527 F.Supp.3d 1210
S.D. Cal.2021Background
- In 2006 Hueso refinanced his home with a Credit Suisse loan documented by a Note and Deed of Trust identifying MERS as beneficiary; Select Portfolio Servicing (SPS) acted as servicer; Hueso paid >$420,000 to SPS.
- In 2017 Hueso discovered his statements showed little principal reduction and alleges SPS misapplied payments to force-placed insurance and a tax escrow despite his maintaining insurance and paying taxes.
- Hueso sent multiple qualified written requests (QWRs) and document demands to SPS (Nov 2017–Feb 2018); SPS produced limited documents and allegedly failed to adequately investigate or explain.
- MERS assigned the Deed to SPS (Nov 28, 2017); SPS substituted Quality Loan Service Corp. as trustee (July 2018); Quality recorded a notice of default and initiated foreclosure.
- Hueso stopped making payments, sued asserting RESPA violations, cancellation of instruments, receipt of stolen property (Cal. Penal Code §496), common count, declaratory relief, accounting, and UCL claims.
- The Court granted in part and denied in part defendants’ motion to dismiss: RESPA claim for force-placed insurance against SPS, common count against SPS, and UCL against SPS survive; many other claims were dismissed (some with prejudice) and Credit Suisse was dismissed from the action.
Issues
| Issue | Hueso's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether SPS violated RESPA §2605(e) by failing to adequately respond to QWRs | Hueso alleges detailed QWRs and that SPS provided incomplete responses and failed to correct errors | SPS contends many requests concerned loan origination, responses were adequate, and Hueso alleged no actual damages from the QWR failures | Dismissed as to QWR theory for lack of pleaded damages; leave to amend denied for damages showing (QWR claim dismissed as to SPS) |
| Whether Quality is a "servicer" under RESPA and liable for QWR failures | Hueso argues Quality was retained to collect and thus assumed servicing duties | Defendants say trustee status alone does not make Quality a servicer and no facts show it received/allocated periodic payments | RESPA claim against Quality dismissed without prejudice for failure to allege servicing duties |
| Whether SPS misapplied payments to a tax escrow in violation of RESPA §2605(g) | Hueso alleges SPS applied payments to taxes though he paid taxes and received no taxing-authority notice | Defendants argue allegations are speculative and do not show escrow misuse | Tax-escrow theory dismissed for insufficient factual support |
| Whether SPS improperly force-placed insurance in violation of RESPA §§2605(k),(l) | Hueso alleges SPS force-placed insurance despite his maintained coverage and without required notices or refunds | Defendants did not move to dismiss this theory | Claim survives: Court finds allegations suffice to plead procedural noncompliance and pecuniary injury |
| Whether Hueso may cancel the Note, Deed, Assignment, Substitution, and Notice of Default | Hueso contends the Note was destroyed and MERS’ actions were invalid | Defendants argue instruments remain effective, MERS regained authority, and claims are time-barred | Cancellation claim dismissed with prejudice as time-barred and legally deficient |
| Whether §496(c) claim (receipt of stolen property) applies to allegedly misapplied loan payments | Hueso treats misapplied payments as stolen and seeks treble damages | Defendants say payments were voluntarily tendered and not "stolen" | §496 claim dismissed with prejudice: Court adopts narrower view that funds were not "stolen" when received and treble damages would inappropriately expand tort remedies |
| Common count (money had and received) against SPS and Quality | Hueso alleges SPS and Quality have his funds and were unjustly enriched | Defendants argue no legal basis because payments were voluntary and Quality did not possess funds | Common count survives against SPS (tied to force-placed insurance RESPA theory); dismissed as to Quality with leave to amend |
| Declaratory judgment on ownership, default, and payments owed | Hueso seeks declaration that Subject Instruments are void and he owes nothing | Defendants note Hueso admits executing the loan and stopping payments | Declaratory claim dismissed with prejudice: no viable underlying basis (cancellation claim failed) |
| Accounting to determine payoff/balance | Hueso seeks equitable accounting due to alleged incomplete servicing records | Defendants say amounts are ascertainable and legal remedies suffice | Accounting dismissed with prejudice: plaintiff failed to allege complicated accounts or underlying misconduct justifying equitable relief |
| UCL claim under California Bus. & Prof. Code §17200 | Hueso predicates UCL on RESPA violations and unlawful business practices by SPS | Defendants argue UCL rises and falls with underlying claims and Hueso lacks standing against some defendants | UCL survives against SPS (unlawful prong via force-placed insurance RESPA violation); UCL dismissed as to Credit Suisse with prejudice and dismissed as to Quality without prejudice |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (establishes plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (applies Twombly plausibility framework to factual and legal conclusions)
- Medrano v. Flagstar Bank, FSB, 704 F.3d 661 (9th Cir.) (defines RESPA QWR scope and standards)
- Catalan v. GMAC Mortg. Corp., 629 F.3d 676 (7th Cir.) (treatment of QWRs as reasonably stated account requests)
- Debrunner v. Deutsche Bank Nat'l Tr. Co., 204 Cal. App. 4th 433 (Cal. Ct. App.) (note possession not required for nonjudicial foreclosure)
- Siliga v. Mortgage Elec. Registration Sys., Inc., 219 Cal. App. 4th 75 (Cal. Ct. App.) (MERS nominee language confers foreclosure/assignment authority)
- Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (Cal. 2016) (context on challenges to foreclosure-related instruments)
- Allwaste, Inc. v. Hecht, 65 F.3d 1523 (9th Cir.) (standards for denying leave to amend where amendment would be futile)