Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_10-cv-03309/USCOURTS-caed-2_10-cv-03309-3/pdf.json

Parties Involved:
BAC Home Loans Servicing, LP
Defendant
Bank of America N.A.
Defendant
Brenna Krouse
Plaintiff
Rusty Krouse
Plaintiff

Document Text:

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

RUSTY KROUSE and BRENNA KROUSE, No. 2:10-cv-03309-MCE-EFB

Plaintiffs, 

v. MEMORANDUM AND ORDER1

BAC HOME LOANS SERVICING, LP;

BANK OF AMERICA N.A.; and DOES

1 through 10, inclusive,

Defendants.

----oo0oo----

Presently before the Court is Defendants’ Motion to Dismiss 

(“MTD”) Plaintiffs’ Third Amended Complaint (“TAC”) (ECF No. 30)

for failure to state a claim upon which relief may be granted

pursuant to Federal Rule of Civil Procedure 12(b)(6).2

///

 Because oral argument would not be of material assistance, 1

the Court ordered this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

 Unless otherwise noted, all further references to Rule or 2

Rules are to the Federal Rules of Civil Procedure.

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BACKGROUND3

On December 19, 2007, Plaintiffs procured a $417,000 loan

for the real property located at 6950 Elm Tree Lane, Orangevale,

California, 95662, which was secured by a Promissory Note and a

Deed of Trust (which was recorded on December 26, 2007). (See

MTD at 3, MTD, EXs. A & B (Note & Deed).) At that time 4

Plaintiffs were provided with the Truth in Lending Act

disclosures, explaining the terms of their loan. (See, id. at

Ex. C.) 

///

///

 The factual assertions in this section are based on the 3

allegations in Plaintiffs’ TAC, except where otherwise noted. 

For the purposes of this Motion, the Court accepts Plaintiffs’

facts as true and makes all inferences in the light most

favorable to Plaintiffs.

 Pursuant to Federal Rules of Evidence 201(b) (authorizing 4

judicial notice of adjudicative facts ‘capable of accurate and

ready determination by resort to sources whose accuracy cannot be

reasonably questioned’), Defendants request the Court take

judicial notice of several documents. (Request for Judicial

Notice (“RJN”) (ECF No. 30, Att. 1 and Exs A-E.) Specifically,

Defendants ask the Court to take judicial notice of the: (1)

Promissory Note, dated December 17, 2007, and signed by

Plaintiffs (RJN, Att. 2, Ex. A); (2) Deed of Trust, dated

December 17, 2007, signed by Plaintiffs and recorded in the

official records of Sacramento County, Book 20071226, Page 1098,

on December 26, 2007 (Id., Ex. B); (3) Federal Truth In Lending

Disclosure Statement, dated December 17, 2007 (Id., Ex C); (4)

Notice of Right to Cancel, dated December 17, 2007, and signed by

Plaintiffs on December 19, 2007. (Id. at Ex. D); and (5) the

Court’s Order regarding Defendants’ Motion to Dismiss the Second

Amended Complaint (Id. at Ex. E; ECF No. 28). Defendants’

requests are unopposed and are the proper subject of judicial

notice. See, e.g., Champlaie v. BAC Home Loans Servicing, LP,

706 F. Supp. 2d 1029, 1040 (E.D. Cal. 2009); Lee v. County of Los

Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (court may take

judicial notice of matters of public record). Accordingly,

Defendants’ Request for Judicial Notice, (ECF No. 13, Att. 1.),

is granted. 

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Also on December 19, Plaintiffs received and signed two Notices

of the Right to Cancel (“NRC”), which set out the time reserved

for Plaintiffs to rescind the loan agreement. (Id. at Ex. D) 5

In early 2009, Plaintiffs found it difficult to make their

mortgage payments. As a result, in April 2009, Plaintiffs

applied for a loan modification through the Home Affordable

Modification Program (“HAMP”), serviced by Bank of America N.A.

(“BoA”). (TAC at ¶¶ 70-74.)

In July 2009, after reviewing Plaintiffs’ financial

information, BoA informed Plaintiffs during the course of a

telephone conversation that they had conditionally met the

eligibility requirements to qualify for a permanent loan

modification under the HAMP. (Id. at ¶ 74.) Plaintiffs claim

that BoA also explained that if the Plaintiffs made three timely

trial period plan (“TPP”) payments of $2,345, then BoA would

provide a permanent loan modification. (Id.) 

On August 23, 2009, Plaintiffs were approved for and

received TPP documents, which they signed. (TAC at ¶ 75; TAC,

Ex. 7 (“TPP”.) The TPP documents explained how Plaintiffs were

required to make three timely TPP payments for the months of

August, October, and November 2009. (Id. at ¶ 76.) Plaintiffs 6

state that they timely made the three TPP payments and continued

to make the TPP payments after November 2009. (Id. at §§ 77-79.)

///

 Plaintiffs now claim that the dates written on the NRC 5

were placed on the form sometime after they signed it, and the

dates were never provided to the Plaintiffs. (TAC at 26.)

 It is unclear why September was not included. 6

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In December 2009, Plaintiffs contacted Defendants and were

told they were “still under review” and must continue making

their mortgage payments. (Id. at ¶ 81.) Plaintiffs then

received a letter dated December 12, 2009, from BoA requesting

their tax returns and the most recent profit and loss statement. 

(Id. at ¶ 82.) Plaintiffs allege the tax returns and similar

financial information had previously been submitted to Defendants

prior to starting the TPP. (Id.)

In January and February 2010, Plaintiffs received letters

from BoA requesting tax returns, documentation stating Plaintiffs

were not subject to homeowners’ association dues, and

documentation showing completion of credit counseling. (Id. at

¶¶ 83, 85.) Again, Plaintiffs claim these documents were already

in BoA’s custody, but they produced the documents. (Id.)

During the latter part of January 2010, Plaintiffs received

a letter from BoA claiming Plaintiffs had not made all necessary

TPP payments. (Id. at ¶ 84.) Plaintiffs thereafter requested and

received a copy of their loan history from Defendants, which,

they assert, indicated that Plaintiffs made every payment since

entering the TPP trial period. (Id.)

In February 2010, Plaintiffs called to inquire as to the

status of the loan modification, and the purpose of the document

request, but did not receive a conclusive answer. (Id. at ¶ 86.)

///

///

///

///

/// 

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Between February and June 2010, Plaintiffs continued to make

their TPP payments and communicated with BoA on seven separate

occasions. (Id. at ¶¶ 85-90.) By phone and in writing, BoA

repeatedly assured Plaintiffs that they had satisfied the HAMP

requirements and had been approved for the permanent loan

modification and that the paperwork would be sent to them in the

near future. (Id.) Plaintiffs were instructed to continue making

their mortgage payments while awaiting the loan modification

paperwork. (Id. at ¶ 88.) However, the promised paperwork never

arrived. (Id. at ¶ 90.)

Then, on June 25, 2010, Plaintiffs received a letter from

BoA informing them that they had not qualified for a HAMP

modification due to a negative net present value test result. 

(Id. at ¶ 91.) Four days later, on June 29, Plaintiffs contacted

BoA by telephone. (Id.) According to Plaintiffs, the BoA

representative “confirmed” Plaintiffs’ loan modification had been

approved in February of 2009. (Id.) 

Plaintiffs never received the final loan modification

documents. (Id.) Instead, BoA allegedly initiated a collection

process, which Plaintiffs contend caused them severe emotional

distress and other damages. (Id. at ¶¶ 92-102.) 

In their TAC, Plaintiffs raise claims against all Defendants 

for: (1) breach of written contract, (2) breach of oral contract;

(3) breach of implied covenant of good faith and fair dealing,

(4) promissory estoppel, (5) violations of California’s Unfair

Competition Law, and (6) violations of the Truth-In-Law Lending

Act (“TILA”) codified at 12 C.F.R. Part 226 (“Regulation Z”). 

(See, TAC, ECF No. 29.) 

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In its prior Order, the Court granted, with final leave to amend,

Defendants’ Motion to Dismiss Plaintiffs’ Second Amended

Complaint (“SAC”) as to all but Plaintiffs’ promissory estoppel

cause of action. (See ECF No. 28.)

STANDARD

A. Motion to Dismiss

On a motion to dismiss for failure to state a claim under

Rule 12(b)(6), all allegations of material fact must be accepted

as true and construed in the light most favorable to the

nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,

337-38 (9th Cir. 1996). Rule 8(a)(2) requires only “a short and

plain statement of the claim showing that the pleader is entitled

to relief” in order to “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, 554-55 (2007) (internal

citations and quotations omitted). 

Though “a complaint attacked by a Rule 12(b)(6) motion to

dismiss does not need detailed factual allegations, 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.” Id. at 555 (internal citations and quotations omitted). 

A plaintiff’s factual allegations must be enough to raise a right

to relief above the speculative level. 

///

///

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Id. (citing 5 C. Wright & A. Miller, Federal Practice and

Procedure § 1216, pp. 235-36 (3d ed. 2004) (“The pleading must

contain something more. . . than . . . a statement of facts that

merely creates a suspicion [of] a legally cognizable right of

action”)).

Moreover, “Rule 8(a)(2) . . . requires a ‘showing,’ rather

than a blanket assertion of entitlement to relief. Without some

factual allegation in the complaint, it is hard to see how a

claimant could satisfy the requirements of providing not only

‘fair notice’ of the nature of the claim, but also ‘grounds’ on

which the claim rests.” Twombly, 550 U.S. at 555, n.3 (internal

citations omitted). A pleading must contain “only enough facts

to state a claim to relief that is plausible on its face.” Id.

at 570; see also Ashcroft v. Iqbal, 556 U.S. 662, 677-679 (2009). 

If the “plaintiffs . . . have not nudged their claims across the

line from conceivable to plausible, their complaint must be

dismissed.” Twombly, 550 U.S. at 570; Iqbal, 556 U.S. at 680. 

A court granting a motion to dismiss a complaint must then

decide whether to grant leave to amend. Rule 15(a) empowers the

court to freely grant leave to amend when there is no “undue

delay, bad faith[,] dilatory motive on the part of the movant, .

. . undue prejudice to the opposing party by virtue of . . . the

amendment, [or] futility of the amendment. . . .” Foman v.

Davis, 371 U.S. 178, 182 (1962). Leave to amend is generally

denied when it is clear the deficiencies of the complaint cannot

be cured by amendment. 

///

///

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DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.

1992); Balistieri v. Pacifica Police Dept., 901 F. 2d 696, 699

(9th Cir. 1990) (“A complaint should not be dismissed under Rule

12(b)(6) unless it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle

him to relief.”) (internal citations omitted).

CLAIMS AND ANALYSIS

A. Breach of Contract, Breach of Duty of Good Faith and

Fair Dealing, Promissory Estoppel, California Unfair

Competition Law

Plaintiffs’ factual allegations and causes of action for

(1) breach of written contract; (2) breach of oral contract;

(3) breach of good faith and fair dealing; (4) promissory

estoppel; and (5) violations of California’s Unfair Competition

Law appear to be essentially identical to the facts and claims

they raised in the Second Amended Complaint. (Cf. ECF Nos. 20

(“SAC”) and 29 (“TAC”).) With the exception of Plaintiffs’

promissory estoppel claim, the Court previously dismissed each of

these claims with final leave to amend. (ECF No. 28) 

Because Plaintiffs have chosen not to materially amend their

claims in their TAC, Defendants’ Motion to Dismiss is granted

without leave to amend as to Plaintiffs’ causes of action for

(1) breach of written contract; (2) breach of oral contract;

(3) breach of good faith and fair dealing; and (4) violations of

California's Unfair Competition, for the reasons set forth in the

Court’s prior Order. (Id.) 

///

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Because the Court previously found Plaintiffs had stated a cause

of action for promissory estoppel, and because this claim is

essentially unaltered in the TAC, Defendants’ motion is denied as

to that claim for the reasons set forth in the Court’s prior

Order. (Id.) However, because Plaintiffs added some detail to

their Sixth Cause of Action, related to TILA and Regulation Z,

the Court will briefly discuss that claim.

B. Truth In Lending Act and Regulation Z

TILA mandates that borrowers be given three business days to

rescind, without penalty, a consumer loan that uses their

principle dwelling as security. 15 U.S.C. § 1635(a). If the

lender does not comply with TILA’s disclosure requirements, the

rescission period is extended to three years. 15 U.S.C.

§ 1635(f). The disclosure requirements at issue here are:

(1) that creditors must provide each borrower two NRCs within

three days of the transactions’ execution, 12 C.F.R. § 226.15(b);

and (2) that the NRC identify when the cancellation period

expires. Id. 

As they did in their Second Amended Complaint, Plaintiffs

again generally allege BoA violated TILA by “failing to deliver

to Plaintiffs two copies of the notice of right to cancel (“NRC”)

that clearly and conspicuously disclosed the date the rescission

period expired.” (TAC ¶ 150.) Plaintiffs claim that “the NRCs

that Plaintiffs received were materially defective in that they

did not indicate the final date to rescind the loan.” (Id.)

///

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Plaintiffs argue, that as a result of receiving defective forms,

they have the right to rescind their initial deed of trust

agreement. (Id. at ¶¶ 151-162.) In their Second Amended

Complaint, Plaintiffs relied on the unsigned version of the NRCs

(see ECF No. 20, Ex. 10). Defendants then responded by directing

the Court’s attention to the signed and dated versions of the

NRCs (see ECF No. 21, Ex. D)

Plaintiffs now contend that the notices of right to cancel

that Defendants sent to them were materially defective because

they didn’t include the final date to rescind the loan. (TAC

¶ 150; see also TAC, Ex. 10 (blank NRCs.) They argue that the

completed NRCs (attached to the TAC at Ex. 11 and to Defendants’

MTD as Ex D) are insufficient because they were not provided to

Defendants as part of the litigation until July of 2011, and

because “[t]he dates handwritten on Exhibit 11 were placed on

that notice sometime after Plaintiffs signed the notice and were

never provided to Plaintiffs.” (TAC at ¶ 151). 

Defendants move to dismiss on the basis that: (1) Plaintiffs

did receive a proper and conspicuously disclosed NRC (MTD at 16-

17, 19-20); (2) Plaintiffs’ claims are time-barred (Id. at 17);

and Plaintiffs failed to properly allege tender (Id. at 17-19). 

The Court previously dismissed this claim on the basis that

Plaintiffs’ claims were too conclusory and generally violated

Rule 8(a)s pleading requirements. (See ECF No. 28 at pages 19-

21.) With respect to Plaintiffs’ contentions regarding the date

of the NRCs, Defendants respond that on December 19, 2007,

Plaintiffs received and signed an NRC identifying both the date

of the transaction and the period of rescission. (See RJN, Ex D.) 

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The completed NRC states, “You have a legal right under

federal law to cancel this transaction, without cost, within

THREE BUSINESS DAYS...” of whichever of the following events

occurs last:” (1) “the date of the transaction” - handwritten in

is the date “12/19/07” – (2) “the date you received your Truth in

Lending Disclosures; or (3) the date you received [the NRC].” 

(See id.) The top of the page indicates that it was faxed from

Bank of America on December 19, 2007 and both Plaintiffs signed

and dated the document in handwriting with a December 19, 2007

date. (Id.) Thus, there is enough information on the form to

have given Plaintiffs notice of their three-day window to cancel

the transaction from December 19, 2007, the date they signed the

NRC. Plaintiffs’ contentions about when the dates were added 7

are inconsistent with the handwritten information on the page,

are implausible, and do not “raise a right to relief above the

speculative level.” Twombly, 550 U.S. 544, 554-55.

It is simply not plausible that Plaintiffs were not fully

aware, and on notice, of their right to rescind within three days

of receiving the NRC. They did not exercise this right, and

therefore have no right under TILA and Regulation Z to rescind

the contract nearly three years later. 

///

 Plaintiffs do not explicitly claim fraud, and their 7

assertion that the dates were added later is not supported by any

further facts. To the extent Plaintiffs are alleging fraud on

Defendants’ part, their claim fails to satisfy either the

heightened pleading requirements of Rule 9(b) or Rule 8(a)s more

lenient standard. There is simply no basis to conclude that the

dates were added later. Where Plaintiffs, as here, “have not

nudged their claims across the line from conceivable to

plausible, their complaint must be dismissed.” Twombly, 550 U.S.

at 570. 

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Therefore, contrary to their claims, Plaintiffs did receive

proper notification of a notice to cancel and the period of

rescission and there is no claim or evidence that they exercised

their right to cancel.

Furthermore, Plaintiffs’ contention that they are “able and

willing to repay any amounts due Defendant, after Defendant has

returned all amounts due to Plaintiffs pursuant to a payment plan

authorized by the Court or in a lump sum with 120 days of an

entry of order granting Plaintiffs’ rescission,” (see TAC ¶ 162),

is insufficient to satisfy TILA’s tender requirement.

Under California law, a plaintiff challenging a foreclosure

sale or any cause of action “implicitly integrated” with the sale

is required to make a valid and viable tender of payment of the

debt. Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575,

578–79 (1984); Karlsen v. Am. Savs. & Loan Ass’n, 15 Cal. App. 3d

112, 121 (1971). An offer to tender is “an offer to pay the full

amount of the debt for which the property was security.” Arnolds

Mgmt. Corp., 158 Cal. App.3d at 578. Here, Plaintiffs’ tender

offer is essentially conditioned on them winning the lawsuit,

which fails both because that does not appear to be a present

offer to tender, nor does such an offer appear to be particularly

likely given that the Court has dismissed all but one of

Plaintiffs’ claims after giving them multiple opportunities to

amend their complaint. Considering the facts and circumstances

present, this Court finds that Plaintiffs have not sufficiently

alleged tender in this case. 

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So, for the reasons set forth in its prior Order dismissing

Plaintiffs’ TILA and Regulation Z cause of action (see ECF

No. 28), as well as for the additional reasons set forth in the

present Order, Defendants’ motion to dismiss Plaintiffs’ Sixth

Cause of Action related to TILA and Regulation Z is GRANTED

without leave to amend.

CONCLUSION

As a matter of law, and for the reasons set forth above, 

Defendants’ Motion to Dismiss Plaintiffs’ Third Amended Complaint

is GRANTED in part and DENIED in part. Defendants’ Motion to

Dismiss is GRANTED without leave to amend as to Plaintiffs’ causes

of action for (1) breach of written contract; (2) breach of oral

contract; (3) breach of good faith and fair dealing; (4) violations

of California’s Unfair Competition Law; and (5) Violations of

Truth-In-Lending Act and Regulation Z. No further amendments will

be permitted. Defendants’ Motion to Dismiss is DENIED as to

Plaintiffs’ promissory estoppel cause of action. 

///

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Plaintiffs shall file an amended Complaint within twenty

(20) days of the date this Order is filed electronically that is

limited to the Promissory Estoppel cause of action. No new facts

or claims are permitted.

IT IS SO ORDERED. 

Dated: July 6, 2012

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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