Myrette-Crosley v. Ditech Home Loans et al

Filing 26

ORDER re 16 Motion to Dismiss; Motion to Strike. Signed by Judge James Donato on 6/28/2018. (jdlc3S, COURT STAFF) (Filed on 6/28/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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FAYE MYRETTE-CROSLEY,
Plaintiff,

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United States District Court
Northern District of California

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Case No. 3:17-cv-05528-JD
ORDER RE MOTION TO DISMISS AND
STRIKE

v.
DITECH HOME LOANS, et al.,

Re: Dkt. No. 16

Defendants.

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This lawsuit involves a dispute over mortgage payments between defendant Ditech

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Financial, LLC (“Ditech”) and plaintiff Myrette-Crosley. In 2007, plaintiff took out a $495,000

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mortgage loan on a home in Richmond, California. Dkt. No. 1-1 at 5. Plaintiff fell behind on her

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payments, and in June 2017, Ditech sent a letter stating that she was delinquent but could avoid

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foreclosure if she agreed to a trial mortgage modification plan requiring payment of $3,375 per

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month. Dkt. No. 1-1 Exh. F. Plaintiff filed this action in California state court shortly after the

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letter, and Ditech removed based on federal question jurisdiction. Dkt. No. 1.

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Plaintiff alleges five causes of action against Ditech. First, plaintiff alleges that Ditech’s

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June 2017 letter violates the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et

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seq. Plaintiff’s second claim is that Ditech has no ability to foreclose, and no enforceable interest

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in the loan or in the deed of trust, because the 2007 loan violated the Truth in Lending Act

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(“TILA”), 15 U.S.C. § 1601 et seq. Third, plaintiff alleges that Ditech is liable for fraudulent

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concealment. Fourth, plaintiff sues Ditech for specific performance of a loan modification plan

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that she entered into with one of Ditech’s successors-in-interest in February 2012. Finally,

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plaintiff says that Ditech’s proposed loan modification constitutes financial abuse of an elderly

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individual because the required monthly payments are almost plaintiff’s entirely monthly income.

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Ditech moves to dismiss the complaint for failure to state a plausible claim under Federal

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Rule of Civil Procedure 12(b)(6).1 The motion is granted and denied in part. Ditech’s request to

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strike prayers for damages and attorney’s fees under Rule 12(f) is denied. See Inn S.F. Enter., Inc.

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v. Ninth St. Lodging, LLC, No. 3:16-CV-00599-JD, 2016 WL 8469189, at *1 (N.D. Cal. Dec. 19,

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2016).
LEGAL STANDARDS

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Straightforward standards govern the application of Rule 12(b)(6). To meet the pleading

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requirements of Rule 8(a) and to survive a Rule 12(b)(6) motion to dismiss, a claim must provide

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“a short and plain statement . . . showing that the pleader is entitled to relief,” Fed. R. Civ. P.
8(a)(2), including “enough facts to state a claim . . . that is plausible on its face.” Bell Atl. Corp. v.

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United States District Court
Northern District of California

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Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face if, accepting all factual

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allegations as true and construing them in the light most favorable to the plaintiff, the Court can

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reasonably infer that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 556

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U.S. 662, 678 (2009). The plausibility analysis is “context-specific” and not only invites but

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“requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.
Rule 9(b) requires a party to “state with particularity the circumstances constituting fraud

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or mistake.” Fed. R. Civ. P. 9(b). “A pleading is sufficient under rule 9(b) if it identifies the

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circumstances constituting fraud so that a defendant can prepare an adequate answer from the

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allegations.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 1989). Generally,

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“[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the

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misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

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While 9(b) “does not require absolute particularity or a recital of the evidence,” conclusory

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allegations with no “particularized supporting detail” do not suffice. United States v. United

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Healthcare Ins. Co., 848 F.3d 1161, 1180 (9th Cir. 2016) (internal quotations and citations

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omitted).

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Ditech’s opening brief exceeds the Court’s page limits by a wide margin. That will be tolerated
on this one occasion only because the motion was originally filed in a different court. Any
oversize briefs in the future will be summarily stricken and disregarded.
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On a motion to dismiss, the Court is limited to the “allegations contained in the pleadings,

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exhibits attached to the complaint, and matters properly subject to judicial notice.” Outdoor

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Media Grp., Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (internal quotation

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omitted). The Court may take judicial notice of undisputed matters of public record. Lee v. City

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of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
DISCUSSION

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Plaintiff’s first cause of action is adequately pleaded. The FDCPA prohibits a debt

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collector from communicating with a consumer about collecting a debt if the collector knows that

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the consumer is represented by counsel in the matter. 15 U.S.C. § 1692c. Ditech’s motion makes

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clear that as of June 2016, it knew that plaintiff was represented by counsel in matters pertaining

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United States District Court
Northern District of California

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to her mortgage loan. Dkt. No. 16 at 15. Ditech tries to sidestep the FDCPA by saying that it is

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not a “debt collector.” That is a surprising and wholly untenable position to take in light of the

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fact that Ditech’s June 2017 delinquency letter expressly states, “This communication is from a

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debt collector. It is an attempt to collect a debt, and any information obtained will be used for that

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purpose.” Dkt. No. 1-1 Exh. F. Ditech’s position is also legally unsound. While the Ninth Circuit

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has not spoken directly on the issue, district courts in this circuit and other courts of appeal agree

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that a mortgage loan servicer is a debt collector under the FDCPA if it acquires servicing for a

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loan after the loan is in default. See, e.g., Heejoon Chung v. U.S. Bank, N.A., 250 F. Supp. 3d 658,

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683 (D. Haw. 2017) (listing cases). Plaintiff’s complaint indicates, and Ditech’s request for

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judicial notice confirms, that plaintiff was in default by August 2013. Dkt. No. 17 Exh. 8. Ditech

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sent the letter in June 2017, and does not appear to have acquired any interest in the mortgage until

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the following month, when the deed of trust was assigned to Ditech. Dkt. No. 16 at 13; Dkt. No.

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17 Exh. 12.
Plaintiff’s second, third, fourth, and fifth causes of action are dismissed with leave to

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amend.
Plaintiff’s second claim is dismissed because it belongs to plaintiff’s bankruptcy estate.

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Defendant’s unopposed request for judicial notice includes the U.S. Bankruptcy Court docket for a

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voluntary Chapter 7 bankruptcy petition filed by plaintiff in January 2016. Dkt. No. 17 Exh. 22.
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Plaintiff does not dispute the accuracy of that record, and the Court takes judicial notice of the

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bankruptcy action. Plaintiff lacks standing to bring claims that accrued before January 2016

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because those claims now belong to the bankruptcy estate. See Cusano v. Klein, 264 F.3d 936,

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945 (9th Cir. 2001). The second claim is predicated on the theory that the original loan violated

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TILA, and plaintiff fails to allege that any actions taken by Ditech are themselves TILA violations.

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Consequently, the claim accrued at the time of the allegedly predatory loan in 2007, well before

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the creation of the bankruptcy estate. Plaintiff’s opposition suggests that her claim was abandoned

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by the trustee, but causes of action that are not properly scheduled “continue[] to belong to the

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bankruptcy estate” and do not revert to the debtor even if the bankruptcy case closes. Id. at 945-

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46; see also In re JZ L.L.C., 371 B.R. 412, 418 (B.A.P. 9th Cir. 2007). At no point does plaintiff

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United States District Court
Northern District of California

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contend that she properly scheduled a TILA claim in her bankruptcy action.

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Plaintiff’s third cause of action for fraudulent concealment fails to meet the heightened

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pleading standards of Rule 9(b). Orange St. Partners v. Arnold, 179 F.3d 656, 662 (9th Cir.

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1999). Plaintiff alleges only that “the above written and oral representations by defendant

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DITECH, to Plaintiffs, were done negligently and recklessly in derogation of Plaintiff’s rights.”

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Dkt. No. 1-1 at 20. This falls far short of the particularity that 9(b) requires.

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Construing the plaintiff’s fourth claim for “specific performance” as a breach of contract

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claim seeking specific performance as an equitable remedy, the claim is time-barred. “Under

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California law, a contract claim based on a written agreement is governed by a four-year statute of

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limitations. The claim accrues when the plaintiff discovers, or could have discovered through

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reasonable diligence, the injury and its cause.” Angeles Chem. Co. v. Spencer & Jones, 44 Cal.

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App. 4th 112, 119 (Cal. Ct. App. 1996) (citing Cal. Code Civ. Proc. § 337). The complaint alleges

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that plaintiff and her loan servicing agent agreed to a permanent loan modification agreement in

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February 2012. Plaintiff says that she made timely payments under that agreement for five

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months, after which one of Ditech’s predecessors-in-interest unilaterally demanded full repayment

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of the outstanding balance. Dkt. No. 1-1 at 9. On the face of the complaint, the claim accrued in

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the second half of 2012. The statute of limitations ran in the second half of 2016, but plaintiff did

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not file this lawsuit until September 2017.
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The fifth cause of action for elder abuse is based entirely on Ditech’s proposed mortgage

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modification plan. California law provides that financial abuse of an elder occurs when a person

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or entity “[t]akes, secretes, appropriates, obtains, or retains real or personal property of an elder or

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dependent adult for a wrongful use or with intent to defraud, or both,” or “[a]ssists in taking,

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secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent

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adult for a wrongful use or with intent to defraud, or both.” Cal. Welf. & Inst. Code § 15610.30.

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Ditech’s mere offer of a loan modification is not a taking or appropriation of property.

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CONCLUSION

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Plaintiff’s second, third, fourth, and fifth causes of action are dismissed with leave to

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United States District Court
Northern District of California

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amend. An amended complaint is due by July 27, 2018.
IT IS SO ORDERED.
Dated: June 28, 2018

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JAMES DONATO
United States District Judge

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