Miller v. Select Portfolio Servicing Inc.
2:18-cv-02889
E.D. Cal.Jul 15, 2019Background
- In 2010 the Millers took a mortgage secured by a deed of trust; MERS assigned interests through transfers ending with DLJ Mortgage Capital, Inc. and Select Portfolio Servicing, Inc. (SPS) servicing the loan.
- Notices of default and trustee’s sale were recorded in 2016; SPS’s recorded declaration stated it had contacted the borrowers to explore foreclosure-avoidance options.
- Plaintiffs submitted loan modification materials in June and again in September 2016 and responded to SPS’s requests for additional documents.
- While modification was allegedly pending, SPS conducted a non-judicial foreclosure sale on November 18, 2016; the trustee’s deed was recorded November 28, 2016. Plaintiffs learned of the sale from the purchaser, not from defendants.
- Plaintiffs sued (2018) asserting breach of contract, fraud, violations of various California Civil Code provisions (HBOR-related), and negligence; defendants moved to dismiss the first amended complaint, which plaintiffs did not oppose.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract | Defendants breached loan/deed of trust by foreclosing while modification negotiations were ongoing and without proper notice | Complaint fails to plead plaintiff performance or specific contractual term breached | Dismissed; leave to amend (plaintiff failed to allege performance/excuse or identify contract term breached) |
| Fraud (fraudulent concealment/representations) | SPS misrepresented intent and prolonged modification process to induce plaintiffs not to take defensive steps | Plaintiff fails to plead particularity (who, what, when, where, how) or DLJ’s role; letters not shown false; no specific detrimental actions alleged | Dismissed; leave to amend (insufficient Rule 9(b) detail and defendant-specific allegations) |
| HBOR / Civil Code claims (including dual-tracking / §2924.11 and §§2923.7, 2924.12, 2924.17, 2924.5) | Defendants materially and recklessly violated listed Civil Code sections by conducting the sale during modification process | Plaintiffs do not allege how those statutes apply, rely on outdated/ inapplicable version of §2924.11, and fail to plead required predicate facts (e.g., declarations under §2923.5/2923.55) | Dismissed; leave to amend in part but warning that claims merely invoking statutes without facts will be dismissed (and some statutory versions may not apply) |
| Negligence | Defendants negligently conducted foreclosure and failed to properly notify plaintiffs | As lenders/servicers, no general common-law duty unless specific circumstances (e.g., materially misleading communications) are pleaded | Dismissed; leave to amend (complaint too vague to establish duty/breach/causation) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead facts plausibly suggesting entitlement to relief)
- Balistreri v. Pacifica Police Dep’t, 901 F.2d 696 (9th Cir. 1990) (12(b)(6) dismissal may be for lack of cognizable legal theory or insufficient facts)
- Bushell v. JPMorgan Chase Bank, N.A., 220 Cal. App. 4th 915 (2013) (elements of breach of contract claim)
- Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir. 2009) (elements of fraud under California law)
- Engalla v. Permanente Med. Group, Inc., 15 Cal. 4th 951 (1997) (fraud elements under California law)
- Cafasso v. General Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011) (Rule 9(b) particularity requirements for fraud pleadings)
- Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) (when multiple defendants are accused of fraud, plaintiff must specify each defendant's role)
- Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089 (1991) (general rule that lender alone does not owe a broad duty of care)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49 (2013) (no common-law duty to offer or approve loan modification)
- Jolley v. Chase Home Finance, LLC, 213 Cal. App. 4th 872 (2013) (circumstances can create a duty regarding loan modification communications)