523 B.R. 24
Bankr. S.D.N.Y.2014Background
- Rozier obtained a 2005 $576,000 loan with WMC secured by real property in Buena Park, CA; she rescinded under TILA after a faulty disclosure but subsequently entered into a modification and release, waiving rescission.
- GMAC Mortgage, LLC began servicing in 2006; ETS became substitute trustee in 2008; Rozier defaulted in 2007 and foreclosure was pursued but later restructured.
- Servicing and ownership of the loan changed hands several times (GMACM, RFC, Ocwen, US Bank) and multiple notices of default and sale were issued between 2008 and 2012; rescission and notices were corrected over time.
- Rozier filed a chapter 13 in 2011, converted to chapter 7 in 2012; two related foreclosure actions and state court litigation followed, culminating in the bankruptcy Trust filing objections to Rozier’s December 2012 proofs of claim.
- The ResCap Borrower Claims Trust objections argue Rozier lacks standing to pursue prepetition claims in chapter 7, and that the claims fail on the merits; the court held Rozier’s claims fail in full and sustained the Trust’s objection.
- The court denied Rozier’s motions to strike, concluded Rozier lacked standing for pre-2012 claims, and disallowed and expunged Rozier’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to pursue prepetition claims | Rozier asserts standing as debtor to pursue claims prepetition. | Trust argues Rozier lacks standing for prepetition claims; only the trustee may pursue them. | Rozier lacks standing for prepetition claims; claims accruing before Jan 12, 2012 belong to the estate unless abandoned. |
| Validity of the Trust’s claim objections | Rozier contends the Trust failed to rebut her prima facie claim. | Trust rebutted elements and demonstrated lack of plausible entitlement under applicable law. | Trust’s objections sustained; Rozier’s claims disallowed and expunged. |
| Wrongful foreclosure claim viability | Rozier contends rescission invalidates foreclosures; seeks relief. | Modification waives rescission; proper substitutions and notices authorize foreclosure. | Wrongful foreclosure claim sustained as meritless; dismissal affirmed. |
| California Civil Code 2923.5 and 2924 issues | Rozier asserts failure to contact borrower prior to default; seeks remedies. | Debtors no longer service or hold interest; 2923.5 remedy is limited and no private right of action exists for 2923.6. | 2923.5 claim moot; 2923.6 private right of action denied; 2924 claims sustained. |
| UCL and other tort/defamation claims viability | Rozier relies on unfair competition to recover; some tort claims alleged. | Claims predate 2012 and lack sufficient standing or pleading; negligence and defamation lack prima facie support. | UCL claim overruled; other tort claims sustained dismissal or failure to plead. |
Key Cases Cited
- Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110 (N.D. Cal. 2013) (preliminary foreclosure issues and standing considerations in mortgage cases)
- In re Spirtos v. One San Bernardino Cnty. Super. Ct., 443 F.3d 1172 (9th Cir. 2006) (bankruptcy trustee as exclusive party to pursue estate claims)
- Moneymaker v. Cohen (In re Eisen), 31 F.3d 1447 (9th Cir. 1994) (exclusive right of estate to pursue certain claims by trustee)
- Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49 (Cal. Ct. App. 2013) (duty of care in loan modification context; reliance on loan documents and forbearance agreements)