Fevinger v. Bank of America , N.A.
Filing
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ORDER GRANTING-IN-PART DEFENDANTS' MOTION TO DISMISS by Judge Paul S. Grewal granting-in-part 18 (psglc2, COURT STAFF) (Filed on 3/31/2014)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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United States District Court
For the Northern District of California
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SAN JOSE DIVISION
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RACHEL FEVINGER,
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Plaintiff,
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v.
BANK OF AMERICA, N.A. and
US BANK N.A. TRUSTEE,
Defendants.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART
DEFENDANTS’ MOTION TO
DISMISS
(Re: Docket No. 18)
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Before the court is Defendants Bank of America, N.A. and US Bank N.A. Trustee’s motion
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to dismiss all claims in the first amended complaint (“FAC”). 1 Plaintiff Rachel Fevinger opposes. 2
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The parties appeared for a hearing. 3 After considering the arguments, the court GRANTS
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Defendants’ motion but only IN-PART.
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See Docket No. 18.
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See Docket No. 21.
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See Docket No. 36.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
I. BACKGROUND
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In September 2005, Fevinger obtained a loan in the amount of $650,000.00 to finance
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property located at 3583-3585 Mauricia Avenue, Santa Clara, CA 95051. 4 The Deed of Trust
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(“DOT”) identifies Fevinger as the borrower, American Mortgage Express Corp. as the lender,
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Fidelity National Title as trustee, and Mortgage Electronic Registration Systems, Inc. as nominee
and beneficiary. 5 On September 22, 2005, Fevinger obtained a home equity line of credit in the
amount of $97,000.00 secured by a DOT and assignment of rents. 6 On August 30, 2011, MERS
recorded an assignment of the beneficial interest of the DOT to U.S. Bank, National Association as
United States District Court
For the Northern District of California
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Trustee for Wamu Mortgage Pass-Through Certificates, Series WMALT 2006-AR1
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(“U.S. Bank”). 7 Bank of America then acted as the servicer of the loan. 8
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Fevinger stayed current on her loan from 2005 to 2009. 9 In 2009 the loan payment amounts
increased 10 and Fevinger missed a few payments. 11 Fevinger received correspondence from
Bank of America inviting her to consider modifying her loan agreement. 12 In August of 2010 she
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reached out to Bank of America, and was informed that she was a good candidate for loan
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See Docket No. 19-1, Ex. A.
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See id.
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See Docket No. 19-2, Ex. B.
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See Docket No. 19-3, Ex. C.
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See id.
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See id. at ¶ 12.
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See id.
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See id. at ¶ 13.
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See id. at ¶ 12.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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modification. Fevinger alleges she was “ready, willing, and able” and “interested in reinstating”
her loan, but was “lured” into awaiting a new payment schedule. 13
Around August 30, 2010 Fevinger applied for a loan modification, but did not hear
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anything within a few weeks. 14 Fevinger called the Bank of America number from the
correspondence and was told over the phone that it was US Bank’s “policy not to foreclose on
borrowers who had submitted complete loan modification applications and we’re awaiting a
decision.” 15 Fevinger called the same Bank of America phone number a few weeks later, but was
unable to obtain any information about the status of her application. 16 In October of 2010 Fevinger
United States District Court
For the Northern District of California
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wrote a letter asking that Bank of America give her an update on the status of her application. 17 In
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November of 2010 Bank of America wrote back that it was still reviewing her application and
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would provide a more detailed response within twenty days. 18 After Fevinger did not hear back
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within twenty days, she called to check the status of her application and was instructed to
reapply. 19
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Fevinger asked if she could resubmit her old application, but was told to await new
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application materials from Bank of America. 20 In December of 2010 Fevinger sought a
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reinstatement calculation but a “phone representative” told her to await new loan modification
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application materials and was reassured that her loan would not be foreclosed while she was
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See id. at ¶ 13.
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See id. at ¶ 14.
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See id. at ¶ 15.
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See id. at ¶ 16.
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See id.
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See id. at ¶ 17.
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See id. at ¶ 18.
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See id.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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awaiting a loan modification. 21 The new loan modification application materials finally arrived in
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February 2011. 22 Fevinger “immediately submitted” all requested documentation in February,
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waited a “short time” and began to regularly follow up on the status of her application. 23 In March
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or April of 2011 Bank of America informed Fevinger that her application was being reviewed. 24
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On April 4, 2011, Bank of America informed Fevinger that several pages of her modification were
missing from her application. 25 Fevinger responded by “immediately” faxing the requested
documents, but they were not received. 26 She re-faxed the pages on May 2 and May 3, 2011, and
on May 6, 2011, Bank of America acknowledged receipt. 27
On May 13, 2011 Fevinger called to “follow up” on the status of her application and alleges
United States District Court
For the Northern District of California
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that she “was still ready willing and able to catch up with her mortgage” payments. 28 Fevinger
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continued to follow up on the status of her application in July 2011 and was informed on
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July 19, 2011, that she needed “to provide updated financials.” 29 On August 9, 2011, Fevinger
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spoke with a bank representative and was informed that her application was still not “complete
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See id. at ¶ 19.
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See id.
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Id. at ¶ 20.
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See id.
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See id. at ¶ 21.
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Id.
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See id.
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Id. at ¶ 22.
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Id. at ¶ 24.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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because it lacked utility bills and a required letter regarding HOA fees.” 30 Fevinger alleges she had
already submitted these documents. 31
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Over the course of August and September different Bank of America representatives told
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Fevinger to submit additional documents for review. 32 In October Fevinger received two letters
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from Bank of America informing her that her loan modification application could not be reviewed
because she had not submitted paperwork regarding her social security benefits, retirement
benefits, bank statements and tax returns. 33 In November 2011, Fevinger received a Home
Affordable Mortgage Program (“HAMP”) denial letter. 34
Following her HAMP denial, Fevinger contacted Bank of America and was directed that
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For the Northern District of California
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“the best way to rectify” the denial of her loan modification application was to refile a new
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application. 35 At this point, Fevinger could no longer afford to pay off the “mounting arrears, late
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fees and attorney’s fees” and “was very much at the mercy” of the bank. 36 During 2012 Fevinger
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“was forced to jump through hoops” in her contact with several Bank of America representatives
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and in September received a notice of default and subsequent denial of loan modification because
her arrears had grown too large. 37
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Id. at ¶ 25.
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See id.
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See id. at ¶¶ 27-29.
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See id. at ¶¶ 30-31.
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See id. at ¶ 32.
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See id. at ¶ 33.
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See id. at ¶ 33.
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See id. at ¶¶ 25-26 (at page 8).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
On August 15, 2012, U.S. Bank substituted ReconTrust Company, N.A. as trustee under the
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DOT. 38 On September 6, 2012, ReconTrust recorded a notice of default because of Fevinger’s
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arrears of $196,431.68. 39 A notice of trustee’s sale was recorded by ReconTrust on
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December 12, 2012. 40 No foreclosure sale of the property has occurred.
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Fevinger now brings claims for (1) breach of the implied covenant of good faith and
fair dealing, (2) breach of contract, (3) negligent misrepresentation, (4) fraud, (5) violation of
Cal. Civil Code § 2924 and (6) unfair competition. 41
II. LEGAL STANDARDS
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United States District Court
For the Northern District of California
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A.
Motion to Dismiss
A complaint must contain “a short and plain statement of the claim showing that the pleader
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is entitled to relief.” 42 When a plaintiff fails to proffer “enough facts to state a claim to relief that is
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plausible on its face,” the complaint may be dismissed for failure to state a claim upon which relief
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may be granted. 43 A claim is facially plausible “when the pleaded factual content allows the court
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to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 44 Under
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Fed. R. Civ. P. 12(b)(6), “dismissal can be based on the lack of a cognizable legal theory or the
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absence of sufficient facts alleged under a cognizable legal theory.” 45 Dismissal with prejudice and
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See Docket No. 19-4, Ex. D.
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See Docket No. 19-5, Ex. E.
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See Docket No. 19-6, Ex. F.
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See Docket No. 14 at 8-18.
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Fed. R. Civ. P. 8(a)(2).
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Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
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Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009).
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Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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without leave to amend is appropriate if it is clear that the complaint could not be saved by
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amendment. 46
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B.
Breach of Contract
“Under California law, the elements of a breach of contract claim are: (1) the existence of a
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contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and
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(4) resulting damage to plaintiff.” 47 It is “well settled that ‘if an ‘essential element’ of a promise is
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United States District Court
For the Northern District of California
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reserved for the future agreement of both parties, the promise gives rise to no legal obligation until
such future agreement is made.’” 48 “To establish damages, a plaintiff must establish ‘appreciable
and actual damage.’” 49 “Nominal damages, speculative harm, or threat of future harm do not
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suffice to show legally cognizable injury.” 50 “In addition, a contract requires an offer articulating
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the terms of the agreement and an acceptance that mirrors the offer.” 51
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See Eminence Capital, LLC v. Asopeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (“Dismissal
with prejudice and without leave to amend is not appropriate unless it is clear on de novo review
that the complaint could not be saved by amendment.”) (citing Chang v. Chen, 80 F.3d 1293, 1296
(9th Cir. 1996)).
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EPIS, Inc. v. Fid. & Guar. Life Ins. Co., 156 F. Supp. 2d 1116, 1124 (N.D. Cal. 2001)
(modifying punctuation) (citing Reichert v. General Ins. Co., 68 Cal. 2d 822, 830 (1968)).
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Cnty. of Alameda v. Superior Court, Case No. A121590, 2009 WL 2993813, at *5
(Cal. Ct. App. Sept. 21, 2009) (quoting City of Los Angeles v. Super. Ct. of L.A. Cnty.,
51 Cal. 2d 423, 433 (1959)); But see Copeland v. Baskin Robbins U.S.A.,
96 Cal. App. 4th 1251, 1255-60 (2002) (holding that in circumstances where essential elements
have been agreed to by the parties, agreements to negotiate may be enforceable).
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Benedict v. Hewlett-Packard Co., Case No. 5:13-cv-00119-LHK, 2014 WL 234218, at *5
(N.D. Cal. Jan. 21, 2014) (quoting Aguilera v. Pirelli Armstrong Tire Co., 223 F.3d 1010, 1015
(9th Cir. 2000)); see also Patent Scaffolding Co. v. William Simpson Constr. Co.,
256 Cal. App. 2d 506, 511 (1967) (“A breach of contract without damage is not actionable.”).
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Id. (citing Aguilera, 223 F.3d at 1015); see also Ruiz v. Gap Inc., 622 F.Supp.2d 908, 917
(N.D. Cal. 2009) (“Under California law, a breach of contract claim requires a showing of
appreciable and actual damage.”).
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Sutherland v. Francis, Case No. 5:12-cv-05110-LHK, 2014 WL 879697, at *3
(N.D. Cal. Mar. 3, 2014) (citing Chaganti v. I2 Phone Int’l, Inc., 635 F. Supp. 2d 1065, 1071
(N.D. Cal. 2007) (“An offer must clearly articulate the terms of the agreement and the acceptance
must be absolute, unqualified and a mirror image of the offer.”).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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C.
Breach of Implied Covenant of Good Faith and Fair Dealing
“It has long been recognized in California that every contract contains an implied covenant
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of good faith and fair dealing that neither party will injure the right of the other party to receive the
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benefits of the agreement.” 52 “The covenant protects the express covenants or promises of the
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contract.” 53 The “factual elements necessary to establish a breach of the covenant of good faith
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and fair dealing are: (1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations
under the contract; (3) any conditions precedent to the defendant’s performance occurred;
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United States District Court
For the Northern District of California
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(4) the defendant unfairly interfered with the plaintiff’s rights to receive the benefits of the
contract; and (5) the plaintiff was harmed by the defendant’s conduct.” 54 “An implied covenant
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claim requires the plaintiff to ‘show that the conduct of the defendant, whether or not it also
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constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge
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contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but
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rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and
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disappoints the reasonable expectations of the other party thereby depriving that party of the
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benefits of the agreement.’” 55
D.
“The elements of a cause of action for fraud in California are: ‘(a) misrepresentation (false
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Fraud and Negligent Misrepresentation
representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to
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In re Apple In-App Purchase Litig., 855 F. Supp. 2d 1030, 1041 (N.D. Cal. 2012) (citing Wolf v.
Walt Disney Pictures & Tel., 162 Cal. App. 4th 1107, 1120 (2008)).
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Id. at 1041-42 (citing Carma Developers (Cal.), Inc. v. Marathon Development California, Inc.,
2 Cal. 4th 342, 373 (1992)).
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Rosenfeld v. JP Morgan Chase Bank, N.A., 732 F. Supp. 2d 952, 968 (N.D. Cal. 2010).
Williams v. Wells Fargo Bank, N.A., Case No.: 5:13-cv-03387-EJD, 2013 WL 5444354, at *2
(N.D. Cal. Sept. 30, 2013) (quoting Careau & Co. v. Sec. Pac. Bus. Credit, Inc.,
222 Cal. App. 3d 1371, 1395 (1990)).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” 56 “Under the
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heightened pleading standard in the federal rules, a plaintiff must also allege the specific
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circumstances constituting fraud such that the defendant has notice of the actual misconduct.” 57
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“Averments of fraud must be accompanied by the who, what, when, where, and how of the
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misconduct charged.” 58 A cause of action “‘based on a false promise is simply a type of
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intentional misrepresentation, i.e., actual fraud.’” 59
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“Under California law, a negligent misrepresentation claim is comprised of the same
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elements as a claim for fraud: ‘(1) the misrepresentation of a past or existing material fact, (2)
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For the Northern District of California
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without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on
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the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting
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damage.’” 60 “The only difference is that a negligent misrepresentation claim does not require
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knowledge of falsity.” 61 “Rather, to plead negligent misrepresentation, it is sufficient to allege that
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the defendant lacked reasonable grounds to believe the representation was true.” 62 “Additionally,
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Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (quoting Engalla v. Permanente
Med. Group, Inc., 15 Cal. 4th 951, 974 (1997)).
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Expression Sys., LLC v. UMN Pharma, Inc., Case No. 2:13-cv-00965-JAM-KJ,
2014 WL 281092, at *2 (E.D. Cal. Jan. 23, 2014) (citing Kearns, 567 F.3d at 1124.).
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Kearns, 567 F.3d at 1126 (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106
(9th Cir. 2003)).
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Foster Poultry Farms v. Alkar-Rapidpak-MP Equip., Inc., 868 F. Supp. 2d 983, 995
(E.D. Cal. 2012) (emphasis in original) (quoting Tarmann v. State Farm Mut. Auto. Ins. Co.,
2 Cal. App. 4th 153, 158-59 (1991)).
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Id. at 995-996 (quoting Apollo Capital Fund, LLC v. Roth Capital Partners, LLC,
158 Cal. App. 4th 226, 243 (2007)).
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Expression Sys., 2014 WL 281092, at *2 (citing Foster Poultry, 868 F. Supp. 2d at 994-95).
Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101, 1141-42 (C.D. Cal. 2003).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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to state a claim for negligent misrepresentation, the plaintiff must also show that the defendant
owed the injured party a duty of care.” 63
III. DISCUSSION
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A.
Defendants request the court take that judicial notice of various foreclosure-related
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United States District Court
For the Northern District of California
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Request for Judicial Notice
documents recorded in the Santa Cruz County Recorder’s Office (Exhibits A through I). 64 The
court may take judicial notice of a “fact that is not subject to reasonable dispute because it is
generally known” or “can be accurately and readily determined from sources whose accuracy
cannot reasonably be questioned.” 65 Fevinger has not objected to the request for judicial notice.
The authenticity of the foreclosure-related documents is not in dispute and may be verified by
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resort to the public record. 66 The court, however, will not rely on facts contained within the
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documents that reasonably may be subject to dispute. 67 Defendants’ request for judicial notice
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therefore is GRANTED as to all documents.
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63
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Martin v. Litton Loan Servicing LP, Case No. 2:12-cv-970-MCE-EFB, 2014 WL 977507, at *15
(E.D. Cal. Mar. 12, 2014) (citing Eddy v. Sharp, 199 Cal. App. 3d 858, 864 (1988) (“As is true of
negligence, responsibility for negligent misrepresentation rests upon the existence of a legal duty,
imposed by contract, statute or otherwise, owed by a defendant to the injured person.”)).
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64
See Docket No. 19.
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Fed. R. Evid. 201(b).
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See Fed. R. Evid. 201(b)(2) (“The court may judicially notice a fact that is not subject to
reasonable dispute because” it: “(2) can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.”).
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See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (finding the district court erred
in relying on disputed facts contained within documents that otherwise were the proper subject of
judicial notice); see also Fed. R. Evid. 201(b).
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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B.
Fevinger’s Breach of Contract Claim is Insufficiently Pleaded
Defendants urge that Fevinger’s claim for breach of “Section 19 of the DOT” fails because
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the allegations do not “point to any breach of an express contract term.” 68 Fevinger responds that
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Defendants breached the contract by (1) refusing to provide her with the size of arrears to enable
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her to reinstate her loan and (2) providing her with an erroneous quote that overstated the size of
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her default. 69
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United States District Court
For the Northern District of California
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The complaint concedes that Fevinger was provided with a reinstatement figure – she
just disputes the accuracy of that figure. 70 Even taking the allegations in the complaint as true,
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Docket No. 18 at 13; see also Covenant 19 of the DOT:
19. Borrower’s Right to Reinstate After Acceleration. If Borrower meets certain
conditions, Borrower shall have the right to have enforcement of this Security Instrument
discontinued at any time prior to the earliest of: (a) five days before sale of the Property
pursuant to any power of sale contained in this Security Instrument; (b) such other period as
Applicable Law might specify for the termination of Borrower’s right to reinstate; or (c)
entry of a judgment enforcing this Security Instrument. Those conditions are that
Borrower: (a) pays Lender all sums which then would be due under this Security Instrument
and the Note as if no acceleration had occurred; (b) cures any default of any other
covenants or agreements; (c) pays all expenses incurred in enforcing this Security
Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and
valuation fees, and other fees incurred for the purpose of protecting Lender’s interest in the
Property and rights under this Security Instrument; and (d) takes such action as Lender may
reasonably require to assure that Lender’s interest in the Property and rights under this
Security Instrument, and Borrower’s obligation to pay the sums secured by this Security
Instrument, shall continue unchanged. Lender may require that Borrower pay such
reinstatement sums and expenses in one or more of the following forms, as selected by
Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer’s check or
cashier’s check, provided any such check is drawn upon an institution whose deposits are
insured by a federal agency, instrumentality or entity; or (d) Electronic Funds Transfer.
Upon reinstatement by Borrower, this Security Instrument and obligations secured hereby
shall remain fully effective as if no acceleration had occurred. However, this right to
reinstate shall not apply in the case of acceleration under Section 18.
Docket No. 18-1, Ex. A at 10.
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See Docket No. 14 at ¶ 52 (quoting Covenant 19 of the DOT) (“Defendants breached Covenant
19 of the DOT “by refusing to provide Plaintiff with the amount of ‘sums which then would be due
under this Security Instrument and Note as if no acceleration had occurred’ despite Plaintiff’s
repeated attempts to obtain the same.”).
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See Docket No. 14 at ¶ 80 (“Defendants continued to provide Plaintiff with an inaccurate
reinstatement quote, or no reinstatement quote at all, which demanded that Plaintiff tender monies
for months in which Plaintiff’s performance was waived by virtue of Cal. Civil Code § 1511.”); see
also Cal. Civil Code § 1511 (“The want of performance of an obligation, or of an offer of
performance, in whole or in part, or any delay therein, is excused by the following causes, to the
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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the court cannot see how Defendants waived Fevinger’s debt obligations under the contract and
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thus provided an artificially inflated value to Fevinger. The DOT contains explicit language
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stating that acts of forbearance, including activities of a loan modification, do not waive the
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Lender’s right to enforce the terms of the DOT. Even if the loan was under review for a
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modification, Fevinger was still obligated to remain current on her loan – she had a preexisting
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legal duty. The DOT also is explicit: the “Lender may charge Borrower fees for services
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performed in connection with Borrower’s default, for the purpose of protecting Lender’s
interest in the Property and rights under this Security Instrument, including, but not limited to,
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For the Northern District of California
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attorneys’ fees, property inspection and valuation fees.” 71 The court therefore cannot credit
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Fevinger’s argument that the reinstatement figure was artificially inflated. Because Fevinger
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remains in default on the loan, her breach of contract claim cannot survive. Although in light
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of the contract language the court is skeptical that this claim can be cured through amendment,
Fevinger is granted leave to amend this claim.
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C.
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Because Fevinger Has Not Adequately Pleaded that She Fulfilled Her Obligations
Under the Contract or that Defendants Breached the Contract, Her Breach of the
Covenant of Good Faith and Fair Dealing Claim Fails
In this case Fevinger has not adequately pleaded that she fulfilled her obligations under the
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contract or that Defendants breached the contract. Fevinger fell behind on her payments and never
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cured the default. Fevinger’s complaint concedes that she was provided with a reinstatement figure
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to settle her arrears. 72 She never did. Her claim for breach of the covenant of good faith and fair
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extent to which they operate: 1. When such performance or offer is prevented or delayed by the act
of the creditor, or by the operation” of law.).
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Docket No. 18-1, Ex. A at 10.
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See supra note 70.
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Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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dealing thus cannot survive. 73 Because the court is not persuaded that amendment as to this claim
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is futile, the claim is dismissed with leave to amend.
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D.
Fraud and Negligent Misrepresentation
Fevinger brings fraud and negligent misrepresentation claims against Defendant Bank of
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America. In short, Fevinger alleges that Bank of America “orally represented” that Fevinger’s
6
property “would not be lost via foreclosure while her account was being reviewed for a loan
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modification.” 74
8
1.
Fraud
9
As an initial matter, the court rejects Bank of America’s argument that Fevinger’s fraud and
United States District Court
For the Northern District of California
10
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negligent misrepresentation claims are insufficiently pleaded pursuant to Rule 9 because the
12
complaint does not spell out (1) which employees made specific representations (2) under what
13
authority and (3) when those misrepresentations were made. The operative complaint does a
14
commendable job alleging the calls Fevinger made to Bank of America in this case: her allegations
15
specifically detail when calls were made, who she talked to and what was discussed. This is
16
adequate at the pleading stage – even under Rule 9’s heightened scrutiny.
17
Bank of America also argues that the purported misrepresentation does not constitute
18
19
actionable fraud. Here, the Bank is on firmer ground. The complaint alleges a single
20
misrepresentation: that Fevinger’s property would not be sold while her application for a loan
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modification was being reviewed. The complaint accepts that Fevinger’s loan modification
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23
24
25
26
27
28
73
The “factual elements necessary to establish a breach of the covenant of good faith and fair
dealing are: (1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations under the
contract; (3) any conditions precedent to the defendant’s performance occurred; (4) the defendant
unfairly interfered with the plaintiff’s rights to receive the benefits of the contract; and (5) the
plaintiff was harmed by the defendant’s conduct.” Rosenfeld, 732 F. Supp. 2d at 968.
74
Docket No. 14 at ¶ 59.
13
Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
1
2
application was denied first 75 and then the notice of default was recorded. 76 It also must be pointed
out that the property has not been sold.
Fevinger responds to this point by arguing that Bank of America’s agents represented that
3
4
so long as any loan modification application was pending, no foreclosure activity would occur –
5
including the filing of a notice of default or notice of trustee’s sale. Because the notice of default
6
was filed before Fevinger received a denial of her second loan modification application, Fevinger’s
7
8
fraud claim is actionable.
Despite Fevinger’s representations at the hearing on this motion, the complaint does not
9
United States District Court
For the Northern District of California
10
clearly allege that Fevinger was told that no foreclosure activity would occur while any loan
11
modification application was pending. Instead, the complaint alleges the actionable fraud was
12
Bank of America’s oral representations that Fevinger’s property “would not be lost via foreclosure
13
while her account was being reviewed for a loan modification.” 77 The complaint includes
14
allegations that Fevinger was told the Bank had a general policy to not foreclose homes while loan
15
16
modification applications were pending and specifically instructed that her property would not be
17
foreclosed while her loan modification application was pending. Generously construed, the claim
18
language remains ambiguous and dismissal is warranted. Because the court does not believe that
19
amendment as to this claim would be futile, Fevinger is granted leave to amend.
20
2.
21
Bank of America urges that because Fevinger has not adequately pleaded why Bank of
22
Negligent Misrepresentation
America owed her a duty in this case, her claim for negligent misrepresentation must be dismissed.
23
24
25
26
27
28
75
See Docket No. 14 at ¶ 32 (“In November 2011, Plaintiff received a HAMP denial letter,
claiming that because she had not sent in all the required materials, she could not be considered for
a HAMP modification.”).
76
See id. at ¶ 26 (“In September 2012” Fevinger “received a Notice of Default” after her first loan
modification application was denied, but while a second “loan modification application was
pending.”).
77
See Docket No. 14 at ¶ 69.
14
Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
1
Fevinger concedes that, in a vacuum, a bank carries no duty to review a loan modification
2
application. But according to Fevinger, that concession is not dispositive because she was
3
instructed by Bank of America not to reinstate her loan on the promise that her home would not be
4
foreclosed while her loan modification application was pending. Once Bank of America elected to
5
review her application, it assumed a duty of care.
6
7
8
9
The court disagrees. Financial institutions “typically do not owe a duty of care to a
borrower when its activities do not exceed those of a conventional money lender.” 78 “Numerous
cases have characterized a loan modification as a traditional money lending activity, warranting
United States District Court
For the Northern District of California
10
application of the rule articulated in Nymark” that “a financial institution in general owes no duty
11
of care to a borrower.” 79 The court agrees with the great weight of authority interpreting Nymark
12
78
13
14
15
Alvarado v. Aurora Loan Servs., LLC, Case No. SA12-cv-0524-DOC, 2012 WL 4475330, at *6
(C.D. Cal. Sept. 20, 2012) (citing Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089,
1096 (1991) (As “as a general rule, a financial institution owes no duty of care to a borrower when
the institution's involvement in the loan transaction does not exceed the scope of its conventional
role as a mere lender of money.”)).
79
16
17
18
19
20
21
22
23
24
25
26
27
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Settle v. World Sav. Bank, F.S.B., Case No. ED 11-cv-00800-MMM, 2012 WL 1026103, at *8
(C.D. Cal. Jan. 11, 2012) (listing cases) (citing Nymark, 231 Cal. App. 3d at 1096); see also
Sullivan v. JP Morgan Chase Bank, NA, 725 F. Supp. 2d 1087, 1094 (E.D. Cal. 2010) (citing
Nymark and holding that “[p]laintiffs have provided no authority to support their argument that
lenders owe borrowers a duty of care not to misinform them about the loan modification process”);
Argueta v. JP Morgan Chase, Case No. 2:11-cv-441-WBS-GGH, 2011 WL 2619060, *5
(E.D. Cal. June 30, 2011) (citing Nymark and stating that “Plaintiff’s allegations about the loan
modification application process are insufficient to plausibly suggest that defendants owed plaintiff
a duty of care.”); Becker v. Wells Fargo Bank, N.A., Inc., Case No. 2:10-cv-02799-LKK-KJN-PS,
2011 WL 1103439, at *23 (E.D. Cal. Mar. 22, 2011) (citing Nymark for the proposition that
allegations concerning loan modification application process did not give rise to a duty on the part
of the lender); Coppes v. Wachovia Mortg. Corp., Case No. 2:10-cv-01689-GEB-DAD,
2011 WL 1402878, *7 (E.D. Cal. Apr.13, 2011) (“Plaintiff has not alleged ‘special circumstances’
plausibly suggesting Wachovia owed her a duty of care [during the loan modification process]
because it ‘actively participate[d] in the financed enterprise beyond the domain of the usual money
lender.’”); Dooms v. Federal Home Loan Mortg. Corp., Case No. F 11-cv-0352-LJO-DLB,
2011 WL 1303272, *9 (E.D. Cal. Mar. 31, 2011) (citing Nymark and stating that the “moving
defendants are correct that a negligence claim based on their roles as lender and loan servicer fails
in the absence of a duty to forego foreclosure or to provide a loan modification. The complaint
lacks facts to support an actionable duty to impose on the moving defendants. ‘No such duty exists’
for a lender ‘to determine the borrower's ability to repay the loan” and the “lender’s efforts to
determine the creditworthiness and ability to repay by a borrower are for the lender’s protection,
not the borrower’s) (citation omitted); DeLeon v. Wells Fargo Bank N.A.,
Case No. 5:10-CV-01390-LHK, 2011 WL 311376, at *9 (N.D. Cal. Jan. 28, 2011) (“Because
Plaintiffs still have not alleged any participation beyond that of the usual money lender [in the loan
modification process], they cannot state a negligence claim against Wells Fargo”); But see
15
Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
1
and holds that because loan modification activities are within the traditional scope of the lender
2
Bank of America owed Fevinger no duty of care regarding her loan modification application. 80
3
E.
Cal. Civil Code § 2924
4
5
6
The amended complaint’s Section 2924 claim is a bit murky. The court’s best
understanding of the claim is that Defendants’ conduct interfered with Fevinger’s statutory right
under Cal. Civil Code § 2924c to reinstate her loan more than five days before the date of the
7
8
9
foreclosure sale by inflating the fees and payments she owed on her loan. The relevant portion of
the statute provides:
Reinstatement of a monetary default under the terms of an obligation secured by a deed
of trust, or mortgage may be made at any time within the period commencing with the date
of recordation of the notice of default until five business days prior to the date of sale set
forth in the initial recorded notice of sale. 81
United States District Court
For the Northern District of California
10
11
12
Fevinger urges that because Defendants waived certain “fees and payments” under Cal. Civil Code
13
Section 1511 she was induced to inaction and is therefore “entitled to all the benefits of the
14
15
contract had it been performed by both parties.” 82 Defendants demand that Fevinger cure the
16
17
18
19
20
Ansanelli v. JP Morgan Chase Bank, N.A., Case No. 3:10-cv-03892-WHA, 2011 WL 1134451, *7
(N.D. Cal. Mar. 28, 2011) (citing Nymark and finding that a lender defendant owed a duty to
plaintiff because defendant went “beyond the domain of a usual money lender” by going “beyond
its role as a silent lender and loan servicer to offer an opportunity to plaintiffs for loan modification
and to engage with them concerning the trial period plan”).
80
21
22
23
24
25
26
27
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Id.
While there appears to be inconsistent decisions among the California districts
regarding whether loan modifications are within the activities of a conventional money
lender, this Court finds persuasive the cases holding that offering loan modifications is
sufficiently entwined with money lending so as to be considered within the scope of typical
money lending activities. If money lending institutions were held to a higher standard of
care by offering a service that could benefit borrowers whose circumstances have changed,
the money lender would be discouraged from leniency and would assert their rights to
reclaim the property upon the borrower’s default. The conventional-moneylender test shall
be sufficient to determine that there is no duty of care owed in servicing Plaintiff's
mortgage loan and loan modification. As the Plaintiff is unable to establish a duty, it is
unnecessary to discuss the elements of breach, causation, and damages.
81
Cal. Civil Code Section 2924c(e).
82
See Docket No. 14 at ¶ 78.
16
Case No.: 5:13-cv-04839-PSG
ORDER GRANTING-IN-PART DEFENDANTS’ MOTION TO DISMISS
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