United States District Court, D. Montana, Billings Division
JAMES L. BARKER, JEANNE A. BARKER, Plaintiffs,
BANK OF AMERICA, N.A., CIT BANK, N.A., ONEWEST BANK, FIRST AMERICAN TITLE COMPANY OF MONTANA, INC., Trustee, and CHARLES PETERSON, Trustee, Defendants.
FINDINGS AND RECOMMENDATION REGARDING DEFENDANT CIT
BANK N.A.'S MOTION TO DISMISS AND MOTION TO DISSOLVE
TIMOTHY J. CAVAN, UNITED STATES MAGISTRATE JUDGE
James L. Barker and Jeanne A. Barker
(“Plaintiffs”) originally filed this action in
Montana's Sixth Judicial District Court on December 7,
2016. Defendant CIT Bank, N.A. removed this case to federal
court on February 16, 2017. (Doc. 1.) On February 24, 2017,
Plaintiffs filed an amended complaint. Thereafter, on May 1,
2017, CIT filed a motion to dismiss for failure to state a
claim. (Doc. 11.) This Court recommended that the motion be
granted without prejudice and with leave to amend. (Doc. 24.)
The Honorable Susan P. Watters ordered CIT's motion be
granted, but ordered that Plaintiffs' Counts I and IV be
dismissed with prejudice, and Plaintiffs' Counts II, III,
V-X be dismissed without prejudice. (Doc. 30.)
have now filed their Second Amended Complaint against Bank of
America,  OneWest Bank and CIT Bank, N.A.,
(collectively “CIT”), First American Title Company of
Montana, Inc., Trustee, and Charles Peterson, Trustee,
arising from an attempted foreclosure and loan modification.
Plaintiffs allege claims of fraud (Count II), violation of
the Fair Debt Collection Practices Act (Count III),
negligence (Count V), violation of the Montana Unfair Trade
Practices and Consumer Protection Act (Count VI),
constructive fraud (Count VII), negligent misrepresentation
(Count VIII), and deceit (Count IX). Plaintiffs also request
injunctive relief (Count XI). (Doc. 36.)
before the Court are CIT's Motion to Dissolve Injunction
(Doc. 43) and Motion to Dismiss (Doc. 46), which have been
referred to the undersigned under 28 U.S.C. §
636(b)(1)(B). The motions are fully briefed and ripe for the
Court's review. (Docs. 44, 51, 57, 47, 56, 58.)
considered the parties' submissions, the Court
RECOMMENDS CIT's Motion to Dismiss and
Motion to Dissolve Injunction be GRANTED.
are the owners of real property located in Park County,
Montana. (Doc. 36 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 as Trustee for the benefit of Bank of
America, N.A. Id. at ¶ 2.
28, 2010, the Federal Deposit Insurance Company
(“FDIC”) executed an Affidavit of Lost Assignment
(“ALA”), stating that FDIC was the owner and
holder of Plaintiffs' mortgage, as receiver for IndyMac
Federal Bank, FSB. Id. at ¶¶ 19- 20. The
ALA stated that IndyMac Bank was the owner and holder of the
mortgage as a result of the sale and assignment of the
mortgage from Bank of America, but the assignment had been
lost or destroyed before it could be placed of record.
Id. at ¶ 21. The ALA was recorded with the Park
County Clerk and Recorder on June 21, 2010. Id. at
allege the ALA is fraudulent because Bank of America could
not have assigned its interest in the Trust Indenture to
IndyMac Bank, FSB. Id. at ¶ 24. Plaintiffs
allege they were in bankruptcy at the time of the alleged
assignment, and their mortgage was subject to an automatic
stay. Id. at ¶ 24. Thus, Plaintiffs allege,
Bank of America would have been prevented from assigning
their mortgage. Id.
allege the ALA was executed to enable the owner of the
mortgage to benefit from a shared loss agreement with the
FDIC. Id. at ¶ 25. If covered by the shared
loss agreement, Plaintiffs allege the owner of the mortgage
stood to benefit in excess of their initial investment in the
property by foreclosing on the home subject to the agreement.
Id. at ¶ 14.
October 12, 2010, IndyMac Bank, FSB appointed Defendant
Charles Peterson (“Peterson”) as Successor
Trustee. Id. at ¶ 27. Again, however,
Plaintiffs allege there is no record IndyMac Bank, FSB held a
beneficial interest in the Trust Indenture, and therefore it
did not have authority to appoint a successor trustee.
Id. at ¶ 27.
2009, Plaintiffs fell behind on their loan payments. (Doc. 36
at ¶ 16.) On October 12, 2010 and November 10, 2010,
Peterson filed two independent Notices of Trustee's
Sales. Id. at ¶ 28, 31. Both sales were later
October 18, 2012, First American Title Company of Montana
(“First American”) was appointed as Successor
Trustee. Id. at ¶ 32. On October 22, 2012,
January 3, 2013, and July 20, 2016, First American filed
three independent Notices of Trustee's Sales.
Id. The first two foreclosure sales were later
cancelled; the Park County District Court enjoined the third
foreclosure on April 4, 2017. Id.
allege that beginning in 2009, they initiated communications
with Bank of America concerning a possible loan modification.
(Doc. 36 at ¶ 37.) Plaintiffs allege they were
frustrated with the process and with their communications
with Bank of America. Id. at ¶¶ 38-43.
They allege that multiple loan modification applications were
denied. Plaintiffs allege that one denial letter, dated
August 31, 2013, identified “IndyMac” as the
“investor” who had not approved the modification.
Id. at ¶ 26.
after the beneficiary interest was transferred to One West,
One West granted Plaintiffs a loan modification. The signed
loan modification agreement was recorded on October 22, 2015
with the Park County Clerk and Recorder. (Doc. 44-1.)
Court will initially address CIT's motion to dismiss,
followed by CIT's motion to dissolve the state court
issued stay of foreclosure.
Motion to Dismiss - Failure to State a Claim
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)).
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.
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).
argues Plaintiffs have failed to allege sufficient facts to
support any of their claims. Additionally, CIT contends
Plaintiffs' claims are all barred by the statutes of
limitations. Therefore, CIT maintains all claims against it
should be dismissed with prejudice.
maintain that the allegations of their Second Amended
Complaint are sufficient to state a claim for each cause of
action set forth in the complaint. Plaintiffs also argue that
their claims are not time-barred, and therefore contend that
CIT's motion to dismiss should be denied.
Counts II and VII - Fraud and Constructive Fraud
assert claims for fraud and constructive fraud in Counts II
and VII of their complaint. CIT contends Plaintiffs fail to
meet the heightened pleading standard of particularity
required for alleging fraud-based claims.
must be pled 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. Davidson v.
Kimberly-Clark Corp., 889 F.3d 956, 964 (9th Cir. 2018);
See also, 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).
courts look 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
(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 representation;
and, (9) consequent and proximate injury was caused by
reliance on the representation.
First Nat'l Bank in Havre v. Nelson, 741 P.2d
420, 421 (Mont. 1987).
Plaintiffs have not alleged fraud with sufficient
particularity because they have not pled facts tending to
show their detrimental reliance on CIT's alleged
misrepresentation. Plaintiffs state the alleged
misrepresentation was CIT's claim that Bank of America
assigned Plaintiffs' mortgage to IndyMac Bank prior to
FDIC being appointed receiver of IndyMac. Plaintiffs allege
this representation is false because IndyMac could not have
been assigned their mortgage to FDIC because an automatic
stay was placed on their mortgage during that time.
Plaintiffs contend that because of CIT's actions, they
were threatened by notices of trustee sales, endured
emotional distress from believing their home would be
foreclosed, and spent significant time filing for home loan
fail to allege, however, that their claimed injuries are a
result of their reliance on the alleged misrepresentation.
They fail to assert that, “but for their reliance on
the alleged [misrepresentation], they would have timely cured
their default and avoided foreclosure.” Anderson v.
ReconTrust Co., N.A., 407 P.3d 692, 699 (Mont. 2017). In
fact, Plaintiffs have represented that they were not even
aware of the ALA and the alleged misrepresentation until the
fall of 2016, when reviewing records at the Clerk and
Recorders office. (Doc. 56 at 21.) Obviously, Plaintiffs
could not have previously relied upon an unknown
representation. Without facts supporting the inference that
the alleged misrepresentation caused detrimental reliance,
the allegations in the Second Amended Complaint fall short,
even without consideration of the particularity required by
Rule 9(b). The Court therefore recommends Count II be
establish constructive fraud, a plaintiff must prove all
elements of actual fraud except for the speaker's intent
that it should be relied upon. Hartfield v.
Billings, 805 P.3d 1293, 1296 (Mont. 1990). For the same
reasons discussed above, the Court also finds that
Plaintiffs' allegations are not sufficient to state a
claim of constructive fraud.
are conflicting statements in cases in this circuit as to
whether 9(b)'s heightened pleading standard applies to
claims of constructive fraud. Compare Sonoma Foods, Inc.
v. Sonoma Cheese Factory, LLC, 634 F.Supp.2d 1009,
1021(N.D. Cal. 2007) (“facts supporting a claim for
constructive fraud must be alleged with particularity under
Rule 9(b)”), with 1849 Condominiums Assoc., Inc. v.
Bruner, 2010 WL 2557711. *3 (E.D. Cal. June 21, 2010)
(“courts do not apply [the] heightened pleading
standard to constructive fraud claims”). Regardless,
the factual allegations of Plaintiffs' complaint are not
sufficient to state a plausible claim for relief even without
application of 9(b)'s heightened pleading standard.
Count VII, Plaintiffs again allege CIT's actions
constitute constructive fraud because it represented to the
Plaintiffs that their mortgage was assigned to and held by
IndyMac prior to FDIC being appointed its receiver. (Doc. 36
at ¶¶ 71-81.) Again, however, Plaintiffs fail to
allege any facts to infer they relied on the alleged
misrepresentation to their detriment. Although they allege
they suffered injuries, Plaintiffs have not set forth any
facts to plausibly show those injuries resulted from their
reliance on the misrepresentation. As such, the Court
recommends Count VII be dismissed.