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

Filing 65

MEMORANDUM AND ORDER signed by Senior Judge William B. Shubb on 5/15/2018 DENYING 55 Motion to Amend, GRANTING 51 Motion for Summary Judgment, and DENYING 52 Motion for Partial Summary Judgment. The Clerk of Court is instructed to enter judgment in favor of defendant and against plaintiff. CASE CLOSED. (York, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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PAUL SCHRUPP, an individual,

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Plaintiff,

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CIV. NO. 2:16-636 WBS KJN

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

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MEMORANDUM AND ORDER RE: MOTIONS
FOR SUMMARY JUDGMENT AND MOTION
TO AMEND

Defendants.

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Plaintiff Paul Schrupp initiated this action against

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defendant Wells Fargo Bank, N.A. (“Wells Fargo”) alleging several

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causes of action based upon Wells Fargo’s failure to provide

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plaintiff a permanent loan modification prior to foreclosing on

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his property.1

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to Amend (Docket No. 55), Wells Fargo’s Motion for Summary

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Judgment (Docket No. 51), and plaintiff’s Motion for Partial

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Summary Judgment (Docket No. 52).

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I.

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Presently before the court are plaintiff’s Motion

Factual and Procedural History
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NDEX West, L.L.C was originally a defendant in this
case as well, but was dismissed on September 9, 2016.
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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. (Decl.

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of Meredith R. Deal (“Deal Decl.”) (Docket No. 51-5) ¶ 9.)

World

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Savings Bank subsequently changed its name to Wells Fargo.

(Id.

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¶ 2.)

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

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County Recorder’s Office on March 26, 2010.

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Plaintiff defaulted on his loan in December 2009 and Wells

(Id. ¶¶ 10, 12.)

On August 10, 2010, plaintiff filed a Chapter 13
bankruptcy petition in the Eastern District of California
(Request for Judicial Notice (“RJN”) Ex. H.)2

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Bankruptcy Court.

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The Bankruptcy Court confirmed plaintiff’s Chapter 13 plan on

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February 2, 2011, requiring plaintiff to pay monthly installments

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of $2,899.24 to Wells Fargo.

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(“La Decl.”) (Docket No. 51-3) ¶ 9.)

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(Id., Ex. I; Decl. of D. Dennis La

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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(Deal Decl. ¶¶ 13, 18.)

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requirements, the modification would be implemented, and after

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three years Wells Fargo would waive a total of approximately

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$95,000 in principal balance.

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approved plaintiff’s trial loan modification with Wells Fargo on

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June 21, 2011.

If plaintiff satisfied these

(Id.)

The Bankruptcy Court

(La Decl., Ex. 68.)

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The court previously took judicial notice of all
requested documents when issuing its July 13, 2016 Motion to
Dismiss. (Docket No. 16.)
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On June 23, 2011, plaintiff moved to confirm his

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modified Chapter 13 plan to permanently implement the TPP payment

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amount.

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disbursed the first TPP payment of $1,550.01 to Wells Fargo,

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which was received on July 12, 2011.

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26, 2011, Wells Fargo sent the trustee and plaintiff’s counsel a

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letter stating that Wells Fargo was “unable to offer a

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modification” because plaintiff failed to make his TPP payments

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on time.

(RJN, Ex. K.)

(Id. ¶ 21.)

On June 30, 2011, the bankruptcy trustee

(Deal Decl. ¶ 20.)

On July

On August 1, 2011, plaintiff contacted

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Wells Fargo, arguing he did in fact make timely payments and

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asking how to reinstate his TPP payments.

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(Id. ¶ 6.)

On August 2, 2011, the Bankruptcy Court denied

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plaintiff’s motion to confirm the modified plan without prejudice

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due to plaintiff’s procedural errors.

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Court found that plaintiff had “failed to meet the burden of

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proving the requirements of confirmation” and explained the type

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of evidence that a debtor must submit.

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(Id.)

The Bankruptcy

(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. (Id.)

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send plaintiff monthly mortgage statements demanding the amount

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due under the original mortgage plan.

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I.)

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foreclosure sale.

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on his loan at the time of the foreclosure sale.

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(RJN, Ex. L.)

On November 23, 2011,

Wells Fargo continued to

(Schrupp Decl. ¶ 46, Ex.

On December 3, 2015, Wells Fargo purchased the property at a
(Deal Decl. ¶ 25.)

Plaintiff owed $722,059.93
(RJN, Ex. M.)

Plaintiff initiated this case in Yolo County Superior
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Court on January 19, 2016, alleging six causes of action against

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

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(3) 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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wrongful foreclosure; (5) violations of the Equal Credit

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Opportunity Act (“ECOA”), 15 U.S.C. § 1691(d); and (6) violations

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of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.

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Code § 17200 et seq.

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Wells Fargo removed the action to this court and moved

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to dismiss plaintiff’s claims on April 1, 2016.

(Docket No. 6.)

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The court denied that motion in full on July 13, 2016.

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No. 16.)

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II.

(Docket

Plaintiff’s Motion for Leave to Amend

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Plaintiff seeks to amend his complaint in order to

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incorporate additional facts that were revealed during discovery.

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Generally, “leave to amend shall be freely given when justice so

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requires.”

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F.3d 946, 951 (9th Cir. 2006); see also United States v. Hougham,

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364 U.S. 310, 316 (1960) (discussing the “liberal rules governing

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the amendment of pleadings” and how Rule 15 “was designed to

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facilitate the amendment of pleadings”).

AmerisourceBergen Corp. v. Dialysist W., Inc., 465

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However, a district court may decline to grant leave to

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amend where the amendment “(1) prejudices the opposing party; (2)

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is sought in bad faith; (3) produces an undue delay in

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litigation; or (4) is futile.”

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at 951.

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carries the greatest weight.”

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Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

AmerisourceBergen Corp., 465 F.3d

“[T]he consideration of prejudice to the opposing party
Eminence Capital, LLC v. Aspeon,

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Additionally, once a

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scheduling order has been entered, no further amendment of

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pleadings is permitted except with leave of court, good cause

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having been shown under Federal Rule of Civil Procedure 16(b).

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See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir.

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1992).

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Here, the court issued its Scheduling Order on October

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5, 2016, expressly ordering that, absent good cause, no further

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amendment to pleadings was permitted.

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Plaintiff attempts to argue that the court’s “Scheduling Order

(Docket No. 27.)

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did not set a deadline for Plaintiff to amend the pleadings,” and

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thus he is not held to the good cause standard.

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P. & A. in Supp. of Mot. to Amend (Docket No. 55).)

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sole argument in favor of his Motion to Amend, therefore, is that

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Wells Fargo would not suffer prejudice from the proposed

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amendments.

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cause is necessary.

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standard.

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(Pl.’s Mem. of
Plaintiff’s

However, the court disagrees and concludes that good
Plaintiff has not satisfied this heightened

Moreover, because discovery has already closed, Wells

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Fargo would not be able to properly investigate these new alleged

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facts without reopening discovery, thereby delaying proceedings.

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See Solomon v. N. Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139

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(9th Cir. 1998)(affirming denial of motion “on the eve of the

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discovery deadline” because it would have required reopening

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discovery).

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to Amend.

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III.

Accordingly, the court will deny plaintiff’s Motion

Defendant’s Motion for Summary Judgment

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A.

Legal Standard

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Summary judgment is proper “if the movant shows that
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there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.”

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P. 56(a).

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of the suit, and a genuine issue is one that could permit a

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reasonable jury to enter a verdict in the non-moving party’s

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favor.

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(1986).

Fed. R. Civ.

A material fact is one that could affect the outcome

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

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The party moving for summary judgment bears the initial

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burden of establishing the absence of a genuine issue of material

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fact and can satisfy this burden by presenting evidence that

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negates an essential element of the non-moving party’s case.

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Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).

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Alternatively, the movant can demonstrate that the non-moving

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party cannot provide evidence to support an essential element

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upon which it will bear the burden of proof at trial.

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inferences drawn from the underlying facts must, however, be

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viewed in the light most favorable to the party opposing the

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motion.

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U.S. 574, 587 (1986).

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B.

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Id.

Any

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475

1.

Discussion
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 that

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Wells Fargo breached by failing to offer plaintiff a permanent

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

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modification after he successfully paid the three trial payments.

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“The Ninth Circuit has recently held that, . . . a TPP

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Agreement offered pursuant to HAMP is a contract, and a party to

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that contract may sue for breach if the lender violates a term

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contained within the four corners of the TPP.”

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Fargo Bank, N.A., 101 F. Supp. 3d 938, 947 (E.D. Cal. Apr. 24,

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2015) (Nunley, J.) (citing Corvello v. Wells Fargo Bank, NA, 728

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

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plaintiff a TPP that required plaintiff to make his first monthly

Meixner v. Wells

Here, Wells Fargo offered

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trial period payment of $1,550.01 by June 1, 2011.

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In order to qualify for a permanent modification, plaintiff had

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to make two additional payments of $1,550.01 by July 1, 2011 and

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August 1, 2011.

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“[a]fter all trial period payments are timely made and you have

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submitted all the required documents, your mortgage would then be

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permanently modified.” (Id.)

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(Id.)

(RJN Ex. J.)

The offer letter notified plaintiff that,

Plaintiff alleges that he made all three trial monthly

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payments on time.

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undisputed that Wells Fargo only received one payment of

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$1,550.01 from plaintiff’s trustee.

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payment was not received until July 12, 2011, after the due date

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for both the first and second payments had passed.

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However, between June 1 and August 1, it is

(Deal Decl. ¶ 20.)

That

(Id.)

Plaintiff points out that Wells Fargo received

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$3,122.04 from plaintiff’s Bankruptcy Trustee on May 11, 2011,

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which he claims should have been applied to his TPP payments.

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However, by May 11, 2011, the TPP had not yet been approved, and

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the confirmed Chapter 13 plan was still in effect.

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himself explains that he was not authorized to make TPP payments
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Plaintiff

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until June 21, 2011, when the Bankruptcy Court approved the TPP

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plan.

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Accordingly, Wells Fargo was not required to construe this May 11

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payment as a TPP payment.

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Court’s order, it would have been unwise for defendant to

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consider this payment as anything other than part of plaintiff’s

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Chapter 13 plan.

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payment made on May 11 cannot be considered a TPP payment.

(Decl. of Stephen M. Reynolds (Docket No. 60-5) ¶ 6.)

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Indeed, in deference to the Bankruptcy

Thus, the court concludes that the $3,122.04

Plaintiff admits that the Bankruptcy Trustee “didn’t

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make timely payments to Wachovia.”3

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(Docket No. 56-1).)

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state that “[i]f each payment is not received by Wachovia

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Mortgage in the month in which it is due, this offer will end and

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your loan will not be modified under the Making Home Affordable

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program.”

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satisfy this requirement and therefore he cannot hold defendant

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liable for breach of contract.

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(Deal Decl. ¶ 22, Ex. 18

The terms of the payment plan explicitly

(Deal Decl. ¶ 19, Exs. 14, 15.)

Plaintiff did not

Moreover, plaintiff has suffered no damages, and as

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such cannot prevail on this claim even if the court were to

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conclude that plaintiff had timely made the required payments.

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The TPP states that only if “your loan is permanently modified,

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you may be eligible to have some of your principal forgiven on a

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deferred basis.”

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any forgiveness that was available to plaintiff was merely

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possible, not guaranteed.

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permanently modified, and thus he never became eligible for loan

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N.A.

(Deal Decl. ¶¶ 18, 19, Ex. 13.)

Accordingly,

However, plaintiff’s loan was never

Wachovia later changed its name to Wells Fargo Bank,
(RJN, Ex. A)
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forgiveness.

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speculative, it cannot form the basis of plaintiff’s damages

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claim.

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577 (1st Dist. 1977)(“[i]t is black-letter law that damages which

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are speculative, remote, imaginary, contingent or merely possible

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cannot serve as a legal basis for recovery”).

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Thus, because the loan forgiveness was merely

See Mozzetti v. City of Brisbane, 67 Cal. App. 3d 565,

Furthermore, any principal forgiveness that plaintiff

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argues he was entitled to, but did not receive, cannot constitute

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damages because plaintiff would still owe repayment of the loan.

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Even if plaintiff had been granted partial principal forgiveness,

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he was required to continue making loan payments, and he has

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presented no evidence to suggest that he could have continued

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making such payments after January 2012.

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would still be in default even if Wells Fargo permanently

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modified his loan and reduced the principal owed under the TPP.

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The court therefore concludes that plaintiff is unable to provide

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evidence in support of damages, an essential element of his

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breach of contract claim.

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prevail on this claim, the court will grant summary judgment in

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favor of defendant.

Accordingly, plaintiff

Accordingly, because plaintiff cannot

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2.

Promissory Estoppel

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

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

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

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and foreseeable; and (4) the party asserting the estoppel must be

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injured by his reliance.”

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60 Cal. App. 3d 885, 890 (2d Dist. 1976).

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Wells Fargo made a promise to plaintiff that if he agreed to the

Laks v. Coast Fed. Sav. & Loan Ass’n,

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Plaintiff alleges that

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terms of the TPP and made the proposed monthly payments, he would

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receive a HAMP modification.

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reasonably relied on that promise by submitting monthly payments.

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Lastly, he argues that he was damaged because, although he

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allegedly complied with the modification agreement, he was still

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denied a permanent modification, and thus he lost the opportunity

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to pursue other strategies to avoid foreclosure.

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Plaintiff further alleges that he

(Compl. ¶ 42.)

However, plaintiff failed to make the payments in
accordance with the TPP, and thus there can be no reliance on any

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promise, or any related damage, because Wells Fargo made no

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promises in the event that plaintiff failed to make timely

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payments.

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promissory estoppel.

Accordingly, defendant cannot be held liable for

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3.

Rosenthal Act

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The Rosenthal Act is intended “to prohibit debt

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collectors from engaging in unfair or deceptive acts or practices

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in the collection of consumer debts and to require debtors to act

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fairly in entering into and honoring such debts.”

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§ 1788.1.

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2016 Order, a loan servicer violates the Rosenthal Act when it

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offers a TPP, borrowers comply with the TPP, but the bank then

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fails to implement a permanent modification.

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F.3d at 885 (concluding that bank is contractually required to

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offer permanent mortgage modification if plaintiffs comply with

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TPP requirements).

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Cal. Civ. Code

As this court previously explained in its July 13,

See Corvello, 728

Here, because of plaintiff’s failure to make timely

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payments, Wells Fargo was not obligated to offer plaintiff a

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permanent loan modification, and thus the original Chapter 13
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Plan requirements were reinstated.

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not violate the Rosenthal Act but rather simply tried to collect

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the amount of debt previously agreed to.

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will grant defendant’s Motion for Summary Judgment with respect

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to this claim.

Therefore, Wells Fargo did

Accordingly, the court

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4.

Wrongful Foreclosure

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Plaintiff asserts that he “reached an enforceable

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agreement to modify the terms of his loan and to bring his loan

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current” and “[s]ince plaintiff made all payments subsequent to

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that date when due until Wells Fargo refused to accept a timely

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monthly payment in accordance with the Modification Agreement[,]

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he has a basis for wrongful foreclosure.”

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(Compl. ¶ 57.)

A plaintiff will prevail on a wrongful foreclosure

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claim only “if the trustor or mortgagor can establish that at the

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time the power of sale was exercised or the foreclosure occurred,

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no breach of condition or failure of performance existed on the

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mortgagor’s or trustor’s part which would have authorized the

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foreclosure or exercise of the power of sale.”

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Suntrust Mortg., Inc., Civ. No. 09-40 RMW, 2010 WL 546896 (N.D.

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Cal. Feb.10, 2010)(quoting Collins v. Union Fed. Sav. & Loan

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Ass’n, 99 Nev. 284, 662 P.2d 610, 623 (Nev. 1983)).

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See Roque v.

In this case the TPP agreement never became permanent,

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and the original Chapter 13 Plan terms were reinstated.

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Plaintiff failed to continue to make these plan payments, he

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defaulted, and his bankruptcy petition was dismissed.

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plaintiff cannot claim that there was no breach of condition or

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failure of performance at the time of the foreclosure sale.

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Accordingly, the court will grant Wells Fargo’s Motion for
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Therefore,

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Summary Judgment in regards to plaintiff’s claim of wrongful

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foreclosure.

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5.

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The Equal Credit Opportunity Act (“ECOA”) prohibits

Equal Credit Opportunity Act

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creditors from discriminating against credit applicants “on the

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basis of race, color, religion, national origin, sex or marital

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status, or age.”

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this goal, the ECOA contains strict notice requirements that

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provide a basis for a cause of action against creditors even

15 U.S.C. § 1681(a)(1).

In order to effectuate

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without allegations of discrimination.

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Fargo Bank, NA, 720 F.3d 1204, 1210 (9th Cir. 2013); see also

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Errico v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 1034, 1042

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

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

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even without regard to allegations of discrimination.” (citing

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

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See Schlegel v. Wells

Under the ECOA, when a lender takes an adverse action

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

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reasons for the action or a written notification of the adverse

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

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reasons within thirty days after receipt of the applicant’s

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request.

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provide the required notices, the applicant may sue for a

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violation of ECOA.

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720 F.3d at 1204.

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15 U.S.C. § 1691(d)(2)(A)-(B).

If a creditor fails to

See 15 U.S.C. §1961(e); see also Schlegel,

Here, plaintiff alleges that Wells Fargo engaged in an

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

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statement of reasons, when it refused to accept the modified
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payment amount in January 2012.

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plaintiff was in default, and therefore the ECOA does not apply.

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12 C.F.R. § 202(c)(2)(iii)(adverse action does not include “any

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action or forbearance relating to an account taken in connection

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

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The denial of a loan modification sought by a borrower in default

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is not an adverse action that requires written notice.

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Trust v. Wells Fargo, N.A., 985 F. Supp. 2d 1110, 1138-39 (N.D.

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Cal. Sept. 25, 2013).

(Compl. ¶¶ 66-69.)

However,

Rockridge

Therefore, the ECOA notice requirements do

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not apply, and defendant cannot be liable for a violation of the

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ECOA.

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Summary Judgment with regard to this claim.

Accordingly, the court will grant defendant’s Motion for

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6.

Unfair Competition Law

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California’s Unfair Competition Law (“UCL”) prohibits

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“any unlawful, unfair or fraudulent business act or practice.”

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Cal. Bus. & Prof. Code § 17200.

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both consumers and competitors by promoting fair competition in

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commercial markets for goods and services.”

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27 Cal. 4th 939, 949 (2002) (citing Barquis v. Merchs. Collection

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Ass’n, 7 Cal. 3d 94, 110 (1972)).

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UCL if it violates an underlying state or federal statute or

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common law.

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20 Cal. 4th 163, 180 (1999).

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“The UCL’s purpose is to protect

Kasky v. Nike, Inc.,

An act is “unlawful” under the

Cal-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co.,

Plaintiff argues that because Wells Fargo violated the

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Rosenthal Act and ECOA, it also violated the UCL.

However,

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because the court concludes that Wells Fargo did not violate

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either of these acts, it must also conclude that Wells Fargo has

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not violated the UCL.

Accordingly, the court will grant
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defendant’s Motion for Summary Judgment with regard to

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plaintiff’s UCL claim.

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IV.

Plaintiff’s Motion for Partial Summary Judgment

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Because the court grants summary judgment in favor of

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Wells Fargo on all of plaintiff’s claims, for the same reasons it

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denies plaintiff’s Motion for Partial Summary Judgment on his

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first claim for breach of contract, his third claim for

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violations of the Rosenthal Act, his fifth claim for violations

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of the ECOA, and his sixth claim for violations of UCL.

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IT IS THEREFORE ORDERED that plaintiff’s Motion to
Amend (Docket No. 55) be, and the same hereby is, DENIED.

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IT IS FURTHER ORDERED that Wells Fargo’s Motion for

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Summary Judgment (Docket No. 51) be, and the same hereby is,

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GRANTED.

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IT IS FURTHER ORDERED that plaintiff’s Motion for

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Partial Summary Judgment (Docket No. 52) be, and the same hereby

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is, DENIED.

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The Clerk of Court is instructed to enter judgment in

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favor of defendant and against plaintiff.

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Dated:

May 15, 2018

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