Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-00596/USCOURTS-caed-2_15-cv-00596-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1331(a) Fed. Question: Real Property

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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

DAVID FREEMAN, 

Plaintiff, 

v. 

BNC MORTGAGE INC., et al., 

Defendants. 

No. 2:15-cv-00596-MCE-CKD 

MEMORANDUM AND ORDER 

Through this action, Plaintiff David Freeman (“Plaintiff”) seeks damages for 

alleged violations of the Real Estate Procedures Act (“RESPA”) and the Truth in Lending 

Act (“TILA”). Plaintiff also alleges that his mortgage contract with Defendant BNC 

Mortgage Inc. was “void ab initio.” Defendant Wells Fargo (“Wells Fargo”) has filed a 

Motion to Dismiss the Complaint (ECF No. 4). For the reasons that follow, the Motion is 

GRANTED and Plaintiff’s Complaint is DISMISSED with leave to amend.1

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 1

 Because oral argument would not have been of material assistance, the Court ordered this 

matter submitted on the briefs. See E.D. Cal. Local R. 230(g). After the Court vacated the hearing date, 

BNC Mortgage Inc. submitted a Notice of Filing of Bankruptcy, which results in an automatic stay under 11 

U.S.C. § 362. Wells Fargo is not the subject of the automatic stay, and this order concerns Wells Fargo’s 

Motion to Dismiss. See Bruce v. Suntech Power Holdings Co. Ltd., No. CV 12-04061 RS, 2013 WL 

6843610, at *1 (N.D. Cal. Dec. 26, 2013). 

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BACKGROUND2

At all times relevant to this action, Plaintiff was the only true owner of the real 

property known as 11582 Winter Moon Way, Nevada City, California 95959 (“the 

Property”). On July 21, 2005, Plaintiff and Defendant BNC Mortgage Inc. (“BNC 

Mortgage”), which is a subsidiary of Defendant BNC National Bank, Inc., entered into a 

thirty-year mortgage note. The mortgage note was secured by a first priority Deed of 

Trust on the Property. BNC Mortgage, who is the “lender” under the Deed of Trust, 

claimed to have the right to collect payments from Plaintiff. BNC Mortgage subsequently 

transferred the servicing of the loan to Defendant America’s Servicing Company 

(“ASC”),3 who in turn transferred the servicing to JPMorgan Chase, N.A.4 

On December 29, 2014, Plaintiff sent a letter to ASC requesting information 

related to the loan. That letter is attached to the Complaint as Exhibit A. ASC 

responded to Plaintiff’s inquiries in a letter dated January 29, 2015, which is included in 

Exhibit B to the Complaint. 

STANDARD 

On a motion to dismiss for failure to state a claim under Federal Rule of Civil 

Procedure 12(b)(6),5

 all allegations of material fact must be accepted 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. 1996). Rule 8(a)(2) “requires only ‘a short and plain 

statement of the claim showing that the pleader is entitled to relief’ in order to ‘give the 

 2

 The following statement of facts is based on the allegations in Plaintiff’s Complaint (ECF No. 1). 

 3

 The pending Motion to Dismiss indicates that Wells Fargo was doing business as America’s 

Servicing Company. See ECF No. 4. 

4

 Although initially included as a Defendant in Plaintiff’s Complaint, Plaintiff has voluntarily 

dismissed JPMorgan Chase, N.A. from this action. ECF No. 5. 

5

 All subsequent references to “Rule” are to the Federal Rules of Civil Procedure. 

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defendant fair notice of what the . . . claim is and the grounds upon which it rests.’” Bell 

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 

47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require 

detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of 

his entitlement to relief requires more than labels and conclusions, and a formulaic 

recitation of the elements of a cause of action will not do.” Id. (internal citations and 

quotations omitted). A court is not required to accept as true a “legal conclusion 

couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 

Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief 

above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & 

Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the 

pleading must contain something more than “a statement of facts that merely creates a 

suspicion [of] a legally cognizable right of action”)). 

Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket 

assertion, of entitlement to relief.” Twombly, 550 U.S. at 555 n.3 (internal citations and 

quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard 

to see how a claimant could satisfy the requirements of providing not only ‘fair notice’ of 

the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright & 

Miller, supra, at 94, 95). A pleading must contain “only enough facts to state a claim to 

relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their 

claims across the line from conceivable to plausible, their complaint must be dismissed.” 

Id. However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge 

that actual proof of those facts is improbable, and ‘that a recovery is very remote and 

unlikely.’” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). 

 A court granting a motion to dismiss a complaint must then decide whether to 

grant leave to amend. Leave to amend should be “freely given” where there is no 

“undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice 

to the opposing party by virtue of allowance of the amendment, [or] futility of the 

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amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. 

Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to 

be considered when deciding whether to grant leave to amend). Not all of these factors 

merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . 

carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 

185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that 

“the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, 

Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 

1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 

1989) (“Leave need not be granted where the amendment of the complaint . . . 

constitutes an exercise in futility”). 

ANALYSIS 

In the pending Motion to Dismiss, Wells Fargo argues that the Complaint fails to a 

state a claim upon which relief can be granted. Proper analysis of the Motion requires 

examination of each cause of action in the Complaint. 

A. RESPA 

The first cause of action in the Complaint alleges that ASC violated RESPA. 

Specifically, Plaintiff contends that the letter it sent ASC on December 29, 2014 was a 

“qualified written response” that, under RESPA, required a response within ten days. 

According to Plaintiff, ASC did not respond to Plaintiff’s letter until it sent the letter dated 

January 29, 2015. Wells Fargo argues that the Complaint fails to state a claim under 

RESPA because (1) the letter that Plaintiff sent ASC on December 29, 2014 was not a 

qualified written response, and (2) the Complaint does not state any cognizable legal 

damages related to the alleged RESPA violation. The Court will address each of these 

arguments in turn. 

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1. Qualified Written Response 

RESPA defines a qualified written response as: 

a written correspondence, other than notice on a payment 

coupon or other payment medium supplied by the servicer, 

that— 

(i) includes, or otherwise enables the servicer to identify, the 

name and account of the borrower; and 

(ii) includes a statement of the reasons for the belief of the 

borrower, to the extent applicable, that the account is in error 

or provides sufficient detail to the servicer regarding other 

information sought by the borrower. 

12 U.S.C. § 2605(e)(1)(B). 

The Court has little difficulty finding, at least at this stage of the litigation, that the 

letter Plaintiff sent to ASC on December 29, 2014 is a qualified written response under 

RESPA. The letter is a written correspondence that includes the name and account of 

the borrower. See Compl. at Ex. A (identifying Plaintiff by name and as a “borrower 

under a residential loan,” and providing a loan number (NPB013241)).6 The letter also 

provides sufficient detail to the servicer regarding the information that Plaintiff sought. 

Plaintiff’s letter specifically requested: 

The name, address, and telephone number of the owner of 

the obligation or the master servicer of the obligation. 

The identity, address, telephone number of any creditors 

subsequent to BNC Mortgage, Inc., a Delaware Corporation 

asserting an interest in any Note or Deed of Trust secured by 

11582 Winter Moon Way, Nevada City, CA 95959. 

The date of any transfers of interest, in whole or in part, from 

BNC Mortgage, Inc., a Delaware Corporation. 

The identity, address, telephone number, and any other 

contact information for an agent or party having legal 

authority to act on behalf of the new creditor or entity 

asserting any interest secured by 11582 Winter Moon Way, 

Nevada City, CA 95959. 

/// 

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 “[M]aterial which is properly submitted as part of the complaint may be considered on a motion 

to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). 

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The location of the place, state and county, or other 

jurisdiction, where transfer of ownership of the any secured 

debt or interest in 11582 Winter Moon Way, Nevada City, CA 

95959 has been recorded; and 

Any other relevant information regarding the identity, location, 

or nature of debt or interest held by any new creditor. 

Id. Accordingly, for purposes of the pending Motion to Dismiss, the letter that Plaintiff 

sent ASC on December 29, 2014 is a qualified written response under RESPA. 

2. Damages 

Because Plaintiff sent ASC a qualified written response, ASC was required to 

timely respond to Plaintiff’s inquiries. 12 U.S.C. § 2605(e)(2)(C). Plaintiff contends that 

ASC violated RESPA (and that Plaintiff is therefore entitled to damages) because ASC 

did not provide the requested information until it sent the letter dated January 29, 2015. 

As to damages: 

RESPA, as codified at 12 U.S.C. § 2605(f)(1)(A), authorizes 

“actual damages to the borrower as a result of the failure [to 

comply with RESPA requirements].” (emphasis added). 

Therefore, allegations made under a separate cause of action 

are insufficient to sustain a RESPA claim for actual damages 

as they are not a direct result of the failure to comply. Nor 

does simply having to file suit suffice as a harm warranting 

actual damages. If such were the case, every RESPA suit 

would inherently have a claim for damages built in. 

Lal v. American Home Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E.D. Cal. 2010). 

Thus, “the loss alleged must be related to the RESPA violation itself.” Id. 

Plaintiff’s Complaint is deficient with respect to damages. Plaintiff’s conclusory 

claim that he “suffered damages in an amount to be proven at trial” is insufficient to 

survive a motion to dismiss for failure to state a claim. Plaintiff appears to realize as 

much in his Opposition. See Pl.’s Opp’n at 5, ECF No. 6 (conceding that his pleading “of 

TILA and RESPA damages are convoluted and would benefit from separation of the two 

for clarity,” and requesting leave to amend to better articulate the alleged damages). 

Thus, the Complaint fails to state a claim for relief under RESPA. Because 

Plaintiff’s RESPA claim can be saved by amendment, Plaintiff is granted leave to file an 

amended complaint. 

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B. TILA 

Plaintiff’s second cause of action alleges that ASC violated TILA. Because 

Plaintiff does not oppose the dismissal of the claim, ECF No. 6 at 5, the TILA claim is 

dismissed. 

C. Validity of Contract 

Plaintiff’s third cause of action alleges that his mortgage contract with BNC 

Mortgage was “void ab initio.” Specifically, Plaintiff alleges that BNC Mortgage, a 

purported Delaware corporation, was the only other party to the mortgage contract, and 

that BNC Mortgage did not actually exist at the time of contract formation because it was 

never organized under the laws of Delaware. Plaintiff concludes that the mortgage 

contract was thus void from the beginning “based on impossibility and [is therefore] 

unenforceable by either party.” Compl. at 7. Wells Fargo contends that the Court should 

dismiss the claim because courts recognize an equitable mortgage when there is a 

defect in the execution of a mortgage contract. In his Opposition, Plaintiff argues Wells 

Fargo cannot move for the dismissal of the third cause of action because the claim is 

asserted against BNC Mortgage only. 

First, the Court may dismiss the third cause of action, notwithstanding the fact that 

the issue is before the Court on Wells Fargo’s Motion to Dismiss. Plaintiff does not 

provide any support for his claim that a defendant cannot move to dismiss a claim 

asserted only against a co-defendant. Furthermore, the Ninth Circuit recently reaffirmed 

that courts have the power to sua sponte dismiss a complaint for failure to state a claim 

upon which relief can be granted. See Seismic Reservoir 2020, Inc. v. Paulsson, 

No. 13-55413, 2015 WL 1883388, at *4 (9th Cir. Apr. 27, 2015) (quoting Omar v. SeaLand Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987)). If the Court has the authority to 

dismiss the third cause of action sua sponte, then surely it may do so on Wells Fargo’s 

Motion. 

Second, the third cause of action fails to state a claim upon which relief can be 

granted. There are two doctrines precluding relief: equitable mortgage and corporation 

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by estoppel. California courts have long recognized equitable mortgages: 

[I]t is settled that every express executory agreement in 

writing, whereby the contracting party sufficiently indicates an 

intention to make some particular property, real or personal, 

or fund, therein described or identified, a security for a debt or 

other obligation creates an equitable lien upon the property 

so indicated, which is enforceable against the property in the 

hands not only of the original contractor, but of his 

purchasers or encumbrancers with notice. Thus, a promise 

to give a mortgage or a trust deed on particular property as 

security for a debt will be specifically enforced by granting an 

equitable mortgage. An agreement that particular property is 

security for a debt also gives rise to an equitable mortgage 

even though it does not constitute a legal mortgage. If a 

mortgage or trust deed is defectively executed, for example, 

an equitable mortgage will be recognized. 

Clayton Development Co. v. Falvey, 206 Cal. App. 3d 438, 443-44 (1988) (citations and 

internal formatting omitted). 

Additionally, the corporation by estoppel doctrine provides that “[a]n individual 

who contracts with an association as if it were a corporation, cannot escape liability on 

the contract by denying corporate existence.” 9 Witkin, Summary of Cal. Law (10th), 

Corporations § 20. See also Close v. Glenwood Cemetery, 107 U.S. 466, 477 (1883) 

(“One who deals with a corporation as existing in fact, is estopped to deny as against the 

corporation that it has been legally organized.”); Curtin v. Salomon, 80 Cal. App. 470, 

477 (1926) (“It is too well settled now to be controverted that a party who contracts with a 

corporation . . . is estopped from denying the existence of the corporation.”). The 

doctrine of corporation by estoppel is “especially applicable where the contract or note 

expressly recites that one party to it is a corporation.” 8 Fletcher Cyc. Corp. § 3910. 

Because Plaintiff contracted with BNC Mortgage as if it were a corporation, 

Plaintiff cannot escape liability on the mortgage contract that it entered into with BNC 

Mortgage—even if, as Plaintiff alleges, BNC Mortgage was not a properly formed 

corporation at the time. Additionally, Plaintiff’s promise would be specifically enforced by 

way of an equitable mortgage. Accordingly, Plaintiff’s third cause of action is dismissed. 

/// 

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CONCLUSION 

For all of the foregoing reasons, Defendant Wells Fargo’s Motion to Dismiss (ECF 

No. 4) is GRANTED. Plaintiff is granted twenty (20) days from the date of electronic 

service of this order to file a First Amended Complaint. Failure to timely file an amended 

complaint in compliance with this Order will result in this action being dismissed for 

failure to state a claim without any further notice to the parties. 

IT IS SO ORDERED. 

Dated: June 16, 2015 

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