Moran v. GMAC Mortgage, LLC et al

Filing 41

Order by Hon. Lucy H. Koh granting 30 Motion to Dismiss. (lhklc1, COURT STAFF) (Filed on 6/18/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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SAN JOSE DIVISION

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PATRICIA C. MORAN,

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Plaintiff,
v.

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GMAC MORTGAGE, LLC, et al.,
Defendants.

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Case No.: 5:13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

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Plaintiff Patricia Moran (“Moran”) brings this mortgage action against GMAC Mortgage,
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LLC, Executive Trustee Services, LLC, Mortgage Electronic Registration Systems, Inc., US Bank
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National Association as Trustee for the Greenpoint Mortgage Funding Trust, and OCWEN Loan
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Servicing, LLC (collectively, “Defendants”). Defendants now move to dismiss the First Amended
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Complaint. Having considered the briefing, the record in this case, and applicable law, the Court
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GRANTS Defendants’ Motion to Dismiss.
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I.

BACKGROUND

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A.

Factual Background

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Except where otherwise noted, the Court draws the following facts, taken as true for
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purposes of a motion to dismiss, from Plaintiff’s First Amended Complaint. ECF No. 29 (“FAC”).
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On September 13, 2006, Plaintiff entered into a residential mortgage loan with Greenpoint
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Mortgage Funding, Inc. (“Greenpoint Mortgage”), a subsidiary of Capital One Financial Group, to
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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finance the purchase of property at 10920 Ridgeview Avenue, San Jose, CA 95127. FAC at 2, 13.

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The Note and Deed of Trust secured the property, and the deed was recorded in the Santa Clara

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County Recorder’s office on November 9, 2005. FAC at 13. Defendant Mortgage Electronic

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Registration Systems, Inc. (“MERS”), which holds title to mortgages and tracks ownership

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interests and servicing rights in mortgages, acted as the nominal beneficiary of Greenpoint

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Mortgage as stated in the deed of trust signed by the Plaintiff. FAC at 3.

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According to the FAC, sometime on or before November 1, 2006, Greenpoint Mortgage

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sold Plaintiff’s loan to Lehman Brothers Holdings, Inc. FAC at 13-14. Lehman Brothers then sold

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the loan to a securitization depositor, Defendant Structured Asset Securities Corporation

United States District Court
For the Northern District of California

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(“SASC”). Id. SASC then sold and securitized the Plaintiff’s mortgage loan into a mortgage-

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backed security (“MBS”) trust organized under New York law called Greenpoint Mortgage

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Funding Trust 2006-AR7. FAC at 5, 16. Defendant US Bank National Association (US Bank) was

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named as the trustee. FAC at 5. Plaintiff alleges Defendant GMAC Mortgage LLC (GMAC)

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represented itself as the “purported servicer, successor lender, mortgagee and secured creditor” in

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Plaintiff’s loan. FAC at 3. Plaintiff claims however that GMAC was actually a “complete

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stranger,” as it was never a party to the original loan transaction and was never a successor lender.

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Id. Executive Trustee Services, LLC (ETS Services) was an affiliate company of GMAC and the

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substitute trustee in Plaintiff’s deed of trust. FAC at 4. ETS was later sold to Defendant Ocwen

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Loan Services, LLC. Id.

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Allegedly, none of these transactions were initially recorded in the Santa Clara County

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Clerk-Recorder’s office at the time of the transaction. FAC at 14-16. Plaintiff also alleges that the

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transfer of Plaintiff’s mortgage into a MBS fund violated procedural rules in the trust agreement

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because it did not take place before the closing date specified in the trust. FAC at 11. Plaintiff

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alleges this violated the Pooling and Serving Agreement (“PSA”) as well as the Mortgage Loan

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Purchase Agreement. FAC at 10.

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Plaintiff entered into a loan modification agreement with Defendant GMAC on February

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10, 2010. FAC at 14. Plaintiff alleges GMAC represented itself as the lender in her loan and

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“deceived” her based on her lack of knowledge between a servicer and a lender of a loan. Id.
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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However, Greenpoint Mortgage, not GMAC, remained the stated lender on Plaintiff’s deed of trust

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throughout this transaction. Id. Plaintiff argues that due to the failure to transfer the full and

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unencumbered interest in the mortgage loan from Greenpoint Mortgage to GMAC, Plaintiff’s loan

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modification with GMAC is void. FAC at 14-15.

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Furthermore, during April of 2011, MERS assigned the beneficial interest in the original

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deed to GMAC. FAC at 17. MERS’ assignment of the deed of trust was notarized in Pennsylvania

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on April 15, 2011, which was three days before Plaintiff alleges it was signed by MERS’ secretary.

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FAC at 17-18. Plaintiff contends that because Greenpoint Mortgage initially failed to properly

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assign and transfer the mortgage to the purchaser, MERS had no beneficial interest in the deed of

United States District Court
For the Northern District of California

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trust. FAC at 17. Moreover, Plaintiff alleges that the discrepancy in signing dates was due to

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automatic computerized signing, or “robo-signing” by the company. FAC at 18. On April 18, 2011,

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MERS issued an assignment of deed of trust which was later recorded on April 26, 2011. FAC at

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24-25. According to Plaintiff, this transfer occurred without ownership of the underlying note, and

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this transfer was an attempted “cover-up” of previous improper transactions by the Defendants.

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FAC at 18.

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B.

Procedural Background

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Moran filed her complaint in state court on September 4, 2013, which Defendants removed

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to federal court on October 25, 2013. ECF No. 1. On November 1, 2013, Defendants filed a Motion

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to Dismiss. ECF No. 7. Moran did not file a timely opposition to Defendants’ Motion to Dismiss.

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Nearly four months after the opposition was due, the Court ordered Moran to show cause why the

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case should not be dismissed for failure to prosecute under Federal Rule of Civil Procedure 41(b).

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ECF No. 18. At the hearing on the order to show cause, the Court “noted that this is at least the

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fifth Northern District of California home foreclosure case [in the last two years] in which

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Plaintiff’s counsel has failed to oppose a first motion to dismiss. Thus, the Court gave Plaintiff’s

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counsel notice that should Plaintiff’s counsel fail to miss another deadline in this case, the Court

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would refer Plaintiff’s counsel to the Northern District of California’s Standing Committee on

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Professional Conduct and levy $1,000 in sanctions.” ECF No. 27, Order Vacating Order to Show

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Cause and Granting Motion to Dismiss. The Court also granted Defendants’ Motion to Dismiss for
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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failure to oppose, and gave Moran leave to file an amended complaint. Id. However, the Court

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cautioned Moran that failure to cure the deficiencies identified in Defendants’ Motion to Dismiss

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would result in a dismissal with prejudice. Id.

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Moran timely filed the FAC on April 9, 2014, ECF No. 29, which the Defendants moved to

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dismiss on April 28, 2014, ECF No. 30 (“Mot.”). Moran filed an opposition (“Opp.”), ECF No. 32,

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and Defendants filed a reply (“Rep.”), ECF No. 33. Defendants also filed a Statement of Recent

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Decision pursuant to Civ. L. R. 7-3(d)(2). ECF No. 35. Plaintiff’s counsel responded with a new

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six page opposition, which is not authorized under the Civil Local Rules. See Civ. L. R. 7-3(d). The

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Court therefore STRIKES Moran’s Opposition to Notice of New Authority.

United States District Court
For the Northern District of California

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II.

LEGAL STANDARD

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A.

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A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal

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sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering

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whether the complaint is sufficient to state a claim, the Court must accept as true all of the factual

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allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662 (2009). However, the Court

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need not accept as true “allegations that contradict matters properly subject to judicial notice or by

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exhibit” or “allegations that are merely conclusory, unwarranted deductions of fact, or

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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). While

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a complaint need not allege detailed factual allegations, it “must contain sufficient factual matter,

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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678

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(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when

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it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Id. at 678. “Determining whether a complaint states a plausible claim for relief . . . [is] a

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

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common sense.” Id. at 679.

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Motion to Dismiss

Claims sounding in fraud are subject to the heightened pleading requirements of Federal

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Rule of Civil Procedure 9(b). A plaintiff alleging fraud “must state with particularity the

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circumstances constituting fraud.” Fed. R. Civ. P. 9(b). To satisfy this standard, the allegations
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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must be “specific enough to give defendants notice of the particular misconduct which is alleged to

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constitute the fraud charged so that they can defend against the charge and not just deny that they

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have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Accordingly,

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claims sounding in fraud must allege “an account of the time, place, and specific content of the

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false representations as well as the identities of the parties to the misrepresentations.” Swartz v.

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KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007).
B.

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If the Court determines that the complaint should be dismissed, it must then decide whether

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to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend

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United States District Court
For the Northern District of California

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“should be freely granted when justice so requires,” bearing in mind that “the underlying purpose

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of Rule 15 . . . [is] to facilitate decision on the merits, rather than on the pleadings or

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technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (internal quotation

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marks omitted). Nonetheless, a court “may exercise its discretion to deny leave to amend due to

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‘undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure

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deficiencies by amendments previously allowed, undue prejudice to the opposing party . . . , [and]

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futility of amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir.

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2010) (alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

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III.

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Leave to Amend

DISCUSSION
The Court first analyzes a preliminary standing issue that affects eight of Plaintiff’s nine

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causes of action. In addition to standing, the Court identifies further deficiencies as alternative

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bases to dismiss Plaintiff’s causes of action for slander of title, fraud, fraud-based unfair

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competition,1 cancellation of instruments, and negligence. The Court will then address Plaintiff’s

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remaining cause of action for violation of California Civil Code Section 2924.17.

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A.

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To establish Article III standing, Plaintiff must demonstrate that she satisfies three

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Standing

irreducible requirements: (1) she has suffered an “injury in fact,” i.e., “an invasion of a legally

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Throughout this order, the Court refers to the California Business and Professions Code section
17200 by its common names, including “unfair competition,” “unfair competition law,” or “UCL.”
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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protected interest which is (a) concrete and particularized, and (b) actual or imminent, not

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conjectural or hypothetical”; (2) the injury is “fairly traceable to the challenged action of the

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defendant”; and (3) it is “likely, as opposed to merely speculative, that the injury will be redressed

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by a favorable decision.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 590 (1992) (internal

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citations, quotation marks, and alterations omitted); accord Friends of the Earth, Inc. v. Laidlaw

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Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000).

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A suit brought by a plaintiff without Article III standing is not a “case or controversy,” and

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an Article III federal court therefore lacks subject matter jurisdiction over the suit. Steel Co. v.

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Citizens for a Better Env’t, 523 U.S. 83 (1998). In that event, the suit should be dismissed under

United States District Court
For the Northern District of California

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Federal Rule of Civil Procedure 12(b)(1). See id. at 109-10.
Eight of Plaintiff’s causes of action are premised on the theory that Defendants failed to

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actually transfer ownership of her loan. Specifically, such causes of action are: (1) wrongful

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foreclosure, (2) quiet title, (3) slander of title, (4) fraud, (5) cancellation of instruments, (6)

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negligence, (7) unjust enrichment, and (8) unfair competition. For all of these claims, Plaintiff

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brings an action as a borrower asserting loss of her property, emotional distress, wrongfully paid

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mortgage payments, and damage to her credit from irregularities in the subsequent assignment of

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her loan. See FAC at 43. Defendants move to dismiss these causes of action on the basis that

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Plaintiff does not have standing. See Mot. at 4-5. As these arguments stem from the same theory,

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the Court consolidates the issues here. Note, however, that the Court addresses Plaintiff’s

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“unlawful business act” unfair competition law (“UCL”) claim separately at the end of this section

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because analysis of this UCL claim is somewhat more complex.

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“Third-party borrowers lack standing to assert problems in the assignment of the loan”

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because the borrowers have not suffered an injury in fact. Flores v. GMAC Mortg., LLC, 2013 WL

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2049388, at *3 (N.D. Cal. May 14, 2013); see also Jenkins v. JP Morgan Bank, N.A., 216 Cal.

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App. 4th 497, 513-14 (2013); Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011).

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Assignment defects do not injure borrowers because “even if there were some defect in the

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[subsequent] assignment of the deed of trust, that assignment would not have changed plaintiff’s

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payment obligations.” Simmons v. Aurora Bank, FSB, 2013 WL 5508136, at *2 (N.D. Cal. Sept.
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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30, 2013); see 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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and there is no reason to believe that . . . the original lender would have refrained from foreclosure

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in these circumstances.”); Apostol v. CitiMortgage, Inc., 2013 WL 6328256, at *7-8 (N.D. Cal.

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Nov. 21, 2013).

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Here, Plaintiff has failed to specify an injury “fairly traceable to the challenged action of the

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defendant.” Lujan, 504 U.S. at 590 (internal citations, quotation marks, and alterations omitted).

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Plaintiff does not contend that the initial securitization of her loan to Greenpoint Mortgage was

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improper. Because Plaintiff’s obligation to repay her mortgage is unaffected by any assignment

United States District Court
For the Northern District of California

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defects, the foreclosure—which is the injury alleged by Plaintiff—also remains unchanged by the

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alleged assignments defects. Therefore, even if a loss in property occurred, “the true victim was not

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plaintiff but the original lender, which would have suffered the unauthorized loss.” Fontenot, 198

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Cal. App. 4th at 272 (2011).

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Plaintiff alleges that Defendant MERS robo-signed documents when assigning the deed of

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trust. FAC at 18. However, “robo-signing” of documents in the securitization and transfer process

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does not itself constitute harm to the borrower because it does not affect the foreclosure, which is

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the only injury suffered by the homeowner. See Javaheri v. JP Morgan Chase Bank, N.A., 2012

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WL 3426278, at *7 (C.D. Cal. Aug. 13, 2012) (“While the allegation of robo-signing may be true,

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the Court ultimately concludes that [Plaintiff] lacks standing to seek relief under such an allegation

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. . . the only injury [Plaintiff] alleges is the pending foreclosure on his home, which is the result of

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his default on his mortgage. The foreclosure would occur regardless of what entity was named as

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trustee, and so Javaheri suffered no injury as a result of this substitution.”). Plaintiff thus cannot

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claim to be the “true victim” of the alleged mistakes in the assignment process. See Fontenot, 198

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Cal. App. 4th at 272 (2011) (“If [defendant] indeed lacked authority to make the assignment, the

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true victim was not plaintiff but the original lender, which would have suffered the unauthorized

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loss . . . .”). Consequently, Plaintiff lacks standing to challenge the alleged irregularities in the

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assignment of her loan.

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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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Moran relies entirely on a single case from the Court of Appeal for the Fifth District, Glaski

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v. Bank of Am. Nat’l Ass’n, 218 Cal. App. 4th 1079, 1099 (2013). Glaski held that a borrower,

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whose loan had been organized into a trust formed under New York law, had standing to challenge

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an assignment of his note because the defendants failed to assign the trust before the trust’s closing

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date, creating a defect in the chain of transfer. See id. at 1096. The court in Glaski acknowledged

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“that some federal district courts sitting in California have rejected the post-closing date theory of

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invalidity on the grounds that the borrower does not have standing to challenge an assignment

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between two other parties.” Id. at 1098 (citing Aniel v. GMAC Mortgage, LLC, 2012 WL 5389706

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(N.D. Cal. Nov. 2, 2012); Almutarreb v. Bank of New York Trust Co., N.A., 2012 WL 4371410

United States District Court
For the Northern District of California

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(N.D. Cal. Sept. 24, 2012)). However, the Glaski court concluded that “[t]hese cases are not

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persuasive because they do not address the principle that a borrower may challenge an assignment

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that is void and they do not apply New York trust law to the operation of the securitized trusts in

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question.” Glaski, 218 Cal. App. 4th at 1098. The court in Glaski explained that if the assignment

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of a trust was void, the defendant could not initiate a lawful foreclosure proceeding against the

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Plaintiff because it did not have a legal right to the property. Id. at 1095-97. The court then went on

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to find that the trust in Glaski was void under New York trust law. Id. at 1097. Because the

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assignment of the note was void, the defendant in Glaski was not the lawful holder of the plaintiff’s

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deed of trust and could not initiate a foreclosure proceeding against the plaintiff. Id. at 1097-98.

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This gave the plaintiff standing to challenge the assignment despite being a third-party borrower.

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See id.

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However, Glaski conflicts with several other California Courts of Appeal cases that have

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held that a mortgage borrower, as a third party, does not have a cause of action due to irregularities

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in the chain of transfer. See, e.g., Fontenot, 198 Cal. App. 4th at 272-73 (stating Plaintiff had no

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cause of action for merely alleging irregularities in the assignment process); Jenkins, 216 Cal. App.

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4th at 515 (“As an unrelated third party to the alleged securitization, and any other subsequent

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transfers of the beneficial interest under the promissory note, [Plaintiff] lacks standing to enforce

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any agreements, including the investment trust’s pooling and servicing agreement, relating to such

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transactions.”). The viewpoint expressed in Glaski is in the minority, and numerous other
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

California appellate courts have declined to follow it, even where the trust at issue was organized

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under New York law. See Sporn v. JP Morgan Chase Bank N.A., 2014 WL 280627, at *5 (Cal. Ct.

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App. 4th Jan. 27, 2014) (categorizing the holding in Glaski as a minority view and declining to

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follow it); Yvanova v. New Century Mortg. Co., 2014 WL 2149797, at *5 (Cal. Ct. App. 2d Apr.

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25, 2014) (declining to follow Glaski). “Moreover, courts in this District have expressly rejected

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Glaski and adhered to the majority view that individuals who are not parties to a PSA [Pooling and

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Serving Agreement] cannot base wrongful foreclosure claims on alleged deficiencies in the

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PSA/securitization process.” Apostol, 2013 WL 6328256, at *7 (citation omitted); see also Giseke

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v. Bank of Am., N.A., 2014 WL 718463, at *4-5 (N.D. Cal. Feb. 23, 2014) (“To the best of the

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United States District Court
For the Northern District of California

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Court’s knowledge, no court has yet followed Glaski on this point, and many have pointedly

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declined to.”); Mottale v. Kimball Tirey & St. John, LLP, 2014 WL 109354, at *4-5 (S.D. Cal. Jan.

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10, 2014) (“[T]he weight of authority rejects Glaski as a minority view on the issue of a borrower’s

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standing to challenge an assignment as a third party to that assignment”); Flores, 2013 WL

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2049388, at *3 (“Even assuming, however, that there was some deficiency in MERS’ assignment

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or substitution with respect to the deed of trust, plaintiffs do not have standing to assert . . . causes

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of action that they claim arise out of that deficiency.”).

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Glaski’s reasoning is also unpersuasive. First, it is already well established that a third

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party should not be permitted to enforce covenants made for the benefit of others. See, e.g.,

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Murphy v. Allstate Ins. Co., 17 Cal. 3d 937, 944 (1976) (“A third party should not be permitted to

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enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his

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right to performance is predicated on the contracting parties’ intent to benefit him.”). In the context

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of home mortgages, neither the case law nor any statute creates a cause of action for individuals

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who have not suffered a distinct injury due to failures in the transfer of title. The obligations of a

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third party borrower to pay the original loan have not changed. See Jenkins, 216 Cal. App. 4th at

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*514-515 (“Because a promissory note is a negotiable instrument, a borrower must anticipate it can

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and might be transferred to another creditor . . . an assignment merely substituted one creditor for

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another, without changing [Plaintiff’s] obligations under the note.”) (quoting Herrera v. Federal

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Nat. Mortg. Assn., 205 Cal. App. 4th 1495, 1507 (2012)); Siliga v. Mortg. Elec. Registration Sys.,
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

Inc., 219 Cal. App. 4th 75, 85 (2013) (“The assignment of the deed of trust and the note did not

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change the Plaintiff’s obligations under the note, and there is no reason to believe that . . . the

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original lender would have refrained from foreclosure in these circumstances.”). Second, there is

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persuasive authority that the reasoning in Glaski is based on a flawed reading of New York trust

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law. New York state appellate courts have consistently found that an act in violation of a trust

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agreement is voidable, not void as Glaski held. See, e.g., In re Levy, 69 A.D. 3d 630, 632 (2010)

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(holding that a violation of a trust’s procedural obligations to formally inform a beneficiary of a

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trustee did not void a trust); Mooney v. Madden, 193 A.D. 2d 933 (1993) (holding that a trustee

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excluding beneficiaries in a trust from voting in a matter violated the trust agreement but did not

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United States District Court
For the Northern District of California

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make the trust void); Anh Nguyet Tran v. Bank of New York, 2014 WL 1225575 (S.D.N.Y. Mar.

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24, 2014) (“though some courts have held that non-compliance with the terms of a PSA renders an

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assignment void under [the New York trust statute], the weight of the case law holds that such an

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assignment is merely voidable, and therefore outside the scope of that section.”); see also Banares

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v. Wells Fargo Bank, N.A., 2014 WL 985532, at *4-5 (N.D. Cal. Mar. 7, 2014) (criticizing Glaski

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for its flawed reading of New York trust law). Whether the assignment of a trust is void or only

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voidable is significant because a foreclosure proceeding involving a void trust assignment can be

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challenged on the basis that the foreclosing entity does not have a legal right to the property,

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whereas a voidable assignment can only be challenged by a directly injured party. Glaski, 218 Cal.

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App. 4th at 1095-97. Because the trust assignment in the instant case is merely voidable and not

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void, Plaintiff cannot challenge defects in the assignment because Plaintiff is not a directly injured

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party. In sum, Plaintiff’s reliance on Glaski is misplaced because Glaski does not state the majority

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rule and its reasoning is unpersuasive. Thus, the Court follows the weight of the authority and finds

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that Plaintiff lacks standing to challenge the alleged assignment defects.

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1. Plaintiff’s claims for wrongful foreclosure, quiet title, slander of title, fraud,
fraud-based unfair competition, cancellation of instruments, negligence,
and unjust enrichment

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Eight of Plaintiff’s nine causes of action—Plaintiff’s claims for wrongful foreclosure, quiet

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title, slander of title, fraud, fraud-based unfair competition, cancellation of instruments, negligence,

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and unjust enrichment—arise directly out of alleged assignment defects. The Court therefore
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

follows numerous courts in this District and the California Courts of Appeal and dismisses these

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claims for lack of standing. See Apostol, 2013 WL 6328256, at *6-8 (holding that Plaintiff lacks

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standing to bring an action for wrongful foreclosure, quiet title, and negligence based purely on

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allegations of irregularities in subsequent transfer); Giseke, 2014 WL 718463, at *5 (holding that

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wrongful foreclosure, quiet title, slander of title, and cancellation of instruments actions can be

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dismissed for lack of standing due to the Plaintiff being a third-party borrower); Reyes-Aguilar v.

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Bank of Am., N.A., 2014 WL 2153792, at*8-9 (N.D. Cal. Mar. 20, 2014) (dismissing a slander of

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title action because errors in the securitization of a loan did not constitute by itself malice or injury

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to the Plaintiff); Dahnken v. Wells Fargo Bank, N.A., 2013 WL 5979356, at *2 (N.D. Cal. Nov. 8,

United States District Court
For the Northern District of California

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2013) (dismissing Plaintiff’s action for wrongful foreclosure, quiet title, slander of title, fraud,

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cancellation of instruments, negligence, and unjust enrichment due to lack of standing); Jenkins,

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216 Cal. App. 4th at 523 (dismissing fraud-based UCL claims for lack of standing).

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2. “Unlawful business act” unfair competition
The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and unfair,

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deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. In addition to

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Plaintiff’s allegations—dismissed for lack of standing above—that Defendants violated this section

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by engaging in the filing of fraudulent foreclosure documents and deceptive practices, Plaintiff also

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alleges that Defendants violated the UCL’s “unlawful business act” prong based on predicate

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violations of six statutes.

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Plaintiff lists, without pleading any specific legal elements or supporting facts, violation of

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California Penal Code sections 115 and 532f(a) and California Civil Code sections 1095, 1708,

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1709, and 2923.5 as predicate violations for a UCL claim based on unlawful business conduct.

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FAC at 56. Despite Plaintiff’s failure to recite even a bare legal element of any of these claims, the

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Court nonetheless substantively analyzes these allegations and dismisses them for lack of standing.

25

The Court first considers Plaintiff’s allegations based upon California Civil Code sections 1708,

26

2923.5, and 1095, and then addresses Plaintiff’s allegations based upon California Civil Code

27

section 1709 and California Penal Code sections 115 and 532f(a).

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11
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

Plaintiff’s allegations based upon California Civil Code sections 1708, 2923.5, and 1095 all

2

relate to Plaintiff’s wrongful foreclosure claim and Plaintiff’s general allegations that there were

3

defects in the assignment of her loan. California Civil Code section 1708 provides that “[e]very

4

person is bound, without contract, to abstain from injuring the person or property of another, or

5

infringing upon any of his rights.” Cal. Civ. Code § 1708. California Civil Code section 2923.5

6

states that a “mortgagee . . . may not record a notice of default pursuant to [s]ection 2924 until . . .

7

30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due

8

diligence requirements . . . .” Cal. Civ. Code § 2923.5(a)(1). It also specifies the types of initial

9

contact required, including options to avoid foreclosure. See Cal. Civ. Code § 2923.5(a)(2).

United States District Court
For the Northern District of California

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California Civil Code Section 1095 states that “[w]hen an attorney in fact executes an instrument

11

transferring an estate in real property, he must subscribe the name of his principal to it, and his own

12

name as attorney in fact.” Cal. Civ. Code § 1095. However, as a third party borrower, Plaintiff has

13

not suffered any injury from irregularities in the assignment process because her payment

14

obligations under the loan have not changed. See Simmons, 2013 WL 5508136, at *2; Siliga v.

15

Mortg. Elec. Registration Sys., Inc., 219 Cal. App. 4th 75, 85 (2013) (“The assignment of the deed

16

of trust and the note did not change [Plaintiffs’] obligations under the note, and there is no reason

17

to believe that . . . the original lender would have refrained from foreclosure in these

18

circumstances.”). Accordingly, Plaintiff does not have standing to bring a UCL claim based on

19

predicate violations of these three statutes. See Jenkins, 216 Cal. App. 4th at 523.

20

Plaintiff’s remaining three UCL claims, which allege violations of California Civil Code

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section 1709 and California Penal Code sections 115 and 532f(a) as predicate “unlawful business

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acts,” all relate to Plaintiff’s fraud claim. The Court has already dismissed Plaintiff’s fraud claim

23

and Plaintiff’s fraud-based UCL claim for lack of standing. Thus, “even if we assume [Plaintiff]

24

. . . alleges facts indicating Defendants’ actions violated at least one of the UCL’s three unfair

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competition prongs (unlawful, unfair, or fraudulent), [she] cannot show any of the alleged

26

violations have a causal link to her economic injury.” Jenkins, 216 Cal. App. 4th at 523; see also

27

Baldoza v. Bank of Am., N.A., 2013 WL 978268, at *2, 14 (N.D. Cal. Mar. 12, 2013) (dismissing

28

Plaintiffs’ section 1708 action together with their wrongful foreclosure action for lack of standing).
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

Therefore, the court dismisses all of Plaintiff’s “unlawful business act” UCL claims for lack of

2

standing.2

3

3. Summary

4

In sum, the Court dismisses eight of Plaintiff’s nine claims—all but Plaintiff’s claim for

5

violation of California Civil Code 2924.17—for lack of standing. Apart from standing, the Court

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now identifies additional and independent reasons to dismiss Plaintiff’s causes of actions for

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slander of title, fraud, fraud-based unfair competition, cancellation of instruments, and negligence.

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The Court now turns to these alternative reasons for dismissal, and then addresses Plaintiff’s claim

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under California Civil Code Section 2924.17.

United States District Court
For the Northern District of California

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B.

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“The recordation of an instrument facially valid but without underlying merit will give rise

12

to an action for slander of title.” Stamas v. Madera, 2011 WL 2433633, at *14 (E.D. Cal. June 14,

13

2011). The elements of the slander of title tort are: “(1) a publication, (2) which is without privilege

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or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss.”

15

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

16

Slander of title

Plaintiff alleges that Defendants falsely and fraudulently made statements of ownership in

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assigning mortgages and substituting trustees. FAC at 45. She additionally asserts that “[t]he

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recording of the foregoing assignment of DOT, SOT, NOD and NOTS have cast a cloud on the

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title to her Property.” FAC at 46.

20

Plaintiff cannot establish the second element of her claim, i.e. that the publication is

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“without privilege.” All of the documents that Plaintiff identifies are foreclosure documents that

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are privileged pursuant to California Civil Code section 2924(d). See Madlaing v. JP Morgan

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Chase Bank, N.A., 2013 WL 243379, at *13-14 (E.D. Cal. May 31, 2013) (stating that Plaintiff’s

24

slander of title claim fails since foreclosure documents are privileged communications). Section

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26
27
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2

Because Plaintiff’s UCL claims based on sections 115 and 532f(a) of the California Penal Code
are dismissed for lack of standing, the Court need not reach the question of whether a plaintiff may
allege a UCL “unlawful business act” violation based on predicate violations of the California
Penal Code. See Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 573 (1998)
(applying a preemption analysis and finding that the criminal statute at issue did not foreclose
related civil actions).
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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

2924(d) identifies, pursuant to Civil Code section 47, privileged communications, among other

2

things, as the “mailing, publication, and delivery” of foreclosure notices and “performance” of

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foreclosure procedures. Cal. Civ. Code § 2924. Thus, in addition to Plaintiff’s lack of standing, the

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Court also grants Defendants’ motion to dismiss Plaintiff’s slander of title claim on the grounds

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that section 2924(d) bars Plaintiff’s claim for slander of title as the publications upon which

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Plaintiff relies are privileged.

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C.

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To state a claim for fraud, a plaintiff must plead “(a) misrepresentation (false

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Fraud

representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to

United States District Court
For the Northern District of California

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defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Kearns v. Ford

11

Motor Co., 567 F.3d 1120, 1126 (9th Cir. 2009) (quoting Engalla v. Permanente Med. Group, Inc.,

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15 Cal. 4th 951, 974 (Cal. 1997)). Under the federal rules, a plaintiff alleging fraud “must state

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with particularity the circumstances constituting fraud.” Fed. R. Civ. P. 9(b). In other words, to

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state a claim for fraud, a plaintiff must plead “the who, what, when, where, and how” of the

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conduct charged. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting

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Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

17

Plaintiff asserts several times, both as an independent cause of action and as a basis for

18

every other claim, that the Defendants “conspired” in fraudulently producing mortgage documents

19

and in initiating foreclosure proceedings. FAC at 46-47. However, Plaintiff alleges no supporting

20

facts that give rise to a plausible claim that Defendants had the intent to defraud her or how the

21

Defendants defrauded her. Plaintiff repeats the factual allegations supporting her claims for

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wrongful foreclosure (among others), but Plaintiff’s specific allegations of fraud and conspiracy

23

are entirely conclusory. See FAC at 47. Specifically, Plaintiff fails to plead how or why

24

Defendants’ actions were fraudulent. First, Plaintiff alleges multiple times that the Defendants took

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out foreclosure insurance to “ensure” that the Plaintiff would default. FAC at 47 (“Defendants

26

failed to advise Plaintiff that they would be taking out insurance to ensure that Plaintiff would

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default on their loan resulting in foreclosure.). Plaintiff further alleges that Defendants “knew at the

28

time Plaintiff made the mortgage that the Bank planned to securitize the loan and the majority of
14
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

loans in these default swaps result [sic] foreclosure, leaving homeowner homeless.” Id. at 47. Yet,

2

Plaintiff fails to plead any facts showing how or why the act of buying an insurance policy to

3

protect the bank in the event of foreclosure is evidence of a scheme to “ensure” Plaintiff would

4

default on her mortgage. See id. at 47; see, e.g., Ward v. Wells Fargo Home Mortg., 2014 WL

5

1922082 (N.D. Cal. May 6, 2014) (holding that allegations a Defendant knew a loan would be

6

likely to fail did not meet the Rule 9(b) requirements for fraud).

7

Later, Plaintiff attempts to plead fraudulent intent by stating: “Defendants’ intention was to

8

defraud Plaintiff from the onset of the mortgage. Taking out insurance to ensure default, charging

9

late fees to increase debt. [sic]” FAC at 47. However, Plaintiff pleads no facts to support her

United States District Court
For the Northern District of California

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allegations that the charging of late fees was fraudulent. Finally, Plaintiff relies on the assertion

11

that irregularities in the chain of transfer are evidence of fraudulent action. See FAC at 48-50

12

(allegations that Defendants filed false and fraudulent statements in the Santa Clara County

13

Recorder’s Office after their mistake in assigning Plaintiff’s loan). Again, irregularities in the loan

14

process are not fraudulent in themselves. See Fontenot, 198 Cal. App. 4th at 272 (“[A]ssignments

15

of debt, as opposed to assignments of the security interest incident to the debt, are commonly not

16

recorded. The lender could readily have assigned the promissory note to HSBC in an unrecorded

17

document that was not disclosed to [P]laintiff.”); Karimi v. GMAC, 2011 WL 5914006, at *4 (N.D.

18

Cal. Nov. 28, 2011) (“Plaintiff does not allege who at GMAC or ETS concealed what information

19

and when. Nor does Plaintiff allege how the substitution of trustee or notice of default are

20

“fraudulent” documents besides stating so in conclusory fashion.”); see also Vess, 317 F.3d at 1106

21

(9th Cir. 2003). Accordingly, the FAC wholly lacks facts to support a plausible claim for fraud,

22

much less the detailed factual pleading required by Federal Rule of Civil Procedure 9(b).

23

Therefore, in addition to Plaintiff’s lack of standing, the Court dismisses Plaintiff’s fraud claim for

24

failure to plead sufficient facts under Federal Rule of Civil Procedure 9(b)

25

Furthermore, Plaintiff alleges a violation of the UCL based on Defendants’ “fraudulent

26

business acts.” Plaintiff’s UCL claim is materially identical to her action for fraud; therefore,

27

Plaintiff’s fraud-based UCL claim is also dismissed for failure to state a claim. Section 17200 does

28

not have the same pleading requirements as common law fraud. See In re Mattel, Inc., 588 F. Supp.
15
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

2d 1111, 1118 (C.D. Cal. 2008). However, if a UCL claim is grounded in fraud, “the pleading of

2

that claim as a whole must satisfy the particularity requirement of Rule 9(b).” Kearns v. Ford

3

Motor Co., 567 F.3d 1120, 1127 (9th Cir. 2009); see Makreas v. First Nat. Bank, 856 F. Supp. 2d

4

1097, 1102 (N.D. Cal. 2012). Because Plaintiff’s “fraudulent business act” UCL claim is grounded

5

in fraud, her UCL claim must also meet the heightened Rule 9(b) pleading standard for fraud. See

6

Lomboy v. SCME Mortg. Bankers, 2009 WL 1457738, at *4 (N.D. Cal. May 26, 2009) (applying

7

Rule 9(b) requirements to section 17200); Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F. Supp.

8

2d 1022, 1037 (N.D. Cal. 2010). Consequently, as Plaintiff has failed to state a claim for fraud, she

9

also fails to state a claim for violation of the UCL based on her fraud claim. See Lomboy, 2009 WL

10
United States District Court
For the Northern District of California

1

1457738, at *6; Nguyen, 749 F. Supp. 2d, at 1037. In addition to lack of standing, Plaintiff’s fraud-

11

related UCL claim is also dismissed for failure to state a claim.

12

D.

Cancellation of Instruments

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Plaintiff seeks to cancel the Note, Deed of Trust, Notice of Default and Sale, and various

14

loan modification agreements and trustee deeds under California Civil Code section 3412. FAC at

15

53. Section 3412 provides a cause of action for the cancellation of instruments, stating: “[a] written

16

instrument, in respect to which there is a reasonable apprehension that if left outstanding it may

17

cause serious injury to a person against whom it is void or voidable, may, upon his application, be

18

so adjudged, and ordered to be delivered up or canceled.” Cal. Civ. Code § 3412.

19

Plaintiff argues that Defendants, despite possessing the deed of trust, did not have recorded

20

documents “showing legally effective assignment” of the deed. FAC at 54. However, there is no

21

“requirement under California law that the original note be produced to render the foreclosure

22

proceedings valid.” Farner v. Countrywide Home Loans, Inc., 2009 WL 189025, at *2 (S.D. Cal.

23

Jan. 29, 2009); Neal v. Juarez, 2007 WL 2140640, at *3 (E.D. Cal. July 23, 2007) (“[An] allegation

24

that the trustee did not have the original note or had not received it is insufficient to render the

25

foreclosure proceeding invalid.”) (citing R.G. Hamilton Corp. v. Corum, 218 Cal. 92, 94, 97

26

(1933)). Therefore, because under California law, the trustee of a deed of trust has the power to

27

initiate foreclosure proceedings, the fact that Defendants lacked a properly-assigned note is not a

28

sufficient basis to cancel the agreements into which Plaintiff entered. See Hafiz v. Greenpoint
16
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

Mortg. Funding, 652 F. Supp. 2d 1039, 1043 (N.D. Cal. 2009) (“California law does not require

2

possession of the note as a precondition to non-judicial foreclosure under a deed of trust . . .

3

Pursuant to section 2924(a)(1) of the California Civil Code the trustee of a Deed of Trust has the

4

right to initiate the foreclosure process.”). In addition to Plaintiff’s lack of standing, the Court thus

5

dismisses Plaintiff’s claim for cancellation of instruments because there is no requirement to

6

produce the original note to initiate foreclosure proceedings in California.

7

E.

Negligence

8

To state a claim for negligence, a plaintiff must allege: (1) the defendant’s legal duty of
care to the plaintiff; (2) the defendant’s breach of duty; (3) injury to the plaintiff as a result of the

10
United States District Court
For the Northern District of California

9

breach; and (4) damage to the plaintiff. See Hoyem v. Manhattan Beach City Sch. Dist., 22 Cal. 3d

11

508, 513 (1978). If no duty exists, there cannot be a cause of action for negligence. See J’Aire Corp

12

v. Gregory 24 Cal. 3d 799, 803 (1979). Plaintiff alleges that Defendant GMAC exceeded its role as

13

a lender in offering the possibility of a loan modification and “falsely represented” itself as a valid

14

lender. FAC at 58.

15

A financial institution owes no duty of care to a borrower when engaged in activity that

16

falls within its traditional role as a lender of money. See Nymark v. Heart Fed. Savings & Loan

17

Assn., 231 Cal. App. 3d 1089, 1095-97 (1991). Plaintiff states she entered into a standard loan

18

modification agreement with Defendant GMAC. FAC at 14. Courts are clear that the mere

19

agreement to modify a loan does not go beyond the traditional actions of a financial institution. See

20

Meyer v. Wells Fargo Bank, N.A., 2013 WL 6407516, at *5-6 (N.D. Cal. Dec. 6, 2013) (“The vast

21

majority of courts in this district have found that merely engaging in the loan modification process

22

is a traditional money lending activity”); Morgan v. U.S. Bank Nat. Ass’n, 2013 WL 684932, at *3-

23

4 (N.D. Cal. Feb. 25, 2013) (“[A] lender undertakes no new duty by offering a loan

24

modification.”). Because Plaintiff has failed to allege that any of the Defendants have acted beyond

25

their traditional role as a lender of money, Defendants owe no duty of care to Plaintiff. Because

26

Plaintiff cannot establish the first element of a claim for negligence, i.e., that the Defendants had a

27

duty of care to the Plaintiff, Plaintiff cannot state a claim for negligence. Therefore, in addition to

28
17
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

Plaintiff’s lack of standing, the Court also dismisses Plaintiff’s claim for negligence because

2

Defendants do not owe Plaintiff a duty of care.

3

F.

Violation of California Civil Code Section 2924.17

4

California Civil Code sections 2924.17(a) and 2924.17(b) (part of the Homeowner Bill of

5

Rights or “HBOR”) provide a private cause of action for multiple and uncorrected recoding and

6

filing violations. See Cal. Civ. Code § 2924.17; Rockridge Trust v. Wells Fargo, 2013 WL

7

5428722, at *24 (N.D. Cal. Sept 25, 2013) (noting that section 2924.17 is part of the Homeowner

8

Bill of Rights). Plaintiff alleges that the Defendants failed to comply with these provisions by using

9

inaccurate and fraudulent documents. FAC at 55.

United States District Court
For the Northern District of California

10

Plaintiff’s claim fails because the HBOR cannot be applied retroactively. See Mcgough v.

11

Wells Fargo Bank, N.A., 2012 WL 5199411, at *5 n.4 (N.D. Cal. 2012) (“there is no indication that

12

the law is intended to be, or will be, applied retroactively.”); Rose v. J.P. Morgan Chase, N.A.,

13

2014 WL 546584, at *8 (E.D. Cal. Feb 11, 2014). See generally Myers v. Philip Morris Cos., 28

14

Cal. 4th 828, 841 (2002). (“unless there is an express retroactivity provision, a statute will not be

15

applied retroactively unless it is very clear from extrinsic sources that the Legislature . . . must have

16

intended a retroactive application”). Section 2924 is part of the Homeowner Bill of Rights

17

(HBOR), which took effect on January 1, 2013. Rockridge Trust v. Wells Fargo, 2013 WL

18

5428722, at *28 (N.D. Cal. Sept 25, 2013). All of the actions Plaintiff alleges violated section

19

2924.17 took place before 2013. FAC at 2-5. Consequently, Plaintiff has no cause of action for a

20

violation of section 2724.17. See McFarland v. JP Morgan Chase Bank, 2014 WL 1705968, at *6-

21

7 (C.D. Cal. Apr. 28, 2014).

22

G.

Leave to Amend

23

“[A] proposed amendment is futile only if no set of facts can be proved under the

24

amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Miller v.

25

Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). Eight of Plaintiff’s nine causes of action—

26

Plaintiff’s claims for wrongful foreclosure, quiet title, slander of title, fraud, cancellation of

27

instruments, negligence, unjust enrichment, and unfair competition—are premised on a

28

fundamental legal defect, i.e., Plaintiff lacks standing to assert her claims arising out of assignment
18
Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

1

defects in the transfer of her loan. Any additional facts Plaintiff may allege cannot overcome this

2

flaw. Moreover, the Court has also identified additional legal defects in several of these causes of

3

action. Thus, amendment of these claims would be futile, and the Court will not grant leave to

4

amend these claims.

5

Plaintiff’s claim under Section 2924.17, her California Homeowner Bill of Rights claim,

6

cannot survive as a matter of law either. The HBOR cannot be applied retroactively, and the entire

7

timeline of events Plaintiff cites in her First Amended Complaint occurred before the statute took

8

effect. Granting Plaintiff leave to amend her HBOR claim would therefore also be futile, and the

9

Court will not grant leave to amend this claim.

United States District Court
For the Northern District of California

10

Moreover, in addition to the fundamental legal defects in all of Plaintiff’s claims, Plaintiff

11

is not entitled to leave to amend because of her “repeated failure to cure deficiencies by

12

amendments previously allowed.” Carvalho, 629 F.3d at 892 (quoting Foman, 371 U.S. at 182).

13

The Court previously cautioned Moran that failure to cure the deficiencies identified in

14

Defendants’ Original Motion to Dismiss would result in a dismissal with prejudice. ECF No. 27.

15

Yet, Plaintiff’s allegations in her FAC are virtually unchanged from her Original Complaint, save

16

for the addition of two defendants. See ECF No. 1; FAC at 47. Similarly, Defendants’ Motion to

17

Dismiss the FAC and their Original Motion to Dismiss are nearly verbatim identical. See ECF No.

18

7; Mot. at 17. Therefore, because Plaintiff has made no attempt to address the deficiencies

19

identified in Defendants’ Original Motion to Dismiss, the Court denies Plaintiff leave to amend.

20

In sum, all of Plaintiff’s claims are dismissed with prejudice, both because leave to amend

21

would be futile, and because Plaintiff has failed to cure the deficiencies identified in the Original

22

Complaint. See Foman, 371 U.S. at 182; Carvalho, 629 F.3d at 892-93.

23

III.

24

CONCLUSION
The Court finds that Plaintiff’s FAC fails to state a claim that entitles her to relief.

25

Accordingly, the Court GRANTS Defendants’ Motion to Dismiss. All causes of action in the FAC

26

are dismissed with prejudice.

27

IT IS SO ORDERED.

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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

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Dated: June 18, 2014

_________________________________
LUCY H. KOH
United States District Judge

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United States District Court
For the Northern District of California

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Case No.: 13-CV-04981-LHK
ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS