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Morales v. Nationstar Mortg. LLC

United States District Court, N.D. California, San Francisco Division

November 20, 2014


For Fernando Morales, an individual, Plaintiff: Matthew David Mellen, LEAD ATTORNEY, Sarah Elizabeth Adelaars, Mellen Law Firm, San Mateo, CA.

For Nationstar Mortgage LLC, Defendant: Maria Schindler, LEAD ATTORNEY, One Embarcadero Center, San Francisco, CA.


LAUREL BEELER, United States Magistrate Judge.

[Re: ECF No. 22]


Plaintiff Fernando Morales has sued Defendant Nationstar Mortgage LLC (" Nationstar") for its failure to accept his timely mortgage payments, even though he is current on his mortgage loan and is not in default. This, he alleges, is a breach of the deed of trust and of the covenant of good faith and fair dealing, and is in violation of California's Unfair Competition Law (" UCL"), Cal. Bus. & Prof. Code § § 17200 et seq. Nationstar moves to dismiss Mr. Morales's claims. Pursuant to Civil Local Rule 7-1(b), the court found this matter suitable for determination without oral argument and vacated the November 6, 2014 hearing. Upon consideration of the papers submitted and the applicable authority, the court DENIES Nationstar's motion.


On or about June 23, 2006, Mr. Morales refinanced property located at 161 Boutwell Street, San Francisco, California 94124 (the " Property"). First Amended Complaint (" FAC"), ECF No. 18 at 3.[1] In doing so, he executed a promissory note (" Note") and a deed of trust (" Deed of Trust"). Id.; see also Request for Judicial Notice (" RJN"), Ex. A (Deed of Trust), ECF No. 23-1.[2] Under the Deed of Trust, Mr. Morales was the borrower, Alternative Financing Corporation was the lender, First American Title was the trustee, Mortgage Electronic Registration Systems, Inc. (" MERS") was the beneficiary. Deed of Trust, ECF No. 23-1 at 2. Pursuant to the Promissory Note and Deed of Trust, Mr. Morales " promised to pay [$415, 000.00] in regular Periodic Payments and to pay the debt in full not later than August 1, 2036." Id. at 3. The Deed of Trust " secure[d] to Lender: (i) the repayment of the Loan, and all renewals, extensions and modifications of the Note; and (ii) the performance of Borrower's covenants and agreements under [the Deed of Trust] and the Note." Id. at 3-4.

The Deed of Trust also contained numerous " uniform covenants." Id. at 4-12. The ones at issue here are Uniform Covenant Nos. 1 and 2.[3] Uniform Covenant No. 1 provides in relevant part:

1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charges.

Borrower shall pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. . . .

Payment are deemed received by Lender when received at the location designated in the Note or at such other location as may be designated by Lender in accordance with the notice provisions in Section 15. Lender may return any payment or partial payment if the payment or partial payments are insufficient to bring the Loan current. Lender may accept any payment or partial payment insufficient to bring the Loan current, without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial payment in the future, but Lender is not obligated to apply such payments at the time such payments are accepted. If each Periodic Payment is applied as of its scheduled due date, then Lender need not pay interest on unapplied funds. Lender may hold such unapplied funds until Borrower makes payment to bring the Loan current. If Borrower does not do so within a reasonable period of time, Lender shall either apply such funds or return them to Borrower. If not applied earlier, such funds will be applied to the outstanding principal balance under the Note immediately prior to foreclosure. No offset or claim which Borrower might have now or in the future against Lender shall relieve Borrower from making payments due under the Note and this [Deed of Trust] or performing the covenants and agreements secured by this [Deed of Trust].

Id. at 4-5. Uniform Covenant No. 2 likewise provides in relevant part:

2. Application of Payments or Proceeds.

Except as otherwise described in this Section 2, all payments accepted and applied by Lender shall be applied in the following order of priority: (a) interest due under the Note; (b) principal due under the Note; (c) amounts due under Section 3 [which relates to funds for escrow items]. Such payments shall be applied to each Periodic Payment in the order in which it became due. Any remaining amounts shall be applied first to late charges, ...

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