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Lavarias v. Wells Fargo Home Mortgage

United States District Court, E.D. California

August 4, 2016

KATHERINE E. LAVARIAS, an individual and borrower, Plaintiff,
WELLS FARGO HOME MORTGAGE, a business entity; and DOES 1 through 10 inclusive, Defendants.



         Defendant Wells Fargo Home Mortgage ("Wells Fargo") moves to dismiss Plaintiff Katherine E. Lavarias's ("Plaintiff's") Complaint for failure to state a claim pursuant to Federal Rules of Civil Procedure ("Rules") 12(b)(6) and 9(b). Plaintiff opposes the motion in part. For the following reasons, the Court GRANTS in part and DENIES in part Wells Fargo's motion.[1]


         The Court takes the following facts as true for purposes of this motion.

         Plaintiff resides at 3021 Simms Lane, Tracy, California 95377. Compl. ¶ 13. She alleges Wells Fargo "may be the current servicer of [her] loan." Id. ¶ 5. In 2014, Plaintiff called Wells Fargo to inquire about a loan modification because her income had decreased. Id. ¶ 14. "Agents of Wells Fargo told Plaintiff to default and to send in all loan documents." Id. ¶ 15. Thereafter, Plaintiff submitted "documents and was put in a loan modification review with Wells Fargo." Id. ¶ 16. Wells Fargo demanded additional documents, which Plaintiff sent via fax. Id. ¶ 20. Wells Fargo denied receiving the documents, and consequently, Plaintiff expended time and money resending them. Id. Despite assurances from Wells Fargo that the Property "would not go to foreclosure sale while" her file was under review for a loan modification, Plaintiff received a Notice of Default. Id. ¶¶ 33-34.

         In December 2015, Plaintiff sued Wells Fargo in San Joaquin County. Her complaint for damages and equitable relief asserts four causes of action: (1) violation of California Business and Professions Code section 17200 (the "UCL cause of action"); (2) violation of the covenant of good faith and fair dealing; (3) breach of fiduciary duty; and (4) actual fraud (Doc. #1-1). Wells Fargo removed the case on the basis of diversity (Doc. #1) and has now moved to dismiss (Doc. #3). Plaintiff opposes (Doc. #6). Although Plaintiff references a "First Amended Complaint" in her opposition, the operative complaint is the Complaint attached as Exhibit A to Wells Fargo's Notice of Removal. Wells Fargo has filed a reply (Doc. #7).

         II. OPINION

         A. Judicial Notice

         Wells Fargo requests the Court take judicial notice of numerous exhibits in support of its motion to dismiss (Doc. #4).

         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., No. SACV 09-224JVS(ANx), 2009 WL 2241664, at *2 (CD. Cal. Mar. 30, 2009) (citing Fed.R.Evid. 201; Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)) .

         The Court takes judicial notice of Wells Fargo's exhibits as they are all either public or court records not subject to reasonable dispute, information obtained from government websites, or documents reflecting official acts of the executive branch of the United States. Fed.R.Evid. 201; Hines v. Wells Fargo Home Mortq., Inc., No. 2:14-CV-0138 6-JAM-KJN, 2014 WL 5325470, at *2-3 (E.D. Cal. Oct. 17, 2014); Williams v. Wells Fargo Bank, NA, No. SA CV 13-0303-DOC, 2013 WL 2047000, at *1 n.3 (CD. Cal. May 13, 2013) .

         B. Analysis

         1. First Cause of Action: Violation of California Business and Professions Code

         Wells Fargo seeks dismissal of Plaintiff's UCL cause of action on multiple grounds, discussed below.

         a. Standing

         Wells Fargo argues Plaintiff lacks standing because she has not alleged economic injury, lost money or property, or causation. Def. Wells Fargo's Notice of Mot. & Mot. to Dismiss Compl.; Mem. of P. & A. ("Mot.") 8:23-25.

         To have standing to bring a UCL cause of action, a plaintiff must: "(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim." Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322 (2011). "At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we 'presum[e] that general allegations embrace those specific facts that are necessary to support the claim.'" Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992) (alteration in original) (quoting Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 889 (1990)).

         Plaintiff has sufficiently pleaded an economic injury. Here, Plaintiff alleges she suffered damages in the form of

loss of Plaintiff's equity, costs and expenses related to protecting Plaintiff's Residence, reduced credit score, unavailability of credit, increased costs of credit, reduced availability of goods and services tied to credit ratings, increased costs of those services, as well as fees and costs, including . . . attorneys' fees and costs and damages for the inability to get credit.

Compl. ¶ 55; see Rizk v. Residential Credit Sols., Inc., No. CV 14-9371-MWFJCX, 2015 WL 573944, at *8 (CD. Cal. Feb. 10, 2015) (finding "alleg[ations] that [borrower] suffered damages in the form of overpayment of interest on his mortgage, reduction in credit limits, increased credit card rates, rejection of car loan and credit card applications, and attorney's fees" sufficient to give borrower standing to bring his UCL claims); see also Hines, 2015 WL 351818, at *5 (collecting cases).

         As for causation, Wells Fargo argues Plaintiff cannot assert Wells Fargo's alleged wrongful actions in 2014 caused her economic injury because Plaintiff was already in default in 2011. E.g., Mot. 8:25-26.

         But Wells Fargo has not shown Plaintiff failed to cure pre-petition arrears as provided for in her Chapter 13 plan. Chapter 13 bankruptcy "allows a homeowner in default to reinstate the original loan payments, pay the arrearages over time, avoid foreclosure, and retain the home." Aceves v. U.S. Bank, N.A., 192 Cal.App.4th 218, 223, as modified (Feb. 9, 2011); 2 Bankruptcy Law Manual § 13:3 (5th ed. 2016) (citing 11 U.S.C. § 1322(b)(3), (5)) ("A Chapter 13 plan can provide for the cure of a default on a home mortgage."). Plaintiff's Chapter 13 plan provided for the "cure [of] all pre-petition arrears" over a three-year commitment period. Ex. I, at 90 § III.C.3.09; Ex. H, at 80. Plaintiff alleges "Plaintiff would have been current on the mortgage save for conversations with agents of Wells Fargo, " which suggests Plaintiff cured pre-petition arrears and was current on her mortgage payments when she contacted Wells Fargo. Compl. ¶ 27. Wells Fargo has not controverted these allegations with judicially-noticed facts.

         Wells Fargo's reliance on Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal.App.4th 497 (2013), as modified (June 12, 2013) disapproved of by Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (2016), is misplaced. Unlike Jenkins, where plaintiff's second amended complaint "and opening brief acknowledge[d] her default occurred prior to the six unlawful or unfair acts she allege[d] as the basis of her UCL action, " id. at 523, here ...

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