Mardikian v. CitiMortgage, Inc.

Decision Date21 July 2014
Docket Number1:14-CV-00407-LJO-SKO
CourtU.S. District Court — Eastern District of California
PartiesGEORGE MARDIKIAN, Plaintiff, v. CITIMORTGAGE, INC., et al, Defendants.



Plaintiff George Mardikian ("Mardikian") brings this action for breach of contract, trespass, and specific performance against Defendants Citimortgage, Inc. ("CMI"), Safeguard Properties Management ("Safeguard"), the Federal National Mortgage Association ("Fannie Mae"), and Does 1 through 100 (collectively, "Defendants"). Now before the Court is Defendants' motion to dismiss Mardikian's complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons discussed below, this Court DENIES in part Defendants' motion and ORDERS the parties to submit supplemental briefing.

A. Facts 1

Mardikian purchased the property at 2417 East El Paso Avenue, Fresno, CA 93720 ("Property") on July 3, 2002 and secured financing by executing a deed of trust and promissory note in favor of First Nationwide Mortgage Corporation in the amount of $101,500.00. The loan was thentransferred to Fannie Mae, the current beneficiary. CMI has been the servicer of Mardikian's loan at all relevant times.

In or around August 2011, the Property was destroyed in a fire. Mardikian immediately filed a claim with Hartford Insurance Company ("Hartford), who insured the Property, and notified CMI of the fire.

The deed of trust on the Property provides, in relevant part, that, in the event of a loss covered by insurance, "[i]f the restoration is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security Instrument, whether or not then due, with the excess, if any, paid to the Borrower." (Compl. ¶ 25). The deed of trust further provides that such insurance proceeds would be applied in the following order of priority: "a) interest due under the Note; b) principal due under the Note; c) amounts due under [another section of the deed of trust]." Id.

Mardikian alleges that CMI, on behalf of Fannie Mae, and Mardikian agreed that it was not economically feasible for the Property to be rebuilt. Therefore, the insurance proceeds would be used to pay off monies Mardikian owed under the deed of trust. Mardikian alleges that he owed approximately $75,000 under the deed of trust at the time of the fire.

On January 20, 2012, Hartford issued a payment in the amount of $78,142.85 to CMI with the instruction that the insurance proceeds be applied to any outstanding funds secured by the Deed of Trust. Mardikian alleges that the payment issued by Hartford was sufficient to fully pay off the deed of trust.

In January 2012, CMI sent Mardikian a statement indicating that he still owed monthly mortgage payments, and that his monthly payments had increased from $633.34 to $1,022.19 per month. Mardikian was shocked to receive the statement and contacted CMI. CMI told Mardikian that it had been instructed by Fannie Mae to place all of the insurance proceeds in a suspense account instead of applying them to Mardikian's loan. Mardikian informed CMI that this was not correct and CMI told Mardikian that it would work with Fannie Mae to resolve the issue.

In the meantime, Mardikian continued to make his monthly mortgage payment to CMI with the understanding that, once the insurance proceeds were applied to his loan, Mardikian would receive anyfunds in excess of that owed under the deed of trust.

In March 2013, when Mardikian was still making monthly mortgage payments to CMI and awaiting confirmation from CMI and Fannie Mae that this loan was paid off by the insurance proceeds, Mardikian was shocked to discover that Safeguard had changed the locks on the doors of the Property and boarded up the windows of the Property at the direction of CMI. Mardikian argues that, at the time CMI and Safeguard entered the Property, they had no interest in the Property because the deed of trust should have been paid off in full. Mardikian alleges that CMI and Safeguard took these actions prior to contemplating foreclosure, obtaining title, or even seeking a writ of possession.

Between March 2013 and August 2013, Mardikian sent multiple letters to CMI informing them that Mardikian's mortgage was paid off in full, requesting that his credit be restored, and indicating that no entities had any right to enter his Property without his permission. The letters also requested that the entities involved resolve the issued caused by their conduct.

On August 8, 2013, Fannie Mae caused to be recorded a notice of default against the Property.

On October 10, 2013, Mardikian was awarded a judgment of specific performance against CMI in San Mateo Superior Court, Small Claims Division for CMI's attempted foreclosure which orders CMI to correct Mardikian's credit. To date, CMI has not taken any steps to correct Mardikian's credit.

B. Procedural History

On February 18, 2014, Mardikian brought an action against Defendants for breach of contract, trespass, and enforcement of small claims judgment in Fresno County Superior Court. On March 21, 2014, Defendants removed the action to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332.

On April 17, 2014, Mardikian filed a first amended complaint for breach of contract, trespass, and specific performance against Defendants.

Defendants filed the instant motion to dismiss Mardikian's first amended complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) on May 1, 2014. Mardikian filed an opposition on June 10, 2014, and Defendants filed a reply on June 17, 2014.

Motion to Dismiss

A. 12(b)(6) Failure to State a Claim

1. Legal Standard

A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) is a challenge to the sufficiency of the allegations set forth in the complaint. A dismissal under Rule 12(b)(6) 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. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). "On a motion to dismiss for failure to state a claim, the court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the nonmoving party." Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987) (citing Western Reserve Oil & Gas Co. v. New, 765 F.2d 1428, 1430 (9th Cir.1985); Sprewell, 266 F.3d at 988.

To survive a Fed. R. Civ. P. 12(b)(6) motion to dismiss, the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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, 129 S.Ct. 1937, 1949 (2009). "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. (citing Twombly, 550 U.S. at 556). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility for entitlement to relief Id. (citing Twombly, 550 U.S. at 557).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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." Twombly, 550 U.S. at 555 (internal citations omitted). Thus, "bare assertions ... amount[ing] to nothing more than a formulaic recitation of the elements ... are not entitled to be assumed true." Iqbal, 129 S.Ct. at 1951. A court is "free to ignore legal conclusions, unsupported conclusions, unwarranted inferences and sweeping legal conclusions cast in the form of factual allegations." Farm Credit Services v. American State Bank, 339 F.3d 764, 767 (8th Cir. 2003) (citation omitted).

Moreover, a court "will dismiss any claim that, even when construed in the light mostfavorable 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 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).

To the extent that the pleadings can be cured by the allegation of additional facts, the plaintiff should be afforded leave to amend. Cook, Perkiss and Liehe, Inc. v. Northern California Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990) (citations omitted).

2. Analysis
i. Breach of Contract

In his first cause of action, Mardikian alleges that Defendants CMI and Fannie Mae breached Covenant 5 and Covenant 20 of the deed of trust.

1. Sufficiency of Pleading

In California, "[a] cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff." Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1388 (Cal. Ct. App. 1990) (internal citations omitted).

Here, Mardikian alleges that the deed of trust was the contract between the parties.

CMI and Fannie Mae argue the Mardikian failed to allege sufficiently that he remained current on his monthly mortgage payments. Mardikian alleges that, after receiving the mortgage statement from CMI in January 2012, he continued to make his monthly mortgage payments to CMI, that he was still making his mortgage payments...

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