Mohanna v. Wells Fargo Bank, N.A.

Background

Keyhan Mohanna filed the case without a lawyer. He alleged claims for wrongful foreclosure and violation of California Commercial Code section 3302 against Wells Fargo Bank, N.A. The court’s jurisdiction was based on diversity of citizenship, although the complaint incorrectly also asserted federal-question jurisdiction.

Mohanna alleged that he borrowed money from World Savings Bank in 2006 and secured the loan with a deed of trust on property in San Francisco. He alleged that World Savings Bank later became Wachovia Mortgage and that Wells Fargo acquired Wachovia, but did not acquire his debt because it had allegedly been transferred to a mortgage pass-through certificate. Wells Fargo recorded a notice of default in 2010 and completed a nonjudicial foreclosure in 2014. Mohanna claimed that Wells Fargo therefore had no legal right to enforce the deed of trust and had filed false records to complete the foreclosure.

Rule 12(b)(6) standard

The court applied the standard for a Rule 12(b)(6) motion, which tests whether a complaint states a legally sufficient claim. The court generally must accept well-pleaded factual allegations as true, but a claim must include enough factual matter to be plausible. The court also noted that self-represented complaints are read liberally and ordinarily should not be dismissed without an opportunity to amend unless the defects cannot be cured.

Wrongful-foreclosure claim

California law provides a three-year limitations period for a wrongful-foreclosure claim based on alleged fraud. The period may be extended under the discovery rule when the plaintiff could not reasonably discover the facts supporting the claim.

The court found that the alleged wrongful conduct occurred when the foreclosure was completed on July 25, 2014, while Mohanna did not file this case until May 20, 2021. It concluded that Mohanna had not adequately pleaded facts supporting use of the discovery rule. His complaint stated only, in general terms, that he could not have discovered the wrongdoing. He did not allege when he discovered the facts or explain whether discovery occurred within three years before filing.

The court also took judicial notice of documents from an earlier 2014 lawsuit Mohanna filed against Wells Fargo in state court. The court did not accept the truth of the statements in those documents, but considered the fact that Mohanna had made them. Because that earlier lawsuit raised substantially similar allegations about the foreclosure and Wells Fargo’s authority to enforce the deed of trust, the court concluded that Mohanna knew the relevant factual basis well before the limitations period expired.

The court held that the wrongful-foreclosure claim was time-barred and that amendment would be futile. It dismissed that claim with prejudice.

California Commercial Code section 3302 claim

Mohanna also alleged that Wells Fargo was not a “holder in due course” under California Commercial Code section 3302 and therefore could not foreclose. The court assumed without deciding that section 3302 provides a private right of action. It held that the claim was nevertheless untimely because it served as a basis for the already time-barred wrongful-foreclosure claim.

The court further observed that California law does not require an entity to be a holder in due course to conduct a nonjudicial foreclosure under a deed of trust. Because Mohanna could not allege additional facts to cure the timeliness problem, the court dismissed the section 3302 claim with prejudice.

Disposition

The court granted Wells Fargo’s motion to dismiss. It dismissed the case with prejudice, directed the clerk to enter judgment for Wells Fargo and against Mohanna, and ordered the case closed.