Case Name: Candelas v. Ocwen Loan Servicing, LLC 

Case No.: 1-14-CV-263407

Defendant Ocwen Loan Servicing, LLC (“Defendant”) demurs to the first amended complaint (“FAC”) filed by plaintiff Ismael Candelas (“Plaintiff”).

This is an action arising out of the foreclosure of a property located at 3234 Sylvan Drive, San Jose (the “Property”).  According to the allegations of the FAC, in March 2013, Plaintiff, the owner of the Property, applied for a loan modification from Defendant, the servicer of his loan.  (FAC 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.4^th 972, 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.  (FAC at ¶¶ 10, 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 ¶ 13.)

On July 25, 2014, Plaintiff filed the FAC asserting the following causes of action:  (1) violation of Homeowners Bill of Rights; (2) negligent misrepresentation; and (3) fraud.

On August 11, 2014, Defendant filed the instant demurrer 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.4^th 1356, 1382; Evans v. Cal. Trailer Court, Inc. (1994) 28 Cal.App.4^th 540, 549; see also Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4^th 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 claim for negligent misrepresentation is deficient because he fails to allege that he justifiably relied on the alleged misrepresentations or that they caused his purported harm.  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 the 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.4^th 226, 243.)  Here, the totality of Plaintiff’s allegations regarding reliance are that he “reasonably relied on Defendant’s representations by not pursuing pre-foreclosure injunctive relief.”  (FAC at ¶ 39.)  This is insufficient to plead justifiable reliance.  Plaintiff does not plead a cognizable theory upon which he would have succeeded in preventing the foreclosure sale.  (See Dick v. Am. Home Mortg. Serv. Co. (E.D. Cal. 2014) 2014 WL 172537, at *4; see also Newgent v. Wells Fargo Bank, N.A. (S.D. Cal. 2010) 2010 WL 761236, at *5.)  Notably, Plaintiff did not contact Defendant until the day prior to the sale.  Further, even if Plaintiff had succeeded in postponing the foreclosure, which is speculative, he does not plead any facts suggesting that he would have ultimately been successful in stemming the eventual foreclosure, barring a loan modification, which Defendant was not obligated to provide.

Moreover, even assuming, arguendo, that there was justifiable reliance, Plaintiff has not pleaded facts which establish that the alleged misrepresentations caused him harm.  Where a borrower defaults under the terms of the loan before “any alleged misrepresentation, his allegation that those misrepresentations resulted in the foreclosure of his home is implausible.”  (Deschaine v. IndyMac Mortg. Services (E.D. Cal. 2014) 2014 WL 281112, at *5; see Defendant’s Request for Judicial Notice, Exhibits 4 and 7.)

Consequently, Defendant’s demurrer to the second cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

Defendant next asserts that Plaintiff’s fraud claim is deficient because it lacks the requisite specificity and he fails to plead reliance.  While Plaintiff has added additional factual allegations to address the lack of specificity previously cited by the Court in its order on Defendant’s demurrer to the Complaint, he fails to plead reliance for the reasons articulated above.  Accordingly, Defendant’s demurrer to the third cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.