Amacker et al v. Bank of America et al

Filing 41

ORDER by Judge Claudia Wilken GRANTING DEFENDANTS' ( 23 , 31 ) MOTIONS TO DISMISS, BANK OF NEW YORK MELLON'S 33 MOTION TO STRIKE and GRANTING PLAINTIFFS 31 LEAVE TO AMEND. (ndr, COURT STAFF) (Filed on 9/24/2014)

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE NORTHERN DISTRICT OF CALIFORNIA

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4
5

CELEDONIA AMACKER and JOSEPH
AMACKER,
Plaintiffs,

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7
8
9

United States District Court
For the Northern District of California

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11
12

v.
BANK OF AMERICA, a national
association; THE BANK OF NEW YORK
MELLON, as trustee for THE
CERTIFICATE HOLDERS OF CWALT,
INC., ALTERNATIVE LOAN TRUST
2005-58 MORTGAGE PASS-THROUGH
CERTIFICATES SERIES 2005-58, a
business entity; and Does 1
through 100, inclusive,

ORDER GRANTING
DEFENDANTS'
MOTIONS TO DISMISS
(Docket Nos. 23
and 31), BANK OF
NEW YORK MELLON'S
MOTION TO STRIKE
(Docket No. 33)
and GRANTING
PLAINTIFFS LEAVE
TO AMEND

Defendants.

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14

No. C 13-3550 CW

________________________________/
Plaintiffs Celedonia Amacker and Joseph Amacker assert

15
various mortgage-related claims against Defendants Bank of
16
America, N.A. (BOA) and Bank of New York Mellon (BNYM).

Both

17
Defendants move separately to dismiss Plaintiffs' first amended
18
complaint (1AC) in its entirety.

BNYM also moves to strike

19
portions of the 1AC.

Plaintiffs have filed an opposition to both

20
motions to dismiss.

Each Defendant has filed a reply.

The Court

21
took the motions under submission on the papers.

Having

22
considered the arguments presented by the parties, the Court
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GRANTS both Defendants' motions and GRANTS Plaintiffs leave to
24
amend.
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26
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1
2
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4
5

BACKGROUND
I.

Facts
The following facts are taken from the 1AC and certain

documents of which the Court takes judicial notice.1
In October 2005, Plaintiffs obtained a loan funded by

6

Countrywide Home Loans, Inc. in the amount of $624,000.

7

for Judicial Notice (RFJN), Ex. B.

8

loan secured by a deed of trust encumbering the real property

9

located at 6589 Fountaine Avenue, Newark, California.

Request

This loan refinanced a prior

Id.

The

United States District Court
For the Northern District of California

10

deed of trust identifies America's Wholesale Lender as the lender,

11

CTC Foreclosure Services Corp. as the Trustee, and Mortgage

12

Electronic Registration System (MERS) as the beneficiary.

13

Ex. A.

14

RFJN,

The deed of trust, which Plaintiffs signed, included an

15

Adjustable Rate Rider.

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adjustable interest rate starting at two percent for approximately

17

the first fifty days of the loan.

18

rate was set to vary monthly according to a set margin above a

19

variable interest-rate index.

20

October 2005 and 2008, their monthly loan payment increased from

RFJN, Ex. B.

The rider provided for an

Id.

Id.

After that, the interest

Plaintiffs allege that between

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1

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23
24
25
26
27
28

Defendants ask, and there is no record of Plaintiffs
opposing, that the Court take judicial notice of various recorded
documents associated with Plaintiffs' purchase of the property,
the refinancing loan secured by a deed of trust, and subsequent
appointment of trustees and beneficiaries: (A) October 2005 Deed
of Trust; (B) May 2008 Notice of Default and Election to Sell
under Deed of Trust; (C) November 2009 Notice of Rescission of
Declaration of Default and Demand for Sale and Notice of Default;
(D) November 2011 Assignment of Deed of Trust; (E) March 2013
Substitution of Trustee; and (F) March 2013 Notice of Default and
Election to Sell under Deed of Trust. Request for Judicial
Notice, Exs. A-E. "[A] court may take judicial notice of 'matters
of public record.'" Sami v. Wells Fargo Bank, 2012 WL 967051, at
*4 (N.D. Cal.) (citation omitted). The Court GRANTS this request.
2

1

approximately $2,100 to $3,000.

2

were only paying the minimum payment, which did not always cover

3

the interest accruing on the loan, the principal amount they owed

4

on the loan increased over time.

5

"negative amortization."

6

not aware when they entered into the loan agreement that the

7

principal could negatively amortize.

8
9

Id.

1AC ¶ 13.

Because Plaintiffs

RFJN, Ex. B.

This is known as

Plaintiffs allege that they were

1AC ¶ 5, Pls.' Opp. 1.

Plaintiffs allege that, in 2008, while current on their
payments, they began to pursue a loan modification with

United States District Court
For the Northern District of California

10

Countrywide.

11

with Countrywide, they were told that in order to obtain a loan

12

modification, they must first default on their loan.

13

Plaintiffs also allege that they were told that they would not

14

face a foreclosure while they were pursuing a loan modification.

15

Id.

16

1AC ¶ 14.

They claim that, during conversations

Id.

Because they felt they needed to modify their loan agreement,

17

Plaintiffs stopped paying on their loan.

18

ReconTrust Company, as the agent for the beneficiary, recorded a

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Notice of Default and Election to Sell Under the Deed of Trust.

20

RFJN, Ex. B.

21

arrears.

22

loan.2

23

negotiations with BOA.

Id.

Id.

In May 2008,

The notice stated that Plaintiffs were $16,556.72 in
In late 2008, Bank of America acquired Plaintiffs'

1AC ¶ 16.

Plaintiffs continued their loan modification
Id.

24

Plaintiffs allege that, around September 2009, BOA

25

representatives advised them that their property was subject to

26
27
28

2

Bank of America was the successor by merger of CountryWide
Home Loans. See RFJN Ex. E.
3

1

imminent foreclosure.

2

retained the assistance of the Housing and Economic Rights

3

Advocates (HERA).

4

interviewed by the San Francisco Chronicle, which then published

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an article featuring Plaintiffs.

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Id. at ¶ 17.

Id.

Plaintiffs claim they then

After they retained HERA, Plaintiffs were

Id.

According to Plaintiffs, soon after the news article was
published, a BOA representative named Tammy Tipton contacted them

8

to "personally assist with [their] account."

9

conversation, Plaintiffs allege, Ms. Tipton told Joseph Amacker

10
United States District Court
For the Northern District of California

7

that she "was working to help keep him keep his home" and would

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provide a modification that would be "really good" for Plaintiffs.

12

Id. at ¶ 18.

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of the proposed modification a few days later.

14

Id.

During the

Plaintiffs allege that they received a written copy
Id. at ¶ 19.

The proposed modification provided an initial interest rate

15

of 3.5% for the first five years and a monthly payment of

16

$2,981.58.

17

rate would increase to 5.125%.

18

the terms of the proposed modification.

19

day Plaintiffs received the proposed loan modification, Plaintiffs

20

allege, Ms. Tipton called them and said, "Let me tell you that

21

this is just to get you started.

22

definitely re-modify you and get you a better loan in the future,

23

in about two years."

24

receiving the 2009 modification, they were "ready to take legal

25

action."

26

modification, even though they thought the terms of the

27

modification were "unfavorable."

28

they felt they had no other choice.

Id. at ¶ 20.

Id.

Id. at ¶ 20.

After the first five years, the interest
Id.

Plaintiffs were unhappy with
Id. at ¶ 27.

On the same

Once the dust settles, we will

Plaintiffs allege that, prior to

Nevertheless, Plaintiffs accepted the

Id. at ¶ 20.

4

Id.

They allege that

Plaintiffs allege they

1

have not heard from Ms. Tipton again, despite attempts to reach

2

her.

3

Id. at ¶ 21.
In November 2009, on behalf of the beneficiary, ReconTrust

4

recorded a notice of rescission of declaration of default and

5

demand for sale and notice of default.

6

RFJN, Ex. C.

In April 2011, Plaintiffs contacted BOA to discuss modifying

7

their loan.

8

modification application, which they did immediately.

9

Plaintiffs spoke to a BOA representative several times, each time

United States District Court
For the Northern District of California

10
11

Id. at ¶ 22.

Plaintiffs were told to submit a loan
Id.

reiterating what they allege Ms. Tipton told them in 2009.

Id.

In November 2011, MERS recorded an assignment of deed of

12

trust to BNYM, assigning "all beneficial interest . . . together

13

with the note(s) and obligations . . . and the money due and to

14

become due."

15

loan servicer.

16

RFJN, Ex. D.

3

Bank of America continued as the

BNYM Mot. Dismiss 1.

Plaintiffs allege that, in early 2012, Anita Lewis, a BOA

17

representative, told them there was no record of Ms. Tipton's

18

assurance that BOA would modify their loan.

19

time, Plaintiffs were notified that their loan modification

20

application had expired and they were required to file a new

21

application.

22

their completed application was then denied.

23
24

Id.

1AC ¶ 23.

At that

They do not allege that they did so, or that

In March 2013, BYNM recorded a substitution of trustee,
replacing CTC Foreclosure Services with ReconTrust.

RFJN, Ex. E.

25
26
27
28

3Plaintiffs

allege that BOA transferred the loan to BNYM in
February 2013. 1AC ¶ 24. The Assignment of the Deed of Trust
indicates the transfer happened in 2011, as alleged by the
Defendants. RFJN, Ex. D.
5

1

On March 19, 2013, BYNM recorded a notice of default and election

2

to sell under deed of trust.

3

RFJN, Ex. F.

Plaintiffs filed suit in July 2013 and filed their amended

4

complaint in September 2013.

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(1) fraud (against Defendant BOA); (2) promissory estoppel

6

(against both Defendants); (3) negligent misrepresentation

7

(against both Defendants); (4) violation of the Uniform Fraudulent

8

Transfer Act (against both Defendants); and (5) violation of

9

Business and Professions Code section 17200 et seq. (against both

United States District Court
For the Northern District of California

10

Defendants).

11
12

Plaintiffs' 1AC alleges claims for

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

13

claim showing that the pleader is entitled to relief."

14

Civ. P. 8(a).

15

claim to relief that is plausible on its face."

16

Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

17

Twombly, 550 U.S. 544, 570 (2007)).

18

"when the plaintiff pleads factual content that allows the court

19

to draw the reasonable inference that the defendant is liable for

20

the misconduct alleged."

21

Fed. R.

The plaintiff must proffer "enough facts to state a
Ashcroft v.

A claim is facially plausible

Id.

In considering whether the complaint is sufficient to state a

22

claim, the court will take all material allegations as true and

23

construe them in the light most favorable to the plaintiff.

24

Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061

25

(9th Cir. 2008).

26

complaint, materials incorporated into the complaint by reference,

27

and facts of which the court may take judicial notice.

The court's review is limited to the face of the

28
6

1

Id. at 1061.

2

conclusions, including "threadbare recitals of the elements of a

3

cause of action, supported by mere conclusory statements."

4

556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

5

However, the court need not accept legal

Iqbal,

When granting a motion to dismiss, the court is generally

6

required to grant the plaintiff leave to amend, even if no request

7

to amend the pleading was made, unless amendment would be futile.

8

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

9

F.2d 242, 246-47 (9th Cir. 1990).

In determining whether

United States District Court
For the Northern District of California

10

amendment would be futile, the court examines whether the

11

complaint could be amended to cure the defect requiring dismissal

12

"without contradicting any of the allegations of [the] original

13

complaint."

14

Cir. 1990).

Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th

15

DISCUSSION

16

Both Defendants seek to dismiss all claims against them.

17

A.

18

Plaintiffs allege that BOA4 "knowingly and recklessly made

First Cause of Action: Fraud

19

false and misleading statements that Plaintiffs relied on to their

20

detriment and were damaged thereby."

21

their fraud claim on "the statements by Ms. Tipton that their loan

22

would be re-modified in the future."

1AC ¶ 33.

Plaintiffs base

Pls.' Opp. 6.5

23
24
25
26
27
28

4

Plaintiffs do not bring a cause of action for fraud against
Defendant BNYM.
5 In their Opposition to the Motion to Dismiss, Plaintiffs
abandon any fraud claims based on their 2007 loan origination or
the terms of the 2009 modification. The Court, therefore,
addresses only those claims related to Ms. Tipton's alleged
statements.
7

1

BOA argues that Plaintiffs' cause of action for fraud should

2

be dismissed for several reasons.

3

claim is time-barred.

4

is inadequately plead under Rule 9(b).

5

Plaintiffs' fraud claim is not actionable under the statute of

6

frauds.

7

action for the reasons stated below.

First, BOA argues that the

Second, BOA argues that Plaintiffs' claim
Lastly, BOA argues that

The Court GRANTS BOA's motion to dismiss this cause of

8

1.

9

In the case of fraud or mistake, the statute of limitations

Statute of Limitations

United States District Court
For the Northern District of California

10

is three years after the fraud or mistake has been discovered.

11

Cal. Civ. Proc. Code § 338(d).

12

is not deemed to have accrued until the discovery, by the

13

aggrieved party, of the facts constituting the fraud or mistake."

14

Id.

15

to run when the plaintiff suspects or should suspect that her

16

injury was caused by wrongdoing, that someone has done something

17

wrong to her."

18

(1988).

19

accrual of a cause of action, '[a] plaintiff whose complaint shows

20

on its face that his claim would be barred without the benefit of

21

the discovery rule must specifically plead facts to show (1) the

22

time and manner of discovery and (2) the inability to have made

23

earlier discovery despite reasonable diligence.'"

24

Endo-Surgery, Inc., 35 Cal. 4th 797, 808 (2005) (citation

25

omitted).

26

theory of delayed discovery, the plaintiff must plead that,

27

despite diligent investigation of the circumstances of the injury,

28

he or she could not have reasonably discovered facts supporting

"The cause of action in that case

"Under the discovery rule, the statute of limitations begins

Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103, 1110

"In order to rely on the discovery rule for delayed

Fox v. Ethicon

"In order to adequately allege facts supporting a

8

1

the cause of action within the applicable statute of limitations

2

period."

3

Id. at 809.

BOA argues that "Plaintiffs cannot rely on the delayed

4

discovery rule to toll the applicable statute of limitations

5

because they do not allege diligence."

6

Mot. Dismiss 1.

7

beginning in 2011 they repeatedly told BOA representatives about

8

Ms. Tipton's statement.

9

repeated assertions, they were not told until 2012 that Ms.

The Court disagrees.

BOA's Reply Pls.' Opp.
Plaintiffs allege that

They further allege that, despite their

United States District Court
For the Northern District of California

10

Tipton's statement promising a favorable 2011 loan modification

11

was false.

12

have plead sufficient facts that, if true, would delay the running

13

of the statute of limitations for fraud to the date of discovery

14

in 2012.

15

based on the statute of limitations.

Plaintiffs filed this suit in July 2013.

Plaintiffs

Accordingly, the Court declines to dismiss this claim

16

2.

17

Plaintiffs allege that BOA defrauded them by "knowingly and

Rule 9(b)

18

recklessly mak[ing] false and misleading statements that

19

Plaintiffs relied on to their detriment[.]"

20

Specifically, Plaintiffs allege Ms. Tipton, as a BOA

21

representative, assured them that BOA would modify their 2009 loan

22

again in two years.

23

statements knowing they were false.

24

relied on Ms. Tipton's assurance to their detriment.

25

¶¶ 19, 35.

26

woefully short of meeting th[e] stringent standard [for pleading

27

fraud] against corporate defendants."

1AC ¶ 33.

Plaintiffs allege that Ms. Tipton made those
They also allege that they
Id. at

BOA argues that "Plaintiff's [sic] allegations fall

28
9

BOA's Mot. Dismiss 6.

1

"In all averments of fraud or mistake, the circumstances

2

constituting fraud or mistake shall be stated with particularity."

3

Fed. R. Civ. P. 9(b).

4

law, while a district court will rely on state law to ascertain

5

the elements of fraud that a party must plead, it will also follow

6

Rule 9(b) in requiring that the circumstances of the fraud be

7

pleaded with particularity."

8

Supp. 2d 992, 996 (N.D. Cal. 2009); see also Kearns v. Ford Motor

9

Co., 567 F.3d 1120, 1125 (9th Cir. 2009).

"Therefore, in an action based on state

Marolda v. Symantec Corp., 672 F.

"[W]hen the claim is

United States District Court
For the Northern District of California

10

'grounded in fraud,' the pleading of that claim as a whole is

11

subject to Rule 9(b)'s particularity requirement."

12

F. Supp. 2d at 997 (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d

13

1097, 1104).

14

specific enough terms "to give defendants notice of the particular

15

misconduct so that they can defend against the charge."

16

567 F.3d at 1124.

17

who, what, when, where, and how" of the alleged fraudulent

18

conduct.

19

"The requirement of specificity in a fraud action against a

20

corporation requires the plaintiff to allege the names of the

21

persons who made the allegedly fraudulent representations, their

22

authority to speak, to whom they spoke, what they said or wrote,

23

and when it was said or written."

24

Auto. Ins. Co., 2 Cal. App. 4th 153, 157 (1991).

25

Marolda, 672

A plaintiff must describe the alleged fraud in

Kearns,

Rule 9(b) requires the plaintiff to allege "the

Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997).

Tarmann v. State Farm Mut.

Plaintiffs have not plead with particularity their fraud

26

claim against BOA in regard to the 2009 future loan modification

27

representation.

28

tort action for deceit, are (a) misrepresentation (false

"The elements of fraud, which give rise to the

10

1

representation, concealment, or nondisclosure); (b) knowledge of

2

falsity (or 'scienter'); (c) intent to defraud, i.e., to induce

3

reliance; (d) justifiable reliance; and (e) resulting damage."

4

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

5

Plaintiffs allege that, in September 2009, Ms. Tipton spoke

6

to Joseph Amacker and told him, "Once the dust settles, we will

7

definitely re-modify this for you and get you a better loan in the

8

future, in about two years."

9

knew her statement was false when she made it and that she made

They also allege that Ms. Tipton

United States District Court
For the Northern District of California

10

the statement to induce Plaintiffs not to file suit or speak with

11

the media.

12

on Ms. Tipton's statement because she was a BOA representative.

13

Plaintiffs have not alleged, however, that they have been damaged

14

as a result of Ms. Tipton's statement.

15

they could have obtained a more favorable loan modification in

16

2009 from another lender or by virtue of litigation or publicity.

17

Instead they say they had to accept the proposed modification.

18

They do not allege that BOA since has denied them another loan

19

modification.

20

Plaintiffs further allege that they reasonably relied

They do not allege that

Plaintiffs' cause of action for fraud against BOA is not

21

sufficiently plead under Rule 9(b).

Accordingly, the Court GRANTS

22

BOA's motion to dismiss this claim.

Plaintiffs are granted leave

23

to amend to remedy the deficiencies noted above if they can do so

24

truthfully and without contradicting the allegations in their

25

prior pleadings.

26

3.

27

Although this claim is dismissed under Rule 9(b), BOA also

28

argues that the claim should be dismissed due to the statute of

Statute of Frauds

11

frauds.

2

statements guaranteeing a future, more favorable, loan

3

modification constituted an oral agreement between Plaintiffs and

4

BOA.

5

intent to induce Plaintiffs into the modification agreement in

6

order to prevent them from continuing to expose the bank's

7

misconduct to the media and seeking to litigate for the

8

misconduct[.]"

9

Plaintiffs' ambiguous references to [BOA's] promises are supported

10
United States District Court
For the Northern District of California

1

by facts, such an oral promise relates to real property interests

11

and, thus, is barred by the statute of frauds."

12

Dismiss 10.

13

Plaintiffs allege, albeit indirectly, that Ms. Tipton's

According to Plaintiffs, this statement was made "with the

1AC ¶ 38.

BOA argues that "even assuming arguendo

BOA's Mot.

"An agreement for . . . the sale of real property, or of an

14

interest therein" is "invalid, unless [it], or some note or

15

memorandum thereof, [is] in writing and subscribed by the party to

16

be charged or by the party's agent[.]"

17

§ 1624(a)(3).

18

invalid unless it is memorialized by a writing subscribed by the

19

party to be charged or by the party's agent."

20

Mortg. Servs., 219 Cal. App. 4th 1052, 1057 (2013) (citations

21

omitted).

22

the statute of frauds is also subject to the statute of frauds."

23

Id.; see also Cal. Civ. Code § 1698.

24

Cal. Civ. Code

"A contract coming within the statute of frauds is

Chavez v. Indymac

"An agreement to modify a contract that is subject to

While "California courts have held that forbearance

25

agreements altering a mortgage are covered by the statute of

26

frauds," Chavez, 219 Cal. App. 4th at 1057 (citation omitted),

27

Plaintiffs do not allege that Ms. Tipton's promise altered their

28

note or deed of trust.

They also do not allege that Ms. Tipton's
12

1

promise itself was a modification of the loan.

2

Plaintiffs allege that Ms. Tipton made a promise to modify the

3

loan as soon as 2011.

4

agreement and, hence, is not subject to the statute of frauds.

5
6

Instead,

That promise did not alter the 2009 loan

Accordingly, the Court's dismissal of this claim is not based
on the statute of frauds.

7

B.

8

Here, Plaintiffs rely on the same facts alleged under their

9

Second Cause of Action: Promissory Estoppel

fraud cause of action, namely that BOA failed to keep a 2009

United States District Court
For the Northern District of California

10

promise to re-modify their loan favorably.

11

Plaintiffs request that BNYM, as BOA's "successor-in-interest" be

12

estopped from preventing Plaintiffs "from modifying their loan and

13

from proceeding with a foreclosure against Plaintiffs[.]"

14

¶ 45.

15

sufficiently plead the elements required under the doctrine of

16

promissory estoppel.

17

dismiss this cause of action for the reasons stated below.

18

As a result,

1AC

Defendants argue that Plaintiffs' allegations do not

The Court GRANTS Defendants' motion to

"The purpose of [promissory estoppel] is to make a promise

19

that lacks consideration (in the usual sense of something

20

bargained for and given in exchange) binding under certain

21

circumstances."

22

3830048, at *4 (N.D. Cal.) (citation omitted). "Promissory

23

estoppel requires: (1) a promise that is clear and unambiguous in

24

its terms; (2) reliance by the party to whom the promise is made;

25

(3) the reliance must be reasonable and foreseeable; and (4) the

26

party asserting the estoppel must be injured by his or her

27

reliance."

28

should reasonably expect a substantial change of position, either

Id.

Cockrell v. Wells Fargo Bank, N.A., 2013 WL

"Under this doctrine a promisor is bound when he

13

1

by act or forbearance, in reliance on his promise, if injustice

2

can be avoided only by its enforcement."

3

Mortg., LLC, 2013 WL 2252112, at *4 (N.D. Cal) (citation omitted).

4

Plaintiffs' promissory estoppel claim fails for several

Panaszewicz v. GMAC

5

reasons.

6

clear and unambiguous.

7

to "definitely re-modify" their loan and "get [them] a better loan

8

in the future, in about two years."

9

ambiguous, and "about two years" is indefinite.

First, it fails because the alleged promise was not
Plaintiffs allege that Ms. Tipton promised

1AC ¶¶ 19, 35.

"Better" is

The only part of

United States District Court
For the Northern District of California

10

Ms. Tipton's promise that is clear and unambiguous is that a loan

11

modification would occur in the future.

12

Plaintiffs allege that they were injured due to their

13

reliance on Ms. Tipton's promise because they ceased pursuing

14

litigation and exercising their right to free speech, believing

15

they would receive a "favorable" loan modification in the future.

16

Plaintiffs allege that they were unhappy with the terms of the

17

2009 modification, and suggest that they would not have accepted

18

the 2009 loan modification if not for Ms. Tipton's promise.

19

they also state that "they felt they had "no other option but to

20

accept the modification for the time being[.]"

21

Plaintiffs cannot allege that accepting the 2009 modification was

22

in reliance on Ms. Tipton's representations if Plaintiffs also

23

allege they felt they had no other choice but to accept, no matter

24

what Ms. Tipton had promised.

25

that they could have obtained a better loan modification in 2009

26

through litigation or other means.

27

plead that Defendants have denied them a loan modification.

But

Compl. ¶ 20.

Further, Plaintiffs do not allege

28
14

Finally, Plaintiffs have not

1

Accordingly the Court GRANTS Defendants' motions to dismiss

2

this cause of action.

3

remedy the deficiencies noted above if they can do so truthfully

4

and without contradicting the allegations in their prior

5

pleadings.

Plaintiffs are granted leave to amend to

6

C.

7

Plaintiffs rely on the same facts alleged under their fraud

Third Cause of Action: Negligent Misrepresentation

8

and promissory estoppel claims to contend, in the alternative,

9

that Ms. Tipton's statements negligently misrepresented the

United States District Court
For the Northern District of California

10

likelihood of a loan modification in the future.6

11

Plaintiffs do not allege that Ms. Tipton knowingly deceived them,

12

but rather that she made the misrepresentation with no reasonable

13

grounds to believe that what she was saying was true.

14

In this claim,

BOA argues that Plaintiffs' claim for negligent

15

misrepresentation fails for three reasons.

16

Plaintiffs' action for negligent misrepresentation is time-barred.

17

Second, BOA argues that Plaintiffs fail to state a claim for

18

negligent misrepresentation.

19

have not sufficiently alleged reliance or damages.

20

GRANTS BOA's motion to dismiss this cause of action for the

21

reasons stated below.

First, BOA argues that

Finally, BOA argues that Plaintiffs
The Court

22

1.

23

When a cause of action alleges negligent misrepresentation,

24

Statute of Limitations

the statute of limitations is two years.

Ventura Cnty. Nat. Bank

25
26
27
28

6

Plaintiffs request that the Court ignore the cause of
action for negligent misrepresentation against Defendant BNYM.
The Court GRANTS that request and dismisses that claim without
leave to amend.
15

1

v. Macker, 49 Cal. App. 4th 1528 (1996); see also Cal. Code Civ.

2

Proc. § 339.

3

the delayed discovery rule may apply.

4

As discussed above with respect to the fraud claim,
Fox, 35 Cal. 4th at 808.

As in the fraud claim, Plaintiffs allege that beginning in

5

2011 they repeatedly told BOA representatives about Ms. Tipton's

6

statement and were not told until 2012 that Ms. Tipton's statement

7

regarding a promised loan modification was false.

8

filed this suit in July 2013.

9

facts that, if true, would delay the running of the statute of

Plaintiffs

Plaintiffs have plead sufficient

United States District Court
For the Northern District of California

10

limitations to the date of discovery in 2012.

11

Court declines to dismiss this claim based on the statute of

12

limitations.

13

2.

14

"The elements of negligent misrepresentation are similar to

Accordingly, the

Rule 9(b)

15

intentional fraud except for the requirement of scienter; in a

16

claim for negligent misrepresentation, the plaintiff need not

17

allege the defendant made an intentionally false statement, but

18

simply one as to which he or she lacked any reasonable ground for

19

believing the statement to be true."

20

App. 4th 170, 184-85 (2006) (citing Bily v. Arthur Young & Co., 3

21

Cal. 4th 370, 407–408 (1992)); see also Alliance Mortg. Co. v.

22

Rothwell, 10 Cal. 4th 1226, 1239, fn. 4 (1995) (negligent

23

misrepresentation is a species of the tort of deceit and like

24

fraud, requires a misrepresentation, justifiable reliance and

25

damage).

26

Charnay v. Cobert, 145 Cal.

"The Ninth Circuit has not yet decided whether Rule 9(b)'s

27

heightened pleading standard applies to a claim for negligent

28

misrepresentation, but most district courts in California hold
16

1

that it does."

2

4097747, at *7 (N.D. Cal.)

3

Bank, N.A., 753 F. Supp. 2d 1034, 1049 (N.D. Cal. 2010)

4

("[N]egligent misrepresentation 'sounds in fraud' and is subject

5

to Rule 9(b)'s heightened pleading standard");

6

Rewards Litig., 737 F. Supp. 2d 1159, 1176 (S.D. Cal. 2010);

7

Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141

8

(C.D. Cal. 2003); but see Petersen v. Allstate Indem. Co., 281

9

F.R.D 413 (C.D. Cal. 2012) (finding that Rule 9(b) does not apply

Villegas v. Wells Fargo Bank, N.A., 2012 WL
See, e.g., Errico v. Pac. Capital

In re Easysaver

United States District Court
For the Northern District of California

10

to negligent misrepresentation claims); Howard v. First Horizon

11

Home Loan Corp., 2013 WL 6174920, at *5 (N.D. Cal.) ("negligent

12

misrepresentation requires a showing that a defendant failed to

13

use reasonable care -— 'an objective standard [that] does not

14

result in the kind of harm that Rule 9(b) was designed to

15

prevent'" (citing Petersen, 281 F.R.D. at 417-418)); Bernstein v.

16

Vocus, Inc., 2014 WL 3673307, at *5 (N.D. Cal.) ("The Court finds

17

the reasoning of [Petersen and Howard] persuasive, and joins in

18

their holdings that negligent misrepresentation claims are not

19

subject to the heightened pleading standards of Rule 9(b).").

20

Because Plaintiffs' claim for negligent misrepresentation is

21

based on the same circumstances as their fraud claim, they must

22

meet the heightened pleading requirements of Rule 9(b).7

23

Plaintiffs fail to allege facts to support a negligent

24

misrepresentation claim for the same reasons they failed to do so

25
26
27
28

7

BOA argues that Plaintiffs fail to show that it owed them a
duty of care. The duty of care is not relevant to a negligent
misrepresentation claim because it is a species of fraud, not
common-law negligence.
17

1

in their claims for fraud and promissory estoppel.

2

above, Plaintiffs do not allege that they could have obtained a

3

more favorable loan modification in 2009 from another lender or by

4

virtue of litigation or publicity.

5

accept the proposed modification.

6

BOA since has denied them another loan modification.

As discussed

Instead, they say they had to
They also do not allege that

7

Accordingly, the Court dismisses this claim because

8

Plaintiffs have failed to state, with particularity, facts to

9

support reliance upon the negligent misrepresentation and

United States District Court
For the Northern District of California

10

resulting damages.

11

remedy the deficiencies noted above if they can do so truthfully

12

and without contradicting the allegations in their prior

13

pleadings.

14
15

D.

Plaintiffs are granted leave to amend to

Fourth Cause of Action: Violation of the Uniform
Fraudulent Transfer Act

Plaintiffs allege that while they were creditors of BOA "by
16
way of their pending allegations against [BOA] for damages," BOA
17
"transferred Plaintiffs' Deed of Trust, and all benefits
18
thereunder" to BNYM in violation of the Uniform Fraudulent
19
Transfer Act (UTFA).

1AC ¶ 56.

As a result, Plaintiffs allege

20
that they were deprived of their "right to seek claims for
21
specific performance and for damages against" BOA.

Id. at ¶ 57.

22
Defendants argue that this cause of action is time-barred.
23
Defendants also argue that Plaintiffs fail to provide facts to
24
support the claim that they were creditors of BOA based on a
25
contingent claim for damages by way of pending allegations.

The

26
Court GRANTS Defendants' motion to dismiss this claim for the
27
reasons stated below.
28
18

1

1.

2

"A cause of action with respect to a fraudulent transfer or

Statute of Limitations

3

obligation under [UTFA] is extinguished . . . within four years

4

after the transfer was made or the obligation was incurred or, if

5

later, within one year after the transfer or obligation was or

6

could reasonably have been discovered by the claimant."

7

Code § 3439.09.

8

transferred the note to BNYM in 2011.

9

complaint in 2013.

Cal. Civ.

According to judicially noticed documents, BOA
Plaintiffs filed this

Plaintiffs have therefore plead sufficient

United States District Court
For the Northern District of California

10

facts to show that their UFTA claim is within the statute of

11

limitations.

12

claim based on the statute of limitations.

Accordingly, the Court declines to dismiss this

13

2.

14

The UFTA "permits defrauded creditors to reach property in

Failure to State a Claim

15

the hands of a transferee."

16

(2003).

17

future creditors."

18

debtor transfers with the "actual intent to hinder, delay, or

19

defraud any creditor of the debtor."

20

§ 3439.04(a)(1).

21

intent is a question of fact, and proof often consists of

22

inferences from the circumstances surrounding the transfer."

23

Filip v. Bucurenciu, 129 Cal. App. 4th 825, 834 (2005).

24

determining a debtor's intent, courts may consider whether "the

25

debtor retained possession or control of the property transferred

26

after the transfer;" whether "before the transfer was made or

27

obligation was incurred, the debtor had been sued or threatened

28

with suit;" and whether "the value of the consideration received

Mejia v. Reed, 31 Cal. 4th 657, 663

Transfers can be fraudulent "both as to present and
Id. at 664.

A transfer can be invalid if a

Cal. Civ. Code

"Whether a conveyance was made with fraudulent

19

In

1

by the debtor was reasonably equivalent to the value of the asset

2

transferred or the amount of the obligation incurred."

3

Code § 3439.04(b)(2), (4) and (8).

4

factors that must be present before the scales tip in favor of

5

finding actual intent to defraud.

6

to provide guidance to the trial court, not compel a finding one

7

way or the other."

8

Cal. 2008) aff'd, 2014 WL 2066714 (9th Cir. 2014) (citation

9

omitted).

United States District Court
For the Northern District of California

10

Cal. Civ.

"There is no minimum number of

This list of factors is meant

In re Still, 393 B.R. 896, 917 (Bankr. C.D.

Plaintiffs allege facts under only two of the eleven factors

11

that would support that the loan transfer from BOA to BYNM was

12

made with the intent to hinder, delay or defraud Plaintiffs.

13

First, Plaintiffs allege that BOA retained control of the property

14

because it remained the servicer of the debt after the transfer.

15

Second, Plaintiffs allege BOA made the transfer to BNYM after BOA

16

became aware that Plaintiffs had retained HERA counsel.

17

Plaintiffs fail to allege facts to support any of the

18

remaining nine factors.

19

transfer from BOA to BNYM was to an insider.

20

that the transfer had been concealed, nor do they allege that the

21

transfer included substantially all of BOA's assets.

22

do not allege that BOA absconded, nor do they allege that BOA

23

removed or concealed assets.

24

value of the consideration received by BOA was not reasonably

25

equivalent to the value of the asset transferred.

26

allege that the transfer happened shortly before or shortly after

27

a substantial debt was incurred; indeed they allege that the

28

transfer occurred approximately two years after BOA was allegedly

Plaintiffs do not allege that the
They do not allege

Plaintiffs

Plaintiffs do not allege that the

20

They do not

1

put on notice that Plaintiffs might file a lawsuit.

2

not allege that BOA transferred the essential assets of a

3

business, nor do they allege that the transfer was to a lienholder

4

who then transferred to an insider of BOA.

5

Plaintiffs do

On balance, Plaintiffs have failed to allege sufficient facts

6

to raise an inference that BOA had the intent to hinder, delay or

7

defraud Plaintiffs through the transfer of their loan to BNYM.

8

Accordingly, the Court GRANTS Defendants' motions to dismiss this

9

cause of action.

Plaintiffs are granted leave to amend to remedy

United States District Court
For the Northern District of California

10

the deficiencies noted above if they can do so truthfully and

11

without contradicting the allegations in their prior pleadings.

12
13

E.

Fifth Cause of Action: Violation of Business and
Professions Code § 17200 et seq. (Unfair Competition
Law)

14

Plaintiffs allege that "Defendants' fraud, inducement of

15

Plaintiffs' detrimental reliance, and negligent misrepresentations

16

to Plaintiffs constitute unfair business practices[.]"

17

They allege that Defendants' conduct was unfair in that it

18

"induce[d] a borrower into a loan agreement through

19

misrepresentations" and "then place[d] [Plaintiffs] into

20

foreclosure based on the fraudulent loan agreement."

21

In their opposition, however, Plaintiffs disclaim allegations

22

regarding their original loan and pursue only their claim related

23

to the promised future modification.

24

1AC ¶ 63.

1AC ¶ 64.

Defendants argue that Plaintiffs' claim under the Unfair

25

Competition Law (UCL) fails for several reasons.

26

Defendants argue that it is time-barred.

27

that Plaintiffs lack standing under the UCL because they have not

28

suffered an injury in fact and have not lost money or property as
21

First,

Second, Defendants argue

1

a result of the claimed violations.

2

Plaintiffs have failed to differentiate between Defendants as to

3

how each has caused Plaintiffs harm.

4

motions to dismiss this cause of action for the reasons stated

5

below.

Lastly, Defendants argue that

The Court GRANTS Defendants'

6

1.

7

"Any action to enforce any cause of action pursuant to [the

Statute of Limitations

8

UCL] shall be commenced within four years after the cause of

9

action accrued."

However, as discussed above with respect to the

United States District Court
For the Northern District of California

10

fraud claim, the delayed discovery rule may apply.

11

4th at 808.

12

sufficient facts that, if true, would delay the running of the

13

statute of limitations to the date of discovery in 2012.

14

Accordingly, the Court declines to dismiss this claim based on the

15

statute of limitations.

Fox, 35 Cal.

As in the fraud claim, Plaintiffs have plead

16

2.

17

The UCL prohibits "any unlawful, unfair or fraudulent

Unfair Business Practices

18

business act."

19

section 17200 is written in the disjunctive, it establishes three

20

types of unfair competition.

21

Cal. App. 4th 581, 593 (2009).

22

prohibited as unfair or deceptive even if it is not unlawful and

23

vice versa.

24

632, 647 (1996).

Plaintiffs only allege an "unfair business

25

practice" claim.

Compl. ¶¶ 61-69.

26

Cal. Bus. & Prof. Code § 17200 et seq. Because

Davis v. Ford Motor Credit Co., 179
Therefore, a practice may be

Podolsky v. First Healthcare Corp., 50 Cal. App. 4th

The California Supreme Court has not established a definitive

27

test to determine whether a business practice is unfair under the

28

UCL.

See Cel–Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20
22

1

Cal. 4th 163, 187 n. 12 (1999) (stating that the test for

2

unfairness in cases involving business competitors is 'limited to

3

that context' and does not 'relate[ ] to actions by consumers.').

4

California courts of appeal have applied three different tests to

5

evaluate claims by consumers under the UCL's unfair practices

6

prong.

7

247, 256 (2010).

Drum v. San Fernando Valley Bar Ass'n, 182 Cal. App. 4th

8

Under one test, a consumer must allege a "violation or

9

incipient violation of any statutory or regulatory provision, or

United States District Court
For the Northern District of California

10

any significant harm to competition."

11

256.

12

competition action under the 'unfair prong' of the UCL must be

13

tethered to specific constitutional, statutory, or regulatory

14

provisions."

15

Drum, 182 Cal. App. 4th at

The "public policy which is a predicate to a consumer unfair

Id.

Under the second test, the "unfair prong" requires a consumer

16

to plead that (1) a defendant's conduct "is immoral, unethical,

17

oppressive, unscrupulous or substantially injurious to consumers"

18

and (2) "the utility of the defendant's conduct" is outweighed by

19

"the gravity of the harm to the alleged victim."

20

(citing Smith v. State Farm Mut. Auto. Ins. Co., 93 Cal. App. 4th

21

700, 718-719 (2001)).

Id. at 257

22

The third test, which is based on the Federal Trade

23

Commission's definition of unfair business practices, requires

24

that, as a result of unfair conduct, "(1) the consumer injury must

25

be substantial; (2) the injury must not be outweighed by any

26

countervailing benefits to consumers or competition; and (3) it

27

must be an injury that consumers themselves could not reasonably

28
23

1

have avoided."

2

omitted).

3

Id. (citation and internal quotation marks

In Lozano v. AT&T Wireless Serv., Inc., 504 F.3d 718, 736

4

(9th Cir. 2007), the Ninth Circuit endorsed the tethering test or

5

the balancing test and declined "to apply the FTC standard in the

6

absence of a clear holding from the California Supreme Court."

7

See Ferrington v. McAfee, Inc., 2010 WL 3910169, at *12 (N.D. Cal.

8

2010) ("[p]ending resolution of this issue by the California

9

Supreme Court, the Ninth Circuit has approved the use of either

United States District Court
For the Northern District of California

10

the balancing or the tethering tests in consumer actions, but has

11

rejected the FTC test") (citation omitted); I.B. ex rel. Fife v.

12

Facebook, Inc., 905 F. Supp. 2d 989, 1010-11 (N.D. Cal. 2012).

13

Under either the tethering test or the balancing test,

14

Plaintiffs fail to plead sufficient facts to support a claim under

15

the unfairness prong of the UCL.

16

"tethered" their UCL claim to any "specific constitutional,

17

statutory, or regulatory provisions."

18

show how Defendants actions were "immoral, unethical, oppressive,

19

unscrupulous or substantially injurious to consumers," especially

20

because, as discussed above, they have failed to allege sufficient

21

facts to support the allegation that they were harmed due to

22

reliance on Ms. Tipton's statements.

23

Plaintiffs have not sufficiently

They have also failed to

Accordingly, the Court GRANTS Defendants' motions to dismiss

24

this cause of action.

25

remedy the deficiencies noted above if they can do so truthfully

26

and without contradicting the allegations in their prior

27

pleadings.

Plaintiffs are granted leave to amend to

28
24

1

F. BNYM's Motion to Strike

2

"The court may strike from a pleading an insufficient defense

3

or any redundant, immaterial, impertinent, or scandalous matter."

4

Fed. R. Civ. P. 12.

5

the 1AC, all of which reference punitive damages: 1AC ¶¶ 41, 60,

6

and Prayer ¶ 7.

7

BNYM for fraud and they abandoned their negligent

8

misrepresentation cause of action against BNYM.

9

not, therefore, brought any cause of action against BNYM for which

BNYM moves to strike three paragraphs from

Plaintiffs never stated a cause of action against

Plaintiffs have

United States District Court
For the Northern District of California

10

punitive damages might be appropriate.

11

GRANTS BNYM's motion to strike without leave to amend.

12
13

Accordingly, the Court

CONCLUSION
For the reasons set forth above, the Court GRANTS Defendants'

14

motions to dismiss.

15

order, Plaintiffs may file an amended complaint to remedy the

16

deficiencies identified above.

17

punitive damages claims against BNYM nor should they allege facts

18

relevant to punitive damages against BNYM.

19

further claims or allegations not authorized by this order.

20

Within fourteen days of the date of this

Plaintiffs may not include

They may not add

If Plaintiffs file an amended complaint, Defendants shall

21

respond to it within fourteen days after it is filed.

22

Defendants file a motion to dismiss, Plaintiffs shall respond to

23

the motion within fourteen days after it is filed.

24

must file a brief that responds only to the arguments raised in

25

Defendants' motion.

26

inapplicable to this case or does not respond to Defendants'

27

arguments, the Court will consider the motion to be unopposed and

28

will grant it.

If

Plaintiffs

If Plaintiffs file an opposition that is

Defendants' reply, if necessary, shall be due
25

1

seven days thereafter.

2

the papers.

Any motion to dismiss will be decided on

3
4

IT IS SO ORDERED.

5
6
7

Dated:

9/24/2014
CLAUDIA WILKEN
United States District Judge

8
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United States District Court
For the Northern District of California

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