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Pyle v. U.S. Bank N.A.

United States District Court, Ninth Circuit

August 2, 2013

Johnny W. Pyle; and Patricia A. Pyle, wife, Plaintiffs,
U.S. Bank NA, a national banking association trustee of Harborview 2006-4 Trust Fund; ReconTrust Company, NA, a national banking association; Bank of America, NA, a national banking association, Defendants.


G. MURRAY SNOW, District Judge.

Defendants have moved to dismiss (Doc. 20) the Amended Complaint (Doc. 15) filed by Plaintiffs Johnny and Patricia Pyle. For reasons specified below, the Court grants in part and denies in part the Motion.[1]


The Pyles took out a loan of $731, 000.00 from Equity 1 Lenders Group on February 10, 2006, to finance a purchase of real estate located at 3945 East Leland Street in Mesa, Arizona. (Doc. 15 ¶ 1; Doc. 20-1, Ex. A.)[3] They secured that loan through a Deed of Trust. (Doc. 20-1, Ex. A.)

As the real estate market collapsed across the country, the Pyles and the company that was then servicing their loan-BAC Home Loans Servicing-discussed a loan modification agreement. (Doc. 15 ¶ 5; Doc. 1-1, Ex. A at "Ex. A.")[4] The Pyles and BAC Home Loans agreed on a loan modification in March of 2010. (Doc. 15 ¶ 5.) The Pyles signed the agreement on March 3, 2010, and returned it to BAC. (Doc. 1-1, Ex. A at "Ex. A.") The Loan Modification Agreement does not contain a signature from BAC. ( Id. ) The Agreement set the monthly payment from April 2010-April 2012 at $2, 068.45. ( Id. )

The Pyles began making monthly payments at the rate specified in the Modification Agreement. (Doc. 15 ¶ 6.) BAC accepted 14 payments beginning in April 2010. ( Id. ) After that, however, BAC began rejecting those payments and returning them to the Pyles. ( Id. ¶ 7.) BAC returned the next 11 payments and claimed instead that the amount due was the payment required under the terms of the original loan ($3, 413.10). ( Id. ¶¶ 7-8.) BAC then instructed the Pyles not to send any further monthly payments. ( Id. ¶ 7.)

Meanwhile, back on June 8, 2011, MERS, as nominee for Equity 1 Lenders, had assigned its beneficial interest under the Deed of Trust to BAC. (Doc. 20-1, Ex. C.) At some point, Bank of America, as successor by merger to BAC, assigned the beneficial interest to Defendant U.S. Bank NA. (Doc. 15 ¶ 3.) On April 18, 2012, U.S. Bank substituted Defendant ReconTrust Company, NA, as the trustee under the Deed of Trust. (Doc. 20-1, Ex. D.) The next day, ReconTrust noticed the property for a Trustee's Sale to take place on July 26, 2012. ( Id., Ex. E.) That sale has not yet occurred, and by stipulation of the Parties, a litigation hold has been placed on it. (Docs. 17, 18.)

The Pyles filed suit in Superior Court on September 20, 2012. (Doc. 1-1.) Defendants removed the suit to federal court on October 12. (Doc. 1.) On February 28, 2013, the Pyles voluntarily dismissed Bank of America as a party and filed their Amended Complaint. (Docs. 14, 15.) They seek declaratory and injunctive relief and assert that Defendants violated their covenant of good faith and fair dealing. (Doc. 15.) Defendants moved to dismiss the Amended Complaint on March 18, 2013. (Doc. 20.)



Rule 12(b)(6) is designed to "test the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain more than "labels and conclusions" or a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While "a complaint need not contain detailed factual allegations... it must plead enough facts to state a claim to relief that is plausible on its face.'" Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully." Id. When a complaint does not "permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief." Id. at 679 (internal quotation omitted).

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), "[a]ll allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal conclusions couched as factual allegations are not given a presumption of truthfulness, and "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).


The Pyles' claims for declaratory and injunctive relief rest on the validity of the Modification Agreement. The Court must therefore determine whether the allegations of the Amended Complaint and the documents attached thereto support the Pyles claim that the original agreement was modified to allow for a reduced monthly payment. Defendants claim ...

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