In re Charles Duff

Case Type:
Case Status:
United States Bankruptcy Appellate Panel of the Ninth Circuit Nos. CC-20-1092-LGF; CC-20-1095-LGF (9th Circuit, Mar 01,2021) Not Published
The BAP affirmed the bankruptcy court's decision to dismiss the Plaintiffs' complaint without leave to amend reasoning that the complaint failed to allege plausible facts to support any claim made by the Plaintiffs, because every cause of action relied on allegation that the Plaintiffs were fraudulently induced into accepting a loan, which was implausible on its face to both the BAP and the bankruptcy court.
Procedural context:
In 2019, the Debtor and his spouse (Plaintiffs) filed an adversary proceeding against Countrywide Financial Corporation, Countrywide Home Loans, Countrywide Bank, N.A. (together Countrywide), Bank of America Corporation (BOA), LandSafe, Inc., LandSafe Apprasial, Inc. (together Landsafe), The Bank of New York Mellon (BONY), Bayview Loan Servicing, LLC (Bayview), and NewRez LLC dba Shellpoint Mortgage Servicing (NewRez) (collectively the Defendants). The complaint stated eight claims including causes of action for violations under California law, for violations under federal law, unjust enrichment, fraud, breach of the covenant of good faith and fair dealing, and promissory estoppel. Each cause of action heavily relied on allegations that the Plaintiffs were fraudulently induced into accepting a loan from Countrywide with a high interest rate. The bankruptcy court declined to go through each element of the causes of action, because this allegation was simply not plausible to the bankruptcy court. The bankruptcy court granted the motion to dismiss without leave to amend.
In 2006 the Plaintiffs, the Debtor and his spouse refinanced their home from Countrywide, one of the Defendants. The Plaintiffs alleged that Countrywide along with LandSafe faked appraisal information on their home during the loan process, which the Plaintiffs did not discover until November 2018. Plaintiffs accepted a loan from Countrywide in the amount of $1,850,000 with terms allowing interest-only payments for the first ten years. In the eleventh year of the loan, when principal and interest payments became due, the Plaintiffs began to suffer financial difficulties. The Plaintiffs attempted to restructure the loan through Countrywide's successor, BOA, but BOA only offered programs for those behind in their payments. The Plaintiffs then fell behind and sought multiple loan modifications without success. Bayview then began to foreclose on the Plaintiffs' home, and the Debtor filed Chapter 11 bankruptcy in 2018 to stop the foreclosure.
The Hons. Lafferty, Gan, and Faris

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