Thomas v. OneWest Bank, FSB

• Decision Date: 11 August 2011
• Docket Number: Civ. No. 10-6234-AA
• Parties: Kenneth E. Thomas and Kristin L. Thomas, Plaintiffs, v. OneWest Bank, FSB, a federally chartered savings bank; and Regional Trustee Services Corporation, a Washington corporation; Defendants.
• Court: U.S. District Court — District of Oregon

Kenneth E. Thomasand Kristin L. Thomas, Plaintiffs,

v. OneWest Bank, FSB,a federally chartered savings bank;and Regional Trustee Services Corporation,a Washington corporation; Defendants.

Civ. No. 10-6234-AA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

Dated: August 11, 2011

OPINION AND ORDER

Kevin W. Luby

Elizabeth Lemoine

Luby Law

Attorneys for plaintiffs

William L. Larkins

Danielle J. Hunsaker

Larkins Vacura LLP

Attorneys for defendants

AIKEN, Chief Judge:

Defendant OneWest Bank, FSB ("OneWest") filed a motion to dismiss plaintiffs' claims for breach of contract and breach of the implied duty of good faith and fair dealing ("duty of good faith"), with prejudice, pursuant to Fed. R. Civ. P. 12(b)(6). Defendant's motion to dismiss is granted.

BACKGROUND

In 2005, plaintiffs took out a loan from IndyMac Bank, FSB ("IndyMac") in the amount of $252,500. Pursuant to this transaction, plaintiffs executed a promissory note in favor of IndyMac. The note was secured by a Deed of Trust, which lists IndyMac as the lender, Mortgage Electronic Registration Systems, Inc. ("MERS") as the beneficiary, "acting solely as a nominee for Lender and Lender's successors and assigns," and Chicago Title Insurance Company as the trustee. The Deed of Trust was filed in Deschutes County on February 11, 2005.

In 2007, plaintiffs received unsolicited telephone calls from IndyMac. IndyMac recommended that plaintiffs modify the terms of their loan. Pursuant to these calls, plaintiffs executed an Amended and Restated Flex Pay Fixed/Adjustable Rate Note (the "Amended Note").

The initial payment under the Amended Note was approximately $990 a month. The monthly payment amount was adjustable under the Amended Note. However, the Amended Note stipulated that monthly payments would not increase until July 2012 unlesscertain conditions were met. Eventually, the monthly payment amount was increased to over $1600 in July 2009. Due to this increase, plaintiffs were unable to make payments under the Amended Note.

In July 2008, the Federal Deposit Insurance Company ("FDIC") was appointed conservator over IndyMac. In March 2009, the FDIC sold IndyMac's assets to OneWest, including plaintiffs' Amended Note. On or about March 3, 2010, MERS, as nominee for IndyMac, assigned its interest in the Deed of Trust to OneWest. This assignment was recorded in Deschutes County on March 9, 2010. On or about the same date, OneWest appointed defendant Regional Trustee Services Corporation ("RTSC") as trustee of the Deed of Trust, and the assignment was recorded in the Deschutes County Official Records on March 9, 2010.

On March 9, 2010, after plaintiffs' failed to make payments for over six months, RTSC recorded a Notice of Default and Election to Sell. A Trustee's Notice of Sale was issued the following day, and a trustee's sale of the real property subject to the Deed of Trust was scheduled for July 13, 2010.

On July 7, 2010, plaintiffs filed an ex parte motion for a temporary restraining order ("TRO"). The Deschutes County Circuit Court granted the motion and entered a TRO expiring on July 23, 2010. The case was then removed to this Court on August 5, 2010. On November 30, 2010, this Court granted plaintiffs' motion for a preliminary injunction to halt the foreclosure and preserve the status quo.

Plaintiffs allege four claims in their complaint. Plaintiffs allege: 1) breach of contract; and 2) breach of the implied duty of good faith and fair dealing against defendant OneWest. Against all defendants, plaintiffs allege: 3) emergency temporary and permanent injunctive relief pursuant to Or. R. Civ. P. 79; and 4) declaratory judgment under Or. Rev. Stat. § 28.160.

STANDARDS

Where the plaintiff "fails to state a claim upon which relief can be granted," the court must dismiss the action. Fed. R. Civ. P. 12(b) (6) . To survive a motion to dismiss, the complaint must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Review is limited to the contents of the complaint. See Enesco Corp. v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir. 1998) . All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Id. The court need not, however, accept as true allegations that contradict matters properly subject to judicial notice or by exhibit. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). This Court has previously taken judicial notice of the Amended Note incorporated in Plaintiffs' Amended Complaint. Op. & Order 5-6.

DISCUSSION

Defendant OneWest moves to dismiss plaintiffs' Amended Complaint for failure to state a claim. First, defendant contends that plaintiffs' breach of contract claim fails to state a claimbecause defendant had a contractual right to increase payments under the Amended Note. Second, defendant argues that plaintiffs' claim for breach of the duty of good faith is preempted by federal law, and alternatively, for failure to state a claim. Finally, defendant argues that any damage resulting from information provided by defendant to credit reporting agencies is preempted by federal law.

I. Breach of Contract: Monthly Payment Increase Before July 1, 2012

Plaintiffs allege that defendant breached the terms of the Amended Note because defendant increased the monthly payment due on the note prior to July 1, 2012, or because defendant wrongfully initiated foreclosure proceedings. Defendant contends that plaintiffs have failed to state a claim for breach of contract because defendant properly exercised rights expressly granted to it under the terms of the Amended Note.

In a diversity action, the substantive law of the forum state will apply. Farina v. Mt. Bachelor, Inc., 66 F.3d 233, 235 (9th Cir. 1995) . In Oregon, a plaintiff must allege four elements to state a breach of contract action: 1) existence of a contract, 2) relevant terms, 3) plaintiff's full performance and lack of breach; and 4) harm to plaintiff. Slover v. Oregon State Bd. of Clinical Social Workers, 144 Or.App. 565, 569-70, 927 P.2d 1098 (1996).

The Oregon Supreme Court has identified a three step test for the interpretation of disputed contract provisions. Yoqman v. Parrott, 325 Or. 358, 361, 937 P.2d 1019 (1997). The first step asks the court to determine, as a matter of law, if the disputedterm is ambiguous. Id. If the court finds that the term is unambiguous then the analysis ends and the court will construe the term as a matter of law. The court will not consider any extrinsic evidence. Webb v. National, 207 F.3d 579, 581-83 (9th Cir. 2000) (citing Yoqman, 325 Or. at 361, 937 P.2d 1019).¹ A term is ambiguous "if it has no definite significance or if it is capable of more than one sensible and reasonable interpretation. A term is unambiguous if its meaning is so clear as to preclude doubt by a reasonable person." Oakridae Cablevision, Inc v. First Interstate Bank of Oregon, N.A., 65 Or.App. 640, 646, 673 P.2d 532 (1983) (citing May v. Chicago Ins. Co., 260 Or. 285, 293, 490 P.2d 150(1971)); See also Pacific First Bank v. New Morgan Park Corp., 319 Or. 342, 347-348, 876 P.2d 761 (1994).

Initially, this Court must decide if the terms at issue are ambiguous. If the language of the provisions is "capable of more than one sensible and reasonable interpretation," then the language is ambiguous. Oakridge, 65 Or.App. at 646, 673 P.2d 532. Plaintiffs assert that Sections 3(C) and 4(F) of the Amended Note are ambiguous. Plaintiffs argue this ambiguity gave plaintiffs an expectation that their monthly payment would not increase before July 1, 2012. Defendant allegedly breached the contract by increasing plaintiffs' monthly payment before that date. Specifically, plaintiffs argue that Section 4(F) is ambiguous because the language is "confusing and technical." Pls.' Resp. to Def.'s Second Mot. to Dismiss 4, April 29, 2011. Defendant responds that plaintiffs had a duty to read and understand the terms of the Amended Note.

The relevant terms of the Amended Note are as follows:

Section 3(C) Payment Changes

My monthly payments will remain the same until July 1, 2012, the month after the first Change Date, and will not change again until after I have made my 120th monthly payment unless it is required to change in accordance with Section 4 (F) below.

(...)

Section 4(F) Limit on My Unpaid Balance: Increased Monthly Payment

My unpaid balance can never exceed a maximum amount equal to one hundred ten and NO/l000ths percent (110.00%) of the principal amount I originally borrowed. Because of my paying only limited monthly payments until I have made 120 scheduled monthly payments, the addition of unpaid interest to my unpaidbalance under Section 4(E)² above could cause my unpaid balance to exceed that maximum. In that event, on the date that the payment of my monthly payment could cause me to exceed that limit, I will instead pay a new monthly payment equal to the interest only portion of the Full Payment if I have made less than 120 scheduled monthly payments.

Although the Court acknowledges the complexity of Sections 3(C) and 4(F), the language does not lend itself to more than one reasonable interpretation. Section 3(C) requires plaintiffs to make a fixed monthly payment "until July 1, 2012 . . . unless it is required to change in accordance with Section 4(F) below." Section 4(F) cautions that the "unpaid balance" can never exceed "110% of the principal amount [plaintiffs] originally borrowed." The section then cautions plaintiffs that by making only limited payments, their principal could be in danger of exceeding the maximum. Finally, the section warns plaintiffs that their monthly payment would then increase on the month that their principal exceeded 110% of the original amount borrowed.

The plain language of the Amended Note is unambiguous. Plaintiffs cite no cases, and this Court finds none, in which confusing language has been equated with...