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Powell v. Nationstar Mortgage, LLC

United States District Court, E.D. California

March 23, 2017





         Pending before the Court is Defendant Nationstar Mortgage LLC and Nationstar Mortgage Holdings, Inc.'s (collectively, "Nationstar") motion to dismiss Plaintiff Sean Daniel Powell's ("Plaintiff") complaint with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 6.) Plaintiff did not file an opposition brief, the matter was taken under submission pursuant to Local Rule 230(g), and the hearing set for March 14, 2017, was vacated. For the reasons set forth below, Nationstar's motion to dismiss is GRANTED in part. With the exception of Plaintiff's claim for injunctive relief, which is dismissed with prejudice, Plaintiff's claims are dismissed without prejudice and with leave to amend. Plaintiff may file an amended complaint within 21 days if, and only if, he is able to cure the deficiencies discussed below.


         Although somewhat difficult to understand, Plaintiff's complaint pertains to a mortgage he obtained on his personal residence in 2008, which was refinanced in 2009. Plaintiff claims the lender concealed the actual value of the residential property at issue, inflated Plaintiff's household income, and altered Plaintiff's credit score in order to underwrite the mortgage.[1] (Cmplt., ¶ 56.) Given Plaintiff's actual reported income, his "lender"[2] knew it would be impossible for Plaintiff to make the loan payments. (Cmplt., ¶ 59.) In 2011, Plaintiff suffered a physical injury, took an extended disability leave of absence from his work, and experienced "extreme difficulty" in maintaining his mortgage payment. (Cmplt., ¶ 19.)

         In 2016, Plaintiff contacted his lender about his financial hardships, and the lender "dragged Plaintiff along through a slow, confusing, contradictory, redundant and fraudulent modification process." (Cmplt., ¶ 22.) The lender continued to ask for "piecemeal and duplicative" paperwork, gave inconsistent answers about the status of the modification request to extract full mortgage payments from Plaintiff, and eventually denied the modification plan. (Cmplt., ¶ 24.) Plaintiff alleges the lender told him a modification would be considered and granted if Plaintiff paid the mortgage amount on time and in full, which Plaintiff alleges he did, but the payments were recorded as insufficient. (Cmplt., ¶ 33.) Plaintiff also alleges, contradictorily, the lender refused to discuss modification with him unless he fell behind on his mortgage. (Cmplt., ¶ 51.) Although Plaintiff suggests the lender has threatened foreclosure of the property under the 2009 Deed of Trust, it is unclear whether a Notice of Default or Notice of Trustee's Sale has been recorded.

         On September 29, 2016, Plaintiff filed suit against Defendants Nationstar Mortgage LLC and Nationstar Mortgage Holdings, Inc.[3] in Kern County Superior Court for fraud, deceit, and negligent misrepresentation; negligence; violation of California Business & Professions Code § 17200; breach of the implied covenant of good faith and fair dealing; injunctive relief, and reformation of the contract. Plaintiff attempted to serve Nationstar with the complaint on December 14, 2016, and on January 11, 2017, Nationstar removed the case to federal court asserting removal jurisdiction predicated on diversity of the parties. On February 9, 2017, Nationstar filed a motion to dismiss. (Doc. 6.) Plaintiff did not file an opposition brief.

         III. ANALYSIS

         A. Legal Standard

         A motion to dismiss pursuant to Rule 12(b)(6) is a challenge to the sufficiency of the allegations set forth in the complaint. Dismissal under Rule 12(b)(6) is proper where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balisteri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990). In considering a motion to dismiss for failure to state a claim, the court generally accepts as true the allegations in the complaint, construes the pleading in the light most favorable to the party opposing the motion, and resolves all doubts in the pleader's favor. Lazy Y. Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).

         To survive a 12(b)(6) motion to dismiss, the plaintiff must allege "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). "A claim has facial plausibility when the Plaintiff pleads 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 plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 556). "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.” Twombly, 550 U.S. at 555 (internal citations omitted). Thus, "bare assertions . . . amount[ing] to nothing more than a 'formulaic recitation of the elements'. . . are not entitled to be assumed true." Iqbal, 556 U.S. at 681. "[T]o be entitled to the presumption of truth, allegations in a complaint . . . must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). In practice, "a complaint . . . must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562. To the extent that the pleadings can be cured by the allegation of additional facts, a plaintiff should be afforded leave to amend. Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 247 (9th Cir. 1990) (citations omitted).

         B. Claims for Fraud, Deceit, and Negligent Misrepresentation Are Insufficiently Pled

         Nationstar argues Plaintiff's claims for fraud and negligent misrepresentation are insufficiently pled and must be dismissed.

         1. The Original Lender is Not Named as a Defendant

         Nationstar asserts that, to the extent Plaintiff's claims pertain to conduct occurring in 2008 or 2009, they are unrelated to Nationstar and must be dismissed.

         Defendants Nationstar Mortgage LLC and Nationstar Mortgage Holdings, Inc. are the only named Defendants in this action, but neither was the original lender or servicer of the mortgage Plaintiff obtained in 2008 and refinanced in 2009. In 2008, Plaintiff signed a Deed of Trust which identifies Netmore America, Inc. as the lender and purports to encumber real property on Firebaugh Street in Bakersfield, California (the "subject property"). (Doc. 7, p. 5.)[4] On June 17, 2009, the subject property was refinanced and a new Deed of Trust in the amount of $154, 894 was recorded identifying Metropolitan Home Mortgage, Inc. ("Metropolitan") as the lender and Mortgage Electronic Registration Systems, Inc. ("MERS") acting as nominee for Metropolitan. (Doc. 7, p. 16.) On July 13, 2009, MERS recorded and substituted Wells Fargo Bank, N.A. as trustee under the Deed of Trust. (Doc. 7, p. 26.) On April 21, 2015, MERS, on behalf of Metropolitan, transferred and assigned all its interest under the 2009 Deed of Trust to Nationstar Mortgage, LLC. (Doc. 7, p. 29.) On August 11, 2015, a second lien Deed of Trust was recorded on the Property in favor of CalHFA Mortgage Assistance Corporation in the amount of $22, 183.74. (Doc. 7, pp. 33-34.)

         Plaintiff alleges that "at various times throughout the origination and servicing of his mortgage loan, " the "lender" knowingly misrepresented the nature and terms of the loan, grossly inflated the value of the property to justify the loan, and held out the loan as a good financial decision for Plaintiff. Plaintiff maintains his "lender" knew it was unlikely Plaintiff would be able to pay off the loan, but Plaintiff's "desperation and desire to stay in the Subject Property" led him to justifiably rely on the lender's misrepresentations about the terms of the loan, Plaintiff's ability to afford the loan, and the value of the subject property.

         The 2008 and 2009 Deeds of Trust demonstrate Nationstar was neither the lender nor the servicer at the time these documents were signed. Nationstar was not assigned any interest in the 2009 Deed of Trust until 2015. Thus, Plaintiff's allegations pertaining to conduct of his "lender" in 2008 and 2009 inducing him to agree to these mortgages bear no relation to Nationstar. Moreover, Plaintiff has not alleged how Nationstar is liable for actions of the lenders in 2008 or 2009 under any theory of successor liability. As currently pled, any claim against Plaintiff's "lender" that relates to execution of the 2008 or 2009 Deeds of Trust is not viable as to Nationstar.

         2. The Claims Against the 2008 and 2009 Lenders Appear Untimely

         Even assuming the lenders associated with the execution of the 2008 and 2009 Deeds of Trust were properly identified and served, the claims against such lenders appear untimely. Under California law, the statute of limitations on claims for fraud or negligent misrepresentation is three years from the discovery "of the facts constituting the fraud or mistake." Cal. Code Civ. Proc. § 338(d). "The statute of limitations begins to run when the plaintiff has information which would put a reasonable person on inquiry." Kline v. Turner, 87 Cal.App.4th 1369, 1374 (2001). It is unclear exactly when Plaintiff reasonably should have become aware of the alleged fraud and misrepresentations of the 2008 and/or 2009 lenders, but based on the allegations of the complaint, the statute of limitations would have commenced in 2009 at the latest, and expired no later than the end of 2012. The claims for fraud or misrepresentation pertaining to the execution of the 2008 or 2009 Deeds of Trust are untimely.

         3. The Claims for Fraud and Misrepresentation are Not Pled with ...

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