Altman v. PNC Mortg.

• Decision Date: 19 January 2012
• Docket Number: CASE NO. CV F 11-1807 LJO MJS
• Parties: ERNIE ALTMAN, et al., Plaintiffs, v. PNC MORTGAGE, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

ERNIE ALTMAN, et al., Plaintiffs,

v.PNC MORTGAGE, et al., Defendants.

CASE NO. CV F 11-1807 LJO MJS

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: January 19, 2012

ORDER ON DEFENDANTS' F.R.Civ.P. 12 MOTIONS

(Docs. 10, 11, 12.)

INTRODUCTION

Defendants PNC Bank, N.A. ("PNC"), and Rushmore Loan Management Services ("Rushmore") seek to dismiss as legally barred plaintiff Ernie Altmann ("Mr. Altmann") and Creative Builders, Inc.'s ("CBI's") common law, statutory, punitive damages and attorney fees claims arising out of Mr. Altmann's loan for and foreclosure activity on his Stanislaus County residence ("property"). Mr. Altman and CBI (collectively "plaintiffs") fail to oppose dismissal of their claims. This Court considered PNC and Rushmore's (collectively "defendants'") F.R.Civ.P. 12(b)(6) motion to dismiss and F.R.Civ.P. 12(f) motion to strike on the record and VACATES the February 1, 2012 hearing, pursuant to Local Rule 230(c), (g). For the reasons discussed below, this Court DISMISSES this action against defendants.

BACKGROUND¹

Summary

According to the complaint, plaintiffs pursue claims to address "Defendant's negligent, fraudulent and unlawful conduct concerning residential mortgage loan transaction with the Plaintiff." CBI "is on title" as the property owner "in exchange for loans and expenses paid by CBI on behalf of Altmann." PNC is named as a defendant as a successor in interest to defendant National City Mortgage Company ("National City"), the "original lender" of Mr. Altmann's "mortgage loan." Rushmore services Mr. Altmann's loan and "has demanded payments." The complaint alleges 15 claims arising under common law and federal and California statutes as well as seeking punitive damages and attorney fees. Defendants challenge the complaint's claims as insufficiently pled and barred by limitations periods and other applicable law.

Loan Origination And Funding

In early 2007, National City "solicited" Mr. Altmann to finance the property with a construction loan so Mr. Altmann "could build his residential home" on the property. National City stated that the construction loan "was to later convert to a 30-year term with a fixed interest rate known as a 'take out loan.'" Mr. Altmann "was not given a copy of any of the loan documents prior to closing as required."

National City never funded the entire construction loan and never converted the loan to a "take out loan." National City fell short by $40,000 to fund the construction loan and funded construction loan draws late and "less than the amount it was supposed to fund" to require Mr. Altmann to complete construction with funds borrowed from CBI.

National City failed to carry construction insurance on the loan. A $50,000 claim arose during construction, and National City stated it would cover the loss and reimburse Mr. Altmann but failed to do so to require Mr. Altmann to again borrow from CBI.

National City offered Mr. Altmann a short-term loan to cover his expenses while National City prepared to convert the loan. Mr. Altmann made timely payments on the short-term loan, but National City returned payments to Mr. Altmann without explanation and caused a default on the loan.

Short Sale Of Property

National City offered Mr. Altmann a $595,000 short sale of the property and to waive its second loan on the property. A third-party buyer offered $595,000 for the property, and Mr. Altmann accepted. National City processed the short sale extremely slowly, and the buyer informed Mr. Altmann that he might cancel the sale due to delays.

When the short sale was set to close in September 2010, National City employee Lynn Rowland ("Mr. Rowland") requested a new property appraisal. The new property appraisal was $635,000, lower than the original $700,000 property appraisal. Mr. Rowland agreed to allow the buyer to reduce the sales price to $510,000 "because PNC accepted up to 85% of the appraised price."

At the end of September 2010, Mr. Rowland was unavailable to prevent timely closing of the short sale. On September 27, 2010, the short sale transaction was stayed due to a bankruptcy on an adjacent property and a bankruptcy debtor's easement which affected Mr. Altmann's property.

On October 1, 2010, Rushmore purchased Mr. Altmann's loan from PNC, despite the bankruptcy stay and such loan purchase "violated the bankruptcy stay and is therefore void."

In October 2010, Mr. Rowland assured Mr. Altmann that Mr. Rowland would handle the short sale for Rushmore, which would accept the $510,000 sale price. Mr. Rowland stated that if Rushmore did not approve the sale price, PNC would repurchase the loan to allow short sale completion.

Two weeks later, Mr. Rowland informed Mr. Altmann that PNC had "changed its mind" and would not repurchase the loan from Rushmore. In November 2010, Rushmore employee Steve Sanchez took over the short sale from Mr. Rowland and ordered a third property appraisal, which came back at $590,000. Rushmore refused to honor the pre-existing short sale approval and demanded an increased price of $590,000 from $510,000 to cause the buyer to cancel the short sale.

Mr. Altmann submitted a loan modification application to Rushmore, which intends to sell the property at a foreclosure trustee sale despite the absence of notice to CBI of the trustee sale to violate due process rights.

Plaintiffs' Claims

Plaintiffs filed their complaint on October 27, 2011 to allege 15 claims which will be addressed below and seeks to recover general, special and punitive damages and attorney fees.

DISCUSSION

F.R.Civ.P. 12(b)(6) Motion To Dismiss Standards

Defendants seek to dismiss the complaint's common law and statutory claims as legally barred and insufficiently pled. Defendants further seek to strike the complaint's punitive damages prayer and references to subject defendants to punitive damages as well as attorney fees claims.²

"When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheurer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683 (1974); Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9^th Cir. 1997). A F.R.Civ.P. 12(b)(6) dismissal is proper where there is either a "lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balisteri v. Pacifca Police Dept., 901 F.2d 696, 699 (9^th Cir. 1990); Graehling v. Village of Lombard, Ill., 58 F.3d 295, 297 (7th Cir. 1995). A F.R.Civ.P. 12(b)(6) motion "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9^th Cir. 2001).

In addressing dismissal, a court must: (1) construe the complaint in the light most favorable to the plaintiff; (2) accept all well-pleaded factual allegations as true; and (3) determine whether plaintiff can prove any set of facts to support a claim that would merit relief. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9^th Cir. 1996). Nonetheless, a court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Sciences Securities Litig., 536 F.3d 1049, 1055 (9^th Cir. 2008) (citation omitted). A court "need not assume the truth of legal conclusions cast in the form of factual allegations," U.S. ex rel. Chunie v. Ringrose, 788 F.2d 638, 643, n. 2 (9^th Cir.1986), and must not "assume that the [plaintiff] can prove facts that it has not alleged or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters,459 U.S. 519, 526, 103 S.Ct. 897 (1983). A court need not permit an attempt to amend if "it is clear that the complaint could not be saved by an amendment." Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9^th Cir. 2005).

A "plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 554,127 S. Ct. 1955, 1964-65 (2007) (internal citations omitted). Moreover, a court "will dismiss any claim that, even when construed in the light most favorable to plaintiff, fails to plead sufficiently all required elements of a cause of action." Student Loan Marketing Ass'n v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal. 1998). In practice, a complaint "must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562, 127 S.Ct. at 1969 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7^thCir. 1984)).

In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937,1949 (2009), the U.S. Supreme Court explained:

. . . a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." . . . 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. . . . 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. (Citations omitted.)

After discussing Iqbal, the Ninth Circuit Court of Appeals summarized: "In sum, for a complaint to survive [dismissal], 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, 989 (9^th Cir. 2009) (quoting Iqbal, 556 U.S. 662, 129 S.Ct. at 1949).

The U.S. Supreme Court applies a "two-prong approach" to address

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