Taylor v. Citimortgage, Inc. et al

Filing 32

ORDER Granting Defendants' 19 Motion to Dismiss, signed by District Judge Dale A. Drozd on 5/3/2018. (Plaintiff will be granted thirty days from the service of this order in which to file an amended complaint should he elect to do so.) (Gaumnitz, R)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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TERRENCE TAYLOR,

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No. 1:17-cv-01231-DAD-JLT

Plaintiff,
ORDER GRANTING DEFENDANTS’
MOTION TO DISMISS

v.
CITIMORTGAGE, INC.; NATIONAL
DEFAULT SERVICING
CORPORATION; and DOES 1 through
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(Doc. No. 19)

Defendants.
This matter is before the court on defendants’ motion to dismiss. (Doc. No. 19.) On May

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1, 2018, that motion came before the court for hearing. Attorney Vartkes Artinian appeared on

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behalf of plaintiff Terrence Taylor. Attorney Matthew Nazareth appeared on behalf of defendant

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CitiMortgage, Inc. (“CitiMortgage”). Attorney Robert P. Zahradka appeared on behalf of

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defendant National Default Servicing Corporation (“NDSC”). All parties appeared

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telephonically. Having reviewed the parties’ briefing and heard arguments, and for the reasons

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that follow, defendants’ motion to dismiss will be granted.

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BACKGROUND

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In his first amended complaint, plaintiff alleges as follows. Plaintiff resides at 6301

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Phyllis Street, Bakersfield, California, the property which is the subject of this suit (hereinafter

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the “property”). (Doc. No. 18 (“FAC”) at ¶ 1.) Plaintiff’s mother Beverly Hicks (“Hicks”)
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purchased the property on or around September 9, 1991, and it was her primary residence until

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her death on August 7, 2016. (Id. at ¶ 11.) On or about January 28, 1992, Hicks obtained a loan

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secured by the property in the amount of $92,000, and concurrently executed a deed of trust as

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security for the loan. (Id. at ¶ 12.) That deed was recorded in the Kern County Recorder’s Office

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on January 31, 1991.1 (Id.) The named trustee in the deed of trust was Stan-Shaw Corporation,

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while the named lender and beneficiary in the deed of trust was Directors Mortgage Loan

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Corporation. (Id.) Interest in the deed of trust was thereafter assigned to various parties; as of

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May 3, 2017, defendant CitiMortgage was the beneficiary of the deed of trust, while defendant

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NDSC was the trustee. (Id. at ¶¶ 13–21.)

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On or about June 6, 2017, defendant NDSC executed a Notice of Default (the “NOD”)

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and Election to Sell Under Deed of Trust, which was recorded in the Kern County Recorder’s

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Office the following day. (Id. at ¶ 22.) On or about June 28, 2017, defendant NDSC executed a

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Notice of Rescission of the NOD, which was recorded in the Kern County Recorder’s Office the

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following day. (Id. at ¶ 23.)

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Plaintiff alleges that he is the successor in interest to his mother Hicks and that, as such,

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he has the same rights and remedies as her under provisions of the California Homeowners Bill of

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Rights (“HBOR”). (Id. at ¶¶ 24–25.) On this basis, plaintiff alleges three causes of action. First,

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plaintiff alleges that he was not provided a single point of contact in seeking available foreclosure

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prevention alternatives, in violation of California Civil Code § 2923.7. (Id. at ¶¶ 38–42). Second,

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plaintiff alleges that defendants are in material violation of California Civil Codes §§ 2923.55,

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2923.6, and 2923.7, as a result of which plaintiff may seek relief under § 2924.12. (Id. at ¶¶ 43–

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47.) Third, plaintiff alleges a violation of California Business and Professions Code § 17200.

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(Id. at ¶¶ 48–53.)
Plaintiff’s FAC was filed on January 8, 2018. On January 29, 2018, defendant

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CitiMortgage moved to dismiss and that motion was joined by defendant NDSC. (Doc. Nos. 19,

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The correct date would appear to be January 31, 1992, although plaintiff’s complaint states that
this occurred in 1991.
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20.) On March 7, 2018, plaintiff filed his opposition. (Doc. No. 26.) Defendants’ reply was filed

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on April 18, 2018. (Doc. No. 29).

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LEGAL STANDARD

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The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal

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sufficiency of the complaint. N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir.

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1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901

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F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to

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relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A

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claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.

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Iqbal, 556 U.S. 662, 678 (2009).

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In determining whether a complaint states a claim on which relief may be granted, the

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court accepts as true the allegations in the complaint and construes the allegations in the light

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most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v.

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United States, 915 F.2d 1242, 1245 (9th Cir. 1989). However, the court need not assume the truth

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of legal conclusions cast in the form of factual allegations. United States ex rel. Chunie v.

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Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed

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factual allegations, “it demands more than an unadorned, the defendant-unlawfully-harmed-me

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accusation.” Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere “labels and

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conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S.

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at 555; see also Iqbal, 556 U.S. at 676 (“Threadbare recitals of the elements of a cause of action,

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supported by mere conclusory statements, do not suffice.”). Moreover, it is inappropriate to

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assume that the plaintiff “can prove facts which it has not alleged or that the defendants have

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violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal.,

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Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

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DISCUSSION

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Defendants have moved to dismiss all three causes of action in the FAC, arguing that as to

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each, plaintiff has failed to state a cognizable claim for relief.

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A.

Violation of California Civil Code § 2923.7

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Plaintiff’s first cause of action alleges a violation of California Civil Code § 2923.7,

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which provides that “[u]pon request from a borrower who requests a foreclosure prevention

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alternative, the mortgage servicer shall promptly establish a single point of contact and provide to

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the borrower one or more direct means of communication with the single point of contact.” Cal.

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Civ. Code § 2923.7(a). Plaintiff contends that he was never given a single point of contact,

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constituting a violation of that provision. (FAC at ¶ 41.)

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The statutory language of § 2923.7 is plain that in order to trigger any obligation on the

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part of the mortgage servicer to establish a single point of contact, the borrower must first make a

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request for a foreclosure prevention alternative. Williams v. Wells Fargo Bank, NA, No. EDCV

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13-02075 JVS (DTBx), 2014 WL 1568857, at *8 (C.D. Cal. Jan. 27, 2014) (affirming that

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§ 2923.7 by its terms “requires that the borrower make a specific request for a single point of

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contact”); see also Mobley v. Wilmington Tr., N.A., No. CV 15-4201 PA (AJWX), 2016 WL

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7234099, at *3 (C.D. Cal. Sept. 9, 2016); Hart v. Select Portfolio Servicing, Inc., No. CV 15-

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7953-R, 2015 WL 8374926, at *2 (C.D. Cal. Dec. 9, 2015). Plaintiff has not alleged in the FAC

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that he ever made such a request of any of the defendants. Accordingly, the first cause of action

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alleging a violation of § 2923.7 will be dismissed.

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B.

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Violations of California Civil Code § 2924.12
Plaintiff’s second cause of action alleges a violation of California Civil Code § 2924.12.

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Section 2924.12 states in relevant part that “[i]f a trustee’s deed upon sale has not been recorded,

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a borrower may bring an action for injunctive relief to enjoin a material violation of Section

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2923.5, 2923.7, 2924.11, or 2924.17.” Cal. Civ. Code § 2924.12(a)(1). It also provides that

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“[a]fter a trustee’s deed upon sale has been recorded, a mortgage servicer, mortgagee, trustee,

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beneficiary, or authorized agent shall be liable to a borrower for actual economic damages” if it

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has violated those same statutory provisions. Id. § 2924.12(b). In other words, if a notice of sale
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has not yet been recorded, a plaintiff is limited to injunctive relief. By contrast, if the notice of

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sale has already been recorded, a plaintiff may seek monetary damages. See Jent v. N. Tr. Corp.,

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Civ. No. 2:13-1684 WBS CKD, 2014 WL 172542, at *4 (E.D. Cal. Jan. 15, 2014). Here, plaintiff

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does not allege that any Notice of Sale has ever been recorded. Accordingly, plaintiff may not

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recover any monetary damages under this provision.

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The next question is whether plaintiff has alleged a cognizable claim for injunctive relief

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to prevent defendants from foreclosing upon and selling the property. A separate provision of

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§ 2924.12 provides that “[a] mortgage servicer, mortgagee, trustee, beneficiary, or authorized

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agent shall not be liable for any violation that it has corrected and remedied prior to the

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recordation of a trustee’s deed upon sale.” Cal. Civ. Code § 2924.12(c). This provision functions

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as a “safe harbor” for defendants, and allows them to avoid liability under HBOR to the extent

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any past violations have been cured. See Pearson v. Green Tree Servicing, LLC, No. 14-cv-

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04524-JSC, 2014 WL 6657506, at *2 (N.D. Cal. Nov. 21, 2014) (“[I]f the servicer takes action to

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correct the violation before proceeding to foreclosure, no liability results.”). The court must

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therefore examine whether, even if defendants have allegedly violated certain provisions of

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HBOR, defendants have subsequently remedied those claimed violations. If so, plaintiff may not

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seek to enjoin the sale of the property at this time.

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Defendants point out that, as plaintiff concedes in his amended complaint, defendant

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NDSC rescinded the NOD less than a month after it was originally filed. (See FAC at ¶ 23; Doc.

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No. 19 at 5.) This is sufficient to constitute remediation under § 2924.12(c), since there is no

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longer any legally operative notice of default. Because a notice of default is a prerequisite in

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order for a plaintiff to bring an action under § 2923.55, the fact that the NOD has been rescinded

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is fatal to plaintiff’s claim. See Jent, 2014 WL 172542, at *5; Vasquez v. Bank of Am., N.A., No.

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13-cv-02902-JST, 2013 WL 6001924, at *7 (N.D. Cal. Nov. 12, 2013) (confirming that a plaintiff

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“may not seek remedies under Section 2924.12 that do not apply to the present status of the

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property”). Plaintiff’s second cause of action will therefore also be dismissed.

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C.

Violation of California’s Unfair Competition Law

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Plaintiff’s third cause of action alleges unfair competition in violation of California

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Business and Professions Code § 17200, which outlaws any unfair, unlawful, or fraudulent

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business act or practice. A claim under § 17200 is derivative, and will “stand or fall depending

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on the fate of the antecedent substantive causes of action.” Krantz v. BT Visual Images, L.L.C.,

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89 Cal. App. 4th 164, 178 (2001). Because the court has already dismissed plaintiff’s other

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causes of action, it must dismiss his unfair competition claim as well. Pantoja v. Countrywide

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Home Loans, Inc., 640 F. Supp. 2d 1177, 1190 (N.D. Cal. 2009). Accordingly, plaintiff’s third

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cause of action will be dismissed.

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D.

Leave to Amend
At oral argument, plaintiff’s attorney requested, in the event the court dismissed plaintiff’s

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complaint, that further leave to amend be granted. Federal Rule of Civil Procedure 15 instructs

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courts to “freely give leave when justice so requires” and that rule is “to be applied with extreme

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liberality.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal

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quotation marks and citations omitted). Because the court does not find that granting leave to

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amend in this case would cause “undue prejudice to the opposing party,” and out of an abundance

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of caution, the court will grant plaintiff’s request for leave to amend his complaint. Foman v.

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Davis, 371 U.S. 178, 182 (1962). Accordingly, plaintiff will be given thirty days from the service

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of this order in which to file an amended complaint should he elect to do so.

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Although the court will grant leave to amend, the court notes that it has already done so

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once in this case, and that plaintiff’s FAC suffers from essentially the same defects as those of his

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original complaint. As in the court’s order dismissing the original complaint, the court here has

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provided plaintiff with detailed explanations as to how the FAC fails to state a cognizable claim

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for relief. The court therefore expects that if plaintiff files a second amended complaint, it will

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have corrected the deficiencies identified herein. If plaintiff and his counsel were to determine

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that the noted deficiencies cannot be cured a notice of dismissal should be filed. Moreover, if a

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second amended complaint is filed, plaintiff is advised that absent the presentation of compelling

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circumstances, no further leave to amend will be granted in this action.
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CONCLUSION
For the reasons set forth above, defendants’ motion to dismiss (Doc. No. 19) is granted.

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Plaintiff will be granted thirty days from the service of this order in which to file an amended

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complaint should he elect to do so.

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IT IS SO ORDERED.

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Dated:

May 3, 2018
UNITED STATES DISTRICT JUDGE

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