Sobayo v. Caliber Home Loans, Inc. et al

Filing 109

Order by Hon. Phyllis J. Hamilton granting 102 Bank of America, N.A.'s Motion to Dismiss.(pjhlc2S, COURT STAFF) (Filed on 2/23/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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KINGSWAY CAPITAL PARTNERS, LLC,

Case No. 16-cv-04798-PJH

Plaintiff,

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v.

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ORDER GRANTING BANA'S MOTION
TO DISMISS

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CALIBER HOME LOANS, INC., et al.,

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Defendants.

Re: Dkt. No. 102

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United States District Court
Northern District of California

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Before the court is defendant Bank of America, N.A.’s motion to dismiss. Dkt. 102.

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The matter is fully briefed and suitable for decision without oral argument. Accordingly,

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the hearing set for March 1, 2017 is VACATED. Having read the parties’ papers and

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carefully considered their arguments and the relevant legal authority, and good cause

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appearing, the court hereby GRANTS the motion, for the following reasons.
BACKGROUND

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A.

Procedural History
This case centers on plaintiff Nathaniel Sobayo’s efforts to purchase the property

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located at 329 Hawk Ridge Drive, Richmond, CA 94806 (the “Property”) from Martin

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Musonge via a short sale. The original complaint asserted three causes of action, relying

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primarily on a February 11, 2015 letter from Bank of America, N.A. (“BANA”) to Musonge,

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approving a short sale to Kingsway Capital Partners, LLC (“Kingsway”). Dkt. 1-1 Ex. A

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(the “Letter” or “February 11 Letter”). The first cause of action construed the Letter as a

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contract and asserted that the contract was breached when the short sale was cancelled.

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Dkt. 1-1 ¶¶ 8–20. The second claim was for promissory estoppel. It alleged that the

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Letter was a promise, on which Sobayo reasonably relied, which induced him to enter

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into a contract to purchase the Property from Musonge, and to submit a $40,000 down

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payment. Dkt. 1-1 ¶¶ 21–27. The third cause of action, fraud, alleged that the

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representations in the Letter were knowingly false. Plaintiff relied on these

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misrepresentations to perform due diligence regarding the Property, to enter into a

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contract to purchase the Property, and to make a down payment. All three claims were

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asserted against all of the defendants: BANA, Real Time Resolutions, Inc. (“RTR”),

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Caliber Home Loans, Inc. (“Caliber”), and Summit Management Company, LLC

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(“Summit”).
Following a hearing, the court granted the RTR’s and BANA’s motions to dismiss

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the original complaint in an order dated October 27, 2016. Dkt. 88. The court held that

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Sobayo did not have standing to pursue the claims pro se on behalf of Kingsway, which

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United States District Court
Northern District of California

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was the named buyer in the Letter and purchase contract. Id. at 8. In addition, the court

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dismissed the complaint on the merits for failure to state a claim, with leave to amend.

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The simple reason was the express terms of the Letter, which required closing to take

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place by April 10, 2015, or else the short sale approval was “void.” Id. The complaint

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admitted that no closing took place by April 10, 2015; on the contrary, the real estate

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purchase contract was not even entered into until July 2015. Thus, even accepting all of

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the allegations in the complaint as true, plaintiff had not stated a claim for breach of

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contract, promissory estoppel, or fraud. Id. at 8–9.

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The court instructed the plaintiff as follows regarding amendment:
First, any amended complaint must be brought on behalf of Kingsway
Capital Partners, LLC. Kingsway must be represented by legal
counsel, who shall enter an appearance on the docket.
Second, to the extent that Kingsway wishes to rely on the Letter as the
operative contract/promise, it must allege specific facts that explain
why the April 10, 2015 deadline was inapplicable and/or had been
extended by the defendants. A similar explanation must be made with
regard to the fact that the purchase price in the contract between
Kingsway and Musonge is lower than that approved in the Letter. To
the extent that Kingsway wishes to rely on other short sale approvals
by defendants, those facts must be pled in the complaint.

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Third, to the extent that Kingsway seeks to assert claims against RTR,
Caliber, and Summit, it must allege a contract, promise, or
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misrepresentation made by these defendants. As pled, the complaint
focuses on representations made by [BANA] to Musonge in the Letter.
Even presuming that Kingsway can claim to be a third party
beneficiary to the Letter, it is not clear to the court why RTR, Caliber,
or Summit would be bound by the representations in the Letter. Any
amended
complaint
shall
make
clear
what
specific
contracts/promises/representations were made by each defendant . . .
It is not sufficient to treat all of the defendants as an undifferentiated
group.

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Fourth, to the extent Kingsway seeks to rely on the theory that
defendants failed to notify it regarding the transfer of servicing of
Musonge’s loans, Kingsway must explain why any defendant had a
duty to notify Kingsway about the transfer of servicing. . . .

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Finally, no new causes of action may be asserted in the amended
complaint.

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United States District Court
Northern District of California

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Dkt. 88 at 9–10.

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Following the dismissal, Sobayo secured counsel, substituted Kingsway as

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plaintiff, and filed the first amended complaint (“FAC”). Dkt. 96. BANA responded with a

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motion to dismiss. Dkt. 102. Kingsway has not responded to the motion.

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B.

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The First Amended Complaint
Kingsway’s FAC contains basically the same factual allegations as the original

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complaint. On February 11, 2015, Musonge entered into a written agreement with BANA

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approving a short sale of the Property to Kingsway with a sales price of $580,000. FAC

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¶ 8; Dkt. 1-1 Ex. A. The February 11 Letter expressly required closing to take place “no

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later than 03/26/2015.” Id. Though this fact is not pleaded in the FAC, the documents

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attached to the original complaint indicate that BANA subsequently extended the

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deadline to April 10, 2015. Dkt. 1-1 Ex. A at 7.

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The FAC alleges that BANA, at an unspecified “[s]ubsequent” time, “orally and in

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writing waived the requirement that the short sale be for a sales price of $580,000 and

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also waived the closing date of March 26, 2015, leaving both subjects open for

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negotiation.” FAC ¶ 10. The February 11 Letter “was made for the benefit of a purchaser

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of said short sale real property, including Plaintiff.” FAC ¶ 11. Relying on the Letter,

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Kingsway entered into a written agreement to purchase the Property from Musonge.
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FAC ¶ 12. The purchase agreement was entered into on July 10, 2015, and lists a price

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of $570,000. Dkt. 1-1 Ex. B.
On July 7, 2015, the first deed of trust on the Property was transferred from BANA

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to Caliber. FAC ¶ 13. On November 6, 2015, Caliber approved a short sale with a

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closing “no later than 12/04/2015” and a purchase price of $570,000. FAC ¶¶ 14–17;

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Dkt. 1-1 Ex. C. Caliber’s approval “was made for the benefit of a purchaser of said short

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sale real property, including Plaintiff.” FAC ¶ 14.
Based on the above facts, Kingsway asserts three causes of action, each against

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all defendants:

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1. Breach of Contract. Alleges that plaintiff “performed all the terms
and conditions of the subject contracts” (presumably, BANA and
Caliber’s short sale approval letters). However, “Defendants refused
to complete the short sale.” FAC ¶¶ 18–19.

United States District Court
Northern District of California

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2. Fraud Per Cal Civil Code § 1572(4). Alleges that at the time that
defendants issued their letters promising to approve the short sale of
the Property, “they had no intention of performing such promises.”
Plaintiff reasonably relied on these “fraudulent promises.” FAC ¶¶ 21–
24.

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3. Declaratory Relief. Plaintiff seeks a judicial declaration “setting
forth the rights and duties” of the parties with regard to the short sale
of the Property. FAC ¶¶ 26–27.

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DISCUSSION

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A.

1.

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Federal Rule of Civil Procedure 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the

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Legal Standards

legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d
1191, 1199–1200 (9th Cir. 2003). To survive a motion to dismiss for failure to state a
claim, a complaint generally must satisfy the requirements of Federal Rule of Civil
Procedure 8, which requires that a complaint include a “short and plain statement of the
claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
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A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the

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plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to

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support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699

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(9th Cir. 1990). The court is to “accept all factual allegations in the complaint as true and

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construe the pleadings in the light most favorable to the nonmoving party.” Outdoor

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Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899–900 (9th Cir. 2007).

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Legally conclusory statements, not supported by actual factual allegations, need

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not be accepted by the court. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). The

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allegations in the complaint “must be enough to raise a right to relief above the
speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations

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United States District Court
Northern District of California

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and quotations omitted). “A claim has facial plausibility when the plaintiff pleads factual

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content that allows the court to draw the reasonable inference that the defendant is liable

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for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). “[W]here the well-

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pleaded facts do not permit the court to infer more than the mere possibility of

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misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is

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entitled to relief.’” Id. at 679. In the event dismissal is warranted, it is generally without

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prejudice, unless it is clear the complaint cannot be saved by any amendment. See

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Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005).

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2.

Federal Rule of Civil Procedure 9(b)

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In actions alleging fraud, “the circumstances constituting fraud or mistake shall be

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stated with particularity.” Fed. R. Civ. P. 9(b). This requires allegations of the “time,

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place, and specific content of the false representations as well as the identities of the

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parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.

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2007) (citations omitted). “[A]llegations of fraud must be specific enough to give

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defendants notice of the particular misconduct which is alleged to constitute the fraud

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charged ‘so that they can defend against the charge and not just deny that they have

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done anything wrong.’” Sanford v. MemberWorks, Inc., 625 F.3d 550, 558 (9th Cir. 2010)

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(citation omitted). In addition, plaintiff must explain why the disputed statement was
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untrue or misleading at the time that it was made. Yourish v. Cal. Amplifier, 191 F.3d

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983, 992–93 (9th Cir. 1999).

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B.

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Analysis
As an initial matter, the court observes that plaintiff has failed to comply with its

instructions regarding amendment in several respects. First, the FAC purports to make a

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new claim for a declaratory judgment even though the court ordered that “no new causes

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of action may be asserted in the amended complaint.” Second, the FAC continues to

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treat all the defendants as “an undifferentiated group,” asserting all three claims against

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all defendants, without specifying the “contract, promise, or misrepresentation” made by

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each defendant. Third, and most critically, plaintiff was required to plead “specific facts

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United States District Court
Northern District of California

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that explain why the April 10, 2015 deadline [and the purchase price requirement] was

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inapplicable and/or had been extended by the defendants.” Dkt. 88 (emphasis added).

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Because the court finds that the FAC has not sufficiently pleaded such facts, it must be

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dismissed. Additionally, the court addresses the individual causes of action as follows.

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Whether the first claim for breach of contract claim against BANA survives hinges

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on whether the FAC plausibly pleads that the closing date and purchase price

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requirements of the Letter were waived. BANA’s February 11 Letter approved a short

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sale only under certain circumstances: a closing before April 10, 2015 and a purchase

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price of $580,000. Plaintiff’s own pleading admits that these conditions were not met.

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The purchase agreement was not entered into until July 10, 2015, at a price of $570,000.

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Seeking to plead around this fundamental problem, paragraph 10 of the FAC alleges:

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Subsequent to February 11, 2015, however, [BANA] orally and in
writing waived the requirement that the subject short sale be for a
sales price of $580,000 and also waived the closing date of March 26,
2015, leaving both subjects open for negotiation and mutual
agreement between [BANA] and Plaintiff.

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The court finds that this allegation of “waiver” is too conclusory to save the contract claim.

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At most, the FAC alleges that these matters were “open for negotiation,” not that there

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was a new binding contract approving a short sale with no deadline and no purchase
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price requirement. Because no date is given, it is not clear whether the “waiver” was

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made prior to the existing April 10, 2015 deadline or after it. It is not even clear whether

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the alleged waiver was made to Musonge, or to Kingsway.

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Moreover, as BANA points out, there is no allegation that any consideration was
given in return for the “wavier.” Cal. Civ. Code § 1698(c) (“Unless the contract otherwise

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expressly provides, a contract in writing may be modified by an oral agreement supported

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by new consideration.”) (emphasis added). Finally, because the Letter was “an

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agreement authorizing . . . any other person to purchase or sell real estate,” Cal. Civ.

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Code § 1624(a), it was subject to the statute of frauds and any modification would have

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to be in writing. See Secrest v. Sec. Nat. Mortg. Loan Trust 2002-2, 167 Cal. App. 4th

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United States District Court
Northern District of California

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544, 553 (2008) (“An agreement to modify a contract that is subject to the statute of

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frauds is also subject to the statute of frauds.”). Although paragraph 10 does allege that

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the waiver was made both “orally and in writing,” no writing is attached to the FAC, and

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no specifics about any writing are alleged. For these reasons, the first cause of action for

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breach of contract is DISMISSED as to BANA.

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The second and third claims also fail to state a claim against BANA. Fraud must

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be pleaded with particularity, and the complaint nowhere specifically alleges any

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misrepresentations made by BANA to Kingsway. The short sale approval letter by BANA

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made representations to Musonge, not to Kingsway, and in any event the Letter was not

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misleading by its express terms and the plaintiff’s own allegations. To the extent that the

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alleged misrepresentations were made in the “waiver,” plaintiff has not pleaded “the who,

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what, when, and how” of the fraud as required by Rule 9(b). Vess v. Ciba-Geigy Corp.

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USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quotation omitted).

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The third claim for declaratory relief was not permitted under the court’s prior

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order. Regardless, declaratory relief is not an independent cause of action, but a remedy

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that must be based upon some other viable legal claim. Wishnev v. Nw. Mut. Life Ins.

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Co., 162 F. Supp. 3d 930, 952 (N.D. Cal. 2016) (“Declaratory relief is not an independent

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cause of action or theory of recovery, only a remedy.”).
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CONCLUSION

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For the foregoing reasons, BANA’s motion to dismiss is GRANTED, and the

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complaint is dismissed as to BANA. Because plaintiff has already been afforded an

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opportunity to amend the complaint, but failed to cure its deficiencies despite the clear

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instructions of the court, the dismissal is WITH PREJUDICE. BANA shall be terminated

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as a defendant in this matter.

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The court will address RTR’s recently filed motion to dismiss (Dkt. 108), as well as

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any response to the complaint by Caliber and Summit, once those matters are fully

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briefed (presuming that the motion is not mooted in light of the parties’ settlement

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United States District Court
Northern District of California

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discussions, see Dkt. 104).
IT IS SO ORDERED.
Dated: February 23, 2017

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__________________________________
PHYLLIS J. HAMILTON
United States District Judge

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