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Barker v. Bank of America, N.A.

United States District Court, D. Montana, Billings Division

December 8, 2017

JAMES L. BARKER, JEANNE A. BARKER Plaintiffs,
v.
BANK OF AMERICA, N.A., ONEWEST BANK, CIT BANK, N.A., FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., Trustee, and CHARLES PETERSON, Trustee, Defendants.

          FINDINGS AND RECOMMENDATION REGARDING DEFENDANTS ONEWEST BANK AND CIT BANK N.A.'S MOTION TO DISMISS

          TIMOTHY J. CAVAN, United States Magistrate Judge

         Plaintiffs James L. Barker and Jeanne A. Barker (“Plaintiffs”) bring this action against Bank of America, [1] OneWest Bank and CIT Bank, N.A., (collectively “CIT”[2]), First American Title Company of Montana, Inc., Trustee, and Charles Peterson, Trustee, [3] arising from an attempted foreclosure and loan modification. Plaintiffs allege claims for wrongful exercise of the power of sale, fraud, violation of the Fair Debt Collection Practices Act, negligence, violation of the Montana Unfair Trade Practices Act, constructive fraud, negligent misrepresentation, and deceit. Plaintiffs also request declaratory and injunctive relief.[4] (Doc. 8.)

         Presently before the Court is CIT's Motion to Dismiss, which has been referred to the undersigned under 28 U.S.C. § 636(b)(1)(B). (Doc. 11.) The motion is fully briefed and ripe for the Court's review. (Docs. 12, 16, 19).

         Having considered the parties' submissions, the Court RECOMMENDS CIT's Motion to Dismiss be GRANTED.

         I. BACKGROUND

         Plaintiffs are the owners of real property located in Park County, Montana. (Doc. 8 at ¶ 1.) On October 11, 2000, Plaintiffs executed a Trust Indenture, securing a $360, 000 loan, in which they named First American Title Insurance Company of Montana (“First American”) as Trustee for the benefit of Bank of America, NA. (Doc. 8 at ¶ 2.) Bank of America assigned its interest in the Trust Indenture to OneWest Federal Bank, FSB (“OneWest”) in March 2010, and it transferred its servicing rights to Nationstar Mortgage in November 2013. (Id. at ¶¶ 3-4.) In August 2014, Nationstar Mortgage assigned its servicing rights to IndyMac Mortgage, a division of One West. (Id. at ¶ 5.)

         In 2009, Plaintiffs fell behind on their loan payments. (Doc. 8 at ¶ 6.) On October 12, 2010, IndyMac Bank, FSB appointed Defendant Charles Peterson (“Peterson”) as Successor Trustee, even though, as plaintiffs allege, there is no record IndyMac Bank, FSB held a beneficial interest in the Trust Indenture. (Id. at ¶ 8.) On October 12, 2010 and November 10, 2010, Peterson filed two independent Notices of Trustee's Sales, which were later cancelled. (Id. at ¶ 9.)

         On October 18, 2012, OneWest appointed First American Title Company of Montana (“First American”) as Successor Trustee. (Id. at ¶ 10.) On October 22, 2012 and January 3, 2013, First American filed a two independent Notices of Trustee's Sale, which were later cancelled. (Id.)

         On July 20, 2016, First American initiated foreclosure proceedings. (Doc. 8 at ¶ 11.) The foreclosure sale was scheduled for November 30, 2016 in Park County. (Id. at ¶ 11.) On April 4, 2017, the Park County District Court enjoined the foreclosure.[5] (Doc. 12-2 at 24.)

         Plaintiffs allege that beginning in 2009, they initiated communications with Bank of American concerning a possible loan modification. (Doc. 8 at ¶ 13.) Plaintiffs were frustrated with the process and their communications with Bank of America. (Id. at ¶¶ 13-19.) After Bank of America transferred its beneficiary interest, Plaintiffs communicated with OneWest about a possible loan modification. (Id. at ¶ 20.) One West granted Plaintiffs a loan modification, and the signed loan modification agreement was recorded on October 22, 2015 with the Park County Clerk and Recorder.[6] (Doc. 12-1.) / / / / / /

         II. ANALYSIS

         “Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory.” Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013) (quoting Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008)). The Court's standard of review under Rule 12(b)(6) is informed by Rule 8(a)(2), which requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-678 (2009) (quoting Fed. R. Civ. P 8(a)).

         To survive a motion to dismiss under Rule 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678. “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.” Id. A plausibility determination is context specific, and courts must draw on judicial experience and common sense in evaluating a complaint. Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014).

         CIT argues Plaintiffs' claim for wrongful exercise of power of sale is not a cognizable legal theory in Montana. CIT also contends that Plaintiffs have failed to allege sufficient facts to support any of their other claims. Therefore, CIT argues all claims against it should be dismissed with prejudice.

         Plaintiffs counter that CIT has wrongfully attempted to foreclose their property, engaged in fraud and deceit, made misrepresentations, and engaged in unfair trade practices. The Plaintiffs further maintain that the allegations of their complaint are sufficient to state a claim for each cause of action set forth in their First Amended Complaint, and CIT's motion to dismiss should be denied.

         A. Counts I & IV-Wrongful Exercise of Power of Sale and Attempted Wrongful Exercise Power of Sale & Additional Acts of Wrong Exercise of Power of Sale

         CIT argues that “wrongful exercise of power of sale, ” and the attempt of the same, are not cognizable claims in Montana. CIT further argues that even if the claims are recognized, Plaintiffs failed to plead sufficient facts that would entitle them to relief.

         It does not appear that a cause of action for “wrongful exercise of power of sale” exists under Montana law. The Court has found very limited recognition for such a cause of action, and none under Montana law. See e.g. Strutt v. Ontario Sav. & Loan Assn., 28 Cal.App.3d 866, 869 (Cal.Ct.App. 1972) (wrongful exercise of a private power of sale is actionable under Cal. Civ. Code § 2924.); Brown v. Freedman, 222 Ga.App. 213, 214 (Ga.Ct.App. 1996) (“A claim for wrongful exercise of a power of sale under OCGA § 23-2-114 can arise when the creditor has no legal right to foreclose.”).

         Because Plaintiffs have failed to cite any authority that “wrongful exercise of power of sale” is recognized under Montana law - and it appears that Montana has not recognized such a cause of action - Counts I and IV should be dismissed.

         Nevertheless, even assuming a claim for “wrongful exercise of power of sale” is cognizable under Montana law, Plaintiffs have failed to plead anything more than conclusory statements in support of such a claim. Plaintiffs allege Defendants caused multiple Notices of Trustee's Sales to be filed and foreclosure proceedings scheduled, which were later cancelled. (Doc. 8 at ¶¶ 9-11.) Plaintiffs conclude Defendants' acts “constitute one or more acts of Wrongful Exercise of Power of Sale or Attempted Exercise of Power of Sale.” (Id. at ¶ 21.) But Plaintiffs failed to allege any facts that would show how the Notice of Trustee's Sales were wrongful, or how Plaintiffs were damaged. Plaintiffs' bare conclusions that Defendants' actions were wrongful are insufficient. Iqbal, 556 U.S. at 678 (stating a complaint that “tenders ‘naked assertion[s]' devoid of ‘further factual enhancement'” is insufficient under Rule 8).

         In addition, in Count IV, Plaintiffs provide no factual basis for the claim entitled “Additional Acts of Wrongful Exercise of Power of Sale.” Plaintiffs merely state “[Plaintiffs] reallege and reincorporate the foregoing paragraphs of their complaint as if restated in full.” (Doc. 8 at ¶ 24.) Even if such a claim existed, it is insufficient to assert a cause of action for “additional acts” without providing any additional facts or allegations upon which the claim is based.

         Accordingly, the Court recommends that Counts I and IV be dismissed for failure to state a claim.

         B. Counts II & VII-Fraud & Constructive Fraud

         CIT contends Plaintiffs failed to meet the heightened pleading standards required for alleging fraud.

         Fraud must be plead with particularity. Federal Rule of Civil Procedure 9(b) provides, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b). “[T]he circumstances constituting the alleged fraud must ‘be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.'” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). To satisfy the requirements of Rule 9(b), a plaintiff who claims fraud must state the “who, what, when, where, and how” of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). “[A]

         plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false.” Id. (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994)) (emphasis in original). When multiple defendants are named, the plaintiff must “inform each defendant separately of the allegations surrounding his alleged participation in the fraud.” Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007) (“Rule 9(b) does not allow a complaint to merely lump multiple defendants together . . . .”).

         Federal courts looks to state law to see whether the elements of fraud have been pled sufficiently. Kearns, 567 F.3d at 1126. A party must plead the following nine elements with particularity in order to properly state a fraud claim in Montana:

(1) a representation; (2) falsity of representation; (3) materiality of that representation; (4) speaker's knowledge of falsity of representation or ignorance of its truth; (5) the speaker's intent that it should be relied on; (6) the hearer is ignorant of the falsity of the representation; (7) the hearer relies on the representation; (8) the hearer has a right to rely on the ...

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