101 F. Supp. 3d 938
E.D. Cal.2015Background
- Meixner obtained a 2005 mortgage from Wells Fargo secured by a deed of trust; he defaulted in 2008 and sought a HAMP loan modification beginning in 2009.
- Wells sent a HAMP Trial Period Plan (TPP) and Meixner made the required trial payments, while Wells repeatedly represented his file was under review and that a permanent modification would follow if conditions were met.
- Wells ultimately denied the modification (citing net present value/income issues), proceeded with nonjudicial foreclosure, and the property was sold in June 2012.
- Meixner sued Wells and HSBC (trustee for GSAA Home Equity Trust 2005-7) asserting claims including breach of contract (TPP), promissory estoppel, negligence, intentional/negligent misrepresentation, wrongful foreclosure, conversion, UCL, unjust enrichment, and accounting.
- Defendants moved to dismiss; the court evaluated pleadings under Twombly/Iqbal and HAMP/TPP precedent and denied dismissal of most claims, deferred ruling on securitization-based wrongful foreclosure and related counts pending the California Supreme Court’s decision in Yvanova, and dismissed unjust enrichment without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TPP created an enforceable contract (breach of contract) | TPP is a contract; Meixner qualified for HAMP and made required payments, entitling him to a permanent modification | TPP is conditional; plaintiff failed to plead he actually qualified for a permanent modification | Denied dismissal — court finds plaintiff plausibly alleged qualification and performance so breach claim survives |
| Promissory estoppel based on TPP and oral promises | Meixner reasonably relied on clear promises to his detriment by making TPP payments and foregoing alternatives | Promises were too conditional to be definite; reliance unreasonable | Denied dismissal — promise sufficiently definite and reliance reasonable/foreseeable |
| Negligence in handling modification application (duty of care) | Servicer undertook to consider modification, creating a special relationship and duty to exercise reasonable care | Lender owes no general duty in loan-modification context (cites Lueras) | Denied dismissal — court adopts Alvarez approach and finds duty plausibly pled when servicer agreed to consider modification |
| Fraud / negligent misrepresentation (Rule 9(b)) | Wells and agents made false factual statements (e.g., approval, income calculations, advising to stop payments) inducing reliance and damages | Allegations are opinion/too vague and not pleaded with particularity | Denied dismissal — court finds particularized allegations (who, what, when, where, how) adequate under Rule 9(b) |
| Wrongful foreclosure / securitization challenge (standing to attack REMIC/PSA transfers) | HSBC lacked valid title/beneficial interest due to late transfers; Meixner can challenge chain-of-title | Third parties lack standing to challenge PSA/securitization; claim fails as a matter of law | Decision deferred — court follows majority rule but awaits California Supreme Court in Yvanova before resolving |
| Conversion & equitable accounting based on securitization theory | Payments were collected by parties without legal right (HSBC not true beneficiary); accounting necessary to determine funds owed | Claims rest on securitization defects and lack standing; premature | Deferred — tied to Yvanova outcome |
| Unjust enrichment as independent cause of action | Meixner seeks restitution for benefits retained by defendants | California does not recognize unjust enrichment as standalone when another remedy exists | Granted dismissal without prejudice — claim dismissed but leave to amend allowed |
| UCL (Bus. & Prof. Code §17200) | Predicated on underlying unlawful/unfair/fraudulent conduct (misrepresentations, breach) | UCL fails if underlying claims fail; challenge to pleading specificity | Denied dismissal — UCL claim survives because underlying tort/contract claims were plausibly pled |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (establishes Iqbal/Twombly plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must contain factual content permitting plausible inference of liability)
- Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013) (HAMP TPP may be an enforceable contract requiring permanent modification upon performance)
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (TPP promises can create enforceable obligations; reliance on trial-period performance may be protected)
- Bushell v. JPMorgan Chase Bank, N.A., 220 Cal. App. 4th 915 (2013) (California appellate recognition that compliance with a TPP can obligate lender to offer permanent modification)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49 (2013) (held lender generally owes no duty of care for loan modification; discussed as contrasting authority)
- Alvarez v. BAC Home Loans Servicing, LP, 228 Cal. App. 4th 941 (2014) (adopted by this court: servicer’s agreement to consider modification can create a special relationship and duty of care)
- Biakanja v. Irving, 49 Cal.2d 647 (1957) (sets out factors for determining existence of duty in negligence actions involving third parties)