JOHN A. MENDEZ, District Judge.
Defendant Wells Fargo Home Mortgage ("Wells Fargo") moves to dismiss Plaintiff Katherine E. Lavarias's ("Plaintiff's") Complaint for failure to state a claim pursuant to Federal Rules of Civil Procedure ("Rules") 12(b)(6) and 9(b). Plaintiff opposes the motion in part. For the following reasons, the Court GRANTS in part and DENIES in part Wells Fargo's motion.
The Court takes the following facts as true for purposes of this motion.
Plaintiff resides at 3021 Simms Lane, Tracy, California 95377. Compl. ¶ 13. She alleges Wells Fargo "may be the current servicer of [her] loan."
In December 2015, Plaintiff sued Wells Fargo in San Joaquin County. Her complaint for damages and equitable relief asserts four causes of action: (1) violation of California Business and Professions Code section 17200 (the "UCL cause of action"); (2) violation of the covenant of good faith and fair dealing; (3) breach of fiduciary duty; and (4) actual fraud (Doc. #1-1). Wells Fargo removed the case on the basis of diversity (Doc. #1) and has now moved to dismiss (Doc. #3). Plaintiff opposes (Doc. #6). Although Plaintiff references a "First Amended Complaint" in her opposition, the operative complaint is the Complaint attached as Exhibit A to Wells Fargo's Notice of Removal. Wells Fargo has filed a reply (Doc. #7).
Wells Fargo requests the Court take judicial notice of numerous exhibits in support of its motion to dismiss (Doc. #4).
Generally, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss for failure to state a claim. The exceptions are material attached to or relied on by the complaint so long as authenticity is not disputed, or matters of public record, provided that they are not subject to reasonable dispute.
The Court takes judicial notice of Wells Fargo's exhibits as they are all either public or court records not subject to reasonable dispute, information obtained from government websites, or documents reflecting official acts of the executive branch of the United States. Fed. R. Evid. 201;
Wells Fargo seeks dismissal of Plaintiff's UCL cause of action on multiple grounds, discussed below.
Wells Fargo argues Plaintiff lacks standing because she has not alleged economic injury, lost money or property, or causation. Def. Wells Fargo's Notice of Mot. & Mot. to Dismiss Compl.; Mem. of P. & A. ("Mot.") 8:23-25.
To have standing to bring a UCL cause of action, a plaintiff must: "(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim."
Plaintiff has sufficiently pleaded an economic injury. Here, Plaintiff alleges she suffered damages in the form of
Compl. ¶ 55;
As for causation, Wells Fargo argues Plaintiff cannot assert Wells Fargo's alleged wrongful actions in 2014 caused her economic injury because Plaintiff was already in default in 2011.
But Wells Fargo has not shown Plaintiff failed to cure pre-petition arrears as provided for in her Chapter 13 plan. Chapter 13 bankruptcy "allows a homeowner in default to reinstate the original loan payments, pay the arrearages over time, avoid foreclosure, and retain the home."
Wells Fargo's reliance on
Wells Fargo also cites
In this case, Plaintiff alleges her income decreased, suggesting she had trouble making her monthly payments. Compl. ¶ 14. But unlike
Wells Fargo also seeks dismissal of Plaintiff's UCL cause of action on grounds the Complaint does not demonstrate any conduct by Wells Fargo that constitutes an unlawful, unfair, or fraudulent business practice. Mot. 10:2-11:17.
Plaintiff argues in response that the following allegations demonstrate an unfair business practice: Wells Fargo promised to modify Plaintiff's loan but breached that promise, and Wells Fargo told Plaintiff to stop making monthly payments so that it could proceed with foreclosure instead of providing a loan modification. Pl.'s Opp'n to Def.'s Mot. ("Opp'n") 6:23-7:9. In her opposition brief, she adds facts about a referral to the program "Keep Your Home California," but these facts are not contained in the Complaint.
Plaintiff's UCL cause of action is predicated, in part, on the same conduct that forms the basis of her other causes of action. As discussed below, the causes of action for violation of the covenant of good faith and fair dealing based on a promise or offer of loan modification, breach of fiduciary duty, and actual fraud fail as insufficiently pleaded. Accordingly, Plaintiff fails to state a UCL cause of action predicated on these causes of action. The Court, however, finds that one of Plaintiff's causes of action — violation of the covenant of good faith and fair dealing based on the loan contract — survives Wells Fargo's dismissal motion. Accordingly, Plaintiff may proceed with a UCL cause of action predicated on this cause of action.
Plaintiff's allegation that Wells Fargo violated California's unfair competition law by failing to offer a loan modification fails to state a claim.
Plaintiff also contends her UCL cause of action is predicated on a violation of dual tracking law. Opp'n 7:21-23. California Civil Code section 2923.6 prescribes: "If a borrower submits a complete application for a first lien loan modification" the foreclosing entity "shall not record a notice of default . . . while the complete first lien loan modification application is pending." Cal. Civ. Code § 2923.6(c). An application is "deemed `complete' when a borrower has supplied the mortgage servicer with all documents required by the mortgage servicer within the reasonable timeframes specified by the mortgage servicer."
The Court rejects Wells Fargo's argument that no dual tracking occurred because a Notice of Default was recorded in 2011, which is before the commencement of the alleged loan modification review in 2014 and before the enactment of the California Homeowner Bill of Rights on January 1, 2013. Mot. 7:6-22. Plaintiff alleges she received a Notice of Default after contacting Wells Fargo in 2014, and Wells Fargo has not controverted these allegations with judicially-noticed facts.
The Court agrees, however, with Well Fargo's alternative argument that Plaintiff has failed to plead sufficient facts stating a violation of dual tracking law.
In sum, Plaintiff's UCL causes of action predicated on a violation of the covenant of good faith and fair dealing based on the loan contract survives, and the Court dismisses her UCL causes of action predicated on other theories. Because Wells Fargo has not shown amendment would be futile, Plaintiff will be given leave to amend.
Wells Fargo seeks dismissal of Plaintiff's second cause of action for violation of the covenant of good faith and fair dealing. Although Plaintiff's Complaint is not a model of clarity, Plaintiff appears to rely on contract principles in this cause of action. That is, she alleges this cause of action is based on Wells Fargo's (1) denial of the loan contract's benefits, Compl. ¶¶ 60-61, and (2) refusal to fulfill its promise or offer of loan modification, Compl. ¶¶ 63-64. Plaintiff's opposition references an "oral contract" to modify the loan, but again adds factual detail not contained in the Complaint. Opp'n 8:22-23.
"Every contract contains an implied covenant of good faith and fair dealing providing that no party to the contract will do anything that would deprive another party of the benefits of the contract."
Wells Fargo first argues Plaintiff cannot use this covenant to vary the deed of trust's express terms requiring Plaintiff to timely pay the lender. Mot. 12:17-24. Indeed, California courts have held that plaintiffs cannot use the covenant to impose substantive duties beyond those explicitly incorporated in the contract.
Wells Fargo next argues Plaintiff does not allege it interfered with Plaintiff's rights under the loan contract. Mot. 12:25-13:13. Specifically, it argues Plaintiff's choice to stop making monthly payments was hers alone to make, and it cites a number of out-of-district cases in which the court dismissed claims for breach of the implied covenant under similar circumstances.
The Court finds that Plaintiff has pleaded sufficient facts to demonstrate Wells Fargo's interference. Plaintiff alleges the following: Wells Fargo's agents told her to default and send in loan documents. Compl. ¶ 15. Thereafter, Plaintiff submitted loan documents and "was put in a loan modification review with Wells Fargo."
This lawsuit is distinguishable from the
Lastly, Wells Fargo contends Plaintiff's Chapter 13 plan makes certain that Plaintiff herself breached the contract terms, "without any excuse or justification," Mot. 13:14-16. Wells Fargo does not, however, explain how this is so or provide authority for this argument.
In sum, Plaintiff's second cause of action is dismissed to the extent it is based on a promise or offer of loan modification. The Court denies dismissal of Plaintiff's second cause of action to the extent it is based on the loan contract.
Wells Fargo seeks dismissal of Plaintiff's breach of fiduciary duty cause of action, arguing, inter alia, Plaintiff fails to allege facts showing Wells Fargo exceeded its traditional role as a mere lender of money and therefore fails to allege the existence of a fiduciary relationship. Mot. 14:1-4.
"The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach."
Plaintiff's opposition fails to address Wells Fargo's grounds to dismiss this claim and the conclusory allegations in her Complaint that Wells Fargo acted as Plaintiff's agent are insufficient to properly demonstrate the existence of a fiduciary relationship,
Wells Fargo seeks dismissal of Plaintiff's fourth cause of action for actual fraud. Plaintiff opposes the motion to dismiss by relying in part, on facts not present in the Complaint.
Well Fargo argues that dismissal is warranted because no misrepresentation concerning Plaintiff's default is identified in the Complaint, Mot. 15:4-6. This is not, however, the misrepresentation Plaintiff alleges. Instead, she alleges Wells Fargo, their agents, and assigns misrepresented to her that she qualified for a loan modification. Compl. ¶¶ 79, 81-82.
Wells Fargo next argues the Complaint fails under Rule 9(b) because Plaintiff does not identify the speaker, or state when and where the representations were made. Plaintiff counters she can ascertain the speaker's identity through discovery. Opp'n 10:13-16.
Rule 9(b) governs allegations of fraud. Under Rule 9(b), "a party must state with particularity the circumstances constituting fraud or mistake," meaning a party must plead "the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations."
The Complaint lacks the necessary factual information to withstand dismissal. Plaintiff alleges Wells Fargo, their agents, and assigns misrepresented to her that she qualified for a loan modification yet her other allegations that Wells Fargo has not yet responded to her application with an approval or denial, Compl. ¶ 37, call into question whether their alleged statements constitute a misrepresentation. Nor does Plaintiff include information about the time or place in which the alleged statements to Plaintiff were made, as required under Rule 9(b).
For these reasons, Plaintiff's fourth cause of action for actual fraud is dismissed with leave to amend. The Court need not and does not reach Wells Fargo's remaining arguments that Plaintiff has failed to allege knowledge of falsity, justifiable reliance, and resulting damages.
Wells Fargo argues Plaintiff is judicially estopped from alleging Wells Fargo induced her to default on her loan in 2014 because in 2011, Plaintiff admitted in her Chapter 13 plan that she owed $10,637.34 in pre-petition arrears to Wells Fargo. Mot. 5:6-8.
"A court invokes judicial estoppel at its discretion."
Wells Fargo has not provided judicially-noticeable documents evincing the outcome of Plaintiff's 20011 bankruptcy case, which the bankruptcy court confirmed in August 2011. Ex. I. Nor has it shown Plaintiff had to disclose causes of action arising post-confirmation. For these reasons, Wells Fargo has not shown judicial estoppel bars this lawsuit; its argument that res judicata bars this lawsuit similarly fails.
Wells Fargo also seeks dismissal of Plaintiff's factual allegation that "Wells Fargo is not the current holder of the Note or the Deed of Trust," but the Court does not reach this issue since it is not necessary to resolve the dismissal motion.
Wells Fargo attempts to argue Plaintiff's claims are preempted by the Home Owner's Loan Act, 12 U.S.C. § 1461, et seq. (HOLA). Mot. 15:26-20:6. Although three lines appear on page fifteen of the motion, which is within the Court's page limits, Wells Fargo makes the substance of this argument beyond the page limit the Court permits for motions to dismiss. Wells Fargo's reply repeats many of the same arguments beyond the page limit as well. Reply 6:25-7:19. Plaintiff does not address HOLA preemption in her opposition.
The only argument made within the Court's page limits is that Plaintiff's claims are similar to claims that other district courts have dismissed on HOLA preemption grounds. Mot. 15:26-28. Wells Fargo has not shown similarity to those claims dismissed on HOLA preemption grounds and the sole remaining claim here: violation of the covenant of good faith and fair dealing.
The Court declines to consider Wells Fargo's remaining HOLA preemption arguments as grounds for dismissal, and this portion of Wells Fargo's motion is denied.
For all the foregoing reasons, the Court DENIES Wells Fargo's motion to dismiss the First Cause of Action to the extent this UCL cause of action is predicated on a violation of the covenant of good faith and fair dealing based on the loan contract. The Court GRANTS the motion to dismiss the UCL cause of action to the extent it is predicated on other theories, with leave to amend.
The Court DENIES the motion to dismiss the Second Cause of Action for violation of the covenant of good faith and fair dealing based on the loan contract. The Court GRANTS the motion to dismiss this cause of action to the extent it is based on a promise or offer of a loan modification, with leave to amend.
The Court GRANTS the motion to dismiss the Third Cause of Action for breach of fiduciary duty, with leave to amend.
The Court GRANTS the motion to dismiss the Fourth Cause of Action for actual fraud, with leave to amend.
If Plaintiff desires to cure the defects identified in her dismissed causes of action, Plaintiff's amended complaint must be filed within twenty days from the date of this Order. Wells Fargo's responsive pleading is due within twenty days thereafter. Failure to cure the defects identified in this Order may be grounds for dismissal of those claims without further leave to amend.
Finally, Wells Fargo's opening brief is five pages longer than the page limit allowed by the Court, and the reply brief exceeds the Court's page limit by two pages.
IT IS SO ORDERED.
