Deschaine et al v. Indymac Mortgage Services et al

Filing 53

MEMORANDUM AND ORDER signed by Senior Judge William B. Shubb on 1/22/2014 GRANTING 35 Motion to Dismiss. CASE CLOSED. (Michel, G)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
----oo0oo----

11
12
13
14
15
16
17

JASON DESCHAINE,

NO. CIV. 2:13-1991 WBS CKD

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

MEMORANDUM AND ORDER RE: MOTION
TO DISMISS SECOND AMENDED
COMPLAINT

Defendants.

18
19
20
21

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

22

defendants IndyMac Mortgage Services, a division of OneWest Bank,

23

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

24

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

25

Defendants now move to dismiss plaintiff’s Second Amended

26

Complaint for failure to state a claim upon which relief can be

27

granted pursuant to Federal Rule of Civil Procedure 12(b)(6).

28
1

1

I.

Factual & Procedural History

2

In 2005, plaintiff entered into a mortgage loan for

3

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

4

Rough and Ready, California.

5

(“RJN”) Ex. A (Docket No. 36).)

6

Corps, a foreclosure trustee, recorded a Notice of Default

7

(“NOD”) against plaintiff’s home stating that plaintiff was

8

$17,901.804 in arrears on his mortgage payments.

9

Later that year, plaintiff contacted IndyMac, the servicer of

(Defs.’ Req. for Judicial Notice
On January 26, 2009, Trustee

(Id. Ex. B.)

10

plaintiff’s mortgage loan, and sought a loan modification.

11

(Second Amended Complaint (“SAC”) ¶ 15 (Docket No. 34).)

12

Plaintiff applied for a HAMP loan modification in September 2009

13

and entered into a trial loan modification plan (“TPP”) in

14

February 2010.

15

(Id. ¶¶ 16-18.)

Plaintiff began making payments under the TPP until

16

IndyMac notified him in July 2010 that he was ineligible for a

17

permanent HAMP1 loan modification because his mortgage payments

18

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

19

19-20.)

20

Backup Modification, under which plaintiff could continue to make

21

payments on the mortgage.

22

attempted to make payments under the backup modification for

23

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

24

again.

(Id. ¶¶

IndyMac invited plaintiff to apply for a Freddie Mac

(Id. ¶ 23.)

(Id. ¶ 20 & Ex. B.)

Plaintiff

On June 15, 2012, Trustee Corps recorded

25
26
27
28

1

The Home Affordable Modification Program (“HAMP”) is a
program initiated by the Treasury Department in 2009 designed “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).
2

1

another NOD, which reflected an arrearage of $11,990.13.

2

Ex. D.)

3

(RJN

Between April 2012 and June 2013, plaintiff attempted

4

to obtain an additional loan modification from IndyMac.

5

24.)

6

plaintiff’s application was incomplete or that he was ineligible

7

for a loan modification.

8

a foreclosure sale on February 26, 2013.

9

February 25, 2013, a day before the foreclosure sale, plaintiff

On several occasions, IndyMac responded either that

(Id. ¶¶ 25-30.)

10

filed for bankruptcy.

11

bankruptcy on June 3, 2013.

12

(SAC ¶

(Id.)

IndyMac then scheduled
(See id. ¶ 31.)

On

Plaintiff obtained a discharge in
(RJN Ex. F.)

At some point between February 26, 2013, and March 20,

13

2013, IndyMac allegedly informed plaintiff that he could re-apply

14

for a loan modification.

15

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

16

application on April 4, 2013.

17

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

18

contact” with IndyMac and continued to send updated financial

19

documents when IndyMac requested him to do so.

20

(SAC ¶ 32.)

Plaintiff submitted that

(Id. ¶¶ 32, 33.)

Between April

(Id. ¶ 34.)

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

21

allegedly informed plaintiff that there was no foreclosure sale

22

scheduled, but that IndyMac required additional documentation in

23

order to process his application.

24

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

25

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

26

foreclosure sale the next day.

27

2013, Freddie Mac purchased plaintiff’s home at a trustee’s sale.

28

(Id. ¶ 38.)

(Id. ¶ 35.)

(Id. ¶¶ 36-37.)

3

Plaintiff then

On June 25,

1

Plaintiff filed this action in Nevada County Superior

2

Court on August 8, 2013.2

3

the action to this court pursuant to 12 U.S.C. § 1452(f), which

4

entitles Freddie Mac to remove to federal court any action to

5

which it is a party.

6

a First Amended Complaint, which alleged twelve claims: (1)

7

intentional misrepresentation; (2) negligent misrepresentation;

8

(3) breach of contract; (4) promissory estoppel; (5) negligence;

9

(6) violation of the Unfair Competition Law (“UCL”), Cal. Bus. &

10

Profs. Code § 17200 et seq.; (7) equitable accounting; (8) “dual

11

tracking” of plaintiff’s loan modification application in

12

violation of California Civil Code section 2923.6(c); (9) failure

13

to issue plaintiff an opportunity to appeal the denial of a loan

14

modification in violation of California Civil Code section

15

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

16

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

17

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

18

foreclosure.3

19

(Docket No. 1.)

(Id.)

Defendants removed

On October 21, 2013, plaintiff filed

(Docket No. 22.)

On November 15, 2013, the court granted defendants’

20

motion to dismiss plaintiff’s First Amended Complaint, and

21

granted plaintiff leave to file an amended complaint within

22
23
24
25
26
27
28

2

In addition to Freddie Mac and IndyMac, plaintiff named
Trustee Corps as a defendant in this action. Plaintiff
subsequently stipulated to dismiss Trustee Corps from this action
with prejudice. (Docket No. 46.)
3
Plaintiff refers to 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) (Shubb, J.) (“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.”
4

1

twenty days “if he can do so consistent with this Order.”

2

(Docket No. 33.)

3

assert a claim for equitable accounting but did re-assert each of

4

the eleven other claims that plaintiff had brought in the First

5

Amended Complaint.

6

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

7

to state a claim upon which relief can be granted.

8

35.)

9

II.

Plaintiff timely filed the SAC, which did not

Defendants now move to dismiss the SAC

(Docket No.

Request for Judicial Notice

10

In general, a court may not consider items outside the

11

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

12

items of which it can take judicial notice.

13

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

14

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

15

are either “(1) generally known within the territorial

16

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

17

ready determination by resort to sources whose accuracy cannot

18

reasonably be questioned.”

19

may properly be taken of matters of public record outside the

20

pleadings.

21

(9th Cir. 1986).

22

Barron v. Reich, 13

A court may take judicial

Fed. R. Evid. 201.

Judicial notice

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

Defendants request that the court judicially notice

23

several recorded documents pertaining to plaintiff’s property,

24

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

25

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

26

these documents, since they are matters of public record whose

27

accuracy cannot be questioned.

28

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

The court will take judicial notice of

See Lee v. City of Los Angeles,

5

The court will also take

1

judicial notice of plaintiff’s bankruptcy court filings, (see RJN

2

Exs. E-F), as they are likewise matters of public record whose

3

accuracy cannot be questioned.

4

Cal., 671 F. Supp. 2d 1111, 1121 (N.D. Cal. 2009) (taking

5

judicial notice of bankruptcy filings).

6

III. Discussion

7

See Rosal v. First Fed. Bank of

On a motion to dismiss, the court must accept the

8

allegations in the complaint as true and draw all reasonable

9

inferences in favor of the plaintiff.

Scheuer v. Rhodes, 416

10

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

11

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

12

(1972).

13

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

14

plausible on its face.”

15

544, 570 (2007).

16

for more than a sheer possibility that a defendant has acted

17

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

18

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

19

line between possibility and plausibility.”

20

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

21
22

A.

To survive a motion to dismiss, a plaintiff needs to

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

This “plausibility standard,” however, “asks

Ashcroft v. Iqbal,

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

23

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

24

falsity; (3) intent to defraud; (4) justifiable reliance on the

25

misrepresentation; and (5) resulting damage.

26

Permanente Med. Grp., Inc., 15 Cal. 4th 951, 974 (1997); Kearns

27

v. Ford Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009).

28

a claim for negligent misrepresentation, a plaintiff must allege:
6

Engalia v.

To state

1

(1) a misrepresentation of a past or existing material fact; (2)

2

without reasonable ground for believing it to be true; (3) intent

3

to induce reliance; (4) justifiable reliance; and (5) resulting

4

damage.

5

158 Cal. App. 4th 226, 243 (2d Dist. 2007); Glenn K. Jackson,

6

Inc. v. Roe, 273 F.3d 1192, 1200 (9th Cir. 2000).

7

Apollo Capital Fund, LLC v. Roth Capital Partners, LLC,

Plaintiff alleges, as he did in the First Amended

8

Complaint, that IndyMac falsely represented that plaintiff’s

9

application for a loan modification was incomplete, (SAC ¶ 71),

10

that plaintiff was ineligible for a successive HAMP modification,

11

(id. ¶ 78), and that there was no foreclosure sale scheduled,

12

(id. ¶ 85).

13

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

14

modification” from IndyMac in lieu of pursuing other options to

15

avert foreclosure.

16

Plaintiff alleges that, as a result of these

(Id. ¶¶ 76, 83, 90.)

Even if plaintiff could satisfy the first three

17

elements of each claim, he has not sufficiently alleged that he

18

acted in reliance on IndyMac’s alleged misrepresentation.

19

Plaintiff has alleged no facts demonstrating that he changed his

20

position in reliance on IndyMac’s alleged misrepresentations; on

21

the contrary, plaintiff repeatedly alleges that he “continued

22

[his] attempts to obtain a loan modification,” which he had

23

initiated prior to any alleged misrepresentations.

24

83, 90 (emphasis added).)

25

took place during the course of ongoing efforts to obtain a loan

26

modification, and because plaintiff’s allegations indicate that

27

he continued to seek a modification both before and after IndyMac

28

made these alleged misrepresentations, plaintiff’s allegations do

(SAC ¶¶ 76,

Because the alleged misrepresentations

7

1

not show that he changed his position in reliance on these

2

misrepresentations.

3

219 Cal. App. 4th 1481, 1500 (4th Dist. 2013) (holding that

4

plaintiff’s continued efforts to seek a loan modification from

5

Bank of America in lieu of obtaining alternative financing based

6

on alleged representations that plaintiff would receive a

7

modification did not constitute reliance).

8
9

See, e.g., Rossberg v. Bank of Am., N.A.,

Plaintiff alleges that had IndyMac had not made these
misrepresentations, he would have “explore[d] other options”

10

to postpone the foreclosure sale, including a short sale of the

11

property, filing for bankruptcy, and borrowing money to cure the

12

default.

13

more specific than those in the First Amended Complaint, they are

14

nonetheless insufficient to survive dismissal because plaintiff

15

has not “allege[d] any facts suggesting how pursuing these

16

hypothetical avenues would have prevented the foreclosure of

17

[his] home.”

18

201 WBS CKD, 2014 WL 172537, at *4 (E.D. Cal. Jan. 15, 2014); see

19

also, e.g., Newgent v. Wells Fargo Bank, N.A., Civ. No. 9-1525

20

WQH, 2010 WL 761236, at *5 (S.D. Cal. Mar. 2, 2010) (dismissing

21

fraud claim because plaintiff did “not allege facts that support

22

a cognizable theory upon which she could have prevented the

23

trustee’s sale”).

24

(SAC ¶¶ 76, 83, 90.)

Although these allegations are

Dick v. Am. Home. Mortg. Serv. Co., Civ. No. 2:13-

For instance, in Sholiay v. Federal National Mortgage

25

Association, the plaintiff claimed that, but for defendant’s

26

representation that he would receive a loan modification, he

27

would have retained an attorney to prevent the foreclosure of his

28

home.

Civ. No. 2:13-958 WBS, 2013 WL 3773896, at *6 (E.D. Cal.
8

1

July 17, 2013).

2

because the plaintiff “fail[ed] to allege facts suggesting how

3

hiring a lawyer could have prevented the sale.”

4

This court nonetheless dismissed the claim

Id.

Like the plaintiff in Sholiay, plaintiff has failed to

5

allege any facts demonstrating that he would have been able to

6

avert the sale of his home through a short sale, a loan,

7

bankruptcy, or any other method.

8

IndyMac’s promise of a loan modification deterred him from

9

declaring bankruptcy is particularly implausible, as plaintiff

10

allegedly continued to seek a loan modification even after he

11

filed his bankruptcy petition.

12

has therefore not alleged sufficient facts to show that he relied

13

on IndyMac’s alleged representations about his application for a

14

loan modification.

15

Plaintiff’s allegation that

(See SAC ¶¶ 31-35.)

Plaintiff

“Even assuming justifiable reliance . . . no liability

16

attaches if the damages sustained were otherwise inevitable or

17

due to unrelated causes.”

18

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

19

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

20

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

21

Like his allegations in the First Amended Complaint, plaintiff’s

22

allegations here do not show that any damages he suffered were a

23

result of IndyMac’s conduct, rather than his own failure to make

24

his mortgage payments.

25

of default against plaintiff’s home prior to any alleged

26

misrepresentations, and each of these notices states an arrearage

27

of over $10,000.

28

repeatedly defaulted prior to any alleged misrepresentations, his

Gardner v. RSM & A Foreclosure Servs.,

Trustee Corps recorded multiple notices

(See RJN Exs. B-D.)

9

Because plaintiff

1

allegation that those misrepresentations resulted in the

2

foreclosure of his home is implausible.

3

Bank, N.A., Civ. No. 2:11-651 WBS DAD, 2011 WL 2080249, at *5

4

(E.D. Cal. May 25, 2011) (dismissing fraud and negligent

5

misrepresentation claims when “plaintiff stopped making payments

6

under the loan before these alleged misrepresentations were

7

made”).

8

See Manzano v. Metlife

While plaintiff has amended his complaint to allege

9

that “[t]he above damages were not inevitable” and that his home

10

would not have been foreclosed upon “had the representations not

11

been false,” (SAC ¶¶ 77, 84, 91), this allegation is also

12

implausible because plaintiff has not alleged any facts to

13

suggest that he could have avoided default.

14

factual basis suggesting that [plaintiff] could have cured the

15

default . . . the [c]ourt cannot reasonably infer that

16

[IndyMac’s] alleged misrepresentations resulted in the loss of

17

[plaintiff’s] home.

18

[plaintiff] lost [his] home because [he] became unable to keep up

19

with monthly payments and lacked the financial resources to cure

20

the default.”

21

10390 LHK, 2011 WL 311376, at *7 (N.D. Cal. Jan. 28, 2011).

22

Accordingly, because plaintiff has not alleged sufficient facts

23

to demonstrate reliance or resulting damage, the court must grant

24

defendants’ motion to dismiss his intentional and negligent

25

misrepresentation claims.

26
27
28

B.

“Without some

Rather, the facts alleged suggest that

DeLeon v. Wells Fargo Bank, N.A., Civ. No. 10-

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

promise that is clear and unambiguous in its terms; (2) reliance
10

1

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

2

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

3

asserting estoppel due to his or her reliance.”

4

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

5

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

6

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

7

(2d Dist. 1976)).

8
9

Alimena v.

Plaintiff again alleges that IndyMac “promised
[p]laintiff a HAMP loan modification in or about 2010 and further

10

promised not to foreclose on [p]laintiff while he was being

11

reviewed for a loan modification.”

12

above, even if IndyMac had made these promises, plaintiff has not

13

sufficiently alleged that he suffered any injury in reliance on

14

those promises.

15

motion to dismiss plaintiff’s promissory estoppel claim.

16
17

C.

(SAC ¶ 106.)

As explained

Accordingly, the court must grant defendants’

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

18

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

19

performance or excuse for nonperformance, (3) defendant’s breach,

20

and (4) the resulting damages to the plaintiff.”

21

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

22

Oasis W.

Plaintiff alleges that IndyMac promised to extend him a

23

permanent loan modification and that it breached this promise by

24

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

25

inconsistent with HAMP guidelines.

26

concedes, as he did in the First Amended Complaint, that he did

27

not make all the payments that were required under the loan

28

modification agreement.

(SAC ¶ 101).

(Id. ¶ 102.)
11

Plaintiff

Because plaintiff has not

1

performed his obligation under any alleged contract, he cannot

2

bring a breach of contract claim unless his failure to perform is

3

excused.

See Goldman, 51 Cal. 4th at 821.

4

Plaintiff re-asserts that his failure to make payments

5

was excused because he could no longer afford to make the

6

payments, which were “based on inaccurate income and outside of

7

HAMP guidelines.”

8

Order, this allegation is insufficient because “mere unforeseen

9

difficulty or performance . . . ordinarily will not excuse

(Id.)

As the court emphasized in its previous

10

performance.”

11

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

12

(1912).

13

terms of the Backup Modification was “objectively impossible” for

14

any person.

15

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

16

omitted).

17

that his performance was excused.

18

Chase Home Fin. LLC, Civ. No. 9-960 H AJB, 2009 WL 1796295, at *5

19

(S.D. Cal. June 23, 2009) (holding that the plaintiff’s

20

performance was not excused even though he alleged that “based

21

upon the actual income information provided . . . Plaintiff could

22

never perform according to the terms of the loan”).

23

1 Witkin, Summary of California Law (Contracts) §

Rather, plaintiff must allege that performance under the

Rosales v. Downey Sav. & Loan Ass’n, Civ. No. 9-39

Because plaintiff has not done so, he cannot allege
See, e.g., id.; Archiunda v.

Insofar as it is not “impossible for anyone to perform”

24

under the terms of the Backup Modification, id., plaintiff’s

25

alleged inability to make payments does not excuse his

26

performance.

27

motion to dismiss plaintiff’s breach of contract claim.

Accordingly, the court must grant defendants’

28
12

1
2

D.

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

3

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

4

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

5

(4) the [plaintiff’s] injury.”

6

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

7

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

8

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

9

particular factual situation is a question of law for the court

10

to decide.”

11

Castaneda, 687 F. Supp. 2d at

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

12

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

As the court noted in its previous Order, the majority

13

of California courts hold that a loan servicer who offers to

14

modify a borrower’s loan does not owe that borrower a duty of

15

care because “its involvement in the loan transaction does not

16

exceed the scope of its conventional role as a lender of money.”

17

Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089,

18

1096 (3d Dist. 1991); see also Settle v. World Sav. Bank.,

19

F.S.B., Civ. No. 11-800 MMM (DTBx), 2012 WL 1026103, at *8 (C.D.

20

Cal. Jan. 11, 2012) (noting that “numerous cases have

21

characterized a loan modification as a traditional money lending

22

activity” and listing cases).

23

that there is “[g]enerally . . . no duty” to grant a loan

24

modification.

25

negligence claim is premised on the allegation that IndyMac

26

failed to modify his mortgage loan, plaintiff therefore cannot

27

state a claim for negligence.

28

(SAC ¶ 133.)

Indeed, plaintiff now concedes

To the extent that plaintiff’s

Relying on Lueras v. BAC Home Loans Servicing, 221 Cal.
13

1

App. 4th 49 (4th Dist. 2013), plaintiff contends that IndyMac

2

nonetheless had a duty “not to make a misrepresentation . . .

3

regarding the status of the application or the time [] and status

4

of the foreclosure sale.”

5

brought a negligence claim arising out of the defendant’s

6

handling of his application for a loan modification.

7

App. 4th at 63.

8

state a negligence claim because the defendant had no “common law

9

duty to offer or approve a loan modification,” it nonetheless

10

concluded that “a lender does owe a duty to a borrower to not

11

make material misrepresentations about the status of an

12

application for a loan modification or about the date, time, or

13

status of a foreclosure sale.”

14

court granted plaintiff leave to amend “to plead a cause of

15

action for negligent misrepresentation.”

16

added).

17

(SAC ¶ 113.)

In Lueras, the plaintiff

221 Cal.

Although the court held that plaintiff could not

Id. at 67-68.

As a result, the

Id. at 69 (emphasis

As in Lueras, plaintiff has not alleged the existence

18

of a duty of care that could support a negligence claim.

19

extent that plaintiff has alleged that IndyMac violated a duty

20

not to misrepresent facts about the modification and foreclosure

21

process, those allegations sound in negligent misrepresentation,

22

rather than negligence.4

23
24
25
26
27
28

4

To the

See 5 Witkin, Summary of Cal. Law

Unlike the plaintiff in Lueras, plaintiff has already
alleged a negligent misrepresentation claim. In fact,
plaintiff’s allegation that IndyMac was negligent because it
“misrepresented the sale date,” (SAC ¶ 115), closely parallels
his allegation that IndyMac committed a “[m]isrepresentation” by
“stat[ing] that there was no foreclosure sale date” (id. ¶ 85).
As explained above, these allegations are insufficient to state a
negligent misrepresentation claim because plaintiff has not
sufficiently alleged that he relied on these representations or
14

1

(Torts) § 819 (10th Ed. 2005) (noting that California law treats

2

negligent misrepresentation as a form of deceit, rather than as a

3

form of negligence); Bily v. Arthur Young & Co., 3 Cal. 4th 370,

4

413 (1992) (holding that plaintiffs can recover for negligent

5

misrepresentation, but not negligence, when they are able to

6

allege reliance on a defendant’s misrepresentation but cannot

7

allege the existence of a duty of care).

8

plaintiff has not sufficiently alleged that IndyMac owed him a

9

duty of care, the court must grant defendants’ motion to dismiss

10
11
12

Accordingly, because

plaintiff’s negligence claim.
E.

HOLA Preemption5
Prior to the enactment of the Dodd-Frank Wall Street

13

Reform Act and Consumer Protection Act of 2010 (“Dodd-Frank

14

Act”), 12 U.S.C. § 5301 et seq., the Home Owners Loan Act of 1933

15

(“HOLA”) authorized the Office of Thrift Supervision (“OTS”) to

16

promulgate regulations governing federal savings associations.

17

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

18

2008) (citing then-current version of 12 U.S.C. § 1464).

19

Pursuant to that authority, OTS issued a regulation that

20

authorized federal savings associations to “extend credit as

21

authorized under federal law . . . without regard to state laws

22

purporting to regulate or otherwise affect their credit

23
24
25
26
27
28

suffered harm as a result of that reliance.
5
Defendants move to dismiss a total of five claims
brought pursuant to California Business & Professions Code
section 17200 and California Civil Code sections 2923 and 2924 on
the basis that these claims are preempted by HOLA. Because the
court dismisses plaintiff’s other claims on alternate grounds, it
need not reach the issue of whether any of those claims are also
preempted by HOLA.
15

1

activities.”

2

regulation “occupie[d] the entire field of lending regulation for

3

federal savings associations,” id., and therefore “left no room

4

for the States to supplement it.”

5

Corp., 331 U.S. 218, 230 (1947).

6

12 C.F.R. § 560.2(a).

By its own terms, that

Rice v. Santa Fe Elevator

Although the Dodd-Frank Act has since transferred that

7

authority to the Office of the Comptroller of the Currency, see

8

12 U.S.C. § 1464, and now provides that HOLA’s implementing

9

regulations no longer occupy the field of lending regulation, see

10

12 U.S.C. § 1465, it explicitly provided that those amendments

11

“shall not be construed to alter or affect the applicability of

12

any regulation, order, guidance, or interpretation prescribed,

13

issued, and established by . . . . the Office of Thrift

14

Supervision regarding the applicability of State law under

15

Federal banking law to any contract entered into on or before the

16

date of enactment of this Act . . . .”

17

result, “claims involving contracts formed before July 21, 2010

18

are subject to the preemption regime in place before Dodd-Frank,”

19

rather than the more lenient conflict preemption standard

20

established by the Dodd-Frank Act.

21

*14; accord Henning v. Wachovia Mortg., FSB, --- F. Supp. 2d ----

22

, Civ. No. 11-11428 WGY, 2013 WL 5229837, at *5 (D. Mass. Sep.

23

17, 2013) (“Courts have uniformly held, however, that the

24

provisions of Dodd-Frank are not retroactive, and that HOLA

25

preemption applies to mortgages originated before either July 21,

26

2010 or July 21, 2011 . . . Because the loans at issue originated

27

before either date, the appropriate preemption standard to apply

28

. . . is that extant prior to the effective date of Dodd-Frank.”
16

12 U.S.C. § 5553.

As a

Settle, 2012 WL 1026103, at

1

(citations omitted)).

2

At the time plaintiff entered into his mortgage loan,

3

OTS’s implementing regulations explicitly stated that HOLA

4

preempted several enumerated types of state law, including any

5

state law that purports to regulate the “processing, origination,

6

servicing, sale, or purchase of, or investment or participation

7

in, mortgages.”

8

not only statutes that specifically regulate lending activities,

9

but also statutes of general applicability, such as the UCL.

12 C.F.R. § 560.2(b)(10).

That list encompasses

10

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

11

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

12

were preempted by HOLA).

13

clause stating that several types of state law, including

14

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

15

not preempted to the extent that they only affect the lending

16

operations of Federal savings associations or are otherwise

17

consistent with the purposes of paragraph (a) of this section.”

18

12 C.F.R. § 560.2(c).

19
20
21
22
23
24
25
26
27
28

The regulation also includes a savings

OTS 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).
OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sept. 30, 1996).6
6

Insofar as the Final Rule evinces OTS’s interpretation
of the preemptive scope of § 560.2, it “must be given controlling
17

1

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

2

savings clause in the regulation, “is intended to be interpreted

3

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

4

preemption.”

5

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

6

contemplated in the list under paragraph (b).”

7

at 1006 (emphasis added).

8
9

Id.7

In applying this framework, the relevant

Silvas, 514 F.3d

IndyMac is a division of OneWest Bank, FSB, which is a
federally chartered savings bank.

The Deed of Trust noted that

10

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

11

savings bank.”

12

mortgage loan with IndyMac on December 7, 2005, (see id.), and

13

subsequently modified that loan on February 1, 2010 and July 14,

14

2010 (see SAC ¶¶ 18, 20).

15

mortgage loan are therefore subject to the preemption standard

16

set forth by 12 C.F.R. § 560.2, and the court must determine

17

whether plaintiff’s five statutory claims are preempted.

(RJN Ex. A.)

Plaintiff initially entered into a

Plaintiff’s claims relating to his

18
19
20
21
22
23
24
25
26
27
28

weight.” Silvas, 514 F.3d at 1005 n.5 (citing Auer v. Robbins,
519 U.S. 452 (1997)); see also Basiri 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.)
7
While plaintiff invokes the “strong presumption”
against federal preemption, (Pl.’s Opp’n at 16:20-21 (Docket No.
48)), the Ninth Circuit has repeatedly held that this presumption
does not apply to HOLA or its implementing regulations. See Bank
of Am. v. City & County of San Francisco, 309 F.3d 551, 559 (9th
Cir. 2002) (“[B]ecause there has been a history of significant
federal presence in national banking, the presumption against
preemption of state law is inapplicable.” (internal quotation
marks and citations omitted)); Silvas, 514 F.3d at 1004
(asserting that “HOLA and its following agency regulations [are]
so pervasive as to leave no room for state regulatory control”)
(citations and internal quotation marks omitted).
18

1

1.

2

Like plaintiff’s first amended complaint, the SAC

California Civil Code Section 2923

3

brings claims under sections 2923.6(c), 2923.6(d), and 2923.7 of

4

the California Civil Code, which regulate loan modification

5

activities.

6

provisions because it “dual-tracked” his application, (SAC ¶

7

126), did not permit him to appeal the denial of his application,

8

(id. ¶ 132), and failed to assign him a single point of contact

9

with regard to his application (id. ¶ 136).

Plaintiff alleges that IndyMac violated these

Plaintiff alleges

10

that these violations resulted in the unlawful sale of his home

11

at a foreclosure sale.

12

(Id. ¶¶ 127, 133, 137.)

As the court held in its earlier Order, plaintiff’s

13

section 2923 claims are preempted because they impose

14

requirements on the “processing, origination, [and] servicing” of

15

plaintiff’s mortgage loan and application for a loan modification

16

in addition to those imposed by federal law.

17

560.2(b)(10); see, e.g., Biggins v. Wells Fargo & Co., 266 F.R.D.

18

399, 417 (N.D. Cal. 2009) (holding that a section 2923.6 claim

19

premised on failure to extend a loan modification was preempted

20

by HOLA); Marquez v. Wells Fargo Bank, N.A., Civ. No. 13-2819

21

PJH, 2013 WL 5141689, at *5 (N.D. Cal. Sept. 13, 2013) (holding

22

that a section 2923.7 claim based on allegations that the

23

plaintiffs were denied a single point of contact and were never

24

“given a meaningful opportunity to apply for, and receive, a loan

25

modification is preempted by HOLA”).

26

12 C.F.R. §

Even if plaintiff were correct that section 2923 does

27

not fall into the enumerated categories of state law preempted by

28

section 560.2(b), plaintiff’s section 2923 claim would
19

1

nonetheless be preempted because it would impose liability on

2

IndyMac for its conduct in the loan modification process and

3

thereby “affect[] lending.”

4

67; see, e.g., Parcray v. Shea Mortg., Inc., Civ. No. 2:09-1942

5

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

6

(holding that claims alleging that a lender “failed to

7

communicate” with a borrower during the loan modification process

8

are preempted insofar as they impose duties on lenders that they

9

“would not be subject to . . . in other states”) (citation and

Final Rule, 61 Fed. Reg. at 50966-

10

internal quotation marks omitted).8

11

grant defendants’ motion to dismiss plaintiff’s section 2923

12

claims.

Accordingly, the court must

13

2.

California Civil Code Section 2924

14

Plaintiff also alleges, as he did in the First Amended

15

Complaint, that IndyMac assigned his mortgage loan to a

16

securitized trust.

17

Default was void and the foreclosure sale violated section 2924

18

of the California Civil Code.

19
20
21
22
23
24
25
26
27
28

As a result, plaintiff alleges, the Notice of

Section 2924 claims “based on misconduct related to the
foreclosure proceedings” are preempted by HOLA.
8

Ismail v. Wells

While plaintiff relies on Mabry v. Superior Court, 185
Cal. App. 4th 208 (4th Dist. 2010), in support of the proposition
that section 2923 or other statutes governing the foreclosure
process are not preempted, that case represents a minority
position. See, e.g., Taguinod v. World Sav. Bank, 755 F. Supp.
2d 1064, 1074 (C.D. Cal. 2010) (characterizing Mabry as
inconsistent with “the overwhelming weight of authority”).
Plaintiff’s reliance on Mabry and other decisions from the
California Courts of Appeal is also misplaced because federal
courts, including this court, “are not bound by state court
decisions on the preemptive effect of federal law.” In re
Holiday Airlines Corp., 647 F.2d 977, 980 (9th Cir. 1981)
(citations omitted).
20

1

Fargo Bank, N.A., Civ. No. 2:12-1653 MCE CKD, 2013 WL 930611, at

2

*9 (E.D. Cal. Mar. 8, 2013) (citations omitted); see also, e.g.,

3

DeLeon v. Wells Fargo Bank, N.A., 729 F. Supp. 2d 1119, 1126

4

(N.D. Cal. 2010) (holding that claims under sections 2923.5 and

5

2924 are preempted by HOLA).

6

claim alleges that the assignment of his loan to a securitized

7

trust was invalid, it is preempted because it would effectively

8

regulate IndyMac’s “sale or purchase” of mortgages.

9

560.2(b)(1)); Sami v. Wells Fargo Bank, Civ. No. 12-108 DMR, 2012

Because plaintiff’s section 2924

12 C.F.R. §

10

WL 967051, at *6-7 (N.D. Cal. Mar. 21, 2012) (holding that a

11

section 2924 claim premised on allegations of an unlawful pooling

12

and servicing agreement was preempted by HOLA).

13

plaintiff’s section 2924 claim is preempted by HOLA because it

14

alleges that IndyMac lacked authority to initiate the foreclosure

15

process.

16

2411 EJD, 2014 WL 129262, at *4 (N.D. Cal. Jan. 14, 2014)

17

(“Plaintiff's claim is preempted by HOLA because it seeks to

18

apply [section 2924] to impose requirements on the initiation of

19

the foreclosure process.” (citations omitted)).

20

court must grant defendants’ motion to dismiss plaintiff’s

21

section 2924 claim.

Further,

Id. at *8; Kenery v. Wells Fargo, N.A., Civ. No. 5:13-

Accordingly, the

22

3.

The UCL

23

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

24

fraudulent business act or practice . . . .”

Cal. Bus. & Profs.

25

Code § 17200.

26

competition . . . In other words, a practice is prohibited as

27

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

28

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

The UCL “establishes three varieties of unfair

21

Cel-

1

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

2

Plaintiff brings a claim under the UCL for “unlawful

3

business practices”9 in which he alleges that defendants

4

“violated Cal. Civ. Code §§ 2923.6, 2923.7, and 2924.”10

5

119.)

6

requirements on [IndyMac] in the mortgage process, the UCL claim

7

is . . . preempted to the extent that it depends on those

8

statutes.”

9

1186 n.4 (N.D. Cal. 2012); see also Vega, 654 F. Supp. 2d at 1118

(SAC ¶

Because “those statutes would impose additional

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

10

(holding that plaintiffs in a foreclosure-related action were

11

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

12

Accordingly, the court must grant defendants’ motion to dismiss

13

plaintiff’s UCL claim.

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

9

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.,
SAC ¶ 118 (“[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 v. JPMorgan Chase
Bank, N.A., 654 F. Supp. 2d 1104, 1118 (E.D. Cal. 2009) (O’Neill,
J.) (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).
10
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.” (SAC ¶ 119.) 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.
22

1

F.

2

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

3

plaintiff seeks to set aside a foreclosure sale.”

Castaneda, 687

4

F. Supp. 2d at 1201.

5

accompanied by a presumption that it was conducted regularly and

6

fairly.”

7

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

8

presumption may only be rebutted by substantial evidence of

9

prejudicial procedural irregularity.”

“A nonjudicial foreclosure sale is

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

Id.; see also Quinteros v.

10

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

11

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

12

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

13

showing that [he was] prejudiced by the alleged procedural

14

defects.”

15

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

16

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

17

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

In order to demonstrate prejudice, plaintiff must show

18

not only that he lost his home in a foreclosure sale, but that

19

the alleged “violation of the statute[s] [themselves], and not

20

the foreclosure proceedings, caused [his] injury.”

21

Wells Fargo Bank, N.A., Civ. No. 12-3653 YGR, 2012 WL 5915124, at

22

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

23

his complaint to allege that he would have qualified for a loan

24

modification and avoided foreclosure “[h]ad . . . [d]efendants

25

complied with the code,” (SAC ¶ 147), this allegation suffers

26

from the same two defects as his earlier complaint.

27
28

Aguiar v.

Although plaintiff has amended

First, because plaintiff’s statutory claims cannot
withstand dismissal, plaintiff cannot bring a wrongful
23

1

foreclosure claim predicated on violations of those statutes.

2

See, e.g., Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 873,

3

887 (E.D. Cal. 2010) (Karlton, J.) (holding that because

4

plaintiff’s statutory claims under the Real Estate Settlement

5

Procedures Act (RESPA) failed, plaintiff could not bring a

6

wrongful foreclosure claim based on RESPA violations).

7

plaintiff avoid pre-emption by re-characterizing his statutory

8

claims as a wrongful foreclosure claim.

9

2d at 1126 (holding that plaintiff’s wrongful foreclosure claim

Nor can

See DeLeon, 729 F. Supp.

10

was preempted because it relied upon violations of statutory

11

claims that were preempted).

12

Second, even if plaintiff could bring this wrongful

13

foreclosure claim, plaintiff has not alleged any facts suggesting

14

that he was prejudiced by any statutory violations.

15

the SAC, plaintiff alleges that he was not assigned a single

16

point of contact about his loan modification application, (SAC ¶

17

136), was “dual-tracked,” (id. ¶ 126), and was denied an

18

opportunity to appeal the denial of his application for a loan

19

modification (id. ¶132).

20

showing that these alleged irregularities resulted in the denial

21

of his application for a loan modification or that he could have

22

successfully applied the denial of his application for a loan

23

modification.

24

alleged “violations of the statute[s] [themselves], and not the

25

foreclosure proceedings, caused [his] injury.”

26

5915124, at *5.

27

motion to dismiss this claim.

Throughout

Plaintiff has not alleged any facts

Plaintiff has therefore not shown that these

Aguiar, 2012 WL

Accordingly, the court must grant defendants’

28
24

1

G.

2

Claims Against Freddie Mac
Plaintiff alleges that Freddie Mac is liable for

3

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

4

Mac, the owner of plaintiff’s loan.

5

plaintiff has not stated a claim for relief against IndyMac and

6

alleges no separate wrongdoing by Freddie Mac, the court need not

7

determine whether plaintiff has alleged sufficient “facts that

8

would create a plausible agency relationship” between IndyMac and

9

Freddie Mac.

(SAC ¶¶ 52-59.)

Because

Castaneda v. Saxon Mortg. Servs., Inc., Civ. No.

10

2:09-1124 WBS DAD, 2010 WL 726903, at *6 (E.D. Cal. Feb 26,

11

2010).

12

dismiss all claims against Freddie Mac.

13

H.

14

Accordingly, the court must grant defendants’ motion to

Leave to Amend
Although leave to amend must be freely granted, the

15

court need not permit futile amendments.

16

Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

17

the court has already permitted plaintiffs to amend their

18

pleadings and it appears that plaintiffs are unable to state a

19

viable claim against defendants, all claims will be dismissed

20

with prejudice and without leave to amend.

21
22

See DeSoto v. Yellow
Because

IT IS THEREFORE ORDERED that defendants’ motion to
dismiss be, and the same hereby is, GRANTED.

23

The Clerk of the Court is directed to enter a judgment

24

of dismissal in accordance with this Order and close the file.

25

Dated:

January 22, 2014

26
27
28
25