when the

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institution’s involvement in the loan transaction does not exceed

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the scope of its conventional role as a mere lender of money.”

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Nymark, 231 Cal. App. 3d at 1096.

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Merrill v. Navegar, Inc., 26 Cal.4th 465, 500

The “existence of a duty of care owed by a defendant to a

Nymark v. Heart Fed. Savings & Loan Assn., 231
“[A]s a general rule, a financial

Some courts have applied this logic to circumstances where a
loan servicer offers to modify a borrowers loan, reasoning that the

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Contrary to Plaintiffs’ admission here, the Complaint does
allege that both MGC and LPP had an obligation to modify the loan.
(Compl. ¶ 47.)
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servicer’s “involvement in the loan transaction does not exceed the

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scope of its conventional role as a lender of money.”

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IndyMac Mortg. Servs., 2014 U.S. Dist. LEXIS 8541, at *17 (E.D.

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Cal. Jan. 22, 2014) (internal quotation marks omitted); see also

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Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 1096

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(1991).

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the loan modification context.

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factor test to determine whether a financial institution owes a

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duty of care to a borrower, and look to “[1] the extent to which

Deschaine v.

The Nymark rule, however, is not absolute, particularly in
California courts employ a six

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the transaction was intended to affect the plaintiff, [2] the

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foreseeability of harm to him, [3] the degree of certainty that the

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plaintiff suffered injury, [4] the closeness of the connection

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between the defendant’s conduct and the injury suffered, [5] the

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moral blame attached to the defendant’s conduct, and [6] the policy

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of preventing future harm.”

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(citing Biakanja v. Irving, 49 Ca.2d 647 (1958)).

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Nymark, 231 Cal. App. 3d at 1098

California courts are currently divided as to the question

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whether lenders owe borrowers a duty of care in processing a loan

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modification.

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to reasonably process a loan modification application where it is

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foreseeable that failure to do so will result in significant harm

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to the borrower.

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Cal.App.4th 941, 948 (2014) (holding that lenders have a “duty to

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use reasonable care in the processing of a loan modification.”).

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However, other courts have concluded that lenders do not owe a duty

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of care when considering a residential loan modification.

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v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 68 (2013)

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(holding that the defendant banks “did not have a common law duty

One court has held that lenders have a duty of care

Alvarez v. BAC Home Loans Servicing, L.P., 228

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Lueras

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of care to offer, consider, or approve a loan modification, or to

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offer [the plaintiff] alternatives to foreclosure.”)

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courts in California have also reached different conclusions

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regarding this issue.

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LLC, No. CV 14-09408 MMM, 2015 WL 10059081 at *14 (C.D. Cal. Oct.

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1, 2015) (noting split and concluding no duty exists); see also

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Robinson v. Bank of Am., No. 12-CV-494-RMW, 2012 WL 1932842, at *7

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(N.D. Cal. May 29, 2012); Ansanelli v. JP Morgan Chase Bank, N.A.,

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No C 10-3892 WHA, 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011);

District

See, e.g., Griffin v. Green Tree Servicing,

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Watkinson v. MortgageIT, Inc., No. 10-CV-327-IEG, 2010 WL 2196083

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(S.D. Cal. June 1, 2010); Garcia v. Ocwen Loan Servicing, LLC , No.

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C 10-290 PVT, 2010 WL 1881098, at *1-3. (N.D. Cal. May 10, 2010).

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Here, Plaintiffs identify the Biankaja factors, but do not

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specifically discuss how the facts of this case apply.

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the balance of factors is somewhat close, the court concludes that

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there was no duty of care here.

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affected Plaintiffs insofar as it determined whether they would be

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able to keep their home or what other efforts they undertook to

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retain possession.

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and foreclosure, from the failure to review Plaintiffs’ application

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was foreseeable.

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whether Plaintiffs have been injured, as no foreclosure activity

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has taken place.

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detailed for the court to make a determination as to the fifth,

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moral blame factor, although the court notes that, in light of the

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lack of any foreclosure activity, there does not appear to have

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been any kind of dual tracking here.

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App. 4th at 949 (“The borrower’s lack of bargaining power coupled

Although

A loan modification may have

The potential harm to Plaintiff, namely default

As discussed above, however, it is unclear

Plaintiffs’ allegations are not sufficiently

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But see Alvarez, 228 Cal.

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with conflicts of interest that exist in the modern loan servicing

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industry provide a moral imperative that those with the controlling

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hand be required to exercise reasonable care in their dealings with

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borrowers seeking a loan modification.”) Imposition of a duty under

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these circumstances would do little to prevent future harm, as no

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harm appears to have occurred.

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Under the circumstances here, Defendants did not have a duty

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to Plaintiffs.

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The Sixth and Seventh causes of action are

dismissed.

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E.

Promissory Estoppel

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The elements of promissory estoppel claim are: “(1) a promise

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clear and unambiguous in its terms; (2) reliance by the party to

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whom the promise is made; (3)[the] reliance must be both reasonable

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and foreseeable; and (4) the party asserting the estoppel must be

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injured by his reliance.”

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Health Servs., 182 Cal. App. 4th 1661, 1672 (2010). Defendants

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contend that Plaintiffs have not sufficiently identified what the

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promise at issue was, or who made it.

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substance of the promise, the court disagrees.

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sufficiently alleges that Defendants promised that the loan

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modification application was being reviewed on the merits, that

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Defendants expressly represented that they would engage in

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negotiations for the purpose of modifying the loan, and that such

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negotiations would prevent foreclosure.

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court agrees, however, that the Complaint is unclear as to who made

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these promises to Plaintiffs.

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Plaintiffs only interacted with MGC representatives, the promissory

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estoppel cause of action is alleged against both MGC and LLP, and

Advanced Choices, Inc. v. Dep’t of

(Motion at 16.)

As to the

The Complaint

(Compl. ¶¶ 84, 87.)

The

Although it would appear that

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refers to Defendants in the plural.

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Cause of Action is dismissed.

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IV.

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For this reason, the Eighth

Conclusion
For the reasons stated above, Defendants’ Motion to Dismiss is

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GRANTED.3 Plaintiffs’ Complaint is DISMISSED, with leave to amend.4

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Any amended complaint shall be filed within fourteen days of the

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date of this Order.

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DENIED.5

Plaintiffs’ Motion to Remand (Dkt.10) is

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IT IS SO ORDERED.

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Dated: May 16, 2016
DEAN D. PREGERSON
United States District Judge

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Having dismissed all other causes of action, the court also
dismisses Plaintiffs’ derivative unfair business practices claim.
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The court’s grant of leave to amend should not be read to
suggest that any cause of action will or will not be viable upon
amendment. Plaintiffs are advised to take care that any amended
cause of action address the deficiencies described in this Order.
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Plaintiffs fail to address the argument that they seek to
enjoin any future foreclosure activity. When a plaintiff attempts
to enjoin a defendant from exercising a right to foreclose, which
in effect prevents the defendant from recouping any losses caused
by the plaintiff’s failure to make payments, the amount in
controversy may be measured by the value of the property. See,
e.g., Zepeda v. U.S. Bank, N.A., No. SACV 11-0909 DOC, 2011 WL
4351801 *3-4 (C.D. Cal. Sept. 16, 2011).
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