Hutchins v. Nationstar Mortgage LLC et al

Filing 53

ORDER granting 40 Motion to Dismiss. (pjhlc1, COURT STAFF) (Filed on 9/22/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 JAMES HUTCHINS, 9 Case No. 16-cv-07067-PJH Plaintiff, 8 v. ORDER GRANTING DEFENDANT'S MOTION TO DISMISS NATIONSTAR MORTGAGE LLC, et al., 11 United States District Court Northern District of California 10 Defendants. 12 13 14 The motion of defendant Nationstar Mortgage LLC (“Nationstar”) for an order 15 dismissing the first amended complaint (“FAC”) pursuant to Federal Rule of Civil 16 Procedure 12(b)(6) for failure to state a claim came on for hearing before this court on 17 August 2, 2017. Plaintiff James Hutchins appeared by his counsel Arash Moussavian, 18 and Nationstar appeared by its counsel Megan Kelly. Having read the parties’ papers 19 and carefully considered their arguments and the relevant legal authority, the court 20 hereby GRANTS defendant’s motion. 21 BACKGROUND 22 In July 2004, plaintiff James Hutchins financed the purchase of real property 23 located in Livermore, California ("the property") through a first and second combination 24 loan, in the principal amounts of $958,400.00 ("the Loan") and $119,680.00, respectively. 25 FAC ¶ 23 & Exh. A; Def's RJN Exh. 1. The Loan was secured by a Deed of Trust, 26 recorded against the property, and memorialized by a promissory note, and the lender 27 was Bank of America, N.A. ("BofA"). See FAC ¶ 23 & Exh. A. The term of the Loan ran 28 to September 1, 2034. FAC Exh. A. 1 The Deed of Trust included an adjustable rate rider, providing that the initial 2 interest rate would be 4.876%, with a possible rate change on September 1, 2009. The 3 period from the origination of the loan through September 1, 2009, was an "interest only" 4 period. Thereafter, during the "amortization" period, the monthly payment would be 5 calculated based on the changed interest rate plus an amount sufficient to repay the 6 capital principal through the life of the loan. See FAC Exh. A. 7 Plaintiff alleges that in late 2008, he and his wife were “feeling the effects of the recession,” and he began calling BofA, asking about a loan modification. FAC ¶ 24. He 9 asserts that July 2009, he submitted a complete "loan modification package" to BofA; that 10 he was told he had to be 90 days late (on the payments) before a loan modification could 11 United States District Court Northern District of California 8 be considered; that he was advised to stop paying his mortgage; and that his last 12 payment on the Loan was made on July 10, 2009. FAC ¶ 24. 13 Plaintiff alleges that on January 5, 2010, he was informed by BofA that his loan 14 modification application was denied. FAC ¶ 25. He claims, however, that the 15 "information" had been incorrectly "inputted" in the system, and was then corrected and 16 resubmitted, and asserts that on March 3, 2010, he was informed that his application was 17 "conditionally approved.” FAC ¶ 25. He claims that he "proceeded with the loan 18 modification process for three years until the loan servicing was transferred to Nationstar 19 in November of 2013;" and that he "never received any documentation or information 20 about being denied in his January 10, 2010, submission." FAC ¶ 25. 21 On April 4, 2012, plaintiff "experienced significant hardship" when he lost his job of 22 25 years, without advance notice, which he claims caused him to "fall further behind on 23 the mortgage payments," FAC ¶ 27 (which payments, as alleged in FAC ¶ 24, he had not 24 been making since July 2009). Plaintiff claims that after his loan was "switched to 25 Nationstar" – which he alleges occurred in November 2013, FAC ¶ 25, he obtained 26 gainful employment and his income returned, FAC ¶ 28. 27 28 Plaintiff asserts that as required by the Homeowners Bill of Rights (“HBOR”), Nationstar provided him with a single point of contact (“SPOC”) – an individual by the 2 1 name of Ms. Karp – but claims that he was never able to reach her. FAC ¶¶ 29-31, 84. 2 He alleges that he tried to follow up with Ms. Karp as to the "ongoing loan modification 3 review that had been submitted to prior servicer BofA, and the status of that review that 4 was ongoing during and after the transfer of servicing to Nationstar." FAC ¶ 30. 5 However, he contends that he received no response to emails sent to Ms. Karp on 6 December 9, 2014, and December 18, 2014. FAC ¶ 30. 7 Plaintiff sent Ms. Karp another email on January 7, 2015, and claims he received a 8 response on January 9, 2015, stating, "You are welcome to contact Nationstar costumer 9 [sic] service directly pertaining to your account with us." FAC ¶¶ 30-31. He alleges that although he was informed that Ms. Karp was his SPOC, she "did not fulfill any of her 11 United States District Court Northern District of California 10 duties under the code," and that he was thereafter “unable to contact anyone at 12 Nationstar familiar with his loan.” FAC ¶ 31. He asserts that in July 2015, he sent a letter 13 to Nationstar inquiring about the status of the "ongoing loan modification review," but that 14 "[t]here was no written response from Nationstar on that issue," although Nationstar 15 "continued to send him mortgage statements on a monthly basis." FAC ¶ 32. 16 A Notice of Default and Election to Sell Under Deed of Trust was recorded against 17 the property on November 6, 2015. FAC ¶ 33 & Exh. B; Def's RJN Exh. 6. Plaintiff 18 alleges that the Notice contained a "false declaration" pursuant to California Civil Code 19 § 2923.55(f), signed on January 23, 2015, averring that Nationstar had contacted plaintiff 20 to assess his financial situation and to explore options to avoid foreclosure, and that 30 or 21 more days had passed since those efforts were satisfied. FAC ¶ 33. Plaintiff claims he 22 had no such contact or conversation with Nationstar. FAC ¶ 33. 23 Plaintiff asserts that on December 10, 2015, after receiving the Notice of Default, 24 he called Nationstar and talked with "Faye," who stated that “the records” showed that a 25 loan modification application was submitted, and under review, and that there were no 26 documents showing if it was approved or denied. FAC ¶ 34. Plaintiff claims that "[t]his 27 referred to the loan modification submission that he had submitted to Bank of America," 28 and asserts that the review was thus "ongoing and continuing when the loan was 3 1 transferred to Nationstar." FAC ¶ 34. Plaintiff claims he informed "Faye" that the filing of 2 the Notice of Default violated the dual-tracking laws, and "Faye" said she would 3 "escalate" the issue. FAC ¶ 34. Plaintiff asserts that he called Nationstar on December 15, 2015, and spoke with 5 "Monique," who informed him that there had been no response from "escalation[;]" and 6 that he contacted Nationstar on January 5, 2016, and spoke to "Icy," who advised him 7 that the loan modification was "denied." FAC ¶ 35. Plaintiff asserts that this “verbal 8 denial” was improper because "the Code" requires that denials be in writing. FAC ¶ 35. 9 Thereafter, he alleges, he again contacted Nationstar to inquire about a loan 10 modification, and on or around January 22, 2016, submitted a “complete loan 11 United States District Court Northern District of California 4 modification application.” FAC ¶ 36. This application was allegedly denied on March 22, 12 2016, "due to Negative NPV." FAC ¶ 37. 13 On April 21, 2016, plaintiff’s counsel Joseph R. Manning, Jr., wrote a letter to 14 Nationstar appealing the March 22, 2016 denial. FAC ¶ 38 & Exh. C. Mr. Manning 15 stated in the April 21, 2016, letter that according to the denial letter (not attached), 16 plaintiff “was ‘evaluated for mortgage payment assistance based on the eligibility 17 requirements of Wells Fargo Bank, N.A.’ but was declined for HAMP Tiers I and II due to 18 an ineligible mortgage and for a standard modification due to the borrower’s ‘Negative 19 NPV.’” FAC Exh. C. He added, “[a]s you know, Cal. Civil Code Section 2923.6(f)(3) 20 requires that if a loan modification application is denied due to a net present value 21 calculation, ‘a statement that the borrower may obtain all of the inputs used’ by written 22 request, must be included in the denial letter[,]” but that the denial letter did not include 23 that statement. FAC Exh. C. 24 Mr. Manning stated further that plaintiff disputed the value in the denial letter for 25 monthly gross income (too low) and property value (too high, considering repairs that 26 were needed). Finally, he stated that in his opinion, plaintiff could qualify for a 2%, 40- 27 year term loan, and requested that Nationstar provide an updated analysis and review 28 based on the information provided in the letter, as well as information regarding all 4 1 available loan modification options. See FAC Exh. C. On May 27, 2016, Nationstar recorded a Notice of Trustee's Sale. FAC ¶ 39 & 2 3 Exh. D; Def’s RJN Exh. 7. Plaintiff claims that the recording of this Notice violated 4 California Civil Code § 2923.6, which prohibits recording a Notice of Trustee's Sale while 5 an appeal of a denial of a loan modification is pending. See FAC ¶ 39. Plaintiff alleges 6 that on May 27, 2016, his attorneys submitted a "Notice of Error" (“NOE”) regarding this 7 violation, but that Nationstar did not rescind the Notice of Sale or the November 2015 8 Notice of Default. FAC ¶ 40. Plaintiff also claims that he had a "sharp change in 9 circumstances" in mid-2016, but that he was "never offered a fair opportunity to be 10 evaluated" and was never evaluated for a "foreclosure prevention alternative." FAC ¶ 41. In the original complaint, plaintiff cited to a letter written by his attorney Mr. United States District Court Northern District of California 11 12 Manning to Nationstar on September 6, 2016, stating that a written denial of the loan 13 modification request was never received – only a "supplemental follow-up." See Orig. 14 Cplt ¶ 50 & Exh. C.1 This letter begins, "In a letter dated August 8, 2016, Nationstar . . . 15 denied the above-referenced borrower [Hutchins] for a loan modification. This letter shall 16 serve both as an appeal and a formal request for additional information regarding the 17 reason or reasons for the denial." Orig. Cplt Exh. C. According to the September 6, 2016, letter, Nationstar's denial letter stated that 18 19 plaintiff was "not eligible for a loan modification due to negative NPV and that Nationstar 20 is unable to offer a HAMP modification, subject to investor restrictions that were used in 21 the NPV evaluation." Orig. Cplt Exh. C. However, the letter goes on, "we never received 22 a written denial letter, as was claimed in the August 8, 2016 letter. . . . Without the 23 separate non-approval notice, which was never received by our client, we cannot 24 intelligibly understand the process used to make this determination and the claimed 25 investor restrictions." Orig. Cplt Exh. C. Mr. Manning proposed that Nationstar "forgive 26 or defer $350,000 of the arrears and provide a 2%-3% interest rate for a 40 year term." 27 1 28 The September 6, 2016, letter was attached to the original complaint, but is not attached to the FAC. 5 1 That, he asserted, would make it possible for plaintiff to qualify for a loan he would be 2 able to "continue." Orig. Cplt Exh. C. Plaintiff alleged further in the original complaint that while his counsel sent NOEs 3 4 to Nationstar in May 2016, Nationstar did not respond until October 6, 2016. See Orig. 5 Cplt ¶¶ 63-64 & Exh. N (Oct. 6, 2016, letter from Nationstar to Mr. Manning, in response 6 to Mr. Manning’s letter received by Nationstar on September 7, 2016).2 Plaintiff asserted 7 in the original complaint that "since there was no denial letter," he had no time to appeal, 8 and as of the date of the complaint, he did not “know what happened to other loan 9 modification submissions, written denials, and were not provided any information on how 10 to appeal or their procedures for appealing." Orig. Cplt ¶ 64. What Nationstar's October 6, 2016, letter actually said was that Nationstar had United States District Court Northern District of California 11 12 reviewed the account and determined that a "printing error" had occurred, which resulted 13 in the actual denial letter not being generated. Nationstar added that it had manually 14 generated the denial letter, and was enclosing it with the October 6, 2016, letter, with an 15 apology for the delay. Orig. Cplt Exh. N. at 1. Nationstar went on to explain that after 16 reviewing the account, it "determined that the denial for modification assistance on July 17 29, 2016, was valid," adding that the account was determined to be ineligible for HAMP 18 Tier I and HAMP Tier II because the unpaid principal balance of the Loan exceeded the 19 program's limit of $729,750. Id. 20 In response to plaintiff's counsel's claim that Nationstar had failed to review 21 plaintiff for alternative modifications, Nationstar responded that plaintiff was not reviewed 22 for HAMP "due to the aforementioned guidelines" but that he was in fact reviewed for the 23 remaining available modification options. Id. However, the Standard Modification was 24 denied due to negative Net Present Value (NPV) – an analysis that takes into account 25 only gross monthly income and property value. Id. Nationstar then went on to explain in 26 detail how it calculated net monthly income, and stated that the value of the property at 27 2 28 The October 6, 2016, letter was attached to the original complaint, but is not attached to the FAC. 6 1 that time was $1.4 million. Id. at 2. Nationstar also provided information regarding how 2 plaintiff could challenge the stated property value used in this calculation. Id. 3 Nationstar added that there were other "loss mitigation alternatives" that might be 4 available, including reinstatement (requiring payment of the total amount delinquent), 5 deed-in-lieu (voluntarily transferring the property to Nationstar to satisfy the debt and 6 avoid foreclosure), and pre-foreclosure/short sale (listing the property for sale and 7 acceptance of sale proceeds by Nationstar in exchange for release of lien, even if less 8 than amount owed). Id. at 2. Nationstar provided a statement of the amount owing (and 9 delinquent); and advised, "If you have any questions regarding payment assistance or the status of the account, you can contact Brenda Mansfield, the assigned Single Point of 11 United States District Court Northern District of California 10 Contact (SPOC), directly[.]" Id. Nationstar also provided the phone number of the Loss 12 Mitigation Department, and the phone number and contact information for the person 13 writing the letter. Id. at 3. 14 Plaintiff filed the original complaint in Alameda County Superior Court on 15 November 2, 2016. The case was removed to this court on December 9, 2016. Plaintiff 16 asserted nine causes of action. On March 24, 2017, Nationstar filed a motion to dismiss, 17 which was granted in an order issued on May 12, 2017 (the “Order”). The court granted 18 leave to amend as to five causes of action only – (1) dual-tracking in violation of Cal. Civ. 19 Code § 2923.6; (2) failure to provide an SPOC, in violation of Cal. Civ. Code § 2923.7; 20 (3) unfair, unlawful, and fraudulent business acts and practices, in violation of Cal. Bus & 21 Prof. Code § 17200; (4) negligence, and (5) negligent misrepresentation. 22 Plaintiff filed the FAC on June 7, 2017, asserting the five causes of action listed 23 above. Plaintiff also alleges that because of the "substantial arrearages," which include 24 unspecified “unnecessary fees added to the loan balance," he has not been able to cure 25 the default, and he has been unable to negotiate a mortgage payment he can afford. 26 FAC ¶ 42. He remains in possession of the property, and concedes no Trustee's sale 27 has occurred, but he asserts that the Notice of Default has not been rescinded, so 28 "further foreclosure proceedings are anticipated." FAC ¶ 43. He contends that "all 7 1 foreclosure activity on the property must cease until his "initial application" is fairly and 2 properly evaluated and a written denial is mailed. FAC ¶ 44. Nationstar now seeks an 3 order dismissing the FAC. DISCUSSION 4 5 6 A. Legal Standard A motion to dismiss under Rule 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, 349 F.3d 1191, 1199-1200 (9th Cir. 2003). 8 Under Federal Rule of Civil Procedure 8, which requires that a complaint include a "short 9 and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. 10 P. 8(a)(2), a complaint may be dismissed under Rule 12(b)(6) if the plaintiff fails to state a 11 United States District Court Northern District of California 7 cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal 12 theory. Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). 13 While the court is to accept as true all the factual allegations in the complaint, 14 legally conclusory statements, not supported by actual factual allegations, need not be 15 accepted. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); see also In re Gilead Scis. 16 Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). The complaint must proffer sufficient 17 facts to state a claim for relief that is plausible on its face. Bell Atlantic Corp. v. Twombly, 18 550 U.S. 544, 555, 558-59 (2007) (citations and quotations omitted). A claim has facial 19 plausibility when the plaintiff pleads factual content that allows the court to draw the 20 reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 21 U.S. at 678 (citation omitted). "[W]here the well-pleaded facts do not permit the court to 22 infer more than the mere possibility of misconduct, the complaint has alleged – but it has 23 not 'show[n]' – that the pleader is entitled to relief.'" Id. at 679. Where dismissal is 24 warranted, it is generally without prejudice, unless it is clear the complaint cannot be 25 saved by any amendment. Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005). 26 Review is generally limited to the contents of the complaint, although the court can 27 also consider a document on which the complaint relies if the document is central to the 28 claims asserted in the complaint, and no party questions the authenticity of the 8 1 document. See Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007). The court may 2 consider matters that are properly the subject of judicial notice, Knievel v. ESPN, 393 3 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001), 4 and may also consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. 5 Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), and documents 6 referenced extensively in the complaint and documents that form the basis of a the 7 plaintiff's claims. See No. 84 Emp'r-Teamster Jt. Counsel Pension Tr. Fund v. Am. W. 8 Holding Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003). 9 B. 10 Defendant's Motion Nationstar argues that each of plaintiff's five causes of action should be dismissed United States District Court Northern District of California 11 for failure to state a claim, and that the entire complaint should be dismissed with 12 prejudice because plaintiff has been given leave to amend and failed to correct the 13 deficiencies in the prior complaint as instructed by the court. 14 1. California Civil Code § 2923.6 15 The first cause of action asserts that Nationstar violated Civil Code § 2923.6, 16 which is part of the HBOR. Section 2923.6 limits the ability of a lender to issue a notice 17 of default or a notice of sale, or conduct a trustee's sale on a “first lien loan modification” 18 until one of three conditions occurs: (1) the mortgage servicer makes a written 19 determination that the borrower is not eligible for a first lien loan modification, and any 20 appeal period has expired; (2) the borrower does not accept an offered first lien loan 21 modification within fourteen days of the offer; or (3) the borrower accepts a written first 22 lien loan modification, but defaults on, or otherwise breaches the borrower's obligations 23 under, the first lien loan modification. See Cal. Civ. Code § 2923.6(c)(1)-(3). 24 Another section of the HBOR, Civil Code § 2924.12, provides that there can be no 25 liability for violation of specified sections of the HBOR, including § 2923.6, where the 26 alleged violation has been “corrected and remedied” prior to the recordation of a trustee's 27 deed upon sale. Cal. Civ. Code § 2924.12(c). Additionally, even where there is liability, 28 the remedies are limited, depending on whether a trustee’s deed upon sale has been 9 1 recorded. See Cal. Civ. Code § 2924.12(a)(1), (b) (Where a trustee’s deed upon sale 2 has not been recorded, a borrower is limited to seeking an injunction to enjoin an 3 improper foreclosure. Only where a trustee’s deed upon sale has been recorded, can a 4 borrower seek damages for the violation.). 5 In this cause of action, plaintiff alleges that he has never "been fairly evaluated for a foreclosure prevention alternative," and that he has not "been afforded a fair 7 opportunity to be evaluated for a foreclosure prevention alternative." FAC ¶ 72; see also 8 FAC ¶ 77. He asserts that "[t]he loan modification which was started with Bank of 9 America then transferred to Nationstar was not denied in writing prior to Nationstar 10 wrongfully recording the Notice of Default" on November 16, 2015, which he claims 11 United States District Court Northern District of California 6 constituted “dual tracking.” FAC ¶¶ 72, 76. In addition, plaintiff alleges that Nationstar 12 "wrongfully recorded" the Notice of Trustee's Sale before he received the result of his 13 appeal of the loan modification denial. FAC ¶ 73. 14 Further, plaintiff contends that he has experienced a "change in circumstances" 15 which “necessitates another review” under § 2923.6(g), which provides that a lender must 16 evaluate a loan modification application when the borrower has experienced a "change in 17 circumstances" which might make it possible for him to qualify. FAC ¶ 73. He asserts 18 that all foreclosure activity on the property must cease until Nationstar has conducted this 19 further evaluation and has mailed a written denial. FAC ¶ 74. Plaintiff claims that 20 Nationstar “has been notified of [his] material financial change.” FAC ¶ 77. 21 Nationstar argues that despite having been given an opportunity to amend his 22 complaint, plaintiff still has not alleged any material violation of the § 2923.6, and has not 23 pled any facts showing how the purported violation of § 2923.6 has injured him. For 24 example, Nationstar asserts, plaintiff has not alleged facts showing that he submitted a 25 complete loan modification application to Nationstar before the Notice of Default was 26 recorded in November 2015. Nationstar notes that the only application plaintiff claims to 27 have been submitted prior to the recording of the Notice of Default was an application 28 submitted to the prior servicer, BofA, in July 2009, several years before the effective date 10 1 2 of the HBOR. Moreover, Nationstar asserts, documents incorporated into the original complaint 3 (but omitted in the FAC) demonstrate that Nationstar reviewed plaintiff for a loan 4 modification in or about July 2016. As set forth in the October 6, 2016 letter, appended to 5 the original complaint as Exhibit N, Nationstar conducted a modification review and 6 issued a denial on or about August 8, 2016. Plaintiff appealed the denial, and 7 Nationstar’s October 6, 2016, letter affirmed that the denial for modification assistance 8 was valid. See Orig Cplt. Exh. N. It is undisputed that no foreclosure sale has occurred 9 to date. For this reason, Nationstar argues, any alleged violation has been "corrected and remedied prior to the recordation of a trustee's deed upon sale." Cal. Civ. Code 11 United States District Court Northern District of California 10 § 2924.12(c). 12 With regard to plaintiff's claim that he was never fairly evaluated for a foreclosure 13 prevention alternative, Nationstar argues that the July 2016 review and subsequent 14 denials also refute plaintiff's allegations that no review was conducted and establish that 15 Nationstar complied with the law. See Orig. Cplt Exh. N. Moreover, Nationstar asserts, 16 plaintiff's allegations demonstrate that he has already received all that he may be entitled 17 to under HBOR – i.e., postponement of the foreclosure sale while loss mitigation efforts 18 are explored. 19 In opposition, plaintiff asserts that the FAC alleges that the Notice of Default was 20 recorded prior to any written denial of loan modification, and that the Notice of Trustee’s 21 Sale was recorded during the time that plaintiff was appealing the loan modification 22 denial – both of which are violations of § 2923.6. Plaintiff asserts that the remedy for 23 such a violation is for Nationstar to rescind the Notice of Default, which it has not done. 24 As for Nationstar's argument that any violation is not "material," or has been remedied, 25 plaintiff responds that whether a violation is "material" is a question of fact and that every 26 violation that undermines the purpose of the HBOR is material. 27 28 The court finds that the motion must be GRANTED. Plaintiff alleges no facts showing that he submitted a complete loan modification application to Nationstar before 11 1 the Notice of Default was recorded on November 16, 2015. The only application 2 allegedly submitted before the recording of the Notice of Default was submitted to BofA in 3 July 2009. 4 As for plaintiff’s contention that the proper manner to resolve the dual tracking claim is to require Nationstar to rescind the Notice of Default, the court finds that 6 argument to be without merit. As indicated above, § 2924.12 clearly provides that where, 7 as here, no trustee’s deed upon sale has been recorded, the only remedy available for a 8 violation of § 2923.6 (and other sections of the HBOR) is an injunction to enjoin an 9 improper foreclosure. Cal. Civ. Code § 2924.12(a)(1). Moreover, there can be no liability 10 where the alleged violation has been “corrected and remedied” prior to the recordation of 11 United States District Court Northern District of California 5 a trustee’s deed upon sale. Cal Civ. Code § 2924.12(c). 12 Plaintiff cites Hestrin v. Citimortgage, Inc.¸ 2015 WL 847132 at *3 (C.D. Cal. Feb. 13 25, 2015), in support of his argument that the court must order Nationstar to rescind the 14 Notice of Default. In that case, which does not support plaintiff’s argument, the court 15 rejected the defendant's contention that it was protected by the safe harbor provision in 16 § 2924.12(c), because there was no allegation that the defendant had corrected or 17 remedied its violation. Id. The court added that “the possibility for remediation does not 18 render an ongoing breach moot[,]” which the court noted could be accomplished by the 19 rescinding of the Notice of Default. Id. 20 Here, by contrast, the allegations in the FAC and documents attached to the FAC 21 and the original complaint show that Nationstar evaluated and denied plaintiff’s request 22 for a loan modification prior to the recording of any trustee’s deed upon sale. Plaintiff 23 himself has acknowledged that Nationstar invoked the safe-harbor, completing a 24 subsequent loan modification review in or about July 2016, conducting a modification 25 review and issuing a denial letter on August 8, 2016. See Orig. Cplt Exh. N. Plaintiff 26 appealed the denial, and Nationstar affirmed that the denial was valid in the October 6, 27 2016 letter. See id. 28 Thus, as Nationstar points out, while rescinding a Notice of Default might be one 12 1 way to cure a violation, it is not the only way. Here, because no trustee's sale has 2 occurred, and because Nationstar has denied plaintiff's application for a loan 3 modification, any alleged violation of § 2923.6 has been corrected and remedied prior to 4 the recordation of a trustee's deed upon sale. Because plaintiff has failed to amend the 5 dual-tracking claim as instructed by the court in the May 12, 2017, Order, the court finds 6 that further leave to amend would be futile. The dismissal is with prejudice. 7 Finally, plaintiff asserts that Nationstar failed to examine his application based on 8 his "changed circumstances," in violation of Civil Code § 2923.6(g). Under § 2923.6(g), 9 the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already . . . been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of this section, unless there has been a material change in the borrower's financial circumstances since the date of the borrower's previous application and that change is documented by the borrower and submitted to the mortgage servicer. 10 United States District Court Northern District of California 11 12 13 Cal. Civ. Code § 2923.6(g) (emphasis added). 14 To seek a review under "changed circumstances," the plaintiff/borrower must 15 allege a specific change in financial circumstances that was documented and submitted 16 to the mortgage servicer, rather than providing a “barebones explanation.” Gilmore v. 17 Wells Fargo Bank N.A., 75 F. Supp. 3d 1255, 1264-65 (N.D. Cal. 2014) (internal 18 quotations omitted). For example, informing the lender of a $2,400 salary increase from 19 new employment and supplying supporting documentation might be sufficient at the 20 pleading stage, see Vasquez v. Bank of America, N.A.. 2013 WL 6001924, at *8 (N.D. 21 Cal. Nov. 9, 2013), but a letter from counsel to the lender stating the amount of the 22 23 borrowers’ gross disposable household income, and stating generally that the borrowers had “also been faced with an increase in their expenses,” with no supporting details or 24 documentation, would be insufficient, see Williams v. Wells Fargo Bank, N.A., 2014 WL 25 1568857 at *5 (C.D. Cal. Jan. 27, 2014). 26 Here, plaintiff has not alleged that the submitted a request to Nationstar, with all 27 the information necessary to show changed circumstances. His conclusory, barebones 28 13 1 allegation that he "had a sharp change in circumstances, in or around the middle of 2016 2 [but] was never afforded a fair opportunity to be evaluated, and . . . was never evaluated, 3 for a foreclosure prevention alternative," FAC ¶ 41, is insufficient to state a claim under 4 § 2923.6(g). As was true with the original complaint, the allegations in the FAC fall well 5 short of pleading a specific change in circumstances, and also fail to plead facts showing 6 when plaintiff advised Nationstar of this purported change and what information he claims 7 to have provided to Nationstar at that time. See, e.g., Ivey v. JP Morgan Chase Bank, 8 N.A., 2016 WL 4502587 at *4 (N.D. Cal. Aug. 29, 2016). 9 In the May 12, 2017 order re the motion to dismiss the original complaint, the court stated, "To the extent plaintiff is attempting to invoke § 2923.6(g), he must allege facts 11 United States District Court Northern District of California 10 showing a specific change in financial circumstances that was documented and 12 submitted to Nationstar." Order at 2. Plaintiff has not complied with these instructions. 13 Accordingly, the court finds that further leave to amend would be futile. The § 2923.6(g) 14 claim is dismissed with prejudice. 15 2. California Civil Code § 2923.7 16 The second cause of action alleges that Nationstar violated Civil Code § 2923.7, 17 which is also part of the HBOR. Section 2923.7 provides that where a borrower requests 18 a foreclosure prevention alternative, “the mortgage servicer shall promptly establish a 19 single point of contact and provide to the borrower one or more direct means of 20 communication with the single point of contact.” Cal. Civ. Code § 2923.7(a). The SPOC 21 may be an individual or a team of personnel, “each of whom has the ability and authority 22 to perform the responsibilities” described in the statute. Cal. Civ. Code § 2923.7(c). 23 The borrower's SPOC is responsible for, among other things, “[c]ommunicating the 24 process by which a borrower may apply for an available foreclosure prevention 25 alternative,” “coordinating receipt of all [associated] documents,” “notifying the borrower 26 of any missing documents necessary to complete the application,” “[h]aving access to 27 current information and personnel sufficient to timely, accurately, and adequately inform 28 the borrower of the current status of the foreclosure prevention alternative,” and “[h]aving 14 1 access to individuals with the ability and authority to stop foreclosure proceedings when 2 necessary.” Cal. Civ. Code § 2923.7(b)(1)-(5). 3 Plaintiff asserts that Nationstar violated § 2923.7 by failing to provide him with an 4 SPOC to accurately and adequately inform him of the current status of the foreclosure 5 prevention alternative and ensure that he was considered for all available loss mitigation 6 options to avoid foreclosure. Plaintiff contends that he was "assigned" to Ms. Karp, but 7 that she failed to perform her duties and was not part of a team who performed such 8 duties. FAC ¶ 87. 9 Plaintiff alleges that Ms. Karp did not respond to his requests when he attempted to reach her. FAC ¶ 29. He claims that he sent emails to Ms. Karp on December 9, 11 United States District Court Northern District of California 10 2014, December 18, 2014, and January 7, 2015, without response, although he also 12 alleges that she provided him with a response on January 9, 2015. FAC ¶ 30. He 13 asserts that he also spoke to “Faye,” “Monique,” and “Icy” at Nationstar. FAC ¶¶ 34-35. 14 In addition, he was later “able to reach other representatives,” although he claims they 15 provided him with “inconsistent information.” FAC ¶ 87. 16 Nationstar argues that this cause of action should be dismissed for failure to state 17 a claim, because while plaintiff alleges that Nationstar failed to assign him an SPOC, he 18 also concedes that Nationstar did assign an SPOC – Ms. Karp – who did at some point 19 contact him, and he also alleges that he spoke to other Nationwide representatives about 20 the status of his application. In addition, Nationstar notes, Exhs. C and N to the original 21 complaint reference plaintiff's contacts with Nationstar (which Nationstar refers to as "loss 22 mitigation reviews"). 23 Moreover, Nationstar asserts, as is true with the claim under § 2923.6, even if 24 plaintiff had pled a violation of § 2923.7, he alleges no facts showing a material violation 25 of the HBOR that was not remedied by the July 2016 loan modification review and denial 26 of his loan modification application. 27 In opposition, plaintiff asserts that he has adequately alleged a violation of 28 § 2923.7 by alleging that while Nationstar designated Ms. Karp as his SPOC, she failed 15 1 to respond to him on many occasions, and then told plaintiff to contact Nationstar 2 customer service directly. In addition, he asserts, he received conflicting information from 3 the representatives he did talk to. He was told by Faye on December 10, 2015, that the 4 application was not denied; but he was told by Icy on January 5, 2015, that the 5 application was denied. Plaintiff contends that a servicer who provides an SPOC who in 6 turn provides incorrect information, or who fails to follow up with a loan modification 7 request, violates § 2923.7. 8 9 The court finds that the motion to dismiss this cause of action must be GRANTED. Plaintiff has pled no claim against Nationstar for failure to provide an SPOC because as explained above, Nationstar has reviewed and denied plaintiff's application for a loan 11 United States District Court Northern District of California 10 modification, and no trustee's deed upon sale has been recorded. Under those 12 circumstances, § 2924.12(c) provides that there can be no liability for violation of 13 specified sections of the HBOR, including § 2923.7. 14 Furthermore, a violation of § 2923.7 is actionable only when that violation is 15 material. A material violation is one where “the alleged violation affected a plaintiff's loan 16 obligations or the modification process.” Cornejo v. Ocwen Loan Servicing, LLC, 151 17 F.Supp.3d 1102, 1113 (E.D. Cal. 2015). Here, based on the exhibits attached to the 18 original complaint, Nationstar conducted a loss mitigation review, plaintiff's application 19 has been processed, and plaintiff was given an opportunity to appeal the denial. Plaintiff 20 has not explained how the alleged denial of his right to an SPOC in any way affected his 21 loan obligations or the modification process. 22 3. California Business & Professions Code § 17200 23 The third cause of action asserts that Nationstar violated Business & Professions 24 Code § 17200 (“UCL”), which prohibits “any unlawful, unfair, or fraudulent business act or 25 practice.” Cal. Bus. & Prof. Code § 17200. 26 In this cause of action, plaintiff alleges, first, that Nationstar engaged in “unlawful” 27 behavior. FAC ¶ 102. He asserts that Nationstar's violations of HBOR "constitute a 28 pattern and practice of unlawful corporate behavior." FAC ¶ 100. He also alleges that 16 1 Nationstar omitted to disclose “the nature of the charges and fees assessed” on his Loan, 2 FAC ¶ 97-98, and that these "omissions of material facts" constitute "unlawful" business 3 practices because they violate 18 U.S.C. § 1341 (mail fraud), § 1344 (bank fraud), and 4 § 1962 (RICO), as well as California Civil Code § 1572 (actual fraud), § 1573 5 (constructive fraud), § 1709 (deceit/damages), § 1710 (deceit defined), and § 1711 6 (deceit on the public) "to name a few." FAC ¶ 102. 7 Second, plaintiff alleges that Nationstar's violations of HBOR "were against public policy, as the legislature enacted the [HBOR] as an emergency act, to slow the 9 foreclosure process so that foreclosure could be avoided." FAC ¶ 100. He asserts that 10 these “acts and practices” constitute "unfair" business acts under § 17200 because they 11 United States District Court Northern District of California 8 “offend public policy and are substantially injurious to [p]laintiff and all consumers[;]" and 12 that they insufficiently “outweigh the substantial harm to [p]laintiff, other consumers, and 13 potential homeowners." FAC ¶ 103. 14 In addition, plaintiff alleges that Nationstar engaged in "deceptive business 15 practices with respect to mortgage loan servicing, foreclosing of residential properties 16 and related matters," by committing violations of HBOR; by sending him "false and 17 misleading advertisements" misrepresenting the availability of options to save his home 18 and leading him to believe he could save his home in a matter of days if he just called; by 19 failing to sufficiently train loss mitigation staff and failing to maintain adequate systems for 20 tracking borrower documents; by instituting improper foreclosure proceedings to generate 21 inflated and unwarranted default-related fees; by misrepresenting the foreclosure status 22 of his property; by concealing the true character, quality, and nature of "their" assessment 23 of marked-up fees against his accounts; and by making false representations and false 24 promises designed to deceive him into thinking he was safe from foreclosure and was 25 working with an SPOC when that was not true. FAC ¶ 95. 26 Third, plaintiff asserts that Nationstar engaged in "fraudulent" business acts and 27 practices by concealing material facts, and that "[t]his concealment was made with 28 knowledge of its effect, and was done to induce [p]laintiff to pay the marked-up and/or 17 1 unnecessary fees for default-related services. FAC ¶ 96. Plaintiff also claims that 2 Nationstar omitted an itemization of all the charges and fees assessed on his Loan, and 3 that it imposed charges and fees that were never incurred. FAC ¶ 97. 4 Nationstar argues that the § 17200 claim should be dismissed for failure to state a 5 claim. As an initial matter, Nationstar contends that plaintiff lacks standing under the 6 UCL, because a § 17200 claim must be brought “by a person who has suffered injury in 7 fact and has lost money or property as a result of the unfair competition,” see Cal. Bus. & 8 Prof. Code § 17204, and plaintiff has not pled facts sufficient to meet that requirement. 9 Under the UCL, a plaintiff must show that her injury came “as a result of’ the unfair competition.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 326 (2011) (quoting Cal. 11 United States District Court Northern District of California 10 Bus. & Prof. Code § 17204). The purpose of this provision is “to confine standing to 12 those actually injured by a defendant's business practices.” Id. 321. To satisfy this 13 standing requirement, a plaintiff must “(1) establish a loss or deprivation of money or 14 property sufficient to qualify as injury-in-fact, i.e., economic injury, and (2) show that the 15 economic injury was the result of, i.e., caused by, the unfair business practice or false 16 advertising that is the gravamen of the claim.” Id. at 322; see also Rubio v. Capital One 17 Bank, 613 F.3d 1195, 1203-04 (9th Cir. 2010). 18 Nationstar asserts that plaintiff has not pled any economic injury, and indeed, 19 admits that he made the last payment on the Loan on July 10, 2009. See FAC ¶ 24. 20 Moreover, Nationstar argues, even if plaintiff had alleged that he lost money or property, 21 he has not pled any nexus between the alleged misconduct and his alleged injury. 22 Indeed, Nationstar asserts, it is clear that any alleged injury was caused by plaintiff's 23 undisputed failure to make his loan payments for the past eight years. 24 In opposition, plaintiff asserts that both the imposition of marked-up and 25 unnecessary fees and the threat to foreclose are sufficient to establish standing to assert 26 a UCL claim, and he argues that he has thus shown injury-in-fact. Some courts have 27 held that both of these can qualify under certain circumstances as injury-in-fact. See, 28 e.g., Sullivan v. Washington Mut. Bank, FA, 2009 WL 3458300, at *4 (N.D. Cal. Oct. 23, 18 1 2009); see also Galang v. Wells Fargo Bank, N.A., 2017 WL 1210021 at *6 (N.D. Cal. 2 Apr. 3, 2017); Stokes v. CitiMortgage, Inc., 2014 WL 4359193 at *12 (C.D. Cal. Sept. 3, 3 2014); Ellis v. J.P. Morgan Chase & Co., 950 F.Supp. 2d 1062, 1086 (N.D. Cal. 2013). 4 Here, however, the vague and conclusory allegations in the FAC regarding 5 “marked-up and unnecessary fees for default-related services” – none of which relate to 6 plaintiff or to his Loan – are not sufficient to show that plaintiff lost money or property, 7 particularly given that plaintiff alleges no facts showing that he has paid any fees. Nor 8 has plaintiff pled a single fact showing that unlawful fees have been imposed. While in 9 theory he might be able to allege economic injury based on such fees and charges, see, e.g., Ellis, 950 F.Supp. 2d at 1086, he does not allege he has actually paid any such 11 United States District Court Northern District of California 10 unlawful fees and charges (indeed, he alleges he has made no payment at all since July 12 2009), nor has he identified any of the fees and charges allegedly assessed to his 13 account or explained why they are excessive or unlawful. 14 As for the alleged threat of foreclosure, any such threat would be a direct result of 15 plaintiff's admitted failure to make his loan payments for the past eight years. See FAC 16 ¶ 24. Where a plaintiff's foreclosure results from his having defaulted on his loan prior to 17 the defendant’s allegedly wrongful acts, he cannot state a claim under the UCL. See, 18 e.g., Morgan v. Aurora Loan Servs., LLC, 646 Fed. Appx. 546 (9th Cir. 2016); Jenkins v. 19 JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 523 (2013). 20 In addition, the Notice of Trustee’s Sale was recorded on May 26, 2016 (with the 21 sale date set for June 20, 2016), but no sale went forward, and plaintiff does not allege 22 that any further notice of sale has been recorded. Under Civil Code § 2924g, a notice of 23 sale expires after 365 days (regardless of any postponements). Since the notice has 24 expired, foreclosure cannot be “imminent.” Accordingly, the court finds that plaintiff has 25 not established that he has standing under the UCL. 26 Nationstar also contends that the FAC fails to plead facts showing any unlawful, 27 unfair, or fraudulent business act or practice; and furthermore that plaintiff’s entire claim 28 sounds in fraud, but he has not alleged fraud with particularity. 19 1 In opposition, plaintiff contends that the FAC presents a valid claim under each of 2 the three “prongs” of § 17200. He argues that he has presented a valid claim under the 3 "unlawful" prong of the UCL "based on [d]efendants' various violations of the HBOR, 4 discussed above and other violations of the law as stated in the Complaint." 5 Plaintiff asserts that the alleged violations of the HBOR also amount to "unfair" 6 conduct under the UCL. He contends that this "unethical, oppressive, and injurious 7 conduct would substantially injure considers [sic] without any countervailing benefit to 8 considers [sic] or competition." He also claims that the alleged violations constitute 9 "conduct against legislatively stated public policy as the purpose of [the HBOR] is to ensure that 'borrowers are considered for, and have a meaningful opportunity to obtain, 11 United States District Court Northern District of California 10 available loss mitigation offered by or through the borrower's mortgage servicer’" (citing 12 Cal. Civ. Code § 2923.4(a)). 13 Finally, plaintiff argues that he has pled facts sufficient to support a claim under 14 the "fraudulent" prong. He points to FAC ¶ 95, where he alleges that Nationstar engaged 15 in “deceptive business practices” by engaging in "dual tracking," by recording a false 16 declaration in violation of Civil Code § 2923.55, by failing to review his financial packet 17 despite his material change in circumstances; by recording the Notice of Sale in May 18 2016 prior to providing any result of the appeal of the loan modification denial; by 19 providing an SPOC who was non-responsive; and by charging fees that were 20 unnecessary and unreasonable. 21 The court finds that plaintiff has not alleged facts sufficient to show an "unlawful," 22 an "unfair," or a "fraudulent" business act or practice, and that the motion to dismiss this 23 cause of action must GRANTED. The "unlawful" prong of the UCL incorporates 24 “violations of other laws and treats them as unlawful practices.” Cel-Tech Comms., Inc. 25 v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999); see also Walker v. Countrywide 26 Home Loans, Inc., 98 Cal. App. 4th 1158, 1169 (2002). To state a claim under the 27 “unlawful” prong of the UCL, a plaintiff may allege the commission of any act “forbidden 28 by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court20 1 2 made.” Saunders v. Sup. Ct., 27 Cal. App. 4th 832, 838-39 (1994). Plaintiff bases his claim under the "unlawful" prong both on the alleged violations 3 of HBOR (as to which he has not stated a claim) and on a laundry list of federal and state 4 statutes (which are not pled as causes of action and as to which he has not alleged facts 5 sufficient to state a claim). Thus, the FAC does not plead the predicate legal violation 6 which is necessary to state a claim under the "unlawful" prong of the UCL. 7 With respect to the “unfair” prong, a business act or practice is “unfair” when the 8 conduct “threatens an incipient violation of an antitrust law, or violates the policy or spirit 9 of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Cel-Tech, 20 Cal. 4th 11 United States District Court Northern District of California 10 at 187; see also Lueras v. BAC Home Loans Servicing, L.P., 221 Cal. App. 4th 49, 81 12 (2013). 13 Here, to the extent it is even comprehensible, plaintiff's claim regarding "unfair" 14 business practices is premised on vague allegations of the "public policy" that underlies 15 the HBOR. However, he has not connected that public policy to any action taken by 16 Nationstar (apart from the claims that Nationstar violated § 2923.6 and § 2923.7). This 17 portion of the claim also appears to sound in fraud, based on the allegations of 18 "deception," but the FAC fails to state "with reasonable particularity" the facts to support 19 this claim. See Khoury v. Maly's of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993). In 20 addition, to the extent that the "unfair" practices claim sounds in fraud. Rule 9(b) must 21 also be satisfied, which is not the case here. See Kenery v. Wells Fargo, N.A., 2015 WL 22 5138635, at *2 (N.D. Cal. Sept. 1, 2015). 23 As for the “fraudulent” prong, the UCL requires “a showing that members of the 24 public are likely to be deceived” by the allegedly fraudulent practice. Prakashpalan v. 25 Engstrom, Lipscomb and Lack, 223 Cal. App. 4th 1105, 1134 (2014). Additionally, 26 however, claims under the “fraudulent” prong of the UCL must be pled “with particularity” 27 as to “the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b); Kearns v. 28 Ford Motor Co., 567 F.3d 1120, 1125-26 (9th Cir. 2009). The plaintiff must set forth “the 21 1 time, place, and specific content of the false representations as well as the identities of 2 the parties to the misrepresentation.” Odom v. Microsoft Corp., 486 F.3d 541, 553 (9th 3 Cir. 2007) (internal quotation marks omitted). 4 Here, as with the claim under the "unfair" prong, the alleged "fraudulent" conduct 5 is based either on the purported violations of the HBOR (which claims are not adequately 6 pled, as explained above) or on vague and non-specific claims of "deceit" which are not 7 supported by any particularized facts in the FAC. See, e.g., FAC ¶¶ 95, 116. Plaintiff 8 has not satisfied the Rule 9(b) requirement and consequently, fails to assert a cause of 9 action under the “fraudulent” prong of the UCL. 4. 11 United States District Court Northern District of California 10 In the fourth cause of action for negligence, plaintiff alleges that Nationstar 12 breached its duty of care to him in the servicing of his Loan. FAC ¶ 116. Plaintiff asserts 13 that Nationstar had a duty to use reasonable care to maintain proper and accurate loan 14 records, and "discharge and fulfill the other incidents attendant to the maintenance, 15 accounting, and servicing of loan records," including keeping an accurate accounting of 16 plaintiff's payments, credits, and debits; disclosing to plaintiff the status of any foreclosure 17 actions taken by defendants; refraining from taking any action against plaintiff that they 18 did not have legal authority to do; providing plaintiff with all relevant information regarding 19 the Loan; and maintaining proper documentation of client status of legal holds and 20 restrictions on communications with clients. See FAC ¶ 110. 21 Negligence Plaintiff asserts that Nationstar "stepped outside its normal role as lender and 22 servicer and assumed additional responsibilities and duties when it undertook efforts to 23 engage in loss mitigation review and modify loans," including his Loan. FAC ¶ 111. 24 These "additional responsibilities" allegedly included the "proper implementation of 25 available foreclosure prevention alternatives" and following the duties set forth in the 26 HBOR, with its provisions against dual-tracking, and provisions implementing an SPOC, 27 so that plaintiff would be fairly and properly evaluated for a suitable foreclosure 28 prevention alternative. FAC ¶ 112. 22 1 Plaintiff alleges further that in taking or in failing to take “the actions alleged 2 above,” defendants breached their duty of care to plaintiff in the servicing of his Loan. 3 See FAC ¶ 116 (listing ways Nationstar allegedly breached its duty of care to plaintiff). 4 The list in FAC ¶ 116 is essentially identical to the list in FAC ¶ 95, describing actions 5 allegedly taken by Nationstar that were "deceptive business practices" for purposes of 6 the UCL claim. In addition, plaintiff asserts that Nationstar breached its duty of skill and 7 care to plaintiff by "refusing to notify plaintiff of his foreclosure prevention alternatives 8 before instituting foreclosure proceedings and recording the Notice of Default and by 9 failing to consider plaintiff for foreclosure prevention alternatives after being informed of 10 United States District Court Northern District of California 11 plaintiff's material change in financial circumstances." FAC ¶ 117. Plaintiff claims that as a result of "defendants' negligence," he has suffered from 12 "substantial arrearages, which include additional and unnecessary interest and fees," "an 13 adverse effect on his credit score," "the loss of equity in his home," and "being precluded 14 from his rights and protections under the [HBOR]." FAC ¶ 118. 15 The elements of negligence in California are: (1) defendant had a legal duty to use 16 due care towards the plaintiff; (2) the defendant breached that duty; and (3) the breach 17 was the proximate or legal cause of (4) the resulting injury. Ladd v. Cty. of San Mateo, 18 12 Cal. 4th 913, 917-18 (1996). “The existence of a legal duty to use reasonable care in 19 a particular factual situation is a question of law for the court to decide.” Vasquez v. 20 Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (2004). 21 “[A]s a general rule, a financial institution owes no duty of care to a borrower when 22 the institution's involvement in the loan transaction does not exceed the scope of its 23 conventional role as a mere lender of money.” Nymark v. Heart Fed. Sav. & Loan Ass'n, 24 231 Cal.App.3d 1089, 1096 (1991). However, courts sometimes apply the so-called 25 Biakanja factors to determine whether a duty is owed under a narrow exception to the 26 general rule. See, e.g., Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 27 941, 945-46 (2014). These factors are (1) the extent to which the transaction was 28 intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree 23 1 of certainty that the plaintiff suffered injury, (4) the closeness of the connection between 2 the defendant's conduct and the injury suffered, (5) the moral blame attached to the 3 defendant's conduct, and (6) the policy of preventing future harm. See Biakanja v. Irving, 4 49 Cal. 2d 657, 650 (1958). 5 Nationstar argues that the negligence cause of action should be dismissed for failure to state a claim. In the May 12, 2017 order, the court dismissed the negligence 7 claim with leave to amend, directing plaintiff to allege facts showing that Nationstar owed 8 him a duty of care, sufficient to show that this alleged duty falls within the narrow 9 exception to the general rule that a financial institution owes no duty of care to a borrower 10 when the institution's involvement in the loan transaction does not exceed the scope of its 11 United States District Court Northern District of California 6 conventional role as a mere lender of money. Order at 5. 12 Nationstar contends that contrary to this directive, plaintiff's amended negligence 13 cause of action is substantively identical to the negligence claim asserted in the original 14 complaint. See, e.g., Orig. Cplt ¶¶ 140-154; FAC ¶¶ 109-122. Once again, Nationstar 15 argues, plaintiff fails to allege any facts demonstrating that Nationstar breached any duty 16 of care owed to him. And, Nationstar contends, even if the FAC alleged any such duty 17 (which it does not), there are no allegations of breach and/or resulting damages. 18 Nationstar asserts that the allegations discernable from the FAC allege, at most, 19 purported statutory violations which are now moot, because the FAC does not adequately 20 plead claims under those statutes. Nationstar argues that because plaintiff again fails to 21 plead negligence on the part of Nationstar, this cause of action must be dismissed. 22 In opposition, plaintiff argues that the negligence claim is adequately pled. With 23 regard to whether "defendants" owed him a duty, plaintiff asserts that under Alvarez, 24 while a lender may not owe a duty to offer or approve a loan modification, a lender does 25 owe a borrower a duty to exercise reasonable care in the review of the borrower's loan 26 modification applications once the lender agrees to review for a modification. In addition, 27 plaintiff asserts, under Lueras, a lender has a duty not to make material 28 misrepresentations about the status of an application for a loan modification or about the 24 1 date, time, or status of a foreclosure. 2 Plaintiff contends that he has properly pled a claim of negligence against 3 Nationstar, and that the claim is supported by the allegations in FAC ¶ 116 that 4 Nationstar breached its duty to plaintiff by violating the HBOR, and by various acts of 5 “deception.” He contends that the question whether defendants owed him a duty of care 6 in this case is governed by the Biakanja factors, which he lists, but does not discuss or 7 explain how they apply here. 8 9 Plaintiff reiterates that the proper way to remedy alleged HBOR violations such as those asserted in the FAC (including in the negligence claim) is to rescind the Notice of Default, but that Nationstar has not done that in this case, and so he argues that the 11 United States District Court Northern District of California 10 HBOR claims are still viable. In addition, plaintiff contends that Nationstar breached its 12 duty to him by informing him that his loan modification was denied, and then that it was 13 conditionally approved, which was not true, "all as set forth in the FAC.” This appears to 14 be a reference to the 2009 request to BofA for a loan modification. 15 The court finds that the motion must be GRANTED. Plaintiff fails to state a claim 16 for negligence because he has not alleged any facts demonstrating the existence of a 17 duty, breach, or damage. In amending the complaint, plaintiff has not complied with the 18 court's directive regarding the pleading of the negligence claim. See Order at 5 (citing 19 Nymark, 231 Cal. App. 3d at 1095-96). 20 Instead, plaintiff re-alleges, almost verbatim from the original complaint, that 21 Nationstar had a duty to "exercise reasonable care and skill to maintain proper and 22 accurate loan records," and to "discharge and fulfill the other incidents attendant to the 23 maintenance, accounting and servicing of loan records," including (a) "[k]eeping an 24 accurate accounting of [p]laintiff's mortgage payments, credits, and debits;" 25 (b) "[d]isclosing to [p]laintiff the status of any foreclosure actions taken by [d]efendants;" 26 (c) "[r]efraining from taking any action against [p]laintiff that they [sic] did not have the 27 legal authority to do;" (d) [p]roviding [p]laintiff with all relevant information regarding the 28 Loan;" and (e) "[m]aintaining proper documentation of client status of legal holds and 25 1 restrictions on communication with clients." See FAC ¶ 110; Orig. Cplt ¶ 141. However, 2 plaintiff pleads no facts showing that Nationstar in fact owed him any of these "duties," or 3 that an exception should be made to the general rule articulated in Nymark. 4 Nor does plaintiff allege facts showing that Nationstar breached any duty of care 5 owed to him, or that he suffered any resulting damages. California courts have differed in 6 their application of the Biakanja factors in the home loan modification context. In Lueras, 7 the court noted that a loan modification is the renegotiation of loan terms, which falls 8 within the scope of a lending institution's conventional role as a lender of money. Id., 221 9 Cal. App. 4th at 67. The court found that the Biankanja factors did not support finding a duty of care because the harm – being unable to make payments on the loan – was a 11 United States District Court Northern District of California 10 result of the borrower's default on the loan, and was not “closely connected to the 12 lender's conduct” as long as the lender had not placed the borrower in the position that 13 created the need for the loan modification in the first place. Id. Thus, the Lueras court 14 found that the lender had no common law duty under California law “to offer or approve a 15 loan modification.” Id. 16 In Alvarez, the court concluded that the lender did have a common law duty to 17 exercise reasonable care in the review of the plaintiffs’ loan modification applications 18 once the lender had agreed to consider the applications. Id., 228 Cal. App. 4th at 948- 19 49. The plaintiffs alleged that the lender improperly handled their loan modifications and 20 that the lender's delay in processing the loan modification deprived them of “the 21 opportunity to seek relief elsewhere.” Id. at 951. The court found that “[t]he transaction 22 was intended to affect the plaintiffs” and that it was foreseeable that failing to timely and 23 carefully process the loan modification applications could result in significant harm to 24 plaintiffs. Id. The court concluded that the Biankanja factors supported finding a duty of 25 care. Id. at 952. 26 Federal courts disagree as to whether Lueras or Alvarez is more persuasive. 27 Compare Romo v. Wells Fargo Bank, N.A., 2016 WL 324286, at *9 (N.D. Cal. Jan. 27, 28 2016) (stating that “most federal district courts have followed Alvarez”), with Marques v. 26 1 Wells Fargo Bank, N.A., 2016 WL 5942329, at *7 (N.D. Cal. Oct. 13, 2016) (“A growing 2 number of courts that have addressed this issue since Lueras and Alvarez have adopted 3 the holding in Lueras in finding that a mortgage servicer does not owe borrowers a duty 4 of care in processing a residential loan modification”). 5 The recent trend among federal district courts in California appears to be more in 6 the direction of adopting the position of the Lueras court. See Newman v. Bank of N.Y. 7 Mellon, 2017 WL 1831940, at *11 (E.D. Cal. May 8, 2017) (collecting cases); Shupe v. 8 Nationstar Mrtg. LLC, 213 F.Supp. 3d 597, 604-05 (E.D. Cal. Jan. 31, 2017) (same); 9 Harris v. Wells Fargo Bank, 2016 WL 3410161, at *6 (C.D. Cal. June 15, 2016). 10 In addition, even though it has yet to issue a "reported" decision, the Ninth Circuit United States District Court Northern District of California 11 also appears to find the Lueras line of cases more persuasive. See Anderson v. 12 Deutsche Bank Nat'l Trust Co. Ams., 649 Fed. Appx. 550, 552 (9th Cir. 2016) (mem.) 13 (citing Lueras, 221 Cal. App. 4th at 68); Badame v. J.P. Morgan Chase Bank, N.A., 641 14 Fed. Appx. 707, 709-10 (9th Cir. 2016) (mem.) quoting Lueras, 221 Cal. App. 4th at 68)); 15 Deschaine v. IndyMac Mortg. Servs., 617 Fed. Appx. 690, 693 (9th Cir. 2015) (mem.) 16 (quoting Lueras, 221 Cal. App. 4th at 68). 17 However, the court need not decide whether Lueras or Alvarez is more 18 persuasive. Even assuming that Alvarez is correct that a lender owes a borrower a duty 19 of care in some circumstances, plaintiff has not shown that those circumstances exist 20 here. Regardless of what may or may not have happened while BofA was servicing 21 plaintiff’s Loan – during which time plaintiff ceased making payments on the Loan – the 22 allegations in the FAC and the documents attached to the FAC and the original complaint 23 show that plaintiff applied for a loan modification, that the application was denied for 24 reasons clearly articulated by Nationstar, and that no foreclosure has occurred to date . 25 By contrast, the plaintiffs in Alvarez alleged that the lender had failed to review the 26 plaintiffs' loan modification application in a timely manner, foreclosed on the plaintiffs' 27 property while the plaintiffs were still under consideration for a HAMP modification, relied 28 on incorrect information in handling plaintiffs' application, and falsely advised plaintiffs 27 1 2 that no documents had been submitted for review. See id., 228 Cal. App. at 945. The allegations discernable from the FAC at most relate to purported statutory 3 (HBOR) violations that are now moot. The FAC pleads no facts plausibly showing that 4 plaintiff’s circumstances were similar to those of the plaintiffs in Alvarez – or that 5 Nationstar exceeded “the scope of its conventional role as a mere lender of money” such 6 that it owed plaintiff a duty of care. Given the absence of any facts relating to cognizable 7 conduct on the part of Nationstar which could give rise to plaintiff's claim that Nationstar 8 breached a duty of care to him, the court finds that this claim must be dismissed. 9 10 5. Negligent Misrepresentation The fifth cause of action for negligent misrepresentation alleges that Nationstar United States District Court Northern District of California 11 "fraudulently misled” plaintiff to believe that Nationstar was going to work with him to 12 obtain a long-term solution for his Loan or review it for modification, FAC ¶ 124; that 13 plaintiff was "fraudulently misled into believing that a long term solution to keep him in the 14 home was being worked on and a sale date was not, in fact, pending and [he] so relied 15 on the representations from Ms. Karp indicating that she was the [assigned SPOC], FAC 16 ¶ 125; and that plaintiff “reasonably relied” on Nationstar reviewing and responding to the 17 loan modification application, and that he "continued to spend valuable money, time, and 18 efforts in attempting to modify the Loan, which [he] had submitted, only in an effort to 19 obtain a loan modification or other 'resolution' and long-term solution[,]" FAC ¶ 126. 20 Plaintiff asserts that Nationstar representatives "asserted facts that were not true, 21 or concealed true facts, having no reasonable ground for believing them to be true, 22 intending [p]laintiff to rely upon the assertions as to the review of their [sic] loan 23 modification application." FAC ¶ 128. He alleges that Nationstar acted "knowingly and 24 maliciously to form and further the common plan and scheme to defraud [p]laintiff and 25 allow the home to be sold improperly" and that its conduct "constutes fraud, deceit, and 26 false promises made without the intent to perform, and intentional misrepresentation, 27 among other wrongs." FAC ¶¶ 130-131. 28 Nationstar argues that this cause of action must be dismissed for failure to state a 28 1 claim. The elements of a cause of action for negligent misrepresentation are (1) a 2 misrepresentation, (2) with absence of reasonable grounds for believing the alleged 3 misrepresentation to be true, (3) with the intent to induce another's reliance on the 4 misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage. Bock v. 5 Hansen, 225 Cal. App. 4th 215, 231 (2014). As is true with negligence, liability for 6 negligent misrepresentation rests upon the existence of a legal duty, imposed by 7 contract, statute, or otherwise, owed by the defendant to the injured person. Id. at 228. 8 In addition, in federal court, a claim of negligent misrepresentation must be pled in accordance with the particularity requirements of Rule 9(b). See Neilson v. Union Bank 10 of Cal., N.A., 290 F.Supp. 2d 1101, 1141 (C.D. Cal. 2003). That is, the facts supporting 11 United States District Court Northern District of California 9 the alleged misrepresentation be pled with specificity, and conclusory allegations are 12 insufficient. Id. (citing Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540 (9th Cir. 13 1989)). 14 In the order dismissing the original complaint, the court directed that in amending 15 this claim, plaintiff must allege particularized facts showing the "who, what, when, where, 16 and how" of the alleged negligent misrepresentation, and that it was not sufficient for 17 plaintiff, as in the original complaint, to allege that Nationstar "fraudulently misled him" 18 into believing it would work "to obtain a long term solution for [p]laintiff's Loan or at least 19 properly review them [sic] for a loan modification" or that plaintiff had been "fraudulently 20 misled into believing that a long term solution to keep him in his home was being worked 21 out and that a sale date was not, in fact pending." See Order at 6-7. 22 Here, Nationstar argues, in amending this cause of action in the FAC, plaintiff has 23 not corrected the deficiencies of the original complaint – in particular, he has not alleged 24 fraud with particularity and has not identified a duty that was owed to him. Rather, he has 25 simply repeated, almost verbatim, the allegations in the claim that was dismissed by the 26 court for failure to state a claim. 27 28 In opposition, plaintiff contends that the FAC adequately states a claim of negligent misrepresentation. He asserts that the FAC alleges that Nationstar fraudulently 29 1 led him to believe that "they" would work with him to obtain a long term solution for his 2 loan, or at least properly review him and the sale was not pending (citing FAC ¶ 125). 3 Plaintiff claims that "[a]s a result" he "continued to spend time money and efforts toward 4 modifying the loan." 5 Plaintiff points to FAC ¶¶ 34-35, where he alleges after receiving the November 6, 2015 Notice of Default in the mail, he called Nationstar on December 10, 2015, and 7 talked with "Faye" who told him that "the records" showed that a loan modification 8 application was "submitted" and "under review" – referring to the application submitted to 9 BofA – and that there were no documents showing if it was approved or denied. FAC 10 ¶ 34. Plaintiff asserts that on December 15, 2015, he called Nationstar and spoke to 11 United States District Court Northern District of California 6 "Monique" who informed him there had been no response from "escalation," and that on 12 January 5, 2016, he called and spoke to "Icy" who advised that the loan modification 13 application had been denied." FAC ¶ 35. 14 Plaintiff claims that these allegations show that he contacted Nationstar between 15 December 10, 2015 to January 5, 2016, as to the status of his loan modification review, 16 but did not receive information or documents showing that it was approved or denied 17 "despite the fact that Nationstar had led [him] to believe there was a long term solution 18 available." He adds that Nationstar made these "representations" without a reasonable 19 ground for believing them to be true under these circumstances, and that Nationstar 20 made "each material misrepresentation" with the intent to induce plaintiff's reliance on 21 "the fact misrepresented," and to deceive plaintiff. He adds that Nationstar owes him a 22 duty under "common law, California statutory laws, and Federal rules and regulations," 23 but does not elaborate. 24 The court finds that the motion to dismiss this cause of action must be GRANTED. 25 First, the pleading does not satisfy the requirements of Rule 9(b). The FAC includes 26 vague allegations essentially suggesting that Nationstar falsely represented that plaintiff 27 would receive a loan modification, and misled him into believing that it was going to "work 28 with him to obtain a long term solution" for his Loan or "at least properly review for a loan 30 1 modification.” See FAC ¶ 124. The implication is that he was told he would receive a 2 loan modification, although he pleads no facts to support such a claim. The fact that he 3 requested a loan modification and the fact that he was being evaluated for a loan 4 modification do not translate into an affirmative representation by Nationstar that he 5 would receive a loan modification. Plaintiff also appears to be claiming that his loan modification application was 6 7 negligently handled by Nationstar. However, he has not alleged facts showing that 8 Nationstar owed him a legal duty of care. It is true that lenders generally “owe a duty to a 9 borrower to not make material misrepresentations about the status of an application for a loan modification or about the date, time, or status of a foreclosure sale.” Lueras, 221 11 United States District Court Northern District of California 10 Cal. App. 4th at 68. This is distinct, however, from a claim that a modification application 12 was negligently handled or considered. Here, plaintiff has not alleged any facts showing 13 that Nationstar made any negligent misrepresentations of a past or existing material fact. 14 CONCLUSION 15 In accordance with the forgoing, the court GRANTS Nationstar’s motion to 16 dismiss. Because the court finds that further amendment would be futile, the dismissal is 17 with prejudice.3 18 19 IT IS SO ORDERED. 20 Dated: September 22, 2017 __________________________________ PHYLLIS J. HAMILTON United States District Judge 21 22 23 24 3 25 26 27 28 The original complaint named Nationstar and NBS Default Services ("NBS") as defendants. NBS has not responded to the complaint, but Nationstar asserted in the Notice of Removal that NBS had filed a declaration of non-monetary status, that plaintiff had not objected to the declaration, and that NBS "does not expect to participate in this matter any further." In the May 12, 2017 Order, the court noted that at the May 10, 2017, hearing, plaintiff's counsel appeared to agree that plaintiff was not pursuing claims against NBS. Accordingly, the court finds that NBS should be dismissed from the case. 31

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