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Rees v. PNC Bank, N.A.

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

April 7, 2015

JAMES REES, et al., Plaintiffs,
v.
PNC BANK, N.A., et al., Defendants.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO STRIKE Re: Dkt. No. 20

LUCY H. KOH, District Judge.

Plaintiffs James and Zane Rees ("Plaintiffs") bring this action against Defendants PNC Bank, N.A., dba PNC Mortgage ("PNC"), Deutsche Bank Trust Company Americas, as Trustee for Residential Accredit Loans, Inc., Mortgage Asset-backed Pass-through Certificates, Series 2006-QA4 ("Deutsche"), and Does 1 through 50 (collectively, "Defendants"), alleging violations of California's Homeowner Bill of Rights ("HBOR"). First Amended Complaint ("FAC"), ECF No. 18. Defendants now move to strike portions of the FAC that relate to statutory, exemplary, and punitive damages ("Mot."). ECF No. 20. Plaintiffs filed an opposition ("Opp'n"), ECF No. 22, and Defendants filed a reply ("Reply"), ECF No. 23. Because the Court finds this matter suitable for decision without oral argument, s ee Civil Local Rule 7-1(b), the Court hereby VACATES the hearing on this motion set for April 9, 2015. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court hereby GRANTS in part and DENIES in part Defendants' Motion to Strike.

I. BACKGROUND

In September 2001, Plaintiffs purchased the property located at 1038 Bethany Lane, Scotts Valley, CA 95066 (the "Property"). FAC ¶ 9. In February 2006, Plaintiffs refinanced the mortgage loan for the Property with National City Mortgage, a division of National City Bank of Indiana. Id. On or about March 30, 2011, National City Mortgage assigned the beneficial interest in the deed of trust to Defendant PNC. Id. ¶ 10. PNC was also Plaintiffs' loan servicer. Id. PNC later assigned the beneficial interest in the deed of trust to Deutsche, but PNC continued to service the loan as an agent of Deutsche. Id. ¶ 11.

In 2012, Plaintiffs' sole-proprietor business flagged, and Plaintiffs began to fall behind in their mortgage payments. Id. ¶ 12. However, their business recovered in 2013 and 2014, and in 2014 Plaintiffs sought a loan modification in an effort to get out of default. Id. Plaintiffs first submitted a loan modification application on or about February 23, 2014, which was subsequently denied on the ground that the proposed modified monthly payment would be too great given Plaintiffs' monthly income. Id. ¶¶ 13-14. The May 5, 2014 denial letter informed Plaintiffs that they could contest the denial if it was based on an incorrect statement of their income. Id. ¶ 14. A follow-up May 9, 2014 letter informed Plaintiffs that their appeal of the loan modification denial would be due by June 8, 2014. Id. ¶ 16.

On May 20, 2014, Plaintiffs appealed their loan modification denial by emailing a letter to the designated email address (MHA_Inquiry@pncmortgage.com), which set forth the grounds for their appeal and included supporting documentation regarding Plaintiffs' income. Id. ¶ 17. Following a June 16, 2014 letter from PNC regarding Plaintiffs' failure to execute acceptance documents, Plaintiff Zane Rees ("Rees") contacted PNC. Id. ¶¶ 18-19. Plaintiffs allege that Rees was unable to speak with Plaintiffs' assigned single point of contact, Pamela S., and the representative with whom Rees spoke informed Rees that PNC rejected Plaintiffs' appeal because the appeal was not on PNC's approved appeal form and Plaintiffs' May 20, 2014 letter "only stated an intention to appeal" the denial. Id. ¶ 19. Plaintiffs allege that they did not use PNC's approved appeal form as the form was not included in any correspondence from PNC and Plaintiffs were not aware of any requirement to use the form. Id. Plaintiffs also allege that contrary to the PNC representative's assertion, Plaintiffs' May 20, 2014 appeal letter stated that Plaintiffs were "appealing the decision made denying [their] loan modification application, " and included the grounds and supporting documentation for the appeal. Id. Moreover, according to Plaintiffs, the approved form (which Plaintiffs later obtained) contains only a request for basic identifying information that Plaintiffs had included in their appeal letter. Id. ¶ 20. Plaintiffs accordingly allege that they submitted a compliant appeal before the June 8, 2014 deadline. Id. Additionally, Plaintiffs are informed and believe that PNC did not have a policy which prevented PNC from reviewing appeals submitted on other forms but which contain all required information for an appeal. Id. ¶ 21.

On June 19, 2014, Plaintiffs received an email acknowledgement from PNC of Plaintiffs' appeal letter, the contents of which led Plaintiffs to believe that an individual within PNC named Stacy Gear deleted Plaintiffs' letter appealing PNC's denial of Plaintiffs' loan modification application from Plaintiffs' account. Id. ¶ 23.

Sometime in June 2014, Plaintiff James Rees ("J. Rees") was able to speak with his single point of contact, Pamela S., who informed J. Rees that "there had been no filings and no pending foreclosure dates, " and that Plaintiffs should simply begin a new loan modification application. Id. ¶ 22. On June 23, 2014, Plaintiffs received an invitation from PNC to again apply for a loan modification. Id. ¶ 24. Notwithstanding this invitation, two days later, on June 25, 2014, PNC directed the foreclosure trustee, Quality Loan Service Corporation, to record a Notice of Default for Plaintiffs' property. Id. Plaintiffs submitted a second loan modification application to PNC on July 7, 2014. Id. ¶ 25. PNC denied Plaintiffs' second loan modification application on September 12, 2014, but gave Plaintiffs until October 12, 2014 to appeal. Id. ¶ 26.

On October 10, 2014, Plaintiff Zane Rees contacted PNC and again was unable to speak with Plaintiffs' single point of contact. Id. ¶ 27. Rees was informed that because California law prevents collectors from contacting debtors while in active bankruptcy, PNC was unable to contact Plaintiffs. Id. Plaintiffs allege that they had never before been informed about this issue, and further allege that their Chapter 7 bankruptcy had closed on January 23, 2014, months before the loan modification process began. Id. Plaintiffs are informed and believe that PNC knew of Plaintiffs' bankruptcy closure but simply failed to update their files. Id.

Plaintiffs appealed the second denial the following day, on October 11, 2014. Id. Plaintiffs sent the appeal via facsimile, as set forth in the September 12, 2014 loan modification denial correspondence, and Plaintiffs received confirmation that the entire appeal was successfully transmitted to PNC. Id. ¶ 28. Two days later, on October 13, 2014, PNC informed Plaintiffs that PNC would not review Plaintiffs' appeal because the appeal was not received within 30 days of the September 12, 2014 denial. Id. ¶ 29. Plaintiffs allege this rejection was in error as Plaintiffs' complete appeal was faxed on October 11, 2014, one day before the deadline, and Plaintiffs received confirmation that the fax was successfully transmitted on that date. Id.

Plaintiff Zane Rees thereafter contacted PNC on October 20, 2014 to check on the status of Plaintiffs' appeal and was informed that Rees would need to call back at a later time, as PNC's systems were down and the appeal unavailable. Id. ¶ 30. Plaintiff called back the following day, October 21, 2014, and was able to speak with Plaintiffs' single point of contact, Pamela S. Id. ¶ 31. Pamela S. informed Rees that PNC's systems were still down, but that Plaintiffs' appeal had been received on October 13, 2014. Id. Rees was also informed that a Notice of Trustee Sale had been recorded and that a November 21, 2014 sale date had been scheduled. Id.

Plaintiffs allege that two days later, on October 23, 2014, PNC directed the foreclosure trustee, Quality Loan Service Corporation, to record a Notice of Trustee's Sale for the Property.[1] Id. The same day, convinced that PNC was intentionally thwarting their efforts to apply for a loan modification, Plaintiffs filed suit in the Superior Court of the State of California for the County of Santa Cruz. ECF No. 1, Ex. A. The Complaint alleged three causes of action, for violation of: (1) California Civil Code § 2923.6; (2) California Civil Code § 2924.17; and (3) California Civil Code § 2923.7. Id. The Complaint alleges generally that "each Defendant was acting as the agent, servant, employee, partner, co-conspirator, and/or joint venturer of each remaining Defendant, " and that "[e]ach Defendant was acting in concert with each remaining Defendant in all matters alleged, [and] at all times was acting within the course and scope of its agency, employment, partnership, and/or concert of action." Id. ¶ 8.[2] The Complaint sought actual, compensatory, statutory, exemplary, and punitive damages, disgorgement, and injunctive relief. See id.

On November 25, 2014, Defendants removed the case to federal court on the ground that this Court has original jurisdiction under 28 U.S.C. § 1331 (diversity of citizenship). ECF No. 1. Following the parties' declination to proceed before a magistrate judge, ECF No. 13, and reassignment to the undersigned judge, ECF No. 15, Plaintiffs filed their FAC on December 16, 2014, ECF No. 18. The FAC contains several new factual allegations, including that Defendants' conduct was malicious, fraudulent and/or oppressive, and calculated to injure Plaintiffs, and that Plaintiffs are therefore entitled to punitive damages under California Civil Code § 3294. Id. ¶¶ 44, 49, 62. The FAC also clarified that Plaintiffs' first and second causes of action are against all Defendants, while Plaintiffs' third cause of action, for violation of Cal. Civ. Code § 2923.7, is against Defendant PNC only. See id. at 9, 12, 13. Lastly, the FAC no longer seeks actual damages, compensatory damages, or disgorgement.

On December 30, 2014, Defendants moved to strike portions of the FAC that relate to statutory, exemplary, and punitive damages. ECF No. 20. Plaintiffs filed an opposition to the Motion to Strike on January 12, 2015, ECF No. 22, ...


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