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Jacob Slipak v. Bank of America

November 10, 2011

JACOB SLIPAK,
PLAINTIFF,
v.
BANK OF AMERICA, N.A.; RECONTRUST COMPANY, N.A.; AND
DOES 1 THROUGH 100, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER

Defendants Bank of America and ReconTrust Co. ("ReconTrust") move for dismissal of Plaintiff's complaint under Federal Rule of Civil Procedure ("Rule") 12(b)(6), arguing Plaintiff fails to state a viable claim against them. Plaintiff does not oppose the motion.

I. LEGAL STANDARD

"In reviewing the dismissal of a complaint, we inquire whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009)). The material allegations of the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. Al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, this tenet "is inapplicable to legal conclusions." Iqbal, 129 S. Ct. at 1949. Further, "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007)). "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. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (internal citation omitted).

II. REQUEST FOR JUDICIAL NOTICE

Defendants' dismissal motion includes requests that the Court take judicial notice of the following documents recorded with the Placer County Recorder: a Notice of Default and Election to Sell Under Deed of Trust, a Substitution of Trustee, a Notice of Trustee's Sale, and a Trustee's Deed upon Sale. (Defs.' Req. for Judicial Notice ("RJN") Exs. B-E.)

"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) (internal quotation marks 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). A matter may be judicially noticed if it is either "generally known within the territorial jurisdiction of the trial court" or "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).

Since each of these documents is publicly recorded, they are capable of accurate determination and may be judicially noticed. See W. Fed. Sav. & Loan Ass'n v. Heflin Corp., 797 F. Supp. 790, 792 (N.D. Cal. 1992) (taking judicial notice of documents in a county's public record). Therefore, the Notice of Default and Election to Sell Under Deed of Trust, Substitution of Trustee, Notice of Trustee's Sale, and Trustee's Deed upon Sale are judicially noticed.

III. BACKGROUND

On or about May 17, 2007, Plaintiff obtained a loan for $321,624.00, which was secured by his real property, located at 1081 Landmark Circle, Lincoln, California 95648 (the "Property"). (Compl. ¶ 8; id. Ex. A.)*fn1 The Deed of Trust on the loan identifies Bank of America as the lender and beneficiary, and PRLAP, Inc., as trustee. Id. Ex. A.

An Assignment of Deed of Trust dated October 12, 2010, substituted ReconTrust as trustee of the Deed of Trust. (Defs.' RJN, Ex. C.) On October 14, 2010, ReconTrust filed a Notice of Default against the Property. Id. Ex. B. On January 20, 2011, ReconTrust filed a Notice of Trustee Sale dated January 20, 2011, which was initially scheduled on February 17, 2011. Id. Ex. D. The Property was sold at a Trustee Sale by ReconTrust to Bank of America on May 4, 2011. Id. Ex. E. On June 13, 2011, Bank of America filed a complaint for unlawful detainer in Placer County Superior Court. (Compl., Ex. C.)

Plaintiff filed the present suit on June 21, 2011, seeking "restitutionary or compensatory damages and . . . a judicial determination that the mortgage lien alleged to exist against [the Property] is null and void[.]" Id. 34:15-18. Specifically, Plaintiff alleges he "was defrauded by the banking industry who removed all of the equity in Plaintiff's home . . . and convinced him he could afford the grossly inappropriate monthly payments [by telling him] over and over that he could refinance his loan in the future." Id. ¶¶ 6-7. Further, Plaintiff alleges that when he applied for the Making Home Affordable Program modification in April 2009 and again in July 2010, he was given a trial payment period before he was finally denied the modification. Id. ¶¶ 29-31. These allegations form the basis of Plaintiff's fourteen claims alleged against Defendants.

IV. DISCUSSION

A. Breach of Fiduciary Duty

Defendants seek dismissal of Plaintiff's breach of fiduciary duty claim, arguing "as a matter of law, Defendants do not owe Plaintiff a fiduciary duty." (Defs.' Mot. 8:10-11.) In California, to state a claim for breach of fiduciary duty, a plaintiff must allege: (1) the existence of a fiduciary relationship; (2) the breach of that relationship; and (3) damage proximately caused thereby. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003).

"Breach of fiduciary duty is a tort that by definition may be committed by only a limited class of persons." 1-800 Contacts, Inc. v. Steinberg, 107 Cal. App. 4th 568, 592 (2003). As a general rule, "a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender." Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006). Further, loan servicers typically do not have a fiduciary relationship with borrowers. See Linder v. Aurora Loan Servicing, LLC, No. 2:09-cv-03490-JAM-KJM, 2010 WL 1525399, at *5 (E.D. Cal. Apr. 15, 2010); Moreno v. Citibank, N.A., No. C-09-5339 CW, 2010 WL 103822, at *3 (N.D. Cal. Mar. 19, 2010).

Plaintiff's breach of fiduciary duty claim contains the following allegations:

At all times relevant Defendants created, accepted, and acted in a fiduciary relationship of great trust and acted for and were the processors of property for the benefit of Plaintiff.

Defendants, collectively and individually, further placed themselves in a position of trust by virtue of the expertise represented by and through their employees, representatives, and[/]or agents.

Defendants, and each of them, breached their fiduciary duties owed to Plaintiff as they acted and continued to act for their own benefit and to the detriment of Plaintiff.

Defendants, and each of them, breached their fiduciary duties owed to Plaintiff by placing and negotiating a loan without due care to the best interest of Plaintiff or for the protection of his rights.

Defendants, and each of them, breached their fiduciary duties owed to Plaintiff by informing Plaintiff he would be able to refinance the fixed loan and to not worry about the interest only payment. Plaintiff, relying on Defendants statements, expertise, and knowledge of the industry entered into the loan. . . .

(Compl. ¶¶ 51-56.) These allegations are insufficient to show the existence of a fiduciary relationship between Plaintiff and any Defendant. See Pajarillo v. Bank of Am., No. 10CV937 DMS (JMA), 2010 WL 4392551, at *5 (S.D. Cal. Oct. 28, 2010) (dismissing a breach of fiduciary claim based upon similar allegations to those pled in this case). Therefore, this portion of the motion is granted, and Plaintiff's breach of fiduciary duty claim is dismissed.

B. Breach of the Covenant of Good Faith and Fair Dealing

Defendants also seek dismissal of Plaintiff's breach of the covenant of good faith and fair dealing tort claim, arguing, inter alia, Plaintiff does not have the required "special relationship" with fiduciary characteristics with either Defendant. (Defs.' Mot. 10:22-24.)

"There is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement." Comunale v. Traders & Gen. Ins. Co., 50 Cal.2d 654, 658 (1958). The implied covenant "rests upon the existence of some specific contractual obligation. [It] is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract's purpose." Racine Laramie, Ltd. v. Dept. of Parks & Recreation, 11 Cal. App. 4th 1026, 1031 (1992). 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). Further, "the 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." Id.

Since the implied covenant is based in contract, compensation for its breach is almost always limited to contractual remedies. Foley v. Interactive Data Corp., 47 Cal.3d 654, 684 (1988). Tort remedies are only available when "the parties are in a 'special relationship' with 'fiduciary characteristics.'" Pension Trust Fund v. Fed. Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002)(citing Mitsui Mfrs. Bank v. Superior Court, 212 Cal. App. 3d 726, 730 (1989)). "A central test of whether a lender is subject to this tort is whether there is a fiduciary relationship in which the financial dependence or personal security by the damaged party has been entrusted to the other." Id. (quotations and citations omitted).

Plaintiff's breach the covenant of good faith and fair dealing claim contains the following allegations:

[T]here existed an implied covenant of good faith and fair dealing represented by the terms of the FIXED loan, Note, and the Deed of Trust, which imposed upon Defendants a duty of good faith and fair dealing in this matter to safeguard, protect, or otherwise care for the [assets] and rights of Plaintiff. . . .

Defendants willfully breached their implied covenant of good faith and fair dealing with ...


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