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Rusty Krouse and Brenna Krouse v. Bac Home Loans Servicing

June 9, 2011

RUSTY KROUSE AND BRENNA KROUSE, PLAINTIFFS,
v.
BAC HOME LOANS SERVICING, LP; BANK OF AMERICA N.A.; AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Through this action, Plaintiffs Rusty Krouse and Brenna Krouse ("Plaintiffs") seek redress from Defendants BAC Home Loans Servicing, LP and Bank of America, N.A. ("Defendants") based on alleged breaches of contract and the covenant of good faith and fair dealing, as well as promissory estoppel. Plaintiffs also seek redress from Defendants based on alleged violations of the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), California Civil Code section 2923.5, the California Business & Professions Code section 17200, and the Truth in Lending Act ("TILA").

Presently before the Court is Defendants' Motion to Dismiss Plaintiffs' Complaint for failure to state a claim upon which relief may be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 Defendants' Motion was filed on February 18, 2011. Plaintiffs filed a timely opposition to Defendants' Motion on April 21, 2011. For the reasons set forth below, Defendants' Motion to Dismiss is granted.

BACKGROUND*fn2

This action arises from Defendants' alleged failure to modify Plaintiffs' residential mortgage. On or about December 17, 2007, Plaintiffs obtained a loan from Defendants. Plaintiffs allege that, at the time of obtaining the loan, they did not receive the required disclosures, including the notice of the right to cancel, in violation of TILA.

In August 2009, Plaintiffs applied for a loan modification. At that time, Plaintiffs provided documentation showing that they initially qualified for such a loan modification. Defendants offered Plaintiffs a trial period plan, under which Plaintiffs were to make reduced loan payments for three months while being evaluated by Defendants for a permanent loan modification.

Plaintiffs made these reduced payments for the months of September, October and November of 2009. At the end of this three-month trial period, Defendants informed Plaintiffs that the modification agreement was not yet finalized, and instructed Plaintiffs to continue making trial period payments. Plaintiffs made eight more loan payments.

On April 3, 2010, Plaintiffs received a letter from Defendant Bank of America informing them that Plaintiffs qualified for a permanent modification. However, on June 25, 2010, Plaintiffs received a letter from Defendant Bank of America stating that Plaintiffs did not qualify for a permanent loan modification.

From the time that the trial period plan began, Defendants made false representations and used deceptive means to collect debt from Plaintiffs. Additionally, Defendants failed to inform Plaintiffs of their options and other rights prior to filing a Notice of Default. On November 23, 2010, Plaintiffs notified Defendants that they were exercising their right to rescind the loan pursuant to TILA § 1635.

STANDARD

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,337-38 (9th Cir. 1996).

Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the [...] claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, "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." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (quoting Twombly, 550 U.S. at 555). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than "a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.")).

Furthermore, "Rule 8(a)(2)...requires a showing, rather than a blanket assertion, of entitlement to relief." Twombly, 550 U.S. at 556 n.3 (internal citations and quotations omitted). Thus, "[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Id. (citing 5 Charles Alan Wright & Arthur R. Miller, supra, at § 1202).

A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed."

Id. However, "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be "freely given" where there is no "undue delay, bad faith or dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment...." Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend).

Not all of these factors merit equal weight. Rather, "the consideration of prejudice to the opposing party...carries the greatest weight." Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987). Dismissal without leave to amend is proper only if it is clear that "the complaint could not be saved by any amendment." Intri-Plex Techs. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d ...


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