Kingsway Capital Partners, LLC v. Caliber Home Loans, Inc.

KINGSWAY CAPITAL PARTNERS, LLC, Plaintiff, v. CALIBER HOME LOANS, INC., et al., Defendants.

Case No. 16-cv-04798-PJH

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

February 23, 2017

ORDER GRANTING BANA'S MOTION TO DISMISS

Re: Dkt. No. 102

Before the court is defendant Bank of America, N.A.'s motion to dismiss. Dkt. 102. The matter is fully briefed and suitable for decision without oral argument. Accordingly, the hearing set for March 1, 2017 is VACATED. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby GRANTS the motion, for the following reasons.

BACKGROUND

A. Procedural History

This case centers on plaintiff Nathaniel Sobayo's efforts to purchase the property located at 329 Hawk Ridge Drive, Richmond, CA 94806 (the "Property") from Martin Musonge via a short sale. The original complaint asserted three causes of action, relying primarily on a February 11, 2015 letter from Bank of America, N.A. ("BANA") to Musonge, approving a short sale to Kingsway Capital Partners, LLC ("Kingsway"). Dkt. 1-1 Ex. A (the "Letter" or "February 11 Letter"). The first cause of action construed the Letter as a contract and asserted that the contract was breached when the short sale was cancelled. Dkt. 1-1 ¶¶ 8-20. The second claim was for promissory estoppel. It alleged that the Letter was a promise, on which Sobayo reasonably relied, which induced him to enter into a contract to purchase the Property from Musonge, and to submit a $40,000 down payment. Dkt. 1-1 ¶¶ 21-27. The third cause of action, fraud, alleged that the representations in the Letter were knowingly false. Plaintiff relied on these misrepresentations to perform due diligence regarding the Property, to enter into a contract to purchase the Property, and to make a down payment. All three claims were asserted against all of the defendants: BANA, Real Time Resolutions, Inc. ("RTR"), Caliber Home Loans, Inc. ("Caliber"), and Summit Management Company, LLC ("Summit").

Following a hearing, the court granted the RTR's and BANA's motions to dismiss the original complaint in an order dated October 27, 2016. Dkt. 88. The court held that Sobayo did not have standing to pursue the claims pro se on behalf of Kingsway, which was the named buyer in the Letter and purchase contract. Id. at 8. In addition, the court dismissed the complaint on the merits for failure to state a claim, with leave to amend. The simple reason was the express terms of the Letter, which required closing to take place by April 10, 2015, or else the short sale approval was "void." Id. The complaint admitted that no closing took place by April 10, 2015; on the contrary, the real estate purchase contract was not even entered into until July 2015. Thus, even accepting all of the allegations in the complaint as true, plaintiff had not stated a claim for breach of contract, promissory estoppel, or fraud. Id. at 8-9.

The court instructed the plaintiff as follows regarding amendment:

First, any amended complaint must be brought on behalf of Kingsway Capital Partners, LLC. Kingsway must be represented by legal counsel, who shall enter an appearance on the docket.

Second, to the extent that Kingsway wishes to rely on the Letter as the operative contract/promise, it must allege specific facts that explain why the April 10, 2015 deadline was inapplicable and/or had been extended by the defendants. A similar explanation must be made with regard to the fact that the purchase price in the contract between Kingsway and Musonge is lower than that approved in the Letter. To the extent that Kingsway wishes to rely on other short sale approvals by defendants, those facts must be pled in the complaint.

Third, to the extent that Kingsway seeks to assert claims against RTR, Caliber, and Summit, it must allege a contract, promise, ormisrepresentation made by these defendants. As pled, the complaint focuses on representations made by [BANA] to Musonge in the Letter. Even presuming that Kingsway can claim to be a third party beneficiary to the Letter, it is not clear to the court why RTR, Caliber, or Summit would be bound by the representations in the Letter. Any amended complaint shall make clear what specific contracts/promises/representations were made by each defendant . . . It is not sufficient to treat all of the defendants as an undifferentiated group.

Fourth, to the extent Kingsway seeks to rely on the theory that defendants failed to notify it regarding the transfer of servicing of Musonge's loans, Kingsway must explain why any defendant had a duty to notify Kingsway about the transfer of servicing. . . .

Finally, no new causes of action may be asserted in the amended complaint.

Dkt. 88 at 9-10.

Following the dismissal, Sobayo secured counsel, substituted Kingsway as plaintiff, and filed the first amended complaint ("FAC"). Dkt. 96. BANA responded with a motion to dismiss. Dkt. 102. Kingsway has not responded to the motion.

B. The First Amended Complaint

Kingsway's FAC contains basically the same factual allegations as the original complaint. On February 11, 2015, Musonge entered into a written agreement with BANA approving a short sale of the Property to Kingsway with a sales price of $580,000. FAC ¶ 8; Dkt. 1-1 Ex. A. The February 11 Letter expressly required closing to take place "no later than 03/26/2015." Id. Though this fact is not pleaded in the FAC, the documents attached to the original complaint indicate that BANA subsequently extended the deadline to April 10, 2015. Dkt. 1-1 Ex. A at 7.

The FAC alleges that BANA, at an unspecified "[s]ubsequent" time, "orally and in writing waived the requirement that the short sale be for a sales price of $580,000 and also waived the closing date of March 26, 2015, leaving both subjects open for negotiation." FAC ¶ 10. The February 11 Letter "was made for the benefit of a purchaser of said short sale real property, including Plaintiff." FAC ¶ 11. Relying on the Letter, Kingsway entered into a written agreement to purchase the Property from Musonge.FAC ¶ 12. The purchase agreement was entered into on July 10, 2015, and lists a price of $570,000. Dkt. 1-1 Ex. B.

On July 7, 2015, the first deed of trust on the Property was transferred from BANA to Caliber. FAC ¶ 13. On November 6, 2015, Caliber approved a short sale with a closing "no later than 12/04/2015" and a purchase price of $570,000. FAC ¶¶ 14-17; Dkt. 1-1 Ex. C. Caliber's approval "was made for the benefit of a purchaser of said short sale real property, including Plaintiff." FAC ¶ 14.

Based on the above facts, Kingsway asserts three causes of action, each against all defendants:

1. Breach of Contract. Alleges that plaintiff "performed all the terms and conditions of the subject contracts" (presumably, BANA and Caliber's short sale approval letters). However, "Defendants refused to complete the short sale." FAC ¶¶ 18-19.

2. Fraud Per Cal Civil Code § 1572(4). Alleges that at the time that defendants issued their letters promising to approve the short sale of the Property, "they had no intention of performing such promises." Plaintiff reasonably relied on these "fraudulent promises." FAC ¶¶ 21-24.

3. Declaratory Relief. Plaintiff seeks a judicial declaration "setting forth the rights and duties" of the parties with regard to the short sale of the Property. FAC ¶¶ 26-27.

DISCUSSION

A. Legal Standards

1. Federal Rule of Civil Procedure 12(b)(6)

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). To survive a motion to dismiss for failure to state a claim, a complaint generally must satisfy the requirements of Federal Rule of Civil Procedure 8, which requires that a complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

/// A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). The court is to "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899-900 (9th Cir. 2007).

Legally conclusory statements, not supported by actual factual allegations, need not be accepted by the court. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and quotations omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citation omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to relief.'" Id. at 679. In the event dismissal is warranted, it is generally without prejudice, unless it is clear the complaint cannot be saved by any amendment. See Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir. 2005).

2. Federal Rule of Civil Procedure 9(b)

In actions alleging fraud, "the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). This requires allegations of the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (citations omitted). "[A]llegations of fraud must be specific enough to give defendants...