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Mulato v. Wells Fargo Bank, N.A.

United States District Court, N.D. California, San Francisco Division

December 19, 2014


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For Yolanda Bumatay Mulato, Plaintiff: David Ross Olick, LEAD ATTORNEY, Attorney at Law, San Francisco, CA; Richard A. Canatella, Cotter & Del Carlo, San Francisco, CA.

For Wells Fargo Bank, N.A., Wells Fargo Home Mortgage, a division of Wells Fargo Bank NA, Defendants: Regina Jill McClendon, LEAD ATTORNEY, Sally Weiss Mimms, Locke Lord LLP, San Francisco, CA.

For Cory Moeller, Angela Nail, Lana Krahn, Karen Lee, Defendants: Regina Jill McClendon, LEAD ATTORNEY, Locke Lord LLP, San Francisco, CA.

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Nathanael M. Cousins, United States Magistrate Judge.

Plaintiff Yolanda Bumatay Mulato brings this action against Wells Fargo Bank and four of its employees arising out of the denial of her application for a loan modification. Wells Fargo moves to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The employee defendants move to dismiss the case against them under Rule 12(b)(2) for lack of personal jurisdiction. Also pending before the Court are Mulato's motion for preliminary injunction, her motion for leave to amend the complaint, and cross-motions for sanctions.


A. The Allegations of the Operative Complaint

In analyzing claims under Federal Rule of Civil Procedure 12(b)(6), the Court assumes

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that all material facts alleged in the complaint are true. Coal. For ICANN Transparency, Inc. v. Verisign, Inc., 611 F.3d 495, 501 (9th Cir. 2010). The operative, first amended complaint alleges that, around June 2000, Mulato purchased a single-family home located at 94 Rae Avenue, San Francisco, California (" the Rae property" ) for around $500,000. Dkt. No. 27 ¶ 29. In June 2006, Mulato applied for a refinancing loan from World Savings Bank, FSB. Id. ¶ 30. The complaint alleges that World Savings was renamed Wachovia Mortgage, FSB on January 1, 2008; Wachovia Mortgage, FSB changed its name to Wells Fargo Bank Southwest, N.A. on November 2009; and then merged with Wells Fargo. Id. n.2.

At the time she applied for the refinancing loan, Mulato was earning a gross annual income of approximately $187,000 as chief operating room nurse at San Mateo County general hospital, operating room nurse at Kaiser Hospital and collecting pension benefits from San Francisco County General Hospital where she had worked 25 years. Id. ¶ 30. The refinancing loan was for $551,000, bearing interest at an adjustable rate of 6.510%, and secured by a deed of trust. Id. The complaint alleges that " [f]rom origination of the subject loan in 2000, through the June 19, 2006 refinancing to filing the instant action, plaintiff timely made each and every loan contract payment, each instalment [sic] of taxes and each real property insurance premium." Id.

After her retirement in 2013, Mulato experienced financial distress as a result of declining monthly income and rising monthly expenses. Id. ¶ ¶ 33-36. Mulato alleges that her " finances put her in jeopardy of imminent default under the increased monthly Rae Avenue mortgage payment, decreasing social security benefits, increasing social security premium, tax obligations for artificial debt forgiveness income in 2012 and increased quarterly tax payments." Id. ¶ 37. As a result, she " is spending more than she earns on monthly obligations including the loan payment on Rae." Id. ¶ 36.

In light of this financial hardship, Mulato sought loan modification to reduce her monthly loan payment on Rae from approximately $3,356 to $2,400. Id. ¶ 37. Mulato retained an attorney to assist her in obtaining a permanent loan modification. Id. ¶ 39. On June 13, 2013, Mulato's counsel wrote Wells Fargo requesting mortgage assistance on her behalf. Id. ¶ ¶ 38-39. On July 1, Wells Fargo's Home Preservation Specialist Cory Moeller acknowledged receipt of the request for mortgage assistance and sent Mulato a package of forms. Id. ¶ ¶ 40-41. On July 23, Mulato submitted the completed application with responsive documentation to Wells Fargo. Id. ¶ 41. Moeller acknowledged receipt of the application. Id.

The complaint alleges that on July 18, 2013, " Moeller wrote plaintiff a letter on behalf of Wells Fargo which from its plain meaning stated a promise or agreement to consider plaintiff's eligibility for 'mortgage assistance' (i.e., 'loan modification')" :

Now that we've received your documents (applying for mortgage assistance), our home preservation team will carefully review what you've submitted to determine if you are eligible for mortgage assistance. We'll follow up with you again soon to outline the next steps in the process and address any additional documents that might be needed to complete our review. After we ensure that we have all the documents we need, we will review and validate those materials to determine if you're eligible for a loan modification. ... If you are eligible and your modification does not require a trial period plan, you will receive

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a final loan modification agreement adjusting the terms of your mortgage....

Id. ¶ 41 (emphasis in the complaint). Mulato contends that the latter statement in italics is significant because it " confirms that plaintiff was promised a permanent loan modification." Id. ¶ 42.

" In order to get a clear statement of the modification terms" Mulato's counsel and Moeller had a telephone conference on August 7, 2013. Id. ¶ 42.[1] The complaint further alleges that " [i]n the phone conference specific terms of a permanent loan modification were discussed as a way to make plaintiff's monthly loan payment more affordable." Id. " Specifically, plaintiff's counsel and Moeller agreed that 'modification of the existing monthly principal and interest loan payment of $3,356 (on an outstanding principal balance of $572,500) could be modified by an interest rate reduction to 2%, amortized over 40-years, with monthly principle [sic], interest and impound payments of $2,400 per month." Id. The complaint alleges that " Counsel confirmed the phone conference in a letter August 8, 2013, specifically 'request[ing] that (Moeller) comply with that representation and furnish [plaintiff] with a permanent loan modification agreement.'" Id. The complaint further alleges that, even though " [t]here was no indication that plaintiff's application was in any respect incomplete and there was no request for additional documentation," " neither plaintiff nor counsel received any response to plaintiff's August 8 letter confirming the specific modification terms being offered!" Id.

On August 21, Moeller sent Mulato a letter acknowledging that he received the documentation she sent supporting her request for mortgage assistance. Id. ¶ 44. The complaint alleges that on August 28, Moeller sent Mulato " a completely contradictory letter" headed " IMMEDIATE ATTENTION REQUIRED" stating in part: " I have not received all of the documentation previously requested. The deadline to return the remaining documents is being extended 15 days to September 12, 2013." Id. (emphasis in complaint). Mulato claims that this letter " evinces a fraud upon the loan modification process." Id.

On September 4 and September 5, Moeller wrote Mulato that Wells Fargo has received, and will review, the documentation she sent. Id. ¶ ¶ 45-46. On September 18, 2013, Wells Fargo employee Angela Nail informed Mulato that Mulato's correspondence was referred to Nail for review and response, stating that Wells Fargo's records indicated Mulato spoke to Moeller on August 21, 2013, regarding documents that were still needed in order to complete the review for the modification. Id. ¶ 47. On September 20, Mulato's counsel wrote to Moeller that this statement was a misrepresentation. Id. ¶ 48.

On September 24, 2013, Mulato received Moeller's " Decision on the federal government's Home Affordable Modification Program (HAMP)" (" the September 24 decision" ) that stated that he " carefully reviewed the information you sent us," and concluded that " [a]t this time, you do not meet the requirements of the Home Affordable Modification Program because: (x) You have not documented a financial hardship that has reduced your income or increased your expenses, thereby impacting your ability to pay your mortgage as agreed." Id. ¶ 50 (emphasis in complaint).

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Mulato's counsel responded on September 25, insisting that Mulato had documented a financial hardship and urging Wells Fargo " to reconsider her request before she is required to exercise all available legal remedies." Id. Mulato alleges that, on October 21, she received a letter from Moeller " purportedly mailed October 14, 2013," (" the October 14 decision" ) revising the September 24 decision. Id. ¶ 51. The October 14 decision states in part " At this time, you do not meet the requirements of the program because: . . . (x) Other: You have the ability to pay your current mortgage payment using cash reserves or assets " and goes on to state: " Please note: the information above is the primary reason that you are not eligible for mortgage assistance, however there may be other reasons related to the decision. . . ." Id. (emphasis in complaint).

On November 13, Mulato received a letter from Moeller stating that Mulato's " appeal request has been sent to our underwriting team for review." Id. ¶ 60. On November 18, Mulato received a letter informing her that another Wells Fargo employee, Lana Krahn, " going forward, will be your new Wells Fargo Home Mortgage home preservation specialist." Id. ¶ 58. On November 22, Mulato received a letter dated November 19, 2013, from Krahn " purportedly denying plaintiff's 'appeal.'" Id. ¶ 59. On November 25, Krahn left a phone message with Mulato's counsel advising counsel to disregard her November 19 letter. Id.

B. Procedural History

On February 27, 2014, Mulato filed her original complaint against Wells Fargo and four of its employees--Wells Fargo's Home Preservation Specialists Cory Moeller, Angela Nail, Lana Krahn, and Karen Lee (" employee defendants" ). Dkt. No. 1.

On April 14, 2014, Mulato filed an ex parte motion for a temporary restraining order seeking to enjoin Wells Fargo from foreclosing on the Rae property, after receiving a " Notice of Intent to Foreclose" on April 1. Dkt. No. 6. On April 30, 2014, the Court denied the ex parte motion for failure to show irreparable harm justifying the relief sought in light of the status of the foreclosure proceedings, and ordered Mulato to file a regularly noticed motion for a preliminary injunction. See Dkt. No. 21.

On May 2, 2014, Wells Fargo filed a motion to dismiss all causes of action in the complaint for failure to state a claim. Dkt. No. 24. In lieu of opposing Wells Fargo's motion, Mulato filed her first amended complaint on May 12, 2014. Dkt. No. 27. On the same day, Mulato also filed a motion for preliminary injunction. Dkt. No. 28.

In the first amended complaint, Mulato asserts ten causes of action against all defendants unless otherwise noted, labeled as: (1) " Breach of Contract" (against Wells Fargo only); (2) " Breach of the Implied Covenant of Good Faith and Fair Dealing" ; (3) " Promissory Estoppel" ; (4) " Negligent Misrepresentation" ; (5) " Fraud" ; (6) " Unfair Competition" (against Wells Fargo only); (7) " Violation of the Fair Debt Collection Practices Act [" FDCPA" ]" (against Wells Fargo only); (8) " Violation of the Equal Credit Opportunity Act [" ECOA" ]" (against Wells Fargo only); (9) " Violation of the Rosenthal Fair Debt Collection Practices Act" (against Wells Fargo only); and (10) " To Enjoin Wrongful Foreclosure against Wells Fargo for HBOR Violations." Id.

Mulato claims that, as a result of defendants' conduct, she sustained damages " equal to the present value of the difference between the existing monthly principal and interest loan payment of $3,356 (on

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an outstanding principal balance of $572,500) at an adjusted interest rate of 4.5%, and the proposed modification loan payment at an interest rate of 2%, on the same principal balance amortized over 40-years with monthly principal, interest and impounds of $2,400 per month." Dkt. No. 27 ¶ 61. Mulato also alleges she was damaged by " the considerable time spent over an eight month period between June 2013 and February 2014, communicating with defendants preparing documents and furnishing information at their request." Id. ¶ 62. Mulato claims that she " could earlier have pursued refinancing from other financial institutions but later in 2013 lacked sufficient income to qualify for any financing" ; she " could also have considered other means of avoiding foreclosure if she was denied the permanent loan modification (such as bankruptcy restructuring, or selling or renting the entire home) though those alternatives were contrary to her original plan" ; and she " could have avoided having her credit reports further damaged and losing Rae through foreclosure." Id. Mulato also seeks to restrain Wells Fargo from, among other things, charging fees as result of late payments or her default, recording a notice of default, or foreclosing on the Rae property. Id. at 64.

On May 29, 2014, Wells Fargo moved to dismiss the first amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Dkt. No. 40. On the same day, the employee defendants moved to dismiss all causes of action under Federal Rule of Civil Procedure 12(b)(2) on the basis that this Court lacks personal jurisdiction over them. Dkt. No. 42.

On August 30, 2014, Mulato filed an ex parte motion seeking " a stay" of defendants' motions to dismiss " until the matter of plaintiff's motion for leave to amend and leave to file a proposed first amended complaint has been resolved." Dkt. No. 71. The next day, Mulato filed a motion for leave to amend the complaint and a proposed amended complaint (" second amended complaint" ). Dkt. No. 75. Both parties also filed motions for sanctions related to the allegations of the first amended complaint. Dkt. Nos. 78, 85.

The Court has federal question jurisdiction over the FDCPA and ECOA claims under 28 U.S.C. § 1331, and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367. See Dkt. No. 27 ¶ ¶ 3-6. All parties consented to the jurisdiction of a United States Magistrate Judge under 28 U.S.C. § 636(c). Dkt. Nos. 16, 17, 20.

C. Requests for Judicial Notice

As a preliminary matter, the Court addresses the parties' requests for judicial notice of documents submitted in connection with the motion to dismiss. Wells Fargo filed a request for judicial notice in support of its motion to dismiss, Dkt. No. 41, and an almost identical request in connection with its opposition to Mulato's motion for preliminary injunction, Dkt. No. 39. Mulato filed an objection to Wells Fargo's request for judicial notice related to the motion to dismiss, agreeing that Exhibits 1 and 2 " may be noticed, but the remaining exhibits should not be noticed for the truth of the facts asserted therein." Dkt. No. 55 at 3. Mulato also filed a request for judicial notice asking that " the Court consider the Amended Complaint Dkt 27 in conjunction with plaintiff's opposition to Wells Fargo's Motion to Dismiss for Lack of Jurisdiction." Dkt. No. 54 at 1.

Generally, a court may not look to matters beyond the complaint without converting a motion to dismiss into one for summary judgment. Datel Holdings Ltd. v. Microsoft Corp., 712 F.Supp.2d 974, 983 (N.D. Cal. 2010) (citations omitted). However, a court may take judicial notice of

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material that is submitted as part of the complaint, or is necessarily relied upon by the complaint, as well as matters of public record. 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 that is either (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate determination by resort to sources whose accuracy cannot reasonably be questioned." Datel Holdings, 712 F.Supp.2d at 983. A court may " take judicial notice of undisputed matters of public record, including documents on file in federal or state courts." Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012) (internal citation omitted).

The Court will take judicial notice of the existence of Wells Fargo's Exhibits 1 through 11, Dkt. No. 41 under Federal Rule of Evidence 201(b). See Fernandez v. Wells Fargo Bank, N.A., No. 12-cv-03941 NC, 2012 WL 5350256, at *2 (N.D. Cal. Oct. 29, 2012) (taking judicial notice of the same and similar documents). As to Mulato's request for judicial notice, it is denied as unnecessary given that the first amended complaint is part of the pleadings in this case, and is the very subject of defendants' motions to dismiss.

D. Mulato's Requests for Leave to File Supplemental Briefs

On July 10, 2014, eight days after Wells Fargo filed a reply in support of its motion to dismiss, Mulato filed a " Request for Leave to File Supplementary Points and Authorities." Dkt. No. 59. Mulato asserts that " [t]he ground upon which the request is made is that this case presents an important question of first impression in this District and the Ninth Circuit, and the Court should be fully briefed on the question." Id. The six-page brief does not provide any facts or make any arguments that could not have been made in Mulato's opposition.

On July 20, Mulato filed a second " Motion for Leave to File Supplemental Points and Authorities Re HOLA Preemption." Dkt. No. 63. The motion is made on the ground that " an important question is presented that the Ninth Circuit has not yet addressed" and that " resolving Wells Fargo's Motion to Dismiss on the merits is the appropriate course of action in light of the split within this District and other federal district courts." Id. Again, the five-page supplemental brief does not provide any facts or make any arguments that could not have been made in Mulato's opposition. The same is true for the arguments made in the additional seven-page brief filed by Mulato on July 28 as a " reply" to Wells Fargo's opposition to the request for leave. See Dkt. No. 68.

Mulato's requests to file supplemental briefs are procedurally improper and lack good cause. These requests are not in compliance with any of the means authorized by the local rules for presenting a written request to the Court for an order. See Civ. L.R. 7-1(a). The Court disapproves of the practice of violating the local rules by filing tardy, piecemeal, supplemental briefs without prior Court approval. See Civ. L.R. 7-3(d) (subject to two exception which do not apply here, " [o]nce a reply is filed, no additional memoranda, papers or letters may be filed without prior Court approval." ). The Court admonishes Mulato and her counsel that they must refrain from this practice. See Civ. L.R. 1-4 (" Failure by counsel or a party to comply with any duly promulgated local rule or any Federal Rule may be a ground for imposition of any authorized sanction." ). For the purposes of the pending motions, however, the Court will consider the supplemental briefs for completeness

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and because Wells Fargo has responded to the additional arguments made.


A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the non-movant. Coal. For ICANN Transparency, Inc., 611 F.3d at 501. The Court, however, need not accept as true " allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it must contain sufficient factual matter, accepted as true, to " state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when it " allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Federal Rule of Civil Procedure 15 further provides that a district court should freely give leave to amend " when justice so requires." Fed.R.Civ.P. 15(a)(2). " [I]n dismissing for failure to state a claim under Rule 12(b)(6), 'a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.'" Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995)). The decision of whether to grant leave to amend is within the discretion of the district court, which may deny leave to amend due to " undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of ...

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