16-CIV-00108 PATRICIA JUNG VS. OCWEN LOAN SERVICING, LLC, ET AL.

PATRICIA JUNG OCWEN LOAN SERVICING, LLC
EUNJI CHO PETER L. ISOLA

MOTION FOR SUMMARY JUDGMENT TENTATIVE RULING:

The Motion of Defendants Ocwen Loan Servicing, LLC and Christiana Trust (“Defendants”) for Summary Judgment, or Alternatively, for Summary Adjudication, is ruled on as follows:

(1) The Motion to the First Cause of Action for Declaratory Relief is GRANTED.

An action for declaratory relief is authorized when an actual controversy relating to the legal rights and duties of the respective parties under a written instrument or contract exists. (C.C.P. § 1060.) Here, Defendants establish that there is no actual controversy regarding the language in the note. (See Defendants’ Undisputed Material Facts nos. 1-45.) Section 1 of the note provides that the principal balance would never exceed 115% of the original principal balance of $648,000.00, which is $745,200.00. (See Defendants’ Undisputed Material Fact no. 12.) Defendant establishes that Plaintiff’s principal balance never exceed more than $743,102.07. (See Decl. of Derrick Raleigh, ¶ 15.) Because Plaintiff made no payments after November 2011 though, interest began to accrue on the unpaid principal balance of $743,102.07, as well as Plaintiff incurred late charges and other fees and expenses related to her default. (Id. at ¶ 16.)

In opposition, Plaintiff fails to show that the note should be interpreted otherwise. Where a contract is in writing, the parties’ intention is determined from the writing alone, if possible. (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 979, citing Civil Code § 1636.) The contract words are to be understood in their ordinary and popular sense. (Civil Code § 1644.) If a dispute arises over the meaning of the contract language, the first question is whether the language is reasonably susceptible to the interpretation urged by a party. (CedarSinai, supra at 979.) If not, the case is over. (Ibid.) If the court decides the language is reasonably susceptible to the interpretation urged though, the court then moves to the second question: what did the parties intend the language to mean?” (Id. at 979-980.) Whether the contract is reasonably susceptible to one party’s interpretation can be determined from the language of the contract itself or from extrinsic evidence of the parties’ intent. (Id. at 980.) It is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation. (Ibid.) “The parties’ undisclosed intent or understanding is irrelevant to contract interpretation.” (Ibid.) Plaintiff claims that an actual controversy exists regarding interpretation of the parties’ rights and duties pursuant to the promissory note (“note”). It is undisputed that the principal balance would never exceed 115% of the original principal balance of $648,000.00, or $745,200.00. (See Plaintiff’s Response to Material Fact no. 12.) Instead, Plaintiff relies on Section 3(E), which also provides that for each month Plaintiff’s monthly payments are less than the interest portion, the Note Holder will subtract the amount of the monthly payment from the amount of the interest portion and add the difference to Plaintiff’s unpaid Principal. (See Plaintiff’s Exh. A.) Plaintiff asserts that any failure to make a monthly payment is the equivalent of paying less than the interest portion, and thus Plaintiff could never owe more than $745,200 for the Principal Balance, including both principal and interest. Thus, Plaintiff’s position is that Defendants were not permitted to separately collect any interest once Plaintiff’s principal balance reached 115% of the original principal balance, or $745,200. Therefore, Plaintiff claims that an actual controversy exists as to whether Defendant was allowed to withhold approximately $120,000.00 in interest from surplus proceeds of the sale of the property.

Plaintiff’s interpretation of the note is not reasonably susceptible though. Such an interpretation has already been rejected. (See Diamos v. Fay Servicing, LLC (N.D. Cal., Dec. 14, 2016, No. 16CV-05164-DMR) 2016 WL 7230896.) In Diamos, the note limited the principal balance to 115% of the amount originally borrowed, and also contained a similar Section 3(E) to the Section 3(E) in this case. (Id. at *1, *3.) The Diamos plaintiff argued too, that interest could only be added to the unpaid principal balance until it reached 115% of the amount originally borrowed. The Diamos plaintiff argued that “the limit on the unpaid principal balance…includes both the principal balance as well as interest.” (Id. at *4.) The court rejected plaintiff’s interpretation, finding that section 3(E) provides for only one limited instance in which interest became capitalized into unpaid principal balance. “It does not state that interest accrued by any other means, including interest accrued due to the borrower’s default, is added to the principal balance of the loan.” (Id. at *4.)

Similarly here, the note separates the Payments portion (Section 3(E)) from the default provisions in Section 7. If Plaintiff failed to pay the full amount of each Minimum Payment on the date it is due, then Plaintiff will be in default. (See Plaintiff’s Exh. A, Section 7(B).) If Plaintiff is in default, then the Note Holder may send a written notice that if Plaintiff does not pay the Minimum Payment by a certain date, the Note Holder may require Plaintiff to pay immediately the full amount of Principal that has not been paid “and all the interest that Plaintiff owes.” (Id., Section 7(C) (emphasis added.) The objective intent from the note as a whole supports that Defendants were permitted to recover the interest on the unpaid Principal following Plaintiff’s default. Moreover, to adopt Plaintiff’s interpretation means that no interest would have accrued from Plaintiff’s default in 2011 until sale of the property in 2016. Plaintiff’s position is untenable.

(2) The Motion to the Second Cause of Action for Violation of the Rosenthal Fair Debt Collection Practices Act, Civil Code sec. 1788, et seq., is GRANTED. Defendant establishes that it did not make any misleading statements in the March 9, 2016 and March 24, 2016 payoff quotes. (See Defendants’ Undisputed Material Facts nos. 12, 15-35.) In opposition, Plaintiff fails to present any evidence to raise a triable issue of material fact as to any misleading statements by Defendants in these payoff quotes. Plaintiff only disputes whether Defendants were permitted to recover separate interest in the payoff quotes based on Section 3(E) of the note. (See Plaintiff’s Response to Material Facts nos. 12, 15-35.) As discussed above in the First Cause of Action though, Plaintiff’s interpretation of the note fails.

(3) The Motion to the Third Cause of Action for Conversion is GRANTED. To establish a cause of action for conversion, a plaintiff must show: (1) the plaintiff’s ownership or right to possession of the property, (2) the defendant’s conversion by a wrongful act or disposition of property rights, and (3) damages. (Finton Const., Inc. v. Bidna & Keys, APLC (2015) 238 Cal.App.4th 200, 213.) Defendants proffer sufficient evidence to support that Plaintiff cannot establish any of the elements of this claim. (See Defendants’ Undisputed Material Facts nos. 1-45.) Plaintiff fails to provide any evidence in opposition to raise a triable issue of material fact as to these elements. Plaintiff’s conversion claim is once again premised on the same allegation that Defendants wrongfully withheld interest of approximately $120,000 from the surplus proceeds based on Section 3(E) of the note. As discussed above, Plaintiff’s interpretation fails.

If the tentative ruling is uncontested, it shall become the order of the Court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required as the tentative ruling affords sufficient notice to the parties.