United States District Court, D. Arizona
Honorable G. Murray Snow United States District Judge
Pending before the Court is Defendant Capital One NA’s Motion to Dismiss Plaintiffs Steven and Elizabeth Weisman’s first amended complaint (“FAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 24.) For the following reasons, the Defendant’s motion is granted in part and denied in part.
Plaintiffs owned real property in Scottsdale, Arizona (“Property”). FAC ¶ 6. Defendant is the mortgagee on the Property. FAC ¶ 7. Plaintiffs filed for bankruptcy on May 6, 2011, and the case closed on February 14, 2013. FAC ¶¶ 8-9. In September 2012, during the adjudication of Plaintiffs’ bankruptcy case, they applied to Defendant for a loan modification. FAC ¶ 10. On November 5, 2012, Defendant approved Plaintiffs for a “trial period for loan modification.” FAC ¶ 21. During a November 7, 2012 phone call with Galen Hines, Defendant’s employee, Mr. Hines explained the details of the trial loan modification, including that the Plaintiffs’ owed $3047 a month. FAC ¶ 23. Plaintiffs began remitting that amount to Defendant. FAC ¶¶ 26-28.
On February 13, 2013, Defendant approved Plaintiffs’ final loan modification application. FAC ¶ 29, Ex. 1. On May 30, 2013, in light of a lower appraisal value on the Property, Plaintiffs requested a principal reduction on their loan. FAC ¶ 35, Ex. 3. Plaintiffs received a letter on June 17, 2013 notifying them of a reduction in their monthly payments due to an interest rate reduction. FAC ¶ 36, Ex. 4. Plaintiffs started remitting reduced payments as a result. FAC ¶ 53. In July 2013, Defendant requested that Plaintiffs execute and return their final loan modification documents. FAC ¶ 41. At the time, Plaintiffs were engaged in efforts to settle with their second mortgagee on the Property, after which Plaintiffs informed Defendant they would send the executed final loan modification documents. FAC ¶¶ 42, 43. Plaintiffs submitted the executed final loan modification documents in August 2013; yet, Defendant did not accept the executed documents and instead notified Plaintiffs that they needed to submit a new loan modification application. FAC ¶¶ 46, 47. On September 11, 2013, Defendant denied Plaintiffs’ loan modification application, informed Plaintiffs that their monthly payments were short of the amount they owed, and that their loan was now in default. FAC ¶¶ 50- 52. After learning of the default, Plaintiffs began remitting higher monthly payments to make up the difference. FAC ¶ 54.
On September 27, 2013, Plaintiffs submitted a new loan modification application. FAC ¶ 56. Defendant rejected Plaintiffs’ application because Plaintiffs held too much money in their personal and business bank accounts. FAC ¶¶ 58, 60. Plaintiffs allege that they did not in fact possess the funds Defendant relied upon in rejecting their application. FAC ¶ 59, 61. Plaintiffs’ attorneys informed Defendant that error caused it to reject Plaintiffs’ application. FAC ¶ 70, Ex. 8. Plaintiffs then submitted a third loan modification application in March 2014. FAC ¶ 73. In June 2014, Defendant denied Plaintiffs third application for failure to meet income criteria. FAC ¶¶ 85, Ex. 9, 86. Plaintiffs then entered a fourth application for loan modification that Defendant denied for incompleteness. FAC ¶¶ 93, 100. On January 6, 2014, Plaintiffs discussed paying off the past due loan balance with Defendant and requested an accounting of those balances. FAC ¶ 107. Defendant provided an Account Activity Statement History covering 2013 to 2015. FAC ¶ 111. Plaintiffs, however, wanted an itemized list of past due amounts, which Defendant never provided. FAC ¶¶ 112, 113. Defendant did supply an Amended Escrow Disclosure Statement. FAC ¶ 114, Ex. 10. In an alleged phone call with Defendant, Plaintiffs accepted an offer of a $9440.41 refund, which they never received. FAC ¶¶ 116-119. Defendant eventually provided the Deed of Trust on the Property and an account history statement. FAC ¶ 120. Although Plaintiffs received numerous notices of default, FAC ¶¶ 52, 55, 57, 66, 69, 78, 102, Plaintiffs remitted monthly payments to Defendant since December 2012. FAC ¶ 121.
I. Legal Standard
On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact are assumed to be true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To avoid dismissal, a complaint need contain only “enough facts to state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The principle that a court accepts as true all of the allegations in a complaint does not apply to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “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.” Id. “The plausibility standard is not akin to a ‘probability requirement, ’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. To show that the plaintiff is entitled to relief, the complaint must permit the court to infer more than a mere possibility of misconduct. Id.
A. Law of the Case Doctrine
Plaintiffs incorrectly invoke the law of the case doctrine and argue that the Court’s previous Order (Doc. 21) granting Plaintiffs’ motion for leave to amend prohibits Defendant from moving to dismiss claims 4 (breach of contract), 5 (negligent/intentional misrepresentation), and 6 (RESPA) of the FAC. The Order itself specifically reserved Defendant’s right to attack the factual basis of Plaintiffs’ FAC pursuant to Rule 12(b)(6). (Doc. 21 at 6 (“Plaintiffs should be granted leave to amend, after which the factual basis of the amended complaint could then be attacked by Defendants under Rule 12(b) or Rule 56. Hernandez v. Maricopa Cnty. Super. Ct., 108 Ariz. 422, 501 P.2d 6 (1972).”) Moreover, the Court’s Order did not decide Plaintiffs’ claims beyond whether they should be permitted to add them to their complaint. See Teamsters Local 617 Pension & Welfare Funds v. Apollo Grp., Inc., 2011 WL 1253250, at *11 (D. Ariz. Mar. 31, 2011) (“[T]he law of the case does not apply to issues or claims that were not actually decided.”) (internal quotation marks omitted) (citation omitted). The law of the case doctrine does not preclude the Court from considering Defendant’s motion to dismiss.
B. Breach of Contract
To state a plausible claim for breach of contract, Plaintiffs must allege “the existence of a contract, the terms of the contract that Defendant has breached, and the damages suffered from that breach.” Repwest Ins. Co. v. Praetorian Ins. Co., 890 F.Supp.2d 1168, 1183 (D. Ariz. 2012). Plaintiffs FAC alleges that “Plaintiffs are the owners of real property[, ]” Defendant “is the mortgagee on the Property[, ]” and that “Plaintiffs and [Defendant] entered into a contract pursuant to which [Defendant] provided a loan to Plaintiffs for the purchase of ...