Gabris et al v. Aurora Loan Services LLC et al

Filing 19

ORDER signed by Judge John A. Mendez on 3/6/15 GRANTING 14 Motion to Dismiss. CASE CLOSED. (Manzer, C)

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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,
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

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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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Plaintiffs Charles and Marlene Gabris (“Plaintiffs”) bring

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claims against Defendants Aurora Loan Services LLC (“Aurora

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

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Western Reconveyance Corporation; and Mortgage Electronic

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Registration Systems, Inc. (“MERS”) (collectively “Defendants”)

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arising from the residential mortgage loan modification
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transactions between the parties.

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(Doc. #1-1, Exh. 1) was dismissed in its entirety by this Court

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(Doc. #10) on Defendants’ previous motion to dismiss (Doc. #4),

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with leave to amend granted on some claims.

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filed the first amended complaint (“FAC”) (Doc. #11), and

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Defendants have again moved to dismiss (Doc. #14) Plaintiffs’

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claims.

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the arguments in their briefs; thereafter, the motion was

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submitted.

Plaintiffs’ original complaint

Plaintiffs then

A hearing was held in which both parties expanded upon

After considering the written and oral arguments of

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both parties, the Court hereby GRANTS the motion to dismiss in

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its entirety for the reasons that follow.

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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

The FAC states six causes of action against Defendants:

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(1) Intentional Misrepresentation; (2) Negligent

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Misrepresentation; (3) Conversion; (4) Violation of California

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Business and Professions Code § 17200 (“UCL”); (5) Equitable

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Accounting; and (6) Unjust Enrichment.

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Plaintiffs entered into a loan with Aurora Services in 2004.

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In 2009, Plaintiffs applied for a loan modification.

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following years, Plaintiffs continued to go back and forth with

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Aurora Services regarding the modification.

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that Aurora Services never intended to modify their loan during

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this period, but rather was “inducing” them into an “incurable

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default.”

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Over the

Plaintiffs allege

Meanwhile, in 2010, Aurora Services agreed to enter into a

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trial payment plan (“TPP”) with Plaintiffs, reducing their

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monthly payment.

Plaintiffs paid regularly on the TPP initially.
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However, Aurora Services eventually had to raise the monthly

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payment amount in order to cover escrow costs.

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Services sent monthly statements indicating the new payment

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amount, Plaintiffs continued to pay the older, lower amount.

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Eventually, Aurora Services referred the loan for foreclosure.

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Although Aurora

Plaintiffs were continually denied a loan modification over

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this period for what they allege were false grounds.

They allege

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that had “Aurora [Services] told Plaintiffs that they would never

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qualify for a loan modification, Plaintiffs had alternative means

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to pay back their arrears and keep the loan current, including

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borrowing money from a family friend.”

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they attempted to cure the arrearages at any point.

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receiving the notice of default, they unsuccessfully attempted a

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short sale of the property securing the loan.

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sold the property at a foreclosure sale to Aurora Services and

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eventually Aurora Services sold it to another party.

Plaintiffs do not allege
After

Defendants then

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II.

OPINION

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A.

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Defendants request the Court take judicial notice (Doc. #15)

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Request for Judicial Notice

of nine exhibits in support of their motion to dismiss.
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

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

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

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

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201).

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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 FAC.

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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.

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B.

Each document is also relevant to either

Therefore, Defendants' request

Intentional & Negligent Misrepresentation Claims

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Defendants contend Plaintiffs’ claims for intentional and

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negligent misrepresentation should be dismissed for failure to

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state a claim.

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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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Federal Rule of Civil Procedure 9(b):

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Lazar v.

“The essential

Chapman v.
A plaintiff's

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
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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).
Plaintiffs claim they have sufficiently pleaded intentional

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and negligent misrepresentation in the FAC.

They point to the

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misrepresentations listed in the FAC that Aurora Services

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allegedly made to them.

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them in a “perpetual modification review.”

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they known Defendants really had no intention to grant a loan

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modification they would have cured any arrearages by borrowing

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from a friend.

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promised a loan modification or absolved them of their

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obligations under the loan itself, Defendants’ misrepresentations

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during the modification negotiations “induc[ed] Plaintiffs into a

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practically incurable default.”

They argue Defendants attempted to keep
They assert that had

Plaintiffs argue that although Defendants never

As the Court discussed in its earlier order, Plaintiffs had

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an obligation under the terms of the loan to make payments and

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were clearly put on notice of the consequences for failing to do

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so.

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claims for relief, but the preexisting obligation to stay current

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on their loan remains, despite their misconceptions of what might

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have resulted from the loan modification process.

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concludes Plaintiffs have again failed to connect Aurora

Plaintiffs have modified some of the language in these

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The Court

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Services’ alleged misrepresentations regarding a possible

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modification, which was never promised to them, to their failure

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to cure their arrearages and their eventual default on the loan.

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Plaintiffs cite to a series of cases they argue support

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their contentions.

However, as pointed out by Defendants in

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their reply (Doc. #17), those cases involve materially different

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factual circumstances and claims.

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Chavez v. IndyMac Mortgage Services, 219 Cal.App.4th 1052 (2013)

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for support.

Plaintiffs first point to

In Chavez, the lender mailed a homeowner a loan

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modification agreement that the homeowner signed, returned and

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performed under.

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the homeowner a signed copy of the loan modification agreement

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and then attempted to rely on the statute of frauds defense to

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renege on the deal.

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alleged viable claims for breach of contract and wrongful

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foreclosure.

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Id. at 1055.

Id.

The lender, however, never mailed

The Chavez court found the homeowner

Id. at 1060-64.

These facts are entirely distinct from those alleged by

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Plaintiffs.

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Plaintiffs that they did not perform on, or make promises they

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did not keep.

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agreement and the TPP, were both breached by Plaintiffs when they

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failed to properly make payments under them.

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Plaintiffs’ reliance on Chavez unpersuasive.

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Defendants never entered into a contract with

The two agreements involved, the original loan

The Court finds

Plaintiffs next rely on Fleet v. Bank of America N.A., 229

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Cal.App.4th 1403 (2014).

In Fleet, Bank of America agreed to

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enter into a TPP with the plaintiffs.

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America specifically told the plaintiffs that if they made three

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payments under the TPP their mortgage would be “permanently
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Id. at 1406.

Bank of

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modified.”

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as to tell them that they would get monthly statements to pay a

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higher amount, but to ignore those and pay the previously agreed

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to amounts.

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two payments as agreed, Bank of America reneged on its promises

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and foreclosed on the plaintiffs’ property.

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During this time, several Bank of America representatives spoke

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directly with the plaintiffs, assuring them the TPP was still in

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full effect and telling them to ignore demands for payment.

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Id. at 1405, 1409.

Id. at 1412.

Bank of America even went so far

After the plaintiffs made the first

Id. at 1406-07.

Id.

at 1412.
The Fleet court found the agreement between the parties

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“guaranteed a modification of the [plaintiffs’] mortgage” upon

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the plaintiffs’ satisfaction of certain conditions, but Bank of

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America foreclosed on the loan despite the plaintiffs’ adequate

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payment on the TPP.

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sufficiently supported a claim for breach of contract, or in the

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alternative a claim for promissory estoppel.

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“promise” of a loan modification, supporting a claim for

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promissory fraud.

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misrepresentations of the representatives supported a claim for

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fraudulent misrepresentation, as the representatives explicitly

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told the plaintiffs to ignore payment demands and assured them

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the TPP was still in effect and would shield them from

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foreclosure.

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Id. at 1410.

The court found this

Id. at 1409-10,

It also found Bank of America improperly broke its

Id. at 1411-12.

Further, the direct

Id.

Again, these facts can be easily distinguished from those

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alleged by Plaintiffs here.

Defendants never made any promises

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to Plaintiffs that they would receive a loan modification or that
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they should ignore the payment demands.

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they were assured their payments under the TPP were sufficient.

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Plaintiffs’ reliance on Fleet is misplaced.

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Plaintiffs do not allege

Plaintiffs rely on Bushell v. JPMorgan Chase Bank, N.A., 220

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Cal.App.4th 915 (2013) for additional support.

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Bank entered into a TPP with the plaintiffs.

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sent a letter to them specifically assuring them that if they

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make all three TPP payments on time they will receive a permanent

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modification of the loan terms.

Id.

In Bushell, Chase
Id. at 919-21.

It

Despite making a series of

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payments in full under the TPP, the plaintiffs were told they

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were being denied a modification.

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called for an explanation, they were told by Chase Bank that they

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should stop making payments altogether while it was “crunching

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the numbers.”

Id.

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process.

The Bushell court found the plaintiffs’ claims

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were viable because they had performed all obligations under the

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TPP and were due the modification.

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Id.

Id.

Then, when the plaintiffs

Chase Bank then started the foreclosure

Id. at 926-31.

Here, Plaintiffs point out that the FAC specifically alleges

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the TPP constituted a false promise and as in Bushell, their

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claims should be found viable.

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without support.

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Bushell plaintiffs, they failed to make full payments under the

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TPP as clearly requested by Defendants.

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therefore, rescue Plaintiffs’ claims in this case.

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However, this legal conclusion is

Plaintiffs concede in the FAC that, unlike the

Bushell does not,

Despite Plaintiffs’ counsel’s vigorous oral argument, the

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factual allegations involved in the case at hand do not support

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his theories.

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Defendants did not make any promises regarding the loan

Unlike the cases cited in Plaintiffs’ brief,

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modification process, the TPP or the underlying mortgage

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agreement that they did not fulfill.

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cases cited by Plaintiffs involved plaintiffs that entered into

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TPPs and successfully performed under their terms.

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Plaintiffs admit they failed to make the full payments required

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under the TPP despite receiving communications from Aurora

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Services of the amounts due.

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claims for intentional and negligent misrepresentation is,

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therefore GRANTED.

In addition, many of the

Here,

Defendants’ motion to dismiss the

Because these grounds are dispositive of the

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motion, the Court does not address Defendants’ remaining

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arguments.

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C.

Conversion

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Defendants next move to dismiss Plaintiffs’ conversion

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claim.

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Defendants’ first motion to dismiss, Plaintiffs are attempting to

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challenge the securitization of the loan.

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previously stated: “The alleged securitization deficiencies

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cannot serve as the basis for the conversion [claim] . . . .

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Again, Plaintiffs were under an obligation to make payments on

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the Loan provided and serviced by Defendants.”

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As the Court previously discussed in its Order on

However, as the Court

As the minimal alterations in the FAC fail to cure the

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deficiencies previously discussed, the Court again finds this

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claim is not viable, and GRANTS Defendants' motion to dismiss the

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fourth cause of action for conversion.

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CitiMortgage, Inc., 13CV404 L WVG, 2013 WL 5964611, at *4 (S.D.

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Cal. 2013) (finding a borrower's obligations are not excused

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because of an improper securitization); see also Marty v. Wells

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Fargo Bank, CIV S–100555 GEB, 2011 WL 1103405, at *7 (E.D. Cal.
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See generally, Reade v.

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2011).

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D.

Equitable Accounting and Unjust Enrichment

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Plaintiffs have reasserted causes of action for equitable

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accounting and unjust enrichment.

The cause of action for unjust

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enrichment in the FAC adds only one paragraph (FAC ¶ 108) to the

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original statement of the claim.

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Defendants had a scheme to “induce Plaintiffs to fall further

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into default by inducing Plaintiffs to believe they were making

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full payments under the TPP.”

In it, Plaintiffs allege

However, as discussed above and as

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is clearly set forth in the FAC, Defendants sent them notices of

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their required payments, and Plaintiffs admittedly failed to pay

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the full amounts.

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the claim unpersuasive, unsupported by the facts, and ineffective

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in saving the cause of action.

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motion to dismiss this cause of action for unjust enrichment.

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The Court finds the additional allegations in

The Court GRANTS Defendants’

The FAC fails to make any changes to the cause of action for

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equitable accounting.

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this claim, especially given there are no underlying claims left

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to support what is more aptly described as a remedy rather than a

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stand-alone cause of action.

The motion will therefore be granted as to

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E.

UCL Claim

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Defendants next move to dismiss Plaintiffs' fifth cause of

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action alleging a violation of California’s UCL, Business and

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Professions Code § 17200.

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alleged damages or injury as a result of Defendants' conduct, the

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claim must fail.

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Corporation v. Superior Court of Orange County, 51 Cal.4th 310,

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320–21 (2011) (finding private standing is limited to any person

Because Plaintiffs have not adequately

Cal. Bus. & Prof.Code § 17204; Kwikset

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who has suffered injury in fact and has lost money or property as

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a result of alleged unfair or unlawful conduct).

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GRANTS Defendants' motion to dismiss the fifth cause of action.

The Court

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F.

Leave to Amend

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The Court finds Plaintiffs have failed to show they can

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properly allege any of these claims and any further attempt would

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be futile.

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granted in its entirety WITHOUT LEAVE TO AMEND.

Accordingly, Defendants’ motion to dismiss the FAC is

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III.

ORDER

For the reasons set forth above, the Court GRANTS the motion
to dismiss WITHOUT LEAVE TO AMEND.
IT IS SO ORDERED.
Dated: March 6, 2015

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