Schrupp v. Wells Fargo Bank, N.A. et al.

Filing 16

MEMORANDUM and ORDER RE 6 Motion to Dismiss signed by Senior Judge William B. Shubb on 7/13/2016: IT IS ORDERED that Wells Fargo's motion to dismiss plaintiff's Complaint 6 be, and the same hereby is, DENIED. IT IS FURTHER ORDER ED that NDEX West, LLC's motion to dismiss plaintiff's wrongful foreclosure claim against it 7 be, and the same hereby is, GRANTED without prejudice. Plaintiff has twenty days from the date this Order is signed to file a First Amended Complaint setting forth a wrongful foreclosure claim against NDEX, West, LLC, if he can do so consistent with this Order.(Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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PAUL SCHRUPP,
Plaintiff,

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CIV. NO. 2:16-00636 WBS KJN
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.
WELLS FARGO BANK, N.A.; NDEX
WEST, LLC; and DOES 1-20,
inclusive,
Defendants.

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----oo0oo---Plaintiff Paul Schrupp initiated this action against

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defendants Wells Fargo Bank, N.A. (“Wells Fargo”) and NDEX West,

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LLC, alleging several causes of action based upon Wells Fargo’s

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failure to provide plaintiff a permanent loan modification prior

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to foreclosing on his property.

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Wells Fargo’s motion to dismiss plaintiff’s Complaint for failure

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to state a claim upon which relief may be granted pursuant to

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Federal Rule of Civil Procedure 12(b)(6).

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Defendant NDEX West, LLC, the agent for the beneficiary and

Presently before the court is

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(Docket No. 6.)

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trustee under the deed of trust against plaintiff’s home, joins

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Wells Fargo’s motion to dismiss.

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I.

(Docket No. 7.)

Factual and Procedural History

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On December 12, 2005, plaintiff borrowed $520,000 from

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World Savings Bank secured by a deed of trust on his home.

(Req.

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for Judicial Notice (“RJN”) Ex. A (Docket No. 6-1).)

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Savings Bank later changed its name to Wachovia Mortgage, FSB

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before eventually becoming Wells Fargo Bank, N.A.

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Plaintiff defaulted on his loan in December 2009 and Wells Fargo

World

(Id. Ex. F.)

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caused a Notice of Default to be recorded in the Yolo County

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Recorder’s Office on March 26, 2010.

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(Id. Ex. G.)

On August 10, 2010, plaintiff filed a Chapter 13

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bankruptcy petition in the Eastern District of California

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bankruptcy court.

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plaintiff’s Chapter 13 plan on February 2, 2011, requiring

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plaintiff to pay monthly installments of $2,899.24 to Wells

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Fargo.

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(Id. Ex. H.)

The bankruptcy court confirmed

(Id. Ex. I.)
In May 2011, Wells Fargo invited plaintiff to

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participate in a Home Affordable Modification Program (“HAMP”)

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Trial Period Plan (“TPP”), promising to offer plaintiff a

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permanent loan modification if he made three timely monthly

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payments of $1,500.01 and submitted the required documents.

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Ex. J.)

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modification with Wells Fargo on June 21, 2011.

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The bankruptcy court noted, however, that it was approving the

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trial modification despite plaintiff’s failure to comply with the

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requirements of the Federal Rules of Bankruptcy Procedure and

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that plaintiff would be “well served to ensure that future

(Id.

The bankruptcy court approved plaintiff’s trial loan

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(Id. Ex. O.)

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filings comply.”

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modified trial payments on May 26, 2011.

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(Id.)

Plaintiff alleges he began making the
(Id. Ex. L.)

On June 23, 2011, plaintiff moved to confirm his

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modified Chapter 13 plan, which incorporated the terms of Wells

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Fargo’s loan modification.

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however, the bankruptcy court denied plaintiff’s motion to

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confirm the modified plan without prejudice due to plaintiff’s

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procedural errors.

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plaintiff had “failed to meet the burden of proving the

(Id.)

(Id. Ex. K.)

On August 2, 2011,

The bankruptcy court found that

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requirements of confirmation” and explained the type of evidence

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that a debtor must submit.

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(Id.)

Plaintiff defaulted on his bankruptcy payment plan and

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the bankruptcy trustee filed a motion to dismiss the bankruptcy

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case on October 13, 2011.

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the bankruptcy court found that plaintiff had failed to cure the

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default and dismissed the case.

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(Id. Ex. L.)

On November 23, 2011,

(Id.)

Plaintiff alleges that he made the three trial payments

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and continued to make modified payments of $1,500.01 to Wells

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Fargo for two months after the bankruptcy court denied his

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amended Chapter 13 plan and two more months after his bankruptcy

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case was dismissed.

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Fargo accepted these payments until January 20, 2012, when a

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branch employee allegedly refused to accept the payment.

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¶ 25.)

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information over the next several years--first informing him that

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it would investigate and correct the error the branch employee

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made when he or she refused to accept payment, later refusing to

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correct the error, and then again agreeing to correct the error.

(Compl. ¶ 25; see also RJN Ex. L.)

Wells

(Compl.

Plaintiff alleges that Wells Fargo gave him contradictory

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(Id. ¶ 26.)

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plaintiff because he was represented by counsel.

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Throughout this time, Wells Fargo sent monthly mortgage

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statements to plaintiff demanding the higher amount due under the

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original mortgage.

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Wells Fargo later refused to communicate with
(Id. ¶ 27.)

(Id. ¶ 29.)

On November 10, 2015, NDEX West, LLC, at the direction

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of Wells Fargo, recorded a notice of trustee’s sale.

(Id. ¶ 30.)

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NDEX West, LLC conducted a foreclosure sale of plaintiff’s home

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on December 3, 2015 and Wells Fargo took title to the property.

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(Id. ¶ 31; Wells Fargo’s Mot. to Dismiss (“Mot. to Dismiss”) at 3

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(Docket No. 6).)

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time of the foreclosure sale.

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Plaintiff owed $722,059.93 on his loan at the
(RJN Ex. M.)

Plaintiff alleges five causes of action against Wells

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Fargo for: 1) breach of contract; 2) promissory estoppel; 3)

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violations of California’s Rosenthal Fair Debt Collection

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Practices Act (“Rosenthal Act”), Cal. Civ. Code § 1788; 4)

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violations of the Equal Credit Opportunity Act (“ECOA”), 15

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U.S.C. § 1691(d); and 5) violations of California’s Unfair

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Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.

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Plaintiff also asserts a wrongful foreclosure claim against both

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Wells Fargo and NDEX West, LLC.

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foreclosure sale, specific performance of the alleged contractual

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obligations, statutory damages, actual damages, restitution, and

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attorney’s fees.

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II.

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Plaintiff seeks to set aside the

(Compl. at 13-14.)

Legal Standard
A.

Motion To Dismiss
On a motion to dismiss under Rule 12(b)(6), the court

must accept the allegations in the complaint as true and draw all
4

1

reasonable inferences in favor of the plaintiff.

2

Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by

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Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S.

4

319, 322 (1972).

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must plead “only enough facts to state a claim to relief that is

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plausible on its face.”

7

544, 570 (2007).

8

for more than a sheer possibility that a defendant has acted

9

unlawfully,” and where a complaint pleads facts that are “merely

10

consistent with a defendant’s liability,” it “stops short of the

11

line between possibility and plausibility.”

12

556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).

13

Scheuer v.

To survive a motion to dismiss, a plaintiff

Bell Atl. Corp. v. Twombly, 550 U.S.

This “plausibility standard,” however, “asks

Ashcroft v. Iqbal,

“While a complaint attacked by a Rule 12(b)(6) motion

14

to dismiss does not need detailed factual allegations, a

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plaintiff’s obligation to provide the ‘grounds’ of his

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‘entitle[ment] to relief’ requires more than labels and

17

conclusions . . . .”

18

original) (citations omitted).

19

elements of a cause of action, supported by mere conclusory

20

statements, do not suffice.”

21

Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the

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framework of a complaint, they must be supported by factual

23

allegations.”).

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B.

Twombly, 550 U.S. at 555 (alteration in
“Threadbare recitals of the

Iqbal, 556 U.S. at 678; see also

Judicial Notice

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In general, a court may not consider items outside the

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pleadings when deciding a motion to dismiss, but it may consider

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items of which it can take judicial notice.

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F.3d 1370, 1377 (9th Cir. 1994).

Barron v. Reich, 13

A court may take judicial
5

1

notice of facts “not subject to reasonable dispute” because they

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are either “(1) generally known within the territorial

3

jurisdiction of the trial court or (2) capable of accurate and

4

ready determination by resort to sources whose accuracy cannot

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reasonably be questioned.”

6

Villagra v. INS, 972 F.2d 1017, 1026 (9th Cir. 1992).

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does not oppose Wells Fargo’s requests for judicial notice.

8
9

Fed. R. Evid. 201; see CastilloPlaintiff

The court will thus take judicial notice of the
documents related to the deed of trust, notice of default, and

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the trustee’s sale in exhibits A, G, M, and N.

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M, N.)

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judicial notice.

13

689 (9th Cir. 2001) (noting that a court may take judicial notice

14

of matters of public record); see also Hopkins v. Wells Fargo

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Bank, N.A., Civ. No. 2:13-444 WBS JFM, 2013 WL 2253837, at *1

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(E.D. Cal. May 22, 2013) (taking judicial notice of a deed of

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trust, notice of default and election to sell under deed of

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trust, notice of trustee’s sale, and trustee’s deed upon sale).

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(RJN Exs. A, G,

These are publicly recorded documents appropriate for
See Lee v. City of Los Angeles, 250 F.3d 668,

The court will also judicially notice the United States

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Department of Treasury documents in exhibits B through F related

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to the charter and certification of World Savings Bank and its

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renaming as Wells Fargo.

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readily verifiable and undisputed.

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Bank, N.A., Civ. No. 2:12-2944 WBS GGH, 2013 WL 504709, at *3

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(E.D. Cal. Feb. 8, 2013) (taking judicial notice of similar

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documents reflecting official acts of the executive branch of the

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United States that were readily verifiable and undisputed).

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(RJN Exs. B-F.)

These documents are

See Ferguson v. Wells Fargo

Finally, the court will take judicial notice of the
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bankruptcy court documents within exhibits H, J, K, L, O, and P,

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(RJN Exs. H, J, K, L, O; Suppl. RJN Ex. P (Docket No. 14)),

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because “the authenticity and existence of a particular order,

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motion, pleading or judicial proceeding, which is a matter of

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public record, is judicially noticeable.”

6

Cal. Edison Co., 300 F. Supp. 2d 964, 974 (E.D. Cal. 2004); see

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also Lane v. Vitek Real Estate Indus. Grp., 713 F. Supp. 2d 1092,

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1097 (E.D. Cal. 2010) (taking judicial notice of court documents

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relating to plaintiff’s bankruptcy proceedings); Lee, 250 F.3d at

United States v. S.

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690 (finding a court may take judicial notice of another court’s

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opinion, but not of the truth of the facts recited therein).

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III. Discussion

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A.

Breach of Contract
A claim for breach of contract requires (1) the

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existence of a contract, (2) plaintiff’s performance or excuse

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for nonperformance, (3) defendant’s breach, and (4) resulting

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damages to plaintiff.

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2d 822, 830 (1968).

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pursuant to HAMP constituted a valid, enforceable contract and

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Wells Fargo breached by failing to offer plaintiff a permanent

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modification after he successfully paid the three trial payments.

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(Pl.’s Opp’n at 3-4 (Docket No. 11).)

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Reichert v. Gen. Ins. Co. of Am., 68 Cal.
Plaintiff alleges that the TPP offered

The United States Treasury Department started the HAMP

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program in 2009 in response to the financial crisis to

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incentivize banks to refinance mortgages of distressed homeowners

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so they could stay in their homes.

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NA, 728 F.3d 878, 880 (9th Cir. 2013).

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homeowners who have defaulted or are in imminent danger of
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Corvello v. Wells Fargo Bank,
HAMP aims to assist

1

defaulting on their home mortgages.

2

Inc., Civ. No. 1:10-1031 AWI GSA, 2010 WL 3516309, at *1 n.2

3

(E.D. Cal. Sept. 3, 2010).

4

Inman v. Suntrust Mortg.,

Eligible borrowers who wish to permanently modify their

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loan through HAMP must first enter a TPP, which is a period of

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three or more months during which the borrower must make timely

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trial payments of the modified amount and provide required

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documentation to the loan servicer.

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81.

Reichert, 68 Cal. 2d at 880-

If the servicer concludes that the borrower is not eligible

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for HAMP after reviewing the documents submitted or the borrower

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does not make the required trial payments, the servicer must

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promptly communicate the ineligibility determination to the

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borrower in writing.

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the terms of the TPP, the servicer must offer the borrower a

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permanent loan modification.

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lenders receive significant financial incentives from the

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Treasury Department for each permanent modification they make.

18

Id. at 880.

19

Id. at 881.

Id.

If the borrower complies with

Home loan servicers and

“[A] trial loan modification under HAMP constitutes a

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valid, enforceable contract under state law, at least at the

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pleading stage of litigation.”

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N.A., 214 Cal. App. 4th 780, 799 (4th Dist. 2013) (citing Wigod

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v. Wells Fargo Bank, N.A., 673 F.3d 547, 556-57 (7th Cir. 2012));

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see also Corvello, 728 F.3d at 883-84 (citing West with

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approval); Meixner v. Wells Fargo Bank, N.A., 101 F. Supp. 3d

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938, 947 (E.D. Cal. Apr. 24, 2015) (Nunley, J.) (“The Ninth

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Circuit has recently held that, . . . a TPP Agreement offered

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pursuant to HAMP is a contract, and a party to that contract may

West v. JPMorgan Chase Bank,

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1

sue for breach if the lender violates a term contained within the

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four corners of the TPP.” (citing Corvello, 728 F.3d at 880)

3

(internal quotation marks omitted)).

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not complete until all of the conditions are met, banks are

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contractually obligated under the terms of the TPP to offer a

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permanent modification to borrowers who comply with the TPP by

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submitting accurate documentation and timely making the required

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trial payments.

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has explained that this “interpretation of the TPP avoids the

While the modification is

Corvello, 728 F.3d at 883.

The Ninth Circuit

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injustice that would result were . . . [banks] allowed to keep

11

borrowers’ trial payments without fulfilling any obligations in

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return.”

13

Id. at 884.
In this case, Wells Fargo offered plaintiff a TPP that

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required plaintiff to make its first monthly trial period payment

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of $1,550.01 by June 1, 2011 to accept the HAMP modification

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offer.

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modification, the offer required plaintiff to make three timely

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payments of $1,550.01 by the first of June, July, and August

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2011.

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all trial period payments are timely made and you have submitted

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all the required documents, your mortgage would then be

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permanently modified.”

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Complaint as true, plaintiff made all three trial monthly

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payments on time.1

25
26
27
28

1

(RJN Ex. J.)

(Id.)

In order to qualify for a permanent

The offer letter notified plaintiff that, “[a]fter

(Id.)

Accepting the allegations in the

(Compl. ¶ 25.)

As a result, plaintiff has

Wells Fargo disputes that plaintiff made his first
payment on time as plaintiff did not seek bankruptcy court
approval of the trial modification until June 26, 2011. (Wells
Fargo’s Reply at 1 (Docket No. 13); RJN Ex. J.) Plaintiff
alleges, however, that he made his trial payments on time.
(Compl. ¶¶ 25, 35.) Further, he contends that the trustee’s
9

1

sufficiently alleged that he accepted the offered modification

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and Wells Fargo breached the resulting modification agreement

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when it failed to provide him a permanent modification.

4

The parties were not precluded from entering into this

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modified agreement because plaintiff was in Chapter 13 bankruptcy

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proceedings and already had a confirmed Chapter 13 plan in place

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requiring monthly mortgage payments of $2,899.24 to Wells Fargo.

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First, Wells Fargo did not condition the permanent modification

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on approval by the bankruptcy court or confirmation of an amended

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Chapter 13 plan.

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presumably, the more sophisticated party, Wells Fargo cannot now

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invoke a condition it did not include.

13

As the drafter of the terms of its offer and,

Further, the bankruptcy court approved the trial loan

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modification and held that plaintiff was “authorized to amend the

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terms of the loan with Wachovia Mortgage, a division of Wells

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Fargo Bank, N.A., which is secured by the real property commonly

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known as 517 D Street, Davis, California, and such other terms as

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stated in the Trial Modification Agreement.”

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see also RJN Ex. O.)

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approved the terms of the TPP, including the promise that the

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loan would be permanently modified if all trial payments were

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timely made and documents submitted.

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subsequently denied confirmation of plaintiff’s amended Chapter

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13 plan, this was because of procedural errors unrelated to the

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modified loan agreement.

(Suppl. RJN Ex. P;

The bankruptcy court therefore implicitly

(RJN Ex. K.)

While the bankruptcy court

Lastly, plaintiff’s

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27
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notice of default demonstrates he made his first modified payment
on May 26, 2011, prior to the June 1, 2011 deadline. (Pl.’s
Opp’n at 4; see RJN Ex. L.)
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bankruptcy case was dismissed in its entirety in November 2011,

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releasing the parties from the confirmed Chapter 13 plan and any

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restrictions the bankruptcy rules may have imposed on them.

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bankruptcy proceedings therefore did not prevent the parties from

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entering into a separate modification agreement.

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The

Accordingly, the court finds plaintiff has adequately

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alleged that the trial loan modification under HAMP constituted a

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valid, enforceable contract and Wells Fargo breached that

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contract by failing to offer plaintiff a permanent loan

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modification.

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to dismiss plaintiff’s breach of contract claim.

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13

B.

The court must therefore deny Wells Fargo’s motion

Tender Requirement for Equitable Claims
Wells Fargo argues that plaintiff’s failure to allege

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he made a tender of his full outstanding debt precludes any

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equitable relief.

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“[t]ender is required only when foreclosure has already occurred

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and the plaintiff alleges irregularities in the foreclosure

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process itself.”

19

No. 2:13-01099 KJM EFB, 2013 WL 5597148, at *11 (E.D. Cal. Oct.

20

11, 2013) (finding tender was not required under California law

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because the plaintiff’s promissory estoppel, negligence, and UCL

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claims did not rely on any irregularities in the foreclosure

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process); Ohlendorf v. Am. Home Mortg. Servicing, 279 F.R.D. 575,

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580 (E.D. Cal. 2010) (finding that an allegation of tender was

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required only for a cause of action for irregularity in the

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foreclosure sale procedure, not the plaintiff’s claims of

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negligence, fraud, violation of the Real Estate Settlement

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Procedures Act, the Rosenthal Act, or the UCL); Nugent v. Fed.

(Mot. to Dismiss at 5.)

In California,

McGarvey v. JP Morgan Chase Bank, N.A., Civ.

11

1

Home Loan Mortg. Corp., Civ. No. 2:12-00091 GEB EFB, 2013 WL

2

1326425, at *7 (E.D. Cal. Mar. 29, 2013) (finding tender was

3

required because the plaintiffs’ claims for wrongful foreclosure

4

were based on irregularities in the sale notice and procedure and

5

no exception to the tender rule applied).

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the tender requirement is that if the borrower “could not have

7

redeemed the property had the sale procedures been proper, any

8

irregularities in the sale did not result in damages to the

9

[borrower].’”

10

The rationale behind

Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 112

(6th Dist. 2011) (citation omitted).

11

Plaintiff need not have alleged tender for his

12

promissory estoppel, Rosenthal Act, ECOA, UCL, or wrongful

13

foreclosure claims as they do not challenge any procedural

14

irregularities in the foreclosure process but rather allege Wells

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Fargo failed to honor its promise to permanently modify his loan,

16

acted in a commercially unreasonable and unfair manner, and

17

lacked authority to foreclose on plaintiff’s home when he was not

18

in default under the modified loan agreement.

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20

C.

Promissory Estoppel
The elements of promissory estoppel are: “(1) a promise

21

clear and unambiguous in its terms; (2) reliance by the party to

22

whom the promise is made; (3) [the] reliance must be both

23

reasonable and foreseeable; and (4) the party asserting the

24

estoppel must be injured by his reliance.”

25

State, 129 Cal. App. 4th 887, 901 (4th Dist. 2005) (citation and

26

internal quotation marks omitted) (alteration in original); see

27

also Poway Royal Mobilehome Owners Ass’n v. City of Poway, 149

28

Cal. App. 4th 1460, 1471 (6th Dist. 2007); Diede Constr., Inc. v.
12

U.S. Ecology, Inc. v.

1

Monterey Mech. Co., 125 Cal. App. 4th 380, 385-86 (1st Dist.

2

2004).

3

allow enforcement of a promise that would otherwise be

4

unenforceable, courts are given wide discretion in its

5

application.”

6

(citing C & K Eng’g Contractors v. Amber Steel Co., 23 Cal. 3d 1,

7

7–8 (1978)).

“Because promissory estoppel is an equitable doctrine to

8
9

U.S. Ecology, Inc., 129 Cal. App. 4th at 902

As discussed above, plaintiff alleges sufficient facts
to put forth a plausible claim that Wells Fargo made a clear

10

promise to plaintiff to offer him a permanent loan modification

11

if he timely made the trial payments and submitted the required

12

documents.

13

this promise by timely making the three trial payments and

14

continuing to pay Wells Fargo the modified amount for several

15

more months.

16

payments even after plaintiff’s modified Chapter 13 plan was

17

rejected and his bankruptcy case dismissed.

18

did not reject the modified payment amount until January 2012

19

and, even then, allegedly informed plaintiff it would investigate

20

and “correct its error.”

21

support plaintiff’s claim that Wells Fargo made a promise and

22

acted in accordance with this promise.

23

Plaintiff also adequately alleges that he relied on

(Compl. ¶¶ 25-28.)

Wells Fargo accepted these

(Id. ¶¶ 25-26.)

(Id.)

Wells Fargo

These allegations

Lastly, plaintiff sufficiently alleges that he relied

24

to his detriment on Wells Fargo’s promise to provide a

25

modification because he forewent other opportunities to avoid

26

foreclosure such as borrowing money to pay the default amount or

27

locating a buyer who would have allowed him to remain in the home

28

in exchange for rent.

(Id. ¶ 42); see West, 214 Cal. App. 4th at
13

1

805 (finding detrimental reliance where the plaintiffs alleged

2

they lost opportunities, including selling their home or finding

3

a co-signer); cf. Turbeville v. JPMorgan Chase Bank, Civ. No.

4

8:10-1464 DOC JCG, 2011 WL 7163111, at *5 (C.D. Cal. Apr. 4,

5

2011) (finding the plaintiffs sufficiently alleged detrimental

6

reliance by stating that they put their money towards TPP trial

7

payments rather than pursuing other avenues of curing their

8

default such as immediate bankruptcy proceedings); Wilcox v. EMC

9

Mortg. Corp., Civ. No. 8:10-1923 DOC JCG, 2011 WL 10065501, at *6

10

(C.D. Cal. July 25, 2011) (finding detrimental reliance where

11

plaintiffs alleged they put their money towards modified mortgage

12

payments rather than curing their default through bankruptcy,

13

short sales, cashing in on 401(k) funds, or paying other

14

creditors).

15

higher loan balances, late charges, foreclosure related servicing

16

fees, potential income tax liability, and poor credit.

17

¶ 42.)

18

Plaintiff also alleges he suffered injuries from

(Compl.

Despite Wells Fargo’s contention that any injury

19

plaintiff suffered was due to plaintiff’s own failure to secure

20

an amended Chapter 13 plan incorporating the loan modification,

21

plaintiff has sufficiently alleged that the parties had a valid

22

agreement and plaintiff invested time and money in complying with

23

that agreement rather than pursuing other strategies.

24

even if the TPP did not constitute an enforceable contract,

25

plaintiff could arguably assert a promissory estoppel claim based

26

on Wells Fargo’s failure to write that its permanent modification

27

offer was conditioned on bankruptcy court approval of an amended

28

Chapter 13 plan and continued acceptance of plaintiff’s modified
14

Further,

1

payments even after the bankruptcy court rejected the amended

2

Chapter 13 plan.

3
4

Accordingly, the court will deny Wells Fargo’s motion
to dismiss plaintiff’s promissory estoppel claim.

5

D.

6

Rosenthal Fair Debt Collection Practices Act
California’s Rosenthal Act prohibits debt collectors

7

from engaging in unfair or deceptive practices in the collection

8

of consumer debts.

9

defendant must fall within the Rosenthal Act’s definition of

Cal. Civ. Code § 1788.1.

As a threshold, the

10

“debt collector” in order to be held liable for violating the

11

Act.

12

who, in the ordinary course of business, regularly, on behalf of

13

himself or herself or others, engages in debt collection.”

14

§ 1788.2(c).

15

collection within the meaning of the Rosenthal Act unless it

16

includes “debt collection activities beyond the scope of the

17

ordinary foreclosure process.”

18

730 F. Supp. 2d 1185, 1203 (E.D. Cal. 2010) (Damrell, J.); Webb

19

v. Bank of Am., N.A., Civ. No. 2:13-2006 MCE AC, 2013 WL 6839501,

20

at *5-6 (E.D. Cal. Dec. 23, 2013).

21

The Rosenthal Act defines a “debt collector” as “any person

Id.

Foreclosure pursuant to a deed of trust is not debt

Walters v. Fid. Mortg. of Cal.,

The Ninth Circuit has recognized that a loan servicer

22

offering a TPP under HAMP with a concomitant demand for trial

23

payments is engaged in debt collection activities beyond the

24

scope of the ordinary foreclosure process and, consequently, a

25

remedy may be available under the Rosenthal Act.

26

F.3d at 885 (finding Wells Fargo was a debt collector engaged in

27

debt collection when it offered the plaintiffs a TPP and demanded

28

trial payments); see also Webb, 2013 WL 6839501, at *6 (finding
15

Corvello, 728

1

the plaintiff sufficiently alleged the defendant was a debt

2

collector and its debt collection activities fell outside of the

3

normal foreclosure process where the defendant demanded payments

4

not owed under the modification agreement and informed plaintiff

5

she was in default when she was not).

6

Plaintiff has sufficiently alleged that Wells Fargo

7

engaged in debt collection under the Rosenthal Act by offering

8

plaintiff a TPP, requesting trial payments, and engaging in

9

improper activities servicing the loan by making “false,

10

deceptive, or misleading” statements to plaintiff that if he made

11

the TPP payments it would provide him a permanent loan

12

modification.

13

used unfair or unconscionable means to collect the debt when it

14

attempted to collect on the original amount due under the

15

promissory note rather than the modified agreement and provided

16

mixed messages about whether the rejection of the modified

17

payment in January 2012 was an error.

18

was therefore engaged in conduct beyond enforcing the original

19

deed of trust.

20

claim under the Rosenthal Act and the court must deny Wells

21

Fargo’s motion to dismiss that claim.

22
23

E.

(Compl. ¶ 49.)

Plaintiff also alleges Wells Fargo

(Id. ¶ 50.)

Wells Fargo

Accordingly, plaintiff has stated a plausible

Equal Credit Opportunity Act
The ECOA prohibits creditors from discriminating

24

against credit applicants “on the basis of race, color, religion,

25

national origin, sex or marital status, or age.”

26

§ 1681(a)(1).

27

contains strict notice requirements that provide a basis for a

28

cause of action against creditors even without allegations of

15 U.S.C.

In order to effectuate this goal, the ECOA

16

1

discrimination.

2

2013); Errico v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034,

3

1042 (N.D. Cal. 2010) (“[A] procedural violation of the notice

4

provisions of ECOA may provide the basis for a cause of action

5

even without regard to allegations of discrimination.” (citing

6

Dufay v. Bank of Am., 94 F.3d 561 (9th Cir. 1996)).

7

See Schlegel, 720 F.3d 1204, 1210 (9th Cir.

Under the ECOA, when a lender takes an adverse action

8

against an applicant, the applicant is entitled to a statement of

9

reasons for the action or a written notification of the adverse

10

action that discloses the applicant’s right to a statement of

11

reasons within thirty days after receipt of the applicant’s

12

request.

13

denial or revocation of credit, a change in the terms of an

14

existing credit arrangement, or a refusal to grant credit in

15

substantially the amount or on substantially the terms

16

requested.”

17

“refusal to extend additional credit under an existing credit

18

arrangement where the applicant is delinquent or otherwise in

19

default.”

20

that the term adverse action does not include “any action or

21

forbearance relating to an account taken in connection with

22

inactivity, default, or delinquency as to that account”).

23

15 U.S.C. § 1691(d)(2)(A)-(B).

15 U.S.C. § 1691(d)(6).

Adverse action means “a

The term does not include a

Id.; see also 12 C.F.R. § 202.2(c)(2)(ii) (providing

The Ninth Circuit has found that termination of a loan

24

modification agreement constitutes an adverse action.

25

720 F.3d at 1211; see also Vasquez v. Bank of Am., N.A., Civ. No.

26

3:13–2902 JST, 2013 WL 6001924, at *13 (N.D. Cal. Nov. 12, 2013)

27

(finding a home loan modification request under HAMP constitutes

28

a credit application under ECOA); Cooksey v. Select Portfolio
17

Schlegel,

1

Servicing, Inc., Civ. No. 2:14-1237 KJM KJN, 2014 WL 4662015, at

2

*3 (E.D. Cal. Sept. 18, 2014) (same).

3

For example, in Schlegel, the plaintiffs fell behind on

4

their mortgage payments, filed a Chapter 7 petition in

5

bankruptcy, and reaffirmed their loan with Wells Fargo.

6

at 1206.

7

agreement from Wells Fargo, which was approved by the bankruptcy

8

court, and began making modified monthly payments.

9

Fargo, however, failed to properly record the status of the

720 F.3d

The plaintiffs then obtained a loan modification

Id.

Wells

10

plaintiffs’ loan modification and sent plaintiffs a series of

11

default notices informing them that it would be accelerating the

12

loan and commencing foreclosure proceedings.

13

The plaintiffs sent Wells Fargo a letter asking it to explain its

14

failure to acknowledge the loan modification and, when Wells

15

Fargo did not respond, the plaintiffs filed suit under the ECOA.

16

Id. at 1207.

17

notices constituted adverse actions under the ECOA as they

18

communicated Wells Fargo’s refusal to abide by the terms of the

19

loan modification agreement, revoking the prior credit

20

arrangement.

21

the plaintiffs had sufficiently alleged an ECOA claim as Wells

22

Fargo failed to provide an explanation for this revocation of

23

credit until after the plaintiffs filed their complaint.

24

Id. at 1206-07.

The Ninth Circuit found that Wells Fargo’s default

Id. at 1211.

The Ninth Circuit therefore held that

Id.

Just as in Schlegel, plaintiff defaulted on his loan,

25

entered into Chapter 13 bankruptcy, received an offer from Wells

26

Fargo for a TPP, obtained approval from the bankruptcy court of

27

the trial modification, and began making modified payments.

28

Without providing an explanation and after accepting the modified
18

1

payment for months, Wells Fargo allegedly refused to accept the

2

modified payment amount in January 2012, thereby revoking the

3

terms of the loan modification agreement.

4

Despite Wells Fargo’s assertion that the ECOA does not apply

5

because plaintiff was in default, plaintiff has sufficiently

6

alleged that the modified loan agreement cured his prior default

7

and he was current on his payments under the modified loan.

8

Wells Fargo’s rejection of payment therefore constituted an

9

“adverse action” for which it failed to provide a written

10

statement of reasons or written notification.

11
12
13

(Compl. ¶¶ 66-69.)

Accordingly, the court must deny Wells Fargo’s motion
to dismiss plaintiff’s ECOA claim.
F.

14

Unfair Competition Law
California’s UCL prohibits “any unlawful, unfair or

15

fraudulent business act or practice.”

16

§ 17200.

17

competitors by promoting fair competition in commercial markets

18

for goods and services.”

19

949 (2002) (citing Barquis v. Merchs. Collection Ass’n, 7 Cal. 3d

20

94, 110 (1972)).

21

generally limited to injunctive relief and restitution of any

22

interest acquired by means of unfair competition.

23

& Prof. Code § 17203; Cel-Tech Commc’ns, Inc. v. L.A. Cellular

24

Tel. Co., 20 Cal. 4th 163, 179 (1999).

25

Cal. Bus. & Prof. Code

“The UCL’s purpose is to protect both consumers and

Kasky v. Nike, Inc., 27 Cal. 4th 939,

Under this statute, a prevailing plaintiff is

See Cal. Bus.

Here, plaintiff alleges that Wells Fargo’s conduct was

26

unlawful because it violated the Rosenthal Act and the ECOA;

27

unfair because Wells Fargo promised but failed to provide a

28

permanent loan modification and initiated foreclosure proceedings
19

1

when plaintiff was current under the modified agreement; and

2

fraudulent in that Wells Fargo promised but failed to provide a

3

permanent modification.

4

(Compl. ¶¶ 72-75.)

Wells Fargo first contends that plaintiff does not have

5

standing to assert a UCL claim.

A private person has standing to

6

sue under the UCL if he can “(1) establish a loss or deprivation

7

of money or property sufficient to qualify as injury in fact,

8

i.e., economic injury, and (2) show that that economic injury was

9

the result of, i.e., caused by, the unfair business practice or

10

false advertising that is the gravamen of the claim.”

11

Corp. v. Superior Ct., 51 Cal. 4th 310, 322 (2011).

12

of the UCL standing requirement is to “eliminate standing for

13

those who have not engaged in any business dealings with would-be

14

defendants and thereby strip such unaffected parties of the

15

ability to file ‘shakedown lawsuits,’ while preserving for actual

16

victims of deception and other acts of unfair competition the

17

ability to sue and enjoin such practices.”

18

Kwikset
The purpose

Id. at 317.

Plaintiff clearly had a business relationship with

19

Wells Fargo and, as discussed above, has sufficiently alleged

20

injury due to a loss of real property through foreclosure and

21

financial loss due to late charges, foreclosure related servicing

22

fees, potential income tax liability, and poor credit.

23

¶ 42); see Kwikset Corp., 51 Cal. 4th at 323 (noting there are

24

“innumerable ways in which economic injury” may be shown

25

including surrendering more or acquiring less in a transaction

26

than one otherwise would have, diminishment of a present or

27

future property interest, deprivation of money or property to

28

which one has a cognizable claim, or being required to enter into
20

(Compl.

1

a transaction costing money or property that would otherwise have

2

been unnecessary).

3

To establish that the economic injury was the result of

4

an unfair business practice, a plaintiff must show a “causal

5

connection or reliance on the alleged misrepresentation.”

6

Kwikset Corp., 216 Cal. App. at 326 (citation and internal

7

quotation marks omitted).

8

“‘required to allege that [the challenged] misrepresentations

9

were the sole or even the decisive cause of the injury-producing

A plaintiff is not, however,

10

conduct.’”

Id. at 327 (citation omitted) (alteration in

11

original).

“A plaintiff fails to satisfy the causation prong of

12

the statute if he or she would have suffered ‘the same harm

13

whether or not a defendant complied with the law.’”

14

JP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497, 522 (4th Dist.

15

2013) (quoting Daro v. Superior Ct., 151 Cal. App. 4th 1079, 1099

16

(1st Dist. 2007)).

17

Jenkins v.

For example, in Jenkins, the court found the plaintiff

18

lacked standing under the UCL because she could not establish a

19

causal link between the foreclosure of her home and the

20

defendant’s six unlawful or unfair acts, all of which occurred

21

after the plaintiff defaulted on her loan.

22

the defendant had not acted unfairly, the plaintiff still would

23

have defaulted and suffered the same economic injury.

24

Id. at 523.

Even if

Unlike in Jenkins, plaintiff has plausibly alleged that

25

he was not in default under the modified loan agreement and lost

26

his home because of Wells Fargo’s misrepresentations regarding a

27

permanent modification and rejection of payment.

28

the court must deny Wells Fargo’s motion to dismiss plaintiff’s
21

Accordingly,

1

UCL claim for lack of standing.

2

“Each prong of the UCL is a separate and distinct

3

theory of liability” and offers an “independent basis for

4

relief.”

5

2009) (citing S. Bay Chevrolet v. Gen. Motors Acceptance Corp.,

6

72 Cal. App. 4th 861 (4th Dist. 1999)).

7

under the UCL and independently actionable if it constitutes a

8

violation of another law, ‘be it civil or criminal, federal,

9

state, or municipal, statutory, regulatory, or court-made.’”

Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir.

“An action is unlawful

10

Cooksey, 2014 WL 4662015, at *7.

11

Complaint sufficiently alleges claims for breach of contract,

12

promissory estoppel, and violations of the Rosenthal Act and the

13

ECOA, it also states a claim under the UCL.

14

Citimortgage, Inc., Civ. No. 08-02250 WBS KJM, 2009 WL 86744, at

15

*6 (E.D. Cal. Jan. 8, 2009).

16

Wells Fargo’s motion to dismiss plaintiff’s UCL claim.

17
18

Given that plaintiff’s

See Ramos v.

Accordingly, the court will deny

G. Wrongful Foreclosure
The elements of wrongful foreclosure are: “(1) the

19

trustee or mortgagee caused an illegal, fraudulent, or willfully

20

oppressive sale of real property pursuant to a power of sale in a

21

mortgage or deed of trust; (2) the party attacking the sale

22

suffered prejudice or harm; and (3) the trustor or mortgagor

23

tenders the amount of the secured indebtedness or was excused

24

from tendering.

25

general rule that courts have power to vacate a foreclosure sale

26

where there has been fraud in the procurement of the foreclosure

27

decree or where the sale has been improperly, unfairly or

28

unlawfully conducted, or is tainted by fraud, or where there has

West, 214 Cal. App. 4th at 800.

22

“It is the

1

been such a mistake that to allow it to stand would be

2

inequitable to purchaser and parties.”

3

Sav. Ass’n v. Reidy, 15 Cal. 2d 243, 248 (1940).

4

Bank of Am. Nat’l Trust &

The first element is satisfied if, for example, “the

5

trustee did not have the power to foreclose” or the “trustor was

6

not in default, no breach had occurred, or the lender had waived

7

the breach.”

8

Ocwen Loan Servicing, LLC, 208 Cal. App. 4th 1001 (2d Dist.

9

2012), the court found that the plaintiff had alleged a basis for

10

wrongful foreclosure where the parties had reached an enforceable

11

agreement to modify the plaintiff’s loan pursuant to HAMP, the

12

plaintiff timely paid all subsequent payments, and the defendant

13

nonetheless foreclosed.

14

America, N.A. v. La Jolla Group II, 129 Cal. App. 4th 706 (5th

15

Dist. 2005), the court found that the foreclosure sale was

16

invalid where the bank accepted the homeowner’s tender of his

17

defaulted loan four days prior to when the foreclosure sale was

18

scheduled to take place but the trustee, ignorant of the tender,

19

still proceeded with the foreclosure sale.

20

court found that “the trustor and beneficiary entered into an

21

agreement to cure the default” and reinstate the loan and, as a

22

result, no contractual basis remained for exercising the power of

23

sale and “the foreclosure sale was invalid.”

24

Lona, 202 Cal. App. 4th at 104-05.

Id. at 1017-18.

In Barroso v.

Similarly, in Bank of

Id. at 709, 712.

The

Id. at 712.

In this case, plaintiff has adequately alleged that he

25

entered into a valid loan modification agreement with Wells Fargo

26

that cured the prior default, he timely made the modified

27

payments, and Wells Fargo nonetheless rejected his January 2012

28

payment and initiated foreclosure.
23

As in Barroso and Bank of

1

America, N.A., Wells Fargo lacked contractual authority to reject

2

the modified payment and foreclose.

3

contains sufficient facts that the non-judicial foreclosure was

4

conducted illegally and the court must deny Wells Fargo’s motion

5

to dismiss plaintiff’s wrongful foreclosure claim.

6

The Complaint therefore

In addition to joining in Wells Fargo’s motion to

7

dismiss, NDEX West, LLC also argues that plaintiff’s wrongful

8

foreclosure claim against it should be dismissed because, as

9

trustee, it is protected from liability under California Civil

10

Code section 2924(b).2

11

Section 2924(b), which deals with transfers and sales of deeds of

12

trust, states: “the trustee shall incur no liability for any good

13

faith error resulting from reliance on information provided in

14

good faith by the beneficiary regarding the nature and the amount

15

of the default under the secured obligation, deed of trust, or

16
17
18
19
20
21
22
23
24
25
26
27
28

2

(NDEX Joinder at 4 (Docket No. 7).)

NDEX West, LLC also claims plaintiff has no viable
claim against it because it has no financial interest in the
property. (NDEX Joinder at 4.) It did not, however, file a
declaration of nonmonetary status pursuant to California Civil
Code section 2924l. Section 2924l provides that a trustee under
a deed of trust may serve on the parties a declaration of
nonmonetary status if it “is named in an action or proceeding in
which that deed of trust is the subject, and in the event that
the trustee maintains a reasonable belief that it has been named
in the action or proceeding solely in its capacity as trustee,
and not arising out of any wrongful acts or omissions on its part
in the performance of its duties as trustee.” Cal. Civ. Code
§ 2924l(a). If no parties object to the nonmonetary judgment
status of the trustee within fifteen days from service of the
declaration, “the trustee shall not be required to participate
any further in the action or proceeding.” Id. § 2924l(d). If a
party timely objects, the trustee shall be required to
participate. Id. § 2924l(e); see also Cabriales v. Aurora Loan
Servs., Civ. No. C-10-161 MEJ, 2010 WL 761081, at *1 n.1 (N.D.
Cal. Mar. 2, 2010) (noting the trustee had filed a declaration of
nonmonetary status and the trustee was therefore no longer a
party to the action).
24

1
2

mortgage.”

Cal. Civ. Code § 2924(b).

For example, in Shelby v. Ocwen Loan Serv., LLC, Civ.

3

No. 2:14-2844 TLN DAD, 2015 WL 5023020 (E.D. Cal. Aug. 24, 2015),

4

the court found that the trustee was entitled to immunity under

5

section 2924(b) for “carrying out its routine duties as trustee”

6

in furtherance of the non-judicial foreclosure and the plaintiffs

7

had failed to substantiate allegations of malice or any other

8

exception to immunity.

9

the plaintiffs’ wrongful foreclosure claim against the trustee.

10

Similarly, in Lundy v. Selene Finance LP, Civ. No. 15-5676 JST,

11

2016 WL 1059423 (N.D. Cal. Mar. 17, 2016), the court dismissed

12

the plaintiff’s claims against the trustee because they were

13

“based entirely on its role in initiating foreclosure proceedings

14

at the direction of the other Defendants” and the plaintiff

15

identified no allegations that the trustee “acted with malice or

16

in bad faith in discharging its duties as trustee and initiating

17

foreclosure proceedings.”

18

Mortg. Corp., Civ. No. 09-1507 LJO DLB, 2009 WL 4884245, at *5

19

(E.D. Cal. Dec. 10, 2009) (dismissing the plaintiff’s wrongful

20

foreclosure claim against the trustee because of the protection

21

provided by section 2924(b)); Powell v. Wells Fargo Home Mortg.,

22

2015 WL 4719660, *6-7 (N.D. Cal. Aug. 7, 2015) (finding the

23

trustee was “immune to Plaintiff’s state law claims arising from

24

recording of the notice of default and related acts” under

25

section 2924(b) to the extent the trustee relied on the lender’s

26

information).

27
28

Id. at *4.

The court therefore dismissed

Id. at *5; see also Swanson v. EMC

Plaintiff alleges only that NDEX West, LLC, “in
accordance with Wells Fargo’s directions, filed a Notice of
25

1

Trustee Sale” and, “in accordance with Wells Fargo’s directions,

2

conducted or allowed to be conducted a foreclosure sale of the

3

Subject Property.”

4

“[d]efendants were guilty of malice, fraud, or oppression” but

5

fails to substantiate this conclusory statement with any

6

supporting facts.

7

claim against NDEX West, LLC appears to be based entirely on NDEX

8

West, LLC’s initiation of non-judicial foreclosure at the

9

direction of Wells Fargo--privileged trustee activity.

(Compl. ¶¶ 30-31.)

(Id. ¶ 59.)

He states that

Plaintiff’s wrongful foreclosure

10

Accordingly, the court will grant NDEX West, LLC’s motion to

11

dismiss plaintiff’s wrongful foreclosure claim without prejudice.

12

IT IS THEREFORE ORDERED that Wells Fargo’s motion to

13

dismiss plaintiff’s Complaint (Docket No. 6) be, and the same

14

hereby is, DENIED.

15

IT IS FURTHER ORDERED that NDEX West, LLC’s motion to

16

dismiss plaintiff’s wrongful foreclosure claim against it (Docket

17

No. 7) be, and the same hereby is, GRANTED without prejudice.

18

Plaintiff has twenty days from the date this Order is

19

signed to file a First Amended Complaint setting forth a wrongful

20

foreclosure claim against NDEX, West, LLC, if he can do so

21

consistent with this Order.

22

Dated:

July 13, 2016

23
24
25
26
27
28
26