Hewitt et al v. Wells Fargo Bank et al, No. 3:2011cv05147 - Document 11 (W.D. Wash. 2011)
Court Description: ORDER granting in part and denying in part 7 Motion to Dismiss by Judge Benjamin H Settle.(TG; cc mailed to plaintiffs)
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Hewitt et al v. Wells Fargo Bank et al Doc. 11 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 7 8 9 HENRY HEWITT and NANCY HEWITT, CASE NO. C11-5147BHS 10 11 12 Plaintiffs, v. WELLS FARGO BANK, et al., 13 Defendants. 14 15 ORDER GRANTING IN PART, RESERVING RULING IN PART, AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ FIRST AMENDED COMPLAINT 16 17 This matter comes before the Court on Defendants’ Motion to Dismiss Plaintiffs’ 18 First Amended Complaint (Dkt. 7). The Court has reviewed the briefs filed in support of 19 and in opposition to the motion and the remainder of the file and hereby grants in part, 20 reserves ruling in part, and denies in part the motion for the reasons stated herein. I. PROCEDURAL HISTORY 21 22 On January 26, 2011, Plaintiffs Henry Hewitt and Nancy Hewitt (“Hewitts”) filed 23 a complaint in the Superior Court for the State of Washington in and for the County of 24 Pierce. Dkt. 1, Exh. A at 5-35. On February 4, 2011, the Hewitts filed a First Amended 25 Complaint (“FAC”) against Defendants Wells Fargo Bank, Old Republic Title Ltd. (“Old 26 Republic”), Stewart Title, Mortgage Electronic Registration Systems, Inc. (“MERS”), 27 OCWEN, Barclays Bank PLC, and John Does 1-5 (collectively “Defendants”). Id. at 35- 28 ORDER - 1 Dockets.Justia.com 1 55. The Hewitts assert claims against Defendants for violations of Washington’s Deed of 2 Trust Act, RCW 61.24.005-146, violations of Washington’s Consumer Protection Act 3 (“CPA”), RCW 19.86.010-920, quiet title, and fraud. Id. The Hewitts request that the 4 Court vacate the foreclosure of their home, enter an order of quiet title, and award 5 monetary damages. Id. 6 7 8 On March 31, 2011, Defendants filed a motion to dismiss the FAC. Dkt. 7. On April 22, 2011, the Hewitts responded. Dkt. 9. On May 6, 2011, Defendants replied. Dkt. 9. 9 II. FACTUAL BACKGROUND 10 11 12 13 14 On September 13, 2005, the Hewitts obtained a mortgage loan and executed a Deed of Trust in favor of Fremont Investment & Loan in the amount of $647,989.00. Dkt. 8, Exh. 1 (“Deed of Trust”). On December 1, 2008, the Hewitts defaulted on the loan, and a Notice of Default was issued on April 6, 2009. FAC, ¶ 10. On May 11, 2009, 15 Old Republic Default Management Service, a division of Old Republic National Title 16 Insurance Company, issued a Notice of Trustee’s Sale scheduling a trustee’s sale for 17 August 14, 2009. Dkt. 8, Exh. 2. The Hewitts allege that Old Republic was not the 18 recorded trustee of their Deed of Trust until the next day, May 12, 2009. FAC, ¶ 53. 19 On August 12, 2009, the Hewitts made a payment to reinstate their loan and work 20 on a loan modification package. Id., ¶64. On February 9, 2010, Old Republic Default 21 Management Service issued a second Notice of Trustee’s Sale scheduling a trustee’s sale 22 for May 14, 2010. Dkt. 8, Exh. 3. The sale was postponed a second time to June 18, 23 2010. FAC ¶ 68. The June sale was also postponed. Id. On July 23, 2010, the Hewitts’ 24 home was sold at a foreclosure sale. Dkt. 8, Exh. 4. 25 26 27 28 ORDER - 2 III. DISCUSSION 1 2 A. 3 Legal Standard Fed. R. Civ. P. 12(b)(6) motions to dismiss may be based on either the lack of a 4 cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal 5 theory. Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). 6 7 8 Material allegations are taken as admitted and the complaint is construed in the plaintiff’s favor. Keniston v. Roberts, 717 F.2d 1295 (9th Cir. 1983). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a 9 plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than 10 11 12 13 14 labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007) (internal citations omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even 15 if doubtful in fact).” Id. at 1965. Plaintiffs must allege “enough facts to state a claim to 16 relief that is plausible on its face.” Id. at 1974. 17 B. 18 Defendants’ Motion Defendants move to dismiss all of the Hewitts’ claims. See Dkt. 7 at 4-17. The 19 Hewitts only responded to the portion of Defendants’ motion regarding violations of the 20 Deed of Trust Act. See Dkt. 9. Although this failure to respond may be considered an 21 admission that Defendants’ motion has merit as to the unanswered portions, the Court 22 will briefly address each of Defendants’ arguments based on the allegations in the FAC. 23 24 25 26 1. Washington CPA To prevail on a CPA claim, a plaintiff must show: (1) an unfair or deceptive act or practice; (2) that occurs in trade or commerce; (3) a public interest; (4) injury in their business or property; and (5) a causal link between the unfair or deceptive act and the 27 injury suffered. Indoor Billboard Washington, Inc. v. Integra Telecom of Washington, 28 ORDER - 3 1 Inc., 162 Wn.2d 59, 74 (2007). Failure to satisfy even one of the elements is fatal to a 2 CPA claim. See Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 3 Wn.2d 778, 793 (1986). 4 In this case, the Hewitts allege that Defendants violated the CPA by “allowing the 5 Trustee to conduct a Trustee sale while it (or another Defendant) was reviewing the loan 6 7 8 modification . . . .” FAC ¶ 82. Defendant moves to dismiss this claim because the Hewitts have failed to allege all elements of the claim. Dkt. 7 at 12. Specifically, Defendants argue that the Hewitts have failed to allege facts that Defendants’ practices 9 affected the public interest. Dkt. 7 at 12-13. The Court agrees and finds that the Hewitts 10 11 12 13 14 15 have failed to allege sufficient facts to support this claim. Twombly, 127 S. Ct. at 1974. Therefore, the Court grants Defendants’ motion and dismisses the Hewitts’ claim for a violation of the CPA. 2. Fraud In Washington, the nine elements of fraud are: (1) representation of an existing 16 fact; (2) materiality; (3) falsity; (4) the speaker's knowledge of its falsity; (5) intent of the 17 speaker that it should be acted upon by the plaintiff; (6) plaintiff's ignorance of its falsity; 18 (7) plaintiff's reliance on the truth of the representation; (8) plaintiff's right to rely upon it; 19 and (9) damages suffered by the plaintiff. Stiley v. Block, 130 Wn.2d 486, 505 (1996). 20 In this case, the Hewitts do not explicitly set forth a claim for fraud. They do, 21 however, allege that Defendants’ actions in violating the Deed of Trust Act may have 22 been fraudulent. FAC ¶ 81. Defendants argue that, “to the extent that [a fraud] claim is 23 stated in the FAC, it is not pled with the requisite particularity.” Dkt. 7 at 15. The Court 24 25 26 agrees and finds that the Hewitts have failed to allege sufficient facts to support this claim. Twombly, 127 S. Ct. at 1974. Therefore, the Court grants Defendants’ motion and dismisses the Hewitts’ claim for fraud. 27 28 ORDER - 4 1 3. 2 In this case, the Hewitts do not explicitly set forth a separate claim for breach of 3 fiduciary duty and they do not use the term fiduciary in the FAC. Therefore, the Court 4 finds that it is unnecessary to address Defendants’ motion on this issue. 5 6 7 4. Fiduciary Duty Deed of Trust Act The Hewitts assert a claim under the Deed of Trust Act alleging that MERS was an improper beneficiary and that Defendants committed various timing and filing violations. 8 a. MERS 9 The Hewitts allege that “MERS did not meet the definition of the beneficiary 10 11 12 13 14 15 16 either, i.e. ‘the holder of the instrument or document evidencing the obligations secured by the Deed of Trust.’” FAC ¶ 27; see also id. ¶¶ 18, 26-28, 51, & 59. The Hewitts also allege that, “whoever the beneficiary was . . . the Trustee is not entitled to rely on the beneficiary’s declaration as evidence of proof because they had violated their duty of good faith to us.” Id. ¶ 28; see also id. ¶¶ 55, 62, & 66. The Hewitts signed a Deed of Trust that acknowledged that MERS was a 17 beneficiary under the deed and that MERS had the right to foreclose and sell the property 18 covered by the deed. See Dkt. 7 at 4. Moreover, the argument that MERS is not a proper 19 beneficiary because MERS only tracks deeds instead of actually holding the deed has 20 been consistently rejected by this court. See, e.g., Vawter v. Quality Loan Service Corp. 21 of Washington, 707 F. Supp. 2d 1115, 1125-26 (W.D. Wash 2010); Daddabbo v. 22 Countrywide Home Loans, Inc., No. C09-1417-RAJ, 2010 WL 2102485 (W.D. Wash. 23 May 20, 2010); Moon v. GMAC Mortgage Corp., No. C08-969Z, 2008 WL 4741492 24 25 26 (W.D. Wash. Oct. 24, 2008). The Hewitts have failed to allege facts or advance an argument that distinguishes their case from these recent cases. Therefore, the Court is inclined to grant Defendants’ motion on this issue. 27 28 ORDER - 5 1 This court, however, has recently stayed adjudication of an action based on this 2 question being certified to the Washington Supreme Court. See Bain v. OneWest Bank, 3 F.S.B., No. C09-0149JCC (W.D.Wash. March 15, 2011). Therefore, the Court will 4 reserve ruling on this issue because of the possibility of the state court decision and 5 because, as set forth below, the Hewitts have sufficiently pled one violation of the Deed 6 of Trust Act. 7 8 b. Notice of Default The Deed of Trust Act requires that a Notice of Default include “a statement that 9 the beneficiary has declared the borrower or grantor to be in default, and a concise 10 11 12 13 14 statement of the default alleged.” RCW 61.24.030(8)(c). The Hewitts allege that the Notice of Default they received is invalid because the statement that they were in default was delivered by the agent for the beneficiary and not the beneficiary. FAC ¶¶ 51 & 52; see also Dkt. 9 at 2. This argument is without merit because the notice must only contain 15 a statement that the beneficiary declares the Hewitts in default, which was included in the 16 Hewitts’ Notice of Default. 17 The Hewitts also argue that the Notice of Default is invalid because it was 18 executed by Old Republic, as agent for the beneficiary, even though the appointment of 19 Old Republic as successor trustee was not recorded until after the Notice of Default was 20 issued. Dkt. 9 at 2-3. The Notice of Default, however, was executed by Old Republic, as 21 agent for the beneficiary, which is permissible under RCW 61.24.031(1)(a). 22 23 Therefore, the Hewitts’ arguments are without merit and the Hewitts have failed to plead a plausible claim for relief under RCW 61.24.030(8)(c). 24 25 26 c. Notices of Sale The Deed of Trust Act requires that “the trustee shall have proof that the beneficiary is the owner of any promissory note or other obligation secured by the deed of 27 28 ORDER - 6 1 trust.” RCW 61.24.030(7)(a). The act also imposes on the trustee or successor trustee “a 2 duty of good faith to the borrower, beneficiary, and grantor.” RCW 61.24.010(4). 3 The Hewitts allege that MERS was not a proper beneficiary under the deed and, 4 therefore, Old Republic did not have proof that MERS was the owner of the note. FAC ¶ 5 55. The Hewitts also claim that Old Republic breached its duty of good faith by 6 7 8 proceeding with the foreclosure without proof that MERS was the owner of the note. Id. ¶¶ 54-57. These allegations are directly tied to the issue of whether MERS was a proper beneficiary under the note. Therefore, the Court will also reserve ruling on this issue. 9 d. Assignment from MERS to Wells Fargo 10 11 12 13 14 The Hewitts allege that the assignment of the beneficial interest in the note from MERS to Wells Fargo is invalid because it was not recorded until after the foreclosure sale. FAC ¶ 66. The Hewitts, however, fail to articulate how this violates the Deed of Trust Act and, therefore, fail to assert a plausible claim for relief. Even if this was a 15 plausible claim for relief, the Hewitts have failed to allege that they were prejudiced by 16 the delay in recording the assignment. See Vawter, 707 F. Supp. 2d at 1127. e. 17 18 Notice of Postponed Sale The Deed of Trust Act requires that, if a trustee postpones a scheduled trustee’s 19 sale, the trustee must give notice of the new time and place of the sale. RCW 20 61.24.040(6). 21 In this case, the Hewitts allege that the trustee’s sale was originally scheduled for 22 May 14, 2010, and that the sale was postponed to June 18, 2010. FAC ¶ 68. They also 23 allege that the June date was postponed and that they were not informed of the new sale 24 25 26 date of July 23, 2010. Id. ¶¶ 68 & 70. Defendants argue that phone records between the loan servicer and the Hewitts “indicate that [the servicer’s] representative advised [the Hewitts] of the continued sale 27 date on three separate telephone conversations.” Dkt. 10 at 9. Defendants request that 28 ORDER - 7 1 the Court take judicial notice of the phone records and, apparently, Defendants’ 2 allegations regarding the content of the conversations of those phone calls. Id.; see also 3 Dkt. 8. These facts are well beyond the scope of judicial notice. See Fed. R. Evid. 203 4 (“A judicially notice fact must be one not subject to reasonable dispute . . . .”) 5 Therefore, the Court denies Defendants’ motion to dismiss this claim because the 6 Hewitts have alleged allegations sufficient to support a claim for relief under RCW 7 61.24.040(6). 8 9 10 11 5. Quiet Title Defendants argue that the Hewitts’ quiet title claim must fail because all of the Hewitts’ underlying claims fail. Dkt. 7 at 14. The Hewitts, however, have sufficiently pled a claim for a violation of the Deed of Trust Act. Its unclear whether quiet title is an 12 appropriate remedy if the Hewitts are successful on their remaining claim. Therefore, the 13 Court denies Defendants’ motion without prejudice. 14 IV. ORDER 15 16 17 18 19 Therefore, it is hereby ORDERED that Defendants’ Motion to Dismiss Plaintiff’s First Amended Complaint (Dkt. 7) is GRANTED in part, RESERVED in part, and DENIED in part as follows: 1. DISMISSED; 20 21 The Hewitts’ claims for a violation of the Washington CPA and fraud are 2. The Court RESERVES ruling on the Hewitts’ claim for a violation of the Deed of Trust Act based on MERS being an improper beneficiary; and 22 23 3. 24 DATED this 31st day of May, 2011. The remainder of the motion is DENIED. A 25 26 BENJAMIN H. SETTLE United States District Judge 27 28 ORDER - 8
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