Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00744/USCOURTS-caed-2_09-cv-00744-2/pdf.json

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

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28 This matter is deemed to be suitable for decision without oral *

argument. E.D. Cal. R. 230(g).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

KAREN GARDNER, )

)

Plaintiff, ) 2:09-cv-00744-GEB-EFB

)

v. ) ORDER GRANTING AND DENYING IN

) PART DEFENDANTS’ MOTION TO

AMERICAN HOME MORTGAGE SERVICING, ) DISMISS*

INC.; AMERICAN BROKERS CONDUIT; )

DEUTSCHE BANK NATIONAL TRUST )

COMPANY AS TRUSTEE FOR AMERICAN )

HOME MORTGAGE ASSETS TRUST 2007- )

MORTGAGE-BACKED PASS-THROUGH )

CERTIFICATES, SERIES 2007-1; T.D. )

SERVICE COMPANY; AHMSI DEFAULT )

SERVICES, INC.; MORTGAGE ELECTRONIC) 

REGISTRATION SYSTEMS, INC.; CYPRESS) 

MORTGAGE GROUP, INC.; THEODORE L. )

FOWLER, STEVEN JAMES SAMUELSON and )

VELMA WILSON, )

)

Defendants. )

)

On October 2, 2009, Defendants American Home Mortgage

Servicing, Inc. (“AHMSI”) and AHMSI Default Services, Inc. (“AHMSI

Default”) (collectively, “Defendants”) filed a motion under Federal

Rule of Civil Procedure 12(b)(6) in which they seek an order

dismissing the seven claims alleged against them in Plaintiff’s first

amended complaint. (Docket No. 42.) For the reasons stated below,

Defendants’ motion to dismiss is GRANTED and DENIED IN PART.

//

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I. LEGAL STANDARD

A Rule 12(b)(6) motion “challenges a complaint’s compliance

with . . . pleading requirements.” Champlaie v. BAC Home Loans

Servicing, LP, No. S-09-1316 LKK/DAD, 2009 WL 3429622, at *1 (E.D.

Cal. Oct. 22, 2009). A pleading must contain “a short and plain

statement of the claim showing that the pleader is entitled to relief

. . . .” Fed. R. Civ. P. 8(a)(2). The complaint must “give the

defendant fair notice of what the [plaintiff’s] claim is and the

grounds upon which relief rests . . . .” Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 555 (2007). Further, “[a] pleading that offers

labels and conclusions or a formulaic recitation of the elements of a

cause of action will not do. Nor does a complaint suffice if it

tenders naked assertions devoid of further factual enhancement.” 

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). 

To avoid dismissal, the plaintiff must allege “only enough

facts to state a claim to relief that is plausible on its face.” 

Twombly, 550 U.S. at 547. “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct

alleged.” Iqbal, 129 S. Ct. at 1949. Plausibility, however, requires

more than “a sheer possibility that a defendant has acted unlawfully.” 

Id. “When a complaint pleads facts that are merely consistent with a

defendant’s liability, it stops short of the line between possibility

and plausibility of entitlement to relief.” Id. (quotations and

citation omitted).

In evaluating a dismissal motion under Rule 12(b)(6), the

court “accept[s] as true all facts alleged in the complaint, and

draw[s] all reasonable inferences in favor of the plaintiff.” Al-Kidd

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v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, neither

conclusory statements nor legal conclusions are entitled to a

presumption of truth. See Iqbal, 129 S. Ct. at 1949-50.

Defendants request that judicial notice be taken of three

documents related to the foreclosure of Plaintiff’s property which are

publically recorded with the Sacramento County Recorder: a November

21, 2008 Notice of Default and Election to Sell Under Deed of Trust, a

February 23, 2009 Notice of Trustee’s Sale, and a March 17, 2009

Trustee’s Deed Upon Sale. Plaintiff objects to Defendants’ request

for judicial notice, arguing that at most, “the documents establish,

date and location of filing and the identity of the filer” but “do not

establish the Moving Parties’ actions.” (Opp’n 22:17-28.)

While, “as a general rule, a district court may not consider

materials not originally included in the pleadings in deciding a Rule

12 motion . . . it may take judicial notice of matters of public

record and may consider them without converting a Rule 12 motion into

one for summary judgment.” United States v. 14.02 Acres of Land, 547

F.3d 943, 955 (9th Cir. 2008) (quotations and citations omitted). 

However, to take judicial notice of a fact, it must be either

“generally known within the territorial jurisdiction of the trial

court” or “capable of accurate and ready determination by resort to

sources whose accuracy cannot reasonably be questioned.” Fed. R.

Evid. 201(b). The documents submitted by Defendants are publically

recorded documents of which judicial notice may properly be taken, and

accordingly, those documents may be considered in deciding Defendants’

dismissal motion. See Champlaie, 2009 WL 3429622, at *4 (finding

judicial notice of recorded Notice of Default, Notice of Trustee’s

Sale, and Trustee’s Deed Upon Sale proper). Plaintiff’s argument in

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opposition to Defendants’ request is insufficient to preclude the

court from taking judicial notice of these documents.

II. BACKGROUND

On or about November 16, 2006, Plaintiff obtained a loan

from American Brokers to refinance her residence located at 6610

Chesterbrock Drive in Elk Grove, California. (First Amended Compl.

(“FAC”) ¶ 38.) The “terms of the loan were [memorialized] in a

promissory note which in turn was secured by a Deed of Trust on the

property.” (Id.) The Deed of Trust identified American Brokers as

the lender and MERS as the beneficiary and nominee for the lender and

the lender’s assigns and successors. (Id. ¶¶ 38, 41.) 

Plaintiff alleges that in 2006, defendant Velma Wilson told

her she was a loan officer for defendant Cypress and “solicited

[Plaintiff] to refinance her residence.” (Id. ¶ 23.) Plaintiff’s

claims largely stem from her allegations that Wilson induced her into

purchasing an unaffordable loan through misrepresentations, nondisclosure and fraudulent conduct. Specifically, Plaintiff alleges

Wilson told Plaintiff that she could get her “the ‘best deal’ and the

‘best interest rates’ available on the market” and if the “loan ever

became unaffordable” Plaintiff would be able to refinance. (Id. ¶¶

25, 36.)

At some point, Plaintiff stopped making payments on her

mortgage loan. On or about November 21, 2008, T.D. Service Company

filed a Notice of Default on the loan and deed of trust with the

Sacramento County Recorder. (Id. ¶ 52, Request for Judicial Notice

(“RJN”) Ex. A.) The Notice of Default provided that Deutsche Bank

National Trust Company as Trustee for American Home Mortgage Assets

Trust 2007-1 Mortgage-Backed Pass-Through Certificates, Series 2007-1,

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was the beneficiary and AHSMI Default the trustee under the Deed of

Trust. (Id.) Plaintiff alleges that “this ‘appointment’ was

fraudulent and void [and] [a]ccordingly, the Notice of Default was

defective and void.” (FAC ¶ 52.) 

A Notice of Trustee’s Sale was recorded on February 23, 2009

with the Sacramento County Recorder, stating that AHSMI Default, as

the trustee, would sell Plaintiff’s property at a public auction

occurring on March 17, 2009. (RJN Ex. B.) The Notice of Trustee’s

Sale provided that the amount of the unpaid balance on Plaintiff’s

loan totaled $458.598.95. (Id.)

 A Trustee’s Deed Upon Sale was recorded on March 23, 2009. 

The Trustee’s Deed Upon Sale states that AHMSI Default, as the

trustee, sold Plaintiff’s residence to Deutsche Bank National Trust

Company for $365,925.93 on March 17, 2009. (RJN Ex. C.) At the time

of sale, the amount of Plaintiff’s unpaid debt with costs totaled

$463,149.54. (Id.)

Plaintiff alleges that:

Defendants, and each of them, are not the real

parties in interest, 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 non-holders of the Note entitled to

payment, as required by the California

Commercial Code §§ 3301 and 3309, and

California Civil Code § 2924 et seq.

Therefore, Defendants instituted foreclosure

proceedings against Plaintiff’s Property

without rights under the law.

 

(FAC ¶ 60.) Further, Plaintiff alleges “Defendants misrepresented

material facts with the intent of forcing Plaintiff to either pay

large sums of money to the Defendants, to which they were not

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The Eastern District amended its Local Rules effective 1

December 1, 2009. Therefore, an older version of the Local Rules was in

effect when Defendants’ dismissal motion was filed.

6

entitled, or to abandon the Property to a foreclosure sale . . . .” 

(Id. ¶ 61.) 

Plaintiff filed her original complaint in this federal

district court on March 17, 2009. She filed her now operative first

amended complaint on August 4, 2009, in which she alleges ten claims

under state and federal law against ten different defendants.

Defendants argue Plaintiff failed to timely serve an

opposition to their dismissal motion since Defendants’ counsel was not

personally served as required under Local Rule 78-230(c). Local Rule

78-230(c) requires that any opposition to a motion be filed with the 1

Clerk of the Court not less than fourteen days before the hearing date

and personally served on opposing counsel not less than fourteen days

before the hearing date or mailed or electronically served not less

than seventeen days before the hearing date. The hearing date for

Defendants’ dismissal motion was noticed for November 23, 2009. 

Plaintiff timely filed her opposition with the Clerk on November 7,

2009. Plaintiff, however, did not effectuate service of her

opposition on Defendants’ counsel. Nonetheless, since Defendants

counsel was aware of Plaintiff’s opposition and filed a reply, both

the opposition and the reply will be considered.

III. DISCUSSION

A. Rosenthal Act Claims Against AHMSI and AHMSI Default

Defendants argue Plaintiff’s Rosenthal Act claims should be

dismissed since Plaintiff has not alleged “any conduct by Defendants

that violated any provision of the Rosenthal Act . . . .” (MTD 8:15-

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16.) Plaintiff responds, arguing she has satisfied the requirements

of Federal Rule of Civil Procedure 8. (Opp’n 9:18-9:10.)

California’s Rosenthal Act serves 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.” Arikat v. JP Morgan Chase

& Co., 430 F. Supp. 2d 1013, 1026 (N.D. Cal. 2006) (citing Cal. Civ.

Code § 1788.1) (emphasis omitted). However, the Act only governs the

conduct of a “debt collector,” which under the statute is defined as

“any person who, in the ordinary course of business, regularly, and on

behalf of himself or herself . . . engages in debt collection.” Cal

Civ. Code. § 1788.2. 

Plaintiff’s complaint alleges Defendants “are debt

collectors” and their “actions constitute a violation of the Rosenthal

Act in that they threatened to take actions not permitted by law,

including . . .: collecting on a debt not owed to Defendants, making

false reports to credit reporting agencies, foreclosing upon a void

security interest, foreclosing upon a Note of which they were not in

possession nor otherwise entitled to payment, falsely stating the

amount of a debt, increasing the amount of a debt by including amounts

that are not permitted by law or contract, and using unfair and

unconscionable means in an attempt to collect a debt.” (FAC ¶¶ 81,

82.) 

Plaintiff’s allegations, however, “are too vague to give

rise to any inference that a specific defendant has violated” the

Rosenthal Act. Arikat, 430 F. Supp. 2d at 1027 (dismissing as too

vague, Rosenthal Act claim that alleged all violations against all

defendants without specifying each defendant’s individual conduct). 

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Further, “foreclosure pursuant to a deed of trust does not constitute

debt collection under the [Rosenthal Act].” Castaneda v. Saxon Mortg.

Servs., Inc., No. CIV 2:09-01124 WBS DAD, --- F. Supp. 2d ----, 2009

WL 4640673, at *3 (E.D. Cal. Dec. 3, 2009) (citations omitted); see

also Morgera v. Countrywide Home Loans, Inc., No. 2:09-cv-01476-MCEGGH, 2010 WL 160348, at *3 (E.D. Cal. Jan. 11, 2010) (stating that

“California courts have declined to regard a residential mortgage loan

as a ‘debt’ under the [Rosenthal Act]”). Therefore, to the extent

Plaintiff’s Rosenthal Act claims against Defendants arise out of

collection efforts related to Plaintiff’s mortgage loan, they are

outside the scope of the Rosenthal Act. See Morgera, 2010 WL 160384,

at *3 (dismissing Rosenthal Act claim related to residential mortgage

loan). Accordingly, Plaintiff’s Rosenthal Act claims against

Defendants are dismissed. 

B. Negligence Claim Against AHMSI and AHMSI Default

Defendants also argue Plaintiff has failed to allege

sufficient facts to state a negligence claim as she only “recites

legal truisms intended to pass as factual allegations.” (MTD 9:10-

11.) Defendants conclude that “these legal conclusions are

insufficient to state a claim . . . .” (Id. 9:19.) Plaintiff

responds, arguing that her amended complaint is “replete with factual

allegations.” (Opp’n. 11:10.)

Plaintiff alleges that Defendants “owed a duty to the

Plaintiff to perform acts in such a manner as to not cause Plaintiff

harm.” (FAC ¶ 89). Plaintiff further alleges that “Defendants

breached their duty of care to the Plaintiff when they failed to

maintain the original Mortgage Note, failed to properly create

original documents, and failed to make the required disclosures to the

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Plaintiff.” (Id.) Plaintiff also alleges Defendants “breached their

duty of care” “when they took payments to which they were not

entitled, charged fees they were not entitled to charge, and made or

otherwise authorized negative reporting of Plaintiff’s

creditworthiness to various credit bureaus wrongfully.” (Id. ¶ 90.)

Defendants have cited no authority in support of their

motion to dismiss Plaintiff’s negligence claim, and therefore, have

not demonstrated that Plaintiff’s factual allegations are insufficient

to state a claim for negligence. Although Defendants argue in their

reply brief that Plaintiff has not demonstrated that Defendants owed

Plaintiff a legal duty of care which could give rise to a negligence

claim, a “district court need not consider arguments raised for the

first time in a reply brief.” Zamani v. Carnes, 491 F.3d 990, 997

(9th Cir. 2007) (citation omitted). Therefore, the portion of

Defendants’ motion seeking to dismiss Plaintiff’s negligence claim is

denied.

C. Real Estate Settlement Procedures Act Claim Against AHMSI

Defendants further argue Plaintiff’s claims against AHSMI

for violations of the Real Estate Settlement Procedures Act (“RESPA”)

should be dismissed since Plaintiff has failed to allege sufficient

facts to establish that “AHMSI had any duty to respond to Plaintiff’s

[qualified written] request or to support the conclusion that the

response was not proper.” (MTD 10:19-21.) Plaintiff counters,

Defendants have “successfully concealed from Plaintiff who was

servicing her loan” and “Plaintiff is not required to ‘describe’ with

factual allegations what was improper about [AMHSI’s] response.” 

(Opp’n 12:14-13:21.)

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Plaintiff’s complaint alleges that “[o]n or about Mach 11,

2009, a Qualified Written Request under RESPA . . . was mailed to

Defendant [AHMSI]. The QWR included a demand to rescind the loan

under the TILA provisions. Defendant [AHMSI] has yet to properly

respond to this request.” (FAC ¶ 42.) Plaintiff further alleges

AHMSI “violated RESPA, 12 U.S.C. § 2605(e)(2), by failing and refusing

to provide a proper written explanation or response to Plaintiff’s

QWR. (Id. ¶ 97.) Plaintiff also alleges “Defendants have engaged in

a pattern or practice of non-compliance with the requirements of the

mortgage servicer provisions of RESPA as set forth in 12 U.S.C. §

2605.” (Id. ¶ 98.) Plaintiff, however, alleges that she “is not

certain at this time exactly which of Defendants was actually the

servicer of the loan at any given time.” (Id. ¶ 95.)

RESPA requires that loan servicers provide a timely written

response to a “qualified written request” (“QWR”) from a borrower. 12

U.S.C. § 2605(e)(1),(2). No later than “60 days (excluding legal

public holidays, Saturdays and Sundays) after the receipt from any

borrower of any qualified written request” a loan servicer is required

to “provide the borrower with a written explanation or clarification”

that includes certain statutorily specified information. 12 U.S.C. §

2605(e)(2). However, the requirements of section 2605(e)(2) apply

only to loan servicers. A “loan servicer” refers to the person

responsible for “receiving any scheduled periodic payments from a

borrower pursuant to the terms of any loan . . . .” 12 U.S.C. §

2605(i)(2), (3).

“Plaintiff’s inability to allege whether [AHMSI] was the

loan servicer at the time in question is troubling because under RESPA

§ 2605, only a loan servicer has a duty to respond to a borrower’s

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inquiries.” Gonzalez v. First Franklin Loan Servs., No. 1:09-CV-00941

AWI-GSA, 2010 WL 144862, at *12 (E.D. Cal. Jan. 11, 2010). Since 

Plaintiff is uncertain about which defendant was her loan servicer at

any given time, her allegations are insufficient to demonstrate that

any particular defendant was her loan servicer and was obligated to

respond to her QWR. See Castaneda, 2009 WL 4640673, at *5 (stating

that “[w]ithout alleging that [defendant] is a ‘loan servicer’ under

RESPA plaintiffs cannot show that [defendant] owed any duty to respond

to their QWR . . . .”); Blanco v. Am. Home Mortgage Servicing, Inc.,

No. CIV 2:09-578 WBS DAD, 2009 WL 4674904, at *6 (E.D. Cal. Dec. 4,

2009) (dismissing RESPA claim for failure to respond to QWR where

plaintiffs alleged they were “not certain . . . exactly which of the

defendants was actually the servicer of the loan at any given time”). 

Plaintiff, therefore, has not pled facts demonstrating that AHMSI was

her loan servicer when she sent AHMSI her purported QWR. Therefore,

Plaintiff’s RESPA claim against AHMSI for failure to respond to her 

QWR is dismissed.

Defendants, however, have not challenged Plaintiff’s

allegation that “Defendants engaged in a pattern or practice of noncompliance with the requirements of the mortgage servicer provisions

of RESPA.” Therefore, this portion of Plaintiff’s RESPA claim is not

dismissed.

D. Fraud Claim Against AHMSI and AHMSI Default

Defendants argue Plaintiff’s fraud claims should be

dismissed since Plaintiff has not satisfied the requirements of

Federal Rule of Civil Procedure 9(b). (MTD 11:13-12:8.) Plaintiff

counters that she has identified specific facts and circumstances

constituting fraud. (Opp’n 14:14-15.) 

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Under California law, the elements of a fraud claim are: (1)

misrepresentation (including, false representation, concealment, or

nondisclosure); (2) knowledge of falsity; (3) intent to induce

reliance; (4) justifiable reliance; and (5) resulting damage. Lazar

v. Superior Court, 12 Cal.4th 631, 638 (1996). A claim for fraud in

federal court, however, must satisfy Federal Rule of Civil Procedure

Rule 9(b)’s particularity requirements. Vess v. Ciba-Geigy Corp., 317

F.3d 1097, 1103 (9th Cir. 2003). “A pleading is sufficient under Rule

9(b) if it identifies the circumstances constituting fraud so that the

defendant can prepare an adequate answer from the allegations. The

complaint must specify such facts as the times, dates, places,

benefits received, and other details of the alleged fraudulent

activity.” Neubronner v. Milken, 6 F.3d 666, 671-72 (9th Cir. 1993)

(quotations and citations omitted).

Plaintiff’s fraud claim is alleged against all ten

defendants. Plaintiff alleges “Defendants, and each of them, have

made several representations to Plaintiff with regard to material

facts”; “[t]hese material representations made by Defendants were

false”; “Defendants knew these material representations were false

when made, or . . . were made with reckless disregard for the truth”;

“Defendants intended that Plaintiff rely on these material

representations; “Plaintiff reasonably relied on said

representations”; and “[a]s a result of Plaintiff’s reliance, she was

harmed and suffered damages.” (FAC ¶¶ 112-17.) 

Plaintiff’s fraud allegations are conclusory and clearly

fail to satisfy the requirements of Rule 9(b). Plaintiff has merely

restated the elements of a fraud claim without providing any factual

support. Nowhere in her complaint does Plaintiff describe any

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representation made by AHMSI or AHMSI Default. Therefore, Plaintiff’s

fraud claims against Defendants are dismissed.

E. Unfair Competition Law Claim Against AHMSI and AHMSI Default

Defendants further seek dismissal of Plaintiff’s claim under

California Business and Professions Code § 17200 et seq (the “UCL")

since “Plaintiff has not alleged any facts that demonstrate Defendants

have engaged in any conduct that violated that statute.” (MTD 12:12-

14.) Further, Defendants argue Plaintiff’s complaint “fails to state

any claim against Defendants, and therefore, fails to allege

sufficient facts to demonstrate Defendants engaged in any unlawful,

unfair or fraudulent business practice.” (Id. 13:1-4.) Plaintiff

responds that she has “alleged viable violations (‘hooks’) of specific

statutory and common law provisions under federal and state laws,

including violations of the Rosenthal Act, the RESPA, fraud, and

negligence against the moving Defendants.” (Opp’n 16:5-8.) 

Plaintiff’s UCL claim is alleged against all Defendants and

alleges “Defendants[’] acts alleged [in the complaint] constitute

unlawful, unfair, and/or fraudulent business practices, as defined in”

the UCL, and “[a]s a result of Defendants’ wrongful conduct, Plaintiff

has suffered various damages and injuries . . . .” (FAC ¶¶ 120-21.) 

“To bring a UCL claim, a plaintiff must show either an (1)

unlawful, unfair or fraudulent business act or practice, or (2)

unfair, deceptive, untrue or misleading advertising. Because section

17200 is written in the disjunctive, it establishes three varieties of

unfair competition - acts or practices which are unlawful, or unfair

or fraudulent. A practice is prohibited as unfair or deceptive even

if not unlawful or vice versa.” Lippitt v. Raymond James Fin. Servs.

Inc., 340 F.3d 1033, 1043 (9th Cir. 2003) (quotations and citations

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omitted). “[A]n action based on [the UCL] to redress an unlawful

business practice ‘borrows’ violations of other laws and treats these

violations . . . as unlawful practices, independently actionable under

section 17200 et seq. and subject to the distinct remedies provided

thereunder.” Farmers Ins. Exchange v. Superior Court, 2 Cal. 4th 377,

383 (1992) (quotations and citations omitted).

Contrary to Defendants’ assertion, Plaintiff’s RESPA and

negligence allegations survive Defendants’ dismissal motion. These

allegations of unlawful conduct, therefore, provide predicate

violations to support Plaintiff’s UCL claim. Therefore, Defendants’

motion to dismiss Plaintiff’s UCL claim is denied. 

F. Wrongful Foreclosure Claim Against AHMSI and AHMSI Default

Lastly, Defendants argue Plaintiff’s claims for wrongful

foreclosure should be dismissed since “delivery of the original note

and deed of trust is not required to foreclose”; Plaintiff was

provided with proper notice under California Civil Code section

2923.5; Defendants were not required to suspend foreclosure to allow

Plaintiff to be considered for alternative foreclosure options; and

Plaintiff has not alleged that she can tender the amount due under the

note. (MTD 13:9-15:6.) Plaintiff responds that Defendants have not

“proffered proof of ownership or possession of the Note” and therefore

are not a “‘person entitled to enforce’ the security interest on the

Property . . . .” (Opp’n 17:15-23.) Plaintiff further argues that

Defendants have not complied with California Civil Code section 2923.5

or California Commercial Code section 3301. (Id. 18:16-20:27.) 

Plaintiff also argues that Defendants were required to offer Plaintiff

a modification of her mortgage loan and suspend the foreclosure

process. (Id. 22:9-10.) Finally, Plaintiff argues that she does not

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need to allege or prove her ability to tender the amount outstanding

on her mortgage loan in order to state a wrongful foreclosure claim. 

(Id. 21:2-22:5.)

Plaintiff’s complaint alleges that “Defendants [AHMSI],

Deutsche Bank, T.D. and AHSMI [Default] were not and are not in

possession of the Note, and are not beneficiaries, assignees or

employees of the person or entity in possession of the Note” and

therefore are “not ‘persons entitled to enforce’ the security

interest” under California Commercial Code section 3301. (FAC ¶ 140.) 

Further, Plaintiff alleges “Defendants also failed to properly record

and give notice of the Notice of Default . . . in violation of

California Civil [C]ode § 2923.5.” (Id. ¶ 142.) Lastly, Plaintiff

alleges that since Defendants have received funds under the Troubled

Asset Relief Program (“TARP”), they are subject to the United States’

Treasury Department’s guidelines for the Making Homes Affordable

Program, and were required to “suspend the foreclosure action to allow

the Plaintiff to be considered for alternative foreclosure prevention

options.” (Id. ¶ 148.) 

California Civil Code sections 2924 through 2941 govern nonjudicial foreclosures initiated under a deed of trust. “California

courts have consistently held that the Civil Code provisions ‘cover

every aspect’ of the foreclosure process and are ‘intended to be

exhaustive.’” Morgera, 2010 WL 160348, *7 (citing I.E. Associates v.

Safeco Title Ins. Co., 39 Cal. 3d. 281, 285 (1985) & Moeller v. Lien,

25 Cal. App. 4th 822, 834 (1994)); see also Castaneda, 2009 WL

4640673, at *7 (finding the California Commercial Code inapplicable to

non-judicial foreclosure because the “comprehensive statutory

framework . . . is intended to be exhaustive” (quotations and

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citations omitted)). Therefore, “Plaintiff’s reliance on Cal. Comm.

Code § 3301 is misplaced” and Plaintiff’s allegations under that

section are insufficient to state a wrongful foreclosure claim. 

Morgera, 2010 WL 160348, at *7 (finding California Commercial Code

section 3301 inapplicable to non-judicial foreclosure proceedings). 

Under California Civil Code section 2924(a)(1), a nonjudicial foreclosure may be initiated by a “trustee, mortgagee, or

beneficiary, or any of their authorized agents . . . .” Cal. Civ.

Code § 2924(a)(1). However, contrary to Plaintiff’s assertions, the

party initiating the foreclosure process need not be in possession of

the note. See Quintero Family Trust v. Onewest Bank, F.S.B., No. 09-

CV-1516-IEG (WVG), 2010 WL 392312, at *6 (S.D. Cal. Jan. 27, 2009)

(stating that “under California law there is no requirement for

production of the original note to initiate nonjudicial foreclosure

proceedings”); Morgera, 2010 WL 160348, at *7 (finding that “[t]here

is no requirement that the party initiating non-judicial foreclosure

proceedings be in possession of the original note”); Champlaie, 2009

WL 3429622, at *14 (concluding that “neither possession of the

promissory note nor identification of the party in possession is a

pre-requisite to non-judicial foreclosure); Castaneda, 2009 WL

4640673, at *7 (finding that “[u]nder California law, there is no

requirement for the production of the original note to initiate a nonjudicial foreclosure”). Accordingly, Plaintiff’s allegation that

Defendants are not in possession of the note does not state a wrongful

foreclosure claim.

Further, a defaulted borrower is “required to allege tender

of the amount of [the lender’s] secured indebtedness in order to

maintain any cause of action for irregularity in the [foreclosure]

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(continued...)

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sale procedure . . . .” Abdallah v. United Sav. Bank, 43 Cal. App.

4th 1101, 1109 (1996) (citation omitted). “Therefore, an action to

set aside a foreclosure sale, unaccompanied by an offer to tender,

does not state a cause of action [for wrongful foreclosure] . . . .” 

Morgera, 2010 WL 160348, at *7 (citing Karlsen v. Am. Sav. & Loan

Ass’n, 15 Cal. App. 3d 112, 117 (1971) (stating that “[a] valid and

viable tender of payment of the indebtedness owing is essential to an

action to cancel a voidable sale under a deed of trust”)); see also

Keen v. Am. Home Mortgage Servicing, Inc., No. CIV. 2-09-01026

FCD/KJM, --- F. Supp. 2d ----, 2009 WL 3380454, at *10 (concluding

that borrower must allege ability to tender the amount of indebtedness

to challenge foreclosure sale). “The application of the tender rule

prevents a court from uselessly setting aside a foreclosure sale on a

technical ground when the party making the challenge has not

established his ability to purchase the property.” Keen, 2009 WL

3380454, at *10 (citing Williams v. Countrywide Home Loans, 1999 WL

740375 (N.D. Cal. Sept. 15, 1999)).

Plaintiff has not alleged any facts suggesting she has the

ability to tender her unpaid debt of $463,149.54. (RJN Ex. C.) 

Rather, she argues that tender is not required when “it would be

inequitable to do so.” (Opp’n. 21:2.) Plaintiff, however, has not

explained why requiring her to tender her outstanding debt would be

“inequitable” under the circumstances. Therefore, regardless of

whether or not Defendants complied with the notice requirements of

California Civil Code section 2923.5, Plaintiff’s wrongful foreclosure

claim cannot survive Defendants’ dismissal motion.2

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contradicted by the recorded Notice of Default and Notice of Trustee’s

Sale of which judicial notice was taken.

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Plaintiff’s last allegation underlying her wrongful

foreclosure claim alleges Defendants were required to suspend the

foreclosure process due to Defendants’ alleged receipt of TARP funds. 

Even if Defendants participated in the Making Homes Affordable Program

(“MHAP”), “Plaintiff fails to show how participation in this program

gives rise to a private cause of action.” Gaitan v. Mortgage

Electronic Registration Systems, No. EDCV 09-1009 VAP (MANx), 2009 WL

3244729, at *13 (C.D. Cal. Oct. 5, 2009). Further, even if provisions

of TARP are binding on Defendants, “there is no express private right

of action against TARP fund recipients.” Pantoja v. Countrywide Home

Loans, Inc., 640 F. Supp. 2d 1177, 1185 (N.D. Cal. 2009). Therefore,

Plaintiff’s allegation that Defendants violated MHAP and TARP by

refusing to suspend the foreclosure sale, fails to state a wrongful

foreclosure claim. Accordingly, Plaintiff’s wrongful foreclosure

claim against Defendants is dismissed.

IV. CONCLUSION

For the stated reasons, Defendants’ motion to dismiss is

GRANTED and DENIED IN PART. Plaintiff, however, is granted leave to

amend any claim that has been dismissed. Any amended pleading shall

be filed within fourteen (14) days of the date on which this order is

filed.

Dated: February 10, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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