US Distressed Mortgage Fund, LLC v. Wells Fargo Bank, N.A. et al

Filing 43

ORDER GRANTING IN PART AND DENYING IN PART 34 WELLS FARGO'S MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT. Signed by Judge Laurel Beeler on 6/10/2014. (lblc2, COURT STAFF) (Filed on 6/10/2014)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 Northern District of California 10 San Francisco Division US DISTRESSED MORTGAGE FUND, LLC, 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 Plaintiff, 13 14 15 16 v. WELLS FARGO BANK, N.A., and REGIONAL TRUSTEE SERVICES CORPORATION, WELLS FARGO HOME MORTGAGE, INC., a division of WELLS FARGO BANK, N.A. a National Association; and DOES 1 through 100, inclusive, No. C 13-05177-LB ORDER GRANTING IN PART AND DENYING IN PART WELLS FARGO’S MOTION TO DISMISS PLAINTIFF’S SECOND AMENDED COMPLAINT [Re: ECF No. 34] 17 18 Defendants. _____________________________________/ 19 INTRODUCTION 20 Plaintiff US Distressed Mortgage Fund, LLC (the “Fund”) sued Wells Fargo Bank, N.A. (“Wells 21 Fargo”) and Wells Fargo Home Mortgage, Inc., a division of Wells Fargo Bank, N.A. (“Wells Fargo 22 Home Mortgage”). See Second Amended Complaint (“SAC”), ECF No. 33.1 The parties stipulated 23 to the dismissal of Wells Fargo Home Mortgage, Stipulation, ECF No. 41, and now Wells Fargo 24 moves to dismiss the Fund’s Second Amended Complaint. See Motion, ECF No. 34. Pursuant to 25 Civil Local Rule 7-1(b), the court finds this matter suitable for determination without oral argument 26 and vacates the June 5, 2014 hearing. Upon consideration of the Second Amended Complaint, the 27 28 1 Citations are to the Electronic Case File (“ECF”) with pin cites to the electronicallygenerated page numbers at the top of the document. C 13-05177 LB ORDER RE MOTION TO DISMISS 1 briefs submitted, and the applicable legal authority, the court GRANTS IN PART and DENIES IN 2 PART Wells Fargo’s motion to dismiss.2 STATEMENT3 3 4 5 6 7 8 9 10 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 The Fund and Wells Fargo have consented to the undersigned’s jurisdiction. Consent (Wells Fargo), ECF No. 8; Consent (Fund), ECF No. 12. 3 The facts are taken from the Second Amended Complaint and the documents submitted by Wells Fargo that are subject to judicial notice. Wells Fargo asks the court to take judicial notice of the following documents: (1) a Deed of Trust, dated January 12, 2000, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2000-005316 on January 13, 2000; (2) an Open End Deed of Trust, dated July 2, 2007, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2007-104376 on July 11, 2007; (3) a Certificate of Corporate Existence, dated April 21, 2006, that was issued by the Office of Thrift Supervision, Department of the Treasury (“OTS”); (4) a letter on the letterhead of the OTS, dated November 19, 2007, authorizing a name change from World Savings Bank, FSB to Wachovia Mortgage, FSB; (5) the Charter of Wachovia Mortgage, FSB, effective December 31, 2007, and signed by the Director of the OTS, reflecting in Section 4 that Wachovia Mortgage, FSB was subject to the Home Owner’s Loan Act and the OTS; (6) the Official Certification of the Comptroller of the Currency (“OCC”) stating that effective November 1, 2009, Wachovia Mortgage FSB converted to Wells Fargo Bank Southwest, N.A., which then merged with and into Wells Fargo Bank, N.A.; (7) a printout from the website of the Federal Deposit Insurance Corporation, dated December 15, 2010, showing the history of Wachovia Mortgage, FSB; (8) a Notice of Default, dated February 24, 2012, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2012-026085 on February 28, 2012; (9) a Notice of Trustee’s Sale, dated May 17, 2012, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2012-074875 on May 30, 2012; (10) a Trustee’s Deed Upon Sale, dated March 4, 2013, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2013-040845 on March 15, 2013; (11) a Notice of Default, dated May 31, 2013, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2013-083249 on June 4, 2013; and (12) a Notice of Trustee’s Sale, dated September 4, 2013, that was recorded in the Official Records of the San Mateo County Recorder’s Office as Document No. 2013-132311 on September 11, 2013. See Defendant’s Request for Judicial Notice (“RJN”), Exs. AL, ECF No. 35. The court may take judicial notice of matters of public record. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). Because Exhibits A-L are public records, the court may take judicial notice of the undisputed facts contained in them. See Fed. R. Evid. 201(b); Hotel Employees & Rest. Employees Local 2 v. Vista Inn Mgmt. Co., 393 F. Supp. 2d 972, 978 (N.D. Cal. 2005); see also Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 264-67 (2011). Moreover, the Fund has not objected to the court’s consideration of any these documents or challenged any of the facts in them. See generally Opposition, ECF No. 36. Accordingly, the court takes judicial notice of Exhibits A through L (numbered 1-12 above) to Wells Fargo’s request. C 13-05177 LB ORDER RE MOTION TO DISMISS 2 1 I. FACTS 2 On or about January 13, 2000, World Savings Bank, FSB (“World Savings”), a federal savings 3 bank, made a loan of $431,200 to Manoj Rijhwani and Lisa Rijhwani. SAC ¶ 5, ECF No. 33 at 2; 4 RJN, Ex. A, ECF No. 35 at 6. This loan was consummated through a promissory note and was 5 secured by a deed of trust recorded against the Rijhwanis’ home located at 1044 Rudder Lane, 6 Foster City, California (the “Property”). SAC ¶ 5, ECF No. 33 at 2; RJN, Ex. A, ECF No. 35 at 6. 7 For purposes of this order, this loan will be referred to as the “First Loan” and this deed will be 8 referred to as the “First Deed.” Savings to refinance the Property. SAC ¶ 5, ECF No. 33 at 2; RJN, Ex. B, ECF No. 20 at 31. This 11 loan also was consummated through a promissory note and was secured by a deed of trust recorded 12 For the Northern District of California On or about July 5, 2007, the Rijhwanis took out a $77,845 equity line of credit with World 10 UNITED STATES DISTRICT COURT 9 against the Property. SAC ¶ 5, ECF No. 33 at 2; RJN, Ex. B, ECF No. 20 at 31. For purposes of 13 this order, this loan will be referred to as the “Second Loan” and this deed will be referred to as the 14 “Second Deed.” 15 On December 31, 2007, World Savings changed its name to Wachovia Mortgage, FSB 16 (“Wachovia”), and remained a federal savings bank. RJN, Exs. D-E, ECF No. 35 at 55-60. In 17 November 2009, Wachovia changed its name to Wells Fargo Bank Southwest, N.A., became a 18 national association (and ceased being a federal savings bank), and immediately merged into Wells 19 Fargo, which was and is a national association. RJN, Exs. F-G, ECF No. 35 at 61-64. The Fund 20 alleges that both the Rijhwanis’ “mortgage[s]” and/or the” promissory note[s] and deed[s] of trust” 21 underlying those loans were eventually “transferred” to Wells Fargo. See SAC ¶ 5, ECF No. 33 at 2. 22 In 2011, the Rijhwanis defaulted on the First Loan and the Second Loan. SAC ¶ 6, ECF No. 33 23 at 2. A Notice of Default relating to the Second Loan and was recorded on February 28, 2012. RJN, 24 Exs. H, ECF No. 35 at 65-69. A Notice of Trustee’s Sale relating to the Second Deed was recorded 25 on May 30, 2012. RJN, Ex. I, ECF No. 35 at 71-72. On March 4, 2013, “Wells Fargo completed a 26 foreclosure” under the Second Deed and a Trustee’s Deed Upon Sale was recorded on March 15, 27 2013. SAC ¶ 6, ECF No. 33 at 2; RJN, Ex. J, ECF No. 35 at 73-76. The Fund was the successful 28 bidder with a bid of $231,600. SAC ¶ 6, ECF No. 33 at 2; RJN, Ex. J, ECF No. 35 at 73-76. The C 13-05177 LB ORDER RE MOTION TO DISMISS 3 1 amount owed on the Second Loan at the time of the sale was $85,468.94. SAC ¶ 6, ECF No. 33 at 2 2; RJN, Ex. J, ECF No. 35 at 73-76. 3 The Rijhwanis, however, had defaulted on the First Loan, too, so after purchasing the Property, the Fund began taking steps to find out how much money was still owed on it. See SAC ¶¶ 7-8, ECF 5 No. 33 at 2. On April 9, 2013, the Rijhwanis “executed two ‘Authorization to Inquire’ forms 6 prepared by Wells Fargo authorizing [the Fund] to assist [the Rijhwanis] in obtaining information 7 about their loans. Id. ¶ 7, ECF No. 33 at 2. However, despite “numerous” and “repeated” requests 8 “for a reinstatement quote and a payoff demand” for the First Loan, Wells Fargo “failed to provide 9 any information even though [the Fund] is the owner of the Property and the [Rijhwanis] submitted 10 an Authorization to Inquire to allow [the Fund] to access information about the loan.” Id. ¶ 8, ECF 11 No. 33 at 2. 12 For the Northern District of California UNITED STATES DISTRICT COURT 4 On May 20, 2013, the Rijhwanis and the Fund entered into a stipulation regarding possession of 13 the Property. Id. ¶ 9, ECF No. 33 at 2. In that stipulation, the Rijhwanis agreed to vacate the 14 Property by July 31, 2013. Id. Since that time, the Fund has been in possession of the Property. Id. 15 On June 4, 2013, Wells Fargo, through its agent, Regional Trustee Services Corporation 16 (“RTSC”), which is not a party to this ligation,4 recorded a Notice of Default under the First Loan. 17 SAC ¶ 10, ECF No. 33 at 3; RJN, Ex. K, ECF No. 35 at 77-81. This notice stated that the amount 18 owed on the First Loan as of May 31, 2013 was $129,063.76. RJN, Ex. K, ECF No. 35 at 77-81. A 19 Notice of Trustee’s Sale was recorded on September 11, 2013. SAC ¶ 10, ECF No. 33 at 3; RJN, 20 Ex. L, ECF No. 35 at 83-84. 21 II. PROCEDURAL HISTORY 22 The Fund initiated this civil action on October 8, 2013 in San Mateo County Superior Court. See 23 Notice of Removal, ECF No. 1. On November 6, 2013, Wells Fargo removed the action to this court 24 on diversity of citizenship grounds. See id. On April 4, 2014, upon the parties’ stipulation, the Fund 25 filed the operative Second Amended Complaint. See SAC, ECF No. 33. It contains the following 26 claims against Defendants: (1) violation of California Civil Code § 2941; (2) violation of California 27 28 4 The Fund named RTSC as a defendant to this action in the original complaint, but the Fund did not name it as a defendant in any subsequent, amended complaints. C 13-05177 LB ORDER RE MOTION TO DISMISS 4 1 Civil Code § 2943; (3) violation of 12 C.F.R. 1026.36; (4) violation of 12 U.S.C. § 2605; and (5) 2 violation of California Business and Professions Code § 17200. See id. ¶¶ 13-37, ECF No. 33 at 3-5. 3 On April 18, 2014, Wells Fargo moved under Federal Rules of Civil Procedure 8(a) and 12(b)(6) 4 to dismiss the Fund’s second, third, fourth, and fifth claims. Motion, ECF No. 34. It did not move 5 to dismiss the Fund’s first claim. The Fund filed an opposition on May 2, 2014, Opposition, ECF 6 No. 36, and Wells Fargo filed a reply on May 9, 2014, Reply, ECF No. 38. 7 On June 2, 2014, the parties stipulated to dismiss Wells Fargo Home Mortgage without prejudice 8 from this action, as it is a division of Wells Fargo, not a separate legal entity. See Stipulation and 9 Order, ECF No. 41. 10 I. LEGAL STANDARD 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 ANALYSIS Federal Rule of Civil Procedure 8(a) requires that a complaint contain a “short and plain 13 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 14 complaint must therefore provide a defendant with “fair notice” of the claims against it and the 15 grounds for relief. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation and 16 citation omitted). 17 A court may dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) when it does 18 not contain enough facts to state a claim to relief that is plausible on its face. See id. at 570. “A 19 claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw 20 the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 21 129 S. Ct. 1937, 1949 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ 22 but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting 23 Twombly, 550 U.S. at 557.). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does 24 not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his 25 ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the 26 elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief 27 above the speculative level.” Twombly, 550 U.S. at 555 (internal citations and parentheticals 28 omitted). C 13-05177 LB ORDER RE MOTION TO DISMISS 5 1 In considering a motion to dismiss, a court must accept all of the plaintiff's allegations as true 2 and construe them in the light most favorable to the plaintiff. See id. at 550; Erickson v. Pardus, 551 3 U.S. 89, 93-94 (2007); Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007). 4 If the court dismisses the complaint, it should grant leave to amend even if no request to amend facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Cook, Perkiss and Liehe, Inc. 7 v. Northern California Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990)). But when a party 8 repeatedly fails to cure deficiencies, the court may order dismissal without leave to amend. See 9 Ferdik v. Bonzelet, 963 F.2d 1258, 1261 (9th Cir. 1992) (affirming dismissal with prejudice where 10 district court had instructed pro se plaintiff regarding deficiencies in prior order dismissing claim 11 with leave to amend). 12 For the Northern District of California is made “unless it determines that the pleading could not possibly be cured by the allegation of other 6 UNITED STATES DISTRICT COURT 5 II. DISCUSSION 13 A. The Fund’s Second Claim 14 The Fund’s second claim is for violation of California Civil Code § 2943. Section 2943(b)(1) 15 16 provides that 18 A beneficiary, or his or her authorized agent, shall, within 21 days of the receipt of a written demand by an entitled person or his or her authorized agent, prepare and deliver to the person demanding it a true, correct, and complete copy of the note or other evidence of indebtedness with any modification thereto, and a beneficiary statement. 19 Section 2943(a)(1) defines a “beneficiary” as “a mortgagee or beneficiary of a mortgage or deed of 20 trust, or his or her assignees.” And Section 2943(a)(2) defines a “beneficiary statement” as “a 21 written statement showing” 17 22 23 (A) The amount of the unpaid balance of the obligation secured by the mortgage or deed of trust and the interest rate, together with the total amounts, if any, of all overdue installments of either principal or interest, or both. 24 (B) The amounts of periodic payments, if any. 25 (C) The date on which the obligation is due in whole or in part. 26 (D) The date to which real estate taxes and special assessments have been paid to the extent the information is known to the beneficiary. 27 28 (E) The amount of hazard insurance in effect and the term and premium of that insurance to the extent the information is known to the beneficiary. C 13-05177 LB ORDER RE MOTION TO DISMISS 6 1 (F) The amount in an account, if any, maintained for the accumulation of funds with which to pay taxes and insurance premiums. 2 3 (G) The nature and, if known, the amount of any additional charges, costs, or expenses paid or incurred by the beneficiary which have become a lien on the real property involved. 4 5 6 7 8 9 (H) Whether the obligation secured by the mortgage or deed of trust can or may be transferred to a new borrower. And Section 2943(a)(4) defines an “entitled person” as the trustor or mortgagor of, or his or her successor in interest in, the mortgaged or trust property or any part thereof, any beneficiary under a deed of trust, any person having a subordinate lien or encumbrance of record thereon, the escrowholder licensed as an agent pursuant to Division 6 (commencing with Section 17000) of the Financial Code, or the party exempt by virtue of Section 17006 of the Financial Code who is acting as the escrowholder. 10 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 13 14 15 16 17 18 Section 2943(e)(4) supplies the Fund’s right of action. It provides that If a beneficiary for a period of 21 days after receipt of the written demand willfully fails to prepare and deliver the statement, he or she is liable to the entitled person for all damages which he or she may sustain by reason of the refusal and, whether or not actual damages are sustained, he or she shall forfeit to the entitled person the sum of three hundred dollars ($300). Each failure to prepare and deliver the statement, occurring at a time when, pursuant to this section, the beneficiary is required to prepare and deliver the statement, creates a separate cause of action, but a judgment awarding an entitled person a forfeiture, or damages and forfeiture, for any failure to prepare and deliver a statement bars recovery of damages and forfeiture for any other failure to prepare and deliver a statement, with respect to the same obligation, in compliance with a demand therefor made within six months before or after the demand as to which the award was made. For the purposes of this subdivision, “willfully” means an intentional failure to comply with the requirements of this section without just cause or excuse. 19 20 21 (Emphasis added). Wells Fargo argues that the Fund’s claim fails because it does not allege that Wells Fargo’s 22 failure to provide a beneficiary statement was “willful.” Motion, ECF No. 34 at 8-9. Wells Fargo is 23 right. The Fund does not allege that Wells Fargo willfully failed to provide a beneficiary statement; 24 instead, it alleges that Wells Fargo simply failed to do so. See SAC ¶ 22, ECF No. 33 at 4. 25 The Fund argues that it does not need to explicitly allege that Wells Fargo willfully failed to 26 provide a beneficiary statement because Wells Fargo “repeatedly failed to provide the information 27 even after confirming receipt of the multiple requests and the authorization.” Opposition, ECF No. 28 36 at 3. The Fund’s argument is both confusing and unavailing. First, nowhere does the Fund allege C 13-05177 LB ORDER RE MOTION TO DISMISS 7 1 that it made multiple requests for a beneficiary statement. As the court recounted above, in its 2 general allegations, the Fund alleges that it made “numerous” and “repeated” requests “for a 3 reinstatement quote and a payoff demand” for the First Loan, not a beneficiary statement. SAC ¶ 8, 4 ECF No. 33 at 2. And in its allegations that are specific to its second claim, the Fund alleges only 5 that it sent 1 written demand for a beneficiary statement on March 13, 2013. Id. ¶ 20, ECF No. 33 at 6 3-4. In addition, despite what it argues now, nowhere in its Second Amended Complaint does the 7 Fund allege that Wells Fargo confirmed receipt of any written demand. See generally id. Although 8 the Fund is correct that it is not necessarily dispositive that it fails to allege the word “willful” 9 because it is the facts to support Wells Fargo’s willfulness that are important, see Opposition, ECF Amended Complaint. Accordingly, the Fund’s second claim fails. Because the court cannot rule out 12 For the Northern District of California No. 36 at 3, the court does not believe that the Fund sufficiently alleges such facts in its Second 11 UNITED STATES DISTRICT COURT 10 the possibly that this insufficiency could be cured by the allegation of other facts, the court 13 DISMISSES WITHOUT PREJUDICE the Fund’s second claim.5 14 B. The Fund’s Third Claim 15 The Fund’s third claim is for violation of 12 C.F.R. § 1026.36. Under the version of Section 16 17 1026.36 that was in effect6 at the relevant time, see SAC ¶ 27, ECF No. 33 at 4, 19 In connection with a consumer credit transaction secured by a consumer’s principal dwelling, no servicer shall . . . [f]ail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer’s obligation in full as of a specified date. 20 12 C.F.R. § 1026.36(c)(1)(iii) (2013). The regulation does not define what a “reasonable time” is, 18 21 22 23 24 25 26 27 5 Wells Fargo makes two other arguments in its reply that the court addresses briefly. First, Wells Fargo argues, because of a statement the Fund made in its opposition, that the Fund did not allege, with respect to its second claim, that Wells Fargo failed to provide it with a “payoff statement.” Reply, ECF No. 38 at 3. This is true, see SAC ¶ 19-24, and for that reason, it does not matter that the Fund suggested in its opposition that it had. Second, Wells Fargo, argues for the first time that the Fund’s second claim fails because the Fund is not an “entitled person” as defined by Section 2943(a)(4). Reply, ECF No. 38 at 3-4. Because Wells Fargo did not make this argument in its motion, and therefore the Fund did not have a chance to respond to it, the court does not consider it here. 28 6 12 C.F.R. § 1026.36 was amended effective January 14, 2014. C 13-05177 LB ORDER RE MOTION TO DISMISS 8 1 but it does define several other relevant terms. A “consumer” is “a cardholder or natural person to 2 whom consumer credit is offered or extended.” 12 C.F.R. § 1026.2(a)(11). “Consumer credit” 3 “means credit offered or extended to a consumer primarily for personal, family, or household 4 purposes.” 12 C.F.R. § 1026.2(a)(12). A “dwelling” is “a residential structure that contains one to 5 four units, whether or not that structure is attached to real property. The term includes an individual 6 condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.” 12 7 C.F.R. § 1026.2(a)(19). A “person” is “a natural person or an organization, including a corporation, 8 partnership, proprietorship, association, cooperative, estate, trust, or government unit.” 12 C.F.R. § 9 1026.2(a)(22). And a “servicer” is “a person responsible for the servicing of a federally related mortgage loan (including the person who makes or holds such loan if such person also services the 11 loan).” 12 C.F.R. § 1024.2(b). 12 For the Northern District of California UNITED STATES DISTRICT COURT 10 The Fund alleges that it “sent numerous written demands to [Wells Fargo] for a payoff 13 statement,” and that Wells Fargo “failed to provide a payoff statement to [it] until October 11, 2013, 14 seven months after the initial request.” SAC ¶¶ 26-27, ECF No. 33 at 4. Wells Fargo argues that the 15 Fund’s claim fails because the Fund is not a “consumer,” there is no transaction secured by its 16 “principal dwelling,” and it did not enter into any “consumer credit transaction” with the Fund. 17 Motion, ECF No. 34 at 9-10. Wells Fargo’s larger point is that any rights provided by Section 18 1026.36(c)(iii) belong to the Rijhwanis, not the Fund. See id. The Fund argues in response that 19 Wells Fargo’s points do not matter because it was acting on behalf of the Rijhwanis and that this is 20 evidenced by the Rijhwanis’ execution of “two ‘Authorization to Inquire’ forms prepared by Wells 21 Fargo authorizing [the Fund] to assist [the Rijhwanis] in obtaining information about their loans. 22 SAC ¶ 7, ECF No. 33 at 2; see Opposition, ECF No. 36 at 3. Wells Fargo counters that the Fund 23 does not specifically allege that it was acting as the Rijhwanis’ agent and that such an allegation 24 would be specious because the Fund, which purchased the Rijhwanis’ foreclosed-upon Property and 25 entered into a stipulation with them to get them out of the Property, obviously was acting in its own 26 interests, rather than in the Rijhwanis’ interest. See Reply, ECF No. 38 at 4-5. Wells Fargo also 27 points out that the Rijhwanis did not execute the two Authorization to Inquire forms until April 9, 28 2013, see SAC ¶ 7, ECF No. 33 at 2, but the Fund alleges that it requested the payoff statement in C 13-05177 LB ORDER RE MOTION TO DISMISS 9 1 March 2013, see id. ¶¶ 26-27, ECF No. 33 at 4 (alleging that Wells Fargo “failed to provide a payoff 2 statement to [it] until October 11, 2013, seven months after the initial request”) (emphasis added). 3 The Fund’s allegations are not a model of clarity. Compare SAC ¶¶ 26-27, ECF No. 33 at 4 (alleging that Wells Fargo did not provide a “beneficiary statement”); see also id. ¶ 27, ECF No. 33 6 at 4 (alleging that “[m]ore than 7 business days have passed since [the Fund] made a written demand 7 for a payoff statement,” even though it does not appear that there is any provision requiring one 8 within 7 business days); id. ¶ 28, ECF No. 33 at 4 (alleging that “Defendants” have suffered 9 damages). And, the court does not believe that the Fund has sufficiently alleged that it was “acting 10 on behalf of” of the Rijhwanis, as Section 1026.36 requires. That said, given the allegations already 11 made, the court does not believe that it impossible for the Fund to do so, and the court is not 12 For the Northern District of California (alleging that Wells Fargo did not provide a “payoff statement”) with id. ¶ 28, ECF No. 33 at 4 5 UNITED STATES DISTRICT COURT 4 persuaded that Section 1026.34 cannot apply to the Fund at all (as Wells Fargo argues) because the 13 regulation states only that the requests for information be made “in connection with a consumer 14 credit transaction secured by a consumer’s principal dwelling.” Accordingly, the court DISMISSES 15 WITHOUT PREJUDICE the Fund’s third claim. 16 C. The Fund’s Fourth Claim 17 The Fund’s fourth claim is for violation of 12 U.S.C. § 2605. It alleges that it “sent numerous 18 qualified written requests for a payoff statement,” that Wells Fargo “failed to provide a payoff 19 statement to [it] until October 11, 2013, seven months after the initial request,” and that “[d]ue to 20 [Wells Fargo’s] failure to timely provide a beneficiary statement, Defendant’s [sic] have suffered 21 damages in an amount to be proven at trial.” SAC ¶¶ 31-33, ECF No. 33 at 4-5. 22 Wells Fargo first points out that presumably the Fund alleges a violation of Section 2605(e), 23 which is titled “Duty of loan servicer to respond to borrower inquiries.” Section 2605(e)(1)(A) 24 provides that 25 26 27 If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period. 28 C 13-05177 LB ORDER RE MOTION TO DISMISS 10 1 2 3 Section 2605(e)(2) then provides that Not later than 30 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower of any qualified written request under paragraph (1) and, if applicable, before taking any action with respect to the inquiry of the borrower, the servicer shall-- 4 5 6 7 8 9 (A) make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction (which shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower); (B) after conducting an investigation, provide the borrower with a written explanation or clarification that includes--(i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer; and (ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower; or 10 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 13 (C) after conducting an investigation, provide the borrower with a written explanation or clarification that includes--(i) information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and (ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower. 14 For purposes of this statute, a “qualified written request” is defined as “a written correspondence, 15 other than notice on a payment coupon or other payment medium supplied by the servicer,” that 16 “includes, or otherwise enables the servicer to identify, the name and account of the borrower” and 17 also “includes a statement of the reasons for the belief of the borrower, to the extent applicable, that 18 the account is in error or provides sufficient detail to the servicer regarding other information sought 19 by the borrower.” 12 C.F.R. § 2605(e)(1)(B). 20 Wells Fargo then makes several arguments. See Motion, ECF No. 34 at 10-12. It argues that 21 Section 2605(e) “governs inquiries relating to loan servicing,” not “payoff requests,” and “primarily 22 seeks to address errors in the servicing of a borrower’s account.” As it did with respect to Section 23 1026.36, Wells Fargo argues that Section 2605(e) only applies to the Rijhwanis (who are the 24 “borrowers”), not the Fund. And Wells Fargo also argues that the Fund does not sufficiently allege 25 damages. In response, the Fund argues that it sufficiently alleges that it sent a “qualified written 26 request,” it was acting as an agent for the Rijhwanis, and it sufficiently alleges damages as Section 27 2605(f) allows for statutory damages and attorney’s fees, which it alleges. See Opposition, ECF No. 28 36 at 4. In reply, Wells Fargo argues that Section 2605(f) makes clear that any claim for a violation C 13-05177 LB ORDER RE MOTION TO DISMISS 11 1 2 of Section 2605 accrues to the borrower, not an agent of the borrower. See Reply, ECF No. 38 at 6. The court agrees with Wells Fargo that under Section 2605(f), the Fund does not have standing this section shall be liable to the borrower for each such failure . . . .” (Emphasis added). Thus, 5 even if the Fund was acting as the Rijhwanis’ agent, only the Rijhwanis would have standing to 6 bring a claim for violation of Section 2605(e). Accordingly, the Fund’s fourth claim is 7 DISMISSED WITH PREJUDICE. 8 D. The Fund’s Fifth Claim 9 The Fund’s fifth claim is for violation of California Business and Professions Code § 17200. 10 Section 17200, also known as California’s “Unfair Competition Law,” prohibits “any unlawful, 11 unfair or fraudulent” business practices. “Since section 17200 is [written] in the disjunctive, it 12 For the Northern District of California to bring its claim. Section 2605(f) provides that “[w]hoever fails to comply with any provision of 4 UNITED STATES DISTRICT COURT 3 establishes three separate types of unfair competition. The statute prohibits practices that are either 13 ‘unfair’” or ‘unlawful,’ or ‘fraudulent.’” Pastoria v. Nationwide Ins., 112 Cal. App. 4th 1490, 1496 14 (2003); see also Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 15 180 (1999). Here, the Fund alleges that Wells Fargo engaged in “unfair” business practices. SAC ¶ 16 37, ECF No. 33 at 5. 17 There is disagreement among California courts regarding the definition of “unfair” business 18 practices in consumer cases such as this. As the district court in Phipps v. Wells Fargo explained, 19 there is a split of authority that has resulted in three different tests: 20 21 22 23 The test applied in one line of cases requires “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.” Drum, 182 Cal. App. 4th at 256, 106 Cal. Rptr.3d 46 (citing Bardin v. Daimlerchrysler Corp., 136 Cal. App. 4th 1255, 1260–1261, 39 Cal. Rptr.3d 634 (2006); Davis v. Ford Motor Credit Co., 179 Cal. App. 4th at 581, 595–596, 101 Cal. Rptr.3d 697 (2009); Gregory v. Albertson’s Inc., 104 Cal. App. 4th 845, 854, 128 Cal. Rptr.2d 389 (2002). 24 ... 25 26 27 28 A second line of cases applies a test to determine whether the alleged business practice “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Drum, 182 Cal. App. 4th at 257, 106 Cal. Rptr.3d 46 (citing Bardin, 136 Cal. App. 4th at 1260, 39 Cal. Rptr.3d 634; Davis, 179 Cal. App. 4th at 594–595, 101 Cal. Rptr.3d 697)). C 13-05177 LB ORDER RE MOTION TO DISMISS 12 1 ... 2 The test applied in a third line of cases draws on the definition of “unfair” in section 5 of the Federal Trade Commission Act (15 U.S.C. § 45, subd. (n)), and requires that “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Drum, 182 Cal. App. 4th at 257, 106 Cal. Rptr.3d 46 (citing Davis, 179 Cal. App. 4th 597–598, 101 Cal. Rptr.3d 697; Camacho v. Automobile Club of Southern California, 142 Cal. App. 4th 1394, 1403, 48 Cal. Rptr.3d 770 (2006)). 3 4 5 6 7 No. CV F 10–2025 LJO SKO, 2011 WL 302803, at *16 (E.D. Cal. Jan. 27 2011). 8 Wells Fargo argues that the Fund’s claim fails because the Fund bases it on the Fund’s statutory 9 claims (Claims 1 through 4). Motion, ECF No. 34 at 13. But this misreads the Fund’s claim, which the fifth claim states that it is for “Unfair Business Practices”), and assumes that the Fund’s claim is 12 For the Northern District of California is brought under the “unfair” prong,” see SAC ¶ 37, ECF No. 33 at 5; id., ECF No. 33 at 5 (title of 11 UNITED STATES DISTRICT COURT 10 brought under the “unlawful prong,” of the UCL. Wells Fargo also argues that to state a UCL 13 violation, a plaintiff must allege ongoing unlawful, unfair, or fraudulent conduct, but here Wells 14 Fargo has provided the Fund with the information it sought. Motion, ECF No. 34 at 12-13. But as 15 the Fund points out, while ongoing conduct is necessary for a plaintiff to seek injunctive relief, it is 16 not seeking injunctive relief. Wells Fargo also says that the UCL allows a plaintiff to recover only 17 injunctive relief or restitution and argues that the Fund seeks neither of these forms of relief. But the 18 Fund points out that its damages are based on money that it paid to Wells Fargo in the form of 19 interest and fees, which can be considered restitutionary in character. Wells Fargo cites no authority 20 rebutting this point. Accordingly, the Fund’s fifth claim SURVIVES. 21 CONCLUSION 22 Based on the foregoing, the court GRANTS IN PART and DENIES IN PART Wells Fargo’s 23 motion. The Fund’s first and fifth claims SURVIVE, its second and third claims are DISMISSED 24 WITHOUT PREJUDICE, and its fourth claim is DISMISSED WITH PREJUDICE. The Fund 25 may file a Third Amended Complaint no later than June 24, 2014. The court urges the Fund to be as 26 clear and precise in its allegations as it can. 27 This disposes of ECF No. 34. 28 C 13-05177 LB ORDER RE MOTION TO DISMISS 13 1 2 IT IS SO ORDERED. Dated: June 10, 2014 3 _______________________________ LAUREL BEELER United States Magistrate Judge 4 5 6 7 8 9 10 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C 13-05177 LB ORDER RE MOTION TO DISMISS 14

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