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Mahoney v. Bank of America, National Association

United States District Court, Ninth Circuit

January 28, 2014

RITA MAHONEY, et al., Plaintiffs,


THOMAS J. WHELAN, District Judge.

On September 12, 2013, Plaintiffs Rita Mahoney and Eric Johnston commenced this action against Defendants Bank of America, National Association ("BANA") and Nationstar Mortgage LLC ("Nationstar") in the San Diego Superior Court. On October 21, 2013, Defendants removed the action to this Court. Defendants now move to dismiss Plaintiffs' complaint in its entirety. Plaintiffs oppose.

The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss.


On or about April 2, 2004, Plaintiffs purchased real property ("subject property") located in San Diego, California. (Compl. ¶ 7.) To fund their purchase, Plaintiffs obtained a purchase-money-mortgage loan in the amount of $960, 000 from McMillin Real Estate and Mortgage Company, Inc. (Id. Ex. B; see also Defs.' RJN Ex. A.) The loan repayment obligations were secured by a deed of trust encumbering the subject property. (Compl. Ex. B.) The deed of trust named MERS as beneficiary and Chicago Title Company as trustee. (Id.) MERS subsequently assigned the beneficial interest in the loan to Bank of America, N.A., successor by merger to BAC Home Loans Servicing, L.P. f/k/a Countrywide Home Loans Servicing, L.P. (Defs.' RJN Ex. B.) BANA then assigned the beneficial interest in the loan to Deutche Bank National Trust Company, as Trustee for the Holders of the GSR Mortgage Loan Trust 2004-7. (Id. Ex. C.) BANA serviced the loan until July 1, 2013, when serving was transferred to Nationstar. (Compl. ¶ 24.)

After purchasing the subject property, Plaintiffs timely paid their monthly mortgage payments. (Compl. ¶ 9.) Despite a "dramatic decrease in their income, " Plaintiffs continued to timely pay their monthly mortgage into 2011, when their monthly payments increased from $3, 800 to $5, 900 per month. (Id. ¶ 10.) The increase occurred because their loan changed from a fixed-interest rate into an adjustable-rate mortgage in 2011. (Id.) Plaintiffs struggled to make these increased payments. (Id.) So in June 2011, Plaintiffs "met with [BANA] loan representatives at a mortgage modification workshop... to request that the Loan be restructured, and were told that they were excellent candidates for a loan modification." (Id.) But Plaintiffs were subsequently told that their loan modification had been rejected because they "were not yet in default and must be in imminent default to be considered for a modification." (Id.) Allegedly following BANA's instructions, Plaintiffs intentionally became delinquent on their loan in order to obtain a loan modification. (Id.)

On June 12, 2012, a notice of default was recorded against Plaintiffs. (Compl. ¶ 11; Defs.' RJN Ex. D.) The notice of default was subsequently rescinded on August 16, 2013, and a notice of rescission of the declaration of default was recorded on the same date. (Defs.' RJN Ex. E.)

In July 2012, Plaintiffs filed a Chapter 13 bankruptcy petition and they allege that they also began paying their monthly mortgage on time. (Compl. ¶ 12; see also Defs.' RJN Ex. F.) In October 2012, the bankruptcy was converted to Chapter 7, and during that time, Plaintiffs allege that they "continued to pay their monthly mortgage payments on time, which [] were accepted by [BANA]." (Compl. ¶ 12.)

In November 2012, Plaintiffs allege that they "decided to liquidate their retirement savings to pay the balance of their arrears on the mortgage by the end of 2012[, ]" suggesting that they continued to make timely payments on their loan. (Compl. ¶ 13.) Throughout November 2012 and into December 2012, Plaintiffs attempted to get a reinstatement quote from BANA, but were unable to obtain a response. (Id. ¶¶ 13-15.) On December 28, 2012, Plaintiffs called BANA "to request that [BANA] accept a payment of $50, 000.00 over the phone so that Plaintiffs could at least pay for a majority of the delinquent balance[, ]" which they estimated to be approximately $50, 000-$60, 000. (Id. ¶ 16.) According to Plaintiffs, the BANA representative agreed to the request, and "told Plaintiffs that the $50, 000 payment would be accepted and credited to their account in 2012." (Id.) At this time, Plaintiffs still had not received a reinstatement quote, and thus proceeded to make the $50, 000 payment over the phone on December 28, 2012 "to pay off the majority of their delinquent balance in the year 2012 so that they could obtain the tax write-off." (Id.)

The payment was not deposited and credited by BANA until January 2013, and BANA also failed to provide Plaintiffs with a 1098 tax form reflecting the $50, 000 payment. (Compl. ¶ 17.) In January 2013, Plaintiffs once again made a mortgage payment that BANA allegedly accepted and applied to the loan. (Id. ¶ 18.) Though not alleged in the complaint, it appears the bankruptcy was eventually discharged around this time on January 23, 2013.

Plaintiffs again submitted a timely mortgage payment in February 2013, but this time, their payment was returned with the explanation that the amount was "insufficient to reinstate the account." (Id.) Plaintiffs contacted BANA again requesting the 1098 tax form for 2012 and a quote for the amount of the remaining reinstatement balance, but BANA failed to provide both. (Id. ¶ 19.) They allege that they continued calling BANA weekly requesting a reinstatement quote and payment history, but BANA continued refusing their requests. (Id. ¶ 20.) Plaintiffs add that "although [BANA] was preventing Plaintiffs from reinstating their account by paying their delinquent balance, [BANA] was still assessing late fees and penalties on the delinquent balance each month, and would not accept their monthly mortgage payments." (Id.)

Finally, in May 2013, Plaintiffs received a response from BANA. The first correspondence was a mortgage statement dated May 6, 2013 stating that Plaintiffs' delinquent amount was $48, 441.30 in "outstanding payments, late fees and penalties." (Id. ¶ 22.) The second correspondence was a letter dated May 8, 2013 informing Plaintiffs that BANA "intended to foreclose on their property, and showed a reinstatement amount of $39, 333.65 which included $963.88 in late fees, and stated that the last payment had been on October 1, 2012, which completely ignored the Plaintiffs' payment in December 2012 and regular monthly payment in January 2013." (Id.) Plaintiffs subsequently sent a formal Qualified Written Request ("QWR") to BANA on June 4, 2013 demanding (1) the payment history on their loan, (2) an accounting of their past payment of $50, 000, and (3) an accounting of their penalties and fees that BANA applied. (Id. ¶ 23.)

On July 1, 2013, BANA transferred the servicing of the loan to Nationstar. (Compl. ¶ 24.) In the Servicing Transfer Notice, BANA acknowledged their duty to provide Plaintiffs with the payment history of their loan and an accounting through a QWR that Plaintiffs had submitted, and further acknowledged their duty to transfer all of the records of the loan to Nationstar. (Id.) Nationstar allegedly failed and refused to respond to Plaintiffs' June 4, 2013 QWR letter. (Id. ¶ 25.) Nationstar further "failed and refused to respond to the Plaintiffs' phone calls in July and August 2013 in which they requested a payment history of their Loan, an accounting of their past payment of $50, 000, and to show an accounting of the penalties that [BANA] and NATIONSTAR had applied." (Id.)

Eventually, Nationstar responded to Plaintiffs in August 2013, but like BANA, it provided conflicting information. (Compl. ¶ 26.) On August 8, 2013, Nationstar returned Plaintiffs' mortgage payment with a letter stating that the payment was returned because the amount was "insufficient to reinstate the account." (Id.) That letter also indicated that the amount needed to reinstate at the time was $59, 110.12 and included "qualifying language instructing the Plaintiffs that this amount is subject to change and thus to call NATIONSTAR to obtain an up-to-date amount owed." (Id.) A few days later, on August 14, 2013, Plaintiffs called Nationstar to verify the reinstatement amount, and the Nationstar representative told them that the reinstatement amount was $65, 769.62. (Id.) On August 21, 2013, a Nationstar representative provided a third reinstatement quote at $61, 068.46, which did not include an additional $15, 248.33 in late fees, penalties, and attorney's fees; Nationstar allegedly refused Plaintiffs' demand to record these penalties and fees in writing. (Id.)

On September 3, 2013, Plaintiffs received a correspondence from Nationstar regarding their QWR, which did not provide the information that Plaintiffs had requested in writing. (Compl. ¶ 26.) It failed to include a full payment history and schedule reflecting all payments (including their $50, 000 payment), as well as accrued interest, penalties, and late fees related to their loan. (Compl. ¶ 26.) Nationstar also failed to provide an "accurate" reinstatement quote. (Id.)

On September 12, 2013, Plaintiffs commenced this action, asserting claims for: (1) accounting; (2) declaratory relief; (3) breach of contract; (4) violation of California Civil Code § 2943; (5) negligent loan administration; and (6) injunctive relief. According to Defendants, Plaintiffs neither listed their claims against Defendants in their bankruptcy schedules nor did they amend their schedules prior to discharge to include their claims. (Defs.' Mot. 2:24-3:2 (citing Defs.' RJN Exs. F, G).) Defendants now move to dismiss the complaint in its entirety. Plaintiffs oppose.


The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all allegations of material fact as true and construe them in light most favorable to the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat'l League of Postmasters of U.S. , 497 F.3d 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). However, the court need not "necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc. , 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotation marks omitted). In fact, the court does not need to accept any legal conclusions as true. Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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." Twombly , 550 U.S. at 555 (internal citations omitted). Instead, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id . Thus, "[t]o 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.'" Iqbal , 556 U.S. at 678 (citing Twombly , 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id . A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc. , 749 F.2d 530, 534 (9th Cir. 1984).

Generally, courts may not consider material outside the complaint when ruling on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co. , 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, documents specifically identified in the complaint whose authenticity is not questioned by parties may also be considered. Fecht v. Price Co. , 70 F.3d 1078, 1080 n.1 (9th Cir. 1995) (superceded by statutes on other grounds). Moreover, the court may consider the full text of those documents, even when the complaint quotes only selected portions. Id . It may also consider material ...

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