Boone et al v. Specialized Loan Servicing LLC

Northern District of California, cand-4:2015-cv-02224

ORDER by Magistrate Judge Donna M. Ryu denying {{8}} Motion to Dismiss. (dmrlc1, COURT STAFF)

Interested in this case?

Current View

Full Text

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 ROBERT BOONE, et al., 7 Case No. 15-cv-02224-DMR Plaintiffs, 8 v. ORDER ON DEFENDANT'S MOTION 9 TO DISMISS SPECIALIZED LOAN SERVICING LLC, 10 Re: Dkt. No. 8 Defendant. 11 12 Defendant Specialized Loan Servicing LLC ("SLS") moves the court to dismiss Plaintiffs Northern District of California United States District Court 13 Robert Boone and Lynn Robello's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) 14 for failure to state a claim upon which relief can be granted. [Docket No. 8.] The court finds that 15 this matter is appropriate for resolution without oral argument pursuant to Civil Local Rule 7-1(b). 16 For the following reasons, Defendant's motion is denied. 17 I. Background 18 Plaintiffs make the following allegations in their complaint, all of which are taken as true 19 for purposes of this motion.1 In May 2007, Plaintiffs refinanced their home, taking out a $396,000 20 loan secured by a deed of trust on their real property in Castro Valley, California ("the property") 21 in favor of Countrywide Home Loans, Inc. (Compl. ¶ 9; Def.'s Req. for Judicial Notice in Supp. 22 of Mot.2 ("RJN"), Ex. 1 (deed of trust).) A notice of default was recorded against the property in 23 1 24 When reviewing a motion to dismiss for failure to state a claim, the court must "accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007) 25 (per curiam) (citation omitted). 2 26 The court grants Defendant's request for judicial notice of Exhibits 1, 2, and 3, the deed of trust and notices of default recorded in connection with Plaintiff's loan. They are true and correct 27 copies of official public records of the Alameda County Recorder's Office, and their authenticity is capable of accurate and ready determination by resort to sources whose accuracy cannot 28 reasonably be questioned. See Fed. R. Evid. 201(b). 1 2008. (RJN Ex. 2.) 2 In 2011, Defendant SLS became the servicer of Plaintiffs' loan. (Compl. ¶ 9.) 3 In September 2011, Plaintiffs contacted Defendant to request a loan modification. Plaintiffs allege 4 that after this conversation, they submitted a complete loan modification application to Defendant, 5 but that this "began a frustrating process whereby Defendant would request that Plaintiffs resubmit 6 countless documents in support of their loan modification application." (Compl. ¶ 10.) Plaintiffs 7 allege they always complied with Defendant's "requests for additional and replacement 8 documents," each time confirming Defendant's receipt of the documents. (Compl. ¶ 10.) 9 In January 2013, having obtained no resolution on their loan modification application, 10 Plaintiffs asked Defendant to assign a single point of contact to their account. Plaintiffs allege that 11 Defendant "purported to assign an individual named Mary as their single point of contact," but 12 that they "were never able to reach Mary" and instead were "transferred to a new individual that Northern District of California United States District Court 13 was unable to provide them any information about their account" each time they contacted 14 Defendant. (Compl. ¶ 11.) Plaintiffs allege that from January 2013 to the date of filing their 15 complaint (May 2015), they only spoke with Mary two times, and never spoke with any other 16 individual Defendant representative more than twice. (Compl. ¶ 11.) During this time, Plaintiffs 17 continued to submit materials in support of their loan modification application in response to 18 Defendant's requests, but Defendant never made a determination on their application in 2013 and 19 2014. (Compl. ¶ 11.) 20 On January 5, 2015, Defendant sent Plaintiffs a letter asking them to submit two additional 21 documents in support of their application by January 21, 2015. Plaintiffs submitted the requested 22 documents by fax on January 20, 2015. On January 21, 2015, Defendant sent Plaintiffs a letter 23 indicating "receipt of the all [sic] required documents." (Compl. ¶ 12.) On the same day, January 24 21, 2015, a second notice of default was recorded against the property. (Compl. ¶ 12; RJN Ex. 3 25 (2015 Notice of Default).) 26 On February 12, 2015, Defendant sent Plaintiffs a letter stating that "all documents had 27 been received and their modification application was under review." (Compl. ¶ 13.) Two weeks 28 later, on February 26, 2015, Defendant sent Plaintiffs a letter stating that their loan modification 2 1 application was "closed and that Plaintiffs had not been evaluated for any foreclosure alternatives 2 because Plaintiffs 'did not provide [Defendant] with the documents [they] requested.'" (Compl. ¶ 3 14 (brackets in original).) Defendant's letter did not provide appeal rights and did not identify the 4 documents it claimed that Plaintiffs had failed to provide. (Compl. ¶ 14.) Plaintiffs immediately 5 contacted Defendant and were told that "their application would not be reopened and that they 6 could not appeal the denial." (Compl. ¶ 15.) 7 Plaintiffs filed their complaint on May 18, 2015, alleging two claims against Defendant: 1) 8 violation of California Civil Code section 2923.6 and 2) violation of California Civil Code section 9 2923.7. Defendant moves to dismiss. 10 II. Legal Standard 11 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in 12 the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Northern District of California United States District Court 13 When reviewing a motion to dismiss for failure to state a claim, the court must "accept as true all 14 of the factual allegations contained in the complaint," Erickson v. Pardus, 551 U.S. 89, 94 (2007) 15 (per curiam) (citation omitted), and may dismiss a claim "only where there is no cognizable legal 16 theory" or there is an absence of "sufficient factual matter to state a facially plausible claim to 17 relief." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing 18 Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 19 2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff "pleads factual 20 content that allows the court to draw the reasonable inference that the defendant is liable for the 21 misconduct alleged." Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged 22 must demonstrate "more than labels and conclusions, and a formulaic recitation of the elements of 23 a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing 24 Papasan v. Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 25 2001), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 26 2002). 27 As a general rule, a court may not consider "any material beyond the pleadings" when 28 ruling on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). 3 1 However, "a court may take judicial notice of 'matters of public record,'" Id. at 689 (citing Mack 2 v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider "documents 3 whose contents are alleged in a complaint and whose authenticity no party questions, but which 4 are not physically attached to the pleading," without converting a motion to dismiss under Rule 5 12(b)(6) into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 6 1994), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119 (9th Cir. 7 2002). The court need not accept as true allegations that contradict facts which may be judicially 8 noticed. See Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987). 9 III. Discussion 10 A. California Civil Code section 2923.6 11 California Civil Code section 2923.6 prohibits certain entities from pursuing a foreclosure 12 sale while a borrower's loan modification application is pending. This prohibited practice is Northern District of California United States District Court 13 known as dual tracking. Under the statute, "[i]f a borrower submits a complete application for a 14 first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage 15 servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or 16 notice of sale, or conduct a trustee's sale, while the complete first lien loan modification 17 application is pending." Cal. Civ. Code § 2923.6(c). Specifically, "[a] mortgage servicer, 18 mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of 19 sale or conduct a trustee's sale until any of the following occurs: (1) [t]he mortgage servicer makes 20 a written determination that the borrower is not eligible for a first lien loan modification, and any 21 appeal period pursuant to subdivision (d) has expired; (2) [t]he borrower does not accept an 22 offered first lien loan modification within 14 days of the offer; or (3) [t]he borrower accepts a 23 written first lien loan modification, but defaults on, or otherwise breaches the borrower's 24 obligations under, the first lien loan modification." Cal. Civ. Code § 2923.6(c). "If the 25 borrower's application for a first lien loan modification is denied, the borrower shall have at least 26 30 days from the date of the written denial to appeal the denial and to provide evidence that the 27 mortgage servicer's determination was in error." Cal. Civ. Code § 2923.6(d). 28 Plaintiffs' dual tracking claim is based on their allegation that Defendant recorded a notice 4 1 of default on January 21, 2015, the day after Plaintiffs submitted a complete loan modification 2 application. Defendant argues that Plaintiffs' section 2923.6 claim should be dismissed because 3 Plaintiffs never submitted a "complete" loan modification application within the meaning of the 4 statute. 5 Section 2923.6(h) provides that an application is "deemed 'complete' when a borrower has 6 supplied the mortgage servicer with all documents required by the mortgage servicer within the 7 reasonable timeframes specified by the mortgage servicer." Cal Civ. Code § 2923.6(h). 8 According to Defendant, the complaint acknowledges that Defendant continued to request 9 additional documents, and Plaintiffs thereby admit that their application was incomplete. 10 Defendant also notes that it closed Plaintiffs' application on February 26, 2015 expressly because 11 Plaintiffs had failed to provide the documents requested. (See Compl. ¶¶ 11, 14.) 12 This ignores Plaintiffs' key allegations regarding their dual tracking claim. Plaintiffs Northern District of California United States District Court 13 allege that they submitted the final two documents requested by Defendant on January 20, 2015, 14 which was within the January 21, 2015 timeframe specified by Defendant. Defendant then 15 confirmed receipt of those documents on January 21, 2015. Additionally, on February 12, 2015, 16 Defendant sent Plaintiffs a letter "stating that all documents had been received and their loan 17 modification application was under review." (Compl. ¶¶ 12, 13.) The statements in Defendant's 18 February 12, 2015 letter, taken with Plaintiffs' allegations that they timely submitted documents in 19 response to Defendant's last request, support the reasonable inference that Plaintiffs' application 20 was complete as of January 21, 2015, the date Defendant confirmed receipt of the final 21 documents.2 22 Defendant also argues that Plaintiffs' dual tracking claim fails because Defendant executed 23 24 2 The statement in Defendant's February 26, 2015 letter closing Plaintiffs' application for failure 25 to provide all requested documents contradicts Defendant's prior statement that the application was "under review." Defendant's own inconsistent statements to Plaintiffs cannot be used to 26 defeat this claim at the pleading stage. See, e.g., Barragan v. Deutsche Bank Nat'l Trust Co., No. CV 15-02614 DDP (FFMx), 2015 WL 3617104, at *7 (C.D. Cal. June 9, 2015) (finding statement 27 that plaintiff had not submitted sufficient documentation in support of loan modification application "by an interested party [defendant servicer] is not enough by itself to conclusively 28 show that Plaintiff cannot state a plausible claim for relief" under section 2923.6, where plaintiff alleged defendant "acknowledged receipt of the loan modification [sic]"). 5 1 the notice of default on January 16, 2015, while the loan modification application was admittedly 2 incomplete. (See RJN Ex. 3.) Therefore, according to Defendant, it took all actions related to the 3 Notice of Default prior to Plaintiffs' alleged complete loan modification submissions. However, 4 section 2923.6 provides that "a mortgage servicer. . . shall not record a notice of default" until it 5 makes a determination on a borrower's complete application for a loan modification. Cal. Civ. 6 Code § 2923.6(c) (emphasis added). By the plain language of the statute, only the date of 7 recordation is relevant, and Defendant provides no authority supporting its position that it can 8 avoid liability based on its earlier execution of the notice of default. The record undisputedly 9 indicates that the notice of default was recorded on January 21, 2015, the same day Plaintiffs 10 allege that they received confirmation that their application was complete. The court therefore 11 finds that Plaintiffs have stated a plausible claim for violation of section 2923.6's prohibition of 12 dual tracking. Northern District of California United States District Court 13 B. California Civil Code section 2923.7 14 The California legislature has enacted a "single point of contact" provision ("SPOC") in 15 order "to prevent borrowers from being given the run-around." Rockridge Trust v. Wells Fargo, 16 N.A., 985 F. Supp. 2d 1110, 1151 (N.D. Cal. 2013) (citing Jolley v. Chase Home Fin., LLC, 213 17 Cal. App. 4th 872, 904-05, (2013)). Specifically, Civil Code section 2923.7 provides that "[u]pon 18 request from a borrower who requests a foreclosure prevention alternative, the mortgage servicer 19 shall promptly establish a single point of contact and provide to the borrower one or more direct 20 means of communication with the single point of contact." Cal. Civ. Code § 2923.7(a). Among 21 other things, the SPOC must communicate "the process by which a borrower may apply for an 22 available foreclosure prevention alternative" and any associated deadlines; coordinate "receipt of 23 all documents associated with available foreclosure prevention alternatives," including notifying 24 the borrower of any missing documents; and have "access to current information and personnel 25 sufficient to timely, accurately, and adequately inform the borrower of the current status of the 26 foreclosure prevention alternative." Cal. Civ. Code § 2923.7(b)(1)-(3). 27 Defendant makes two arguments in support of its motion to dismiss Plaintiffs' SPOC 28 claim. First, it argues that the claim fails because Plaintiffs admit that Defendant established an 6 1 SPOC in January 2013 ("Mary"), and that they were able to contact her at least twice. Plaintiffs 2 do not dispute that Defendant purported to assign them an SPOC; they challenge Defendant's 3 failure to provide an "SPOC that could carry out the duties delineated by the statute." (Pls.' Opp'n 4 5.) Specifically, Plaintiffs allege that the individuals with whom they spoke "[were] unable to 5 provide them any information about their account." (Compl. ¶ 11.) Therefore, since the 6 individuals were not knowledgeable about their account, they failed to carry out the duties listed in 7 the statute. The court finds that these allegations are sufficient to state a claim for violation of 8 section 2923.7, since the statute requires an SPOC to "[h]av[e] access to current information. . . 9 sufficient to timely, accurately, and adequately inform the borrower of the current status of the 10 foreclosure prevention alternative" and "[c]oordinat[e] receipt of all documents associated with 11 available foreclosure prevention alternatives." Cal. Civ. Code § 2923.7(b)(2), (3). 12 Defendant next argues that Plaintiffs' claim fails because a violation of section 2923.7 is Northern District of California United States District Court 13 only actionable if it is "material," citing California Civil Code section 2924.12. Section 2924.12 14 provides that "[i]f a trustee's deed upon sale has not been recorded, a borrower may bring an 15 action for injunctive relief to enjoin a material violation of" section 2923.7. Cal. Civ. Code § 16 2924.12(a)(1). Defendant's argument on this point is not clear. Defendant appears to contend that 17 the alleged violation is not "material" within the meaning of section 2924.12 because the violation 18 did not "result[] in some secondary loss or harm." However, Defendant does not cite any 19 supporting authority.3 (Def.'s Mot. 5.) 20 In response, Plaintiffs contend that "they were never given the option to be evaluated for a 21 loan modification because of Defendant's failure to provide them a SPOC. Therefore, it is entirely 22 possible that they would have received a favorable determination on their application if they had 23 been provided with a remotely competent SPOC who would have ensured that they were 24 considered for all foreclosure prevention alternatives." (Pls.' Opp'n 7.) In other words, Plaintiffs 25 allege that Defendant's failure to comply with the SPOC statute deprived them of the opportunity 26 3 27 Defendant also seems to conflate materiality with damages, arguing that Plaintiffs' damages stem from their own default, not any alleged failure by the SPOC. Again, Defendant does not cite any 28 authority supporting this interpretation. 7 1 to obtain a loan modification. Construing Plaintiffs' allegations in the light most favorable to 2 Plaintiffs, see Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008), 3 the court finds that Plaintiffs have pleaded a sufficiently material violation of section 2923.7 to 4 survive the motion to dismiss stage. See, e.g., Segura v. Wells Fargo Bank, N.A., No. 14–04195, 5 2014 WL 4798890, at *7 (C.D. Cal. Sept. 26, 2014) (denying motion to dismiss section 2923.7 6 claim; stating "[t]he failure to assign a SPOC, and the alleged wrongful foreclosure, therefore, 7 deprived them of the opportunity to obtain the modification. Had [plaintiffs] obtained a 8 modification, they may have been able to keep their house and lower their mortgage payments. At 9 this stage, the Court cannot say that this alleged violation was not material."); Salazar v. U.S. Bank 10 Nat'l Ass'n, No. ED CV 14-514-GHK (DTBx), 2015 WL 1542908, at *7 (C.D. Cal. April 6, 2015) 11 ("it is plausible that [defendant's] failure to appoint a SPOC prevented [plaintiff] from submitting 12 a complete modification application and sufficient documentation of the material change in her Northern District of California United States District Court 13 financial circumstances. . . it is plausible that the appointment of a SPOC would have prevented 14 Plaintiff from suffering the loss of her home").4 15 IV. Conclusion 16 For the foregoing reasons, Defendant's motion to dismiss is denied. ISTRIC TES D TC 17 TA O S U ED 18 IT IS SO ORDERED. RT DERED UNIT O OR 19 Dated: July 29, 2015 IT IS S R NIA ______________________________________ 20 Donna M. Ryu M. Ryu NO 21 o naJudge United States Magistrate n Judge D FO RT LI 22 ER H A N C 23 F D IS T IC T O R 24 4 Defendant argues that Plaintiffs' claim that they could have received a favorable loan 25 modification determination had they been provided with a competent SPOC is speculative and insufficient, citing Johnson v. PNC Mortgage, No. C 14-02976 LB, 2014 WL 6629585, at *8 26 (N.D. Cal. Nov. 21, 2014). However, in Johnson, the court declined to consider whether the plaintiffs had alleged a "material" SPOC violation because it concluded they lacked standing to 27 pursue an unfair business practices claim under California Business and Professions code section 17200 predicated on the SPOC statute. Id. Johnson does not bear on what constitutes a material 28 violation of section 2923.7 and is therefore inapposite. 8