Opinion
3:13-cv-00371-RCJ-VPC
02-12-2014
GARY J. DUARTE et al., Plaintiffs, v. WELLS FARGO BANK, N.A. et al., Defendants.
ORDER
This case arises out of the foreclosure of a rental property. Pending before the Court is a Motion to Dismiss (ECF No. 44). Because Plaintiffs have not timely responded, see Local R. 7-2(d), and for the reasons given herein, the Court grants the motion in part and denies it in part.
I. FACTS AND PROCEDURAL HISTORY
Plaintiffs Gary and Ellen Duarte gave lender Wells Fargo a $213,600 promissory note to refinance property at 1101 Los Amigos Dr., Sparks, NV 89434 (the "Property"), secured by a deed of trust (the "DOT") against the Property given to trustee United Title of Nevada ("United Title"). (See DOT 1-3, Jan. 25, 2007, ECF No. 6-1). Mortgage Electronic Registration Systems, Inc. does not appear to be a party to or third-party beneficiary of the DOT. MTC Financial, Inc., d.b.a. Trustee Corps, as purported attorney-in-fact for Wells Fargo, substituted itself as trustee in place of United Title. (See Substitution, June 13, 2012, ECF No. 6-2). Because it was signed after July 1, 2011, the Substitution, assuming it was otherwise proper, was effective when recorded on June 19, 2012. See Nev. Rev. Stat. § 107.028(4). Trustee Corps filed a Notice of Breach and Default and Election to Cause Sale (the "NOD") along with an Affidavit of Authority ("AA"), indicating a default of $13,370.88 as of July 9, 2012. (See NOD and AA, July 19, 2012, ECF No. 6-3). The Property is not eligible for mediation under Nevada's Foreclosure Mediation Program. (See FMP Certificate, Oct. 15, 2012, ECF No. 6-4). Trustee Corps noticed a trustee's sale for December 28, 2012. (See Notice of Trustee's Sale, Nov. 20, 2012, ECF No. 6-5). Trustee Corps sold the Property to Federal Home Loan Mortgage Corp. ("Freddie Mac") for $139,597 cash at a trustee's sale on March 8, 2013. (See Trustee's Deed Upon Sale, Mar. 21, 2013, ECF No. 6-7). Although the DOT was extinguished upon its own foreclosure by operation of law, Wells Fargo formally assigned the DOT to Freddie Mac, anyway. (See Assignment, Mar. 19, 2013, ECF No. 6-6).
Plaintiffs sued Wells Fargo, Trustee Corps, and Malcolm & Cisneros, A Law Corporation in state court on seven causes of action: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) statutorily defective foreclosure under section 107.080; (4) intentional interference with contractual relations; (5) equitable estoppel; (6) deceptive trade practices under section 598.0923(2)-(4); and (7) appointment of a receiver. Defendants removed. Trustee Corps and Wells Fargo separately moved to dismiss for failure to state a claim. The Court granted those motions on the merits, with leave to amend the promissory estoppel and deceptive trade practices claims. Plaintiffs asked the Court to reconsider, and Malcolm & Cisneros separately moved to dismiss for failure to state a claim. The Court denied the motion to reconsider, giving Plaintiffs fourteen days to amend in accordance with the previous order. The Court granted Malcolm & Cisneros's motion because Plaintiffs failed to respond. Plaintiffs timely filed the First Amended Complaint ("FAC") exactly fourteen days later. The remaining Defendant, Wells Fargo, has moved to dismiss the FAC. Plaintiffs have not timely responded.
II. LEGAL STANDARDS
Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). The court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts pertaining to his own case making a violation plausible, not just possible. Ashcroft v. Iqbal, 556 U.S. 662, 677-79 (2009) (citing Twombly, 550 U.S. at 556) ("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."). In other words, under the modern interpretation of Rule 8(a), a plaintiff must not only specify a cognizable legal theory (Conley review), but also must plead the facts of his own case so that the court can determine whether the plaintiff has any plausible basis for relief under the legal theory he has specified, assuming the facts are as he alleges (Twombly-Iqbal review).
"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, "documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss" without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule of Evidence 201, a court may take judicial notice of "matters of public record." Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).
II. ANALYSIS
The FAC contains seven claims. The Court dismisses all but the fourth and fifth claims for promissory estoppel and violation of the Nevada Deceptive Trade Practices Act ("NDTPA" or the "Act"), without further analysis, because those are the only two claims Plaintiffs had leave to amend. Also, the Court notes that only the Property described, infra, which Plaintiffs refer to in the FAC as the "Rental," appears to be directly at issue in this case, although the FAC contains allegation relating to at least one other property, which Plaintiffs refer to as the "Residence."
A. Promissory Estoppel
Plaintiffs previously alleged only that their counsel assured them Wells Fargo would not foreclose while they sought a modification, not that Wells Fargo had made any such representation to them or their counsel. In the FAC, Plaintiffs now allege that on December 5, 2012 an employee of Wells Fargo, Stephanie Chia, one of their many "single points of contact," told Plaintiffs' counsel that Wells Fargo would stop the foreclosure on the Property if Plaintiffs submitted a loss mitigation package on the Property, and they submitted a Rental Mortgage Application ("RMA") on December 21, 2012. (See First Am. Compl. ¶¶ 16-17, Oct. 29, 2013, ECF No. 40). On that date, Plaintiffs' counsel sent a latter to Ms. Chia seeking confirmation that the submission of the RMA would suspend the foreclosure. (Id. ¶ 18). Although Ms. Chia did not directly respond to this request, on January 27, 2013, she discussed with Plaintiffs' counsel over the telephone that the pending trustee's sale on the Property had been suspended indefinitely pending the April 3, 2013 mediation on the Property and two other properties against which Wells Fargo held security interests. (See id. ¶¶ 19-20). Plaintiffs repaired and improved the Rental in early 2013 based upon Wells Fargo's representations that foreclosure would be forestalled until the April 3, 2013 mediation. (See id. ¶ 29). Nevertheless, Plaintiffs' tenants received a March 13, 2013 notice at the Rental that the Rental had been sold on March 8, 2013 and that they faced eviction, resulting in that tenants refused to pay rent to Plaintiffs. (See id. ¶¶ 25-28).
Promissory estoppel in Nevada consists of four elements: "(1) the party to be estopped must be apprised of the true facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting estoppel has the right to believe it was so intended; (3) the party asserting the estoppel must be ignorant of the true state of facts; (4) he must have relied to his detriment on the conduct of the party to be estopped." Cheqer, Inc. v. Painters & Decorators Joint Comm., Inc., 655 P.2d 996, 998-99 (Nev. 1982) (citing Strong v. Santa Cruz Cnty., 543 P.2d 264 (Cal. 1975); City of Long Beach v. Mansell, 476 P.2d 423 (Cal. 1970)). The Court will not dismiss this claim. Plaintiffs have sufficiently alleged facts supporting the elements of the claim, i.e., that Wells Fargo, knowing that the foreclosure would proceed, told Plaintiffs' counsel that it would be suspended until the mediation on April 3, 2013, such that Wells Fargo intended that Plaintiffs would continue to maintain and/or improve the Property in the meantime, when Plaintiffs were unaware that the foreclosure would not in fact be suspended and relied to their detriment thereupon by repairing and improving the Property.
The Court rejects Wells Fargo's statute of frauds argument. That defense, requiring a writing for contracts concerning, inter alia, interests in real property, only applies to contracts, and promissory estoppel is a claim that necessarily only exists where no enforceable contract has been formed, because there has been no formal consideration. See Restatement (Second) of Contracts § 90 (1981). The claim exists precisely to correct the injustice that might occur where equity requires a remedy but no contract, written or oral, can be shown. For this reason, the statute of frauds cannot be a defense to a promissory estoppel claim, as opposed to a claim for breach of an oral contract: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce the action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement of the promise." Restatement (Second) of Contracts § 139(1) (1981) (emphasis added). In any case, the alleged oral promise here did not directly concern a promise to transfer any interest in real estate, but only to forestall a foreclosure, and the remedy sought is therefore appropriately limited to damages resulting from the failure to delay as promised, not a rescission of the sale of the real property. So it does not appear that the alleged promise was within the statute of frauds at all.
B. NDTPA
Defendant argues that the Act does not apply here. Plaintiffs allege violations of subsections 598.0923(2)-(4) of the Nevada Revised Statutes. Subsections (2) through (4) make it a deceptive trade practice to "[f]ail[] to disclose a material fact in connection with the sale or lease of goods or services," "violate[] a state or federal statute or regulation relating to the sale or lease of goods or services," or "[u]se coercion, duress or intimidation in a transaction." Nev. Rev. Stat. § 598.0923(2)-(4). Plaintiffs allege that Wells Fargo's use of multiple conflicting points of contact, inaccurate identification of which loans it was acting upon at various times, and agreement to suspend foreclosure upon the Rental but proceeding anyway violated one or more of these subsections.
Defendants argue that the Act simply does not apply to real estate transactions. The Court agrees that the Property does not constitute "goods" under subsections (2) and (3). "Goods" is separately defined in section 598.0934 as including mobile or manufactured homes under some circumstances, but there is no indication the Property is a mobile or manufactured home. See id. § 598.0934. The question remains whether the servicing of Plaintiffs' loan constitutes the sale of services. The Court finds that it does not. Although the servicing of Plaintiffs' loan is indeed a service itself, the subsections at issue do not on their face apply to acts taken during the provision of goods and services already purchased or leased, but only during the sale of services, i.e., fraud-in-the-inducement-type claims. The only remaining question is whether Wells Fargo used coercion, duress, or intimidation. Plaintiffs have alleged this only in conclusory fashion. They do not allege any physical or economic threats beyond the scope of Wells Fargo's lawful right to foreclose the deed of trust on the Property. Because this deficiency was specifically identified in the previous order dismissing with leave to amend, the Court now dismisses this claim without leave to amend.
CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 44) is GRANTED IN PART and DENIED IN PART. All claims are dismissed except the claim for promissory estoppel.
IT IS SO ORDERED.
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ROBERT C. JONES
United States District Judge