Filed 6/8/20 Ratliff v. Trojan Capital Investments CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

REGINALD RATLIFF,

Plaintiff and Appellant,

v.

TROJAN CAPITAL INVESTMENTS, LLC et al.,

Defendants and Respondents.

A153044

(Alameda County

Super. Ct. No. HG15789502)

Reginald Ratliff sued Trojan Capital Investments, LLC (Trojan) and Trinity Financial Services, LLP (Trinity), based on their alleged “mishandling of his loan” after they became the servicers of his second mortgage. Ratliff alleged that Trojan, which acquired the loan from Trinity, violated Civil Code section 2924.17 by proceeding with foreclosure without having reviewed evidence that would have revealed that the loan had been extinguished, or if the loan was not extinguished, that Ratliff was entitled to a loan modification under a federal program. And he alleged that both defendants acted negligently and engaged in unfair competition by failing to recognize the extinguishment or his entitlement to modification. The trial court granted summary judgment to defendants, and Ratliff now appeals. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. Background Facts

The following facts are undisputed.

In August 2005, Ratliff bought a single-family residence in Union City (the Property) for $890,000 by making a down payment of $28,000 and obtaining two loans amounting to $862,000. The next month, he refinanced his first and second mortgages on the Property with two loans from First Franklin, secured by deeds of trust. The loans from First Franklin amounted to $890,000 (a first lien for $700,000 and a second lien, which is at issue in this case, for $190,000). Ratliff stopped making payments on the second lien in 2008, and he was in default from December 1 of that year. The debt on the second lien was never paid off or discharged.

In August 2009, Ratliff applied to First Franklin for a modification of the first lien under the federal government’s Home Affordable Modification Program (HAMP). First Franklin, which was a HAMP Participating Servicer, and Ratliff entered into a HAMP agreement that modified the first lien with an effective date of May 1, 2010. At some point, Bank of America, N.A. (BANA) acquired First Franklin and, either in its own name or through subsidiaries, began servicing both the first and second liens. BANA, like First Franklin, was a HAMP Participating Servicer; BANA also agreed to participate in the second lien modification counterpart of HAMP, called 2MP, which was introduced by the Department of the Treasury in Supplemental Directive 09-05, published in August 2009 (Directive 09-05). Ratliff alleged that under 2MP, BANA was required to take steps to modify the second lien or accept a payment from the federal government to extinguish it, and that BANA failed to do so.

Effective October 1, 2010, BANA transferred the servicing rights for the second lien to Select Portfolio Services, which later transferred servicing to Land Home Financial Services, which in turn transferred servicing to Trinity in March 2014. Trinity purchased the underlying note for Ratliff’s second mortgage from Stelis, LLC, and in 2015, Trinity transferred the servicing rights to Trojan, and assigned Trojan the note and all beneficial interest in the corresponding deed of trust.

Trojan caused a notice of default for the second lien to be recorded in June 2015. The next month, Ratliff applied to Trojan for a modification of the second lien. Although Trojan undisputedly was not, and had not been, a participating servicer under HAMP or 2MP, Trojan offered Ratliff a modification of the second lien, which Ratliff declined. In September 2015, a notice of trustee’s sale for the Property was recorded. In early October 2015, Ratliff wrote to BANA, requesting modification of the second lien under 2MP. BANA responded in a letter stating that, as Ratliff had previously been advised, servicing of the second lien had been transferred from BANA to Select Portfolio Servicing in 2010.

B. Proceedings in the Trial Court

Ratliff filed his initial complaint in this matter in mid-October 2015 and the operative Third Amended Complaint in February 2017. As relevant for this appeal, Ratliff alleged three causes of action.

The first cause of action, against Trojan, alleged that when Trojan recorded a notice of default with respect to Ratliff’s second mortgage and a notice of trustee’s sale, it violated Civil Code section 2924.17, subdivision (b), which states that before recording such documents, “a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose, including the borrower’s loan status and loan information.” Ratliff alleged that if Trojan had properly reviewed the evidence, as required by the statute, it would have discovered that the loan on which it sought to foreclose had been extinguished, so there could be no default, and that if it had not been extinguished, then as the assignees of the loan they were required to modify the loan under Directive 09-05. Accordingly, Trojan had no right to proceed with foreclosure. His theory was that once the first lien was modified under HAMP in 2010, BANA was required to extinguish or modify the second lien under Directive 09-05, and that even though BANA failed to do so, Trinity and Trojan were required to “abide by” Directive 09-05 and either modify the second lien or treat it as being modified effective 2010.

Ratliff’s second cause of action alleged that Trinity and Trojan were negligent in failing to discover that the second lien had been extinguished or, if it had not been, that he was entitled to modification under Directive 09-05. His third cause of action, also against Trinity and Trojan, alleged that the violation of section 2924.17 and the negligence constituted unlawful, unfair, or fraudulent business practices as defined in Business and Professions Code section 17200 et seq. (UCL).

Ratliff sought a preliminary injunction prohibiting defendants from further pursuing foreclosure proceedings on the Property. The trial court issued the requested injunction, concluding that Ratliff made a sufficient showing of a likelihood of prevailing on his claim under section 2924.17 to justify a preliminary injunction and that the balance of harms weighed in Ratliff’s favor.

Eventually defendants filed a motion for summary judgment or, alternatively, summary adjudication. Ratliff submitted his opposition evidence with his declaration, which was not executed under penalty of perjury.

After a hearing, the trial court issued an order granting Trojan summary adjudication on the cause of action under section 2924.17, and granting Trinity and Trojan summary adjudication on the negligence and UCL causes of action.

Several weeks after the order was issued, and after a hearing at which the parties and the trial court discussed the proposed judgment, summary judgment was entered for defendants, dissolving the preliminary injunction and dismissing Ratliff’s complaint “without prejudice to any party’s right to file and serve a motion for attorney’s fees after entry of judgment.”

After the trial court issued its summary adjudication order, but before judgment was entered, Ratliff filed his notice of appeal. We deem Ratliff’s premature notice of appeal to have been timely filed after the entry of judgment. (Mukthar v. Latin American Security Service (2006) 139 Cal.App.4th 284, 288; Cal. Rules of Court, rule 8.104(d)(2).)

DISCUSSION

A. Summary Judgment Standards

A defendant is entitled to summary judgment “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).) “We review a grant of summary judgment de novo; we must decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law.” (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.) We view the evidence in the light most favorable to the plaintiff, as the nonmoving party. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768 (Saelzler).) In deciding whether a material issue of fact exists for trial, we “consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence.” (Code Civ. Proc., § 437c, subd. (c).)

A defendant “moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that [the defendant] is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) A defendant meets this burden by showing that plaintiff “has not established, and cannot reasonably expect to establish,” an essential element of his claim. (Saelzler, supra, 25 Cal.4th at p. 768.)

A defendant’s initial burden in moving for summary judgment is to come forward with evidence to make a prima facie showing that there is no triable issue of material fact (Aguilar, supra, 25 Cal.4th at p. 850), where the material facts are determined by the pleadings. (Fisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 320.) If defendant meets that burden of production, the burden of production shifts to plaintiff to make a showing that there is a triable issue of material fact. (Ibid.) “The plaintiff . . . shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists.” (Code Civ. Proc., § 437c, subd. (p)(2).) “A party cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact.” (LaChapelle v. Toyota Motor Credit Corp. (2002) 102 Cal.App.4th 977, 981.)

We review an order granting summary judgment de novo and limit our review to issues that are raised and supported in appellant’s opening brief. (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6; Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1295 [“we will not address arguments raised for the first time in the reply brief”].)

B. Analysis

1. Violation of Civil Code Section 2924.17

Ratliff makes three arguments for reversing the trial court’s ruling on his section 2924.17 claim: First, the trial court erred as a matter of law “to the extent it held that Ratliff lacks a private right of action” under section 2924.17 to enforce a material violation of that statute “where the violation involves HAMP”; second, there is a triable issue of fact as to whether Trojan was required to modify Ratliff’s second mortgage under HAMP/2MP; third, the trial court erred by granting summary adjudication as to part of Ratliff’s statutory claim, which it had no authority to do. We find none of them persuasive.

a. Private Right of Action

We reject Ratliff’s first argument, because we reject its premise. We do not read the trial court’s order as holding that there is no private right of action under section 2924.17 when the alleged violation of section 2924.17 “involves HAMP.” Instead, the trial court concluded that as a matter of law, HAMP/2MP did not require Trojan to modify Ratliff’s loan, and that therefore Ratliff could not show that a review of reliable records would have revealed that Trojan was required to undertake a modification.

We recognize, however, that the trial court’s order referred to authority presented by Trojan to the effect that Directive 09-05 is “not enforceable by a borrower in a private lawsuit or otherwise.” We need not, and do not, decide whether the directive could ever be enforceable by a borrower. The trial court’s determination did not rest solely on this issue, and in any event “[w]e review the trial court’s ruling, not its rationale; thus, we are not bound by the trial court’s stated reasons for granting summary judgment.” (McIntosh v. Mills (2004) 121 Cal.App.4th 333, 338.)

b. Trojan’s Obligation to Modify the Second Lien

In his Third Amended Complaint, Ratliff alleged that when the first lien was modified in 2010, BANA, as servicer of the second lien, was required to extinguish or modify the second lien in compliance with Directive 09-05, and that if Trojan had reviewed competent and reliable evidence, it would have discovered that it had no right to foreclose because the second lien had been extinguished and, if it had not been extinguished Trojan was required to comply with Directive 09-05 and modify the second lien or treat it as though it had been modified in compliance with 2MP in 2010.

Ratliff’s extinguishment theory is not before us. Although Ratliff alleged that BANA informed him repeatedly, from 2010 until December 2014 that “his second mortgage had been charged off and, therefore, a modification under the HAMP requirements was not necessary” and that “the second mortgage had been charged off and was not active,” Trojan came forward with evidence that Ratliff never received any writing “excusing, cancelling, eliminating, or discharging the debt” on the second lien, and that Ratliff acknowledged at his deposition that the debt on the second lien had not been extinguished. Ratliff has abandoned his extinguishment theory on appeal.

On appeal, Ratliff argues his modification theory: if Trojan had reviewed his loan file, Trojan would have recognized that it was required to modify the second lien under 2MP rather than proceeding with foreclosure, or at least there was a triable issue as to whether Trojan was required to modify the second lien under 2MP guidelines.

In the trial court, Trojan came forward with evidence that the relevant HAMP and 2MP directives by their terms apply only to participating servicers. Specifically, under Supplemental Directive 09-05 Revised, issued March 26, 2010, which “replace[d] in its entirety” Directive 09-05, “[w]hen a borrower’s first lien is modified under HAMP, a participating second lien servicer must offer to modify the borrower’s second lien according to a defined protocol.” (Italics added.) It was undisputed that Trojan was not a Participating Servicer under HAMP or 2MP. Further, Trojan came forward with evidence that it never entered an agreement in which it agreed to assume any liability under HAMP or 2MP to modify Ratliff’s second lien, and that no participating servicer ever asked Trojan to assume such liability. As a result, the burden shifted to Ratliff to come forward with evidence creating a triable issue of fact as to whether Trojan assumed liability under 2MP to modify the second lien.

Under Ratliff’s theory of liability, any obligation on Trojan’s part to modify the second lien presupposes that BANA was required to modify it under 2MP. The trial court assumed for purposes of argument that BANA was subject to 2MP at the time it was servicing the second lien and should have offered Ratliff a modification; we will make the same assumption. But even if BANA should have complied with 2MP, and even if BANA could have liability to Ratliff for failing to do so, Ratliff did not provide in the trial court, and does not provide on appeal, any evidence or authority to suggest that Trojan, which did not participate in 2MP, assumed BANA’s liability.

Under California law, the purchaser of a corporation’s assets typically “does not assume the seller’s liabilities unless (1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller’s debts.” (Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28.)

Ratliff contended in the trial court, and contends on appeal there is an agreement of assumption: Trojan assumed liability for BANA’s 2MP obligations under the deed of trust, which provides, “If the Note is sold and thereafter the Loan is serviced by a Loan Servicer other than the purchaser of the Note, the mortgage loan servicing obligations to Borrower will remain with the Loan Servicer or be transferred to a successor Loan Servicer and are not assumed by the Note purchaser unless otherwise provided by the Note purchaser.” He cites no authority to support his position that the deed constituted an agreement of assumption, nor does he address Galindo v. BSI Financial Services, Inc. (N.D. Cal Mar. 17, 2017) 2017 WL 1036735, at *6 (Galindo), a case cited by Trojan in the trial court that rejects Ratliff’s position. Like Ratliff, the plaintiff in Galindo argued that this language in a deed of trust constitutes an express or implied agreement by a loan servicer to assume the liabilities imposed by HAMP on a previous servicer. The court in Galindo explained that the language “simply provides that if the Note is sold to a new owner, the mortgage servicing obligations will not be transferred to the new owner, but will instead ‘remain with the Loan Servicer or be transferred to a successor Loan Servicer.’ [Citation.] The section does not contain any provision by which the new Loan Servicer assumes the previous Loan Servicer’s liabilities to the Borrower. [Citation.] Indeed, ‘[s]imply because the contract contemplates that changes in the loan servicer may occur does not imply that a transfer of liability also automatically occurs.’ (Pacini [v. Nationstar Mortgage, LLC (N.D. Cal. June 13, 2013)] 2013 WL 2924441, at *4.)” (Galindo, supra, 2017 WL 1036735 at *6.) Accordingly, we reject Ratliff’s argument.

On appeal, Ratliff argues for the first time that under HAMP, BANA was limited in its authority to transfer its rights and obligations. He points to a May 26, 2016 document entitled, “Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages,” which states that “When a participating servicer transfers or assigns mortgage loans, or servicing rights relating to mortgage loans, that constitute Eligible Loans pursuant to the SPA [Servicer Participation Agreement], the transferee servicer must assume the transferor’s obligations under the SPA with respect to the transferred Eligible Loans. A transferring servicer may not use a transfer to circumvent its existing obligations under the SPA. If the transferee servicer has signed its own SPA, the Eligible Loans involved in the transfer become subject to the transferee servicer’s SPA. If a transferee servicer has not signed its own SPA, it will be required to execute an assignment and assumption agreement, the form of which is attached as Exhibit D to the SPA.” (Italics added.) We do not read this provision in the Handbook, of which we take judicial notice at Ratliff’s request, as imposing any obligation on Trojan, which did not acquire the servicing rights or note from a participating servicer. Even if we assume that BANA was a participating servicer and Ratliff’s second lien was subject to 2MP, Ratliff offers no authority to suggest that he could enforce this provision against Trojan. Trojan was not a party to the contract that created the requirement described in the Handbook. That contract, according to Ratliff, was a January 2010 agreement between Fannie Mae and a BANA affiliate. Further, even if that contract effectively imposed an obligation on the entities to which BANA, as a participating servicer, transferred the note or servicing rights, Ratliff offers no evidence or authority to suggest that this would result in Trojan having an obligation to him, especially since nothing in the record suggests that any of the intervening servicers or note holders between BANA and Trojan participated in 2MP.

It may be that BANA acted wrongly in failing to modify Ratliff’s second lien, or in transferring the note or servicing rights without ensuring that the transfer was in keeping with its obligations under HAMP and 2MP. But even if that were the case, it would not mean that Ratliff can pursue a cause of action against Trojan under section 2924.17.

c. Grant of Summary Adjudication as to Partial Cause of Action

In his Third Amended Complaint, Ratliff alleged that as a result of Trojan’s material violation of section 2924.17, he was entitled to injunctive relief and attorney fees. Ratliff argues on appeal that summary adjudication on the section 2924.17 cause of action was improper because the trial court reserved the issues of whether he was entitled to fees as a prevailing party in light of the trial court’s grant of a preliminary injunction on the section 2924.17 claim, and what the amount of such fees would be. Therefore, according to Ratliff, the trial court granted summary adjudication on the section 2924.17 claim in violation of the requirement in the Code of Civil Procedure that “[a] motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).) The argument is entirely without merit.

To begin, we note that this issue is entirely hypothetical: nothing in the record suggests that Ratliff ever filed a motion for attorney fees, and Ratliff cites no authority to suggest that such a motion would have been granted.

In any event, as Ratliff acknowledges, attorney fees are a remedy that is available in connection with a claim under section 2924.17. Remedies are not part of a cause of action. (People ex rel. Feuer v. Superior Court (Cahuenga’s the Spot) (2015) 234 Cal.App.4th 1360, 1378.) Because attorney fees, as a remedy, is not a part of, or an element of, Ratliff’s cause of action under section 2924.17, the fact that the remedy may remain to be determined does not bar a grant of summary adjudication for a defendant: under Code of Civil Procedure section 437c, subdivision (p)(2), which provides that once a defendant has shown that plaintiff cannot establish an element of the cause of action, or that there is a complete defense to the cause of action, the burden shifts to plaintiff to show a triable issue of fact as to the cause of action or defense. And, as we discussed above, Ratliff failed to show a triable issue of fact.

Ratliff mistakenly argues that this case is like Paramount Petroleum Corp. v Superior Court (2014) 227 Cal.App.4th 226, 244 (Paramount), where the trial court erred in granting summary adjudication to plaintiff on a partial cause of action for breach of contract where plaintiff had established breach of a contractual duty, but not damages. The case is inapposite, because damages are an element of a cause of action for breach of contract. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Because plaintiff failed to prove an element of its cause of action in Paramount, summary adjudication was improper under Code of Civil Procedure section 437c, subdivision (p)(1), which provides that a plaintiff meets its “burden of showing there is no defense to a cause of action if that party has proved each element of the cause of action.” (Paramount, supra, 227 Cal.App.4th at p. 239.)

In sum, Ratliff fails to show error in the trial court’s grant of summary adjudication to Trojan on the section 2924.17 cause of action.

2. Negligence and UCL Claims

Ratliff advances a single argument on appeal with respect to his cause of action for negligence: he argues that we should reverse the judgment as to negligence if we reverse on his section 2924.17 claim. He takes the position that both Trinity and Trojan, as servicers to whom Ratliff’s second lien were transferred, had a legal duty under 2MP to modify the second lien. We have rejected this position with respect to Trojan, and we likewise reject it as to Trinity, since the facts are essentially the same. Ratliff’s only argument on appeal with respect to his UCL cause of action is that we should reverse the trial court on that claim if we reverse on his section 2924.17 or negligence claims. In other words, he concedes that his negligence and UCL causes of action are viable only if his section 2924.17 cause of action is viable. Accordingly, Ratliff’s failure to show error in the trial court’s ruling on that cause of action prevents him from showing error in the rulings on the others.

DISPOSITION

The judgment is affirmed. Respondents are awarded their costs on appeal.

_________________________

Miller, J.

WE CONCUR:

_________________________

Kline, P.J.

_________________________

Stewart, J.

A153044, Ratliff v. Trojan Capital Investments, LLC et al.