Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_22-cv-01627/USCOURTS-caed-1_22-cv-01627-1/pdf.json

Parties Involved:
Cenlar F.S.B.
Defendant
Citibank, N.A.
Defendant
James Lawrence
Plaintiff
Marilyn Mellies
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JAMES LAWRENCE, MARILYN 

MELLIES,

Plaintiffs,

v.

CENLAR F.S.B., CITIBANK, N.A., and 

DOES 1 through 10,

Defendants.

Case No. 1:22-cv-01627-JLT-CDB

ORDER GRANTING IN PART AND 

DENYING IN PART DEFENDANT 

CENLAR’S MOTION TO DISMISS AND

GRANTING IN PART AND DENYING IN 

PART DEFENDANT CITIBANK’S MOTION 

TO DISMISS

(Docs. 10, 13.)

I. INTRODUCTION

This case concerns the foreclosure of the residence owned by James Lawrence and 

Marilyn Mellies’ in Ridgecrest, California. Before the Court are motions to dismiss brought by 

Citibank, N.A. (“Citibank”) and Cenlar FSB (“Cenlar”) (collectively “Defendants”). (Docs. 10, 

13.) For the reasons set forth below, the Court grants in part and denies in part Citibank’s motion 

to dismiss (Doc. 10), and grants in part and denies in part Cenlar’s motion to dismiss (Doc. 13).

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 The Court’s standing order provides that “[b]efore filing a motion in a case in which the parties are represented by 

counsel, counsel shall engage in a pre-filing meet and confer to discuss thoroughly the substance of the contemplated 

motion and any potential resolution . . . In the notice of motion, counsel for the moving party shall certify that meet 

and confer efforts have been exhausted and include a summary of meet and confer efforts.” All future motions must 

satisfy the meet-and-confer requirements or the motions will be stricken.

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II. BACKGROUND

On November 7, 2022, Plaintiffs filed this action against Defendants in the Superior Court 

of the State of California, Kern County, Case No. BCV-22-102977. (Doc. 1-1 at 2.) Defendants 

removed this action to this Court on December 20, 2022, based on federal question jurisdiction. 

(Doc. 1-1 at 3–4.)

In August 2007, Plaintiffs obtained a mortgage loan on the real property located at 1039 

W. Beston Ave., Ridgecrest, CA 93555 for $100,000 by deed of trust from Citibank. (Doc. 1-4, ¶ 

10.) On May 5, 2022, Defendants recorded a notice of default and election to sell under a deed of 

trust. (Doc. 1-4, ¶ 11.) The notice of default included a declaration from Cenlar dated March 16, 

2022, and signed on March 21, 2022, which detailed Defendant Cenlar’s assertion that it

unsuccessfully attempted to contact Plaintiffs by mail and telephone. (Doc. 1-4 at 25–26.) A 

notice of trustee’s sale was recorded on August 3, 2022. (Doc. 1-4, ¶ 12.) Plaintiffs contend the 

property was unlawfully sold on September 7, 2022. (Doc. 1-4, ¶ 12.)

III. JUDICIAL NOTICE

Defendants request this Court take judicial notice of three documents: (1) a deed of trust 

recorded on August 7, 2007, in the Kern County Recorder’s Office; (2) a substitution of trustee 

recorded on May 5, 2022, in the Kern County Recorder’s Office; and (3) a trustee’s deed upon 

sale recorded on October 28, 2022, in the Kern County Recorder’s Office. (Docs. 11, 14.) The 

deed of trust and the trustee’s deed upon sale are also attached and incorporated in Plaintiffs’ 

complaint. (Doc. 1-4 at 15–20; 1-3 at 2–4.)

“[C]ourts do not take judicial notice of documents, they take judicial notice of facts. The 

existence of a document could be such a fact, but only if the other requirements of Rule 201 are 

met.” Cruz v. Specialized Loan Servicing, LLC, No. SACV 22-01610-CJC-JDEX, 2022 WL 

18228277, at *2 (C.D. Cal. Oct. 14, 2022) (internal citation and quotations omitted). Generally, 

judicial notice may be taken of recorded instruments because they are public records whose 

accuracy cannot reasonably be questioned. Fed. R. Evid. 201; see Perez v. Am. Home Mortg. 

Servicing, Inc., No. 12-cv-009323-WHA, 2012 WL 1413300, at *2 (N.D. Cal. Apr. 23, 2012) 

(taking judicial notice of a deed of trust, notice of default, assignment of deed of trust, and 

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substitution of trustee recorded with the Alameda County Recorder’s Office). However, a court 

may not take judicial notice of a fact within a public record that is “subject to reasonable dispute.” 

Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).

Under Rule 201, the Court may take judicial notice that the substitution of trustee were 

recorded with the Kern County Recorder’s Office on the dates indicated by the receipt stamp. 

However, the Court’s judicial notice “extends only to the existence of these documents and not to 

their substance, which may contain disputed or irrelevant facts.” Givens v. Newsom, 629 F. Supp. 

3d 1020, 1024 (E.D. Cal. 2022). Accordingly, the Court grants judicial notice limited to the point

that the three documents exist and were publicly filed in the Kern County Recorder’s Office on 

the respective dates reflected on each document. Because Plaintiffs attached the deed of trust and 

the trustee’s deed upon sale as exhibits to the complaint, they have incorporated by reference 

certain facts contained in the documents, rendering Defendants’ requests for judicial notice 

unnecessary. See Lee, 250 F.3d at 688 (“[A] court may consider material which is properly 

submitted as part of the complaint on a motion to dismiss without converting the motion to 

dismiss into a motion for summary judgment.”) 

IV. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a party may file a motion to dismiss on 

the grounds that a complaint “fail[s] to state a claim upon which relief can be granted.” Fed. R. 

Civ. P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the 

complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In deciding a motion to dismiss, 

“all allegations of material fact are taken as true and construed in the light most favorable to the 

non-moving party.” In re Facebook, Inc. Internet Tracking Litig., 956 F.3d 589, 601 (9th Cir. 

2020). In assessing the sufficiency of a complaint, all well-pleaded factual allegations must be 

accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009).

A claim is facially plausible “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, 556 U.S. at 678. A complaint that offers mere “labels and conclusions” or “a formulaic 

recitation of the elements of a cause of action will not do.” Id.; see also Moss v. U.S. Secret Serv., 

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572 F.3d 962, 969 (9th Cir. 2009). “Dismissal is proper only where there is no cognizable legal

theory or an absence of sufficient facts alleged to support a cognizable legal theory.” Navarro, 

250 F.3d at 732.

If the court dismisses the complaint, it “should grant leave to amend even if no request to 

amend the pleading was made, unless it determines that the pleading could not possibly be cured 

by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In making 

this determination, the court should consider factors such as “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.” Moore v. 

Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 1989).

V. DISCUSSION

In their complaint, Plaintiffs allege eight causes of action: violations of the California 

Homeowner Bill of Rights under California Civil Code §§ 2923.5, 2924(a)(1), and 2924.9; 

negligence; wrongful foreclosure; interpleader; violation of California’s Unfair Competition Law 

under California Business and Professions Code § 17200; and cancellation of instruments. 

A. Count One: Violation of California Civil Code § 2923.5

Plaintiffs allege that Defendants violated California Civil Code § 2923.5(a)(2), which 

requires a “mortgagee, beneficiary or authorized agent” to “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” prior to recording a notice of default. Defendants argue that 

Plaintiffs’ first cause of action should be dismissed for two reasons: (1) Plaintiffs fail to state a 

cognizable claim because Cenlar’s March 2022 declaration confirms that Defendants fully 

complied with § 2923.5 and (2) Plaintiffs’ claim fails as a matter of law because the Property has 

already been sold and the only remedy for a violation of § 2923.5 is postponement of an 

impending foreclosure. (Docs. 10-1 at 12–31; 13-1 at 8–9.)

1. March 2022 Declaration

Plaintiffs allege that Defendants violated § 2923.5(a)(2), because despite residing at the 

property when the notice of default was recorded on May 5, 2022, they “received no mail or 

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messages” from Defendants to assess the financial situation and explore options to avoid 

foreclosure. (Doc. 1-4, ¶ 19.) In response, Defendants point to the March 2022 declaration—

which was both recorded with the notice of default on May 5, 2022, and attached as an exhibit to 

Plaintiffs’ complaint—on which the assigned mortgage servicer attests, by checking a line next to 

pre-prepared language, that she took certain steps to contact Plaintiffs in conformance with 

§ 2923.5. (Doc. 1-2 at 30–31.) Defendants argue that Plaintiffs fail to state a claim under 

§ 2923.5(a)(2) because Plaintiffs’ allegations that they did not receive proper notice is 

contradicted by the recorded March 2022 declaration.

Defendant Citibank cites to Wyman v. First Am. Title Ins. Co., No. C-16-07079-WHA, 

2017 WL 1508864, at *3 (N.D. Cal. Apr. 27, 2017), and Major v. Wells Fargo Bank, No. 14-CV998-LAB-RBB, 2014 WL 4103936, at *3 (S.D. Cal. Aug. 18, 2014), to support its proposition 

that a declaration recorded with a notice of default is sufficient to satisfy a defendant’s obligations 

under § 2923.5. (Doc. 10-1 at 13.) The Major court only found the declaration to be sufficient 

because the plaintiff did not allege sufficient facts to indicate any lack of communication and only 

made conclusory allegations that the declaration was false. See Major, 2014 WL 4103936, at *3. 

Wyman held that, only in light of plaintiff’s inability to allege a specific violation regarding the 

notice of default and the declaration, the declaration was prima facie evidence of an attempt to 

contact plaintiffs. See Wyman, 2017 WL 1508864, at *3. Plaintiffs have specifically alleged in 

their complaint that they “received no mail or messages” while indirectly challenging the 

content—not the existence—of the declaration.

The Court finds Defendants’ arguments in favor of dismissal of Plaintiffs’ first cause of 

action unavailing at the pleading stage because the arguments are rooted entirely on a factual 

challenge. See Lee, 250 F.3d at 688 (“Factual challenges to a plaintiff’s complaint have no 

bearing on the legal sufficiency of the allegations under Rule 12(b)(6).”). Defendants allege that 

the recorded March 2022 declaration indicates compliance with § 2935.5(a)(5), however 

Plaintiffs allege that Defendants did not make any contact in violation of § 2935.5(a)(5). (Docs. 

10-1 at 12–13; 13-1 at 8–9; 1-4 at ¶ 19.) The Court cannot resolve such a factual disagreement at 

the pleadings stage. See Barrionuevo v. Chase Bank, N.A., 885 F. Supp. 2d 964, 977 (N.D. Cal. 

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2012) (“When a plaintiff’s allegations dispute the validity of defendant’s declaration of 

compliance in a Notice of Default . . . the plaintiff has plead[ed] enough facts to state a claim to 

relief that is plausible on its face.”). Plaintiffs have plausibly alleged that Defendants did not 

contact them prior to recording the notice of default to assess Plaintiffs’ financial situation and 

explore options to avoid foreclosure in violation of § 2923.5(a)(2). Therefore, Plaintiffs have 

properly pled a violation of § 2923.5(a)(2).

2. Relief Under § 2923.5

Defendants argue that even if Plaintiffs state a cognizable claim under § 2923.5, Plaintiffs 

have no available relief because the only remedy for a violation of § 2923.5 is postponement of 

an impending foreclosure. (Docs. 10-1 at 12; 13-1 at 9–10.) Because it is undisputed the 

Property was already sold in a foreclosure sale on September 7, 2022, Defendants argue that 

Plaintiffs have failed to state a claim upon which any relief can be granted. (Docs. 1-4 at ¶ 12; 

10-1 at 12; 13-1 at 9–10.) The Court agrees. See Mabry v. Superior Ct., 185 Cal. App. 4th 208, 

214, 235 (2010) (explaining that the only remedy available under § 2923.5 is “a postponement of 

an impending foreclosure to permit the lender to comply with” § 2923.5); Herrejon v. Ocwen 

Loan Servicing LLC, 990 F. Supp. 2d 1186, 1210 (E.D. Cal. Nov. 1, 2013) (noting “if the 

foreclosure sale has occurred, section 2923.5 provides plaintiffs no remedy”). Defendants’ 

motions to dismiss Plaintiffs’ first cause of action are GRANTED. Because there is no way to 

cure this defect in an amended complaint, this dismissal is without leave to amend.

B. Count Two: Violation of California Civil Code § 2924(a)(1)

Count Two is based on a violation of California Civil Code § 2924(a)(1). Plaintiffs 

indicated in their oppositions that they have abandoned this cause of action. (Docs. 18-1 at 1; 

19-1 at 1.) The motion to dismiss Count Two is GRANTED without leave to amend.

C. Count Three: Violation of California Civil Code § 2924.9

Plaintiffs’ allege Defendants’ violated California Civil Code § 2924.9, which requires that 

a mortgage servicer send the borrower a written communication containing specific information 

regarding foreclosure prevention alternatives within five business days after recording a notice of 

default. The remedy for § 2924.9 is governed by § 2924.12, which states: “After a trustee’s deed 

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upon sale has been recorded, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized 

agent shall be liable to a borrower for actual economic damages . . . resulting from a material 

violation of . . . section 2924.9.” Cal. Civ. Code 2924.12(b) (emphasis added).

California Civil Code § 2924.12(b) provides a remedy only for a “material violation” of 

§ 2924.9. “A material violation occurs where the violation: (1) affects the borrower’s loan 

obligations, (2) disrupts the borrower’s loan modification process, or (3) causes the borrower to 

suffer harm that he would not have otherwise suffered related to his right to be considered for loss 

mitigation options.” Mountjoy v. Seterus, Inc., No. 2:15-CV-02204-DJC-DB, 2023 WL 4086763, 

at *11 (E.D. Cal. June 20, 2023). Though some district courts within the Ninth Circuit “have held 

that materiality is a question that cannot be resolved at the pleading stage, Plaintiff still must 

plead something to satisfy 2924.12’s materiality requirement.” Galvez v. Wells Fargo Bank, 

N.A., No. 17-CV-06003-JSC, 2018 WL 4849676, at *5 (N.D. Cal. Oct. 4, 2018).

1. Citibank

Citibank argues that § 2924.9 does not apply to Citibank because it is not a loan servicer. 

(Doc. 10-1 at 8.) This is correct. Section 2924.9 only imposes obligations on a “mortgage 

servicer.” Cal. Civ. Code § 2924.9. A “mortgage servicer” is an “entity who directly services a 

loan, or who is responsible for interacting with the borrower” and “managing the loan account on 

a daily basis.” Cal. Civ. Code § 2920.5. Plaintiffs explicitly state that Cenlar is the loan servicer 

and Citibank is the beneficiary of the mortgage loan. (Doc. 1-4, ¶ 2.) Defendant Citibank’s 

motion to dismiss Count Three is GRANTED without leave to amend.

2. Cenlar

Cenlar argues that Plaintiffs cannot allege noncompliance with § 2924.9 “merely by 

saying they did not receive anything.” (Doc. 13-1 at 6.) To the contrary, Plaintiffs allege that 

Cenlar failed to notify them of any foreclosure prevention alternatives within five business days 

after the notice of default was recorded. (Doc. 1-4, ¶ 33.) Plaintiffs further allege that they were 

living in the Property when the notice of default was recorded and “did not receive any phone 

calls or phone messages, and did not receive any pieces of mail that referred to discussions about 

alternatives to foreclosure before it was commenced.” (Doc. 1-4, ¶ 34.)

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Notwithstanding these allegations, Cenlar argues for dismissal of this claim with prejudice 

because Plaintiffs fail to allege why their purported non-receipt of communications amounted to a 

material violation. (Doc. 13-1 at 11.) Plaintiffs fail to directly respond to Cenlar’s materiality 

argument, but they argue in relation to the first cause of action that Cenlar failed to give Plaintiffs 

any loss mitigation options after recording the notice of default. (Doc. 18-1 at 12.) Plaintiffs 

argue that as a result, they “lost the chance to receive a loan modification that they would 

otherwise have been eligible for” and they suffered harm because they “had to pay additional 

interest & late charges and fees associated with inspection on the property which servicers 

normally do every month and is standard procedure when foreclosure activity is initiated.” (Doc. 

18-1 at 12.) Plaintiffs allege that Cenlar failed to notify them via mail or messages of any 

foreclosure prevention alternatives within five business days after the notice of default was 

recorded, as required by § 2924.9. (Doc. 1-4, ¶ 33.) Furthermore, Plaintiffs allege that had they 

received the contact and communication required under § 2924.9, “they would have taken action 

to avoid the foreclosure of the Subject Property with other lending sources.” (Doc. 1-4, ¶ 34.) 

Instead, Plaintiffs allege Defendant Cenlar foreclosed on the property and recorded the notice of 

sale in September 2022. (Doc. 1-4, ¶ 12.)

Two districts in California recently found indistinguishable allegations sufficiently alleged

a material violation of § 2924.9. See Warren v. PNC Bank Nat’l Ass., 671 F. Supp. 3d 1035, 

1045 (N.D. Cal. Apr. 30, 2023) (plaintiff alleged the servicer did not contact him regarding 

foreclosure alternatives before recording notice of default; this plausibly alleged a material 

violation because he further alleged that such a communication would have caused him to take 

action to avoid foreclosure); Scott v. Cenlar FSB, No. 2:23-CV-05473-SVW-MRW, 2023 WL 

6881906, at *2 (C.D. Cal. Sep. 28, 2023) (plaintiff sufficiently alleged materiality by alleging that 

if he had received required communication, he would have taken action to avoid foreclosure). 

Plaintiffs’ allegations plausibly demonstrate that their loan modification process was affected by 

Cenlar’s violation of § 2924.9 because Cenlar’s lack of communication precluded Plaintiffs from 

taking action through other lending sources. (Doc. 1-4, ¶ 34.) Therefore, the Court finds that 

Plaintiffs have properly alleged a material violation of § 2924.9 by Cenlar. Cenlar’s motion to 

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dismiss the third cause of action is DENIED.

D. Count Four: Negligence

Plaintiffs’ fourth cause of action alleges that Defendants were negligent in violating the 

HBOR and thus, Defendants breached their duty of ordinary care and good faith. (Doc. 1-4, 

¶ 37.) A negligence claim has four elements: “(1) the defendant owed the plaintiff a legal duty, 

(2) the defendant breached the duty, and (3) the breach proximately or legally caused (4) the 

plaintiff’s damages or injuries.” Thomas v. Stenberg, 206 Cal. App. 4th 654, 662 (2012). 

Defendants move to dismiss the negligence claim on the grounds that they owed Plaintiffs no 

duty of care. (Docs. 10-1 at 16–17; 13-1 at 11–13.) The Court agrees.

Under the economic loss doctrine, “[i]n general, there is no recovery in tort for negligently 

inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or 

property damage,” when parties are in contractual privity. Sheen v. Wells Fargo Bank, N.A., 12 

Cal. 5th 905, 922 (2022) (citation omitted).2 “[I]n the lender-borrower context,” the “general 

rule” is that a “financial institution owes no duty of care to a borrower when the institution’s 

involvement in the loan transaction does not exceed the scope of its conventional role as a mere 

lender of money.” Id. Thus, “when a borrower requests a loan modification, a lender owes no 

tort duty sounding in general negligence principles to ‘process, review and respond carefully and 

completely to’ the borrower’s application.” Id. at 948. Plaintiffs and Defendants are in 

contractual privity, and the negligence claim arises from their lender-borrower relationship. 

Accordingly, Defendants’ motions to dismiss the negligence claim are GRANTED without leave 

to amend as there does not appear to be any way to cure this defect.

E. Count Five: Wrongful Foreclosure

In Count Four, Plaintiffs allege wrongful foreclosure—a common law tort claim “to set 

aside a foreclosure sale, or an action for damages resulting from the sale, on the basis that the 

foreclosure was improper.” Sciarratta v. U.S. Bank Nat’l Assn., 247 Cal. App. 4th 552, 561 

(2016). The elements for wrongful foreclosure are: “(1) the trustee or mortgagee caused an 

2 Sheen, which was decided shortly after the opposition briefs were filed in this case, directly overruled Alvarez v. 

BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 941 (2014), a case relied upon extensively by Plaintiffs. 

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illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a 

mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or 

mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges 

the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused 

from tendering.” Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 104 (2011). Defendants 

challenge Plaintiffs’ wrongful foreclosure claim on each of the three elements.

1. Illegal, Fraudulent, or Willfully Oppressive Trustee’s Sale

a. Illegal Sale

Defendants assert that the wrongful foreclosure claim necessarily fails because it is based 

on allegations that Defendants violated California Civil Code §§ 2923.5, 2924(a)(1), 2934a(a)(1), 

2924a(e), and 2924.9, which they contend are inadequately pled or fail as a matter of law. (Docs. 

10-1 at 17–18; 13-1 at 13–15.) Because Court dismissed Plaintiffs’ first cause of action under 

§ 2923.5 with prejudice and Plaintiffs withdrew their second cause of action under §§ 2924(a)(1), 

2934a(a)(1), and 2924a(e), none of those theories of liability can form the basis for a wrongful 

foreclosure based on an illegal sale. However, because the Court finds that Plaintiffs sufficiently 

alleged a claim under § 2924.9 against Cenlar, the Court will analyze the wrongful foreclosure by 

illegal sale allegation in the context of this alleged § 2924.9 violation.

“[M]ere technical violations of the foreclosure process will not give rise to a tort claim; 

the foreclosure must have been entirely unauthorized on the facts of the case.” Miles v. Deutsche 

Bank Nat’l Tr. Co., 236 Cal. App. 4th 394, 409 (2015). An alleged violation is a “mere technical 

violation” unless the plaintiff can “show both that there was a failure to comply with the 

procedural requirements for the foreclosure sale and that the irregularity prejudiced the plaintiff.” 

Morris v. JPMorgan Chase Bank, N.A., 78 Cal. App. 5th 279, 294–95 (2022). Because the Court 

concludes that Plaintiffs have properly alleged a § 2924.9 violation and the resulting prejudice, 

(Doc. 1-4, ¶ 34), Plaintiffs have alleged more than a mere technical violation. Therefore, the 

wrongful foreclosure by illegal sale claim can proceed against Cenlar. See Santana v. BSI Fin. 

Servs., Inc., 495 F. Supp. 3d 926, 948 (S.D. Cal. 2020) (finding a properly alleged claim for 

wrongful foreclosure based on a properly alleged statutory violation of a California Civil Code).

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b. Fraudulent Sale

It is possible that Plaintiffs are attempting to allege that both Defendants caused a 

fraudulent sale. (See Doc. 1-4, ¶ 44 (alleging that Defendants “caused an illegal, fraudulent, or 

willfully oppressive sale of the Subject Property pursuant to a power of sale in a mortgage or deed 

of trust”); Docs. 18-1 at 19; 19-1 at 19 (arguing that “Defendant[s] willingly and maliciously 

recorded the notice of default so they could claim they were in default and thereafter file a 

fraudulent notice of sale,” and that “Defendant[s] knew the house had equity and knew 

foreclosing on the property would quickly pay off the entire loan.”) However, the “fraudulent 

sale” prong of wrongful foreclosure is subject to the heightened pleading requirements of Federal 

Rule of Civil Procedure 9(b). See Herrejon v. Ocwen Loan Servicing, LLC, 980 F. Supp. 2d 

1186, 1203 (E.D. Cal. Nov. 1, 2013) (explaining that a claim for wrongful foreclosure is subject 

to the heightened pleading standard of Rule 9(b)). Rule 9(b) requires a plaintiff to “state with 

particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and 

other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). “Averments 

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

charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal 

quotations omitted). Plaintiffs have not met the heightened pleading standards of Rule 9.

2. Prejudice or Harm to Plaintiffs

Defendants further argue that Plaintiffs failed to plead facts demonstrating they were 

prejudiced or harmed by Defendants’ violation of § 2924.9. (Docs. 10-1 at 18; 13-1 at 14.) 

Though Plaintiffs generally allege they “suffered prejudice or harm as a result of the wrongful 

foreclosure trustee sale,” Plaintiffs “re-allege and incorporate all preceding paragraphs as though 

set forth fully” in the wrongful foreclosure cause of action. (Doc. 1-4, ¶ 42.) Because Plaintiffs 

sufficiently allege in preceding causes of action that they suffered harm, such as immediate 

damage to their credit and emotional and mental suffering due to Defendants’ wrongful conduct, 

(Doc. 1-4, ¶ 29), the Court finds that Plaintiffs plausibly alleged they suffered harm as a result of 

Defendants’ alleged wrongful foreclosure.

///

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3. Tender Rule

Defendants also argue the wrongful foreclosure claim fails because Plaintiffs failed to 

allege they tendered the full amount of the loan. (Docs. 10-1 at 19–20; 13-1 at 14–15.) “While 

tendering is required and not excused, a plaintiff seeking to set aside an irregular sale must allege 

tender of the full amount of the loan to maintain any cause of action that either is based on the 

wrongful foreclosure allegations or seeks redress from that foreclosure.” Turner v. Seterus, Inc., 

27 Cal. App. 5th 516, 525 (2018). Plaintiffs do not allege they tendered the full amount of the 

loan; rather, specifically allege they are “excused from the tender requirement because of 

[Defendants] violations of Civ. Code § . . . 2924.9.” (Doc. 1-4, ¶ 46.)

The tender requirement may only be excused when, “(1) the underlying debt is void, (2) 

the foreclosure sale or trustee’s deed is void on its face, (3) a counterclaim offsets the amount 

due, (4) specific circumstances make it inequitable to enforce the debt against a party challenging 

the sale, or (5) the foreclosure sale has not yet occurred.” Chavez v. Indymac Mortgage Servs., 

219 Cal. App. 4th 1052, 1062 (2013). Furthermore, the mortgagor must establish that there was 

no breach on the mortgagor’s part that would have authorized the foreclosure. See Miles, 236 

Cal. App. 4th at 408–09. Here, Plaintiffs only generally allege that the violations excuse them

from tendering the full amount of the loan. (Doc. 1-4, ¶ 46.) Plaintiffs provide no authority to 

support the general allegation that a defendant’s violation of § 2924.9 is an exception to the 

tender rule under a claim for wrongful foreclosure. Similarly, Plaintiffs do not allege that there 

was no breach on their part that could have authorized Defendants’ foreclosure of the Property.

A claim for wrongful foreclosure requires Plaintiffs to sufficiently allege each of the three 

elements. See Lona, 202 Cal. App. 4th at 104. Although Plaintiffs have sufficiently alleged that 

Cenlar allegedly violated § 2924.9, and that Plaintiffs were prejudiced from that alleged violation, 

Plaintiffs’ complaint fails to plead facts demonstrating they are excused from the tender rule. To 

the extent they are attempting to allege wrongful foreclosure by fraudulent sale, Plaintiffs fail to 

meet the heightened pleading standard for fraud under Rule 9(b). Therefore, Plaintiffs have not 

sufficiently plead facts on each element of wrongful foreclosure. Because Plaintiffs have 

requested leave to amend, and because it is possible that the complaint could be amended to cure 

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the deficiencies regarding fraud and the tender rule, Defendants’ motions to dismiss the fifth 

cause of action is GRANTED with leave to amend.

F. Count Six: Interpleader

Count Six is a request that this Court “intervene by way of interpleader” to award 

Plaintiffs “all surplus funds from the trustee’s sale” of the disputed property pursuant to 

California Code of Civil Procedure § 386. (Doc 1-4, ¶ 59.) Plaintiffs have indicated they will no 

longer pursue this cause of action. (Docs. 18-1 at 1; 19-1 at 1.) The motion to dismiss Count Six 

is GRANTED without leave to amend.

G. Count Seven: Unfair Business Practices

Plaintiffs allege a violation of the UCL, which prohibits “unfair competition,” which is 

“any unlawful, unfair or fraudulent business act of practice.” Cal. Bus. & Prof. Code § 17200. 

“A business act or practice may violate the UCL if it is either ‘unlawful,’ ‘unfair,’ or 

‘fraudulent,’” as “[e]ach of these three adjectives captures ‘a separate and distinct theory of 

liability.’” Rubio v. Cap. One Bank, 613 F.3d 1195, 1203 (9th Cir. 2010). To plead a violation of 

the “unlawful” prong, a plaintiff must plead a violation of another statute or common law. 

Shumake v. Caliber Home Loans, Inc., No. CV16-4296-CA(AGRX), 2017 WL 1362681, at *8 

(C.D. Cal. Jan. 6, 2017). To plead a violation of the “unfair” prong, a plaintiff must allege a 

business practice that “‘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)). To allege a violation of the “fraudulent” prong, “it is 

only necessary to show that members of the public are likely to be deceived.” Buller v. Sutter 

Health, 160 Cal. App. 4th 981, 986 (2008). “The UCL, while broad in scope, is limited in 

remedies. Private individuals . . . may win restitution or injunctive relief, but they cannot obtain 

damages or attorney fees.” De La Torre v. CashCall, Inc., 5 Cal. 5th 966, 983 (2018) (citations 

omitted).

Plaintiffs allege violations of the unfair, unlawful, and fraudulent prongs of the UCL

stemming from Defendants’ HBOR violations and a violation of 15 U.S.C. § 1641(g). (Doc. 1-4, 

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¶ 62.) The state and federal law claims are addressed separately.

1. Plaintiffs’ UCL Cause of Action Predicated on the HBOR Violations

Plaintiffs allege that Defendants “violated the ‘unfair,’ ‘unlawful,’ and ‘fraudulent’ prongs 

of the UCL resulting in injury and economic loss to Plaintiffs when they purposefully violated 

Civ. Code §§ 2923.5, 2924(a)(1), 2934a(a)(1) and 2924.9.” (Doc. 1-4, ¶ 62.) Plaintiffs further 

allege that this “unlawful and unfair conduct has caused substantial harm to Plaintiffs,” including 

“actual, pecuniary injury of the loss of the equity in the value of the Subject Property, and the 

costs of seeking a remedy for [Defendants] wrongful actions.” (Doc. 1-4, ¶¶ 65, 68.) Defendants 

argue that Plaintiffs’ UCL claim should be dismissed on each prong. (Docs. 10-1 at 21–24; 13-1 

at 16.)

Defendants argue that Plaintiffs have not alleged any unlawful business practice because 

Plaintiffs have failed to properly state a claim for a violation of any law. (Docs. 10-1 at 21–22; 

13-1 at 16.) However, the Court found above that Plaintiffs sufficiently alleged a § 2924.9 claim 

against Cenlar.

3

 Thus, Cenlar’s motion to dismiss is DENIED as to the unlawful prong of the 

UCL, and Citibank’s motion to dismiss this theory of liability is GRANTED without leave to 

amend.

Plaintiffs allege unfair conduct occurred, “resulting in injury and economic loss,” because

the “information provided to Plaintiffs was certainly misleading and not consistent as to the status 

of the loan modification and what [they] w[ere] supposed to do to satisfy the lender’s demands.” 

(Doc. 1-4 at ¶¶ 63, 65–67.) Plaintiffs attempt to clarify this unfair conduct in their opposition by 

stating that Defendants allegedly collected “various improper fees, costs and charges, that are 

either not legally due under the mortgage contract or California law, or that are in excess of 

amounts legally due,” and Defendants “failed to send any written notifications as to any 

alternatives to foreclosure or make any calls in this regard even.” (Docs. 18-1 at 23; 19-1 at 23.) 

Because Plaintiffs’ statements in their opposition briefs are not in the complaint, this Court is 

3

 Because the Court has already dismissed Plaintiffs’ §§ 2923.5 and 2924.9 (as to Citibank) claims, and Plaintiffs 

cease to pursue the §§ 2924(a)(1) and 2934a(a)(1) claims, the Court only addresses Plaintiffs’ derivative § 2924.9 

unlawful UCL claim against Cenlar.

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unable to consider Plaintiffs’ statements regarding the improper collection of fees. See Susoeff v. 

Pamulapati, 2022 WL 256866, at *2 (E.D. Cal. Jan. 27, 2022). In the complaint, Plaintiffs fail to 

allege “with reasonable particularity the facts supporting the statutory elements” of the unfair 

conduct violation and how the conduct was unfair such that it was substantially injurious. See 

Khoury v. Maly’s of California, Inc., 14 Cal. App. 4th 612, 619 (1993); see also McDonald, 543 

F.3d at 506. Therefore, Defendants’ motions to dismiss the unfair business practices prong of the 

UCL are GRANTED with leave to amend.

Defendants also allege that Plaintiffs have insufficiently pled allegations of fraud under 

the UCL. (Docs. 10-1 at 23–24; 13-1 at 16.) Claims brought under the UCL’s fraud prong must 

satisfy the particularity requirements of Federal Rule of Civil Procedure 9(b). See Kearns v. Ford 

Motor Co., 567 F.3d 1120, 112 (9th Cir. 2009). Plaintiffs allege only that Defendants provided 

information that “was certainly misleading and not consistent as to the status of the loan 

modification.” (Doc. 1-4, ¶ 67.) Plaintiffs have not alleged “the who, what, when, where, and 

how” required under Rule 9(b). Vess, 317 F.3d at 1106. Defendants’ motions to dismiss on the 

fraud prong of the UCL are GRANTED with leave to amend.

2. Plaintiffs’ UCL Cause of Action Predicated on a Violation of 15 U.S.C. § 1641(g)

Consumer Credit Protection Act, 15 U.S.C. § 1641(g), provides that when a mortgage 

loan is sold, transferred, or assigned to a third party, the new owner of the debt must notify the 

borrower of certain information in writing within thirty days of the transfer. A creditor that 

violates § 1641(g) is liable for actual damages or specified statutory damages. 15 U.S.C. 

§ 1640(a)(1)–(2).

Citibank argues that Plaintiffs have not pled sufficient facts to state a claim under 

§ 1641(g). (Doc. 10-1 at 22–23.) Plaintiffs allege only that Defendants “fail[ed] to advise 

homeowners in writing within 30 days that their Deed of Trust was transferred or assigned to a 

third party, and that it is the new owner or assignee of the debt is illegal in violation of Title 15 

U.S.C. § 1641(g).” (Doc. 1-4, ¶ 64.) It appears that Plaintiffs base this argument on an alleged

assignment of the deed of trust, which they claim triggered Defendants’ disclosure obligations 

under § 1641(g). (Doc. 1-4, ¶ 64.) However, the § 1641(g) notice requirements apply only when 

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a mortgage loan—not a deed of trust—is transferred or assigned to a third party. See Cheatham v. 

Real Time Resolutions, Inc., No. 2:19-CV-08911-RGK-JPR, 2020 WL 1000606, at *3 (C.D. Cal. 

Jan 7, 2020) (holding plaintiff insufficiently pled a § 1641(g) claim when plaintiff simply pled 

that the defendant failed to notify her of the assignment of the deed of trust). Therefore, without 

an allegation that Defendants—as the new owner or assignee of Plaintiffs’ mortgage loan—failed 

to notify Plaintiffs in writing of the transfer or assignment, the Court finds that Plaintiffs have not 

sufficiently pled a claim for a violation of 15 U.S.C. § 1641(g). Thus, Defendants’ motions to 

dismiss Plaintiffs’ claim for a violation of 15 U.S.C. § 1641(g) is GRANTED with leave to 

amend.

H. Count Eight: Cancellation of Written Instruments

Plaintiffs seek cancellation of the recorded notice of default, notice of trustee’s sale, and 

trustee’s deed upon sale. (Doc. 1-4, ¶ 72.) Under California Civil Code § 3412, a court may 

order the cancellation of a written instrument if “there is a reasonable apprehension that if left 

outstanding it may cause serious injury to a person against whom it is void or voidable.” To 

obtain cancellation of an instrument, a plaintiff “must show that he will be injured or prejudiced if 

the instrument is not cancelled, and that such instrument is void or voidable.” Zendejas v. GMAC 

Wholesale Mortg. Corp., No. 1:10-CV-0184-OWW-GSA, 2010 WL 2629899, at *7 (E.D. Cal. 

June 29, 2010). A plaintiff must allege “facts, ‘not mere conclusions, showing the apparent 

validity of the instrument designated, and point out the reason for asserting that it is actually 

invalid.’” Santana v. BSI Fin. Servs., Inc., 495 F. Supp. 3d 926, 950 (S.D. Cal. 2020) (quoting 

Ephraim v. Metro Tr. Co. of Cal., 28 Cal. 2d 824, 833 (1946)). “Cancellation of an instrument is 

essentially a request for rescission of the instrument.” Deutsche Bank Nat’l Tr. Co. v. Pyle, 13 

Cal. App. 5th 513, 523 (2017).

Plaintiffs’ complaint alleges that they have “reasonable belief” that the notice of default, 

notice of trustee’s sale, and trustee’s deed upon sale are void or void ab initio. (Doc. 1-4, ¶ 72.) 

However, Plaintiffs fail to plead any facts to support the allegation that the instruments are void 

or voidable as required under § 3412. See Zendejas, 2010 WL 262899, at *7 (holding that merely 

indicating that the instruments were void or voidable without explaining why was insufficient for 

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an allegation under § 3412). Rather, Plaintiffs merely reiterate that the instruments were “illicit 

recordings” and that “the disparaging instruments were intended to affect Plaintiffs and their 

home.” (Docs. 18-1 at 24; 19-1 at 24.) Because Plaintiffs fail to demonstrate how the 

instruments are “voidable or void ab initio” and would cause “serious injury” if not canceled, the 

Court grants Defendants’ motions to dismiss Count Eight with leave to amend.

CONCLUSION

For the reasons set forth above:

1. Defendants’ requests for judicial notice are GRANTED.

2. Defendants’ motions to dismiss Plaintiffs’ first, second, fourth, and sixth causes of 

action are GRANTED without leave to amend.

3. Defendants’ motions to dismiss Plaintiffs’ third cause of action are granted in part and 

denied in part as follows:

a. Defendant Citibank’s motion to dismiss Plaintiffs’ third cause of action is 

GRANTED without leave to amend; and

b. Defendant Cenlar’s motion to dismiss Plaintiffs’ third cause of action is 

DENIED.

4. Defendants’ motions to dismiss Plaintiffs’ fifth and eighth causes of action are 

GRANTED with leave to amend.

5. Defendants’ motions to dismiss Plaintiffs’ seventh cause of action are granted in part 

and denied in part as follows:

a. Defendant Citibank’s motion to dismiss Plaintiffs’ unlawful prong of the 

UCL cause of action is GRANTED without leave to amend.

b. Defendant Cenlar’s motion to dismiss Plaintiffs’ unlawful prong of the UCL 

cause of action is DENIED.

c. Defendants’ motions to dismiss Plaintiffs’ unfair prong of the UCL cause of 

action is GRANTED with leave to amend.

d. Defendants’ motion to dismiss Plaintiffs’ fraud prong of the UCL cause of 

action is GRANTED with leave to amend; and

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e. Defendants’ motion to dismiss Plaintiffs’ 15 U.S.C. § 1641(g) cause of 

action is GRANTED with leave to amend.

IT IS SO ORDERED.

Dated: September 4, 2024 

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