Judge: Bruce G. Iwasaki, Case: 21STCV21457, Date: 2023-04-25 Tentative Ruling
Case Number: 21STCV21457 Hearing Date: April 25, 2023 Dept: 58
Judge Bruce
G. Iwasaki
Hearing
Date: April 25, 2023
Case
Name: Pablo Aleman, Jr. v.
Trinity Financial Services, LLC, et al.
Case
No.: 21STCV21457
Matter: Motion for Summary Judgment
Moving Party: Defendant Trinity Financial
Services, LLC
Opposing
Party: Plaintiff Pablo Aleman
Tentative Rulings: Defendant Trinity Financial Services Inc.’s motion for
summary judgment is DENIED.
Defendant
Trinity Financial Services Inc.’s motion for summary adjudication as to second
cause of action for unfair business practices, fifth cause of action for violation
of Civil Code section 2924.17, sixth cause
of action for violation of TILA, seventh cause of action for violation of the
Fair Debt Collection Practice Acts, and eighth cause of action for slander of
title is DENIED.
Defendant
Trinity Financial Services Inc.’s motion for summary adjudication as to the
first cause of action for promissory estoppel and third cause of action for
wrongful foreclosure is GRANTED.
Procedural and factual background.
This is a real property case in which Pablo
Aleman Jr. sues Trinity Financial Services, LLC (“Trinity”) and Barret Daffin Frappier Tredder & Weiss, LLP
(“Barrett Daffin”). Barrett Daffin, as substitute trustee under the Deed of
Trust that is the subject of this action, subsequently agreed to be
bound by any non-monetary order or judgment issued by the court regarding the
Subject Deed of Trust. (See 6/30/21 Declaration of Non-Monetary Status, ¶ 6.)
Plaintiff’s first
amended complaint alleged that in March of 2006, Plaintiff took out a second
mortgage (“Subject Loan”) on his home for $82,000 which was secured by a Deed
of Trust (“Subject DOT”). In 2008, Plaintiff was in arrears on both his primary
mortgage and the Subject Loan. As part of a negotiated modification, Plaintiff alleged,
the Subject loan was cancelled. Plaintiff bore the tax consequences of the
cancellation. After the Subject Loan was cancelled in 2008, Plaintiff did not
receive any statements regarding the Subject Loan. Nor did Plaintiff receive notice
that the previous trustee had assigned its rights under the Subject DOT to
Trinity. Nonetheless, on February 5, 2021, Barrett Daffin, on behalf of
Trinity, recorded a Notice of Default and Election to Sell Under Deed of Trust
(“NOD”) on Plaintiff’s property. The NOD states Plaintiff owes $157,643.19 as
of February 3, 2021.
Based on these
allegations, the FAC asserts causes of action for (1) promissory estoppel, (2)
violations of the UCL, (3) wrongful foreclosure, (4) negligent
misrepresentation, (5) violation of Civil Code § 2924.17, (6) violation of the
Truth in Lending Act, (7) violation of the Federal and California Rosenthal
Fair Debt Collections Practices Act, and (8) slander of title.
The Court sustained Trinity’s
demurrer to the fourth cause of action for negligent misrepresentation without
leave to amend. Trinity now moves for summary judgment, or in the alternative,
summary adjudication as to the remaining causes of action.
Request for judicial notice.
Trinity requests the Court take judicial notice of recorded grant deeds,
a notice of default and election to sell, and recession of a notice of default
and election to sell, and the Subject Deed of Trust.
The request is granted. (Evid. Code, §§ 452, subds. (c) and (h), 453; San
Francisco CDC LLC v. Webcor Construction L.P. (2021) 62 Cal.App.5th
266,281, n.5 ["Judicial notice may be taken of the existence and facial
contents of recorded real property records where, as here, the authenticity of
the document is not challenged"].)
Evidentiary objections.
Trinity raises three objections to Plaintiff’s
declaration in support of his opposition to this motion. The objections were
filed with Trinity’s reply papers on April 20, 2023. Reply papers were due April
18, 2023. (See Code Civ. Proc. § 1005(b) [requiring all reply papers to be filed at least five court days before
the hearing].) The objections are therefore untimely. Nonetheless, the Court will consider the
objections.
Trinity’s
objections to Plaintiff’s declarations, nos. 1, 2, and 3, are overruled.
Discussion.
Trinity moves for summary judgment,
or in the alternative, summary adjudication of each remaining cause of action
in Plaintiff’s FAC. Trinity argues: First, there is no evidence that the
Subject Loan was cancelled. Plaintiff’s claims are premised on Plaintiff having
received a Form 1099-C in 2008 when the Subject Loan was purportedly cancelled. But Plaintiff
admits that he is unable to locate the alleged Form 1099-C. In any case, federal
case law holds that a Form 1099-C by itself does not create a triable issue as
to whether a loan was cancelled. Even if Plaintiff produces a Form 1098, the
U.S. District Court for the Northern District of California has found that Form
1099-C is more probative of loan cancellation than Form 1098. Thus, Plaintiff’s
possible reliance on a Form 1098 also fails to establish that the Subject Loan
has been cancelled.
Second,
Trinity purchased the Subject Loan and obtained possession of the original Note
in 2014. Because Trinity is holder of the Note and entitled to enforce the
Note, the Subject DOT—and the power of sale thereunder—is still in full force
and effect.
Third,
Trinity did not violate the Truth in Lending Act (“TILA”). Trinity claims to fall under the small
servicer exception because during all relevant times it serviced 5,000 or fewer
mortgage loans. As such, Trinity was exempt from issuing monthly statements
while still permitted to charge interest and fees on the Subject Loan.
Finally,
because Plaintiff cannot establish that the Subject Loan was cancelled, or that
Trinity violated TILA by charging interest on the Subject Loan without sending
monthly statements to Plaintiff, each cause of action in the FAC fails.
In opposition, Plaintiff argues: First,
there is evidence the Subject Loan was cancelled. Plaintiff has declared, under
penalty of perjury, that he received a Form 1099-C cancelling the entire debt
owed on the Subject Loan as of October 2008. Although Trinity argues this is
not enough, Trinity’s argument is based on a 4th Circuit ruling that is not binding
on this court. Other courts have found that a 1099-C creates a dispute of fact.
Furthermore, Plaintiff has offered a Form 1098 indicating the Subject Loan was
cancelled in October 2008. The form reflects a balance due on the loan at the
end of 2008 of zero. Although Trinity argues that a Form 1098 is not probative
based on a Bankruptcy Court decision, Aniel v. HSBC Bank (N.D. Cal. 2021) 633 B.R. 368, Plaintiff
counters that the entries in the 1098 in this case reflect no transfers of the
loan, unlike the 1098 in Aniel.
Second,
Trinity does not have any records pertaining to the Subject Loan prior to 2014 when
it purportedly became the servicer. Even Trinity’s person most knowledgeable
could not confirm or deny that Regions Mortgage had serviced the Loan
previously. Trinity claims they are in possession of the original Note—they should
have to produce it.
Third,
Trinity violated TILA. Trinity admits that no monthly statements were sent to
Plaintiff during the time Trinity and its affiliate Trojan serviced the Subject
Loan. The only correspondence that Trinity sent to Plaintiff from October 2014
to 2020 was a letter from their foreclosing trustee before they recorded a
Notice of Default. Trinity nonetheless charged interest on the Loan, and
Trinity has not met its burden of showing that it is entitled to the small
servicer exemption under TILA. Under
TILA, a small servicer is a servicer that “[s]ervices, together with any
affiliates, 5,000 or fewer mortgage loans, for all of which the servicer (or an
affiliate) is the creditor or assignee” and Trinity has not
demonstrated that for all the loans in which it is the servicer it is also the
creditor or assignee.
Finally, the
remaining causes of action in the FAC do not fail.
Trinity’s reply was due on April 18,
2023, but was not filed until April 20, 2023. The Court may disregard it. That said, in reply, Trinity reiterates there
is no evidence the Subject Loan was cancelled. Even if there is a split of
authority over whether a 1099-C creates a triable fact, Plaintiff has not
actually produced a 1099-C for the Subject Loan. Plaintiff’s only evidence that he
was issued a 1099-C in connection with the Subject Loan is his own statement.
The 1098, Trinity contends, is not enough. Regarding alleged TILA violations,
Trinity qualifies as a small servicer. Trinity offers a declaration from its
president who attests that Trinity only services loan for which Trinity or
Trinity’s affiliates are the creditor or assignee. According to Trinity, this declaration
is not new evidence on reply—it’s a clarification of evidence submitted with
its original motion. Trinity agrees to allowing Plaintiff an opportunity to
provide supplemental briefing to respond to the supplemental declaration
presented concurrently with its reply.
Legal standard
“A party
may move for summary judgment in any action or proceeding if it is contended
that the action has no merit or that there is no defense to the action or
proceeding.” (Code Civ. Proc. § 437c(a).) The motion shall be granted if there
is no triable issue as to any material fact and the moving party is entitled to
judgment as a matter of law. (Id. § 437c(c).)
Similarly, “[a] party may move for summary adjudication as to one or more
causes of action within an action…if the party contends…that there is no
affirmative defense to the cause of action, that there is no merit to an
affirmative defense as to any cause of action…”
(Code Civ. Proc. § 437c(f)(1).)
“A motion for summary adjudication may be made by itself or as an
alternative to a motion for summary judgment and shall proceed in all
procedural respects as a motion for summary judgment.” (Id. §437c(f)(2).)
A defendant moving for summary judgment “has met his or her burden of
showing that a cause of action has no merit if the party has shown that one or
more elements of the cause of action...cannot be established.” (Code Civ.
Proc., § 437c(p)(2).) “[T]he initial burden is always on the moving party to
make a prima facie showing that there are no triable issues of material
fact.” (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510,
1519.) “Once the defendant...has met that burden, the burden shifts
to the plaintiff...to show that a triable issue of one or more material facts
exists as to the cause of action or a defense thereto.” (Code Civ. Proc.,
§ 437c(p)(2).) “If the plaintiff cannot do so, summary judgment should be
granted.” (Avivi v. Centro Medico Urgente Med. Ctr. (2008) 159 Cal.App.4th
463, 467.)
“When deciding whether to grant summary judgment, the court must consider
all of the evidence set forth in the papers (except evidence to which the court
has sustained an objection), as well as all reasonable inferences that may be
drawn from that evidence, in the light most favorable to the party opposing
summary judgment.” (Avivi, supra, 159 Cal.App.4th at 467;
see also Code Civ. Proc., § 437c(c).)
Analysis
The
parties do not dispute the following: In 2006, Plaintiff took out the Subject
Loan as a junior mortgage on his home. The Subject Loan allowed the Note to be
transferred. In February 2020, Plaintiff received a letter from Barrett Daffin
advising Plaintiff that Trinity was the servicer of the Subject Loan and had
authorized Barrett Daffin to initiate foreclosure of the DOT. Before that, Trinity
had never sent Plaintiff any monthly statements or communications regarding the
Loan. On February 5, 2021, a Notice of Default and Election to Sell Under Deed
of Trust was recorded on behalf of Trinity in connection with the Subject Loan.
However, the parties dispute whether the Subject Loan was forgiven (or
cancelled) when Plaintiff
modified his senior loan in 2008. The parties also dispute whether Trinity
qualifies as a small servicer under TILA—and thus whether Trinity was obligated
to send monthly statements while the Subject Loan was accruing interest.
Trinity
fails its initial burden of showing the loan was not cancelled in 2008.
As noted by Trinity in its moving
papers, many of Plaintiff’s claims are premised on the Subject Loan having been
cancelled in 2008. The initial burden is on Trinity to negate this element.
Trinity fails to meet its burden.
Trinity’s entire argument is that
Plaintiff offers inadequate evidence showing the Subject Loan was cancelled in
2008. Trinity misconceives its burden of
proof. “Summary judgment law in this
state, however, continues to require a defendant moving for summary judgment to
present evidence, and not simply point out that the plaintiff does not possess,
and cannot reasonably obtain, needed evidence. In this particular at least, it
still diverges from federal law. For the defendant must support the
motion with evidence including affidavits, declarations, admissions, answers to
interrogatories, depositions, and matters of which judicial notice must or may
be taken.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,
854-855, internal quotes omitted.)
To this extent, Trinity offers no evidence showing that the Subject Loan
was not cancelled. Trinity offers a blank endorsement and assignment executed
by the original lender in 2006—before Trinity acquired the Note. (Madden Decl.,
Ex. 2.) Trinity offers allonges transferring the Note to and from Trinity’s
affiliate Trojan—after Trinity acquired the Note. (Id., Exs. 3, 4.) Trinity
also offers the Subject DOT which was recorded in 2006, and the Notice of
Default and Election to Sell Under Deed of Trust relating to the DOT which was
recorded in February 2021. (Id., Exs. 5, 6.) But Trinity submits no documentation concerning
its acquisition of the Note, and nothing showing that the loan had not been
cancelled after 2008. Trinity offers no evidence of why, between September 2006
when it purchased the Subject Loan, and 2020, it never communicated with Plaintiff
once – in any way – whether to inquire about the loan, demand payment, or to
pursue other remedies. While it seeks to discredit the probative force of the
Form 1098, which indicates the Subject Loan’s cancellation on October 21, 2008,
Trinity offers nothing to meet its burden that the loan has not been cancelled.
In fact, other than allonges transferring the Note back and forth between
Trinity and its affiliate, Trinity does not offer any chain of custody for the
Note after the time Plaintiff alleges the Loan was cancelled. Nor does Trinity
offer any transactional documents indicating that value was paid and/or
received for the Note after 2008. Trinity provides no evidence concerning who
purchased the Note from the original lender, who held the note from 2006-2016,
and from whom Trinity purchased the note. The same applies to the the chain of trustees
on the DOT that is now being foreclosed on.
Most notably, Trinity does not explain why no one—including Trinity, its
affiliate, or the previous Note holder—attempted to collect monthly interest
payments on the Loan after 2008. The Loan calls for $843.47 monthly interest
payments. (Madden Decl., Ex. 1, ¶ 3.) Plaintiff offers evidence indicating interest
was paid on the Note up until 2008. (Aleman Decl., Ex. D.) Plaintiff attests the Loan was then cancelled in
2008. (Aleman Decl., ¶ 8.) Trinity offers no evidence of anyone attempting to
collect interest payments on the Loan from 2006 until Barret Daffin informed Plaintiff
of Trinity’s intent to foreclose in 2020. These circumstances strongly indicate
the loan was cancelled.
The only evidence Trinity offers is the declaration of its president who
states: “Since
purchasing the Subject Loan, Trinity has never seen nor been in possession of
any document or record that would show or suggest that the subject Loan had previously
cancelled.” (Madden Decl., ¶ 9.) This is not enough to satisfy the moving
party’s initial burden—especially considering all the evidence Trinity could
have conceivably offered.
Even if Trinity
had met its initial burden, Plaintiff creates a triable issue of fact. First,
Plaintiff offers a Form 1098—sent from the mortgage servicer in 2008—indicating
the Subject Loan was cancelled that year. Trinity does not dispute the validity
of the 1098. Rather, Trinity argues it is insufficient to create a triable
issue of fact. In support, Trinity points to federal case law holding that a
Form 1099-C is not enough (F.D.I.C. v. Cashion (4th Cir. 2013)
720 F.3d 169, 177), and a Form 1098 is less probative than a Form 1099-C (Aniel v. HSBC
Bank USA, National Association (N.D. Cal. 2021) 633 B.R. 368).
But
Plaintiff also offers his own declaration where he attests to the Subject Loan
being cancelled in 2008. (Aleman Decl., ¶ 8.) Plaintiff explains in his
declaration that in 2008 he was underwater on both the primary loan and Subject
Loan on his home. (Id., ¶ 7.) As a result, he negotiated a loan
modification in 2008, which resulted in the primary loan being reduced and the
Subject Loan being forgiven. (Ibid.) The parties agree that Plaintiff
was able to produce a 1099-C showing that $81,056.420 had been written off the primary
loan in 2018. In other words, the 1099-C is not direct evidence that the
Subject Loan was written off, but it corroborates Plaintiff’s testimony of a
significant loan reduction of the primary debt.
Trinity
has failed to meet its burden to make a prima facie showing that there are no triable
issues of material fact. Even if it had,
Plaintiff has met his burden of showing a triable issue of fact exists as to
whether the Subject Loan was cancelled in 2008.
Trinity
fails its initial burden of showing it qualified as a small servicer
The
2016 amendment to TILA requires mortgage servicers to provide periodic billing
statements. (12 C.F.R. § 1026.41(b).) However, a servicer is not required to
provide periodic statements for a loan during the period of time in which the
loan is charged off. (See 12 C.F.R. § 1026.41(e)(6)(i).) To qualify for and
maintain this exemption, the loan cannot accrue any additional fees or charges
during the time period in which the loan is charged off. (See 12 C.F.R. §
1026.41(e)(6)(i)(A).)
Trinity
admits that interest and fees accrued on the Subject Loan, but that periodic
statements were not sent to Plaintiff. However, according to Trinity this is
not a violation of TILA because Trinity qualifies for the small servicer
exception.
12 C.F.R.
§ 1026.41(e)(4)(i) states that a “creditor, assignee, or servicer is exempt
from the requirements of this section for mortgage loans serviced by a small
servicer.” The definition of a small servicer includes
a servicer that “[s]ervices, together with any affiliates, 5,000 or fewer
mortgage loans, for all of which the servicer (or an affiliate) is the creditor
or assignee.” (12 C.F.R. § 1026.41(e)(4)(ii)(A).)
To meet
its initial burden, Trinity offers a declaration from its president who states:
“From the time in which Trinity first purchased the Loan and gained possession
of the Note to the present, Trinity, along with its affiliated (including
Trojan), serviced less than 5,000 mortgage loan at all relevant times.” (Madden
Decl., ¶ 12.) In opposition, Plaintiff points out that 12 C.F.R. §
1026.41(e)(4)(ii)(A) defines a small servicer as a servicer that “[s]ervices,
together with any affiliates, 5,000 or fewer mortgage loans” and “for
all of which the servicer (or an affiliate) is the creditor or assignee.”
Indeed, the declaration from Trinity’s president does not establish that
Trinity was the creditor or assignee of all the loans it serviced during the
times relevant to this action. The declaration only establishes that Trinity
serviced less than 5,000 loans. Trinity has therefore failed to meet its burden
of showing exemption from the Truth-in-Lending Act.
Trinity
offers a supplemental declaration from its president with its reply papers. In
the supplemental declaration, Trinity’s president avers that Trinity and its affiliates
serviced less than 5,000 loans and “Trinity only services loan that either
Trinity or Trinity’s affiliates are the creditor or assignee of.” (Supp. Madden
Decl., ¶ 3.)
“[T]he
inclusion of additional evidentiary matters with the reply should only be
allowed in the exceptional case” and its an abuse of discretion for trial
courts to consider such evidence unless the opposing party has had notice and
an opportunity to respond. (Plenger v. Alza Corp. (1992) 11 Cal.App.4th
349, 362, fn. 8.)
Trinity’s
inclusion of additional evidence with its reply papers is not an exceptional
case. Not only has Plaintiff not had notice or an opportunity to respond to the
new evidence, but the Court barely has either, as Trinity’s reply was filed
only two court days before the hearing. Trinity will have an opportunity to
present this evidence at trial. For the purposes of this motion for summary
judgment, the Court declines to consider it.
Accordingly,
Trinity has failed to meet its initial burden of showing that it is a small
servicer and therefore exempt from the requirements of TILA.
The motion
for summary adjudication as to the first cause of action promissory estoppel is
granted.
Trinity
argues Plaintiff’s first cause of action for promissory estoppel fails because
Trinity did not promise loss mitigation options as alleged in the FAC and Plaintiff
has failed to demonstrate how his actions were the result of any
representations made by Trinity.
“The elements of a promissory estoppel claim are (1) a promise clear
and unambiguous in its terms; (2) reliance by the party to whom the promise is
made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the
party asserting the estoppel must be injured by his reliance.” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th
935, 945.)
Here,
Trinity meets its burden of showing it did not make a clear and unambiguous
promise to Plaintiff. Trinity points out that Plaintiff admitted in his ex
parte application
for a restraining order that Trinity was only offering Plaintiff cash for
keys—that Trinity was “not working with [Plaintiff].” (Clark Decl., ¶ 3, Ex. 1
at ¶ 10.) Plaintiff does not dispute this. Trinity meets its burden.
In
response, Plaintiff does not offer any evidence creating a triable issue of
fact as to whether Trinity made a promise to Plaintiff.
Accordingly,
summary adjudication as to the first cause of action for promissory estoppel is
granted.
The motion
for summary adjudication as to the second cause of action for unfair business
practices is denied.
Trinity
argues the second cause of action for unfair business practices fails because
Trinity was assigned the Subject Loan and did not violate TILA. As noted above,
Trinity has not negated Plaintiff’s allegations that the Subject Loan was cancelled
and Trinity is subject to the requirements of TILA. Accordingly, summary
adjudication as to this cause of action is denied.
The motion
for summary adjudication as to the third cause of action for wrongful
foreclosure is granted.
Trinity argues
the third cause of action for wrongful foreclosure fails because a foreclosure
sale has not occurred.
“The basic elements of a tort cause of action for wrongful foreclosure
track the elements of an equitable cause of action to set aside a foreclosure
sale. They are: ‘(1) the trustee or mortgagee caused an illegal, fraudulent, or
willfully oppressive sale of real property pursuant to a power of sale in a
mortgage or deed of trust; (2) the party attacking the sale (usually but not
always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases
where the trustor or mortgagor challenges the sale, the trustor or mortgagor
tendered the amount of the secured indebtedness or was excused from tendering.’
” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394,
408.)
Here,
Trinity contends in its separate statement that a trustee’s sale has yet to occur.
(SSUMF 28.) Plaintiff admits a foreclosure sale has not occurred. (Ibid.) Since the cause of action for
wrongful foreclosure requires that a trustee’s sale has actually occurred,
Trinity is entitled to judgment as a matter of law on this claim.
Accordingly,
summary adjudication as to the cause of action for wrongful foreclosure is granted.
The motion
for summary adjudication as to the fifth cause of action for violation of Civil
Code section 2924.17 is denied.
Trinity
argues the fifth cause of action for violation of Civil Code section 2924.17
fails because Trinity was permitted to charge both fees and interest on the Subject
Loan under the small servicer exception of TILA—and therefore Plaintiff has not
presented any facts to dispute the accuracy of the Notice of Default that was
recorded. As noted above, Trinity has not established as a matter of law that
it qualified for the small servicer exception under TILA. Accordingly, summary
adjudication as to this cause of action is denied.
Summary
adjudication as to this cause of action is denied for the reasons stated above.
The motion
for summary adjudication as to the seventh cause for violation of the Fair Debt
Collection Practice Act, and the eighth cause of action for slander of title
are denied.
Trinity
argues the seventh cause of action for violation of the Federal and California Rosenthal
Fair Debt Collection Practice Act and eighth cause of action for slander of fail
because they are predicated on the Subject Loan being cancelled and violations
of TILA that did not occur. As noted above, Trinity has not negated Plaintiff’s
allegations that the Subject Loan was cancelled, and Trinity has not
established as a matter of law that it qualified for the small servicer
exception under TILA. Accordingly, summary adjudication as to these two causes
of action is denied.
CONCLUSION:
Defendant Trinity Financial Services Inc.’s motion for
summary judgment is DENIED.
Defendant Trinity Financial Services Inc.’s motion for
summary adjudication as to second cause of action for unfair business practices,
fifth cause of action for violation of Civil Code section 2924.17, sixth cause of action for violation of TILA, seventh cause of action for
violation of the Fair Debt Collection Practice Acts, and eighth cause of action
for slander of title is DENIED.
Defendant Trinity Financial Services Inc.’s motion for
summary adjudication as to the first cause of action for promissory estoppel and
third cause of action for wrongful foreclosure is GRANTED.