Mattos v. Nationstar Mortgage LLC

• Court: District Court, E.D. California
• Decided: May 1, 2025
• Docket: 2:24-cv-02508
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 THOMAS MATTOS, No. 2:24-cv-02508-DJC-DMC 12 Plaintiff, 13 v. ORDER 14 NATIONSTAR MORTGAGE, LLC DBA 15 MR. COOPER; et al. 16 Defendants. 17 18 Currently before the Court is Defendant Nationstar Mortgage LLC d/b/a Mr. 19 Cooper’s Motion to Dismiss (Mot. (ECF No. 3)) Plaintiff Thomas Mattos’s Complaint 20 (Compl. (ECF No. 1-5)). This case concerns the foreclosure of a residential property 21 despite efforts by the self-identified successor in interest to the property to pay the 22 mortgage on the property after the death of the original borrower. Defendant argues 23 that Plaintiff had no right to the property and that foreclosure was proper. Because 24 the Court finds that Plaintiff has not established himself as a “borrower” for purposes 25 of the Homeowners Bill of Rights, has not stated a wrongful foreclosure claim, and has 26 not met the “unlawful” or “fraudulent” prongs of the UCL, the Court GRANTS in part 27 the Motion to Dismiss. However, the Court also finds that Plaintiff has adequately 28 1 alleged a cause of action under the UCL’s “unfairness” prong and thus DENIES in part 2 the Motion to Dismiss. 3 I. Background 4 Plaintiff, Thomas Mattos, is “the rightful and lawful owner” of the residence 5 located at 266 E. Fig Lane, Corning CA 96201 (“Subject Property”).1 (Compl. ¶ 1.) 6 Plaintiff alleges he is the “successor in interest” of the Subject Property following the 7 death of Nancy Mattos. (Id. at 1.) In March 2013, Nancy Mattos obtained a home loan 8 of $110,800.00 from Bank of America, N.A., secured by the Subject Property, which 9 was memorialized in a Deed of Trust. (Id. ¶ 9.) The Deed of Trust was then assigned 10 twice: first from the Bank of America, N.A. to Fannie Mae (id. ¶ 10,) then from Fannie 11 Mae to Defendant, Nationstar Mortgage (id. ¶ 11). 12 In August 2023, Nancy Mattos passed away and Defendant was sent her death 13 certificate via mail. (Id. ¶¶ 14, 16.) Plaintiff alleges he was advised that he was the 14 “successor in interest” and wanted to confirm himself as such. (Id. ¶ 16.) Plaintiff 15 submitted documents and attempted to make payments on the Loan via phone. (Id. 16 ¶¶ 17, 18.) However, Defendant did not accept any payments from Plaintiff since “he 17 was not on the loan.” (Id. ¶ 18.) 18 Between August 2023 and October 2023, Defendant continued to send notices 19 to the deceased Nancy Mattos at the Subject Property. (See id. ¶ 32.) In January 20 2024, Defendant recorded a Substitution of Trustee in the records which replaced 21 Reconstruct Company with America West Lender Services, LLC as the trustee under 22 the Deed of Trust. (Mot. at 1.) That same month, a Notice of Default and Election to 23 Sell Under Deed of Trust was recorded. (Compl. ¶ 12.) The Notice reflected that 24 $5,639.73 was past due and owing under the Loan as of January 24, 2024. (Mot. at 2.) 25 This Notice, and the accompanying declaration, lists Nancy Mattos as the “borrower”

26 1 As an initial matter, the Court notes that there are several inconsistencies in the Plaintiff’s pleadings, 27 with regard to both factual allegations and legal citations. Should Plaintiff’s attorney amend, the Court suggests ensuring these inconsistencies are fixed. Where applicable, Plaintiff should also state causes 28 of action individually rather than raising them within other causes of action. 1 and represents that Defendant “tried with due diligence” to contact her—a confusing 2 effort given that (1) she had been dead for five months (2) Plaintiff alleged to have sent 3 Defendant’s her death certification and (3) Plaintiff had reached out about being 4 confirmed as a successor in interest. (See ECF No. 1-5, Ex. D at 5.) 5 In April 2024, a Notice of Trustee’s Sale was recorded, the sale date was set for 6 May 28, 2024, and the Subject Property was sold on that date. (Compl. ¶ 13.) A 7 Trustee’s Deed Upon Sale was recorded on June 25, 2024, reflecting the foreclosure 8 of the Subject Property and transfer of interest in the Subject Property to Black Rock 9 Real Estate Investments, LLC. (Mot. at 2.) 10 Plaintiff now seeks compensatory and injunctive relief from Defendant based 11 on several causes of action. First, Plaintiff alleges three violations of the California 12 Homeowners Bill of Rights: sections 2923.5, 2924.9, and 2924.11. Plaintiff also brings 13 causes of action for wrongful foreclosure, violations of the California Business and 14 Professions Code Section 17200, and a cancellation of instruments. 15 This action was initially filed in the Superior Court of the State of California, 16 County of Tehama. (See ECF No. 1 at 1). Defendant removed the matter to this Court 17 on diversity jurisdiction grounds and now moves to dismiss the complaint.2 (Id.) The 18 parties submitted a joint motion to submit the pleadings without oral argument. (ECF 19 No. 9). The Court granted the request pursuant to Local Rule 230(g). (ECF No. 10.) 3 20 //// 21 ////

22 2 Although Plaintiff does not challenge the Court’s jurisdiction, the Court finds that diversity jurisdiction 23 is satisfied here because (1) complete diversity exists and (2) the amount in controversy appears to exceed $75,000. Plaintiff does not dispute that the amount in controversy is met. See Dark Cherokee 24 Basin Operating Co., LLC v. Owens, 574 U.S. 81, 83 (2014) (“[W]hen a defendant seeks federal-court adjudication, the defendant’s amount in controversy allegation should be accepted when not contested 25 by the plaintiff or questioned by the court.”). 26 3 Defendant requests judicial notice of several documents located in the Official Records of the Tehama County Recorder’s Office. The Court GRANTS the request as to the Deed of Trust recorded in the 27 Official Records (ECF No. 4-1) which is also incorporated into the Complaint by reference (see ECF No. 1-5, Ex. A). The Court need not consider the other documents contained in the request for judicial 28 notice, and the remainder of the request is DENIED on that basis. 1 II. Motion to Dismiss for Failure to State a Claim 2 A. Legal Standard 3 A party may move to dismiss “for failure to state a claim upon which relief can 4 be granted.” Fed. R. Civ. P.12(b)(6). The motion may be granted only if the complaint 5 lacks a “cognizable legal theory or sufficient facts to support a cognizable legal 6 theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). 7 The court assumes all factual allegations are true and construes “them in the light 8 most favorable to the nonmoving party.” Steinle v. City & Cnty. S.F., 919 F.3d 1154, 9 1160 (9th Cir. 2019). However, if the complaint’s allegations do not “plausibly give 10 rise to an entitlement of relief” the motion must be granted. Ashcroft v. Iqbal, 556 U.S. 11 662, 679 (2009). A complaint need only contain “a short and plain statement of the 12 claim showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), not “detailed 13 factual allegations.” Bell. Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, 14 this rule demands more than unadorned accusations; “sufficient factual matter” must 15 make the claim at least plausible. Iqbal, 556 U.S. at 678. In the same vein, conclusory 16 or formulaic recitations of elements do not alone suffice. Id. “A claim has facial 17 plausibility when the plaintiff pleads factual content that allows the court to draw the 18 reasonable inference that the defendant is liable for the misconduct alleged.” Id.4 19 Generally, “a district court may not consider any material beyond the pleadings 20 in ruling on a 12(b)(6) motion.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 21 2001) (citation omitted), overruled on other grounds by Galbraith v. County of Santa 22 Clara, 307 F.3d 1119 (9th Cir. 2002). If a court considers evidence outside the 23 pleadings on a Rule 12(b)(6) motion, it must “normally convert the 12(b)(6) motion into 24 a Rule 56 motion for summary judgment, and it must give the nonmoving an 25

26 4 The Defendant moves to dismiss on both 12(b)(1) and 12(b)(6) grounds. However, given the nature of the arguments presented, the Court finds that the instant Motion is most appropriately resolved under 27 Rule 12(b)(6). See e.g., Lawrence v. Cenlar F.S.B., No. 1:22-cv-01627-JLT-CDB, 2024 WL 4093227, at *2 (E.D. Cal. Sept. 5, 2024); Marasigan v. MidFirst Bank, No. 3:23-cv-00634-H-MMP, 2023 WL 3470128, at 28 *1–2 (S.D. Cal. May 15, 2023). 1 opportunity to respond.” United States v. Ritchie, 342 F.3d 903, 907–08 (9th Cir. 2 2003). That said, the court may consider “documents attached to the complaint, 3 documents incorporated by reference in the complaint or matters of judicial matters — 4 without converting the motion to dismiss into a motion for summary judgment.” Id. at 5 908 (citation omitted). 6 B. First, Second and Third Causes of Action: HBOR Claims 7 The California HBOR was enacted in response to the ongoing mortgage 8 foreclosure crisis in 2012. Morris v. JP Morgan Chase Bank, N.A., 78 Cal. App. 5th 279, 9 295 (2022). The HBOR “is principally designed to ensure that ‘as part of the 10 nonjudicial foreclosure process, borrowers are considered for, and have a meaningful 11 opportunity to obtain, available loss mitigation options, if any, offered by or through 12 the borrower’s mortgage servicer, such as loan modifications or alternatives to 13 foreclosure.’” Id. (quoting Cal. Civ. Code § 2923.4). Plaintiff raises three causes of 14 action based on separate statutory violations of the HBOR. First, Plaintiff alleges a 15 violation of section 2923.5 for failing to notify the homeowner about possible 16 foreclosure and waiting thirty days after notice to record a notice of default. Second, 17 Plaintiff alleges a violation of section 2924.9, for failure to provide the homeowner 18 with foreclosure alternatives. Lastly, Plaintiff alleges a violation of section 2924.11 for 19 dual tracking. 20 The first issue the Court considers is whether the Plaintiff is a “borrower” for 21 purposes of bringing these causes of action under the HBOR. See id. at 297 22 (analyzing first whether the plaintiff met the statutory definition of a “borrower” to 23 bring claims that were limited to borrowers under the HBOR). Not all parties may 24 bring causes of action under the HBOR. Section 2920.5 defines “borrower” for 25 purposes of several HBOR sections5 as “any natural person who is a mortgagor or 26 trustor and who is potentially eligible for any federal, state, or proprietary foreclosure

27 5 The definition of “borrower” applies to sections 2923.4, 2923.5, 2923.55, 2923.6, 2923.7, 2924.9, 28 2924.10, 2924.11, 2924.18 and 2924.19. See Cal. Civ. Code § 2920.5(c)(1). 1 prevention alternative program offered by, or through, his or her mortgage servicer.” 2 Cal. Civ. Code § 2920.5(c)(1). Here, Plaintiff alleges that he is the successor in interest 3 to the Subject Property and is therefore permitted to bring suit under the HBOR. 4 The HBOR previously included a provision specifically granting successors in 5 interest certain rights. See Mazzone-Urie v. OneWest Bank FSB, No. 3:21-cv-06075- 6 EMC, 2024 WL 4894288, at *6 (N.D. Cal. Nov. 25, 2024) (explaining the rights a 7 successor in interest previously had under the HBOR). However, that section was 8 repealed in January 2020. Cal. Civ. Code § 2920.7 (2019). Since then, district courts 9 within the Ninth Circuit have held that a successor in interest does not have standing 10 under the HBOR to bring certain causes of action. See e.g., Mazzone-Urie, 2024 WL 11 4894288, at *6 (discussing that the plaintiff was not a “borrower” for purposes of her 12 HBOR claim because the rights plaintiff had as a successor in interest were repealed); 13 Duarte v. Rushmore Loan Mgmt. Servs., LLC, No. 5:23-cv-01101-MCS-KK, 2023 WL 14 9420443, at *3 (C.D. Cal. Dec. 5, 2023) (rejecting Plaintiff’s argument that he can bring 15 an HBOR claim under section 2924.9(a) as a successor in interest based on the more 16 expansive definition of “borrower” used in a different section); Marasigan v. MidFirst 17 Bank, 2023 WL 3470128, at *3 (finding that plaintiff, a successor in interest, did not 18 have standing to bring HBOR claims under section 2923.5 or 2924.9 because she was 19 not a borrower under the plain language of the statute). The Court also finds it 20 informative that the HBOR expands the definition of “borrower” to encompass 21 successors in interest in certain provisions but has not done so with respect to the 22 causes of actions brought by the Plaintiff here. Compare Cal. Civ. Code § 2929.5(e)(1) 23 (defining “borrower” for that provision to include “any successor-in-interest of the 24 trustor or mortgagor to the real property”). Given that the Legislature has specified 25 when it intends “borrower” to include successors in interest, its failure to do so for the 26 provisions on which Plaintiff is suing is dispositive. Because Plaintiff has failed to 27 establish that he is a statutorily recognized “borrower”, Plaintiff’s claims under the 28 HBOR are dismissed with leave to amend. 1 C. Fourth Cause of Action: Wrongful Foreclosure Claim 2 Plaintiff next brings a cause of action for wrongful foreclosure. Specifically, 3 Plaintiff claims that Defendant wrongfully foreclosed in violation of HBOR sections 4 2923.5, 2924.9, 2924.1, and in violation of 12 C.F.R. § 1024.41. Wrongful foreclosure 5 “is an equitable action to set aside a foreclosure sale, or an action for damages 6 resulting from that sale, on the basis that the foreclosure was improper.” Sciarratta v. 7 U.S. Bank, Nat’l Ass’n, 247 Cal. App. 4th 552, 561 (2016). To state a claim for wrongful 8 foreclosure under California law, a plaintiff must allege: “(1) the trustee or mortgagee 9 caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a 10 power of sale in a mortgage or deed of trust; (2) the party attacking the sale was 11 prejudiced or harmed; (3) and in cases where the trustor or mortgagor challenges the 12 sale, the trustor or mortgagor tendered the amount of the secured indebtedness, or 13 was excused from tendering. Miles v. Deutsche Bank Nat’l Tr. Co., 236 Cal. App. 4th 14 394, 408 (2015). “[M]ere technical violations of the foreclosure process will not give 15 rise to a tort claim; the foreclosure must have been entirely unauthorized on the facts 16 of the case.” Sciarratta, 247 Cal. App. 4th at 562 (citation omitted). Defendant 17 challenges Plaintiff’s claim for failing to meet the necessary elements. 18 Looking at the first requirement, Plaintiff has not adequately alleged that an 19 “illegal, fraudulent or willfully oppressive sale of real property has occurred.” Plaintiff 20 instead summarily states that one took place. To the extent that Plaintiff relies on the 21 HBOR violations he cited above, the Court has not found that those are suitable 22 causes of action which would support a showing that an improper sale occurred. 6 See 23 e.g., Lawrence, 2024 WL 4093227, at *6 (explaining that no illegal sale occurred 24 where allegations were based on unsuccessful HBOR claims). Thus, this requirement 25 is not satisfied.

26 6 In the Complaint Plaintiff also references 12 C.F.R § 1024.41, however that provision does not support 27 the argument that Plaintiff makes. Additionally, in the Opposition, Plaintiff makes allegations of negligence. As these allegations are not in the operative Complaint, the Court does not consider them. 28 Plaintiff may add additional causes of action, should he amend. 1 The Court is also not convinced that tender has been met. The tender rule 2 applies to equitable claims such as wrongful foreclosure and is “premised on the 3 notion that it would be futile to set aside a foreclosure sale on the technical grounds 4 that notice was improper, if the party making the challenge did not first make full 5 tender and thereby establish his ability to purchase property.” Warren v. PNC Bank, 6 Nat’l Ass’n, 671 F. Supp. 3d 1035, 1047 (N.D. Cal. 2023) (citations omitted). The 7 tender rule also has implications for Plaintiff’s ability to bring such a claim. See 8 Santana v. BSI Fin. Servs., Inc., 495 F. Supp. 3d 926, 937 (S.D. Cal. 2020) (analyzing 9 defendant’s argument that plaintiffs lacked standing for failure to tender the full 10 amount). To satisfy the tender rule, “a plaintiff seeking to set aside an irregular sale 11 must allege tender of the full amount of the loan to maintain any cause of action that 12 either is based on the wrongful foreclosure allegations or seeks redress from that 13 foreclosure.” Turner v. Seterus, Inc., 27 Cal. App. 5th 516, 525 (2018). 14 California law recognizes some exceptions to the tender rule where: (1) the 15 underlying debt is void; (2) the foreclosure sale or trustee’s deed is void on its face; (3) 16 a counterclaim offsets the amount due; (4) specific circumstances make it inequitable 17 to enforce the debt against the party challenging the sale; or (5) the foreclosure sale 18 has not yet occurred. Chavez v. Indymac Mortg. Servs., 219 Cal. App. 4th 1052, 1062 19 (2013). 20 Here, Plaintiff does not allege that he tendered the amount on the mortgage. 21 Rather, Plaintiff alleges that he is “excused from the tender requirement because of 22 [Defendant’s] violations of” the HBOR. (Compl. ¶ 58.) However, Plaintiff has not 23 shown that the HBOR would apply here such that tender would be excused. See 24 Lawrence, 2024 WL 4093227, at *7 (dismissing wrongful foreclosure claim where 25 plaintiffs failed to plead facts demonstrating that they were excused from the tender 26 rule); compare Santana, 495 F. Supp. 3d at 948 (denying dismissal of plaintiff’s 27 wrongful foreclosure claim where it was premised on an adequately alleged HBOR 28 violation that did not require a showing of tender). Thus, the Court GRANTS 1 Defendant’s Motion to Dismiss as to Plaintiff’s wrongful foreclosure claim with leave to 2 amend. 3 D. Fifth Cause of Action: Violations of California Business & Professions 4 Code Section 17200 “UCL” 5 The UCL prohibits any “unlawful, unfair or fraudulent business act.” Cal. Bus. & 6 Prof. Code. § 17200. A defendant violates the UCL if its act is “unlawful,” “unfair” or 7 “fraudulent.” See McGarvey v. JP Morgan Chase Bank, N.A., No. 2:13-cv-01099 KJM, 8 2013 WL 5597148, at *7 (E.D. Cal. Oct. 11, 2013) (quoting Rubio v. Capitol One Bank, 9 613 F.3d 1195, 1203 (9th Cir. 2010)). The statute is disjunctive such that “[e]ach prong 10 of the UCL is a separate and distinct theory of liability.” Lozano v. AT&T Wireless 11 Servs., Inc., 504 F.3d 718, 731 (9th Cir. 2007). Plaintiff alleges violations under all 12 three prongs. Specifically, Plaintiff claims that Defendant violated the Homeowner Bill 13 of Rights, negligently made false misrepresentations, violated 12 C.F.R. § 1024.41, 14 and misled Plaintiff as to the status of his loan modification and what needed to be 15 done. Defendant argues that Plaintiff lacks standing to bring claims under the UCL 16 and that all three causes of action fail. 17 1. UCL Standing 18 Defendant argues that Plaintiff lacks standing because he is not the borrower 19 and because the borrower on the loan, Nancy Mattos, defaulted prior to the 20 Defendant committing any of the alleged business practices. Plaintiff contends that 21 standing exists because he has alleged a loss in a present or future property interest 22 and suffered damages in taking the time and effort to find alternatives to foreclosure. 23 Standing under the UCL is a two-part inquiry. A party must establish a loss or 24 deprivation of money or property sufficient to qualify as injury in fact and show that 25 the economic injury was the result of the unfair business practice or false advertising 26 that is the gravamen of the claim. Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 27 322 (2011). “The phrase ‘as a result of’ in its plain and ordinary sense means ‘caused 28 by’ and requires a showing of causal connection or reliance on the alleged 1 misrepresentation.” Id. (citation omitted). For “fraudulent” claims, a plaintiff must 2 allege that the plaintiff actually relied on the purposed misrepresentations. In re 3 Tobacco II Cases, 46 Cal. 4th 298, 326 (2009). A plaintiff fails to “satisfy the causation 4 requirement if he or she would have suffered the same harm whether or not a 5 defendant complied with the law.” In re Turner, 859 F.3d 1145, 1151 (9th Cir. 2017) 6 (citation and quotation marks omitted). 7 Here, Plaintiff stated an injury in fact through the alleged loss of his home. See 8 Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 82 (2013) (holding that 9 the sale of a home through foreclosure is “certainly a deprivation of property to which 10 a plaintiff has a cognizable claim.”). Plaintiff has also successfully alleged causation for 11 purposes of the “unfair” and “unlawful” UCL prongs. Plaintiff argues that he attempted 12 to take actions to prevent foreclosure on the Subject Property, namely by attempting 13 to make payments on the loan, but that due to Defendant’s actions, he was unable to 14 prevent foreclosure. Thus, Plaintiff has tied the economic loss to the Defendant’s 15 actions. However, Plaintiff has not established the causation requirement for a fraud 16 claim under the UCL. While the Complaint states that Defendant “negligently made 17 false representations,” it does not state that Plaintiff actually relied on them. As such, 18 the Plaintiff does not have standing to bring a UCL fraud claim. See e.g., Marasigan, 19 2023 WL 3470128, at *7 (finding Plaintiff failed to adequately plead standing to bring 20 a UCL fraud claim where the only allegations supporting actual reliance were that 21 defendant “negligently made false representations.”). 22 As to the Defendant’s argument that standing fails because Plaintiff caused his 23 own harm through defaulting on the loan, the Court is not convinced that this warrants 24 dismissal. Defendant relies on Jenkins v. JP Morgan Chase Bank, where a Plaintiff 25 failed to establish causation because she alleged that she defaulted on her loan, 26 thereby causing her impending foreclosure. 216 Cal. App. 4th 497, 523 (4th Dist. 27 2013) disapproved on other grounds by Yvanova v. New Century Mortg. Corp., 62 Cal. 28 4th 919 (2016). Here, however, Plaintiff attempted to make payments prior to when 1 the Notice of Default was filed. Moreover, Plaintiff is not the borrower on the loan, has 2 made no allegations of default, and alleges that Defendant behaved improperly 3 leading up to the Notice of Default. Compare id. (describing that the plaintiff 4 borrower defaulted on her loan which triggered the power of sale clause in the deed 5 of trust and it was that which subjected her home to nonjudicial foreclosure not the 6 defendants’ alleged wrongful acts) (emphasis added); Petrey v. Wells Fargo Bank, 7 N.A., No. 2:17-cv-00503-TLN-DB, 2018 WL 5099279, at *11–12 (E.D. Cal. Oct. 15, 8 2018) (dismissing a UCL claim for lack of causation where it was undisputed that 9 plaintiff borrower defaulted on the mortgage payments and not sufficiently pleading a 10 viable theory regarding the impropriety of the default) (emphasis added). Thus, it is 11 plausible that Plaintiff’s loss was the result of Defendant’s conduct, rather than 12 Plaintiff’s own behavior. As such, the Plaintiff has standing to bring causes of action 13 under the “unfair” and “unlawful” prongs of the UCL. 14 2. Merits Arguments for the Unlawfulness and Unfairness UCL 15 Claims 16 Plaintiff first claims that Defendant violated the UCL’s “unlawfulness” prong. 17 The unlawful prong of the UCL requires that the plaintiff sufficiently plead some 18 separate unlawful offense. See Rivera v. BAC Home Loans Servicing, L.P., 756 F. Supp. 19 2d 1193, 1200–01 (N.D. Cal. 2010) (citations omitted). For the reasons stated above, 20 supra II.B, Plaintiff has failed to plausibly allege a violation of the HBOR. Plaintiff also 21 raises, within the UCL cause of action, a violation of 12 C.F.R. § 1024.41. The Court 22 finds that this allegation is insufficient to plausibly allege a violation of 12 C.F.R. 23 § 1024.41. See e.g. Marasigan, 2023 WL 3470128, at *7 (explaining that plaintiff 24 alleging within a UCL cause of action a violation of 15 U.S.C. § 1641(g) was insufficient 25 under the “unlawful” prong). Thus, the Court finds that Plaintiff has failed to state a 26 cause of action under the UCL based on any unlawful activity. 27 Next, Plaintiff claims that the Defendant violated the unfairness prong of the 28 UCL. The unfairness prong of the UCL provides a cause of action for a business 1 practice that is unfair even if not proscribed by another law. Korea Supply Co. v. 2 Lockheed Martin Corp., 29 Cal. 4th 1134, 1143 (2003). The UCL does not explicitly 3 define “unfair” and the proper definition of unfair conduct against consumers is 4 currently in flux among California courts. See Obertman v. Electrolux Home Care 5 Prods., 482 F. Supp. 3d 1017, 1027 (E.D. Cal. 2020) (“There is some confusion in the 6 law over the applicable test for ‘unfair’ conduct.”). 7 Whether conduct is unfair can be determined in one of two ways: (1) by 8 establishing that the conduct offends “some legislatively declared policy” (the 9 “tethering” test) or (2) by weighing the utility of the conduct against the harm to the 10 consumer (the “balancing” test). Day v. GEICO Cas. Co., 580 F. Supp. 3d 830, 844–45 11 (N.D. Cal. 2012) (citing Lozano, 504 F.3d at 735 and Davis v. HSBC Bank Nevada, N.A., 12 691 F.3d 1152, 1169 (9th Cir. 2012)). While the California Supreme Court has 13 rejected the balancing test in favor of the tethering test in competitor suits under the 14 UCL, it has failed to clarify whether the tethering test is the sole test that should apply 15 to consumer suits as well. Cel-Tech Commc’ns, Inc., v. Los Angeles Cellular Tel. Co., 16 20 Cal. 4th 163, 186–87 (1999); see Capito v. San Jose Healthcare Sys., LP, 17 Cal. 5th 17 273, 284 (2024) (“[T]he standard for determining which business acts or practices are 18 ‘unfair’ in consumer actions under the UCL is currently unsettled.”); Nationwide 19 Biweekly Admin., Inc., v. Superior Ct. of Alameda County., 9 Cal. 5th 279, 303–04 20 (2020) (acknowledging a split in California courts but declining to address whether the 21 tethering test also applies to consumer suits). 22 In the absence of such guidance, the Ninth Circuit has endorsed the use of the 23 balancing test for consumer suits but has in practice reviewed unfairness under both 24 the balancing and tethering tests. Lozano, 504 F.3d at 736 (stating that the two tests 25 are not mutually exclusive); Davis, 691 F.3d at 1170 (finding that plaintiff failed to state 26 a claim under either the balancing or tethering tests); see also Doe v. CVS Pharmacy, 27 982 F.3d 1204, 1215 (9th Cir. 2020). While Defendant only addresses the tethering 28 1 test and Plaintiff only references the balancing test, in accordance with the Ninth 2 Circuit’s instruction, the Court has considered Plaintiff’s claim under both standards. 3 Although not a model of clarity, Plaintiff plausibly alleges an unfair business 4 practice under the “balancing test.” Here, Plaintiff alleges that the information 5 provided to him was “certainly misleading and not consistent as to the status of the 6 loan modification and what [he] was supposed to do to satisfy the lender’s demands.” 7 (Compl. ¶ 9.) Plaintiff contends that he was advised that he was the successor in 8 interest, that a packet would be sent to him, that he submitted all required documents 9 proving he was the successor in interest and attempted to make payments over the 10 phone. (Compl. ¶¶ 17, 18.) While Plaintiff was attempting to be confirmed as the 11 successor in interest, Defendants continued to send letters to the deceased borrower 12 and initiated foreclosure proceedings. The home was ultimately foreclosed on. 13 Defendant’s policies resulted in Plaintiff, an individual who plausibly alleges that he 14 followed the proper procedures to take over the loan, losing his principal residence. 15 Defendant’s practices may have utility in ensuring that they are communicating with 16 the actual borrower. However, it is unclear how these practices would provide utility 17 to the Defendant such that they would outweigh the harm to the consumer in this 18 instance. Taking these allegations together the Court finds that it is plausible that 19 Defendants engaged in unfair practices. 20 Given that Plaintiff has stated a cause of action under the balancing test, the 21 Court does not reach the tethering test. Following the Ninth Circuit’s decision in Doe 22 v. CVS Pharmacy, at least one district court has found that UCL claims may succeed 23 where only the balancing test is met. See e.g., Schmitt v. SN Servicing Corp., No. 3:21- 24 cv-03355-WHO, 2021 WL 5279822, at *7 (N.D. Cal. Nov. 12, 2021) (denying dismissal 25 of a UCL unfairness claim where the balancing test was satisfied but the tethering test 26 failed in a consumer suit). Thus, the Court DENIES Defendant’s Motion to Dismiss 27 Plaintiff’s UCL unfairness claim. 28 //// 1 E. Sixth Cause of Action: Cancellation of Written Instruments 2 Lastly, Plaintiff seeks a cancellation of written instruments arguing that the 3 notice of default and notice of trustee’s sale are voidable or void ab initio. A “written 4 instrument, in respect to which there is a reasonable apprehension that if left 5 outstanding it may cause serious injury to a person against whom it is void or 6 voidable, may, upon his application, be so adjudged, and ordered to be delivered up 7 or cancelled.” Cal. Civ. Code § 3412. To make this showing, a plaintiff must prove “(1) 8 the instrument is void or voidable due to, for example, fraud; and (2) there is a 9 reasonable apprehension of serious injury including pecuniary loss or the prejudicial 10 alteration of one’s position.” U.S. Bank Nat’l Ass’n v. Naifeh, 1 Cal. App. 5th 767, 778 11 (2016). Essentially, Plaintiff must “plausibly allege that the document Plaintiff wishes to 12 cancel is invalid.” See Marasigan, 2023 WL 3470128, at *8 (citation omitted). 13 Here, Plaintiff makes conclusory statements that (1) the instruments are 14 “voidable or void ab initio,” (2) Plaintiff would be injured given the violations of HBOR 15 sections, and (3) Plaintiff seeks to cancel the instruments. These allegations are not 16 enough to state a viable claim, especially given the Court’s decision to dismiss the 17 HBOR claims. See Zendejas v. GMAC Wholesale Mortg. Corp., No. 1:10-cv-0184 18 OWW-GSA, 2010 WL 2629899, at *7 (E.D. Cal. June 29, 2010) (finding that merely 19 indicating that instruments are void or voidable without explaining why is insufficient 20 under section 3412); Marasigan, 2023 WL 3470128, at *8 (dismissing a cancellation of 21 instruments claim for conclusory statements without accompanying facts). Thus, 22 Plaintiff has failed to allege a cause of action to seek a cancellation of written 23 instruments. 24 III. Conclusion 25 For the reasons above, the Court GRANTS Defendant’s Motion to Dismiss (ECF No. 26 3) with respect to the First, Second, Third, Fourth, and Sixth causes of action with leave 27 to amend. The Court also GRANTS Defendant’s Motion to Dismiss with respect to the 28 Fifth cause of action is it pertains to claims under the UCL’s unlawfulness and 1 | fraudulence prongs with leave to amend. The Court DENIES Defendant's Motion to 2 | Dismiss with respect to the Fifth cause of action as it pertains to unfair business 3 | practices. Plaintiff shall file a First Amended Complaint within twenty-one days of this 4 | order. 5 6 IT 1S SO ORDERED. 7 | Dated: _April 30, 2025 Donel J Hon. Daniel alabretta 8 UNITED STATES DISTRICT JUDGE 9 10 11 12 | DJC6- MATTOS24cv02508.mtd 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15