Judge Christian R. Gullon, Case Number: 22PSCV02903, Date: 2023-08-10 Tentative Ruling

Judge: Christian R. Gullon, Case: 22PSCV02903, Date: 2023-08-10 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, attorneys are advised to check this website to determine if any changes or updates have been made to the tentative ruling.

Counsel may submit on the tentative rulings by calling the clerk in Dept. O at 909-802-1126 before 8:30 the morning of the hearing. Submission on the tentative does not bind the court to adopt the tentative ruling at the hearing should the opposing party appear and convince the court of further modification during oral argument.

The Tentative Ruling is not an invitation, nor an opportunity, to file any further documents relative to the hearing in question. No such filing will be considered by the Court in the absence of permission first obtained following ex-parte application therefore.

Defendants U.S. Bank, N.A., As Trustee for Structured Asset Investment Loan Trust Mortgage Pass Through Certificates, Series 2006-2, PHH Mortgage Corporation (sued in its own right and as a successor to Ocwen Loan Servicing, LLC), NewRez, LLC, and Western Progressive LLC (together, the “Defendants”) DEMURRER to Plaintiff’s SAC is SUSTAINED in part (i.e., as to the 2^nd-4^th COAs) and OVERRULED in part (i.e., as to 1^st and 5^th COAs). Leave to amend is DENIED as Plaintiff has had ample opportunity to amend the complaint(s).

This case pertains to a foreclosure. Plaintiff Jerome Kern alleges that Defendants “repeatedly mishandled Plaintiff’s mortgage. For approximately two and a half years, Defendant Ocwen attempted to collect thousands of dollars in unlawful fees that supposedly accrued when Plaintiff did not even own or occupy the property.” (SAC p. 2.) And when Plaintiff was approved for a trial modification plan, Defendant PHH later deemed Plaintiff ineligible for mortgage modification. (Ibid.)

On December 14, 2022, Plaintiff filed suit against Defendants asserting causes of action for:

1.     Violation of Cal. Civ. Code § 2924.17

2.     Negligent Misrepresentation

3.     Violation of Cal. Civ. Code § 2923.7

4.     Violation of Rosenthal Fair Debt Collection Practices Act

5.     Violation of Bus. & Prof. Code § 17200, et seq.

On June 12, 2023, the court sustained Defendants’ demurrer with leave to amend.

On August 10, 2023, the court sustained Defendants’ demurrer to the FAC with leave to amend.

On September 11, 2023, Plaintiff filed its SAC against Defendants Ocwen, PHH, and Newrez for the same 5 COAs.

1. Violation of Cal. Civ. Code § 2924.17 of the Homeowner’s Bill of Rights (HBOR)

Pursuant to California Civil Code §2924.17 (a), “a declaration or affidavit filed in any court relative to a foreclosure proceeding shall be accurate and complete and supported by competent and reliable evidence.” Cal. Civ. Code § 2924.17(a). Pursuant to subdivision (b): “Before recording or filing any of the documents described in subdivision (a), a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower's default and the right to foreclose, including the borrower's loan status and loan information.” Cal. Civ. Code § 2924.17(b).

Defendants demur on the grounds that the violation of this statute must be “material” to be actionable. (Demurrer p. 12, citing Civ. Code § 2924.12; see also Travis v. Nationstar Mortgage, LLC (9th Cir. 2018) 733 Fed. Appx. 371, 374.) A violation is material when the alleged violation affected a plaintiff’s loan obligations or the modification process. (Demurrer p. 12, citing Johnson v. Nationstar Mortgage (N.D. Cal. Aug. 7, 2019) LLC, 2019 WL 3718592.)[1]

Here, however, Plaintiff has articulated a material violation (i.e., an injury): the purportedly falsely inflated amount deprived Plaintiff of the opportunity to reinstate or pay off the loan. (SAC ¶52.) In fact, Defendants’ citation to Johnson v. PNC Mortgage (N.D. Cal. Nov. 21, 2014) 2014 WL 6629585, at *9 for the proposition that a sham assignment of a loan from one lender to another is not a “material” violation of § 2924.17 because such an assignment does not affect the borrower’s payment obligations under the loan supports Plaintiff’s position as he alleges that it did affect his payment obligations.

To the extent Defendants argue that Plaintiff does not allege what he actually believes is owed on the Loan or allege facts suggesting that Plaintiff had the financial wherewithal to pay off the Loan (Demurrer p. 12), Defendants have not provided authority that more specificity is required. Thus, Plaintiff’s allegation that the fees included in the $1,007,932.61 amount expressly violated the terms of the Settlement Agreement (by including attorney’s fees, litigation costs), interest and fees accrued during the time that Plaintiff did not have title to the Property, and failed to account for at least ten payments that Plaintiff made is sufficient for purposes of a demurrer.

Therefore, the court OVERRULES the demurrer as to the 1^st COA for the HBOR violation.

The elements for negligent misrepresentation are: (1) a misrepresentation; (2) made negligently; (3) intent to induce reliance; (4) actual and justifiable reliance; and (5) resulting damage.

The negligent misrepresentation COA is predicated upon two allegations. (SAC P56.) The first being related to the modification application and the second relating to terms of the modification agreement. The court will not discuss whether the allegation that NewRez and PHH misrepresented what actions Plaintiff’s needed to take to complete his early 2020 Modification application via the February 25, 2020 letter is sufficient for this COA because the opposition does not squarely address Defendants’ arguments.

The second allegation comprising this COA pertains to several conversations Plaintiff had with NewRez and PHH employees relating to the loan modification but that the terms were “negligently misstated” because they were not the “actual modification offer.” (SAC ¶¶ 64-68.)[2]

Defendants demur on various grounds, but the strongest argument is that the claim is unenforceable under the statute of frauds. A mortgage or deed of trust is subject to the statute of frauds. (Demurrer p. 13, See Civil Code §2922 (a mortgage can be created, renewed, or extended, only by writing, executed with the formalities required in the case of a grant of real property); see also Civil Code §1624(a)(3).) As such, any claim by Plaintiffs that PHH and NewRez orally promised a permanent modification is unenforceable as there is no writing signed by Defendants that evidences such an agreement. To the extent that Plaintiff attemps to recast the breach of oral contract claim into a claim for fraud, that too fails as Plaintiff all but concedes no “fraudulent intent” as the purported misrepresentation was negligent, not intentional. (Demurrer p. 14.)

Therefore, as the court has granted numerous opportunities for leave to amend, the court SUSTAINS the demurrer as to the 2^nd COA WITHOUT leave to amend.

Under Civil Code § 2923.7(a), “[w]hen a borrower requests a foreclosure prevention alternative, the mortgage servicer shall promptly establish a single point of contact [SPOC] and provide to the borrower one or more direct means of communication with the single point of contact.” A “single point of contact means an individual or team of personnel.” (Civ. Code § 2923.7 (a).)

Here, the court agrees as a Geesun Rodrigues of NewRez was assigned as the SPOC. (SAC, ¶¶ 29, 35, 37, 39. To the extent that Plaintiff concedes an SPOC was given but that Plaintiff’s assigned single of contact failed to fulfill all of its statutory duties (Opp pp. 11-12), Plaintiff does not provide any authority for the proposition that the seeming failure for the SPOC to provide “accurate and adequate information about the foreclosure prevention alternative” (Opp. p. 12:11-12) amounts to a violation of the claim.

Therefore, the court sustains the demurrer as to the 3^rd COA without leave to amend because an SPOC was assigned.

4. Violation of the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”)

Section 1788.17 of the RFDCPA mandates that every debt collector collecting or attempting to collect a consumer debt shall comply with the provisions of 15 U.S.C. § 1692(b)-(j) and shall be subject to the remedies dictated by 15 U.S.C. §1692k and §1692d(5). In turn, the Fair Debt Collection Practices Act (“FDCPA”) is codified in 15 U.S.C. §1692. The FDCPA provides that a debt collector may not use false, deceptive, or misleading representations or means in connection with collection of a debt (15 U.S.C. § 1692e). The false representation of the character, amount, or legal status of any debt is a violation of this section. See 15 U.S.C. § 1692e(2).

Plaintiff alleges that “Defendants have violated each of these provisions by attempting to collect an amount of debt that was not owed and that could not legally be demanded.” (SAC ¶102.)

Defendants demur on 3 grounds: (i) The Claim is Time Barred; (ii) Plaintiff Fails to Plead a Claim; and (iii) The FDCPA Does Not Apply.

A claim under the FDCPA and Rosenthal Act must be brought “within one year from the date on which the violation occurs.” (15 U.S.C. § 1692k(d); see also Civil Code 1788.30(f).)

Defendant PHH and Newrez repeatedly and currently attempt to collect amounts not owed, including thousands and thousands of dollars in maintenances fees and other “REO” charges from the two and half year period when Plaintiff was wrongfully dispossessed of his home, attorney’s fees and litigation costs precluded by the Settlement Agreement, and failed to account for at least ten monthly payments that Plaintiff had already made when they were due to the prior loan servicer. (¶103, emphasis added.)

But, and as noted by Defendants in demurrer, Plaintiff was allegedly dispossessed of his home between November 2012 and March 2015. (SAC ¶¶15-16.) Thus, with a lawsuit filing date of 12/2022, the claim as to the maintenance fees and other “REO” charges is time barred. As for the attorney fees and litigation costs, such fees date back to at least November of 2016. (SAC ¶19.) Lastly, as to the allegation regarding the ten monthly payments, those too are time barred because such payments were made before the servicing of Plaintiff’s loan was allegedly transferred back to Ocwen in April of 2012,” which is ten years before Plaintiff filed his current action. (¶¶ 14-16.)

To the extent that in opposition Plaintiff relies upon the continuing violation doctrine, Plaintiff does not provide instructive authority. Rather, Plaintiff cites to Jumaane v. City of L.A. (2015) 241 Cal. App. 4th 1390, 1402, 194, but that is an employment law case which bears no similarity to a mortgage foreclosure. In employment cases, there is generally an ongoing process harassment; here, harassment is not at issue.

5. Unfair Competition – Violation of Business and Professions Code §§17200

The UCL prohibits: (1) unlawful, (2) fraudulent, and (3) unfair business practices. Bus. & Prof. Code § 17200. A “violation of another law is a predicate for stating a cause of action under the UCL’s unlawful prong.” (Demurrer p. 20, quoting Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1554.)

A plaintiff can plead a UCL violation under the unlawfulness prong by pleading that a business practice violated a predicate federal, state, or local law. (See Opp. p. 14, citing Cel–Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 [“Its coverage is ‘sweeping, embracing ‘ “anything that can properly be called a business practice and that at the same time is forbidden by law.’”].) (The Reply does not address this case.)

Here, as Plaintiff’s California Business and Professions Code § 17200 allegations are “tethered to” all the other claims. (See SAC ¶108.) including Defendants’ alleged violations of Civ. Code § 2924.17. (¶109), then a UCL violation has been pled.

Based on the foregoing, the demurrer is SUSTAINED in part and OVERRULED in part (i.e., 1^st and 5^th COAs are overruled; COAs Nos. 2-4 are SUSTAINED). As for leave to amend, the court denies leave to amend as Plaintiff would be afforded a third opportunity at leave to amend, but such defects (as raised during meet and confer efforts) should have been cured prior to Defendants filing a demurrer.

[1] See also Demurrer p. 16, citing Billesbach v. Specialized Loan Servicing LLC (2021) 63 Cal.App.5th at 830, 837 [“A material violation is one that affected the borrower’s loan obligations, disrupted the borrower’s loan modification process, or otherwise harmed the borrower.”]; id. at p. 846 [“the HBOR creates no liability for a technical violation that does not thwart its purposes”].)

[2] Defendant demurs that the claim lacks the requisite specificity. (Demurrer p. 14, citing Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 [The elements of negligent misrepresentation, like that of fraud, “must also be pled with specificity.”].)

The opposition merely conclusively states that it has pled specific facts. (Opp. p. 10.) But the 2^nd COA does not state what terms were provided versus what were the actual terms. Therefore, specific facts have not been provided.