Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_09-cv-00798/USCOURTS-caed-1_09-cv-00798-4/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

VINCENT SIPE, )

)

)

)

Plaintiff, )

)

vs. )

)

)

COUNTRYWIDE BANK, et al., )

)

)

Defendants. )

)

)

No. CV-F-09-798 OWW/DLB

MEMORANDUM DECISION GRANTING

DEFENDANT SIERRA PACIFIC

MORTGAGE COMPANY'S MOTION TO

DISMISS SECOND AMENDED

COMPLAINT (Doc. 42) AND

GRANTING DEFENDANTS

COUNTRYWIDE BANK AND

MORTGAGE ELECTRONIC

REGISTRATION SYSTEM, INC.'S

MOTION TO DISMISS SECOND

AMENDED COMPLAINT (Doc. 43)

Pursuant to the Memorandum Decision filed on February 16,

2010, (Doc. 37, “February 16 Memorandum Decision”), and the Order

filed on February 18, 2010, (Doc. 39), Plaintiff timely filed a

Second Amended Complaint (“SAC”). The caption of the SAC names

as Defendants Countrywide Bank (“CWB” or “Countrywide”), Sierra

Pacific Mortgage Company, Inc. (“SPM” or “Sierra Pacific”),

Financial Advantage, Inc., John Daniel Norberg, Carol DeSilva,

The status of Financial Advantage, Inc., John Norberg, and 1

Carol DeSilva is unclear. Although summons were issued on May 5,

2009 (Doc. 4), the only return of service is as to John Norberg,

who was personally served on September 28, 2009 (Doc. 18). Norberg

has not appeared in this action. There are no returns of service

filed for Financial or DeSilva. 

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and Does 1-20. 

1

In the section of the SAC captioned “Parties,” Mortgage

Electronic Registration System, Inc. (“MERS”) is also named as a

defendant. However, MERS is not specifically named in any of the

causes of action in the SAC, although causes of action for

negligence, fraud and unfair competition were alleged against

MERS in the First Amended Complaint. The SAC alleges that MERS

is engaged in the business of holding title to mortgages, that

MERS was not licensed to do business in California at the time of

the residential mortgage loan, that it has no beneficial interest

or right to enforce the terms of the promissory note, and because

it is not in possession of the promissory note, it has no

authority to conduct a non-judicial foreclosure sale. Plaintiff

must clarify whether or not MERS is still a party to this action

and, if not, whether these allegations should be stricken as

irrelevant.

The SAC alleges that CWB is a diversified services

corporation engaged primarily in residential mortgage loan

servicing which has represented to Plaintiff that it has the

right to service Plaintiff’s residential mortgage and demand

payments from Plaintiff, which right Plaintiff denies; that SPM

is a diversified financial marketing and/or services corporation

The status of Defendants Financial, Norberg and DeSilva is 1

unclear. Summons were issued as to these defendants on May 5, 2009

(Doc. 4). The only return of service filed is as to Norberg, who

was personally served on September 28, 2009 (Doc. 18). Norberg has

not appeared in this action. There are no returns of service filed

as to Financial and DeSilva.

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and is believed to be a residential mortgage lender and was the

original lender for Plaintiff’s residential mortgage loan; that

Financial, Norberg and DeSilva sold Plaintiff the mortgage

involved in this action; that DeSilva, a licensed real estate

salesperson, was employed by Financial and sold the mortgage to

Plaintiff; that Norberg, a licensed real estate broker, was the

broker of record for Financial; and that Financial is a

diversified financial marketing company engaged in mortgage

brokering and was the mortgage broker for Plaintiff’s residential

mortgage loan. 

For “General Allegations,” the SAC alleges:

17. This action arises out of a loan related

activity to the Property of which the

Plaintiff is the rightful owner.

18. Beginning in 1998 and continuing through

2009, lenders, including Defendant SPM, their

agents, employees, and related servicers,

including Defendant CWB, developed a scheme

to rapidly infuse capital into the home

mortgage lending system by selling mortgages

on the secondary market, normally three to

five times, to create a bankruptcy remote

transaction. For there to be a bankruptcy

remote transaction, there must be a true sale

of the note and no interest can remain in the

seller of the note.

19. In a typical transaction, the original

lender, called “Originator”, in this case

Defendant SPM would immediately upon closing,

enter the loan into MERS system, then sell

the loan to their “Warehouse Lender”. The

“Warehouse Lender” in this case is not known

to Plaintiff. Since these transactions are

hidden and not recorded, Plaintiff will only

be able to discover the name of the

“Warehouse Lender” through Discovery. 

20. The loan would then be sold by the

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“Warehouse Lender” to a “Special Investment

Vehicle” (“SIV”). The SIV would then sell the

loan to a “Depositor”. Depositor would in

turn pool these mortgages into large trusts,

securitizing the pool and selling these

securities on Wall Street as mortgage backed

securities, bonds, derivatives, and

insurances, often for twenty or thirty times

the original mortgage and sometimes

fraudulently selling the same mortgage to

multiple investors.

21. This securitized trust is governed by

the common law trust rules of Delaware or New

York, depending on its origin, the prospectus

filed with the Securities and Exchange

Commission and distributed to investors, and

Internal Revenue Code § 860A through 860G,

better known as the Real Estate Mortgage

Investment Conduit (“REMIC”) rules. 

22. The servicing of the pool is governed by

a document titled “Pooling and Servicing

Agreement” (“PSA”). Plaintiff is informed and

believes, and thereon alleges that the REMIC

rules, the PSA and the prospectus require the

notes and deeds of trust to be received by

the trustee on or before the closing date of

the trust. 

23. Plaintiff's mortgage note is a

negotiable instrument under the Uniform

Commercial Code Article 3 and California

Commercial Code § 3301 et seq. To transfer

ownership of a mortgage note, it must be

properly endorsed by a person with authority

to endorse the note, physical delivery of the

note and acceptance of the note. 

24. Plaintiff is informed and believes, and

there on alleges that the mortgage note which

is the subject of this action was not

received by the trustee of the securitized

trust at all, and certainly not within a

specified number of days of the trust’s

formation. 

25. Plaintiff is informed and believes and

thereon alleges that the mortgage note and

deed of trust, immediately after closing and

recording, was entered into MERS and the

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original note was destroyed or warehoused,

but not transferred, assigned or negotiated.

This resulted in the stripping and voiding of

the security interest in the note and no

interest was ever transferred to the trust.

26. In “selling” these mortgage notes on the

secondary market, Defendant SPM, along with

the Warehouse Lender, Sponsor and Depositor

failed to follow the basic legal requirements

for the transfer of a negotiable instrument

and an interest in real property, including,

but not limited to, written assignments of

Plaintiff's Deed of Trust, delivery of the

Deed of Trust, endorsements of Plaintiff's

Note by the owner of Plaintiff's Note,

delivery of Plaintiff's Note and acceptance

of Plaintiff's Note.

27. In fact, no interest in Plaintiff's

Mortgage Note, Deed of Trust or Property was

ever legally transferred to any of the

parties in the chain and that the Defendants

are in effect strawmen, and parties without

any standing before this Court to assert

legal rights with respect to this contractual

transaction.

28. Defendant CWB thus could not have

legally been given the right to service

Plaintiff's Loan. Accordingly, Plaintiff

alleges Defendant CWB representations to

Plaintiff that it has the right to service

Plaintiff's Loan was, and is, fraudulent and,

Defendant CWB, knowingly and fraudulently

entered this information into the MERS

system.

29. Further, as this process became more and

more profitable, the underwriting

requirements were repeatedly reduced to

ensure [sic] more and more unsuspecting

borrowers. As Defendant SPM reduced the

underwriting requirements, it introduced the

concept of “churning” loans involving a

calculated plan to repeatedly refinance

borrowers’ loans taking as much equity as

possible, and artificially driving up housing

prices. 

30. In this case, Defendants FINANCIAL and

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NORBERG, in concert with Defendant SPM,

placed Plaintiff into a predatory loan with

toxic terms, as detailed below, with the

ultimate objective of forcing Plaintiff to

refinance his loan in the near future for

each of these named Defendants' financial

gain.

31. Unlike the former traditional lending

practices prior to the loan securitization

process, Defendant SPM profited from the sale

of the loans, not from the loan investment

itself. The intent of these “Lenders”, such

as Defendant SPM, under the securitization

process, was to trap as many unsuspecting

borrowers as possible, Plaintiff included,

regardless of the borrower’s credit history

or ability to pay, take as much of the

borrower’s equity as possible through high

fees and sell the loans for a profit on the

secondary market. 

32. Servicers, such as Defendant CWB, would

then obtain the servicing rights to the

borrowers’ loans, Plaintiff's loan included,

profiting by taking a percentage of the

amounts collected from the borrowers,

collecting additional fees or initiating

foreclosure proceedings. Plaintiff is

informed and believes, and thereon alleges

that Defendant CWB is not paid to modify the

terms of Plaintiff's Mortgage Note, giving

them a disincentive to work with borrowers,

Plaintiff included, to negotiate a fair

resolution.

33. Defendant SPM regularly trained,

directed, authorized and/or participated with

mortgage brokers, in this case, Defendants

FINANCIAL and NORBERG, to implement this

scheme, giving them monetary incentives to

violate the borrowers’ trust, Plaintiff

included. 

34.On or about March 01, 2006, Defendant

DESILVA approached Plaintiff telling him that

she was the loan officer for Defendant

FINANCIAL, and solicited him to refinance his

residence. 

35. Defendant DESILVA advised Plaintiff that

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she could get him the “best deal” and the

“best interest rates” available on the

market. Defendant DESILVA knew or should have

known that these assurances were false and

misleading. 

36. When Plaintiff applied for this loan, he

accurately described his income and provided

Defendant DESILVA with documentation of his

income including tax returns, bank

statements, W-2s and 1099s. Plaintiff is now

informed and believes, and thereon alleges

that his income was overstated on the loan

application by Defendant DESILVA, without his

knowledge or permission. Plaintiff is

informed and believes, and thereon alleges

that Defendant SPM’s underwriters knew or

should have known of the fraudulent

information on the loan application but

approved the loan anyway. Plaintiff's income

was overstated on the loan application by the

Defendant DESILVA, Plaintiff had an income of

$4,800.00 per month and the loan application

stated Plaintiff had an income of $7,800.00

at the time the loan was made.

37. Defendant DESILVA overstated the

borrower’s income in order to qualify him for

this refinance transaction. The standard

housing and debt to income ratios are 33% for

housing and 38% for debt to income. Based on

the Plaintiff’s monthly income of $4,800.00

and using the minimum mortgage payments of

$1,398.61, the housing ratio was 29.14% and

the debt to income ratio was 46.05%. Using

the fully amortized and/or fully indexed

mortgage payments of $2,082.43, the housing

ratio was 43.38% and the debt to income ratio

was 60.30%. Based on the overstated monthly

income of $7,800.00 and using the minimum

mortgage payments of $1,398.61, the housing

ratio was 17.93% and the debt to income ratio

was 28.34%.

38. Defendant DESILVA advised Plaintiff that

he [sic] could get him 100% financing for his

loan. However, Defendant DESILVA actually

sold Plaintiff a predatory loan. The loan, in

the amount of $286,000.00 carried a teaser

rate of 2.0% for one month, that adjusted to

9.95% interest rate, based on 12 month MTA

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index plus 2.90%, negatively amortized

115.00%. Plaintiff’s initial monthly

payments for the loan was $1,057.11.

Plaintiff’s fully amortized payment was

$2,082.43. 

39. Plaintiff is informed and believes, and

thereon alleges that Defendant DESILVA

received $4,290.00 in yield spread premiums

and $1,840.00 in origination fee for

Plaintiff’s loan. The combined yield spread

premiums of the loan was $6,130.00. 

40. Defendant DESILVA further advised

Plaintiff that if the loan ever became

unaffordable, she would simply refinance it

into an affordable loan, something Defendant

DESILVA knew or should have known was false

and misleading. Defendant DESILVA knew or

should have known that these

misrepresentations were designed to induce

Plaintiff to accept this loan to his

detriment.

41. Plaintiff was not given a copy of any of

the loan documents prior to closing as

required. At closing, Plaintiff was only

given a few minutes to sign the documents.

The notary did not explain any of the loan

documents nor was Plaintiff allowed to review

them. Plaintiff was simply told to sign and

initial the documents provided by the notary.

Further, Plaintiff did not receive the

required copies of a proper notice of

cancellation.

42. The facts surrounding this loan

transaction were purposefully hidden to

prevent Plaintiff from discovering the true

nature of the transaction and the documents

involved therein. Facts surrounding this

transaction continue to be hidden from the

Plaintiff to this day.

43. On or about June 1, 2006, Plaintiff

completed the loan on the Property. The terms

of the loan were memorialized in a Promissory

Note, which was secured by a Deed of Trust on

the Property. The Deed of Trust identified

Greenhead Investments, Inc. as Trustee, and

Defendant Spm [sic] as Lender. 

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44. The Deed of Trust also identified MERS

as nominee for the Lender and Lender’s

successors and assigns, and the beneficiary.

However, MERS has no standing in this forum.

It is not licensed to be and/or act as a

nominee or a beneficiary of any of the

Defendants, nor does its Terms and

Conditions, enumerated above, permit MERS to

act in such capacity. MERS was developed to

be a document storage company, not a nominee

or a beneficiary of any of the Defendants.

Therefore, the Deed of Trust must fail.

Further, MERS was not licensed to do business

in the State of California, and was not

registered with the State of California at

the inception of the loan involved herein. 

45. On or about April 7, 2009, a Qualified

Written Request (“QWR” or “Request”) was

mailed to Defendant CWB. The QWR properly

identified the Plaintiff, the Plaintiff's

residential mortgage loan, the objections to

the loan servicing and requested specific

documents. The QWR also included a demand to

rescind the loan. Defendant CWB has yet to

properly respond to this Request.

46. On information and belief, Plaintiff

alleges that each of the Defendants is not a

“person entitled to enforce” the security

interest under the Note and the Deed of

Trust, as defined in California Commercial

Code § 3301. Plaintiff alleges that

Defendants sold home loans, Plaintiff home

loan included, to other financial entities,

which "pooled" large numbers of loans, put

them into trusts, and sold securities based

on such loans. Defendants do not own the

loan subject to this action, and are not

entitled to enforce the security interest.

47. Defendants regularly approved loans to

unqualified borrowers and implemented

unlawful lending practices. Further,

Defendant SPM employed brokers and loan

officers who were paid commissions based on

the volume of loans they sold to consumers,

Plaintiff included. Defendant SPM loan

officers received a greater commission or

bonus for placing borrowers in loans with

relatively high yield spread premiums. As

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such, borrowers, Plaintiff included, were

steered and encouraged into loans with terms

unfavorable to them, or loans which the

borrowers were not qualified to obtain.

48. Defendants are attempting to obtain

putative legal title to Plaintiff’s Property

without having established that either of

them was ever a "person entitled to enforce"

the security interest under the Note and the

Deed of Trust.

49. Each Defendant, in fact, is not a

“person entitled to enforce” said interest.

No legal transfer of the Mortgage Note, Deed

of Trust or any other interest in Plaintiff’s

Property was effected that gave any of the

Defendants the right to be named a trustee,

mortgagee, beneficiary or an authorized agent

of trustee, mortgagee or beneficiary of

Plaintiff’s Mortgage Note, Deed of Trust or

any other interest in Plaintiff’s Property.

50. Plaintiff entered into a loan

transaction with Defendant SPM, which was

subject to finance charges, and which was

initially payable to Defendant SPM under the

Deed of Trust.

51. Defendants SPM and NORBERG, as agents of

the Lender, were required to provide

Plaintiff with said disclosures, but failed

to do so. 

52. In all of the wrongful acts alleged

herein, Defendants, and each of them, have

utilized the United States mail, telephones,

and internet in furtherance of their pattern

of unlawful and illegal conduct to collect on

negotiable instruments when they were not

entitled to do so.

53. Further, Defendants fraudulently added

costs and charges to the payoff amount of the

Note that were not justified or proper under

the terms of the Note or the law.

54. Defendants represented that they have

the right to payment under the Mortgage Note,

payment of which was secured by the Deed of

Trust. Whereas in fact, Defendants, and each

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of them, are not the real parties in interest

because they are not the legal trustee,

mortgagee or beneficiary, nor are they

authorized agents of the trustee, mortgagee

or beneficiary, nor are they in possession of

the Note, or holders of the Note, or nonholders of the Note entitled to payment, as

required by the California Commercial Code §§

3301 and 3309, and California Civil Code §

2924 et seq.

55. Defendants engaged in a civil conspiracy

where by they secreted the nature of the

misdeeds alleged herein, the roles and

identities of the various entities that were

purportedly handling his Loan at any given

time, and the transfers of the loan documents

and negotiable instruments that are the

subject of this action.

56. Defendants misrepresented material facts

with the intent of forcing Plaintiff to pay

large sums of money to the Defendants, to

which they were not entitled, resulting in

profit for the Defendants.

57. The misrepresentations and allegations

stated herein were all discovered within the

past year, such that any applicable statute

of limitations are extended or should be

extended pursuant to the equitable tolling

doctrine or other equitable principles. Even

through the exercise of reasonable diligence,

Plaintiff would still not have been able to

learn of or file his claim on time.

The SAC alleges the following causes of action: (1) First

Cause of Action for fraud against all Defendants; (2) Second

Cause of Action for breach of contract against DeSilva and

Norberg; (3) Third Cause of Action for breach of the implied

covenant of good faith and fair dealing against DeSilva, Norberg

and Financial; (4) Fourth Cause of Action for violation of

California Rosenthal Act, Civil Code §§ 1788 et seq. against CWB;

(5) Fifth Cause of Action for negligence against DeSilva, Norberg

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and Financial; (6) Sixth Cause of Action for breach of fiduciary

duty against DeSilva, Norberg and Financial; and (7) Seventh

Cause of Action for violations of California Business &

Professions Code §§ 17200 et seq. against all Defendants.

Before the Court are the motions to dismiss the SAC by SPM

and by CWB and MERS.

A. GOVERNING STANDARDS.

1. Motion To Dismiss.

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

complaint lacks sufficient facts to support a cognizable legal

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

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

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

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

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

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

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

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

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

In other words, the "complaint must contain sufficient factual

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

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

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

Circuit has summarized the governing standard, in light of Twombly

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

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

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inferences from that content, must be plausibly suggestive of a

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

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

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

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

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

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

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

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

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

pleading under attack. Iqbal, 129 S. Ct. at 1950. A court is

not, however, "required to accept as true allegations that are

merely conclusory, unwarranted deductions of fact, or

unreasonable inferences." Sprewell v. Golden State Warriors, 266

F.3d 979, 988 (9th Cir. 2001); see, e.g., Doe I v. Wal-Mart

Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009). "When ruling on

a Rule 12(b)(6) motion to dismiss, if a district court considers

evidence outside the pleadings, it must normally convert the

12(b)(6) motion into a Rule 56 motion for summary judgment, and

it must give the nonmoving party an opportunity to respond."

United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). "A

court may, however, consider certain materials-documents attached

to the complaint, documents incorporated by reference in the

complaint, or matters of judicial notice-without converting the

motion to dismiss into a motion for summary judgment." Id. at

908. 

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2. Rule 9(b).

Rule 9(b) imposes an elevated pleading standard for fraud

claims. Rule 9(b) states:

In alleging fraud or mistake, a party must

state with particularity the circumstances

constituting fraud or mistake. Malice,

intent, knowledge, and other conditions of a

person's mind may be alleged generally.

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

enough to give defendants notice of the particular misconduct

which is alleged to constitute the fraud . . . .” Swartz v. KPMG

LLP, 476 F.3d 756, 764 (9th Cir. 2007) (internal quotation marks

omitted). Allegations of fraud must include the “time, place,

and specific content of the false representations as well as the

identities of the parties to the misrepresentations.” Id.

(internal quotation marks omitted). The “[a]verments of fraud

must be accompanied by the who, what, when, where, and how of the

misconduct charged.” Kearns v. Ford Motor Co., 567 F.3d 1120,

1124 (9th Cir. 2009) (internal quotation marks omitted). A

plaintiff alleging fraud “must set forth more than the neutral

facts necessary to identify the transaction. The plaintiff must

set forth what is false or misleading about a statement, and why

it is false.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106

(9th Cir. 2003) (emphasis and internal quotation marks omitted).

B. FIRST CAUSE OF ACTION FOR FRAUD.

CWB and SPM move to dismiss the First Cause of Action for

fraud.

The February 16 Memorandum Decision dismissed this claim

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with leave to amend, ruling:

With respect to Sierra Pacific, the complaint

alleges that it directed, authorized, or

participated in a “scheme” to “fraudulently

induce Plaintiff” to enter into his loan

transaction. (Doc. 14 at 17.) Elsewhere in

the complaint, Plaintiff asserts that his

loan was part of a larger "scheme"

perpetrated by "Defendants" pursuant to which

they sold home loans on the "secondary

market,” then "pooled" these loans into

trusts, and issued new securities backed by

the pool. (Id. at 5, 7) Under this scheme,

Sierra Pacific's borrowers, including

Plaintiff, "were steered and encouraged into

loans with terms unfavorable to them, or

loans which the borrowers . . . were not

qualified to obtain." (Id. at 8.) 

With respect to Countrywide, the complaint

alleges that Countrywide “misrepresented to

Plaintiff that Countrywide has the right to

collect monies from Plaintiff on its behalf

or on behalf of others when Defendant

Countrywide had no legal right to collect

such monies.” (Id. at 17.) As to MERS, the

complaint alleges that “MERS misrepresented

to Plaintiff on the Deed of Trust that it is

a qualified beneficiary with the ability to

assign or transfer the Deed of Trust and/or

the Note and/or substitute trustees under the

Deed of Trust.” (Id. at 17-18.)

In California, “[t]he elements of fraud,

which give[ ] rise to the tort action for

deceit, are (a) misrepresentation (false

representation, concealment, or

nondisclosure); (b) knowledge of falsity (or

scienter); (c) intent to defraud, i.e., to

induce reliance; (d) justifiable reliance;

and (e) resulting damage.” Small v. Fritz

Companies, Inc., 30 Cal. 4th 167, 173 (2003)

(internal quotation marks omitted). 

Plaintiff’s fraud claim is subject to Rule

9(b)’s elevated pleading standard, which

Plaintiff has failed to meet with respect to

each moving defendant. 

As to Sierra Pacific, the allegations in the

complaint fail to specify the “who, what,

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when, where, and how of the misconduct

charged,” Kearns, 567 F.3d at 1124 (internal

quotation marks omitted). The complaint

provides no particular details on what

specific role Sierra Pacific played in the

“scheme” to “fraudulently induce Plaintiff”

to enter into his loan transaction, or when

and where the scheme occurred. See Swartz,

476 F.3d at 764-65 (concluding that, in a

fraud suit involving multiple defendants, a

plaintiff must “identif[y] the role” each

defendant played “in the alleged fraudulent

scheme,” informing “each defendant separately

of the allegations surrounding his alleged

participation in the fraud”) (alteration in

original) (internal quotation marks omitted);

Vess, 317 F.3d at 1106 (concluding that a

fraudulent conspiracy claim failed to satisfy

Rule 9(b) because, among other things, the

pleading failed to “provide the particulars

of when, where, or how the alleged conspiracy

occurred”). In addition, the complaint fails

to specify what particular misrepresentation

was involved in the fraudulent scheme. The

complaint alleges that certain agents “made

false statements to Plaintiff regarding

material facts, including, but not limited

to, interest rates, financing options,

availability of financing, and Plaintiff’s

qualification for this loan . . . [which

were] designed to fraudulently induce

Plaintiff to enter into his transaction.”

(Doc. 14 at 17.) The complaint, however,

fails to specify what these “false

statements” were, when they were made, and

how they were false. Sierra Pacific, or any

defendant, is not required to guess what

particular misrepresentation(s) are at issue

in the fraud claim. Under Rule 9(b), the

obligation is on Plaintiff to spell it out. 

The complaint’s allegation of a larger

“scheme” in which “defendants” sold home

loans on the "secondary market,” "pooled"

these loans into trusts, and issued new

securities backed by the pool, is similarly

deficient under Rule 9(b). Plaintiff has not

identified the role each defendant played in

this fraudulent scheme, when and where the

scheme occurred, or details on the specific

misrepresentation involved in the fraudulent

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scheme.

As to Countrywide, the allegation that

Countrywide "misrepresented to Plaintiff that

Countrywide has the right to collect monies

from Plaintiff on its behalf or on behalf of

others when Defendant Countrywide had no

legal right to collect such monies," fails to

satisfy Rule 9(b). No details are provided

on the specific content of the false

representation, when the statement was made,

where it was made, and how it was false.

Finally, as to MERS, the complaint is also

deficient with respect to the allegation that

(i) “MERS misrepresented to Plaintiff on the

Deed of Trust that it is a qualified

beneficiary with the ability to assign or

transfer the Deed of Trust and/or the Note

and/or substitute trustees under the Deed of

Trust” and (ii) “MERS misrepresented that it

followed the applicable legal requirements to

transfer the Note and Deed of Trust to

subsequent beneficiaries.” Missing from the

complaint are facts specifying the particular

verbal or written misrepresentations at

issue, when they were made, where they were

made, and how or why they are false. See

Morgera v. Countrywide Home Loans, Inc., No.

2:09-cv-1476-MCE-GGH, 2010 WL 160348, at *6

(E.D. Cal. Jan. 11, 2010) (dismissing same

fraud claim as to MERS for failure to satisfy

Rule 9(b) requirements); Webb v. Indymac Bank

Home Loan Servicing, No. CIV 2:09-2380 WBS

DAD, 2010 WL 121084, at *4 (E.D. Cal. Jan. 7,

2010) (same).1

In addition, and apart from Rule 9(b), under

California law, resulting damage is a

necessary element of fraud. At the pleading

stage, “the pleading must show a cause and

effect relationship between the fraud and

damages sought; otherwise no cause of action

is stated.” Commonwealth Mortgage Assurance

Co. v. Superior Court, 211 Cal. App. 3d 508,

518 (1989). The complaint, as MERS correctly

argues, does not indicate how Plaintiff was

damaged by MERS’s alleged misrepresentations. 

Instead, the complaint states, in conclusory

fashion, that Plaintiff was “harmed and

suffered damages” (Doc. 14 at 18) as a result

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of the fraud. Absent facts to plausibly

suggest a causal connection between the

alleged fraud and some damage to Plaintiff,

the fraud claim is insufficiently pled.

...

To the extent any fraud claim against 1

Countrywide, MERS or any defendant is tied to

or involves the theory that possession of the

original promissory note is a prerequisite to

the initiation of non-judicial foreclosure,

this theory lacks merit. See Castaneda, 2009

WL 4640673 at *7 (“Under California law,

there is no requirement for the production of

the original note to initiate a non-judicial

foreclosure.”); see also Nool v. HomeQ

Servicing, 653 F. Supp. 2d 1047, 1053 (E.D.

Cal. 2009).

As to SPM and CWB, the First Cause of Action of the SAC

alleges:

Defendants SPM, NORBERG, DESILVA, and

FINANCIAL 

66. Defendant SPM was the original lender of

the subject mortgage loan for Plaintiff's

Property.

67. Defendant SPM’s conduct herein was not

that of a traditional lender, in that it

actively participated in the enforcement of

the predatory lending scheme against

Plaintiff's interest.

68. Defendant SPM regularly trained,

directed, authorized, and participated with

mortgage brokers and loan officers to

implement this fraud, giving them monetary

incentives to violate the borrowers’ trust.

69. Defendant SPM exercised extensive

control over the actions of Defendants

NORBERG, DESILVA, and FINANCIAL by directly

ordering, authorizing and participating with

Defendants NORBERG, DESILVA, and FINANCIAL in

order to conceal the misrepresentations on

Plaintiff's loan application.

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70. Defendant SPM shared in the profits made

from the sale of the subject mortgage loans

to Plaintiff by ensuring that the mortgage

contained terms that made them profitable on

the secondary market.

71. Defendant SPM, through its underwriters,

knew that the income stated on Plaintiff’s

loan application did not match the monthly

income represented from the income

verification documents provided by Plaintiff

to Defendants NORBERG, DESILVA, and

FINANCIAL.

72. Defendant SPM conspired with Defendants

NORBERG, DESILVA, and FINANCIAL to hide the

true terms of this loan from Plaintiff by not

providing Plaintiff with the required loan

disclosure documents prior to or after the

signing of the loan documents.

73. At closing, Plaintiff were presented

with a stack of documents by a notary,

approximately 1 inch thick, with tabs that

indicated where Plaintiff should sign and/or

initial. There was no representative of SPM,

NORBERG, DESILVA, or FINANCIAL present at

closing.

74. In fact, Defendants NORBERG, DESILVA, or

FINANCIAL have been advised by Defendant SPM

not to be present at closing.

75. At closing, the notary did not explain

any of the loan documents to Plaintiff and

had been advised not to explain any of the

loan documents to Plaintiff by Defendants

NORBERG, DESILVA, or FINANCIAL. The notary

simply told Plaintiff to sign and initial the

documents provided.

76. Plaintiff were [sic] only given a few

minutes to sign the documents and Plaintiff

were [sic] not allowed to review the

documents.

77. When Plaintiff applied for this loan, he

accurately described his income and provided

Defendant DESILVA with documentation of his

income including tax returns, bank

statements, W-2s and 1099s. Plaintiff is now

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informed and believes, and thereon alleges

that his income was overstated on the loan

application by Defendant DESILVA, without his

knowledge or permission. Plaintiff is

informed and believes, and thereon alleges

that Defendant SPM’s underwriters knew or

should have known of the fraudulent

information on the loan application but

approved the loan anyway. Plaintiff's income

was overstated on the loan application by the

Defendant DESILVA, Plaintiff had an income of

$4,800.00 per month and the loan application

stated Plaintiff had an income of $7,800.00

at the time the loan was made. 

Defendant CWB

78. As alleged herein, Defendant CWB

misrepresented to Plaintiff that Defendant

CWB has the right to collect monies from

Plaintiff on its behalf or on behalf of

others when Defendant CWB had no legal right

to collect such monies.

79. Defendant CWB has known, at all relevant

times, that it, in fact, is not entitled to

collect monies from Plaintiff.

80. Plaintiff's mortgage note is a

negotiable instrument under the Uniform

Commercial Code Article 3 and California

Commercial Code § 3301 et seq.

81. To transfer ownership of a mortgage note

in a “True Sale” transaction, it requires

proper endorsement by a person with authority

to endorse the note, physical delivery of the

note and acceptance of the note.

82. In “selling” this mortgage note

Defendant SPM failed to follow the basic

legal requirements for the transfer of a

negotiable instrument and an interest in real

property, in that (1) there was not a proper

and timely written assignment of the deed of

trust, (2) there was not a proper endorsement

of the note a person with authority to

endorse the note, and (3) there was not

proper and timely delivery of the Note and

acceptance of the Note and Deed of Trust.

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83. As a result of Defendant SPM’s failure

to follow the guidelines under Uniform

Commercial Code Article 3 and California

Commercial Code § 3301 et seq., no interest

in Plaintiff’s Mortgage Note, Deed of Trust

or Property was ever legally transferred to

any of the named Defendants or Doe

Defendants.

84. Defendant CWB, as part of its duties and

responsibilities “servicing” the Subject

Mortgage, entered information related to the

subject mortgage loan into MERS and therefore

has direct knowledge related to inadequate

and illegal transfers of title, inadequate

and illegal assignments of rights, inadequate

and illegal substitutions of parties and all

other inadequate and illegal activity related

to the chain of title for the Subject

Property.

85. Accordingly, Defendant CWB could not

have legally been given the right to service

Plaintiff’s Loan. 

86. Defendant CWB knew or should have known

the law namely, Uniform Commercial Code

Article 3 and California Commercial Code §

3301 - and its application to its business

services. 

87. Defendant CWB’s representations to

Plaintiff that it has the right to service

Plaintiff’s Loans was, and is, fraudulent. 

General Allegations as to all Defendants and

Damages

88. These material representations made by

each Defendant were false.

89. Each Defendant knew that these material

representations were false when made, or

these material representations were made with

reckless disregard for the truth.

90. Defendants intended that Plaintiff rely

on these material representations.

91. Plaintiff reasonably relied on said

representations.

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92. As a result of Plaintiff’s reliance, he

was harmed and suffered damages including,

but not limited to, loss of property,

incurred attorneys' fees and costs to recover

the Property, a loss of reputation and

goodwill, destruction of credit, severe

emotional distress, loss of appetite,

frustration, fear, anger, helplessness,

nervousness, anxiety, sleeplessness, sadness,

and depression. Plaintiff’s reliance on

Defendants' false material representations

was a substantial factor in causing Plaintiff

harm.

93. Additional evidentiary facts

constituting fraud in this matter are

secreted within Defendants’ knowledge and

possession.

94. Defendants, and each of them, conspired

together to perpetrated the fraud alleged

herein over the course of several years.

95. Defendants are guilty of malice, fraud

and/or oppression, as defined in California

Civil Code § 3294. Defendants' actions were

malicious and willful, in conscious disregard

of the rights and safety of Plaintiff in that

the actions were calculated to injure

Plaintiff. As such, Plaintiff is entitled to

recover, in addition to actual damages,

punitive damages to punish Defendants and to

deter them from engaging in future

misconduct.

96. Defendants SPM, CWB, and FINANCIAL’s

officers, directors and/or managing agents

failed to adequately supervise, train and

direct its employees, and employing them with

conscious disregard for the safety of

Plaintiff and thereafter ratified the conduct

of its employees. 

97. Defendants SPM, CWB, and FINANCIAL

implemented policies and procedures which

permitted and encouraged the conduct of its

employees and agents in this case and as such

said Defendant consented, acquiesced,

approved and ratified the behavior and

conduct of its employees, including Does 1

through 20, and each of them in causing harm

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to Plaintiff. 

98. Accordingly, Plaintiff is entitled to

recover punitive damages from Defendants

pursuant to California Civil Code § 3294, in

an amount according to proof.

SPM argues that the allegations against it in the First

Cause of Action fail to comply with Rule 9(b):

[N]ot only does Plaintiff continue to fall

short of meeting the specificity requirements

imposed by Rule 9(b), Plaintiff still fails

... to identify any representation whatsoever

that Sierra Pacific allegedly made ... [¶]

Far from pleading a viable fraud cause of

action, Plaintiff cannot even describe one,

single statement by Sierra Pacific on which

such a claim might even theoretically stand.

Plaintiff responds that the allegations in Paragraphs 57 to

65 and 73-84 are very specific about the actions of SPM,

including that SPM told people not to attend the closing. 

Plaintiff asserts that “[t]hese individuals would have explained

the true terms of the loan to Plaintiff and Plaintiff would not

have gone through with the transaction.”

Paragraphs 57-65 of the SAC allege fraud against Defendants

Financial, DeSilva and Norberg, not against SPM. As to

Paragraphs 73-84, SPM asserts: “where they mention Sierra Pacific

at all - contain only a few lines about (a) no representative of

Sierra Pacific being present at closing and (b) a purported

instruction by Sierra Pacific that others need not be present,

either, followed by an allegation that Sierra Pacific’s

underwriters should have known about allegedly fraudulent

information placed on Plaintiff’s loan application by another

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Defendant.”

SPM’s motion to dismiss the First Cause of Action for fraud

is GRANTED WITH PREJUDICE. The SAC alleges no fraudulent actions

against SPM and certainly without the specificity required by

Rule 9(b). A mortgage is not a negotiable instrument unless and

until the requirements for negotiability have been satisfied. 

The theory is contrived and based on a misapprehension of the law

of commercial paper. Because Plaintiff has had multiple

opportunities to allege a claim for fraud against SPM upon which

relief can be granted, no further leave to amend is granted.

CWB moves to dismiss this cause of action. With regard to

the allegations in Paragraphs 78 and 82 that “CWB misrepresented

to Plaintiff that Defendant CWB has the right to collect monies

from Plaintiff on its behalf or on behalf of others when

Defendant CWB had no legal right to collect such monies,” and

that in “selling” this mortgage note Defendant SPM failed to

follow the basic legal requirements for the transfer of a

negotiable instrument and an interest in real property, in that

(1)there was not a proper and timely written assignment of the

deed of trust, (2) there was not a proper endorsement of the note

a person with authority to endorse the note, and (3) there was

not proper and timely delivery of the Note and acceptance of the

Note and Deed of Trust,” CWB argues that these allegations are

“nothing more than the latest manifestation of the ‘produce the

note” theory.”2008 Because case law holds that California law

does not require production of the promissory note to initiate

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foreclosure, see, e.g., Putkkuri v. Recontrust Co., 2009 WL 32567

at *2 (S.D.Cal., Jan. 5, 2009); Candelo v. Ndex West LLC, 2008 WL

5382259 at *4 (E.D.Cal., Dec. 23, 2008), CWB asserts that it did

not defraud Plaintiff by collecting loan payments without

demonstrating that it is in possession of the original note. The

holder of a note secured by deed of trust may appoint any

collection agent and need not transfer possession of the note to

enable collection. CWB further argues that the allegations of

fraud are not pleaded with the required specificity: “Plaintiff

has recited nothing but legal theories about why the sale of a

promissory note might be flawed, without any facts that are

relevant to this case.” Finally, CWB asserts that the

allegations do not demonstrate that Plaintiff was damaged:

Plaintiff does not contend that some other

entity tried to collect loan payments as well

as Countrywide. Plaintiff signed a note and

deed of trust in which he promised to make

specified monthly payments, under the threat

of foreclosure. Countrywide, and nobody

else, has sought to collect those payments. 

If, hypothetically, someone else was entitled

to those payments, that other person may have

a claim against Countrywide. But plaintiff

has not shown how he has been damaged by

making the loan payments that he promised he

would make when he executed the note and deed

of trust.

Plaintiff responds that Paragraphs 57-65 and 85-94 are very

specific about the actions of CWB and believes the requirements

of Rule 9(b) have been met. Again, Paragraphs 57-65 of the SAC

allege fraud against Defendants Financial, DeSilva and Norberg,

not against CWB. Paragraphs 85-94 pertain to CWB’s alleged legal

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inability to service the loan under U.C.C. Art. 3 and to

Plaintiff’s contention that CWB’s representation that it was the

loan servicer is fraudulent.

CWB’s motion to dismiss the First Cause of Action is

GRANTED. Plaintiff’s reliance on California Commercial Code §

3301 is misplaced in this context. See Blanco v. American Home

Mortgage Servicing, Inc., 2010 WL 716311 at *2 (E.D.Cal., Feb.

26, 2010):

Plaintiff also bases her theory of fraud

against AHSMI on an erroneous theory. 

Specifically, plaintiff claims that AHSMI

made misrepresentations to plaintiff when it

‘represented ... that AHSMI has the right to

collect monies’ from her because AHSMI is not

a ‘person entitled to enforce’ the mortgage

note pursuant to California Commercial Code

Section 3301. ... In that regard, plaintiff

contends that defendants failed to properly

endorse the note and physically deliver it,

rendering the transfer of the note invalid. 

However, ‘[w]hen a mortgage is sold, physical

transfer of the note is not required.’ Wood

v. Aegis Wholesale Corp., 2009 U.S. Dist.

LEXIS 57151, *14 (E.D.Cal. July 2, 2009)

(citing In re Golden Plan of Cal., Inc. 829

F.2d 705, 708-11 (9 Cir.1986). Accordingly, th

plaintiff has failed to identify any

misrepresentations made by AHSMI or why AHSMI

would know a statement that it had the right

to service her loan was false. 

Further, Plaintiff has not alleged facts from which it may be

inferred that he was damaged by CWB’s alleged misrepresentation. 

As CWB notes, Plaintiff agreed to make monthly payments pursuant

to the terms of the promissory note and deed of trust when he 

obtained the loan from SPM. Whether or not CWB is legally

entitled to service Plaintiff’s does not harm Plaintiff in the

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absence of allegations that Plaintiff was also making loan

payments to a third party.

The First Cause of Action as to CWB is DISMISSED WITH

PREJUDICE. 

C. FOURTH CAUSE OF ACTION FOR VIOLATION OF CALIFORNIA

ROSENTHAL ACT.

CWB moves to dismiss the Fourth Cause of Action for

violation of the Rosenthal Fair Debt Collection Practices Act

(“RFDCPA”) for failure to state a claim upon which relief can be

granted.

The February 16 Memorandum Decision dismissed this claim

with leave to amend, ruling:

The RFDCPA was enacted “to prohibit debt

collectors from engaging in unfair or

deceptive acts or practices in the collection

of consumer debts, and to require debtors to

act fairly in entering into and honoring such

debts.” Cal. Civ. Code § 1788.1. Under the

RFDCPA, a “debt collector” is defined as “any

person who, in the ordinary course of

business, regularly, on behalf of himself or

herself or others, engages in debt

collection.” Cal. Civ. Code § 1788.2(c). The

term “debt collection” means “any act or

practice in connection with the collection of

consumer debts,” § 1788.2(b), and “consumer

debt” means “money, property or their

equivalent, due or owing or alleged to be due

or owing from a natural person by reason of a

consumer credit transaction,” § 1788.2(f). 

In turn, “consumer credit transaction” means

“a transaction between a natural person and

another person in which property, services or

money is acquired on credit by that natural

person from such other person primarily for

personal, family, or household purposes.” §

1788.2(e). A debt collector violates the act

when it engages in harassment, threats, the

use of profane language, false simulation of

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the judicial process, or when it cloaks its

true nature as a licensed collection agency

in an effort to collect a consumer debt. See

Cal. Civ. Code. §§ 1788.10-1788.16.

Plaintiff alleges that Countrywide and Sierra

Pacific violated the RFDCPA by “collecting on

a debt not owed to the Defendants, making

false reports to credit reporting agencies,

falsely stating the amount of a debt,

increasing the amount of debt by including

amounts that are not permitted by law or

contract, and using unfair and unconscionable

means to collect a debt.” (Doc. 14 at 13.) 

Plaintiff’s RFDCPA claim is deficient in at

least two respects. 

First, “[t]he law is clear that foreclosing

on a deed of trust does not invoke the

statutory protections of the RFDCPA.” Collins

v. Power Default Servs., Inc., No. 09–4838

SC, 2010 WL 234902, at *3 (N.D. Cal. Jan. 14,

2010) (collecting numerous cases). 

“[F]oreclosure pursuant to a deed of trust

does not constitute debt collection under the

RFDCPA.” Castenda v. Saxon Mortgage Servs.,

Inc., __ F. Supp. 2d __, 2009 WL 4640673, at

*3 (E.D. Cal. 2009); see also Gonzalez v.

First Franklin Loan Servs., No. 1:09-CV-00941

AWI-GSA, 2010 WL 144862, at *7 (E.D. Cal.

Jan. 11, 2010) (“[F]oreclosure related

actions . . . do not implicate the RFDCPA.”). 

The conduct Plaintiff complains of concerns

foreclosure related actions in connection

with his residential mortgage. This conduct

is not covered by the RFDCPA. For this

reason, Plaintiff’s RFDCPA claim is subject

to dismissal.

Second, the RFDCPA claim lacks any supporting

facts. The complaint has no non-conclusory

factual content to plausibly suggest that

Countrywide and Sierra Pacific violated the

RFDCPA by engaging in acts (such as

harassment) prohibited by the statute. See

Keen v. Am. Home Mortgage Servicing, Inc., __

F. Supp. 2d __, 2009 WL 3380454, at *5 (E.D.

Cal. 2009); Gonzalez, 2010 WL 144862 at *7.

After incorporating all preceding allegations, the Fourth

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Cause of Action in the SAC alleges:

130. Plaintiff alleges that Defendant CWB is

a debt collector within the meaning of the

Rosenthal Act in that they [sic] regularly,

in the course of their business, on behalf or

themselves or others, engage in the

collection of debt.

131. Defendant CWB used unfair and

unconscionable means to collect a debt not

owed to Defendant CWB or its principal by

sending deceptive letters and making phone

calls to Plaintiff demanding payment.

132. Defendant CWB made false reports to

credit reporting agencies about Plaintiff's

credit standing, falsely stating the amount

of Plaintiff's mortgage debt, falsely stating

that a debt was owed to Defendant CWB, and

falsely stating Plaintiff's payment history.

133. Further, Defendant CWB increased the

amount of Plaintiff's mortgage debt by

stating amounts not permitted by law or

contract, including, but not limited to,

excessive service fees, attorneys’ fees, and

late charges.

Defendant CWB’s actions have caused Plaintiff

actual damages, including, but not limited

to, loss of property, incurred attorneys'

fees and costs to recover the Property, a

loss of reputation and goodwill, destruction

of credit, severe emotional distress, loss of

appetite, frustration, fear, anger,

helplessness, nervousness, anxiety,

sleeplessness, sadness, and depression,

according to proof at trial but within the

jurisdiction of this Court.

134. As a result of Defendant CWB’s

violations, Plaintiff is entitled to

statutory damages in an amount to be

determined at trial, actual damages according

to proof, and costs and reasonable attorneys'

fees.

CWB argues that these allegations do nothing more than

recite the language of the statutes and fail to set forth any

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facts showing how CWB violated the RFDCPA. See Keen v. American

Home Mortg. Servicing, Inc., 644 F.Supp.2d 1086, 1095

(E.D.Cal.2009)(dismissing complaint where it failed to allege the

specific provisions of the RFDCPA were violated or any facts that

defendant used threats, harassment, or profane language to

collect a debt); accord Rosal v. First Federal Bank of

California, 671 F.Supp.2d 1111 (N.D.Cal.2009). 

Plaintiff responds that the Fourth Cause of Action alleges

that CWB violated the RFDCPA in attempting to collect money from

Plaintiff and not just to enforce a security interest. Plaintiff

cites Ohlendorf v. American Home Mortgage Servicing, 2010 U.S.

Dist. LEXIS 31098 at *18-20 (E.D.Cal., March 13, 2010):

California’s Rosenthal Fair Debt Collection

Practices Act ... prohibits creditors and

debt collectors from, among other things,

making false, deceptive, or misleading

misrepresentations in an effort to collect a

debt ... Pursuant to Cal. Civ. Code Section

1788.17, the Rosenthal Act incorporates the

provisions of the federal Fair Debt

Collection Practices Act prohibiting

‘[c]ommunicating or threatening to

communicate to any person credit information

which is known or which should be known to be

false.’ 15 U.S.C. § 1692e(8).

Plaintiff alleges that AHMSI violated the

Rosenthal Act by making false reports to

credit reporting agencies, falsely stating

the amount of debt, falsely stating a debt

was owed, attempting to collect said debt

through deceptive letters and phone calls

demanding payment, and increasing plaintiff’s

debt by stating amounts not permitted,

including excessive service fees, attorneys’

fees, and late charges ... AHMSI argues that

foreclosing on a property is not a collection

of a debt, and so is not regulated by the

Rosenthal Act, that the alleged activities

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resulted from plaintiff’s default, and

plaintiff has not alleged when the violations

occurred. AHMSI correctly points out that

foreclosure on a property securing a debt is

not debt collection activity encompassed by

[the] Rosenthal Act ... However, plaintiff’s

allegations with respect to this cause of

action do not mention foreclosure, instead

alleging violations related to payment

collection efforts ... Further, the actions

of debt collectors under the act are not

immunized if plaintiff actually owed money. 

Rather, the Rosenthal Act prohibits conduct

in collecting a debt, whether valid or not. 

Accordingly, AHMSI’s second argument is

without merit. Lastly, as to AHMSI’s third

argument, plaintiff has sufficiently alleged

the general time of the conduct he claims

violates the Rosenthal Act. Specifically,

the court infers from the complaint, that the

alleged conduct occurred after plaintiff

stopped making his loan payments. Thus,

AHMSI’s motion to dismiss this claim is

denied. 

See also Azzini v. Countrywide Home Loans, 2010 WL 962856 at *

(S.D.Cal., March 15, 2010)(denying motion to dismiss Rosenthal

Act claim based on allegations that Countrywide is a loan

servicer, it has collected mortgage payments from Plaintiffs, it

is a debt collector under the Rosenthal Act, and has engaged in

acts such as ‘threatening and deceptive phone calls); Gumbs v.

Litton Loan Servicing, 2010 WL 1992199 at * 5 (E.D.Cal., May 13,

2010)(denying motion to dismiss Rosenthal Act claim based on

allegations that Litton made deceptive phone calls, sent letters,

and engaged in unlawful acts in an attempt to collect a debt it

was not lawfully owed). Plaintiff also cites Castrillo v.

American Home Mortg. Servicing, Inc., 2010 WL 1424398 (E.D.La.,

April 5, 2010), discussing the federal Fair Debt Collection

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Practices Act, and noting that the Fifth Circuit in Perry v.

Stewart Title Co., 756 F.2d 1197, 1208 (5 Cir.1985), held that a th

“debt collector ‘does not include ... a mortgage servicing

company, or an assignee of a debt, as long as the debt was not in

default at the time it was assigned.”2

The only “debt” CWB is allegedly attempting to collect is a

residential mortgage loan, which is not a debt under the

Rosenthal Act. Cases hold that a residential mortgage loan is

not a consumer debt within the meaning of the RFDCPA. See

Pontiflet-Moore v. GMAC Mortg., 2010 WL 432076 at *6 (E.D.Cal.,

Jan. 15, 2010); Fuentes v. Duetsche Bank, 2009 WL 1971610 at * 3

(S.D.Cal., July 8, 2009). Pittman v. Barclays Capital Real

Estate, Inc., 2009 WL 1108889 at 3 (S.D.Cal., April 24, 2009);

Ines v. Countrywide Home Loans, Inc., 2008 WL 4791863 at * 3

(S.D.Cal., Nov. 3, 2008). The cases cited by Plaintiff do not

address the definition of “consumer debt” within the meaning of

the Rosenthal Act. A District Court judge is not bound by

decisions of other District Court judges, even in the same

district. Hernandez v. Balakian, 2007 WL 1649911 at *6 n.2

(E.D.Cal., June 1, 2007). If a residential mortgage loan is not

a debt under the RFDCPA for purposes of foreclosure, it makes no

Plaintiff also cites Wilson v. Draper & Goldberg, P.L.L.C., 2

443 F.3d 373 (4 Cir.2006), where the Fourth Circuit held that th

“Defendants could still be ‘debt collectors’ even if they were

enforcing a security interest.” However, in Odinma v. Aurora Loan

Services, 2010 WL 2232169 at * 12 (N.D.Cal., June 3, 2010), the

District Court rejected the plaintiff’s reliance on Wilson as being

against the weight of authority. 

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sense to categorize it as a “consumer debt” when a loan servicing

company allegedly attempts to collect the debt by means other

than foreclosure.

CWB’s motion to dismiss the Fourth Cause of Action is

GRANTED WITHE PREJUDICE. 

D. SEVENTH CAUSE OF ACTION FOR VIOLATION OF CALIFORNIA

BUSINESS & PROFESSIONS CODE.

SPM and CWB move to dismiss the Seventh Cause of Action. 

The February 16 Memorandum Decision dismissed this claim

with leave to amend:

The complaint alleges that Countrywide, MERS,

and Sierra Pacific engaged in “unlawful,

unfair, and/or unfair business practices” in

violation of California’s Unfair Competition

Law (“UCL”), Business & Professions Code §

17200 et seq. (Doc. 14 at 18.) The complaint

does not assert any particular facts in

support of this claim; rather, the pleading

indiscriminately incorporates by reference

all prior allegations in the complaint. (Id.) 

The UCL prohibits unfair competition

including “any unlawful, unfair or fraudulent

business act or practice.” Cal. Bus. & Prof.

Code § 17200. Because the statute is written

in the disjunctive, it applies separately to

business acts or practices that are (1)

unlawful, (2) unfair, or (3) fraudulent. See

Pastoria v. Nationwide Ins., 112 Cal. App.

4th 1490, 1496 (2003). “Each prong of the

UCL is a separate and distinct theory of

liability; thus, the ‘unfair’ practices prong

offers an independent basis for relief.”

Kearns, 567 F.3d at 1127. 

As to the unlawful prong, the UCL

incorporates other laws and treats violations

of those laws as unlawful business practices

independently actionable under state law. 

Chabner v. United Omaha Life Ins. Co., 225

F.3d 1042, 1048 (9th Cir. 2000). As to the

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“unfair” prong, “[a]n unfair business

practice is one that either ‘offends an

established public policy’ or is ‘immoral,

unethical, oppressive, unscrupulous or

substantially injurious to consumers.’”

McDonald v. Coldwell Banker, 543 F.3d 498,

506 (9th Cir. 2008) (quoting People v. Casa

Blanca Convalescent Homes, Inc., 159 Cal.

App. 3d 509, 530 (1984)). As to the

fraudulent prong, “fraudulent acts are ones

where members of the public are likely to be

deceived.” Sybersound Records, Inc. v. UAV

Corp., 517 F.3d 1137, 1151-52 (9th Cir.

2008).

Plaintiff’s UCL claim has several

deficiencies. First, to the extent Plaintiff

asserts a UCL claim based on a violation of

other law, his complaint fails to state a

claim for a violation of TILA, RESPA, or any

other law. Accordingly, to the extent the

UCL claim is predicated on the violation of

other law, it is insufficiently pled. 

Second, to the extent Plaintiff seeks to

impose liability on Countrywide, MERS, or

Sierra Pacific for “unfair” business

practices, the complaint fails to indicate

which particular acts or practices Plaintiff

is relying upon to advance this claim, or

what acts or practices each defendant did

which constitute “unfair” acts or practices. 

Third, to the extent Plaintiff asserts a UCL

claim that is based on or grounded in fraud,

it must meet the requirements of Rule 9(b),

Kearns, 567 F.3d at 1124-27, Vess, 317 F.3d

at 1103-04, which it does not. The complaint

fails to specify what particular role each

defendant played in the fraudulent conduct or

scheme, when and where the scheme occurred,

or details on the specific misrepresentation

involved in the fraudulent scheme.

The Seventh Cause of Action of the SAC, after incorporating

all preceding allegations, alleges:

Defendant CWB

159. Defendant CWB’s violation of the

Rosenthal Act, their fraud, and illegal

foreclosure activities, as alleged herein,

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constitute unlawful, unfair, and/or

fraudulent business practices, as defined in

the California Business and Professions Code

§ 17200 et seq.

160. Defendant CWB violated the Rosenthal

Act when it used unfair and unconscionable

means to collect a debt not owed to Defendant

CWB or its principal by repeatedly, over the

past year, sending threatening and deceptive

letters and making threatening and deceptive

phone calls to Plaintiff demanding payment in

violation of California Civil Code §1788.13,

when it repeatedly made false reports to

credit reporting agencies about Plaintiff’s

credit standing, falsely stating the amount

of Plaintiff’s mortgage debt, falsely stating

that a debt was owed to Defendant SPM and

falsely stating Plaintiff’s payment history,

violating California Civil Code § 1788.13(f),

and when it increased the amount of

Plaintiff’s mortgage debt by stating amounts

not permitted by law or contract, including,

but not limited to, excessive service fees,

attorneys’ fees, and late charges, in

violation of California Civil Code

1788.10(f).

Defendant SPM

161. Defendant SPM’s fraud, breach of

contract, and breach of the implied covenant

of good faith and fair dealing, as alleged

herein, constitute unlawful, unfair, and/or

fraudulent business practices, as defined in

the California Business and Professions Code

§ 17200 et seq.

162. Defendant SPM, committed negligence

when it breached its fiduciary duty when it

directly ordered, authorized and participated

in Defendant DESILVA’s conduct, approved

anapplication with false information, and

placed Plaintiff into a loan which he could

not ultimately afford. In addition, Defendant

SPM, breached its duty of care to the

Plaintiff provide proper disclosures on or

before closing, properly maintain the

original Note, and properly assign or

transfer the Note. 

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163. Defendant SPM, committed fraud when it,

while acting in concert with Defendant

DESILVA’s tortious conduct, approved the loan

to Plaintiff which he was unqualified for,

implemented unlawful lending practices, and

engaged in fraudulent assignments for the

purposes of foreclosure.

164. Defendant SPM breached its contract,

implied covenant of good faith and fair

dealing, and fiduciary duty when it ordered,

authorized, and participated in Defendant

DESILVA’s conduct, approved an application

with false information, failed to provide

proper disclosures at closing, failed to

allow Plaintiff to review the final loan

documents, and failed to explain any of the

final loan documents to Plaintiff at closing.

Defendant SPM, also breached by failing to

exercise reasonable efforts and due diligence

as promised, engaged in the above mentioned

wrongful acts, and thus failed to provide

Plaintiff with an affordable loan.

The Seventh Cause of Action prays for, among other things,

reasonable attorney’s fees. SPM, citing America Online, Inc. v.

Superior Court, 90 Cal.App.4th 1, 16 n.10 (2001), asserts that

attorney’s fees are not recoverable by a plaintiff in an UCL

action. In Walker v. Countrywide Home Loans, Inc., 98

Cal.App.4th 1158, 1179 (2002), the Court ruled that, although the

unfair competition law does not provide for attorney’s fees, if a

plaintiff prevails on an unfair competition law claim, it may

seek attorney’s fees as a private attorney general pursuant to

Code of Civil Procedure § 1021.5. At the hearing, Plaintiff

conceded that attorney’s fees pursuant to the Seventh Cause of

Action are not recoverable. SPM’s request to strike the request

for attorney’s fees is GRANTED.

CWB argues that the Seventh Cause of Action must be

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dismissed against it because the allegations of violation of the 

RFDCPA which CWB asserts are conclusorily alleged. See

discussion supra. Because Plaintiff’s claim for relief against

CWB for violation of RFDCPA is granted without leave to amend,

the Seventh Cause of Action as against CWB is DISMISSED WITH

PREJUDICE.

SPM moves to dismiss the Seventh Cause of Action to the

extent it is based on breach of contract, breach of the implied

covenant of good faith and fair dealing, negligence, and breach

of fiduciary duty. None of these claims are alleged against SPM

in the SAC.

Plaintiff cites Baldain v. American Home Mortg. Servicing,

Inc., 2010 WL 56143 (E.D.Cal., Jan. 5, 2010) as holding that

“allegations of negligence, breach of TILA and unfair debt

collection are sufficient to support a cause of action for unfair

competition.” 

However, the SAC does not allege these claims against SPM

and the breach of contract, breach of the implied covenant of

good faith and fair dealing, negligence, and breach of fiduciary

duty upon which the Seventh Cause of Action rests are not

asserted against SPM.

To the extent the Seventh Cause of Action is based on SPM’s

alleged fraud, because the First Cause of Action is not

adequately pleaded and is dismissed without leave to amend, see

discussion supra, the Seventh Cause of Action as against SPM is

DISMISSED WITH PREJUDICE.

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 CONCLUSION

For the reasons stated:

1. Defendants Countrywide Bank and Sierra Pacific Mortgage

Company, Inc.’s motions to dismiss the First, Fourth and Seventh

Causes of Action is GRANTED WITHOUT LEAVE TO AMEND;

2. Counsel for Defendants shall prepare and lodge a form of

order consistent with this Memorandum Decision within five (5)

court days following service of this Memorandum Decision.

IT IS SO ORDERED.

Dated: July 13, 2010 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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