Spangler v. Selene Finance LP
3:16-cv-01503
N.D. Cal.Jul 22, 2016Background
- In 2007 Spangler executed a promissory note and deed of trust secured by her home; MERS was listed as nominee/beneficiary and Recontrust later served as trustee.
- Multiple notices of default and notices of sale were recorded between 2008 and 2016; a Trustee’s Deed Upon Sale was recorded in February 2012, later rescinded, and a second foreclosure sale occurred in January 2016 with a Trustee’s Deed Upon Sale recorded February 2016 conveying the property to Wilmington Savings Fund Society.
- Assignments and substitutions of trustee and beneficiary occurred over time (assignments involving Countrywide/BAC/Bank of America, MERS corrective assignment, and an assignment to Wilmington effective January 22, 2016 but recorded February 5, 2016).
- Spangler filed a FAC asserting eight claims: wrongful foreclosure; violations of Cal. Civ. Code §§ 2924(a)(6) and 2924.17; TILA § 1641(g) and rescission under § 1635; FDCPA § 1692c(b); UCL; and declaratory relief.
- Defendants (MERS, Wilmington, Selene Finance) moved to dismiss; the court granted the motion with leave to amend, finding each claim deficient as pleaded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Wrongful foreclosure | Assignment to Wilmington was void (post‑closing transfer / Pooled Agreement violation), so foreclosure was defective | Assignment was effective (executed before sale); post‑closing assignment (if at all) would be voidable not void; recording is not required for effectiveness | Dismissed: plaintiff lacks standing to challenge as void; Yvanova does not make post‑closing transfers automatically void |
| Cal. Civ. Code § 2924(a)(6) | Les Zieve/Wilmington lacked authority to record notice of default/foreclose | Judicially noticeable records show Recontrust substituted Les Zieve as trustee and Wilmington was purchaser/trustee | Dismissed: pleadings contradicted by recorded substitutions/Trustee’s Deed Upon Sale |
| Cal. Civ. Code § 2924.17 | Servicer failed to review competent evidence before recording notices/sale | Record shows rescission of 2012 sale and subsequent notices; plaintiff fails to address rescission or plead facts showing lack of competent review | Dismissed: plaintiff omitted/failed to rebut rescission and pleaded no substantive facts |
| TILA § 1641(g) (notice of transfer) | Failure to notify plaintiff of transfer caused damages (overpaid interest, credit repair costs, lost equity) | Plaintiff fails to plead actual damages causally linked to nondisclosure; damages are speculative | Dismissed: no pleaded detrimental reliance or causal nexus |
| TILA § 1635 (rescission) | Spangler mailed a rescission in 2010 asserting right to rescind | Right to rescind expired: three‑day statutory window and three‑year backstop elapsed (loan consummated in 2007) | Dismissed: rescission untimely and/or defective |
| FDCPA § 1692c(b) | Recording trustee’s deeds and communications with county amounted to improper third‑party communications | Les Zieve and Selene are not alleged to be debt collectors; foreclosure is not FDCPA debt collection activity as pleaded | Dismissed: plaintiff failed to allege defendants are debt collectors or actions beyond foreclosure |
| UCL § 17200 | Business practices were unlawful/unfair based on the other claims | UCL claim is derivative of dismissed claims | Dismissed: no surviving predicate violations |
| Declaratory relief | Requests declaration regarding validity of foreclosure/assignments | Declaratory relief depends on viable underlying claims | Dismissed: not an independent basis for relief when underlying claims fail |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must state plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept conclusory allegations)
- Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919 (borrower may challenge assignments as void but court expressed no view on whether post‑closing transfers are void vs. voidable)
- Glaski v. Bank of Am., N.A., 218 Cal. App. 4th 1079 (post‑closing trust transfers held sufficient to allege void assignment — treated as an outlier in later decisions)
- Rajamin v. Deutsche Bank Nat. Trust Co., 757 F.3d 79 (post‑closing recordation does not establish assignment occurred at recording)
- Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (TILA rescission procedure and timing)
- Cel‑Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163 (UCL borrows violations of other laws as predicates)
- Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808 (post‑closing assignment renders assignment voidable, not void)