Hull v. Wells Fargo Bank, N.A.

• Decision Date: 28 March 2016
• Docket Number: Case No. 6:15-cv-01990-AA
• Citation: Hull v. Wells Fargo Bank, N.A., Case No. 6:15-cv-01990-AA (D. Or. Mar 28, 2016)
• Parties: ELEANOR A. HULL, Plaintiff, v. WELLS FARGO BANK, N.A., and NORTHWEST TRUSTEE SERVICES, INC., Defendants.
• Court: U.S. District Court — District of Oregon

ELEANOR A. HULL, Plaintiff, v. WELLS FARGO BANK, N.A.,and NORTHWEST TRUSTEE SERVICES, INC., Defendants.

Case No. 6:15-cv-01990-AA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON

March 28, 2016

OPINION AND ORDER

Jeffrey A. Myers

Bowles Fernández Law LLC

5200 S.W. Meadows Road, Suite 150

Lake Oswego, OR 97025

Attorney for plaintiff

Molly J. Henry

Keesal, Young & London

1301 Fifth Avenue, Suite 3100

Seattle, WA 98101

John M. Thomas

RCO Legal, P.C.

511 S.W. 10th Avenue, Suite 400

Portland, OR 97205

Attorneys for defendants

AIKEN, Judge:

Plaintiff Eleanor A. Hull seeks a declaratory judgment invalidating the sale of her former residence at a foreclosure auction based on alleged violations of the Oregon Trust Deed Act ("OTDA"). She also alleges defendant Wells Fargo Bank, N.A. ("Wells Fargo") breached two agreements to modify the terms of the loan secured by the property and committed financial abuse of a vulnerable person, in violation of Or. Rev. Stat. § 124.110. Defendants moved for judgment on the pleadings. For the reasons set forth below, defendants' motion is granted.

BACKGROUND

Plaintiff owned a piece of residential property located in Salem, Oregon ("the property"). She purchased the property with the proceeds of a loan from Wells Fargo. The loan was secured by a Deed of Trust ("DOT"). Shortly after origination, Wells Fargo sold the property to the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Wells Fargo remained the loan servicer.

In July 2009, Wells Fargo advised plaintiff she qualified for a Home Affordable Modification Trial Period Plan ("TPP"). A letter from Wells Fargo to plaintiff, attached as an exhibit to the Complaint, explains "[i]f you qualify under the federal government's Home Affordable Modification program and comply with the terms of the Trial Period Plan, we will modify your mortgage loan and you can avoid foreclosure." Doc. 1-1 at 41. The letter sets out three steps to apply for loan modification: (1) explain the financial hardship making it difficult to keep up with mortgage payments; (2) submit documentation of income; and (3) make monthly TPP payments, which are set at a lower rate than the regular mortgage payments. Plaintiff made three TPP payments of $1,123.13 each. Compl. ¶ 11. In December 2009, Wells Fargo stopped accepting TPP payments.

In August 2010, plaintiff defaulted on her loan payments. Wells Fargo initiated nonjudicial foreclosure proceedings. Defendant Northwest Trustee Services ("NWTS") served as trustee and agreed to conduct the sale.

Plaintiff alleges she sought the assistance of Consumer Credit Counseling NW, which negotiated an agreement in late 2011 to stop the foreclosure. Pursuant to the agreement, plaintiff promised to pay $3,256.59 to Wells Fargo and thereafter resume her normal payment schedule; in exchange, Wells Fargo "would recapitalize the arrearage onto the back end of the loan and stop the non-judicial foreclosure." Compl. ¶ 15. Plaintiff further asserts she made the required payment, but Wells Fargo did not stop the foreclosure proceedings.

Plaintiff then filed for Chapter 13 bankruptcy. The bankruptcy plan, confirmed in October 2011, required plaintiff to resume regular mortgage payments to Wells Fargo as well as make monthly payments to cure $21,116 in arrearages. See Doc. 11-1 at 3-4 (original plan proposal); Doc. 11-3 at 4 (order confirming plan with amendments).¹ Plaintiff immediately defaulted on her payments under the plan, and in December 2011 Wells Fargo moved for relief from the automatic stay. Plaintiff admitted defaulting and stipulated to cure the post-petition arrearages through an additional six-month payment plan. Plaintiff then defaulted on the stipulation. Based on this series of defaults, in April 2012 Wells Fargo sought and obtained "relief from the automatic stay to foreclose on, and obtain possession of, the property, to the extent permitted by applicable nonbankruptcy law." Doc. 11-6 at 3.

In July 2012, plaintiff filed a post-confirmation amendment to her plan. The amendment removed conditions requiring payment to Walls Fargo and instead provided plaintiff would surrender the property to Wells Fargo. The amended plan, which became effective in November 2012, eliminated plaintiff's obligation to make regular mortgage payments and also lowered her monthly payments to the trustee. Compare Doc. 11-3 at 4 (monthly trustee payments of $305 for twelve months, followed by payments of $600 for twenty-four months) with Doc, 11-7 at 3 (monthly trustee payments of $265 for thirty-six months).

While her initial Chapter 13 bankruptcy was still open, plaintiff filed two more Chapter 13 petitions. She did not disclose her open bankruptcy case or previous bankruptcy petitions in either filing. In February 2015, the second bankruptcy petition was dismissed through a form order. In June 2015, the Bankruptcy Court for the District of Oregon issued an Order to Show Cause why the third petition "should not be dismissed with a bar to filing any petition under the Bankruptcy Code in any District of the United States before the later of: 1) one year, or 2) the closure of [the initial bankruptcy case]." Doc. 11-10 at 3. The United States Trustee responded to the Order to Show Cause by explaining that plaintiff, who is in her early 90s, appeared to have filed the second and third bankruptcy petitions on the advice of Colleagues in Law, which is based in Las Vegas, Nevada, and advertises itself as a "foreclosure rescue" operation. Doc. 11-11 at 3-4. Plaintiff paid Colleagues in Law $3,800 for their services. Doc. 11-11 at 3. The United States Trustee disclaimed any intent to take enforcement action against plaintiff, but recommended dismissing the third bankruptcy case and barring plaintiff from filing any further petitions for one year. Consistent with that recommendation, the bankruptcy court dismissed the third bankruptcy case in August 2015.

Dismissal of the third bankruptcy case and entry of the bankruptcy court's one-year bar order removed the barrier of the automatic stay. In September 2011, NWTS issued an Amended Trustee's Notice of Sale, informing plaintiff the property would be sold at auction on October 5, 2015.

On October 1, 2015, plaintiff filed this lawsuit in Marion County Circuit court, alleging violations of the OTDA, breach of contract, and financial abuse of a vulnerable person. The complaint seeks (1) a declaratory judgment invalidating the foreclosure sale; (2) monetary damages related to the breach of contract and financial abuse claims; and (3) costs and attorney fees. On October 21, 2015, defendants removed the suit to federal court on diversity grounds. On October 26, 2015, the property was sold at auction. Defendants now move for judgment on the pleadings.

STANDARD

A party may move for judgment on the pleadings after the pleadings are closed but early enough not to delay trial. Fed. R. Civ. P. 12(c). "Analysis under Rule 12(c) is substantially identical to analysis under Rule 12(b)(6) because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy." Pat River Tribe v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (citation and quotation marks omitted). Accordingly, "[a] judgment on the pleadings is properly granted when, taking all allegations in the pleadings as true, the moving party is entitled to judgment as a matter of law." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (quotation marks omitted). To survive a motion for judgment on the pleadings, "the non-conclusory 'factual content' [of the complaint]," and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. US. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2007)). "A claim has facial plausibility when the plaintiff pleads factualcontent that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 (2007).

DISCUSSION

In their motions to dismiss, defendants argue plaintiff has failed to state a claim for relief and assert a number of affirmative defenses. Because different defenses and arguments apply to each claim, I will address the claims separately.

I. Violation of OTDA

Plaintiff argues the foreclosure sale must be invalidated because the notice was not compliant with the OTDA. Specifically, she alleges it (1) listed an incorrect zip code for the property; and (2) listed Wells Fargo, rather than Freddie Mac, as the beneficiary on the DOT. Defendants contend plaintiff is judicially estopped from any attempt to invalidate the foreclosure because she agreed to surrender the property in bankruptcy court.

"Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position." Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). The doctrine promotes "general consideration[s] of the orderly administration of justice and regard for the dignity of judicial proceedings" and "protect[s] against a litigant playing fast and loose with the courts." Id. (quoting Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). To determine whether judicial estoppel applies, a court must consider three factors. First, the "party's later position must be clearly inconsistent withits earlier position." New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (citationsand quotation marks omitted). Second, the court asks whether the party "succeeded in persuading a court to accept that party's earlier position," because "[a]bsent success in a prior...