Horton v. Wells Fargo Bank, N.A.
703 F. App'x 23
| 2d Cir. | 2017Background
- Plaintiff Lovella Horton owned a California residential property that underwent nonjudicial foreclosure; she sought a loan modification during the foreclosure process.
- Horton sued Wells Fargo and The Bank of New York (trustee) asserting claims including declaratory relief, constructive fraud, TILA, slander of title, and violations of California’s Homeowner Bill of Rights (HBOR).
- The U.S. District Court for the Southern District of New York dismissed Horton’s amended complaint and denied leave to amend a second time.
- On appeal, Horton challenged dismissal of declaratory relief, constructive fraud, and HBOR (dual-tracking) claims, and the denial of further leave to amend; she abandoned TILA and slander-of-title claims.
- The Second Circuit affirmed, concluding Horton failed to plead facts sufficient to survive dismissal and that amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Declaratory relief re: assignment of note vs. deed of trust | Horton argued the note was improperly assigned without a corresponding assignment of the deed of trust, invalidating the foreclosure | Defendants argued under California law the deed of trust follows the note and separate assignment of the deed is unnecessary | Dismissed: California law (Yvanova) treats the deed of trust as inseparable from the note, so Horton's theory fails |
| Constructive fraud (failure to plead with particularity) | Horton alleged misconduct during loan-modification and foreclosure process amounting to constructive fraud | Defendants argued Horton did not identify specific misstatements/omissions or show reliance required under Rule 9(b) | Dismissed: Pleading failed to satisfy Rule 9(b) particularity and causation/reliance requirements |
| HBOR dual-tracking (Cal. Civ. Code § 2923.6) | Horton claimed defendants pursued foreclosure while a loan modification application was pending | Defendants argued Horton did not allege she submitted a complete application or when it became complete, nor that she qualified for modification | Dismissed: Complaint did not allege a complete application or sufficient facts to show a pending modification under HBOR |
| Leave to amend (futility) | Horton sought further leave to cure pleading defects | Defendants opposed; district court denied further leave as futile | Affirmed: Appellant offered no plausible way to cure defects; denial of leave to amend was not an abuse of discretion |
Key Cases Cited
- Yvanova v. New Century Mortg. Corp., 365 P.3d 845 (Cal. 2016) (deed of trust follows the note; separate assignment of deed not required)
- Stevelman v. Alias Research Inc., 174 F.3d 79 (2d Cir. 1999) (standard of de novo review for pleadings)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) (applying Rule 9(b) pleading requirements to state and federal claims)
- ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (Twombly pleading standard applied to raise claim above speculative level)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Balintulo v. Ford Motor Co., 796 F.3d 160 (2d Cir. 2015) (de novo review for denial of leave to amend based on futility)
- F5 Capital v. Pappas, 856 F.3d 61 (2d Cir. 2017) (plaintiff must indicate how amendment would cure pleading defects)