Orosco v. Specialized Loan Servicing, LLC

• Decision Date: 19 August 2020
• Docket Number: No. 2:20-cv-00743-KJM-EFB,2:20-cv-00743-KJM-EFB
• Court: U.S. District Court — Eastern District of California
• Parties: PAUL OROSCO, et al., Plaintiffs, v. SPECIALIZED LOAN SERVICING, LLC et al., Defendants.

PAUL OROSCO, et al., Plaintiffs, v. SPECIALIZED LOAN SERVICING, LLC et al., Defendants.

No. 2:20-cv-00743-KJM-EFB

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

August 19, 2020

ORDER

In this mortgage-related dispute, defendants moves to dismiss plaintiffs' complaint. Mot., ECF No. 3. Plaintiffs oppose, Opp'n, ECF No. 8, and defendants have filed a reply, ECF No. 10. The court held a hearing on the matter on July 24, 2020. ECF No. 12. At hearing, plaintiffs' counsel made several concessions, as noted in the discussion below. The court and the parties discussed whether leave to amend for certain claims was warranted; plaintiffs' counsel argued leave to amend was warranted, because he could plead additional facts. The court allowed plaintiffs seven days to file supplemental briefing on the subject. ECF No. 12. To date, plaintiffs have not filed supplemental briefing, and defendants noted as much in their "responsive" supplemental briefing, filed August 3, 2020. Supp'l Br., ECF No. 13.

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///// Having reviewed the allegations of the complaint and the parties' briefing, the court orders as follows.

I. REQUEST FOR JUDICIAL NOTICE

In conjunction with their motion to dismiss, defendants request that the court take judicial notice of the following documents:

1. "Grant Deed" recorded in the Official Records of San Joaquin County;

2. "Deed of Trust" recorded in the Official Records of San Joaquin County as Document Number 2003-118818;

3. "Deed of Trust" recorded in the Official Records of San Joaquin County as Document Number 2003-118819;

4. "Deed of Trust and Assignment of Rents" recorded in the Official Records of San Joaquin County as Document Number 2004-057751;

5. "Assignment of Deed of Trust" recorded in the Official Records of San Joaquin County;

6. "Substitution of Trustee" recorded in the Official Records of San Joaquin County;

7. "Notice of Default" recorded in the Official Records of San Joaquin County;

8. "Notice of Trustee's Sale" recorded in the Official Records of San Joaquin County;

9. "Trustee's Deed Upon Sale" recorded in the Official Records of San Joaquin County.

Plaintiffs did not file an opposition to defendants' request for judicial notice, and so are deemed to not dispute the authenticity of any of the exhibits. Penermon v. Wells Fargo Bank, N.A., 47 F. Supp. 3d 982, 989 (N.D. Cal. 2014). Defendants' exhibits are "copies of official public records, whose authenticity is capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Id. (citing Fed. R. Evid. 201(b)). Accordingly, the request for judicial notice is GRANTED.

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II. DISCUSSION

A. Violation of Section 2924 (Claim 1)

Plaintiffs' first claim is for a violation of section 2924 of the California Homeowner Bill of Rights (HBOR), based on defendants' alleged failure to "record a Substitution of Trustee with the San Joaquin County Recorder's Office" when the Deed of Trust was transferred from "GMAC Defendant" (U.S. Bank, National Association as Indenture Trustee of the GMAC Home Equity Loan Trust 2004-HE3) to a third party. Compl. ¶¶ 15-21, ECF No. 1, at 13-14. However, defendants provide a document from the San Joaquin County Recorder showing US Bank recorded a substitution of trust whereby it substituted Affinia as successor-trustee under the Deed of Trust, dated May 8, 2019. Req. for Jud. Not., Ex. 6 at 47. Plaintiffs do not oppose defendants' request for judicial notice, nor do they acknowledge defendants' argument or documentation in their opposition to the motion to dismiss. In fact, plaintiffs do not mention section 2924 at all in their opposition.

Because plaintiffs' first claim is defeated by the judicially noticed document provided by defendants, and plaintiffs provide no argument or evidence to the contrary, the claim is DISMISSED.

Defendants argue the court should not grant leave to amend because plaintiffs do not have a private right of action to enforce section 2924. Defendants are correct. See Zeppeiro v. Green Tree Servicing, LLC, 679 F. App'x 592, 593 (9th Cir. 2017) (finding no private right of action to sue for monetary damages based on Cal. Civ. Code section 2924(a)(6) because it is not listed in Cal. Civ. Code section 2924.12(b), which creates a private right of action for damages for enumerated statutes); Cal. Civ. Code § 2924.12(b) (not listing any part of section 2924); Penermon, 47 F. Supp. 3d at 997 (finding court not authorized to award monetary damages for violation of § 2924(a)(6) as it was excluded from § 2924.12). Plaintiffs do not identify any authority to the contrary, nor any authority providing that the court can award injunctive relief for a violation of section 2924; in fact, they ignore defendants' argument altogether. See Cal. Civ. Code § 2924.12(a)(1) (listing sections for which a borrower may bring an action for injunctive relief if a trustee's deed upon sale has not been recorded, not including section 2924). Becausethere is no reason to believe plaintiffs can amend to state a claim, the court DENIES leave to amend plaintiffs' first claim. See Rutman Wine Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987) ("Denial of leave to amend is not an abuse of discretion where the pleadings before the court demonstrate that further amendment would be futile.").

B. Violation of Section 2923.6(c) (Claim 2) & Section 2924.9 (Claim 3)

Defendants argue plaintiffs' second and third claims must be dismissed because sections 2923.6(c) and 2924.9 do not apply to a third-lien loan like the one at issue here. Mot. at 14 (citing Req. for Jud. Not., Exs. 1-3). At hearing, plaintiffs' counsel conceded that, because the lien at issue here is a third lien, not a first lien, the relevant provisions of HBOR do not apply to plaintiffs' case. See Parker-Bokelman v. Specialized Loan Servicing LLC, No. EDCV1900173AGSHKX, 2019 WL 3243739, at *5 (C.D. Cal. June 3, 2019) (citing Cal. Civ. Code. § 2924.15(a)). Accordingly, plaintiffs' second and third HBOR claims are DISMISSED.

The court DENIES leave to amend for this claim, given the apparent futility of amendment based on plaintiffs' counsel's concession HBOR does not apply and plaintiffs' having not submitted supplemental briefing on the topic, despite being given the opportunity. See Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991) ("A district court does not err in denying leave to amend where the amendment would be futile, or where the amended complaint would be subject to dismissal.") (citations omitted).

C. Negligence (Claim 4)

Defendants argue plaintiffs' negligence claim must be dismissed because defendants, as the loan servicers, did not owe a duty of care to plaintiffs. "Federal district courts in California are divided on when lenders owe a duty of care to borrowers in the context of the submission of loan modification applications and negotiations related to loan modifications." Penermon, 47 F. Supp. 3d at 1001 (citing Rijhwani v. Wells Fargo Home Mortg., Inc., No. C 13-05881 LB, 2014 WL 890016, at *15-16 (N.D. Cal. Mar. 3, 2014)). This court has previously adopted the position that a lender owes a duty of care to a borrower not to make material misrepresentations about the status of an application for a loan modification, and that a borrower would foreseeably be harmed by inaccurate or untimely updates about a pending loanmodification application. Ogamba v. Wells Fargo Bank, N.A., No. 2:17-CV-01754-KJM-AC, 2018 WL 558799, at *4 (E.D. Cal. Jan. 24, 2018), appeal dismissed, No. 18-15313, 2018 WL 4178698 (9th Cir. July 19, 2018).

Plaintiffs' negligence claim is primarily based on alleged HBOR violations. See Compl. ¶ 36 (citing Cal. Civ. Code sections 2924(a)(1), 2934a(d), 2934a(e), 2923.6(c), 2924.9, 2923.5). As explained above, plaintiffs concede the loan at issue is not a first-lien loan, so sections 2923.6(c), 2924.9, 2923.5 do not apply to plaintiffs' loan, and sections 2924(a)(1) and 2923a are not privately enforceable according to section 2924.12. As for the remainder of the claim, which appears to be based on defendants' review of plaintiffs' loan modification application, Compl. ¶¶ 34-35, at hearing, plaintiffs' counsel represented that he could allege additional facts to support a negligence claim and thereby clarify the claim. Accordingly, the court GRANTS leave to amend this claim, if possible, in any amended complaint. See Jordan v. Bank of Am., N.A., 396 F. Supp. 3d 922, 931 (E.D. Cal. 2019) (granting leave to amend where dismissal of negligence claim based insufficient facts to show lender owed duty of care to plaintiff).

D. Wrongful Foreclosure (Claim 5)

Wrongful foreclosure is a California common law claim that generally tracks the elements of an equitable cause of action to set aside a foreclosure sale. Haynish v. Bank of Am., N.A., 284 F. Supp. 3d 1037, 1049 (N.D. Cal. 2018) (quoting Miles v. Deutsche Bank Nat'l Tr. Co., 236 Cal. App. 4th 394, 408 (2015)).¹ As defendants point out, a wrongful foreclosure claimgenerally requires the mortgagor allege he "has made a valid and viable tender [offer] of payment of the indebtedness," or that he is excused from tendering. See Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1183-84 (N.D. Cal. 2009) (quotation marks and citations omitted). Plaintiffs admit they did not tender, but argue they are excused from the tender requirement "because of [defendants'] violations of Civ. Code §§ 2924 (a)(1), 2934a(d), 2934a(e), 2923.6(c) and 2924.9." Compl. ¶ 53; see also Opp'n at 10. In their opposition, plaintiffs analogize to Dimock v. Emerald Properties LLC, 81 Cal. App. 4th 868, 876 (2000); they argue that, as in Dimock, plaintiffs allege the foreclosure sale was void, as opposed to voidable, so tender is excused. Opp'n at 10-11. However, plaintiffs have not adequately pled that the foreclosure was void. Rather, they base their wrongful foreclosure claim on HBOR violations that may not be applicable to the loan at issue...