Cockrell v. Wells Fargo Bank, N.A.

Filing 21

Order by Hon. Samuel Conti granting in part and denying in part 4 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 7/23/2013)

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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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)
)
ERIKA COCKRELL, for the Estate )
of Dennis F. Cockrell,
)
)
Plaintiff,
)
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v.
)
)
WELLS FARGO BANK, N.A., and Does )
1-100, inclusive,
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)
Defendants.
)
)
)
)

Case No. CV 13-2072 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S
MOTION TO DISMISS

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I.

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INTRODUCTION
This is a foreclosure dispute.

Now before the Court is

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Defendant Wells Fargo Bank, N.A.'s ("Defendant") motion to dismiss

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Plaintiff Erika Cockrell's ("Plaintiff") complaint.

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A ("Compl."); ECF No. 4 ("MTD").

The motion is fully briefed.

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Nos. 10 ("Opp'n"), 15 ("Reply").

For the reasons discussed below,

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Defendant's motion is GRANTED in part and DENIED in part.

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///

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ECF No. 1 Ex.
ECF

1 II.

BACKGROUND

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In December 2005, Dennis F. Cockrell obtained a loan from

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Defendant, secured by a deed of trust against his home.

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("Def.'s RJN") Ex. A ("DOT").

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Defendant for a loan modification to obtain a fixed interest rate

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loan, since his loan's monthly payments and interest rates reset

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annually.

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told Mr. Cockrell that he could obtain a loan modification

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guaranteeing fixed rates if he went late on his monthly payments,

Compl. ¶ 10.

ECF No. 5

In December 2011, Mr. Cockrell asked

Defendant's agent Anthony Garcia allegedly

United States District Court

For the Northern District of California

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and that if he did go late, Defendant would neither report Mr.

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Cockrell for nonpayment nor accelerate his loan.

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Cockrell was skeptical, so he applied for a loan modification while

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also making payments, but Defendant denied this application around

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April 2012.

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Cockrell that his application was denied because he was current on

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his payments, and that the earlier promise not to take action in

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response to nonpayment still stood.

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Mr. Cockrell missed his first payment in May 2012, hoping to obtain

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a loan modification.

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of Intent to Accelerate and learned that Defendant had reported him

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late for the missed payment.

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Id. ¶ 12.

Id. ¶ 11.

Mr.

Defendant's agent Mr. Garcia told Mr.

Id.

Id.

After this discussion,

Shortly after that, he received a Notice

Id. ¶ 2013.

Sadly, Mr. Cockrell fell ill and passed away in June 2012.

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Compl. ¶ 15.

Plaintiff, one of Mr. Cockrell's children, sued

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Defendant on behalf of Mr. Cockrell's estate, asserting causes of

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action for (1) breach of the covenant of good faith and fair

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dealing, (2) promissory estoppel, (3) breach of contract, (4)

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intentional infliction of emotional distress, and (5) unfair

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competition under California's Unfair Competition Law ("UCL"), Cal.

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Bus. & Prof. Code §§ 17200, et seq.

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3 III.

LEGAL STANDARD

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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.

"Dismissal can be based

United States District Court

For the Northern District of California

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1988).

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

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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)).

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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).

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. at 678 (citing Bell Atl. Corp. v.
The allegations made in a

Starr v. Baca, 652 F.3d

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26 IV.

DISCUSSION

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Defendant argues that the Court should dismiss Plaintiff's

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case because (1) Plaintiff lacks standing to sue, (2) Plaintiff's

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state law claims are preempted by federal law, and (3) Plaintiff

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fails to state claims for any of the complaint's causes of action.

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i.

Standing

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Defendant claims that Plaintiff lacks standing to bring this

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case because she has no legal authority to litigate claims on her

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father's estate's behalf.

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section 9820, which says that a "personal representative," such as

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an estate's executor or administrator, can commence actions on

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behalf of the estate.

Defendant cites California Probate Code

Reply at 1.

Defendant goes on to raise

United States District Court

For the Northern District of California

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several legal arguments that are inapposite here, because Plaintiff

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has pled that she is the executor and administrator of Mr.

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Cockrell's estate, and that she has supplied Defendant with papers

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proving as much.

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of Foreign Assets Control, 466 F.3d 764, 771 (9th Cir. 2006) ("To

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survive a rule 12(b)(6) motion to dismiss, [plaintiff] must allege

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facts in [the complaint] that, if proven, would confer standing

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upon [her].")

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this action.

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ii.

See Compl. ¶¶ 3, 5, 16; see also Sacks v. Office

The Court finds that Plaintiff has standing to bring

Preemption

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Defendant contends that Plaintiff's state law claims are

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preempted by the federal Home Owner's Loan Act ("HOLA"), which is

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overseen by the Office of Thrift Supervision ("OTS").

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Under HOLA, Congress gave OTS authority to issue regulations

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concerning thrifts such as World Savings Bank, Defendant's

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predecessor in interest.

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Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008).

MTD at 1-6.

See 12 U.S.C. 1464; Silvas v. E*Trade

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Pursuant to HOLA, OTS promulgated a regulation stating that

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OTS "occupies the entire field of lending regulation for federal

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further provides that "federal savings associations may extend

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credit as authorized under federal law . . . without regard to

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state laws purporting to regulate or otherwise affect their credit

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activities."

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"[t]he terms of credit, including amortization of loans and the

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deferral and capitalization of interest," "[d]isclosure and

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advertising, including laws requiring specific statements,

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information, or other content to be included in credit application

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United States District Court

savings associations."

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For the Northern District of California

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forms," and "[p]rocessing, origination, servicing, sale or purchase

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of, or investment or participation in, mortgages."

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Id.

12 C.F.R. § 560.2(a).

The regulation

Preempted state laws include those relating to

Id. § 560.2(b).

However, state "contract and commercial law," "real property

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law," and "tort law," among other things, "are not preempted to the

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extent that they only incidentally affect lending operations . . .

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or are otherwise consistent with the purpose [of the regulation]."

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Id. § 560.2(c).

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OTS has outlined a framework for evaluating whether or not a
state law is preempted under 12 C.F.R. § 560.2:
When analyzing the status of state laws
under § 560.2, the first step will be to
determine whether the type of law in
question is listed in paragraph (b). If so,
the analysis will end there; the law is
preempted. If the law is not covered by
paragraph (b), the next question is whether
the law affects lending. If it does, then,
in
accordance
with
paragraph
(a),
the
presumption
arises
that
the
law
is
preempted. This presumption can be reversed
only if the law can clearly be shown to fit
within the confines of paragraph (c). For
these purposes, paragraph (c) is intended to
be interpreted narrowly. Any doubt should be
resolved in favor of preemption.
OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sep. 30, 1996).

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In Silvas, the Ninth Circuit employed this framework to

preempted under OTS regulations.

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so, "the Ninth Circuit focused not on the nature of the cause of

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action allegedly preempted, but rather on the 'functional effect

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upon lending operations of maintaining the cause of action.'"

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Rumbaua v. Wells Fargo Bank, N.A., No. 11-1998 SC, 2011 WL 3740828,

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at *7 (N.D. Cal. Aug. 25, 2011) (citation omitted).

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question was whether applying a state law to a federal savings

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United States District Court

determine whether a plaintiff's UCL claims, "as applied," were

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For the Northern District of California

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association would "impose requirements" concerning activities

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regulated by OTS.

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"premised on fraud or promises made by Wells Fargo . . . are not

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necessarily preempted, because the only 'requirement' they impose

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on federal savings banks is that they be held responsible for the

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statements they make to their borrowers."

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Id.

514 F.3d at 1004-07.

In doing

The pertinent

This Court has previously held that claims

Id. at 20.

HOLA governs the loan at issue here, since it originated with

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Defendant's predecessor WSB, a federal savings bank subject to HOLA

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and OTS regulations.

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history of Defendant's corporate structure).

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though Defendant changed name and form several times, and Defendant

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itself is not subject to HOLA and OTS regulations, the loan's

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origination from a HOLA-regulated entity makes HOLA applicable in

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this case.

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961, 971 (N.D. Cal. 2010).

Def.'s RJN Exs. B-F (documents describing the
Therefore, even

See Appling v. Wachovia Mortg., FSB, 745 F. Supp. 2d

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Defendant argues that HOLA preempts all of Plaintiff's state

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law claims because they would impose requirements related to loan

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servicing, and such an imposition would be barred by HOLA.

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10-11 (citing 12 C.F.R. § 560.2(b)).

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MTD at

HOLA preemption is not so

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broad.

Plaintiff's claims in this case may "relate" to loan

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servicing, a category that appears in 12 C.F.R. § 560.2(b).

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However, the claims are tort causes of action whose effects on loan

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servicing are incidental, and functionally, the causes of action

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that Plaintiff asserts serve only to make Defendant tell the truth

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and abide by its promises -- not to impose additional requirements

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specifically related to loan servicing.

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Fargo Bank, N.A., 829 F. Supp. 2d 873, 881 (N.D. Cal. 2011).

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Holding otherwise, in a case like this one, could essentially

See Shaterian v. Wells

United States District Court

For the Northern District of California

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permit federal savings associations to lie to their customers with

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impunity.

Rumbaua, 2011 WL 3740828, at *7.

iii.

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Plaintiff's Breach of the Implied Covenant Claim

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"The covenant of good faith and fair dealing, implied by law

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in every contract, exists merely to prevent one contracting party

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from unfairly frustrating the other party's right to receive the

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benefits of the agreement actually made."

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Inc., 24 Cal. 4th 317, 349 (Cal. 2000).

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a

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technically not a breach, frustrates the other party's right to the

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benefit of the contract.

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3d 1136, 1153 (Cal. Ct. App. 1990).

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substantive duties or limits on the contracting parties beyond

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those incorporated in the specific terms of their agreement."

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24 Cal. 4th at 349-50.

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covenant of good faith and fair dealing are:

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contracting

party

from

taking

Guz v. Bechtel Nat.

The covenant thus prevents

an

action

that,

although

Love v. Fire Ins. Exchange, 221 Cal. App.
The covenant "cannot impose

Guz,

The elements of a claim for breach of the

(1) the plaintiff and the defendant entered
into a contract; (2) the plaintiff did all or
substantially all of the things that the
contract required him to do or that he was
excused from having to do; (3) all conditions

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required for the defendant's performance had
occurred; (4) the defendant unfairly interfered
with the plaintiff's right to receive the
benefits
of
the
contract;
and
(5)
the
defendant's conduct harmed the plaintiff.

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Woods v. Google, Inc., -- F. Supp. 2d --, 2012 WL 3673319, at *8

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(N.D. Cal. 2012) (citing Judicial Counsel of California Civil Jury

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Instructions § 325 (2011)).

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Plaintiff alleges that Defendant's promise to forgo action

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against Mr. Cockrell if he went late on her payments impeded his

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contractual obligation to pay her loans and interfered with his

United States District Court

For the Northern District of California

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rights to receive the benefits of those agreements.

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As the Court has repeatedly held, this argument fails unless the

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defendant actively hindered a plaintiff's obligation to pay his

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loans.

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632088, at *3 (N.D. Cal. Feb. 20, 2013) (citing Tanner v. Title

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Ins. & Trust Co., 20 Cal. 2d 814, 824 (Cal. 1942)).

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noted that the same circumstances that may support a promissory

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estoppel claim could fail to support a breach of the implied

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covenant claim: in some circumstances, actionable dishonesty is not

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necessarily an active interference with the right to receive a

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contract's benefits.

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0272 SC, 2013 WL 2458368, at *3 (N.D. Cal. June 7, 2013).

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claim is therefore DISMISSED with leave to amend, so that Plaintiff

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has the opportunity to plead facts showing that Defendant actively

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hindered Mr. Cockrell's loan payments.

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Opp'n at 5.

See Harvey v. Bank of Am., N.A., No. 12-3238 SC, 2013 WL

iv.

The Court has

See Ren v. Wells Fargo Bank, N.A., No. 13This

Plaintiff's Promissory Estoppel Claim

"Promissory estoppel requires: (1) a promise that is clear and

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

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promise is made; (3) the reliance must be reasonable and

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

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injured by his or her reliance."

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v. Paleewong Trading Co., Inc., 688 F. Supp. 2d 940, 953 (N.D. Cal.

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2010).

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lacks consideration (in the usual sense of something bargained for

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and given in exchange) binding under certain circumstances."

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Plaintiff alleges that in December 2010 and April 2011,

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Defendant's agent Anthony Garcia told Mr. Cockrell that he could

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cure the defects that resulted in the denial of his loan

Boon Rawd Trading Int'l Co., Ltd.

"The purpose of this doctrine is to make a promise that

Id.

United States District Court

For the Northern District of California

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modification application if he went late on his payments, and that

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Defendant would take no action against him if he did so.

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29-31.

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Defendant's promises because of their consistency across several

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months, Defendant's agent's apparent authority, and Mr. Cockrell's

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desire to modify his loan's terms.

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Further, Plaintiff alleges that Mr. Cockrell was harmed by

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Defendant's acceleration of the loan and reporting of Mr. Cockrell

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to the credit reporting agencies.

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Plaintiff cannot identify a clear and unambiguous promise, and

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cites a non-binding case holding a different plaintiff's

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allegations of promissory estoppel implausible.

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Compl. ¶¶

Plaintiff adds that Mr. Cockrell foreseeably relied on

Id. ¶¶ 31-34; Opp'n at 9-11.

Id.

Defendant claims that

Reply at 5-6.

The Court finds that Plaintiff's allegations set forth a prima

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facie promissory estoppel claim.

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enough detail to support Plaintiff's cause of action.

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v.

They are plausible and provide

Plaintiff's Breach of Contract Claim

"To state a cause of action for breach of contract, a party

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must plead [1] the existence of a contract, [2] his or her

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performance of the contract or excuse for nonperformance, [3] the

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defendant's breach, and [4] resulting damage."

Mora v. U.S. Bank,

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N.A., No. 11-6598 SC, 2012 WL 2061629, *6 (N.D. Cal. June 7, 2012)

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(citing Harris v. Rudin, Richman & Appel, 74 Cal. App. 4th 299, 307

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(Cal. Ct. App. 1999)).

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Plaintiff alleges that Defendant breached the DOT when it

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refused to allow Plaintiff to take over the rights and obligations

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of the DOT from Mr. Cockrell, because the DOT includes a section

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concerning the rights and obligations of anyone who assumes Mr.

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Cockrell's rights and obligations under the DOT.

Opp'n at 13;

United States District Court

For the Northern District of California

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Compl. ¶ 39 (citing DOT Section 11).

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11 of the DOT does not create a contractual right for anyone to

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assume the loan (including Mr. Cockrell's heirs).

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Defendant also argues that the property secured by the DOT is not

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the property of Plaintiff, and that Plaintiff has no standing

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relative to the property because she is not the executor of Mr.

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Cockrell's estate.

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Defendant argues that Section

Reply at 5.

Id.

Defendant is wrong on both latter points, since Plaintiff is

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Mr. Cockrell's estate's executor or administrator, and as one of

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his children she also takes a share of ownership interest in the

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property.

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that Plaintiff has failed to indicate the basis for her contractual

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right to assume Mr. Cockrell's rights and responsibilities under

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the DOT.

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would happen under such circumstances does not itself create a

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right or prove that Defendant breached the DOT.

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determine, based on the pleadings or Plaintiff's opposition brief,

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whether Plaintiff has complied with the Probate Code's requirements

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for transference of a secured debt or obligation, or otherwise how

Cal. Probate Code § 6402.

However, Defendant is correct

The fact that the DOT includes language governing what

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The Court cannot

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Plaintiff claims to be subject to the section of the DOT she claims

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that Defendant breached.

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leave to amend, so that Plaintiff can correct the pleading

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deficiency described here.

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vi.

This claim is therefore DISMISSED with

Plaintiff's IIED Claim

To state a claim for intentional infliction of emotional

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

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outrageous conduct by the defendant with the intention of causing,

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or reckless disregard of the probability of causing, emotional

United States District Court

For the Northern District of California

10

distress; (2) the plaintiff's suffering severe or extreme emotional

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

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distress by the defendant's outrageous conduct."

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Super. Ct., 54 Cal. 3d 868, 903 (Cal. 1991) (quotations and

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citations omitted).

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it is "so extreme as to exceed all bounds of that usually tolerated

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in a civilized community."

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Cal. 3d 197, 185 (Cal. 1982).

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Christensen v.

Conduct is only "extreme and outrageous" when

Davidson v. City of Westminster, 32

Plaintiff claims that Defendant is liable for IIED, because

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Defendant allegedly induced Mr. Cockrell to go late on his payments

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with the intention of placing him in default and ruining his

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credit, all while knowing of Mr. Cockrell's weakened state and of

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the fact that causing him to default would compound his health

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problems.

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Opp'n at 13-14; Compl. ¶ 43.

Plaintiff's allegation is not plausible.

The Court takes as

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true Plaintiff's pleadings that bank-related stress worsened Mr.

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Cockrell's condition, and there is no doubt that Mr. Cockrell's

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death was a tragic loss for his family.

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Defendant may have known of Mr. Cockrell's health issues, Plaintiff

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However, even though

cause distress to Mr. Cockrell when it accelerated his loan; that

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it was recklessly inconsiderate of his emotional health in doing

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so; or that Defendant's behavior (however self-interested or

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unfeeling) rose to the level of intolerable extremity that the law

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requires here.

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health's deterioration was apparently his doctor's prescription of

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improper medication.

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removed from Defendants' conduct to support Plaintiff's claims, and

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United States District Court

has not pled sufficient facts indicating that Defendant intended to

2

For the Northern District of California

1

in any event, Plaintiff cannot use that physical condition as proxy

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for Mr. Cockrell's emotional state.

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Further, the ultimate cause of Mr. Cockrell's

Compl. ¶ 15.

This is a factor too far

Plaintiff's IIED claim is DISMISSED with leave to amend, to

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provide Plaintiff the opportunity to plead sufficient facts to

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support this cause of action.

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vii.

Plaintiff's UCL Claim

The UCL prohibits unfair competition, including, inter alia,

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"any unlawful, unfair or fraudulent business act."

Cal. Bus. &

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Prof. Code § 17200.

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disjunctive, it establishes three varieties of unfair competition -

20

- acts or practices which are unlawful, or unfair, or fraudulent."

21

Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554

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(Cal. Ct. App. 2007).

"Because [section 17200] is written in the

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Plaintiff's complaint is not a model of clarity, but she

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appears to bring her UCL claim under the "unfairness" prong because

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her substantive allegations concern only unfair competition, not

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unlawful or fraudulent activity.

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courts and the legislature have not specified which of several

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possible "unfairness" standards is the proper one, but this Court

See Compl. ¶¶ 48-51.

12

California

the approach to unfairness provided in Camacho v. Auto. Club of S.

3

Cal., 142 Cal. App. 4th 1394, 1402 (Cal. Ct. App. 2006), which

4

incorporated the three factors constituting unfairness under the

5

Federal Trade Commission Act: "(1) the injury must be substantial;

6

(2) the injury must not be outweighed by any countervailing

7

benefits to consumers or competition; and (3) the injury must be

8

one that the consumer could not reasonably have avoided."

9

Bank of America, N.A., No. 11–01232 CW, 2011 WL 3607608, at *10

10

United States District Court

recently found that the California Supreme Court would likely adopt

2

For the Northern District of California

1

(N.D. Cal. Aug. 15, 2011) (citing Camacho, 12 Cal. App. 4th at

11

1402).

Lyons v.

Plaintiff asserts that the conduct underlying all of her state

12
13

law claims "constitute[] unfair competition" under the UCL.

FAC ¶¶

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48-51.

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dismissed because all of their predicate claims fail.

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10.

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predicate claims fail as insufficiently pled, with only the

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promissory estoppel claim surviving.

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claims premised on causes of action other than promissory estoppel

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are DISMISSED.

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states a claim for unfair competition under the UCL: the injury was

22

substantial, no countervailing benefits to consumers or competition

23

exist, and Plaintiff's pleading of reasonable reliance under the

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promissory estoppel claim also serves to show that Mr. Cockrell

25

could not reasonably have avoided the injury in this case.

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///

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///

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///

Defendant argues that Plaintiff's UCL claims should be
Reply at 9-

As discussed above, the Court finds that three of Plaintiff's

Consequently, Plaintiff's UCL

However, Plaintiff's promissory estoppel claim also

13

1

V.

CONCLUSION

2

As explained above, the Court GRANTS in part and DENIES in

3

part Defendant Wells Fargo Bank, N.A.'s motion to dismiss Plaintiff

4

Erika Cockrell's complaint.

The Court orders as follows:

5

Claim 1 (Breach of the Implied Covenant) is DISMISSED with

6

leave to amend.

7

Claim 2 (Promissory Estoppel) is undisturbed.

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Claim 3 (Breach of Contract) is DISMISSED with leave to

9

amend.

United States District Court

For the Northern District of California

10

Claim 4 (IIED) is DISMISSED with leave to amend.

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Claim 5 (UCL) is undisturbed as to the unfair competition

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claim predicated on Plaintiff's promissory estoppel claim.

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Other UCL claims are DISMISSED with leave to amend.

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Plaintiff has thirty (30) days from this Order's signature date to

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file an amended complaint.

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may be dismissed with prejudice.

If she does not, her defective claims

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IT IS SO ORDERED.

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Dated: July 23, 2013
UNITED STATES DISTRICT JUDGE

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