Vitale v. Wells Fargo Bank National Association

Background

Francesco Vitale and Frances Vitale, proceeding without lawyers, sued Wells Fargo Bank, N.A.; WT Capital Lender Services; Browning Law Group APC; and Yvonne Ramirez-Browning. The dispute concerned real property at 4067 Cory Street, Soquel, California. The plaintiffs obtained a business line of credit from Wells Fargo in 2004, secured by a deed of trust. After Francesco Vitale defaulted, Wells Fargo demanded payment, and WT Capital sent a notice of default and election to sell under the deed of trust.

The plaintiffs alleged that the defendants lacked title, a perfected security interest, or authority to foreclose because the deed of trust was not properly transferred or assigned. They also alleged fraud at the beginning of the loan and claimed that they discharged the debt with a “tender negotiable bond.” Their complaint asserted claims for unjust enrichment; violations of unspecified financial-protection laws for commercial loans; negligence; quiet title; and deprivation of rights under 42 U.S.C. § 1983.

Court’s Analysis

The court applied Federal Rule of Civil Procedure 12(b)(6), which asks whether the complaint states a legally sufficient claim. It held that the first four claims appeared to be based on events occurring in 2004 or, at the latest, 2009, making them time-barred on the face of the complaint. The plaintiffs did not plead facts showing that the discovery rule, the continuing-violation doctrine, or equitable tolling should extend the filing deadlines. The court nevertheless found that amendment might allow the plaintiffs to plead facts supporting an exception to the usual filing deadlines.

The court also held that the plaintiffs’ “show me the note” and securitization theories were legally insufficient. California law does not require possession of the original promissory note to begin foreclosure, and borrowers generally cannot challenge alleged securitization or assignment irregularities on the theory asserted here. The court allowed amendment so the plaintiffs could allege additional facts that moved their claims beyond those theories.

The complaint also failed to satisfy the general requirement to give defendants fair notice of the claims and the facts supporting them. The allegations were described as unorganized, conclusory, and sometimes unintelligible, and the second claim did not identify the law involved. The fraud allegations also failed Federal Rule of Civil Procedure 9(b), which requires fraud to be pleaded with particularity, including the who, what, when, where, and how.

As to individual claims, the court dismissed unjust enrichment because the plaintiffs did not identify the misleading, deceptive, or fraudulent conduct that supposedly made the defendants’ retention of payments unjust. It dismissed negligence against Wells Fargo because the plaintiffs did not allege facts showing that Wells Fargo owed them a duty of care, although the court found that a duty might possibly be pleaded. It dismissed quiet title because the plaintiffs had not plausibly alleged that they satisfied the debt; the documents they cited and 48 C.F.R. § 53.228 did not discharge the debt under the deed of trust.

The court dismissed the Section 1983 claim without leave to amend. Section 1983 requires action under color of state law and deprivation of a federal right. The plaintiffs did not plausibly allege that Wells Fargo, WT Capital, Browning Law Group, or Yvonne Ramirez-Browning was a state actor. The court found amendment of that claim futile.

The court also dismissed the negligence claim against WT Capital without leave to amend because the claim was based on WT Capital’s sending of the foreclosure notice while acting as trustee. The court did not dismiss the plaintiffs’ unjust-enrichment, financial-protection-law, or quiet-title claims against WT Capital on the arguments presented, although it found the argument concerning WT Capital’s ownership interest inadequately briefed.

Order

Judge Beth Labson Freeman granted Wells Fargo’s motion to dismiss with leave to amend in part and without leave to amend in part. Claims 1 through 4 were dismissed with leave to amend, while Claim 5, the Section 1983 claim, was dismissed without leave to amend against all defendants.

The court granted WT Capital Lender Services’ motion to dismiss with leave to amend in part and without leave to amend in part. Claims 1, 2, and 4 against WT Capital were dismissed with leave to amend, while Claim 3, negligence, was dismissed without leave to amend against WT Capital. The plaintiffs could file an amended complaint addressing the identified deficiencies within 30 days of the order, subject to a reasonable extension by motion or stipulation.