Walker v. Bayview Loan Servicing, LLC

Background

The plaintiffs alleged that Ditech Financial, LLC approved a trial loan-modification plan in 2017. After they made three required monthly payments, they alleged that the mortgage would be permanently modified, but they did not receive the modification. Bayview began servicing the loan on September 1, 2017.

The plaintiffs later settled a state-court lawsuit with Bayview. Under the settlement, the loan was permanently modified effective August 1, 2017. The complaint alleged that the loan balance increased from $637,579.97 to $856,211.12, monthly payments were set at $3,397.57 beginning in December 2018, and Bayview deferred and waived interest on $58,186 until December 1, 2025. Bayview represented at the hearing that the loan-modification and settlement agreements included fee provisions.

The plaintiffs alleged that Bayview later sent statements demanding amounts that did not match the agreement. In May 2019, a statement and telephone representatives said that $56,911.65 was due, including property-inspection and legal fees. The plaintiffs sent Bayview written requests concerning the loan account under the federal Real Estate Settlement Procedures Act, and Bayview responded that the amount was correct. In November 2019, the plaintiffs were informed that Bank of America would service the loan, and Bank of America’s first statement said that $53,504 plus the actual monthly payment was owed.

Motion and legal standard

Bayview moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. The court accepted well-pleaded factual allegations as true for purposes of the motion but did not accept labels, conclusions, or unsupported statements. The court had diversity jurisdiction and did not reach Bayview’s alternative argument about federal-question jurisdiction.

Claims and analysis

Breach of contract. The plaintiffs alleged that Bayview breached the settlement agreement by failing to implement the permanent modification, defer and waive interest, and limit the monthly payment to the agreed amount. The court held that the complaint did not plausibly allege damages. The allegations were based mainly on statements showing an incorrect amount due, and the statements apparently had been corrected. The plaintiffs did not say whether they paid more than the agreement required, and the court noted that there had been no foreclosure proceedings. The court therefore granted the motion to dismiss this claim.

Implied covenant of good faith and fair dealing. Because the court dismissed the breach-of-contract claim, it dismissed the claim for breach of the implied covenant of good faith and fair dealing as well.

Negligence and negligence per se. The court explained that lenders generally do not owe borrowers a duty of care unless their conduct goes beyond the ordinary role of lending money, although a duty can arise in some loan-modification circumstances. The plaintiffs alleged only that they received a statement inconsistent with the loan-modification agreement and offered conclusions rather than supporting facts. The court held that they did not plausibly allege a breached duty and dismissed the negligence claim.

For negligence per se, a legal doctrine that can presume a lack of due care when a statute or regulation is violated and other requirements are met, the court held that the plaintiffs did not plausibly allege a violation of the Real Estate Settlement Procedures Act or another law. They alleged only that Bayview failed to respond to a written request, and they also failed to plead damages. The court dismissed this claim.

Intentional infliction of emotional distress. The court held that sending incorrect loan statements, without more, was not extreme or outrageous conduct. The remaining allegations were conclusory, so the court granted the motion to dismiss this claim.

California Unfair Competition Law. The court held that the plaintiffs did not plausibly allege damages and therefore lacked standing to pursue an unfair-competition claim. It also found no unlawful underlying act and no particular facts supporting fraud or mistake. The court dismissed the claim.

Disposition

The court granted Bayview’s motion to dismiss. The plaintiffs were permitted to file an amended complaint by June 25, 2020, and were required to attach a comparison showing changes from the original complaint. The order states that it disposes of ECF No. 9. The opinion does not state that the dismissal was with or without prejudice.