The opinion of the court was delivered by: M. James Lorenz United States District Court Judge
ORDER DENYING DEFENDANT'S MOTION TO DISMISS
In this mortgage foreclosure action, Defendant filed a motion to dismiss the first amended complaint. Plaintiff opposed the motion and Defendant replied. For the reasons which follow, Defendant's motion is DENIED.
According to the first amended complaint, Plaintiff was the owner of the property located at 4431 Paola Way in San Diego ("Property"). The Property was a single-family residence and Plaintiff's primary residence. In September 2005 Plaintiff refinanced the mortgage on the Property. Plaintiff alleges that at the time of the refinance, he was deceived by Centex Home Equity Co., LLC regarding the true nature and ramifications of the loan. Defendant Wells Fargo Home Mortgage, Inc. dba America's Servicing Company is the servicer on the loan.
Plaintiff defaulted on the loan, a notice of default was recorded, the Property was sold, and on December 8, 2008 a Trustee's Deed upon Sale was recorded. The sale, however, was rescinded and Plaintiff remained the trustor and assessed owner of the Property.
On or about April 13, 2009 Defendant entered into the Commitment to Purchase Financial Instrument and Servicer Participation Agreement for the Home Affordable Modification Program under the Emergency Economic Stabilization Act of 2008 ("HAMP Agreement") with Federal National Mortgage Association ("Fannie Mae") and agreed to perform certain loan modification and foreclosure prevention services for eligible loans.
On July 17, 2009 Plaintiff came into possession of a copy of an unrecorded Notice of Trustee's Sale with an August 6, 2009 sale date, which appears to have prompted the filing of this action. Plaintiff subsequently filed a complaint in San Diego County Superior Court alleging breach of the HAMP Agreement on the theory that he is a third-party beneficiary under California Civil Code Section 1559, that his loan was eligible for modification, Defendant refused to offer to modify it under the HAMP Agreement, but instead commenced foreclosure proceedings. Defendant removed the action to this court based on federal question jurisdiction pursuant to 28 U.S.C. Section 1331 and diversity jurisdiction pursuant to 28 U.S.C. Section After removal, Defendant moved to dismiss the complaint, arguing that Plaintiff was not an intended third-party beneficiary of the HAMP Agreement so as to be able to enforce it. By order field August 12, 2010 the court held that Plaintiff was an intended third-party beneficiary ("Order").*fn1 However, the complaint was dismissed with leave to amend because it lacked sufficient factual allegations regarding Plaintiff's request for loan modification and Defendant's consideration of the request.
Plaintiff timely filed an amended complaint, alleging that in August 2009 he requested loan modification from Defendant pursuant to the HAMP Agreement and provided the requisite financial information. On November 5, 2009 Defendant's counsel informed Plaintiff's counsel that Plaintiff had been given a modification. The offer included a three-month initial modification and set forth the monthly payment amount, "with a review for full modification after successful completion of the plan." (First Am. Compl. at 6.) It set a new interest rate for the remaining term of the loan and indicated the first payment would likely be due December 1, 2009. Plaintiff accepted the offer and requested documents to formalize the modification. (Id.)
However, the document provided by Defendant was a Stipulated Partial Reinstatement/Repayment Agreement ("Reinstatement") and not a modification. It merely provided a forbearance rather than modified the terms of the loan. Plaintiff did not accept the Reinstatement but timely sent a check in the amount of the first payment as indicated in Defendant's modification offer. On December 2, 2009 Defendant's counsel informed Plaintiff's counsel that Plaintiff was not eligible for modification and returned Plaintiff's check.
On January 8, 2010 Plaintiff inquired with Defendant whether the foreclosure sale could be further postponed, but Defendant indicated that the Reinstatement was the only offer, and that any new request "would restart the review process." Plaintiff then requested to restart the process.
Subsequently, Defendant indicated that the Property would be foreclosed. On March 23, 2010 Plaintiff contacted Defendant regarding his options to keep his home and offered to repurchase the Property with a $50,000 down payment; however, Defendant declined. The Property was foreclosed and sold to U.S. Bank.
In the first amended complaint, Plaintiff asserted causes of action for breach of the HAMP Agreement in his capacity as a third-party beneficiary, breach of the loan modification agreement, and violation of the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. ("UCL"). He seeks damages as well as declaratory and injunctive relief.
Defendant filed a motion to dismiss for failure to state a claim upon which relief can be granted. A Rule 12(b)(6) motion tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted under Rule 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc.,749 F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law"). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks, brackets and citations omitted). In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. , 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998).
Defendant argues that the first amended complaint failed to correct the pleading defects noted in the order dismissing the complaint with leave to amend. "[B]ecause Plaintiff did not allege whether he contacted Defendant in reference to the modification and because it [was] unclear from the allegations whether Defendant considered Plaintiff's loan for modification at all, Plaintiff . . . alleged insufficient facts to state a claim for breach of the [HAMP] Agreement" (Order at 10), but was granted leave to amend. In the first amended complaint, Plaintiff alleged that he requested loan modification pursuant to the HAMP Agreement from Defendant in August 2009 and continued to request it throughout this litigation. (First Am. Compl. at 5.) He also alleged that Defendant failed to consider his loan under the guidelines pertaining to the HAMP Agreement. (Id. at 8.) Plaintiff therefore corrected the pleading defects noted in the Order.
In addition, Defendant argues that Plaintiff did not sufficiently allege breach of the HAMP Agreement because he did not allege that Defendant had obtained the necessary consents and waivers to modify the loan. According to the HAMP Agreement, excepted from Defendant's obligation to modify are the loans for which Defendant is unable to obtain the ...