Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-04838/USCOURTS-cand-3_09-cv-04838-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1446 Breach of Contract- Insurance

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United States District Court

For the Northern District of California 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

TIMOTHY J. COLLINS, 

VICTORIA C. COLLINS, 

Plaintiffs, 

v. 

POWER DEFAULT SERVICES, INC., 

F/K/A AHMI DEFAULT SERVICES, 

INC., a Delaware corporation, et 

al., 

Defendants. 

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Case No. 09-4838 SC 

ORDER GRANTING DEFENDANTS' 

MOTION TO DISMISS

I. INTRODUCTION

 This suit involves the allegations of Timothy J. Collins and 

Victoria C. Collins ("Plaintiffs") that Defendants engaged, or were 

about to engage, in an improper foreclosure upon their home. See

Notice of Removal, Docket No. 1, Ex. A ("Compl."). Defendants 

filed a Motion to Dismiss. Docket No. 5. Plaintiffs have not 

opposed the motion, and Defendants filed a Statement of Plaintiffs' 

Non-Opposition. Docket No. 8. For the reasons stated herein, the 

Motion to Dismiss is GRANTED. 

II. BACKGROUND

On July 20, 2006, Plaintiffs executed a promissory note for 

$595,000 ("Note") in favor of the lender, Argent Mortgage Company, 

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United States District Court

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LLC, ("Argent"), and secured the Note with a Deed of Trust to real 

property located at 112 Williams Lane, Foster City, California 

94404 ("the Property"). Compl. ¶¶ 8-9; Request for Judicial Notice 

("RJN") Ex. 1 ("Deed of Trust").1

 On January 20, 2009, the Deed of 

Trust securing the Note was assigned to Deutsche Bank National 

Trust Company ("Deutsche Bank"). Id. Ex. 2 ("Assignment of Deed of 

Trust"). On May 8, 2009, Deutsche Bank substituted AHMSI Default 

Services, Inc., now known as Power Default Services, Inc. ("Power 

Default"), as trustee to the Deed of Trust. Id. Ex. 4 

("Substitution of Trustee"). On May 12, 2009, T.D. Service 

Company, an agent for Deutsche Bank, recorded a Notice of Default 

against the Property. Id. Ex. 3 ("Notice of Default"); Compl. 

¶ 15. Plaintiffs allegedly accrued approximately $45,919.64 in 

mortgage payment arrears. Notice of Default; Mot. at 1. On August 

13, 2009, Power Default recorded a Notice of Trustee's Sale, 

setting the foreclosure sale date for September 2, 2009. Id. Ex. 6 

("Notice of Trustee's Sale"); Compl. ¶ 19. Plaintiffs filed their 

Complaint on August 31, 2009. See Compl. 

 

III. LEGAL STANDARD

 A motion to dismiss under Federal Rule of Civil Procedure 

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

Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal can be based 

 

1

 Defendants submitted a Request for Judicial Notice in support of 

the Motion to Dismiss. Docket No. 5-1. All of the relevant 

documents have been recorded in the San Mateo County Recorder's 

Office. These items are public records and properly subject to 

judicial notice. See Hotel Employees & Rest. Employees Local 2 v. 

Vista Inn Mgmt. Co., 393 F. Supp. 2d 972, 978 (N.D. Cal. 2005). 

These documents are neither disputed nor reasonably questioned, and 

the Court may take judicial notice of them. See O'Toole v. 

Northrop Grumman Corp., 499 F.3d 1218, 1224-25 (10th Cir. 2007). 

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United States District Court

For the Northern District of California 

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

sufficient facts alleged under a cognizable legal theory. 

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

1990). Allegations of material fact are taken as true and 

construed in the light most favorable to the nonmoving party. 

Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 

1996). Although well-pleaded factual allegations are taken as 

true, a motion to dismiss should be granted if the plaintiff fails 

to proffer "enough facts to state a claim for relief that is 

plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 

547 (2007). The court need not accept as true legal conclusions 

couched as factual allegations. Ashcroft v. Iqbal, 129 S.Ct. 1937, 

1949-50 (2009). "Threadbare recitals of the elements of a cause of 

action, supported by mere conclusory statements, do not suffice." 

Id. at 1949. 

IV. DISCUSSION

A. Plaintiffs' Ability to Tender

In California, claims that seek to undo a wrongful foreclosure 

generally cannot go forward unless the plaintiff has at least 

alleged a credible offer to tender indebtedness. See Abdallah v. 

United Savings Bank, 43 Cal. App. 4th 1101, 1109 (Ct. App. 1996) 

(borrower "required to allege tender of the amount of . . . 

[lender's] secured indebtedness in order to maintain any cause of 

action for irregularity in the sale procedure"); Arnolds Management 

Corp. v. Eischen, 158 Cal. App. 3d 575, 578 (Ct. App. 1984) ("It is 

settled that an action to set aside a trustee's sale for 

irregularities in sale notice or procedure should be accompanied by 

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United States District Court

For the Northern District of California 

an offer to pay the full amount of the debt for which the property 

was security."). This requirement prevents "a court from uselessly 

setting aside a foreclosure sale on a technical ground when the 

party making the challenge has not established his ability to 

purchase the property." Williams v. Countrywide Home Loans, No. 

99-242, 1999 U.S. Dist. LEXIS 14550, *5-6 (N.D. Cal. Sept. 15, 

1999) (citing United States Cold Storage v. Great Western Sav. & 

Loan Ass'n, 165 Cal. App. 3d 1214, 1225 (Ct. App. 1985)). 

Here, the Court has examined Plaintiffs' Complaint and it does 

not contain an offer by Plaintiffs to pay the full amount of the 

debt. See Compl. Since Plaintiffs have not filed an Opposition, 

the Court is not aware of an offer to tender indebtedness 

subsequent to filing their Complaint. Plaintiffs' fourth cause of 

action is for wrongful foreclosure. Compl. ¶¶ 40-46. Plaintiffs' 

fifth cause of action seeks declaratory relief related to the 

alleged wrongful foreclosure. Id. ¶¶ 47-50. Plaintiffs' eighth 

cause of action seeks to quiet title to the property. Id. ¶¶ 67-

71. Plaintiffs' ninth cause of action seeks to enjoin the 

foreclosure sale. Id. ¶¶ 72-76. These causes of action are all 

based on alleged irregularities in the foreclosure sale procedure. 

Because Plaintiffs have not made a credible offer to pay their 

debt, the Court GRANTS Defendants' motion to dismiss the fourth, 

fifth, eighth, and ninth causes of action WITH LEAVE TO AMEND. 

B. Violation of California Civil Code Section 2923.6

 Plaintiffs' first cause of action alleges that California 

Civil Code Section 2923.6 requires Defendants to engage in loan 

modification arrangements with Plaintiffs. Compl. ¶¶ 23-29. This 

code section provides, in pertinent part, that: 

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United States District Court

For the Northern District of California 

The Legislature finds and declares that any duty 

servicers may have to maximize net present value under 

their pooling and servicing agreements is owed to all 

parties in a loan pool, not to any particular parties, 

and that a servicer acts in the best interests of all 

parties if it agrees to or implements a loan modification 

or workout plan. 

Cal. Civ. Code § 2923.6(a). 

Defendants contend that this statute does not provide a 

private right of action to Plaintiffs, and that it does not impose 

any requirement on lenders to agree to loan modifications suggested 

by borrowers. Mot. at 5-6. In Connors v. Home Loan Corp., the 

District Court for the Southern District of California determined 

that there was no private right of action under section 2923.6 of 

the California Civil Code. No. 08-1134, 2009 WL 1615989, at *8 

(S.D. Cal. June 9, 2009). The Court is not aware of any authority 

to the contrary. Therefore, the Court GRANTS Defendants' motion to 

dismiss Plaintiffs' first cause of action WITH LEAVE TO AMEND. 

C. Rosenthal Fair Debt Collection Practices Act

Plaintiffs' second cause of action alleges that Defendants 

violated the Rosenthal Fair Debt Collection Practices Act ("RFDCPA" 

or "Rosenthal Act"), Cal. Civ. Code §§ 1788 et seq. Compl. ¶¶ 30-

33. The law is clear that foreclosing on a deed of trust does not 

invoke the statutory protections of the RFDCPA. See, e.g., Rosal 

v. First Federal Bank of California, No. 09-1276, 2009 WL 2136777, 

at (N.D. Cal. July 15, 2009)(dismissing RFDCPA claim as to all 

defendants in foreclosure case); Ricon v. Recontrust Co., No. 09-

937, 2009 WL 2407396, at *4 (S.D. Cal. Aug. 4, 2009)(dismissing 

with prejudice plaintiff's unfair debt collection claims in 

foreclosure case); Pittman v. Barclays Capital Real Estate, Inc., 

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No. 09-0241, 2009 WL 1108889, at *3 (S.D. Cal. Apr. 24, 

2009)(dismissing with prejudice plaintiff's Rosenthal Act claim in 

foreclosure case); Gallegos v. Recontrust Co., No. 08-2245, 2009 WL 

215406, at *3 (S.D. Cal. Jan. 28, 2009)(dismissing RFDCPA claim in 

foreclosure case). The Court DISMISSES Plaintiffs' second cause of 

action WITHOUT LEAVE TO AMEND. 

D. Breach of the Covenant of Good Faith and Fair Dealing

Plaintiffs' third cause of action alleges breach of the 

covenant of good faith and fair dealing. Compl. ¶¶ 34-39. 

Plaintiffs allege that Defendants breached the implied covenant by: 

a. Failing to put at least as much consideration to 

Plaintiffs’ interests as to Defendants’ financial 

interests; 

b. Sending deceptive letters to Plaintiffs advising 

Plaintiffs of the ability to modify the loan despite 

Defendants selling Plaintiffs’ subject property; 

c. Sending deceptive letters indicating that all actions 

would be suspended and taking actions during that time; 

d. Foreclosing on the property despite failure to comply 

with California law; 

e. Failing to modify Plaintiffs’ loan despite having 

received TARP funds. 

Compl. ¶ 37. 

The implied covenant of good faith and fair dealing rests upon 

the existence of some specific contractual obligation. Foley v. 

Interactive Data Corp. 47 Cal. 3d 654, 683-84 (1988). The covenant 

is implied as "a supplement to the express contractual covenants, 

to prevent a contracting party from engaging in conduct which 

(while not technically transgressing the express covenants) 

frustrates the other party's rights to the benefits of the 

contract." Love v. Fire Ins. Exchange, 221 Cal. App. 3d 1136, 

1153 (Ct. App. 1990) (emphasis in original). 

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United States District Court

For the Northern District of California 

 Here, the Complaint does not state which Defendants were 

parties to the loan agreement at issue, and it does not identify 

which Defendants allegedly sent deceptive letters or engaged in the 

other conduct that allegedly breached the implied covenant. The 

judicially-noticed documents indicate that at least one of the 

defendants, Power Default, as trustee, had the right to foreclose 

and sell the property if Plaintiffs defaulted on their loan. See

Deed of Trust; Substitution of Trustee. The covenant of good faith 

and fair dealing cannot "be read to prohibit a party from doing 

that which is expressly permitted by an agreement." Carma 

Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 

342, 374 (1992). The Court DISMISSES Plaintiffs' third cause of 

action WITH LEAVE TO AMEND. 

E. Violation of California Business & Professions Code

Plaintiffs' seventh cause of action alleges that all 

Defendants have violated California Business and Professions Code 

sections 17200 et seq. Compl. ¶¶ 51-54. Plaintiffs simply allege 

that “Defendants committed unlawful, unfair, and/or fraudulent 

business practices,” id. ¶ 52, but Plaintiffs do not explain which 

actions of which particular Defendants were unlawful, unfair, 

and/or fraudulent. Such a threadbare recital of the elements of 

this cause of action is clearly insufficient to survive a motion to 

dismiss. The Court DISMISSES Plaintiffs' seventh cause of action 

WITH LEAVE TO AMEND. 

F. Violation of Statutory Duties

Plaintiffs' seventh cause of action alleges a breach of 

statutory duties. Compl. ¶¶ 55-66. The Complaint does not 

identify which statutory duties have been violated, but instead 

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alleges that Defendants “failed to give proper notice under 

California law,” and Plaintiffs also accuse Defendants of “issuing 

a notice of trustee’s sale that was not compliant with California 

law.” Id. ¶¶ 56-57. 

California law provides that “[t]he trustee, mortgagee, or 

beneficiary, or any of their authorized agents shall first file for 

record, in the office of the recorder of each county wherein the 

mortgaged or trust property or some part or parcel thereof is 

situated, a notice of default.” Cal. Civ. Code § 2924(a)(1). 

California law also provides that notice of a scheduled foreclosure 

sale must be posted on the door of a single-family residence and 

published in a newspaper of general circulation. Id. § 2924f. 

Here, Plaintiffs' Complaint itself states that a notice of default 

was recorded against the property, see Compl. ¶ 15, and the 

Complaint was filed a few days before the foreclosure sale was 

scheduled to occur. Also, the Court has taken judicial notice of 

the Notice of Default and the Notice of Trustee's Sale, both of 

which were recorded in the San Mateo Recorder's Office. 

Plaintiffs' vague allegations that Defendants have breached 

statutory duties related to notice are simply not plausible. 

Plaintiffs also accuse Defendants of failing to comply with 

the guidelines of the Making Homes Affordable Program. Compl. 

¶ 61-64. Without more information, the Court is unable to 

determine whether this allegation amounts to the breach of a 

statutory duty. The Court DISMISSES Plaintiffs' seventh cause of 

action WITH LEAVE TO AMEND. 

/// 

/// 

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V. CONCLUSION

For the foregoing reasons, Plaintiffs' second cause of action 

is DISMISSED WITH PREJUDICE. Plaintiffs' first, third, fourth, 

fifth, sixth, seventh, eighth, and ninth causes of action are 

DISMISSED WITHOUT PREJUDICE. Plaintiffs' Amended Complaint must be 

filed within thirty (30) days from the date of this Order. Failure 

to do so will result in dismissal of the case with prejudice. 

 

IT IS SO ORDERED. 

Dated: January 14, 2010 

UNITED STATES DISTRICT JUDGE

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