Todd Sharp v. Nationstar Mortgage LLC
701 F. App'x 596
| 9th Cir. | 2017Background
- Todd and Maria Sharp sued Aurora Commercial Corp. and Nationstar after Aurora sent a November 24, 2010 letter notifying the Sharps of a referral for foreclosure.
- The Sharps alleged causes of action including misrepresentation, conversion (and embezzlement), breach of contract, breach of the implied covenant, promissory estoppel, and negligence.
- The Sharps filed their initial complaint in January 2014 and amended the complaint three times; the district court dismissed the action under Fed. R. Civ. P. 12(b)(6).
- The district court applied judicial estoppel in its analysis (the Ninth Circuit did not reach that doctrine because it resolved the case on the merits).
- The Ninth Circuit reviewed dismissal de novo and affirmed, concluding the claims were either time-barred, inadequately pleaded, or legally deficient.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations for fraud/misrepresentation | Sharps contend defendants made actionable misrepresentations triggering fraud claim | Defendants argue Sharps discovered facts constituting fraud with Aurora’s Nov. 24, 2010 letter, starting the limitations period | Held: Fraud and conversion claims time-barred (more than 3 years lapsed) |
| Embezzlement as independent claim | Sharps assert embezzlement separate cause of action | Defendants assert embezzlement is subsumed by conversion under CA law | Held: No independent embezzlement cause; embezzlement fails because conversion is time-barred |
| Breach of contract / Workout Agreement obligations | Sharps argue defendants breached by not offering modification after Workout Agreement | Defendants point to clear Workout Agreement reserving lender discretion to offer new modification or resume foreclosure | Held: No breach — contract unambiguously allowed lender discretion |
| Promissory estoppel based on Aurora letter | Sharps claim reliance on Aurora’s letter promising modification | Defendants argue letter lacked definite terms and no clear enforceable promise existed | Held: Promissory estoppel dismissed — letter too indefinite for reasonable reliance |
| Implied covenant of good faith and fair dealing | Sharps assert implied covenant breach tied to modification dealings | Defendants say claim merely duplicates contract claims | Held: Implied covenant claim disregarded as duplicative of contract claim |
| Negligence duty of care | Sharps claim negligence in loan modification/foreclosure handling | Defendants say no special duty beyond conventional lender role | Held: Negligence claim dismissed for failure to plausibly allege duty and facts |
| Leave to amend | Sharps sought further amendment after three amended complaints | Defendants oppose more amendment given prior opportunities | Held: Dismissal without further leave to amend affirmed (plaintiffs already had multiple chances) |
Key Cases Cited
- Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984 (9th Cir. 2017) (standard of review for Rule 12(b)(6) dismissal)
- Somers v. Apple, Inc., 729 F.3d 953 (9th Cir. 2013) (appellate courts may affirm on any basis supported by the record)
- Platt Elec. Supply, Inc. v. EOFF Elec., Inc., 522 F.3d 1049 (9th Cir. 2008) (statute of limitations starts on discovery of facts, not their legal significance)
- In re Basinger, 45 Cal.3d 1348 (Cal. 1988) (embezzlement not an independent civil cause of action apart from conversion)
- Daniels v. Select Portfolio Servicing, Inc., 246 Cal. App. 4th 1150 (Cal. Ct. App. 2016) (indefinite loan-modification promises cannot support promissory estoppel)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard under Rule 8)
- Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089 (Cal. Ct. App. 1991) (lender generally owes no special duty beyond conventional lending role)
- Rich v. Shrader, 823 F.3d 1205 (9th Cir. 2016) (district court discretion to deny further amendment after prior opportunities)