Thomas et al v. Wells Fargo Bank, N.A. et al

Filing 53

ORDER Granting 46 Motion for Summary Judgment. Signed by Judge Gonzalo P. Curiel on 9/4/17. (dlg)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 Case No.: 3:15-cv-02344-GPC-JMA 12 13 14 EVERETT L. THOMAS, MARTHA A. THOMAS, 15 16 17 18 19 20 ORDER GRANTING MOTION FOR SUMMARY JUDGMENT Plaintiffs, v. [ECF No. 46] WELLS FARGO BANK, N.A, WELLS FARGO BANK HOME MORTGAGE, BARRETT DAFFIN FRAPPIER & WEISS, LLP, Defendants. 21 22 23 Before the Court is a motion for summary judgment filed by Defendant Wells 24 Fargo Bank, N.A (“Wells Fargo”), erroneously sued as Wells Fargo Home Mortgage. 25 ECF No. 46. The motion has been fully briefed. Plaintiffs Everett and Martha Thomas 26 filed an opposition on July 13, 2017 and Defendant Wells Fargo filed a reply on July 25, 27 2017. Based upon a review of the moving papers, the applicable law, and for the 28 foregoing reasons, the Court GRANTS Defendant’s motion for summary judgment. 1 3:15-cv-02344-GPC-JMA 1 FACTS In 2007, Plaintiffs Everett and Martha Thomas procured a $695,000 loan from 2 3 Defendant Wells Fargo’s predecessor-in-interest World Savings Bank, FSB for real 4 property located in Chula Visa, California.1 The loan was memorialized in a promissory 5 note and secured by a deed of trust against the property. 6 Two years later in 2009, Wells Fargo provided Plaintiffs with a loan modification 7 agreement that reduced the existing principal balance of the loan by $145,000, from 8 $724,000 to $579,000. Thereafter, between 2011 and 2013, Plaintiffs submitted a 9 number of additional complete loan modification applications. Defendant Wells Fargo 10 denied all of the applications. 11 12 By the beginning of January 2014, Plaintiffs were no longer able to make their loan payments. Consequently, they defaulted on the loan. 13 Contemporaneously and after having submitted a number of unsuccessful loan 14 modification applications, Plaintiffs hired Nissim Sasson of American Capital 15 Modification Specialists, Inc. to assist them with the loan modification process. With the 16 help of Sasson, Plaintiffs submitted a complete loan modification application to 17 Defendant in January 2014. Defendant reviewed the application, denied it, and sent 18 Plaintiffs two letters, both dated January 27, 2014, informing them of the denial. 19 Plaintiffs appealed the denial decision, but Defendant declined to change its decision. 20 Defendant confirmed its denial of Plaintiffs’ appeal in a letter dated March 24, 2014. 21 Plaintiffs submitted another complete loan modification application in May 2014. 22 Defendant Wells Fargo reviewed the loan modification and denied it. On June 29, 2014, 23 Defendant sent Plaintiffs two letters indicating that their application had yet again been 24 denied. Plaintiffs appealed Defendant’s denial, and Defendant yet again denied the 25 appeal. Defendant sent a letter confirming the denial on July 24, 2014. 26 27 28 1 The background section states the undisputed facts. See ECF No. 48-2. 2 3:15-cv-02344-GPC-JMA 1 About four months later, sometime in November 2014, Plaintiffs submitted yet 2 another loan modification application. In the meantime, on November 12, 2014, the 3 trustee under the deed of trust recorded a Notice of Default. Defendant denied the 4 November 2014 application in two letters dated December 5, 2014. Plaintiffs submitted a 5 new loan modification application in early 2015 as well. Defendant denied that 6 application in two letters dated March 24, 2015. 7 The trustee recorded a notice of trustee’s sale on June 12, 2015 and set a 8 foreclosure sale for July 9, 2015. By the time the trustee’s sale was recorded, Plaintiffs 9 owed more under the terms of their loan than what the property was worth. The June 9, 10 2015 sale never took place because Plaintiffs filed for bankruptcy shortly before the sale. 11 Ultimately, the bankruptcy proceeding was dismissed due to a failure to file any of the 12 required paperwork. Plaintiffs do not dispute that they “filed for bankruptcy solely for 13 the purpose of delay.” 14 The foreclosure sale was rescheduled for September 10, 2015. On the day before 15 the foreclosure was to take place, Plaintiffs filed another loan modification application. 16 Defendant acknowledged receipt of the application in a letter dated September 9, 2015. 17 The foreclosure sale was then postponed to November 6, 2015, at which time now- 18 dismissed Defendant Southland purchased the property for $581,000. Plaintiffs, 19 however, did not leave the property until April 2017. 20 21 PROCEDURAL BACKGROUND On September 1, 2015, Plaintiffs, residents of California, brought suit against 22 Defendant Wells Fargo, a national banking association with its main office located in 23 South Dakota, in San Diego Superior Court. Notice of Removal 2-5, ECF No. 1. 24 Plaintiffs alleged violations of (1) Cal. Civ. Code § 2923.7 and (2) Cal. Civ. Code 25 § 2923.6, and (3) common law breach of contract. Id. at 6-9. 26 On October 16, 2015, Defendant removed the case to federal court on the basis of 27 diversity jurisdiction. Id. at 2. On November 16, 2015, Plaintiffs filed an ex parte 28 motion for a temporary restraining order (“TRO”) to restrain Defendant from selling 3 3:15-cv-02344-GPC-JMA 1 Plaintiffs’ home through a nonjudicial foreclosure sale, on the basis that such sale would 2 be in violation of a September 9, 2015 temporary restraining order restraining the sale 3 issued by the San Diego Superior Court. ECF No. 6 at 2-3. Defendant conceded that 4 Plaintiffs’ home had been sold, but argued that the sale was proper because the TRO had 5 expired no later than 14 days after the case was removed pursuant to Fed. R. Civ. P. Rule 6 65(b)(2), and Plaintiff had not renewed it. ECF No. 8 at 3-5. At the November 20, 2015 7 hearing on Plaintiffs’ TRO motion, this Court denied the motion, finding that the state 8 court TRO was no longer in effect. ECF No. 11. 9 On January 14, 2016, the Court granted Defendant’s first motion to dismiss. ECF 10 No. 15. The Court found that Plaintiffs’ state-law claims were preempted by the federal 11 Home Owners’ Loan Act. Id. at 9. Nonetheless, the Court granted Plaintiffs leave to 12 amend in order to add a RICO claim to their suit. Id. at 10. 13 Plaintiffs filed the amended and now-operative complaint on February 10, 2016. 14 ECF No. 16. In it, Plaintiffs allege that Defendant Wells Fargo violated 12 C.F.R. §§ 15 1024.41(b) & (c) by failing to respond to Plaintiffs’ September 9, 2015 loan modification 16 application. Id. ¶ 43. Plaintiff also alleges that Defendant Wells Fargo, along with 17 Defendant Southland colluded with one another in order to sell Plaintiffs’ home to 18 Southland, thereby “wiping out $150,000 in equity which served to unjustly enrich 19 Defendant Southland, and served as an inequitable forfeiture of Plaintiff[s]’[ ] equitable 20 interest in the property.” Id. ¶ 45 (emphases omitted). Such collusion, Plaintiffs allege, 21 amounted to a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 22 U.S.C. §§ 1961 et seq. (RICO). Id. ¶ 67. 23 Defendant Wells Fargo filed a motion to dismiss all three causes of action on 24 February 24, 2016. ECF No. 18-1 at 2. On March 11, 2016, Defendant Southland moved 25 the Court to join in the motions filed by its co-defendant, ECF No. 20 at 2, and the Court 26 subsequently granted the motion, ECF No. 24. In the motion to dismiss, Defendant Wells 27 Fargo argued that Plaintiffs had no standing to assert violations of 12 C.F.R. 28 §§ 1024.41(b) and (c) because their September 9, 2015 request for loan modification was 4 3:15-cv-02344-GPC-JMA 1 duplicative. ECF No. 18 at 7-8. Specifically, Defendants argued that because 12 C.F.R. 2 §§ 1024.41(i) only requires a loan servicer to “comply with the requirements of this 3 section for a single complete loss mitigation application” and because Plaintiffs had 4 already submitted a number of complete applications, Plaintiffs had no right to enforce 5 the regulations against Defendants as to their September 9, 2015 application. Id. 6 On April 28, 2016, the Court denied Defendant Wells Fargo’s motion to dismiss 7 Plaintiffs’ 12 C.F.R. §§ 1024.41(b) and (c) claims, but granted the motion as to Plaintiffs’ 8 RICO claim. ECF No. 23. The April 28, 2016 order specifically rejected Defendant 9 Wells Fargo’s contention that Plaintiffs could not enforce the relevant regulations 10 because of duplicative requests under 12 C.F.R. §§ 1024.41(i). Id. at 6-10. In so doing, 11 the Court emphasized that the facts in the complaint, when viewed in the light most 12 favorable to Plaintiffs, suggested that Defendants had never considered a “complete 13 application.” Id. As such, the Court declined to hold that Defendants had already 14 considered a “single complete loss mitigations application” in accordance with 12 C.F.R. 15 §§ 1024.41(i) and, therefore, declined to hold that Defendants were no longer required to 16 comply with the section’s requirements. Id. 17 On October 12, 2016, Defendant Southland filed a motion for judgment on the 18 pleadings alleging that Plaintiffs had failed to state a cause of action under 12 C.F.R. 19 §§ 1024.41 as to Southland. ECF No. 34. The Court granted the motion on December 2, 20 2016 and dismissed Defendant Southland from the complaint. ECF No. 40. The instant 21 motion followed after discovery took place. 22 23 LEGAL STANDARD Fed. R. Civ. P. 56 empowers courts to enter summary judgment on factually 24 unsupported claims or defenses, and thereby “secure the just, speedy and inexpensive 25 determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 325, 327 (1986). 26 Summary judgment is appropriate if the “pleadings, depositions, answers to 27 interrogatories, and admissions on file, together with the affidavits, if any, show that 28 there is no genuine issue as to any material fact and that the moving party is entitled to 5 3:15-cv-02344-GPC-JMA 1 judgment as a matter of law.” Fed. R. Civ. P. 56(c). A fact is material when it affects the 2 outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 3 The moving party bears the initial burden of demonstrating the absence of any 4 genuine issues of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy 5 this burden by demonstrating that the nonmoving party failed to make a showing 6 sufficient to establish an element of his or her claim on which that party will bear the 7 burden of proof at trial. Id. at 322-23. If the moving party fails to bear the initial burden, 8 summary judgment must be denied and the court need not consider the nonmoving 9 party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 (1970). 10 Once the moving party has satisfied this burden, the nonmoving party cannot rest 11 on the mere allegations or denials of his pleading, but must “go beyond the pleadings and 12 by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions 13 on file’ designate ‘specific facts showing that there is a genuine issue for trial.’” Celotex, 14 477 U.S. at 324. If the non-moving party fails to make a sufficient showing of an 15 element of its case, the moving party is entitled to judgment as a matter of law. Id. at 16 325. “Where the record taken as a whole could not lead a rational trier of fact to find for 17 the nonmoving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. 18 Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting First Nat’l Bank of Arizona v. 19 Cities Serv. Co., 391 U.S. 253, 289 (1968)). In making this determination, the court must 20 “view[ ] the evidence in the light most favorable to the nonmoving party.” Fontana v. 21 Haskin, 262 F.3d 871, 876 (9th Cir. 2001). The court does not engage in credibility 22 determinations, weighing of evidence, or drawing of legitimate inferences from the facts; 23 these functions are for the trier of fact. Anderson, 477 U.S. at 255. 24 25 DISCUSSION Defendant argues that the undisputed material facts demonstrate that it is entitled 26 to judgment as a matter of law. Specifically, Defendant contends that summary judgment 27 is warranted because (1) 12 C.F.R. § 1024.41 does not apply to repeat applications; (2) 28 alternatively, 12 C.F.R. § 1024.41 does not apply because Plaintiffs did not file their 6 3:15-cv-02344-GPC-JMA 1 September 2015 loan modification application within the appropriate time period before 2 the scheduled foreclosure sale; (3) alternatively, Wells Fargo did not violate 12 C.F.R. 3 § 1024.41 because it acknowledged receipt of Plaintiff’s September 2015 application 4 within five business days; and (4) in the event that the Wells Fargo did violate 12 C.F.R. 5 § 1024.41, Plaintiffs claim still fails because they have no evidence of damages. ECF 6 No. 46-1. In response, Plaintiffs argue in conclusory fashion that summary judgment is 7 inappropriate because “some of the ‘undisputed’ material facts cited by Defendant are in 8 fact disputed or partially disputed” and because “Defendant has, through artful pleading, 9 obfuscated the fact that several material facts are actually in issue . . . .” ECF No. 48-1. 10 Plaintiffs’ opposition to Defendant’s motion for summary judgment fails for a 11 number of reasons, but chief among them is its failure to demonstrate that there is a 12 genuine dispute of material fact as to the applicability of 12 C.F.R. § 1024.41 to 13 Plaintiffs’ September 2015 loan modification application. Defendant argues that there is 14 no dispute that 12 C.F.R. § 1024.41 does not apply because Plaintiffs concede that they 15 submitted multiple “complete” loan modification applications between 2011 and 2013, in 16 January 2014, and in May 2014. See Pl.’s Reply to Def.’s Separate Statement of 17 Undisputed Facts, ECF No. 48-2. Accordingly, Defendant argues, Wells Fargo already 18 satisfied their obligation under 12 C.F.R. § 1024.41(i) to comply with the requirements of 19 the section for a “single complete loss mitigation application.” 20 The Consumer Financial Protection Bureau (“CFPB”) promulgated 12 C.F.R 21 § 1024.41 under the Real Estate Settlement Procedures Act, 12. U.S.C. § 2605. See 22 Brimm v. Wells Fargo Bank, N.A., — F. App’x — , 2017 WL 1628996, *2 (6th Cir. 23 2017). The regulation came into effect on January 10, 2014. Id. “The regulation 24 requires mortgage servicers to make decisions on loan modification requests in a timely 25 manner and prohibits servicers from foreclosing if a mortgagor submits a complete 26 modification application more than 37 days before a scheduled sale.” Id. (citing 12 27 C.F.R. § 1024.41(b), (c), (g)). 28 7 3:15-cv-02344-GPC-JMA 1 Section 1024.41, however, “does not require mortgage servicers to consider 2 duplicative requests.” Id. Rather, the regulation states that “A servicer is only required 3 to comply with the requirements of this section for a single complete loss mitigation 4 application for a borrower’s mortgage loan account.” 12 C.F.R. § 1024.41(i). The 5 Consumer Financial Protection Bureau has explained its reasoning for limiting a loan 6 servicer’s obligations under the regulations as follows: 7 8 9 10 11 The Bureau believes that it is appropriate to limit the requirements in § 1024.41 to a review of a single complete loss mitigation application. Specifically, the Bureau believes that a limitation on the loss mitigation procedures to a single complete loss mitigation application provides appropriate incentives for borrowers to submit all appropriate information in the application and allows servicers to dedicate resources to reviewing applications most capable of succeeding on loss mitigation options. 12 Mortgage Servicing Rules Under the Real Estate Settlement Procedures Act (Regulation 13 X), 78 Fed. Reg. 10696-01, 10836 (Feb. 14, 2013). 14 As Plaintiffs concede, they submitted at least one complete loan modification 15 application to Wells Fargo after Regulation X was promulgated, in May 2014, and Wells 16 Fargo denied the application in due course. See ECF No. 48-2 at 3 (“Plaintiffs 17 resubmitted another complete loan modification application in May 2014.”); id. at 4 18 (“Wells Fargo determined that they did not qualify for a loan modification and sent two 19 letters dated June 19, 2014 indicating that the application had been denied.”). There is no 20 dispute that Wells Fargo notified Plaintiffs of the denial of their application. There is 21 also no dispute that both applications were “complete” for purposes of the regulation. In 22 light of this, the Court concludes that Wells Fargo had no obligation to comply with the 23 requirements of § 1024.41 for any subsequent complete loss mitigation application, 24 including Plaintiffs’ September 2015 application. See Brimm, — F. App’x — , 2017 WL 25 1628996 at *2 (concluding that Wells Fargo had no obligation to respond to any renewed 26 loan modification request because Wells Fargo had already reviewed and denied a 27 complete application). 28 8 3:15-cv-02344-GPC-JMA 1 In reaching this conclusion, the Court rejects Plaintiffs’ argument that Defendant 2 was nonetheless obligated to abide by the requirements of Regulation X because it had 3 “accepted for consideration Plaintiffs’ loss mitigation application.” ECF No. 48-1 at 3. 4 Not only does this argument make little sense in light of the plain language of Section 5 1024.41(i), but Plaintiffs have cited to no binding legal authority supporting their 6 position. In fact, the one case that Plaintiffs cite in support of this position actually 7 contradicts it. See Coury v. Caliber Home Loans, Inc., 2016 WL 6962882, *4 (N.D. Cal. 8 Nov. 29, 2016) (“Coury seems to suggest that his subsequent submissions of complete 9 applications also required Caliber to respond under § 1024.41(c). . . . The regulation, 10 however, does not obligate servicers to respond to multiple applications from a single 11 borrower.”). 12 The Court moreover notes that Plaintiffs have failed to produce any genuine issue 13 of material fact demonstrating that their May 2014 loan modification application was 14 otherwise incomplete. Defendant, on the other hand, has cited to multiple evidentiary 15 submissions showing that the loan application sent to Defendant in May 2014 was a 16 “complete” loan modification application. See, e.g., Deposition of Nissim Sasson, 31:12- 17 32:12 (Q: “Okay. Did at any point you have a conversation with somebody at Wells 18 Fargo before the denial and say, “We’ve now received everything that we have; it’s a 19 complete application; we’ll give you a review”? A: “Yes.”). As such, and because there 20 is no material dispute that Defendant reviewed and denied a complete loan modification 21 application in May 2014, the Court concludes that the requirements of 12 C.F.R. 22 § 1024.41(b) and (c) do not apply to Plaintiffs’ subsequent loan modification application 23 submitted in September 2015. 24 25 Accordingly, the Court concludes that Defendants are entitled to judgment as a matter of law on Plaintiffs’ claims under 12 C.F.R. § 1024.41(b) and (c). 26 //// 27 //// 28 //// 9 3:15-cv-02344-GPC-JMA 1 CONCLUSION 2 Defendant’s motion for summary judgment is GRANTED. 3 IT IT SO ORDERED. 4 5 Dated: September 4, 2017 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 3:15-cv-02344-GPC-JMA

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