Khan v. Citimortgage Inc.
2013 U.S. Dist. LEXIS 141338
E.D. Cal.2013Background
- Ms. Khan borrowed $648,500 in 2003 secured by a deed of trust on her Bakersfield property.
- Golden Empire Mortgage assigned the note and DOT to CitiMortgage (CMI) in 2010; CMI later assigned to Wilmington Trust Company (Wilmington).
- Ms. Khan defaulted in September 2009; CMI recorded a default and trustee’s sale notice in 2010 for a June 30, 2010 sale.
- CMI allegedly delayed, mishandled, and thwarted loan modification attempts, including lost documents and shifting deadlines.
- CMI postponed the foreclosure during modification, then conducted a trustee’s sale on May 15, 2012 which CMI later claimed was a mistake; CMI transferred its interests to Wilmington.
- Ms. Khan filed a complaint alleging breach of contract, fraud, negligence, and related claims, which the court dismissed under Rule 12(b)(6) with prejudice.]
- Ms. Khan did not oppose dismissal or amend the complaint; the court vacated a hearing and granted dismissal with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Promissory estoppel viability | Khan relied on repeated promises of postponement | Oral promise to modify/postpone foreclosure is unenforceable under statute of frauds | Promissory estoppel barred by statute of frauds |
| Fraud elements and pleading particularity | CMI misrepresented in modification process to delay | Complaint lacks particularity and misrepresentation specifics | Fraud claim dismissed for lack of particularity and proof of misrepresentation |
| Implied covenant claim viability | Covenant required due fair dealing in loan modification | No contract duty beyond DOT; implied covenant not to create new duties | Implied covenant claim dismissed with prejudice |
| UCL standing and predicate violations | CMI engaged in unlawful/fraudulent practices affecting Khan | No standing or predicate unlawful conduct proven; UCL claims fail | UCL claim dismissed with prejudice for lack of standing and predicate violation |
| Negligence duty by lender/servicer | Lender owed duty in processing loan modification | No duty of care in arms-length loan mod; no breach established | Negligence claim dismissed with prejudice |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for pleadings; not mere conclusory statements)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (failure to plead plausible claims requires dismissal)
- Balistreri v. Pacifica Police Dept., 901 F.2d 696 (9th Cir. 1990) (standard for assessing motion to dismiss; legal sufficiency)
- Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir. 1996) (treats pleading standards and fact-pleading requirements)
- Secrest v. Sec. Natl Mortg. Loan Trust 2002-2, 167 Cal.App.4th 544 (Cal. Ct. App. 2008) (statute of frauds applicability to loan modification agreements)
- Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal.App.3d 1089 (Cal. Ct. App. 1991) (no general duty by lender to borrower in loans absent special circumstances)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) (Rule 9(b) particularity for fraud claims; ‘grounded in fraud’ pleading)