Gabris et al v. Aurora Loan Services LLC et al

Filing 10

ORDER signed by Judge John A. Mendez on 10/29/14 ORDERING that the Court GRANTS Defendants' motion to dismiss the third cause of action for wrongful foreclosure WITHOUT LEAVE TO AMEND, and GRANTS the motion as to the other six counts WITH LEAVE TO AMEND. If Plaintiffs wish to submit an amended complaint, it must be filed within 20 days from the date of this Order. Defendants' responsive pleading is due within 20 days thereafter. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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CHARLES GABRIS and MARLENE
GABRIS,

No.

2:14-cv-01759-JAM-KJN

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Plaintiffs,
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ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

v.
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AURORA LOAN SERVICES LLC;
AURORA BANK, FSB; CITIBANK,
N.A., as Trustee in Trust for
the Benefit of the Holders of
Structured Asset Securities
Corporation, Mortgage PassThrough Certificates, Series
2004-23XS; CAL-WESTERN
RECONVEYANCE CORP.; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC., and DOES 1
through 50, inclusive,
Defendants.

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Defendants Aurora Loan Services LLC (“Aurora Services”);

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Aurora Bank, FSB; Citibank, N.A. (“Citibank”); Cal Western

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Reconveyance Corporation; and Mortgage Electronic Registration

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Systems, Inc. (“MERS”) (collectively “Defendants”) move to

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dismiss (Doc. #4) all seven causes of action in Plaintiffs

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Charles and Marlene Gabris’ (collectively “Plaintiffs”) Complaint
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(Doc. #1-1, Exh. 1). 1

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the foreclosure and sale of a property previously belonging to

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Plaintiffs and the loan modification negotiations preceding that

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sale.

The action arises out of a dispute over

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I.

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FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

In September 2004, Plaintiffs obtained a loan in the amount

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of $226,000 (“the Loan”).

Request for Judicial Notice, Exh. 1.

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The Loan was secured by a deed of trust recorded against property

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located at 11529 Mother Lode Circle, Rancho Cordova, California

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95670 (“the Property”).

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was Vitek Real Estate Industries Group, Inc. d/b/a Vitek Mortgage

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Group (“Vitek”), the Trustee was Chicago Title Company (CTC) and

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MERS was the beneficiary as well as the nominee for the lender

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and its successors and assigns.

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The deed of trust indicates the Lender

Plaintiffs allege that in December 2009 they applied to

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Aurora Services for a Home Affordable Modification Program

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(“HAMP”) loan modification through the Neighborhood Assistance

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Corporation of America (“NACA”).

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they sent in all required financial documentation, and Aurora

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Services acknowledged receipt of those documents and requested

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additional documents.

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approximately two months behind in their loan payments.

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Comp. ¶ 19.

Plaintiffs allege

By April 2010, Plaintiffs were

In May 2010, Plaintiffs enlisted an individual named Lou
Dedier to negotiate with Aurora Services on their behalf.

Comp

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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 scheduled
for September 17, 2014.
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¶ 23.

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of another package of financial documents regarding a HAMP

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modification request, but again requested more information,

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providing Plaintiffs thirty days to provide the aforementioned

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information.

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later informing them their modification request was denied for

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failing to provide the documents requested.

Shortly thereafter, Aurora Services acknowledged receipt

However, Plaintiffs received a letter five days

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Plaintiffs allege in June 2010 Aurora Services verbally

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agreed to extend Plaintiffs a trial payment plan thereby reducing

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their monthly payments from $1130 to $912.

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making these modified trial payments, Plaintiffs allege they

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continued to seek a permanent loan modification, but the attempts

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were repeatedly denied based on Aurora Services’ false

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representations that Plaintiffs failed to provide necessary

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documents.

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Aurora Services the documents requested.

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Comp. ¶ 25.

Comp. ¶ 24.

While

Plaintiffs allege they always provided

In October 2010, Aurora Services increased the monthly

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payment from $1130 to $1715.43, which was indicated on the

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monthly statements sent to Plaintiffs.

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Plaintiffs continued to make the lower payments under the belief

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they were still performing under the trial payment plan.

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they attempted a “normal unmodified payment” of $1130 in June

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2011, the payment was returned to them.

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allege the loan was referred to foreclosure at this time.

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Comp. ¶ 27.

Comp. ¶ 32.

However,

When

Plaintiffs

In February 2011 and again in March 2011, Aurora Services

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denied Plaintiffs a HAMP modification on the grounds that a

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modification was not justified given the net present value

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(“NPV”) calculations.

Comp. ¶ 29.
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After additional failed attempts to secure a loan

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modification, Aurora Services recorded a notice of default in

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June 2011 and notified Plaintiffs of a trustee’s sale in July

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2011.

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another failed application for a loan modification, the property

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was sold at a foreclosure sale in December 2011.

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40-42.

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Comp. ¶¶ 35-36.

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After a failed short sale attempt and

Comp. ¶¶ 37-38,

Plaintiffs plead seven causes of action in their Complaint:
(1) Intentional Misrepresentation; (2) Negligent

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Misrepresentation; (3) Wrongful Foreclosure; (4) Conversion;

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(5) Violation of California Business and Professions Code § 17200

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(“§17200”); (6) Equitable Accounting; and (7) Unjust Enrichment.

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Defendants removed the matter to this Court and filed the present

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motion.

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II.

OPINION

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A.

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Defendants request the Court take judicial notice (Doc. #5)

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Request for Judicial Notice

of nine exhibits in support of their motion to dismiss.

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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. 2009) (citing Lee v. City of Los

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

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201).

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

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

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The Court takes judicial notice of all nine exhibits as each

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is a public record not subject to reasonable dispute and is

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relied on by the Complaint. Each document is also relevant to

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either the ownership of the property or the status of the Loan

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underlying Plaintiffs’ claims.

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for judicial notice is GRANTED in its entirety.

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B.

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Therefore, Defendants’ request

Discussion
1.

Initial Arguments

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Defendants initially contend Plaintiffs cannot seek return

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of the property for failure to tender and based on the doctrine

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of laches.

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clarified the Complaint does not seek a return of the property,

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and so, the Court disregards these arguments.

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MTD at pp. 6-7.

2.

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In their response, Plaintiffs have

Negligent and Intentional Misrepresentations

Defendants contend Plaintiffs’ claims for negligent and

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intentional misrepresentation fail on the merits.

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10.

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MTD at pp. 9-

The essential elements of a claim for intentional

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misrepresentation are (1) a misrepresentation; (2) knowledge of

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falsity; (3) intent to induce reliance; (4) actual and

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justifiable reliance; and (5) resulting damage.

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Superior Court, 12 Cal. 4th 631, 638 (1996).

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elements of a count for negligent misrepresentation are the same

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except that it does not require knowledge of falsity, but instead

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requires a misrepresentation of fact by a person who has no

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reasonable grounds for believing it to be true.”

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Skype Inc., 220 Cal.App.4th 217, 230-31 (2013).

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claim for fraud must also satisfy the heightened requirements of
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Lazar v.

“The essential

Chapman v.
A plaintiff’s

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Federal Rule of Civil Procedure 9(b):
Rule 9(b) demands that, when averments of fraud are
made, the circumstances constituting the alleged fraud
“be ‘specific enough to give defendants notice of the
particular misconduct . . . so that they can defend
against the charge and not just deny that they have
done anything wrong.’” Bly–Magee [v. California], 236
F.3d [1014,] 1019 [(9th Cir. 2001)] (quoting Neubronner
v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). Averments
of fraud must be accompanied by “the who, what, when,
where, and how” of the misconduct charged. Cooper v.
Pickett, 137 F.3d 616, 627 (9th Cir. 1997). “[A]
plaintiff must set forth more than the neutral facts
necessary to identify the transaction. The plaintiff
must set forth what is false or misleading about a
statement, and why it is false.” Decker v. GlenFed,
Inc. (In re GlenFed, Inc. Sec. Litig.), 42 F.3d 1541,
1548 (9th Cir. 1994).

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Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.

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2003).

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Plaintiffs base these two claims on allegations that Aurora

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Services continually denied them a loan modification on false

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grounds, had no intention of ever granting a loan modification,

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and were involved in a “conspiracy to deceive and victimize

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Plaintiffs” with the other Defendants.

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Plaintiffs allege they would have cured their default with the

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help of a friend if they knew they were not going to get a loan

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modification.

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Comp. ¶¶ 63-66, 70-75.

First, Plaintiffs’ allegations regarding the involvement of

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all Defendants other than Aurora Services fail to meet the

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heightened pleading standard for fraud.

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regarding the other Defendants is that they conspired with Aurora

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Services in a scheme to defraud Plaintiffs.

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allegations are insufficient.

The only allegations

These conclusory

As for the negligent

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misrepresentation claim, Plaintiffs have failed to properly plead

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facts which demonstrate how exactly the other Defendants are to

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be held responsible for the negligent representations allegedly

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made by Aurora Services.

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the claims for intentional and negligent misrepresentations as to

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all Defendants other than Aurora Services on this ground.

The Court grants the motion to dismiss

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As for Aurora Services, notwithstanding other possible

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defects in these claims, the Court finds Plaintiffs have failed

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to adequately allege justifiable reliance or damages as a result

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against this Defendant.

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Defendant ever promised Plaintiffs that they would receive a loan

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modification.

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the ability to cure their arrearage but decided to continue to

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apply for loan modifications despite being repeatedly rejected by

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Aurora Services.

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There are no allegations that any

Plaintiffs’ Complaint makes clear that they had

Plaintiffs were already contractually obligated to make loan

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payments and were aware of the consequences of failing to do so,

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default and foreclosure.

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granted motions to dismiss on these grounds.

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Wells Fargo Bank, N.A., 09CV1525 WQH, 2010 WL 761236, at *6-7

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(S.D. Cal. 2010) (finding that because the “Plaintiff was already

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legally obligated to make payments on her mortgage . . . the

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payment in reliance on the promise that Wells Fargo would delay

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the trustee's sale was not detrimental).

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Other courts facing similar claims have
See Newgent v.

In Morgan v. Aurora Loan Servs., LLC, CV 12-4350-CAS MRWX,

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2013 WL 3448552, at *5-6 (C.D. Cal. 2013), the plaintiff brought

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a claim for intentional misrepresentation on the basis that the

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defendants represented to her that she would be reviewed for a
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loan modification but never intended to do so.

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alleged the defendants’ true intention was to take more of her

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money before foreclosing on her property.

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alleged that she relied on those statements by continuing to make

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payments under a payment plan agreement while seeking a

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modification.

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deficiencies, the plaintiff was “unable to allege that she

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justifiably relied on defendants[’] statements to her detriment,

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as she was already contractually obligated to make loan

Id.

Id.

The plaintiff

The plaintiff

The court found that, in addition to other

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payments.”

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somehow fraudulently induced plaintiff to make additional

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payments with the promise of a potential permanent loan

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modification, these payments were made pursuant to preexisting

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contractual duties.”

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Id.

The court reasoned that “[e]ven if defendants

Id.

Similarly, in Zierolf v. Wachovia Mortgage, C-12-3461 EMC,

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2012 WL 6161352, at *5-7 (N.D. Cal. 2012), appeal dismissed (July

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31, 2013), the court found that the plaintiff did not demonstrate

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that “any damages resulted from his apparent reliance on Wells

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Fargo's alleged promises to process his loan modification”

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because he “had an existing obligation to make his mortgage

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payments or risk default and foreclosure.”

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that “[t]he risk that one's home loan could go into default and

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one's home be sold at a foreclosure auction for nonpayment is a

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remedy provided in the loan agreement itself, not a consequence

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of allegedly relying on promises to process a loan modification.”

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Id.

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The court reasoned

The Court notes that Plaintiffs do allege that there was
some “verbal agreement” to enter into a trial payment plan.
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Comp. ¶ 24.

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in tort, and Plaintiffs have not alleged that Defendants were

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contractually obligated to provide a loan modification as a

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result of a verbal agreement.

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Nat. Mortgage Ass'n, CIV 2:13-00958, 2013 WL 5569988, at *3-6

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(E.D. Cal. 2013); Corvello v. Wells Fargo Bank, NA, 728 F.3d 878,

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884 (9th Cir. 2013), as amended on reh'g in part (Sept. 23,

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2013); see also Hoffman v. Bank of Am., N.A., C 10-2171 SI, 2010

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WL 2635773, at *5 (N.D. Cal. 2010) (concluding that “lenders are

However, the claims brought in the Complaint sound

See generally, Sholiay v. Fed.

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not required to make loan modifications for borrowers that

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qualify under HAMP nor does the servicer's agreement confer an

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enforceable right on the borrower”).

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For all the reasons discussed above, the Court grants

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Defendants’ motion to dismiss Plaintiffs’ first and second causes

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of action for intentional and negligent misrepresentations. While

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leave to amend must be freely given, the Court is not required to

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allow futile amendments. See DeSoto v. Yellow Freight Sys., Inc.,

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957 F.2d 655, 658 (9th Cir. 1992); Dick v. Am. Home Mortgage

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Servicing, Inc., CIV. 2:13-00201 WBS, 2013 WL 5299180, at *6

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(E.D. Cal. 2013).

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amendment of these claims would be futile, leave to amend is

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granted, but “plaintiffs are admonished that failure to cure the

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defects identified in this Order will be grounds for dismissal

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without further leave to amend.”

Because it is not clear to the Court that

Dick, at *6.

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Having granted the motion on these grounds, the Court need

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not, and does not, address the statute of limitations arguments

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proffered by Defendants.

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3.

Wrongful Foreclosure

Defendants contend Plaintiffs have failed to plead a valid

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cause of action for wrongful foreclosure in the third cause of

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action.

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the defects that Plaintiffs allege were involved in the

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securitization of the Loan and which serve as the basis for this

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claim.

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no standing to challenge the securitization or assignment of the

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Loan, and even if standing were established, Plaintiffs cannot

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MTD at pp. 11-13.

The Complaint sets forth in detail

Comp. ¶¶ 43-49, 79-86.

Defendants argue Plaintiffs have

prove any prejudice occurred as a result.

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“Many courts have aborted homeowners' lawsuits following

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foreclosure, holding that the homeowners did not have standing to

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challenge a vast array of irregularities in the transfer of

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rights and obligations under assignments and substitutions.”

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Mendoza v. JPMorgan Chase Bank, N.A., 228 Cal.App.4th 1020, 1030-

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31 (2014), review filed (Sept. 23, 2014); see also Jenkins v. JP

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Morgan Chase Bank, N.A., 216 Cal.App.4th 497, 513 (2013).

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Similarly, the position taken by many District Courts in the

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Ninth Circuit is that a homeowner plaintiff lacks standing to

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challenge the securitization of his or her loan.

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1031; Aniel v. GMAC Mortgage, LLC, C 12-04201 SBA, 2012 WL

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5389706, at *4 (N.D. Cal. 2012).

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Mendoza, at

The Court finds that Plaintiffs have not properly alleged a

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basis for standing to challenge the securitization of the Loan in

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their wrongful foreclosure claim.

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found, Plaintiffs fail to properly allege prejudice as a result.

However, even if standing were

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“[A] plaintiff in a suit for wrongful foreclosure has

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generally been required to demonstrate the alleged imperfection
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in the foreclosure process was prejudicial to the plaintiff's

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interests.”

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256, 272 (2011).

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when a borrower is in default and cannot show that the allegedly

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improper assignment interfered with the borrower’s ability to pay

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or that the original lender would not have foreclosed under the

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circumstances.”

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Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th
“California courts find a lack of prejudice

Dick, 2013 WL 5299180, at *2-3.

The issues here are analogous to those in Siliga v. Mortgage
Elec. Registration Sys., Inc., 219 Cal.App.4th 75, 85 (2013).

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The Siliga court found that despite the issue regarding standing,

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the plaintiffs failed “to allege any facts showing that they

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suffered prejudice as a result of any lack of authority of the

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parties participating in the foreclosure process.”

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court reasoned:

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The

The [plaintiffs] do not dispute that they are in
default under the note. The assignment of the deed of
trust and the note did not change the plaintiffs'
obligations under the note, and there is no reason to
believe that . . . the original lender would have
refrained from foreclosure in these circumstances.
Absent any prejudice, the [plaintiffs] have no standing
to complain about any alleged lack of authority or
defective assignment.

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Id.

Id.

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The Court finds Plaintiffs have failed to properly allege

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any prejudice as a result of the securitization or foreclosure

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process, and so, the Court GRANTS Defendants’ motion to dismiss

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the third cause of action for wrongful foreclosure.

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is granted without leave to amend, as Plaintiffs cannot properly

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make out a wrongful foreclosure claim based on an improper

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securitization under the circumstances alleged.

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The motion

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4.

Conversion and Unjust Enrichment

The fourth and seventh causes of action for conversion and

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unjust enrichment rely on allegations of a faulty securitization

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and misrepresentations regarding modification of the Loan that

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have been discussed and rejected above.

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The alleged securitization deficiencies cannot serve as the

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basis for the conversion or unjust enrichment claims because

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Plaintiffs were under an obligation to make the payments

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underlying the claims as already discussed.

Similarly, the

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alleged misrepresentations did not result in an unjust enrichment

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of Defendants.

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make payments on the Loan provided and serviced by Defendants.

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The Court finds these claims are not viable, and so GRANTS

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Defendants’ motion to dismiss the fourth and seventh causes of

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action. The dismissal of these claims is with leave to amend

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since it is not clear that further amendment would be futile.

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See generally, Reade v. CitiMortgage, Inc., 13CV404 L WVG, 2013

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WL 5964611, at *4 (S.D. Cal. 2013) (finding a borrower’s

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obligations are not excused because of an improper

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securitization); see also Marty v. Wells Fargo Bank, CIV S-10-

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0555 GEB, 2011 WL 1103405, at *7 (E.D. Cal. 2011).

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5.

Again, Plaintiffs were under an obligation to

Unfair Competition

Plaintiffs’ fifth cause of action alleges a violation of

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§17200.

Because the Court has found Plaintiffs have not

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adequately alleged damages or injury as a result of Defendants’

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conduct, the claim must fail.

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Kwikset Corporation v. Superior Court of Orange County, 51

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Cal.4th 310, 320-21 (2011) (finding that private standing is

Cal. Bus. & Prof. Code § 17204;

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limited to any person who has suffered injury in fact and has

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lost money or property as a result of alleged unfair or unlawful

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conduct).

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action is GRANTED with leave to amend.

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Defendants’ motion to dismiss the fifth cause of

6.

Equitable Accounting

Defendants contend Plaintiffs have failed to state a valid

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claim for equitable accounting.

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argue that because Defendants unjustly enriched themselves

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through a modification process tainted with fraud it is owed an

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accounting.

MTD at p. 15-16.

Plaintiffs

Opp. at p. 19.

“An accounting cause of action is equitable and may be

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sought where the accounts are so complicated that an ordinary

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legal action demanding a fixed sum is impracticable.”

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v. Ocwen Loan Servicing, LLC, 980 F. Supp. 2d 1186, 1207 (E.D.

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Cal. 2013).

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based on other claims.”

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68 Cal.App.4th 824, 833 (1998).

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Herrejon

“A right to an accounting is derivative; it must be
Janis v. California State Lottery Com.,

Plaintiffs base their cause of action for an equitable

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accounting on Defendants’ “indebtedness” arising from the

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payments made by Plaintiffs during the loan modification process.

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The court in Herrejon dismissed a similar claim finding:

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The complaint lacks facts to support an accounting,
especially given the dismissal of the complaint’s other
claims from which to derive an accounting. There are
no facts to support complicated accounts, and
presumably plaintiffs have the ability to ascertain
what they allegedly paid to defendants. The complaint
fails to invoke equity for an accounting, and the
accounting claim is subject to dismissal.

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Herrejon, 980 F. Supp. 2d at 1208; see also Janis, 68 Cal.App.4th

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at 833.
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Applying Herrejon to the instant case, the Court GRANTS

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Defendants’ motion to dismiss the sixth cause of action for an

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equitable accounting.

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amendment would be futile given that leave to amend other claims

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has been granted, the Court grants leave to amend this cause of

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action as well.

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7.

As the Court is not convinced that

Defendants Aurora Bank FSB and Citibank

Defendants contend the complaint should be dismissed against
Defendants Aurora Commercial Corp. (alleged to be the successor

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entity of Defendant Aurora Bank FSB) and Citibank as there are no

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direct allegations of their involvement in the conduct underlying

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Plaintiffs’ claims.

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dismissed each of the causes of action in the Complaint as

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against all Defendants, the Court need not address these

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arguments specifically.

MTD at pp. 5-6.

As the Court has already

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III.

ORDER

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For the reasons set forth above, the Court GRANTS

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Defendants’ motion to dismiss the third cause of action for

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wrongful foreclosure WITHOUT LEAVE TO AMEND, and GRANTS the

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motion as to the other six counts WITH LEAVE TO AMEND.

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Plaintiffs wish to submit an amended complaint, it must be filed

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within twenty (20) days from the date of this Order.

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responsive pleading is due within twenty (20) days thereafter.

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IT IS SO ORDERED.
Dated: October 29, 2014

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If

Defendants’