Supporting, Informing & Connecting People in Foreclosure
* TENTATIVE RULING: *
Case 12-562074 Plaintiff v. Wells Fargo Bank
1) Defendant Wells Fargo Bank N.A.., successor by merger with Wells Fargo Bank Southwest , N.A., fka Wachovia Mortgage, FSB, fka World Savings Bank’s Demurrer to the Plaintiff’s Complaint
Sustain. The Demurrer to the Complaint by defendant Wells Fargo Bank N.A., successor by merger with Wells Fargo Bank Southwest, N.A., fka Wachovia Mortgage, FSB, fka World Saving Bank, FSB, is sustained with 14 days leave to amend. Defendant’s Request for Judicial Notice and Supplemental Request for Judicial Notice are granted.
Defendant argues that the Complaint is moot because plaintiff’s entire case is predicated on the Notice of Default recorded on February 24, 2012[sic] (the correct date of the Notice of Default is February 11, 2011, recorded on February 14, 2011). Although a Notice of Rescission of Notice of Default was recorded on April 20, 2011 (Defendant’s Supplemental RFJN) as to the Notice of Default recorded on February 14, 2011 (Complaint, Exhibit 3), plaintiff’s case is not based on this Notice of Default, but rather on the alleged misrepresentations made in the reinstatement letters. Complaint, paragraph 19, and Exhibits 4 and 6.
Apparently a subsequent Notice of Default was recorded at some point, since plaintiff received a Notice of Trustee’s Sale setting a sale date of April 26, 2012. Complaint, paragraph 16 and Exhibit 7.
The First Cause of Action for Fraud
In order to state a cause of action for fraud (intentional misrepresentation), plaintiff must set forth facts which support the following: (1) misrepresentation, (2) knowledge of falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting damage. Civil Code §’s 1709 and 1710.
Fraud must be specifically pled because allegations of fraud involve a serious attack on a defendant’s character. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216. Pleadings for fraud must allege “facts which show how, when, where, to whom and by what means the representations were tendered.” Stansfield v. Starkey, (1990) 220 Cal. App. 3d 59, 73; Lazar v. Superior Court (1996) 12 Cal. 4th 631, 645.
If fraud is alleged against a corporation, plaintiff must also allege “…the names of persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal. App. 4th 153, 157.
Less specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,’ ‘[e]ven under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party ....’
Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 217 (citations omitted).
Plaintiff has stated sufficient facts in support of the elements of misrepresentation, knowledge of falsity and intent to defraud, but not in support of the elements of justifiable reliance or damages.
Misrepresentations – Plaintiff has specifically alleged what misrepresentations were made. Plaintiff states that the defendants falsely represented, in writing, that plaintiff had defaulted on his loans, that he was required to pay $6,365.63 to reinstate the second loan, and that he was required to pay $88,923.88 to reinstate the first loan. Complaint, paragraphs 18 & 19.
Knowledge of Falsity – Plaintiff has alleged sufficient facts in support of this element. Plaintiff alleges that the defendants knew the representations were false because defendants had in their control and possession the records of payments made by plaintiff. Complaint, paragraph 20. From this allegation it can be reasonably inferred that defendants had sufficient knowledge to determine how much, if anything, plaintiff actually owed, and were lying to plaintiff about the amounts owed.
Intent to Defraud – Plaintiff alleges that defendants were giving him false information about the amounts owed (Complaint, paragraphs 18 – 20), from which it can be reasonably inferred that defendants were either attempting to collect amounts that were not owed or were attempting to facilitate foreclosure by demanding payment.
Justifiable Reliance – Plaintiff does not explain how he relied on defendants’ representations, or why his reliance would have been reasonable. He simply states that he reasonably relied on the representations, which is only a conclusion. Complaint, paragraph 21. In the Opposition plaintiff argues that since the defendants are the servicers of plaintiffs’ loan, they have complete control over the accounting and he had to rely on them and perform or face the loss of his property. But the fact that defendants have their own accounting documents is not a reason why plaintiff was justified in relying on defendants’ representations. Plaintiff has the obligation to make payments and to know whether or not his payments are current.
Damages – Plaintiff alleges that he has suffered damages of not less than $100,000. Complaint, paragraph 22. However, plaintiff does not state how he has suffered damages as a result of defendants’ actions. In his Opposition plaintiff claims that his damages are attorney’s fees and the extra penalties and trustee’s fees claimed by the defendants, but this is not clear from the Complaint.
How, When, Where, to Whom and by What Means - The allegations are sufficiently specific as to these “elements”. Plaintiff states that the misrepresentations were made in writing on November 14, 2011, February 11, 2012, March 22, 2012, March 29, 2012, and March 30, 2012, and that they were made to him. Complaint, paragraphs 8, 10, 12, 14, and 15. In the Opposition plaintiff states that evidence of oral representations is set forth in defendants’ call logs. However, plaintiff does not allege that any oral misrepresentations were made. The oral representations concerned who would contact him and what he would be sent (a reinstatement letter), neither of which is alleged to have been a misrepresentation. Complaint, paragraphs 9 and 11.
Names of Persons and Authority to Speak – The names of the persons who made the alleged misrepresentations and their authority to speak cannot be determined from the letters dated November 14, 2011, March 22, 2012, March 29, 2012, and March 30, 2012, in that the letters only include the names of the departments from which they were sent (i.e. Wachovia Foreclosure Department, NDeX West Homeowners Assistance Department, and Wells Fargo Cashiering Department). See Complaint, Exhibits 2-1, 4-1, 5-1 and 6-1. However, since defendants sent these letters, defendants should have full knowledge of who sent the letters and what authority those persons had. The Notice of Default is allegedly signed by Gregory Peck on behalf of NDeX. See Complaint, Exhibits 3-1 and 3-2. NDeX should have sufficient information to determine whether or not Mr. Peck had authority to issue the Notice of Default listing the allegedly false amount owed.
Liability of the Defendants - Although in the allegations plaintiff lumps both defendants (Wells Fargo and NDeX West) together, by reviewing the attachments to the Complaint it can be determined who made which of the allegedly false representations. Complaint, Exhibits 2-1, 3-1, 3-2, 4-1, 5-1 and 6-1.
Fraud v. Breach of Contract -
…conduct amounting to a breach of contract becomes tortious when it also violates a duty independent of the contract arising from principles of tort law.
Aas v. Superior Court (2000) 24 Cal.4th 627, 643.
Everyone has an independent duty not to make intentional misrepresentations, regardless of whether or not the person is a party to a contract.
Though one may be under no duty to speak as to a matter, if he undertakes to do so either voluntarily or in response to inquiry, he is bound not only to state truly what he tells but also not to suppress or conceal any facts within his knowledge which materially qualify those statements. If he speaks at all he must make a full and fair disclosure.
Pohl v. Mills (1933) 218 Cal. 641, 654 (citation omitted).
Thus plaintiff may allege a fraud cause of action based on intentional misrepresentations, even if those misrepresentations would also constitute breaches of contract.
The Second Cause of Action for Breach of Contract
A complaint for breach of contract must include allegations which show the following: (1) the existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff therefrom. Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.
If the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference. Otworth v. Southern Pac. Transp. Co. (1985) 166 Cal. App. 3d 452, 459. Alternatively, a plaintiff may plead the legal effect of the contract rather than its precise language. Construction Protective Services, Inc. v. TIG Specialty Insurance Co. (2002) 29 Cal. 4th 189, 198-199.
Plaintiff states that the defendants breached the loan and the deed of trust by claiming plaintiff defaulted and by demanding exorbitant and improper fees to reinstate the loan. Complaint, paragraph 28. However, plaintiff has not attached copies of the Note or Deed of Trust, and therefore it cannot be determined from the allegations whether or not what defendants were demanding constituted breaches of contract.
Plaintiffs' ability to sue the Bank for fraud does not interfere with what the Bank may do, that is, how it may conduct its operations; it simply insists that the Bank cannot misrepresent how it operates, or employ fraudulent methods in its operations. Put another way, the state cannot dictate to the Bank how it can or cannot operate, but it can insist that, however the Banks chooses to operate, it do so free from fraud and other deceptive business practices.
Gibson v. World Savings & Loan Assn. (2002) 103 Cal.App.4th 1291, 1299 (citation omitted).
Contractual duties are voluntarily undertaken by the parties to the contract, not imposed by state law. A stated intent to preempt requirements or prohibitions imposed by state law does not reasonably extend to those voluntarily assumed in a contract.
Gibson v. World Savings & Loan Assn. (2002) 103 Cal.App.4th 1291, 1302 (citation omitted).
Defendant argues that Gibson v. World Savings & Loan Assn. (2002) 103 Cal.App.4th 1291 and Fenning v. Glenfed (1995) 40 Cal. App. 4th 1928 (which Gibson followed), have been superseded by controlling federal authority: i.e. Silvas v. E Trade Mortgage (9th Cir. Cal. 2009) 514 F. 3d 1001, as recognized by Schilke v. Wachovia Mortgage (N.D. Ill. 2010) 705 F. Supp. 932.
In Gibson the Court stated that there was a presumption against preemption (Id. at 1300), which is not the case in the context of lending regulation of federal savings associations because there has been a history of significant federal presence in national banking, the presumption against preemption of state law is inapplicable. Silvas v. E*Trade Mortg. Corp. (9th Cir. 2008) 514 F.3d 1001, 1005.
The ruling in Silvas does not mean that Gibson is no longer good law other than as to the presumption issue: it simply means that an analysis must be made under the pertinent federal regulation with a presumption in favor of preemption.
The proper analysis in evaluating whether a state law is preempted under the applicable OTS Regulation (12 C.F.R. §560.2) is as follows:
When analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption. OTS, Final Rule, 61 Fed.Reg. 50951, 50966-67 (Sept. 30, 1996).
Silvas v. E*Trade Mortg. Corp. (9th Cir. 2008) 514 F.3d 1001, 1005, footnote omitted.
In his Opposition plaintiff claims that his damages are attorney’s fees and the extra penalties and trustee’s fees claimed by the defendants (Opposition, 3:28 – 4:2), which would seem to indicate that plaintiff is attempting to assert state law claims against Wells Fargo solely as to whether or not Wells Fargo can charge certain fees. Such an action is preempted by HOLA. 12 C.F.R. §§’s 560.2(b)(4)&(5).
However, in the Complaint plaintiff alleges that defendants’ representations that he was in default and was required to pay certain amounts were false. Complaint, paragraphs 18-20. These allegations can be interpreted to apply to defendants’ general obligation to be truthful, and not as an attempt to use state law to regulate or otherwise affect defendants’ credit activities. The obligations to be truthful and not to breach a contract do not fall under any of the specific types of claims listed in 12 C.F.R. §560.2(b). Therefore the question becomes whether or not the law in question affects lending.
Common law breach of contract and fraud laws affect lending in that they prohibit breaching a contract and making misrepresentations, and the lending of money is done pursuant to contract, and involves the making of representations. Thus the presumption in favor of preemption applies.
2) Defendant Wells Fargo Bank N.A.., successor by merger with Wells Fargo Bank Southwest , N.A., fka Wachovia Mortgage, FSB, fka World Savings Bank’s Motion to Strike the Plaintiff Fred Mellenbruch’s Complaint
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