Nadan v. Homesales, Inc.
| Decision Date | 12 August 2011 |
| Docket Number | Doc. 8.,CASE NO. CV F 11-1181 LJO SKO |
| Parties | MUNI NADAN, et al., Plaintiffs, v. HOMESALES, INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of California |
ORDER ON DEFENDANTS' F.R.Civ.P. 12 MOTION TO DISMISS
Defendants Homesales, Inc. ("Homesales") and Chase Home Finance, LLC ("Chase Home") seek to dismiss plaintiffs Muni Nadan and Sakuntla Nadans' (collectively the "Nadans'") claims arising out of Chase Home's failure to extend a permanent loan modification for the Nadans' Modesto property ("property").1 The Nadans fail to oppose dismissal of claims against defendants. This Court considered defendants' F.R.Civ.P. 12(b)(6) motion to dismiss on the record and VACATES the August 23, 2011 hearing, pursuant to Local Rule 230(c), (g). For the reasons discussed below, this Court DISMISSES the Nadans' claims against defendants.
The Nadans defaulted on their property loan, and Chase Home enrolled the Nadans into a trial period plan ("TPP")2 to temporarily modify the Nadans' monthly payment while Chase Home determined the Nadans' eligibility for permanent loan modification. Chase Home did not agree to a permanent loan modification and foreclosed on the property. The Nadans pursue claims that they were entitled to permanent loan modification.
Chase Manhattan loaned the Nadans' $269,500 secured by a deed of trust ("DOT") recorded on September 24, 2004.3 All beneficial interest under the DOT was transferred to Homesales pursuant to an assignment, which was recorded on August 25, 2010.
After the Nadans defaulted, a Notice of Default and Election to Sell Under Deed of Trust was recorded on April 28, 2009 to indicate the Nadans' $9,779.72 amount in arrears. A Notice of Trustee's Sale was recorded on July 31, 2009 to indicate an August 18, 2009 trustee's sale of the property. Homesales purchased the property, and a Trustee's Deed Upon Sale was recorded on August 25, 2010.
As discussed below, the Nadans pursue this action to challenge Homesales' title to the property.
The Nadans' TPP arose under the Home Affordable Modification Program ("HAMP"), which the U.S. Department of Treasury ("Treasury") established pursuant to the Emergency Economic Stabilization Act of 2008 ("EESA"), 12 U.S.C. §§ 5201, et seq. EESA directed Treasury to protect home values and other assets of individuals, to preserve home ownership, to maximize returns to taxpayers, and to provide public accountability. Although HAMP's purpose is to assist at-risk homeowners, HAMP does not seek to prevent all foreclosures, only "avoidable" foreclosures. See 12 U.S.C. §§ 5219(a)(1). HAMP offers financial incentives for borrowers, servicers and investors to enterinto loan modifications which are economically sound for all parties. See Supplemental Directive ("SD") 09-01 (April 6, 2009).
To accomplish HAMP goals, Treasury promulgated directives to compare the net present value ("NPV") of a HAMP modified loan to the NPV of an unmodified loan, that is, a loan that will likely proceed to foreclosure. SD 09-01 at 4-5. The directives set threshold criteria for modification, including a limit on outstanding principal and an existing payment exceeding 31 percent of the homeowner's gross income. SD 09-01 at 2. The directives set a sequence of steps, known as the "waterfall," for servicers to determine eligibility for a hypothetical loan modification to lower payment to no more than 31 percent of the borrower's gross monthly income. SD 09-01 at 8. The waterfall includes interest rate reduction, loan term extension, and principal forbearance. SD 09-01 at 9.
Defendants note that modification requests are subject to failure at the waterfall stage and that the waterfall fashions a hypothetical modified loan that the servicer may use to conduct the NPV test. "The NPV is essentially an accounting calculation to determine whether it is more profitable to modify the loan or allow the loan to go into foreclosure." Williams v. Geithner, 2009 U.S. Dist. LEXIS 104096, at *9, n. 3 (D. Minn. 2009). If a loan appears eligible for modification under these criteria, the loan may be placed into a TPP to establish a provisional period during which the borrowers make no less than three modified monthly payments. HAMP Base Net Present Value Model Specifications, at 2 (June 11, 2009).
Participation in HAMP is voluntary for non-government sponsored entities, including Chase Home.
Defendants note that prior to June 1, 2010, servicers were able to evaluate a TPP applicant based solely in the applicant's verbal eligibility representations. A servicer evaluated and verified permanent modification eligibility after the borrower returned the TPP application and required documentation. SD 09-01, at 6-7. HAMP guidelines mandated that for a TPP offered on verbal representations, the servicer "must" use verified documentation to confirm eligibility before permanent modification. (SD 09-01, at 5-6.
Defendants note that reliance on an applicant's initial, verbal representations as to eligibility allowed servicers to expedite the TPP process but resulted in TPPs offered to "borrowers who wereultimately found ineligible for permanent modifications upon verification of their hardship information or after the NPV analysis." Treasury later issued a directive requiring "full verification of borrower eligibility prior to offering a trial period plan." SD 10-01, at 1. Defendants point out that the Nadans' modification request preceded the full verification of eligibility directive.
The Nadans proceed on their Complaint to Set Aside Trustee's Sale; To Cancel Trustee's Deed; To Quiet Title; and Fraud ("complaint") to allege that:
The complaint alleges claims to set aside the trustee's sale and to cancel the trustee's deed as improper and invalid and to quiet title in the property in the Nadans' favor. The complaint alleges a fraud claim that defendants misrepresented that defendants and the Nadans had entered into an agreement whereby if the Nadans "paid to Defendants the monthly sum of $1,438.79 the Defendants would not foreclose on Plaintiffs' property."
Defendants attack the complaint's claims as premised on the Nadans' three monthly payments under the TPP, which "only prevented Chase Home from foreclosing for three months, after which time Chase was free to pursue all of its rights and remedies under the DOT." Defendants contend that the complaint's claims fail in that the trustee's sale was nine months at the trial period ended.
Scheurer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683 (1974); Gilligan v. Jamco Development Corp., 108 F.3d 246, 249 (9th 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 legaltheory." Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990); Graehling v. Village of Lombard, Ill., 58 F.3d 295, 297 (7th Cir. 1995).
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 (9th 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 (9th 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 (9th Cir.1986), and a court 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 (9th 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 (7th Cir. 1984)).
In Ashcroft v. Iqbal, __ U.S. _, 129 S.Ct. 1937,1949 (2009), the U.S. Supreme Court explai...
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