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Meredith L. Manzano, An v. Metlife Bank N.A.


May 24, 2011



Plaintiff Meredith L. Manzano brought this action against defendants MetLife Bank, N.A. ("MetLife"), Quality Loan Service Corp. ("Quality Loan"), and Donn Steier, Inc. dba Sierra Mortgage ("Sierra Mortgage"), arising out of defendants' allegedly wrongful conduct relating to a residential loan agreement. Presently before the court are plaintiff's motion to remand and Metlife's motions to dismiss plaintiff's Second Amended Complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) and to strike plaintiff's SAC pursuant to Rule 12(f).

I. Factual and Procedural Background

Plaintiff is the owner of real property located at 168 Beaver Trail in Mammoth Lakes, California. (SAC ¶ 7 (Docket No. 14).) In July of 2008, First Horizon Home Loans recorded a Deed of Trust on the property with the Mono County Recorder's Office as security for a loan for $417,000.00. (Def.'s Req. for Judicial Notice Ex. 1 (Docket No. 18); see SAC ¶ 8.)

On April 28, 2009, MetLife filed a Corporate Reassignment of Deed of Trust with the Mono County Recorder's Office, which stated that First Horizon Home Loans conveyed the Deed of Trust on plaintiff's home to Metlife. (Def.'s Req. for Judicial Notice Ex. 2.) Plaintiff alleges, however, that MetLife is not the true owner of the Deed of Trust and underlying indebtedness. (SAC ¶ 29.)

Plaintiff apparently missed at least one loan payment, as on July 8, 2010, plaintiff received a letter from MetLife regarding the possibility of loan modification following plaintiff's "failure to pay." (SAC ¶ 28.) Plaintiff then allegedly called the loss mitigation department of MetLife and spoke to a representative who told plaintiff to stop making regular payments in order to qualify for a loan modification. (Id. ¶ 31.) The representative allegedly told plaintiff that her credit would not be affected during the process as long as she provided MetLife with the required financial information for the modification. (Id. ¶ 32.)

Plaintiff allegedly made a Qualified Written Request ("QWR") to MetLife on November 16, 2010. (Id. ¶ 88.) She received no response. (Id.) MetLife has allegedly recorded a Notice of Default and Notice of Trustee's Sale on plaintiff's home but has not yet foreclosed. (Id. ¶¶ 10-11.)

On December 21, 2010, plaintiff filed suit in the Superior Court of the County of Mono against MetLife and Quality Loan, asserting both state and federal claims. (Notice of Removal ¶ 1 (Docket No. 1).) On February 22, 2011, plaintiff filed a First Amended Complaint in state court, adding another federal claim against MetLife. (John Manzano Decl. in Supp. of Mot. to Remand ¶ 12 (Docket No. 9).) The parties dispute whether and when MetLife was properly served with the Complaint or First Amended Complaint in state court.

On March 9, 2011, MetLife removed the action to this court on the basis of both diversity and federal question jurisdiction.*fn1 (Notice of Removal ¶¶ 7-12.) Plaintiff then filed her SAC in this court on April 12, 2011, adding a state law claim against MetLife and Sierra Mortgage, which had not previously been a party. (Docket No. 14.) The SAC states claims against MetLife for slander of title and quiet title, fraud, negligent misrepresentation, bad faith, wrongful foreclosure, violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, and predatory lending under California Financial Code sections 4970-4979.8.*fn2

II. Discussion

A. Motion to Remand

Plaintiff moves to remand this action to state court on the grounds that removal was untimely, MetLife waived its right to remove by taking substantial action in state court, MetLife failed to obtain the requisite consent to remove from Sierra Mortgage, and this court does not have jurisdiction under 28 U.S.C. § 1332. (Pl.'s Mot. to Remand (Docket No. 8).)

A motion to remand a case on the basis of any defect other than lack of subject matter jurisdiction must be made within thirty days after the filing of the notice of removal under 28 U.S.C. § 1446(a). 28 U.S.C. § 1447(c); Pavone v. Miss. Riverboat Amusement Corp., 52 F.3d 560, 566 (5th Cir. 1995). "Federal courts strictly observe the thirty-day deadline for filing motions to remand." Alter v. Bell Helicopter Textron, Inc., 944 F. Supp. 531, 535 (S.D. Tex. 1996) (citing In re Shell Oil Co., 932 F.2d 1518, 1522-23 (5th Cir. 1991) (holding that remand was precluded when the motion to remand was filed thirty-four days after the removal notice); Elder v. Wal-Mart Stores, Inc., 751 F. Supp. 639, 640 (E.D. La. 1990) (thirty-one days)); see also Borchers v. Standard Fire Ins. Co., No. C-10-1706, 2010 WL 2608291, at *1 (N.D. Cal. June 25, 2010) (thirty-one days); Ramos v. Quien, 631 F. Supp. 2d 601, 608 (E.D. Pa. 2008) (thirty-one days).

MetLife filed its notice of removal with this court on March 9, 2011, which gave plaintiff until April 8, 2011, to move to remand.*fn3 Plaintiff did not file her motion to remand until April 11, 2011.*fn4 Accordingly, plaintiff's motion was untimely. Because the thirty-day limitation for a motion to remand on procedural grounds also limits a court's authority to remand a case sua sponte on such grounds, Maniar v. F.D.I.C., 979 F.2d 782, 785 (9th Cir. 1992) (court may not consider plaintiff's untimely argument that removal was untimely), the court will not consider whether MetLife's removal was procedurally defective.

However, the court must still consider whether it has subject matter jurisdiction over the action. See 28 U.S.C. § 1447(c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."). Plaintiff has brought federal claims under the FDCPA and RESPA. Because the court has federal question jurisdiction, 28 U.S.C. § 1331, the court need not consider plaintiff's argument regarding diversity jurisdiction. Accordingly, plaintiff's motion to remand will be denied.

B. Motion to Strike

MetLife moves to strike plaintiff's SAC on the ground that she filed it without leave of court. A plaintiff is allowed to amend her complaint once as a matter of course. Fed. R. Civ. P. 15(a). "When a state court action is removed to federal court, the removal is treated as if the original action has been commenced in federal court." Schnabel v. Lui, 302 F.3d 1023, 1037 (9th Cir. 2002); see also Butner v. Neustadter, 324 F.2d 783, 785 (9th Cir. 1963) ("The federal court takes the case as it finds it on removal and treats everything that occurred in the state court as if it had taken place in federal court.") (footnote omitted).

Because plaintiff filed her First Amended Complaint in state court prior to removal to this court, plaintiff already amended her pleading once as a matter of course. Thus, she could not properly file the SAC without first obtaining leave of court. Howell v. City of Fresno, No. CV-F-07-371 OWW TAG, 2007 WL 1501844, at *2 (E.D. Cal. May 23, 2007); see also Yazdanpanah v. Sacramento Valley Mortg. Grp., No. C 09-02024, 2009 WL 4573381, at *1 (N.D. Cal. Dec. 1, 2009).

However, even when a pleading is improperly filed, the court may choose not to strike the pleading in the interests of judicial economy. See Telles v. Stanislaus Cnty., No. 1:10-cv-01911 AWI JLT, 2011 WL 643358, at *1 n.1 (E.D. Cal. Feb. 17, 2011); Roybal v. Equifax, No. 2:05-cv-01207 MCE KJM, 2008 WL 4532447, at *14 n.12 (E.D. Cal. Oct. 9, 2008); Chang Heum Lee v. Cnty. of Kern, No. CV-F-07-1337 LJO SMS, 2007 WL 4372838, at *3 (E.D. Cal. Dec. 12, 2007); Rhodes v. Elec. Data Sys. Corp., No. CIV S-06-1715 MCE EFB, 2007 WL 1988750, at *1 n.2 (E.D. Cal. July 3, 2007); Sapiro v. Encompass Ins., 221 F.R.D. 513, 517 (N.D.Cal. 2004). This is often true when "leave to amend would have been granted had it been sought and when it does not appear that any of the parties will be prejudiced by allowing the change." Charles Alan Wright et al., Federal Practice & Procedure § 1484 (3d ed. 2010) (observing that "[p]ermitting an amendment without formal application to the court under these circumstances is in keeping with the overall liberal amendment policy of Rule 15(a) and the general desirability of minimizing needless formalities").

Plaintiff's SAC makes two substantive changes from her FAC: it adds a cause of action for predatory lending under California Financial Code sections 4970-4979.8 and adds Sierra Mortgage as a defendant as to that cause of action only. While the addition of Sierra Mortgage destroys diversity between the parties, this court has jurisdiction because the case presents a federal question. Accordingly, the amendments do not appear to prejudice any party. Because the court would have granted leave to amend had plaintiff sought it, the court will decline to strike the SAC and will treat it as properly filed.*fn5

C. Motion to Dismiss

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.*fn6 Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and "[w]here a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57).

1. Slander of Title and Quiet Title

Plaintiff alleges that title to her property was slandered when the Notice of Default and Notice of Trustee's Sale were recorded. (SAC ¶¶ 13-22.) To state a claim for slander of title, a plaintiff must establish: "1) a publication; 2) which is without privilege or justification; 3) which is false; and 4) which causes direct and immediate pecuniary loss." Jackson v. Ocwen Loan Servicing, LLC, No. 2:10-cv-00711 MCE GGH, 2010 WL 3294397, at *4 (E.D. Cal. Aug. 20, 2010) (citing Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal. App. 4th 1040, 1050-51 (2d Dist. 2009)).

Plaintiff has not alleged that anything is false about the Notice of Default and Notice of Trustee's Sale. She alleges that MetLife is not an owner of the underlying deed of trust and that she is not in default on the underlying indebtedness. (SAC ¶ 19.) As to the latter allegation, other portions of the SAC make clear that plaintiff was in fact in default on the indebtedness. Even before MetLife allegedly told her not to pay so that she could qualify for a loan modification, she had missed payments on her loan. (Id. ¶ 28.) Thus, plaintiff has not plausibly alleged that the Notices were false in stating that she was in default.

Furthermore, this court and others have made it abundantly clear that a party need not be the owner of the subject deed to foreclose on the property. See, e.g., Foster v. SCME Mortg. Bankers, Inc., No. CIV 2:10-518 WBS GGH, 2010 WL 1408108, at *4 (E.D. Cal. Apr. 7, 2010) ("Under California Civil Code section 2924(a)(1), a 'trustee, mortgagee or beneficiary or any of their authorized agents' may conduct the foreclosure process."). Plaintiff has alleged nothing false about the Notices, and thus her claim for slander of title will be dismissed.

The purpose of a quiet title action is to establish one's title against adverse claims to real property. California Code of Civil Procedure section 761.020 states that a claim to quiet title requires: (1) a verified complaint, (2) a description of the property, (3) the title for which a determination is sought, (4) the adverse claims to the title against which a determination is sought, (5) the date as of which the determination is sought, and (6) a prayer for the determination of the title. Cal. Civ. Proc. Code § 761.020.

The tender rule applies to a quiet title action. Kozhayev v. America's Wholesale Lender, No. CIV S-09-2841 FCD DAD, 2010 WL 3036001, at *5 (E.D. Cal. Aug. 2, 2010); see also Shimpones v. Stickney, 219 Cal. 637, 649 (1934). A "quiet title action is doomed in the absence of Plaintiffs' tender of the full amount owed." Gjurovich v. California, No. 1:10-cv-01871 LJO SMS, 2010 WL 4321604, at *8 (E.D. Cal. Oct. 26, 2010). Here, among other deficiencies, plaintiff has not alleged tender or the ability to tender.*fn7 Accordingly, the court will grant MetLife's motion to dismiss the quiet title claim.

2. Fraud

In California, the elements of a claim for fraud are "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young, 160 Cal. App. 4th 62, 79 (4th Dist. 2008) (quoting Lazar v. Super.Ct., 12 Cal. 4th 631, 638 (1996)) (internal quotation marks omitted). Under the heightened pleading requirement for claims of fraud under Federal Rule of Civil Procedure 9(b), "a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). A plaintiff must include the "who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

Plaintiff alleges that MetLife made the following misrepresentations: MetLife was the owner of the deed and note, which were transferred to MetLife by the true owner after the loan was created, (SAC ¶ 24), and payments should be made to MetLife, (id.), MetLife was willing to renegotiate the loan by allowing plaintiff to participate in its loan modification program and MetLife had the authority to modify the loan, (id. ¶ 28), plaintiff should not make payments so that she would qualify for the loan modification program, (id. ¶ 31), and during the loan modification process, MetLife would forbear on foreclosure proceedings and her credit would not be adversely affected. (Id.¶ 31-32.)

Plaintiff alleges that she justifiably relied on the above representations and stopped making regular payments on the loan, repeatedly filled out form applications, and provided MetLife with financial information. (Id. ¶ 34.) Damages allegedly only resulted from the first act of reliance: when she stopped making payments, she allegedly lost all ability to obtain financing. (Id. ¶37.)

While MetLife's statements that plaintiff should stop making payments in order to participate in the loan modification process and that MetLife would take no action against her do appear to be misrepresentations, and even assuming that these statements were pled with the requisite particularity, plaintiff has fallen short of stating a plausible claim to relief. Specifically, plaintiff had stopped making payments under the loan before these alleged misrepresentations were made. Unless plaintiff can allege that the statements caused her to continue not making payments, which she otherwise would have resumed making, then MetLife's statements cannot have caused any damage. Accordingly, the court will grant MetLife's motion to dismiss plaintiff's claim for fraud.

3. Negligent Misrepresentation

The elements of negligent misrepresentation under California law are: "(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage." Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226, 243 (2d Dist.2007).

The alleged misrepresentations plaintiff complains of are identical to those in the fraud claim.*fn8 (SAC ¶ 40.) As discussed above, plaintiff has not pled that any damage resulted from any of MetLife's alleged misrepresentations, so her claim for negligent misrepresentation fails. The court therefore will grant MetLife's motion to dismiss plaintiff's negligent misrepresentation claim.

4. Bad Faith

Plaintiff titles her fourth cause of action "bad faith," and repeats most of the allegations from the other claims, additionally alleging that MetLife never approved a loan modification. (Id. ¶¶ 45-69.) The court construes the claim as one for breach of the implied covenant of good faith and fair dealing.

"Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) (applying California law) (internal quotation marks omitted). That duty, known as the covenant of good faith and fair dealing, requires "that neither party . . . do anything which will injure the right of the other to receive the benefits of the agreement." Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2d Dist. 2005) (internal quotation marks omitted). "[T]he implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract." Racine & Laramie, Ltd. v. Dep't of Parks & Recreation, 11 Cal. App. 4th 1026, 1032 (4th Dist. 1992). "[T]he implied covenant is a supplement to an existing contract, and thus it does not require parties to negotiate in good faith prior to any agreement." McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2d Dist. 2008).

Here, plaintiff rests this claim on her attempts at loan modification. (See SAC ¶ 46.) However, plaintiff alleges that MetLife "could not help plaintiff renegotiate the loan by allowing plaintiff to participate in MetLife's loan modification program, because it never had the authority to negotiate on behalf of the true owner." (Id. ¶ 47.) Taking plaintiff's allegation as true, no contract existed between MetLife and plaintiff that could have given MetLife an obligation to act in good faith in its performance of that contract. Furthermore, because plaintiff has not alleged facts plausibly suggesting that plaintiff and MetLife actually agreed to modify the loan, no contract came into existence at that time, and the claim must fail as it relates to loan modification. See Prasad v. BAC Home Loans Servicing LP, CIV No. 2:10--CV--2343 FCD KJN, 2010 WL 5090331, at *4 (E.D. Cal. Dec. 7, 2010) (granting motion to dismiss when agreement to modify was not sufficiently alleged). Accordingly, the court will grant MetLife's motion to dismiss plaintiff's claim for "bad faith."

5. Wrongful Foreclosure

Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a foreclosure sale that has already occurred. See Karlsen v. Am. Sav. & Loan Ass'n, 15 Cal. App. 3d 112, 117 (2d Dist. 1971). Because plaintiff's house has not yet been sold, a claim for wrongful foreclosure is not yet ripe. Accordingly, the court will grant MetLife's motion to dismiss plaintiff's claim for wrongful foreclosure.

6. Fair Debt Collection Practices Act

Plaintiff did not respond in her opposition to MetLife's motion to dismiss her claim under the FDCPA. The SAC alleges that MetLife violated the FDCPA by threatening to foreclose on the property and recording the Notice of Default and Notice of Trustee's Sale without the right to do so. (SAC ¶¶ 82-83.)

The FDCPA provides that "[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt." 15 U.S.C. § 1692f. The term "debt collector" is defined as "any person . . . in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." Id. § 1692a(6). The "definition of debt collector 'does not include the consumer's creditors, a mortgage servicing company, or any assignee of the debt, so long as the debt was not in default at the time it was assigned.'" Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) (quoting Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985)). Plaintiff alleges that MetLife was the servicer of the loan, and thus MetLife cannot be subject to liability under the FDCPA. Accordingly, the court will grant MetLife's motion to dismiss plaintiff's FDCPA claim.


RESPA imposes a duty on loan servicers to take certain actions upon receipt of a qualified written request ("QWR") from a borrower asking for information relating to the servicing of the loan. 12 U.S.C. § 2605(e)(1)(A). A QWR is "a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer," that (i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and (ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

12 U.S.C. § 2605(e)(1)(B).

Plaintiff alleges that:

On November 16, 2010, plaintiff made a qualified written request under RESPA 12 USC §2605(e)(1)(A) to both MetLife and First Horizon under separate cover. The first letter was a request for information under the Real Estate Settlement Procedures Act (RESPA) and the second was a request for an accounting of the amount necessary to reinstate the loan.

(SAC ¶ 88.) Plaintiff did not attach the letters to the SAC.

While plaintiff is correct that she is not required to attach copies of the alleged QWRs to her complaint, she cannot simply allege in conclusory fashion that the written correspondence constituted QWRs. See, e.g., Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 873, 887-88 (E.D. Cal. 2010) (Karlton, J.) (dismissing RESPA claim because "[p]laintiffs make no other allegations regarding the content of this purported QWR, nor have plaintiffs provided a copy of the letter"); Aguilar v. Cabrillo Mortg., No. 09-CV-1799, 2010 WL 1909547, at *2-3 (S.D. Cal. May 11, 2010) ("Although Plaintiffs correctly argue that they have no affirmative duty to attach a copy of the letter to the SAC, they still must allege sufficient facts to demonstrate that the letter sent to [defendant] triggered the procedures set forth in 12 U.S.C. § 2605(e)."). Plaintiff's conclusory allegations that her letters constituted QWRs are insufficient to state a claim for a violation of RESPA. Accordingly, the court will grant MetLife's motion to dismiss plaintiff's RESPA claim.

8. California Financial Code sections 4970-4979.8

Plaintiff did not respond in her opposition to MetLife's motion to dismiss her claim under California's predatory lending laws. Plaintiff's only allegation regarding MetLife in this claim is that MetLife "recommended or encouraged the plaintiff to default on the loan or other debt in connection with the solicitation or making of a covered loan that refinances all or any portion of the existing consumer loan or debt." (SAC¶ 107.)

California Financial Code section 4973, which prohibits certain actions for covered loans, "covers lenders who negotiate the terms of the loans, and not servicers . . . who become involved with the loans after their execution." Levy v. Residential Credit Solutions Inc., No. 10-CV-0292, 2010 WL 3470656, at *3-4 (S.D. Cal. Sept. 2, 2010); see Sutherland v. Diversified Capital Inc., No. C 08-03474, 2008 WL 2951353, at *2 (N.D. Cal. July 24, 2008) ("[section] 4973 explicitly does not apply to holders in due course").

Plaintiff makes no allegation that MetLife was the original lender on her loan, and actually alleges that MetLife was the servicer. (SAC ¶ 90.) Accordingly, MetLife cannot be held liable for predatory lending under California law.*fn9 Because plaintiff fails to state a claim against MetLife, plaintiff's claim for predatory lending will be dismissed.


(1) plaintiff's motion to remand be, and the same hereby is, DENIED;

(2) MetLife's motion to strike be, and the same hereby is, DENIED; and

(3) MetLife's motion to dismiss plaintiff's Second Amended Complaint be, and the same hereby is, GRANTED.

Plaintiff has twenty days from the date of this Order to file an amended complaint, if she can do so consistent with this Order.

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