Flores v. Wells Fargo Bank, N.A.

• Decision Date: 26 June 2012
• Docket Number: Case No.: 11-6619 JSC
• Citation: Flores v. Wells Fargo Bank, N.A., Case No.: 11-6619 JSC (N.D. Cal. Jun 26, 2012)
• Parties: ROLAND FLORES, JR., et al., Plaintiffs, v. WELLS FARGO BANK, N.A., aka WACHOVIA MORTGAGE, et al., Defendants.
• Court: U.S. District Court — Northern District of California

ROLAND FLORES, JR., et al., Plaintiffs,

v.WELLS FARGO BANK, N.A., aka WACHOVIA MORTGAGE, et al., Defendants.

Case No.: 11-6619 JSC

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

Dated: June 26, 2012

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS'

MOTIONS TO DISMISS AND STRIKE

(Dkt. Nos. 5,7.)

Plaintiffs challenge Defendants' foreclosure on Plaintiffs' home, alleging numerous causes of action including Breach of Contract and Wrongful Foreclosure. Now pending before the Court are Defendants' motions to dismiss, or in the alternative, strike portions of Plaintiffs' Complaint. (Dkt. Nos. 5, 7.) After reviewing the papers submitted by both parties, with the benefit of oral argument on February 16, 2012, and upon being notified by the parties that their efforts at settlement have been unsuccessful, the Court DENIES the motion to dismiss the Breach of Contract claim and GRANTS the motion to dismiss all other claims. The Court also GRANTS in part and DENIES in part the motion to strike.

ALLEGATIONS OF THE COMPLAINT

On February 19, 2008, Plaintiffs Roland and Karen Flores, a married couple, borrowed $767,505.00 from Wells Fargo's predecessor, Wachovia Mortgage, FSB. (Dkt. No. 30 at 2.)The loan was memorialized by a promissory note and secured by a deed of trust recorded against 341 Granelli Ave, Half Moon Bay, CA ("Property"). (Dkt. No. 30 at 2.) Plaintiffs subsequently entered into a Modification Agreement with Defendants in which Defendants agreed to charge monthly "Interest Only" payments on the loan balance that would adjust on an annual basis. (Dkt. No. 1 ¶ 11.) At the time they entered the Agreement, Defendants' representatives told Plaintiffs that any unpaid taxes and insurance would be added to the principal balance due, and monthly payments under the Modification Agreement would not change. (Dkt. No. 1 ¶ 12.) Notwithstanding this oral promise, Defendants charged amounts over and above the amounts stated in the Agreement and breached the oral promise that unpaid taxes and insurance would be added to the principal and not charged monthly. (Dkt. No. 1 ¶¶ 23-24.) Specifically, in January 2010, Defendants added $1,196.46 in "escrow" and "shortage" charges for taxes and insurance to the $2,450.51 monthly interest payments, so the new total monthly payment became $3,646.97. (Dkt. No. 1 ¶¶ 11, 13.) Plaintiffs paid these additional charges, but their February 2010 payment was not credited to their account. Accordingly, in March 2010, Defendants began sending statements to Plaintiffs showing "past due" balances and indicating a minimum monthly payment of $7,293.94. (Dkt. No. 1 ¶ 15.) Plaintiffs continued to pay $3,646.97 per month through August 2010 and Defendants accepted those payments. (Dkt. No. 1 ¶ 16.)

Plaintiff Roland Flores was involved in an automobile accident in September 2010 which resulted in "a significant reduction in Plaintiffs' income" as disability payments were delayed through no fault of Plaintiffs. (Dkt. No. 1 ¶¶ 17-18.) The next month, Plaintiffs applied for a loan modification based on hardship. (Dkt. No. 1 ¶ 19.) Defendants subsequently denied Plaintiffs' application on the ground that their policies "[did] not allow them to process another loan modification for Plaintiffs." (Dkt. No. 1 ¶ 21.) Thereafter, Plaintiffs defaulted on the loan and a notice of default was recorded on February 7, 2011. (Dkt. No. 30 at 2.) On November 7, 2011, a Notice of Trustee's Sale was recorded. (Dkt. No. 30 at 2.)

PROCEDURAL HISTORY

Plaintiffs filed this action in state court on November 21, 2011, which Defendants removed to this Court on the ground of diversity jurisdiction. Plaintiffs make claims for Breach of Contract, Promissory Estoppel, Wrongful Foreclosure, Breach of Covenant of Good Faith and Fair Dealing, violations of the California Business & Professional Code § 17200 (Unfair Business Practices), and Accounting.

After Defendants filed the pending motions to dismiss and strike, the Court sua sponte raised the issue of subject matter jurisdiction and concluded that the diversity of citizenship requirement is met. (Dkt. No. 24.) After hearing oral argument on February 16, 2012, the Court stayed any decision on Defendants' motions pending the parties' settlement efforts. Having been advised that those efforts have been unsuccessful, the Court now decides Defendants' motions. (Dkt. Nos. 5, 7.)

DISCUSSION

A. Defendants' 12(b)(6) Motion to Dismiss

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed for failure to state a claim upon which relief may be granted based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). For purposes of evaluating a motion to dismiss, the court "must presume all factual allegations of the Complaint to be true and draw all reasonable inferences in favor of the nonmoving party." Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009). The complaint must plead "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant hasacted unlawfully." Id. Courts may dismiss a case without leave to amend only if the plaintiff is unable to cure the defect by amendment. Lopez v. Smith, 203 F.3d 1122, 1129 (9th Cir. 2000).

1. Breach of Contract

Plaintiffs contend that Defendants breached their original Modification Agreement by charging amounts over and above those stated in the contract. In order to state a claim for breach of contract, Plaintiffs must allege "the existence of the contract, performance by the plaintiff or excuse for nonperformance, breach by the defendant, and damages." Lucia v. Wells Fargo Bank, N.A., 798 F. Supp. 2d 1059, 1066-67 (N.D. Cal. 2011) (internal citations omitted). Plaintiffs' allegations satisfy these elements. They allege the existence of a contract: "[Defendants] entered into a Modification Agreement in which [Defendants] agreed to charge stated monthly 'Interest Only' payments on the loan balance which would adjust on an annual basis." (Dkt. No. 1, Ex. A, ¶ 11.) They allege further that Defendants breached the written contract "by charging excessive amounts to Plaintiffs over and above the amounts stated in the Agreement, and by adding unauthorized monthly charges to Plaintiffs' account." (Dkt. No. 1, Ex. A, ¶ 23.) They also allege that at the time they entered the written contract Defendants told them that any unpaid taxes and insurance would not increase their monthly payments and Defendants breached this oral promise. (Dkt. No. 1, Ex. A, ¶¶ 12, 24.) Finally, Plaintiffs allege that they incurred monetary damages as a result of the increased payments. (Dkt. No. 1, Ex. A, ¶ 25.)

Defendants nonetheless move to dismiss on the ground that the alleged oral promise is banned by the parol evidence rule because it flatly contradicts the written Modification Agreement. California Civil Procedure Code Section 1856 governs parol evidence:

(a) Terms set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. (b) The terms set forth in a writing described in subdivision (a) may be explained or supplemented by evidence of consistent additional terms unless the writing is intended also as a complete and exclusive statement of the terms of the agreement.

Cal. Civ. Proc. Code § 1856. This rule requires a court to first ask if the writing was intended to be an integration, or a complete and final expression of the parties' agreement, and second if the agreement is susceptible to the meaning argued by the party offering the evidence. Davis Wine Co. v. Vina Y Bodega Estampa, S.A., 823 F. Supp. 2d 1159, 1170 (D. Or. 2011) (internal citations omitted). The court in Banco Do Brasil, S. A. v. Latian, Inc. reduced the integration analysis to four questions:

(1) does the written agreement appear on its face to be a complete agreement; obviously, the presence of an 'integration' clause will be very persuasive, if not controlling, on this issue; (2) does the alleged oral agreement directly contradict the written instrument; (3) can it be said that the oral agreement might naturally have been made as a separate agreement or, to put it another way, if the oral agreement had been actually agreed to, would it certainly have been included in the written instrument; and (4) would evidence of the oral agreement be likely to mislead the trier of fact.

Id. 234 Cal. App. 3d 973, 1002-03 (Ct. App. 1991).

Defendants' motion focuses on the second question: does the alleged oral agreement contradict the written agreement. Viewing the agreement and the allegations in the light most favorable to the Plaintiffs it does not. Plaintiffs allege Defendants made an oral promise that unpaid taxes and insurance would be added to the principal balance and would not be charged monthly. (Dkt. No. 1, Ex. A ¶ 24.) Unpaid taxes and insurance are not referenced anywhere in the Modification Agreement. The Modification Agreement states that the lender agrees to "[a]dd amounts owed for 'Escrow Amounts Advanced,' 'Foreclosure Fees,' 'Attorney's Fees,' and 'Property Inspection Fees' to the Loan balance" if these are outstanding on the date of the Agreement. The court cannot...