Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_09-cv-00937/USCOURTS-caed-1_09-cv-00937-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1441 Petition for Removal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

MARY AMARAL, JOE AMARAL and DANNY

AMARAL,

 Plaintiffs,

 v. 

WACHOVIA MORTGAGE CORPORATION, a

North Carolina Corporation;

CARRINGTON MORTGAGE SERVICES, LLC;

and DOES 1-50 inclusive,

 Defendants.

09-CV-00937-OWW-GWA

MEMORANDUM DECISION AND

ORDER RE: (1) DEFENDANT

CARRINGTON’S MOTION TO

DISMISS OR, IN THE

ALTERNATIVE, MOTION FOR A

MORE DEFINITE STATEMENT;

(2) DEFENDANT WACHOVIA’S

MOTION TO DISMISS; AND (3)

DEFENDANT WACHOVIA’S MOTION

TO STRIKE

I. INTRODUCTION

Before the court is a motion to dismiss or, in the

alternative, a motion for a more definite statement filed by

Defendant Carrington Mortgage Corporation (“Carrington”), and a

motion to dismiss and a motion to strike filed by Defendant

Wachovia Mortgage, FSB (“Wachovia”) erroneously sued as Wachovia

Mortgage Corporation. The motions are directed at the claims

asserted by Plaintiffs Mary Amaral, Joe Amaral, and Danny Amaral

(“Plaintiffs”) in their removed complaint (Doc. 24-2). The

following background facts are taken from the complaint and other

documents on file in this case. 

II. BACKGROUND

A. General Background

This is a mortgage fraud case concerning Plaintiffs’ residence

located in Lemoore, California. Initially, Plaintiffs obtained two

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 1 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

loans from Freemont & Loan (“Freemont”), one for $460,000 (the

“First Loan”) and one for $115,000 (the “Second Loan”). Around

January 2008, Plaintiffs approached Wachovia to obtain a third

loan, i.e., a refinance loan, to pay off both their First and

Second Loan. (Doc. 24-2 at 2-3.) 

On or about April 1, 2008, Carrington took over “servicing” of

the First Loan allegedly without notice to Plaintiffs. On or about

April 30, 2008, Wachovia purportedly wired $594,806.16 to Freemont

to pay off both loans. On May 13, 2008, however, Carrington sent

Plaintiffs a Notice of Intent to Foreclose on the First Loan. This

notice stated that the monthly loan payments due on or after March

1, 2008, had not been received. Starting in June 2008, Plaintiffs

made monthly payments to Wachovia on the refinance loan. Starting

in December 2008, Wachovia refused to accept Plaintiffs’ payments.

(Id. at 3-4.) 

B. Procedural History And Plaintiffs’ Complaint

On April 21, 2009, Plaintiffs filed a complaint in Kings

County Superior Court. In May 2009, Defendant Carrington filed a

notice of removal purporting to remove, with Wachovia’s consent,

Plaintiffs’ state case to federal court. Carrington, however,

attached the wrong complaint to its notice of removal – the

attached complaint was filed by “Gerald Anudokem” in the Northern

District of California. This irregularity was pointed out to

Carrington in an order dated September 17, 2009. (Doc. 23.) On

October 1, 2009, Carrington filed an amended notice of removal (to

which no party objected) and attached the correct complaint. 

Plaintiffs’ complaint contains causes of action for: (1) a

violation of the Real Estate Settlement Procedures Act of 1974, 12

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 2 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

U.S.C. § 2601 et seq. (“RESPA”); (2) a violation of § 2937 of the

California Civil Code; (3) declaratory relief; (4) fraud; and (5)

conversion. The RESPA, § 2937, and declaratory relief claims are

asserted against Carrington. The fraud and conversion claims are

asserted against Wachovia. 

Federal question jurisdiction, which exists over the RESPA

claim, is the asserted basis for subject matter jurisdiction.

Supplemental jurisdiction is asserted as to the state law claims.

C. The Motions

Carrington moves to dismiss Plaintiffs’ RESPA, § 2937, and

declaratory relief claims. Alternatively, Carrington moves for a

more definite statement of these claims. Wachovia moves to dismiss

the fraud and conversion claims, and also moves to strike

Plaintiffs’ request for punitive damages. With respect to the

fraud claim, Wachovia further contends that Plaintiffs have failed

to comply with Rule 9(b)’s pleading requirements. 

III. STANDARDS OF DECISION

A. Motion To Dismiss

Dismissal under Rule 12(b)(6) is appropriate where the

complaint lacks sufficient facts to support a cognizable legal

theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699

(9th Cir. 1990). To sufficiently state a claim to relief and

survive a 12(b)(6) motion, the pleading "does not need detailed

factual allegations" but the "[f]actual allegations must be enough

to raise a right to relief above the speculative level." Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 555 (2007). Mere "labels and

conclusions" or a "formulaic recitation of the elements of a cause

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 3 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

of action will not do." Id. Rather, there must be "enough facts to

state a claim to relief that is plausible on its face." Id. at 570.

In other words, the "complaint must contain sufficient factual

matter, accepted as true, to state a claim to relief that is

plausible on its face." Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct.

1937, 1949 (2009) (internal quotation marks omitted). The Ninth

Circuit has summarized the governing standard, in light of Twombly

and Iqbal, as follows: "In sum, for a complaint to survive a motion

to dismiss, the non-conclusory factual content, and reasonable

inferences from that content, must be plausibly suggestive of a

claim entitling the plaintiff to relief." Moss v. U.S. Secret

Serv., 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks

omitted). Apart from factual insufficiency, a complaint is also

subject to dismissal under Rule 12(b)(6) where it lacks a

cognizable legal theory, Balistreri, 901 F.2d at 699, or where the

allegations on their face "show that relief is barred" for some

legal reason, Jones v. Bock, 549 U.S. 199, 215 (2007). 

In deciding whether to grant a motion to dismiss, the court

must accept as true all "well-pleaded factual allegations" in the

pleading under attack. Iqbal, 129 S. Ct. at 1950. A court is not,

however, "required to accept as true allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable

inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001); see, e.g., Doe I v. Wal-Mart Stores, Inc., 572

F.3d 677, 683 (9th Cir. 2009). "When ruling on a Rule 12(b)(6)

motion to dismiss, if a district court considers evidence outside

the pleadings, it must normally convert the 12(b)(6) motion into a

Rule 56 motion for summary judgment, and it must give the nonmoving

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 4 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

party an opportunity to respond." United States v. Ritchie, 342

F.3d 903, 907 (9th Cir. 2003). "A court may, however, consider

certain materials-documents attached to the complaint, documents

incorporated by reference in the complaint, or matters of judicial

notice-without converting the motion to dismiss into a motion for

summary judgment." Id. at 908. 

B. Motion For A More Definite Statement

"If a pleading fails to specify the allegations in a manner

that provides sufficient notice, a defendant can move for a more

definite statement under Rule 12(e) before responding."

Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002). Under Rule

12(e), "[a] party may move for a more definite statement of a

pleading" when it is "so vague or ambiguous that the party cannot

reasonably prepare a response." 

A Rule 12(e) motion is proper only if the complaint is so

indefinite that the defendant cannot ascertain the nature of the

claim being asserted, i.e., so vague that the defendant cannot

begin to frame a response. See Famolare, Inc. v. Edison Bros.

Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981). The motion

must be denied if the complaint is specific enough to notify

defendant of the substance of the claim being asserted. See

Bureerong v. Uvawas, 922 F. Supp. 1450, 1461 (C.D. Cal. 1996); see

also San Bernardino Pub. Employees Ass'n v. Stout, 946 F. Supp.

790, 804 (C.D. Cal. 1996) ("A motion for a more definite statement

is used to attack unintelligibility, not mere lack of detail, and

a complaint is sufficient if it is specific enough to apprise the

defendant of the substance of the claim asserted against him or

her."). 

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 5 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

C. Motion To Strike

Under Rule 12(f), a court may strike from a pleading “an

insufficient defense or any redundant, immaterial, impertinent, or

scandalous matter.” Fed. R. Civ. P. 12(f). “The function of a

12(f) motion to strike is to avoid the expenditure of time and

money that must arise from litigating spurious issues by dispensing

with those issues prior to trial.” Sidney-Vinstein v. A.H. Robins

Co., 697 F.2d 880, 885 (9th Cir. 1983). A motion to strike should

not be granted unless it is clear that the matter to be stricken

could have no possible bearing on the subject matter of the

litigation. Neveu v. City of Fresno, 392 F. Supp. 2d 1159, 1170

(E.D. Cal. 2005). 

D. Rule 9(b)

In terms of factual sufficiency, Rule 9(b), when it applies,

imposes an elevated pleading standard. Rule 9(b) states:

In alleging fraud or mistake, a party must state with

particularity the circumstances constituting fraud or

mistake. Malice, intent, knowledge, and other conditions

of a person's mind may be alleged generally.

“To comply with Rule 9(b), allegations of fraud must be specific

enough to give defendants notice of the particular misconduct which

is alleged to constitute the fraud.” Swartz v. KPMG LLP, 476 F.3d

756, 764 (9th Cir. 2007) (internal quotation marks omitted). The

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

well as the identities of the parties to the misrepresentations”

must be specified. Id. (internal quotation marks omitted). The

“[a]verments of fraud must be accompanied by the who, what, when,

where, and how of the misconduct charged.” Kearns v. Ford Motor

Co., 567 F.3d 1120, 1124 (9th Cir. 2009). A plaintiff alleging

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 6 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

fraud “must set forth more than the neutral facts necessary to

identify the transaction. The plaintiff must set forth what is

false or misleading about a statement, and why it is false.” Vess

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

(emphasis removed). 

IV. ANALYSIS

A. Carrington’s Motion

1. RESPA Claim

As to the RESPA claim, Plaintiffs’ complaint alleges:

23. The transaction was a ‘federally related mortgage

loan’ as that term is defined in the Real Estate

Settlement and Procedures Act (‘RESPA’), 12 U.S.C. §

2602(1). 

24. Carrington is a ‘servicer’ as defined in 12 U.S.C.

§ 2605(i)(2),(3).

25. The notification provision in section 2605(c)(1)

states: ‘Each transferee servicer to whom the servicing

of any federally related mortgage loan is assigned, sold,

or transferred shall notify the borrower of any such

assignment, sale, or transfer.’ Section 2605(c)(2)(A)

states that the notice required ‘shall be made to the

borrower not more than 15 days after the effective date

of transfer of the servicing of the mortgage loan (with

respect to which such notice is made).’

26. Plaintiffs never received a notice regarding the

purported assignment, sale or transfer of the servicing

of the loan to Carrington.

27. Further, if the Notice of Default is correct and

Carrington became the ‘transferee servicer’ as of March

1, 2008, Carrington failed to provide notice of the

transfer of servicing within 15 days after the effective

date of transfer.

28. Pursuant to RESPA, the above violations committed by

Carrington subject defendants to actual damages to the

plaintiffs and any additional damages allowed by the

Court. 

(Doc. 24-2 at 5.) 

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 7 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

In enacting RESPA, Congress found “that significant reforms in

the real estate settlement process are needed to insure that

consumers . . . are provided with greater and more timely

information on the nature and costs of the settlement process and

are protected from unnecessarily high settlement charges caused by

certain abusive practices . . . .” 12 U.S.C. § 2601(a). The RESPA

provision at issue in Plaintiffs’ complaint, § 2605(c), deals with

a loan servicer’s obligation to give notice to a borrower when a

federally related mortgage loan is assigned, sold or transferred to

that servicer. 

Section 2605(c) reads, in pertinent part, as follows:

(1) Each transferee servicer to whom the servicing of any

federally related mortgage loan is assigned, sold, or

transferred shall notify the borrower of any such

assignment, sale, or transfer. 

. . . .

(2)(A) Except as provided in subparagraphs (B) and (C),

the notice . . . shall be made to the borrower not more

than 15 days after the effective date of transfer of the

servicing of the mortgage loan (with respect to which

such notice is made). 

(3) Any notice required under paragraph 1 [above] shall

include information described in subsection (b)(3) of

this section [i.e., § 2605(b)(3)]. 

12 U.S.C. § 2605(c)(1)-(3). 

In terms of civil liability, “[w]hoever fails to comply” with

§ 2605(c), or any provision of § 2605, is liable to the borrower

for “any actual damages to the borrower as a result of the failure”

and “any additional damages, as the court may allow, in the case of

a pattern or practice of noncompliance with the requirements of

this section, in an amount not to exceed $1,000.” § 2605(f)(1)(A)-

(B).

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 8 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

Carrington advances two arguments as to why Plaintiffs’ RESPA

claim under § 2605(c) is insufficiently pled. First, citing Wanger

v. EMC Mortgage Corp., 103 Cal. App. 4th 1125 (2002), Carrington

argues that Plaintiffs’ allegation that they never “received” a

notice from Carrington when it became the loan servicer is

insufficient to state a claim under § 2605(c) because this section

only requires Carrington to “mail” the requisite notice to the

borrower; it does not require Carrington to ensure the notice is

actually “received” by the borrower or physically placed in the

borrower’s hands. See also Rodriguez v. Countrywide Homes, __ F.

Supp. __, 2009 WL 3792308, at *5-6 (E.D. Cal. 2009). Second,

Carrington contends the RESPA claim fails because Plaintiffs have

not alleged that they suffered “actual damages” as a result of the

statutory violation nor, more importantly, any facts suggesting that

they suffered actual damages. 

In opposition, Plaintiffs offer to amend their complaint to

allege, on information and belief, that the requisite RESPA notice

“was not sent” by Carrington. While this amendment would address

Carrington’s first argument, it would not cure the deficiency in

Plaintiffs’ complaint with respect to actual damages. 

As Carrington correctly notes, there are no allegations in the

complaint suggesting that Plaintiffs suffered actual damages as a

result of Carrington’s alleged violation of § 2605(c). Absent

factual allegations suggesting that Plaintiffs suffered actual

damages, Plaintiffs’ RESPA claim is insufficiently pled and subject

to dismissal. Molina v. Washington Mutual Bank, No. 09-CV-00894-IEG

(AJB), 2010 WL 431439, at *7 (S.D. Cal. Jan. 29, 2010) (concluding

that a RESPA claim was infirm because the plaintiffs “failed to

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 9 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

sufficiently plead pecuniary loss"); Lemieux v. Litton Loan

Servicing, LP, No. 2:09-cv-02816-JAM-EFB, 2009 WL 5206641, at *3

(E.D. Cal. Dec. 22, 2009) (“Plaintiffs have not pled facts showing

they suffered actual damages. Their failure to do so defeats their

RESPA claim.”); Garcia v. Wachovia Mortgage Corp., __ F. Supp. 2d

__, 2009 WL 3837621, at *10 (C.D. Cal. 2009) (dismissing RESPA claim

because Plaintiff “failed to allege damages under Section 2605").

Although Plaintiffs have alleged that Carrington’s RESPA violation

“subjects defendant[] to actual damages” under the statute (Doc. 24-

2 at 6), this allegation is insufficient. “Th[is] is not a factual

allegation of damage to Plaintiff[s]; it is a conclusory statement

of law.” Garcia, 2009 WL 3837621 at *10. 

The RESPA claim is DISMISSED WITH LEAVE TO AMEND. 

2. Section 2937

The complaint asserts, perfunctorily, a “Violation of

[California] Civil Code § 2937" against Carrington. The complaint

alleges:

31. Defendant Carrington failed to give written notice to

plaintiffs of the transfer of servicing of indebtedness

on the First Loan.

32. Pursuant to Civil Code § 2937(g), plaintiffs are not

liable to the holder of the note or any servicing agent

for payments made to Freemont, nor are they liable for

late charges.

(Doc. 24-2 at 6.) Carrington raises two arguments against this

purported claim. First, without citing any authority, Carrington

argues that § 2937 does not give rise to a private right of action;

instead, a violation of the statute merely relieves the aggrieved

borrower of certain monetary obligations such as late charges. See

§ 2937(g). Second, Carrington contends that even if § 2937 gives

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 10 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

rise to a private right of action, Plaintiffs’ allegations are

insufficient to state a claim because the statute only requires

Carrington to "mail" the requisite notice to the borrower; it does

not require Carrington to ensure the notice is actually received by

the borrower or physically given to the borrower. According to

Carrington, Plaintiffs must, at a minimum, allege that Carrington

“failed to mail” the statutory notice. 

Section 2937 reads, in pertinent part, as follows:

(a) The Legislature hereby finds and declares that

borrowers or subsequent obligors have the right to know

when a person holding a promissory note, bond, or other

instrument transfers servicing of the indebtedness

secured by a mortgage or deed of trust on real property

containing one to four residential units located in this

state. The Legislature also finds that notification to

the borrower or subsequent obligor of the transfer may

protect the borrower or subsequent obligor from

fraudulent business practices and may ensure timely

payments.

. . . . 

(b) Any person transferring the servicing of indebtedness

as provided in subdivision (a) to a different servicing

agent and any person assuming from another responsibility

for servicing the instrument evidencing indebtedness,

shall give written notice to the borrower or subsequent

obligor before the borrower or subsequent obligor becomes

obligated to make payments to a new servicing agent.

. . . .

(e) The notices required by subdivision (b) shall be sent

by first- class mail, postage prepaid, to the borrower's

or subsequent obligor's address designated for loan

payment billings, or if escrow is pending, as provided in

the escrow, and shall contain each of the following:

(1) The name and address of the person to which the

transfer of the servicing of the indebtedness is made.

(2) The date the transfer was or will be completed.

(3) The address where all payments pursuant to the

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 11 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

transfer are to be made.

(f) Any person assuming from another responsibility for

servicing the instrument evidencing indebtedness shall

include in the notice required by subdivision (b) a

statement of the due date of the next payment.

(g) The borrower or subsequent obligor shall not be

liable to the holder of the note, bond, or other

instrument or to any servicing agent for payments made to

the previous servicing agent or for late charges if these

payments were made prior to the borrower or subsequent

obligor receiving written notice of the transfer as

provided by subdivision (e) and the payments were

otherwise on time.

Cal. Civ. Code § 2937(a)-(b), (e)-(g). 

As to Carrington’s first argument, i.e., that § 2937 does not

create a private right of action, Faria v. San Jacinto Unified

School District, 50 Cal. App. 4th 1939, 1947 (1996) (internal

citations and quotation marks omitted), explains the general rule:

The general rule is that ‘[f]or every wrong there is a

remedy.’ (Civ. Code, § 3523.) In accordance with that

principle, [t]he violation of a statute gives to any

person within the statute's protection a right of action

to recover damages caused by its violation. Where a new

right is created by statute, the party aggrieved by its

violation is confined to the statutory remedy if one is

provided; otherwise any appropriate common law remedy may

be resorted to. A private right of action is an

appropriate remedy when it is needed to assure the

effectiveness of the provision . . . .

Carrington has not explained why the general rule stated in

Faria – that a statutory violation gives any person within the

statute’s protection a right to recover damages caused by the

violation – does not apply in this case. Nor has Carrington argued

that § 2937(g) is a remedial provision which precludes any further

remedy for a statutory violation (this argument would actually

undermine Carrington’s contention that § 2937 provides no private

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 12 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Under certain circumstances, § 2937(g) excuses the 1

remission of payments and late charges to the new servicing agent

if the payments have been made to the former payee.

13

right of action at all). 

1

Even assuming, however, that § 2937 may supply a private right

of action, there is a problem with the complaint that precludes a

conclusive resolution of Carrington’s argument. It is impossible

to discern, from the complaint, whether Plaintiffs are even

asserting a private right of action under § 2937 or, instead, are

using § 2937 solely as a defense. Sutton v. Providence St. Joseph

Md. Ctr., 192 F.3d 826, 844 (9th Cir. 1999) (recognizing that a

statute may give the plaintiff a viable “defense” but not a “private

right of action”); see also Sanai v. Saltz, 170 Cal. App. 4th 746,

775 n.21 (2009) (same). There is no indication in the complaint

that Plaintiffs are requesting damages, declaratory relief, or some

other affirmative remedy for the alleged violation of § 2937. The

complaint merely states that, because of the statutory violation,

“plaintiffs are not liable to holder of the note or to any servicing

agent for payments made to Freemont, nor are they liable for late

charges.” (Doc. 24-2 at 6.) An allegation that Plaintiffs are “not

liable” is not equivalent to, and falls short of, pleading an

affirmative claim for relief.

Without knowing whether Plaintiffs are using § 2937 to obtain

some affirmative remedy, whether Plaintiffs have a viable private

right of action cannot be properly analyzed or conclusively

determined at this time. Whether § 2937 provides a private right

of action is not something which can be determined in the abstract.

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 13 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 If they are using the statute only defensively, then there 2

should not be a separately pled "claim" or "cause of action" for a

violation of § 2937 in any amended complaint. 

14

See Maldonado v. Morales, 556 F.3d 1037, 1044 (9th Cir. 2009) ("The

role of the courts is neither to issue advisory opinions nor to

declare rights in hypothetical cases, but to adjudicate live cases

or controversies.") (internal quotation marks omitted); Schneider

v. Chertoff, 450 F.3d 944, 959 (9th Cir. 2006) ("It has long been

settled that we have no authority to give opinions upon . . .

abstract propositions, or to declare principles or rules of law

which cannot affect the matter in issue in the case before us")

(internal quotation marks omitted). 

Carrington’s motion to dismiss on the grounds that § 2937 does

not provide Plaintiffs with a private right of action is DENIED

without prejudice to refiling. Carrington’s motion for more a

definite statement is, however, GRANTED. Because it is unclear

whether Plaintiffs are asserting a private right of action under §

2937, Plaintiffs, if they wish to pursue such a claim, must amend

the complaint to clarify whether they are requesting damages,

declaratory relief, or some other affirmative remedy for the

statutory violation. Carrington’s motion for a more definite 2

statement of this claim is GRANTED WITH LEAVE TO AMEND.

As to Carrington’s second argument in support of dismissal,

Plaintiff has offered to amend the complaint to allege, on

information and belief, that the requisite statutory notice under

§ 2937 "was not sent" by Carrington. This proposed amendment

addresses Carrington's second argument and tracks the statutory

text, which requires that notices “be sent by first-class mail.” §

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 14 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

2937(e). At this juncture, however, whether Plaintiffs are even

asserting a private right of action under § 2937, or are using the

statute solely as a defense, is unclear. Given the complaint’s lack

of clarity on this issue, Carrington’s motion to dismiss for failure

to state a “claim” is premature, as no affirmative “claim” presently

appears in the complaint. If Plaintiffs amend the complaint to

affirmatively assert a private right of action (i.e., a claim) under

§ 2937, it can then be determined whether it is subject to dismissal

for, among other reasons, insufficient factual allegations. 

Carrington’s motion to dismiss the § 2937 “claim” because it

is insufficiently pled is DENIED without prejudice to refiling. 

3. Declaratory Relief 

Plaintiffs assert a declaratory relief claim against

Carrington. The complaint describes a purported controversy between

Carrington and Plaintiffs concerning a non-judicial foreclosure on

Plaintiffs’ property. 

35. An actual controversy has arisen and now exists

between plaintiffs and Carrington concerning their

respective rights and duties under the Deed of Trust, in

that defendants allege that a default exists as stated in

the Notice of Default, and that the defendants have the

right to complete the non-judicial foreclosure pursuant

to the Notice of Trustee’s Sale, while plaintiffs allege

that the Notice of Default is defective, and therefore

defendants have no right to proceed with the non-judicial

foreclosure pursuant to the Notice of Trustee’s Sale.

36. Plaintiffs desire a judicial determination of their

rights and duties, and declarations as to whether: (a)

plaintiffs are in default under the provisions of the

Deed of Trust; (b) the Notice of Default and the Notice

of Trustee's Sale are defective and invalid; and (c)

defendants have the right to proceed with the

non-judicial foreclosure pursuant to the Notice of

Trustee's Sale.

(Doc. 24-2 at 7.) 

Declaratory relief “operates prospectively, and not merely for

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 15 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

the redress of past wrongs.” Babb v. Superior Court, 3 Cal. 3d 841,

848 (1971); see also County of San Diego v. California, 164 Cal.

App. 4th 580, 607 (2008). A declaratory relief action “serves to

set controversies at rest before they lead to repudiation of

obligations, invasion of rights or commission of wrongs; in short,

the remedy is to be used in the interests of preventive justice, to

declare rights rather than execute them.” Babb, 3 Cal. 3d at 848

(internal quotation marks omitted). As recently stated in Meyer v.

Sprint Spectrum L.P., 45 Cal. 4th 634, 647 (2009) (internal

citations and quotation marks omitted):

The purpose of a declaratory judgment is to serve some

practical end in quieting or stabilizing an uncertain or

disputed jural relation. Another purpose is to liquidate

doubts with respect to uncertainties or controversies

which might otherwise result in subsequent litigation.

One test of the right to institute proceedings for

declaratory judgment is the necessity of present

adjudication as a guide for plaintiff's future conduct in

order to preserve his legal rights. 

The first two declarations which Plaintiffs request concern

only past conduct, i.e., whether Plaintiffs are “in default under

the provisions of the Deed of Trust” and whether “the Notice of

Default and the Notice of Trustee's Sale are defective and invalid.”

A judicial declaration as to these matters would not, standing

alone, serve the purposes of declaratory relief. However, the final

declaration Plaintiffs request is whether Carrington has a “right

to proceed with the non-judicial foreclosure pursuant to the Notice

of Trustee's Sale.” This requested declaration is prospective in

nature – the non-judicial foreclosure has not yet occurred – and

could conceivably prevent future litigation over a completed

wrongful foreclosure, as well as guide the parties’ future conduct.

Carrington argues that declaratory relief is not necessary

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 16 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

To the extent the first two requested declarations (i.e., 3

whether Plaintiffs are in default and whether the default notice

and trustee’s sale notice were defective and invalid) are tied to

and provide the basis for the third requested declaration (i.e.,

whether Carrington can proceed with the non-judicial foreclosure),

a determination as to whether Plaintiffs are entitled to the third

requested declaration will involve an analysis of the issues

surrounding the first two with no need for separate declarations on

all three matters. 

17

because “[i]f Carrington wants to foreclose on the subject home in

the future, it need not rely on the validity of the previously

recorded notice of default, it can issue a new notice of default.”

Incidentally, this argument underscores that there is an ongoing

dispute between the parties over their rights and duties and reveals

the potential utility of declaratory relief in guiding the parties’

future conduct, i.e., Carrington may or may not need to issue a new

notice of default if the old one is or is not defective. 

Carrington’s motion to dismiss the declaratory relief claim is

GRANTED in part and DENIED in part. The motion is GRANTED to the

extent the complaint requests independent declarations as to past

conduct, i.e., whether Plaintiffs are "in default under the

provisions of the Deed of Trust" and whether "the Notice of Default

and the Notice of Trustee's Sale are defective and invalid.” This

portion of the declaratory relief claim is DISMISSED. The motion 3

is DENIED to the extent the complaint requests a declaration that

Carrington has a “right to proceed with the non-judicial foreclosure

pursuant to the Notice of Trustee's Sale.”

B. Wachovia's Motion

1. HOLA Preemption

Wachovia, a federally chartered savings bank, moves to dismiss

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 17 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Because Wachovia’s status as a federal savings bank subject 4

to HOLA is not challenged, judicial notice need not be taken of

Wachovia’s Certificate Of Corporate Existence (Doc. 30-2, Ex. E),

a signed letter from the Office of Thrift Supervision (Doc. 30-2,

Ex. F), and the Charter of Wachovia (Doc. 30-2, Ex. G), which is

signed by the Secretary of the Office of Thrift Supervision. 

18

the state law fraud and conversion claims on the grounds that these

claims are preempted by the federal Home Owners Loan Act (“HOLA”).4

Numerous courts have found state law fraud and conversion claims

preempted by HOLA. See, e.g., Lopez v. Wachovia Mortgage, No. 2:09-

CV-01510-JAM-DAD, 2009 WL 4505919, at *5 (E.D. Cal. Nov. 20, 2009);

Kelley v. Mortgage Electronic Registration Sys., Inc., 642 F. Supp.

2d 1048, 1054 (N.D. Cal. 2009); Andrade v. Wachovia Mortgage, FSB,

No. 09 CV 0377 JM (WMc), 2009 WL 1111182, at *2 (S.D. Cal. Apr. 21,

2009). 

“HOLA was designed to restore public confidence by creating a

nationwide system of federal savings and loan associations to be

centrally regulated according to nationwide best practices.” Silvas

v. E*Trade Mortgage Corp., 514 F.3d 1001, 1004 (9th Cir. 2008)

(internal quotation marks omitted). HOLA and its accompanying

regulations represent a “radical and comprehensive response to the

inadequacies of the existing state system, and [are] so pervasive

as to leave no room for state regulatory control.” Silvas, 514 F.3d

at 1004 (internal quotation marks omitted). Through HOLA, Congress

gave the Office of Thrift Supervision (“OTS”) wide authority to

issue regulations governing thrifts. Id. at 1005. OTS promulgated

a preemption regulation, 12 C.F.R. § 560.2, which the Ninth Circuit

relies upon to determine whether state law is preempted. Id. at

1005-06. 

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 18 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

19

Section 560.2(a) states that “OTS hereby occupies the entire

field of lending regulation for federal savings associations. OTS

intends to give federal savings associations maximum flexibility to

exercise their lending powers in accordance with a uniform federal

scheme of regulation.” Section 560.2(b) then lists specific types

of state laws which are preempted:

(b) . . . [T]he types of state laws preempted by

paragraph (a) of this section include, without

limitation, state laws purporting to impose requirements

regarding: . . . .

(4) The terms of credit, including amortization of loans

and the deferral and capitalization of interest and

adjustments to the interest rate, balance, payments due,

or term to maturity of the loan, including the

circumstances under which a loan may be called due and

payable upon the passage of time or a specified event

external to the loan; . . . .

(9) Disclosure and advertising, including laws requiring

specific statements, information, or other content to be

included in credit application forms, credit

solicitations, billing statements, credit contracts, or

other credit-related documents and laws requiring

creditors to supply copies of credit reports to borrowers

or applicants;

(10) Processing, origination, servicing, sale or purchase

of, or investment or participation in, mortgages;

(11) Disbursements and repayments; . . . .

12 C.F.R. § 560.2(b)(4), (9)-(11). The OTS has outlined a proper

analysis to employ when evaluating whether state law is preempted

under the regulation:

When analyzing the status of state laws under § 560.2,

the first step will be to determine whether the type of

law in question is listed in paragraph (b). If so, the

analysis will end there; the law is preempted. If the law

is not covered by paragraph (b), the next question is

whether the law affects lending. If it does, then, in

accordance with paragraph (a), the presumption arises

that the law is preempted. This presumption can be

reversed only if the law can clearly be shown to fit

within the confines of paragraph (c). For these purposes,

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 19 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

20

paragraph (c) is intended to be interpreted narrowly. Any

doubt should be resolved in favor of preemption.

Silvas, 514 F.3d at 1005 (quoting 61 Fed. Reg. 50951, 50966-67

(Sept. 30, 1996)). The Ninth Circuit has adopted this analytical

approach. Id. at 1006. In Silvas, the court stated:

As outlined by OTS, the first step is to determine if UCL

§ 17200, as applied, is a type of state law contemplated

in the list under paragraph (b) of 12 C.F.R. § 560.2. If

it is, the preemption analysis ends.

Id. (emphasis added). Here, Plaintiffs’ fraud and conversion

claims, as applied, are a type of state law contemplated in §

560.2(b). These claims are preempted. 

a. Fraud Claim

As to the fraud claim, Plaintiffs allege Wachovia “made

material false representations to plaintiffs that their refinance

loan was approved by Wachovia, that all loan documents had been

processed, and that plaintiff had incurred an obligation to make

monthly payments to Wachovia to repay the refinance loan.” (Doc. 24-

2 at 8.) This fraud claim concerns lending and revolves around the

“processing, origination [and/or] servicing” of a mortgage. As

applied, this fraud claim is a type of state law contemplated in §

560.2(b)(10) and is preempted. 

Plaintiffs’ fraud claim also alleges that “[t]here was no

documents indicating the Wachovia loan had been processed or

approved, or that plaintiffs had any obligation to pay any money to

Wachovia.” (Doc. 24-2 at 8.) This fraud allegation fits squarely

within § 560.2(b)(10), and likely within § 560.2(b)(9), which deals

with information in “credit-related documents,” and § 560.2(b)(11),

which deals with “repayments.” 

Finally, Plaintiffs’ fraud claim alleges that Wachovia “made

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 20 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs’ reliance on Fenning v. Glenfield, 40 Cal. App. 5

4th 1285 (1995) is unpersuasive. Fenning is materially

distinguishable. See In re Wash. Mut. Overdraft Prot. Litig., 539

F. Supp. 2d 1136, 1155 (C.D. Cal. 2008) (noting that Fenning

involved “claims for fraud related to a bank's sale of uninsured

investment securities, not its deposit or lending-related

activities”). 

21

false representations with the intent to induce plaintiffs to make

monthly mortgage payments to Wachovia.” (Doc. 24-2 at 8.) As

applied, this claim is also within § 560.2(b)(10) as it is based on,

and seeks to impose liability for and regulate, alleged false

statements made in connection with the “[p]rocessing, origination

[and/or] servicing . . . of, . . . or participation in,” a mortgage.

Because Plaintiffs’ fraud claim, as applied, bears on lending

activities expressly contemplated by § 560.2(b), it is preempted.

No further analysis is necessary. Wachovia’s motion to dismiss the

fraud claim is GRANTED and this claim is DISMISSED. 

b. Conversion Claim

The conversion claim alleges “Wachovia converted the personal

property of plaintiffs, in the form of mortgage payments made on a

fraudulent and non-existent loan, to its own use or control.” (Doc.

24-2 at 8.) This claim, as applied, also fits within § 560.2(b).

The alleged wrongful conversion of Plaintiffs’ “mortgage payments”

made on a “fraudulent loan” is a state law claim that is based on

alleged wrongful conduct in the “processing, origination [and/or]

servicing” of a mortgage, § 560.2(b)(10), and also concerns

“repayment[],” § 560.2(b)(11). Because Plaintiffs' conversion

claim, as applied, would regulate lending activities expressly

contemplated by § 560.2(b), it is preempted, and no further analysis

is necessary. Wachovia's motion to dismiss the conversion claim is 5

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 21 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Because Plaintiffs’ fraud and conversion claims are 6

preempted, there is no need to consider Wachovia’s other arguments

as to why these claims should be dismissed. 

22

GRANTED and this claim is DISMISSED.6

c. Requested Amendment

At the hearing on the motion, Plaintiffs argued that their

fraud and conversion claims are not preempted because Wachovia did

not, in fact, issue them a loan. Plaintiffs requested leave to

amend to clarify that Wachovia did not issue them a loan, and

Plaintiffs believe that such an amendment would save their fraud and

conversion claims from preemption. 

The preceding analysis on preemption is predicated on the

understanding that Plaintiffs were, in fact, issued a loan by

Wachovia. Numerous allegations in the complaint suggest that

Wachovia actually issued them a loan. (See, e.g., Doc. 24-2 at 4

(alleging, among other things, “Wachovia failed to give plaintiffs

a complete set of executed documents regarding their refinance

loan,” “[s]ince the inception of the Wachovia loan, plaintiffs made

all monthly payments to Wachovia,” and “[b]eginning in December

2008, Wachovia refused to accept plaintiffs’ payment on the Wachovia

loan.”)). In addition, the allegation in the conversion claim that

Wachovia “made” a “fraudulent loan” is based on the necessary

premise that Wachovia actually made a loan to Plaintiffs. Either

a loan was made which was fraudulent or there was no loan at all,

but there cannot be both a loan which was fraudulent and no loan at

all. The allegation in the conversion claim that the “fraudulent

loan” was “non-existent” can be read to mean, as it was here, that

Wachovia actually made the loan to Plaintiffs but formalities were

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 22 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

23

not followed and there is no definitive documentation that affirms

the loan’s existence, i.e., the loan does not exist on paper. 

Even if Plaintiffs amend their complaint, as requested, to

allege that Wachovia never issued a loan to Plaintiffs, it is not

clear that this would impact the preemption analysis. One stated

purpose for the regulatory preemption provision is to ensure “a

uniform federal scheme of regulation” for federal savings

associations. 12 C.F.R. § 560.2(a). Under Plaintiffs’ analysis,

however, in any given situation, the lending activities of federal

savings associations would be subject to both federal and state

regulations so long as no loan is ultimately issued to the borrower.

Nevertheless, supplemental briefing is requested to properly analyze

this preemption issue. 

On or before February 22, 2010, Wachovia shall file

supplemental briefing, not to exceed seven (7) pages, to address

whether Plaintiffs’ proposed amendment to their fraud and conversion

claims is futile because these claims will still be preempted even

if Wachovia did not issue a loan to Plaintiffs. Any opposition to

Wachovia’s supplemental briefing is due by February 26, 2010, and

shall not exceed five (5) pages. There is no need for a reply.

C. Wachovia’s Motion To Strike

Wachovia moves to strike the punitive damages allegations with

respect to the fraud and conversion claims. Given, however, that

these claims are preempted and dismissed, Wachovia’s motion to

strike is DENIED as moot.

//

//

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 23 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

24

V. CONCLUSION

For the reasons stated:

1. As to the RESPA claim:

a. Carrington’s motion to dismiss is GRANTED. This

claim is DISMISSED WITH LEAVE TO AMEND. 

b. Carrington’s motion for a more definite statement is

DENIED as moot. 

2. As to the § 2937 “claim”:

a. Carrington’s motion to dismiss is DENIED without

prejudice to refiling.

b. Carrington’s motion for a more definite statement of

the § 2937 claim is GRANTED. Because it is unclear whether

Plaintiffs are asserting a private right of action under § 2937,

Plaintiffs, if they wish to pursue such a claim, must amend the

complaint to clarify whether they are requesting damages or some

affirmative remedy for the statutory violation. 

3. As to the declaratory relief claim:

a. Carrington’s motion to dismiss is GRANTED in part and

DENIED in part. The motion is GRANTED to the extent the complaint

requests independent declarations as to past conduct, i.e., whether

Plaintiffs are "in default under the provisions of the Deed of

Trust" and whether "the Notice of Default and the Notice of

Trustee's Sale are defective and invalid.” This portion of the

declaratory relief claim is DISMISSED. The motion is DENIED to the

extent the complaint requests a declaration that Carrington has a

“right to proceed with the non-judicial foreclosure pursuant to the

Notice of Trustee's Sale.”

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 24 of 25
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The surviving portion of Plaintiffs’ declaratory relief 7

claim is sufficiently clear and does not warrant a more definite

statement. 

25

b. Carrington’s motion for a more definite statement is

DENIED as moot.7

4. As to the fraud and conversion claims:

a. Wachovia’s motion to dismiss the fraud and conversion

claims is GRANTED on the grounds that these claims, as presently

pled, are preempted. 

b. Supplemental briefing is requested, as stated, to

address whether Plaintiffs’ proposed amendment to the complaint

would be futile. 

c. Wachovia’s motion to strike the request for punitive

damages is DENIED as moot. 

Once the supplemental briefing is received and the preemption

issue resolved, an order will issue specifying the due date for any

amended complaint and any corresponding responsive pleading.

IT IS SO ORDERED.

Dated: February 17, 2010 /s/ Oliver W. Wanger 

9i274f UNITED STATES DISTRICT JUDGE

Case 1:09-cv-00937-AWI-GSA Document 43 Filed 02/17/10 Page 25 of 25