*9 Plaintiff also fails to plead sufficient facts to support a UCL claim for “unlawful, unfair, or fraudulent business act or practice.” Cal. Bus. & Prof.Code § 17200. Because the framers of the UCL expressed the three categories of unfair competition in the disjunctive, “each prong of the UCL is a separate and distinct theory of liability,” each offering “an independent basis for relief.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir.2009). Furthermore, a claim under Section 17200 is “derivative of some other illegal conduct or fraud committed by a defendant, and [a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation.” See Benham v. Aurora Loan Servs., No. 09–2059, 2009 WL 2880232, at *4 (N.D.Cal. Sept.1, 2009). “A complaint based on an unfair business practice may be predicated on a single act; the statute does not require a pattern of unlawful conduct.” Brewer v. Indymac Bank, 609 F.Supp.2d 1104, 1122 (E.D.Cal.2009).
There is little question that the execution of documents in connection with a Deed of Trust constitutes a “business act or practice.” As for the nature of the conduct alleged, while the Complaint alludes to all three prongs of this statute generally, Plaintiff does not specify the theory on which she bases her claim, nor does she address the elements of any one of these theories. Compl. ¶ 41 (“[T]he instances mentioned in paragraphs 32–26[sic] above are unfair, deceptive, untrue acts, which are prohibited by California Business And Professions Code § 17200.”). Other courts have dismissed UCL claims on these grounds. See, e.g., Jensen, 702 F.Supp.2d at 1200 (dismissing plaintiff’s UCL claim because his UCL allegations “do not specify the basis for his claim, i.e., whether it is based on unlawful, unfair, or fraudulent practice”). However, in an effort to construe the factual allegations in a light most favorable to Plaintiff, this Court will consider the adequacy of the Complaint under each prong separately.
a. “Unlawful” Prong
The “unlawful” prong of the UCL requires a plaintiff to demonstrate that the defendant’s conduct violated some other law. Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir.2000). In effect, Section 17200 “borrows” violations of federal, state, or local law and makes them independently actionable. Id. To state a claim for relief under this theory, a plaintiff must “state, with reasonable particularity, the facts supporting the statutory elements of the violation.” Jensen, 702 F.Supp.2d at 1189.
Aside from the cause of action for breach of contract, Plaintiff alleges no violation of federal, state, or local law in her Complaint that could be actionable under Section 17200. Courts consistently conclude that a breach of contract is not itself an unlawful act for the purposes of the UCL. Puentes v. Wells Fargo Home Mortgage, Inc., 160 Cal.App.4th 638, 645, 72 Cal.Rptr.3d 903 (2008); Gibson v. World Sav. & Loan Ass’n, 103 Cal.App.4th 1291, 1302, 128 Cal.Rptr.2d 19 (2002) (“Contractual duties are voluntarily undertaken by the parties to the contract, not imposed by state or federal law.”). Only when the act constituting breach is unfair, unlawful, or fraudulent for some additional reason may that act also violate the UCL. Smith v. Wells Fargo Home Mortgage, Inc., 135 Cal.App.4th 1463, 1483, 38 Cal.Rptr.3d 653 (2005). Here, Plaintiff fails to demonstrate how the facts alleged to support breach are, apart from the breach, wrongful.
*10 Contractual considerations aside, to the extent that Plaintiff bases a theory of “unlawful” conduct on defendant Aurora’s lack of authority to substitute a trustee or CalWestern’s lack of authority to initiate foreclosure proceedings, her cause of action fails. California Civil Code Sections 2924 through 2924k, “[t]he comprehensive statutory framework established to govern nonjudicial foreclosure sales” are intended to be “exhaustive.” Moeller v. Lien, 25 Cal.App.4th 822, 834, 30 Cal.Rptr.2d 777 (1994). Section 2924(a)(1) provides that a “trustee, mortgagee, or beneficiary, or any of their authorized agents may initiate the foreclosure process.” Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1155, 121 Cal.Rptr.3d 819 (2011). Thus, even a breach of contract theory invalidating Cal–Western’s appointment as trustee does not also bar Cal–Western from initiating foreclosure as an agent of the trustee. Only the alleged breach, and not a violation of California law, could potentially render the Defendants’ conduct illegal.
Furthermore, California Civil Code Section 2934a(a)(1)(A) provides that “a trustee under a trust deed … may be substituted by … all of the beneficiaries under the trust deed, or their successors in interest.” Again, while Aurora’s attempt to appoint Cal–Western as the new trustee may have breached the terms of the Deed of Trust, it did comply with California law.7
Thus, to the extent Plaintiff predicates her UCL claim on a violation of another law, this cause of action fails.
b. “Unfair” Prong
The California Supreme Court has yet to establish a definitive test that may be used in consumer cases to determine whether a particular business act or practice is “unfair” for the purposes of the UCL. Drum v. San Fernando Valley Bar Ass’n, 182 Cal.App.4th 247, 253–54, 106 Cal.Rptr.3d 46 (2010) (citing Cel–Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 187 n. 12, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999)). As a result, three tests have developed among state and federal courts. See Vogan v. Wells Fargo Bank, N.A., No. 11–02098, 2011 WL 5826016, at *6 (E.D.Cal. Nov. 17, 2011); Davis v. Ford Motor Credit Co., 179 Cal.App.4th 581, 593–97, 101 Cal.Rptr.3d 697 (2009) (detailing the split in authority in handling consumer UCL cases).
One test, which has garnered the most attention from the Ninth Circuit, limits unfair conduct to that which “offends an established public policy” and is “tethered to specific constitutional, statutory, or regulatory provisions.” Davis, 179 Cal.App.4th at 595, 101 Cal.Rptr.3d 697; Lozano v. AT & T Wireless Servs., 504 F.3d 718, 736 (9th Cir.2007) (holding that unfairness must be tied to a “legislatively declared” policy). The second test contemplates whether the alleged business practice is “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers,” and requires the court to “weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” Davis, 179 Cal.App.4th at 594–95, 101 Cal.Rptr.3d 697; McDonald, 543 F.3d at 506; Progressive West Ins. Co. v. Yolo County Sup.Ct., 135 Cal.App.4th 263, 285–87, 37 Cal.Rptr.3d 434 (2005). The third test, which borrows the definition of “unfair” from the Federal Trade Commission Act, requires that “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.” Davis, 179 Cal.App.4th at 597, 101 Cal.Rptr.3d 697.
*11 Plaintiff’s complaint does not, in any meaningful way, address the considerations presented by these tests. She fails to link her claim to a “legislatively declared” policy as required under the first test. Under the second and third tests, the Complaint fails because Plaintiff does not allege that Defendants’ conduct caused any injury, to the Plaintiff or others. Even under the second test, which a California Court of Appeal admits is “fact intensive and not conducive to resolution at the demurrer stage,” Plaintiff’s claim under this theory cannot proceed without allegations of its fundamental requirements. Progressive West, 135 Cal.App.4th at 287, 37 Cal.Rptr.3d 434.
Thus, to the extent that Plaintiff attempts to state a claim under the “unfair” prong of the UCL, this cause of action fails.
c. “Fraudulent” Prong
“Fraudulent acts are ones where members of the public are likely to be deceived.” Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151–52 (9th Cir.2008). In response to the new eligibility requirements for private actions under Section 17200 enacted through Proposition 64, a UCL claim under the “fraudulent prong” requires a plaintiff to have “actually relied” on the alleged misrepresentation to his detriment. In re Tobacco II Cases, 46 Cal.4th at 326, 93 Cal.Rptr.3d 559, 207 P.3d 20 (2009).
Under the Federal Rules of Civil Procedure 9(b), the “circumstances constituting fraud” or any other claim that “sounds in fraud” must be stated “with particularity.” Fed.R.Civ.P. 9(b); Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1103–04 (9th Cir.2003). The Ninth Circuit has explained that this standard requires, at a minimum, that the claimant pleads evidentiary facts, such as time, place, persons, statements, and explanations of why the statements are misleading. See In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1547–48 (9th Cir.1994) (en banc).
The Complaint does, with particularity, allege several instances that could plausibly constitute acts of fraud. Specifically, Plaintiff argues that MERS committed fraud under the UCL by causing Stacy Sandoz, who is neither Vice President as stated nor authorized to act on behalf of MERS in this capacity, to execute the Corporate Assignment. Compl. ¶¶ 19, 38, 43; Compl. Ex. 2. The Complaint makes identical allegations against Aurora regarding Vice President Michele Rice, as stated on the Substitution of Trustee. Compl. ¶¶ 26, 45; Compl. Ex. 6. The Plaintiff similarly maintains that First American’s use of the name “Derrick Sue” on the Notice of Default and Election to Sell was fraudulent conduct, owing to the fact that “no such person by that name exists or is employed by First American.” Compl. ¶¶ 22, 40; Compl. Ex. 5. The Complaint also claims that Cal–Western fraudulently represented Megan Cooper as having the authority to execute the Affidavit of Mailing Substitute Trustee, since no such person exists, is employed by Cal–Western, or signed said document. Compl. ¶¶ 27, 46; Compl. Ex. 6. Such detailed accounts may very well satisfy the particularity requirement under 9(b) because they appear to allege the who, what, when, and how of the alleged “deceptive business acts.” Compl. ¶ 36. But see Jensen, 702 F.Supp.2d at 1189 (granting defendant JP Morgan’s motion to dismiss plaintiff borrower’s UCL claim for failure “to specify what particular role JP Morgan played in the fraudulent scheme, when and where the scheme occurred, or details of the specific misrepresentations involved”).8
*12 Defendant argues that Plaintiff fails to state that the alleged fraudulent statements “were disseminated to the public [such that] reasonable consumers are likely to be deceived.” Mot. at 10 (quoting Sybersound, 517 F.3d at 1151–52). This argument, while accurate in pointing out Plaintiff’s failure to address the distinct features of a fraud-based UCL claim, is questionable considering the fact that all challenged documents were publicly recorded and notarized. While Plaintiff does not attempt to demonstrate that Defendants have likely deceived the public under the Sybersound test, recording documents with the county may be sufficient “dissemination to the public.”
More problematic, however, Plaintiff does not and likely cannot plead actual reliance on the Defendants’ alleged fraud. The Complaint does not indicate that Plaintiff ever believed in the alleged misrepresentations or that they caused her to take any action to her detriment. As discussed above with regard to UCL standing, Plaintiff fails to plead loss of money or property, let alone a causal correlation of a loss with the Defendants’ alleged fraud.
To the extent that Plaintiff attempts to state a claim under the “fraudulent” prong of the UCL, the cause of action fails.
For the foregoing reasons, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s UCL claim without prejudice to provide an opportunity to establish standing and more clearly articulate the basis for this cause of action.
Ford v. Lehman Bros. Bank, FSB, C 12-00842 CRB, 2012 WL 2343898 (N.D. Cal. June 20, 2012)
However, Plaintiff’s third UCL theory, Recontrust’s continual advertising of Plaintiff’s foreclosure after this Court’s preliminary injunction went into effect, is flawed because it is unclear what damage such conduct caused Plaintiff. While she alleges emotional damages, she does not allege any loss of money or property—either threatened or realized—as a result of Recontrust’s advertising. See Cal. Bus. & Prof.Code § 17204 (requiring a private litigant to have “suffered injury in fact and [ ] lost money or property as a result of the unfair competition” in order to bring a UCL claim); Cf. Sullivan v. Washington Mut. Bank, FA, C–09–2161 EMC, 2009 WL 3458300, at *4 (N.D.Cal. Oct.23, 2009) (finding standing where “foreclosure proceedings have been initiated which puts her interest in the property in jeopardy”). Accordingly, the Court will dismiss this UCL claim.
Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)
January 2008, Debrunner and his co-investors filed a notice of default, presumably for Chiu’s inability to remain current on the second-position loan. Debrunner, supra, 204 Cal.App.4th at 436, 138 Cal.Rptr.3d 830. A trustee’s sale of the Los Altos property was scheduled for May 2008, but was delayed after Chiu’s business entity petitioned for Chapter 11 bankruptcy protection in June 2008. The bankruptcy court granted Debrunner’s and his co-investors’ motion for relief from the bankruptcy stay, allowing them to foreclose upon the property and obtain a trustee’s deed upon sale in March 2009. Id. But back in August 2008, before the sale was completed, Saxon—the servicer on the first-position loan—had also filed a notice of default, which was rescinded because of the bankruptcy proceedings. Deutsche Bank—the assignee of the first deed of trust—moved for relief from the bankruptcy stay in July 2009 in order to file a new notice of default, although its motion was taken off calendar after the bankruptcy case was closed in August 2009. Old Republic Default Management Services (Old Republic), the foreclosure trustee, then recorded a new notice of default on the Los Altos property in September 2009. In the accompanying Fair Debt Collection Practices Act Notice, Old Republic named Deutsche Bank as the creditor and Saxon as its ‘ “attorney-in-fact’ “ and informed the debtor that payment to stop the foreclosure could be made to Saxon. Id. On January 5, 2010, the same day the assignment from FV–1 to Deutsche Bank was recorded, a ‘ “Substitution of Trustee’ “ from Chicago Title Company to Old Republic was recorded. This document had been signed and notarized by Saxon on behalf of Deutsche Bank on September 2, 2008. Id. at 436–37, 138 Cal.Rptr.3d 830.
In November 2009, Debrunner brought an action against Deutsche Bank, Saxon and Old Republic to stop the foreclosure proceedings on the first deed of trust, contending the defendants had no right to foreclose because Deutsche Bank did not have physical possession of or ownership rights to the original promissory note executed by Chiu. Debrunner, supra, 204 Cal.App.4th at 437, 138 Cal.Rptr.3d 830. Deutsche Bank and Saxon demurred to the complaint, contending possession of the original note was not required under California’s non-judicial foreclosure statutes, Cal. Civ.Code §§ 2924 et seq. In opposition, Debrunner contended that “any assignment of the deed of trust was immaterial because a deed of trust ‘cannot be transferred independently’ of the promissory note, which must be ‘properly assigned’ and attached,” and that “ ‘[a] deed of trust standing alone is a nullity,’ and thus cannot provide authority for a lender to foreclose.” Id. The trial court sustained Deutsche Bank’s and Saxon’s demurrer without leave to amend, id. at 438, 138 Cal.Rptr.3d 830, and the Court of Appeal affirmed.
On appeal, Debrunner reiterated his argument that an assignment of the deed of trust was ineffective and a legal nullity unless the assignee also physically received the promissory note and endorsed it, and that the beneficiary of the deed of trust must physically possess the note to initiate foreclosure proceedings. Debrunner, supra, 204 Cal.App.4th at 439, 138 Cal.Rptr.3d 830. The court rejected this contention: “As the parties recognized, many federal courts have rejected this position, applying California law. All have noted that the procedures to be followed in a nonjudicial foreclosure are governed by sections 2924 through 2924k, which do not require that the note be in the possession of the party initiating the foreclosure. [Citations.] We likewise see nothing in the applicable statutes that precludes foreclosure when the foreclosing party does not possess the original promissory note. They set forth a ‘comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust. The purposes of this comprehensive scheme are threefold: (1) to provide the creditor/beneficiary with a quick, inexpensive and efficient remedy against a defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.’ [Citation.] Notably, section 2924, subdivision (a)(1), permits a notice of default to be filed by the ‘trustee, mortgagee, or beneficiary, or any of their authorized agents.’ The provision does not mandate physical possession of the underlying promissory note in order for this initiation of foreclosure to be valid.” Debrunner, supra, 204 Cal.App.4th at 440, 138 Cal.Rptr.3d 830.
*5 Plaintiffs further contend the April 29, 2009 notice of default and September 18, 2009 notice of sale recorded by NDEx were invalid because no substitution of trustee was ever recorded naming NDEx as the trustee under the deed of trust. Not so. Pursuant to Plaintiffs’ motion, the Court has consulted the official Fresno County Recorder website (http://www.co.fresno.ca.us) and notes that on June 29, 2009 (two months after the notice of default but three months before the notice of sale), a substitution of trustee naming Deutsche Bank National Trust Company as grantor and NDEx as grantee appeared to have been recorded as document # 2009–00879966–00. To the extent Plaintiffs intend to suggest a preliminary injunction should issue because the notice of default recorded by NDEx was defective in that it listed NDEx as the trustee even though there was no recorded substitution of NDEx as a trustee at the time, the claim likewise fails. An identical argument was raised and rejected in Debrunner. Debrunner had alternatively contended the notice of default in that case was defective because it listed Old Republic as the trustee even though there was no recorded substitution of Old Republic as a trustee at the time the notice of default was recorded. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. The court disagreed, observing that “[California Civil Code] section 2934a provides for the situation in which a substitution of trustee is executed but is not recorded until after the notice of default is recorded.” Id. at 443–44, 138 Cal.Rptr.3d 830 (citing Cal. Civ.Code, § 2934a, subd. (b)).3 Plaintiffs have provided no argument or evidence to suggest a substitution of NDEx as trustee had not been executed at the time NDEx recorded the April 29, 2009 notice of default.
Even if there were a defect in NDEx’s commencement of the foreclosure proceedings, Plaintiffs have failed to allege prejudice. In Debrunner, the court concluded that a failure to show or assert prejudice resulting from an alleged defect in the foreclosure process was fatal to the plaintiff’s claims. Debrunner, supra, 204 Cal.App.4th at 443, 138 Cal.Rptr.3d 830. “ ‘[A] plaintiff in a suit for wrongful foreclosure has generally been required to demonstrate [that] the alleged imperfection in the foreclosure process was prejudicial to the plaintiff’s interests.’ [¶] … [¶] … [T]here was no allegation in the first amended complaint that plaintiff’s ability to contest or avert foreclosure was impaired. Even in his opposition to the demurrer and on appeal he has not identified the harm he suffered from any asserted violation of section 2934a, subdivision (b), again preferring to assume that he is entitled to judgment without any showing of prejudice.” Id. at 444, 138 Cal.Rptr.3d 830 (quoting Fontenot v. Wells Fargo Bank, N.A., 198 Cal.App.4th 256, 271, 129 Cal.Rptr.3d 467 (2011)). In this case, as in Debrunner, Plaintiffs have provided no argument or evidence of harm resulting from the failure to record a substitution of NDEx as trustee before NDEx filed its notice of default. Accordingly, the Court finds no basis for injunctive relief on this ground. A substitution would simply have replaced one trustee with another without modifying Plaintiffs’ obligations under the note or deed of trust. Under these circumstances, Plaintiffs would be hard pressed to show any conceivable prejudice, given Plaintiffs have offered no facts to suggest the substitution of NDEx (or the allegedly improper recording thereof) adversely affected their ability to pay their debt or cure their default.
Ghuman v. Wells Fargo Bank, N.A., 1:12-CV-00902-AWI, 2012 WL 2263276 (E.D. Cal. June 15, 2012)
ADD AGENT TO DESTROY DIVERSITY
Like Golden West, Defendant LSI is a citizen of California. The Wells Fargo Bank Defendants contend that LSI’s “citizenship should be ignored for purposes of diversity jurisdiction” on the grounds that LSI did nothing more than facilitate the recording of the Notice of Default on behalf of NDeX. Defs.’s Resp. to OSC at 4. The pleadings are not a model of clarity, and LSI’s precise role in connection with the claims alleged is not entirely clear. However, it appears that Plaintiffs are alleging, inter alia, that LSI, among others, failed to comply with California law in proceeding with the foreclosure in accordance with California Civil Code section 2923.5. See SAC at 2.
*5 Section 2923.5 provides a private right of action to postpone a foreclosure sale. Mabry v. Superior Court, 185 Cal.App.4th 208, 2141, 110 Cal.Rptr.3d 201 (2010). Under section 2923.5, “a mortgagee, trustee, beneficiary, or authorized agent” must follow certain procedures in the context of a foreclosure. Cal. Civ.Code § 2923.5. Plaintiffs allege that LSI acted as an agent for Wells Fargo and was involved in the preparation of forged and fraudulent foreclosure notices, including the Notice of Default, Substitution of Trustee and Notice of Trustee’s Sale. See Notice of Joinder for Inclusion of LSI Title Company, Dkt. 25. These allegations support the conclusion that Plaintiffs may have a potential claim against LSI under section 2923.5, and that LSI is not merely a nominal party as Wells Fargo Defendants now contend. See Cheng v. Wells Fargo Bank, N.A., No. SACV10–1764–JST (FFMx), 2010 WL 4923045, at *1 (C.D.Cal., Dec.2, 2010) (finding that LSI was not fraudulently joined in a mortgage fraud action removed from state court where plaintiffs alleged that LSI was acting as an agent for Wells Fargo in connection with the allegedly fraudulent foreclosure of their home). Thus, even if there was complete diversity at the time of removal, Plaintiffs’ subsequent joinder of LSI destroyed diversity jurisdiction and requires remand. See 28 U.S.C § 1447(e).
Boggs v. Wells Fargo Bank NA, C 11-2346 SBA, 2012 WL 2357428 (N.D. Cal. June 14, 2012)
NBA IS WEAKER THAN HOLA
Defendants cite to only one case holding that the NBA has preemptive effect over certain California laws relating to foreclosure. See Acosta v. Wells Fargo Bank, N.A., C 10–9910JF (PVT), 2010 WL 2077209 (N.D.Cal. May 21, 2010). In Acosta, Judge Fogel analogized the NBA to the Home Owners’ Loan Act (“HOLA”), which some courts have found to preempt state laws relating to federal savings banks. Id. at *8 (finding that the NBA preempted § 2923.5 because “several district courts within the Ninth Circuit have determined that the Home Owners’ Loan Act (“HOLA”), 12 U.S.C. § 1464–which contains the nearly identical language at 12 U.S.C. § 1464(b)(10)-preempts Section 2923.5”).
However, the analogy between the NBA and HOLA is flawed. Unlike the NBA, which contains only a conflict preemption clause, HOLA contains a broad field preemption clause. Specifically, 12 C.F.R. § 560.2(a) provides, in relevant part,
To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), [the Office of Thrift Supervision (“OTS”) ] hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) or § 560.102 of this part.
paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption.
Parcray v. Shea Mortg. Inc., CV–F09–1942OWW/GSA, 2010 WL 1659369, at *7–8 (E.D.Cal. Apr.23, 2010) (quoting OTS, Final Rule, 61 Fed.Reg. 50951, 50966–50967 (Sept. 30, 1996) (emphasis added)). Thus, the savings clause comes into play only if the law at issue is not listed in the preemption section.
Such broad preemption language is absent from the NBA. In contrast to 12 C.F.R. § 502.2(b) of the OTS/HOLA regulations which broadly declares categories of state law that are preempted per se, 12 C.F.R. § 34.4(b) declares categories that are not preempted if they have an incidental effect on bank’s lending powers. Indeed, the Ninth Circuit has concluded that, while the OTS/HOLA regulations described above permit a court to consider the savings clause of § 560.2(c) only if the law at issue does not fall within the express preemption provisions of § 560.2(b), the OCC/NBA regulations “require[ ] the court to consider both the express preemption and savings clauses together” in the first instance. Aguayo v. U.S. Bank, 653 F.3d 912, 922 (9th Cir.2011) (emphasis added) (internal citations omitted).
As the Ninth Circuit held in Aguayo v. U.S. Bank, “while the OTS [HOLA] and the OCC [NBA] regulations are similar in many ways, the OCC has explicitly avoided full field preemption in its rulemaking and has not been granted full field preemption by Congress.” 653 F.3d at 921–22 (internal citations omitted). “Because of this difference in field preemption, courts have been cautious in applying OTS analysis to OCC regulations.” Id. at 922 (internal citations omitted). HOLA’s strict field preemption analysis therefore bears little relation to the NBA’s more flexible conflict preemption analysis. See also Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997 (D.Ariz. Feb.9, 2012) (“[T]he [NBA] rule only preempts the types and features of state laws pertaining to making loans and taking deposits that are specifically listed in the regulation.”) (quoting OCC Interpretive Letter No. 1005, 2004 WL 3465750 (June 10, 2004) (emphasis added); citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“The [NBA] (and OCC regulations thereunder) does not ‘preempt the field’ of banking.”)).
The distinction between HOLA’s field preemption, on the one hand, and NBA’s mere conflict preemption, on the other, renders cases construing HOLA preemption inapposite to the question of whether NBA preemption applies. It is likely for this reason that almost no courts have addressed NBA preemption in the context of foreclosure litigation, despite the growing body of foreclosure cases circulating through the state and federal court systems.
*8 Aside from the one case Defendants cite which, in this Court’s view, erroneously applies the HOLA preemption analysis in the context of the NBA, Defendants provide no other authority for the proposition that Plaintiff’s state law claims, including § 2923.5, are preempted by the NBA. The few courts that have examined the NBA’s application to state foreclosure laws have concluded that “state laws regulating foreclosure are [ ] not preempted by NBA.” Gerber v. Wells Fargo Bank, N.A., CV 11–01083–PHX–NVW, 2012 WL 413997, at *8 (D.Ariz. Feb.9, 2012). Gerber reached this conclusion after an extensive analysis of the NBA’s preemption provisions, and concluded that “there has never been a federal presence [ ] sufficient to displace the various types of state statutes governing foreclosure procedures. Indeed, foreclosure practices govern ‘acquisition and transfer of property,’ an area which the Supreme Court has already confirmed lies within states’ presumed powers to regulate.” See id. at *5 (quoting Watters, 550 U.S. at 11) (addressing NBA preemption and concluding that banks remain subject to state laws regarding, e.g., “acquisition and transfer of property”). Gerber also concluded that “foreclosure” was not among the NBA’s expressly preempted state laws in 12 C.F.R. § 34.4(a). Although the regulation listed “servicing,” the court found that “foreclosure” was not sufficiently related to “servicing” because “[t]he OCC went to the trouble of specificity concerning other phases of the loan’s existence (e.g., ‘processing,’ ‘origination’) but did not list ‘foreclosure,’ and it is therefore difficult to assume that it meant to include it within a ‘servicing’ catch-all.” Id. at *8. The court noted that such a reading would create the implausible result of “bring[ing] down … probably every state’s laws regarding foreclosure.” Id. See also Loder v. World Savings Bank, N.A., No. C11–00053 TEH, 2011 WL 1884733, at *7 (N.D.Cal. May 18, 2011) (expressing concern, in the context of a HOLA preemption argument, that “a broad interpretation of what it means to ‘service’ or ‘participate in’ a mortgage could operate to preempt most all California foreclosure statutes where the foreclosing entity is a national lender”).
The Court finds Gerber persuasive and adopts its reasoning with respect to Plaintiff’s state law claims asserted here, including under § 2923.5. As the Supreme Court has explained, the NBA leaves national banks “subject to the laws of the State,” and banks “are governed in their daily course of business far more by the laws of the State than of the nation.” Atherton v. FDIC, 519 U.S. 213, 222, 117 S.Ct. 666, 136 L.Ed.2d 656 (1997) (quoting Nat’l Bank v. Commonwealth, 75 U.S. 353, 362 (1869)). The Supreme Court has also noted the states’ longstanding interest in regulating the foreclosure process, and has imposed a clear statement rule on any statutes that could potentially be construed to impinge on that interest. See BFP v. Resolution Trust Corp., 511 U.S. 531, 541–44, 114 S.Ct. 1757, 128 L.Ed.2d 556 (1994) (describing long history of state regulation of the foreclosure process and declining to read a provision of the Bankruptcy Code as disrupting “the ancient harmony that foreclosure law and fraudulent conveyance law … have heretofore enjoyed”).
*9 The OCC itself has confirmed that state foreclosure laws are not generally within the scope of NBA preemption. See Bank Activities and Operations; Real Estate Lending and Appraisals, 69 Fed.Reg.1904–01, at 1912 & n. 59 (Jan. 23, 2004) (OCC final rule describing state foreclosure laws as generally among laws that “do not attempt to regulate the manner or content of national banks’ real estate lending, but that instead form the legal infrastructure that makes it practicable to exercise a permissible Federal power”).
If there were any doubt as to whether preemption under HOLA was equivalent to preemption under the NBA, the recent Dodd–Frank legislation lays such doubt to rest. The Dodd–Frank Act changed the above-described HOLA preemption analysis and mandates that HOLA preemption would now follow the more lenient NBA conflict preemption standard. See Settle v. World Sav. Bank, F.S.B., ED CV 11–00800 MMM, 2012 WL 1026103, at *13 (C.D.Cal. Jan.11, 2012) (“The Dodd–Frank Act provides that HOLA does not occupy the field in any area of state law and that preemption is governed by the standards applicable to national banks.”) (quoting Davis v. World Savings Bank, FSB, 806 F.Supp.2d 159, 166 n. 5 (D.D.C.2011); citing Pub.L. No. 111–203, 2010 HR 4173 § 1046 (“Any determination by a court or by the Director or any successor officer or agency regarding the relation of State law to a provision of this chapter or any regulation or order prescribed under this chapter shall be made in accordance with the laws and legal standards applicable to national banks regarding the preemption of State law…. Notwithstanding the authorities granted under sections 4 and 5, this Act does not occupy the field in any area of State law.”). Thus, not only is HOLA preemption inapplicable to NBA cases, it is no longer applicable at all to any post-Dodd-Frank transactions.
ii. No Conflict Preemption
Under NBA conflict preemption, Plaintiff’s § 2923.5 claim does not impose any constraints on banks’ lending or servicing powers. Rather, it “only incidentally affect[s] the exercise of national banks’ real estate lending powers” by requiring certain procedural hurdles before a bank may foreclose on real property and transfer said property to a new owner. See 12 C.F.R. § 34.4(b) (exempting from NBA preemption any state laws that incidentally affect banks and concern, inter alia, contracts, torts, rights to collect debts, or acquisition and transfer of real property); Mabry v. Superior Court, 185 Cal.App.4th 208, 231, 110 Cal.Rptr.3d 201 (2010) (finding that § 2923.5 does not create a right to loan modification and that failure to comply with its requirements can only result in a delay in foreclosure).
Other cases are in accord and confirm that Plaintiff’s state common law claims are similarly outside the scope of NBA preemption. See, e.g., Lucia v. Wells Fargo Bank, N.A., 798 F.Supp.2d 1059, 1065–66 (N.D.Cal.2011) (White, J.) (finding that UCL, state contract, and Rosenthal Act claims arising out of failed modifications of home mortgage loans under HAMP were not preempted because the “theories upon which the claims are based do not necessarily impinge upon the bank’s obligations under the NBA” because they are “state laws of general application”); Sutclife v. Wells Fargo Bank, N.A., C–11–06595 JCS, 2012 WL 1622665, at *23 (N.D.Cal. May 9, 2012) (same); see also Gutierrez v. Wells Fargo & Co., C07–05923 WHA, 2010 WL 1233885 (N.D.Cal. Mar.26, 2010) (finding that UCL claims based on banks’ alleged deceptive business practices related to fees and other servicing conduct are not preempted when they do not challenge “a bank’s right to establish a fee,” but rather challenge, e.g., “a bank’s right to deceive or unfairly induce customers into paying them”) (citing Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 555 (9th Cir.2010) (“State laws of general application, which merely require all businesses (including national banks) to refrain from fraudulent, unfair, or illegal behavior, do not necessarily impair a bank’s ability to exercise its [federally-authorized] powers.”)).3
*10 Indeed, as noted above, if the Court accepted Defendant’s arguments, it would be questionable whether any of California’s (or other states’) foreclosure laws could avoid preemption. Yet federal law provides no legal framework for foreclosure. Mabry, 185 Cal.App.4th at 231, 110 Cal.Rptr.3d 201. Thus, Defendant essentially asks the Court to eviscerate decades of state foreclosure regulation. The Court finds no authority to do so.
Tamburri v. Suntrust Mortg., Inc., C-11-2899 EMC, 2012 WL 2367881 (N.D. Cal. June 21, 2012)
INTERESTING ATTORNEY FRAUD ALLEGATION IN 5.1M TIBURON SHORT SALE AFTER F/C SUIT IN MARIN
Plaintiffs allege that on January 12, 2012, the day the short sale was to close, Michael Zhao, Buyer Defendants’ real estate agent, informed SPS that defendants were attempting to defraud plaintiffs. Id. at ¶ 34. The FAC alleges that Zhao told SPS that defendants prepared two sets of purported short sale documents. Id. One set, which was given to SPS for its review, provided that no proceeds from the sale would be directed to the Attorney Defendants or would be used to satisfy any junior liens on the property. Id. at ¶ 35. The second set of documents, which reflected a higher purchase price than the documents presented to SPS, provided that some proceeds would go to the Attorney Defendants as well as other junior lien holders. Id. Plaintiffs allege that defendants intended the second set of documents to be recorded as the actual transaction. Id.
Select Portfolio Servicing v. Valentino, C 12-0334 SI, 2012 WL 2343754 (N.D. Cal. June 20, 2012)