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James P. Barajas v. Countrywide Home Loans


February 24, 2012


The opinion of the court was delivered by: Dean D. Pregerson United States District Judge


Presently before the court is the Motion to Dismiss filed by defendants Countrywide Home Loans, Inc. ("Countrywide"), BAC Home Loans Servicing, LP ("BAC"), and Mortgage Electronic Registration Systems, Inc. ("MERS"). Having considered the parties' moving papers, the court grants the motion and adopts the following Order.

I. Background

In 2007, Plaintiff obtained a loan from defendant Countrywide and purchased real property at 6847 Thornlake Avenue, Whittier, California 90606. (Second Amended Complaint ("SAC") ¶¶ 10-11). Plaintiff executed a Promissory Note in favor of Countrywide and a Deed of Trust listing Countrywide as "Lender" and MERS as "nominee for lender" and "beneficiary."*fn1 (SAC ¶¶ 16- 17). Plaintiff later learned that BAC was the servicer of Plaintiff's loan. (SAC ¶¶22).

Sometime in 2008, Plaintiff began experiencing economic difficulties and sought to renegotiate the terms of his loan. SAC ¶¶ 76-77). According to Plaintiff, BAC representatives led him to believe that he "would likely qualify" for a loan modification. (SAC ¶ 79). However, Plaintiff's requests for a loan modification were ultimately denied. (SAC ¶¶ 82, 85).

Plaintiff alleges that he does not know who currently owns his Note. (SAC ¶ 38, 44). Through this action, Plaintiff seeks to "prevent the improper taking and/or foreclosure of his family home" by defendants who no longer own the debt secured by Plaintiff's home and/or lack the right to initiate non-judicial foreclosure proceedings on behalf of the true owners of the debt." (SAC ¶ 1).

In his First, Fourth, and Fifth claims (collectively, the "foreclosure claims"), Plaintiff seeks: (1) a declaration that no defendant has authority to foreclose, (2) to quiet title against BAC, Countrywide, and MERS, and (3) damages for BAC's alleged breach of the implied covenant of good faith and fair dealing in connection with its acquisition of Plaintiff's debt and authority to foreclose. Plaintiff's Second and Third Claims (collectively, the "misrepresentation claims") allege misrepresentations against BAC in connection with Plaintiff's attempts to obtain a loan modification. In his Sixth claim, Plaintiff alleges that Defendants violated California Civil Code § 2923.5 and requests that any notice of default be voided and any resulting sale be unwound. In his Seventh claim, Plaintiff asks that Defendants be disgorged of the illicit profits they amassed as a result of their unfair business practices. Plaintiff Eighth's claim, is for an accounting to determine the amount due on the loan, if any.

In March 2011, Defendants filed a Motion to Dismiss the First Amended Complaint. After considering the parties' moving papers and oral arguments, this court granted the motion and dismissed the First Amended Complaint without prejudice. Defendants now move to dismiss the Second Amended Complaint.

II. Judicial Notice

Defendants request that the court take judicial notice of two documents that are matters of public record: (1) the Deed of Trust regarding the property located at 6847 Thornlake Avenue, Whittier, CA 90606 - the property at issue in this action; and (2) the Assignment of Deed of Trust regarding the property at issue in this action.

Under Federal Rule of Evidence 201, a court may take judicial notice of "matters of public record." Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986). Consequently, this court GRANTS Defendants' unopposed request for judicial notice.

III. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a complaint is subject to dismissal when the plaintiff's allegations fail to state a claim upon which relief can be granted. When considering a 12(b)(6) motion to dismiss for failure to state a claim, "all allegations of material fact are accepted as true and should be construed in the light most favorable to [the] plaintiff." Resnick v. Hayes, 213 F.3d 433, 447 (9th Cir. 2000).

In Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), the Supreme Court explained that a court considering a 12(b)(6) motion should first "identify[] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth."

Id. Next, the court should identify the complaint's "well-pleaded factual allegations, . . . assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."

Id.; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) ("In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief" (internal quotation marks omitted)).

III. Discussion

A. The Misrepresentation Claims (claims 2 & 3) Fail For Lack of Particularity.

To survive a motion to dismiss, a claim for intentional misrepresentation must allege (1) a misrepresentation,(2) knowledge of the falsity,(3) intent to induce another's reliance on the misrepresentation,(4) justifiable reliance, and (5) resulting damages. Conroy v. Regents of Univ. Of California, 45 Cal.4th 1244, 1255 (2009). A claim for negligent misrepresentation must allege the same elements as intentional misrepresentation to the exception of scienter. Charnay v. Cobert, 145 Cal.App.4th 170, 184 (2006).

To comply with Federal Rule of Civil Procedure 9(b), a complaint alleging misrepresentation must state the time, place, and content of misrepresentations, as well as the misrepresenting parties. Sanford v. MemberWorks, Inc., 625 F.3d 550, 558 (9th Cir. 2010). The complaint must be sufficiently specific "to give defendants notice of the particular misconduct so that they can defend against the charge." Id. (quotation, alteration, and citation omitted).

In Becker v. Wells Fargo Bank, N.A., Inc., 2011 WL 1103439, *11 (E.D.Ca.2011), the court held that there was "an obvious difference between a statement that loan modification 'could' happen, and, on the other hand, representing that loan modification 'would' happen. The first is a statement of opinion, the second is a statement of fact that is capable of being fraudulently misrepresented." Id. (citing Neu-Visions Sports v. Soren/McAdam/Bartells, 86 Cal.App. 4th 303, 307 (2000)). In Becker, the court found the First Amended Complaint ("FAC") to be lacking in particularity, as the Plaintiff argued the defendant told him his loans "would be" modified but in other paragraphs stated the defendant told him his loans "could be" modified. See Id. As such, the court found the FAC "internally contradictory regarding [the defendant's] alleged representations to plaintiff." Id. The court stated that since "plaintiff's fraud allegations are inconsistently pleaded with respect to whether his loan merely 'could be' modified versus whether it definitely 'would be' modified [,] the FAC fail[ed] to particularly plead facts supporting the 'misrepresentation' element of a fraud cause of action. Id.

Here, like the plaintiff in Becker, Plaintiff inconsistently pleads the misrepresentation element. On the one hand, Plaintiff states BAC told him in non-equivocal words that he "would qualify" for a loan modification. SAC ¶¶ 99, 113, 120, 121, 123, 127, 133, 137. But, on the other hand, Plaintiff also pleads that BAC told him he was "likely" eligible for a modification, SAC ¶ 79 & 85, that he "would likely" qualify for a modification, SAC ¶ 80, that he "might be eligible" for a modification, SAC ¶ 84, and that he "may qualify" for a modification*fn2 . SAC ¶ 87, 119. Consequently, like in Becker, Plaintiff's SAC is internally contradictory regarding BAC's alleged representations to Plaintiff. Therefore, as Plaintiff failed to plead the misrepresentation element with the particularity required by Rule 9(b), his claims of intentional and negligent*fn3 misrepresentations are dismissed.

Hence, the court grants the Defendants' Motion to Dismiss on these claims.

B. The Action to Quiet Title Fails As (1) The SAC is Not Verified, (2) Plaintiff Does Not Allege Credible Tender, And (3) Plaintiff Admits A Cloud Remains Upon His Title To The Property.

To maintain an action to quiet title a plaintiff's complaint must be verified and must include (1) a description of the property including both its legal description and its street address or common designation; (2) the title of plaintiff as to which determination is sought and the basis of the title; (3) the adverse claims to the title of the plaintiff against which a determination is sought; (4) the date as of which a determination is sought and, if other than the date the complaint is filed, a statement why the determination is sought as of that date; and (5) a prayer for determination of plaintiff's title against the adverse claims. See Cal. Code Civ. Pro. § 761.020. The purpose of a quiet title action is to settle all conflicting claims to the property and to declare each interest or estate to which the parties are entitled. Newman v. Cornelius, 3 Cal.App.3d 279, 284 (1970). In addition to the required elements for a quiet title action, a borrower cannot quiet title to a Property without discharging any debt owed. Miller v. Provost, 26 Cal. App.4th 1703 (1994)(holding: a mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee); see also Aguilar v. Bocci, 39 Cal.App.3d 475 (1974) ("The cloud upon [one's] title persists until the debt is paid").

First, the SAC is not verified, as it does not include, among other things, the date at which Plaintiff seeks the title to be quieted. Therefore, on that basis alone, the claim must be dismissed.

Second, Plaintiff alleges that "he is ready, willing, and able to tender his obligation to whoever is entitled to payment of the money." SAC ¶ 152. However, in his sixth claim, Plaintiff argues that he has the "ability to tender the full amount to bring his loan current[.]" SAC ¶ 177. (emphasis added). Therefore, Plaintiff fails to allege credible tender. Indeed, it is unclear whether Plaintiff intends to pay the entire amount due under the note --which is required in an action to quiet title --- or whether he simply intends to bring his loan current.

Third, by his own admission, Plaintiff admits that a cloud has been placed upon his title to the property. SAC ¶¶ 188-89. So long as a cloud remains, the title to the property cannot be quieted in the Plaintiff's favor.

For the above-mentioned reasons, the court grants the Defendants' Motion to Dismiss this claim.

C. Breach of Covenant of Good Faith and Fair Dealing

"It is universally recognized the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract." Berger v. Home Depot U.S.A., Inc., 476 F.Supp.2d 1174, 1177 (C.D.Cal. 2007). "[U]nder traditional contract principles, the implied covenant of good faith 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.'" Id. "There is implied in every contract a covenant by each party not to do anything which will deprive the other parties thereto of the benefits of the contract. This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his [or her] own, but also the duty to do everything that the contract presupposes that he [or she] will do to accomplish its purpose." Poway Royal Mobilhome Owners Ass'n v. City of Poway, 149 Cal.App.4th 1460, 1477 (2007)(citations omitted). "The implied covenant of good faith and fair dealing does not extend beyond the terms of the contract at issue." Id. (emphasis original).

Plaintiff contends the Note and Deed are valid contracts necessarily encompassing an implied covenant of good faith and fair dealing. Assuming, without deciding, that Plaintiff is correct, he concedes that the express terms of the Note did not require Countrywide to discuss, negotiate, or alter the debt obligation.

SAC ¶ 167. Additionally, after reviewing the Deed of Trust, this court was unable to locate any provision therein addressing an obligation from Countrywide, or its successors in interests, to discuss, negotiate, or alter the debt obligation. See RJN Exh. A. Thus, as neither the Note nor the Deed create an obligation to discuss, negotiate, or alter the obligation, an implied covenant of good faith and fair dealing cannot be found to exist on that point.

Since a covenant which does not exist cannot be breached, the Plaintiff fails to state a claim upon which relief can be granted. Consequently, the claim is dismissed.

D. Violation of California Civil Code § 2923.5

California Civil Code section 2923.5 ("section 2923.5") requires a lender or its agent to attempt to contact a defaulting borrower prior to foreclosure. Section 2923.5(a)(2) requires a "mortgagee, beneficiary or authorized agent" to "contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." Section 2923.5(b) requires a default notice to include a declaration "from the mortgagee, beneficiary, or authorized agent" of compliance with section 2923.5, including an attempt "with due diligence to contact the borrower as required by this section." Id.

Plaintiff asserts that "[he] was not contacted by BAC or MERS to assess his financial situation or to explore his options [.]" SAC ¶ 177. However, Plaintiff also states that "in or about 2008, [he] called the servicer of the Note [...] a representative of BAC," Id. at ¶ 78, and "on or about [F]all of 2008, the Plaintiff was informed that he qualified and was approved for a trial loan modification." Id. at ¶ 81. Plaintiff further argues that he "made trial modification payments for 8 months after the trial period expired while he waited for BAC to approve the permanent modification." Id. Even though BAC denied the Plaintiff's loan modification request, in early 2009, Id. at ¶ 82., Plaintiff continued to seek out a loan modification. Id. at ¶ 83. "Again in 2009 and 2010, the Plaintiff contacted BAC [to] work out a resolution under the loan agreements." Id. Each time, Plaintiff contends, he was told he might be eligible for a modification, was required to provide supporting financial information, and saw his requests denied. Id. at ¶¶ 83-85. Therefore, by his own admission, Plaintiff had contacts with BAC and had several discussions regarding his financial situation and possible loan modifications. Consequently, the claim is dismissed.

E. Violation of California Business and Professions Code Section 17200 et. seq.

Section 172000 defines unfair competition as "any unlawful, unfair, or fraudulent business act or practice" and "unfair, deceptive, untrue or misleading advertising." See Cal. Bus. & Prof. Code § 17200.

An act is "unlawful" under section 17200 if it violates an underlying state or federal statute or common law. See Cal-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 180 (1999). "[When the] cause of action is derivative of some other illegal conduct [...] by a defendant, [...] a plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation.'" Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F.Supp.2d 1022 (N.D.Cal. 2010) (citation omitted). In his SAC, Plaintiff alleges "Defendant's conduct, for the reasons stated herein is in direct violation of Cal. Civ. Code Sections 2924f (c)(2) and 2932.5." SAC ¶ 180. First, Plaintiff does not specify which defendant he is referring to. Second, Plaintiff actually never did explain, other than in general terms, how the conduct of any of the defendants violated the above-mentioned California laws. Since Plaintiff did not plead facts supporting the statutory elements with reasonable particularity, he cannot rely on the "unlawful" prong of section 17200. Consequently, this part of the claim is dismissed.

An act is "unfair" if the act "threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law." Cal-Tech Communications, Inc., at 187. A practice is "false or misleading" if "members of the public are likely to be deceived." See Chern v. Bank of America, 15 Cal.3d 866, 876 (1976). "[A] plaintiff alleging unfair business practices under the unfair competition statutes 'must state with reasonable particularity the facts supporting the statutory elements of the violation.'" Silicon Knights, Inc. V. Crystal Dynamics, Inc., 983 F.Supp. 1303, 1316 (N.D.Cal.1997) (quoting Khoury v. Maly's of California, 14 Cal.App.4th 612, 619 (1993)). Once more, instead of pleading facts with reasonable particularity, Plaintiff simply provides this court with conclusory statements and general allegations. For example, Plaintiff argues that Defendants engaged in deceptive business practices by "[v]iolating the Security First Rule." SAC § 183. Plaintiff, however, does not even attempt to provide facts showing that such a violation occurred; rather he simply hands the court a bare conclusion. As a result, this part of the claim is insufficiently pled, and is dismissed.

To the extent that plaintiff's § 17200 claim is predicated on the "fraudulent" prong of the UCL, it is subject to dismissal for failure to state a claim. Although fraud is not an essential element of a claim under § 17200, allegations of fraudulent conduct must nevertheless satisfy the heightened pleading requirements of Rule 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir.2003)(the heightened pleading standards of Rule 9(b) apply to allegations of fraud and allegations that sound in fraud, including false misrepresentations); see also Meridian Project Sys., Inc. V. Hardin Constr. Co., LLC, 404 F.Supp.2d 1214, 1219 (E.D.Cal.2005)("It is well settled in the Ninth Circuit that misrepresentation claims are a species of fraud, which must meet Rule 9(b)'s particularity requirement."); Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101, 1141 (C.D.Cal.2003)("It is well-established in the Ninth Circuit that both claims for fraud and negligent misrepresentation must meet Rule 9(b)'s particularity requirements"); Perdiguerra v. Meridas Capital, Inc., 2010 WL 395932 at *8 (N.D.Cal.Feb.1,2010) (claim under "fraudulent" prong of UCL requires showing of reliance and heightened particularity standard required for fraud). A court may dismiss a claim grounded in fraud when its allegations fail to satisfy Rule 9(b)'s heightened pleading requirements. Vess, 317 F.3d at 1107. In other words, plaintiff must include "the who, what, when, where, and how" of the fraud, Vess, 317 F.3d at 1106 (citations omitted), and "set forth specific descriptions of the misrepresentations made, [and] the reasons for their falsity." Blake v. Dierdorff, 856 F.2d 1365, 1369 (9th Cir. 1988). Plaintiff alleges that Defendants engaged in "fraudulent business act[s] or practice[s]," SAC § 182, but fails to plead facts supporting his assertions. Consequently, this part of the claim is dismissed.

For the aforementioned reasons, this cause of action is dismissed.

F. The Accounting Claim Fails Since (1) The Amount Can Be Made Certain Without An Accounting; and (2)It Is The Plaintiff Who Owes Money To The Defendants.

Under California law, an accounting is generally a remedy under equity. See Batt v. City & County of San Francisco, 155 Cal.App.4th 65, 82 (2007). In certain cases, an accounting can be a cause of action. "A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting." Tesselle v. Mcloughlin, 173 Cal.App.4th 156, 179 (2009) (citations omitted). An action for an accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation. St. James Church of Christ Holiness v. Superior Court, 135 Cal.App.2d 352, 359, (1955). First, Plaintiff argues he "paid BAC his mortgage payments for a period of approximately two years." SAC ¶ 193. Plaintiff also alleges that "the amount due from Defendants [...] is unknown and cannot be ascertained without an accounting [.]" Id. at ¶ 194. However, like in St. James Church of Christ Holiness, the amount purportedly owed can be made certain by a calculation. To be sure, Plaintiff is undoubtedly aware of the time at which he started making payments to BAC and when he ended them. Therefore, Plaintiff is capable of looking at his own records and bank statements to calculate the amount that is allegedly owed to him. Hence, an accounting is not an appropriate remedy. Second, it is clear from the record that it is Plaintiff who owes money to the Defendants, not the contrary. Therefore, as Plaintiff is not owed any money, he cannot maintain an action for an accounting.

Lastly, Plaintiff's claim against MERS and DOES fails as he does not allege any facts as to these Defendants. For the aforementioned reasons, the Motion to Dismiss is GRANTED on this claim as to all defendants.

G. The Claim For Declaratory Relief Fails As Tender Is Not Alleged.

"When a debtor is in default of a home mortgage loan, and a foreclosure is either pending or has taken place, the debtor must allege credible tender of the amount of the secured debt to maintain any cause of action for wrongful foreclosure." Alicea v. GE Money Bank, 2009 WL 2136969 *3 (N.D. Cal. 2009). The tender requirement spares courts from being called upon to "order a useless act performed" in cases where plaintiffs would be unable, even under proper sale procedures, to redeem a property. FPCI REHAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021-22 (1989).

The Plaintiff is correct that an allegation of tender is not required from a plaintiff raising a claim under California Code Section 2923.5. Das v. WMC Mortgage Corp., 2010 WL 4393885 *2 (N.D. Cal. 2010). However, as outlined in section "III. D." of this Order, Plaintiff's 2923.5 claim is unsuccessful and, thus, cannot be relied upon to obtain Declaratory Relief. Consequently, Plaintiff, here, is required to alleged tender to sustain his claim. Since he has not done so, Plaintiff's request for Declaratory Relief is denied.

As a result, the court grants the Defendants' Motion to Dismiss this claim.

IV. Conclusion

For the reasons stated above, Defendants' Motion to Dismiss is granted with respect to all claims and against all Defendants.


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