Gieser v. Freedom Mortgage Corporation

Background

Jason A. Gieser brought the case as trustee of a trust that challenged the October 10, 2023 nonjudicial foreclosure sale of property in Discovery Bay, California. The opinion states that Gieser purchased the property individually in 2009 and obtained a $251,671 mortgage loan from Freedom Mortgage in 2020. A notice of default was recorded in July 2022, and a notice of trustee’s sale was recorded in February 2023. Gieser transferred title from himself individually to the trust on July 10, 2023, before the foreclosure sale.

The complaint alleged that Freedom Mortgage failed to provide required foreclosure notices and alternatives, used a trustee without authority, and violated federal and California law. The body of the complaint asserted seven causes of action: violations of California Civil Code §§ 2923.5, 2924(a)(1), and 2924.9; negligence; wrongful foreclosure; unfair business practices under California’s Unfair Competition Law; and cancellation of written instruments under California Civil Code § 3412. The opinion notes that the caption listed an eighth cause of action under § 2924.10, but the complaint’s body did not assert it.

The plaintiff did not appear at two scheduled video hearings on the motion to dismiss. The court therefore decided the motion based on the written submissions.

Court’s analysis and rulings

The court granted Freedom Mortgage’s motion to dismiss. It held that the trust had not plausibly alleged any claim because all the conduct challenged in the complaint occurred before the trust took ownership of the property.

First cause of action: California Civil Code § 2923.5. The court dismissed this claim because the trust lacked statutory standing. Statutory standing asks whether a statute gives a particular plaintiff the right to bring the asserted claim. The court explained that the Homeowner Bill of Rights defines “borrower” as a natural person, and a trust is not a natural person. The court also rejected the plaintiff’s reliance on a borrower definition in § 2929.5 because the plaintiff did not assert a claim under that statute. The court further stated that § 2920.7 could not support the claim because that provision had been repealed before Gieser obtained the mortgage.

Second cause of action: California Civil Code § 2924(a)(1). The plaintiff stated that he would no longer pursue this claim. The court dismissed it with prejudice.

Third cause of action: California Civil Code § 2924.9. The court dismissed this claim for lack of statutory standing. Section 2924.12 provides a private right of action for material violations of § 2924.9, but the court held that this remedy applies only to a “borrower,” which the Homeowner Bill of Rights limits to natural persons. The plaintiff was the trust, not Gieser individually.

Fourth cause of action: negligence. The court dismissed the negligence claim. It held that the complaint did not adequately allege that Freedom Mortgage owed the trust a common-law or statutory duty of care. The court also found that the alleged violations occurred before the trust owned the property and that the complaint did not explain how those actions affected the trust. The allegations concerning 15 U.S.C. § 1641(g), which requires notice of certain mortgage transfers, were also insufficient because the complaint did not clearly identify any transfer by Freedom Mortgage to another party or allege facts specific to the trust. The court rejected the plaintiff’s interpretation of California Civil Code § 2924(c), explaining that the provision addresses the evidentiary effect of deed recitals rather than creating a notice duty to the plaintiff.

Fifth cause of action: wrongful foreclosure. The court dismissed this claim because the plaintiff did not adequately allege prejudice or tender. The complaint asserted harm in general terms but did not allege that the foreclosure would have been prevented if proper notice had been given. It also did not allege that the trust offered to pay the secured debt or explain why the tender requirement should be excused.

Sixth cause of action: unfair business practices. The court dismissed the claim under California’s Unfair Competition Law because the trust did not adequately allege a causal connection between Freedom Mortgage’s alleged violations and an injury to the trust. The court noted that the alleged violations occurred while Gieser individually, rather than the trust, owned the property.

Seventh cause of action: cancellation of written instruments. The court dismissed this claim. The plaintiff alleged that Nestor Trustee Services, LLC had not been properly substituted as trustee and that the notices of default and sale were therefore void. The court judicially noticed a public record showing that Nestor had been substituted for the original trustee. It held that the plaintiff did not identify a defect in that substitution. The court also stated that, even assuming a failure to record the substitution, the plaintiff had not identified authority showing that the alleged violation made the later notices void or provided a remedy under the statute.

Leave to amend and order to show cause

The court granted the plaintiff leave to amend the dismissed claims, except that the second cause of action was dismissed with prejudice. An amended complaint had to be filed by March 13, 2024, if it could be filed consistently with the court’s ruling. The court stated that if no amended complaint were filed by that date, the action would be dismissed with prejudice.

Because the plaintiff missed both scheduled hearings, the court ordered the plaintiff to show cause why the action should not be dismissed for failure to prosecute. The court also ordered plaintiff’s counsel to show cause why counsel should not at least pay Freedom Mortgage’s fees for appearing at the two missed hearings. Written responses were due March 13, 2024. The order vacated the initial case-management conference and disposed of the motion to dismiss.