CA Court Site Info on Foreclosure

Wednesday, August 27, 2014

New Cases, August 2014, Some Not published but Relevant

Several  Examples:

HBOR Violations are Outside “Scope” of Unlawful Detainer Actions and Not Barred by Res Judicata
Bolton v. Carrington Mortg. Servs., LLC, No. 34-2013-00144451-CU-OR-GDS (Cal. Super. Ct. Sacramento Cnty. July 24, 2014):[1] Generally, an unlawful detainer (UD) judgment has a limited res judicata effect and does not prevent UD defendants from bringing post-UD actions to resolve title. 
The Malkoskie exception to this general rule, however, states: if the title suit is “founded on allegations of irregularity in a trustee’s sale,” res judicata bars the subsequent action. 
Here, borrowers brought a post-UD suit against servicer, but not to resolve a title issue. Rather, borrowers alleged dual tracking and SPOC violations and sought damages under CC 2924.12. HBOR violations are “not within the scope of the unlawful detainer action. Indeed, nothing in [CCP 1161a] requires that an unlawful detainer plaintiff show that it complied with [HBOR] as part of proving tits right to possession.” CCP 1161a only requires UD plaintiffs to show, inter alia, the sale complied with foreclosure procedures outlined in CC 2924, and duly perfected title. 
A suit based on HBOR violations does not, then, “necessarily challenge the validity of the foreclosure sale,” and were not fully litigated as part of the UD. Accordingly, the court overruled servicer’s demurrer to borrower’s HBOR claims.

Borrowers Fraudulently Induced to Sign Unfavorable Modification with Promises of a Better Mod in the Future; Equitable Tolling Analysis on Promissory Estoppel Claim; UCL Causation
Peterson v. Wells Fargo Bank, N.A., 2014 WL 3418870 (N.D. Cal. July 11, 2014): Fraud claims have a heightened pleading standard that requires borrowers to allege “the who, what, when, where, and how” of the alleged fraudulent conduct. Here, borrower pled his servicer fraudulently induced him to agree to a financially burdensome “modification” agreement, promising that a better modification would be forthcoming in one year and would “negate” the unfavorable terms of the first modification. No new modification was granted and borrower now faces foreclosure. Borrower met the heightened pleading standard: 1) he identified the servicer representative who made the fraudulent promise by name; 2) the month and year of the promise; 3) where the promise was made (over the phone); and 4) the “what” and “how” –the exact representations servicer made and how they never came to pass. The court also found that borrower had adequately pled damages resulting from servicer’s fraudulent promise: borrower’s attorney’s fees and accumulating late fees. The court denied servicer’s motion to dismiss borrower’s fraud claim.
There is a two-year statute of limitations for promissory estoppel claims, unless the borrower can take advantage of equitable tolling. “Generally, a litigant seeking equitable tolling bears the burden of establishing two elements: 1) that he has been pursuing his rights diligently; and 2) that some extraordinary circumstances stood in his way.” Here, borrower alleged that servicer reneged on its promise more than two years before borrower initiated his suit. He argued for equitable tolling, however, because servicer kept stringing him along after its initial denial of a second loan modification, urging borrower to “try again later.” The court accepted servicer’s argument that these representations were statutorily required because servicer was “obligated to continue to consider borrowers for loan modification options as long as programs remain available.” Borrower could not show, then, that extraordinary circumstances stood in his path toward litigation. The court granted servicer’s motion to dismiss borrower’s promissory estoppel claim as time-barred.
Viable UCL claims must establish that the borrower suffered economic injury caused bydefendant’s misconduct. Here, borrower’s valid fraud claim served as a basis for their “unlawful” prong UCL cause of action. Further, this court adopted the view that borrowers may allege “causation more generally” at the pleading stage. Here, for example, borrower alleged he spent financial resources improving the property, relying on servicer’s promise that a better modification would be granted in the near future. At the pleading stage, this allegation was enough to establish UCL standing. The court denied servicer’s MTD.

A National Bank May Invoke HOLA to Defend its Own Conduct
Hayes v. Wells Fargo Bank, N.A., 2014 WL 3014906 (S.D. Cal. July 3, 2014): The Home Owners’ Loan Act (HOLA) and the (now defunct) Office of Thrift Supervision (OTS) governed lending and servicing practices of federal savings banks. HOLA and OTS regulations occupied the field, preempting any state law that regulated lending and servicing. Here, borrower brought a UCL claim against her servicer, a national bank, alleging improper escrow fees. 
Normally, national banks are regulated by the National Banking Act and Office of the Comptroller of the Currency (OCC) regulations. Under those rules, state laws are only subject to conflict preemption and stand a much better chance of surviving a preemption defense. Borrower’s loan originated with a federal savings association, which then assigned the loan to Wachovia, which merged with Wells Fargo, a national bank. 
Rather than apply the HOLA preemption analysis to a national bank without evaluating that logic, this court acknowledged the “growing divide in the district courts’ treatment of this issue” and its three different options: 1) HOLA preemption follows the loan, through assignment and merger; 2) national banks can never invoke HOLA; or 3) application of HOLA should depend on the nature of the conduct at issue—the federal savings association’s conduct can be defended with HOLA preemption, but the national bank’s conduct cannot. 
Here, the court chose the first option, relying on the reasoning in Metzger v. Wells Fargo Bank, N.A., 2014 WL 1689278 (C.D. Cal. Apr. 28, 2014). In a footnote, the court summed up the basis the Metzger court’s reasoning as: the OTS’s “opinion letters, the rationale behind the HOLA preemption regulation, and the fact that [borrowers] agreed that the loan would be governed by HOLA” at loan origination. Applying HOLA field preemption, the court found borrower’s UCL claim preempted because it was based in improper escrow allegations, and escrow accounts are specifically named as preempted in the OTS regulations. The court dismissed borrower’s action.

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