Choudhuri v. Wells Fargo Bank, N.A.

Decision Date25 October 2011
Docket NumberCase No: C 11-00518 SBA
CourtU.S. District Court — Northern District of California
Dkt. 70, 71, 72, 82 and 87

Plaintiff Kabita Choudhuri, acting pro se, filed the instant action against Wells Fargo Bank, N.A. ("Wells Fargo"), Vericrest Financial, Inc. ("Vericrest"), CIT Group Inc. ("CIT"), First American Trustee Servicing Solutions LLC ("First American"), Deutsche Bank USA ("Deutsche Bank"), Todd Bell ("Bell") and Meg DeGroote ("DeGroote"), accusing them of having engaged in fraudulent mortgage practices in connection with a mortgage obtained by Plaintiff on December 22, 2005.1 The Court previously granted Defendants' motion to dismiss with leave to amend. On June 27, 2011, Plaintiff filed her First Amended Complaint ("FAC"), which alleges federal claims under the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA") and theRacketeer Influenced and Corrupt Organizations Act ("RICO"), as well as causes of action predicated on state law.

The parties are presently before the Court on Defendants' separate motions to dismiss the FAC. Dkt. 70, 71 and 72. Having read and considered the papers filed in connection with this matter and being fully informed, the Court hereby GRANTS the motions as to Plaintiff's federal claims and declines to assert supplemental jurisdiction over her state law causes of action. The Court, in its discretion, finds this matter suitable for resolution without oral argument. See Fed. R. Civ. P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).

1. The Pleadings

The following facts are taken from the FAC and are presumed true for purposes of the instant motions to dismiss. On November 5, 2005, Plaintiff submitted an application to Wells Fargo to refinance her home located at 331 Richardson Way, Mill Valley, California ("the Property"). FAC at 2, Dkt. 48. In response, an unidentified "banker" allegedly advised Plaintiff that she did not qualify for a "regular" mortgage, but that she might be eligible for a sub-prime mortgage. Id. Plaintiff's file was then sent to Bell, a mortgage broker and employee of Wells Fargo. Id. Bell informed Plaintiff that she would qualify for a loan amount of $712,000 with no points or fees. Id. at 4. On November 20, 2005, Bell further advised Plaintiff she qualified for a second loan from CIT in the amount of $192,000. Id. On December 12, 2005, Bell emailed Plaintiff and assured her that the loan documentation was being prepared and would be ready for her signature the following week. Id.

A Wells Fargo appraiser appraised the Property on December 20, 2005. Id.2 On December 21, 2005, Bell advised Plaintiff that because the Property appraised for an amount lower than anticipated, she would only qualify for a loan in the amount of$649,000, as opposed to $712,000. Id. In addition, Bell stated that Plaintiff no longer qualified for the second loan because her credit score had declined. Id. Later in the evening, Bell further advised Plaintiff that because of her lower credit score, the terms of her $649,000 loan had changed and that she, in fact, would be charged fees and points. Id. at 5. Although Bell supposedly stated that the charges "were already included in the $649,000 note," Plaintiff claims that the charges were not disclosed until after she signed her loan documents. Id. Plaintiff claims that she requested written notice "as required by TILA" from Bell and CIT but that they never provided the requested documentation. Id. She alleges that Bell, Wells Fargo and CIT colluded to reduce the amount of her loan "in order to place her finances in peril and pre-dispose her to foreclosure." Id. at 4-5.

On December 22, 2005, Plaintiff signed loan documents for a mortgage in the amount of $649,000 which was secured by a deed of trust on the Property. Id. at 6. According to Plaintiff, Bell was the only person present at the time Plaintiff signed the documents, and that he was acting as her fiduciary. Id. She alleges that he violated "TILA, RESPA, and other statutes and regulations" by failing to disclose the fees and costs associated with the loan prior to the time that she executed loan documents. Id. In addition, Plaintiff claims that Bell colluded with Wells Fargo underwriter Meg DeGroote and CIT to "falsify loan documents" which, in turn, placed her at risk for "inevitable foreclosure." Id. at 7.

Unbeknownst to Plaintiff, Bell had directed that the "cash-out" from the refinancing proceeds be reduced from $8,000 to $2,000, for payment of taxes "that were not yet overdue." Id. Plaintiff was in transit from December 23 to 25 on a European vacation, and therefore, was unaware of the cash-out reduction which, in turn, resulted in many of her scheduled payments not to clear. Id. Between December 28, 2005 and June 2008, Plaintiff demanded rescission of the loan, "but Wells Fargo refused to consider her requests for rescission or loan modification." Id. at 8. Instead, beginning in or about August 2007, Wells Fargo began the foreclosure process. Id.

2. Prior State Court Action

On June 26, 2008, Plaintiff filed a pro se action in Marin County Superior Court against Bell and Wells Fargo. She filed an amended complaint in November 20, 2008. Defs.' RJN, Ex. 2, Dkt. 74-1. In her discursive pleadings, Plaintiff alleged that Bell and Wells Fargo violated TILA, RESPA and various other state statutes based on their allegedly fraudulent conduct relating to the mortgage agreement which she entered into on December 22, 2005. Id. at 15.3 Among other things, Plaintiff alleged that Wells Fargo fraudulently inflated her income in the loan documents, resulting in her placement in a loan for which she should not otherwise have qualified. Id. at 11. In addition, she alleged that her placement in such a loan put her at an "unreasonable risk of foreclosure." Id. She further accused Wells Fargo and Bell of failure to provide the requisite disclosures under TILA and RESPA, and of misrepresenting the terms of the loan. Id. at 10-23. As relief, Plaintiff sought compensatory and statutory damages resulting from Bell and Wells Fargo's allegedly fraudulent course of conduct; damages for emotional distress and the loss of employment; the withdrawal of all negative credit reports; and rescission of her loan. Id. at 7, 8, 24, 26-27.

On July 8, 2010, Marin County Superior Judge, the Honorable James Ritchie, granted Well Fargo and Bell's motion for summary judgment as to all causes of action alleged against them. Id. Ex. 3, Dkt. 74-2. Judge Ritchie ruled that any claims based on Bell's alleged oral representations were barred by the two year statute of limitations applicable to oral contracts. Id. at 2. He further found that Plaintiff "was aware" of the terms applicable to her mortgage "before agreeing to and signing the loan documents," and that Wells Fargo properly paid delinquent property taxes from the escrow account and did not otherwise engage in any misconduct in its handling of the loan. Id. With regard to Plaintiff's claim that Bell and other Wells Fargo employees fraudulently misrepresented facts to Plaintiff, the court found that those "misrepresentations or conversations toconvince plaintiff to enter into a 30-year fixed mortgage never took place." Id. at 4. Thus, the court rejected Plaintiff's claims of fraudulent misrepresentation, accounting fraud and foreclosure fraud. Id. at 4-6. Based on the court's ruling, final judgment was entered against Plaintiff on October 21, 2010. Id. On November 19, 2010, Plaintiff appealed the adverse judgment to the California Court of Appeal. Id. Ex. C, Dkt. 74-3. The appeal is currently pending. See Defs.' RJN, Ex. A, Dkt. 52.


On February 2, 2011, Plaintiff filed a cursory pro se Complaint in this Court against Wells Fargo, Bell, DeGroote, Vericrest, CIT, First American and Deutsche Bank in which she alleged that they defrauded her in connection with the mortgage she obtained on December 28, 2005.4 Wells Fargo, Deutsche Bank, Bell and DeGroote filed a Rule 12(b)(6) motion to dismiss, which the Court granted on June 15, 2011. 6/15/11 Order, Dkt. 44. Though the pleadings failed to allege any actual legal claims, the Court liberally construed the Complaint as stating claims for damages and rescission under TILA. The Court, however, found that Plaintiff had failed to allege sufficient facts to state a claim for damages or rescission under TILA. Id. at 5-6. In addition, the Court ruled that any claim under TILA was time-barred and that her bare allegation of equitable tolling was insufficient. Id. at 6-7. The Court granted leave to amend the damages claim, but dismissed Plaintiff's rescission claim with prejudice.

On June 27, 2011, Plaintiff filed her FAC. Dkt. 48. Although the Court only granted Plaintiff leave to amend her TILA claim, her FAC alleges claims for: (1) damages and rescission under TILA; (2) common law fraud; (3) violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.; (4) violation of RICO; (5) violation of RESPA; (6) violation of the Robbins-Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code §§ 1788.1 et seq.; (7) quiet title; and (8) negligent infliction of emotional distress. Plaintiff seeks $1 million in compensatory damages, general damages,treble damages under RICO, punitive damages, the reversal of all negative credit reporting, rescission of the loan, and an injunction preventing foreclosure of the Property. Plaintiff's claims are based principally on Wells Fargo and Bell's allegedly fraudulent conduct in inducing Plaintiff to enter into a mortgage on December 22, 2005. She claims that discovery obtained during the course of her prior ...

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