1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 KATHERINE SCONIERS, Case No. 1:25-cv-01350 JLT FJS
12 Plaintiff, ORDER GRANTING MOTION TO DISMISS IN PART WITH LEAVE TO AMEND IN 13 PART v. 14 (Doc. 5) CARRINGTON MORTGAGE SERVICES 15 LLC, et al.,
16 Defendants. 17 18 Katherine Sconiers alleges Carrington Mortgage Services, LLC, violated state and federal 19 laws and regulations in connection with a nonjudicial foreclosure sale of a residential property. 20 Carrington moves to dismiss under Federal Rule of Civil Procedure 12(b)(6). (Doc. 5.) The 21 motion is GRANTED IN PART, and the Court will permit Sconiers to make limited 22 amendments to her complaint, specified below. 23 ALLEGATIONS 24 Sconiers’s father obtained a mortgage loan on a residential property in Visalia, California, 25 in 2016, which Sconiers alleges is her residence. (Doc. 1-1 at 9.) Her father passed away in 26 August 2021. (Id.) For reasons that are not currently clear, there was a default on the mortgage 27 loan, and a notice of default and election to sell was recorded in August 2022. (Id. at 10, 45–52.) 28 The notice cited unpaid amounts from February 2022 onward. (Id. at 47.) 1 After the notice of default was recorded, the estate’s administrator executed a quitclaim 2 deed conveying title in the Visalia property to Sconiers. (Id. at 10, 41–43.) She alleges she “had 3 no issues with paying on the account for the mortgage loan” with the loan’s servicer at that time. 4 (Id. at 10.) But in April 2023, an assignment of the deed of trust to Carrington was recorded. 5 (Id.) Carrington refused to communicate with Sconiers at all because she was “not on the loan.” 6 (Id.) She alleges that she attempted to contact Carrington but was “ignored,” and she alleges 7 Carrington never told her “what additional documents were needed to confirm her as successor.” 8 (Id.) She also attempted to discuss loan modifications and alternatives to foreclosure, all without 9 success. (See id. at 11.) A notice of trustee’s sale was eventually recorded in July 2025, and the 10 property was sold at a nonjudicial foreclosure sale in August of that year. (Id. at 11.) 11 Sconiers filed this lawsuit against Carrington in state court. (See id. at 7.) She asserts five 12 claims. Her first two claims are based on two sections of the California Civil Code that were 13 added as part of a set of enactments commonly known as the “Homeowners Bill of Rights” or 14 “HBOR.” (See id. at 12–13 (citing Cal. Civ. Code §§ 2923.5, 2924.9).) Her third and fourth 15 claims are based on federal regulations implementing the Real Estate Settlement Procedures Act 16 or “RESPA.” (See id. at 13–15 (citing 12 C.F.R. § 1024.35, 1024.38).) Her fifth claim is based 17 on the California Unfair Competition Law. (See id. at 15–16 (citing Cal. Bus. & Prof. Code 18 § 17200 et seq.).) 19 Carrington removed the case to this court and moves to dismiss under Federal Rule of 20 Civil Procedure 12(b)(6). (Doc. 5.) Sconiers opposes the motion (Doc. 9), and Carrington filed a 21 reply (Doc. 11.) The Court found a hearing was not necessary. (Doc. 10.) 22 DISCUSSION 23 Federal Rule of Civil Procedure 12(b)(6) permits motions to dismiss for “failure to state a 24 claim upon which relief can be granted.” A Rule 12(b)(6) motion tests a complaint’s “legal 25 sufficiency,” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001), that is, whether it is based on 26 “a cognizable legal theory” and includes “sufficient facts” to support that theory, Mendiondo v. 27 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). The district court’s task is to 28 decide whether the complaint contains “sufficient factual matter, accepted as true, to ‘state a 1 claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 2 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This is a “context-specific task.” Id. at 3 679. The court must draw on its “judicial experience and common sense,” id., and accept “all 4 reasonable inferences in favor of the nonmoving party,” Boquist v. Courtney, 32 F.4th 764, 773 5 (9th Cir. 2022) (quoting Retail Prop. Tr. v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 6 938, 945 (9th Cir. 2014)). 7 I. CLAIMS 1 AND 2 (HBOR) 8 Sconiers’s first two claims both rely on provisions in the state’s Civil Code that impose 9 obligations on mortgage servicers vis-à-vis the “borrower.” See Cal. Civ. Code §§ 2923.5(a)(2), 10 2924.9(a). Carrington argues Sconiers was not a “borrower” and cannot rely on these provisions. 11 (Doc. 5 at 9.) 12 The word “borrower” is defined in section 2920.5. It means “any natural person who is a 13 mortgagor or trustor and who is potentially eligible for any federal, state, or proprietary 14 foreclosure prevention alternative program offered by, or though, his or her mortgage servicer.” 15 Cal. Civ. Code § 2920.5(c)(1). Carrington does not allege or argue that she is a “mortgagor” or 16 “trustor” or that she is potentially eligible for a foreclosure prevention alternative program. She 17 argues “borrower” also includes successors in interest, citing a section of the Civil Code that was 18 repealed automatically several years ago when the Legislature did not renew it. See 2019 Cal. 19 Stat. Ch. 497, § 27 (A.B. 991) (enacting Cal. Civ. Code § 2920.7); Cal. Civ. Code § 2920.7(o) 20 (2019) (“This section shall remain in effect only until January 1, 2020, and as of that date is 21 repealed, unless a later enacted statute, that is enacted before January 1, 2020, deletes or extends 22 that date.”). That section did extend rights to successors in interest in some circumstances, but 23 because it was not renewed, she cannot rely on it. See, e.g., Mattos v. Nationstar Mortg., LLC, 24 No. 24-02508, 2025 WL 1263985, at *3 (E.D. Cal. May 1, 2025). 25 Thus, the motion to dismiss claims one is GRANTED. Sconiers requests leave to amend, 26 but she does not propose any allegations that might show she was a “borrower” for purposes of 27 sections 2329.5 or 2924.9. (See Doc. 9 at 13.) The Court cannot conceive of any potential 28 amendment. Claims one and two are dismissed without leave to amend, as an amendment would 1 be an exercise in futility. See Doe v. Garland, 17 F.4th 941, 950 (9th Cir. 2021) (“A district court 2 acts within its discretion to deny leave to amend when amendment would be futile.” (citations 3 omitted)). 4 II. CLAIMS 3 AND 4 (RESPA) 5 In Sconiers’s third claim, she cites a federal regulation that imposes obligations on 6 mortgage servicers who receive a written notice from a borrower “that asserts an error.” 7 12 C.F.R. § 1024.35(a). She alleges that under this section, “a servicer must provide the 8 successor in interest written information with respect to any loan.” (Doc. 1-1 at 14).
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 KATHERINE SCONIERS, Case No. 1:25-cv-01350 JLT FJS
12 Plaintiff, ORDER GRANTING MOTION TO DISMISS IN PART WITH LEAVE TO AMEND IN 13 PART v. 14 (Doc. 5) CARRINGTON MORTGAGE SERVICES 15 LLC, et al.,
16 Defendants. 17 18 Katherine Sconiers alleges Carrington Mortgage Services, LLC, violated state and federal 19 laws and regulations in connection with a nonjudicial foreclosure sale of a residential property. 20 Carrington moves to dismiss under Federal Rule of Civil Procedure 12(b)(6). (Doc. 5.) The 21 motion is GRANTED IN PART, and the Court will permit Sconiers to make limited 22 amendments to her complaint, specified below. 23 ALLEGATIONS 24 Sconiers’s father obtained a mortgage loan on a residential property in Visalia, California, 25 in 2016, which Sconiers alleges is her residence. (Doc. 1-1 at 9.) Her father passed away in 26 August 2021. (Id.) For reasons that are not currently clear, there was a default on the mortgage 27 loan, and a notice of default and election to sell was recorded in August 2022. (Id. at 10, 45–52.) 28 The notice cited unpaid amounts from February 2022 onward. (Id. at 47.) 1 After the notice of default was recorded, the estate’s administrator executed a quitclaim 2 deed conveying title in the Visalia property to Sconiers. (Id. at 10, 41–43.) She alleges she “had 3 no issues with paying on the account for the mortgage loan” with the loan’s servicer at that time. 4 (Id. at 10.) But in April 2023, an assignment of the deed of trust to Carrington was recorded. 5 (Id.) Carrington refused to communicate with Sconiers at all because she was “not on the loan.” 6 (Id.) She alleges that she attempted to contact Carrington but was “ignored,” and she alleges 7 Carrington never told her “what additional documents were needed to confirm her as successor.” 8 (Id.) She also attempted to discuss loan modifications and alternatives to foreclosure, all without 9 success. (See id. at 11.) A notice of trustee’s sale was eventually recorded in July 2025, and the 10 property was sold at a nonjudicial foreclosure sale in August of that year. (Id. at 11.) 11 Sconiers filed this lawsuit against Carrington in state court. (See id. at 7.) She asserts five 12 claims. Her first two claims are based on two sections of the California Civil Code that were 13 added as part of a set of enactments commonly known as the “Homeowners Bill of Rights” or 14 “HBOR.” (See id. at 12–13 (citing Cal. Civ. Code §§ 2923.5, 2924.9).) Her third and fourth 15 claims are based on federal regulations implementing the Real Estate Settlement Procedures Act 16 or “RESPA.” (See id. at 13–15 (citing 12 C.F.R. § 1024.35, 1024.38).) Her fifth claim is based 17 on the California Unfair Competition Law. (See id. at 15–16 (citing Cal. Bus. & Prof. Code 18 § 17200 et seq.).) 19 Carrington removed the case to this court and moves to dismiss under Federal Rule of 20 Civil Procedure 12(b)(6). (Doc. 5.) Sconiers opposes the motion (Doc. 9), and Carrington filed a 21 reply (Doc. 11.) The Court found a hearing was not necessary. (Doc. 10.) 22 DISCUSSION 23 Federal Rule of Civil Procedure 12(b)(6) permits motions to dismiss for “failure to state a 24 claim upon which relief can be granted.” A Rule 12(b)(6) motion tests a complaint’s “legal 25 sufficiency,” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001), that is, whether it is based on 26 “a cognizable legal theory” and includes “sufficient facts” to support that theory, Mendiondo v. 27 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). The district court’s task is to 28 decide whether the complaint contains “sufficient factual matter, accepted as true, to ‘state a 1 claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 2 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This is a “context-specific task.” Id. at 3 679. The court must draw on its “judicial experience and common sense,” id., and accept “all 4 reasonable inferences in favor of the nonmoving party,” Boquist v. Courtney, 32 F.4th 764, 773 5 (9th Cir. 2022) (quoting Retail Prop. Tr. v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 6 938, 945 (9th Cir. 2014)). 7 I. CLAIMS 1 AND 2 (HBOR) 8 Sconiers’s first two claims both rely on provisions in the state’s Civil Code that impose 9 obligations on mortgage servicers vis-à-vis the “borrower.” See Cal. Civ. Code §§ 2923.5(a)(2), 10 2924.9(a). Carrington argues Sconiers was not a “borrower” and cannot rely on these provisions. 11 (Doc. 5 at 9.) 12 The word “borrower” is defined in section 2920.5. It means “any natural person who is a 13 mortgagor or trustor and who is potentially eligible for any federal, state, or proprietary 14 foreclosure prevention alternative program offered by, or though, his or her mortgage servicer.” 15 Cal. Civ. Code § 2920.5(c)(1). Carrington does not allege or argue that she is a “mortgagor” or 16 “trustor” or that she is potentially eligible for a foreclosure prevention alternative program. She 17 argues “borrower” also includes successors in interest, citing a section of the Civil Code that was 18 repealed automatically several years ago when the Legislature did not renew it. See 2019 Cal. 19 Stat. Ch. 497, § 27 (A.B. 991) (enacting Cal. Civ. Code § 2920.7); Cal. Civ. Code § 2920.7(o) 20 (2019) (“This section shall remain in effect only until January 1, 2020, and as of that date is 21 repealed, unless a later enacted statute, that is enacted before January 1, 2020, deletes or extends 22 that date.”). That section did extend rights to successors in interest in some circumstances, but 23 because it was not renewed, she cannot rely on it. See, e.g., Mattos v. Nationstar Mortg., LLC, 24 No. 24-02508, 2025 WL 1263985, at *3 (E.D. Cal. May 1, 2025). 25 Thus, the motion to dismiss claims one is GRANTED. Sconiers requests leave to amend, 26 but she does not propose any allegations that might show she was a “borrower” for purposes of 27 sections 2329.5 or 2924.9. (See Doc. 9 at 13.) The Court cannot conceive of any potential 28 amendment. Claims one and two are dismissed without leave to amend, as an amendment would 1 be an exercise in futility. See Doe v. Garland, 17 F.4th 941, 950 (9th Cir. 2021) (“A district court 2 acts within its discretion to deny leave to amend when amendment would be futile.” (citations 3 omitted)). 4 II. CLAIMS 3 AND 4 (RESPA) 5 In Sconiers’s third claim, she cites a federal regulation that imposes obligations on 6 mortgage servicers who receive a written notice from a borrower “that asserts an error.” 7 12 C.F.R. § 1024.35(a). She alleges that under this section, “a servicer must provide the 8 successor in interest written information with respect to any loan.” (Doc. 1-1 at 14). She does not 9 identify any particular provisions within section 1024.35 that impose this obligation, but she 10 appears to be relying on section 1024.35(e)(4). That subsection requires mortgage servicers to 11 “provide to the borrower, at no charge, copies of documents and information relied upon by the 12 servicer in making its determination that no error occurred within 15 days . . . of receiving the 13 borrower’s request for such documents.” Sconiers does not allege that she gave written notice of 14 an “error” that might have triggered this obligation, however, and she does not allege that she 15 requested documents. The motion to dismiss claim three is GRANTED with leave to amend, so 16 that she may add allegations about any such notices and errors, if there were any. 17 In claim four, Sconiers alleges Carrington violated 12 C.F.R. § 1024.38, which imposes an 18 obligation on servicers to “maintain policies and procedures that are reasonably designed to 19 achieve” several specific objectives. (See Doc. 1-1 at 14–15.) There is no private right of action 20 under § 1024.38. See, e.g., Shiflett v. Lakeview Loan Servicing, LLC, No. 23-00397, 2025 WL 21 603616, at *7 (E.D. Cal. Feb. 25, 2025); Vanisi v. Citibank, N.A., No. 23-02835, 2024 WL 22 1091196, at *2 (N.D. Cal. Feb. 26, 2024). Even so, Sconiers’s complaint does not include 23 allegations about Carrington’s policies. For that reason, her allegations would not support a claim 24 under § 1024.38, even if she could pursue one. See, e.g., Calcut v. Paramount Residential Mortg. 25 Grp. Inc., No. 22-01215, 2024 WL 233175, at *4 (D. Ariz. Jan. 22, 2024) (rejecting similar 26 claims), aff’d, No. 24-764, 2025 WL 1341672 (9th Cir. May 8, 2025). The motion to dismiss 27 claim four is GRANTED without leave to amend. Any amendment related to section 1024.38 28 would be futile. See Doe, 17 F.4th at 941. 1 III. CLAIM 5 (UCL) 2 Sconiers’s fifth and final claim is for a violation of the California Unfair Competition 3 Law, or “UCL.” “The UCL is a broad remedial statute that permits an individual to challenge 4 wrongful business conduct ‘in whatever context such activity might occur.’” Lozano v. AT & T 5 Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007) (quoting Cel-Tech Commc'ns, Inc. v. L.A. 6 Cellular Tele. Co., 20 Cal. 4th 163, 181 (1999)). “It prohibits ‘unfair competition,’ which it 7 broadly defines as including ‘any unlawful, unfair or fraudulent business act or practice[.]’” Id. 8 (quoting Cal. Bus. & Prof. Code § 17200). Because the UCL uses the word “or,” each part of this 9 three-part definition can support a claim; an “unfair” act or practice might violate the UCL even if 10 it was neither a “fraudulent” nor an “unlawful” act, for example. Id. (citing S. Bay Chevrolet v. 11 Gen. Motors Acceptance Corp., 72 Cal. App. 4th 861, 886–87 (1999)). 12 Carrington argues Sconiers cannot pursue any claim under the UCL at all, however, 13 because in its view, she did not lose money or property as a result of its actions. (Doc. 5 at 16– 14 17.) “The foreclosure sale,” it argues, was “the direct result of the loan’s default in 2022,” i.e., 15 before Carrington came on as servicer. (Id. at 15.) This argument does not take adequate account 16 of Sconiers’s allegations about foreclosure sale and its causes. Sconier’s allegation that her 17 property was “sold at a foreclosure sale is sufficient to satisfy the economic injury prong of the 18 standing requirement” of the UCL. Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 19 49, 82 (2013). Her allegations that Carrington refused to recognize her as her father’s successor 20 in interest and refused to discuss the loan with her suffice together to show that her loss was “a 21 result of” Carrington’s actions as well. See Mattos, 2025 WL 1263985, at *5. 22 With that said, the complaint does not lay out a plausible theory of how Carrington 23 violated the HBOR provisions or federal regulations cited above. This means on Sconiers cannot 24 pursue a UCL claim about “unlawful” acts or practices based on her current allegations. 25 Although Sconiers alleges Carrington made “false representations,” she does not say what these 26 representations were, nor why they were false. (See Doc. 1-1 at 15–17.) Her allegation of 27 “fraudulent” action is a mere label or conclusion. See Iqbal, 556 U.S. at 678. This means her 28 complaint does not show that Carrington could be liable based on a theory of “fraudulent” acts or 1 practices. 2 What remains, then, is the UCL’s prohibition of “unfair” acts or practices. “The UCL 3 does not define ‘unfair,’ and the ‘standard for determining what business acts or practices are 4 unfair in consumer actions under the UCL is currently unsettled.’” Capito v. San Jose Healthcare 5 Sys., LP, 17 Cal. 5th 273, 284 (2024) (quoting Zhang v. Superior Court, 57 Cal. 4th 364, 380 n.9 6 (2013)). The Ninth Circuit has held that in consumer actions like this one, district courts may 7 refer to both the “balancing” test, which the Court of Appeal described in South Bay Chevrolet, 8 for example, see Lozano, 504 F.3d at 736 (citing 72 Cal. App. 4th at 886–87), and the “tethering” 9 test, which the California Supreme Court laid out in Cel-Tech, see id. at 735(citing 20 Cal. 4th at 10 565). 11 Another judge of this court recently considered a strikingly similar claim of “unfair” acts 12 and practices in Mattos, cited above. See 2025 WL 1263985, at *6. The plaintiff in Mattos 13 alleged that he had become the “rightful and lawful owner” of a property after the death of the 14 person whose name appeared on the deed of trust on a home loan. Id. at *1. Like Sconiers, the 15 plaintiff in Mattos alleged he was the “successor in interest” and had attempted unsuccessfully to 16 communicate with the loan’s servicer. See id. As in the Visalia property underlying this case, the 17 property in Mattos was eventually sold in a nonjudicial foreclosure sale, despite the plaintiff’s 18 efforts to prevent that sale. See id. 19 The district court found the complaint stated a claim for “unfair” acts or practices under 20 the “balancing” test. See id. at *6. Under this test, the court balances the effects of an allegedly 21 unfair practice, on the one hand, “against the reasons, justifications and motives of the alleged 22 wrongdoer” on the other. S. Bay Chevrolet, 72 Cal. App. 4tha t 886 (citations and quotation 23 marks omitted). “In brief, the court must weigh the utility of the defendant's conduct against the 24 gravity of the harm to the alleged victim.” Id. (citations, alterations, and quotation marks 25 omitted). In Mattos, harm to the consumer was easy to see: the defendant servicer’s actions had 26 allegedly deprived the plaintiff of his home despite his efforts to follow “the proper procedures to 27 take over the loan.” 2025 WL 1263985, at *6. On the other side of the balance, the servicer’s 28 interests were opaque. See id. Careful checks might have helped to assure servicers “that they 1 are communicating with the actual borrower.” Id. But it was “unclear how these practices would 2 provide utility to the [servicer] such that they would outweigh the harm to the consumer in this 3 instance.” Id. With the benefit of favorable inferences, which the court must make in response to 4 a motion to dismiss, the plaintiff’s UCL claim was “plausible” and withstood the servicer’s 5 motion to dismiss. Id. 6 This reasoning applies equally well to Sconiers’s allegations and complaint. She alleges 7 she is the successor in interest to her father’s rights; she alleges she obtained a quitclaim deed for 8 the property in Visalia, where she lives; she alleges she had “no issues” communicating with a 9 previous servicer, nor with “paying on the account of the mortgage loan” before Carrington took 10 over; she alleges she attempted to contact Carrington about the property but that its 11 representatives “would not speak with her” or explain to her what she should do to demonstrate 12 that she was the proper successor in interest; and she alleges the property was sold as a result. 13 (See Doc. 1-1 at 9–11.) Carrington has not explained what interest it has in following the policies 14 it allegedly followed, and it has not explained why—on the face of the complaint—those policies 15 outweigh the alleged harm that Sconiers suffered. For these reasons, the complaint states a 16 plausible claim that Carrington’s actions were “unfair” under the balancing test. It is not 17 necessary to decide whether its actions would be “unfair” under the terms of a different legal test, 18 such as the “tethering” test, and the Court does not reach that issue. See Mattos, 2025 WL 19 1263985, at *7 (doing the same). 20 In sum, the motion to dismiss claim five is granted in part, with leave to amend, to the 21 extent Sconiers relies on the UCL’s prohibitions against “unlawful” and “fraudulent” acts and 22 practices. The motion is denied in part with respect to the UCL’s prohibition against “unfair” acts 23 and practices. 24 CONCLUSION 25 For the reasons above, the motion to dismiss (Doc. 5) is granted in part and denied in part: 26 (1) Claims one, two, and four are DISMISSED without leave to amend. 27 (2) Claim three is DISMISSED with leave to amend. 28 (3) Claim five is DISMISSED in part, as specified above, with leave to 1 amend. 2 Any first amended complaint must be filed within thirty days. 3 4 IT IS SO ORDERED. 5 | Dated: _ May 12, 2026 Cerin | Tower TED STATES DISTRICT JUDGE 6 7 8 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28