Denise Diller v. Rushmore Loan Management Services LLC, et al.
Case No: 18CV01355
Hearing Date: Tue Apr 02, 2019 9:30

Nature of Proceedings: Motion Summary Judgment

Motion for Summary Judgment or, in the Alternative, for Summary Adjudication of Issues

Attorneys: For Plaintiff: John A. Holman (San Anselmo)

For Defendant Rushmore: Jana Logan (Kirby & McGuinn – San Diego)

Ruling: The Court grants defendant Rushmore Loan Management Services LLC’s motion for summary judgment. The Court vacates the Trial Date of 5/7 and the MSC of 4/12.

Background:

Plaintiff Denise A. Diller’s sole remaining cause of action against defendant Rushmore Loan Management Services LLC is negligence. MSC is scheduled for April 12 and trial for May 7, 2019.

Motion for Summary Judgment/Adjudication:

Defendant Rushmore moves for summary judgment or, in the alternative, summary adjudication. Plaintiff Diller opposes the motion.

1. Issues Regarding Pleadings: Diller has not provided electronic bookmarks for exhibits attached to her counsel’s declaration. “[E]lectronic exhibits must include electronic bookmarks with links to the first page of each exhibit and with bookmark titles that identify the exhibit number or letter and briefly describe the exhibit.” CRC 3.1110(f)(4). This made the Court’s review more difficult.

Rushmore does not consecutively number the pages of its motion using only Arabic numbers. CRC 2.109 provides that the page numbering of papers filed in trial court “must begin with the first page and use only Arabic numerals (e.g., 1, 2, 3).” “The pages of a memorandum must be numbered consecutively beginning with the first page and using only Arabic numerals (e.g., 1, 2, 3). The page number may be suppressed and need not appear on the first page.” (CRC 3.1113(h).) Rushmore assigned numbers “1” and “2” to its two-page motion, but then followed those two pages with four pages of Roman numerals and then numbered the next page with Arabic “1.” This made it difficult for the Court to locate pages in the electronically filed pleading that correspond to the pages listed in the table of contents.

Rushmore submitted new evidence with its reply. The court has discretion whether to accept new evidence with the reply papers. Alliant Ins. Servs., Inc. v. Gaddy, 159 Cal.App.4th 1292, 1308 (2008). That would require permitting Diller an opportunity to respond. Id. The Court is not considering Rushmore’s new evidence.

2. Request for Continuance: Diller asks the Court to continue the hearing or deny the motion because Rushmore has not identified and provided contact information for all individuals and employees with knowledge about the loan at issue and loan modification.

The court shall deny a motion to continue it if it appears from affidavits “that facts essential to justify opposition may exist but cannot, for reasons stated, then be presented.” CCP § 437c(h). The declarations must state““(1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts.” Cooksey v. Alexakis, 123 Cal.App.4th 246, 254 (2004). The party seeking a continuance must show diligence in discovery and a request for continuance will be denied where the party fails to explain why the discovery sought could not have been completed sooner. Id. at 255. Continuances under CCP § 437c(h) are to be liberally granted. Hamilton v. Orange Cty. Sheriff’s Dep’t, 8 Cal.App.5th 759, 765 (2017), citing Bahl v. Bank of America, 89 Cal.App.4th 389, 395 (2001).

Diller’s counsel states that he propounded interrogatories seeking identification of individuals familiar with the loan and loan modification. [Holman Dec. ¶2] He does not say when he served the interrogatories but says he granted a two-week extension to respond and received responses on February 26, 2019. Holman Dec. ¶¶3, 4] Therefore, he must have served the interrogatories in early-mid January, nine months after filing the case and five months after the Court set a trial date.

Counsel says that Rushmore’s counsel wrote a March 7 letter with names of individuals but no contact information. [Holman Dec. ¶5, Exhibit C] That letter says that supplemental responses would be provided on March 15. Counsel does not say whether he contacted counsel for the contact information after receiving the letter or whether supplemental responses have been served. He does not explain why he did not schedule a “person most knowledgeable” deposition even without the contact information for specific individuals.

Counsel says he needs to take the depositions of these individuals and their testimony is critical to determining the duty of care in the loan modification process and the decision not to accept the loan modification approved by Chase. He does not say what facts may exist that are critical to the issues.

It is not clear what information has been kept from Diller and the timing of the discovery does not demonstrate diligence in obtaining information. Therefore, the Court will not continue the hearing or deny the motion pursuant to CCP § 437c(h).

3. Summary Judgment Standards: Summary judgment is appropriate where there is no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. CCP § 437c(c). “The party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 850 (2001). “A defendant bears the burden of persuasion that ‘one or more elements of’ the ‘cause of action’ in question ‘cannot be established,’ or that ‘there is a complete defense’ thereto. (§ 437c, subd. (p)(2).)” Id.

“All that the defendant need do is to ‘show that one or more elements of the cause of action . . . cannot be established’ by the plaintiff. (Code Civ. Proc., § 437c, subd. (o)(2).) In other words, all that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action–for example, that the plaintiff cannot prove element X. Although he remains free to do so, the defendant need not himself conclusively negate any such element–for example, himself prove not X.” Id. at 853-854.

“[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” Id. at 850. A burden of production entails only the presentation of evidence, while a burden of persuasion “entails the establishment through such evidence of a requisite degree of belief.” Id.

Summary judgment is appropriate when no reasonable juror could find facts necessary for a plaintiff’s case and there are not equally conflicting inferences to be drawn from the evidence. Eddins v. Redstone, 134 Cal.App.4th 290, 328 (2005).

“In ruling on the motion, the court must view the evidence in the light most favorable to the opposing party.” Shin v. Ahn, 42 Cal.4th 482, 499 (2007). “[T]he moving party’s evidence must be strictly construed, while the opposing party’s evidence must be liberally construed. Binder v. Aetna Life Ins. Co., 75 Cal.App.4th 832, 838 (1999). The court must “consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence.” Id. The court may not weigh conflicting evidence in the context of a summary judgment motion. Spangle v. Farmers Ins. Exchange, 166 Cal.App.4th 560, 576 (2008).

“To defeat a motion for summary judgment, a party cannot rely on legal conclusions or assertions of ultimate facts. [Citation] Rather, the party must provide admissible evidence, for example, in the form of declarations that cite evidentiary facts.” Knox v. Dean, 205 Cal.App.4th 417, 432 (2012).

4. Undisputed Facts: The Court has taken the material facts from Rushmore’s separate statement of undisputed material facts and Diller’s response in opposition thereto (collectively “UF”). Where either party indicates a dispute, the Court has reviewed the underlying evidence to determine if there truly is a dispute and, if so, what portion, if any, of the stated fact is undisputed. Diller has responded to some facts by stating that they are undisputed but not relevant. There is no objection to any of Rushmore’s evidence based on relevance or any other ground. The Court finds the stated facts to be relevant.

Diller held title to the property at 4317 Cuna Drive in Santa Barbara. [UF #1] On July 24, 2007, Diller obtained a loan of $ 1,180,000.00 from Washington Mutual Bank (“WaMu”), secured by the property via a deed of trust (“DOT”) recorded on July 24, 2007. [UF ##2, 3] WaMu assigned the DOT to JPMorgan Chase Bank (“Chase”), which later assigned it to US Bank, NA. [UF ##4, 5] Rushmore commenced servicing Diller’s loan and a Notice of Assignment, Sale or Transfer of Servicing was mailed to Diller at the property address on March 10, 2017. [UF #6]

Diller’s last loan payment was applied to the November 2010 payment. [UF #7] Rushmore never received a loan payment after commencing service of the loan. Diller says no one from Rushmore advised her to make a payment and always insisted that she reapply for a loan modification. She was informed that Rushmore was responsible for receiving and processing of payments. [UF #9, Exhibit 3]

At the time of the foreclosure sale, the unpaid principal balance was $1,257,811.22 and Diller was in default in the approximate amount of $1,787,608.42. [UF ##10, 11] The loan had matured and become all due and payable on October 1, 2013. Diller says she obtained a loan modification approval from Chase in 2016. [UF #12] Diller obtained a loan modification from WaMu in October 2008. [UF #13]

Rushmore reached out to Diller for loss mitigation options on April 11, 2017, and again on June 28, 2017. Diller says she was not appointed a single point of contact. [UF ##14, 16] Rushmore says it never received a response to its loss mitigation letters and closed its file on May 9 and again on July 15, 2017. Diller says she was in contact with Rushmore employees about “the approved loan modification process.” [UF ##15, 17]

Diller sent a home retention loan modification package in July 2017 (the “July 2017 LMA”). [UF #18] By July 21, 2017, Rushmore deemed that LMA incomplete. [UF #19] The July 2017 LMA was missing several documents and Rushmore notified Diller of the missing documents on July 21, 2017, giving her 15 days to submit the missing documents. [UF ##20, 21; Exhibit 9] As of August 9, 2017, Rushmore did not have a complete loan modification application package and a letter was sent to Diller closing the review. [UF #22]

A Notice of Default (“NOD” was recorded on September 11, 2017, stating an amount of default of $1,737,608.42. [UF ##23, 25] On that date, there was no pending complete loan modification application. [UF #26]

The Notice of Sale (“NOS”) was recorded on December 19, 2017. [UF #27] On that date, there was no pending complete loan modification application. [UF #28]

In January 2018, Diller requested to participate in a short sale program and that request was denied. [UF ##29, 30] The foreclosure sale was held on January 19, 2018, though Diller says she was never notified of the sale. [UF #31] The loan was not a PMI loan. [UF #32]

5. Analysis: In any action based on negligence, “the elements of duty, breach of duty, causation and damages must be pleaded and proven.” Christensen v. Superior Court, 54 Cal.3d 868, 882 (1991).

Diller contends that Rushmore breached its duty of care by 1) denying the existence of Chase’s loan modification approval prior to Rushmore becoming the loan servicer in February 2017; 2) “rigging” the loan modification process by “timing out” Diller’s financial documents and application information and never appointing a single point of contact; and 3) failing to notify plaintiff of the change in the trustee sale date and sold the property during a state of emergency. [Opp. 9:15-20] Diller says that Rushmore continued its negligence by foreclosing on the property on an invalid assignment creating doubt as to whether Rushmore ever had sufficient authority to commence foreclosure proceedings and to collect mortgage payments in the first place. [Opp. 10:3-5] She concludes that there exist triable issues of material fact establishing that Rushmore breached their duty to Plaintiff and extended their scope as money lenders by refusing to accept the loan modification approval by Chase, failing to advise Plaintiff of foreclosure options, and foreclosing on the property without any authority to do so. [Opp. 10:22-25]

“[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089, 1096 (1991). In Nymark, the court said: “In California, the test for determining whether a financial institution owes a duty of care to a borrower-client ‘involves the balancing of various factors, among which are [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant’s conduct and the injury suffered, [5] the moral blame attached to the defendant’s conduct, and [6] the policy of preventing future harm.’” Id. at 1098, citing Biakanja v. Irving, 49 Cal.2d 647, 650 (1958).

There is a conflict in District Courts of Appeal as to whether lenders owe a duty of care to borrowers when considering their loan modifications. In concluding that there is a duty, the First District, Div. 3, applied the six non-exhaustive factors discussed in Biakanja v. Irving. Jolley v. Chase Home Fin., LLC, 213 Cal.App.4th 872, 899 (2013). But that court addressed a construction loan “not a residential home loan where, save for possible loan servicing issues, the relationship ends when the loan is funded. By contrast, in a construction loan the relationship between lender and borrower is ongoing, in the sense that the parties are working together over a period of time, with disbursements made throughout the construction period, depending upon the state of progress towards completion.” Id. at 901.

In a case involving a residential loan, the First District, Div. 3, held that where “defendants allegedly agreed to consider modification of the plaintiffs’ loans, the Biakanja factors clearly weigh in favor of a duty.” Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941, 948 (2014) (“Alvarez”). A panel of the Third District was persuaded by the reasoning in Alvarez. Rossetta v. CitiMortgage, Inc., 18 Cal.App.5th 628, 640 (2017).

On the other hand, the Fourth District, Div. 3, held that “a loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution’s conventional role as a lender of money” and the “Biakanja factors do not support imposition of a common law duty to offer or approve a loan modification.” Lueras v. BAC Home Loans Servicing, LP, 221 Cal.App.4th 49, 67 (2013). (The court in Lueras did say that “the law imposes a duty not to make negligent misrepresentations of fact,” citing Civil Code § 1710(2). Id. at 68.)

There is no published opinion on this issue from the Second District Court of Appeal. There is a similar split of authority among U.S. District Courts in California. Diller was in privity of contract with the assignee US Bank for which Rushmore was the loan servicer. Rushmore’s obligations to Diller to process a loan modification derives from contract, not tort. Notwithstanding its ruling on demurrer, the Court will not impose a common law duty of care on the traditional lender-borrower relationship.

Assuming there was a duty of care, the Court finds that Rushmore has sustained its burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact and Diller has not sustained her burden of production to make a prima facie showing of the existence of a triable issue of material fact with respect to negligence.

First, as to the authority to collect mortgage payments and foreclose, it is undisputed that Rushmore commenced servicing the loan in March 2017 on behalf of US Bank. It is also undisputed that US Bank is the assignee of the DOT. [UF ##4-6, Exhibits 3, 17] Diller states nothing in the separate statement indicating that Rushmore did not have authority to foreclose. In her declaration she states that Rushmore did not have authority “from the current beneficial financial holder to foreclose.” [Diller Dec. ¶8] This is a combined statement of ultimate fact and conclusion of law. She provides no supporting facts or evidence demonstrating lack of authority to foreclose. This is insufficient for purposes of opposing summary judgment. Knox v. Dean, supra, 205 Cal.App.4th at 432.

Diller insists that Chase approved her for a loan modification and Rushmore negligently refused to acknowledge the modification. Diller says that, in December 2016, she spoke on the phone with Sherry Talbot of Chase, who informed her that she had been approved for a loan modification and principal reduction. She says she accepted the loan modification offer and waited for the paperwork to arrive. [Diller Dec. ¶4] Diller does not say what she accepted. She does not state the terms of the loan modification or the amount of the principal reduction. She knows what a formal loan modification looks like because she received one from WaMu in 2008. [UF #13, Exhibit 4] Again, this is a statement of the ultimate fact of the modification and conclusion of law to the extent she attempts to state a binding loan modification agreement with Chase.

Diller repeatedly states that Rushmore “rigged” the loan modification process by “timing out” her financial documents and application information and never appointing a single point of contact. Regarding the “timing out” of documents, Diller complains that she was not given enough time to provide documents. Each time she was given 15 days to provide documentation. [Exhibits 5, 7, 9] She was informed that certain documents, such as income documents, expires 90 days after submission. [Exhibit 9] She says these timelines are “unfair.” The setting and notice of deadlines is not a breach of a duty of care. The allegations of “rigging” and “timing out” are conclusory statements that are insufficient to establish a triable issue of fact.

Diller argues that Rushmore was negligent in failing to notify her of the change in the trustee sale date. The conduct of the foreclosure sale is not part of the loan modification review process which the Alvarez court held does involve a duty of care. The conduct of the foreclosure sale does not exceed the lender’s conventional role as a mere lender of money. In any event, a recital in the trustee’s deed “of compliance with all requirements of law regarding the mailing of copies of notices or the publication of a copy of the notice of default or the personal delivery of the copy of the notice of default or the posting of copies of the notice of sale or the publication of a copy thereof shall constitute prima facie evidence of compliance with these requirements….” Civil Code § 2924(c). There is such a recital in the trustee’s deed here. [Exhibit 14] Therefore, “a rebuttable presumption arises that the sale has been conducted regularly and properly.” Moeller v. Lien, 25 Cal.App.4th 822, 831 (1994).

The common law presumption that a foreclosure sale has been conducted fairly and regularly and the statutory presumption of validity based on recitals in the trustee’s deed are rebuttable. Royal Thrift & Loan Co. v. County Escrow Inc., 123 Cal.App.4th 24, 32 (2004). (The conclusive presumption in favor of bona fide purchasers without notice does not apply here as the lien holder purchased the property. [Exhibit 14]) Notice of the date of a postponed sale must be given to the borrower. Civil Code § 2924(a)(5). But failure to give that notice does not invalidate a sale otherwise valid under Civil Code 2924f. Id.

Diller attempts to rebut the presumption by generally stating that Rushmore foreclosed without notifying her. There is ample evidence of notice of the sale. [Exhibit 12] She says that Rushmore posted one date for the trustee sale in the newspaper and later changed the date without any notice during a state of emergency which kept her from going to the property or seeking an injunction with the court. [Diller Dec. ¶8] The Court presumes the emergency was the Montecito debris flow that occurred in January 2018. Diller does not say where she was in relation to the property located on the western edge of Santa Barbara and does not say what she could have accomplished by going to the property. She does not state her grounds for an injunction against the sale.

Despite her attempts to generally state that the sale was continued and she was not notified, the undisputed evidence shows that the sale occurred on the date initially scheduled. The NOS set a date of January 19, 2018. [UF #27; Exhibit 12] The sale occurred on that date. [UF #31; Exhibit 14]

Diller complains that Rushmore did not appoint a single point of contact. But she does not dispute receiving the July 21, 2017, letter [UF ##19, 20, 21; Exhibit 9], in which Rushmore instructed her to contact her “relationship manager Viviana Santoyo.” Santoyo was still her “loss mitigation agent” in January 2018. [UF #30; Exhibit 13] Diller says she was “redirected to a different person each time I called.” [Diller Dec. ¶7] She does not say whether she asked to speak to Ms. Santoyo.

Diller has not established that Rushmore owed her a duty of care in processing her loan modification application or in conducting the foreclosure sale. Even if she had, the Court finds that Rushmore has sustained its burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact and Diller has not sustained her burden of production to make a prima facie showing of the existence of a triable issue of material fact with respect to breach of any duty constituting negligence. Therefore, the Court grants defendant Rushmore Loan Management Services LLC’s motion for summary judgment.