Pinel v. Aurora Loan Servs., LLC

• Decision Date: 30 August 2011
• Docket Number: Case No. C 10–03118 SBA.
• Citation: 814 F.Supp.2d 930
• Court: U.S. District Court — Northern District of California
• Parties: Maritza PINEL, individually and on behalf of all others similarly situated, Plaintiffs, v. AURORA LOAN SERVICES, LLC; and Does 1–25, inclusive, Defendants.

814 F.Supp.2d 930

Maritza PINEL, individually and on behalf of all others similarly situated, Plaintiffs,

v.AURORA LOAN SERVICES, LLC; and Does 1–25, inclusive, Defendants.

Case No. C 10–03118 SBA.

United States District Court, N.D. California,Oakland Division.

Aug. 30, 2011.

Ali Abtahi, Idene Saam, The Abtahi Law Firm, San Mateo, CA, T. Christopher Tuck, Richardson Patrick Westbrook & Brickman, LLC, Mt. Pleasant, SC, for Plaintiffs.

Michael John Agoglia, Rita Lin, Wendy M. Garbers, Morrison & Foerster, San Francisco, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

SAUNDRA BROWN ARMSTRONG, District Judge.

Plaintiff Maritza Pinel (“Plaintiff”) filed the instant class action on behalf of herself and all others similarly situated to challenge the allegedly unfair and unlawful business practices of Defendant Aurora Loan Services, LLC (“Aurora”) with respect to its use of mortgage “Workout Agreements.” The Court has subject matter jurisdiction, pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d).

The parties are presently before the Court on Aurora's Motion to Dismiss Plaintiff's First Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6). Dkt. 25. Having read and considered the papers filed in connection with this matter, and being fully informed, the Court hereby GRANTS IN PART and DENIES IN PART the motion for the reasons set forth below. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b); Civ. L.R. 7–1(b).

I. BACKGROUNDA. Factual Summary

The following facts are based on the allegations in the First Amended Complaint (“FAC”), which are taken as true for the purposes of the instant motion. Plaintiff is the owner of residential property located at 220 Valley Oak Lane, in Vallejo, California (“the Property”). FAC ¶ 32. Defendant Aurora serviced the loan. Id. In 2009, Plaintiff fell behind on her mortgage payments. Id. As a result, on June 5, 2009, Cal–Western Reconveyance Corporation (“Cal–Western”) recorded a Notice of Default against the property, stating that the default amount was $7,464.20. Def.'s Req. for Jud. Not. Ex. A, Dkt. 26. Cal–Western recorded a Notice of Trustee's Sale on October 19, 2009, setting November 5, 2009, as the date of the non-judicial foreclosure sale. Id. Ex. B.

In an effort to avoid foreclosure, Plaintiff sought a loan modification from Aurora to lower her monthly payments. FAC ¶ 33. On or about October 29, 2009, Aurora provided Plaintiff with a Workout Agreement, which required her to make six monthly payments of $1,625. Id. & Ex. A. In turn, Aurora agreed to “forebear from exercising any or all of its rights and remedies now existing or arising during the term of this Agreement under the Loan Documents [.]” Id. Ex. A ¶ 3. Notably, the agreement states that Plaintiff and Aurora agree that Plaintiff has defaulted on her mortgage, but that “Customer has requested and that Lender has agreed to allow Customer to repay the Arrearage pursuant to a loan workout arrangement on the terms set forth herein.” FAC Ex. A, Bates No. AURORA 0000151.¹

Attached to the Workout Agreement is a document styled as “Attachment A—Stipulated Payments,” which sets forth Plaintiff's payment obligations. Id. Bates No. AURORA 000157, 0000148. The Attachment begins with the following:

For purposes of repayment of the Arrearage, Customer shall pay a stipulated payment of $1625 (the “First Plan payment”), on or before 11/15/2009. Thereafter, Customer shall pay five (5) consecutive stipulated monthly payments each in the amount of $162500 [sic] on or before the 15th day of each month ... commencing 12/15/2009 and continuing through and including 04/15/2010.....

Id. Despite the stated purpose of “repayment of the Arrearage,” the final paragraph of the Attachment contains the ostensibly contradictory statement that: “The aggregate Plan payment will be insufficient to pay the Arrearage. At the Expiration Date, a portion of the Arrearage will still be outstanding.” Id. Bates No. 0000148. The Attachment further states that after all of the Plan payments have been made, the Customer must “cure the Arrearage through a full reinstatement, payment in full, loan modification agreement or other loan workout option that Lender may offer....” Id.

Plaintiff timely made all of the requisite payments due under the Workout Agreement, plus an extra payment in the amount of $1,625.00 in April 2010. Id. ¶¶ 33, 34. While Plaintiff was making payments under the Workout Agreement, the foreclosure sale was postponed at least four times. Id. ¶ 35. The last postponement was made on April 9, 2010, at which time Aurora reset the trustee's sale to May 13, 2010. Id. Aurora postponed these dates “without notice and without [Plaintiff]'s mutual consent.” Id. On April 26, 2010, Aurora denied Plaintiff's pending request for a loan modification, notwithstanding her timely performance under the Workout Agreement. Id. ¶ 36. Unbeknownst to Plaintiff, the next day, on April 27, 2010, Aurora lifted the foreclosure hold, clearing the way for the trustee's sale to proceed. Id.

Although Aurora had denied Plaintiff's request for a loan modification, it continued its attempts to extract additional payments from her. Id. ¶ 37. During a telephone call on April 29, 2010, Aurora advised Plaintiff to send additional financial documents and a payment of $1,781.41. Id. The $1,781.41 payment would have brought Plaintiff's total payments to $13,160.41—an amount only $594.89 short of curing her total Arrearage under the Workout Agreement. Id. ¶ 38. On May 14, 2009, Plaintiff tendered payment of $1,781.41 to Aurora. Id. ¶ 40. Plaintiff was unaware that Aurora had purchased the Property for $204,000 at the trustee's sale conducted the previous day on May 13, 2010. Id. ¶ 40. Plaintiff did not receive notice of the sale or an opportunity to cure the Arrearage. Id.

B. Procedural History

On June 10, 2010, Plaintiff filed the instant action in San Mateo County Superior Court. Notice of Removal ¶ 1, Dkt. 1. On July 16, 2010, Aurora removed the case to this Court under CAFA, and subsequently filed a motion to dismiss. Dkt. 1, 13. The parties subsequently stipulated to Plaintiff's filing of an amended complaint. Dkt. 22, 24. The FAC alleges five state law causes of action for: (1) violation of the California's Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; (4) unjust enrichment; and (5) declaratory relief. FAC ¶¶ 14–19.

Plaintiff alleges that Aurora offers Workout Agreements to financially distressed borrowers as a means of bringing their loans current while they are being considered for a loan modification. However, the aggregate amount of Plan Payments due under the Workout Agreement is intentionally insufficient to satisfy the arrearage. Thus, after collecting all of the Plan Payments, Aurora initiates loan foreclosures without notice to borrowers and without providing them an opportunity to cure any remaining arrearage and avoid foreclosure. Plaintiff alleges that Aurora utilizes its Workout Agreements as a means of extracting further payments from borrowers under the false premise of helping them to avoid foreclosure. Aurora now moves to dismiss all claims alleged in the FAC. Dkt. 25, 26. The motion has been fully briefed and is ripe for adjudication.²

II. LEGAL STANDARD

A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). In deciding a Rule 12(b)(6) motion, the court must generally “consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir.2007). The court is to “accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899–900 (9th Cir.2007). The allegations must “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations and citation omitted). Where a complaint or claim is dismissed, leave to amend generally is granted, unless further amendment would be futile. Chaset v. Fleer/Skybox Int'l, 300 F.3d 1083, 1087–88 (9th Cir.2002).

III. DISCUSSIONA. UCL

The UCL makes actionable any “unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof.Code § 17200. “Each prong of the UCL is a separate and distinct theory of liability.” Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir.2009). The FAC alleges claims under each prong. FAC ¶¶ 56–62. In its motion, however, Aurora does not separately address each aspect of Plaintiff's UCL claim. Rather, Aurora generally contends that Plaintiff's UCL claim is based on two aspects of the Workout Agreement, i.e., the lack of an opportunity to cure the loan delinquency and the failure to issue a new notice of sale—and challenges Plaintiff's UCL claim on that basis. Nonetheless, because each prong of the UCL entails a separate and distinct legal analysis, the Court discusses Aurora's arguments in that manner.

1. Unlawful

“An ‘unlawful’ business practice or act within the meaning of the UCL ‘is an act or practice, committed pursuant to business activity, that is at the same time forbidden by law.’ ” People ex rel. Harris v. Pac Anchor Transp., Inc., 195 Cal.App.4th 765, 773, 125 Cal.Rptr.3d 709 (2011) (quoting Bernardo v. Planned Parenthood Federation of Am., 115 Cal.App.4th 322, 351–52, 9 Cal.Rptr.3d 197 (2004)). In her FAC, Plai...