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Lam v. Mac

United States District Court, E.D. California

November 15, 2019

MONICA K. LAM and DOUGLAS RING, Plaintiffs,
v.
PENNY MAC, et al., Defendants.

          ORDER AND FINDINGS & RECOMMENDATIONS

          CAROLYN K. DELANEY UNITED STATES MAGISTRATE JUDGE

         I. Introduction

         This case proceeds on plaintiffs' operative first amended complaint. (ECF No. 28.) The following motions are before the court and came on regularly for hearing on October 30, 2019: (1) Breckenridge Property Fund 2016 (“Breckenridge”) and Wedgewood, Inc.'s (“Wedgewood”) motion to dismiss (ECF No. 34) and request for judicial notice (ECF No. 35); (2) Fidelity National Title's (“Fidelity”) motion to dismiss (ECF No. 39); (3) Penny Mac's motion to strike (ECF No. 40) and request for judicial notice (ECF No. 41); (4) Penny Mac, Mass. Mutual Life Insurance (“Mass Mutual”), and Mortgage Electronic Registration Systems' Motion to Dismiss (ECF No. 42) and request for judicial notice (ECF No. 43); and (5) National Default Servicing Corporation's (“National Default”) motion to dismiss (ECF No. 49) and request for judicial notice (ECF No. 50). Plaintiffs filed an opposition to only Breckenridge's and Wedgewood's motion despite receiving several warnings from the court that failure to file an opposition could result in a recommendation that this action be dismissed for failure to prosecute.

         Christopher Rivas, Elaine Yang, Mark Erlich, and Megan Lees, separate counsel for the defendants, appeared telephonically at the October 30, 2019 hearing. Plaintiffs did not appear.

         II. Procedural History

         Plaintiffs proceed in this case in pro per and have filed the requisite filing fee. On May 24, 2019, plaintiffs filed a motion to amend the complaint. (ECF No. 9.) Thereafter, Breckenridge and Wedgewood filed a motion to dismiss and request for judicial notice. (ECF Nos. 21-22.) On June 19, 2019, the court granted plaintiffs' motion to amend the complaint to add a defendant given the early stage of the case, and vacated the hearing on Breckenridge and Wedgewood's motion. (ECF No. 26.) On June 20, 2019, Fidelity filed a motion to dismiss.

         On July 19, 2019, plaintiffs filed their first amended complaint. (ECF No. 28.)

         Also on July 19, 2019, plaintiffs filed a motion for extension of time to file a second amended complaint. (ECF No. 30.) On July 23, 2019, the court denied plaintiffs' request to file a second amended complaint and vacated the hearing on Fidelity's motion. (ECF No. 31.) The court ordered defendants to “re-file and re-notice, if necessary, a motion to dismiss plaintiffs' operative first amended complaint (ECF No. 28).” (ECF No. 31.)

         Two days later, on July 25, 2019, plaintiffs filed a document titled “corrected first amended complaint.” (ECF No. 32.) This document was stricken in light of the court's July 23, 2019 order denying plaintiffs' request to file a second amended complaint. (Id.)

         On August 27, 2019, the court issued an order vacating the hearing on Breckenridge and Wedgewood's motion to dismiss because no opposition was filed. (ECF No. 54.) The court warned plaintiffs that failure to file an opposition will result in plaintiffs not being entitled to be heard at oral argument. (Id.) The court ordered plaintiffs to file an opposition no later than September 25, 2019. (Id.) Similarly, on September 17, 2019, the court issued a separate order because plaintiffs failed to file oppositions to four other motions. (ECF No. 56.) The court again cautioned plaintiffs that failure to timely file oppositions will be deemed a statement of non-opposition to the pending motions that will result in a recommendation that this action be dismissed. (Id. (citing Fed.R.Civ.P. 41(b) (providing for dismissal of actions based on lack of prosecution).) The court also clarified that plaintiffs' “corrected” first amended complaint is stricken. (Id.) The court continued the hearing on all outstanding motions to October 30, 2019 and ordered plaintiffs to file oppositions no later than October 16, 2019. (Id.)

         In the interim, defendants filed the motions pending before the court between July 30, 2019 and August 19, 2019. (ECF Nos. 34, 39, 40, 42, and 49.)

         Plaintiffs filed only one opposition-to Breckenridge and Wedgewood's motion to dismiss. (ECF No. 58.) No. other opposition was filed. Breckenridge and Wedgewood filed a reply on October 17, 2019 (ECF No. 59), and Penny Mac, Mass. Mutual, and Mortgage Electronic Registrations Systems filed a reply on October 23, 2019 (ECF No. 60.)

         III. Allegations in the Operative Complaint

         As noted above, the operative complaint is plaintiffs' first amended complaint filed on July 19, 2019. (ECF No. 28.) Plaintiffs allege as follows.[1]

         On November 28, 2018 Penny Mac Loan Services LLC (“Penny Mac”) “successfully blocked the sale of the real property in question” located at 124 Illinois St., Vallejo CA 94590 for the amount of $370, 000 by Rajesh Sharma to pay off debts secured by the property during a Chapter 11 bankruptcy proceeding. (ECF No. 28 at ¶ 6; ECF No. 32 at ¶ 6.)

         On February 13, 2019, Penny Mac initiated a non-judicial foreclosure in violation of FDCPA 15 U.S.C. § 1692f(6) during the bankruptcy proceeding with GrandView Financial LLC (“GrandView”) regarding the property. (Id. at ¶ 7; ECF No. 32 at ¶ 7.)

         Auction.com, acting on National Default Servicing Corporation's behalf, sold Penny Mac's “unproven lien in accordance with CCC Sec.2924 to Breckenridge” to “satisfy an alleged debt of $351, 632.46” that Penny Mac “regarded as discharged.” (Id. at ¶ 8; ECF No. 32 at ¶ 8.)

         On April 1, 2019, plaintiffs received notice that Breckenridge initiated an unlawful detainer case against plaintiff Monica K. Lam (“Lam”). (Id. at ¶ 9 and page 9; ECF No. 32 at ¶ 9 and page 7.)

         Lam communicated with counsel for Penny Mac in January and February 2019 regarding whether her loan could be modified. (ECF No. 28 at 8.) On February 26, 2019, a representative with Wedgewood confirmed that tenants were living at the property and if they wished to remain, they would need to speak with Breckenridge's counsel. (Id. at 8-9.) According to plaintiffs, they had a lease agreement with GrandView Financial and the unlawful detainer notices violated the Protecting Tenants at Foreclosure Act. (Id. at 9; ECF No. 32 at 7.) On May 6, 2019, plaintiff Douglas Ring (“Ring”) asked a Breckenridge representative why it owned the property while he was paying rent to GrandView Financial. (Id.; ECF No. 32 at 7.) Plaintiffs believe Wedgewood and Breckenridge “are acting in bad faith and are attempting to bully [plaintiffs] with improper and unjust legal proceedings in an attempt to effectuate a transfer of real property that otherwise would be taken possession of to pay a debt while avoiding addressing the title issues that started this. . . . In this manner, Wedgewood and Breckenridge are acting in concert with other Defendants in order to collect a debt that they do not have a right to in violation of FDCPA 1692(f)6.” (Id. at 9-10; ECF No. 32 at 7.)

         Plaintiffs allege that Lam owned the property and on or about November 1, 2016, Lam executed a “Real Estate Shared-Equity Transaction & Purchase and Sale Agreement” with GrandView Financial in favor of Lam. (Id. at ¶¶ 15, 24; see also Ex. 3 within Ex. A; ECF No. 32 at ¶¶ 23-24.) As a result, at present, plaintiffs and GrandView Financial are parties to a rental agreement for payment of $1, 000 per month in rent for the property. (Id. at ¶ 30.) Based on this, it appears Lam concedes she no longer has a right to the property and alleges that she and Ring are now renting the property from GrandView. See also ECF No. 58 (plaintiffs' opposition to Breckenridge's and Wedgewood's motion arguing that there is a “federal stay in place by the title owners” of the property, not that plaintiffs are the owners of the property).

         On February 2, 2017, Penny Mac sent a letter to Lam stating that the loan on the property was sold to Mass. Mutual and Penny Mac would continue to service the loan. (Id. at ¶¶ 31-32, 43-45; ECF No. 32 at ¶¶ 43-45.) The letter apparently references a loan number ending in 2683 but according to plaintiffs, Lam's loan on the property ended in 6290. Based on this, plaintiffs allege

[T]he loan was satisfied by insurance proceeds or otherwise and/or replaced by a new loan such that that Loan was satisfied and, pursuant to the Original Lender DOT, the Original Lender (or its successor in interest) is required to request that the Original DOT Trustee (or its successor in I 4 11 interest) reconvey the Property and to surrender the Original Lender DOT and the Original Note to the Original DOT Trustee (or its successor in interest), who was required to reconvey the 16 11 Property without warranty to the Former Owner (or his/her successor in interest).

(Id. at ¶ 46; see also id. at 91 (GrandView's complaint that alleges the same in paragraph 67); ECF No. 32 at ¶ 46.) On August 15, 2017, Mortgage Electronic assigned the “Original Lender DOT, but not 1811 the Original Note, to PennyMac LLC pursuant to an Assignment of Deed of Trust.” (Id. at ¶ 47; ECF No. 32 at ¶ 47.) Plaintiffs allege the assignment is “void, invalid, and ineffective” because the assignment did not assign the original note. (Id. at ¶ 49.)

         “On December 22, 2017, PennyMac LLC filed a motion for relief from stay . . . seeking relief from the automatic stay of 11 U.S.C. § 362 to proceed with remedies, including foreclosure of the Property.” (Id. at ¶ 50.) Plaintiffs allege that “Claimants” opposed the motion on January 9, 2018. (Id. at ¶ 53.) It is unclear whether “Claimants” refers to plaintiffs or to GrandView, which is the entity that opposed PennyMac's motion in the separate bankruptcy case. Following further briefing and a hearing, the court granted the motion and Penny Mac has proceeded with efforts to effectuate a foreclosure on the property. (Id. at ¶¶ 55-62; ECF No. 32 at ¶¶ 56-61.) The court notes that plaintiffs appear to have again taken these allegations directly from a complaint filed by GrandView Financial, LLC in a bankruptcy action. (Compare id. at 90-91 (GrandView makes the same allegations in its complaint at paragraphs 50 through 59; Compare ECF No. 32 at 135-48 (same).)

         Plaintiffs appear to have two claims. One claim against Penny Mac based on FDCPA 15 U.S.C. § 1692f(6), (Id. at ¶¶ 11-14 and 72-76; ECF No. 32 at 13), although Breckenridge is mentioned as well. (Id.) A second claim against all defendants is for declaratory relief under 28 U.S.C. § 2201. (Id. at ΒΆ 63-69.) As noted ...


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