Rockridge Trust v. Wells Fargo, N.A.
2013 U.S. Dist. LEXIS 139606
| N.D. Cal. | 2013Background
- Shahani obtained a $755,250 refinance in 2007; loan became delinquent and he repeatedly sought loan modifications from 2009–2013 while foreclosure proceedings moved forward.
- Multiple foreclosure-related instruments were recorded (NOD, substitutions of trustee, assignment, notices of trustee’s sale) and the property was sold at trustee’s sale on March 4, 2013; plaintiffs allege defendants lacked authority and committed multiple statutory and common-law violations.
- Plaintiffs filed a First Amended Complaint asserting 18 causes of action (federal FDCPA and ECOA claims plus numerous state claims including wrongful foreclosure, breach of oral contract, HBOR/HAMP-related claims, fraud, negligent misrepresentation, quiet title, slander/cancellation of instruments, UCL, etc.).
- Wells Fargo and Bank of America moved jointly to dismiss; First American moved separately. The magistrate judge considered prior dismissal and leave to amend and the same recorded documents judicially noticed previously.
- Court exercised federal-question jurisdiction over FDCPA and ECOA claims, dismissed some claims with prejudice, dismissed others with leave to amend, denied dismissal of FDCPA and Rosenthal Act claims as to Wells Fargo, and dismissed FDCPA claim as to First American (leave to amend for FDCPA against First American).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FDCPA applicability (Wells Fargo) | Wells Fargo acted as debt collector/servicer and used deceptive collection tactics during modification review, inducing payments | Foreclosure is not "debt collection"; servicer activity was ordinary foreclosure/modification handling, not FDCPA conduct | Denied dismissal as to Wells Fargo: allegations plausibly plead Wells Fargo as a debt collector under §1692a(6) and deceptive collection during modification review survives at pleading stage |
| FDCPA applicability (First American) | First American engaged in debt collection by recording NOD and foreclosure instruments | Its actions were routine statutory foreclosure acts not covered by FDCPA | Granted dismissal as to First American FDCPA claim; leave to amend permitted with specific facts alleging non‑statutory collection conduct |
| ECOA claim | Defendants revoked or changed credit/terms (modification/payment acceptance then rejection) without required adverse‑action notice | Plaintiffs were in default or otherwise no actionable "revocation"; no protected‑class discrimination pled; actions were not ECOA adverse acts | ECOA claim dismissed with leave to amend: facts as pled do not show an ECOA adverse action/notice violation (no showing credit was extended then revoked while not in default) |
| Wrongful foreclosure / HBOR / dual‑tracking / notice violations | Defendants dual‑tracked, failed to follow HBOR notice/appeal/single‑point‑of‑contact rules, recorded defective instruments, and thus sale is void | Many challenged recordings pre‑date HBOR; many statutory provisions don’t create private remedy to unwind completed sale; plaintiffs lack prejudice/tender; some statutory limits apply (e.g., §2923.6(g)) | Mixed: claims based on pre‑2013 statutory notice irregularities and on §2923.6 net‑present‑value theory, and certain statutory causes dismissed with prejudice; some HBOR‑based and single‑point/late‑fee theories survived or were left with leave to amend; many foreclosure‑process irregularity claims dismissed for failure to allege prejudice or other elements |
| Security‑first rule (CCP §726) | Payments made during modification negotiations violated security‑first rule, rendering DOT void | Payments were voluntary under modification negotiations; rule does not apply to these facts | Dismissed with prejudice—Mehta line controls: allegations show voluntary payments and no impermissible setoff or pursuit of borrower’s assets |
| Fraud / negligent misrepresentation / conspiracy / slander / cancellation / quiet title | Defendants made false promises, misrepresented ownership/status, conspiratorial scheme; recordings were false or unauthorized so title should be quieted/cancelled | Pleadings are conclusory, fail Rule 9(b) particularity for fraud, fail to allege authority absence or prejudice, tender requirement or lack of standing defeats some relief | Many common‑law fraud/conspiracy/slander/cancellation claims dismissed (some with leave to amend, some with prejudice). Fraud/negligent‑misrepresentation dismissed for lack of particularity; conspiracy dismissed with prejudice; quiet title, slander, cancellation dismissed with leave to amend but tender/authority issues require more facts |
| UCL and Rosenthal Act | Conduct was unlawful, unfair, fraudulent; Rosenthal incorporated FDCPA violations and independently alleged unfair debt collection | Underlying claims largely fail or are inapplicable to some defendants; Rosenthal/ UCL cannot survive without predicate violations or standing | UCL allowed to the extent tied to surviving federal/state claims (survived against Wells Fargo for unlawful prong tied to FDCPA/Rosenthal/HBOR predicates); Rosenthal Act claim survives as to Wells Fargo; dismissed as to defendants lacking conduct allegations |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state plausible claim to survive dismissal)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (court must accept well‑pleaded facts and reject legal conclusions)
- Schlegel v. Wells Fargo Bank, N.A., 720 F.3d 1204 (9th Cir. 2013) (standards for servicer as "debt collector" and ECOA/FDCPA analyses)
- Mehta v. Wells Fargo Bank, N.A., 737 F.Supp.2d 1185 (S.D. Cal. 2010) (security‑first rule and voluntary modification payments)
- Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal.App.3d 1089 (1991) (limitation on lender duty—when lender’s role is conventional money‑lender)
- Lona v. Citibank, N.A., 202 Cal.App.4th 89 (2011) (elements of wrongful foreclosure claim and tender discussion)