Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_10-cv-00991/USCOURTS-cand-5_10-cv-00991-6/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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28 This disposition is not designated for publication in the official reports. 1

Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

**E-Filed 5/21/10**

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ANGEL ACOSTA,

 Plaintiff,

 v.

WELLS FARGO BANK, N.A., a national

association, FIRST AMERICAN LOANSTAR, a

limited liability corporation, FINANCIAL GROUP,

a California company, entity type unknown, and

DOES 1 to 100 inclusive,

 Defendants.

Case Number C 10-991 JF (PVT)

ORDER GRANTING 1

DEFENDANTS’ MOTIONS TO

DISMISS AND DENYING

PLAINTIFF’S MOTION FOR A

PRELIMINARY INJUNCTION

[re doc nos. 3, 21, and 25]

Plaintiff seeks a preliminary injunction to restrain Defendants from taking actions that

would be adverse to Plaintiff’s interest in certain real property. Moving Defendants Wells Fargo

Bank, N.A. (“Wells Fargo”) and First American Loanstar (“First American”) oppose and move

pursuant Fed. R. Civ. P. 12(b)(6) to dismiss the complaint. The Court has considered the

moving papers, declarations and exhibits, and the oral arguments of counsel presented at the

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 The deed of trust, recorded on September 7, 2006, indicates that Plaintiff borrowed

2

$620,000. Wells Fargo’s RJN in Support of the Motion to Dismiss, Ex. A.

2

Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

hearing on March 26, 2010. For the reasons discussed below, Plaintiff’s request for a

preliminary injunction will be denied. The motions to dismiss will be granted. Plaintiff’s

motion for a preliminary injunction will be denied.

I. BACKGROUND

On March 8, 2010, Plaintiff Angel Acosta (“Plaintiff”) filed the instant action against

Wells Fargo, First American, and Financial Group (collectively, “Defendants”). The dispute

arises out of a mortgage transaction in which Defendants allegedly violated the Truth in Lending

Act (“TILA”), 15 U.S.C. § 1601 et seq., the Real Estate and Settlement Procedures Act

(“RESPA”), 12 U.S.C. § 2601 et seq., and several provisions of California law, including

California Civil Code §§ 2923.5 and 2924.

In September 2006, Plaintiff purchased real property located at 754 North 17th Street,

San Jose, California 95112, a multi-family residence in which Plaintiff currently resides (“the

Subject Property”). Complaint ¶¶ 11-12. To purchase the Subject Property, Plaintiff entered

into a loan transaction with Wells Fargo Bank in the amount of $775,000. His loan has an 2

interest-only period of sixty months at 6.875%, following which the interest rate is to become

adjustable based on the LIBOR index plus 2.250%, capped at 11.875%. Complaint ¶ 15. The

loan was arranged through Financial Group, which acted as the mortgage broker and selling

agent for Wells Fargo. Complaint ¶ 13. Plaintiff alleges that upon execution of the loan he was

not provided with two copies of the Notice of the Right to Cancel and that he was not informed

of payments from Wells Fargo to Financial Group in connection with the loan. Complaint ¶ 16. 

Plaintiff also alleges that his first and primary language is Spanish, Complaint ¶ 14, and that the

loan documents were provided in English only. Complaint ¶ 83.

In September 2008, Plaintiff began experiencing financial difficulties and requested a

loan modification from Wells Fargo. Complaint ¶ 19. He was told that he was not eligible for a

loan modification until his account was between sixty and ninety days delinquent; he therefore

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

decided to stop making payments on his loan. Id. Plaintiff alleges that he subsequently was

unable to discuss a loan modification with Wells Fargo despite making several attempts each

week since October 2008 to contact Wells Fargo or an agent acting on its behalf. Complaint ¶

24.

On February 12, 2009, Defendants recorded a notice of default against the property. 

Complaint ¶ 25. While he acknowledges receiving collection calls, Plaintiff alleges that he did

not receive any mail, telephone calls, or other correspondence from Wells Fargo or First

American before the notice of default was recorded. Complaint ¶¶ 20-21. On March 8, 2009,

Plaintiff sent the Defendants a notice of cancellation, seeking to rescind the loan. Complaint ¶

17. Plaintiff alleges that he sent Wells Fargo a Qualified Written Request, as defined by

RESPA, on November 30, 2009, and that Wells Fargo did not respond within twenty days as

required by RESPA. Id.

A foreclosure sale was scheduled for March 10, 2010. Complaint ¶ 26. On March 9,

2010, Plaintiff moved for a temporary restraining order (“TRO”) and an order to show cause

why Defendants should not be enjoined from selling, transferring, conveying, or foreclosing on

the Subject Property. On March 10, 2010, Judge Hamilton, the district judge initially assigned to

the instant case, issued a TRO effective through March 21, 2010 and ordered that the case be

transferred to the San Jose Division. On the same date, Plaintiff filed a voluntary petition for

Chapter 13 bankruptcy. Wells Fargo’s RJN in Opp’n to Preliminary Injunction, Ex. F. The case

was reassigned from Judge Hamilton to Magistrate Judge Trumbull. On March 19, 2010, Judge

Trumbull issued an order directing that the case be reassigned to a district judge. On the same

day, this Court extended the TRO through March 26, 2010 so that the Court could consider in an

orderly fashion the merits of Plaintiff’s application for a preliminary injunction. A hearing was

held on March 26, 2010. The hearing was continued to May 14, 2010 because Defendants had

not yet appeared in the instant case. Wells Fargo and First American (collectively, “Moving

Defendants”) now move to dismiss.

//

//

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

II. LEGAL STANDARDS

A. Motion to dismiss

A complaint may be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a

claim upon which relief may be granted if a plaintiff fails to proffer “enough facts to state a

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

(2007). Allegations of material fact must be taken as true and construed in the light most

favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.

1997). However, the Court need not accept as true allegations that are conclusory, unwarranted

deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d

979, 988 (9th Cir. 2001). See also Twombly, 550 U.S. at 561 (“a wholly conclusory statement of

[a] claim” will not survive a motion to dismiss). 

On a motion to dismiss, the Court’s review is limited to the face of the complaint and

matters judicially noticeable. MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.

1986); N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). However, under

the “incorporation by reference” doctrine, the Court also may consider documents which are

referenced extensively in the complaint and which are accepted by all parties as authentic. In re

Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999). Leave to amend should be

granted unless it is clear that the complaint’s deficiencies cannot be cured by amendment. Lucas

v. Dep’t of Corr., 66 F. 3d 245, 248 (9th Cir. 1995). 

In assessing whether to grant Plaintiff an opportunity to amend, the Court considers “the

presence or absence of undue delay, bad faith, dilatory motive, repeated failure to cure

deficiencies by previous amendments, undue prejudice to the opposing party[,] and futility of the

proposed amendment.” Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1052 (9th Cir. 2001)

(quoting Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 538 (9th Cir. 1989)). When

amendment would be futile, dismissal may be ordered with prejudice. Dumas v. Kipp, 90 F.3d

386, 393 (9th Cir. 1996). 

B. Injunctive relief

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

A preliminary injunction is “an extraordinary remedy that may only be awarded upon a

clear showing that the plaintiff is entitled to such relief.” Winter v. Natural Res. Def. Council,

Inc., 129 S.Ct. 365, 376 (2008). “The proper legal standard for preliminary injunctive relief

requires a party to demonstrate [1] ‘that he is likely to succeed on the merits, [2] that he is likely

to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities

tips in his favor, and [4] that an injunction is in the public interest.’” Stormans, Inc. v. Selecky,

586 F.3d 1109, 1127 (9th Cir. 2009) (citing Winter, 129 S. Ct. at 374)). The issuance of a

preliminary injunction is committed to the discretion of the District Court. Indep. Living Ctr.,

572 F.3d at 651.

Plaintiff argues that a preliminary injunction also is appropriate when a party can show

that “serious questions going to the merits [are] raised and the balance of hardships tips sharply

in [its] favor.” Before the Supreme Court’s decision in Winter, the Ninth Circuit had held that:

“[a] preliminary injunction is appropriate when a plaintiff demonstrates either: (1) a

likelihood of success on the merits and the possibility of irreparable injury; or (2) that

serious questions going to the merits were raised and the balance of hardships tips

sharply in [the plaintiff's] favor. [citation] These two options represent extremes on a

single continuum: the less certain the district court is of the likelihood of success on the

merits, the more plaintiffs must convince the district court that the public interest and

balance of hardships tip in their favor.”

Lands Council v. McNair, 537 F.3d 981, 987 (9th Cir. 2008). In Winter, the Supreme Court

expressly disapproved the “possibility standard” because it was “too lenient”. Winter, 129 S. Ct.

at 375. Following Winter, the Ninth Circuit found that “[t]he [Supreme] Court succinctly stated

the rule to be as follows: ‘A plaintiff seeking a preliminary injunction must establish that he is

likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of

preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the

public interest.’ [Winter,] 129 S. Ct. at 374. To the extent that our cases have suggested a lesser

standard, they are no longer controlling, or even viable.” Am. Trucking Ass’ns v. City of Los

Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009)

Plaintiff relies on Save Strawberry Canyon v. Dept. of Energy, No. C 08-03494 WHA,

2009 WL 1098888, *3 (N.D.Cal. April 22, 2009), in which the court addressed further the postCase 5:10-cv-00991-JF Document 32 Filed 05/21/10 Page 5 of 15
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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

Winter standard for a preliminary injunction in the Ninth Circuit. The court recognized

American Trucking, but it concluded that it could not ignore the implications of an unpublished

Ninth Circuit decision subsequent to American Trucking. See Greater Yellowstone Coalition v.

Timchak, 323 Fed. Appx. 512, 514 (9th Cir. 2009) (remanding a case with “serious questions”

on the merits so that the district court could properly consider irreparable harm). However,

following the Strawberry Canyon decision, the Ninth Circuit reiterated that “‘[t]o the extent that

our cases have suggested a lesser standard, they are no longer controlling, or even viable.’

[citation] . . . The proper legal standard for preliminary injunctive relief requires a party to

demonstrate [1] ‘that he is likely to succeed on the merits, [2] that he is likely to suffer

irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his

favor, and [4] that an injunction is in the public interest.’” Stormans, 586 F.3d at 1127 (internal

citations omitted). Winter requires a showing of the likelihood of success on the merits, while

the second prong of the McNair standard would require a showing only of a “serious question

going to the merits”, which is something less than a showing of likelihood.

III. DISCUSSION

A. Documents considered

Moving Defendants request judicial notice of the deed of trust and Plaintiff’s voluntary

bankruptcy petition. A court “may take judicial notice of matters of public record outside the

pleadings.” MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Accordingly,

the Court may take judicial notice of the deed of trust, Plaintiff’s voluntary bankruptcy petition,

and other matters of public record as discussed below.

B. Merits of the claims

Plaintiff asserts that Defendants are liable for (1) TILA violations, (2) RESPA violations,

(3) breach of the implied covenant of good faith and fair dealing, (4) fraudulent

misrepresentation and concealment, (5) violating Cal. Finance Code §§ 4970-79, (6) violating

Cal. Civ. Code §§ 1920-21, (7) violating Cal. Civ. Code § 1916.7, (8) violating Cal. Civ. Code §

1632, (9) negligence per se, (10) breach of fiduciary duties, (11) violating California’s unfair

competition law (the “UCL”), Cal. Bus. and Prof. Code § 17200, et seq., and (12) civil

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

conspiracy. Plaintiff also seeks a judicial declaration of the rights and duties of the parties under

the loan agreement.

1. TILA violations (Claim 2)

Plaintiff alleges that all Defendants, except First American, violated TILA by failing to

provide him with two copies of the notice of his right to rescind; to reveal the true terms of the

loan; to disclose kickbacks to Financial Group; and to acknowledge his purported rescission of

the loan. However, the right to rescind does not apply to a residential mortgage transaction, 12

C.F.R. § 226.23(f), which is defined as “a transaction in which a mortgage . . . is created or

retained against the consumer’s dwelling to finance the acquisition . . . of such a dwelling”. 15

U.S.C. § 1602(w). The deed of trust provides specifically that the instant loan is a purchase

money mortgage. Wells Fargo’s RJN in Support of Motion to Dismiss, Ex. A at 3. Thus,

Plaintiff’s loan is not subject to rescission and Defendants were not required to serve two copies

of the notice of the right to rescind. See 12 C.F.R. § 226.23(b)(1) (requiring a creditor to deliver

two copies of the notice of right to rescind “in transactions subject to rescission”). Plaintiff’s

allegation with respect to kickbacks is entirely conclusory and need not be accepted even at the

pleading stage. See Sprewell, 266 F.3d at 988. 

In light of his complaint as a whole and documents of which the Court may take judicial

notice, Plaintiff’s allegation that Defendants did not disclose the true terms of the loan is

implausible. Plaintiff alleges that the actual loan amount was $775,000, even though the deed of

trust indicates that the loan amount is $620,000. Complaint ¶ 15 and Wells Fargo’s RJN in

Support of Motion to Dismiss, Ex. A at 2. Allegations sounding in fraud are subject to the

heightened pleading requirements of Fed. R. Civ. P. 9(b). See Vess v. Ciba-Geigy Corp. USA,

317 F.3d 1097, 1103-04 (9th Cir. 2003) (if “the claim is said to be ‘grounded in fraud’ or to

‘sound in fraud,’ [then] the pleading of that claim as a whole must satisfy the particularity

requirement of Rule 9(b).”). “In the context of a fraud suit involving multiple defendants, a

plaintiff must, at a minimum, identify the role of each defendant in the alleged fraudulent

scheme.” Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir. 2007) (internal marks and

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ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

quotation omitted). Plaintiff’s allegation is entirely conclusory: he alleges that he discovered

Defendants’ failure to disclosure the true terms of the loan, but does not indicate what terms

were not disclosed and the role each defendant played in the allegedly fraudulent scheme.

2. RESPA violations (Claim 3)

Under RESPA, loan servicers “ha[ve] a duty to respond to a borrower’s inquiry or

‘qualified written request.’ 12 U.S.C. § 2605(e).” Keen v. Amer. Home Mortgage Servicing,

Inc., 664 F. Supp. 2d 1086 (E.D. Cal. 2009). Plaintiff alleges that he sent a qualified written

request (“QWR”) to Wells Fargo. Complaint ¶ 17. However, the allegation too is entirely

conclusory. To qualify as a QWR, correspondence must meet particular requirements. See 12

U.S.C. § 2605(e). Plaintiff does not allege that his correspondence satisfied any of the elements

of a QWR. Plaintiff’s allegation that Defendants provided kickbacks to Financial Group in

violation of RESPA also is devoid of facts.

3. Breach of the implied covenant of good faith an fair dealing (Claim 4)

“There is implied in every contract a covenant by each party not to do anything which

will deprive the other parties thereto of the benefits of the contract.” Harm v. Frasher, 181

Cal.App.2d 405, 417 (Cal. Ct. App. 1960). A “breach of a specific provision of the contract is

not a necessary prerequisite” to establishing a breach of the implied covenant of good faith and

fair dealing. Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342,

373(1992). However, “[t]he implied covenant will not apply where no express term exists on

which to hinge an implied duty, and where there has been compliance with the contract’s

express terms.” Berger v. Home Depot U.S.A., Inc., 476 F. Supp. 2d 1174, 1177 (C.D. Cal.

2007).

Plaintiff alleges that “in failing and refusing to comply with the foreclosure avoidance

provisions of Civil Code § 2923.5, Defendants breached the subject loan agreements”. 

Complaint ¶ 49. The California Courts of Appeal addressed a similar argument in Smith v. City

& County of San Francisco, 225 Cal. App. 3d 38, 49 (Cal. App. 1st Dist. 1990). In that case,

appellants argued that “the implied covenant can exist based on certain statutory duties imposed

on [the appellee]. They offer[ed] no authority for such a proposition and [the court] [has] found

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

none. To the contrary, the covenant of good faith and fair dealing is, by definition, an implied

contract term. It has no relation to any statutory duties which may exist.” Id. Plaintiff also

alleges that Defendants improperly reported the notice of default and the foreclosure to the

credit reporting agencies. This claim, however, rises and falls with Plaintiff’s claim that

Defendants wrongfully recorded the notice of default, which will be discussed below.

4. Fraudulent misrepresentation and concealment (Claims 5 and 6)

Plaintiff alleges that Defendants misrepresented that he earned sufficient income to repay

the loan, falsified his income to obtain the loan, and concealed his right to rescind the loan. 

Although these claims arise under state law, Plaintiff’s allegations are subject to the Federal

Rules of Civil Procedure. Allegations sounding in fraud are subject to Rule 9(b). See

Ciba-Geigy, 317 F.3d at 1103-04; Swartz, 476 F.3d at 765. While he alleges that Financial

Group fraudulently reported his income on the loan application paperwork, Complaint ¶ 13,

Plaintiff makes only general allegations against the other “Defendants”. Moreover, Plaintiff

does not allege that he was unaware of Financial Group’s purported misstatement of his

financial situation.

5. Cal. Finance Code §§ 4970-79 (Claim 9)

Plaintiff alleges that Wells Fargo and Financial Group sell loans with hidden fees and

that they “approved an unaffordable loan to Plaintiff without regard to [his] creditworthiness,

financial loss or ability to repay this loan”. Complaint ¶¶ 68-69. Plaintiff alleges that Financial 3

Group prepared his loan paperwork and that “Defendants” fraudulently reported his income. 

Complaint ¶¶ 13, 53. However, Plaintiff does not allege that Wells Fargo had any role in

preparing the allegedly fraudulent loan application or that the application was false. Plaintiff

himself alleges that Wells Fargo approved his loan based on his loan application, which at least

made it appear that he had the ability to repay the loan. Plaintiff’s allegation with respect to

hidden fees is entirely conclusory and need not be accepted. See Sprewell, 266 F.3d at 988.

6. Cal. Civ. Code §§ 1920-21 (Claim 10)

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ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

Plaintiff alleges that Wells Fargo and Financial Group violated Cal. Civ. Code §§ 1920-

21 by misrepresenting the terms of the loan. He claims that Wells Fargo and Financial Group

represented that the interest rate was fixed at 6.875% for the life of the loan. Complaint ¶ 74. 

However, the rate actually was fixed only for the first sixty months, after which the payments

increased “dramatically”. Id. Because this claim sounds in fraud, it must meet the particularity

requirements of Rule 9(b). See Ciba-Geigy, 317 F.3d at 1103-04. A plaintiff must include a

description of the “time, place, and specific content of the false representations as well as the

identities of the parties to the misrepresentations.” Swartz, 476 F.3d at 764. While Plaintiff

identifies the parties to the misrepresentation generally, he does not allege the time, place, and

specific content of any misrepresentation.

7. Cal. Civ. Code § 1916.7 (Claim 11)

Plaintiff alleges that Wells Fargo failed to fully inform him “of the terms, pros, cons, and

risks of their adjustable rate mortgage and other loan options that might have been more

beneficial to [him] as a borrower.” Complaint ¶ 79. Cal. Civ. Code § 1916.7 places certain

restrictions on adjustable rate mortgages and requires that the lender make certain disclosures at

the time the borrower requests an application. Wells Fargo argues that Section 1916.7, at least

insofar as it applies to a national bank, is preempted by the National Bank Act, 12 U.S.C. § 21 et

seq. 

12 C.F.R. § 34.4(a) provides that “state laws that obstruct, impair, or condition a national

bank’s ability to fully exercise its Federally authorized real estate lending powers do not apply to

national banks”. Specifically, the National Bank Act allows a national bank to “make, arrange,

purchase, or sell loans or extensions of credit, or interests therein, that are secured by liens on, or

interests in, real estate (real estate loans)”, 12 C.F.R. § 34.3, “without regard to state law

limitations concerning . . . [d]isclosure and advertising, including laws requiring specific

statements, information, or other content to be included in credit application forms, credit

solicitations, billing statements, credit contracts, or other credit-related documents.” 12 C.F.R. §

34.4(a)(9). Accordingly, the disclosure requirements of Cal. Civ. Code § 1916.7 do not apply to

Wells Fargo.

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Case Number C 10-991 JF

ORDER GRANTING DEFENDANTS’ MOTIONS TO DISMISS, ETC.

(JFEX1)

8. Cal. Civ. Code § 1632 (Claim 12)

Plaintiff alleges that certain Defendants violated Cal. Civil Code § 1632 by failing to

provide him with the loan documents in his primary language – Spanish. Complaint ¶¶ 82, 83. 

Cal. Civ. Code § 1632 provides that “[a]ny person engaged in . . . business who negotiates

primarily in Spanish . . . , orally or in writing, in the course of entering into [certain loans], shall

deliver to the other party to the contract or agreement and prior to the execution thereof, a

translation of the contract or agreement in the language in which the contract or agreement was

negotiated . . . .” However, Plaintiff does not allege that the loan was negotiated in Spanish. 

Moreover, Section 1632 does not apply to a loan secured by real property unless certain

exceptions apply. See Cal. Civ. Code § 1632(b)(2) and (4). Plaintiff has not alleged that his

loan would qualify under any of these exceptions.

9. Negligence per se (Claim 1)

“[California] Evidence Code section 669 . . . codifies the common law doctrine of

negligence per se, pursuant to which statutes and regulations may be used to establish duties and

standards of care in negligence actions.” Elsner v. Uveges, 34 Cal. 4th 915, 927 (2004). Cal.

Evid. Code § 669(a) provides that “[t]he failure of a person to exercise due care is presumed if:

(1) He violated a statute, ordinance, or regulation of a public entity; (2) The violation

proximately caused death or injury to person or property; (3) The death or injury resulted from

an occurrence of the nature which the statute, ordinance, or regulation was designed to prevent;

and (4) The person suffering the death or the injury to his person or property was one of the

class of persons for whose protection the statute, ordinance, or regulation was adopted.” 

Plaintiff alleges that Defendants have “a duty to comply with the foreclosure avoidance

and workout plan requirements of [Cal.] Civil Code Section 2923.5.” Complaint ¶ 28. “The

procedure for foreclosing on security by a trustee’s sale pursuant to a deed of trust is set forth in

Civil Code section 2924 et seq. The statutory requirements must be strictly complied with, and

a trustee’s sale based on a statutorily deficient notice of default is invalid.” Miller v. Cote, 127

Cal. App. 3d 888, 894 (Cal. Ct. App. 1982). Cal. Civ. Code § 2923.5(a)(1) precludes an entity

from recording a notice of default until 30 days after the mortgagee, trustee, beneficiary, or

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 This document, the substitution of a trustee under a deed of trust, is a judicially 4

noticeable document because it is a matter of public record. MGIC Indem. Corp. v. Weisman,

803 F.2d 500, 504 (9th Cir. 1986).

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authorized agent satisfies one of two requirements. 

The creditor must either “contact the borrower in person or by telephone in order to

assess the borrower’s financial situation and explore options for the borrower to avoid

foreclosure” as required under Section 2923.5(a)(2) or satisfy the due diligence requirements

provided under Section 2923.5(g). Due diligence under Section 2923.5(g) requires a number of

steps, including mailing a first class letter to the borrower that provides a toll-free number to

find a HUD-certified housing counseling agency, attempting to contact the borrower by

telephone at least three separate occasions at three different times of day, and mailing a certified

letter to the borrower. Cal. Civ. Code § 2923.5(g)(1) and (2). Plaintiff alleges that he did not

receive any mail, telephone calls, or other correspondence from the Defendants before February

12, 2009, when the notice of default was recorded. Complaint ¶ 21, Declaration of Angel

Acosta, ¶ 7. 

a. Trustee liability

First American is the successor trustee under the deed of trust. See Complaint ¶ 3

(identifying First American as the foreclosing trustee) and First American’s RJN in Support of

Motion to Dismiss, Ex. C. First American has authority to foreclose on the property. See Cal. 4

Civ. Code § 2924b(b)(4) (providing that “any person designated in an executed substitution of

trustee” may record a notice of default). Cal. Civ. Code § 2923.5(a)(2) only requires the

“mortgagee, beneficiary, or authorized agent” to contact the borrower. While Cal. Civ. Code §

2923.5(a)(1) prevents a trustee from recording a notice of default until that contact has been

made, the only responsibility imposed on a recording trustee is to include a declaration of

compliance with the law executed by the mortgagee, beneficiary, or authorized agent. Such a

declaration was included with the notice of default in the instant case. Wells Fargo’s RJN in

Support of Motion to Dismiss, Ex. B. Even if the declaration is false, First American cannot be

liable.

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 “[T]he types of state laws preempted by . . . this section include, without limitation, 5

state laws purporting to impose requirements regarding . . . [p]rocessing, origination, servicing,

sale or purchase of, or investment or participation in, mortgages.” 12 U.S.C. § 1464(b)(10).

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b. Federal preemption

Wells Fargo also contends that Section 2923.5 is preempted by the National Bank Act. 

“Federally chartered banks are subject to state laws of general application in their daily business

to the extent such laws do not conflict with the letter or the general purposes of the [National

Bank Act].” Watters v. Wachovia Bank, N.A., 550 U.S. 1, 11 (2007). Nonetheless, as discussed

above, 12 C.F.R. § 34.4(a) provides that “state laws that obstruct, impair, or condition a national

bank’s ability to fully exercise its Federally authorized real estate lending powers do not apply to

national banks”. “Specifically, a national bank may make real estate loans . . . without regard to

state law limitations concerning . . . [p]rocessing, origination, servicing, sale or purchase of, or

investment or participation in, mortgages”. 12 C.F.R. § 34.4(a)(10). 

The Court is unaware of other decisions addressing this precise issue. However, several

district courts within the Ninth Circuit have determined that the Home Owners’ Loan Act

(“HOLA”), 12 U.S.C. § 1464 – which contains the nearly identical language at 12 U.S.C. §

1464(b)(10) – preempts Section 2923.5. See Parcray v. Shea Mortg., Inc., No. CV-F-09-1942 5

OWW/GSA, 2010 WL 1659369, at *9 (E.D. Cal. Apr. 23, 2010) (concluding that HOLA

preempts Section 2923.5 because it “concerns the processing and servicing of [the plaintiff]’s

mortgage”); Odinma v. Aurora Loan Servs., No. C-09-4674 EDL, 2010 WL 1199886, at *8

(N.D. Cal. Mar. 23, 2010) (concluding that a “Section 2923.5 claim concerns the processing and

servicing of Plaintiffs’ mortgage and is preempted by HOLA”); Murillo v. Aurora Loan Servs.,

LLC, NO. C 09-00504 JW, 2009 WL 2160579, at *4 (N.D. Cal. July 17, 2009) (same). “The

extent of Federal regulation and supervision of Federal savings associations under the Home

Owners’ Loan Act is substantially the same as for national banks under the national banking

laws, a fact that warrants similar conclusions about the applicability of state laws to the conduct

of the Federally authorized activities of both types of entities.” 69 Fed. Feg. 1904, at 1912 n.62. 

Accordingly, this Court concludes that Section 2923.5 also is preempted by the National Bank

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Act.

10. Breach of fiduciary duties

Plaintiff alleges that Defendants have breached fiduciary duties owed to him. However,

with respect to First American, “[t]he trustee of a deed of trust is not a true trustee, and owes no

fiduciary obligations; he merely acts as a common agent for the trustor and the beneficiary of the

deed of trust.” Vournas v. Fidelity Nat. Tit. Ins. Co., 73 Cal. App. 4th 668, 677 (Cal. App. 4th

Dist. 1999). With respect to Wells Fargo, there is no fiduciary relationship between a bank and

its loan customer. Price v. Wells Fargo Bank, 213 Cal. App. 3d 465, 476 (Cal. App. 1st Dist.

1989) (noting that the principle – that there is no fiduciary relationship between a bank and a

depositor – applies with “even greater clarity” to the relationship between a bank and its loan

customers).

11. The UCL (also Claim 9)

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and

unfair, deceptive, untrue or misleading advertising.” Cal. Civ. Code § 17200. Accordingly,

“[a]n act can be alleged to violate any or all of the three prongs of the UCL – unlawful, unfair,

or fraudulent.” Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (2007). 

Plaintiff alleges that Defendants’ conduct – specifically their failure to comply with Cal. Civ.

Code § 2923.5 – was unlawful. However, with respect to First American, Plaintiff has not

stated a plausible claim that the trustee has violated the law. With respect to Wells Fargo, as

discussed above, Section 2923.5 is preempted by the National Bank Act and Wells Fargo’s

conduct is not regulated by that statute. 

12. Civil conspiracy (Claim 7)

Plaintiff alleges that Defendants engaged in a civil conspiracy to defraud him. Plaintiff’s

conclusory allegation that “Defendants were acting in concert and ratified and approved the

above-described fraudulent conduct by the other Defendants” need not be accepted as true. See

Sprewell, 266 F.3d at 988.

13. Declaratory relief (also Claim 10)

Finally, Plaintiff seeks a judicial declaration of the rights and obligations of the parties

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pursuant to the loan agreement. Because Plaintiff has failed to allege a viable substantive

claim, he has failed to demonstrate that he is entitled to injunctive or declaratory relief at this

time.

IV. CONCLUSION

Because Plaintiff has failed to establish a likelihood of success on the merits, the Court

need not reach the remaining factors relative to Plaintiff’s motion for a preliminary injunction. 

Accordingly, the TRO will be vacated, and Plaintiff’s motion for a preliminary injunction will be

denied. The motions to dismiss will be granted. Because Plaintiff did not file opposition to the

motions to dismiss or provide a credible explanation for his failure to do so, leave to amend the

claims with respect to the Moving Defendants will be denied.

IT IS SO ORDERED

DATED: 5/20/2010 

JEREMY FOGEL

United States District Judge

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