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

Filing 35

ORDER by Judge Hamilton granting 15 Motion to Dismiss; denying 28 Motion to Remand (pjhlc2, COURT STAFF) (Filed on 7/9/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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HEDDI LINDBERG,

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For the Northern District of California

United States District Court

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Plaintiff,
v.

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WELLS FARGO BANK N.A., et al.,

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No. C 13-0808 PJH
ORDER DENYING MOTION TO
REMAND, GRANTING MOTION
TO DISMISS

Defendants.
_______________________________/

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Plaintiff’s motion to remand and defendant’s motion to dismiss came on for hearing

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before this court on June 12, 2013. Plaintiff Heddi Lindberg appeared through her counsel,

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John Holman. Defendant Wells Fargo Bank N.A. (“Wells Fargo”) appeared through its

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counsel, Yaw-Jiun Wu. Having read the parties’ papers and carefully considered their

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arguments and the relevant legal authority, and good cause appearing, the court hereby

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DENIES plaintiff’s motion to remand, as stated at the hearing, and GRANTS Wells Fargo’s

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motion to dismiss as follows.

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This is a mortgage case. The facts, as alleged in the first amended complaint

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(“FAC”), are as follows. Plaintiff entered into a loan agreement with World Savings Bank

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(the predecessor-in-interest to Wells Fargo1) in March 2007. The amount of the loan was

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$475,000. Plaintiff was having trouble making the mortgage payments, and in 2012, she

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sought a loan modification from Wells Fargo. Plaintiff was first told that she needed to be in

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In December 2007, World Savings changed its name to Wachovia Mortgage, FSB, and
Wachovia was then merged with Wells Fargo.

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default for three months in order to qualify for a loan modification. Plaintiff was then told to

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provide documentation of her income. However, on or about October 10, 2012, plaintiff

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received a notice of default from Wells Fargo. Plaintiff claims that she contacted Wells

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Fargo, and was told “not to be concerned about foreclosure.” But on January 10, 2013, a

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notice of trustee’s sale was recorded, setting a sale date of February 13, 2013. While

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these foreclosure proceedings were going on, plaintiff claims that she was still in

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discussions with Wells Fargo about a loan modification. On February 1, 2013, plaintiff

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received a letter from Patrick Finnegan at Wells Fargo, asking for additional information

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and documents to be provided before February 4, 2013. On February 4, plaintiff contacted
Mr. Finnegan, who maintained that the documents needed to be submitted by the end of

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For the Northern District of California

United States District Court

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the day. Plaintiff contends that Wells Fargo was “hoping that plaintiff would not be vigilant

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with her foreclosure,” thus rendering moot her modification application. Plaintiff further

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claims that Wells Fargo “never intended to modify her loan.” Plaintiff also argues that,

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aside from any irregularities in the loan modification process, Wells Fargo lacks authority to

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foreclose, because (1) Wells Fargo lost its interest in the loan during the securitization

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process, (2) the note has been separated from the deed of trust, because the chain of title

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in the note has been broken, and (3) plaintiff’s debt has become unsecured.

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Plaintiff originally filed suit in state court on February 8, 2013, naming as defendants

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Wells Fargo and Regional Trustee Services Corporation (together, “defendants”).

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Defendants removed the case to this court on February 21, 2013. Plaintiff then filed a first

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amended complaint (“FAC”), which is the subject of this motion, on March 15, 2013. The

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FAC alleges sixteen causes of action: (1) declaratory relief, (2) temporary, preliminary, and

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permanent injunction, (3) intentional infliction of emotional distress, (4) negligent infliction of

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emotional distress, (5) quiet title, (6) breach of implied covenant of good faith and fair

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dealing, (7) deceit - promise made without intent to perform, (8) deceit - intentional

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misrepresentation, (9) fraud and deceit - suppression of material fact, (10) fraud and deceit

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- negligent misrepresentation, (11) promissory estoppel, (12) negligence, (13) elder abuse,

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(14) wrongful foreclosure, (15) violation of Cal. Bus. & Prof. Code § 17200, and (16)
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cancellation of instruments. On the same day that plaintiff filed the FAC, she also filed a

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motion for preliminary injunction, seeking to stop the foreclosure sale of the subject

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property. The court denied the motion for preliminary injunction on April 22, 2013. See

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Dkt. 27.

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Now before the court are Wells Fargo’s motion to dismiss (filed March 29, 2013) and

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plaintiff’s motion to remand (filed May 3, 2013). Because plaintiff’s motion to remand

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presents a threshold jurisdictional question, the court will address that motion first. In her

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motion, plaintiff argues that neither of the requirements for diversity jurisdiction is met,

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because Wells Fargo “has not shown that the amount in controversy exceeds $75,000,”
and because both parties are citizens of California. As to the amount in controversy, Wells

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For the Northern District of California

United States District Court

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Fargo argues that “[i]n actions seeking declaratory or injunctive relief, it is well established

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that the amount in controversy is measured by the value of the object of the litigation.” Hunt

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v. Washington State Apple Advertising Com’n, 432 U.S. 333, 347 (1977). In this case,

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plaintiff seeks to invalidate the deed of trust to the subject property (valued at $565,000)

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and seeks a determination that her debt to Wells Fargo (which was $475,000 at the time of

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the loan, and is now $531,195.49) is invalid. Thus, the court finds that the amount in

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controversy in this case does exceed $75,000.

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As to the citizenship of Wells Fargo, the court first notes that the Supreme Court has

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held that “a national bank . . . is a citizen of the state in which its main office, as set forth in

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its articles of association, is located.” Wachovia Bank v. Schmidt, 546 U.S. 303, 307

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(2006). Plaintiff does not dispute that Wells Fargo’s articles of association designate South

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Dakota as the state in which its main office is located. However, plaintiff argues that Wells

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Fargo should also be considered a citizen of the state in which its principal place of

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business is located. Under this view, Wells Fargo would be considered a citizen of both

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South Dakota and California, which would preclude diversity jurisdiction in this case, since

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plaintiff is also a citizen of California. In support of her argument, plaintiff cites to a handful

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of cases from district courts in California. See, e.g., Martinez v. Wells Fargo Bank, 2013

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WL 2237879 (N.D. Cal. May 21, 2013); Goodman v. Wells Fargo Bank, 2011 WL 2372044
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(C.D. Cal. June 1, 2011); Saberi v. Wells Fargo, 2011 WL 197860 (S.D. Cal. Jan. 20,

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2011). In each of these cases, the court found that the Ninth Circuit’s opinion in American

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Surety Co. v. Bank of California, 133 F.2d 160 (9th Cir. 1943), which held that banks are

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citizens of the state in which their principal place of business is located, was not expressly

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overruled by Schmidt. In their (and plaintiff’s) view, Schmidt allows for the possibility that a

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bank can be a citizen of both the state designated in its articles of association and that

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state in which its principal place of business is located. However, in the absence of any

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clear post-Schmidt authority from the Ninth Circuit, the court declines to adopt this “dual

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citizenship” argument. Instead, consistent with Schmidt, the court finds that Wells Fargo is
a citizen of South Dakota, and not of California. Thus, both requirements of diversity

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For the Northern District of California

United States District Court

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jurisdiction are met, and plaintiff’s motion to remand is DENIED.

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Turning to Wells Fargo’s motion to dismiss, the court first notes that plaintiff alleges

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four general categories of allegedly wrongful conduct on the part of Wells Fargo. These

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four categories of conduct are spread across plaintiff’s sixteen asserted causes of action.

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The four categories are as follows: (1) claims related to the origination of plaintiff’s loan; (2)

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claims that Wells Fargo did not have standing to foreclose on the subject property; (3)

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claims that Wells Fargo committed fraud in the loan modification process; and (4) claims

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that Wells Fargo engaged in “dual tracking” by initiating foreclosure proceedings while

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plaintiff was attempting to negotiate a loan modification.

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As to category (1), claims related to the origination of plaintiff’s loan, the court first

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notes that claims related to the origination of mortgage loans are expressly preempted by

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the Home Owners’ Loan Act of 1933 (“HOLA”). However, at least one of plaintiff’s loan

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origination claims (specifically, the eighth cause of action) alleges fraud in the origination of

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her loan, which would exempt the claim from HOLA preemption. Instead, to the extent that

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plaintiff’s loan origination claims allege fraud, the court finds such claims to be time-barred

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by the three-year statute of limitations applicable to fraud claims. Plaintiff’s loan was

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originated on or about March 15, 2007, but plaintiff did not file suit until February 8, 2013.

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Thus, the court finds that plaintiff cannot state a claim for any conduct related to the
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origination of her loan. The court will address the specific causes of action affected by this

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finding below.

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As to category (2), plaintiff alleges that Wells Fargo lacks standing to foreclose,

property has been broken, and because plaintiff’s loan has been securitized, which

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extinguishes Wells Fargo’s interest in the subject property. The court notes that plaintiff’s

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opposition brief does not substantively address these arguments, and instead focuses on

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her loan modification and dual tracking arguments. Regardless, the judicially noticeable

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documents submitted by Wells Fargo establish that there was no assignment of the deed of

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trust; instead, the original lender (World Savings) changed its name to Wachovia Mortgage,

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For the Northern District of California

because it is not in possession of the original note, because the chain of title to the subject

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United States District Court

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FSB, which was then merged with Wells Fargo Bank. The court further finds that Wells

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Fargo need not demonstrate ownership of the original note in order to foreclose. See, e.g.,

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Hafiz v. Greenpoint Mortgage Funding, Inc., 652 F.Supp.2d 1039, 1043 (N.D. Cal. 2009).

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Finally, the court finds that plaintiff makes no non-conclusory allegations that her specific

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loan was securitized, nor does she present any authority for her argument that

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securitization would preclude Wells Fargo from foreclosing. The court also notes that

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HOLA preemption provides an independent basis for dismissing these “standing to

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foreclose” claims. See, e.g., Ahmed v. Wells Fargo, 2011 WL 1751415 (N.D. Cal. May 9,

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2011); DeLeon v. Wells Fargo, 729 F.Supp.2d 1119 (N.D. Cal. 2010).

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As to category (3), plaintiff alleges that Wells Fargo told plaintiff to stop making loan

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payments in order to qualify for a loan modification, that she did indeed stop making loan

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payments in reliance on that promise, and that she defaulted on her loan as a result.

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Taken as true, these allegations could potentially state a claim for fraud, promissory

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estoppel, and/or violation of Cal. Bus. & Prof. Code § 17200. As discussed above, plaintiff

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spreads these loan modification claims across many of her sixteen asserted claims. Those

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claims will be discussed more fully below.

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Finally, as to category (4), plaintiff alleges that Wells Fargo improperly engaged in
“dual tracking” by initiating foreclosure proceedings while plaintiff was still negotiating a
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loan modification. For support, plaintiff relies on the recently-passed California

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Homeowners’ Bill of Rights (“HBOR”), which prohibits such dual tracking. However, the

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statute prohibits foreclosure only after “a foreclosure prevention alternative is approved in

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writing,” and if the “borrower is in compliance with the terms of a written trial or permanent

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loan modification, forbearance, or repayment plan.” Cal Civ. Code § 2924.11(a). Plaintiff

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does not allege that any loan modification plan was actually approved, and instead claims

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only that she was “working on securing a loan modification.” Thus, plaintiff’s dual tracking

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arguments do not have merit.

plaintiff’s first cause of action (for declaratory relief) is based on her claims that Wells Fargo

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For the Northern District of California

Applying these findings to plaintiff’s sixteen causes of action, the court first finds that

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United States District Court

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does not own the original note and that her loan was securitized. Thus, for the reasons

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described above, plaintiff’s first cause of action is DISMISSED. Because plaintiff has not

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provided any authority to show that these allegations may state a viable claim, the

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dismissal is with prejudice.

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Plaintiff’s second cause of action is for a “preliminary and permanent injunction.”

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Wells Fargo points out that injunctive relief is a remedy, not a cause of action, and plaintiff

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does not dispute this point in her opposition. The court agrees, and DISMISSES plaintiff’s

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second cause of action with prejudice.

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Plaintiff’s third cause of action is for intentional infliction of emotional distress, and

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appears to be based on both the origination of plaintiff’s loan and on the attempted loan

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modification. To the extent this claim is based on loan origination, it is time-barred and

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DISMISSED with prejudice. To the extent this claim is based on loan modification efforts,

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plaintiff has not (and cannot) allege that Wells Fargo’s behavior was sufficiently

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“outrageous” to give rise to an emotional distress claim. Thus, plaintiff’s third cause of

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action is DISMISSED with prejudice.

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Plaintiff’s fourth cause of action is for negligent infliction of emotional distress, and is

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based only on the attempted loan modification. Plaintiff concedes that she needs to allege

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the existence of a legal duty to use reasonable care in order to state a claim, and concedes
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that a usual lender of money owes no duty to the borrower, but argues that Wells Fargo

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went “far beyond the domain of the usual money lender.” However, neither the FAC nor

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plaintiff’s opposition brief allege any facts that support this legal conclusion, and instead

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allege only that Wells Fargo ultimately did not offer to modify plaintiff’s loan. Thus, plaintiff

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has not adequately alleged that Wells Fargo owed her a duty that was breached, and

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plaintiff’s fourth cause of action is DISMISSED with prejudice.

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Plaintiff’s fifth cause of action is for “quiet title to real property,” and is based on her

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allegations that Wells Fargo does not possess the promissory note. As explained above,

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plaintiff’s note ownership claims lack merit, and thus cannot give rise to a cause of action to
quiet title. Moreover, to state a claim for quiet title, plaintiff must allege a credible offer to

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For the Northern District of California

United States District Court

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tender the indebtedness. See, e.g., Collins v. Power Default Services, Inc., 2010 WL

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234902 (N.D. Cal. Jan. 24, 2010). Plaintiff has not alleged such a tender, and instead

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argues that there is no tender requirement for this claim. The court disagrees, and

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DISMISSES plaintiff’s fifth cause of action with prejudice.

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Plaintiff’s sixth cause of action is for breach of the implied covenant of good faith.

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According to the FAC, this claim is based on four categories of conduct: (1) failure to

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“evaluate plaintiff’s condition for foreclosure avoidance;” (2) failure to “advise plaintiff of her

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statutory right to meet with defendants regarding such foreclosure avoidance;” (3) advising

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plaintiff to stop payments in order to qualify for a loan modification; and (4) continuing with

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foreclosure proceedings while plaintiff was attempting to get a loan modification. FAC, ¶¶

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68-69. Plaintiff does not make clear which contract forms the basis of this claim. To the

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extent this cause of action is based on the original loan agreement, there is no allegation

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that the agreement provided for or even contemplated a loan modification, so Wells Fargo’s

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alleged failure to properly evaluate/advise would not constitute a breach of any implied duty

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under that contract. And because there was never any agreement regarding a loan

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modification, plaintiff cannot argue that Wells Fargo breached an implied duty under a

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modification contract. While these allegations regarding the modification would properly fall

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under a fraud-type claim (which will be addressed below), they do not state a claim for
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breach of an implied duty of good faith. Thus, plaintiff’s sixth cause of action is

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DISMISSED with prejudice.
Plaintiff’s seventh cause of action is for “deceit - promise made without intent to

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perform,” and is premised on plaintiff’s attempted loan modification. Plaintiff alleges that

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she was promised a loan modification if she submitted the necessary paperwork, that she

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was told to stop making payments in order to qualify for a modification, and that no

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foreclosure would occur until the loan modification process was completed. FAC, ¶ 71.

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Taken as true, these allegations could state a claim for fraud, assuming they are pled with

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the required “particularity” under Rule 9(b). A fraud claim requires (1) a false
representation as to a material fact; (2) knowledge of its falsity; (3) intent to defraud; (4)

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actual and justifiable reliance; and (5) resulting damage. Wilhelm v. Pray, Price, Williams &

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Russell, 186 Cal.App.3d 1324, 1331 (1986). Rule 9(b) further requires that fraud claims

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allege the “who, what, when, and where” of the allegedly fraudulent statements. Plaintiff

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has identified the “what,” and makes a general allegation regarding the “when,” but

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otherwise falls short of this pleading standard. Thus, plaintiff’s seventh cause of action is

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DISMISSED, but plaintiff shall have an opportunity to amend this cause of action to satisfy

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Rule 9(b)’s pleading standard. Plaintiff’s amended complaint must specifically allege what

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the material false representations were, who made them, and when and where they were

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made.

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Plaintiff’s eighth cause of action is for “deceit - intentional misrepresentation,” and is

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based on the origination of plaintiff’s loan. Plaintiff alleges that she was “unaware that

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World Savings was operating in the subprime loan market,” and that the “deal was in

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actuality fake.” FAC, ¶ 82. Plaintiff further alleges that the facts underlying this claim

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“could not have been discovered sooner” because “defendants continually told these lies to

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plaintiff telling her that plaintiff would not be put into foreclosure.” FAC, ¶ 85. Here, plaintiff

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muddles her loan modification allegations with her loan origination allegations, but it

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appears that the loan modification allegations are intended to support her tolling argument.

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In any case, plaintiff does not identify any specific misrepresentation during the origination
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of her loan, and does not adequately allege any basis for tolling her claims. Thus, the court

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finds that plaintiff’s claim is time-barred. Plaintiff’s eighth cause of action is DISMISSED

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with prejudice.

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Plaintiff’s ninth cause of action is for “suppression of material facts.” A claim for

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fraud by non-disclosure requires (1) a fiduciary or confidential relationship, (2)

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nondisclosure, (3) intent to deceive, and (4) reliance and resulting injury. See, e.g.,

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Johannson v. Wachovia Mortgage FSB, 2011 WL 3443952 (N.D. Cal. Aug. 5, 2011).

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However, “[a]bsent special circumstances, a loan does not establish a fiduciary relationship

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between a commercial bank and its debtor.” Das v. Bank of America, 186 Cal.App.4th 727,
741 (2010). Thus, plaintiff cannot allege each element of this claim, and for that reason,

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For the Northern District of California

United States District Court

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plaintiff’s ninth cause of action is DISMISSED with prejudice.

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Plaintiff’s tenth cause of action is for “fraud and deceit - negligent

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misrepresentation.” In order to state a claim for negligent misrepresentation, plaintiff must

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allege the existence of a duty of care between herself and Wells Fargo. See Ditto v.

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McCurdy, 510 F.3d 1070, 1078 (9th Cir. 2007). As explained above, a usual lender of

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money owes no duty to the borrower. Thus, plaintiff cannot state a claim for negligent

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misrepresentation, and the tenth cause of action is DISMISSED with prejudice.

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Plaintiff’s eleventh cause of action is for promissory estoppel, and is based on her

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attempted loan modification. A claim for promissory estoppel requires (1) a clear and

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unambiguous promise, (2) reliance by the party to whom the promise was made, (3) that

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the reliance be reasonable and foreseeable, and (4) injury caused by the reliance. Laks v.

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Coast Fed. Sav. & Loan Ass’n, 60 Cal.App.3d 885, 890 (1976). Plaintiff’s allegations are

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similar to her allegations with respect to her seventh cause of action - but because this

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claim does not sound in fraud, Rule 9(b)’s particularity requirements do not apply here.

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However, plaintiff has not identified the “clear and unambiguous” promise made by Wells

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Fargo. Instead, plaintiff alleges (in her opposition brief) that Wells Fargo promised her a

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loan modification “with reasonable terms.” The court notes that “reasonable terms” cannot

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constitute a clear and unambiguous promise, and finds it likely that this case is similar to
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Cabanillas v. Wachovia, in which the court found that the bank “merely promised to

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consider and evaluate” a request for modification, but did not promise an actual

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modification. See Case No. 12-0228 (C.D. Cal. Mar. 20, 2012). However, the court will

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DISMISS the eleventh cause of action with leave to amend, to allow plaintiff an opportunity

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to allege a sufficiently “clear and unambiguous” promise.

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Plaintiff’s twelfth cause of action is for negligence. As explained above, plaintiff must

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allege the existence of a duty of care between herself and Wells Fargo in order to state a

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claim for negligence. See Ditto v. McCurdy, 510 F.3d 1070, 1078 (9th Cir. 2007). And

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because a usual lender of money owes no duty to the borrower, plaintiff’s twelfth cause of

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For the Northern District of California

United States District Court

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action is DISMISSED with prejudice.
Plaintiff’s thirteenth cause of action is for elder abuse, and is based entirely on the

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origination of plaintiff’s loan. As discussed above, all loan origination claims are time-

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barred, and thus plaintiff’s thirteenth cause of action is DISMISSED with prejudice.

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Plaintiff’s fourteenth cause of action is for wrongful foreclosure, and is based on

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HBOR’s prohibition of “dual tracking.” As explained above, HBOR prohibits the initiation of

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foreclosure proceedings only “if a foreclosure prevention alternative is approved in writing.”

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Cal. Civ. Code § 2924.11. Plaintiff concedes that no loan modification (or other foreclosure

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prevention alternative) was ever approved; thus, plaintiff’s fourteenth cause of action is

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DISMISSED with prejudice.

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Plaintiff’s fifteenth cause of action alleges a violation of Cal. Bus. & Prof. Code §

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17200, and is largely derivative of plaintiff’s other claims. As a result, this claim rises and

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falls with those claims. Thus, to the extent that this claim is based on allegations of fraud in

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the loan modification process, it is DISMISSED with leave to amend. To the extent that this

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claim is based on plaintiff’s other allegations (loan origination, standing to foreclose, dual

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tracking), it is DISMISSED with prejudice.

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Plaintiff’s sixteenth cause of action is for “cancellation of instrument,” and is based

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on allegations that Wells Fargo lacked standing to foreclose on the subject property

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because of improprieties regarding the chain of title. As discussed above, plaintiff has not
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adequately alleged any problem in the chain of title, and as a result, plaintiff’s sixteenth

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cause of action is DISMISSED with prejudice.

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In sum, the FAC is dismissed in full, with leave to amend granted only as to the

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seventh (fraud), eleventh (promissory estoppel), and fifteenth (section 17200) causes of

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action, and only to the extent that those causes of action are based on plaintiff’s attempted

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loan modification. Plaintiff is directed to file a second amended complaint, in accordance

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with this order, no later than August 8, 2013. The second amended complaint must be

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limited to the three causes of action described above, and cannot contain any allegations

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regarding the origination of plaintiff’s loan, defendants’ standing to foreclose, or defendants’
alleged “dual tracking.” No new parties may be added without leave of court. Defendants

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shall have until August 29, 2013 to answer or otherwise respond to the complaint.

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Finally, Wells Fargo’s request for judicial notice is GRANTED.

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IT IS SO ORDERED.
Dated: July 9, 2013
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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