Walker v. Bayview Loan Servicing, LLC

• Court: District Court, N.D. California
• Decided: June 11, 2020
• Docket: 3:20-cv-02944
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division 11 LESLIE EDWARD WALKER, and ELAHE Case No. 20-cv-02944-LB S. WALKER, 12 Plaintiffs, ORDER GRANTING BAYVIEW’S 13 MOTION TO DISMISS v. 14 Re: ECF No. 9 BAYVIEW LOAN SERVICING, LLC, and 15 BANK OF AMERICA, N.A., 16 Defendants.

17 INTRODUCTION 18 This dispute concerns the modification of a residential-mortgage loan. In 2017, Ditech 19 Financial, LLC approved a trial plan that required the plaintiffs Leslie and Elahe Walker to make 20 three monthly payments, and then the loan modification would be permanent. The plaintiffs made 21 the three payments and all monthly payments thereafter and now (apparently) challenge the 22 alleged failure of the successor servicers — defendants Bayview Loan Servicing, LLC and Bank 23 of America, N.A. — to permanently modify the loan. They assert claims for breach of contract, 24 breach of the implied covenant of good faith and fair dealing, negligence, intentional infliction of 25 emotional distress, and violations of California’s Unfair Competition Law (“UCL”), California 26 27 1 Business and Professions Code § 17200.1 Bayview moved to dismiss the complaint on the grounds 2 that (1) the plaintiffs did not plausibly plead damages for their claims of breach of contract and the 3 implied covenant of good faith and fair dealing, (2) the plaintiffs did not plausibly plead breach of 4 a duty or negligence per se, (3) the plaintiffs did not allege the outrageous and extreme conduct 5 that is intentional infliction of emotional distress, and (5) the plaintiffs lack standing and do not 6 plausibly plead a UCL claim under any prong.2 7 The court grants the motion. 8 STATEMENT 9 1. Background 10 The plaintiffs own property in Danville, California, that is subject to a mortgage.3 In February 11 2016, the plaintiffs sent their loan servicer, Residential Credit Solutions, Inc., a loan-modification 12 application.4 Residential Credit recorded a notice of default that month, initiating the nonjudicial 13 foreclosure process.5 Then, Ditech Financial, LLC began servicing the loan and allegedly dual- 14 tracked the loan, in violation of HBOR, by simultaneously reviewing the loan-modification 15 application and pursuing the foreclosure, and the plaintiffs sued Ditech.6 The parties dismissed 16 that lawsuit pursuant to a loan-modification agreement where the plaintiffs would make three 17 monthly payments starting in May 2017 and then the plaintiffs’ mortgage would be “permanently 18 modified.”7 The plaintiffs made the payments but did not receive the loan modification.8 As of 19 September 1, 2017, Bayview began servicing the loan.9 The plaintiffs filed another lawsuit in state 20

21 1 Compl. – ECF No. 1. Citations refer to material in the Electronic Case File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the top of documents. 22 2 Mot. – ECF No. 9 at 9–15. 23 3 Compl. – ECF No. 1 at 10 (¶ 1), 11 (¶ 10). 24 4 Id. at 11 (¶ 10). 5 Id. 25 6 Id. at 11–12 (¶¶ 13–16); Walker v. Ditech Financial, LLC., Case No. 4: 16-cv-03084-KAW. 26 7 Compl. – ECF No. 1 at 12 (¶ 17). 27 8 Id. (¶ 18). 9 Id. (¶ 19). 1 court against Ditech and Bayview about their disputes.10 Ultimately, the plaintiffs dismissed 2 Ditech and entered into a settlement agreement with Bayview for a permanent loan modification 3 (effective as of August 1, 2017) whereby the loan balance was increased from $637,579.97 to 4 $856,211.12, the plaintiffs’ monthly payments were $3,397.57 (beginning in December 2018), and 5 Bayview “deferred and waived the accrual of interest on $58,186.00 of that amount [presumably 6 the $856,211.12] until December 1, 2025.”11 Bayview said at the hearing that the loan- 7 modification and settlement agreements have fee provisions. 8 In January 2019, the plaintiffs “made the first (of many) requests” to Bayview for monthly 9 loan statements (pursuant to 12 C.F.R. § 1026.41).12 In May 2019, the plaintiffs received a 10 statement (for the first time) stating that $56,911.65 was due by June 1, 2019.13 11 On May 7, 2019, the plaintiffs called Bayview and spoke to a customer-service representative, 12 who said that the next payment was $56,911.65 and that property-inspection and legal fees had 13 been added to the loan balance.14 A supervisor named Latoya confirmed this information, and 14 when the plaintiffs asked why the amount was $56,911.65 instead of the agreed-to monthly 15 payment, she suggested that the plaintiffs obtain legal representation.15 16 On May 20, 2019, the plaintiffs sent Bayview a Qualified Written Request, pursuant to 12 17 U.S.C. § 2605, the Real Estate Settlement Procedures Act (“RESPA”).16 RESPA requires loan 18 servicers to respond to Qualified Written Requests within 30 days.17 Bayview responded on June 19 14, 2019, and said that the amount was correct.18 The plaintiffs hired a lawyer and sent a second 20 21 10 Id. at 14 (¶ 30); Walker v. Ditech Financial, LLC, No. MSC17-02165. 22 11 Compl. – ECF No. 1 at 14 (¶¶ 32–36). 23 12 Id. (¶ 37). 24 13 Id. at 15 (¶¶ 38–39). 14 Id. (¶¶ 40–41). 25 15 Id. (¶¶ 42– 43). 26 16 Id. (¶ 44). 27 17 Id. at 15–16 (¶ 45–46). 18 Id. at 16 (¶ 47). 1 Qualified Written Request on September 9, 2019, notifying Bayview about the settlement terms 2 and asserting that they needed to be included in the terms of the loan modification.19 Bayview 3 confirmed receipt of the plaintiffs’ second Qualified Written Request on September 17, 2019.20 4 In November 2019, the plaintiffs “were informed” that Bank of America would be the loan 5 servicer.21 The plaintiffs’ first monthly statement from Bank of America stated that they owed 6 $53,504 plus the actual monthly payment.22 7 8 2. Procedural History 9 The plaintiffs filed the lawsuit in the Superior Court for Contra Costa County on January 23, 10 2020.23 Invoking the court’s diversity jurisdiction, Bayview removed the case to federal court and 11 then moved to dismiss the complaint.24 All parties have consented to the undersigned’s 12 jurisdiction.25 The court held a hearing on June 11, 2020.26 13 14 STANDARD OF REVIEW 15 A complaint must contain a “short and plain statement of the claim showing that the pleader is 16 17 19 Id. (¶¶ 48–51). 20 Id. (¶ 52). 18 21 Id. (¶ 53). 19 22 Id. (¶ 54). 20 23 Id. at 1 (¶ 1). 24 Id.; Mot. – ECF No. 9. Bayview also invokes the court’s federal-question jurisdiction on the ground 21 that the negligence claims are based on California Evidence Code § 669(a), which in turn is predicated on RESPA. But the cases that it cites do not support that conclusion. All involved violations of federal 22 statutes. Fristoe v. Reynolds Metals Co., 615 F.2d 1209, 1212 (9th Cir. 1980) (Labor Management Relations Act § 301); Taylor v. Nelson, No. Civ. A. 02-6558, 2006 WL 266052, at *2 (E.D. Pa. Jan. 23 31, 2006) (RESPA and other federal statutes and regulations); Sicinski v. Reliance Funding Corp., 461 F. Supp. 649, 650–52 (S.D.N.Y. 1978) (RESPA and TILA). Because the court has diversity 24 jurisdiction (the parties are diverse, and it is undisputed that the amount-in-controversy requirement is met by the damages and attorney’s fees), the court does not reach the federal-question issue. J. 25 Marymount, Inc. v. Bayer Healthcare, LLC, No. C 09-03110-JSW, 2009 WL 4150126, at *2 (N.D. Cal. Nov. 30, 2009) (amount in controversy includes fees if recoverable by statute or contract and 26 punitive damages if recoverable as a matter of law). Bank of America filed a joinder on May 8, 2020. Joinder – ECF No. 12. 27 25 Consent Forms – ECF Nos. 10, 15, & 16. 1 entitled to relief” to give the defendant “fair notice” of what the claims are and the grounds upon 2 which they rest. See Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 3 A complaint does not need detailed factual allegations, but “a plaintiff’s obligation to provide the 4 ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic 5 recitation of the elements of a cause of action will not do. Factual allegations must be enough to 6 raise a claim for relief above the speculative level[.]” Twombly, 550 U.S. at 555 (internal citations 7 omitted). 8 To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain sufficient 9 factual allegations, which when accepted as true, “‘state a claim to relief that is plausible on its 10 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim 11 has facial plausibility when the plaintiff pleads factual content that allows the court to draw the 12 reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility 13 standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that 14 a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 557). “Where a complaint 15 pleads facts that are merely consistent with a defendant’s liability, it stops short of the line 16 between possibility and plausibility of ‘entitlement to relief.’” Id. (internal quotation marks 17 omitted) (quoting Twombly, 550 U.S. at 557). 18 If a court dismisses a complaint, it should give leave to amend unless the “pleading could not 19 possibly be cured by the allegation of other facts.” Yagman v. Garcetti, 852 F.3d 859, 863 (9th 20 Cir. 2017) (citations and internal quotation marks omitted). 21 22 ANALYSIS 23 The plaintiffs claim (1) breach of contract, for violating the settlement agreement, (2) breach 24 of the covenant of good faith and fair dealing, on the same ground, (3) negligence and negligence 25 per se for violating duties of care owed under 12 C.F.R. §§ 1026.41 et seq., and 12 U.S.C. §§ 2605 26 et seq., (4) intentional infliction of emotional distress, and (5) a violation of the UCL, for creating 27 1 the allegedly false statements about the loans.27 Bayview moved to dismiss the complaint on the 2 grounds that (1) the plaintiffs did not plausibly plead damages for their claims of breach of 3 contract and the implied covenant of good faith and fair dealing, (2) the plaintiffs did not plausibly 4 plead breach of a duty or negligence per se, (3) the plaintiffs did not allege the outrageous and 5 extreme conduct that is intentional infliction of emotional distress, and (5) the plaintiffs lack 6 standing and do not plausibly plead a UCL claim under any prong.28 7 The court grants the motion. 8 9 1. Breach of Contract 10 Bayview move to dismiss claim one for breach of contract on the ground that the plaintiffs did 11 not allege damages.29 The court grants the motion. 12 To state a claim for breach of contract, a plaintiff must show the following: (1) a contract 13 existed; (2) the plaintiff performed his duties or was excused from performing his duties under the 14 contract; (3) the defendant breached the contract; and (4) the plaintiff suffered damages as a result 15 of that breach. See First Commercial Mortgage Co. v. Reece, 89 Cal. App. 4th 731, 745 (2001). 16 The plaintiffs allege that Bayview breached their settlement agreement by failing to implement 17 the permanent loan modification, “defer and waive” interest, and limit the plaintiffs’ monthly 18 payment to $3,394.57.30 The bank added property-inspection and legal fees to the loan balance.31 19 The plaintiffs also obtained legal representation and “have incurred and will incur costs and 20 reasonable attorneys’ fees.”32 The court is not certain that this is the theory of damages. If it is, 21 bank fees and attorney’s fees may be enough. See Rockridge Trust v. Wells Fargo NA, No. 13–cv– 22 01457–JCS, 2014 WL 688124, at *12 (N.D. Cal. Feb. 19, 2014); Peterson v. Wells Fargo Bank, 23 24 27 Compl. – ECF No. 1 at 17–22 (¶¶ 56–87); Mot. – ECF No. 9. 28 Mot. – ECF No. 9 at 9–15. 25 29 Id. at 9–10. 26 30 Compl. – ECF No. 1 at 14 (¶¶ 34–36). 27 31 Id. (¶¶ 40–41). 32 Id. at 15 (¶ 43), 16 (¶ 48), 17 (¶ 61). 1 N.A., No. 13–03392, 2014 WL 3418870, at *5 (N.D. Cal. July 11, 2014). The plaintiffs are 2 (perhaps purposefully) vague about damages: “Plaintiffs have suffered, and will continue to suffer 3 damages, the exact amount of which have not fully been ascertained . . . [and include] incidental 4 and consequential damages[, and they] have further been forced to retain a law firm and have 5 incurred” costs and attorney’s fees.33 6 The allegations about damages are vague and grounded only in the fact allegation that the 7 plaintiffs received loan statements that had the wrong amount due. The loan statements here 8 apparently were corrected.34 The plaintiffs specify no other facts, such as whether they paid 9 anything more than their settlement agreement and loan modification required. There were no 10 foreclosure proceedings. By alleging only a loan statement with the wrong amount due, the 11 plaintiffs do not plausibly plead damages, and the court grants the motion to dismiss the contract 12 claim. 13 14 2. Breach of the Implied Covenant of Good Faith and Fair Dealing 15 Because the court dismisses the breach-of-contract claim, it dismisses this claim too. 16 17 3. Negligence and Negligence Per Se Claims 18 Lenders generally do not owe borrowers a duty of care unless their involvement in a 19 transaction goes beyond their “conventional role as a mere lender of money.” See, e.g., Nymark v. 20 Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089, 1095–96 (1991). Still, “Nymark does not 21 support the sweeping conclusion that a lender never owes a duty of care to a borrower.” Alvarez v. 22 BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 941, 945 (2014). A duty may arise even 23 where the lender remains within its “conventional role” of merely loaning money. Id. For 24 example, in Alvarez, the court held that in light of HBOR, once a mortgagee undertakes to 25 26

27 33 Id. at 17 (¶ 61). 1 consider a loan-modification request, it owes the borrower a duty to use reasonable care in 2 handling that request. Id. at 945–52. 3 The problem here — again — is that the plaintiffs allege only that they received a statement 4 that showed a loan payment inconsistent with their loan-modification agreement as imbedded in 5 their settlement agreement. The other allegations are conclusions, not facts. The plaintiffs do not 6 plausibly allege breach of any duty and thus do not plausibly plead negligence. 7 For the claim of negligence per se, the failure of a person to exercise due care is presumed if 8 (1) he violates a statute, ordinance, or regulation of a public entity, (2) the violation proximately 9 cause death or injury to a person or property, (3) the death or injury resulted from an occurrence 10 that the statute, ordinance, or regulation was designed to prevent, and (4) the person suffering the 11 death or injury was in the class of person that the statute, ordinance, or regulation was designed to 12 protect. Cal. Evid. Code § 669(a); Capalungo v. Bondi, 179 Cal. App. 346, 349 (1986). The 13 plaintiffs do not plausibly plead a RESPA or other violation (and thus do not plead any predicate 14 statutory violation) and plead only that Bayview did not respond to a Qualified Written Request. 15 Even if that were a statutory claim, the plaintiffs did not plead damages. 16 The court dismisses the claim. 17 18 4. Intentional Infliction of Emotional Distress 19 Bayview moves to dismiss the claim for intentional infliction of emotion distress on the 20 ground that the plaintiffs did not plead extreme or outrageous conduct.35 The court grants the 21 motion. 22 In California, the elements of a cause of action for intentional infliction of emotional distress 23 are as follows: (1) “extreme and outrageous conduct by the defendant with the intention of 24 causing, or reckless disregard of the probability of causing, emotional distress;” (2) the plaintiff 25 suffered severe or extreme emotional distress; and (3) “actual and proximate causation of the 26 emotional distress by the defendant’s outrageous conduct.” Kelley v. Conco Cos., 196 Cal. App. 27 1 4th 191, 215 (2011). “A defendant’s conduct is outrageous when it is so extreme as to exceed all 2 || bounds of that usually tolerated in a civilized community.” /d. (internal quotation marks omitted). 3 The plaintiff alleges only that Bayview sent incorrect loan statements. The other allegations 4 are conclusory. This is not extreme or outrageous conduct. Cf. Erlich v. Menezes, 21 Cal. 4th 543, 5 554 (1999) (“[A] preexisting contractual relationship, without more, will not support a recovery 6 for mental suffering where the defendant’s tortious conduct has resulted only in economic injury 7 to the plaintiff.’’). 8 The court dismisses the claim. 9 10 || 5. UCL Claims 11 The plaintiffs did not allege damages plausibly and thus do not have standing for any UCL 12 claim. Cal. Bus. & Prof. Code § 17204; Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. App. 5 13 4th 497, 523 (2013). There are no predicate unlawful acts. There are no allegations about fraud, let 14 alone particular allegations about the circumstances constituting fraud or mistake. Fed. R. Civ. P.

2 15 |] 9b). B 16 The court dismisses the claim.

Z 18 CONCLUSION 19 The court grants the motion to dismiss. The plaintiffs may file an amended complaint by June 20 || 25, 2020. If they do, they must file as an attachment a blackline of their amended complaint 21 against the original complaint. 22 This disposes of ECF No. 9. 23 IT ISSO ORDERED. 24 Dated: June 11, 2020 LAS 25 LAUREL BEELER 26 United States Magistrate Judge 27 28