Nguyen et al v. JP Morgan Chase Bank N.A.

Filing 50

ORDER GRANTING-IN-PART MOTION TO DISMISS by Judge Paul S. Grewal granting in part and denying in part 35 Motion to Dismiss (psglc1, COURT STAFF) (Filed on 5/15/2013)

1
2
3
4
5
6
7
8
9

United States District Court
For the Northern District of California

10

UNITED STATES DISTRICT COURT

11

NORTHERN DISTRICT OF CALIFORNIA

12

SAN JOSE DIVISION

13
14
15
16

SON T. NGUYEN and HANH T. NGUYEN,
Plaintiffs,
v.
JP MORGAN CHASE BANK N.A.,

17

Defendant.

18
19
20

)
)
)
)
)
)
)
)
)
)
)

Case No.: 12-CV-04183
ORDER GRANTING-IN-PART
DEFENDANT’S MOTION TO
DISMISS PLAINTIFFS’ COMPLAINT
PURSUANT TO FRCP 12(B)(6)
(Re: Docket No. 31)

On October 29, 2012, Son T. Nguyen and Han T. Nguyen (“Plaintiffs”) filed their first

21

amended complaint, alleging (1) slander of title, (2) wrongful foreclosure, (3) violation of

22

California Civil Code Section 2923.5, and (4) violation of California’s Unfair Competition Law

23

(“UCL”). As successor in interest to Washington Mutual Bank, FA, JP Morgan Chase Bank, N.A.

24

(“Defendant”) moves to dismiss Plaintiffs’ complaint for failure to state a claim upon which relief

25

can be granted. Plaintiffs oppose. The parties appeared for hearing. Having reviewed the papers,

26
27
28

and considered the arguments and evidence presented, the court GRANTS-IN-PART Defendant’s
motion to dismiss.
1
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

I.

1

BACKGROUND

Except where otherwise noted, the court draws the following facts from Plaintiffs’

2
3

complaint, taken as true for the purposes of a motion to dismiss. In 2005, Plaintiffs took out a loan

4

for $1,175,000.00 from Washington Mutual Bank (“WaMu”), that was secured by a Deed of Trust

5

on Plaintiffs’ property at 2118 Chisin Street, San Jose, California, 95121. WaMu securitized the

6
7
8
9

loan by assigning the beneficial interest in the Deed of Trust to Deutsche Bank National Trust
Company (“Deutsche Bank”) as Trustee for Washington Mutual Mortgage Pass-Through
Certificates Series 2005-AR8 Trust (“the Loan Trust”) in 2005. In 2008, WaMu became insolvent

United States District Court
For the Northern District of California

10

and entered into a receivership, with the Federal Deposit Insurance Corporation (“FDIC”) acting as

11

the receiver. JP Morgan Chase Bank entered a Purchase and Assumption Agreement (“P&A

12

Agreement”) to acquire certain assets, liabilities, and obligations of WaMu.

13
14

On June 22, 2009, a Notice of Default under the Deed of Trust was recorded in Santa Clara
County Recorder’s Office, initiating foreclosure proceedings on Plaintiffs’ property. Plaintiffs

15
16

allege that on the same day, an Assignment of Deed of Trust also was recorded in Santa Clara

17

County. The Assignment was signed by Huey Jen Chui (“Chui”) as Vice President for Defendant

18

and reflected the earlier 2005 securitization process. 1 On September 2, 2010, a Notice of Trustee’s

19

Sale was recorded in Santa Clara County Recorder’s Office. On February 14, 2011, a second

20

Notice of Trustee’s Sale was recorded in the Santa Clara County Recorder’s Office.

21

On August 9, 2012, Plaintiffs filed a complaint alleging slander of title and a violation of

22
unfair competition laws. Plaintiffs allege that the Deed of Trust on their property was not
23
24

effectively included in the assets assumed by Defendant, so Defendant has no enforceable interest

25

in Plaintiffs’ property. On September 4, 2012, Defendant moved to dismiss Plaintiffs’ complaint

26

and requested that the court take judicial notice of the following: foreclosure-related documents

27
1

28

See Docket No. 7, Ex. D.
2

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

recorded in the Santa Clara County Recorder’s Office (Exs. A, D-G); the P&A Agreement between

2

WaMu and Chase, available to the public through the FDIC website (Ex. B); the affidavit of the

3

FDIC recorded on October 3, 2008 with the King County Recorder’s Office (Ex. C); and filings

4

associated with the previous Santa Clara County Superior Court case involving the parties

5

regarding the same foreclosure matter (Ex. H-K).2

6

Noting that it would not rely on facts that

could reasonably be subject to dispute, the court granted the request for judicial notice and

7
8
9

subsequently dismissed the complaint on October 17, 2012, with leave to file an amended
complaint.3
II.

United States District Court
For the Northern District of California

10

LEGAL STANDARDS

A complaint must contain “a short and plain statement of the claim showing that the pleader

11
12

is entitled to relief.”4 If a plaintiff fails to proffer “enough facts to state a claim to relief that is

13

plausible on its face,” the complaint may be dismissed for failure to state a claim upon which relief

14

may be granted.5 A claim is facially plausible “when the pleaded factual content allows the court

15
16

to draw the reasonable inference that the defendant is liable for the misconduct alleged.”6

17

Accordingly, under Fed. R. Civ. P. 12(b)(6), which tests the legal sufficiency of the claims alleged

18

in the complaint, “[d]ismissal can be based on the lack of a cognizable legal theory or the absence

19

of sufficient facts alleged under a cognizable legal theory.”7

20
21
22
2

See Docket No. 7.

3

See Docket No. 29.

4

Fed. R. Civ. P. 8(a)(2).

5

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).

6

Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009).

7

Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1990).

23
24
25
26
27
28

3
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

On a motion to dismiss, the court must accept all material allegations in the complaint as

1
2

true and construe them in the light most favorable to the non-moving party.8 The court’s review is

3

limited to the face of the complaint, materials incorporated into the complaint by reference, and

4

matters of which the court may take judicial notice.9 However, the court need not accept as true

5

allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences.10

6
7

“Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that
the complaint could not be saved by amendment.”11

8
III.

9

United States District Court
For the Northern District of California

10

A.

11

DISCUSSION

Slander of Title
In their amended complaint, Plaintiffs reassert a claim for slander of title. Plaintiffs allege

12

that Defendant slandered Plaintiffs’ title by recording a “false and invalid” Assignment of the Deed

13

of Trust.12 To state a claim for slander of title, Plaintiffs must properly allege: “1) a publication, 2)

14
which is without privilege or justification, 3) which is false, and 4) which causes direct and
15
16

immediate pecuniary loss.”13
Defendant does not dispute that there was a publication in the recording of the Assignment.

17
18

However, Defendant argues that Plaintiffs cannot sustain a claim for slander of title because the

19
8

See Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008).

9

See id. at 1061.

20
21

10

22
23

See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also Twombly,
550 U.S. at 561 (“a wholly conclusory statement of [a] claim” will not survive a motion to
dismiss).
11

24

Eminence Capital, LLC v. Asopeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

12

25
26
27

See Docket No. 31 at 6-14. The court notes that Plaintiffs also allege Defendant slandered
Plaintiffs’ title by recording a “false and invalid” June 22, 2009 Notice of Default, September 2,
2010 Notice of Trustee’s Sale, and February 14, 2011 Notice of Trustee’s Sale. However, as these
claims are predicated on the falsity of the Assignment, the court will focus on this allegation for the
purposes of the motion.
13

28

Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal. App. 4th 1040, 1051 (2009).
4

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1
2

allegations cannot sustain the remaining three elements of a slander of title claim. The court
considers each argument as follows.

3

1.

4

Defendant first contends that Plaintiffs do not sufficiently allege the element of falsity.

5
6

Falsity of the Assignment and Notice of Default

Plaintiffs allege the Assignment was false for three reasons: first, Defendant could not have owned
Plaintiff’s Deed of Trust because Defendant never owned the beneficial interest; second, the

7
8
9

United States District Court
For the Northern District of California

10

Assignment was not recorded within 90 days of the July 15, 2005 closing date as required by the
Pooling and Service Agreement; and third, even if Defendant owned the beneficial interest, the
Assignment was invalid because it was signed by a “robo-signer.”14
As noted in the court’s October 17 order dismissing Plaintiffs’ original complaint, at least

11
12

the third of Plaintiffs’ assertions satisfies the falsity element. Plaintiffs allege the Assignment was

13

false because it was signed without proper authority by Huey-Jen Chui, allegedly as “Vice

14

President” of Defendant.15 Plaintiffs allege that Chui is not an employee of Defendant, but rather a

15
16

“robo-signer” employed at California Reconveyance Company (“CRC”) who merely signs

17

property records without any legal or corporate authority. While Defendant challenges this

18

allegation as baseless,16 the court must accept the factual allegations of the complaint as true, and

19

so Plaintiffs have sufficiently alleged the falsity element.17

20

2.

21

Recordation of the Assignment as a Privileged Act

Defendant next contends the recordation of the Assignment was a privileged act. California

22
Civil Code Section 47(c)(1) defines a privileged communication, among others, as a
23
24

14

See Docket No. 31 at 6-14.

25

15

See Docket No. 7, Ex. D.

26

16

See Docket No. 35 at 10.

27

17

28

See, e.g., Ogilvie v. Select Portfolio Servicing, Case No. 12–CV–001654–DMR, 2012 WL
3010986, at *3 (N.D. Cal. July 23, 2012).
5
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

“communication, without malice, [made] to a person interested therein (1) by one who is also

2

interested.” California Civil Code Section 2924(d) separately and specifically establishes that the

3

recording of an assignment of a Deed of Trust is a privileged act.18 This same statute also applies

4

to Plaintiffs’ identical claims concerning the Notice of Default and the Notices of Trustee’s Sale.19

5
6
7
8
9

United States District Court
For the Northern District of California

10

Plaintiffs concede that the privilege is applicable.20 Plaintiffs argue, however, that the
recording was made with malice. While the privilege doctrine does not apply when plaintiffs can
show the defendant acted with malice,21 malice requires that the defendant was either “motivated
by hatred or ill will towards the plaintiff” or “lacked reasonable ground for belief in the truth of the
publication and therefore acted in reckless disregard of the plaintiff's rights.”22

11
12
13
14

Plaintiffs reassert allegations that were insufficient to establish a malice exception in the
initial complaint: that Defendant made the assignment despite knowing it did not have beneficial
interest in the Loan; that Defendant knew there was no underlying assignment; and that Defendant
acted recklessly by using a robo-signer. Again, Plaintiffs’ arguments are conclusory; they give no

15
16

specific reasons to support an inference that formulation of the documents was intentionally done

17

with ill will or done without at least a reasonable belief in their truth. “[T]he mere formulation of

18

false documents is inadequate to plead malice;”23 as before, no malice exception applies.

19
20
21
18

22
23

California Civil Code Section 2924(d) states that “All of the following shall constitute privileged
communications pursuant to Section 47… (2) Performance or the procedures set forth in this
article.”
19

See id.

20

See Docket No. 39 at 14.

21

Ogilvie, 2012 WL 3010986, at *4.

22

Kachlon v. Markowitz, 168 Cal. App. 4th 316, 336 (2008) (citations omitted).

23

Ogilvie, 2012 WL 3010986, at *4 (internal citations omitted).

24
25
26
27
28

6
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

3.

1

Pecuniary Damages from Recordation

2

Plaintiffs also fail to state a “direct and immediate” pecuniary harm as a result of the

3

alleged false publication. As in their original complaint, the monetary harm is based on the alleged

4

“impair[ment] of vendibility” to the Property, as well as Plaintiffs’ need to retain attorneys and file

5

suit in order “to cancel the instruments casting doubt on Plaintiffs’ title.”24 Although Plaintiffs cite

6
7
8
9

California authority to support their argument that attorney fees and costs may serve as pecuniary
damages, Plaintiffs miss a significant distinction.25 “[F]ees to quiet title are part of damages, but
fees to prosecute a slander of title action are not.”26 As Plaintiffs have introduced no specific and

United States District Court
For the Northern District of California

10

non-speculative facts related to impairment of vendibility, they have not alleged direct and

11

immediate pecuniary harm.

12

B.

13
14

Wrongful Foreclosure
Wrongful foreclosure is an action in equity in which the mortgagor or trustor seeks to

unwind an “illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of

15
16

sale in a mortgage or deed of trust.”27 The elements of wrongful foreclosure are:

19

(a) the trustee or mortgagee caused an illegal, fraudulent or willfully oppressive sale of real
property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking
the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3)
in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor
tendered the amount of secured indebtedness or was excused from tendering.28

20

Defendant cites Rosenfeld and Lane in arguing that the Plaintiffs may not bring a claim for

17
18

21

wrongful foreclosure until the foreclosure sale has actually occurred, and here no sale has taken

22
24

Docket No. 39 at 19.

25

See id.

23
24
26

25

Ryan v. Editions Ltd. West, Inc., No. C-0604812-PVT, 2007 WL 4577867, at *13 (N.D. Cal.
Dec. 27, 2007) (not reported in F.Supp.2d); Ogilvie, 2012 WL 3010986, at *4.

26

27

27

Ogilvie, 2012 WL 3010986, at *4 (quoting Lona v. Citibank N.A., 202 Cal. App. 4th 89, 104
(2011)).
28

28

Ogilvie, 2012 WL 3010986, at *5 (quoting Lona, 202 Cal. App. 4th at 104 (2011)).
7

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

place.29 Defendant’s reliance on Lane is inapposite, however, because although the court

2

dismissed the plaintiff’s wrongful foreclosure claim, it did so because the defendant had the

3

authority to foreclose, not because the wrongful foreclosure claim was premature.30 In fact, the

4

Lane court granted a TRO and considered granting a preliminary injunction to halt the scheduled

5

foreclosure sale, which had not yet taken place.31 Rosenfeld is closer to the case at hand, where

6
7
8

the court found that although the plaintiff received a notice of default, no sale had occurred or had
even been noticed, and so the cause of action was “premature.”32
In their complaint, Plaintiffs ask the court to enjoin Defendant from enforcing their rights

9

United States District Court
For the Northern District of California

10

laid out in the purportedly false ownership documents.33 It is well-established that “a suit for an

11

injunction deals primarily, not with past violations, but with threatened future ones; and that an

12

injunction may issue to prevent future wrong, although no right has yet been violated.”34 Unlike in

13

Rosenfeld, Plaintiffs have received two Notices of Trustee’s Sale, recorded on February 10 and

14

February 14, 2011. These notices reflect Defendant’s intent to sell the property.35 If the

15
16

foreclosure is indeed wrongful, it seems artificial and counter to the rules of equity to require

17

Plaintiffs to wait for the inevitable to take place – the sale of their property – before bringing suit.

18

As Plaintiffs complaint notes, “[i]f defendants are permitted to rely on the wrongful Notice of

19
29

21

See Docket No. 35 at 12 (citing Rosenfeld v. JP Morgan Chase Bank, N.A., 732 F.Supp.2d 952,
961 (N.D. Cal. 2010) and Lane v. Vitek Real Estate Industries Group, 713 F.Supp.2d 1092, 1097
(E.D. Cal. 2010) (“Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a
foreclosure sale.”).

22

30

Lane, 713 F. Supp. 2d at 1097.

23

31

See id. at 1096.

24

32

Rosenfeld, 732 F. Supp. 2d at 961.

25

33

See Docket No. 31 at 19.

26

34

Swift & Co. v. United States, 276 U.S. 311, 326 (1928).

27

35

20

28

See Docket No. 7, Ex. F and G (“Unless you take action to protect your property, it may be sold
at a public sale.”).
8
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

Trustee’s to complete this foreclosure process by conducting a Trustee’s sale and issuing a

2

Trustee’s Deed Upon Sale, Plaintiffs will wrongfully lose their home.”36 “Many courts have

3

recognized that losing one's home through foreclosure constitutes irreparable harm.”37 Injunctive

4

relief is designed to prevent such irreparable harm from occurring before it occurs.38 As the

5

complaint prays for an injunction based on allegedly wrongful foreclosure, the court finds it

6
7
8

appropriate to examine the merits of the wrongful foreclosure claim, even though no sale has yet
taken place.39
1.

9

Plaintiffs’ claim challenging the sale was unlawful turns on whether Defendant had the

10
United States District Court
For the Northern District of California

Illegal Sale

11

authority to initiate foreclosure proceedings. Plaintiffs allege that CRC acted on behalf of WaMu

12

or Defendant, but neither of those entities held a valid beneficiary interest necessary to direct

13

CRC’s actions.

14
The foreclosure documents do not establish that Defendant had any beneficial interest, but
15
16

merely refer to Defendant as the loan servicer.40 Regarding Wamu’s status, the Notice of Default

17

does not name Wamu as a current beneficiary, but rather the original beneficiary “recorded

18

02/09/2005.”41 In the two Notices of Trustees’ Sale, however, WaMu is listed as “Beneficiary.”42

19
36

20

Docket No. 31 ¶ 59.

37

21

Osorio v. Wells Fargo Bank, Case No. C 12-02645 RS, 2012 WL 1909335, at*3 (N.D. Cal. May
24, 2012).

22

38

23

Cf. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (requiring the plaintiff to show
irreparable injury and inadequacy of remedies at law before obtaining a permanent injunction).
39

24
25

The court is not alone in considering the merits of a wrongful foreclosure claim for the purposes
of enjoining a pending sale. See, e.g., Barrionuevo v. Chase Bank, N.A., 885 F. Supp. 2d 964, 97172 (N.D. Cal. 2012) and Miller v. Carrington Mortgage Servs., Case No. C-12-2282 EMC, 2012
WL 3537056, at *6 (N.D. Cal. Aug. 14, 2012).

26

40

See Docket No. 7, Ex. E at 2.

27

41

See id.

28

42

See id., Exs. F, G.
9

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

While the court has taken judicial notice of these documents, the court does not as a matter of law

2

accept their contents as absolute. Although the documents suggest that either Defendant (in the

3

Notice of Default) or WaMu (in the Notices of Trustees’ Sale) are beneficiaries, the court may not

4

rely on Defendant’s assertions of this chain of title based on these documents. Moreover, nothing

5

in the September 2008 Purchase and Assumption Agreement specifically establishes that Plaintiffs’

6

mortgage was among the instruments that were transferred.43 Defendant’s version of the chain of

7
8
9

title runs counter to Plaintiff’s complaint, which alleges that the interest in their home had already
“spun off” and thus was not included in the pool of assets and liabilities transferred from Wamu to

United States District Court
For the Northern District of California

10

JP Morgan Chase through the Purchase and Assignment Agreement. Taking the allegations in the

11

complaint as true, Defendant does not own the beneficial interest in Plaintiffs’ property and the

12

foreclosure would constitute an illegal sale.44

13
14

Defendant next argues that whether it owns the beneficial interest is irrelevant because
Plaintiffs admit Defendant at least retained loan servicing rights of the mortgage, allowing CRC to

15
16

act on behalf of Defendant’s position as loan servicer to initiate the foreclosure. Defendant cites

17

case law stating that a “loan servicer [] is authorized to enforce the Deed of Trust beneficiary’s

18

security interest.”45 However, Defendant cites no precedent which would allow a loan servicer to

19

act independently or on behalf of an unknown beneficiary. California Civil Code Section

20

2924(a)(1) gives loan servicers the ability issue the Notice of Default, but only if they are an

21
22

43

23

44

24
25
26
27

Cf. Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472, at *10-14 (N.D. Cal. Dec. 15, 2011)
(finding plaintiff’s allegation that the foreclosing bank did not own the loan at the time of issuing
the notice of default sufficient to sufficient to state a claim for wrongful foreclosure). See also
Selby v. Bank of America, Inc., No. 09cv2079 BTM(JMA), 2010 WL 4347629, at *4 (S.D. Cal.
Oct. 27, 2010) (finding problematic “gaps in the documentation pertaining to the Deed of Trust and
the transfer of rights thereunder,” but granting motion to dismiss because plaintiff failed to allege
that the entity “was not actually the beneficiary” or that the agent “was not an authorized agent of
the beneficiary or trustee”).
45

28

See id., Ex. D.

See Docket No. 35 at 13.
10

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

“authorized agent” of the beneficiary.46 In each of the authorities cited by the Defendant, the

2

beneficiary, for whom the loan servicer was authorized to act, was a known entity.47 As discussed

3

above, it is disputed in this case which party holds the beneficial interest. It is unclear how the

4

Defendant can claim to be an authorized agent when the identity of the party able to give that

5

authorization is in dispute. By these facts, the Plaintiffs have sufficiently pled the element of an

6

illegal sale.

7

Plaintiffs also claim an illegal sale occurred due to Defendant’s violations of Civil Code

8
9

Section 2923.5, which states in pertinent part that:
Where a power to sell real property is given to a mortgagee . . . the power is part of
the security and vests in any person who by assignment becomes entitled to
payment of the money secured by the instrument. The power of sale may be
exercised by the assignee if the assignment is duly acknowledged and recorded.48

United States District Court
For the Northern District of California

10
11
12
13
14

Defendant correctly argues that there is no requirement under California law for the foreclosing
entity to have recorded the assignment of the Deed of Trust. Plaintiffs argue that Civil Code

15
Section 2932.5 limits the power of sale to be exercised only by an assignee who has recorded the
16
17

assignment. Plaintiffs cite In re Salazar in support of their position that the foreclosing beneficiary

18

“had to be entitled to payment of the secured debt” and had to “appear before the sale in the public

19

record title for the Property” as the foreclosing beneficiary.49 Plaintiffs fail to note, however, that

20

on appeal by the bank, the court reversed and remanded, holding unequivocally that Section 2932.5

21
22
46

23

Cal. Civ. Code § 2924(a)(1).

47

24
25
26

See Impink v. Bank of America, Case No. 11-cv-0104 BTM (WMC), 2011 WL 3903197, at *4
(S.D. Cal. Sept. 6, 2011) (stating that loan servicer or agent may properly collect payment on
behalf of beneficiary); Saldate v. Wilshire Credit Corp., 711 F.Supp.2d 1126, 1131 (E.D. Cal.
2010) (stating that “a loan servicer [ ] is authorized to enforce the DOT beneficiary’s security
interest”) (emphasis added).
48

Cal. Civ. Code § 2923.5.

49

See In re Salazar, 448 B.R. 814, 819-20 (Bankr. S.D. Cal. 2011).

27
28

11
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

“does not apply to deeds of trust.”50 The court in In re Salazar went on to hold that both the bank

2

and the bank’s nominal beneficiary and agent “are entitled to invoke the power of sale in the Deed

3

of Trust.”51 Section 2932.5 thus does not serve as a basis to challenge the actions by Defendant

4

based on a failure to record.

5
6

Plaintiffs identify additional grounds for an illegal sale, such as claiming that the Plaintiff’s
loan is not in default, that the Trust is receiving payments and cannot now obtain ownership of the

7
8
9

note, that Defendant violated Section 2923.6, and that the Servicer is motivated by a conflict of
interest to foreclose.52 Because these claims were never mentioned in the complaint, the court may

United States District Court
For the Northern District of California

10

not consider them here. In any event, as noted above, Plaintiffs sufficiently plead the illegal sale

11

element.

12

2.

13
14

Prejudice or Harm

Plaintiffs allege that if Defendant proceeds with the foreclosure sale, Plaintiffs will be
subject to the wrongful loss of their home.53 Defendant has not challenged this allegation as

15
16

inadequate. As expressed by the court in Tamburri, “the threat of foreclosure by the wrong party

17

would certainly be sufficient to constitute prejudice to the homeowner because there is no power of

18

sale without a valid notice of default.”54

19
20
21
22

50

In re Salazar, 470 B.R. 557, 560 (Bankr. S.D. Cal. 2012).

23

51

Id. at 562.

24

52

See Docket No. 39 at 22-23.

25

53

See Docket No. 31 at 16.

26

54

27
28

Tamburri, 2011 WL 6294472, at *14 (citing Castillo v. Skoba, Case No. 10-cv-1838-BTM, 2010
WL 3986953, at *2 (S.D. Cal. Oct. 8, 2010) (“The power of sale in a nonjudicial foreclosure may
only be exercised when a notice of default has first been recorded . . . [A]ny foreclosure sale based
on a void notice of default is also void.”)).
12
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

3.

1

Tender or Excuse From Tender

The sale in this case has not yet taken place, and Defendants do not raise the “tender rule”

2
3

as a basis for seeking dismissal of the wrongful foreclosure claim. “[F]ailure to allege tender is not

4

decisive at [the pleading] stage.”55 The tender element of wrongful foreclosure is an equitable

5

concept, so the court declines to apply the tender rule at this early pleading stage without an

6

“opportunity to undertake a more informed analysis of the equities.”56

7
8

C.

Violation of California Civil Code Section 2923.5
Defendant moves to dismiss allegations under California Civil Code Section 2923.5 on the

9

United States District Court
For the Northern District of California

10

basis that they are preempted by the Home Owners’ Loan Act (“HOLA”),57 and the implementing

11

regulations, including 12 C.F.R. 560. An overwhelming number of federal courts have specifically

12

found that Section 2923.5 is preempted by HOLA because allegations relating to foreclosure “fall

13

within § 560.2(b)(10) – that is, the ‘[p]rocessing, origination, servicing, sale or purchase of, or

14

investment or participation in, mortgages.’”58

15
Plaintiffs respond as follows. First, Plaintiffs cite Mabry v. Superior Court to support their

16
17

argument that the “the exclusive federal regulation of processing and servicing of mortgages under

18

HOLA does not extend beyond mortgage servicing to include preemptive regulation of real

19
20
21
22
23

55

Storm v. Am.'s Servicing Co., Case No. 09–CV–1206–IEG–JMA, 2009 WL 3756629, at *6, *8
(S.D. Cal. Nov. 6, 2009).
56

See Tamburri, 2011 WL 6294472, at *5 (“These exceptions and qualifications counsel against a
blanket requirement of the tender rule at the pleading stage. The Court thus declines to dismiss the
complaint on the basis of her failure to allege tender.”).
57

24

12 U.S.C. § 1461.

58

25
26
27
28

See, e.g., Varela v. Wells Fargo Home Mortg., Case No. C-12-3502 KAW, 2012 WL 6680261,
at *6 (N.D. Cal. Dec. 21, 2012) (quoting 12 C.F.R. §560.2(b)(10)); see also Ngoc Nguyen v. Wells
Fargo Bank, N.A., 749 F.Supp.2d 1022, 1033 (N.D. Cal. Oct. 27, 2010), DeLeon v. Wells Fargo
Bank, N.A., 729 F.Supp.2d 1119, 1127 (N.D. Cal. 2010) (collecting cases with similar holdings),
Parcray v. Shea Mortg., Inc., Case No. CV-F-09-1942 OWW/GSA, 2010 WL 1659369, at *9 (E.D.
Cal. Apr. 23, 2010) (concluding that HOLA preempts section 2923.5 because it “concerns the
processing and servicing of [the plaintiff]’s mortgage”).
13
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

property transfers via non-judicial foreclosures, an area traditionally within the confines of state

2

law as ‘real property law.’”59 In the simplest of terms, the Mabry court held that “since the term

3

‘foreclosure’ does not explicitly appear in 12 C.F.R. § 560.2(b), state statutes that can be read to

4

regulate only the foreclosure process, like § 2923.5, are not preempted by HOLA.”60

5
6
7
8
9

However, this district and others have found Mabry to be neither binding nor persuasive in
its reasoning.61 “[L]ooking to the categories of state laws expressly preempted by HOLA is only
the first step of the two step inquiry prescribed by the Ninth Circuit.”62 Other courts have found,
after undertaking both steps that “the additional notice and disclosure requirements imposed by

United States District Court
For the Northern District of California

10

Section 2923.5 affect lending in a manner that cannot be described as incidental, even if

11

foreclosure activities are not explicitly listed.”63 For this reason, Section 2923.5 is preempted by

12

HOLA.

13
14

Plaintiffs also argue that, as a national bank, “the actions of [Defendant] are not subject to
preemption by HOLA . . . instead, the actions of [Defendant] are regulated under the National Bank

15
16

Act (“NBA”).”64 But because the loan originated with WaMu, a federally-chartered savings bank,

17

organized and operating under HOLA,65 courts have held that HOLA preempts all conduct relating

18

to the loan.66 Plaintiffs’ claims under Section 2923.5 thus are preempted by HOLA.

19
59

20

See Docket No. 42 at 24.

60

21

Sato v. Wachovia Mortg., FSB, Case No. 5:11-cv-00810 EJD (PSG), 2011 WL 2784567, at *6
(N.D. Cal. July 13, 2011) (citing Mabry v. Sup. Ct., 185 Cal. App. 4th 208, 231 (2010)).

22

61

See id.

23

62

Id. (citing Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Circ. 2008)).

24

63

Id.

25

64

26

See Docket No. 39 at 24. While Plaintiffs’ opposition actually refers to Wells Fargo throughout
this argument as the bank in question, the court will assume that Plaintiffs intent the argument to
apply to Chase Bank and advises Plaintiffs’ counsel to take more care in writing its briefs.

27

65

28

66

See Docket No. 31 at Ex. A.

Sato, 2011 WL 2784567, at *5; DeLeon, 729 F. Supp. 2d at 1126.
14
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

1

D.

Violation of UCL
California’s UCL prohibits unfair competition, which is defined as “any unlawful, unfair or

2
3

fraudulent business act or practice.”67 “To bring a UCL claim, a plaintiff must show either an (1)

4

unlawful, unfair or fraudulent business act or practice, or (2) unfair, deceptive, untrue or

5

misleading advertising.”68 “Unlawful business activity includes anything that can properly be

6

called a business practice and that at the same time is forbidden by law.”69 Defendant argues that

7
8
9

Plaintiffs have not alleged a predicate wrongful act. A plaintiff need only allege conduct by which
the “‘members of the public are likely to be deceived.’”70 Plaintiffs’ claim for wrongful

United States District Court
For the Northern District of California

10

foreclosure is based on allegations of false assignments and recordations, which, if true, would

11

certainly deceive the public as to the true beneficiary. Because Plaintiffs’ claim of wrongful

12

foreclosure survives, it provides the necessary predicate violation to support Plaintiffs’ UCL

13

claim.71

14
E.

Additional Claim

15
In Plaintiffs’ Opposition to the Motion to Dismiss, Plaintiffs identify an additional claim

16
17

that Defendant violated RESPA.72 Because this claim is not alleged in the complaint, the court

18

may not consider it here.

19
20
21
22

67

Cal. Bus. & Prof. Code § 17200.

23

68

Lippit v. Raymond James Fin. Servs. Inc., 340 F.3d 1033, 1043 (9th Cir. 2003).

24

69

25

Makreas v. First Nat. Bank of Northern California, 856 F. Supp. 2d 1097, 1102 (N.D. Cal.
2012).
70

26

See Tamburri, 2011 WL 6294472, at *1027 (quoting Makreas, 856 F. Supp. 2d at 1102).

71

27

See Susilo v. Wells Fargo Bank, N.A., 796 F. Supp. 2d 1177, 1196 (C.D. Cal. 2011) (finding
Plaintiff had standing to bring her UCL claim based on wrongful foreclosure-based claims);

28

72

See Docket No. 39 at 12.
15

Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

IV.

1
2

CONCLUSION

Defendant’s motion to dismiss is GRANTED without leave to amend with respect to the

3

slander of title and violation of California Civil Code Section 2923.5. Defendant’s motion is

4

DENIED with respect to the wrongful foreclosure and UCL claims.

5

IT IS SO ORDERED.

6

Dated: May 15, 2013

7
_________________________________
PAUL S. GREWAL
United States Magistrate Judge

8
9

United States District Court
For the Northern District of California

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
16
Case No.: 5:12-cv-04183-PSG
ORDER GRANTING-IN-PART MOTION TO DISMISS PLAINTIFFS’ COMPLAINT