Shaterian v. Wells Fargo Bank, N.A.

• Decision Date: 07 November 2011
• Docket Number: Case No. 11–00920 SC.
• Citation: 829 F.Supp.2d 873
• Parties: Nader SHATERIAN, Plaintiff, v. WELLS FARGO BANK, N.A., et al., Defendants.
• Court: U.S. District Court — Northern District of California

829 F.Supp.2d 873

Nader SHATERIAN, Plaintiff,

v.WELLS FARGO BANK, N.A., et al., Defendants.

Case No. 11–00920 SC.

United States District Court, N.D. California.

Nov. 7, 2011.

Neil Jon Bloomfield, Law Office of Neil Jon Bloomfield, Randall L. Hornibrook, Bloomfield Law Group, San Rafael, CA, for Plaintiff.

Christopher Alan Carr, Viddell Lee Heard, Jr., Anglin, Flewelling Rasmussen Campbell & Trytten, LLP, Pasadena, CA, Nicole Kimberly Neff, Robin Prema Wright, Wright Finlay & Zak, LLP, Newport Beach, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART WELLS FARGO'S MOTION TO DISMISS AND DENYING WELLS FARGO'S MOTION TO STRIKE

SAMUEL CONTI, District Judge.I. INTRODUCTION

Defendant Wells Fargo Bank, N.A. (“Wells Fargo”) moves to dismiss and strike Plaintiff Nader Shaterian's (“Shaterian”) Second Amended Complaint (“SAC”). ECF Nos. 60 (“MTD”); 61 (“MTS”). Wells Fargo's motions are fully briefed, though Wells Fargo has not filed a reply brief in support of its Motion to Strike. ECF Nos. 72 (“MTS Opp'n”), 73 (“MTD Opp'n”), 74 (“MTD Reply”). For the reasons set forth below, the Court GRANTS in part and DENIES in part Wells Fargo's Motion to Dismiss and DENIES Wells Fargo's Motion to Strike.

II. BACKGROUND

As it must on a Rule 12(b)(6) motion to dismiss, the Court takes all well-pleaded facts in the SAC as true. In 2003, Shaterian purchased a home located at 511 Browning Court, Mill Valley, California. ECF No. 56 (“SAC”) ¶ 9. In August 2007, Shaterian sought refinancing of his home “to take advantage of lowering interest rates and to be able to withdraw a portion of the equity in his home to be able to finish needed improvements to his home.” Id. ¶ 10. Shaterian alleges that he spent roughly $300,000 to build two retaining walls to prevent his home from sliding down the hill on which it was built. Id.

Shaterian alleges that, in August 2007, Diablo Funding Group, Inc. (“Diablo”) ¹ and World Savings Bank (“WSB”) qualified him for a new mortgage loan for the property. Id. ¶ 12. WSB was a federal savings bank regulated by the Office of Thrift Supervision (“OTS”). RJN ² Exs. A (“WSB Certificate of Corp. Existence”), C (“Wachovia Mortgage FSB Charter”). WSB changed its name to Wachovia Mortgage (“Wachovia”), but remained chartered under the Home Owner's Loan Act (“HOLA”) and overseen by OTS. RJN Ex. B (“Nov. 19, 2007 OTS Ltr.”); Wachovia Mortgage FSB Charter. Around November 2009, Wachovia became a division of Wells Fargo, and consequently, Wells Fargo became WSB's successor in interest. RJN Ex. D (“Off. Cert. of the Comptroller of the Currency”).

The type of loan provided to Shaterian was an Option Adjustable Rate Mortgage (“Option ARM”). SAC ¶ 14. Shaterian also describes his loan as a “pick-a-payment” loan. Id. ¶ 15. Pick-a-payment loans “allow the borrower to select and make a minimum payment amount for a limited time and subject to certain conditions.” Id. ¶ 16. Loan documents provided to Shaterian included an Adjustable Rate Mortgage Note (“the Note”) and a Truthin–Lending Disclosure Statement (“TILDS”). Id. On August 27, 2007, Shaterian signed a Deed of Trust, and it was recorded on September 13, 2007. RJN Ex. F. (“Deed of Trust”). According to the Deed of Trust, Shaterian received a $985,000 loan from WSB secured by his property. Id.

Shaterian alleges his loan was “intentionally designed to result in negative amortization and obligations to pay compound interest.” Id. ¶¶ 15, 19. He claims he was unaware of the loan's terms at the time he agreed to the loan due to “fraudulent nondisclosure” of its terms and because the closing documents were “executed in blank.” Id. ¶ 15. He also claims that the disclosures he did receive were misleading. Id. ¶ 17.

In April 2010, Shaterian contacted Wachovia (WSB's successor in interest) about obtaining a loan modification, but received no response. Id. ¶ 143. In June 2010 John H. Kearny (“Kearny”), a Wells Fargo loan adjustment specialist, contacted Shaterian to assist him with obtaining a loan modification and Shaterian submitted a completed application later that month. Id. ¶¶ 144, 147. In August 2010, Kearny informed Shaterian that his application had been rejected but that he could qualify for the loan modification by showing an income of $9,500 per month. Id. ¶¶ 144, 148–49. Shaterian eventually increased his income to $15,000 per month by expanding his business and reapplied for the loan modification in both October and November 2010, but he was rejected for a second and third time. Id. ¶¶ 150, 152.

On October 7, 2010, Cal–Western Reconveyance Corporation (“Cal–Western”), the substituted trustee on Shaterian's Deed of Trust, recorded a Notice of Default. SAC Ex. 4 (“Not. of Default”). The Notice of Default stated that, as of October 6, 2010, Shaterian had accrued $60,175.64 in arrears. Id. at 1. On January 12, 2011, a Notice of Trustee's sale was recorded, setting a sale date of February 1, 2011. ECF No. 1 (“Not. of Removal”) Ex. B. Shaterian later filed a Chapter 13 petition in bankruptcy court, staying the scheduled foreclosure sale until July 18, 2011. ECF No. 55 (“July 7, 2011 Order”) at 1. It is unclear whether the foreclosure sale has yet taken place.

On January 28, 2011 Shaterian commenced this action in the Superior Court of California, County of Marin. Not. of Removal. Three days later, Shaterian filed a First Amended Complaint (“FAC”) in state court. Id. Defendants removed the case to federal court on February 28, 2011, id., and moved to dismiss and strike the FAC on March 13, 2011, ECF No. 10. Shaterian later moved for a preliminary injunction to restrain the trustee's sale of his property which the Court ultimately denied. ECF Nos. 16, 20, 52. After denying the motion for a preliminary injunction and learning of Shaterian's bankruptcy petition, the Court granted Shaterian thirty days leave to amend his complaint and denied Wells Fargo's pending motions to dismiss and strike as moot. July 7, 2011 Order at 2. As Shaterian was allowed to file a third complaint, the Court stated that “any claims dismissed on a subsequent motion to dismiss will be dismissed without leave to amend,” and that the Court would only grant additional leave to amend if Shaterian filed a motion under Federal Rule of Civil Procedure 15(a)(2) establishing that justice so required. Id. at 2–3.

Shaterian filed his SAC on August 5, 2011. The SAC alleges ten claims: (1) violation of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. ; (2) fraudulent omissions; (3) violation of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code § 17200 et seq. ; (4) breach of contract; (5) breach of implied covenant of good faith and fair dealing; (6) aiding and abetting fraud; (7) violation of California Civil Code Section 2923.5; (8) breach of oral contract; (9) fraud through misrepresentation in oral contract; and (10) declaratory relief. Some of these claims arise from the initial loan agreement; others involve the subsequent foreclosure process and Wells Fargo's refusal to offer Shaterian a loan modification.

On September 2, 2011, Wells Fargo moved to dismiss each of Shaterian's claims. Also on September 2, 2011, Wells Fargo moved to strike Shaterian's punitive damages allegations on the grounds that Shaterian does not allege a proper basis for recovering such damages.

III. LEGAL STANDARDA. Motion to Dismiss

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). “Dismissal can be based on 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.1988). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The allegations made in a complaint must be both “sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it” and “sufficiently plausible” such that “it is not unfair to require the opposing party to be subjected to the expense of discovery.” Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir.2011).

B. Motion to Strike

Federal Rule of Civil Procedure 12(f) provides that a court may, on its own or on a motion, “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Motions to strike “are generally disfavored because they are often used as delaying tactics and because of the limited importance of pleadings in federal practice.” Rosales v. Citibank, 133 F.Supp.2d 1177, 1180 (N.D.Cal.2001). In most cases, a motion to strike should not be granted unless “the matter to be stricken clearly could have no possible bearing on the subject of the litigation.” Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1057 (N.D.Cal.2004).

IV. DISCUSSIONA. Wells Fargo's Motion to Dismiss

1. Claim for Violation of TILA (Claim 1)

In his first claim for relief, Shaterian alleges that the Note and TILDS violated TILA because they failed to “clearly and conspicuously disclose”: (1) “that payment schedules are not based on the actual interest rate,” (2) “negative amortization,” (3) “the legal obligations between the parties,” and (4) “the effect of rate and payment caps.” SAC ¶ 36. Based on Wells Fargo's alleged TILA violations, Shaterian seeks rescission, damages, attorney's...