United States District Court, W.D. Washington, Seattle
KEVIN D. STEELE, et al., Plaintiffs,
WELLS FARGO BANK N.A., et al., Defendants.
ORDER GRANTING DEFENDANTS' MOTION TO
L. ROBART UNITED STATES DISTRICT JUDGE
Wells Fargo Bank, N.A. (“Wells Fargo”) and HSBC
Bank USA, N.A., as Trustee for Wells Fargo Asset Securities
Corporation, Mortgage Pass-Through Certificates, Series
2007-7 (“HSBC”) (collectively, “Moving
Defendants”) move to dismiss Plaintiffs Kevin D. Steele
and Stephanie A. Steele's (collectively, “the
Steeles”) complaint under Federal Rule of Civil
Procedure 12(b)(6). (See MTD (Dkt. # 13);
see also Compl.); Fed.R.Civ.P. 12(b)(6).
The Steeles oppose the motion. (See Resp. (Dkt. #
16).) The court has reviewed the motion, the relevant
portions of the record, and the applicable law. Being fully
advised,  the court GRANTS the motion and DISMISSES
the Steeles' complaint with leave to amend within 14
Steeles purchased a residence located at 20705 S.E. 24th
Street, Sammamish, Washington 98075 (“the
Property”). (Compl. at 2.) On February 16, 2007, Mr.
Steele executed an Initial Interest Note (“Note”)
in the original amount of $999, 000.00 in favor of Wells
Fargo. (MTD, Ex. A (attaching a copy of the
Note).) The Note is secured by a Deed of Trust on
the Property in favor of Wells Fargo. (Id., Ex. B
(attaching copy of the Deed of Trust).) The Deed of Trust
is recorded in the records of King County, Washington, under
Recorder's Number 20070228001463. (See id.) HSBC, as
Trustee, is the current beneficiary of the Deed of Trust.
(Id., Exs. C-E.)
Steele failed to timely make all payments due on the Note
since at least 2011 when Defendant Quality Loan Service
Corporation of Washington (“QLSCW”) first filed a
Notice of Trustee's Sale with the King County
Recorder's Office. (Id., Ex. C (attaching Notice of
Trustee's Sale); see also Compl. at 2
(“Plaintiffs began experiencing financial hardship
leading to a default in Mortgage payments . . . .”).)
In connection with a potential foreclosure, Wells Fargo sent
Mr. Steele a letter dated June 3, 2014, notifying his of
certain pre-foreclosure options pursuant to RCW 61.24.031.
(Id., Ex. D (attaching June 3, 2014,
letter).) The June 3, 2014, letter informs Mr.
Steele that he may request a meeting with Wells Fargo
“to assess [his] financial ability to modify or
restructure the loan obligation or consider other
alternatives to foreclosure.” (Id. at 3.) The
letter listed “possible outcomes of the meeting,
” including “a temporary or permanent loan
modification” and “an agreement to conduct a
short sale.” (Id.)
the most recent Notice of Trustee's Sale, which was filed
in 2017, Mr. Steele's arrearage on the Note reached $430,
658.41. (Id. Ex. E.) On October 12, 2017, QLSCW
recorded a Notice of Trustee's Sale, which scheduled a
foreclosure sale for the Property on February 16, 2018.
(Id.) On January 30, 2018, the Steeles filed this
lawsuit seeking to enjoin the trustee's sale.
(See Compl.) Moving Defendants assert that QLSCW did
not perform a foreclosure sale on February 16, 2018.
(See MTD at 3.)
Steeles allege that Wells Fargo indicated a willingness to
consider a review of their financial circumstances to
determine their eligibility for a short-sale of the Property.
(Compl. at 3.) The Steeles also allege that they have
“attempt[ed] to modify” their Note with Wells
Fargo. (Id. at 4.) The Steeles do not claim that
they qualify for a short sale of the Property or for a
modification of the Note. (See generally id.) But
the Steeles generally allege claims for (1) “Short
Sale, ” (2) “Mortgage Modification, ” (3)
“Preliminary Injunction, ” and (4) a violation of
Washington's Consumer Protection Act (“CPA”),
RCW ch. 19.86. (Id. at 3-4.) Moving Defendants seek
to dismiss each claim. (See generally MTD.) The
court now considers Moving Defendants' motion.
ANALYSIS A. Legal Standard
considering a motion to dismiss under Rule 12(b)(6), the
court construes the complaint in the light most favorable to
the nonmoving party. Livid Holdings Ltd. v. Salomon Smith
Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The
court must accept all well-pleaded allegations of material
fact as true and draw all reasonable inferences in favor of
the plaintiff. See Wyler Summit P'ship v. Turner
Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998).
“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.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007)); see also Telesaurus VPC, LLC v.
Power, 623 F.3d 998, 1003 (9th Cir. 2010). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678.
court, however, need not accept as true a legal conclusion
presented as a factual allegation. Id. Although the
pleading standard announced by Federal Rule of Civil
Procedure 8 does not require “detailed factual
allegations, ” it demands more than “an
accusation.” Id. (citing Twombly, 550
U.S. at 555). A pleading that offers only “labels and
conclusions or a formulaic recitation of the elements of a
cause of action” will not survive a motion to dismiss
under Rule 12(b)(6). Id.
Claims for a “Short Sale, ” Note
“Modification, ” and an
Steele argues that the court should enjoin the Property's
sale in foreclosure on “equitable grounds” to
provide Wells Fargo with sufficient time to determine whether
the Note is subject to modification or whether Wells Fargo
will agree to a short sale.(Compl. at 3.) Wells Fargo argues
that the Steeles fail to identify any legal, equitable,
statutory, or common law grounds that would justify
restraining the trustee's sale. (MTD at 5; see also
generally Resp.) In its June 3, 2014, letter to Mr.
Steele, Wells Fargo identified a loan modification agreement
or an agreement to accept a short sale of the Property as
“possible outcomes” of a meeting between Mr.
Steele and Wells Fargo. (Mot. Ex. D at 3.) However, Wells
Fargo did not promise either one of these outcomes. (See
id.) Moreover, Wells Fargo was under no legal obligation
to agree to either possibility. See Bhatti v. Guild
Mortg. Co., No. C11-0480JLR, 2011 WL 6300229, at *10
(W.D. Wash. Dec. 16, 2011) (denying motion to amend complaint
to state a claim for wrongful foreclosure because the
defendant “was under no legal obligation to approve a
short sale on Plaintiff's property or to approve a loan
modification prior to the institution of foreclosure
proceedings”); see also Vu Nguyen v. Aurora Loan
Servs., LLC, 614 Fed.Appx. 881, 884 (9th Cir. 2015)
(ruling that the district court did not err in dismissing the
plaintiff's breach of contract and promissory estoppel
claims because the plaintiff “fail[ed] to plead facts
demonstrating a clear and unambiguous promise by [the
defendant] to offer [the plaintiff] a loan modification that
would prevent foreclosure”).
Steeles' reliance on RCW 61.24.031 is also unavailing.
(See Compl. at 3.) Under RCW 61.24.031, the
beneficiary of the deed of trust “must first attempt to
communicate with the borrower who is in default through a
series of statutorily prescribed methods.” Brown v.
Wash. State Dep't of Commerce, 359 P.3d 771, 774
(Wash. 2015) (citing RCW 61.24.031). “The beneficiary
must send a letter to the borrower containing certain
information, including that the borrower should contact a
housing counselor to discuss mediation . . . .”
Id. (citing RCW 61.24.031(1)(c)). “If the
borrower responds . . ., the notice of default cannot issue
for at least 90 days.” Id. (citing RCW
61.24.031(1)(a)). The statute provides that during this
90-day period, the parties “shall attempt to reach a
resolution, ” such as a loan modification. RCW
61.24.031(1)(f)(4). Nevertheless, “[a]fter the relevant
time period elapses and if the parties have not agreed to
modify the loan, the trustee or beneficiary may then issue
the notice of default.” Brown, 359 P.3d at 774
(citing RCW 61.24.031(a)(1)). Here, Wells Fargo sent the
statutorily required letter on June 3, 2014. (See
MTD, Ex. D.) Although the parties “shall attempt”
to resolve the issue short of a foreclosure, there is ...