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Charlene Mccormick, An Individual; Sylina Kidd, Xan Individual v. Us Bank

March 12, 2013


The opinion of the court was delivered by: Hon. Anthony J. Battaglia U.S. District Judge


This is an action involving multiple Plaintiffs who allege individual negligence claims against U.S. Bank, N.A. ("U.S. Bank"). Presently before the Court is U.S. Bank's motion to dismiss Plaintiffs' Second Amended Complaint ("SAC"). (Doc. No. 30.) Plaintiffs filed an opposition on January 11, 2013, (Doc. No. 34), and U.S. Bank filed a reply on January 15, 2013, (Doc. No. 35). In accordance with Civil Local Rule 7.1.d.1, the Court finds the motion suitable for determination on the papers and without oral argument. Accordingly, the motion hearing set for March 14, 2013 is hereby vacated. For the reasons set forth below, the Court GRANTS U.S. Bank's motion with regard to claims alleged by Plaintiffs Charlene McCormick, Robert Crocker, William Crocker, Vincent Chambers, and Gerald Schiff with prejudice; and GRANTS U.S. Bank's motion with regard to claims alleged by Plaintiffs Sylina and Douglas Kidd without prejudice.


Procedural History

On January 13, 2012, Plaintiffs Charlene McCormick, Douglas Kidd, Sylina Kidd, Robert Crocker, William Crocker, Vincent Chambers, and Gerald Schiff (collectively, "Plaintiffs") filed a complaint against U.S. Bank. (Doc. No. 1, Ex. A at 11.) The complaint alleged various causes of action arising from Plaintiffs' individual mortgage loans, including: (1) privity of contract; (2) rescission; (3) negligence in origination; (4) negligence in servicing; (5) intentional misrepresentation; (6) conspiracy to commit civil tort; (7) and violation of California's Unfair Competition Law ("UCL"). (Id.)

On February 17, 2012, U.S. Bank removed the action to this Court on the basis of diversity jurisdiction and federal question jurisdiction. (Doc. No. 1 at 2-4.) On March 9, 2012, Plaintiffs filed a motion to remand, (Doc. No. 8), subsequently followed by their First Amended Complaint ("FAC"), (Doc. No. 11). The FAC added Temecula Valley Bank (a non-diverse party) and Mortgage Electronic Registration Systems, Inc. ("MERS") as Defendants. (Id. at 5.) The FAC also removed the UCL cause of action, which had been the sole basis for federal question jurisdiction. (Doc. No. 1 at 4.) The Court denied Plaintiffs' motion to remand on August 20, 2012. (Doc. No. 27.)

However, on July 2, 2012, while the motion to remand was still pending, U.S. Bank and MERS filed a motion to dismiss the FAC. (Doc. No. 19.) On October 30, 2012, the Court granted the motion, providing Plaintiffs limited leave to amend the complaint, but only with regard to the second cause of action for rescission and third and fourth causes of action for negligence. (Doc. No. 29.) Plaintiffs filed the operative SAC on November 30, 2012, which alleges a single cause of action for negligence in servicing against U.S. Bank. (Doc. No. 30.) U.S. Bank now moves to dismiss the negligence claim as to each individual Plaintiff. (Doc. No. 32.)

Factual Background

The allegations in the SAC concern five separate mortgage loans, each of which was obtained independently by one or more of the individual Plaintiffs. Thus, although Plaintiffs allege a single cause of action against U.S. Bank, the factual basis for each claim depends heavily on the individual representations made to each Plaintiff in the servicing and/or successful or unsuccessful modification of their loans. Accordingly, each loan is discussed in detail below.

A. Chambers Loan

On or about May 21, 2008, Vincent Chambers and Maria Prieto ("Chambers", husband and wife, borrowed $634,500.00 from U.S. Bank to purchase the property located at 763 Hill View Way, Chico, California 95926 ("Chambers Loan"). (Doc. No. 30 at 6:14-17.) In late 2008, Mr. Chambers inquired about a loan modification with Matt Griffin, a "Mortgage Specialist" at his local U.S. Bank. (Id. at 17:23-25.) At this time, Mr. Chambers was informed that he was not eligible for a loan modification because his mortgage payment was not 22% of his gross income. (Id.) However, Mr. Griffin allegedly told Mr. Chambers that he might later qualify for a loan modification if he stopped making payments on his loan. (Id.) U.S. Bank denies this statement was ever made. (Doc. No. 32 at 9:23.)

Nonetheless, Mr. Chambers chose not to fall behind on his payments, (Doc. No. 30 at 17:26-27), and submitted a loan modification application to U.S. Bank. (Id. at 18:3-5.) Since this time, Mr. Chambers alleges he has tried to contact U.S. Bank numerous times, but each time he is transferred from one department to another, the employees are unable to offer him any assistance, and no one can answer any of his questions regarding his loan modification application. (Id. at 18:6-8.) Accordingly, Mr. Chambers alleges that U.S. Bank owed him a duty by accepting his loan modification application, and breached this duty by failing to adequately communicate with him. (Id. at 18.) As a result, Mr. Chambers contends he has suffered severe emotional distress, anxiety, and frustration.

. at 18:17-19.)

B. Crocker Loan

On or about April 29, 2004, Lois Crocker refinanced the property located at 3190-3192 Dovecrest Court, Spring Valley, California 91977 ("Crocker Loan"). (Id. at 25; Doc. No. 32, Def.'s RJN, Exs. C, D.) The Crocker Loan was acquired from Temecula Valley Bank, and was a 30 year fixed rate loan at 6.25% in the amount of $390,000. (Doc. No. 30 at 6:19-24; Doc. No. 32, Def.'s RJN.) The loan was secured by a Deed of Trust, which was recorded on April 24, 2004, and required monthly payments in the amount of $2,401.30. (Doc. No. 32, Def.'s RJN, Ex. D.) However, after Lois Crocker died, Lois' son Robert Crocker occupied the property.

Robert Crocker alleges that he attempted to modify the Crocker loan in July 2009, but was denied because his name was not on the loan or listed on the title to the property.

. at ¶114.) The Crockers further allege that William Crocker, Lois' husband, was denied a modification because he was not residing in the property at the time his loan modification application was submitted. (Doc. No. 32 at 4:2-8.) However, as set forth in U.S. Bank's request for judicial notice, it appears William Crocker ultimately executed a "Loan Modification Agreement" on September 13, 2009, which amended the original Note and Deed of Trust. (Doc. No. 32, Def.'s RJN, Ex. E at 39-46.) Although this modification was in fact successful, the Crockers contend that U.S. Bank failed to inform them that their monthly payments would increase. (Doc. No. 30 at 19:18-20.) The Crockers further allege that U.S. Bank's refusal to use Robert Crocker's financial information to approve the modification agreement was improper because they used his information to approve the forbearance agreement. (Id. at 18:21-24.)

Ultimately, however, the Crockers fells behind in their mortgage payments and the property went into foreclosure in 2011. (Doc. No. 32 at 3:22-23.) The property has not yet been sold in foreclosure. (Doc. No. 30 ¶ 125.) Accordingly, the Crockers allege that U.S. Bank created a duty by accepting their loan modification application and granting them a forbearance, (Doc. No. 32 at 22), and breached this duty by failing to adequately communicate with them, (Doc. No. 30 ¶ 114). As a result, the Crockers contend to have suffered loss in income, severe stress, anxiety, damage to their credit rating, and financial damage to the family trust. (Id. ¶¶123, 124, 125.) Robert Crocker also claims to have wasted a significant amount of time on the phone speaking about his modification application, which was ultimately unsuccessful. (Id. at ¶115-116.)

C. Kidd Loan

On or about January 12, 2006, Douglas Kidd and his wife Sylina Kidd ("Kidd') refinanced their mortgage loan with Downey Savings and Loan ("Downey"). (Doc. No. 30 ¶ 26.) The Kidds refinanced the property located at 2585 Royal Saint James Drive, El Cajon, California 92019, with an Adjustable Rate Note in the amount of $460,000.00. (Doc. No. 32, Def.'s RJN, Exs. G, H.) Section Two of the Note set forth specific details regarding the initial interest rate, the maximum interest rate, and when and how the interest rate may change; and Section Three of the Note set forth the initial monthly payments, when/how the monthly payments may change, and how the monthly payment was calculated. (Doc. No. 32, Def.'s RJN, Ex. H.)

The Kidds first tried to modify their loan in 2008, and allege that they were "strung along" and "required to complete the same paperwork on three different occasions" before Downey eventually agreed to modify their loan in April 2008. (Id. at ΒΆ 128.) Although their loan was eventually modified, the Kidds allege that the modification was insufficient because despite initially lowering their interest rate to 6%, the interest rate on the loan increased every six months thereafter. (Id.) The Kidds also claim that they submitted payments to Downey to pay down the principal under the modification, that ...

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