Case Name: Candelas v. Ocwen Loan Servicing, LLC
Case No.:1-14-263407
Defendant Ocwen Loan Servicing, LLC (“Defendant”) demurs to the complaint (“Complaint”) filed by plaintiff Ismael Candelas (“Plaintiff”).
This is action arising out of the foreclosure of a property located at 3234 Sylvan Drive, San Jose (the “Property”). According to the allegations of the Complaint, in March 2013, Plaintiff, the owner of the Property, applied for a loan modification from Defendant, the servicer of his loan. (Complaint at ¶ 9.) Plaintiff alleges that Defendant subsequently engaged in a practice known as “duel tracking,” in which a lending institution continues to pursue foreclosure at the same time the borrower in default seeks a loan modification. (See Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 904.) While Plaintiff’s modification application was pending, Defendant caused a Notice of Trustee’s Sale to be recorded on April 24, 2013 and then sold the Property at auction on May 21, 2013. (Complaint at ¶ 11.) The day prior to the sale, Plaintiff contacted Defendant and was informed that (1) there was no foreclosure sale date pending and (2) no foreclosure sale would occur pending review of his modification request. (Id. at ¶ 12.)
On April 8, 2014, Plaintiff filed the Complaint asserting the following causes of action: (1) violation of the Homeowner Bill of Rights; (2) negligent misrepresentation; and (3) fraud.
On June 4, 2014, Defendant filed the instant demurrer to the Complaint, as well as to the second and third causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)
Defendant’s request for judicial notice is GRANTED. (Evid. Code, § 452, subds. (d) and (h); see Alfaro v. Committee Housing Imp. System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1382; Evans v. Cal. Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265 [stating that “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in the recorded document, and the document’s legally operative language … [and, f]rom this, the court may deduce and rely upon the legal effect of the recorded document”].)
Defendant first asserts that Plaintiff’s entire Complaint is barred by the doctrine of judicial estoppel based on his failure to list the claims contained therein as assets in his petitions for bankruptcy.
Judicial estoppel is an equitable doctrine that “prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding.” (13 Witkin, Summary of California Law (10th ed. 2005) Equity, § 193, p. 532, citing Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181.) The 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 first 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.” (Jackson, supra, 60 Cal.App.4th at 183.) “In the bankruptcy context, a party is judicially estoppel from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure statements.” (Hamilton v. State Farm Fire & Casualty Company (9th Cir. 2001) 270 F.3d 778, 783.)
Section 541(a)(1) of the Bankruptcy Code provides that at the time of commencement of a bankruptcy proceeding, the bankruptcy estate includes “all legal or equitable interests of the debtor.” (11 U.S.C. § 541, subd. (a)(1).) This “include[es] causes of action belonging to the debtor at the commencement of the bankruptcy case.” (In Re Coastal Plains (5th Cir. 1999) 179 F.3d 197, 207-208.) Courts will not allow debtors to obtain relief from the bankruptcy court by representing that no claims exist and then subsequently asserting those claims for their own benefit in another proceeding. (See Hamilton, supra, 270 F.3d at 785.)
Here, based on the allegations of the Complaint and the judicially noticed materials setting forth when Plaintiff filed his petitions for bankruptcy, it is clear that Plaintiff’s claims existed prior to his filing for Chapter 7 bankruptcy. However, what is not clear is whether Plaintiff’s claims were disclosed in the petitions that he filed. According to Defendant, Plaintiff and the co-borrower on the Property filed for bankruptcy three times, with each ultimately resulting in a dismissal. (Defendant’s Memorandum of Points and Authorities at 2:13-24.) Defendant submits the first two bankruptcy petitions filed by Plaintiff on October 7 and November 12, 2013, but fails to include the asset schedules filed in those petitions. The third petition filed on December 12, 2013 includes such a schedule, but the debtor who filed the petition was not Plaintiff, but rather co-borrower Doroteo Meza Bracamontes. (See Defendant’s Request for Judicial Notice (“RJN”), Exhibit 12.) Thus, while Defendant represents that Plaintiff’s claims were not disclosed in his bankruptcy filings, the record currently before the Court does not demonstrate as much. Consequently, the Court cannot evaluate the substantive merits of Defendant’s judicial estoppel argument and Defendant’s demurrer to the Complaint on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.
Defendant’s demurrer to the second cause of action (negligent misrepresentation) on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED. The elements of a claim for negligent misrepresentation are: “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) “As of true negligence, responsibility for negligent misrepresentation rests upon the existence of a legal duty, imposed by contract, statute or otherwise, owed by a defendant to the injured person.” (Eddy v. Sharp (1988) 199 Cal.App.3d 858, 864.)
This cause of action is predicated on allegations that Defendant breached a duty of care owed to Plaintiff by misrepresenting the status of his loan modification request and foreclosure sale information. Defendant insists that as a financial institution, it owed no duty of care to Plaintiff, its loan customer. However, this assertion is directly contradicted by Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 68, where the Court held that a lender “owe[s] a duty of care to a borrower to not make material misrepresentations about the status of an application for a loan modification or about the date, time, or status of a foreclosure sale.” This is precisely the duty that Defendant is alleged to have breached here. While Defendant also contends that Plaintiff has not sufficiently pleaded reliance, this argument was raised for the first time in reply and therefore Court did not consider it. (See REO Broadcasting Consultants v. Martin (1999) 69 Cal.App.4th 489, 500 [court declined to consider arguments raised for first time in reply because opposing party was deprived of opportunity to address them].)
Defendant’s demurrer to the third cause of action (fraud) on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. The elements of a claim for fraud are (1) a misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity (or scienter), (3) intent to defraud, i.e., to induce reliance, (4) justifiable reliance, and (5) resulting damage. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) It is well-settled that fraud claims must be pleaded with particularity; this necessitates pleading facts showing how, when, where, to whom and by what means the alleged misrepresentations were tendered. (Id. at 645.) Moreover, in actions for fraud/misrepresentation against a corporation, a plaintiff must allege the names of the persons who made the misrepresentations and their authority to speak for the corporation. (Id.; see also Tarmann v. State Farm. Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.) Plaintiff’s fourth cause of action fails to comport with the foregoing requirements, as Plaintiff has failed to specifically articulate who made the purported misrepresentations to him and on what authority.
Link to this page