Gamboa et al v. World Savings Bank FSB et al

Filing 24

ORDER. IT IS HEREBY ORDERED THAT Defendants' 4 Motion to Dismiss is GRANTED. Plaintiff's seventh and eighth claims are dismissed. FURTHER ORDERED THAT Plaintiffs shall have twenty-one (21) days within which time to file an amended complaint. Signed by Judge Edward C. Reed, Jr on 12/6/2010. (Copies have been distributed pursuant to the NEF - KO)

1 2 3 4 5 6 7 RAFAEL GAMBOA AND LINDA GAMBOA, 8 Plaintiffs, 9 vs. 10 WORLD SAVINGS BANK, FSB, WACHOVIA 11 MORTGAGE FSB, WELLS FARGO BANK, N.A. , and DOES 1-10 12 Defendants. 13 14 15 Plaintiffs in this case are homeowners who claim to be victims 16 of an unlawful and wrongful foreclosure initiated by Defendants. 17 Now pending is Defendants' motion to dismiss (#4). 18 is ripe, and we now rule on it. 19 20 I. Factual and Procedural Background 21 On August 26, 2006, Plaintiffs executed a promissory note and 22 deed of trust. 23 executed a second promissory note and deed of trust on the same 24 property. 25 an agent of Defendants "who refused to give them their full name and 26 were advised that Plaintiffs would be eligible for a loan 27 modification by reason of the financial hardships undertaken by 28 (Id.) In March 2009, Plaintiffs spoke, by telephone, to (Compl. ¶ IV (#1-2).) On August 28, 2006, Plaintiffs The motion ) ) ) ) ) ) ) ) ) ) ) ) ) 3:10-CV-454-ECR-VPC UNITED STATES DISTRICT COURT DISTRICT OF NEVADA RENO, NEVADA

Order

1 Plaintiffs as a result of Plaintiff's illness."

(Id. ¶ XV.)

2 "Plaintiffs were advised not to make any more payments on their loan 3 in order to qualify for the loan modification program." 4 (#1-2).) (Id. ¶ XV

In March 2009, Plaintiffs spoke, by telephone, to

5 Defendants "for purposes of electing to convert said loan to a fixed 6 rate loan." (Id. ¶ XIII.) Plaintiffs were advised "that said

7 right was no longer available to Plaintiffs and refused to permit 8 such a conversion as World Savings Bank was no longer in business." 9 (Id.) In April 2010, Plaintiffs were told they were approved for a (Id. ¶ XVII) On July 14, 2009, Defendants filed

10 loan modification.

11 a notice of default and election to sell on one of Plaintiffs' deeds 12 of trust. 13 (Id. ¶ V.)

On May 25, 2010, Plaintiffs filed this lawsuit in state court.

14 On July 20, 2010, Defendants removed the lawsuit (#1) to federal 15 court, invoking our diversity jurisdiction. On July 27, 2010,

16 Defendants filed the pending motion to dismiss (#4) and request for 17 judicial notice (#5). Plaintiffs opposed (#10) the motion to

18 dismiss (#10), and Defendants replied (#13). 19 20 21 II. Motion to Dismiss Standard A motion to dismiss under Fed. R. Civ. P. 12(b)(6) will only be

22 granted if the complaint fails to "state a claim to relief that is 23 plausible on its face." 24 570 (2007). Bell Atl. Corp. v. Twombly, 550 U.S. 544,

On a motion to dismiss, "we presum[e] that general

25 allegations embrace those specific facts that are necessary to 26 support the claim." Lujan v. Defenders of Wildlife, 504 U.S. 555,

27 561 (1992) (quoting Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 28
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1 (1990)) (alteration in original).

Moreover, "[a]ll allegations of

2 material fact in the complaint are taken as true and construed in 3 the light most favorable to the non-moving party." In re Stac

4 Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996) (citation 5 omitted). 6 Although courts generally assume the facts alleged are true,

7 courts do not "assume the truth of legal conclusions merely because 8 they are cast in the form of factual allegations." 9 Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). W. Mining Accordingly,

10 "[c]onclusory allegations and unwarranted inferences are 11 insufficient to defeat a motion to dismiss." 12 F.3d at 1403 (citation omitted). 13 Review on a motion pursuant to Fed. R. Civ. P. 12(b)(6) is See Lee v. City of L.A., In re Stac Elecs., 89

14 normally limited to the complaint itself. 15 250 F.3d 668, 688 (9th Cir. 2001).

If the district court relies on

16 materials outside the pleadings in making its ruling, it must treat 17 the motion to dismiss as one for summary judgment and give the non18 moving party an opportunity to respond. Fed. R. Civ. P. 12(d); "A

19 see United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003).

20 court may, however, consider certain materials -- documents attached 21 to the complaint, documents incorporated by reference in the 22 complaint, or matters of judicial notice -- without converting the 23 motion to dismiss into a motion for summary judgment." 24 F.3d at 908. 25 If documents are physically attached to the complaint, then a Ritchie, 342

26 court may consider them if their "authenticity is not contested" and 27 "the plaintiff's complaint necessarily relies on them." 28
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Lee, 250

1 F.3d at 688 (citation, internal quotations, and ellipsis omitted). 2 A court may also treat certain documents as incorporated by 3 reference into the plaintiff's complaint if the complaint "refers 4 extensively to the document or the document forms the basis of the 5 plaintiff's claim." Ritchie, 342 F.3d at 908. Finally, if

6 adjudicative facts or matters of public record meet the requirements 7 of Fed. R. Evid. 201, a court may judicially notice them in deciding 8 a motion to dismiss. Id. at 909; see Fed. R. Evid. 201(b) ("A

9 judicially noticed fact must be one not subject to reasonable 10 dispute in that it is either (1) generally known within the 11 territorial jurisdiction of the trial court or (2) capable of 12 accurate and ready determination by resort to sources whose accuracy 13 cannot reasonably be questioned."). 14 15 16 III. Discussion Defendants challenge Plaintiffs seventh and eighth claims for

17 breach of the implied covenant of good faith and fair dealing and 18 breach of fiduciary duty, respectively.1 19 A. Breach of the Implied Covenant of Good Faith and Fair

20 Dealing 21 Plaintiffs' seventh claim alleges a violation of the implied In every contract, there

22 covenant of good faith and fair dealing.

23 is an implied covenant of good faith and fair dealing: "When one 24 25 26 27 28 Plaintiffs do not actually label their claims with the names of causes of action under which they seek relief. Nevertheless, Defendants characterize Plaintiffs' seventh and eight claims as `breach of the implied covenant of good faith and fair dealing' and `breach of fiduciary duty' and Plaintiffs do not dispute Defendants' characterization.
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1 party performs a contract in a manner that is unfaithful to the 2 purpose of the contract and the justified expectations of the other 3 party are thus denied, damages may be awarded against the party who 4 does not act in good faith." Hilton Hotels Corp. v. Butch Lewis A breach of the

5 Prods., Inc., 808 P.2d 919, 923 (Nev. 1991).

6 covenant occurs "[w]here the terms of a contract are literally 7 complied with but one party to the contract deliberately contravenes 8 the intention and spirit of the contract . . . ." Id. at 922-23.

9 The following provides a quintessential example of a circumstance 10 giving rise to a claim for breach of the implied covenant of good 11 faith and fair dealing: A lessee enters into a percentage lease 12 wherein it agrees to pay a certain percentage of gross sales 13 receipts as rental and then deliberately alters its business in a 14 way that reduces expected sales by, for example, diverting business 15 to another store for the sole purpose of bringing down the rent. 16 Id. at 924 n.6. 17 The allegations in Plaintiffs' complaint do not support a claim

18 for breach of the implied covenant of good faith and fair dealing. 19 There are no allegations indicating Defendants performed the 20 contract in a manner inconsistent with the intention or spirit of 21 the contract. Id. The information allegedly provided to Plaintiffs

22 telephonically by Defendants may indeed form the basis of another 23 claim for relief, but it does not support a claim for breach of the 24 implied covenant of good faith and fair dealing. 25 seventh claim will therefore be dismissed. 26 27 28
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Plaintiffs'

1 2

B. Breach of Fiduciary Duty Plaintiffs' eighth claim is breach of fiduciary duty. Under

3 Nevada law, a "fiduciary relation exists between two persons when 4 one of them is under a duty to act for or to give advice for the 5 benefit of another upon matters within the scope of the relation." 6 Stalk v. Mushkin, 199 P.3d 838, 843 (Nev. 2009) (internal quotation 7 marks and citation omitted). 8 We have not discovered, nor have the parties provided, any

9 Nevada precedent addressing the issue of whether or not a fiduciary 10 relationship arises from the relationship between a lender and a 11 debtor. In Yerington Ford, Inc. v. General Motors Acceptance Corp.,

12 359 F. Supp. 2d 1075, 1090 (D. Nev. 2004)(overruled on other 13 grounds), a federal district court in the District of Nevada, faced 14 with the same lack of Nevada precedent, conducted an exhaustive 15 survey of Nevada case law regarding fiduciary relationships and 16 analyzed case law in other jurisdictions. The Yerington court

17 ultimately concluded that the "Nevada Supreme Court would hold that 18 an arms-length lender-borrower relationship is not fiduciary in 19 nature, absent exceptional circumstances." Id. We agree. Because

20 Plaintiffs have not alleged facts that might constitute "exceptional 21 circumstances," their claim for breach of fiduciary duty must fail. 22 Id. 23 24 25 IV. Leave to Amend Plaintiffs' eighth claim will therefore be dismissed.

Under Rule 15(a) leave to amend is to be "freely given when FED. R. CIV. P. 15(a). In general, amendment Owens v. Kaiser Found.

26 justice so requires."

27 should be allowed with "extreme liberality." 28
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1 Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001) (quoting 2 Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th 3 Cir. 1990)). If factors such as undue delay, bad faith, dilatory

4 motive, undue prejudice or futility of amendment are present, leave 5 to amend may properly be denied in the district court's discretion. 6 Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051-52 (9th 7 Cir. 2003)(discussing Foman v. Davis, 371 U.S. 178, 182 (1962). 8 In light of the liberal spirit of Rule 15(a), Plaintiffs should

9 have an opportunity to amend their complaint to cure the 10 deficiencies noted herein. If Plaintiffs do not amend their

11 complaint, this lawsuit will proceed with respect to the claims not 12 challenged by the motion to dismiss. If Plaintiffs choose to amend

13 the complaint and the amended complaint is similarly deficient, 14 however, we may be forced to conclude that leave to further amend 15 would be futile. 16 17 18 VI. Conclusion Plaintiffs' seventh claim for breach of the implied covenant of

19 good faith and fair dealing fails because Plaintiffs do not allege 20 facts indicating Defendants performed the contract in a manner 21 inconsistent with the intention or spirit of the contract. 22 Plaintiffs' eighth claim for breach of fiduciary duty fails because 23 Plaintiffs have not alleged facts that might constitute "exceptional 24 circumstances." 25 26 27 28
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Plaintiffs will be given leave to amend.

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IT IS, THEREFORE, HEREBY ORDERED THAT Defendants' Motion to Plaintiffs' seventh and eighth claims are

2 Dismiss (#4) is GRANTED. 3 dismissed. 4 5

IT IS FURTHER ORDERED THAT Plaintiffs shall have twenty-one

6 (21) days within which time to file an amended complaint. 7 8 9 DATED: December 6, 2010. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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____________________________ UNITED STATES DISTRICT JUDGE