Green v. Central Mortgage Company, No. 3:2014cv04281 - Document 65 (N.D. Cal. 2015)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 55 THE DEFENDANTS' MOTION TO DISMISS THE SECOND AMENDED COMPLAINT. Signed by Magistrate Judge Laurel Beeler on 12/1/2015.(lblc2, COURT STAFF) (Filed on 12/1/2015)

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Green v. Central Mortgage Company Doc. 65 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 San Francisco Division United States District Court Northern District of California 11 ANGELIA GREEN, 12 Case No. 3:14-cv-04281-LB Plaintiff, 13 v. 14 15 CENTRAL MORTGAGE COMPANY, et al., 16 Defendants. 17 ORDER GRANTING IN PART AND DENYING IN PART THE DEFENDANTS’ MOTION TO DISMISS THE SECOND AMENDED COMPLAINT [Re: ECF No. 55] INTRODUCTION 18 The three plaintiffs—Angelia Green in both her individual capacity and her capacity as trustee 19 of the Robert J. Tregre Jr. & Rosia L. Tregre Family Revocable Living Trust (“the Trust”), and the 20 Trust itself—sued three defendants—Central Mortgage Company (“CMC”), PLM Loan 21 Management Services, Inc. (“PLM”), and Deutsche Bank National Trust Company as Trustee for 22 Harborview Mortgage Loan Trust 2007-2 (“Deutsche Bank”)—for violating federal and California 23 law in relation to the denial of her loan modification applications and the foreclosure on her home. 24 (Second Amended Complaint (“SAC”), ECF No. 54.1) The court approved the parties’ stipulation 25 that PLM has non-monetary status pursuant to California Civil Code § 2924l and does not have to 26 participate as a party to this action at this time. (Stipulation and Order, ECF No. 45.) CMC and 27 1 28 Record citations are to documents in the Electronic Case File (“ECF”); pinpoint citations are to the ECF-generated page numbers at the tops of the documents. ORDER (No. 3:14-cv-04281-LB) Dockets.Justia.com 1 Deutsche Bank now have moved to dismiss Ms. Green’s Second Amended Complaint (Motion, 2 ECF No. 55.) Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the 3 court finds this matter suitable for determination without oral argument. The court grants in part 4 and denies in part their motion. STATEMENT 5 6 1. The Plaintiffs’ Allegations 7 In 1977, Ms. Green’s parents, Robert Tregre and Rosia Tregre (the “Tregres”), purchased 8 property at 823 Templeton Avenue, Daly City, California 94104 (the “Property”). (SAC, ECF No. 9 54, ¶¶ 3, 14, 24.) On September 15, 2006, the Tregres created the Robert J. Tregre & Rosia L. Tregre Family Revocable Living Trust (the “Trust”), and they placed the Property into it. (Id. ¶¶ 5, 11 United States District Court Northern District of California 10 27-28.) Upon the death of the Tregres, all of the Trust’s assets—including the Property—were to 12 be distributed to Ms. Green, the Trust’s beneficiary. (Id. ¶ 29.) 13 On January 11, 2007, the Trust entered into a refinance loan transaction (the “Loan”) and 14 secured the Loan with the Property through a deed of trust (the “Deed of Trust”). (Id. ¶ 34; 15 Request for Judicial Notice (“RJN”), ECF No. 36, Ex. 1.) The Trust was listed as the “borrower” 16 on the Deed of Trust. (RJN, ECF No. 56, Ex. 1.) And Paragraph 13 of the Deed of Trust states in 17 relevant part: “[A]ny Successor in Interest of Borrower who assumes Borrower’s obligations 18 under this Security Instrument in writing, and is approved by Lender, shall obtain all of 19 Borrower’s rights and benefits under this Security Instrument.” (Id.) 20 21 22 Sometime thereafter, CMC became the servicer of the Loan, and Deutsche Bank became the beneficiary under the Deed of Trust. (SAC, ECF No. 54, ¶ 34.) Then, in June 2013, the Tregres each died. (Id. ¶ 35.) As a result, pursuant to the terms of the 23 Trust, title to the Property was conveyed to Ms. Green. (Id. ¶¶ 29, 36, 40.) Ms. Green then 24 “automatically became the trustee” of the Trust. (Id. ¶¶ , 30-31, 41.) The plaintiffs allege that, 25 according to the Trust, 26 27 28 the trustee’s powers include, but are not limited to: The power to sell [T]rust property, and to borrow money and to encumber property, specifically including [T]rust real estate, by mortgage, deed of trust, or other method . . . The power to manage [T]rust real estate as if the trustee were the absolute owner of it, including the power to lease (even if the lease term may extend beyond the period of any 2 ORDER (No. 3:14-cv-04281-LB) 1 2 3 4 trust) or grant options to lease the property, to make repairs or alterations and to insure against loss . . . The power to employ and pay reasonable fees to accountants, lawyers or investment experts for information or advice relating to the [T]rust . . . The power to continue any business of either grantor . . . The power to execute any documents necessary to administer any trust created in this Declaration of Trust . . . [and] The power to institute or defend legal actions concerning the [T]rust or the grantors’ affairs. 5 (Id. ¶ 32.) At that point, Ms. Green “was authorized to act on behalf of the [T]rust immediately 6 upon her parents’ passing,” including by “making payments on the . . . [L]oan and applying for 7 loss mitigation opportunities on behalf of” the Trust. (Id. ¶ 42.) 8 9 “The [p]laintiffs” thereafter made three payments on the Loan from July 2013 to September 2013, but thereafter the Loan fell into default after Ms. Green’s daycare business closed that summer and she suffered a loss of income. (Id. ¶¶ 37, 43.) CMC and Deutsche Bank accepted all 11 United States District Court Northern District of California 10 three of these payments. (Id. ¶ 43.) 12 In September 2013, Ms. Green contacted CMC about a loan modification. (Id. ¶ 38.) She 13 informed CMC that both of her parents died and that she had obtained title to the Property. (Id. ¶ 14 38-39.) She also told CMC that she wished to inquire about a loan modification. (Id. ¶ 38.) She 15 subsequently sent CMC the Trust documents. (Id. ¶ 39.) 16 CMC never questioned Ms. Green’s ability to apply for a loan modification, and it asked “the 17 [p]laintiffs” to send various documents to be considered for one. (Id. ¶¶ 44-45.) No one at CMC, 18 however, discussed “loss mitigation options” with “the [p]laintiffs,” whether in person or by 19 telephone, about how to save the home. (Id. ¶ 45.) 20 In December 2013 and early January 2014, Ms. Green sent to CMC all of the documents it 21 requested to be considered for a loan modification. (Id. ¶ 47.) CMC acknowledged receiving the 22 “documents to be considered for a loan modification” and also acknowledged that Ms. Green’s 23 application was “under review.” (Id. ¶ 46.) CMC subsequently denied her application on the basis 24 that it had not received all of the documents it requested. (Id. ¶ 47.) Even though Ms. Green sent 25 her bank statements, CMC claimed that it had not received them. (Id.) CMC denied Ms. Green’s 26 loan modification application on this basis. (Id.) 27 28 On January 24, 2014, CMC sent “the [p]laintiffs” a letter addressed to the “Mortgagor” and which thanked the “Mortgagor” “for contacting us about your mortgage.” (Id. ¶ 48.) The letter 3 ORDER (No. 3:14-cv-04281-LB) 1 stated that the “Mortgagor” was ineligible to receive a loan modification because the loan 2 modification application packet was incomplete. (Id.) “The [p]laintiffs,” though, “had already sent 3 in all requested information.” (Id.) 4 On March 7, 2014, PLM recorded a Notice of Default stating that the Trust was $19,910.59 in 5 arrears on the Loan. (RJN, Ex. 4, ECF No. 56-1 at 28-31.) Exhibit A to the Notice of Default is a 6 “Declaration Per CA Civil Code Section 2923.5(c).” (RJN, Ex. 4, ECF No. 56-1 at 31.) It states 7 that the mortgage servicer, CMC, “was unable to make contact with the Borrower” but that “the 8 following efforts were made”: 9 [x] Sent a First-Class letter to Borrower’s last known mailing address advising Borrower (a) that Borrower is in default under the Loan, (b) that Borrower should contact Servicer regarding alternative options to avoid foreclosure, (c) of Servicer’s toll-free number with access to a live representative during Servicer’s business hours, (d) of a toll-free number to a HUD certified counseling agency, and € that Borrower’s failure to contact Servicer may result in commencement of a foreclosure action; 10 United States District Court Northern District of California 11 12 13 [x] Attempted to contact Borrower by telephone at least 3 times at 3 different hours on 3 different days at the primary telephone number on file; 14 [x] Two weeks after last telephone contact was completed and no contact having been made, Servicer sent a letter via Certified Mail Return Receipt Requested to Borrower’s last known mailing address advising Borrower (a) that Borrower is in default under the Loan, (b) that Borrower should contact Servicer regarding alternative options to avoid foreclosure, (c) of Servicer’s toll-free number with access to a live representative during Servicer’s business hours, (d) of a toll-free number to a HUC certified counseling agency, and € that Borrower’s failure to contact Servicer within 30 days of receipt of this letter will result in commencement of a foreclosure action. 15 16 17 18 19 20 21 (RJN, Ex. 4, ECF No. 56-1 at 31.) Ms. Green received the Notice of Default in the mail at the Property in mid-March 2014. 22 (SAC, ECF No. 54, ¶ 49.) She had not previously received written denial of her loan modification 23 application “on the merits.” (Id.) Before the Notice of Default was recorded, Ms. Green had never 24 been able to speak with a CMC representative, whether in person or by telephone, regarding her 25 options to avoid foreclosure. (Id.) 26 On June 12, 2014, PLM recorded a Notice of Trustee’s Sale. (RJN, Ex. 5, ECF No. 56-1 at 33- 27 34.) 28 In late June 2014, CMC acknowledged that it received all necessary documents to consider the 4 ORDER (No. 3:14-cv-04281-LB) 1 “[p]laintiffs” for a loan modification. (SAC, ECF No. 54, ¶ 50.) And on June 26, 2014, CMC 2 thanked the “[p]laintiffs” for their “timely submission of your Borrower Response Package.” (Id. ¶ 3 51.) On July 1, 2014, CMC sent the “[p]laintiffs” another letter thanking them for submitting a 4 borrower response package and requesting addition information. (Id. ¶ 52.) 5 CMC subsequently denied the “[p]laintiffs’” loan modification application “on the basis of 6 insufficient income.” (Id. ¶ 53.) CMC’s “denial letter,” however, made no mention of what her 7 gross income was. (Id.) The plaintiffs allege that this denial was improper because Ms. Green and 8 her family had sufficient income pursuant to federal guidelines and thus should have been 9 approved for a loan modification. (Id.) Her income was approximately $3,400 per month, and her 10 United States District Court Northern District of California 11 children pledged to contribute $2,300 toward the payments. (Id.) The “[p]laintiffs” apparently appealed CMC’s decision, (see id. ¶ 55), because on August 28, 12 2014, CMC sent Ms. Green a letter denying the appeal. (Id.) The denial letter was addressed to 13 “Borrower.” (Id.) Ms. Green was the only natural person who communicated with CMC about a 14 loan modification. (Id.) 15 “Thereafter, Ms. Green filed a consumer complaint.” (Id. ¶ 56.) 16 Ms. Green then sent CMC documentation showing that the amount it calculated for her gross 17 income was “significantly inaccurate.” (Id. ¶ 57.) She also spoke with CMC’s representatives 18 regarding her income. (Id.) CMC then sent a letter stating that the “[p]laintiffs’” appeal was denied 19 because they had not provided it with updated income information. (Id. ¶ 58.) But the 20 “[p]laintiffs” had in fact sent CMC documents showing additional income. (Id.) 21 On September 12, 2014, Ms. Green, proceeding pro se, filed a voluntary Chapter 13 22 bankruptcy petition. (Id. ¶ 59.) It turns out that the Property was scheduled to be sold at a trustee’s 23 sale that same day. (Id.) Ms. Green was aware that a sale date was coming up, but she did not 24 know it was scheduled to take place on September 12. (Id.) 25 On September 23, 2014, PLM recorded a Trustee’s Deed upon Sale stating that Deutsche Bank 26 purchased the property for $685,000 at a trustee’s sale held on September 12, 2014. (RJN, Ex. 7, 27 ECF No. 56-1 at 38-40.) 28 On October 13, 2014, CMC “sent a letter in response to [Ms. Green’s] consumer complaint.” 5 ORDER (No. 3:14-cv-04281-LB) 1 (SAC, ECF No. 54, ¶ 60.) In the letter, CMC stated that Ms. Green “was now authorized to take 2 action relative to our borrowers’ account.” (Id.) The plaintiffs allege that this letter is “factually 3 incorrect” because Ms. Green sent CMC information about her parents’ deaths and the Trust the 4 previous year. (Id.) (In other words, the plaintiffs believe that Ms. Green had been authorized to 5 take action with respect to the Loan and the Property much earlier than CMC stated.) 6 Notwithstanding this new “authorization,” CMC “obviously had been permitting Ms. Green to 7 negotiate a loan modification application with [it] the entire time.” (Id.) It “treated [her] as an 8 authorized representative on the account,” “accepted payments from her for the [L]oan,” and 9 “even communicated to a third party regulator that [she] was authorized to take action on the 10 United States District Court Northern District of California 11 12 13 account.” (Id. ¶ 62.) Several weeks later, Ms. Green received the Trustee’s Deed upon Sale in the mail and learned that Deutsche Bank purchased her Property. (Id. ¶ 61.) As Ms. Green did not have the help of legal counsel, her bankruptcy cases were dismissed. (Id. 14 ¶ 66.) The bankruptcy court’s September 23, 2014 “Order and Notice of Dismissal for Failure to 15 Comply” states that Ms. Green failed to comply with the bankruptcy court’s September 15, 2014 16 “Notice of Failure of Debtor(s) to Provide Statement of Social Security Number and/or List of 17 Creditors.” (RJN, Ex. 8, ECF No. 56-1 at 42-43.) 18 Ms. Green “subsequently learned that Deutsche Bank obtained an [unlawful detainer] 19 judgment against her.” (SAC, ECF No. 54, ¶ 67.) Deutsche Bank filed the unlawful detainer action 20 against Ms. Green (in her individual capacity) in San Mateo County Superior Court on January 29, 21 2015. (RJN, Ex. 9, ECF No. 56-1 at 45-62.) On March 4, 2015, pursuant to California Code of 22 Civil Procedure § 1169, the San Mateo County Superior Court Clerk issued a default judgment 23 against Ms. Green for possession of the Property. (RJN, Ex. 10, ECF No. 56-1 at 64-67.) Ms. 24 Green was evicted from the Property on April 23, 2015, but she was let back into it on May 7, 25 2015. (SAC, ECF No. 54, ¶¶ 68-69.) 26 2. Procedural History 27 28 Ms. Green, in her individual capacity only, filed her original complaint in this action on September 23, 2014. (Complaint, ECF No. 1.) At that time, she was proceeding pro se. After 6 ORDER (No. 3:14-cv-04281-LB) 1 several extensions of time to serve the defendants, Ms. Green retained counsel and filed a First 2 Amended Complaint on June 24, 2015. (FAC, ECF No. 22.) PLM was declared to have 3 nonmonetary status, and CMC and Deutsche Bank filed a motion to dismiss. (Motion, ECF No. 4 35; Stipulation and Order, ECF No. 45.) The court granted the defendants’ motion on the ground 5 that Ms. Green lacked standing in her individual capacity to bring the action and granted her leave 6 to file an amended complaint. (9/2/2015 Order, ECF No. 53.) 7 Ms. Green filed a Second Amended Complaint on September 23, 2015. (SAC, ECF No. 54.) 8 She brings the following 12 claims: (1) violation of California’s Homeowners Bill of Rights 9 (“HBOR”), Cal. Civ. Code § 2923.55; (2) violation of HBOR, Cal. Civ. Code § 2923.6; (3) violation of HBOR, Cal. Civ. Code § 2923.7; (4) violation of HBOR, Cal. Civ. Code § 2924.17; 11 United States District Court Northern District of California 10 (5) violation of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2605(f); (6) 12 violation of the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. § 1691(d)(1); (7) negligent 13 misrepresentation; (8) fraud; (9) wrongful foreclosure; (10) unfair business practices in violation 14 of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; (11) 15 cancellation of deed; and (12) declaratory relief. (Id. ¶¶ 74-140.) 16 CMC and Deutsche Bank again filed a motion to dismiss. (Motion, ECF No. 55.) ANALYSIS 17 18 1. The Defendants’ Request for Judicial Notice 19 To begin, the court addresses the defendants’ request for judicial notice. (See RJN, ECF No. 20 56.) The defendants ask the court to take judicial notice of the following 14 documents: (1) a Deed 21 of Trust recorded on January 22, 2007, in the San Mateo County Recorder’s Office bearing 22 instrument number 2007-009851; (2) an Assignment of Deed of Trust recorded March 4, 2014, in 23 the San Mateo County Recorder’s Office bearing instrument number 2014-017912; (3) a 24 Substitution of Trustee recorded March 4, 2014, in the San Mateo County Recorder’s Office 25 bearing instrument number 2014-017913; (4) a Notice of Default recorded March 7, 2014, in the 26 San Mateo County Recorder’s Office bearing instrument number 2014-019210; (5) a Notice of 27 Trustee’s Sale recorded June 12, 2014, in the San Mateo County Recorder’s Office bearing 28 instrument number 2014-051353; (6) an Assignment of Deed of Trust recorded September 23, 7 ORDER (No. 3:14-cv-04281-LB) 1 2014, in the San Mateo County Recorder’s Office bearing instrument number 2014-086030; (7) a 2 Trustee’s Deed Upon Sale recorded September 23, 2014, in the San Mateo County Recorder’s 3 Office bearing instrument number 2014-086031; (8) an Order and Notice of Dismissal for Failure 4 to Comply entered on September 23, 2014 with the United States Bankruptcy Court bearing 5 bankruptcy case number 14-31336-HLB 13; (9) a Verified Complaint filed on January 29, 2015, 6 with the San Mateo County Court bearing case number CLJ210694; (10) a Judgment entered by 7 the San Mateo County Court Clerk on March 4, 2015, bearing case number CLJ210694; (11) an 8 Order and Notice of Dismissal for Failure to Comply entered on March 23, 2015 by the United 9 States Bankruptcy Court for the Northern District of California, bearing bankruptcy case number 15-30294; (12) a Voluntary Petition filed on April 13, 2015 in United States Bankruptcy Court for 11 United States District Court Northern District of California 10 the Northern District of California, bearing bankruptcy case number 15-30454; (13) a Summary of 12 Schedules filed on May 8, 2015 in United States Bankruptcy Court for the Northern District of 13 California, bearing bankruptcy case number 15-30454; and (14) the Declaration of Nelson Goodell 14 filed on July 29, 2015 in this action. (Id.) 15 Under Federal Rule of Evidence 201, “[t]he court may judicially notice a fact that is not 16 subject to reasonable dispute because it: (1) is generally known within the trial court’s territorial 17 jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot 18 reasonably be questioned.” Fed. R. Evid. 201(b). A “high degree of indisputability is the essential 19 prerequisite” to taking judicial notice and “the tradition [of taking judicial notice] has been one of 20 caution in requiring that the matter be beyond reasonable controversy.” Fed. R. Evid. 201(a) & (b) 21 advisory committee’s notes (emphasis added). A court, then, may take judicial notice of 22 undisputed facts contained in public records, but it may not take judicial notice of disputed ones. 23 Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001); see also Muhammad v. 24 California, C-10-1449-SBA, 2011 WL 873151, at *4 (N.D. Cal. Mar. 11, 2011) (denying request 25 for judicial notice of an address contained on a complaint filed in another case because the 26 “underlying facts relevant to Plaintiff’s residence are disputed and otherwise do not meet the 27 requirements of Rule 201”). Here, Ms. Green objects to the court taking judicial notice “of the 28 truthfulness” of the documents, (Opposition, ECF No. 59 at 17), but she does not object to the 8 ORDER (No. 3:14-cv-04281-LB) 1 court taking judicial notice of the existence of them, all of which are public records. Therefore, the 2 court takes judicial notice of the existence of the documents but does not take judicial notice of the 3 disputed facts contained with them. 4 This distinction is important. At several points in their motion the defendants argue that the 5 plaintiffs’ claims fail because the allegations are undermined by statements made in letters from 6 CMC that are attached to the Declaration of Nelson Goodell. (See Motion, ECF No. 55 at 12, 21- 7 22, 23, 24, 25). These letters are not judicially noticeable because they are not public records; they 8 are private correspondence attached to a declaration which is a public record. The defendants 9 provide no authority to support their implied argument that the letters themselves are judicially noticeable in this context. Moreover, the plaintiffs dispute the factual content of the letters. 11 United States District Court Northern District of California 10 Because the letters that are attached as exhibits to the Declaration of Nelson Goodell are not 12 judicially noticeable, and because the plaintiffs’ complaint does not rely upon them, the court does 13 not consider them at the motion-to-dismiss stage of the litigation. See United States v. Corinthian 14 Colleges, 655 F.3d 984, 998-99 (9th Cir. 2011) (“As a general rule, [a district court] ‘may not 15 consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.’”) (quoting Lee v. 16 City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)). This also means that the court does not 17 consider the defendants’ arguments that are based on them. The court therefore has omitted these 18 arguments when analyzing the defendants’ other arguments in the remainder of this order. 19 2. The Plaintiffs’ Standing and the Real Party in Interest 20 2.1 The Trust Is Dismissed as a Plaintiff 21 As an initial matter, the defendants move to dismiss the Trust itself as a plaintiff to this action. 22 (Motion, ECF No. 55 at 15.) Under Federal Rule of Civil Procedure 17(a), a “[p]laintiff must be 23 the ‘real party in interest,’ with respect to the claim sued upon.” Schwarzer, Tashima & Wagstafe, 24 Cal. Prac. Guide: Fed. Civ. P. before Trial, ¶ 7:1 (The Rutter Group 2015); see Estate of 25 Migliaccio v. Midland Nat’l Life Ins. Co., 436 F. Supp. 2d 1095, 1100 (C.D. Cal. 2006). 26 Generally, for parties other than corporations or individuals not acting in a representative capacity, 27 capacity to sue or be sued is determined by the law of the state where the court is located. Fed. R. 28 Civ. P. 17(b). In California, a trust is not a legal entity and has no capacity to sue or be sued. 9 ORDER (No. 3:14-cv-04281-LB) 1 Jordan v. Paul Fin., LLC, 644 F. Supp. 2d 115, 1172 (N.D. Cal. 2009) (citing Galdjie v. Darwish, 2 113 Cal. App. 4th 1331, 1343-45 (2003); see Greenspan v. LADT, LLC, 191 Cal. App. 4th 486, 3 522 (2010) (“A trust . . . is simply a collection of assets and liabilities. As such, it has no capacity 4 to sue or be sued, or to defend an action.”) (internal quotation marks omitted); see also Schwarzer, 5 Tashima & Wagstafe, Cal. Prac. Guide: Fed. Civ. P. before Trial, ¶ 7:7 (The Rutter Group 2015). 6 Because the Trust does not have capacity to sue, the court dismisses it as a plaintiff from this 7 action. See Estate of Migliaccio, 436 F. Supp. 2d at 1100-01 (granting the defendants’ motion to 8 dismiss because “as a matter of law, the Estate cannot be a plaintiff in this lawsuit” and “only the 9 Estate’s trustee, administrator or executor may bring suit on its behalf as the real party in interest”); see also Tuttle v. Sky Bell Asset Mgmt., LLC, No. C 10-03588 WHA, 2012 WL 440393, 11 United States District Court Northern District of California 10 at *4 (N.D. Cal. Feb. 10, 2012) (“To avoid potential standing issues that may be raised as to the 12 Trust’s capacity to sue as a trust, plaintiffs were granted leave to amend their complaint to reflect 13 that the Braun Family Trust would be suing by its co-trustee Mr. Braun.”). 14 2.2 Ms. Green, in Her Individual Capacity, Is Dismissed as a Plaintiff 15 In its September 2, 2015 order, the court determined that Ms. Green lacked standing to bring 16 her claims in her individual capacity (which was the only capacity in which she originally sued) 17 because she was not a party to or “borrower” under the Loan or Deed of Trust and had no existing 18 obligations under the Loan or Deed of Trust. (9/2/2015 Order, ECF No. 53 at 6-10.) The court 19 noted that only “borrowers” have standing to assert HBOR or RESPA claims, (id. at 6-7), and the 20 court rejected Ms. Green’s argument that she had standing because she received title to the 21 Property upon her parents’ deaths and allegedly “assumed” the Loan, (id. at 8-9). The court noted 22 that this argument was “directly at odds with Paragraph 13 of the Deed of Trust, which states that 23 ‘any Successor in Interest of Borrower who assumes Borrower’s obligations under this Security 24 Instrument in writing, and is approved by Lender, shall obtain all of Borrower’s rights and benefits 25 under this Security Instrument.’” (Id. at 8 (citing RJN, ECF No. 36, Ex. 1 (emphasis added)).) 26 The court also noted that “[o]ther courts have found that a successor in interest does not assume a 27 borrower’s obligations simply upon obtaining title to property when the deed of trust requires an 28 assumption be made in writing and approved by the lender.” (Id. at 8-9 (citing Layton v. Ocwen 10 ORDER (No. 3:14-cv-04281-LB) 1 Loan Serv., LLC, No. EDCV 15-840-GW(Ex), 2015 WL 4512015, at *4 (C.D. Cal. July 23, 2015); 2 Gonzalez on Behalf of Estate of Perez, v. JP Morgan Chase Bank, N.A., No. C-14-2558 EMC, 3 2014 WL 5462550, at *3 (N.D. Cal. Oct. 28, 2014); Robertson v. GMAC Mortg. LLC, 982 F. 4 Supp. 2d 1202, 1207 (W.D. Wash. 2013); Anolik v. Bank of Am. Loans, No. 2:11-cv-00406-MCE- 5 JFM, 2011 WL 1549291, at *1, *3 (E.D. Cal. Apr. 21, 2011)).) In dismissing her claims, the court 6 allowed Ms. Green leave to file a Second Amended Complaint and invited her to bring claims in 7 her capacity as representative of the Trust. (Id. at 10.) 8 Ms. Green filed a Second Amended Complaint, and she sued the defendants in her capacity as the trustee of the Trust, but she also sued the defendants in her individual capacity again. (SAC, 10 ECF No. 54, ¶ 7.) The defendants move to dismiss her in her individual capacity. (Motion, ECF 11 United States District Court Northern District of California 9 No. 13-15.) In their motion the defendants raise the same factual and legal points raised previously 12 and argue that nothing has changed. (See id.) They point out that Ms. Green still has not alleged 13 that she entered into a written loan assumption agreement or that she was approved by the lender, 14 so she never became the “borrower” under the Deed of Trust. (Id. at 15.) The defendants therefore 15 ask the court to dismiss Ms. Green in her individual capacity for the same reasons the court did 16 before. 17 In opposition, the plaintiffs argue that Ms. Green has standing in her individual capacity 18 because she lost title to the Property and thus was harmed. (Opposition, ECF No. 59 at 2-3, 5.) But 19 this is the same argument that the court rejected the last time, and the court sees no reason to alter 20 its conclusion. Also, the plaintiffs’ argument that the defendants treated Ms. Green, in her 21 individual capacity, as the borrower, even if true, does not turn her into the borrower under the 22 Deed of Trust. As described above, Ms. Green could have assumed the Trust’s obligations under 23 the Deed of Trust only in writing and after approval by the lender. The plaintiffs have not alleged 24 this. 25 The plaintiffs also cite Federal Rule of Civil Procedure 17 and argue that Ms. Green, in her 26 individual capacity, is a real party in interest. (Id. at 3-4.) Rule 17 requires that “[a]n action must 27 be prosecuted in the name of the real party in interest” and provides that “a trustee of an express 28 trust” “may sue in [his or her] own name[ ] without joining the person for whose benefit the action 11 ORDER (No. 3:14-cv-04281-LB) 1 is brought.” Fed. R. Civ. P. 17(a)(1)(e). Citing Estate of Migliaccio and County of Todd, Minn. v. 2 Loegering, the plaintiffs say this rule allows Ms. Green to sue in her own name both as an 3 individual and as the trustee of the trust. (Opposition, ECF No. 59 at 3.) 4 The court is not persuaded by the plaintiffs’ argument. First, Rule 17 says that a trustee may 5 sue in his or her own name; it does not say that the trustee may sue in his or her own name both in 6 an individual and a representative capacity. Rule 17 allows a trustee to sue in his or her own name 7 without also having to name the trust itself as a plaintiff. Second, the cases the plaintiffs cite do 8 not support their position. In Estate of Migliaccio, the court dismissed the estate itself as a plaintiff 9 and granted leave to amend to add the estate’s representative as a plaintiff. 436 F. Supp. 2d at 1100-01. And while the court did allow a beneficiary of the estate to sue in her individual capacity 11 United States District Court Northern District of California 10 because she was an “interested person” for purposes of Article III standing, the court did not 12 address any of the barriers to standing at issue here, namely, that Ms. Green was not a party to or 13 “borrower” under the Loan or Deed of Trust and had no existing obligations under the Loan or 14 Deed of Trust. Loegering featured a plaintiff who sued not in her individual capacity but in her 15 capacity as trustee to a decedent’s estate. 297 F.2d 470, 471-72 (8th Cir. 1961). This fact alone 16 makes it inapposite. 17 Accordingly, the court dismisses Ms. Green, in her individual capacity, as a plaintiff to this 18 action. To the extent that the defendants argue, with respect to any particular claim, that the claim 19 fails insofar as Ms. Green brings it in her individual capacity (see Motion, ECF No. 55 at 19, 22, 20 24, 26, 28-29, 32), the court finds those arguments encompassed by the defendants’ general 21 standing argument and this ruling, and the court does not address them later in this order. 22 23 2.3 Ms. Green, in Her Capacity as Trustee of the Trust, Is the Real Part in Interest and Is the Proper Plaintiff 24 The defendants do not argue that Ms. Green, in her capacity as trustee of the Trust, lacks 25 standing to sue them. The court therefore finds that Ms. Green, in her capacity as trustee of the 26 Trust, has standing, is the real party in interest, and is the proper plaintiff to this action. As the 27 only remaining plaintiff is Ms. Green in her capacity as trustee of the Trust, the court addresses the 28 defendants’ additional arguments with respect to her only in that capacity. 12 ORDER (No. 3:14-cv-04281-LB) 1 3. Res Judicata The defendants argue that all of Ms. Green’s claims are barred by California’s res judicata, or 2 3 claim preclusion, doctrine.2 (Motion, ECF No. 55 at 15-16.) This doctrine “prevents relitigation of 4 the same cause of action in a second suit between the same parties or parties in privity with them.” 5 Mycogen Corp. v. Monsanto Co., 28 Cal. 4th 888, 896 (2002). “[I]f a plaintiff prevails in an 6 action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a 7 judgment for the defendant serves as a bar to further litigation of the same cause of action.” Id. at 8 896-97. The defendants bear the burden of showing that res judicata applies. Vella v. Hudgins, 20 Cal. 9 3d 251, 257 (1977) (“The burden of proving that the requirements for application of res judicata 11 United States District Court Northern District of California 10 have been met is upon the party seeking to assert it as a bar or estoppel.”). To meet this burden, 12 the defendants must show that the following “prerequisite elements” are satisfied: (1) a claim 13 raised in the present action is identical to a claim litigated in a prior proceeding; (2) the prior 14 proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine 15 is being asserted was a party or in privity with a party to the prior proceeding. Boeken, 48 Cal. 4th 16 at 797. “Even if these threshold requirements are established, res judicata will not be applied ‘if 17 injustice would result or if the public interest requires that relitigation not be foreclosed.’” Citizens 18 for Open Access to Sand and Tide, Inc. v. Seadrift Ass’n, 60 Cal. App. 4th 1053, 1065 (1998) 19 (quoting Consumers Lobby Against Monopolies v. Pub. Util. Comm’n, 25 Cal. 3d 891, 902 20 (1979)). The defendants have not met their burden. They say that Deutsche Bank’s unlawful detainer 21 22 action against Ms. Green in her individual capacity bars the claims that Ms. Green brings against 23 CMC and Deutsche Bank here in her capacity as trustee of the Trust. (Motion, ECF No. 55 at 16.) 24 25 26 27 28 2 While the United States Supreme Court uses the term “res judicata” to refer collectively to claim preclusion and issue preclusion, see, e.g., Taylor v. Sturgell, 553 U.S. 880, 892 (2008), the California Supreme Court generally uses the term “res judicata” to refer to claim preclusion, and the term “collateral estoppel” to refer to issue preclusion, see Boeken v. Philip Morris USA, Inc., 48 Cal. 4th 788, 797 (2010) (distinguishing between the two “aspects” that compose California law’s preclusion doctrine). Here, the defendants raise only claim preclusion. (See Motion, ECF No. 55 at 15.) 13 ORDER (No. 3:14-cv-04281-LB) 1 Even if the unlawful detainer action resulted in a final judgment on the merits, the defendants have 2 not met their burden to show which of Ms. Green’s claims are barred. Although a prior unlawful 3 detainer action—which is a “summary proceeding ordinarily limited to resolution of the question 4 of possession”— bars subsequent claims challenging the trustee’s sale and the validity of the title, 5 see Malkoskie v. Option One Mortg. Corp., 188 Cal. App. 4th 968, 973-76 (2010), it “does not, 6 however, necessarily bar actions which encompass ‘activities not directly related with the conduct 7 of the sale,’” Elstner-Bailey v. N. Pac. Mortg. Corp., No. CV 10-07151 DDP (CWx), 2012 WL 8 2077190, at *2 n.1 (C.D. Cal. June 8, 2012) (citing Vella, 20 Cal. 3d at 256). Thus, when 9 determining whether res judicata applies, the key question is whether the claim challenges the trustee’s sale and the validity of title or whether it challenges other conduct. Compare, e.g., Dancy 11 United States District Court Northern District of California 10 v. Aurora Loan Servs. LLC, No. C 10-2602 SBA, 2011 WL 835787, at *6 (N.D. Cal. Mar. 4, 12 2011) (“In the instant case, all of Plaintiff’s claims are based on the same primary right at issue in 13 the unlawful detainer proceeding; namely, the alleged invalidity of the foreclosure sale.”); Castle 14 v. Mortg. Elec. Registration Sys., Inc., No. EDCV 11-00538 VAP, 2011 WL 3626560, at *7 (C.D. 15 Cal. Aug. 16, 2011) (“As in Malkoskie, Plaintiffs’ claims here are based on the same primary right 16 at issue in the unlawful detainer proceeding, i.e., the right to the Property. . . . The validity of the 17 foreclosure process, trustee’s sale, and Fannie Mae’s acquisition of the Property were all 18 encompassed by the Unlawful Detainer Action.”) with, e.g., Helmer v. Bank of Am., N.A., No. CIV 19 S-12-0733 KJM-GGH, 2013 WL 1192634, at *4 (E.D. Cal. Mar. 22, 2013) (“Because plaintiff’s 20 allegations do not challenge the validity of the foreclosure sale, plaintiff’s claims are not estopped 21 by the unlawful detainer action.”); Albizo v. Wachovia Mortg., No. 2:11-cv-02991 KJN, 2012 WL 22 1413996, at *4 (E.D. Cal. Apr. 20, 2012) (“Here, plaintiffs are not solely challenging the validity 23 of the foreclosure sale; instead, plaintiffs are also challenging defendants’ conduct (i.e., properly 24 accounting for plaintiffs’ loan payments, agreeing to a loan modification, etc.) that occurred before 25 the foreclosure sale.”); Johannson v. Wachovia Mortg. FSB, No. C 11-02822 WHA, 2011 WL 26 3443952, at *10 (N.D. Cal. Aug. 5, 2011) (“Here, plaintiff is not challenging the validity of the 27 foreclosure sale; plaintiff is challenging defendant’s conduct that occurred before the foreclosure 28 sale.”). The defendants never examine this issue in detail and appear to assume that all of Ms. 14 ORDER (No. 3:14-cv-04281-LB) 1 Green’s claims are for “wrongful foreclosure.” (See Motion, ECF No. 55 at 16.) The issue, 2 however, is not as clear-cut as the defendants suggest. 3 4 5 6 7 8 9 10 The defendants also have not shown privity. The California Court of Appeals has explained that: The concept of privity for the purposes of res judicata or collateral estoppel refers to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights and, more recently, to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is sufficiently close so as to justify application of the doctrine of collateral estoppel. This requirement of identity of parties or privity is a requirement of due process of law. Due process requires that the nonparty have had an identity or community of interest with, and adequate representation by, the party in the first action. The circumstances must also have been such that the nonparty should reasonably have expected to be bound by the prior adjudication. United States District Court Northern District of California 11 Citizens, 60 Cal. App. 4th at 1069-70 (internal citations, quotation marks, and ellipses omitted). 12 “Privity,” moreover, “is not susceptible of a neat definition, and determination of whether it exists 13 is not a cut-and-dried exercise.” Aronow v. LaCroix, 219 Cal. App. 3d 1039, 1048 (1990). Indeed, 14 “[w]hether someone is in privity with the actual parties requires close examination of the 15 circumstances of each case.” Victa v. Merle Norman Cosmetics, Inc., 19 Cal. App. 4th 454, 464 16 (1993) (internal quotation marks and citation omitted). 17 The defendants contend, without citation to any legal authority, that “[p]rivity is satisfied here 18 since [Ms.] Green was trustee of the Trust at the time of the [unlawful detainer] action (SAC ¶ 31) 19 and CMC is the loan servicer for Deutsche Bank.” (Motion, ECF No. 55 at 16.) This is the extent 20 of their argument on this point. The defendants do not provide any authority for the critical point 21 that a party, when sued in her individual capacity, is in privity with the Trust for which she is 22 trustee. It is not obvious to the court that privity would exist in this situation, and without more, 23 the court cannot conduct the “close examination” to determine if it does. 24 The court also notes the defendants’ incongruous opinions about Ms. Green’s two capacities. 25 When discussing her standing, the defendants emphasized that her two capacities were entirely 26 distinct. But when discussing privity, the defendants are quick to argue that her individual and 27 representative capacities are one and the same. This vacillation suggests that the Trust, through 28 Ms. Green as its trustee, may not “have had an identity or community of interest with, and 15 ORDER (No. 3:14-cv-04281-LB) 1 adequate representation by, [Ms. Green, in her individual capacity,] in the first action” and may 2 not “reasonably have expected to be bound by the prior adjudication.” Citizens, 60 Cal. App. 4th 3 at 1070. On this record, then, the court concludes that Deutsche Bank’s unlawful detainer action against 4 5 Ms. Green in her individual capacity does not bar the claims brings now in her capacity as trustee 6 of the Trust. 7 4. Judicial Estoppel 8 Next, the defendants argue that all of the claims that Ms. Green brings in her individual 9 capacity should be precluded under the judicial estoppel doctrine. (Motion, ECF No. 55 at 17. (“[Ms.] Green, individually, is also barred as a result of her prior bankruptcy filings.”) Because the 11 United States District Court Northern District of California 10 court has dismissed Ms. Green in her individual capacity as a plaintiff to this action, the 12 defendants’ judicial estoppel argument is moot.3 13 5. Tender 14 The defendants also argue that all of Ms. Green’s claims are barred because she did not allege 15 that she “tendered the debt owed by the Borrower under the Deed of Trust.” (Motion, ECF No. 55 16 at 18 (“Absent tender, Plaintiffs’ SAC is barred.”).) 17 The California Court of Appeal, Sixth District, has summarized the so-called “tender rule”: 18 Because the action is in equity, a defaulted borrower who seeks to set aside a trustee’s sale is required to do equity before the court will exercise its equitable powers. Consequently, as a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of 19 20 21 22 23 24 25 26 27 28 3 Were Ms. Green, in her individual capacity, still a plaintiff to this action, the court would be reluctant to apply the judicial estoppel doctrine where Ms. Green never obtained a discharge and the bankruptcy court never confirmed a bankruptcy plan. See Ah Quin v. Cnty. of Kauai Dep’t of Transp., 733 F.3d 267, 271 (9th Cir. 2013) (“In the bankruptcy context, the federal courts have developed a basic default rule: If a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules and obtains a discharge (or plan confirmation), judicial estoppel bars the action.”); Nissim v. Wells Fargo Bank, N.A., No. C 14-1128 CW, 2014 WL 4421384, at *6-7 (N.D. Cal. Sept. 5, 2014); Chancellor v. OneWest Bank, No. C 12-01068, at *5-6 (May 22, 2012); Sannah v. Wells Fargo Bank, N.A., No. SACV 11-01920 DOC, 2012 WL 10423186, at *34 (C.D. Cal. Mar. 19, 2012). And at least two courts in this district have concluded that the entry of an automatic stay, without more, does not constitute judicial “acceptance” of a debtor’s prior inconsistent position, a requirement for judicial estoppel. See Boatright v. Aurora Loan Servs., No. C-12-00009 EDL, 2012 WL 2792415, at *2-6 (N.D. Cal. July 9, 2012); Perez v. Wells Fargo Bank, N.A., No. C-11-02279 JCS, 2011 WL 3809808, at *11-12 (N.D. Cal. Aug. 29, 2011); see also Gottlieb v. Kest, 141 Cal. App. 4th 110, 142-145 (2006). 16 ORDER (No. 3:14-cv-04281-LB) 1 2 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. The rationale behind the rule is that if the borrower could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the borrower. There are, however, exceptions to the tender requirement. Our review of the case law discloses four exceptions. First, if the borrower’s action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmation of the debt. Second, a tender will not be required when the person who seeks to set aside the trustee’s sale has a counter-claim or set-off against the beneficiary. In such cases, it is deemed that the tender and the counter claim offset one another, and if the offset is equal to or greater than the amount due, a tender is not required. Third, a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale. Fourth, no tender will be required when the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face. 12 Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 112-13 (2011) (internal quotation marks, citations, 13 and brackets omitted). 14 The tender rule applies to equitable claims, such as claims to set aside a trustee’s sale, to quiet 15 title, to cancel an instrument, or for wrongful foreclosure, see Arnolds Mgmt. Corp. v. Eischen, 16 158 Cal. App. 3d 575, 578-79 (1984) (“[The tender] rule is premised upon the equitable maxim 17 that a court of equity will not order that a useless act be performed.”), and to claims “implicitly 18 integrated” with the foreclosure, see id. at 579 (citing Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal. 19 App. 3d 112, 121 (1971)). Cf. Ukiru v. Fed. Home Loan Mortg. Corp., 602 Fed. App’x 395, 396 20 (9th Cir. 2015) (affirming the district court’s dismissal of the plaintiff’s equitable claims— 21 including her claims to set aside the trustee’s sale, to cancel the trustee’s deed, to quiet title, and 22 for wrongful foreclosure—due to her failure to allege credible tender); Adesokan v. U.S. Bank, 23 N.A., 582 Fed. App’x 672, 673 (9th Cir. July 2, 2014) (“The district court properly dismissed 24 Adesokan’s wrongful foreclosure, quiet title, cancellation of instruments, and fraud claims because 25 Adesokan failed to allege facts showing tender in the amount of his indebtedness or that the 26 foreclosure sale was void.”) But the tender rule “has no application . . . where [a] plaintiff[’s] 27 lawsuit is not based on the premise of a defect in the giving of notice [of foreclosure] but on the 28 statutory grounds laid out in HBOR, and seeks monetary damages.” Valbuena v. Ocwen Loan 17 ORDER (No. 3:14-cv-04281-LB) 1 Servicing, LLC, 237 Cal. App. 4th 1267, 1273-74 (2015); see id. at 1273 (“Nothing in the 2 language of HBOR suggests that a borrower must tender the loan balance before filing suit based 3 on a violation of the requirements of the law.”). 4 Moreover, “[b]ecause tender is an equitable concept, courts have held that ‘[w]hether Plaintiffs are required to tender is a matter of discretion left up to the Court,’ and that ‘failure to allege 6 tender is not decisive at [the pleading] stage.’” Bingham v. Ocwen Loan Servicing, LLC, No.: 13- 7 CV-04040-LHK, 2014 WL 1494005, at *7-8 (N.D. Cal. Apr. 16, 2014) (quoting Storm v. Am.’s 8 Servicing Co., No. 0911206, 2009 WL 3756629, at *6 (S.D. Cal. Nov. 6, 2009); accord Stokes v. 9 CitiMortgage, Inc., No. CV 14-00278 BRO (SHx), 2014 WL 4359193, at *8-9 (C.D. Cal. Sept. 3, 10 2014) (exercising discretion to decline to apply tender at pleadings stage); Nguyen v. JP Morgan 11 United States District Court Northern District of California 5 Chase Bank N.A., No. 12-4183, 2013 WL 2146606, at *6 (N.D. Cal. May 15, 2013) (same). 12 Here, Ms. Green brings a mix of equitable and non-equitable claims (including claims under 13 HBOR), some of which challenge the foreclosure process and some of which relate to her loan 14 modification efforts. The defendants, however, never attempt to explain how or why the tender 15 rule applies to each claim; they just say that the entire Second Amended Complaint is barred. (See 16 Motion, ECF No. 55 at 18; Reply, ECF No. 60 at 6.) This does not suffice, especially at the 17 pleading stage, where application of the tender rule depends upon the equitable circumstances of 18 the case. Accordingly, the court declines to dismiss the Second Amended Complaint because Ms. 19 Green did not allege tender. 20 6. Claims 21 22 With the defendants’ generally-applicable arguments resolved, the court now turns to the defendants’ arguments about each of Ms. Green’s claims. 23 6.1 HBOR – Cal. Civ. Code § 2329.55 24 In her first claim, Ms. Green alleges that the defendants violated California Civil Code § 25 2329.55 “by failing to contact Ms. Green, in person or by telephone, at least 30 days prior to 26 recording the Notice of Default on March 7, 2014 and the Notice of Trustee’s Sale on June 12, 27 2014 to explore the ‘traditional’ options for the Plaintiff to avoid foreclosure, such as a repayment 28 plan, a forbearance agreement or a ‘short sale,’ despite the fact that Ms. Green was fully available 18 ORDER (No. 3:14-cv-04281-LB) 1 to explore such options.” (SAC, ECF No. 54, ¶ 75.); see also Cal. Civ. Code § 2923.55(a)(2) (“A 2 mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent may not record a notice of 3 default pursuant to Section 2924 until . . . 30 days after initial contact is made as required by 4 paragraph (2) of subdivision (b) . . . .”), (b)(2) (“A mortgage servicer shall contact the borrower in 5 person or by telephone in order to assess the borrower’s financial situation and explore options for 6 the borrower to avoid foreclosure.”). 7 The defendants argue that Ms. Green’s allegations undermine her section 2923(b)(2) claim 8 because she alleges that she and CMC communicated about loan modification applications months 9 before the Notice of Default was recorded. (See Motion, ECF No. 55 at 20-21.) The court agrees that they do. Several courts have concluded that a section 2923(b)(2) claim fails where the plaintiff 11 United States District Court Northern District of California 10 mortgagor and the defendant mortgage servicer had been in communication regarding a loan 12 modification before a notice of default was recorded. See Avnieli v. Residential Credit Solutions, 13 Inc., No 2:15-cv-02877-ODW, 2015 WL 5923532, at *4 (C.D. Cal. Oct. 9, 2015) (granting the 14 defendants’ motion to dismiss the plaintiffs’ section 2923.55(b)(2) claim where the plaintiffs “had 15 several discussions with [the defendants] regarding loan modification prior to the Notice of 16 Default”); Field v. Bank of Am., N.A., No. 15-cv-01262 NJV, 2015 WL 4647876, at *4 (N.D. Cal. 17 Aug. 5, 2015) (“Plaintiffs’ allegations in support of this [section 2923.55(b)(2)] cause of action are 18 negated by their concessions that they were in modification discussions with BANA long before 19 the NOD was recorded.”); Johnson v. SunTrust Mortg., Inc., No. CV 14–2658 DSF (PJWx), 2014 20 WL 3845205, at *4 (C.D. Cal. Aug. 4, 2014) (“Because Plaintiffs concede that they had 21 discussions with SunTrust regarding their financial situation and loan modification options, this 22 alleged violation of Section 2923.55(b)(2) fails.”). Here, Ms. Green alleges that she had a 23 “conversation” with CMC about a loan modification as early as September 2013, that CMC asked 24 Ms. Green to send it document to be considered for a loan modification, that she submitted the 25 first loan modification application in December 2013, and that the Notice of Default was not 26 recorded until March 2014. (SAC, ECF No. 54, ¶¶ 38, 45-49.) These allegations undermine her 27 allegation that no one at CMC ever discussed loss mitigation efforts with her, whether in person or 28 by telephone. (See id. ¶¶ 45, 49.) A loan modification is a loss mitigation effort. Ms. Green’s first 19 ORDER (No. 3:14-cv-04281-LB) 1 claim for violation of section 2923.55(b)(2) therefore fails. Because a conversation took place 2 more than 30 days before the foreclosure was initiated, and Ms. Green cannot now plead around 3 this, the court dismisses her first claim with prejudice. 4 6.2 5 In her second claim, Ms. Green alleges that the defendants violated California Civil Code § 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 HBOR – Cal. Civ. Code § 2923.6 2923.6. (SAC, ECF No. 54, ¶¶ 83-89.) Section 2923.6(c) provides: (c) If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs: (1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired. (2) The borrower does not accept an offered first lien loan modification within 14 days of the offer. (3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification. 17 Ms. Green alleges that she “never received a written denial letter, prior to the Notice of Default 18 and Notice of Trustee’s Deed Upon Sale being filed, for the complete loan modification 19 application that she submitted in January 2014.” (SAC, ECF No. 54, ¶ 84.) Thus, the defendants 20 “violated Civil Code section 2923.6 by proceeding towards foreclosure, even though they have 21 never made a determination on [her] complete loan modification applications prior to initiating 22 foreclosure or scheduling a sale time.” (Id. ¶ 85.) 23 As an initial matter, the defendants argue that section 2923.6(c)(1) applies to mortgage 24 servicers only and does not apply to beneficiaries such as Deutsche Bank. (Motion, ECF No. 55 at 25 22.) To be sure, subsection (c)(1) applies to only mortgage servicers, but subsection (c)(1) does 26 not set forth the prohibited conduct. The prohibited conduct is set forth in the paragraph above it. 27 It states that if a borrower submits a complete loan modification application, “a mortgage servicer, 28 mortgagee, trustee, beneficiary, or authorized agent” cannot record a notice of default or notice of 20 ORDER (No. 3:14-cv-04281-LB) 1 sale, or conduct a trustee’s sale, while the application is pending. The statute applies to 2 beneficiaries. The defendants next argue that Ms. Green did not allege that a complete loan modification 3 4 application was pending at the time a notice of default, notice of trustee’s sale, or trustee’s deed 5 upon sale was recorded. (Motion, ECF No. 55 at 22-23.) They are right. First, the defendants 6 highlight that the Notice of Default was recorded on March 7, 2014, but Ms. Green alleges that by 7 letter CMC denied Ms. Green’s first loan modification application two months earlier in January 8 2014 because her application was incomplete. (See SAC, ECF No. 54, ¶¶ 47-48.) Second, they 9 point out that the Notice of Trustee’s Sale was recorded on June 12, 2014, before Ms. Green allegedly submitted more documents to CMC “in late June” 2014. (See id. ¶ 50.) Third, they note 11 United States District Court Northern District of California 10 that Ms. Green also alleges that CMC “subsequently” (i.e., sometime before August 2014 (see id. 12 ¶ 55)) sent her a “denial letter” denying this second loan modification application, before the 13 Trustee’s Sale took place in September 2014. (See id. ¶ 53.) Even if CMC improperly denied Ms. 14 Green’s loan modifications (as she alleged), this does not change the fact that CMC denied them 15 and therefore they was not pending when the foreclosure documents were recorded. Because, 16 according to Ms. Green’s allegations, her first loan modification application was not pending in 17 March 2014 when the Notice of Default was recorded, the Notice of Trustee’s Sale was recorded 18 before she allegedly submitted a second loan modification application, and her second loan 19 modification application was not pending in September 2014 when the Trustee’s Sale took place, 20 the defendants did not violate section 2923.6(c). She did not have an application pending when 21 any those events took place. Accordingly, the court dismisses her second claim for violation of 22 section 2923.6(c).4 Because this timeline is clear, and Ms. Green cannot plead around it, the court 23 dismisses her second claim with prejudice. 24 25 26 27 28 4 Because Ms. Green alleges that she received written denials of both of her loan modification applications, the court need not address the defendants’ argument (which Ms. Green did not respond to in her opposition) that any lack of denial was not material. (See Motion, ECF No. 55 at 23-24 (citing Cal. Civ. Code § 2924.12 (providing remedies for “material” HBOR violations only)).) 21 ORDER (No. 3:14-cv-04281-LB) 1 6.3 2 In her third claim, Ms. Green alleges that the defendants violated California Civil Code § 3 HBOR – Cal. Civ. Code § 2923.7 2923.7. (SAC, ECF No. 54, ¶¶ 90-93.) Section 2923.7 provides that, when a borrower requests a foreclosure-prevention alternative, 4 such as a loan modification, the servicer must promptly designate a “single point of contact” 6 (“SPOC”) to communicate directly with the borrower. Cal. Civ. Code § 2923.7(a). The SPOC can 7 be an individual or a team, but must (among other things5) possess sufficient knowledge about 8 foreclosure alternatives and have access to individuals who have the ability and authority to stop 9 foreclosure proceedings. See id. §§ 2923.7(b)-(d). Moreover, “[t]he mortgage servicer shall ensure 10 that each member of the [SPOC] team is knowledgeable about the borrower’s situation and current 11 United States District Court Northern District of California 5 status in the alternatives to foreclosure process.” Id. § 2923.7(e). Ms. Green alleges that the defendants violated section 2923.7 because, despite her numerous 12 13 requests to speak to CMC representatives about the status of her loan modification application” 14 and the trustee’s sale, she was “never able to speak to a designated single point of contact, and no 15 one at [CMC] could provide her with accurate information regarding the [L]oan] or foreclosure.” 16 (SAC, ECF No. 54, ¶ 91.) “Instead,” she “received contradictory and confusing information about 17 which documents were needed to be sent to” CMC. (Id.) “As a result of the confusion [this] 18 created,” CMC sold the Property without Ms. Green’s knowledge. (Id.) 19 20 21 22 23 24 25 26 27 28 5 The SPOC is responsible for all the following: (1) Communicating the process by which a borrower may apply for an available foreclosure prevention alternative and the deadline for any required submissions to be considered for these options. (2) Coordinating receipt of all documents associated with available foreclosure prevention alternatives and notifying the borrower of any missing documents necessary to complete the application. (3) Having access to current information and personnel sufficient to timely, accurately, and adequately inform the borrower of the current status of the foreclosure prevention alternative. (4) Ensuring that a borrower is considered for all foreclosure prevention alternatives offered by, or through, the mortgage servicer, if any. (5) Having access to individuals with the ability and authority to stop foreclosure proceedings when necessary. Cal. Civ. Code § 2923.7(b). 22 ORDER (No. 3:14-cv-04281-LB) 1 As an initial matter, the defendants argue that Deutsche Bank cannot be liable for a violation 2 of section 2923.7 because section 2923.7 applies only to loan servicers. (Motion, ECF No. 55 at 3 24.) This is true. See Rockridge Trust v. Wells Fargo, N.A., 985 F. Supp. 2d 1110, 1152 (N.D. Cal. 4 2013) (finding that section 2923.7 “imposes duties only on the loan servicer”). The court 5 dismisses the claim with prejudice insofar as Ms. Green brings it against Deutsche Bank. 6 The defendants also say that section 2923.7 “only requires the servicer to establish a SPOC 7 ‘[u]pon request from a borrower.’” (Motion, ECF No. 55 at 24 (quoting Cal. Civ. Code § 2923.7).) 8 Although they do not explicitly argue it, the defendants imply that Ms. Green’s claim fails because 9 she does not allege that she requested a SPOC. (See id.) Federal courts sitting in California are split on whether a borrower has to. Some courts have found that the statute is not triggered unless 11 United States District Court Northern District of California 10 a borrower specifically requests a SPOC. See Jerviss v. Select Portfolio Servicing, Inc., No. 2:15- 12 cv-01904-MCE-KJN, 2015 WL 6081994, at *4 (E.D. Cal. Oct. 13, 2015); Hatton v. Bank of Am., 13 N.A., No. 1:15-cv-00187-GSA, 2015 WL 4112283, at *6 (E.D. Cal. July 8, 2015); Carbajal v. 14 Wells Fargo Bank, N.A., No. CV 14-7851 PSG (PLAx), 2015 WL 2454054, at *7 (C.D. Cal. Apr. 15 10, 2015); Garcia v. PNC Mortg., No. C 14-3543 PJH, 2015 WL 534395, at *5 (N.D. Cal. Feb., 9, 16 2015); Diamos v. Specialized Loan Servicing LLC, No. 13-cv-04997 NC, 2014 WL 5810453, at 17 *3-4 (Nov. 11, 2014); Williams v. Wells Fargo Bank, NA, No. EDCV 13-02075 JVS (DTBx), 18 2014 WL 1568857, at *8 (C.D. Cal. Jan. 27, 2014). Other courts have found that the statute 19 requires a servicer to appoint a SPOC upon the borrower’s request for a foreclosure prevention 20 alternative. See Mora v. US Bank, No. CV 15-02436 DDP (AJWx), 2015 WL 4537218, at *5 21 (C.D. Cal. July 27, 2015); Major v. Wells Fargo Bank, N.A., No. 14cv998-LAB (RBB), 2015 WL 22 2449516, at *4 (S.D. Cal. May 22, 2015); Hild v. Bank of Am., N.A., No. EDCV 14-2126-JGB 23 (SPx), 2015 WL 401316, *7 (C.D. Cal. Jan. 29, 2015); Penermon v. Wells Fargo Bank, N.A., 47 F. 24 Supp. 3d 982, 1000 (N.D. Cal. 2014); Mungai v. Wells Fargo Bank, No. C-14-00289 DMR, 2014 25 WL 2508090, at *9-10 (N.D. Cal. June 3, 2014). 26 27 28 The court follows the rulings of the latter courts. As one court explained: Under the plain meaning of the statute, a mortgage servicer’s obligation to establish a single point of contact is triggered “upon request from a borrower who requests a foreclosure prevention alternative,” not upon request from a borrower who requests 23 ORDER (No. 3:14-cv-04281-LB) 1 2 3 4 5 6 7 8 9 a single point of contact. In the phrase “upon request from a borrower who requests a foreclosure prevention alternative,” the words “upon request” and “a borrower who requests” refer to the same request; namely, the borrower’s request for a foreclosure prevention alternative. The phrase “upon request” simply indicates when the SPOC must be assigned (i.e., upon the borrower’s request for a foreclosure prevention alternative, as opposed to the borrower’s selection of a foreclosure prevention alternative). Mungai, 2014 WL 2508090, at *9. And another court persuasively reasoned that: [T]o the degree that the statute is ambiguous, Defendant’s reading also runs against the general canon that a statute should not be read to defeat itself. To read the statute as requiring an explicit request would at best place an unnecessary technical burden on borrowers and at worst defeat the intent of the statute altogether: most borrowers are unlikely to be aware of the language of § 2923.7 and are therefore unlikely to demand their right to a single point of contact. Mora, 2015 WL 4537218, at *5 n.1. The court agrees with these courts that section 2923.7 11 United States District Court Northern District of California 10 requires a loan servicer to appoint a SPOC upon the borrower’s request for a foreclosure 12 prevention alternative. Accordingly, the court rejects the defendants’ argument that section 2923.7 13 was not triggered in this case. 14 Finally, the defendants argue that Ms. Green’s claim fails because she does not allege that she 15 was harmed by any violation of section 2923.7. (Motion, ECF No. 55 at 24.) They say that 16 because “she admits that CMC reviewed her [loan modification] application twice, informed her 17 of its decision, and provider her [with] the time and opportunity to appeal,” she “cannot truthfully 18 allege that she was unaware of the application process, or the documents required to proceed with 19 the review.” (Id. at 24-25.) The defendants mischaracterize Ms. Green’s allegations. Although she 20 alleges that she submitted two loan modification applications to CMC and that CMC sent her 21 letters denying those applications, she also alleges that CMC’s representatives gave her conflicting 22 information. (See SAC, ECF No. 54, ¶ 91.) Ms. Green also clearly alleges that she was harmed: 23 “As a result of the confusion” created by “never [being] able to speak to a designated single point 24 of contact” and by not being provided with “accurate information regarding the [L]oan or 25 foreclosure,” CMC sold the Property without Ms. Green’s knowledge. (Id.) The court thus rejects 26 the defendants’ argument that Ms. Green failed to sufficiently allege a section 2923.7 violation 27 against CMC. 28 24 ORDER (No. 3:14-cv-04281-LB) 1 6.4 2 In her fourth claim, Ms. Green alleges that the defendants violated California Civil Code § 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 HBOR – Cal. Civ. Code § 2924.17 2924.17. (SAC, ECF No. 54, ¶¶ 94-96.) Section 2924.17 provides in relevant part: (a) A declaration recorded pursuant to Section 2923.5 or, until January 1, 2018, pursuant to Section 2923.55, a notice of default, notice of sale, assignment of a deed of trust, or substitution of trustee recorded by or on behalf of a mortgage servicer in connection with a foreclosure subject to the requirements of Section 2924, or a declaration or affidavit filed in any court relative to a foreclosure proceeding shall be accurate and complete and supported by competent and reliable evidence. (b) Before recording or filing any of the documents described in subdivision (a), a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and loan information. Cal. Civ. Code § 2924.17(a)-(b). Ms. Green alleges that a CMC representative falsely stated in Exhibit A to the March 7, 2015 12 Notice of Default that CMC exercised due diligence in an attempt to contact the borrower but was 13 unable to do so. (SAC, ECF No. 54, ¶ 95.) She alleges that because this statement was false, CMC 14 had no right to foreclose. (Id.) 15 First, the defendants argue that section 2924.17 applies only to mortgage servicers and does 16 not apply to beneficiaries under deeds of trust, so the claim must be dismissed as to Deutsche 17 Bank. (Motion, ECF No. 55 at 22.) It is true that the statute appears to apply only to the mortgage 18 servicer or a party recording a declaration on behalf of the mortgage servicers. In response, Ms. 19 Green says that the statute “actually applies to everyone,” but she cites no authority to support this 20 statement. She also says that the statute is “not subject to the limitations of California Civil Code § 21 2920.5,” but section 2920.5 only provides definitions for the terms “mortgage servicer,” 22 foreclosure prevention alternatives,” “borrower,” and “first lien”; section 2920.5 says nothing 23 about whether section 2924.17 applies to beneficiaries such as Deutsche Bank. The court thus 24 dismisses the claim with prejudice insofar as Ms. Green brings it against Deutsche Bank. 25 Second, the defendants argue that “[b]ecause Plaintiffs’ § 2923.55 claim [(Claim One)] fails in 26 that Plaintiffs do not state facts that Defendants did not comply with the statute, their § 2924.17 27 claim fails for the same reasons.” (Motion, ECF No. 55 at 22.) The court notes, however, that the 28 servicer’s requirements under section 2923.55 and different from the mortgage servicer’s 25 ORDER (No. 3:14-cv-04281-LB) 1 requirements under section 2924.17. Section 2923.55(b)(2) requires “[a] mortgage servicer [to] 2 contact the borrower in person or by telephone in order to assess the borrower’s financial situation 3 and explore options for the borrower to avoid foreclosure.” Section 2924.17, on the other hand, 4 requires a declaration filed by or on behalf of a mortgage servicer in connection with a foreclosure 5 to be “accurate and complete and supported by competent and reliable evidence,” and requires the 6 mortgage servicer to “ensure that it has reviewed competent and reliable evidence to substantiate 7 the borrower’s default and the right to foreclose, including the borrower’s loan status and loan 8 information.” 9 This difference matters because in Exhibit A to the Notice of Default, CMC’s representative declared that CMC “was unable to make contact with the Borrower” but that CMC sent a first- 11 United States District Court Northern District of California 10 class letter and a letter via certified mail to the Trust regarding the default and foreclosure 12 alternatives and also attempted to contact the Trust by telephone at least 3 times at 3 different 13 hours on 3 different days at the primary telephone number on file. (RJN, Ex. 4, ECF No. 56-1 at 14 31.) Ms. Green alleges that CMC did not do all of these things. So even if the communications 15 between Ms. Green and CMC were sufficient to satisfy section 2923.55’s obligations (as the court 16 found above), CMC still may not have done what its representative said it did in Exhibit A to the 17 Notice of Default. If that is the case, then Exhibit A may not have been “accurate and complete 18 and supported by competent and reliable evidence.” At this stage in the litigation, the discrepancy 19 between CMC’s declaration (Exhibit A to the Notice of Default) and Ms. Green’s allegations is 20 enough to state a plausible claim against CMC for violation of section 2924.17. 21 6.5 RESPA 22 In her fifth claim, Ms. Green alleges that the defendants violated regulations promulgated 23 pursuant to RESPA, 12 U.S.C. § 2605, namely 12 C.F.R. § 1024.41(b)(2)(i) and 12 C.F.R. § 24 1024.41(f)(2). (SAC, ECF No. 54, ¶¶ 97-104.) 25 26 27 28 The first regulation, 12 C.F.R. § 1024.41(b)(2)(i), provides: If a servicer receives a loss mitigation application 45 days or more before a foreclosure sale, a servicer shall: (A) Promptly upon receipt of a loss mitigation application, review the loss mitigation application to determine if the loss mitigation application is 26 ORDER (No. 3:14-cv-04281-LB) complete; and 1 2 3 4 5 6 7 8 9 (B) Notify the borrower in writing within 5 days (excluding legal public holidays, Saturdays, and Sundays) after receiving the loss mitigation application that the servicer acknowledges receipt of the loss mitigation application and that the servicer has determined that the loss mitigation application is either complete or incomplete. If a loss mitigation application is incomplete, the notice shall state the additional documents and information the borrower must submit to make the loss mitigation application complete and the applicable date pursuant to paragraph (b)(2)(ii) of this section. The notice to the borrower shall include a statement that the borrower should consider contacting servicers of any other mortgage loans secured by the same property to discuss available loss mitigation options. Ms. Green alleges that the defendants violated this regulation in two ways. First, the defendants violated it because she submitted a complete loan modification application in January 2014, but CMC failed to acknowledge her application until June 2014. (SAC, ECF 11 United States District Court Northern District of California 10 No. 54, ¶ 99.) Second, the defendants violated it because CMC failed to evaluate her for all 12 available loss mitigation options and instead simply denied her application “erroneously.” 13 (Id. ¶ 100.) 14 The second regulation,12 C.F.R. § 1024.41(f)(2), provides: 15 16 17 18 19 (2) Application received before foreclosure referral. If a borrower submits a complete loss mitigation application . . . before a servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process, a servicer shall not make the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process unless: (i) The servicer has sent the borrower a notice pursuant to paragraph (c)(1)(ii) of this section that the borrower is not eligible for any loss mitigation option and the appeal process in paragraph (h) of this section is not applicable, the borrower has not requested an appeal within the applicable time period for requesting an appeal, or the borrower’s appeal has been denied; (ii) The borrower rejects all loss mitigation options offered by the servicer; or (iii) The borrower fails to perform under an agreement on a loss mitigation option. 20 21 22 23 24 Ms. Green alleges that the defendants violated this regulation because CMC “filed the Notice 25 of Default in March 2014 without serving the notice” fulfilling all of the requirements of section 26 1024.41(f)(2)(i). (SAC, ECF No. 54, ¶ 102.) 27 The defendants make several arguments with respect to this claim. First, they point out that the 28 regulations Ms. Green cites apply only to loan servicers and do not apply to beneficiaries such as 27 ORDER (No. 3:14-cv-04281-LB) 1 Deutsche Bank. (Motion, ECF No. 55 at 25.) They are correct. See Bennett v. Nationstar Mortg., 2 No. CA 15-00165-KD-C, 2015 WL 5294321, at *10 (S.D. Ala. Sept. 8, 2015) (dismissing claim 3 against a defendant who was not a “servicer”). The regulations circumscribe the conduct of loan 4 servicers only. Moreover, Ms. Green never alleges that Deutsche Bank acted as a loan servicer or 5 committed any prohibited conduct; she alleges only that CMC committed prohibited conduct. She 6 also failed to address this argument in her opposition. The court thus dismisses the claim with 7 prejudice insofar as Ms. Green brings it against Deutsche Bank. 8 Next, the defendants argue that Ms. Green’s claim for violation of section 1024.41(b)(2)(i) 9 fails because she cannot credibly allege that CMC never acknowledged her January 2014 loan modification application (her first one) when she also alleges that (1) CMC acknowledged 11 United States District Court Northern District of California 10 receiving the “documents to be considered for a loan modification” and also acknowledged that 12 Ms. Green’s application was “under review,” and (2) CMC subsequently denied her application on 13 the basis that it had not received all of the documents it requested. (Motion, ECF No. 55 at 25 14 (citing SAC, ECF No. 54, ¶ 46-48).) This particular argument is not persuasive. Section 15 1024.41(b)(2)(i) does not simply require an acknowledgement; it requires that an acknowledgment 16 containing specific things be sent within a certain time. That said, Ms. Green did allege that CMC 17 acknowledged receiving her application in January 2014 but she never alleges when CMC sent 18 that acknowledgement or that CMC’s acknowledgment did not include the required things. She 19 also never addresses the defendants’ argument in her opposition. (See Opposition, ECF No. 59 at 20 20 (responding to the argument at page 17 of the defendants’ motion, not the argument at page 25 21 of the defendants’ motion).) Without more specific allegations about CMC’s acknowledgement, 22 she does not plausibly allege a claim for violation of section 1024.41(b)(2)(i). It is not clear 23 whether Ms. Green can or cannot sufficiently allege that CMC’s acknowledgment failed to comply 24 with section 1024.41(b)(2)(i). Accordingly, the court dismisses her section 1024.41(b)(2)(i) claim 25 without prejudice. 26 With respect to Ms. Green’s claim for violation of section 1024.41(f)(2), the defendants point 27 out that this section applies only if a borrower submits a “complete” loan modification application 28 and argue that Ms. Green does not allege that she submitted one. (Motion, ECF No. 55 at 25.) But 28 ORDER (No. 3:14-cv-04281-LB) 1 Ms. Green does allege that she submitted a complete loan modification application in early 2 January 2014. (See SAC, ECF No. 54, ¶ 46-48.) That CMC allegedly denied her application on the 3 ground that it was not complete does not require dismissal of the claim. Whether her application 4 was complete is a question of fact to be resolved at summary judgment, not at the motion-to- 5 dismiss stage. 6 The defendants also argue that Ms. Green alleges that CMC sent her a notice on January 24, 7 2014, which stated that she was ineligible to receive a loan modification because the loan 8 modification application packet was incomplete. (Motion, ECF No. 55 at 25 (citing SAC, ECF No. 9 54, ¶ 48.) They say this undermines her claim. In Paragraph 48 of her Second Amended Complaint, Ms. Green alleges that the letter informed her that she was ineligible to receive a loan 11 United States District Court Northern District of California 10 modification because her application was incomplete. (See SAC, ECF No. 54, ¶ 48.) She did not 12 allege that the letter informed her that she was ineligible for any loss mitigation option, which is 13 what the regulation requires. The court does not find that her allegation at Paragraph 48 14 undermines this claim. Accordingly, the court concludes that Ms. Green’s claim against CMC for 15 violation of section 1024.41(f)(2) survives. 16 6.6 ECOA – 15 U.S.C. § 1691(d)(1) 17 In her sixth claim, Ms. Green alleges that the defendants violated ECOA. (SAC, ECF No. 54, 18 ¶¶ 105-09.) 15 U.S.C. § 1691(d)(1), the subsection she alleges the defendants violated, states: 19 “Within thirty days (or such longer reasonable time as specified in regulations of the Bureau for 20 any class of credit transaction) after receipt of a completed application for credit, a creditor shall 21 notify the applicant of its action on the application.” Ms. Green alleges that the defendants 22 violated section 1691(d)(1) because she “submitted a complete application for credit, i.e., a 23 complete loan modification application,” in January 2014, but CMC did not inform her of its 24 decision on this application until July 2014, more than 30 days after she submitted it. (SAC, ECF 25 No. 54, ¶¶ 106-07.) 26 The defendants correctly point out that ECOA applies only to creditors and note that Ms. 27 Green does not allege that Deutsche Bank was a creditor. (Motion, ECF No. 55 at 27.) They also 28 point out that Ms. Green does not allege that Deutsche Bank took any action with respect to this 29 ORDER (No. 3:14-cv-04281-LB) 1 claim. (Id.) The court thus dismisses the claim with prejudice insofar as Ms. Green brings it 2 against Deutsche Bank. 3 The defendants next argue that CMC was not obligated to notify Ms. Green of its action on her 4 loan modification application within 30 days because an “adverse action for purposes of the 5 ECOA does not include ‘refusal to extend additional credit under an existing credit arrangement 6 where the applicant is delinquent or otherwise in default,’” and in this case the Trust was in 7 default. (Motion, ECF No. 55 at 26-27 (quoting 15 U.S.C. 1691(d)(6)).) They cite one case, 8 Owens v. Bank of America, N.A., No. 11-cv-458-YGR, 2013 WL 1820769 (N.D. Cal. Apr. 30, 9 2013), where the court dismissed a plaintiff’s ECOA claim because the plaintiffs were in default on their mortgage. See id. at *5. The court is not persuaded by the defendants’ argument. First, 11 United States District Court Northern District of California 10 Owens involved a claim under section 1691(d)(2), which requires a creditor to do certain things 12 when it takes an “adverse action” with respect to an applicant’s application. Section 1691(d)(1), 13 however, requires a creditor to notify the applicant about its “action” on an application. Ms. Green 14 brings a claim for violation of section 1691(d)(1), not section 1691(d)(2). At least one court has 15 recognized this distinction and read section 1691(d) as follows: 16 17 18 19 20 21 22 Under Section 1691, an “adverse action” triggers a creditor’s obligation to provide a statement of reasons, not its obligation to provide a determination within thirty days, which is triggered by the completion of the application for credit. Compare 11 U.S.C. § 1691(d)(1) with § 1691(d)(2). The phrase “adverse action” does not appear in Section 1691(d)(1). Accordingly, a plain reading of the statute confirms that creditors are required to make a determination on a completed application within thirty days regardless of the status of the applicant, but need not send applicants in default a statement of reasons when their application is rejected. See id. at § 1691(d)(6). Neither a plain reading of the statute nor public policy supports a rule requiring a creditor to promptly resolve applications of nondefaulting applicants while permitting creditors to leave those applicants in default twisting in the wind indefinitely. 23 MacDonald v. Wells Fargo Bank, N.A., No. 14-cv-04970-HSG, 2015 WL 1886000, at *3 (N.D. 24 Cal. Apr. 24, 2015). The court finds MacDonald’s reading of the statute to be the correct one. The 25 court rejects the defendants’ statutory interpretation argument. 26 In their reply, the defendants argue for the first time that Ms. Green also has not alleged the 27 basic elements of an ECOA violation. (See Reply, ECF No. 60 at 10.) They cite the four elements 28 outlined by the district court in Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039 30 ORDER (No. 3:14-cv-04281-LB) (N.D. Cal. 2009). The court there stated that “to determine whether a plaintiff properly has 2 pleaded a claim of discrimination under the ECOA,” a plaintiff “must allege that: (1) she is a 3 member of a protected class; (2) she applied for credit with defendants; (3) she qualified for credit; 4 and (4) she was denied credit despite being qualified.” Id. at 1045. The defendants’ argument does 5 not distinguish between violations of ECOA’s discrimination provisions and violations of ECOA’s 6 procedural requirements. Compare 15 U.S.C. §§ 1691(a)-(c) with 15 U.S.C. §§ 1691(d)-(e); see 7 also Vasquez v. Bank of Am., N.A., No. 13-cv-02902-JST, 2013 WL 6001924, at *11 (N.D. Cal. 8 Nov. 12, 2013) (discussing this distinction). This is important because, as one court in this district 9 has persuasively noted, “Hafiz did not involve the procedural notice requirements of the ECOA,” 10 and “ECOA’s procedural requirements apply regardless of whether the Hafiz prerequisites have 11 United States District Court Northern District of California 1 been satisfied.” Vasquez, 2013 WL 6001924, at *12. Ms. Green’s ECOA claim survives. 12 6.7 13 In her seventh and eight claims, Ms. Green alleges claims against the defendants for negligent 14 Negligent Misrepresentation and Fraud misrepresentation and fraud. (Motion, ECF No. 54, ¶¶ 110-19.) 15 To state a claim for negligent misrepresentation, a plaintiff must allege the following: “1) a 16 representation as to a material fact; 2) that the representation is untrue; 3) that the defendant made 17 the representation without a reasonable ground for believing it true; 4) an intent to induce reliance; 18 5) justifiable reliance by the plaintiff who does not know that the representation is false; and, 6) 19 damage.” Bear Stearns & Co. v. Daisy Sys. Corp., 97 F.3d 1171, 1180 (9th Cir. 1996) (citing 20 Masters v. San Bernardino County Employees Retirement Ass’n, 32 Cal. App. 4th 30, 40 n.6 21 (1995)). As with intentional misrepresentation, the existence of a duty of care is necessary to 22 support a negligent misrepresentation claim. Alfus v. Pyramid Tech. Corp., 745 F. Supp. 1511, 23 1523 (N.D. Cal. 1990) (“Liability for negligent misrepresentation may attach only where plaintiff 24 establishes that defendants breached a duty owed to him”); Garcia v. Superior Court, 50 Cal. 3d 25 728, 735 (1990). 26 “A cause of action for fraud [under California law] requires the plaintiff to prove (a) a 27 knowingly false misrepresentation by the defendant, (b) made with the intent to deceive or to 28 induce reliance by the plaintiff, (c) justifiable reliance by the plaintiff, and (d) resulting damages.” 31 ORDER (No. 3:14-cv-04281-LB) 1 Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192 (9th Cir. 2001) (quoting Wilkins v. Nat’l 2 Broadcasting Co., Inc., 71 Cal. App. 4th 1066, 1082 (1999)); see also Cal. Civ. Code § 1572. 3 In addition, the court applies Federal Rule of Civil Procedure 9(b)’s heightened pleading 4 standard to claims for fraud and negligent misrepresentation. See Kelley v. Rambus, Inc., 384 Fed. 5 App’x 570, 573 (9th Cir. June 16, 2010) (Kelley’s [California] state law claims for common law 6 fraud and negligent misrepresentation fail to meet the heightened pleading standards of Rule 9(b) 7 of the Federal Rules of Civil Procedure.”); Errico v. Pac. Capital Bank, N.A., 753 F. Supp. 2d 8 1034, 1049 (N.D. Cal. 2010) (“[N]egligent misrepresentation ‘sounds in fraud’ and is subject to 9 Rule 9(b)’s heightened pleading standard . . . .”); Neilson v. Union Bank of Cal., N.A., 290 F.Supp.2d 1101, 1141 (C.D. Cal. 2003); but see Petersen v. Allstate Indem. Co., 2012 U.S. Dist. 11 United States District Court Northern District of California 10 LEXIS 32968, *8-9, 2012 WL 833034 (C.D. Cal. Mar. 12, 2012) (finding that Rule 9(b) does not 12 apply to negligent misrepresentation claims; criticizing Neilson ). Under Rule 9(b), a party 13 alleging fraud or intentional or negligent misrepresentation must satisfy a heightened pleading 14 standard by stating with particularity the circumstances constituting fraud. Specifically, 15 “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the 16 misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) 17 (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)). Further, “a plaintiff must set forth 18 more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what 19 is false or misleading about a statement, and why it is false.” Id. (quoting Decker v. GlenFed, Inc., 20 42 F.3d 1541, 1548 (9th Cir. 1994) (superceded by statute on other grounds)). A plaintiff must 21 also differentiate his allegations when suing more than one defendant, especially in the context of 22 fraud claims. See Destfino v. Reiswig, 630 F.3d 952, 958 (9th Cir. 2011). 23 The basis of both claims is her allegation that CMC “repeatedly told [her] that [it] had not 24 received all necessary documents to be considered for a loan modification when [it actually] had.” 25 (SAC, ECF No. 54, ¶¶ 111, 115.) She also alleges that she relied upon CMC’s representations “by 26 accruing substantial late charges, failing to take other actions to save her home such as obtaining a 27 loan with another lender or finding a friend/relative that [could have] provide[d] financial 28 assistance, and not taking legal action earlier, even though [she had] numerous viable claims 32 ORDER (No. 3:14-cv-04281-LB) 1 against” CMC. (Id. ¶¶ 112, 118.) She further alleges that she has been “damaged through damaged 2 credit, loss of title to her home, unwarranted late fees, and other charges by [CMC] and having to 3 pay legal costs and expenses.” (Id. ¶¶ 112, 118.) She also has “suffered emotional distress for fear 4 of losing [her] home.” (Id. ¶¶ 112, 118.) In addition to these allegations, Ms. Green also alleges 5 with respect to her negligent misrepresentation claim that CMC “denied [her] for a loan 6 modification on the basis of insufficient income by grossly miscalculating [her] gross income.” 7 (Id. ¶ 111.) 8 The defendants first argue that Deutsche Bank must be dismissed from these claims because 9 Ms. Green makes no specific allegations against it. (Motion, ECF No. 55 at 29, 30.) Indeed, Ms. Green’s only mention of Deutsche Bank in this claim is when she alleges, without elaboration, that 11 United States District Court Northern District of California 10 CMC is Deutsche Bank’s agent. (SAC, ECF No. 54, ¶¶ 111, 115.) The rest of the claims simply 12 describes CMC’s conduct. (See id. ¶¶ 111-13, 115-18.) Ms. Green does not respond to this 13 argument in her opposition. (See Opposition, ECF No. 59 at 21-24.) The court thus dismisses the 14 negligent misrepresentation and fraud claims with prejudice insofar as Ms. Green brings them 15 against Deutsche Bank. 16 Next, the defendants argue that Ms. Green’s allegations are not particular enough to meet Rule 17 9(b)’s heightened pleading requirement. (Motion, ECF No. 55 at 27, 30.) The court disagrees. She 18 identifies who made the misrepresentations: CMC. Her claims are largely based on letters she 19 received from CMC as an entity, not on conversations she had with particular individuals, so this 20 is sufficient. She identifies the misrepresentation: CMC telling her that her first loan modification 21 application was incomplete even though, as she alleges, it was complete, and by falsely using a 22 miscalculated gross income. She also identifies when the misrepresentation was made: when CMC 23 denied her loan modification applications. In short, Ms. Green has stated with particularity the 24 circumstances constituting the alleged negligent misrepresentation and fraud. 25 The defendants also argue that Ms. Green’s negligent misrepresentation claims fails because 26 she alleges no facts to suggest that they owed a duty to her. (Motion, ECF No. 55 at 28-29.) The 27 court has faced this issue before and concluded that whether a lender has a duty of care requires 28 the balancing of the non-exhaustive factors listed in Nymark v. Heart Fed. Savings & Loan Ass’n, 33 ORDER (No. 3:14-cv-04281-LB) 1 231 Cal. App. 3d 1089, 1098 (1991). See Rowland v. JP Morgan Chase Bank, No. C 14-00036 2 LB, 2014 WL 992005, at *8-9 (N.D. Cal. Mar. 12, 2014); Rijhwani v. Wells Fargo Home 3 Mortgage, Inc., No. C 13-05881 LB, 2014 WL 890016, at *14-17 (N.D. Cal. Mar. 3, 2014). As the 4 court has explained: 5 6 7 8 9 10 United States District Court Northern District of California 11 12 13 Under California law, as Defendants point out, lenders generally do not owe borrowers a duty of care unless their involvement in the loan transaction exceeds the scope of their “conventional role as a mere lender of money.” See Nymark v. Heart Fed. Savings & Loan Ass’n, 231 Cal. App. 3d 1089, 1095-96 (1991) (citations omitted). To determine “whether a financial institution owes a duty of care to a borrower-client,” courts must balance the following non-exhaustive factors: [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm. Id. at 1098 (quotation marks and citations omitted). 14 Rowland, 2014 WL 992005, at *8. In Rijhwani, the court found that Garcia v. Ocwen Loan 15 Servicing, LLC, No. C 10–0290 PVT, 2010 WL 1881098 (N.D. Cal. May 10, 2010) (finding that a 16 servicer had a duty of care to a borrower under the Nymark factors), is persuasive and instructive. 17 As the court explained, in Garcia: 18 19 20 21 22 23 24 25 26 the defendant had [at least twice] cancelled the trustee’s sale to allow time for processing the plaintiff’s application. The defendant asked the plaintiff to submit various documents in connection with the loan modification request. The plaintiff did so, but upon receiving the documents, the defendant routed them to the wrong department. Later, the plaintiff’s agent received a recorded message indicating documents were missing, but the message did not identify which ones were missing. For the next several weeks, the plaintiff’s agent repeatedly tried to contact the defendant to determine which documents were missing, but he was unable to speak with any of the defendant's employees. The plaintiff’s agent was finally able to actually speak with one of the defendant’s employees, but it was too late. The employee informed the plaintiff’s agent that the home had been sold at a trustee’s sale the day before. The court concluded that at least five of the six factors cited above weighed in favor of finding that the defendant owed the plaintiff a duty of care in processing the plaintiff’s loan modification application. [Garcia, 2010 WL 1881098,] at *3-4. 27 Rijhwani, 2014 WL 890016, at *16-17. 28 After weighing the Nymark factors, the court finds that Ms. Green’s allegations are sufficient, 34 ORDER (No. 3:14-cv-04281-LB) 1 at least at this stage of the litigation, to support a finding that the defendants owed her a duty of 2 care. The potential loan modifications were intended to affect her (as trustee of the Trust); it was 3 foreseeable that improperly denying her loan modification applications would harm her; the 4 Property was foreclosed upon so she suffered harm; the foreclosure likely would not have 5 occurred had CMC not improperly denied her applications; if CMC did in fact improperly deny 6 her applications, it is morally blameworthy; and requiring a duty in this context would help to 7 prevent future harm. This is sufficient at this time. The defendants may revisit this issue on 8 summary judgment after discovery is taken. 9 Lastly, the defendants argue that Ms. Green has not alleged justifiable reliance on CMC’s purported misrepresentations. (Motion, ECF No. 55 at 29, 31.) The court disagrees. Ms. Green 11 United States District Court Northern District of California 10 alleges that she relied upon CMC’s representations “by accruing substantial late charges, failing to 12 take other actions to save her home such as obtaining a loan with another lender or finding a 13 friend/relative that [could have] provide[d] financial assistance, and not taking legal action earlier, 14 even though [she had] numerous viable claims against” CMC. (SAC, ECF No. 54, ¶¶ 112, 118.). 15 The defendants say that this is not sufficient as a matter of law, but the opinion it cites, which was 16 dealing with promissory estoppel and not negligent misrepresentation or fraud, says only that 17 “[m]erely submitting a modification application or making payments to the beneficiary or servicer, 18 however, is insufficient to establish the required detrimental reliance, because plaintiff was already 19 legally obligated to make payments under the loan.” Ortiz v. America’s Servicing, Co., No. EDCV 20 12–191 CAS (SPx), 2012 WL 2160953, at *7 (C.D. Cal. June 11, 2012). This court, on the other 21 hand, has denied motions to dismiss on this ground where a plaintiff has alleged reliance more 22 specifically, as Ms. Green has, in support of fraud and misrepresentation claims. See Cruz v. 23 Aurora Loan Servs., LLC, No. 3:15-cv-00585-LB, 2015 WL 4915452, at *6 (Aug. 17, 2015); 24 Khan v. ReconTrust Co., 81 F. Supp. 3d 867, 875 (N.D. Cal. 2015). The court does so again. Ms. 25 Green’s negligent misrepresentation and fraud claims against CMC survive. 26 6.8 27 In her ninth and eleventh claims, Ms. Green brings equitable claims for wrongful foreclosure 28 Wrongful Foreclosure and Cancellation of Deed and cancellation of the Deed of Trust showing Deutsche Bank’s purchase of the Property at the 35 ORDER (No. 3:14-cv-04281-LB) 1 Trustee’s Sale. (SAC, ECF No. 54, ¶¶ 120-24, 131-34.) The defendants make two arguments 2 regarding these claims. First, they argue that the claims fail because Ms. Green has not alleged that 3 she made a viable tender of the amount owed. (Motion, ECF No. 31, 32.) The court, however, 4 already rejected the defendants’ tender argument. Second, the defendants say that these claims are 5 derivative of Ms. Green’s other claims, and because those claims fail, so do these. (Id. at 31, 32.) 6 But as the court ruled above, not all of Ms. Green’s other claims fail, so neither do these. They 7 survive. 8 6.9 Unfair Business Practices – Cal. Bus. & Prof. Code §§ 17200 et seq. 9 Ms. Green’s tenth claim is for violation of the UCL. (SAC, ECF No. 54 ¶¶ 125-30.) The defendants argue only that this claim is derivative of Ms. Green’s other claims, and because those 11 United States District Court Northern District of California 10 claims fail, so does this one. (Motion, ECF No. 55 at 31.) The court has ruled that not all of Ms. 12 Green’s other claims fail, so neither does this one. It survives. 13 6.10 Declaratory Relief 14 Ms. Green’s twelfth claim is for declaratory relief. (SAC, ECF No. 54, ¶¶ 135-40.) The federal 15 Declaratory Judgment Act applies in this action. See Guccione v. JPMorgan Chase Bank, N.A., 16 No. 3:14–cv–04587 LB, 2015 WL 1968114, at *20-21 (N.D. Cal. May 1, 2015). The defendants 17 argue only that this claim is derivative of Ms. Green’s other claims, and because those claims fail, 18 so does this one. (Motion, ECF No. 55 at 32-33.) The court has ruled that not all of Ms. Green’s 19 other claims fail. This claim survives. 20 CONCLUSION 21 The court grants in part and denies in the part the defendants’ motion. 22 The Trust and Ms. Green, in her individual capacity, are dismissed as plaintiffs to this action. 23 Only Ms. Green, in her capacity as trustee of the Trust, remains as the plaintiff. 24 Ms. Green’s first and second claims are dismissed with prejudice against both CMC and 25 Deutsche Bank. Her third, fourth, sixth, seventh, and eighth claims are dismissed with prejudice 26 against Deutsche Bank, but they survive against CMC. Her fifth claim is dismissed with prejudice 27 against Deutsche Bank, dismissed without prejudice against CMC insofar as it alleges a violation 28 of 12 C.F.R. § 1024.41(b)(2)(i), and survives against CMC insofar as it is based on a violation of 36 ORDER (No. 3:14-cv-04281-LB) 1 12 C.F.R. § 1024.41(f)(2). Her ninth, tenth, eleventh, and twelfth claims survive against both 2 CMC and Deutsche Bank. 3 If Ms. Green choses to file a Third Amended Complaint to re-allege a claim against CMC for 4 violation of 12 C.F.R. § 1024.41(b)(2)(i), she must do so within 14 days from the date of this 5 order. 6 IT IS SO ORDERED. 7 Dated: December 1, 2015 ______________________________________ LAUREL BEELER United States Magistrate Judge 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 37 ORDER (No. 3:14-cv-04281-LB)

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