santos v. rms, 3.12-cv-03296-sc, order doc 25

7/28/2019 Santos v. Rms, 3.12-Cv-03296-Sc, Order Doc 25

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U n i t e d S t a t e s D i s t r i c t C o u r t

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I N THE UNI TED STATES DI STRI CT COURT

FOR THE NORTHERN DI STRI CT OF CALI FORNI A

I SABEL SANTOS, i ndi vi dual l y and ast r ust ee and benef i ci ar y of t he

Yol anda Mar i a Sant os Tr ust ,

Pl ai nt i f f ,

v.

REVERSE MORTGAGE SOLUTI ONS, I NC. ;NDEX WEST, LLC; and DOES 1 t hr ough20,

Def endant s.

))))))))))))))

Case No. 12- 3296- SC

ORDER DENYI NG DEFENDANTS'MOTI ONS ( 1) FOR J UDGMENT ON

THE PLEADI NGS AND ( 2) TODI SSOLVE OR MODI FYPRELI MI NARY I NJ UNCTI ON

I. INTRODUCTION

On J une 8, 2012, Pl ai nt i f f I sabel Sant os ( " Pl ai nt i f f " ) f i l ed acompl ai nt agai nst Def endant s NDEX West , LLC ( " NDEX" ) and Rever se

Mor t gage Sol ut i ons, I nc. ( "RMS") ( col l ect i vel y, "Def endant s") i n

t he Cal i f or ni a Super i or Cour t i n and f or t he Count y of Cont r a

Cost a. ECF No. 1 ( not i ce of r emoval ( " NOR" ) ) Ex. A ( " Compl . " ) .

The compl ai nt chal l enges Def endant s' r i ght t o f or ecl ose on a home

equi t y conver si on mor t gage ( " HECM" ) , or so- cal l ed " r ever se"

mor t gage, t hat Pl ai nt i f f ' s mot her had t aken out on her Pl easant

Hi l l r esi dence. I d. The Super i or Cour t ent er ed a pr el i mi nar y

i nj unct i on agai nst Def endant s, hal t i ng t he f or ecl osur e pr ocess.

ECF No. 18- 5 ( " Pr el i m. I nj ' n Or der " ) . On J une 26, 2012, Def endant s

r emoved t o t hi s Cour t . Af t er r emoval , Def endant s f i l ed t he t wo

Case3:12-cv-03296-SC Document25 Filed10/12/12 Page1 of 16


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mot i ons now pendi ng: ( 1) a mot i on f or j udgment on t he pl eadi ngs or ,

i n t he al t er nat i ve, summar y j udgment , and ( 2) a mot i on t o di ssol ve

t he pr el i mi nar y i nj unct i on or , i n t he al t er nat i ve, t o modi f y i t by

r equi r i ng Pl ai nt i f f t o post a bond equal t o t he amount of

ar r ear ages, whi ch Def endant s say i s $320, 750. 96, pl us an addi t i onal

$200, 000 i n est i mat ed f ut ur e at t or ney f ees. ECF Nos. 8 ( " MJ P" ) , 12

( "Mot . t o Di ssol ve") . Bot h mot i ons ar e f ul l y br i ef ed and sui t abl e

f or deci si on wi t hout or al ar gument . ECF Nos. 17 ( " Opp' n t o MJ P" ) ,

19 ( " Opp' n t o Mot . t o Di ssol ve" ) , 22 ( " Repl y I SO MJ P" ) , 23 ( " Repl y

I SO Mot . t o Di ssol ve") . 1 For t he r easons set f or t h bel ow, t he

Cour t DENI ES bot h mot i ons.

II. BACKGROUND

A. The HECM Program

The Cour t t akes i t s account of t he f act s f r om Pl ai nt i f f ' s

st at e- cour t compl ai nt and const r ues t hem i n t he l i ght most

f avor abl e t o her . Gen. Conf er ence Cor p. of Sevent hDay Advent i st sv. Sevent hDay Advent i st Congr egat i onal Chur ch, 887 F. 2d 228, 230

( 9t h Ci r . 1989) . I n 2009, Pl ai nt i f f ' s mot her , t he l at e Yol anda

Mar i a Sant os, t ook out a f eder al l y i nsur ed HECM. Compl . 15.

HECMs ar e " r ever se" mor t gages. Unl i ke a t ypi cal mor t gage, wher e a

bor r ower r ecei ves l oan pr oceeds as a l ump sum, uses t he pr oceeds t o

buy a home, and t hen pays back t he l oan gr adual l y, a "r ever se"

mor t gage bor r ower al r eady owns a home and t akes out a l oan agai nst

1 The par t i es f i l ed r equest s f or j udi ci al not i ce wi t h t hei r movi ngpaper s. ECF Nos. 9 ( " RJ N I SO MJ P" ) , 13 ( " RJ N I SO Mot . t oDi ssol ve" ) , 18 ( " RJ N I SO Opp' n t o MJ P" ) , 20 ( " RJ N I SO Opp' n t o Mot .t o Di ssol ve" ) . The r equest s ar e al l unopposed and t he document s t owhi ch t hey r ef er ar e j udi ci al l y not i ceabl e publ i c r ecor ds. TheCour t t her ef or e GRANTS t he par t i es' r equest s f or j udi ci al not i ce.



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i t s equi t y. I n t he r ever se of a t ypi cal mor t gage, an HECM bor r ower

gener al l y r ecei ves t he l oan pr oceeds i n gr adual payment s and pays

back t he l oan i n a l ump sum. Repayment i s t r i gger ed by cer t ai n

qual i f yi ng event s, f or exampl e, sal e of t he pr oper t y.

The HECM at i ssue i n t hi s case was i nsur ed t hr ough a pr ogr am

of t he U. S. Depar t ment of Housi ng and Ur ban Devel opment ( " HUD" ) .

See gener al l y 12 U. S. C. 1715z- 20 ( or gani c st at ut e) , 24 C. F. R.

206. 1 et seq. ( i mpl ement i ng r egul at i ons) . The pr ogr am does not

pr ovi de mor t gages di r ect l y; r at her , i t i nsur es l ender s who ext end

qual i f yi ng HECMs t o " el der l y" bor r ower s over t he age of 62. 12

U. S. C. 1715z- 20( b) ( 1) ; 24 C. F. R. 206. 33. The pr ogr am i s

desi gned t o make l endi ng t o t hese homeowner s mor e at t r act i ve by

i nsul at i ng l ender s f r om r i sk. See 12 U. S. C. 1715z- 20( a) .

HUD r egul at i ons i mpl ement i ng t he pr ogr am def i ne t he qual i f yi ng

event s t hat t r i gger r epayment of t he i nsur ed HECMs. 24 C. F. R.

206. 27( c) . One such event i s t he deat h of t he bor r ower . I d. I n

such ci r cumst ances, t he r egul at i ons pr ovi de:

The mor t gagee [ l ender ] shal l r equi r e t hemor t gagor [ bor r ower ] t o ( i ) pay t he mor t gagebal ance, i ncl udi ng any accr ued i nt er est and MI P[ mor t gage i nsur ance pr emi um] , i n f ul l ; ( i i )sel l t he pr oper t y f or at l eas t 95% of t heappr ai sed val ue . . . , wi t h t he net pr oceedsof t he sal e t o be appl i ed t owar ds t he mor t gagebal ance; or ( i i i ) pr ovi de t he mor t gagee wi t h adeed i n l i eu of f or ecl osur e.

I d. 206. 125( a) ( 2) ( br acket s added) . The r egul at i ons al so gi ve

bor r ower s a way t o sat i sf y t he mor t gage r egar dl ess of whet her a

qual i f yi ng event has occur r ed:

Whet her or not t he mor t gage i s due and payabl e,t he mor t gagor may sel l t he pr oper t y f or atl east t he l esser of t he mor t gage bal ance or t heappr ai sed val ue . . . . I f t he mor t gage i s dueand payabl e at t he t i me t he cont r act f or sal e



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i s execut ed, t he mor t gagor may sel l t hepr oper t y f or at l east t he l esser of t hemor t gage bal ance or f i ve per cent under t heappr ai sed val ue. The mor t gagee shal l sat i sf yt he mor t gage of r ecor d . . . i n or der t of aci l i t at e t he sal e, pr ovi ded t hat t her e ar e no

j uni or l i ens . . . and al l t he net pr oceedsf r om t he sal e ar e pai d t o t he mor t gagee.

I d. 206. 125( c) .

I n shor t , t he r egul at i ons cont empl at e t he possi bi l i t y of HECM

mor t gagor s sat i sf yi ng t hei r mor t gages ei t her bef or e or af t er t he

bor r ower ' s deat h by, f i r st , sel l i ng t he mor t gaged pr oper t y, t hen

ei t her payi ng t he mor t gage i n f ul l or , i f t he pr oper t y i s not wor t h

as much as t he mor t gage bal ance, payi ng at l east 95 per cent of t he

appr ai sed val ue of t he pr oper t y ( t he so- cal l ed " 95 per cent r ul e" ) .

For pur poses of such sal es, t he r egul at i ons' def i ni t i on of

" mor t gagor " i ncl udes " t he mor t gagor ' s est at e or per sonal

r epr esent at i ve. " I d. 206. 123( b) .

I n t he event t hat a mor t gagor sel l s t he pr oper t y but t he sal e

pr oceeds f al l shor t of t he amount needed t o sat i sf y t he mor t gage,

t he pr ogr am pr ohi bi t s HECM l ender s f r om seeki ng a def i ci ency j udgment agai nst t he mor t gagor . See i d. 206. 27( b) ( 8) . The

pr ogr am al so pr ot ect s HECM l ender s by i nsur i ng t hem f or t he amount

of t he shor t f al l . I d. 206. 123( a) . Though l ender s pay t he

pr emi um f or t hi s mor t gage i nsur ance di r ect l y t o HUD, t he

r egul at i ons per mi t l ender s t o pass on at l east some of t he cost of

t he pr emi um t o bor r ower s. See i d. 206. 27( b) ( 7) , 206. 109.

B. The HECM at Issue

On Apr i l 20, 2009, Pl ai nt i f f ' s mot her , Yol anda Mar i a Sant os,

conveyed t he subj ect pr oper t y t o t he Yol anda Mar i a Sant os Tr ust

2 HUD r egul at i ons pr ovi de an appr ai sal pr ocedur e. 24 C. F. R. 206. 125( b) . Pl ai nt i f f does not al l ege t hat t he subj ect pr oper t yhas been appr ai sed t hr ough t hi s pr ocedur e. See Compl . 43.



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( " Sant os Tr ust " ) , of whi ch she was t r ust ee. Compl . 33; RJ N I SO

MJ P at 39- 41 ( " Gr ant Deed" ) . On t he same day, Pl ai nt i f f ' s mot her

t ook out t he HECM at i ssue i n t hi s case. Compl . 35- 40; RJ N I SO

MJ P at 28- 38 ( " HECM Deed") . 3 The HECM Deed i dent i f i es t he bor r ower

as " Yol anda Mar i a Sant os, Tr ust ee of t he Yol anda Mar i e [ si c] Sant os

Li vi ng Tr ust . " HECM Deed at 1. The HECM Deed' s bor r ower sect i on

was si gned t wi ce, once by Yol anda Mar i a Sant os as an i ndi vi dual and

once by her as t r ust ee of t he Sant os Tr ust . I d. at 10.

Par agr aph 9( a) ( i ) of t he HECM Deed pr ovi des: " Lender may

r equi r e i mmedi at e payment - i n- f ul l of al l sums secur ed by t hi s

Secur i t y I nst r ument i f . . . [ a] Bor r ower di es and t he Pr oper t y i s

not t he pr i nci pal r esi dence of at l east one sur vi vi ng Bor r ower . "

I d. at 4. Par agr aph 9( e) pr ovi des: "A t r ust shal l not be

consi der ed an occupant or be consi der ed as havi ng a pr i nci pal

r esi dence f or pur poses of t hi s Par agr aph 9. " I d. at 4- 5.

On or ar ound Febr uar y 7, 2011, Yol anda Mar i a Sant os di ed.

Compl . 43. At t he t i me of her deat h, t he bal ance on t he HECM wasappr oxi mat el y $360, 000. I d. Pl ai nt i f f est i mat es t he val ue of t he

subj ect pr oper t y at t he t i me of her mot her ' s deat h as $288, 000.

I d. Pl ai nt i f f al so al l eges that she i s the sol e benef i ci ar y of t he

Sant os Tr ust , as wel l as i t s t r ust ee. I d. 34, 60. She al l eges

t he exi st ence of a wi l l est abl i shi ng t hat she was her mot her ' s

hei r . See i d. 60. She f ur t her al l eges t hat she has per sonal l y

r esi ded i n t he subj ect pr oper t y si nce 2010. I d. 32.

Pl ai nt i f f al l eges t hat , f ol l owi ng her mot her ' s deat h, she

cont i nual l y at t empt ed t o ent er i nt o a payment pl an t hat woul d pay

of f t he HECM l oan and al l ow her t o pur chase t he subj ect pr oper t y,

3 Lat er ci t at i ons t o t he HECM Deed ci t e i t s i nt er nal page number s.



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but t hat RMS r ef used t o per mi t her t o pur chase i t and i nst ead

i nsi st ed t hat t he pr oper t y ei t her be f or ecl osed or sol d t o some

t hi r d par t y. See gener al l y i d. 43- 72. NDEX began f or ecl osur e

pr oceedi ngs i n Febr uar y 2012. I d. 56- 64. Pl ai nt i f f al l eges

t hat RMS has i nsi st ed t hat onl y a f ul l payof f of t he mor t gage

amount wi l l sat i sf y t he mor t gage, as compar ed t o t he 95 per cent

f i gur e ment i oned i n t he HUD r egul at i ons. I d. 15, 78. Pl ai nt i f f

f ur t her al l eges t hat t he not i ce of def aul t f ai l ed t o pr ovi de her

wi t h r equi r ed not i ces, namel y, t hat she coul d sat i sf y t he HECM by

buyi ng t he pr oper t y her sel f at 95 per cent of i t s appr ai sed val ue,

and t hat f or ecl osur e i s pr ohi bi t ed bef or e she r ecei ves t hose

not i ces. I d. 78.

On J une 8, 2012, Pl ai nt i f f f i l ed a compl ai nt i n Cal i f or ni a

st at e cour t , asser t i ng f our causes of act i on: ( 1) br each of

cont r act , ( 2) decl ar at or y r el i ef , 4 ( 3) s l ander of t i t l e, and ( 4)

cancel l at i on of wr i t t en i nst r ument s pur suant t o Cal i f or ni a Ci vi l

Code 3412. I d. 73- 103. On J une 26, 2012, t he st at e cour tor al l y ent er ed a pr el i mi nar y i nj unct i on agai nst Def endant s,

pr ohi bi t i ng t hem f r om pr oceedi ng wi t h t he pl anned f or ecl osur e sal e

4 Under f eder al l aw, decl ar at or y r el i ef i s a r emedy, not a cl ai m.E. g. , Rosenf el d v. J PMor gan Chase Bank, N. A. , 732 F. Supp. 2d 952,975 ( N. D. Cal . 2010) . However , Pl ai nt i f f or i gi nal l y f i l ed hercompl ai nt i n Cal i f or ni a st at e cour t , whi ch per mi t s t he pl eadi ng of an i ndependent cause of act i on f or decl ar at or y r el i ef . See Cal .

Ci v. Pr oc . Code 1060. Si nce Pl ai nt i f f ' s decl ar at or y r el i ef " cl ai m" r est s on f eder al st at ut es and r egul at i ons and not sol el y onCal i f or ni a' s decl ar at or y r el i ef cause of act i on, t he Cour tconst r ues i t as a c l ai m ar i s i ng under t he f eder al aut hor i t i es c i t edt her ei n. Pl ai nt i f f asks f or a decl ar at i on concer ni ng her r i ght t or ecei ve not i ce of her r i ght t o sel l t he subj ect pr oper t y, as wel las of her r i ght t o r epur chase t he subj ect pr oper t y f or 95 per centof i t s appr ai sed val ue, and addr essi ng whet her , by f ai l i ng t opr ovi de such not i ce, Def endant s " have vi ol at e[ d] 12 U. S. C. 1715z-20, 24 C. F. R. [ ] 206. 1 et seq. , and t he st andar d HECM l oancont r act . " Compl . 85.



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unt i l t r i al or f ur t her or der. 5 That same day, NDEX, wi t h t he

consent of RMS, r emoved t o t hi s Cour t . NOR 13- 14.

III. DISCUSSION

A. Motion for Judgment on the Pleadings

" Af t er t he pl eadi ngs are cl osed - - but ear l y enough not t o

del ay t r i al - - a par t y may move f or j udgment on t he pl eadi ngs. "

Fed. R. Ci v. P. 12( c) . " J udgment on t he pl eadi ngs i s pr oper when

t he movi ng par t y cl ear l y est abl i shes on t he f ace of t he pl eadi ngs

t hat no mat er i al i ssue of f act r emai ns t o be r esol ved and t hat i t

i s ent i t l ed t o j udgment as a mat t er of l aw. " Hal Roach St udi os,

I nc. v. Fei ner & Co. , I nc. , 896 F. 2d 1542, 1550 ( 9t h Ci r . 1989) .

When a Rul e 12( c) mot i on at t acks a compl ai nt , i t i s subj ect t o t he

same st andar d of r evi ew as a Rul e 12( b) ( 6) mot i on t o di smi ss f or

f ai l ur e t o st at e a cl ai m upon whi ch r el i ef can be gr ant ed; t hus,

t he compl ai nt must cont ai n suf f i ci ent f act ual mat t er , accept ed as

t r ue, t o s t at e a cl ai m t o r el i ef t hat i s pl aus i bl e on i t s f ace. J ohnson v. Rowl ey, 569 F. 3d 40, 44 ( 2d Ci r . 2009) ; see al so

Caf asso, U. S. ex rel . v. Gener al Dynami cs C4 Sys. , I nc. , 637 F. 3d

1047, 1055 n. 4 ( 9t h Ci r . 2011) ( ci t i ng J ohnson wi t h appr oval ) . A

cl ai m i s pl aus i bl e on i t s f ace when t he pl ai nt i f f pl eads "f actual

cont ent t hat al l ows t he cour t t o dr aw t he r easonabl e i nf er ence t hat

t he def endant i s l i abl e f or t he mi sconduct al l eged. " Ashcr of t v.

I qbal , 556 U. S. 662, 678 ( 2009) ( ci t i ng Bel l At l . Cor p. v. Twombl y,

550 U. S. 544, 556 ( 2007) ) .

5 The or der was r educed t o wr i t i ng and si gned on J une 28, 2012.Pr el i m. I nj ' n Or der .



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" [ D] i smi ssal on t he pl eadi ngs i s pr oper onl y i f t he movi ng

par t y i s c l ear l y ent i t l ed t o pr evai l . " Kr use v. St at e of Hawai ' i ,

857 F. Supp. 741, 749 ( D. Haw. 1994) af f ' d 68 F. 3d 331 ( 9t h Ci r .

1995) . Feder al cour t s may decl i ne t o ent er j udgment on t he

pl eadi ngs when t hey per cei ve t hat " hast y or i mpr udent use of t hi s

summar y pr ocedur e" woul d i mpede t he st r ong pol i cy i n f avor of

deci di ng cases on t hei r mer i t s. See Car r asco v. Fi or e Ent er s. , 985

F. Supp. 931, 934 ( D. Ar i z. 1997) ( quot i ng 5A Char l es A. Wr i ght &

Ar t hur R. Mi l l er , Feder al Pr ac. & Pr oc. , Ci vi l 2d 1368 ( 1990) ) .

As a pr el i mi nar y mat t er , t he Cour t addr esses t he quest i on of

who bear s t he bur den of per suasi on on t he i nst ant mot i on.

Def endant s aver t hat i t i s Pl ai nt i f f . MJ P Repl y at 4. Def endant s

ar e wr ong. I t i s bl ack- l et t er l aw t hat , on a Rul e 12( c) mot i on,

t he movi ng par t y - - her e, Def endant s - - bear s t he bur den. Hal

Roach St udi os, 896 F. 2d at 1550; Kr use, 857 F. Supp. at 749. The

bur den does not , as Def endant s appear t o suggest , shi f t t o t he non-

movi ng par t y af t er t he opposi t i on br i ef i s f i l ed.6

Def endant s put f or war d a var i et y of t heor i es as t o why t he

pl eadi ngs ent i t l e t hem t o j udgment . For t he r easons set f or t h

bel ow, t he Cour t cannot concl ude on t he st at e of t he ar gument s

submi t t ed t hat any of Def endant s' t heor i es have mer i t and t her ef or e

6 Def endant s seem t o r est t hei r novel bur den- shi f t i ng t heor y i n

par t on a chal l enge t o Pl ai nt i f f ' s Ar t i c l e I I I s t andi ng. See MJ PRepl y at 6- 7. But Def endant s' const i t ut i onal st andi ng chal l enge i spr ocedur al l y i mpr oper f or t wo r easons. Fi r st , t he pr oper procedur ef or chal l engi ng Ar t i cl e I I I s t andi ng i s a Rul e 12( b) ( 1) mot i on t odi smi ss , not a Rul e 12( c) mot i on. See Whi t e v. Lee, 227 F. 3d 1214,1242 ( 9t h Ci r . 2000) . Second, whi l e i t i s t r ue t hat Pl ai nt i f f bear s t he bur den of est abl i shi ng her const i t ut i onal st andi ng,Def endant s r ai sed t he st andi ng i ssue f or t he f i r st t i me i n t hei rr epl y br i ef . Because Pl ai nt i f f has not had a chance t o r espond,basi c f ai r ness pr event s t he Cour t f r om consi der i ng Def endant s'Ar t i c l e I I I s t andi ng chal l enge at t hi s t i me.



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t he Cour t decl i nes t o ent er j udgment i n f avor of Def endant s. The

Cour t ' s deni al of Def endant s' mot i on i s wi t hout pr ej udi ce and does

not bar ei t her par t y f r om l at er seeki ng j udgment on gr ounds r ai sed

her e. 7

1. Declaratory Relief

Def endant s f ocus t hei r mot i on on Pl ai nt i f f ' s cl ai m f or

decl ar at or y r el i ef , whi ch t he Cour t const r ues as a cl ai m ar i si ng

under t he f eder al aut hor i t i es ci t ed t her ei n. Supr a not e 4.

Def endant s' pr i mar y ar gument i s t hat t hey ar e ent i t l ed t o j udgment

on t hat cl ai m because Pl ai nt i f f i s sui ng under f eder al r egul at i ons

whi ch conf er no pr i vat e r i ght of act i on. However , none of t he

aut hor i t y Def endant s ci t e st ands f or t hi s pr oposi t i on. The

r egul at i ons at i ssue her e wer e pr omul gat ed under 12 U. S. C. 1715z-

20, whi ch was added t o t he Nat i onal Housi ng Act ( " NHA" ) i n 1988.

See Pub. L. 100- 242, , 417( a) , 101 St at . 1815, 1908- 12 ( 1988) .

Near l y al l of t he cases r el i ed on by Def endant s wer e deci ded bef or e

t hi s l aw was enact ed and t hus ar e i napposi t e. The l at er - deci dedcases ci t ed by Def endant s ar e i napposi t e, t oo, i n t hat t hey addr ess

7 Fr ankl y, t hi s i s because t he ar gument s s ubmi t t ed by bot h par t i esf r equent l y ar e ei t her ( 1) uncl ear or ( 2) mi st aken as t o f undament alpoi nt s of l aw, such as t he i dent i t y of t he par t y t hat bear s t hebur den of per suasi on on a Rul e 12( c) mot i on, see MJ P Repl y at 4, ort he f act t hat f eder al st andar ds r at her t han st at e l aw st andar dsappl y t o cl ai ms seeki ng decl ar at or y r el i ef , see MJ P Opp' n at 13- 14.

The Cour t bel i eves t hat t he par t i es have not yet j oi ned t he i ssues

t hat wi l l deci de t hi s case. One ai m of t hi s Or der i s to f ocus t hei ssues so t hat any f ur t her mot i ons wi l l come cl oser t o t he hear t of t he mat t er . The Cour t al so pauses t o not e def ense counsel ' st r oubl i ng t endency t o f or go l egal ar gument i n f avor of i r r el evant ,i nf l ammat or y per sonal r het or i c. The Cour t wi l l not t ol er at et r ucul ence i n t he paper s any mor e t han i t woul d i n open cour t . TheCour t r emi nds def ense counsel of t hei r et hi cal obl i gat i on t opr act i ce bef or e t hi s Cour t wi t h t he l evel of "decor um r equi r ed f ort he f ai r and ef f i c i ent admi ni s t r at i on of j us t i ce. " Ci v. L. R. 11-4( a) ( 4) . Fur t her vi ol at i ons of t hi s r ul e by ei t her par t y mayr esul t i n sanct i ons .



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sect i ons of t he NHA not at i ssue her e. Def endant s pr ovi de no

r eason why hol di ngs i nt er pr et i ng ot her sect i ons of t he NHA shoul d

appl y t o t he sect i on r el i ed on by Pl ai nt i f f s. Fur t her , a number of

t he cases ci t ed by Def endant s st and onl y f or t he not i on t hat no

pr i vat e cause of act i on exi st s t o enf or ce t er ms of t he HUD

Handbook. E. g. , Rober t s v. Camer on- Br own Co. , 556 F. 2d 356, 357- 58

( 5t h Ci r . 1977) . That may be so, but , as Pl ai nt i f f poi nt s out ,

Opp' n at 14- 15, Pl ai nt i f f seeks decl ar at or y rel i ef on t he basi s of

aut hor i t i es ot her t han t he HUD Handbook, such as f eder al

r egul at i ons. Def endant s do not say why hol di ngs appl i cabl e t o t he

HUD Handbook - - whi ch shar e a common pr emi se i n t hat t hey f ocus on

t he Handbook' s bei ng unpubl i shed - - woul d appl y t o r ul es publ i shed

i n t he Code of Feder al Regul at i ons. I n shor t , Def endant s'

aut hor i t i es do not suppor t t he concl usi on Def endant s seek.

The Cour t ' s pr i mar y concer n, however , i s Def endant s' f ai l ur e

t o acknowl edge t he di st i nct i on bet ween expr ess and i mpl i ed r i ght s

of act i on. Def endant s ' t heor y i s t hat t hey ar e ent i t l ed t o j udgment on Pl ai nt i f f ' s decl ar at or y r el i ef cl ai m because t he

under l yi ng aut hor i t i es pr ovi de Pl ai nt i f f wi t h no pr i vat e r i ght of

act i on. Pr i vat e r i ght s of act i on may be expr ess or i mpl i ed - - a

di st i nct i on t hat i s ment i oned t hr oughout t he cases Def endant s ci t e,

but whi ch Def endant s t hemsel ves never di scuss. To pr evai l on t hei r

t heor y, Def endant s woul d need t o show t hat nei t her t ype of r i ght of

act i on exi st s, whi ch necessari l y woul d ent ai l an anal ysi s under

Cor t v. Ash, 422 U. S. 66 ( 1975) , and i t s pr ogeny. Def endant s do

not at t empt t hi s anal ysi s and, because t hey do not , t hey cannot and

do not car r y t hei r bur den of showi ng t hat Pl ai nt i f f has no pr i vat e

r i ght of act i on her e.



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Def endant s al so chal l enge Pl ai nt i f f ' s st andi ng t o seek

decl ar at or y r el i ef . Thi s chal l enge concer ns Pl ai nt i f f ' s s t andi ng

under t he HECM Deed, as compar ed t o her const i t ut i onal st andi ng.

See supr a not e 6. Def endant s ' f i r st chal l enge i s t hat Pl ai nt i f f i s

not a r eal par t y i n i nt er est because she i s not one of t he or i gi nal

bor r ower s under t he HECM Deed or t he not es i t secur es. Thi s

ar gument f ai l s because i t does not account f or t he f act t hat

Yol anda Mar i a Sant os al l egedl y si gned bot h t he HECM Deed and t he

not es i n bot h her capaci t y as t r ust ee of t he Sant os Tr ust as wel l

as her per sonal capaci t y, and t hat Pl ai nt i f f al l eges t hat she now

i s t r us tee of t he Sant os Tr us t . Pl ai nt i f f ' s t heor y, i n shor t ,

hi nges on t he not i on t hat t he bor r ower i s t he Sant os Tr ust .

Def endant s ar gue t hat t he Sant os Tr ust cannot be t he bor r ower under

t he HECM Deed or t he not es because t he not es l i mi t t he def i ni t i on

of " bor r ower " t o "each per son si gni ng at t he end of t hi s Not e. "

Def endant s' ar gument i s unavai l i ng. Fi r st , Def endant s do not

account f or t he f act t hat , whi l e t he not es i ndeed def i ne " bor r ower "i n t hi s way, t he HECM Deed l i st s t he bor r ower as Yol anda Mar i a

Sant os i n her capaci t y as t r ust ee f or t he Sant os Tr ust . Second,

Def endant s appar ent l y i nt er pr et t he not es' def i ni t i on of bor r ower

t o i ncl ude onl y nat ur al per sons act i ng i n t hei r i ndi vi dual

capaci t i es. The Cour t i s unconvi nced t hat t hi s nar r ow r eadi ng i s

t he cor r ect one. On t he cont r ar y, t he HECM Deed speci f i cal l y

cont empl at es t r ansf er of a bor r ower ' s i nt er est i n t he pr oper t y t o

or f r om a separ at e t r ust , HECM Deed 9( e) , whi ch suggest s t hat

t r ust s can hol d t he r i ght s of bor r ower s under t he HECM Deed, as



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wel l as t hei r obl i gat i ons under t he not es. Def endant s ci t e no

cont r ar y aut hor i t y. 8

Def endant s' second chal l enge t o Pl ai nt i f f ' s st andi ng under t he

HECM Deed i s t hat Pl ai nt i f f cannot sue under t he HUD r egul at i ons

because t hose r egul at i ons def i ne " mor t gagor " i n a way t hat excl udes

Pl ai nt i f f . The HUD r egul at i on ci t ed by Def endant s i ncl udes

or i gi nal bor r ower s, whi ch Def endant s say Pl ai nt i f f i s not , but

excl ude an or i gi nal bor r ower ' s successors or assi gns. See 24

C. F. R. 206. 3. Def endant s t ake t he posi t i on t hat Pl ai nt i f f

t her ef or e i s not a " mor t gagor " under t he r egul at i ons and t hus l acks

a mor t gagor ' s st andi ng t o enf or ce t he HECM Deed. The Cour t i s not

per suaded. Fi r st , Def endant s have not est abl i shed t hat Pl ai nt i f f ,

i n her capaci t y as t r ust ee, i s not an or i gi nal bor r ower . Second,

al t hough Def endant s cor r ect l y ci t e t he t ext of t he r egul at i ons'

gener al def i ni t i on of "mor t gagor , " t hey i gnor e a di f f er ent

pr ovi si on whi ch expands t hat def i ni t i on i n t he case of sal es t o

i ncl ude "t he mor t gagor ' s est at e or per sonal r epr esent at i ve. " I d. 206. 123( b) . Her e, Pl ai nt i f f al l eges t he exi st ence of a wi l l t hat

makes her t he or i gi nal mor t gagor ' s sol e hei r . I t i s uncl ear why

t hi s st at us al one does not ent i t l e her t o exer ci se t he mor t gagor ' s

r i ght t o sel l t he pr oper t y under t he 95 per cent r ul e. Def endant s,

havi ng f ai l ed t o ci t e t he appl i cabl e r egul at i on, do not addr ess t he

poi nt .

8 Def endant s do ci t e a Cal i f or ni a st at e case f or t heuncont r over si al pr oposi t i on t hat a t r ust "i s not a per son butr at her a f i duci ar y r el at i onshi p wi t h r espect t o pr oper t y. " MJ P at11 ( quot i ng Zi egl er v. Ni ckel , 64 Cal . App. 4t h 545, 548 ( 1998) ) .However , t r ust s must act t hr ough per sons. I ndeed, as t he ver y nextsent ence of Zi egl er st at es, "an or di nar y expr ess t r ust i s not anent i t y separ at e f r om i t s t r us t ees . " I d. Def endant s c i t e t hi sl anguage, but do not say how i t under mi nes Pl ai nt i f f ' s posi t i ont hat t he bor r ower f or pur poses of t he HECM i s t he Sant os Tr ust .



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of showi ng on t hat t he pl eadi ngs ent i t l e t hem t o j udgment on

Pl ai nt i f f ' s cl ai m f or decl ar at or y r el i ef .

2. Other Claims

Def endant s chal l enge Pl ai nt i f f ' s ot her t hr ee cl ai ms - - br each

of cont r act , s l ander of t i t l e, and cancel l at i on of wr i t t en

i nst r ument s - - sol el y on t he gr ound t hat t hey ar e der i vat i ve of t he

decl ar at or y r el i ef cl ai m. Taki ng t he ar gument on i t s own t er ms,

Def endant s' chal l enge t o t hese t hr ee cl ai ms woul d f ai l because

t hei r chal l enge t o t he decl ar at or y r el i ef cl ai m f ai l s .

Looki ng past t he t er ms of Def endant s' ar gument , however , t he

Cour t obser ves t hat t hei r posi t i on mi sappr ehends t he l ogi cal and

l egal st r uct ur e of Pl ai nt i f f ' s remai ni ng cl ai ms. The br each of

cont r act cl ai m i s at l east par t l y pr emi sed on t he i dea t hat t he HUD

r egul at i ons ar e i ncor por at ed i nt o t he HECM Deed by bei ng r epeat ed

t her e near l y ver bat i m, and t hus have l egal f or ce not onl y as

f eder al l aws, but as i ndependent cont r act ual t er ms. Li kewi se,Pl ai nt i f f ' s cl ai ms f or s l ander of t i t l e and cancel l at i on of wr i t t en

i nst r ument s ar e pr edi cat ed on Cal i f or ni a st at e l aw, not f eder al

l aw. I t i s uncl ear t o t he Cour t how any of Pl ai nt i f f ' s cl ai ms ar e

der i vat i ve of her decl ar at or y r el i ef cl ai m, l egal l y or l ogi cal l y.

Because Def endant s have not met t hei r bur den of showi ng t hat

t he pl eadi ngs cl ear l y ent i t l e t hem t o r el i ef , t hei r Rul e 12( c)

mot i on i s DENI ED. Def endant s al so moved f or summar y j udgment i n

t he al t er nat i ve. However , Def endant s never expl ai n why summar y

j udgment pr ocedur es ar e needed or war r ant ed her e, addr ess t he

st andar d f or summar y j udgment or how i t woul d appl y i n t hi s case,

or ci t e evi dence. Accor di ngl y, t o t he ext ent t hat Def endant s'



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mot i on i s const r ued as one f or summar y j udgment , t hat mot i on, t oo,

i s DENI ED.

B. Motion to Dissolve Preliminary Injunction

Def endant s have moved t o di ssol ve t he pr el i mi nar y i nj unct i on

al r eady ent er ed by t he st at e cour t or , i n t he al t er nat i ve, t o

modi f y t hat i nj unct i on by r equi r i ng Pl ai nt i f f s t o post a bond.

Def endant s r equest a bond i n t he amount of $520, 750. 96 - - t hat i s,

t he pur por t ed amount of ar r ear ages, $320, 750. 96, pl us est i mat ed

f ut ur e at t or ney f ees of $200, 000. Repl y I SO Mot . t o Di ssol ve at

13. Def endant s pr ovi de no evi dence i n suppor t of t hei r at t or ney

f ee est i mat e.

I n a ci vi l act i on r emoved f r om st at e cour t , as t hi s one was,

"[ a] l l i nj unct i ons, or der s, and ot her pr oceedi ngs had i n such

act i on pr i or t o i t s r emoval shal l r emai n i n f ul l f or ce and ef f ect

unt i l di ssol ved or modi f i ed by t he di st r i ct cour t . " 28 U. S. C.

1450. Essent i al l y, "[ a] f t er r emoval , t he f eder al cour t t akes the

case up wher e t he St at e cour t l ef t i t of f . " Car val ho v. Equi f axI nf o. Ser vs. , LLC, 629 F. 3d 876, 887 ( 9t h Ci r . 2010) ( quot i ng

Gr anny Goose Foods, I nc. v. Bhd. of Teamst er s & Aut o Tr uck Dr i ver s

Local No. 70 of Al ameda Cnt y. , 415 U. S. 423, 436 ( 1974) ) . " The

f eder al cour t t r eat s ever yt hi ng t hat occur r ed i n t he st at e cour t as

i f i t had t aken pl ace i n f eder al cour t . " I d. ( quot i ng But ner v.

Neust adt er , 324 F. 2d 783, 785 ( 9t h Ci r . 1963) ( el l i pses omi t t ed) ) .

" Consequent l y, an or der ent er ed by a st at e cour t shoul d be t r eat ed

as t hough i t had been val i dl y r ender ed i n t he f eder al pr oceedi ng. "

I d. ( i nt er nal quot at i on mar ks omi t t ed) . "[ F] eder al r at her t han

st at e l aw gover ns t he f ut ur e cour se of pr oceedi ngs. " Gr anny Goose

Foods, 415 U. S. at 437.



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I n t hi s case, t he st at e cour t ent er ed a pr el i mi nar y i nj unct i on

on J une 26, 2012. That i nj unct i on pr ohi bi t s Def endant s and any

per son act i ng on t hei r behal f f r om sel l i ng, t r ansf er r i ng, or

encumber i ng t he subj ect pr oper t y, and i t does not expi r e unt i l

concl usi on of t r i al or modi f i cat i on or di ssol ut i on by some f ur t her

or der . See Pr el i m. I nj ' n Or der at 2. What Def endant s seek, t hen,

i s a "f ur t her or der " i ssued pur suant t o t hi s Cour t ' s br oad

di scret i on t o modi f y or di ssol ve pr el i mi nar y i nj unct i ons i n t he

f ace of changed l aw or ci r cumst ance. See Mar i scal - Sandoval v.

Ashcr of t , 370 F. 3d 851, 859 ( 9t h Ci r . 2004) . Def endant s must show,

t hen, some change i n l aw or ci r cumst ance. They have not done so.

The onl y t hi ng t hat has changed si nce ent r y of t he pr el i mi nar y

i nj unct i on i s t he venue of t hi s act i on, whi ch has shi f t ed f r om

st at e t o f eder al cour t . That change, however , i s i mmat er i al ,

Car val ho, 629 F. 3d at 887, and Def endant s do not ment i on any ot her .

The t hr ust of Def endant s' ar gument i s t hat Pl ai nt i f f i s

unl i kel y t o succeed on t he mer i t s of her cl ai m. See Wi nt er v.Nat ur al Res. Def . Counci l , I nc. , 555 U. S. 7, 20 ( 2008) . Leavi ng

asi de t he f act t hat t he st at e cour t al r eady r ul ed on t hi s i ssue

when ent er i ng t he pr el i mi nar y i nj unct i on, Def endant s' at t acks on

t he mer i t s of Pl ai nt i f f ' s cl ai m consi st of ar gument s t he Cour t

r ej ec ted i n Sect i on I I I . A supr a. I ndeed, t he br i ef s f i l ed by bot h

si des i n connect i on wi t h t he mot i on t o di ssol ve ar e obvi ous copi es

of t he br i ef s t hey f i l ed i n connect i on wi t h t he mot i on f or j udgment

on t he pl eadi ngs. The Cour t f i nds Def endant s' ar gument s unavai l i ng

i n t hi s cont ext , t oo.

By f ai l i ng t o i dent i f y any r el evant change i n l aw or

ci r cumst ance, Def endant s f ai l t o per suade t he Cour t t hat i t shoul d



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r econsi der t he st at e cour t ' s ear l i er ent r y of a pr el i mi nar y

i nj unct i on, i ncl udi ng t he st at e cour t ' s deci si on t o do so wi t hout

r equi r i ng a bond. Accor di ngl y, Def endant s' mot i on t o di ssol ve or ,

i n t he al t er nat i ve, t o modi f y t he pr el i mi nar y i nj unct i on by

r equi r i ng a bond of $520, 750. 96, i s DENI ED WI THOUT PREJ UDI CE. Any

f ur t her at t empt t o di ssol ve or modi f y t he pr el i mi nar y i nj unct i on

shal l be consi st ent wi t h t he gui dance pr ovi ded i n t hi s Or der .

IV. CONCLUSION

For t he f or egoi ng r easons, t he mot i on f or j udgment on t he

pl eadi ngs or , i n t he al t er nat i ve, summar y j udgment , br ought by

Def endant s NDEX West , LLC and Rever se Mor t gage Sol ut i ons, I nc.

agai nst Pl ai nt i f f I sabel Sant os, i s DENI ED WI THOUT PREJ UDI CE.

Def endant s' mot i on t o di ssol ve or modi f y t he pr el i mi nar y

i nj unct i on or i gi nal l y ent er ed on J une 26, 2012 i s DENI ED WI THOUT

PREJ UDI CE. The pr el i mi nar y i nj unct i on r emai ns undi st ur bed.

Def endant s and t hei r empl oyees, agent s, and per sons act i ng wi t ht hem or on t hei r behal f ar e enj oi ned and r est r ai ned f r om sel l i ng,

t r ansf er r i ng any owner shi p i nt er est i n or f ur t her encumber i ng t he

pr oper t y l ocat ed at 930 Sant a Cr uz Dr i ve, Pl easant Hi l l ,

Cal i f or ni a, 94523, APN: 127- 012- 019- 7, pendi ng t he t r i al of t hi s

act i on or f ur t her or der of t hi s Cour t .

I T I S SO ORDERED.

Dat ed: Oct ober 12, 2012UNI TED STATES DI STRI CT J UDGE


santos v. rms, 3.12-cv-03296-sc, order doc 25

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