Sutcliffe v. Wells Fargo Bank, N.A.
283 F.R.D. 533
N.D. Cal.2012Background
- Sutcliffes obtained a July 2006 loan for $140,000 with monthly payments around $1,180.
- They sought a modification due to financial hardship and received a Home Affordable Modification Program Trial Period (TPP) in December 2009.
- TPP outlined that a permanent modification would be provided if conditions were met and the borrower signed, with representations and documentation required.
- Sutcliffes made three trial payments, but Wells Fargo did not provide a permanent modification and issued default notices; various forbearance discussions followed.
- Wells Fargo sent multiple letters offering forbearance plans; Sutcliffes made additional reduced payments and faced foreclosure notices.
- Plaintiffs asserted class-wide UCL, breach of contract, and rescission/restitution claims based on the TPP and forbearance plans; Wells Fargo moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ripeness and mootness of claims | Claims ripe since default notices and foreclosures threatened relief. | Claims moot because permanent modification offered and accepted. | Ripeness not defeated; most claims not moot except rescission. |
| California law applicability to out-of-state plaintiffs | Alleged California conduct and Wells Fargo's California nexus support California law. | Non-residents; conduct outside California; apply choice-of-law. | California law may apply at pleading stage; factual questions remain. |
| UCL claim sufficiency | FDCPA, deceitful TPP/forbearance; unfair and fraudulent conduct stated. | UCL claims insufficiently pled with specificity and not ripe; FDCPA basis invalid. | UCL survives; FDCPA basis limited, others viable at pleading stage. |
| Breach of contract claim – existence of a contract | TPP terms, mutual assent, and consideration create a contract for permanent modification. | Contingent language negates binding contract; no definite modification terms. | Sufficient at pleading stage to allege mutual assent and a contract under TPP (with caveats). |
| Damages for breach of contract | Damages include more than reduced payments; future credit and loan amount effects. | Only reduced payments alleged; not cognizable damages. | Plaintiffs may amend to allege additional damages beyond reduced payments. |
| Preemption by National Bank Act (NBA) and HAMP overlap | State-law claims not preempted; remedies under state contract law exist alongside HAMP. | State-law claims improperly encroach on HAMP and lender servicing. | NBA preemption not apply to state-law claims; end-run around HAMP not accepted. |
Key Cases Cited
- Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012) (TPP can support contract claim; mutual assent and consideration at pleading stage)
- Gaudin v. Saxon Mortgage Services, Inc., 820 F. Supp. 2d 1051 (N.D. Cal. 2011) (Modification not conditioned on receipt of signed agreement; TPP can create contract)
- Nungaray v. Litton Loan Servicing, LP, 200 Cal.App.4th 1499 (Cal.App. 2011) (Summary judgment: language did not create a contract for permanent modification)
- Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214 (Cal.App. 1999) (California choice-of-law: out-of-state harms require California conduct for statutory claims)
- Lucia v. Wells Fargo Bank, N.A., 798 F. Supp. 2d 1059 (N.D. Cal. 2011) (Favoring contracting interpretation under TPP; contract formation analysis)