Hart v. Bayview Loan Servicing

          Attorneys Present for Plaintiffs: Varand Vartanian

          Attorneys Present for Defendants: Mike Aleali

         Proceedings: HEARING BY TELEPHONE ON DEFENDANTS BAYVIEW LOAN SERVICING, BANK OF AMERICA, AND LAW OFFICES OF LES ZIEVE’S MOTION TO DISMISS PLAINTIFFS’ FIRST AMENDED COMPLAINT (Dkt. 40, filed June 14, 2016)

          CIVIL MINUTES - GENERAL

          CHRISTINA A. SNYDER J.

         I. INTRODUCTION

         On December 21, 2015, plaintiffs Guy Hart, Leemor Hart Lavy, and Zeev Lavy (collectively, “plaintiffs”) filed the instant action in the Los Angeles County Superior Court against defendants Bayview Loan Servicing (“Bayview”), Bank of America (“Bank of America”), the Law Offices of Les Zieve (“Zieve”), and Does 1 through 20, inclusive. Dkt. 1 (Compl.). Plaintiffs later identified Doe 1 as REO Partners, LLC (“REO”). The original complaint asserted claims for wrongful foreclosure, declaratory relief, and “temporary restraining order and preliminary injunctions.” See generally Compl. On February 25, 2016, defendants removed this action to federal court, asserting diversity jurisdiction. Dkt. 1 (Notice of Removal).

         On March 2, 2016, defendants Bayview and Bank of America filed a joint motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 7. On March 15, 2016, defendant REO filed a separate motion to dismiss pursuant to Rule 12(b)(6). Dkt. 12. In an order dated May 10, 2016, the Court granted defendants’ motions to dismiss without prejudice. Dkt 33 (Order). On May 26, 2016, pursuant to a Joint Stipulation filed by the parties, the Court dismissed defendant REO from this action without prejudice. Dkt 35.

         On May 31, 2016, plaintiffs filed the operative first amended complaint (“FAC”) against defendants Bayview, Bank of America, and Zieve, again asserting claims for (1) wrongful foreclosure and (2) declaratory relief. Dkt. 36. The FAC also asserts, for the first time in this action, claims for (3) fraud and (4) and intentional infliction of emotional distress. Id.

         On June 14, 2016, defendants Bayview, Bank of America, and Zieve filed the instant motion to dismiss plaintiffs’ FAC. Dkt. 40 (“Motion”). On June 27, 2016, plaintiffs filed an opposition to defendants’ motion, dkt. 45 (“Opp’n”), and on July 6, 2016, defendants filed a reply, dkt. 46 (“Reply”).

         On July 18, 2016, the Court provided the parties with a tentative order and held oral argument on the instant motion. Having carefully considered the parties’ arguments, the Court concludes as follows.

         II. BACKGROUND

         On or about March 27, 2007, plaintiff Guy Hart obtained a $1, 000, 000 loan (the “subject loan”) from Countrywide Home Loans, Inc. in order to purchase the real property located at 20338 Via Sansovino, Los Angeles, California 91326 (the “Property”). See FAC at ¶¶ 12-13; Dkt. 8 (Request for Judicial Notice, or “RJN”), Ex. 1.^[1] A Deed of Trust was entered evidencing a mortgage. See RJN, Ex. 1. According to the FAC, plaintiff Guy Hart’s sister (plaintiff Leemor Hart Levy) and her husband (plaintiff Zeev Lavy) have resided at the Property since 2007. FAC ¶¶ 4-5. The FAC further alleges that the Lavys “help[ed] with all the payments on the Property, including the mortgage, down payment association fees, electrical, gas, etc. and maintained the Property as part of their agreement with Plaintiff Guy Hart that they were co-owners on the Property.” Id. ¶ 5.

         On or about November 18, 2011, a Notice of Default and Election to Sell Under Deed of Trust indicating an arrearage of $78, 534.24 was recorded in the Los Angeles County Recorder’s Office. See RJN, Ex. 2; FAC ¶ 16. The FAC alleges that after the recording of the Notice of Default, plaintiffs “communicated at length with Bank of America in an effort to modify the loan, ” but were informed on November 3, 2011 that the property was to be placed in “Accelerated Foreclosure.” Id. ¶¶ 15-16. Thereafter, plaintiff Guy Hart purportedly made numerous attempts to seek a loan modification and prevent the foreclosure. Id. ¶ 16. Specifically, plaintiffs allege that in January 2012, they sent Bank of America a tender offer to purchase the home in full or, in the alternative, to modify the subject loan. Id. ¶¶ 17-18. Plaintiffs further allege, however, that while they were engaged with Bank of America in ongoing efforts to modify the loan, the Deed of Trust had already been assigned to The Bank of New York Mellon in October 2011. Id. ¶ 19. The assignment was recorded on November 1, 2011. Id.

         Plaintiffs further aver that throughout 2014 and 2015, negotiations to modify the loan were ongoing between plaintiff Guy Hart and defendant Bayview Loan Servicing. See generally id. ¶¶ 20-29. Nonetheless, on November 4, 2015, a Notice of Trustee’s Sale was recorded in the Los Angeles County Recorder’s Office indicating that the estimated amount of the “unpaid balance and other charges” on the loan was $1, 341, 448.66. RJN, Ex. 3. Pursuant to the Notice of Trustee’s Sale, a sale of the Subject Property was held on November 30, 2015. RJN, Ex. 4.

         In the operative complaint, plaintiff Guy Hart alleges that on December 2, 2015, he contacted defendant Bayview Loan Servicing regarding the status of the loan modification and discovered, to plaintiffs’ surprise, that the property had already been sold days earlier. Id. ¶ 32. Plaintiffs allege that they had no notice of the impending Trustee’s Sale and that the resulting sale was wrongful and must be set aside. See id. ¶¶ 33-35, 44-56. Plaintiffs also aver that defendants “conducted this illegal sale during the widely-publicized Porter Ranch gas leak when the area was under evacuation.” Id. ¶ 41.

         Plaintiffs’ operative complaint also asserts claims for fraud and intentional infliction of emotional distress, neither of which was asserted in their original complaint. More specifically, plaintiffs assert that defendants intended to deceive plaintiffs by failing to disclose or provide proper notice of the foreclosure sale. Id. ¶ 65. Plaintiffs further allege that they have suffered severe emotional distress as a result of defendants’ conduct. Id. ¶ 71.

         III. LEGAL STANDARD

         A motion pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in a complaint. Under this Rule, a district court properly dismisses a claim if “there is a ‘lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.’ ” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balisteri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)). “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.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a right to relief above the speculative level.” Id.

         In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). However, “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); see Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content, ’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”). Ultimately, “[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.

         Unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment, a court cannot consider material outside of the complaint (e.g., facts presented in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the complaint and matters that may be judicially noticed pursuant to Federal Rule of Evidence ...