Summary
noting split among California courts and federal courts applying California law and ultimately following Alvarez to impose a duty
Summary of this case from Tanner v. Nationstar Mortg., LLCOpinion
Case No. CV 14-09821 DDP (SSx)
04-11-2016
CANDY GARCIA, Plaintiff, v. WELLS FARGO BANK, N.A., CAL-WESTERN RECONVEYANCE, LLC, Defendants.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS IN PART AND DENYING IN PART
[Dkt. 23]
Presently before the court is Defendant Wells Fargo Bank N.A. ("Wells Fargo"'s) Motion to Dismiss. Having considered the submissions of the parties, the court grants the motion in part, denies the motion in part, and adopts the following Order.
I. Background
In June 2006, Plaintiff Candy Garcia ("Garcia") obtained a $442,500.00 mortgage loan from Wells Fargo's predecessor in interest. (Second Amended Complaint ("SAC") ¶¶ 11-12.) See Gholizadeh v. Wells Fargo Bank, No. 14-cv-7575 ODW, 2014 WL 6884004 at *1 n.1. (C.D. Cal. Dec. 3, 2014) (describing Wells Fargo's relationship with predecessors). The loan was secured by a Deed of Trust to real property at 1216 Gillespie Way in Santa Barbara, California. (SAC, Ex. B.)
In February 2012, Plaintiff requested a loan modification. (SAC ¶ 15.) Wells Fargo later claimed that Plaintiff's modification application was incomplete, and required her to resubmit certain information. (SAC ¶ 21.) In October 2012, while Plaintiff's application was pending, Wells Fargo recorded a Notice of Default. (SAC, Ex. C.) In February 2013, while Plaintiff's application was still pending, a Notice of Trustee's Sale was recorded. (SAC, Ex. D.) In March, Plaintiff was asked to resubmit her modification application. (SAC ¶ 29.)
Another Notice of Trustee's Sale was later recorded in November 2014, with the sale taking place in December 2014. (Defendant's Request for Judicial Notice, Exs. I, J.)
Plaintiff's Second Amended Complaint alleges eight state law causes of action, including five claims under California's Homeowner Bill of Rights ("HBOR"), as well as claims for unfair business practices, promissory estoppel, and negligence. Wells Fargo now moves to the dismiss all claims.
Plaintiff's opposition does not dispute that her Seventh and Eighth claims for promissory estoppel and unfair business practices must be dismissed. Those claims are, therefore, DISMISSED.
II. Legal Standard
A complaint will survive a motion to dismiss when it contains "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations," it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).
"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
III. Discussion
A. HBOR Claims
Plaintiff brings five HBOR causes of action under California Civil Code Sections 2923.55, 2923.6, 2923.7, 2924.10, and 2924.17. With the exception of the Section 2924.17 claim, however, these claims are subject to California Civil Code Section 2924.15(a), which limits the applicability of the statutes at issue "to first lien mortgages . . . that are secured by owner-occupied residential real property . . . . For these purposes, 'owner-occupied' means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes." Cal. Civil Code § 2924.15(a).
Although the SAC describes the Gillespie Way property as "an owner-occupied, principal residence[,]" this allegation conflicts with the exhibits to the SAC. First, the contact address Plaintiff provided on the Deed of Trust is not the Gillespie Way property. (SAC, Ex. B at 9.) Second, and more critically, Plaintiff left blank the section of the Deed indicating and confirming that the Gillespie Way property was her personal and primary residence, that should would occupy the property, and that she intended to live there. (Id. at 14.) Because the Gillespie Way property was not "owner-occupied" for purposes of HBOR, Plaintiff's First, Second, Third, and Fourth causes of action must be dismissed.
As explained in this court's Order dismissing Plaintiff's First Amended Complaint, and contrary to Plaintiff's arguments, the court may consider the exhibits to the SAC at this stage. It is well-established that documents attached as exhibits to a complaint are part of the complaint, and may be considered on a motion to dismiss. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001); Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1996); Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987).
The body of Plaintiff's Fourth cause of action, as opposed to the SAC's caption, references both California Civil Code Section 2923.6 and 2924.18. Section 2924.15's owner-occupied requirement applies to both provisions. Cal. Civil Code § 2924.15(a).
1. Section 2924.17 Claim
Contrary to Defendant's Argument, California Civil Code § 2924.15(a) does not apply to Plaintiff's Fifth cause of action, brought under California Civil Code Section 2924.17. That section requires that certain declarations and recorded documents, including notices of default or sale, "be accurate and complete and supported by competent and reliable evidence." Cal. Civil Code § 2924.17(a).
Neither the SAC nor Plaintiff's Opposition is particularly clear about the basis for Plaintiff's Section 2924.17 claim. The SAC alleges, without explanation, that the 2012 Notice of Default and the Notice of Trustee's sale, were "fraudulent and/or false." The 2012 Notice of Default, however, was recorded prior to Section 2924.17's effective date of January 1, 2013. Appearing to acknowledge that fact, Plaintiff's Opposition emphasizes the Notice of Sale, which was recorded in February 2013. (Opp. at 11:22.) The SAC's Fifth cause of action, however, provides no explanation or elaboration of how the February 2013 Notice of Sale was inaccurate, incomplete, or unsupported by competent evidence. Nor does Plaintiff's Opposition provide any clarification. Although Plaintiff contends that the recording of the Notice of Sale violated "HBOR's dual tracking provision," such a violation would concern California Civil Code Section 2923.6 or 2924.18. Plaintiff has not articulated how such an alleged violation of those provisions also constituted a violation of Section 2924.17. Plaintiff's Fifth Cause of Action is, therefore, DISMISSED, with leave to amend. See Fed. R. Civ. P. 8.
As explained above, California Civil Code Section 2924.15 bars these dual-tracking claims under the circumstances here.
B. Negligence
The elements of a negligence claim are: (1) the existence of a duty to exercise due care, (2) breach of that duty, (3) causation, and (4) damages. Merrill v. Navegar, Inc., 26 Cal.4th 465, 500 (2001). The "existence of a duty of care owed by a defendant to a plaintiff is a prerequisite to establishing a claim for negligence." Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089, 1095 (1991). Wells Fargo contends that Plaintiff's negligence claim must fail because Wells Fargo does not owe Plaintiff a duty of care beyond its role as a lender.
Courts have generally held that, under California law, a lender does not owe a fiduciary duty to a borrower. See, e.g., Walters v. Fidelity Mortg. of California, 730 F. Supp. 2d 1185, 1205 (E.D. Cal. 2010). Some courts have applied that logic to circumstances where a loan servicer offers to modify a borrowers loan, reasoning that the servicer's "involvement in the loan transaction does not exceed the scope of its conventional role as a lender of money." Deschaine v. IndyMac Mortg. Servs., 2014 U.S. Dist. LEXIS 8541, at *17 (E.D. Cal. Jan. 22, 2014) (internal quotation marks omitted); see also Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991). That rule, however, is not absolute. California courts employ a six factor test to determine whether a financial institution owes a duty of care to a borrower, and look to "[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm." Nymark, 231 Cal. App. 3d at 1098 (citing Biakanja v. Irving, 49 Ca.2d 647 (1958)).
California courts are currently divided as to the question whether lenders owe borrowers a duty of care in processing a loan modification. One court has held that lenders have a duty of care to reasonably process a loan modification application where it is foreseeable that failure to do so will result in significant harm to the borrower. Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941, 948 (2014) (holding that lenders have a "duty to use reasonable care in the processing of a loan modification") However, other courts have concluded that lenders do not owe a duty of care when considering a residential loan modification. Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 68 (2013) (holding that the defendant banks "did not have a common law duty of care to offer, consider, or approve a loan modification, or to offer [the plaintiff] alternatives to foreclosure.") District courts in California have also reached different conclusions regarding this issue. See, e.g., Griffin v. Green Tree Servicing, LLC, No. CV 14-09408 MMM, 2015 WL 10059081 at *14 (C.D. Cal. Oct. 1, 2015) (noting split and concluding no duty exists); see also Robinson v. Bank of Am., No. 12-CV-4 94-RMW, 2012 WL 1932842, at *7 (N.D. Cal. May 29, 2012); Ansanelli v. JP Morgan Chase Bank, N.A., No C 10-3892 WHA, 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011); Watkinson v. MortgageIT, Inc., No. 10-CV-327-IEG, 2010 WL 2196083 (S.D. Cal. June 1, 2010); Garcia v. Ocwen Loan Servicing, LLC, No. C 10-290 PVT, 2010 WL 1881098, at *1-3. (N.D. Cal. May 10, 2010).
At this stage of the proceedings, the balance of the Nymark/Biakanja factors suggests that Wells Fargo did owe Plaintiff a duty of care. A loan modification would clearly affect Plaintiff and determine whether she would be able to keep the home. The potential harm to Plaintiff, namely default and foreclosure, from the failure to review Plaintiff's application was readily foreseeable. Plaintiff has undoubtedly been injured, as Wells Fargo has proceeded with a trustee's sale. There was a close connection between Wells Fargo's conduct and the injury suffered. The allegations of the SAC are not sufficiently detailed for the court to make a determination as to the fifth, moral blame factor. But see Alvarez, 228 Cal. App. 4th at 949 ("The borrower's lack of bargaining power coupled with conflicts of interest that exist in the modern loan servicing industry provide a moral imperative that those with the controlling hand be required to exercise reasonable care in their dealings with borrowers seeking a loan modification.") Finally, discouraging lenders from "dual tracking," or encouraging borrowers to seek loan modifications while simultaneously ignoring modification applications and initiating foreclosure proceedings, is consistent with both federal and state policies. See, e.g., Cal. Civ. Code §§ 2923.6, 2924.18. Thus, the balance of the Nymark/Biakanja factors weighs in favor of a duty of care in the processing of a loan modification application. Defendant's motion is therefore denied with respect to Plaintiff's Sixth cause of action.
IV. Conclusion
For the reasons stated above, Defendant's Motion is GRANTED in part and DENIED in part. The motion is denied with respect to the Sixth cause of action for negligence. Plaintiff's First, Second, Third, Fourth, Seventh, and Eighth cause of action are DISMISSED, with prejudice. Plaintiff's Fifth cause of action is DISMISSED, with leave to amend. Any amended complaint shall be filed within ten days of the date of this Order. Failure to timely file an amended complaint shall result in a dismissal of the entire action, with prejudice. IT IS SO ORDERED. Dated: April 11, 2016
/s/
DEAN D. PREGERSON
United States District Judge