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Curley v. Wells Fargo & Co.

United States District Court, N.D. California

July 31, 2015

DAVID M. CURLEY, Plaintiff,
v.
WELLS FARGO & COMPANY; WELLS FARGO BANK, N.A.; and WELLS FARGO HOME MORTGAGE, Defendants

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

For Wells Fargo & Company, Defendant: Mark Douglas Lonergan, LEAD ATTORNEY, Severson & Werson, A Profesional Corporation, San Francisco, CA; Mark Ian Wraight, Natilee S Riedman, LEAD ATTORNEYS, Evelina Manukyan, Severson & Werson, San Francisco, CA; Thomas Nathaniel Abbott, LEAD ATTORNEY, Severson & Werson, P.C., San Francisco, CA.

For Wells Fargo Bank N.A, Federal Home Loan Mortgage Corporation, Defendants: Mark Ian Wraight, Natilee S Riedman, LEAD ATTORNEYS, Evelina Manukyan, Severson & Werson, San Francisco, CA.

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ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT Re: Dkt. No. 119

NATHANAEL M. COUSINS, United States Magistrate Judge.

In this wrongful foreclosure case, plaintiff David Curley brings breach-of-contract and fraud claims against defendant Wells Fargo. Curley argues that Wells Fargo failed to abide by the terms of a Trial Period Plan when it failed to offer him a permanent loan modification and initiated foreclosure proceedings against him despite his compliance with the TPP's terms. Wells Fargo moves for summary judgment on all of Curley's causes of action. A key part of the TPP states, " If you qualify under the federal government's Home Affordable Modification program and comply with the terms of the Trial Period Plan, we will modify your mortgage loan and you can avoid foreclosure." Dkt. No. 119-6 at 5 (emphasis added). The primary issue this Court must decide is whether Curley complied with the terms of the TPP; without such compliance, Wells Fargo contends that Curley failed to perform his contractual obligations and his claims fail.

The Court agrees with Wells Fargo. Specifically, because Curley failed to perform his obligations under TPP by not

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submitting his IRS Form 4506-T, and for the reasons discussed below, the Court GRANTS Wells Fargo's summary judgment motion as to Curley's claims for breach of contract, breach of the implied covenant of good faith and fair dealing, constructive fraud, and intentional fraud.

I. BACKGROUND

A. Factual Background

This case stems from Curley's failed attempt to secure a loan modification and the subsequent foreclosure sale of his home. In 2006, Curley obtained a $356,000 fixed-rate loan from Wells Fargo Bank, secured by his home in Burlingame, California. Dkt. No. 106 at 4 (Second Amended Complaint). 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. He eventually defaulted on his loan. Id. A notice of default was recorded on November 2, 2009. Id. Under the Home Affordable Modification Program, Wells Fargo agreed to review Curley for a loan modification by offering him a Trial Period Plan. Id.

The offer under the TPP stated, " If you qualify under the federal government's Home Affordable Modification program and comply with the terms of the Trial Period Plan, we will modify your mortgage loan and you can avoid foreclosure." Dkt. No. 119-6 at 5 (Trial Period Plan). Another part of the offer stated: " 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. at 8 (under " frequently asked questions" section).

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." Dkt. No. 119-6 at 6. In particular, item 5 of the TPP offer required " [d]ocumentation 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. TPP item 4 required a " signed and dated copy of the IRS Form 4506-T (Request for Transcript of Tax Return) for each borrower . . . ." Id. The purpose of the IRS Form 4506-T is to give the loan servicer consent to obtain copies of a borrower's tax returns. See Dkt. No. 135-5 at 12 (Ferguson Dep.) (" It's an IRS form that, once the borrower signs it, the financial institution can send that to the IRS to get a transcript of the income tax return." ).

To accept the offer, the TPP required Curley 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." Dkt. No. 119-6 at 6. The TPP did make the following clarification under the heading " Important Program Info" : " The Trial Period Plan is the first step. Once we are able to confirm your income and eligibility for the program, we will finalize your modified loan terms and send you a loan modification agreement . . . ." Dkt. No. 119-6 at 7.

According to Curley, he timely accepted this TPP offer on January 3, 2010, and formed a contract with Wells Fargo. Dkt. No. 106 at 7. Curley alleges that he made three loan payments of $1,836.75 under this TPP contract on the first of each month beginning February 1, 2010, through April 1, 2010. Id. at 6-7. 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

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statements, and proof of income and expenses. Id. at 5.

Wells Fargo, however, contends that Curley failed to submit his most recent tax returns or his IRS Form 4506-T. Dkt. No. 119-6 at ¶ ¶ 8-10 (Mulder Decl.). According to Wells Fargo, because Curley failed to submit a complete loan modification application, it sent Curley a letter on June 10, 2010, denying his modification application. Id. at ¶ 10; Dkt. No. 119-6 at 61-62 (" We are unable to offer you a Home Affordable Modification because you did not provide us with the documents we requested." ).

On July 1, 2010, a notice of sale was recorded. Dkt. No. 106 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.

The gravamen of Curley's complaint is that Wells Fargo failed to abide by the terms of the TPP when it failed to offer him a permanent loan modification, and, instead, took steps to foreclose on Curley's property even though Curley " was in compliance with his obligations under the TPP contract." Id. at 3-4.

B. Procedural History

Curley filed suit against Wells Fargo and KMA Properties, LLC in the San Mateo County Superior Court on August 12, 2010. Dkt. No. 67 at 3 (citations omitted). In that lawsuit, Curley asserted claims for breach of contract, promissory fraud, constructive fraud, actual fraud, quiet title, breach of fiduciary duties, and conversion. Id. Discovery occurred between 2010 and February 2013 when Wells Fargo filed a motion for summary judgment in state court. Id. The state court issued a tentative ruling, finding no disputed issues of material fact because it was undisputed that Curley did not provide verifiable proof of his income under the TPP. Id. Before the state court ruled on the motion for summary judgment, however, Curley moved to dismiss the action. Id. The San Mateo County Superior Court dismissed Curley's case without prejudice on July 11, 2013. Id.

On July 17, 2013, Curley filed this action in the San Francisco Superior Court against defendants Wells Fargo[1] and The Federal Home Loan Mortgage Corporation (Freddie Mac) asserting claims for wrongful disclosure, breach of implied covenant of good faith and fair dealing, constructive fraud, intentional fraud, promissory fraud, intentional infliction of emotional distress, and declaratory relief. Dkt. No. 1 at 28 (state court complaint). 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 then denied Curley's motion to remand the case to state court as well as a request by Curley for Rule 56(d) discovery. Dkt. No. 67. Additionally, the

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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, ...


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