Lansdown v. Bayview Loan Servicing, LLC

Background

Melissa Lansdown alleged that she entered mortgage-related agreements involving property after Bank of America, N.A. (BANA) allegedly told her she needed to fall behind on payments to qualify for a loan modification. She alleged that Bayview refused some of her payments and attempted to foreclose, although foreclosure proceedings were temporarily stopped and a later sale was canceled. Bayview later transferred servicing of the loan to NewRez LLC doing business as Shellpoint Mortgage Servicing.

Lansdown’s amended complaint asserted nine causes of action: federal debt-collection claims against Bayview and Shellpoint; California Rosenthal Act claims against Bayview and Shellpoint; intentional infliction of emotional distress claims against Bayview and Shellpoint; breach-of-contract claims against Bayview and Shellpoint; and a rescission claim against all defendants. Rescission is a remedy that seeks to undo a contract. Lansdown sought rescission of a memorandum of understanding, a settlement agreement, and a loan-modification agreement.

Bayview and Shellpoint’s Motion

Bayview and Shellpoint moved to dismiss under Federal Rule of Civil Procedure 12(b)(7), which addresses failure to join a required party, and Rule 12(b)(6), which tests whether the complaint adequately states a legally sufficient claim.

The defendants argued that Ellis Greenberg was a required party because he had signed the deed of trust, was a co-borrower on the promissory note, and was named as a co-borrower on the loan-modification agreement. The court denied the Rule 12(b)(7) motion. It found that Greenberg was not a signatory to the contracts Lansdown sought to rescind, that the court could provide complete relief without him, and that the defendants had not shown that his interest in the loan was substantial enough to require his participation.

The court granted the motion to dismiss Lansdown’s federal debt-collection claims because they were filed more than one year after the latest alleged violation. The court rejected Lansdown’s argument that California Emergency Rule 9 extended the federal claims’ filing deadline and found that the complaint did not establish grounds for equitable tolling, which can extend a deadline in limited circumstances. The court granted Lansdown leave to amend if she could allege facts supporting tolling or another basis for avoiding the time bar.

The court also granted the motion to dismiss Lansdown’s Rosenthal Act claims as untimely and granted leave to amend. It granted the motion to dismiss the intentional-infliction-of-emotional-distress claims because the allegations of extreme conduct and severe emotional distress were conclusory and insufficient. Lansdown was likewise given leave to amend those claims.

The court denied the motion to dismiss the breach-of-contract claims. It found that Lansdown had sufficiently alleged that she performed, or was excused from performing, her contractual obligations. The court also denied the motion to dismiss the rescission claim, concluding that service of the lawsuit could provide the required notice of rescission and that the defendants had not shown that any delay in restoring benefits substantially prejudiced them.

BANA’s Motion

BANA moved to dismiss the rescission claims against it. The court granted BANA’s motion, agreeing that rescission is a remedy rather than an independent cause of action and that Lansdown had not adequately pleaded a basis for rescission against BANA. The opinion states that Lansdown did not respond to BANA’s arguments and sought leave to amend.

Disposition

The court granted in part and denied in part Bayview and Shellpoint’s motion to dismiss, granted BANA’s motion to dismiss, and granted Lansdown leave to amend. Judge Thomas S. Hixson ordered Lansdown to file a second amended complaint within 30 days of the order. The opinion does not state that any dismissal was with or without prejudice.