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Lansburg v. Federal Home Loan Mortgage Corporation

United States District Court, D. Arizona

June 7, 2016

JEANETTE K. LANSBURG and LARRY J. ENCINAS, husband and wife, Plaintiffs,


          RUSSEL HOLLAND, District Judge.

         Motion to Dismiss

         Defendants move to dismiss plaintiffs' amended verified complaint.[1] This motion is opposed.[2] Oral argument was not requested and is not deemed necessary.


         Plaintiffs are Jeanette K. Lansburg and Larry J. Encinas. Defendants are Federal Home Loan Mortgage Company and Saxon Mortgage.

         Plaintiffs allege that in February 2007, they "entered in to a mortgage/deed of trust/security deed/note with Taylor Bean & Whitaker for the real property located at 14394 West Shaw Butte Drive, Surprise, Arizona 85379...."[3] Plaintiffs allege that on February 22, 2008, they negotiated a loan modification with Taylor Bean & Whitaker "due to financial hardship...."[4]

         Plaintiffs allege that in March or April 2008, they decided to become foster parents and that their home was approved as a foster care facility.[5]

         Plaintiffs allege that in April 2009, they requested another loan modification.[6] Plaintiffs allege that they "started the loan modification process with Taylor Bean & Whitaker" but that their loan was then transferred to Sparta Special Servicing.[7] Plaintiffs allege that in June 2009, they "entered in to another loan modification through Sparta Special Servicing" and that they "executed documents with Sparta Special Servicing regarding a loan modification...."[8]

         Plaintiffs allege that after entering into the "loan modification" with Sparta Special Servicing, "servicing on [their] loan was then supposedly transferred to Saxon Mortgage."[9] Plaintiffs allege that they received notice of the transfer when Lansburg was sending her third payment on the loan modification to Sparta Special Servicing.[10] Plaintiffs allege that after receiving notice of the transfer to Saxon Mortgage, they "made payments to Saxon on the loan modification."[11]

         Plaintiffs allege that in November 2009, "Lansburg wrote to Saxon concerning her loan modification and continued payments."[12] Plaintiffs allege that Lansburg advised Saxon that plaintiffs "were filing bankruptcy and that the two outstanding personal checks in [Saxon's] possession that had not been cashed would need to be replaced with cashier's checks...."[13] Plaintiffs allege that they "continued to make their monthly payments to Saxon after the filing of the bankruptcy."[14]

         Plaintiffs allege that in June 2010, they "were informed by a Saxon employee that they had no loan modification and that all the money they had been paying [Saxon] since June 2009 did not cover the outstanding payments[.]"[15] Plaintiffs further allege that on the same day, they "found out that their home had already been sold at a trustee sale, which was supposed to have been previously cancelled."[16] Plaintiffs allege that they then were "forced to vacate" their home and "obtain substitute housing."[17]

         Plaintiffs' home was sold at a trustee sale on June 14, 2010 for $240, 000.[18] At the time of the sale, the amount of the unpaid debt on the underlying loan was $482, 178.96.[19]

         Plaintiffs allege that they "paid their monthly payment to Saxon under the terms of the loan modification. Saxon and FHLMC then breached the loan modification agreement and had the substitute trustee sell [their] home and had [p]laintiffs and their foster children evicted from" their home.[20] Plaintiffs allege that they "would not have made their monthly payment under the loan modification agreement if they had known that Saxon and FHLMC had no intent to abide by the terms of the loan modification agreement."[21] Plaintiffs allege that they made $20, 000 in payments "as consideration for a loan modification[.]"[22]

         Plaintiffs commenced this action on July 6, 2011 in state court. It was subsequently removed to this court. In their original complaint, plaintiffs alleged five claims: 1) declaratory relief, 2) conversion of real property/slander of title, 3) breach of fiduciary duty, 4) breach of the covenant of good faith and fair dealing, and 5) misrepresentation. Defendants moved to dismiss all of plaintiffs' claims. The court granted the motion to dismiss in part and denied it in part.[23] The court dismissed plaintiffs' request for a declaration that "[d]efendants are not legally entitled to claim title to the subject Real Property'" with prejudice.[24] The court also dismissed plaintiffs' slander of title claim with prejudice.[25] The court dismissed plaintiffs' misrepresentation claim without prejudice.[26] And, the court denied defendants' motion as to plaintiffs' request for a declaration that "[d]efendants are not legally entitled to enforce the underlying Deed of Trust or promissory note under their former terms due to the modifications that occurred" and as to plaintiffs' breach of the implied covenant of good faith and fair dealing claim.[27]

         The parties then commenced with discovery. After discovery was complete, defendants moved for summary judgment on plaintiffs' two remaining claims. On March 7, 2013, the court granted defendants' motion for summary judgment.[28]

         Plaintiffs appealed and on June 12, 2015, the Ninth Circuit vacated this court's judgment and remanded for reconsideration of plaintiffs' claims in light of Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013), an opinion that was issued after this court had granted defendants' motion for summary judgment. In Corvello, the Ninth Circuit held that borrowers have a viable cause of action against a loan servicer if the servicer has "accepted and retained the payments demanded by" a trial period plan, "but neither offered a permanent modification nor notified [the borrowers] they were not entitled to one, as required by the terms of the TPP." Id. at 880. "Where... borrowers allege... that they have fulfilled all of their obligations under the TPP, and the loan servicer has failed to offer a permanent modification, the borrowers have valid claims for breach of the TPP agreement." Id. at 884.

         Upon remand, plaintiffs were given until December 1, 2015 to move to amend their complaint.[29] Plaintiffs so moved, and the court granted their motion to amend.[30]

         In their amended complaint, plaintiffs assert four counts. In Count One, plaintiffs seek declaratory relief. In Count Two, plaintiffs assert a wrongful foreclosure claim. In Count Three, plaintiffs assert a breach of contract claim and a breach of the implied covenant of good faith and fair dealing claim. In Count Four, plaintiffs assert negligence claims.

         Defendants now move to dismiss all of plaintiffs' claims.


         As an initial matter, defendants point out that plaintiffs' response to the instant motion was untimely. Defendants filed their motion to dismiss on April 1, 2016. Pursuant to Local Rule 7.2(c), plaintiffs' response was due 14 days later. Excluding the day of service, and including the additional three days permitted under Rule 6(d), Federal Rules of Civil Procedure, plaintiffs' response was due on April 18, 2016. Plaintiffs' response was not filed until April 20, 2016. Plaintiffs did not request an extension of time nor did they provide any reason as to why they filed their response two days late. Because plaintiffs' response was untimely, the court could, pursuant to Local Rule 7.2(i), summarily grant defendants' motion to dismiss. But, because a decision on the merits of defendants' motion to dismiss is preferable and defendants have not been prejudiced by the two-day delay, the court will treat plaintiffs' opposition as timely. However, because this is not the first time plaintiffs have made an untimely filing, [31] plaintiffs are admonished that if this case goes forward, the next time they file a late document, the court may not be as lenient.

         Turning then to the merits of defendants' motion, "[t]o survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege enough facts to state a claim to relief that is plausible on its face.'" Turner v. City and County of San Francisco, 788 F.3d 1206, 1210 (9th Cir. 2015) (quoting Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008)). "In assessing whether a party has stated a claim upon which relief can be granted, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party; but conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal.'" Id . (quoting Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009)). "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 . (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "This standard asks for more than a sheer possibility that a defendant has acted unlawfully, ' but it is not akin to a probability requirement.'" Id . (quoting Iqbal, 556 U.S. at 678). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, ' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 556 U.S. at 678).

         Count One-Declaratory Relief

         Plaintiffs seek "a declaration stating that the [d]efendants are not legally entitled to claim title to the subject Real Property and were not entitled to foreclose on the Real Property and evict the [p]laintiffs from the Real Property."[32] This claim for declaratory relief is dismissed with prejudice for the same reason the court previously dismissed this claim with prejudice.[33]

         Plaintiffs also seek "a declaration that the [d]efendants are not legally entitled to enforce the underlying Deed of Trust or promissory note under their former terms due to the modifications that occurred."[34] Plaintiffs allege that defendants are not legally entitled to enforce the underlying Deed of Trust or promissory notes because of defendants' "material misrepresentations."[35] This claim for declaratory relief is dismissed. Plaintiffs have alleged no factual support for this claim. This claim is based on allegations that defendants made material misrepresentations. But nowhere in plaintiffs' amended complaint do they allege any specific misrepresentations made by defendants, when any of these alleged misrepresentations were made, or how these alleged misrepresentations were material. All plaintiffs have alleged is that defendants made material misrepresenta-tions, but such conclusory allegations are not sufficient to withstand a Rule 12(b)(6) motion to dismiss. Although it is possible that plaintiffs could allege some factual support for their contention that defendants made material misrepresentations, this claim is dismissed with prejudice because it is duplicative of plaintiffs' substantive claims in Count Three. See Vang Chanthavong v. Aurora Loan Services, Inc., 448 B.R. 789, 803 (E.D. Cal. 2011) (quoting Fimbres v. Chapel Mortg. Corp., No. 09-cv-0886-IED, 2009 WL 4163332, at *5 (S.D. Cal. Nov. 20, 2009) ("federal court may decline to address a claim for declaratory relief' where the substantive claims would resolve the issues raised by the declaratory action'").

         Count Two-Wrongful Disclosure Claim

         "Arizona state courts have not yet recognized a wrongful foreclosure cause of action." Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1043 (9th Cir. 2011). Because Arizona has not expressly recognized a cause of action for wrongful foreclosure, plaintiffs' wrongful foreclosure claim in Count Two is dismissed. This claim is dismissed with prejudice because "amendment would be ...

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