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 first amended complaint (“FAC”) of plaintiff Foaad Hanna (“Hanna”).  Wells Fargo demurs to each cause of action asserted in the FAC on the ground that Hanna fails to allege facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).)

Procedural Matter

 

In his opposition, Hanna requests leave to amend the FAC in order to allege a cause of action for negligence. In order to seek leave to amend, a party must file a formal motion that complies with California Rules of Court, rule 3.1324, which requires, among other things, the moving party to provide a copy of the proposed amendment and a supporting declaration indicating why the amendment is necessary. Here, Hanna has not filed a formal motion and does not submit a copy of the proposed amendment or a supporting declaration. Accordingly, the request for leave to amend is DENIED WITHOUT PREJUDICE.

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; (2) a copy of the order on Wells Fargo’s demurrer to the complaint; (3) a copy of a deed of trust, recorded on November 7, 2006; and (4) a copy of a notice of default, recorded on July 27, 2009.

 

Pursuant to Evidence Code section 452, subdivision (d), a trial court may properly take judicial notice of the records of any state or federal court. A court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914.)

 

With regard to the complaint and order on Wells Fargo’s demurrer, these documents are court records and are relevant to the issues to be decided in this demurrer. 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.) Here, Hanna does object to the request for judicial notice. Thus, Wells Fargo’s request for judicial notice as to these recorded documents is GRANTED.

First Cause of Action for Violation of Civil Code Section 2923.6

 

Wells Fargo first argues that Hanna is merely submitting loan modification applications for the purpose of delay and he is “is not entitled to a third evaluation simply to delay foreclosure.” (Mem. Ps. & As., p. 5:2-3.) Wells Fargo, however, fails to demonstrate, based on the allegations of the FAC and judicially noticeable matter, that Hanna submitted his third loan modification application solely for the purposes of delay. Thus, this argument lacks merit.

 

Next, Wells Fargo contends that the increase in Hanna’s income does not constitute a material change in his financial circumstances for the purposes of section 2923.6. It asserts that Hanna alleged in his original complaint that his second loan modification application was rejected on the ground that his income was too high. Wells Fargo reasons that a further increase in Hanna’s income would not change its evaluation of Hanna’s eligibility for a loan modification. In opposition, Hanna asserts that there is no authority for the proposition that subdivision (g) does not apply if the lender believes that the change in financial circumstances is not material.

 

Given the relative youth of the Homeowner’s Bill of Rights (“HBOR”), no California appellate court has defined what constitutes a material change in a borrower’s financial circumstances. Federal trial courts in California have generally found that increases in monthly income and decreases in expenses constitute a “material change” in financial circumstances for the purposes of the statute. (See Gilmore v. Wells Fargo Bank N.A. (N.D.Cal. June 5, 2014, C 14-2389 CW) 2014 U.S.Dist. Lexis 78358 [increase in income and $1,000 decrease in expenses a “material change” for purposes of temporary restraining order]; Rosenfeld v. Nationstar Mortg., LLC (C.D.Cal. February 3, 2014, 2:13-cv-04830-CAS-CWx) 2014 U.S.Dist. Lexis 14034 [elimination of credit card debt “material change” for purposes of motion to dismiss]; Vasquez v. Bank of America, N.A. (N.D.C.D. Nov. 12, 2013, 13-cv-02902-JST) 2013 U.S.Dist. Lexis 161244 [$2,400 monthly increase in income a “material change”].)  However, in each of these cases, the plaintiff did not allege the reason for the denial of the previous application or alleged that the lender denied the previous application on the ground that the plaintiff’s income was too low. Thus, these cases are inapposite to the instant action where Hanna’s previous application was denied on the ground that his income was too high.

 

In Caldwell v. Wells Fargo (N.D.Cal. July 16, 2013, 13-CV-1344-LHK) 2013 U.S.Dist. Lexis 100107, the federal district court took a more nuanced view of materiality under Civil Code section 2923.6, subdivision (g), finding that even a substantial increase in income did not necessarily constitute a material change for the purposes of a temporary restraining order. After making a number of loan modification applications which her lender denied, the plaintiff submitted a new loan modification application based on a 70% increase in her income. Her lender declined to review the application, in part, because the increase in income did not constitute a material change in her financial circumstances which would make her eligible for a new first lien loan modification review. The plaintiff sought a temporary restraining order to enjoin a trustee’s sale until her lender reviewed her application. The district court denied the temporary restraining order, reasoning that even if the plaintiff had experienced a 70% increase in income, Wells Fargo could determine that this change was not sufficiently material to warrant granting a loan modification. Thus, the Caldwell court appears to have measured the materiality of the change in financial circumstances by determining whether the change would affect the lender’s decision-making process in determining whether to grant a loan modification..

 

Here, Hanna affirmatively alleged in his original complaint that Wells Fargo denied his second loan modification application on the ground that his income was too high. (Compl., ¶ 77.) However, the basis for the submission of his third loan modification was that his financial circumstances improved. (FAC, ¶ 40.) Given the denial of his previous loan modification application on the ground that his income was too high, information indicating that his income continues to increase would not affect Wells Fargo’s decisionmaking-process in determining whether to grant a loan modification. Therefore, Hanna’s improved financial circumstances do not constitute a material change for the purposes of Civil Code section 2923.6, subdivision (g).

 

In light of the foregoing, Hanna fails to state facts sufficient to constitute a cause of action for violation of Civil Code section 2923.6. Accordingly, the demurrer to the first cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

Second Cause of Action for Negligent Misrepresentation
Wells Fargo contends that Hanna does not allege this cause of action with the requisite specificity. In opposition, Hanna does not address this argument.
“Fraud must be pleaded with specificity rather than with ‘general and conclusory allegations.’ [Citation.] The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.) A cause of action for negligent misrepresentation must be pleaded with the same level of specificity. (Id.)

 

Here, Hanna does not allege how, where, to whom and by what means Wells Fargo’s misrepresentation was made. Thus, Hanna fails to allege sufficient facts to state a cause of action for negligent misrepresentation. Accordingly, the demurrer to the second cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

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

 

Wells Fargo contends that Hanna cannot show that he suffered an injury-in-fact as a result of Wells Fargo’s conduct. In opposition, Hanna argues that he has alleged an injury-in-fact due to being charged marked-up and unnecessary fees.

 

Hanna alleges two separate injuries-in-fact: (1) the imminent loss of his home from foreclosure and (2) 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. As an initial matter, Hanna alleges no facts indicating that a foreclosure has taken place. In any case, Hanna acknowledges that, due to a significant financial setback in 2009, he defaulted on his loan and stopped making mortgage payments. (FAC, ¶ 37.) It is undisputed that this default triggered the power of sale clause that subjected his home to nonjudicial foreclosure and the default occurred prior to the alleged unfair, unlawful and fraudulent acts he alleges as the basis of his UCL claim. As his home is subject to nonjudicial foreclosure due to the default five years ago, he cannot assert that the impending foreclosure sale of his home was caused by Wells Fargo’s actions. Thus, 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 [plaintiff must allege causal link between unlawful actions and injury-in-fact].)

 

With regard to the charging of unnecessary and unreasonable fees, Hanna relies on Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1383-1384, for the proposition that a plaintiff adequately alleges standing where he or she is promised services at a regular rate, but is charged a higher rate. Hale, supra, is distinguishable from the present matter. In Hale, the plaintiff alleged that she actually paid some of the fees at issue. (Id. at p. 1383.) In contrast, Hanna fails to plead facts which demonstrate that he has suffered an actual, realized injury as a result of the allegedly marked-up fees and does not allege that he has in fact paid any of these fees. Accordingly, as Hanna fails to allege an injury-in-fact or that he lost money or property as a result of unfair competition, he does not state facts sufficient to constitute a cause of action for a violation of Business and Professions Code section 17200.

 

Accordingly, the demurrer to the third cause of action for violation of Business and Professions Code section 17200 is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

Fourth Cause of Action for Accounting

 

Wells Fargo contends that the FAC fails to allege sufficient facts to state a cause of action for an accounting because Hanna does not allege that some balance is due to him.

 

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.)

 

Hanna alleges that some of Wells Fargo’s $21,144.75 claim against him includes improper default-related charges and fees. (FAC, ¶ 105.) Nevertheless, 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 (FAC, ¶ 37) and he has continued to fall behind on his mortgage payments to this date (FAC, ¶ 33). Even assuming an equitable offset of any default-related charges and fees, some balance would be due Wells Fargo, not Hanna. Thus, Hanna fails to state facts sufficient to constitute a cause of action for an accounting.

 

Hanna provides no indication in his opposing papers, nor is it readily apparent, how the foregoing deficiency can be remedied by amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [burden on plaintiff to establish he can amend pleading and how amendment changes legal effect of pleading].) Accordingly, the demurrer to the fourth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.