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Peter Salvato and Julie Salvato v. Ocwen Loan Servicing

July 23, 2012


The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge


Presently before the Court is Defendant Ocwen Loan Servicing, LLC's ("Defendant" or "Ocwen") motion to dismiss Plaintiffs' First Amended Complaint. (MTD, ECF No. 7.) Also before the Court is an opposition to that motion brought by Plaintiffs Peter Salvato and Julie Salvato ("Plaintiffs" or "Salvatos"), and Ocwen's reply. (Opp'n, ECF No. 8; Reply, ECF No. 9.) Having considered the parties' arguments and the law, the Court DENIES Defendant's motion to dismiss for the reasons discussed below.


The Salvatos purchased a home located at 9240 Vista Drive in Spring Valley, California ("the Property") in October 2005. At that time, they took out a loan from Defendant Secured Bankers Mortgage in the approximate amount of $460,000, secured by a Deed of Trust to the Property, to be repaid at an "adjustable rate." This loan was brokered by Defendant Regal Home Loans. On December 1, 2009, the Salvatos entered into a loan modification with the successor lender, Bank of New York Mellon ("Mellon"), through the Home Affordable Modification Program ("HAMP"). In this modification, various prior unpaid fees and amounts past due*fn2 were added into the loan principal, and Plaintiffs' repayment schedule was changed to a fixed rate over a 40--year term, with reduced monthly payments.

Subsequently, around late 2010 or early 2011, Defendant Ocwen "took over the servicing" of the Salvatos' loan from the prior servicer, "Saxon," at which point the loan was already apparently in default. Ocwen then attempted to collect on amounts that Plaintiffs allege are not due, which is the same approximate amount as the prior unpaid fees and amounts past due that were rolled into the new principal amount as part of the terms of the loan modification agreement. Ocwen has apparently "continued to try to collect these alleged past due payment amounts from PLAINTIFFS in addition to the principal which already contains these alleged past due payments, even though these amounts were disputed in writing by PLAINTIFFS, and even though OCWEN was notified in writing by PLAINTIFFS' counsel that PLAINTIFFS have retained counsel and that OCWEN is no longer to contact PLAINTIFFS directly regarding this alleged debt." (FAC ¶ 2.) Further, Ocwen has apparently reported this "wrongful debt information" to reporting agencies and indicated an intent to foreclose on the Property, even though Plaintiffs "dispute the amount in default alleged by OCWEN on the mortgage that was modified in December of 2009." (FAC ¶ 16.)

On January 18, 2011, Plaintiffs sent Ocwen a letter by certified mail to notify Ocwen of its unfair and illegal debt collection practices, and to inform Ocwen that Plaintiffs had retained counsel for representation regarding their disputed debt. In this letter, Plaintiffs disputed the debt in writing, requested verification of the disputed debt, and demanded Ocwen no longer contact the Salvatos directly, instead communicating with their attorney. After that, Plaintiffs allege Ocwen made repeated collection attempts-on January 24, 2011, January 28, 2011, February 10, 2011, and March 15, 2011. Plaintiffs then sent a second letter on April 26, 2011, informing Ocwen of the information contained in the previous letter and again demanding that Ocwen cease contacting Plaintiffs directly. Subsequent to the second letter, Ocwen made more collection attempts-on June 17, 2011, July 9, 2011, July 12, 2011, July 22, 2011, September 13, 2011, and October 17, 2011. At least the communication on July 9, 2011, was a letter sent by Ocwen to the Salvatos stating "NOTICE OF DEFAULT," informing the Salvatos their payments were past due and that they were in default. The letter further stated: "Failure to bring your account current may result in our election to exercise our right to foreclose on your property." (FAC ¶ 23.)

Plaintiffs filed their Complaint in state court on November 28, 2011. Defendant Ocwen removed the case on January 11, 2012, asserting jurisdiction based on federal question and supplemental jurisdiction. 28 U.S.C. §§ 1331, 1441(b), 1367(a). Plaintiffs filed an FAC on February 7, 2012 (ECF No. 4) and have also voluntarily dismissed Defendants Regal Home Loans and Secured Bankers Mortgage (ECF No. 5.) The FAC states two causes of action, alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200. However, the second cause of action is asserted only against Defendants Regal Home Loans, Secured Bankers Mortgage, and Does 26-50. Plaintiffs having voluntarily dismissed the two named Defendants against whom their UCL claim was brought, and not having sought leave to amend their claim to substitute Doe Defendants, the UCL claim is not at issue here.


Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it [does] demand[] more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 557).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. Facts "'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. This review requires context-specific analysis involving the Court's "judicial experience and common sense." Id. at 679 (citation omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not 'show[n]'-'that the pleader is entitled to relief.'" Id. Moreover, "for a complaint to be dismissed because the allegations give rise to an affirmative defense[,] the defense clearly must appear on the face of the pleading." McCalden v. Ca. Library Ass'n, 955 F.2d 1214, 1219 (9th Cir. 1990) (internal quotations omitted).

Where a motion to dismiss is granted, "leave to amend should be granted 'unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'" DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.


Defendant asserts that the FAC fails to state a claim upon which relief can be granted because it fails to adequately allege a violation of the FDCPA by Ocwen. Specifically, Defendant argues the FAC does not contain facts that indicate how Ocwen qualifies as a "debt collector" under the FDCPA. Further, as a "loan servicer," Ocwen states it cannot not fall within the scope of the FDCPA as a matter of law. (MTD 6-7.) Second, the FAC lacks sufficient facts regarding the source or basis for the disputed debt. (Id. at 7.)

The FDCPA imposes requirements on "debt collectors" for certain prohibited "debt collection" by regulating the manner in which a debt collector may contact a debtor. See Jerman v. Carlisle, McNellie, Rini, Kramer, & Ulrich LPA, - U.S. -, 130 S.Ct. 1605, 1608 (2010); Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028, 1031 (9th Cir. 2009). "[T]he purpose of the FDCPA is to protect consumers broadly from improper practices and the statute is to be interpreted liberally for this purpose." Riley v. Giguiere, 631 F. Supp. 2d 1295, 1305 (E.D. Cal. 2009) (citing Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1171, 1175 (9th Cir. 2006)). It is a strict liability statute that "makes debt collectors liable for violations that are not knowing or intentional." Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1030 (9th Cir. 2010) (internal quotation and citation omitted). Proof of actual damages is not required for recovery under the FDCPA. Keele v. Wexler, 149 F.3d 589, 593 (7th Cir. 1998). To state a claim under the FDCPA, a "plaintiff must show: (1) that he is a consumer within the meaning of 15 U.S.C. ยงยง 1692a(3) and 1692c(d); (2) that the debt arises out of a transaction entered into for personal purposes; (3) that the defendant is a debt collector ...

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