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Taylor v. Wells Fargo Bank, N.A.

United States District Court, E.D. California

November 14, 2014

JOHN TAYLOR, an individual; ANITA TAYLOR, an individual, Plaintiffs,

For John Taylor, an individual, Anita Taylor, an individual, Plaintiffs: Matthew Mellen, Sarah Elizabeth Adelaars, LEAD ATTORNEYS, Mellen Law Firm, San Mateo, CA.

For Wells Fargo Bank, N.A., Defendant: Melissa Marie Coyle, Anglin, Flewelling, Rasmussen, Campbell & Trytten LLP, Pasadena, CA.



Defendants Wells Fargo Bank, N.A. (" Wells Fargo") and Cal-Western Reconveyance Corporation (" Cal-Western") (collectively " Defendants") move to dismiss (Doc. #4) Plaintiffs John and Anita Taylor's (collectively " Plaintiffs") entire complaint (Doc. #1, Exh. A).[1] The action arises out of a dispute over the foreclosure and sale of a property previously belonging to Plaintiffs and the loan modification negotiations and notice preceding that sale.


In January 2007, Plaintiffs obtained a loan in the amount of $384, 000 (" the loan") secured by a deed of trust recorded against property located at 6918 N. Old Stage Road, Weed, California 96094 (" the property"). Request for Judicial Notice (Doc. #5), Exh. A.

In July 2013, Plaintiffs applied for a loan modification through Defendant Wells Fargo. Comp. ¶ 10. When Wells Fargo received Plaintiffs' application, it sent Plaintiffs a letter stating:

" [y]ou have requested assistance under the federal government's Home Affordable Modification Program (" HAMP") . . . [i]f the loan has been previously referred to foreclosure, the foreclosure process will continue. However, a foreclosure sale will not be held and you will not lose your home during this time period."

Id. During this time period, Plaintiffs were also seeking an in-house loan modification through Wells Fargo. Id. ¶ 11.

In September 2013, Plaintiffs received a letter from Wells Fargo denying their application for an in-house modification based on its calculation of Plaintiffs' net present value. Comp. ¶ 12. The letter informed Plaintiffs of their right to appeal the denial and stated " [y]our home will not be sold in a foreclosure sale during the appeal period." Id. Plaintiffs submitted an appeal of the denial. Id. ¶ 13.

On October 25, 2013, Wells Fargo sent Plaintiffs a letter acknowledging their appeal and indicating it would " provide a written response to the [appeal] by November 23, 2013." Comp. ¶ 14. On November 26, 2013, Wells Fargo filed a Notice of Trustee's Sale against the property.[2] Id.

Plaintiffs allege they never received the Notice of Trustee's Sale and Wells Fargo never gave them a determination on either of their loan modification applications. Comp. ¶ ¶ 15-16. On June 2, 2014, Wells Fargo instructed Cal-Western to sell Plaintiffs' property at a trustee's sale at which Wells Fargo took back title to the property. Id. Plaintiffs allege they had sufficient funds " to reinstate their loan prior to the sale by paying all amounts in default and would have reinstated the loan had they known that the foreclosure sale would take place." Id. ¶ 17.

Plaintiffs plead five causes of action in their complaint: (1) Wrongful Foreclosure; (2) Negligent Misrepresentation; (3) Fraud; (4) Breach of the Implied Covenant of Good Faith and Fair Dealing; and (5) Quiet Title. Defendants removed the matter to this Court and filed the present motion.


A. Request for Judicial Notice

Defendants initially request the Court take judicial notice (Doc. #5) of ten exhibits in support of their motion to dismiss. In addition, Defendants filed a " Supplemental Request for Judicial Notice" (Doc. #9) in support of their reply, seeking notice of two additional documents.

Generally, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss for failure to state a claim. The exceptions are material attached to, or relied on by, the complaint so long as authenticity is not disputed, or matters of public record, provided that they are not subject to reasonable dispute. E.g., Sherman v. Stryker Corp., 2009 WL 2241664, at *2 (C.D. Cal. 2009) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) and Fed.R.Evid. 201). Plaintiffs have not objected to the request for judicial notice and the Court finds that it is appropriate to take such notice of all the requested exhibits other than exhibits K and L since they are not relevant to the Court's determination of this motion.

B. Sanctions for late filing of Plaintiffs' Opposition

Local Rule 230(c) provides that opposition to the granting of a motion shall be filed and served not less than fourteen days preceding the hearing date. The hearing date set for this motion was October 15, 2014. Plaintiffs' counsel filed the opposition on October 7, 2014, nearly a week late. Plaintiffs' counsel filed a declaration (Doc. #10) the following day, placing the blame for noncompliance on their email service " somehow" moving the deadline. Only the Court has the power to move the deadline for briefing. The Court will consider the arguments presented in the opposition and address the motion on its merits. However, pursuant to Local Rule 110, the Court hereby sanctions Mellen Law Firm, $150 for noncompliance with Local Rule 230(c).

C. Discussion

1. Tender

Defendants contend Plaintiffs are not entitled to relief because they have failed to allege an adequate tender. MTD at pp. 5-6; Reply pp. 3, 10. Plaintiffs contend the tender rules do not apply and that their claims are viable because they have alleged they would have been able to reinstate the loan and cure the default if they had known of the intent to foreclose. Opp. at pp. 5-7.

This Court has recently addressed the requirements regarding tender in the context of a wrongful foreclosure claim:

For a wrongful foreclosure claim, a plaintiff must allege that " (1) Defendants caused an illegal, fraudulent, or willfully oppressive sale of the property pursuant to a power of sale in a mortgage or deed of trust; (2) Plaintiffs suffered prejudice or harm; and (3) Plaintiffs tendered the amount of the secured indebtedness or were excused from tendering." Nugent v. Fed. Home Loan Mortgage Corp., 2: 12-CV-00091-GEB, 2013 WL 1326425, at *7 (E.D. Cal. 2013). . . . A plaintiff may be able to state a wrongful foreclosure claim without full tender, " [i]f, after a default, the trustor and beneficiary enter into an agreement to cure the default and reinstate the loan, no contractual basis remains for exercising the power of sale." [Barroso v. Ocwen Loan Servicing, LLC, 208 Cal.App.4th 1001, 1017, 146 Cal.Rptr.3d 90 (2012)].

">Gilliland v. Chase Home Fin., LLC, No. 2: 13-CV-02042 JAM-AC, 2014 WL 325318, at *5 (E.D. Cal. 2014) (emphasis added). The Court has also addressed the requirement in the context of a quiet title claim concluding that " '[a] mortgagor cannot quiet his title against the mortgagee without paying the debt secured.'" Hall v. Mortgage Investors Grp., No. 2: 11-CV-00952-JAM, 2011 WL 4374995, at *8 (E.D. Cal. 2011) (quoting Dyachishin v. America's Wholesale Lenders, No. 2: 09-CV-02639-JAM-GGH, 2010 WL 1525703, at *2 (E.D. Cal. 2010)).

Plaintiffs have failed to allege their ability to tender the full amount of their indebtedness. They also have not alleged any agreement with Defendants to cure the default and/or reinstate the loan prior to the foreclosure and sale of the property. The Court therefore grants Defendants' motion to dismiss Plaintiffs' first cause of action for wrongful foreclosure and fifth cause of action for quiet title.

2. Negligent Misrepresentation and Fraud

Defendants contend Plaintiffs' claims for negligent misrepresentation and fraud fail on the merits. MTD at pp. 8-10; Reply at pp. 4-8. Among other arguments, Defendants contend the claims should fail because Plaintiffs cannot adequately allege damages. Plaintiffs respond that they have alleged damages for loss of their property, negative credit history, and emotional damages. Opp. at pp. 11-12. Plaintiffs contend they were able to, and would have, brought their loan current if not for Defendants' misrepresentations.

The essential elements of fraud are (1) a misrepresentation; (2) knowledge of falsity; (3) intent to induce reliance; (4) actual and justifiable reliance; and (5) resulting damage. Lazar v. Superior Court, 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996). " The essential elements of a count for negligent misrepresentation are the same except that it does not require knowledge of falsity, but instead requires a misrepresentation of fact by a person who has no reasonable grounds for believing it to be true." Chapman v. Skype Inc., 220 Cal.App.4th 217, 230-31, 162 Cal.Rptr.3d 864 (2013). A plaintiff's claim for fraud must also satisfy the heightened requirements of Federal Rule of Civil Procedure 9(b):

Rule 9(b) demands that, when averments of fraud are made, the circumstances constituting the alleged fraud " be 'specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong.'" Bly--Magee [v. California], 236 F.3d [1014, ] 1019 [(9th Cir. 2001)] (quoting Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993)). Averments of fraud must be accompanied by " the who, what, when, where, and how" of the misconduct charged. Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). " [A] plaintiff must set forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what is false or misleading about a statement, and why it is false." Decker v. GlenFed, Inc. (In re GlenFed, Inc. Sec. Litig.), 42 F.3d 1541, 1548 (9th Cir. 1994).

">Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).

Plaintiffs' negligent misrepresentation and fraud claims rely on two alleged misrepresentations: (1) Defendants told them that while a HAMP modification application was being processed, no foreclosure sale would take place; and (2) Defendants told Plaintiffs that if Plaintiffs appealed a loan modification denial, no foreclosure sale would take place during the appeal period. Comp. ¶ 30; Opp. at p. 9.

The Court finds that these allegations are insufficient to maintain these causes of action because Plaintiffs have failed to adequately allege that they were damaged as a result of these misrepresentations. There are no allegations that either Defendant ever promised Plaintiffs that they would receive a loan modification or that their failure to pay on the loan was excused. By their own allegations, Plaintiffs had the ability to cure their arrearage but failed to do so. Plaintiffs were already contractually obligated to make loan payments and were aware of the consequences of failing to do so--default and foreclosure.

" In the context of mortgage foreclosures, courts applying California law have generally been reluctant to permit borrowers to assert claims arising out of forbearance agreements . .., whether styled as claims for breach of contract, conversion or fraud. Reyes v. Wells Fargo Bank, N.A., No. C- 10-01667 JCS, 2011 WL 30759, at *13 (N.D. Cal. 2011). Other courts facing similar claims have granted motions to dismiss on these grounds. See Newgent v. Wells Fargo Bank, N.A., 09CV1525 WQH, 2010 WL 761236, at *6-7 (S.D. Cal. 2010) (finding that because the " Plaintiff was already legally obligated to make payments on her mortgage . . . reliance on the promise that Wells Fargo would delay the trustee's sale was not detrimental"); Zierolf v. Wachovia Mortgage, C- 12-3461 EMC, 2012 WL 6161352, at *5-7 (N.D. Cal. 2012), appeal dismissed (July 31, 2013) (finding " [t]he risk that one's home loan could go into default and one's home be sold at a foreclosure auction for nonpayment is a remedy provided in the loan agreement itself, not a consequence of allegedly relying on promises to process a loan modification").

Applying these cases to the instant case, the Court is compelled to grant Defendants' motion to dismiss Plaintiffs' second cause of action for negligent misrepresentation and third cause of action for fraud based on Plaintiffs' failure to adequately allege damages as a result of the misrepresentations, a necessary element of each claim.

3. Breach of Implied Covenant

Defendants contend Plaintiffs have failed to articulate an actionable claim for relief in their fourth cause of action for breach of the implied covenant of good faith and fair dealing. MTD at pp. 10-11. In their opposition, Plaintiffs concede the deficiencies in this cause of action and merely request leave to amend. Opp. at p. 12. The Court grants Defendants' motion to dismiss Plaintiffs' fourth cause of action.

4. Request for Leave to Amend

Leave to amend must be freely given, however, the Court is not required to allow futile amendments. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992); Dick v. Am. Home Mortgage Servicing, Inc., CIV. 2: 13-00201 WBS, 2013 WL 5299180, at *6 (E.D. Cal. 2013). At this early stage of the proceedings, it is not clear to the Court that amendment would be futile. Therefore leave to amend the complaint is granted. However, " plaintiffs are admonished that failure to cure the defects identified in this Order will be grounds for dismissal without further leave to amend." Dick, at *6.


For the reasons set forth above, the Court GRANTS Defendants' motion to dismiss WITH LEAVE TO AMEND. Plaintiffs must file their Amended Complaint within twenty days from the date of this Order and Defendants responsive pleading is due within twenty days thereafter. It is further ordered that within twenty days of this Order, Mellen Law Firm shall pay sanctions of $150 to the Clerk of the Court for failure to comply with Local Rule 230(c).


Dated: November 14, 2014

/s/ John A. Mendez



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