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Curley v. Wells Fargo & Co.

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

December 23, 2014

DAVID CURLEY, Plaintiff,
WELLS FARGO & CO., and others, Defendants.


NATHANAEL M. COUSINS, Magistrate Judge.

Plaintiff David Curley alleges that Wells Fargo, along with Freddie Mac, fraudulently deprived him of a permanent loan modification, despite Curley's compliance with the terms of a trial period payment plan. According to Curley, he justifiably relied upon Wells Fargo's promise not to start foreclosure proceedings so long as he fulfilled his contractual obligations under the plan. He claims to have suffered damages when Wells Fargo foreclosed on his home. Wells Fargo and Freddie Mac seek to dismiss all of Curley's causes of action, as alleged in the First Amended Complaint. For the reasons discussed below, the Court DENIES Wells Fargo's motion to dismiss Curley's claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and intentional fraud. The Court DENIES in part and GRANTS in part Well's Fargo's motion to dismiss Curley's constructive fraud claim. The Court GRANTS Freddie Mac's motion to dismiss Curley's claims for intentional interference with contract, and intentional interference with prospective economic advantage.


A. Facts

This case stems from Curley's failed attempt to secure a loan modification and the subsequent foreclosure sale of his home. The following relevant facts come from Curley's First Amendment Complaint. Dkt. No. 92.

In 2006, Curley obtained a $356, 000 fixed-rate loan from Wells Fargo Bank, secured by his home in Burlingame, California. Dkt. No. 92 at 4. As a result of the economic downturn in 2008 and 2009, Curley's coin-operated amusement and vending business struggled, and Curley's income declined. Id. Curley defaulted on his loan. Id. A notice of default was recorded on November 2, 2009. Id. Pursuant to the Home Affordable Modification Program ("HAMP"), Wells Fargo agreed to review Curley for a loan modification by offering him a trial period plan ("TPP"). Id.

According to the complaint, the offer stated, "If you qualify under the federal governments [sic] Home Affordable Modification program and comply with the terms of the Trial Period Plan (TPP) we will modify your mortgage loan and you can avoid foreclosure." Id. at 5. Another part of the offer states: "As long as you comply with the terms of the Trial Period Plan we will not start foreclosure proceedings or conduct a foreclosure sale if foreclosure proceedings have started...." Id.

This TPP offer further stated: "To accept this offer, and see if you qualify for a Home Affordable Modification, fax items 1, 3, 4 and 5 listed below... and use the enclosed return envelope to return your 1st payment no later than 01/30/2010." Id. Notably, item 5 of the TPP offer required "documentation to verify all of the income of each borrower[, ]" including a "[c]opy of the most recent filed federal tax return with all schedules[.]" Id. To accept the offer, Curley was required to "send in both signed copies of the Trial Period Plan, all required income documentation, and [his] first trial period payment by... 02/01/2010." Id. The TPP provided that Wells Fargo would permanently modify Curley's loan if (1) Curley was qualified for a loan modification under HAMP's guidelines, and (2) Curley accepted the offer, submitted all necessary documentation, and made all TPP payments. Id. According to the complaint, "the TPP offer stated that Wells Fargo would send plaintiff either a copy of the proposed loan modification or a notification that he did not qualify for the offer after he returned signed copies of the TPP." Id. at 4.

According to Curley, he timely accepted this TPP offer on January 3, 2010, and formed a contract with Wells Fargo. Id. Curley alleges that he made three loan payments of $1, 836.75 under the TPP on the first of each month beginning February 1, 2010, through April 1, 2010. Id. He made an additional payment in May, but his additional payment for June 1, 2010, was rejected without explanation from Wells Fargo. Id. Curley states that he also submitted a hardship application, his most recent tax return, profit and loss statements, and proof of income and expenses. Id. at 5-6.

According to Curley, Wells Fargo and Freddie Mac had an agreement that "permitted Freddie Mac to abrogate at its discretion Wells Fargo's promise to suspend or postpone foreclosure even if [Curley] fulfilled the TPP requirements entitling him to a permanent loan modification." Id. at 6. Curley claims that Wells Fargo "concealed" from plaintiff this agreement with Freddie Mac. Id.

On July 1, 2010, a notice of sale was recorded. Id. at 6. On July 21, 2010, Wells Fargo's agent, Cal-Western Reconveyance Corporation, conducted a trustee's sale and KMA Properties, LLC purchased Curley's home. Id. According to Curley, the sale took place despite the fact that he "provided all required documentation and otherwise complied with his obligations under the TPP." Id. Moreover, Wells Fargo neither provided Curley with a copy of the proposed loan modification nor a notification that he did not qualify. Id. at 4.

B. Procedural History

On July 17, 2013, Curley filed this action in the San Francisco Superior Court. Dkt. No. 1 at 2. Defendants removed to this Court on August, 16, 2013. Dkt. No. 1. Defendants then moved to dismiss Curley's claims. Dkt. No. 4. Curley moved to remand the action to state court and responded to the motion to dismiss. Dkt. Nos. 25, 27. Because the parties asked the Court to rely on evidence not properly before the Court on a motion to dismiss, the Court converted the motion to dismiss into a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d). Dkt. No. 48.

The Court denied Curley's motion to remand the case to state court a well as a request by Curley for Rule 56(d) discovery. Dkt. No. 67. Additionally, the Court granted defendants' motion for summary judgment on Curley's wrongful foreclosure, fraud, intentional infliction of emotional distress, and declaratory judgment claims. The Court granted summary judgment as to Freddie Mac on the breach of implied covenant of good faith and fair dealing claim, but denied summary judgment on that claim with respect to Wells Fargo.

Since that summary judgment order, the Court granted Curley's motion for leave to amend his complaint to add claims for breach of contract, as well as intentional and constructive fraud against Wells Fargo, and claims for interference with contract and interference with prospective economic advantage claims against Freddie Mac. Dkt. No. 89. Curley had submitted a proposed amended complaint with his motion. Dkt. No. 79. Curley subsequently filed a First Amended Complaint, alleging these claims, in addition to the claim for breach of the implied covenant of good faith and fair dealing, which survived summary judgment. Dkt. No. 92. Defendants now move to dismiss all of Curley's claims alleged in the amended complaint. Dkt. No. 93. The Court vacated the hearing on the motion. Dkt. No. 103.

Both parties have consented to the jurisdiction of a magistrate judge under 28 U.S.C. ยง 636(c). Dkt. Nos. 21, 23.


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. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The Court, however, need not accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Secs. 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 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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 (2009). If a court grants a motion to dismiss, leave to amend should be granted unless the pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).


A. Request for Judicial Notice

As a preliminary matter, the Court addresses Wells Fargo's request for judicial notice of documents submitted in connection with its motion to dismiss. Dkt. No. 94.

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 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).

Here, the Court did not rely upon the documents for which Wells Fargo requested judicial notice in reaching its conclusion in this order. Thus, its request for judicial notice is denied.

Yet Wells Fargo asserts that this Court already took judicial notice of certain documents-namely a document entitled "Retention Workout Option Checklist"-at a hearing on October 9, 2013, concerning defendants' motion to dismiss Curley's initial complaint. Dkt. No. 93 at 11. In that hearing the Court asked, "Does the plaintiff object to the defendants' request for judicial notice?" Dkt. No. 36 at 4:4-5. The plaintiff did not object. Id. at 4:9. The Court stated, "All right. So the request for judicial notice as part of the motion to dismiss is granted. And that's as to the state court proceedings that... were not disputed as to what took place." Id. at 4:10-13. Thus, the Court specifically limited its judicial notice to undisputed documents that demonstrated the state court proceedings took place (e.g., official docket from the state court action). The Court did not take judicial notice of the myriad underlying exhibits that may have accompanied various motions in those state court proceedings. In its current motion to dismiss, Wells Fargo does not submit a request for judicial notice of the "Retention Workout Option Checklist."

In short, the Court did not then, and does not now take judicial notice of the "Retention Workout Option Checklist, " Dkt. No. 10 at 50. Wells Fargo also did not request for the Court to take judicial notice of this or other documents in its current request for judicial notice. See Dkt. No. 94.

B. Breach of Contract and Breach of Implied Covenant (Claim 1)

Curley brings claims against Wells Fargo for breach of contract and breach of the implied covenant of good faith and fair dealing. Because these two causes of actions do not consist of the same ...

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