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Henderson v. Wells Fargo Home Mortgage, Inc.

United States District Court, D. Utah

November 28, 2016



          Ted Stewart, District Judge

         This matter is before the court on Defendants' Motion to Dismiss. For the reasons discussed below, the court will grant Defendants' Motion.

         I. BACKGROUND

         In October 2007, Plaintiff Gayle Henderson took out a mortgage with Wells Fargo Home Mortgage, Inc. It was a Stated Income loan, which means Plaintiff was only required to verify employment; he was not required to verify income. Defendants had previously refinanced a loan for Plaintiff, and at the time of refinancing they had access to information regarding his income. Plaintiff has subsequently had difficulty maintaining his mortgage payments, and the home has lost value. It is unclear from the Complaint whether Plaintiff was never in a financial situation to repay the loan or whether he became unable to repay his loan during the nationwide financial crisis. During the financial crisis, Plaintiff's employment was reduced and he lost household income. He faced increased interest, longer loan payoff times, higher principal balances, damage to his credit score, additional income tax liability, and costs and expenses incurred to prevent or fight foreclosures. He also suffered from severe depression and was prescribed antidepressant medication.

         Plaintiff sent a letter of hardship and his complete financial file to Defendants in early 2016, seeking a modification of his loan. Defendants responded with letters indicating that they were investigating the matter and would respond promptly. Defendants did not respond to Plaintiff's inquiries regarding the status of his modification request in a timely manner, or they ignored his responses. Defendants repeatedly requested piecemeal or duplicative paperwork, failed to accurately assess Plaintiff's LTV ratio, and made erroneous assessments of Plaintiff's cash reserves. Defendants denied Plaintiff's modification request, providing contradictory reasons for doing so. Defendants did not engage in meaningful discussion with Plaintiff regarding a modification until he fell behind in his mortgage. Defendants also indicated that Plaintiff's credit would not be affected by the request for modification. However, Plaintiff's credit was damaged.

         On May 27, 2016, Plaintiff filed a Complaint pro se against Defendants for (1) fraud, deceit, and negligent misrepresentation; (2) negligence; (3) injunctive relief; (4) reformation of contracts; and (5) breach of the implied covenant of good faith and fair dealing in the Fourth Judicial District Court, Salt Lake County, Utah. On August 1, 2016, Defendants removed the case to this Court. On August 8, 2016, Defendants filed a 12(b)(6) Motion to Dismiss. On September 7, 2016, Plaintiff filed a Motion for Relief from Order of Dismissal, a Response to Defendants' Motion to Dismiss, and a Proposed Order. On September 19, 2016, Defendants filed a Reply Memorandum in support of their Motion to Dismiss.


         On a 12(b)(6) Motion to Dismiss, the court “must accept as true all of the allegations contained in a complaint.”[1] Plaintiff must “state a claim for relief that is plausible on its face.”[2]

         Facial plausibility involves “more than a sheer possibility that a defendant has acted unlawfully” and requires “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[3] The Court must view reasonable inferences in favor of the nonmoving party, and a Motion to Dismiss “may be granted only if it appears beyond a doubt that the plaintiff is unable to prove any set of facts entitling her to relief under her theory of recovery.”[4] However, a court is not required to accept conclusory allegations as true.[5]


         A. Sufficiency of Pleadings

          Defendants' Motion to Dismiss is granted because Plaintiff did not sufficiently plead his allegations. Taking all of Plaintiff's allegations as true, Plaintiff did not state a plausible claim for relief because his allegations were conclusory for negligence, reformation, and breach. In addition, Plaintiff did not meet the enhanced pleading standard for fraud under Rule 9(b). Because Plaintiff did not plead appropriately and a declaration would not resolve questions regarding Plaintiff and Defendants' legal relationship, Plaintiff's request for injunctive or declaratory relief is denied.

         1. Pleadings for Negligence, Reformation, and Breach

          Plaintiff's second, fourth, and fifth causes of action fail under the Twombly/Iqbal pleading standard because Plaintiff's allegations are conclusory. Allegations are conclusory if they are no “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”[6] In other words, “the mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.”[7]

         In Ambuehl v. Aegis Wholesale, the Tenth Circuit held that mortgagers failed to state a claim on which relief could be granted.[8] The mortgagers in that case claimed that although they signed the mortgage loan, they did not know that their loan could be administered by a third party.[9] They sought rescission of the contract based on a unilateral misunderstanding.[10] They alleged that “they did not understand they were entering a ‘new and different world of high finance' in which loans were not serviced by the lender but by loan servicing companies.”[11]The Tenth Circuit affirmed the district court's dismissal, holding that “Plaintiffs fail[ed] to allege any facts, or articulate any legal basis” on which relief could be granted.[12] The court reasoned that because there was “no factual basis” for their claims, they had not alleged a plausible claim for relief.[13]

         Here, because Plaintiff alleges only conclusory facts, he has not stated a claim that entitles him to relief. Like the mortgagers in Ambuehl, Plaintiff claims he did not understand the terms of his loan. However, also like the mortgagers in Ambuehl, Plaintiff has not stated any facts to support his claims that Defendants breached a duty they had to him, that there was no mutual understanding regarding the terms of the contract, or that Defendants were not truthful with him during the loan modification process. In addition, Plaintiff pleads contradictory conclusory facts on several instances. For example, Plaintiff claims both that Defendants did not respond to or ignored his requests for information regarding his loan modification, and that Defendants responded to his requests with misleading information. One of Plaintiff's central contentions is that Defendants knew he would be unable to repay the loan. He claims that Defendants were aware of his income and capacity to pay, but he also alleges that the loan was predatory because it did not require income verification. Therefore, Plaintiff has not stated a claim on which relief could be granted.

         2. Rule 9(b) pleading for fraud, deceit, and negligent misrepresentation Plaintiff does not plead his claim for fraud, deceit, and negligent misrepresentation with the level of specificity required by either Rule 8 or Rule 9. Plaintiff alleges that Defendants either knew that he could not repay the loan or knew the loan was based on an inaccurate and inflated appraisal, or both. Additionally he alleges that Defendants may have inflated his income figures to allow him to qualify for the loan amount.

         Under Rule 9(b), when “alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”[14] The Tenth Circuit has held that “[a]t a minimum, Rule 9(b) requires that a plaintiff set forth the who, what, when, where and how of the alleged fraud and must set forth the time, place, and contents of the false representation.”[15] In Jensen v. America's Wholesale Lender, homeowners stated a claim for fraud against their lender when they were unable to pay their mortgage, alleging that the lender made false and misleading statements by failing to properly credit mortgage assessments or calculate interest charges.[16]The court held that this was not sufficient to sustain a claim for fraud because it failed under the Twombly/Iqbal pleading standard. The court reasoned that “these are the type of unadorned, the-defendant-unlawfully-harmed-me accusation[s] . . . rejected by the Supreme Court [in Iqbal].”[17]The court also held that these allegations failed under the heightened pleading standard for Rule 9(b) because they did not address the who, what, when, where, and how of the alleged fraud.[18]The court reasoned that the homeowners “simply speculate that defendants and/or their agents collectively engaged in various instances of wrongdoing that eventually culminated in the foreclosure of their home.”[19]

         Here, Plaintiff does not allege specific facts to meet the pleading standard for fraud. Like the homeowners in Jensen, Plaintiff makes conclusory allegations that Defendants made false and misleading statements about the terms of the mortgage without factual support. Plaintiff alleges who defrauded him-Defendants-but not ...

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