Garder III v. Nationstar Mortgage LLC et al

Filing 17

ORDER signed by District Judge Troy L. Nunley on 3/25/2015 GRANTING in part and DENYING in part defendants' 4 Motion to Dismiss. Defendants' 4 Motion to Dismiss is GRANTED with respect to claim 1 (breach of implied covenant of good faith ); claim 2 (California Civil Code § 2923.5); claim 3 (intentional misrepresentation); claim 4 (unfair and deceptive business practices); claim 5 (Californias UCL); claim 6 (cancellation of instruments); claim 8 (declaratory relief); and claim 9 (injunctive relief). Plaintiff is given leave to amend these claims. Defendants' 4 Motion to Dismiss is DENIED with respect to claim 7, to the extent plaintiff states a claim under Cal. Civ. Code § 2924.10. Otherwise, the 4 Motion to di smiss is GRANTED with respect to Cal. Civ. Code §§ 2924.11, 2923.7, 2924.17, and 2924(a)(6), which are also cited in this cause of action. Plaintiff is given leave to amend claim 7. Plaintiff shall file and serve a First Amended Complaint w ithin 14 days of entry of this Order. The First Amended Complaint should comply with Fed. R. Civ. Proc. 8, which requires "a short and plain statement" of plaintiff's entitlement to relief. Defendants shall file their responsive pleading within 21 days of service of the First Amended Complaint. (Marciel, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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EDGAR GARDNER, III,

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Plaintiff,

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No. 2:14-cv-1583-TLN-CKD

ORDER

v.
NATIONSTAR MORTGAGE LLC;
RSM&A FORECLOSURE SERVICES,
LLC; & DOES 1–10,

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Defendants.

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The matter is before the Court on Defendants Nationstar Mortgage LLC (“Nationstar”)

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and RSM&A Foreclosure Services LLC’s (“RSM&A”) (“collectively Defendants”) motion to

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dismiss (ECF No. 4) Plaintiff Edgar Gardner, III’s (“Plaintiff”) complaint (ECF No. 1-1, Ex. A).

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For the reasons discussed below, the motion to dismiss is GRANTED IN PART and DENIED IN

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PART.

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I.

Facts and Procedural History

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Plaintiff has already brought a lawsuit against the same Defendants in federal court, in

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Gardner v. RSM&A Foreclosure Services, LLC & Nationstar Mortgage, LLC, 12-cv-2666-JAM-

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AC (E.D. Cal. 2013), which was dismissed with prejudice. That court set forth the relevant
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factual allegations as follows:
This case arises out of a loan refinance related to Plaintiff’s
property at 6650 18th Avenue in Sacramento, California (“subject
property”). [Nationstar] previously moved to dismiss Plaintiff’s
complaint and that motion was granted with leave to amend.
According to the FAC, Plaintiff has owned and lived at the subject
property since 1979, and in 2007, Plaintiff refinanced his mortgage
and obtained the loan at issue. The loan was secured by the subject
property and is a payment option adjustable rate mortgage in which
Plaintiff could initially select the monthly payment amount.
A disclosure statement regarding the loan received by Plaintiff
indicates that through the plan it is possible the monthly payment
will be less than the monthly interest, thereby increasing the
principal amount on the loan (negative amortization). The
disclosure includes the following language: “In the event your
balance exceeds your original loan amount by 120.00%, the
payment amount may change more frequently and you will no
longer have a minimum payment option.”
The Adjustable Rate Note entered into by the parties reiterates the
possibility of negative amortization and states that the unpaid
principal amount “can never exceed a maximum amount equal to
120.000%” of the principal amount originally borrowed. The Note
indicates the holder will redetermine the monthly payment amount
“[i]n the event the unpaid Principal would otherwise exceed that
120.000% limitation.”
According to the FAC, on May 4, 2011, Aurora Bank
([Nationstar]’s predecessor), notified Plaintiff that his loan would
reach the 120% limitation (“negative amortization limit”) on
August 1, and that his minimum payment would jump from
$1318.76 to $2531.99. Plaintiff was unable to pay the new monthly
amount and the loan went into default. [The first] trustee’s sale was
scheduled for October 10, 2012.
On February 16, 2012, Plaintiff’s Counsel sent a letter to Aurora
Bank “indicating that [Nationstar and RSM&A] improperly
increased his monthly loan payment” and “demanding correction of
the error in payment amount.” Neither Aurora Bank, nor
[Nationstar], has responded.
(Case No. 12-cv-2666, ECF No. 27.)

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Ultimately, the amended complaint in that case brought five causes of action, which were
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each dismissed with prejudice: 1) breach of contract; 2) negligent misrepresentation; 3) fraudulent
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inducement; 4) a violation of the Real Estate Settlement Procedures Act; and 5) a request for
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declaratory relief. (Case No. 12-cv-2666, ECF No. 21 at 5–11 & ECF No. 27.)
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Plaintiff filed the instant complaint in Sacramento County Superior Court on May 28,
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2014. (ECF No. 1-1, Ex. A.) In the state court action, Plaintiff re-alleges much of the factual

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basis from Case No. 12-cv-2666, and makes the following additional assertions:

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

“On May 12, 2012, a Notice of Default was recorded by Aurora Bank FSB c/o

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RSM&A Foreclosure Services, LLC. RSM&A wrongly recorded the Notice of

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Default as they had not been properly substituted as trustee nor are they registered

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to do business in California.” (ECF No. 1-1, Ex. A ¶ 24.)

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“On May 25, 2012, a Corporate Assignment of Deed of Trust was recorded in the

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Official Records of Sacramento County wherein MERS assigns and transfers the

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beneficial interest under the Deed of Trust to Aurora Bank, FSB. The Corporate

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Assignment of Deed of Trust was executed on January 23, 2012, but was not

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recorded for several months.” (ECF No. 1-1, Ex. A ¶ 26.)

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“In June 2012, Plaintiff sent Nationstar a Home Affordable Modification Program

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Packet (HAMP) packet. Plaintiff never heard from Nationstar with regard to the

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paperwork he sent them.” (ECF No. 1-1, Ex. A ¶ 27.)

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“On September 20, 2012, a Substitution of Trustee was recorded in the Official

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Records of Sacramento County whereby Michele Rice, Vice President of Aurora

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Bank substituted RSM&A Foreclosure Services, LLC as trustee of the Deed of

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Trust. The Substitution was dated May 29, 2012, and recorded several months

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later. This fact can be perceived as backdating of documents. RSM&A

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Foreclosure Services, LLC is not registered with the California Secretary of State

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to do business in California.” (ECF No. 1-1, Ex. A ¶ 28.)

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

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“In July 2013, Plaintiff submitted [a] HAMP modification package to Nationstar.
Nationstar did not acknowledge receipt at all.” (ECF No. 1-1, Ex. A ¶ 31.)

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“In April 2014, Plaintiff submitted a loan modification package to Nationstar through

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Neighborhood Assistance Corporation of America (NACA) and is still waiting for notice

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that the loan modification was received.” (ECF No. 1-1, Ex. A ¶ 32.)

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“On April 10, 2014, a [second] Notice of Trustee’s Sale was recorded. . . . The Notice of
Trustee’s Sale is dated August 24, 2012, and by Kimberly Karas of RSM&A . . . The
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supposed date of execution of the Notice of Trustee’s Sale of August 24, 2012, is

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approximately a year and [a] half before the official recording date.” (ECF No. 1-1, Ex. A

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¶ 35.)

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The instant complaint contains nine causes of action: (1) breach of implied covenant of

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good faith; (2) violation of California Civil Code § 2923.5 (against only Defendant RSM&A); (3)

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intentional misrepresentation; (4) unfair and deceptive business practices; (5) violation of

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Business and Professions Code § 17200 (unfair competition); (6) cancellation of instruments; (7)

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violations of California’s Homeowner Bill of Rights; (8) a request for declaratory relief; and (9) a

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request for injunctive relief.1 (ECF No. 1-1, Ex. A.)

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In summary, the claims, to varying degrees, rest on two factual threads: (1) that

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Defendants failed to acknowledge or process Plaintiff’s loan applications; and (2) that Defendants

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proceeded with foreclosure without properly recording instruments showing an assignment of

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trustee or beneficiary had taken place. The theory of liability with respect to (2) is stated at

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various points in the complaint, but is summarized in Plaintiff’s assertion that: “Where there is a

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successor Trustee, there can be no valid non-judicial foreclosure where the trustee under the

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original deed of trust is not properly substituted with a “recorded” instrument. To avoid

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confusion and litigation, there cannot be at any given time more than one person with the power

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to conduct a sale under a Deed of Trust. Therefore, failure to execute or record a Substitution of

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Trustee is a substantial defect and impacted a right afforded to Plaintiff.” (ECF No. 1-1, Ex. A ¶

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63.)

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Defendants submitted a motion to dismiss (ECF No. 4) the complaint and a supporting

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request for judicial notice (ECF No. 5) on July 10, 2014. Plaintiff has filed an opposition2 (ECF

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The complaint contains a “any and all” prayer for relief, including a request for a temporary restraining order and a
preliminary injunction. As Plaintiff does not argue separately for these forms of relief, the Court declines to address
them on the instant motion. (ECF No. 1-1, Ex. A at 29.)
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Generally, Plaintiff’s opposition (ECF No. 9) references facts and causes of action that do not appear in the
complaint. For example, the opposition states additional, albeit vague details about requests for a single point of
contact (ECF No. 9 at 8) and Plaintiff’s attempt to contact Nationstar regarding a submitted HAMP packet (ECF No.
9 at 7); those allegations do not appear to be in the complaint. The opposition references claims for negligent
misrepresentation and for “dual tracking” under Cal. Civ. Code § 2924.18 (ECF No. 9 at 13 & 17 ) which do not
appear in the complaint. Plaintiff should include all relevant facts and causes of action in the complaint.

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No. 9) to the motion to dismiss and Defendants have filed a reply (ECF No. 12) to the opposition.

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This matter was submitted without oral argument, on the Court’s own motion, on September 5,

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2014.

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II.

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Defendants’ Request for Judicial Notice
Defendants request judicial notice of several instruments referenced by Plaintiff in the

complaint. (ECF No. 10.) Plaintiff has not opposed the request. Accordingly, the Court takes
judicial notice, under Fed. R. Evid. 201, of the following publicly recorded documents:

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A notice of default (the “NOD”), recorded May 25, 2012, by RSM&A. The document
states RSMA is “either the original trustee, the duly appointed substituted trustee, or

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acting as agent for the trustee or beneficiary.”3 (ECF No. 5, Ex. 1.)

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A notice of trustee’s sale, recorded September 20, 2012, by RSM&A. The document is
dated August 24, 2012, and states RSM&A is the trustee under the DOT. (ECF No. 5, Ex.

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2.)

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A notice of trustee’s sale, recorded April 10, 2014, by RSM&A. The document is dated
August 24, 2012. The document states RSM&A is the trustee under the DOT. (ECF No.

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5, Ex. 3.)

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The Court notes the following discrepancies between the instruments attached in

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Defendants’ request for judicial notice, and the complaint:
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Plaintiff states that on May 12, 2012, a notice of default was recorded and on May 25,

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2012, a corporate assignment deed of trust was recorded. (ECF No. 1-1, Ex. A ¶ 26.) As

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indicated above, the attached instruments by Defendants show a notice of default was

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The Court also notes that Exhibit 1, together with the NOD, contains a declaration of compliance with Cal. Civ.
Code § 2923.5 (providing that the beneficiary contact the borrower to assess alternatives to foreclosure). That
declaration is dated May 7, 2012. It is not clear if that declaration is part of the NOD, which was recorded, or is a
separate document that was not recorded. At this juncture, the Court notes the contents of this declaration, but does
not take judicial notice of it. Plaintiff asserts in his first claim that Defendants have not complied with § 2923.5; and
the document attached by Defendants is simply a piece of paper purporting to show compliance. Hence, the Court
does not consider the document either to be, or to contain, a fact “not subject to reasonable dispute because it: (1) is
generally known within the trial court’s territorial jurisdiction; or (2) can be accurately and readily determined from
sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b).

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recorded on May 25, 2012; and no party has attached a separate corporate assignment

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deed of trust.

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Plaintiff also asserts: on September 20, 2012, a “Substitution of Trustee” was recorded

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and that document is dated May 29, 2012. (ECF No. 1-1, Ex. A ¶ 28.) As indicated

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above, the filings contain a notice of trustee’s sale recorded on September 20, 2012, and

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dated August 24, 2012; but otherwise, it is not clear which document Plaintiffs are

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referencing.

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Plaintiff is advised to clarify these discrepancies in future filings.
III.

Standard of Review

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Federal Rule of Civil Procedure 8(a) requires that a pleading contain “a short and plain

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statement of the claim showing that the pleader is entitled to relief.” On a motion to dismiss, the

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factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

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(1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn

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from the “well-pleaded” allegations of the complaint. Retail Clerks Int’l Ass’n v. Schermerhorn,

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373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege “‘specific facts’ beyond those necessary

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to state his claim and the grounds showing entitlement to relief.” Twombly, 550 U.S. at 570. “A

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claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.

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at 678 (citing Twombly, 550 U.S. at 556).

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Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of

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factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir.

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1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an

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unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A

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pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the

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elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678

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(“Threadbare recitals of the elements of a cause of action, supported by mere conclusory

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statements, do not suffice.”). Moreover, it is inappropriate to assume that the plaintiff “can prove
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facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not

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been alleged[.]” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters,

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459 U.S. 519, 526 (1983).
Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough

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facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting

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Twombly, 550 U.S. at 570). Only where a plaintiff has failed to “nudge[] [his or her] claims . . .

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across the line from conceivable to plausible[,]” is the complaint properly dismissed. Id. at 680.

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While the plausibility requirement is not akin to a probability requirement, it demands more than

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“a sheer possibility that a defendant has acted unlawfully.” Id. at 678. This plausibility inquiry is

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“a context-specific task that requires the reviewing court to draw on its judicial experience and

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common sense.” Id. at 679.

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IV.

Analysis

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A. Collateral estoppel

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Defendants move to dismiss the complaint in full on the basis of collateral estoppel.
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Collateral estoppel (i.e. issue preclusion) “prevents relitigation of issues actually litigated and

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necessarily decided, after a full and fair opportunity for litigation, in a prior proceeding.” Shaw v.
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Hahn, 56 F.3d 1128, 1131 (9th Cir. 1995). “Three factors must be considered before applying

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collateral estoppel: (1) the issue at stake must be identical to the one alleged in the prior litigation;
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(2) the issue must have been actually litigated [by the party against whom preclusion is asserted]
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in the prior litigation; and (3) the determination of the issue in the prior litigation must have been
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a critical and necessary part of the judgment in the earlier action.” McQuillion v.

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Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004) (internal quotations and citations omitted).
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Collateral estoppel does not bar the instant claims. As stated in the order dismissing
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Plaintiff’s suit in Case No. 12-cv-2666, Plaintiff’s causes of action, and that court’s disposition,

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concerned the terms of his 2007 loan refinance, not subsequent attempts to obtain loan
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modifications. (Case No. 12-cv-2666, ECF No. 27.)

The Court also does not locate any

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analysis done by the prior court regarding whether the substitution of various entities, and their
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recording, was properly done. So, at minimum, the prior court did not determine these issues as

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“a critical and necessary part of the judgment.” McQuillon, 368 F.3d at 1096.

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B. Res judicata
Defendants also move to dismiss the complaint in full on the basis of res judicata (i.e.

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claim preclusion). The doctrine of res judicata bars “all grounds for recovery which could have

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been asserted, whether they were or not, in a prior suit between the same parties ... on the same

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cause of action, if the prior suit concluded in a final judgment on the merits.” Int'l Union of

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Operating Engineers-Employers Const. Indus. Pension, Welfare & Training Trust Funds v. Karr,

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994 F.2d 1426, 1429 (9th Cir. 1993) (citing Ross v. Int'l Bhd. of Elec. Workers, 634 F.2d 453, 457

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(9th Cir.1980)). Case No. 12-cv-2666 involved the same Plaintiff and Defendants, and that suit

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concluded in a final judgment on the merits. Accordingly, the Court looks to whether Plaintiff’s

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instant claims constitute the same causes of action, which either were, or could have been,

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asserted in the prior suit.

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“In determining whether successive claims constitute the same cause of action, [courts]

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consider the following: (1) whether rights or interests established in the prior judgment would be

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destroyed or impaired by prosecution of the second action; (2) whether substantially the same

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evidence is presented in the two actions; (3) whether the two suits involve infringement of the

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same right; and (4) whether the two suits arise out of the same transactional nucleus of facts.”

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Constantini v. Trans World Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982). “The last of these

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criteria is the most important.” Id. at 1202.

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Looking to the four factors enumerated in Constanti, the Court concludes that Plaintiff’s

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claims here are not barred under res judicata. First, (1) No rights or interests established in the

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prior judgment would be impaired in the instant action, because the prior action concerned the

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alleged unlawfulness of Plaintiff’s entry into a negative amortization loan, whereas here, the

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instant case involves subsequent attempts to modify Plaintiff’s loan or allegations regarding

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improper substitution or recording. Secondly, (2) The prior action was dismissed with prejudice

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on a Rule 12(b)(6) motion, so no substantial evidence was presented in that case. Thirdly, (3) The

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present action concerns Plaintiff’s right to modify his loan and have foreclosure occur with the
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correct entities having been substituted on properly recorded instruments, not Plaintiff’s rights

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under the terms of the loan agreement.

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Lastly, with respect to (4) – whether the instant causes of action arise out of the same

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transactional nucleus of facts – Plaintiff filed the complaint in case No. 12-cv-2666, in September,

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2012, and an amended complaint in April, 2013. (Case No. 12-cv-2666, ECF No. 27 at 3.) By

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virtue of the timeline stated by Plaintiff in the instant complaint, it is unlikely that Plaintiff could

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have brought claims in that suit relating to his loan modification attempt made in July, 2013.

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Plaintiff could not have brought suit based on an April, 2014 modification attempt. Plaintiff

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could, by virtue of timing, have brought a cause of action in the prior suit, with respect to his

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June, 2012 loan modification attempt. However, that loan modification attempt, like the others,

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does not appear to be related to the terms of 2007 loan, or his entry into that loan, which was the

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“transactional nucleus of facts” giving rise that complaint.

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In the instant case, Plaintiff also asserts an ongoing pattern of attempts by Defendants to

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foreclose without properly documenting substitutions of beneficiary or trustee. These issues are

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not related to the terms of Plaintiff’s 2007 loan, or his entry into that loan, which was the

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transactional nucleus of facts alleged in Case No. 12-cv-2666.

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In summary, Plaintiff’s prior claims involved the terms of, or his entry into, his 2007

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negative amortization loan. The instant claims concern loan modification attempts, allegations

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that Defendants have proceeded with foreclosure without properly substituting various entities,

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and allegations that Defendants have not properly recorded documents relevant to foreclosure.

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Those claims are not barred.

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C. Claim 1: Breach of implied covenant of good faith and fair dealing
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Under California law, all contracts contain an implied covenant of good faith and fair

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dealing. This covenant requires each contracting party to refrain from doing anything to injure

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the right of the other to receive the benefits of the agreement. San Jose Prod. Credit Ass'n v. Old

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Republic Life Ins. Co., 723 F.2d 700, 703 (9th Cir. 1984) (citing Egan v. Mutual of Omaha

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Insurance Company, 24 Cal.3d 809, 818 (1979)). “It is universally recognized [that] the scope of
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conduct prohibited by the covenant of good faith is circumscribed by the purposes and express

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terms of the contract.” Jenkins v. JP Morgan Chase Bank, N.A. 216 Cal. App. 4th 497, 524

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(2013) (citing Carma Developers, Inc. v. Marathon Development Cal. Inc., 2 Cal. 4th 342, 373

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(1992)). “Because contracts differ, the nature and extent of the duties owed under the implied

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covenant are also variable and will depend on the contractual purposes.” Id. (citing Love v. Fire

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Ins. Exchange, 221 Cal. App. 3d 1136, 1147 (1990)).

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The Court agrees with Defendants that, at this juncture, the only enforceable contract

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identified by Plaintiff is the loan contract he entered into in 2007. Plaintiff brought a cause of

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action for breach of contract, with respect to that loan, in Case No. 12-cv-2666; that cause of

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action was dismissed with prejudice.

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Plaintiff also alleges under this cause of action as follows: that he submitted loan

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modification applications in June, 2012, July, 2013, and April, 2014, and did not receive

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responses (ECF No. 1-1, Ex. A. ¶¶ 48–53); that a substitution of trustee occurred on May 29,

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2012, but was not recorded until September, 2012 (ECF No. 1-1, Ex. A ¶ 49); that RSM&A is not

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registered to do business in California (ECF No. 1-1, Ex. A ¶ 49); and that Defendants did not

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“record reliable or accurate documents to support a non-judicial foreclosure” (ECF No. 1-1, Ex. A

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¶ 54). However, Plaintiff does not show Defendants contracted for a loan modification such that

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Defendants engaged in unfair dealing or a lack of good faith with respect to this contract.

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Therefore, this claim is dismissed with leave to amend.

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D. Claim 2: Cal. Civ. Code § 2923.5
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Cal. Civ. Code § 2923.5 provides, generally, that the mortgagee, trustee, beneficiary, or

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authorized agent may not file a notice of default until initial contact has been made with the

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borrower for the purpose of discussing options so that the borrower may avoid foreclosure.4 The

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relevant factual allegations for a claim under § 2923.5, as stated in the complaint, appear to be:

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The relevant time period for this claim appears to be when the NOD was recorded, in May, 2012. Plaintiff does not
reference any materially different provisions in Cal. Civ. Code § 2923.5 as it stood at the time the NOD was
recorded, compared to § 2923.5 as it stood following any subsequent amendments.

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“On May 12, 2012, a Notice of Default was recorded by Aurora Bank FSB c/o

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RSM&A Foreclosure Services, LLC. RSM&A wrongly recorded the Notice of

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Default as they had not been properly substituted as trustee nor are they registered

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to do business in California.” (ECF No. 1-1, Ex. A ¶ 24.)

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“On May 25, 2012, a Corporate Assignment of Deed of Trust was recorded in the

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Official Records of Sacramento County wherein MERS assigns and transfers the

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beneficial interest under the Deed of Trust to Aurora Bank, FSB. The Corporate

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Assignment of Deed of Trust was executed on January 23, 2012, but was not

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recorded for several months.” (ECF No. 1-1, Ex. A ¶ 26.)

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On September 20, 2012, a Substitution of Trustee was recorded in the Official

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Records of Sacramento County whereby Michele Rice, Vice President of Aurora

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Bank substituted RSM&A Foreclosure Services, LLC as trustee of the Deed of

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Trust. The Substitution was dated May 29, 2012, and recorded several months

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later. This fact can be perceived as backdating of documents. RSM&A

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Foreclosure Services, LLC is not registered with the California Secretary of State

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to do business in California.” (ECF No. 1-1, Ex. A ¶ 28.)

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Liberally construed, Plaintiff’s point may be that the NOD was recorded sometime in

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May, 2012 prior to the substitution of RSM&A for Aurora as beneficiary. However, the NOD

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was signed by an agent for RSM&A, not Aurora. Thus, the argument would be that a properly

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substituted “mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent” never

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complied with the notice requirements (i.e. contacting the borrower) described in § 2923.5, prior

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to recording the notice of default.

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Presently, Plaintiff cites no authority for the position that when the substitution of a

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beneficiary is either executed or recorded after a notice of default, but the notice of default was

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recorded by the substituted beneficiary, that those circumstances permit a claim under § 2923.5.

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Further, as stated, supra, Defendants have filed with the Court a document purporting to show

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compliance with section 2923.5, dated May 7, 2012. That document states Aurora Bank is the

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beneficiary and loan servicer, and it appears to be signed by an agent for Aurora. (ECF No. 5, Ex.
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1.) The Court does not take judicial notice of that document at this juncture, but Plaintiff does not

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appear to dispute that Aurora contacted him, in purported compliance with section 2923.5. Claim

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2 is dismissed with leave to amend if Plaintiff can show different facts or produce legal authority

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showing that this is a plausible claim for relief.5

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E. Claim 3: Intentional Misrepresentation
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Plaintiff cites the following elements that must be met to prevail on a claim of intentional
misrepresentation:

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(1) [T]he defendant represented to the plaintiff that an important
fact was true; (2) that representation was false; (3) the defendant
knew that the representation was false when the defendant made it,
or the defendant made the representation recklessly and without
regard for its truth; (4) the defendant intended that the plaintiff rely
on the representation; (5) the plaintiff reasonably relied on the
representation; (6) the plaintiff was harmed; and (7) the plaintiff’s
reliance on the defendant's representation was a substantial factor in
causing that harm to the plaintiff.

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Manderville v. PCG & S Group, Inc. 146 Cal. App. 4th 1486, 1498 (2007). Plaintiff appears to

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state an intentional misrepresentation occurred: 1) because Defendants have not complied with

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HBOR requirements regarding acknowledging receipt of loan modifications; and 2) Defendants

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wrongfully recorded documents in furtherance of foreclosure. (ECF No. 1-1 ¶¶ 65–75.)
However, allegations of fraud must, under Fed. R. Civ. P. 9(b), “be accompanied by the

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‘who, what, when, where, and how’ of the misconduct charged. Kearns v. Ford Motor Co., 567

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F.3d 1120, 1124 (9th Cir. 2009) (quoting Cooper v. Pickett, 137 F.3d 1120, 1124 (9th Cir. 2009).

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The facts pled (ECF No. 1-1 ¶¶ 65–75) do not meet the pleading requirements for a fraud claim

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under Rule 9(b). Plaintiff does not allege, with any particularity, a statement made by

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Defendants, reasonably relied on by Plaintiff, resulting in harm. This claim is dismissed with

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leave to amend.

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///

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5

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The parties do not take a position on whether any applicable portions of Cal. Civ. Code § 2923.5 are federally
preempted. See e.g. Rodriguez v. JP Morgan Chase & Co. 809 F.Supp.2d 1291, 1295 (S.D. Cal. 2011).

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F. Claim 4: Unfair And Deceptive Business Act Practices
It is unclear which law Plaintiff is invoking. This cause of action is entitled “Unfair and

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Deceptive Business Act Practices (UDAP) Against All Defendants”, but Plaintiff cites the

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standing requirements for Cal. Bus. & Prof. Code § 17200, et seq., i.e. California’s Unfair

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Competition Law (“UCL”), which forms the basis for Plaintiff’s fifth, and independent, cause of

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action. (ECF No. 1-1 ¶ 77.)

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Defendants construe this cause of action as if Plaintiff tries to state a claim under 15

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U.S.C. § 45, et seq., the Federal Trade Commission (“FTC”) Act, which prohibits “[u]nfair

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methods of competition in commerce, and unfair or deceptive acts or practices in commerce.” 15

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U.S.C. § 45(a)(1). The authority cited by Defendants indicates there is no private right of action

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under the FTC Act. See Izenberg v. ETS Services, LLC, 589 F. Supp. 2d 1193, 1201, n. 20 (C.D.

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Cal. 2008) (“The FTC Act does not provide a private right of action. Fisher v. Coca–Cola

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Bottling Co. of Los Angeles, No. CV 78 0479–F, 1979 WL 1597, *2 (C.D.Cal. Mar. 12, 1979)

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(“There is no private right of action under the Federal Trade Commission Act. Initial remedial

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power lies with the Commission itself,” citing Carlson v. Coca–Cola Company, 483 F.2d 279,

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280 (9th Cir.1973))).

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As it is not presently clear under which law Plaintiff is attempting to state a claim, the
claim is dismissed with leave to amend.
G. Claim 5: California’s Unfair Competition Law
California’s UCL, Cal. Bus. & Prof. Code § 17200 et seq., prohibits, and provides civil

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remedies for, unfair competition, which it defines as “any unlawful, unfair or fraudulent business

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act or practice.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 320 (2011) (quoting Cal. Bus.

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& Prof. Code § 17200). Its purpose “is to protect both consumers and competitors by promoting

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fair competition in commercial markets for goods and services.” Id. (citing Kasky v. Nike, Inc. 27

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Cal. 4th 939, 949 (2002)). To bring suit under the UCL, a person must “(1) establish a loss or

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deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and

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(2) show that the economic injury was the result of, i.e. caused by, the unfair business practice or

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false advertising that is the gravamen of the claim.” Id. at 322.
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The relevant allegations that the Court locates in the complaint, specific to the UCL claim,

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are: Defendants have collected mortgage payments and fees for foreclosure related services;

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Plaintiff has suffered a damaged credit score; Plaintiff has “suffered additional interest and a

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pointless loan extension.” (ECF No. 1-1 ¶¶ 101, 102.) Presently, these allegations do not

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constitute “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on

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its face.’” Iqbal, 556 U.S. at 663 (citing Twombly, 550 U.S. at 570). For example, Plaintiff does

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not elaborate any further on how his mortgage payments or related fees, specific to the allegations

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in this complaint, and not the terms of his 2007 negative amortization loan that were at issue in

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Case No. 12-cv-2666, violate the UCL. Claim 5 is dismissed with leave to amend.6
H. Claim 6: Cancellation of Instruments

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Cal. Civ. Code § 3412 states:

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A written instrument, in respect to which there is a reasonable
apprehension that if left outstanding it may cause serious injury to a
person against whom it is void or voidable, may, upon his
application, be so adjudged, and ordered to be delivered up or
canceled.

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Plaintiff seeks cancelation of two instruments: the NOD and the 2014 Notice of Trustee's

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Sale.
Plaintiff's stated basis for seeking cancelation of the NOD is the following assertions:

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

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“On May 12, 2012, a Notice of Default was recorded by Aurora Bank FSB c/o RSM&A
Foreclosure Services, LLC. RSM&A wrongly recorded the Notice of Default as they had

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not been properly submitted as trustee nor are they registered to do business in

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California.” (ECF No. 1-1, Ex. A ¶ 111.)

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

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“On May 25, 2012, a Corporate Assignment Deed of Trust was recorded in the Official
Records of Sacramento County wherein MERS assigns and transfers the beneficial

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interest under the Deed of Trust to Aurora Bank, FSB. The Corporate Assignment Deed

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of Trust was executed on January 23, 2012, but was not recorded for several months. This

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6

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The parties do not brief the Court on other cases—California or federal—in which courts have construed, or
declined to construe, violations of the HBOR as also forming a cause of action under the UCL.

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fact can be perceived as backdating of documents.” (ECF No. 1-1, Ex. A ¶ 113.)

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

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“On September 20, 2012, a Substitution of Trustee was recorded in the Official Records

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of Sacramento County whereby Michele Rice, Vice President of Aurora Bank substituted

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RSM&A Foreclosure Services, LLC as trustee of the Deed of Trust. The Substitution was

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dated May 29, 2012, and recorded several months later. This fact can be perceived as

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backdating of documents. RSM&A Foreclosure Services, LLC is not registered with the

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California Secretary of State to do business in California.” (ECF No. 1-1, Ex. A ¶ 115.)

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Beyond the lack of clarity discussed, supra, over which instruments Plaintiff is referring

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to in these assertions, Plaintiff has not pled sufficient facts to show how the NOD “if left

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outstanding [] may cause serious injury.” Cal. Civ. Code § 3142. Were the faults alleged by

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Plaintiff cured, it is not apparent that foreclosure, or any of the related injuries, would be

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prevented. Plaintiff asserts again, under this cause of action, that he has not received an

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acknowledgement of his 2013 and 2014 loan modification attempts, but does not explain how the

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alleged flaws in the NOD are relevant to these attempts.

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Plaintiff’s stated basis for seeking cancellation of the April, 2014 Notice of Trustee’s Sale

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is the following assertion: “On April 10, 2014, a Notice of Trustee's Sale was recorded in the

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official records of the county recorder. The Notice of Trustee's Sale is dated August 24, 2012, by

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Kimberly Karas of RSM&A Foreclosure Services, LLC. RSM&A are not registered with the

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Secretary of State to do business in California. The supposed date of execution of the Notice of

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Trustee's Sale of August 24, 2012, is approximately a year and half before the official recording

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date. The difference between the execution and recording of the Notice of Trustee's Sale shows

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that the document is not reliable.” (ECF No. 1-1, Ex. A ¶ 120, emphasis from original omitted.)

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Plaintiff has not pled sufficient facts to show how the NOD “if left outstanding [] may

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cause serious injury.” Cal. Civ. Code § 3142. Were the faults alleged by Plaintiff cured, it is not

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apparent that foreclosure, or any of the asserted injuries, would be prevented. Claim 6 is

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dismissed with leave to amend.

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I. Claim 7: Homeowner Bill of Rights, Cal. Civ. Code §§ 2924.10, 2924.11, 2923.7,
2924.17, 2924(a)(6)
Claim 7 alleges violations under numerous sections of California’s Homeowner Bill of

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Rights, Cal. Civ. Code §2920 et seq..
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a. Section 2924.10

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Section 2924.10 provides that, upon submission by the borrower of a loan modification or
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related document, the servicer will provide written acknowledgement within five days of receipt,
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and the acknowledgment will include a description of the loan modification process, relevant
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deadlines, expiration dates for submitted documents, and information on a deficiency in the
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application. Cal. Civ. Code § 2924.10.
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Plaintiff states that in July, 2013, he “submitted [a] HAMP modification package to

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Nationstar. Nationstar did not acknowledge receipt at all. Nationstar did not provide notice of
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information regarding the application process, missing documents, or a deadline for submitting
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documents.” (ECF No. 1-1, Ex. A ¶ 31.) Plaintiff also states, with respect to his April, 2014 loan

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modification submission through NACA, that Nationstar did not acknowledge receipt within five
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days, and “did not give notice providing information about the application process, advising
Plaintiff of any missing documents needed to make the application complete….” (ECF No. 1-1,

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Ex. A ¶ 70.)
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Plaintiff has alleged sufficient facts, accepted as true, stating that loan modifications
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applications were submitted in July, 2013 and April, 2014, and that he did not receive the
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acknowledgement required under § 2924.10. Plaintiff has stated a claim under Cal. Civ. Code §
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2924.10.
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b. Section 2924.11

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Section 2924.11 provides, generally, that mortgage servicers may not record a notice of

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default when a foreclosure prevention alternative has been approved in writing, or a foreclosure

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prevention alternative has been accepted by the borrower. See e.g. § 2924.11(a) (“If a foreclosure

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prevention alternative is approved in writing prior to the recordation of a notice of default, a

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mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of

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default …”).

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Here, Plaintiff does not allege a foreclosure prevention plan has been approved in writing,

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that he has accepted a foreclosure prevention alternative, or another set of circumstances covered

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by § 2924.11(a)-(g).7 Thus, a claim under § 2924.11 is dismissed with leave to amend.

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c. Section 2923.7

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Section 2923.7 provides, in relevant part, that upon request from the borrower, Defendant

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must “promptly establish a single point of contact” with the borrower, in order to facilitate

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communication regarding an “available foreclosure prevention alternative,” such as a loan

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application submitted by Plaintiff.

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Plaintiff references § 2923.7 (ECF No. 1-1 ¶ 128) but otherwise makes no clear

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allegations regarding a failure by Defendants to provide a single point of contact. The claim

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under § 2923.7 is dismissed with leave to amend.

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d. Section 2924.17

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Section 2924.17 provides, generally, that instruments recorded in connection with a

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foreclosure (including a notice of default, notice of sale, assignment of a deed of trust, or
substitution of trustee), and any declaration recorded pursuant to section 2923.5 (attesting to the
fact that the mortgage servicer has contacted the borrower to discuss options to avoid foreclosure)
shall be “accurate and complete and supported by competent and reliable evidence.”

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The only documents alleged to be wrongly recorded or executed, after January 1, 2013

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when the HBOR went into effect, is the April 10, 2014 Notice of Trustee’s sale.8 The relevant

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7

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8

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See Cal. Civ. Code § 2924.18.

See Sepehry-Fard v. Aurora Bank FSB, 2013 WL 2239820, at *3 (N.D. Cal. 2013); McGough v. Wells Fargo Bank,
N.A., 2012 WL 5199411, at *5, n. 4 (N.D. Cal. 2012) (“[The HBOR] amendments do not go into effect until Jan. 1,
2013 and there is no indication that the law is intended to be, or will be, applied retroactively”).

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1

factual allegation in support of this claim appears to be: “On April 10, 2014, a Notice of Trustee's

2

Sale was recorded in the official records of the county recorder. The Notice of Trustee's Sale is

3

dated August 24, 2012, by Kimberly Karas of RSM&A Foreclosure Services, LLC. RSM&A are

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not registered with the Secretary of State to do business in California. The supposed date of

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execution of the Notice of Trustee's Sale of August 24, 2012, is approximately a year and half

6

before the official recording date. The difference between the execution and recording of the

7

Notice of Trustee's Sale shows that the document is not reliable.” (ECF No. 1-1, Ex. A ¶ 120,

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emphasis from original omitted.)

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Without more, Plaintiff does not adequately allege conduct, post-enactment of the HBOR,
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that violates § 2924.17.
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e. Section 2924(a)(6)
Section 2924(a)(6) provides:
No entity shall record or cause a notice of default to be recorded or
otherwise initiate the foreclosure process unless it is the holder of
the beneficial interest under the mortgage or deed of trust, the
original trustee or the substituted trustee under the deed of trust, or
the designated agent of the holder of the beneficial interest. No
agent of the holder of the beneficial interest under the mortgage or
deed of trust, original trustee or substituted trustee under the deed
of trust may record a notice of default or otherwise commence the
foreclosure process except when acting within the scope of
authority designated by the holder of the beneficial interest.
Plaintiff references § 2924(a)(6) (ECF No. 1-1, Ex. A ¶ 129), but otherwise makes no
clear allegation under this section. As discussed, supra, Plaintiff makes multiple statements
regarding when various entities were substituted as beneficiaries or trustees, and when documents
demonstrating the substitution were recorded. At present, it is not possible for the Court to
comprehend which documents Plaintiff is referring to, and how Plaintiff’s allegations comport
with the recorded documents attached in Defendants’ (unopposed) request for judicial notice.
Plaintiff is advised to provide a coherent set of facts and a coherent legal argument to support his
general assertion that: “Where there is a successor Trustee, there can be no valid non-judicial
foreclosure where the trustee under the original deed of trust is not properly substituted with a
18

1

“recorded” instrument. To avoid confusion and litigation, there cannot be at any given time more

2

than one person with the power to conduct a sale under a Deed of Trust. Therefore, failure to

3

execute or record a Substitution of Trustee is a substantial defect and impacted a right afforded to

4

Plaintiff.” (ECF No. 1-1, Ex. A ¶ 63 ). A claim under § 2924(a)(6) is dismissed with leave to

5

amend.

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J. Claim 8 (Declaratory Relief) and Claim 9 (Injunctive Relief)
Plaintiff’s claims for declaratory and injunctive relief are dismissed on the basis that

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8

“[d]eclaratory and injunctive relief are not independent claims, rather they are forms of relief.”

9

Lane v. Vitek Real Estate Indus. Grp., 713 F. Supp. 2d 1092, 1104 (E.D. Cal. 2010). If Plaintiff

10

prevails on any other cause of action, and declaratory or injunctive relief are the appropriate

11

remedy, then those forms of relief remain available, just as economic damages are available.

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Plaintiff should clarify in any future filing whether there is a basis for separate causes of action

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for declaratory or injunctive relief.

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V.

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

Order
Defendants’ Motion to Dismiss is GRANTED with respect to claim 1 (breach of implied

16

covenant of good faith); claim 2 (California Civil Code § 2923.5); claim 3 (intentional

17

misrepresentation); claim 4 (unfair and deceptive business practices); claim 5

18

(California’s UCL); claim 6 (cancellation of instruments); claim 8 (declaratory relief); and

19

claim 9 (injunctive relief). Plaintiff is given leave to amend these claims.

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

Defendants’ Motion to Dismiss is DENIED with respect to claim 7, to the extent Plaintiff

21

states a claim under Cal. Civ. Code § 2924.10. Otherwise, the motion to dismiss is

22

GRANTED with respect to Cal. Civ. Code §§ 2924.11, 2923.7, 2924.17, and 2924(a)(6),

23

which are also cited in this cause of action. Plaintiff is given leave to amend claim 7.

24



Plaintiff shall file and serve a First Amended Complaint within 14 days of entry of this

25

Order. The First Amended Complaint should comply with Fed. R. Civ. Proc. 8, which

26

requires “a short and plain statement” of Plaintiff’s entitlement to relief.

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///

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19

1
2



Defendants shall file their responsive pleading within 21 days of service of the First
Amended Complaint.

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4

Dated: March 25, 2015

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6

Troy L. Nunley
United States District Judge

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