Case Number: KC066055    Hearing Date: April 28, 2014    Dept: J

Re: Tony Branson v. Bank of America, N.A., etc., et al. (KC066055)

DEMURRER TO FIRST AMENDED COMPLAINT

Moving Party: Defendant Ocwen Loan Servicing, LLC

Respondent: Plaintiff Tony Branson

POS: Moving OK; Opposing served by regular mail contrary to CCP § 1005(c)

Plaintiff commenced this action on 5/28/13. The First Amended Complaint, filed on 9/25/13, asserts causes of action for:

1. Wrongful Foreclosure
2. Cancellation of Void Instrument
3. Quiet Title
4. Negligence
5. Negligent Misrepresentation
6. Violation of the Rosenthal FDCPA
7. Violation of the Bus & Prof C § 17200 et al.
8. Declaratory Relief

The Case Management Conference is set for 4/28/14.

Defendant Ocwen Loan Servicing, LLC (“Ocwen”) demurs to all causes of action of the First Amended Complaint (“FAC”) on the ground that they fail to state facts sufficient to constitute a cause of action against it.

OVERVIEW AS TO OCWEN:

Ocwen was named as Doe 1 on 12/18/13, months after the FAC was filed (on 9/25/13), and the FAC contains no direct allegations pertaining to Ocwen. Plaintiff’s only argument in his Opposition regarding Ocwen (at 10:8-10) is that Ocwen’s standing to foreclose rests on the defective “chain of title” of the other defendants who wrongfully foreclosed on Plaintiff (B of A, Recontrust, and Deutche Bank –apparently parties to a partial settlement with Plaintiff). Thus, if this “chain of title” theory fails, the claims against Ocwen also fail.

FIRST CAUSE OF ACTION FOR WRONGFUL FORECLOSURE:

Here, the wrongful foreclosure is allegedly the result of breaks in the “chain of title” which left Ds with no standing to foreclose. It is incorporated by reference into every cause of action in the FAC, so if that claim is defective, the entire FAC is defective.

To assert a claim for wrongful foreclosure, plaintiff must allege that: (1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property; (2) pursuant to a power of sale contained in a mortgage or deed of trust; and (3) the trustor or mortgagor sustained damages. (Munger v. Moore (1970) 11 Cal. App. 3d 1, 7; See also Sierra-Bay Fed. Land Bank Ass’n v. Sup. Ct. (1991) 227 Cal. App. 3d 318, 337 – trustee sale under deed of trust presumed valid, but debtors may obtain equitable relief to set aside a foreclosure, upon showing unfairness or irregularity of the sale, inadequate price, and an offer to pay the debt.)

Plaintiff in an action to set aside a trustee’s sale must offer to do equity through redemption of the property, that is, must tender the outstanding indebtedness. (Karlsen v. American Sav. & Loan Asso. (1971) 15 Cal.App.3d 112.) Tender is required whoever the plaintiff may be, trustor (mortgagor) or junior lienor. (Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575.) California Courts have expanded the application of the tender rule to any cause of action that is based upon allegations of wrongful foreclosure or that seeks redress from foreclosure. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109.)

The FAC alleges that on or about 2009, due to government budget cuts, Plaintiff had a cutback in his hours and his pay as a firefighter (FAC ¶ 21); on or about February 2009, Plaintiff called Defendant Bank of America (“B of A”) for a loan modification (Id. ¶ 22); Plaintiff was told by an agent of B of A that he did not qualify for a loan modification because he was current on his mortgage (Id. ¶ 22); on or about March 2009, Plaintiff was told by another agent of B of A that he could qualify for a loan modification if he stopped paying his mortgage (Id. ¶ 23); on or about April 2009, a third agent of B of A told Plaintiff that he would have a better chance of qualifying for a loan modification if he stopped paying his mortgage (Id. ¶ 24); on August 26, 2009, Defendant ReconTrust wrongfully recorded a Notice of Default claiming to be acting as an agent for the beneficiary of Plaintiff’s Deed of Trust (Id. ¶ 27); Defendants did not make the contacts required under CC § 2923.5, and did not serve Plaintiff with the Notice of Default (Id. ¶ 28); from August 2009 to June 2010, Plaintiff applied for loan modification with B of A (Id. ¶ 29); beginning from 2009, Plaintiff received multiple threatening calls from B of A stating that he was going to lose his home (Id. ¶ 30); the assignments of his Deed of Trust is void since it was in violation of the pooling and servicing agreement and other laws and regulations (Id. ¶¶ 32-38); and that on August 3, 2010, Defendant ReconTrust recorded a Notice of Trustee’s Sale (Id. ¶ 39).

In the first cause of action for wrongful foreclosure, Plaintiff alleges that Defendants do not have standing to foreclose on the subject property because the securitization of the loan failed (FAC ¶¶ 42-43); and that all documents recorded after 2006 are void because the promissory note was not endorsed and the deed of trust was not assigned to the Real Estate Investment Trust (“REIT”) within 120 days of the closing (Id. ¶¶ 44-45).

The FAC, however, fails to allege that Plaintiff has tendered the amount due on his loan. Further, the alleged “securitization of the loan does not in fact alter or affect the legal beneficiary’s standing to enforce the deed of trust.” (Reyes v. GMAC Mortgage LLC (D.Nev. Apr. 5, 2011) 2011 WL 1322775, at 2; see also Nguyen v. Bank of Am. Nat’l Ass’n (N.D.Cal. Nov. 15, 2011) 2011 WL 5574917, at 9 – securitization of mortgage loan does not provide the mortgagor with cause of action.) “[S]ecuritization merely creates ‘a separate contract, distinct from [p]laintiffs[’] debt obligations” under the note, and does not change the relationship of the parties in any way. (Commonwealth Prop. Advocates, LLC v. First Horizon Home Loan Corp. (D.Utah Nov. 16, 2010) 2010 WL 4788209, at 2.) Moreover, Plaintiff may not challenge a foreclosure by a bank based on the theory that loan was pooled with other home loans in securitized trust. (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497.)

In addition, the authority of the lender’s (beneficiary’s) nominee to initiate nonjudicial foreclosure proceedings is beyond judicial challenge notwithstanding the fact the nominee merely holds legal title to the subject property and is not the owner of the underlying promissory note. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 — “[N]owhere does [CC § 2924(a)] provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and we see no ground for implying such an action … The recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the noteholder would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.”) Further CC § 2934(a) does not require recording a substitution of trustee prior to recording a notice of default. Finally, the publicly recorded chain of title demonstrates that the assignment and related documents were proper. (See FAC, Exhs. A-L.) Thus, the demurrer to the first cause of action is sustained.

SECOND CAUSE OF ACTION FOR CANCELLATION OF VOID INSTRUMENT:

An action may be brought to cancel a written instrument that is void or voidable when there is a reasonable apprehension that if it is left outstanding it may cause a serious injury. (CC § 3412.) This remedy is distinct from and in addition to the remedy of quiet title, but similar to an action for rescission. The action can be brought against the person who received the instrument or any successor of the instrument or of the title transferred by the instrument with notice of the plaintiff’s right to cancel. (Duley v. Westinghouse Electric Corp. (1979) 97 Cal.App.3d 430, 432.)

The second cause of action for cancellation of void instrument is based upon the same allegations as the first cause of action for wrongful foreclosure and thus, fails for the reasons discussed above. (FAC ¶¶ 47-50.) Therefore, the demurrer to the second cause of action is sustained.

THIRD CAUSE OF ACTION FOR QUIET TITLE:

To state a cause of action for quiet title, the complaint must allege: (1) a description of the property; (2) plaintiff’s title or interest therein and the basis; (3) defendant’s assertion of an adverse claim or antagonistic property interest; (4) the date as of which the determination is sought; and (5) a prayer for determination of title. (CCP §761.020.) Further, a mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee.” (Miller v. Provost (1994) 26 Cal.App.4th 1703, 1707.)

The FAC fails to allege that Plaintiff paid his debt. The FAC also fails to adequate allege facts demonstrating that Ocwen is asserting an adverse claim or antagonistic property interest in the property. Thus, the demurrer to the third cause of action is sustained.

FOURTH AND FIFTH CAUSE OF ACTION FOR NEGLIGENCE AND NEGLIGENT MISREPRESENTATION:

The elements of a negligence cause of action are duty, breach, causation, and damages. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 318.) The elements of negligent misrepresentation are: (1) the assertion of an untrue fact; (2) believed by defendant to be true; (3) a lack of reasonable ground for the belief; (4) defendant’s intent to induce plaintiff’s reliance upon the representation; (5) plaintiff’s justifiable reliance upon the representation; and (6) resulting damage. (Melican v. Regents of Univ. of Cal. (2007) 151 Cal. App. 4th 168, 182.)

“[W]hen the [financial] institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money,” the institution owes no duty of care to the borrower. (Nymark v. Heart Fed. Sav. & Loan Ass’n (1991) 231 Cal.App.3d 1089 (brackets added); see Wagner v. Benson (1980) 101 Cal.App.3d 27, 35 — “Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender.”)

Plaintiff’s negligence claims are not based on Ocwen’s conduct, but rather are based on Defendant B of A’s handling of his loan modification application October 2010 through November 23, 2012. (FAC ¶¶ 56-64). Plaintiff alleges that he was induced to rely on the loan modification process by Defendant B of A’s agents and his reliance was justified since Plaintiff was promised that he would receive a trial payment plan for a HAMP modification if he submitted his documents. (Id. ¶ 66.)

The FAC fails to adequately allege any facts to demonstrate that Ocwen, a loan servicer, owed a duty of care to the Plaintiff. Even lenders have no fiduciary duty to their loan customers. (Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465.) Lenders do not have a common-law duty of care in negligence, to offer, consider, or approve a loan modification, to offer foreclosure alternatives, or to handle loans so as to prevent foreclosure. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal. App. 4th 49, 68.) Further, bank advice directly related to loan modification is within the scope of a conventional role as a lender, and does not support a lender duty in negligence or negligent infliction of emotional distress. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 207.) Even if there were a duty, Plaintiff’s claims would still fail since he does not allege any conduct by Ocwen and demonstrates no duty owed by Ocwen. Thus, the demurrers to the fourth and fifth causes of action are sustained.

SIXTH CAUSE OF ACTION FOR VIOLATION OF ROSENTAL ACT:

CC § 1788, et seq. The Rosenthal Fair Debt Collection Practices Act (the “RFDCPA”) prohibits debt collectors from engaging in abusive, deceptive and unfair practices in the collection of consumer debts. To state a claim for violation of the RFDCPA, a plaintiff must allege that the defendant is a “debt collector” collecting a “debt” within the meaning of the statute. (See CC § 1788.2.) Loan servicing companies are not “debt collectors” for the purposes of the RFDCPA. (See Caballero v. Ocwen Loan Serv., 2009 WL 1528128 (N.D. Cal. 2009).)

Here, Ocwen is a loan servicer; thus, it cannot be liable under the RFDCPA as a matter of law. Therefore, the demurrer to the sixth cause of action is sustained.

SEVENTH CAUSE OF ACTION FOR VIOLATION OF BUS & PROF C § 17200:

In order to properly assert a claim for Unfair Business Practices, Bus & Prof C. § 17200, the complaint must allege a business practice that is unfair, unlawful or fraudulent, and an authorized remedy. (Bus & Prof C § 17200.) In addition, “the concept of vicarious liability has no application to actions brought under the unfair business practices act.” People v. Toomey, 157 Cal.App.3d 1, 14 (1984).

Here, the FAC does not allege any personal participation by Ocwen in the alleged unlawful practices. Thus, the demurrer to the seventh cause of action is sustained.

EIGHTH CAUSE OF ACTION FOR DECLARATORY RELIEF:

An action for declaratory relief lies when there is an actual bona fide dispute between parties as to a legal obligation arising under the circumstances specified in CCP § 1060 and, in addition, the controversy must be justiciable – i.e., presents a question as to which there is more than one answer. (Western Motors Servicing Corp. v. Land Development & Inv. Co. (1957) 152 Cal.App.2d 509.) CCP § 1060 requires that (1) there is person interested under a written instrument or a contract; or (2) a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property; and, an actual controversy. (CCP §1060; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal. App. 4th 592, 605-06.)

Plaintiff’s declaratory relief claim is essentially based on the other causes of action alleged in the FAC and thus, fails for the same reasons discussed above. The FAC fails to adequately allege an actual controversy. Thus, the demurrer to the eighth cause of action is sustained.

The court will hear from counsel for Plaintiff as to whether leave to amend is again requested, and as to which cause(s) of action, and will require an offer of proof if so.