2017-00224160-CU-OR

Ronnie Davis vs. Nationstar Mortgage, LLC

Nature of Proceeding: Motion for Judgment on the Pleadings

Filed By: Burnett, Timothy A.

Defendant Nationstar Mortgage, LLC’s (“Nationstar”) Motion for Judgment on the Pleadings is GRANTED with leave to amend.

Nationstar’s request for judicial notice is GRANTED. However, the Court does not assume the truth of matters stated in court documents other than Orders. In taking judicial notice of these documents, the Court accepts the fact of their existence, not the truth of their contents. (See Professional Engineers v. Dep’t of Transp. (1997) 15 Cal.4th 543, 590; Steed v. Department of Consumer Affairs (2012) 204 Cal.App.4th 112, 120-121; Fremont Indem. Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 113; 1 Witkin, Cal. Evid. (5th ed.) Judicial Notice, § 21 at p. 128 [“Judicial notice of the authenticity and contents of an official document does not establish the truth of all recitals therein”] [collecting authorities].

Overview

On September 19, 2006, Plaintiff Ronnie Davis (“Plaintiff”) obtained a loan from Nationstar in the principal amount of $475,072.50 (the “Loan”). (See Request for Judicial Notice (“RJN”), Ex. I.) The Loan was secured by a deed of trust (“DOT”) recorded against the property located at 121 Alcantar Circle, Sacramento 92834 (the “Property”). (Id.) The DOT lists Nationstar as the beneficiary of the DOT. (Id.) Plaintiff defaulted on the Loan, and as a result, Nationstar and Plaintiff entered into a Home Affordable Modification Agreement on July 29, 2016. (Id.) In September 2016, Plaintiff against defaulted on the Loan. (Compl. ¶12.) On January 26, 2017, Nationstar assigned the DOT to The Bank of New York Mellon f/k/a The Bank of New York as Trustee for Nationstar Home Equity Loan Trust 2007-A (“BONYM.”) (RJN Ex. 3.) A notice of default (“NOD”) was recorded on April 13, 2017 and a notice of trustee’s sale (“NOS”) was recorded on July 18, 2017. (RJN Exs. 4, 5.)

On May 8, 2017, Defendant West H&A caused an Assignment of Mortgage/Deed of Trust (“Fraudulent Assignment) to be recorded against the Property. (RJN, Ex. 6.) The Fraudulent Assignment falsely purported to convey the beneficial interest in the DOT from Nationstar to West H&A, although at that time, the holder of the beneficial interest was BONYM. (Id.) On June 27, 2017, West H&A caused a Deed of Trust to be recorded against the Property, purporting to secure repayment of a $300,000.00 loan to West H&A (“Fraudulent DOT”). (See RJN, Ex. 7.)

On August 4, 2017, shortly before the foreclosure sale of the Property was scheduled to occur, Plaintiff filed a Chapter 13 bankruptcy petition in the Eastern District of California. (Compl. ¶¶16-17; RJN Ex. 8.) Plaintiff’s schedules stated that Nationstar has a secured claim against the Property, which Plaintiff does not dispute, and that Plaintiff does not have any claims against third parties. (RJN Ex. 9.) Plaintiff’s petition was dismissed for failure to make plan payments. (RJN Ex. 10.)

West’s actions were part of West’s mortgage fraud scheme, which has since come to

light, in which West recorded assignments of distressed borrowers’ deeds of trusts and then tricked the borrower into making their mortgage payments directly to West. (RJN Ex. 11.) As a result of West’s actions, in related litigation brought by Nationstar, the Central District of California has enjoined West in Nationstar Mortgage LLC v. Patrick Joseph Soria, et al., Central District Case No. 2:18-cv-03041, from continuing to record fraudulent deeds of trust. (RJN Exs. 12-14.) Further, an equity receiver has been appointed over their assets. (RJN Ex. 15.) Additionally, in the Central District Action, Nationstar obtained the Court-ordered cancellation of the fraudulent recordings made by West, including those made against Plaintiff’s Property. (RJN Exs. 16-18.)

Plaintiff’s Complaint alleges four causes of action against Nationstar for (1) violation of Civil Code § 2923.6, (2) violation of Civil Code § 2924.17, (3) negligent misrepresentation, and (4) declaratory relief. Plaintiff alleges that (1) Nationstar recorded a notice of default on the Property on April 13, 2017, while his complete loan modification application was under review, (2) Nationstar failed to review competent and reliable evidence to substantiate its right to foreclose, and (3) Nationstar negligently misrepresented its right to foreclose on the loan when it recorded the NOS on July 18, 2017.

Nationstar argues that Plaintiff lacks standing to pursue his claims against Nationstar, Plaintiff’s claims are barred by judicial estoppel, and all of Plaintiff’s claims fail to state facts sufficient to state a cause of action.

Standing & Judicial Estoppel

Nationstar first argues that Plaintiff lacks standing to prosecute the claims in this action because he did not disclose his claims against Nationstar as assets in his bankruptcy filing. Here, Plaintiff filed his bankruptcy petition on August 4, 2017, after both the NOD and NOS were recorded, on April 13, 2017 and July 18, 2017, respectively. Nationstar argues that Plaintiff’s claims against Nationstar therefore accrued prior to him filing his petition, and that Plaintiff had an affirmative duty to schedule those claims. (RJN Ex. 9.) Thus, because Plaintiff’s claims against Nationstar arose pre-petition, Nationstar contends they are property of the bankruptcy estate and remain its property now, as Plaintiff has not obtained an abandonment of these claims from the trustee.

Nationstar further argues that the claims are barred by judicial estoppel because Plaintiff asserted two contrary positions: (1) in his bankruptcy filing, he stated under penalty of perjury that he had no claims against third parties, and (2) in his Complaint, Plaintiff alleges four causes of action against Nationstar. Because Plaintiff obtained the benefit of an automatic stay on the foreclosure of his Property, Nationstar asserts Plaintiff was successful in asserting his first position in his bankruptcy petition (i.e., that he has not claims against third parties) and is therefore estopped from asserting claims against Nationstar now.

Plaintiff appears to concede in his opposition that he lacks standing to pursue his claims and that he may also be judicially estopped from asserting them. Thus, Plaintiff requests leave to amend to allow Plaintiff time to reopen his bankruptcy, amend the schedules, request that the trustee abandon the claims, and then close the bankruptcy, in an effort to fix the standing and estoppel issues. Plaintiff anticipates this will take 60-90 days.

It is well established that California courts have a policy of great liberality in allowing amendments at any stage of the proceeding so as to dispose of cases upon their substantial merits where the authorization does not prejudice the substantial rights of others. (Board of Trustees v. Super. Court (2007) 149 Cal.App.4th 1154, 1163.) Moreover, Section 473 of the Code of Civil Procedure authorizes the trial court, in its discretion, to allow amendments in furtherance of justice. The policy of great liberality in permitting amendments at any stage of the proceeding has been declared by our courts. (Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19-20.)

As Plaintiff does not oppose Nationstar’s assertion that Plaintiff lacks standing and is judicially estopped from asserting his claims against Nationstar, the Court construes Plaintiff’s position as a concession on the merits and grants the motion for judgment on the pleadings. However, given the deficiencies noted and Plaintiff’s proposed solution, the Court will allow Plaintiff additional time for leave to amend to attempt to correct these defects.

Failure to State a Cause of Action

Nationstar further argues that Plaintiff’s causes of action are all defectively pled. Specifically, Nationstar argues that Plaintiff failed to allege facts demonstrating that he submitted a complete loan modification prior to the recordation of the NOD. Nationstar further argues that the judicially noticeable documents contradict Plaintiff’s claims, specifically, the finding from the Central District of California that the assignment was fraudulent.

Again, Plaintiff concedes to Nationstar’s position, but seeks leave to amend his Complaint. He acknowledges that facts have changed or come to light in the past two years since the Complaint was filed, particularly given the pending case in the Central District of California. Thus, Plaintiff seeks leave to amend to incorporate the findings and orders from the Central District. Plaintiff further asserts that if given leave to amend, he can alleged that he submitted a complete loan modification application to Nationstar before Nationstar recorded the NOD.

The Court again construes Plaintiff’s failure to oppose Nationstar’s arguments here as a concession on the merits. However, leave to amend is granted to permit Plaintiff to incorporate new information derived from the Central District action and to correct any defects in Plaintiff’s Complaint.

In reaching this ruling, the Court has considered Nationstar’s arguments on reply that Plaintiff will be unable to amend the Complaint to successfully state a cause of action. However, given the policy to liberally permit amendments, the fact that Plaintiff’s Complaint is impacted by new information and outcomes from the related Central District action, and the fact that Plaintiff has not had any opportunity to amend, the Court finds it proper to grant leave to amend here.

The validity of a proposed amendment is generally not considered in deciding whether to grant leave to amend. (California Casualty General Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-281.) Such challenges to the pleadings are more properly addressed in a demurrer or a motion to strike rather than in an opposition to a motion to amend. It is axiomatic that “the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.” (California Casualty

Gen. Ins. Co., supra, 173 Cal.App.3d at 281.) Nationstar is free to challenge the amended pleading by way of appropriate motion.

Based on the foregoing, the motion for judgment on the pleadings is GRANTED.

Leave to amend is also GRANTED.

Plaintiff to file and serve its First Amended Complaint no later than November 15, 2019. Although not required by Court rule or statute, Plaintiff is directed to present a copy of this order when the amended complaint is presented for filing.

The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further notice is required.