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Dennly R. Becker, et al v. Wells Fargo Bank

November 30, 2012

DENNLY R. BECKER, ET AL., PLAINTIFFS,
v.
WELLS FARGO BANK, NA, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge

ORDER

Presently before the court is defendants' Motion to Dismiss (the "Motion") plaintiff's third amended pleading as modified by order of the court (Third Am. Compl., Dkt. No. 98; Order dated Aug. 22, 2012, Dkt. No. 115 at 15-17).*fn1 (Mot. to Dismiss, Dkt. No. 125.) Plaintiff filed a written opposition to the pending motion. (Opp'n, Dkt. No. 131.) Defendants filed reply briefing in support of the pending motion. (Reply, Dkt. No. 134.)

The motion to dismiss came on for hearing on November 15, 2012. (Minutes, Dkt. No. 135.) Attorney David Newman appeared on behalf of defendants. Plaintiff appeared on his own behalf. The undersigned has fully considered the moving papers and appropriate portions of the record and, for the reasons that follow, denies the Motion. The court also requires the parties to file a joint status report as addressed herein.

I. BACKGROUND

Generally, this case involves plaintiff's loans and attempted loan modifications relating to several of plaintiff's pieces of real property, and plaintiff's default on some of those loans. Plaintiff sued the banks or other entities that made, acquired, serviced, or refused to modify the loans, and which ultimately attempted to foreclose on some of the properties. Plaintiff's 113-page First Amended Complaint alleged the following claims for relief against defendants: (1) fraud; (2) violation of the Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 et seq.; (3) violation of the Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.; (4) false advertising, Cal. Bus. & Prof. Code §§ 17500 et seq.; (5) violation of California Civil Code § 2943; (6) wrongful foreclosure proceedings; (7) quiet title; (8) unfair debt collection practices under state and federal law; (9) Racketeer Influenced and Corrupt Organizations ("RICO") violations, 18 U.S.C. §§ 1961 et seq.; and (10) negligent misrepresentation and negligence. (See First Am. Compl. at 56-103, Dkt. No. 19.)

Defendants previously filed a motion to dismiss with respect to plaintiff's original pleading. (Mot. to Dismiss, Dkt. No. 11.) On August 1, 2011, the court adopted findings and recommendations filed by the undersigned and dismissed some of plaintiff's claims with leave to amend and others with prejudice. (See Order, Aug. 1, 2011, Dkt. No. 58.) The court dismissed plaintiff's wrongful foreclosure and quiet title claims with prejudice on the grounds that those claims were preempted by the Home Owners Loan Act ("HOLA"), 12 U.S.C. §§ 1461 et seq. (See Order and Findings and Recommendations, Mar. 22, 2011, at 27-32, Dkt. No. 49, adopted by Order, Aug. 1, 2011, at 2, 7.) The court also construed plaintiff's objections to the undersigned's findings and recommendations as a motion for reconsideration and denied it insofar as it challenged the dismissal of the wrongful foreclosure and quiet title claims. (See Order, Aug. 1, 2011, at 2.) In its August 1, 2011 order, the court further explained the relevant HOLA preemption analysis. (Id. at 2-4.)

Remaining unsatisfied with the court's ruling, plaintiff sought reconsideration of the order addressing plaintiff's first motion for reconsideration, arguing that the court committed "clear error" in its analysis of HOLA preemption (Dkt. No. 59). After considering supplemental briefing, the court denied plaintiff's motion for reconsideration of the denial of plaintiff's first motion for reconsideration. (Order, Mar. 29, 2012, Dkt. No. 87.)

Meanwhile, plaintiff filed a Second Amended Complaint and later filed a motion for leave to file a Third Amended Complaint (Dkt. No. 89) before the court could resolve defendants' motion to dismiss the Second Amended Complaint. The undersigned denied plaintiff's motion for leave to amend without prejudice based on the deficiencies in the proposed Third Amended Complaint. The undersigned then granted plaintiff leave to file another motion for leave to amend, and held the motion to dismiss the Second Amended Complaint in abeyance pending resolution of the motion for leave to amend. (Order, May 14, 2012, Dkt. No. 92; see also Order, Oct. 17, 2011, Dkt. No. 80.)*fn2 On June 19, 2012, plaintiff filed another motion for leave to file a Third Amended Complaint and a revised, proposed Third Amended Complaint (Dkt. Nos. 97-98). Plaintiff's proposed Third Amended Complaint included claims for "Preempted/Unlawful Foreclosure" and "Improper Foreclosure Process" that challenge defendants' right to foreclose on plaintiff's properties. (See Proposed Third Am. Compl. ¶¶ 73-89, Dkt. No. 98.)

The undersigned issued Findings and Recommendations recommending that plaintiff's motion for leave to amend (Dkt. No. 97) be granted in part and denied in part, and that plaintiff be granted leave to pursue some of his amended claims but not others.*fn3 (Order, Aug. 22, 2012, Dkt. No. 115 at 15-17.)

The United States District Judge adopted the undersigned's Findings and Recommendations on September 19, 2012. (Dkt. No. 123). On September 29, 2012, defendants moved to dismiss plaintiff's Third Amended Complaint (Third Am. Compl., Dkt. No. 125) as modified by the Order issued August 22, 2012 (Dkt. No. 115 at 15-17), and that motion is addressed herein.

II. LEGAL STANDARDS

A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase Bank, N.A., 654 F. Supp. 2d 1104, 1109 (E.D. Cal. 2009). Under the "notice pleading" standard of the Federal Rules of Civil Procedure, a plaintiff's complaint must provide, in part, a "short and plain statement" of plaintiff's claims showing entitlement to relief. Fed. R. Civ. P. 8(a)(2); see also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009), cert. denied, 130 S. Ct. 1053 (2010). "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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "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." Id.

In considering a motion to dismiss for failure to state a claim, the court accepts all of the facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Corrie v. Caterpillar, 503 F.3d 974, 977 (9th Cir. 2007). The court is "not, however, required to accept as true conclusory allegations that are contradicted by documents referred to in the complaint, and [the court does] not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Paulsen, 559 F.3d at 1071 (citations and quotation marks omitted). The court must construe a pro se pleading liberally to determine if it states a claim and, prior to dismissal, tell a plaintiff of deficiencies in his complaint and give plaintiff an opportunity to cure them if it appears at all possible that the plaintiff can correct the defect. See Lopez v. Smith, 203 F.3d 1122, 1130-31 (9th Cir. 2000) (en banc); accord Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990) (stating that "pro se pleadings are liberally construed, particularly where civil rights claims are involved"); see also Hebbe v. Pliler, 627 F.3d 338, 342 & n.7 (9th Cir. 2010) (stating that courts continue to construe pro se filings liberally even when evaluating them under the standard announced in Iqbal).

In ruling on a motion to dismiss filed pursuant to Rule 12(b)(6), the court "may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). Although the court may not consider a memorandum in opposition to a defendant's motion to dismiss to determine the propriety of a Rule 12(b)(6) motion, see Schneider v. Cal. Dep't of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998), it may consider allegations raised in opposition papers in deciding whether to grant leave to amend, see, e.g., Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003).

III. DISCUSSION A. The Trust

Defendants argue that plaintiff cannot represent The Becker Trust Dated March 25, 1991 (the "Trust") in this action because he is not a licensed attorney. (Mot. to Dismiss at 2.) While defendants cite authorities on the subject of non-attorneys representing trusts, defendants do not discuss whether plaintiff might be a "beneficial owner" of the Trust such that he may represent the Trust in this case.

The general rule in federal litigation is that a non-attorney can represent himself on his own behalf. See 28 U.S.C. § 1654 (stating that "[i]n all courts of the United States the parties may plead and conduct their own cases . . . ."); C.E. Pope Equity Trust v. United States, 818 F.2d 696, 697 (9th Cir. 1987). Although an individual has the right to represent himself, however, an individual does not have the right to appear on behalf of anyone other than himself. C.E. Pope Equity Trust, 818 F.2d at 697 (citing Russell v. United States, 308 F.2d 78, 79 (9th Cir. 1962)); see also Knoefler v. United Bank of Bismark, 20 F.3d 347, 348 (8th Cir. 1994) (citing C.E. Pope Equity Trust and holding that pro se purported trustees had no right to represent trusts).

Further, pursuant to this court's local rules, "[a] corporation or other entity may appear only by an attorney." E.D. Local Rule 183(a) (emphasis added). The rule requiring entity defendants to appear only through counsel applies to trusts. C.E. Pope Equity Trust, 828 F.2d at 698 (holding that even a party's status as trustee does not include the right to present pro se arguments in federal court, and while Federal Rule of Civil Procedure 17(a) authorizes a trustee of an express trust to sue on behalf of the trust without joining the trust beneficiaries, it does not authorize the trustee to proceed pro se); see also Alpha Land Co. v. Little, 238 F.R.D. 497, 502 (E.D. Cal. 2006) ("a trust can only be represented by an attorney in federal court") (emphasis in original) (citing C.E. Pope Equity Trust, 828 F.2d at 697 and 28 U.S.C. § 1654).

The court in C.E. Pope Equity Trust held that, while a trustee cannot appear pro se on the trust's behalf, there is an exception to that general rule: an individual who is the trust's "beneficial owner" may appear pro se on the trust's behalf. C.E. Pope Equity Trust, 818 F.2d at 697-98 (quoting 28 U.S.C. § 1654). The court explained,

Here the record does not identify the Trusts' beneficiaries. Because Stradley is not the actual beneficial owner of the claims being asserted by the Trusts (so far as one can tell from the record), he cannot be viewed as a 'party' conducting his 'own case personally' within the meaning of Section 1654.

Id. (emphasis in original); Simon v. Hartford Life, Inc., 546 F.3d 661, 664 (9th Cir. 2008) (where pro se party conceded that he was alleged to be representing is his employer benefit plan, court held that "[b]ecause [he] is not the actual beneficial owner of the claims being asserted" he could not be "viewed as a 'party' conducting his 'own case personally'"); accord Alpha Land Co., 238 F.R.D. at 502 ("Although individuals who are parties to an action may appear in propria persona, this exception applies only to individuals who are asserting their own personal rights or interests").)

Here, plaintiff purports to bring this case on his own behalf and behalf of his Trust. (Third Am. Compl. at 1-2.) During the hearing, plaintiff stated on the record that he was in fact the Trust's sole beneficial owner. Accordingly, unlike the pro se trustee in C.E. Pope Equity Trust, plaintiff has confirmed on the record that he is indeed the actual beneficial owner of the claims being asserted on the Trust's behalf in this case, see C.E. Pope Equity Trust, 818 F.2d at 697-98, and therefore defendants have not shown that the Trust must be dismissed from this action at this time.*fn4

B. Fraud

Defendants argue that plaintiff's fraud claim fails because plaintiff has not alleged material misrepresentations of fact and has not alleged his reasonable reliance upon such misrepresentations. (Mot. to Dismiss at 3-4.) These arguments are not well-taken.

Plaintiff alleges that defendants told him his loans "would be" modified if he took certain steps, such as supplying additional documentation, and that in reliance on these statements he proceeded with withdrawing monies from his IRA prematurely, among other things. (Third Am. Compl. ¶¶ 17 ("modification would be processed quickly"); 19 ("$2000 would make the difference" in his obtaining a modification); 24 ("Ms. Vasquez said this [lowered payment] was acceptable to Wachovia"); 27 ("Saris said plaintiff would quickly receive loan modifications"); 28(a) ("he said plaintiff would get the modifications"); 28(c) ("Saris stated the Wachovia computer showed that plaintiff would be quickly given loan modifications"); 28(d)-(f) (alleging defendants made multiple misrepresentations to plaintiff that his documentation had "not been received" when it actually had been received, that he had "withdrawn" his modification requests when he had not actually withdrawn them, that his modification requests were "closed because of missing documentation or information" when he actually had supplied such documentation and information, and that his modification request "fell out of the system because of missing documentation" that was not actually missing from defendants' system); 32 (alleging a lowered credit score resulted from defendants' purposefully delaying plaintiff's loan modification process); 33-37 (alleging that defendants' agent "Teo" told plaintiff to make monthly withdrawals from his retirement account to qualify for the modification, and alleging that plaintiff actually made such withdrawals in reliance on the representation).)

Taking plaintiff's well-pleaded allegations as true, as the court must at this procedural posture, plaintiff has alleged material misrepresentations of fact with respect to the requested loan modifications, his reliance on defendants' representations thereon, and resulting damages in the form of, among other things, premature withdrawals from his IRA accounts resulting in loss of tax-deferred income. Plaintiff alleges that he materially changed his behavior, i.e., that he made such withdrawals in actual reliance upon defendants' representations. (Id. ¶¶ 31-32, 37.) Accordingly, defendants' motion is denied in this regard.

Defendants also argue that plaintiff was ultimately told just "weeks" after the alleged misrepresentations that his loans would not be modified, such that he could not have incurred "any real damage." (Mot. to Dismiss at 4.) This argument is not well-taken. Whether plaintiff actually ultimately suffered the damages he alleges is not the issue at this procedural posture.

Defendants also argue that plaintiff fails to allege an "intent to deceive." (Mot. to Dismiss at 5.) This argument is not well-taken. For instance, plaintiff alleges that defendants knew they had received certain documents from plaintiff, as reflected by defendants' internal computer tracking programs, and yet purposefully told him that no such documents had been received. (Third Am. Comp. ¶¶ 28(d)-(e), 29, 55.) Plaintiff also alleges defendants acted with the intent to "extract[] money from the plaintiff upon threat of seizing his property." (Id. ¶ 6.) Taking well-pleaded allegations in plaintiff's favor, as the court must do at this procedural posture, the undersigned cannot conclude that plaintiff has failed to adequately allege defendants' intent to defraud.

Defendants also argue that plaintiff's "fraud claim is barred by the statute of frauds." (Mot. to Dismiss at 7.) Defendants appear to argue that because no valid oral agreement to modify loans could have been legally created given that plaintiff's deed of trust contained a provision requiring modifications to be in writing, then no fraud could have possibly occurred. (Id.) Defendants support this argument by citing to cases where promises to modify a loan were held to not amount to enforceable contracts to complete a modification. (Id. (citing cases).) Defendants' argument is not well-taken. The undersigned rejected this same argument in his previous findings and recommendations (Dkt. No. 49 at 16), as adopted in the Order of the assigned United States District Judge (Dkt. No. 58). Here again, defendants do not cite any authorities holding that a fraud claim must be dismissed as a matter of law if the allegedly fraudulent statement could not have created a valid contract. In short, defendants' arguments blur the distinctions between the breach, creation, and/or modification of a valid contract and the intentional tort of fraud, and defendants have not demonstrated that a fraud claim cannot be maintained as a matter of law here.

Defendants have not shown that plaintiff's fraud claim is defectively alleged, so defendants' motion is denied with ...


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