Tapia
v.
Wells Fargo Bank, N.A.

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIAAug 4, 2015
Case No. CV 15-03922 DDP (AJWx) (C.D. Cal. Aug. 4, 2015)

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Case No. CV 15-03922 DDP (AJWx)

08-04-2015

H. JAMES TAPIA, Plaintiff, v. WELLS FARGO BANK, N.A.; WACHOVIA MORTGAGE CORPORATION, a North Carolina financial institution; NDEX WEST, LLC, a Minnesota limited liability; REGIONAL TRUSTEE SERVICES CORPORATION, a California financial institution, Defendants.


ORDER RE DEFENDANT'S MOTION TO DISMISS

[Dkt. No. 8]

Presently before the Court is Defendant's motion to dismiss Plaintiff's complaint. (Dkt. No. 8.) Having considered the parties' submissions, the Court adopts the following order.

I. BACKGROUND

Plaintiff is the owner and mortgagor of a home in San Dimas. (Compl., ¶¶ 2, 26, 29.) Plaintiff alleges that in 2005 he obtained his mortgage loan from World Savings Bank, and that the loan was subsequently "owned and serviced" by Defendant Wachovia Mortgage Corporation ("Wachovia") and then later by Defendant Wells Fargo Bank ("Wells Fargo"). (Id. at ¶¶ 27-28.) Plaintiff alleges that he "fulfilled each and every term of the agreement of the Mortgage Loan." (Id. at ¶ 29.) Plaintiff also alleges that after experiencing "economic hardships" in 2009, he attempted to obtain a loan modification from "Wachovia and Wells [Fargo]," but that those Defendants "refused to accept modification packets, lost modification packets, and made unreliable offers to assist, while actively attempting to foreclose on the Plaintiff's home." (Id. at ¶¶ 30-32.) Plaintiff alleges that Wachovia and Wells Fargo also did not adequately review or correctly apply Plaintiff's financial information in evaluating his loan modification application. (Id. at ¶ 32.)

Plaintiff alleges that a loan modification "would have been in the best interests of all parties." (Id. at ¶ 35.)

Plaintiff also alleges that Defendants recorded a Notice of Default for the Subject Property without doing any of the following: contacting Plaintiff to discuss options for avoiding foreclosure; notifying him of his right to request a meeting; providing him with a toll-free phone number to reach a housing counseling-agency; filing a declaration regarding due diligence; sending a first-class letter; attempting to reach him by phone three times; sending a certified letter including a toll-free number to reach a live representative; or posting a clear link on their websites to a page explaining certain matters regarding foreclosure. (Id. at ¶¶ 47-50.)

Plaintiff alleges that Defendants failed to identify a single, qualified "point of contact" - i.e., customer service representative or other agent - for him to speak and work with. (Id. at ¶¶ 54-60.)

Plaintiff alleges that Defendants did not give him written notice that he was eligible "to be evaluated for a foreclosure prevention alternative," written notice describing the loan modification process within five days of receiving his application, (Id. at ¶¶ 63, 67.)

Plaintiff alleges that Defendants did not use "competent and reliable evidence" in substantiating the right to foreclose. (Id. at ¶¶ 72-73.)

Plaintiff alleges that Defendants did not send him the Notice of Default, notice of the recording date, or notice of the time and place of the foreclosure sale by registered or certified mail. (Id. at ¶¶ 77-78.) Plaintiff alleges that he never received a copy of the Notice of Default. (Id. at ¶ 79.)

Plaintiff also alleges that Defendants refused to accept "regularly due payments" when Plaintiff tendered such payments, causing Plaintiff to incur various fees, interest, and damage to his credit rating. (Id. at ¶¶ 89-90.)

Plaintiff alleges that Defendants advised him to "fall behind or withhold mortgage payments in order to qualify for a mortgage modification," gave him the wrong documents, and lulled Plaintiff into "a false sense of security with regards to keeping his home." (Id. at ¶ 93.)

Finally, Plaintiff alleges that Defendants promised they would not foreclose on the property if Plaintiff completed a loan modification application and made certain monthly payments. (Id. at ¶ 99.) He also alleges that he relied on that promise in deciding not to file bankruptcy or sell the property. (Id. at ¶ 101.)

II. LEGAL STANDARD

In order to survive a motion to dismiss for failure to state a claim, a complaint need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint must include "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). The facts recited in a complaint must also give "fair notice" to "enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

III. DISCUSSION

A. Wachovia as a Defendant

Plaintiff alleges that Wachovia Mortgage Corporation "owned and serviced" his loan at some unspecified time. (Compl., ¶ 27.) Defendant, however, alleges that Wachovia Mortgage Corporation is erroneously sued, and that in fact the correct entity is Wachovia Mortgage, FSB, which was later merged into Wells Fargo. (Mot. Dismiss at 3.) This contention is not addressed in the opposition. The Court therefore deems any objection to the motion to dismiss claims against Wachovia Mortgage waived. Shorter v. Los Angeles Unified Sch. Dist., No. CV 13-3198 ABC AJW, 2013 WL 6331204, at *5 (C.D. Cal. Dec. 4, 2013) (collecting cases regarding waiver by non-opposition).

All claims are therefore dismissed as to Defendant Wachovia Mortgage Corporation.

B. Violation of Cal. Civ. Code § 2923.6(a)

Plaintiff alleges that Defendants violated Cal. Civ. Code § 2923.6(a) by not modifying Plaintiff's loan in a way that would serve the best interests of all parties. (Opp'n at 4.) However, California courts have held that mortgagors do not have a private right of action under § 2923.6(a). Pfeifer v. Countrywide Home Loans, Inc., 211 Cal. App. 4th 1250, 1282 n.17 (2012) ("The Pfeifers have no private right of action under Civil Code section 2923.6, and this statute does not require loan servicers to modify loans."). Plaintiff argues that its claim is saved because it alleges that Defendants "caused harm to Plaintiff and the investor(s) of the underlying note." (Opp'n at 4 (quoting Compl., ¶ 36).) But, first, it is not clear that § 2923.6(a) provides a cause of action for investors, either. Mabry v. Superior Court, 185 Cal. App. 4th 208, 222 (2010) ("[S]ection 2923.6 . . . does not operate substantively. Section 2923.6 merely expresses the hope that lenders will offer loan modifications on certain terms."). And second, Plaintiff does not offer any explanation as to why he might have standing to assert claims on behalf of the investors, even if they did have substantive claims.

After Mabry, the Legislature amended the statute to add substantive components; however, subsection (a) is not one of them. Vasquez v. Bank of Am. , N.A., No. 13-CV-02902-JST, 2013 WL 6001924, at *7 (N.D. Cal. Nov. 12, 2013).

The claim as to § 2923.6(a) is therefore dismissed.

C. Violation of Cal. Civ. Code § 2923.5(a)

Cal. Civ. Code § 2923.5(a) requires a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent to perform due diligence and discuss options to avoid foreclosure with the borrower before recording a Notice of Default. Plaintiff alleges that Defendants violated Cal. Civ. Code § 2923.5(a) by not contacting Plaintiff before filing a Notice of Default.

Many federal courts have found that § 2923.5(a) is preempted by the federal Home Owners' Loan Act ("HOLA"). The Ninth Circuit has held that to determine whether a state law is preempted by HOLA, a court should first analyze whether the law falls under Section 560.2(b) of HOLA. Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008). Section 560.2(b)(10) of HOLA preempts any state laws pertaining to the "processing, origination, servicing, sale or purchase of, or investment or participation in mortgages." This Court finds that laws pertaining to the "servicing of mortgages" includes laws relating to foreclosure. The pertinent state law here (Cal. Civ. Code § 2923.5(a)) also regulates the foreclosure process. Thus, this Court finds that section 560.2(b)(10) of HOLA preempts Cal. Civ. Code § 2923.5(a).

See, e.g., Taguinod v. World Sav. Bank, FSB, 755 F.Supp.2d 1064, 1073-74 (C.D. Cal. 2010)(declining to follow a California state court who found that section 2923.5 was not preempted by HOLA); Rodriguez v. JP Morgan Chase & Co., 809 F.Supp.2d 1291 (S.D. Cal. 2011)(holding that Plaintiff's section 2923.5 claim was preempted by HOLA because the loan provider was a federally chartered savings bank at the time of the loan's origination); Pinales v. Quality Loan Service Corp., 2010 WL 3749427 at *3 (S.D. Cal. 2010)(holding that section 2923.5 is preempted by HOLA since the state law requirement falls "squarely within the scope of HOLA").

The Court notes that courts are divided on this issue. However, this Court finds the reasoning of the courts who determined HOLA preempts section 2923.5 most persuasive because foreclosure laws are embodied in laws relating to the "servicing of mortgages."

The claim as to § 2923.5(a) is therefore dismissed.

D. Violation of Cal. Civ. Code § 2923.7

Cal. Civ. Code § 2923.7 requires a mortgage servicer to "promptly establish a single point of contact" when a borrower requests a foreclosure prevention alternative. Plaintiff alleges that he attempted to modify his mortgage loan with Defendants several times. (Compl., ¶ 31.) Plaintiff further alleges that Defendants violated Cal. Civ. Code § 2923.7 by failing to appoint a contact person to communicate and coordinate a foreclosure alternative option. (Compl., ¶ 54.) Defendants allege that the statute requires Plaintiff to specifically request a point of contact in order to be appointed one. (Motion to Dismiss p. 6.) However, a plain reading of the statute requires servicers to furnish a contact person to every borrower who requests a foreclosure prevention alternative. Penermon v. Wells Fargo Bank, N.A., 47 F.Supp.3d 982, 1000 (N.D. Cal. 2014). Borrowers do not need to specifically request a contact person under this statute. Id. Because Plaintiff alleges he requested a foreclosure prevention alternative and was not appointed a contact person, this series of facts is sufficient to both give notice to the Defendant and to plausibly suggest entitlement to relief. It would be difficult for Plaintiff to allege a more detailed version of these facts.

The claim as to § 2923.7 is thus adequately pled. E. Claims Under the California Homeowner's Bill of Rights § 2924 Based on Acts that Occurred Before January 1, 2013

Plaintiff alleges that Defendants violated Cal. Civ. Code § 2924.9 by failing to provide written communications about foreclosure prevention alternatives within five business days after recording a Notice of Default, which was filed in September 2012. (Compl., ¶ 63.) Plaintiff also alleges that Defendants violated Cal. Civ. Code § 2924.10 by failing to provide written acknowledgment upon receiving a loan modification application. (Id. at ¶ 67.) Plaintiff provides only vague allegations about when he submitted the loan modification application, but the facts seem to indicate it happened before the Notice of Default was recorded in 2012. (Id. at ¶ 30-32.)

The California Homeowner's Bill of Rights ("HBOR"), including § 2924.9 and § 2924.10, did not take effect until January 1, 2013, and many courts in the Ninth Circuit have found that the statute does not apply retroactively. See, e.g., Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1152 (N.D. Cal. 2013); Martinez v. Wells Fargo Bank, N.A., 2014 WL 1572689 at *3 (N.D. Cal. 2014). Since the facts underlying Plaintiff's claims occurred before the statute was in effect, and because the statute does not apply retroactively, Plaintiff may not obtain relief under § 2924.

The claims as to § 2924.9 and § 2924.10 are therefore dismissed.

F. Violation of Cal. Civ. Code § 2924.17

Plaintiff alleges that Defendants violated Cal. Civ. Code § 2924.17 by including inaccurate or incomplete information in the Notice of Default and Notice of Trustee's Sale. (Compl., ¶ 72-73.) Cal. Civ. Code § 2924.17 requires a borrower to review evidence to substantiate its Notice of Default and its right to foreclose. The complaint fails to allege specific inaccuracies in the recorded documents. (Id.) For example, Plaintiff does not indicate that he was current in his payments, or that the Notice of Default was recorded in error. Plaintiff merely states that "Defendants' actions were not accurate and complete. . . ." (Id.) Plaintiff's alleged facts are therefore not sufficient "to raise his right to relief above the speculative level." Davis v. U.S. Bank Nat. Ass'n, 2015 WL 2124938 at *6 (C.D. Cal. 2015); see also Twombly, 550 U.S. at 555.

The claim as to § 2924.17 is therefore dismissed.

G. Violation of Cal. Civ. Code § 2924b(b)

Plaintiff alleges Defendants violated Cal. Civ. Code § 2924b(b) by not providing him with a copy of the Notice of Default and Notice of Trustee's Sale. Defendants argue that this claim is not actionable because there was no evidence of harm or prejudice to Plaintiff. (Motion to Dismiss p. 8.) However, in the case Defendants cite to support this argument, the Notice of Default was mailed to Plaintiff, and it only contained minor deficiencies that had no effect on the Notice. Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 860, 870 (E.D. Cal. 2010). In this situation, conversely, Plaintiff allegedly did not receive the Notice of Default at all. (Compl., ¶¶ 79, 81.) Defendants have provided no evidence that they did in fact mail Plaintiff the Notice of Default. Plaintiff's alleged facts therefore "plausibly suggest an entitlement to relief" and "contain sufficient allegations. . . to give fair notice" to the Defendants to adequately prepare a defense. Starr, 652 F.3d at 1216. It would be difficult for Plaintiff to allege more specific facts for this claim.

The Complaint erroneously names the April 1, 2015 Notice of Trustee's Sale as a Notice of Default. --------

The claim as to § 2924b(b) is thus adequately pled.

H. Contractual Breach of Implied Covenant of Good Faith and Fair Dealing

Plaintiff alleges that Defendants breached the Implied Covenant of Good Faith and Fair Dealing. (Compl., ¶ 86.) A breach of the implied covenant of good faith and fair dealing must be a "conscious and deliberate act," more than a contractual breach, that "unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party." Celador Intern. Ltd. v. Walt Disney Co., 347 F.Supp.2d 846, 852 (C.D. Cal. 2004)(citing Careau & Co. v. Security Pacific Business Credit, Inc., 222 Cal. App. 3d 1371, 1394 (1990)). In California, the factual elements necessary to establish a breach of the covenant of good faith and fair dealing are: (1) the parties entered into a contract; (2) the plaintiff fulfilled his obligations under the contract; (3) any conditions precedent to the defendant's performance occurred; (4) the defendant unfairly interfered with the plaintiff's rights to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant's conduct. Rosenfeld v. JPMorgan Chase Bank, N.A., 732 F.Supp.2d 952, 968 (N.D. Cal. 2010)(citing Judicial Council of California Civil Jury Instruction 325).

Here, the allegations in the complaint are pled such that they plausibly fulfill the required elements. First, both parties concur that a contract existed. (Compl. ¶ 26; Motion to Dismiss p. 1.) Second, Plaintiff alleges that he fulfilled his obligations under the contract, as he "attempted to make payment pursuant to the terms of the Mortgage Loan." (Compl., ¶ 89.) Plaintiff also states that he was "able to fulfill each and every obligation under the mortgage loan" at the time of filing the complaint. (Id. at ¶ 88.) According to the facts as stated in the complaint, Defendants deliberately interfered with Plaintiff's rights to receive the benefits of the contract. (Id. at ¶ 86-90.) Finally, Plaintiff alleges he has been harmed financially by Defendants' failure to accept his payments. (Id. at ¶ 90.)

Thus, the Plaintiff has pled sufficient facts to make his claim plausible, and has provided sufficient detail to put the Defendants on notice to adequately defend themselves. Starr, 652 F.3d at 1216.

The claim as to the breach of the implied covenant of good faith and fair dealing is therefore adequately pled.

I. Violation of California Business & Professions Code § 17200

Plaintiff alleges that Defendants violated the California Business and Professions Code § 17200. Section 17200 defines unfair competition as "unlawful, unfair, or fraudulent" business acts or practices. Under the "unlawful" prong of the statute, "'the UCL borrows violation of other laws. . .and makes those unlawful practices actionable under the UCL.'" Berryman v. Merit Property Management, Inc., 152 Cal. App. 4th 1544, 1554 (2007). Thus, as long as Plaintiff alleges a violation of another law, Plaintiff has an actionable claim under the UCL. Johnson v. SunTrust Mortg., Inc., 2014 WL 3845205 at *7 (C.D. Cal. 2014).

Here, Plaintiff alleges that Defendants violated several other statutes. As noted above in Parts III.D. and III.G., some of Plaintiff's statutory claims are pled with adequate specificity, and these, at a minimum, can form the basis for his § 17200 claim.

The claim as to the violation of the California Business and Professions Code § 17200 is therefore adequately pled.

J. Promissory Estoppel Claim

The elements required for a promissory estoppel claim are as follows: (1) a clear and unambiguous promise; (2) reliance on the promise by the party to whom the promise is made; (3) reasonable and foreseeable reliance; and (4) injury due to reliance. Rockridge, 985 F.Supp.2d at 1159. Furthermore, "a promisor is bound when he should reasonably expect a substantial change of position. . .in reliance on his promise. . . ." Id.

Plaintiff alleges that Defendants made oral and written representations that they would not foreclose on the property if Plaintiff applied for a loan modification and continued to make monthly payments. (Compl., ¶ 99.) Defendants also allegedly offered Plaintiff a three month trial period of a Home Affordable Modification Program ("HAMP"), an agreement which Defendants allegedly breached. (Id. at ¶ 102-03.) Plaintiff alleges he relied on Defendants' statements and did not pursue other opportunities to avoid foreclosure, such as filing for bankruptcy, refinancing or selling the property. (Id. at ¶ 99-103.)

Defendants allege that without a written agreement to modify a loan, any oral contract for loan modification is barred by the statute of frauds. (Motion to Dismiss p. 11.) However, the complaint indicates that there were at least some written representations made to Plaintiff by Defendants. (Compl., ¶ 99.) Furthermore, Plaintiff alleges with specificity the type of program allegedly agreed to by Defendants (a HAMP three-month trial program). (Id. at ¶ 102.) Plaintiff also alleges with specificity the other options he neglected to pursue because of Defendants' representations. (Id. at ¶ 101.) The facts as stated are both plausible enough to suggest that the Plaintiff is entitled to relief, and specific enough to put the Defendants on notice so they may adequately represent themselves. Starr, 652 F.3d at 1216.

The promissory estoppel claim is therefore adequately pled.

IV. CONCLUSION

The Court GRANTS the motion IN PART. ALL claims against Defendant Wachovia are DISMISSED. The claims against other Defendants regarding the violation of California Civil Code §§ 2923.6(a), 2923.5(a), 2924.9, 2924.10, and 2924.17 are DISMISSED. The claims pertaining to California Civil Code §§ 2923.7, 2924b(b), California Business and Professions Code § 17200, the implied covenant of good faith and fair dealing, and promissory estoppel are adequately pled and are not dismissed. IT IS SO ORDERED. Dated: August 4, 2015

/s/


DEAN D. PREGERSON


United States District Judge