2017-00216442-CU-OR

Lynn West vs. Wells Fargo Bank, N.A.

Nature of Proceeding: Motion for Judgment on the Pleadings

Filed By: Vukovic, Adam A.

Defendant Wells Fargo Bank, N.A.’s (Wells Fargo) motion for judgment on the pleadings is DENIED.

This is a nonjudicial foreclosure case. Plaintiff Lynn West’s (West) complaint contains a single cause of action against Wells Fargo for violation of former CC § 2923.6(c). That subdivision prohibited certain “dual tracking” practices, i.e., engaging a borrower in the loan modification process while simultaneously foreclosing on the property. Section 2923.6 was enacted in 2012 as part of the Homeowners Bill of Rights (HBOR). When West filed her complaint in July 2017, § 2923.6(c) read:

If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs:

(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.

(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.

(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification.

By its terms, § 2923.6(c) circumscribed foreclosure once the borrower had submitted a “compete application for a first lien loan modification.”

Former § 2924.11, also enacted as part of the HBOR, contained other dual tracking provisions. Whereas § 2923.6(c) focused on a borrower’s complete loan modification application, § 2924.11(a) and (b) focused on “foreclosure prevention alternatives” that were “approved in writing.” Under the HBOR, a “foreclosure prevention alternative” includes a “first lien loan modification” as well as other “available loss mitigation option [s].” (CC § 2920.5(b).) Former § 2924.12 afforded borrower’s remedies for violations of the dual tracking provisions in §§ 2923.6 and 2924.11.

The HBOR was enacted with some built-in sunset provisions effective 1/01/18. Former § 2923.6(c) was repealed pursuant to one such provision. The current version of § 2923.6 contains some of the provisions in the former version, but not the dual tracking provisions in former subd. (c). The HBOR’s dual tracking prohibitions now appear in § 2924.11. Section 2924.11 limits mortgage servicers and others from proceeding with the nonjudicial foreclosure process after (1) a borrower has submitted a “complete application for a foreclosure prevention alternative” or (2) a “foreclosure prevention alternative is approved in writing.” (CC § 2924.11(a)-(c).) Hence, despite some amendments, the provisions in former § 2923.6(c) by and large appear in § 2924.11. As a result, West argues her allegations can be construed to state a dual tracking cause of action under current § 2924.11.

Wells Fargo has a different take. It argues West is in a catch-22 that bars her from stating a dual tracking claim predicated on either former § 2923.6(c) or current §

2924.11. Wells Fargo reasons that West can no longer sue under former § 2923.6(c) because that subdivision was repealed and no longer provides a remedy. Wells Fargo further reasons that West cannot sue under current § 2924.11 because that section is not retroactive and, therefore, does not cover the violations West alleges.

West counters that current § 2924.11 merely recodifies provisions in former § 2923.6 (c). “When a statute, although new in form, re-enacts an older statute without substantial change, even though it repeals the older statute, the new statute is but a continuation of the old. There is no break in the continuous operation of the old statute, and no abatement of any of the legal consequences of acts done under the old statute.” (Sobey v. Molony (1940) 40 Cal.App.2d 381, 385, emphasis added.) In reply, Wells Fargo argues that the differences between the old and new HBOR provisions are substantive and, therefore, do not preserve West’s dual tracking cause of action.

West has the better argument. Within the HBOR’s legislative history are the following

committee remarks: “The amendments also contain several procedural elements of this dual track ban which sunset on January 1, 2018. After that date, a general ban on dual tracking will become operative.” (Sen. Rules Com., Off. of Sen. Floor Analyses, Conf. Rep. No. 1 on Sen. Bill 900 (2011-2012 Reg. Sess.) as amended June 27, 2012, p. 27.) The court thus concludes that differences between the dual tracking provisions in former § 2923.6(c) and current § 2924.11 are best characterized as procedural, not substantive. These procedural differences do not abate West’s action, and judgment on the pleadings is denied.

In denying the motion, the court is mindful of the odd distinctions among borrowers Wells Fargo’s position would yield. Borrowers advancing dual tracking claims under former § 2923.6(c) could obtain relief as long as the claims reached disposition before 1/01/18. Similarly, borrowers proceeding under current § 2924.11 could obtain relief for dual tracking arising and litigated after 1/01/18. But borrowers with dual tracking claims that arose before 1/10/18 but for whatever reason were not adjudicated by that date would lose their claims forever. The court is not persuaded that the Legislature intended such a result.

The motion is denied.