Gooden v. Suntrust Mortgage, Inc., et al.,

Filing 88

ORDER signed by Judge John A. Mendez on 10/2/2013 ORDERING that Defendant's 66 Motion to Dismiss is GRANTED in its entirety without leave to amend. (Zignago, K.) Modified on 10/3/2013 (Zignago, K.).

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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SHEILA GOODEN, an individual,
MICHELLE HALL, an
individual,,

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Plaintiffs,

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No.

2:11-cv-02595-JAM-DAD

ORDER GRANTING DEFENDANT’S
MOTION TO DISMISS

v.
SUNTRUST MORTGAGE, INC., a
Virginia Corporation,

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Defendant.
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This matter is before the Court on Defendant Suntrust

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Mortgage, Inc.’s (“Defendant”) Motion to Dismiss (Doc. #66). 1

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Plaintiffs Sheila Gooden and Michelle Hall (“Plaintiffs”) oppose

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the motion (Doc. #72), and Defendant filed a reply in support of

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its motion (Doc. #75).

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Judicial Notice (Doc. #60).

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///

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///

Defendant also filed a Request for

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
originally scheduled for August 21, 2013.
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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

This action originated when Plaintiff Gooden filed her

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complaint in this Court on September 30, 2011.

Plaintiff alleges

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that she obtained a mortgage from Defendant to refinance the

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existing debt on her property in June 2005.

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property is located at 632 S. Murdock, Willows, CA 95988.

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According to Plaintiff, the terms of the mortgage agreement

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required Plaintiff Gooden to purchase hazard and flood insurance

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coverage at least equal to the replacement value of the

Plaintiff Gooden’s

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improvements on the property or the principal balance of the

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mortgage, whichever was less.

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maintained coverage on the property between $130,130 and $161,960

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at all times.

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Plaintiff alleges that she

Plaintiff Gooden alleges that in October 2010, after 6 years

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of carrying the same amount of insurance, Defendant determined

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without explanation that her existing insurance coverage was

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inadequate.

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flood and hazard insurance on Plaintiff’s property and sent her a

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mortgage bill that contained line item charges for the premiums

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of the additional coverage.

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In March 2011, Defendant force placed additional

On June 19, 2013, Plaintiff Gooden was granted leave to

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amend the complaint (Doc. #62).

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(“FAC”) expanded the class on whose behalf the second and third

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causes of action are being brought and added Plaintiff Hall to

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the litigation (Doc. #63).

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The First Amended Complaint

The FAC alleges that in August 2008 Plaintiff Hall

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refinanced her mortgage on her property at 3229 Glennon Place,

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Bronx, NY 10465 with Defendant.

Plaintiffs allege Defendant
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force placed hazard insurance on Plaintiff Hall despite the fact

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that she already had adequate insurance.

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Plaintiffs assert six causes of action in the FAC:

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(1) Violation of Truth in Lending Act (“TILA”) (Hazard Insurance),

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15 U.S.C. § 1601; (2) Violation of TILA (Flood Insurance), 15

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U.S.C. § 1601; (3) Breach of Contract; (4) Violation of Cal. Civ.

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Code § 2955.5; (5) Violation of California Unfair Competition Law

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(“UCL”) (Hazard Insurance), Cal. Bus. & Prof. Code § 17200; and

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(6) Violations of California Unfair Competition Law (Flood

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Insurance), Cal. Bus. & Prof. Code § 17200.
The Court has jurisdiction over Plaintiffs’ federal causes

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of action pursuant to 28 U.S.C. § 1331 and the related state law

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claims pursuant to 28 U.S.C. § 1367.

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II.
A.

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OPINION

Legal Standard
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Motion to Dismiss

A party may move to dismiss an action for failure to state a

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claim upon which relief can be granted pursuant to Federal Rule

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of Civil Procedure 12(b)(6).

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plaintiff must plead “enough facts to state a claim to relief

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that is plausible on its face.”

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556 U.S. 662, 570 (2007).

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district court must accept all the allegations in the complaint

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as true and draw all reasonable inferences in favor of the

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plaintiff.

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overruled on other grounds by Davis v. Scherer, 468 U.S. 183

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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).

To survive a motion to dismiss a

Bell Atlantic Corp. v. Twombly,

In considering a motion to dismiss, a

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),

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“First, to be

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entitled to the presumption of truth, allegations in a complaint

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or counterclaim may not simply recite the elements of a cause of

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action, but must sufficiently allege underlying facts to give

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fair notice and enable the opposing party to defend itself

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effectively.”

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2011), cert. denied, 132 S. Ct. 2101, 182 L. Ed. 2d 882 (U.S.

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2012).

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must plausibly suggest an entitlement to relief, such that it is

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not unfair to require the opposing party to be subjected to the

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir.

“Second, the factual allegations that are taken as true

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expense of discovery and continued litigation.”

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that are mere “legal conclusions” are therefore not entitled to

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the presumption of truth.

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(2009) (citing Twombly, 550 U.S. at 555).

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appropriate when a plaintiff fails to state a claim supportable

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by a cognizable legal theory.

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Department, 901 F.2d 696, 699 (9th Cir. 1990).

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Id.

Assertions

Ashcroft v. Iqbal, 556 U.S. 662, 678
Dismissal is

Balistreri v. Pacifica Police

Upon granting a motion to dismiss for failure to state a

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claim, a court has discretion to allow leave to amend the

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complaint pursuant to Federal Rule of Civil Procedure 15(a).

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“Dismissal with prejudice and without leave to amend is not

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appropriate unless it is clear . . . that the complaint could not

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be saved by amendment.”

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Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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B.

Eminence Capital, L.L.C. v. Aspeon,

Discussion
1.

Defendant’s Request for Judicial Notice

Defendant requests that the Court take judicial notice of

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four documents: (A) a deed of trust signed by Plaintiff Gooden,

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(B) a mortgage signed by Plaintiff Hall, (C) the assignment of
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Plaintiff Hall’s mortgage, and (D) a subsequent mortgage signed

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by Plaintiff Hall.

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RJN at p. 1.

Generally, the Court may not consider material beyond the

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pleadings in ruling on a motion to dismiss for failure to state a

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claim.

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the complaint so long as authenticity is not disputed, or matters

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of public record, provided that they are not subject to

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reasonable dispute.

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2241664 at *2 (C.D. Cal. Mar. 30, 2009) (citing Lee v. City of

The exceptions are material attached to, or relied on by,

E.g., Sherman v. Stryker Corp., 2009 WL

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Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) and Fed. R. Evid.

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201).

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Each of the documents listed above are public records and/or

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are relied on by the Complaint.

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opposed Defendant’s request and reference the documents in their

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opposition.

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Therefore, they are the proper subject of a request for judicial

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notice.

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The documents are not subject to reasonable dispute.

See Fed. R. Evid. 201.
2.

Furthermore, Plaintiffs have not

Defendant’s request is granted.

Defendant’s Motion to Dismiss
a.

Breach of Contract

Defendant argues that Plaintiffs’ Breach of Contract claim

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should be dismissed insofar as that claim is based upon the

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theory that Defendant could not require Plaintiffs to maintain

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insurance coverage up to replacement value.

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Plaintiffs argue the Closing Instructions attached to the

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Complaint created a contractual maximum on the amount of

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insurance Defendant could require of them.

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MTD at p. 3.

Opp. at p. 5.

Plaintiffs’ claim relies on language in Plaintiff Gooden’s
closing instructions which provide: “coverage must be at least
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equal to the lesser of: 100% of the insurable value of the

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improvements . . . or the unpaid principal balance of the

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mortgage . . . .”

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Instructions (Doc. ##1-2) at pp. 8-9.

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language sets the maximum level of coverage that could be

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required by Defendant.

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agreement was breached when Defendant required them to obtain

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coverage in excess of that stated.

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FAC ¶ 95 (emphasis added); see Master Closing

Opp. at p. 5.

Plaintiffs claim this

Plaintiffs claim this

In its motion, Defendant relies on language from the Deed of

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Trust and other mortgage documents that it argues allow it sole

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discretion in setting the amount of coverage it could require.

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MTD at pp. 3-9; RJN Exh. A-D.

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primarily from the Northern District of California interpreting

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language similar to that contained in these other documents. MTD

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at pp. 2, 7-9.

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state laws setting the maximum amount of coverage a lender can

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legally require of a borrower, generally set at replacement

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value.

Defendant discusses several cases

The motion also includes references to relevant

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Plaintiff Gooden’s deed of trust and Plaintiff Hall’s

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mortgage agreement both include language indicating that hazard

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insurance shall be maintained by the borrower in the amounts and

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for the periods of time required by Defendant.

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The documents also clearly state that what Defendant requires can

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change during the term of the loan.

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regardless of the discretionary language in these other

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documents, the language in the closing instructions sets a

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maximum amount of coverage that can be required of them, removing

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the ability of Defendant to change the amount at its own
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Id.

RJN Exh. A, B, D.

Plaintiffs argue that

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discretion.

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Opp. at pp. 9-12.

An almost identical dispute recently arose in Lane v. Wells

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Fargo Bank N.A., C 12-04026 WHA, 2013 WL 269133, at *9 (N.D. Cal.

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2013).

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minimum requirements for the hazard insurance coverage that

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needed to be provided by the borrower.

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provision stated:

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equal to the replacement value of improvements on the property or

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the loan amount.”

There, the plaintiff signed a form that outlined the

Id.

The relevant

“1. Coverage must be in an amount at least

Id.

The plaintiff also signed a mortgage

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agreement that included the same language appearing in

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Plaintiffs’ mortgage documents here, indicating the hazard

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coverage needed to be maintained in an amount that the lender

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required and which amount could change during the term of the

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loan.

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documents, the court in Lane held:

Id. at *6; RJN Exh. A, B, D.

Faced with these two

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“Reading [the hazard insurance form] together with the

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mortgage agreement, the form notice indicated that the

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lender could set insurance at either the replacement cost

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value or the loan amount.

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required amount, it did not displace or contradict the

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mortgage agreement, which provided that the lender had

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discretion to set the amount of insurance required, within

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reason.”

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While it indicated a minimum

Lane, at *9.
This Court finds the reasoning and conclusion in Lane

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persuasive.

The closing instruction quoted by Plaintiffs and

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attached to the Complaint sets an initial amount of coverage that

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Plaintiffs would be required to provide. However, this statement
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of the minimum required at the closing of the loan cannot be used

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to displace or contradict the broad discretion provided to

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Defendant by the accompanying mortgage agreement.

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269133, at *9; see also Cannon v. Wells Fargo Bank N.A., 917 F.

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Supp. 2d 1025, 1040-43 (N.D. Cal. 2013).

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mortgage agreement dispelled any ambiguities in what coverage

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could be required of Plaintiffs in the future by clearly putting

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them on notice that the required amount could change during the

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period of the loan.

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Lane, 2013 WL

In addition, the

As Defendant readily concedes, this does not mean that

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Defendant’s discretion to set the amount of coverage is

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unlimited.

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the implied covenants included in such agreements place limits on

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that discretion.

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the Court.

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document, the Court finds Plaintiffs’ theory that Defendant would

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be in breach of the mortgage agreements by requiring coverage

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above the outstanding balance of the loan is not supported by the

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contractual language used in those documents.

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Court grants Defendant’s motion to dismiss the Breach of Contract

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claim to the extent it is premised on the theory that outstanding

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loan balance set a contractual maximum on the amount of hazard

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coverage that could be required.

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b.

Lane, 2013 WL 269133, at *8.

Relevant state laws and

However, those issues are not presently before

After evaluating the relevant language in each

Accordingly, the

Cal. Civ. Code § 2955.5

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Cal. Civ. Code § 2955.5 prohibits a lender from “requir[ing]

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a borrower . . . to provide hazard insurance coverage . . . in an

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amount exceeding the replacement value of improvements on the

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property.”

Plaintiffs’ fourth cause of action alleges a
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violation of this provision in paragraph 103 of the FAC.

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section alleges:

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hazard insurance on Plaintiff Gooden and other class members in

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amounts above the value of the improvements and/or the

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outstanding principal balance on the property.”

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(emphasis added).

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as it relies upon a “loan balance” theory.

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The

“Defendant violated this law by force placing

FAC ¶ 103

Defendant moves to dismiss this claim insofar

A violation of § 2955.5 occurs when the insurance coverage
required by a lender exceeds replacement value; the provision

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does not make reference to the outstanding principal balance on

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the property.

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“inadvertently included” the statement in the Complaint.

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p. 13.

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situations where Defendant required or force placed insurance

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either (1) in an amount above replacement cost and/or (2) on a

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borrower who had coverage which equaled or exceeded replacement

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cost.

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on the loan balance, is in harmony with the applicable statute.

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In the Opposition, Plaintiffs concede they
Opp. at

They claim the fourth cause of action is limited to

Id.

This restatement of the claim, removing any reliance

Accordingly, the Court grants Defendant’s motion to dismiss

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the fourth cause of action insofar as it alleges a violation of

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Cal. Civ. Code § 2955.5 based on the required coverage exceeding

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the outstanding loan balance.
III. ORDER

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For the foregoing reasons, Defendant’s Motion to Dismiss is
GRANTED in its entirety without leave to amend.

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IT IS SO ORDERED.

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Dated: October 2, 2013

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____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE
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