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McMahon v. JPMorgan Chase Bank, N.A.

United States District Court, E.D. California

April 25, 2017

GORDON MCMAHON, an individual; Plaintiff,
JPMORGAN CHASE BANK, N.A.; SELECT PORTFOLIO SERVICING, INC.; and DOES 1 through 10 inclusive, Defendants.



         Plaintiff Gordon McMahon (“McMahon”) sued Defendant Select Portfolio Servicing (“SPS”) and other defendants seeking to save his home from foreclosure. ECF No. 1. SPS moves to dismiss McMahon's First Amendment Complaint (“FAC”), ECF No. 26, with prejudice. ECF No. 30. McMahon opposes the motion. ECF No. 36.[1]


         The Court takes the facts alleged by McMahon as true for purposes of this motion.

         McMahon obtained a mortgage loan in 2005. FAC ¶ 1. The interest rate and monthly payment increased about two years later, and by the end of 2007, McMahon could not make his mortgage payments. Id.

         SPS began servicing McMahon's loan in June 2013. FAC ¶ 49. McMahon submitted his first Request for Mortgage Assistance (“RMA”) to SPS two months later. FAC ¶ 52. SPS offered McMahon a Trial Period Plan (“TPP”), but calculated that plan using an incorrect amount for McMahon's monthly income. FAC ¶ 57. McMahon informed SPS of this inaccuracy, and SPS revoked the TPP. FAC ¶ 60. In revoking the TPP, SPS used another inaccurate monthly income. Id. McMahon appealed SPS's denial of his RMA, but SPS never responded to the appeal. FAC ¶ 61.

         In May 2015, Keep Your Home California approved McMahon for up to $100, 000 in Principal Reduction Program funds. FAC ¶ 84. McMahon submitted an RMA notifying SPS of his change in circumstances. Id. SPS denied the RMA, stating that McMahon's “account would not qualify for another government program such as HAMP.” FAC ¶¶ 86, 89.

         McMahon submitted another application in June 2016, which SPS did not respond to. FAC ¶¶ 96-97. McMahon then filed this suit against SPS, seeking a temporary restraining order (“TRO”) and preliminary injunction. FAC ¶ 98.

         The Court granted McMahon's application for TRO on June 29, 2016, enjoining SPS from foreclosing on McMahon's property. ECF No. 7. On July 11, the Court stayed the case pending the outcome of McMahon's pending RMA. ECF No. 10. SPS denied the application nine days later. FAC ¶ 99. McMahon appealed SPS's denial, and SPS denied the appeal. FAC ¶¶ 100, 101. On August 23, 2016 the Court granted McMahon's motion for preliminary injunction. ECF No. 17 McMahon filed another RMA in November 2016. FAC ¶ 102. SPS denied the application and the appeal. FAC ¶¶ 103, 107. McMahon alleges that over the past four years, SPS has failed to appropriately consider his loan modification applications and otherwise comply with the law. FAC ¶ 108.

         McMahon brings six causes of action against SPS in his FAC: (1) violation of the Homeowners Bill of Rights (“HBOR”) at California Civil Code § 2924.12, (2) violation of the Equal Credit Opportunity Act (“ECOA”) at 15 U.S.C. § 1691(d)(1), (3) violation of the Real Estate Settlement Procedures Act (“RESPA”), Regulation X at 12 C.F.R. § 1024.41, (4) violation of Regulation X at 12 C.F.R. §§ 1024.35, 1024.36, (5) negligence, and (6) violation of California Business and Professions Code § 17200.

         II. OPINION

         A. Request for Judicial Notice

         SPS asks the Court to take judicial notice of eight documents submitted with its motion to dismiss. ECF No. 31. The first seven documents concern the real property at issue and are recorded with the Solano County Recorder's Office. Request for Judicial Notice (“RJN”) at 2-3. The Court may take judicial notice of publically recorded documents. Sullivan v. JP Morgan Chase Bank, N.A., 725 F.Supp.2d 1087, 1091 (E.D. Cal. 2010). The eighth document is McMahon's First Amended Complaint in the case he filed in superior court in December 2014. RJN at 3. A district court may take judicial notice of records in a state court case. Simpson v. Best W. Int'l, Inc., 2012 WL 5499928, at *1 (N.D. Cal. Nov. 13, 2012). The Court therefore grants SPS's request for judicial notice in full.

         B. Analysis

         1. First Cause of Action

         California Civil Code § 2924.12 permits a borrower to bring a lawsuit based upon a violation of the HBOR “[a]fter a trustee's deed upon sale has been recorded” if “actual economic damages . . . result[ed] from a material violation of [s]ection[s] . . . 2923.55, 2923.6 . . . or 2924.17.” Cal. Civ. Code § 2924.12(b). Under his first cause of action, McMahon alleges SPS has violated §§ 2923.55, 2923.6, and 2924.17.

         a. California Civil Code § 2923.55

         Section 2923.55 states that a servicer may not record a notice of default until after the servicer sends the borrower a statement notifying the borrower that he may request a copy of the promissory note, deed of trust, any assignment, and payment history. Cal. Civ. Code § 2923.55(b)(1)(B).

         SPS argues McMahon has not plead a § 2923.55 claim because he has not alleged that a material violation occurred. Mot. at 4. McMahon does not point to any allegation in the FAC indicating how any alleged violation of § 2923.55 was material.

         Because the need to plead materiality is evident from the face of statute, McMahon has already amended his complaint once, and McMahon brought similar claims in his state court case, the Court finds that granting leave to further amend the complaint would be futile. Centeno v. Wilson, 2010 WL 1980157, at *1 (E.D. Cal. May 17, 2010) (“[L]eave to amend may be denied if it appears to be futile.”). The Court therefore dismisses McMahon's § 2923.55 claim with prejudice.

         b. California Civil Code § 2923.6

         Section 2923.6(c) states that a servicer cannot record a notice of default or a notice of trustee's sale while a complete first lien loan modification is pending. Cal. Civ. Code § 2923.6(c). Section 2923.6(f)(2) states that “[f]ollowing the denial of a first lien loan modification application, the mortgage servicer shall send a written notice to the borrower identifying the reasons for the denial, including . . . [i]f the denial was ...

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