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

Filing 31

ORDER by Judge Samuel Conti granting in part and denying in part 26 Motion to Dismiss (sclc1, COURT STAFF) (Filed on 11/25/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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TROY L. McNEIL and TRICIA A.
McNEIL,

)
)
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Plaintiffs,
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v.
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WELLS FARGO BANK, N.A., U.S. BANK, )
N.A., CAL-WESTERN RECONVEYANCE,
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LLC, and DOES 1-10, inclusive,
)
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Defendants.
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)
)
)

Case No. 13-5519 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS'
MOTION TO DISMISS

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I.

INTRODUCTION

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Now before the Court is Defendants Wells Fargo Bank, N.A.

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("Wells Fargo") and U.S. Bank, N.A.'s ("U.S. Bank") (collectively,

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"Defendants") motion, ECF No. 26 ("Mot."), to dismiss Plaintiffs

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Troy and Tricia McNeil's first amended complaint, ECF No. 24

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("FAC").

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Defendants have declined to file a reply brief.

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the motion suitable for determination without oral argument per

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Plaintiffs oppose the motion, ECF No. 29 ("Opp'n"), and
The Court finds

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Civil Local Rule 7-1(b).

For the reasons set forth below, the

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Motion is GRANTED in part and DENIED in part.

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II.

BACKGROUND
This is a mortgage foreclosure dispute.

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Plaintiffs are

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residents of the property at issue in this case, which is located

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in Livermore, California (the "subject property").

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Plaintiffs borrowed $536,000 from Wells Fargo in 2004.

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was secured by a deed of trust on the subject property.

FAC ¶¶ 1, 17.
The loan
FAC Ex. A.

United States District Court

For the Northern District of California

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Wells Fargo subsequently transferred its beneficial interest in the

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deed of trust to U.S. Bank.

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of default was recorded against the subject property, indicating

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that Plaintiffs were $24,848.53 in arrears.

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2012, the trustee on the deed of trust recorded a notice of

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trustee's sale, scheduling the sale for April 4, 2012.

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The notice indicates that the total unpaid balance on the loan was

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$522,493.45.

FAC Ex. C.

In December 2011, a notice

FAC Ex. B.

In March

FAC Ex. D.

Id.

In May 2012, Plaintiffs entered into a loan modification

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agreement with Wells Fargo.

FAC ¶ 28.

The modification agreement

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created a secondary principal balance of $34,212.59, on which no

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interest accrues, and dropped the interest rate on the remaining

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balance to 2.5 percent for six years.

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1-2.

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monthly principal and interest payments of $2,424.62 starting on

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July 1, 2012.

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escrow deposits "as defined in the Note."

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states that escrow deposits may be subject to change in the future.

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Id.

ECF No. 14 ("RJN") Ex. 6 ¶¶

Pursuant to the agreement, Plaintiffs promised to make

Id. ¶ 2.

Plaintiffs also promised to make monthly

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Id.

The agreement

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Plaintiffs allege that the monthly escrow charges initially

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amounted to $800, bringing Plaintiffs' total monthly payments to

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$3,224.62.

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for additional charges, increasing the total monthly payments to

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$4,400.

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FAC ¶ 30.

Defendants subsequently assessed Plaintiffs

Id. ¶ 31.

On February 4, 2013, the substituted trustee on the deed of

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trust recorded another notice of default against the subject

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property, indicating that Plaintiffs were $29,644.95 in arrears.

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FAC Ex. F.

Another notice of trustee's sale was recorded on May 6,

United States District Court

For the Northern District of California

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2013, setting the sale date for May 28, 2013.

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that the foreclosure was the direct result of the unauthorized

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charges assessed by Defendants after they executed the first loan

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modification agreement.

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Plaintiffs allege

FAC ¶ 39.

In June 2013, Wells Fargo agreed to a loan modification

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review.

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conduct the review because "Plaintiffs had exceeded the number of

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modifications allowed by the investor."

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Wells Fargo, the "investor" lacked contractual authority to modify

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the loan, and Plaintiffs had exceeded the number of modifications

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allowed by the investor.

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modification was "properly given," and therefore Wells Fargo's

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refusal to conduct a modification review was improper.

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Fargo subsequently denied Plaintiffs' appeal of the denial of the

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modification request.

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FAC ¶ 42.

However, Wells Fargo subsequently declined to

Id.

FAC ¶ 43.

According to

Plaintiffs contend that no

Id.

Wells

Id. ¶ 45.

The trustee's sale was apparently delayed during the

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application process for the second loan modification, and a new

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notice of trustee's sale was later recorded, setting the sale date

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for October 16, 2013.

RJN Ex. 11.

According to Defendants, the

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trustee's sale was postponed yet again to April 14, 2014.

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Based on these facts, Plaintiffs asserted seven causes of

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action related to Defendants' alleged misrepresentations during the

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loan issuance and foreclosure processes.

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Court granted in part and denied in part Defendants' motion to

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dismiss for failure to state a claim and granted Plaintiffs leave

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to amend their complaint to rectify certain defects.

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("Prior Order").

On July 1, 2014, the

ECF No. 23

Plaintiffs filed their FAC on July 31, asserting

United States District Court

For the Northern District of California

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claims for (1) intentional misrepresentation, (2) negligent

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misrepresentation, (3) promissory estoppel, (4) violation of

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California Civil Code Section 2923.55, (5) breach of the implied

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covenant of good faith, (6) wrongful foreclosure, (6) cancellation

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of instruments, and (7) unfair and deceptive acts and practices.

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Defendants now move to dismiss the FAC pursuant to Federal
Rule of Civil Procedure 12(b)(6).

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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).

"Dismissal can be based

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

Ashcroft v.

However, "the tenet that a court

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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)).

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.

Claims sounding in fraud are subject to the heightened

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which requires that a plaintiff alleging fraud "must state with

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particularity the circumstances constituting fraud."

See Kearns v.

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United States District Court

pleading requirements of Federal Rule of Civil Procedure 9(b),

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For the Northern District of California

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Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).

"To satisfy

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

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

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misleading about [the purportedly fraudulent] statement, and why it

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is false."

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Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (quotation marks and

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citations omitted).

United States ex rel. Cafasso v. Gen. Dynamics C4 Sys.,

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IV.

DISCUSSION

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A.

Intentional Misrepresentation

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The elements of intentional misrepresentation, also known as

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fraud, are: "(1) misrepresentation (false representation,

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concealment, or nondisclosure), (2) knowledge of falsity (or

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'scienter'), (3) intent to defraud (i.e., to induce reliance), (4)

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justifiable reliance, and (5) resulting damage."

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Ct., 12 Cal. 4th 631, 638 (Cal. 1996).

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misrepresentations: (1) Defendants represented that the loan had a

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fixed rate for 30 years when it actually had an adjustable rate;

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(2) Wells Fargo represented that the loan modification agreement

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Lazar v. Super.

Plaintiffs allege several

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("LMA") provided for monthly escrow deposits of approximately $100

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and included no hidden fees when, in fact, the LMA called for

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escrow deposits and fees that totaled around $1,200 monthly; (3)

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Defendants told Plaintiffs that Defendants would "resolve the

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discrepancies on the loan balance and default amount," but that

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Defendants did not make any corrections; (4) Defendants represented

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that Plaintiffs qualified for the Home Affordable Modification

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Program ("HAMP") and that Defendants would conduct a loan

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modification review to address issues with the LMA, but Defendants

United States District Court

For the Northern District of California

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never conducted such a review; (5) Defendants represented that no

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review could be conducted because the loan had already been

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modified when, in fact, "there was never a true modification of the

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loan;" and (6) Defendants represented that Plaintiffs could appeal

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the denial, but Defendants never permitted an appeal.

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54.

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FAC ¶¶ 51-

Defendants argue that each of these claims is insufficiently

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specific to meet the heightened pleading standards of Rule 9(b).

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Defendants are correct.

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represented that the loan had a fixed rate for 30 years at the loan

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origination.

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dates or persons who made that representation.

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loan documents included an adjustable rate rider specifying (in all

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capital, bolded letters) that the loan provided for an initial

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period of monthly payments at a certain rate, but that after the

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initial period, both the interest rate and monthly payments could

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be changed.

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documents, it must be presumed that Plaintiffs allege that one of

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Defendants' agents made an oral representation about a fixed rate.

Id. ¶ 51.

FAC Ex. 2.

Plaintiffs allege that Defendants

However, Plaintiffs do not specify the
Id.

Plaintiffs'

Given this explanation in the loan

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But Plaintiffs do not specify who made such a representation, that

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person's relationship to Defendants, or when the alleged

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representation was made.

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necessary specificity to meet the pleading standards of Rule 9(b).

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Plaintiffs have failed to add the

Plaintiffs' claims regarding Defendants' representations about

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their payments following the LMA are also insufficient.

Once

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again, Plaintiffs fail to specify who made the representation or

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even to identify that person's relationship to Defendants.

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again, the written agreement supports Defendants: the LMA states

Once

United States District Court

For the Northern District of California

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that Plaintiffs must make monthly escrow deposits, which were

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subject to change.

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"notice of no oral agreements" stating that the written agreement

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represents the final agreement between the parties and that there

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are no oral agreements between them.

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FAC Ex. 6 at 2.

The LMA also includes a

Id. at 5.

The remaining alleged misrepresentations are also

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insufficiently specific.

Again, Plaintiffs fail to allege the who,

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where, and (in most cases) when of the allegedly false statements.

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The remaining statements are also even vaguer than the two

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discussed previously; it is unclear from the FAC exactly what

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Plaintiffs allege Defendants said.

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Defendants' statements that they would conduct a modification

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review or that a modification had already occurred -- Plaintiffs

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fail to explain why the statements were false.

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misrepresentations are pled with sufficient specificity.

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directed Plaintiffs to plead this claim with additional specificity

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when granting leave to amend the original complaint.

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have failed to do so.

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misrepresentation claim is DISMISSED WITH PREJUDICE.

In some cases -- for example,

None of the alleged

Therefore, their intentional

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The Court

Plaintiffs

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B.

Negligent Misrepresentation

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Plaintiffs did not bring a claim for negligent

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misrepresentation in their original complaint.

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Defendants' motion to dismiss the original complaint, the Court

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granted Plaintiffs leave to amend only to rectify certain problems

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with their existing claims, not to add new ones.

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Defendants are correct that Plaintiffs' new negligent

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misrepresentation claim must be dismissed.

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consider the merits of this claim, though, it would still be

United States District Court

For the Northern District of California

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In ruling on

Accordingly,

Even were the Court to

dismissed.
The elements for a cause of action for negligent

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misrepresentation are (1) a misrepresentation of a material fact,

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(2) without reasonable grounds for believing it to be true, (3)

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with intent to induce another's reliance on the fact

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misrepresented, (4) reasonable reliance by the plaintiff, and (5)

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damages.

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1986).

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Fox v. Pollack, 181 Cal. App. 3d 954, 962 (Cal. Ct. App.

There is a split among district courts in the Ninth Circuit as

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to whether claims for negligent misrepresentation must always meet

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the Rule 9(b)'s specificity requirements.

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Allstate Indem. Co., 281 F.R.D. 413, 416-18 (C.D. Cal. 2012).

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However, the Ninth Circuit's general guidance is that a claim

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sounds in fraud where a plaintiff "allege[s] a unified course of

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fraudulent conduct and rel[ies] entirely on that course of conduct

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as the basis of a claim."

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1097, 1103 (9th Cir. 2003).

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misrepresentation and intentional misrepresentation for precisely

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the same course of conduct which they claim amounts to intentional

See, e.g., Petersen v.

Vess v. Ciba-Geigy Corp. USA, 317 F.3d
Here, Plaintiffs allege negligent

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misrepresentation.

The FAC repeatedly alleges that Defendants

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acted intentionally.

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pleadings indicates that the negligent misrepresentation claim is

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really just an attempt to repackage the intentional

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misrepresentation claim: Plaintiffs did not initially allege

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negligent misrepresentation at all, and they added the claim only

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after the Court found their intentional misrepresentation claims to

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be insufficiently specific.

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Plaintiffs' negligent misrepresentation claim sounds in fraud and

Additionally, the manner of Plaintiffs'

Therefore, the Court finds that

United States District Court

For the Northern District of California

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is subject to the Rule 9(b).

For the same reasons that their

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intentional misrepresentation claim fails, Plaintiffs' negligent

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misrepresentation claim also fails.

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WITH PREJUDICE.

This claim, too, is DISMISSED

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C.

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"Promissory estoppel applies whenever a promise which the

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promissor should reasonably expect to induce action or forbearance

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on the part of the promisee or a third person and which does induce

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such action or forbearance would result in an injustice if the

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promise were not enforced."

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4th 1179, 1185 (Cal. Ct. App. 1998).

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must be clear and unambiguous."

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Promissory Estoppel

Lange v. TIG Ins. Co., 68 Cal. App.
"To be binding, the promise

Id.

Again, Plaintiffs allege that Defendants broke numerous

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promises.

First, Plaintiffs allege that Defendants promised that

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the original loan would be held at a fixed interest rate for thirty

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years, but then adjusted the interest rate.

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discussed above, the adjustable rate rider attached to the loan

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contradicts that allegation.

FAC ¶ 57.

As

This claim is DISMISSED WITH

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PREJUDICE to the extent that it is premised on a promise not to

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adjust the interest rate.

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Plaintiffs also allege that Defendants promised that

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Plaintiffs' monthly payments under the LMA would be around $3,300,

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including the escrow deposits.

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allege that Defendants charged them additional fees that were not

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included among those specified in the LMA.

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hearing on the original motion to dismiss, the Court found the

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promissory estoppel claim, as it related to the allegedly

Id. ¶ 58.

However, Plaintiffs

Id. ¶¶ 31-32.

After a

United States District Court

For the Northern District of California

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undisclosed charges after execution of the LMA, adequately pled so

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as to survive a motion to dismiss.

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in the FAC or Defendants' motion papers alters that conclusion.

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Accordingly, Defendants' motion is DENIED with respect to that

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particular claim.

Prior Order at 10-11.

Nothing

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D.

Civil Code Section 2923.55

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Section 2923.55 provides that a mortgage servicer may not

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record a notice of default until a number of requirements are met

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and sets forth a list of information that the mortgage servicer

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must send to the borrower in writing.

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dismissed Plaintiffs' Section 2923.55 claim because Plaintiffs

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failed to "specify how Defendants ran afoul of the statute or which

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particular provisions are at issue."

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Plaintiffs have clarified their allegations somewhat.

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claim that, after recording the first notice of default in December

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2011, Defendants failed to provide Plaintiffs with a copy of the

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Note, identity of the beneficiary, and assignment and accounting of

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the loan -- as required by law -- even after Plaintiffs requested

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that information.

FAC ¶ 65.

The Court previously

Prior Order at 8-9.
Plaintiffs

Plaintiffs also allege that

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Defendants failed to provide the required advanced notice before

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recording the second notice of default in February 2013.
The Court has already rejected that second argument, finding

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that the loan modification discussions constituted sufficient

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notice as required by statute.

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Defendants apparently find no fault with Plaintiffs' allegations

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regarding Defendants' failure to provide the required information.

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See Mot. at 8-10.

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2923.55 remains undisturbed as it relates to the allegation that

See Prior Order at 8-9.

However,

Accordingly, Plaintiffs' claim for violation of

United States District Court

For the Northern District of California

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Defendants failed to provide the required documents after

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Plaintiffs requested them.

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in all other respects.
E.

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This claim is DISMISSED WITH PREJUDICE

Breach of the Implied Covenant of Good Faith and Fair
Dealing

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Plaintiffs' next claim is for breach of the implied covenant

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of good faith and fair dealing.

"A typical formulation of the

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burden imposed by the implied covenant of good faith and fair

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dealing is 'that neither party will do anything which will injure

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the right of the other to receive the benefits of the agreement.'"

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Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (Cal.

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Ct. App. 2005) (quoting Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566,

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573 (Cal. 1973)).

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dealing "cannot impose substantive duties or limits on the

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contracting parties beyond those incorporated in the specific terms

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of their agreement."

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Supp. 2d 1092, 1102 (E.D. Cal. 2010) (quoting Agosta v. Astor, 120

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Cal. App. 4th 596, 607 (Cal. Ct. App. 2004)).

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///

The implied covenant of good faith and fair

Lane v. Vitek Real Estate Indus. Grp., 713 F.

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In its prior order, the Court permitted Plaintiffs' claim to

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remain undisturbed to the extent it is "premised on the theory that

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Defendants assessed them for additional charges in violation of the

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executed loan modification agreement . . . ."

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However, Plaintiffs have amended their claim to make it less

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specific.

Compare ECF No. 1-1 Ex. 2 ("Compl.") ¶¶ 80-98, with FAC

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¶¶ 74-81.

Nonetheless, Plaintiffs still manage to state a claim in

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this respect.

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claim because Plaintiffs have "not identified an express provision

Prior Order at 11.

In every other respect, Plaintiffs fail to state a

United States District Court

For the Northern District of California

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or even the underlying purpose giving rise to [their] claim[s] of

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an implied covenant."

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01399-KJM, 2014 WL 5473554, at *7 (E.D. Cal. Oct. 23, 2014).

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Plaintiffs' claim for breach of the implied covenant of good faith

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and fair dealing remains undisturbed as to the allegation that

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Defendants charged Plaintiffs fees beyond those permitted by the

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loan modification agreement.

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PREJUDICE in all other respects.

Moenig v. Bank of Am., N.A., No. 2:14-CV-

This claim is DISMISSED WITH

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F.

Wrongful Foreclosure

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Next, Plaintiffs bring a claim for wrongful foreclosure, in

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lieu of their claim (asserted in the original complaint) that

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Defendants lacked standing to foreclose on the subject property.

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Plaintiffs again assert that "Defendants failed to perfect any

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security interest in the subject property."

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the FAC fails to explain why Plaintiffs believe that is the case.

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None of the facts asserted provide any basis for Plaintiffs'

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assertion that Defendants failed to perfect their security

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interest.

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distinguish this claim from their cancellation of interests claim,

FAC ¶ 83.

However,

In their opposition brief, Plaintiffs fail to

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and they provide no argument to separately support a wrongful

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foreclosure claim.

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PREJUDICE.

Accordingly, this claim is DISMISSED WITH

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G.

Cancellation of Instruments

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In its order on Defendants' motion to dismiss the original

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complaint, the Court dismissed Plaintiffs' cancellation of

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instruments claim with prejudice to the extent that it was premised

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on Defendants' violation of a pooling services agreement. 1

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Court held that Plaintiffs' cancellation of instruments claim

The

United States District Court

For the Northern District of California

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survived to the extent that it is based on the allegation that

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Defendants assessed Plaintiffs' monthly charges in violation of the

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LMA.

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prior ruling.

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undisturbed to the extent that it is premised on Defendants'

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violation of the LMA.

Nothing in the FAC or Defendants' motion alters the Court's
Plaintiffs' cancellation of instrument claim remains

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V.

CONCLUSION
Defendants' motion to dismiss is GRANTED in part and DENIED in

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part:

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•

The motion to dismiss is GRANTED with respect to Plaintiffs'
claim for intentional misrepresentation.

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•

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The motion to dismiss is GRANTED with respect to Plaintiffs'
claim for negligent misrepresentation.

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1

In the original complaint, Plaintiffs alleged that Wells Fargo
transferred its beneficial interest in the deed of trust to U.S.
Bank through a Corporate Assignment Deed of Trust (the "Corporate
Assignment"). They further alleged that the Corporate Assignment
shows that the deed of trust was transferred to a mortgage backed
security trust, and that this trust was governed by a Pooling
Services Agreement. Compl. ¶ 21, Ex. B.

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1

•

The motion to dismiss is GRANTED in part and DENIED in part

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with respect to Plaintiffs' claim for promissory estoppel.

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The motion is DENIED as to Plaintiffs' claim that Defendants

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assessed fees beyond those permitted in the LMA.

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is GRANTED as to Plaintiffs' claims regarding all other

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promises Defendants' allegedly made.

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•

The motion

The motion to dismiss is GRANTED in part and DENIED in part

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with respect to Plaintiffs' claim for violation of Section

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2923.55.

The motion is DENIED as to Plaintiffs' claim that

United States District Court

For the Northern District of California

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Defendants violated the LMA.

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Plaintiffs' other Section 2923.55 claims.

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•

The motion is GRANTED as to

The motion to dismiss is GRANTED in part and DENIED in part

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with respect to Plaintiffs' claim for breach of the implied

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covenant.

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Defendants violated the LMA.

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Plaintiffs' other breach of implied covenant claims.

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•

The motion is GRANTED as to

The motion to dismiss is GRANTED with respect to Plaintiffs'
claim for wrongful foreclosure.

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The motion is DENIED as to Plaintiffs' claim that

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The motion to dismiss is GRANTED in part and DENIED in part

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with respect to Plaintiffs' claim for cancellation of

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instruments.

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that Defendants breached the LMA.

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Plaintiffs' other cancellation of instrument claims.

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///

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///

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///

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///

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The motion is DENIED as to Plaintiffs' claim

///

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The motion is GRANTED as to

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All claims dismissed by this order are DISMISSED WITH PREJUDICE.

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IT IS SO ORDERED.

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November 25, 2014
UNITED STATES DISTRICT JUDGE

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United States District Court

For the Northern District of California

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