2018-00231486-CU-OR

Robert S. Mac Bride vs. Ocwen Loan Servicing, LLC

Nature of Proceeding: Hearing on Demurrer

Filed By: Ozel, Gabriel

*** If oral argument is requested, the parties must at the time oral argument is requested notify the clerk and opposing counsel of the specific causes of action that will be addressed at the hearing. The parties are also reminded that pursuant to local rules, only limited oral argument is permitted on law and motion matters. ***

*** If oral argument is requested in an attempt to obtain leave to amend, plaintiff shall be prepared to specifically discuss the new or different facts which may now be alleged in good faith to overcome the deficiencies noted below. ***

Defendant Ocwen Loan Servicing, LLC (“OLS”), et al.’s (collectively “Defendants”)

demurrer to plaintiff in pro per’s complaint is SUSTAINED without leave to amend, as follows.

The notice of demurrer does not provide notice of the court’s tentative ruling system, as required by Local Rule 1.06. Moving counsel is directed to contact plaintiff and advise him of Local Rule 1.06 and the court’s tentative ruling procedure and the manner to request a hearing. If moving counsel is unable to contact plaintiff prior to hearing, moving counsel is ordered to appear at the hearing in person or by telephone.

Both moving counsel and plaintiff in pro per failed to comply with CRC Rule 3.1110(b)

(3)-(4).

Plaintiff’s declaration in opposition was not considered since such extrinsic evidence is beyond the permissible scope of a demurrer, where the court’s consideration is limited to the face of the challenged pleading and those facts for which judicial notice is requested and granted. Accordingly, the court need not rule on Defendants’ objections to plaintiff’s declaration and exhibits thereto.

Plaintiff’s “Response to Defendants’ Reply” also was not considered since the Code of Civil Procedure does not permit the filing of such a document and the accompanying extrinsic evidence is beyond the permissible scope of a demurrer.

Factual Background

In 2006, plaintiff obtained from New Century Mortgage Corporation (“NCMC”) a

$427,500 mortgage loan which was secured by a Deed of Trust (“DOT”) on the subject property in Carmichael. Defendant MERS was listed as the original beneficiary of the DOT while Fidelity National Title was identified as the trustee. In 2010 MERS, on behalf of NCMC, assigned all of the latter’s interest in the DOT to defendant Deutsche Bank (“Bank”), with OLS becoming the servicer of the loan and defendant Western Progressive later becoming the trustee in 2014.

As of January 2010 plaintiff was more than $61,000 on his mortgage payments and a Notice of Default (“NOD”) was recorded. Around the same time plaintiff filed for Chapter 13 bankruptcy protection, listing OLS among the creditors. Plaintiff completed his Chapter 13 plan and received a discharge in October 2012. In May 2014 plaintiff was again behind on his mortgage payments by more than $50,000, resulting in another NOD being recorded. In June 2015 plaintiff was granted a loan modification which substantially reduced not only the principal on the loan but also the minimum monthly payment and the modification agreement explicitly acknowledged Bank as “the owner of the Original Note and Original [DOT],” with OLS being Bank’s designated agent for servicing the mortgage. Plaintiff fell behind on his payments yet again and in January 2016, another NOD was recorded. A Trustee’s Sale was scheduled for July 2016. In early 2017 plaintiff again filed for Chapter 13 bankruptcy protection, listing “Deutsche Bank c/o Ocwen Loan” as a secured creditor, and both his original and modified Chapter 13 plans acknowledged significant amounts owed to Bank/OLS. The Chapter 13 Bankruptcy Trustee objected to the modified Chapter 13 plan, resulting in a court-ordered conversion to a Chapter 7 bankruptcy (liquidation) and a 2/21/2018 formal discharge from most but not all debts.

Since plaintiff failed to cure his default on the mortgage loan during the pendency of

his 2017 bankruptcy or afterward, a Notice of Trustee’s Sale (“NOTS”) was recorded on 3/29/2018 and set a foreclosure sale for 4/25/2018. In an attempt to stop this sale, plaintiff commenced the present action on 4/20/2018 and promptly sought a Temporary Restraining Order against the sale and leave to record a lis pendens but both requests were denied on 4/23/2018. Shortly thereafter, plaintiff again filed for Chapter 13 bankruptcy protection, again listing “Deutsche Bank c/o Ocwen Loan” as a secured creditor and further acknowledging arrearages of over $36,000. No Trustee’s Sale has to date been completed.

The complaint presently purports to assert causes of action for “Fraud,” “Cancellation of Voidable Contract,” “Wrongful Foreclosure,” Breach of Implied Covenant of Good Faith, Violation of Business & Professions Code §17200 et seq., Quiet Title and Slander of Title. Notably, the fundamental premise for all causes of action is plaintiff’s contention in Paragraph 17 that “there was no valid assignment of the Note with the Deed of Trust” and thus, “none of the Foreclosing Defendants have [sic] ever been entitled to enforce the Note.”

Defendants now demur to the entire complaint and each cause of action on various grounds including but not limited to judicial estoppel, statute of limitations and failure to state sufficient facts. Plaintiff in pro per opposes.

Request for Judicial Notice

Both sides’ requests for judicial notice of various documents either recorded or filed in connection with judicial proceedings are granted.

Analysis

Legal Standing. At the outset the court must note that plaintiff’s most recent filing for bankruptcy protection deprives him of the legal standing necessary to prosecute the present action. Once plaintiff filed his bankruptcy action, all of his assets including but not limited to the present action against Defendants became an asset of the bankruptcy estate and are subject to the exclusive control of the assigned Bankruptcy Trustee. (See, e.g., Haley v. Dow Lewis Motors, Inc. (1999) 72 Cal.App.4th 497; Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995 [holding that a plaintiff lacks standing to assert on his own behalf any pre-bankruptcy petition claims which belong to the bankruptcy estate]; see also, 11 U.S.C. §541 [defining bankruptcy estate].) In fact, for the same reasons, plaintiff also lacks standing even to oppose the present demurrer.

Judicial Estoppel. Defendants assert plaintiff is judicially estopped from alleging in the present action that they have the right to foreclose on the subject property by virtue of his repeated admissions in each of his bankruptcy filings that Bank and/or OLS is a secured creditor with a lien against his home. The court agrees and will sustain the demurrer to each cause of action on this ground.

According to the California Supreme Court’s decision in People v. Castillo (2010) 49 Cal.4th 145, the doctrine of judicial estoppel precludes a party from gaining an advantage by taking one position and then seeking a second advantage later by taking an incompatible position, advancing dual goals of maintaining the integrity of the judicial system and protecting parties from opponents’ unfair, inconsistent strategies. ( Id., at 155.) This doctrine applies when (1) the same party has taken two positions; (2)

the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake but to be sure, the doctrine does not require a showing of “detrimental reliance.” (Id.)

While the opposition suggests that plaintiff’s repeated listing of “Deutsche Bank c/o Ocwen Loan” as a secured creditor in his various bankruptcy filings was simply a “mistake” on his part, the court is not persuaded since the present record (including but not limited to the June 2015 loan modification which explicitly acknowledged Bank as “the owner of the Original Note and Original [DOT],” with OLS being Bank’s designated agent for servicing the mortgage) remove any doubt as to whether the Defendants have the right to proceed with the foreclosure in light of plaintiff’s most recent uncured default on his loan obligations.

Regardless of the application of the judicial estoppel doctrine, the court holds that the demurrer must also be sustained on the ground that plaintiff has failed to plead facts sufficient to demonstrate Defendants lack the authority to proceed with the foreclosure sale on account of his failure to cure his current default. As explained above, the record now before the court is sufficient to establish the rights of Bank and/or OLS to proceed with the Trustee’s Sale unless plaintiff promptly cures his current default and reinstates the loan.

Statute of Limitations. According to Defendants, all of plaintiff’s causes of action are premised on Bank and/or OLS’ lack of authority to collect payments on the mortgage and to foreclose on the property but plaintiff was, by his own admission, aware of Bank and OLS’ pursuit of the mortgage payments and/or foreclosure no later than 2010 when plaintiff first filed for bankruptcy protection and listed OLS among his creditors. Thus, plaintiff either knew or should have suspected at this time that OLS and/or Bank were wrongfully collecting mortgage payments from plaintiff and/or wrongfully trying to foreclose on his home. California law is clear that the limitations period is governed by the “discovery rule,” which provides that the clock starts running when the plaintiff could have discovered his/her harm and its cause with a reasonable investigation of the sources available to him/her. (See, e.g., Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109-1111 [“So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.”])

Notably, the opposition at Page 10 appears to concede that Defendants’ alleged fraud commenced in 2009-2010 when they produced in the bankruptcy proceedings a promissory note which had not been endorsed by the original holder and then refused plaintiff’s request for documentation of a proper assignment of the mortgage to Bank/OLS. Consequently, the court concludes that plaintiff has actually suspected Defendants had engaged in some wrongdoing relating to the mortgage loan no later than 2010 and under the discovery rule cited above, this commenced the limitations period on the causes of action currently alleged against Defendants but plaintiff failed to file this action for roughly another eight (8) years, well after the expiration of the longest applicable statute of limitations.

Failure to State Facts. The court concludes that the complaint, as currently pled, fails to allege facts sufficient to state a single valid cause of action against Defendants. First, the “Fraud” cause of action consists of an impermissible mix of allegations about false representations and concealment, despite these being separate and distinct

theories of fraud with differing prima facie elements and regardless, this cause of action is defective in failing to satisfy the heightened pleading standard for fraud and in failing to identify any out-of-pocket damages caused plaintiff’s reasonable, justifiable reliance on Defendants’ alleged fraud. Second, the complaint fails to plead facts which establish the existence of a voidable contract or which support a claim for cancelation of such contract. Third, plaintiff has not alleged facts which demonstrate that Defendants have no right to declare a default on the loan, to record a NOD or to conduct a Trustee’s Sale, particularly since the documents now before the court demonstrate the opposite is true. For the same reasons and coupled with plaintiff’s failure to identify a single contractual term which prohibits any of Defendants’ alleged conduct, the breach of the implied covenant of good faith and fair dealing also fails as a matter of law.

The cause of action based on §17200 is plainly deficient inasmuch as plaintiff has not pled facts sufficient to show any defendant actually engaged in any conduct which was either unfair, illegal or fraudulent. The quiet title cause of action is subject to demurrer because it fails to plead facts showing plaintiff is entitled to a declaration that title should be vested in him without any lien by Defendants, since the complaint is not verified as required by Code of Civil Procedure §761.020, and since plaintiff has failed to tender full payment of the debt which he has repeatedly acknowledged as being owed to Defendants (see, e.g., U.S. Cold Storage v. Great Western Savings (1985) 165 Cal.App.3d 1214, 1222-1225; Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109 [general rule in California is that “tender” of the debt is “a prerequisite to challenge [a] foreclosure sale”]; Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 439 [to be effective, “tender” must be unambiguous and unconditional such that all that remains is “acceptance” by the other party]). The final cause of action for slander of title fails as a matter of law because nothing recorded by Defendants slanders plaintiff’s title to the property, because nothing recorded has been false and Defendants’ recording of the various NOD and NOTS is privileged under Civil Code §2924(d).

Conclusion

For the reasons explained above, the demurrer to the complaint must be and hereby is sustained in its entirety. Since the court finds that plaintiff has no reasonable possibility of overcoming the defects noted above and stating a valid cause of action against any of the demurring Defendants, leave to amend is denied.

*** If oral argument is requested in an attempt to obtain leave to amend, plaintiff shall be prepared to specifically discuss the new or different facts which may now be alleged in good faith to overcome the deficiencies noted above. ***

Pursuant to CRC Rule 3.1312, Defendants to prepare a judgment of dismissal for the court’s signature.