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Sharon Noelle Harris v. Wells Fargo Bank

April 30, 2013


The opinion of the court was delivered by: Jon S. Tigar United States District Judge


United States District Court Northern District of California

Before the Court is Defendant Wells Fargo Bank's Amended Motion to Dismiss Plaintiff's First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 19. 15

Having considered the papers filed in support of the motion, the Court finds the matter appropriate 16 for resolution without oral argument. See Civil L.R. 7-1(b). For the reasons set forth below, the 17 motion is granted in part and denied in part. 18


The Court takes the following allegations from the complaint as true for the purposes of 20 this motion to dismiss. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Plaintiff Sharon 21 Harris owns residential property in San Carlos, California. Compl., 1st Am., ECF No. 11 ¶ 1. In 22 purchasing the property in August 2006, Harris entered into a loan agreement by executing a 23 promissory note and deed of trust in favor of World Savings Bank. Id. ¶ 13. World Savings Bank 24 was acquired by Wachovia Bank, which was then acquired by Defendant Wells Fargo. Id. 25

For two years, from August 2006 to August 2008, Harris paid her mortgage payment on 26 the sixteenth of each month. ¶ 14. She made that arrangement with her account manager, whom 27 she knew by the first name Crystal, in order to coincide with Harris' pay schedule. Pursuant to 28 that arrangement, Crystal, who knew that processing the payment earlier would result in the check bouncing, always waited until the next day to process the payment so the payment would clear. 2

Id. Each month for two years, Harris called her loan servicer's mortgage department and spoke to 3 Crystal, who would confirm that she received the payment and wait to process it until the 4 seventeenth. Id. Until August 2008, Harris' lender never counted those payments as late. Id. 5

In August 2008, Harris submitted her mortgage payment in the usual manner and called the 6 phone number Crystal provided her, but the mortgage department referred her to a new account 7 representative named Stacey. ¶ 15. Harris explained to Stacey the arrangement she had with 8 Crystal, and Stacey reassured her that Wells Fargo would continue to honor it. 9

When Harris received her next statement from Wells Fargo, however, she was shocked to 10 discover that Wells Fargo had processed her mortgage payment immediately upon receipt, and that 11 the check had bounced. Id. She immediately called the mortgage department and asked for either 12 Stacey or Crystal. She was unable to speak to either representative. Instead, a different representative informed her that Wells Fargo had processed the check immediately, and that it was 14 rejected due to insufficient funds. Id. Harris offered to pay her mortgage payment immediately, 15 but the new representative told Harris that the bank would no longer honor her prior arrangement, 16 that Wells Fargo would now assess late fees on the rejected payment, and that Wells Fargo would 17 only accept a payment from Harris in the full amount of the mortgage payment and the late fees. 18

Id. Harris was never again able to speak with Crystal or Stacey. Id. 19

The next month, Harris again attempted to pay her monthly mortgage payment. ¶ 17. The 20 bank rejected her payment and demanded that she tender both August and September's monthly 21 payments in addition to late fees and attorney's fees. Harris refused to tender that amount in full 22 because, she claimed, the late fees and attorney's fees were assessed wrongfully. Id. For the next 23 four or five months, Harris attempted to submit regular monthly payments in the sole amount of 24 her monthly mortgage payment, excluding fees, and Defendant rejected them each time. ¶ 18. 25

In February 2009, the bank encouraged Harris to apply for a loan modification in order to 26 resolve the "accounting dispute." The bank's representatives specifically told Harris that it was 27 not necessary to continue paying her monthly payments while it reviewed her application. ¶ 19. 28

Harris was afraid that withholding monthly payments would result in more late fees, but Defendant continually reassured her that it would not. Id. Defendant also told Harris that failing 2 to pay her monthly payments would not result in foreclosure, and that the bank would not report 3 her failure to pay her mortgage to credit agencies because she was withholding payments at their 4 instruction. Id. 5

Wells Fargo recorded a notice of default with the San Mateo County Recorder's Office on March 25, 2012. ¶ 20. At least until November 2012, Harris continued to attempt to make her 7 monthly payments, and Wells Fargo continued to reject them. ¶ 21. From at least March to 8 November 2012, Wells Fargo assured Harris that it was working to resolve the dispute over the 9 timing of her mortgage payments and that it would not foreclose. Id. Harris later learned that 10

Wells Fargo had reported her failure to pay her mortgage payments to credit agencies, which 11 substantially and negatively affected her credit score. ¶ 22. 12

Harris alleges that she was, at all times, "ready, willing, and able" to resume her monthly 13 payments had the bank waived the late fees and attorney's fees. Harris filed this action in San 14 Mateo County Superior Court; Wells Fargo removed the action to this Court on November 1, 2012. Harris filed the operative First Amended Complaint on November 28, 2012, alleging claims 16 for breach of the covenant of good faith and fair dealing, promissory estoppel, intentional 17 misrepresentation, negligent misrepresentation, violation of California Civil Code sections 2923.5 18 and 2924, breach of contract, reformation, invasion of privacy, and violation of California's Unfair Competition Law, Bus. & Prof. Code § 17200. ¶ 11. Harris seeks an injunction preventing Wells Fargo from foreclosing or seeking to evict her, injunctive relief, including an order that Wells Fargo repair her credit, and compensatory, statutory, and punitive damages, disgorgement, 22 attorneys' fees, and costs. 23


On a motion to dismiss, the Court accepts the material facts alleged in the complaint, 25 together with reasonable inferences to be drawn from those facts, as true. Navarro, supra, 250 26 F.3d at 732. However, "the tenet that a court must accept a complaint's allegations as true is 27 inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory 28 statements." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To be entitled to the presumption of truth, a complaint's allegations "must contain sufficient allegations of underlying facts to give fair 2 notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 3 1216 (9th Cir. 2011), cert. denied, --- U.S. ----, 132 S.Ct. 2101 (2012). 4

In addition, to survive a motion to dismiss, a plaintiff must plead "enough facts to state a 5 claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 6 (2007). Plausibility does not mean probability, but it requires "more than a sheer possibility that a 7 defendant has acted unlawfully." Iqbal, 556 U.S. at 678. "A claim has facial plausibility when 8 the plaintiff pleads factual content that allows the court to draw the reasonable inference that the 9 defendant is liable for the misconduct alleged." Id. In the Ninth Circuit, "[i]f there are two 10 alternative explanations, one advanced by defendant and the other advanced by plaintiff, both of 11 which are plausible, plaintiff's complaint survives a motion to dismiss under Rule 12(b)(6).

' s plausible alternative explanation is Plaintiff s complaint may be dismissed only when defendant' so convincing that plaintiff's explanation is implausible." Starr, 652 F.3d at 1216 (original 14 emphasis). 15 Claims which sound in fraud are subject to a heightened pleading standard. "In alleging 16 fraud or mistake, a party must state with particularity the circumstances constituting fraud or 17 mistake. Fed. R. Civ. P. 9(b). The allegations must be specific enough to give a defendant notice 18 of the particular misconduct alleged to constitute the fraud such that the defendant may defend 19 against the charge. Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). In general, 20 allegations sounding in fraud must contain "an account of the time, place, and specific content of 21 the false representations as well as the identities of the parties to the misrepresentations." Swartz 22 v. KPMG LLP, 476 F.3d 756, 765 (9th Cir. 2007). 23


On a Rule 12(b)(6) motion to dismiss, the Court generally may not consider materials 25 beyond the pleadings. However, the Court may properly take judicial notice of material attached 26 to the complaint and of matters in the public record pursuant to Federal Rule of Evidence 201(b). 27 A Court "shall take judicial notice if requested by a party and supplied with the necessary 28 information." Fed. R. Evid. 201(d). See Sato v. Wachovia Mortg., FSB, 11-cv-00810-EJD, 2011 WL 2784567, at *2 (N.D. Cal. July 13, 2011). Accordingly, the Court GRANTS Defendant's 2 unopposed request for judicial notice of several documents concerning the underlying agreement 3 between the parties and Plaintiff's bankruptcy proceedings, initiated in August 2012, ECF No. 17, 4 and has considered those materials in ruling on the present motion. 5


Wells Fargo moves to dismiss Plaintiff's First Amended Complaint in its entirety based on 7 several arguments addressed to the entire complaint, as well as arguments specific to each cause of 8 action. ECF No. 19. The Court addresses Wells Fargo's arguments concerning the tender rule, 9 plausibility, and preemption first, followed by Defendant's arguments concerning Plaintiff's 10 individual causes of action. 11

A.The Tender Rule Does Not Apply to Plaintiff's Claims

Wells Fargo invokes the tender rule to argue that Plaintiff's "inability to tender her considerable debt is a death knell to this action." Id. at 2. Defendant argues that Harris' failure to 14 allege in her complaint that she can and will tender the amount that she owes on her mortgage 15 precludes her from challenging the foreclosure sale or seeking injunctive relief. 16

The tender rule is an equitable doctrine meant to prevent courts "from uselessly setting 17 aside a foreclosure sale on a technical ground when the party making the challenge has not 18 established his ability to purchase the property." Plastino v. Wells Fargo Bank, 873 F. Supp. 2d 19 1179, 1187 (N.D. Cal. 2012) (quotation omitted). Thus, "as a precondition to challenging a 20 foreclosure sale, or any cause of action implicitly integrated to the sale, the borrower must make a 21 valid and viable tender of payment of the secured debt." Sacchi v. Mortgage Elec. Registration 22 Sys., Inc., 11-cv-1658-AHM, 2011 WL 2533029, at *9 (C.D. Cal. June 24, 2011) (quotation 23 omitted). However, courts do not apply the tender rule if it would produce an inequitable result. 24

See id. (where plaintiff sought to prevent foreclosure, applying tender rule was "grossly 25 inequitable" because pre-foreclosure notice requirements were meant to help avoid foreclosure in 26 the first instance); Tamburri v. Suntrust Mortg., Inc., 11-cv-2899-EMC, 2011 WL 6294472, at *3-- 27 5 (N.D. Cal. Dec. 15, 2011) (listing exceptions to tender rule; noting several courts do not apply 28 tender rule if action is brought before foreclosure sale).

The Court finds that the allegations in the First Amended Complaint make application of 2 the tender rule inequitable. Application of the tender rule in this case would require Plaintiff to 3 tender a debt she claims she does not owe to a bank that refused, in the first instance, to accept her 4 monthly mortgage payments in order to prevent an unlawful foreclosure sale. Under these 5 circumstances, Plaintiff is permitted to challenge the validity of the foreclosure sale without first 6 being required to cure the default she claims exists only by virtue of Defendant's misconduct. An 7 obligor may not prevent the performance of an obligee and then demand a tender of performance 8 that the obligor itself frustrated. See Cal. Civ. Code § 1511--12; Barnes v. Osgood, 103 Cal. App. 9 730, 734, 284 P. 975, 976 (1930) ("The law does not require the performance of a vain act, and a 10 formal tender of performance is excused by the refusal in advance of the party as to whom such 11 performance should be made to accept the same."). Moreover, several courts have held the tender rule inapplicable in pre-foreclosure cases where the plaintiff challenges the validity of the foreclosure, as Plaintiff does here. See Barrionuevo v. Chase Bank, N.A., 885 F. Supp. 2d 964, 14 969 (N.D. Cal. 2012); Mabry v. Superior Court,185 Cal. App. 4th 208, 225--226 (Cal. Ct. App. 15 2010). 16

B.Plaintiff's Complaint is Not Implausible as a Matter of Law

Defendant moves to dismiss each of Plaintiff's claims on the grounds that her factual 18 allegations are "implausible as a matter of law." ECF No. 19 at 3. Defendant argues that Harris 19 "cannot credibly allege that Wells Fargo induced her to cease making mortgage payments, and 20 more importantly, plaintiff cannot maintain that the purported statements of a bank employee have 21 caused her actual damages." Id. 22

In this circuit, "[i]f there are two alternative explanations, one advanced by defendant and 23 the other advanced by plaintiff, both of which are plausible, plaintiff's complaint survives a 24 motion to dismiss." Starr, 652 F.3d at 1216. Dismissal is appropriate only when a "defendant's 25 plausible alternative explanation is so convincing that plaintiff's explanation is implausible." Id. 26 (original emphasis). Here, Wells Fargo does not provide an alternative explanation for Plaintiff's 27 allegations. Defendant does not even explain why Plaintiff's allegations are not credible. Instead, 28 Wells Fargo merely asserts in conclusory fashion that Plaintiff's allegations are false, and that Plaintiff's conduct was unreasonable. Though courts may employ common sense and past 2 experience in making a determination of ...

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