United States District Court, E.D. California
plaintiffs, Edgar Martinez, Erika Martinez, and Delfina
Prado, allege Flagstar Bank, FSB foreclosed on their home
while their application for a loan modification was pending.
They also allege the application process was so bewildering
that it shows Flagstar was negligent, and so deceptive that
it shows Flagstar acted fraudulently. Flagstar moves to
dismiss their first amended complaint. The matter was
submitted for decision without a hearing. As discussed below,
the motion is granted in part and denied in part.
preliminary matter, the court grants the defendants’
unopposed request for judicial notice. The documents for
which judicial notice is requested are public records,
including publicly recorded documents and court filings in
related cases. See Fed. R. Civ. P. 201 (governing
judicial notice); Harris v. Cty. of Orange, 682 F.3d
1126, 1132 (9th Cir. 2012) (undisputed matters of public
record are subject to judicial notice on a motion to
dismiss); Olmstead v. ReconTrust Co., 852 F.Supp.2d
1318, 1321 (D. Or. 2012) (recorded documents, such as a deed
of trust, may be subject to judicial notice on a motion to
dismiss). The court notes, however, that Flagstar can save
effort in the future by simply citing the court’s
previous orders in this case rather than requesting judicial
notice of them. See, e.g., L.H. v.
Schwarzenegger, 645 F.Supp.2d 888, 891 n.1 (E.D. Cal.
motion, the court assumes the plaintiffs’ allegations
are true. Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). Here, the plaintiffs’ first amended complaint
alleges as follows: Mr. and Ms. Martinez purchased a house in
Stockton, California in September 2008, and lived there with
their children. First Am. Compl. ¶ 10, ECF No. 15. Their
purchase was financed by a mortgage loan through Wholesale
America Mortgage, Inc. Id. ¶ 11. The deed of
trust names Mr. Martinez and Ms. Prado as borrowers, Req. J.
Notice Ex. 1, ECF No. 17-1, but in October 2008, the property
was conveyed from Ms. Prado and Mr. Martinez to Mr. and Mrs.
Martinez as husband and wife as joint tenants. Id.
Exs. 2, 3. The loan was refinanced in late 2008, and Flagstar
acquired it soon afterwards. See First Am. Compl.
2011, after Mr. Martinez lost his job and Ms. Martinez began
suffering from health problems, they began experiencing
financial hardship. Id. ¶ 14. In about January
2012, they contacted Flagstar and asked whether they could
obtain mortgage relief assistance. Id. ¶ 15.
They were current in their payments at the time. Id.
Flagstar sent them an application for a loan modification,
which they completed and returned. Id. For the next
six months, Flagstar representatives frequently told the
Martinezes they must miss payments before Flagstar would
consider a modification. Id. ¶ 16. They were
reluctant to follow this advice, and they could have borrowed
money from friends or family or even declared bankruptcy
instead of missing payments, but in July 2012, they decided
to miss a payment. Id. ¶ 17. At about this
time, Ms. Prado moved into the house. Id. ¶ 11.
In 2012, she also signed a quitclaim deed, transferring her
rights in the property to Mr. Martinez. Req. J. Notice Ex. 6,
ECF No. 17-2.
repeatedly asked the Martinezes to resubmit the same
documents, and despite the fact that they submitted
everything Flagstar requested, their application was
repeatedly denied for incompleteness. First Am. Compl.
¶¶ 18-19. These delays, claim the Martinezes, were
intentional and meant to prolong the loan modification
process. Id. Flagstar assured them it would not
foreclose on the house while their applications were pending,
but in September 2012, while their application for a loan
modification was pending, Flagstar recorded a notice of
default. Id. ¶ 20; Req. J. Notice Ex. 4, ECF
No. 17-1 (notice of default). In April 2013, Flagstar
recorded a notice of trustee’s sale. First Am. Compl.
¶ 21; Req. J. Notice Ex. 5, ECF No. 17-2 (notice of
recording these notices, Flagstar informed the Martinezes
their application had been denied because it was incomplete,
but the Martinezes had in fact submitted a complete
application. First Am. Compl. ¶ 22. The same day
Flagstar denied their application for incompleteness, the
Martinezes submitted another complete application, and
Flagstar postponed the foreclosure sale date. Id.
¶ 23. The next month, Flagstar sent the Martinezes a
letter that stated they did not qualify for a modification
due to “excessive obligations” and because they
did not meet the investor requirements. Id. ¶
24. But Flagstar had known about their obligations, it was
itself the “investor, ” and since the outset it
had told the Martinezes they were qualified for a loan
modification. Id. In May and July 2013, the
Martinezes again submitted complete applications for a loan
modification, but as before, Flagstar claimed the
applications were incomplete. Id. ¶ 25.
9, 2013, Flagstar sold the house in a foreclosure sale.
Id. ¶ 26. The Martinezes moved out in the
second week of August 2013. Id. ¶ 26. They were
forced to sell many of their possessions for less than their
true value. Id. ¶ 30. If Flagstar had fairly
considered the applications for loan modifications, it would
have granted them, and the Martinezes would have made
payments to bring their account current. Id. Fees,
interest, and penalties would not have accrued, and they
would not have suffered negative reports to their credit.
Id. The process caused them stress, anxiety,
migraines, depression, and marital difficulties. Id.
plaintiffs assert many facts about Ms. Prado in their
opposition brief that they do not allege in their complaint.
Ms. Prado’s identity is the first of these facts.
According to the plaintiffs’ opposition brief, Ms.
Prado is Ms. Martinez’s mother. See
Opp’n at 1, ECF No. 19. In addition, the briefing
asserts Ms. Prado lived with the Martinez family in 2008, but
later moved away to Arizona. See Id. at 1, 3.
plaintiffs’ opposition brief also asserts that in about
July 2012, Ms. Prado moved back to California to help the
Martinezes with their expenses and begin looking for a job.
Opp’n at 3. As noted above, in 2012 she signed a
quitclaim deed, transferring her rights in the property to
Mr. Martinez. Req. J. Notice Ex. 6. In the plaintiffs’
opposition brief, they assert she signed the quitclaim deed
at the request of “the bank.” Opp’n at 3.
the complaint alleges Ms. Prado was “generally aware of
the modification process and foreclosure proceedings”
and that she, along with the Martinezes, was forced to leave
the house and suffered harm to her credit as a result of the
foreclosure. See First Am. Compl. ¶¶ 11
& 31. In their opposition brief, the plaintiffs assert in
addition that Ms. Prado submitted documents with the
Martinezes’ application for a loan modification,
including a financial worksheet, a letter of hardship, a
statement of her income, and an explanation of her residence
in California and Arizona. Opp’n at 3.
plaintiffs filed a complaint in San Joaquin County Superior
Court in July 2015. ECF No. 1-2. They alleged claims for
negligent and intentional misrepresentation, false promise,
negligence, intentional infliction of emotional distress,
violation of California Civil Code sections
2923.6 and 2924.10,  and violations of
California’s Unfair Competition Law (UCL), Cal. Bus.
& Prof. Code §§ 17200 et seq. See generally
Id. Flagstar removed the case to this court on the basis
of this court’s diversity jurisdiction. Not. of
Removal, ECF No. 1.
moved to dismiss in September 2015. ECF No. 7. In January
2016, the motion was granted in part and denied in part: (1)
Ms. Prado’s claims were dismissed with leave to amend
to allege facts showing she suffered a redressable injury;
(2) the motion was granted with respect to the claims for
negligence and negligent infliction of emotional distress,
but leave to amend was granted to allege facts that showed
these claims accrued within the limitations period; and (3)
the motion was denied with respect to the claims for
negligent and intentional misrepresentation, false promise,
and violation of the California Civil Code and UCL. Order
Jan. 7, 2016, ECF No. 12.
plaintiffs filed an amended complaint later in January,
alleging the same claims as in the original complaint. ECF
No. 15. In February 2016, Flagstar renewed its motion to
dismiss Ms. Prado’s claims and the claims for
negligence and intentional infliction of emotional distress.
ECF No. 16. As to Ms. Prado’s claims, Flagstar argues
the plaintiffs have still not alleged facts that establish
Ms. Prado’s standing. As to the negligence claims,
Flagstar argues the plaintiffs’ allegations show
neither that Flagstar owed a duty nor that the plaintiffs
suffered damages. And as to the claim for intentional
infliction of emotional distress, Flagstar argues the
plaintiffs have not alleged facts that show it acted
outrageously or that they suffered anything but financial