Cherie Morgan v. Aurora Loan Services
646 F. App'x 546
9th Cir.2016Background
- Plaintiff Cherie J. Morgan defaulted on a mortgage and entered two written agreements with Aurora: a Workout Agreement (WAG) and a Foreclosure Alternative Agreement (FAA) to pursue a loan modification.
- Morgan alleged Aurora and MERS proceeded with a nonjudicial foreclosure improperly and failed to provide a permanent loan modification after she complied with the agreements.
- Morgan asserted breach of contract (WAG/FAA and deed of trust), intentional and negligent misrepresentation, violations of Cal. Civ. Code § 2924(a)(6) (Homeowner’s Bill of Rights), quiet title/cancellation, promissory estoppel, and UCL claims.
- The district court dismissed Morgan’s complaint under Fed. R. Civ. P. 12(b)(6); Morgan appealed. The Ninth Circuit reviewed whether her pleadings stated viable claims and whether further amendment was warranted.
- The court affirmed dismissal in full, finding Morgan failed to plead contractual guarantees, cognizable damages for misrepresentation, standing under statutory and securitization theories, tender for quiet title relief, and promissory estoppel or UCL injury.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of WAG/FAA (contract) | WAG/FAA and oral assurances promised a permanent loan modification if she complied | WAG/FAA did not guarantee a permanent modification; payments insufficient to cure arrears; no contractual duty to modify | Dismissed — agreements did not guarantee permanent modification; oral promise not pleaded in complaint; no breach shown |
| Rejection of July 4 payment under FAA | Aurora rejected her payment, breaching FAA | Morgan had missed a required payment by then and was herself in breach; no injury from alleged rejection | Dismissed — even if payment rejected, no resulting injury; foreclosure occurred after FAA expired and failure to cure |
| Breach of deed of trust / §2924f compliance | Alleged defects in trustee’s sale procedures injured her title | Morgan had constructive and express notice of sale; any technical noncompliance did not cause injury | Dismissed — no injury from alleged technical defects; amendment futile |
| Intentional & negligent misrepresentation | Aurora’s statements induced her to forbear and expend time pursuing modification | Damages insufficiently pleaded; time/effort are de minimis unless pleaded with factual detail | Dismissed — failed to plead cognizable damages for misrepresentation |
| §2924(a)(6) standing (HBOR) & wrongful-foreclosure/securitization theory | Foreclosure invalid because defendant lacked standing; assignment into Lehman Trust was defective | HBOR not retroactive; securitization/PSA defects render transfers voidable, not void; MERS can assign as nominee | Dismissed — statute not retroactive; securitization/PSA defects render transfers voidable (no standing); MERS assignments valid |
| Quiet title / cancellation / tender | Alleged title defects and wrongful foreclosure justify quiet title or cancellation without tender | Plaintiff failed to tender debt or show an excuse to tender; no offsetting counterclaims or inequity | Dismissed — no tender or valid excuse established |
| Promissory estoppel | Relied on defendants’ promises to her detriment | Express contracts (WAG/FAA) govern the parties’ exchange; estoppel unavailable where express agreement exists | Dismissed — promissory estoppel precluded by existing agreements |
| Unfair Competition Law (UCL) | Defendants’ noncompliance with foreclosure rules was an unlawful/unfair practice causing injury | Foreclosure was caused by Morgan’s prior default; any wrongful acts occurred after default and did not cause injury | Dismissed — lacks UCL standing because injury was not caused by defendants’ conduct |
| Leave to amend | Morgan sought further amendments to cure defects | Court noted multiple prior amendments and no proposed cure shown | Denied — district court did not abuse discretion; further amendment would be futile |
Key Cases Cited
- Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013) (distinguishes when a trial-period plan creates a contractual right to a permanent modification)
- Rajamin v. Deutsche Bank Nat. Trust Co., 757 F.3d 79 (2d Cir. 2014) (PSA breaches render transfers voidable under New York law, not void)
- Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016) (borrower may challenge assignments allegedly rendering them void)
- Kwikset Corp. v. Superior Court, 246 P.3d 877 (Cal. 2011) (UCL standing requires injury "as a result of" the unfair practice)
- Lazar v. Superior Court, 909 P.2d 981 (Cal. 1996) (elements of intentional misrepresentation under California law)
- Lueras v. BAC Home Loans Servicing, LP, 163 Cal. Rptr. 3d 804 (Ct. App. 2013) (time/effort assembling modification materials may be de minimis)
- Herrera v. Fed. Nat’l Mortg. Ass’n, 141 Cal. Rptr. 3d 326 (Ct. App. 2012) (MERS as nominee has power to assign deed of trust)
- Bushell v. JPMorgan Chase Bank, N.A., 163 Cal. Rptr. 3d 539 (Ct. App. 2013) (examples where time spent pursuing modification supported damages)
- Lipton v. Pathogenesis Corp., 284 F.3d 1027 (9th Cir. 2002) (standard for denying leave to amend for futility)
- Broam v. Bogan, 320 F.3d 1023 (9th Cir. 2003) (courts may not consider facts outside the complaint on Rule 12(b)(6) review)