Hogan v. Central Loan Administration and Reporting ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 THOMAS M. HOGAN and RU HOGAN, No. 2:22-CV-00039 WBS AC 13 Plaintiffs, 14 v. MEMORANDUM AND ORDER RE: DEFENDANT CITIBANK’S MOTION 15 CENTRAL LOAN ADMINISTRATION dba TO DISMISS PLAINTIFFS’ SECOND CENLAR FSB; CITIBANK, N.A.; and AMENDED COMPLAINT 16 DOES 1 through 20, inclusive, 17 Defendants. 18 19 ----oo0oo---- 20 Defendant Citibank, N.A. (“Citibank”) moves to dismiss 21 (Docket No. 40) plaintiffs’ second amended complaint ((“SAC”) 22 Docket No. 35) which alleges breach of contract against both 23 defendants. 24 I. Factual and Procedural Background 25 The factual background of this case is described in 26 detail in the court’s April 26, 2022 Order (Docket No. 32) 27 granting Citibank’s motion to dismiss, and granting in part and 28 denying in part Central Loan Administration dba Cenlar FSB’s 1 (“Cenlar”) motions to dismiss and strike (Docket Nos. 16, 17, 2 19). In short, on September 22, 2019 plaintiffs met with a 3 Citibank representative, Gabriella Peter, at a Sacramento branch 4 of Citibank to fix their bi-monthly mortgage payment schedule as 5 Cenlar was rejecting the second payments of each month. (SAC ¶¶ 6 14-17.) During this meeting, Peter assisted with contacting a 7 Cenlar representative. (Id. ¶ 18.) 8 Plaintiffs allege that during this phone call the 9 following agreement was made: 10 “A. [Citibank] and [Cenlar] agreed to recharacterize all past payments incorrectly 11 applied to principal and apply them to payments 12 on the loan, to remove all negative credit reporting and waive late fees. 13 B. Plaintiffs agreed to immediately pay in excess 14 of $4,400 for rejected payments along with a “telephone convenience fee” to bring the account 15 up to date. 16 C. With the application of payments applied to 17 principal now reset as payments on the loan, Plaintiff[s’] account would be paid current 18 through January 2022” 19 (Id.) 20 Plaintiffs allege that defendants continue to misapply 21 payments, “report negative credit[,] threaten other legal actions 22 against [p]laintiffs,” and “engage[] in ongoing and constant 23 harassment of plaintiffs.” (Id. ¶¶ 31-32.) 24 II. Discussion 25 The court previously granted Citibank’s motion to 26 dismiss because the First Amended Complaint, ((“FAC”) (Docket No. 27 12)), did not plausibly allege that “Citibank was a party to the 28 alleged September 22, 2019 agreement, was aware of it, or made 1 any representations during the call.” (See April 26, 2022 Order 2 at 4.) That is no longer true. The SAC plausibly alleges that 3 Citibank is a party to the contract formed on September 22, 2019 4 because it states that Peter advised plaintiffs that she was 5 “authorized to broker an agreement on behalf of Citibank as a 6 lender.” (SAC ¶ 23.) The SAC also alleges that Citibank 7 ratified the specifics of how Cenlar was to recharacterize the 8 payments and Peter stated that Citibank “agreed, as a lender, to 9 the terms of the” agreement. (Id. ¶¶ 24, 26.) 10 The SAC sufficiently alleges facts supporting each 11 element of a contract claim under California law against both 12 defendants. See First Com. Mortg. Co. v. Reece, 89 Cal. App. 4th 13 731, 745 (2d Dist. 2001) (listing elements for breach of contract 14 claim: “existence of the contract, performance by the plaintiff 15 or excuse for nonperformance, breach by the defendant and 16 damages”). 17 The SAC alleges that the September 22, 2019 agreement 18 constitutes a contract between Citibank, Cenlar, and plaintiffs 19 in which plaintiffs would pay $4,400 and reset their payment 20 schedule, and in exchange defendants would recharacterize past 21 payments, waive late fees, and remove negative credit reporting. 22 (SAC ¶¶ 25-26.) Citibank argues the agreement lacks 23 consideration. (Citibank’s Mot. at 9.) The court disagrees. 24 The SAC sufficiently alleges consideration because plaintiffs 25 agreed to pay $4,400 on September 22, 2019, which was not a 26 scheduled payment due on that date pursuant to the original 27 mortgage agreement, and reset their account to pay $2,500 each 28 month, “which was more than the minimum mortgage payment.” (SAC 1 ¶ 20.) 2 The SAC alleges that plaintiffs performed pursuant to 3 the terms of the agreement by making the necessary payments and 4 resetting their payment schedule. (Id. ¶ 30.) The SAC also 5 sufficiently pleads that defendants breached the agreement 6 because they “continue to misapply payments,” “report negative 7 credit,” “threaten other legal actions,” and “engage[] in ongoing 8 and constant harassment of plaintiffs.” (Id. ¶¶ 31-32.) The SAC 9 also pleads resulting harm by alleging plaintiffs were denied 10 another loan due to the negative credit reporting. (Id. ¶ 33.) 11 Citibank argues that the oral agreement on September 12 22, 2019 falls within the statute of frauds, and is therefore 13 unenforceable. However, as the court determined in its previous 14 order, the FAC alleged, and the SAC also now alleges, sufficient 15 facts to support plaintiffs’ claim that Citibank is estopped from 16 asserting the statute of frauds as a defense if it applies. 17 “Where assertion of the statue of frauds would cause 18 unconscionable injury, part performance allows specific 19 enforcement of a contract that lacks the requisite writing.” In 20 Re Marriage of Benson, 36 Cal. 4th 1096, 1108 (2005). 21 As discussed in detail in the court’s previous order 22 (Docket No. 32), plaintiffs sufficiently plead part performance 23 and unconscionable injury. Plaintiffs paid the agreed upon 24 $4,400 and changed their payment schedule, but defendants are 25 still misapplying payments and making negative credit reports -- 26 leading to denial of another loan plaintiffs applied for. (Id. 27 ¶¶ 30-33.) 28 Citibank also argues that plaintiffs’ breach of nn enn nnn enn nn OD NE 1 contract claim is preempted by the Fair Credit Reporting Act 2 (“FCRA”), 15 U.S.C. § 1681, to the extent it is based on the 3 alleged wrongful furnishing or reporting of credit information. 4 (Citibank’s Mot. at 13.) As the court previously reasoned, the 5 FCRA does not preempt plaintiffs’ breach of contract claim 6 | because Citibank allegedly imposed upon itself the requirement to 7 stop inaccurately reporting negative credit, and the FCRA 8 prohibits only legal duties “imposed under the laws of any 9 state.” See 15 U.S.C. § 1681t(b) (1) (F); (April 26, 2022 Order at 10 9-10). 11 IT IS THEREFORE ORDERED that Citibank’s motion to 12 dismiss (Docket No. 40) be, and the same hereby is, DENIED. 13 | Dated: July 26, 2022 . . ak. ah Lhe, (LA. WILLIAM B. SHUBB 15 UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28