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Viclouis Arreola Iii, et al v. Wells Fargo Home Mortgage


March 28, 2011


The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge


Defendants' motions to dismiss came on regularly for hearing on March 3, 2011. Plaintiff VicLouis Arreola appeared on his own behalf and is proceeding in this action without counsel.*fn1 No appearance was made for plaintiff Imelda Cid-Arreola, who is also proceeding in this action without counsel. Alex Sears appeared telephonically for defendants Wells Fargo and Mortgage Electronic Registration Systems, Inc. ("MERS"), hereinafter "Wells Fargo defendants." Charles Pernicka appeared telephonically for defendant DHI Mortgage Company ("DHI"). Upon review of the documents in support and opposition, upon hearing the arguments of plaintiffs and counsel, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:

This action arises out of the foreclosure of plaintiffs' home. The action was filed in state court on October 29, 2010, and was removed from state court to this court on the basis of federal question jurisdiction. Dckt. no. 1. Plaintiffs allege claims for declaratory and injunctive relief, fraud, violation of the Real Estate Settlement Procedures Act ("RESPA"), reformation, quiet title, violation of the California Unfair Competition Law ("UCL"), violation of California Civil Code § 2923.6, and violation of the California Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"). Defendants Wells Fargo and MERS moved to dismiss on December 13, 2010, and defendant DHI Mtg. Co. moved to dismiss on December 15, 2010, and joined in defendant Wells Fargo's motion to dismiss. Dckt. nos. 9, 12. Opposition to both motions was filed.*fn2 Dckt. nos. 22, 28. The undersigned has fully considered the parties' briefs and the record in this case and, for the reasons stated below, recommends that defendants' motions to dismiss be granted and that the action be dismissed with prejudice.*fn3


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 April 30, 2007. See Defendant Wells Fargo's Request for Judicial Notice ("WFRJN"), Ex. A.*fn4

MERS was named as the beneficiary (in its capacity as nominee for the lender) and Fidelity National Title was named as the trustee. Id. In September 2009, plaintiffs defaulted on their payments. On December 9, 2009, MERS executed a substitution of trustee, naming Cal-Western as the new trustee. WFRJN, Ex. C. The substitution of trustee was recorded on October 14, 2010, and notice of the substitution was mailed to plaintiffs. Id. On December 10, 2009, MERS executed an assignment of deed of trust, assigning the beneficial interest to Wells Fargo. See Defendant DHI's Request for Judicial Notice ("DHIRJN"), Ex. B. This assignment was recorded on October 6, 2010. Id. On December 14, 2009, Cal-Western recorded a notice of default, which included a notice of default declaration that the requirements of California Civil Code § 2923.5 had been met. DHIRJN, Ex. D. A notice of trustee's sale was recorded on October 20, 2010, with a sale date scheduled for November 9, 2010. WFRJN, Ex. E. The instant action was filed on October 29, 2010, in state court. Dckt. no. 2, Ex. A.


A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) challeges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase Bank, N.A., 654 F. Supp. 2d 1104, 1109 (E.D. Cal. 2009). Under the "notice pleading" standard of the Federal Rules of Civil Procedure, a plaintiff's complaint must provide, in part, a "short and plain statement" of plaintiff's claims showing entitlement to relief. Fed. R. Civ. P. 8(a)(2); see also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009). "A complaint may survive a motion to dismiss if, taking all well-pleaded factual allegations as true, it contains 'enough factsto state a claim to relief that is plausible on its face.'" Coto Settlement v. Eisenberg, 593 F.3d 1031, 1034 (9th Cir. 2010) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). "'A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Caviness v. Horizon Cmty. Learning Ctr., Inc., 590 F.3d 806, 812 (9th Cir. 2010) (quoting Iqbal, 129 S. Ct. at 1949). The court accepts all of the facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Corrie v. Caterpillar, 503 F.3d 974, 977 (9th Cir. 2007). The court is "not, however, required to accept as true conclusory allegations that are contradicted by documents referred to in the complaint, and [the court does] not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Paulsen, 559 F.3d at 1071 (citations and quotation marks omitted). The court must construe a pro se pleading liberally to determine if it states a claim and, prior to dismissal, tell a plaintiff of deficiencies in his complaint and give plaintiff an opportunity to cure them if it appears at all possible that the plaintiff can correct the defect. See Lopez v. Smith, 203 F.3d 1122, 1130-31 (9th Cir. 2000) (en banc).

In ruling on a motion to dismiss pursuant to Rule 12(b), the court "may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). The court may consider judicially noticeable court records to determine the preclusive effect of prior decisions without converting a motion to dismiss to a motion for summary judgment. See, e.g., Shaw, 56 F.3d at 1129 n.1.

A motion to dismiss pursuant to Rule 12(b)(6) may also challenge a complaint's compliance with Federal Rule of Civil Procedure 9(b) where fraud is an essential element of a claim. See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). Rule 9(b), which provides a heightened pleading standard, states: "In alleging fraud or mistake, a party must 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). These circumstances include the "'time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.'" Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (per curiam) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) ("Averments of fraud must be accompanied by 'the who, what, when, where, and how' of the misconduct charged" (citation and quotation marks omitted).). "Rule 9(b) demands that the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong." Kearns, 567 F.3d at 1124 (citing Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (internal quotation marks omitted and modification in original).


Defendants contend the fraud claims*fn5 are barred by the statute of limitations.*fn6 The fraud claims arise out of alleged misrepresentations in connection with the origination of the loan. The deed of trust was executed on April 4, 2007, and this action was filed was filed in state court on October 29, 2010. Plaintiffs knew the material terms of the loan in April 2007. Plaintiffs submit no argument in opposition to the bar of the statute of limitations or that would raise a plausible claim for equitable tolling. Plaintiffs' fraud claim is therefore barred by the three year statute of limitations provided under California Code of Civil Procedure § 338(d).

Plaintiff's third claim is for violation of the RESPA, 12 U.S.C. § 2607(b), which prohibits fee splitting for real estate settlement services. Claims under this section are subject to a one-year statute of limitations. 12 U.S.C. § 2614. Plaintiffs fail to allege conduct violative of this statute. However, in any event, plaintiffs would have paid for the real estate settlement services at the time of closing, which occurred over three years prior to the filing of the instant action. See Garcia v. Wachovia Mtg. Co., 676 F. Supp. 2d 895, 908 (C.D. Cal. 2009) (dismissing RESPA section 2607 claim as time barred where mortgage transaction closed over one year prior to filing of lawsuit); see also Jensen v. Quality Loan Service Corp., 702 F. Supp. 2d 1183, 1195 (E.D. Cal. 2009); Rogers v. Cal. State Mortg. Co. Inc., 2010 WL 144861 at *11 (E.D. Cal. 2010). Accordingly, plaintiffs' claim under RESPA is time barred.

The fourth cause of action seeks reformation of the contract to reduce the amount of the loan from $417,000, to the estimated fair market value of the property of approximately $220,000. Reformation is not a stand alone action and can be granted only where plaintiffs can demonstrate a valid cause of action justifying reformation. Landis v. Superior Court, 232 Cal. App. 2d 548, 555 (1965). There are no allegations that the loan documents did not reflect the parties' intent at the time of execution. This court does not have the authority to make a new contract for the parties. Lemoge Electric v. County of San Mateo, 46 Cal. 2d 659, 663 (1956). Plaintiffs' claim for reformation therefore fails.

Plaintiffs also seek to quiet title to the subject property. There are no allegations that plaintiffs have tendered the full amount due on the loan. Plaintiff conceded at the hearing that such tender could not be made. In the absence of tender, a claim for quiet title cannot lie. California Civil Code § 1691(b); see Aguilar v. Bocci, 39 Cal. App. 3d 475, 477 (1974) (cloud upon title persists until debt is paid); see also Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1183-84 (N.D. Cal. 2009) ("Under California law, in an action to set aside a trustee's sale, a plaintiff must demonstrate that he has made a valid and viable tender [offer] of payment of the indebtedness" (citations and quotation marks omitted).); Alcaraz v. Wachovia Mortgage FSB, 592 F. Supp. 2d 1296, 1304 (E.D. Cal. 2009) ("'A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.'") (citing Karlsen v. Am. Sav. & Loan Ass'n, 15 Cal. App. 3d 112, 92 Cal. Rptr. 851 (Ct. App. 1971)). .

In the seventh cause of action, plaintiffs allege a claim under California Civil Code § 2923.6.*fn7 This section addresses the rights and obligations of a loan servicer with respect to participants in a loan pool. There is no private right of action created under this statute. See Farner v. Countrywide Home Loans, Inc., 2009 WL 189025, *22 & n.1 (S.D. Cal. 2009) (no private right of action for borrowers); Ruiz v. Saxon Mort. Services, 2009 WL 1872465, *2 n.2 (C.D. Cal. 2009) (no cognizable claim for wrongful foreclosure under statute); see also Nool v. HomeQ Servicing, 653 F.Supp.2d 1047, 1052 (E.D. Cal. 2009) (lender not obligated to provide loan modification under section 2923.6). Because there is no private right of action, plaintiffs cannot state a claim under this statute.

Plaintiffs' eighth claim for relief under the Rosenthal Act fails to state a claim because foreclosing on a home does not constitute debt collection under the Act. Izenberg v. ETS Services, LLC, 589 F.Supp.2d 1193, 1199 (C.D. Cal. 2008); see also Keen v. American Home Mtg. Servicing, Inc., 664 F.Supp.2d 1086, 1095 (E.D. Cal. 2009); Rosal v. First Federal Bank of California, 671 F.Supp.2d 1111, 1135 (N.D. Cal. 2009) (foreclosing on property pursuant to deed of trust not debt collection within meaning of Rosenthal Act).

In plaintiffs' sixth claim for relief, plaintiffs invoke the UCL, California Business and Professions Code § 17200. A claim under the UCL must rest on a violation of some independent substantive statute, regulation or case law. See Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th 377, 383 (1992) (action under section 17200 borrows violations of other laws); see also Khoury v. Maly's of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993) (plaintiff must state with reasonable particularity the facts supporting statutory elements of violation of UCL). Because the UCL claim is predicated on the same conduct giving rise to plaintiffs' other causes of action, all of which are subject to dismissal, the UCL claim fails as well. See generally CelTech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999) (claim under "unfair" prong of UCL requires conduct threatening incipient violation of antitrust laws); Krantz v. BT Visual Images, LLC, 89 Cal. App. 4th 164, 178 (2001) (violation under "unlawful" prong of UCL requires underlying violation of law); Perdiguerra v. Meridas Capital, Inc., 2010 WL 395932 at *8 (N.D. Cal. Feb. 1, 2010) (claim under "fraudulent" prong of UCL requires showing of reliance and heightened particularity standard required for fraud).

Plaintiffs also seek declaratory and injunctive relief regarding their contention that defendants do not have the right to foreclose. A claim for declaratory or injunctive relief is not a separate cause of action and plaintiffs are not entitled to such relief absent a viable claim. See, e.g., Lane, 713 F. Supp. 2d at 1104 ("Declaratory and injunctive relief are not independent claims, rather they are forms of relief."). As discussed above, defendant Cal-Western was the properly substituted trustee and has the right to initiate foreclosure proceedings. Cal. Civil Code §§ 2924(a)(1), 2934a(d); see Champlaie v. BAC Home Loans Servicing, LP, et al., 706 F.Supp.2d 1029 (E.D. Cal. 2009); see also Roque v. Suntrust Mortgage, Inc., No. C-09-00040 RMW, 2010 WL 546896 at *3 (N.D. Cal. Feb. 10, 2010) (California Civil Code § 2932.5 inapplicable to deeds of trust; claim for declaratory relief based on this section dismissed with prejudice). Thus, plaintiffs are not entitled to the declaratory and injunctive relief they seek.

As discussed above, all of plaintiffs' causes of action fail to state a claim. In opposition to the pending motions, plaintiffs proffer no facts which would suggest amendment of the complaint would be anything other than futile. Similarly, at the hearing on the pending motions, the court explored at some length with plaintiff whether any facts could be proffered to cure the deficiencies in the complaint and plaintiff was unable to make such a proffer. After careful review of the plaintiffs' pleadings, the undersigned concludes amendment would be futile and the motions to dismiss should be granted with prejudice.

IV. Defendant Who Has Not Been Served

The claims against the remaining non-appearing defendant Cal-Western Reconveyance Corporation should also be dismissed. "A District Court may properly on its own motion dismiss an action as to defendants who have not moved to dismiss where such defendants are in a position similar to that of moving defendants or where claims against such defendants are integrally related." Silverton v. Dep't of Treasury, 644 F.2d 1341, 1345 (9th Cir. 1981). "Such a dismissal may be made without notice where the [plaintiffs] cannot possibly win relief." Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th Cir. 1987). The court's authority in this regard includes sua sponte dismissal as to defendants who have not been served and defendants who have not yet answered or appeared. Columbia Steel Fabricators, Inc. v. Ahlstrom Recovery, 44 F.3d 800, 802 (9th Cir. 1995) ("We have upheld dismissal with prejudice in favor of a party which had not yet appeared, on the basis of facts presented by other defendants which had appeared."); see also Bach v. Mason, 190 F.R.D. 567, 571 (D. Idaho 1999); Ricotta v. California, 4 F. Supp. 2d 961, 978-79 (S.D. Cal. 1998). Here, the non-appearing defendant is in a position similar to that of the defendants who have moved for dismissal and the claims are integrally related. Accordingly, the undersigned will recommend that all claims against defendant Cal-Western Reconveyance Corporation be dismissed along with all claims against the moving defendants.*fn8


For the foregoing reasons, IT IS HEREBY RECOMMENDED that:

1. Defendants' motions to dismiss (Dckt. nos. 9 and 12) be granted;

2. This action be dismissed with prejudice;

3. This case be closed.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any response to the objections shall be filed and served within seven days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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