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Stewart v. Wells Fargo Bank, N.A.

United States District Court, C.D. California

December 1, 2014


Attorneys for Plaintiff: Not Present.

Attorneys for Defendants: Not Present.


Present: The Honorable BEVERLY REID O'CONNELL, United States District Judge.

Pending before the Court is Defendant Wells Fargo Bank, N.A.'s motion to dismiss Plaintiff Sara Stewart's Complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). (Dkt. No. 11.) After consideration of the papers filed in support of and in opposition to the instant motion, the Court deems this matter appropriate for decision without oral argument of counsel. See Fed.R.Civ.P. 78; C.D. Cal. L.R. 7-15. For the following reasons, Defendant's motion is GRANTED.


A. Factual Background

Plaintiff Sara Stewart is an individual who resides in the County of Riverside, California. (Compl. ¶ 1.) On or about June 9, 2004, Plaintiff purchased the property that is the subject of this lawsuit. (Compl. ¶ 12.) On May 31, 2007, Plaintiff obtained a loan of $430, 800.00 from World Savings Bank, FSB (" World Savings"), secured by the property. (Compl. ¶ 13, Ex. B.) Effective January 1, 2008, World Savings was renamed Wachovia Mortgage, FSB (" Wachovia").[1] Wachovia then merged with Defendant Wells Fargo Bank, N.A. (" Wells Fargo") in November 2009, and Wells Fargo took over the loan-servicing responsibilities for Plaintiff's mortgage.[2]

Beginning in June 2012, Plaintiff underwent several medical hardships related to a ruptured brain aneurism, which ultimately resulted in her falling behind on her mortgage payments.[3](Compl. ¶ 14.) On September 14, 2013, Wells Fargo sent Plaintiff an email informing her that it would be drafting $3035.10 from her bank account, which they did shortly thereafter. (Compl. ¶ 15, Exs. C, D.) On October 5, 2013, Wells Fargo sent Plaintiff another email, this time informing her that it would be withdrawing $1735.12 as Plaintiff's monthly mortgage payment, which Plaintiff asserts was a higher amount than her previous payments. (Compl. ¶ 16, Exs. E, F.) Less than two weeks later, on October 14, 2013, Wells Fargo contacted Plaintiff to inform her that her October 2013 monthly mortgage payment was not paid in full because she owed $5.83, and that Wells Fargo would be drafting that amount from her bank account. (Compl. ¶ 17, Exs. G, H.)

On December 9, 2013, a Substitution of Trustee was recorded in the County of Riverside Recorder's Office substituting Defendant NDEX West, LLC (" NDEX") as the Trustee on Plaintiff's mortgage. (Compl. ¶ 18, Ex. I.) The following day, Plaintiff alleges that NDEX, at Wells Fargo's direction, recorded a Notice of Default and Election to Sell Under the Deed of Trust, stating that Plaintiff was in arrears in the amount of $9236.27. (Compl. ¶ 19, Ex. J.) After the Notice of Default was recorded, Plaintiff contacted Wells Fargo to seek mortgage assistance. (Compl. ¶ 21.) Wells Fargo informed Plaintiff that the only option would be for Plaintiff to apply for a loan modification review, but Plaintiff responded that she would not be approved because she was currently unemployed due to her medical hardships. (Compl. ¶ 21.)

Plaintiff next alleges that in January 2014, without Plaintiff's knowledge, Wells Fargo added an escrow account to Plaintiff's mortgage payments that greatly increased Plaintiff's monthly mortgage payments beyond what she had been paying since 2004. (Compl. ¶ 22.) Consequently, in February 2014, Plaintiff submitted a loan modification application to Wells Fargo. (Compl. ¶ 23.) In April 2014, Wells Fargo denied Plaintiff's application, and Plaintiff appealed the denial. (Compl. ¶ ¶ 24-25.) On September 3, 2014, NDEX, again at Wells Fargo's direction, recorded a Notice of Trustee Sale on her property, and scheduled a sale date for September 25, 2014. (Compl. ¶ ¶ 26-27, Ex. K.)

B. Procedural History

On September 19, 2014, Plaintiff filed her Complaint in the Superior Court of California, County of Riverside, naming Wells Fargo and NDEX as Defendants. (Compl.) In her Complaint, Plaintiff alleges causes of action for: (1) declaratory relief pursuant to California Civil Code section 2924.12; (2) violation of California Civil Code section 2923.5; (3) negligent misrepresentation; (4) promissory estoppel; and (5) violation of California's Unfair Competition Law (" UCL"), Cal. Bus. & Prof. Code § § 17200 et seq . (Compl. ¶ ¶ 28-64.) Defendants then removed the action to this Court on October 23, 2014 invoking this Court's diversity jurisdiction. (Dkt. No. 1.) On October 30, 2014, Wells Fargo brought the instant motion to dismiss Plaintiff's Complaint pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). (Dkt. No. 11.) Plaintiff opposed this motion on November 18, 2014, (Dkt. No. 13), and Wells Fargo replied on November 24, 2014, (Dkt. No. 14).


Under Rule 8(a), a complaint must contain a " short and plain statement of the claim showing that the [plaintiff] is entitled to relief." Fed.R.Civ.P. 8(a). If a complaint fails to do this, the defendant may move to dismiss it under Rule 12(b)(6). Fed.R.Civ.P. 12(b)(6). " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim is plausible on its face " 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. " Factual allegations must be enough to raise a right to relief above the speculative level." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, there must be " more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. " Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility'" that the plaintiff is entitled to relief. Id.

Where a district court grants a motion to dismiss, it should provide leave to amend unless it is clear that the complaint could not be saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).


When considering a motion to dismiss, a court normally does not look beyond the complaint in order to avoid converting a motion to dismiss into a motion for summary judgment. See Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986), overruled on other grounds by Astoria Fed. Sav. & Loan Ass'n Solimino, 501 U.S. 104, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991). Notwithstanding this precept, a court may properly take judicial notice of (1) material which is included as part of the complaint or relied upon by the complaint, and (2) matters in the public record. See Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006); Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). Under Federal Rule of Evidence 201(b), a judicially noticed fact must be one " not subject to reasonable dispute in that it (1) is generally known within the territorial jurisdiction of the trial court; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Further, a court " must take judicial notice if a party requests it and the court is supplied with the necessary information." See Fed.R.Evid. 201(c)(2); In re Icenhower, 755 F.3d 1130, 1142 (9th Cir. 2014).

Wells Fargo requests that the Court take judicial notice of six documents. First, Wells Fargo requests that the Court take judicial notice of the Fixed Rate Mortgage Note signed by Plaintiff. (Dkt. No. 12 at 7-12.) Because Plaintiff refers to this document in the Complaint and Plaintiff does not question its authenticity in her opposition, the Court may properly take judicial notice of this document. See Branch v. Tunnell, 14 F.3d 449, 453-54 (9th Cir. 1994), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). Second, Wells Fargo asks the Court to take judicial notice of the Deed of Trust, which was recorded in the Official Records of the Riverside County Recorder's Office. (Dkt. No. 12 at 14-32.) As this document has been publicly filed with the Riverside County Recorder's Office, the Court may take judicial notice of it as a public record. See Gamboa v. Tr. Corps, No. 09-0007 SC, 2009 WL 656285, at *3 (N.D. Cal. Mar. 12, 2009) (taking judicial notice of a deed of trust as a public document).

The remaining documents of which Wells Fargo asks the Court to take judicial notice are either (1) official publications from government entities such as the Office of Thrift Supervision (" OTS") or the Office of the Comptroller of the Currency; (2) opinion letters issued by one of these departments; or (3) printouts from governmental websites. ( See Dkt. No. 12 at 34-65.) The Court may properly take judicial notice of these documents as well. See, e.g., Hite v. Wachovia Mortg., No. 2:09-cv-02884-GEB-GGH, at *6 (E.D. Cal. June 10, 2010) (taking judicial notice of Wachovia's " Certificate of Corporate Existence, " " a letter dated November 19, 2007 from the Office of Thrift Supervision, " " Wachovia's charter dated December 31, 2007, " and a letter from the Comptroller of the Currency confirming Wachovia's conversion to " a national bank with the name Wells Fargo Bank Southwest, National Association"); Paralyzed Veterans of Am. v. McPherson, No. C064670SBA, 2008 WL 4183981, at *7 (N.D. Cal. Sept. 9, 2008) (taking judicial notice of printouts from an official state website). Accordingly, Wells Fargo's request for judicial notice is GRANTED.


While both parties address the merits of Plaintiff's specific allegations regarding each cause of action, the Court finds that a threshold issue bars all of Plaintiff's claims. As discussed below, the Court finds that Plaintiff's claims are preempted by the Home Owner's Loan Act of 1933, 12 U.S.C. § § 1461 et seq . (" HOLA").

A. HOLA Preemption Applies

The HOLA, which regulates federal savings banks, was enacted during the Great Depression of the 1930s in order to " restore the public's confidence in savings and loan associations at a time when 40% of home loans were in default." Bank of Am. v. City & Cnty. of S.F., 309 F.3d 551, 559 (9th Cir. 2002); accord 12 U.S.C. § 1464(d)(5) (defining a " savings association"). Through the HOLA, Congress gave the OTS broad authority to issue regulations governing thrifts. See 12 U.S.C. § 1464. As the principal regulator of federal savings associations, the OTS promulgated a preemption regulation in 12 C.F.R. § 560.2.[4] This regulation states:

OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section or § 560.110 of this part. For purposes of this section, " state law" includes any state statute, regulation, ruling, order or judicial decision.

Id. (emphasis added). Section 560.2 also provides specific examples of laws that are preempted, including " [l]oan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees"; " [d]isclosure and advertising"; " [p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages"; and " [d]isbursements and repayments." Id. § 560.2(b).

Plaintiff contracted with World Savings in May 2007. (Compl. ¶ 13, Ex. B.) It is undisputed both that World Savings was then a Federal Savings Bank and that it remained one when it was renamed Wachovia. As a Federal Savings Bank, Wachovia was " chartered under section 5 of the [HOLA]." (Dkt. No. 12 at 36.) Moreover, Paragraph 15 of the Deed of Trust signed by Plaintiff states that the instrument " shall be governed by and construed under federal law and federal rules and regulations, including those for federally chartered savings institutions." (Dkt. No. 12 at 22.) And despite Plaintiff's arguments to the contrary, that Wachovia merged into Wells Fargo does not render the HOLA inapplicable. Courts have held that successors in interest (such as Wells Fargo in this case) may properly assert preemption under the HOLA even if the successor entity is not a federally chartered savings institution. See, e.g., Williams v. Wells Fargo Bank, NA, No. SA CV 13-0303-DOC, 2013 WL 2047000, at *3 (C.D. Cal. May 13, 2013) (" HOLA preemption analysis applies even after the FSB merges into a national bank, as long as the mortgage originated with an FSB."); Gorton v. Wells Fargo Bank NA, No. SA CV 12-1245 JVS (MLGx), at *12 (C.D. Cal. Nov. 27, 2012) (" HOLA preemption continues to apply to loans originated by a federal savings bank even after those banks are merged into national banking associations."); Appling v. Wachovia Mortg., FSB, 745 F.Supp.2d 961, 971 (N.D. Cal. 2010) (" [A]lthough Wells Fargo itself is not subject to HOLA and OTS regulations, this action is nonetheless governed by HOLA because Plaintiff's loan originated with a federal savings bank and was therefore subject to the requirements set forth in HOLA and OTS regulations."). " These cases teach that the preemptive power of HOLA attaches to a loan, and continues with that loan throughout its lifetime." Poyorena v. Wells Fargo Bank, N.A., No. CV 14-683 GAF (Ex), at *16 (C.D. Cal. Apr. 3, 2014). HOLA preemption may thus apply.[5]

B. The Standard for Preemption Under the HOLA

The OTS has outlined the proper framework to apply in evaluating whether a state law is preempted pursuant to section 560.2:

When analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption .

OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sept. 30, 1996) (emphasis added); Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008).

The Ninth Circuit applied this framework in a similar context in Silvas . There, " the Ninth Circuit focused not on the nature of the cause of action allegedly preempted, but rather on the functional effect upon lending operations of maintaining the cause of action." Rumbaua v. Wells Fargo Bank, N.A., No. 11-1998 SC, 2011 WL 3740828, at *7 (N.D. Cal. Aug. 25, 2011). Under this approach, even state laws of general applicability such as tort, contract, and real property laws are preempted if their enforcement would impact federal savings associations in areas listed in section 560.2(b). See Silvas, 514 F.3d at 1006; see also 12 C.F.R. § 560.2(c). Alternatively, such laws are preempted if they have more than an incidental effect on the lending operations of a federal savings association. 12 C.F.R. § 560.2(c). Moreover, a claim or state law may be preempted on an " as applied" or case-specific basis. See Silvas, 514 F.3d at 1006.

C. Plaintiff's Claims Are Preempted by the HOLA

Plaintiff has asserted claims against Wells Fargo for (1) violations of California Civil Code section 2923.5 (first and second causes of action), (Compl. ¶ ¶ 28-39); (2) negligent misrepresentation and promissory estoppel (third and fourth causes of action, respectively), (Compl. ¶ ¶ 40-58); and (3) violations of California's UCL (fifth cause of action), (Compl. ¶ ¶ 59-64). Applying the framework described above, the Court finds that all of Plaintiff's causes of action are preempted under the HOLA.

1. Violations of Section 2923.5 (First and Second Claims)

First, Plaintiff alleges that Wells Fargo has violated California Civil Code section 2923.5 by failing to contact Plaintiff in person or by telephone in order to assess her financial situation to avoid foreclosure. (Compl. ¶ ¶ 28-39.) Section 2923.5, which is part of the California Homeowner Bill of Rights (" HBOR"), requires a mortgage servicer to include in any notice of default a declaration stating " that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the individual did not meet the definition of 'borrower' pursuant to subdivision (c) of Section 2920.5." Cal. Civ. Code § 2923.5. Plaintiff thus brings a claim for injunctive relief pursuant to this section as well as a claim for attorney's fees and costs under section 2924.12.

Courts have routinely held that such claims are preempted by the HOLA. See, e.g., Metzger, 2014 WL 1689278, at *5 (" '[C]laims arising under . . . section 2924 are preempted by HOLA' because such claims concern the 'processing' and 'servicing' of mortgages." (modification in original) (quoting Sami v. Wells Fargo Bank, N.A., No. C 12-00108 DMR, 2012 WL 967051, at *8 (N.D. Cal. Mar. 21, 2012))); Marquez v. Wells Fargo Bank, N.A., No. C 13-2819 PJH, 2013 WL 5141689, at *5 (N.D. Cal. Sept. 13, 2013) (finding that four " causes of action, which allege various violations of the HBOR, are preempted by HOLA"); Williams, 2013 WL 2047000, at *3 (" Because Section 2923.5 is a state law that attempts to regulate federal savings banks and their lending and servicing activities, it is exactly the sort of statute that is proscribed by the HOLA."); Nodari v. Wells Fargo Bank, N.A., CV 11-9681-JFW (SHx), at *11 (C.D. Cal. Jan. 4, 2012) (finding that the HOLA preempted the plaintiff's claims under sections 2923.5 and 2923.6); Taguinod v. World Sav. Bank, FSB, 755 F.Supp.2d 1064, 1074 (C.D. Cal. 2010) (" [I]t is evident that the overwhelming weight of authority has held that a claim under § 2923.5 is preempted by HOLA."); Murillo v. Aurora Loan Servs., LLC, No. C 09-00503 JW, 2009 WL 2160579, at *4 (N.D. Cal. July 17, 2009) (finding that plaintiffs' claim under section 2923.5 was preempted because it " concern[ed] the processing and servicing of Plaintiffs' mortgage"). As in these cases, the Court finds that Plaintiff's HBOR claims alleging violation of section 2923.5 relate to the " processing" and " ...

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