Torbov v. Cenlar Agency, Inc

Filing 110

ORDER GRANTING 91 MOTION TO DISMISS WITH LEAVE TO AMEND IN PART AND WITHOUT LEAVE TO AMEND IN PART; AND ORDERING PLAINTIFF TO SHOW CAUSE WHY ACTION AGAINST DEFENDANT TORNQUIST SHOULD NOT BE DISMISSED FOR FAILURE TO EFFECT TIMELY SERVICE OF PROCESS. Signed by Judge Beth Labson Freeman on 4/29/2015. (blflc1, COURT STAFF) (Filed on 4/29/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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TSVETEN S. TORBOV,
Plaintiff,

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ORDER GRANTING MOTION TO
DISMISS WITH LEAVE TO AMEND IN
PART AND WITHOUT LEAVE TO
AMEND IN PART; AND ORDERING
PLAINTIFF TO SHOW CAUSE WHY
ACTION AGAINST DEFENDANT
TORNQUIST SHOULD NOT BE
DISMISSED FOR FAILURE TO
EFFECT TIMELY SERVICE OF
PROCESS

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[Re: ECF 91]

v.

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CENLAR AGENCY, INC., et al.,
Defendants.

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United States District Court
Northern District of California

Case No. 14-cv-00130-BLF

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Defendants Cenlar Agency, Inc. (“Cenlar”) and Nationstar Mortgage LLC (“Nationstar”)

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seek dismissal of the fourth amended complaint (“FAC”) under Federal Rule of Civil Procedure

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12(b)(6) for failure to state a claim upon which relief may be granted. The Court has considered

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the briefing and the oral argument presented at the hearing on April 23, 2015. For the reasons

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discussed below, the motion is GRANTED WITH LEAVE TO AMEND IN PART AND

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WITHOUT LEAVE TO AMEND IN PART. Additionally, Plaintiff is hereby ORDERED TO

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SHOW CAUSE why the action against Defendant Gregory S. Tornquist (“Tornquist”) should not

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be dismissed without prejudice for failure to effect timely service of process.

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I.

BACKGROUND
The facts of this case are well-known to the parties and to the Court and need not be recited

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in full here. In brief, Plaintiff Tsveten S. Torbov claims that he made timely monthly mortgage

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payments for fifteen years; that starting in March 2013 his monthly mortgage payment checks

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were returned without explanation and his account was not credited with those payments; and that

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subsequently he was informed that his mortgage was in default and that a foreclosure sale had

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been scheduled. Plaintiff, acting pro se, filed this action on January 9, 2014. Plaintiff

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subsequently filed several iterations of the complaint, first as of right and then with leave of court.

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Plaintiff ultimately retained counsel, who filed the operative FAC on December 5, 2014. The

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FAC asserts claims against Cenlar, Cenlar’s chief executive officer, Tornquist, and Nationstar for:

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(1) injunctive relief; (2) declaratory relief; (3) accounting; (4) breach of the implied covenant of

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good faith and fair dealing; (5) intentional infliction of emotional distress; and (6) negligent

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infliction of emotional distress.
Cenlar and Nationstar filed the present motion to dismiss on December 19, 2014.

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Although Plaintiff was represented by counsel at that time, no timely opposition to the motion was

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United States District Court
Northern District of California

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filed. On March 24, 2015, shortly before the scheduled hearing date, new counsel substituted in

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and filed a late opposition on Plaintiff’s behalf. The Court continued the hearing date in order to

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afford Defendants adequate time to respond to the late-filed opposition.

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II.

LEGAL STANDARD
“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a

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claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation

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Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d

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729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts

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as true all well-pled factual allegations and construes them in the light most favorable to the

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plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the

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Court need not “accept as true allegations that contradict matters properly subject to judicial

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notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or

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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)

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(internal quotation marks and citations omitted). While a complaint need not contain detailed

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factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to

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relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.

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Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
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III.

DISCUSSION

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A.

General Observations

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Before addressing the merits of Plaintiffs’ claims, the Court makes some general

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observations. First, moving parties object to Plaintiffs’ late-filed opposition. The opposition was

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due on January 5, 2015 but it was not filed until March 24, 2015. At the hearing, current counsel

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stated that he substituted in as counsel of record and filed opposition as soon as he was able to

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complete his due diligence investigation. While that statement accounts for the month of March

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2015, it does not account for the nearly two months that elapsed after the opposition was due and

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before current counsel became involved in the case. Ordinarily, the Court would not consider
such a late filing without adequate explanation, particularly where (as here) accepting the untimely

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United States District Court
Northern District of California

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opposition necessitated a continuance of the hearing date. When a plaintiff seeks to stave off

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foreclosure, any delay is a victory. However, because the untimely filing appears to be the fault of

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Plaintiff’s former counsel, because there is no prejudice to moving parties, and in light of the

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strong policy favoring resolution of cases on their merits, the Court overrules Defendants’

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objection and has considered the late-filed opposition. See Eitel v. McCool, 782 F.2d 1470, 1472

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(9th Cir. 1986) (“Cases should be decided upon their merits whenever reasonably possible.”).

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Second, the FAC does not contain any substantive allegations against Tornquist.

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Moreover, the docket does not reflect that service of process has been effected upon Tornquist.

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He was added as a defendant in the third amended complaint filed on July 29, 2014. See Third

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Am’d Compl., ECF 67. Under Federal Rule of Civil Procedure 4(m), Plaintiff had 120 days, or

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until November 26, 2014 to effect service of process. Plaintiff is hereby ORDERED TO SHOW

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CAUSE, in writing and on or before May 19, 2015, why the action against Tornquist should not

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be dismissed for failure to effect timely service of process. See Fed. R. Civ. P. 4(m) (“If a

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defendant is not served within 120 days after the complaint is filed, the court – on motion or on its

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own after notice to the plaintiff – must dismiss the action without prejudice against that defendant

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or order that service be made within a specified time.”).

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Third, the FAC and some of Plaintiff’s briefing were not filed in PDF format as required
by the Court’s Civil Local Rules. See Civ. L.R. 5-1(e) (documents filed electronically must be
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filed in PDF format “to permit text searches and to facilitate transmission and retrieval”). Plaintiff

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shall file all future documents in compliance with the Court’s Civil Local Rules.

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B.

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Defendant has filed a timely request for judicial notice of publicly recorded documents

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relating to the property and of Plaintiff’s Chapter 13 Bankruptcy petition filed on December 5,

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2014. See Ds’ RJN, ECF 92. The Court may take judicial notice of matters of public record and

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court filings. See Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir.

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2006) (“We may take judicial notice of court filings and other matters of public record.”); Mir v.

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Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988) (court may take judicial notice of

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matters of public record). Accordingly, Defendants’ request for judicial notice is GRANTED.

United States District Court
Northern District of California

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Requests for Judicial Notice

Plaintiff has filed an untimely request for judicial notice on April 3, 2015, after Defendants

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filed their reply brief. Under this Court’s Civil Local Rules, “[o]nce a reply is filed, no additional

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memoranda, papers or letters may be filed without prior Court approval” except an objection to

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new evidence submitted in the reply. Civ. L.R. 7-3(d). Moreover, Plaintiff seeks judicial notice

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of “facts” that are not appropriate subject matter for judicial notice. Federal Rule of Evidence 201

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permits the Court to take judicial notice of “a fact that is not subject to reasonable dispute because

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it: (1) is generally known within the trial court’s territorial jurisdiction; or (2) can be accurately

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and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R.

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Evid. 201(b). Plaintiff request the Court to take judicial notice of a number of “facts” that do not

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satisfy these criteria, including facts that “Defendant Cenlar instructed Defendant [sic] to contact

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the law firm of Aronowitz & Ford, LLP for purposes of ascertaining his default amount,” and that

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“The law firm of Aronowitz & Ford, LLP was never authorized to do business in California.” P’s

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RJN at 1, ECF 106. Plaintiff does request judicial notice of a proof of claim filed in his

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bankruptcy proceeding, which would be appropriate subject matter for judicial notice. See Reyn’s

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Pasta Bella, 442 F.3d at 746 n.6 (9th Cir. 2006) (judicial notice appropriate with respect to court

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filings). However, the document in question is irrelevant to the issues before the Court on the

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present motion to dismiss. Plaintiff’s request for judicial notice is DENIED.

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C.

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Turning to the merits, as noted at the hearing and discussed below, the FAC is drafted

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Failure to State a Claim

extremely poorly and all claims alleged therein are defective.
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Claim 1 – Injunctive Relief

Claim 1, entitled “To Enjoin Foreclosure,” is defective because “[i]njunctive relief is a

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remedy, not a cause of action.” Guessous v. Chrome Hearts, LLC, 179 Cal. App. 4th 1177, 1187

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(2009) (internal quotation marks and citation omitted); see also Hafiz v. Greenpoint Mortg.

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Funding, Inc., 652 F. Supp. 2d 1039, 1049 (N.D. Cal. 2009) (“Injunctive relief is a remedy which

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must rely upon underlying claims.”).
Claim 1 is DISMISSED WITHOUT LEAVE TO AMEND. Dismissal of Claim 1 does not

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United States District Court
Northern District of California

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preclude Plaintiff from seeking injunctive relief as a remedy for a properly pled substantive claim.

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2.

Claim 2 – Declaratory Relief

Claim 2 does not allege an appropriate basis for declaratory relief because it seeks redress

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for alleged past wrongful conduct – Defendants’ refusal of Plaintiff’s timely mortgage payments

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for the months March 2013 through October 2013 – rather than seeking a declaration as to the

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prospective rights and obligations of the parties. See Babb v. Sup. Ct., 3 Cal. 3d 841, 848 (1971)

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(“[D]eclaratory procedure operates prospectively, and not merely for the redress of past wrongs. It

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serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights

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or commission of wrongs.”) (internal quotation marks and citation omitted) (emphasis added).

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Claim 2 is DISMISSED WITHOUT LEAVE TO AMEND.
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Claim 3 – Accounting

Claim 3, seeking an accounting, does not allege the requisite element that Plaintiff is owed

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money by Defendants. See Almutarreb v. Bank of N.Y. Trust Co., N.A., No. C-12-3061 EMC,

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2012 WL 4371410, at *6 (N.D. Cal. Sept. 24, 2012) (an element of an accounting claim is that the

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plaintiff is owed money by the defendant); Hernandez v. First Am. Loanstar Trustee Servs., No.

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10cv00119 BTM(WVG), 2010 WL 1445192, *5 (S.D. Cal. Apr. 12, 2010) (“Plaintiffs, as the

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party owing money, not the party owed money, has no right to seek an accounting.”).

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Claim 3 is DISMISSED WITHOUT LEAVE TO AMEND.
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4.

Claim 4 – Breach of Implied Covenant of Good Faith and Fair Dealing

Claim 4 alleges breach of the implied covenant of good faith and fair dealing. “‘The

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implied promise [of good faith and fair dealing] requires each contracting party to refrain from

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doing anything to injure the right of the other to receive the benefits of the agreement.’” Avidity

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Partners, LLC v. State of Cal., 221 Cal. App. 4th 1180, 1204 (2013) (quoting Egan v. Mutual of

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Omaha Ins. Co., 24 Cal. 3d 809, 818 (1979)) (alteration in original). “The implied covenant of

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good faith and fair dealing does not impose substantive terms and conditions beyond those to

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which the parties actually agreed.” Id.

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Plaintiff alleges that Cenlar breached the implied covenant by “failing to accept payments
tendered by Plaintiff, making unjustified claims for sums in excess of those to which it was

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United States District Court
Northern District of California

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entitled and then providing an inaccurate accounting to its successor in interest, [Nationstar].”

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FAC ¶ 30. He alleges that Nationstar breached the implied covenant by “making unjustified

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claims for sums in excess of those to which it is entitled and then commencing foreclosure

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proceedings.” Id. He asserts that Cenlar and Nationstar acted in bad faith, and “were guilty of

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malice, oppression and a willful and conscious disregard for the rights of Plaintiff, and that he is

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therefore entitled to an award of exemplary and punitive damages.” Id. ¶ 31.

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Plaintiff appears to be attempting to state a claim for breach of the implied covenant of

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good faith and fair dealing with respect to the note, and he appears to be asserting that Defendants

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acted in a manner designed to deprive him of the benefits due him under the note by refusing to

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accept his timely payments on the note. The problem is that Plaintiff does not identify the note as

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the contract giving rise to his implied covenant claim. Nor does he make clear that at the time

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Cenlar began rejecting his payments, he was current on his loan and the rejected payments

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represented full and complete payments of the amounts owed. Defendants’ position throughout

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this litigation has been that Plaintiff defaulted on his loan, the loan thereafter was accelerated as

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contractually permitted, and Plaintiff’s subsequent payments were rejected as only partial

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payments on the then-outstanding loan balance. Some of the evidence submitted to the Court in

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connection with Plaintiff’s motion for preliminary injunction suggests that Plaintiff in fact may

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have been in default before Cenlar returned his checks. While the Court’s task on a motion to
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dismiss is to evaluate the sufficiency of the pleadings, and not the evidence, the Court raises the

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point to emphasize that Plaintiff must allege facts showing that Cenlar’s rejection of his loan

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payments was not consistent with the contract but instead deprived Plaintiff of benefits to which

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he was entitled under the contract.

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Finally, Plaintiff’s request for punitive damages for breach of the implied covenant is
unsupported by the law. “[W]ith the exception of bad faith insurance cases, a breach of the

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covenant of good faith and fair dealing permits a recovery solely in contract.” Spinks v. Equity

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Residential Briarwood Apartments, 171 Cal. App. 4th 1004, 1054 (2009) (internal quotation

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marks and citation excluded). Accordingly, even if Plaintiff were able to amend to state a viable

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claim for breach of the implied covenant, he would not be able to recover punitive damages but

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United States District Court
Northern District of California

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would be limited to contract damages.

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Accordingly, Claim 4 is DISMISSED WITH LEAVE TO AMEND.
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Claim 5 – Intentional Infliction of Emotional Distress

Claim 5 is for intentional infliction of emotional distress. The elements of that claim are:

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“(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless

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disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or

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extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the

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defendant’s outrageous conduct.” Christensen v. Sup. Ct., 54 Cal. 3d 868, 903 (1991) (internal

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quotation marks and citation omitted). The alleged conduct “must be so extreme as to exceed all

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bounds of that usually tolerated in a civilized community.” Id. (internal quotation marks and

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citation omitted).

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Generally, “[t] he act of foreclosing on a home (absent other circumstances) is not the kind

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of extreme conduct that supports an intentional infliction of emotional distress claim.” Quinteros

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v. Aurora Loan Servs., 740 F. Supp. 2d 1163, 1172 (E.D. Cal. 2010). Plaintiff argues that “other

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circumstances” exist in this case, relying upon Ragland v U.S. Bank Nat. Ass’n, 209 Cal. App. 4th

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182, 204-05 (2012). In Ragland, the California Court of Appeal held that the plaintiff could go

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forward on a claim of intentional infliction of emotional distress based upon the bank’s conduct

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leading to foreclosure on the plaintiff’s home. The plaintiff claimed that when she refinanced her
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home she thought she was getting a fixed rate mortgage, but actually her mortgage broker forged

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her signature on a number of loan documents and she ended up with an adjustable rate mortgage.

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Some years later, when she sought a loan modification, the issue of the forgery came up and the

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bank began an investigation. Plaintiff claims that bank employees told her that the bank could not

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collect from her while that investigation was ongoing, and that in reliance on those statements she

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cancelled her scheduled loan payment. The bank thereafter sent the plaintiff a delinquency notice;

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however, when she called the bank she again was told that the bank could not collect from her

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while the forgery investigation was ongoing. Shortly thereafter, the bank instituted foreclosure

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proceedings. The plaintiff claimed that she got the runaround when she tried to clear matters up
and ultimately her home was sold in a foreclosure sale. The Court of Appeal reversed the trial

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United States District Court
Northern District of California

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court’s grant of summary judgment for the bank, concluding in relevant part that the bank’s

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treatment of the plaintiff, if proved, “was so extreme as to exceed all bounds of decency in our

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society.” Id. at 205.

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Ragland is factually distinguishable from the present case. Torbov does not allege any

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forgery with respect to his loan documents, or that Defendants indicated that payments were not

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due, or that Defendants in fact have foreclosed upon his property. Torbov does allege that Cenlar

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declined to accept certain payments but, as discussed above, he has not alleged facts showing that

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he was current on his loan at the time and that his payments were rejected without proper cause.

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Moreover, Torbov has not alleged facts showing that he has suffered severe or extreme emotional

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distress as a result of Defendants’ conduct. His allegation that Defendants’ conduct “has caused

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Plaintiff severe emotional and physical distress, pain and suffering,” FAC ¶ 33, is too conclusory

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to satisfy the pleading requirements for this claim. See Harvey G. Ottovich Revocable Living

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Trust Dated May 12, 2006 v. Wash. Mut., Inc., No. 10-cv-02842 WHA, 2010 WL 3769459, at *6

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(N.D. Cal. Sept. 22, 2010) (“Plaintiffs’ amended complaint lacks specific facts describing the

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severe emotional distress suffered, let alone that defendants’ conduct proximately caused this

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distress. Plaintiffs merely assert legal conclusions that they suffered severe emotional distress as a

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result of the conduct of defendants.”).

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Claim 5 is DISMISSED WITHOUT LEAVE TO AMEND.
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6.

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Claim 6 – Negligent Infliction of Emotional Distress

Claim 6 is for negligent infliction of emotional distress. Negligent infliction of emotional
distress is not a separate claim from negligence. In order to plead such a claim, Plaintiff must

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allege that Defendants owed him a duty of care which they breached. Quinteros, 740 F. Supp. 2d

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at 1173. Plaintiff has not alleged the existence of a special relationship giving rise to a duty of

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care on the part of Defendants. See id. (“Lender-borrower relations do not normally give rise to a

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duty supporting a negligence cause of action.”); Nymark v. Heart Fed. Sav. & Loan Ass’n, 231

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Cal. App. 3d 1089, 1096 (1991) (“[A]s a general rule, a financial institution owes no duty of care

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to a borrower when the institution’s involvement in the loan transaction does not exceed the scope

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of its conventional role as a mere lender of money.”). Additionally, under California law, Plaintiff

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United States District Court
Northern District of California

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“may recover in tort for physical injury to person or property, but not for purely economic losses

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that may be recovered in a contract action.” Spencer v. DHI Mortg. Co., Ltd., 642 F. Supp. 2d

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1153, 1161 (E.D. Cal. 2009). The relationship between Plaintiff and Defendants is contractual in

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nature and arises from the note and deed of trust. Plaintiff has not alleged facts adequate to show

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physical injury rather than purely economic loss arising from that contractual relationship.

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Claim 6 is DISMISSED WITHOUT LEAVE TO AMEND.

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C.

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Plaintiff has been granted numerous opportunities to plead a viable claim and has failed to

Leave to Amend

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do so. Defendants urge the Court to deny further leave to amend. The Court certainly is not

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inclined to permit wholesale amendment of Plaintiffs’ claims. In particular, the Court will not

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permit amendment of claims that are legally untenable or as to which Plaintiff has not

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demonstrated any likelihood of curing the defects noted herein. However, if the facts are as

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represented by Plaintiff’s counsel at the hearing – that Plaintiff was current on his loan payments

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when Cenlar stopped accepting his checks – dismissal of this action would result an unjust

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foreclosure upon Plaintiff’s home. Accordingly, the Court will allow Plaintiff to amend to allege a

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claim for breach of the note and/or deed of trust – a claim that has never been pled in this case –

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and a companion claim for breach of the implied covenant of good faith and fair dealing.

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At the hearing, Plaintiff’s counsel stated that he would like to amend to add new claims,
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including a claim of elder abuse. The Court will not permit the injection of new theories or claims

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into the case at this stage of the proceedings absent a noticed motion for leave to amend and a

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showing that amendment would not be futile. Thus Plaintiff is ordered to confine his amended

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pleading to claims for breach of contract and breach of the implied covenant.

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IV.

ORDER

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For the foregoing reasons, IT IS HEREBY ORDERED that:

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(1)

The motion to dismiss is GRANTED WITH LEAVE TO AMEND as to Claim 4

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for breach of the implied covenant. Leave to amend also is GRANTED to add a

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new claim for breach of contract. Any amended pleading shall be filed on or before
May 19, 2015;

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United States District Court
Northern District of California

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(2)

The motion to dismiss is GRANTED WITHOUT LEAVE TO AMEND as to

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Claim 1 for injunctive relief; Claim 2 for declaratory relief; Claim 3 for accounting;

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Claim 5 for intentional infliction of emotional distress; and Claim 6 for negligent

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infliction of emotional distress.

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(3)

authorized herein.

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Plaintiff may not amend his pleading to add claims or parties not expressly

(4)

Plaintiff shall SHOW CAUSE, in writing and on or before May 19, 2015, why the

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action against Tornquist should not be dismissed for failure to effect timely service

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of process.

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Dated: April 29, 2015
______________________________________
BETH LABSON FREEMAN
United States District Judge

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