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Resham Singh and Gurmit Kaur v. Wells Fargo Bank

March 1, 2012



I. History*fn1

Plaintiffs Resham Singh and Gurmit Kaur ("Plaintiffs"), together with third party Singh Balwinder obtained a $143,114 mortgage ("Original Mortgage") from Wells Fargo Home Mortgage Inc., now Defendant Wells Fargo Bank, N.A. ("Wells Fargo") for the purchase of 890 Jessica Street in Turlock, California ("Property"). The Deed of Trust was dated November 5, 2003 and recorded on November 13, 2003. Plaintiffs fell behind on their mortgage payments, starting on June 1, 2009. A Notice of Default was filed on October 2, 2009. A Notice of Trustee's Sale was filed on January 6, 2010, setting the date of public sale as January 26, 2010.

At an unspecified date, Plaintiffs requested a loan modification from Wells Fargo under the federal Home Affordable Modification Program ("HAMP"). Wells Fargo agreed to a trial loan modification ("Temporary Modification"). Wells Fargo then sent Plaintiffs papers for a permanent loan modification ("Permanent Modification"). Plaintiffs signed and returned those documents at the end of March/ beginning of April 2010. Notwithstanding the Permanent Modification, the house was sold in a non-judicial foreclosure on June 28, 2010, to Defendant Federal Home Loan Mortgage Corporation ("Freddie Mac"). An Assignment of Deed of Trust and Trustee's Deed Upon Sale were filed July 7, 2010.

Plaintiffs filed suit against Wells Fargo and Freddie Mac in the Superior Court, County of Stanislaus on August 2, 2010. The complaint alleges a quiet title cause of action against both Wells Fargo and Freddie Mac and breach of contract, breach of implied covenant of good faith and fair dealing, promissory fraud, and intentional infliction of emotional distress causes of action against Wells Fargo only. Freddie Mac removed the case to the Eastern District on September 14, 2010, based on the special federal jurisdiction provisions of 12 U.S.C. §1452(f). Freddie Mac and Wells Fargo filed motions to dismiss for failure to state a claim under Fed. Rule Civ. Proc. 12(b)(6) which were granted in part and denied in part. Plaintiffs filed a first amended complaint ("FAC"). The FAC lists thirteen causes of action. Freddie Mac and Wells Fargo have again filed motions to dismiss for failure to state a claim under Fed. Rule Civ. Proc. 12(b)(6). Plaintiffs have filed oppositions to both motions. In key part, Plaintiffs have agreed to abandon six causes of action (the fifth through tenth). Doc. 31, Opposition to Wells Fargo, at 8:1-3. The remaining contested causes of action are breach of contract, unfair competition law, fraud, breach of the implied covenant of good faith and fair dealing, rescission and restoration, possession, and quiet title. These matters were taken under submission without oral argument.

II. Legal Standards

Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, 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 fact)....a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007), citations omitted. "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be 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 alleged -- but it has not shown that the pleader is entitled to relief." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), citations omitted. The court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). The court must also assume that "general allegations embrace those specific facts that are necessary to support the claim." Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990), citing Conley v. Gibson, 355 U.S. 41, 47 (1957), overruled on other grounds at 127 S. Ct. 1955, 1969. Thus, the determinative question is whether there is any set of "facts that could be proved consistent with the allegations of the complaint" that would entitle plaintiff to some relief. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). At the other bound, courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated...laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983).

In deciding whether to dismiss a claim under Fed. Rule Civ. Proc. 12(b)(6), the Court is generally limited to reviewing only the complaint. "There are, however, two exceptions....First, a court may consider material which is properly submitted as part of the complaint on a motion to dismiss...If the documents are not physically attached to the complaint, they may be considered if the documents' authenticity is not contested and the plaintiff's complaint necessarily relies on them. Second, under Fed. Rule Evid. 201, a court may take judicial notice of matters of public record." Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001), citations omitted. The Ninth Circuit later gave a separate definition of "the 'incorporation by reference' doctrine, which permits us to take into account documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005), citations omitted. "[A] court may not look beyond the complaint to a plaintiff's moving papers, such as a memorandum in opposition to a defendant's motion to dismiss. Facts raised for the first time in opposition papers should be considered by the court in determining whether to grant leave to amend or to dismiss the complaint with or without prejudice." Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003), citations omitted.

If a Fed. Rule Civ. Proc. 12(b)(6) motion to dismiss is granted, claims may be dismissed with or without prejudice, and with or without leave to amend. "[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc), quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).

III. Discussion

Overall, Wells Fargo argues that "Plaintiffs' claim is ultimately grounded in the allegation that Wells Fargo was obligated to provide them with a HAMP loan modification and failed to do so. However, there is no legal basis for such claim because there is no private right of action for HAMP violations." Doc. 26, Brief, at 4:14-16. Wells Fargo is correct that there is no private right of action under HAMP. See Hart v. Countrywide Home Loans, Inc., 2010 U.S. Dist. LEXIS 85272, *13-14 ( E.D. Mich. Aug. 19, 2010); Zeller v. Aurora Loan Servs., LLC, 2010 U.S. Dist. LEXIS 80449, *2 (W.D. Va. Aug. 10, 2010); Hoffman v. Bank of Am., 2010 U.S. Dist. LEXIS 70455, *6 (N.D. Cal. June 30, 2010); Simon v. Bank of Am., 2010 U.S. Dist. LEXIS 63480, *26-27 (D. Nev. June 23, 2010); Marks v. Bank of Am., 2010 U.S. Dist. LEXIS 61489, *13 (D. Ariz. June 22, 2010); De La Salle v. America's Wholesale Lender, 2010 U.S. Dist. LEXIS 36319, *3-4 (E.D. Cal. Apr. 13, 2010); Aleem v. Bank of Am., 2010 U.S. Dist. LEXIS 11944, *12 (C.D. Cal. Feb. 9, 2010). To the extent that any of Plaintiffs' claims are based on an attempt to enforce the provisions of HAMP, those theories are dismissed. As far as can be determined, no cause of action can be based on the Temporary Modification.

However, the focus of Plaintiffs' claims in this suit is that Wells Fargo did agree to the Permanent Modification and then violated its terms. Thus, Plaintiffs' claims are not dependent upon HAMP but rather upon the Permanent Modification as a separate, enforceable contract between Plaintiffs and Wells Fargo. Wells Fargo has neither argued nor presented case law that suggests HAMP preempts such causes of action. The court treats this breach of contract claim as Plaintiffs' central allegation in this suit.

Plaintiffs' allegations in the FAC generally discuss Wells Fargo's actions. Regarding Freddie Mac, Plaintiffs states "Purchaser Freddie Mac was fully apprised of defendant bank's fraud and bad faith in its efforts to wrest title from the unsuspecting Singh Family. Freddie Mac acquiesced by its inaction to this fraudulent course of conduct which included paying lip service to a Permanent Loan Modification Agreement when in fact the bank had no inclination or intention of modifying the loan or helping the family to stay in its home." Doc. 24, FAC, at 21:10-15. In briefing the present motions, Plaintiffs argue that "Federal Home Loan, is specifically alleged to have been actively engaged in a contractual relationship with Lender Wells Fargo whereby Lender would proceed to liquidate a 'toxic asset' under a government mandate which would require Federal Home Loan to purchase the asset at its full encumbered amount. Thus, it is clear that under the court's reasoning in Melandrez, defendant Federal Home Loan is absolutely chargeable with the 'fraud or imposition' which led to the Plaintiff[s] being dispossessed of [their] family home." Doc. 36, Opposition to Freddie Mac, at 3:18-24. Plaintiffs appear to be suggesting that Freddie Mac should be considered a conspirator of Wells Fargo However, under Plaintiffs' own reasoning, Freddie Mac's actions in purchasing the property were mandated by the U.S. Government. Plaintiffs may not use state law to interfere with the operation of federal law. Plaintiffs have not explained how Wells Fargo's actions can be imputed to Freddie Mac.

A. Breach of Contract

"The standard elements of a claim for breach of contract are (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) damage to plaintiff therefrom." Wall Street Network, Ltd. v. New York Times Co., 164 Cal. App. 4th 1171, 1178 (Cal. App. 2nd Dist. 2008), citations omitted. Wells Fargo argues that all four elements are missing from the FAC. It was previously determined that, "Plaintiff[s have] sufficiently stated facts supporting the second through fourth elements." Doc. 23, January 7, 2011 Order, at ...

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