Case Name:   Nationstar Mortgage LLC v. Tyson, et al.

Case No.:       1-14-CV-259457

 

This is an action for judicial foreclosure on a deed of trust.  On March 1, 2009, defendants Leonard K. Tyson, individually and as trustee for the Leonard K. Tyson and Mary Ann Tyson Trust, Mary Ann Tyson, individually and as trustee for the Leonard K. Tyson and Mary Ann Tyson Trust, (collectively, “the Tysons”) missed a payment on their $3,000,000 loan, secured by a deed of trust, recorded on July 27, 2005.  (See complaint, ¶¶ 9-14.)  On January 22, 2014, plaintiff Nationstar Mortgage LLC (“Plaintiff” or “Nationstar”) filed their complaint for judicial foreclosure on deed of trust.  The Tysons demurred and moved to strike portions of the complaint, and, on May 15, 2014, the Court overruled the demurrer and denied the motion to strike in their entirety.

 

On June 13, 2014, the Tysons filed a cross-complaint, asserting causes of action for:  violation of Bankruptcy discharge; TILA violations; and, HAMP violation.  Nationstar demurs to each cause of action of the cross-complaint on the ground that they fail to state facts sufficient to constitute a cause of action.

 

First cause of action for violation of Bankruptcy discharge

 

Nationstar demurs to the first cause of action for violation of Bankruptcy discharge, arguing that there is no private right of action for violation of a section 524 discharge injunction and that any remedy would be before the Bankruptcy court that issued the discharge order.  (See Nationstar’s memorandum of points and authorities in support of demurrer to cross-complaint (“Cross-def.’s memo”), p.2:11-20, citing Walls v. Wells Fargo Bank, N.A. (9^th Cir. 2002) 276 F.3d 502, 510 (stating that “jurisdiction of determining the effect of a discharge was given to the bankruptcy court”; also stating that “we cannot say that Congress intended to create a private right of action under § 524, and we shall not imply one”); also citing Barrientos v. Wells Fargo Bank, N.A. (9^th Cir. 2011) 633 F.3d 1186, 1188 (stating that “[a] motion for contempt for violation of a discharge injunction under § 524 must be brought via motion in the bankruptcy case, not via an adversary proceeding”).)

 

In opposition, the Tysons “concede Walls, supra, requires them to bring contempt proceedings against Nationstar for ‘commencing or continuing’ this lawsuit.”  (Tyson’s memorandum of points and authorities in opposition to demurrer to cross-complaint (“Opposition”), p.6:8-10.)  However, in an attempt to rescue their claim, the Tysons argue that “Nationstar knows that its act of filing this lawsuit seeking a personal judgment is a public record… [and] is used by the credit reporting agencies to damage the credit of defendants… [which] constitutes a violation of the Federal Fair Credit Reporting Act.”  (Id. at p.6:15-20, citing 15 U.S.C. § 1691[1].)

 

Here, there are absolutely no allegations in the cross-complaint that would suggest a violation of the Federal Fair Credit Reporting Act.  Moreover, the Tysons do not suggest facts that show that they may be able to state a claim for violation of the FCRA.  (See Goodman v. Kennedy (1976)18 Cal. 3d 335, 349 (stating that “Plaintiff [or a defendant answering a complaint] must show in what manner he can amend his complaint [or answer] and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal. 2d 627, 636; see also Hendy v. Losse (1991) 54 Cal. 3d 723, 742 (stating that “the burden is on the plaintiff [or answering defendant]… to demonstrate the manner in which the complaint [or answer] might be amended”).)

 

Moreover, the cases upon which the Tysons rely, King v. Bank of Am., N.A. (N.D. Cal. Oct. 1, 2012) 2012 U.S.Dist. LEXIS 141963 *1, and Hanks v. Talbots Classics Nat’l Bank (N.D. Cal. Aug. 6, 2012) 2012 U.S.Dist. LEXIS 109934 *1, involve dischargeable debts pursuant to 11 U.S.C. § 727.  (See King, supra, 2012 U.S.Dist. LEXIS 141963 at pp.*1-*2; see also Hanks, supra, 2012 U.S.Dist. LEXIS 109934 at p.*2.)  Here, the instant case involves a non-dischargeable secured debt.  (See Cortez v. American Wheel (In re Cortez) (B.A.P. 9th Cir. Cal. 1995)191 B.R. 174, 177-179 (stating that “[i]t is well settled that valid, perfected liens and other secured interests pass through bankruptcy unaffected”); see also Johnson v. Home State Bank (1991) 501 U.S. 78, 83 (stating that “the Code provides that a creditor’s right to foreclose on the mortgage survives or passes through the bankruptcy”).)  King and Hanks are unhelpful to the Tysons’ argument as they are distinguishable.

 

As the Tysons fail to demonstrate that the first cause of action might be amended to state a viable cause of action, Nationstar’s demurrer to the first cause of action of the cross-complaint is SUSTAINED without leave to amend.

 

Second cause of action for violation of TILA

 

Nationstar demurs to the second cause of action on the ground that it is time barred.  Indeed, although the cross-complaint is minimal in terms of specifics, it does allege that the Tysons initiated the loan on July 11, 2005.  As Nationstar notes, 15 U.S.C. § 1640, subd. (e) states that an action for violation of TILA must be brought “within one year from the date of the occurrence of the violation.”  (15 U.S.C. § 1640, subd. (e).)  Here, the cross-complaint was filed well beyond the one year statute of limitations.

 

The second cause of action asserts that they “seek recoupment of the subject property by this cross complaint, and are defending the action by seeking rescission.”  However, “[a]n obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first….”  (15 U.S.C. § 1640, subd. (f).)  “[R]ecoupment of damages and rescission in the nature of recoupment receive unmistakably different treatments, which under the normal rule of construction are understood to reflect a deliberate intent on the part of Congress.”  (Beach v. Ocwen Fed. Bank (1998) 523 U.S. 410, 418.)  “[T]he Act permits no federal right to rescind, defensively or otherwise, after the 3-year period of § 1635(f) has run.”  (Id. at p.419; see also McOmie-Gray v. Bank of Am. Home Loans (9th Cir. Cal. 2012) 667 F.3d 1325, 1328 (stating that “rescission suits must be brought within three years from the consummation of the loan, regardless whether notice of rescission is delivered within that three-year period”).)  Here, the cross-complaint was filed well beyond the three year statute of limitations for any rescission in the nature of recoupment.

 

Moreover, recoupment is “a ‘defense arising out of some feature of the transaction upon which the plaintiff’s action is grounded.’”  (Beach, supra, 523 U.S. at p.415 (emphasis added), quoting Rothensies v. Electric Storage Battery Co. (1946) 329 U.S. 296, 299; see also City of St. Paul v. Evans (9th Cir. 2003) 344 F.3d 1029, 1034 (stating that “[e]quitable recoupment has been allowed by state courts as well, but it has always been recognized as a defense, not a claim”); see also Molina v. Onewest Bank (D. Haw. 2012) 903 F. Supp. 2d 1008, 1017 (no affirmative claim for recoupment).)  “The 2010 Dodd-Frank Amendment to TILA… allows a consumer to assert a TILA claim as ‘matter of defense [to a foreclosure action] by recoupment or set-off’ without regard for the statute of limitations… [i]f a TILA claim is asserted offensively in an action to recover damages, however, the one-year statute of limitations for inadequate TILA disclosures applies.”  (Bhandari v. Capital One, N.A. (N.D.Cal. Apr. 22, 2013) 2013 U.S. Dist. LEXIS 58284 *1, *16-*17.)  It is clear that Plaintiff cannot state facts sufficient to constitute an affirmative claim for violation of TILA.  (See Goodman v. Kennedy (1976)18 Cal. 3d 335, 349 (stating that “Plaintiff [or a defendant answering a complaint] must show in what manner he can amend his complaint [or answer] and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal. 2d 627, 636; see also Hendy v. Losse (1991) 54 Cal. 3d 723, 742 (stating that “the burden is on the plaintiff [or answering defendant]… to demonstrate the manner in which the complaint [or answer] might be amended”).) Accordingly, the demurrer to the second cause of action of the cross-complaint is SUSTAINED without leave to amend.

 

Third cause of action for violation of HAMP

 

The third cause of action is rather confusing, but according to the allegations, it is based on violation of HAMP and the HAMP SPA.  The third cause of action acknowledges that “Federal law does not grant them a private right of action to compel acceptance of their qualified loan modification request… [and, i]n fact, the SPA specifically denies a Federal cause of action to enforce this right.”  (Cross-complaint, ¶ 16.)  Nevertheless, the Tysons seek a “private right of action regarding HAMP loan modifications” as the Tysons contend that states such as California permit such a claim.  At the same time, in their opposition, the Tysons “acknowledge that they are not eligible for the HAMP modification.”  (Opposition, p.11:25-26.)  Instead, they contend that “there are literally dozens of other plans which are offered by servicers and HUD.”  (Id. at p.11:26-27.)

 

To the extent that the third cause of action is premised on a breach of the HAMP SPA, the Tysons lack standing to allege such a breach of the HAMP SPA and cannot state a claim based on such breach, or recast a claim for such breach as one for fraud or anything else.  (See Warner v. Wells Fargo Bank, N.A. (C.D.Cal. 2011) 2011 U.S. Dist. LEXIS 66551 *1, *9-*10; see also Kilaita v. Wells Fargo Home Mortgage, et al. (N.D.Cal. 2011) 2011 U.S. Dist. LEXIS 142524 *1, *26-*27 (stating that “[t]he nature of HAMP does not provide Plaintiffs with a private right of action”; also stating that “[q]ualified borrowers under HAMP ‘‘would not be reasonable in relying on the Agreement as manifesting an intention to confer a right on him because the agreement does not require [a loan servicer to] modify eligible loans… [and t]hus, Plaintiffs lack standing to challenge HAMP compliance’”); see also Cleveland v. Aurora Loan Servs., LLC (N.D.Cal. 2011) 2011 U.S. Dist. LEXIS 55168 (stating that “numerous courts have determined that individual borrowers do not have standing to sue under a HAMP SPA because they are not intended third-party beneficiaries of the SPA… [and] have ruled that there is no express or implied private right of action to sue lenders or loan servicers for violation of HAMP”; also stating that since “the alleged HAMP violations are not actionable, [they] thus cannot be used to support a claim under § 17200”); see also Correia v. Deutsche Bank Natl. Trust Co. (B.A.P. 1st Cir. 2011) 452 B.R. 319, 324; see also Armeni v. America’s Wholesale Lender (C.D.Cal. 2012) 2012 U.S. Dist. LEXIS 24004 *1, *7-*8 (stating that “plaintiff lacks standing to challenge the process by which his mortgage was (or was not) securitized because he is not a party to the PSA”), citing Bascos v. Fed. Home Loan Mortgage Corp. (C.D.Cal. 2011) 2011 U.S. Dist. LEXIS 86248 *1, *4-*6; see also Deerinck v. Heritage Plaza Mortgage, Inc. (E.D.Cal. 2012) 2012 U.S. Dist. LEXIS 45728 *1, *15-*16 (stating that “Plaintiffs lack standing to challenge the process in which their mortgage was securitized because they are not a party to the PSA”); see also Junger v. Bank of America, N.A. (C.D.Cal. 2012) 2012 U.S. Dist. LEXIS 23917 *1, *7-*9 (same); see also Bastida v. Indymac Bank (C.D. Cal. July 13, 2011) 2011 U.S. Dist. LEXIS 75586 *1, *9 (stating that “Plaintiffs have no standing to sue under HAMP, which does not allow for a private right of action under HAMP”); see also Ward v. Wells Fargo Bank, N.A. (E.D. Cal. June 16, 2011) 2011 U.S. Dist. LEXIS 63725 *1, *5-*11; see also Cleveland v. Aurora Loan Servs., LLC (N.D. Cal. May 24, 2011) 2011 U.S. Dist. LEXIS 55168 *1, *11-13 (stating that “[s]ince plaintiff has no right of action under HAMP to challenge the denial of his request for loan modification, the court would have no basis upon which to make a judicial determination… [in accordance with the plaintiff’s] cause of action for declaratory relief… [and s]imilarly, plaintiff has no standing to assert a claim of breach of contract or promissory estoppel based on alleged HAMP violations, as he is not (contrary to what he alleges) a third-party beneficiary of any HAMP contract between a servicer or lender and the government… [and f]inally, the alleged HAMP violations are not actionable, and thus cannot be used to support a claim under § 17200”); see also Gallardo v. Wells Fargo Bank N.A. (C.D. Cal. Oct. 26, 2010) 2010 U.S. Dist. LEXIS 119066 *1, *9; see also Phu Van Nguyen v. Bac Home Loan Servs., LP (N.D. Cal. Oct. 1, 2010) 2010 U.S. Dist. LEXIS 105704 *1, *12-*14; see also Wright v. Bank of Am. (N.D. Cal. July 22, 2010) N.A., 2010 U.S. Dist. LEXIS 73807 *1, *10-*15; see also Hoffman v. Bank of Am., N.A. (N.D. Cal. June 30, 2010) 2010 U.S. Dist. LEXIS 70455 *1, *6-*15 (stating that there is no private right of action to enforce HAMP and that plaintiff lacks standing to pursue a claim based on the breach of the HAMP agreement); see also Yongbae Kim v. Bank of Am., N.A. (W.D. Wash. Aug. 11, 2011) 2011 U.S. Dist. LEXIS 89510 *1, *8 (stating that neither TARP nor HAMP “recognizes a private right of action against lenders or servicers”); see also Cade v. BAC Home Loans Servicing, LP (S.D. Tex. June 20, 2011) 2011 U.S. Dist. LEXIS 65045 *1, *13-*16.; see also Edwards v. Aurora Loan Servs., LLC (D.D.C. June 14, 2011) 2011 U.S. Dist. LEXIS 62462 *1, *17-*18; see also Wright v. Chase Home Fin. LLC (D. Ariz. June 1, 2011) 2011 U.S. Dist. LEXIS 58977 *1, *4; see also Freeman Invs., L.P. v. Pac. Life Ins. Co. (9^th Cir. Cal. 2013) 704 F.3d 1110, 1116 (stating that parties may not recast claims for breach of contract as ones for fraud claims); see also BFGC Architect Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4^th 848, 853 (stating that “[a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations”); see also Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4^th 1036, 1041 (stating same).)

 

To the extent that the third cause of action is seeking a private right of action regarding HAMP loan modifications that the Tysons are admittedly not eligible for, the Tysons concede that they cannot state such a claim in their opposition.  (See Opposition, pp.11:5-28, 12:1-8.)

 

Finally, to the extent that the Tysons seek to state “a claim for breach of the obligation to approve the appropriate modification for which defendants qualify… any modification,” the Tysons do not cite to any authority that suggests that Nationstar was obligated to approve such a modification.  The Tysons cite to some cases to support their assertion that “there is a private right of action to compel the loan servicer to grant the borrower modifications for which it qualifies,” but then “acknowledge[s] that these decisions dealt with the HAMP loan modification applications”—a situation inapposite to the third cause of action that apparently seeks a non-HAMP modification.  The Tysons do not cite to any legal authority suggesting the existence of a claim to compel a lender to approve any non-HAMP loan modification, and this Court declines to create such a cause of action.  (See Goodman v. Kennedy (1976)18 Cal. 3d 335, 349 (stating that “Plaintiff [or a defendant answering a complaint] must show in what manner he can amend his complaint [or answer] and how that amendment will change the legal effect of his pleading”), quoting Cooper v. Leslie Salt Co. (1969) 70 Cal. 2d 627, 636; see also Hendy v. Losse (1991) 54 Cal. 3d 723, 742 (stating that “the burden is on the plaintiff [or answering defendant]… to demonstrate the manner in which the complaint [or answer] might be amended”).)  Nationstar’s demurrer to the Tysons’ third cause of action of the cross-complaint is SUSTAINED without leave to amend.

 

The Court will prepare the order.

 

[1]  It should be noted that, as a preliminary matter, 15 U.S.C. § 1691 refers to the Equal Credit Opportunity Act, not the Federal Fair Credit Reporting Act.