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Villanueva v. Select Portfolio Services, Inc.

United States District Court, N.D. California, San Jose Division

May 11, 2015




Defendants Select Portfolio Servicing, Inc. ("SPS", sued as Select Portfolio Services, Inc.) and National Default Servicing Corporation ("NDSC") jointly move to dismiss Plaintiff's Complaint, which alleges various causes of action arising out of a mortgage loan modification application, and the subsequent Notice of Trustee's Sale filed on the subject real property while the loan modification application was pending. Plaintiff did not file an opposition to the motion to dismiss, and has not otherwise filed a document in this action since the case was removed by Defendants to federal court.[1] The Court determined that this motion was appropriate for adjudication without oral argument, pursuant to Civil Local Rule 7-1(b). See ECF 15. For the reasons below, the Court GRANTS the motion to dismiss, with prejudice.


Plaintiff is the owner of real property located in San Jose, California. See Compl., ECF 1-1 ¶ 6. On or about September 10, 2014, Plaintiff received a letter from Defendant SPS "indicating that her request for a loan modification was under active review." Compl. ¶ 7.[2] Plaintiff then pleads that on September 16, 2014, prior to receiving a determination as to the requested loan modification, a "Notice of Trustee's Sale was filed with a sale date set for October 10, 2014... in violation of the bar against dual tracking in the California Homeowner's Bill of Rights." Compl. ¶ 8. Plaintiff's Complaint asserts causes of action for negligent servicing, fraud, breach of the covenant of good faith and fair dealing, breach of contract, violations of the Homeowner's Bill of Rights, promissory estoppel, and intentional infliction of emotional distress.


A motion to dismiss under Rule 12(b)(6) concerns what facts a plaintiff must plead on the face of the complaint. Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Any complaint that does not meet this requirement can be dismissed pursuant to Rule 12(b)(6). A "short and plain statement" demands that a plaintiff plead "enough facts to state a claim to relief that is plausible on its face, " Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), which requires that "the plaintiff plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court must "accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519, F.3d 1025, 1031 (9th Cir. 2008).


Defendants move to dismiss Plaintiff's seven causes of action for failure to state a claim. The Court considers each cause of action in turn.[3]

A. Negligent Servicing

Plaintiff's first cause of action, against both SPS and NDSC, alleges negligent servicing of the subject loan. Plaintiff contends that Defendants, "acting as Plaintiff's lender and loan servicer, had a duty to exercise reasonable care [] to maintain proper and accurate loan records, " Compl. ¶ 10, and breached this duty in the servicing of the loan by "fail[ing] to timely investigate Plaintiff's RESPA request, or remedy their error in dual tracking Plaintiff's account." Compl. ¶ 11.

A cause of action for negligence in California requires a party to plead (1) a legal duty to use reasonable care, (2) breach of that duty, (3) proximate cause, and (4) injury to the Plaintiff. See, e.g., Mendoza v. City of Los Angeles, 66 Cal.App.4th 1333, 1339 (1998). In California, courts have repeatedly held that a lender does not owe a duty of care to a borrower when its involvement in the loan transaction "does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal.App.3d 1089, 1096 (1991); see also Oaks Mgmt. Corp. v. Superior Court, 145 Cal.App.4th 453, 466 (2006) ("Absent special circumstances a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender."). To the extent Plaintiff's negligence claim is based on the requested loan modification, see Compl. ¶ 7, loan modification falls within a lender's conventional role as a money lender, and lenders generally owe no duty to borrowers to modify a loan. See, e.g., Dooms v. Fed. Home Loan Mortg. Co., 2011 WL 1232989, at *12 (E.D. Cal. Mar. 31, 2011); see also Armstrong v. Chevy Chase Bank, FSB, 2012 WL 4747165, at *4 (N.D. Cal. Oct. 3, 2012) ("[A] loan modification... is nothing more than a renegotiation of loan terms."). Plaintiff has pled no "special circumstances" to show an exception to this general rule. Cf. Nymark at 1096.

The Court finds that Plaintiff has failed to establish that either Defendant owed a duty that it then breached. Further, Plaintiff pleads no facts regarding the proximate cause of any injury that resulted from any alleged negligence. The first cause of action must therefore be dismissed.

B. Fraud

Plaintiff's second cause of action against both SPS and NDSC alleges that both Defendants engaged in a "pattern and practice of defrauding Plaintiff in that[] Defendants encouraged Plaintiff to continue to submit documentation for the NPV calculation, " but had "no intention of properly investigating Plaintiff's NPV calculation." Compl. ¶¶ 14, 15. Plaintiff pleads that Defendants made representations that "they knew [] to be false, " id. at ¶ 15, and that based on these representations Plaintiff was "induced to stop making payments on ...

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