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Duenas v. Ocwen Loan Servicing, LLC

United States District Court, E.D. California

September 16, 2014

XOCHITL VIVANCO DUENAS, Plaintiff,
v.
OCWEN LOAN SERVICING, LLC; MTC FINANCIAL, INC. and FEDERAL HOME LOAN MORTGAGE CORPORATION, Defendants.

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS

JENNIFER L. THURSTON, Magistrate Judge.

Defendants MTC Financial Inc., doing business as Trustee Corps; Ocwen Loan Servicing, LLC; and Federal Home Loan Mortgage Corporation seek dismissal of the claims of Plaintiff Xochitl Vivanco Duenas pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Docs. 5, 20.) Because the Court determined the matters were suitable for decision without oral argument, the motions were taken under submission pursuant to Local Rule 230(g). For the following reasons, Defendants' motions are GRANTED.

I. Factual and Procedural History

Plaintiffs initiated an action by filing a complaint in Kern County Superior Court Case No. S-1500-CV-281048 against Defendants Ocwen Loan Servicing, LLC; MTC Financial, Inc.; and several "Doe" defendants on January 8, 2014. (Doc. 1-1.) On February 27, 2014, Plaintiff filed an Amendment to Complaint, substituting Federal Home Loan Mortgage Corporation ("Freddie Mac") for Doe 1. ( Id. at 2, 79.) Plaintiff alleges the defendants are liable for ten causes of action based upon the foreclosure of the mortgage on their primary residence. ( See id. at 6.) Defendant Freddie Mac filed a Notice of Removal on March 21, 2014, thereby initiating the action before this Court. (Doc. 1.)

On April 1, 2014, MTC Financial Inc., doing business as Trustee Corps ("Trustee Corps" or "MTC") filed a motion to dismiss, asserting Plaintiff's complaint fails to state a claim upon which relief may be granted against Trustee Corps. (Doc. 5.) Trustee Corps argues the complaint should be dismissed without leave to amend, because Plaintiff cannot state facts sufficient to cure the defects of the complaint. ( Id. ) Plaintiff filed her opposition to the motion on April 8, 2014 (Doc. 15), to which Trustee Corps filed a reply on April 28, 2014 (Doc. 18).

On May 1, 2014, Defendants Freddie Mac and Ocwen Loan Servicing, LLC ("Ocwen") also filed a motion to dismiss pursuant to Rule 12(b)(6). (Doc. 20.) According to Defendants, "Plaintiff sets forth absolutely no allegations of ultimate fact as to Freddie Mac and the complaint utterly fails to state a claim for relief as to Freddie Mac." ( Id. at 3.) In addition, Defendants assert that her contract-based claims against Ocwen Loan Servicing fail because Plaintiff "does not identify any written promise by Ocwen for a permanent loan modification." ( Id. ) Plaintiff filed her opposition to the motion on May 15, 2015 (Doc. 24), to which Defendants filed a reply on June 6, 2014 (Doc. 25).

The parties consented to the jurisdiction of a United States Magistrate Judge for all purposes pursuant to 28 U.S.C. § 636(c)(1), after which the pending motions to dismiss were transferred to the undersigned on August 28, 2014. ( See Doc. 40 at 1.)

II. Background and Plaintiff's Allegations

Plaintiff alleges she purchased the real property commonly known as 810 Houchin Road, Bakersfield, California ("the Property") on June 20, 2007. (Doc. 1-1 at 10, ¶ 17.) She financed the Property by executing a promissory note in the sum of $155, 000.00 and a Deed of Trust, which was recorded as document number XXXXXXXXXX in the Official Records of the Kern County Recorder's Office. ( Id. ) The Deed of Trust identified Plaintiff as the borrower; First American Title Insurance Company as the trustee; and Indymac Bank, FSB, as the lender. ( Id. )

Plaintiff obtained a home mortgage loan modification through the Home Affordable Modification Program ("HAMP") with Indymac Bank, a division of OneWest Bank, on December 12, 2009. (Doc. 1-1 at 10, ¶ 19; see also Doc. 1-1 at 53.)

On July 29, 2013, the Substitution of Trustee was recorded with the Kern County Recorder's Office as document number XXXXXXXXXXXX. (Doc. 1-1 at 10, ¶ 18.) The Substitution identified the new trustee as MTC Financial, Inc. ( Id. ) The same day, MTC "caused to be recorded a Notice of Default and Election to Sell Under Deed of Trust, " which the Kern County Recorder identified as document number XXXXXXXXXXXX. ( Id., ¶ 20.) The Notice of Default instructed Plaintiff: "[T]o find out the amount you must pay, or arrange for payment to stop the foreclosure, or if your property is in foreclosure for any other reason, contact: OneWest Bank, FSB." ( Id. at 10-11, ¶ 20.)

According to Plaintiff, "[the] loan was transferred immediately thereafter" to Ocwen Loan Servicing, LLC ("Ocwen") in August 2013. (Doc. 1-1 at 11, ¶ 21.) Plaintiff reports that when she attempted to make the modified loan payment to Ocwen, the company "would not honor the modification agreement." ( Id. ) In addition, Plaintiff asserts that she "submitted a modification application to [Ocwen] once the loan was transferred." ( Id., ¶ 23.) Plaintiff asserts that Ocwen "informed Plaintiff to remain in default on the loan if Plaintiff wanted to obtain a modification." ( Id., ¶ 21.) She alleges that she relied upon this representation that she needed to default on the loan to obtain a modification with Ocwen, and defaulted on the loan. ( Id., ¶ 21.) In addition, Plaintiff asserts that she "submitted a modification application to [Ocwen] once the loan was transferred.

On October 23, 2013, an Assignment of Deed of Trust was recorded with the Kern County Recorder's Office, under which Indymac Bank "granted, assigned, and transferred... all beneficial interest under the Deed of Trust" to Ocwen. (Doc. 1-1 at 11, ¶ 22.)

A Notice of Trustee's Sale was recorded as document number XXXXXXXXXXXX on December 4, 2013. (Doc. 1-1 at 11, ¶ 23.) The Notice of Trustee's Sale indicated that the Property would be sold on December 30, 2014. ( Id. ) Plaintiff asserts that her loan modification application was still under review by Ocwen when the company proceeded with the foreclosure sale. ( Id., ¶ 24.) Plaintiff alleges:

When Plaintiff was told that the house was still going to sale, Plaintiff told OCWEN that she did not want to lose the home and wanted to reinstate her loan and pay the entire amount in default. OCWEN advised that even if they received the payment via overnight mail, they would not stop the sale. Instead, the representative stated that if Plaintiff emailed them a bank statement showing that she had the funds in the account they would

stop the sale date. Plaintiff did so immediately, yet the property still went to auction. ( Id. ) According to Plaintiff, "[a]t all times relevant... and leading up to the foreclosure sale, Plaintiff [was] willing and able to tender funds to satisfy the alleged deficiency, and was prepared to make that tender if necessary to stop a foreclosure sale." ( Id. at 12, ¶ 28.)

On January 31, 2014, an Assignment of the Deed of Trust from Ocwen Loan Servicing, LLC to Freddie Mac was recorded. In addition, a Trustee's Deed Upon sale was recorded, showing the Property was sold and reverted to Freddie Mac on December 30, 2013.

Based upon these facts, Plaintiff asserts the Property "was wrongfully foreclosed upon." (Doc. 1-1 at 12, ¶ 25.) In addition, Plaintiff argues that "Defendants engaged in dual tracking" by "[f]ailing to honor the modification agreement Plaintiff already had, and simultaneously reviewing [her application] for a loss mitigation alternative." ( Id. at 11-12, ¶¶ 23, 25.) Plaintiff asserts Ocwen is liable for a breach of contract. ( Id. at 12.) Further, Plaintiff states the following causes of action against all Defendants: (1) breach of the covenant of good faith and fair dealing; (2) promissory estoppel; (3) a violation of Cal. Civ. Code § 2937; (4) violations of Cal Civ. Code §§ 2923.6 and 2923.7; (5) negligence; (6) unfair business practices in violation of Cal. Bus. & Prof. Code § 17200, et seq.; (7) to set aside Trustee's sale; (8) to cancel Trustee's deed; (9) and quiet title.

In response, Defendants filed the motions to dismiss now pending before the Court, seeking dismissal of all of Plaintiff's claims against the company pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Docs. 5, 20.)

III. Legal Standards for a Motion to Dismiss

A Rule 12(b)(6) motion "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal under Rule 12(b)(6) is appropriate when "the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). Thus, under Rule 12(b)(6), the Court's review is generally "limited to the complaint alone." Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993).

"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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Supreme Court explained,

A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a "probability requirement, " but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of entitlement to relief.'"

Iqbal, 556 U.S. at 678 (internal citations, quotation marks omitted). Further, allegations of a complaint must be accepted as true when the Court considers a motion to dismiss. Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976).

A court must construe the pleading in the light most favorable to the plaintiff, and resolve all doubts in favor of the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). "The issue is not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to officer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). However, the Court "will dismiss any claim that, even when construed in the light most favorable to plaintiff, fails to plead sufficiently all required elements of a cause of action." Student Loan Marketing Assoc. v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal. 1998). Leave to amend should not be granted if "it is clear that the complaint could not be saved by an amendment." Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).

IV. Requests for Judicial Notice

Defendants filed requests for judicial notice in conjunction with their motions to dismiss. (Docs. 7, 21.) Specifically, Defendants seek judicial notice of the following documents: (1) the Deed of Trust recorded on July 20, 2007; (2) the Assignment of Deed of Trust recorded on July 29, 2009; (3) the Notice of Default recorded June 24, 2009; (4) the Substitution of Trustee recorded on August 5, 2009; (5) the Substitution of Trustee recorded on July 29, 2013; (6) the Notice of Default and Election to Sell Under Deed of Trust recorded on July 29, 2013; (7) the Assignment of Deed of Trust recorded on October 23, 2013, assigning the Deed of Trust to Ocwen; (8) the Notice of Trustee's Sale recorded on December 4, 2013; (9) the Assignment of Deed of Trust recorded on January 31, 2014, assigning the Deed of Trust to Federal Home Loan Mortgage Corporation; and (10) the Trustee's Deed Upon Sale recorded on July 31, 2014. (Doc. 7 at 2; Doc. 21 at 2-3.) Plaintiff does not oppose the requests for judicial notice.

In considering a motion to dismiss, the Court may consider material outside the pleadings that is properly the subject of judicial notice. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001); MGIC Indemnity Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). The Court may take judicial notice of a fact that "is not subject to reasonable dispute because it (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201. In addition, the Court may take judicial notice of material incorporated by reference into the complaint without converting the motion to dismiss into a motion for summary judgment. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); Intri-Plex Technologies, Inc. v. Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). Documents are incorporated into the complaint by reference "where the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance." Coto Settlement, 593 F.3d at 1038; see also U.S. v. Corinthian Colleges, 655 F.3d 984, 999 (9th Cir. 2011).

Here, documents identified above are incorporated into Plaintiff's complaint by reference, and several are attached as exhibits thereto. ( See, e.g., Doc. 1-1, ¶¶ 17-22.) In addition, recorded documents are matters of public record, certified and maintained by the Kern County Recorder's Office. Therefore, Defendants' unopposed requests for judicial notice are GRANTED.

V. Discussion and Analysis

As an initial matter, Trustee Corps argues its "conduct was privileged under California Civil Code §47 and Civil Code §2924(d)." (Doc. 6 at 12, emphasis omitted.) Pursuant to Cal. Civ. Code § 47(c), any communication made "without malice, to a person interested therein" is privileged. The litigation privilege is "given expansive application by California courts, " and "has been extended to any communication, whether or not it is a publication, and to all torts other than malicious prosecution." Edwards v. Centex Real Estate Corp., 53 Cal.App.4th 15, 29 (2007) (emphasis in original). Further, § 2924(d) "makes the recording of the notice of default by the beneficiary, and any other statutorily authorized act of the beneficiary acting as trustee, a privileged communication under section 47." Kachlon v. Markowitz, 168 Cal.App.4th 316, 340 (2008). In addition, Cal. Civ. Code § 2924(b) creates a specific qualified privilege for trustees, stating: "the trustee shall incur no liability for any good faith error resulting from reliance on information provided in good faith by the beneficiary regarding the nature and the amount of the default under the secured obligation, deed of trust, or mortgage."

Trustee Corps asserts that "Plaintiff has not alleged factually any malice by Trustee Corps, " and as a result its "actions in performance of its duties during the foreclosure process were privileged" pursuant to Cal. Civ. Code §§ 47 and 2924. (Doc. 6 at 14, emphasis omitted.) On the other hand, Plaintiff argues that the privilege should not be applied because Trustee Corps "has failed to submit facts within the four corners of the pleading that refute Plaintiff's allegations of [its] intentional wrongful acts, nor has [Trustee Corps] shown that Plaintiff cannot reasonably plead malice." (Doc. 15 at 10.)

Significantly, for purposes of the qualified privilege, "malice is defined as actual malice, meaning that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.'" Kachlon, 168 Cal.App.4th at 336 (quoting Sanborn v. Chronicle Pub. Co., 18 Cal.3d 406, 413 (1976)). Here, Plaintiff does not allege that Trustee Corps was motivated by hatred or ill will, or that Trustee Corps lacked reasonable grounds for belief of the fact that Plaintiff was in default when it recorded the Notice of Default on July 29, 2013. Further, Plaintiff does not allege facts supporting a determination that Trustees Corps acted maliciously when the Notice of Trustee's Sale was recorded on December 4, 2013. Consequently, Plaintiff does not allege facts that support a finding ...


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