Warren v. PNC Bank National Association

Background

Christopher Warren alleged that PNC violated the California Homeowner Bill of Rights (HBOR), the federal Real Estate Settlement Procedures Act (RESPA) and its implementing regulations, and California law by failing to provide information or respond to communications before foreclosing on and selling his home. He alleged that he tried to make a mortgage payment through PNC’s website on January 17, 2021, notified PNC of a payment problem, tendered $10,000, and later sought information about the debt, foreclosure alternatives, and a loan modification. He also alleged that PNC did not respond to later correspondence or payments before the foreclosure. PNC moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

HBOR claims

Warren asserted claims under California Civil Code sections 2923.5 and 2924.9. Section 2923.5 generally requires contact with a borrower, or specified diligent efforts to make contact, before recording a notice of default. Section 2924.9 requires certain written information about foreclosure-prevention alternatives after recording a notice of default, unless an exception applies.

PNC argued that Warren had not adequately alleged that the property was owner-occupied or that any violation was material. The court rejected those arguments at the pleading stage. Warren alleged that he owned and had lived at the property for years before the foreclosure and when the notice of default was issued. The court also found that his allegations plausibly showed that PNC’s alleged failures to contact him and provide foreclosure-alternative information disrupted the loan-modification process or otherwise harmed him. The court further held that the notice of default’s checked box stating that due diligence had been attempted did not resolve the factual dispute on a motion to dismiss. The claims under sections 2923.5 and 2924.9 may proceed.

The complaint also alleged a violation of section 2924(a)(1), but Warren conceded that claim in his opposition. The opinion does not separately state a disposition for that conceded claim beyond the overall ruling.

Wrongful foreclosure

The court dismissed Warren’s wrongful-foreclosure claim with leave to amend. The complaint merely repeated the elements of the claim and did not clearly identify which alleged misconduct made the foreclosure illegal, fraudulent, or oppressive. It also did not specifically allege that Warren had tendered the mortgage debt or adequately explain why tender was excused. The court therefore found the claim too conclusory to proceed.

Cancellation of instruments

The court dismissed Warren’s claim seeking cancellation of foreclosure-related instruments with leave to amend. Warren did not adequately allege that the instruments were void or voidable. His allegations concerning a missing declaration and the recording of a substitution of trustee did not sufficiently connect the cited legal requirements to the documents at issue. Because he had not adequately alleged that an instrument was void or voidable, his allegations about tender were also insufficient.

RESPA and Regulation X claims

Warren alleged violations of Regulation X sections 1024.35 and 1024.38. The court allowed the section 1024.35 claim to proceed. Warren alleged that he notified PNC about a payment that was not applied to his account, and the attached letter included his name, loan number, property address, and a description of the payment problem. The court found that these allegations plausibly described a servicing error requiring PNC to acknowledge the notice and investigate, correct the error, or explain why no error occurred.

The court dismissed the section 1024.38 claim with prejudice because Warren did not respond to PNC’s argument that this regulation does not provide a private right of action. The court also noted that the complaint appeared to identify these claims as RESPA and Regulation X claims even though it referred to the Truth in Lending Act; the court stated that Warren should clarify the legal basis if he intended to plead a different claim.

Negligence

The court allowed Warren’s negligence claim to proceed. It held that the alleged HBOR and RESPA violations plausibly supported a statutory duty of care, meaning a duty imposed by law. Warren also adequately alleged that PNC breached that duty by failing to provide required information before the foreclosure. The court did not decide whether PNC owed a separate common-law duty of care.

Unfair Competition Law claim

The court allowed the claim under the unlawful prong of California’s Unfair Competition Law (UCL) to proceed because Warren plausibly alleged that PNC violated the HBOR and RESPA, which could serve as the underlying unlawful conduct.

The court dismissed the UCL theories based on unfairness and fraud with leave to amend. The complaint included allegations about delayed or misleading loan-modification reviews that did not clearly relate to Warren’s allegations that PNC failed to provide required information. It did not provide enough detail to support the unfairness theory or plead the fraud theory with the required specificity.

Disposition

Judge William H. Orrick’s order granted in part and denied in part PNC’s motion to dismiss. The HBOR claims under sections 2923.5 and 2924.9, the RESPA section 1024.35 claim, the negligence claim, and the UCL unlawful-prong theory may proceed. The wrongful-foreclosure and cancellation-of-instruments claims, along with the UCL unfair and fraudulent theories, were dismissed with leave to amend. The section 1024.38 claim was dismissed with prejudice. The order permitted an amended complaint within 20 days to address the deficiencies identified by the court.