Richard Gale v. First Franklin Loan Services
701 F.3d 1240
9th Cir.2012Background
- Gale refinanced his home loan with Franklin in November 2006, with Franklin acting as creditor and servicer and MERS named as the trustee's nomine e for Franklin.
- A deed of trust on Gale’s Las Vegas residence secured the loan, with MERS as beneficiary and Service Link as trustee.
- By June 2008 Gale defaulted and sent a June 2008 letter requesting the name/address of the loan owner per TILA; he sent a follow-up in August 2008 seeking the same information.
- In August 2008 MERS substituted Cal-Western as trustee, MERS assigned beneficial interest to LaSalle Bank as trustee for the First Franklin Mortgage Loan Trust, and Cal-Western recorded a Notice of Trustee’s Sale in November 2008.
- Gale filed suit asserting TILA violations, injunctive relief against foreclosure, and Nevada-law claims (breach of contract, good faith, wrongful foreclosure) against multiple defendants; the district court dismissed Nevada-law claims but allowed amendment on TILA, which was later dismissed; on appeal, RESPA was raised and the state-law foreclosure claims were remanded for potential state-court consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Franklin’s failure to respond violated TILA §1641(f)(2). | Gale contends Franklin, as servicer, must respond to the request. | Franklin is not an owner/assignee; not liable under §1641(f)(2). | No; duty applies only to servicer-assignees, Franklin not liable. |
| Whether RESPA claims against Franklin were viable. | Gale argued RESPA duty to respond applies to Franklin. | RESPA claim misframed against Cal-Western; lack of proper notice to defendant. | Not considered/waived against Franklin; RESPA claim dismissed. |
| Whether Gale’s Nevada covenant of good faith and fair dealing claim survives. | Franklin’s failure to respond violated the covenant. | Failure to respond not arbitrary or unfair under Nevada law absent contractual provision. | Dismissed; no cognizable breach of the covenant. |
| Whether Nevada foreclosure-related claims against MERS/LaSalle/Cal-Western survive. | Foreclosure actions improper; breaches of fiduciary duty. | Foreclosure actions permitted upon default; insufficient basis for state-law relief. | District court’s dismissal vacated in part and remanded to address state-law claims; remand to consider arguments first in district court or remand to state court. |
Key Cases Cited
- Spaulding v. Evenson, 149 F.913 (C.C.E.D. Wash. 1906) (breach of manners not always a legal right)
- American Bankers Ass’n v. Gould, 412 F.3d 1081 (9th Cir. 2005) (statutory context and coherence important for interpretation)
- Brown & Williamson Tobacco Corp. v. FDA, 529 U.S. 120 (2000) (statutory interpretation in context of regulatory scheme)
- Onink v. Cardelucci, 285 F.3d 1231 (9th Cir. 2002) (definiteness of article usage; interpretation in context)
- Sagana v. Tenorio, 384 F.3d 731 (9th Cir. 2004) (notice pleading requirements; need to notify defendant of issues)
- In re Am. W. Airlines, Inc., 217 F.3d 1161 (9th Cir. 2000) (pleading and remand standards; state-law issues)
- Mitchell v. Bailey & Selover, Inc., 605 P.2d 1139 (Nev. 1980) (contractual right to sell; good-faith analysis under Nevada law)