Shelton v. Ocwen Loan Servicing

• Decision Date: 30 September 2019
• Docket Number: Case No.: 18-cv-02467-AJB-WVG
• Parties: ALAN E. SHELTON, an Individual, and JUSTINE M. SHELTON, an Individual; Plaintiffs, v. OCWEN LOAN SERVICING, LLC, a Delaware Limited Liability Company; U.S. BANK TRUST, N.A., in Its Individual Capacity and as Trustee for LSF9 MASTER PARTICIPATION TRUST; QUALITY LOAN SERVICE CORPORATION, a California Corporation; CALIBER HOME LOANS, INC., a Delaware Corporation; WSFS FINANCIAL CORPORATION, an Entity of Unknown Form; WILMINGTON SAVINGS FUND SOCIETY, FSB, aka WSFS BANK, an Entity of Unknown Form; CHRISTIANA TRUST, a Division of WSFS Bank, an Entity of Unknown Form, in Its Individual Capacity and as Trustee of ARLP TRUST 3; and DOES 1 - 50 Inclusive, Defendants.
• Court: U.S. District Court — Southern District of California

ALAN E. SHELTON, an Individual,and JUSTINE M. SHELTON, an Individual; Plaintiffs, v. OCWEN LOAN SERVICING, LLC, a Delaware Limited Liability Company; U.S. BANK TRUST, N.A.,in Its Individual Capacity and as Trustee for LSF9 MASTER PARTICIPATION TRUST;

QUALITY LOAN SERVICE CORPORATION, a California Corporation; CALIBER HOME LOANS, INC.,

a Delaware Corporation; WSFS FINANCIAL CORPORATION, an Entity of Unknown Form;

WILMINGTON SAVINGS FUND SOCIETY, FSB, aka WSFS BANK, an Entity of Unknown Form;

CHRISTIANA TRUST, a Division of WSFS Bank, an Entity of Unknown Form,

in Its Individual Capacity and as Trustee of ARLP TRUST 3; and DOES 1 - 50 Inclusive, Defendants.

Case No.: 18-cv-02467-AJB-WVG

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

September 30, 2019

ORDER:

(1) GRANTING IN PART AND DENYING IN PART OCWEN LOAN SERVICING'S MOTION TO DISMISS;

(2) GRANTING IN PART AND DENYING IN PART CHRISTIANA TRUST'S MOTION TO DISMISS;

(3) GRANTING IN PART AND DENYING IN PART CALIBER HOME LOANS AND U.S. BANK TRUST'S MOTION TO DISMISS; AND

(4) GRANTING PLAINTIFFS LEAVE TO AMEND THEIR FIRST AMENDED COMPLAINT.

Before the Court are three motions to dismiss Plaintiffs' First Amended Complaint ("FAC"), (Doc. No. 1-4), for failure to state a claim brought by Defendant Ocwen Loan Servicing, LLC, (Doc. No. 6), Defendant Christiana Trust, (Doc. No. 24), and Defendants Caliber Home Loans, Inc., and U.S. Bank Trust, N.A., (Doc. No. 27).

I. BACKGROUND

The following facts are taken from the FAC and construed as true for the limited purpose of resolving the instant motions. See Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247 (9th Cir. 2013).

Plaintiffs Alan E. Shelton and Justine M. Shelton (collectively "Plaintiffs") are husband and wife. (Doc. No. 1-4 ¶ 1.) On or about July 2007, Plaintiffs purchased real property at 619 South Cleveland Street in Oceanside, California, ("Property" or "Subject Property") subject to a mortgage for $810,000.00 ("Loan"). (Doc. No. 6-3, Ex. A ¶ A.) Defendant Ocwen Loan Servicing, LLC, ("Ocwen") was the loan servicer on the mortgage. (Id. ¶ B.) On or before 2013, Plaintiffs defaulted on the Loan. (Id. ¶ C.) On September 15, 2014, Plaintiffs filed a lawsuit in California state court against Ocwen, Case number 37-2014-00030966 ("First Action"). (Doc. No. 1-4 ¶ 11.)

The First Action resulted in the execution of a Confidential Settlement and Release Agreement ("Contract") by and between Plaintiffs and Ocwen. (Id.) The Contract purported to "settle all disputes and claims which exist or which may exist between and among [the Parties] arising out of the facts, matters, and events set forth above, without admitting any liability and settle their rights and obligations in connection with the Loan Documents." (Doc. No. 6-3, Ex. A ¶ F.) The Contract required Ocwen to accept a deed in lieu of foreclosure ("DIL") to the Subject Property and required Plaintiffs to surrender the premises with clear title and dismiss the First Action. (Id., Ex. A at 5-6.)

Plaintiffs executed the Contract on or about August 31, 2015. (Id., Ex. A at 11-12.) Plaintiffs allege Ocwen executed the Contract on September 9, 2015. (Doc. No. 1-4 ¶ 17.) The First Action was subsequently dismissed. (Id. ¶ 15.) Plaintiffs vacated the premises on or before November 15, 2015, as required by the Contract. (Id. ¶ 18.) On or about April29, 2016, Ocwen sent Plaintiffs the Notice of Service Transfer to Caliber Home Loans, Inc., ("Caliber") to the address of the Subject Property, addressed to Plaintiffs. (Id., Ex. B.) On or about September 23, 2016, Quality Loan Service Corporation ("Quality")¹ recorded a Notice of Default and Election to Sell Under Deed of Trust with the San Diego County Recorder Office on the Subject Property. (Id., Ex. C.) Attached to the Notice of Default was a California Declaration of Compliance form, signed on or about November 21, 2013, by Matthew Owens, a Contract Management Coordinator for Ocwen. (Id., Ex. C at 60.) On or about January 3, 2017, Quality recorded a Notice of Trustee's Sale on the Subject Property. (Id., Ex. D.) And finally, Caliber recorded a Trustee's Deed Upon Sale on February 3, 2017, on behalf of Quality as Trustee, on the Subject Property. (Id., Ex. E.)

Plaintiffs now sue Defendants under the Contract and in connection with the subsequent non-judicial foreclosure on the Subject Property. Plaintiffs plead the following causes of action in their FAC: (1) breach of written contract; (2) breach of implied covenant of good faith and fair dealing; (3) fraud and intentional misrepresentation; (4) negligent misrepresentation; (5) negligence; (6) violations of section 17200 of the California Business and Professions Code; (7) intentional infliction of emotional distress; (8) violations of section 1692 et seq. of Title 15 of the United States Code, the Federal Fair Debt Collection Practices Act; and (9) negligence per se.

II. LEGAL STANDARD

A motion under Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a case for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). The purpose of Rule 12(b)(6) motion is to test the legal sufficiency of the complaint and a claim may only be dismissed if "it appears beyond doubt that the plaintiff can prove no set offacts in support of his claim which would entitle him to relief." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001) (internal quotations omitted).

In order to survive a motion to dismiss, "a complaint . . . must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 562 (2007) (internal citations and quotations marks omitted) (emphasis and omission in original). "[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 Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007)). Detailed factual allegations are not required, but "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. With respect to Plaintiffs' state law causes of action, "California law applies because a federal court exercising jurisdiction over non-federal claims must usually apply the substantive law of the state in which it sits. [Citation]." Yount v. Acuff Rose-Opryland, 103 F.3d 830, 836 n.6 (9th Cir. 1996) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80 (1938)).

III. DISCUSSION

In their motions to dismiss, each Defendant moves to dismiss each cause of action in Plaintiffs' FAC on different grounds. Plaintiffs' FAC generally alleges all Defendants are liable for each cause of action, however, as discussed below, Plaintiffs do not sufficiently plead conspiracy or agency, nor do they specify which Defendant is responsible for the various alleged acts of misconduct. As such, the Court will address Defendants' requests for judicial notice and each cause of action as to each Defendant in turn.

A. Defendants' Requests for Judicial Notice

Federal Rule of Evidence 201 states that a "court may judicially notice 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(b).

Ocwen requests judicial notice of the following three documents: (1) as Exhibit A the Notice and Default and Election to Sell under the Deed of Trust recorded on September 26, 2016 regarding the Property; (2) as Exhibit B the Notice of Trustee's Sale recorded on January 3, 2017 regarding the Property; and (3) as Exhibit C the Trustee's Deed upon Sale recorded on February 3, 2017 regarding the Property. (Doc. No. 6-2 at 2.)

Christiana Trust requests judicial notice of the following nine documents: (1) as Exhibit 1 the Deed of Trust recorded on July 27, 2017 regarding the Property; (2) as Exhibit 2 the Assignment of Deed of Trust recorded on August 24, 2011 regarding the Property; (3) as Exhibit 3 the Assignment of Deed of Trust recorded on December 13, 2013 regarding the Property; (4) as Exhibit 4 the Substitution of Trustee recorded on January 15, 2014 regarding the Property; (5) as Exhibit 5 the Corrective Assignment of Deed of Trust recorded on September 7, 2016 regarding the Property; (6) as Exhibit 6 the Substitution of Trustee recorded on September 26, 2016 regarding the Property; (7) as Exhibit 7 the Notice of Default and Election to Sell under Deed of Trust recorded on September 26, 2016 regarding the Property; (8) as Exhibit 8 the Notice of Trustee's Sale recorded on January 3, 2017 regarding the Property; and (9) as Exhibit 9 the Trustee's Deed upon Sale recorded on February 3, 2017 regarding the Property. (Doc. No. 24-2 at 2-3.)

All of the above documents are proper for judicial notice as they are publicly recorded documents, referenced in the FAC and/or are central to the allegations of Plaintiff's FAC. See U.S. v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). Accordingly, the Court GRANTS Ocwen's request for judicial notice and GRANTS Christiana Trust's request for judicial notice.

B. Insufficiently Pled Agency and Conspiracy Claims

Plaintiffs allege as a part of each of their causes of action that "all of the Defendants were, and are, agents of, assigns of, or acting on behalf of, in concert with, and/or conspiring with, each other in doing all of the actions alleged herein." (Doc. No. 1-4 ¶¶ 33,43, 53, 65, 76, 96, 133, 143, 153.) However, the balance of Plaintiffs' FAC is generally devoid of any specific factual allegations to support their claims of agency or conspiracy.

Under California Civil Code section 2295, an agent is "'one who represents another, called the principal, in dealings with...