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

Filing 22

ORDER by Judge Claudia Wilken GRANTING IN PART, AND DENYING IN PART, DEFENDANTS 5 MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 10/25/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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FAIYAZ KHAN and REHANA A. KHAN,

No. C 11-03853 CW

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Plaintiffs,

ORDER GRANTING IN
PART, AND DENYING
IN PART,
DEFENDANTS’ MOTION
TO DISMISS

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v.

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BANK OF AMERICA, N.A., BAC HOME
LOANS SERVICING, L.P., and DOES
1-10,

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Defendants.

United States District Court
For the Northern District of California

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________________________________/

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Defendants Bank of America, N.A. and BAC Home Loan Servicing,

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L.P. (collectively, Bank of America) move pursuant to Federal Rule

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of Civil Procedure 12(b)(6) to dismiss Plaintiffs Faiyaz Khan and

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Rehana A. Khan’s first amended complaint (FAC).

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Plaintiffs oppose the motion.

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parties' submissions and oral argument, the Court GRANTS IN PART

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Bank of America's motion to dismiss, and DENIES IT IN PART.

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Docket No. 5.

Having considered all of the

BACKGROUND
On May 23, 2007, Plaintiffs obtained a home loan on a

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property that they owned in Pinole, California from Bank of

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America, secured by a deed of trust listing Bank of America as the

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beneficiary and PRLAP, Inc. as the Trustee.

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FAC ¶ 2; Defs.’

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Request for Judicial Notice (RJN), Ex. C, 1.1

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this property to a tenant and received rental income from that

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tenant.

Plaintiffs rented

FAC ¶ 13.

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On September 15, 2009, Bank of America sent a letter

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addressed solely to Faiyaz Khan that stated in relevant part,

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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.

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United States District Court
For the Northern District of California

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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.

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FAC, Ex. A, 1.

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also listed several contingencies and required Plaintiffs to agree

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to some additional terms, including

The terms and conditions attached to the letter

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* 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
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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.
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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. . .

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* This commitment is contingent on those listed in
Section C. Bank of America, N.A. shall determine if
those contingencies have been satisfied. . .

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* We will sign all documents necessary to complete the
Modification. . .

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Id. at 2-3.
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United States District Court
For the Northern District of California

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On September 22, 2009, Faiyaz Khan signed the Acceptance page
of the Offer for Modification.

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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.”

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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.

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On September 23, 2009,

a notary signed an acknowledgement of Faiyaz Khan’s signature,

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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

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Bank of America pursuant to the loan modification and the amount

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of the payments that would have been due under the unmodified

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mortgage agreement.

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FAC ¶ 7.

On September 23, 2010, Bank of America recorded a

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Substitution of Trustee substituting Recontrust Company as Trustee

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under the Deed of Trust.

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dated September 16, 2010 and notarized on September 21, 2010.

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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

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After exchanging several letters and telephone calls over several

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months, Bank of America sent Plaintiffs’ counsel a letter on

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January 20, 2011, stating that the loan modification agreement was

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void because the notary’s acknowledgment of Faiyaz Khan’s

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signature was dated the day after Faiyaz Khan had signed the

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Acceptance.

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out that the notary did not have to witness the actual act of

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signing the document; he did not receive a response.

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FAC ¶¶ 8-9.

In response, Plaintiffs’ counsel pointed

Id. ¶ 10.

On April 8, 2011, Bank of America sent Plaintiffs another

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offer of a loan modification, the terms of which were less

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favorable than the prior offer.

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this offer.

Id. ¶ 11.

Plaintiffs rejected

Id. ¶ 11.

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On June 7, 2011, Recontrust Company, as Trustee, held a

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public auction and sold the Deed of Trust to Bank of America. RJN,

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Ex. E at 1-2.

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debt as of that date was $551,927.53.

The Trustee’s Deed stated that the amount of unpaid
Id. at 1.

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On the day of the Trustee’s sale, Plaintiffs filed a

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complaint against Bank of America in Superior Court in Contra

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Costa County, which they later amended.
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Notice of Removal, Exs.

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1-2.

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willing and able to make all of any missing or rejected payments

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pursuant to the 2009 loan modification agreement and asserted the

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following causes of action: (1) breach of contract;

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(2) injunction; and (3) slander of title.

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relief, Plaintiffs asked for the Trustee’s Sale to be set aside

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and the Trustee’s Deed voided, specific performance of the

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modified mortgage agreement, damages to compensate for loss of

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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

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appropriate relief.

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that, because the property was a rental property and not their

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home, they would be willing to accept monetary damages in lieu of

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the set aside of the Trustee’s sale and specific performance of

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the agreement.

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FAC 4-5.2

At the hearing, Plaintiffs stated

LEGAL STANDARD
A complaint must contain a “short and plain statement of the

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claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

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state a claim, dismissal is appropriate only when the complaint

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does not give the defendant fair notice of a legally cognizable

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claim and the grounds on which it rests.

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Twombly, 550 U.S. 544, 555 (2007).

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complaint is sufficient to state a claim, the court will take all

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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

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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.
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favorable to the plaintiff.

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896, 898 (9th Cir. 1986).

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to legal conclusions; “threadbare recitals of the elements of a

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cause of action, supported by mere conclusory statements,” are not

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taken as true.

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

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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

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accompanied by attached documents, such documents are deemed part

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United States District Court
For the Northern District of California

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of the complaint and may be considered in evaluating the merits of

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a Rule 12(b)(6) motion.

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1265, 1267 (9th Cir. 1987).

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incorporated by reference in the complaint, even if the document

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is not attached to the complaint, or matters of judicial notice.

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United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

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also MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.

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1986) (“On a motion to dismiss, we may take judicial notice of

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matters of public record outside the pleadings.”).

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Durning v. First Boston Corp., 815 F.2d
The court may also consider documents

See

DISCUSSION

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Bank of America moves to dismiss each of the causes of action

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and Plaintiffs’ claims for punitive damages and attorneys’ fees,

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and seeks to have the lis pendens on the property expunged.

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I.

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Breach of Contract
Bank of America moves to dismiss Plaintiffs’ first cause of

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action for breach of contract.

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breach of contract, a plaintiff must plead: (1) the existence of a

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contract; (2) the plaintiff’s performance or excuse for non-

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performance; (3) the defendant’s breach; and (4) damages to the

To assert a cause of action for

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plaintiff as a result of the breach.

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Tri-Valley Oil & Gas Co., 116 Cal. App. 4th 1375, 1391 n.6 (2004).

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Plaintiffs’ complaint alleges that the 2009 loan modification

Armstrong Petrol. Corp. v.

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agreement constituted a contract, that Plaintiffs complied with

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their obligations or were excused from compliance due to Bank of

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America’s refusal to accept their payments, that Bank of America

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breached the contract by refusing to honor the modification, and

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that Plaintiffs were harmed because of the loss of their property

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and rental income, and their inability to obtain another mortgage

United States District Court
For the Northern District of California

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with similar terms on the market.

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argues that no contract was formed or, alternatively, that it was

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not enforceable against Bank of America.

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FAC ¶¶ 4-17.

Bank of America

Bank of America first argues that Plaintiffs did not accept

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its offer in the manner specified, because they returned the

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acceptance letter a day late and Rehana A. Khan did not sign the

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acceptance letter.

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any way by Plaintiffs returning the acceptance letter eight days,

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instead of seven days, after the date of the offer letter and the

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variance from this requirement was de minimis.

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letter was addressed to only Faiyaz Khan, and it is not clear that

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both signatures were required.

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countered Plaintiffs’ argument that Defendants waived any

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requirement for strict compliance by accepting Plaintiffs’

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mortgage payments for a year without protesting or providing

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notice of any inadequacy.

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tender of payment is made, the recipient “must, at the time,

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specify any objection he may have to the [tender] or he must be

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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

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Ass’n, 200 Cal. App. 3d 1154, 1166 (1988) (stating that this code

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section is “intended to enable a debtor to pay his debt without

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being later confronted with hidden objections which could have

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been obviated”).

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find that a complaint was formed.

Thus, Plaintiffs have plead facts sufficient to

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Bank of America also argues that any contract for a loan

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modification that was formed is unenforceable against Bank of

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America.

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“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

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with no essential terms omitted or left open for future agreement,

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and had language suggesting that the parties intended to be bound.

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Cf. Wilcox v. EMC Mortg. Corp., 2011 U.S. Dist. LEXIS 82128, at

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*15 n.3 (C.D. Cal.) (finding that a loan modification could have

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sufficiently definite terms for enforceability when essential

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terms can be calculated using a formula).

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copy of the agreement letter to the complaint, with Bank of

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America’s electronic signature, Plaintiffs have sufficiently plead

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that Bank of America signed the contract as required by the

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statute of frauds.

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California, a “signature may not be denied legal effect or

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enforceability solely because it is in electronic form” and a

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“contract may not be denied legal effect or enforceability solely

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because an electronic record was used in its formation”); see also

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Marks v. Walter G. McCarty Corp., 33 Cal. 2d 814, 820 (1949)

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(citations omitted) (“The statute of frauds does not demand that

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the signature of the party to be charged be placed at the end of

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the writing relied upon if a proper signature be found elsewhere

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on the instrument. . . Furthermore the signature need not be

Further, by attaching a

See Cal. Civ. Code § 1633.7(a), (b) (in

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manually affixed, but may in some cases be printed, stamped or

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typewritten.”).

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Because Plaintiffs have sufficiently plead their claim for

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breach of contract against Bank of America, its motion to dismiss

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this claim is DENIED.

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II.

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Injunction
Plaintiffs’ second cause of action seeks injunctive relief to

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void the Trustee’s Deed and set aside the Trustee’s Sale.

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parties recognize in their filings, "[i]njunctive relief is a

As both

United States District Court
For the Northern District of California

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remedy, not a cause of action."

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179 Cal. App. 4th 1177, 1187 (2009) (quoting City of South

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Pasadena v. Dep't of Transp., 29 Cal. App. 4th 1280, 1293 (1994)).

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It is granted as “an equitable remedy for certain torts or

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wrongful acts of a defendant where a damage remedy is inadequate.”

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City of South Pasadena, 29 Cal. App. 4th at 1293.

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Plaintiffs have conceded that they could be adequately compensated

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through monetary damages.

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to dismiss Plaintiffs’ second cause of action is GRANTED without

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leave to amend.

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III. Slander of Title

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Guessous v. Chrome Hearts, LLC,

Here,

Accordingly, Bank of America’s motion

Plaintiffs’ third cause of action alleges that Bank of

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America publicly recorded, or caused to be publicly recorded,

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notices regarding the foreclosure of the property, with actual

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knowledge or reckless disregard for the facts that Plaintiffs were

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not actually in default and that the Notice of Default was void.

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In their opposition to the Motion to Dismiss, Plaintiffs point

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only to the publication of “the Trustee’s Deed” as being the basis

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for this claim.

Opp. to Mot. to Dismiss, 10.
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The elements of a claim for slander of title under California

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law are (1) publication, (2) falsity, (3) absence of privilege and

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(4) “‘disparagement of another’s land which is relied upon by a

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third party and which results in a pecuniary loss.’”

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Commonwealth Land Title Ins. Co., 177 Cal. App. 3d 625, 630 (1986)

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(quoting Appel v. Burman, 159 Cal. App. 3d 1209, 1214 (1984)).

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Because, under California law, the “mailing, publication, and

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delivery of notices” required as part of the nonjudicial

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foreclosure process are considered privileged communications, see

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United States District Court
For the Northern District of California

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Cal. Civ. Code § 2924(d)(1), Plaintiffs must also allege that the

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recording was done with malice, that is, that it “was motivated by

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hatred or ill will” or “the defendant lacked reasonable grounds

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for belief in the truth of the publication and therefore acted in

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reckless disregard of the plaintiff's rights.”

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Markowitz, 168 Cal. App. 4th 316, 336 (2008) (internal quotations

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omitted).

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Smith v.

Kachlon v.

Assuming without deciding that Bank of America could be held

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liable for the recording of the Trustee’s Deed by Recontrust

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Company, the lawful Trustee at the time of this recording, see

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McFadden v. Deutsche Bank Nat’l Trust Co., 2011 U.S. Dist. LEXIS

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91010, at *40 (E.D. Cal.) (holding that only the lawful Trustee or

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the actor who recorded the Trustee's Deed Upon Sale may be liable

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for slander of title for this publication), Plaintiffs’ claim

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fails for multiple reasons.

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First, contrary to Plaintiffs’ arguments, the Notice of

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Default was not void.

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Default, the Notice identifies Recontrust Company as “agent for

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the Beneficiary,” see RJN, Ex. B, 2, 3, and state law authorizes

Recontrust Company recorded the Notice of

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agents of the beneficiary to perform this act,

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§ 2924b(b)(4).

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Cal. Civ. Code

Second, Plaintiffs have not made anything beyond conclusory

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statements that could support a finding that Bank of America acted

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with malice.

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motivated by ill will or hatred toward them, and have not

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sufficiently plead that Bank of America lacked reasonable grounds

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to believe that Plaintiffs were in default.

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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

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modification, the facts conceded by Plaintiffs, including that

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only Faiyaz Khan signed the acceptance and that it was returned a

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day late, establish that Bank of America may have had grounds to

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believe that the contract was unenforceable and that it had the

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right to foreclose.

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Accordingly, Bank of America’s motion to dismiss Plaintiffs’

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claim for slander of title is GRANTED.

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cannot be amended to cure these defects without contradicting the

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allegations set forth in the FAC, Plaintiffs are not granted leave

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to amend this claim.

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291, 296 (9th Cir. 1990).

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IV.

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Because the complaint

See Reddy v. Litton Indus., Inc., 912 F.2d

Punitive Damages
Bank of America seeks to dismiss Plaintiffs’ request for

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punitive damages.

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right to recover punitive damages, makes these damages available

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only on an “action for the breach of an obligation not arising

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from contract.”

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only surviving cause of action is for breach of contract, punitive

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damages are not available to them.

California Civil Code § 3294, which governs the

Cal. Civ. Code § 3294(a).

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Because Plaintiffs’

Accordingly, Bank of America’s

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motion to dismiss Plaintiffs’ request for punitive damages is

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GRANTED.

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V.

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Attorneys’ Fees
Bank of America seeks to dismiss Plaintiffs’ request for

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attorneys’ fees.

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provided by statute or contract.

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Amtower v. Photon Dynamics, Inc., 158 Cal. App. 4th 1582, 1601

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(2008).

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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

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attorneys’ fees.

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promissory note and deed of trust provide for attorneys’ fees to

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be awarded to a prevailing party for an action thereon and that

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these terms were not modified by the loan modification agreement.

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Accordingly, Bank of America’s motion to dismiss Plaintiffs’

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request for attorneys’ fees is DENIED.

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VI.

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However, Plaintiffs allege in their FAC that the

Lis Pendens
Bank of America seeks to have the lis pendens on the property

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expunged.

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“the court shall order the notice expunged if the court finds that

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the pleading on which the notice is based does not contain a real

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property claim.”

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action “which would, if meritorious, affect title to, or the right

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to possession of, specific real property.”

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§ 405.4.

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to, or right to possession of, the property at issue have been

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dismissed and Plaintiffs have conceded that they could be

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adequately compensated through monetary damages for the remaining

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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

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Accordingly, Bank of

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America’s request for an order expunging the lis pendens is

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GRANTED.

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CONCLUSION
For the foregoing reasons, Bank of America’s motion to

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dismiss is GRANTED IN PART and DENIED IN PART.

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for an injunction and slander of title and request for punitive

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damages are hereby dismissed without leave to amend.

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Court orders that the lis pendens on the property be expunged.

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Plaintiffs’ claims

Further, the

A case management conference is scheduled for February 15,

United States District Court
For the Northern District of California

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2012 at 2:00 p.m.

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mediation to occur before the case management conference.

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The parties are referred to court-connected

IT IS SO ORDERED.

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Dated: 10/25/2011

CLAUDIA WILKEN
United States District Judge

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cc: ADR

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