Takowsky v. Del Toro Loan Servicing, Inc et al

OCR transcription for search; preserved printed pages are authoritative

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FILED

ENTERED

FEB 6- 2012 FEB -§ 2012
RUPTCY COURT
SESE Oe FRE ROT LR,
BY: Deputy Clerk ABY: Deputy Clerk

UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
LOS ANGELES DIVISION

In re:

Suzannne Marie Takowsky,

Debtor.

Suzanne Takowsky,

Plaintiff,

Del Toro Loan Servicing, Inc., a California
corporation; Alan |. Sherman and Rachel
Sherman, Trustees of the Alan I.
Sherman and Rachel Sherman Trust
dated 11/22/1994; Arden Management,
LLC, a limited liability company; and
Borkes Capital Management, LLC, a
limited liability company,

Defendants.

Hf

CHAPTER 13

Case No.: 2:08-bk-14149-NB
Adv No: 2:11-ap-02468-NB

TENTATIVE RULING RE DEFENDANTS’
MOTIONS TO DISMISS FIRST AMENDED
COMPLAINT AND MOTION TO EXPUNGE
LIS PENDENS

Date: February 7, 2012
Time: 2:00 p.m.
Courtroom: 1545

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An initial hearing was held on January 10, 2012, at or about 1:00 p.m., on (1) the
Motion to Dismiss for Failure to State a Claim Upon Which Relief Can be Granted (Dkt
24) filed by Defendants Arden Management, LLC and Borkes Capital Management, LLC
(‘Arden & Borkes”), (2) the Motion to Dismiss the First Amended Complaint Filed by
Plaintiff, Suzanne Takowsky, Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Dkt
26) filed by Defendants Del Toro Loan Servicing, Inc. (“Del Toro”) and Alan |. Sherman
and Rachel Sherman, Trustees of the Alan |. Sherman Trust dated 11/22/1984
(“Sherman’ or, with the other defendants, “Defendants”), and (3) the Motion to Expunge
Lls Pendens and for Award of Attorney's Fees and Costs (Dkt 25). At the conclusion of
the initial hearing, | continued the hearings on Defendants’ motions to dismiss to
February 7, 2012 at 2:00 p.m. so that the parties could file supplemental briefs on
jurisdiction and related issues. For the reasons set forth below and in the prior tentative
ruling (Exhibit A hereto), my tentative ruling for the February 7, 2012 hearing is as
follows:

(A) Jurisdiction: overrule Defendants’ jurisdictional objections, on the basis that
there is “related to” jurisdiction under 28 U.S.C. § 1334;

(B) Withdrawal of the reference: deny Defendants’ requests to have matter

heard by the District Court because any motion to withdraw the reference is properly
addressed to that court (by means of a motion filed in the Bankruptcy Court) and unless
and until the reference is withdrawn | have both the authority and the duty to issue a
report and recommendation to the District Court in this non-core matter pursuant to 28
U.S.C. § 157(c)(1);

(C) Abstention: deny Defendants’ abstention request for reasons set forth below;

(D) Merits re motions to dismiss: grant the motions to dismiss as to all but two of
Plaintiffs claims — dismiss with prejudice her claims for wrongful foreclosure,
cancellation of instrument, breach of duty of deed of trust, and breach of covenant of
good faith and fair dealing — but (1) deny the motions to dismiss as to Plaintiff's claim for

fraud and deceit; (2) deny those motions as to Plaintiff's claim to quiet title, to the extent

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that potential remedies for the fraud and deceit claim might include not only damages
but also remedies affecting title to the property at issue; and (3) deny the requests for
awards of attorneys’ fees in connection with such motions; and

(E) Merits re motion to expunge lis pendens: deny the motion to expunge the /is

pendens, in view of the possible effect on title from Plaintiff's claim for fraud and deceit.
Appearances are required at the hearing on February 7, 2012.

I. DISCUSSION
During the hearing conducted on January 10, 2012, | invited the parties to file

supplemental briefs regarding which court should hear this matter, which was raised in
the reply brief of Defendants Arden & Borkes filed on December 14, 2011 (Dkt 38) and
was joined in by the other Defendants at that hearing. On January 27, 2012, Plaintiff
filed her Brief Re Authority of Bankruptcy Court to Enter a Final Judgment in This
Adversary Proceeding (Dkt 44). On February 3, 2012, Defendants Del Toro and
Sherman filed their Brief Re: Authority of the Bankruptcy Court to Enter a Final
Judgment (Dkt 45).

The following discussion is generally applicable to both of the pending motions to
dismiss and the continued status conference in this adversary proceeding.

(A) Jurisdiction.

In their reply (Okt 38), Arden & Borkes argue that the Court lacks subject matter
jurisdiction over the claims set forth in Plaintiffs first amended complaint. They assert
that there is no “arising under” or “arising in” jurisdiction (28 U.S.C. § 1334), but they do
not reach the issue of “related to” jurisdiction (id.) except for an oblique reference made
in their discussion of supplemental jurisdiction. The Reply filed by Dei Toro and
Sherman (Dkt 45) does address the issue of “related to” jurisdiction and argues that
such jurisdiction is lacking because:

Plaintiffs Chapter 13 Plan has already been confirmed and
she is paying her unsecured creditors 100% through the
Plan. Therefore, should Plaintiff prevail in this action, her

unsecured creditors will not receive any additional benefit.
[Brief (Dkt 45) at 6:2-4.]

—_—

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| agree that Plaintiff's claims do not “arise under’ title 11 or “arise in” a case
under title 11 as those terms are used in 28 U.S.C. § 1334. But Plaintiff's claims are
“related to” this bankruptcy case, so there is jurisdiction under 28 U.S.C. § 1334(b).
See In re Fietz, 852 F.2d 455, 457 (9th Cir. 1988) (a proceeding is “related to” a
bankruptcy case if “the oufcome of the proceeding could conceivably have any effect on
the estate being administered in bankruptcy’) (citing Pacor, inc. v. Higgins, 743 F.2d
984, 994 (3d Cir. 1984) (emphasis in original).

The outcome of the instant adversary proceeding has a “conceivable effect” on
the bankruptcy estate because (a) although creditors may not receive any “additional
benefit” (in Defendants’ phrase) if Plaintiff prevails, creditors would receive little or
nothing if Plaintiff does not prevail (see Amended Chapter 13 Plan, Dkt 32, relying on
future refinance to pay creditors, and thus relying on an outcome favorable to Plaintiff in
this adversary proceeding) and (b) alternatively, Plaintiff asserts an exemption in her
principal residence and intends to retain that residence (which also depends upon an
outcome favorable to Plaintiff in this adversary proceeding). For either of these
alternative reasons, the claims in this adversary proceeding are “related to” this
bankruptcy case.

(B) Whether the District Court or the Bankruptcy Court should hear this
matter in the first instance.

Bankruptcy Courts constitute a unit of the District Court. 28 U.S.C. § 151. The
District Courts may refer any or all cases and proceedings described in 28 U.S.C. §
1334(a) and (b) to the Bankruptcy Court. 28 U.S.C. § 157(a). The District Court for the
Central District of California has done so in LBR 5011-1.

Bankruptcy Courts have authority to issue final judgments in “core” matters
pursuant to 28 U.S.C. § 157(b)(1). Stern v. Marshall, 131 S.Ct. 2594 (2011). A
Bankruptcy Court also may hear non-core proceedings that are otherwise related to a
bankruptcy case. 28 U.S.C. § 157(c)(1). fd. In such non-core, related-to proceedings,

“the bankruptcy judge shall submit proposed findings of fact and conclusions of law to

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the district court, and any final order or judgment shall be entered by the district judge
after considering the bankruptcy judge’s proposed findings and conclusions and after
reviewing de novo those matters to which any party has timely and specifically
objected.” /d.

Plaintiff in her first amended complaint alleges that this adversary proceeding
constitutes a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(B), 157(b)(2)(K), and
157(b)(2}(O). | disagree. Admittedly, there is some uncertainty about what is core and
what is non-core after Stern v. Marshall, but the claims at issue are clearly non-core.
The Ninth Circuit has warned against overly expansive interpretations of 28 U.S.C.

§ 157(b)(2). in re Castlerock Properties, 781 F.2d 159, 162 (9th Cir. 1986). Plaintiff's
claims are purely state law claims that are no more “core” than the claims at issue in
Stern v. Marshall. |n short, | am satisfied that this adversary proceeding is a related-to,
non-core matter. Thus, pursuant to 28 U.S.C. § 157(c)(1) | do not have authority to
issue a final judgment but | can submit proposed findings of fact and conclusions of law
to the District Court.

| recognize that there is a possible inefficiency in this process. If | hold a trial in
this adversary proceeding and the District Court on de novo review requires a complete
retrial, then my decision to try this matter could result in duplicative proceedings which
could be a waste of judicial resources, the parties’ time, and funds. But nothing requires
such a result. As pointed out in in re Heller Ehrman, LLP, 2011 WL 4542512 at *3 n. 11
(Bankr. N.D. Cai. Sept. 28, 2011), the District Court is not bound by any requirement to
conduct a full retrial on de novo review. Rather, the District Court has discretion, and
the parties have all the benefits of de novo review while only having to bear so much of
the costs as the District Court in its discretion believes may be warranted, because the
District Court can decide what manner of de novo review is most appropriate:

De novo review therefore does not necessarily require a new
trial; rather, the district court has broad discretion in the
manner in which it conducts its de novo review. The notion
that the district judge will have to reinvent the wheel and
start all over is simply not so. De novo review might be

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nothing more than reviewing the findings and agreeing with
them. And review of conclusions of law de novo is exactly
the same as the rule of appellate practice. [/d.]

(C) Abstention.

During the January 10, 2012 hearing, counsel for Defendants Arden and Borkes
argued that this matter is properly addressed by the state courts and that as a matter of
comity this Bankruptcy Court should abstain from deciding this adversary proceeding.
The Ninth Circuit has identified several factors for the Court to consider in deciding
whether to abstain under 28 U.S.C. § 1334(c)({1):

1. the effect or lack thereof on the efficient administration of
the estate if a Court recommends abstention;

2. the extent to which state law issues predominate over
bankruptcy issues;

3. the difficulty or unsettled nature of the applicable law;

4. the presence of a related proceeding commenced in state
court or other nonbankruptcy court;

5. the jurisdictional basis, if any, other than 28 U.S.C. §
1334;

6. the degree of relatedness or remoteness of the
proceeding to the main bankruptcy case;

7. the substance rather than form of an asserted “core”
proceeding;

8. the feasibility of severing state law claims from core
bankruptcy matters to allow judgments to be entered in state
court with enforcement left to the bankruptcy court;

9. the burden of [the bankruptcy court’s] docket;

10. the likelihood that the commencement of the proceeding
in bankruptcy court involves forum shopping by one of the
parties;

11. the existence of a right to a jury trial; and

12. the presence in the proceeding of nondebtor parties. [/n
re Tucson Estates, Inc., 912 F.2d 1162 (9th Cir. 1990)
(citation omitted)].

| have considered each of the Tucson Estates factors, and exercising my
discretion, | conclude that | should not abstain from adjudicating this adversary
proceeding.

Admittedly, there are factors present which weigh in favor of abstention: most

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prominently, determination of the issues involves only state law, there are nondebtor
parties, and the parties could assert that they have a right to a jury trial (an issue on
which | express no opinion for present purposes). Nevertheless, for several reasons |!
do not believe that abstention is appropriate in this instance.

First, efficiency: it appears that the matter can be resolved more efficiently if this
action continues in the Bankruptcy Court, rather than requiring a new action to be
commenced in state court. | am already familiar with the issues and have already
analyzed the merits of the various claims.

Second, possible forum shopping: the jurisdictional matters and related issues
were not raised until the Reply papers, after | had reviewed the merits, and some of
those issues were not raised until after | had issued a tentative ruling. This suggests
that | should retain the matter to preclude possible forum shopping.

Third, the degree of relatedness to the main bankruptcy case: this adversary
proceeding is central to the success or failure of the Chapter 13 Plan. In addition, if | do
not abstain then | can adjust the calendar of both the adversary proceeding and the
Chapter 13 matters according to the needs of each.

On balance, | conclude that the Tucson Estates factors weigh in favor of retaining
the adversary proceeding in Bankruptcy Court, and not abstaining.

(D) Merits, as to the motions to dismiss.

At oral argument on January 10, 2012, the parties focused on a document
entitled “Loan Reinstatement Calculation” (Dkt 21, Ex. 3) and argued whether it
constitutes a “beneficiary statement* under Cal. Civ. Code § 2943. According to
Plaintiff's opposition (Dkt 41), the Loan Reinstatement Calculation was delivered
pursuant to a request made in an email from Plaintiff to Del Toro. But Plaintiff has not
provided a copy of such email. Thus, | do not know what request was made to Del Toro
and if there was an explicit request for a beneficiary statement.

Assuming for the sake of argument that Plaintiff requested a beneficiary

statement, and that in response Del Toro and/or other Defendants were required to

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provide every item that is required by statute to be included in a “beneficiary statement,”
nothing in Cal. Civ. Code § 2943 on its face requires that a beneficiary statement
include either a warning that accrued and unpaid prior liens are in default, or the amount
of such claims. See Cal. Civ. Code § 2943 (definition of “beneficiary statement”).
Conversely, nothing in the statute on its face excuses Del Toro and/or the other
Defendants from providing that information, if such information was otherwise required
by law or contract. In other words, the statute appears to be irrelevant to Plaintiff's
claims.

Nevertheless, for the reasons stated in the Court's January 10, 2012 tentative
ruling (Exhibit A hereto, incorporated by reference), Defendants’ motions to dismiss are
well taken as to all claims in Plaintiff's first amended complaint except the claim for
fraud and deceit. Those claims will be dismissed by separate order. In addition,
Plaintiff has not suggested any possible amendment to those claims that would
overcome the concerns expressed in that tentative ruling, and therefore the dismissal of
those claims will be without leave to amend.

As to the fraud and deceit claim, there appear to be unresolved factual issues
including what was communicated by both sides, whether there was justifiable reliance
by Plaintiff on any alleged statements or omissions, and whether Plaintiff can satisfy the
other elements of her claim. For the foregoing reasons, Defendants’ motion to dismiss
will be denied by separate order as to Plaintiffs claim for fraud and deceit.

In view of the foregoing disposition it does not appear appropriate at this time to
award attorneys’ fees in favor of or against any of the parties. Accordingly those
requests will be denied without prejudice to any party seeking attorneys’ fees at an
appropriate time in future.

E. Merits, as to the motion to expunge /is pendens.

In view of the foregoing the motion to expunge the /is pendens will be denied.
Plaintiff's claim for fraud and deceit might give rise to remedies that would affect title to

the property at issue. The parties have not briefed that issue, and unless and until that

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issue is decided against Plaintiff it appears to be premature to expunge the /is pendens.
ll. CONCLUSION

The parties are invited to address the foregoing tentative ruling at the hearing on

February 7, 2012. They also should be prepared to address a discovery schedule,
possible trial dates, whether this matter should be mediated, and any other relevant
procedural issues.

Hit

Date: 2/6/2012 N ul ly. er—

Neii W. Bason
U.S. Bankruptcy Judge

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Exhibit A

Grant the motion to dismiss except as to the claim for fraud, as further described below.
Appearances are required. If you do not appear, and the matter is not resolved by
consent, then the court may rule against you.

The following discussion is generally applicable to each of the pending motions and the
status conference.

The gravamen of the first amended complaint ("FAC") is that plaintiff Suzanne Marie
Takowsky (individually, or with her husband Pedro Ferre as the context suggests,
"Plaintiff’) (a) was led to believe that she would not lose her home in foreclosure if she
paid the $14,158.20 doliar amount set forth in the July 1, 2011 Beneficiary Statement
issued pursuant to California Civil Code § 2943, and (b) did in fact pay that amount, but
(c) the foreclosure and sale of her home nevertheless proceeded. Plaintiff alleges that
Defendants, by and through their alleged agent or representative Carrie Dickman
("Dickman"), repeatedly told Plaintiff that the full payment of past due amounts under
the promissory note at issue (the "Note") would be accepted and upon such payment
the Note and associated Deed of Trust ("DOT") would be reinstated, but that Dickman’s
statement was false, and known by her to be false, in that Defendants asserted and
continue to assert that (1) failure to bring current a senior consensual lien (the
"Wachovia Lien") and property taxes (the "Property Taxes") (collectively, the "Senior
Debts") were events of default and (2) the Note and DOT would not be reinstated unless
and until such Senior Debts were brought current. In addition, Plaintiff argues that
reliance on Dickman’s alleged statements was reasonable because Plaintiff previously
had received a beneficiary statement that did not inform Plaintiff that payment of the
Senior Debts was required for reinstatement. See, e.g., FAC para's 15 & 47-48.

The legal standards and presumptions applicable in the context of a motion to dismiss
are well known and in the interests of brevity the Court will not repeat them in this
tentative ruling.

(1) First Claim (Wrongful Foreclosure against all Defendants).

Regarding the rule of California law that a valid and viable tender of payment of the
indebtedness owing is essential to an action to cancel a voidable sale under a deed of
trust, Plaintiff argues that (1) a sufficient tender was made when she allegedly
reinstated the note, (2) a tender is not necessary where the foreclosure sale is void, and
(3) even if tender is required, the treatment of the claims at issue under the confirmed
chapter 13 plan is a sufficient tender. With respect to first and third arguments, Plaintiff
cites no persuasive authority that would make the tender rule inapplicable under these
circumstances. Regarding the second argument, Plaintiff cites no authority that the
foreclosure sale is void ab initio, as opposed to possible other remedies such as
subsequent avoidability or damages, and the applicable cases appear to require
voidness ab initio.

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Regarding Plaintiff's assertion that the foreclosure was wrongful due to allegedly
misleading omissions in the Beneficiary Statement, Judge Bason is persuaded by
Defendants' arguments that the Beneficiary Statement is a document the form of which
is largely dictated by California law and the omission of statements reiterating the terms
of the DOT and the statements in the NOD is insufficient to support a claim for wrongful
foreclosure absent fraud (discussed below).

Plaintiffs first claim includes in paragraphs 26 and 27 of the FAC an alternative request
for $500,000 in alleged economic damages and $500,000 in alleged injuries including
emotional distress. Those claims appear to be grounded in claims of fraud or other
theories discussed below, rather than any independent viable claim of wrongful
foreclosure. Accordingly, the request for damages Is discussed below.

Plaintiff has not suggested any amendment to the FAC that would cure the foregoing
issues. Unless Plaintiff can suggest such amendment, this claim should be dismissed
without leave to amend.

(2) Second Claim (Cancellation of Instrument against all Defendants).

Judge Bason is persuaded by Defendants’ arguments regarding the lack of tender.
Plaintiff has not suggested any amendment to the FAC that would cure this issue.
Unless Plaintiff can suggest such amendmert, this claim should be dismissed without
leave to amend.

(3) Third Claim (Quiet Title against all Defendants).

Judge Bason is tentatively persuaded that title cannot be quieted without paying the
amounts required to cure not only the Note but also the Senior Debts. Plaintiff has not
suggested any amendment to the FAC that would cure this issue. Unless Plaintiff can
suggest such amendment, this claim should be dismissed without leave to amend.

(4) Fourth Claim (Breach of Duty Under Deed of Trust against Defendants Del Toro and
Sherman).

Judge Bason is tentatively persuaded that Del Toro had no statutory or contractual or
other duty to stop the foreclosure sale, separate and apart from any claim based on
fraud. Plaintiff has not asserted that the alleged oral misrepresentations served to
amend the DOT or other written agreements, and as Defendants point out California
Civil Code 1698 and the statute of frauds preclude any oral amendment of those
writings. That does not necessarily preclude a claim of fraud, but that is addressed
separately below.

Plaintiff has not suggested any amendment to the FAC that would cure the above
issues. Unless Plaintiff can suggest such amendment, this claim should be dismissed
without leave to amend.

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(5) Fifth Claim (Fraud and Deceit against Del Toro and Sherman).

Judge Bason's tentative ruling is that a trial is required to address at least the following
disputed factual issues regarding justifiable reliance and actual or apparent authority:
(a) whether Plaintiff knew or should have known, regardless what Dickman did or did
not say, that the unpaid Senior Debts by their nature were prejudicial to Defendants’
interests and would have to be brought current, or alternatively (b) whether Plaintiff
knew or should have known those things because less than four months before
receiving the Beneficiary Statement Plaintiff received a Notice of Default that explicitly
notifies Plaintiff of the requirement to pay obligations such as the Senior Debts (Req. for
Jud. Notice Ex.A), or (c) whether Plaintiff justifiably relied on Dickman's alleged
statements and omissions in light of typical practices among lenders and borrowers
regarding postponements of foreclosure sales and attempted workouts, and (d) whether
Dickman had actual or apparent authority to engage in discussion of such matters.
Accordingly, Judge Bason is not persuaded that Plaintiff's claim for fraud must be
dismissed.

(6) Sixth Claim (Breach of Covenant of Good Faith and Fair Dealing against Defendants
Del Toro and Sherman).

Judge Bason is persuaded that this claim depends on a contractual breach, and for the
reasons set forth above the FAC does not sufficiently allege facts that would constitute
a breach of contract in view of California Civil Code 1698 and the statute of frauds.

Plaintiff has not suggested any amendment to the FAC that would cure this issue.
Unless Plaintiff can suggest such amendment, this claim should be dismissed without
leave to amend.

The parties should be prepared to discuss not only the foregoing issues but also
discovery, trial scheduling, and other pretrial matters and case management issues.

Pursuant to LBR 9021-1(b)(1)(B), movant must serve and lodge a proposed order via
LOU within 7 days of the hearing.

Judge Bason presumes that one or more parties will wish to dispute the above tentative
ruling, so it is not necessary to follow Judge Bason's Procedures regarding notice of
intent to contest tentative rulings (posted at www.cacb.uscourts.gov, "Information,"
"Bason, N.,” Forms/Instructions/Procedures/Self-Calendaring,” "Procedures;" see the
section labeled “Tentative rulings”).

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NOTE TO USERS OF THIS FORM:
1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.
2) The title of the judgment or order and all service information must be filled in by the party fodging the order.
3) Category |. below: The United States trustee and case trustee (if any) will always be in this category.
4) Category Il. below: List ONLY addresses for debtor (and attorney), movant (or attorney) and person/entity (or
attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in category |.

NOTICE OF ENTERED ORDER AND SERVICE LIST

Notice is given by the court that a judgment or order entitled (specify) TENTATIVE RULING RE
DEFENDANTS’ MOTIONS TO DISMISS FIRST AMENDED COMPLAINT AND MOTION TO EXPUNGE
LIS PENDENS_ was entered on the date indicated as “Entered” on the first page of this judgment or
order and will be served in the manner indicated below:

l. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF*) - Pursuant to controlling
General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served on the following
person(s) by the court via NEF and hyperlink to the judgment or order. As of 2/6/2072, the following
person(s) are currently on the Electronic Mail Notice List for this bankruptcy case or adversary proceeding
to receive NEF transmission at the email address(es) indicated below.

Richard T. Baum: rickbaum@hotmail.com, rickbaum@hotmail.com
Coby R. Halavais: coby@halavaislaw.com
Amy E. Martinez: amy.martinez@geracilawfirm.com

E] Service information continued on attached page
ll. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment or

order was sent by United States Mail, first class, postage prepaid, to the following person(s) and/or
entity(ies) at the address(es) indicated below:

[] Service information continued on attached page

lll. FO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment
or order which bears an “Entered” stamp, the party lodging the judgment or order will serve a complete
copy bearing an “Entered” stamp by U.S. Mail, overnight mail, facsimile transmission or email and file a
proof of service of the entered order on the following person(s) and/or entity(ies) at the address(es),
facsimile transmission number(s), and/or email address(es) indicated below:

[] Service information continued on attached page

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

duoust 2010 F 9021-1.1.LNOTICE.ENTERED.ORDER