Hill v. Wells Fargo Bank, N.A.

• Court: District Court, D. Nevada
• Decided: October 21, 2019
• Docket: 2:18-cv-01350
• Status: Unknown

Opinion

3 UNITED STATES DISTRICT COURT

4 DISTRICT OF NEVADA

5 * * *

6 MICHAEL HILL, Case No. 2:18-cv-01350-MMD-BNW

7 Plaintiff, ORDER 8 v.

9 WELLS FARGO BANK, N.A., et al.,

10 Defendants.

11 12 I. SUMMARY 13 This case arises out of an alleged failure to modify a home loan. Plaintiff Michael 14 Hill sued Defendants Wells Fargo Bank, N.A. (“Wells Fargo”) and U.S. Bank National 15 Association (“U.S. Bank”) after they foreclosed on his home despite alleged promises not 16 to foreclose after Plaintiff repeatedly explained to Defendants’ representatives over the 17 phone that his house was essentially uninhabitable because it was constructed of ‘toxic 18 Chinese drywall’ and included a faulty heating and cooling system. (ECF No. 48 (“FAC”).) 19 Before the Court is Defendants’ motion to dismiss Plaintiff’s FAC for failure to state a claim 20 as to three of Plaintiff’s four asserted claims (the “Motion”).1 (ECF No 57.) Because 21 Plaintiff’s claims for breach of contract, breach of the implied covenant of good faith and 22 fair dealing, and promissory estoppel fail as a matter of law—and as further explained 23 below—the Court will grant the Motion. 24 /// 25 /// 26 27 28 1The Court has also reviewed Plaintiff’s response (ECF No. 67), and Defendants’ 1 II. BACKGROUND 2 A. Allegations in the FAC 3 Plaintiff purchased the property located at 3432 Big Stomp Court, Las Vegas, 4 Nevada, 89129 (the “Home”). (ECF No. 48 at 2.) To do so, he obtained a mortgage from 5 the Concord Mortgage Company for $191,760.00 (“Loan”). (Id.) The beneficial interest in 6 the Loan was assigned to Defendant U.S. Bank. (Id. at 2-3.) Defendant Wells Fargo 7 purchased the servicing rights to the Loan. (Id. at 3.) Plaintiff noticed a chemical odor 8 circulating throughout the Home after he purchased it, which adversely impacted his 9 health. (Id.) Between 2006 and 2010, the Home’s builder and Plaintiff discovered issues 10 with the Home’s forced air units, and that it contained “hazardous-to-health Chinese 11 Drywall, as well as otherwise defective and toxic drywall.” (Id.) 12 Beginning on February 16, 2010, Plaintiff communicated with Wells Fargo about 13 the issues with the Home—he told a Wells Fargo representative that they were forced to 14 leave their Home because its toxic environment was harming their health. (Id.) Plaintiff 15 “pleaded with Wells Fargo that, while he could afford his mortgage payments and he could 16 afford alternative accommodations, he could not afford them both simultaneously.” (Id.) 17 Over the next several years, he spoke with different Wells Fargo representatives who 18 made him explain his story each time he called. (Id. at 4.) At one point,2 a Wells Fargo 19 representative told Plaintiff Wells Fargo would not foreclose on his Home, take any 20 adverse action against him, or require him to submit more financial information to Wells 21 Fargo. (Id.) In 2013, Wells Fargo representatives pressured Plaintiff to say he still lived in 22 the Home on a “Request for Mortgage Assistance Form,” even though he had moved out. 23 (Id.) Wells Fargo called Plaintiff on the phone even though he asked that all 24

25 2There is a discrepancy in the dates alleged in the FAC. Plaintiff alleges he first 26 contacted Wells Fargo to discuss the issues with the Home on February 16, 2010 (ECF No. 48 at 3), but also alleges that in “early 2009, Wells Fargo assured [Plaintiff] that it 27 would not require him to furnish any further financial information and that Wells Fargo would not seek foreclosure, nor take any detrimental action against [Plaintiff], nor his 28 defectively built home.” (Id. at 4.) The Court will address this discrepancy in more detail 1 communications with him be in writing. (Id.) Wells Fargo also “used Mr. Hill’s refusal to 2 perjure himself on the Request for Mortgage Assistance Form as an excuse to not undergo 3 Nevada required mediation.” (Id.) 4 “Despite its repeated assurances that it would not initiate any adverse action until 5 after [Plaintiff’s] home was repaired, Wells Fargo foreclosed on the Home on January 5, 6 2017.” (Id.) Plaintiff asserts claims for: (1) breach of contract; (2) breach of the implied 7 covenant of good faith and fair dealing; (3) violation of NRS § 107.540; and (4) promissory 8 estoppel. (Id. at 4-10.) 9 B. Procedural History 10 Plaintiff initially filed this case in state court. (ECF No. 1-1.) Defendants removed it 11 to this Court. (ECF No. 1.) Plaintiff’s Complaint included claims for: (1) breach of contract; 12 (2) breach of the implied covenant of good faith and fair dealing; (3) breach of fiduciary 13 duty against Wells Fargo; (4) violation of Nevada Foreclosure Mediation Rules; (5) 14 violation of NRS § 107.540; (6) negligence, negligent hiring, retention, and supervision; 15 (7) economic duress; and (8) declaratory relief. (ECF No. 1-1 at 6-14.) Defendants moved 16 to dismiss the Complaint, and filed a corresponding request for judicial notice.3 (ECF Nos. 17 5, 6.) The Court held a hearing on that motion, where the Court granted in part and denied 18 in part Defendants’ motion to dismiss, and granted the request for judicial notice. (ECF 19 No. 45.) 20 Per the Court’s order at that hearing, Defendants submitted (ECF No. 54), and the 21 Court accepted (ECF No. 56), a proposed order granting Defendants’ motion to dismiss 22 and request for judicial notice. The Court specifically dismissed most of Plaintiff’s claims 23 asserted in the Complaint with prejudice. (Id. at 2.) However, the Court granted Plaintiff 24 leave to amend his claims for breach of contract, breach of the implied covenant of good 25 faith and fair dealing, and violation of NRS § 107.540. (Id.) Plaintiff’s FAC followed (ECF 26

27 3Defendant MTC Financial, Inc. also moved to dismiss the Complaint. (ECF No. 28 14.) The Court also granted that motion to dismiss with prejudice. (ECF Nos. 45, 53.) 1 No. 48), where, as noted, Plaintiff alleges violation of those three claims and a claim for 2 promissory estoppel (id.). In their Motion, Defendants move to dismiss Plaintiff’s claims for 3 breach of contract, breach of the implied covenant of good faith and fair dealing, and 4 promissory estoppel, but not for violation of NRS § 107.540. (ECF No. 57.) 5 After Defendants filed the Motion, the parties filed a joint request for a settlement 6 conference. (ECF Nos. 60, 69.) The Court eventually granted that request. (ECF No. 71.) 7 The settlement conference occurred on July 10, 2019, but did not result in settlement. 8 (ECF No. 79.) 9 III. LEGAL STANDARD 10 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 11 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide “a 12 short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. 13 R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 14 does not require detailed factual allegations, it demands more than “labels and 15 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 16 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “Factual allegations 17 must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to 18 survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a 19 claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (internal citation omitted). 20 In Iqbal, the Supreme Court clarified the two-step approach district courts are to 21 apply when considering motions to dismiss. First, a district court must accept as true all 22 well-pled factual allegations in the complaint; however, legal conclusions are not entitled 23 to the assumption of truth. See id. at 678-79. Mere recitals of the elements of a cause of 24 action, supported only by conclusory statements, do not suffice. See id. at 678. Second, 25 a district court must consider whether the factual allegations in the complaint allege a 26 plausible claim for relief. See id. at 679. A claim is facially plausible when the plaintiff’s 27 complaint alleges facts that allow a court to draw a reasonable inference that the 28 defendant is liable for the alleged misconduct. See id. at 678. Where the complaint does 1 not permit the court to infer more than the mere possibility of misconduct, the complaint 2 has “alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 3 (internal quotation marks omitted). That is insufficient. A complaint must contain either 4 direct or inferential allegations concerning “all the material elements necessary to sustain 5 recovery under some viable legal theory.” Twombly, 550 U.S. at 562 (quoting Car Carriers, 6 Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1989)) (emphasis in original). When 7 the claims in a complaint have not crossed the line from conceivable to plausible, the 8 complaint must be dismissed. See Twombly, 550 U.S. at 570. 9 IV. DISCUSSION 10 As noted, Defendants move to dismiss three of the four claims Plaintiff asserts in 11 the FAC. The Court addresses Defendants’ Motion as to each of the three claims in turn, 12 below. The Court will grant the Motion. 13 A. Breach of Contract 14 A breach of contract claim requires a plaintiff to show: (1) the existence of a valid 15 contract; (2) a breach by the defendant; and (3) damage because of the breach. See Saini 16 v. Int’l Game Tech., 434 F. Supp 2d 913, 919-20 (D. Nev. 2006) (citing Richardson v. 17 Jones, 1 Nev. 405, 405 (Nev. 1865)). To create an enforceable contract there must be an 18 “offer and acceptance, meeting of the minds, and consideration.” May v. Anderson, 119 19 P.3d 1254, 1257 (Nev. 2005) (citation omitted). 20 Defendants argue Plaintiff’s breach of contract claim should be dismissed for a 21 second time because Plaintiff fails to allege he provided adequate consideration for a 22 modified agreement, and because Plaintiff’s claim is barred by the statute of frauds. (ECF 23 No. 57 at 4-5.) Plaintiff responds he provided adequate consideration for Wells Fargo’s 24 agreement not to foreclose on his Home—saving Wells Fargo foreclosure costs, and 25 giving Wells Fargo the opportunity to require Plaintiff to take certain actions as part of a 26 loan modification. (ECF No. 67 at 4-5.) The Court agrees with Defendants that Plaintiff 27 fails to allege he provided adequate consideration for Wells Fargo’s agreement not to 28 foreclose. 1 Plaintiff specifically alleges that terms “added in writing” to his mortgage agreement 2 with Defendants after its execution provided that Wells Fargo would not foreclose on his 3 Home. (ECF No. 48 at 4-5.) He further alleges the consideration he provided for this 4 agreement was that Wells Fargo could retain a customer, and he could continue paying 5 his mortgage and fees that had accumulated. (Id. at 5.) And he alleges that Defendants 6 breached that agreement when they foreclosed on his Home. (Id. at 5.) 7 The Court will dismiss Plaintiff’s breach of contract claim for two alternative 8 reasons. First, Plaintiff’s alleged consideration is inadequate. Plaintiff was already 9 obligated to pay his mortgage and corresponding fees when he entered into the 10 modification agreement with Wells Fargo. (ECF No. 6-1 at 5, 11.)4 Thus, agreeing to pay 11 his mortgage and corresponding fees cannot, and does not, constitute adequate 12 consideration for the modification agreement. See Jordan v. Bank of Am., Case No. 3:13- 13 CV-00058-MMD, 2013 WL 5308268, at *3 (D. Nev. Sept. 19, 2013) (“Plaintiffs were not 14 undertaking any action that they were not otherwise required to perform and thus the 15 payment is not consideration for a contract not to foreclose.”); see also Nurczewska v. 16 Fed. Home Loan Mortg., 528 F. App’x 710, 711 (9th Cir. 2013) (affirming dismissal of first 17 amended complaint with prejudice and finding the plaintiff’s breach of contract claim failed 18 for lack of consideration). The alleged modification agreement is therefore not a valid 19 contract. See May, 119 P.3d at 1257 (stating that a valid contract requires consideration). 20 That means Plaintiff cannot establish the first of three required elements of a breach of 21 contract claim. See Saini, 434 F. Supp 2d at 919-20 (providing that the existence of a valid 22 contract is one of the elements of a breach of contract claim). 23 Second, Plaintiff effectively pleads himself out of court with fatal contradictions 24 within his FAC. See Weisbuch v. Cty. of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 25 1997) (“[A] plaintiff may plead herself out of court.”) (citation omitted). To start, Plaintiff 26 alleges the modification agreement with Wells Fargo was in writing, but the factual 27

28 1 allegations supporting that claim do not mention the written agreement, and instead 2 appear to suggest the agreement was oral. (Compare ECF No. 48 at 4 (providing that the 3 agreement was in writing) with id. at 2-4 (failing to mention a writing when describing the 4 purported modification).) Moreover, Plaintiff alleges that he first reached out to Wells Fargo 5 in February 2010 to tell them about the toxic environment in his Home, but then alleges 6 that Wells Fargo entered into the modification agreement not to foreclose in early 2009.5 7 (Id. at 3, 4.) Plaintiff does not explain why Wells Fargo agreed not to foreclose 8 approximately a year before he reported any issues with his Home or stopped making 9 payments on his mortgage. But the logical answer is that Wells Fargo could not have. 10 Unfortunately for Plaintiff, his factual allegations as to his breach of contract claim are 11 fatally inconsistent. See Weisbuch, 119 F.3d at 783 n.1 (explaining that a plaintiff can 12 plead facts that establish they cannot prevail on their claim). Thus, even if Plaintiff had 13 alleged adequate consideration, his breach of contract claim would fail as a matter of law. 14 The Court will thus dismiss Plaintiff’s breach of contract claim. 15 B. Breach of Covenant of the Implied Covenant of Good Faith and Fair Dealing 16 17 Plaintiff bases his claim for breach of the implied covenant of good faith and fair 18 dealing on an alleged breach of duty by Defendants when they repeatedly asked him for 19 information about the toxic drywall in his Home, and foreclosed on his Home despite 20 repeatedly assuring him they would not foreclose on his Home until it had been repaired. 21 (ECF No. 48 at 6.) 22 To establish a claim for contractual breach of the implied covenant of good faith 23 and fair dealing, a plaintiff must allege the existence of a valid contract and a breach of 24 the implied duty of good faith and fair dealing by performing in a manner that was unfaithful 25 to the purpose of the contract. See Perry v. Jordan, 900 P.2d 335, 338 (Nev. 1995); see 26

27 5To the extent this inconsistency was a typographical error or mere oversight on 28 Plaintiff’s counsel’s part, the Court notes it persisted from the Complaint through the FAC. 1 also Hilton Hotels v. Butch Lewis Productions, 808 P.2d 919, 923-24 (Nev. 1991). A 2 plaintiff must also establish that the defendant intentionally breached the intention and 3 spirit of the agreement. See Morris v. Bank of America, 886 P.2d 454, 457 (Nev. 1994) 4 (citing Hilton Hotels, 808 P.2d at 922-23). 5 Defendants argue this claim should be dismissed because there was no valid 6 contract to modify Plaintiff’s mortgage, and the only valid contracts—the note and deed of 7 trust—gave Defendants the right to foreclose on Plaintiff’s Home. (ECF No. 57 at 6.) 8 Plaintiff counters this claim should not be dismissed because a plaintiff may 9 simultaneously plead both breach of contract and breach of the implied covenant of good 10 faith and fair dealing in the alternative under Nevada law. (ECF No. 67 at 6-7.) The Court 11 agrees with Defendants in pertinent part. 12 Specifically, the Court will dismiss Plaintiff’s claim because, as explained supra in 13 Section IV.A, there was no enforceable contract between the parties requiring Defendants 14 to modify the loan. A valid contract is a required element of a claim for breach of the implied 15 covenant of good faith and fair dealing. See Walker v. State Farm Mut. Auto. Ins. Co., 259 16 F. Supp. 3d 1139, 1149-50 (D. Nev. 2017), aff’d, 758 F. App’x 599 (9th Cir. 2019) 17 (specifying that the existence of a contract is an element of this claim). Moreover, Plaintiff 18 does not even allege, much less argue, that Defendants were required to modify the terms 19 of his mortgage under the documents governing that mortgage. Similarly, Plaintiff does 20 not allege or argue that Defendants were not allowed to repeatedly ask him for information 21 about his toxic drywall issues. Plaintiff has therefore failed to plead any plausible facts that 22 Defendants breached the intention or spirit of the contracts governing his relationship with 23 Defendants as to his mortgage. 24 Plaintiff cannot plausibly state a claim for a contractual breach of the implied 25 covenant of good faith and fair dealing. The Court will dismiss this claim. 26 C. Promissory Estoppel 27 The Court will also dismiss Plaintiff’s promissory estoppel claim. To state a claim 28 for promissory estoppel under Nevada law, Plaintiff must show four elements exist: “(1) 1 the party to be estopped must be apprised of the true facts; (2) he must intend that his 2 conduct shall be acted upon, or must so act that that party asserting estoppel has the right 3 to believe it was so intended; (3) the party asserting the estoppel must be ignorant of the 4 true state of facts; (4) he must have relied to his detriment on the conduct of the party to 5 be estopped.” Pink v. Busch, 691 P.2d 456, 459 (Nev. 1984). 6 Plaintiff alleges in relevant part that he received correspondence on January 4, 7 2017 in response to his written request for more loan modification options as discussed in 8 a previous phone call with Jeremy Kerns “from Leesa Whitt-Potter, indicating that Wells 9 Fargo had received his correspondence and [noting] ‘We except [sic] to complete our 10 research and provide you with the results on or before January 19, 2017.’” (ECF No. 48 11 at 9.) However, Defendants foreclosed on the Home the next day—January 5, 2017. (Id.) 12 Plaintiff alleges he understood from this interaction, and preceding interactions, that his 13 Home would not be foreclosed on until Wells Fargo completed its investigation, but it was. 14 (Id. at 9-10.) 15 Defendants argue that Plaintiff’s promissory estoppel claim premised on mere 16 promises to modify a loan must be dismissed. (ECF No. 57 at 7.) Defendants’ argument 17 has a few components. Defendants first argue that loan modifications must be in writing. 18 (Id.) Because an oral contract cannot modify a loan, any reliance on an oral promise to 19 modify a loan is unjustified. (Id.) Therefore, it was unreasonable for Plaintiff to expect his 20 Home would not be foreclosed on when he had merely received oral promises to negotiate 21 a loan modification, and not the written document required to receive a loan modification. 22 (Id. at 7-8.) Plaintiff counters that one of the cases Defendants rely on in support of this 23 argument is distinguishable, and that he relied to his detriment on Wells Fargo’s promise 24 that they were investigating loan modifications at the time his Home was foreclosed upon, 25 because he otherwise would have tried to stop the foreclosure. (ECF No. 67 at 7.) 26 The Court again agrees with Defendants. Plaintiff has only alleged he relied on a 27 promise to further negotiate a loan modification, not a written loan modification signed by 28 all relevant parties. (ECF No. 48 at 8-10.) This is insufficient to state a claim for promissory 1 estoppel under Nevada law. See Lalli v. Bank of Am., N.A., Case No. 2:12-cv-1221-JCM- 2 PAL, 2014 WL 334810, at *3 (D. Nev. Jan. 29, 2014) (“A failed negotiation is not a basis 3 for promissory estoppel. Because no agreement was reached on the loan modification, 4 this cause of action must be dismissed.”); see also Duarte v. Wells Fargo Bank, N.A., 5 Case No. 3:13-cv-00371-RCJ, 2013 WL 5236565, at *2 (D. Nev. Sept. 16, 2013) (“Insofar 6 as Plaintiffs mean to imply a claim for promissory estoppel based upon Wells Fargo’s 7 continuation of foreclosure proceedings while negotiating a modification, Plaintiffs simply 8 do not allege any promise by Wells Fargo to modify or forbear foreclosure but only ongoing 9 negotiations.”);6 Gonzalez v. Bank of Am., N.A., Case No. 2:13-CV-00460-MMD, 2013 WL 10 3877708, at *2 (D. Nev. July 24, 2013) 11 (dismissing the plaintiff’s “promissory estoppel claim based on her allegation that she 12 reasonably relied on representations of the Defendant that a loan modification was under 13 review and foreclosure would not occur.”). The Court will also dismiss this claim. 14 D. Leave to Amend 15 Plaintiff requested leave to amend any of his claims the Court decided to dismiss. 16 (ECF No. 67 at 7-8.) Plaintiff’s request does not comply with LR 15-1. Regardless, the 17 Court will deny his request because amendment would be futile. See, e.g. Carvalho v. 18 Equifax Info. Servs., LLC, 629 F.3d 876, 893 (9th Cir. 2010) (affirming district court’s denial 19 of a motion for leave to amend because amendment would be futile, noting that futility is 20 a proper basis for denying leave to amend). 21 To start, the Court previously granted Plaintiff leave to amend the breach of contract 22 and breach of the implied covenant of good faith and fair dealing claims. (ECF Nos. 45, 23 51, 56 at 2.) Amendment of the breach of contract and implied covenant claims would also 24

25 6The Court is unpersuaded by Plaintiff’s attempt to distinguish Duarte. (ECF No. 67 26 at 7.) While Plaintiff is of course correct that the Duarte plaintiffs relied on their counsel’s representations rather than the lender’s representations, unlike this case, the point of 27 Duarte in this context is that a mere promise to negotiate a loan modification cannot give rise to a promissory estoppel claim despite the lender foreclosing on the property during 28 those negotiations. See Duarte, 2013 WL 5236565, at *2. And that reasoning applies to 1 be futile because Plaintiff cannot—and was not able to in the FAC—show adequate 2 consideration for the loan modification agreement. See also supra Section IV.A. Plaintiff 3 was already obligated to repay the loan at the time he entered into the loan modification 4 agreement. Continuing to pay down the loan he was already obligated to pay is inadequate 5 consideration for a loan modification. Moreover, the lack of adequate consideration means 6 that Plaintiff cannot allege the valid contract upon which his breach of the implied covenant 7 claim must rely. See also supra Section IV.B. Thus, it would also be futile to grant Plaintiff 8 leave to amend that claim. 9 Moreover, while Plaintiff has not previously been granted leave to amend his 10 promissory estoppel claim, the Court will also dismiss that claim with prejudice because 11 amendment would be futile. Plaintiff merely alleges he had a promise to continue 12 negotiating a potential loan modification at the time of foreclosure, which is insufficient to 13 state a claim for promissory estoppel as a matter of law. See also supra Section IV.C. 14 V. CONCLUSION 15 It is therefore ordered that Defendants’ motion to dismiss (ECF No. 57) is granted. 16 DATED THIS 21st day of October 2019. 17

19 MIRANDA M. DU CHIEF UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28