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McKinley v. Citimortgage, Inc.

United States District Court, E.D. California

July 17, 2017

ROGER J.B. MCKINLEY JR. and CARON D. MCKINLEY, Plaintiffs,
v.
CITIMORTGAGE, INC., Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

          TROY L. NUNLEY UNITED STATES DISTRICT JUDGE

         This matter is before the Court pursuant to Defendant CitiMortgage, Inc.'s (“Defendant”) Motion to Dismiss Plaintiffs Roger J.B. McKinley, Jr. and Caron D. McKinley's (collectively “Plaintiffs”) Third Amended Complaint. (ECF No. 70.) Plaintiffs oppose this motion. (ECF No. 77.) For the reasons set forth below, the Court hereby GRANTS in part and DENIES in part Defendant's Motion to Dismiss. (ECF No. 70.)

         I. Factual Background

         The claims in this case arise out of Defendant's alleged conduct in connection with Plaintiffs' residential mortgage loan modification applications. The residence (“the Subject Property”) is located at 4546 Crown Point Drive, Diamond Springs, California 95619. (Third Am. Compl. (“TAC”), ECF No. 64 ¶ 1.)

         On or about January 20, 2006, Plaintiffs applied for and obtained a loan from Citibank (West) F.S.B. using the Subject Property as collateral. (ECF No. 64 ¶ 8.) Plaintiffs allege soon thereafter, Defendant “purported to take over the servicing rights to and became the beneficiary of the [loan].” (ECF No. 64 ¶¶ 2, 9.)

         In late 2011, Plaintiffs allege they began experiencing financial trouble and sought a loan modification from Defendant. (ECF No. 64 ¶ 11.) From late 2011 to August 2014, Plaintiffs allege they submitted numerous loan modification applications to Defendant and provided supporting documents and information when requested. (ECF No. 64 ¶¶ 13-17, 20-25.) On October 4, 2012, while Plaintiffs' request(s) for modification were under review, Plaintiffs allege Defendant recorded a Notice of Default against the Subject Property. (ECF No. 64 ¶ 14.) On March 12, 2013, Plaintiffs allege Defendant recorded a Notice of Trustee's Sale against the Subject Property. (ECF No. 64 ¶ 18.)

         On November 26, 2014, Defendant's counsel sent Plaintiffs' counsel a letter dated November 7, 2014, denying Plaintiffs a loan modification based on Plaintiffs' “Most Recent Federal Income Tax Returns' (i.e. their 2013 federal tax return).” (ECF No. 64 ¶ 26 and Ex. 8.) The letter stated Plaintiffs were not eligible for a Home Affordable Modification Program (HAMP) loan modification because Defendant was “unable to create an affordable payment equal to 31% of [Plaintiffs'] reported monthly gross income without changing the terms of [the] loan beyond the requirements of the program.” (ECF No. 64, Ex. 8 at 57.) Defendant had determined Plaintiffs' monthly income was $1. (ECF No. 64, Ex. 8 at 57.)

         On December 29, 2014, Plaintiffs allege they submitted an appeal detailing “the tax return relied on by [Defendant] in denying Plaintiffs a loan modification demonstrated that Plaintiffs earned $100, 000 annually ($8, 333 monthly) and also demonstrated that Plaintiffs had reduced their monthly expenses by $841 resulting in a net monthly surplus of $2, 641.74.” (ECF No. 64 ¶ 28 and Ex. 9.) Plaintiffs allege Defendant did not change its decision to deny Plaintiffs a loan modification in response to Plaintiffs' appeal. (ECF No. 64 ¶ 29.) Plaintiffs “allege that by failing to accurately assess Plaintiffs' monthly income and/or expenses, [Defendant] denied Plaintiffs [] a modification for which they otherwise qualified.” (ECF No. 64 ¶ 30.)

         II. Procedural History

         On April 24, 2013, Plaintiffs filed a Complaint in the Superior Court of El Dorado County against Defendant.[1] (ECF No. 64 ¶ 19.) Plaintiffs applied for and were granted a Temporary Restraining Order (“TRO”) enjoining the foreclosure of the Subject Property. (ECF No. 64 ¶ 19.) On May 28, 2013, Defendant filed a Notice of Removal to this Court, on the basis of diversity jurisdiction. (ECF No. 1.) Plaintiffs filed a Motion for Preliminary Injunction on June 19, 2013. (ECF No. 16.) The parties stipulated the TRO remain in effect pending determination of the Motion for Preliminary Injunction before this Court. (ECF No. 18.) This Court granted the Motion for Preliminary Injunction enjoining the foreclosure of the Subject Property on February 19, 2014. (ECF No. 39.)

         On June 18, 2013, Plaintiffs filed a First Amended Complaint against Defendant. (ECF No. 14.) On July 12, 2015, Plaintiffs filed a Second Amended Complaint against Defendant adding accompanying exhibits which include communications from Defendant and Defendant's counsel and Plaintiffs' appeal of Defendant's denial of a modification in November 2014. (ECF No. 54, Ex.'s 1-10.) Plaintiffs Second Amended Complaint claimed a violation of California Civil Code § 2923.6(c), a violation of California Civil Code §§ 2923.4 & 2923.6(b), and Negligence. (ECF No. 54 at 1.) Subsequently, Defendant filed a motion to dismiss Plaintiffs' Second Amended Complaint. (ECF No. 59.) On June 14, 2016 the Court dismissed all claims in Plaintiffs' Second Amended Complaint without prejudice. (ECF No. 63.) Thereafter, Plaintiffs filed the TAC against Defendant. (ECF No. 64.)

         In the TAC, Plaintiffs reallege two causes of action against Defendant: (1) Violation of California Civil Code Section 2923.6(b); and (2) Negligence. (ECF No. 64 at 1.) Plaintiffs seek injunctive relief to “compel [Defendant] to perform a good faith modification review, ” along with compensatory damages. (ECF No. 64 at 12.) On August 10, 2016, Defendant filed a Motion to Dismiss the TAC contending the Plaintiffs fail to state a claim upon which relief can be granted. (ECF No. 70.)

         III. Standard of Law

         Federal Rule of Civil Procedure 8(a) requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” On a motion to dismiss, the factual allegations of the complaint are assumed to be true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the well-pleaded allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege “‘specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief.” Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007) (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 (2009)). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (citing Twombly, 550 U.S. at 556).

         Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). Additionally, it is inappropriate to assume that the plaintiff “can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

         Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). While the plausibility requirement is not akin to a probability requirement, it demands more than “a sheer possibility that a defendant has acted unlawfully.” Id. at 678. This plausibility inquiry is “a ...


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