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Fleshman v. Wells Fargo Bank, N.A.

United States District Court, D. Oregon

June 17, 2014

WELLS FARGO BANK, N.A., a national association, Defendant

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For Plaintiffs: David Richardson, PDX LAW GROUP, P.C., Portland, Oregon.

For Defendant: Robert E. Sabido, Timothy J. Fransen, COSGRAVE VERGEER KESTER LLP, Portland, Oregon.

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Marco A. Hernandez, United States District Judge.

Plaintiffs Janet Fleshman and Tiberiu Anton bring this mortgage-related action against Defendant Wells Fargo Bank. Defendant moves to dismiss the action for failure to state a claim. I grant the motion because none of Plaintiffs' claims as currently pleaded in the First Amended Complaint state a claim. I dismiss the negligence claim with prejudice because any amendment would be futile. I dismiss the breach of contract claim and the Unlawful Trade Practices Act claims without prejudice because Plaintiffs may be able to re-plead those claims sufficiently to state a claim.


Plaintiffs allege that in 2010, they received a loan from Defendant to purchase residential property on Illinois Street in Portland. First Am. Compl. at ¶ 6. In 2012, they took out another loan from Defendant, this time to purchase rental property in Gresham. Id. In both loans, Plaintiffs executed promissory notes which were secured with trust deeds. Id.

In late 2012 and early 2013, Plaintiffs began the process of refinancing the loan on their residential Illinois Street property in order to fund remodeling construction. Id. at ¶ 7. Although the loan eventually went through in late May 2013, Plaintiffs allege that during the application process, Defendant mailed them loan documents intended for another borrower, and that the other borrower received Plaintiffs' loan

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documents. Id. at ¶ 9. The documents contained sensitive personal information such as social security numbers, credit card account numbers, and bank account numbers. Id. Plaintiffs further allege that Defendant failed to complete the loan application process by the anticipated loan closing date of March 15, 2013, even though Defendant knew Plaintiffs had commenced construction on the residential Illinois Street property. Id. at ¶ ¶ 10-12. Plaintiffs were forced to work with several different employees of Defendant's during this time. Id. at ¶ ¶ 11-12. In the end, Defendant funded the loan on May 31, 2013. Id. at ¶ 13.

Plaintiffs allege that Defendant mistakenly applied the loan funds to their Gresham rental property instead of their residential Illinois Street property. Id. at ¶ 14. This triggered a past due notice for the payment on the Illinois Street property. Id. After extensive communications by Plaintiffs with various employees of Defendant's, the mortgage on the Gresham rental property was reinstated in late June 2013. Id. at ¶ 15. Plaintiffs spent additional time contacting Defendant to get certain late fee charges reversed. Id.

Plaintiffs contend that Defendant misdirected the Gresham rental property payments for July 2013, placing them in an escrow account. Id. at ¶ 16. They further allege that Defendant mailed Plaintiffs multiple past due notices and inaccurate account statements throughout June and July for both properties. Id. Finally, they contend that Defendant began calling Plaintiffs in July to inquire about their delinquent mortgages, which were in fact not delinquent. Id. Additional facts relevant to particular claims are discussed below.


A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). " All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Am. Family Ass'n, Inc. v. City & Cnty. of S.F., 277 F.3d 1114, 1120 (9th Cir. 2002). However, the court need not accept conclusory allegations as truthful. See Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003) (" [W]e are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint, and we do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations" ) (internal quotation marks, citation, and alterations omitted).

A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the " grounds" of his " entitlement to relief" with nothing " more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]" Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). " Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Id. (citations and footnote omitted).

To survive a motion to dismiss, a complaint " must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[,]" meaning " when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). Additionally, " only a complaint that states a plausible claim

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for relief survives a motion to dismiss." Id. at 679. A complaint must contain " well-pleaded facts" which " permit the court to infer more than the mere possibility of misconduct[.]" Id. at 679.


Plaintiffs bring three claims: (1) breach of contract; (2) negligence; and (3) a claim under Oregon's Unlawful Trade Practices Act, Or. Rev. Stat. § § (O.R.S.) 646.605-646.656 (UTPA). First Am. Compl. at ¶ ¶ 17-29. I address them in turn.

I. Breach of Contract

In addition to the allegations above, Plaintiffs contend in support of their breach of contract claim that by entering into promissory notes and trust deeds for both properties, Plaintiffs and Defendant were in a " special relationship" where Defendant " and its subsidiaries were acting in part to further Plaintiffs' economic and beneficial interest of home ownership and/or pursuant to real property interests of Plaintiff's [sic] held in trust." Id. at ¶ 18. As a result of this relationship, Plaintiffs contend that Defendant owed Plaintiffs heightened duties under " applicable laws and agreements," " including without limitation Oregon foreclosure and UTPA laws, MHA Treasury regulations, and the National Mortgage Settlement." Id.

Although somewhat confusing, based on additional allegations in the First Amended Complaint, I understand Plaintiffs to allege that the promissory note and trust deed agreements contain provisions for how payments will be applied, what fees and charges may be assessed, how the parties must communicate, and " each party's rights and remedies[,]" and that Defendant breached those provisions by (1) acting without proper authority or permission; (2) providing confidential information to a stranger; (3) failing to apply the loan refinance money to the residential Illinois Street property; (4) failing to credit payments to Plaintiffs' Gresham rental property; (5) assessing and collecting improper fees and charges; (6) providing inadequate servicing; and (7) reporting false, negative, and damaging credit information. Id. at ¶ 19. Plaintiffs also allege that the promissory note and trust deed agreements " incorporate[] applicable federal and state law and regulations." Id.

Based on these allegations, Plaintiffs allege that Defendant breached the promissory notes and trust deed agreements as well as the covenants of good faith and fair dealing implied in those agreements. Id. at ¶ 20. Plaintiffs then allege that it was " foreseeable that Wells Fargo's breaches of contract and breaches of its duty to act in good faith and deal fairly would cause Plaintiffs damages." Id. at ¶ 21. At a minimum, Plaintiffs contend, Defendant's " conduct breached its duty of good faith and fair dealing to facilitate performance and enforcement of the promissory notes and Trust Deeds." Id. According to Plaintiffs " [t]hese actions include conduct stated in the previous paragraphs." Id.

Plaintiffs then allege more specifically that as a result of Defendant's breaches, they suffered mental and emotional injury. Id. at ¶ 22. They also allege that the alleged breaches caused them economic damages, including " potential loss of Property, communication of private financial information to a stranger, negative and false credit reporting, and attempts to remedy Wells Fargo's actions, of at least $15,000.00." Id.

Defendant moves to dismiss the breach of contract claim because it relies on an alleged special relationship which, ...

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