Richard S. GALE, Plaintiff-Appellant, v. FIRST FRANKLIN LOAN SERVICES, subsidiary of First Franklin Financial Corporation; First Franklin Financial Corporation; Mortgage Electronic Registration Systems, Inc.; Cal-Western Reconveyance Corporation; LaSalle Bank National Association, Defendants-Appellees.
No. 09-16498.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 14, 2012. Filed July 12, 2012. Amended Aug. 31, 2012.
692 F.3d 1240
Peter Dunkley, Wolfe & Wyman LLP, Las Vegas, NV, for defendants-appellees.
Before: SIDNEY R. THOMAS, M. MARGARET McKEOWN, and WILLIAM A. FLETCHER, Circuit Judges.
ORDER
The opinion filed on July 12, 2012, slip op. 8053, 2012 WL 2855811, is amended as follows:
At slip op. 8061, at the end of the first full paragraph; 2012 WL 2855811, at *4, at the end of the first full paragraph, insert the following text:
Unable to rely squarely on
§ 1641 , Gale leans upon another section of the statute for support,§ 1640(a) . At the time Gale‘s action accrued, this subsection, in relevant part, read, “any creditor who fails to comply with any requirement imposed under [TILA Part B, including§ 1641 ], ... is liable” for actual and statutory damages. Gale points out that the term “creditor” refers only to an original creditor, not an assignee. See15 U.S.C. § 1602(f)(2) (“creditor” defined as “the person to whom the debt arising from the consumer credit transaction is initially payable“). Therefore, in providing a cause of action against “creditor[s],”§ 1640(a) extends§ 1641(f) assignee liability to original creditors such as Franklin, as well as assignees.This argument proves too much. Each subsection of
§ 1641 limits liability on its face to assignees. Gale‘s argument essentially boils down to the claim that in one fell swoop,§ 1640(a) ‘s reference to a “creditor” erases all of these limitations, and broadens liability to original creditors—in§ 1641 and throughout Part B of TILA. Subsection 1640(a) is far too small a “mousehole[ ]” to hide an “elephant[ ]” of such proportions. Whitman v. Am. Trucking Ass‘ns, 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001).Seeking to bolster his argument, Gale relies on the 2009 TILA amendments, in which Congress specified that the
§ 1640(a) cause of action extends to a creditor‘s failure to satisfy “any requirement imposed under ... subsection (f) or (g) of section 1641 of this title....” Helping Families Save Their Homes Act of 2009,Pub.L. No. 111-22 , 123 Stat. 1632, 1658. Gale argues that this amendment would be superfluous if an original creditor could be held liable under§ 1641(f) . At the outset, Gale‘s action accrued in 2008; he cannot rely on amendments Congress made after his action accrued to bolster his claim. In any case, the 2009 amendmentsbetray Gale‘s position. In the 2009 amendments, along with the clause upon which Gale relies, Congress added § 1641(g) , which suggests that the narrow definition of “creditor” in§ 1602 is no longer valid. Subsection (g) applies to a “creditor that is the new owner or assignee of the debt.” (Emphases added). Given this broader definition which includes assignees, it makes perfect sense for Congress to refer in§ 1640(a) to§ 1641 provisions whose effect is limited to assignees.
*
With the opinion as amended, the panel has voted to deny the petition for rehearing and rehearing en banc. The full court has been advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.
The petition for panel rehearing and the petition for rehearing en banc are DENIED. No further petitions for rehearing may be filed.
OPINION
McKEOWN, Circuit Judge:
Failing to read and respond to letters may be impolite; however, “a breach of good manners” is not always “an invasion of any legal right.” Spaulding v. Evenson, 149 F. 913, 920 (C.C.E.D.Wa.1906). Richard Gale faults his lender, First Franklin Loan Services (“Franklin“), for failing to respond to his correspondence regarding ownership of his loan, and alleges that this failure amounted to a violation of the Truth in Lending Act (“TILA“), and Nevada‘s covenant of good faith and fair dealing. Because Franklin was not legally required to respond in its capacity as loan servicer, we affirm the district court‘s dismissal of these claims. However, Gale also alleges that after failing to respond to his letter, Franklin and the other defendants engaged in illegal conduct by wrongfully foreclosing on his property. We remand these remaining state law claims to the district court.
Background
In November 2006, Gale refinanced his home mortgage loan with Franklin, and signed a promissory note. Franklin was both the creditor and servicer for the loan. A deed of trust on Gale‘s residence in Las Vegas secured the loan. The deed designated Mortgage Electronic Registration Systems, Inc. (“MERS“) as the trust beneficiary, “acting solely as a nominee for [Franklin] ....” and Service Link as the trustee.
By June 2008, Gale had lost his job, defaulted on the loan, and was facing financial difficulties. In a bid to renegotiate his loan, he sent a letter to Franklin in June, explaining his predicament, his resolve to pay the amount due, and suggesting possible solutions. However, to ensure that he was courting the right audience, he also asked that Franklin, “in accordance with [TILA,]
As it turned out, Gale‘s loan was the subject of much activity. In August 2008, beneficiary MERS substituted defendant Cal-Western in place of Service Link as trustee of Gale‘s deed of trust, and together with Cal-Western initiated non-judicial foreclosure proceedings on Gale‘s residence. Later that month, MERS assigned
Gale filed suit against all the actors involved—Franklin, MERS, Cal-Western and LaSalle Bank—alleging violations of TILA, seeking injunctive relief against foreclosure, and claiming breach of contract, failure to act in good faith, and wrongful foreclosure under Nevada law. The district court dismissed Gale‘s Nevada law claims with prejudice, but permitted Gale to amend his Complaint as to TILA. Gale‘s First Amended Complaint set out his TILA claims more specifically, and claimed a breach of the covenant of good faith and fair dealing. Gale also alleged that Cal-Western violated its duty under the Real Estate Settlement Procedures Act (“RESPA“),
Analysis
Gale‘s suit focuses on two alleged wrongs: Franklin‘s failure to reply to his letter, and the foreclosure proceedings on his home. His federal claims target only Franklin‘s failure to respond; his state claims target both the failure to respond and the foreclosure.
I. Federal Claims
In his initial letter to Franklin and again in his amended complaint, Gale claims that Franklin violated TILA,
Gale‘s argument has surface appeal if we take a blindered view of the statute and read the language he highlights in isolation. However, “we start with the premise that ‘the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.‘” Am. Bankers Ass‘n v. Gould, 412 F.3d 1081, 1086 (9th Cir.2005) (quoting Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000)). Our goal is to “understand the statute ‘as a symmetrical and coherent regulatory scheme’ and to ‘fit, if possible, all parts into a ... harmonious whole.‘” Id. (quoting Brown & Williamson, 529 U.S. at 133). Gale places emphasis on the final sentence of
Consistent with basic principles of statutory interpretation, we step back to examine
(f) Treatment of servicer
(1) In general
A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as an assignee of such obligation for purposes of this section unless the servicer is or was the owner of the obligation.
(2) Servicer not treated as owner on basis of assignment for administrative convenience
A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as the owner of the obligation for purposes of this section on the basis of an assignment of the obligation from the creditor or another assignee to the servicer solely for the administrative convenience of the servicer in servicing the obligation. Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.
Subsection (f), in keeping with the theme of
However, Congress did not intend that all servicers who owned loans would be liable as assignees. Paragraph (f)(2) carves out an exception to the general rule of paragraph (f)(1), so that servicers who are merely nominal assignees (that is, when a servicer is assigned ownership of the loan solely for “administrative convenience“) would not be liable on the same basis as actual owners of the loan. The paragraph ends with the sentence that is the basis of Gale‘s claim, which places on
Read in this context, our analysis of this last sentence is straightforward. As a logical matter, it would be anomalous for Congress to randomly impose a duty on servicers in general in a section otherwise completely devoted to describing the duties of assignees, and more critically, in a subsection that pertains only to servicer-assignees.
Close scrutiny of paragraph f(2) supports the same reading. The paragraph begins by addressing the duties of “[a] servicer of a consumer obligation.” The next sentence, on which Gale states his claim, imposes a duty to respond not upon “a” servicer, or “any” servicer, but rather, states that “the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner.” (Emphasis added.) “In construing [a] statute, [the] definite article ‘the’ particularizes the subject which it precedes and is [a] word of limitation as opposed to [the] indefinite or generalizing force [of] ‘a’ or ‘an.‘” Ink v. Cardelucci (In re Cardelucci), 285 F.3d 1231, 1234 (9th Cir.2002) (quoting Black‘s Law Dictionary 1477 (6th ed. 1990)). The use of the definite article in referring to the servicer only makes sense by reference to the preceding sentence of paragraph (f)(2), which relates to “[a] servicer of a consumer obligation” who is a nominal owner “on the basis of an assignment of the obligation” for “administrative convenience.” (Emphases added.) Such a servicer escapes liability because it is only a nominal owner of the note, but must still respond to an obligor seeking information as to the true owner of the note.
In short, reading the statute as a whole and with respect to the subsection at issue brings us to the same conclusion: the duty to provide notice under
Unable to rely squarely on
This argument proves too much. Each subsection of
Seeking to bolster his argument, Gale relies on the 2009 TILA amendments, in which Congress specified that the
Gale argues for the first time on appeal that Franklin violated RESPA. Although pro se plaintiffs “need not plead specific legal theories in the complaint,” we require that “the other side receive[ ] notice as to what is at issue in the case” against it. Sagana v. Tenorio, 384 F.3d 731, 736-37 (9th Cir.2004) (internal quotation marks and citation omitted). Gale did not merely fail to plead a RESPA claim against Franklin, but advanced a RESPA claim against a different defendant, Cal-Western. We therefore decline to consider the RESPA claim. See In re Am. W. Airlines, Inc., 217 F.3d 1161, 1165 (9th Cir.2000).
We are not unsympathetic to the frustration that resulted from Franklin‘s failure to respond to Gale‘s inquiry regarding his home. The servicer is often the only entity that the consumer is in contact with after the loan issues—unless the servicer is forthcoming, the homeowner may not know with whom to negotiate to stave off foreclosure and loss of his abode. Although Congress recognized the importance of such information after Gale‘s claim accrued, see Dodd-Frank Wall Street Reform and Consumer Protection Act,
II. Nevada State Law Claims
Gale also advances numerous state law claims. The first claim again arises out of Franklin‘s failure to respond, which, Gale alleges, violated the covenant of good faith and fair dealing. The remaining claims arise out of the actual foreclosure action against Gale. Gale argues that MERS and LaSalle wrongfully began foreclosure proceedings, and Cal-Western breached its duty to act in good faith and its fiduciary duties in proceeding with the foreclosure. The district court dismissed these claims.
To state a claim for breach of the covenant of good faith and fair dealing under Nevada law, Gale must show that Franklin acted in an “arbitrary or unfair” way “to the disadvantage of the” plaintiff. Nelson v. Heer, 123 Nev. 217, 163 P.3d 420, 426-27 (2007). Failing to respond to correspondence in this context hardly qualifies as “arbitrary or unfair.” The rule Gale proposes would require contracting parties to respond to correspondence on the pain of legal penalty. In the absence of an express contractual provision to the contrary, we cannot hold Franklin to such a standard.
Gale points us to Mitchell v. Bailey & Selover, Inc., which involved a contract for transportation and storage of property that gave the bailee “the right to sell [a customer‘s] property if, in the company‘s opinion, such action was necessary to protect its accrued charges.” 96 Nev. 147, 605 P.2d 1138, 1139 (1980). Although Mitchell contacted the bailee and provided evidence that she was owed social security payments that would allow her to pay the debt, the bailee sold her property nonethe-
By contrast, under Gale‘s contract, default automatically provides the right of foreclosure, whether or not the holder of the note and mortgage believes that the default might be remedied. The holder need form no opinion, in good faith or otherwise, as to whether its investment is safe, before it may proceed. Mitchell is therefore inapplicable, and we affirm the district court‘s dismissal of this claim.
Before the district court, Gale invoked
AFFIRMED IN PART, VACATED IN PART, and REMANDED. Each party shall bear its own costs on appeal.