Dominguez v. Selene Finance, LP

Background

Rick S. Dominguez sued Selene Finance, LP under the Fair Debt Collection Practices Act, the Rosenthal Fair Debt Collection Practices Act, and for negligent misrepresentation. According to the complaint, Dominguez owns and lives in a home in Hayward, California. His mortgage loan was later assigned to U.S. Bank, and Selene serviced the loan.

Dominguez alleged that Selene sends a “Final Letter” when a loan becomes more than 45 days delinquent. The letter states that the borrower must pay all amounts due to cure the default and warns that Selene may accelerate the loan and schedule the property for foreclosure if the default is not cured within 35 days. Dominguez alleged that Selene could not refer the loan to foreclosure or accelerate it until the loan was more than 120 days delinquent. He contended that the letter therefore created a false sense of urgency and misrepresented when acceleration could occur.

Motion to Dismiss and Notice Provision

Selene moved to dismiss the Second Amended Complaint under Rule 12(b)(6), which permits dismissal when a complaint does not adequately state a legal claim. Selene argued that Dominguez had not complied with a notice-and-cure provision in the deed of trust. That provision required the borrower or lender to notify the other party of an alleged breach and provide a reasonable opportunity to take corrective action before starting a lawsuit arising from actions under the deed of trust.

The court held that it could consider the deed of trust on the motion because the complaint referred to it, its authenticity was not disputed, and it was also a public document. The court also considered a notification of the loan’s assignment to U.S. Bank and Selene’s servicing role.

The court rejected Dominguez’s argument that the notice provision did not apply to his statutory claims. It concluded that the claims arose from Selene’s alleged use of the deed of trust’s acceleration-notice procedures. The deed of trust itself required the lender to give notice before acceleration after a borrower’s breach. The court also concluded that requiring notice and an opportunity to correct the problem did not waive Dominguez’s statutory rights or conflict with the federal and California debt-collection laws.

Whether Selene Could Enforce the Provision

The notice provision expressly referred to the “Borrower” and “Lender,” while Selene was neither. Selene relied on another deed-of-trust provision stating that the deed’s covenants and agreements bind and benefit the lender’s successors and assigns. The court agreed that an assignee could enforce the notice provision when the deed of trust contained that language.

However, the court held that Selene had not shown as a matter of law that it was an assignee of the lender within the meaning of the deed of trust. The notification letter stated that the loan had been assigned, sold, or transferred to U.S. Bank and that Selene would service the loan with authority to act on U.S. Bank’s behalf. The court found that Selene had not provided legal authority establishing that this servicing authorization made Selene an assignee entitled to enforce the deed-of-trust provision. Dominguez also alleged that Selene was not such an assignee.

Other Grounds for Dismissal and Ruling

Selene separately argued that Dominguez failed to state a claim. The court did not decide that issue. It reasoned that the notice provision could be dispositive and that granting dismissal on the other arguments would likely require allowing an amended complaint. The court therefore left those arguments open for possible renewal after discovery and an initial summary-judgment motion if Selene could not prevail on the assignee issue as a matter of law.

Judge Jacquelyn Scott Corley denied Selene’s motion to dismiss. The case was ordered to proceed, with discovery and summary-judgment briefing to address whether Selene was an assignee entitled to invoke the notice-and-cure provision. The order also set a case-management conference for November 14, 2024, and required a joint case-management statement by November 7, 2024.