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Gabriel James Deleon and Shawna L. v. Wells Fargo Bank

January 28, 2011


The opinion of the court was delivered by: Lucy H. Koh United States District Judge

United States District Court For the Northern District of California


Before the Court are Defendant Wells Fargo Bank, N.A.'s ("Wells Fargo") Motion to Dismiss Plaintiffs' Second Amended Complaint ("SAC"), Motion to Strike portions of the SAC, 23 and Motion to Expunge the Notice of Pendency of Action. Defendant NDEX West, LLC, joins in 24 Wells Fargo's motion to dismiss. Although Plaintiff Gabriel DeLeon appeared at the motion 25 hearing, Plaintiffs failed to file an opposition to any of the pending motions. Having considered 26 the arguments of the parties and the relevant law, the Court GRANTS Defendants' motion to dismiss with prejudice, DENIES as moot Wells Fargo's motion to strike, and GRANTS Wells Fargo's motion to expunge the lis pendens. 3


In June 2004, Plaintiffs Gabriel and Shawna DeLeon purchased a home in San Benito County for $804,000, and entered into a mortgage with World Savings Bank, FSB, in the amount 6 of $562,800.*fn1 SAC ¶ 7. In 2007, World Savings Bank offered Plaintiffs the option of refinancing 7 their loan because their home had appreciated in value. SAC ¶ 8. Plaintiffs chose to refinance the 8 loan and entered into a 4-year adjustable rate mortgage. Id. Beginning in August 2008, Plaintiffs 9 became unable to afford the payments on the refinanced loan, and in 2009, a notice of default was 10 recorded and sent to Plaintiffs. SAC ¶¶ 9-10. In response, Plaintiffs contacted Wells Fargo by phone to inquire about a loan modification. SAC ¶10. Wells Fargo agreed to discuss a potential United States District Court For the Northern District of California

loan modification, and Wells Fargo Representative Brett Davis was assigned to handle Plaintiffs' 13 loan modification process. SAC ¶¶ 11-12. Between October 2009 and January 2010, Plaintiffs 14 engaged in phone discussions with Davis in attempts to finalize a loan modification. SAC ¶¶ 11-15

14. Plaintiffs allege that Wells Fargo expressed confidence that a loan modification would be 16 approved once all documents were received from the Plaintiffs, and that they faxed Davis all the 17 required documentation on October 3, 2009. SAC ¶¶ 11, 13. When Plaintiffs asked why the loan 18 modification process was taking so long, Davis told them that it was not uncommon for the process 19 to take months. SAC ¶ 14. Plaintiffs allege that Mr. Davis assured them that no foreclosure sale 20 would occur while negotiations for the modification were pending. Id. 21

Nonetheless, on January 16, 2010, a realtor informed Plaintiffs that their home had been sold and that their property was now owned by the bank. SAC ¶ 15. Plaintiffs allege that they were 23 stunned because they had not received a mailed notice of trustee's sale and no such notice was 24 posted on their property. SAC ¶ 15. They immediately contacted Davis, who "was in disbelief" 2 and initially told them that the realtor must be mistaken. SAC ¶ 16. After speaking to the realtor, 3 however, Davis confirmed that the property had indeed been sold and told Plaintiffs that there must 4 have been some mistake. SAC ¶ 17. He told them not to worry, that the mix-up would be resolved 5 and the loan modification reinstated. Id. 6

7 vacate the property within three days. SAC ¶ 18. Although Plaintiffs attempted to contact Mr. On January 20, 2010, Plaintiffs received a notice from Wells Fargo requiring them to Davis again to find out what was happening, they allege that he began distancing himself from 9 their situation and that Wells Fargo took no action to correct the problem. SAC ¶ 19-20. Sometime after the trustee's sale, Plaintiffs learned that Defendant NDEX was subcontracted by Wells Fargo to handle the foreclosure and sale of Plaintiff's property. SAC ¶ 22. Plaintiffs allege United States District Court For the Northern District of California that at no time prior to the sale were they contacted by either Wells Fargo or NDEX to explore 13 options to avoid foreclosure. SAC ¶ 21. Plaintiffs allege further that they were never advised that 14 they had a right to request a meeting and were never provided a toll free number to find a HUD-15

On February 10, 2010, Plaintiffs filed suit in San Benito County Superior Court, asserting seven claims for relief. Defendant removed the action to federal court on the basis of diversity 18 jurisdiction and immediately filed a motion to dismiss Plaintiffs' Complaint. In an order dated 19 June 9, 2010, Judge Jeremy Fogel (who was then assigned to this case) granted Defendant's motion 20 to dismiss with leave to amend in part. Order Denying Mot. to Remand and Granting Mot. to 21 June 29, 2010, Plaintiffs filed a First Amended Complaint ("FAC"), which included four new 23 claims for relief. The Court granted Wells Fargo's motion to dismiss the FAC on October 22, 24

Amend in Part ("Second Order Granting Mot. to Dismiss"), ECF No. 44. Plaintiff responded by 26 filing a Second Amended Complaint ("SAC") that includes five claims: (1) violations of the 27 Certified Housing Counseling Agency. Id. 16 Dismiss with Leave to Amend in Part ("First Order Granting Mot. to Dismiss"), ECF No. 18. On 22 2010, and granted Plaintiff leave to amend in part. Order Granting Mot. to Dismiss with Leave to California Unfair Competition Law, Cal. Bus. & Profs. Code § 17200 et seq.; (2) intentional misrepresentation; (3) negligent misrepresentation; (4) negligence; (5) breach of contract. Wells Fargo now moves to dismiss the entire SAC, to strike portions of the SAC, and to expunge the lis 3 pendens on the subject property. Defendant NDEX West, LLC, which is named only in Plaintiff's 4 negligence cause of action, joins in Wells Fargo's motion to dismiss. ruling on a 12(b)(6) motion to dismiss for failure to state a claim. Lee v. City of Los Angeles, 250 8

II.Request for Judicial Notice

As a general rule, a district court may not consider any material beyond the pleadings in F.3d 668, 688 (9th Cir. 2001). However, a court may take judicial notice of matters of public 9 record outside the pleadings. Id. at 689. In this case, Defendant requests judicial notice of records 10 of the Office of Thrift Supervision and the Comptroller of the Currency, including copies of 1) a letter from OTS reflecting the certificate of corporate existence of World Savings Bank, FSB; 2) 12 name change from World Savings Bank, FSB, to Wachovia Mortgage, FSB; 3) Wachovia 13 Mortgage's merger into Wells Fargo. Def. Wells Fargo's Req. for Judicial Notice in Supp. of 15 Mots. to Dismiss and Strike the SAC ("RJN") 2, Ex. A-D. Defendant also requests judicial notice 16 of four documents recorded with the San Benito County Recorder's Office in connection with 17

A district court may take notice of facts not subject to reasonable dispute that are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be 20 questioned." Fed. R. Evid. 201(b); United States v. Bernal-Obeso, 989 F.2d 331, 333 (9th 21 Defendant are not subject to reasonable dispute and are proper subjects of judicial notice. See 23 Lopez v. Wachovia Mortg., No. C 10-01645, 2010 WL 2836823, at *2 (N.D.Cal. 2010) (taking 24 judicial notice of nearly identical documents). Accordingly, the Court GRANTS Defendants' 25 request for judicial notice. sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering 5 whether the complaint is sufficient to state a claim, the court must accept as true all of the factual 6 allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However, 7 the court need not accept as true "allegations that contradict matters properly subject to judicial 8 notice or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or 9 unreasonable inferences." St. Clare v. Gilead Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference 14 that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. of Federal Rule of Civil Procedure 9(b). Under the federal rules, a plaintiff alleging fraud "must 17 state with particularity the circumstances constituting fraud." Fed. R. Civ. Pro. 9(b). To satisfy this 18 standard, the allegations must be "specific enough to give defendants notice of the particular 19 misconduct which is alleged to constitute the fraud charged so that they can defend against the 20 charge and not just deny that they have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 21 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege "an account of the time, place, and 22 specific content of the false representations as well as the identities of the parties to the 23 misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1130 26 (9th Cir. 2000). The rule favoring liberality in granting leave to amend is particularly important for 27 pro se litigants. Id. at 1131.

III. Motion to Dismiss

A.Legal Standard

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its United States District Court For the Northern District of California face.'" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 13Additionally, claims sounding in fraud are subject to the heightened pleading requirements If a court grants a motion to dismiss, leave to amend should be granted unless the pleading action. Because Wells Fargo argues that each of Plaintiff's claims is preempted by the Home HOLA preemption, and then turn to analysis of Plaintiff's individual claims. ("OTS"). 12 U.S.C. § 1464; Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 10 1979), aff'd, 445 U.S. 921 (1980)). In its role as principal regulator of federal savings associations, OTS promulgated an express field preemption regulation codified at 12 C.F.R. § 560.2. The 15 regulation states that "OTS hereby occupies the entire field of lending regulation for federal 16 savings associations." 12 C.F.R. § 560.2(a). The effect of this regulation is to leave virtually "no 17 room for state regulatory control." Silvas, 514 F.3d at 1004 (quoting Conference of Fed. Sav., 604 18 OTS regulations provide guidance on determining whether a state law is preempted.

Section 560.2(b) of the OTS regulation provides a nonexclusive list of the types of state laws 21 22


Wells Fargo asserts a number of grounds for dismissal for each of Plaintiff's causes of Owners' Loan Act ("HOLA"), 12 U.S.C. ยง 1461 et seq, the ...

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