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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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 5 KINGSWAY CAPITAL PARTNERS, LLC, Case No. 16-cv-04798-PJH Plaintiff, 6 v. 7 ORDER GRANTING BANA'S MOTION TO DISMISS 8 CALIBER HOME LOANS, INC., et al., 9 Defendants. Re: Dkt. No. 102 10 United States District Court Northern District of California 11 Before the court is defendant Bank of America, N.A.’s motion to dismiss. Dkt. 102. 12 13 The matter is fully briefed and suitable for decision without oral argument. Accordingly, 14 the hearing set for March 1, 2017 is VACATED. Having read the parties’ papers and 15 carefully considered their arguments and the relevant legal authority, and good cause 16 appearing, the court hereby GRANTS the motion, for the following reasons. BACKGROUND 17 18 19 A. Procedural History This case centers on plaintiff Nathaniel Sobayo’s efforts to purchase the property 20 located at 329 Hawk Ridge Drive, Richmond, CA 94806 (the “Property”) from Martin 21 Musonge via a short sale. The original complaint asserted three causes of action, relying 22 primarily on a February 11, 2015 letter from Bank of America, N.A. (“BANA”) to Musonge, 23 approving a short sale to Kingsway Capital Partners, LLC (“Kingsway”). Dkt. 1-1 Ex. A 24 (the “Letter” or “February 11 Letter”). The first cause of action construed the Letter as a 25 contract and asserted that the contract was breached when the short sale was cancelled. 26 Dkt. 1-1 ¶¶ 8–20. The second claim was for promissory estoppel. It alleged that the 27 Letter was a promise, on which Sobayo reasonably relied, which induced him to enter 28 into a contract to purchase the Property from Musonge, and to submit a $40,000 down 1 payment. Dkt. 1-1 ¶¶ 21–27. The third cause of action, fraud, alleged that the 2 representations in the Letter were knowingly false. Plaintiff relied on these 3 misrepresentations to perform due diligence regarding the Property, to enter into a 4 contract to purchase the Property, and to make a down payment. All three claims were 5 asserted against all of the defendants: BANA, Real Time Resolutions, Inc. (“RTR”), 6 Caliber Home Loans, Inc. (“Caliber”), and Summit Management Company, LLC 7 (“Summit”). Following a hearing, the court granted the RTR’s and BANA’s motions to dismiss 9 the original complaint in an order dated October 27, 2016. Dkt. 88. The court held that 10 Sobayo did not have standing to pursue the claims pro se on behalf of Kingsway, which 11 United States District Court Northern District of California 8 was the named buyer in the Letter and purchase contract. Id. at 8. In addition, the court 12 dismissed the complaint on the merits for failure to state a claim, with leave to amend. 13 The simple reason was the express terms of the Letter, which required closing to take 14 place by April 10, 2015, or else the short sale approval was “void.” Id. The complaint 15 admitted that no closing took place by April 10, 2015; on the contrary, the real estate 16 purchase contract was not even entered into until July 2015. Thus, even accepting all of 17 the allegations in the complaint as true, plaintiff had not stated a claim for breach of 18 contract, promissory estoppel, or fraud. Id. at 8–9. 19 20 21 22 23 24 25 26 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. 27 28 Third, to the extent that Kingsway seeks to assert claims against RTR, Caliber, and Summit, it must allege a contract, promise, or 2 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. 1 2 3 4 5 6 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. . . . 7 8 9 Finally, no new causes of action may be asserted in the amended complaint. 10 United States District Court Northern District of California 11 Dkt. 88 at 9–10. 12 Following the dismissal, Sobayo secured counsel, substituted Kingsway as 13 plaintiff, and filed the first amended complaint (“FAC”). Dkt. 96. BANA responded with a 14 motion to dismiss. Dkt. 102. Kingsway has not responded to the motion. 15 B. 16 The First Amended Complaint Kingsway’s FAC contains basically the same factual allegations as the original 17 complaint. On February 11, 2015, Musonge entered into a written agreement with BANA 18 approving a short sale of the Property to Kingsway with a sales price of $580,000. FAC 19 ¶ 8; Dkt. 1-1 Ex. A. The February 11 Letter expressly required closing to take place “no 20 later than 03/26/2015.” Id. Though this fact is not pleaded in the FAC, the documents 21 attached to the original complaint indicate that BANA subsequently extended the 22 deadline to April 10, 2015. Dkt. 1-1 Ex. A at 7. 23 The FAC alleges that BANA, at an unspecified “[s]ubsequent” time, “orally and in 24 writing waived the requirement that the short sale be for a sales price of $580,000 and 25 also waived the closing date of March 26, 2015, leaving both subjects open for 26 negotiation.” FAC ¶ 10. The February 11 Letter “was made for the benefit of a purchaser 27 of said short sale real property, including Plaintiff.” FAC ¶ 11. Relying on the Letter, 28 Kingsway entered into a written agreement to purchase the Property from Musonge. 3 1 FAC ¶ 12. The purchase agreement was entered into on July 10, 2015, and lists a price 2 of $570,000. Dkt. 1-1 Ex. B. On July 7, 2015, the first deed of trust on the Property was transferred from BANA 3 4 to Caliber. FAC ¶ 13. On November 6, 2015, Caliber approved a short sale with a 5 closing “no later than 12/04/2015” and a purchase price of $570,000. FAC ¶¶ 14–17; 6 Dkt. 1-1 Ex. C. Caliber’s approval “was made for the benefit of a purchaser of said short 7 sale real property, including Plaintiff.” FAC ¶ 14. Based on the above facts, Kingsway asserts three causes of action, each against 8 9 all defendants: 10 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 11 12 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. 13 14 15 16 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. 17 18 DISCUSSION 19 20 A. 1. 21 24 25 26 27 28 Federal Rule of Civil Procedure 12(b)(6) A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the 22 23 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). /// 4 1 A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the 2 plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to 3 support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 4 (9th Cir. 1990). The court is to “accept all factual allegations in the complaint as true and 5 construe the pleadings in the light most favorable to the nonmoving party.” Outdoor 6 Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899–900 (9th Cir. 2007). 7 Legally conclusory statements, not supported by actual factual allegations, need 8 not be accepted by the court. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). The 9 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 11 United States District Court Northern District of California 10 and quotations omitted). “A claim has facial plausibility when the plaintiff pleads factual 12 content that allows the court to draw the reasonable inference that the defendant is liable 13 for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). “[W]here the well- 14 pleaded facts do not permit the court to infer more than the mere possibility of 15 misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is 16 entitled to relief.’” Id. at 679. In the event dismissal is warranted, it is generally without 17 prejudice, unless it is clear the complaint cannot be saved by any amendment. See 18 Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005). 19 2. Federal Rule of Civil Procedure 9(b) 20 In actions alleging fraud, “the circumstances constituting fraud or mistake shall be 21 stated with particularity.” Fed. R. Civ. P. 9(b). This requires allegations of the “time, 22 place, and specific content of the false representations as well as the identities of the 23 parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 24 2007) (citations omitted). “[A]llegations of fraud must be specific enough to give 25 defendants notice of the particular misconduct which is alleged to constitute the fraud 26 charged ‘so that they can defend against the charge and not just deny that they have 27 done anything wrong.’” Sanford v. MemberWorks, Inc., 625 F.3d 550, 558 (9th Cir. 2010) 28 (citation omitted). In addition, plaintiff must explain why the disputed statement was 5 1 untrue or misleading at the time that it was made. Yourish v. Cal. Amplifier, 191 F.3d 2 983, 992–93 (9th Cir. 1999). 3 B. 4 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 6 new claim for a declaratory judgment even though the court ordered that “no new causes 7 of action may be asserted in the amended complaint.” Second, the FAC continues to 8 treat all the defendants as “an undifferentiated group,” asserting all three claims against 9 all defendants, without specifying the “contract, promise, or misrepresentation” made by 10 each defendant. Third, and most critically, plaintiff was required to plead “specific facts 11 United States District Court Northern District of California 5 that explain why the April 10, 2015 deadline [and the purchase price requirement] was 12 inapplicable and/or had been extended by the defendants.” Dkt. 88 (emphasis added). 13 Because the court finds that the FAC has not sufficiently pleaded such facts, it must be 14 dismissed. Additionally, the court addresses the individual causes of action as follows. 15 Whether the first claim for breach of contract claim against BANA survives hinges 16 on whether the FAC plausibly pleads that the closing date and purchase price 17 requirements of the Letter were waived. BANA’s February 11 Letter approved a short 18 sale only under certain circumstances: a closing before April 10, 2015 and a purchase 19 price of $580,000. Plaintiff’s own pleading admits that these conditions were not met. 20 The purchase agreement was not entered into until July 10, 2015, at a price of $570,000. 21 Seeking to plead around this fundamental problem, paragraph 10 of the FAC alleges: 22 23 24 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. 25 26 The court finds that this allegation of “waiver” is too conclusory to save the contract claim. 27 At most, the FAC alleges that these matters were “open for negotiation,” not that there 28 was a new binding contract approving a short sale with no deadline and no purchase 6 1 price requirement. Because no date is given, it is not clear whether the “waiver” was 2 made prior to the existing April 10, 2015 deadline or after it. It is not even clear whether 3 the alleged waiver was made to Musonge, or to Kingsway. 4 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 6 expressly provides, a contract in writing may be modified by an oral agreement supported 7 by new consideration.”) (emphasis added). Finally, because the Letter was “an 8 agreement authorizing . . . any other person to purchase or sell real estate,” Cal. Civ. 9 Code § 1624(a), it was subject to the statute of frauds and any modification would have 10 to be in writing. See Secrest v. Sec. Nat. Mortg. Loan Trust 2002-2, 167 Cal. App. 4th 11 United States District Court Northern District of California 5 544, 553 (2008) (“An agreement to modify a contract that is subject to the statute of 12 frauds is also subject to the statute of frauds.”). Although paragraph 10 does allege that 13 the waiver was made both “orally and in writing,” no writing is attached to the FAC, and 14 no specifics about any writing are alleged. For these reasons, the first cause of action for 15 breach of contract is DISMISSED as to BANA. 16 The second and third claims also fail to state a claim against BANA. Fraud must 17 be pleaded with particularity, and the complaint nowhere specifically alleges any 18 misrepresentations made by BANA to Kingsway. The short sale approval letter by BANA 19 made representations to Musonge, not to Kingsway, and in any event the Letter was not 20 misleading by its express terms and the plaintiff’s own allegations. To the extent that the 21 alleged misrepresentations were made in the “waiver,” plaintiff has not pleaded “the who, 22 what, when, and how” of the fraud as required by Rule 9(b). Vess v. Ciba-Geigy Corp. 23 USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quotation omitted). 24 The third claim for declaratory relief was not permitted under the court’s prior 25 order. Regardless, declaratory relief is not an independent cause of action, but a remedy 26 that must be based upon some other viable legal claim. Wishnev v. Nw. Mut. Life Ins. 27 Co., 162 F. Supp. 3d 930, 952 (N.D. Cal. 2016) (“Declaratory relief is not an independent 28 cause of action or theory of recovery, only a remedy.”). 7 1 CONCLUSION 2 For the foregoing reasons, BANA’s motion to dismiss is GRANTED, and the 3 complaint is dismissed as to BANA. Because plaintiff has already been afforded an 4 opportunity to amend the complaint, but failed to cure its deficiencies despite the clear 5 instructions of the court, the dismissal is WITH PREJUDICE. BANA shall be terminated 6 as a defendant in this matter. 7 The court will address RTR’s recently filed motion to dismiss (Dkt. 108), as well as 8 any response to the complaint by Caliber and Summit, once those matters are fully 9 briefed (presuming that the motion is not mooted in light of the parties’ settlement 10 United States District Court Northern District of California 11 12 discussions, see Dkt. 104). IT IS SO ORDERED. Dated: February 23, 2017 13 14 15 __________________________________ PHYLLIS J. HAMILTON United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28 8

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