Chen v. Deutsche Bank Natioal Trust Company et al

Filing 77

ORDER by Judge Yvonne Gonzalez Rogers denying 63 Motion for Leave to Amend. No later than December 5, 2014, the defendants shall provide the Court with a form of judgment after allowing plaintiff a reasonable opportunity to comment as to form. (fs, COURT STAFF) (Filed on 11/24/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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NAN HUI CHEN,

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United States District Court
Northern District of California

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Plaintiff,

ORDER DENYING PLAINTIFF’S MOTION FOR
LEAVE TO AMEND

v.
DEUTSCHE BANK NATIONAL TRUST CO., et
al.,
Defendants.

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Case No.: 13-CV-3352 YGR

Plaintiff Nan Hui Chen (“plaintiff”) brings this civil action against defendants Deutsche

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Bank National Trust Company, Western Progressive, Mortgage Electronic Registration Systems,

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Inc., and Ocwen Loan Servicing LLC (collectively “defendants”) for actions relating to the

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management of her home mortgage loan.1 The Court previously granted defendants’ Motion to

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Dismiss with leave to amend. (Dkt. No. 55 (“Order”).) Plaintiff now brings the instant Motion for

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Leave to Amend, attached to which is her Proposed First Amended Complaint (“PFAC”).2 (Dkt.

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No. 63.)

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Having carefully considered the papers submitted, the pleadings in this action, and for the

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reasons set forth below and in the Court’s prior Order, the Court hereby DENIES plaintiff’s Motion

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for Leave to Amend.

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As stated in the Court’s prior Order, to date defendant Securitized Asset Backed
Receivables, LLC has not been served. Accordingly, Securitized Asset Back Receivables, LLC is
dismissed due to plaintiff’s failure to prosecute. See Fed. R. Civ. P. 4(m).
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Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court
determined this motion suitable for resolution without oral argument. Accordingly, the Court
vacated the hearing set for August 19, 2014.

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I.

BACKGROUND
On November 1, 2006, plaintiff entered into a $206,310.00 loan with New Century

Mortgage Corporation to finance the purchase of property at 4121 Shelter Creek Lane, in San

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Bruno, California. (PFAC ¶ 18.) Plaintiff signed a Deed of Trust (“DOT”), which named

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Mortgage Electronic Registration Systems, Inc. (“MERS”) as beneficiary and nominee for the

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lender. (Id. ¶ 19.) New Century Mortgage Corporation (“NCMC”) was the lender. (Id.) First

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American Title Company was the trustee. (Id.) Since that time, the interest in plaintiff’s loan and

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deed of trust has transferred ownership and plaintiff has defaulted on her mortgage payments.

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On July 18, 2013, plaintiff filed the instant action to stop the trustee sale of her home,

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alleging that defendants are not the true interested parties in her mortgage loan. (Dkt. No. 1.)

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United States District Court
Northern District of California

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Defendants subsequently filed a Motion to Dismiss. (Dkt. No. 33.) On June 9, 2014, having

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considered the parties’ arguments and relevant case law, the Court granted defendants’ motion and

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provided plaintiff an opportunity to move for leave to amend. (Dkt. No. 55.) The Court’s Order

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outlined specific steps plaintiff should take when filing a motion for leave to amend and drafting an

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amended complaint. (See, id. at 19.)

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After two court-granted extensions, on July 14, 2014, plaintiff filed the instant Motion for

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Leave to Amend and attached a PFAC. (Dkt. No. 63.)3 The PFAC is not a model of clarity. In her

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PFAC, plaintiff alleges that defendants fraudulently concealed and misrepresented their true roles

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in servicing her loan. (PFAC ¶ 1.) Plaintiff alleges that Defendants are “third-party strangers” to

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her mortgage loan and have no ownership interest entitling them to collect payments or declare a

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default. (Id.) She contends that defendants have “hid[den] behind the complexities of the mortgage

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Defendants have submitted for judicial notice four items in connection with its Opposition
regarding plaintiff’s prior bankruptcy proceedings. (Dkt. 69, Exh. 1-4.) Fed. R. Evid. 201 allows a
court to take judicial notice of “matters of public record,” but not facts that may be subject to a
reasonable dispute. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001). A court
should only take judicial notice of those facts in the documents that are both undisputed and
relevant to the issues presented in the motion to dismiss. See Santa Monica Food Not Bombs v.
City of Santa Monica, 450 F.3d 1022, 1025 n. 2 (9th Cir. 2006). Because the Court resolves the
pending motion on grounds other than defendants’ judicial estoppel argument, which relates to
plaintiff’s representations during her bankruptcy proceeding, these four documents are not relevant
to the disposition of this motion. For this reason, judicial notice is DENIED.
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finance system” to “deceive Plaintiff into believing they have the right to collect” on her loan. (Id.)

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The gravamen of plaintiff’s theory of her case is set forth in her PFAC as follows:

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United States District Court
Northern District of California

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In an attempt to further their fraudulent scheme and create a patina of
validity to their debt collection efforts, Defendants have created a
series of documents that contain materially false representations in
violation of Federal and State law, and Internal Revenue Codes; by
employing individuals who have no personal knowledge of the facts
they attest, and falsely represent to Plaintiff, the public and this court
that they have the right to take Plaintiff’s property away. Not only is
Defendant’s conduct a criminal violation of California’s Mortgage
Fraud Statute, California Penal Code § 532(f)(a)(4), and an affront to
long standing property law, but their reliance on fabricated and
forged documents undermine the integrity of the judicial system.
Through this action Plaintiff seeks to stop Defendant’s fraudulent
practices.
(Id. (emphasis in original).)
To support her theory that defendants have perpetrated said fraud, plaintiff alleges that the
originating loan documents were fraudulent. Specifically, she contends that “on or about
November 1, 2006 NCMC concealed from Plaintiff that NC Capital paid NCMC an undisclosed
yield spread premium of approximately $3,502.00.” (Id. ¶ 90.) Plaintiff further alleges that
“Western, on behalf of Ocwen, concealed from Plaintiff that the debt was not owed to Ocwen with
the knowledge that Plaintiff would rely on Western as an ‘agent of the beneficiary’ to be truthful in
its representation of the ownership of the debt.” (Id. ¶ 96.)
Plaintiff also contends that because defendants did not validly transfer (or validly possess)
rights to the loan, they do not now have legally cognizable interests in her loan or her property.
Plaintiff alleges “Deutsche Bank as Trustee of the REMIC Trust did not acquire any legal or valid
interest in the disputed DOT on the basis the [Assignment of the Deed of Trust] is void and violates
the governing law of the REMIC Trust” because “NCMC had no assets to transfer as said assets
had been transferred to the Liquidating Trustee and MERS failed to get authorization from the
Liquidating Trustee to transfer assets in the Liquidating Trust of NCMC.” (Id. ¶¶ 69, 72.)
Accordingly, plaintiff alleges that all instruments recorded pertaining to plaintiff’s default on her
mortgage, the assignments in interests, and even the deed of trust itself, are void.

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In her PFAC, plaintiff alleges eight causes of action: (1) fraud and deceit, (2) cancellation of

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instruments, (3) unjust enrichment, (4) accounting, (5) slander of title, (6) violations of California

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Business & Professional Code § 17200 et seq. (“Unfair Competition Law” or “UCL”), (7)

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violations of the Federal Debt Collection Practices Act (“FDCPA”), and (8) violations of the Real

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Estate Settlement Procedures Act (“RESPA”). She seeks cancellation of the subject note and Deed

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of Trust, reformation of a note and deed of trust between plaintiff and the true creditor(s),

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accounting, disgorgement of mistaken payments, damages no less than $600,000, punitive

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damages, and attorneys’ fees and costs.

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II.

LEGAL STANDARDS
A.

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United States District Court
Northern District of California

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Motion for Leave to Amend

The Court generally has the sound discretion to grant or deny leave to amend. Swanson v.

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United States Forest Serv., 87 F.3d 339, 343 (9th Cir. 1996). Leave to amend should be freely

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granted “unless the court determines that the allegation of other facts consistent with the challenged

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pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture

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Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986). The Court “may exercise its discretion to deny

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leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated

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failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing

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party . . . , [and] futility of the amendment.’” Carvalho v. Equifax Info Servs., LLC, 629 F.3d 876,

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892-93 (9th Cir. 2010) (alterations in the original) (quoting Foman v. Davis, 371 U.S. 178, 182

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(1962)). A proposed amendment is futile if no set of facts can be proven under the amended

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pleading that would constitute a valid and sufficient claim. Miller v. Rykoff–Sexton, Inc., 845 F.2d

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209, 214 (9th Cir. 1988) (the proper test in determining legal sufficiency of a proposed amendment

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is identical to that used under Rule 12(b)(6)).

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Under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient

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factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.

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Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)).

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This “facially plausible” standard requires the plaintiff to allege facts that add up to “more than a

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sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678. Although courts

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do not require “heightened fact pleading of specifics,” a plaintiff must sufficiently allege facts to

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“raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Merely reciting the

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elements of a cause of action and stating conclusory allegations are insufficient. Id.; see also In re

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Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (the court is not required to accept as

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true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable

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inferences”).
B.

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Under Federal Rule of Civil Procedure 9(b), claims sounding in fraud are subject to a

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heightened pleading requirement. Rule 9 provides that “[i]n alleging fraud or mistake, a party must

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state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge,

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United States District Court
Northern District of California

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and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). Such

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circumstances include the “time, place, and specific content of the false representations as well as

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the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764

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(9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). “In

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the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, ‘identif[y]

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the role of [each] defendant[ ] in the alleged fraudulent scheme.’” Swartz, 476 F.3d at 765

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(alterations in the original) (quoting Moore v. Kayport Package Express, 885 F.2d 531, 541 (9th

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Cir. 1989)).

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Rule 9(b)

Claims subject to Rule 9(b) pleading requirements must also satisfy the ordinary pleading
requirements of Rule 8, which states:
“A pleading that states a claim for relief must contain: (1) a short and
plain statement of the grounds for the court’s jurisdiction, unless the
court already has jurisdiction and the claim needs no new
jurisdictional support; (2) a short and plain statement of the claim
showing that the pleader is entitled to relief; and (3) a demand for the
relief sought, which may include relief in the alternative or different
types of relief.”

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Fed. R. Civ. P. 8(a). In general, plaintiffs can have inconsistent alternative claims, but “each

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allegation must be simple, concise, and direct.” Fed. R. Civ. P. 8(d).

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III.

DISCUSSION
The Court explained in its prior Order that when filing a Motion for Leave to Amend and

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PFAC, plaintiff must (1) identify the specific claims and the statutory basis for each claim, (2)

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identify the elements of each asserted claim, (3) provide authorities for the elements of each

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asserted claim, and (4) present a chart identifying which paragraphs of the PFAC relate to each

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required element. (Order at 19.)

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Having reviewed plaintiff’s motion and her PFAC, the Court finds that plaintiff has failed

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again to state plausibly a claim for relief as to each of the claims in the PFAC. Accordingly, the

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PFAC would be immediately subject to dismissal such that amendment to the complaint would be
futile. Foman, 371 U.S. 182. Plaintiff lacks standing to assert six of her eight total claims (Causes

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United States District Court
Northern District of California

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of Action 1-6). Plaintiff’s claim for violation of RESPA (Cause of Action 8) is time barred and

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also fails to allege harm causally linked to defendants. Finally, plaintiff’s FDCPA claim (Cause of

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Action 7) fails to allege defendants were “debt collectors” within the meaning of the FDCPA.

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For purposes of efficiency and clarity, the Court first addresses the six claims that lack

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standing, and then addresses the reasons the remaining two claims fail.

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A.

CLAIMS FOR WHICH PLAINTIFF LACKS STANDING

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Article III section 2 of the Constitution limits the federal courts’ judicial power to deciding

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actual “cases” or “controversies.” U.S. CONST. art. III § 2. “One essential aspect of this

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requirement is that any person invoking the power of a federal court must demonstrate standing to

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do so.” Hollingsworth v. Perry, --- U.S. ---, 133 S. Ct. 2652, 2661 (2013). If a case is brought

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without Article III standing, the court lacks subject matter jurisdiction over the suit because there is

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no “case” or “controversy.” Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 102 (1998).

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To properly establish Article III standing, “a plaintiff must show (1) it has suffered an

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‘injury in fact’ that is (a) concrete and particularized and (b) actual or imminent, not conjectural or

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hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is

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likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.”

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Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000) (citing

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Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). “[T]he ‘injury in fact’ test requires

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more than an injury to a cognizable interest. It requires that the party seeking review be himself

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among the injured.” Sierra Club v. Morton, 405 U.S. 727, 734-35 (1972).

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Here, six of plaintiff’s claims are predicated on her allegations that defendants failed to
transfer ownership of her loan properly, such that the “true” holders of interest have been prevented

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from exercising their rights. These causes of actions are: (1) fraud and deceit, (2) cancellation of

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instruments, (3) unjust enrichment, (4) accounting, (5) slander of title, and (6) violations of UCL.

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(See generally, PFAC at 12-24.) Plaintiff, a third-party to the allegedly improper transfers at issue,

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alleges that she has been harmed by loss of property, interruption in enjoyment of the property,

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increased loan amount, wrongfully paid mortgage payments, and damaged credit. (Id. ¶¶ 97, 102,

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112, 133, 150, 162, 179.) Because these claims all stem from the same factual theory and fail for

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United States District Court
Northern District of California

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the same reasons, the Court consolidates these issues into a single discussion.
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Lack of Injury for Defective Assignment

As a borrower, plaintiff lacks standing to challenge the transfers of interest in her loan

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between a transferor and transferee. “Third-party borrowers lack standing to assert problems in the

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assignment of the loan” because the borrowers have not suffered an injury in fact. Flores v. GMAC

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Mortg., LLC, Case No. 12–cv–00794 SI, 2013 WL 2049388, at *3 (N.D. Cal. May 14, 2013); see

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also, Jenkins v. JP Morgan Bank, N.A., 216 Cal.App.4th 497, 513-14 (2013); Fontenot v. Wells

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Fargo Bank, N.A., 198 Cal.App.4th 256, 272 (2011). Essentially, “an impropriety in the transfer of

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a promissory note would [] affect only the parties to the transaction, not the borrower.” Yvanova v.

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New Century Mortg. Corp., 226 Cal.App.4th 495, 172 Cal.Rptr.3d 104, 109 (2014) (cert. granted).4

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“[T]he relevant parties to such a transaction were the holders (transferors) of the promissory note

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The Court is aware the California Supreme Court has granted review of Yvanova, 331 P.3d
1275 (2014) on the following issue: “In an action for wrongful foreclosure on a deed of trust
securing a home loan, does a borrower have standing to challenge an assignment of the note and
deed of trust on the basis of defects allegedly rendering the assignment void?” However, in view of
authority in both state and federal courts that hold that there is no such standing, as well as
plaintiff’s failure to identify any prejudice or harm arising from these allegedly improper transfers
in interest, see Section III.A, supra, the Court finds this case suitable for resolution at this time
notwithstanding the California Supreme Court’s pending review.

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[or other interest] and the third party acquirers (transferees) of the note [or other interest],” not

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borrowers such as plaintiff. Id. (citing Jenkins, 216 Cal.App.4th at 515.)

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The widely accepted rule that borrowers cannot challenge assignments or transfers in the
interests of their loans makes logical sense. Defects in transfers do not injure the borrower because

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“[e]ven if there were some defect in the [subsequent] assignment of the deed of trust, that

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assignment would not [] change[] plaintiff’s payment obligations.” See Simmons v. Aurora Bank,

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FSB, Case No. 13–cv–00482 HRL, 2013 WL 5508136, at *2 (N.D. Cal. Sept. 30, 2013); see also,

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Apostol v. CitiMortgage, Inc., Case No. 13–cv–01983 WHO, 2013 WL 6328256, at *7-8 (N.D. Cal.

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Nov. 21, 2013); Siliga v. Mortg. Elec. Registration Sys., Inc., 219 Cal.App.4th 75, 85 (2013) (“The

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assignment of the deed of trust and the note did not change [plaintiffs'] obligations under the note,

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United States District Court
Northern District of California

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and there is no reason to believe that . . . the original lender would have refrained from foreclosure

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in these circumstances”).

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Here, plaintiff complains of the following harms: loss of her property through the

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nonjudicial foreclosure process, interruption of her enjoyment of the property, and damaged credit.

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A fair reading of her PFAC suggests that these harms stem from plaintiff’s failure to make monthly

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mortgage payments. Although plaintiff alleges that the Notice of Default was faulty for failure to

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properly identify the parties in interest, nowhere does she contest that she had actually paid her loan

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payments; she does not deny that she was in default. (See PFAC ¶ 41, 155, 158.)

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Under controlling law, even if there were irregularities in the interest transfer and

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assignment processes, plaintiff does not allege facts that, if proven, would establish that she was

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“among the injured.” Sierra Club, 405 U.S. at 735. Said differently, plaintiff does not allege any

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injury “fairly traceable to the challenged action,” namely the allegedly invalid transfers in interest.

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Friends of the Earth, 528 U.S. at 180. “The true victim [of the scheme plaintiff alleges] was not

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plaintiff but the original lender, which would have suffered the unauthorized loss” of being

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deprived its rightful interest in her mortgage loan. See Fontenot, 198 Cal.App.4th at 272. Plaintiff

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“may not assume the theoretical claims of hypothetical transferors and transferees” to assert causes

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of action relating to allegedly improper assignments of interests in her mortgage loan. Jenkins, 216

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Cal.App.4th at 515. Plaintiff would not be the victim of such invalid transfers because her

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obligations to make mortgage payments remained unchanged.
Finally, plaintiff has failed to plead allegations that, if true, establish actual prejudice

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resulting from the improper assignments or transfers in interest. As in the instant case, plaintiffs in

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Dick v. Am. Home Mortg. Servicing, Inc., Case No. 13–cv–00201 WBS CKD, 2013 WL 5299180 at

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*4-5 (E.D. Cal. Sept. 18, 2013) attempted to challenge a deed of trust assignment as void.

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Acknowledging that a majority of California courts have held that “borrowers do not have standing

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to challenge the assignment of a loan because borrowers are not party to the assignment

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agreement,” the court noted it did not even need to reach that issue because the plaintiff could not

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establish prejudice. See Dick, 2013 WL 5299180 at *3; In re Sandri, 501 B.R. 369, 376-77 (N.D.

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United States District Court
Northern District of California

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Cal. 2013) (citing Dick, supra). The court further noted that “California courts find a lack of

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prejudice when a borrower is in default and cannot show that the allegedly improper assignment

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interfered with the borrower’s ability to pay or that the original lender would not have foreclosed

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under the circumstances.” Dick, 2013 WL 5299180 at *3. Plaintiff’s proposed amended complaint

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fails to allege facts sufficient to meet this standard.

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2.

Glaski is the Minority Rule and Does Not Control

Plaintiff’s PFAC relies almost exclusively on the minority legal theory expressed in Glaski

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v. Bank of America Nat’l Ass’n, 218 Cal.App.4th 1079 (2013), which the Court has already stated

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will not be accorded persuasive weight. (See Order at 12-13.) There, the California Court of

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Appeals held that a borrower had standing to challenge the assignment of his note. See id. at 1096.

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The Glaski defendants organized the loan at issue into a trust formed under New York law, but

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failed to assign the trust before the operative closing date, thus resulting in a technical deficiency.

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Id. The Glaski court recognized “that some federal district courts sitting in California have rejected

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the post-closing date theory of invalidity on the grounds that the borrower does not have standing to

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challenge an assignment between two other parties.” Id. at 1098 (citations omitted). Nonetheless,

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the court found the trust void under New York law, and held the plaintiff could challenge the

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assignment despite being a third-party borrower. Id. at 1095-97.

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Multiple state court of appeals decisions conflict with Glaski, holding instead that a thirdparty mortgage borrower does not have a cause of action stemming from irregularities in the chain

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of transfer. See, e.g., Jenkins, 216 Cal.App.4th at 515 (“As an unrelated third party to the alleged

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securitization, and any other subsequent transfers of the beneficial interest under the promissory

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note, [plaintiff] lacks standing to enforce any agreements, including the investment trust’s pooling

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and servicing agreement, relating to such transactions”); Fontenot, 198 Cal.App.4th at 272-73

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(finding plaintiff had no cause of action for merely alleging irregularities in the assignment

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process). Even when a trust was created under New York law, numerous other courts have

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declined to follow Glaski. See, e.g., Yvanova, 172 Cal.Rptr.3d at 110 (declining to follow Glaski);

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Sporn v. JP Morgan Chase Bank N.A., Case No. G047501, 2014 WL 280627, at *5 (Cal. Ct. App.

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United States District Court
Northern District of California

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4th Jan. 27, 2014) (finding the Glaski holding a minority view and declining to follow it).

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Indeed, “[c]ourts in this District have expressly rejected Glaski and adhered to the majority

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view that individuals who are not parties to a PSA [Pooling and Servicing Agreement] cannot base

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wrongful foreclosure claims on alleged deficiencies in the PSA/securitization process.” Apostol,

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2013 WL 6328256, at *6-7. No court in this District has followed the minority rule articulated in

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Glaski. See Giseke v. Bank of America, N.A., Case No. 13–cv–4772 JST, 2014 WL 718463, at *3

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(N.D. Cal. Feb. 23, 2014). To the contrary, “many have pointedly declined to.” Id.; see, e.g.,

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Moran v. GMAC Mortg., LLC, Case No. 13–cv–4981 LHK, 2014 WL 3853833, at *5 (N.D. Cal

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Aug. 5, 2014) (“Plaintiff’s reliance on Glaski is misplaced because Glaski does not state the

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majority rule and its reasoning is unpersuasive”); Banares v. Wells Fargo Bank, N.A., Case No. 13–

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cv–4896 EMC, 2014 WL 985532, at *4-5 (N.D. Cal. March 7, 2014) (considering and rejecting

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Glaski on the merits of its analysis of New York trust law, and listing cases in this District that

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“have since rejected Glaski”); Zapata v. Wells Fargo Bank, N.A., Case No. 13–cv–4288 WHA,

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2013 WL 6491377 (N.D. Cal. Dec. 10, 2013) (“Every court in this district that has evaluated Glaski

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has found it is unpersuasive and not binding authority”); Apostol, 2013 WL 6328256; Dahnken v.

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Wells Fargo Bank, N.A., Case No. 13–cv–2838 PJH, 2013 WL 5979356, *2 (N.D. Cal. Nov. 8,

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2013) (“[t]he court adopts the ‘majority position’ of courts within this district, which is that

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‘plaintiffs lack standing to challenge noncompliance with a PSA in securitization unless they are

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parties to the PSA or third party beneficiaries of the PSA’”); Subramani v. Wells Fargo Bank, N.A.,

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Case No. 13–cv–1605 SC, 2013 WL 5913789 (N.D. Cal. Oct. 31, 2013) (citations omitted); In re

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Sandri, 501 B.R. at 374-75 (noting that “the weight of authority is against Glaski”; citing California

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state and federal cases).

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Plaintiff’s attempt to save Glaski does not persuade. Plaintiff argues Glaski stands for two

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holdings: “a) a borrower may challenge a void assignment regardless of whether they are a party to

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the contract, and b) that an assignment into a closed New York Trust was a void act pursuant to the

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trust’s governing law.” (Dkt. 71 at 8 (“Reply”).) Plaintiff concedes that there is significant

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disagreement with Glaski’s second holding, but states the first holding “has not been challenged by
any Court.” (Id.) In support thereof, plaintiff relies on three cases, none of which support her

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United States District Court
Northern District of California

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position. (Id. at 8-9.) Two cases plaintiff cites directly contradict Glaski, finding Glaski

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unpersuasive and confirming that third-party borrowers lack standing. See In re Sandri, 501 B.R. at

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378; Yvanova, 172 Cal.Rptr.3d at 110. The only case plaintiff cites that could possibly support her

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position is Johnson v. HSBC Bank USA, Nat. Ass’n, Case No. 11–cv–2091 JM WVG, 2012 WL

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928433 (S.D. Cal. March 19, 2012). That decision, however, provides no reasoned analysis on the

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issue before this Court. Indeed, the Johnson order does not discuss Glaski at all. Moreover,

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plaintiff’s contention that the first purported holding “has not been challenged by any court” is

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untrue as a factual matter. As stated above, the weight of authority holds that Glaski’s reasoning is

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unpersuasive, and the criticism of Glaski has not been limited to simply Glaski’s questionable

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treatment of New York law. See, e.g., Moran, 2014 WL 3853833 at *5 (“[I]t is already well

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established that a third party should not be permitted to enforce covenants made for the benefit of

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others”).

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Accordingly, as six of plaintiff’s eight causes of action – fraud, cancellation of instruments,

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unjust enrichment, accounting, slander of title, and UCL violations – arise from alleged assignment

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defects, the Court finds that plaintiff lacks standing to assert claims based on defects in the

26

assignment process. Plaintiff has suffered no injury as a result of these defects; her payment

27

obligations remained unchanged. Moreover, there is no causal link between the harm plaintiff

28

alleges and defendants’ alleged acts. Given that each of these six claims would be immediately

11

1

subject to dismissal, amendment would be futile. Foman, 371 U.S. at 182. Plaintiff’s motion for

2

leave to amend these six claims (Causes of Action 1-6) is therefore DENIED.5

3

B.

1.

4
5

PLAINTIFF’S REMAINING CLAIMS
RESPA Claim

The Court next addresses plaintiff’s claim for violations of RESPA (Cause of Action 8).

6

Plaintiff alleges two violations of the RESPA statute: 12 U.S.C. section 2605 (“Section 2605”) and

7

12 U.S.C. section 2607 (“Section 2607”). (PFAC at 25-28.)

8
9

First, plaintiff alleges Ocwen violated Section 2605 “by failing to provide a detailed
accounting of the alleged past due payments due to the creditor as requested by Plaintiff.” (Id. ¶
197.) Section 2605 governs the duty of loan servicers to respond to borrowers’ inquiries. “If any

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Northern District of California

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servicer of a federally related mortgage loan receives a qualified written request from the borrower

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. . . for information relating to the servicing of such loan, the servicer shall provide a written

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5

Plaintiff’s fraud allegations also do not achieve the requisite level of specificity under Rule
9(b). See Swartz, 476 F.3d at 764. Plaintiff fails to plead sufficiently the final two elements of
fraud: “. . . (4) the plaintiff must have been unaware of the fact and would not have acted as he did
if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or
suppression of the fact, the plaintiff must have sustained damage.” Boschma v. Home Loan Ctr.,
Inc., 198 Cal.App.4th 230, 248 (2011) (citations omitted). Plaintiff alleges she was “unaware of the
fact” that defendants were acting fraudulently regarding her loan because she is an unsophisticated
consumer. (PFAC at ¶¶ 91, 92.) While it is questionable this allegation alone meets the heightened
pleading requirement of Rule 9(b), nowhere in plaintiff’s PFAC does she allege facts to show she
“would not have acted as [s]he did if [s]he had known of he concealed or suppressed fact.”
Boschma, 198 Cal.App.4th at 248. In addition, plaintiff did not, and cannot, plead facts to show
she sustained damage as a result of the concealment. Nowhere in the PFAC does plaintiff allege
she relied on the fraudulent statements or concealment to her detriment. Thus, she has not
sufficiently pleaded facts, taken as true in the light most favorable to the plaintiff, to meet all the
elements of fraud.
In addition, plaintiff’s UCL claim also fails to meet the requisite level of specificity under
the Federal Rules. Because plaintiff’s UCL claim is grounded in fraud, “the pleading of that claim
as a whole must satisfy the particularity requirement of Rule 9(b).” Kearns v. Ford Motor Co., 567
F.3d 1120, 1127 (9th Cir. 2009) (citations omitted). Plaintiff merely summarily alleges defendants
violated the UCL because they failed to identify the true creditor, lacked consideration, and should
have known the loan violated state and federal law. (Id. at ¶¶ 54, 56, 61.) Plaintiff’s allegations
regarding “a causal link to her economic injury” are insufficient. Jenkins, 216 Cal.App.4th at 523.
Plaintiff cannot plead facts to show how defendants’ allegedly unlawful or fraudulent business acts
caused her injury because the harm plaintiff suffered was of her own making. Thus, plaintiff’s
UCL allegations do not meet the requisite 9(b) pleading standard.

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response acknowledging receipt of the correspondence within 5 days.” 12 U.S.C. § 2605(e)(1)(A).

2

A qualified written request (“QWR”) is “a written correspondence, other than notice on a payment

3

coupon or other payment medium supplied by the servicer” that includes “the name and account of

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the borrower” and “a statement of the reasons for the belief of the borrower . . . that the account is

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in error or provides sufficient detail to the servicer regarding other information sought by

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borrower.” 12 U.S.C. § 2605(e)(1)(B). No later than 30 days after the receipt of the QWR, the

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servicer shall “provide the borrower with a written explanation or clarification that includes: (i) to

8

the extent applicable, a statement of the reasons for which the servicer believes the account of the

9

borrower is correct as determined by the servicer; and (ii) the name and telephone number of an
individual employed by, or the office or department of, the servicer who can provide assistance to

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the borrower.” 12 U.S.C. § 2605(e)(2)(B).

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Here, plaintiff alleges she sent a series of QWRs to Ocwen stating on December 9, 2010

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seeking confirmation of the creditor’s identity because she was concerned with who owned her

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loan. (PFAC ¶¶ 191-92.) Plaintiff also alleges Ocwen sent two debt validation letters in early 2011

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with conflicting statements of who owned the loan.6 (Id. ¶ 193.) Because of this conflicting

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information, plaintiff specifically emphasizes in the QWRs her concerns about the payments being

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made to the true creditor. (Id. ¶ 194.) In September 2011, Ocwen replied to plaintiff’s QWRs with

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an acknowledgment letter and only a partial reply. (Id. ¶ 195.) Plaintiff alleges “Ocwen provided

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only the payment history made by Plaintiff but refused to acknowledge the principal balance of the

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loan with the creditor.” (Id.) Thus, plaintiff alleges that Ocwen violated 2605 RESPA by “failing

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to provide a detailed accounting of the alleged past due payments due to the creditor.” (Id. ¶ 197.)

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Second, plaintiff alleges NCMC and NC Capital violated Section 2607 with the alleged

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table-funding scheme. Section 2607 states “[n]o person shall give and no person shall accept any

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fee, kickback, or thing of value pursuant to any agreement or understanding” involving a federally

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related mortgage. 12 U.S.C. § 2607(a). Additionally, “[n]o person shall give and no person shall

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6

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“In a debt validation letter sent by Ocwen agents on January 21, 2011, the letter claimed
the debt was owed to Ocwen; which conflicted with the February 2011 letter stating the loan was
one of many in the Securitized Asset Backed Receivables, LLC Trust 2007-BRI Mortgage Pass
Through Certificates, Series 2007-BR1.” (PFAC ¶ 193.)
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accept any portion, split, or percentage of any charge made or received for the rendering of a real

2

estate settlement service in connection with a transaction involving a federally related mortgage

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loan other than for services actually performed.” 12 U.S.C. § 2607(b). Thus, plaintiff alleges the

4

“illegal yield spread premium [table-funding scheme] between NCMC and NC Capital” and

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NCMC’s “failure to disclose the yield spread premium to Plaintiff” violated Section 2607. (Id. ¶

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204; see also, ¶¶ 49-51.)

7

Plaintiff’s RESPA claim fail for two separate reasons: (1) the statutes of limitations have

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run as to plaintiff’s Section 2607 claim and plaintiff has insufficiently alleged a basis for equitable

9

tolling, and (2) plaintiff has not actually stated a claim for either her Section 2605 and 2607 claims.

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Northern District of California

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Accordingly, for purposes of clarity, the Court will divide its discussion into two sections.
a.

Statutes of Limitations as to Plaintiffs’ Section 2607 Claim

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Claims under Section 2607, which prohibits kickbacks and unearned fees, must be brought

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within one year of the alleged violation. See 12 U.S.C. § 2614. The parties do not dispute that the

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one-year statute applies to her Section 2607 claim. Rather, the issue is one of tolling.

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Plaintiff alleges defendants’ “table-funding” scheme violated Section 2607. (Id. ¶ 204.)

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This claim became time-barred on November 1, 2007, one year after the alleged table funding took

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place. (Id. at ¶ 90.) Plaintiff argues the statutes of limitations should be tolled because “Plaintiff

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was kept ignorant of critical information required for prosecution of her claims, without any fault or

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lack of diligence on her part.” (Reply at 6.) In their Opposition, defendants argue plaintiff’s

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attempt to plead around the RESPA statutes of limitations, by alleging “it was not until July of

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2013 that plaintiff became aware of the table funding arrangement” (PFAC at ¶ 206), is insufficient

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and the statutes of limitations have run. (Dkt. 68 at 14.)

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While a statute of limitations typically begins to run from the time the plaintiff is injured,

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the “discovery rule” tolls a statute of limitations until the plaintiff discovers, or has reason to

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discover, the cause of action. Harper v. Lugbauer, Case No. 11–cv–1306, 2011 WL 6329870, at *2

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(N.D. Cal. Nov. 29, 2011) (citing Pooshs v. Philip Morris USA, Inc., 51 Cal.4th 788, 797-98

27

(2011)). “Rather than examining whether the plaintiffs suspect facts supporting each specific legal

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element of a particular cause of action, [courts should] look to whether the plaintiffs have reason to

14

1

at least suspect that a type of wrongdoing has injured them.” Engineering v. City and County of

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San Francisco, Case No. 08–cv–4022 SI, 2010 WL 816831, at *2 (N.D. Cal. Mar. 9, 2010)

3

(quoting Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 807 (2005)). A plaintiff has reason to

4

discover a cause of action when she “has reason at least to suspect a factual basis for its elements.”

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Nogart v. Upjohn Co., 21 Cal.4th 383, 398 (1999). To properly invoke the discovery rule, plaintiff

6

must plead sufficient facts showing: “(1) the time and manner of discovery and (2) the inability to

7

have made earlier discovery despite reasonable diligence.” McKelvey v. Boeing N. Am., Inc., 74

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Cal.App.4th 151, 160 (1999) (emphasis in original) (superseded by statute on another point as

9

stated in Grisham v. Philip Morris U.S.A., Inc., 40 Cal.4th 623, 637 n. 8 (2007)). “The burden is
on the plaintiff to show diligence,” and “conclusory allegations” will not suffice. Harper, 2011

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Northern District of California

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WL 6329870, at *2 (citing McKelvey, 74 Cal.App.4th at 160).

12

The Court finds that plaintiff has failed to plead sufficient facts to demonstrate either her

13

diligence or her inability to have made earlier discovery of the alleged table funding scheme. First,

14

the allegations in the PFAC reveal that plaintiff had ample reason to discover her Section 2607

15

cause of action before the date she claims. According to her PFAC, plaintiff first began to question

16

the ownership of her loan in 2010. (PFAC ¶¶ 191-94.) Taking that as true, as is required, plaintiff

17

admits that as of 2010 she had cause to become suspicious about the origins of her loan and the

18

processing of her loan. However, Plaintiff pleads no facts sufficient to show her diligence in

19

discovering this alleged scheme. Plaintiff merely alleges the statutes of limitations should be tolled

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until 2013 for all causes of action because defendants were concealing information. (PFAC ¶¶ 83,

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206.) Plaintiff alleges she is an “unsophisticated consumer” lacking the ability to discover this type

22

of information, even with due diligence. (Id. ¶ 205; see also, Reply at 4.) However, plaintiff has

23

pleaded no facts to demonstrate what diligence she ultimately undertook to discover the defendants’

24

concealment, other than her QWR request submitted in 2010, and why her ultimate discovery

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occurred as quickly as was possible.

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Finally, plaintiff’s allegations concerning the nature of defendants’ efforts to conceal their

27

fraudulent scheme lack the requisite degree of specificity to allow the Court to conclude reasonably

28

that plaintiff was actually unable to discover this information until 2013. The gravamen of

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plaintiff’s RESPA claim is that defendants actively concealed information to perpetrate a fraud.

2

(PFAC ¶¶ 49, 204-05.) Accordingly, as plaintiff was previously advised, she is obligated to “state

3

with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Her

4

allegations must include the “time, place, and specific content of the false representations as well as

5

the identities of the parties to the misrepresentations.” Swartz, 476 F.3d at 764 (citations omitted).

6

She fails to do so. Thus, plaintiff’s RESPA allegations sounding in fraud fail to meet the level of

7

specificity that Rule 9(b) requires.

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United States District Court
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b.

Lack of Causal Harm

In addition to the statute of limitations issue, plaintiff also fails to allege harm caused by
defendants’ conduct relative to both her RESPA claims.
The RESPA statute states that anyone who violates RESPA shall be liable for damages. 12

12

U.S.C. § 2605(f). While the statute does not create a pleading standard, courts have read the statute

13

to require a showing of pecuniary damages. Hutchinson v. Del. Sav. Bank FSB, 410 F. Supp. 2d

14

374, 383 (D.N.J. 2006) (“alleging a breach of RESPA duties alone does not state a claim under

15

RESPA. Plaintiff must, at a minimum, also allege that the breach resulted in actual damages”).

16

Plaintiffs must also show a causal link between RESPA breach and the actual harm. Allen v.

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United Fin. Mortg. Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009) (citing Singh v. Wash. Mut.

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Bank, Case No. 09–cv–2771 MMC, 2009 WL 2588885, at *5 (N.D. Cal. Aug. 19, 2009)

19

(dismissing RESPA claim because “[i]n particular, plaintiffs have failed to allege any facts in

20

support of their conclusory allegation that as a result of defendants’ failure to respond, defendants

21

are liable for actual damages, costs, and attorney fees”) (quotation marks and citations omitted)).

22

Here, when construed liberally in her favor, plaintiff’s RESPA allegations do not establish

23

that she experienced actual harm. Plaintiff alleges no facts beyond the speculative and conclusory

24

to show that defendants’ participation in a table-funding scheme or failure to respond properly to

25

her QWRs were the causes for the harms of which she complains. For example, Plaintiff does not

26

claim she would have continued to make payments if there was no table-funding scheme or if

27

Ocwen had properly responded to her QWRs. Rather, as stated above in Section III.A.1, supra, the

28

harm about which plaintiff complains, fairly construed, stems from her failure to make timely

16

1

mortgage payments. (See PFAC ¶¶ 126, 129, 132 (“Plaintiff alleges said payments were mistaken

2

payments intended for the true creditor”).)

3

For the reasons stated above, plaintiff has not pleaded a basis for tolling the statutes of

4

limitation for her RESPA claim and has failed to allege harm causally linked to defendants’ alleged

5

RESPA violations. For these reasons, amendment would be futile. Foman, 371 U.S. at 182.

6

Accordingly, plaintiff’s motion to amend her RESPA claim is hereby DENIED.

7
8
9

2.

FDCPA Claim

Plaintiff alleges defendants violated the FDCPA (Cause of Action 7). To state a claim
under the FDCPA, “a plaintiff must allege facts that establish the following: (1) the plaintiff has
been the object of collection activity arising from a consumer debt; (2) the defendant attempting to

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United States District Court
Northern District of California

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collect the debt qualified as a ‘debt collector’ under the FDCPA; and (3) the defendant has engaged

12

in a prohibited act or has failed to perform a requirement imposed by the FDCPA.” Adesokan v.

13

U.S. Bank, N.A., Case No. 11–cv–1236 LJO SKO, 2011 WL 5241178, at *4 (E.D. Cal. Oct. 31,

14

2011) (citations omitted). Insofar as plaintiff’s FDCPA claim turns on her theory that defendants

15

perpetrated a fraud, this claim is also subject to the heightened pleading requirement in Rule 9(b).

16

Plaintiff asserts that defendants are “debt collectors,” and that the non-judicial foreclosure

17

qualifies as a form of “debt collection,” to support her FDCPA claim. (See PFAC ¶ 181.)

18

However, the weight of authority this District counsels that the FDCPA does not apply to actions

19

taken by lenders or their agents when foreclosing on a lender’s security interest under a deed of

20

trust in a non-judicial foreclosure. See, e.g., Cromwell v. Deutsche Bank Nat. Trust Co., Case No.

21

11–cv–2693 PJH, 2012 WL 244928, at *3 (N.D. Cal. Jan. 25, 2012) (non-judicial foreclosures “do

22

not amount to debt collection because . . . the lender or its agent is simply foreclosing on the

23

lender’s interest in the property as secured by the Deed of Trust”); Garcia v. American Home

24

Mortg. Serv., Inc., Case No. 11–cv–3678 LHK, 2011 WL 6141047 at *4 (N.D. Cal. Dec. 9, 2011)

25

(“non-judicial foreclosure does not constitute ‘debt collection’ as defined by the [FDCPA]”);

26

Garfinkle v. JPMorgan Chase Bank, Case No. 11–cv–1636 CW, 2011 WL 3157157 at *3 (N.D.

27

Cal. July 26, 2011) (collecting cases concluding foreclosing on a property is not debt collection

28

within the meaning of the FDCPA). These courts rely heavily on the reasoning in Hulse v. Ocwen

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1

Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Ore. 2002). There, plaintiffs challenged their

2

creditor’s right to foreclose due to an FDCPA violation. Hulse, 195 F. Supp. 2d at 1203. The court

3

rejected the plaintiffs’ claims because “the activity of foreclosing on the property pursuant to a deed

4

of trust is not the collection of a debt within the meaning of the FDCPA.” Id. at 1204. The court

5

explained that “[f]oreclosing on a trust deed is distinct from the collection of the obligation to pay

6

money.” Id. The Hulse court continued by stating: “[p]ayment of funds is not the object of the

7

foreclosure action. Rather, the lender is foreclosing its interest in the property.” Id.

8
9

Some courts in this District have found Hulse’s reasoning overly broad. See Harvey G.
Ottovich Revocable Living Trust dated May 12, 2006 v. Wash. Mut., Inc., Case No. 10–cv–02842
WHA, 2010 WL 3769459, at *4 (N.D. Cal. Sept. 22, 2010) (denying defendants’ motion to dismiss

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United States District Court
Northern District of California

10

plaintiffs’ FDCPA claim and noting that “Hulse has been found to be overly broad in the

12

categorical exclusions it provided under federal law to lenders”); Carter v. Deutsche Bank Nat.

13

Trust Co., Case No. 09–cv–3033 BZ, 2010 WL 1875718, at *1-2 (N.D. Cal. May 7, 2010)

14

(discussing split in authority and declining to dismiss plaintiff's FDCPA claim at the pleading

15

stage).7 However, many of these cases involved alleged conduct that was more than just non-

16

judicial foreclosure acts. See, e.g., Wilson, 443 F.3d at 376-77 (defendant allegedly made a specific

17

request for money to reinstate the plaintiffs’ account after foreclosure proceedings began); Harvey

18

G. Ottovich, 2010 WL 3769459, at *4 (plaintiffs alleged that defendants repeatedly obfuscated the

19

truth with regard to the loan amounts and payments). Here, as explained throughout this Order,

20

plaintiff’s theory that defendants perpetrated a fraud and engaged in financial chicanery and

21

therefore did not have real interests in her loan is not grounded in factual allegations sufficient to

22

make this theory plausible. For the same reason, plaintiff has not alleged facts beyond the

23

speculative that raise any inference that defendants were not undertaking non-judicial foreclosure

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25
26
7

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Wilson v. Draper & Goldberg PLLC, 443 F.3d 373, 376-77 (4th Cir. 2006) (“‘debt’
remained a ‘debt’ even after foreclosure proceedings commenced” and “foreclosure proceedings
were attempts to collect that debt”).

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acts, but rather, were perpetrating fraud and acting as “debt collectors” within the meaning of the

2

FDCPA.8
In sum, the Court, like many courts in this District, finds that at most, plaintiff’s FDCPA

3
4

allegations relate to non-judicial foreclosure activities. Such actions do not constitute “debt

5

collection” and defendants are not “debt collectors” within the meaning of the FDCPA.

6

Accordingly, amendment is futile. Foman, 371 U.S. at 182. Plaintiff’s motion for leave to amend

7

her FDCPA claim is DENIED.

8

IV.

9

CONCLUSION
For the reasons set forth above, plaintiff’s motion for leave to amend is denied. First,

amendment would be futile, for each of plaintiff’s eight claims would be immediately subject to

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United States District Court
Northern District of California

10

dismissal. Carvalho, 629 F.3d at 892-93 (citing Foman, 371 U.S. at 182). For six of her claims –

12

fraud, cancellation of instruments, unjust enrichment, accounting, slander of title, and UCL

13

violations – plaintiff lacks standing. Plaintiff’s fraud and UCL claims also fail to meet the required

14

pleading standard. In addition, Plaintiff’s RESPA claims are either barred by the applicable statute

15

of limitations and/or fails to allege harm casually linked to defendants’ actions. Lastly, plaintiff’s

16

FDCPA fails because her allegations relate to a non-judicial foreclosure, and thus the statute does

17

not apply.

18

Second, plaintiff’s “[r]epeated failure to cure deficiencies by amendments previously

19

allowed,” provides another basis to deny leave to amend. Foman, 371 U.S. at 182. In its previous

20

Order, plaintiff was provided detailed instructions to remedy her complaint, and was directed not to

21

rely on Glaski. After granting plaintiff two extensions of the deadline to file her Motion for Leave

22
23
8

24
25
26
27

In addition, because plaintiff’s allegations concerning defendants’ debt collection actions
are grounded in fraud, she must also satisfy the heightened pleading requirement of Federal Rule of
Civil Procedure 9(b). (See PFAC at 24-25.) The Court finds that plaintiff’s FDCPA claim does not
meet this standard. Not only has plaintiff failed to allege facts that, taken together and construed in
her favor, fail to “raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, she
has also failed to set forth facts supporting her allegations of fraud underlying her FDCPA claim
with the required level of specificity. See Fed. R. Civ. P. 9(b).

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1

to Amend, plaintiff continues to rely in large part on Glaski, and her PFAC lacks factual allegations

2

to support her claim of harm.

3

Finally, the Court may exercise its discretion to deny leave to amend due to “undue delay,

4

bad faith or dilatory motive on the part of the movant.” Foman, 371 U.S. at 182. According to

5

plaintiff’s original complaint, she was twice offered loan modifications, once in 2010 and another

6

in early 2011, which she apparently did not accept. (See Dkt. No. 1 ¶¶ 26, 31.) According to the

7

PFAC, a Notice of Default was recorded against plaintiff in April of 2011. (PFAC ¶ 39.) Nowhere

8

does plaintiff state that the default was in error because she had made mortgage payments, nor does

9

she allege that she has made mortgage payments since that time. The Court recognizes that
“foreclosures are a far too frequent occurrence in today’s difficult financial times. But the hardship

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United States District Court
Northern District of California

10

must not become a haven for those who, as here, do not appear to make any good faith effort to

12

resolve the issue but, instead, seek shelter in minor ministerial omissions or speculative acts that

13

neither misled nor prejudiced them.” Shuster v. BAC Home Loans Servicing, LP, 211 Cal.App.4th

14

505, 513 (2012).

15
16
17
18

Accordingly, plaintiff’s Motion for Leave to Amend is DENIED. Therefore, the claims
contained in her proposed first amended complaint are DISMISSED with prejudice.
No later than December 5, 2014, defendants shall provide the Court with a form of
judgment after allowing plaintiff a reasonable opportunity to comment as to form.

19

This terminates Docket No. 63.

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IT IS SO ORDERED.

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22

Date: November 24, 2014

_______________________________________
YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE

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