Case Name:   Foaad Hanna v. Wells Fargo Home Mortgage, et al.

Case No.:       1-13-CV-251211

Currently before the Court is the demurrer of defendant Wells Fargo Home Mortgage (“Wells Fargo”) to the complaint of plaintiff Foaad Hanna (“Hanna”).  Wells Fargo demurs to each cause of action asserted in the complaint on the ground that Hanna fails to allege facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).) Wells Fargo also demurs to the first cause of action for breach of contract on the ground that it cannot ascertain whether the contract being sued upon is written, oral or implied by conduct. (See Code Civ. Proc., § 430.10, subd. (g).)

Procedural Matter

 

Wells Fargo claims that Hanna’s opposition was not served in compliance with Code of Civil Procedure section 1005, subdivision (b). This motion was set for hearing on July 17, 2014. On July 7, 2014, eight court days before the hearing, Hanna filed his opposition to the motion. Therefore, Hanna’s opposition was not timely served. Nevertheless, Wells Fargo submitted a detailed reply brief, fully addressing the merits of the opposition. Accordingly, given the absence of prejudice and in deference to the principle that matters should be decided on their merits, the Court will consider Hanna’s opposition.

Request for Judicial Notice

 

In support of its demurrer, Wells Fargo asks the Court to take judicial notice of the following: (1) a copy of the complaint filed by Hanna in case number 112CV218677, (2) a copy of the order on Wells Fargo’s demurrer to the complaint filed in case number 112CV218677, (3) a copy of a deed of trust, recorded on November 8, 2006, and (4) a copy of a notice of default, recorded on July 27, 2009.

 

With regard to the complaint and order on Wells Fargo’s demurrer in case number 112CV218677, these documents are court records and are relevant to the issues to be decided in this demurrer. (See Evid. Code, § 452, subd. (d).) Accordingly, Wells Fargo’s request for judicial notice as to these documents is GRANTED.

 

With regard to the deed of trust and the notice of default, courts may take judicial notice of the existence and recordation of real property records, when the authenticity of the documents is not challenged. (See Fontenot v. Wells Fargo Bank, N.A. (2011)

198 Cal.App.4th 256, 264-265.) Thus, Wells Fargo’s request for judicial notice as to these recorded documents is GRANTED.

First and Second Causes of Action for Breach of Contract and Promissory Estoppel

Wells Fargo contends that Hanna’s causes of action for breach of contract and promissory estoppel are barred by res judicata because Hanna previously litigated these claims in his 2012 complaint in case number 112CV218677. In opposition, Hanna asserts that the judgment in case number 112CV218677 is not a final judgment on the merits and his breach of contract and promissory estoppel causes of action in this action do not concern the same issues as the prior action.

 

With regard to Hanna’s first contention, on August 8, 2012, the Court (Hon. Mary Arand) sustained a demurrer to Hanna’s breach of contract and promissory estoppel causes of action without leave to amend. (See Request for Judicial Notice, Ex. 2,

pp. 2:9-10, 20-21, 3:7-8.) The Court specifically found that Hanna did not fully perform the terms of the contract and that Hanna rejected a loan modification he considered economically infeasible, rendering the doctrine of promissory estoppel inapplicable. Thus, the August 8, 2012 order constituted a final judgment on the merits. (See Kanarek v. Bugliosi (1980) 108 Cal.App.3d 327, 334 [“a demurrer which is sustained for failure of the facts alleged to establish a cause of action, is a judgment on the merits.”].)

 

With regard to Hanna’s argument that her present causes of action concern different factual allegations, “[r]es judicata bars the relitigation not only of claims that were conclusively determined in the first action, but also matter that was within the scope of the action, related to the subject matter, and relevant to the issues so that it could have been raised.” (See Burdette v. Carrier Corp. (2008) 158 Cal.App.4th 1668, 1674-1675.) Hanna’s causes of action for breach of contract and promissory estoppel in this action are based upon Wells Fargo’s written and oral promises made in 2010 that if Hanna complied with the terms of a trial payment plan (“TPP”), he would receive a permanent modification with the same monthly payment amounts as the TPP. (See Compl., p. 16:18-21). These allegations are related to the subject matter of the first action, which concerned Wells Fargo’s promise to enter into an affordable, loan modification agreement that would allow Hanna to remain in his home. (See Request for Judicial Notice, pp. 11:28, 12:1-2.)  In his opposition, Hanna acknowledges that Wells Fargo’s breach of the TPP agreement occurred in 2010, well before the date he filed his previous action in 2012. (See Opp’n., p. 3:10-14.) As the facts underlying Hanna’s present causes of action for breach of contract and promissory estoppel constitute matter that was within the scope of the first action and could have been raised at that time, the first and second causes of action are barred by res judicata. Accordingly, the demurrer to the first and second causes of action for breach of contract and promissory estoppel is SUSTAINED WITHOUT LEAVE TO AMEND.

Third Cause of Action for Violation of Civil Code Section 2923.6

 

Wells Fargo demurs to the third cause of action for violation of Civil Code Section 2923.6 on the ground that it has already reviewed Hanna’s two previous loan modification requests and a further increase in his income is not a material change in his financial circumstances. Hanna acknowledges that, absent a substantial change in his financial circumstances, Wells Fargo had no duty to evaluate his third loan modification application. (See Opp’n., p. 6:10-16.) Nevertheless, he argues that his counsel’s letter documents a material change in his financial circumstances. (See Opp’n., p. 6:17-23.)

 

The letter of Hanna’s counsel provides little detail and no documentation of the purported increase in his household income. Thus, Hanna fails to allege that he documented a material change in his income and submitted this documentation to Wells Fargo. (See Ware v. Bayview Loan Servicing, LLC (S.D.Cal. Oct. 29, 2013, 13-CV-1310 JLS (NLS)) 2013 U.S.Dist. Lexis 163346 at pp. 14-15 [to accept letter without details or documentation at odds with purpose of Civil Code section 2923.6, subdivision (g), “which is meant to relieve mortgage services from evaluating multiple loan modification applications submitted for the purpose of delay.”].) Moreover, Hanna does not allege that he submitted a new loan modification application after his counsel sent the July 24, 2013 letter “documenting” the material change in his financial circumstances. (See Williams v. Wells Fargo Bank, N.A. (C.D.Cal. Jan. 27, 2014, EDCV 13-02075 JVS (DTBx)) 2014 U.S.Dist. Lexis 17215 at pp. 16-17 [loan servicer not required to reevaluate previous loan modification application after submission of documentation concerning material change in financial circumstances].) Therefore, Hanna fails to state facts sufficient to constitute a cause of action for violation of Civil Code section 2923.6, and the demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

Fourth Cause of Action for Negligence

Wells Fargo demurs to the fourth cause of action for negligence on the ground that, as Hanna’s lender, it does not owe him a duty of care. In opposition, Hanna argues that Wells Fargo owed him a duty of care not make misrepresentations designed to deceive Hanna into thinking a loan modification was imminent and foreclosure would be avoided.

 

Here, the alleged breaches of the duty of care fall squarely within the scope of a lending institution’s conventional role as a lender of money and cannot therefore form the basis of a negligence cause of action. (See Lueras v. BAC Home Loans Servicing, L.P. (2013) 221 Cal.App.4th 49, 67-68 [renegotiation of loan terms falls squarely within the scope of a lending institution’s conventional role as a lender of money and lender does not owe  borrower duty of care].)  Hanna relies upon Lueras, supra, for the proposition that a lender owes a duty to a borrower to not make material misrepresentations about the status of an application for a loan modification. (Lueras, supra, 221 Cal.App.4th at p. 68.) While this proposition is correct, the duty not to make a material misrepresentation forms the basis of a cause of action for negligent misrepresentation, not negligence. (Id. at p. 69 [reversing judgment sustaining demurrer to cause of action for negligence and remanding with directions to allow plaintiff to plead cause of action for negligent misrepresentation].) Accordingly, the demurrer to the fourth cause of action for negligence is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND to allow Hanna to plead a cause of action for negligent misrepresentation.

 

 

Fifth Cause of Action for Violation of Business and Professions Code Section 17200

 

As an initial matter, Wells Fargo contends that this cause of action is barred by res judicata because Hanna previously litigated this claim in his 2012 complaint in case number 112CV218677. In contrast to Hanna’s cause of action for breach of contract and promissory estoppel, Hanna could not have alleged all of his claims concerning the violation of Business and Professions Code section 17200 in the prior action. (See Neil Norman v. William Kasper & Co. (1983) 149 Cal.App.3d 942, 947 [“‘The doctrine of res judicata does not apply where there are changed conditions and new facts which were not in existence at the time of the prior judgment, and upon which such judgment was based.’ [Citation.]”.]) In particular, Hanna alleges that Wells Fargo engaged in the deceptive business practice of violating the Homeowner’s Bill of Rights by engaging in “dual tracking” and continues to charge improper, default-related fees. (See Compl., p. 35:3-6, 21.)  The Homeowner’s Bill of Rights did not go into effect until 2013. Therefore, Hanna could not have brought this claim in the original action. In addition, any additional default-related fees would constitute new facts not in existence at the time of the prior judgment. Accordingly, the defense of res judicata does not apply to this cause of action.

 

In addition, Wells Fargo demurs to Hanna’s cause of action for violation of Business and Professions Code section 17200 on the ground that each of the unfair practices alleged by Hanna could have been prevented had he continued to pay his mortgage and Hanna cannot show that he suffered an injury-in-fact as a result of Wells Fargo’s conduct. In opposition, Hanna contends that he has alleged an injury-in-fact due to being charges marked-up and unnecessary fees.

 

Hanna identifies two different injuries-in-fact, the imminent loss of his home, and the charging of marked-up and excessive fees. With regard to the loss of his home, Hanna fails to allege that he lost or will lose his home as a result of Well’s Fargo’s purportedly wrongful acts. In this regard, Hanna cannot establish a causal link between the alleged wrongful actions of Wells Fargo and the imminent loss of his house. (See Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 523 [holding plaintiff could not satisfy standing requirement for Bus. & Prof., § 17200 claim because default triggered the nonjudicial foreclosure which threatened to extinguish interest in subject property].) With regard to the charging of marked-up and excessive fees,  Hanna fails to plead facts which demonstrate that he has suffered an actual, realized injury as a result of the allegedly, marked-up fees as he does not allege that he has in fact paid any of these fees. Accordingly, the demurrer to the fifth cause of action for violation of Business and Professions Code section 17200 is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

Sixth Cause of Action for Accounting

 

Wells Fargo contends that complaint fails to state sufficient facts for a cause of action for an accounting because Hanna does not allege that some balance is due to him. Hanna does not allege that there is any balance due and owing to him. In this regard, he admits that he fell behind on his mortgage payments in 2009 (Compl., p. 15:19-23) and he has continued to fall behind on his mortgage payments to this date. (See Compl., p. 18:3:5.) Even assuming an equitable offset of any default-related charges and fees, some balance would be due Wells Fargo, not Hanna. (See Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179 [plaintiff must allege some balance due to him that can only be ascertained by accounting].)  Thus, Hanna fails to state facts sufficient to constitute a cause of action for an accounting. Accordingly, the demurrer to the sixth cause of action for an accounting is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.