(PS) Prasad v. Wells Fargo Home Mortgage ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 ROSHNI PRASAD, Case No. 2:22-cv-01505-WBS-JDP (PS) 12 Plaintiff, 13 v. FINDINGS AND RECOMMENDATIONS 14 WELLS FARGO HOME MORTGAGE, et al., 15 Defendants. 16 17 Plaintiff Prasad, proceeding without counsel, brings claims for breach of contract against 18 defendants for allegedly failing to modify the terms of her mortgage agreement after the parties 19 entered into a loan modification agreement. ECF No. 1-1.1 Defendants move to dismiss the 20 complaint, arguing primarily that—contrary to plaintiff’s allegations—they offered plaintiff the 21 agreed-upon loan modification and that plaintiff rejected the proposed terms. ECF No. 4. In 22 support of this argument, defendants ask that this court take judicial notice of correspondence 23 between the parties, which they contend demonstrates the falsity of plaintiff’s allegations. ECF 24 No. 5. Because defendants’ argument relies on extrinsic documents that may not be considered in 25 adjudicating their motion, I recommend that their motion be denied.2 26 1 Defendants removed this case from the Superior Court of California, County of 27 Sacramento, on the basis of diversity of citizenship pursuant to 28 U.S.C. §§ 1332 & 1441(b). ECF No. 1 at 1. 28 2 As explained below, defendants provide two other arguments, both of which are 1 Legal Standards 2 “Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable 3 legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory.” Somers v. 4 Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). To survive a motion to dismiss for failure to state 5 a claim, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” 6 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has facial plausibility when a 7 plaintiff “pleads factual content that allows the court to draw the reasonable inference that the 8 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 9 In deciding motions under Rule 12(b)(6), the court generally considers only allegations 10 contained in the pleadings, exhibits attached to the complaint, and matters properly subject to 11 judicial notice, and construes all well-pleaded material factual allegations in the light most 12 favorable to the nonmoving party. Chubb Custom Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 13 946, 956 (9th Cir. 2013); Akhtar v. Mesa, 698 F.3d 1202, 1212 (9th Cir. 2012). In certain 14 circumstances, the court may also consider documents referenced in—but not included with—the 15 complaint or documents that form the basis of plaintiff’s claims. United States v. Ritchie, 342 16 F.3d 903, 907 (9th Cir. 2003). 17 Discussion 18 Plaintiff obtained a home loan from defendant Wells Fargo in 2008 and a modification to 19 the terms of that loan in 2016. See ECF No. 1-1 at 40. She alleges that in November 2020 20 defendants offered her—and she signed—the “FHA Home Affordable Modification Program 21 (HAMP) TRIAL PLAN” (“HAMP plan”), whereby defendants agreed to provide a modified loan 22 agreement after her successful completion of a three-month trial period. Id. at 6 (capitalization in 23 original). She alleges that she timely made each monthly trial payment, but defendants never sent 24 her the final loan modification agreement. Id. at 6-7. 25 Defendants first argue that the HAMP plan did not obligate them to “offer the plaintiff 26 another loan modification with any specific terms.” ECF No. 4 at 8. Plaintiff acknowledges that, 27 28 insufficient to show that plaintiff’s allegations fail to state a claim. 1 under the loan modification agreement, “the loan terms may change” following completion of the 2 HAMP plan. ECF No. 1-1 at 6. But she alleges that the agreement nevertheless included a 3 commitment to provide some modification to her loan agreement and that defendants’ failure to 4 do so constitutes breach of contract. See id. at 6-7; ECF No. 8 at 3. Plaintiff includes with her 5 complaint the November 2020 HAMP plan offer letter, which states: “after you successfully 6 complete your trial plan . . . we will send you a temporary loan modification agreement . . . , 7 which will reflect the terms of your modified loan.” Id. at 16. Plaintiff’s claim for breach of 8 contract thus does not depend on whether defendants were obligated to offer particular loan 9 terms. 10 Defendants’ second argument—that California law does not entitle plaintiff to a loan 11 modification—similarly misconstrues plaintiff’s claims. ECF No. 4 at 8 n.1 (citing Cal. Civ. 12 Code §§ 2923.6 & 2923.4; Marbry v. Superior, 185 Cal. App. 4th 208, 223 (2010) (holding that 13 California Civil Code § 2923.6 “merely expresses the hope that lenders will offer loan 14 modifications on certain terms”) (emphasis in original)). Nowhere does plaintiff claim that 15 defendants violated either §§ 2923.6 or 2923.4; rather, she sues defendants for breach of the 16 HAMP plan contract. See ECF No. 4 at 8.3 17 Last, defendants argue that “a judicially noticeable record clearly demonstrates that 18 plaintiff received the proposed modification in February 2021, and expressly rejected this 19 modification offer.” ECF No. 4 at 5. Defendants ask that the court take judicial notice of a fax 20 sent by plaintiff to a representative of Wells Fargo Bank. ECF No. 5 at 2. 4 According to 21 3 To the extent defendants suggest that plaintiff cannot enforce the terms of the HAMP plan with a state law breach of contract claim, such argument is unavailing. See Corvello v. Wells 22 Fargo Bank, NA, 728 F.3d 878, 884 (9th Cir. 2013) (“Where, as here, borrowers allege, and we 23 must assume, that they have fulfilled all of their obligations under the [HAMP plan], and the loan servicer has failed to offer a permanent modification, the borrowers have valid claims for breach 24 of the [HAMP] agreement.”). 4 Defendants also request that the court take judicial notice of a “Deed of Trust executed 25 by plaintiff Roshni Prasad and recorded with the Sacramento County Recorder’s Office on November 3, 2008” and a “Promissory Note executed by plaintiff Roshni Prasad on October 24, 26 2008.” ECF No. 5 at 2. Defendants identify neither the particular facts to be noticed from either 27 nor why notice is essential to the resolution of their motion. See id.; cf. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018) (“Just because the document itself is 28 susceptible to judicial notice does not mean that every assertion of fact within that document is 1 defendants, the fax includes a letter originally sent by Wells Fargo on February 5, 2021, that 2 purports to enclose the loan modification agreement and a handwritten response from plaintiff, 3 stating: “‘I have received this and I [would] like you to give me [a] lower interest rate than 3%.’” 4 ECF No. 4 at 6 (quoting ECF No. 5 at 25). 5 Generally, facts may only be noticed where “the fact is ‘not subject to reasonable dispute,’ 6 either because it is ‘generally known within the territorial jurisdiction,’ or is ‘capable of accurate 7 and ready determination by resort to sources whose accuracy cannot reasonably be questioned.’” 8 Castillo-Villagra v. I.N.S., 972 F.2d 1017, 1026 (9th Cir. 1992) (citing Fed. R. Evid. 201(b)). 9 Documents that are not a matter of public record and were not included with the complaint should 10 not ordinarily be subject to judicial notice. Moreover, even if a document is “susceptible to 11 judicial notice,” that “does not mean that every assertion of fact within that document is judicially 12 noticeable for its truth.” Khoja, 899 F.3d at 999 (declining to take judicial notice of an investor 13 call transcript that purportedly revealed “what investors already knew” because, “from the 14 transcript, it is unclear what exactly [the defendant] ‘previously disclosed’”). Defendants have 15 given the court no reason to depart from standard practice; they have not shown that it is 16 appropriate to take judicial notice of the fax or its contents.5 17 Defendants also contend that the documents may be considered under the incorporation- 18 by-reference doctrine “because plaintiff’s sole claim for breach of contract hinges on these 19 records,” and “plaintiff may not deliberately omit references to documents upon which her claim 20 is based to survive a 12(b)(6) motion.” ECF No. 5 at 2 (citing Parrino v. FHP, Inc., 146 F.3d 21 699, 706 (9th Cir. 1998)). “[I]ncorporation-by-reference is a judicially created doctrine that treats 22 certain documents as though they are part of the complaint itself.” Khoja v. Orexigen 23 24 judicially noticeable for its truth.”). In any case, my recommendation that their motion to dismiss be denied would not be affected by consideration of either document. 25 5 Additionally, the conclusions that defendants ask the court to draw are not conclusively shown by the fax. The exhibit includes a cover letter that purports to enclose loan modification 26 agreement documents and a handwritten letter allegedly written by plaintiff acknowledging that 27 she “received this.” ECF No. 5 at 25. Such evidence may suggest that plaintiff received the loan modification agreement documents but does not conclusively demonstrate the falsity of her 28 allegations, which refer to communications between the parties spanning several months. 1 Therapeutics, Inc., 899 F.3d 988, 1002 (9th Cir. 2018). Under this doctrine, a document may be 2 incorporated into the complaint “if the plaintiff refers extensively to the document or the 3 document forms the basis of the plaintiff’s claim.” Ritchie, 342 F.3d at 907. The doctrine 4 extends to “situations in which the plaintiff’s claim depends on the contents of a document, the 5 defendant attaches the document to its motion to dismiss, and the parties do not dispute the 6 authenticity of the document, even though the plaintiff does not explicitly allege the contents of 7 that document in the complaint.” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). 8 However, incorporation is not appropriate if the document “merely creates a defense to the well- 9 pled allegations in the complaint.” Khoja, 899 F.3d at 1002. Because the doctrine risks being 10 used as “a tool for defendants to short-circuit the resolution of a well-pleaded claim,” the Ninth 11 Circuit has urged that the doctrine be “approached with caution.” Id. 12 Here, the complaint does not refer extensively to the fax at issue or its contents; indeed, 13 plaintiff’s allegations suggest that she never sent a letter or fax rejecting an offer from defendants. 14 ECF No. 1-1 at 6-7. Moreover, in plaintiff’s opposition she appears to contest the authenticity of 15 the documents submitted by defendants as well as defendants’ interpretation of their contents. 16 See ECF No. 8 at 2-3. Although such documents could prove essential to a defense, they are 17 properly reserved for a motion for summary judgment allowing plaintiff a full opportunity to 18 present evidence in opposition. See Khoja, 899 F.3d at 1003 (holding that “if the document 19 merely creates a defense to the well-pled allegations in the complaint, then that document did not 20 necessarily form the basis of the complaint”). 21 Accordingly, it is hereby RECOMMENDED that defendants’ motion to dismiss, ECF No. 22 4, be denied. 23 These findings and recommendations are submitted to the United States District Judge 24 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days 25 after being served with these findings and recommendations, any party may file written 26 objections with the court and serve a copy on all parties. Such a document should be captioned 27 “Objections to Magistrate Judge’s Findings and Recommendations.” Any response to the 28 objections shall be served and filed within fourteen days after service of the objections. The 1 | parties are advised that failure to file objections within the specified time may waive the right to 2 | appeal the District Court’s order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez 3 | v. Yist, 951 F.2d 1153 (9th Cir. 1991). 4 5 IT IS SO ORDERED. Dated: _ May 13, 2023 Q_——_. 7 JEREMY D. PETERSON 8 UNITED STATES MAGISTRATE JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28