Macias v. Ocwen Loan Servicing LLC et al

Filing 35

MEMORANDUM OPINION & ORDER re: 26 MOTION to Dismiss Plaintiff's Amended Complaint. filed by Deutsche Bank National Trust Company, Ocwen Loan Servicing LLC. For the foregoing reasons, Defendants' motion to dismiss Plaintiff's Amended Complaint is GRANTED. The Clerk of Court is respectfully directed to terminate the open motion at docket entry 26 and to close the case. (Signed by Judge Valerie E. Caproni on 3/2/2017) (kgo)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------------------------------- X
ROBERT MACIAS,
:
:
:
Plaintiff,
:
:
:
-against:
OCWEN LOAN SERVICING LLC; DEUTSCHE :
:
BANK NATIONAL TRUST COMPANY as
:
Trustee for DSLA Mortgage Loan Trust 2007AR1; and DOES 1 THROUGH 100 INCLUSIVE, :
:
:
Defendants. :
-------------------------------------------------------------- X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
3/2/17
DATE FILED:

16-CV-2215 (VEC)
MEMORANDUM
OPINION & ORDER

VALERIE CAPRONI, United States District Judge:
Plaintiff Robert Macias brings this suit against Defendants Ocwen Loan Servicing LLC
(“Ocwen”) and Deutsche Bank National Trust Company as Trustee for DSLA Mortgage Loan
Trust 2007-AR1 (the “Trust,” and collectively with Ocwen, “Defendants”) effectively to prevent
foreclosure on his California home even though he has defaulted on his mortgage loan. In his
Amended Complaint, Plaintiff alleges that Ocwen, the loan servicer, and the Trust, which
purportedly owns the Deed of Trust and Note for Plaintiff’s mortgage, have violated the Fair
Debt Collection Practice Act (“FDCPA”), 15 U.S.C. § 1692 et seq., the Truth in Lending Act
(“TILA”), 15 U.S.C. § 1601 et seq., and the California Homeowner Bill of Rights (“HBOR”).
In addition, Plaintiff alleges claims for constructive fraud and slander of title and seeks a
declaratory judgment. Defendants move to dismiss Plaintiff’s Amended Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6). Defendants’ motion is GRANTED.

BACKGROUND
On or about January 18, 2007, Plaintiff received a $576,000 mortgage loan (the “Loan”)
from non-party Downey Savings and Loan (“Downey”) to refinance property located at 5833
Seminole Way, Fontana, CA 92336 (the “Property”). Am. Compl. ¶ 9 (Dkt. 23). On March 7,
2012, the Trust recorded the assignment to the Trust of the Note and Deed of Trust; according to
the recorded Corporation Assignment Deed of Trust, Downey executed the assignment on
February 1, 2007, years before it was recorded. Id. ¶¶ 10-11.
Plaintiff alleges that the assignment was invalid for several reasons. First, it was
recorded after US Bank N.A. purchased Downey’s deposits and loans in 2008 when Downey
went out of business. Id. ¶¶ 11, 26-30. According to Plaintiff, the Trust claims ownership of the
Note, while US Bank N.A. may own the Deed of Trust. Id. ¶ 28. Plaintiff alleges that the Trust
and US Bank may therefore have competing clams of ownership over Plaintiff’s Note and Deed
of Trust. Id. ¶ 30. Second, Plaintiff contends that the assignment was invalid because the
transaction failed to comply with the governing Pooling and Servicing Agreement (“PSA”). Id.
¶¶ 32-38. Specifically, Plaintiff maintains that the PSA required the Note to be endorsed,
transferred, and delivered to the Trust prior to a specified closing date, and there are no
documents or records to demonstrate that Defendants satisfied those conditions. Id. ¶¶ 36-38.
For that reason, according to Plaintiff, the assignment was invalid. Id. ¶¶ 37, 39. Furthermore,
Plaintiff alleges that the Note and Deed of Trust were split and held by distinct and unrelated
entities for at least five years, in violation of the terms of the Note, the Deed of Trust, and
California law. Id. ¶ 25.
In addition to alleging that Defendants can neither collect on the Loan nor foreclose on
the Property because the Deed of Trust and Note were not validly assigned to the Trust, Plaintiff
contends that Defendants have attempted to collect portions of the loan that have been
2

discharged. Plaintiff alleges that on April 30, 2012, Plaintiff received a Form 1099-C1 from
Ocwen when Defendants purportedly agreed to discharge $66,926.19 from his principal balance.
Id. ¶ 12. On January 1, 2014, Plaintiff received another Form 1099-C from Ocwen when
Defendants purportedly agreed to discharge an additional $332,567.86 from the principal
balance. Id. ¶ 14. According to Plaintiff, despite those discharges, Defendants continue to
charge Plaintiff for the full principal balance, plus interest, fees, and penalties. Id. ¶ 15.
On August 27, 2015, Western Progressive, LLC (“Western”), which had replaced the
original trustee of the Deed of Trust in 2013, recorded a Notice of Default and Election to Sell
under Deed of Trust, which included a Notice of Compliance pursuant to California Civil Code
Section 2923.55(c). Id. ¶¶ 13, 16. According to Plaintiff, the Declaration of Compliance, which
is part of the Notice of Compliance, was false and violated California law because neither
Western nor the Defendants had contacted Plaintiff to assess Plaintiff’s financial situation or to
explore options to avoid foreclosure. Id. ¶ 17. Within the allotted time, Plaintiff requested that
Western validate the debt and send him a copy of the Note, but neither Western nor the
Defendants responded. Id. ¶ 19. On January 4, 2016, Western recorded a Notice of Trustee’s
Sale, setting the sale of the Property for February 11, 2016. Id. ¶ 20. The Notice indicated that
the estimated unpaid loan balance was $695,135.73, which did not account for the allegedly
discharged principal. Id. The foreclosure sale was later postponed to March 14, 2016. Id. ¶ 22.
Meanwhile, in January 2016, Plaintiff obtained a loan audit and learned that the Loan had been

1

A Form 1099-C is an Internal Revenue Service form. Creditors reporting under 26 U.S.C. § 6050P “‘that
discharge[ ] an indebtedness of any person . . . of at least $600 during a calendar year must file an information return
on Form 1099–C with the Internal Revenue Service.’” Kaff v. Nationwide Credit, Inc., No. 13CV5413 (SLT)
(VVP), 2015 WL 12660327, at *3 (E.D.N.Y. Mar. 31, 2015) (citing 26 C.F.R. § 1.6050P-1(a)).

3

allegedly improperly assigned. Id. ¶¶ 21, 23-28. Plaintiff commenced this lawsuit in March
2016.
DISCUSSION
I.

Legal Standard
“To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must allege

sufficient facts, taken as true, to state a plausible claim for relief.” Johnson v. Priceline.com,
Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56
(2007)). A plaintiff “must provide the grounds upon which his claim rests through factual
allegations sufficient ‘to raise a right to relief above the speculative level.’” ATSI Commc’ns Inc.
v. The Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555).
Courts must “‘accept all allegations in the complaint as true and draw all inferences in the nonmoving party’s favor.’” L.C. v. LeFrak Org., Inc., 987 F. Supp. 2d 391, 398 (S.D.N.Y. 2013)
(quoting LaFaro v. New York Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009)).
Furthermore, courts are generally confined to “the four corners of the complaint” and must “look
only to the allegations contained therein.” Perez v. Westchester Foreign Autos, Inc., No. 11–
CV–6091(ER), 2013 WL 749497, at *5 (S.D.N.Y. Feb. 28, 2013) (citing Roth v. Jennings, 489
F.3d 499, 509 (2d Cir. 2007)).
II.

Plaintiff Has Failed to State a Claim for Violations of the FDCPA
Plaintiff alleges Defendants have violated various provisions of the FDCPA. Am.

Compl. ¶¶ 40-46. Defendants argue that Plaintiff fails to state a claim pursuant to the FDCPA
because (1) Defendants are not debt collectors subject to the FDCPA, and (2) Plaintiff’s
allegations regarding partial discharges are deficient as a matter of law. Defs. Mem. 4 (Dkt. 27).
Conceding that the Trust is not a debt collector under the FDCPA but instead a creditor
exempt from the FDCPA’s requirements, Plaintiff voluntarily dismisses the FDCPA claim
4

against the Trust. Pl. Opp. ¶ 26 (Dkt. 29); see also Def. Mem. 5-6. Plaintiff also concedes that
he has failed to allege that Ocwen, as servicer, obtained the mortgage when it was already in
default, Pl. Opp. ¶ 25, and concedes that the FDCPA exempts from the definition of “debt
collector” any entity that attempts to collect a debt that was not in default at the time the entity
obtained the debt, see 15 U.S.C. § 1692(a)(6)(F).
“[T]he FDCPA only covers servicers who obtain a mortgage that is already in default.”
Dumont v. Litton Loan Servicing, LP, No. 12-CV-2677 (ER) (LMS), 2014 WL 815244, at *17
(S.D.N.Y. Mar. 3, 2014). Because Plaintiff has failed to allege that Ocwen began servicing the
Loan after Plaintiff defaulted on the Loan, Plaintiff has failed to state a claim pursuant to
FDCPA against Ocwen. Gabriele v. Am. Home Mortg. Servicing, Inc., 503 F. App’x 89, 96 (2d
Cir. 2012) (“As the district court held, the complaint does not allege that [defendant] acquired
[plaintiff’s] debt before it was in default and so fails plausibly to allege that [defendant] qualifies
as a debt collector under the FDCPA.”); Dumont, 2014 WL 815244, at *17 (“To survive a
motion to dismiss, an FDCPA claim must allege that this statutory condition was satisfied.”);
Costigan v. CitiMortgage, Inc., No. 10 CIV. 8776 (SAS), 2011 WL 3370397, at *9 (S.D.N.Y.
Aug. 2, 2011) (“The Amended Complaint does not allege that [plaintiff’s] loan was in default at
the time [defendant] ‘obtained’ that loan. As a result, [defendant] is excluded from the definition
of ‘debt collector’ under the statute. [Plaintiff’s] claim under the FDCPA is therefore
dismissed.”).
Accordingly, Plaintiff’s FDCPA claim against the Trust is dismissed with prejudice, and
Plaintiff’s FDCPA claim against Ocwen is dismissed without prejudice.2

2

Defendants also argue that Plaintiff’s FDCPA claims should be dismissed because courts have held that the
filing of a Form 1099-C alone does not discharge a debt. See Defs. Mem. 6-8. Plaintiff’s allegation, however, is
that he “received a 1099-C from Ocwen when the Defendants agreed to a permanent discharge,” Am. Compl. ¶ 12;
see also id. ¶ 14, which can fairly be read to mean that Defendants agreed to the discharge, and the Form 1099-C
merely evidences that agreement. In other words, Plaintiff does not allege that the Form 1099-C itself is a discharge

5

III.

Plaintiff Has Failed to State a Claim for Violation of TILA
Plaintiff alleges that Defendants violated TILA by failing to disclose the assignment of

the Note in 2007, and the assignment was purportedly concealed by Defendants and thus not
reasonably discovered by Plaintiff until the 2016 loan audit. Am. Compl. ¶¶ 47-51.3 Defendants
argue that Plaintiff’s TILA claim is barred by the statute of limitations and that equitable tolling
does not apply. Def. Mem. 8-9. “Pursuant to 15 U.S.C. § 1640(e), a borrower seeking damages
under TILA must file an action ‘within one year from the date of the occurrence of the
violation.’” Midouin v. Downey Sav. & Loan Ass’n, F.A., 834 F. Supp. 2d 95, 108 (E.D.N.Y.
2011) (quoting 15 U.S.C. § 1640(e)). In addition, “[t]here is a three year limitations period on
the rescission remedy that begins to run upon the consummation of the transaction or sale of the
property, whichever occurs first.” Ledgerwood v. Ocwen Loan Servicing LLC, No. 15 CIV. 1944
(BMC), 2015 WL 7455505, at *4 (E.D.N.Y. Nov. 21, 2015). According to the March 7, 2012
record of assignment, the Note and Deed of Trust were assigned on February 1, 2007. Am.
Compl. ¶ 10. Plaintiff filed this lawsuit on March 24, 2016, more than nine years after the
assignment and four years after the assignment was recorded. Plaintiff appears to concede that
the statute of limitations has run; he argues only that the statute of limitations should be tolled for
fraudulent concealment. Pl. Opp. ¶¶ 33-38. Plaintiff, however, has not adequately alleged
fraudulent concealment.

but alleges instead that it is evidence that there was a discharge. Given that the Court must construe all factual
allegations in favor of the nonmoving party, Shalam v. KPMG, LLP, No. 05CV3602 (HB), 2005 WL 2139928, at *2
(S.D.N.Y. Sept. 6, 2005), Plaintiff’s allegation that Defendants discharged portions of the debt suffices, albeit
barely, at the motion to dismiss stage.
3

Count II of Plaintiff’s Amended Complaint alleges that Defendants failed to disclose the assignment of the
Note “in July 2005,” Am. Compl. ¶ 49, but elsewhere Plaintiff alleges that he received the loan in January 2007 and
that the document recording the assignment states that the assignment occurred in February 2007, id. ¶¶ 9-10.
Accordingly, the Court believes the 2005 date is a typographical error.

6

“A claim of fraudulent concealment must be pled with particularity, in accordance with
the heightened pleading standards of Fed. R. Civ. P. 9(b).” Hinds Cty., Miss. v. Wachovia Bank
N.A., 620 F. Supp. 2d 499, 520 (S.D.N.Y. 2009). “‘Under federal common law, a statute of
limitations may be tolled due to the defendant’s fraudulent concealment if the plaintiff
establishes that: (1) the defendant wrongfully concealed material facts relating to defendant’s
wrongdoing; (2) the concealment prevented plaintiff’s discovery of the nature of the claim within
the limitations period; and (3) plaintiff exercised due diligence in pursuing the discovery of the
claim during the period plaintiff seeks to have tolled.’” Koch v. Christie’s Int’l PLC, 699 F.3d
141, 157 (2d Cir. 2012) (quoting Corcoran v. N.Y. Power Auth., 202 F.3d 530, 543 (2d Cir.
1999)). “Equitable tolling is available in rare and exceptional circumstances, where the court
finds that extraordinary circumstances prevented the party from timely performing a required act,
and that the party acted with reasonable diligence throughout the period he sought to toll.”
Grimes v. Fremont Gen. Corp., 785 F. Supp. 2d 269, 286 (S.D.N.Y. 2011) (citations and
quotations marks omitted).
Plaintiff has not satisfied the heightened pleading standard to allege fraudulent
concealment. Plaintiff has alleged in general terms that Defendants were required to disclose the
assignment, that they failed to do so, that they concealed the assignment, and that the assignment
was not reasonably ascertainable by Plaintiff until the 2016 loan audit. Am. Compl. ¶¶ 48-50.
“[I]n cases involving TILA, the courts have held uniformly that fraudulent conduct beyond the
nondisclosure itself is necessary to equitably toll the running of the statute of limitations . . . .”
Grimes, 785 F. Supp. 2d at 286 (quotation marks and citation omitted). Because Plaintiff has
alleged only that Defendants failed to disclose the assignment, Plaintiff has failed to allege
fraudulent concealment. Nor has Plaintiff alleged—let alone with particularity—that
Defendants’ acts of concealment prevented discovery of the claim or that Plaintiff exercised due
7

diligence to discover the claim during the period Plaintiff seeks to toll. Koch, 699 F.3d at 157.
That Plaintiff may have had no reason to audit the Loan until Defendants sought to foreclose on
the Property does not mean that Defendants took any action to conceal the alleged TILA
violation. See McAnaney v. Astoria Fin. Corp., No. 04-CV-1101 (JFB) (WDW), 2007 WL
2702348, at *9 (E.D.N.Y. Sept. 12, 2007) (“[A]bsent some affirmative concealing conduct by the
defendant beyond the nondisclosure of information required by TILA, a plaintiff’s inability to
discover a nondisclosure is not enough to toll the statute.” (quotation marks and citation
omitted)), on reconsideration in part, No. 04-CV-1101 (JFB) (WDW), 2008 WL 222524
(E.D.N.Y. Jan. 25, 2008).
Accordingly, Plaintiff’s TILA claim is dismissed with prejudice.
IV.

Plaintiff Has Failed to State a Constructive Fraud Claim4
Plaintiff alleges that Defendants have committed constructive fraud because they have

materially misrepresented the Trust’s status as the holder and owner of the Note and Deed of
Trust. Am. Compl. ¶¶ 52-59. “Constructive fraud is a unique species of fraud applicable only to
a fiduciary or confidential relationship.” Salahutdin v. Valley of California, Inc., 29 Cal. Rptr.

4

This Court has diversity jurisdiction over Plaintiff’s state law claims pursuant to 28 U.S.C. § 1332: the
parties are citizens of different states and the amount in controversy exceeds $75,000. Am. Compl. ¶¶ 4-6, 9. A
federal court sitting in diversity must apply the choice-of-law rules of the forum State, which in this case is New
York. Fireman’s Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 822 F.3d 620, 641 (2d Cir. 2016). The parties appear
to dispute whether New York or California law applies to Plaintiff’s tort claims; Defendants apply New York law in
their opening brief, while Plaintiff argues California law in his opposition brief. “When confronted with a choice of
law question, New York courts generally look to the law of the jurisdiction that has ‘the greatest interest in the
litigation,’ as determined by the ‘facts or contacts which . . . relate to the particular law in conflict.’” Watts v.
Jackson Hewitt Tax Serv. Inc., 579 F. Supp. 2d 334, 345 (E.D.N.Y. 2008) (quoting Intercontinental Planning, Ltd. v.
Daystrom, Inc., 24 N.Y.2d 372, 382 (1969)). “When the law is one which regulates conduct, such as fraudulent
conveyance statutes, . . . the law of the jurisdiction where the tort occurred will generally apply because that
jurisdiction has the greatest interest in regulating behavior within its borders.” Lyman Commerce Sols., Inc. v. Lung,
No. 12-CV-4398, 2013 WL 4734898, at *4 (S.D.N.Y. Aug. 30, 2013) (quotation marks and citations omitted). “A
tort occurs in the place where the injury was inflicted, which is generally where the plaintiffs are located.” Id.
(citation omitted). Here, the underlying mortgage transaction, the Property, the foreclosure, the failure to disclose
the assignment, and the recording in bad faith of the foreclosure notices—the grounds for Plaintiff’s tort claims—all
occurred in California. Accordingly, California has the greatest interest in regulating the conduct at issue, and this
Court applies California law to Plaintiff’s constructive fraud and slander of title claims.

8

2d 463, 466 (1994) (quotation marks and citation omitted). “Section 1573 of the California Civil
Code creates a statutory cause of action for constructive fraud.” Gen. Am. Life Ins. Co. v. Rana,
769 F. Supp. 1121, 1126 (N.D. Cal. 1991). “The elements of a cause of action for constructive
fraud are (1) a fiduciary relationship; (2) nondisclosure; (3) intent to deceive; and (4) reliance
and resulting injury (causation).” Id. (citing Younan v. Equifax Inc., 169 Cal. Rptr. 478, 489 n.
14 (1980)). “‘Unlike actual fraud, constructive fraud depends on the existence of a fiduciary
relationship of some kind, and this must be alleged.’” Lopez v. GMAC Mortg., No. CV F 111795 (LJO) (JLT), 2011 WL 6029875, at *11 (E.D. Cal. Dec. 5, 2011) (quoting Younan, 169
Cal. Rptr. at 478).
Plaintiff argues that he has alleged a fiduciary relationship because, pursuant to
California Civil Code Section 1710(2), a lender owes a duty to a borrower not to misrepresent
facts negligently. Pl. Opp. ¶¶ 40-41. While that may be true, “‘[t]he relationship between a
lending institution and its borrower-client is not fiduciary in nature.’” Lopez, 2011 WL 6029875,
at *12 (quoting Nymark v. Heart Fed. Sav. & Loan Ass’n., 231 Cal. App. 3d 1089, 1093 n.1
(1991)). “[A]s a general rule, a financial institution owes no duty of care to a borrower when the
institution’s involvement in the loan transaction does not exceed the scope of its conventional
role as a mere lender of money.” Nymark, 231 Cal. App. at 1096. Plaintiff has alleged no facts
suggesting that Defendants’ relationship to Plaintiff is anything other than a traditional
relationship between borrower and lender and loan servicer.
Accordingly, Plaintiff’s constructive fraud claim is dismissed with prejudice. See
Apostol v. CitiMortgage, Inc., No. 13-CV-01983 (WHO), 2013 WL 6328256, at *9 (N.D. Cal.
Nov. 21, 2013) (“As agents of the mortgage lending and servicing defendants, no such fiduciary
relationship can be established between Apostol and Moore/Bly to support a claim [sic]
constructive fraud.”); James v. Litton Loan Servicing, LP, No. C 10-05407 (CRB), 2011 WL
9

724969, at *3 (N.D. Cal. Feb. 22, 2011) (dismissing borrower’s constructive fraud claim against
lender and loan servicer on the basis that no fiduciary relationship exists).
V.

Plaintiff Has Failed to State a Claim for Slander of Title
Plaintiff alleges that Defendants are liable for slander of title because they recorded in

bad faith a Notice of Default and Notice of Intent to Foreclose (collectively, “Notices”), knowing
that those Notices were based on an invalid security interest. Am. Compl. ¶¶ 61-63, 67. “To
state a claim for slander of title, Defendants must allege ‘(1) a publication, (2) which is without
privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary
loss.’” Watson v. Bank of Am., N.A., No. 16CV513 (GPC) (MDD), 2016 WL 6581846, at *21
(S.D. Cal. Nov. 7, 2016) (quoting Manhattan Loft, LLC v. Mercury Liquors, Inc., 173 Cal. App.
4th 1040, 1051 (2009)).
The Notices on which Plaintiff bases his slander of title claim are subject to a qualified
privileged under California law and cannot support a slander of title claim if the privilege
applies. Watson, 2016 WL 6581846, at *21 (“California Civil Code section 2924 also provides
that the publication of notices, such as the Notice of Default and Notice of Trustee’s sale,
constitute privileged communications pursuant to California Civil Code section 47.” (citing Cal.
Civil Code §§ 2924(a)(1), (a)(3), (d)). “An exemption to the privilege is predicated on an
allegation of malice.” Id. (citing Kachlon v. Markowitz, 168 Cal. App. 4th 316, 333 (2008)).
“Malice requires ‘that the publication was motivated by hatred or ill will towards the plaintiff or
by a showing that the defendant lacked reasonable ground for belief in the truth of the
publication and therefore acted in reckless disregard of the plaintiff's rights.’” Id. (quoting
Kachlon, 168 Cal. App. 4th at 336).
Plaintiff fails to allege any facts giving rise to an inference of malice. Plaintiff makes the
following boilerplate allegations: (1) “Defendants recorded the [Notices] against the property,
10

knowing that the foregoing were based upon an invalid security interest;” (2) “Defendants
recorded the [Notices] with the intent to wrongfully foreclose against Plaintiff’s property;” and
(3) “Defendants recording of the void Assignment was done in bad faith, with malice, or done in
reckless disregard of the rights of Plaintiff.” Am Compl. ¶¶ 61-63. Because Plaintiff does no
more than make conclusory allegations of malice, the Notices are privileged. See Pratap v.
Wells Fargo Bank, N.A., No. C 12-06378 (MEJ), 2013 WL 5487474, at *8 (N.D. Cal. Oct. 1,
2013) (dismissing slander of title claim in part because allegations of malice were conclusory);
Ogilvie v. Select Portfolio Servicing, No. 12-CV-001654 (DMR), 2012 WL 3010986, at *4 (N.D.
Cal. July 23, 2012) (“Plaintiff alleges that Defendants acted in malice and reckless disregard for
the truth when they formulated false documents. . . . However, this allegation is conclusory; the
mere ‘formulation of false documents’ is inadequate to plead malice.”); Carrasco v. HSBC Bank
USA Nat’l Ass’n, No. C-11-2711 (EMC), 2011 WL 6012944, at *4 (N.D. Cal. Dec. 1, 2011)
(dismissing slander of title claim in part because plaintiff’s allegation that “Defendant[s]
committed such acts knowingly and with the intent to cause harm and/or with reckless disregard
for the Truth” was too conclusory to allege malice).5
Accordingly, Plaintiff’s slander of title claim is dismissed without prejudice.

5

Plaintiff mistakenly relies on Lundy v. Selene Fin., LP, No. 15-CV-05676 (JST), 2016 WL 1059423 (N.D.
Cal. Mar. 17, 2016) to argue that the privilege does not apply here. Pl. Opp. ¶ 55. In Lundy, the district court held
that the privilege did not apply pursuant to California Civil Code Section 2924 to the plaintiff’s wrongful foreclosure
claim against the mortgage servicer and trustee because the plaintiff’s claims were based on the defendants’
substantive decision to foreclose on the property and not based on the foreclosure notice or the procedures
surrounding the notice. 2016 WL 1059423, at *4. Here, in contrast, Plaintiff’s slander of title claim is based on the
Notices. Am. Compl. ¶¶ 60-68. Moreover, in Lundy, the district court also held that the privilege applied to the
foreclosure trustee because it was only responsible for executing the foreclosure sale at the direction of the
beneficiary, which included issuing the notices, and it was not responsible for the decision to initiate the foreclosure.
Id. at *5. Similarly, here the slander of title claim is based on the publication of the Notices and not on the
foreclosure itself.

11

VI.

Plaintiff Has Failed to State Any Claim under HBOR
In general terms and without identifying the specific HBOR provisions on which he is

relying, Plaintiff alleges that Defendants committed a variety of HBOR violations. The alleged
HBOR violations include: (1) failure to contact Plaintiff prior to recording the Notice of Default,
which appears to implicate California Civil Code Section 2923.5; (2) failure to alert Plaintiff that
he could request documentation demonstrating Ocwen’s authority to foreclose, which may
implicate California Civil Code Section 2923.55; (3) failure to provide post-Notice of Default
outreach with regard to the loan modification process, which appears to implicate California
Civil Code Section 2923.6; (4) failure to provide a single point of contact when requested by
Plaintiff, which implicates California Civil Code Section 2923.7; and (5) negligent or intentional
mishandling of the mortgage modification process, which prevented Plaintiff from completing
the modification process before foreclosure, which may implicate California Civil Code
Section 2923.6. See Am. Compl. ¶ 72(a)-(e).
Because these allegations are “merely a formulaic recitation of the elements of a cause of
action,” Twombly, 550 U.S. at 555, “devoid of further factual enhancement,” Iqbal, 556 U.S. at
664, they do not plausibly allege a cause of action. For example, to state a claim pursuant to
California Civil Code Section 2923.5, Plaintiff would need to allege whether he was
purposefully avoiding corresponding with Defendants, whether Defendants exercised due
diligence in trying to reach Plaintiff, and whether Plaintiff received any telephone calls or
personal messages from Defendants. Major v. Wells Fargo Bank, N.A., No. 14-CV-998 (LAB)
(RBB), 2014 WL 4103936, at *3 (S.D. Cal. Aug. 18, 2014); see also Newman v. Bank of N.Y.
Mellon, No. 1:12-CV-1629 (AWI) (GSA), 2013 WL 1499490, at *10-11 (E.D. Cal. Apr. 11,
2013) (“In order to plead a violation of § 2923.5, a plaintiff should include allegations that: (1)
he did not receive mail or telephone calls from the mortgage servicer/lender regarding assessing
12

his financial situation and exploring alternatives to foreclosure; (2) he was not purposefully
avoiding corresponding with the mortgage servicer/lender, and; (3) he could have been contacted
if due diligence had been exercised.”). As another example, to state a claim under California
Civil Code Section 2923.55, Plaintiff must allege when he requested the documents to which he
is entitled under this Section and in what manner he made the request. Major, 2014 WL
4103936 at *5. Plaintiff’s HBOR claims are therefore dismissed without prejudice. See Garcia
v. PNC Mortg., No. C 14-3543 (PJH), 2015 WL 534395, at *4-7 (N.D. Cal. Feb. 9, 2015)
(dismissing conclusory HBOR claims; Major, 2014 WL 4103936, at *2-6 (same); Newman,
2013 WL 1499490, at *10-11 (same).
VII.

Plaintiff Has Failed to State a Claim for Declaratory Judgment

Pursuant to the Declaratory Judgment Act (“DJA”), “[i]n a case of actual controversy
within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further relief is or could
be sought.” 28 U.S.C. § 2201(a) (emphasis added). A district court has discretion whether to
exercise jurisdiction under the DJA. See Dow Jones & Co. v. Harrods, Ltd., 346 F.3d 357, 359
(2d Cir. 2003) (per curiam); Bruce Winston Gem Corp. v. Harry Winston, Inc., No. 09-cv-7352
(JGK), 2010 WL 3629592, at *6 (S.D.N.Y. Sept. 16, 2010). Nevertheless, courts must entertain
declaratory judgment actions when the judgment “will serve a useful purpose in clarifying and
settling the legal relations in issue” or “when it will terminate and afford relief from the
uncertainty, insecurity, and controversy giving rise to the proceeding.” Cont’l Cas. Co. v.
Coastal Sav. Bank, 977 F.2d 734, 737 (2d Cir. 1992) (citation omitted); see also Duane Reade,
Inc. v. St. Paul Fire and Marine Ins. Co., 411 F.3d 384, 389 (2d Cir. 2005).
“[T]he ‘jurisdictional’ analysis in a declaratory judgment action comprises a two part
inquiry: (1) whether subject matter exists because the declaratory judgment action meets the
13

constitutional case or controversy requirement; and, if so (2) whether the Court should exercise
that jurisdiction.” U.S. Dep’t of Treasury v. Official Comm. of Unsecured Creditors of Motors
Liquidation Co., 475 B.R. 347, 358 (S.D.N.Y. 2012). At the first stage of the inquiry, to
determine whether the plaintiff satisfies Article III standing, the court must consider whether the
plaintiff has shown that: “(1) he has suffered an actual or imminent injury in fact, which is
concrete and particularized; (2) there is a causal connection between the injury and defendant’s
actions; and (3) it is likely that a favorable decision in the case will redress the injury.” Gonzalez
v. J.P. Morgan Chase Bank, N.A., No. 16-CV-02611 (JGK), 2017 WL 122993, at *5 (S.D.N.Y.
Jan. 12, 2017) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). In addition,
the plaintiff must satisfy the prudential standing rule, which “‘normally bars litigants from
asserting the rights or legal interests of others in order to obtain relief from injury to
themselves.’” Id. at *6 (quoting Warth v. Seldin, 422 U.S. 490, 509 (1975)). At the second stage
of the inquiry, the Second Circuit requires district courts to consider: “(1) whether the judgment
will serve a useful purpose in clarifying or settling the legal issues involved; and (2) whether a
judgment would finalize the controversy and offer relief from uncertainty.” Duane Reade, 411
F.3d at 389. Additional factors include “‘(1) whether the proposed remedy is being used merely
for ‘procedural fencing’ or a ‘race to res judicata’; (2) whether the use of a declaratory judgment
would increase friction between sovereign legal systems or improperly encroach on the domain
of a state or foreign court; and (3) whether there is a better or more effective remedy.’” Chevron
Corp. v. Naranjo, 667 F.3d 232, 245 (2d Cir. 2012) (quoting Dow Jones Co., 346 F.3d at 35960).
Arguing that Defendants do not have a valid security interest in the Property because the
Note and Deed of Trust were allegedly improperly assigned, Plaintiff seeks a declaratory
judgment stating that “all attempts to foreclose by Defendants against the subject property are
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void.” Am. Compl. ¶¶ 75-78. To the extent that Plaintiff’s declaratory judgment claim is based
on a violation of the PSA, his claim is dismissed with prejudice for lack of prudential standing
because Plaintiff cannot establish that he was an intended beneficiary of the PSA. See Gonzalez,
2017 WL 122993, at *6 (holding plaintiff lacked prudential standing to pursue declaratory
judgment claim based on violations of the PSA); see also Rajamin v. Deutsche Bank Nat’l Trust
Co., 757 F.3d 79, 86-87 (2d Cir. 2014). To the extent Plaintiff requests a declaratory judgment
to determine whether the ongoing foreclosure proceeding6 is void because the Note and Deed of
Trust were allegedly held by separate entities in violation of their terms and of California law,
Plaintiff also lacks standing. Plaintiff does not dispute that he is in default of his mortgage;
Plaintiff alleges that the Trust, claiming to own the mortgage, has initiated the foreclosure.
Plaintiff does not allege that any entity other than Defendants has demanded payments or
attempted to commence foreclosure. For this reason, Plaintiff’s purported injury arising from the
alleged improper assignments is too speculative and hypothetical to support standing. Rajamin,
757 F.3d at 85 (holding plaintiffs failed to allege injuries sufficient to show constitutional
standing to support a declaratory judgment claim that assignees did not own the mortgages when,
inter alia, the assignees claiming to own the mortgages initiated foreclosure, and there were no
allegations that another entity demanded loan payments or threatened foreclosure); see also
Houck v. US Bank NA, No. 15-CV-10042 (AJN), 2016 WL 5720783, at *8 (S.D.N.Y. Sept. 30,
2016); Ocampo v. JP Morgan Chase Bank, N.A., 93 F. Supp. 3d 109, 117 (E.D.N.Y. 2015),
appeal dismissed (May 19, 2015).

6

The status of the non-judicial foreclosure proceeding is unclear. Plaintiff alleges that the foreclosure sale
was rescheduled for March 14, 2016, Am. Compl. ¶ 22, which date has passed, and neither party addressed in their
briefs the current status of the foreclosure proceeding.

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Plaintiff cites Springer v. U.S. Bank Nat’l Ass’n, No. 15-CV-1107(JGK), 2015 WL
9462083, at *7 (S.D.N.Y. Dec. 23, 2015), appeal dismissed (Apr. 6, 2016), to argue that he has
standing. Pl. Opp. ¶¶ 61-63, 70-72. In Springer, the district court held that the plaintiff had
standing to seek a declaratory judgment adjudicating whether defendants had a property interest
in the note and deed of trust and whether the foreclosure was defective under Nevada law. 2015
WL 9462083, at *6-8. The court reached that conclusion based on the plaintiff’s allegations that
the separation of the note and deed of trust violated their terms and Nevada law and that the
defendants, relying on invalid assignments, had initiated non-judicial foreclosure. Id. The court
in Springer attempted to distinguish Rajamin on the ground that in Rajamin the assignments
were allegedly invalid only because they violated the PSA and were recorded after the closing
date of the trusts, while in Springer the assignments were allegedly invalid because they violated
the terms of the note and deed of trust and Nevada law. Springer, 2015 WL 9462083, at *8.
This Court is not persuaded that the distinction drawn in Springer matters inasmuch as those
nuances did not appear to play any part in the Second Circuit’s holding that the plaintiffs lacked
standing because they did not allege that any other entity was also demanding payment or
threatening foreclosure.
But even if Springer did provide an exception to Rajamin’s holding relative to standing,
and the exception applied in this case, this Court would employ its discretion to decline to
exercise jurisdiction. Unlike in Springer, where the court exercised jurisdiction because the
parties had agreed to transfer the case to the District of Nevada where the property was located
and foreclosure was ongoing, 2015 WL 9462083, at *8, here, the parties have not indicated that
they intend to transfer the case to a district court in California, where the property is located and
foreclosure proceedings appear to be ongoing. Declaratory relief at this juncture would not serve
a useful purpose and may result in conflict if the foreclosure proceedings continue to proceed
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through the California state courts. It is also not unreasonable to suspect that Plaintiff brought
this claim in a “race for res judicata.” Plaintiff’s declaratory judgment claim is, therefore,
dismissed with prejudice.
CONCLUSION
For the foregoing reasons, Defendants’ motion to dismiss Plaintiff’s Amended Complaint
is GRANTED. The Clerk of Court is respectfully directed to terminate the open motion at
docket entry 26 and to close the case.
SO ORDERED.
_________________________________
____________________________
__
_________ __
__
__
VALERIE CAPRONI
CAPRONI
ON
United S
U i d States District J d
Di i Judge

Date: March 2, 2017
New York, New York

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