United States District Court, N.D. California
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Re: Dkt. No.
HAYWOOD S. GILLIAM, JR. United States District Judge
before the Court is Defendant Wells Fargo Bank, N.A.'s
motion for summary judgment. Dkt. No. 63
(“Mot.”). Having read the parties' papers and
carefully considered their arguments and the relevant legal
authorities, the Court hereby GRANTS IN PART AND
DENIES IN PART the motion.
judgment is proper when a “movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A fact is “material” if it “might
affect the outcome of the suit under the governing
law.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). And a dispute is “genuine”
if there is evidence in the record sufficient for a
reasonable trier of fact to decide in favor of the nonmoving
party. Id. But in deciding if a dispute is genuine,
the court must view the inferences reasonably drawn from the
materials in the record in the light most favorable to the
nonmoving party, Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587-88 (1986), and “may
not weigh the evidence or make credibility determinations,
” Freeman v. Arpaio, 125 F.3d 732, 735 (9th
Cir. 1997), overruled on other grounds by Shakur v.
Schriro, 514 F.3d 878, 884-85 (9th Cir. 2008).
first cause of action asserts that Defendant violated the
Equal Credit Opportunity Act (“ECOA”), 15 U.S.C.
§ 1691(d)(1) (2012) by failing to timely notify
Plaintiffs of its determination on their October 2013 loan
modification application. Dkt. No. 1 (“Compl.”)
¶¶ 20-24. Defendant argues that “this claim
fails as a matter of law because ECOA's implementing
regulations do not apply the notice requirement to situations
in which a borrower is already in default.” Mot. at 10.
The Court finds that there is no genuine dispute of material
fact that Plaintiffs were in default during the relevant time
period, based upon both Plaintiffs' June 10, 2013
hardship letter, see Dkt. No. 63-2 (Stonehocker
Decl.), Ex. 25 (“[W]e are asking for hardship
assistance with a mortgage loan modification for our home
mortgage. . . . [W]e have fallen behind in making our
mortgage payments.”), and Plaintiff's own
admission, see Dkt. No. 67 (“Opp.”)
(referring to Plaintiffs' own “default or
the Court finds that Defendant is entitled to judgment as a
matter of law because “the fact that [Plaintiffs were]
in default when [they] applied for a loan modification means
that no ECOA notice was required regarding action on [their]
application.” Smith v. Wells Fargo Bank, N.A.,
No. 15-CV-01779-YGR, 2016 WL 283521, at *8 (N.D. Cal. Jan.
25, 2016); see also Coury v. Caliber Home Loans,
Inc., No. 16-CV-05583-RS, 2016 WL 6962882, at *5 (N.D.
Cal. Nov. 29, 2016) (“Because [the plaintiff borrower]
requested that [the defendant mortgage loan servicer] modify
his loan in response to his default, ECOA's notice
requirements did not apply.”); Perryman v. JPMorgan
Chase Bank, N.A., No. 116CV00643LJOSKO, 2016 WL 4441210,
at *8 (E.D. Cal. Aug. 23, 2016) (“[W]here an applicant
is already in default, no notice is required as to a
modification request pertaining to that loan.”) (citing
cases), order clarified on other grounds, No.
116CV00643LJOSKO, 2016 WL 6124209 (E.D. Cal. Oct. 19, 2016).
Court previously reached a contrary conclusion regarding
section 1691(d)(1)'s notice requirement in denying
Defendant's motion to dismiss. See Dkt. No. 35
(MacDonald v. Wells Fargo Bank N.A, No.
14-CV-04970-HSG, 2015 WL 1886000, at *2-3 (N.D. Cal. Apr. 24,
2015)). But as Defendant admits (without explaining why), its
prior motion failed to address the significance of the
regulations implementing section 1691(d)(1)'s notice
requirements, and the Court thus did not consider those
regulations. See Mot. at 12-13; see also
Smith, 2016 WL 283521 at *5 (“In offering
competing interpretations of an arguably ambiguous statutory
provision, the parties in MacDonald did not argue,
and the court there did not consider, the effect of the
regulations implementing section 1691's notice
requirements.”) The regulations conclusively resolve
the statutory ambiguity identified by the Court in its prior
order. See MacDonald, 2015 WL 1886000, at *3
(addressing ambiguity of whether section 1691(d)(6)'s
exclusion for applicants in default impacted only the
statement of reasons requirement under subsection (d)(2) or
also the 30-day notice requirement under subsection (d)(1));
12 C.F.R. §§ 202.2(c)(2)(ii), 202.9(a)(1)(i)
(clarifying together that the notice requirement does not
apply when the loan applicant is in default). Since the
statute is ambiguous and the implementing regulations
resolving this ambiguity are reasonable, the Court defers to
the agency interpretation. See Vega v. Holder, 611
F.3d 1168, 1170 (9th Cir. 2010).
second cause of action asserts that Defendant violated
section 2923.7 of the California Civil Code by failing to
provide a single point of contact (“SPOC”) who
adequately performed the duties required by the
statute. Compl. ¶¶ 25-31. The Court finds
that there are genuine disputes of material fact relating to
this claim. For example, the opposition and reply clash over
whether Defendant's representatives gave Plaintiffs
conflicting information regarding what was needed to complete
their loan modification application during July and August of
2013. Compare Opp. at 11-12 with Reply at
8. Resolving this dispute would require the Court to make
determinations regarding the credibility of Plaintiff Brett
MacDonald's declaration and the reliability and proper
interpretation of Defendant's business records, which are
tasks for the fact finder at trial. Moreover, the Court is
unable to find at this juncture that, under the safe harbor
provision of section 2924.12(c),  any material violation of
section 2923.7 that Defendant committed in 2013 would
regardless have been remedied by “Defendant's full
review and denial of Plaintiff's loan modification
application in 2015, ” see Mot. at 18, given
that the Court finds that there is a reasonable dispute of
fact regarding whether the 2015 review was completed in good
faith, compare Opp. at 12-13 with Reply at
Plaintiffs' third cause of action asserts that Defendant
negligently handled their loan modification application and
loan account through 2013. Compl. ¶¶ 32-37.
Defendant moves for summary judgment on the grounds that it
did not breach any legal duty and that its action did not
proximately cause any damages suffered by Plaintiffs. Mot. at
19; see also Alvarez v. BAC Home Loans Servicing,
L.P., 228 Cal.App.4th 941, 944 (2014) (stating that the
elements of a negligence claim are duty of care, breach, and
proximate cause). As to breach, the Court finds that there is
a dispute of material fact regarding whether Defendant's
delay in reviewing Plaintiffs' loan modification during
2013 was caused by Plaintiffs' hiring of the Ayayo Law
Firm to postpone the sale of their property or by
Defendant's allegedly negligent actions related to
determining whether Plaintiffs' loan was subject to
bankruptcy. Compare Mot. at 21-22 with Opp.
at 13-14. And viewing the facts in the light most favorable
to Plaintiffs, the Court cannot find that no reasonable juror
could conclude that Defendant's negligence caused
Plaintiff to suffer damages such as emotional distress.
Determining whether any damages suffered by Plaintiff were
“self-inflicted, ” as Defendant asserts, Mot. at
23, is a job for the fact finder at trial.
said, the Court has substantial questions as to whether
Defendant owed Plaintiffs a duty of care as a matter of law.
In denying Defendant's motion to dismiss Plaintiffs'
negligence claim, the Court recognized that the California
appellate courts have split on the issue of whether
“financial institutions . . . owe borrowers a duty of
care in connection with making or servicing loans.”
MacDonald, 2015 WL 1886000, at *5 (comparing
Lueras v. BAC Home Loans Servicing, 221 Cal.App.4th
49 (2013) with Alvarez, 228 Cal.App.4th 941). The
Court held that Alvarez was more likely to be
adopted by the California Supreme Court, and therefore held
that Defendant had a duty to “process [Plaintiffs']
application with ordinary care.” Id. at *6.
Subsequently, the Ninth Circuit held that, under California
law, lenders do not owe borrowers a duty of care to process a
borrower's loan modification application within a
particular time frame. See Anderson v. Deutsche
Bank Nat. Trust Co. Ams., 649 F. App'x 550, 552 (9th
Cir.), cert. denied sub nom. Anderson v. Aurora Loan
Servs., LLC, 137 S.Ct. 496 (2016). The Court has
since relied on Anderson in dismissing certain
negligence claims. See Ivey v. JP Morgan Chase Bank,
N.A., No. 16-CV-00610-HSG, 2016 WL 4502587, at *5 (N.D.
Cal. Aug. 29, 2016). Nevertheless, the Court finds that
sua sponte dismissal of Plaintiffs' negligence
claim without notice would be unwarranted here, given that
the parties have not had the opportunity to brief whether the
analysis set out in Anderson controls the facts of
this case. The parties should, however, be prepared
to address this issue in their pretrial filings and at the
foregoing reasons, the motion for summary judgment is
GRANTED as to Plaintiffs first cause of
action, and DENIED as to Plaintiffs'
second and third causes of action.
IS SO ORDERED.
 The Court finds that this matter is
appropriate for disposition without oral argument.
See N.D. ...