Doran et al v. Wells Fargo Bank, National Association et al
Filing
36
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED JUNE 13, 2011 re: 29 . ~ Excerpt of order: Counts II, III, and IV of the First Amended Complaint a re Dismissed with Prejudice. Count I of the First Amended Complaint is Dismissed withotu Prejudice. "The Court ORDERS plaintiffs to file their Second Amended Complaint by no later than November 21, 2011." ~ Signed by JUDGE LESLIE E. KOBAYAS HI on 10/31/2011. [Order follows hearing held on 10/17/022 re: Motion to Dismiss (doc 29). Minutes of Hearing: doc no. 35 ]. (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). All participants are registered to receive electronic notifications.
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
RICHARD A. DORAN AND PATRICIA
R. DORAN, individually and as
trustees of THE RICHARD A.
DORAN AND PATRICIA R. DORAN
FAMILY TRUST,
)
)
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
WELLS FARGO BANK, ET AL.,
)
)
Defendants.
)
_____________________________ )
CIVIL NO. 11-00132 LEK-KSC
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S
MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED JUNE 13, 2011
Before the Court is Defendant Wells Fargo Bank,
National Association’s1 (“Defendant”) Motion to Dismiss First
Amended Complaint Filed June 13, 2011 (“Motion”), filed on
June 27, 2011.
Plaintiffs Richard A. Doran and Patricia R.
Doran, individually and as trustees of the Richard A. Doran and
Patrician R. Doran Family Trust (“the Trust”, all collectively
“Plaintiffs”) filed their memorandum in opposition on September
13, 2011, and Defendant filed its reply on September 27, 2011.
This matter came on for hearing on October 17, 2011.
Appearing
on behalf of Defendant was Audrey Yap, Esq., and appearing on
behalf of Plaintiffs was David Cain, Esq., by telephone.
After
careful consideration of the Motion, supporting and opposing
1
Wells Fargo Bank, National Association, is also known as
Wells Fargo.
memoranda, and the arguments of counsel, Defendant’s Motion is
HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set
forth below.
BACKGROUND
Richard and Patricia Doran, individually (“the
Dorans”), filed the original complaint pro se in the State of
Hawai`i Circuit Court of the Second Circuit on February 8, 2011.
The Dorans alleged numerous claims against Defendant in relation
to the loan modification process for, and eventual foreclosure
on, their home at 3360 Kua`au Place, Kihei, Hawai`i 96753 (“the
Property”).
Defendant removed the action based upon diversity
jurisdiction on March 2, 2011.
(dkt. no. 1-1), at ¶ 5.]
[Notice of Removal, filed 3/2/11
A week later, Defendant filed a Motion
to Dismiss, arguing that the Dorans failed to state a claim upon
which relief could be granted and that the Dorans lacked standing
since the Trust holds title to the Property at issue.
The Dorans
obtained counsel while the motion was pending.
On May 31, 2011, the Court issued an order granting
Defendant’s Motion to Dismiss (“May 31, 2011 Order”).
Doran v.
Wells Fargo Bank, et al., Civil No. 11-00132 LEK-BMK, 2011 WL
2160643 (D. Hawai`i May 31, 2011).
The Court dismissed with
prejudice the Dorans’ claims of unfair and deceptive trade
practices under Washington law, slander of title, slander of
credit, and negligent infliction of emotional distress.
2
The
Court dismissed without prejudice the Dorans’ claims of fraud,
wrongful foreclosure, intentional infliction of emotional
distress (“IIED”), and loss of consortium.
Id. at *16.
The
Court required the Dorans to include the Trust as a named
plaintiff in any subsequent amended complaint that claims fraud
or wrongful foreclosure because the Trust, as title-holder to the
Property, is the allegedly injured party in these claims.
Id.
Plaintiffs filed their First Amended Complaint on
June 13, 2011, in accordance with May 31, 2011 Order.
The First
Amended Complaint names the Dorans as plaintiffs in their
individual capacities and as trustees of the Trust.
The First
Amended Complaint alleges all of the counts that the May 31, 2011
Order dismissed without prejudice: Count I - fraud; Count II wrongful foreclosure; Count III - IIED; and Count IV - loss of
consortium.
The factual allegations common to all counts are
identical to those in the original complaint, [First Amended
Complaint at ¶¶ 1-28,] with the exception of the allegations
discussing the Trust [id. at ¶¶ 1-2, 5].
The principal changes from the original complaint to
the First Amended Complaint are expanded recitations of the
claims.
As to Count I (fraud), Plaintiffs newly allege that,
when Defendant encouraged Plaintiffs to apply for a loan
modification and told them that they were “pre-qualified”,
Defendant “had no intention of giving them a loan modification.”
3
[Id. at ¶¶ 30-33.]
Further, Defendant “refused to update its
files” regarding the loan modification and foreclosed on the
Property in spite of its representations to Plaintiffs.
¶¶ 37, 39.]
[Id. at
The First Amended Complaint also alleges that
Defendant benefitted from the misrepresentation by charging late
fees, claiming a larger tax loss, and acquiring the Property,
which Defendant knew would eventually appreciate.
36.]
[Id. at ¶¶ 35-
As to Count II (wrongful foreclosure), Plaintiffs allege
that Defendant did not give proper notice of the impending
foreclosure, as required under Hawai`i Revised Statutes Chapter
667, because “Plaintiffs were being assured they were being
considered for loan modification.”
[Id. at ¶¶ 41-42.]
Plaintiffs also allege that the foreclosure protections under
2011 Haw. Sess. Laws Act 48 (“Act 48”) apply.
[Id. at ¶ 43.]
For Count III (IIED), Plaintiffs allege that the
misrepresentation that Plaintiffs were “pre-qualified” for a loan
modification, the cancellation of the modification process, and
the subsequent foreclosure, “intentionally or recklessly injured
Plaintiffs.”
[Id. at ¶¶ 45-46.]
Plaintiffs claim that, as a
result, they have suffered “sleeplessness, health-effects from
[Id. at ¶ 49.]
stress, and loss of consortium.”
Count IV
alleges that “[a]s a proximate result of the negligent actions of
Wells Fargo, Plaintiffs’ marriage has been affected and as a
consequence, has impaired their society and services.”
4
[Id. at ¶
52.]
Plaintiffs ask the Court to enjoin any actions relating
to the transfer of the Property to Defendant or to a third-party
buyer; consequential damages; fees and costs pursuant to any
written loan agreement binding Defendant; and any other
appropriate relief.
I.
Motion
In the instant Motion, Defendant first points out that,
on April 6, 2005, the Dorans, as Trustees of the Trust, executed
a Promissory Note secured by a Mortgage (“First Note” and “First
Mortgage”)2 as Trustees under the Trust.
The principal amount of
the First Note was $926,000.00, and the First Mortgage gave
Defendant a security interest in the Property.
Defendant
subsequently sold, assigned and transferred its interest in the
First Note and First Mortgage to U.S. Bank N.A., as Successor
Trustee to Wachovia Bank N.A. for WFASC 2005-AR13 (“U.S. Bank”).
One of Defendant’s divisions, Wells Fargo Home Mortgage, Inc., is
and was U.S. Bank’s servicing agent for the First Mortgage.
[Mem. in Supp. of Motion at 2-3.]
On May 21, 2007, the Dorans, as Trustees of the Trust,
also executed another promissory note and another mortgage
2
The First Mortgage is attached to the Motion as Exhibit A
to the Declaration of Counsel.
5
(“Second Note” and “Second Mortgage”) in favor of Defendant.3
The principal amount of the Second Note was $200,000.00, and the
Second Mortgage gave Defendant a security interest in the
Property.
Defendant states that, on or about October 1, 2009,
the Trust defaulted under the terms of the First Note and First
Mortgage.
Defendant served a Notice of Mortgagee’s Intention to
Foreclose (“Foreclosure Notice”) on the Trust on April 19, 2010.4
[Id. at 3-4.]
Defendant argues that Plaintiffs fail to state a claim
for fraud because they have failed to plead fraud with
particularity as required by Fed. R. Civ. P. 9(b).
Defendant
argues that Plaintiffs failed to follow the “ample guidance”
given in the May 31, 2011 Order on how to rectify the defects in
the original complaint.
[Id. at 2.]
Defendant contends that the
First Amended Complaint does not sufficiently allege the
circumstances of fraud, specifically, the “time, place, and
3
The Second Mortgage, between “Richard A. Doran and
Patricia Ruth Doran, Trustees Under the Richard and Patricia
Doran Family Trust Dated Nov -4 1991” as “Mortgagor” and Wells
Fargo Bank, N.A. as “Mortgagee”, recorded on July 24, 2007 in the
Bureau of Conveyances as document number 2007-131571, is attached
to the Motion as Exhibit B to the Declaration of Counsel.
4
The Mortgagee’s Affidavit of Foreclosure Sale Under Power
of Sale, filed October 15, 2010 in the Bureau of Conveyances as
document number 2010-156277 (“Foreclosure Affidavit”), is
attached to the Motion as Exhibit C to the Declaration of
Counsel. The Foreclosure Affidavit notes the service of the
Foreclosure Notice on various persons and entities, including
Plaintiffs, in their capacities as trustees. [Foreclosure Aff.
at 2-3.]
6
content of the fraudulent representation.”
[Id. at 6-7 (citing
Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035,
1042 (9th Cir. 2010)).]
Plaintiffs allege that Defendant made
false representations to them when they were applying for a loan
modification.
The First Amended Complaint does not specify who
made the purportedly false representations, what representations
were made, how the representations were expressed, why the
representations were false, and when and where the
representations were made.
[Id. at 7 (citing Vess v. Ciba-Geigy
Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003); Swartz v. KPMG
LLP, 476 F.3d 757, 764 (9th Cir. 2007); Kearns v. Ford Motor Co.,
567 F.3d 1120, 1124 (9th Cir. 2009)).]
Defendant argues that,
because Plaintiffs provided insufficient detail regarding the
alleged misrepresentations, Plaintiffs failed to put Defendant on
notice of the alleged misconduct.
[Id. at 8.]
Further,
Defendant contends that Plaintiffs have not alleged that they
detrimentally relied on the allegedly fraudulent statements, as
their position is not worse as a result of those statements.
[Id. at 8-9 (citing Fisher v. Grove Farm Co., 123 Hawai`i 882,
103, 230 P.3d 382, 403 (2009)).]
Defendant argues that Plaintiffs’ wrongful foreclosure
claim fails because there is no basis in law or fact to conclude
that the foreclosure was wrongful.
Defendant emphasizes that
Plaintiffs admit they failed to make timely payments on the
7
Mortgages, and Defendant therefore argues that the foreclosure
was proper under existing law.
[Id. at 9 (citing Johnson v.
Ass’n of Apt. Owners of Ke Aina Kai Townhomes, 2006 U.S. Dist.
LEXIS 61106, at *25-26 (D. Haw. 2006)).]
Defendant argues that
Plaintiffs received the Foreclosure Notice, and that discussing a
possible loan modification does not vitiate notice of a
nonjudicial foreclosure under Haw. Rev. Stat. § 667-5.
[Id. at
9-10 (citing Mortgagees’ Affidavit of Foreclosure Sale Under
Power of Sale).]
Defendant further argues that the new nonjudicial
foreclosure procedures under Act 48 do not apply because Act 48
did not come into force until seven months after Plaintiffs’
foreclosure, and there is no retrospective intention in the
legislation.
[Id. at 10-11.5]
Defendant finally asks the Court
to follow California precedent, ruling that tender is a required
element of a wrongful foreclosure claim.
Defendant argues that
Plaintiffs should have to allege that they made or could make a
“valid and viable tender” of the amounts owed in order to pursue
a wrongful foreclosure claim.
[Id. at 11-12 (citing Williams v.
Countrywide Home Loans, 1999 WL 740375, at *2 (N.D. Cal. Sept.
20, 1999); Benham v. Aurora Loan Servs., 2009 U.S. Dist. LEXIS
91287 (N.D. Cal. Oct. 1, 2009)).]
5
Act 48 is attached to the Motion as Exhibit D to the
Declaration of Counsel.
8
Defendant next argues that Plaintiffs’ IIED claim fails
because the Complaint does not allege outrageous conduct.
at 13.]
[Id.
U.S. Bank holds the validly executed First Note and
First Mortgage, which Plaintiffs defaulted on; Defendant
therefore did not engage in outrageous conduct by proceeding with
the foreclosure on behalf of U.S. Bank.
[Id. at 13-14.]
Finally, Defendant argues that Plaintiffs have failed
to state a claim for loss of consortium.
Loss of consortium is a
derivative claim, and all of Plaintiffs’ underlying tort claims
are without factual or legal basis.
[Id. at 14 (citing Mist v.
Westin Hotels, 69 Haw. 192, 197, 738 P.2d 85, 90 (1987)).]
Defendant therefore asks the Court to dismiss the First
Amended Complaint in its entirety.
II.
Plaintiffs’ Memorandum in Opposition
In their Memorandum in Opposition, Plaintiffs argue
that the First Amended Complaint contains the basic elements of
the claims, and therefore it is sufficient to survive a Fed. R.
Civ. P. 12(b)(6) motion to dismiss for failure to state a claim.
They contend that the recent United States Supreme Court
decisions do not invalidate the general rules that a plaintiff
need only plead the basic elements of a claim, and a court
considering a motion to dismiss must construe the allegations of
fact in the light most favorable to the non-moving party.
[Mem.
in Opp. at 4 (some citations omitted) (citing Zimmerman v. City
9
of Oakland, 255 F.3d 734, 737 (9th Cir. 2001); Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(2007); Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 704 (6th
Cir. 2009) (supporting the proposition that Iqbal and Twombly do
not displace the rule of construing facts favorably towards the
non-moving party)).]
Plaintiffs further assert that dismissal
without leave to amend is improper unless the complaint could not
be saved by amendment.
[Id. (citing Harris v. Amgen, Inc., 573
F.3d 728, 737 (9th Cir. 2009)).]
As to the fraud claim, Plaintiffs argue that Defendant
falsely assured them that they would qualify for a loan
modification when Defendant did not intend to give the
modification and knew it would foreclose on the Property.
Plaintiffs state that they relied on Defendant’s assurance to
their detriment, and Defendant was aware of Plaintiffs’ reliance.
[Id. at 5-6.]
As to the wrongful foreclosure claim, Plaintiffs argue
that the Foreclosure Notice was deficient because Defendant told
them to ignore the foreclosure notices they received because of
the pending loan modification process.
[Id. at 6-7.]
The Court,
however, notes that the First Amended Complaint does not allege
that Defendant told Plaintiffs to ignore any foreclosure notices.
10
As to the IIED and loss of consortium claims,
Plaintiffs reallege that Defendant’s intentional or reckless and
outrageous conduct caused them sleeplessness, health-effects from
stress, and loss of consortium by affecting their marriage and
impairing “their society and services.”
[Id. at 7-8.]
Plaintiffs therefore urge the Court to deny Defendant’s Motion.
[Id. at 8.]
III. Defendant’s Reply
In its Reply, Defendant reiterates its argument that
Plaintiffs’ First Amended Complaint cannot survive a motion to
dismiss because it does not contain sufficient factual
allegations to support its legal conclusions.
[Reply at 2.]
As to the fraud claim, Defendant reiterates the
arguments in the Motion and asserts that Plaintiffs have ignored
the Court’s instructions to specify the “time, place, and content
of the allegedly fraudulent statements.”
Doran, 2011 WL 2160643, at *11).]
[Id. at 3 (citing
Defendant further argues that
Plaintiffs fail to establish facts showing that Plaintiffs
detrimentally relied on a misrepresentation.
Detrimental
reliance requires reasonable action or forbearance that results
in damages; Defendant argues that Plaintiffs failed to establish
the necessary factual allegations and offered only “a formulaic
recitation of the elements”.
[Id. at 4-5 (citing Iqbal, 129 S.
Ct. at 1949; Kau Agribusiness Co. v. Heirs or Assigns of
11
Kahananui, 105 Haw. 182, 194 (2004); Exotics Hawaii-Kona, Inc. v.
E.I. du Pont de Nemours & Co., 116 Haw. 277, 285 (2007); Brennan
v. Wells Fargo & Co., 2011 U.S. Dist. LEXIS 68571 (N.D. Cal.
2011); Tom v. GMAC Mortg., LLC, 2011 U.S. Dist. LEXIS 56825 (D.
Haw. May 25, 2011); Learning Works, Inc. v. Learning Annex, Inc.,
830 F.2d 541, 546 (4th Cir. 1987)).]
As to the wrongful foreclosure claim, Defendant argues
that Plaintiffs failed to follow the Court’s instructions to
“plead specific factual allegations setting forth the claimed
defects in the foreclosure process.”
2011 WL 2160643, at *13).]
[Id. at 6 (citing Doran,
Defendant further argues that the
consideration of Plaintiffs’ loan modification application did
not invalidate Defendant’s Foreclosure Notice and therefore did
not result in defective notice.
While Plaintiffs state no legal
authority to support their claim, Defendant cites to persuasive
authority holding that neither oral promises nor a homeowner’s
submission of materials during the loan modification process
supercedes a mortgagee’s right to sell.
[Id. at 6-7 (citing
Karimi v. Wells Fargo, 2011 U.S. Dist. LEXIS 47902 at *7-8 (C.D.
Cal. May 4, 2011); Morris v. Wells Fargo Home Mortg., 2011 U.S.
Dist. LEXIS 93729 at *5) (E.D. Mo. August 22, 2011)).]
Defendant
finally argues that Haw. Rev. Stat. Chapter 667 does not require
a mortgagee to halt nonjudicial foreclosure proceedings because
of loan modification considerations.
12
[Id. at 7.]
As to the IIED claim, Defendant argues that the
findings in the May 31, 2011 Order apply because Plaintiffs’
First Amended Complaint does not significantly differ from the
original complaint.
The Court should therefore reassert its
finding that default and foreclosure proceedings and the denial
of loan modification do not rise to the level of outrageous
conduct necessary to support an IIED claim.
2011 WL 2160643, at *14).]
[Id. (citing Doran,
Finally, Defendant argues that,
because the IIED claim fails, the loss of consortium claim also
fails as a derivative claim.
STANDARD
I.
Federal Rule of Civil Procedure 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) permits a
motion to dismiss a claim for “failure to state a claim upon
which relief can be granted[.]”
Under Rule 12(b)(6), review is generally
limited to the contents of the complaint.
Sprewell v. Golden State Warriors, 266 F.3d 979,
988 (9th Cir. 2001). If matters outside the
pleadings are considered, the Rule 12(b)(6) motion
is treated as one for summary judgment. See Keams
v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th
Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934
(9th Cir. 1996). However, courts may “consider
certain materials-documents attached to the
complaint, documents incorporated by reference in
the complaint, or matters of judicial
notice-without converting the motion to dismiss
into a motion for summary judgment.” United
States v. Ritchie, 342 F.3d 903, 908 (9th Cir.
2003).
On a Rule 12(b)(6) motion to dismiss, all
allegations of material fact are taken as true and
13
construed in the light most favorable to the
nonmoving party. Fed’n of African Am. Contractors
v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir.
1996). To survive a motion to dismiss, a
complaint must contain sufficient factual matter
to “state a claim to relief that is plausible on
its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929
(2007). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the
court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937,
1949, 173 L. Ed. 2d 868 (2009). “Threadbare
recitals of the elements of a cause of action,
supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 554,
127 S. Ct. 1955). Factual allegations that only
permit the court to infer “the mere possibility of
misconduct” do not show that the pleader is
entitled to relief. Id. at 1950.
Hawaii Motorsports Inv., Inc. v. Clayton Group Servs., Inc., 693
F. Supp. 2d 1192, 1195-96 (D. Hawai`i 2010).
Further, “dismissal without leave to amend is improper
unless it is clear that the complaint could not be saved by any
amendment.”
Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir.
2009) (citation and quotation marks omitted).
“But courts have
discretion to deny leave to amend a complaint for futility[.]”
Johnson v. American Airlines, Inc., 834 F.2d 721, 724 (9th Cir.
1987).
II.
Federal Rule of Civil Procedure 9(b)
Federal Rule of Civil Procedure 9(b) requires that
“[i]n alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud or mistake.”
14
Rule 9(b) requires that a party make particularized allegations
of the circumstances constituting fraud.
See Sanford v.
MemberWorks, Inc., 625 F.3d 550, 557-58 (9th Cir. 2010).
In order to sufficiently plead a fraud claim, the
plaintiffs “must allege the time, place, and content of the
fraudulent representation; conclusory allegations do not
suffice.”
Shroyer v. New Cingular Wireless Servs., Inc., 622
F.3d 1035, 1042 (9th Cir. 2010) (citation omitted).
“Malice,
intent, knowledge, and other conditions of a person’s mind may be
alleged generally.”
Fed. R. Civ. P. 9(b); see also Odom v.
Microsoft Corp., 486 F.3d 541, 554 (9th Cir. 2007) (en banc)
(“[T]he state of mind - or scienter - of the defendants may be
alleged generally.” (citation omitted)).
In addition to the particularity requirement, the Iqbal
plausibility standard applies to fraud claims, that is, the facts
must be plead with plausibility as well as particularity.
To satisfy Rule 9(b), a pleading must identify
“the who, what, when, where, and how of the
misconduct charged,” as well as “what is false or
misleading about [the purportedly fraudulent]
statement, and why it is false.”
. . . [C]laims of fraud or mistake . . .
must, in addition to pleading with particularity,
also plead plausible allegations.
Cafasso ex rel. United States v. Gen. Dynamics C4 Sys., Inc., 637
F.3d 1047, 1055 (9th Cir. 2011) (citations omitted) (some
alterations in original).
15
A motion to dismiss for failure to plead with
particularity is “the functional equivalent of a motion to
dismiss under Rule 12(b)(6)[.]”
Vess v. Ciba-Geigy Corp. USA,
317 F.3d 1097, 1107 (9th Cir. 2003).
In considering a motion to
dismiss, the court is not deciding whether a claimant will
ultimately prevail but rather whether the claimant is entitled to
offer evidence to support the claims asserted.
Twombly, 550 U.S.
at 563 n.8 (citation omitted).
DISCUSSION
I.
Count I - Fraud
The May 31, 2011 Order stated:
The Court also notes that, under Hawai`i law,
the false representation forming the basis of a
fraud claim “must relate to a past or existing
material fact and not the occurrence of a future
event.” Joy A. McElroy, M.D., Inc. v. Maryl
Group, Inc., 107 Hawai`i 423, 433, 114 P.3d 929,
939 (Ct. App. 2005) (citations and block quote
format omitted) (emphasis in original). Further,
even if the allegations satisfy the other elements
of a fraud claim, “[f]raud cannot be predicated on
statements which are promissory in their nature,
or constitute expressions of intention, and an
actionable representation cannot consist of mere
broken promises, unfulfilled predictions or
expectations, or erroneous conjectures as to
future events[.]” Id. (citations and block quote
format omitted) (emphasis in original). The
exception to this general rule is that “[a]
promise relating to future action or conduct will
be actionable, however, if the promise was made
without the present intent to fulfill the
promise.” Id. (citations and block quote format
omitted) (emphasis in McElroy).
Doran, 2011 WL 2160643, at *12.
16
In the First Amended Complaint, Plaintiffs attempted to
amend their fraud claim to allege the intentional element
required for a fraud claim based on representations about future
events.
Plaintiffs allege that Defendant “knew when it
encouraged Plaintiffs to apply for a loan modification, that it
had no intention of giving them a loan modification.”
Amended Complaint at ¶ 31.]
[First
Although Plaintiffs addressed this
defect identified in the May 31, 2011 Order, they still fail to
state a plausible fraud claim because they did not plead the
alleged misrepresentations with the required particularity.
In the May 31, 2011 Order, the Court ruled as follows
with respect to Plaintiffs’ fraud claim:
[T]he allegations of Plaintiffs’ fraud claim fail
to meet the pleading requirements of Fed. R. Civ.
P. 9(b). Plaintiffs merely made conclusory
allegations about the allegedly fraudulent
statements without setting forth the time, place,
and content of the allegedly fraudulent
statements. See Shroyer v. New Cingular Wireless
Servs., Inc., 622 F.3d 1035, 1042 (9th Cir. 2010).
This Court must dismiss the fraud claim on this
basis alone.
Doran, 2011 WL 2160643, at *11.
The Court, however, found that
it was “arguably possible for Plaintiffs to cure the defects in
this claim if they can make specific allegations according to the
standards discussed.”
Id. at *12.
Plaintiffs’ First Amended Complaint fails to offer any
details as to the time, place, or content of the allegedly
fraudulent statements.
The First Amended Complaint merely makes
17
general allegations, for example, stating that Defendant “made a
number of statements that Plaintiffs were ‘pre-qualified’ for
loan modification”, but Plaintiffs have not provided the required
information about these misrepresentations.
The general
allegations in the First Amended Complaint are not sufficient to
satisfy the pleading standard for fraud claims.
Fraud claims must, “in addition to pleading with
particularity, also must plead plausible allegations.
That is,
the pleadings must state ‘enough fact[s] to raise a reasonable
expectation that discovery will reveal evidence of [the
misconduct alleged].’”
Cafasso, 637 F.3d at 1055 (citing Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 566, 127 S. Ct. 1955,
167 L. Ed. 2d 929 (2007)) (alterations in Cafasso) (footnotes
omitted).
The Court acknowledges that, at this stage of the
case, Plaintiffs may not have documentary evidence supporting
their allegations and they may not know the names of the persons
who made the representations.
Plaintiffs, however, must plead
enough facts to raise a reasonable expectation that discovery
would reveal evidence of such a misrepresentation.
Plaintiffs
must allege the time, place, and content of the allegedly
fraudulent statements in order to satisfy the Rule 9(b) standard
of particularity.
Further, Plaintiffs must also plead plausible
allegations that they reasonably relied on Defendant’s
18
misrepresentations to their detriment.
While it is
understandable that the Dorans have suffered hardships because of
the foreclosure on their home, it does not necessarily follow
that the Trust’s reliance on the alleged misrepresentations
regarding the loan modification process caused harm to the Trust.
Based on the foregoing, the Court finds that it is
arguably possible for Plaintiffs to cure the defects in their
fraud claim.
The Court therefore GRANTS Defendant’s Motion as to
Count I insofar as this Court DISMISSES Count I WITHOUT
PREJUDICE.
The Court will allow Plaintiffs to amend their fraud
claim, but the Court CAUTIONS Plaintiffs that, if they cannot
allege a fraud claim that satisfies the pleading standards
identified in this Order, this Court will dismiss the fraud claim
with prejudice.
II.
Count II - Wrongful Foreclosure
Wrongful foreclosure is a state law claim.
See, e.g.,
Curiel v. Barclays Capital Real Estate Inc., Civ. No. S-09-3074
FCD/KJM, 2010 WL 729499, at *1 (E.D. Cal. Mar. 2, 2010).
Plaintiffs do not state what specifically was “wrongful” about
the foreclosure, except that the foreclosure happened while
Plaintiffs were applying for loan modification and while
Defendant was assuring Plaintiffs that they qualified.
Amended Complaint at ¶ 42.]
[First
Plaintiffs contend that, because
Defendant assured them that they were under consideration for a
19
loan modification, this consideration made the Foreclosure Notice
deficient.
[First Amended Complaint at ¶ 42.]
Other cases in this district have asserted wrongful
foreclosure claims pursuant to Haw. Rev. Stat. Chapter 667.
See,
e.g., Rundgren v. Bank of New York Mellon, 777 F. Supp. 2d 1224,
1234 (D. Hawai`i 2011).
In the instant action, Defendant
provided Plaintiffs with notice of the impending foreclosure in
accordance with the foreclosure guidelines set forth in Chapter
667.
[Motion, Decl. of Counsel, Exh. C (Foreclosure Aff.).]
Defendant’s Foreclosure Notice was proper under Chapter 667, and
the loan modification process did not invalidate the notice
because an oral promise of a future loan modification does not
supercede a mortgagee’s right to sell.
See Karimi v. Wells
Fargo, CV 11-00461-RGK (Opx), 2011 U.S. Dist. LEXIS 47902, at *78 (C.D. Cal. May 4, 2011) (“Defendant’s alleged promise not to
sell Plaintiffs’ home was not made in writing, so it does not
constitute an enforceable modification of the written loan
agreement that originally created Defendant’s right of
foreclosure.
Thus, the right of foreclosure remained intact.”
(citations omitted));6 see also Haw. Rev. Stat. § 656-1(8)
(requiring a writing to enforce a “promise, contract, or
agreement” “[t]o charge any financial institution upon an
agreement by the financial institution to lend money or extend
6
Karimi is not available on Westlaw.
20
credit in an amount greater than $50,000”).
Further, the Ninth Circuit has recognized that
“[s]ubstantive wrongful foreclosure claims . . . typically are
available after foreclosure and are premised on allegations that
the borrower was not in default, or on procedural issues that
resulted in damages to the borrower.”
Cervantes v. Countrywide
Home Loans, Inc., --- F.3d ----, No. 09-17364, 2011 WL 3911031,
at *6 (9th Cir. Sept. 7, 2011) (citations omitted) (finding leave
to amend a Second Amended Complaint futile because of failure to
state a plausible claim for relief).
In the instant case, the
only basis that Plaintiffs offer for their allegation that the
foreclosure was wrongful is that “[b]ecause Plaintiffs were being
assured they were being considered for loan modification, the
notice that Wells Fargo claims to have given in the non-judicial
foreclosure is deficient.”
[First Amended Complaint at ¶ 42.]
Plaintiffs admit they were having trouble paying their mortgage
payments, [id. at ¶ 7,] Defendant contends that Plaintiffs were
in default, [Mem. in Supp. of Motion at 4,] and Defendant
provided notice to Plaintiffs through the Foreclosure Notice
[Motion, Decl. of Counsel, Exh. C (Foreclosure Aff.)].
Plaintiffs’ wrongful foreclosure claim is not premised on the
allegation that they were not in default.
Rather, Plaintiffs
apparently contend that the wrongful foreclosure was based on the
“procedural defect” of their reliance on the pending loan
21
modification approval process.
According to Chapter 667,
however, the loan modification process does not invalidate notice
of foreclosure.
Plaintiffs therefore have not alleged an actual
procedural defect.
Regarding the new nonjudicial foreclosure procedures
set forth in Act 48, this Act does not apply to foreclosure
proceedings that took place prior to the Act’s approval.
Act 48
was approved by the Governor on May 5, 2011, and Defendant held
the foreclosure auction on September 17, 2010.
Section 45 of Act
48 states: “[T]his Act shall take effect upon its approval.”
The
Hawai`i Supreme Court has held that all statutes are to be
proscriptively construed unless the legislature “expressly
declared or . . . necessarily implied” its intention or purpose
for retrospective application in the language of the statute.
Taniguchi v. Ass’n of Apartment Owners of Kind Manor, Inc., 114
Hawai`i 37, 48, 155 P.3d 1138, 1149 (2007) (citations and
quotation marks omitted).
Act 48 therefore does not apply to
Defendant’s foreclosure procedures.
Based on the rule that the consideration of a loan
modification application does not invalidate a notice of
foreclosure and in light of the applicable state laws, Count II
fails to state a claim.7
Further, insofar as the Court found the
7
In light of this Court’s ruling, it is unnecessary for
this Court to reach Defendant’s argument that the Court should
(continued...)
22
original complaint failed to allege facts establishing that the
foreclosure was wrongful and Plaintiffs failed to set forth any
additional factual allegations establishing that the foreclosure
was wrongful, the Court finds that Plaintiffs cannot allege the
facts necessary to state a plausible wrongful foreclosure claim
and that any further opportunity to amend the complaint would be
futile.
The Court therefore GRANTS Defendant’s Motion as to
Count II and DISMISSES Count II WITH PREJUDICE.
III. Count III - Infliction of Emotional Distress
Under Hawai`i law, there are four elements of an IIED
claim.
First, the plaintiff must prove that the defendant’s
conduct was either intentional or reckless.
in question must have been “outrageous.”
Second, the conduct
Next, the plaintiff
must establish causation, and finally, there must be evidence
that the plaintiff suffered extreme emotional distress.
See
Young v. Allstate Ins. Co., 119 Hawai`i 403, 425, 198 P.3d 666,
688 (2008).
specific.
A determination of “outrageous” conduct is fact
Hawai`i courts have defined outrageous conduct as
conduct “‘without just cause or excuse and beyond all bounds of
decency.’”
Chin v. Carpenter-Asui, No. 28654, 2010 WL 2543613,
at *4 (Hawai`i Ct. App. June 24, 2010) (some citations omitted)
(quoting Lee v. Aiu, 85 Hawai`i 19, 34 n.12, 936 P.2d 655, 670
7
(...continued)
adopt California’s rule requiring a wrongful foreclosure claim to
include a tender allegation.
23
n.12 (1997)).
If the alleged conduct does not rise to the level
of “outrageous,” dismissal is proper.
See Farmer ex rel. Keomalu
v. Hickam Fed. Credit Union, No. 27868, 2010 WL 466007, at *14
(Hawai`i Ct. App. Feb. 2, 2010) (citing Shoppe v. Gucci America
Inc., 94 Hawai‘i 368, 387, 14 P.3d 1049, 1068 (2000)), cert.
denied, 2010 WL 2625261 (Hawai`i June 29, 2010).
This district court has recognized that:
“Default and foreclosure proceedings generally do
not rise to the level of extreme and outrageous
conduct. Denying a loan modification which might
result in foreclosure is no more ‘outrageous in
character’ than actually foreclosing.” Erickson
v. Long Beach Mortg. Co., No. 10–1423 MJP, 2011 WL
830727, at *7 (W.D. Wash. Mar. 2, 2011) (citation
omitted) (dismissing IIED claim on summary
judgment). But cf. Bass v. Ameriquest Mortg. Co.,
Civ. No. 09–00476 JMS–BMK, 2010 WL 3025167, at
*10–11 (D. Haw. Aug. 3, 2010) (denying summary
judgment as to an IIED claim where the plaintiff
asserted that the defendant “forged her signature
on the 2006 loans, refused to honor [her] right of
cancellation of the loans when she discovered the
forgeries, and commenced foreclosure proceedings
against [her] when she failed to make her loan
payments”).
Uy v. Wells Fargo Bank, N.A., Civ. No. 10–00204 ACK–RLP, 2011 WL
1235590, at *14 (D. Hawai`i Mar. 28, 2011) (alterations in
original).
In its May 31, 2011 Order, this Court ruled as follows
with respect to Plaintiffs’ IIED claim:
The mere denial of loan modification and the
foreclosure itself do not rise to the level of
outrageous conduct sufficient to allege an IIED
claim (citing Uy, 2011 WL 1235590, at *14). The
Court recognizes that Plaintiffs have raised
24
factual allegations of certain conduct by
Defendant in the course of the loan modification
application process that is separable from the
actual denial of loan modification. For example,
Plaintiffs allege that Defendant misplaced their
loan modification paperwork and erroneously
transferred their modification file to the short
sale department. [Complaint at ¶¶ 15-17.] Even
if these, and other similar actions alleged in the
Complaint, were without just cause or excuse, they
do not rise to the level of actions that are
“beyond all bounds of decency.” See Chin, 2010 WL
2543613, at *4 (citations and quotation marks
omitted). Plaintiffs’ IIED claim does not allege
“outrageous” conduct sufficient to raise an IIED
claim. The Court therefore FINDS that Plaintiffs
have failed to allege a plausible claim for IIED.
It is, however, arguably possible for
Plaintiffs to cure the defects in this claim if
they can identify any outrageous conduct by
Defendant. Further, it may also be possible for
Plaintiffs to amend the Complaint to allege
outrageous conduct by Defendant which caused them
to personally experience extreme emotional
distress.
Doran, 2011 WL 2160643, at *14-15.
In the First Amended Complaint, Plaintiffs allege that
Defendant acted outrageously when it cancelled the loan
modification process, during which it represented that Plaintiffs
were “pre-qualified” for the loan modification.
Complaint at ¶¶ 45-46.]
[First Amended
Again, these claims “do not rise to the
level of actions that are ‘beyond all bounds of decency.’”
Doran, 2011 WL 2160643, at *14 (quoting Chin, 2010 WL 2543613, at
*4).
Foreclosure and denial of loan modifications do not rise to
the level of “outrageous conduct” necessary for an IIED claim.
Uy, 2011 WL 1235590, at *14.
Plaintiffs’ First Amended Complaint
25
therefore fails to state a plausible IIED claim.
Further, insofar as the Court found the original
complaint’s allegations of Defendant’s conduct did not to rise to
the level of “outrageous conduct” and Plaintiffs failed to
identify other conduct beyond the loan modification process, the
Court finds that Plaintiffs cannot allege the facts necessary to
allege a plausible IIED claim and that any further opportunity to
amend the complaint would be futile.
The Court therefore GRANTS
Defendant’s Motion as to Count III and DISMISSES Count III WITH
PREJUDICE.
IV.
Count IV - Loss of Consortium
Under Hawai`i law, loss of consortium is a derivative
action based on the damages sustained by the injured spouse.
Brown v. KFC Nat’l Mgmt. Co., 82 Hawai`i 226, 241, 921 P.2d 146,
161 (1996).
A loss of consortium claims is “only derivative in
the sense that [they do] not arise unless one’s spouse has
sustained a personal injury.
The loss of consortium claim is a
claim for damages independent and separate from the spouse’s
claim for damages.”
Id. (citations and quotation marks omitted)
(alteration in original).
The only claim in Plaintiffs’ First
Amended Complaint that survives the instant Motion is Count I
(fraud), in which the Trust is the injured party.
Thus, the
Court must also dismiss Plaintiffs’ loss of consortium claim
because there is no remaining claim by the Dorans in their
26
individual capacity that would support the loss of consortium
claim.
Insofar as the Court has dismissed the First Amended
Complaint’s only claim by the Dorans in their individual capacity
(the IIED claim) with prejudice, leave to amend the loss of
consortium claim would also be futile.
The Court therefore
GRANTS Defendant’s Motion as to Count IV and DISMISSES Count IV
WITH PREJUDICE.
CONCLUSION
On the basis of the foregoing, Wells Fargo Bank’s
Motion to Dismiss First Amended Complaint, filed June 27, 2011,
is HEREBY GRANTED insofar as Counts II, III, and IV are DISMISSED
WITH PREJUDICE, and Count I is DISMISSED WITHOUT PREJUDICE.
The Court grants Plaintiffs leave to file a Second
Amended Complaint alleging a fraud claim that satisfies the
standards identified in this Order.
Plaintiffs do not have leave
to add any new defendants, causes of action, or theories of
liability.
The Court ORDERS Plaintiffs to file their Second
Amended Complaint by no later than November 21, 2011.
The Court
CAUTIONS Plaintiffs that, if they fail to file their Second
Amended Complaint by November 21, 2011, or if their Second
Amended Complaint does not comply with the pleading standards
identified in this Order, the Court will dismiss Plaintiffs’
fraud claim with prejudice.
IT IS SO ORDERED.
27
DATED AT HONOLULU, HAWAII, October 31, 2011.
/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
RICHARD A. DORAN, ET AL. V. WELLS FARGO BANK, ET AL; CIVIL NO.
11-00132 LEK-KSC; ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION TO DISMISS FIRST AMENDED COMPLAINT FILED
JUNE 13, 2011
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