employees of the original lenders - many of which no longer exist.

But the mortgage-foreclosure mess has yet to yield any federal prosecution against the big banks that are the major servicers of home loans.

REUTERS HAS identified one pending federal criminal investigation into suspected improper foreclosure procedures. That inquiry has been under way since 2009.

The investigation focuses on a defunct subsidiary of Jacksonville, Florida-based Lender Processing Services, the nation's largest subcontractor of mortgage servicing duties for banks.

People close to the investigation said indictments may come as early as the end of this month. Nationwide press reports had showed photos of what appeared to be obviously forged signatures on foreclosure affidavits.

The Justice Department doesn't disclose pending investigations, making it impossible to say if other criminal inquiries are underway. Officials in state attorneys' general offices and lawyers in foreclosure cases say they have seen no signs of any other federal criminal investigation.

"I think it's difficult to find a fraud of this size on the U.S. court system in U.S. history," said Raymond Brescia, a visiting professor at Yale Law School who has written articles analyzing the role of courts in the financial crisis. "I can't think of one where you have literally tens of thousands of fraudulent documents filed in tens of thousands of cases."

Spokesmen for the five largest servicers - Bank of America Corp., Wells Fargo & Co., JP Morgan Chase & Co, Citigroup Inc., and Ally Financial Group - declined to comment about the possibility of widespread fraud for this article.

Paul Leonard, spokesman for the Housing Policy Council, whose membership includes those banks, said any faults in foreclosure cases are being addressed under a civil settlement earlier this year with federal regulators.

JUSTICE DEPARTMENT and Federal Bureau of Investigation officials say they have brought mortgage-fraud criminal cases through their "Operation Stolen Dreams." None, however, were against big banks. All targeted small-scale operators who allegedly defrauded banks with forged mortgage applications or took advantage of homeowners by falsely promising arrangements to get them out of default and then pocketing their money.

Justice Department spokeswoman Adora Andy declined to comment on the absence of prosecutions for foreclosure practices by big banks. She said in a statement: "The Department of Justice has been and will continue to aggressively investigate financial fraud wherever it occurs, including at all levels of the mortgage industry and, when we find evidence of a crime, we will not hesitate to pursue it."

Some judges have accused banks of falsely stating in court that they are working on loan modifications for homeowners in default.

In a Nov. 30 court hearing, not previously reported, a federal bankruptcy judge in New York accused Bank of America of falsely telling courts and the public that it was working to renegotiate loans.

"Bank of America issues constant press releases about how it is responsive to their borrowers on these issues. They are not, period," said Judge Robert Drain, in a case involving homeowner Richard Tomasulo, a pharmacist from Crompond, New York. Drain said Bank of America had been telling the court since January that it was working to modify Tomasulo's mortgage, but hadn't done so.

"Whoever is in charge of this program and their supervisor, who should be following it, should be fired" because "they are frankly incompetent."

Bank of America spokeswoman Jumana Bauwens said the bank has completed "nearly one million" modifications since

NORTHERN DISTRICT OF CALIFORNIA

DEBORAH TAMBURRI,

Plaintiff,

v.

Defendants.

___________________________________/

No. C-11-2899 EMC

Act ("RESPA"), unfair business practices, and wrongful foreclosure. Defendants are Suntrust

Mortgage, Inc. ("Suntrust"), Wells Fargo Bank, NA ("Wells Fargo"), U.S. Bank National

Association ("US Bank"), Recontrust Company, NA ("Recontrust"), and Mortgage Electronic

Registration Systems, Inc. ("MERS"). Defendant Suntrust removed the case to federal court, and

the next day Ms. Tamburri moved for a temporary restraining order to enjoin the foreclosure sale of

her home. This Court granted the motion and, after holding a hearing on June 28, 2011, granted the

preliminary injunction enjoining Defendants from foreclosing on her home. Docket No. 33. All

Defendants besides Wells Fargo and Recontrust have moved to dismiss Plaintiff's complaint and

Docket No. 39.

purposes of the motion to dismiss.

state court.

2

entered against it on September 6, 2011. Docket No. 45. Plaintiff moved for default judgment

against Wells Fargo, but Wells Fargo subsequently moved to set aside default.

Pending before the Court are Defendants Suntrust, MERS, and US Bank's motion to dismiss

Docket Nos. 31, 54, 57. After considering the parties' submissions, oral argument, and

against Defendants:

1. Cal. Civ. Code § 2923.5 (against Suntrust, Wells Fargo, MERS, and Recontrust)

2. 11 U.S.C. § 2605 (RESPA) (against Suntrust, Wells Fargo, MERS, and US Bank)

3. Cal. Bus. & Prof. Code § 17200 (against all Defendants)

4. Fraud (against Suntrust and US Bank)

5. Quiet Title (against all Defendants)

6. Wrongful Foreclosure (against all Defendants)

7. Negligence (against all Defendants)

8. Accounting (against Suntrust, Wells Fargo, and US Bank)

9. Declaratory Relief (against all Defendants)

3

In her FAC, Plaintiff alleges as follows. Ms. Tamburri entered into a refinance mortgage

Note and Deed of Trust ("DOT") executed in conjunction with that loan, Docket No. 11, Ex. 1,

conveys title and power of sale to Jackie Miller as Trustee. It names Suntrust as the Lender and

MERS as the Beneficiary. As Beneficiary, MERS "holds only legal title to the interests granted by

Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as

nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of

those interests, including, but not limited to, the right to foreclose and sell the Property; and to take

any action required of Lender including, but not limited to, releasing and canceling this Security

Instrument." DOT at 3.

In August 2008, Plaintiff defaulted on her loan. FAC ¶ 20. Suntrust recorded a Notice of

Fargo actually held the Note, but Wells Fargo was unable to confirm that information in response to

Another Notice of Default was filed on June 9, 2010, listing US Bank as the beneficiary and

lists US Bank as the entity to contact regarding questions of payment and how to stop the

foreclosure. On June 21, 2010, an Assignment of the Deed of Trust was recorded naming MERS as

the grantor and US Bank as the grantee. FAC ¶ 33. It also substituted Recontrust as Trustee.

Docket No. 9.

In response to a Notice of Trustee's Sale, Plaintiff filed for bankruptcy to stop the

foreclosure. FAC ¶¶ 34-35. She also submitted additional QWRs to Suntrust, MERS, and US Bank,

objection period, the trustee shall not be required to participate any further in the action or

proceeding, shall not be subject to any monetary awards as and for damages, attorneys' fees or costs,

shall be required to respond to any discovery requests as a nonparty, and shall be bound by any court

order relating to the subject deed of trust that is the subject of the action or proceeding."

4

hearing, granted a preliminary injunction. Docket No. 33.

Defendants Suntrust, MERS, and US Bank moved the Court to dismiss all causes of action

on July 1, 2011. Docket Nos. 31, 35 (US Bank's notice of joinder). Meanwhile, the Clerk entered

default against Wells Fargo, which had failed to appear. After Plaintiff filed a motion for default

judgment, Docket No. 54, Wells Fargo has now filed a motion to set aside default asserting no

interest at all in the property. Docket No. 57. In addition, Recontrust filed a "Declaration of Non-

Recontrust will not participate in this action and will be bound by any order relating to the deed of

trust.

A. Motion to Dismiss

1. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the

must take all allegations of material fact as true and construe them in the light most favorable to the

nonmoving party, although "conclusory allegations of law and unwarranted inferences are

2009). While "a complaint need not contain detailed factual allegations . . . it must plead 'enough

5

facts to state a claim to relief that is plausible on its face.'" Id. "A claim has facial plausibility when

the plaintiff pleads factual content that allows the court to draw the reasonable inference that the

a 'probability requirement,' but it asks for more than sheer possibility that a defendant acted

2. Tender Rule

Defendants argue first that all of the claims should be dismissed because each of them is

based on an alleged wrongful foreclosure and Plaintiff has failed to provide or allege tender of the

indebtedness owed. Mot. to Dismiss at 4-5.

"The California Court of Appeal has held that the tender rule applies in an action to set aside

a trustee's sale for irregularities in the sale notice or procedure and has stated that '[t]he rationale

behind the rule is that if plaintiffs could not have redeemed the property had the sale procedures

in the Miller & Starr legal treatise,

A challenge to the validity of the trustee's sale is an attempt to have

the sale set aside and to have the title restored. The action is in equity,

and a trustor seeking to set the sale aside is required to do equity

before the court will exercise its equitable powers. Therefore, as a

condition precedent to an action by the trustor to set aside the trustee's

sale on grounds that the sale is voidable, the trustor must pay, or offer

to pay, the secured debt, or at least all of the delinquencies and costs

due for redemption, before an action is commenced or in the

complaint. Without an allegation of such a tender in the complaint

that attacks the validity of the sale, the complaint does not state a

cause of action.

Cal. App. 3d 575, 578-79 (1984) ("It is settled that an action to set aside a trustee's sale for

irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of

the debt for which the property was security. This rule is premised upon the equitable maxim that a

court of equity will not order that a useless act be performed.").

6

While the tender rule thus has application to the instant case in general terms, the Court

should note that despite Defendants' suggestions, the tender rule is not without exceptions. First,

there is a general equitable exception that "tender may not be required where it would be inequitable

161 Cal. 285, 291 (1911) (recognizing that there are "cases holding that, where a party has the right

to avoid a sale, he is not bound to tender any payment in redemption"; adding that, "[w]hatever may

be the correct rule, viewing the question generally, it is certainly not the law that an offer to pay the

debt must be made, where it would be inequitable to exact such offer of the party complaining of the

sale"); Miller & Starr California Real Estate 3d § 10:212 (same). In the instant case, Plaintiff has a

fairly strong argument that tender - or at least full tender - should not be required because she is

(S.D. Cal. 2011) ("If U.S. Bank was not authorized to foreclose the [Deed of Trust] under Civil

Code section 2932.5, the foreclosure sale may be void, and Salazar would not need to tender the full

(declining to require tender in wrongful foreclosure action because it "would permit entities to

foreclose on properties with impunity"). The Court has already required Plaintiff to post a bond of

$2,000 per month pursuant to the Court's preliminary injunction order. Docket No. 33. This

protects Defendants' ongoing interests and thus provides some equity in Plaintiff's favor. Plaintiff

has shown a willingness and ability to pay during the pendency of this action.

Second, at least one federal court has explicitly held that the tender rule only applies in cases

seeking to set aside a completed sale, rather than an action seeking to prevent a sale in the first

1031013, at *2 (S.D. Cal. March 19, 2010) ("[T]he California 'tender rule' applies only where the

plaintiff is trying to set aside a foreclosure sale due to some irregularity."). As the court held in

7

that case is distinguishable on the grounds that the defendants had performed all of their obligations

and the plaintiff's only recourse to avoid a sale was to tender the amount owed. Here Plaintiff

alleges Defendants have not performed all their obligations.

208, 225 (2010). Such a "harmless error" standard is inapposite in a case brought before the

requirements before foreclosure, a prerequisite of full tender before one can initiate an action

("[T]he whole point of section 2923.5 is to create a new, even if limited right, to be contacted about

very operation of the statute if enforcement were predicated on full tender. It is well settled that

statutes can modify common law rules.").

Third, where a sale is void, rather than simply voidable, tender is not required. Miller &

Starr California Real Estate 3d § 10:212 ("When the sale is totally void, a tender usually is not

that where the incorrect trustee had foreclosed on a property and conveyed it to a third party, the

conveyed deed was not merely voidable, but void). "The word void, in its strictest sense, means that

(internal quotation marks omitted). In contrast, "[v]oidable is defined as [that] which may be

of tender for a voidable sale is "based on the theory that one who is relying upon equity in

overcoming a voidable sale must show that he is able to perform his obligations under the contract

what constitutes a voidable one. According to the court, when a notice defect is at issue, it is not the

8

extent of the defect that is determinative. Rather, "what seems to be determinative" is whether the

deed of trust contains a provision providing for a conclusive presumption of regularity of sale.

C-11-0477 EMC, 2011 WL 3652501, at *4 (N.D. Cal. Aug. 19, 2011) (declining to dismiss

complaint on basis of tender with a similar deed of trust where "the Court cannot conclude, at least

at this juncture, that the sale is merely voidable wherein tender would be required").

These exceptions and qualifications counsel against a blanket requirement of the tender rule

at the pleading stage. The Court thus declines to dismiss the complaint on the basis of her failure to

allege tender.

3. Cal. Civ. Code § 2923.5

California Civil Code § 2923.5(a)(1) provides that "[a] mortgagee, trustee, beneficiary, or

requirements as described in subdivision (g)." Cal. Civ. Code § 2923.5(a)(1) (emphasis added).

Under paragraph (2), "[a] mortgagee, beneficiary, or authorized agent shall contact the borrower in

person or by telephone in order to assess the borrower's financial situation and explore options for

required by paragraph (2) of subdivision (a) provided that the failure to contact borrower occurred

(emphasis added).

In the instant case, Ms. Tamburri asserts that Defendants violated § 2923.5(a)(1) because

they failed to contact her prior to filing the notice of default on June 9, 2010. FAC ¶ 32. Defendants

argue that Ms. Tamburri has failed to state a claim under this cause of action because "SunTrust

this motion to dismiss.

9

fully complied with" the statute. Mot. to Dismiss at 5. However, Defendants' motion to dismiss is

Docket No. 33, at 4-6. In its Order, the Court held that "Ms. Tamburri has raised at least a serious

two competing declarations - one from Ms. Tamburri and one from Suntrust/Defendants - as to

whether Suntrust in fact contacted Ms. Tamburri as required by § 2923.5."), does not establish that

declaration (even one signed under oath), while perhaps fulfilling one of the statutory requirements

under § 2923.5, does not bar the homeowner from disputing the facts asserted in the declaration.").

Rather, under 12(b)(6) standards, taking Plaintiff's allegation as true, Defendants' motion to dismiss

must be denied.

Defendants also argue that Plaintiff's claim cannot succeed because she has failed to tender.

However, as discussed above, this argument fails.

4. Real Estate Settlement Procedures Act ("RESPA") - 12 U.S.C. § 2605

Ms. Tamburri alleges that Defendants violated 12 U.S.C. § 2605(e) by either failing to

properly respond to Plaintiff's Qualified Written Requests ("QWRs") (in the case of Suntrust,

FAC ¶¶ 43-48; Opp. At 12-14.

"Congress enacted RESPA in 1974 to protect home buyers from inflated prices in the home

sought to implement significant reforms in the real estate settlement process which "are needed to

insure that consumers throughout the Nation are provided with greater and more timely information

on the nature and costs of the settlement process." 12 U.S.C. § 2601. RESPA applies not only to

the actual settlement process, however, but also to the servicing of federally related mortgage loans.

Section 2605(e) is titled "[d]uty of loan servicer to respond to borrower inquiries." It

provides in relevant part as follows.

(1) Notice of receipt of inquiry

(A) In general. If any servicer of a federally related mortgage

loan receives a qualified written request from the borrower (or

an agent of the borrower) for information relating to the

servicing of such loan, the servicer shall provide a written

response acknowledging receipt of the correspondence within

20 days . . . unless the action requested is taken within such

period.

(B) Qualified written request. For purposes of this subsection,

a qualified written request shall be a written correspondence,

other than notice on a payment coupon or other payment

medium supplied by the servicer, that -

(i) includes, or otherwise enables the servicer to

identify, the name and account of the borrower; and

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

the borrower, to the extent applicable, that the account

is in error or provides sufficient detail to the servicer

regarding other information sought by the borrower.

12 U.S.C. § 2605(e). The terms "servicer" and "servicing" are defined in § 2605(i). "The term

'servicer' means the person responsible for servicing of a loan (including the person who makes or

receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan . . .

and making the payments of principal and interest and such other payments with respect to the

2605(i)(3).

Under § 2605(e), a loan servicer has an obligation to act when it receives a QWR from the

borrower or borrower's agent "for information relating to the servicing of [the] loan." 12 U.S.C. §

2605(e)(1)(A). As noted above, "'servicing' means receiving any scheduled periodic payments from

a borrower . . . and making the payments of principal and interest and such other payments with

attorney's letters to Suntrust, MERS, and US Bank in March of 2011. Ex. 7. However, while the

same declaration attaches Suntrust and Wells Fargo's responses to Plaintiff's letters in December

(Wells Fargo).

11

Defendants argue that Plaintiff's claim should be dismissed for two reasons. First,

Defendants claim that Plaintiff's letters are not QWRs because they do not relate to the servicing of

the loan as required under § 2605; rather, they merely ask for documentation as to who owns the

borne out by the fact that § 2605(e) expressly imposes a duty upon the loan servicer, and not the

owner of the loan.") (emphasis added). Second, Defendants assert that Plaintiff fails to allege

damages, and that she cannot have been harmed by failing to learn the identity of the holder of her

RESPA claims could not stop a foreclosure because RESPA did not have as a remedy injunctive

relief), actual damages and, in the case of a pattern or practice, statutory damages, are the only

With respect to the first argument, it is unclear whether each of the purported QWRs indeed

However, with regard to the letters the Court has in its possession, Plaintiff requested "documents

and documentation supporting [] collection and enforcement efforts," including "documents in

support of the enforcement of [Ms. Tamburri's] Promissory Note . . . and the Deed of Trust."

Docket 11-7. The letter also requests a list of all assignments, "as well as any reporting of this

validity, rather than the servicing, of the loan, they also arguably request information as to how the

No. C08-5089RBL, 2009 WL 1325947, at *2 (W.D. Wash. May 12, 2009) (finding letter not a QWR

appears to rest on a misreading of § 2605(e) insofar as it appears to require both a statement of

reasons the account may be in error and a description of information sought by the borrower.

statute defines a QWR as a letter that either includes a statement of reasons the borrower thinks the

account is in error, or provides sufficient detail regarding the information sought by the borrower.

12

2005 WL 1593673, at *3 (D. Kan. July 6, 2005) (finding letter not a QWR where it provided "no

statement that the account is in error, nor does the letter request any information from the lender,"

885, 901 (N.D. Ill. 2000) (finding letter not a QWR where "the letter sought information about the

validity of the loan and mortgage documents, but made no inquiry as to the status of the [] account

(Chen, J.) (finding a letter not a QWR where plaintiff had "simply disputed the validity of the loan

one can make an inquiry describing the "information sought by the borrower" if it is "relating to the

service of the loan"), Plaintiff's letter may suffice, at least for purposes of Rule 12(b)(6).

Even construing Plaintiff's letters as QWRs, however, Plaintiff has not alleged any actual

obtain loan due to wrongful reporting of delinquent loan to credit bureaus). Her statement that she

was harmed by not knowing the true owner of Note and "whether her payments have been properly

claim with prejudice where plaintiff alleged only harm as a result of foreclosure and did not directly

as a matter of law, Plaintiffs' argument that they were harmed by not being able to name the real

13

party of interest in this suit. Under RESPA, a borrower may not recover actual damages for

nonpecuniary losses."). Plaintiff has not alleged that she attempted to make a payment that was not

properly credited, thus leading to Plaintiff's default. Therefore, the Court finds that dismissal of the

RESPA claim is appropriate on this ground.

The Court also notes some Defendants, including US Bank, do not appear to be the servicers

¶ 18 (asserting that Suntrust has been the servicer since 2006).

dismissal is without prejudice.

5. Fraud

Defendants Suntrust and US Bank argue that Plaintiff has failed to satisfy the Rule 9(b)

requirement that "a party must state with particularity the circumstances constituting fraud or

mistake." Specifically, Defendants argue that Plaintiff "pleads almost no facts in support of her

fraud claim," including the specifics of dates, times, content of alleged misrepresentations, and other

details. Mot. to Dismiss at 12. In addition, they argue that Plaintiff provides no allegations of

"[T]he required elements for claims for fraud [are]: (a) misrepresentation (false

representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to

Plaintiff's FAC falls well short of this mark. The FAC includes only two substantive

paragraphs regarding the fraud allegations. It points only to general assertions the Suntrust has

made in "numerous documents" regarding its purported ownership of Plaintiff's Note, and later

Wells Fargo's purported ownership of the loan, which seem at odds with other information in

Plaintiff's possession regarding the latest assignment of the loan to US Bank. FAC ¶ 56. The only

other allegations in the fraud section of the FAC relate to Plaintiff's claimed detrimental reliance,

FAC ¶ 57 (alleging reliance based on Plaintiff continuing to contact Suntrust with questions about

misconduct by it could not form the basis of her claim to harm.

14

Fargo or US Bank holds the Note because Plaintiff has been unable to speak with them about her

options to avoid foreclosure).

This is insufficient to describe any elements of fraud. While some portions of Plaintiff's

names US Bank as beneficiary); ¶ 33 (describing assignment of Deed of Trust naming US Bank as

grantee); ¶ 37 (Suntrust's letter naming Wells Fargo as the holder of the Note), many of the other

the plaintiff was informed the Wells Fargo was the actual holder of the Note."); ¶ 30 (describing

1120, 1124 (9th Cir. 2009) ("Averments of fraud must be accompanied by 'the who, what, when,

317 F.3d 1097, 1106 (9th Cir. 2003) ("The plaintiff must set forth what is false or misleading about

sufficiently specific. Plaintiffs must allege each of the elements of fraud. In particular, they must

allege what the misrepresentations were, who made them, when, where, and why plaintiffs' reliance

1053, 1056 (N.D. Cal. 1991) ("[P]laintiff must allege the time, place, and contents of the alleged

fraud.").

Moreover, Plaintiff has not pled facts establishing reliance on such fraud. If anything, it

requesting information as to who owns her loan and has challenged foreclosure on this basis. As for

the harm, that a particular defendant may hold the note does not cause Plaintiff harm if the servicer

misrepresentation, reliance, or damages elements are adequately pled, Plaintiff provides no

15

knowledge, and other conditions of a person's mind may be alleged generally."). Accordingly, the

6. Wrongful Foreclosure

In the instant case, Ms. Tamburri alleges a cause of action for wrongful foreclosure because,

although Suntrust has identified Wells Fargo as the owner of her loan, Wells Fargo has no right to

foreclose on the real property at issue because the last recorded assignment of the deed of trust

she alleges that Defendants violated Cal. Civ. Code § 2932.5 because they do not have the power of

sale and have not demonstrated "legal standing to foreclose upon the subject property." FAC ¶ 64.

In addition, Plaintiff alleges that US Bank, the entity that issued the Notice of Default to Plaintiff on

June 9, 2010, acted before it had legal authority to do so pursuant to an assignment of the deed of

trust. FAC ¶ 65.

As a preliminary matter, to the extent that Plaintiff's wrongful foreclosure claim is

predicated on the foreclosing parties' failure to physically produce the note, Defendants are correct

that she cannot state a viable claim on the basis of that theory. California law does not require a

10-4946 LHK, 2011 WL 500067, at *7 (N.D. Cal. Feb. 8, 2011) ("[U]nder California law, there is

no requirement that a trustee produce the original promissory note prior to a non-judicial foreclosure

sale.") (citations omitted).

Defendants next argue that Plaintiff has failed to state a claim for wrongful foreclosure under

§ 2932.5 because it is not applicable to her loan as the "deed of trust gives the power of sale not to a

'mortgagee or other encumbrancer,' but to the trustee." Mot. to Dismiss at 15. Section 2932.5

provides as follows:

Where a power to sell real property is given to a mortgagee, or other

encumbrancer, in an instrument intended to secure the payment of

money, the power is part of the security and vests in any person who

by assignment becomes entitled to payment of the money secured by

discusses it extensively in its joinder to the motion to dismiss. However, it was ordered depublished

by the California Supreme Court, and is not citable under the California Rules of Court.

2011), on which Defendants also attempt to rely.

authorized agents" to initiate the foreclosure process.

16

Cal. Civ. Code § 2932.5 (emphasis added).

As the Court already foreshadowed in its Preliminary Injunction Order, there is an ongoing

debate among courts as to whether 2932.5 applies to deeds of trust and not just mortgages. As the

Court previously noted, multiple courts have held that § 2932.5 applies only to mortgages and not to

413 (1908), supports Defendants' position. And most recently, a California Court of Appeal opinion

has never been reversed or modified in any reported California decision in the more than 100 years

"foreclosure sale was void and should be set aside because HSBC Bank invoked the power of sale

without complying with the requirement of section 2932.5 to record the assignment of the deed of

not whether the wrong entity had initiated foreclosure; rather, the issue was whether the company

selling the property in the nonjudicial foreclosure sale (MERS) was authorized to do so by the owner

person initiating the foreclosure has the authority to do so; "[t]he recognition of the right to bring a

lawsuit to determine a nominee's authorization to proceed with foreclosure on behalf of the

noteholder would fundamentally undermine the nonjudicial nature of the process and introduce the

possibility of lawsuits filed solely for the purpose of delaying valid foreclosures"). Notably, the

alleged wrongful foreclosure on the ground that assignments of the deed of trust had been

improperly backdated, and thus the wrong party had initiated the foreclosure process. No such

As this Court noted in its previous Order, there is also authority that favors Ms. Tamburri.

with the above authority based on state cases, indicating that formal distinctions between mortgages

and deeds of trust were "outdated" and that trustors were deserving of the same protection as

App. 3d at 743 (stating that "[a] recorded assignment of note and deed of trust vests in the assignee

all of the rights and interests of the beneficiary, including authority to exercise any power of sale

given the beneficiary"; citing in support the predecessor statute to § 2932.5)).

(S.D. Cal. Aug. 11, 2011), held that § 2932.5 requires an assignee trust deed beneficiary to record its

California Court of Appeal decisions holding to the contrary, reasoning that the plain language and

has abrogated the distinction between mortgages and deeds of trust where necessary to "protect a

economic function of the two instruments [mortgages and deeds of trust] would seem to be identical.

Where there is one and the same object to be accomplished, important rights and duties of the parties

should not be made to depend on the more or less accidental form of the security."). Thus, the court

concluded that to shelter beneficiaries, who are the real parties in interest under a deed of trust, from

Accordingly, the fact that the beneficiary of record was not the foreclosing beneficiary gave "rise to

suspicion that the sale was not authorized," which was "the very risk that § 2932.5 was intended to

the authority of a mortgagee or his assigns to sell.")).

Other courts have allowed wrongful foreclosure actions to proceed under similar reasoning,

but without relying on § 2932.5. Regardless of whether § 2932.5 applies, Plaintiff may still assert

the notice of default to be issued by the "trustee, mortgagee, or beneficiary, or any of their

Plaintiff had stated a wrongful foreclosure claim against an entity that had "no beneficial interest in

the Deed of Trust when it acted to foreclose on Plaintiffs' home." The court expressed incredulity

when confronted with counsel's arguments--similar to those made here--suggesting that "someone

at *7. The court asked, if defendants' argument that "the recording and execution date is

inconsequential and in no way connotes that the DOT's beneficial interest was transferred at that

precise time" was accepted, "how is one to determine whether (and when) the purported assignment

was consummated? How could one ever confirm whether the entity seeking to throw a homeowner

and held that, since the plaintiffs had alleged facts suggesting the foreclosing party had no legal

assignment of the beneficial interest under a deed of trust may be recorded, and from the time the

same is filed for record operates as constructive notice of the contents thereof to all persons."

19

failure to record an assignment of the deed of trust, even if it were not fatal under § 2932.5, opens

the door (as an evidentiary matter) to the claim that there is no valid assignment held by the

foreclosing party.

31098, at *21-24 (E.D. Cal. March 31, 2010), the court held that, while "proof of possession of the

note" is not necessary to "legally institute non-judicial foreclosure proceedings against plaintiff,"

Plaintiff still had a viable claim for wrongful foreclosure insofar as he argued that defendants "are

interest were recorded after the new beneficiary had already issued the Notice of Default, and were

simply backdated to be effective before the Notice of Default was issued, Plaintiff could argue the

of recording assignments with backdated effective dates may be improper, and thereby taint the

that "Plaintiff is likely to succeed on the merits of his claim that neither Aurora nor Cal-Western had

authority to initiate the foreclosure sale at the time the Notice of Default was entered." No.

10cv1838 BTM, 2010 WL 3986953, at*2 (S.D. Cal. Oct. 8, 2010). The Court concluded that

because the assignments appeared to have been backdated, the "[d]ocuments do not support a

finding that either Cal-Western was the trustee or Aurora was the beneficiary on May 20, 2010 when

backdating. However, Plaintiff does allege that "US Bank recorded a Notice of Default . . . before it

had the legal right to do so." FAC ¶ 65. Plaintiff alleges that the Notice is consequently invalid.

This is sufficient to raise a question as to the validity of the assignment and the notion that the

foreclosing parties did not have authority to issue the Notice.

63; Tamburri Decl., Docket No. 11, ¶ 13, despite the fact that it is recorded as the assignee and listed

on the Notice of Default as the entity to contact to avoid foreclosure, raise questions as to whether

the current recorded Substitution of Trustee and Assignment of Deed is up-to-date.

20

While MERS' Substitution of Trustee (Recontrust) and Assignment of Deed (US Bank) is dated

Recontrust recorded the notice of default, and the assignment was not recorded until June 21, 2010.

The Notice of Default, by contrast, was dated June 8, 2010, and recorded June 9, 2010. Thus,

insofar as Plaintiff contends that the Notice of Default (NOD) is invalid due to a lack of authority to

there had been no assignment.

still took place after the Notice of Default was issued, and Plaintiff alleges the foreclosing parties

Cal.App.4th 42, 46 (2011) (holding that while a borrower may not preemptively challenge the

standing of a foreclosing entity, "a borrower who believes that the foreclosing entity lacks standing

(granting motion to dismiss where the plaintiff's only claim was that the foreclosing party did not

have a recorded assignment in place under § 2932.5, which the court found inapplicable, but where

the plaintiff "does not allege that the Bank of New York was not actually the beneficiary, nor does

the FAC allege that Aztec was not an authorized agent of the beneficiary or trustee.").

indicate that the Notice of Default was actually issued before the assignment and substitution, not

after.

21

In its supplemental brief, Defendants now claim that Recontrust, in issuing the Notice of

Default, was merely acting as agent for MERS, the beneficiary at the time the Notice was issued.

Def's Supp. Memo at 1-2. Thus, according to Defendants, Recontrust issued the Notice of Default

in its capacity as agent for MERS rather than as Trustee, and later acted as Trustee after it was so

to be listed as the beneficiary on the Notice, despite the fact that US Bank did not yet have any

interest in the deed. Indeed, the Notice instructed Plaintiff to contact US Bank to arrange for

payment, despite the fact that US Bank apparently (and as alleged) had no right to such payment.

Thus, assuming Recontrust was acting as an agent, it is unclear on behalf of what entity it was acting

and whether said entity had any interest in the property.

To the extent that it may be plausible that US Bank was a lender or loan servicer, rather than

Bank has neither acted as lender or loan servicer with respect to plaintiff's loan."). Indeed, it also

appears to be contrary to US Bank's Joinder to the motion to dismiss which, while not entirely clear,

Joinder at 2-3.

US Bank takes issue with Plaintiff's contention that MERS could not assign the loan to US

Bank, but it does not dispute her contention that US Bank did in fact act as the beneficiary in issuing

ReconTrust as Trustee . . . [and] assigned beneficial interest in the Deed of Trust to [US Bank]. That

same day, after ReconTrust had been substituted as trustee by MERS, ReconTrust recorded a notice

addition, while the Notice does list MERS, it is unclear whether it lists MERS as the current

beneficiary or merely as the original beneficiary under the Deed of Trust, as a way of describing the

original deed under which the foreclosing parties are acting. The Notice makes no explicit

beneficiary that was recorded on 12/20/2006, the final page of the Notice refers to a "present

beneficiary," thus arguably implying that the original beneficiary may not be the same entity as the

22

Thus, on the basis of the current record, Defendants' new argument fails to render the Notice of

Default sufficiently clear to defeat as a matter of law Plaintiff's claim that the wrong party initiated

foreclosure, and that US Bank wrongfully asserted an interest in the property which it did not have.

Any claim that Recontrust and US Bank were operating as authorized agents of the appropriate

No. 10cv1838 BTM, 2011 WL 92991, at *1 (S.D. Cal. Jan. 7, 2011) (discussing party's claim that it

was an authorized agent pursuant to a master servicing agreement with the lender, but concluding

that "[w]ithout a copy of this agreement, the Court is unwilling to definitively conclude that Aurora

was an authorized agent of the mortgagee and thus had authority to enter the Notice of Default at

issue in this case").

Assuming the wrong party initiated foreclosure, Defendants nonetheless contend that

6-8. Defendants' prejudice claim largely amounts to a restatement of its tender arguments, which

the Court has already rejected. In addition, the cases on which Defendants rely involve claims to set

aside a foreclosure that has already occurred. While Defendants challenge the notion that procedural

defects should derail a foreclosure, California law requires strict compliance with non-judicial

requirements must be strictly complied with, and a trustee's sale based on statutorily deficient notice

of default is invalid."). California courts have acknowledged that notices of default serve a vital

Cal.App.4th 208, 221 (2010). Thus, assuming prejudice is required, the threat of foreclosure by the

wrong party would certainly be sufficient to constitute prejudice to the homeowner because there is

power of sale in a nonjudicial foreclosure may only be exercised when a notice of default has first

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been recorded. . . . [A]ny foreclosure sale based on a void notice of default is also void.") (citing

Cal. Civ. Code § 2924; 5-123 California Real Estate Law & Practice § 123.01).

Accordingly, the Court finds that Plaintiff has stated a claim for wrongful foreclosure.

Regardless of whether § 2932.5 applies, a party may not foreclose without the legal power to do so.

Plaintiff alleges that the wrong parties issued the Notice of Default. At the 12(b)(6) stage, given the

factual uncertainties underlying the parties' arguments, Plaintiff's claim is sufficient to withstand a

motion to dismiss.

insofar as it is based on Plaintiff's allegations that the wrong party initiated foreclosure without any

as it is predicated on Defendants' not physically producing the note.

7. Quiet Title - Cal. Code Civ. P. § 761.020

California Code of Civil Procedure § 761.020 provides that a quiet title complaint must be

verified and include each of the following:

(a) A description of the property that is the subject of the

action. . . .

(b) The title of the plaintiff as to which a determination under this

chapter is sought and the basis of the title. . . .

(c) The adverse claims to the title of the plaintiff against which a

determination is sought.

(d) The date as of which the determination is sought. If the

determination is sought as of a date other than the date the complaint

is filed, the complaint shall include a statement of the reasons why a

determination as of that date is sought.

(e) A prayer for the determination of the title of the plaintiff

against the adverse claims.

Cal. Code Civ. Proc. § 761.020. The purpose of a quiet title action is to determine "all conflicting

claims to the property in controversy, and to decree to each such interest or estate therein as he may

In her complaint, Ms. Tamburri seeks to quiet title in her name "[d]ue to the confusion over

who exactly holds the Note." FAC ¶¶ 58-61. Defendants argue that she fails to state a claim for this

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cause of action because she does not identify which Defendant failed to produce the note, there is no

requirement that a trustee produce the note to foreclose, she has not alleged tender, she has not

alleged the date on which she seeks to quiet title, and the complaint is not verified. Mot. to Dismiss

at 14-15. Defendants appear to have abandoned their arguments regarding the verified complaint

and the date allegation based on Plaintiff's opposition pointing out that these requirements have

Defendants' most central argument is that Plaintiff's cause of action fails because she fails to

allege that she has satisfied her payment obligations pursuant to the Deed of Trust, or that she has

alleged that they are the rightful owners of the property, i.e. that they have satisfied their obligations

requirement of an action to quiet title is an allegation that plaintiffs 'are the rightful owners of the

property, i.e., that they have satisfied their obligations under the Deed of Trust.'") (quotations

mortgagor cannot quiet his title against the mortgagee without paying the debt secured."). Plaintiff's

no valid right to the property, whereas here "Wells Fargo has no right to initiate nonjudicial

foreclosure proceedings against the plaintiff." Opp. at 20.

The problem with Plaintiff's argument is that, even if the proper party did not initiate

foreclosure, Plaintiff does not allege that she is the rightful owner as she admits that she is in default.

She also fails to specify what adverse claims, and by which Defendants, she seeks to quiet title

against. Indeed, while she asserts that Wells Fargo (who is not a party to this motion to dismiss) has

no right to her property, and that US Bank initiated foreclosure before it had authority to do so, she

does not allege that US Bank or any other Defendant currently has no valid interest in the property.

Accordingly, the Court GRANTS Defendants' motion to dismiss the quiet title claim with leave to

amend.

8. Negligence

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Ms. Tamburri's negligence claim is predicated on the following allegations: (1) that Suntrust

and Wells Fargo failed to explore options with her to avoid foreclosure as required by California

In the motion to dismiss, Defendants argue that the negligence claim should be dismissed

because Plaintiff has failed to sufficiently allege a duty or breach, and she has failed entirely to

allege causation or damages. Mot. to Dismiss at 17-18.

As Defendants point out, one of the essential elements of a negligence claim is a duty of

"'[t]o prevail on [an] action in negligence, plaintiff[s] must show that defendants owed [them] a

legal duty, that they breached the duty, and that the breach was a proximate or legal cause of [their]

injuries'"), and it is a general rule 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

App. 3d 1089, 1096 (1991). "Liability to a borrower for negligence arises only when the lender

'actively participates' in the financed enterprise 'beyond the domain of the usual money lender.'"

LEXIS 88302, at *10 (S.D. Cal. Oct. 30, 2008) ("Defendant Countrywide, as the mortgage lender,

has no fiduciary duty to Plaintiffs. 'A debt is not a trust and there is not a fiduciary relation between

debtor and creditor as such.' The same principle applies 'to the relationship between a bank and its

*21-22 (N.D. Cal. Mar. 28, 2011) (concluding that there were allegations that defendant went

beyond the domain of the usual money lender by agreeing to place plaintiffs on a trial modification

plan).

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Plaintiff argues that she can allege a duty of care based on the statutes to which Plaintiff's

allegations refer. As noted above, one of the allegations in the negligence claim is that Defendants

failed to explore options with her to avoid foreclosure as required by California Civil Code § 2923.5.

The other refers to 12 U.S.C. § 2605, Defendants' purported requirement to respond to Plaintiff's

through statute, contract, the general character of the activity, or the relationship between the

parties'").

Nonetheless, to the extent that Ms. Tamburri argues a duty of care based on § 2923.5, she is

really bringing a claim for violation of § 2923.5, and a failure to comply with § 2923.5 does not give

185 Cal. App. 4th 208, 214 (2010). Thus, it does not appear that Ms. Tamburri can allege damages

(N.D. Cal. Aug. 19, 2011) ("To allow § 2923.5 to serve as a statutory basis for a negligence claim

would circumvent the limited scope of relief provided by the statute."). In addition, even if

permitted, Ms. Tamburri has not alleged any damages resulting from Defendants' purported

violation of § 2923.5. Moreover, with respect to § 2605, for the reasons discussed above, Ms.

Tamburri has not alleged damages stemming from any failure to respond to her QWRs. Finally, to

the extent Plaintiff alleges any damages, as Defendants point out, a negligence claim is generally not

15, 2011).

is without prejudice.

9. Accounting

"A cause of action for an accounting requires a showing that a relationship exists between

the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that

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only the simplest pleading is required: (1) The fiduciary relationship or other circumstances

appropriate to the remedy [and] (2) A balance due from the defendant to the plaintiff that can only

be ascertained by an accounting"; adding that "a complaint does not state a cause of action for an

to recover a sum certain or a sum that can be made certain by calculation").

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(2009). The main problem with Plaintiff's accounting claim is that she is not asking for an

JMA, 2009 U.S. Dist. LEXIS 67807, at *18 (S.D. Cal. Aug. 4, 2009) (noting that, "while Plaintiff

allegedly owes Defendants an amount past due on the underlying mortgage, Defendants do not

allegedly owe Plaintiff any money"; adding that "[t]his failure to plead 'some balance is due the

the motion to dismiss the accounting claim without prejudice.

10. Declaratory Relief

Plaintiff's only statement in that section is a request for an injunction, rather than a declaration. In

addition, she requests only a "declaration that Plaintiff is the prevailing party" in her prayer section.

FAC at 14. Thus, Defendants are correct that Plaintiff's cause of action is "duplicative" and

11. Cal. Bus. & Prof. Code § 17200

California Business & Professions Code § 17200 prohibits unfair competition, which is

defined as, inter alia, "any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof.

Code § 17200. Plaintiff asserts claims under § 17200 for (1) Suntrust and Recontrust's violation of

§ 2923.5; (2) Suntrust, Wells Fargo, MERS, and US Bank's violation of § 2605; (3) Suntrust's

forcing of Plaintiff to "send in a plethora of different documents and speak to countless

representatives, none of whom provided the plaintiff with any helpful information regarding her

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alternatives in avoiding foreclosure"; and (4) Wells Fargo's denial that it is the holder of Plaintiff's

loan. The Court does not consider (4) herein as Wells Fargo has not joined in the motion to dismiss,

and it does not consider any claim against Recontrust pursuant to its unopposed statement of

nonmonetary status. Docket No. 39.

Defendants make two primary challenges to the § 17200 claim as pled in the FAC. As a

preliminary matter, Defendants argue that Ms. Tamburri lacks standing to bring the claim. Mot. to

Dismiss at 11. Under § 17204 of the Code, only "a person who has suffered injury in fact and has

However, "[i]t is undisputed that foreclosure proceedings were initiated which put Ms. Tamburri's

interest in the property in jeopardy; this fact is sufficient to establish standing as this Court has

Defendants' claim that Plaintiff cannot establish a causal connection between any unlawful activity

and her harm presupposes that Defendants prevail on Plaintiff's substantive claims, which is

inappropriate for purposes of a 12(b)(6) analysis.

Second, Defendants argue that Plaintiff fails to plead facts with the requisite particularity to

state a UCL claim. Mot. to Dismiss at 10-11. "A plaintiff alleging unfair business practices under

[17200] must state with reasonable particularity the facts supporting the statutory elements of the

To the extent that Plaintiff asserts unlawful claims based on the statutes described above -

claims (1) and (2) above - these claims rise and fall with the substantive causes of action already

discussed. Accordingly, while Plaintiff's claim under § 2923.5 survives, her claim under § 2605

does not. The third potential claim - that Plaintiff was essentially given the run-around from

Suntrust when she attempted to get information about her loan - is insufficient to allege any separate

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[must] be tethered to some legislatively declared policy or proof of some actual or threatened impact

886 (1999) ("The test of whether a business practice is unfair involves an examination of [that

practice's] impact on its alleged victim, balanced against the reasons, justifications and motives of

the alleged wrongdoer.") (internal quotations omitted). With more detail, however, such a claim

may be sufficient if, for example, Plaintiff provided more context as to the number of times she

attempted to contact Suntrust and supplied additional information as to the content of her

communications with them.

In addition, Plaintiff argues that her allegations about US Bank's refusal to communicate

with her and denial that it owned her loan is sufficient to state an "unfair" claim. Opp. at 23. This is

a closer call. If, as noted above, US Bank was not her loan servicer, there does not appear to be any

requirement under § 2605 that it respond to her letters. However, since US Bank is listed on her

Notice of Default as the entity she should contact to avoid foreclosure, and Plaintiff alleges that US

Bank "had denied owning her loan," FAC ¶ 63, such conduct may constitute an unfair business

practice as it misled Plaintiff regarding the status of her loan and precluded her from gaining the

requisite information as to how she could avoid foreclosure. Plaintiff's FAC is currently insufficient

to make out such a claim, however, as she does not provide any context such as when and how US

Bank made such a representation to support a conclusion that, at a minimum, US Bank made such a

representation after it gained an interest in the loan in June of 2010.

prejudice insofar as it is predicated on other theories against the moving Defendants.

B. Motion to Strike

Defendants also move to strike Plaintiff's request for punitive damages. Mot. to Dismiss at

20. Under Rule 12(f), a "court may strike from a pleading an insufficient defense or any redundant,

immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "Immaterial matter is that

which has no essential or important relationship to the claim for relief or the defenses being

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by the language of the rule, "'[t]he function of a 12(f) motion to strike is to avoid the expenditure of

time and money that must arise from litigating spurious issues by dispensing with those issues prior

2d 556, 561 (C.D. Cal. 2005). Courts generally disfavor motions to strike because striking is such a

"striking a party's pleadings is an extreme measure, and, as a result, we have previously held that

'motions to strike under Fed. R. Civ. P. 12(f) are viewed with disfavor and are infrequently

granted'").

The proper medium for challenging the sufficiency of factual allegations in a complaint is

where a motion is in substance a Rule 12(b)(6) motion, but is incorrectly denominated as a Rule

12(f) motion, a court may convert the improperly designated Rule 12(f) motion into a Rule 12(b)(6)

damages claim into a 12(b)(6) motion).

Defendants claim Plaintiff has not alleged sufficient facts to support a basis for punitive

damages. In evaluating Defendants' argument, the Court looks first to California Civil Code § 3294,

which defines when punitive damages are available for a violation of state law. The statute states in

relevant part:

(a) In an action for the breach of an obligation not arising from

contract, where it is proven by clear and convincing evidence that the

defendant has been guilty of oppression, fraud, or malice, the plaintiff,

in addition to the actual damages, may recover damages for the sake of

example and by way of punishing the defendant.

(b) An employer shall not be liable for damages pursuant to

subdivision (a), based upon acts of an employee of the employer,

unless the employer had advance knowledge of the unfitness of the

employee and employed him or her with a conscious disregard of the

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rights or safety of others or authorized or ratified the wrongful conduct

for which the damages are awarded or was personally guilty of

oppression, fraud, or malice. With respect to a corporate employer,

the advance knowledge and conscious disregard, authorization,

ratification or act of oppression, fraud, or malice must be on the part of

an officer, director, or managing agent of the corporation.

Cal. Civ. Code § 3294.

In the instant case, Plaintiff includes no specific allegations supporting punitive damages.

While she does assert a fraud claim, as discussed above, that cause of action is severely lacking in

detail. Furthermore, Plaintiff has made no assertions to satisfy (b)'s requirements regarding

employers.

Because the Court has granted the motion to dismiss the fraud claim, the motion to strike is

her claim for punitive damages.

C. Motion to Set Aside Default

In the instant case, default has been entered against Wells Fargo, but there is no default

judgment as of yet. Ms. Tamburri has filed a motion for default judgment; Wells Fargo opposes the

motion and also asks that the Court set aside the entry of default.

Under Federal Rule of Civil Procedure 55(c), a "court may set aside an entry of default for

good cause." Fed. R. Civ. P. 55(c). Under Ninth Circuit case law, a court considers three factors in

determining whether there is good cause: (1) whether the defendant engaged in culpable conduct

that led to the default; (2) whether the defendant had a meritorious defense; or (3) whether reopening

are disjunctive). The defendant bears the burden of showing that any of the factors favors setting

811, 814 (9th Cir. 1985) (noting that default judgments are generally disfavored so that, "[w]henever

it is reasonably possible, cases should be decided upon their merits").

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1. Culpable Conduct

With respect to the first factor, the Ninth Circuit has emphasized that a defendant's conduct

"Intentional" in many legal contexts means an act or omission taken

by an actor knowing what the likely consequence will be. So one

might think, reading this standard out of context, that a litigant who

receives a pleading, reads and understands it, and takes no steps to

meet the deadline for filing a responsive pleading acted intentionally

in failing to answer, without more, and therefore cannot meet the

culpability standard.

. . . .

Our cases, however, have not used the term "intentional" in

what we have meant is something more like, in the words of a recent

Second Circuit opinion addressing the same issue, "willful, deliberate,

or evidence of bad faith." Neglectful failure to answer as to which the

defendant offers a credible, good faith explanation negating any

intention to take advantage of the opposing party, interfere with

judicial decisionmaking, or otherwise manipulate the legal process is

not "intentional" under our default cases, and is therefore not

are considered - culpable or inexcusable.

In the instant case, Plaintiff raises a valid suspicion as to how Wells Fargo could have failed

to learn of this case given that it received both written and telephonic notice numerous times since

describing the two times he personally served Wells Fargo through its registered agent for service of

process); Goodell Decl. ¶¶ 2-9 (describing Plaintiff's counsel's numerous attempts to contact Wells

Fargo regarding the litigation). Notwithstanding Wells Fargo's clear mistake here, however, it has

met its burden of showing that it did not engage in culpable conduct. Wells Fargo admits that it was

in fact served with Plaintiff's complaint and other related documents. Reply at 1-2; Krause Decl. ¶

2. However, pursuant to an agreement with Suntrust as the Servicer-in-Fact of Plaintiff's loan,

Wells Fargo's Corporate Trust Services department had tendered all documents to Suntrust and was

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under the belief that Suntrust was defending the action on its behalf. Reply at 3; Krause Decl. ¶¶ 4-

7; Krause Decl. Ex. A (letter to Suntrust attaching complaint and stating, "Pursuant to the governing

documents of the securitization that contains this loan, your company must provide defense of this

claim and pay all expenses associated with the enclosed claim."). Wells Fargo's legal department

did not learn of the litigation until after default was entered. Krause Decl. ¶ 8.

In light of this explanation, there is nothing to suggest that Wells Fargo's decision not to

answer the complaint, even if conscious, was "designed to obtain strategic advantage in the

behind Wells Fargo's conduct by describing the negotiations between counsel regarding a potential

("TBDC's nonappearance appears to have been a result of trying to settle the case without having to

engage in litigation. No doubt TBDC's decision to do so entailed a fair amount of risk, but again

there is nothing to show that TBDC was trying to 'manipulate the legal system' to its advantage.")

its neglect sufficient to negate Plaintiff's arguments that it has acted in bad faith.

Accordingly, the Court concludes that Wells Fargo has not engaged in culpable conduct.

2. Meritorious Defense

As to the second factor, most courts have indicated that the issue here is "not whether there is

a likelihood that the defaulting party will prevail on the defense, but rather whether a defense is

proposed that is legally cognizable and, if proved at trial, would constitute a complete defense to the

F.3d 90, 98 (2d Cir. 1993) ("The test of such a defense is measured not by whether there is a

likelihood that it will carry the day, but whether the evidence submitted, if proven at trial, would

("Resolving the ambiguous evidence in favor of the defendant, he has stated a meritorious defense.

Likelihood of success on the merits is not the measure of whether the defendant presents a

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meritorious defense. If he 'states a defense good at law, then a meritorious defense has been

component of the test for setting aside a default does not go so far as to require that the movant

demonstrate a likelihood of success on the merits. Rather, a party's averments need only plausibly

suggest the existence of facts which, if proven at trial, would constitute a cognizable defense.");

meritorious defense is accomplished when 'allegations of defendant's answer, if established on trial,

would constitute a complete defense to the action.'").

Under this standard, this factor weighs in Wells Fargo's favor. Wells Fargo claims it has no

ownership interest in the loan, which would constitute a defense to many of Plaintiff's claims.

Summers, and not to TBDC, then TBDC would have a complete defense to the action."). Instead,

potential liability under § 2605). However, as Wells Fargo points out and the Court's conclusions

above regarding the motion to dismiss indicates, there are numerous weaknesses in Plaintiff's

to Set Aside at 7-8 (summarizing defenses against Plaintiff). Accordingly, the Court concludes that

the second factor weighs in favor of setting aside default.

3. Prejudice to Plaintiff

setting aside of a judgment must result in greater harm than simply delaying resolution of the case.

"'the delay must result in tangible harm such as loss of evidence, increased difficulties of discovery,

It should be obvious why merely being forced to litigate on the

merits cannot be considered prejudicial for purposes of lifting a

default judgment. For had there been no default, the plaintiff would of

course have had to litigate the merits of the case, incurring the costs of

doing so. A default judgment gives the plaintiff something of a

windfall by sparing her from litigating the merits of her claim because

of her opponent's failure to respond; vacating the default judgment

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merely restores the parties to an even footing in the litigation.

because of the delay and cost it has imposed. Opp. at 9. But, as noted above, the Ninth Circuit has

expressly held that being forced to litigate on the merits cannot be considered prejudicial. In

addition, the case is still in the early stages.

However, given the cost that Wells Fargo has needlessly caused Plaintiff, the Court does

the Ninth Circuit expressly addressed the issue of conditioning, stating as follows:

In discussing the conditioning of defaults, we have noted that other

circuits have held that Fed. R. Civ. P. 60(b) allows district courts to

impose such conditions on relief from judgment of default. .

By conditioning the setting aside of a default, any prejudice

suffered by the non-defaulting party as a result of the default and the

subsequent reopening of the litigation can be rectified. According to

Wright, Miller & Kane, the most common type of prejudice is the

additional expense caused by the delay, the hearing on the Rule 55(c)

motion, and the introduction of new issues. Courts have eased these

burdens by requiring the defaulting party to provide a bond to pay

costs, to pay court costs, or to cover the expenses of the appeal. The

use of imposing conditions can serve to "promote the positive

purposes of the default procedures without subjecting either litigant to

their drastic consequences."

procedure favors trials on the merits, and default judgments should

generally be set aside where the moving party acts with reasonable

promptness, alleges a meritorious defense to the action, and where the

default has not been willful." Moreover, reasonable conditions may be

imposed in granting a motion to vacate a default judgment. The

condition most commonly imposed is that the defendant reimburse the

plaintiff for costs incurred because of the default. In some cases, it

may also be appropriate for the defendant to be required to post bond

to secure the amount of the default judgment pending a trial on the

merits.

By setting aside the default with conditions, the district court

judge in the instant case was attempting to facilitate discovery and was

protecting the non-defaulting party by not requiring the plaintiff to pay

for its costs. We find this behavior appropriate and not an abuse of

discretion. Accordingly, we now hold that it is appropriate to

condition setting aside a default upon the payment of a sanction.

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[to impose reasonable conditions in order to avoid undue prejudice to the nondefaulting party] to

require a party to post security for payment of all or part of an eventual judgment. Another

condition a court may impose is the payment of reasonable attorney's fees and costs incurred by the

opposing party because of the default.").

In the instant case, Plaintiff's counsel states that he has spent 7.4 hours on this issue and

anticipates an additional 1.5 hours at a billing rate of $200/hour. Goodell Decl. ¶ 11. The Court

finds that these fees are appropriate, and orders Wells Fargo to pay the $1780 in costs Plaintiff has

reasonably incurred as a result of Wells Fargo's default.

D. Motion for Default Judgment

Because the Court has granted Wells Fargo's motion to set aside default, the motion for

For the foregoing reasons, the Court hereby orders:

(1) Defendants Suntrust and MERS's motion to dismiss Plaintiff's claim under Cal. Civ. Code §

2923.5 is DENIED.

(2) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's claim under

RESPA, 12 U.S.C. § 2605, is GRANTED without prejudice.

(3) Defendants Suntrust and US Bank's motion to dismiss Plaintiff's Fraud claim is GRANTED

without prejudice.

(4) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's Wrongful

Foreclosure claim is DENIED insofar as it is based on Plaintiff's allegations that the wrong party

initiated foreclosure without any interest in the subject property, and GRANTED with prejudice

insofar as it is predicated on Defendants' not physically producing the note.

(5) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's Quiet Title claim

is GRANTED without prejudice.

(6) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's Negligence claim

is GRANTED without prejudice.

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(7) Defendants Suntrust and US Bank's motion to dismiss Plaintiff's Accounting claim is

GRANTED without prejudice.

(8) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's Declaratory Relief

claim is GRANTED without prejudice.

(9) Defendants Suntrust, MERS, and US Bank's motion to dismiss Plaintiff's claim under Cal.

Bus. & Prof. Code § 17200 claim is DENIED insofar as it is predicated on alleged violations of §

2923.5, and GRANTED without prejudice as to all other theories.

(10) Defendants Suntrust, MERS, and US Bank's motion to strike is GRANTED.

(11) Defendant Wells Fargo's motion to set aside default is GRANTED.

(12) Defendant Wells Fargo is ordered to pay $1780 in legal fees and costs Plaintiff.

(13) Plaintiff's motion for default judgment is DENIED.

This order disposes of Docket Nos. 31, 54, 57.

IT IS SO ORDERED.

Dated: December 15, 2011

_________________________

EDWARD M. CHEN

United States District Judge