Court Opinion

ID: 4273152
Source: CourtListenerOpinion
Date Created: 2018-05-07 20:00:32.121499+00
Date Added: 2024-06-11T14:06:06.798323
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                            MAY 07 2018
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

ROBERT EDWARD TRAVIS and                         No.   16-55388
KERRI JUNE WILKERSON,
                                                 D.C. No.
              Plaintiffs-Appellants,             2:15-cv-06516-AB-KS

 v.
                                                 MEMORANDUM*
NATIONSTAR MORTGAGE, LLC and
VERIPRISE PROCESSING
SOLUTIONS, LLC,

              Defendants-Appellees.

                    Appeal from the United States District Court
                       for the Central District of California
                    Andre Birotte, Jr., District Judge, Presiding

                     Argued and Submitted November 6, 2017
                              Pasadena, California

Before: TASHIMA and BERZON, Circuit Judges, and PAYNE,** District Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Robert E. Payne, United States District Judge for the
Eastern District of Virginia, sitting by designation.
      Robert Travis and Kerri Wilkerson (“Homeowners”) appeal two district

court orders dismissing with prejudice their claims under the California

Homeowner Bill of Rights (“HBOR”), Cal. Civ. Code § 2923.4, et seq., brought

against their former mortgage servicer, Nationstar Mortgage LLC (“Nationstar”),

and trustee under the deed of trust that secured their mortgage, Veriprise

Processing Solutions, LLC (“Veriprise”).

      1. After argument, Nationstar and Veriprise moved to dismiss the

Homeowners’ appeal as to their claims under former Cal. Civ. Code §§ 2923.6 and

2923.55, sections repealed on January 1, 2018.1 But, under the rule of “statutory

continuity,” Cort v. Steen, 36 Cal. 2d 437, 440 (1950), “when a statute is repealed

without a saving clause and as a part of the same act it is simultaneously re-enacted

in substantially the same form and substance, all rights and liabilities which

accrued under the former act will be preserved and enforced,” Chambers v. Davis,

131 Cal. App. 500, 506 (1933); accord S. Coast Reg’l Comm’n v. Gordon, 84 Cal.

App. 3d 612, 618-19 (1978). Here, former section 2923.55 was reenacted as

section 2923.5, word-for-word as to all provisions relevant to this appeal. Former

section 2923.6 was reenacted with somewhat different language as section

      1
          All undesignated citations are to the California Civil Code.

                                            2
2924.11, but section 2924.11 still protects the same rights the Homeowners seek to

enforce here. The Homeowners thus may still pursue their claims under former

sections 2923.55 and 2923.6.

       2. The district court reasoned that HBOR’s prohibition on dual tracking

applies only to the first loan modification application submitted by a borrower,

because “by its terms, § 2923.6(c) applies with respect to a pending application for

a first lien loan modification.” In so doing, the district court misread the phrase

“first lien loan modification.” HBOR defines a “first lien” as “the most senior

mortgage or deed of trust.” Cal. Civ. Code § 2920.5(d). The adjective “first”

modifies the noun “lien,” not the noun “modification”; in mortgage parlance, a

“first lien” is one with priority over all others.

       Nationstar and Veriprise, relying on former section 2923.6(c)(3), argue a

variant of the district court’s position. However, former section 2923.6(c)(3)

required a servicer to take a sequence of steps to avoid dual tracking; that sequence

did not depend on a modification application being a borrower’s first. Further,

several other subdivisions in former section 2923.6 made sense only if subdivision

(c)’s prohibition on dual tracking applied to loan modification applications for

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previously modified loans. See former Cal. Civ. Code § 2923.6(f); former Cal.

Civ. Code § 2923.6(g).

      However, although the former section 2923.6(c) prohibition on dual tracking

did apply to new loan modification applications where there had been an earlier

application, former section 2923.6(g) required mortgage servicers to evaluate such

repeat applications only if there had been “a material change in the borrower’s

financial circumstances since the date of the borrower’s previous application . . .

documented by the borrower and submitted to the mortgage servicer.” Former Cal.

Civ. Code § 2923.6(g).2 The Homeowners’ original complaint did not allege that

these conditions were met. The only change in circumstances alleged in the

complaint was that, under the terms of the modified loan agreement, the

Homeowners’ mortgage payment increased. That change concerns the specific

mortgage terms, not “the borrower’s financial circumstances,” and so does not

suffice. Former Cal. Civ. Code § 2923.6(g).

      We therefore affirm, but on different grounds, the district court’s dismissal

of the Homeowners’ former section 2923.6(c) claim. But we remand to allow the

      2
        The 2011 document was titled a “Loan Modification Agreement,” and its
terms increased the loan’s unpaid principal balance, indicating that the document
was a loan modification.

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Homeowners to seek to amend their complaint as to that claim.3 See Eminence

Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

      3. The district court also erred in dismissing the Homeowners’ claims that

Nationstar inaccurately completed and recorded a “due diligence declaration” in

violation of section 2924.174 and former section 2923.55. Nationstar’s failure

accurately to complete the declaration was more than “merely check[ing] the

wrong box.” On the facts as alleged, Nationstar could not have accurately checked

any box on its due diligence form; it neither “assess[ed] the borrower’s financial

situation and explore[d] options for the borrower to avoid foreclosure,” even under

a “limited” interpretation of that checkbox, see Mabry v. Superior Court, 185 Cal.

App. 4th 208, 232 (2010), nor “tried with due diligence to contact the borrower.”

      The Homeowners did not, however, allege (or argue) how the inaccurately

completed due diligence form itself could have caused them injury. In particular,

they did not explain if an accurately completed due diligence form attached to the

      3
        Former section 2923.6(g) was repealed as of January 1, 2018, and was not
replaced with an analog in current section 2924.11. On remand, the parties may
address the effect, if any, of this particular statutory change, under which
borrowers who previously submitted a loan modification application no longer
need to allege material changes in financial circumstances to state a claim for dual
tracking.
      4
          Section 2924.17 has not been repealed.

                                          5
notice of default would have had a different legal or factual consequence in the

foreclosure process from the one that was attached. We thus affirm the district

court’s dismissal of the Homeowner’s claims with respect to the claims under

section 2924.17 and former section 2923.55, but, again, instruct the district court to

allow the Homeowners to seek to amend their complaint.

      4. Contrary to Nationstar and Veriprise’s argument before us, the

Homeowners sufficiently pled that Nationstar was subject to the mandates of

section 2923.7(a).5 The Homeowners allege they did not request a single point of

contact “because Nationstar’s procedure is to automatically assign a [single point

of contact],” which it did here. Once a “mortgage servicer . . . promptly

establish[es] a single point of contact,” Cal. Civ. Code § 2923.7(a), under HBOR,

that contact is subject to the remaining mandates of section 2923.7(b)-(e); nothing

in the statute indicates that further requests for service are required. Holding

otherwise would require borrowers to engage in an absurd endeavor—requesting a

single point of contact already assigned—to ensure that their contact is required to

follow the mandates of HBOR.

      5
          Section 2923.7 has not been repealed.

                                           6
      5. Finally, with regard to the Homeowners’ claims under section 2923.7 and

former section 2924.10, we hold that the general damages theory alleged in the

Homeowners’ complaint comports with California law. As in Alvarez v. BAC

Home Loans Servicing, L.P., we accept here as sufficient the borrowers’ general

“alleg[ations] that the improper handling of their applications deprived them of the

opportunity to obtain loan modifications, which they allege they were qualified to

receive and would have received had their applications been properly reviewed,

and alternatively, that the delay in processing deprived them of the opportunity to

seek relief elsewhere.” 228 Cal. App. 4th 941, 951 (2014). “‘Although there was

no guarantee the modification would be granted had the loan been properly

processed, the mishandling of the documents deprived [the Homeowners] of the

possibility of obtaining the requested relief.’” Id. at 949 (quoting Garcia v. Ocwen

Loan Servicing, LLC, No. C 10-0290 PVT, 2010 WL 1881098, *3 (N.D. Cal., May

10, 2010)). “Should [the Homeowners] fail to prove that they would have obtained

a loan modification absent defendants’ negligence, damages will be affected

accordingly, but not necessarily eliminated.” Id.

      Although Alvarez concerned a common law negligence claim, HBOR

specifically authorizes the same economic damages as those recognized in tort

                                          7
cases. HBOR’s current and former section 2924.12(b) provide for “actual

economic damages pursuant to [Cal. Civ. Code] Section 3281,” and section 3281,

in turn, “defines damages as monetary compensation for one who suffers detriment

from the unlawful act or omission of another,” Flethez v. San Bernardino Cty.

Emps. Ret. Ass’n, 2 Cal. 5th 630, 635 n.2 (2017) (internal quotation marks

omitted).

      Further, even though HBOR does not require servicers to provide borrowers

with loan modifications or any other specific alternative to foreclosure, see Cal.

Civ. Code § 2923.4(a), the Homeowners still could have been harmed by

Nationstar’s failure to communicate with them about the status of their loan

modification application and about other alternatives to foreclosure. Had there

been such communication, the Homeowners may have been able to pursue either a

loan modification or some alternative that would have caused them less harm than

the foreclosure that occurred—a standard sale, for example.

      In other words, the alleged harm in this case is not that the Homeowners

were not offered some specific foreclosure alternative, but that they lost the chance

to discuss, pursue, and be evaluated for any alternative, from Nationstar or another

entity or individual, despite HBOR’s various mandates to the contrary. HBOR’s

                                          8
private right of action for violations of lenders’ obligations promptly to

communicate with borrowers would serve no purpose if borrowers could not sue

for damages caused by failures to communicate promptly. See Cal. Civ. Code

§ 2924.12(b).

      However, the Homeowners’ actual allegations require further specification.

The Homeowners allege that, if they “were denied for a loan modification they

would have . . . sought some other type of foreclosure alternative such as a

standard sale of the property.” These allegations lack sufficient details to survive a

motion to dismiss, including how the foreclosure alternatives the Homeowners

would have sought, had they received an answer to their application from

Nationstar, would have avoided or reduced the damages they allege.

      We thus deny Nationstar and Veriprise’s motion to dismiss the

Homeowners’ appeal, and affirm the district court’s dismissal of the Homeowners’

claims. We remand to allow the Homeowners to seek to amend their claims under

former sections 2923.55, 2923.6, and 2924.10, as well as under sections 2923.7

and 2924.17.

      MOTION TO DISMISS DENIED. REVERSED AND REMANDED.

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