-KJN (TEMP)(PS) Arreola, et al v. Wells Fargo Bank, et al, No. 2:2010cv03272 - Document 32 (E.D. Cal. 2011)

Court Description: FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Kendall J. Newman on 3/28/2011 RECOMMENDING that Dfts' 9 and 12 motions to dismiss be granted. This action be dismissed and this case be closed. Referred to Judge William B. Shubb. Objections to F&R due within 14 days. (Zignago, K.)

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-KJN (TEMP)(PS) Arreola, et al v. Wells Fargo Bank, et al Doc. 32 1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 VICLOUIS ARREOLA III, et al., 11 12 13 Plaintiffs, No. 2:10-cv-3272 WBS KJN (TEMP) PS v. WELLS FARGO HOME MORTGAGE, et al., 14 15 Defendants. ______________________________/ 16 FINDINGS AND RECOMMENDATIONS Defendants’ motions to dismiss came on regularly for hearing on March 3, 2011. 17 Plaintiff VicLouis Arreola appeared on his own behalf and is proceeding in this action without 18 counsel.1 No appearance was made for plaintiff Imelda Cid-Arreola, who is also proceeding in 19 this action without counsel. Alex Sears appeared telephonically for defendants Wells Fargo and 20 Mortgage Electronic Registration Systems, Inc. (“MERS”), hereinafter “Wells Fargo 21 defendants.” Charles Pernicka appeared telephonically for defendant DHI Mortgage Company 22 (“DHI”). Upon review of the documents in support and opposition, upon hearing the arguments 23 of plaintiffs and counsel, and good cause appearing therefor, THE COURT FINDS AS 24 FOLLOWS: 25 26 1 This action proceeds before the undersigned pursuant to Eastern District of California Local Rule 302(c)(21) and 28 U.S.C. § 636(b)(1). Dockets.Justia.com 1 This action arises out of the foreclosure of plaintiffs’ home. The action was filed 2 in state court on October 29, 2010, and was removed from state court to this court on the basis of 3 federal question jurisdiction. Dckt. no. 1. Plaintiffs allege claims for declaratory and injunctive 4 relief, fraud, violation of the Real Estate Settlement Procedures Act (“RESPA”), reformation, 5 quiet title, violation of the California Unfair Competition Law (“UCL”), violation of California 6 Civil Code § 2923.6, and violation of the California Rosenthal Fair Debt Collection Practices Act 7 (“Rosenthal Act”). Defendants Wells Fargo and MERS moved to dismiss on December 13, 8 2010, and defendant DHI Mtg. Co. moved to dismiss on December 15, 2010, and joined in 9 defendant Wells Fargo’s motion to dismiss. Dckt. nos. 9, 12. Opposition to both motions was 10 filed.2 Dckt. nos. 22, 28. The undersigned has fully considered the parties’ briefs and the record 11 in this case and, for the reasons stated below, recommends that defendants’ motions to dismiss be 12 granted and that the action be dismissed with prejudice.3 13 I. BACKGROUND 14 15 Plaintiffs borrowed $417,000 from defendant DHI on April 4, 2007, for the purchase of a residential property in Elk Grove, California, and the deed of trust was recorded on 16 17 18 19 20 21 22 23 24 2 Plaintiffs’ opposition papers rely on the discredited theory that the holder of the note must be identified before nonjudicial foreclosure can take place in California. Plaintiffs dispute the authority of defendant Cal-Western Reconveyance Corporation, which was substituted as a trustee before recording the Notice of Default and Notice of Trustee’s Sale, to initiate the nonjudicial foreclosure proceedings against plaintiffs’ home. This contention is meritless. See Champlaie v. BAC Home Loans Servicing, LP, et al., 706 F.Supp.2d 1029 (E.D. Cal. 2009) (in nonjudicial foreclosure under California law, production or possession of the promissory note is not required). Plaintiff’s reliance on In re Rickie Walker, (Bankr. E.D. Cal. 2010, No. 10-21656, May 20, 2010 civil minutes) and a Massachusetts decision is misplaced. Whether an entity has standing to assert or object to a claim in bankruptcy court and judicial foreclosure under Massachusetts law is inapposite to determination of the propriety of nonjudicial foreclosure under the California statutory scheme. Cal. Civil Code §§ 2924(a)(1), 2934a(d). 3 25 26 Defendant Cal-Western Reconveyance Corporation has not appeared in this action. For the reasons discussed below, the court also recommends dismissal of the action against the non-appearing defendant. 2 1 April 30, 2007. See Defendant Wells Fargo’s Request for Judicial Notice (“WFRJN”), Ex. A.4 2 MERS was named as the beneficiary (in its capacity as nominee for the lender) and Fidelity 3 National Title was named as the trustee. Id. In September 2009, plaintiffs defaulted on their 4 payments. On December 9, 2009, MERS executed a substitution of trustee, naming Cal-Western 5 as the new trustee. WFRJN, Ex. C. The substitution of trustee was recorded on October 14, 6 2010, and notice of the substitution was mailed to plaintiffs. Id. On December 10, 2009, MERS 7 executed an assignment of deed of trust, assigning the beneficial interest to Wells Fargo. See 8 Defendant DHI’s Request for Judicial Notice (“DHIRJN”), Ex. B. This assignment was recorded 9 on October 6, 2010. Id. On December 14, 2009, Cal-Western recorded a notice of default, 10 which included a notice of default declaration that the requirements of California Civil Code § 11 2923.5 had been met. DHIRJN, Ex. D. A notice of trustee’s sale was recorded on October 20, 12 2010, with a sale date scheduled for November 9, 2010. WFRJN, Ex. E. The instant action was 13 filed on October 29, 2010, in state court. Dckt. no. 2, Ex. A. 14 II. LEGAL STANDARDS 15 A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) 16 challenges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase 17 Bank, N.A., 654 F. Supp. 2d 1104, 1109 (E.D. Cal. 2009). Under the “notice pleading” standard 18 of the Federal Rules of Civil Procedure, a plaintiff’s complaint must provide, in part, a “short and 19 plain statement” of plaintiff’s claims showing entitlement to relief. Fed. R. Civ. P. 8(a)(2); see 20 also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009). “A complaint may survive a 21 motion to dismiss if, taking all well-pleaded factual allegations as true, it contains ‘enough facts 22 23 24 25 4 Defendants request judicial notice of documents recorded by the Sacramento County Recorder. On a motion to dismiss, the court may consider matters of public record. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Accordingly, defendants’ request for judicial notice of official records is granted. 26 3 1 to state a claim to relief that is plausible on its face.’” Coto Settlement v. Eisenberg, 593 F.3d 2 1031, 1034 (9th Cir. 2010) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). “‘A claim 3 has facial plausibility when the plaintiff pleads factual content that allows the court to draw the 4 reasonable inference that the defendant is liable for the misconduct alleged.’” Caviness v. 5 Horizon Cmty. Learning Ctr., Inc., 590 F.3d 806, 812 (9th Cir. 2010) (quoting Iqbal, 129 S. Ct. at 6 1949). The court accepts all of the facts alleged in the complaint as true and construes them in 7 the light most favorable to the plaintiff. Corrie v. Caterpillar, 503 F.3d 974, 977 (9th Cir. 2007). 8 The court is “not, however, required to accept as true conclusory allegations that are contradicted 9 by documents referred to in the complaint, and [the court does] not necessarily assume the truth 10 of legal conclusions merely because they are cast in the form of factual allegations.” Paulsen, 11 559 F.3d at 1071 (citations and quotation marks omitted). The court must construe a pro se 12 pleading liberally to determine if it states a claim and, prior to dismissal, tell a plaintiff of 13 deficiencies in his complaint and give plaintiff an opportunity to cure them if it appears at all 14 possible that the plaintiff can correct the defect. See Lopez v. Smith, 203 F.3d 1122, 1130-31 15 (9th Cir. 2000) (en banc). 16 In ruling on a motion to dismiss pursuant to Rule 12(b), the court “may generally 17 consider only allegations contained in the pleadings, exhibits attached to the complaint, and 18 matters properly subject to judicial notice.” Outdoor Media Group, Inc. v. City of Beaumont, 19 506 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). The court may 20 consider judicially noticeable court records to determine the preclusive effect of prior decisions 21 without converting a motion to dismiss to a motion for summary judgment. See, e.g., Shaw, 56 22 F.3d at 1129 n.1. 23 A motion to dismiss pursuant to Rule 12(b)(6) may also challenge a complaint’s 24 compliance with Federal Rule of Civil Procedure 9(b) where fraud is an essential element of a 25 claim. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). Rule 9(b), 26 4 1 which provides a heightened pleading standard, states: “In alleging fraud or mistake, a party must 2 state with particularity the circumstances constituting fraud or mistake. Malice, intent, 3 knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 4 9(b). These circumstances include the “‘time, place, and specific content of the false 5 representations as well as the identities of the parties to the misrepresentations.’” Swartz v. 6 KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (quoting Edwards v. Marin Park, 7 Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 8 1124 (9th Cir. 2009) (“Averments of fraud must be accompanied by ‘the who, what, when, 9 where, and how’ of the misconduct charged” (citation and quotation marks omitted).). “Rule 10 9(b) demands that the circumstances constituting the alleged fraud be specific enough to give 11 defendants notice of the particular misconduct . . . so that they can defend against the charge and 12 not just deny that they have done anything wrong.” Kearns, 567 F.3d at 1124 (citing Bly-Magee 13 v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (internal quotation marks omitted and 14 modification in original). 15 III. DISCUSSION Defendants contend the fraud claims5 are barred by the statute of limitations.6 The 16 17 fraud claims arise out of alleged misrepresentations in connection with the origination of the 18 loan. The deed of trust was executed on April 4, 2007, and this action was filed was filed in state 19 court on October 29, 2010. Plaintiffs knew the material terms of the loan in April 2007. 20 Plaintiffs submit no argument in opposition to the bar of the statute of limitations or that would 21 raise a plausible claim for equitable tolling. Plaintiffs’ fraud claim is therefore barred by the 22 23 24 25 26 5 Plaintiffs allege as a second cause of action a claim for fraud, and allege in the ninth cause of action a claim for fraud under California Civil Code § 1572, which sets forth the statutory definition of “actual fraud.” 6 Defendants also correctly contend that the fraud claims are not pleaded with sufficient particularity. The statute of limitations issue, however, is dispositive. 5 1 three year statute of limitations provided under California Code of Civil Procedure § 338(d). 2 Plaintiff’s third claim is for violation of the RESPA, 12 U.S.C. § 2607(b), which 3 prohibits fee splitting for real estate settlement services. Claims under this section are subject to 4 a one-year statute of limitations. 12 U.S.C. § 2614. Plaintiffs fail to allege conduct violative of 5 this statute. However, in any event, plaintiffs would have paid for the real estate settlement 6 services at the time of closing, which occurred over three years prior to the filing of the instant 7 action. See Garcia v. Wachovia Mtg. Co., 676 F. Supp. 2d 895, 908 (C.D. Cal. 2009) 8 (dismissing RESPA section 2607 claim as time barred where mortgage transaction closed over 9 one year prior to filing of lawsuit); see also Jensen v. Quality Loan Service Corp., 702 F. Supp. 10 2d 1183, 1195 (E.D. Cal. 2009); Rogers v. Cal. State Mortg. Co. Inc., 2010 WL 144861 at *11 11 (E.D. Cal. 2010). Accordingly, plaintiffs’ claim under RESPA is time barred. 12 The fourth cause of action seeks reformation of the contract to reduce the amount 13 of the loan from $417,000, to the estimated fair market value of the property of approximately 14 $220,000. Reformation is not a stand alone action and can be granted only where plaintiffs can 15 demonstrate a valid cause of action justifying reformation. Landis v. Superior Court, 232 Cal. 16 App. 2d 548, 555 (1965). There are no allegations that the loan documents did not reflect the 17 parties’ intent at the time of execution. This court does not have the authority to make a new 18 contract for the parties. Lemoge Electric v. County of San Mateo, 46 Cal. 2d 659, 663 (1956). 19 Plaintiffs’ claim for reformation therefore fails. 20 Plaintiffs also seek to quiet title to the subject property. There are no allegations 21 that plaintiffs have tendered the full amount due on the loan. Plaintiff conceded at the hearing 22 that such tender could not be made. In the absence of tender, a claim for quiet title cannot lie. 23 California Civil Code § 1691(b); see Aguilar v. Bocci, 39 Cal. App. 3d 475, 477 (1974) (cloud 24 upon title persists until debt is paid); see also Pantoja v. Countrywide Home Loans, Inc., 640 F. 25 Supp. 2d 1177, 1183-84 (N.D. Cal. 2009) (“Under California law, in an action to set aside a 26 6 1 trustee’s sale, a plaintiff must demonstrate that he has made a valid and viable tender [offer] of 2 payment of the indebtedness” (citations and quotation marks omitted).); Alcaraz v. Wachovia 3 Mortgage FSB, 592 F. Supp. 2d 1296, 1304 (E.D. Cal. 2009) (“‘A valid and viable tender of 4 payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed 5 of trust.’”) (citing Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal. App. 3d 112, 92 Cal. Rptr. 851 6 (Ct. App. 1971)). . 7 In the seventh cause of action, plaintiffs allege a claim under California Civil 8 Code § 2923.6.7 This section addresses the rights and obligations of a loan servicer with respect 9 to participants in a loan pool. There is no private right of action created under this statute. See 10 Farner v. Countrywide Home Loans, Inc., 2009 WL 189025, *22 & n.1 (S.D. Cal. 2009) (no 11 private right of action for borrowers); Ruiz v. Saxon Mort. Services, 2009 WL 1872465, *2 n.2 12 (C.D. Cal. 2009) (no cognizable claim for wrongful foreclosure under statute); see also Nool v. 13 HomeQ Servicing, 653 F.Supp.2d 1047, 1052 (E.D. Cal. 2009) (lender not obligated to provide 14 loan modification under section 2923.6). Because there is no private right of action, plaintiffs 15 cannot state a claim under this statute. 16 7 17 18 19 20 21 22 23 24 25 26 In the complaint, plaintiffs also refer to California Civil Code § 2923.5, and in the opposition plaintiffs stress that this section requires the “true, real and actual” beneficiary must contact the borrower to assess their financial condition. Under California Civil Code § 2923.5, a mortgagee, trustee, beneficiary or authorized agent must contact or diligently attempt to contact the borrower before recording a notice of default and must declare it has done so. Cal. Civ. Code §§ 2923.5(a)(1), (b). This section applies to mortgages and deeds of trust recorded from January 1, 2003, to December 31, 2007, inclusive, that are secured by owner-occupied residential real property containing no more than four dwelling units, as is the case here. Section 2923.5 implicitly provides a private right of action. See Mabry v. Superior Court, 185 Cal. App. 4th 208 (2010); but see Giordano v. Wachovia Mortgage, FSB, 2010 WL 5148428 at *4, 5 (N.D. Cal. Dec. 14, 2010) (claim under section 2923.5 preempted by federal law under HOLA). Assuming, without deciding, that section 2923.5 creates a private right of action that is not preempted, the allegations in plaintiffs’ complaint are fatal to a viable claim under this statute. Plaintiffs allege that they spoke with Wells Fargo regarding their financial condition. Complaint at ¶ 28. The documents of which this court may take judicial notice establish that Wells Fargo is the beneficiary of the deed of trust. DHIRJN, Ex. C. The notice of default includes a declaration of compliance with section 2923.5 which is signed by the Vice President of Loan Documentation for Wells Fargo Home Mortgage. DHIRJN, Ex. D. Under these circumstances, plaintiffs cannot state a claim under section 2923.5. 7 1 Plaintiffs’ eighth claim for relief under the Rosenthal Act fails to state a claim 2 because foreclosing on a home does not constitute debt collection under the Act. Izenberg v. 3 ETS Services, LLC, 589 F.Supp.2d 1193, 1199 (C.D. Cal. 2008); see also Keen v. American 4 Home Mtg. Servicing, Inc., 664 F.Supp.2d 1086, 1095 (E.D. Cal. 2009); Rosal v. First Federal 5 Bank of California, 671 F.Supp.2d 1111, 1135 (N.D. Cal. 2009) (foreclosing on property 6 pursuant to deed of trust not debt collection within meaning of Rosenthal Act). 7 In plaintiffs’ sixth claim for relief, plaintiffs invoke the UCL, California Business 8 and Professions Code § 17200. A claim under the UCL must rest on a violation of some 9 independent substantive statute, regulation or case law. See Farmers Ins. Exch. v. Superior 10 Court, 2 Cal. 4th 377, 383 (1992) (action under section 17200 borrows violations of other laws); 11 see also Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993) (plaintiff must state 12 with reasonable particularity the facts supporting statutory elements of violation of UCL). 13 Because the UCL claim is predicated on the same conduct giving rise to plaintiffs’ other causes 14 of action, all of which are subject to dismissal, the UCL claim fails as well. See generally Cel- 15 Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999) 16 (claim under “unfair” prong of UCL requires conduct threatening incipient violation of antitrust 17 laws); Krantz v. BT Visual Images, LLC, 89 Cal. App. 4th 164, 178 (2001) (violation under 18 “unlawful” prong of UCL requires underlying violation of law); Perdiguerra v. Meridas Capital, 19 Inc., 2010 WL 395932 at *8 (N.D. Cal. Feb. 1, 2010) (claim under “fraudulent” prong of UCL 20 requires showing of reliance and heightened particularity standard required for fraud). 21 Plaintiffs also seek declaratory and injunctive relief regarding their contention that 22 defendants do not have the right to foreclose. A claim for declaratory or injunctive relief is not a 23 separate cause of action and plaintiffs are not entitled to such relief absent a viable claim. See, 24 e.g., Lane, 713 F. Supp. 2d at 1104 (“Declaratory and injunctive relief are not independent 25 claims, rather they are forms of relief.”). As discussed above, defendant Cal-Western was the 26 8 1 properly substituted trustee and has the right to initiate foreclosure proceedings. Cal. Civil Code 2 §§ 2924(a)(1), 2934a(d); see Champlaie v. BAC Home Loans Servicing, LP, et al., 706 3 F.Supp.2d 1029 (E.D. Cal. 2009); see also Roque v. Suntrust Mortgage, Inc., No. C-09-00040 4 RMW, 2010 WL 546896 at *3 (N.D. Cal. Feb. 10, 2010) (California Civil Code § 2932.5 5 inapplicable to deeds of trust; claim for declaratory relief based on this section dismissed with 6 prejudice). Thus, plaintiffs are not entitled to the declaratory and injunctive relief they seek. 7 As discussed above, all of plaintiffs’ causes of action fail to state a claim. In 8 opposition to the pending motions, plaintiffs proffer no facts which would suggest amendment of 9 the complaint would be anything other than futile. Similarly, at the hearing on the pending 10 motions, the court explored at some length with plaintiff whether any facts could be proffered to 11 cure the deficiencies in the complaint and plaintiff was unable to make such a proffer. After 12 careful review of the plaintiffs’ pleadings, the undersigned concludes amendment would be futile 13 and the motions to dismiss should be granted with prejudice. 14 IV. Defendant Who Has Not Been Served 15 The claims against the remaining non-appearing defendant Cal-Western 16 Reconveyance Corporation should also be dismissed. “A District Court may properly on its own 17 motion dismiss an action as to defendants who have not moved to dismiss where such defendants 18 are in a position similar to that of moving defendants or where claims against such defendants are 19 integrally related.” Silverton v. Dep’t of Treasury, 644 F.2d 1341, 1345 (9th Cir. 1981). “Such a 20 dismissal may be made without notice where the [plaintiffs] cannot possibly win relief.” Omar v. 21 Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987). The court’s authority in this regard 22 includes sua sponte dismissal as to defendants who have not been served and defendants who 23 have not yet answered or appeared. Columbia Steel Fabricators, Inc. v. Ahlstrom Recovery, 44 24 F.3d 800, 802 (9th Cir. 1995) (“We have upheld dismissal with prejudice in favor of a party 25 which had not yet appeared, on the basis of facts presented by other defendants which had 26 9 1 appeared.”); see also Bach v. Mason, 190 F.R.D. 567, 571 (D. Idaho 1999); Ricotta v. California, 2 4 F. Supp. 2d 961, 978-79 (S.D. Cal. 1998). Here, the non-appearing defendant is in a position 3 similar to that of the defendants who have moved for dismissal and the claims are integrally 4 related. Accordingly, the undersigned will recommend that all claims against defendant Cal- 5 Western Reconveyance Corporation be dismissed along with all claims against the moving 6 defendants.8 7 V. CONCLUSION 8 For the foregoing reasons, IT IS HEREBY RECOMMENDED that: 9 1. Defendants’ motions to dismiss (Dckt. nos. 9 and 12) be granted; 10 2. This action be dismissed with prejudice; 11 3. This case be closed. 12 These findings and recommendations are submitted to the United States District 13 Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen 14 days after being served with these findings and recommendations, any party may file written 15 objections with the court and serve a copy on all parties. Such a document should be captioned 16 “Objections to Magistrate Judge’s Findings and Recommendations.” Any response to the 17 objections shall be filed and served within seven days after service of the objections. The parties 18 are advised that failure to file objections within the specified time may waive the right to appeal 19 the District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 20 DATED: March 28, 2011 21 _____________________________________ KENDALL J. NEWMAN UNITED STATES MAGISTRATE JUDGE 22 23 8 24 25 26 Dismissal is also warranted under Federal Rule of Civil Procedure 4(m). In the order setting status conference, filed December 8, 2010, plaintiff was cautioned this action might be dismissed if defendants were not timely served. Dckt. no. 6. Over 120 days have passed since this action was removed to federal court, and there is no evidence that defendant Cal-Western Reconveyance Corporation has been served with summons in this action. 10

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