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

Filing 21

ORDER by Judge Edward M. Chen granting 12 Motion to Dismiss With Leave to Amend (emclc1, COURT STAFF) (Filed on 8/24/2015)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 CUSTODIO P. GUTIERREZ, et al., 9 Plaintiffs, 10 v. 11 For the Northern District of California United States District Court No. C-15-2984 EMC WELLS FARGO BANK, N.A., et al. 12 ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS Defendants. ___________________________________/ (Docket No. 12) 13 14 15 On August 20, 2015, this Court held oral argument on Defendants’ motion to dismiss 16 Plaintiffs’ complaint in this action. For the reasons articulated on the record, and further for the 17 reasons briefly summarized below, the Court GRANTS Defendants’ motion. Plaintiffs may file an 18 amended complaint by September 25, 2015. 19 A. Count 1: Elder Abuse 20 Plaintiffs’ first cause of action is for elder abuse under California Welfare and Institutions 21 Code section 15610.30(a). This claim is expressly grounded in fraud. See Bertolina v. Wachovia 22 Mortgage, FSB, No. 10-5250 CW, 2011 WL 3473527, at *4-5 (N.D. Cal. Aug. 9, 2011) (holding 23 that a claim under California Welfare and Institutions Code section 15610.20(a)(1) is grounded in 24 fraud); see also Chavers v. GMAC Mortgage, LLC, No. 11-cv-1097-ODW, 2012 WL 2343202, at *6 25 (C.D. Cal. June 20, 2012) (same). Consequently, Plaintiffs are required to “plead a violation of the 26 Elder Abuse Act with particularity” in order to satisfy the pleading requirements of Federal Rule of 27 Civil Procedure 9(b). Bertolina, 2011 WL 3473527, at *4; see also Fed. R. Civ. P. 9(b) (“In alleging 28 fraud or mistake, a party must state with particularity the circumstances constituting fraud or 1 mistake.”). Like the Plaintiff in Bertolina, however, “Plaintiff’s complaint does not identify the 2 manner in which Defendant [Wells Fargo] purportedly violated the Elder Abuse Act. It merely 3 states that Defendant [Wells Fargo] violated the Act by obtaining a security interest in Plaintiff’s 4 property through ‘deceitful, wrongful, illegal conduct.’” Bertolina, 2011 WL 3473527, at *4. Such 5 vague legal conclusions, without adequate factual allegations, are insufficient. Id. Plaintiffs may 6 amend this claim in an effort to satisfy the heightened pleading standard of Rule 9(b). 7 B. Count 2: Breach of Security Instrument 8 Plaintiffs next claim that Wells Fargo breached its contract with them by recording a Notice 9 of Default before complying with two separate purported notice provisions (Sections 14 and 26) in the Deed of Trust. See Complaint at ¶¶ 57, 79. Section 14 appears merely to govern how notice 11 For the Northern District of California United States District Court 10 should be given (either by mail or hand-delivery), not when it must be given. Plaintiffs do not 12 appear to complain that they never received any notice of their default or Wells Fargo’s intent to 13 foreclose – rather the allegation seems to be that they did not receive notice at the proper time (i.e., 14 before the Notice of Default was recorded). See Complaint at ¶ 79. Because Section 14 says 15 nothing about the timing of notice, Plaintiffs’ current allegations of breach of this provision are not 16 plausible. The same is true of Section 26. That section appears to require the Lender to provide 17 prior notice to the borrower if “any right in the Property[] is sold or transferred without Lender’s 18 prior written permission.” Id. There is no such allegation in the complaint, however. As confirmed 19 at the hearing, the subject property apparently has not yet been sold, and Plaintiffs have not sold the 20 property without lender permission. Thus, Plaintiffs’ allegations of breach of security instrument are 21 dismissed with leave to amend. 22 C. Counts 3, 5, 7 and 8: California Homeowner’s Bill of Rights Procedural Claims 23 Plaintiffs allege in Counts 3, 5, 7 and 8 that Wells Fargo breached certain procedural 24 protections contained in California’s Homeowners Bill of Rights (HBOR). Specifically, Plaintiffs 25 allege that Wells Fargo violated: California Civil Code Section 2923.5 by failing to contact Plaintiffs 26 at least 30 days prior to recording a Notice of Default; California Civil Code Section 2923.10, by 27 failing to provide a written acknowledgment that it had received Plaintiffs’ loan modification 28 request; California Civil Code Section 2923.6, which prohibits dual tracking (i.e., proceeding with 2 1 foreclosure while a loan modification application is pending); and California Civil Code Section 2 2923.7, by failing to assign a single point of contact for Plaintiffs to speak to regarding their loan 3 modification request. See, e.g., Complaint at ¶¶ 86, 103, 113, 119. Plaintiffs seek both injunctive 4 and monetary relief. 5 As explained at the hearing, where no trustee’s deed upon sale was filed and no foreclosure 6 has taken place, a Plaintiff may not maintain a suit for money damages for procedural HBOR 7 violations. See Gonzales v. Citimortgage, Inc., No. 14-cv-4059-EMC, 2015 WL 3505533, at *2 8 (N.D. Cal. June 3, 2015); see also Cal. Civ. Code § 2924.12(b) (“After a trustee’s deed upon sale has 9 been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for actual economic damages pursuant to Section 3281, resulting from a material 11 For the Northern District of California United States District Court 10 violation of Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. . .”). 12 Essentially, Plaintiffs’ request for monetary damages is currently unripe because no foreclosure has 13 occurred. If a foreclosure does occur, as this Court held in Gonzales, damages require a material 14 breach. Plaintiffs’ request for injunctive relief currently appears moot. As this Court has explained, 15 injunctive relief is available to enforce the procedural requirements of HBOR while a borrower’s 16 loan modification request is still pending, and where the HBOR violations alleged are “material.” 17 See Gonzales, 2015 WL 3505533, at *4; see also Cal. Civil Code § 2924.12(a). As currently 18 pleaded, Plaintiffs do not meet either requirement. According to the complaint, Wells Fargo denied 19 Plaintiffs’ loan modification on the merits in January 2015. Complaint at ¶ 114. Plaintiffs’ 20 complaint does not currently identify what injunctive relief could issue here that would redress their 21 injuries, or how the alleged violations that previously occurred could be material to Plaintiffs now, 22 after their loan modification request has been denied. Hence, the procedural HBOR claims are 23 dismissed without prejudice. 24 D. Counts 4, 6, 11 and 12: California Homeowner’s Bill of Rights Substantive Claims; Slander 25 of Title and Quiet Title 26 Counts 4, 6, 11 and 12 all appear predicated on an allegation that Wells Fargo lacks standing 27 or authority to initiate/prosecute foreclosure proceedings on Plaintiffs’ home. These counts do not 28 currently appear to be cognizable under California law. The California Court of Appeal has 3 1 repeatedly held that there is no legal authority which permits a borrower to “bring a preemptive 2 judicial action to determine whether Defendants have the authority to initiate nonjudicial foreclosure 3 on [the borrower’s] home” unless the borrower pleads a specific factual basis to support their claim 4 that the foreclosing party lacks such authority. Jenkins v. JP Morgan Chase Bank, N.A., 216 Cal. 5 App. 4th 497, 512-13 (2013); see also Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 6 1149 (2011); Silga v. Mortgage Electronic Reg. Sys., Inc., 219 Cal. App. 4th 75, 84-85 (2013). As 7 the Court of Appeal explained in Silga, “[a]bsent a specific factual basis” in support of the claim, a 8 claim challenging a party’s authority to foreclose “amounts to a preemptive claim seeking to require 9 the foreclosing party to demonstrate in court its authority to initiate a foreclosure. Such a claim is invalid and subject to demurrer.” Silga, 219 Cal. App. 4th at 86 (citations omitted). Here, the 11 For the Northern District of California United States District Court 10 complaint contains no factual basis in support of Plaintiffs’ contention that Wells Fargo does not 12 have standing/authority to foreclose, let alone a specific factual basis. Indeed, public documents 13 submitted by Wells Fargo indicate it does have standing to foreclose. Out of an abundance of 14 caution, however, these claims will be dismissed with leave to amend. 15 E. 16 Count 10: Intentional Infliction of Emotional Distress Plaintiffs allege in Count 10 that they have suffered severe emotional distress, including 17 “lack of sleep, anxiety, and depression” as a result of Defendants’ alleged “outrageous conduct” of 18 attempting to foreclose on their property “without legal right to do so.” As a number of courts have 19 recognized, “[t]he act of foreclosing on a home (absent other circumstances) is not the kind of 20 extreme conduct that supports an intentional infliction of emotional distress claim.” Quinteros v. 21 Aurora Loan Servs., 740 F. Supp. 2d 1163, 1172 (E.D. Cal. 2010); Davenport v. Litton Loan 22 Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal. July 16, 2010) (Seeborg, J.) (holding that absent 23 specific allegations that the lending party asserted its rights to foreclose in bad faith, an IIED claim 24 will not lie in a foreclosure case). Plaintiffs have not made any specific allegations that would 25 support a finding that Wells Fargo has committed any such “outrageous conduct.” Thus, Plaintiffs 26 IIED claim is dismissed without prejudice. 27 // 28 // 4 1 2 F. Count 9: Unfair Competition Law The last count to be discussed is brought pursuant to California’s Unfair Competition Law 3 (UCL), and is derivative on the previously discussed and dismissed claims. See Newton v. Am. Debt 4 Servs., 75 F. Supp. 3d 1048, 1056 (N.D. Cal. 2014). Because the Court finds that none of the 5 predicate violations alleged in Plaintiffs’ complaint survive Defendants’ motion to dismiss, 6 Plaintiffs’ derivative UCL claim must similarly be dismissed. Such dismissal is with leave to 7 amend. Plaintiffs shall have until September 25, 2015 to file an amended complaint. 8 This order disposes of Docket No. 12. 9 IT IS SO ORDERED. 11 For the Northern District of California United States District Court 10 12 Dated: August 24, 2015 13 _________________________ EDWARD M. CHEN United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5

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