Wong v. Wells Fargo Bank N.A. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 CHIN KING WONG, et al., No. 2:18-cv-02811-TLN-CKD 12 Plaintiffs, 13 v. ORDER 14 WELLS FARGO BANK, N.A., et al., 15 Defendants. 16 17 This matter is before the Court pursuant to Defendant Wells Fargo Bank, N.A.’s (“Wells 18 Fargo”) Motion to Dismiss.1 (ECF No. 4.) Plaintiffs Chin King Wong (“Wong”) and Robitah 19 Mohd-Khatib (collectively, “Plaintiffs”) oppose Wells Fargo’s motion. (ECF No. 6.) Wells 20 Fargo has filed a reply. (ECF No. 7.) Having carefully considered the briefing filed by both 21 parties, the Court hereby GRANTS in part and DENIES in part Wells Fargo’s Motion to Dismiss. 22 (ECF No. 4.) 23 / / / 24 / / / 25 / / / 26 / / / 27 1 This action involves two named Defendants and 50 unnamed Defendants. Only Wells 28 Fargo is a party to the instant motion. 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 Plaintiffs are borrowers who seek to obtain damages from the allegedly wrongful 3 foreclosure by Defendants Wells Fargo and U.S. Bank, N.A. (“U.S. Bank”) (collectively, 4 “Defendants”) of their property at 128 Hopper Lane, Folsom, California 95630 (“Subject 5 Property”). Plaintiffs purchased the Subject Property in or around January 1990 and obtained a 6 “first lien loan” of $399,999.000 for the Subject Property from Wells Fargo in or around February 7 2006. (ECF No. 1-2 at ¶ 9.) U.S. Bank became the beneficiary of the loan in 2012. (Id.) 8 Wong submitted a short sale application to Wells Fargo in or around January 2018. (Id. at 9 ¶ 10.) Wong received confirmation from Wells Fargo on or around February 8, 2018, that his 10 application was pending and learned there was a foreclosure sale on the Subject Property that had 11 been suspended. (Id.) Wells Fargo’s system2 did not reflect that Wong’s application was in loss 12 mitigation review until March 2, 2018. (Id.) 13 Wong continued to submit documents to Wells Fargo in support of his short sale 14 application but learned a foreclosure sale on the Subject Property was scheduled for March 6, 15 2018. (Id. at ¶ 11.) Wong subsequently contacted his “supposed [Single Point of Contact],” 16 Patricia Rubalcava (“Rubalcava”), who informed Wong “that any pending foreclosure sale of the 17 [Subject Property] would be postponed given the pending short sale application.” (Id.) Wong 18 contacted Rubalcava on March 5, 2018, when the foreclosure sale was still set for the next day to 19 ask for an update. (Id.) Rubalcava emailed Wong on March 5, 2018, to inform him Wells 20 Fargo’s “liquidations department requested a hard stop on the foreclosure” and Wells Fargo 21 received her “report to suspend or postpone the sale date.” (Id.) 22 Wong followed up with Rubalcava on March 6, 2018 — the date of the foreclosure sale. 23 (Id. at ¶ 12.) Rubalcava informed Wong “his file had been assigned to an individual with Wells 24 Fargo’s president’s office” and “that someone from the president’s office should reach out to 25 [him].” (Id.) Wong emailed Rubalcava an hour before the scheduled foreclosure sale to inform 26 2 Plaintiffs’ Second Amended Complaint refers to “Defendant’s system,” but does not 27 identify whether it is Wells Fargo’s system or U.S. Bank’s system. (ECF No. 4 at ¶ 10.) Based on the context in which it is used in the SAC, the Court infers that Plaintiffs are referring to Wells 28 Fargo’s system. 1 her he had not heard from Wells Fargo about the postponement and “that he was growing 2 nervous,” but Rubalcava did not respond. (Id.) Wong also asked Rubalcava for the president’s 3 office contact information, but she did not respond. (Id.) Wong later learned the foreclosure sale 4 had occurred, “despite [Rubalcava’s] insistence that it would be postponed,” and a Trustee’s Deed 5 Upon Sale was recorded. (Id. at ¶¶ 12, 13.) 6 On March 12, 2018, Plaintiffs filed the instant suit with the Sacramento County Superior 7 Court. (ECF No. 1-3 at 3–12.) On September 19, 2018, Plaintiffs submitted a Second Amended 8 Complaint (“SAC”), the operative complaint in this case. (See ECF No. 1-2.) Plaintiffs seek 9 injunctive relief in the form of overturning the foreclosure sale on the Subject Property, damages, 10 and attorneys’ fees. (ECF No. 1-2 at 6–10.) 11 On October 19, 2018, Wells Fargo filed a Notice of Removal to this Court from 12 Sacramento County Superior Court. (ECF No. 1.) On October 24, 2018, Wells Fargo filed the 13 instant Motion to Dismiss. (ECF No. 4.) 14 II. STANDARD OF LAW 15 A motion to dismiss for failure to state a claim upon which relief can be granted under 16 Federal Rule of Civil Procedure (“Rule”) 12(b)(6) tests the legal sufficiency of a complaint. 17 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Rule 8(a) requires that a pleading contain 18 “a short and plain statement of the claim showing that the pleader is entitled to relief.” See 19 Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009). Under notice pleading in federal court, the 20 complaint must “give the defendant fair notice of what the claim . . . is and the grounds upon 21 which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 22 “This simplified notice pleading standard relies on liberal discovery rules and summary judgment 23 motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz 24 v. Sorema N.A., 534 U.S. 506, 512 (2002). 25 On a motion to dismiss, the factual allegations of the complaint must be accepted as true. 26 Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give the plaintiff the benefit of every 27 reasonable inference to be drawn from the “well-pleaded” allegations of the complaint. Retail 28 Clerks Int’l Ass’n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege 1 “‘specific facts’ beyond those necessary to state his claim and the grounds showing entitlement to 2 relief.” Twombly, 550 U.S. at 570. 3 Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of 4 factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 5 1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an 6 unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A 7 pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the 8 elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 9 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory 10 statements, do not suffice.”). Moreover, it is inappropriate to assume the plaintiff “can prove 11 facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not 12 been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 13 U.S. 519, 526 (1983). 14 Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough 15 facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 697 (quoting 16 Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual 17 content that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged.” Id. at 680. While the plausibility requirement is not akin to a probability 19 requirement, it demands more than “a sheer possibility that a defendant has acted unlawfully.” 20 Id. at 678. This plausibility inquiry is “a context-specific task that requires the reviewing court to 21 draw on its judicial experience and common sense.” Id. at 679. 22 In ruling on a motion to dismiss, a court may only consider the complaint, any exhibits 23 thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. 24 See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. 25 Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 26 If a complaint fails to state a plausible claim, “‘[a] district court should grant leave to 27 amend even if no request to amend the pleading was made, unless it determines that the pleading 28 could not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 203 F.3d 1122, 1 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)). 2 III. ANALYSIS 3 Plaintiffs’ SAC alleges four claims: (1) violation of Cal. Civ. Code § 2924g; (2) violation 4 of Cal. Civ. Code § 2924.11; (3) violation of Cal. Civ. Code § 2923.7; and (4) wrongful 5 foreclosure. (ECF No. 1-2 at 5–9.) Wells Fargo moves to dismiss each of these claims for failure 6 to state a claim upon which relief may be granted. (See ECF No. 4.) The Court will first address 7 Wells Fargo’s and Plaintiffs’ Requests for Judicial Notice (ECF Nos. 5, 6-1) and then evaluate 8 each of Plaintiffs’ claims in turn. 9 A. Requests for Judicial Notice 10 Generally, a district court “may not consider any material beyond the pleadings in a ruling 11 on a 12(b)(6) motion.” Snyder v. HSBC Bank, USA, N.A., 913 F. Supp. 2d 755, 768 (C.D. Cal. 12 2012) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)). There are two 13 notable exceptions to this rule. Id. First, “a court may take judicial notice of “matters of public 14 record.” Id. However, the court “need not accept as true allegations ‘contradicted by facts that 15 can be judicially noticed or by other allegations or exhibits attached to or incorporated in the 16 pleading.’” Spy Optic, Inc. v. Alibaba.com, Inc., 163 F. Supp. 755, 764 (C.D. Cal. 2015) (citing 17 Wright & Miller, Federal Practice & Procedure § 1363 (3d ed. 2004)). Second, “a court may take 18 judicial notice of material which is either submitted as a part of the complaint or necessarily 19 relied upon by the complaint.” Snyder, 913 F. Supp. 2d at 768. 20 The Court may also take judicial notice of facts that can be “accurately and readily 21 determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 22 201(b)(2). The Ninth Circuit has held that proceedings and determinations of the courts are a 23 matter of public record suitable for judicial notice. Emrich v. Touche Ross & Co., 846 F.2d 1190, 24 1198 (9th Cir. 1988). 25 i. Wells Fargo’s Requests 26 Wells Fargo requests the Court take judicial notice of Exhibits A through L. (ECF No. 5 27 at 1–3.) Plaintiffs do not oppose Wells Fargo’s Request for Judicial Notice. (See ECF No. 6.) 28 Exhibits A and C through L are all “matters of public record” or “proceedings and 1 determinations of the courts.”3 (ECF No. 5 at 1–3.) Furthermore, with regard to the publicly- 2 recorded documents such as Exhibits A, C, D, and L, the accuracy of such records is not subject 3 to reasonable dispute. See Armacost v. HSBC Bank USA, 2011 WL 825151, at *1 n.1 (D. Id. Feb. 4 9, 2011) (taking judicial notice of documents filed in a county’s public record, including deeds of 5 trust); Pantoja v. Countywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1189 n. 12 (N.D. Cal. 6 2009); W. Fed. Sav. & Loan Ass’n v. Heflin Corp., 797 F. Supp. 790, 792 (N.D. Cal. 1992). 7 Thus, Wells Fargo’s Request for Judicial Notice of Exhibits A and C through L is GRANTED. 8 Exhibit B is the Loan Modification Agreement dated November 14, 2009, which Wells 9 Fargo states was “signed by plaintiff4 and Chin King Wong.” (ECF No. 5 at 2; ECF No. 5-1 at 10 25–31.) Wells Fargo has not pointed to any judicially noticeable facts in this document. 11 Additionally, Plaintiffs’ SAC does not reference this loan modification agreement at all. (See 12 13 3 Exhibit A is a “Deed of Trust dated February 15, 2006 and recorded with the Sacramento County Recorder on February 16, 2006 as Document No. 200602161839.” (ECF No. 5-1 at 1– 14 24.) Exhibit C is a “Corporate Assignment of Deed of Trust dated February 6, 2012 and recorded 15 with the Sacramento County Recorder on February 14, 2012 as Document No. 201202142368.” (Id. at 32–34.) Exhibit D is a “Notice of Default dated May 8, 2012 and recorded with the 16 Sacramento County Recorder on May 9, 2012 as Document No. 201205090309.” (Id. at 35–39.) Exhibit E is the “Eastern District Bankruptcy Docket (Sacramento) relating to plaintiff Chin King 17 Wong’s Chapter 13 bankruptcy filed on October 8, 2015 in the United States Bankruptcy Court, Eastern District of California, Case No. 15-27886.” (Id. at 40–47.) Exhibit F is the “Chapter 13 18 Bankruptcy Petition filed by Chin K. Wong on October 8, 2015 in the United States Bankruptcy 19 Court, Eastern District of California, Case No. 15-27886.” (Id. at 48–53.) Exhibit G is the “Eastern District Bankruptcy Docket (Sacramento) relating to plaintiff Chin King Wong’s 20 Chapter 13 bankruptcy filed on October 17, 2017 in the United States Bankruptcy Court, Eastern District of California, Case No. 17-26854.” (Id. at 54–63.) Exhibit H is the “Chapter 13 21 Bankruptcy Petition filed by Chin K. Wong on October 17, 2017 in the United States Bankruptcy Court, Eastern District of California, Case No. 17-26854.” (Id. at 64–71.) Exhibit I the “Motion 22 for In Rem Relief from the Automatic Stay brought by creditor U.S. Bank on December 8, 2017 23 in the U.S. Bankruptcy Court, Eastern District of California, Case No. 17-26854.” (Id. at 72–78.) Exhibit J is the “Order by the U.S. Bankruptcy Court entered on January 19, 2018, granting U.S. 24 Bank’s Motion for In Rem Relief, Eastern District of California, Case No. 17-26854.” (Id. at 79– 80.) Exhibit K is the “Order Closing Case Where Case Has Been Dismissed, entered by the U.S. 25 Bankruptcy Court on March 28, 2018 Eastern District of California, Case No. 17-26854.” (Id. at 81–82.) Exhibit L is the “Trustee’s Deed Upon Sale recorded with the Sacramento County 26 Recorder’s Office on March 16, 2018 as Document No. 201803161124.” (Id. at 83–87.) 27 4 By stating “plaintiff and Chin King Wong,” the Court assumes Wells Fargo refers to 28 Robitah Mohd-Khatib, the other Plaintiff in this case. 1 ECF No. 1-2.) Thus, it cannot be argued the agreement was “necessarily relied upon by the 2 complaint.” See Snyder, 913 F. Supp. 2d at 768. Thus, Wells Fargo’s Request for Judicial Notice 3 of Exhibit B is DENIED. 4 ii. Plaintiffs’ Requests 5 Plaintiffs request the Court to take judicial notice of Exhibits A and B. (ECF No. 6-1 at 6 1–2.) Wells Fargo does not object to this request in its reply. (See ECF No. 7.) As both Exhibits 7 A and B are “matters of public record” or “proceedings and determinations of the courts,”5 8 Plaintiffs’ Request for Judicial Notice of Exhibits A and B is GRANTED. 9 B. Claim One: Violation of California Civil Code § 2924g 10 Plaintiffs allege Defendants6 violated their obligation under California Civil Code § 2924g 11 (“§ 2924g”) “to postpone the foreclosure sale of the [Subject Property] [pursuant to] their 12 agreement to postpone the sale of the property.” (ECF No. 1-2 at ¶ 17.) Wells Fargo argues the 13 claim under § 2924g “is misplaced because Wells Fargo ceased to be the ‘beneficiary’ and 14 ‘mortgagor’ after the loan assignment to U.S. Bank in February 2012,” and thus any agreement 15 under § 2924g must be between Plaintiffs (the “trustors” or “mortgagors”) and U.S. Bank (the 16 “beneficiary” or “mortgagee”). (ECF No. 4 at 11; ECF No. 7 at 2.) Wells Fargo further argues 17 even if Plaintiffs could state a claim, case law provides Plaintiffs were required to provide “a 18 legitimate tender of the debt at issue” to accompany their claim and Plaintiffs failed to do so. 19 (ECF No. 4 at 11–12.) Wells Fargo finally argues this claim fails because Plaintiffs have not 20 sufficiently articulated economic damages and Plaintiffs’ claims for destruction of credit and 21 severe emotional distress damages fail as a matter of law. (Id. at 13–14.) In opposition, Plaintiffs 22 23 5 Exhibit A is “Defendant’s Demurrer to Plaintiffs’ First Amended Complaint filed on July 9, 2018 in . . . Sacramento County Superior Court Case No. 34-2018-00228853.” (ECF No. 6-1 24 at 3–26.) Exhibit B is a “Minute Order on Defendant’s Demurrer to Plaintiffs’ First Amended Complaint filed on September 4, 2018 in . . . Sacramento County Superior Court Case No. 34- 25 2018-00228853.” (Id. at 27–31.) 26 6 Again, Plaintiffs’ SAC states “Defendant violated its statutory obligation,” but in the next 27 sentence states “[as] a result of Defendants’ violations.” (ECF No. 1-2 at ¶ 17 (emphasis added).) Plaintiffs also bring this claim against both Defendants. (Id. at 5.) The Court therefore construes 28 the former quotation as referencing both Defendants. 1 argue Wells Fargo is an “agent of U.S. Bank and is independently liable for this violation.” (ECF 2 No. 6 at 4.) 3 The Court will first address the § 2924g claim, and then each of Wells Fargo’s arguments 4 — agency/assignment, tender, and damages — in turn. 5 i. Section 2924g Claim 6 Section 2924g(c)(1) provides that a trustee shall postpone the sale of a property with “the 7 order of any court of competent jurisdiction,” if it is “stayed by operation of law,” “by mutual 8 agreement, whether oral or in writing, of any trustor and any beneficiary or any mortgagor and 9 any mortgagee,” or “at the discretion of the trustee.” Cal. Civ. Code § 2924g (2020), amended by 10 2020 Cal. Legis. Serv. Ch. 202 (S.B. 1079) (West). 11 Here, Plaintiffs allege the parties reached a mutual agreement when “Wells Fargo agreed 12 to postpone the sale of the [Subject P]roperty.” (ECF No. 1-2 at ¶ 16.) Specifically, Plaintiffs 13 allege “Patricia Rubalcava informed Plaintiff[s] that any pending foreclosure sale of the property 14 would be postponed given the pending short sale application.” (Id. at ¶ 11.) Plaintiffs allege 15 when they noted the foreclosure sale was still set for March 6, 2018, they continued to ask 16 Rubalcava about the sale. (Id.) Plaintiffs further allege Rubalcava emailed them on March 5, 17 2018, to notify them “Wells Fargo’s ‘liquidations department requested a hard stop on the 18 foreclosure,’” and “Wells Fargo got her ‘report to suspend or postpone the sale date.’” (Id.) On 19 the date of the sale, Rubalcava notified them “that someone from the president’s office should 20 reach out to Plaintiff[s],” as their file had been assigned to that office. (Id. at ¶ 12.) Plaintiffs 21 contend that if they had received “sufficient notice of the sale,” they “could have and would have 22 reinstated the loan or taken other measures to save the property.” (Id. at ¶ 17.) Based on these 23 allegations, the Court finds Plaintiffs have sufficiently alleged the existence of a mutual 24 agreement under § 2924g. 25 ii. Agency Issue 26 The judicially-noticed recorded assignment of the Deed of Trust dated February 6, 2012, 27 assigned Wells Fargo’s interest in Plaintiffs’ loan to U.S. Bank. (See ECF No. 5-1 at 32–34.) 28 However, Plaintiffs incorporate by reference the allegations of all preceding claims and facts in 1 their § 2924g claim and suggest that even after the assignment, “each Defendant was acting as the 2 agent, servant, employee, partner, co-conspirator, and/or joint venture of each remaining 3 Defendant.” (Id. at ¶¶ 7, 14.) Plaintiffs maintain in their opposition that they sufficiently allege 4 Wells Fargo and U.S. Bank had an agency relationship in which U.S. Bank “was the owner of the 5 beneficial interest in the Deed of Trust securing Plaintiff[s’] loan,” and Wells Fargo “was the 6 servicer of the loan and maintained all servicing rights and responsibilities associated with 7 Plaintiff[s’] mortgage loan.” (ECF No. 6 at 5 (citing ECF No. 1-2 at ¶¶ 5, 6, 9, 26).) Further, 8 Plaintiffs cite to a statute that expressly identifies a mortgage servicer as the current loan owner’s 9 “authorized agent,” as well as case law that provides an agent’s conduct is binding on the 10 principal. (Id.) (citing Cal. Civ. Code § 2920.5(a); Dastagir v. Dastagir, 109 Cal. App. 2d 809 11 (1952); American Sur. Co. of N.Y. v. Heise, 136 Cal. App. 2d 689 (1955)). Wells Fargo fails to 12 address the loan servicer–beneficiary agency relationship in its reply. (See ECF No. 7.) 13 Whether Wells Fargo and U.S. Bank had an agency relationship remains a question of 14 fact. Accepting all factual allegations as true, as it must at this stage in the pleadings, the Court 15 finds Plaintiffs have sufficiently alleged an agency relationship between the Defendants. See 16 Cruz, 405 U.S. at 322 (holding on a motion to dismiss, the factual allegations of the complaint 17 must be accepted as true). 18 iii. Tender Issue 19 Tender is generally required in actions to set aside a completed foreclosure sale by a 20 trustee for irregularities in the sale procedure, such as violations of § 2924. Toneman v. U.S. 21 Bank, Nat’l Ass’n for Bear Stearns Asset Backed Securities Trust 2004-AC7, 2013 WL 22 12141443, at *12 (C.D. Cal. Feb. 22, 2013) (collecting cases). “The tender rule applies to 23 equitable claims, such as claims to set aside a trustee’s sale, to quiet title, to cancel an 24 instrument, or for wrongful foreclosure.” Green v. Central Mortg. Co., 148 F. Supp. 3d 852, 870 25 (N.D. Cal. 2015) (citing Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 578–79 (1984)). 26 The tender rule also applies to claims seeking damages, as “plaintiffs cannot claim to have been 27 damaged by the foreclosure process unless they are in a position to redeem the property.” 28 Toneman, 2013 WL 12141443, at *12. The rationale for this rule is that any irregularities in the 1 foreclosure sale do not damage plaintiffs if they could not have redeemed the property had the 2 procedures been proper. Id. “A plaintiff must (1) demonstrate a willingness to pay and (2) show 3 the ability to pay.” Pantoja, 640 F. Supp. 2d at 1184 (citing In re Worcester, 811 F.2d 1224, 4 1231 (9th Cir. 1987)). 5 Nevertheless, the tender rule is an equitable concept, which means it is within the Court’s 6 discretion to require tender from a plaintiff. Id. Courts have held “failure to allege tender is not 7 decisive at [the pleading] stage.” Id. (quoting Storm v. Am.’s Servicing Co., 2009 WL 3756629, 8 at *6 (S.D. Cal. Nov. 6, 2009); Stokes v. CitiMortgage, Inc., 2014 WL 4359193, at *8–9 (C.D. 9 Cal. Sept. 3, 2014)). Furthermore, courts have held the tender rule does not apply to violations of 10 the California Homeowner’s Bill of Rights (“HBOR”). Id. (citing Valbuena v. Ocwen Loan Serv., 11 LLC, 237 Cal. App. 4th 1267, 1273–74 (2015) (“Nothing in the language of HBOR suggests that 12 a borrower must tender the loan balance before filing suit based on a violation of the requirements 13 of the law.”). 14 This Court, too, has excused compliance with the tender requirement in the past when 15 plaintiffs have sought to prevent the sale of their home through injunctive relief, when plaintiffs 16 allege that with a modification they could have cured their deficiency without having to pay the 17 amount due (but defendants foreclosed while plaintiffs’ loan modification application was 18 pending), or when plaintiffs have alleged a violation of California’s foreclosure statutes. See Way 19 v. JP Morgan Chase Bank, NA, 2018 WL 2117630, at *10 (E.D. Cal. May 8, 2018); Swasey v. 20 Seterus, Inc., 2018 WL 3017554, at *11 (E.D. Cal. Jun. 14, 2018). 21 Here, Plaintiffs seek both equitable and non-equitable remedies, in the form of injunctive 22 relief overturning the foreclosure sale on the Subject Property, damages, and attorneys’ fees. 23 (ECF No. 1-2 at 6–10.) Defendants argue Plaintiffs’ Claim One (the instant claim) and Claim 24 Four (wrongful foreclosure) should both fail, as tender is required in “any claim that challenges 25 the foreclosure process” and Plaintiffs “cannot tender the considerable debt at issue.” (ECF No. 4 26 at 2, 12.) Plaintiffs note tender is not required “in cases involving dual[-]tracking allegations”7 27 7 The HBOR prohibits “dual-tracking,” a process by which a financial institution pursues 28 foreclosure while simultaneously making a decision on a completed loan modification. 1 and in cases in which “the borrower seeks monetary damages.” (ECF No. 6 at 6.) As Plaintiffs 2 allege violations of California’s foreclosure statues and also argue they “could have and would 3 have reinstated the loan or taken other measures to save the property” (ECF No. 6 at 7), the Court 4 finds Plaintiffs are excused from the tender requirement at this time. 5 iv. Damages Issue 6 Plaintiffs allege as a result of Wells Fargo’s violation of § 2924g, the Subject Property 7 “was sold at a trustee’s sale which [Wong] did not have sufficient notice of.” (ECF No. 1-2 at ¶ 8 17.) Plaintiffs further allege if they had notice of the sale, “[Wong] could have and would have 9 reinstated the loan or taken other measures to save the property.” (Id.) Plaintiffs also assert they 10 “lost all equity [Wong] had accumulated in his home.” (ECF No. 6 at 8 (citing ECF No. 1-2 at ¶ 11 19.).) Regardless of Plaintiffs’ claims for destruction of credit and severe emotional distress 12 damages, which Wells Fargo argues should fail as a matter of law (see ECF No. 4 at 13–14), the 13 Court finds Plaintiffs sufficiently alleged damages through allegation of a foreclosure sale and the 14 loss of their property. 15 Based on the foregoing, the Court finds Plaintiffs have pleaded sufficient “factual content 16 that allows [this Court] to draw the inference that [Wells Fargo] is liable for the misconduct 17 alleged.” Iqbal, 556 U.S. at 680. Accordingly, Wells Fargo’s Motion to Dismiss Claim One is 18 DENIED. 19 C. Claim Two: Violation of California Civil Code § 2924.11 20 Plaintiffs allege Wells Fargo violated California Civil Code § 2924.11 (“§ 2924.11”) by 21 conducting a trustee’s sale while Plaintiffs’ short sale application, a “complete foreclosure 22 prevention alternative application,” was pending. (ECF No. 1-2 at ¶¶ 22–23.) Plaintiffs 23 specifically assert Wong submitted a complete short sale application “on or around March 2, 24 2018,” but Wells Fargo still proceeded with the foreclosure sale on the Subject Property on 25 March 6, 2018. (Id. at ¶ 23.) The Court declines to evaluate Wells Fargo’s arguments because 26 the underlying law has changed. 27 application. Wilkins v. Bank of America, N.A., 2016 WL 5940082, at *4 (E.D. Cal. Aug. 19, 28 2016); see generally Cal. Civ. Code § 2923.6. 1 Here, it appears Plaintiffs rely on a prior version of § 2924.11. The prior version 2 provides: 3 (a) If a borrower submits a complete application for a foreclosure prevention alternative offered by, or through, the borrower’s 4 mortgage servicer, a mortgage servicer, trustee, mortgagee, beneficiary, or authorized agent shall not record a notice of sale or 5 conduct a trustee’s sale while the complete foreclosure prevention alternative application is pending, and until the borrower has been 6 provided with a written determination by the mortgage servicer regarding that borrower’s eligibility for the requested foreclosure 7 prevention alternative. 8 Cal. Civ. Code § 2924.11 (eff. Jan. 1, 2018 to Dec. 31, 2018). This provision encompassed the 9 prohibition on dual-tracking at the time Plaintiffs filed their 2018 complaint and when Wells 10 Fargo filed its motion to dismiss. See Cal. Civ. Code § 2924.11(a) (2018); see also Miller v. 11 Select Portfolio Servicing, Inc., 2019 WL 3080817, at *5 (E.D. Cal. Jul. 15, 2019). Effective 12 January 1, 2019, § 2924.11 was amended and the prior subdivision (a) was repealed. See 2018 13 Cal. Legis. Serv. Ch. 404 (S.B. 818) (West). 14 The Ninth Circuit has held the rule of statutory continuity provides that “when a statute is 15 repealed without a saving clause and as a part of the same act it is simultaneously re-enacted in 16 substantially the same form and substance, all rights and liabilities which accrued under the 17 former act will be preserved and enforced.” Travis v. Nationstar Mortgage, LLC, 733 Fed. Appx. 18 371, 373 (9th Cir. 2018). In Travis, the Ninth Circuit specifically found the pre-2018 § 2923.6 19 “was reenacted with somewhat different language as § 2924.11,” but § 2924.11 “still protects the 20 same 21 rights.” Id. Thus, the court allowed the plaintiffs to seek to amend their complaint as to their 22 claim. 23 A.B. 278, which enacted the pre-2019 § 2924.11 that was effective from Jan. 1, 2018 to 24 Dec. 31, 2018, also enacted a version of California Civil Code § 2923.6 (“§ 2923.6”) that was 25 effective from Jan. 1, 2013 through Dec. 31, 2017. See 2012 Cal. Legis. Serv. Ch. 86 (A.B. 278) 26 (West). The pre-2018 § 2923.6(c) stated: 27 If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, 28 1 mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien 2 loan modification application is pending. 3 A.B. 278 provided the pre-2018 § 2923.6(c) would sunset on Dec. 31, 2017, and the pre-2019 § 4 2924.11 would be effective Jan. 1, 2018. See 2012 Cal. Legis. Serv. Ch. 86 (A.B. 278) (West). 5 Courts have found that since “both provisions were enacted at the same time . . . they represent a 6 unitary legislative scheme to protect the borrower from being dual[-]tracked.” Haynish v. Bank of 7 America, N.A., 2018 WL 2445516, at *4 (N.D. Cal. May 31, 2018) (quoting Jacobik v. Wells 8 Fargo Bank, N.A., 2018 WL 1184812, at *5 (N.D. Cal. Mar. 7, 2018)) (internal quotations 9 omitted). Courts found “[t]he two laws are also mostly coextensive when it comes to prohibiting 10 financial institutions from advancing the foreclosure process while a modification application is 11 pending.” Id. Under both laws, “a financial institution may not record notice of sale or conduct a 12 trustee’s sale while a modification application is under review.” Id. (comparing Cal. Civ. Code § 13 2923.6(c) (2013) with id. § 2924.11(a) (2018)). 14 S.B. 818, while repealing the pre-2019 § 2924.11(a), also reinstated the pre-2018 § 15 2923.6(c) verbatim, which suggests the Legislature intended for the continuation of a dual- 16 tracking ban. See 2018 Cal. Legis. Serv. Ch. 404 (S.B. 818) (West). The language of the dual- 17 tracking ban, as re-codified at § 2923.6, is narrower than the language of pre-2019 § 2924.11 (the 18 pre-2019 § 2924.11 applied to “foreclosure prevention alternatives” while the current § 2923.6 19 applies to “first lien loan modification application[s]”). See Haynish, 2018 WL 2445516, at *5. 20 Despite the language dissimilarity, the Ninth Circuit held “all rights and liabilities which accrued 21 under former [§ 2923.6] will be preserved and enforced” through the pre-2019 § 2924.11. See 22 Travis, 733 Fed. Appx. at 373. 23 The parties have not expressed any opinions as to how the 2019 amendment and repeal of 24 § 2924.11(a) affects Plaintiffs’ claim, as their briefings were filed prior to the enactment of the 25 current version. As the law has changed, “[i]f [P]laintiffs wish to plead a dual[-]tracking claim, 26 they must specifically allege as much and identify the controlling law.” Miller, 2019 WL 27 3080817, at *5 (citing Travis, 733 Fed. Appx. at 373). 28 1 Accordingly, Wells Fargo’s Motion to Dismiss Claim Two is GRANTED with leave to 2 amend. 3 D. Claim Three: Violation of California Civil Code § 2923.7 4 Plaintiffs allege Wells Fargo violated California Civil Code § 2923.7 (“§ 2923.7”) when 5 “it appointed a single point of contact [SPOC] who clearly did not have access to individuals with 6 the ability and authority to stop the sale” of the Subject Property. (ECF No. 1-2 at ¶ 29.) Wells 7 Fargo argues Plaintiffs’ § 2923.7 claim fails for the exact same reasons articulated in the prior 8 claim — the Subject Property was not owner-occupied at the time of the Defendants’ purported 9 misconduct and Plaintiffs have not alleged facts to suggest there has been a “material” violation 10 of the statute. (ECF No. 4 at 18–19.) Wells Fargo notes there “are no facts that suggest a link 11 between [its] actions and actual damages to [P]laintiffs.” (Id. at 19.) The Court will first address 12 the § 2923.7 claim and then address each of Wells Fargo’s arguments in turn. 13 i. Section 2923.7 Claim 14 Section 2923.7 provides: “When a borrower requests a foreclosure prevention alternative, 15 the mortgage servicer shall promptly establish a [SPOC] and provide to the borrower one or more 16 direct means of communication with the [SPOC].” Cal. Civ. Code § 2923.7. Section 2923.7 was 17 enacted as a part of the HBOR in an attempt to eliminate dual-tracking, as it was intended “to 18 prevent borrowers from being given the run around, being told one thing by one bank employee 19 while something entirely different is being pursued by another.” Santana v. BSI Financial 20 Services, Inc., 2020 WL 6150473, at *10 (S.D. Cal. Oct. 20, 2020) (citing Jolley v. Chase Home 21 Fin., LLC, 213 Cal. App. 4th 872, 904–05 (2013)). The SPOC is responsible for having access 22 “to current information and personnel sufficient to timely, accurately, and adequately inform the 23 borrower of the current status of the foreclosure prevention alternative” and “to individuals with 24 the ability and authority to stop foreclosure proceedings when necessary.” Cal. Civ. Code §§ 25 2923.7(b)(3), 2923.7(b)(5). Courts have denied a motion to dismiss a § 2923.7 claim when 26 plaintiffs alleged the defendant’s representative gave them conflicting information “while 27 acknowledging they received, processed, and denied two loan modification applications,” or 28 provided them with incorrect information about what foreclosure prevention alternatives were 1 available. See Green, 148 F. Supp. 3d at 875; Nasseri v. Wells Fargo Bank, N.A., 147 F. Supp. 3d 2 937, 945 (N.D. Cal. 2015). 3 Here, it appears Plaintiffs were assigned a SPOC — Rubalcava with Wells Fargo. 4 Plaintiffs allege when they learned about the foreclosure sale, Rubalcava informed Wong “she 5 had submitted a request for the sale to be postponed and indicated that a hard stop on the 6 foreclosure sale had been noted in Plaintiff’s8 account.” (ECF No. 1-2 at ¶¶ 11, 30.) On the date 7 of the foreclosure sale, when Wong reached out to Rubalcava, she informed him “that his file had 8 been assigned to an individual with the Wells Fargo president’s office” and “that someone from 9 the president’s office should reach out to [Wong].” (Id. at ¶ 12.) Plaintiffs allege they reached 10 out to Rubalcava an hour before the sale as they had not heard from Wells Fargo, but “Rubalcava 11 did not respond.” (Id.) Plaintiffs allege the Subject Property “still sold at foreclosure,” which 12 suggests “the single point of contact appointed to Plaintiff’s account did not have the required 13 access to individuals that could stop the sale of [the Subject Property].” (Id.) Based on these 14 allegations, the Court finds Plaintiffs have sufficiently alleged a violation of § 2923.7. 15 ii. Owner-Occupied 16 The HBOR provides § 2923.7 “shall apply only to a first lien mortgage or deed of trust” 17 where the first lien mortgage or deed of trust is secured “by owner-occupied residential real 18 property containing no more than four dwelling units,” or “by residential real property that is 19 occupied by a tenant, contains no more than four dwelling units, and meets all of the conditions 20 described [by the statute].” Cal. Civ. Code § 2924.15. The law clarifies “owner-occupied” 21 means “the property is the principal residence of the borrower and is security for a loan made for 22 personal, family, or household purposes.” Id. 23 Here, Wells Fargo argues Plaintiffs have failed to adequately allege the Subject Property 24 is owner-occupied or their principal residence, pointing to the judicially-noticed bankruptcy 25 filings in which Wong listed different addresses. (ECF No. 4 at 15 (citing ECF No. 5-1 at 48–53, 26 27 8 Again, the SAC is ambiguous. However, given the context, the Court construes “Plaintiff’s” to mean Wong’s, and will hereinafter do so, as deemed appropriate by the context of 28 the allegations in the SAC. 1 64–71).) However, Plaintiffs argue in opposition that “both filings significantly predate the 2 allegations of the instant actions,” as the bankruptcy filings were from 2015 and 2017 and the 3 instant action was filed in 2018. (ECF No. 6 at 8.) Plaintiffs further argue Wells Fargo has not 4 offered any “judicially noticeable documents” that support a finding the Subject Property was not 5 owner-occupied. (Id. at 8–9.) Plaintiffs also specifically allege in their SAC the Subject Property 6 “is a single[-]family home and has served as [Wong’s] residence for the times mentioned herein.” 7 (ECF No. 1-2 at ¶ 8.) 8 The Court is left with a factual dispute which at this juncture the Court must find in favor 9 of Plaintiffs. See Cruz, 405 U.S. at 322. The Court finds Plaintiffs have alleged sufficient facts to 10 demonstrate the Subject Property was owner-occupied. 11 iii. Material Violation 12 The HBOR authorizes relief only if it can be proven there is a “material” violation of § 13 2923.7. See Cal. Civ. Code § 2924.12(b). “Material” has not been defined by statute or case law, 14 but courts have concluded “a violation [under § 2924.12] is ‘material’ if it is plausible that the 15 violation ‘affected a plaintiff’s loan obligations or the modification process.’” Greene v. Wells 16 Fargo Bank, N.A., 2018 WL 6832092, at *7 (N.D. Cal. Dec. 28, 2018) (citing Cornejo v. Ocwen 17 Loan Servicing, LLC, 151 F. Supp. 3d 1102, 1113 (E.D. Cal. 2015); Cardenas v. Caliber Home 18 Loans, Inc., 281 F. Supp. 3d 862, 869–71 (N.D. Cal. 2017)). 19 Plaintiffs incorporate by reference the allegations of all preceding claims and facts in their 20 § 2923.7 claim. (ECF No. 1-2 at ¶ 26.) Plaintiffs allege “it is clear that the [SPOC] appointed to 21 [Wong’s] account did not have the required access to individuals that could stop the sale of [the 22 Subject Property],” as the Subject Property “still sold at foreclosure.” (Id. at ¶ 30.) Plaintiffs 23 emphasize that “had [Rubalcava] had access to the individuals with the ability and authority to 24 stop the sale, the foreclosure sale would not have occurred as it did.” (ECF No. 6 at 10.) 25 The Court agrees Plaintiffs’ allegations support an inference of a “material violation” of § 26 2924.11. See Travis, 733 Fed. Appx. at 375 (“[E]ven though HBOR does not require servicers to 27 provide borrowers with loan modifications or any other specific alternative to foreclosure, 28 [plaintiffs] still could have been harmed by [defendant’s] failure to communicate with them about 1 the status of their loan modification application and about other alternatives to foreclosure”). 2 Plaintiffs have specifically alleged Wells Fargo’s failure to establish a SPOC for Plaintiffs 3 affected their “loan obligations or the modification process.” See Greene, 2018 WL 6832092, at 4 *7. 5 Again, the Court is left with a factual dispute which at this juncture the Court must find in 6 favor of Plaintiffs. See Cruz, 405 U.S. at 322. The Court finds Plaintiffs have alleged sufficient 7 facts to demonstrate a material violation of § 2923.7. 8 Based on the foregoing, the Court finds Plaintiffs have sufficiently pleaded their § 2923.7 9 claim against Defendants. See Iqbal, 556 U.S. at 680. Accordingly, Wells Fargo’s Motion to 10 Dismiss Claim Three is DENIED. 11 E. Claim Four: Wrongful Foreclosure 12 Plaintiffs allege Defendants wrongfully foreclosed on the Subject Property by breaching a 13 “statutorily and contractually created duty by instituting foreclosure proceedings and selling 14 [Wong’s] property at foreclosure while [he] was being reviewed for loss mitigation options, in 15 violation of Cal. Civ. Code § 2924.11.” (ECF No. 1-2 at ¶ 36.) Wells Fargo argues the wrongful 16 foreclosure claim is premised on prior statutory claims and “due to the shortcomings that plague” 17 those claims, “[P]laintiffs fail to state a viable wrongful foreclosure claim.” (ECF No. 4 at 19.) 18 To state a claim for wrongful foreclosure, a plaintiff must allege: “(1) the trustee or 19 mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a 20 power of sale in a mortgage or deed of trust; (2) the party attacking the sale . . . was prejudiced or 21 harmed; and (3) . . . the trustor or mortgagor tendered the amount of the secured indebtedness or 22 was excused from tendering.” Rockridge Tr. v. Wells Fargo, N.A., 985 F. Supp. 2d 1110, 1145 23 (N.D. Cal. Sept. 25, 2013) (citing Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 104 (2011)). 24 i. Illegality of Trustee’s Sale 25 Wells Fargo argues Plaintiffs have failed to allege “an illegal, fraudulent, or willfully 26 oppressive” act by Wells Fargo. (ECF No. 4 at 19.) In opposition, Plaintiffs assert Wells Fargo 27 “wrongly sold Plaintiff[s’] home at foreclosure, after failing to uphold its duties under [Cal.] Civil 28 Code §§ 2924g, 2923.6, and 2923.7,” and that Plaintiffs have sufficiently alleged damages. (ECF 1 No. 6 at 11.) 2 The Court finds Plaintiffs sufficiently allege illegal acts by Wells Fargo. Plaintiffs allege 3 Wells Fargo breached its duty “by instituting foreclosure proceedings and selling [the Subject 4 Property] at foreclosure while Plaintiff[s] were being reviewed for loss mitigation options, in 5 violation of Cal. Civ. Code § 2924.11” and “by carrying out foreclosure proceedings on [the 6 Subject Property] without providing Plaintiff[s] with the requisite notice in violation of Cal. Civ. 7 Code § 2924g.” (ECF No. 1-2 at ¶¶ 36, 37.) In addition to the allegations previously discussed, 8 Plaintiffs also allege they attempted to contact Wells Fargo to inquire about the foreclosure sale 9 repeatedly and did not receive a response as to whether the sale would be stopped. (Id. at ¶¶ 11, 10 12, 38.) 11 The Court is left with a factual dispute which at this juncture the Court must find in favor 12 of Plaintiff. See Cruz, 405 U.S. at 322. Accordingly, the Court finds Plaintiffs have alleged 13 sufficient facts to demonstrate the potential illegality of the foreclosure sale. 14 ii. Prejudice or Harm to Plaintiffs 15 Wells Fargo argues Plaintiffs have not “sufficiently alleged any resulting damages from 16 the conduct alleged in the SAC.” (ECF No. 4 at 19.) As previously discussed, Plaintiffs argue in 17 opposition they have “plainly alleged that Defendants’ conduct resulted in [Wong] losing [the 18 Subject Property] to foreclosure and all equity contained in the property.” (ECF No. 6 at 11.) 19 Plaintiffs incorporate by reference the allegations of all preceding claims and facts in their 20 wrongful foreclosure claim, and Plaintiffs did specifically allege these damages. (ECF No. 1-2 at 21 ¶¶ 33, 38.) Thus, construing Plaintiffs’ SAC liberally, as the Court must at this stage in the 22 pleadings, the Court finds Plaintiffs have sufficiently alleged harm caused by the alleged 23 wrongful foreclosure. See Orcilla v. Big Sur, Inc., 244 Cal. App. 4th 982, 998–99 (2016) 24 (liberally construing a complaint and holding the plaintiff alleged harm even where the wrongful 25 foreclosure claim did not incorporate by reference the remaining allegations). 26 / / / 27 / / / 28 / / / 1 iii. Tender 2 Wells Fargo argues Plaintiffs “cannot plausibly allege an actual tender of the debt at 3 issue.” (Id.) As noted previously, the Court has determined Plaintiffs are excused from 4 compliance with the tender rule at the pleading stage. 5 Thus, Plaintiffs have adequately alleged facts supporting the three elements necessary to 6 prove a claim for wrongful foreclosure. Accordingly, Wells Fargo’s motion to dismiss Claim 7 Four is DENIED. 8 IV. CONCLUSION 9 The Court hereby GRANTS in part and DENIES in part Wells Fargo’s Motion to Dismiss 10 (ECF No. 4) as follows: 11 1. Wells Fargo’s Motion to Dismiss Plaintiffs’ Claim One is DENIED; 12 2. Wells Fargo’s Motion to Dismiss Plaintiffs’ Claim Two is GRANTED with leave to 13 amend; 14 3. Wells Fargo’s Motion to Dismiss Plaintiffs’ Claim Three is DENIED; and 15 4. Wells Fargo’s Motion to Dismiss Plaintiffs’ Claim Four is DENIED. 16 Wells Fargo shall file an answer to the Second Amended Complaint not later than thirty (30) days 17 after the electronic filing date of this Order. 18 IT IS SO ORDERED. 19 DATED: November 29, 2020 20 21 22 23 24 25 26 27 28