Valencia v. Nationstar Mortgage LLC

Background

Lilia Valencia and Lilia Chavez sued Nationstar Mortgage LLC, U.S. Bancorp, Clear Recon Corp., and unidentified defendants. The complaint asserted five causes of action, including negligent misrepresentation against Nationstar. The case was filed in state court and later removed to federal court.

Nationstar previously moved to dismiss the negligent-misrepresentation claim. The court granted that motion and allowed plaintiffs to amend. Plaintiffs then filed an amended complaint, and Nationstar again moved under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

Alleged Misrepresentations

The amended complaint identified three alleged misrepresentations by Nationstar:

Plaintiffs alleged that the property was sold on January 8, 2025, the application was denied, and they were not given an opportunity to appeal. They sought injunctive and declaratory relief, damages, attorneys’ fees and costs, and other relief.

Court’s Analysis

Under California law, negligent misrepresentation requires allegations of: (1) a misrepresentation of a past or existing material fact; (2) no reasonable ground for believing the statement was true; (3) an intent to induce reliance; (4) justifiable reliance; and (5) resulting damage.

Nationstar challenged the first four elements. It argued that the statements were future-looking and therefore generally not actionable, and that plaintiffs had not adequately alleged that Nationstar’s agents lacked reasonable grounds for their statements, intended to induce reliance, or caused plaintiffs to rely on them.

The court concluded that the statements could reasonably be understood as assertions about the existing status of plaintiffs’ application and the procedures used when processing it, rather than predictions about future events. Drawing reasonable inferences in plaintiffs’ favor, the court found that plaintiffs sufficiently pleaded the first element.

The court also found that plaintiffs’ allegations, although thin, were not entirely conclusory. The alleged contradiction between Nationstar’s assurances and the later denial of the application, lack of an appeal period, and immediate foreclosure supported an inference that the agents lacked reasonable grounds for their statements. Plaintiffs also alleged that the statements were made to influence their actions and decisions about the property, which plausibly alleged an intent to induce reliance. The court relied on its earlier conclusion that plaintiffs had sufficiently alleged justifiable reliance.

Ruling

The court held that plaintiffs plausibly alleged negligent misrepresentation and denied Nationstar’s partial motion to dismiss that claim. The court vacated the July 29, 2025 hearing and ordered Nationstar to file an answer by August 8, 2025. Judge Virginia K. DeMarchi did not rule in this order on the sufficiency of the other causes of action.