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

Filing 44

Order by Hon. Samuel Conti granting 36 Motion to Dismiss.(sclc1, COURT STAFF) (Filed on 1/28/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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)
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KARTHIK SUBRAMANI,
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Plaintiff,
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v.
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WELLS FARGO BANK N.A., FIDELITY )
NATIONAL TITLE COMPANY, and DOES )
1-100,
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Defendants.
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Case No. C 13-1605 SC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS

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I.

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INTRODUCTION
Now before the Court is Defendant Wells Fargo Bank N.A.'s

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("Defendant") motion to dismiss Plaintiff Karthik Subramani's

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("Plaintiff") second amended complaint.

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("MTD").

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("Reply"), and appropriate for decision without oral argument, Civ.

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L.R. 7-1(b).

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DENIES in part Defendant's motion to dismiss.

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///

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///

ECF Nos. 35 ("SAC"), 36

The matter is fully briefed, ECF Nos. 38 ("Opp'n"), 40

As explained below, the Court GRANTS in part and

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BACKGROUND

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A.

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The facts alleged in the SAC are substantially similar to

Factual Background

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those alleged in Plaintiff's prior pleading.

This action arises

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from a $479,600 mortgage loan (the "Loan") Plaintiff obtained from

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Defendant on October 18, 2006, recorded by an adjustable-rate

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promissory note and secured by a deed of trust ("DOT") against

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residential real property in Livermore, California.

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that Plaintiff agreed to repay the borrowed $479,600 or risk

The DOT states

United States District Court

For the Northern District of California

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foreclosure, and that "[t]he Note or a partial interest in the note

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(together with this Security Instrument) can be sold one or more

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times without prior notice to [Plaintiff]."

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original lender under the DOT, and Fidelity National Title

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Insurance Company ("FNTIC") -- purportedly not the same entity as

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the non-appearing defendant FNTC -- was the original trustee.

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Defendant was the

Plaintiff alleges that Defendant first sold the Loan to Wells

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Fargo Asset Securities Corporation ("WFASC") sometime around

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October 24, 2006.

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Plaintiff's Loan (consisting of the note and DOT) with other

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mortgages into a mortgage-backed securities pool, the Wells Fargo

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Mortgaged Backed Securities 2006-AR18 Trust, Mortgage Pass-Through

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Certificates, Series 2006-AR18 (the "WFMBS 2006-AR18 Trust").

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WFMBS 2006-ARIB Trust had been established on October 1, 2006 with

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the execution of a pooling and servicing agreement ("PSA").

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According to Plaintiff, one effect of the PSA was to prohibit

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assignment of the DOT and note before the trust's "Closing Date" of

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October 24, 2006.

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Soon after that, WFASC allegedly bundled

On July 23, 2009, Plaintiff received a notice of default

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The

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("NOD") from First American Title Insurance Company acting as an

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agent for First American Loanstar Trustee Services ("First American

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Loanstar") as purported "Agent for the Current Beneficiary."

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Compl. Ex. B ("NOD 1").

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associated with that NOD suggested without stating that Defendant

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was the "current beneficiary" of the Loan.

According to Plaintiff, statements

On August 25, 2009, First American Loanstar, acting as

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"attorney in fact for [Defendant]," issued a Substitution of

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Trustee ("SOT 1"), substituting itself as trustee.
Plaintiff's first NOD was rescinded on September 10, 2010, but

United States District Court

For the Northern District of California

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Plaintiff defaulted again and a second NOD was recorded on May 10,

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2011.

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Company acting as agent for FNTC.

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second NOD stated that Defendant was the original beneficiary under

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the DOT, but did not state who the current beneficiary was.

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The second NOD was issued on May 4, 2011, by LSI Title
According to Plaintiff, the

On May 6, 2011, between the issuance and recordation of the

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second NOD, Defendant issued a second Substitution of Trustee ("SOT

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2") appointing FNTC as substitute in place of FNTIC as trustee

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under the DOT.

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SOT was recorded.

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Three months later, on August 11, 2011, the second

Plaintiff did not cure his second default, and on August 11,

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2011 -- the same day the second SOT was recorded -- FNTC, acting as

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trustee under the DOT, issued and caused recording of the Notice of

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Trustee Sale.

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Plaintiff's Property in a foreclosure sale to non-party California

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Equity Management Group, Inc., and issued the Trustee's Deed Upon

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Sale ("TDUS") on August 15, 2012.

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A year later, on August 9, 2012, FNTC sold

Plaintiff contends that all of the legal documents described

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above were void because Defendant was no longer the valid lender in

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the DOT, or even an agent of a successor beneficiary, after it sold

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the Loan in 2006.

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the DOT or endorse the note pursuant to the PSA.

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abide by California law regarding the endorsement, assignment, and

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recordation of notes and DOTs.

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after Defendant sold the Loan, neither Defendant nor anyone else

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had any right to or interest in the Loan, so all legal notices

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associated with the note and DOT -- including the SOTs, NODs, and

United States District Court

For the Northern District of California

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According to Plaintiff, Defendant did not assign
Nor did Defendant

Plaintiff therefore states that

the foreclosure sale itself -- are illegal and void.

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B.

Procedural History

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Plaintiff filed this action in federal court in April 2013.

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He subsequently filed a first amended complaint, asserting causes

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of action for: (1) wrongful foreclosure; (2) constructive fraud;

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(3) cancellation of fraudulent instruments; (4) violation of

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California's nonjudicial foreclosure statute, Cal. Civ. Code §

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2934a(a)(1)(A); (5) unjust enrichment; (6) violation of the federal

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Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1601 et seq.; (7)

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violation of California's Unfair Competition Law ("UCL"), Bus. &

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Prof. Code Section 17200; and (8) declaratory relief.

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("FAC").

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ECF No. 24

Defendant moved to dismiss the FAC in its entirety, and the

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motion was granted in part and denied in part on October 31, 2013.

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ECF No. 33 ("Oct. 31 Order").

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declined to disturb Plaintiff's claims for wrongful foreclosure,

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cancellation of fraudulent instruments, unjust enrichment, and UCL

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fraud.

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Plaintiff's claims for constructive fraud, TILA, and UCL unfairness

Id. at 18.

For the most part, the Court

The Court dismissed with leave to amend

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and unlawfulness.

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Id.

The remaining claims were dismissed with

prejudice.

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Plaintiff subsequently filed the SAC, which reasserts the

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claims the Court declined to disturb, along with the claims that it

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dismissed with prejudice.

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SAC and the FAC is that the SAC contains new allegations regarding

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a fiduciary relationship between Plaintiff and Defendant.

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filing the SAC, Plaintiff disregarded much of the guidance provided

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in the October 31 Order.

The only material difference between the

In

Defendant does too, as it now moves to

United States District Court

For the Northern District of California

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dismiss the SAC in its entirety, including those claims that the

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Court previously found were sufficiently pleaded.

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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

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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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1988).

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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, 556 U.S. 662, 679 (2009).

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

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

"Dismissal can be based

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

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.

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The allegations made in a

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1202, 1216 (9th Cir. 2011).

Starr v. Baca, 652 F.3d

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IV.

DISCUSSION
Notwithstanding the Court's October 31 Order denying

United States District Court

For the Northern District of California

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Defendant's motion to dismiss Plaintiff's claims for wrongful

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foreclosure, cancellation of written instruments, unjust

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enrichment, and UCL fraud, Defendant now moves to dismiss those

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claims again.

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to reconsider its prior ruling.

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arguments are meritless.

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support of these claims, and the Court declines to disturb the

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findings of the October 31 Order.

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claims that it previously dismissed with leave to amend:

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constructive fraud, TILA, and UCL unfairness and unlawfulness.

It is unclear whether Defendant is asking the Court
In any event, Defendant's

Plaintiff pleads the same facts in

The Court considers only those

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A.

Constructive Fraud

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To state a prima facie claim for constructive fraud, a

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plaintiff must allege (1) a fiduciary or confidential relationship;

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(2) an act, omission or concealment involving a breach of that

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duty; (3) reliance; and (4) resulting damage.

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Fed. Bank, 82 Cal. App. 4th 399, 414 (Cal. Ct. App. 2000).

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the first element, "a financial institution owes no duty of care to

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a borrower when the institution's involvement in the loan

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transaction does not exceed the scope of its conventional role as a

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Assilzadeh v. Cal.
As to

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mere lender of money," and commercial lenders "[are] entitled to

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pursue [their] own economic interests in a loan transaction."

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Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089, 1096

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& 1093 n.1 (Cal. Ct. App. 1991) (citations omitted).

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The Court previously dismissed Plaintiff's claim for

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constructive fraud on the ground that Plaintiff failed to allege a

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fiduciary relationship between himself and Defendant.

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Order at 12-13.

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regarding the existence of a fiduciary relationship, it offers no

Oct. 31

While Plaintiff's SAC contains new conclusions

United States District Court

For the Northern District of California

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new factual allegations.

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that Defendant provided him with a loan, that "he TRUSTED his

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lender to act in good faith [and] keep the chain of title clear,"

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and that "Plaintiff did not expect his investment to fund some sort

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of Wall Street securities."

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not the borrower's expectations, that creates a fiduciary

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relationship.

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ordinary loan transaction.

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alleged bad faith conduct after the completion of the loan

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transaction, see id., but he cites no authority establishing that

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such conduct can create a fiduciary relationship.

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See SAC ¶ 90.

Id.

Plaintiff merely pleads

But it is the lender's conduct,

Here, Plaintiff has pleaded nothing more than an
Plaintiff also targets Defendant's

Plaintiff's claim for constructive fraud fails.

As it appears

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that further amendment would be futile, the claim is DISMISSED WITH

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PREJUDICE.

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B.

TILA

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The Court previously dismissed Plaintiff's TILA claim with

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leave to amend so that Plaintiff could plead new facts establishing

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that the claim is not time-barred.

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Plaintiff has failed to plead such facts in the SAC.

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Oct. 31 Order at 16-17.
In fact, the

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TILA claims pleaded in the SAC and FAC are virtually identical.

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Compare FAC 112-117 with SAC ¶¶ 101-105.

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Defendant raises a statute of limitations argument in its motion to

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dismiss, Plaintiff fails to join the issue in his opposition brief.

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Plaintiff also fails to address a number of other concerns raised

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in the Court's October 31 Order, including its instruction that the

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FDCPA cannot support Plaintiff's TILA claim.

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Plaintiff's TILA claim is DISMISSSED WITH PREJUDICE.
C.

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United States District Court

Accordingly,

UCL

In its October 31 Order, the Court dismissed Plaintiff's UCL

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For the Northern District of California

Further, although

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claim to the extent it was predicated on unfair or unlawful

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practices.

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specify whether he was asserting a claim under the unfair and

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unlawful prongs of the UCL, and the Court found Plaintiff's

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references to the Unfair Practice Act impermissibly vague.

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16.

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one pleaded in the FAC.

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The only difference is an additional conclusory paragraph in the

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SAC asserting: "Plaintiff properly alleges that Defendants

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completed an illegal Trustee Sale of the Plaintiff's Property . .

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."

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Court's guidance, his UCL claim is DISMISSED WITH PREJUDICE to the

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extent that it is predicated on the unfair and unlawful prongs of

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the statute.

Oct. 31 Order at 15-16.

Plaintiff had failed to

Id. at

The UCL claim pleaded in the SAC is virtually identical to the

SAC ¶ 120.

Compare FAC ¶¶ 118-31 with SAC ¶¶ 106-20.

As Plaintiff has made no effort to comply with the

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V.

CONCLUSION
For the reasons set forth above, Defendant's motion to dismiss

Plaintiff's SAC is GRANTED in part and DENIED in part.

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Plaintiff's

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claims for constructive fraud and TILA are DISMISSED WITH

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PREJUDICE.

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claim to the extent it is predicated on allegedly unfair and

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unlawful practices.

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remain undisturbed, except to the extent they were dismissed by the

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Court's October 31 Order.

The Court also DISMISSES WITH PREJUDICE Plaintiff's UCL

The other causes of action pleaded in the SAC

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IT IS SO ORDERED.

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United States District Court

For the Northern District of California

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Dated: January 28, 2014

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UNITED STATES DISTRICT JUDGE

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