Summary
holding plaintiff sufficiently alleged detrimental reliance, where plaintiff asserted that she could have paid arrearage to reinstate her loan, but instead relied on defendant's promise that it would not foreclose on plaintiff's property while loan-modification application was pending
Summary of this case from Stancil v. First Mount Vernon Indus. Loan Ass'nOpinion
NO. CIV. 2:12-209 WBS KJN
07-02-2012
RHODA Y. SOLOMON, Plaintiff, v. AURORA LOAN SERVICES LLC, a California limited liability company; and DOES 1 through 50, inclusive, Defendant.
MEMORANDUM AND ORDER RE:
MOTION TO DISMISS
Plaintiff Rhoda Y. Solomon brings this action against defendant Aurora Loan Services LLC ("Aurora"), arising from defendant's allegedly wrongful conduct related to a residential loan. Aurora now moves to dismiss the First Amended Complaint ("FAC") for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Def.'s Mot. to Dismiss (Docket No. 16).)
I. Factual and Procedural Background
In December of 2007, plaintiff obtained a loan from American Broker's Conduit ("ABC"), secured by her residence at 1558 Tamarisk Lane in Tracy, California ("Tamarisk Lane property"). (FAC ¶¶ 1, 6.) Defendant was the servicer of ABC's loan. (FAC ¶ 9.) According to plaintiff, on or about January 2010, she was experiencing economic hardship and, for the first time, missed a payment due on this loan. (Id. ¶ 7.)
Later that month, plaintiff alleges that she applied for a Home Affordable Modification Program ("HAMP") loan modification with defendant, (id. ¶ 8), and engaged Financial Hope for America ("FHFA") to assist her in the application process, (id. ¶ 10, Ex. C). Over the next several months, plaintiff further alleges that defendant repeatedly told her that her application was incomplete and requested that she submit additional documents in connection with her application. (Id. ¶¶ 9, 11-14, Exs. E-G.) Plaintiff alleges that despite the fact that she had already submitted these documents, she submitted additional copies of the requested documents. (Id.)
According to plaintiff, in August 2010, defendant informed her in a letter that her request for a HAMP modification was denied because she had not provided the required documents within the specified time frame. (Id. ¶ 15, Ex. H.) Approximately one week later, defendant allegedly sent plaintiff another letter informing her that she may be eligible for a HAMP modification. (Id. ¶ 16, Ex. I.) Plaintiff alleges that she then reapplied for a HAMP modification. (Id. ¶ 17.)
Defendant again notified plaintiff that her application for a HAMP modification had been denied, this time for excessive forbearance. (Id. ¶ 19.) The letter explained that defendant was "unable to create an affordable payment equal to 31% of your reported monthly gross income without changing the terms of your loan beyond the requirements of the program." (Id. ¶ 19, Ex. K.) According to plaintiff, this statement was false. (Id. ¶ 20.)
A month later, plaintiff alleges that she received a second letter rejecting her August 2010 application for a HAMP modification, this time on the ground that her monthly debt to income ratio was too high. (Id. ¶ 21, Ex. M.) She further alleges that this is not a valid reason to deny a HAMP application. (Id. ¶ 22.)
According to plaintiff, she submitted a third application for a HAMP modification in December 2010. (Id. ¶ 23.) In January 2011, plaintiff alleges that she received a letter from defendant indicating that several documents were missing from her application package when those documents in fact had already been submitted in a timely manner. (Id. ¶ 24, Ex. N.)
On February 22, 2011, ABC assigned the Deed of Trust on plaintiff's property to defendant. (Id. ¶ 25, Ex. O.) On March 2, 2011, defendant filed a Substitution of Trustee naming Quality Loan Service Corporation ("Quality") as trustee under the Deed of Trust. (Id. ¶ 26, Ex. P.) Several days later, Quality recorded a Notice of Default listing a past-due balance of $20,802.84. (Id. ¶ 27, Ex. Q.) On June 10, 2011, Quality recorded a Notice of Trustee's Sale, which indicated that a sale would be held on July 5, 2011, and that the total outstanding balance on the loan was $567,089.94. (Id. ¶ 28, Ex. R.)
Plaintiff alleges that she contacted defendant on June 15, 2011, and spoke with Rebecca. (Id. ¶ 29.) She further alleges that when she explained that she had been wrongfully denied for a HAMP modification twice in the past, Rebecca informed her that she could either pay defendant the entirety of her arrearage on the loan or obtain a loan workout under HAMP. (Id.)
Plaintiff claims that after discussing these options with her mother and brother, who were living with her at the time, she called defendant back the next day and spoke with Maytal. (Id. ¶ 30.) According to plaintiff, when she explained to Maytal that she wanted to reinstate her loan so as to avoid foreclosure and that she was hoping defendant would reduce the principal balance on her home, Maytal told her that she could reinstate her loan by paying the amount past due, but that the only way to reduce the principal would be to obtain a loan workout. (Id.) According to plaintiff, she had sufficient funds available and offered to pay the amount past due. Maytal then told her to wait until defendant informed her of the results of her HAMP application. (Id.) Maytal allegedly informed plaintiff that defendant filed the Notice of Sale "as a matter of course, but that [defendant] could not foreclose on her property until and unless they reject her application." (Id.)
Approximately two weeks later, on June 29, 2011, plaintiff claims that she sent defendant a letter in which she explained that she was experiencing financial hardship due, in part, to the loss of her job and disability and requested a loan modification. (Id. ¶ 31, Ex. S.) She also submitted a fourth HAMP modification application. (Id.)
On August 11, 2011, defendant foreclosed on the Tamarisk Lane property, which was sold to defendant for $215,100. (Id. ¶ 32, Ex. T.) On or about October 3, 2011, defendant filed an unlawful detainer action against plaintiff. (Id. ¶ 33, Ex. U.)
On January 11, 2012, plaintiff filed suit in state court. (Notice of Removal ("Compl.") Ex. 1 (Docket No. 1).) Defendant removed the proceeding to this court two weeks later. (Docket No. 1.) In her first complaint, plaintiff alleged nine claims. (Id.) Defendant moved to dismiss plaintiff's complaint in its entirety for failure to state a claim. (Docket No. 7). Plaintiff filed her non-opposition and this court granted defendant's motion to dismiss with leave to amend within twenty days.
Plaintiff filed her FAC alleging claims against defendant for: (1) negligence, (2) promissory estoppel, (3) violation of California's Unfair Competition Law, Bus. & Prof. Code § 17200 et seq., (4) preliminary and permanent injunction, (5) declaratory relief, (6) set aside of the trustee's deed upon sale, (7) cancellation of the trustee's deed upon sale, and (8) quiet title. Defendant now moves to dismiss plaintiff's FAC in its entirety for failure to state a claim.
II. Request for Judicial Notice
In general, a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts not subject to reasonable dispute because they are either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201. The court may take judicial notice of matters of public record or of documents whose contents are alleged in the complaint and whose authenticity is not questioned. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).
Defendant has filed a request for judicial notice of plaintiff's bankruptcy application and order dismissing her application, along with a publicly filed Consent Order that plaintiff relies on in her FAC. (Docket No. 16-1.) The court will take judicial notice of the two bankruptcy documents as they are matters of public record whose accuracy cannot be questioned. See Lane v. Vitek Real Estate Indus. Group, 713 F. Supp. 2d 1092, 1097 (E.D. Cal. 2010) (taking judicial notice of documents from plaintiff's bankruptcy proceedings). The court will also take judicial notice of the Consent Order as it was referenced in the FAC and its authenticity has not been questioned. See No. 84 Employer-Teamster Joint Council Pension Trust Fund v. Am. W. Holding Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003).
III. Discussion
On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and "[w]here a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 556-57).
A. Negligence
Plaintiff asserts that defendant negligently handled and reviewed her HAMP application. To state a claim for negligence, a plaintiff must show: "(1) a legal duty to use reasonable care, (2) breach of that duty, and (3) proximate cause between the breach and (4) the plaintiff's injury." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (2d Dist. 1998) (citation omitted). "[A]bsent a duty, the defendant's care, or lack of care, is irrelevant" and plaintiff's negligence claim fails. Dooms v. Fed. Home Loan Mortg. Corp., No. 11-0352, 2011 WL 1232989, at *11 (E.D. Cal. Mar. 31, 2011) (quoting Software Design & Application, Ltd. v. Hoefer & Arnett, Inc., 49 Cal. App. 4th 472, 481 (1st Dist. 1996)). The existence of a legal duty to use reasonable care in a particular factual situation is a question of law for the court to decide. Vasquez v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (4th Dist. 2004).
Plaintiff argues that, having voluntarily undertaken to review her HAMP application, defendant owed her a duty to complete that task. (Pl.'s Opp'n to Mot. to Dismiss at 10:12-26 (Docket No. 17).) It is true that there is California authority suggesting that "a person may become liable in tort for negligently failing to perform a voluntarily assumed undertaking even in the absence of a contract to do so" and, in such a case, "the person undertaking to perform the serve is under a duty to exercise due care in performing the voluntarily assumed duty." Valdez v. Taylor Auto Co., 129 Cal. App. 2d 810, 817 (1954). In Valdez, however, the defendant promised to obtain liability and property damage insurance for the plaintiff, but failed to do so. Id. at 812. In finding a duty of care, the court noted that in cases involving a voluntarily assumed undertaking, "the court has laid stress upon the fact that the plaintiff has relied upon the conduct of the defendant to his damage, and has indicated that this is essential to liability." Id. at 817-18 (quoting Prosser on Torts § 32). Similarly, in Aim Insurance Co. v. Culcasi, 229 Cal. App. 3d 209 (6th Dist. 1991), the plaintiff alleged that she entrusted an application for health insurance and supporting documents to the defendant, who told her she would be properly enrolled in the plan. Id. at 216. The defendant then failed to complete the enrollment. Id. Because the plaintiff had reason to rely on the defendant's representations, the court found that a duty of care existed. Id.
Here, defendant only represented that plaintiff might be eligible for a home loan modification. Plaintiff was never promised a modification and so plaintiff could not reasonably rely on defendant's offer to review her HAMP loan modification application. This case is therefore distinguishable from Valdez and Aim Insurance and plaintiff may not rely on them to show a duty of care in this case.
As a general rule, "a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Savs. & Loan Ass'n, 231 Cal. App. 3d 1089, 1096 (3d Dist. 1991). Liability to a borrower for negligence arises only when the lender "actively participates" in the financed enterprise "beyond the domain of the usual money lender." Wagner v. Benson, 101 Cal. App. 3d 27, 35 (4th Dist. 1980); see also Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (4th Dist. 2006) (holding that absent "special circumstances" a loan transaction "is at arms-length and there is no fiduciary relationship between the borrower and lender").
Plaintiff also appears to allege that a duty of care arose from a Consent Order entered into by defendant and the Office of Thrift Supervision. (FAC ¶ 44.) That document dealt with deficiencies identified by the Office of Thrift Supervision in defendant's handling of residential home loans. The Consent Order provides:
Nothing in this Stipulation or the Order, express or implied shall give to any person or entity, other than the parties hereto, and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Stipulation or the Order.(Req. for Judicial Notice Ex. 3 at 29.) Plaintiff was not a party to the Consent Order; it mentions nothing about plaintiff or a duty of care owed to plaintiff or similarly situated individuals. Plaintiff cites to no authority to explain how the Consent Order imposes a duty of care towards her on the defendant.
According to plaintiff's allegations, it does not appear that defendant acted beyond the domain of the usual money lender. Most courts that have considered the issue have held that a duty does not arise when a lender reviews a debtor's application for a loan. See Dooms, 2011 WL 1232989, at *12; Becker v. Wells Fargo Bank, N.A., Inc., No. 2:10-cv-02799, 2011 WL 1103439, at *23 (E.D. Cal. Mar. 22, 2011) (magistrate judge's findings and recommendations) (holding that allegations about loan modification application process did not give rise to a duty); DeLeon v. Wells Fargo Bank, N.A., No. 10-CV-01390, 2010 WL 4285006, at *4 (N.D. Cal. Oct. 22, 2010) (finding that defendant did not have a duty "to complete the loan modification process"); Sullivan v. JP Morgan Chase Bank, NA, 725 F. Supp. 2d 1087, 1094 (E.D. Cal. 2010) (holding that "[p]laintiffs' allegations that Defendant misrepresented to them that a permanent loan modification would be put into place are insufficient to form the basis of a negligence claim"). But see Ansanelli v. JP Morgan Chase Bank, N.A., No. 10-03892, 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011) (holding that duty existed after plaintiff and defendant entered into trial period plan); Garcia v. Ocwen Loan Servicing, LLC, No. 10-0290, 2010 WL 1881098, at *3 (N.D. Cal. May 10, 2010) (magistrate judge's order) (holding that plaintiff's allegations about loan modification application process were sufficiently pled).
Moreover, to the extent that plaintiff bases her negligence claim on an alleged entitlement to a modification under HAMP, her claim is an improper attempt to privately enforce HAMP when Congress granted no such private right of action. See Ingalsbe v. Bank of Am., N.A., No. 1:10-CV-01665-OWW, 2010 WL 5279839, at *5 (E.D. Cal. Dec. 13, 2010) ("The consensus among district courts in the Ninth Circuit is that there is no private right of action under HAMP"). This leaves plaintiff's allegation that defendant's negligence in processing her modification application caused her to lose her home. Plaintiff admits, though, that she was in default on her loan. Defendant never promised plaintiff a modification, it only represented that she might be eligible for one. At any point during plaintiff's default, defendant had the right to foreclose on the property. It was that default that caused the foreclosure that caused her injury, not defendant's denial of a home loan modification. See DeLeon v. Wells Fargo Bank, N.A., No. 10-CV-01390, 2011 WL 311376, at *7 (N.D. Cal. Jan. 28, 2011) (finding that defaulted homeowners had their home foreclosed on because they fell behind on payments, not because they were denied a loan modification).
Accordingly, plaintiff has not stated a claim for negligence and defendant's motion to dismiss with respect to the negligence claim will be granted.
B. Promissory Estoppel
A plaintiff alleging a promissory estoppel claim must show: (1) the existence of a promise "clear and unambiguous in its terms"; (2) "reliance by the party to whom the promise is made"; (3) that any reliance was both "reasonable and foreseeable"; and (4) that the party asserting the estoppel was injured by his reliance. US Ecology, Inc. v. State, 129 Cal. App. 4th 887, 901 (4th Dist. 2005) (quoting Laks v. Coast Fed. Sav. & Loan Ass'n, 60 Cal. App. 3d 885, 890 (2d Dist. 1976)).
In Garcia v. World Savings FSB, 183 Cal. App. 4th 1031, 1041 (2d Dist. 2010), a homeowner couple fell behind on their mortgage payments, but were told they could pay the arrearage and reinstate their loan. Id. at 1035. The homeowners requested an extension and the defendant promised to postpone foreclosure until after the extension period. Id. During the extension period, the homeowners procured a high-cost, high-interest loan using other property they owned as security. Id. at 1041. Before the homeowners were able to reinstate their loan and before the extension period ended, however, the defendant foreclosed on the property. Id. at 1036. The court found that the homeowners had detrimentally and reasonably relied on the defendant's clear promise and therefore had successfully stated a claim for promissory estoppel. Id. at 1041.
Here, defendant allegedly promised that they would not foreclose on plaintiff's property while her HAMP application was pending. Plaintiff allegedly could have paid back the arrearage to reinstate her loan, but followed defendant's advice to delay payment until after the results of her most recent HAMP application were in. This step was taken in reasonable reliance on defendant's promise, and was foreseeable as it was precisely what defendant's agent advised her to do. Plaintiff suffered injury as a result of her reliance because her home was foreclosed on before her HAMP application was resolved. She has therefore sufficiently alleged the elements of a promissory estoppel claim.
Defendant argues that an oral promise to delay foreclosure violates the statute of frauds and is therefore unenforceable. However, "[a] party is estopped to assert the statute of frauds as a defense where the party, by words or conduct, represents that he will stand by his oral agreement, and the other party, in reliance upon that representation, changes his position, to his detriment." Garcia, 183 Cal. App. 4th at 1041. Accordingly, the statute of frauds is not a bar to plaintiff's promissory estoppel claim.
Defendant further suggests that plaintiff cannot assert a promissory estoppel claim because a claim for promissory estoppel requires extra contractual statements. It argues there was an express contract between the parties and "[i]f the promisee's performance was requested at the time the promisor made his promise and that performance was bargained for, [promissory estoppel] is inapplicable." Philips Med. Capital, LLC v. Med. Insights Diagnostics Ctr., Inc., 471 F. Supp. 2d 1035, 1043 (N.D. Cal. 2007). This argument is unavailing because Philips, the only case defendant cites, goes on to qualify that "it is only where the reliance was unbargained for that there is room for application of the doctrine of promissory estoppel." Id. (quoting Healy v. Brewster, 59 Cal. 2d 455, 463 (1963)). Here, the promise that plaintiff relied on was the promise not to foreclose while her application was pending, a promise extraneous to the note and deed of trust. Therefore, an express contract does not bar plaintiff's promissory estoppel claim.
Defendant also argues that plaintiff cannot assert a promissory estoppel claim because she has no private right of action under HAMP. (Docket No. 16.) The court agrees that plaintiff has no private right of action under HAMP. Plaintiff's promissory estoppel claim, however, is not an attempt to privately enforce HAMP.
Accordingly, plaintiff has stated a claim for promissory estoppel and the court will deny defendant's motion to dismiss the claim.
C. Unfair Business Practices
California's UCL prohibits "any unlawful, unfair or fraudulent business act or practice . . . " Cal. Bus. & Prof. Code § 17200. This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant. Khoury v. Maly's of Cal., Inc., 14 Cal. App. 4th 612, 619 (2d Dist. 1993). Plaintiff alleges defendant violated the UCL by failing to conduct a good faith review of, and using disingenuous pretexts to deny, her HAMP application and foreclosing while her third application was still pending.
Standing to bring a UCL claim requires "a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." Cal. Bus. & Prof. Code § 17204 (emphasis added). To have standing under the UCL, a plaintiff must sufficiently allege that (1) [s]he has "lost 'money or property' sufficient to constitute an 'injury in fact' under Article III of the Constitution," Rubio v. Capital One Bank, 613 F.3d 1195, 1203-04 (9th Cir. 2010), and (2) there is a "causal connection" between the defendant's alleged UCL violation and the plaintiff's injury in fact. Id. (quoting Hall v. Time Inc., 158 Cal. App. 4th 847, 855 (4th Dist. 2008)).
Plaintiff demonstrates that she has suffered an injury in losing her home, but fails to demonstrate a "causal connection" between defendant's alleged wrongful conduct and her losing her home. As discussed above in the court's discussion of plaintiff's failed negligence claim, defendant's alleged statements that plaintiff "might" be eligible for a loan modification and subsequent denial of her application are not causally related to plaintiff's loss of property. Plaintiff had no right to a loan modification, Mabry v. Superior Court, 185 Cal. App. 4th 208, 214 (4th Dist. 2010), and had already defaulted on her mortgage. Accordingly, the plaintiff does not have standing on her UCL claim and the court will grant defendant's motion to dismiss this claim. D. Set Aside and Cancel Trustee's Sale
Plaintiff does not mention defendant's alleged breach of its promise to delay foreclosure in the UCL section of her FAC. The section does contain one sentence incorporating the rest of the FAC, but such a conclusory statement is insufficient to put defendant on notice that plaintiff bases her UCL claim on that part of defendant's conduct. The court therefore does not consider whether the conduct alleged in plaintiff's promissory estoppel claim could form the basis for a valid UCL claim.
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The elements of an equitable cause of action to set aside a foreclosure sale are: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale was prejudiced or harmed; and (3) the mortgagor tendered the amount of the secured indebtedness or was excused from tendering. Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 104 (6th Dist. 2011). "It is the general rule that courts have power to vacate a foreclosure sale where the sale has been improperly, unfairly, or unlawfully conducted, or where there has been such a mistake that to allow it to stand would be inequitable to purchaser and parties." Lona, 202 Cal. App. 4th at 104.
"A properly conducted non-judicial foreclosure sale constitutes a final adjudication of the rights of the borrower and lender," Moeller v. Lien, 25 Cal. App. 4th 822, 831 (2d Dist. 1994), and is "accompanied by a common law presumption that it
'was conducted regularly and fairly,'" Melendrez v. D & I Inv., Inc., 127 Cal. App. 4th 1238, 1258 (6th Dist. 2005) (quoting Brown v. Busch, 152 Cal. App. 2d 200, 204 (3d Dist. 1957)). The party challenging the trustee's sale bears the burden of overcoming the presumptive regularity of the sale. Id. This presumption is conclusive if the buyer is a bona fide purchaser ("BFP"). 6 Angels, Inc. v. Stuart-Wright Mortg., Inc., 85 Cal. App. 4th 1279, 1286 (2d Dist. 2001) ("[T]he sale can be successfully attacked on the grounds of procedural irregularity only if the buyer is not a bona fide purchaser.").
"[T]he proper standard to determine whether a buyer at a foreclosure sale is a BFP is whether the buyer (1) purchased the property for value, and (2) had no knowledge or notice of the asserted rights of another." Singh v. Wells Fargo Bank, No. 1:10-CV-1659 AWI SMS, 2012 WL 691705, at *8 (E.D. Cal. Mar. 2, 2012) (quoting Melendrez, 127 Cal. App. 4th at 1258). Defendant did purchase the property for value, although it paid less than half of what was due on the loan at the time of the sale. (FAC ¶ 32.) It is not a bona fide purchaser, however, because it was aware of plaintiff's claims to the property.
Plaintiff argues that the foreclosure was conducted unlawfully because defendant breached its HAMP contract with the U.S. Treasury Department and because defendant breached its oral contract with plaintiff to stay foreclosure proceedings until after review of her HAMP application.
As to plaintiff's first ground to set aside the trustee's sale, because HAMP does not provide a private cause of action, she cannot base her claim to set aside on a violation of HAMP or a violation of defendant's contract with the U.S. Treasury Department. Velasquez v. Chase Home Finance LLC, No. CIV S-12-0433, 2012 WL 1378492, at *4 (E.D. Cal. Apr. 19, 2012) (citing Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1184-85 (N.D. Cal. 2009)); see also Astra USA, Inc. v. Santa Clara County, 131 U.S. 1342, 1348 (2011) (where government contract merely confirmed statutory obligations and statute did not provide private right of action, county could not bring breach of contract suit as intended third-party beneficiary).
As to plaintiff's second ground to set aside the sale, while plaintiff has not stated a claim for breach of contract, she has stated a claim for promissory estoppel. California courts have held that a foreclosure sale may be set aside if the debtor was not in fact in default at the time that the foreclosure sale occurred or if the lender excused the debtor's default. Lona, 202 Cal. App. 4th at 105 (citing cases); see also Nguyen v. Calhoun, 105 Cal. App. 4th 428, 449 (6th Dist. 2003) (suggesting that breach of a valid oral promise to postpone a foreclosure sale might provide grounds to set aside the sale, but finding that plaintiff had not alleged a valid promise).
As discussed above in the section discussing plaintiff's claim for promissory estoppel, although plaintiff was in default at the time the sale occurred, plaintiff had allegedly offered to cure her default, but was told by defendant that she should not do so until review of her HAMP application was complete. Defendant also allegedly promised that foreclosure would not occur in the meantime and, relying on this promise, plaintiff refrained from paying the amount she owed under the loan agreement. Had defendant not instructed her otherwise, plaintiff alleges that would not have been in default when the foreclosure sale occurred. Although the court has not found and neither party has produced a case directly on point, these facts suggest that the court has the power to vacate the foreclosure sale because a mistake occurred such that to allow the sale to stand would be inequitable to the parties and purchaser. See Lona, 202 Cal. App. 4th at 104.
Having alleged that the sale was improper, two elements of a claim to set aside a trustee's sale remain. First, a plaintiff must also allege that the imperfection in the sale harmed or prejudiced her. Permito v. Wells Fargo Bank, N.A., No. C-12-00545 YGR, 2012 WL 1380322, at *6 (N.D. Cal. Apr. 20, 2012). Plaintiff here was harmed when defendant sold her house despite its promise it would not do so until the review of her HAMP application was complete.
Second, plaintiff must allege that she tendered or that a tender was not required. A full tender must be made to set aside a foreclosure sale, based upon equitable principles. Stebley v. Litton Loan Servicing, LLP, 202 Cal. App. 4th 522, 526 (3rd Dist. 2011). A tender, however, may not be required where it would be inequitable to impose such a condition on the party challenging the sale. Lona, 202 Cal. App. 4th at 113.
In Singh, the plaintiffs, who had not been in default at the time of the foreclosure sale of their house, sought to set aside the sale and reinstate the modified loan agreement the parties had entered into. In their First Amended Complaint, they alleged that they "'stood ready willing and able to pay the entire indebtedness at the agreed-upon interval set forth in the deed of trust and promissory note.'" Singh, 2012 WL 691705, at *8 (quoting plaintiffs' First Amended Complaint).
The court held that although plaintiffs' offer was not a valid tender because it was not an offer of full performance, tender was not required. Id. The court reasoned that the tender rule is premised upon the maxim that a court of equity will not order that a useless act be performed. Id. (citing Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 579 (2d Dist. 1984)). In the usual foreclosure case it thus makes sense to require a plaintiff in default to tender because without a tender, the plaintiff will recover the property but remain in default, with the result that a second foreclosure is likely to occur. Id. (citing Karlsen v. Am. Sav. & Loan Assn., 15 Cal. App. 3d 112, 115 (2d Dist. 1971)). The plaintiffs in Singh, though, were not in default, so if the sale were set aside, the loan would be reinstated free from any default. The set aside would not be useless and so the court concluded that tender was not required. Id.
Here, plaintiff alleges that she had sufficient funds to pay all of her arrearage at the time that the foreclosure sale occurred and further alleges that she "offers to tender to Defendant all amounts due and owing so that the claimed default may be cured and Plaintiff may be reinstated to all former rights and privileges under the subject deed of trust. Plaintiff is ready willing and able [sic] to tender all amounts that the court finds due and owing." (FAC ¶ 71.) Because plaintiff would not have been in default but for defendant's instructions that she delay payment until her HAMP application was resolved and she alleges that she is willing and able to make payments sufficient to cure any default on her loan, as in Singh it does not appear that it would be useless to set aside the foreclosure sale and reinstate plaintiff's loan. Tender is therefore not required.
Accordingly, plaintiff has stated a valid claim to set aside the foreclosure sale and defendant's motion to dismiss this claim will be denied. Plaintiff's seventh cause of action, to cancel the trustee deed, is not an independent cause of action, but a request for a particular remedy. Plastino v. Wells Fargo Bank, No. 12-01037 CRB, 2012 WL 2061515, at *7 (N.D. Cal. June 7, 2012). Plaintiff will be given leave to amend to add cancellation to her prayer for relief.
F. Quiet Title
The purpose of a quiet title action is to establish one's title against adverse claims to real property. A basic requirement of an action to quiet title is an allegation that plaintiffs "are the rightful owners of the property, i.e., that they have satisfied their obligations under the Deed of Trust." Kelley v. Mortg. Elec. Registration Sys., 642 F. Supp. 2d 1048, 1057 (N.D. Cal. 2009). California Code of Civil Procedure section 761.020 states that a claim to quiet title requires: (1) a verified complaint, (2) a description of the property, (3) the title for which a determination is sought, (4) the adverse claims to the title against which a determination is sought, (5) the date as of which the determination is sought, and (6) a prayer for the determination of the title. Cal. Civ. Proc. Code § 761.020.
"A quiet title action is doomed in the absence of tender of the full amount owed." Gjurovich v. California, No. 1:10-CV-01871-LJO, 2010 WL 4321604, at *7 (E.D. Cal. Oct. 26, 2010). "Unless the mortgagor discharges the debt, the cloud on his or her title cannot be removed." Aquilar v. Bocci, 39 Cal. App. 3d 475, 477 (1st Dist. 1974). A mortgagor, therefore, cannot quiet his title against the mortgagee without paying the debt secured. Singh, 2012 WL 691705, at *9 (citing Shimpones v. Stickney, 219 Cal. 637, 649 (1934)).
While the FAC includes an offer to tender the amount due on her loan, plaintiff does not allege that she has tendered or offer to tender the total debt secured, which appears to be over $500,000.00. (FAC ¶ 28.) The court will therefore grant defendant's motion to dismiss plaintiff's claim to quiet title.
G. Declaratory Relief
In plaintiff's claim for declaratory relief, she repeats her claims that the foreclosure was wrongful because defendants violated HAMP and failed to suspend foreclosure proceedings while reviewing plaintiff's modification application and suggests that defendant will likely argue that they were entitled to foreclose on her property and complied with statutory procedures governing the foreclosure process. (FAC ¶¶ 64-65.) She then alleges that "an actual controversy exists as to whether the above-mentioned contracts existed, and which party breached them, if any, and whether Defendants were lawfully entitled to effectuate said foreclosure" and requests a "judicial determination of each parties' rights and duties pertaining to the above-referenced contracts." (Id. ¶¶ 66, 68.)
The court is unable to determine what contracts plaintiff refers to here. Because it is not at all clear what declaratory relief plaintiff is seeking, the court will grant defendant's motion to dismiss this claim.
H. Injunctive Relief
Plaintiff purports to state a cause of action for injunctive relief. Injunctive relief is not an independent cause of action; rather, it is a remedy. See McDowell v. Watson, 59 Cal. App. 4th 1155, 1159 (4th Dist. 1997) ("Injunctive relief is a remedy and not, in itself a cause of action") (internal quotation marks omitted). The court will dismiss plaintiff's fourth cause of action, but plaintiff may amend her FAC to a include injunctive relief in her prayer.
IT IS THEREFORE ORDERED that Aurora's motion to dismiss be, and the same hereby is, DENIED with respect to plaintiff's claims for promissory estoppel and to set aside the trustee's sale and GRANTED with respect to the remaining claims.
Plaintiff has twenty days from the date of this Order to file an amended complaint, if she can do so consistent with this Order.
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WILLIAM B. SHUBB
UNITED STATES DISTRICT JUDGE