United States District Court, E.D. California
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 ...