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

Filing 35

ORDER by Judge Samuel Conti denying 12 Motion to Strike ; granting 13 Motion to Dismiss; granting 22 Motion for Leave to File Excess Pages (sclc1, COURT STAFF) (Filed on 8/25/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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BRYAN J. VALVERDE,

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Plaintiff,

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v.

For the Northern District of California

United States District Court

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WELLS FARGO BANK, N.A.; and ETS
SERVICES, LLC, INC.,

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Defendants.

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Case No. C-11-2423 SC
ORDER GRANTING WELLS
FARGO'S MOTIONS TO DISMISS
AND STRIKE

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I.

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INTRODUCTION
Plaintiff Bryan J. Valverde ("Plaintiff") commenced this

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action against Defendants Wells Fargo Bank, N.A. ("Wells Fargo")

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and ETS Services, LLC ("ETS")1 (collectively, "Defendants"),

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bringing twelve claims relating to unsuccessful loan modification

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discussions between Plaintiff and Wells Fargo and Defendants'

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subsequent attempts to foreclose on Plaintiff's home.

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("Notice of Removal") Ex. A ("Compl.").

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are before the Court -- Wells Fargo moves to dismiss and to strike

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portions of Plaintiff's Complaint.

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1

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26
27
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ECF No. 1

Two fully briefed motions

ECF Nos. 12 ("MTS"), 13

Pursuant to California Civil Code § 2924l, ETS filed a
declaration of non-monetary status in which it declares that it was
named as a defendant in this action solely because it is the
trustee under the deed of trust executed by Plaintiff. ECF No. 11.
Because no objection to ETS's declaration has been served or filed,
the Court finds that ETS shall not be required to participate in
the action, shall not be subject to any monetary awards, and shall
be bound by any court order relating to the subject deed of trust.
Cal. Civ. Code § 2924l(d).

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("MTD"), 17 ("MTD Opp'n"), 18 ("MTS Opp'n"), 27 ("MTD Reply"), 28

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("MTS Reply").2

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Fargo's motions.

For the following reasons, the Court GRANTS Wells

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II.

BACKGROUND
As it must on a Rule 12(b)(6) motion, the Court assumes the

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truth of the well-pleaded facts in Plaintiff's Complaint.3

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Plaintiff, a resident of Marin County, held title to a property

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located at 122 Marion Avenue, Mill Valley, California, 94941-2617

United States District Court

For the Northern District of California

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("the property").

Compl. ¶ 6.

On or about July 14, 2007,

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Plaintiff obtained a residential adjustable-rate home mortgage loan

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of $1,045,000 from World Savings Bank FSB ("World Savings").

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9.

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later changed its name to Wachovia Mortgage, FSB ("Wachovia"), and

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is now a division of Wells Fargo.

Id. ¶

Plaintiff alleges, and Wells Fargo concedes, that World Savings

Id. ¶ 2.4

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Plaintiff alleges that in offering the loan, World Savings

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engaged in "predatory lending" because it knew "that housing prices

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were inflated above real value" and it "intended to sell-off many

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2

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Plaintiff's MTD Opposition exceeds Civil Local Rule 7-4(b)'s page
limit by several pages. After filing it, Plaintiff filed a motion
seeking leave to exceed this page limit, claiming that "Plaintiff's
attorney momentarily failed to consider the page limitation
requirement" and ensuring the Court that such error "will not occur
again." ECF No. 22. The Court GRANTS Plaintiff's Motion, and puts
the parties on notice that it will not condone future violations of
court rules.
3

However, the Court does not accept as true allegations that
contradict exhibits attached to the Complaint or matters properly
subject to judicial notice. Manzarek v. St. Paul Fire & Marine
Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).
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Wells Fargo seeks judicial notice of various documents in support
of these contentions. ECF No. 14 ("RJN"). The Court judicially
notices the above facts, as well as the fact that Wachovia
converted to Wells Fargo Bank Southwest, N.A., which then merged
with and into Wells Fargo Bank, N.A.
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loans that had been made to borrowers with sub-standard credit" as

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part of a fraudulent scheme.

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to the subsequent rapid reduction in home values, he was unable to

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sell or refinance his home, and if World Savings had notified him

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that housing prices were inflated and that a housing collapse was

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imminent, he never would have agreed to the loan.

Id. ¶ 10.

Plaintiff alleges that due

Id.

Plaintiff claims representatives of Wachovia told him that he

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must be sufficiently in default for three months in order to

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qualify for in-house modification of his loan.

Id. ¶ 26.

United States District Court

For the Northern District of California

Plaintiff ultimately defaulted on his loan.

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that when Wells Fargo took over Wachovia, it canceled this in-house

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modification program.

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loan modification with Defendants5 for more than a year "while at

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the same time Wells Fargo Bank was continuing with their

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foreclosure on their dual track approach to loan modification,

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always holding out the carrot of a modification at the same time

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having the hammer over the homeowner with a foreclosure on his

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property."

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government's HAMP loan modification program because it only went up

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to $750,000.

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modification application and instead continued to tell him that he

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needed to produce documentation that he had already produced.

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He alleges that Defendants never intended to modify his loan, but

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led Plaintiff to believe otherwise.

Id.

Id.

Id.

Id.

Plaintiff claims

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Plaintiff alleges that he worked toward

Plaintiff was told he did not qualify for the

He claims Defendants failed to process his loan

Id.

Plaintiff brings twelve causes of action.

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Id.

First, he brings a

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declaratory action challenging Defendants' standing to initiate

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foreclosure proceedings on the property.

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Id. ¶¶ 16-23.

Second, he

Plaintiff's Complaint attributes numerous actions to "Defendants"
without identifying the specific parties by name.
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seeks an injunction restraining Defendants from selling the

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property.

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infliction of emotional distress ("IIED") and negligent infliction

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of emotional distress ("NIED") caused by Defendants' activity

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during the attempted mortgage modification and foreclosure.

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25-32.

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alleging that Defendants have failed to establish a clear and

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unbroken chain of title for both the deed of trust and the

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promissory note.

Id. ¶ 24.

Third and fourth, he claims intentional

Id. ¶¶

Fifth, he brings an action to quiet title to the property,

Id. ¶¶ 33-39.

Sixth, he brings a claim for

United States District Court

For the Northern District of California

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breach of the implied covenant of good faith and fair dealing

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("good faith claim"), alleging that Defendants failed to evaluate

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Plaintiff's financial condition for foreclosure avoidance; advise

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Plaintiff of his statutory right to meet with Wells Fargo regarding

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such foreclosure avoidance; and advise Plaintiff of the toll-free

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HUD phone number regarding counseling opportunities to avoid the

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subject foreclosure.

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claim of deceit, alleging that on or about October 1, 2009,

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Defendants falsely told Plaintiff that Plaintiff would be placed in

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a loan modification program if he stopped making payments and went

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into default, and that until the loan review process was completed,

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the house would not be sold at a trustee's sale.

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Eighth, Plaintiff brings a claim for "fraud and deceit -- negligent

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misrepresentation."

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for promissory estoppel.

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claim for negligence, alleging Defendants owed Plaintiff a duty to

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disclose information "regarding the loan and to act in accordance

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with banking industry practice, statute, and regulations, and to

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act with respect to Plaintiff in good faith and with fair dealing."

Id.

¶¶ 40-44.

Id. ¶¶ 56-58.

Seventh, Plaintiff brings a

Ninth, Plaintiff brings a claim

Id. ¶¶ 59-64.

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Id. ¶¶ 45-55.

Tenth, Plaintiff brings a

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Id. ¶¶ 65-68.

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1798.82 of California's Civil Code, alleging "Defendants failed to

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timely disclose to Plaintiff the disclosure of his personal

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information."

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under section 17200 of California's Business and Professions Code

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("section 17200"), alleging that Defendants implemented and

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perpetrated a "fraudulent scheme of inducing Plaintiff to accept

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mortgages based on inflated property valuations."

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Eleventh, Plaintiff brings a claim under section

Id. ¶¶ 69-71.

Twelfth, Plaintiff brings a claim

Id. ¶¶ 71-98.

Defendants removed this action from state court.

See Notice

United States District Court

For the Northern District of California

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of Removal.

On June 30, 2011, Plaintiff filed an ex parte motion

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for a temporary restraining order, seeking to restrain Defendants

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from selling the property at a trustee's sale scheduled to occur on

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July 22, 2011.

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the Court denied Plaintiff's motion and permitted the trustee's

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sale to go forward as scheduled.

ECF No. 30.

A hearing occurred on July 7, 2011;

ECF No. 34.

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Wells Fargo moves to dismiss Plaintiff's Complaint.

Wells

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Fargo argues that Plaintiff's claims are preempted by the Home

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Owners' Loan Act ("HOLA"); that Plaintiff lacks standing and is

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judicially estopped from asserting claims due to his failure to

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disclose them in bankruptcy; and that all of Plaintiff's claims

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fail to satisfy the relevant pleading requirements.

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Wells Fargo also moves to strike portions of Plaintiff's Complaint

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in which fraud is alleged on the basis that Plaintiff has failed to

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plead facts sufficient to support them.

See MTD.

See MTS.

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) "tests the legal sufficiency of a claim."

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Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

Dismissal can be based

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory.

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1990).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 129 S. Ct. 1937, 1950 (2009).

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court must accept as true all of the allegations contained in a

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a

United States District Court

For the Northern District of California

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complaint is inapplicable to legal conclusions.

Threadbare

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recitals of the elements of a cause of action, supported by mere

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conclusory statements, do not suffice."

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(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

Iqbal, 129 S. Ct. at 1950

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IV.

DISCUSSION

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The allegations made in a complaint must be "sufficiently

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detailed to give fair notice to the opposing party of the nature of

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the claim so that the party may effectively defend against it."

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Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011).

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explains, Plaintiff's Complaint fails to do this.

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raises a number of compelling arguments in favor of prejudicial

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dismissal in its motions, but due to the vagueness of Plaintiff's

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Complaint, the Court cannot rule on these arguments with finality.

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Accordingly, and for the reasons below, the Court DISMISSES

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Plaintiff's Complaint.

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Complaint to address the deficiencies identified below.

As this Order

Wells Fargo

Plaintiff is granted LEAVE TO AMEND his

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A.

HOLA Preemption

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Wells Fargo argues that all of Plaintiff's claims are

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preempted by HOLA because they are "based on the origination of

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Plaintiff's mortgage loan and on Wells Fargo's subsequent servicing

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of the loan."

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MTD at 5.

Congress enacted HOLA "to charter savings associations under

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federal law, at a time when record numbers of homes were in default

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and a staggering number of state-chartered savings associations

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were insolvent."

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1004 (9th Cir. 2008).

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("OTS") "broad authority to issue regulations governing thrifts."

United States District Court

For the Northern District of California

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Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001,
HOLA gives the Office of Thrift Supervision

Id. at 1005 (citing 12 U.S.C. § 1464).
OTS, in turn, has promulgated regulations stating that OTS

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"occupies the entire field of lending regulation for federal

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savings associations."

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Section 560.2 offers a framework for determining whether a state

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law claim is preempted by HOLA and its implementing regulations,

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and the Ninth Circuit has held that this framework controls.

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Silvas, 514 F.3d at 1005.

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state law is one of the enumerated types of laws expressly

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identified as preempted in section 560.2(b).

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12 C.F.R. § 560.2(a) ("section 560.2").

Courts must first determine whether the

Id.

These include:

(4) The terms of credit, including amortization
of loans and the deferral and capitalization of
interest and adjustments to the interest rate,
balance, payments due, or term to maturity of
the loan, including the circumstances under
which a loan may be called due and payable upon
the passage of time or a specified event
external to the loan;

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. . . .
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(9) Disclosure and advertising, including laws
requiring specific statements, information, or
other
content
to
be
included
in
credit
application
forms,
credit
solicitations,
billing statements, credit contracts, or other
credit-related documents and laws requiring

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creditors to supply copies of credit reports to
borrowers or applicants;

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(10) Processing, origination, servicing, sale
or purchase of, or investment or participation
in, mortgages;

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12 C.F.R. § 560.2(b).
If the state law is one of these enumerated types, "the

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analysis will end there; the law is preempted."

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at 1005.

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affects lending."

Silvas, 514 F.3d

If not, the court should determine "whether the law
Id.

If it does, the law is presumed to be

United States District Court

For the Northern District of California

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preempted, subject to the exceptions provided by section 560.2(c).

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Id.

Section 560.2(c) provides:
State laws of the following types are not
preempted
to
the
extent
that
they
only
incidentally affect the lending operations of
Federal savings associations or are otherwise
consistent with the purposes of [section
560.2(a)]:

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(1) Contract and commercial law;
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(2) Real property law;
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(3) Homestead laws specified in 12 U.S.C. §
1462a(f);

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(4) Tort law;

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(5) Criminal law; and

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(6) Any other law that OTS, upon review, finds:

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(i) Furthers a vital state interest; and

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(ii) Either has only an incidental effect
on lending operations or is not otherwise
contrary to the purposes expressed in
paragraph (a) of this section.

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26

12 C.F.R. § 560.2(c).

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narrowly."

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These exceptions are "to be interpreted

Silvas, 514 F.3d at 1005.

Wells Fargo argues that Plaintiff's claims are preempted under

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section 560.2(b)(4), (b)(9), and (b)(10).

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argues that Plaintiff's chief allegations of wrongdoing -- that

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Defendants committed fraud, acted in bad faith, or otherwise

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violated the law during the loan modification discussions and the

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foreclosure procedure -- concern "processing" or "servicing" of the

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mortgage and thus compel preemption.

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MTD at 4.

Wells Fargo

Id.

Plaintiff argues that HOLA should not apply because only

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federal savings banks and associations are regulated by OTS and

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covered under HOLA, and while World Savings and Wachovia were

United States District Court

For the Northern District of California

10

federal savings banks, Wells Fargo is not.

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Wells Fargo counters that HOLA should apply because "in a merger

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the surviving entity succeeds to the rights of the prior entity."

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MTD Reply at 1.

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this district in which HOLA was found to apply "even though the

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conduct at issue occurred after Wells Fargo merged with Wachovia."

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Haggarty v. Wells Fargo Bank, N.A., 2011 WL 445183 at *4 (N.D. Cal.

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Feb. 2, 2011); DeLeon v. Wells Fargo Bank, N.A., 729 F. Supp. 2d

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1119, 1126 (N.D. Cal. 2010).

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MTD Opp'n at 2-3.

Wells Fargo cites several court orders from within

The Court finds that HOLA applies to this action, including

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Wells Fargo's servicing of the loan.

However, HOLA preemption is

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not as broad as Wells Fargo argues it is.

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Circuit focused not on the nature of the cause of action allegedly

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preempted, but rather on the "functional effect upon lending

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operations of maintaining the cause of action."

25

GreenPoint Mortg. Funding, Inc., No. 09-1542, 2009 WL 2870620, at

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*4 (N.D. Cal. Sep. 3, 2009).

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application of a given state law to the activities of federal

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savings associations would 'impose requirements' regarding the

In Silvas, the Ninth

Naulty v.

"The question was rather whether an

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various activities broadly regulated by the OTS."

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thus interpreted Silvas to not preempt all state law causes of

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action arising out of loan modification and/or foreclosure

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proceedings, but only those that impose new requirements on the

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lender.

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WL 2471167, at *4-6 (C.D. Cal. June 21, 2011) (denying bank's

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motion to dismiss borrower's breach of contract, negligence, bad

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faith, and fraud claims as preempted by HOLA).

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Id.

Courts have

E.g., Susilo v. Wells Fargo Bank, N.A., No. 11-1814, 2011

To the extent that Plaintiff's claims are premised on fraud or

United States District Court

For the Northern District of California

10

promises made by Wells Fargo, such claims are not necessarily

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preempted.

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encouraged him to pursue loan modification when Defendants had no

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intention of agreeing to modification; such a claim is not

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preempted.

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state a viable claim.

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requirement on Wells Fargo -- the only "requirement" it imposes on

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Wells Fargo is that it be held responsible for the statements it

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makes to its borrowers.

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federal savings associations would be free to lie to their

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customers with impunity.

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allegations that Wells Fargo failed to use proper care or comply

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with industry standards essentially seek to impose new requirements

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on the lender, and are thus preempted by HOLA.

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For instance, Plaintiff alleges that Defendants

As the Court will discuss, this allegation fails to
However, it also does not impose a new

If these causes of action were preempted,

On the other hand, Plaintiff's

In light of this analysis, several of Plaintiff's claims are

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extremely susceptible to HOLA preemption -- namely, Plaintiff's

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negligence, negligent misrepresentation, NIED, and good faith

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claims.

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failed to plead sufficient facts to render any of his claims

And given HOLA's wide preemptive effect, Plaintiff has

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plausible.

Accordingly, the Court DISMISSES all twelve of

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Plaintiff's claims, WITH LEAVE TO AMEND.

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claims suffer from several additional flaws, the Court continues

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its analysis below.

Because Plaintiff's

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B.

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Wells Fargo alleges that Plaintiff filed for Chapter Seven

Judicial Estoppel

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bankruptcy in June 2010, and as a consequence, any cause of action

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Plaintiff possessed at that time is now property of the bankrupt

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estate and can no longer be brought by Plaintiff.

MTD at 8.

While

United States District Court

For the Northern District of California

10

Plaintiff's Complaint makes no mention of bankruptcy, Plaintiff

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admits that he declared bankruptcy.

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that his causes of action had not yet accrued during the bankruptcy

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proceedings, as he was still in negotiation with Wells Fargo at

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that time.

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MTD Opp'n at 6-7.

He argues

Id.

Wells Fargo is correct that the property of the bankruptcy

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estate includes the bankrupt entity's causes of action.

Sierra

17

Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th

18

Cir. 1986).

19

wrongdoing on the part of World Savings in the initiation of his

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loan; because any claim arising from the 2007 loan origination

21

would have accrued by the 2010 bankruptcy proceedings, Plaintiff

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lacks standing to bring any such claims.

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too vague as to Wells Fargo's alleged misrepresentations and

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promises for the Court to determine whether Plaintiff's claims

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plausibly accrued after the bankruptcy proceedings had concluded.

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Accordingly, Plaintiff's claims related to loan modification are

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DISMISSED WITH LEAVE TO AMEND for failure to plead with the

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required specificity.

Plaintiff's Complaint makes numerous allusions to

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Plaintiff's Complaint is

1

C.

Claims Challenging the Foreclosure Sale

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Wells Fargo argues that Plaintiff's first, second, fifth, and

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twelfth claims challenging the foreclosure sale fail because

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Plaintiff has not tendered his indebtedness to Wells Fargo.

5

11.

6

the original promissory note to initiate foreclosure proceedings,

7

and so Plaintiff's declaratory relief and quiet title claims fail

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as a matter of law.

MTD at

Wells Fargo also argues that it need not be in possession of

Id. at 12.

United States District Court

Plaintiff admits that a tender of indebtedness is required to

10
For the Northern District of California

9

set aside a foreclosure, but argues that tender is not required to

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preemptively challenge a party's standing to foreclose on a

12

property; Plaintiff cites no law for this novel proposition.

13

Opp'n at 12.

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challenges to his "failure to produce the note" theory.

MTD

Plaintiff also does not respond to Wells Fargo's
Id.

The Court agrees with Wells Fargo, and DISMISSES Plaintiff's

15
16

first, second, fifth, and twelfth claims.6

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cure these claims by tendering his indebtedness to Wells Fargo, the

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Court does so WITH LEAVE TO AMEND.

Because Plaintiff may

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D.

NIED and IIED Claims

20

An NIED claim has the same elements as a claim for negligence.

21

Lawson v. Mgmt. Activities, 69 Cal. App 4th 626, 656 (1999).

22

Accordingly, a plaintiff asserting an NIED claim must show that the

23

defendant owed the plaintiff a duty of care.

24

for IIED, Plaintiff must allege: "(1) extreme and outrageous

25

conduct by the defendant with the intention of causing, or reckless

26

disregard of the probability of causing, emotional distress; (2)

Id.

To plead a claim

27
6

28

Furthermore, as the foreclosure sale was scheduled to occur in
July 2011, the Court assumes it has already occurred, and so any
challenge to Wells Fargo's standing is likely moot.
12

1

the plaintiff's suffering severe or extreme emotional distress; and

2

(3) actual and proximate causation of the emotional distress by the

3

defendant's outrageous conduct."

4

Cal. 3d 868, 903 (1991).

5

when it was "so extreme as to exceed all bounds of that usually

6

tolerated in a civilized community."

7

Westminster, 32 Cal.3d 197, 185 (1982) (citation omitted).

8

emotional distress to be severe, it must be "of such substantial

9

quantity or enduring quality that no reasonable man in a civilized

Christensen v. Super. Ct,, 54

Conduct is only "extreme and outrageous"

Davidson v. City of
For

United States District Court

For the Northern District of California

10

society should be expected to endure it."

11

Nat'l Life Ins. Co., 10 Cal. App. 3d 376, 397, (Ct. App. 1970).

12

Fletcher v. Western

Wells Fargo argues that Plaintiff's NIED and IIED claims fail

13

as a matter of law.

14

an NIED claim, Plaintiff must allege Defendants breached a duty of

15

care owed to Plaintiff, and argues that because a financial

16

institution "owes no duty of care to a borrower when the

17

institution's involvement in the loan transaction does not exceed

18

the scope of its conventional role as a mere lender of money,"

19

Plaintiff's NIED claim fails.

20

Fed. Savings & Loan, 231 Cal. App. 3d 1089, 1096 (Ct. App. 1991)).

21

Plaintiff responds that "the bank exceeded its conventional role as

22

money lender" by offering "comprehensive restructuring and loan

23

modification services."

24

MTD at 14.

Wells Fargo argues that to state

Id. at 14-15 (citing Nymark v. Heart

MTD Opp'n at 14.

The Court agrees with Wells Fargo that Plaintiff's NIED and

25

IIED claims are insufficiently pleaded.

26

and with little detail, Plaintiff alleges that he suffered extreme

27

emotional distress due to Defendants' conduct.

28

what about Defendants' conduct rendered it so extreme as to "exceed

13

In rather broad strokes

He fails to state

1

all bounds of that usually tolerated in a civilized community."

2

fails to state what duty Wells Fargo owed him, and how that duty

3

was breached.

4

Court rejects Wells Fargo's arguments that these claims are barred

5

as a matter of law.

He fails to allege proper damages.

He

However, the

6

E.

Fraud and Negligent Misrepresentation Claims

7

Wells Fargo challenges Plaintiff's seventh and eighth claims,

8

as well as other portions of Plaintiff's complaint which allege

9

fraud.

MTD at 17.

Claims sounding in fraud are subject to a

United States District Court

For the Northern District of California

10

higher pleading standard.

Fed. R. Civ. P. 9(b).

"To satisfy Rule

11

9(b), a pleading must identify the who, what, when, where, and how

12

of the misconduct charged, as well as what is false or misleading

13

about [the purportedly fraudulent] statement, and why it is false."

14

Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d

15

1047, 1055 (9th Cir. 2011) (internal quotation marks omitted).

16

Plaintiff's Complaint obliquely refers to numerous unidentified

17

"statements" by unidentified representatives of Defendants; he

18

fails to sufficiently identify "what" these statements were, "when"

19

they were made, or "who" said them.

20

than what Plaintiff supplies here.

21

seventh and eighth fraud claims are DISMISSED WITH LEAVE TO AMEND

22

and Wells Fargo's MTS is GRANTED.

Far more detail is required
Accordingly, Plaintiff's

23

F.

24

In California, "[e]very contract imposes upon each party a

Good Faith Claim

25

duty of good faith and fair dealing in its performance and its

26

enforcement."

27

Inc., 2 Cal. 4th 342, 371 (1992).

28

imposes a duty upon a party to a contract not to deprive the other

Carma Dev. (Cal.), Inc. v. Marathon Dev. California,

14

"In general, the covenant

1

party of the benefits of the contract."

Sutherland v. Barclays

2

American/Mort. Corp., 53 Cal. App. 4th 299, 314 (Ct. App. 1997).

3

Wells Fargo alleges that Plaintiff's good faith claim "is in

4

actuality a claim that Wells Fargo breached Civil Code § 2923.5."

5

MTD at 20.

Wells Fargo argues that section 2923.5 is preempted by

6

HOLA.

Wells Fargo also argues that "one of the elements of a

7

breach of the covenant claim is that the plaintiff did all, or

8

substantially all, of the significant things the contract

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required," and because Plaintiff admits that he defaulted on the

United States District Court

For the Northern District of California

10
11

Id.

loan, his claim fails.

Id.

California's Civil Code provides a framework for non-judicial

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foreclosure: the lender must first record a notice of default; once

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three months have elapsed, the lender must give notice of the

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planned foreclosure sale.

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framework, section 2923.5 concerns the notice of default.

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requires the "mortgagee, trustee, beneficiary, or authorized agent"

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seeking to file a notice of default to first contact the borrower

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in person or by telephone "in order to assess the borrower's

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financial situation and explore options for the borrower to avoid

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foreclosure."

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default may not be filed until thirty days after this initial

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contact or the statute's due diligence requirements are satisfied.

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Id. § 2923.5(a)(1).

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to file a notice of default must advise the borrower that he or she

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has the right to request a subsequent meeting and, if requested,

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schedule the meeting within fourteen days.

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Cal. Civ. Code § 2924.

Cal. Civ. Code § 2923.5(a)(2).

Within this
It

The notice of

During this initial contact, the party seeking

Id. § 2923.5(a)(2).

The California Court of Appeal has narrowly interpreted
section 2923.5 "as to avoid having the state law invalidated by

15

1

federal preemption."

Mabry v. Super. Ct., 185 Cal. App. 4th 208,

2

231 (Ct. App. 2010).

The rights provided to borrowers under

3

section 2923.5 are purely procedural -- there is no "right" to a

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loan modification.

5

2923.5 to "assess" the borrower's financial situation and "explore"

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options to avoid foreclosure can be satisfied by simply asking the

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borrower "why can't you make your payments?" and "telling the

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borrower the traditional ways that foreclosure can be avoided

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(e.g., deeds 'in lieu,' workouts, or short sales)."

Id.

The lender's obligations under section

Id. at 232.

United States District Court

For the Northern District of California

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The statute does not place a duty on the lender "to become a loan

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counselor itself."

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offers is the postponement of a foreclosure sale until the lender

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comes into compliance with the statute.

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at 213.

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Id. at 219.

The only remedy section 2923.5

Mabry, 185 Cal. App. 4th

To the extent Plaintiff's bad faith claim is merely a claim of

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violation of section 2923.5, this claim is likely moot given the

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scheduled July 2011 foreclosure sale of the house, as the only

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remedy available under section 2923.5 -- postponement of the

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foreclosure sale -- would be no longer available.

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Plaintiff attempts to premise a separate good faith claim for

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damages on Wells Fargo's alleged failure to satisfy section 2923.5,

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such a claim is preempted under Mabry's analysis.

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To the extent

Because Plaintiff has failed to identify the contract at issue

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and the benefits deprived by Defendants, he has failed to plead

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this claim with the required specificity.

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rejects Wells Fargo's argument that Plaintiff's failure to make

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payments under the note relieved Defendants of their duty to act in

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good faith in performing under the note and in enforcing it.

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However, the Court

As

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such, Plaintiff may be able to plead a claim based on Defendants'

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conduct as a party to the deed of trust.

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pleaded sufficient facts, the Court DISMISSES, WITH LEAVE TO AMEND,

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Plaintiff's claim.

Because Plaintiff has not

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G.

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The elements of a claim for promissory estoppel are: "(1) a

Promissory Estoppel Claim

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

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

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

United States District Court

For the Northern District of California

10

estoppel must be injured by his reliance."

Aceves v. U.S. Bank,

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N.A., 192 Cal. App. 4th 218, 225 (Ct. App. 2011).
Wells Fargo argues that Plaintiff's Complaint does not allege

12
13

a clear and unambiguous promise upon which Plaintiff reasonably

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relied to his detriment.

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Plaintiff's assertion that Wells Fargo told Plaintiff to stop

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making mortgage payments in order to qualify for a loan

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modification is "implausible on its face."

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that Plaintiff's claim that his decision to default on the mortgage

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ruined his credit is implausible.

MTD at 21.

Wells Fargo alleges that

Id.

It also alleges

While the Court agrees with Wells Fargo that Plaintiff has

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failed to identify a "clear and unambiguous promise," it does not

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agree that Plaintiff's allegations are implausible on their face.7

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Plaintiff's Complaint alleges that representatives of Wachovia told

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him that he must be sufficiently in default for three months in

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order to qualify for in-house modification of his loan.

Compl. ¶

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7

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Wells Fargo seeks judicial notice of several filings in
Plaintiff's bankruptcy proceeding in support of the factual
argument that Plaintiff's indebtedness to Wells Fargo was dwarfed
by his indebtedness to other creditors. The Court DECLINES this
request.
17

1

26.

He does not allege that these representatives promised him

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that he would qualify for the loan if he was sufficiently in

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default; he merely alleges that he would not qualify for in-house

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modification if he were not considerably in default.

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is not sufficient to support a promissory estoppel claim.

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Plaintiff must include considerably more detail in order to render

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this claim plausible.

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his cause of action is not duplicative of a claim for breach of

9

contract, as "tort recovery for breach of the covenant is available

This pleading

Furthermore, Plaintiff must establish that

United States District Court

For the Northern District of California

10

only in limited circumstances, generally involving a special

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relationship between the contracting parties."

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Water Dist., 70 Cal. App. 4th 1358, 1370 (Ct. App. 1999).

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Plaintiff alleges no special relationship here.

Bionghi v. Met.

14

H.

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In extremely brief language, Plaintiff claims Wells Fargo

16

violated California Civil Code § 1798.82 by failing "to timely

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disclose to Plaintiff the disclosure of his personal information."

18

Compl. ¶ 70.

19

MTD at 23.

20

page Complaint is there even a fleeting reference to facts that

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could support this claim.

22

much less improper disclosure of it.

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this claim.

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I.

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Wells Fargo argues that Plaintiff's section 17200 claim --

California Civil Code § 1798.82 Claim

Wells Fargo calls this claim "as vague as can be."

The Court agrees.

Nowhere in Plaintiff's twenty-five-

No "personal information" is discussed,
The Court therefore DISMISSES

Section 17200 Claim

26

which is premised on Plaintiff's first eleven claims -- is not

27

pleaded with the requisite particularity.

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particular, Wells Fargo contends that Plaintiff "lumps all

18

MTD at 23-24.

In

1

defendants together without identifying which defendant committed

2

which alleged violation," and the claim "is defective to the same

3

extent that its underlying claims are defective."

4

agrees.

5

such, the derivative section 17200 claim fails as well.

Id.

The Court

The Complaint fails to state a single viable claim, and as

In sum, Plaintiff's Complaint falls far short of federal

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7

pleading standards.

While Plaintiff is granted leave to amend his

8

complaint to address the above shortcomings, he is put on notice

9

that any claims dismissed on a subsequent motion to dismiss will be

United States District Court

For the Northern District of California

10

dismissed WITHOUT LEAVE TO AMEND.

The Court will only grant

11

additional leave to amend if Plaintiff files a motion under Rule

12

15(a)(2) of the Federal Rules of Civil Procedure establishing that

13

justice requires it.
Furthermore, the Court puts Plaintiff and his attorney on

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15

notice that under 28 U.S.C. § 1927, "[a]ny attorney . . . who so

16

multiplies the proceedings in any case unreasonably and vexatiously

17

may be required by the court to satisfy personally the excess

18

costs, expenses, and attorneys' fees reasonably incurred because of

19

such conduct."

20

Pacific Harbor Capital, Inc. v. Carnival Air Lines, Inc., 210 F.3d

21

1112, 1118 (9th Cir. 2000).

22

arguments in his amended complaint or pleads any clearly meritless

23

claims, he and his counsel may be subject to sanctions under 28

24

U.S.C. § 1927, Federal Rule of Civil Procedure 11, the Court's

25

local rules, and the Court's inherent power.

26

///

27

///

28

///

The Court may impose such sanctions sua sponte.

If Plaintiff makes any frivolous

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1
2

V.

CONCLUSION
For the foregoing reasons, the Court GRANTS the motion to

3

dismiss and the motion to strike filed by Defendant Wells Fargo

4

Bank, N.A.

5

WITH LEAVE TO AMEND.

6

to file an amended complaint.

7

amended complaint within this time frame, this action will be

8

dismissed WITH PREJUDICE.

Plaintiff Bryan J. Valverde's Complaint is DISMISSED,
Plaintiff is granted thirty (30) days' leave
If Plaintiff fails to file an

9

United States District Court

For the Northern District of California

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IT IS SO ORDERED.

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Dated: August 25, 2011
UNITED STATES DISTRICT JUDGE

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