2017-00211956-CU-OR

Paul Fraga vs. Bank Of America, National Association

Nature of Proceeding: Hearing on Demurrer to Verified Second Amended Complaint (Ocwen

Filed By: Julian, Jason M.

The demurrer of Defendants Ocwen Loan Servicing, LLC (Ocwen) and Bank of America, N.A. (BANA) (collectively “Defendants”) is SUSTAINED in part without leave to amend and OVERRULED in part.

Defendants’ request for judicial notice is GRANTED.

Overview

This is a nonjudicial foreclosure case. The plaintiffs are Paul and Luis Fraga (the “Fragas”). In the second amended complaint (SAC), the Fragas allege that BANA is the lender and former servicer. (The Fragas do not allege that BANA is the beneficiary under the deed of trust, and the Notice of Default attached to the SAC indicates MERS is the beneficiary.) They allege Ocwen subsequently serviced the loan until early
2016. The Fragas concede that they defaulted on the loan in 2008 and again in 2009. They allege that they began seeking loan modifications in 2012, but Defendants thwarted the modification process. In particular, the Fragas allege that Ocwen mailed a HAMP Trial Period Plan (TPP) offer to the wrong address and, because Ocwen never appointed a single point of contact under the Homeowner’s Bill of Rights (HBOR), they never learned about the offer when they contacted Ocwen by telephone. When the Fragas ultimately learned about the offer and attempted to accept, the acceptance was rejected.

Ocwen allegedly recorded notices of default and trustee’s sale in 2015. The right to service the loan was then transferred to a co-defendant. The Fragas still did not obtain a loan modification. There is no allegation the property was sold at auction.

The FAC contains causes of action against Defendants for Violation of CC § 2923.6, Violation of CC § 2923.7, Negligence and Violation of B&P Code §§ 17200 et seq. Defendants demur on grounds the allegations fail to state facts sufficient to state a valid cause of action. The Fragas oppose.

The court sustained in part and overruled in part Defendants’ demurrers to the first

amended complaint. The court granted leave to amend.

Discussion

The First and Second Causes of Action for Violations of CC §§ 2923.6 [Dual Tracking] and 2923.7 [Single Point of Contact]

The demurrers are SUSTAINED without leave to amend.

In its ruling on Defendants’ prior, joint demurrers, the court pointed out that, because the property has not been sold at auction, §§ 2923.6 and 2923.7 only afford injunctive relief. There is still no allegation that the property has been sold, and the cited statutory provisions therefore continue to support only injunctive relief. Given the Fragas’ allegations that Defendants are no longer servicing their loan, however, there is no basis to enjoin Defendants from advancing the foreclosure process. Other parties are in charge of that now.

The Fragas have failed to demonstrate a reasonable likelihood they can cure the allegations through further amendment. As a result, the court denies leave to amend.

The court does not address the parties’ dispute whether the recent repeal of § 2923.6 independently eliminates the first cause of action. And the court expresses no opinion whether the Fragas would be entitled to add damages causes of action under §§ 2923.6 or 2923.7 if the property were sold while this case is pending.

The Third Cause of Action for Negligence

The demurrers are SUSTAINED without leave to amend.

As they did in the FAC, the Fragas merely allege that BANA delayed the modification process before Ocwen took over as servicer. Absent additional factual allegations explaining how the delay contributed to any damages, the negligence cause of action against BANA is missing the elements of causation and damages.

Similarly, although the Fragas continue to allege Ocwen mailed their TPP offer letter to the wrong address and ultimately denied them the TPP, the allegations still do not establish how this conduct contributed to any damages. The Fragas do not allege they lost their home, and they do not allege any specific losses that might constitute resulting damages.

The demurrers are sustained because the allegations do not establish resulting damages. In reaching this conclusion, the court is aware of allegations supporting the fourth cause of action for unfair competition in which the Fragas allege they incurred late fees and charges. The Fragas have not alleged these facts under the third cause of action for negligence, and they do not request leave specifically to do so. Consequently, the court denies leave to amend.

Although the court need not address the parties’ further dispute whether Defendants owed a duty of care in their capacities as loan servicers, the court continues to abide by the view that servicers can be liable to borrowers for negligence. (See Moving Memo. at 17:11-18:10 [California courts are split on the issue].) Furthermore, to the extent Defendants argue the allegations do not establish the element of breach, the

court disagrees. (See SAC, ¶¶ 113-114 [Defendants were aware of the Fragas’ mailing address but delivered the HAMP TPP offer to the wrong address].)

The Fourth Cause of Action for Violation of B&P Code §§ 17200 et Seq.

The demurrers are OVERRULED.

The court sustained Defendants’ prior demurrers to the fourth cause of action on grounds the Fragas had failed to establish standing, i.e., their loss of money or property. Given the Fragas’ new allegations about damaged credit, higher interest and late fees and charges, (SAC, ¶¶ 123-124), they have now alleged enough to establish standing.

In addition, the Fragas have alleged enough to establish an unfair practice in violation of § 17200. Liberally construed, the allegations establish that Ocwen deliberately mailed the TPP offer to the wrong address. (See SAC, ¶ 42.) The allegations can also be construed to establish that BANA knowingly gave the Fragas the run-around during the loan modification process. (See id., ¶ 33.) As a result, the court rejects Defendants’ position that the allegations cannot be construed to establish “unfair” conduct supporting a cause of action under § 17200. (See Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 907-908 [dual tracking indicated unfairness under § 17200].)

Disposition

The demurrers are sustained and overruled on the terms above.

No later than 4/23/18, Defendants shall file and serve their answer(s).