Subramani v. Wells Fargo Bank, N.A.
3:13-cv-01605
N.D. Cal.Oct 31, 2013Background
- Plaintiff Karthik Subramani obtained a $479,600 adjustable-rate mortgage on residential property in October 2006; Wells Fargo was the original lender and Fidelity National Title Insurance Company was original trustee.
- Plaintiff alleges Wells Fargo sold the loan into a mortgage-backed trust (WFMBS 2006-AR18) around October 24, 2006 and failed to assign or endorse the note/DOT properly, breaking the chain of title.
- Notices of default, substitutions of trustee, a notice of trustee sale, and a trustee’s deed upon sale were recorded between 2009 and 2012; the property was sold in a nonjudicial foreclosure sale in August 2012.
- Plaintiff sued alleging wrongful foreclosure, constructive fraud, cancellation of fraudulent instruments, violations of Cal. Civ. Code § 2934a(a)(1)(A), unjust enrichment, TILA violations, UCL claims, and declaratory relief.
- Wells Fargo moved to dismiss; the court evaluated standing to challenge securitization/PSA-related defects, pleading standards (Rules 8, 9(b)), tender rule issues, and statute of limitations for TILA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Wrongful foreclosure / standing to foreclose | Wells Fargo lost beneficial interest when it sold the loan and thus had no right to foreclose; procedural defects and improper SOTs/NODs render sale void | Securitization/PSA issues cannot be challenged by a non-party; securitization alone doesn’t defeat foreclosure | Court denied dismissal as to wrongful foreclosure except to the extent claim relies on PSA/third-party agreements; plaintiff plausibly alleged defective chain of title and wrong party actions |
| Tender rule / relief to set aside sale | Tender not required where foreclosure is void (e.g., wrong trustee) | Plaintiff failed to allege tender, so claims to set aside sale should be dismissed | Court declined to dismiss for lack of tender because plaintiff alleged foreclosure may be void |
| Cancellation of instruments (Cal. Civ. Code § 3412) | SOTs, TDUS and related documents are void and should be cancelled | Claims depend on securitization/standing defects and should be dismissed | Claim survives except to the extent it relies on Cal. Civ. Code § 2932.5 (which doesn’t apply to deeds of trust) |
| Constructive fraud (fiduciary duty; Rule 9(b)) | Wells Fargo knowingly acted without beneficial interest, concealed facts, accepted payments, and committed fraud | No fiduciary relationship; allegations are conclusory and fail Rule 9(b) | Claim dismissed with leave to amend: plaintiff must plead fiduciary relationship or facts showing lender exceeded ordinary role and must satisfy Rule 9(b) |
| Cal. Civ. Code § 2934a(a)(1)(A) re: Substitution of Trustee | Recorded substitutions were ineffective | Wells Fargo properly caused a substitution to be recorded and complied with the Code | Claim dismissed with prejudice — procedural requirements were met |
| Unjust enrichment | Wells Fargo accepted payments to which it was not entitled because loan/contract was void | Quasi-contract is not a separate cause of action; repayment obligation existed | Court allowed unjust enrichment claim to proceed (permissible quasi-contract theory here) |
| TILA; FDCPA allegations | Defendants failed to record proper lender documents, rendering disclosures defective | TILA claim is time-barred; FDCPA inapplicable because defendant is not a debt collector and nonjudicial foreclosure is not debt collection | TILA claim dismissed with leave to amend to address tolling; FDCPA-based portion and related TILA theory dismissed with prejudice as time-barred/inapplicable |
| UCL (fraud, unfair, unlawful) | Defendant engaged in deceptive practices and consumer deception | Plaintiff fails to plead predicate violations or damages sufficiently | UCL fraud prong survives; unfair and unlawful prongs dismissed with leave to amend for specificity |
| Declaratory relief | Plaintiff seeks declaration of rights and injunction | Declaratory relief is a remedy, not a standalone cause of action | Claim dismissed with prejudice |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal conclusions vs. factual allegations under Rule 8)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Jenkins v. J.P. Morgan Chase Bank, N.A., 216 Cal. App. 4th 497 (third-party lacks standing to enforce PSA/securitization agreements)
- Glaski v. Bank of America, N.A., 218 Cal. App. 4th 1079 (contrasting, minority view on trustee acceptance after trust closing date)
- Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089 (financial institution generally owes no fiduciary duty in ordinary lending role)
- Barrionuevo v. Chase Bank, N.A., 885 F. Supp. 2d 964 (wrongful foreclosure plausibility when chain of title defects alleged)
- King v. California, 784 F.2d 910 (TILA equitable tolling principles)