Carpenter v. Bank of America, N.A. et al, No. 3:2012cv00973 - Document 11 (S.D. Cal. 2013)
Court Description: ORDER granting defendant's 6 Motion to Dismiss, with leave to amend. Within two weeks of the date this order is entered, Carpenter may file a first amended complaint that re-alleges all of the claims except for the elder abuse claim. Signed by Judge Larry Alan Burns on 12/28/12. (kaj)
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Carpenter v. Bank of America, N.A. et al Doc. 11 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 JAMES CARPENTER, CASE NO. 12cv0973-LAB (BLM) Plaintiff, 12 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS, WITH LEAVE TO AMEND vs. 13 14 BANK OF AMERICA, N.A., et al., 15 Defendant. 16 17 I. 18 19 20 21 22 Carpenter previously owned two properties in the San Diego area—one on West Bernardo Drive in San Diego proper (the “West Bernardo Property”) and another on Valencia Avenue in Carlsbad (the “Valencia Property”). This case involves BOA’s refusal to modify his loans on the properties, and their subsequent sale in foreclosure. BOA was not the original lender; it just serviced both of the loans. 23 24 25 26 27 28 Introduction It is really the West Bernardo loan that’s at issue here. When Carpenter initially requested the loan modifications, the request with respect to the Valencia Property was quickly denied. But Carpenter alleges that he spent a considerable amount of time, money, and energy working with a BOA agent to modify the loan on the West Bernardo Property, and that he was led to believe, falsely, the loan modification would go through. // -1- 12cv0973 Dockets.Justia.com 1 Specifically, Carpenter attended a loan modification event sponsored by BOA in 2 August 2011 and spoke with a BOA representative who stated, in Carpenter’s words, “that 3 he could see no problem and that the numbers looked good.” After this, in about November 4 2011, he was put in touch with a person named Joe Brown, who insisted that they start from 5 scratch and resubmit all of Carpenter’s paperwork. In the midst of this, however, BOA 6 apparently decided not to modify Carpenter’s West Bernardo loan, and it recorded a Notice 7 of Default and initiated foreclosure proceedings. Brown told Carpenter on February 3, 2012 8 that he had requested a postponement of a February 6 foreclosure sale, but the sale went 9 forward. 10 And later, around February 7, Brown told Carpenter he requested that the foreclosure sale be rescinded, but again, this was denied. 11 Carpenter brings five claims: (1) negligence; (2) promissory estoppel; (3) negligent 12 misrepresentation; (4) elder abuse; and (5) unfair and deceptive acts and practices. 13 Carpenter’s essential grievance is that he was misled by BOA about the possibility of a loan 14 modification—as well as the subsequent possibility of a foreclosure postponement and 15 rescission—and that as a result he wasted time, money, and energy and was not able to 16 pursue other options to save his properties. 17 II. Legal Standards 18 A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency 19 of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering such a 20 motion, the Court accepts all allegations of material fact as true and construes them in the 21 light most favorable to the non-moving party. Cedars-Sinai Med. Ctr. v. Nat’l League of 22 Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007). To defeat a 12(b)(6) motion, a 23 complaint’s factual allegations needn’t be detailed; they must simply be sufficient to “raise 24 a right to relief above the speculative level . . . .” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 25 555 (2007). However, “some threshold of plausibility must be crossed at the outset” before 26 a case can go forward. Id. at 558 (internal quotations omitted). A claim has “facial 27 plausibility when the plaintiff pleads factual content that allows the court to draw the 28 reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. -2- 12cv0973 1 Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a ‘probability 2 requirement,’ but it asks for more than a sheer possibility that a defendant has acted 3 unlawfully.” Id. 4 While the Court must draw all reasonable inferences in Carpenter’s favor, it need not 5 “necessarily assume the truth of legal conclusions merely because they are cast in the form 6 of factual allegations.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 7 2003) (internal quotations omitted). In fact, the Court does not need to accept any legal 8 conclusions as true. Iqbal, 556 U.S. at 678. A complaint does not suffice “if it tenders naked 9 assertions devoid of further factual enhancement.” Id. (internal quotations omitted). Nor 10 does it suffice if it contains a merely formulaic recitation of the elements of a cause of action. 11 Bell Atl. Corp., 550 U.S. at 555. 12 Leave to amend must “be freely given when justice so requires.” Fed. R. Civ. P. 13 15(a). This policy is applied with “extraordinary liberality.” See Morongo Band of Mission 14 Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990). “Their exists a presumption under Rule 15 15(a) in favor of granting leave to amend.” See Eminence Capital, LLC v. Aspeon, Inc., 316 16 F.3d 1048, 1052 (9th Cir. 2003). 17 III. Discussion 18 The Court will address each of Carpenter’s causes of action in sequence. 19 A. 20 A negligence claim has to start with a duty of care. United States Liability Ins. Co. v. 21 Haidinger-Hayes, Inc., 1 Cal.3d 586, 594 (1970). “[A]s a general rule, a financial institution 22 owes no duty of care to a borrower when the institutions involvement in the loan transaction 23 does not exceed the scope of its conventional role as a mere lender of money.” Nymark v. 24 Heart Fed. Savings & Loan Ass’n, 231 Cal.App.3d 1089, 1096 (Cal. Ct. App. 1991). This 25 rule has been applied to loan servicers. See Shepherd v. American Home Mortg. Servs., 26 Inc., 2009 WL 4505925 at *2 (E.D. Ca. Nov. 20, 2009) (“In fact loan servicers do not owe a 27 duty to the borrowers of the loans they service.”); Mulato v. WMC Mortg. Corp., 2009 WL 28 3561536 at *3 (N.D. Cal. Oct. 27, 2009). Negligence -3- 12cv0973 1 Carpenter relies on this Court’s recent decision in Johnson v. HSBC Bank USA, N.A. 2 to argue that BOA did owe him a duty of care because it “has gone beyond the typical 3 lender’s role.” 2012 WL 928433 at *4 (S.D. Cal. Mar. 19, 2012). Johnson is distinguishable 4 from this case. The bank plausibly went beyond the typical lender’s role in that case 5 because, on the facts alleged, it actually established a loan modification plan, charged 6 excessive interest, filed derogatory reports with credit bureaus, and didn’t even have the 7 legal authority to demand payments. The Court would also distinguish Garcia v. Ocwen 8 Loan Servicing, LLC, 2010 WL 1881098 (N.D. Cal. 2010), from this case. In Garcia, the 9 court concluded that a loan servicer arguably owed a duty of care to a loan modification 10 applicant, and it reached this conclusion by considering the familiar five-factor test for 11 determining whether a financial institution owes a duty of care to a borrower-client 12 announced in Nymark. But in context, the duty of care identified in Garcia was really a duty 13 to properly route loan modification paperwork. Id. at *2–3. It was not a duty to give the 14 distressed homeowner the answer he wants with respect to a loan modification. 15 Even if the Court is wrong here, and BOA exceeded the typical lender’s role merely 16 by hosting a loan modification event that Carpenter attended—thereby assuming a duty of 17 care—the Court would still find that Carpenter has failed to state a claim. This is because 18 Carpenter’s factual allegations fall short of establishing that BOA actually breached its duty. 19 All Carpenter alleges, really, is that a BOA agent told him a loan modification looked 20 possible, and that after he submitted the formal paperwork his application was denied. He 21 alleges no facts from which it can be inferred that his application was mishandled, or that he 22 was affirmatively misled, or that the decision not to modify his loan was so unreasonable as 23 to be negligent. 24 disagreement with a loan modification decision into a negligence claim. He claims in his 25 Complaint that “[h]ad Defendant exercised ordinary care and skill, it would not have denied 26 Plaintiff’s modification request as Plaintiff had sufficient income to qualify for and pay on a 27 loan modification.” (Compl. ¶ 38.) That’s a kind of policy disagreement with BOA; it doesn’t 28 support the allegation that BOA breached a duty of care it owed to him. Indeed, what Carpenter really wants to do here is transform his -4- 12cv0973 1 BOA’s motion to dismiss Carpenter’s negligence claim is GRANTED WITH LEAVE 2 TO AMEND. Carpenter has alleged insufficient facts to suggest BOA owed him a duty of 3 care, and even looking beyond that he has alleged virtually no facts to suggest that BOA 4 breached any duty of care it did owe him. 5 B. 6 The elements of a promissory estoppel claim are “(1) a promise clear and 7 unambiguous in its terms; (2) reliance by the party to whom the party is made; (3) [the] 8 reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel 9 must be injured by his reliance.” Advanced Choices, Inc. v. State Dep’t of Health Servs., 182 10 Promissory Estoppel Cal.App.4th 1661, 1672 (Cal. Ct. App. 2010). 11 Carpenter manifestly fails to allege facts sufficient to satisfy the first prong—that clear 12 and unambiguous promises were made to him respecting the modification of his loan. All 13 he alleges is that, on a preliminary screening of his loan, a BOA representative said he could 14 see no problem with a modification, and that subsequently another BOA representative, Joe 15 Brown, said he would request that the foreclosure sale be postponed and, after that, 16 rescinded. In no way does Carpenter allege that he was promised a loan modification, or 17 a postponed or rescinded foreclosure sale. That pleading failure alone is grounds for 18 dismissal of this cause of action. 19 BOA’s motion to dismiss Carpenter’s promissory estoppel claim is GRANTED WITH 20 LEAVE TO AMEND. The factual allegations in support of this cause of action are simply too 21 thin and conclusory. See Iqbal, 556 U.S. at 678. 22 C. 23 Negligent misrepresentation requires “(1) the misrepresentation of a past or existing 24 material fact by defendant, (2) without reasonable ground for believing it to be true, (3) with 25 intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on his 26 misrepresentation, and (5) resulting damage.” Apollo Capital Fund LLC v. Roth Capital 27 Partners LLC, 158 Cal.App.4th 226, 243 (Cal. Ct. App. 2007). 28 // Negligent Misrepresentation -5- 12cv0973 1 Carpenter fails to plead any elements of this cause of action with the requisite 2 specificity. Even worse, he pleads precisely the kind of “naked assertions devoid of further 3 factual enhancement” that the Supreme Court held in Iqbal cannot survive a motion to 4 dismiss. Iqbal, 556 U.S. at 1949. Carpenter fails to explain the misrepresentation in a BOA 5 agent indicating that he believes a loan modification is possible, and in another BOA agent 6 saying he will request the postponement and rescission of a foreclosure sale. He also 7 alleges no facts from which the Court can infer that the agents had no reasonable grounds 8 to support their statements. All Carpenter does is turn the elements of the cause of action 9 into bullet-pointed factual allegations in his complaint. A complaint will not survive a motion 10 to dismiss, however, if it contains a merely formulaic recitation of the elements of a cause 11 of action. Bell Atl. Corp., 550 U.S. at 555. 12 13 BOA’s motion to dismiss Carpenter’s negligent misrepresentation claim is GRANTED WITH LEAVE TO AMEND. 14 D. 15 The Court agrees with BOA’s argument that the facts of this case are a square peg 16 and the Elder Abuse Act is a round hole. Ever since the collapse of the housing market and 17 the ensuing shock on the nation’s financial system, the Court has seen countless cases like 18 this one, all filed by distressed homeowners with grievances against their mortgage lender 19 or loan servicer. The claims are more or less the same across those cases, and violation 20 of the Elder Abuse Act is not one of them. Carpenter probably ladles it onto his complaint 21 because he is age-eligible, but he alleges no other facts to satisfy the elements of the claim. 22 The Court also finds that Negrete v. Fidelity and Guar. Life Ins. Co., 444 F.Supp.2d 998 23 (C.D. Cal. 2006) is distinguishable. It is not a wrongful foreclosure case, for starters, and 24 also involves a set of facts that are an altogether different fit for the underlying offense of 25 elder abuse. BOA’s motion to dismiss the Elder Abuse Act claim is therefore GRANTED, 26 and this claim is DISMISSED WITH PREJUDICE. Violation of Elder Abuse Act 27 E. 28 To state a claim for violation of the Business and Professions Code, Carpenter must Violation of California Business and Professions Code § 17200 -6- 12cv0973 1 allege a violation of statutory or common law. Lazar v. Hertz Corp., 69 Cal. App. 4th 1494, 2 1505 (Cal. Ct. App. 1999) (“In effect, the UCL borrows violations of other laws—such as the 3 state’s anti-discrimination laws—and makes those unlawful practices actionable under the 4 UCL.”). The Court finds that Carpenter alleges inadequate facts to show an independent 5 violation of § 17200, and the failure of his other claims above means the § 17200 claim 6 cannot be staked on them. BOA’s motion to dismiss this claim is therefore GRANTED WITH 7 LEAVE TO AMEND. 8 IV. Conclusion 9 For the reasons set forth above, BOA’s motion to dismiss is GRANTED. Within two 10 weeks of the date this order is entered, Carpenter may file a first amended complaint that 11 re-alleges all of the claims except for the elder abuse claim. 12 13 14 IT IS SO ORDERED. DATED: December 28, 2012 15 16 HONORABLE LARRY ALAN BURNS United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 -7- 12cv0973
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