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

Filing 20

OPINION AND ORDER: Defendants motions for judgment on the pleadings ( 11 and 12 ) are GRANTED. Plaintiffs first and third claims for relief, for violation of the OTDA and financial abuse, are dismissed with prejudice. Plaintiffs second claim for relief, for breach of contract, is dismissed without prejudice. Plaintiffs request for oral argument is DENIED as unnecessary. This case is DISMISSED. See formal OPINION AND ORDER. Signed on 3/28/2016 by Judge Ann L. Aiken. (rh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
ELEANOR A. HULL,
Plaintiff,
vs.
WELLS FARGO BANK, N.A., and
NORTHWEST TRUSTEE SERVICES,
INC.,
Defendants.

Jeffrey A. Myers
Bowles Fernandez Law LLC
5200 S.W. Meadows Road, Suite 150
Lake Oswego, OR 97025
Attorney for plaintiff
Molly J. Remy
Keesal, Young & London
1301 Fifth A venue, Suite 3100
Seattle, WA 98101
John M. Thomas
RCO Legal, P.C.
511 S.W. 10th Avenue, Suite 400
Portland, OR 97205
Attorneys for defendants

Page 1 - OPINION AND ORDER

Case No. 6:15-cv-01990-AA
OPINION AND ORDER

AIKEN, Judge:
Plaintiff Eleanor A. Hull seeks a declaratmy judgment invalidating the sale of her former
residence at a foreclosure auction based on alleged violations of the Oregon Trust Deed Act
("OTDA"). She also alleges defendant Wells Fargo Bank, N.A. ("Wells Fargo") breached two
agreements to modify the terms of the loan secured by the property and committed financial abuse
of a vulnerable person, in violation of Or. Rev. Stat. § 124.110. Defendants moved for judgment on
the pleadings. For the reasons set forth below, defendants' motion is granted.

BACKGROUND
Plaintiff owned a piece of residential property located in Salem, Oregon ("the property").
She purchased the property with the proceeds of a loan from Wells Fargo. The loan was secured by
a Deed of Trust ("DOT"). Shortly after origination, Wells Fargo sold the property to the Federal
Home Loan Mortgage Corporation ("Freddie Mac"). Wells Fargo remained the loan servicer.
In July 2009, Wells Fargo advised plaintiff she qualified for a Home Affordable Modification
Trial Period Plan ("TPP"). A letter from Wells Fargo to plaintiff, attached as an exhibit to the
Complaint, explains "[i]fyou qualify under the federal government's Home Affordable Modification
program and comply with the terms of the Trial Period Plan, we will modify your mortgage loan and
you can avoid foreclosure." Doc. 1-1 at 41. The letter sets out three steps to apply for loan
modification: (1) explain the financial hardship making it difficult to keep up with mortgage
payments; (2) submit documentation of income; and (3) make monthly TPP payments, which are set
at a lower rate than the regular mortgage payments. Plaintiff made three TPP payments of $1, 123 .13
each.

Comp!.~

11. In December 2009, Wells Fargo stopped accepting TPP payments.

Page 2 - OPINION AND ORDER

In August 2010, plaintiff defaulted on her loan payments. Wells Fargo initiated nonjudicial
foreclosure proceedings. Defendant Nmihwest Trustee Services ("NWTS") served as trustee and
agreed to conduct the sale.
Plaintiff alleges she sought the assistance of Consumer Credit Counseling NW, which
negotiated an agreement in late 2011 to stop the foreclosure. Pursuant to the agreement, plaintiff
promised to pay $3,256.59 to Wells Fargo and thereafter resume her normal payment schedule; in
exchange, Wells Fargo "would recapitalize the arrearage onto the back end of the loan and stop the
non-judicial foreclosure." Comp!. iJ 15. Plaintiff fmther asserts she made the required payment, but
Wells Fargo did not stop the foreclosure proceedings.
Plaintiff then filed for Chapter 13 bankruptcy. The bankruptcy plan, confirmed in October
2011, required plaintiff to resume regular mortgage payments to Wells Fargo as well as make
monthly payments to cure $21,116 in arrearages. See Doc. 11-1 at3-4 (original plan proposal); Doc.
11-3 at 4 (order confirming plan with amendments). 1 Plaintiff immediately defaulted on her
payments under the plan, and in December 2011 Wells Fargo moved for relief from the automatic
stay. Plaintiff admitted defaulting and stipulated to cure the post-petition arrearages tluough an
additional six-month payment plan. Plaintiff then defaulted on the stipulation. Based on this series
of defaults, in April 2012 Wells Fargo sought and obtained "relief from the automatic stay to
foreclose on, and obtain possession of, the prope1ty, to the extent permitted by applicable
nonbankruptcy law." Doc. 11-6 at 3.

1

The Co mi takes judicial notice of the bankruptcy court filings attached as exhibits to
Wells Fargo's Motion for Judgment on the Pleadings. See Fauley v. Wash. Mut. Bank FA, 2014
WL 1217852, *4 (D. Or. Mar. 21, 2014) (Because "motions and orders filed in the bankruptcy
court are matters of public record that are beyond dispute," they meet the judicial notice
requirements of Fed. R. Evid. 201.).
Page 3 - OPINION AND ORDER

In July 2012, plaintiff filed a post-confirmation amendment to her plan. The amendment
removed conditions requiring payment to Walls Fargo and instead provided plaintiff would surrender
the property to Wells Fargo. The amended plan, which became effective in November 2012,
eliminated plaintiffs obligation to make regular m01tgage payments and also lowered her monthly
payments to the trustee. Compare Doc. 11-3 at 4 (monthly trustee payments of $305 for twelve
months, followed by payments of $600 for twenty-four months) with Doc. 11-7 at 3 (monthly trustee
payments of $265 for thilty-six months).
While her initial Chapter 13 bankruptcy was still open, plaintiff filed two more Chapter 13
petitions. She did not disclose her open bankruptcy case or previous bankruptcy petitions in either
filing. In Februaiy 2015, the second bankruptcy petition was dismissed tlu·ough a form order. In
June 2015, the Bankruptcy Co mt for the District of Oregon issued an Order to Show Cause why the
third petition "should not be dismissed with a bar to filing any petition under the Bankruptcy Code
in any District of the United States before the later of: 1) one year, or 2) the closure of [the initial
bankruptcy case]." Doc. 11-10 at 3. The United States Trustee responded to the Order to Show
Cause by explaining that plaintiff, who is in her early 90s, appeared to have filed the second and
third bankruptcy petitions on the advice of Colleagues in Law, which is based in Las Vegas, Nevada,
and advertises itself as a "foreclosure rescue" operation. Doc. 11-11 at 3-4. Plaintiff paid
Colleagues in Law $3,800 fortheir services. Doc. 11-11at3. The United States Trustee disclaimed
any intent to take enforcement action against plaintiff, but recommended dismissing the third
bankruptcy case and baning plaintiff from filing any further petitions for one year. Consistent with
that recommendation, the bankruptcy comt dismissed the third bankruptcy case in August 2015.

Page 4 - OPINION AND ORDER

Dismissal of the third bankruptcy case and ently of the bankruptcy court's one-year bar order
removed the bani er of the automatic stay. In September 2011, NWTS issued an Amended Trustee's
Notice of Sale, informing plaintiff the property would be sold at auction on October 5, 2015.
On October 1, 2015, plaintiff filed this lawsuit in Marion County Circuit comt, alleging
violations of the OTDA, breach of contract, and financial abuse of a vulnerable person. The
complaint seeks (1) a declaratmy judgment invalidating the foreclosure sale; (2) monetmy damages
related to the breach of contract and financial abuse claims; and (3) costs and attorney fees. On
October 21, 2015, defendants removed the suit to federal comt on diversity grounds. On October
26, 2015, the prope1ty was sold at auction. Defendants now move for judgment on the pleadings.
STANDARD
A pmty may move for judgment on the pleadings after the pleadings are closed but early
enough not to delay trial. Fed. R. Civ. P. 12(c). "Analysis under Rule 12(c) is substantially identical
to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts
alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy." Pat River Tribe v.

Bureau ofLand Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (citation and quotation marks omitted).
Accordingly, "[a] judgment on the pleadings is properly granted when, taking all allegations in the
pleadings as true, the moving party is entitled to judgment as a matter of law." Owens v. Kaiser

Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (quotation marks omitted). To survive
a motion for judgment on the pleadings, "the non-concluso1y 'factual content' [of the complaint],"
and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the
plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Ashcroft

v. Jqba/, 556 U.S. 662, 678 (2007)). "A claim has facial plausibility when the plaintiff pleads factual
Page 5 - OPINION AND ORDER

content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." Iqbal, 556 U.S. at 678. "[O]nce a claim has been stated adequately, it may be
supported by showing any set of facts consistent with the allegations in the complaint." Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 563 (2007).

DISCUSSION
In their motions to dismiss, defendants argue plaintiff has failed to state a claim for relief and
assert a number of affirmative defenses. Because different defenses and arguments apply to each
claim, I will address the claims separately.

I.

Violation ofOTDA
Plaintiff argues the foreclosure sale must be invalidated because the notice was not compliant

with the OTDA. Specifically, she alleges it (1) listed an inco1Tect zip code for the property; and (2)
listed Wells Fargo, rather than Freddie Mac, as the beneficiary on the DOT. Defendants contend
plaintiff is judicially estopped from any attempt to invalidate the foreclosure because she agreed to
surrender the property in bankruptcy comi.
"Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage
by asserting one position, and then later seeking an advantage by taking a clearly inconsistent
position." Hamiltonv. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). The doctrine
promotes "general consideration[s] of the orderly administration ofjustice and regard for the dignity
ofjudicial proceedings" and "protect[s] against a litigant playing fast and loose with the courts." Id.
(quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). To determine whether judicial
estoppel applies, a comt must consider three factors. First, the "patty's later position must be clearly
inconsistent with its earlier position." New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (citations

Page 6 - OPINION AND ORDER

and quotation marks omitted). Second, the court asks whether the party "succeeded in persuading
a court to accept that party's earlier position," because "[a]bsent success in a prior proceeding, a
party's later inconsistent position introduces no risk of inconsistent court detetminations, and thus
little threat to judicial integrity." Id. at 750-51 (citations and quotation marks omitted). Third, the
court asks "whether the paiiy seeking to asseti an inconsistent position would derive an unfair
advantage or impose an unfair detriment on the opposing party if not es topped." Id. This list of
factors is not "an exhaustive formula," and "[a]dditional considerations may inform the doctrine's
applications in specific factual contexts." Id.
In this case, the threshold question is whether plaintiffs bankrnptcy court representation that
she intended to surrender the propetiy is clearly inconsistent with her challenge to the foreclosure
sale under the OTDA. "The Bankruptcy Code does not define the term[] 'surrender' ... for the
purposes of Chapter 13. Nonetheless, 'surrender' has been interpreted in this context as the debtor's
relinquishment of his or her right to the property at issue, such that the secured creditor is free to
accept or reject that collateral." Bank ofN. Y. Mellon v. Watt, 2015 WL 1879680, *4 (D. Or. Apr.
22, 2015).

Coutis interpret "surrender" under the Bankruptcy Code to mean "voluntarily

relinquish[ing] all rights in the propetty, including the right to possession, to the secured creditor."

In re White, 487 F.3d 199, 207 (4th Cir. 2007); accord In re Pratt, 462F.3d14, 18-19 (lst Cir. 2006)
(surrender means to "cede ... possessory rights in the collateral" and make it "available" to the
secured creditor); Watt, 2015 WL 1879680 at* 5 (surrender means "cessation of [a debtor's] interest"
in prope1ty).
With these definitions in mind, I turn to the question of inconsistency. Neither this court nor
the Ninth Circuit has addressed whether actively opposing foreclosure is clearly inconsistent with
Page 7 - OPINION AND ORDER

an agreement to sun-ender property under a bankruptcy plan.

However, bankruptcy courts

addressing motions to compel compliance with sm1'ender provisions of bankruptcy plans have
concluded active opposition to foreclosure is in-econcilable with surrender. See, e.g., In re Lapeyre,
544 B.R. 719, 722 (Banla:. S.D. Fla. 2016); In re Metzler, 530 B.R. 894, 900 (Bmili:. M.D. Fla.
2015). Although these courts did not directly address the "clearly inconsistent" standard for judicial
estoppel, their discussion is on point. For example, inln re Guerra, 544 B.R. 707 (Banla:. M.D. Fla.
2016), the court explained that where (1) a foreclosure action is already in progress when the debtor
agrees to surrender the property; and (2) the debtor actively fights the foreclosure shortly after
making that agreement, the debtor's behavior gives rise to an inference he or she "had no intention
of surrendering the[] property- i.e., [the debtor] misled [the c]ourt." Id at 709.
Plaintiff had already attempted to prevent Wells Fargo from foreclosing at the time of the
2012 surrender amendment. Her decision to file two new bankrnptcy petitions and this lawsuit in
an attempt to stop or invalidate the foreclosure gives rise to an inference she never intended to
surrender the property. Accordingly, I find her agreement to the surrender amendment clearly
inconsistent with her subsequent attempts to stop the foreclosure sale. I also find plaintiff succeeded
in convincing the bankruptcy comt she intended to surrender the prope11y, as that comt confirmed
the amended plan. Finally, I find plaintiff would derive an unfair advantage from her surrender
representation if she were permitted to proceed on her OTDA claims here. As a result of her
decision to sun·ender the prope1ty, plaintiffs trustee payments were significantly lower. Moreover,
Wells Fargo might have objected to the amended plan had it not reasonably believed plaintiff would
in fact smTender the property.

Page 8 - OPINION AND ORDER

Plaintiff cannot tell the bankrnptcy court she will surrender the property and then use this
court to block Wells Fargo from exercising its ownership rights. Under similar circumstances,
district comis in the Ninth Circuit have found judicial estoppel applies. See Cordero v. America's

Wholesale Lender, 2012 WL 4895869, *11 (D. Idaho Oct. 15, 2012) (finding the plaintiffjudicially
estopped from identifying defendant bank as a secured creditor in her bankruptcy schedules, then
fighting foreclosure on the ground defendant was an unsecured creditor); Rivera v. Recontrust Co.,

NA., 2012 WL 2190710, *2 (D. Nev. Jun. 14, 2012) (applying judicial estoppel where the plaintiff
agreed to sun·ender property in bankruptcy court and subsequently asse1ied state law claims in an
attempt to halt foreclosure). Plaintiff is judicially estopped from asserting her OTDA claims, and
those claims are dismissed with prejudice.2
II.

Breach of Contract
Plaintiff next alleges Wells Fargo breached two agreements to modify the te1ms of the DOT.

Wells Fargo argues plaintiffs breach of contract claim is barred by Oregon's statute of frauds,
plaintiffs material breach in defaulting on the underlying loan obligation, and plaintiffs failure to
provide notice and an oppmiunity to cure, as required by the DOT. Wells Fargo further contends
plaintiffs breach of contract claim is inadequately pleaded.
Oregon law requires certain types of agreements to be signed and in writing in order to be
valid and enforceable. Or. Rev. Stat. § 41.580(1 ). Agreements "concerning real prope1iy" and

2

Defendants argue judicial estoppel bars all the claims in this lawsuit. I disagree.
Although plaintiffs agreement to smTender the property is clearly inconsistent with attempting to
stop the foreclosure sale, it is not inconsistent with seeking damages in connection with
allegations Wells Fargo broke promises to plaintiff in the months leading up to plaintiffs default.
Similarly, there is no inconsistency between plaintiffs agreement to surrender the prope1iy and
her financial abuse claim. Plaintiffs remaining claims seek money damages and in no way
interfere with Wells Fargo's ownership rights in the prope1iy.
Page 9 - OPINION AND ORDER

agreements "to modify or amend the terms under which [a] person has lent money or otherwise
extended credit" are covered by the statute of frauds. Id § 41.580(1)(£), (h). Wells Fargo is
therefore correct that an agreement to "hold off on conducting any foreclosure or enforcement
proceedings" generally must be in writing to be enforceable. Nelson v. Am. Home Mtg. Servicing,
Inc., 2013 WL 3834656, *5 (D. Or. Jul. 24, 2013) (quotation marks omitted and alterations

normalized). However, "[fjull performance of a promise by one party removes that part of the
contract from the operation of the statute [of frauds.]" Willamette Quarries, Inc. v. Wodtli, 781 P .2d
1196, 1199 (Or. 1989). To the extent plaintiff alleged full performance, the statute of frauds does
not bar her breach of contract claims. As explained in futiher detail below, pleading deficiencies
prevent me from determining whether plaintiff has alleged full performance; thus, it is premature to
determine whether the statute of frauds bars her breach of contract claim.
Defendant fmiher asserts plaintiffs breach of contract claim is barred by (1) plaintiffs
default on her mortgage payments, which constitute a material breach of the DOT; and (2) plaintiff's
failure to provide notice and an opportunity to cure, as required by the DOT. Neither defense is
applicable to plaintiff's claims here. Plaintiff alleges Wells Fargo breached its agreements to modifY
the DOT, not the DOT itself. Courts regularly enforce loan modification contracts against the lender
even when it is clear the bon-ower's default on the underlying loan agreement led to the modification.
See, e.g., Schmelzer v. Wells Fargo Home Mtg., 2011 WL 5873058, *6 (D. Or. Nov. 21, 2011).

Similarly, the DOT notice-and-cure provision applies to judicial actions "aris[ing] from the other
party's actions pursuant to this Security Instrument." Doc. 1-1 at 29 (emphasis added). Plaintiff
does not allege defendant breached the DOT, so the notice-and-cure requirement does not apply to
her breach of contract claim.
Page 10 - OPINION AND ORDER

Nonetheless, plaintiffs breach of contract claim must be dismissed because it is inadequately
pleaded. To establish a breach of contract claim, a plaintiff"must allege the existence of a contract,
its relevant terms, plaintiffs full performance and lack ofbreach[,] and defendant's breach resulting
in damages to plaintiff." Slover v. Or. State Bd ofClinical Soc. Workers, 927 P.2d 1098, 1101 (Or.
Ct. App. 1996) (quotation marks omitted). A lender's failure to enter into a loan modification
agreement with a qualifying bmTOwer following successful completion ofTPP may constitute breach
of contract. See Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 884 (9th Cir. 2013) (per curiam).
But here, the complaint does not adequately allege what Wells Fargo promised to do, explain how
it failed to live up to any such promise, or set out how plaintiff complied with her po11ion of the
agreement aside from making three TPP payments. The complaint merely alleges "Wells Fargo
cancelled Plaintiffs TPP and refused to accept further payments from Plaintiff."

Comp!.~

12. That

is inadequate to state a claim for breach of contract under Oregon law.
The allegations related to the second alleged loan modification also suffer from pleading
deficiencies. Plaintiff alleges some te1ms of the modification agreement negotiated by Consumer
Credit Counseling NW: for example, she alleges she agreed to pay $3,256.59 and thereafter resume
normal payments, and Wells Fargo agreed to stop foreclosure proceedings and recapitalize the
atTearage on the back end of the loan.

Comp!.~

15. But key terms are missing, including the total

amount of arrearage. Moreover, plaintiff does not allege full performance - she alleges she made
the initial payment but says nothing about the regular mortgage payment. Because plaintiff has
inadequately pleaded her claim for breach of contract, and because it is unclear based on these
pleading deficiencies whether the statute of frauds is a ban'ier to her asse11ion of that claim,

Page 11 - OPINION AND ORDER

plaintiffs breach of contract claim is dismissed without prejudice. If plaintiff amends her breach
of contract claim, Wells Fargo is free to reassert its statute of frauds defense.

III.

Financial Abuse of Vulnerable Person
Plaintiff concedes Wells Fargo, a financial institution, is statutorily exempt from a claim for

financial abuse ofa vulnerable person. See Or. Rev. Stat.§ 124.l 15(1)(a). Accordingly, plaintiffs
financial abuse claim against Wells Fargo must be dismissed with prejudice.
Plaintiff argues dismissal of the claim is unwarranted because NWTS is a proper defendant.
Although I agree Oregon law permits a financial abuse claim against NWTS,3 plaintiff has
nonetheless failed to state a claim for financial abuse. First, all the financial abuse allegations in the
complaint refer to Wells Fargo, not NWTS. See Comp!. iJiJ 53-54. Second, the complaint does not
allege NWTS engaged in any conduct qualifying as "wrongful" within the meaning of Or. Rev. Stat.
§ 124.l!O(l)(a). See Church v. Woods, 77 P.3d 1150, 1153 (Or. Ct. App. 2003) ("[W]rongful"
conduct is conduct "carried out in pursuit of an improper motive or by improper means," for example
by "violence, threats, intimidation, deceit, misrepresentation, bribery, unfounded litigation,

3

NWTS asserts it is also exempt from such a claim. I disagree. Section 124.l 15(l)(a)
exempts from financial abuse claims "financial institutions." Or. Rev. Stat.§ 124.l 15(1)(a).
The provision then cross-references Or. Rev. Stat. § 706.008, which defines "financial
institution" as "an insured institution, an extranational institution, a credit union as defined in
[Or. Rev. Stat. §] 723.006, and out-of-state credit union under [Or. Rev. Stat. §] 723.042 or a
federal credit union." Id. § 706.008(9). Acknowledging it does not fit within this definition,
NWTS attempts to incorporate the definition of"banking institution," which appears in a
different subsection of section 706.008. See id.§ 706.008(4). "[A]n Oregon trust company"
such as NWTS is a "banking institution" under that provision. But as the different statutmy
definitions demonstrate, "banking institution" and "financial institution" are not synonymous.
Section 124.115(1 )(a) exempts "financial institution[s ]" but not "banking institution[s ]" from
financial abuse claims. NWTS 's remaining citations are to provisions of Oregon law
establishing powers and qualifications of trustees; none of them exempt NWTS from being
subject to an elder abuse claim. NWTS is not statutorily exempt.
Page 12 - OPINION AND ORDER

defamation, ... disparaging falsehood[, or] ... undue influence.") (citations and quotation marks
omitted).
CONCLUSION

Defendants' motions for judgment on the pleadings (docs. 11 and 12) are GRANTED.
Plaintiffs first and third claims for relief, for violation of the OTDA and financial abuse, are
dismissed with prejudice. Plaintiffs second claim for relief, for breach of contract, is dismissed
without prejudice. Plaintiffs request for oral argument is DENIED as unnecessary. This case is
DISMISSED.
IT IS SO ORDERED.
Dated this

~of March 2016.

Ann Aiken
United States District Judge

Page 13 - OPINION AND ORDER