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Johnson v. PNC Mortgage

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

February 12, 2015

CHARLOTTE JOHNSON, et al., Plaintiffs,
PNC MORTGAGE, et al., Defendants

Page 981

For Charlotte Johnson, Nelvin Johnson, Plaintiffs: Michael Patrick Rooney, LEAD ATTORNEY, Michael Rooney Law Office, San Francisco, CA.

For PNC Mortgage, a division of PNC Bank, National Association, Defendant: Marcus T. Brown, LEAD ATTORNEY, Law Office of Marcus T. Brown, Walnut Creek, CA; Brian H. Gunn, Wolfe & Wyman LLP, Walnut Creek, CA.

For U.S. Bank, National Association, Defendant: Marcus T. Brown, LEAD ATTORNEY, Law Office of Marcus T. Brown, Walnut Creek, CA.

Page 982


Laurel Beeler, United States Magistrate Judge.


This case involves a residential mortgage loan. Plaintiffs Charlotte and Nelvin Johnson allege that, in handling their requests for a loan modification, the defendants violated California's Homeowner Bill of Rights.

The Johnsons sued PNC Mortgage and U.S. Bank in Napa County Superior Court. (Compl. -- ECF No. 1 at 5-21.)[1] PNC removed the case to this court based on diversity jurisdiction. (ECF No. 1 at 1.) (When it removed the case, PNC was the only defendant that had been served. ( See ECF No. 1 at 2 (¶ 6)); 28 U.S.C. § 1446(b)(2)(A).) All parties have consented to the undersigned's jurisdiction. (ECF Nos. 7, 11.)

The operative complaint is the Second Amended Complaint. (ECF No. 30.) The Johnsons there advance three claims: 1) negligence; 2) unfair business practices under California Civil Code § § 2923.7 and 17200; and 4) statutory cancellation of instruments under California Civil Code § 3214. (ECF No. 30, passim.)

This is the third time the defendants have moved to dismiss the Johnsons' claims. The court granted the defendants' previous motions to dismiss and (except for a statutory-damages claim under Cal. Civ. Code § 2924.19) gave the Johnsons leave to amend their complaint. ( See ECF Nos. 14, 29.) On December 30, 2014, PNC and U.S. Bank moved to dismiss the Second Amended Complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 32.) The Johnsons filed a timely opposition (ECF No. 36), to which the defendants have not replied.

The court finds this matter suitable for determination without oral argument. See Civ. L.R. 7-1(b). For the reasons discussed below, the court denies the defendants' motion to dismiss the negligence and Unfair Competition Law claims, and grants their motion to dismiss the cancellation claim. Because it does not appear that the Johnsons can allege different facts that would make the cancellation claim viable under the applicable law, that claim is dismissed with prejudice.


This discussion assumes familiarity with the court's earlier order dismissing the Johnsons' First Amended Complaint. (ECF No. 29.) That order set out at length the Johnsons' factual allegations describing their mortgage, their efforts to obtain a loan modification from defendant PNC (who has represented itself as the servicer of the Johnsons' loan), and their ultimately accepting a modification that they still find unaffordable. ( Id. at 2-6.) Those allegations continue to give a good description of the circumstances underlying this case. It is the Johnsons' legal claims, rather than the facts, that have undergone the more marked change in the Second Amended Complaint. Only two specific points need be made here.


The first is to recall the facts surrounding two documents related to the Johnsons'

Page 983

mortgage loan: the assignment under which PNC claims to be the Johnsons' legitimate loan servicer; and a notice of default that PNC recorded against the Johnsons' loan. These are the documents that the Johnsons challenge in their claim for statutory cancellation of instruments. ( See ECF No. 30 at 9-18, ¶ ¶ 35-64.)

In January 2013, invoking California's Homeowner Bill of Rights (" HBOR" ), the Johnsons sent PNC a demand for proof that PNC was the authorized servicer on their loan. (2nd Am. Compl. -- ECF No. 30 at 12, ¶ 45.) PNC responded by sending the Johnsons various documents. ( See id. at 13, ¶ ¶ 46, 48.) Among these was an " un-endorsed certified true and correct copy of the [mortgage] Note." ( Id. at 13, ¶ 46.) PNC also sent the Johnsons an " Assignment of Deed of Trust" that " recited and sought to transfer [the original mortgage lender] Commonwealth['s] . . . interest in [the Johnsons'] Deed of Trust to 'Banc of America Funding Corporation Mortgage Pass-Th[r]ough Certificates, Series 2006-2 U.S. Bank National Association as Trustee, by PNC Bank, National Association as Servicer with delegated authority under the transaction documents.'" ( Id. at 13, ¶ 48.) The assignment was executed by " PNC Bank, National Association, successor by merger to National City Mortgage, a division of National City Bank." ( Id. at 14, ¶ 49.)

The Johnsons allege that their original lender, Commonwealth, never assigned its interest in the Note or Deed of Trust to anyone, including National City Bank of Indiana. ( Id. at 12, 14, ¶ ¶ 44, 49-52.) Therefore, PNC lacked " apparent authority to assign the interest of 'National City Bank of Indiana'" and failed to establish that any of the entities on the face of the assignment have an interest in the property. ( Id. at 14, ¶ ¶ 49-53.) The assignment is therefore void. ( Id. at 14, ¶ 52.) The Johnsons also allege that the assignment was " robosigned without reliance on competent or reliable evidence to substantiate the right to foreclose," in violation of California Civil Code § 2924.17(b). ( Id. at 17, ¶ 61.) Instead, the Johnsons allege, PNC " had the assignment created in order to create its own evidence, which was knowingly without basis in truth and that PNC did record the assignment illegally." ( Id.)

The Johnsons further allege that PNC has recorded a notice of default against their property. ( Id. at 12, ¶ 42.)


The Second Amended Complaint adds a discussion of a PNC employee, whom the Johnsons call " Josh," who was assigned as a " single point of contact" to oversee their loan-modification application. ( Id. at 4, 8-9, ¶ ¶ 15, 31-32.) The Johnsons allege that they called Josh to explain that, in working out a possible modification, PNC had miscalculated their income, overstating that income by 10%. ( Id.) This error led to a monthly mortgage payment " several hundred dollars higher than what plaintiffs can afford." ( Id. at 8, ¶ 31.) According to the Johnsons, Josh " acknowledged" the error. ( Id. at 4, ¶ 15.) He promised to look into the problem and call them back. ( Id.) But he never did. ( Id. at 4, 8, ¶ ¶ 15-16, 31.) The Johnsons allege that Josh, though nominally their single point of contact, " did not have the authority" to correct the mistake. ( Id. at 8, ¶ 31.) The mistake was not corrected. ( Id. at 4, 8, ¶ ¶ 15-16, 31.) This caused the Johnsons' modified monthly payment to be " unaffordable" to them, and to run afoul of PNC's own loan-modification guidelines. ( See ECF No. 36 at 2, 6-7.)


A court may dismiss a complaint under Federal Rule of Civil ...

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