Rijhwani v. Wells Fargo Home Mortg., Inc.

• Decision Date: 03 March 2014
• Docket Number: No. C 13-05881 LB,C 13-05881 LB
• Court: U.S. District Court — Northern District of California
• Parties: MANOJ RIJHWANI, et al., Plaintiffs, v. WELLS FARGO HOME MORTGAGE, INC., Defendant.

MANOJ RIJHWANI, et al., Plaintiffs, v. WELLS FARGO HOME MORTGAGE, INC., Defendant.

No. C 13-05881 LB

UNITED STATES DISTRICT COURT Northern District of California San Francisco Division

Dated: March 3, 2014

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS'

MOTION TO DISMISS PLAINTIFFS'

SECOND AMENDED COMPLAINT

[Re: ECF No. 11]

INTRODUCTION

Plaintiffs Manoj Rijhwani and Lisa Rijhwani ("Plaintiffs") sued Wells Fargo Bank, N.A. ("Wells Fargo")¹ for its alleged misconduct in relation to Plaintiffs' attempt to get a loan modification and the concurrent foreclosure proceedings on Plaintiffs' property. See Second Amended Complaint ("SAC"), ECF No. 1-1 at 1-24.² Wells Fargo moves to dismiss Plaintiffs' Second Amended Complaint. See Motion, ECF No. 11. Pursuant to Civil Local Rule 7-1(b), the court found this matter suitable for determination without oral argument and vacated the February 20, 2014 hearing. 2/19/2014 Clerk's Notice, ECF No. 16. Upon consideration of the Second Amended Complaint, the briefs submitted, and the applicable legal authority, the court GRANTS IN PART and DENIES IN PART Wells Fargo's motion to dismiss.

STATEMENT³

I. PLAINTIFFS' LOANS

In or about July 5, 2007, Plaintiffs took out an equity line of credit with World Savings Bank, FSB ("World Savings"), a federal savings bank, on their home at 1044 Rudder Lane, Foster City, California (the "Property"). SAC, ECF 1-1 ¶ 11. As part of this transaction, Plaintiffs executed apromissory note that gave World Savings a security interest in the Property in the form of a deed of trust. See SAC, ECF No. 1-1 ¶ 11; RJN, Ex. A, ECF No. 12 at 5. For purposes of this order, this loan will be referred to as the "Second Loan."

Plaintiffs' prior loan history is a bit unclear from the pleadings and documents submitted. Although they do not explicitly describe it, Plaintiffs allege that at some point prior to 2007 they had entered into a mortgage loan transaction with World Savings and executed a promissory note that gave World Savings a security interest also in the Property in the form of a deed of trust. See SAC, ECF No. 1-1 ¶ 11 ("Plaintiffs entered into a consumer loan transaction with World Savings to refinance [the Property]") (emphasis added); id. ¶ 12 & n.3 (alleging that the beneficial interest in the promissory notes underlying both Plaintiff's first mortgage and second mortgage with World Savings had been sold to Wells Fargo in late January 2012); id. ¶ 13 ("Plaintiffs were in default under their first loan in 2011") (emphasis added); id. ¶ 20 ("Plaintiffs [were] instructed not to make payments on either of their loans") (emphasis added). For purposes of this order, this loan will be referred to as the "First Loan."

On December 31, 2007, World Savings changed its name to Wachovia Mortgage, FSB ("Wachovia"), and remained a federal savings bank. In November 2009, Wachovia changed its name to Wells Fargo Bank Southwest, N.A., became a national association (and ceased being a federal savings bank), and immediately merged into Wells Fargo, which was and is a national association. See RJN, Exs. B-E, ECF No. 12 at 28-37. Plaintiffs allege that both of Plaintiffs' "loans," and/or the "beneficial interests in the [p]romissory [n]otes underlying" those loans, were "sold and/or transferred" to Wells Fargo in late January 2012. SAC, ECF No. 1-1 ¶ 12 & n.3.

II. PLAINTIFFS' ATTEMPT TO MODIFY THE FIRST LOAN AND THE PURPORTED POSTPONEMENT OF FORECLOSURE PROCEEDINGS

In 2011, Plaintiffs defaulted on their First Loan, and, "in an earnest attempt to stave off an impending foreclosure" of the Property, Plaintiffs "decided to avail themselves of Wells Fargo's available foreclosure avoidance programs." Id. ¶ 13. In September of that year, Plaintiffs began a series of discussions with bank representatives about obtaining a loan modification on the first loan. Id. According to Plaintiffs, "Sean Martin, a Wachovia representative who apprised them of theupcoming transfer of their loans to Wells Fargo," advised Plaintiffs that a new loan modification program was being instituted and that Plaintiffs should "refrain from paying toward their [S]econd [L]oan" and await enrollment information for the new program. Id. "No such enrollment information was forthcoming," however, and after this "both Wachovia and Wells Fargo ceased sending Plaintiffs monthly statements with respect to either of their loans." Id.

At some point, Plaintiffs defaulted on their Second Loan. Id. ¶ 14 ("Because their second loan's regular monthly payment was between $200.00 and $300.00, Plaintiffs would have had no difficulty making it . . . Plaintiffs had already made numerous attempts with various Wells Fargo representatives to cure the [S]econd [L]oan's arrearages, but because they were no longer receiving monthly statements, the exact amount in default was unknown"). Plaintiffs attempted to bring the Second Loan current, but bank representatives failed to provide Plaintiffs with "a straight answer" about the amount owed. Id.

On February 27, 2012, a Wells Fargo representative named "Armando" provided Plaintiffs with information regarding Wells Fargo's pre-qualification process for a Home Affordable Modification Program ("HAMP") loan modification. Id. Nevertheless, on the following day, February 28, 2012, Wells Fargo recorded and issued a Notice of Default with respect to Plaintiffs' Second Loan, stating that the amount owed was $4,023.90. Id. ¶ 15; see RJN Ex. G, ECF No. 12 at 41.

On March 3, 2012, another Wells Fargo representative stated that Plaintiffs would need to pay $2,000.00 to bring the Second Loan current, but advised Plaintiffs to wait for the "specialist" who would ultimately be assigned to their case because he or she would be making the decisions as to the "next steps" in the process, including any issues regarding payment. SAC, ECF No. 1-1 ¶ 16.

On April 18, 2012, Plaintiffs were assigned a "Home Preservation Specialist" named Juan Teran. Id. ¶ 19. Despite Plaintiffs' financial ability and willingness to continue paying toward the Second Loan and to bring it current, Mr. Teran instructed Plaintiffs not to make payments on either of their loans until he had a clear picture of Plaintiffs' situation. Id. ¶ 20. On April 24, 2012, Mr. Teran reiterated his advice to not make payments because the principal amount on both loans would be reduced and that the two loans might ultimately be combined. Id. ¶ 21. He further told Plaintiffs that he would provide them with the necessary forms to submit their HAMP loan modificationapplication. Id.

Plaintiffs, however, did not receive any forms, and they were not able to get a hold of any Wells Fargo representative until May 8, 2012. Id. ¶ 22. At that time, Mr. Teran assured Plaintiffs that no foreclosure sale would be conducted during the evaluation of Plaintiffs' HAMP loan modification application. Id. A letter from Mr. Teran, dated May 15, 2012, reiterated this assurance. Id. Plaintiffs were informed in a later conversation on May 17, 2012 that they were indeed eligible for a HAMP loan modification and that the necessary forms to apply for it were forthcoming. Id.

To the contrary, on June 15, 2012, Plaintiffs discovered a Notice of Trustee's Sale (based on their defaulting on the Second Loan) posted on their door; the sale was scheduled for June 20, 2012. Id. ¶ 23; see RJN Ex. H, ECF No. 12 at 45. On June 18, 2012, Plaintiffs contacted Mr. Teran to express their concern. SAC, ECF No. 1-1 ¶ 23. Mr. Teran told Plaintiffs not to worry because the sale would be postponed to August 7, 2012, and he instructed Plaintiffs not to make any payments because Wells Fargo could not decide how much these payments would be, in part because Plaintiffs' modified interest rate had not yet been established. Id.

On June 20, 2012, Mr. Teran told Plaintiffs to ignore any further notices from Regional Trustee Services Corporation ("RTSC"), as this company was "just a formality from Wells Fargo," that he, not the Trustee, was the "primary decision maker," and that as long as they continued to work with him, "nothing [would] happen to [their] home." Id. ¶ 24.

At Mr. Teran's request, Plaintiffs faxed their most recent pay stubs, along with their 2011 federal tax statements on June 22, 2012; receipt of the documents was confirmed on June 25, 2012. Id. ¶ 25. The following week, Plaintiffs filled out and submitted electronic copies of the Request for Modification Affidavit ("RMA") and IRS Form 4506-T (Request for Transcript of Tax Return); receipt of those documents was confirmed on July 15, 2012. Id.

On August 7, 2012, Mr. Teran stated that he was still reviewing Plaintiffs' documents and that the previously rescheduled Trustee's Sale had been postponed, a second time, to October 2012. Id. The next day, at Mr. Teran's request, Plaintiffs again completed and submitted Wells Fargo's previously-mailed versions of the RMA and Form 4506-T. Id. ¶ 26. In a subsequent phone conversation, Mr. Teran once again asked for Plaintiffs' most recent pay stubs in order to "submit[their] application"; receipt of the documents was confirmed on August 27, 2012. Id.

In mid-September, Mr. Teran informed Plaintiffs that he "ha[d] all the information to submit [their] application," that he would do so "in the next couple of weeks," and that, based upon the underwriter's results, he would follow up within four to six weeks with Wells Fargo's determination. Id. ¶ 26. Plaintiffs were also informed that the Trustee's Sale had been postponed, a third time, to December 2012. Id.

In December, Mr. Teran told Plaintiffs that he needed a Homeowners' Association Statement in order to submit the application, and that the Trustee's Sale had been postponed, a fourth time, to January 2013. Id. ¶ 28. Plaintiffs inquired as to why, despite their apparent eligibility for a loan modification, their home continued to be scheduled and rescheduled for sale. Id. Mr. Teran responded that this was "just part of [the Wells Fargo] process to...