Dougherty v. Bank of Am., N.A.

• Citation: 177 F.Supp.3d 1230
• Decision Date: 01 April 2016
• Docket Number: No. 2:15-cv-01226-TLN-CKD,2:15-cv-01226-TLN-CKD
• Parties: Penny Dougherty and Dennis Dougherty, Plaintiffs, v. Bank of America, N.A.; Wells Fargo Bank, N.A., as Trustee, on Behalf of The Holders of the Harborview Mortgage Loan Trust Mortgage Pass-through Certificates, Series 2006-12; Select Portfolio Servicing, Inc.; Does 1 through 50, inclusive, Defendants.
• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California

177 F.Supp.3d 1230

Penny Dougherty and Dennis Dougherty, Plaintiffs,

v.Bank of America, N.A.; Wells Fargo Bank, N.A., as Trustee, on Behalf of The Holders of the Harborview Mortgage Loan Trust Mortgage Pass-through Certificates, Series 2006-12; Select Portfolio Servicing, Inc.; Does 1 through 50, inclusive, Defendants.

No. 2:15-cv-01226-TLN-CKD

United States District Court, E.D. California.

Signed April 1, 2016

Filed April 5, 2016

Andre M. Chernay, John Steve Sargetis, United Law Center, Roseville, CA, for Plaintiffs.

Jacqueline Canlas-LaFlam, Jason Matthew Richardson, Severson and Werson, Myles Alexander Lanzone, Regina J. McClendon, Lindsey Elizabeth Kress, Locke Lord LLP, San Francisco, CA, for Defendants.

ORDER

Troy L. Nunley, United States District Judge

This matter is before the Court pursuant to Defendant Bank of America, N.A. (“BOA”) and Wells Fargo Bank, N.A. (“Wells”), as trustee on behalf of the Holders of the HarborView Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2006-12 and Select Portfolio Servicing, Inc.'s (“SPS”) (together “Defendants”) Motions to Dismiss Plaintiffs' First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). (ECF Nos. 28, 30.) For the reasons set forth below, Defendant BOA's Motion to Dismiss is GRANTED IN PART and DENIED IN PART, and Defendants Wells and SPS' Motion to Dismiss is GRANTED IN PART and DENIED IN PART.

I. FACTUAL BACKGROUND

The claims in this case arise out of Defendants' alleged breach of their agreements in connection with the modification of Plaintiffs' residential mortgage loan. The residence is located in Newcastle, CA 95658. (Pls.' First Am. Compl., “FAC”, ECF No. 26 ¶ 2.)

For clarity, the Court cites first to Defendant BOA's summary of the underlying facts, and then states the more detailed allegations from the FAC. Defendant BOA alleges as follows: in November 2006, Plaintiffs obtained a $458,000 home loan from Aegis Wholesale Corporation. The loan was secured by a Deed of Trust (“DOT”) recorded against the property. The DOT listed Commonwealth Land Title as the trustee and Mortgage Electronic Registration Systems (“MERS”) as nominee and beneficiary. On October 20, 2011, an Assignment of Deed of Trust was recorded, wherein MERS transferred the beneficial interest to BOA, as successor by merger to BAC Home Loans Servicing LP FKA Countrywide Home Loans Servicing LP. On May 8, 2012 a Deed of Trust related to the “Keep Your Home California Program” (“KYHC”) was recorded against the property in favor of CalHFA Mortgage Assistance Corporation, securing a Note for $16,089.03. On April 9, 2015, a Corporation Assignment Deed of Trust was recorded wherein BOA's interest in the DOT was assigned to Wells Fargo, as trustee for a securitized trust. On April 14, 2015, a Substitution of Trustee was recorded, wherein Wells Fargo, as trustee for the securitized trust, substituted in Clear Recon Corp. as trustee. Clear Recon Corp. recorded a Notice of Default on April 30, 2015, indicating that Plaintiffs were $33,685.97 in arrears as of April 27, 2015.¹ (See Def. BOA's Mot. Dism., ECF No. 28 at 10.)

The following are the material allegations from the FAC: the November 2006 loan for $458,000 was “a jumbo non-conforming adjustable rate negative amortization loan, whereby the monthly payment would not cover the interest, and thus the difference would be added to and increase the principal each month.” (ECF No. 26 ¶ 14.)

Immediately after entering the loan, Plaintiffs began making monthly payments of $1,775 to an “entity known as Countrywide. Countrywide was either Countrywide Home Loans, Inc. or Countrywide Financial Corporation. Plaintiffs made monthly loan payments to Countrywide through approximately August, 2009 when they were notified future payments were to be made to an entity known as BAC. Plaintiffs understood the entity to be BAC Home Loans Servicing LP which was a servicer subsidiary of Countrywide.” (ECF No. 26 ¶ 15.) At all relevant times, “BAC Home Loans Servicing, LP operated as a subsidiary of [Defendant BOA].”² (ECF No. 26 ¶ 16.)

At some point, Plaintiffs contacted an agent of BOA to request to change their loan to a fixed rate loan. (ECF No. 26 ¶ 18.) The BOA agent explained “there was no program available for a modification of [Plaintiffs] loan terms since they were current in their payments.” (ECF No. 26 ¶ 18.) Plaintiffs continued to call BOA to inquire about converting the loan to a fixed rate, but they “were told there was no... modification...available because they were current and not in default.” (ECF No. 26 ¶ 19.) Mrs. Dougherty started a job with the Fieldhaven Feline Rescue earning $500 per month; she performed her job duties from home so she could care for her disabled husband. (ECF No. 26 ¶ 20.) In January 2010, the monthly payment increased to $1,880 for two months and then to $1,850 for three months.³ (ECF No. 26 ¶ 22.) In January 2010, Mrs. Dougherty lost her position with Fieldhaven. However, Plaintiffs continued to make monthly payments. (ECF No. 26 ¶ 23.)

In July 2010, Plaintiffs did not make their monthly payment. (ECF No. 26 ¶ 24.) Immediately thereafter, Plaintiffs contacted BOA to notify it of the missed payment in order to apply for a modification. (ECF No. 26 ¶ 25.) BOA said “there was still no program available even if [Plaintiffs] missed payments and [they] must resume [their] monthly payments.” (ECF No. 26 ¶ 25.) In August 2010, Plaintiffs resumed making a partial monthly payment of $1,700 and did not pay the full amount of $1,850, because that was the payment they could afford. (ECF No. 26 ¶ 26.) Plaintiffs made this payment for 14 consecutive months without objection from BOA. (ECF No. 26 ¶ 28.) However, in September 2011, BOA returned Plaintiffs' $1,700 payment for that month and said it would not accept any more payments that were not $1,952.56 monthly. (ECF No. 26 ¶ 32.) Consequently, out of fear of default, in October and November 2011 Plaintiffs made $1,952.56 monthly payments. (ECF No. 26 ¶ 34.)

On November 15, 2011, BOA invited Plaintiffs to attend an event at the Sacramento Convention Center to discuss and apply for a loan modification. (ECF No. 26 ¶ 35.) At the convention, BOA granted Plaintiffs a written modification of their loan terms, which would commence in January 2012 for just over $2,000 per month. (ECF No. 26 ¶ 36.) Plaintiffs agreed to enter this modification despite the amount being over $1,700, because the “[BOA] agent told them there was a program known as Keep Your Home California (“KYHC”) that would give [BOA] $100,000 towards a reduction of the principal, which would then result in a lower monthly payment down to about $1,700 per month.” (ECF No. 26 ¶ 38.) Plaintiffs signed the BOA modification documents, and thereafter a BOA agent led them “to the KYHC table to fill out the paperwork to obtain the $100,000 Principal Reduction Program.” (ECF No. 26 ¶ 39.) “The KYHC representative confirmed to plaintiff that [BOA] was a participant in the program and all they had to do was submit the forms online which [Plaintiffs] did immediately.” (ECF No. 26 ¶ 40.) A BOA representative told Plaintiffs that their monthly loan payment of $1,700 would begin in approximately January 2012. (ECF No. 26 ¶ 41.)

On November 30, 2011, BOA sent a letter to Plaintiffs, notifying them that their loan had been sold to an unknown entity (which Plaintiffs later learned was Defendant Wells) and that SPS would be the new servicer for that entity. (ECF No. 26 ¶ 42.) In December 2011, Plaintiffs contacted SPS and “spoke to [its'] authorized agent Debra Shrowder” to inquire about the status of their loan modification. (ECF No. 26 ¶ 43.) Shrowder “told plaintiff she would look into the status of the $100,000 from KYHC and also asked plaintiff to send her the [BOA] approval papers for the loan modification which plaintiff did send to her. Shrowder also told plaintiff in this initial conversation not to make any payments to SPS until they resolve the issue.” (ECF No. 26 ¶ 43.)

In January 2012, Shrowder told Plaintiffs that SPS had received written confirmation of the modification; however SPS was not going to honor it “because [SPS was] not yet a participant in the KYHC program but [was] applying to become one.” (ECF No. 26 ¶ 44.) Shrowder told Plaintiffs “the owner of the loan was a participant in an aspect of the KYHC program known as the loan reinstatement program whereby only the past due payments are covered by KYHC and not yet the KYHC program whereby $100,000 is given to the lender to reduce the principal.” (ECF No. 26 ¶ 47.) Shrowder told Plaintiffs they were approved for $16,000 through the KYHC reinstatement program, which “SPS would receive and accept...which would make the loan current.” (ECF No. 26 ¶ 52.) Additionally, Shrowder instructed them to submit a Home Affordable Modification Program (“HAMP”) application as a sign of goodwill, pending SPS' membership in the KYHC principal reduction program. (ECF No. 26 ¶ 48.) Plaintiffs consented to SPS's applying $16,000 to their past-due amount through the KYHC reinstatement program, and Plaintiffs also submitted a completed HAMP application. (ECF No. 26 ¶¶ 50, 52.) “For three months thereafter in 2012 plaintiff made numerous calls to SPS to inquire as to the status of the... modification agreement, as well as both the KYHC and the HAMP application.” (ECF No. 26 ¶ 51.) “Plaintiffs were told repeatedly everything was still pending and to submit certain financial records that they had already submitted or to send in updated bank statements.” (ECF No. 26 ¶ 51.)

Sometime thereafter, Shrowder told Plaintiffs that they were approved for the KYHC loan reinstatement program for $16,000. (ECF No. 26 ¶ 52.) Shrowder told Plaintiffs that despite this approval, beginning April 1, 2012, Plaintiffs had to pay $1,952.56 until either SPS became a member of the KYHC principal reduction program or until SPS approved Plaintiffs' HAMP application. (ECF No. 26 ¶ 53.) Shrowder told Plainti...