Soares v. Recontrust Company, N.A. et al

Filing 24

Order by Hon. Samuel Conti granting 19 Motion to Dismiss.(sclc1, COURT STAFF) (Filed on 5/25/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ROBERTO P. SOARES,
Plaintiff,

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For the Northern District of California

United States District Court

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v.

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RECONTRUST COMPANY, N.A., et al.,

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Defendants.

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) Case No. 12-00070
)
) ORDER GRANTING MOTION TO
) DISMISS
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I.

INTRODUCTION
Plaintiff Roberto P. Soares ("Soares") brings this action in

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connection with the foreclosure of his home in Alamo, California

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("the Property").

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qualified him for a loan that he could not afford, refused to offer

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him a reasonable loan modification, and then wrongfully foreclosed

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on the Property.

Soares alleges that the defendants1 fraudulently

With the exception of Mortgage Broker Associates,

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The defendants in this action are ReconTrust Company, N.A.
("ReconTrust"); U.S. Bank National Association; HSBC Bank USA
National Association as Trustee for JP Morgan Alternative Loan
Trust 2007-A2 ("HSBC"); Mortgage Electronic Registration Systems,
Inc. ("MERS"); Bank of America, N.A. ("BofA"), individually and as
successor in interest to Countrywide Bank, N.A. ("Countrywide"),
Countrywide Home Loans, Inc.; Mortgage Broker Associates; BAC Home
Loans Servicing LP ("BAC"), fka Countrywide Home Loans Servicing LP
for the Benefit of JP Morgan Alternative Loan Trust 2007-A2; and
Does 1 through 100 inclusive.

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all of the named defendants (collectively, "Moving Defendants") now

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move to dismiss Soares's First Amended Complaint in its entirety.

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ECF Nos. 12 ("FAC"), 19 ("Mot.").

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ECF Nos. 21 ("Opp'n"), 22 ("Reply").

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appropriate for decision without oral argument.

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the Motion is GRANTED.

The Motion is fully briefed.
The Court finds this matter
As detailed below,

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II.

BACKGROUND
In December 2006, Soares refinanced the Property with two

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United States District Court

For the Northern District of California

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loans totaling $1.12 million.2

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for the loans on December 20, 2006 at a Countrywide branch located

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at 2174 N. California Boulevard in Walnut Creek, California.

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Soares alleges that Countrywide grossly inflated his monthly income

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on his December 19, 2006 loan application and, thus, qualified

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Soares for a loan that he could not possibly repay.

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According to the loan application, Soares's income was $25,000 per

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month.

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application was completed, his monthly income was only $8,000 to

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$10,000.

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him excessive and bogus fees without his knowledge or consent.

Id. Ex. B.

Id. ¶ 8.

FAC ¶ 7, Exs. A-B.3

Soares applied

Id. ¶¶ 8, 10.

Soares alleges that, at the time the

Soares further alleges that Countrywide charged
Id.

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At some unspecified time, Soares realized that he could no

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longer afford the mortgage payments on the Property and applied for

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loan modifications from Countrywide and/or its successor-in-

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interest, BofA.

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2

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Id. ¶ 12.

Soares alleges that these applications

A Deed of Trust was recorded on December 27, 2006, naming MERS as
the beneficiary and CTC Real Estate Services ("CTC") as the
trustee. FAC Ex. D.
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The Court takes judicial notice of the exhibits attached to
Soares's Complaint, as well as the exhibits attached to Moving
Defendants' Request for Judicial Notice, ECF No. 19-1 ("RJN").

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were denied in bad faith and in violation of a stipulated

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settlement between Countrywide/BofA and California's Attorney

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General, which provided for remediation of various "predatory"

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loans sold by Countrywide between 2003 and 2008.

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Id. ¶¶ 9-12.

Soares ultimately defaulted on his loan and a Notice of

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Default was recorded in November 2010.

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Default indicates that Soares was over $41,000 in arrears on his

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loan payments.

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of Trustee and Assignment of Deed of Trust was recorded,

Id.

RJN Ex. 2.

The Notice of

On December 9, 2010, a Notice of Substitution

United States District Court

For the Northern District of California

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substituting ReconTrust as the trustee and HSBC as the beneficiary

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on Soares's Deed of Trust.

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ReconTrust recorded a Notice of Trustee's Sale.

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June 29, 2011, ReconTrust recorded a Trustee's Deed Upon Sale,

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conveying the Property to BAC.

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FAC Ex. F.

On March 3, 2011,
FAC Ex. H.

On

FAC Ex. J.

Soares retained possession of the Property after the trustee's

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sale and BAC brought an unlawful detainer action against him in

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California Superior Court under Section 1161a of the California

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Code of Civil Procedure.

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Superior Court entered judgment against Soares and awarded

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possession to BAC.

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RJN Ex. 3.

On February 6, 2012, the

Id.

Soares filed the instant action on January 5, 2012.

The FAC,

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which is the operative pleading in the matter, asserts thirteen

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causes of action: (1) actual fraud; (2) violation of the Finance

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Lenders Law, Cal. Fin. Code §§ 4973, et seq., 2200, et seq., 5000

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et seq.; (3) breach of contract; (4) cancellation of void contract,

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Cal. Civ. Code §§ 1670.5, 1689, 3412; (5) violation of the Truth in

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Lending Act ("TILA"), 15 U.S.C. § 1641(g), (6) violation of the

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California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §

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17200 et seq.; (7) breach of fiduciary duties; (8) violation of the

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Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-

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2617; (9) declaratory relief; (10) equitable estoppel; (11)

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violation of the covenant of good faith and fair dealing; (12)

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wrongful foreclosure; and (13) set aside of trustee sale.

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prays for damages and declaratory relief, including an order

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forcing all defendants to rescind any and all trustee's deeds upon

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sale.

Soares

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United States District Court

For the Northern District of California

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III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 679 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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complaint must be both "sufficiently detailed to give fair notice

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to the opposing party of the nature of the claim so that the party

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may effectively defend against it" and "sufficiently plausible"

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. at 678 (citing Bell Atl. Corp. v.

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The allegations made in a

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such that "it is not unfair to require the opposing party to be

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subjected to the expense of discovery."

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1191, 1204 (9th Cir. 2011).

Starr v. Baca, 633 F.3d

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IV.

DISCUSSION

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A.

Fraud (First Cause of Action)

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Soares's fraud claim is predicated on Countrywide's alleged

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falsification of his loan application.

See FAC ¶ 37.

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Specifically, Soares alleges that Countrywide grossly inflated his

United States District Court

For the Northern District of California

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income on his December 19, 2006 loan application so that Soares

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qualified for a loan that he could not possibly repay.

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Defendants argue that Soares's fraud claim fails to satisfy Federal

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Rule of Civil Procedure 9(b), which requires plaintiffs to plead

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fraud with particularity.

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that Soares's claim is time-barred under the three-year statute of

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limitations for fraud set forth in section 338(d) of the California

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Code of Civil Procedure.

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MTD at 7.

Id.

Moving

Moving Defendants also argue

Id.

The Court finds that Soares's fraud claim meets the

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requirements of Rule 9(b).

"To satisfy Rule 9(b), a pleading must

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identify 'the who, what, when, where, and how of the misconduct

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charged,' as well as 'what is false or misleading about [the

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purportedly fraudulent] statement, and why it is false.'"

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U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055

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(9th Cir. 2011) (internal citations omitted).

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"[i]nstances of corporate fraud may . . . make it difficult to

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attribute particular fraudulent conduct to each defendant as an

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individual."

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540 (9th Cir. 1989).

Cafasso,

However,

Moore v. Kayport Package Express, Inc., 885 F.2d 531,
In such cases, "the allegations should

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include the misrepresentations themselves with particularity and,

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where possible, the roles of the individual defendants in the

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misrepresentations."

Id.

Here, Soares alleges when -- December 19, 2006 -- and where --

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2174 N. California Boulevard in Walnut Creek -- he applied for his

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loan.

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incorrect because it overstated his monthly income by more than

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$15,000 and that this misstatement was made by Countrywide without

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his knowledge or consent.

FAC ¶ 7.

He also alleges that his loan application was

Id. ¶ 8.

It is unclear from Moving

United States District Court

For the Northern District of California

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Defendants' motion what more Soares is required to plead against a

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corporate defendant.

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longer knows or remembers the particular Countrywide employee who

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helped him with his application should not bar his claim.

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In any event, the mere fact that Soares no

Nevertheless, the Court finds that the fraud claim fails

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because it is time-barred.

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the instant action and the statute of limitations for fraud is only

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three years.

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Soares waited over five years to file

Cal. Code. Civ. Proc. § 338(d).

Soares urges the Court to apply the doctrine of equitable

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tolling on the grounds that a cause of action for fraud "is not

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deemed to have accrued until the discovery, by the aggrieved party,

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of the facts constituting the fraud . . . ."

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Soares argues that he should not be charged with knowledge of the

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facts underlying the alleged fraud until recordation of the Notice

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of Default in December 2010.

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Id.

Specifically,

Opp'n at 6-7.

For equitable tolling to apply, a plaintiff "must specifically

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plead facts to show (1) the time and manner of discovery and (2)

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the inability to have made earlier discovery despite reasonable

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diligence.

The burden is on the plaintiff to show diligence, and

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conclusory allegations will not withstand demurrer."

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Boeing N. Am., Inc., 74 Cal. App. 4th 151, 160 (Cal. Ct. App.

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1999).

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not alleged when or how he discovered that his income was misstated

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on his loan application.

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discern the alleged fraud from his 2006 loan application or various

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other 2006 disclosures which revealed the terms of the loan,

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including the monthly payments.4

Soares has not met this burden.

McKelvey v.

Specifically, Soares has

Nor has he alleged why he was unable to

See FAC Exs. C, E.

For these reasons the Court DISMISSES Soares's first cause of

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United States District Court

For the Northern District of California

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action for actual fraud.

The Court GRANTS Soares leave to amend so

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that he may include additional allegations sufficient to invoke the

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doctrine of equitable tolling.

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B.

The Finance Lenders Law (Second Cause of Action)

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Soares's second cause of action is premised on the notion that

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Countrywide violated California's Finance Lenders Law by offering

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him an unconscionable loan and by failing to disclose critical

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information prior to the closing of the loans.

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FAC specifically points to section 22302 of the California Finance

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Code, which provides that "a loan found to be unconscionable

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pursuant to Section 1670.5 of the Civil Code shall be deemed to be

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in violation of this division and subject to the remedies specified

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in this division."

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provides that willful violators "shall be liable for a civil

Id. ¶ 41.

FAC ¶¶ 39-46.

The

The Finance Lenders Law also

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Soares also contends that he did not discover the fraud earlier
because "he [was] confused and uncertain as to who the owner of the
Note [was], [and] who [was] able to enforce it." Opp'n at 3. This
argument lacks merit. It is completely unclear how Soares's
knowledge concerning the ownership of the Note prevented him from
discovering that his income was misstated on his application.
Further, if Soares was in fact "confused," then he had reason to
seek assistance to discern the terms of the loan.

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penalty not to exceed two thousand five hundred dollars ($2,500)

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for each violation, which shall be assessed and recovered in a

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civil action brought in the name of the people of the State of

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California by the commissioner in any court of competent

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jurisdiction."

Cal. Fin. Code § 22713(c).

Moving Defendants argue that this claim fails because

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MTD at 7.

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Superior Court, 211 Cal. App. 3d 758, 766 (Cal. Ct. App. 1989),

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United States District Court

unconscionability cannot constitute an affirmative cause of action.

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For the Northern District of California

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which holds that "Civil Code section 1670.5 does not create an

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affirmative cause of action but merely codifies the defense of

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unconscionability."

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under California law, a lender has no duty to determine the

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suitability of a loan for a borrower.

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MERS, 109-CV-01028-OWW-SMS, 2009 WL 3233865 (E.D. Cal. Oct. 2,

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2009)).

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arguments.5

Id.

Moving Defendants further argue that,

Id. at 8 (citing Phillips v.

Soares does not offer any meaningful response to these

Accordingly, the Court finds that Soares's second cause of

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Moving Defendants rely on Dean Witter Reynolds, Inc., v.

action fails as a matter of law and DISMISSES it WITH PREJUDICE.
C.

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Breach of Contract (Third Cause of Action)

In his third cause of action, Soares alleges that Countrywide

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and BofA breached the loan agreement by securitizing the loan.

FAC

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¶¶ 47-48.

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confusion and uncertainty as to who the actual owner of the Note is

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and who if anyone, is able to enforce the Note . . . ."

Soares further alleges that the securitization "created

Id. ¶ 48.

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In his opposition brief, Soares explains why his loan was
unconscionable, but does nothing to rebut Moving Defendants'
contention that unconscionability cannot constitute an affirmative
cause of action. See Opp'n at 7-8.

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Moving Defendants argue the FAC is too vague to state a

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plausible claim since it fails to identify which provisions of what

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loan agreement were allegedly breached.

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responds that BofA and Countrywide breached paragraph 20 of the

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Deed of Trust by failing to sell the Note "together with the

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Security Instrument."

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to clarify matters.

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allows for the sale of the Note.

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in the Deed of Trust suggests that sale of the Note, independent of

United States District Court

For the Northern District of California

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Opp'n at 8.

See MTD at 8.

Soares

Soares's argument does little

Paragraph 20 of the Deed of Trust expressly
FAC Ex. D § 20.

Further, nothing

the "security instrument," constitutes a material breach.

See id.

Since the FAC fails to identify how defendants breached the

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loan agreement, the Court DISMISSES the third cause of action.

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Amendment would be futile since the contractual provision that

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Soares intended to cite permits the challenged conduct.

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dismissal is WITH PREJUDICE.

As such,

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D.

Cancellation of Void Contract (Fourth Cause of Action)

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In his fourth cause of action, Soares alleges that the Court

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may cancel his loan agreements with defendants since the agreements

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are unconscionable under sections 1670.5, 1689, and 3412 of the

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California Civil Code.

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plaintiff cannot state an affirmative cause of action under section

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1670.5.

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"unlawful contracts," cannot support an affirmative cause of

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action.

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(Cal. Ct. App. 1987) ("Rescission is not a cause of action; it is a

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remedy" (emphasis in the original).).

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the contract under section 3412 also fails, because section 3412 is

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subject to a four-year statute of limitations.

As explained in section IV.B supra, a

Likewise, section 1689, which allows for rescission of

See Nakash v. Superior Court, 196 Cal. App. 3d 59, 70

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Soares's request to cancel

Robertson v.

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Superior Ct., 90 Cal. App. 4th 1319, 1325-26 (Cal. Ct. App. 2001).

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Further, for the reasons set forth in Section IV.A. supra, Soares

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has failed to plead sufficient facts to invoke the doctrine of

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equitable tolling.
Accordingly, the Court DISMISSES Soares's fourth cause of

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action WITH PREJUDICE to the extent that it is predicated on

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California Civil Code Sections 1670.5 and 1689.

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DISMISSES the claim WITH LEAVE TO AMEND to the extent that it is

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based on Civil Code section 3412.

United States District Court

For the Northern District of California

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The Court

Soares may amend his complaint

to allege additional facts sufficient to support equitable tolling.

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E.

Violation of TILA (Fifth Cause of Action)

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Section 131(g) of TILA requires a creditor to notify its

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borrower of a transfer of the borrower's mortgage loan.

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§ 1641(g).

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transfer and must include information concerning, among other

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things, the identity and contact information of the new creditor.

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Id.

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notice after it was substituted as beneficiary on the Deed of Trust

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on December 9, 2010.

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15 U.S.C.

Such notice must occur within thirty days of the

Soares alleges that HSBC failed to provide him with such

FAC ¶ 60.

Moving Defendants argue that this claim fails because Soares

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has not shown and cannot show that any damages resulted from the

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alleged violations.

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"[a] creditor that fails to comply with any requirement imposed

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under § [131(g)] only faces liability for 'any actual damage

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sustained by such person as a result of the failure.'"

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Quality Loan Serv. Corp., 10-CV-1900-IEG WVG, 2011 WL 1044148, at

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*6 (S.D. Cal. Mar. 21, 2011) (quoting 15 U.S.C. § 1640(a)(1)).

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Here, Soares has not alleged that HSBC's failure to provide notice

MTD at 10.

The Court agrees.

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Under TILA,

Beall v.

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of assignment resulted in any additional financial charges or any

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other plausible damages.

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Soares argues that he has sustained actual damages because

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"had he been informed in a timely manner of the assignment of the

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Deed of Trust, he would have had ample time to seek different

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avenues to protect his real property interest."

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argument is unavailing.

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recorded, Soares had already been notified that he was in default

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and the Property was subject to foreclosure.

Opp'n at 10.

This

By the time HSBC's assignment was

Further, the Notice

United States District Court

For the Northern District of California

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of Default directed Soares to contact HSBC at a particular address

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and number if he wished to pay off his loan to avoid foreclosure.

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Compl. Ex. E.

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differently if he had received notice of the assignment is simply

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not plausible.

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The notion that Soares would have done something

Accordingly, the Court DISMISSES the fifth cause of action for
violation of TILA WITH PREJUDICE.

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F.

Violation of UCL (Sixth Cause of Action)

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Soares alleges that defendants violated the UCL by engaging in

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a number of unlawful, unfair, and/or fraudulent business practices.

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Among other things, Soares claims that defendants violated the UCL

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by: (1) "marketing and funding predatory loans"; (2) "egregiously

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and in bad faith, failing to and refusing to comply with California

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law (Civ. Code § 2923.5 et seq.) and public policy"; (3) "failing

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and refusing to offer a loan modification"; (4) "fraudulently

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recommending, offering, marketing, accepting, purchasing and or

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collecting on a debt/mortgage that they . . . should have known was

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void"; (5) violating Civil Code sections 1667, 1708, 1709, 1710;

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and 1770; (6) refusing to comply with Moving Defendants'

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stipulation with the California attorney general; (7) offering a

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loan agreement in violation of Financial Code sections 4973 and

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50205; (8) "fraudulently and knowingly

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false or fraudulently prepared documents to fabricate the missing

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gaps in the chain of title . . . in violation of California Penal

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Code § 155.5"; (9) and "initiating foreclosure proceedings with

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knowledge of their falsity and with intent to defraud [Soares] in

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violation of CA Penal Code § 532(f)(a)(4)."6

procur[ing] or offer[ing]

FAC ¶¶ 64-76.

Moving Defendants argue that Soares, "as a borrower in default

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United States District Court

For the Northern District of California

10

and not a depositor," lacks standing to assert a violation of the

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UCL.

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Civ. S-08-1543 LKK/DAD, 2009 WL 2038137 (E.D. Cal. June 2, 2009)).

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This argument would be persuasive if Soares were only alleging

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violations of regulations intended to protect depositors.

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is not the case.

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single regulation cited in the FAC that is intended to protect only

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depositors.

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moving party.

MTD at 11 (citing Intervest Mortg. Inv. Co. v. Skidmore, No.

But that

In fact, Moving Defendants fail to identify a

As such, they have failed to meet their burden as the

Moving Defendants also argue that Soares's UCL claim fails

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because he "does not and cannot allege that the alleged predicate

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criminal violations cause him harm."

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Defendants do not specify, the Court assumes they are referring to

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Soares's allegation that they offered fraudulently prepared

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documents to fabricate missing gaps in the chain of title.

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¶ 75.

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6

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Id. at 12.

Though Moving

See FAC

Moving Defendants reason that Soares would have suffered the

The Court notes that California "Penal Code § 532(f)(a)(4)" does
not exist. Accordingly, the Court dismisses Soares's UCL claim to
the extent that is predicated on a violation of this non-existent
provision. The Court also reminds Soares's counsel of their Rule
11 obligations.

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alleged harm -- the foreclosure of his home -- even if none of the

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allegedly unlawful acts had occurred.

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respond to this argument.

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the pleading what false documents defendants filed or why there

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were missing gaps in the title.

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cannot state a plausible claim for relief, let alone meet the

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heightened pleading standards set forth by Rule 9(b).

Further, it is completely unclear from

Such threadbare legal conclusions

While Moving Defendants do not address the other alleged UCL

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9

Soares does not meaningfully

violations, the Court finds that they are also far from precise.

United States District Court

For the Northern District of California

10

In many cases, it appears that Soares has not pled any facts which

11

would support the alleged violations.

12

Soares alleges, with practically no explanation, that his loan

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violated at least twelve California statutory provisions.

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¶ 73.

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be "unlawful," as opposed to "unfair," and/or "fraudulent."

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sum, Soares' UCL claim is hardly a "plain statement of the claim

17

showing that the pleader is entitled to relief."

18

P. 8(a)(2).

19

For example, at one point,

See FAC

Further, Soares does not explain what conduct is alleged to
In

See Fed. R. Civ.

Accordingly, Soares's UCL claim is DISMISSED WITH LEAVE TO

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AMEND.

Soares' amended complaint should coherently distinguish

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each alleged UCL violation as well as set forth what prong of the

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UCL is applicable to each alleged violation, particular facts

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supporting each alleged violation, and identifiable legal theories

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and/or authorities.

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G.

Breach of Fiduciary Duties (Seventh Cause of Action)

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Soares's seventh cause of action for breach of fiduciary

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duties is asserted only against Mortgage Broker Associates, the one

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named defendant who has not moved to dismiss.

13

See FAC ¶¶ 78-81.

1

Nevertheless, Moving Defendants move to dismiss this cause of

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action.

3

Soares makes "boilerplate agency allegations as to all defendants"

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in paragraph 7 of the FAC.

5

that paragraphs 37 and 104 allege that "Countrywide breached their

6

duty of care when they inflated his income to qualify him for the

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highly risky adjustable rate loan."

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declines to read the Complaint so broadly.

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thirteen causes of action against seven named defendants.

They lack standing to do so.

MTD at 12.

Moving Defendants argue that

Likewise, Soares claims

Opp'n at 12.

The Court

Soares has asserted
Applying

United States District Court

For the Northern District of California

10

a cause of action to a party who is not expressly identified would

11

deprive the party of the notice to which it is entitled under Rule

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8.

13

fiduciary duties is directed at any defendant other than Mortgage

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Broker Associates -- the only party named in that cause of action -

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- the claim is DISMISSED.

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defendants in this cause of action, he may amend his complaint to

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do so.

Accordingly, to the extent that Soares's claim for breach of

If Soares wishes to name other

As to Mortgage Broker Associates, the claim stands.

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H.

Violation of RESPA (Eighth Cause of Action)

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Soares alleges that Countrywide and Mortgage Broker Associates

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violated RESPA when Countrywide paid Mortgage Broker Associates

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fees totaling $8,790 as an incentive to place Soares in a loan he

22

could not afford.

23

cause of action is barred by the one-year statute of limitations

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set forth in 12 U.S.C. § 2614.

25

the statute of limitations does not begin to run until one knows or

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reasonably should know that a cause of action exists.

27

Several courts have held that the statute of limitations under

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RESPA is subject to equitable tolling.

FAC ¶¶ 82-84.

Moving Defendants argue that this

MTD at 13.

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Soares responds that

Opp'n at 13.

See, e.g., Hogan v. NW

1

Trust Servs., Inc., 441 F. App'x 490 (9th Cir. 2011); Ortiz v.

2

Wells Fargo Bank, N.A., C 10-4812 RS, 2011 WL 4952979, at *7 (N.D.

3

Cal. May 27, 2011).

4

Soares must plead facts concerning the time and manner of discovery

5

and his inability to have made the discovery earlier.

6

IV.A. supra.

7

DISMISSES his RESPA claim WITH LEAVE TO AMEND.

However, in order to invoke equitable tolling,

He has failed to do so.

See Section

Accordingly, the Court

8

I.

Declaratory Relief (Ninth Cause of Action)

9

Soares's Ninth Cause of Action seeks a declaration that the

United States District Court

For the Northern District of California

10

subject loan agreements are void and unenforceable.

FAC ¶¶ 85-92.

11

This claim is ultimately a request for relief, and Soares is not

12

entitled to such relief absent a viable underlying claim.

13

Lomboy v. SCME Mortg. Bankers, C-09-1160 SC, 2009 WL 1457738, at *3

14

(N.D. Cal. May 26, 2009).

15

Soares's claim for declaratory relief to the extent it seeks a

16

declaration concerning his dismissed claims.

See

Accordingly, the Court DISMISSES

17

J.

18

Soares's tenth cause of action for "equitable estoppel"

19

asserts that Countrywide and BofA are estopped from enforcing the

20

loan due to their refusal to offer a reasonable loan modification,

21

as stipulated in their 2009 agreement with the attorney general,

22

and because the loan was "void from inception due to fraud."

23

at 36.7

24

a right to foreclose on the Property because they failed to perfect

25

their security interest -- though he does not plead any facts that

26

would support such a conclusion.

27

7

28

Equitable Estoppel (Tenth Cause of Action)

FAC

Soares further alleges that Moving Defendants do not have

See id. ¶ 95.

There are several errors in the paragraph numbering on page 36 of
the FAC; therefore, the Court refers to the page number rather than
the paragraph number.

15

1

Equitable estoppel "prevents a party from profiting from the

2

detriment he induced another to suffer."

3

S. California Bank, 98 Cal. App. 4th 722, 732 (Cal. Ct. App. 2002).

4

The doctrine "acts defensively only" -- it must be pleaded either

5

as a part of a cause of action or as a defense.

6

Farm Gen. Ins. Co., 196 Cal. App. 4th 1443, 1463 (2011).

7

Accordingly it cannot stand as an independent cause of action.

8

id.; Money Store, 98 Cal. App. 4th at 732.

9

United States District Court

For the Northern District of California

10
11

Money Store Inv. Corp. v.

Behnke v. State

See

Accordingly, the Court DISMISSES Soares's claim for equitable
estoppel WITH PREJUDICE.
K.

Breach of the Implied Covenant of Good Faith and Fair
Dealing (Eleventh Cause of Action)

12
13

Soares's eleventh cause of action asserts that Moving

14

Defendants breached the implied covenant of good faith and fair

15

dealing by qualifying him for a loan that he could not afford and

16

then refusing to offer him a reasonable loan modification.

17

102-08.

18

"prompted by a conscious and deliberate act that unfairly

19

frustrates the agreed common purposes [of the contract] and

20

disappoints the reasonable expectations of the other party."

21

Celador Int'l Ltd. v. Walt Disney Co., 347 F. Supp. 2d 846, 852

22

(C.D. Cal. 2004) (internal quotations and citations and omitted).

23

"However, the implied covenant will only be recognized to further

24

the contract's purpose; it will not be read into a contract to

25

prohibit a party from doing that which is expressly permitted by

26

the agreement itself."

27

162 Cal. App. 4th 1107, 1120 (Cal. Ct. App. 2008).

28

implied covenant may only be used to further the purpose and terms

FAC ¶¶

Breach of the implied covenant involves unfair dealing

Wolf v. Walt Disney Pictures & Television,

16

Because the

1

of an existing contract, it cannot be breached at contract

2

formation.

3

the contract's terms.

4

Soares is alleging here.

5

eleventh cause of action WITH PREJUDICE.
L.

6

These are precisely the types of breach that
Accordingly, the Court DISMISSES Soares's

Wrongful Foreclosure and Set Aside of Trustee Sale
(Twelfth and Thirteenth Causes of Action)

7

In Soares's twelfth and thirteenth causes of action, he seeks

8
9

Nor can it be breached when a party refuses to modify

to set aside the trustee sale of the Property on the grounds that

United States District Court

For the Northern District of California

10

Moving Defendants failed to comply with statutory prerequisites set

11

forth in sections 2323.5 and 2924 of the California Civil Code.

12

FAC ¶¶ 110-117.

13

to offer in good faith, alternatives to foreclosure and instead,

14

rushed to assert its asserted contractual rights . . . ."

15

110.

16

by "forclos[ing] on a California property without a valid contract

17

providing it with the power of foreclosure, and did so without

18

complying with other statutory pre-requisites, such as proper

19

notice and good faith efforts to resolve the disputed default."

20

Id. ¶ 113.

21

legal right to foreclose due to the allegedly fraudulent nature of

22

the loan.

23

Specifically, Soares alleges that BofA "fail[ed]

Id. ¶

Soares further alleges that ReconTrust violated section 2924

Soares also claims that Moving Defendants lacked a

See id. ¶¶ 110, 114.

Section 2924 provides a framework for non-judicial

24

foreclosure: The lender must first record a notice of default; once

25

three months have elapsed, the lender must give notice of the

26

planned foreclosure sale.

27

concerns the notice of default.

28

trustee, beneficiary, or authorized agent" seeking to file a notice

Cal. Civ. Code § 2924.

Section 2923.5

It requires the "mortgagee,

17

1

of default to first contact the borrower in person or by telephone

2

"in order to assess the borrower's financial situation and explore

3

options for the borrower to avoid foreclosure."

4

2923.5(a)(2).

5

days after this initial contact or after the statute's due

6

diligence requirements are satisfied.

7

Further, the notice of default must include a declaration that the

8

mortgagee, beneficiary, or authorized agent has contacted the

9

borrower.

Id. §

The notice of default may not be filed until thirty

Id. § 2923.5(b).

Id. § 2923.5(a)(1).

During this initial contact, the party

United States District Court

For the Northern District of California

10

seeking to file a notice of default must advise the borrower that

11

he or she has the right to request a subsequent meeting and, if

12

requested, schedule the meeting within fourteen days.

13

2923.5(a)(2).

Id. §

14

Moving Defendants argue that Soares's claims for relief under

15

section 2923.5 are moot because the property has already been sold

16

at a trustee's sale.

17

respond except to cite an inapposite decision from the

18

Massachusetts Supreme Court concerning a Massachusetts statutory

19

scheme.

20

Mass. 637, 941 (2011)).

21

MTD at 17-18.

Soares does not meaningfully

Opp'n at 16 (citing U.S. Bank Nat. Ass'n v. Ibanez, 458

The Court agrees with Moving Defendants.

The only remedy

22

available under Section 2923.5 is the postponement of a foreclosure

23

sale until the requirements of the statute have been fulfilled.

24

Mabry v. Super. Ct., 185 Cal. App. 4th 208, 223-24 (Cal. Ct. App.

25

2010).

26

since his home has already been sold.

27

Bank, N.A., -- F. Supp. 2d --, 2011 WL 5358751, at *11 (N.D. Cal.

28

Nov. 7, 2011).

The Court cannot possibly provide such a remedy to Soares
See Shaterian v. Wells Fargo

Accordingly, Soares's twelfth and thirteenth causes

18

1

of action are moot to the extent they are based on an alleged

2

violation of 2923.5.

3

Moving Defendants also argue that Soares is collaterally

4

estopped from relitigating title and possession of the Property due

5

to the judgment entered against him in the 2012 unlawful detainer

6

action.

7

law, a court may apply collateral estoppel to an underlying

8

unlawful detainer judgment brought pursuant to Civil Code section

9

1161a -- such as the unlawful detainer judgment rendered against

To a certain extent, the Court agrees.

Under California

United States District Court

For the Northern District of California

10

Soares -- where a plaintiff's claim arises from the alleged

11

invalidity of the foreclosure sale.

12

Corp., 188 Cal. App. 4th 968, 974 (Cal. Ct. App. 2010).

13

Application of collateral estoppel "bec[o]me[s] doubtful only if

14

the claims in the second action involve[] activities or alleged

15

wrongdoing not 'directly connected' with the conduct of the

16

foreclosure sale."

17

Malkoskie v. Option One Mortg.

Id.

Thus, collateral estoppel bars Soares from seeking to set

18

aside the trustee sale based on alleged irregularities in the

19

foreclosure process.

20

arising out of activities that are not directly connected with the

21

conduct of the foreclosure sale are time-barred.

22

Court DISMISSES his twelfth and thirteenth causes of action WITH

23

LEAVE TO AMEND.

24

claims are not time-barred.

Further, as discussed above, Soares's claims

Accordingly, the

Soares may amend his complaint to show why his

25

M.

Tender

26

Moving Defendants also argue that all of Soares's claims are

27

barred because he has failed to show that he could tender his

28

obligation due under the loans.

The Court disagrees.

19

As Moving

1

Defendants point out, a plaintiff must make a full tender before he

2

or she can set aside a foreclosure sale.

3

pray for the Court to set aside the foreclosure sale.

4

also seeks a number of other remedies, including damages.

5

Accordingly, Soares's failure to tender is not fatal to all of his

6

claims.

7

set aside the trustee's sale.

8

relief, then he must plead facts sufficient to show that he could

9

tender the amount due under his loans.

United States District Court

For the Northern District of California

10

MTD at 5.

Soares does
However, he

It is, however, fatal to his prayer that the Court void or
If Soares wishes to obtain such

See Shaterian, 2011 WL

5358751, at *4.
Soares argues that several exceptions to the tender rule apply

11
12

in this case.

The Court agrees that at least one exception to the

13

tender rule might apply, but Soares has pled insufficient facts to

14

invoke it.

15

borrower's action attacks the validity of the underlying debt."

16

Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 1112-13 (Cal. Ct.

17

App. 2011).

18

debt, alleging that defendants fraudulently induced him to agree to

19

the loan by misstating his income on his loan application.

20

8.

21

barred.

22

exception cannot apply.

Specifically, the tender rule does not apply where "the

Soares has attacked the validity of the underlying

FAC ¶

However, as set forth above, Soares's fraud claim is timeThus, as Soares's complaint is currently pled, this

23
24

V.

CONCLUSION
For the reasons set forth above, the Court GRANTS Moving

25
26
27
28

Defendants' Motion to Dismiss.
•

Soares's second, third, fifth, tenth, and eleventh causes of
action are DISMISSED WITH PREJUDICE.

20

1

•

cause of action are DISMISSED WITH LEAVE TO AMEND.

2
3

Soares's first, fourth, sixth, eighth, twelfth, and thirteenth

•

Soares's seventh cause of action for breach of fiduciary

4

duties is DISMISSED WITH LEAVE TO AMEND as to all defendants

5

except Mortgage Broker Associates.

6

•

Soares's ninth cause of action for declaratory relief is

7

DISMISSED since it is predicated on his dismissed claims.

8

Soares may amend his complaint within thirty (30) days of this

9

Order.

Failure to do so will result in dismissal with prejudice of

United States District Court

For the Northern District of California

10

his action against the Moving Defendants.

The case management

11

conference set for June 22, 2012 is hereby VACATED and rescheduled

12

to August 10, 2012 at 10:00 a.m. in Courtroom 1, 450 Golden Gate

13

Avenue, San Francisco, California.

14

Joint Case Management Conference Statement seven days prior to the

15

conference.

The parties are to file one

16
17

IT IS SO ORDERED.

18
19
20

Dated: May 25, 2012
UNITED STATES DISTRICT JUDGE

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26
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28

21