Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_15-cv-00956/USCOURTS-casd-3_15-cv-00956-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1692 Fair Debt Collection Act

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OCT 01 2015 

CLERK, U.S. DI:::Tr;'CT COURT 

SOUTHERN DISTHIGT OF CAI..IFORNIA 

lW __ .... _____ .J5,.~.E.~:.rUTY 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

11 LAURA D. SATERBAK, Civil No. 15cv956-WQH-NLS 

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Plaintiff, 

vs. 

NATIONAL DEFAULT SERVICING 

CORPORATION' SELECT 

PORTFOLIO SERVICING, INC.; and 

DOES I-XXX, 

Defendants. 

HAYES, Judge: 

The matter before the Court is the Motion to Dismiss (ECF No.8) filed by 

Defendants Select Portfolio Servicing, Inc. ("SPS") and National Default Servicing 

corporation ("NDSC"). 

I. Background 

On April 29, 2015, Plaintiff Laura D. Saterbak commenced this action by filing 

the Complaint. (ECF No.1). On June 12,2015, Defendants SPS and NDSC filed the 

Motion to Dismiss. (ECF No.8). On July 6,2015, Plaintifffiled a response. (ECF No. 

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10). On July 10,2015, Defendants filed a reply. (ECF No. 11). 

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II. Allegations of the Complaint 

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"[4826 Mount Helix Dr., La Mesa, California] was acquired by way of a Grant 

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Deed dated April 30, 2007." (ECF No.1 Cj[ 8). Plaintiff alleges that the Defendants 

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have sent correspondence to the Plaintiff through the United States Mails claiming that 

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1 "they or their alleged principal are owed a sum certain, which is not correct, and which 

2 they know or should know is not correct," and that "they are collecting for an 

.3 undisclosed principal." Id. 'j[ 10-11. "Plaintiff believes and alleges the amount noted 

4 for collection or the amount stated that is needed to satisfy the foreclosure is incorrect, 

5 and discovery is highly likely to show Defendant's alleged 'principal' has been paid 

6 (in full or in part) due to third party payers, and thus a full explanation or accounting 

7 is requested." Id. 'j[ 10. "Further, the Plaintiff herein believes and alleges that the 

8 actions of the Defendants jointly and severally continue to cause her personal economic 

9 harm, in addition to jeopardizing her business relationship with other third parties, 

10 slandering her credit histories with false and misrepresentative information; thus 

11 depriving her of an income or the quiet enjoyment of her property. Said conduct of 

12 Defendants tortuously interferes with her business affairs and relations with third 

13 parties by and through their actions as debt collectors." Id. 'j[ 15. "The actions ofthe 

14 Defendants, jointly and severally, now constitute an imminent threat to the Plaintiff's 

15 possession of the property which is the subject ofthis Complaint." !d. 'j[ 17. 

16 "Defendant NDSC, [] by and through its agent, and or under the direction of 

17 Defendant SPS, sent correspondence and various Notices of Trustee's Sales to the 

18 Plaintiff, only to later postpone or completely cancel them." Id'j[ 19. "The Plaintiff 

19 alleges that the directives given in this regard and other similar notices that Defendant 

20 NDSC sent Plaintiff each and every month through April 2015 are identical and 

21 possess inherent issues based on the lack of authority due to defendants: (a) having 

22 done improper accounting relating to the actual sum due and owing; and (b) failure to 

23 establish a full and verifiable chain of custody as to the note or Deed of Trust ("DOT") 

24 between Plaintiff and the 'real party in interest. ,,, !d. 

25 "Defendants' (NDSC and SPS) activities are wrongful because it emanates from 

26 a void or voidable DOT ... or note ... because the actual parties to it were defunct, or 

27 not viable, at the time or nothing but shell, pass-through entities .... " Id. 'j[ 21. "It is 

28 impossible for SPS or any other patty to appoint a Substitute Trustee, or NDSC to act 

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1 as such for a number of reasons: 

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There are defects in the chain of title of the entity carrying the financing. This started because the original lender, American Brokers CondUIt 

("ABC"), and its nominee, and agent for foreclosure pUrPoses, Mortgage 

Electronic Registration Sy.stems,~Inc. (MERS) were defective, not vIable 

entities, and not registereu to do business in California in 2007 when the 

Note or DOT was executed.... ABC and MERS at the time in essence 

were fictitious entities, representing a real party in interest that did not 

manifest itself or 2roperly perfect its interest. Therefore the Deed of Trust 

filed on June 1, 2U07, as Hie underlying authority for this foreclosure is a 

nullity at the option of Plaintiff, wliich she elects to void with the 

assistance of the court. 

Even if the above is not voided or set aside, the subsequent attempt to 

assign the DOT as set forth in Exhibit 12 is fraught with error and cannot 

be deemed a valid transfer. It is believed the Defendants claim their 

aut!lOrity from this im2roper assigpment. This is an invalid and improper 

assIgnment because 01 the followmg: 

The document is dated on December 27, 2011; yet it wasn't 

filed for record until December 17, 2012, almost a year 

later .... 

American Brokers Conduit was not qualified to do business 

in California at that time. Plus, it was never a legitimate 

company; and even if it was, it ceased to be sud} and or 

became aefunct or bankrupt before December 27, 2011. 

MERS as nominee ABC claims to have received "good and 

valuabie consideration from ABC". Both entities have no 

right to conduct business in California, so their actions 

tliereafter are voidable, at the election of the other party, 

Plaintiff who has so elected. 

MERS could NOT have received anything of value because 

of its bankruptcy-remote status and subsiQiary status. 

The attmpt to assign this to the Securitized trust (Structured 

Asset Mortgage Investment II Trust 2007-AR7 Mortgage Pass-Through Certificates 2007-AR7), is invalid, so any 

action by the trust or an arm of the trust is invalid. 

The cut -off date for this trust is September 1).2007. The date 

of this assignment is Decemoer 27, LO 11..... recorded 

December 17, 2012.,;.. OVER FOUR YEARS AFTnRITWAS 

EXECUTED ANu FIVE YEARS AFTER IT WAS 

RECORDED. 

Based upon the Pooling and Servicing Agreement (PSA) at 

pages S-96 through S-98, of the aoove named trust, the 

manner in which tfie above assignment purported to convey the note and deed into the trust pool was noncompliant in 

multiple aspects and thus, could not have made the trust pool 

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!d. <J[ 22. 

as prescribed.... Thus, the actions of any subsequent "trustee" on behalf of this trust entity is ultra vires and 

without legal authority. 

"It is believed the real party in interest has not authorized the commencement of 

foreclosure proceedings herein. Further, it is alleged the real party in interest has been 

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substantially paid or paid in full and the principal trying to collect money from the 

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Plaintiff is an imposter. Suggesting the contrary by these defendants is proffered as 

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false and a misrepresentation, emanating from bad records, self-interest, and/or 

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deception." Id. <J[ 23. 

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"Defendants used a ruse to lure Plaintiff into thinking there was a way to modify 

the (alleged) loan which would allow Plaintiff to save her property without filing legal 

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action. Said ruse occupied a lot of time and money for nothing. It caused plaintiff 

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emotional stress waiting for naught. Defendants never had any intention of modifying 

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the alleged loan or an ability to modify and wrongfully and deceitfully gave the 

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impression otherwise or that this process would help Plaintiff save her property. 15 

Plaintiff wasted time and money trying to comply, and now that her credit is ruined she 

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is in a precarious position in her ability to conduct her own business, let alone refinance 

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with another lender, if in fact such was warranted. Defendants' actions have negatively 

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affected the marketability of the property. Plaintiff seeks damages for the above 

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including damages for breaches of law and contract according to proof at tria!''' Id. <J[ 

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Basis for Action against Defendant SPS 

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Plaintiff alleges separate basis for action against Defendant SPS. Plaintiff 

alleges that "Defendant SPS sent the Plaintiff a 'Validation of Debt Notice', dated 

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August 12, 2013, wherein Defendant SPS claims that it is collecting payments for 

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Wilmington Trust Company, successor Trustee to Citibank, N.A., as Trustee for the 

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benefit of registered holders of Structured Asset Mortgage Investments II Trust 

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("SAMI II Trust 2007 -ART'), Mortgage Pass-Through Celtificates Series 2007 -AR 7." 

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(ECF No. 1 ~[27). "Plaintiff believes and alleges that the SAMI II 2007-AR7 Trust is 

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1 regulated by a pooling and servicing agreement ("PSA") .... Specifically, there was a 

2 Closing Date stated in this trust's PSA of September 18,2007." Id. en 28. "This date 

3 was not met here." Id. "On December 17,2012 at 8:00 a.m., over five (5) years 

4 AFTER the Closing Date of the Trust, the Plaintiff maintains and alleges that 

5 employees of Nationwide Title Clearing, Inc., a known Florida document 

6 manufacturing plant, under the request of Lender Processing Services, Inc., caused to 

7 be drafted and recorded a "Corporate Assignment of Deed of Trust" on behalf of a 

8 defunct Lender, American Brokers Conduit ("ABC") .... " Id. en 29. "ABC, never had 

9 any authority to contract in the State of California so any liaison involving 

10 MERSCORP HOLDINGS, Inc. as the parent corporation of Mortgage Electronic 

11 Registration Systems, Inc. as ABC's nominee, could not exist and therefore any 

12 purported transfer ofthis (alleged) loan to Citibank as Trusteefor SAMI II 2007-AR7 

13 could not have properly taken place." Id. en 30. Plaintiff further alleges that "this loan 

14 became an asset of American Home Mortgage or one of its affiliated companies above 

15 mentioned. American Home Mortgage and its affiliated companies went bankrupt, and 

16 when it did, any and all arrangements it had with MERS in association with this loan 

17 were rendered void and no longer effective." Id. en 32. 

18 Plaintiff's Complaint alleges twenty-one causes of action: (1) violation of the 

19 Fair Debt Collection Practices Act ("FDCPA") against Defendant SPS; (2) violation 

20 of the FDCPA against Defendant NDSC; (3) cancellation of instruments against 

21 Defendants NDSC and SPS; (4) fraud and deceit against Defendants NDSC and SPS; 

22 (5) wrongful foreclosure against Defendants NDSC and SPS; (6) declaratory relief 

23 against Defendants NDSC and SPS; (7) interference with contract and prospective 

24 business relations against Defendants NDSC and SPS; (8) recession as voidable 

25 contract against Defendants NDSC and SPS; (9) violation of the Deceptive Trade 

26 Practices Act against Defendant SPS; (10) injunctive relief against Defendants NDSC 

27 and SPS; (11) California Homeowner's Bill of Rights against Defendants NDSC and 

28 SPS; (12) violation of Regulation X of RESPA and Regulation Zof TILA against 

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1 Defendant SPS; (13) violation of 12 C.F.R. § 1024.36( d)(2)(B) againstDefendant SPS; 

2 (14) violation of 12 C.F.R. § 1024.36(d)(1)(i)-(ii) against Defendant SPS; (15) 

3 violation of 12 C.F.R. § 1026.36(c)(3) against Defendant SPS; (16) violation of 12 

4 C.F.R. § 1026.3 againstDefendantSPS; (17) violationof12 C.F.R. § 1024.35(e)(1)(A) 

5 against Defendant SPS; (18) negligence against Defendants NDSC and SPS; (19) 

6 violation of California Business & Professions Code § 17200 against Defendants 

7 NDSC and SPS; (20) accounting against Defendants NDSC and SPS; (21) violation of 

8 the Equal Credit Opportunity Act ("ECOA"), 11 U.S.c. § 1691 (d)(l) againstDefendant 

9 SPS. 

10 III. Motion to Dismiss 

11 Legal Standard 

12 Federal Rule of Civil Procedure 12(b )(6) permits dismissal for "failure to state 

13 a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal Rule of 

14 Civil Procedure 8(a) provides that "[aJ pleading that states a claim for relief must 

15 contain ... a short and plain statement of the claim showing that the pleader is entitled 

16 to relief." Fed. R. Civ. P. 8(a)(2). "A district court's dismissal for failure to state a 

17 claim under Federal Rule of Civil Procedure 12(b)( 6) is proper if there is a 'lack of a 

18 cognizable legal theory or the absence of sufficient facts alleged under a cognizable 

19 legal theory. '" Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) 

20 (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696,699 (9th Cir. 1990». 

21 "[AJ plaintiff's obligation to provide the 'grounds' of his 'entitle[mentJ to relief' 

22 requires more than labels and conclusions, and a formulaic recitation of the elements 

23 ofa cause of action will not do." Bell At!. Corp. v. Twombly, 550 U.S. 544, 555 (2007) 

24 (quoting Fed. R. Civ. P. 8(a». "To survive a motion to dismiss, a complaint must 

25 contain sufficient factual matter, accepted as true, to 'state a claim to relief that is 

26 plausible on its face. '" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 

27 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual 

28 content that allows the court to draw the reasonable inference that the defendant is 

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1 liablefor the misconduct alleged." [d. (citation omitted). "[T]he tenetthat a court must 

2 accept as true all of the allegations contained in a complaint is inapplicable to legal 

3 conclusions. Threadbare recitals of the elements of a cause of action, supported by 

4 mere conclusory statements, do not suffice." [d. (citation omitted). "When there are 

5 well-pleaded factual allegations, a court should assume their veracity and then 

6 determine whether they plausibly give rise to an entitlement to relief." /d. at 679. "In 

7 sum, for a complaintto survive a motion to dismiss, the non-conclusory factual content, 

8 and reasonable inferences from that content, must be plausibly suggestive of a claim 

9 entitling the plaintiffto relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 

10 2009) (quotations and citation omitted). 

11 Plaintiff's Third, Fourth, Fifth, Sixth, Seventh, and Eighth Claims 

12 Plaintiff's Third, Fourth, Fifth, Sixth, Seventh, and Eighth claims appear to be 

13 based on Plaintiff's allegations that there are defects in the chain of title because: "ABC 

14 and MERS at the time in essence were fictitious entities, representing a real party in 

15 interest that did not manifest itself or properly perfect its interest;" "[t]he attempt to 

16 assign this to the Securitized trust (Structured Asset Mortgage Investment II Trust 

17 2007 -AR7 Mortgage Pass-Through Certificates 2007 -AR7), is invalid;" and "[b ]ased 

18 upon the Pooling and Servicing Agreement ... the manner in which the above 

19 assignment purported to convey the note and deed into the trust pool was noncompliant 

20 ... and thus, could not have made the trust pool as prescribed .... Thus, the actions of 

21 any subsequent "trustee" on behalf of this trust entity is ultra vires and without legal 

22 authority." 

23 Defendants contend that Plaintiff's claims fail to the extent they stem from her 

24 attack on MERS' authority to assign the loan. Defendants contend that "it is well 

25 settled that MERS is authorized to act on behalf of the beneficiary for whom it acts as 

26 nominee." (ECF No.8 at 8). Defendants contend that Plaintiff lacks standing to 

27 challenge the securitization and fails to allege the requisite prejudice. Defendants 

28 contend that, given this agreement, Plaintiff was not damaged when the loan was 

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1 assigned. Defendants further contend that Plaintiff cannot allege any harm because her 

2 obligations under the loan remained the same. Defendants further contend that Plaintiff 

3 specifically agreed by signing the Deed of Trust that the "Note or a partial interest in 

4 the Note together with [the] Security Instrument) can be sold one or more times without 

5 prior notice to Borrower .... " (ECF No.8 at 7). 

6 I. Mers' Authorityto Assign the Loan 

7 In Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256 (2011) the court 

8 explained: 

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MERS is a private corporation that administers a national registry of real 

estate debt mterest transactions. Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments but the members retain the 

promissory notes and mortgage servicing rights. The notes may thereafter 

be transferred among memBers without reqUiring recordation in the public records. Ordinarily, the owner of a promissory note secured by a deed of 

trust is designated as the beneficiary of the deed of trust. Under the MERS 

System, however, MERS is designated as the beneficiary in deeds of trust, 

acting as 'nominee' for the lender and granted the authority to exercise 

legal rights of the lender. 

15 Fontenot, 198 Cal. App. 4th at 267; see also Siliga v. Mortgage Elec. Registration Sys., 

16 Inc., 219 Cal. App. 4th 75,83-84 (2013). California courts have held that a trustor who 

17 agreed under the terms of the deed of trust that MERS, as the lender's nominee, has the 

18 authority to exercise all of the rights and interests of the lender, including the right to 

19 foreclose, is precluded from maintaining a cause of action based on the allegation that 

20 MERS has no authority to exercise those rights. See Siliga, 219 Cal. App. 4th at 83-84 

21 (2013) ("The deed of trust itself, attached to the Siligas' complaint, establishes as a 

22 factual matter that MERS has the authority to exercise all of the rights and interests of 

23 the lender. The authority to exercise all of the rights and interests of the lender 

24 necessarily includes the authority to assign the deed of trust.") (internal citations 

25 omitted); Herrera v. Fed. Nat. Mortgage Assn., 205 Cal. App. 4th 1495, 1503-04 

26 (2012) ("[I]n the instant case, plaintiffs agreed in the original DOTthat MERS held the 

27 right to exercise all interests and rights held by the lender and its successors and 

28 assigns, including the right to assign the DOT and to foreclose on plaintiffs' property. 

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1 The DOT states: Borrower [plaintiffs] understands and agrees that MERS holds only 

2 legal title to the interests granted by Borrower in this Security Instrument, but, if 

3 necessary to comply with law or custom, MERS (as nominee for Lender and Lender's 

4 successors and assigns) has the right: to exercise any or all of those interests, including, 

5 but not limited to, the right to foreclose and sell the Property; and to take any action 

6 required of Lender including, but not limited to, releasing and canceling this Security 

7 Instrument.") (internal quotation omitted). 

8 In this case, the Deed of Trust states that the lender is American Brokers Conduit 

9 and "MERS is a separate corporation that is acting solely as nominee for Lender and 

10 Lender's successors and assigns." (ECF No. 1-4, Exh. 59: Deed of Trust at 16). The 

11 Deed of Trust further states that 

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Borrower understands and agrees that MERS holds only legal title to the 

interests granted by Borrower in this Security Instrument, but, if necessary 

to com,l?Iy with law or custom, MERS ~as nominee for Lender ana 

Lender s successors and assigns) has the fIght: to exercise any or all of 

those interests, including, but not limited to, the right to foreclose and sell 

the Property; and to take any action required of Lender including, but not 

limited to, releasing and canceling this Security Instrument. 

16 !d. at 17. The Deed of Trust itself establishes that MERS has the authority to exercise 

17 all of the rights and interests of the lender. See Siliga, 219 Cal. App. 4th at 83-84. The 

18 authority to exercise all of the rights and interests of the lender necessarily includes the 

19 authority to assign the deed oftrust. See Herrera, 205 Cal. App. 4th at 1505; Siliga, 

20 219 Cal. App. 4th at 84. 

21 II. Standing 

22 "[D]istrict courts have held that borrowers who were not parties to the 

23 assignment of their deed-and whose rights were not affected by it-lacked standing to 

24 challenge the assignment's validity because they had not alleged a concrete and 

25 particularized injury that is fairly traceable to the challenged assignment." Marques 

26 v. Fed. Home Loan Mortg. Corp., No. 12-cv-1873, 2012 WL6091412, at *4 (S.D. Cal. 

27 Dec. 6, 2012) (citations omitted); see id. at *5 ("[T]he validity ofthe assignment does 

28 not affect whether [the] borrower owes its obligations, but only to whom [the] borrower 

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1 is obliged.") (quotation omitted). This Court has held that borrowers who were not 

2 parties to the assignment of their deed-and whose rights were not affected by 

3 it-lacked standing to challenge the assignment's validity. See Diunugala v. IP 

4 Morgan Chase Bank, N.A., No. 12CV2106-WQH KSC, 2015 WL 350559, at * 13 (S.D. 

5 Cal. Jan. 21, 2015). See also McLaughlin v. Wells Fargo Bank, N.A., No. 12-1114, 

6 2012 WL 5994924, at *6 (C.D. Cal. Nov. 30, 2012) ("[t]o the extent [a] Plaintiff bases 

7 her claims on the theory that [Defendant] allegedly failed to comply with the terms of 

8 the [pooling and servicing agreement], the court finds that she lacks standing to do so 

9 because she is neither a party to, nor a third party beneficiary of, that agreement." 

10 (citing Sami v. Wells Fargo Bank, No. 12-108,2012 WL 967051, at *5 (N.D. Cal. Mar. 

11 21,2012»); Ienkins v. IP Morgan Chase Bank, N.A., 216 Cal. App. 4th 497,514-15 

12 (2013) ("As an unrelated third party to the alleged securitization, and any other 

13 subsequent transfers of the beneficial interest under the promissory note, [Plaintiff] 

14 lacks standing to enforce any agreements, including the investment trust's pooling and 

15 servicing agreement, relating to such transactions. Furthermore, even if any subsequent 

16 transfers of the promissory note were invalid, [Plaintiff] is not the victim of such 

17 invalid transfers because her obligations under the note remained unchanged.") 

18 (citations omitted); cf Murphyv. Allstate Ins. Co., 17 Cal. 3d 937,944 (1976) ("A third 

19 party should not be permitted to enforce covenants made not for his benefit, but rather 

20 for others.... As to any provision made not for his benefit but for the benefit of the 

21 contracting parties or for other third parties, he becomes an intermeddler."). 

22 In this case, Plaintiff was not a party to the assignment of the deed of trust, and 

23 her rights were not affected by it. Plaintiff's obligations under the Deed of Trust were 

24 only affected by the assignment of the Deed of Trust insofar as they altered the party 

25 to whom the Plaintiff was obliged. Therefore, Plaintiff does not have standing to 

26 challenge the secu~itization of her loan or any subsequent assignment of the Deed of 

27 Trust. 

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1 III. The Deed of Trust 

2 Even if Plaintiff had standing to challenge the securitization of her loan, the 

3 securitization theory fails when plaintiffs have signed a Deed of Trust which provides 

4 that the note or a partial interest in the note may be sold. See Fares v. GMAC 

5 Mortgage, LLC, 2013 WL 2049388, at *3 (N.D. Cal. May 14, 2013) ("Here, the 

6 securitization theory also fails because plaintiffIrene Flores agreed that her Promissory 

7 Note, and partial interests in the Note, could be sold. Likewise, plaintiff Irene Flores 

8 signed the deed of trust, which provides that '[t]he Note or a partial interest in the Note 

9 (together with this Security Instrument) can be sold one or more times without prior 

10 notice to Borrower. "'). In this case, Section 20 ofthe Deed of Trust signed by Plaintiff 

11 states: "The Note or a partial interest in the Note (together with this Security 

12 Instrument) can be sold one or more times without prior notice to Borrower." (ECF 

13 No. 1-4, Exh. 59 at 25). 

14 Plaintiff's Third, Fourth, Fifth, Sixth, Seventh, and Eighth claim, which appear 

15 to be based on Plaintiff's allegations that there are defects in the chain of title are 

16 dismissed. 

17 Plaintiff's First and Second claims for Violation of FDCPA 

18 A. Defendant NDSC 

19 Defendants contend that Defendant NDSC is not liable pursuant to the FDCP A 

20 because foreclosure sale notices issued in compliance with Civil Code section 2924 do 

21 not implicate the FDCPA. Defendants contend that Defendant NDSC is alleged to 

22 have done "nothing more than send Plaintiff notice of a nonjudicial foreclosure sale." 

23 (ECfNo. 8 at 11). Plaintiff contends that NDSC is a debt collector because it obtained 

24 the debt in default. 

25 To be liable for a violation of the FDCPA, the defendant must, as a threshold 

26 requirement, be a "debt collector" within the meaning of the FDCPA. Heintz v. 

27 Jenkins, 514 U.S. 291, 294 (1995). A debt collector is defined as: 

28 any person who uses any instrumentality of interstate commerce or the 

mails in any business the principal purpose of which is the collection of 

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any debts, or who regularly collects or attempts to collect, directly or 

indirectly, debts owed or due or asserted to be owed or due another. 

15 U.S.c. § 1692a(6). As the Ninth Circuit Court of Appeals noted in Santoro v. CTC 

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Foreclosure Servo Corp., 12 Fed. Appx. 476 *11-12 (9th Cir.2001), a foreclosure sale 

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notice issued in compliance with California Civil Code section 2924 et seq. does not 

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seek to collect a debt. See also Gonzalez V. CNA Foreclosure Serv., Inc., No. 09 CV 

2034 MMA MDD, 2011 WL 2580681, at *3 (S.D. Cal. June 29,2011) ("[T]he Court 

concludes CNA is not a 'debt collector' within the meaning of the FDCP A. At no time 

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did CNA seek to collect money from Plaintiffs. Rather, CNA's notices informed 

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Plaintiffs that if they did not take action with respect to the amounts allegedly owed to 

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the beneficiary, Dakota Loans, Plaintiffs may lose legal rights and the Property may be 

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subject to foreclosure .... [S]uch notices do not fall within the conduct prohibited by 

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the FDCPA."). 

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Plaintiff alleges that Defendant NDSC sent correspondence to Plaintiff on 

September 15,2014, October 15, 2014, November 20,2014, and December 31,2014. 

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Plaintiff alleges that each correspondence "threatens to take foreclosure action that the 

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Plaintiff does not believe the Defendant is entitled to take, in violation of 15 USC 

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1692e(5) and 15 USC 1692f(6)(A)." !d. <J[<J[ 83,89,95, 101. Plaintiff alleges that each 

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correspondence "misrepresented the character and status of the debt under 15 USC 

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1692e(2)(A)." Id. <J[<J[ 84, 90, 96, 102. Plaintiff alleges that "Defendant NDSC has 

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repeatedly cancelled and reset the sale date multiple times without specifically advising 

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who it is collecting a debt for, in violation of 15 USC 1692e(1O)." Id. <J[ 104. Plaintiff 

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further alleges that Defendant NDSC sent correspondence to Plaintiff through its agent 

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Tiffany and Bosco on August 19, 2015, and March 24, 2015. With respect to this 

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correspondence, Plaintiff alleges that Defendant NDSC "knew or should have known 

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that they did not have any real authority to demand payment or threaten to take such 

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action, all while knowingly misrepresenting to the Plaintiff their intentions to take such 

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actions, knowing such actions were false imd misrepresentative, in violation of 15 USC 

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1692e(5) and 15 USC 1692f(6)(A)." Id. <J[<J[114, 118. 

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1 In this case, the cOlTespondence sent by Defendant NDSC on September 15, 

2 2014, October 15,2014, November 20,2014, and December 31,2014, do not seek to 

3 collect money from Plaintiff, but inform Plaintiffthat "UNLESS YOU TAKE ACTION 

4 TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE 

5 WITHOUT FURTHER NOTICE." See ECF No. 1-2, Exhs. 21-24. The Court finds 

6 thatthe cOlTespondence sent by Defendant NDSC on September 15,2014, October 15, 

7 2014, November 20, 2014, and December 31, 2014, issued in compliance with 

8 California Civil Code section 2924 et seq. were not attempts to collect a debt. 

9 Defendant NDSC is not a "debt collector" pursuant to the FDCP A. Plaintiff's FDCP A 

10 claim against Defendant NDSC is dismissed. 

11 B. Defendant SPS 

12 Plaintiff alleges that Defendant SPS sent cOlTespondence to Plaintiff on April 12, 

13 2014,July 14, 2014, September 3, 2014, September 13, 2014, October 1,2014, October 

14 8,2014, and October 18, 2014. Plaintiff alleges that each cOlTespondence "purports 

15 to misrepresent SPS's authority." ECFNo. 1 <J[CJ[39, 46, 50, 54, 60, 64, 69, 72. Plaintiff 

16 alleges that each cOlTespondence "threatens ... to take foreclosure action that the 

17 Plaintiff believes and alleges is not within the rights of Defendant SPS to take, in 

18 violation of 15 USC 1692e(5) and 15 USC 1692f(6)(A)." !d. n 41,44,48,51,56,62, 

19 66, 70, 73. Plaintiff further alleges that each cOlTespondence "misrepresented the 

20 character and status of the debt under 15 USC 1692e(2)(A)." Id. n 42,45,49,52,57, 

21 63,67,71,74. 

22 Defendants contend that Defendant SPS does not qualify as a debt collector for 

23 purposes of the FDCPA because Defendant SPS is a mortgage servicing company. 

24 Plaintiff contends that the cOlTespondence sent by Defendant SPS specifically state that 

25 SPS is a debt collector. 

26 Excluded from the definition of "debt collector" is any person collecting or 

27 attempting to collect "a debt which was not in default at the time it was obtained by 

28 such person." 15 U.S.C. § 1692a(6)(F)(iii). Therefore, a mortgage servicing company 

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1 is excluded from the definition of a debt collector if it acquired the loan before the 

2 borrower was in default. See Schlegel v. Wells Fargo Bank, N.A., 799 F.Supp.2d 1100, 

3 1103-04 (N.D. Cal. 2011), rev'd on other grounds, 720 F.3d 1204 (2013); Nool v. 

4 HomeQ Servicing, 653 F.Supp.2d 1047, 1053 (E.D. Cal. 2009) (quoting Perry v. 

5 Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985». 

6 Attached to Plaintiff's Complaint is a "Validation of Debt Notice" sent to 

7 Plaintiff by Defendant SPS, dated August 12, 2013. See ECF No. 1-2, Exh. 31. The 

8 Notice states that "[ w]e recently sent you a letter advising you that the servicing of your 

9 mortgage loan was transferred to Select Portfolio Servicing, Inc. (SPS) effective 

10 08/0112013." Id. Furthermore, Plaintiff asserts that "the last payment made by her on 

11 this alleged debt was October, 2008." (ECF No.1 at 24). The Court finds that Plaintiff 

12 has alleged sufficient facts to show that Defendant SPS is a "debt collector" under the 

13 FDCPA. 

14 However, Plaintiff's FDCPA claim against Defendant SPS fails for other 

15 reasons. Plaintiff alleges that Defendants SPS violated 15 U.S.C. §§ 1692e(5) and 

16 1692f(6)(A). 15 U.S.C. § 1692e(5) prohibits debt collectors from threatening "to take 

17 any action that cannot legally be taken or that is not intended to be taken." 15 U.S.c. 

18 § 1692f(6)(A) prohibits debt collectors from "[t]aking or threatening to take any 

19 nonjudicial action to effect dispossession or disablement of property if there is no 

20 present right to possession of the property claimed as collateral through an enforceable 

21 security interest." Plaintiff alleges that Defendant SPS violated 15 U.S.C. § § 1692e(5) 

22 and 1692f(6)(A) because "[t]he correspondence threatens ... to takeforeclosure action 

23 thatthe Plaintiff believes and alleges is not within the rights of Defendant SPS to take." 

24 (ECF No. i<J[<j[ 41,44,48,51,56,62,66,70,73). Plaintiff's allegations that the actions 

25 were not within Plaintiff's rights are based on Plaintiff's allegations that "it is 

26 impossible forSPS or any other party to appoint a Substitute Trustee, or NDSC to act 

27 as such." (ECF No.1 <j[ 22). Because the Court has found that Plaintiff lacks standing 

28 to challenge the securitization of her loan or any subsequent assignment of the Deed 

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1 of Trust, Plaintiff's allegations that Defendant SPS violated 15 U.S .C. § § 1692e(5) and 

2 1692f(6)(A), which are based on the same grounds, must also be dismissed. To the 

3 extent Plaintiff's FDCPA claim against Defendant SPS alleges that Defendant SPS 

4 violated 15 U.S.c. §§ 1692e(5) and 1692f(6)(A), Plaintiff's FDCPA claim against 

5 Defendant SPS is dismissed. 

6 Plaintiff also alleges that Defendant SPS violated 15 U.S.C. § 1692(2)(A). 15 

7 U.S.C. § 1692e(2)(A) prohibits the false representation of the character, amount, or 

8 legal status of any debt. However, Plaintiff fails to allege facts to show that Defendant 

9 SPS made a false representation of the character, amount, or legal status of any debt. 

10 To the extent Plaintiff's FDCP A claim against Defendant SPS alleges that Defendant 

11 SPS violated 15U.S.C. § 1692e(2)(A), Plaintiff's FDCPAclaimagainstDefendantSPS 

12 is dismissed. 

13 Plaintiff's Ninth Claim: Violation of Deceptive Trade Practices Act 

14 Defendants contend that Plaintiff does not allege any facts to show that 

15 Defendants are subject to the Utah statute. Defendants further contend that the parties 

16 agreed to be governed by California law pursuant to the Deed of Trust. 

17 Plaintiff contends that Utah law applies as to Defendant SPS because Defendant 

18 SPS is headquartered in Utah, its principal place of business and the place of 

19 incorporation. Plaintiff contends that Defendant SPS "is therefore bound to follow the 

20 law wherever regardless if the ultimate act hurt persons and properties elsewhere." 

21 (ECF No. 10 at 23). 

22 Plaintiff's ninth claim alleges violation of the deceptive trade practices act 

23 pursuantto a Utah statute § 13-Ua-3. Plaintiff alleges that "SPS knew or was reckless 

24 in not knowing it was violating the provisions of [§ 13-11a-3]." (ECF No.1 q[ 169). 

25 Plaintiff alleges that: 

26 

27 

28 

As a result of the above violation, Plaintiff spent time and effort and 

expended emotional energy related to attemjJting to deal with this matter. 

She continued to deal WIth it because SPS masqueraded as the true 

servicer under the authority of the real party in interest when it was not. 

SPS procedures that could have resulted in the loss of Plaintiff's home to 

the wrong party if she did not fight them. She fought back and as a result 

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1 

2 

had to expend money and suffer emotional stress dealing with it. This 

also harmed her in her ability to have the quiet enjoyment of her premises and not be disturbed. 

3 [d. <j[ 170. 

4 Section sixteen of the Deed of TlUst, attached to Plaintiff's Complaint states that 

5 "[t]his Security Instrument shall be governed by federal law and the law of the 

6 jurisdiction in which the Property is located." (ECF No. 1-4, Exh. 59: Deed of TlUst 

7 at 24). Plaintiff's Complaint states that the subject property is "situated in La Mesa, 

8 San Diego County, California." (ECF No.1 <j[ 5). Therefore, pursuant to the Deed of 

9 TlUst, the parties agreed that the security instrument is governed by the law of 

10 California. Plaintiff's ninth claim for violation of Deceptive Trade Practices Act, Utah 

11 statute § 13-11a-3 is dismissed. 

12 Plaintiff's Eleventh Claim: Homeowner's Bill of Rights 

13 Plaintiff eleventh claim alleges violation of the Homeowner's Bill of Rights 

14 against "all Defendants." (ECF No.1 at 50). Defendants contend that Plaintiff fails 

15 to allege any facts to show that Plaintiff previously received a loan modification; that 

16 Plaintiff was previously evaluated for a loan modification; and/or that the application 

17 Plaintiff purportedly submitted in October 2014 contained documentation of a material 

18 change. Defendants contend that it is impossible to determine whether Defendants 

19 owed any duty under § 2923.6 to refrain from recording any foreclosure document 

20 without these facts. Defendant contend that "as best can be ascertained from the 

21 availablefacts, no TlUstee's Deed Upon Sale has been recorded, to date, and Plaintiff's 

22 application for a modification is still pending." (ECF No.8 at 19). Defendants contend 

23 that absent any facts showing that the alleged violations have not been cured and/or 

24 that the foreclosure sale has taken place, Plaintiff's claim lacks sufficient facts upon 

25 which relief may be granted. Defendants further contend that Plaintiff's claim is not 

26 ripe because a lender/servicer can avoid liability under HBOR altogether by correcting 

27 any would-be violations before the sale takes place. Defendants contend that "because 

28 there has been no sale ... Plaintiff's HBOR claims [are] not ripe." (ECF No.8 at 20). 

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1 Plaintiffs contend that the Complaint alleges that "Defendants' recorded the 

2 Notice of Sale on March 26, 2015 while Plaintiff's completed application was pending 

3 in violation of Civ. Code § 2923.6(c)." (ECF No. 10 at 24). Plaintiff's contend that 

4 the allegation is sufficient to withstand a motion to dismiss. 

5 In reply, Defendants contend that California Civil Code § 2924.12( c) of HBOR 

6 specifically absolves servicers and trustees of all liability where they have corrected the 

7 alleged violation before the foreclosure. 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

California Civil Code § 2923.6(c) provides: 

If a borrower submits a complete application for a first lien loan 

modification offered by, or through, the norrower's mortgage servicer, a 

mortgage servicer, mortgagee, trustee, beneficiary, or autliorized agent shall not record a notice of Clefault or notice of salel or conduct a trustee's 

sale, while the complete first lien loan modification application is 

pending. A mortgage servicer mortgagee, trustee, beneficiary or 

authorized agent snail not record a notice of default or notice of safe or 

conduct a trustee's sale until any ofthe following occurs: 

(1) The mortgage servicer makes a written determination that 

the borrower is not eligible for a first lien loan modification, 

and. any appeal period pursuant to subdivision (d) has 

expired. 

(2) The borrower does not accept an offered first lien loan 

modification within 14 days of the offer. 

(3) The borrower accepts a written first lien loan 

modification, but defaults on, or otherwise breaches the 

borrower's obligations under, the first lien loan modification. 

A borrower may seek an injunction to enjoin an improper foreclosure if a 

trustee's deed upon sale has not been recorded, Cal. Civ.Code § 2924. 12(a)(l); or, if 

21 

a trustee's deed upon sale has been recorded, the borrower may seek damages for 

22 

violations of the statutory provisions, id. § 2924. 12(b). However, the statute provides 

23 

a "safe harbor," precluding liability "for any violation ... corrected and remedied prior 

24 

to the recordation of a trustee's deed upon sale." [d. § 2924.12(c). 

25 

26 

Plaintiff alleges that she sent an "application package was sent via USPS Priority 

Mail." (ECF No.1 <J[ 186). "In a letter dated October 8, 2014, SPS acknowledged 

27 

receipt of Plaintiff's application and identified additional documentation required to 

28 

complete the application." [d. <J[ 187. Plaintiff alleges that she mailed Defendant SPS 

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1 the additional documents on November 11,2014. Id. Cj[ 189. Plaintiff alleges that "[a]s 

2 of November 12, 2014, SPS was in possession of Plaintiff's complete application for 

3 a loan modification." Id. Cj[ 196. "Defendants recorded the Notice of Sale on March 26, 

4 2015 while Plaintiff's complete application was pending, in violation of Civil Code § 

5 2923.6(c)." Id. Cj[ 197. "To date, SPS has not made a written determination of 

6 Plaintiff's modification application and, instead, Defendants attempt to conduct a 

7 trustee's sale on May 19, 2015 in further violation of Civil Code § 2923.6(c)." Id. Cj[ 

8 198. 

9 In this case, Plaintiff alleges that Defendants recorded the Notice of Sale on 

10 March 26, 2015 while Plaintiff's complete application was pending. Plaintiff fails to 

11 allege that a trustee's deed upon sale has been filed or that a foreclosure sale has taken 

12 place. Therefore, Plaintiff has not alleged facts sufficient to show that Defendant SPS 

13 does not fall within the "safe harbor" of California Civil Code § 2924.12( c). See 

14 Gonzales v. Citimortgage, Inc, No. C-14-4059 EMC, 2015 WL 3505533, at *2 (ND. 

15 Cal. June 3, 2015) (Here, it is undisputed that no trustee's deed upon sale was filed and 

16 that no foreclosure has taken place. Because a foreclosure sale has not taken place, and 

17 thus a trustee deed upon sale has not been recorded, Plaintiff has not stated a claim for 

18 damages."); Vasquezv. Bank of Am., N.A., No. 13-CV-02902-JST, 2013 WL6001924, 

19 at *7 (N.D.Cal. Nov. 12,2013) ("Plaintiffs claims ... for actual damages, attorneys' 

20 fees, and treble damages are unavailable until such time as the deed upon sale has been 

21 recorded."); Ellis v. Bank of Am., N.A., No. 13-cv-5257, 2013 WL 5935412, at *4 

22 (C.D.Cal. Oct. 28, 2013) ("There is currently no foreclosure activity against the 

23 property and plaintiff does not allege that a trustee's sale ever took place. The Court 

24 accordingly concludes that section 2924.12 shields defendants from any liability for 

25 their alleged violations of statutory requirements, and that plaintiff's claim therefore 

26 fails."). 

27 Furthermore, Plaintiff alleges that the loan modification application was 

28 complete on November 2, 2014, but indicates that Defendant SPS requested additional 

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1 information after November 2, 2014. Plaintiff fails to plausibly allege that the loan 

2 modification application was complete. Plaintiff's Homeowner's Bill of Rights claim 

3 is dismissed. 

4 Plaintiff's Eighteenth Claim: Negligence 

5 Plaintiff's eighteenth claim alleges negligence against all Defendants. 

6 Defendants contend that there are no facts to suggest that Defendants owed Plaintiff 

7 a duty or that Defendants' role exceeded the scope of a conventional lender. 

8 Defendants contend that, even if the Defendants did owe Plaintiff a duty, there are no 

9 facts to suggest that Defendants breached that duty. Defendants further contend that 

10 Plaintiff cannot show Defendants caused her poor credit rating because Plaintiff admits 

11 that she has not made a payment towards her loan since 2008. 

12 Plaintiff contends that servicers owe a duty in certain situations. Plaintiff 

13 contends that the facts relating to causation and damages are factual issues not 

14 appropriate for dismissal at the motion to dismiss stage. Plaintiff further contends that 

15 she has set forth her version of the facts in the eleventh cause of action which are 

16 incorporated by reference. 

17 "The elements of a cause of action for negligence are (1) a legal duty to use 

18 reasonable care, (2) breach of that duty, and (3) proximate cause between the breach 

19 and (4) the plaintiff's injury." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 

20 1339 (1998) (citation omitted). "The existence of a legal duty to use reasonable care 

21 in a particular factual situation is a question of law for the court to decide." Vasquez 

22 v. Residential Invs., Inc., 118 Cal. App. 4th 269,278 (2004). "[F]or purposes of a 

23 negligence claim, 'as a general rule, a financial institution owes no duty of care to a 

24 borrower when the institution's involvement in the loan transaction does not exceed 

25 the scope of its conventional role as a mere lender of money. '" Das v. Bank of Am., 

26 N.A., 186 Cal. App. 4th 727, 740 (2010) (quoting Nymark v. Heart Fed. Sav. & Loan 

27 Assn., 231 Cal. App. 3d 1089,1096 (1991»; see also Wagnerv. Benson, 101 Cal. App. 

28 3d 27, 34-35 (1980). Absent "special circumstances ... a loan transaction is at arm's 

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1 length and there is no fiduciary relationship between the borrower and lender." Oaks 

2 Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006). Likewise, a loan 

3 serviceI' generally does not owe a duty to the borrower of the loan it is servicing. See 

4 Castaneda v. Saxon Mortg. Servs., 687 F. Supp. 2d 1191, 1198 (E.D. Cal. 2009). 

5 Furthermore, absent special circumstances, there is no duty for a serviceI' to modify a 

6 loan. See Bunce v. Ocwen Loan Servicing, LLC, No. 13-00976,2013 WL 3773950, at 

7 *5-*6 (E.D. Cal. July 17,2013) (collecting cases); Gonzalez v. Wells Fargo Bank, No. 

8 12cv3842, 2012 WL 5350035 *6 (N.D. Cal. Oct. 29, 2012) ("A loan modification, 

9 which is nothing more than a renegotiation of loan terms, falls well within a[n] 

10 institution's conventional money-lending role.") (citations omitted). 

11 "However, even when the lender is acting as a conventional lender, the no-duty 

12 rule is only a general rule." Alvarez v. BA C Home Loans Servicing, L.P., 228 Cal. App. 

13 4th 941,945 (2014) (internal citations omitted). In California, the test for determining 

14 whether a financial institution owes a duty of care to a borrower-client involves the 

15 balancing of various factors, referred to as the Biakanja factors, '''among which are (1) 

16 the extent to which the transaction was intended to affect the plaintiff, (2) the 

17 foreseeability of harm to him, (3) the degree of certainty that the plaintiff suffered 

18 injury, (4) the closeness of the connection between the defendant's conduct and the 

19 injury suffered, (5) the moral blame attached to the defendant's conduct, and (6) the 

20 policy of preventing future harm. ", Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. 

21 App. 3d 1089,1098 (Cal. Ct. App. 1991) (citing Connorv. Great WesternSav. &Loan 

22 Assn., (1968) 69 Cal.2d 850, 865 (quoting Biakanja v. Irving (1958) 49 Cal.2d 647, 

23 650). 

24 

25 

26 

27 

28 

Plaintiff alleges: 

Defendants breached their duty by: (1) failing to acquire authority from the real party in interest, (2) failing to give Plainliff credit for 

payments, (3) commencing legal action outside the time barred allowed 

lsic] by law; (4) failing fo review Plaintiff's aRplication in a timet' 

manner; (5) misplacing Plaintiff's application for loan modification; (0) 

mishandlmg Plamtiff's application by relying on incorrect information; 

(7) misrepresenting the stafus of Plaintiff' s loan modification application; and (8) initiating and continuing foreclosure in violation of public policy 

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1 

2 

and the HBOR's restrictions on dual-track foreclosures, (9) not 

responding to the letters referenced above and required by law. 

(ECF No.1 err 272). "As a direct and proximate result of Defendants' negligence, 

3 

Plaintiff has been harmed in that the delayed processing of her application the slander 

4 

to her credit that was done, and the inability to settle the case through a court option." 

5 

/d. err 273. "In addition SPS was negligent to suggest a loan modification as a viable 

6 

option to settle, Defendant did not have authority to act for the proper real party in 

7 

interest." Id. Plaintiff alleges that, as a result, she: "now faces imminent foreclosure 

8 

and must pursue court action at great expense to her;" "has suffered the derogatory 

9 

ratings by the credit agencies that have made it difficult for her to establish 

10 

creditworthiness;" "has been required to retain legal counsel and has paid money to 

11 

protect her interest and defending title in the Subject Property that otherwise she would 

12 

not have had to expend; and "has been harmed in that she has lost substantial equity in 

13 

the Subject Property." Id. 

14 

15 

Plaintiff cites Jolley v. Chase Home Finanace, LLC, 213 Cal. App. 4th 872, 

(2013) in support of her contention that this case involves a circumstance where 

16 

Defendants owe Plaintiff a duty of care. In Jolley, the court found triable issues of fact 

17 

existed as to the plaintiff's negligence claim. The plaintiff in Jolley alleged that: 

18 

19 

20 

21 

Chase ... acted unreasonably by failing to review Jolley's request for a 

loan modification in good faith, having decided in advance it would 

extend no further momes in connection with WaMu's loans. Jolley also 

complains about specific misstatements, false assurances given by Chase 

personnel about the prospects for a loan modification, while different 

personnel at Chase-Hie actual decision makers-were bent on foreclosure. 

22 Jolley, 213 Cal. App. 4th at 899-900. 

23 The court in Jolley conducted an analysis of the Biakanja factors as noted that 

24 defendants made specific misrepresentations to the plaintiff which affected the 

25 plaintiff's decision making. See Jolley, 213 Cal. App. 4th 900 ("North's 

26 representations were made directly to Jolley, and were certainly likely to, if not 

27 intended to, affect his decisionmaking."); id. ("Given North's encouragement, it was 

28 also foreseeable that Jolley would sink more of his own money into the project, thereby 

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1 suffering further injury."); id. ("the upbeat prediction of the availability of a loan 

2 modification and the rollover of the loan into a conventional mortgage was almost 

3 certainly a primary factor in causing this patticular injury."). 

4 The court in Jolley further stated "[ w]e find support for our conclusion in recent 

5 federal district court cases." Id. at 905. The court stated that: 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

Ansanelli v. JP Morggn Chase Bank, N.A. (N.D. Cal. Mar. 28, 2011 No. 

C 10-03892) 2011 WL 1134451, p. *7,2011 U.S. Dist. Lexis 32350, p. *21, is illustrative. There, the COUlt found a duty of care had properly been pleaded in a negligence action where the bank offered plaintIffs a 

trial loan modification plan, then reneged on a promise to modily the loan. 

The bank reported the loan as past due despite the fact that plamtiffs had ma~e proper p'ayments under the trial modification, thereby damaging theIr credIt rafing. 

Similarly" Robinson v. Bank of America (N.D. Cal. Mlly 29;...,2012 No. 

12-CV-Ou494-RMW) 2012 WL 1932842, p. *7, 2012 U.S. uist. Lexis 

74212, p. *21, decided on a motion to dIsmiss, held that a bank went 

beyond Its role as a "silent" lender in its dealings with plaintiff during loan modification negotiations. There, the banK was "alleged to have 

executed and breached the modification agreement, then engaged in a 

series of contradictory and somewhat misleading communications with 

plaintiff-in person, in writing, and by phone-regarding the status of his 

loan. Under such circumstances, it was entirely foreseeable that [the 

bank's] conduct could result in damage to plaintiffs credit rating or a 

decrease in the value of his home." 

/d. at 906. 

18 

In this case, the Court finds that Plaintiff's allegations are not sufficient to show 

that Defendants owed a duty of care. The facts alleged do not show that Defendants' 

19 

involvement exceeded the scope of their conventional role as a mere lender of money. 20 

See Gonzalez v. Wells Fargo Bank, No. 12cv3842, 2012 WL 5350035 *6 (N.D. Cal. 

21 

Oct. 29, 2012) ("A loan modification, which is nothing more than a renegotiation of 

22 

loan terms, falls well within a[n] institution's conventional money-lending role.") 23 

(citations omitted); see also Bunce v. Ocwen Loan Servicing, LLC, No. 13-00976,2013 

24 

WL 3773950, at *5-*6 (E.D. Cal. July 17,2013) (collecting cases). Jolley and the 

25 

supporting cases are distinguishable from this case. Jolley, Ansanelli, and Robinson 

26 

all involve defendants who actively mislead plaintiffs as to the status of their loan 

27 

modification application, or the likelihood of receiving a loan modification. In this 

28 

case, Plaintiff fails to allegefacts to support her conclusory allegations that Defendants 

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1 misplaced Plaintiff's application for loan modification, mishandled Plaintiff's 

2 application, and misrepresented the status of Plaintiff's loan modification application. 

3 Plaintiff only alleges that "Plaintiff had a complete loan modification application in 

4 process with SPS as of November 12, 2014. However, SPS has kept Plaintiff's 

5 application in perpetual review with an endless cycle of requests for duplicative or 

6 unnecessary information." These allegations fail to support a claim for negligence. 

7 Plaintiff's Twentieth Claim: Accounting 

8 Plaintiff's twentieth claim requests an accounting. 

9 Defendants contend that Plaintiffs accounting claim fails because there is no 

10 fiduciary relationship exists between Plaintiff and Defendants. Defendants further 

11 contend that Plaintiff has not alleged facts to show that she is owed any balance. 

12 Plaintiff contends that an accounting is appropriate where there is a dispute as 

13 to the amount due. Plaintiff contends that she has no confidence that Defendants are 

14 calculating the alleged account correctly because Defendants "do not come up with the 

15 same amount each time," and "Defendants cannot obtain a consistent amount." (ECF 

16 No. 10 at 29). Plaintiff does not address Defendants' contention that no fiduciary 

17 relationship exists. 

18 "A cause of action for an accounting requires a showing that a relationship exists 

19 between the plaintiff and defendant that requires an accounting, and that some balance 

20 is due the plaintiff that can only be ascertained by an accounting." Tamburri v. 

21 Suntrust Mortg., Inc., 2011 WL 6294472, at *17 (N.D. Cal. Dec. 15,2011) (quoting 

22 Teselle v. McLoughlin, 173 Cal. App. 4th 156, 179 (2009)). "[A]bsent special 

23 circumstances ... a loan transaction is at arm's length and there is no fiduciary 

24 relationship between the borrower and lender." Oaks Mgmt. Corp. v. Super. Ct., 145 

25 Cal. App. 4th 453, 466 (2006). A loan servicer generally does not owe a duty to the 

26 borrower of the loan it is servicing. See Shepherd v. Am. Home Mortgage Servs., Inc., 

27 No. CIY 209-1916 WBS GGH, 2009 WL 4505925, at *2 (E.D. Cal. Nov. 20, 2009) 

28 ("In fact, loan servicers do not owe a duty to the borrowers ofthe loans they service."); 

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1 Watts v. Decision One Mortg. Co., No. 09-43, 2009 U.S. Dist. LEXIS 59694 (S.D. Cal. 

2 July 13,2009); Marks v. Ocwen Loan Servicing, No. 07-2133, 2009 WL 975792, at *7 

3 (N.D.Cal. Apr. 10, 2009) ("[A] loan servicer does not owe a fiduciary duty to a 

4 borrower beyond the duties set forth in the loan contract"). 

5 Plaintiff alleges that "Defendants improperly marked-up prices charged by 

6 vendors and then, without disclosing the mark-up, assessed Plaintiff's account for the 

7 marked-up amounts with the intention of generating a profit on the nonperforming 

8 loan." Id. err 292. Plaintiff alleges that "Defendants fraudulently concealed these 

9 unauthorized fees on borrowers' alleged accounts, omitting any information about 

10 Defendants' additional profits, by not identifying them on mortgage statements as 

11 alleged above." Id. err 293. 

12 Plaintiff's First Amended Complaint fails to allege facts demonstrating that 

13 circumstances exist between Plaintiff and Defendants creating a fiduciary relationship. 

14 Plaintiff's accounting claim is dismissed. 

15 Plaintiff's Twenty-First Claim: Violation of 11 U.S.C. § 1691(d)(1) 

16 Plaintiff's twenty-first claim alleges violation of the Equal Credit Opportunity 

17 Act, 11 U.S.c. § 1691(d)(I), against Defendant SPS. Plaintiff alleges that "[i]n 

18 November 20 14 Plaintiff submitted a completed loan modification application, thereby 

19 applying for an extension of credit. However, the application remained in Defendants' 

20 underwriting department through at least the time the suit was commenced." (ECF No. 

21 1 err 296). Plaintiff alleges that "Defendants' failure to notify Plaintiff of an answer 

22 within thirty days of the receipt of a loan modification application constitutes a 

23 violation of section 1691(d)(l) of the Equal Credit Opportunity Act, regardless of 

24 Plaintiff's default status, which she denies." Id. err 297. 

25 Defendants contend that Plaintiff fails to allege facts to show that she was a 

26 member of a protected class. Defendants contend that Plaintiff fails to allege facts to 

27 show that she was qualified for the modification for which she applied. Defendants 

28 contend that Plaintiff fails to allege facts to show that she was wrongfully denied credit 

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1 despite being qualified. Defendants further contend that Plaintiff fails to allege facts 

2 to show that she suffered any actual damages arising from Defendants' alleged failure 

3 to make a determination on her loan modification application within thirty days. 

4 

5 

6 

7 

8 

15 U.S.c. § 1691(a) provides: 

It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction-(I) on the basis of race, 

color, religion, national origin, sex or marital status, or age (provided the 

applicant nas the capacity to contract); (2) because an or part of the 

applicant's income derives from any public assistance program\ or (3) because the applicant has in good faIth exercised any riglit unaer this 

chapter. 

9 Plaintiff seeks relief under a provision of the Equal Credit Opportunity Act which 

10 requires creditors to notify applicants of the outcome of their credit applications within 

11 thirty days of the application. Id. § 1691(d)(1). 

12 The Ninth Circuit has yet to articulate the elements of an Equal Credit 

13 Opportunity Act claim. However, numerous district courts in this circuit have held that 

14 to state a claim under the Equal Credit Opportunity Act a plaintiff must allege that: "( 1) 

15 she is a member of a protected class; (2) she applied for credit with defendants; (3) she 

16 qualified for credit; and (4) she was denied credit despite being qualified." Harvey v. 

17 Bank of Am., N.A., 906 F. Supp. 2d 982, 990-91 (N.D. Cal. 2012) (citing Hafiz v. 

18 Greenpoint Mortg. Funding, Inc., 652 F.Supp.2d 1039, 1045 (N.D. Cal.2009)). 

19 Plaintiff's Complaint fails to allege that she is a member of a protected class, or that she 

20 was denied credit despite being qualified. Plaintiff specifically alleges that her loan 

21 modification application is still pending. See ECF No.1 <J[ 198 ("To date, SPS has not 

22 made a written determination of Plaintiff's modification application .... "). The Court 

23 concludes that Plaintiff fails to plausibly allege facts under the Equal Credit 

24 Opportunity Act. Plaintiff's twenty-first claim alleging violation of the Equal Credit 

25 Opportunity Act, 11 U.S.C. § 1691(d)(1) is dismissed. 

26 Plaintiff's Tenth Claim: Injunctive Relief 

27 Plaintiff's tenth claim for injunctive relief is brought against all Defendants. 

28 Plaintiff alleges that "Defendants ... have engaged in a course of conduct that has 

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1 resulted in repeated violations of the Plaintiff's rights under the Fair Debt Collection 

2 Practices Act, and the numerous other causes of action set forth above, not the least of 

3 which is the improper commencing of foreclosure proceedings beyond what the State 

4 of California allows." (ECF No.1 <J[ 175). Plaintiff alleges that "[i]t has been since 

5 October 2008 since the last payment was made, and that is four years beyond that 

6 allowed to enforce the underlying debt as provider d] in violation of CCP 337." Plaintiff 

7 alleges that "[0 ]nce the underlying debt is unenforceable because of the statute of 

8 limitations, so is the ability to enforce the security which is dependent upon it," and 

9 "[r]egardless, foreclosing on security after five years is not permissible under CCP 320." 

10 /d. Plaintiff alleges that "unless Defendants are restrained by this Court, Plaintiff may 

11 lose her home and suffer irreparable harm including losing her home, her good credit, 

12 relations with parties, and her emotional health." Id. <J[ 176. 

13 Defendants contend that a nonjudicial foreclosure sale does not involve the filing 

14 of an action and therefore CCP 320 and CCP 337 are not applicable. Defendants further 

15 contend that there are no grounds for an injunction. Defendants contend that injunctive 

16 relief is not available to Plaintiff pursuant to the FDCP A and Plaintiff's other claims all 

17 fail for lack of merit. Defendants contend that Plaintiffs injunctive relief claim rises 

18 and falls with Plaintiff's other causes of action. 

19 Plaintiff contends that she is seeking injunctive relief pursuant to Federal Rule 

20 of Civil Procedure 65. Plaintiff further contends that California provides for injunctive 

21 relief in homeowner foreclosure actions such as action based on Cal. Civ. Code § 

22 2924. 12(a). 

23 CCP 320 states provides that "[n]o entry upon real estate is deemed sufficient or 

24 valid as a claim, unless an action be commenced thereupon within one year after making 

25 such entry, and within five years from the time when the right to make it descended or 

26 accrued." Cal. Civ. Proc. Code § 320. Cal. Civ. Proc. Code § 337 provides: 

27 

28 

An action upon any contract, obligation or liability founded upon an 

instrument in writing, except as provided in Section 336a of this code; 

lJrovided, that the time withm whlCh any action for a money judgment for 

the balance due upon an obligation for the payment of WhICh a deed of 

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1 

2 

3 

4 

trust or mortgage with power of sale upon real property or any interest 

therein was gIven as security, following the exercise of tile power of sale 

in such deed-of trust or mortgage may oe brought shall not extend beyond three months after the time of sale under such deed of trust or mortgage. 

Plaintiff fails to allege facts to show that CCP 320 and CCP 337 are applicable 

5 in this case. Defendants have not brought a claim against Plaintiff, rather Defendants 

6 have engaged in nonjudicial foreclosure. 

7 To the extent Plaintiff alleges that she is entitled to injunctive relief due to 

8 Defendants' repeated violations of Plaintiff's right "under the Fair Debt Collection 

9 Practices Act, and the numerous other cause of action set forth above," the Court finds 

10 that Plaintiff is not entitled to injunctive relief. Plaintiff's prayer for relief requests 

11 injunctive relief "pursuant to Cal. Bus. & Prof. Code § 17200, Cal. Civ. Code § 3396 

12 and CCP § 526, Cal. Civ. Code § 2924.12 and/or pursuant to Fed. Rules of Civ. Proc. 

13 65." (ECF No.1 at 7S). To the extentthat Plaintiff seeks injunctive relief "pursuant to 

14 Cal. Bus. & Prof. Code § 17200, Cal. Civ. Code § 3396 and CCP § 526, Cal. Civ. Code 

15 § 2924.12," the Court finds that Plaintiff is not entitled to injunctive relief because 

16 Plaintiff's claims have been dismissed. 

17 To the extent Plaintiff seeks injunctive relief pursuant to Federal Rule of Civil 

18 Procedure 65, the Court finds that Plaintiff is not entitled to injunctive relief. To obtain 

19 preliminary injunctive relief, a movant must show "that he is likely to succeed on the 

20 merits, tlIat he is likely to suffer irreparable harm in the absence of preliminary relief, 

21 that the balance of equities tips in his favor, and that an injunction is in the public 

22 interest." Winter v. Natural Res. De! Council, 555 u.s. 7, 20 (200S); see also Alliance 

23 or the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011) ("[S]erious 

24 questions going to the merits and a balance of hardships that tips sharply towards the 

25 plaintiff can support issuance of a preliminary injunction .... "). The function of a 

26 preliminary injunction is to preserve the status quo pending a determination of the 

27 action on the merits. King v. Saddleback Junior Coll. Dist., 425 F.2d 426,427 (9th Cir. 

28 1970). The Court has dismissed all claims on which Plaintiff relies for injunctive relief 

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1 based on a failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)( 6). 

2 For the reasons stated above, the Court finds that Plaintiffs have failed to establish a 

3 likelihood of success on the merits. Plaintiff's request for injunctive relief pursuant to 

4 Federal Rule of Civil Procedure 65 is denied. See Global Horizons, Inc. v. U.S. Dep 'f 

5 of Labor, 510 F.3d 1054, 1058 (9th Cir. 2007) ("Once a court determines a complete 

6 lack of probability of success or serious questions going to the merits, its analysis may 

7 end, and no further findings are necessary."). Plaintiff's injunctive relief claim is 

8 dismissed. 

9 RESP A and TILA Claims 

10 Plaintiff's twelfth through seventeenth claim allege violations of RESPA and 

11 TILA against Defendant SPS. Plaintiff alleges that "she is entitled to statutory damages 

12 and actual damages suffered as a result of SPS's willful and intentional failure to 

13 comply with [its statutory obligations and duties under Regulation X of RESP A and 

14 Regulation Z of TILA], including, but not limited to, the time and expense spent 

15 attempting to obtain SPS's compliance, and the emotional and psychological harm 

16 suffered as a result of SPS's persistent noncompliance." (ECF No.1 <j[ 203). "On or 

17 about October 29,2015, Plaintiff, by and through her attorney, mailed nine (9) separate 

18 [Requests for Information] ("RFIs") in nine (9) separate letters to SPS. Each RFI letter 

19 related to separate and distinct information rights under Regulations X and Z and in 

20 many instances different responsive time lines applied to each separate RFI letter." Id. 

21 <j[ 206. 

22 A. RESPA 

23 Sufficient Facts to State a RESP A Claim 

24 Section 2605( e) provides that not later than 30 after the receipt from any borrower 

25 of any qualified written request the servicer shall, after conducting an investigation, 

26 provide the borrower with a written explanation or clarification that includes (i) 

27 information requested by the borrower or an explanation of why the information 

28 requested is unavailable or cannot be obtained by the servicer; and (ii) the name and 

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1 telephone number of an individual employed by, or the office or department of, the 

2 servicer who can provide assistance to the borrower. 12 U.S.c. § 2605(e). 

3 Plaintiff alleges that" SPS failed to provide accurate and complete responses to 

4 the RFIs ... within 30 days after receipt." (ECF No.1 <J[ 226). Plaintiff alleges that: 

5 

6 

7 

8 

9 

Defendant provided inaccurate payoffbalances, at least four (4) inaccurate 

itemized payoff balances, and maccurate periodic billing statements. 

These four separate and each inaccurate itemIzed payoff balances/statements were provided by SPS in letters dated November 4, 

2014, November 61 2014, November 18, 2014 and February 3, 2015, 

respectively. Plaintiff was only provided with a pay offbalancelstatement, albeit incorrect, an itemized pay off balance/statement, and an owner of the 

note, albeit incorrect, and was not provided with any of the other 

information requested in the RFIs. 

10 Id. <J[ 245. With respect to Plaintiff's first, second, third and ninth Requests for 

11 Information, Plaintiff alleges that "SPS has failed to provide responses to Plaintiff's [] 

12 RFIs in violation of 12 C.F.R. § 1024.36(d)(2)(B)." Id. <J[ 253. With respect to all nine 

13 of Plaintiff's RFI letters, Plaintiff alleges that: 

14 

15 

16 

SPS failed to provide adequate and accurate information to Plaintiff's 

counsel's office with contact information and a telephone number for 

further assistance in writing, and failed to conduct a reasonable search for 

such information and provide a written notification1 with the basis for 

SPS's determination that the information was not avaIlable to it. 

17 /d. <J[ 256. With respect to all nine of Plaintiff's Notice of Error letters, Plaintiff alleges 

18 that "SPS concluded 'some of the documents you requested will not be provided as they 

19 are not specific to the servicing of the mortgage or are proprietary to SPS,'" but 

20 "Plaintiff's RFIs and subsequent NOE letters related specifically to the servicing of the 

21 mortgage and were not proprietary to SPS because all information was requested, and 

22 is specifically identified in either RESP A or TILA, and must be provided by SPS to 

23 Plaintiff." Id. n 266-67. Plaintifffurther alleges that "SPS failed to identify which of 

24 these requested documents or information were proprietary to SPS, and failed to identify 

25 which of the requested documents or information did not specifically relate to the 

26 servicing of Plaintiff's Loan." Id. <J[ 268. 

27 The Court finds that Plaintiff has not alleged sufficient facts to show that 

28 Defendant SPS failed to comply with the requirements of RESPA because Plaintiff's 

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1 allegations are conclusory. Plaintiff alleges that the information provided by Defendant 

2 SPS is inadequate and incorrect, but Plaintiff fails to provide facts to support the 

3 conclusion that the information was inadequate or incorrect. .Plaintiff's twelfth claim 

4 is dismissed to the extent it alleges a RESPA claim. Plaintiff's thirteenth, fourteenth, 

5 and seventeenth actions alleging violations of RESP A are dismissed. 

6 B. TILA 

7 Defendants contend that Regulation Z of TILA does not apply to them because 

8 neither NDSC, nor SPS constitute lenders who offers or extends credit regularly. 

9 Plaintiff does not address this contention. 

10 

11 

12 

13 

14 

15 

16 

17 

12 C.P.R. § 226.1(c) specifies who is covered by the provision: 

(c) Coverage. 

(1) In general, this regulation applies to each individual or business that 

offers or extends credit when four conditions are met: 

(i) The credit is offered or extended to consumers; 

(ii) The offering or extension of credit is done regularly; 

(iii) The credit is subject to a finance charge or is payable by a written 

agreement in more than four installments; and 

(iv) The credit is primarily for personal, family, or household purposes. 

18 Plaintiff's Complaint fails to allege facts to show that Defendants regularly offer or 

19 extend credit. Plaintiff fails to allege that Defendants offered or extended Plaintiff 

20 credit in this case. Documents attached to Plaintiff's Complaint show that Defendants 

21 NDSC and SPS are the trustee and loan servicer, respectively. Neither Defendant 

22 NDSC, nor Defendant SPS offered or extended credit to Plaintiff. Because Plaintiff 

23 fails to allege facts to show that Defendants regularly offer or extend credit, Plaintiff 

24 fails to show that 12 c.P.R. § 226 is applicable in this case. Plaintiff's twelfth claim is 

25 dismissed to the extent it alleges a TILA claim. Plaintiff's fifteenth and sixteenth claims 

26 for violation of TILA are dismissed. 

27 VeL § 17200 

28 Plaintiff's nineteenth claim alleges violation of Cali fomi a Business & Professions 

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1 Code § 17200 against Defendants NDSC and SPS. 

2 Defendants contend that Plaintiff's allegations "amount to a laundry list of mere 

3 conclusions of law." (ECF No. 8at 24). Defendants contend that Plaintiff's 

4 conclusions do not meet the required degree of specificity required to bring a VCL 

5 claim. Defendants further contend that Plaintiff does not allege an injury in fact because 

6 Plaintiff was facing foreclosure before any of the alleged conduct occurred. 

7 Plaintiff contends that "[a]ll that is required is an unfair, unlawful, and or 

8 fraudlent business act of practice." (ECF No.1 0 at 28). Plaintiff contends that "[t]here 

9 are many ofthose things here, and they are listed at [paragraph] 279, and declared action 

10 able at [paragraphs] 281 through 284." Plaintiff does not address Defendants' 

11 contention that she fails to allege an injury in fact. 

12 The VCL prohibits any "unlawful, unfair or fraudulent business act or practice." 

13 Cal. Bus. & Prof. Code § 17200. A plaintiff alleging a VCL claim must satisfy VCL 

14 standing requirements. See Birdsong v. Apple, Inc., 590 F.3d 955, 960 nA (9th Cir. 

15 2009). Private standing under the VCL is limited to "a person who has suffered injury 

16 in fact and has lost money or property as a result of the unfair competition." Cal. Bus. 

17 & Prof. Code § 17204; see also Degelmann v. Advanced Med. Optics, Inc., 659 F.3d 

18 835, 839 (9th Cir. 2011). "This provision requires [plaintiff] to show that she has lost 

19 money or property sufficient to constitute an injury in fact under Article III of the 

20 Constitution, and also requires a causal connection between defendant's alleged VCL 

21 violation and her injury in fact." Rubio v. Capital One Bank, 613 F.3d 1195, 1204-05 

22 (9th Cir. 201 0) (quotation omitted). Several courts have found that a plaintiff has not 

23 suffered an injury in fact when the loss suffered is a result of a plaintiff's default on the 

24 loan. See, e.g., Bernardi v. JPMorgan Chase Bank, NA., No: H-tv-4212, 2012 WL 

25 2343679, at *5 (N.D. Cal. June 20, 2012); Serna v. Bank of Am., NA., No. 11-10598, 

26 2012 WL 2030705, at *5 (C.D. Cal. June 4,2012); DeLeon v. Wells Fargo Bank, NA., 

27 No. lO-cv-1390, 2011 WL 311376, at *7 (N.D. Cal. Jan. 28, 2011). 

28 Plaintiff alleges that "[ a]s a direct and proximate result of Defendants' unlawful, 

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1 unfair and fraudulent conduct alleged herein, Plaintiff is in imminent risk of losing the 

2 Subject Property to the wrong parties." (ECF No.1 err 285). Plaintiff alleges that "[t]he 

3 imminent threat and risk of foreclosure constitutes injury-in-fact because it is concrete 

4 and particularized as to the property in question and initiation of foreclosure 

5 proceedings puts Plaintiff's interest in the Subject Property sufficiently in jeopardy [] 

6 constituting an injury under § 17200." [d. 

7 However, Plaintiff concedes that she has not made a payment on her loan since 

8 2008. (ECF No.1 err 33). Therefore, the Complaint fails to adequately allege facts that 

9 support the claim that the imminent risk of foreclosure is a result of the alleged 

10 unlawful, unfair or fraudulent business acts or practices. Plaintiff's Complaint fails to 

11 adequately allege that Plaintiff has standing to assert a claim pursuant to the UCL. See, 

12 e.g., Bernardi, 2012 WL 2343679, at *5. Plaintiff's nineteenth claim for violation of 

13 California Business and Professions Code § 17200 is dismissed. 

14 IV. Conclusion 

15 IT IS HEREBY ORDERED that Defendants' Motion to Dismiss Plaintiff's 

16 Complaint is GRANTED in its entirety. Plaintiff's Complaint is dismissed without 

17 prejudice. Plaintiff may file a motion to file a First Amended Complaint within thirty 

18 (30) days of the date this order is issued, accompanied by the proposed First Amended 

19 Complaint. If Plaintiff does not file a motion to file a First Amended Complaint within 

20 thirty (30) days of the date this order is issued, the Clerk of Court will be ordered to 

21 close the case. 

22 

23 DATED: ,hi ,/ 

24 /o(1fI I 

25 

26 

27 

28 

WILLIAM O. HA 

United Statesl)istr' 

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