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Vissuet v. Indymac Mortgage Services


March 19, 2010


The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court


Currently before the Court is a Motion to Dismiss the First Amended Complaint brought by Defendant OneWest Bank, FSB as Successor in Interest to Certain Assets and Liabilities of IndyMac Bank, FSB ("OneWest"). Having considered the parties' arguments, and for the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the motion.


I. Parties

Frida Vissuet ("Vissuet") is the owner of certain real property commonly known as 2234 MOROSE STREET, LEMON GROVE, CALIFORNIA 91945 ("Property").

OneWest is the current owner of all beneficial interest under the Deed of Trust executed by Vissuet. The original lender under the Deed of Trust was PacificBanc Mortgage. (Def. MTD, Ex. A.) OneWest became the beneficial owner on July 13, 2009, through an assignment by Mortgage Electronic Registration Systems, Inc., acting as a nominee for PacificBanc Mortgage. (Id., Ex. C.) The Assignment of Deed of Trust was recorded on July 23, 2009. (Id.)

Quality Loan Services is the current trustee. The original trustee under the Deed of Trust was LandAmerica Southland Title. (Id., Ex. A.) Quality Loan Services was substituted as a trustee on June 20, 2009. (Id., Ex. D.)The Substitution of Trustee was recorded on August 4, 2009. (Id.)

II. Factual Background

On July 24, 2007, Vissuet executed a Deed of Trust securing a loan in the amount of $360,000 from PacificBanc Mortgage. According to Vissuet, this was an Alternative-A loan,*fn1 and it consisted of a "refinance" of the first deed on the Property. (FAC ¶ 4.) On June 20, 2009, after Vissuet defaulted on her loan, Quality Loan Services recorded and served a Notice of Default on the Property. (See Def. MTD, Ex. B.) On September 25, 2009, Quality Loan Services recorded a Notice of Trustee's Sale of the Property in the amount of $379,660.17, setting October 15, 2009 as the date of sale. (Id., Ex. E.)

Upon receipt of the Notice of Trustee's Sale, Vissuet contacted IndyMac and requested loan modification. She was allegedly told that if she completed and submitted the loan modification application, IndyMac would postpone the trustee's sale. (FAC ¶ 9.) Vissuet alleges that based upon that promise, she completed and submitted her loan modification application. (Id. ¶ 10.) However, after Vissuet submitted the application, she was informed by IndyMac that there was nothing that could be done to stop the trustee's sale of the Property. (Id.) As a result, Vissuet filed the present suit. After the action was commenced, Vissuet received in the mail two additional letters from IndyMac, dated November 2 and November 5, indicating that IndyMac was willing to work with Vissuet on a loan modification. (See, e.g., id., Ex. B.)

III. Procedural Background

Vissuet filed the present complaint on October 13, 2009, in the Superior Court for the County of San Diego, alleging four causes of action. OneWest subsequently removed the case to this Court on October 19, 2009. On November 10, 2009, Vissuet moved for a Temporary Restraining Order ("TRO") to avoid an impending trustee's sale. The Court granted the motion for TRO and scheduled a hearing on the preliminary injunction for November 23, 2009. After the hearing, the Court denied the request for preliminary injunction and dissolved the TRO. [Doc. No. 12]. On December 4, 2009, Vissuet filed her First Amended Complaint ("FAC"), alleging five causes of action: (1) for predatory lending against IndyMac; (2) for breach of contract against all Defendants; (3) for fraud against all Defendants; (4) for violation of Section 2923.52 et seq. of the California Civil Code against all Defendants; and (5) for declaratory and injunctive relief against all Defendants. [Doc. No. 14].

Subsequently, on January 13, 2010, OneWest filed the present Motion to Dismiss the FAC pursuant to Fed. R. Civ. P. 12(b)(6). Vissuet filed a late opposition, and OneWest filed a reply.*fn2


A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings. A complaint survives a motion to dismiss if it contains "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S.544, 570 (2007). The court may dismiss a complaint as a matter of law for: (1) "lack of cognizable legal theory," or (2) "insufficient facts under a cognizable legal claim." SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). The court only reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citation omitted).

Despite the deference, the court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949-50 (2009). It is also improper for the court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S.Ct. at 1950.


I. Failure to Tender

OneWest first asserts that the entire FAC should be dismissed due to Plaintiff's failure to allege or make an actual tender. OneWest relies on an apparent maxim in the context of foreclosures known as the "tender rule," pursuant to which a borrower who has defaulted must first do equity himself before requesting the Court to stop or set aside the foreclosure proceedings. However, a review of the cases cited by OneWest indicates that the California "tender rule" applies only where the plaintiff is trying to set aside a foreclosure sale due to some irregularity. See, e.g., Nguyen v. Calhoun, 105 Cal. App. 4th 428, 439 (2003) (plaintiff's purchase of the subject property before the sale took place); Abdallah v. United Sav. Bank, 43 Cal. App. 4th 1101, 1109 (1996) (irregularity in the sale procedure); U.S. Cold Storage v. Great Western Sav. & Loan Ass'n, 165 Cal. App. 3d 1214, 1225 (1985) (irregularity in the sale notice); Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 578 (1984) (irregularity in the sale notice); Karlsen v. Am. Sav. & Loan Ass'n, 15 Cal. App. 3d 112, 118 (1971) (voidable sale under a deed of trust)

In the present case, however, the trustee's sale has not occurred yet, and OneWest has failed to cite to any case that would establish a similar bright-line rule requiring tender where the plaintiff is merely attempting to prevent a trustee sale from proceeding.*fn3 Moreover, it is well-established that "an offer to pay debt may not be required where doing so would be inequitable." See Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1184 (N.D. Cal. 2009) (citations omitted).As the California Supreme Court has stated:

[T]here are not a few cases holding that, where a party has the right to avoid a sale, he is not bound to tender any payment in redemption. Whatever may be the correct rule, viewing the question generally, it is certainly not the law that an offer to pay the debt must be made, where it would be inequitable to exact such offer of the party complaining of the sale. Under the circumstances disclosed by this record, the defendant would be subjected to very evident injustice and hardship if her right to attack the sale were made dependent upon an offer by her to pay the whole debt. Humboldt Sav. Bank v. McCleverty, 161 Cal. 285, 291 (1911) (internal citations omitted).

Accordingly, because Plaintiff alleges improprieties with the origination and servicing of her loan, and because the trustee sale has not taken place yet, the Court declines to require Plaintiff to make or allege an actual tender at this time.

II. First Cause of Action for Predatory Lending (against IndyMac)

In her first cause of action, Plaintiff alleges that the subject loan was accomplished by the use of predatory lending because Defendants knew or should have known that the loan was one that Plaintiff should not have qualified for. (FAC ¶¶ 17-19.) In moving to dismiss this cause of action, OneWest argues that the term "predatory lending" is very expansive and that Plaintiff's FAC does not really provide notice to OneWest of the allegations against it. The Court agrees.

First, Plaintiff fails to indicate any legal basis for her "predatory lending" cause of action. As a result, both the Court and OneWest are left to guess whether this cause of action is based on an alleged violation of federal law, state law, common law, or some combination of the above.*fn4 Second, Plaintiff fails to plead sufficient facts to support her claim of "predatory lending." Notably, Plaintiff does not allege that she signed the documents based on duress or fraud, that there were terms in the loan documents she did not understand, or that some mandated disclosures were not provided to her. Rather, Plaintiff alleges IndyMac did not factor her ability to pay the loan, her creditworthiness, or her ability to pay the adjusted monthly payments in the future when providing Plaintiff with the loan; but she does not allege whether any of that information was available to IndyMac at the relevant time or how that amounted to "predatory lending." (See FAC ¶¶ 17-19.) Accordingly, because Plaintiff has failed to provide the "grounds"--both factual and legal--of her "entitlement to relief," the Court GRANTS OneWest's Motion to Dismiss and DISMISSES WITH LEAVE TO AMEND the first cause of action for "predatory lending." See Twombly, 550 U.S. at 555.

III. Second cause of action for breach of contract (against all Defendants)

In her second cause of action, Plaintiff alleges that in exchange for her promise to complete and submit to IndyMac a loan modification application, IndyMac promised to postpone the trustee's sale on the subject property. (FAC ¶ 23.) According to Plaintiff, she performed her portion of this oral contract, and IndyMac breached its obligation when it failed to postpone the trustee's sale. (Id. ¶ 24.) In its motion to dismiss, OneWest denies that any oral contract was formed between the parties, and in the alternative argues that any such contract would be unenforceable due to lack of certainty regarding the material terms and because it violates the Statute of Frauds.

The Court is not persuaded by the argument that the alleged agreement by itself violates the Statute of Frauds. Section 1624(a)(6), on which OneWest relies, provides only that "[a]n agreement by a purchaser of real property to pay an indebtedness secured by mortgage or deed of trust upon the property purchased" is invalid unless made in writing and subscribed by the party to be charged. CAL. CIV. CODE § 1624(a)(6) (emphasis added). Plaintiff's second cause of action, however, alleges an oral contract where IndyMac promised to postpone the trustee's sale in exchange for Plaintiff's promise to complete and submit a loan modification application. (FAC ¶ 23.) This agreement is not for any obligation "to pay an indebtedness secured" and therefore is not covered by Section 1624(a)(6).

Rather, the proper challenge to the validity of an oral modification of a deed of trust is through Section 1698. See Secrest v. Sec. Nat'l Mortgage Loan Trust 2002-2, 167 Cal. App. 4th 544, 553 (2008) (concluding that an agreement that "altered the lender's ability to exercise a right to foreclose under the note and deed of trust due to the borrower's default" amounted to a modification, which must comply with the requirements of Section 1698). Section 1698 provides that a contract in writing may only be modified (1) in writing, (2) by an executed oral agreement, or (3) by an oral agreement supported by new consideration. CAL. CIV. CODE § 1698(a)-(c). The California Supreme Court has held that "if there exists sufficient consideration for an oral modification agreement, then full performance by the promisee alone would suffice to render the agreement 'executed' within the meaning of section 1698." Raedeke v. Gibraltar Sav. & Loan Ass'n, 10 Cal. 3d 665, 673 (1974) (concluding that the borrowers had a cognizable cause of action at law because they relied on the lender's promise to postpone the foreclosure sale if they obtained a solvent buyer).

In the present case, adequate consideration can be found in the form of Plaintiff's completion and submission of the loan modification application. The application was not something Plaintiff was required to do under the original contract, and if not for the application, Plaintiff alleges she would have spent the time pursuing alternate measures to avoid the foreclosure. See Pope v. Sav. Bank of Puget Sound, 850 F.2d 1345, 1356 (9th Cir. 1988) ("We recall the first lesson in contracts, the peppercorn theory--that courts will not inquire into the adequacy of consideration, so long as it was true and valuable."). Accordingly, because Plaintiff has alleged sufficient facts that there was "sufficient consideration" for an oral modification and that she has fully performed her part of the contract, Plaintiff's second cause of action is not barred by Section 1698. See Raedeke, 10 Cal. 3d at 673.

Moreover, Plaintiff can state a cause of action even in the absence of actual consideration. Thus, "the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise. . . . 'The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange." Id. at 672. "'Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.'"*fn5 Id. at 672 n.1. In the present case, Plaintiff has sufficiently alleged that: (1) IndyMac made a promise that it would postpone the sale if Plaintiff completed and submitted the loan modification application; (2) IndyMac should have reasonably expected that Plaintiff would rely on that promise; (3) Plaintiff in fact did rely on that promise by spending time to complete the application rather than pursuing alternate measures to avoid the foreclosure; and (4) if the promise is not enforced, injustice will occur in the form of a foreclosure on Plaintiff's property.*fn6 (See FAC ¶¶ 10, 22-25.) Accordingly, even in the absence of actual consideration, Plaintiff has pled sufficient facts for her second cause of action to withstand a motion to dismiss.*fn7 See Sutherland v. Barclays Am. / Mortgage Corp., 53 Cal. App. 4th 299, 312 (1997) (concluding that Plaintiff could proceed with her cause of action for breach of contract where she detrimentally relied on the defendant's statement that she could postpone three mortgage payments).

III. Third cause of action for fraud (against all Defendants)

In her third cause of action, Plaintiff alleges she was defrauded by Defendants when they promised to postpone the trustee's sale if she filed her application, and then failed to do so. (FAC ¶¶ 27-29.) Plaintiff argues that this conduct constituted a fraudulent business practice because IndyMac failed to act in good faith and deal fairly with Plaintiff. (Id. ¶ 30.) Finally, Plaintiff alleges that this is a wide-spread practice by IndyMac, whereby it promises to postpone the trustee's sales upon the borrowers' submission of their loan modification applications and subsequently either falsely claims that it did not receive the applications or all of the documentation, or proceeds with the trustee's sales regardless of what the borrowers do. (Id. ¶ 33.) OneWest moves to dismiss this cause of action, arguing there is no obligation to modify the loan, and that in any event Plaintiff has failed to plead the necessary elements to support a claim for fraud with required particularity.

As an initial matter, OneWest misunderstands Plaintiff's third cause of action. Specifically, this cause of action appears to be based on OneWest's obligation to modify the loan as agreed in the oral contract, and not on any duty under the California Civil Code. (See FAC ¶¶ 26-29.)

Nonetheless, the Court agrees that Plaintiff has failed to plead her cause of action for fraud with the required particularity. To recover for common law fraud under California law, Plaintiff must demonstrate: (1) misrepresentation, (2) knowledge of its falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage. Gil v. Bank of Am., N.A., 138 Cal. App. 4th 1371 (2006) (citation omitted). Moreover, Federal Rule of Civil Procedure 9(b) requires allegations of fraud or mistake to be stated "with particularity." In the Ninth Circuit, this rule "has been interpreted to mean the pleader must state the time, place and specific content of the false representations as well as the identities of the parties to the misrepresentation." Misc. Serv. Workers, Drivers & Helpers v. Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir.1981) (citations omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) ("Averments of fraud must be accompanied by 'the who, what, when, where, and how' of the misconduct charged." (citation omitted)). Thus, where multiple defendants are involved, "a plaintiff must, at a minimum, 'identify the role of each defendant in the alleged fraudulent scheme.'" Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.2007) (quotation omitted).

In the present case, as OneWest points out, Plaintiff has failed to identify who she talked to, what specifically was promised, and why there was any knowledge of falsity. As such, the third cause of action fails to comply with Rule 9(b) because it is not "specific enough to give defendants notice of the particular misconduct ... so that they can defend against the charge and not just deny that they have done anything wrong." See Vess, 317 F.3d at 1106 (internal quotation marks and citation omitted). Accordingly, the Court GRANTS the Motion to Dismiss in this regard and DISMISSES WITH LEAVE TO AMEND Plaintiff's third cause of action.

IV. Fourth cause of action for violation of California Civil Code Section 2923.52 et seq. (against all Defendants)

In her fourth cause of action, Plaintiff alleges Defendants are in violation of Section 2923.52 et seq. of the California Civil Code because they have not implemented a viable loan modification program. (FAC ¶¶ 34-36.) Specifically, with respect to her, Plaintiff alleges Defendants failed to offer her a viable loan modification program. (Id. ¶ 37.) Accordingly, because they failed to implement a viable loan modification program, Plaintiff alleges Defendants were "required to extend the notice of default period an additional 90 days," including with respect to Plaintiff's loan. (Id. ¶¶ 38-39.)

Plaintiff's fourth claim essentially boils down to two arguments. First, it appears Plaintiff argues Defendants had an obligation to provide her with a loan modification program. However, "nothing in Cal. Civ. Code § 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers." Farmer v. Countrywide Home Loans, No. 08cv2193 BTM (AJB), 2009 WL 189025, at *2 (S.D. Cal. Jan. 26, 2009); accord Pantoja v. Countrywide Home Loans, 640 F. Supp. 2d 1177, 1188 (N.D. Cal. 2009).

Second, and in the alternative, Plaintiff appears to argue that Defendants had to provide her with additional 90 days after the notice of default. Normally, notice of sale cannot be given less than three months from the filing of the notice of default.*fn8 CAL. CIV. CODE § 2924(2), (3). However, under the California Foreclosure Prevention Act, Cal. Civ. Code §§ 2923.52 et seq., with regard to certain residential loans, lenders are required to provide the borrower with additional 90 days. The longer period applies only if all of the following criteria are met: (1) the loan was recorded during the period of January 1, 2003 to January 1, 2008; (2) the loan at issue is "the first mortgage or deed of trust that the property secures;" (3) the borrower "occupied the property as the borrower's principal residence at the time the loan was delinquent;" and (4) the notice of default has been recorded on the property. Id. § 2923.52(a). If Section 2923.52 does not apply to the particular sale at hand, that fact must be expressly stated in the Notice of Sale. Id. § 2923.54.

In the present case, Plaintiff has failed to allege sufficient facts to show that she was entitled to the additional 90 days. Notably, the FAC expressly provides that Plaintiff's loan "consisted of a refinance of a first trust deed on [the Property]." (FAC ¶ 4 (emphasis added).) However, to qualify for the longer period, the loan must have been "the first mortgage or deed of trust that the property secures."*fn9 See CAL. CIV. CODE § 2923.52(a)(2) (emphasis added). Moreover, Section 2923.52 does not apply in this case because OneWest obtained a permanent exemption from the Department of Financial Institutions pursuant to Section 2923.53.*fn10 See Dep't of Fin. Inst., California Foreclosure Prevention Act, (last visited March 11, 2010). As required by Section 2923.54, this fact was expressly stated in the Notice of Sale sent to Plaintiff.*fn11 (See Def. MTD, Ex. E.) For the foregoing reasons, the Court GRANTS OneWest's Motion to Dismiss and DISMISSES WITH PREJUDICE Plaintiff's fourth cause of action.

V. Fifth cause of action for declaratory and injunctive relief (against all Defendants)

Finally, OneWest moves to dismiss Plaintiff's fifth cause of action seeking declaratory and injunctive relief. According to OneWest, Plaintiff's declaratory relief action fails because she seeks to redress past wrongs, rather than declaration of her future rights. Moreover, OneWest argues the request for declaratory relief is entirely commensurate with relief sought through the other causes of action. Finally, OneWest argues Plaintiff is not entitled to injunctive relief because: (1) it is a remedy, and not a cause of action; (2) it is unavailable because Plaintiff has failed to do equity herself; and (3) it is unavailable to Plaintiff because she has slept on her rights.

Under 28 U.S.C. § 2201, "any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Declaratory relief, however, may be unnecessary where an adequate remedy exists under some other cause of action. See Mangindin v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 707 (N.D. Cal. 2009). Likewise, "[d]eclaratory relief should be denied when it will neither serve a useful purpose in clarifying and settling the legal relations in issue nor terminate the proceedings and afford relief from the uncertainty and controversy faced by the parties." United States v. Washington, 759 F.2d 1353, 1356-57 (9th Cir. 1985) (en banc) (per curiam) (citations omitted). In the present case, Plaintiff's request for declaratory relief is not redundant in the face of the other causes of action, and it may be useful in clarifying the legal relations between the parties. Specifically, Plaintiff wants the Court to adjudge whether she is entitled to a good faith evaluation of her loan modification application, and if so, whether Defendants are then required to make a good faith offer to modify her loan and cancel the currently pending trustee's sale. (FAC ¶¶ 43-44.) Because the relief sought is different from what is sought in the remaining four causes of action, the Court DENIES OneWest's Motion to Dismiss in this regard. See StreamCast Networks, Inc. v. IBIS LLC, No. CV 05-04239 MMM (Ex), 2006 WL 5720345, at **3-5 (C.D. Cal. May 2, 2006) (denying defendant's motion to dismiss the declaratory relief claim where the claim sought a declaration that plaintiff could terminate the agreement in the future and retain the advance payment without liability, which was different than the relief sought in plaintiff's breach of contract claim).

On the other hand, the Court agrees with OneWest that injunctive relief "is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted." See Shell Oil Co. v. Richter, 52 Cal. App. 2d 164, 168 (1942) (citation omitted). Accordingly, the Court GRANTS the Motion to Dismiss in this regard and DISMISSES WITH PREJUDICE the cause of action for injunctive relief. Plaintiff's request for injunctive relief as a remedy, however, remains viable--provided Plaintiff is successful on the merits of one of her remaining causes of action.


For the foregoing reasons, the Court ORDERS as follows:

(1) OneWest's Motion to Dismiss Plaintiff's first and third causes of action is GRANTED, and those causes of action are DISMISSED WITH LEAVE TO AMEND. Plaintiff shall have twenty (20) days from the date of the filing of this Order to file a Second Amended Complaint.

(2) OneWest's Motion to Dismiss Plaintiff's fourth cause of action and fifth cause of action seeking injunctive relief is GRANTED,and those causes of action are DISMISSED WITH PREJUDICE.

(3) OneWest's Motion to Dismiss is DENIED in all other respects. IT IS SO ORDERED.

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