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Garcia v. Mortgage

United States District Court, N.D. California

February 9, 2015

DAVID P. GARCIA, Plaintiff,
PNC MORTGAGE, Defendant.


PHYLLIS J. HAMILTON, District Judge.

Defendant's motion for an order dismissing the first amended complaint ("FAC") for failure to state a claim, or in the alternative, striking certain allegations in the FAC, and plaintiff's motion for a preliminary injunction, came on for hearing before this court on January 28, 2015. Plaintiff appeared by his counsel Marie G. Quashnock, and defendant appeared by its counsel Marcus T. Brown. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, the court hereby GRANTS the motion to dismiss and DENIES the motion for preliminary injunction.


In June 2006, plaintiff David P. Garcia purchased real property located in Pleasant Hill, California. FAC ¶ 31. He obtained a loan from the predecessor of defendant PNC Mortgage ("PNC") which was secured by a promissory note and deed of trust, recorded on June 22, 2006. Id . In September 2011, plaintiff defaulted on the loan. FAC ¶ 36. In April 2012, he filed for bankruptcy protection for himself and his business. FAC ¶ 38. His bankruptcy was discharged on July 16, 2012. Id.

Plaintiff subsequently initiated loan modification negotiations with PNC. FAC ¶ 39. He authorized his wife, Susie Garcia (not a borrower on the loan) to act in his stead in the discussions with PNC. Id . Plaintiff alleges that he submitted a "complete" application for a loan modification on August 13, 2012 ("the first application"), but that over the next few months, PNC repeatedly requested additional information and documents. FAC ¶ 42. He asserts that "in or around January 2013, " he was told by a PNC representative that he needed to submit a new loan modification application because a new calendar year had begun. FAC ¶ 43.

On February 20, 2013, before plaintiff submitted the new application, PNC recorded a Notice of Default ("NOD") on the property, showing $46, 825.43 owing as of February 18, 2013. FAC ¶ 44. Attached to the NOD was a Declaration of Mortgage Servicer dated January 25, 2013, stating that the servicer had "tried with due diligence to contact the borrower as required by California Civil Code § 2923.55(f), " but had not made contact despite such due diligence. Id.

Plaintiff alleges that on April 10, 2013, he submitted a new "complete" loan modification application to PNC ("the second application"), but that PNC made repeated requests for additional information over the period from April to August 2013. FAC ¶¶ 45-50. He also asserts that Mrs. Garcia continued to get a different representative each time she contacted PNC in response to the requests for information or documents, and that those representatives were not always able to respond adequately to her requests for a "status update on [p]laintiff's application" (apparently referring to the April 10, 2013 application). FAC ¶ 45.

On August 9, 2013, while the April 10, 2013 loan modification application was pending, PNC recorded a Notice of Rescission of the February 20, 2013 NOD; a Substitution of Trustee, substituting Cal-Western Reconveyance as Trustee in place of the former trustee; and an NOD showing $59, 587.88 owing as of August 6, 2013. FAC ¶ 51. This NOD was accompanied by a copy of the same Declaration of Mortgage Servicer dated January 25, 2013, which had previously been attached to the February 20, 2013 NOD. FAC ¶ 52. Plaintiff alleges that this declaration was void, because the February 20, 2013 NOD had been rescinded, and was also false, because he was in active loan modification review and PNC was actively soliciting documents from him. Id.

It is not clear from the FAC what plaintiff claims happened with the April 20, 2013 loan modification application. Plaintiff alleges only that on October 5, 2013, at PNC's request, he submitted a new "complete" application for a loan modification ("the third application"). FAC ¶ 54.

On November 11, 2013, Mrs. Garcia spoke with "Chris, " in PNC's Loss Mitigation Department, who allegedly told her that PNC had closed the October 5, 2013 application the same day it was submitted. FAC ¶ 55. Plaintiff asserts that "Chris" offered no explanation as to why the file had been closed on October 5, 2013, or why PNC had not acknowledged receipt of the application sent in on that date, although "Chris" did allegedly say that the financial information plaintiff had previously submitted had expired, and that plaintiff would have to file another loan modification application. Id . When Mrs. Garcia asked whether plaintiff should obtain legal representation at that time, "Chris" allegedly responded that no foreclosure sale had been scheduled, so plaintiff "still had time." Id.

At the end of January 2014, Mrs. Garcia contacted PNC to discuss which documents would be needed to submit a new loan modification application. FAC ¶ 57. On February 4, 2014, she spoke to "Anna, " who stated there was no foreclosure sale scheduled on the property, and provided a long list of the required documents. Id . However, plaintiff asserts, "Anna" never informed Mrs. Garcia that PNC required that a completed loan application be received at least 15 business days prior to any foreclosure sale date. Id.

Plaintiff alleges that on March 7, 2014, he faxed a new "complete" loan modification application ("the fourth application") to PNC, along with all the requested supporting documents. FAC ¶ 59. At that point, plaintiff was unaware that a Notice of Trustee Sale had been recorded on March 3, 2014, and a copy mailed on March 4, 2014. FAC ¶ 60. Plaintiff received the Notice of Trustee Sale "on or about" March 11, 2014. Id . The Notice set the sale for March 27, 2014. Id.

On March 20, 2014, Mrs. Garcia called PNC to ask why plaintiff had received a Notice of Trustee Sale when he had just faxed a fourth application for a loan modification. FAC ¶ 61. This time she spoke to "Crystal, " who explained that PNC needed to receive the completed application 15 business days in advance of the Trustee sale, or the sale could not be stopped. Id . Plaintiff alleges that this was the first time PNC had disclosed this internal deadline to him. Id.

On March 22, 2014, plaintiff received a letter from PNC acknowledging receipt of the fourth application and supporting documents, which had been faxed on March 7, 2014. FAC ¶ 62. The letter was dated Friday, March 14, 2014, but was not mailed until Tuesday, March 18, 2014. Id . In the letter, PNC stated that the fourth application could not be reviewed "because the complete application was not received within the required timeframe before [the] foreclosure sale date or you are otherwise ineligible for review." Id . & Exh. H.

Plaintiff filed the present action in Contra Costa Superior Court on March 24, 2014. The court granted plaintiff's application for a temporary restraining order on March 25, 2014. PNC subsequently postponed the date of the foreclosure sale to May 1, 2014. FAC ¶¶ 64-65 & Exh. I. On April 24, 2014, the court granted plaintiff's motion for preliminary injunction. PNC had not been properly served as of that date, and did not oppose the motion.

On April 29, 2014, plaintiff sent a qualified written request ("QWR") to PNC pursuant to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605, in an attempt to gather additional information about his loan. FAC ¶ 67 & Exh. J. PNC provided an initial response on May 9, 2014, and a further response on June 12, 2014, but did not provide copies of all the documents plaintiff had requested. Id . & Exh. K.

PNC removed the case to this court on August 6, 2014, and on November 9, 2014, plaintiff filed the FAC, asserting seven causes of action - (1) violation of California Civil Code § 2923.5; (2) violation of various provisions of the California Homeowner's Bill of Rights ("HBOR"), Cal. Civ. Code §§ 2923.7, 2923.55, 2924.10, and 2923.6 and/or 2924.11; (3) violation of RESPA; (4) violation of California Business & Professions Code § 17200; (5) quiet title; (6) negligence; and (7) declaratory judgment. On November 20, 2014, the parties filed a stipulation agreeing that the state court's preliminary injunction would be dissolved; that plaintiff would file another motion for preliminary injunction in this court; and that PNC would cause any scheduled trustee's sale of the property to be postponed until after the hearing of the new motion to be filed by plaintiff.

PNC now seeks an order dismissing the FAC for failure to state a claim, and/or striking certain allegations in the complaint. Plaintiff seeks a preliminary injunction barring PNC from selling the property until after the present dispute is resolved.


A. Motion to Dismiss

1. Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc. , 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Review is limited to the contents of the complaint. Allarcom Pay Television, Ltd. v. Gen. Instrument Corp. , 69 F.3d 381, 385 (9th Cir. 1995). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8, which requires that a complaint include a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).

A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Somers v. Apple, Inc. , 729 F.3d 953, 959 (9th Cir. 2013). While the court is to accept as true all the factual allegations in the complaint, legally conclusory statements, not supported by actual factual allegations, need not be accepted. Ashcroft v. Iqbal , 556 U.S. 662, 678-79 (2009); see also In re Gilead Scis. Sec. Litig. , 536 F.3d 1049, 1055 (9th Cir. 2008).

The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007) (citations and quotations omitted). A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face. See id. at 558-59. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678 (citation omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n]' - that the pleader is entitled to relief.'" Id. at 679. In the event dismissal is warranted, it is generally without prejudice, unless it is clear the complaint cannot be saved by any amendment. See Sparling v. Daou , 411 F.3d 1006, 1013 (9th Cir. 2005).

Although the court generally may not consider material outside the pleadings when resolving a motion to dismiss for failure to state a claim, the court may consider matters that are properly the subject of judicial notice. Knievel v. ESPN , 393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of Los Angeles , 250 F.3d 668, 688-89 (9th Cir. 2001). Additionally, the court may consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc. , 896 F.2d 1542, 1555 n.19 (9th Cir. 1989), as well as documents referenced extensively in the complaint and documents that form the basis of a the plaintiff's claims. See No. 84 Employer-Teamster Jt. Counsel Pension Tr. Fund v. America West Holding Corp. , 320 F.3d 920, 925 n.2 (9th Cir. 2003).

2. Defendant's Motion

PNC seeks an order dismissing all causes of action asserted in the FAC, for ...

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