231 F. Supp. 3d 597
E.D. Cal.2017Background
- In 2006 the Shupes borrowed $862,500 from Bank of America secured by a deed of trust; they defaulted in 2011 and a Notice of Default was recorded. Bank of America later assigned its interest to U.S. Bank.
- Plaintiffs filed Chapter 13 in 2012; the bankruptcy was dismissed after U.S. Bank objected.
- Nationstar became loan servicer in 2013; Plaintiffs applied for a loan modification in February 2016, which Nationstar denied April 14, 2016; an appeal was processed and denied June 3, 2016.
- Plaintiffs sued in state court asserting violations of the California Homeowner Bill of Rights (HBOR §§ 2923.6, 2923.7, 2924.10, 2924), negligence, UCL claims, quiet title, and declaratory relief; defendants removed and moved to dismiss under Rule 12(b)(6).
- The district court dismissed all claims (dismissal without prejudice except negligence which was dismissed with prejudice), giving Plaintiffs 20 days to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| §2923.6 (HBOR) compliance | Defendants failed to comply with restrictions on recording NODs while a modification was pending | Defendants complied; Plaintiffs concede no current violation | Dismissed — Plaintiffs concede and no live violation alleged |
| §2923.7 (SPOC requirement) | Nationstar repeatedly reassigned contacts and failed to provide a single point of contact | Assignments were proper; any alleged failures were not pled with facts and were immaterial | Dismissed — allegations conclusory, no material effect shown, and no pending sale to warrant relief |
| §2924.10 (acknowledgement of application) | No written acknowledgement or required info after complete application | Application was processed; no material violation alleged; injunctive relief unavailable absent pending sale | Dismissed — failure to plead materiality and no pending foreclosure sale |
| §2924 / Notice of Default validity | NOD is void for errors (e.g., wrong address) and should be rescinded | NOD was recorded years ago by BANA; statute of limitations applies; no pending sale | Dismissed — no pending sale alleged; limitations and lack of present injury defeat relief |
| Negligence re: modification handling | Defendants negligently handled and delayed modification process causing harm | No common-law duty to consider/approve modifications; Biakanja factors do not impose duty | Dismissed with prejudice — court follows Lueras line holding no common-law duty |
| UCL (unlawful, unfair, fraudulent) | HBOR breaches and other misconduct support UCL claims and economic injury from pending foreclosure | UCL claims are duplicative/conclusory; no economic injury shown and no causation | Dismissed — conclusory pleading, no causal economic injury, no pending foreclosure |
| Quiet title / Declaratory relief | Defendants have no right or interest; ask to set aside foreclosure | Plaintiffs do not allege sale or tender or any basis to defeat defendants’ interest | Dismissed — no factual basis and duplicative of other defective claims |
Key Cases Cited
- Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir.) (standard for accepting allegations on Rule 12(b)(6))
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must be plausible, not speculative)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept legal conclusions as true)
- Lueras v. BAC Home Loans Servicing L.P., 221 Cal.App.4th 49 (no common-law duty to offer/approve loan modification)
- Nymark v. Heart Fed. Savings & Loan Ass’n, 231 Cal.App.3d 1089 (general rule that lender owes no duty beyond conventional lender role; Biakanja factors)
- Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (UCL standing requires economic injury and causation)