Valbuena v. Ocwen Loan Servicing, LLC

• Decision Date: 21 May 2015
• Docket Number: B256378
• Citation: 237 Cal.App.4th 1267,188 Cal.Rptr.3d 668
• Court: California Court of Appeals Court of Appeals
• Parties: Amado VALBUENA et al., Plaintiffs and Appellants, v. OCWEN LOAN SERVICING, LLC, Defendant and Respondent.

237 Cal.App.4th 1267

188 Cal.Rptr.3d 668

Amado VALBUENA et al., Plaintiffs and Appellants

v.OCWEN LOAN SERVICING, LLC, Defendant and Respondent.

B256378

Court of Appeal, Second District, Division 5, California.

Filed May 21, 2015

As Modified June 19, 2015

Gomez & Simone, Mark A. Gomez and Stuart R. Simone, Los Angeles, for Plaintiffs and Appellants.

Wright Finlay & Zak, Nicole S. Dunn and T. Robert Finlay, Newport Beach, for Defendant and Respondent.

Opinion

GOODMAN, J.^*

Plaintiffs Amado and Myrna Valbuena sued Ocwen Loan Servicing, LLC (“Ocwen”) following their lender's purchase of their residence at a nonjudicial foreclosure sale. They allege that Ocwen violated Civil Code section 2923.6, the prohibition on “dual tracking” contained in the Homeowner Bill of Rights, when it conducted a foreclosure sale of their property while their loan modification application was pending. The trial court sustained Ocwen's demurrer, ruling that plaintiffs' failure to allege tender of the loan balance defeated their claims. We disagree, and so reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND¹

Plaintiffs purchased the real property located at 360 East 238th Place in Carson (the “property”) in 2004. In August 2006, plaintiffs obtained from American Brokers Conduit a $485,000 loan secured by the property; that loan was assigned to Deutsche Bank in September 2011. At that time, plaintiffs were behind in their mortgage payments, having suffered financial difficulties.

On September 26, 2011, T.D. Service Company, as trustee, recorded a notice of default and election to sell under deed of trust on the property. The notice of default stated that plaintiffs were $21,181.11 in arrears as of September 30, 2011. A Notice of Trustee's Sale was recorded on December 22, 2011, setting a foreclosure sale for January 17, 2012. A second notice of trustee's sale was recorded on February 15, 2013, setting the foreclosure sale date for March 14, 2013; the sale was later postponed until March 25, 2015. The lender acquired the property at the foreclosure sale on that date. A Trustee's Deed upon Sale was recorded on October 15, 2013.²

As of March 1, 2013, after the second Notice of Trustee's Sale was recorded, Ocwen took over the servicing of plaintiffs' mortgage loan. Ocwen sent plaintiffs a letter dated March 13, 2013, which plaintiffs received on March 18, 2013, stating: “[A]s your loan servicer, we are committed to helping YOU. We offer a full range of mortgage assistance programs, and actively participate in the Obama Administration's Home Affordable Mortgage Program (HAMP). [¶] You may be able to lower your monthly payments —APPLY NOW to find out what options are available to you!” The letter explained the application process, and promised “a thorough review of your financial situation.” The letter continued: “While we consider your request, we will not initiate a new foreclosure action and we will not move ahead with the foreclosure sale on an active foreclosure as long as we have received all required documents and you have met the eligibility requirements. In the event that a foreclosure sale has been set and is within 30 days from this request for a HAMP application, the foreclosure sale will not be stopped and the sale will take place on the scheduled date unless a complete HAMP application with all required attachments and signatures is delivered to Ocwen no later than 7 business days prior to the scheduled foreclosure sale date.”

On March 21, 2013, plaintiffs responded to this letter by submitting paystubs, a W–2, and bank statements to Ocwen. On March 23, 2013, after speaking with an Ocwen representative, plaintiffs submitted additional financial documentation in support of their loan modification application. By letter dated March 25, 2013 the date of the foreclosure sale, Ocwen notified plaintiffs that they were not eligible for a loan modification because “[a]s of the date of this letter your loan has a confirmed sale date within 7 days.”

Plaintiffs filed the instant lawsuit on May 7, 2013 and amended the complaint on August 19, 2013 alleging causes of action for breach of contract, intentional and negligent misrepresentation, promissory estoppel, wrongful foreclosure, unlawful business practices, breach of the implied covenant of good faith and fair dealing, and “Set Aside of Trustee's Sale.” Ocwen demurred, and plaintiffs filed their second amended complaint, the operative pleading herein. That complaint omitted the causes of action for intentional misrepresentation, wrongful foreclosure and to set aside the foreclosure sale, and added four new claims, for violation of the Homeowner Bill of rights, fraud, negligence, and intentional infliction of emotional distress.³

Ocwen again demurred, contending that the second amended complaint failed to state a cause of action upon which relief could be granted. The trial court agreed, stating in its minute order that its grant of leave to amend did not authorize plaintiffs to allege the new causes of action for negligence and intentional infliction of emotional distress, and that the remaining causes of action were defective due to the absence of “pleading of tender or exception to tender requirement even though this is post-foreclosure.” The court sustained the demurrer without leave to amend, and subsequently entered judgment in favor of Ocwen.

Plaintiffs timely appealed the judgment of dismissal.

DISCUSSION

“A demurrer tests the legal sufficiency ... in a complaint. We independently review the sustaining of a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 [106 Cal.Rptr.2d 271, 21 P.3d 1189].) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 [6 Cal.Rptr.3d 457, 79 P.3d 569].) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid. ) We must affirm the judgment if the sustaining of a general demurrer was proper on any of the grounds stated in the demurrer, regardless of the trial court's stated reasons. (Aubry v. Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 967 [9 Cal.Rptr.2d 92, 831 P.2d 317].)” (Siliga v. Mortgage Electronic Registration Systems, Inc. (2013) 219 Cal.App.4th 75, 81, 161 Cal.Rptr.3d 500.)

Plaintiffs frame the issue in this appeal as follows: “[W]hether the Trial Court erred in sustaining the Respondent's Demurrer to the SAC in its entirety, concluding that the entire case—which, among other things, alleges several statutory violations of the California Homeowner's Bill of Rights (‘HBOR’)—should be dismissed with prejudice because Plaintiffs/Appellants did not allege tender of their entire loan balance in their amended complaint.”

The Homeowner Bill of Rights (Civ.Code,⁴ §§ 2920.5, 2923.4 –.7, 2924, 2924.9 –.12, 2924.15, 2924.17 –.20 ) (“HBOR”), effective January 1, 2013, was enacted “to ensure that, as part of the nonjudicial foreclosure process, borrowers are considered for, and have a meaningful opportunity to obtain, available loss mitigation options, if any, offered by or through the borrower's mortgage servicer, such as loan modifications or other alternatives to foreclosure.” (§ 2923.4.) Among other things, HBOR prohibits “dual tracking,” which occurs when a bank forecloses on a loan while negotiating with the borrower to avoid foreclosure. (§ 2923.6.) HBOR provides for injunctive relief for statutory violations that occur prior to foreclosure (§ 2924.12, subd. (a)), and monetary damages when the borrower seeks relief for violations after the foreclosure sale has occurred. (§ 2924.12, subd. (b).)

Section 2923.6, the dual tracking prohibition in HBOR which plaintiff maintains Ocwen violated, provides in pertinent part as follows:

“(b) It is the intent of the Legislature that the mortgage servicer offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.

“(c) If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee's sale until any of the following occurs: [¶] (1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired. [¶] (2) The borrower does not accept an offered first lien loan modification within 14 days of the offer. [¶] (3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under, the first lien loan modification.

“(d) If the borrower's application for a first lien loan modification is denied, the borrower shall have at least 30 days from the date of the written denial to appeal the denial and to provide evidence that the mortgage servicer's determination was in error.

“(e) If the borrower's application for a first lien loan modification is denied, the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or, if a notice of default has already been recorded, record a notice of sale or conduct a trustee's sale until the later of: [¶] (1) Thirty-one days after the borrower is notified in writing of the denial. [¶] (2) If the borrower appeals the denial pursuant to subdivision (d), ... 15 days after the...