United States District Court, N.D. California
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND Re: Dkt. No. 12
ELIZABETH D. LaPORTE, Magistrate Judge.
Before the Court is Defendant's Motion to Dismiss Plaintiff's complaint. For the reasons stated at the hearing and in this Order, Defendant's Motion to Dismiss is granted with leave to amend.
Allegations from the complaint
Plaintiff obtained the mortgage loan that is the subject of this case on July 15, 2004. Compl. ¶ 8. The loan was a negative amortization loan that was structured so that Plaintiff's payments would not be sufficient to satisfy the interest accruing on the loan and the principal balance would rise over time rather than decrease as with other loans. Id.
Beginning in 2012, and continuing to the present, Plaintiff has been unable to afford her mortgage payments and has been trying to obtain a loan modification with Defendant so that she can afford her payments. Compl. ¶ 9. Plaintiff alleges that Defendant has delayed the modification process and caused Plaintiff to incur penalties and late charges in addition to the added expense associated with the failure to offer a modification, which should have taken only three months. Compl. ¶ 10.
Plaintiff alleges that during the loan modification process, Defendant requested financial documents that Plaintiff was not otherwise obligated to provide. Compl. ¶ 11. Plaintiff provided those documents, which were then either lost or not reviewed for months. Id. Plaintiff alleges that Defendant then called her to say that it had not received the documents. Id. Plaintiff alleges that Defendant told her that her loan modification was under review, but that this was not true. Compl. ¶ 112. Plaintiff alleges that Defendant mishandled the loan modification application by using the wrong criteria and financial data to evaluate it. Compl. ¶ 13.
A complaint will survive a motion to dismiss if it contains "sufficient factual matter... to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007)). The reviewing court's "inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff." Lazy Y Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).
A court need not, however, accept as true the complaint's "legal conclusions." Iqbal, 129 S.Ct. at 1949. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 1950. Thus, a reviewing court may begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id.
Courts must then determine whether the factual allegations in the complaint "plausibly give rise to an entitlement of relief." Id. Though the plausibility inquiry "is not akin to a probability requirement, " a complaint will not survive a motion to dismiss if its factual allegations "do not permit the court to infer more than the mere possibility of misconduct...." Id. at 1949 (internal quotation marks omitted) & 1950. That is to say, plaintiffs must "nudge their claims across the line from conceivable to plausible." Twombly, 550 U.S. at 570.
1. Plaintiff's negligence claim is dismissed with leave to amend.
Plaintiff alleges that Defendant owed a duty to Plaintiff regarding the servicing of the loan and during the modification process because Defendant took action and made representations to Plaintiff about the loan. Compl. ¶ 16. Plaintiff alleges that Defendant's actions were more extensive than those of a typical lender. Id. Plaintiff alleges that Defendant breached the duty of care by losing documents, failing to acknowledge that documents were received, unreasonably delaying the process, assigning inexperienced employees to review the loan application, failing to assign a single point of contact, incorrectly applying the loan modification criteria, failing to return calls from Plaintiff, failing to properly assess Plaintiff's financial condition and generally failing to properly evaluate Plaintiff's modification application. Compl. ¶ 17. Plaintiff alleges that because of Defendant's breach, Plaintiff was not given a loan modification that she could afford, and that she suffered damages. Compl. ¶ 18.
Under California law, the elements of a claim for negligence are "(a) a legal duty to use due care; (b) a breach of such legal duty; and (c) the breach as the proximate or legal cause of the resulting injury." Ladd v. County of San Mateo, 12 Cal.4th 913, 917, 50 Cal.Rptr.2d 309, 911 P.2d 496 (1996) (internal citations and quotations omitted); see also Cal Civ Code § 1714(a). In general, "a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Savs. & Loan Ass'n, 231 Cal.App.3d 1089, 1096 (1991). "Liability to a borrower for negligence arises only when the lender actively participates' in the financed enterprise beyond the domain of the usual money lender.'" Id. (internal citation omitted). In Nymark, the court held a lender owed no duty of care to a borrower in preparing an appraisal of the real property security for the loan when the purpose of the appraisal is to protect the lender by satisfying it that the collateral provided adequate security for the loan. The court reached this holding by considering the six factors identified in Biakanja v. Irving, 49 Cal.2d 647, 649-50 (1958) to determine whether to recognize a duty of care: (1) the extent to which the transaction was intended ...