Rockridge Trust v. Wells Fargo, N.A.

Decision Date25 September 2013
Docket NumberCase No.: C-13-01457 JCS
CourtU.S. District Court — Northern District of California
PartiesROCKRIDGE TRUST, et al., Plaintiffs, v. WELLS FARGO, N.A., et al., Defendants.

Plaintiffs Rockridge Trust and Ray K. Shahani, trustee, ("Shahani") (collectively, "Plaintiffs") brought this action against Defendants Wells Fargo, N.A. ("Wells Fargo"), Bank of America, N.A. ("Bank of America"), First American Trustee Servicing Solutions LLC ("First American Trustee"), and First American Loanstar Trustee Services LLC ("First American Loanstar") (collectively, "Defendants") alleging twenty causes of action arising out of a series of loan modification negotiations followed by foreclosure. The First Amended Complaint ("FAC"), the operative pleading, contains eighteen causes of action. Presently before the Court are (1) a Motion to Dismiss the FAC jointly filed by Wells Fargo and Bank of America ("Wells Fargo Motion"); and (2) a Motion to Dismiss the FAC filed by First American Trustee ("First American Motion").1 The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28 U.S.C. § 636(c). For the reasons set out below, the Court (1) grants in part and denies in part the Wells Fargo Motion; (2)grants the First American Motion; and (3) dismisses the FAC, in part, with leave to amend as specified below.

A. The June 24, 2013 Order

In its June 24, 2013 Order ("Order"), the Court dismissed the Complaint without prejudice. Order, 2, 30. In so doing, the Court only addressed those causes of action over which it had subject matter jurisdiction on the basis of a federal question: (1) the "Federal Violations" cause of action; (2) the "Violation of Anti-Trust Laws" cause of action; and (3) the breach of contract cause of action, which the court found was a pure attempt to enforce the Servicer Participation Agreement ("SPA") Wells Fargo and Bank of America entered into with Fannie Mae in which they agreed to apply the Home Affordable Mortgage Program ("HAMP") criteria to all loans they service. Id. at 25-28. The Court declined to exercise supplemental jurisdiction over the remaining state law claims. Id. at 28-30.

The Federal Violations cause of action arguably included a claim under 42 U.S.C. § 1983, a claim under the Fair Housing Act, and a claim for breach of two settlement agreements. Id. at 25-26. In dismissing that cause of action, the Court gave Plaintiffs "leave to amend to clearly plead a federal violation with supporting factual allegations." Id. at 26. Likewise, the "anti-trust claims [were] dismissed with leave to amend." Id. at 27. Moreover, Plaintiffs were "given an opportunity to amend their Complaint if they wish[ed] to elaborate a breach of written contract under a [theory other than violation of the SPA]." Id. at 28.

B. The FAC
1. Factual Background

On or about February 23, 2007, Shahani executed a consumer loan transaction in the amount of $755,250 with Wells Fargo to re-finance his single family residential property located at 82 Rockridge Drive, San Francisco, CA. FAC, ¶ 20.2 Wells Fargo took a security interest in the subject property in a Deed of Trust ("DOT").3 Id. at ¶ 20 and Ex. 1.4 Fidelity National Title InsuranceCompany ("Fidelity National") was named as the trustee under the DOT. Id. at Ex. 1. On March 13, 2007, Wells Fargo executed a Substitution of Trustee ("First Substitution") substituting itself for Fidelity National as trustee. Id. at ¶ 22 and Ex. 2.

Plaintiffs made payments pursuant to the mortgage agreement for close to two years. Id. at ¶ 23. Shortly thereafter, Wells Fargo and/or Wells Fargo Home Mortgage ("Home Mortgage") represented that Home Mortgage was the servicer of Plaintiffs' loan. Id. at ¶ 24. However, Home Mortgage ceased to exist as a separate entity in May 2004. Id. at ¶ 26. In February 2009, Shahani requested a loan modification to reduce the fixed loan interest rate of 6.375% to one commensurate with the then-available rates of between 2% and 4%. Id. at ¶¶ 25, 140(a). At the time, Shahani was less than 30 days late on his monthly mortgage payments but feared the possibility of multiple claims for late and/or unpaid payments. Id. at ¶ 25. Shahani entered the loan modification process with Home Mortgage that month. Id.

Pursuant to the loan modification negotiations, Shahani submitted financial information pertaining to his income and expenses in March 2009. Id. at ¶ 140(c). In April 2009, Defendants requested additional documentation. Id. at ¶ 140(e). In May 2009, Defendants informed Shahani that all requested documentation had been received and was in process. Id. at ¶ 140(f). In July 2009, Shahani was informed by telephone that the loan modification was denied. Id. at ¶ 140(g).5 Shahani was invited to re-fax further financial information to update his file. Id. During negotiations that month, Shahani spoke to Lupeta, Leslie, Doris, Dante, and Gordon, all separate agents for Defendants, regarding his loan modification request. Id. at ¶ 140(j). Shahani also received a letter, dated July 1, 2009, incorrectly stating that his expenses exceeded his income by close to $4,100. Id. at ¶ 140(h).6A July 14, 2009 letter to Shahani indicated that "the loan file ha[d] been referred to our attorney with instructions to begin foreclosure proceedings." Id. at ¶ 140(k).7

In a letter, Shahani received an unsigned, incomplete, and unrecorded Notice of Default ("NOD"). Id. at ¶ 140(l) and Ex. 3.8 The mailing, attached to the Complaint as Exhibit 3, recites thatthe contents are a "copy of the 'notice,' the original of which was filed for record on July 20, 2009 in the Office of the Recorded of San Francisco, California." Id. at Ex. 3 (capitalization omitted). On the signature line of the mailed copy of the NOD, the document reads: "original document signed by authorized agent." Id. (capitalization omitted). The NOD was executed by First American Loanstar as agent for the "current beneficiary" and by First American Title Insurance Company as Attorney-in-Fact. Id. (capitalization omitted). The mailing also contained a copy of the Notice of Default Declaration ("NOD Declaration"), completed by Home Mortgage as the "mortgagee, beneficiary, or authorized agent." Id. The copy states: "Original document executed by authorized agent." Id. (italics omitted). Also included in Exhibit 3 is a letter, dated July 23, 2009, from First American Loanstar stating: (1) that the creditor to whom the debt is owed is Bank of America; (2) Home Mortgage is the servicer; and (3) First American Loanstar has been authorized by either the servicer o: the creditor to initiate foreclosure proceedings. Id. The letter also states that the outstanding debt is $783,383.70. Id.

On July 28, 2009, Shahani was informed by the "Loss Mitigation" department that Defendants were suspending foreclosure and no foreclosure sale date was set. Id. at ¶ 140(n).9 Shahani received a July 28, 2009 letter indicating that Defendants were reviewing the information he had provided and working quickly to respond to his request for assistance with his mortgage payment challenges. Id. at ¶ 140(m).10 On August 5, 2009, a person named David from a call center in Milwaukee requested proof of income and statements of profit and loss for the past three months to be sent to Mary Mulholland in Norfolk. Id. at ¶ 140(o).11 That month, Shahani was informed numerous times that his application was in the review stage. Id. On August 25, 2009, the loan modification was denied due to expenses greater than income by over $7,543. Id. at ¶ 140(p). The next day, Shahani was orally informed that a work director would re-review the file if he resubmitted a number of documents, which he did. Id. Shahani spoke to Travis, Marion, and Jessica between September 4 and 11, 2009. Id. at ¶ 140(q).12

Meanwhile, on August 19, 2009, Wells Fargo executed a Second Substitution of Trustee ("Second Substitution") naming First American Loanstar as Trustee. Id. at ¶ 28 and Ex. 4.13 Plaintiffs attach a copy of the Second Substitution accompanied by an affidavit stating that "[a] copy of the attached substitution has been mailed prior to the recording thereof..." Id. at Ex. 4. The copy of the substitution states, on the signature line: "original document signed, dated, and notarized by current beneficiary." Id. (capitalization omitted). Directly above that line is written: "Wells Fargo Bank, N.A." Id. (capitalization omitted).

On or about September 3, 2009, Wells Fargo recorded an Assignment of Deed of Trust ("Assignment") assigning all beneficial interest to Bank of America. Id. at ¶ 30, Ex. 5. The Assignment was dated August 25, 2009, and signed by a putative agent of First American Loanstar as Wells Fargo's attorney-in-fact. Id. at Ex. 5.

An October 5, 2009 letter from Defendants offered Plaintiffs yet another loan modification and requested a number of pieces of information. Id. at ¶ 140(r). The next day, Defendant instructed Shahani to submit an initial payment of $5,412.27, due in two weeks, and financial documentation. Id. at ¶ 140(s).14 Shahani wired the requested payment on the deadline. Id. at ¶ 140(t). A letter dated October 16, 2009 stated that the loan modification was denied because Shahani failed to provide requested documentation within the time frame provided in his trial modification period workout plan. Id. at ¶ 140(u). No time frame had been provided. Id. Shortly thereafter, on or about October 21, 2009, First American Loanstar recorded a Notice of Trustee's Sale ("First NOTS"), listing the sale date as November 10, 2009. Id. at ¶ 31 and Ex. 6.15 Nevertheless, on October 26, 2009, Shahani was informed that he had been approved for modification and should re-submit certain documents. Id. at ¶ 140...

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