Becker et al v. Wells Fargo Bank, NA, Inc. et al

Filing 58

ORDER signed by Senior Judge Lawrence K. Karlton on 8/1/2011 adopting 49 FINDINGS AND RECOMMENDATIONS in full; Plaintiff's Request for Reconsideration is GRANTED IN PART and DENIED IN PART; plaintiff is granted leave to add new facts in support of his RESPA claim; the Request for Reconsideration is OTHERWISE DENIED; plaintiff shall file a Second Amended Complaint w/i 30 days from date of this order. (Waggoner, D)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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DENNLY R. BECKER, THE
BECKER TRUST DATED
MARCH 25, 1991,

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NO. CIV. S-10-2799 LKK/KJN
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Plaintiffs,

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v.
O R D E R

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WELLS FARGO BANK, N.A.,
WACHOVIA MORTGAGE
CORPORATION; DOES 1-20,

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Defendants.
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/

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Plaintiff, who is proceeding pro se, has filed this suit

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concerning several mortgages on different properties. The matter

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was referred to a United States Magistrate Judge pursuant to 28

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U.S.C. § 636(b)(1)(B) and L.R. 302(c)(21).

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On March 21, 2011, the Magistrate Judge filed an order and

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findings and recommendations, which were served on all parties and

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which contained notice to all parties that any objections to the

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findings and recommendations were to be filed within twenty-one

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days.

Plaintiff

filed

timely

objections
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to

the

findings

and

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recommendations. He also disputed aspects of the Magistrate Judge’s

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order. In the interests of justice, this court construed his

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“objections” to the order as a motion for reconsideration of the

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order.

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Having carefully reviewed the entire file, the court adopts

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the findings and recommendations in full. The court also grants in

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part and denies in part plaintiff’s motion for reconsideration.

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A.

Motion for Reconsideration

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Plaintiff’s motion for reconsideration of the Magistrate

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Judge’s order is denied for the reasons stated in the order, except

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as discussed herein. The Magistrate Judge granted plaintiff leave

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to file a claim under the Real Estate Settlement Procedures Act

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(“RESPA”), 12 U.S.C. §§ 2600 et seq. However, he limited this leave

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to be premised only upon facts that Becker has already pled.

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Plaintiff seeks reconsideration of this limitation. The court finds

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that plaintiff shall be permitted to allege new facts in support

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of this claim. Thus, plaintiff’s motion for reconsideration is

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granted only insofar as the Magistrate Judge’s order limited the

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facts Becker could allege in his RESPA claim.

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B.

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The court finds that the findings and recommendations are

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supported by the record and by the Magistrate Judge’s analysis.

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Nonetheless, the determines that it is appropriate to address an

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issue raised in plaintiff’s objections and to clarify a standard.

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Findings and Recommendations

1.

Preemption Under HOLA

Plaintiff seeks leave to amend several of his claims to
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include allegations that defendants are not the holders of his

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notes. Ostensibly, plaintiff intends to argue, under various legal

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theories, that defendants have no right to foreclose upon him

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because

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unidentified entities own the loans. The court finds that the

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Magistrate Judge’s denial of this request was appropriate because

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any claims premised upon such allegations are preempted by the Home

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Owner’s Loan Act (“HOLA”).

they

do

not

own

his

loans,

but

that

rather

other,

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HOLA expressly preempts claims based on the “processing,

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origination, servicing, sale or purchase of, or investment or

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participation in, mortgages.” 12 C.F.R. § 560.2 (b)(10) (emphasis

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added). A state law that applies generally must be preempted by

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HOLA if, as applied, it falls under § 560.2(b). Silvas v. E*Trade

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Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008); see also DeLeon

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v. Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119, 1124-26 (N.D. Cal.

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2010) (detailed discussion and analysis of preemption under HOLA).

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Here, plaintiff seeks to add allegations that his mortgages were

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somehow transferred to or acquired by unknown entities. HOLA,

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however, expressly preempts claims based upon the sale or purchase

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of mortgages. 12 C.F.R. § 560.2(b)(10); see also Jarbo v. BAC Home

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Loan Servicing, No. 10-12632, 2010 WL 5173825, at *5 (E.D. Mich.

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Dec. 15, 2010) (concluding that claims resting upon alleged flaws

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in

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Plaintiff's

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560.2(b)(10)). Consequently, claims premised on allegations that

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an entity foreclosed upon a loan that was assigned to another party

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"sale,

transfer,

mortgages"

are

acquisition,
specifically

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and/or

investment

preempted

by

in

Section

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or for which that entity possessed no ownership interest at the

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time of foreclosure are preempted.1 Thus, the court adopts the

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findings and recommendations insofar as they deny plaintiff leave

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to amend to include these allegations because such amendment would

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be futile.
2.

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Lender’s Duty of Care

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In his order, the Magistrate Judge dismissed plaintiff’s

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negligence claims, but granted him leave to file amended claims

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premised upon “a duty that may have been triggered based upon

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defendants’ . . . actions or representations during the loan

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modification application process.” Findings and Recommendations at

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38. While the Magistrate Judge made no error in his description of

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the standard by which a lender may owe a borrower a duty of care,

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the court nonetheless finds it appropriate to provide additional

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discussion concerning this test.

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California courts have stated that "as a general rule, a

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financial institution owes no duty of care to a borrower when the

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institution's involvement in the loan transaction does not exceed

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the scope of its conventional role as a mere lender of money."

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Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089,

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1096 (1991). Applying this rule, the court in Nymark granted

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summary judgment to defendant on a claim that the defendant lender

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The court notes that in a related, yet distinct contention
as to whether a party need demonstrate actual possession of the
underlying note to foreclose, courts in this district have
“unanimously concluded that in a non-judicial foreclosure,” actual
possession is not required. See, e.g., Champlaie v. BAC Home Loans
Servicing, 706 F. Supp. 2d 1029, 1045, 1048-49 (E.D. Cal. 2009).
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had acted negligently in appraising the borrower's collateral to

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determine if it is adequate security for a loan refinancing the

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borrower’s mortgage, as the court concluded as a matter of law that

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no duty of care existed with respect to the appraisal. Id. at 1096.

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See also Wagner v. Benson, 101 Cal. App. 3d 27, 35 (1980) (a lender

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has no duty to ensure that borrower will use borrowed money

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wisely).

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The court understands Nymark to be limited in two ways. First,

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a lender may owe a duty of care sounding in negligence to a

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borrower

when

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conventional lender. The Nymark court noted that the "complaint

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does not allege, nor does anything in the summary judgment papers

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indicate, that the appraisal was intended to induce plaintiff to

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enter

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collateral was sound."2 Id. at 1096-97. Nymark thereby implied that

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had such an intent been present, the lender may have had a duty to

into

the

the

loan

lender’s

activities

transaction

or

to

exceed

assure

those

him

of

that

a

his

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The court notes that in Nymark, the loan was being taken to
refinance a mortgage. In this scenario, a borrower may have less
need to know the value of the property. The home has already been
bought, and if the lender attempts to enforce the security through
a non-judicial foreclosure, the lender may not seek a deficiency
judgment against the borrower. Alliance Mortgage Co. v. Rothwell,
10 Cal. 4th 1226, 1236 (1995) (citing Roseleaf Corp. v.
Chierighino, 59 Cal. 2d 35, 43-44 (1963)). Even in this situation,
however, the borrower has an interest in the value of the home, at
least because the lender may seek a deficiency judgment after a
judicial foreclosure. Id.
In the context of a purchase money loan, the borrower has a
much clearer interest in the appraisal, and the instant court
doubts that Nymark could be extended to such a case. In this case,
however, there is no dispute regarding the accuracy of the
appraisal. The court instead discusses Nymark for its general
holdings.
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exercise due care in preparing the appraisal. See also Wagner v.

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Benson, 101 Cal. App. 3d 27, 35 (1980) (“Liability to a borrower

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for negligence arises only when the lender actively participates

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in the financed enterprise beyond the domain of the usual money

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lender.”).

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Second, even when a lender’s acts are confined to their

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traditional scope, Nymark announced only a “general” rule. Rather

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than conclude that no duty existed per se, the Nymark court

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determined whether a duty existed on the facts of that case by

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applying the six-factor test established by the California Supreme

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Court in Biakanja v. Irving 49 Cal. 2d 647 (1958). Nymark, 231 Cal.

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App. 3d at 1098; see also Glenn K. Jackson Inc. v. Roe, 273 F.3d

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1192, 1197 (9th Cir. 2001). This test balances six non-exhaustive

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factors:

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[1] the extent to which the transaction was
intended to affect the plaintiff, [2] the
foreseeability of harm to him, [3] the degree
of certainty that the plaintiff suffered
injury, [4] the closeness of the connection
between the defendant's conduct and the injury
suffered, [5] the moral blame attached to the
defendant's conduct, and [6] the policy of
preventing future harm.

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Roe, 273 F.3d at 1197 (quoting Biakanja, 49 Cal. 2d at 650)

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(modification in Roe). Although Biakanja stated that this test

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determines “whether in a specific case the defendant will be held

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liable to a third person not in privity” with the defendant, 49

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Cal. 2d. at 650, Nymark held that this test also determines

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“whether

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borrower-client,” 231 Cal. App. 3d at 1098. Applying these factors

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a

financial

institution

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owes

a

duty

of

care

to

a

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to the specific facts in that case, the Nymark court assumed that

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plaintiff suffered injury, but held that the remaining factors all

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indicated against finding a duty of care. Id. at 1098-1100.

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In Roe, the Ninth Circuit noted that the California Supreme

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Court “arguably limited” Biakanja in Bily v. Arthur Young & Co.,

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3 Cal. 4th 370, (1992), which held a court must consider three

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additional factors before imposing a duty of care. Roe, 273 F.3d

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at 1198. Roe summarized these factors as “(1) liability may in

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particular cases be out of proportion to fault; (2) parties should

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be encouraged to rely on their own ability to protect themselves

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through their own prudence, diligence and contracting power; and

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(3) the potential adverse impact on the class of defendants upon

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whom the duty is imposed.” Id. (citing Bily, 3 Cal. 4th at 399-

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405). Bily was decided before Nymark, but not discussed therein.

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C.

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For the reasons discussed in the findings and recommendations

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and the reasons discussed herein, the court ORDERS as follows:
(1)

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Conclusion

The Magistrate Judge’s March 22, 2011 Findings and
Recommendations (Doc. No. 49) are ADOPTED IN FULL.

(2)

Plaintiff’s request for reconsideration is GRANTED IN

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PART and DENIED IN PART. Specifically, plaintiff is

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granted leave to add new facts in support of his RESPA

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claim. The request for reconsideration is OTHERWISE

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DENIED.

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(3)

Plaintiff

shall

file

an

amended

pleading

entitled

“Second Amended Complaint” within thirty (30) days of
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being served with this order.

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IT IS SO ORDERED.

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DATED:

August 1, 2011.

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