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Eric M. Cross, et al. v. Wells Fargo Bank

December 9, 2011



Present: The Honorable A. HOWARD MATZ, U.S. DISTRICT JUDGE

Stephen Montes Not Reported

Deputy Clerk Court Reporter / Recorder Tape No. Attorneys NOT Present for Plaintiff: Attorneys NOT Present for Defendants:

Proceedings: IN CHAMBERS (No Proceedings Held)

Defendant Wells Fargo Bank moves to dismiss Plaintiffs' First Amended Complaint.*fn1 For the reasons stated below, the Court GRANTS Defendant's motion in part and DENIES it in part. To the extent that leave to amend is granted, the Court cautions Plaintiffs and their counsel to comply fully with the requirements of Fed. R. Civ.


Plaintiffs Eric M. Cross and Venita K. Cross own real property in Victorville, California. Plaintiffs borrowed money from Wells Fargo in May 2006 and their loan was secured by a deed of trust on the Victorville property. On February 14, 2011, facing an impending foreclosure, Plaintiffs filed this suit in state court. Notice of Removal ("NOR") at Ex. A, ¶ 15-16.

Defendant Wells Fargo removed Plaintiffs' case to this Court on March 15, 2011, on the basis of federal question jurisdiction as well as diversity jurisdiction. NOR, Dkt.

1. On March 22, 2011, Defendant filed a motion to dismiss. Dkt. 7. Plaintiffs filed a First Amended Complaint on April 11, 2011, thereby mooting that motion. Dkt. 15, 16. The First Amended Complaint is the current operative complaint.

The First Amended Complaint alleges a total of seventeen causes of action for: (1) violation of Cal. Civil Code § 2923.5; (2) unjust enrichment; (3) Real Estate Settlement

Procedures Act ("RESPA") violations, 12 U.S.C. § 2601 et seq.; (4) fraud and concealment; (5) breach of contract; (6) quiet title; (7) declaratory and injunctive relief;

(8) slander of title; (9) intentional infliction of emotional distress; (10) violation of the Federal Fair Debt Collection Practices Act ("FDCPA"); (11) violation of California Bus. & Prof. Code § 17200 et seq. ("UCL"); (12) violation of the Home Ownership Equity Protection Act ("HOEPA"); (13) violation of the Fair Credit Reporting Act ("FCRA");

(14) fraudulent misrepresentation; (15) breach of fiduciary duty; (16) civil conspiracy; and (17) civil RICO. Wells Fargo filed this motion to dismiss on May 2, 2011. Dkt. 17.


A complaint may be dismissed for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). "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.' A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, - U.S.-, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in

Twombly, 550 U.S. at 555 (internal quotation marks and ellipsis omitted).

The plausibility standard articulated in Twombly and Iqbal, requires that a complaint plead facts demonstrating "more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 129 S.Ct. at 1949 (internal quotation marks and citation omitted). Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has not shown that the pleader is entitled to relief. Iqbal, 129 S.Ct. at 1950 (internal citation, alteration, and quotation marks omitted); see Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the pleader to relief.") (citing Iqbal, 129 S.Ct. at 1949).

To determine whether a complaint states a claim sufficient to withstand dismissal, a court considers the contents of the complaint and its attached exhibits, documents incorporated into the complaint by reference, and matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). The court must accept as true all factual allegations contained in the complaint. That principle, however, "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1950. A complaint pro se, however, is "to be liberally construed," and "however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94 (2007).

Where a motion to dismiss is granted, a district court should provide leave to amend unless it is clear that the complaint could not be saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008) (citation omitted).


A. California Civil Code § 2923.5 (First Cause of Action)

California Civil Code § 2923.5 states that, before filing a notice of default, lenders must "contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." In this case, the parties agree that they discussed alternatives to foreclosure, but Plaintiffs argue that they, and not Wells Fargo, initiated all these discussions. According to Plaintiffs, the statute requires the lender to initiate contact.

California Courts have not resolved this question but in at least one unpublished decision, the California Court of Appeal found that § 2923.5 is not satisfied by borrower-initiated communications.*fn2 Johnson v. Super. Ct., No. 30-2010-00342645, 2010 WL 2895611, at *3 (Cal. Ct. App. July 26, 2010). In Johnson, the court explained that the language of the statute requires the lender to initiate the contact. This appears to be correct; the statute states that the "[lender] shall contact the borrower." Cal. Civ. Code § 2923.5. Furthermore, as the court explained, § 2923.5(h) provides a lender certain excuses for not initiating contact-borrower-initiated communication is not one of these excuses.

Because it is willing to proceed on the basis that it should defer to the language of the statute-and not because it makes much sense-the Court finds that Plaintiffs have alleged facts sufficient to state a claim under § 2923.5.

B. Unjust Enrichment (Second Cause of Action)

According to Plaintiffs, once Wells Fargo sold their loan "through securitization or other means," it no longer had a right to receive loan payments. FAC ¶ 32. As a result, Plaintiffs claim, "Defendant Wells Fargo has no interest in Plaintiffs' mortgage, so payments made to Wells Fargo . . . constitute unjust enrichment." Id.

Unjust enrichment requires receipt of a benefit and unjust retention of the benefit at the expense of another. First Nationwide Savings v. Perry, 15 Cal. Rptr. 2d 173, 176 (Cal. Ct. App. 1992). California courts "appear to be split on whether unjust enrichment can be an independent claim or merely an equitable remedy." Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1099 (N.D. Cal. 2007) (Alsup, J.). But even assuming, arguendo, that unjust enrichment is an independent claim, Plaintiffs have nonetheless failed to state such a claim.

Plaintiffs admit that they borrowed money from Wells Fargo. Their only claim is that Wells Fargo entered into a subsequent transaction with someone else that fully compensated Wells Fargo for the money it lent Plaintiffs. These allegations do not state a claim for unjust enrichment because Plaintiffs cannot show that Wells Fargo is retaining anything at Plaintiffs' expense. If Wells Fargo entered into a contract with a third party that fully compensated Wells Fargo ...

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