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Huerta v. Wells Fargo Bank, National Association

United States District Court, D. Oregon

March 1, 2017

EUSEBIO G. HUERTA, an individual and LINDA Z. HUERTA, an individual, Plaintiffs,
v.
WELLS FARGO BANK, NATIONAL ASSOCIATION, a foreign corporation, Defendant.

          OPINION AND ORDER

          Michael McShane United States District Judge.

         Plaintiffs Eusebio G. Huerta and Linda Z. Huerta bring this action against Wells Fargo Bank, National Association (“Wells Fargo”). The Huertas allege Wells Fargo was unjustly enriched when it received proceeds of a parcel of land it did not pay for, and breached the warranty of good faith and fair dealing in connection with a vague complaint filed in judicial foreclosure proceedings.

         Wells Fargo argues that the Huertas' claims are barred by issue preclusion, claim preclusion, and Oregon's anti-SLAPP statute. Because the Huerta's unjust enrichment claim was neither litigated in state court, nor required to be raised there as an affirmative defense, it is not barred here. Because the breach of the implied warranty of good faith and fair dealing is a contract claim necessarily decided by the state court, the Huertas are barred from raising it here. Wells Fargo's Motion to Dismiss, ECF No. 5, is GRANTED in part and DENIED in part.

         BACKGROUND

         In 1998, the Huertas purchased two adjacent parcels in Salem, Oregon. Compl. ¶ 3, ECF No. 1 Ex. A. One parcel contained a house (the “House Parcel”) and the other parcel was undeveloped (the “Bare Parcel”). Compl. ¶ 3. The Huertas received bank financing for the purchase and the bank received a first position trust deed on both parcels. Compl. ¶ 3. The Huertas refinanced the loan two times, once in 2006 and again in 2008. Compl. ¶ 4. When the Huertas refinanced in 2008, the bank agreed that the loan was secured by a trust deed with only the House Parcel as collateral. Compl. ¶ 4. In other words, after 2008, the Bare Parcel did not secure any loan and the Huertas owned it free and clear. Compl. ¶ 4. In February 2012, the Huertas defaulted on the loan and the loan was purchased by and assigned to Wells Fargo. Compl. ¶¶ 7-8.

         Wells Fargo began judicial foreclosure proceedings in Marion County. In September 2012, Wells Fargo filed a complaint for declaratory relief and deed of trust foreclosure. Wells Fargo v. Huerta, Case No. 12C21744, ECF No. 6-1.[1] Wells Fargo also sought declaratory relief to reform the trust deed to include the Bare Parcel. ECF No. 6-1; Compl. ¶ 10. The Huertas received notice of the complaint, but failed to appear or respond because they did not believe the 2012 foreclosure would affect their rights to the Bare Parcel. As alleged by the Huertas:

The Complaint in the Foreclosure Case was misleading and confusing and did not clearly convey to lay people such as the Huertas that it was acting to unilaterally collateralize the Bare Parcel, which was free and clear.

Compl. ¶ 13.

         The Marion County Circuit Court entered default judgment against the Huertas in May 2013. ECF No. 6-2; ECF No. 6-3. Two years later, in February 2015, the House Parcel and the Bare Parcel were sold in a sheriff's sale to U.S. Bank Trust, National Association. Compl. ¶ 15.

         On May 3, 2016, the Huertas moved to set aside the Marion County default judgment. ECF No. 6-4. The Huertas alleged that the default judgment should be set aside because of lack of adequate notice, inadvertence, surprise, neglect, fraud, misrepresentation, and other misconduct by Wells Fargo. ECF No. 6-4. Specifically, the Huertas alleged that Wells Fargo obtained the equivalent of an illegal deficiency judgment by reforming the trust deed to include the Bare Parcel . ECF No. 6-4. In August 2016, after hearing oral arguments, the Marion County Circuit Court denied the Huertas' motion to set aside the default. ECF No. 6-5.

         Rather than appealing that ruling to the Oregon Court of Appeals, the Huertas filed the current Complaint. Similar to their arguments in the motion to set aside the default judgment, the Huertas allege here that Wells Fargo breached the covenant of good faith and fair dealing by obtaining the equivalent of an illegal deficiency judgment because it was not entitled to the Bare Parcel. As a result, Wells Fargo was allegedly unjustly enriched. Compl. ¶¶ 5-7.

         STANDARD OF REVIEW

         To survive a motion to dismiss under rule 12(b)(6), a complaint must contain sufficient factual matter that “state[s] a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual allegations allow the court to infer the defendant's liability based on the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). The factual allegations must present more than “the mere possibility of misconduct.” Id. at 678.

         While considering a motion to dismiss, the court must accept all allegations of material fact as true and construe them in the light most favorable to the non-movant. Burget v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661, 663 (9th Cir. 2000). But the court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555. If the complaint is dismissed, leave to amend should be granted unless the court ‚Äúdetermines that the ...


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