The Real News

February, 2018
CFPB Is Making News Through The Courts

The Consumer Financial Protection Bureau (CFPB) has been in the news lately due to two separate court cases being decided.  Both cases have major ramifications.
PHH Corp. is a New Jersey mortgage service provider.  The CFPB targeted them for an enforcement action in 2015.  PHH lost the first round and was given a hefty fine.  They appealed the fine, and the director of the CFPB at that time, Richard Cordray, decided that the original fine was not enough and increased it by more than an additional $100 million.  PHH appealed not only the enforcement action and the increased fine, but also the constitutional structure of the CFPB.
The D.C. Circuit Court of Appeals ruled 7-3 the structure of the CFPB is constitutional.  This is a big win for the CFPB, since it's facing major political challenges from business interests and conservatives.  The ruling was that a provision in the 2010 Dodd-Frank law does limit the president's ability to remove the CFPB director during his or her five-year term and that law does not violate the president's authority to appoint and remove executive branch officers.  Although this appears to be a major victory for the CFPB, the court also struck down the additional fine levied by Cordray.  The Court stayed his order pending review.  This is viewed as a victory for the industry and there will surely be more to come from this.
The second court decision is being viewed as a "stunning rebuke" to the CFPB.  A federal judge in Los Angeles, California ruled in favor of the CFPB in their suit against CashCall, a lender based in Orange County, California.  Again, this appears to be a win for the CFPB.  The Court stunned the CFPB by ordering CashCall (and its owner J. Paul Reddam) to pay $10.3 million in penalties and restitution.  However, that's only a fraction of the $287 million CFPB was seeking.  The CFPB was asking for the total amount of interest and fees paid to CashCall, $235.6 million, plus a $51.6 million penalty.
CashCall was using a company named Western Sky Financial to avoid state lending laws limiting how much interest they can charge the consumer.  Western Sky Financial is based on the Cheyenne River Sioux Tribe's reservation in South Dakota.  Since they are based on tribal land, it was argued they are not subject to state laws.  The CFPB argued that it was a sham, and that CashCall was the true lender.  The Court agreed, but the fine was so much less than what the CFPB was asking for because CashCall was not deceptive in the higher than allowed interest rates they were charging.  Since the consumers were told about the high interest rates and decided to sign up anyway, the fine was greatly reduced to the $10.3 million figure.
Case of the Month

Kathleen D. McBride, as Trustee, etc., Plaintiff and Appellant v. Byron C. Smith et al., Defendants and Respondents

Kathleen McBride sued Byron and Kalmia Smith, citing they violated her rights with respect to a recorded easement involving the Smith's property. The Trial Court sustained demurrers to several versions of McBride's complaint. Each time they granted her leave to amend. After the fourth amendment, the Trial Court entered judgment in favor of the Smiths. McBride appealed the decision.

In 1993, Delores Daniels owned 1670 Spring in St. Helena, CA. Silvio Pelandini owned the next-door property, 1664 Spring. In March of that year, Daniels filed a complaint against Pelandini (and all unknown persons) to quiet title in, and reform her deed to include, two strips of land along the opposite borders of her property at 1670 Spring. She asked for a 15 foot wide strip along the western border and a 12 foot wide strip along the eastern border. In June of 1993, the Trial Court entered judgment quieting Daniels' title to both strips of land. In September of 1993, Daniels granted Pelandini an easement running with the land over the 12 foot strip. The easement was described as a secondary right-of-way over the existing roadway surface within the easement location, for the purpose of emergency ingress and egress. It specifically excluded primary access.

In 1998, the Smiths purchase 1670 Spring. In 2004, the McBride family acquires title to 1664 Spring. In 2004, Lindsey Vickers owns 1660 Spring. Vickers and McBride execute an agreement granting McBride a "driveway easement" within the western border of 1660 Spring for vehicular and pedestrian ingress, egress, and access...   Kathleen McBride becomes the sole owner of 1664 Spring in July 2013.

In 2014, the Smiths "erected permanent fixtures in said driveway to impede [McBride] and block her access to her property." The Smiths built a fence, including a large pole and substantial chain, blocking access to the area with the easement that was only supposed to be used for emergency purposes. McBride sued, claiming she used that driveway every single day and wished to continue to do so.

McBride's first complaint claimed trespass. However, it was the Smiths' property, and McBride could be considered the person trespassing. The Smiths filed general and special demurrers to the complaint, arguing, among other things, that McBride did not and could not allege facts to establish her right to exclusive possession of a shared driveway. McBride used the driveway with the Smiths' expressed permission. The Smiths further claimed that the allegations and judicially noticeable facts showed that the Smiths did not prevent McBride from accessing her property. The Trial Court sustained the Smiths' demurrer with leave to amend.

In McBride's first amended complaint, she claimed that she had to drive onto 1660 Spring in order to access her property at 1664 Spring. This would force her to trespass onto 1660 Spring, among many other claims. The Trial Court sustained the Smiths' demurrer stating that McBride cannot trespass onto property she already owns, again with leave to amend.

McBride's second amended complaint supplemented her factual allegations in an effort to state claims for trespass, forcible detainer, nuisance, and prescriptive easement. She stated that the driveway easement terminates before 1664 Spring, and therefore she is forced onto the secondary easement in order to access her property. She also supplied additional facts about the "chain, pole, and wood dividers" the Smiths erected that "prevents Plaintiff from reasonably accessing 1664 Spring Street." The maps she provided appeared to be machine generated, but also had multiple hand-written notes on them. Other documents also had questionable authenticity. In February 2015, the Trial Court sustained the Smiths' demurrers to the forcible detainer claim without leave to amend. The Court granted McBride leave to amend her other claims because they contained many flaws.

McBride filed her third amended complaint in February 2015, which purported to state eight separate causes of action. She kept the four from the last complaint, although she changed her forcible detainer claim to a cause of action for forcible entry. She added four new causes of action to quiet her title to: 1. A right of way over the Western Border Easement, 2. An unrestricted right of way over the part of the road covered by the Secondary Access Easement, 3. An easement by necessity over the part of the road covered by the Secondary Access Easement, and 4. An equitable easement over the part of the road covered by the Secondary Access Easement. In June 2015, the court sustained without leave to amend, McBride's forcible entry claim and new causes of action to quiet title, finding that McBride had not alleged facts to satisfy the elements of these claims. The court did however, sustain the Smiths' demurrer with right to amend in regards to trespass or nuisance claims. The court gave two reasons for that, 1. It wasn't clear if the chain attached to the pole was stretched across the entire 12 foot easement area, or invaded other areas, and 2. McBride's counsel stated that McBride had recently sold 1660 Spring, which may impact her use of that property to gain access to 1664 Spring.

McBride filed her fourth amended complaint alleging, among other things, factual allegations into causes of action for trespass, nuisance, and prescriptive easement. She argued that installing encroachments in the Secondary Access Easement constituted a trespass and a nuisance because they prevented her from using the easement, causing her damage. In September, 2015, the Trial Court sustained the Smiths' demurrers without leave to amend. The court specifically asked McBride to amend her third complaint to provide clarification about the Driveway Easement. Since she addressed the Secondary Access Easement and not the Driveway Easement, she failed to appease the court. She also failed to allege facts to establish that the Smiths' conduct prevented her from accessing her property. Several of the documents and facts she did bring contradicted each other and presented a confusing argument to the court. Since McBride had multiple opportunities to amend, the demurrers were sustained without leave to amend.

The Smiths filed a separate motion for attorney fees. There was an attorney fees clause included in the recorded grant of the Secondary Access Easement, which McBride opposed. The Trial Court granted the motion and awarded the Smiths $147,540.00. McBride appealed shortly thereafter.

The Appellate Court ruled the Trial Court erred by sustaining the demurrers. The two allegations that McBride used the Secondary Access Easement for primary access to her property, and that McBride and her associates used the easement on a daily basis, showed the Appellate Court that these allegations are sufficient to support a cause of action for a prescriptive easement under the terms of the 1993 recorded grant. The judgment was reversed and was remanded to the Trial Court for further proceeding consistent with the Appellate Court's decision. Both parties were ordered to bear their own costs on appeal.
Financial Fraud Kill Chain

The FBI offers a process named the Financial Fraud Kill Chain (FFKC) to help recover large international wire transfers that are stolen from inside the United States. The FFKC is just one tool people can use to try and recover stolen funds. It's important to follow all procedures and attempt all avenues to recover funds if you are a victim of wire fraud.
The FFKC has a few requirements before it can be used:
  • The wire transfer is $50,000.00 or more
  • The wire transfer is international
  • A SWIFT recall notice has been initiated
  • The wire transfer has occurred within the last 72 hours
All wire fraud occurrences should be reported to law enforcement, even if they do not meet the requirements listed above. The FFKC is just one of many tools that can be used to recover funds. RELAW, APC reminds everyone that wire fraud is growing and becoming a lot more common. Everyone needs to be vigilant and do their part to combat this crime. Even if funds are fraudulently stolen, there are many tools to attempt a recovery.

Upcoming Speaking Engagements

February 20 - Riverside County Escrow Association Dinner Meeting - 6:00pm - 8:00pm

March 17 - Escrow Training Institute - "Starting up an Escrow Company" 8:30am - 12:00pm (National Universtiy - Costa Mesa)

March 21 - CSMAR Lunch Seminar - "Advertising Laws & Social Media"




Jennifer Felten, Esq., Principal & Editor
(805) 265-1031 
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