Case Name: Kyes v. Ocwen Loan Servicing, LLC, et al.

Case No.: 1-14-CV-264802

Defendants Ocwen Loan Servicing, LLC (“Ocwen”) and U.S. Bank National Association, as Trustee for Greenpoint Mortgage Funding Mortgage Pass-Through Certificates, Series 2006-AR7 (“U.S. Bank”) demur to the complaint filed by plaintiff Georgia Brown Kyes (“Plaintiff”). Plaintiff filed a complaint against U.S. Bank and Ocwen (collectively “Defendants”) on May 5, 2014. The complaint sets forth three causes of action: (1) negligence; (2) unfair business practices in violation of Business and Professions Code section 17200; and (3) declaratory relief.

Defendants ask the Court to take judicial notice of twenty-four documents. The documents attached as Exhibits 1-10 to Defendants’ request for judicial notice relate to the deed of trust, notice of default, and notice of trustee’s sale, all of which were recorded in the Official Records of the Santa Clara County Recorder. The Court may take judicial notice of the existence and recordation of real property records when the authenticity of the documents is not challenged. (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4^th 256, 264-265.) Here, Plaintiff has not challenged the authenticity of the documents. Attachments 11-24 to Defendants’ request for judicial notice consist of records of a court of this state, a United States District Court, or a United States Bankruptcy Court. Such records are subject to judicial notice under Evidence Code section 452, subdivision (d). Accordingly, Defendants’ request for judicial notice is GRANTED.

Defendants assert that the issues and claims in this case have been decided in previous lawsuits and are therefore barred by the principle of res judicata. The burden of establishing preclusion by prior adjudication (res judicata) rests squarely on the party invoking the doctrine. (Vella v. Hudgins (1977) 20 Cal.3d 251, 257; see also Federal Home Loan Bank of San Francisco, supra, 214 Cal.App.4^th at p. 1527.)

Defendants’ assertion of res judicata is misplaced for two reasons. The first lawsuit referred to by Defendants (filed in this Court in May of 2010 by Plaintiff against U.S. Bank and other loan servicing companies (Case No. 1-10-CV-170903) and later removed to federal court) was voluntarily dismissed. (RJN Ex. 22.) Thus, even assuming for the purposes of this discussion that the claims were identical to those raised in this suit, there was not adjudication on the merits that would give rise to res judicata. (See Stephan v. American Home Builders (1971) 21 Cal.App.3d 402, 406 [holding that a judgment of dismissal without prejudice is not on the merits and does not provide a basis for asserting res judicata in a second action].) Second, as Plaintiff points out, even assuming the causes of action raise the same or similar legal theories, the causes of action are based upon facts that did not occur until after the two previous lawsuits concluded. More specifically, Plaintiff raises claims in the current complaint relating to actions taken by Ocwen in 2013, i.e., failing to negotiate a loan modification. Those facts were not the basis of either of two prior suits. Thus, the claims are not identical for the purposes of res judicata. Accordingly, Defendants’ demurrer to the complaint on the basis of res judicata is OVERRULED.

Defendants also argue that Plaintiff’s claims are inconsistent with her previous bankruptcy petitions and that the claims in this action are therefore barred by the doctrine of judicial estoppel. In support of this argument, Defendants direct the Court to the five bankruptcy petitions filed by Plaintiff in the federal bankruptcy courts. Defendants further note that, in none of those petitions, did Plaintiff list the claims raised in this case as a contingent asset or claim of her estate. The problem with Defendants’ argument is that all of Plaintiff’s bankruptcy petitions were ultimately dismissed. In other words, she never persuaded a court to accept her earlier allegedly inconsistent position, which is one of the factors required to invoke the doctrine of judicial estoppel. (See New Hampshire v. Maine (2001) 532 U.S. 742, 751 [“Absent success in a prior proceeding, a party’s later inconsistent position introduces no ‘risk of inconsistent court determinations,’ [citation] and thus no threat to judicial integrity.”].) Accordingly, Defendants’ demurrer to Plaintiff’s complaint on the basis of judicial estoppel is OVERRULED.

Defendants demur to Plaintiff’s first cause of action for negligence on the ground that they did not owe Plaintiff any duty and, even if there was a duty, there are no allegations that Defendants breached that duty. In her complaint, Plaintiff’s allegations concerning duty and breach are limited to the following allegation:

Defendant OCWEN owed Plaintiff a duty to provide it with mortgages and rates that are not predatory, as well as loan documents that are not unconscionable. Defendant also owed Plaintiff a duty to negotiate a loan modification with it in good faith. Defendant has breached those duties.

(Compl., ¶ 10.) These allegations are conclusory in nature and do not properly plead facts that would give rise to the existence of a duty of care or Defendants’ breach of that duty. (See Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4^th 845, 850 [stating that, on demurrer, “[t]he court does not . . . assume the truth of contentions, deductions or conclusions of law”].) In other words, Plaintiff has failed to plead sufficient facts to state a cause of action against Defendants for negligence. However, Because there is a possibility that Plaintiff could potentially plead the existence of a duty of care, Defendants’ demurrer to Plaintiff’s first cause of action for negligence is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Defendants demur to the second cause of action on the ground that Plaintiff has not sufficiently pled the unlawful, unfair, or fraudulent business practice giving rise to the violation of Business and Professions Code section 17200. Defendants are correct. Plaintiff’s claim is based on a single conclusory allegation that Defendants did not negotiate a loan modification with Plaintiff in good faith. (Compl., ¶ 16.) The complaint does not contain any factual allegations that Defendants engaged in any unlawful, unfair, or fraudulent activities. This failure is fatal to Plaintiff’s claim. (See Wilson v. Hynek (2012) 207 Cal.App.4^th 999, 1008 [finding no error in trial court sustaining demurrer on a claim under section 17200 where the plaintiffs failed to sufficiently plead an unlawful or unfair predicate act].) Accordingly, Defendants’ demurrer to the second cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim.

Defendants demur to Plaintiff’s third cause of action for declaratory relief on the ground that the pleading fails to state facts sufficient to constitute a cause of action. In her opposition, Plaintiff does not address Defendants’ demurrer to the third cause of action. The first two declarations Plaintiff seeks from the Court—that Plaintiff is the sole and true owner of the property and that Defendants have no interest in the Subject Property—are essentially requests to quiet title. Such relief is unavailable as a matter of law because Plaintiff defaulted on her loan and has not demonstrated that she made a proper tender to cure the default. (See e.g., McElroy v. Chase Manhattan Mortg. Corp. (2005) 134 Cal.App.4^th 388, 394 [requiring payment of debt by mortgagor as prerequisite to stating a claim to quiet title].) The last portion of Plaintiff’s third cause of action seeks a declaration that “Defendants must engage in a loan modification discussion with Plaintiff in good faith prior to any attempts to foreclose upon the property.” (Compl., ¶ 25(c).) It has been held that a plaintiff may not seek such relief. (See Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4^th 497 [“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.”].) This is precisely what Plaintiff is attempting to do in this action: obtain a declaration that foreclosure proceedings cannot commence until certain conditions are met. Accordingly, Defendants’ demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim.