NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

WILLHITE, J.

After defaulting on a secured loan and failing to secure a third loan modification, plaintiff sued his lender (among others) for damages, declaratory relief, and to prevent a foreclosure sale. The trial court sustained the lender's demurrer to the complaint without leave to amend, and dismissed the lawsuit. We affirm.

FACTUAL BACKGROUND1

In July 2004, plaintiff and appellant Matthew Andreef (appellant) obtained a mortgage loan (Loan) from World Savings Bank, FSB (WSB). WSB was a federal savings bank (FSB), chartered under the federal Home Owners' Loan Act (HOLA), 12 U.S.C. section 1461, et seq., the primary regulator of which was the federal Office of Thrift Supervision (OTS). Appellant's Loan with WSB succeeded to Wachovia Mortgage, FSB, and ultimately, to defendant and respondent Wells Fargo, N.A. (Wells Fargo). The Loan was memorialized in a promissory note (Note) secured by a deed of trust on a residential property in Burbank (Property).

Appellant became delinquent on his payments on the Loan and, in October 2006 and August 2009, entered into loan modification agreements with Wells Fargo. Appellant again defaulted on the Loan in November 2009. In April 2012, Wells Fargo's agent, Cal-Western Reconveyance Corp. (Cal-Western), recorded a Notice of Default on the Property. In March 2017, Cal-Western issued a Notice of Trustee's sale.

Between 2012 and 2016, appellant "submitted several loan modification packages," each of which was denied. Appellant appealed from the final denial in July 2016. In October 2016, Wells Fargo informed appellant that "his appeal had `fell [sic] out of the [loan] modification process[,]'" and "he would need to resubmit a completely new loan modification application." In March 2017, when Cal-Western recorded a notice of trustee's sale (foreclosure), the Loan balance was $453,412.98.

In April 2017, appellant "re-submitted another application for a loan modification." On April 26, 2017, Wells Fargo informed appellant that his application had been denied, "based on the results of [appellant's] net present value (NPV) evaluation." He was given 36 days to appeal the denial. On May 15 and May 22, 2017, appellant contacted Wells Fargo to request the NPV evaluation on which the denial was based. Wells Fargo mailed the NPV information to appellant on May 22, 2017.

On May 31, 2017, appellant submitted an appeal from the loan modification denial. He provided an appraisal indicating that the Property was in a state of severe disrepair and worth only $340,000, approximately $200,000 less than Wells Fargo's appraised amount. On June 5, 2017, Wells Fargo informed appellant he would have to pay $200 by June 20, 2017, to obtain a reappraisal.

Appellant alleges that he timely submitted $200 for a new appraisal. Documentation submitted by Wells Fargo in opposition to appellant's request for a preliminary injunction reflects that appellant did not remit the $200 payment for the reappraisal until at least July 5, 2017. In late June 2017, Wells Fargo informed appellant that his request for a loan modification was under review. On July 19, 2017, Wells Fargo informed appellant that it had "recently reviewed [his] loan," that his "previously remitted funds" of $200 were being returned because the amount was "less than the total amount required to bring [his] loan current," and that it would proceed with foreclosure. It is undisputed that foreclosure occurred on May 23, 2018.

PROCEDURAL BACKGROUND

On August 2, 2017, appellant filed this action against Wells Fargo among others, seeking damages and declaratory and injunctive relief. Appellant alleged six causes of action, as follows: (1) declaratory relief; (2) fraud; (3) negligence; (4) lack of standing to foreclose under Civil Code section 2924 [for unauthorized recording of notice of default]; (5) lack of standing under Civil Code section 2923.6, et seq.; and (6) unlawful business practices in violation of Business and Professions Code section 17200 [failure to comply with California's statutes governing non-judicial foreclosure].

On August 3, 2017, the court granted appellant's ex parte request for a temporary restraining order barring foreclosure, and set an OSC re: Preliminary Injunction. Wells Fargo demurred to the complaint. At the court's request, Wells Fargo submitted evidence reflecting that appellant did not tender payment for the reappraisal until at least July 5, 2016.

A joint hearing on the OSC and demurrer was conducted on October 20, 2017. Following that hearing, the court adopted its tentative ruling denying appellant's request for a preliminary injunction, and sustained Wells Fargo's demurrer without leave to amend. Appellant filed a timely notice of appeal from the November 15, 2017 judgment and dismissal of the action.2

On December 20, 2018, the California Attorney General filed an amicus curiae brief. Wells Fargo filed a response to the brief of amicus curiae on January 15, 2019.

DISCUSSION

1. Standard of Review

We independently review a judgment dismissing an action after an order sustaining a demurrer without leave to amend to determine whether the complaint alleges facts sufficient to state a cause of action on any legal theory or discloses a complete defense. (Akopyan v. Wells Fargo Home Mortgage, Inc. (2013) 215 Cal.App.4th 120, 130-131 (Akopyan); Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 833 (Tenet Healthsystem).) In making this determination, we assume the truth of properly pleaded material facts, but not contentions, deductions or conclusions of fact or law; we may also consider matters subject to judicial notice. (Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924.) "`[W]e decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse. [Citation.]' [Citation.]" (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 61; see Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1387, fn. 16.)

The burden of showing the pleaded facts are sufficient to establish each element of a cause of action and overcome the legal grounds on which the demurrer was sustained, or that "`there is a reasonable possibility that the defect [in the pleading] can be cured by amendment'" rests squarely on appellant. (Tenet Healthsystem, supra, 245 Cal.App.4th at p. 833; Bergeron v. Boyd (2014) 223 Cal.App.4th 877, 890.) Such a showing may be made for the first time on appeal. (Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1044 ["having requested an opportunity to amend in the trial court is not a condition precedent to [the appellate court] granting such relief"].)

2. Whether Preemption Applies

Appellant's claims for fraud, negligence and unfair business practices are premised on the theory that Wells Fargo violated section 2923.6 of what is commonly referred to as the "Homeowners' Bill of Rights" (HOBR), Civil Code sections 2920.5 et seq.,3 by proceeding with foreclosure to collect its debt, notwithstanding appellant's pending application for a loan modification.4 Appellant, supported by Amicus Curiae, argues that his claims are not preempted by HOLA because the misconduct allegedly committed by Wells Fargo occurred after the Loan was transferred from WSB, and Wells Fargo is not entitled to invoke HOLA preemption.5

a. Federal Preemption in the Area of National Banking, Generally

The Supreme Court has long held that federal law is supreme over state law in the area of national banking. (Watters v. Wachovia Bank, N.A. (2007) 550 U.S. 1, 10-11.) As we explained in Akopyan, the "supremacy clause of the United States Constitution requires courts to follow federal rather than state law if, in enacting a federal statute, Congress intended to set aside state law. [Citation.]" (Akopyan, supra, 215 Cal.App.4th at pp. 137-138.)

Moreover, "Federal regulations have the same preemptive effect as the statutes under which they are promulgated, and the agency's reasonable construction of the statute it is charged with enforcing is entitled to deference. [Citation.] The agency's interpretation of its own regulations controls unless it is plainly erroneous or inconsistent with the regulations. [Citation.]" (Akopyan, supra, 215 Cal.App.4th at p. 138.)

b. HOLA Preemption

The trial court found appellant's state law claims were preempted by HOLA. HOLA, enacted as a result of the Great Depression of the 1930s, was intended "`to provide emergency relief with respect to home mortgage indebtedness' at a time when as many as half of all home loans in the country were in default." (Fidelity Federal Sav. & Loan Assn. v. de la Cuesta (1982) 458 U.S. 141, 159.) Under HOLA, Congress gave the Office of Thrift Supervision (OTS) "plenary authority to issue regulations governing federal savings and loans." (Id. at p. 160, citing 12 U.S.C. § 1464.) "The broad language of [HOLA] expresses no limits on [OTS]'s authority to regulate the lending practices of federal savings and loans." (Id. at p. 161.)

Pursuant to its plenary authority, OTS adopted the now-superseded lending preemption regulation (12 C.F.R. § 560.2), at issue here.[6] (61 Fed.Reg. 50952 (Sept. 30, 1996).) By that regulation, "the OTS announced its intent to preempt `the entire field of lending regulation for federal savings associations,' in order to give them `maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law . . . without regard to state laws purporting to regulate or otherwise affect their credit activities. . . .' (12 C.F.R. § 560.2(a).)" (Akopyan, supra, 215 Cal.App.4th at p. 139; see Silvas v. E*Trade Mortg. Corp. (9th Cir. 2008) 514 F.3d 1001, 1005 (Silvas).) A nonexhaustive list of Examples of state laws preempted by 12 C.F.R. section 560.2(b) includes: "(4) The terms of credit, including amortization of loans and the deferral and capitalization of interest and adjustments to the interest rate, balance, payments due . . . [¶] . . . [and] [¶] (10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages." (12 C.F.R. § 560.2(b)(4), (10).) The determination whether a state law cause of action is encompassed within these regulations focuses on the "functional effect upon lending operations of maintaining the cause of action," not the label attached to a claim. (Naulty v. GreenPoint Mortg. Funding, Inc. (N.D. Cal. 2009) 2009 WL 2870620.) If a state law claim falls within paragraph (b), that law is preempted and the inquiry ends. (Silvas, at p. 1005, fn. 1 [OTS's "construction . . . must be given controlling weight"].)

HOLA and its regulations have been described "as a `radical and comprehensive response to the inadequacies of the existing state system,' and `so pervasive as to leave no room for state regulatory control.'" (Silvas, supra, 514 F.3d at p. 1005, fn. 1; see Fidelity Federal Sav. & Loan Assn. v. de la Cuesta, supra, 458 U.S. at p. 161 ["`It would have been difficult for Congress to give the Bank Board a broader mandate'"]; Lopez v. World Savings & Loan Assn. (2003) 105 Cal.App.4th 729, 738 (Lopez) [HOLA regulations "preempt all state laws purporting to regulate any aspect of the lending operations of a federally chartered savings association, whether or not OTS has adopted a regulation governing the precise subject of the state provision"].)

12 C.F.R. section 560.2(c) "saved from preemption certain state laws . . . `to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a). . . .' (12 C.F.R. § 560.2(c)(1).)" (Akopyan, supra, 215 Cal.App.4th at p. 139.) However, under section 560.2, if a state law affects the lending operations of covered entities, the law is presumptively preempted and that presumption can be overcome only if the law is clearly shown to fit within the confines of paragraph (c). Paragraph (c) is interpreted narrowly, and any doubts must be resolved in favor of preemption. (OTS, Final Rule, 61 Fed.Reg. 50951, 50966-67 (Sept. 30, 1996).) (See Silvas, supra, 514 F.3d at pp. 1004-1005.)

c. Application of HOLA Preemption in This Action

To determine if a state law is preempted by HOLA, the court looks to a list of specific examples provided in section 560.2(b). If that inquiry is not dispositive, it must determine whether the law in question nonetheless affects lending. (Silvas, supra, 514 F.3d at p. 1005.) "Any doubt should be resolved in favor of preemption." (Ibid.)

Wells Fargo is not a federal savings association. But Wells Fargo maintains that, because the Loan originated with an FSB to which Wells Fargo is a successor, HOLA preemption applies. Numerous courts have found that HOLA preemption follows a loan after it is made and as it passes among different holders. However, appellant and Amicus Curiae assert that an increasing number of courts have rejected this rationale and applied HOLA preemption only to conduct that occurred before a loan changed hands from a thrift or FSB to an entity not governed by HOLA. (See e.g., Grigsby v. Wells Fargo Bank, N.A. (C.D. Cal. 2018) 2018 WL 1779338 ["align[ing] itself with `the growing trend'" to reject argument that HOLA preemption may be transferred from a thrift to a non-thrift for conduct arising after the transfer); Penermon v. Wells Fargo Bank (N.D. Cal. 2014) 47 F.Supp.3d 982 (Penermon); Rijhwani v. Wells Fargo Home Mortgage, Inc. (N.D. Cal., Mar. 3, 2014) 2014 WL 8900162, at *7 (Rijhwani); Leghorn v. Wells Fargo Bank, N.A. (N.D. Cal. 2013) 950 F.Supp.2d 1093, 1107-1108 (Leghorn); Hopkins v. Wells Fargo Bank, N.A. (E.D. Cal. 2013) 2013 WL 2253837.) Premised on this authority, appellant and Amicus Curiae assert that "`preemption is not some sort of asset that can be bargained, sold, or transferred.'" (Rijhwani, supra, 2014 WL 8900162, at *7.) They maintain that a non-thrift like Wells Fargo cannot inherit HOLA preemption protection for wrongful acts taken after the federal savings association ceases to exist. (See Hixson v. Wells Fargo Bank N.A. (N.D. Cal. 2014) 2014 WL 3870004; see also Leghorn, supra, 950 F.Supp.2d at p. 1108 [the "timing of the challenged conduct" determines whether HOLA preemption applies to claims against a national bank in cases where the loan originated from a HOLA regulated bank]).7

Appellant's contention that HOLA does not preempt his state claims is premised on what is still a minority view under which the court must consider whether the alleged violations took place when the banking entity was covered by HOLA. Under this view, Wells Fargo inherits the liabilities and possible defenses WSB could raise regarding its own conduct, but is not itself protected with regard to state law violations for loans originated by an entity regulated by HOLA. (Penermon, supra, 47 F.Supp.3d at p. 995.)

Courts are split on this question. Nevertheless, this Court, the OTS and the majority of courts to have addressed the issue have held that HOLA preemption runs with a loan and have applied HOLA preemption broadly. (See Akopyan, supra, 215 Cal.App.4th at pp. 140-141; Lopez, supra, 105 Cal.App.4th at pp. 738, 734-742; Faught v. Wells Fargo Bank, N.A. (E.D. Cal. 2018) 2018 WL 1071269 at *5 (Faught); Heagler v. Wells Fargo Bank, N.A. (E.D. Cal. 2017) 2017 WL 1213370 (Heagler).)

The power to govern thrifts is vested in OTS. (Akopyan, supra, 215 Cal.App.4th at p. 138; Lopez, supra, 105 Cal.App.4th at pp. 734-742; see 12 C.F.R. §§ 545.2, 560.2 (2012) [preemption clauses].) In accordance with the OTS's opinion letters, most courts have held that HOLA preemption applies to a successor-in-interest of a federal savings association.8 (See OTS Opinion Letter, P-2003-5 (July 22, 2003) [state laws cannot apply to the management and servicing of a loan originated by federal savings associations after that loan is sold or assigned to another entity because state law "might interfere with the ability of federal savings associations to sell mortgages . . . originate[d] under a uniform federal system"].) (Akopyan, supra, 215 Cal.App.4th at p. 142.)9 The "rationale for applying preemption to the assignees of federal thrifts is to allow the thrifts themselves greater freedom from state interference." (Akopyan, supra, 215 Cal.App.4th at p. 148.) This rationale has prevailed in the majority of cases that have considered the issue. (See Faught, supra, 2018 WL 1071269 at *5; Heagler, supra, 2017 WL 1213370; Metzger v. Wells Fargo Bank, N.A. (C.D. Cal. 2014) 2014 WL 1689278, at *3-4 (Metzger); Castillo v. Wells Fargo Bank, N.A. (C.D. Cal. 2016) 2016 WL 7479403, at *3; Houman v. Wells Fargo Bank, N.A., (C.D. Cal. 2016) 2016 WL 7444869, at *5); Lopez v. Wells Fargo Bank, N.A. (N.D. Cal. 2016) 2016 WL 283507, at *3; Campos v. Wells Fargo Bank, N.A. (C.D. Cal. 2015) 2015 WL 5145520, at *5; Villareal v. Seneca Mortg. Services (E.D. Cal. 2015) 2015 WL 2374288, at *5; Aldana v. Bank of America, N.A. (C.D. Cal. 2014) 2014 WL 6750276, at *6; Hayes v. Wells Fargo Bank, N.A. (S.D. Cal. 2014) 2014 WL 3014906, at *4.) Persuasive reasoning and the weight of this authority supports our conclusion. Appellant's Loan originated with WSB, an FSB subsequently acquired by Wells Fargo, a national banking association. Our conclusion is aligned with the courts that have concluded that HOLA preemption continues to apply to conduct related to loans originated by a FSB or thrift even after those entities merge into national banking associations. (See, e.g., e.g., Penermon, supra, 47 F.Supp.3d at p. 995 [acknowledging that a contrary holding constitutes the "minority view"]. Appellant's HOBR claims are preempted by HOLA.

d. Appellant Contractually Agreed to be Bound by HOLA

The demurrer was properly sustained for an independent reason. At the time he entered into the Loan, appellant expressly agreed it would be governed by the federal law and regulations applicable to federally chartered savings institutions. Appellant contractually agreed to be bound by HOLA preemption which would travel with the Loan. HOLA applies not only to WSB's conduct in originating the Loan, but also to Wells Fargo's alleged misconduct after succeeding WSB as the lender. (Romero v. Wells Fargo Bank, N.A. (C.D. Cal. 2015) 2015 WL 12781210, at *5; ["where the terms of a loan expressly incorporate federal regulations governing [FSA's], those regulations apply to the conduct of a successor to the loan, even where the successor is not [an FSA]"; Metzger, supra, 2014 WL 1689278.)

Appellant's Note and Deed of Trust each provide: "This Security Instrument and the Secured Notes shall be governed by and construed under federal law and federal rules and regulations, including those for federally chartered savings institutions." The "federal rules and regulations . . . for federally chartered savings institutions" include HOLA and its regulations. (12 C.F.R. § 560.2(a).) Appellant also explicitly agreed that "Lender's rights" under the Deed of Trust would survive a merger: "Any Person who takes over [Lender's] rights or obligations under this Security Instrument will have all of [Lender's] rights and will be obligated to keep all of [Lender's] agreements made in this Security Instrument." The Deed of Trust specifically defines WSB and "ITS SUCCESSORS AND/OR ASSIGNEES" as "Lender . . . A FEDERAL SAVINGS BANK which is organized and exists under the laws of the United States." The Note expands this definition, identifying a "lender" as "anyone to whom [the] Note is transferred." "[I]t is hornbook law that the assignee of a mortgage succeeds to all of the assignor's rights power and equities." (Progressive Consumers Federal Credit Union v. U.S. (1st Cir. 1996) 79 F.3d 1228, 1238.)

Based on language identical to that in the Deed of Trust involved here, courts have found that HOLA preemption obtains after a merger. (See e.g., Marquez v. Wells Fargo Bank, N.A. (N.D. Cal. 2013) 2013 WL 5141689, at *4 (Marquez) ["[G]iven that plaintiffs contracted with a [FSB], and that the parties agreed to be bound by such laws under the terms of the Deed of Trust, the court finds no bar to applying HOLA preemption"]; Carley v. Wells Fargo Bank (N.D. Cal. 2014) 2014 WL 5830146, at *4 [HOLA preemption applies where parties agreed to be bound by such laws under the terms of the Deed of Trust]; Babb v. Wachovia Mortg., FSB (C.D. Cal. 2013) 2013 WL 3985001 at *4 [same]; Appling v. Wachovia Mortg., FSB (N.D. Cal. 2010) 745 F.Supp.2d 961, 971 (Appling) [a loan that originated with WSB remains subject to HOLA following merger with a National Bank]; but see Pimentel v. Wells Fargo, N.A. (N.D. Cal. 2015) 2015 WL 2184305 ["adopt[ing] the minority view of HOLA preemption" to find that "`Wells Fargo . . . inherit[s] the liabilities and possible defenses that Wachovia could raise about its own conduct, [but] . . . itself cannot violate state laws when servicing loans . . . originated by an entity regulated by HOLA'"]; Rijhwani, supra, 2014 WL 890016 at *6-7.)

The OTS adheres to the "principle that loan terms should not change simply because an originator entitled to federal preemption may sell or assign a loan to an investor that is not entitled to federal preemption." (OTS Opinion Letter, P-2003-5 (July 22, 2003).) Courts have largely agreed that, where the terms of a loan expressly incorporate federal regulations governing federal savings associations, those regulations govern the conduct of a successor to the loan, even where the successor is not a federal savings association. (See e.g., Marquez, supra, 2013 WL 5141689, at *4; Babb, supra, 2013 WL 3985001, at *4.) To adopt appellant's analysis and find the Loan not subject to the rules and regulations applicable to FSA's would require us to impermissibly rewrite unambiguous contractual terms. (See Civ. Code, §§ 1638, 1639.)

Appellant's and Amicus Curiae's contention that HOLA preemption does not apply is unpersuasive, and we find no flaw in the trial court's analysis. Appellant expressly agreed the Loan was governed by federal law and regulations for federally chartered savings institutions. In short, he agreed to be bound by HOLA. We continue to adhere to the principle that HOLA preemption travels with a thrift-originated loan, even after it has been sold to a non-thrift like Wells Fargo. (Akopyan, supra, 215 Cal.App.4th at p. 148.)10

3. The Trial Court Did Not Err in Denying Leave to Amend

Appellant contends that the trial court erred in denying his request for leave to amend the complaint. We must determine if there is a reasonable possibility the pleading deficiencies can be cured. (Lueras v. BAC Home Loans Servicing, LP, supra, 221 Cal.App.4th at p. 61; Klein v. Chevron U.S.A., Inc., supra, 202 Cal.App.4th at p. 1387, fn. 16.) It is appellant's obligation to demonstrate there is a reasonable possibility of cure. (Tenet Healthsystem, supra, 245 Cal.App.4th at p. 833.) To satisfy this burden, appellant "`must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading [i.e., state a viable cause of action].'" (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Total Call Internat. Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166.) The trial court cannot be found to have abused its discretion in denying leave to amend if no potentially effective amendment is possible. (Audio Visual Services Group, Inc. v. Superior Court (2015) 233 Cal.App.4th 481, 494.)

The record does not reflect any effort by appellant below to demonstrate a possible cure for the pleading deficiencies, nor has he made an effort on appeal to show a reasonable possibility of such a cure. The trial court considered whether viable amendment was possible. It concluded it did "not appear reasonably possible to correct the defects in the pleadings by amendment because federal law preempt[ed] [appellant's] claims." Appellant has not shown that conclusion was flawed. Instead, he simply "maintains that each cause of action was sufficiently plead." We find no abuse of discretion.

For the forgoing reasons, the court properly found that appellant's state law claims are barred by HOLA preemption, which attaches to Wells Fargo as successor to WSB. (Akopyan, supra, 215 Cal.App.4th at p. 138; Lopez, supra, 105 Cal.App.4th at pp. 734-742; 12 C.F.R. §§ 545.2, 560.2.) In light of our determination, it is unnecessary to address the parties' or Amicus Curiae's remaining arguments.

DISPOSITION

The judgment is affirmed. Costs are awarded to Wells Fargo.

MANELLA, P. J. and MICON, J.*, concurs.