Qu et al v. Federal Home Loan Mortgage Corporation et al

Filing 64

ORDER by Judge Claudia Wilken GRANTING ( 9 , 23 ) MOTIONS TO DISMISS AND GRANTING PLAINTIFFS LEAVE TO AMEND CERTAIN CLAIMS AGAINST DEFENDANT WELLS FARGO. (ndr, COURT STAFF) (Filed on 9/25/2014)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 YAN QU and MAN LI, 5 6 7 8 9 United States District Court For the Northern District of California 10 Plaintiffs, 13 14 15 16 17 18 19 20 21 22 23 ORDER GRANTING MOTIONS TO DISMISS AND GRANTING PLAINTIFFS LEAVE TO AMEND CERTAIN CLAIMS AGAINST DEFENDANT WELLS FARGO v. MIKE HUANG; ZIPREALTY, INC.; PRUDENTIAL CALIFORNIA REALTY; JOHN A. AZEVEDO; WACHOVIA CORPORATION; WELLS FARGO BANK, N.A.; and FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendants. 11 12 No. C 13-6005 CW ________________________________/ Plaintiffs Yan Qu and Man Li assert various claims related to their purchase of a condominium in Hayward, California. Defendant Wells Fargo Bank, N.A., as successor by merger with Wachovia Mortgages, FSB, erroneously sued as Wachovia Corporation, and Defendant Federal Home Loan Mortgage Corporation (FHLM) have filed motions to dismiss the second amended complaint (2AC).1 Plaintiffs oppose the motions. Having considered the papers filed by the parties, the Court GRANTS Defendant Wells Fargo’s motion to dismiss (Docket No. 9) and grants Plaintiffs leave to amend certain claims against Wells Fargo. The Court grants Defendant FHLM’s motion to dismiss without leave to amend (Docket No. 23). 24 25 26 27 28 1 Defendants Michael Huang, Ziprealty, Inc., John Azevedo and Prudential California Realty have answered the complaint. Several of the parties have filed cross- and counter-claims that are not at issue in these motions. 1 BACKGROUND 2 The following facts are taken from the 2AC and certain 3 documents of which the Court takes judicial notice.2 4 allege that, at all times relevant to this complaint Plaintiff Li 5 was stationed in Japan with the United States Navy. 6 Plaintiffs further allege that Li’s mother, Plaintiff Qu, “speaks 7 and comprehends little to no English, and has limited written 8 English comprehension skills.” 9 relevant documents after they were emailed or mailed to her in Id. Plaintiffs 2AC ¶ 12. Plaintiff Li signed the United States District Court For the Northern District of California 10 Japan, or Plaintiff Yu signed documents with power of attorney for 11 Plaintiff Li, or both. 12 Id. In 2010, Defendant Azevedo, a real estate agent working for 13 Defendant Prudential California Realty, was the listing broker for 14 a condominium at 342 Blossom Way in Hayward, California. 15 ¶ 15; see also 2AC, Ex. 1. 16 that “public Record shows address as: 336 Blossom Way #3.” 17 Ex. 1. 18 estate agent working for Defendant Ziprealty, Inc., who showed 19 them the property at 342 Blossom Way. 20 2010, Plaintiffs signed a Residential Purchase Agreement to 21 purchase the property at 342 Blossom Way. 22 2. 23 received other documents from Fidelity National Title related to 24 the purchase of the property and that some of those documents 25 26 27 28 2AC The listing for the property notes 2AC, Plaintiffs were represented by Defendant Huang, a real SAC ¶ 15. On January 20, Id.; see also SAC, Ex. Plaintiffs allege that, prior to closing on the property, they 2 With their filings, Defendants Wells Fargo and FHLM have asked that the Court take judicial notice of various documents, including Plaintiffs’ original complaint in this case and documents related to the purchase of the property. Plaintiffs do not oppose or object to the requests and the Court grants them. 2 1 refer to the property purchased as 336 Blossom Way #4. 2 Plaintiffs further allege that some of the documents refer to APN 3 429-0014-128, while others refer to APN 429-0014-129. 4 Plaintiffs do not attach any of these documents to their 5 complaint. 6 SAC ¶ 18. Id. A grant deed recorded February 19, 2010 indicates Wells 7 Fargo, NA granted the property to Plaintiffs. 8 grant deed refers to Assessor’s Parcel Number (APN) 429-0014-129. 9 Id. SAC, Ex. 2. The The grant deed does not include any street addresses.3 Id. United States District Court For the Northern District of California 10 On February 19, 2010, Defendant Huang gave them the keys to 342 11 Blossom Way and they proceeded to move into the property and spend 12 “a substantial amount of money to renovate the property.” 13 ¶ 21. Id. 14 On September 24, 2010, a law enforcement officer served 15 Plaintiffs with a notice of a delayed access to unlawful detainer 16 case against named and unnamed defendants, Alameda Superior Court 17 case number HG10537928, Federal Home Loan Mortgage Corporation v. 18 Singh. 19 from an attorney, stating that FHLM held title to the property 20 identified as 342 Blossom Way, Unit #3 and Plaintiffs hold title 21 to 340 Blossom Way, Unit #4. 22 Plaintiffs to move out of 342 Blossom Way and into 340 Blossom 23 Way. Id. ¶ 22. On April 25, 2011, Plaintiffs received a letter Id. ¶ 23. The letter asked Plaintiffs state that the day they received the letter was 24 25 26 27 28 3 Plaintiffs allege that they received a grant deed that identified the property as “342 Blossom Way, #4” and “APN: 4290014-129.” 2AC ¶ 20. Plaintiffs do not provide a copy of this grant deed. 3 1 the first time they suspected there was something wrong with the 2 title to their property. 3 On April 23, 2013, Plaintiffs filed a complaint in state 4 court. 5 this motion. 6 the action to this Court. On December 13, 2013, Plaintiffs filed the 2AC at issue in Also on December 13, 2013, Defendant FHLM removed 7 8 9 LEGAL STANDARD A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. United States District Court For the Northern District of California 10 Civ. P. 8(a). 11 state a claim, dismissal is appropriate only when the complaint 12 does not give the defendant fair notice of a legally cognizable 13 claim and the grounds on which it rests. 14 Twombly, 550 U.S. 544, 555 (2007). 15 complaint is sufficient to state a claim, the court will take all 16 material allegations as true and construe them in the light most 17 favorable to the plaintiff. 18 896, 898 (9th Cir. 1986). 19 to legal conclusions; “threadbare recitals of the elements of a 20 cause of action, supported by mere conclusory statements,” are not 21 taken as true. 22 (citing Twombly, 550 U.S. at 555). 23 On a motion under Rule 12(b)(6) for failure to Bell Atl. Corp. v. In considering whether the NL Indus., Inc. v. Kaplan, 792 F.2d However, this principle is inapplicable Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) When granting a motion to dismiss, the court is generally 24 required to grant the plaintiff leave to amend, even if no request 25 to amend the pleading was made, unless amendment would be futile. 26 Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 27 F.2d 242, 246-47 (9th Cir. 1990). 28 amendment would be futile, the court examines whether the In determining whether 4 1 complaint could be amended to cure the defect requiring dismissal 2 “without contradicting any of the allegations of [the] original 3 complaint.” 4 Cir. 1990). Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th 5 6 DISCUSSION I. Defendant Wells Fargo’s Motion to Dismiss 7 Defendant Wells Fargo argues that each of Plaintiffs’ causes 8 of action against it fails to state a claim upon which relief can 9 be granted. United States District Court For the Northern District of California 10 A. 11 Defendant Wells Fargo argues, and Plaintiffs concede, that Breach of Fiduciary Duty 12 there was no fiduciary relationship between Plaintiffs and 13 Defendant Wells Fargo. 14 cause of action as to Defendant Wells Fargo without leave to 15 amend. Accordingly, the Court dismisses this 16 B. 17 Defendant Wells Fargo next argues that Plaintiffs fail to Negligence 18 state a claim for negligence against it. 19 of a cause of action for negligence is the existence of a duty to 20 use due care.” 21 citing Bily v. Young & Co., 3 Cal. 4th 370, 397 (1992). 22 from affirmative duties that arise in the context of special 23 relationships, a person is responsible for “an injury occasioned 24 to another by his want of ordinary care or skill in the management 25 of his property or person.” 26 law also provides, “A person may not ordinarily recover in tort 27 for the breach of duties that merely restate contractual “The threshold element Paz v. State of Cal., 22 Cal. 4th 550, 559 (2000), Cal. Civ. Code § 1714(a). 28 5 Aside California 1 obligations. 2 a contractual promise through contract law, except when the 3 actions that constitute the breach violate a social policy that 4 merits the imposition of tort remedies.” 5 24 Cal. 4th 627, 643 (2000), superseded by statute on other 6 grounds as stated in Burch v. Superior Court, 223 Cal. App. 4th 7 1411 (2014) (internal quotation marks and citations omitted). 8 Instead, courts will generally enforce the breach of Aas v. Superior Court, Where, as here, an agreement to purchase real property results in the recording of a deed, the rights of the parties 10 United States District Court For the Northern District of California 9 “depend upon the deed, and not upon the agreement--the latter 11 being merged in and extinguished by the former. 12 deemed to express the final and entire contract between the 13 parties.” 14 Wells Fargo points out, California law provides that a grant deed, 15 the method by which the property was conveyed from Defendant Wells 16 Fargo to Plaintiffs, contains two implied covenants and “none 17 other,” that: (1) “previous to the time of the execution of such 18 conveyance, the grantor has not conveyed the same estate, or any 19 right, title, or interest therein, to any person other than the 20 grantee” and (2) “such estate is at the time of the execution of 21 such conveyance free from incumbrances done, made, or suffered by 22 the grantor, or any person claiming under him.” 23 § 1113. 24 Fargo had any knowledge of the error prior to the date of the 25 sale. 26 The deed is Bryan v. Swain, 56 Cal. 616, 617 (1880). As Defendant Cal. Civ. Code Moreover, Plaintiff does not allege that Defendant Wells Plaintiffs argue, without citation, that Defendant Wells 27 Fargo “owed a duty to the plaintiffs that it only list[], show[], 28 and sell[] a property that it owns.” 6 Opposition to Motion to 1 Dismiss at 2. 2 numerous discrepancies in the title search including but not 3 limited to two assessor’s parcel numbers to describe 342 Blossom 4 Way, [Defendant Wells Fargo] made no effort to investigate the 5 matter and correct mistakes in the titles if any.” 6 However, Plaintiffs entered into an arm’s-length transaction with 7 Defendant Wells Fargo to purchase the property. 8 Menezes, 21 Cal. 4th 542, 551 (1999) (“An arms-length commercial 9 transaction does not generally implicate such a ‘special Plaintiffs further allege that “while there were 2AC ¶ 30. See Erlich v. United States District Court For the Northern District of California 10 relationship.’”) 11 transferred through a grant deed, which provides no covenant of 12 good title. 13 Moreover, as discussed above, the home was Further, there is a presumption that a buyer of real property 14 “act[s] upon his own knowledge of the title, and he will not be 15 heard to complain that he did not receive a perfect title, unless 16 some misrepresentation was made, upon which he was authorized to 17 and did, rely in making the contract, that will entitle him to 18 relief.” 19 quotation marks omitted). 20 always necessary--for a buyer to require the issuance of a policy 21 of title insurance concurrent with (and as a condition of) the 22 closing, insuring that title is held in the buyer’s name.” 23 Greenwald & Bank, Cal. Practice Guide: Real Property Transactions 24 (The Rutter Group 2013) ¶ 3:12, p. 3-6 (emphasis in original); see 25 also id. at ¶ 4:404, p. 4-94.3 (“buyers should thoroughly research 26 the condition of title to the property to be purchased”) (emphasis 27 in original). Gaffey v. Welk, 46 Cal. App. 385, 388 (1920) (internal In California, “it is standard--and Indeed, the sales contract attached to Plaintiffs’ 28 7 1 complaint indicates that Plaintiffs as buyers were responsible for 2 purchasing a title insurance policy. 3 See Complaint, Ex. 2 at 2. Plaintiffs acknowledge that on February 17, 2010, prior to 4 closing on the purchase, the title company provided them with 5 documents related to the purchase. 6 state, 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 In their complaint, Plaintiffs The documents do not identify the property as either 342 Blossom Way, or 340 Blossom Way. Some of the documents identify the property being purchased by Plaintiffs as 336 Blossom Way, #4, Hayward, CA 94541, while others describe the property by APN number: 429-0014-128. Within these documents, there is no connection to identify whether 336 Blossom Way, #4, is 342 Blossom Way or 340 Blossom Way. Furthermore, the documents which describe the property using APN numbers contain different APN numbers between the documents. Some identify the property as 429-0014-128, while others identify the property as 429-0014-129. Complaint ¶ 18. This should have been sufficient to put Plaintiffs on notice that there might be defects in the title to be transferred. Accordingly, the Court finds that Plaintiffs have failed to state a claim for negligence against Defendant Wells Fargo. Because amendment would be futile, dismissal is without leave to amend. C. Negligent Infliction of Emotional Distress Negligent infliction of emotional distress is not an independent tort under California law, but is simply the tort of negligence. Klein v. Children’s Hospital Medical Center of Northern California, 46 Cal. App. 4th 889, 894 (1996). Because the Court concludes that Plaintiffs have not stated a cause of action for negligence against Defendant Wells Fargo, Plaintiffs’ 28 8 1 cause of action for negligent infliction of emotional distress is 2 also dismissed as to Defendant Wells Fargo without leave to amend. 3 D. 4 “The elements of a cause of action for breach of contract Breach of Contract 5 are: 1) the existence of the contract; 2) performance by the 6 plaintiff or excuse for nonperformance; 3) breach by the 7 defendant; and 4) damages.” 8 Bank, N.A., 863 F. Supp. 2d 928, 954 (N.D. Cal. 2012). 9 allege that “Defendants breached the written agreement by failing McNeary-Calloway v. JP Morgan Chase Plaintiffs United States District Court For the Northern District of California 10 to deliver the correct title into escrow for the Plaintiffs to 11 receive on that date, but instead delivered title to another 12 property.” 13 this case is the grant deed executed by Defendant Wells Fargo and 14 Plaintiffs. 15 transfer APN 429-0014-129 to Plaintiffs. 16 alleged that Defendant Wells Fargo failed to make this transfer. 17 Moreover, Plaintiffs have not alleged that Defendant Wells Fargo 18 breached any of the implied covenants imposed by California Civil 19 Code § 1113 discussed above. 20 Plaintiffs have failed to state a breach of contract claim against 21 Defendants Wells Fargo. 22 additional facts to support their breach of contract claims, they 23 may do so in an amended complaint. Complaint ¶ 42. As discussed above, the contract in In that grant deed, Defendant Wells Fargo agreed to Plaintiffs have not Accordingly, the Court finds that If Plaintiffs can truthfully allege 24 E. 25 Under California law, the elements of fraud are Fraud 26 “(a) misrepresentation (false representation, concealment, or 27 nondisclosure); (b) knowledge of falsity (or scienter); (c) intent 28 to defraud, i.e., to induce reliance; (d) justifiable reliance; 9 1 and (e) resulting damage.” 2 167, 173 (2003) (internal quotation marks and citations omitted). 3 “In all averments of fraud or mistake, the circumstances 4 constituting fraud or mistake shall be stated with particularity.” 5 Federal Rule of Civil Procedure 9(b). 6 “specific enough to give defendants notice of the particular 7 misconduct which is alleged to constitute the fraud charged so 8 that they can defend against the charge and not just deny that 9 they have done anything wrong.” Small v. Fritz Cos., Inc., 30 Cal. 4th The allegations must be Semegen v. Weidner, 780 F.2d 727, United States District Court For the Northern District of California 10 731 (9th Cir. 1985). 11 saying that it existed. 12 (“Malice, intent, knowledge, and other condition of mind of a 13 person may be averred generally”). 14 and nature of the alleged fraudulent activities are sufficient, 15 id. at 735, provided the plaintiff sets forth “what is false or 16 misleading about a statement, and why it is false.” 17 GlenFed, Inc., Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994). 18 Allegations of fraud based on information and belief usually do 19 not satisfy the particularity requirements of Rule 9(b); however, 20 as to matters peculiarly within the opposing party’s knowledge, 21 allegations based on information and belief may satisfy Rule 9(b) 22 if they also state the facts upon which the belief is founded. 23 Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 24 1987). 25 Scienter may be averred generally, simply by Id. at 1547; see Fed. R. Civ. Proc. 9(b) Statements of the time, place In re Plaintiffs allege that Defendant Wells Fargo falsely 26 represented to Plaintiffs that they were contracting to purchase 27 342 Blossom Way. 28 that representation was false when they made it, or they made it Plaintiffs allege that “Defendants knew that 10 1 recklessly and without regard for its truth.” 2 Plaintiffs make no factual allegations to support their contention 3 that Defendants knew or should have known of the mistake regarding 4 the property to be sold. 5 be plead with particularity. 6 Plaintiffs’ fraud claim as to Defendant Wells Fargo. 7 Plaintiffs can truthfully allege additional facts to support their 8 fraud claim, they may do so in an amended complaint. 9 II. United States District Court For the Northern District of California 10 2AC ¶ 46. However, As noted above, any claim for fraud must Accordingly the Court dismisses If Defendant FHLM’s Motion to Dismiss Plaintiffs allege two causes of action against Defendant 11 FHLM, negligence and negligent infliction of emotional distress. 12 As discussed above, both of these claims require a showing of a 13 duty owed by Defendant to Plaintiffs. 14 motion to dismiss, Plaintiffs argue that FHLM “owes a duty to the 15 general public and plaintiffs not to allow the co-defendants 16 access to its property.” 17 not provide any authority to support this contention. 18 Plaintiffs had no relationship to FHLM. 19 has no duty to control the conduct of another, and no duty to warn 20 those who may be endangered by such conduct.” 21 Francisco Cmty. Coll. Dist., 36 Cal. 3d 799, 806 (1984) (citations 22 omitted). 23 between the actor and the third person which imposes a duty upon 24 the actor to control the third party’s conduct, or (b) a special 25 relation exists between the actor and the other which gives the 26 other a right to protection.” 27 allegations here. In their opposition to the Opposition at 2. However, Plaintiffs do Here, “As a general rule one Peterson v. San A duty may arise where “(a) a special relation exists Id. Plaintiffs have made no such Accordingly, the Court dismisses Plaintiffs’ 28 11 1 claims as to Defendant FHLM. 2 dismissal is without leave to amend. 3 Because amendment would be futile, CONCLUSION 4 For the foregoing reasons, the Court GRANTS Defendant Wells 5 Fargo’s motion to dismiss (Docket No. 9). 6 negligence and negligent infliction of emotional distress are 7 dismissed without leave to amend as to Defendant Wells Fargo. 8 Plaintiffs’ claim for breach of contract is dismissed with leave 9 to amend if Plaintiffs can truthfully allege facts sufficient to Plaintiffs’ claims for United States District Court For the Northern District of California 10 remedy the deficiencies noted above. 11 is dismissed with leave to amend if Plaintiffs can truthfully 12 allege facts sufficient to support a finding that Defendant Wells 13 Fargo recklessly disregarded the truth with respect to the 14 property to be sold. 15 fourteen days of the date of this order. 16 amended complaint, Defendant shall respond to it within fourteen 17 days after it is filed. 18 Plaintiffs shall respond to the motion within fourteen days 19 thereafter. 20 that. 21 Plaintiffs’ claim for fraud Any amended complaint must be filed within If Plaintiffs file an If Defendant files a motion to dismiss, Defendants may file a reply within seven days after Any motion to dismiss will be decided on the papers. The Court GRANTS Defendant FHLM’s motion to dismiss (Docket 22 No. 23). 23 without leave to amend. Plaintiffs’ claims against Defendant FHLM are dismissed 24 25 26 27 28 12 1 A case management conference will be held in this case at 2 2:00 PM on Wednesday, December 3, 2014. 3 a joint case management statement by November 26, 2014. 4 The parties shall submit IT IS SO ORDERED. 5 6 7 Dated: September 25, 2014 CLAUDIA WILKEN United States District Judge 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13

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