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Title: Edward Kho v. Wells Fargo & Company

August 6, 2012

TITLE: EDWARD KHO
v.
WELLS FARGO & COMPANY



The opinion of the court was delivered by: The Honorable David O. Carter, Judge

O

CIVIL MINUTES -- GENERAL

PRESENT: THE HONORABLE DAVID O. CARTER, JUDGE

Julie Barrera N/A Courtroom Clerk Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFF: ATTORNEYS PRESENT FOR DEFENDANT: None Present None Present

PROCEEDINGS: (IN CHAMBERS): ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

Before the Court are two motions filed by Defendant Wells Fargo Bank, N.A. ("Wells Fargo") (erroneously sued as Wells Fargo & Company): (1) a Motion to Dismiss (Dkt. 5); and (2) a Motion to Strike (Dkt. 6). The Court finds the matter appropriate for decision without oral argument. Fed R. Civ. P. 78; Local R. 7-15. After considering the moving, opposing, and replying papers, the Court GRANTS the Motion to Dismiss and DENIES AS MOOT the Motion to Strike.

I. Background

On June 15, 2006, Plaintiff Edward Kho ("Plaintiff") applied for a refinance loan with World Savings Bank, FSB, ("WSB") for the property located at 6 Calabria Lane, Foothill Ranch, California 92610. Removal Ex. A ("Compl.") (Dkt.1) at ¶ 10. WSB qualified Plaintiff for a thirty year adjustable rate loan and subsequently executed the loan agreement. Id. Plaintiff's stated income on the loan application was $10,250 although Plaintiff actually made less than $7,000. Id. at ¶ 13. Plaintiff alleges that he never stated such an inflated income amount nor confirmed that amount. Id. Plaintiff alleges the terms of the loan, which allowed for negative amortization and variable interests rates, "set the Plaintiff up for certain default and the ruination of his credit and ability to purchase real property again," and Defendant Wells Fargo, as successor-in-interest to WSB, "was in a position to tell Plaintiff of the financial difficulties . . . but did not disclose anything of the such [sic]." Id.at ¶ 14.

In 2007, WSB changed its name to Wachovia Mortgage, FSB. RJN Ex. G.*fn1 On November 1, 2009, Wachovia Mortgage was converted to Wells Fargo Bank Southwest, N.A. and thereby merged into Defendant Wells Fargo Bank, N.A. Id.

When Plaintiff fell behind in his payments in 2012, he sought assistance from Defendant Wells Fargo "to resolve his impending default and obtain a payment that he could actually afford." Id. at ¶ 16. Defendant Wells Fargo allegedly "refused to offer any financial relief or even evaluate Plaintiff's financial situation." Id. Though Plaintiff has been threatened with foreclosure, the home has not been sold at this time and Plaintiff resided in it at the time the Complaint was filed. Id. at ¶¶ 1, 16.

Plaintiff filed the Complaint on April 18, 2012, alleging six causes of action for:

(1) fraud; (2) cancellation of contract; (3) violation of the California Business and Professions Code; (4) violation of covenant of good faith and fair dealing; (5) declaratory relief; and (6) violation of California's Finance Lenders Law. Compl. (Dkt.1). Defendant Wells Fargo filed a Motion to Dismiss and a Motion to Strike on June 1, 2012. Mot. Dismiss (Dkt. 5); Mot. Strike (Dkt. 6).

II.Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to set forth a set of facts which, if true, would entitle the complainant to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (holding that a claim must be facially plausible in order to survive a motion to dismiss). The pleadings must raise the right to relief beyond the speculative level; a plaintiff must provide "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)). On a motion to dismiss, this court accepts as true a plaintiff's well-pled factual allegations and construes all factual inferences in the light most favorable to the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The court is not required to accept as true legal conclusions couched as factual allegations. Iqbal, 556 U.S. at 678.

In evaluating a Rule 12(b)(6) motion, review is ordinarily limited to the contents of the complaint and material properly submitted with the complaint. Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc.,896 F.2d 1542, 1555 n.19 (9th Cir. 1990). Under the incorporation by reference doctrine, the court may also consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading." Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by 307 F.3d 1119, 1121 (9th Cir. 2002).

A motion to dismiss under Rule 12(b)(6) can not be granted based upon an affirmative defense unless that "defense raises no disputed issues of fact." Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984). For example, a motion to dismiss may be granted based on an affirmative defense where the allegations in a complaint are contradicted by matters properly subject to judicial notice. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). In addition, a motion to dismiss may be granted based upon an affirmative defense where the complaint's allegations, with all inferences drawn in Plaintiff's favor, nonetheless show that the affirmative defense "is apparent on the face of the complaint." See Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010).

Additionally, Federal Rule of Evidence 201 allows the court to take judicial notice of certain items without converting the motion to dismiss into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). The court may take judicial notice of facts "not subject to reasonable dispute" because they are either: "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201; see also Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (noting that the court may take judicial notice of undisputed "matters of public record"), overruled on other grounds by 307 F.3d 1119, 1125-26 (9th Cir. 2002). The court may disregard allegations in a complaint that are contradicted by matters properly subject to judicial notice. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010).

Dismissal without leave to amend is appropriate only when the court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003); Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (holding that dismissal with leave to amend should be granted even if no request to amend was made). Rule 15(a)(2) of the Federal Rules of Civil Procedure states that leave to amend should be freely given "when justice so requires." This policy is applied with "extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. 1990).

Federal Rule of Civil Procedure 9(b) states that an allegation of "fraud or mistake must state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). The "circumstances" required by Rule 9(b) are the "who, what, when, where, and how" of the fraudulent activity. Vess v. Ciba--Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir.1993) ("[Rule 9(b) requires] the times, dates, places, benefits received, and other details of the alleged fraudulent activity."). In addition, the allegation "must set forth what is false or misleading about a statement, and why it is false." Vess, 317 F.3d at 1106 (quoting In re Glenfed, Inc. Secs. Litig., 42 F.3d 1541, 1548 (9th Cir.1994)). Rule 9(b)'s heightened pleading standard applies not only to federal claims, but also to state law claims brought in federal court. Id. at 1103. This heightened pleading standard ensures that "allegations of fraud are specific enough to ...


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