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Michael Trant; Deborah Trant v. Wells Fargo Bank

July 12, 2012


The opinion of the court was delivered by: Jeffrey T. Miller States United State District District Judge



Plaintiffs Michael and Deborah Trant filed this case in California Superior Court for the County of San Diego in November 2011. The case was removed to this court on January 20, 2012. The complaint is based on a mortgage transaction between Plaintiffs and Wells Fargo and the subsequent Notice of Default and threat of foreclosure sale.

According to the complaint, Plaintiffs obtained a mortgage loan and purchased a home in Pine Valley, California in September of 2007. ¶ 1. The original lender was Edward Jones Mortgage, LLC. At some point the loan was transferred to Wells Fargo, which is the current lender and servicer of Plaintiffs' loan. ¶¶ 2-3, 5.

Plaintiffs state that they are both retired and living off investment income. ¶ 18. At some point, a family tragedy required them to take full guardianship of three grandchildren. ¶ 18. They also provide 24-hour care for two disabled brothers. ¶ 18. Because of these responsibilities, Plaintiffs sought a loan modification under the Home Affordable Modification Program ("HAMP") on May 5, 2010. ¶ 20. Plaintiffs detail significant difficulties during the application process. According to the complaint, Wells Fargo repeatedly lost their paperwork, sent them inconsistent letters concerning the status of their application, and asked Plaintiffs to submit applications to the HAMP program on multiple occasions. In October 2011, a representative from Wells Fargo stated that Plaintiffs' modification file was closed due to a failure to submit documentation, but the representative could not explain what document was missing. ¶ 32. After speaking with various other Wells Fargo employees, on January 6, 2011, Plaintiffs were told by Susann Armour that they had been prequalified for a four month trial modification, which they would soon receive in the mail. ¶ 41. The modification was to reduce Plaintiffs' payment from about $2,451 to $2,206 for the months of January to April, 2011. ¶ 41. Plaintiffs never received the trial modification letter, so they continued to make timely mortgage payments of the original amount. ¶ 43.

In April 2011, Wells Fargo sent Plaintiffs a "Payment arrangement agreement," reflecting a payment schedule for January to April, 2011 that matched the trial modification discussed by Plaintiffs with Ms. Armour in January 2011. ¶ 46. The agreement is included in the complaint as Exhibit D. The third page of the agreement (separately titled the "Forbearance Agreement") clearly states that the loan is in default. Plaintiffs explain that the loan was not actually in default, but they signed the agreement because they believed the document was intended to represent the HAMP trial modification discussed on the phone with Susann Armour. ¶¶ 47-48. Plaintiffs state that they made the April payment in full. ¶ 48. On May 8, 2011, Plaintiffs received a letter stating that the loan was in default and that Plaintiffs owed $3,524 in delinquent payments and fees, but did not provide the basis for this figure. ¶ 50.

After receiving the May 2011 letter, Plaintiffs spent several additional months attempting to secure the HAMP modification, repeatedly being told that the file was still being reviewed.

On August 1, 2011, Plaintiffs were denied a loan modification because they "did not have a 'long-term financial hardship.'" ¶ 55.

In late October of 2011, Plaintiffs received a letter informing them that the loan had been accelerated and the matter had been referred to Wells Fargo's attorney to begin foreclosure proceedings. ¶ 56. Defendants ceased accepting mortgage payments, and Defendant NDEX filed a Notice of Default and Election to Sell Under Deed of Trust dated November 1, 2011. ¶ 58. Plaintiffs state that they were never delinquent on payments until Wells Fargo announced foreclosure and stopped accepting payments.

Based on the foregoing, Plaintiffs state eleven causes of action: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) promissory estoppel; (4) fraud; (5) intentional or negligent misrepresentation; (6) negligence; (7) violation of the Rosenthal Fair Debt Collection Practices Act; (8) negligence per se; (9) violation of Cal. Bus. & Prof. Code § 17200; (10) declaratory relief; (11) quiet title.

Wells Fargo has moved to dismiss the entire complaint. For the reasons explained below, the motion is GRANTED as to the eighth and tenth causes of action, but DENIED as to all other claims.


The Supreme Court has clarified that in order to defeat a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the complaint's "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the court is required to construe plaintiff's allegations in the light most favorable to the non- moving party, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). The court should grant the motion if the complaint does not contain either a "cognizable legal theory" or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

A. Breach of Contract and Breach of Covenant of Good Faith and Fair Dealing

Plaintiffs' breach of contract theory is based on their contention that they made all mortgage payments on time until "Defendants unilaterally deemed Plaintiffs delinquent and added an immediately due $3,524.01 charge onto their loan balance." Compl. ¶ 68. They also state that Defendants breached the contract by deeming Plaintiffs delinquent on the basis of the fraudulent charge and accelerating payment on the loan. ¶¶ 73-74.

First, Wells Fargo argues that this claim should be dismissed because Plaintiffs' allegations are ambiguous and do not specify the provisions of the Deed of Trust that were breached. However, the complaint specifically states that "Plaintiffs . . . were only required to 'pay when due the principle [sic] of, and interest on, the debt evidenced by the Note.'" ¶ 67.*fn1 The next paragraph states that $3,524 was erroneously charged to Plaintiffs.*fn2 Later, Plaintiffs allege that Wells Fargo's acceleration of the loan based on the erroneous charge breached the contract by demanding more than was owed. ¶ 74. Wells Fargo does not address this reference and provides no law that would persuade the court the allegations are insufficient.

Second, Wells Fargo moves for dismissal of this claim "because Plaintiffs defaulted on their loan obligation," contending that the documents presented to the court establish that Plaintiffs made no payments on the loan for five months.*fn3 MTD at 4. It cites the Notice of Default, which was recorded on November 3, 2011, and states that payments are past due for the month of July 2011 and all subsequent months.*fn4 More importantly, Wells Fargo cites the Forbearance Agreement signed by Plaintiffs. This agreement was attached to the "Payment arrangement agreement," and states that "[t]he indebtedness of the referenced loan is in default." Plaintiffs each signed the document on April 16, 2011. Wells Fargo maintains that this forecloses success of the breach of contract claim because it clearly shows that Plaintiffs were in default. Plaintiffs' opposition does not address this issue directly, though it does repeat the claim that Plaintiffs were never in default and that they executed the agreement because they believed it was the "trial modification agreement" they had been promised over the phone. Pl. Opp. at 4.

Wells Fargo has cited several cases in support of its argument that the court should dismiss the complaint because documents attached to it contradict allegations contained therein. See Sumner Peck Ranch, Inc. v. Bureau of Reclamation, 823 F.Supp. 715, 720 (E.D. Cal. 1993) ("In addition, the court may disregard allegations in the complaint if contradicted by facts established by exhibits attached to the complaint.") (citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987)).

However, Wells Fargo fails to recognize that a similar question was recently answered by the Ninth Circuit. In Balderas v. Countrywide Bank, N.A., 664 F.3d 787 (9th Cir. 2011), the plaintiffs made several claims against defendant Countrywide based on a loan refinancing. As a result of allegedly intimidating actions by a mortgage broker, the plaintiffs signed the loan documents. Under the federal Truth in Lending Act, borrowers have three days in which to rescind a loan agreement, and the lender must provide the borrowers with two copies of the Notice of Right to Cancel so they are aware of when and how they can rescind. The plaintiffs claimed that they were not provided with this information, meaning that the lender violated TILA and as a result the plaintiffs should have had a right of rescission lasting for three years. The ...

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