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Dougherty v. Bank of America, N.A.

United States District Court, E.D. California

March 29, 2018

BANK OF AMERICA, N.A.; WELLS FARGO BANK, N.A., as trustee, on behalf of the holders of the HarborView Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2006-12; and SELECT POR TFOLIO SERVICING, INC., Defendants.


          Troy L. Nunley, United States District Judge

         This matter is before the Court pursuant to Defendant Bank of America's (“Defendant”) Motion to Dismiss. (ECF No. 45.) Plaintiffs Penny and Dennis Dougherty (“Plaintiffs”) oppose the Motion. (ECF No. 46.) Defendant filed a reply in support of its motion. (ECF No. 48.) For the reasons discussed below, the Court hereby DENIES in part and GRANTS in part Defendant's Motion to Dismiss (ECF No. 45).

         I. Factual Background

         Plaintiffs allege Defendant breached an agreement to modify Plaintiffs' residential mortgage. (ECF No. 41 ¶¶ 1-2.) The residence which secures the mortgage is located at 5130 Fruitvale Road, Newcastle, California 95658 (“Property”). (ECF No. 41 ¶ 2.)

         Plaintiffs allege that in November 2006 they refinanced their mortgage in the amount of $458, 000 with Aegis Wholesale Corporation. (ECF No. 41 ¶ 12.) Plaintiffs allege their mortgage was a jumbo non-conforming adjustable rate negative amortization mortgage. (ECF No. 41 ¶ 14.) Plaintiffs allege their monthly payment was $1, 775, starting in January 2007. (ECF No. 41 ¶ 14.)

         Plaintiffs allege they were first instructed to make their monthly payments to an entity known as Countrywide, and then to BAC Home Loans Servicing, LP, a subsidiary of Defendant.[1](ECF No. 41 ¶¶ 15-16.) Plaintiffs allege Defendant's agent told Plaintiffs there was no modification program available for them since they were current on their payments. (ECF No. 41 ¶ 18.) Plaintiffs allege they regularly asked Defendant about converting to a fixed rate mortgage but were told there was no program, modification, refinance, or restructure available because they were current and not in default. (ECF No. 41 ¶ 19.)

         Plaintiffs allege their monthly payment to Defendant was $1770 from September through December 2009. (ECF No. 41 ¶ 21.) Plaintiffs allege that in January 2010, their payment increased to $1880 for two months and then to $1850 for three months. (ECF No. 41 ¶ 22.) Plaintiffs allege they did not make the July 2010 payment. (ECF No. 41 ¶ 24.) Plaintiffs allege they contacted Defendant to notify Defendant of the missed payment and apply for a modification but were told no modification was available despite the missed payment. (ECF No. 41 ¶ 25.)

         Plaintiffs allege that from August 2010 through September 2011 they made monthly payments of only $1700, rather than paying the $1850 per month due. (ECF No. 41 ¶¶ 26, 28.) Plaintiffs allege that in September 2011, Defendant returned Plaintiffs' $1700 payment and informed Plaintiffs that Defendant would no longer accept payments below $1952.56 per month. (ECF No. 41 ¶ 32.) Plaintiffs allege they made monthly payments of $1952.56 in October and November 2011. (ECF No. 41 ¶ 33.)

         Plaintiffs allege Defendant invited Plaintiffs to attend an event at the Sacramento Convention Center on November 15, 2011, to apply for a modification. (ECF No. 41 ¶ 34.) Plaintiffs allege Defendant's agent told Plaintiffs they qualified for and would receive a modification which would reduce their payment to $1700 per month once Defendant received $100, 000 from the Keep Your Home California Program (KYHC) for which Plaintiffs qualified. (ECF No. 41 ¶ 35.) Plaintiffs allege they signed a pink form with the modification terms but never received a copy of that form. (ECF No. 41 ¶ 35.) Plaintiffs allege the written modification required monthly payments of just over $2000. (ECF No. 41 ¶ 35.) Plaintiffs allege Defendant's agent told Plaintiffs Defendant would send them final documents to sign. (ECF No. 41 ¶ 35.)

         Plaintiffs allege they agreed to the modification with payments over $1700 per month, “because [Defendant's] agent told [Plaintiffs] there was a program known as KYHC that would give [Defendant] $100, 000 towards a reduction of their mortgage principle, which would then result in a lower monthly payment down to about $1700 per month.” (ECF No. 41 ¶¶ 37-38.) Plaintiffs allege Defendant's agent directed Plaintiffs to a KYHC table to apply for $100, 000 from the KYHC Principle Reduction Program. (ECF No. 41 ¶ 39.) Plaintiffs allege they submitted the required forms online, the KYHC representative told Plaintiffs to expect funding of the $100, 000 to Defendant within six weeks, and Defendant's representative told Plaintiffs their first $1700 monthly payment would begin in or about January 2012. (ECF No. 41 ¶¶ 40-41.)

         Plaintiffs allege that on November 30, 2011, Defendant sent Plaintiffs a letter stating the mortgage had been sold to a new entity and Select Portfolio Servicing (“SPS”) would be the servicer. (ECF No. 41 ¶ 42.) Plaintiffs allege they were not informed that neither SPS nor the new entity would honor the KYHC principle reduction or modification. (ECF No. 41 ¶ 42.)

         Plaintiffs assert Defendant induced Plaintiffs to enter into a long, fruitless modification process and Plaintiffs incurred penalties, fees, costs, and a lower credit score. (ECF No. 41 ¶ 93.) In short, Plaintiffs assert (i) Defendant's statement Plaintiffs had to be behind on their payments to qualify for a modification was misleading and inaccurate, and (ii) Defendant failed to ensure the new entity and SPS honored the modification Defendant and Plaintiffs agreed to in November 2011, or ensure Plaintiffs would receive funds from the KYHC principle reduction program.

         II. Procedural History

         Plaintiffs filed their case in the Superior Court of Placer County, and the case was then removed to this Court. (ECF No. 1 at 1-2, ¶ 1.) Defendant moved to dismiss, but before the Court ruled Plaintiffs filed a First Amended Complaint (“FAC”). (ECF Nos. 14, 20, 26.) Defendant moved to dismiss the FAC, which the Court granted in part and denied in part. (ECF Nos. 28, 38.) Plaintiffs then filed a Second Amended Complaint (“SAC”) asserting six claims: (1) Intentional Misrepresentation; (2) Negligent Misrepresentation; (3) Breach of Contract; (4) Negligence; (5) Intentional Infliction of Emotional Distress; and (6) Violations of Business ...

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