Rodriguez v. Countrywide Homes

Citations: 668 F. Supp. 2d 1239; 2009 U.S. Dist. LEXIS 105433; 2009 WL 3792308Docket: 1:08cv0869 DLB

Court: District Court, E.D. California; November 12, 2009; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Defendant Countrywide Home Loans, Inc. filed a motion for summary judgment or summary adjudication regarding the Plaintiffs' claims, which include violations of the Real Estate Settlement Procedure Act (RESPA), California Civil Code section 2937, wrongful foreclosure, and California Business and Professions Code section 17200. The case originated in the Fresno County Superior Court before being removed to the U.S. District Court for the Eastern District of California. Plaintiffs Leonel Rodriguez and Maria Del Carmen Soto allege that Countrywide failed to send them a notice of transfer of servicing to their mailing address.

The Plaintiffs settled with co-defendants Litton Loan Servicing Inc. and Mortgage Electronic Registration System, Inc. and indicated intentions to dismiss their wrongful foreclosure and restitution claims against Countrywide, acknowledging they could not be maintained. The undisputed material facts reveal that Rodriguez was the sole borrower on a loan refinance obtained in June 2006, securing an interest in the property at 16688 2nd Street, Huron, CA. While both Plaintiffs executed the Deed of Trust and the Balloon Payment Rider, the loan application did not list their P.O. Box address, which was not included in any Truth in Lending Act Disclosure Statements. The court, presided over by Magistrate Judge Dennis L. Beck, granted Countrywide's motion for summary adjudication concerning the first and second causes of action and required the Plaintiffs to file dismissal documents for the third and fourth causes of action.

Rodriguez and Soto executed a Notice of Right to Cancel under the Truth in Lending Act, which identified the Property Address but did not include their P.O. Box Address. They were aware that the United States Post Office did not deliver to the Property Address due to its rural location. Soto, who has used the P.O. Box for 30 years, found it odd that it was absent from the loan documents. Despite being unable to read English, both plaintiffs could identify addresses on the documents. 

During Countrywide's servicing of the loan, borrowers could change their mailing address through written or telephone requests, but a specific request was always necessary. The Deed of Trust and Note outlined that notices would default to the Property Address unless a different address was designated in writing. Simply placing an address on a money order did not qualify as a formal request for a change. 

Rodriguez claimed he had no involvement with the loan and did not communicate with Countrywide, nor did anyone on Soto's behalf request a mailing address change. Countrywide sent mail to the Property Address, which was returned as undeliverable, indicating a failure to receive communication at that address. Internal policies dictated that upon return of mail, Countrywide would check for an alternate address based on the loan application.

Countrywide verifies a borrower’s deed of trust and note for mailing addresses and checks for any correspondence requesting address changes. The Loan Application, Deed of Trust, and Note only list the Property Address as the mailing address, with no requests from the Plaintiffs to change it to a P.O. Box. Soto expected to receive correspondence from Countrywide but found it unusual not to receive any. The Payment Letter signed by both Plaintiffs informed them of the possibility of their loan being service-released and provided a contact number. Soto acknowledged during her deposition that she could identify phone numbers on English documents but could not recall why she did not call the provided toll-free number, despite the availability of Spanish-speaking assistance. After the loan was service-released to Litton, Soto continued making payments to Countrywide, while Rodriguez, the account borrower, did not make any payments. Payments made lacked identifying details like the account number or property address, with only one payment in September 2007 having a coupon attached. Countrywide employees added identifying features to Soto's payments after conducting research. Countrywide received 13 payments post-service release and, for customer service, forwarded 10 payments to Litton. One money order was inadvertently cashed but the funds were sent to Litton, while three money orders were returned to a postal repository due to identification issues, as P.O. Boxes are often associated with fraud.

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. The moving party must identify material portions that demonstrate the absence of genuine issues, shifting the burden to the opposing party to present specific facts showing a genuine dispute. The court does not weigh conflicting evidence but draws inferences favorably for the nonmoving party. To establish a factual dispute, the opposing party must provide evidence, not merely deny allegations.

The excerpt outlines the standards and requirements for opposing a motion for summary judgment, emphasizing that the opposing party must establish the materiality of facts in contention and demonstrate that a genuine dispute exists. A fact is considered material if it could affect the outcome of the case, and a dispute is genuine if a reasonable jury could find for the nonmoving party. The opposing party does not need to conclusively prove their case but must show that the factual dispute requires resolution by a jury or judge. The court evaluates evidence, including pleadings and affidavits, in favor of the opposing party, drawing reasonable inferences from the facts presented. However, the opposing party must provide a factual basis for any inferences drawn. To establish a genuine issue, it is insufficient to merely suggest doubt about material facts; the evidence must be compelling enough to support a rational trier of fact's finding in favor of the nonmoving party.

In the discussion section, the first cause of action is based on the Real Estate Settlement Procedures Act (RESPA), specifically 12 U.S.C. § 2605(b)(1), which mandates that servicers of federally related mortgage loans must notify borrowers in writing of any servicing transfers. This requirement is reiterated in Regulation X, which states that written notice must be delivered to the borrower. Although 'deliver' is not defined in Regulation X, the parties agree that it includes mailing. The regulation specifies that mailing is considered satisfied by placing the document in the mail to the address provided in the loan application, unless a revised address has been formally communicated. 

Countrywide argues for summary judgment, asserting that there are no factual disputes regarding the plaintiffs' provision of their Property Address on the Loan Application, their failure to notify Countrywide of any address change, the indication that the Property Address was also their Mailing Address on other settlement documents, and that Countrywide sent correspondence to the Property Address.

The Court's decision hinges on the interpretation of the Real Estate Settlement Procedures Act (RESPA) requirements. It rejects the Plaintiffs' interpretation, ruling that summary judgment is warranted on both the RESPA claim and the claim under California Civil Code section 2937(a). The Court agrees with Countrywide that RESPA mandates sending a "Good Bye" letter to the address specified by the borrower in the loan documents, and if a borrower provides a new mailing address, the lender must send the letter there. In this case, Countrywide sent the letter to the address listed in the loan application, which was the property address, and Plaintiffs did not formally notify Countrywide of any address change.

Plaintiffs argue that RESPA does not prevent using a revised address when the lender has been orally informed or has notice of a change by other means. However, this argument attempts to impose additional duties on Countrywide and is unconvincing. The Court points out that the Plaintiffs introduced an agency theory for the first time to counter summary judgment, which is procedurally improper since issues for summary judgment are defined by the complaint. The complaint did not assert an agency theory, nor did it provide related facts during discovery. Citing relevant case law, the Court notes that introducing a new legal theory at this stage effectively blindsides the defendant. 

Even if the Court considered the agency argument, it lacks merit as Plaintiffs provide no legal basis for attributing verbal communication from the loan broker to Countrywide. Moreover, the suggestion that lenders should exercise "reasonable care and diligence" in determining a borrower's correct address is also rejected. Overall, Plaintiffs' claims and arguments are deemed insufficient to overcome summary judgment.

Plaintiffs' reliance on Wanger v. EMC Mortgage Corp. is misplaced. In Wanger, the plaintiff notified her lender of a change of address prior to foreclosure, leading to a determination that the lender had a duty to ascertain the correct address. In contrast, Plaintiffs did not inform Countrywide of any new mailing address, meaning Countrywide cannot be charged with knowledge of their P.O. Box as their address. Attempts to cite documents like money orders or driver's licenses with the P.O. Box are insufficient, as these documents do not establish that Plaintiffs communicated their address change to Countrywide. Plaintiffs argue that Countrywide should have exercised reasonable diligence after a Welcome Letter was returned undeliverable; however, this expectation contradicts the clear language of Regulation X and improperly shifts responsibility onto the lender when Plaintiffs failed to ensure their documents were accurate. Claims regarding Countrywide's internal policies do not affect the RESPA analysis, as those policies are irrelevant to compliance with RESPA requirements.

Under California Civil Code Section 2937, a transferor must provide written notice to borrowers before they are obligated to make payments to a new servicing agent. However, based on the previous analysis, Plaintiffs' claim under this section cannot survive summary judgment. Consequently, Countrywide's motion for summary adjudication is granted for the first and second causes of action. Plaintiffs will move to dismiss the third and fourth causes of action and must file the appropriate dismissal documents within ten days. Notes clarify some misunderstandings regarding the intelligibility of certain statements made by Countrywide.