Deschaine et al v. Indymac Mortgage Services et al

Filing 33

ORDER signed by Senior Judge William B. Shubb on 11/15/2013 GRANTING 9 Motion to Dismiss; GRANTING Plaintiff twenty (20) days to file an amended complaint consistent with this Order. (Michel, G)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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JASON DESCHAINE,

NO. CIV. 2:13-1991 WBS CKD

Plaintiff,

MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.
INDYMAC MORTGAGE SERVICES, A
DIVISION OF ONEWEST BANK,
FSB; FEDERAL HOME LOAN
MORTGAGE CORPORATION; and
DOES 1 through 50, inclusive,
Defendants.

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----oo0oo---Plaintiff Jason Deschaine brought this action against

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defendants IndyMac Mortgage Services, a division of OneWest Bank,

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FSB (“IndyMac”) and the Federal Home Loan Mortgage Corporation

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(“Freddie Mac”) arising out of the foreclosure of his home.

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Defendants now move to dismiss the action pursuant to Federal

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Rule of Civil Procedure 12(b)(6) for failure to state a claim

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upon which relief can be granted.

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I.

Factual & Procedural History

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In 2005, plaintiff entered into a mortgage loan for

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$310,000, which was secured by a Deed of Trust to his home in

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Rough and Ready, California.

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(“IndyMac RJN”) Ex. A (Docket No. 10).)

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Trustee Corps, a foreclosure trustee, recorded a Notice of

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Default against plaintiff’s home stating that plaintiff was

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$17,901.804 in arrears on his mortgage payments.

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Later that year, plaintiff contacted IndyMac, the servicer of

(IndyMac Req. for Judicial Notice
On January 26, 2009,

(Id. Ex. B.)

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plaintiff’s mortgage loan, about the possibility of applying for

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a loan modification.

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22).)

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modification1 in September 2009 and entered into a trial loan

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modification plan (“TPP”) in February 2010.

(First Am. Compl. (“FAC”) ¶ 15 (Docket No.

Plaintiff initiated an application for a HAMP loan

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(Id. ¶¶ 16-18.)

Plaintiff began making payments under the TPP, but

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received notice from IndyMac in July 2010 that he was ineligible

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for a permanent HAMP loan modification because his mortgage

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payments were less than thirty-one percent of his monthly income.

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(Id. ¶¶ 19-20.)

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Mac Backup Modification, under which plaintiff could continue to

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make payments on the mortgage.

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attempted to make payments under the Backup Modification for

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approximately a year and a half, but fell behind on his payments

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again.

IndyMac invited plaintiff to apply for a Freddie

(Id. ¶ 23.)

(Id. ¶ 20, Ex. B.)

Plaintiff

On June 13, 2012, Trustee Corps recorded

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HAMP is a program initiated by the Treasury Department
in 2009 “to incentivize banks to refinance mortgages of
distressed homeowners so they could stay in their homes.”
Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878, 880 (9th Cir.
2013).
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another NOD, reflecting an arrearage of $11,990.13.

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Ex. D.)

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(IndyMac RJN

On several occasions between April 2012 and June 2013,

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plaintiff attempted to obtain an additional loan modification

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from IndyMac.

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repeatedly declined to offer him a loan modification, either

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because IndyMac claimed that plaintiff’s application was

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incomplete or because plaintiff was ineligible for a loan

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modification.

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(FAC ¶ 24.)

Plaintiff alleges that IndyMac

(Id. ¶¶ 25-30.)

Plaintiff then filed for bankruptcy on February 25,

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2013.

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discharge in bankruptcy on June 3, 2013.

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Although plaintiff did not disclose any of the claims he asserts

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in this lawsuit as assets in his bankruptcy filings, (see FAC ¶¶

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49, 50; IndyMac RJN Ex. D), he alleges that he re-opened his

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bankruptcy petition on October 29, 2013, to list these claims as

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assets.

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(Docket No. 27).)

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(Id. ¶ 31; IndyMac RJN Ex. E.)

Plaintiff obtained a
(IndyMac RJN Ex. F.)2

(Pl.’s Opp’n to Mot. to Dismiss (“Pl.’s Opp’n”) 9:16-18

During the time his bankruptcy petition was pending,

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IndyMac allegedly informed plaintiff that he could re-apply for a

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loan modification.

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loan application to IndyMac on March 20, 2013, as well as an

(FAC ¶ 32.)

Plaintiff submitted a complete

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It is not explained in the pleadings, and it is unclear to
this court why plaintiff’s debt on his home loan was not
discharged in the bankruptcy proceeding. But obviously it was
not. Apparently, the bankruptcy petition was filed in order to
avert the sale of plaintiff’s home, which was scheduled for the
next day. It clearly accomplished that purpose, but not much
else, and after the discharge the parties simply returned to
business as usual.
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updated application on April 4, 2013.

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April and June 2013, plaintiff alleges he “remained in constant

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contact” with IndyMac and continued to send updated financial

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documents when requested to do so.

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(Id. ¶¶ 32-33.)

Between

(Id. ¶ 34.)

On June 11, 2013, an IndyMac employee named “Alex W19”

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allegedly informed plaintiff that there was no foreclosure sale

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scheduled, but that IndyMac required additional documentation in

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order to process his application.

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alleges that on June 24, 2013, an IndyMac employee named “Albert

(Id. ¶ 35.)

Plaintiff then

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938” informed plaintiff that his home would be sold at a

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foreclosure sale the next day.

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Freddie Mac purchased plaintiff’s home at a trustee’s sale. (Id.

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¶ 38.)

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(Id. ¶ 36.)

On June 25, 2013,

Plaintiff filed this action in Nevada County Superior

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Court on August 8, 2013, bringing ten claims against IndyMac,

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Trustee Corps, and Freddie Mac.

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No. 1).)

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12 U.S.C. § 1452(f), which entitles Freddie Mac to remove to

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federal court any action to which it is a party.

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October 21, 2013, plaintiff filed a First Amended Complaint

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(“FAC”), which alleged, as is typical in this kind of case,

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twelve separate claims for relief: (1) intentional

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misrepresentation; (2) negligent misrepresentation; (3) breach of

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contract; (4) promissory estoppel; (5) negligence; (6) violation

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of the Unfair Competition Law (“UCL”), Cal. Bus. & Profs. Code §

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17200 et seq.; (7) equitable accounting; (8) “dual tracking” of

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plaintiff’s loan modification application in violation of

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California Civil Code section 2923.6(c); (9) failure to issue

(Not. of Removal Ex. A (Docket

Defendants removed the action to this court pursuant to

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(Id.)

On

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plaintiff an opportunity to appeal the denial of a loan

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modification in violation of California Civil Code section

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2923.6(d); (10) failure to appoint a single point of contact in

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violation of California Civil Code section 2923.7; (11) violation

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of California Civil Code section 2924; and (12) wrongful

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foreclosure.3

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dismiss Trustee Corps from the action with prejudice.

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No. 30.)

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Federal Rule of Civil Procedure 12(b)(6) for failure to state a

On November 12, 2013, plaintiff stipulated to
(Docket

Defendants now move to dismiss the FAC pursuant to

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claim upon which relief can be granted.4

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II.

(Docket No. 9.)

Request for Judicial Notice

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In general, a court may not consider items outside the

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pleadings when deciding a motion to dismiss, but it may consider

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items of which it can take judicial notice.

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F.3d 1370, 1377 (9th Cir. 1994).

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notice of facts “not subject to reasonable dispute” because they

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are either “(1) generally known within the territorial

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jurisdiction of the trial court or (2) capable of accurate and

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ready determination by resort to sources whose accuracy cannot

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reasonably be questioned.”

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may properly be taken of matters of public record outside the

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Barron v. Reich, 13

A court may take judicial

Fed. R. Evid. 201.

Judicial notice

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Plaintiff styles this claim as an “equitable action to
set aside sale,” which is equivalent to a wrongful foreclosure
claim. See, e.g., Castaneda v. Saxon Mortg. Servs, Inc., 687 F.
Supp. 2d 1191, 1201 (E.D. Cal. 2009) (“Wrongful foreclosure is an
action in equity, where a plaintiff seeks to set aside a
foreclosure sale.”). In the interest of brevity, the court will
refer to this claim as “wrongful foreclosure.”
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Although only IndyMac initially moved to dismiss,
IndyMac and Freddie Mac later filed an amended notice clarifying
that they jointly moved to dismiss. (Docket No. 23.)
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pleadings.

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(9th Cir. 1986).

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See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504

Defendants request that the court judicially notice

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several recorded documents pertaining to plaintiff’s property,

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including the Deed of Trust, (IndyMac RJN Ex. A), and three

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Notices of Default, (id. Exs. B-D).

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notice of these documents, since they are matters of public

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record whose accuracy cannot be questioned.

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Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

The court will take judicial

See Lee v. City of
The court will

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also take judicial notice of plaintiff’s bankruptcy court

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filings, (see IndyMac RJN Exs. E-F), as they are likewise matters

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of public record whose accuracy cannot be questioned.

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v. First Fed. Bank of Cal., 671 F. Supp. 2d 1111, 1121 (N.D. Cal.

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2009) (taking judicial notice of bankruptcy filings).

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III. Discussion

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See Rosal

On a motion to dismiss, the court must accept the

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allegations in the complaint as true and draw all reasonable

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inferences in favor of the plaintiff.

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U.S. 232, 236 (1974), overruled on other grounds by Davis v.

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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

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(1972).

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plead “only enough facts to state a claim to relief that is

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plausible on its face.”

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544, 570 (2007).

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for more than a sheer possibility that a defendant has acted

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unlawfully,” and where a complaint pleads facts that are “merely

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consistent with” a defendant’s liability, it “stops short of the

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line between possibility and plausibility.”

Scheuer v. Rhodes, 416

To survive a motion to dismiss, a plaintiff needs to

Bell Atl. Corp. v. Twombly, 550 U.S.

This “plausibility standard,” however, “asks

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Ashcroft v. Iqbal,

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556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556–57).
A.

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Negligent & Intentional Misrepresentation
To state a claim for intentional misrepresentation, a

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plaintiff must allege: (1) a misrepresentation, (2) knowledge of

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falsity, (3) intent to defraud, i.e., to induce reliance; (4)

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justifiable reliance on the misrepresentation; and (5) resulting

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damage.

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974 (1997); Kearns v. Ford Motor Co., 567 F.3d 1120, 1126 (9th

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Cir. 2009).

Engalia v. Permanente Med. Grp., Inc., 15 Cal. 4th 951,

To state a claim for negligent misrepresentation, a

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plaintiff must allege: (1) a misrepresentation of a past or

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existing material fact; (2) without reasonable ground for

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believing it to be true; (3) intent to induce reliance; (4)

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justifiable reliance; and (5) resulting damage.

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Fund, LLC v. Roth Capital Partners, LLC, 158 Cal. App. 4th 226,

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243 (2d Dist. 2007); Glenn K. Jackson, Inc. v. Roe, 273 F.3d

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1192, 1200 (9th Cir. 2000).

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Apollo Capital

Plaintiff alleges that at various points in 2012 and

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2013, IndyMac falsely represented that plaintiff’s loan

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application was incomplete, (FAC ¶ 64), that plaintiff was

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ineligible for a successive HAMP modification, (id. ¶ 70), and

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that there was no foreclosure sale scheduled.

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Plaintiff then alleges that, as a result of these three

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misrepresentations, he “continued [his] attempts to obtain a loan

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modification” from IndyMac rather than “exploring other options”

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that would have enabled him to continue making monthly mortgage

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payments and postpone the trustee’s sale.

(Id. ¶ 76.)

(Id. ¶¶ 68, 74, 80.)

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Even if plaintiff could satisfy the first three

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elements of each claim, he has not shown that he acted in
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reliance on any of IndyMac’s alleged misrepresentations.

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mortgage context, a plaintiff’s allegations that he declined to

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“explore other options” as a result of a lender’s false

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representations are generally not sufficient to withstand a

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motion to dismiss because they simply “re-state the element of

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the claim.”

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0849 AWI GSA, 2011 WL 2078024, at *3 (E.D. Cal. May 25, 2011)

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(holding that an allegation that “Plaintiff could have explored

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other options had the [Defendant] not acted in such a deceptive

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In the

Valtierra v. Wells Fargo Bank, N.A., No. CIV-F-10-

manner” was not sufficient to demonstrate reliance).
Plaintiff does not identify what “other options” he

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declined to pursue, or how they would have enabled him to make

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his mortgage payments or postpone the foreclosure sale.

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instance, one panel of the California Court of Appeal held that a

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plaintiff could survive demurrer based on allegations that “she

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would have pursued other options, including possibly selling her

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home, retaining counsel earlier, and/or finding a cosigner to

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save her home” but for the defendant’s statement that she would

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receive a permanent loan modification.

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Bank, N.A., 214 Cal. App. 4th 780, 805 (4th Dist. 2013).

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contrast, this court has held that bare allegations that the

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plaintiff would have explored other options or pursued legal

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action to stop a foreclosure sale were insufficient to survive a

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motion to dismiss.

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Assoc., No. CIV 2:13-00958, 2013 WL 5569988, at *7 n. 6 (E.D.

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Cal. Oct. 9, 2013) (holding that plaintiff’s allegation that he

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would have been able to enjoin a trustee’s sale if he was not

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falsely promised a loan modification was implausible because his

For

West v. JPMorgan Chase
By

See, e.g., Sholiay v. Fed. Nat’l Mortg.

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“underlying claim lacks merit”).

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“Even assuming justifiable reliance . . . no liability

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attaches if the damages sustained were otherwise inevitable or

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due to unrelated causes.”

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LLC, No. CIV. 2:12-2666 JAM AC, 2013 WL 3242211, at *4 (E.D. Cal.

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June 25, 2013) (quoting Kruse v. Bank of Am., 202 Cal. App. 3d

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38, 60–61 (1st Dist. 1988) (internal quotation marks omitted)).

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Here, plaintiff’s allegations do not show that any damages he

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suffered were the result of IndyMac’s conduct, rather than his

Gardner v. RSM & A Foreclosure Servs.,

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own failure to make his mortgage payments.

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recorded multiple notices of default against plaintiff’s home

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prior to any of the alleged misrepresentations, and each of these

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notices states an arrearage of over $10,000.

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Exs. B-D.)

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WBS DAD, 2011 WL 2080249, at *5 (E.D. Cal. May 25, 2011)

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(dismissing fraud and negligent misrepresentation claims when

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“plaintiff stopped making payments under the loan before these

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alleged misrepresentations were made”);

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Bank, N.A., 10-CV-10390-LHK, 2011 WL 311376, at *7 (N.D. Cal.

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Jan. 28, 2011) (“Without some factual basis suggesting that

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Plaintiffs could have cured the default . . . the Court cannot

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reasonably infer that Wells Fargo’s alleged misrepresentations

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resulted in the loss of plaintiff’s home.

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suggest that Plaintiffs lost their home because they became

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unable to keep up with monthly payments and lacked the financial

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resources to cure the default.”).

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Trustee Corps

(See IndyMac RJN

See Manzano v. Metlife Bank, N.A., No. CIV 2:11-651

DeLeon v. Wells Fargo

The facts alleged

In short, plaintiff has not sufficiently alleged that
he relied on any of IndyMac’s representations; even if he had, he
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has not alleged any facts showing that the damages he suffered

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were a result of IndyMac’s alleged misrepresentations, as opposed

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to his own inability to pay back his loan.

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3242211, at *4.

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motion to dismiss plaintiff’s intentional and negligent

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misrepresentation claims.

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B.

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See Gardner, 2013 WL

Accordingly, the court must grant IndyMac’s

Promissory Estoppel
“The elements of a promissory estoppel claim are: (1) a

promise that is clear and unambiguous in its terms; (2) reliance

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on the promise by the party to whom the promise is made; (3) that

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is reasonable and foreseeable; and (4) injury to the party

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asserting estoppel due to his or her reliance.”

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Vericrest Fin., Inc., --- F. Supp. 2d ----, No. CIV 2:12-901 LKK

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JFM, 2013 WL 4049663, at *12 (E.D. Cal. Aug. 29, 2013) (citing

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Laks v. Coast Fed. Sav. & Loan Ass’n, 60 Cal. App. 3d 885, 890-91

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(2d Dist 1976)).

Alimena v.

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Plaintiff alleges that IndyMac “promised [p]laintiff a

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HAMP loan modification in or about 2010 and further promised not

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to foreclose on [p]laintiff while he was being reviewed for a

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loan modification.”

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IndyMac had made these promises, plaintiff has not sufficiently

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alleged that he suffered any injury in reliance on these

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promises.

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dismiss plaintiff’s promissory estoppel claim.

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C.

(FAC ¶ 95.)

As explained above, even if

Accordingly, the court must grant IndyMac’s motion to

Breach of Contract
“[T]he elements of a cause of action for breach of

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contract are (1) the existence of the contract, (2) plaintiff’s

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performance or excuse for nonperformance, (3) defendant’s breach,
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and (4) the resulting damages to the plaintiff.”

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Realty, Inc. v. Goldman, 51 Cal. 4th 811, 821 (2011).

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Oasis W.

Plaintiff alleges that IndyMac promised to extend him a

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permanent loan modification and that it breached this promise by

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providing him with a “backup modification” with terms that were

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inconsistent with HAMP guidelines.

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not decide whether this alleged promise constituted an

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enforceable contract because, even if it did, plaintiff admits

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that he did not make all of the payments that were required under

(FAC ¶ 90.)

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the loan modification agreement.

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has not performed his obligation under any alleged contract, he

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cannot bring a breach of contract claim unless his failure to

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perform is excused.

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(Id. ¶ 91.)

The court need

Because plaintiff

Plaintiff alleges that his failure to make payments was

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excused because he could no longer afford to make the payments,

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which were “based on inaccurate income and outside of HAMP

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guidelines.”

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unforeseen difficulty or expense . . . ordinarily will not excuse

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performance.”

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830 (10th ed. 2005); Metzler v. Thye, 163 Cal. 95, 98 (1912).

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In order to show that his performance was excused, plaintiff must

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show that it was “objectively impossible” for any person to make

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the required payments.

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09cv39 WQH (AJB), 2009 WL 514229, at *8 (S.D. Cal. Mar. 2, 2009)

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(citing Hensler v. City of Los Angeles, 124 Cal. App. 2d 71, 83

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(2d Dist. 1954)).

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(Id.)

However, it is black-letter law that “mere

1 Witkin, Summary of California Law (Contracts) §

Rosales v. Downey Sav. & Loan Ass’n, No.

The fact that the required mortgage payments were
onerous is not enough to excuse plaintiff’s failure to pay them.
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See, e.g., Archiunda v. Chase Home Fin. LLC, No. 09-CV-00960-H

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(AJB), 2009 WL 1796295, at *5 (S.D. Cal. June 23, 2009) (holding

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that plaintiff’s performance was not excused even though he

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alleged that “based upon the actual income information provided .

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. . Plaintiff could never perform according to the terms of the

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loan”).

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id., plaintiff’s failure to make payments does not excuse his

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nonperformance, and plaintiff cannot state a breach of contract

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claim.

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Because it is not “impossible for anyone to perform,”

Accordingly, the court must grant IndyMac’s motion to

dismiss plaintiff’s breach of contract claim.
D.

Negligence
“To prove a cause of action for negligence, plaintiff

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must show (1) a legal duty to use reasonable care, (2) breach of

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that duty, and (3) proximate [or legal] cause between the breach

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and (4) the [plaintiff’s] injury.”

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1197 (citing Mendoza v. City of Los Angeles, 66 Cal. App. 4th

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1333, 1339 (2d Dist. 1998)) (internal quotation marks omitted).

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“The existence of a legal duty to use reasonable care in a

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particular factual situation is a question of law for the court

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to decide.”

21

4th 269, 278 (4th Dist. 2004).

22

Castaneda, 687 F. Supp. 2d at

Vasquez v. Residential Invs., Inc., 118 Cal. App.

“[A]s a general rule, a financial institution owes no

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duty of care to a borrower when the institution’s involvement in

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the loan transaction does not exceed the scope of its

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conventional role as a lender of money.”

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Sav. & Loan Ass’n, 231 Cal. App. 3d 1089, 1096 (3d Dist. 1991).

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Plaintiff argues, however, that IndyMac owed him a duty of care

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because it “actively engaged him in the modification process” and
12

Nymark v. Heart Fed.

1

exceeded the scope of its traditional role as a lender.

2

Opp’n at 20:13-14.)

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loan servicer who offers a loan modification goes “beyond its

4

role as a silent lender and loan servicer” and that its

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activities “constitute sufficient active participation to create

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a duty of care.”

7

10-03892 WHA, 2011 WL 1134451, at *7 (N.D. Cal. Mar. 28, 2011);

8

see also, e.g., Jolley v. Chase Home Fin., LLC, 213 Cal. App. 4th

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872, 905 (1st Dist. 2013); Becker v. Wells Fargo Bank, N.A., No.

(Pl.’s

Some courts in California have held that a

Ansanelli v. JP Morgan Chase Bank, N.A., No. C-

10

CIV. 2:10-02799 LKK KJN, 2012 WL 6005759, at *11-*12 (E.D. Cal.

11

Nov. 30, 2012) (Newman, M.J.); Garcia v. Ocwen Loan Servicing,

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LLC, No. C-10-0290 PVT, 2010 WL 1881098, at *2-*3 (N.D. Cal. May

13

10, 2010).

14

Despite plaintiff’s reliance on this “long line” of

15

authorities, (Pl.’s Opp’n at 20:27), Ansanelli and its progeny

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represent a minority position.

17

FSB, No. 5:11-cv-05664 EJD, 2012 WL 4747165, at *4 (N.D. Cal.

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Oct. 3, 2012); see also Settle v. World Sav. Bank, F.S.B., No. ED

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CV 11-00800 MMM (DTBx), 2012 WL 1026103, at *8 (C.D. Cal. Jan.

20

11, 2012) (noting that “numerous cases have characterized a loan

21

modification as a traditional money lending activity” and listing

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cases).

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modification, which at its core is an attempt by a money lender

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to salvage a troubled loan, is nothing more than a renegotiation

25

of loan terms.”

26

actually lending money, it is undebatable that negotiating the

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terms of the lending relationship is one of the key functions of

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a money lender.”

Armstrong v. Chevy Chase Bank,

In Armstrong, the court explained that “a loan

Armstrong, 2012 WL 4747165, at *4.

Id.

“Outside of

For this reason, the court has stated
13

1

before that it, “like the court in Armstrong, finds Ansanelli

2

unpersuasive.”

3

2:13-00976 WBS EFB, 2013 WL 3773950, at *6 (E.D. Cal. July 17,

4

2013).

5

Bunce v. Ocwen Loan Servicing, LLC, No. CIV.

Because the majority of California courts hold that

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loan modification activities are part and parcel of a loan

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servicer’s “conventional role as a lender of money,” Nymark, 231

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Cal. App. 3d at 1096, and because plaintiff has not alleged any

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facts that show a special relationship with IndyMac, plaintiff

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cannot allege that IndyMac owed him a duty of care.

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the court must grant IndyMac’s motion to dismiss plaintiff’s

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negligence claim.

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E.

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Accordingly,

Equitable Accounting
“Under California law, an accounting is generally a

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remedy under equity,” rather than a freestanding cause of action.

16

Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177,

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1191 (N.D. Cal. 2009) (citing Batt v. City & County of San

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Francisco, 155 Cal. App. 4th 65, 82 (1st Dist. 2007)).

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extent that California law does permit a separate cause of action

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for accounting, a plaintiff must show that there is “some balance

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due the plaintiff that can only be ascertained by an accounting.”

22

Teselle v. McLoughlin, 173 Cal. App. 4th 156, 179 (3d Dist.

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2009).

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defendants owe him; rather, he seeks an accounting of the “true

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amount of his indebtedness” to defendants.

26

23:15.)

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accounting, and the court must grant defendants’ motion to

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dismiss this claim.

To the

Plaintiff does not seek an accounting of the money that

(Pl.’s Opp’n at

Accordingly, plaintiff cannot bring a claim for

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1

F.

HOLA Preemption

2

The Home Owners Loan Act of 1933 (“HOLA”) authorizes

3

the Office of Thrift Supervision (“OTS”) to promulgate

4

regulations governing federal savings associations.

5

1464; Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th

6

Cir. 2008).

7

regulation that authorizes federal savings associations to

8

“extend credit as authorized under federal law . . . without

9

regard to state laws purporting to regulate or otherwise affect

12 U.S.C. §

Pursuant to that authority, OTS has issued a

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their credit activities.”

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terms, this regulation “occupies the entire field of lending

12

regulation for federal savings associations,” id., and therefore

13

“le[aves] no room for the States to supplement it.”

14

Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).

15

12 C.F.R. § 560.2(a).

By its own

Rice v.

The regulation lists thirteen “illustrative examples”

16

of state laws that are preempted.

12 C.F.R. § 560.2(b).

In

17

particular, the regulation preempts any state law that purports

18

to regulate the “processing, origination, servicing, sale or

19

purchase of, or investment or participation in, mortgages.”

20

C.F.R. § 560.2(b)(10).

21

to statutes that specifically regulate lending activities, but

22

also encompasses statutes of general applicability, such as the

23

UCL.

24

F. Supp. 2d 1156, 1163 (C.D. Cal. 2008) (holding that UCL claims

25

were preempted by HOLA).

26

clause stating that several types of state law, including

27

contract and commercial law, real property law, and tort law,

28

“are not preempted to the extent that they only incidentally

12

The list in paragraph (b) is not limited

See, e.g., Munoz v. Fin. Freedom Senior Funding Corp., 567

The regulation also includes a savings

15

1

affect the lending operations of Federal savings associations or

2

are otherwise consistent with the purposes of paragraph (a) of

3

this section.”

4
5
6
7
8
9
10

12 C.F.R. § 560.2(c).

OTS has also promulgated a framework for courts to
determine “the status of state laws under § 560.2”:
[T]he first step will be to determine whether the type
of law in question is listed in paragraph (b). If so,
the analysis will end there; the law is preempted. If
the law is not covered by paragraph (b), the next
question is whether the law affects lending.
If it
does, then, in accordance with paragraph (a), the
presumption arises that the law is preempted.
This
presumption can be reversed only if the law can be
shown to fit within the confines of paragraph (c).

11

OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sept. 30, 1996).5

12

The Final Rule emphasizes that “paragraph (c),” the savings

13

clause in the regulation, “is intended to be interpreted

14

narrowly,” and that “[a]ny doubt should be resolved in favor of

15

preemption.”

16

Francisco, 309 F.3d 551, 558 (9th Cir. 2002) (“[B]ecause there

17

has been a history of significant federal presence in national

18

banking, the presumption against preemption of state law is

19

inapplicable.”).

20

is whether the state law, “as applied, is a type of state law

21

contemplated in the list under paragraph (b).”

22

at 1006 (emphasis added).

Id.; see also Bank of Am. v. City & County of San

In applying this framework, the relevant issue

Silvas, 514 F.3d

23
24
25
26
27
28

5

To the extent that the Final Rule evinces OTS’s
interpretation of the preemptive scope of § 560.2, it “must be
given controlling weight.” Silvas, 514 F.3d at 1005 n.5 (citing
Auer v. Robbins, 519 U.S. 452 (1997)); see also Bassiri v. Xerox
Corp., 463 F.3d 927, 930 (9th Cir. 2006) (explaining that an
agency’s interpretation of its own regulation is “controlling”
under Auer).
16

1

IndyMac is a division of OneWest Bank, FSB, which is a

2

federally chartered savings bank.

3

the “Lender” was “IndyMac Bank, F.S.B., a federally chartered

4

savings bank.”

5

federal savings association subject to OTS regulations, see 12

6

U.S.C. § 1462 (defining a “federal savings association”), and the

7

court must determine whether plaintiff’s five statutory claims

8

are preempted.6

9

1.

10

The Deed of Trust noted that

(IndyMac RJN Ex. A.)

IndyMac is therefore a

California Civil Code Section 2923

Plaintiff brings claims under sections 2923.6(c),

11

2923.6(d), and 2923.7 of the California Civil Code, which

12

regulate loan modification activities.

13

IndyMac’s conduct in the loan modification process violated

14

California Civil Code section 2923 because IndyMac “dual tracked”

15

his application, (FAC ¶ 120), did not permit him to appeal the

16

denial of his application, (id. ¶ 117), and failed to assign him

17

a single point of contact with regard to his application (id. ¶

18

121).

19

unlawful sale of his home at a foreclosure sale.

20

120, 122.)

Plaintiff alleges that

Plaintiff alleges that these violations resulted in the

21

(Id. ¶¶ 118,

As applied to plaintiff’s claims, section 2923 is

22

preempted because it imposes requirements on the “processing,

23

origination, [and] servicing” of plaintiff’s mortgage loan and

24

application for a loan modification in addition to those imposed

25

by federal law.

12 C.F.R. § 560.2(b)(10); see, e.g., Biggins v.

26
27
28

6

Because the court grants IndyMac’s motion to dismiss
plaintiff’s non-statutory claims on alternative grounds, it need
not determine whether those claims are also preempted by HOLA.
17

1

Wells Fargo & Co., 266 F.R.D. 399, 417 (N.D. Cal. 2009) (holding

2

that a section 2923.6 claim premised on failure to extend a loan

3

modification was preempted by HOLA); Marquez v. Wells Fargo Bank,

4

N.A., No. C 13-2819 PJH, 2013 WL 5141689, at *5 (N.D. Cal. Sept.

5

13, 2013) (holding that a section 2923.7 claim based on

6

allegations that the plaintiffs were denied a single point of

7

contact and were never “given a meaningful opportunity to apply

8

for, and receive, a loan modification . . . is preempted by

9

HOLA”).

10

Even if section 2923 were not covered by §

11

560.2(b)(10), it would still be preempted to the extent that it

12

affected IndyMac’s lending activities by imposing liability on

13

IndyMac for its conduct in the loan modification process.

14

Final Rule, 61 Fed. Reg. at 50966-67.

15

plaintiff alleges that IndyMac’s “fail[ure] to communicate” with

16

him during the loan modification process can give rise to

17

liability, section 2923 is preempted because it would impose

18

duties on IndyMac that it would “not be subject to . . . in other

19

states.”

20

GSA, 2010 WL 1659369, at *8 (E.D. Cal. Apr. 23, 2010) (citing

21

Odinma v. Aurora Loan Svcs., No. C-09-4674 EDL, 2010 WL 1199886,

22

at *8 (N.D. Cal. Mar. 23, 2010)).

23

grant IndyMac’s motion to dismiss plaintiff’s section 2923

24

claims.

See

To the extent that

Parcray v. Shea Mortg., Inc., No. CIV. 2:09-1942 OWW

Accordingly, the court must

25

2.

California Civil Code Section 2924

26

Plaintiff also brings a claim under section 2924 of the

27

California Civil Code, which regulates foreclosure proceedings.

28

Plaintiff alleges that the assignment of his mortgage loan to a
18

1

securitized trust was unlawful, that the Notice of Default was

2

therefore void, and that, as a result, the foreclosure sale

3

violated Civil Code section 2924.

4

Like plaintiff’s section 2923 claims, section 2924

5

“[c]laims based on misconduct related to the foreclosure

6

proceedings” are preempted by HOLA.

7

N.A., No. CIV. 2:12-1653 MCE CKD, 2013 WL 930611, at *9 (E.D.

8

Cal. Mar. 8, 2013) (citations omitted); see also, e.g., DeLeon v.

9

Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119, 1126 (N.D. Cal.

10

2010) (holding that claims under sections 2923.5 and 2924 are

11

preempted by HOLA); Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F.

12

Supp. 2d 1022, 1032 (N.D. Cal. 2010) (same).

13

which is premised on the alleged assignment of his loan to a

14

securitized trust, is squarely preempted because it seeks to

15

apply section 2924 to regulate IndyMac’s “sale or purchase” of

16

mortgages.

17

No. C. 12-00108 DMR, 2012 WL 967051, at *6-7 (holding that a

18

section 2924 claim premised on allegations of unlawful assignment

19

was preempted by HOLA).

20

is premised on the allegation that IndyMac lacked authority to

21

initiate the foreclosure sale, it is preempted for the same

22

reason.

23

type of lending activity expressly contemplated by § 560.2(b)(10)

24

because it constitutes the ‘processing’ and ‘servicing’ of a

25

mortgage.”).

26

motion to dismiss plaintiff’s section 2924 claim.

Ismail v. Wells Fargo Bank,

Plaintiff’s claim,

12 C.F.R. § 560.2(b)(10); Sami v. Wells Fargo Bank,

Because plaintiff’s section 2924 claim

Id. at *8 (“Initiation of the foreclosure process is the

Accordingly, the court must grant defendants’

27

3.

The UCL

28

California’s UCL prohibits “any unlawful, unfair, or
19

1

fraudulent business act or practice . . . .”

2

Code § 17200.

3

competition . . . .

4

unfair or deceptive even if not unlawful and vice versa.”

5

Tech Comm’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163,

6

180 (1999) (internal quotation marks and citations omitted).

7

Cal Bus. & Profs.

The UCL “establishes three varieties of unfair
In other words, a practice is prohibited as
Cel-

Plaintiff brings a claim under the UCL for “unlawful

8

business practices,”7 in which he alleges that IndyMac “violated

9

Cal. Civ. Code §§ 2923.6, 2923.7, and 2924.”8

(FAC ¶ 108.)

10

Because “those statutes would impose additional requirements on

11

[IndyMac] in the mortgage process, the UCL claim is . . .

12

preempted to the extent that it depends on those statutes.”

13
14
15
16
17
18
19
20

7

Although plaintiff labels his UCL claim “unlawful
business practices,” some allegations suggest that he also seeks
to assert a claim under the UCL’s “unfair” prong. (See, e.g.,
FAC ¶ 107 (“[T]he unlawful acts and practices of Defendants
alleged herein constitute unlawful or unfair business practices .
. . .”).) The court need not determine whether plaintiff has
stated a claim under the UCL’s “unfair” prong because any such
claim would also be preempted. See, e.g., Vega, 654 F. Supp. 2d
at 1118 (noting that a UCL claim brought under the “unfair” prong
was preempted by HOLA to the extent that it relied on allegations
of inadequate loan disclosures).
8

21
22
23
24
25
26
27
28

Plaintiff’s UCL claim also reiterates his allegations
that IndyMac committed “material misrepresentations affecting
plaintiff’s interest in [his home] and committed numerous acts of
negligence in the handling of and processing of [p]laintiff’s
loan modification applications.” (FAC ¶ 108.) These allegations
cannot give rise to an “unlawful business practices” claim, which
must be premised on the violation of a statute or constitutional
provision. Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1168
(9th Cir. 2012) (citing People ex rel. Lockyer v. Fremont Life
Ins. Co., 104 Cal. App. 4th 508, 515 (2d Dist. 2002)). Because
plaintiff’s section 2923 and 2924 claims are preempted by HOLA,
plaintiff has no constitutional or statutory predicate for his
UCL claim. See id.
20

1

Plastino v. Wells Fargo Bank, 873 F. Supp. 2d 1179, 1186 n.4

2

(N.D. Cal. 2012); see also Vega v. JPMorgan Chase Bank, N.A., 654

3

F. Supp. 2d 1104, 1118 (E.D. Cal. 2009) (O’Neill, J.) (holding

4

that plaintiffs in a foreclosure-related action “are unable to

5

avoid [HOLA] preemption in the guise of a UCL claim”).

6

Accordingly, the court must grant defendants’ motion to dismiss

7

plaintiff’s UCL claim.9

8

G.

9

Wrongful Foreclosure
“Wrongful foreclosure is an action in equity, where a

10

plaintiff seeks to set aside a foreclosure sale.”

Castaneda, 687

11

F. Supp. 2d at 1201.

12

accompanied by a presumption that it was conducted regularly and

13

fairly.”

14

1258 (6th Dist. 2005) (internal quotation marks omitted).

15

presumption may only be rebutted by substantial evidence of

16

prejudicial procedural irregularity.”

17

Aurora Loan Servs., 740 F. Supp. 2d 1163, 1169 (E.D. Cal. 2010)

18

(Ishii, J.) (“[S]ome form of actual prejudice is necessary.”).

19

On a motion to dismiss, therefore, a plaintiff must allege “facts

20

showing that [he was] prejudiced by the alleged procedural

21

defects.”

22

(9th Cir. 2012) (citing Arnolds Mgmt. Corp. v. Eischen, 158 Cal.

“A nonjudicial foreclosure sale is

Melendrez v. D & I Inv., Inc., 127 Cal. App. 4th 1238,
“This

Id.; see also Quinteros v.

Hadley v. BNC Mortg., Inc., 466 Fed. App’x 612, 613

23
24
25
26
27
28

9

Because all of plaintiff’s statutory claims are
preempted by HOLA, the court need not reach IndyMac’s argument
that these statutes violate the Contracts Clause of the
Constitution. See Douglas v. Seacoast Prods., Inc., 431 U.S. 265
(1977) (holding that addressing preemption questions before
constitutional questions is consistent with the “practice of
deciding statutory claims first to avoid unnecessary
constitutional adjudications”).
21

1

App. 3d 575 (2d Dist. 1984)).

2

Plaintiff alleges that he “suffered harm and prejudice

3

as the sale occurred and he has now lost title to the Subject

4

Property.”

5

his home in a foreclosure sale does not constitute prejudice; if

6

it did, the prejudice inquiry would be meaningless because every

7

plaintiff in a wrongful foreclosure action has lost title to his

8

or her home in a foreclosure sale.

9

demonstrate that the “violation of the statute[s] [themselves],

(FAC ¶ 132.)

The fact that plaintiff lost title to

Rather, plaintiff must

10

and not the foreclosure proceedings, caused [his] injury.”

11

Aguiar v. Wells Fargo Bank, N.A., No. 12-CV-03653 YGR, 2012 WL

12

5915124, at *5 (N.D. Cal. Nov. 26, 2012).

13

Plaintiff cannot do so for two reasons.

14

plaintiff’s statutory claims cannot withstand dismissal, he

15

cannot bring a wrongful foreclosure claim predicated on

16

violations of those statutes.

17

Mortg., Inc., 709 F. Supp. 2d 873, 887 (E.D. Cal. 2010) (Karlton,

18

J.) (holding that because plaintiff’s statutory claims under the

19

Real Estate Settlement Procedures Act (RESPA) failed, plaintiff

20

could not bring a wrongful foreclosure claim predicated on RESPA

21

violations).

22

preemption by recasting his statutory claims as a wrongful

23

foreclosure claim.

24

that plaintiff’s wrongful foreclosure claim was preempted because

25

it relied upon violations of statutory claims that were

26

preempted).

27
28

First, because

See, e.g., Falcocchia v. Saxon

Plaintiff cannot do an end-run around HOLA

See DeLeon, 729 F. Supp. 2d at 1126 (holding

Second, even if plaintiff could bring this wrongful
foreclosure claim, plaintiff has not sufficiently alleged that he
22

1

was prejudiced by any alleged violation of these statutes.

2

various points throughout the FAC, plaintiff alleges that he was

3

not assigned a single point of contact about his loan

4

modification application, (FAC ¶ 121), was “dual tracked,” (id. ¶

5

120), and was denied an opportunity to appeal the decision not to

6

offer him a loan modification, (id. ¶ 117).

7

allege any facts showing that these alleged irregularities

8

resulted in the denial of his application for a loan modification

9

or that he could have successfully appealed the denial of his

At

Plaintiff does not

10

application for a loan modification.

11

alleged that these “violations of the statute[s] [themselves],

12

and not the foreclosure proceedings, caused [his] injury.”

13

Aguiar, 2012 WL 5915124, at *5.

14

grant IndyMac’s motion to dismiss this claim.

15

H.

Plaintiff has therefore not

Accordingly, the court must

Claims Against Freddie Mac

16

Plaintiff also asserts that Freddie Mac is liable for

17

IndyMac’s conduct because IndyMac acted as the agent of Freddie

18

Mac, the owner of plaintiff’s loan.

19

need not determine whether plaintiff has alleged sufficient

20

“facts that would suggest a plausible agency relationship”

21

between IndyMac and Freddie Mac, Castaneda v. Saxon Mortg.

22

Servs., Inc., No. CIV. 2:09-1124 WBS DAD, 2010 WL 726903, at *6

23

(E.D. Cal. Feb. 26, 2010), because plaintiff has not stated a

24

claim for relief against IndyMac and does not allege any separate

25

wrongdoing by Freddie Mac.

26

defendants’ motion to dismiss all claims against Freddie Mac.10

27
28

10

(FAC ¶¶ 51-58.)

The court

Accordingly, the court must grant

Because the court grants defendants’ motion to dismiss
in its entirety, it need not reach defendants’ argument that
23

1

IT IS THEREFORE ORDERED that defendants’ motion to

2

dismiss be, and the same hereby is, GRANTED.

Plaintiff has

3

twenty days to file an amended complaint, if he can do so

4

consistent with this Order.

5

Dated:

November 15, 2013

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

plaintiff is estopped from bringing any claims that he did not
include in his bankruptcy petition.
24