1197 W. 39th St. v. Seterus, Inc.
| Docket Number | B299994 |
| Decision Date | 02 August 2022 |
| Parties | 1197 WEST 39TH STREET, LLC, Plaintiff and Appellant, v. SETERUS, INC. et al., Defendants and Appellants. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
APPEALS from a judgment and postjudgment order of the Superior Court of Los Angeles County No. BC620025, Rupert A Byrdsong, Judge. Judgment reversed. Postjudgment order denying attorney fees affirmed.
Leonard, Dicker &Schreiber, Richard C. Leonard and Kevin S. Dicker for Plaintiff and Appellant.
The Ryan Firm, Timothy M. Ryan, Andrew J. Mase and Tadeusz McMahon for Defendants and Appellants Seterus, Inc. and Federal National Mortgage Association.
Plaintiff 1197 West 39th Street, LLC (the Company) purchased from the trustee of Stanley Simmons's bankruptcy estate property encumbered by a deed of trust securing a loan to Simmons. The Company sued Federal National Mortgage Association (Fannie Mae)-the deed of trust's successor beneficiary-and Fannie Mae's loan servicer, Seterus, Inc. (collectively the Fannie Mae parties), for declaratory relief to determine the amount required to pay off the loan. It also sued Fannie Mae for damages for an alleged refusal to provide certain information in violation of Civil Code section 2943.[1]
After a bench trial the trial court entered judgment in favor of the Company. On the declaratory relief cause of action, the court determined the amount due to be $185,107.69. On the cause of action for a violation of section 2943, the court awarded the Company $88,850 in damages jointly and severally against the Fannie Mae parties. Although the court found the Company to be the prevailing party entitled to its costs of suit including attorney fees if applicable, it denied the Company's motion for attorney fees.
The Fannie Mae parties appeal the judgment on a variety of grounds, including the bankruptcy court had exclusive jurisdiction over the Company's action; the cause of action for violation of Civil Code section 2943 was preempted by federal law; and the Company failed to establish the elements required by Code of Civil Procedure section 1060 for declaratory relief.[2] The Company appeals the trial court's postjudgment order denying attorney fees.[3] We reverse the judgment and affirm the postjudgment order denying attorney fees.
On May 11, 2016 the Company filed this action for declaratory relief against the Fannie Mae parties to determine the amount due on the secured loan that had been made to Simmons. On July 13, 2016 the Fannie Mae parties demurred to the complaint asserting that the Company, because it was not the borrower and had neither personal liability under the loan nor a contractual relationship with the Fannie Mae parties, lacked standing to pursue the matter and also that they were prohibited by law, including federal privacy laws, from sharing information with the Company absent authorization from Simmons, the borrower. The demurrer was noticed for hearing on February 17, 2017. On September 2, 2016 the Company filed a first amended complaint that added a second cause of action against only Fannie Mae for violation of section 2943.
In its first amended complaint the Company alleged its lawsuit involved a deed of trust recorded on August 4, 2005 against property located at 1197 West 39th Street in Los Angeles that secured a loan to Simmons in the original sum of $285,000 at an interest rate of 5.625 percent. The deed of trust and underlying loan changed hands several times but were eventually assigned to Fannie Mae, which hired Seterus to service the loan. Simmons filed for bankruptcy, and ownership of the property passed to his bankruptcy estate. On November 23, 2015 the Company purchased the property from the bankruptcy trustee subject to the deed of trust. On or about December 2, 2015 the Company began contacting the Fannie Mae parties to learn the outstanding loan amount.
The Fannie Mae parties provided a demand dated January 8, 2016, addressed to Simmons and attached as an exhibit to the first amended complaint, which stated the amount required to reinstate the loan to a current status was $32,539.81 if received between January 8, 2016 and February 5, 2016. The demand indicated that reinstatement amount was comprised of $24,693.90 in past due principal and interest payments; $7,449.39 in tax and insurance payments; actual charges through February 5, 2016 (including one $411.92 entry with a due date in May 2015 for "PSLGLPOSTINGCOST"); estimated charges through February 5, 2016; and a subtraction (-$209.52) for "Suspense Funds." The January 8, 2016 demand stated the unpaid principal balance was $212,101.76.
The first amended complaint noted the January 8, 2016 demand did not further divide the $24,693.90 amount between principal and interest, and the $7,449.39 amount between tax and insurance. The Company alleged it had paid all property taxes due from the date it took title and it had also purchased insurance and an umbrella policy of $5 million. It questioned the charges on the demand as unsupported and contended the May 2015 charge of more than $400 for posting costs violated an automatic stay issued by the bankruptcy court.
The Company alleged it wired $32,539.81 to Seterus on February 4, 2016, and on February 26, 2016 sent another $5,000, which Seterus accepted. Since February 26, 2016 Seterus either refused to cash the Company's checks or, when the Company paid electronically, returned money to the Company's account. Although the Company submitted payments totaling $180,000 between April 1 and April 14, 2016, all of the payments were returned or not cashed. The Company sent a replacement check in the amount of $180,000.
On March 30, 2016 Seterus sent a new demand, addressed to Steven Schuman of Leonard, Dicker &Schreiber LLP and also attached as an exhibit to the first amended complaint, that set forth a payoff amount rather than a reinstatement amount. The demand explained that "the amount required to pay your loan in full is $213,429.17," a "payoff figure" that was "good through April 22, 2016," with funds received after April 22, 2016 "requir[ing] an additional $32.18 interest per day." The Company alleged the March 30, 2016 demand contained unsupported amounts that it disputed were owed. It also alleged the Fannie Mae parties refused to provide any back-up or explanation for the charges in either of the demands. It further contended interest should stop running on the amounts tendered by the Company from the dates of each payment even though the Fannie Mae parties had refused to accept and/or returned the funds. The Company sought a declaration of the amount due on the loan. It alleged entitlement to attorney fees pursuant to a paragraph of the deed of trust and section 1717.
The second cause of action alleged section 2943 required Fannie Mae to provide certain information to the Company within 21 days of demand-including the balance owed on the obligation; the amount of the monthly payment; the amount of the impound or escrow account; the nature and amount of any expense that Fannie Mae claimed had become a lien on the property; and the total amount due-but Fannie Mae failed and refused to provide the information in a timely manner, or at all. Despite the Company's continuing requests for an accounting after filing of its action, the Fannie Mae parties' counsel refused to provide further information. The first amended complaint attached exhibits described as "some of the relevant correspondence." On July 21, 2016 Seterus returned the sum of $178,026.92 to the Company without an explanation. The Company further alleged, for its second cause of action, it had been damaged as a result of the rise in interest rates pending resolution of the matter because it was unable to refinance the property. It sought compensatory damages and a statutory penalty.
The Fannie Mae parties demurred to the first amended complaint contending, among a host of other arguments, the Company failed to allege facts sufficient to establish an actual controversy because it lacked standing to pursue its action: As asserted by the Fannie Mae parties, a lender had no duty to accept a new owner of the collateral property as a borrower, as shown by title 12 United States Code section 1701j-3's authorization of "due-on-sale clause[s]"[4]; section 13 of the deed of the trust in the case at bar provided in part, ; the Company was not a party to, or named as an intended beneficiary of, the loan secured by the deed of trust and had not assumed personal liability for the loan, which only reflected a contractual relationship between Simmons and the Fannie Mae parties; and federal district courts have held that a nonborrower lacks standing to challenge a deed of trust solely based on an ownership interest in the collateral property. For the cause of action for violation of Civil Code section 2943, the Fannie Mae parties argued the first amended complaint failed to allege facts sufficient to show when a written demand for information required under that statute was made to Seterus or Fannie Mae. They also contended the March 30, 2016 demand to Schuman provided information complying with the statute.
In its opposition the Company...
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