Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_18-cv-03102/USCOURTS-cand-4_18-cv-03102-7/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1441 Petition for Removal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MARY GRACE PURGANAN,

Plaintiff,

v.

WELLS FARGO BANK N.A,

Defendant.

Case No. 18-cv-03102-HSG 

ORDER GRANTING DEFENDANT’S 

MOTION TO DISMISS SECOND 

AMENDED COMPLAINT

Re: Dkt. No. 37

Pending before the Court is the motion to dismiss Plaintiff Mary Grace Purganan’s Second 

Amended Complaint, filed by Defendant Wells Fargo Bank N.A. (“Wells Fargo”). Dkt. No. 37

(“Mot.”). The Court held a hearing on the motion on June 6, 2019. Having carefully considered 

the parties’ briefs and arguments, for the following reasons the Court GRANTS Defendant’s 

motion.

I. BACKGROUND

In this foreclosure action, Plaintiff brings claims against Wells Fargo for its alleged 

misconduct relating to the review of her loan modification. See generally Dkt. No. 32 (“FAC”). 

For purposes of deciding the motion to dismiss, the following allegations are taken as true.

In 2007, Plaintiff obtained a $515,000 mortgage secured by Plaintiff’s property located at 

89 Muriwood Drive, Daly City, California 94014 (the “Property”). SAC ¶¶ 1, 6–7. Defendant 

recorded a notice of default on Plaintiff’s mortgage in October 2015. Dkt. No. 38-2, Ex. B.1 On 

 

1 Defendant has requested that the Court take judicial notice of the Notice of Default, Dkt. No. 38-

1, Ex. A. Dkt. No. 38. Plaintiff does not object. Under Federal Rule of Evidence 201, a court 

may take judicial notice of a fact “not subject to reasonable dispute because it ... can be accurately 

and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. R. 

Evid. 201(b)(2). Accordingly, a court may take “judicial notice of matters of public record,” but 

“cannot take judicial notice of disputed facts contained in such public records.” Khoja v. Orexigen 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 1 of 9
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

or around July 27, 2017, Plaintiff submitted a loan modification application to Defendant. FAC 

¶ 8. Between then and October 5, 2017, Plaintiff alleges that she submitted all documents to 

complete the loan modification application. Id. ¶¶ 9–10. Plaintiff contends that Defendant, on 

October 11, 2017, recorded a Notice of Trustee’s Sale against the Property before making a 

determination on her loan modification application. Id. ¶ 10. 

On January 31, 2019, the Court dismissed Plaintiff’s first amended complaint (“FAC”) in 

its entirety for failure to state a claim. Dkt. No. 31 (“Dismissal Order”). In the Dismissal Order, 

the Court held that although Plaintiff plausibly alleged that the loan modification application was 

complete, Plaintiff failed to plead any damages resulting from Defendant’s alleged unlawful 

conduct, as the damages were a result of her own default. Dismissal Order at 3–4. Following the 

Dismissal Order, Plaintiff filed the SAC, asserting substantially the same four claims under 

California and federal law: (1) violation of California’s Homeowners’ Bill of Rights, California 

Civil Code § 2923.6 (“HBOR”); (2) violation of Real Estate Settlement Procedures Act, 12 C.F.R. 

§ 1024.41(g) (“RESPA”); (3) negligence; and (4) violation of California Business and Professions 

Code § 17200 et seq. (“UCL”). SAC ¶¶ 11–43. Plaintiff seeks injunctive relief and damages. 

SAC, Demand for Jury Trial and Prayer for Damages. 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain 

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A 

defendant may move to dismiss a complaint for failing to state a claim upon which relief can be 

granted under Federal Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is 

appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support 

a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th 

Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a 

 

Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (citation and quotations omitted). The 

Notice of Default is a publicly-recorded document, and therefore the Court takes judicial notice of 

its existence and of its representations as demonstrations of what Defendant understood at the time 

the representations were made. See Jara v. Aurora Loan Servs., 852 F. Supp. 2d 1204, 1205 n.2 

(N.D. Cal. 2012), aff’d sub nom. Jara v. Aurora Loan Servs., LLC, 633 F. App’x 651 (9th Cir. 

2016) (taking judicial notice of a notice of default). 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 2 of 9
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

A claim is facially plausible when a plaintiff pleads “factual content that allows the court to draw 

the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 

556 U.S. 662, 678 (2009). 

In reviewing the plausibility of a complaint, courts “accept factual allegations in the 

complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 

Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, 

courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of 

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

2008). 

If dismissal is appropriate under Rule 12(b)(6), a court “should grant leave to amend even 

if no request to amend the pleading was made, unless it determines that the pleading could not 

possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 

2000) (quotations and citation omitted).

III. DISCUSSION

A. California Civil Code § 2923.6 (HBOR) (Claim One)

Plaintiff’s first cause of action alleges a violation of California Civil Code § 2923.6(c), 

which prohibits a borrower from “dual tracking.” SAC ¶¶ 11–18. Under Section 2923.6(c):

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

modification offered by, or through, the borrower’s mortgage servicer 

at least five business days before a scheduled foreclosure sale, a 

mortgage servicer, mortgagee, trustee, beneficiary, or authorized 

agent shall not record a notice of default or notice of sale, or conduct 

a trustee’s sale, while the complete first lien loan modification 

application is pending.

Cal. Civ. Code § 2923.6(c) (2019). Plaintiff alleges that she submitted a complete loan 

modification application on October 5, 2017, but before she received a determination on her loan 

modification, Wells Fargo recorded a Notice of Trustee’s Sale on December 11, 2017, in violation 

of § 2923.6(c). SAC ¶¶ 13–17.

Defendant first argues that Plaintiff’s HBOR claim is preempted by federal law, 

specifically the Home Owners’ Loan Act of 1933 (“HOLA”), and therefore Plaintiff’s HBOR 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 3 of 9
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

claim must be dismissed with prejudice. Mot. at 5–6. Alternatively, Defendant asserts that

Plaintiff fails to plead a “material violation” of § 2923.6(c). Mot. at 6–7. The Court addresses 

each argument below. 

i. HOLA Preemption

Defendant contends that HOLA, codified at 12 U.S.C. § 1461 et seq., preempts Plaintiff’s 

HBOR claim against it. Under HOLA, Congress gave the Office of Thrift Supervision (“OTS”) 

broad authority to regulate lending activity by federal savings associations. Silvas v. E*Trade 

Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008) (citing 12 C.F.R. § 560.2). The loan here was 

issued by World Savings Bank, a federal savings association subject to HOLA. See SAC ¶ 7. 

However, World Savings Bank subsequently merged into Wells Fargo, which is not a federal 

savings association. But according to Defendant, application of HOLA preemption post-merger 

still applies and has been recognized in other court decisions. Mot. at 5. Plaintiff asserts that 

HOLA preemption does not apply to conduct by Wells Fargo after the federal savings association

ceased to exist. Dkt. No. 43 (“Opp.”) at 3.

12 C.F.R. § 560.2(a) states that the OTS is authorized to promulgate regulations “that 

preempt state laws affecting the operations of federal savings associations.” 12 C.F.R. § 560.2(a) 

(emphasis added). Under this framework, the Ninth Circuit set forth the following analysis when 

determining whether state law claims are preempted by HOLA:

When analyzing the status of state laws under [12 C.F.R.] § 560.2, 

the first step will be to determine whether the type of law in question 

is listed in paragraph (b). If so, the analysis will end there; the law 

is preempted. If the law is not covered by paragraph (b), the next 

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

accordance with paragraph (a), the presumption arises that the law is 

preempted. This presumption can be reversed only if the law can 

clearly be shown to fit within the confines of paragraph (c). For 

these purposes, paragraph (c) is intended to be interpreted narrowly. 

Any doubt should be resolved in favor of preemption.

Silvas, 514 F.3d at 1005 (quoting OTS, Final Rule, 61 Fed. Reg. 50951, 50966-67 (Sept. 30, 

1996)). 12 C.F.R. § 560.2(b) lists the categories of state law that are preempted by HOLA, and 

include laws that regulate activity such as licensing, registration, filings, reporting by creditors, 

terms of credit, loan-related fees, escrow accounts, processing, origination, servicing, and sale or 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 4 of 9
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

purchase of mortgages. 12 C.F.R. § 560.2(b). Under 12 C.F.R. § 560.2(c), however, claims based 

on contracts, real property, and torts are not preempted “to the extent that they only incidentally 

affect the lending operations of Federal savings associations.” 12 C.F.R. § 560.2(c).

The threshold question here is whether HOLA applies to Wells Fargo, given that Wells 

Fargo is not a federal savings association. Defendant concedes that there is a split among the 

courts as to whether HOLA preemption attaches to the loan or the lender, but argues that more 

recent case law “shows that courts are indeed ruling that HOLA preempts claims brought against 

Wells Fargo.” Dkt. No. 44 (“Reply”) at 1–2. The Ninth Circuit has not yet addressed this issue, 

and the Court recognizes that there is a split among the district courts in this circuit. See 

Penermon v. Wells Fargo Bank, N.A., 47 F. Supp. 3d 982, 991 (N.D. Cal. 2014) (citing cases). 

The Court finds the recent decisions in this district holding that HOLA does not preempt dual 

tracking claims to be more persuasive. See, e.g., Snider v. Wells Fargo Bank, N.A., No. 18-CV06353-RS, 2019 WL 1473459, at *5 (N.D. Cal. Feb. 12, 2019) (“State laws regulating nonjudicial 

foreclosure sales are not preempted by HOLA” (citation omitted)); Rijhwani v. Wells Fargo Home

Mortg., Inc., No. C 13-05881 LB, 2014 WL 890016, at *6 (N.D. Cal. Mar. 3, 2014) (“in nearly all 

of those cases [where the court held HOLA preemption applied], the plaintiffs either failed to 

argue otherwise or conceded the issue, the upshot being that the courts never had to grapple with 

it; instead, the courts simply concluded, without much analysis, that HOLA preemption applied”). 

HOLA was enacted as a response to the “inadequacies of the existing state system” during 

a time when a record number of homes were in default and a “staggering number” of statechartered savings associations were insolvent. Silvas, 514 F.3d at 1004. The purpose of HOLA 

was to restore public confidence by creating a nationwide system of federal savings and loan 

associations to be centrally regulated. Id. Here, the alleged wrongful conduct occurred after the 

federal savings association ceased to exist, and preemption would not serve the original intent of 

HOLA. Indeed, it seems unlikely that HOLA “contemplated the subsequent mortgage crisis and 

the resulting mergers of federal savings banks into national banks or loan servicing as it exists 

today.” Penermon, 47 F. Supp. 3d at 995. Although the Ninth Circuit in Silvas held that “[a]ny 

doubt should be resolved in favor of preemption,” 514 F.3d at 1005, “preemption is not some sort 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 5 of 9
6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

of asset that can be bargained, sold, or transferred,” Rijhwani, 2014 WL 890016, at *7 (quotations 

and citation omitted). HOLA preemption was created for the benefit of federal savings 

associations, which Wells Fargo is not. Accordingly, the Court agrees that whether HOLA 

preemption applies depends on the nature of the claims: that is, whether they arise from alleged 

misconduct by a federal savings association, or by a national bank after acquisition of a federal 

savings association. In this case, since the alleged misconduct occurred after Wells Fargo 

absorbed World Savings Bank, the Court finds that HOLA preemption does not apply to the dual 

tracking claim at issue.

ii. Material Violation

Having concluded that HOLA does not preempt Plaintiff’s HBOR claim, the Court next 

addresses the merits of Plaintiff’s dual tracking allegation. Defendant avers that Plaintiff fails to 

allege a “material” violation under California Civil Code § 2924.12, a defect that is fatal to 

Plaintiff’s claim. The Court agrees. 

Under § 2924.12, Plaintiff must plead a “material violation” of the specified foreclosure 

provisions. See Cal. Civ. Code § 2924.12 (2019). Although neither the statute nor California state 

courts have defined materiality for purposes of § 2924.12, district courts have held that a “material 

violation” is one that “affect[s] [the plaintiff’s] loan obligations or the loan modification process.” 

Cardenas v. Caliber Home Loans, Inc., 281 F. Supp. 3d 862, 869 (N.D. Cal. 2017) (quotations 

citation omitted). Under this definition, even assuming that Defendant’s action constituted

impermissible dual tracking, Plaintiff does not plead how this violation is material. She merely 

alleges that she is now “at risk of foreclosure,” SAC ¶ 17, and that “Defendant’s actions clearly 

interfered with the modification review process,” Opp. at 11. But Plaintiff does not explain how

the dual tracking interfered with the review process: in other words, she does not contend that she 

was denied a loan modification to which she was entitled, or that the dual tracking affected her 

loan modification application in any way. See Galvez v. Wells Fargo Bank, N.A., No. 17-CV06003-JSC, 2018 WL 2761917, at *6 (N.D. Cal. June 7, 2018). Plaintiff does not dispute that she 

defaulted on her loan in October 2015 and that she would have undergone foreclosure proceedings 

regardless. 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 6 of 9
7

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Plaintiff’s conclusory allegations fall short of the basic pleading requirements to survive a 

motion to dismiss, because she has only pled the elements of the claim. See Cardenas, 281 F. 

Supp. 3d at 870 (plaintiff failed to allege how defendants’ misconduct affected plaintiff’s loan 

obligations, disrupted the loan modification process, or caused plaintiff to suffer harm plaintiff 

would not have suffered otherwise). However, because the Court did not address the merits of the 

dual tracking claim in the previous Dismissal Order, the Court will allow Plaintiff one more 

chance to amend her HBOR claim to plead materiality.2 The Court cannot say at this stage that 

amendment would be futile. Accordingly, the Court GRANTS Defendant’s motion to dismiss 

Plaintiff’s HBOR claim with leave to amend.

B. RESPA (Claim Two)

Under 12 C.F.R. § 1024.41(g), if a “borrower submits a complete loss mitigation 

application ... a servicer shall not move for foreclosure judgment or order of sale, or conduct a 

foreclosure sale,” absent certain enumerated exceptions. 12 C.F.R. § 1024.41(g). Plaintiff’s 

RESPA violation is based on the same dual tracking allegations as those in her HBOR claim. 

SAC ¶¶ 19–24. As the Court held in its Dismissal Order, Plaintiff must plead actual damages that 

“include the assertion of concrete harms caused by the RESPA violation itself, not harms 

generally resulting from a plaintiff’s default and the foreclosure of his of her home.” Dismissal 

Order at 3 (quoting Jenkins v. JPMorgan Chase Bank, N.A., 216 Cal. App. 4th 497, 532 (2013), as 

modified (June 12, 2013), and disapproved of on other grounds by Yvanova v. New Century 

Mortg. Corp., 62 Cal. 4th 919 (2016)). Therefore, to survive a motion to dismiss, Plaintiff must 

plead damages that are attributable to Defendant’s alleged misconduct.

Plaintiff’s SAC fails to cure these deficiencies, and as a result, her RESPA claim must be 

dismissed. In the SAC, Plaintiff now adds conclusory allegations that she suffered “foreclosure 

fees which would not have been due but for Defendant’s actions,” a negative “detrimental[] 

impact[]” to her credit report, and “severe emotional distress.” SAC ¶ 24; see also Opp. at 11. 

 

2 Plaintiff’s HBOR claim in the FAC was for a violation of California Civil Code § 2924.11, 

which was repealed as of December 31, 2018 and amended such that it no longer applies to a 

notice of sale. The Court therefore dismissed Plaintiff’s claim brought under § 2924.11. 

Dismissal Order at 3 n.2. 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 7 of 9
8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

But these additional allegations fail to salvage Plaintiff’s claim. Similar to the allegations in her 

FAC, these alleged damages did not result from the RESPA violation but from Plaintiff’s own 

default. See Jenkins, 216 Cal. App. 4th at 533 (Plaintiff’s allegations “fail[ed] to show her 

claimed damages for fees, negative credit reports, and emotional distress were plausibly incurred

because of the alleged RESPA violation, and were not the consequences of her earlier default.”). 

Accordingly, because this is Plaintiff’s second attempt to allege damages attributable to 

Defendant’s misconduct, the Court GRANTS Defendant’s motion to dismiss Plaintiff’s RESPA 

claim without leave to amend. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 

(9th Cir. 2009), as amended (Feb. 10, 2009) (“where the plaintiff has previously been granted 

leave to amend and has subsequently failed to add the requisite particularity to its claims, the 

district court’s discretion to deny leave to amend is particularly broad”).

C. Negligence (Claim Three)

Similarly, because Plaintiff’s negligence cause of action relies on the same dual tracking 

allegations underlying Plaintiff’s RESPA claim, Plaintiff has not sufficiently amended her claim to 

allege damages attributable to Defendant’s unlawful conduct. See Graham v. Bank of Am., N.A., 

226 Cal. App. 4th 594, 614 (2014) (finding no causation for damages where the “prospect of 

losing the home to foreclosure [was] the result of default, not the alleged conduct of defendants”). 

Further, as the Court has previously stated, the Ninth Circuit unambiguously has held that 

application of the Biakanja factors leads to the conclusion that lenders do not owe borrowers a 

duty of care to process loan modification applications within a particular time frame. Ivey v. JP 

Morgan Chase Bank, N.A., No. 16-CV-00610-HSG, 2016 WL 4502587, at *5 (N.D. Cal. Aug. 29, 

2016) (citing Anderson v. Deutsche Bank Nat. Trust Co. Americas, 649 F. App’x 550, 552 (9th 

Cir. 2016)). While Plaintiff’s negligence claim is premised on Defendant’s failure to comply with 

RESPA rather than delays in processing her application, the Court finds that the Ninth Circuit’s 

reasoning equally applies to Plaintiff’s allegations. See Anderson, 649 F. App’x at 552 

(explaining that “when the lender did not place the borrower in a position creating a need for a 

loan modification, [ ] no moral blame ... attache[s] to the lender’s conduct” (quotations and 

citation omitted and alterations in original)); see also Badame v. J.P. Morgan Chase Bank, N.A., 

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 8 of 9
9

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

641 Fed.Appx. 707, 709 (9th Cir. 2016) (reasoning that lender “did not owe Plaintiffs a duty of 

care when considering their loan modification application because ‘a loan modification is the 

renegotiation of loan terms, which falls squarely within the scope of a lending institution’s 

conventional role as a lender of money’” (citation omitted)).

3

 Accordingly, because Plaintiff has 

not alleged any damages caused by Defendant’s unlawful conduct or established that Wells Fargo 

owed her a duty of care, her negligence claim is DISMISSED without leave to amend. See 

Zucco, 552 F.3d at 1007.

D. California’s UCL (Claim Four)

Finally, Plaintiff’s UCL claim is also dismissed. For the same reason as Plaintiff’s 

negligence claim, because the UCL claim relies on the RESPA allegations, Plaintiff fails to allege 

damages attributable to Defendant’s unlawful conduct. See Graham, 226 Cal. App. 4th at 614. 

And, Plaintiff’s SAC has failed to adequately allege any unfair, unlawful, or fraudulent conduct by 

Wells Fargo. See Ivey, 2016 WL 4502587, at *6. Plaintiff’s UCL claim is DISMISSED without 

leave to amend. See Zucco, 552 F.3d at 1007.

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS Defendant’s motion to dismiss the SAC, 

Dkt. No. 37. Plaintiff’s RESPA, negligence, and UCL claims are DISMISSED WITHOUT 

LEAVE TO AMEND, and Plaintiff’s HBOR claim is DISMISSED WITH LEAVE TO 

AMEND. To the extent Plaintiff is able to adequately plead materiality with respect to her 

HBOR claim, Plaintiff may file one final amended complaint within 21 days of the date of this 

Order. Plaintiff may not bring additional claims in her amended complaint.

IT IS SO ORDERED.

Dated:

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

 

3 As unpublished Ninth Circuit decisions, Anderson and Badame are considered only for their 

persuasive value. See Fed. R. App. P. 32.1; CTA9 Rule 36-3.

6/19/2019

Case 4:18-cv-03102-HSG Document 51 Filed 06/19/19 Page 9 of 9