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Johnson v. Aurora Bank, F.S.B.

United States District Court, N.D. California

March 23, 2015

AURORA BANK, F.S.B., et al., Defendants.



Plaintiff Angelita Johnson ("Plaintiff") brings this action seeking damages stemming from the foreclosure of her home. She sues Defendants Aurora Bank, F.S.B. ("Aurora Bank") and Nationstar Mortgage, LLC ("Nationstar") for violation of California's Homeowner's Bill of Rights, breach of contract, and misrepresentation. Plaintiff contends that after she defaulted on her loan, Aurora induced Plaintiff to enter two forbearance agreements under the pretense that if she made payments the bank would consider her for a permanent loan modification; Plaintiff now contends that Aurora never intended to consider her for a modification at all, but rather solely sought to obtain as much money as possible before foreclosing on the home. Plaintiff also contends that Nationstar improperly foreclosed on her property while she was in active loan modification review despite a Nationstar representative having told Plaintiff that her application was still under review and no sale would take place. Now pending before the Court is Defendants' Motion to Dismiss for failure to state a claim upon which relief can be granted. (Dkt. No. 14.) The Court finds this matter suitable for disposition without oral argument. See N.D. Cal. Civ. L.R. 7-1(b). Accordingly, the hearing set for March 26, 2015 is VACATED. Having considered the parties' arguments and the relevant legal authority, and for the reasons set forth in this Order, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss.


The following facts are taken from the allegations of the First Amended Complaint ("FAC"), the documents attached thereto, and judicially noticeable documents.[1] Plaintiff was the owner of real property located at 1785-1787 Franklin Street, Berkeley, California (the "Property"). In April 2008, Aurora became the servicer under the Deed of Trust on the Property, which is a first lien deed of trust. (Dkt. No. 14 ¶ 10.) In 2011, Aurora became the beneficiary under the Deed of Trust, as well. ( Id. ) At all times relevant to this action, Plaintiff lived in the Property as her primary residence. ( Id. ¶¶ 2, 10.)

In March 2009, Plaintiff began to experience financial difficulty following the death of her son and both of her parents and defaulted on the loan. ( See id. ¶ 11 & Ex. A.) Aurora filed a Notice of Default against the Property in June 2009. ( Id. ) In October of 2009, Aurora recorded a Notice of Trustee's Sale against the Property. ( Id. ) When Plaintiff received the Notice of Trustee's Sale, she contacted Aurora to find out what she could do to avoid foreclosure. ( Id. ¶ 12.) In December 2009, Aurora sent Plaintiff a "Special Forbearance Agreement"-titled "Workout Agreement"-(the "December 2009 Forbearance Agreement"), which notes that Plaintiff owed over $25, 000 in arrears, but provides that Aurora would postpone any foreclosure sale in exchange for Plaintiff making monthly payments of $1, 169.00. ( Id. at ¶ 12 & Ex. A, 19 & § a.2.) In addition, the December 2009 Forbearance Agreement provides that Aurora "shall be under no obligation to dismiss a pending foreclosure proceeding until such time as all terms and conditions of this Agreement and Attachment A have been fully performed." ( Id. at Ex. A § 4.) Section b of Attachment A, in turn, provides in relevant part that

Because payment of the Plan payments will not cure the Arrearage, Customer's account will remain delinquent. Upon the Expiration Date [of this agreement], Customer must cure the Arrearage through a full reinstatement, payment in full, loan modification agreement, or other loan workout option that Lender may offer (individually and collectively, a "Cure Method.")[.] Customer's failure to enter into a Cure Method will result in the loan being disqualified from any future Lender Loss Mitigation program with respect to the loan evidenced by the Note, and regular collection activity will continue, including, but not limited to, commencement or resumption of the

foreclosure process[.] ( Id. at Ex. A § b.) The agreement also provides

No Waiver. Nothing contained herein shall constitute a waiver of any [or] all of the Lender's rights or remedies, including the right to commence or resume foreclosure proceedings. Failure by Lender to exercise any right or remedy under this Agreement or as otherwise provided by applicable law shall not be deemed a waiver thereof.

( Id. at Ex. A § 7 (emphasis in original).) In addition, the agreement includes a provision titled "Entire Agreement, " which notes that it "may not be amended, waived, discharged or terminated orally but only by an instrument in writing." ( Id. at Ex. A § 14.) Finally, Plaintiff's Deed of Trust explicitly provides that forbearance does not constitute a waiver of the lender's right to foreclose. (Dkt. No. 17-1 at 9.) Plaintiff signed the December 2009 Forbearance Agreement and made the monthly payments as required through June 2010. ( Id. ¶ 13.)

Meanwhile, in April 2010, Aurora sent Plaintiff a letter offering Plaintiff a "more permanent home retention option" at the completion of the December 2009 Forbearance Agreement, provided that Plaintiff continued to make her $1, 169.00 monthly payments after the completion of that agreement. ( Id. ¶ 14.) Plaintiff continued to make those monthly payments after the agreement expired and also submitted documents that Aurora regarding a permanent modification solution. ( Id. )

Around January 12, 2011, however, Aurora rejected Plaintiff's monthly payment. ( Id. ¶ 15.) Plaintiff asserts that she had been planning to either reinstate the loan or apply for a modification, but before she could do so, on January 21, 2011 Aurora recorded a new Notice of Trustee's Sale against the Property. ( Id. ¶ 16.) On January 27, 2011, Aurora sent Plaintiff a "Foreclosure Alternative Agreement" (the "January 2011 Forbearance Agreement"), which is similar to the December 2011 Forbearance Agreement, and noted that Plaintiff now owed more than $44, 000 in arrears. ( Id. ¶ 17 & Ex. B) The January 2011 Forbearance Agreement required Plaintiff to make a first payment of $2, 269.56 followed by five monthly payments of $1, 654.00. ( Id. ¶ 17 & Ex. B § a.1.) The January 2011 agreement contained the same language as the December 2009 agreement: the "no waiver" provision, the "Entire Agreement" clause providing that the agreement could only be amended in writing, and the statement regarding the plaintiff's obligation to cure the arrearage upon the expiration of the plan period. ( Id. at Ex. B. §§ 7, b.) In addition, the January 2011 agreement provided that it was Plaintiff's responsibility to provide Aurora with "accurate and complete financial information and documentation in support of [her] request for a loan modification or other foreclosure options[, ]" and specifically listed the required items. ( Id. at Ex. B. § a.2.) Plaintiff signed this agreement and made the monthly payments from February through July 2011. ( Id. ¶ 18.)

In July 2011, after Plaintiff submitted her last payment under the January 2011 Forbearance Agreement, Aurora instructed Plaintiff to continue to submit monthly payments pursuant to that agreement while Aurora "continued to determine if Plaintiff was eligible for a permanent loan modification." ( Id. ) Accordingly, Plaintiff made monthly payments of $1, 645.00 for several months until October 2011, when Aurora rejected her payment. ( Id. )

Back in January 2011, and continuing until July 2012, Aurora had been requesting that Plaintiff submit new documents in support of her loan modification application. ( Id. ¶ 19.) Plaintiff complied with these requests but never received a determination of her loan modification application. ( Id. )

In June 2012, Plaintiff received notice that servicing on the loan was being transferred to Nationstar on July 1, 2012. ( Id. ¶ 20.) Aurora remained the beneficiary until October 3, 2012, when it transferred its interest to Nationstar. ( Id. ¶ 21.) On July 2, 2012, Nationstar, at Aurora's instruction, recorded a new Notice of Trustee's Sale against the Property. ( Id ¶ 20.) Sometime thereafter, Nationstar asked Plaintiff to submit additional documents in support of her loan modification application, and Plaintiff did so. ( Id. ¶ 21.) On January 26, 2013, Nationstar notified Plaintiff that her loan modification application was denied because Plaintiff had failed to submit documents. ( Id. ¶ 22.) Plaintiff immediately contacted Nationstar to inform the servicer that she had, in fact, submitted all requested documents. ( Id. ) Nationstar then agreed to continue evaluating Plaintiff for a loan modification. ( Id. ) During this time, a trustee's sale was scheduled for February 20, 2013. ( Id. ¶ 23.) Plaintiff received notice that because she was being considered for a loan modification, the sale would be postponed to March 6, 2013. ( Id. ) On February 23, 2013, Plaintiff received a letter from Nationstar stating that Nationstar had received all of Plaintiff's documents and her loan modification application was complete. ( Id. )

On March 5, 2013, Plaintiff spoke on the telephone with her single point of contact at Nationstar, Edward Babino, who confirmed that there was no scheduled sale date for the Property, and that the March 6 sale date had been vacated because Plaintiff had submitted a completed loan modification application. ( Id. ¶ 24.) Mr. Babino confirmed the same on March 13, 2013. ( Id. ) Notwithstanding Mr. Babibo's assurances that there would be no sale, on March 19, 2013, Plaintiff received a letter stating that her home had been sold at a trustee's sale on March 13, 2013, and Nationstar now owned the home. ( Id. ¶ 25.) In shock, Plaintiff contacted Mr. Babino, who informed her in writing that his representation on March 13 that there was no sale date was an "oversight" and that, to the contrary, there had been a sale scheduled that very day and the Property was in fact sold that day. ( Id. ) On March 21, 2013, Nationstar recorded a Trustee's Deed upon Sale. ( Id. )

Plaintiff contends that if she had known her home was going to a trustee's sale on March 13, 2013, she would have pursued other foreclosure prevention alternatives, such as a deed-in-lieu, short sale, or reinstatement. ( Id. ¶ 26.)

Plaintiff filed suit in December 2014. ( See Dkt. No. 1.) After Defendants moved to dismiss her initial complaint, Plaintiff filed the FAC alleging that Nationstar violated the California Homeowner's Bill of Rights by recording a notice of trustee's sale and proceeding with a foreclosure sale while her complete first lien loan modification application was pending, see Cal. Civ. Code § 2923.6, and committed fraud by telling her there was no scheduled sale date when there actually was. (Dkt. No. 14.) In addition, Plaintiff alleges breach of contract against Aurora, on the ground that in the forbearance agreements Aurora gave Plaintiff the right to cure arrearage through reinstatement, modification, or other foreclosure alternatives and breached that agreement by commencing foreclosure proceedings and filing a Notice of ...

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