79 F. Supp. 3d 1074
N.D. Cal.2015Background
- Marci Patera and co-borrower Roy Bartlett bought 308 Iron Horse Ct., Alamo, CA; loans include a $1,000,000 first deed of trust and two junior deeds ($449,500 and $250,000) serviced by Citi entities.
- Beginning in 2011 the borrowers sought loan modifications; they allege multiple promises by CitiBank representatives to consider modifications, not to foreclose during review, and to waive fees; communications and repeated document requests continued through 2013.
- Notices of Default and multiple Notices of Trustee Sale were recorded (primarily against junior liens); Plaintiffs allege Citi continued foreclosure activity while modification applications were pending ("dual tracking").
- Patera filed a 13‑count state-law FAC alleging fraud/deceit, negligent misrepresentation, negligence, violations of Cal. Bus. & Prof. Code § 17200 (HBOR theory), promissory estoppel, breach of contract (two alleged modification agreements), slander of title, cancellation of instruments, Rosenthal Act violations, and breach of the covenant of good faith and fair dealing.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1), 12(b)(6), and 12(b)(7) (failure to join co-borrower Bartlett). The court granted dismissal with leave to amend, denying the Rule 12(b)(1) challenge to subject‑matter jurisdiction but requiring joinder of Bartlett and finding pleading defects across the causes of action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter jurisdiction (diversity) | Patera seeks injunctive relief to stop foreclosure; diversity exists between parties | No federal question; diversity not adequately pled | Diversity adequately alleged (amount in controversy measured by value of property). 12(b)(1) denied |
| Failure to join co-borrower Bartlett (Rule 19 / 12(b)(7)) | Patera sues on her own and may proceed without Bartlett | Bartlett is a co-borrower with an interest; his absence would risk inconsistent obligations and impair his ability to protect interests | Bartlett is a required party under Rule 19(a); joinder is feasible; dismissal for failure to join is warranted unless amended to join him |
| Fraud, negligent misrepresentation, negligence, promissory estoppel, breach of contract | Alleged promises to consider modification, not foreclose, waive fees; Patera relied and suffered damages | Plaintiffs pleadings lack particularity (Rule 9(b)), fail to allege specific reliance, breach, definite contract terms, consideration, or damages | Fraud and negligent misrep dismissed for failure to meet Rule 9(b) and to plead reliance/damages; negligence and promissory estoppel dismissed for insufficient duty/breach/reliance/damages; breach of contract and implied covenant dismissed for indefinite terms, lack of consideration and inadequately pled damages; leave to amend granted |
| HBOR / §17200, slander of title, cancellation, Rosenthal Act, other claims | HBOR/§17200 and related claims for dual-tracking and unfair practices | Many alleged acts predate HBOR; HBOR applies to first-lien only; claims lack standing, complete application, or requisite injuries; some claims target non‑parties (Northwest) | §17200 claims dismissed (no standing, pre-HBOR activity, no complete application alleged); slander of title and cancellation claims dismissed (target non-party and rely on inadequately pled fraud); Rosenthal claim dismissed for same defects; overall claims dismissed with leave to amend |
Key Cases Cited
- White v. Lee, 227 F.3d 1214 (9th Cir. 2000) (distinguishes facial and factual 12(b)(1) challenges)
- Safe Air for Everyone v. Meyer, 373 F.3d 1035 (9th Cir. 2004) (standard for facial jurisdictional attack)
- Miranda v. Reno, 238 F.3d 1156 (9th Cir. 2001) (accept factual allegations as true on facial jurisdiction challenge)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards and plausibility inquiry)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (Rule 9(b) requires particulars in fraud allegations)
- Kearns v. Ford Motor Co., 567 F.3d 1120 (the who, what, when, where, how standard for fraud pleading)
- Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025 (accept factual allegations as true and construe in plaintiff’s favor on 12(b)(6))
- Lopez v. Smith, 203 F.3d 1122 (leave to amend should be freely given)
- Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876 (leave to amend guidance)
- Salt River Project Agric. Improvement & Power Dist. v. Lee, 672 F.3d 1176 (Rule 19 joinder framework)
- Shermoen v. United States, 982 F.2d 1312 (joinder and indispensability analysis)