United States District Court, S.D. California
MARGARETTE SMITH, on behalf of herself and all others similarly situated, Plaintiff,
SPECIALIZED LOAN SERVICING, LLC, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO DISMISS [DKT. NO. 8.]
GONZALO P. CURIEL United States District Judge.
the Court is Defendant's motion to dismiss for failure to
state a claim. (Dkt. No. 8.) Plaintiff filed an opposition
and Defendant filed a reply. (Dkt. Nos. 14, 15.) Based on the
reasoning below, the Court GRANTS in part and DENIES in part
Defendant's motion to dismiss with leave to amend.
Margarette Smith (“Plaintiff” or
“Smith”) filed a purported class action complaint
against Defendant Specialized Loan Servicing, LLC
(“Defendant” or “SLS”) for alleged
violations of Regulation X of the Real Estate Settlement
Procedures Act (“RESPA”), 12 C.F.R.
§1024.41; the California Consumers Legal Remedies Act
(“CLRA”), and California Unfair Competition Law
(“UCL”), Cal. Bus. & Prof. Code 17200 et
seq. (Dkt. No. 1, Compl.)
owns the subject real property located at 2453 Blackton
Drive, San Diego, CA 92105. (Id. ¶ 69.) On
October 13, 2005, Smith obtained a residential mortgage
adjustable rate loan from IndyMac Bank, F.S.B.
(“IndyMac”) in the amount of $220, 000.
(Id. ¶ 70.)
is an eighty-eight year old woman who suffers from dementia.
(Id. ¶ 7.) A durable power of attorney was
executed in May 2005 where Smith's daughter, Lynette
Ethan-Groza, was granted the authority to manage Smith's
affairs. (Id.) In August 2016, after the death of
Lynette Ethan-Groza, Zarah Kimble, Lynette's daughter and
Smith's granddaughter, became the successor to the power
of attorney. (Id.)
December 2013 until February 2014, Plaintiff did not pay her
mortgage payments due to a family emergency. (Id.
¶ 71.) When the family crisis had passed, Smith sought a
repayment plan that would allow her to prepay the amounts
past-due. (Id.) In a letter dated February 11, 2014,
IndyMac confirmed the details of a six-month repayment plan
which called for six monthly payments of $826.88.
(Id. ¶ 72.) Despite the confirmation of a
repayment plan, IndyMac sent letters to Smith dated February
18, March 5, April 4, and April 15, 2014 informing Plaintiff
that her loan was in default and invited her to explore
repayment and loan modification options. (Id. ¶
73.) After calling and emailing IndyMac concerning her
repayment plan, around April 23, 2014, Smith submitted a
formal Request for Mortgage Assistance (“RMA”),
her first loss mitigation application pursuant to 12 C.F.R.
§ 1024.41. (Id. ¶ 74.) Instead of
responding to the RMA, in a letter dated May 3, 2014, IndyMac
stated Smith's loan was in serious default and threatened
foreclosure. (Id. ¶ 75.) Two days later,
IndyMac sent another letter inviting her to explore a
repayment plan or a loan modification. (Id.) Then in
a letter dated May 16, 2014, IndyMac informed Smith that her
loan was being transferred to SLS effective June 1, 2014.
(Id. ¶ 76.)
first correspondence from SLS was around June 12, 2014 when
SLS informed Smith of her delinquency and encouraged her to
apply for loss mitigation programs offered by SLS to prevent
foreclosure; there was no mention of IndyMac's repayment
plan or the loan modification application she submitted to
IndyMac. (Id. ¶ 78.)
First Loss Mitigation Application with SLS
response to SLS's letter, Smith resubmitted her loss
mitigation application around July 1, 2014 with a letter
specifically asking whether SLS would let her know if any
additional documentation was required. (Id. ¶
79.) In violation of RESPA, SLS did not inform Smith in
writing within 5 days after receiving her loss mitigation
application that it received the application and whether the
application was complete or incomplete. (Id. ¶
82.) Instead, SLS sent two letters dated August 19, 2014. The
first letter acknowledged receipt of her application without
informing her whether the application was complete or
incomplete. (Id. ¶ 83.) The letter also stated
that SLS was in the process of reviewing the application and
may contact her if the application is determined to be
incomplete. (Id.) The second letter indicated two
documents were missing from Smith's
application. (Id. ¶ 84.) Then around
September 23, 2017, SLS informed Smith that she had not been
evaluated for a loan modification or repayment program
because she failed to provide the required documents but the
letter did not identify which documents were missing or when
SLS had requested them, if ever. (Id. ¶ 87.)
November 7, 2014, SLS sent Smith a letter encouraging her to
apply for loss mitigation options similar to the initial June
12, 2014 letter. (Id. ¶ 88.) Around December
11, 2014, SLS sent Smith another letter informing her that
her mortgage was in serious default, threatening foreclosure,
and invited her to contact SLS to discuss repayment plans.
(Id. ¶ 89.)
Second Loss Mitigation Application with SLS
December 16, 2014, Plaintiff submitted another loan
modification application. (Id. ¶ 90.) Around
December 15, 2014 and again on December 22, 2014, SLS sent
letters identical to the letter of August 19, 2014 in which
SLS stated that her application was under review without
specifying whether the application was complete or not.
(Id. ¶ 91.) Around December 22, 2014, SLS sent
a second letter that SLS had received a letter from Smith
about her loan and it would submit a response within 30
business days. (Id. ¶ 92.) On December 30,
2014, SLS informed Smith that her application was missing two
documents. (Id. ¶ 94.) The next day,
Smith faxed the missing documents to SLS on December 31,
2014. (Id.) On or about January 19, 2015, SLS sent a
letter denying her application because she failed to provide
the requested documents. (Id. ¶ 102.) From
December 31, 2014 when Plaintiff faxed SLS the missing
documents and while her application was under review, until
the denial of her application on January 19, 2015, Plaintiff
received five contradictory and conflicting letters regarding
the status of her loan. (Id. ¶¶ 95-101.)
For example, on January 5, 2015, SLS informed Smith that her
account was past due and encouraged her to contact SLS to
discuss possible loss mitigation options. (Id.
¶ 95.) The next day, SLS sent Smith a letter informing
her that her application was under review. (Id.
¶ 96.) But then on January 7, 2015, SLS sent Smith a
“Notice of Default and Notice of Intent to
Foreclose” which stated that she had 33 days to pay all
past due amounts. (Id. ¶ 97.) Additional
letters were sent with conflicting information on January 14,
2015 and January 15, 2015. (Id. ¶¶
to the denial of the December 16, 2014 application on January
19, 2015, and prior to her next loss mitigation application
submission on May 14, 2015, Plaintiff received conflicting
letters similar to the ones described above. (Id.
Third Loss Mitigation Application with SLS
14, 2015, Smith faxed a new, complete RMA and supporting
materials to SLS. (Id. ¶ 111.) In a letter
dated June 12, 2015, SLS informed Smith that it needed a
couple of documents. (Id. ¶ 115.) Plaintiff
faxed the additional responsive information around June 26,
2015. (Id.) Then, on July 1, 2015, SLS informed
Smith, for the first time, that it required a Dodd Frank
Certification concerning financial contributors.
(Id. ¶ 118.) In a letter dated July 21, 2015,
SLS indicated it had not evaluated her account for any loss
mitigation options because she failed to provide all
necessary documentation. (Id. ¶ 120.) Then in a
letter dated September 14, and 21, 2015, SLS identified five
documents that were supposedly missing from her application.
(Id. ¶ 124.) A letter from SLS dated November
11, 2015 informed Smith that it evaluated her request for
loan assistance and it was denied because of undisclosed
requirements by the investor and the net present value
calculation. (Id. ¶ 134.) Again, from May 14,
2015, when Plaintiff submitted her application until November
11, 2015, when SLS denied her application, Plaintiff received
a deluge of conflicting letters from SLS informing her that
her application was under review, informing her that she was
in default and SLS intended to foreclose, and informing her
that her mortgage was in serious default and inviting her to
discuss alternative payment plans. (Id. ¶¶
112, 113, 116-117, 119, 121, 122, 123, 125, 126, 127, 132.)
Fourth Loss Mitigation Application with SLS
November 19, 2015 Smith contacted SLS to pursue a secondary
review but in a letter dated December 2, 2015, SLS told Smith
that it conducted a further review and found her denial of
her request for mortgage assistance was proper. (Id.
¶ 142.) The letter explained that SLS did not consider
the contributor income because the contributor, Smith's
granddaughter, [Zarah Kimble] did not reside at the property
and invited Smith to submit a new RMA for consideration.
(Id.) Plaintiff immediately filed a new RMA.
(Id.) In a letter dated December 22, 2015, SLS
informed Smith she needed Kimble's paystubs.
(Id. ¶ 143.) On January 20, 2016, Smith faxed
SLS Kimble's paystubs. (Id. ¶ 145.) In a
letter dated February 1, 2016, SLS requested the paystubs
early March 2016, Smith received a property valuation report
which was conducted as part her request for mortgage
assistance. (Id. ¶ 146.) Two weeks after
receiving the property valuation report, around March 17,
2016, Smith received a letter informing her that her loan was
in serious default and was referred to foreclosure.
(Id. ¶ 148.) In letters dated May 15 and 17,
2016, SLS told Smith that her application was under review
and referred her to the RMA form for a list of required
documents without stating which documents were missing.
(Id. ¶149.) A May 18, 2016 letter indicated she
failed to provide proof of her social security income, when
in fact she had previously submitted that document.
(Id. ¶ 150.) The May 18th letter asked that the
document be provided by June 17, 2016. (Id.) A
letter dated May 25, 2016 informed Smith that her account had
been referred to foreclosure, and stated that it was unable
to review the account to determine the appropriate program
until receipt of a complete “financial information
package, with all supporting documentation.”
(Id. ¶ 151.) The letter also provided a
breakdown of assessed fees to Smith's account to include
$4, 909.63 in foreclosure fees/costs; $249.70 in property
inspections; $25.00 for payoff statement and $11.00 on
corporate advances for a total of $5, 195.33. (Id.
¶ 152.) A June 3, 2016 letter again requested proof of
Plaintiff's social security income by June 17, 2016.
(Id. ¶ 153.) On June 17, 2016, SLS sent her
another letter stating that her application is in the process
of being reviewed. (Id.) In a latter dated August
18, 2016, SLS stated it conducted a review of Smith's
loan modification request but did not evaluate her
eligibility because she did not provide the required
documents. (Id. ¶ 157.) According to Plaintiff,
SLS's letters from May - August 2016 indicate that it was
dual tracking her loan in violation of RESPA.
(Id. ¶ 158.)
filed the instant complaint on October 7, 2016. (Dkt. No. 1.)
Defendant filed a motion to dismiss all causes of action
alleged against it. (Dkt. No. 8.) Plaintiff filed an
opposition to the RESPA and UCL claims. However, Plaintiff
does not oppose Defendant's motion concerning the CLRA
claim and withdraws her CLRA claim. (Dkt. No. 14 at 30 n.
10.) Accordingly, the Court GRANTS Defendant's unopposed
motion to dismiss the CLRA claim.
Legal Standard on Federal Rule of Civil Procedure
Rule of Civil Procedure (“Rule”) 12(b)(6) permits
dismissal for “failure to state a claim upon which
relief can be granted.” Fed.R.Civ.P. 12(b)(6).
Dismissal under Rule 12(b)(6) is appropriate where the
complaint lacks a cognizable legal theory or sufficient facts
to support a cognizable legal theory. See Balistreri v.
Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir.
1990). Under Rule 8(a)(2), the plaintiff is required only to
set forth a “short and plain statement of the claim
showing that the pleader is entitled to relief, ” and
“give the defendant fair notice of what the . . . claim
is and the grounds upon which it rests.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
complaint may survive a motion to dismiss only if, taking all
well-pleaded factual allegations as true, it contains enough
facts to “state a claim to relief that is plausible on
its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570).
“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.” Id. “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. “In sum, for 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.” Moss v. U.S. Secret Serv., 572 F.3d
962, 969 (9th Cir. 2009) (quotations omitted). In reviewing a
Rule 12(b)(6) motion, the Court accepts as true all facts
alleged in the complaint, and draws all reasonable inferences
in favor of the plaintiff. al-Kidd v. Ashcroft, 580
F.3d 949, 956 (9th Cir. 2009). The court evaluates lack of
statutory standing under the Rule 12(b)(6) standard. Maya
v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir.
motion to dismiss is granted, “leave to amend should be
granted ‘unless the court determines that the
allegation of other facts consistent with the challenged
pleading could not possibly cure the deficiency.'”
DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655,
658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v.
Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.
1986)). In other words, where leave to amend would be futile,
the Court may deny leave to amend. See Desoto, 957
F.2d at 658; Schreiber, 806 F.2d at 1401.
Requests for Judicial Notice
and Plaintiff filed requests for judicial notice. (Dkt. Nos.
10, 14-1.) As a general rule, “a district court may not
consider any material beyond the pleadings in ruling on a
Rule 12(b)(6) motion.” Lee v. City of Los
Angeles, 250 F.3d 668, 688 (9th Cir. 2001). However, a
district court may consider “material which is properly
submitted as part of the complaint” or if the documents
are not attached to the complaint, they may be considered if
the documents' “authenticity . . . is not
contested” and “the plaintiff's complaint
necessarily relies” on them. Id. (citations
omitted). In addition, a court may take judicial notice of
“matters of public record” under Rule 201.
Id. at 688-89.
both parties seek judicial notice of the Deed of Trust
recorded on October 20, 2005. Plaintiff also seeks judicial
notice of SLS's May 25, 2016 letter to Ms. Ethan-Groza,
which is incorporated by reference in the complaint. Because
neither party has filed an opposition to either party's
request for judicial notice, and the Court finds it
appropriate to take judicial notice of the deed of trust, a
publically recorded document, and the May 25, 2017 letter
which is ...