In re Residential Capital, LLC
IN RE: RESIDENTIAL CAPITAL, LLC, Debtors
Attorneys
Karen Rozier, Pro Se, 7957 Dahlia Circle, Buena Park, California 90620, By: Karen Rozier, Morrison & Foerster LLP, Attorneys for ResCap Borrower Claims Trust, 250 West 55th Street, New York, New York 10019, By: Norman S. Rosenbaum, Esq., Jordan A. Wishnew, Esq., Meryl Roth-child, Esq.
Full Opinion (html_with_citations)
Jointly Administered
MEMORANDUM OPINION AND ORDER SUSTAINING THE RESCAP BORROWER CLAIMS TRUSTâS OBJECTION TO THE CLAIMS FILED BY KAREN MICHELE RO-ZIER
In December 2005, Karen Michele Rozier (âRozierâ) took out a home mortgage loan with non-debtor WMC Mortgage Corporation (âWMCâ). After WMC discovered- that it had not provided Rozier an accurate Truth in Lending Act (âTILAâ) disclosure statement with respect to her
More than four months after Rozier entered into the loan modification and general release, Debtor GMAC Mortgage, LLC (âGMACMâ) acquired servicing rights to Rozierâs loan, and Debtor Executive Trustee Services, LLC (âETSâ) was made substitute trustee under the applicable deed of trust. Rozier defaulted on her loan in March 2008, and the Debtors initiated a foreclosure action. The foreclosure sale was cancelled after the Debtors attempted to work out repayment plans and a short sale with Rozier, which she ultimately can-celled.
In August 2011, Rozier filed a chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Central District of California. Rozierâs chapter 13 bankruptcy case was converted to a case under chapter 7 of the Bankruptcy Code on January 12, 2012.
In September 2012, the Debtors again initiated foreclosure and executed a deed upon sale that was rescinded after ETS discovered a defect in the applicable notice. The Debtors corrected the defect and issued another notice of sale in October 2012. In posting this notice of sale on Rozierâs home, the Debtorsâ posting agent was accompanied by several local police officers due to alleged threats Rozier had made in the past. The Debtors subsequently transferred servicing rights of Ro-zierâs loan to Ocwen Loan Services, LLC (âOcwenâ) in February 2013, and transferred their interest in Rozierâs deed of trust to U.S. Bank National Association (âUS Bankâ). A foreclosure sale was not completed during the time the Debtors serviced the loan or held an interest in the deed of trust.
Rozier alleges a litany of claims against the Debtors, which she previously asserted in an action commenced in California state court on September 27, 2012, days after the' September 2012 deed upon sale was executed. Rozierâs claims generally arise from the Debtorsâ allegedly wrongful efforts to foreclose on her home. Among other claims, Rozier asserts causes of action for wrongful foreclosure, negligence, violations of the California Civil Code, intentional infliction of emotional distress, defamation of character, and violations of the California Business and Professional Code section 17200, et seq. (the âUCLâ). As set forth below, each of her claims fails to raise a plausible basis for the Debtorsâ liability. The Court therefore SUSTAINS the Debtorsâ objection to her claims in its entirety.
I. BACKGROUND
The ResCap Borrower Claims Trust (the âTrustâ) objects to two claims filed by Karen Rozier (the âObjection,â ECF Doc. # 7474):(1) claim number 4738 against GMAC (the âGMACM Claim,â Obj. Ex. 1-A); and (2) claim number 5632 against ETS (the âETS Claim,â Obj. Ex. 1-B) (together, the âClaimsâ). The Objection is supported by the declaration of Deanna Horst (the âHorst Declaration,â Obj. Ex. 3-A), Chief Claims Officer for the ResCap Liquidating Trust (the âLiquidating Trustâ), and the declaration of Yaron Sha-ham (the âShaham Declaration,â Obj. Ex. 3-B), co-counsel for the Liquidating Trust.
Rozier filed an opposition to the Objection (the âOpposition,â ECF Doc. # 7620), supported by a declaration (the âRozier Declaration,â Opp. Ex. A). Rozier also filed two motions to strike (the âMotions to Strikeâ): (1) Rozierâs motion to strike the
The Trust filed a reply (the âReply,â ECF Doc. # 7655) and an objection to Rozierâs Motions to Strike (the âStrike Objection,â ECF Doc. # 7654). Additionally, the Trust filed a supplemental declaration of Deanna Horst (the âSupplemental Horst Declaration,â ECF Doc. # 7658), correcting certain errors made in the Horst Declaration, and submitting a corrected exhibit to the Objection. Rozier filed an objection to the Trustâs Reply (the âReply Objection,â ECF Doc. # 7670), arguing that she was prejudiced by the fact that the Reply was filed less than 48 hours before the scheduled October 22, 2014 hearing (the âHearingâ). The Court heard argument on the Objection and ordered the Trust to file a supplemental declaration addressing one of the exhibits submitted in support of the Trustâs Objection. (See Oct. 22, 2014 Hrg. Tr. 44:1-4, ECF Doc. #7686.) The Court also gave Rozier the opportunity to file supplemental papers. (See id. 44:6-21.) Thereafter, the Trust filed the second supplemental declaration of Deanna Horst (the âSecond Supplemental Horst Declaration,â ECF Doc. # 7679), and Rozier filed a supplemental opposition and declaration (the âSupplemental Opposition,â ECF Doc. # 7730).
A. Procedural History
On My 14, 2012 (the âPetition Dateâ), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. The general bar date to file proofs of claim was originally set as November 9, 2012, and was extended to November 16, 2012 at 5:00 p.m. (Prevailing Eastern Time) (ECF Doc. #2093). The Claims were timely filed on November 12, 2012.
B. Factual Background
1. Rozierâs Loan History
On December 23, 2005, Rozier executed a $576,000 note in favor of WMC (the âLoanâ or the âNote,â Obj. Ex. 3-A.l), secured by a mortgage and deed of trust (the âDeed of Trust,â Obj. Ex. 3-A.2) on real property located at 7957 Dahlia Circle, Buena Park, California, 90620 (the âPropertyâ). (Horst Decl. ¶ 11.) Westwood Associates (âWestwoodâ) was the trustee of the Deed of Trust, which named Mortgage Electronic Registration Systems (âMERSâ) as the beneficiary. (Id.) Rozier subsequently obtained a second loan in the amount of $144,000, secured by another deed of trust.
On May 22, 2006, Rozier entered into a modification of the Note with WMC, reducing Rozierâs monthly payments, interest rate, and first change date (the âModification of Noteâ). (Id. ¶ 13.) She signed the Modification of Note after receiving a letter from WMC (the âNotice of Right to Cancel,â Obj. Ex. 3-A.3), dated February 24, 2006, notifying her that WMC did not provide a TILA disclosure statement with respect to her Loan. (See Horst Decl. ¶ 12.) The Notice of Right to Cancel informed Rozier that she had the option to rescind the Note, which she exercised on February 28, 2006. (See id.; âRozier Rescission Letter,â Obj. Ex. 3-A.4.) On May 5, 2006, WMC sent Rozier a letter (the âWMC Rescission Response,â Ex. 3-A.5), acknowledging its receipt of the Rozier Rescission Letter, and providing Rozier with the options of tendering the amount
On October 3, 2006, servicing of the Loan was transferred to GMACM. (See id. ¶ 14.) Residential Funding Corporation (âRFCâ) became master servicer of the Note from January 1, 2007 until February 15, 2013, when servicing was transferred to Ocwen. (Id.) Rozier failed to make her monthly Loan payments beginning December 1, 2007. (See id. ¶¶ 15-16.)
On March 3, 2008, ETS was named substitute trustee of the Deed of Trust (the âMarch 2008 Substitution,â Obj. Ex. 3-A.8).
Following the failed repayment plan and short sale attempts, Rozier sent letters to the Debtors and other parties who subsequently acquired an interest in the Loan and servicing rights to the Loan (the âRo-zier Letters,â Obj. Ex. 3-A.22). (Horst Decl. ¶ 28.) The Rozier Letters contain allegations of âforgedâ signatures on the Deed of Trust and the Note, based on alleged discrepancies among serial numbers that appear on her Loan documents. (See id.) The Rozier Letters set forth that the Debtors violated the terms of TILA, the Real Estate Settlement Procedures Act (âRESPAâ), and the Fair Debt Collection Practices Act. (See id.)
The Debtors responded to the Rozier Letters (Obj. Ex. 3-A.23), sending her the documents she requested and concluding that there was âno basis to conclude that there were any errors in her file to warrant rescission.â (See Horst Decl. ¶28.) On March 3, 2011, Westwood assigned its interest as trustee to Bank of America, N.A. (âBOAâ) pursuant to an assignment of the Deed of Trust (the âBOA Assign
GMACM foreclosed on the Loan on September 24, 2012 and ETS executed a deed upon sale of the Property (the âSeptember 2012 Deed Upon Sale,â Obj. Ex. 3-A.18).
Servicing was transferred to Ocwen on February 15, 2013. (See Supp. Horst Decl. ¶ 5.) On March 25, 2013, GMACM transferred all beneficial interests and rights in the Deed of Trust to U.S. Bank, successor in interest to BOA.
2. Rozierâs Litigation History
On October 28, 2008, Rozier filed a complaint against GMACM and MERS in California state court, challenging the validity of the March 2008 Default Notice. (See Obj. Ex. 4.) The case was removed to the United States District Court for the Central District of California on August 18, 2009. (See id.) Rozier claimed that GMACM was illegally conducting business in California, that ETS was not a trustee to the Deed of Trust and Note, and that
On September 27, 2012, Rozier filed another complaint in California state court against GMACM, ETS, BOA, and several John Doe defendants (the âCalifornia Actionâ). (See Shaham Decl. ¶ 4.) In her first amended complaint filed in the California Action (the âComplaint,â Obj. Exs. 1-A at 3-71, 1-B at 5-76), Rozier alleged wrongful foreclosure claims against GMACM and ETS, and sought compensation for damages.
On February 5, 2013, David Rozier, Sr., as trustee for the Rozier Trust, filed an ex-parte application in California state court, seeking a temporary restraining order against U.S. Bank to prevent U.S. Bank from foreclosing on the Property. (See Shaham Decl. ¶7; Obj. Ăx. 3-B.4.) The California court granted a preliminary injunction against U.S. Bank. (See Shaham Decl. ¶ 7; Obj. Ex. 3-B.5.)
In the California Action, Rozier received permission to file a third amended complaint solely against BOA, U.S. Bank, and RFC for wrongful foreclosure; nonetheless, Rozier again amended her Complaint to include eight additional claims and also named Ocwen as a defendant. (See Sha-ham Decl. ¶ 8.) On November 21, 2013, Rozierâs third amended complaint against RFC was voluntarily dismissed without prejudice. (See id. at ¶ 9.) None of the Debtor entities are currently parties to the California Action.
3. Rozierâs Bankruptcy Case
Rozier filed a chapter 13 bankruptcy petition on August 22, 2011. (See Obj. Ex. 8.) On January 12, 2012, the case was converted to chapter 7. (See Obj. Ex. 9.) As of the date of the Objection, Rozierâs bankruptcy case was still pending. (Obj. ¶ 51.) On June 18, 2012, U.S. Bank filed a motion for relief from the automatic stay as to the Property, and Rozier filed a response. (See Obj. Ex. 11.) On June 30, 2012, the bankruptcy court entered an order lifting the stay. (See id.) Rozier then filed (1) an appeal to the Ninth Circuit Bankruptcy Appellate Panel (the âBAPâ) (see Obj. Ex. 12); (2) a motion for violation of the automatic stay (see Obj. Ex. 13); and (3) a notice of appeal to the United States Court of Appeals for the Ninth Circuit (the âNinth Circuitâ) after the BAP affirmed the bankruptcy courtâs order lifting the stay (see Obj. Ex. 16). The Ninth Circuit appeal remains pending, but it does not name any of the Debtors as parties to the action. (See id.)
On November 14, 2012, Rozier filed the GMACM Claim in the amount of $666,000.00 plus punitive damages. (See Obj. Ex. 1-A at 1.) The GMACM Claim is based on âwrongful foreclosure / IFR / Civil Case 30-2012-00601310 [the California Action.]â (See id.) Rozier appended the Complaint filed in the California Action to the GMACM Claim, asserting (i) wrongful foreclosure; (ii) temporary and permanent injunctive relief; (iii) violation of California Civil Code section 2923.5; (iv) violation of California Civil Code section 2924; (v) slander of title; (vi) violation of the UCL; (vii) negligence; (viii) defamation of character; and (ix) quiet title. (See id. at 3-71.) Rozier alleges that GMACM, as the loan servicer, had been improperly servicing and crediting Rozierâs monthly payments to the allegedly rescinded Note rather than to the allegedly separate note executed after rescission and in place of the Note. (See Obj. ¶ 60.) Rozier also alleges that the Deed of Trust on the Property is invalid. (See id.)
On November 16, 2012, Rozier filed the ETS Claim in the amount of $666,000.00 plus punitive damages. (See Horst Decl. ¶ 30; Obj. Ex. 1-B at 1.) The ETS Claim is based on âgross negligence, harassment, other affirmative defenses raised 30-2012-00601310.â (See Obj. Ex. IB at 1.) As with the GMACM Claim, Rozier appended the Complaint filed in the California Action to the ETS Claim. (See Obj. Ex. 1-B at 5-76.) Rozier alleges that ETS was not a legally recognized corporation in California during the time it served as trustee of her Deed of Trust, and therefore ETS violated both California and federal law by recording notices relating to Rozierâs default on her Note. (See Obj. ¶ 61.) Rozier also alleges that ETS caused embarrassment, loss of employment, loss of credit, litigation costs, emotional duress, and a negative impact on her - husbandâs business. (See id.)
5. Rozierâs Prior Motions Before the Court
Rozier has requested immediate payment of her Claims on several occasions: (i) $666,000.00 for the ETS Claim; and (ii) $29,175,120.01 for the GMACM Claim (the âMotions for Payment,â ECF Doc. # 6173, 6173-1, 6401, 6402). The Trust points out that the face amount of the GMACM Claim is $666,000.00, in contrast to the stated amount of $96,927,309.00 requested in the Motions for Payment. (See Obj. ¶ 66; Obj. Ex. 1-A at 1.) According to the Trust, prior to Rozier filing the Motions for Payment, the Trust was not informed that Rozier had increased the amount of the GMACM Claim from $666,000.00 to $96,927,309.00. (See Obj. 1166.) The Trust also notes that the Claims are classified as general unsecured claims in the first Motion for Payment, but Rozier reclassified the Claims as administrative expense claims in subsequent Motions for Payment. (See id.)
. The Trust filed an objection to the Motions for Payment (ECF Doc. # 6461), alleging that Rozier was not entitled to payment on her Claims since they were not yet deemed âAllowed Borrower Claims.â (See Obj. ¶ 67.) Rozier filed a reply in support of her Motions for Payment (ECF Doc. # 6597), characterizing the Debtorsâ response as ânonresponsive, vague, and misleadingâ and challenging the Trustâs right to evaluate and determine the allowance or disallowance of claims. (See Horst Decl. ¶ 36.)
The Court entered an order sustaining the Trustâs objection to the Motions for Payment (ECF Doc. # 6519). Rozier filed a motion for reconsideration of the Courtâs order (ECF Doc. # 6861); the Trust filed an objection in response (ECF Doc. #7004). (See Obj. ¶70.) The Court en
Rozier filed a second motion for reconsideration, alleging that the Clerk of the Court colluded with the Debtors, selectively choosing when to file documents on ECF. (See ECF Doc. # 7121.) The Court entered an order denying Rozierâs second reconsideration motion and directing the Clerk of the Court not to accept any further pleadings by Rozier in connection with her Motions for Payment. (See ECF Doc. # 72101)
C. The Objection
The Trust asserts that Rozierâs Claims, which relate to causes of action brought against the Debtors prior to the petition date, are devoid of merit. (Obj.f 2.) Her wrongful foreclosure claim purportedly fails under Californiaâs non-judicial foreclosure scheme, under which a homeowner like Rozier lacks standing to challenge the authority of a party to initiate foreclosure. (See id. ¶¶ 2, 85-87.) Moreover, Rozier has been delinquent on her Loan for the last six years, and the Debtors had authority to foreclose on her Property. (See id.) According to the Trust, Rozier mistakenly claims that her Note and Deed of Trust are void or voidable because she purports to have rescinded both instruments; however, her subsequent modification of such documents negated her earlier rescission notice. (Id. ¶ 3.) Even if her Claims had merit, they cannot be brought by Rozier given her pending chapter 7 bankruptcy case; only the chapter 7 trustee would have standing to pursue such Claims. (Id. ¶ 7.)
D. The Opposition and the Motions to Strike
Rozier argues that the Objection has no merit because the Trust has not met its burden of proving her Claims fail while she has met her burden of establishing the validity of her Claims.
She also contends that the Horst Declaration and the Shaham Declaration contain untrue statements and therefore moves to strike them in their entirety. (See id. ¶¶ 2-3; id. Exs. B-C.) The Shaham Motion to Strike sets forth that Shaham misstated material facts, including that Rozierâs Loan had been placed into a U.S. Bank securiti-zation trust rather than a BOA Residential Asset Mortgage Products, Inc. (âRAMPâ) trust. (See Opp. Ex. B ¶ 1.) Rozier also contends that Shaham engaged in outrageous behavior in the California Action, including by âfalsely prosecuting [Rozier] for 'workplace violenceâ.... â (Id. ¶ 14.) The Horst Motion to Strike sets forth that Horst is unqualified and incompetent to provide her declaration. (See Opp. Ex. C ¶¶ 1- 4.) Rozier argues that the Horst Declaration contains a number of misstatements, omissions, and lies, and Rozier sets forth a series of alleged inconsistencies contained in the Horst Declaration. (Id. ¶¶ 7-26.)
The Trust argues that, contrary to Rozierâs assertion otherwise, the Trust sufficiently rebutted the prima facie validity of her Claims. (See Reply ¶ 3.) Rozier, on the other hand, fails to meet her burden of establishing the validity of the legal predicates of her Claims, including by showing any nexus between the Debtorsâ actions and her alleged damages. (Id. ¶ 1.) According to the Trust, Rozier only addresses a few of the several causes of action underlying her Claims; with respect to the causes of action she does address, she does not provide further legal or factual support but rather offers âunsubstantiated statements and allegations that do not support valid causes of action against the Debtors .... â (Id. ¶ 5.) The Trust reiterates that Rozier lacks standing to bring her Claims as a chapter 7 debtor, noting that Rozier has not provided the Trust with any notice of abandonment filed by the chapter 7 trustee in her bankruptcy case with respect to her estateâs causes of action, and the chapter 7 trustee â who was noticed with the Objection â has not filed any response or otherwise contacted the Trust. (See id. ¶ 11.)
With respect to the Motions to Strike, the Trust argues they âare not only frivolous; [but] more importantly, they fail to meet the requisite legal standards required to warrant the Courtâs striking either the Horst Declaration or the Shaham Declaration.â (Strike Obj. ¶¶ 2, 12-13.) According to the Trust, the Motions to Strike misconstrue the statements contained in the Objectionâs supporting declarations and contain baseless allegations against the declarants. (Id. ¶ 1.) The Trust contends that both the Horst Declaration and the Shaham Declaration are based on the personal knowledge of the declarants. (See id. ¶¶ 3-4.) The Trust concedes that the Horst Declaration contained certain errors, but notes that the Supplemental Horst Declaration sought to correct those erroneous statements premised on a mistakenly filed document. (See id. ¶¶ 13 n.3,15.)
II. DISCUSSION
A. Motions to Strike
Under Rule 12(f) of the Federal Rules of Civil Procedure, a court âmay strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.â Fed. R. Civ. P. 12(f). Rozierâs Motions to Strike are improper because Rule 12(f) âallows a court to strike pleadings only.â Granger v. Gill Abstract Corp., 566 F.Supp.2d 323, 334 (S.D.N.Y.2008) (emphasis added) (citations omitted). âMotions, declarations and affidavits are not pleadings.â Id. at 335 (citing Fed. R. Civ. P. 7(a) (defining pleadings as the complaint, answer, eounter- and crossclaims); Sierra v. United States, No. 97 Civ. 9329(RWS), 1998 WL 599715, at *9 (S.D.N.Y. Sept. 10, 1998) (denying plaintiffs motion to strike defendantâs motion to dismiss because a motion is not a pleading)). The Motions to Strike are therefore denied because they do not comport with Federal Rule of Civil Procedure 12(f).
Moreover, the Motions to Strike fail to the extent that they seek to strike inconsistent testimony in the Objectionâs supporting declarations since âRule 12(f) does not allow a document to be stricken because it is allegedly inconsistent with a previous position.â Id.; see Trinidad v. Pret a Manger (USA) Ltd., 962 F.Supp.2d 545, 553 (S.D.N.Y.2013) (âThe mere fact that testimony is inconsistent is insufficient to justify striking an entire document.â) (citation omitted). The Supplemental Horst Declaration corrected
B. Standing
The Trust argues that Rozier lacks standing to bring her Claims because she is currently, and was at the time she filed the Claims, a debtor in a chapter 7 bankruptcy case; thus, only the chapter 7 trustee has standing. Under chapter 7 of the Bankruptcy Code, a trustee is appointed as representative of the estate and is vested with control over the property of the estate, including causes of action that arose prepetition. 11 U.S.C. §§ 323(a), 704. Courts hold that the chapter 7 trustee has the exclusive power to assert pre-petition legal claims on behalf of the estate. See, e.g., In re Spirtos v. One San Bernardino Cnty.Super. Ct. Case No. SPR 0221, 443 F.3d 1172, 1176 (9th Cir.2006) (â[T]he bankruptcy code endows the bankruptcy trustee with the exclusive right to sue on behalf of the estate.â); Moneymaker v. Cohen (In re Eisen), 31 F.3d 1447, 1451 n. 2 (9th Cir.1994) (holding that debt- or lacked standing to appeal orders dismissing adversary proceedings brought by chapter 7 trustee, because trustee was representative of estate and therefore âthe proper party in interest and the only person with standing to appeal the bankruptcy courtâs orderâ (quoting Hancock Bank v. Jefferson, 73 B.R. 183, 185 (S.D.Miss.1986))). â[A] Chapter 7 debtor may not prosecute on his or her own a cause of action belonging to the bankruptcy estate unless the claim has been abandoned by the trustee.â Bostonian v. Liberty Savs. Bank, 52 Cal.App.4th 1075, 61 Cal.Rptr.2d 68, 71 (1997) (citations omitted).
Whether Rozier has standing turns on whether her claims accrued before or after the chapter 7 petition date: claims that accrued prepetition become property of her estate and may only be brought by the chapter 7 trustee, while claims that accrued postpetition did not become property of her chapter 7 estate and may be asserted by Rozier. See Griffin v. Allstate Ins. Co., 920 F.Supp. 127, 130 (C.D.Cal.1996) (finding that chapter 7 debtor lacked standing to assert causes of action accruing prepetition, because such causes of action were property of the estate and âremain[ed] part of the bankruptcy estate
Rozier filed a chapter 13 bankruptcy petition on August 22, 2011 (Obj. Ex. 8), and on January 12, 2012 the case was converted to chapter 7 and a chapter 7 trustee was appointed (id. Ex. 9). Her Claims were filed on November 12 and 16, 2012, while Rozier was still a chapter 7 debtor. (See Obj. Exs. 1-A, 1-B.) The Trust conceded at the Hearing that Rozier did not lack standing to bring the totality of her Claims; Rozier has standing to assert the asserted causes of action that accrued after January 12, 2012 â the date Rozierâs chapter 13 case was converted to chapter 7. (See Oct. 22, 2014 Hrg. Tr. 11:5â 8.) The Trust therefore acknowledged that Rozier would have standing to bring her causes of action for intentional infliction of emotional distress, wrongful foreclosure, negligence, defamation, violation of the UCL, and claims based on false instruments to the extent such claims accrued after January 12, 2012. (See id. 12:17-14:7.) With respect to all claims based on events occurring prior to January 12, 2012, the Trust maintained that Rozier lacks standing to bring such claims. (See id. 11:18-12:11.)
Rozier attaches to her Supplemental Opposition a document purporting to be an email to her from the chapter 7 trustee of her estate, in which the trustee indicates that he does not object to Rozier asserting claims she may possess in the Debtorsâ chapter 11 cases so long as any distribution received on account of such claims is held pending the trusteeâs further instruction. (Supp.Opp. Ex. 7.) However, section 554 of the Bankruptcy Code provides that notice and a hearing is required to abandon estate property. 11 U.S.C. § 554(a) â (b); see also Pace v. Battley (In re Pace), 146 B.R. 562, 564 (9th Cir. BAP 1992) (âAbandonment pursuant to § 554(a) or (b), according to Federal Rule of Bankruptcy Procedure 6007, requires notice, a hearing, and an order of the court authorizing the abandonment.â) (citations omitted). âSection 554(d) explicitly provides that when property is not effectively abandoned in accordance to § 554(a), it remains property of the estate.â Holta v. Zerbetz (In re Anchorage Nautical Tours, Inc.), 145 B.R. 637, 642 (9th Cir. BAP 1992). Abandonment is only effective if notice and a hearing is provided to creditors. Id. (finding that assigned vessel remained property of the debtorsâ estate since notice and a hearing was not provided to creditors). Because Rozierâs chapter 7 trustee has not formally sought and obtained approval of the abandonment of the claims against the Debtors, they remain property of her estate. Accordingly, Rozier lacks standing to assert any claims arising prior to January 12, 2012.
C. Claims Objections
Correctly filed proof of claims âconstitute prima facie evidence of the validity and amount of the claim.... To overcome this prima facie evidence, an objecting party must come forth with evidence which, if believed, would refute at least one of the allegations essential to the claim.â Sherman v. Novak (In re Reilly), 245 B.R. 768, 773 (2d Cir. BAP 2000). By producing âevidence equal in force to the prima facie case,â an objector can negate a claimâs presumptive legal validity, thereby shifting the burden back to the claimant to âprove by a preponderance of the evidence that under applicable law the claim should be allowed.â Creamer v. Motors Liquidation Co. GUC Trust (In re Motors Liquidation Co.), No. 12 Civ. 6074(RJS), 2013 WL 5549643, at *3 (S.D.N.Y. Sept. 26, 2013) (internal quotation marks omitted). If the objector does not âintroduce[] evidence as to the invalidity of the claim or
Bankruptcy Code section 502(b)(1) provides that claims may be disallowed if âunenforceable against the debtor and property of the debtor, under any agreement or applicable law.â 11 U.S.C. § 502(b)(1). To determine whether a claim is allowable by law, bankruptcy courts look to âapplicable nonbankruptcy law.â In re W.R. Grace & Co., 346 B.R. 672, 674 (BankrD.Del.2006).
Federal pleading standards apply when assessing the validity of a proof of claim. See, e.g., Residential Capital, 518 B.R. at 731; In re DJK Residential LLC, 416 B.R. 100, 106 (Bankr.S.D.N.Y.2009) (âIn determining whether a party has met their burden in connection with a proof of claim, bankruptcy courts have looked to the pleading requirements set forth in the Federal Rules of Civil Procedure.â) (citations omitted). Accordingly, Rozier must allege âenough facts to state a claim for relief that is plausible on its face.â Vaughn v. Air Line Pilots Assân, Intâl, 604 F.3d 703, 709 (2d Cir.2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). âWhere a complaint pleads facts that are merely consistent with a defendantâs liability, it stops short of the line between possibility and plausibility of entitlement to relief.â Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation and internal quotation marks omitted). Plausibility âis not akin to a probability requirement,â but rather requires âmore than a sheer possibility that a defendant has acted unlawfully.â Id. (citation and internal quotation marks omitted). The court must accept all factual allegations as true, discounting legal conclusions clothed in factual garb. See, e.g., id. at 677-78, 129 S.Ct. 1937; Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111, 124 (2d Cir.2010) (stating that a court must âassum[e] all well-pleaded, nonconclusory factual allegations in the complaint to be trueâ (citing Iqbal, 556 U.S. at 678, 129 S.Ct. 1937)). The court must then determine if these well-pleaded factual allegations state a âplausible claim for relief.â Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (citation omitted).
Courts do not make plausibility determinations in a vacuum; it is a âcontext-specific task that requires the reviewing court to draw on its judicial experience and common sense.â Id. (citation omitted). A claim is plausible when the factual allegations permit âthe court to draw the reasonable inference,that the defendant is liable for the misconduct alleged.â Id. (citation omitted). A claim that pleads only facts 'that are âmerely consistent with a defendantâs liabilityâ does not meet the plausibility requirement. Id. at 678, 129 S.Ct. 1937 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). âA pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.â Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955) (internal quotation marks omitted). âThreadbare recitals of the-elements of a cause of action, supported by mere conclu-sory statements, do not suffice.â Id. (citation omitted). âThe pleadings must create the possibility of a right to relief that is more than speculative.â Spool v. World Child Intâl Adoption Agency, 520 F.3d 178, 183 (2d Cir.2008) (citation omitted).
To support her claims grounded in fraud, Rule 9(b) of the Federal Rules of Civil Procedure require Rozier to âstate with particularity the circumstances consti
Although â[claims] drafted by pro se [claimants] are to be construed liberally, [ ] they must nonetheless be supported by specific and detailed factual allegations sufficient to provide the court and the defendant with âa fair understanding of what the [claimant] is complaining about and ... whether there is a legal basis for recovery.â â Kimber v. GMAC Mortgage, LLC (In re Residential Capital, LLC), 489 B.R. 489, 494 (Bankr.S.D.N.Y.2013) (quoting Iwachiw v. New York City Bd. of Elections, 126 Fed.Appx. 27, 29 (2d Cir.2005)) (ellipsis in original).
D. Rozierâs Claims
1. Wrongful Foreclosure
The Trust argues that Rozierâs wrongful foreclosure claim is meritless for three reasons. First, GMACM and ETS had the right to foreclose on the Property following Rozierâs continued payment defaults beginning December 2007. (Obj-¶ 83.) The Trust further asserts that the Debtorsâ foreclosure on Rozierâs Property was initiated pursuant to a valid Note and Deed of Trust; the Note and Deed of Trust that Rozier purports to have rescinded were validly modified, effectively waiving Rozierâs rescission. (Id. ¶¶ 83-84.)
Second, the Trustee contends that Rozier lacks standing to challenge the Debtorsâ foreclosure, because the California statute enabling nonjudicial foreclosure sales does not permit judicial actions to determine whether âthe party initiating foreclosure is so authorized-â (Id. ¶ 86.) Additionally, since Rozier transferred her interest in the Property to the Rozier Trust in July 2011, the Trust argues that Rozier no longer has an interest in the Property and therefore lacks standing to challenge the foreclosure. (Id, ¶ 87.)
Third, the Trust alleges that âa prerequisite to challenging a foreclosure sale [under California law] is tendering the amount owed under the promissory note, or at least making a good faith allegation that the plaintiff is ready and able to make such a tender.â (Id. ¶ 91.) While Rozier asserts that she has repeatedly offered to tender payment for her May 28, 2006 loan but refuses to tender payment for any amounts due on the purportedly rescinded Note, the Trust contends that the Note is the only valid Note and is the subject of all foreclosure activity. (Id. ¶ 92.) Since Ro-zier has not tendered payment and has stated that she does not intend to tender payment, the Trust asserts that she cannot challenge the foreclosure action. (Id.)
While Rozierâs arguments in response are disjointed and fragmented, the gravamen of her wrongful foreclosure claim is that she validly rescinded her Note on February 28, 2006. (Motion to Strike Horst Declaration at 13.) Rozier states that within twenty days of rescinding the Note, she asked WMC to return her to her original position and WMC failed to respond. (Id. at 14.) After WMC failed to respond, she hired an attorney who allegedly contacted WMC and âinformed them that the rescinded Note was a nullity and that they were required by law to put [her] back in [her] original position.â (Id.)
Rozier also claims that she was not in default when the Debtors declared default
A claim for wrongful foreclosure in California requires a plaintiff to allege that
(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.
Rockridge Trust v. Wells Fargo, N.A., 985 F.Supp.2d 1110, 1145 (N.D.Cal.2013) (citations omitted). âA sale of real property is illegal if the trasteĂ© did not have the power to foreclose under the deed of trust.â Kilpatrick v. U.S. Bank, N.A., No. 12-CV-1740 W(NLS), 2013 WL 4525571, at *3 (S.D.Cal. Aug. 26, 2013) (citing Cal. Civ. Code § 2924(a)(1); Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149, 1151, 121 Cal.Rptr.3d 819 (Ct.App.2011)).
Although Rozierâs wrongful foreclosure claim rests on the allegation the February 2006 rescission of the Note and Deed of Trust stripped the Debtors of their ability to foreclose, the Trust argues that Rozier waived her right to rescind the Note and Deed of Trust by entering into the Modification of Note and the Modification of Deed of Trust, respectively. (See Obj. ¶ 83 (citing Ramsey v. Vista Mortgage Corp. (In re Ramsey), 176 B.R. 183 (9th Cir. BAP 1994)).) In Ramsey, a chapter 11 debtor brought an adversary proceeding seeking rescission of a home refinancing loan for violation of TILAâs disclosure requirements. See Ramsey, 176 B.R. at 185-86. After entering into the original loan agreement, the debtor gave notice of his three-day right to cancel the loan under TILA. Id. at 185. Two days after the debtor exercised such cancellation right, he âwithdrew his cancellation in a handwritten note and requested that [the lender] proceed with the loan.â Id. After the bankruptcy court granted summary judgment in favor of the lender, the Ninth Circuit Bankruptcy Appellate Panel affirmed on several independent grounds, including that the debtor would ânot be entitled to rescind the loan agreement, having already exercised and waived his right of rescission with full knowledge of the loan modification.â Id. at 189.
Rozier contends that she intended to rescind the original Note and Deed of Trust and subsequently entered into a new loan in June 2006. (See Opp. at 2.) She states that within twenty days of rescinding the December 2005 note, she asked WMC to return her to her original position and WMC failed to respond. (Horst Motion to Strike at 14.) At the Hearing, Rozier indicated that she submitted âloan closing documents from the June 1st loan,â including an âitemization of amount financed in the three-day closing, which is
The Trust does not dispute that WMC did not respond to the Rozier Rescission Letter until May 5, 2006, at which time WMC provided her with the option of modifying the terms of her Loan. (See Obj. ¶ 19.) However, the WMC Rescission Response to Rozier unequivocally presented mutually exclusive options: tender the balance of the Loan to WMC or enter into a modified Loan. (See id.; id. Ex. 3-A.5.) Moreover, the Modification Release executed by Rozier clearly states, â[b]y signing below, I affirm that I do not wish to rescind this loan, and that I agree to the terms and conditions as outlined in the loan documents.â (See id. Ex. 3-A.6.) Accordingly, the Trust has established that Rozier waived her right to rescind the Note.
Additionally, ETS had the authority to commence foreclosure on Rozierâs Property. âUnder California Civil Code section 2924(b)(4), a âperson authorized to record the notice of default or the notice of saleâ includes âan agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee.â â Halajian v. Deutsche Bank Natâl Trust Co., No. 1:12-CV-00814 (AWI)(GSA), 2013 WL 593671, at *5 (E.D.Cal. Feb. 14, 2013). First, MERS, as the named beneficiary, had the authority to substitute ETS as a trustee under the Deed of Trust. Cedano v. Aurora Loan Servs., LLC (In re Cedano), 470 B.R. 522, 532 (9th Cir. BAP 2012) (âNumerous cases have held that, as the nominee for the lender under a deed of trust, MERS has authority to substitute a trustee.â) (citations omitted). Second, under California law, a substitution of trustee is only required to be executed, not recorded, before a notice of default is recorded. Id. â(â[Tjhere is no requirement that [a] Substitution of Trustee be recorded, only that it be executed.â (citing Cal. Civ. Code § 2924(b)(4); Padayachi v. IndyMac Bank, No. C 09-5545(JF), 2010 WL 4367221, at *3 (N.D.Cal. Oct. 28, 2010))); see also Myers v. Encore Credit, No., CIV S-11-1714 (KJM), 2012 WL 4511033, at *13 (E.D.Cal. Sept. 30, 2012) (citation omitted).
Here, each substitution of trustee was recorded (1) before or concurrently with the recordation of the relevant notice of default; and (2) prior to the recordation of the relevant notice of sale. On March 3, 2008, MERS, as nominee for WMC, substituted ETS as trustee under the Deed of Trust; this substitution was recorded on March 4, 2008. (See Horst Decl. ¶ 15; Obj. Ex. 3-A.8.) Also on March 3, 2008, ETS executed the March 2008 Notice of Default, which was recorded on March 4, 2008. (See Horst Decl. ¶ 16; Obj. Ex. 3-A.9.) On December 15, 2009, ETS executed the Notice of Rescission of Default Notice, which was recorded on December 22, 2009. (See Horst Deck ¶20; Obj. Ex. 3-A.13.)
On March 3, 2011, Westwoodâs interest as trustee under the Deed of Trust was assigned to BOA pursuant to the BOA Assignment. (See Horst Deck ¶ 21; Obj. Ex. 3-A.14.) BOA substituted ETS as trustee under the Deed of Trust on April 4, 2011 pursuant to the April 2011 Substitution (see Horst Deck ¶ 21), which was recorded on April 11, 2011 (see Second Supp. Horst Deck ¶ 5; id. Ex. 1). ETS executed the April 2011 Default Notice on April 8, 2011, which was recorded on April 11,
The Trust has rebutted the prima facie validity of Rozierâs wrongful foreclosure claim, and she has not established the validity of such claim by a preponderance of the evidence. The Objection is therefore SUSTAINED with respect to Rozierâs wrongful foreclosure claim.
2. Temporary and Permanent Injunction on Foreclosure '
The Trust argues that Rozier is unable to establish that injunctive relief is appropriate as an independent legal theory. (See Obj. ¶ 94.) According to the Trust, injunctive relief must be tethered to a separate legal claim and, since Rozierâs wrongful foreclosure claim is meritless, so too is the injunctive relief she seeks. (See id.) Alternatively, since the Debtors no longer service Rozierâs Loan and therefore no longer have any role in foreclosing on her Property, the Trust asserts that in-junctive relief against the Debtors is moot. (Id. ¶ 95.) Rozier does not appear to make any arguments in rebuttal in her Opposition or otherwise.
The Trust has established via uncontro-verted evidence that the Debtors no longer service her Loan or hold any interest therein. Accordingly, any injunctive relief with respect to a foreclosure action on her Property would be moot as to the Debtors. The Objection is SUSTAINED with respect to Rozierâs requests for injunctive relief.
3. California Civil Code Section 2923.5
Rozier argues that the Debtors' violated California Civil Code section 2923.5 by failing to contact her to discuss or assess her financial situation prior to issuing a notice of default. (See Obj. Ex. 1-A at 57-59.) Rozier claims that she contacted the Debtorsâ loss mitigation department on at least two occasions in September 2012, but âthey refused to speak with her.â (Id. at 58-59.) According to the Trust, the Debtors in fact contacted Rozier by mail and telephone to set up numerous repayment plans and a short sale workout package; they subsequently cancelled these repayment plans after her failure to respond and Rozier cancelled the 2008 short sale herself. (Obj. ¶ 99 (citing Horst. Decl. ¶¶ 17-18).) The Trust contends that the Court may take judicial notice of the applicable notices of default to show that Rozier does not state a claim under California Civil Code section 2923.5. (Id. ¶ 98 (citations omitted).)
Section 2923.5 of the California Civil Code requires a mortgagee, beneficiary, or authorized agent to contact the borrower in person or by telephone âin order to assess the borrowerâs financial situation and explore options for the borrower to avoid foreclosure.â Cal. Civ. Code § 2923.5(a). Section 2923.5 also provides that:
[a] notice of default recorded pursuant to Section 2924 shall include a declaration that the mortgage servicer has contacted the borrower, has tried with due diligence to contact the borrower as required by this section, or that no contact was required because the individual did not meet the definition of âborrowerâ pursuant to subdivision (c) of Section 2920.5.
Id.§ 2923.5(b). âAll that the statute requires is for Defendants to contact or attempt to contact Plaintiffs in a good faith effort to avoid foreclosure.â Quintero Family Trust v. OneWest Bank, F.S.B., No. 09-1561, 2010 WL 392312, at *14 (S.D.Cal. Jan. 27, 2010) (citing Ortiz v.
The plaintiff in Quintero brought a claim under California Civil Code section 2923.5, asserting that the defendant did not properly contact or attempt to contact the plaintiff before issuing the notice of default. Quintero, 2010 WL 392312, at *14. The court held that the plaintiffs claim failed because the notice of default at issue sufficiently demonstrated that the defendant had contacted the plaintiff prior to issuing the notice. Id. The notice of default stated in pertinent part:
The Beneficiary or its designated agent declares it has contacted the borrower, tried with due diligence to contact the borrower as required by California Civil Code § 2923.5, or the. borrower has surrendered the property to the beneficiary or authorized agent, or is otherwise exempt from the requirements of § 2923.5.
Id. at *14 n.ll. The court dismissed the claim without prejudice, affording the plaintiff an opportunity to amend the complaint to contest the accuracy of the statement in the notice of default. Id. at *14.
Despite the Trustâs contentions, there does not appear to be a similar declaration in the March 2008 Default Notice. (See Obj. Ex. 3-A.9.) Thus, the March 2008 Default Notice on its own does not establish that the Debtors complied with California Civil Code section 2923.5. Additionally, the Debtorsâ alleged contact made with Rozier regarding repayment plan options and the short sale work out plan were all made after the March 2008 Default Notice was issued. (See Obj. ¶¶ 24-25.) The first such contact was allegedly made over a month after the March 2008 Default Notice was executed, on April 23, 2008. (See id. ¶ 24.) Rozier defaulted on her Loan after failing to make required Loan payments beginning December 1, 2007. (Horst Deck ¶ 15.) The Trust does not provide evidence demonstrating that the Debtors made any contact with Rozier from December 1, 2007. through March 3, 2008.
However, the âsole remedy for a failure to comply with California Civil Code section 2923.5 is âlimited to postponement of an impending foreclosure.â â Cedano, 470 B.R. at 533 (quoting Bascos v. Fed. Home Loan Mortg. Corp., No. CV 11-3968(JFW), 2011 WL 3157063, at *6 (C.D.Cal. July 22, 2011)). The Debtors neither service Rozierâs Loan nor have any interest in the Deed of Trust. (See Supp. Horst Decl. ¶ 5.). Accordingly, there is no remedy available against the Debtorsâ for their failure to follow the requirements of section 2923.5, see Stebley v. Litton Loan Servicing, LLP, 202 Cal.App.4th 522, 134 Cal.Rptr.3d 604, 607 (2011) (âCM Code section 2923.5 does not provide for damages, or for setting aside a foreclosure sale ....â), and the Objection is hereby SUSTAINED with respect to this count.
ft California Civil Code Section 2928.6
Rozier also asserts that the Debtors violated California Civil Code section 2923.6 by failing to offer her a loan modification. (Obj. Ex. 1-A at 59.) The Trust argues that the Debtors were not obligated or required to modify Rozierâs loan, and in any event, California Civil Code section 2923.6 does not give rise to a private right of action.
The Trust is correct. A number of California courts have held that section 2923.6 does not provide a private right of action to borrowers. See, e.g., Rodriguez v. JP Morgan Chase & Co., 809 F.Supp.2d 1291, 1296 (S.D.Cal.2011) (âSection 2923.6 does not require loan servicers to modify loans, and it does not create a private right of action for borrowers.â (citing cases)); Gaitan v. Mortg. Elec. Registration Sys., No. 09-CV-1009, 2009 WL 3244729, at *7
5. California Civil Code Section 2924-
Rozier claims that ETS violated California Civil Code section 2924 because ETS was not properly substituted under the Deed of Trustâs covenants and thus had no legal authority to carry out their actions relating to foreclosure under the statute. (Obj. Ex. 1-A at 59.) The Deed of Trust provides that a substitution of trustee is required to be executed - and recorded. (Obj. Ex. 3A.2 ¶24.) As discussed above in the analysis of Rozierâs wrongful foreclosure claim, all such substitutions were properly executed and recorded in accordance with California law, and ETS had authority to foreclose on the Property.
Rozier also argues that ETS did not satisfy California Civil Code section 2924(a)(1)(C) by failing to set forth the nature of the applicable breach known to the âunnamed beneficiaryâ in a notice of default (see Obj. Ex. 1-A at 59), and it posted a notice of sale to her front door that did not identify the beneficiary at whose request the sale is being conducted as required by California Civil Code section 2924f (id. at 60).
California Civil Code section 2924(a)(1)(C) requires a notice of default to include â[a] statement setting forth the nature of each breach actually known to the beneficiary and of his or her election to sell or cause to be sold the property to satisfy that obligation and any other obligation secured by the deed of trust or mortgage that is in default.â Cal Civ. Code § 2924(a)(1)(C). Section 2924f of the California Civil Code expressly provides that a notice of sale need not contain the name and address of the beneficiary where âa legal description or a county assessorâs parcel number and either a street address or another common designation of the property is given.... â Id. § 2924f(5). The April 2011 Default Notice contains a statement detailing the nature of Rozierâs default. (See Obj. Ex. 3-A.16.) Each of the notices of sale provided to the Court includes both an assessorâs parcel number as well as a street address for the Property. (See Obj. Exs. 3-A.ll, -20; Obj. Ex. 1-A at 98-99, 104.) Rozier has failed to satisfy her burden of establishing that the Debtors violated California Civil Code section 2924, and the Objection is therefore SUSTAINED with respect to this claim.
6. Slander of Title
To state a claim for slander of title under California law, a plaintiff must allege â(1) a publication; (2) which is false; (3) which is without privilege or justifieation[;] and (4) which causes direct and immediate pecuniary loss.â Pratap v. Wells Fargo Bank, N.A., â F.Supp.3d -, -, 2014 WL 3884413, at *4 (N.D.Cal. Aug. 7, 2014) (quoting Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal.App.4th 1040, 1051, 93 Cal.Rptr.3d 457 (Ct.App.2009)). Rozier argues that âETS slandered [her] title when it accepted the substitution [of trustee] and began pretending to act as trustee.â (Obj. Ex. 1-A at 61.) The gravamen of her claim is that ETS did not have the requisite authority to file notices of default and sale and aid in foreclosing on the property, and therefore such notices were false. As set forth above, ETS had the authority to act as substitute trustee under the Deed of Trust; the notices of default and sale were
Additionally, Rozierâs slander of title claim fails because she fails to establish by a preponderance of the evidence that she suffered a pecuniary harm as a proximate result of ETSâs actions. See Sumner Hill Homeownersâ Assân, Inc. v. Rio Mesa Holdings, LLC, 205 Cal.App.4th 999, 141 Cal.Rptr.3d 109 (Ct.App.1012) (âThe pecuniary loss for which a publisher of injurious falsehood is subject to liability is restricted to [¶] (a) the pecuniary loss that results directly and immediately from the effect of the conduct of third persons, including impairment of vendibility or value caused by disparagement, and [¶] (b) the expense of measures reasonably necessary to counteract the publication, including litigation to remove the doubt case upon ven-dibility or value by disparagement.â (quoting Restatement (Seoond) of ToRts § 633(1))) (alteration and internal quotation marks omitted). While Rozier makes the conclusory allegation that she âsuffered general and special damagesâ as a result of ETSâs actions, she does not provide any factual allegations supporting this claim. Accordingly, the Objection is SUSTAINED with respect to this count.
7. Negligence
Rozier also asserts a negligence claim against the Debtors. As to ETS, Rozier alleges that ETS owed her a duty to exercise reasonable care and skill under the California foreclosure laws and breached that duty when it wrongfully foreclosed on her Property in violation of various sections of the California Civil Code. (Obj. Ex. 1-A at 66-67.) According to Rozier, ETS should have been more diligent âgiven the rescinded 2009 foreclosure and wrongful September 2012 foreclosure.â (Id. at 67.) As to GMACM, Rozier asserts that GMACM was the mortgage servicer and thus owed her a duty âto exercise reasonable care to follow California law with regard to the enforcement of monetary obligations, and to refrain from taking or failing to take any action against her that they did not possess the legal authority to do so.â (Id. at 68.)
Under California law, a negligence claim consists of three elements: â(a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.â Ladd v. Cnty. of San Mateo, 12 Cal.4th 913, 50 Cal.Rptr.2d 309, 911 P.2d 496, 498 (1996) (alterations and internal quotation marks omitted). âThe existence of a duty of care owed by a defendant to a plaintiff is a prerequisite to establishing a claim for negligence.â Nymark v. Heart Fed. Sav. & Loan Assân, 231 Cal.App.3d 1089, 283 Cal.Rptr. 53, 56 (1991) (quoting Beauchamp v. Los Gatos Golf Course, 273 Cal.App.2d 20, 77 Cal. Rptr. 914 (1969)). Generally, âa financial institution owes no duty of care to a borrower when the institutionâs involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.â Id. at 56-57 (citing cases). However, California courts lack consensus regarding whether a financial institution owes a borrower a duty of care when a loan modification is involved. See, e.g., Segura v. Wells Fargo Bank, N.A., No. CV-14-04195, 2014 WL 4798890, at *12 (C.D.Cal. Sept. 26, 2014) (âThe existence of a duty of care owed by financial institutions in the process of considering borrowers for a loan modification ... is an unsettled issue.â); Armstrong v. Chevy Chase Bank, FSB, No. 5:11-cv-05664 (EJD), 2012 WL 4747165, at *4 (N.D.Cal. Oct. 3, 2012) (observing that several courts âhave characterized a loan modification as a traditional money lending activity,â and finding that âthe minority of cases which hold otherwise ... are unpersuasiveâ) (in
California courts examine and balance the following factors to determine whether a duty of care exists between a financial institution and a borrower: â[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendantâs conduct and the injury suffered, [5] the moral blame attached to the defendantâs conduct, and [6] the policy of preventing future harm.â Nymark, 283 Cal.Rptr. at 58 (citing cases).
In Lueras v. BAC Home Loans Servicing, LP, the court held that these factors âdo not support imposition of a common law duty to offer or approve a loan modificationâ or other foreclosure alternatives. 221 Cal.App.4th 49, 163 Cal.Rptr.3d 804, 820 (2013). Instead, the court found that the lending institutionsâ ârights, duties, and obligations in [offering, considering, or approving loan modifications and exploring foreclosure alternatives] [a]re set forth in the note and deed of trust, the [partiesâ forbearance agreement], federal and state statutes and regulations, and the directives and announcement of the United States Department of Treasury and Fannie Mae.â Id. at 820-21. The plaintiffs negligence claim was rejected because the plaintiff failed to demonstrate that his default in paying the monthly loan payments was a result of, or exacerbated by, the defendantsâ conduct. Id. at 820-21 (âIf the modification was necessary due to the borrowerâs inability to repay the loan, the borrowerâs harm, suffered from denial of a loan modification, would not be closely connected to the lenders conduct. If the lender did not place the borrower in a position creating a need for a loan modification, then no moral blame would be attached to the lenderâs conduct.â)
The Trust argues that GMACM never offered or entered into negotiations for a loan modification, but rather only negotiated with Rozier for repayment options and a short sale workout plan; cancellation of those plans was a result of Rozierâs failure to make the required payments pursuant to them. (Obj. ¶¶ 105-06.) According to the Trust, the Debtors never owed a duty to Rozier and therefore never committed a breach. (Id.) Rozier asserts that the Debtorsâ actions leading up to their allegedly wrongful foreclosure were negligent; the Debtors owed her a duty to exercise the reasonable care of a substitute trustee and a loan servicer, and they failed to exercise such duty. (See Obj. Ex. 1-A at 67-68.)
Such alleged duties are similar to the allegations made by the plaintiff and rejected by the court in Lueras. See Lueras, 163 Cal.Rptr.3d at 820-21 (â[Plaintiffs] allegations that [defendants] owed him duties to follow through on their own agreements, to comply with consumer protection laws and to stop foreclosure sales that were unlawful fail to state a cause of action for negligence because such duties, if any, are imposed by the loan documents and the [partiesâ forbearance agreement], statutes and regulations. If [the defendants] failed to follow through on those agreements, then [plaintiffs] remedy lies in breach of contract not negligence.â). Additionally, the factors set forth in Ny-mark do not support a finding of a duty owed by the Debtors to Rozier under these circumstances. None of the Debtorsâ alleged actions take them out of their âconventional roleâ as trustee or loan servicer. Even if the Debtors did affirmatively act in an unconventional manner, Rozier has failed to provide evidence that it was the Debtorsâ conduct that led her to default on
8. Defamation of Character
Rozier asserts a defamation claim against the Debtors alleging the following in the Complaint attached to her proofs of claim:
Defendant GMACM made false statement against Plaintiff in ongoing litigation knowing them to be false.' These false statements include calling Plaintiff a âdefaulted Borrower.â Defendant GMACM knew that the December 2005 loan was rescinded and they knew that California law states that the effect of loan rescission is to render the underlying instrument void.
(Obj. Ex. 1-A at 71.) Rozier contends that the Debtors characterized her Claims as âbizarreâ and âweirdâ and they made false statements to the police âin order to use the threat of police action and murder against [Rozier].â (Id. at 72.) The Trust argues that the statements Rozier references were true, not false, and therefore cannot form the basis of a defamation claim. (Obj-¶ 108). In any event, the Trust argues that she has not alleged any harm as a result; Rozier has failed to provide proof that such statements led to her inability to obtain employment or the purported downfall of her husbandâs business. According to the Trust, she cannot allege and has not alleged that it was the Debtorsâ conduct that caused her financial difficulties.
To state a defamation claim under California law, a plaintiff must prove that there is a false publication that is defamatory and unprivileged, and that such publication has a natural tendency to injure, or that it causes special damage. Cal. Civ. Code §§ 45-46; Smith v. Maldonado, 72 Cal.App.4th 687, 85 Cal.Rptr.2d 397, 402 (1999); Seelig v. Infinity Broad. Corp., 97 Cal.App.4th 798,119 Cal.Rptr.2d 108, 116 (2002).
Here, the majority of the challenged statements surround the issue of whether Rozier in fact defaulted on her loan. (Obj. Ex. 1-A at 71-72.) Rozier denies being in default on the Loan. (See Opp. at 2; Horst Mot. Strike ¶ 11.) She bases her argument that she was not in default on her already rejected contention that she successfully rescinded the Loan. (See Opp. at 2.) Rozier has not provided any evidence to rebut the Trustâs allega
9. Fraud-Based, Claims
Rozier makes several disjointed allegations regarding the Debtorsâ purportedly fraudulent conduct. She contends that the Debtors fraudulently mis-characterized the size and value of her Property in order to portray her in a negative light. (See Opp. ¶ 14; Rozier Decl. ¶ 10.) With respect to a forbearance agreement she negotiated with the Debtors, she claims that âGMACM admitted that they were at fault.... Debtor GMACM then reneged but then attempted to bully Rozier into signing a blank signature page to replace the one they executed.â (Opp. ¶20; see Rozier Decl. IT 29.) Rozier asserts that a representative named Latina Dawn attempted to convince Rozier to become 90 days past due on the Loan âto qualify for customer service help,â a former GMACM attorney refused to accept Rozierâs âtimely rescission of the alleged modification of note,â and the Debtors and their agents committed âwrongful acts including filing false declarations.â (Rozier Decl. ¶ 33.)
The Trust argues that Rozier does not sufficiently allege a claim for fraud, but rather, her allegations amount to âwholly unsupported and speculative claims.... â (Obj-¶ 119.) Rozier alleges that âGMACM was aware that it was collecting mortgage loan payments on a purportedly rescinded note, and to further its scheme, directed ETS âto start recording false instruments into the County Recorderâs office.â â (Id. (citing Obj. Ex. 1-A at 40).) Additionally, she contends that ETS was not a licensed corporation in California and thereby knew it could not act as a trustee in that state. (See id.) However, according to the Trust, âRozierâs allegations fail to demonstrate that the Debtors misrepresented anything to Rozier, much less that they knew of and intended to convey any misrepresentation so as to defraud Rozier.â (Id. ¶ 120.) Instead, the Debtors acted lawfully in connection with a valid Note and Deed of Trust. (See id.) According to the Trust, Rozierâs conspiracy to commit fraud claim is defective because her underlying fraud claim is defective. (Id. ¶ 121.)
Rozierâs fraud-based claims are largely premised on actions occurring prior to the commencement of her chapter 7 case, and
10. Cancellation of Voidable Instruments
Rozier asserts that the Note is invalid and should be cancelled, claiming that she rescinded the Note modified as of May 22, 2006 and executed a new note on June 1, 2006, âafter the May Modification which Debtors now claim[] is valid.â (Shaham Mot. Strike ¶ 27; see Opp. at 2.) Rozier contends that within twenty days of rescinding the December 2005 note, she asked WMC to return her to her original position and they failed to respond. (Horst Mot. Strike at 14.) After WMC failed to respond, she hired an attorney who allegedly contacted WMC and âinformed them that the rescinded Note was a nullity and that they were required by law to put [her] back in [her] original position.â (Id.)
The Trust argues that Rozierâs cancellation of instruments claim fails because she has not sufficiently alleged that her subject Loan is void. (Obj-¶ 123.) Rather, the Trust reiterates that âRozier annulled the rescission of the Note when she executed the Modification of Note and Modification of Deed of Trust documents.â (Id.) Furthermore, any cancellation must be conditioned upon Rozier returning any consideration received for the Loan, which Rozier has failed to show she could or would do. (Id.) The Trust contends that the recording of foreclosure documents is a privileged act under California law, barring all tort causes of action except malicious prosecution. (Id. ¶ 124.) Since there is no basis for a malicious prosecution claim against the Debtors, the Trust argues that the Debtorsâ foreclosure notices are privileged. (See id.)
As discussed above, the Trust established that Rozier waived her right to rescind the Loan by entering into the Modification of Note, the Modification of Deed of Trust, and the Modification Release. See supra II.D.l. Accordingly, the Objection is SUSTAINED with respect to Rozierâs cancellation of instruments claim.
11. Intentional Infliction of Emotional Distress
Rozier also appears to assert a separate claim for intentional infliction of emotional distress in connection with the foreclosure action, citing to section 3333 of the California Civil Code in support.
In California, the elements of an intentional infliction of emotional distress claim requires a showing of the following: â(1) the defendant engaged in extreme and outrageous conduct with the intention of causing, or reckless disregard of the probability of causing, severe emotional distress to the plaintiff; (2) the plaintiff actually suffered severe or extreme emotional distress; and (3) the outrageous conduct was the actual and proximate cause of the Âżmotional distress.â Ross v. Creel Printing & Publâg Co., 100 Cal.App.4th 736, 122 Cal.Rptr.2d 787, 793 (2002). For the first element, the conduct must be âso extreme as to exceed all bounds of that usually tolerated in a civilized community.â Id. at 745 (citation omitted). The court in Ross stated:
In the context of debt collection, courts have recognized that the attempted collection of a debt by its very nature often causes the debtor to suffer emotional distress. Frequently, the creditor intentionally seeks to create concern and worry in the mind of the debtor in order to induce payment. Such conduct is only outrageous if it goes beyond all reasonable bounds of decency.
Id. (internal citations and quotation marks omitted). Generally, foreclosing upon a borrowerâs home âis not the kind of extreme conduct that supports an intentional infliction of emotional distress claim.â Quinteros v. Aurora Loan Servs., 740 F.Supp.2d 1163, 1172 (E.D.Cal.2010). Even a foreclosure that was executed without the proper prior notice would not constitute âoutrageous conductâ giving rise to an intentional infliction of emotional distress claim. Id.; see also Mehta v. Wells Fargo Bank, N.A., 737 F.Supp.2d 1185, 1204 (S.D.Cal.2010) (dismissing intentional infliction of emotional distress claim asserted against mortgage lender for its actions taken in connection with foreclosure).
Here, the Debtors had the legal right to foreclose. Even if proper notice was not provided and the Debtors are guilty of minor deficiencies in complying with California law, this would be insufficient to constitute âoutrageous conduct.â See Quinteros, 740 F.Supp.2d at 1172. The alleged presence of eight SWAT team members at Rozierâs home, one of whom allegedly held her at gunpoint, is insufficient to state a claim against the Debtors. First, the Trust denies that this occurred and states that police officers were asked to escort the Debtorsâ posting agent to the door to Rozierâs Property, allegedly due to
12. The UCL
Californiaâs UCL prohibits âunfair competition,â which includes âany unlawful, unfair or fraudulent business act or practice.... â Cal. Bus. & Prof. Code § 17200. A claim based on a violation of the UCL may be brought under any of the above prongs. See Birdsong v. Apple, Inc., 590 F.3d 955, 959 (9th Cir.2009) (âEach prong of the UCL is a separate and distinct theory of liability.â (citing Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th Cir.2009))). A claim brought under the UCL may also be based on the violation of another law. Leonel v. Am. Airlines, Inc., 400 F.3d 702, 714 (9th Cir.2005) (âUnder the statute, â[u]nfair competition encompasses anything that can properly be called a business practice which at the same time is forbidden by law.â â (quoting Wilkinson v. Times Mirror Corp., 215 Cal.App.3d 1034, 264 Cal.Rptr. 194, 206 (1989))). âBy proscribing âany unlawfulâ business practice, section 17200 âborrowsâ violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.â Chabner v. United of Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9thCir.2000) (quoting Cel-Tech Commcâns, Inc. v. L.A Cellular Tel. Co., 20 Cal.4th 163, 83 Cal.Rptr.2d 548, 973 P.2d 527, 539-40 (1999)).
The Trust argues that Rozierâs UCL claim fails to the extent âit is a mere recasting of her other claims,â because the UCL cannot be used to circumvent the requirements of other statutes. (Obj. ¶¶ 131-32.) According to the Trust, Rozier has not identified any unlawful activity engaged in by the Debtors, as âGMACM and ETS acted lawfully in their respective roles as servicer ĂĄnd substitute trustee in connection with the subject loan,â {id. ¶ 133), she has not alleged that the Debtors engaged in any unfair business practice that âviolates established public policy or ... is immoral, unethical, oppressive or unscrupulousâ (id. ¶ 134 (citing McKell v. Wash. Mut., Inc., 142 Cal.App.4th 1457, 49 Cal.Rptr.3d 227, 240 (2006))), and she has not alleged that the Debtors engaged in any fraudulent conduct within the meaning of the UCL, such that the public would likely be deceived by such conduct. (Id. ¶ 135.)
Rozier contends that she was encouraged by the Debtors to stop making payments on her Loan as early as December 4, 2007. (Horst Mot. Strike at 15.) She states that she made a payment to the Debtors in February 2008; the Debtors accepted that payment, declared default on March 3, 2008, and then returned her payment to her account. (Id.) Rozier also alleges that ETS filed false police reports âclaiming that [she] was making physical threats against employees.â (Id. at 16.) Additionally, she claims that â[o]n October 16, 2012 ... ETS and GMACM sent eight (8) heavily armed Buena Park SWAT offi
While Rozierâs allegations that one of the Debtorsâ employees encouraged her to default on her Loan might state a claim for a fraudulent business practice within the meaning of the UCL, see Residential Capital, 518 B.R. at 740 (finding that allegations that a mortgage servicer instructed the borrower to default on her mortgage in order to qualify for a loan modification state a claim under the UCL), Rozier lacks standing to bring such a claim because it is based on events that took place before her chapter 7 petition date. In addition, Rozierâs UCL claim would likely be barred by the applicable four-year statute of limitations. See Cal. Bus. & Prof.Code § 17208; Residential Capital, 518 B.R. at 740. Ro-zierâs remaining allegations do not support a claim under the UCL, as they do not concern unlawful, unfair, or fraudulent business practices. The Objection is OVERRULED with respect to her UCL claim.
III. CONCLUSION
For the foregoing reasons, Rozierâs Motions to Strike are DENIED, the Trustâs Objection is SUSTAINED, and Rozierâs Claims are DISALLOWED and EXPUNGED.
IT IS SO ORDERED.
. Each of the Motions to Strike is supported by a declaration of Karen Michele Rozier.
. This second loan is not the subject of this dispute.
. The March 2008 Substitution was recorded on March 4, 2008. (Horst Decl. ¶ 15; see-Obj. Ex. 3-A.8.)
. The March 2008 Default Notice was recorded on March 4, 2008. (Horst Decl. ¶ 16; see Obj. Ex. 3-A.9.)
. On December 15, 2009, ETS rescinded the March 2008 Default Notice (the "Notice of Rescission of Default Notice,â Obj. Ex. 3-A.13). (Horst Decl. ¶ 20.) The Notice of Rescission of Default Notice was subsequently recorded on December 22, 2009. (See id.)
. BOA became trustee by succession following a merger of BOA with LaSalle National Association. (See Horst Decl. ¶ 21; Obj. Ex. 3-A.14.) The BOA Assignment was recorded on March 9, 2011. (See Horst Decl. ¶21; Obj. Ex. 3-A.14.)
. The version of the April 2011 Substitution attached as Exhibit 3-A.15 to the Objection did not have a recording stamp indicating the date on which it was recorded; however, at the Hearing, the Trust maintained that a recorded version of the April 2011 Substitution existed. (See Oct. 22, 2014 Hrg. Tr. 29:19â 25.) The Court directed the Trust to file a supplemental declaration attaching the recorded version of the April 2011 Substitution. (Id. 30:9-11.) Thereafter, the Trust filed the Second Supplemental Horst Declaration, attaching the April 2011 Substitution as recorded on April 11, 2011. (See Second Supp. Horst Decl. ¶ 4; id. Ex. 1.)
. The April 2011 Default Notice was recorded on April 11, 2011. (See Horst Decl. ¶ 22; Obj. Ex. 3-A.16.)
. The September 2012 Deed Upon Sale was recorded on September 26, 2012. (See Horst Decl. ¶ 24; Obj. Ex. 3-A.18.)
. The Sale Rescission Notice was recorded on October 4, 2012. (See Horst Decl. ¶ 25; Obj. Ex. 3-A.19.)
. The October 2012 Sale Notice was recorded on October 16, 2012. (See Horst Decl. ¶ 26; Obj. Ex. 3-Ă.20.) Additionally, on October 16, 2012, several local police officers accompanied the posting agent to Rozierâs Property, allegedly due to perceived safety concerns that arose from prior threats allegedly made by Rozier. (See id.)
. This assignment was recorded on January 13, 2012. (See Obj. Ex. 3-A.21.)
. The Complaint was attached to Rozierâs proofs of claim for both of her Claims. (See Obj. Exs. 1-A, 1-B.) All citations herein to the Complaint are to âObj. Ex 1-A."
. Rozier also purports to reply to the Trustâs argument that she lacks standing (see Opp. ¶¶ 10-13); however, this section of her Opposition only contains incoherent allegations of how the Debtors disrupted employment opportunities for her and her husband (see id.).
. To the extent that Rozier objects to the admissibility of the Horst Declaration and the Shaham Declaration, the Court finds that both the Horst Declaration and the Shaham Declaration are admissible. Horst is the Chief Claims Officer of the Liquidating Trust. (Horst Decl. ¶ 1.) The Horst Declaration describes the claims reconciliation process carried out under her direction and supervision, specifically addressing Rozierâs Claims. (See id. ¶¶ 1, 3, 11-33.) Horst also states that she is qualified to testify regarding the contents of the Debtors' books and records. (See id. ¶ 2.) She has personal knowledge regarding these facts. While she states that she spoke with others in the process of her review and reconciliation of claims (see id. 112), she does not repeat their statements. The Horst Declaration simply does not contain hearsay. Similarly, Shaham is an attorney with Severson & Werson, P.C., co-counsel to the Liquidating Trust.. (Shaham Decl. ¶ 1.) The Shaham Declaration describes the chronology of the California Action. (See id. ¶¶ 4 â 14.) Shaham states that he is qualified to testify regarding the California Action based upon his personal knowledge. (Id. ¶ 3.) While he states that he spoke with others in the process of his review of the Debtors' litigation history with Rozier (see id.), he does not repeat their statements. The Shaham Declaration also does not contain hearsay.
. Consequently, the Court need not decide whether Rozier is required to tender the bal-anee on her Loan as a precondition to asserting a wrongful foreclosure claim.
. A plaintiff may not^ need to allege special damages if the plaintiff demonstrates that the statement made is "libel on its face.â Cal. Civ. Code § 45a. The statements at issue here do not rise to that level. See id. ("A libel which is defamatory of the plaintiff without the necessity of explanatory matter, such as an inducement, innuendo or other extrinsic fact, is said to be a libel on its face.â).
. Section 3333 provides that â[f]or the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is