Khan et al v. Bank of America, N.A. et al

Filing 22


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 FAIYAZ KHAN and REHANA A. KHAN, No. C 11-03853 CW 5 Plaintiffs, ORDER GRANTING IN PART, AND DENYING IN PART, DEFENDANTS’ MOTION TO DISMISS 6 7 v. 8 BANK OF AMERICA, N.A., BAC HOME LOANS SERVICING, L.P., and DOES 1-10, 9 Defendants. United States District Court For the Northern District of California 10 ________________________________/ 11 12 Defendants Bank of America, N.A. and BAC Home Loan Servicing, 13 L.P. (collectively, Bank of America) move pursuant to Federal Rule 14 of Civil Procedure 12(b)(6) to dismiss Plaintiffs Faiyaz Khan and 15 Rehana A. Khan’s first amended complaint (FAC). 16 Plaintiffs oppose the motion. 17 parties' submissions and oral argument, the Court GRANTS IN PART 18 Bank of America's motion to dismiss, and DENIES IT IN PART. 19 20 Docket No. 5. Having considered all of the BACKGROUND On May 23, 2007, Plaintiffs obtained a home loan on a 21 property that they owned in Pinole, California from Bank of 22 America, secured by a deed of trust listing Bank of America as the 23 beneficiary and PRLAP, Inc. as the Trustee. 24 25 26 27 28 FAC ¶ 2; Defs.’ 1 Request for Judicial Notice (RJN), Ex. C, 1.1 2 this property to a tenant and received rental income from that 3 tenant. Plaintiffs rented FAC ¶ 13. 4 On September 15, 2009, Bank of America sent a letter 5 addressed solely to Faiyaz Khan that stated in relevant part, 6 7 8 This letter constitutes our offer to modify the Mortgage identified above, subject to the terms and conditions agreement [attached]. When signed by you, this letter will also constitute your acceptance and agreement to these terms and conditions. 9 United States District Court For the Northern District of California 10 11 12 13 14 15 Your mortgage is currently in default. Collection activities, which may include foreclosure, may continue. If you sign the attached acceptance and perform as required in this commitment, we will cease any collection activity when the mortgage is modified. Indicate your acceptance of this offer for a Modified Mortgage . . . by signing the attached acceptance, which must be signed by each borrower and returned within seven days from the date of this letter. 16 FAC, Ex. A, 1. 17 also listed several contingencies and required Plaintiffs to agree 18 to some additional terms, including The terms and conditions attached to the letter 19 20 21 22 23 24 25 26 27 28 * The commitment for a Modified Mortgage will not be considered a waiver of or defense to the right of Bank of America, N.A. to commence or continue any collection 1 Bank of America submitted a Request for Judicial Notice, wherein it requested judicial notice of five documents recorded in the Contra Costa County Clerk-Recorder’s Office. RJN 2-3. Plaintiffs oppose this request as to one of the documents, Exhibit A of the request, on the basis that the document that Bank of America attached to its request as Exhibit A is not the document it described as Exhibit A in its request and is instead a Deed of Trust that is unrelated to this case. Obj. to RJN 1. Plaintiffs do not oppose Bank of America’s request as to the remaining documents. The Court therefore DENIES Bank of America’s request as to Exhibit A and GRANTS the request as to Exhibits B through E. 2 action, including foreclosure. Even when signed by Bank of America, N.A. and us, it will not prevent collection actions continuing if we fail to fulfill any of its terms and conditions. . . 1 2 3 * This commitment is contingent on those listed in Section C. Bank of America, N.A. shall determine if those contingencies have been satisfied. . . 4 5 * We will sign all documents necessary to complete the Modification. . . 6 7 Id. at 2-3. 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 On September 22, 2009, Faiyaz Khan signed the Acceptance page of the Offer for Modification. 18 19 20 21 stating that on that date, Faiyaz Khan appeared before the notary and “proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity.” 24 25 26 27 Id. at 5. For about a year after this, Plaintiffs sent Bank of America payments in the amount called for in the loan modification agreement, and Bank of America accepted these payments without protest. FAC ¶ 6. At some point after about a year, Bank of America began to reject some monthly payments tendered by Plaintiffs. 22 23 On September 23, 2009, a notary signed an acknowledgement of Faiyaz Khan’s signature, 16 17 Id. at 4. Id. ¶ 16. On September 17, 2010, Recontrust Company, “acting as an agent for” Bank of America, recorded a Notice of Default on the loan. RJN, Ex. B, 1. This notice was dated September 16, 2010 and stated that Plaintiffs were $61,072.48 in arrears as of that date. Id. at 3. This arrearage amount was the difference between the amount of the payments that Plaintiffs had been sending to 28 3 1 Bank of America pursuant to the loan modification and the amount 2 of the payments that would have been due under the unmodified 3 mortgage agreement. 4 FAC ¶ 7. On September 23, 2010, Bank of America recorded a 5 Substitution of Trustee substituting Recontrust Company as Trustee 6 under the Deed of Trust. 7 dated September 16, 2010 and notarized on September 21, 2010. 8 9 RJN, Ex. C, 1. This Substitution was Id. On December 27, 2010, Recontrust Company recorded a Notice of Trustee’s Sale of Plaintiffs’ property. RJN, Ex. D, 1. United States District Court For the Northern District of California 10 After exchanging several letters and telephone calls over several 11 months, Bank of America sent Plaintiffs’ counsel a letter on 12 January 20, 2011, stating that the loan modification agreement was 13 void because the notary’s acknowledgment of Faiyaz Khan’s 14 signature was dated the day after Faiyaz Khan had signed the 15 Acceptance. 16 out that the notary did not have to witness the actual act of 17 signing the document; he did not receive a response. 18 FAC ¶¶ 8-9. In response, Plaintiffs’ counsel pointed Id. ¶ 10. On April 8, 2011, Bank of America sent Plaintiffs another 19 offer of a loan modification, the terms of which were less 20 favorable than the prior offer. 21 this offer. Id. ¶ 11. Plaintiffs rejected Id. ¶ 11. 22 On June 7, 2011, Recontrust Company, as Trustee, held a 23 public auction and sold the Deed of Trust to Bank of America. RJN, 24 Ex. E at 1-2. 25 debt as of that date was $551,927.53. The Trustee’s Deed stated that the amount of unpaid Id. at 1. 26 On the day of the Trustee’s sale, Plaintiffs filed a 27 complaint against Bank of America in Superior Court in Contra 28 Costa County, which they later amended. 4 Notice of Removal, Exs. 1 1-2. 2 willing and able to make all of any missing or rejected payments 3 pursuant to the 2009 loan modification agreement and asserted the 4 following causes of action: (1) breach of contract; 5 (2) injunction; and (3) slander of title. 6 relief, Plaintiffs asked for the Trustee’s Sale to be set aside 7 and the Trustee’s Deed voided, specific performance of the 8 modified mortgage agreement, damages to compensate for loss of 9 rent, punitive damages, attorneys’ fees and costs and other In their FAC, Plaintiffs stated that they were ready, FAC ¶¶ 14-22. As United States District Court For the Northern District of California 10 appropriate relief. 11 that, because the property was a rental property and not their 12 home, they would be willing to accept monetary damages in lieu of 13 the set aside of the Trustee’s sale and specific performance of 14 the agreement. 15 16 FAC 4-5.2 At the hearing, Plaintiffs stated LEGAL STANDARD A complaint must contain a “short and plain statement of the 17 claim showing that the pleader is entitled to relief.” 18 Civ. P. 8(a). 19 state a claim, dismissal is appropriate only when the complaint 20 does not give the defendant fair notice of a legally cognizable 21 claim and the grounds on which it rests. 22 Twombly, 550 U.S. 544, 555 (2007). 23 complaint is sufficient to state a claim, the court will take all 24 material allegations as true and construe them in the light most Fed. R. On a motion under Rule 12(b)(6) for failure to Bell Atl. Corp. v. In considering whether the 25 26 27 28 2 Plaintiffs also sought an injunction preventing the “pending foreclosure of the Property.” FAC 4. However, because the foreclosure has already taken place, FAC 12, this request is moot. 5 1 favorable to the plaintiff. 2 896, 898 (9th Cir. 1986). 3 to legal conclusions; “threadbare recitals of the elements of a 4 cause of action, supported by mere conclusory statements,” are not 5 taken as true. 6 (citing Twombly, 550 U.S. at 555). 7 NL Indus., Inc. v. Kaplan, 792 F.2d However, this principle is inapplicable Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009) Although the court is generally confined to consideration of the allegations in the pleadings, when the complaint is 9 accompanied by attached documents, such documents are deemed part 10 United States District Court For the Northern District of California 8 of the complaint and may be considered in evaluating the merits of 11 a Rule 12(b)(6) motion. 12 1265, 1267 (9th Cir. 1987). 13 incorporated by reference in the complaint, even if the document 14 is not attached to the complaint, or matters of judicial notice. 15 United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). 16 also MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 17 1986) (“On a motion to dismiss, we may take judicial notice of 18 matters of public record outside the pleadings.”). 19 Durning v. First Boston Corp., 815 F.2d The court may also consider documents See DISCUSSION 20 Bank of America moves to dismiss each of the causes of action 21 and Plaintiffs’ claims for punitive damages and attorneys’ fees, 22 and seeks to have the lis pendens on the property expunged. 23 I. 24 Breach of Contract Bank of America moves to dismiss Plaintiffs’ first cause of 25 action for breach of contract. 26 breach of contract, a plaintiff must plead: (1) the existence of a 27 contract; (2) the plaintiff’s performance or excuse for non- 28 performance; (3) the defendant’s breach; and (4) damages to the To assert a cause of action for 6 1 plaintiff as a result of the breach. 2 Tri-Valley Oil & Gas Co., 116 Cal. App. 4th 1375, 1391 n.6 (2004). 3 Plaintiffs’ complaint alleges that the 2009 loan modification Armstrong Petrol. Corp. v. 4 agreement constituted a contract, that Plaintiffs complied with 5 their obligations or were excused from compliance due to Bank of 6 America’s refusal to accept their payments, that Bank of America 7 breached the contract by refusing to honor the modification, and 8 that Plaintiffs were harmed because of the loss of their property 9 and rental income, and their inability to obtain another mortgage United States District Court For the Northern District of California 10 with similar terms on the market. 11 argues that no contract was formed or, alternatively, that it was 12 not enforceable against Bank of America. 13 FAC ¶¶ 4-17. Bank of America Bank of America first argues that Plaintiffs did not accept 14 its offer in the manner specified, because they returned the 15 acceptance letter a day late and Rehana A. Khan did not sign the 16 acceptance letter. 17 any way by Plaintiffs returning the acceptance letter eight days, 18 instead of seven days, after the date of the offer letter and the 19 variance from this requirement was de minimis. 20 letter was addressed to only Faiyaz Khan, and it is not clear that 21 both signatures were required. 22 countered Plaintiffs’ argument that Defendants waived any 23 requirement for strict compliance by accepting Plaintiffs’ 24 mortgage payments for a year without protesting or providing 25 notice of any inadequacy. 26 tender of payment is made, the recipient “must, at the time, 27 specify any objection he may have to the [tender] or he must be 28 deemed to have waived it”); see also Goffney v. Downey Sav. & Loan However, Bank of America was not prejudiced in Further, the offer Finally, Defendants have not See Cal. Civ. Pro. § 2076 (when a 7 1 Ass’n, 200 Cal. App. 3d 1154, 1166 (1988) (stating that this code 2 section is “intended to enable a debtor to pay his debt without 3 being later confronted with hidden objections which could have 4 been obviated”). 5 find that a complaint was formed. Thus, Plaintiffs have plead facts sufficient to 6 Bank of America also argues that any contract for a loan 7 modification that was formed is unenforceable against Bank of 8 America. 9 “agreement to agree;” it contained sufficiently definite terms, However, the modification contract was not an illusory United States District Court For the Northern District of California 10 with no essential terms omitted or left open for future agreement, 11 and had language suggesting that the parties intended to be bound. 12 Cf. Wilcox v. EMC Mortg. Corp., 2011 U.S. Dist. LEXIS 82128, at 13 *15 n.3 (C.D. Cal.) (finding that a loan modification could have 14 sufficiently definite terms for enforceability when essential 15 terms can be calculated using a formula). 16 copy of the agreement letter to the complaint, with Bank of 17 America’s electronic signature, Plaintiffs have sufficiently plead 18 that Bank of America signed the contract as required by the 19 statute of frauds. 20 California, a “signature may not be denied legal effect or 21 enforceability solely because it is in electronic form” and a 22 “contract may not be denied legal effect or enforceability solely 23 because an electronic record was used in its formation”); see also 24 Marks v. Walter G. McCarty Corp., 33 Cal. 2d 814, 820 (1949) 25 (citations omitted) (“The statute of frauds does not demand that 26 the signature of the party to be charged be placed at the end of 27 the writing relied upon if a proper signature be found elsewhere 28 on the instrument. . . Furthermore the signature need not be Further, by attaching a See Cal. Civ. Code § 1633.7(a), (b) (in 8 1 manually affixed, but may in some cases be printed, stamped or 2 typewritten.”). 3 Because Plaintiffs have sufficiently plead their claim for 4 breach of contract against Bank of America, its motion to dismiss 5 this claim is DENIED. 6 II. 7 Injunction Plaintiffs’ second cause of action seeks injunctive relief to 8 void the Trustee’s Deed and set aside the Trustee’s Sale. 9 parties recognize in their filings, "[i]njunctive relief is a As both United States District Court For the Northern District of California 10 remedy, not a cause of action." 11 179 Cal. App. 4th 1177, 1187 (2009) (quoting City of South 12 Pasadena v. Dep't of Transp., 29 Cal. App. 4th 1280, 1293 (1994)). 13 It is granted as “an equitable remedy for certain torts or 14 wrongful acts of a defendant where a damage remedy is inadequate.” 15 City of South Pasadena, 29 Cal. App. 4th at 1293. 16 Plaintiffs have conceded that they could be adequately compensated 17 through monetary damages. 18 to dismiss Plaintiffs’ second cause of action is GRANTED without 19 leave to amend. 20 III. Slander of Title 21 Guessous v. Chrome Hearts, LLC, Here, Accordingly, Bank of America’s motion Plaintiffs’ third cause of action alleges that Bank of 22 America publicly recorded, or caused to be publicly recorded, 23 notices regarding the foreclosure of the property, with actual 24 knowledge or reckless disregard for the facts that Plaintiffs were 25 not actually in default and that the Notice of Default was void. 26 In their opposition to the Motion to Dismiss, Plaintiffs point 27 only to the publication of “the Trustee’s Deed” as being the basis 28 for this claim. Opp. to Mot. to Dismiss, 10. 9 The elements of a claim for slander of title under California 2 law are (1) publication, (2) falsity, (3) absence of privilege and 3 (4) “‘disparagement of another’s land which is relied upon by a 4 third party and which results in a pecuniary loss.’” 5 Commonwealth Land Title Ins. Co., 177 Cal. App. 3d 625, 630 (1986) 6 (quoting Appel v. Burman, 159 Cal. App. 3d 1209, 1214 (1984)). 7 Because, under California law, the “mailing, publication, and 8 delivery of notices” required as part of the nonjudicial 9 foreclosure process are considered privileged communications, see 10 United States District Court For the Northern District of California 1 Cal. Civ. Code § 2924(d)(1), Plaintiffs must also allege that the 11 recording was done with malice, that is, that it “was motivated by 12 hatred or ill will” or “the defendant lacked reasonable grounds 13 for belief in the truth of the publication and therefore acted in 14 reckless disregard of the plaintiff's rights.” 15 Markowitz, 168 Cal. App. 4th 316, 336 (2008) (internal quotations 16 omitted). 17 Smith v. Kachlon v. Assuming without deciding that Bank of America could be held 18 liable for the recording of the Trustee’s Deed by Recontrust 19 Company, the lawful Trustee at the time of this recording, see 20 McFadden v. Deutsche Bank Nat’l Trust Co., 2011 U.S. Dist. LEXIS 21 91010, at *40 (E.D. Cal.) (holding that only the lawful Trustee or 22 the actor who recorded the Trustee's Deed Upon Sale may be liable 23 for slander of title for this publication), Plaintiffs’ claim 24 fails for multiple reasons. 25 First, contrary to Plaintiffs’ arguments, the Notice of 26 Default was not void. 27 Default, the Notice identifies Recontrust Company as “agent for 28 the Beneficiary,” see RJN, Ex. B, 2, 3, and state law authorizes Recontrust Company recorded the Notice of 10 1 agents of the beneficiary to perform this act, 2 § 2924b(b)(4). 3 Cal. Civ. Code Second, Plaintiffs have not made anything beyond conclusory 4 statements that could support a finding that Bank of America acted 5 with malice. 6 motivated by ill will or hatred toward them, and have not 7 sufficiently plead that Bank of America lacked reasonable grounds 8 to believe that Plaintiffs were in default. 9 that Bank of America breached the contract for the loan Plaintiffs have not alleged that Bank of America was While it may be found United States District Court For the Northern District of California 10 modification, the facts conceded by Plaintiffs, including that 11 only Faiyaz Khan signed the acceptance and that it was returned a 12 day late, establish that Bank of America may have had grounds to 13 believe that the contract was unenforceable and that it had the 14 right to foreclose. 15 Accordingly, Bank of America’s motion to dismiss Plaintiffs’ 16 claim for slander of title is GRANTED. 17 cannot be amended to cure these defects without contradicting the 18 allegations set forth in the FAC, Plaintiffs are not granted leave 19 to amend this claim. 20 291, 296 (9th Cir. 1990). 21 IV. 22 Because the complaint See Reddy v. Litton Indus., Inc., 912 F.2d Punitive Damages Bank of America seeks to dismiss Plaintiffs’ request for 23 punitive damages. 24 right to recover punitive damages, makes these damages available 25 only on an “action for the breach of an obligation not arising 26 from contract.” 27 only surviving cause of action is for breach of contract, punitive 28 damages are not available to them. California Civil Code § 3294, which governs the Cal. Civ. Code § 3294(a). 11 Because Plaintiffs’ Accordingly, Bank of America’s 1 motion to dismiss Plaintiffs’ request for punitive damages is 2 GRANTED. 3 V. 4 Attorneys’ Fees Bank of America seeks to dismiss Plaintiffs’ request for 5 attorneys’ fees. 6 provided by statute or contract. 7 Amtower v. Photon Dynamics, Inc., 158 Cal. App. 4th 1582, 1601 8 (2008). 9 to any “specific term” of a statute or contract that provides for Attorneys’ fees may be recovered only where Cal. Civ. Proc. Code § 1021; Bank of America argues that Plaintiffs have not pointed United States District Court For the Northern District of California 10 attorneys’ fees. 11 promissory note and deed of trust provide for attorneys’ fees to 12 be awarded to a prevailing party for an action thereon and that 13 these terms were not modified by the loan modification agreement. 14 Accordingly, Bank of America’s motion to dismiss Plaintiffs’ 15 request for attorneys’ fees is DENIED. 16 VI. 17 However, Plaintiffs allege in their FAC that the Lis Pendens Bank of America seeks to have the lis pendens on the property 18 expunged. 19 “the court shall order the notice expunged if the court finds that 20 the pleading on which the notice is based does not contain a real 21 property claim.” 22 action “which would, if meritorious, affect title to, or the right 23 to possession of, specific real property.” 24 § 405.4. 25 to, or right to possession of, the property at issue have been 26 dismissed and Plaintiffs have conceded that they could be 27 adequately compensated through monetary damages for the remaining 28 claim, the lis pendens should be expunged. California Code of Civil Procedure § 405.31 states that A “real property claim” refers to a cause of Cal. Code Civ. Pro. Because Plaintiffs’ claims which would affect the title 12 Accordingly, Bank of 1 America’s request for an order expunging the lis pendens is 2 GRANTED. 3 4 CONCLUSION For the foregoing reasons, Bank of America’s motion to 5 dismiss is GRANTED IN PART and DENIED IN PART. 6 for an injunction and slander of title and request for punitive 7 damages are hereby dismissed without leave to amend. 8 Court orders that the lis pendens on the property be expunged. 9 Plaintiffs’ claims Further, the A case management conference is scheduled for February 15, United States District Court For the Northern District of California 10 2012 at 2:00 p.m. 11 mediation to occur before the case management conference. 12 The parties are referred to court-connected IT IS SO ORDERED. 13 14 15 Dated: 10/25/2011 CLAUDIA WILKEN United States District Judge 16 17 18 19 20 21 22 23 cc: ADR 24 25 26 27 28 13

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