Sanchez v. Seterus, Inc.
5:17-cv-01183
N.D. Cal.Jun 14, 2017Background
- Plaintiff Jorge Sanchez borrowed in 2005 (Countrywide loan) secured by a Florida property; BOFA later acquired the loan and Seterus is the servicer.
- Sanchez alleges Countrywide misrepresented loan terms at origination (fixed rate vs. reverse amortization) and inflated appraisal values.
- Sanchez claims that at a later date BOFA agreed to write off the debt, reconvey the mortgage lien, and cease collection; he says Defendants failed to perform.
- Original complaint pleaded breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and California UCL violations; Seterus moved to dismiss for failure to state a claim and judicial estoppel based on Sanchez’s bankruptcy.
- Sanchez filed a purported First Amended Complaint adding negligent misrepresentation but did so without leave; the court treated it as a motion for leave to amend.
- Court took judicial notice of Sanchez’s bankruptcy petition, discharge, and docket but found insufficient information to apply judicial estoppel at this stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Judicial estoppel (failure to disclose claims in bankruptcy) | Sanchez didn’t disclose claims in bankruptcy or they weren’t assets | Seterus: Sanchez omitted claims from bankruptcy schedules and received a discharge; estoppel should bar suit | Court declined to apply judicial estoppel now because an amended bankruptcy petition on the docket (not judicially noticed) could affect disclosure; Seterus may renew later |
| Breach of contract / implied covenant | Defendants promised to write off loan and reconvey lien; breached that promise | Seterus: alleged contract lacks consideration and is unenforceable; no contract with Seterus | Contract-based claims fail for lack of pleaded consideration; dismissed with prejudice as to Seterus; Sanchez may amend these claims as to BOFA |
| Fraud | Misrepresentations at origination and regarding the write-off induced reliance and damages | Seterus: fraud not pleaded with Rule 9(b) specificity and origination fraud is time-barred | Fraud claims are dismissed for lack of specificity as to the alleged write-off promise; origination fraud appears time-barred |
| Negligent misrepresentation (FAC) | New claim: defendant negligently represented payoff would be zero | Seterus: FAC was filed without leave and claim is legally deficient because negligent false-promise is not cognizable | Court construed FAC as motion for leave to amend and denied leave as futile because California does not recognize negligent misrepresentation based on negligent false promises; denial without prejudice |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (establishes plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (applies pleading standard to factual allegations)
- Hamilton v. State Farm Fire & Casualty Co., 270 F.3d 778 (9th Cir. 2001) (discusses judicial estoppel in bankruptcy context)
- New Hampshire v. Maine, 532 U.S. 742 (discusses factors for judicial estoppel)
- Lee v. City of L.A., 250 F.3d 668 (9th Cir. 2001) (judicial notice of public records on Rule 12(b)(6) motions)
- Rockridge Trust v. Wells Fargo, N.A., 985 F. Supp. 2d 1110 (N.D. Cal. 2013) (fraud and pleading specificity; contract consideration discussion)
- Perfect 10, Inc. v. Visa Intern. Serv. Ass’n, 494 F.3d 788 (9th Cir. 2007) (UCL does not impose vicarious liability)
- Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153 (1991) (California does not recognize negligent misrepresentation claims based on negligent false promises)