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Galindo v. BSI Financial Services, Inc.

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

July 14, 2017

CESAR GALINDO, ET AL., Plaintiffs,


          LUCY H. KOH United States District Judge

         Plaintiffs Cesar Galindo (“Galindo”) and Maria Rivera (“Rivera”) (collectively, “Plaintiffs”), bring suit against Defendant BSI Financial Services, Inc. (“BSI”) and Ocwen Loan Servicing LLC (“Ocwen”) (collectively, “Defendants”) for negligence, violation of California Civil Code § 29236(c), and violation of California's Unfair Competition Law (“UCL”). Before the Court is Plaintiffs' motion for a temporary restraining order (“TRO”), which seeks to enjoin Defendants from foreclosing on Plaintiffs' home on July 19, 2017. See ECF No. 46 (“TRO Mot.”). Defendants have opposed Plaintiffs' motion. ECF Nos. 52 & 53. For the following reasons, Plaintiffs' TRO motion is DENIED.

         I. BACKGROUND

         A. Factual Background

         On September 26, 2006, Galindo borrowed $436, 000 from Bank of America, N.A. (“BOA”), secured by a deed of trust encumbering property located at 3146 Barletta Lane in San Jose, CA (hereinafter, “the Property”). ECF No. 31 (First Amended Complaint, or “FAC”), ¶ 14. Plaintiffs defaulted on the loan on March 1, 2009. See ECF No. 53-2 (Notice of Default). A Notice of Default and Election to Sell Under Deed of Trust was recorded on March 2, 2011. Id.

         On September 11, 2012, Ocwen acquired from BOA the servicing rights for Plaintiffs' loan. See ECF No. 53-3, at ¶ 5. Plaintiffs “began applying for a [Home Affordable Modification Program (“HAMP”)] loan modification.” FAC ¶ 18. In 2015, “after years of applications [for home loan modifications] that resulted in bad faith denials, Plaintiffs' filed an administrative complaint with Ocwen. Id. ¶ 15. Ocwen informed Plaintiffs that Plaintiffs had been approved for a Trial Period Plan (“TPP”) offer on September 14, 2012, but Ocwen ultimately denied Plaintiffs a loan modification on December 13, 2012 because Plaintiffs failed to make the TPP payments. Id., Ex. 2. Further, Ocwen had approved Plaintiffs “for a Proprietary Modification” on December 14, 2014, but Plaintiff failed to make the initial payments by the due date, and accordingly, Ocwen denied Plaintiff a Proprietary Modification on February 11, 2015. Id. Ocwen's May 29, 2015 letter to Plaintiffs also informed Plaintiffs that Ocwen received “[a] second HAMP request” from Plaintiffs on April 8, 2015.” Id. However, Ocwen again denied Plaintiffs a HAMP modification “because the owner of the account either does not allow principal reduction or does not participate in the HAMP” program. Id.

         In July 2015, BSI acquired from Ocwen the servicing rights to Plaintiffs' loan. See ECF No. 52-4 (“BSI Decl.”), at ¶ 5; ECF No. 53-3 (“Ocwen Decl.”), at ¶ 4. Thereafter, Plaintiffs sent a loan modification request to BSI. See BSI Decl., at ¶ 5. On September 22, 2015, Galindo emailed documents to Daniel McAteer (“McAteer”), senior loss mitigation specialist for BSI. FAC ¶ 28. On September 23, 2015, McAteer replied to Galindo and told Galindo that McAteer would forward the documents for review. Id. ¶ 29.

         On September 28, 2015, BSI filed a Notice of Trustee's Sale (hereinafter, “Notice of Sale”) with the Santa Clara County Recorder's Office. Id. ¶ 32. The Notice of Sale scheduled sale for October 30, 2015. Plaintiff alleges that at the time that BSI recorded the Notice of Sale on September 28, 2015, “[n]o decision had been made on Plaintiffs' loan modification application.” Id. ¶ 33.

         B. Procedural History

         On January 4, 2017, Plaintiffs filed suit against BSI in this Court. ECF No. 1. Plaintiffs alleged four causes of action against BSI: (1) negligence; (2) breach of the implied covenant of good faith and fair dealing; (3) violation of California Civil Code Section 2923.6(c); and (4) violation of the UCL.

         On January 26, 2017, BSI moved to dismiss all four causes of action. See ECF No. 11. On February 2, 2017, Plaintiffs opposed BSI's motion. ECF No. 14. On February 9, 2017, BSI filed a reply. ECF No. 15.

         On March 17, 2017, the Court granted BSI's motion to dismiss. ECF No. 23. As relevant here, the Court held that Plaintiffs failed to state a claim for negligence against BSI because Plaintiffs based their negligence claim, in part, on conduct that was committed by Ocwen, not BSI. Id. at 10-11. For similar reasons, the Court held that Plaintiffs could not state a claim for violation of the implied covenant of good faith and fair dealing or the UCL against BSI for Ocwen's conduct. The Court held that Plaintiffs also failed to allege that BSI violated California Civil Code § 2923.6(c) because Plaintiffs failed to allege that their application was “complete” within the meaning of the statute, and Plaintiffs had attached an email to the Complaint from McAteer that showed that McAteer considered Plaintiffs' application to be incomplete. The Court granted Plaintiffs leave to amend the complaint within thirty days, but stated that Plaintiffs “may not add new causes of action or parties without leave of the Court or stipulation of the parties pursuant to Federal Rule of Civil Procedure 15.” Id. at 17.

         On April 13, 2017, Plaintiffs filed a motion for leave to file a FAC and requested leave of Court to add Ocwen as a defendant. ECF No. 26. BSI did not oppose Plaintiffs' motion. ECF No. 28. On May 26, 2017, the Court granted Plaintiffs' motion for leave to file a FAC. ECF No. 30.

         On May 29, 2017, Plaintiffs filed a FAC, which added Ocwen as a defendant and alleged that BSI violated California Civil Code § 2923.6(c) and that both Ocwen and BSI were negligent and violated the UCL. ECF No. 31.

         The Court held a case management conference on June 14, 2017. ECF No. 42. Because Plaintiffs indicated at the case management conference that Plaintiffs may dismiss BSI, the Court ordered Plaintiffs to file by July 5, 2017 either a stipulation of dismissal as to BSI or a statement as to why Plaintiffs are proceeding against BSI. Id.

         On July 5, 2017, Plaintiffs' counsel filed a declaration stating that Plaintiffs intended to keep BSI as a defendant until Plaintiffs could “add[] in the owner(s) of the loan” to the lawsuit. ECF No. 45.

         Also on July 5, 2017, Plaintiffs filed a motion for TRO, which asked the Court to enjoin Defendants from selling Plaintiffs home at a trustee's sale that was scheduled to occur on July 19, 2017. ECF No. 46. Plaintiffs stated in their motion that they had demonstrated a likelihood of success on the merits as to their negligence and UCL claims against Ocwen. Id. Plaintiffs' motion for TRO did not address any of Plaintiffs' claims against BSI. In support of their negligence and UCL claims against Ocwen, Plaintiffs submitted a declaration that they learned on May 29, 2015 that Ocwen had offered Plaintiffs a HAMP loan modification on September 14, 2012. See ECF No. 46-2, at ¶ 6. However, Plaintiffs “never received notice-either verbally or in writing-of Ocwen's offer.” Id. ¶ 8. Plaintiffs state that they did not learn of the misconduct until “May 29, 2015” and Plaintiffs “then filed a complaint against various defendants.” Id.¶ 10.

         Plaintiffs' counsel also filed a declaration in support of Plaintiffs' motion for TRO. Plaintiffs' counsel stated that he had provided notice of Plaintiffs' TRO motion to Defendants BSI and Ocwen by mail, email, and phone. ECF No. 46-4, at ¶ 2.

         On July 5, 2017, the Court ordered Defendants Ocwen and BSI to file a response to Plaintiffs' application ...

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