Cherie Morgan v. Aurora Loan Services

FILED
NOT FOR PUBLICATION MAR 28 2016

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

CHERIE J. MORGAN, an individual, No. 14-55203

Plaintiff - Appellant, D.C. No. 2:12-cv-04350-CAS-
MRW
v.

AURORA LOAN SERVICES, LLC, a MEMORANDUM*
Delaware Limited Liability Company and
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC., a
California Corporation,

Defendants - Appellees.

Appeal from the United States District Court
for the Central District of California
Christina A. Snyder, District Judge, Presiding

Argued and Submitted March 9, 2016
Pasadena, California

Before: REINHARDT, MURGUIA, and OWENS, Circuit Judges.

Plaintiff Cherie J. Morgan appeals the district court’s dismissal under

Federal Rule of Civil Procedure 12(b)(6) of her diversity action against Defendants

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Aurora Loan Services, LLC and Mortgage Electronic Registration Systems

(MERS). Morgan’s action arises from an allegedly wrongful nonjudicial

foreclosure proceeding brought against her real property. We have jurisdiction

under 28 U.S.C. § 1291, and we affirm. Because the parties are familiar with the

facts of this case, we do not repeat them here.

1. The district court properly dismissed Morgan’s contract claims. She

entered into two written agreements with Aurora—the workout agreement (WAG)

and the foreclosure alternative agreement (FAA). First, Morgan’s claim that

Aurora breached the WAG and FAA by ultimately failing to offer her a permanent

loan modification fails because neither the WAG nor the FAA guaranteed a

permanent loan modification. Cf. Corvello v. Wells Fargo Bank, NA, 728 F.3d

878, 880-81 (9th Cir. 2013) (per curiam) (holding that the plaintiff stated a breach

of contract claim where the contract provided that if he complied with a trial period

plan, the lender would provide a loan modification agreement). Both contracts

clearly provided that the aggregate plan payments would be insufficient to cure

Morgan’s arrearage, and that she would need to utilize a cure method to avoid

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foreclosure. Neither requires Aurora to provide a permanent loan modification.1

Further, Morgan has not sufficiently alleged that any Aurora representative orally

guaranteed a permanent loan modification upon successful completion of the WAG

and FAA. Morgan alleges only she was told she “needed to enter into a Workout

Agreement in order to receive a permanent loan modification.”2 Assuming without

deciding that this statement was admissible under California’s parol evidence rule,

Cal. Civ. Proc. Code § 1856(g), at most it suggests that compliance with a workout

agreement was a necessary, but not a sufficient, condition to obtain a permanent

modification.

Morgan also alleges that Aurora breached the FAA by rejecting her July 4,

1
Like the district court, we are unpersuaded by Morgan’s reliance on the
interpretation of a similar contract in Pinel v. Aurora Loan Services, LLC, 814 F.
Supp. 2d 930, 943-44 (N.D. Cal. 2011).
2
Morgan relies on an oral statement mentioned only in her opposition to
defendants’ motion to dismiss her third amended complaint, not in the complaint
itself. We may not consider this statement because “[i]n determining the propriety
of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint to a
plaintiff’s moving papers.” Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir.
2003) (quoting Schneider v. Cal. Dep’t. of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir.
1998)). While “facts raised for the first time in plaintiff’s opposition papers should
be considered by the court in determining whether to grant leave to amend or to
dismiss the complaint with or without prejudice,” id., Morgan has now filed four
complaints without this statement and there is no reason to believe she would
include it if granted another leave to amend.

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2011 payment, but this too fails. Morgan’s own allegations establish that she had

missed one required payment by July 4, and thus was herself in breach. Even if

Aurora breached the FAA by not accepting the July 4 payment, Morgan was not

injured because Aurora still considered her for a permanent loan modification and

did not foreclose on her property until after the FAA expired and she failed to cure

the arrearage.

Finally, Morgan fails to state a claim that defendants breached the deed of

trust. As Morgan was given leave to amend her second amended complaint only

for the purpose of pleading claims similar to those in Corvello, her claim fails as an

improper amendment. See Fed. R. Civ. P. 15(a)(2); Johnson v. Riverside

Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (explaining that this

court “may affirm based on any ground supported by the record”). Granting

further leave to amend would be futile because, as Morgan had constructive and

express notice of the trustee’s sale, she was not injured by the defendants’ alleged

failure to comply with the technical requirements of § 2924f.

2. Morgan’s intentional and negligent misrepresentation claims were

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properly dismissed because she failed to sufficiently plead damages.3 See Lazar v.

Superior Court, 909 P.2d 981, 984-85 (Cal. 1996) (stating the elements of

intentional misrepresentation); Wells Fargo Bank, N.A. v. FSI, Fin. Sols., Inc., 127

Cal. Rptr. 3d 589, 600 (Ct. App. 2011) (stating the elements of negligent

misrepresentation); see also Cal. Civ. Code § 1709. Morgan alleges that she was

injured in forbearing from pursuing other options to save her home and spending

time repeatedly contacting Aurora to ascertain the status of her loan modification

and submitting requested documents.4 To the extent that some California courts of

appeal recognize the time spent pursuing modification as a cognizable theory for

damages in this context, a plaintiff must still plead an adequate factual basis for

such damages, which Morgan has not done for either alleged injury. See

Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (stating that a

Rule 12(b)(6) dismissal is proper if there is “the absence of sufficient facts alleged

under a cognizable legal theory” (quoting Balistreri v. Pacifica Police Dep’t, 901

3
As Morgan failed to sufficiently plead damages, we need not address any
issues related to Federal Rule of Civil Procedure 9(b).
4
Morgan does not dispute that any WAG or FAA payments made in reliance
on purported misrepresentations that she would be reviewed for a permanent loan
modification were made pursuant to preexisting contractual duties, and thus do not
constitute damages. See, e.g., Lueras v. BAC Home Loans Servicing, LP, 163 Cal.
Rptr. 3d 804, 829 (Ct. App. 2013).

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F.2d 696, 699 (9th Cir. 1988)). Compare Bushell v. JPMorgan Chase Bank, N.A.,

163 Cal. Rptr. 3d 539, 549 (Ct. App. 2013) (holding that plaintiffs had adequately

pled damages where they alleged they were injured by the time spent dealing with

the defendant throughout the loan modification process, among other things) with

Lueras, 163 Cal. Rptr. 3d at 829 (“Time and effort spent assembling materials for

an application to modify a loan is the sort of nominal damage subject to the maxim

de minimis non curat lex—i.e., the law does not concern itself with trifles.”).

4. Morgan similarly fails to state a claim for “lack of standing” under

§ 2924(a)(6). This provision of the California Homeowner’s Bill of Rights did not

go into effect until January 1, 2013—well after Morgan’s foreclosure—and does

not apply retroactively. See Cal. Civ. Code § 2924(a)(6); Myers v. Philip Morris

Cos., Inc., 50 P.3d 751, 759 (Cal. 2002) (explaining that unless a California statute

contains an express retroactivity provision, it will not be applied retroactively

unless it is clear from extrinsic sources that the legislature intended it to be applied

retroactively). To the extent that this claim can be construed as one for wrongful

foreclosure, it still fails. Morgan alleges that Aurora was not the proper beneficiary

of the deed of trust because the deed of trust was not assigned to the Lehman Trust

before its closing date. A borrower does have standing to challenge an assignment

6
of her note and deed of trust on the basis of defects allegedly rendering the

assignment void. Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016).

But because an act in violation of a trust agreement is voidable—not void—under

New York law, which governs the Pooling and Servicing Agreement (PSA) at

issue, Morgan lacks standing here. See Rajamin v. Deutsche Bank Nat. Trust Co.,

757 F.3d 79, 87-90 (2d Cir. 2014) (finding that “any failure to comply with the

terms of the PSAs” did not render the “acquisition of plaintiffs’ loans and

mortgages void” because “[u]nder New York law, unauthorized acts by trustees are

generally subject to ratification by the trust beneficiaries”). Similarly, to the extent

Morgan alleges defects due to MERS’s role in the securitization process,

“California [courts] have universally held that MERS, as nominee beneficiary, has

the power to assign its interest under a deed of trust.” Herrera v. Fed. Nat’l Mortg.

Ass’n, 141 Cal. Rptr. 3d 326, 328 (Ct. App. 2012).

5. The district court properly dismissed Morgan’s quiet title and cancellation

of instruments claims because she failed to allege facts sufficient to show tender in

the amount of her indebtedness or a valid excuse to the tender requirement. See

Lona v. Citibank, N.A., 134 Cal. Rptr. 3d 622, 640-42 (Ct. App. 2011) (explaining

the tender requirement and excuses to tender); Miller v. Provost, 33 Cal. Rptr. 2d

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288, 289-90 (Ct. App. 1994) (quiet title); Arnolds Mgmt. Corp. v. Eischen, 205 Cal.

Rptr. 15, 17-18 (Ct. App. 1984) (equitable set-aside). First, as explained

previously, Morgan’s failure to tender is not excused by the allegedly voidable

transfer of her note and deed of trust into the Lehman Trust. See Rajamin, 757 F.3d

at 88-90. Second, no counterclaims survive to offset the amount of the debt

claimed by Aurora. Third, no specific circumstances here make it inequitable to

enforce Morgan’s debt.

6. The district court properly dismissed Morgan’s promissory estoppel claim.

Under California law, promissory estoppel applies only in the absence of an express

agreement between the parties. See Youngman v. Nevada Irr. Dist., 449 P.2d 462,

468 (Cal. 1969); Fontenot v. Wells Fargo Bank, N.A., 129 Cal. Rptr. 3d 467, 483-84

(Ct. App. 2011). As Morgan’s payments under the WAG and FAA were made as

part of a bargained-for exchange with Aurora, she fails to state a claim for

promissory estoppel.

7. Finally, the district court properly dismissed Morgan’s claim under the

Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200-17210. Morgan

alleges that defendants failed to comply with California’s nonjudicial foreclosure

scheme, but she lacked standing to bring this claim. See Kwikset Corp. v. Superior

8
Court, 246 P.3d 877, 321-22 (Cal. 2011). Under the UCL, a plaintiff must show

that her injury came “‘as a result of’ the unfair competition.” Id. at 326 (quoting

Cal. Bus. & Prof. Code § 17204). As Morgan’s foreclosure resulted from her

defaulting on her loan prior to defendants’ allegedly wrongful acts, she has not

stated a claim under the UCL. See, e.g., Jenkins v. JP Morgan Chase Bank, N.A.,

156 Cal. Rptr. 3d 912, 933-34 (Ct. App. 2013) (“As [the plaintiff’s] home was

subject to nonjudicial foreclosure because of [her] default on her loan, which

occurred before Defendants’ alleged wrongful acts, [she] cannot assert the

impending foreclosure of her home . . . was caused by Defendants’ wrongful

actions.”).

8. The district court did not abuse its discretion in failing to grant Morgan’s

requests to amend her claims again. She was granted multiple opportunities to

amend her claims, and did not demonstrate how she would cure the defects if

further leave to amend were granted. See Lipton v. Pathogenesis Corp., 284 F.3d

1027, 1039 (9th Cir. 2002).

AFFIRMED.

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