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Kurt Ehlert and Melissa Ehlert Traub v. America's Servicing Company


October 12, 2011


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


Presently before the Court is Defendant Wells Fargo Bank's ("Defendant" or "Wells Fargo")*fn1 motion to dismiss Plaintiffs' first amended complaint ("FAC") for failure to state a claim. (ECF No. 4) Also before the Court is Plaintiffs Kurt Ehlert and Melissa Ehlert-Traub's ("Plaintiffs") response in opposition, (Resp. in Opp'n, ECF No. 12), and Defendant's reply in support, (Reply in Supp., ECF No. 14). For the reasons stated below, Defendant's motion is GRANTED.


1. Factual Background

Plaintiffs are owners of a condominium located in Coronado, California ("the Property"). (FAC ¶ 7, ECF No. 1-1) Plaintiffs obtained a loan from Defendant, secured by a deed of trust on the Property. (Mot to Dismiss 1, ECF No. 4) In 2009, Plaintiffs "began to experience financial difficulties and were unable to pay their monthly mortgage payment." (FAC ¶ 9, ECF No. 1-1) As a result, Plaintiffs contacted Defendant to request a loan modification. (Id. ¶ 10) Plaintiff and Defendant entered into a forbearance agreement whereby Defendant would forbear from foreclosing on the Property if Plaintiffs made timely payments. (Id. ¶¶ 10--11) At this time, Defendant allegedly "represented to Plaintiffs that Plaintiffs would qualify for a loan modification if they were timely in making three trial payments." (Id. ¶ 11)

Pursuant to the forbearance agreement, Plaintiffs made six timely payments. (Id.) "These monthly trial payments were considerably less than the monthly payments Plaintiffs were previously paying under the loan." (Id.) Nevertheless, Defendant "failed to respond to Plaintiffs' numerous communications regarding the status of their loan modification request," and "denied the Plaintifs' loan modification." (Id. ¶ 12)

A notice of trustee sale of the Property was recorded on February 11, 2011. (Id. ¶ 13) The trustee's sale was later postponed, (Mot. to Dismiss 2, ECF No. 4), but the Property was eventually foreclosed on, subsequent to the filing of the FAC, (Resp. in Opp'n 8, ECF No. 12).

2. Procedural Background

Plaintiffs filed their original complaint in California Superior Court for the County of San Diego on April 5, 2011. (Notice of Removal 2, ECF No. 1) Plaintiffs filed the instant FAC on April 7, 2011, alleging claims for breach of contract, promissory estoppel, intentional misrepresentation, negligent misrepresentation, false promise, and injunction. (FAC, ECF No. 1-1) Defendant removed the case pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. (Id.) On June 23, 2011, Defendant filed a motion to dismiss Plaintiffs' FAC for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).


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." Id. (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. Moreover, "for a complaint to be dismissed because the allegations give rise to an affirmative defense[,] the defense clearly must appear on the face of the pleading."

McCalden v. Ca. Library Ass'n, 955 F.2d 1214, 1219 (9th Cir. 1990).

Where a motion to dismiss is granted, "leave to amend should be granted 'unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'" DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.


As an initial matter, Defendant requests that the Court take judicial notice of a written Special Forbearance Agreement. (Req. Judicial Notice, ECF No. 4-2); (Ex. D, ECF No. 4-6) In ruling on a motion to dismiss, a court may consider a document not physically attached to the plaintiff's pleading if its contents are alleged in the complaint and its authenticity is not disputed. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322--23 (2007). Here, although Plaintiffs allege that Defendant "approved a special loan forbearance" whose terms nearly mirror those of the Special Forbearance Agreement Defendant requests be judicially noticed,*fn2 the Court finds that the written agreement may not be considered on Defendant's motion to dismiss. Even if it can be argued that Plaintiffs allege the contents of the Special Forbearance Agreement in their complaint, Plaintiffs apparently dispute the authenticity of the written agreement. (Resp. in Opp'n 3, ECF No. 12 (stating that the "contract . . . may or may not have been signed by all parties thereto," and "the document lacks foundation and has not been authenticated in any way")). This evidence is more properly received on a motion for summary judgment. Thus, the Court DENIES Defendant's request for judicial notice and will not consider the written Special Forbearance Agreement on this motion to dismiss.

1. Breach of Contract

Plaintiffs first claim is for breach of the alleged verbal agreement between Plaintiff and Defendant. (FAC ¶¶ 14--17, ECF No. 1-1) "A claim for breach of contract under California law consists of the following elements: (1) the existence of a contract; (2) performance by the plaintiff; (3) breach by the defendant; and (4) damage resulting from the breach." Alcalde v. NAC Real Estate Invs. & Assignments, Inc., 316 F. App'x 661, 662 (9th Cir. 2009) (citing First Commercial Mortg. Co. v. Reece, 108 Cal. Rptr. 2d 23, 33 (Cal. Ct. App. 2001)).

Plaintiffs allege that there was an oral agreement: if Plaintiffs "were timely in making three trial payments," Defendant "would qualify [them] for a loan modification." (FAC ¶ 11, ECF No. 1-1) Defendant allegedly breached this agreement by declining to modify Plaintiffs loan despite Plaintiffs having "performed all conditions, covenants, and promises required to be performed on their part in accordance with the terms and conditions of the verbal agreement." (Id. ¶ 15)

Defendant argues that Plaintiffs claim is barred by the statute of frauds because oral contracts relating to real property are not enforceable. (Mot. to Dismiss 5, ECF No. 4) The statute of frauds states that an "agreement . . . for the sale of real property, or of an interest therein," is "invalid[] unless [it], or some note or memorandum thereof, [is] in writing and subscribed by the party to be charged or by the party's agent." Cal. Civ. Code § 1624(a)(3). "A mortgage or deed of trust . . . comes within the statute of frauds." Secrest v. Sec. Nat. Mortg. Loan Trust 2002-2, 84 Cal. Rptr. 3d 275, 282 (Cal. Ct. App. 2008); see also Cal. Civ. Code § 2922 ("A mortgage can be created, renewed, or extended, only by writing, executed with the formalities required in the case of a grant of real property."). A forbearance agreement-although not creating, renewing, or extending a mortgage-is nevertheless subject to the statute of frauds because it modifies the mortgage agreement. See Secrest, 84 Cal. Rptr. 3d at 282 ("An agreement to modify a contract that is subject to the statute of frauds is also subject to the statute of frauds.") (citing Cal. Civ. Code § 1698).

Here, the alleged verbal agreement was that "Plaintiffs would qualify for a loan modification if they were timely in making three trial payments." (FAC ¶ 11, ECF No. 1-1) This was not an agreement to modify the mortgage, but rather an agreement that Defendant would qualify Plaintiffs for a loan modification if Plaintiffs were timely in making three trial payments. Although the eventual loan modification agreement would be subject to the statute of frauds, the Court finds that the alleged verbal agreement to enter into a loan modification agreement is not subject to the statute of frauds.

This does not end the inquiry, however. Defendant also argues that Plaintiffs have not sufficiently alleged the existence of a contract because, at most, Plaintiffs alleged merely an agreement to agree. (Mot. to Dismiss 5, ECF No. 4)"There is no dispute that neither law nor equity provides a remedy for breach of an agreement to agree in the future. Such a contract cannot be made the basis of a cause of action." Autry v. Republic Prods., Inc., 180 P.2d 888, 893 (Cal. 1947); see also First Nat'l Mortg. Co. v. Fed. Realty Inv. Trust, 631 F.3d 1058, 1065 (9th Cir. 2011) ("[A]n 'agreement to agree,' without more, is not a binding contract.") (quoting Autry, 180 P.2d at 893). Moreover, "[w]here any of the terms [of an agreement] are left for future determination . . . there is no binding contract until this is done." Smissaert v. Chiodo, 330 P.2d 827, 830--31 (Cal. Ct. App. 1958). "Preliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement." Kruse v. Bank of Am., 248 Cal. Rptr. 217, 229 (Cal. Ct. App. 1988).

Here, the subject matter of the alleged oral agreement was the loan modification, which was "at best left open to future negotiations and agreement." Id. Plaintiffs have not alleged that the parties had discussed or reached an agreement as to the terms of a loan modification; not some, but all of the terms of the loan modification were "left for future determination."*fn3 Smissaert, 330 P.2d at 830. At best, Plaintiffs have alleged an expectation that Plaintiffs and Defendant would later form a loan modification agreement.But this expectation did not rise to the level of an enforceable contract. See Kruse, 248 Cal. Rptr. at 229 ("The [party's] hopeful expectation that a loan agreement would eventually be reached was simply that: an expectation."). Because of this, Plaintiffs have failed to allege the existence of a contract-an essential element of a claim for breach of contract. Thus, Plaintiffs first claim for breach of contract is DISMISSED.

2. Promissory Estoppel

Plaintiffs' promissory estoppel claim arises from the same facts that underlie the breach of contract claim. (See FAC ¶¶ 18--23, ECF No. 1-1) Promissory estoppel will bind a promisor "'when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement.'" Raedeka v. Gibraltar Sav. & Loan Ass'n, 517 P.2d 1157, 1161 n.1 (Cal. 1974) (quoting Youngman v. Nev. Irrigation Dist., 449 P.2d 462, 468 (Cal. 1969)). "Cases have characterized promissory estoppel claims as being basically the same as contract actions, but only missing the consideration element." U.S. Ecology, Inc. v. State, 28 Cal. Rptr. 3d 894, 906 (Cal. Ct. App. 2005). Courts have broken this doctrine down into four elements: "(1) a promise that is clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his or her reliance." Boon Rawd Trading Int'l Co., Ltd. v. Paleewong Trading Co., Inc., 688 F. Supp. 2d 940, 953 (N.D. Cal. 2010) (citing U.S. Ecology, 28 Cal. Rptr. 3d at 904--07); see also Rennick v. O.P.T.I.O.N. Care, Inc., 77 F.3d 309, 316 (9th Cir. 1996) ("In order to constitute part performance the acts (1) must be 'unequivocally referable' to the terms of the oral contract; (2) must irretrievably change plaintiff's position, and (3) must be performed in reasonable reliance on the contract." (citing Am. Cas. Co. v. Curran Prods., Inc., 28 Cal. Rptr. 131, 135 (Cal. Ct. App. 1963); Monarco v. Lo Greco, 220 P.2d 737 (Cal. 1950))).

The Court finds that Plaintiffs have failed to state a claim for promissory estoppel because they have failed to allege an essential element of the claim-"a promise that is clear and unambiguous in its terms." Boon Rawd Trading Int'l, 688 F. Supp. 2d at 953. As explained above, at most Plaintiffs and Defendant entered into an agreement to agree. The alleged oral agreement contains none of the terms of the future loan modification.Accordingly, Plaintiffs have failed to allege a clear and unambiguous promise and the first element of a claim for promissory estoppel is therefore missing.*fn4 See, e.g., Laks v. Coast Fed. Sav. & Loan Ass'n, 131 Cal. Rptr. 836, 839--40 (Cal. Ct. App. 1976) (finding that "the first requisite for a complaint for promissory estoppel is missing" where plaintiffs sued on the basis of a failure to make two loans but none of the essential terms of the loan were agreed upon).Thus, Plaintiffs second claim for promissory estoppel is DISMISSED.

3. Fraud Claims

Plaintiffs' third, fourth, and fifth causes of action-for intentional misrepresentation, negligent misrepresentation, and false promise, respectively-are all subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). See Neilson v. Union Bank, N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003). Under this rule, Plaintiffs must "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). The allegations of fraud 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." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). Namely, these allegations "must be accompanied by 'the who, what, when, where, and how' of the misconduct charged." Id. (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). "'[A] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false.'" Id. (quoting Decker v. GlenFed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).

Plaintiffs fail to allege the "who, what, where, when, and how" with sufficient particularity as required by Rule 9(b). See Vess, 317 F.3d at 1106. Plaintiffs offer conclusory allegations that Defendant Wells Fargo represented that Plaintiffs would receive a loan modification, without a statement of who at Wells Fargo made such a representation, whether the representation was made in person or over the phone, what particular statement or statements were false or misleading, and so on. Though Defendant may have better "access to the information," (Resp. in Opp'n 10, ECF No. 12), it is not true that Plaintiffs have such little information that they could not allege more than the bare assertions provided in the FAC.

Plaintiffs third through fifth claims in the FAC are DISMISSED because they have failed to plead their fraud claims with sufficient particularity. In addition, each of these claims is subject to dismissal for failure to satisfy Rule 8(a).

A. Intentional Misrepresentation

Plaintiffs' third claim alleges intentional misrepresentation, deceit, or concealment of a material fact by Defendant. Even assuming Plaintiffs alleged misrepresentation with sufficient particularity, the Court finds that they have failed to sufficiently allege the essential elements of an intentional misrepresentation claim. Intentional misrepresentation under California law requires "'(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 Mortgage Co. 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)).

The FAC alleges that "[w]hen Defendant made these representations, they knew them to be false and made these representations with the intention to deceive and defraud the Plaintiffs and to induce the Plaintiffs to act in reliance of these representations." (FAC ¶ 27, ECF No. 1-1) Plaintiffs provide no factual allegations to support their conclusory statements that Defendant "knew" their representations were false or that Defendant had an "intention to deceive and defraud" Plaintiffs. However, the Court need not accept as true legal conclusions contained in the complaint. Iqbal, 129 S. Ct. at 1949.Thus, Plaintiffs have failed to plead all of the essential elements of a claim for intentional misrepresentation, and Plaintiffs third claim for intentional misrepresentation is DISMISSED.

B. Negligent Misrepresentation

Plaintiffs' fourth claim alleges negligent misrepresentation of facts by Defendant. Under California law, plaintiffs asserting negligent misrepresentation claims must establish "(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage." Nat'l Union Fire Ins. Co. v. Cambridge Integrated Servs., 89 Cal. Rptr. 3d 473, 483 (Cal. Ct. App. 2009) (internal quotation marks omitted) (citations omitted). Plaintiffs' claim here fails for want of a necessary element-that Defendant misrepresented a past or existing material fact.

Plaintiffs allege that Defendants informed Plaintiffs that they "would receive a loan modification after payment of the trial payments." (FAC ¶ 32, ECF No. 1-1) This statement is prospective, however. It is a promise of future conduct rather than a representation of past or existing facts. See Stevens v. JPMorgan Chase Bank, N.A., 2010 WL 329963, at *7 (N.D. Cal. Jan. 20, 2010) (citing Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. Rptr. 2d 861, 863 (Cal. Ct. App. 1991). Based on this allegation, Plaintiffs cannot set forth a claim for negligent misrepresentation. This claim is therefore DISMISSED.

C. False Promise

Plaintiffs' fifth claim alleges false promise. To allege a claim for false promise, a plaintiff must plead the essential elements:

(1) A promise made regarding a material fact; (2) the absence of intent on the part of the defendant at the time the promise was made to perform it; (3) intent on the part of the defendant to induce action by plaintiff; (4) justifiable reliance on the promise by plaintiff; (5) nonperformance of the promise by the defendant, and (6) injury and damage proximately resulting to the plaintiff.

Bondi v. Jewels by Edwar, Ltd., 73 Cal. Rptr. 494, 497 (Cal. Ct. App. 1968) (citation omitted). As above, Plaintiffs have failed to allege Defendant's absence of intent to perform on the alleged promise. Thus, Plaintiffs fifth claim for false promise is DISMISSED.

4. Injunction

Finally, Plaintiffs sixth claim is for "injunction." Plaintiffs' request for an injunction asks that Defendant be "enjoined and restrained" from the "threatened auction of the subject real property." (FAC ¶ 47, ECF No. 1-1) The Property has since been foreclosed on, however, subsequent to the filing of the FAC. (See Resp. in Opp'n 8, ECF No. 12) As such, the Court finds that injunctive relief would inappropriate.

Moreover, "[i]njunctive relief, like damages, is a remedy requested by the parties, not a separate cause of action." Cox Commc'ns PCS, L.P. v. City of San Marcos, 204 F. Supp. 2d 1272, 1283 (S.D. Cal. 2002). Accordingly, because none of Plaintiffs claims is sufficiently pleaded, the sixth claim for injunctive relief is DISMISSED.


For the reasons stated above, the Court GRANTS Defendant's motion to dismiss. Plaintiff's complaint is DISMISSED WITHOUT PREJUDICE. If Plaintiff wishes, Plaintiff may file an amended complaint within fourteen days after this order is electronically docketed.


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