Sunday, May 15, 2016

FYI: Cal App Ct (1st Dist) Upholds Dismissal of Allegations Contradicting Judicially Noticed Purchase and Assumption Agreement

The Court of Appeal of the State of California, First Appellate District, recently upheld a trial court’s demurrer without leave to amend in a case in which a judicially noticed Purchase and Assumption Agreement (“P&A Agreement”) contradicted the borrower’s allegations that a subsequent purchaser of the loan had no authority to foreclose on her property.

A copy of the opinion can be found at:  Link to Opinion

In 2004, a borrower obtained a $450,000 loan secured by a deed of trust recorded against her property. In 2008, the lender and first beneficiary failed and a receiver was appointed. The receiver then sold the mortgage loan at issue to a second beneficiary and the transaction was memorialized in September 2008 in a P&A Agreement. 

In March 2011, the foreclosure trustee recorded a notice of default claiming that the borrower was in arrears of $60,984.42. The deed of trust was then assigned to a third beneficiary and notice of sale was recorded.

In January 2012, the borrower filed the first of three lawsuits challenging foreclosure.  The borrower voluntarily dismissed the first lawsuit without prejudice. She then filed a second lawsuit, which she ultimately voluntarily dismissed without prejudice after the defendants’ demurrer was sustained with leave to amend. 

In July 2013, the foreclosure trustee executed a third notice of sale, and the borrower then filed her third lawsuit.  In her latest lawsuit, the borrower alleged that the assignment of the deed of trust to the third beneficiary and foreclosure proceedings were both initiated without authority.

The defendants filed a demurrer and request for judicial notice. The trial court granted the request for judicial notice and sustained the demurrer with leave to amend. In the amended complaint, borrower asserted six causes of action:  cancellation of instruments under Cal. Civil Code section 3412; unfair competition under Cal. Business and Professions Code Section 17200 et seq.; foreclosure commenced by entity lacking a beneficial interest in violation of sections 2924, subdivision (a)(6) and “2924(f)(3)” [sic]; declaratory relief; and two causes of action for alleged violation of the California Homeowner Bill of Rights (HBOR).  None of the claims alleged any wrongful foreclosure or alleged that the property was sold.

The defendants again filed a demurrer and request for judicial notice as to the P&A Agreement.  The trial court granted the request for judicial notice and sustained the demurrer without leave to amend, and dismissed the case. 

The borrower then appealed.  The Appellate Court focused on the defendants’ argument that the borrower’s allegations regarding the third beneficiary and trustee’s supposed lack of authority to enforce the deed of trust was contradicted by matters subject to judicial notice – namely, the P&A Agreement. 

Assuming that borrower had standing to assert a claim involving the P&A Agreement, the Appellate Court held that the borrower did not present any argument to challenge the trial court’s determination that the lack of authority to enforce the deed of trust was contradicted by the P&A Agreement.

By failing to present a challenging argument, the Appellate Court held that the borrower waived her claim that the finding was in error.  Even if borrower had not waived her claim to finding the trial court was erroneous in their ruling, the Appellate Court found no error in the trial court’s ruling.

The basis of borrower’s claim that the defendants lacked authority to initiate foreclosure proceedings were allegations that the judicially noticed P&A Agreement did not include the second beneficiary of the promissory note. Therefore, the borrower argued, the second beneficiary of the promissory note never became beneficiary and could not convey authority to foreclose.

However, the Appellate Court noted that the P&A agreement stated that the secondary beneficiary purchases all mortgage servicing rights and obligations of the first beneficiary.  The Court held that the borrower failed to challenge the trial court’s determination that the P&A Agreement was subject to judicial notice, and failed to explain why the P&A Agreement did not cover the entity to which the lender sold her loan.

Thus, the Appellate Court found that the judicially noticed P&A Agreement contradicted the borrower’s allegations.

Secondly, the Appellate Court held that the borrower did not address how she could amend her complaint to assert a valid cause of action, and therefore forfeited any argument that the trial court abused its discretion in sustaining the demurrer without leave to amend.

Accordingly, the Appellate Court affirmed the trial court’s dismissal without leave to amend as the judicially noticed P&A Agreement contradicted the borrower’s allegations.


Eric Tsai
Maurice Wutscher LLP
 
71 Stevenson Street, Suite 400
San Francisco, CA 94105
Direct: (415) 529-7654
Fax: (866) 581-9302
Mobile: (714) 600-6000
Email: etsai@MauriceWutscher.com

Admitted to practice law in California, Nevada and Oregon



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Sunday, May 8, 2016

FYI: ND Cal Holds 2015 TCPA Amendment Applies to Collection Calls Made in 2014

The U.S. District Court for the Northern District of California recently held that an amendment to the federal Telephone Consumer Protection Act ("TCPA") enacted as part of the Bipartisan Budget Act of 2015 applies to calls made in 2014 "solely to collect a debt owed to or guaranteed by the United States," and therefore granted summary judgment in favor of the defendant.

A copy of the opinion is available at:  Link to Opinion

The plaintiff filed a putative class action under the TCPA alleging that, in or around January 2014, the defendant student loan lender began calling his cellular phone in an attempt to collect a student loan debt.  The plaintiff asserted that he requested that the defendant not contact him by means other than mail, but that the calls supposedly continued, including two calls placed on January 29, 2014.

As you may recall, the TCPA in relevant part prohibits the making of any call, without the prior express consent of the called party, using an automatic telephone dialing system or an artificial or prerecorded voice, to any telephone number assigned to a cellular telephone service. 47 U.S.C. § 227(b)(1)(A).

As you may also recall, the Bipartisan Budget Act of 2015 (at section 301), signed into law on November 2, 2015, amended the TCPA to exclude calls "made solely to collect a debt owed to or guaranteed by the United States."  See 47 U.S.C. § 227(b)(1)(A)(iii).

The parties did not dispute that the loans at issue were federally funded student loans, and therefore the defendant argued that the issue was "whether the TCPA amendment can be applied retroactively to bar plaintiff's current action."

The federal trial court noted that the Supreme Court of the United States "addressed the issue of retroactive application of a statute in Landgraf v. USI Film Products, 511 U.S. 244 (1994)."  In Landgraf, the Supreme Court of the United States acknowledged that "retroactivity is not favored in the law", and held that "[a] statute does not operate retrospectively merely because it is applied in a case arising from conduct antedating the statute's enactment," but "[r]ather, the court must ask whether the new provision attached new legal consequences to events completed before its enactment." Id. at 269-70.

With those principles in mind, the Supreme Court of the United States articulated the relevant test as follows:

When a case implicates a federal statute enacted after the events in suit, the court's first task is to determine whether Congress has expressly prescribed the statute's proper reach. If Congress has done so, of course, there is no need to resort to judicial default rules. When, however, the statute contains no such express command, the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed. If the statute would operate retroactively, our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result.

511 U.S. at 280.

Under this test, the parties disputed whether "Congress has expressly prescribed the statute's proper reach."  The defendant argued that Congress was silent on the amended statute's retroactivity.  However, the plaintiff argued that the 2015 amendment to the TCPA "requires the [FCC] to issue regulations to implement its TCPA changes within nine (9) months of the date of the enactment of the bill."  Because those implementing regulations have not been prescribed, the plaintiff argued the amendment does not apply retroactively.

The Court here rejected the plaintiff's argument, as the plaintiff cited no authority for the position that a statute has no legal effect until implementing regulations are put in place.  Instead, the Court held that the amendment is silent on the issue of retroactivity. 

Accordingly, under Landgraf, the Court was required to address the next part of the test — i.e., whether retroactive application "would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed."  The Court found that none of these three conditions were met.  

More specifically, the Court held that rather than "increas[ing] a party's liability for past conduct," the 2015 TCPA amendment "decreases liability for past conduct, by creating an exception for telephone calls 'made solely to collect a debt owed to or guaranteed by the United States.'" In addition, the Court held that the 2015 TCPA amendment did not "impose new duties with respect to transactions already completed," but instead "eliminated certain duties with respect to completed transactions."

Perhaps more importantly, the Court also held that the 2015 TCPA amendment would not "impair rights a party possessed when he acted," because "merely impairing the ability to bring a lawsuit does not provide a sufficient basis, under Landgraf, to bar retroactive application."

The Court cited Southwest Center for Biological Diversity v. U.S. Dept. of Agriculture, 314 F.3d 1060 (9th Cir. 2002), in which the Ninth Circuit held that an exemption enacted during the pendency of a lawsuit was properly applied to the bar the claims raised by the plaintiff in that case. 

The Ninth Circuit rejected the argument that the plaintiff's rights would be impaired by retroactive application of the amendment, holding that the plaintiff in Southwest Center for Biological Diversity "took no action in reliance on prior law that qualifies under Landgraf." 314 F.3d at 1062.  The Ninth Circuit also "specifically held that the plaintiff's 'expectation of success in its litigation is not the kind of settled expectation protected by Landgraf's presumption against retroactivity,' because 'if that expectation were sufficient then no statute would ever apply to a pending case unless Congress expressly made it so applicable,' which would render the Landgraf test 'pointless.' Id. at 1062, n.1."

Thus, the Court in the case at had held that the plaintiff failed to meet any of the three conditions identified by the United States Supreme Court in Landgraf, therefore "that applying the TCPA amendment would not have a 'retroactive effect,' as that term was defined by the Landgraf Court."

Moreover, again citing the Ninth Circuit's ruling in Southwest Center for Biological Diversity, the Court also held that "application of the TCPA amendment would further Congress's intent to allow telephone calls to be placed in the furtherance of collecting debts owed to or guaranteed by the United States."

Accordingly, the Court held that the 2015 TCPA amendment applied to exempt the calls allegedly placed by defendant in 2014, and granted the defendant's motion for summary judgment.


Eric Tsai
Maurice Wutscher LLP
 
71 Stevenson Street, Suite 400
San Francisco, CA 94105
Direct: (415) 529-7654
Fax: (866) 581-9302
Mobile: (714) 600-6000
Email: etsai@MauriceWutscher.com

Admitted to practice law in California, Nevada and Oregon



ALABAMA   |   CALIFORNIA   |   FLORIDA   |   ILLINOIS   |   INDIANA   |   MARYLAND   |   MASSACHUSETTS   |   NEW JERSEY   |   NEW YORK   |   OHIO   |   PENNSYLVANIA   |   TEXAS   |   WASHINGTON, D.C.