IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA
December 22, 2010
ECI FINANCIAL CORP., A CALIFORNIA CORPORATION, PLAINTIFF,
AMERICAN HOME MORTGAGE SERVICING, INC., A DELAWARE CORPORATION, AND DOES 1-50, INCLUSIVE, DEFENDANTS.
The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER GRANTING MOTION TO DISMISS, DENYING MOTION TO STRIKE, AND DENYING MOTION FOR MORE DEFINITE STATEMENT
Defendant American Home Mortgage Servicing, Inc. ("Defendant") moves for dismissal of Plaintiff's Complaint under Federal Rule of Civil Procedure ("Rule") 12(b)(6), arguing Plaintiff fails to state a claim upon which relief can be granted. In the alternative, Defendant moves to strike Plaintiff's punitive damages allegations under Rule 12(f) and for a more definite statement under Rule 12(e).
Plaintiff did not file an opposition or statement of non-opposition in response to Defendant's motion as required by Local Rule 230(c). Nor did Plaintiff respond to an Order to Show Cause ("OSC") concerning this failure. A separate order imposed a monetary sanction against Plaintiff's counsel.
I. LEGAL STANDARD
A Rule 12(b)(6) dismissal motion tests the legal sufficiency of the claims alleged in the complaint. Novarro v. Black, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief . . . ." Fed. R. Civ. P. 8(a)(2). The complaint must "give the defendant fair notice of what the [plaintiff's] claim is and the grounds upon which relief rests . . . ." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Dismissal of a claim under Rule 12(b)(6) is appropriate only where the complaint either 1) lacks a cognizable legal theory, or 2) lacks factual allegations sufficient to support a cognizable legal theory. Balistreri v. Pacific Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). To avoid dismissal, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 547.
In deciding a Rule 12(b)(6) motion, the material allegations of the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. See al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, conclusory statements and legal conclusions are not entitled to a presumption of truth. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009); Twombly, 550 U.S. at 555. "In sum, for a complaint to survive a motion to dismiss, the nonconclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).
II. REQUEST FOR JUDICIAL NOTICE
Defendant's motion includes a request that the Court take judicial notice a Deed of Trust, which was recorded with the Kern County Recorder's Office on December 30, 2005. (Def.'s Req. for Judicial Notice ("RJN") Ex. 1.)
"As a general rule, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (quotations and citation omitted). However, a court may consider matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007).
Since the Deed of Trust is publically recorded, it is capable of accurate determination and may be judicially noticed. See W. Fed. Sav. & Loan Ass'n v. Heflin Corp., 797 F. Supp. 790, 792 (1992) (taking judicial notice of documents in a county's public record, including deeds of trust). Therefore, this judicial notice request is granted.*fn1
Vincent Billera obtained a loan for $220,500.00 around December of 2005, which was secured by a Deed of Trust on his property located in Bakersfield, California. (RJN, Ex. 1.) On January 1, 2009, Billera and Defendant entered into a Loan Modification Agreement. (Compl., Ex. 1.) This agreement "may be considered" in ruling on this Rule 12(b)(6) motion, since it is attached to Plaintiff's Complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989).
Plaintiff alleges it "took over the subject property and assumed the [loan] modification agreement with Defendant." (Compl. ¶7.) Plaintiff further alleges Defendant "agreed to have Plaintiff take over the property as well as the loan for the subject property[,]" and accepted "numerous payments . . . with no issue." Id. However, Plaintiff alleges, Defendant wrongfully returned one of Plaintiff's payment checks and "[has] since started the foreclosure process." Id.
Plaintiff alleges seven state claims in its Complaint: breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California Business & Professions Code section 17200, willful misrepresentation, negligent misrepresentation, fraud, and promise without intent to perform. Defendant challenges the sufficiency of all seven claims.
A. Breach of Contract
Defendant seeks dismissal of Plaintiff's breach of contract claim, which is based upon the January 1, 2009 Loan Modification Agreement and Defendant's oral agreement that Plaintiff could "[take] over [the] property and step into the shoes of the borrower." (Compl. ¶ 17.) Defendant argues inter alia, Plaintiff lacks standing to enforce the Loan Modification Agreement because "it was not a party to the Agreement[,]" and Plaintiff does not allege "that it was the intention of the parties . . . to have Plaintiff benefit from the Agreement." (Mot. 4:16-18, 5:1-4.) Defendant further argues that Plaintiff cannot base its breach of contract claim on Defendant's alleged "verbal communication" because "an oral contract pertaining to a mortgage loan is invalid and unenforceable" under the "Statute of Frauds." Id. 5:5-10.
In California, "[a] cause of action for breach of contract requires proof of the . . . existence of the contract." CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (2008).
In order for a contract to be enforceable by a third party, the contract must be made expressly for the benefit of the third person. A third party who is only incidentally benefited [sic] by performance of a contract is not entitled to enforce it. . . . It must appear to have been the intention of the parties to secure to him personally the benefit of its provisions.
Eastern Aviation Group, Inc. v. Airborne Express, Inc., 6 Cal. App. 4th 1448, 1452 (1992) (quotations and citations omitted).
Plaintiff was not a party to the Loan Modification Agreement, and Plaintiff does not allege it was an intended beneficiary of the agreement. (Compl., Ex. 1.) Further, Defendant's alleged "verbal communication" to allow Plaintiff to take over the original borrower's property is invalid under the statute of frauds. Cf. Secrest v. Security National Mortgage Loan Trust 2002-2, 167 Cal. App. 4th 544, 553-54 (2008) ("An agreement for . . . an interest in real property comes within the statute of frauds.") Since Plaintiff has not alleged the existence of a valid contract between it and Defendant, its breach of contract claim is dismissed.
B. Good Faith & Fair Dealing
Defendant also seeks dismissal of Plaintiff's good faith and fair dealing claim, arguing inter alia, "there is no [prerequisite] valid or enforceable contract between Plaintiff [and] Defendant." (Mot. 7:16-21.)
"The implied covenant of good faith and fair dealing rests upon the existence of some specific contractual obligation." Racine Laramie, Ltd. v. Dept. of Parks & Recreation, 11 Cal. App. 4th 1026, 1031 (1992) (citation omitted). The implied covenant "cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of [the parties'] agreement." McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2008).
Plaintiff has not alleged the existence of a valid contract between it and Defendant. Therefore, its good faith and fair dealing claim is dismissed.
C. California Business & Professions Code section 17200 Defendant also seeks dismissal of Plaintiff's California Business and Professions Code section 17200 ("§ 17200") claim, arguing "Plaintiff simply alleges no facts to support [its] claim." (Mot. 9:10-11.)
California's Unfair Competition Law, § 17200, prohibits "unlawful, unfair or fraudulent" business acts and practices. "This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant, and '[a] plaintiff [. . .] must state with reasonable particularity the facts supporting the statutory elements of the violation.'" Grant v. WMC Mortg. Corp., No. CIV. 2:10-1117 WBS KJN, 2010 WL 2509415, at *4 (E.D. Cal. June 17, 2010) (quoting Khoury v. Maly's of California, Inc., 14 Cal. App. 4th 612, 619 (1993)).
Plaintiff's § 17200 claim is vague and conclusory, since it alleges only that "[b]y their activities and omissions as herein alleged, defendants . . . have engaged in unlawful or unfair business practice[s] within the meaning of [§ 17200]." (Compl. ¶ 32.) See Espinoza v. Recontrust Co., N.A., No. 09-CV-1687-IEG (RBB), 2010 WL 1568551, at *9 (S.D. Cal. Apr. 19, 2010) (holding similar allegations were "insufficient to survive a motion to dismiss"). Therefore, Plaintiff's § 17200 claim is dismissed.
D. Willful Misrepresentation, Negligent Misrepresentation, Fraud, and Promise without Intent to Perform Defendant also seeks dismissal of Plaintiff's fourth through seventh claims, in which Plaintiff alleges willful misrepresentation, negligent misrepresentation, fraud, and promise without intent to perform. Defendant argues, inter alia, that these claims fail to comply with Rule 9(b)'s heightened pleading standard. (Mot. 9:16-19, 11:10-13, 11:23-24.)
Rule 9(b)'s heightened pleading standard applies to "averments of fraud" in all civil cases, regardless of whether or not "fraud" is an essential element of the claim. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103-1105 (9th Cir. 2003). Rule 9(b) provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." The required specificity includes the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (quotation omitted).
Plaintiff's claims for willful misrepresentation, negligent misrepresentation, fraud, and promise without intent to perform are based upon the following allegations:
Defendants . . . confirm[ed] to Plaintiff that if [it] complie[d] with all obligations and requests regarding [the loan] modification, that [it] would and has stepped into the shoes of the original borrower. .
Defendants . . . affirmatively represented to Plaintiff that Defendants would represent the interests of the plaintiff, and not just take its money and foreclose on the subject property. . . . .
Defendant . . . in breach of their duties as described herein, so negligently and carelessly failed to make reasonable efforts and inquiry so that Plaintiff was not made aware of all material facts which would or could affect Plaintiff's agreement to purchase the subject property. . . . .
Defendants did the acts herein alleged with the intent to deceive and defraud Plaintiff. . . . .
At the time Defendant . . . had Plaintiff [take over the Loan Modification A]greement, Defendants had no intention of performing the terms of said agreement . . . ."
(Compl. ¶¶ 9, 37, 45, 51, 56.)
These "averments of fraud" do not provide the specificity required by Rule 9(b). See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125-27 (9th Cir. 2009) (holding allegations concerning false representations and non-disclosures "are grounded in fraud" and are subject to Rule 9(b)). They do not provide sufficient detail concerning the time, date, and place of the alleged misrepresentations and non-disclosures, nor the identity of who made them. Therefore, Plaintiff's claims against Defendant alleging willful misrepresentation, negligent misrepresentation, fraud and promise without intent to perform are dismissed.
For the stated reasons, Defendant's motion to dismiss is GRANTED. Since all claims alleged against Defendant are dismissed, Defendant's alternative motion to strike and motion for a more definite statement are DENIED as moot. Plaintiff is granted ten (10) days from the date on which this order is filed to file a First Amended Complaint.
This action may be dismissed with prejudice under Federal Rule of Civil Procedure 41(b) if Plaintiff fails to file an amended complaint within the prescribed time period.