Summary
granting request for judicial notice of deed of trust and trust transfer deed
Summary of this case from Becker v. Wells Fargo Bank, N.A.Opinion
No. 14-cv-00970 JAM-AC
07-31-2014
KRISTEN J. AUSTIN, as trustee of the Pauline Hatch Trust, Plaintiff, v. OCWEN LOAN SERVICING, LLC, a limited liability company; and DOES 1 to 10, inclusive, Defendants.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
This matter is before the Court on Defendant Ocwen Loan Servicing, LLC's ("Defendant") Motion to Dismiss Plaintiff's complaint (Doc. #7). Plaintiff Kristen J. Austin ("Plaintiff"), trustee of the Pauline Hatch Trust, opposes the motion (Doc. #9) and Defendant replied (Doc. #12). For the reasons set forth below, Defendant's motion is GRANTED.
This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for July 9, 2014.
I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
Plaintiff originally filed this action on April 21, 2014. In the complaint, Plaintiff alleges three causes of action against Defendant: (1) violation of the Homeowner Bill of Rights ("HBOR"), California Civil Code section 2924.11(d); (2) breach of the loan modification agreement; and (3) breach of the implied covenant of good faith and fair dealing. Compl. ¶¶ 29-44. On May 12, 2014, Defendant moved to dismiss Plaintiff's complaint (Doc. #5) and filed a notice of errata correcting its motion to dismiss on May 14, 2014 (Doc. #7).
On or about August 27, 2007, Plaintiff's mother, Pauline Hatch ("Ms. Hatch") borrowed $370,000.00 (the "Loan") from IndyMac Bank, F.S.B. ("Indymac") for a property. See Ex. 1, Def.'s Notice of Errata Request for Judicial Notice ("RJN"), Doc. #6. In 2010, Ms. Hatch transferred her interest in the property into the Pauline Hatch Trust ("Trust"). Ex. 1, Pl.'s RJN, Doc. #9-1. In or about August 2012, Mrs. Hatch sought a loan modification from Indymac. Id. ¶ 11-12.
Indymac filed a Notice of Default and Election to Sell the Property on or around December 2012 and a Notice of Sale was recorded on March 2013 (collectively "Notices"). Id. ¶¶ 14, 15. In or about August 2013, Indymac offered and Ms. Hatch accepted a Trial Period Plan ("TPP") Agreement for modification. Id. ¶ 17. Ms. Hatch complied with the TPP terms. Id. ¶ 18.
In October 2013, Ms. Hatch passed away and Plaintiff became the trustee of the Trust. Id. ¶ 19. At a time unknown, Indymac transferred the Loan to Defendant. Id. ¶ 20. On November 7, 2013, Defendant sent a loan modification agreement ("Loan Modification") for the Loan, which Plaintiff signed and notarized then returned to Defendant on November 14, 2013. Id. ¶ 22. On or around December 23, 2013, an authorized officer of Defendant countersigned and notarized the Loan Modification and sent it back to Plaintiff. Id. ¶ 25.
II. OPINION
A. Judicial Notice
Both parties request judicial notice.
1. Defendant's Requests
Defendant requests judicial notice of the Deed of Trust recorded in the Official Records of Shasta County Recorder's Office on August 30, 2007 as Document No. 2007-0040158. Ex. 1, RJN, Doc. #6. Plaintiff does not object to this request. This document is appropriate for judicial notice because it is a public record and is "not subject to reasonable dispute." Fed. R. Evid. 201(b).
Defendant also made a supplemental request for judicial notice for (1) the Voluntary Petition in the United States Bankruptcy Court filed on March 30, 2012; and (2) the Notice of Rescission of Declaration of Default and Demand for Sale and Notice of Breach and Election to Sell under Deed of Trust recorded on June 25, 2015. Def.'s Supp. RJN, Doc. #13. Plaintiff objects to Defendant's supplemental request on the ground that the moving party should not be permitted to submit new evidence for the first time with a reply brief (Doc. #15). "It is improper for a moving party to introduce new facts or different legal arguments in the reply brief than those presented in the moving papers." U.S. ex rel. Giles v. Sardie, 191 F. Supp. 2d 1117, 1127 (C.D. Cal. 2000) (citation omitted). Accordingly, the Court denies Defendant's supplemental request.
2. Plaintiff's Requests
Plaintiff requests judicial notice of the Trust Transfer Deed recorded on May 7, 2010. See Pl.'s RJN, Doc. #9-1. Defendant does not object. Because the document is a public record and not subject to dispute, it is appropriate for judicial notice. Accordingly, the Court grants Plaintiff's request.
B. Discussion
Defendant moves to dismiss all three of Plaintiff's claims because of lack of standing and for failure to state a claim.
1. Standing
Defendant argues that Plaintiff does not have standing because she is not a real party in interest to the claims in the complaint. Plaintiff contends that this argument is without merit.
Under Federal Rule of Civil Procedure 17 ("Rule 17"), an action must be prosecuted in the name of the real party in interest. Fed. R. Civ. P. 17. Whether a party is the real party in interest under Rule 17 depends on the applicable state substantive law. Allstate Ins. Co. v. Hughes, 358 F.3d 1089, 1094 (9th Cir. 2004).
a. HBOR
Plaintiff's first claim is for violation of California Civil Code section 2924.11(d) ("Section 2924.11"). Under Section 2924.11(d), "A mortgagee, beneficiary, or authorized agent shall record a rescission of a notice of default or cancel a pending trustee's sale, if applicable, upon the borrower executing a permanent foreclosure prevention alternative." Cal. Civ. Code § 2924.11 (emphasis added). Therefore, on its face, this subsection applies to borrowers.
Plaintiff argues that she should be considered the "borrower" in this case because she sought a modification agreement for the Loan secured by Plaintiff's home, citing McGarvey v. JP Morgan Chase Bank, N.A., 2:13-CV-01099-KJM, 2013 WL 5597148, at *1 (E.D. Cal. Oct. 11, 2013). In McGarvey, the servicer of the loan secured by the house plaintiff inherited from her mother continued to send her loan modification offers even after learning the mother, who was the original borrower, was deceased. Id. The servicer then rejected the loan modification because plaintiff was not listed as a borrower on the loan. Id. The court found that the plaintiff was treated as the borrower for some purposes but not others. Id. Nevertheless, the court dismissed the plaintiff's promissory estoppel claim because "plaintiff's alleged facts do not support a claim that defendant made plaintiff, as the owner of the home that secured the Loan, a clear and unambiguous promise to treat her as the borrower for purposes of modifying the Loan." Id. at *4.
Contrastingly, the McGarvey court allowed the plaintiff's Unfair Competition Law ("UCL") claim to proceed. Id. at *8. The court found that the plaintiff suffered an injury because she paid thousands of dollars for which she was not personally liable. Id. Under the UCL, however, a plaintiff does not have to be the borrower, instead "a plaintiff must have 'suffered injury in fact and . . . lost money or property as a result of the unfair competition.'" Id. at *7. Therefore, despite Plaintiff's claim, the McGarvey court did not allow the plaintiff to raise claims for violations of law in the mortgage loan modification process because the defendant treated plaintiff as the borrower for some purposes; instead, the plaintiff was allowed to bring a UCL claim.
The facts in McGarvey are distinguishable from this case because Plaintiff in this case has not alleged a UCL claim. Under Section 2924.11(d), the plaintiff must be the borrower, which Plaintiff is not because she was not a party to the Loan at issue. Further, Plaintiff has not alleged that she has authority to sue on behalf of Pauline Hatch. She has authority to sue on behalf of the Pauline Hatch Trust, but the Trust was not a party to the mortgage either.
Therefore, because Plaintiff is not the borrower, she is not the real party in interest for her HBOR claim and this cause of action is dismissed on standing grounds. The Court does not grant leave to amend because the claim cannot be saved by amendment.
b. Breach of Contract Claim
Plaintiff's second claim is for breach of the Loan Modification Agreement. Plaintiff contends that Defendant's refusal to rescind the Notices of Default and Sale and cancel the trustee's sale violates the terms of this agreement. Compl. ¶ 38. Defendant argues that Plaintiff is not a party to any contract with Defendant.
Generally, "[a] person who is not a party to a contract does not have standing either to seek its enforcement or to bring tort claims based on the contractual relationship." Ambers v. Wells Fargo Bank, N.A., 13-CV-03940 NC, 2014 WL 883752, at *4 (N.D. Cal. Mar. 3, 2014).
In this case, Plaintiff alleges she signed her name on behalf of the trust and notarized the Loan Modification then mailed it back to Defendant. Compl. 23. Defendant argues that the Loan Modification is an agreement "between PAULINE HATCH . . . and Ocwen" and therefore, Plaintiff had no authority to sign. However, an authorized officer countersigned and notarized the Loan Modification and sent it back to Plaintiff even though neither Plaintiff nor the Trust was the borrower. Id. ¶ 24. Moreover, Plaintiff has been making payments pursuant to the agreement. Id. ¶ 25. Based on these allegations, Defendant entered into a contract with Plaintiff, as the trustee, and the Court finds that Plaintiff has standing to bring a breach of contract claim. The Court addresses Defendant's substantive arguments in support of its motion to dismiss this claim below.
c. Breach of Implied Covenant
"The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract." Smith v. City & Cnty. of San Francisco, 225 Cal.App.3d 38, 49 (1990). Since the Court finds that there is a contractual relationship between Defendant and Plaintiff, Plaintiff has standing to bring her breach of implied covenant of good faith and fair dealing.
2. Failure to State a Claim
Defendant argues that even if Plaintiff has standing, she has failed to state viable breach of contract and breach of the implied covenant of good faith and fair dealing claims.
a. Breach of Contract
To state a claim for breach of contract, Plaintiff must allege "(1) [a] contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff." Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal.App.4th 1375, 1391 (2004).
Plaintiff claims that Defendant breached the contract by failing to rescind the Notices. Defendant argues that there is no breach because the Loan Modification does not require Defendant to rescind them. Plaintiff does not address this argument and in the absence of any opposition the Court finds that because Defendant was not required to rescind the Notices pursuant to the Loan Modification, its failure to do so is not a breach.
Accordingly, the Court dismisses Plaintiff's breach of contract claim. Moreover, since Plaintiff cannot state a breach of contract claim as a matter of law, leave to amend is denied.
b. Breach of Implied Covenant
Plaintiff alleges Defendant breached the implied covenant of good faith and fair dealing because of Defendant's "desire" to proceed with foreclosure. Compl. ¶ 44.
Every contract "imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Fortaleza v. PNC Fin. Servs. Grp., Inc., 642 F. Supp. 2d 1012, 1021-22 (N.D. Cal. 2009) (citing McClain v. Octagon Plaza, LLC, 159 Cal.App.4th 784, 798 (2008)). "To establish a breach of an implied covenant of good faith and fair dealing, a plaintiff must establish the existence of a contractual obligation, along with conduct that frustrates the other party's rights to benefit from the contract." Id. (citations omitted).
Plaintiff has not alleged any specific conduct that frustrates her rights to benefit from the Loan Modification. She has only alleged that Defendant has a "desire" to foreclose but has not alleged any actions. Moreover, as Defendant points out, more than 365 days have passed since the notice of sale was recorded; therefore, Defendant would have to record a new notice. See Cal. Civ. Code § 2924g ("In the event that the sale proceedings are postponed for a period or periods totaling more than 365 days, the scheduling of any further sale proceedings shall be preceded by giving a new notice of sale in the manner prescribed in Section 2924f.")
The Court finds, therefore, that Plaintiff has failed to state a claim and dismisses her cause of action for breach of the implied covenant of good faith and fair dealing. Because Defendant must file a new notice of sale before acting, granting leave to amend at this time would be futile.
III. ORDER
For the reasons set forth above, the Court GRANTS Defendant's Motion to Dismiss WITHOUT LEAVE TO AMEND.
IT IS SO ORDERED. Dated: July 31, 2014
/s/_________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE