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Elizabeth Passantino-Miller, Individually and As Trustee of the Miller Family Trust, James R. Miller, Individually and As v. Wells Fargo Bank

January 3, 2013

ELIZABETH PASSANTINO-MILLER, INDIVIDUALLY AND AS TRUSTEE OF THE MILLER FAMILY TRUST, JAMES R. MILLER, INDIVIDUALLY AND AS
TRUSTEE OF THE MILLER FAMILY TRUST, AND THE MILLER FAMILY TRUST, ON BEHALF OF THEMSELVES,
ON BEHALF OF THE CLASSES, AND ON BEHALF OF THE GENERAL PUBLIC, PLAINTIFFS,
v.
WELLS FARGO BANK, N.A.,
DEFENDANT.



The opinion of the court was delivered by: Garland E. Burrell, Jr. Senior United States District Judge

ORDER GRANTING AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

Defendant seeks dismissal of Plaintiffs' Second Amended Class Action Complaint ("Complaint") under Federal Rule of Civil Procedure ("Rule") 12(b)(6). The Complaint is comprised of a Truth-In-Lending Act ("TILA") claim and state law breach of contract, breach of the covenant of good faith and fair dealing, and California Business & Professions Code section 17200 claims. In essence, this putative class action concerns Plaintiffs' allegations that they obtained a home equity line of credit ("HELOC") secured by their residential property and were charged for lender-placed flood insurance in an amount exceeding their line of credit in violation of TILA and the terms of the Flood Insurance Agreement that was executed in connection with the closing of their HELOC. (Second Am. Compl. ¶¶ 1-4, 18, 25, ECF No. 38.)

I. FACTUAL ALLEGATIONS

Plaintiffs allege in relevant part as follows:

16. On August 11, 2005, Plaintiffs obtained a HELOC from WFFB, secured by an Open-End Deed of Trust ("Deed of Trust") on their residential property. The total available credit limit on this HELOC was $80,000. The HELOC further provided that the outstanding principal on the loan could never exceed $96,000. Wells Fargo is now the lender-in-interest to this HELOC as successor in interest to WFFB. Wells Fargo also services Plaintiffs' HELOC. The current principal balance of Plaintiffs' HELOC is approximately $78,000. . . .

18. In conjunction with the closing of their HELOC with WFFB, Plaintiffs executed an Agreement to Provide Property/Flood Insurance ("Flood Insurance Agreement").

(Id. at ¶¶ 16-18.)

The Flood Insurance Agreement is an exhibit to the Complaint.*fn1 It states in relevant part:

I understand that to provide protection from serious financial loss, should a loss occur, [Wells Fargo] requires the property securing my line of credit to be continuously covered at all times during the term of the line of credit as follows: . . . . * with special flood insurance if [Wells Fargo] notifies me . . . that the Federal Emergency Management Agency (FEMA) has determined that such property is located in a flood hazard area. Special flood insurance must meet FEMA coverage requirements, and it must be in an amount equal to the lesser of the amount of the line of credit or the maximum insurance available under the National Flood Insurance Program. . . . . . . . . I understand that even if my property is not located in a special flood hazard area at this time or even if my community does not currently participate in the federal flood insurance program, that this may change. If my community later participates or FEMA determines that my property is in a special flood hazard area, I agree upon receipt of notice from Wells Fargo Financial Bank to obtain flood insurance within 45 days of notice. Failure to obtain required insurance is an event of default under the [HELOC]. I understand that failure to provide such insurance gives [Wells Fargo] the right . . . to purchase coverage for [Wells Fargo] only and to add the premium to the principal balance on which interest will be charged. Insurance coverage obtained by [Wells Fargo] will be much more expensive than coverage I can obtain on my own. The coverage may also be less as it will not include contents coverage or liability coverage. (Id., Ex. 2.)

Plaintiffs further allege:

19. WFFB did not require Plaintiffs to obtain flood insurance when they closed their loan, and WFFB Bank did not tell Plaintiffs that their property was located in a flood zone.

20. On July 31, 2011, Wells Fargo sent Plaintiffs a form letter entitled Notice of Flood Insurance Requirement ("Requirement Notice"). The Requirement Notice asserted that Plaintiffs were required to purchase flood insurance on their residential property and must provide Wells Fargo with proof of such insurance within 45 days. The Requirement Notice further mandated that Plaintiffs were required to purchase a policy with coverage in an amount at least equal to the lesser of:

* the replacement value of the building(s) on [the] property, or

* the total of all liens on [the] property (including the limit on a line of credit) or

* the maximum coverage available under the National Flood Insurance Program.

The Requirement Notice was the first time Wells Fargo informed Plaintiffs that they were allegedly in a flood zone. The Requirement Notice also asserted that Plaintiffs were required to purchase more flood insurance than was required in the Flood Insurance Agreement.

21. The Requirement Notice further informed Plaintiffs that: (1) if they did not provide proof of insurance in 45 days, Wells Fargo would purchase a flood insurance policy on their behalf; (2) the policy may be more expensive than a policy that Plaintiffs might obtain on their own; (3) the policy would not ...


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