Pfeifer v. Countrywide Home Loans, Inc.
| Decision Date | 20 February 2013 |
| Docket Number | A133071 |
| Citation | 150 Cal.Rptr.3d 673,211 Cal.App.4th 1250 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Allen PFEIFER, Florence A. Pfeifer, Plaintiffs and Appellants, v. COUNTRYWIDE HOME LOANS, INC. (Countrywide) and ReconTrust Company, Defendants and Respondents. |
211 Cal.App.4th 1250
150 Cal.Rptr.3d 673
Allen PFEIFER, Florence A. Pfeifer, Plaintiffs and Appellants,
v.
COUNTRYWIDE HOME LOANS, INC. (Countrywide) and ReconTrust Company, Defendants and Respondents.
A133071
Court of Appeal,
First District, Division 2, California.
Filed December 13, 2012
Review Denied February 20, 2013
Alameda County Superior Court Trial Judge: Hon. Richard Keller (Alameda County Super. Ct. No. HG09471481)
Attorney for Plaintiffs and Appellants: Moss & Murphy Glen L. Moss
Attorneys for Amicus Curiae on behalf of Kamala D. Harris Plaintiffs and Appellants upon the request Attorney General of California of the Court of Appeal Brian E. Nelson TravisLeBlanc Special Assistant Attorneys General Frances T. Grunder Senior Assistant Attorney General Benjamin G. Diehl Supervising Deputy Attorney General Todd I. EspinosaSamuel J. MaselliAmy Teng Deputy Attorneys General
Attorneys for Defendants and Respondents: Bryan Cave, LLP James Goldberg Berrie Goldman Attorneys for Amicus Curiae on behalf of Severson & Werson Defendants and Respondents Jan T. Chilton Wells Fargo Bank Jon D. Ives
Lambden, J.
[211 Cal.App.4th 1255]
Allen Pfeifer (Allen) and Florence A. Pfeifer (Florence), a son and his mother (collectively, the Pfeifers), have a mortgage insured by the Federal Housing Administration (FHA). They filed a third amended complaint against Countrywide Home Loans, Inc. (Countrywide) and ReconTrust Company (Recon), after a nonjudicial foreclosure proceeding was commenced[150 Cal.Rptr.3d 677]against their property. The trial court sustained a demurrer by Countrywide and Recon (collectively, the lenders) without leave to amend against the Pfeifers' third amended complaint and then entered judgment in favor of the lenders.
The Pfeifers appeal and challenge the trial court's rulings that they did not have a cognizable legal claim against Recon under the federal Fair Debt Collection Practices Act (FDCPA or the Act). They also challenge, among other things, the trial court's denial of their requests for declaratory relief and for wrongful foreclosure based on the lenders' failure to conduct a face-to-face interview as mandated by the servicing regulations of the Department of Housing and Urban Development (HUD).
We conclude that the deed of trust incorporates by reference the servicing requirements of HUD, including the face-to-face interview, and the lenders had to comply with the servicing terms prior to conducting a valid nonjudicial foreclosure. We also hold that tender is not required in the present situation, because the borrowers are seeking to enjoin a pending foreclosure sale based on the lenders' failure to comply with the servicing requirements incorporated in the FHA deed in trust. Although we agree with those courts that refuse to permit any private right of action for failure to comply with the HUD regulations and the Pfeifers cannot seek damages based on their wrongful foreclosure action, we concur with those courts distinguishing an offensive action from a defensive action. Thus, we conclude that the servicing requirements are conditions precedent to the acceleration of the debt or to foreclosure. Consequently, the Pfeifers may seek to enjoin the lenders from proceeding with a nonjudicial foreclosure based on the lenders' failure to perform an HUD servicing requirement.
Accordingly, we reverse the trial court's judgment as to the Pfeifers' request for injunctive relief based on their wrongful foreclosure claim and their request for declaratory relief. We, however, otherwise affirm the trial court's judgment, including the lower court's ruling that the Pfeifers do not have a claim for damages against Recon for violating the FDCPA, because Recon is not a debt collector under the statute.
[211 Cal.App.4th 1256]
On August 31, 2009, the Pfeifers filed a complaint against the lenders to enjoin a foreclosure, for declaratory relief, for an accounting, and for elder abuse.1 The Pfeifers filed a first amended complaint, and the lenders demurred. On June 28, 2010, the trial court sustained the lenders' demurrer with leave to amend the Pfeifers' pleading. The Pfeifers filed a second amended complaint and, after obtaining new counsel after the death of their original attorney, received the court's permission to file a third amended complaint.
The Pfeifers filed their third amended complaint on January 25, 2011, which set forth the following seven causes of action: breach of the implied covenant of good faith and fair dealing against the lenders, wrongful foreclosure against the lenders, breach of contract against the lenders, fraud and deceit against the lenders, a violation of the FDCPA against Recon, financial elder abuse against Countrywide, and a request for declaratory relief against the lenders. The Pfeifers requested, among other things, general and punitive [150 Cal.Rptr.3d 678]damages as well as an order canceling the notice of default and notice of trustee sale.
In their pleading, the Pfeifers alleged that they owned property in Hayward, California, and that Florence is the mother of Allen. The pleading asserted that Florence was incompetent and suffered from Alzheimer's disease and that the original lender knew, or reasonably should have known, that Florence was incompetent and unable to provide consent to a loan agreement. In May 2011, Allen was appointed as guardian ad litem to represent the interests of his mother.
The Pfeifers had a mortgage insured by the FHA. The note indicated that on April 25, 2008, the Pfeifers borrowed $606,977.00 at 6.125 percent interest from Alameda Mortgage Corporation (Alameda Mortgage). The monthly payment was $3,688.06. The deed of trust was filed on April 30, 2008.
According to the Pfeifers' third amended complaint, Countrywide purchased the loan made by Alameda Mortgage in the principal amount of $606,977, but this transaction “was a sham and fictitious one.” This loan was secured by the Pfeifers' home in Hayward. The Pfeifers alleged that Alameda Mortgage “was essentially a front for Countrywide. Alameda Mortgage was
[211 Cal.App.4th 1257]
only the nominal lender and did not use its own money to make the loan. Instead, it used the money from Countrywide and the entire transaction was premised on the fact that Countrywide would promptly become the owner of the loan, and would then securitize it. Countrywide set the terms of the deal and enforced all the underwriting standards and guidelines.” The pleading stated that Alameda Mortgage was a dual agent of both Countrywide and them. Bank of America purchased Countrywide, and Bank of America received the servicing rights of the Pfeifers' loan.2
After Countrywide declared the Pfeifers' loan in default, Countrywide, according to the Pfeifers' third amended complaint, retained Recon to collect the debt. The third amended complaint stated that Recon became the trustee of the deed of trust after the Pfeifers defaulted on their obligations. The Pfeifers alleged that Recon was a “debt collector” as used in FDCPA. They further asserted that Mortgage Electronic Registration Systems, Inc. (MERS), a Delaware corporation, was the “nominee beneficiary of the subject loan” but did not have any beneficial interest in the loan. MERS, according to the pleading, is a subsidiary of MERSCORP, a Reston, Virginia corporation. These corporations, the Pfeifers asserted, failed to register to do business in California.
On May 13, 2009, Recon recorded a notice of default. The notice of default stated pursuant to Civil Code section 2924, subdivision (c) the following: “Upon your written request the beneficiary ... will give you a written itemization of the entire amount you must pay.” The notice of default also stated that at this time the Pfeifers owed $27,313.25 to reinstate their loan.
The Pfeifers claimed in their third amended complaint that on May 13, 2009, Recon recorded the notice of default prior to providing them with the 30–day advance debt validation notice required by the FDCPA. If they had received proper notice, they would have been able to explain, according to their pleading, that a truck had collided with their property and that they had collected checks in the amount of [150 Cal.Rptr.3d 679]$13,844.99, $637.00, and $314.00 (for a total of $14,795.99) in damages, which could have been credited to their mortgage. They declared that Countrywide failed to credit them with this money and unlawfully kept the money. They maintained that Countrywide also received $4,691 for mortgage payments that were not properly credited to their mortgage. Additionally, the Pfeifers asserted, “Countrywide unlawfully ‘force placed’ insurance thereby wrongfully charging [their] account approximately $637.00.” They alleged that they had adequate insurance at all relevant times.
[211 Cal.App.4th 1258]
They averred that Recon had a mandatory duty under the FDCPA to investigate these accounting problems and correct them prior to recording a notice of default. Furthermore, they stated that Recon was not entitled to any immunity from suit and was not entitled to claim “any bona fide error defense for failure to comply with debt validation procedure in the FDCPA.”
With regard to their second cause of action, wrongful foreclosure, the Pfeifers alleged, among other things: “The instant loan is insured by the [FHA] and is subject to the pre-foreclosure requirements provided by the FHA. These requirements include a requirement of a face-to-face interview between an agent of the lender and the borrower prior to commencing any foreclosure proceedings. The scope of this interview is summarized in [title 24 of the Code of Federal Regulations section] 203.604(b), which is incorporated by reference. Defendants have breached this obligation and prematurely commenced a foreclosure proceeding. Plaintiffs are entitled to the cancellation of the notice of default and notice of sale until defendants comply with these regulations. These regulations have the...
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