IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA
March 16, 2011
DENNLY R. BECKER; THE BECKER TRUST
WELLS FARGO BANK, N.A., INC.; WACHOVIA MORTGAGE CORPORATION; DOES 1-20, DEFENDANTS.
The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge
DATED MARCH 25, 1991,
This order addresses plaintiff Dennly Becker's "Ex Parte Motion For: 1) Order To Show Cause Why Defendants Should Not Be Held In Contempt And Sanctioned, 2) Order For Rescission of NOS ("notice of sale"), 3) Order For Written Instructions Stopping Foreclosure, and 4) Court Approval Of Lis Pendens" (plaintiff's "Motion"). (Dkt. No. 24.)*fn1 Defendants Wells Fargo Bank, N.A., and Wachovia Mortgage Corporation ("defendants") opposed the motion (Defendants' Opposition, ("Oppo."), Dkt. No. 31). Plaintiff*fn2 replied by filing a "response" in support of his motion. (Plaintiff's Reply ("Reply"), Dkt. No. 35.) Plaintiff also filed a request for judicial notice ("RJN") supporting his Motion. (Dkt. No. 36.)*fn3
The court heard oral arguments on the Motion on March 3, 2011. Plaintiff, who is proceeding without counsel, appeared on his own behalf. Attorney Gene Wu appeared on behalf of defendants. During that hearing, the undersigned also heard oral arguments on several other motions*fn4 pending in this case.
The undersigned has considered the briefs, oral arguments, and the record in this case and, for the reasons that follow, orders that plaintiff's Motion is denied. For the reasons stated below, the undersigned denies plaintiff's request that defendants be sanctioned and held in contempt for violating the court's December 13th Order. The undersigned also denies plaintiff's requests for an Order of "Rescission of NOS" and an Order for "Written Instructions Stopping Foreclosure," as plaintiff has conceded that these two requests were rendered moot by defendants' opposition (Dk. No. 31) and the declarations attached thereto. Further, plaintiff has indicated that he is willing to wait until the complaint surpasses the pleading stage before seeking to record any lis pendens. Therefore plaintiff's request that the undersigned approve his nine lis pendens is denied, without prejudice to later refiling.
Plaintiff has alleged various claims against defendants in connection with plaintiff's mortgage loans, potential modification of those loans, representations made during the modification application process, and defendants' steps to foreclose upon three of plaintiff's properties. (FAC, Dkt. No. 19.)
The relevant procedural history is as follows. On November 29, 2010, plaintiff filed his verified FAC. (Dkt. No. 19.) On November 12, 2010, plaintiff filed a motion for a preliminary injunction. (Dkt. No. 14.) Plaintiff sought to enjoin foreclosure sales of three properties, which plaintiff represented were scheduled to occur on December 23, 2010. The three properties were located at 865 Shelborne Drive, Tracy, CA ("Shelborne property"), 2416 Third Street, Lincoln, CA ("Third Street property"), and 1896 Larkflower Way, Lincoln, CA ("Larkflower property").
On December 13, 2010, Senior Judge Lawrence K. Karlton granted plaintiff's motion for a preliminary injunction (the "December 13th Order"). (December 13th Order, Dkt. No. 21.) The December 13th Order enjoined the foreclosure sales of the three properties described in plaintiff's motion for a preliminary injunction. (Id.) On January 3, 2011, plaintiff filed the pending Motion. (Motion, Dkt. No. 24.)*fn5 On January 21, 2011, Judge Karlton referred plaintiff's pending Motion (Dkt. No. 24) to the undersigned. (Dkt. No. 34)
Plaintiff's pending Motion was prompted by Cal-Western Reconveyance Corporation's recording of a notice of trustee sale ("Notice of Sale" or "NOS") for the Third Street property-one of the three properties embraced by the December 13th Order-on December 29, 2010. (Motion at 1.) Plaintiff declares that the trustee's sale was scheduled for January 19, 2011. (Plaintiff's Declaration, Dkt. No. 24 at 2.) According to plaintiff, the December 13th Order enjoined foreclosure sale of plaintiff's Shelborne, Larkflower, and Third Street properties and in violation of that order, defendants' trustee recorded a NOS for the Third Street property 16 days after that order was issued. (Motion at 4, 12.) Plaintiff's Motion therefore requests "(1) [an] order to show cause why defendants should not be held in contempt and sanctioned, (2) [an] order for rescission of [the notice of trustee sale on the Third Street property], (3) order for written instructions stopping foreclosure, and (4) court approval*fn6 of lis pendens."
Defendants do not dispute that Cal-Western Reconveyance Corporation ("Cal-Western") improperly recorded a NOS upon the Third Street property, but contend that because no trustee's sale has actually "taken place," the December 13th Order was never violated. (Oppo. at 2.) Defendants explain that immediately after issuance of the Preliminary Injunction, they notified LPS Default Solutions, Inc. ("LPS"), the agent for the trustee Cal-Western, to cease all foreclosure activity as to plaintiff's properties. (Id.; Declaration of Michael Barnas, Vice- President of Loan Documentation for Wachovia, ¶ 3 and Exh. A thereto.) The written instructions to LPS stated: "Preliminary Injunction was granted. Please place file on hold. (Id.) Defendants explain that LPS acknowledged the written instructions to place all foreclosure activity on hold. (Id.) According to defendants, LPS normally communicates this sort of "hold" information to counsel for Cal-Western via "intercom message," but in this instance, the typical communication from LPS to Cal-Western did not occur. (Id.) Defendants argue that this was the result of mere oversight on the part of LPS, and note that defendants themselves did not play a role in the communication breakdown. (Id. at 2-3.) Ultimately, LPS's failure to make its typical communication to Cal-Western resulted in the posting and recording of the Third Street NOS. (Id.)
Defendants acknowledge that the recordation of the Third Street NOS was improper and done by mistake. (Id.) Defendants also argue, however, that sanctions and contempt are inappropriate because since learning of the NOS, they have "taken every measure to ensure that no foreclosure will take place." (Id.) Specifically, defendants "took immediate action by contacting Cal-Western and request[ing] written reassurance that all foreclosure activity would be terminated." (Id. at 3.) Further, Cal-Western "caused to be recorded a Notice of Withdrawal of Notice of Trustee's Sale." (Id. at 3; Declaration of Pamela Campbell, Assistant Vice President for Cal-Western, ¶ 6 and Exh. B thereto).)
Defendants argue that plaintiff's request for an "Order of Rescission" and an order for "Written Instructions Stopping Foreclosure" are unnecessary given the declarations filed with defendants' opposition. Those declarations confirm that the Third Street NOS has been withdrawn and the foreclosure process halted. (Id. at 4.) As to plaintiff's request for approval of lis pendens, defendants argue that the court should not give its approval because plaintiff's claims are insufficiently pleaded. (Oppo. at 4-5.)
In his Reply, plaintiff does not dispute defendants' representations that the Third Street NOS was withdrawn and that the foreclosure process was ultimately halted in accordance with the December 13th Order. (Reply at 2-3.) Indeed, because the NOS was withdrawn, plaintiff agrees with defendants that his Motion's second and third requests (for an "Order of Rescission" of the NOS and for "Written Instructions Stopping the Foreclosure") are no longer necessary. (Id. at 3.) Plaintiff's primary contention on Reply is that defendants should be sanctioned for not taking a more active role in assuring its agents' compliance with the court's December 13th Order. (Reply at 3.) Plaintiff argues that defendants' "inadequate email" is "what caused Cal-Western to proceed with the foreclosure process in violation of the court order." (Id.)
A. Plaintiff's Request that Defendants be Sanctioned*fn7
and Held in Contempt This particular dispute centers on
numerous communications between plaintiff and defendant and
plaintiff's allegations of fraudulent representations by defendants
throughout those communications. Given this context, and the recent
violation of the December 13th Order with respect to the Third Street
NOS, plaintiff clearly distrusts defendants and is understandably
frustrated at their violation of the court's order. However, such
distrust and frustration does not necessarily translate into
sufficient grounds for sanctions or contempt.
Courts "may" impose sanctions for "failure of . . .a party to comply with . . . any order of the Court . . . ." Fed. R. Civ. P. 11(c); E.D. Cal. L.R. 110. "'A court has the inherent power to sanction a party or its lawyers if it acts in "willful disobedience of a court order." Gomez v. Vernon, 255 F.3d 1118, 1133-34 (9th Cir. 2001) (citing cases); Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001). "Three primary sources of authority enable courts to sanction parties or their lawyers for improper conduct: (1) Federal Rule of Civil Procedure 11, which applies to signed writings filed with the court; (2) 28 U.S.C. § 1927, which is aimed at penalizing conduct that unreasonably and vexatiously multiplies the proceedings; and (3) the court's inherent power." Fink, 239 F.3d at 991-93. The undersigned construes plaintiff's pending request for sanctions as a request that the court exercise its inherent power.
The Supreme Court in Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980), delivered the definitive summary of the bases on which a federal court may levy sanctions under its inherent power. The Court reiterated the federal courts' inherent power to levy sanctions, including attorneys' fees, for "willful disobedience of a court order . . . or when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons . . . ." Id. at 766 (internal quotation marks and citations omitted); accord Fink, 239 F.3d at 991-93. "A specific finding of bad faith ... must 'precede any sanction under the court's inherent powers.'" Fink, 239 F.3d at 991-93 (quoting Roadway Express, 447 U.S. at 767). The district court may not sanction mere "inadvertent" conduct, "oversight," or "ordinary negligence." Fink, 239 F.3d at 991-93 (citing Zambrano v. City of Tustin, 885 F.2d 1473 (9th Cir. 1989).)
Plaintiff argues that defendants should be sanctioned and held in civil contempt because defendants made only a "passive" attempt to comply with the court's order. (Dkt. No. 35 at 2-3.) As described above, defendants argue that the Third Street NOS was recorded through no fault of theirs: it was defendants' agents, LPS and Cal-Western, that failed to properly communicate regarding defendants' instructions to halt foreclosure pursuant to court order. (Oppo. at 2-3.) Defendants also point to their efforts to promptly correct their agents' mistake: "[u]pon being informed of the posting of the NOS, Wachovia took immediate action by contacting Cal-Western and requested written reassurance that all foreclosure activity would be terminated." (Dkt. No. 31 at 3.) Also according to defendants, corporate counsel for Cal-Western provided written reassurance to defendants that the NOS was withdrawn, and defendants forwarded that written reassurance to plaintiff. (Id.)
Given these particular facts, the undersigned denies plaintiff's request that defendants be sanctioned for violating a court order. While the court's December 13th Order was violated when the Third Street NOS was posted and recorded, whether to order sanctions for such violation is within the discretion of the court.
Defendants' opposition and declarations filed therewith indicate that the violation of the December 13th Order was the result of an inadvertent oversight rather than bad faith. While plaintiff is correct that defendants left compliance with the court's order largely (and perhaps passively) in the hands of their agents, this does not necessarily indicate willful disobedience or bad faith, especially given the fact that the violation of the court's order was unintentional and quickly corrected. See Fink, 239 F.3d at 991-93. Accordingly, the undersigned declines to impose sanctions upon defendants.
As to plaintiff's request that defendants be held in contempt for violation of a court order, that request is also denied. Having considered the briefs, oral arguments, and the record, the undersigned concludes that defendants took all "reasonable steps" within their power to comply with the order and ultimately "substantially complied" with it such that civil contempt is unwarranted. See In re Dual-Deck Video Cassette Antitrust Litigation, 10 F.3d 693, 695 (9th Cir. 1993) (holding that the defendant failed to prove by clear and convincing evidence that under a good faith, reasonable interpretation of the order, the plaintiff did not "substantially comply" with the order proscribing the use of discovery in prior action.) In Dual-Deck, the court clarified that "[s]ubstantial compliance with the court order is a defense to civil contempt, and is not vitiated by a few technical violations where every reasonable effort has been made to comply." Id. (internal quotation marks and citations omitted).
While the December 13th Order was violated when the Third Street NOS was posted and recorded, based on declarations filed with Defendants' opposition the undersigned cannot conclude that defendants' efforts to comply with the court's order were unreasonable. Indeed, defendants' declarations indicate that defendants made "every reasonable effort" to comply with the court order and took steps to promptly correct the oversight that led to the violation in the first place. (Oppo. at 3; Reply at 1.) While defendants could presumably have taken a more active role to ensure compliance with the December 13th Order-and are strongly cautioned to do so in the future-nothing suggests that they willfully violated that order or acted in bad faith. Accordingly, the undersigned declines to hold defendants in contempt.
Finally, while plaintiff suggests defendants' violation of the December 13th Order damaged his reputation and caused him emotional distress, plaintiff has not convincingly demonstrated either of these assertions,*fn8 and moreover, the pending Motion is not the proper vehicle for making such claims. If plaintiff believes he has actual claims for emotional distress or defamation arising from defendants' violation of the court order, plaintiff should file a motion for leave to amend his complaint to add such claims.*fn9
B. Plaintiff's Request for an Order for Rescission of the Third Street NOS and Order for Written Instructions Stopping Foreclosure Sale
Plaintiff's Motion seeks an "Order for Rescission" of the Third Street NOS, and for "Written Instructions Stopping Foreclosure Sale." (Motion at 2-3.) However, as described above, a Notice of Withdrawal of Notice of Trustee's Sale was recorded on January 14, 2011. (Oppo. at 4, Campbell Decl. ¶ 6, Exh. B; Barnas Decl. ¶ 5.) Plaintiff himself has confirmed that the Notice of Withdrawal was recorded. (Reply at 1, 3.)
The requested "Rescission" and "Written Instructions" are no longer necessary. Indeed, according to plaintiff, because the NOS has been withdrawn these two issues "require no further discussion." (Reply at 1.) Because plaintiff agrees with defendant that "further order of the court regarding foreclosure sales is unnecessary," (Reply at 3), plaintiff's requests for "Rescission of the 3rd Street NOS" and "Written Instructions Stopping Foreclosure Sale" are denied as moot.
C. Plaintiff's Request for Approval of Lis Pendens For actions involving a "real property claim," California Code of Civil Procedure Sections 405.4 and 405.21 require that an attorney or judge "approve a notice of pendency of action" as a prerequisite to recording any lis pendens. Because plaintiff is proceeding without counsel, he properly seeks the undersigned's approval of his proposed lis pendens.
Defendants argue that, at most, plaintiff is entitled to judicial approval of three lis pendens for the properties at the center of his pleading (the Third Street, Larkflower, and Shelborne properties) rather than the nine properties at the periphery of the FAC. (Oppo. at 4-6.) The parties' pleadings also raise contentions regarding the sufficiency of plaintiff's real property claims as pleaded.
However, the appropriate inquiry with respect to "approval" of a lis pendens does not necessarily involve an examination of whether the claim would withstand a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Upon a request to "approve" lis pendens," the only tasks before the court are to "confirm that an action containing a real property claim...is pending, and to approve a lis pendens proper in form if such a claim is pending." Cal. Code Civ. Proc. § 405.22, Code Comment 2. Moreover, the only law and motion vehicle that permits defendants to challenge the propriety of lis pendens is a "motion to expunge," which can only be filed after lis pendens are recorded. (Cal. Code Civ. Proc. §§ 405.30-32.) The California Code of Civil Procedure does not appear to contain a mechanism for defendants to "oppose" a pro se plaintiff's request for approval of lis pendens; in other words, there is no mechanism that permits defendants to seek to "expunge" a lis pendens on the front end.
Regardless, the undersigned need not resolve these disputes at this time. During the hearing on the Motion, plaintiff expressed a willingness to permit the case to progress through the pleading stage and become "at issue" before seeking to record any lis pendens. Because a separate order gives plaintiff leave to amend several of his claims, plaintiff's complaint is not yet "at issue." Accordingly, based on plaintiff's statements during the hearing, plaintiff's request for approval of lis pendens is denied without prejudice at this time. Plaintiff is free to refile a request for approval of lis pendens after his complaint surpasses the pleading stage. Notwithstanding the foregoing, plaintiff may refile his request before that time if he perceives a need to do so.
In light of the foregoing, IT IS HEREBY ORDERED that: 1. Plaintiff's "Ex Parte Motion For: 1) Order To Show Cause Why Defendants Should Not Be Held In Contempt And Sanctioned, 2) Order For Rescission of NOS, 3) Order For Written Instructions Stopping Foreclosure, and 4) Court Approval Of Lis Pendens" (Dkt. No. 24) is denied.
2. Based on plaintiff's statements at the March 3, 2011 hearing, plaintiff's request for approval of lis pendens is denied without prejudice to refiling.
IT IS SO ORDERED.