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McKissack v. Wells Fargo Home Mortgage

July 12, 2010


The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge


Presently before the Court is Defendants Wells Fargo Bank, N.A. and U.S. Bank, N.A.'s motion to dismiss.*fn1 (Doc. No. 9.) Also before the Court are Plaintiff's opposition and Defendant's reply. (Doc. Nos. 13 & 14.) Having thoughtfully considered the relevant issues, the Court GRANTS Defendants' motion.


Plaintiffs Scott A. and Lisa R. McKissack "are the owners of a single family residence . . . and were the borrowers and Trustor(s) on the promissory note . . . secured by a Deed of Trust . . . in the loan transaction . . . that is the subject of [the] complaint." (Doc. No. 10 (FAC) ¶ 2.) "On . . . January 26, 2006 Plaintiffs re-financed a single-family home . . . by borrowing $468,000 from [Defendant] WELLS FARGO BANK NA." (Id. ¶ 9 (capitalization in original).) The note was secured by a deed of trust. (Id.) Plaintiffs obtained the financing from Defendant Wells Fargo Bank N.A. and Defendant Wells Fargo Home Mortgage was allegedly the broker and the current servicing company of that loan. (Id. ¶¶ 10--12.) Eventually, "Plaintiffs began having difficulty paying her mortgage" and Defendant First American Loanstar Trustee Services "executed a NOTICE OF TRUSTEE'S SALE." (Id. ¶¶ 23--24.) On August 26, 2009, Plaintiffs' counsel sent a letter to Defendants Wells Fargo Bank, N.A. and First American Loanstar Trustee Services purporting to rescind the loan for various "violations of federal and state laws." (Id. ¶ 25.)

Plaintiffs filed this suit on September 3, 2009. (Doc. No. 9.) On filing, this matter was assigned to the Honorable Larry Alan Burns. On February 5, 2010, Defendants filed the present motion to dismiss. (Doc. No. 9.) On February 26, 2010, Plaintiffs filed an amended complaint. (Doc. No. 10.) Judge Burns permitted Defendants to file a notice stating whether they wished to have their motion to dismiss considered as to the sufficiency of the First Amended Complaint (FAC). (Doc. No. 11.) Defendants filed that notice on March 8, 2010, electing to have the motion applied to the FAC. (Doc. No. 12.) On March 19, 2010, Plaintiffs filed their opposition to Defendants' motion and on March 29, 2010, Defendants filed their reply. (Doc. Nos. 13 & 14.) On June 1, 2010, Judge Burns recused himself from this case and it was reassigned to the Honorable Janis L. Sammartino.


Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it [does] demand[] more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, -- US - , 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 557).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. Facts "'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. This review requires context-specific analysis involving the Court's "judicial experience and common sense." Id. at 1950 (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.



Defendants request, pursuant to Federal Rule of Evidence 201(d), that the Court take judicial notice of four documents: (1) the deed of trust, (2) the notice of default, (3) the notice of trustee's sale, and (4) the trustee's deed upon sale. (Doc. No. 9-2 (RJN), at 1--2.) For purposes of a motion to dismiss, a court "may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (citations omitted). However, the court "may [also] consider a writing referenced in a complaint but not explicitly incorporated therein if the complaint relies on the document and its authenticity is unquestioned." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (citations omitted).

The Court finds that all four of the documents are properly subject to judicial notice. The FAC repeatedly mentions the deed of trust and as such it is appropriately considered here. (See, e.g., Compl. ¶ 2.) As to the notice of default, the notice of trustee's sale, and trustee's deed upon sale, these are all properly noticed as publicly recorded documents. Moreover, Plaintiffs do not object to the Court taking notice of these documents. Therefore, Defendants' request for judicial notice is GRANTED.


Plaintiffs' opposition to Defendants' motion concedes that their claims for (1) breach of the covenant of good faith and fair dealing, (2) violation of the Equal Credit Opportunity Act, (3) California Financial Code § 4970, (4) Fair Credit reporting act, (5) usury, and (6) negligence are not viable. (Opp. at 14.) Therefore, the Court DISMISSES WITH PREJUDICE the third, sixth, seventh, eighth, ninth, and thirteenth causes of action in the FAC.


Plaintiff's first cause of action is for intentional misrepresentation. (FAC ¶¶ 26--35.) Defendants argue that this claim should be dismissed for four reasons. First, they argue that it does not allege actionable intentional misrepresentations. (Memo. ISO Motion at 6--7.) Second, Defendants claim that this cause of action does not meet the requirements set forth in Federal Rule of Civil Procedure 9(b). (Id. at 5--6.) Third, this claim is allegedly time-barred. (Id. at 7.) And finally, Defendants assert that to the extent that Plaintiffs' misrepresentation claim is based on violations of the Truth in Lending Act or Real Estate Settlement Procedures Act, it has been affirmatively preempted by federal regulation. (Reply at 4--5.)

Defendants' final argument may be correct. However, the Court cannot dismiss this claim on that basis at this time. The Home Owners Loan Act (HOLA), 12 U.S.C. §§ 1461, et seq., "gave the [Office of Thrift Supervision (OTS)] broad authority to issue regulations governing federal savings associations." Naulty v. GreenPoint Mortgage Funding, Inc., 2009 WL 2870620, at *3 (N.D. Cal. 2009). "As the principal regulator for federal savings associations, OTS promulgated a preemption regulation in 12 C.F.R. § 560.2." Silvas v. E*Trade Mortgage Corp., 514 F.3d 1001, 1005 (9th Cir. 2008). That regulation reads, in relevant part:

OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, "state law" includes any state statute, regulation, ruling, order or judicial decision.

12 C.F.R. § 560.2(a). It may be that OTS's regulations preempt Plaintiffs' intentional misrepresentation claims, but the Court need not address that issue at present because Defendants have not established that they are federal savings associations entitled to the preemptive effect of this regulation. However, if it becomes necessary, and Plaintiffs' wish, they may raise this issue again in the future.

Next, the Court finds that Plaintiffs' have not brought their claim within the limitations period. Under California Code of Civil Procedure § 338(d), "An action for relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." Since Plaintiffs have not alleged any facts related to when they discovered the alleged misrepresentations,*fn2 the Court presumes that they "ha[d] notice or information of circumstances to put a reasonable person on inquiry" at the time of their loan's closing. Jolly v. Eli Lilly & Co., 751 P.2d 923, 927--28 (1988) (internal quotation marks and citation omitted). Since the loan closed on January 26, 2006, this action would have to have been filed by January 26, 2009. (FAC ¶ 9.) It was not and as such it must be DISMISSED.

However, even assuming that the complaint was timely, the Court would still dismiss it because it does not state a claim. The elements of the tort of intentional misrepresentation are "'(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.'" Alliance MortgageCo. v. Rothwell, 900 P.2d 601, 608 & n.4 (Cal. 1995) (quoting Molko v. Holy Spirit Ass'n, 762 P.2d 46, 53 (Cal. 1988)). When the misrepresentation at issue is a concealment, the Plaintiffs must show that Defendants "suppress[ed] . . . a fact," and that they were "bound to disclose it." Cal. Civ. Code § 1710(3).

In the FAC, Plaintiffs allege that Defendants Wells Fargo Bank NA and Wells Fargo Home Mortgage "failed to inform Plaintiffs of their right to rescind, along with failing to disclose numerous federal safeguards in the application process." (FAC ¶ 28.) Defendants Wells Fargo Bank NA and Wells Fargo Home Mortgage also allegedly "failed to include the Initial Goof (sic) Faith Estimate or an Initial TIL within the 3 business days required." (Id. ¶ 29.)

Since Plaintiffs make no allegations against Defendant U.S. Bank, it is not clear how they could possibly be liable on this claim. Plaintiffs' opposition sheds no light on this question, simply stating that they "clearly allege[] all actions made by the original broker and lender . . . as well as flow through liability to the subsequent noteholders (sic) . . . making it liable for any and all acts or omissions made therein." (Opp. at 6.) However, Plaintiffs do not allege that Defendant U.S. Bank is liable for any of the Wells Fargo Defendants' acts, nor allege facts indicating that such vicarious liability would be proper, nor do they cite statutory or case law which would permit the imposition of such liability. Therefore, the Court DISMISSES this claim against Defendant U.S. Bank.

As to Defendant Wells Fargo Bank, Plaintiffs' allegations do not constitute a cognizable intentional misrepresentation claim. First, Plaintiffs have not alleged a single affirmative false representation. And Plaintiffs' statement that "WELLS FARGO produced documents that are fraudulent on their face," is not supported by any explanation of which aspects of any particular document were fraudulent. (Opp. at 6.) Next, on the issue of concealment, the allegations are also inadequate. As stated above, actionable concealment involves both the suppression of a fact and a duty to disclose. Cal. Civ. Code § 1710(3). The allegation that Wells Fargo "fail[ed] to disclose numerous federal safeguards" must be dismissed because Plaintiffs do not clarify which "federal safeguards" were not disclosed nor do they suggest from where Defendant's duty to disclose arises. In alleging that Defendants did not "include the Initial Goof (sic) Faith Estimate or an Initial TIL," Plaintiffs do not allege a fact which was not disclosed. Although those documents might contain facts, there is no indication that the relevant facts were not otherwise disclosed.

Finally, Plaintiffs' claim lacks the specificity required by Federal Rule of Civil Procedure 9(b). In federal court, Rule 9(b) requires a plaintiff to plead with increased specificity any claims of fraud or mistake. Fed. R. Civ. P. 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). Intentional misrepresentation under California Law is a form of fraud and thus subject to Rule 9(b)'s strictures. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102--03 (9th Cir. 2003); Cadlo v. Owens-Illinois, Inc., 23 Cal. Rptr. 3d 1, 5 (Cal. Ct. App. 2004).

Under Rule 9(b), allegations must "be 'specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.' Averments of fraud must be accompanied by 'the who, what, when, where, and how' of the misconduct charged. '[A] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth ...

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