Zambrano v. Ocwen Loan Servicing CA2/1 ( 2021 )

Filed 9/28/21 Zambrano v. Ocwen Loan Servicing CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
ADRIAN ZAMBRANO, B303814
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 19PSCV00259)
v.
OCWEN LOAN SERVICING, LLC,
et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Gloria L. White-Brown, Judge. Affirmed.
The Milner Firm and Timothy V. Milner for Plaintiff and
Appellant.
Locke Lord, Regina J. McClendon and James C. Magid for
Defendants and Respondents.
Plaintiff and Appellant Adrian Zambrano appeals from
a judgment dismissing his claims against defendants and
respondents PHH Mortgage Corporation as successor by merger
to Ocwen Loan Servicing, LLC (Ocwen); Deutsche Bank National
Trust Company, as Indenture Trustee under the Indenture
Relating to IMH Assets Corp., Collateralized Asset-Backed
Bonds, Series 2005-4 (Deutsche Bank); and Western Progressive
Trustee, LLC, d/b/a Western Progressive, LLC (collectively,
respondents) following an order sustaining their demurrer to
Zambrano’s first amended complaint (FAC) without leave to
amend. We affirm.
The FAC alleges causes of action for negligence, negligent
misrepresentation, violation of Business and Professions Code
section 17200 (section 17200), and promissory estoppel. We can
affirm the court’s ruling as to the first three causes of action
without further analysis, because Zambrano does not challenge
the court’s conclusions that the FAC failed to plead actionable
negligent misrepresentation and that Zambrano’s negligence
claim was untimely. Nor does Zambrano challenge the court’s
ruling regarding the section 17200 claim. As to his promissory
estoppel claim, the court correctly concluded that Zambrano
had failed to plead facts sufficient to support reasonable reliance,
a necessary element of that claim. We further hold that the
trial court acted within its discretion in denying Zambrano leave
to amend, given that Zambrano failed to address these same
deficiencies in the FAC after they were raised in an earlier
sustained demurrer, and that Zambrano has failed to identify
any new allegations he might add to the FAC to cure them.
2
FACTS AND PROCEEDINGS BELOW
Because “[a] demurrer tests the legal sufficiency of the
challenged pleading,” “[w]e accept as true all material facts
properly pleaded in the complaint.” (Brown v. Los Angeles
Unified School Dist. (2021) 60 Cal.App.5th 1092, 1103.)
Accordingly, the following factual background summary is based
solely on the properly pleaded allegations in the FAC, which we
accept as true for the purposes of our demurrer analysis.
A. Alleged Factual Basis for Claims
In 2005, Zambrano obtained a $325,600 loan payable over
30 years, secured by a deed of trust against his home. That
loan contained an “adjustable rate rider,” which, after one year,
allowed the interest rate on the loan to fluctuate within a certain
range every six months.1
The loan also contained an “interest-only addendum” that
permitted Zambrano to make no payments on the principal of
the loan for the first five years. Thus, during this initial five-year
period, Zambrano’s minimum monthly payment on the loan
would be the monthly interest due at the applicable (potentially
fluctuating) interest rate. The addendum also permitted
voluntary payments of principal. After the five-year interest-only
1 Specifically, the adjustable rate rider set the interest
rate at 5.875 percent for the first year of the loan. After that first
year, the interest rate would be re-set every six months to a rate
calculated by adding 3.625 percent to the most recent rate in the
LIBOR index. The rider permitted a deviation from this formula
as necessary to assure that (1) the interest rate would never
increase more than one percent during any six-month period, and
(2) that the interest rate would neither drop below 3.625 percent
nor exceed 11.875 percent.
3
period expired, the minimum monthly payment would include
both principal and interest. Because the minimum payment
amount after the interest-only period included both principal
and interest, it would necessarily be greater than the minimum
payments required during the interest-only period. The specific
amount of the minimum principal-and-interest payment required
in any given month would depend on the applicable interest rate
under the adjustable rate rider and the remaining principal on
the loan.
“In or around March 2010 when [Zambrano’s] interest[-]
only period on his loan was set to expire, [Zambrano] received
a modification . . . to extend the interest[-]only period of the
loan for approximately another five years.” The record does not
contain any further details about this 2010 modification and
whether it modified any other terms of the loan, the interest-only
addendum, or the adjustable rate rider.
Then, “[i]n or around March 2015” when the extended
interest-only period expired, Ocwen, the loan’s servicer at the
time, “told [Zambrano] that he was approved for a[nother]
loan modification and that the modification would no longer
include an interest[-]only payment and [that] it would correct
the interest[-]only issues with the loan that kept causing the
payment to increase when the interest[-]only period expired.”
The FAC does not more specifically allege what these
“interest-only issues” were and/or how the modification Ocwen
allegedly indicated Zambrano had been approved for would
“correct” those issues. The FAC alleges that Zambrano executed
a loan modification in 2015, but does not identify the terms of the
2015 loan modification, nor does the FAC attach the 2015 loan
modification.
4
“On or around May 2018, the interest[-]only period [under
the 2015 modification] ended, and [Zambrano’s] mortgage loan
payment increased over 100 [percent]. This is when [Zambrano]
learned that the loan modification failed to correct the
interest[-]only issues with the loan and that his payment would
be higher than the substantial increase in the monthly mortgage
payments that occurred in March 2015 and was the reason for
the modification of the loan. [Zambrano] was not able to afford
the substantial monthly payment increase so he reached out to
Ocwen for assistance.” (Capitalization omitted.)
“In or around May 2018, [Zambrano] submitted a complete
loan modification [application] to Ocwen” and six months later,
“Deutsche Bank and Ocwen offered [Zambrano] a [third] loan
modification” which “resulted in a payment that was just as high
if not higher than the . . . mortgage payment” under the 2015
modification because “it did not change the maturity date of the
loan” (capitalization omitted), and “allowed an interest[-]only
payment to be made for over ten years,” which “resulted in the
principal balance now having to be paid off over a period of
17 years as opposed to 30 years. Both these things made the
payment increase substantially.” “The [2018] loan modification
offer also claimed that the principal balance on the loan was
$373,837.58,” which the FAC alleges is incorrect. The FAC
does not allege whether Zambrano accepted this 2018 loan
modification offer.
Zambrano went into default on his loan and incurred late
fees and foreclosure fees.
5
B. Zambrano’s Initial Complaint and Respondents’
First Demurrer
In March 2019, Zambrano filed an initial complaint
against respondents alleging causes of action for negligence,
negligent misrepresentation, promissory estoppel, and violation
of section 17200. Respondents filed a joint demurrer, and
Zambrano did not oppose the demurrer. The trial court sustained
the demurrer with leave to amend. In so doing, the court
concluded that respondents did not owe Zambrano a duty of care,
and that Zambrano had alleged neither an actionable negligent
misrepresentation nor an actionable false promise. Specifically,
the court concluded that the alleged 2015 statement underlying
Zambrano’s misrepresentation and promissory estoppel claims
in the initial complaint—namely, Ocwen’s alleged statement
that Zambrano “qualified for a loan modification that would
make his monthly payment affordable and consistent”—was
neither a representation of a past or existing fact nor a “clear
and unambiguous promise.” The court further concluded that
Zambrano had failed to sufficiently allege any causal relationship
between the alleged misconduct and the loss of any money or
property. Respondents’ demurrer also argued that Zambrano’s
claims were barred by the statute of limitations, but the court
declined to sustain on this ground.
C. The FAC
Zambrano filed the FAC, which contains a revised
description of Ocwen’s March 2015 statement. Namely,
the FAC alleges Ocwen told Zambrano he “was approved for
a loan modification and . . . that the modification would no
longer include an interest[-]only payment and it would correct
the interest[-]only issues with the loan that kept causing the
6
payment to increase when the interest[-]only period expired.”
The FAC further alleged that “[Zambrano] relied on [Ocwen’s]
promise and did not seek out other options such as refinancing
the loan through another lender that could have made his
monthly mortgage payments affordable for the life of the loan,”
and that Zambrano “was unaware that th[e] type of modification
[offered in March 2015] only placed a band[-]aid on the issue
and did not address the affordable monthly mortgage payment
over the course of the loan.” The FAC alleges that as a result of
Ocwen’s alleged negligent misrepresentation and false promise,
as well as the negligence of both Ocwen and Deutsche Bank,
he was unable to afford his mortgage payments and the loan
went into default. Like the initial complaint, the FAC includes
a general allegation that respondents concealed their misconduct,
and that Zambrano could not have discovered it before 2018
(when the interest-only period under the 2015 modification
expired), but the FAC does not allege any facts supporting why
or how this was so.
D. Demurrer to the FAC and Resulting Judgment
Against Zambrano
Respondents demurred to the FAC. On the morning of the
hearing on the demurrer, the court provided a written tentative
ruling, which counsel acknowledged he had reviewed prior to
the hearing. The tentative ruling sustained respondents’ joint
demurrer without leave to amend, but indicated that the court
would consider a request for leave to amend, if supported by
“an offer of proof.” (Boldface omitted.) At the hearing, the
court again indicated it would consider an offer of proof to cure
the deficiencies in the FAC. Counsel specially appearing for
Zambrano declined to make such an offer and also declined the
7
court’s suggestion that he call Zambrano’s attorney of record,
even during the hearing, to provide the necessary information.
Nor did counsel specially appearing for Zambrano request a
continuance to obtain the necessary information.
The court ultimately adopted its tentative ruling, which
noted, among other deficiencies, that the FAC failed to state facts
to establish reasonable reliance on Ocwen’s alleged March 2015
promise.2
The court concluded that the FAC did not cure many of
the defects in the prior complaint. On this basis, as well as the
failure to act on the court’s invitation to offer facts that would
cure the defects, the court denied leave to amend.
The court entered judgment dismissing Zambrano’s claims,
and Zambrano timely appealed.
DISCUSSION
A. The Trial Court Properly Sustained the
Demurrer
Zambrano contends that the trial court erred in sustaining
the demurrer to the negligence, negligent misrepresentation,
and promissory estoppel causes of action. Our review is de novo.
(Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256,
264, disapproved of on other grounds by Yvanova v. New Century
Mortgage Corp. (2016) 62 Cal.4th 919, 937.)
2 The court made this ruling in analyzing the negligent
misrepresentation claim, but it applies equally to Zambrano’s
promissory estoppel claim, which is based on the same factual
allegations regarding Ocwen’s March 2015 statements as the
promissory estoppel claim and requires a showing of reasonable
reliance on the alleged false promise.
8
1. The negligence and negligent
misrepresentation claims
Zambrano argues the trial court erred in its analysis
of his negligence and negligent misrepresentation claims,
but does not challenge the court’s conclusions (1) that the
FAC failed to allege respondents made a misrepresentation of
“ ‘ “past or existing facts,” ’ ” a required element of a negligent
misrepresentation claim (Tarmann v. State Farm Mut. Auto.
Ins. Co. (1991) 2 Cal.App.4th 153, 158), or (2) that Zambrano’s
negligence claim is untimely. He has thus conceded these points.
(See Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6
[“[i]ssues not raised in an appellant’s brief are deemed waived
or abandoned”]; Cox Cable San Diego, Inc. v. City of San Diego
(1987) 188 Cal.App.3d 952, 968 [on appeal, “[i]f an argument
is not presented, it will not be considered”].) Because these
unchallenged deficiencies identified by the trial court provide
an independently sufficient basis for granting the respondents’
demurrer as to these claims, we need not address Zambrano’s
arguments as to purported errors in the court’s rulings on those
claims. (See Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th
962, 967 (Aubry) [reviewing court must affirm judgment “ ‘if
any one of the several grounds of demurrer is well taken’ ”].)
2. The FAC does not allege facts sufficient to
establish Zambrano reasonably relied on
Ocwen’s alleged false promises.
The required elements for promissory estoppel are “(1) a
promise clear and unambiguous in its terms; (2) reliance by the
party to whom the promise is made; (3) [the] reliance must be
both reasonable and foreseeable; and (4) the party asserting the
estoppel must be injured by his reliance.” (Laks v. Coast Fed.
9
Sav. & Loan Assn. (1976) 60 Cal.App.3d 885, 890 (Laks).) The
false promise alleged in the FAC is Ocwen’s 2015 statements
that “[Zambrano] was approved for a loan modification and
that the modification would no longer include an interest[-]only
payment and [that] it would correct the interest[-]only issues
with the loan that kept causing the payment to increase when
the interest[-]only period expired.” Among other deficiencies,
the trial court concluded that this allegation did not state facts
sufficient to support reasonable reliance.3 We agree.
“ ‘[W]hether a party’s reliance was justified may be decided
as a matter of law if reasonable minds can come to only one
conclusion based on the facts.’ ” (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1239.) That is the situation
here. It is unreasonable for a borrower to expect a loan
modification that would be to his satisfaction based on a
vague statement about changing one aspect of the loan (the
interest-only payment option). The statement does not identify
any of the key terms of the proposed loan, including, most
notably, the interest rate. Thus, Zambrano “could not have had
legitimate expectations that this was a binding offer; therefore,
[he] could not reasonably have relied on it.” (See Laks, supra,
60 Cal.App.3d at p. 893 [promissory estoppel claim failed for
lack of clear and unambiguous promise and lack of reasonable
reliance where loan offer was conditional and did not include
many key terms of loan].) Indeed, without the offer specifying
the interest rate Zambrano was approved to receive as part
of the loan modification, “[n]o borrower could reasonably rely
3Because we agree with the trial court on this point, we
need not consider whether the FAC sufficiently pleads the other
elements of a promissory estoppel claim.
10
on such a promise [to issue a loan modification] because the
offered modification might not lower their monthly payments
sufficiently to allow them to avoid default.” (Daniels v. Select
Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1179
(Daniels) [plaintiff had not sufficiently alleged promissory
estoppel because allegations of promise to offer a loan
modification did not include any key terms of the loan]; see also
White v. J.P. Morgan Chase, Inc. (E.D.Cal. 2016) 167 F.Supp.3d
1108, 1113 [plaintiff had not alleged reasonable reliance because
promise of a loan relied upon “contained no essential terms”
such as payment schedules, prepayment conditions, and terms
for interest calculations, and was thus “fatally uncertain”], affd.
sub nom. White v. JPMorgan Chase & Co. (9th Cir. 2017) 702
Fed.Appx. 642.)
Finally, we also note that a “plaintiff ’s reliance is not
reasonable when he ‘ “ ‘put[s] faith in representations . . . which
are shown by facts within his observation to be so patently
and obviously false that he must have closed his eyes to avoid
discovery of the truth. . . .’ [Citation.]” [Citation.]’ [Citation].”
(Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1067.) One who
signs a document is presumed to know its contents “and cannot
complain of unfamiliarity with the language of the instrument.”
(Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d
699, 710; accord, Stewart v. Preston Pipeline Inc. (2005) 134
Cal.App.4th 1565, 1588−1589.) The terms of the 2015 loan
modification agreement Zambrano signed were thus within his
observation as a matter of law.
Because we agree with the trial court that Zambrano has
not alleged facts sufficient to support reasonable reliance, we
need not reach Zambrano’s arguments regarding causation or
11
whether the statute of limitations bars his promissory estoppel
claim. (See Aubry, supra, 2 Cal.4th at p. 967.)
B. The Trial Court Did Not Abuse Its Discretion
in Denying Leave to Amend
In the alternative, Zambrano contends that the court
should have granted him leave to amend, an issue we review for
an abuse of discretion. (Vaca v. Wachovia Mortgage Corp. (2011)
198 Cal.App.4th 737, 743.)
“ ‘[O]n appeal the plaintiff . . . bear[s] the burden of proving
there is a reasonable possibility the defect in the pleading can be
cured by amendment. [Citation.]’ ” (Everett v. State Farm
General Ins. Co. (2008) 162 Cal.App.4th 649, 655.) “To show
abuse of discretion, plaintiff must show in what manner the
complaint could be amended and how the amendment would
change the legal effect of the complaint, i.e., state a cause of
action.” (Buller v. Sutter Health (2008) 160 Cal.App.4th 981,
992; accord, Cooper v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636
(Cooper) [to establish an abuse of discretion, plaintiff “must
show in what manner he can amend his complaint and how that
amendment will change the legal effect of his pleading”].) The
trial court gave Zambrano an opportunity to cure the defects in
his initial complaint, but Zambrano was unable to do so in the
FAC. Although the court offered him yet another opportunity
to cure the defects if he could identify how he would amend the
FAC to do so, he declined the opportunity. Although a plaintiff
may propose new facts for the first time on appeal to explain
how a complaint may be amended to state a cause of action (see
Connerly v. State of California (2014) 229 Cal.App.4th 457, 460),
12
Zambrano has not done so.4 Therefore, the court did not abuse
its discretion in denying Zambrano another attempt to cure the
defects in his complaint. (See Cooper, supra, 70 Cal.2d at p. 636.)
4 At the hearing before this court, Zambrano represented
that, if given the chance to amend the FAC, he would add a fraud
cause of action and allege that, in 2015, Ocwen represented to
Zambrano that he could obtain a loan modification that would
have a fixed (rather than adjustable) interest rate, a term of
30 years, and would not increase his principal amount. As
Zambrano failed to identify these proposed allegations in his
appellate briefing, we do not consider them. Even if we were
to consider them, however, Zambrano still would not have met
his burden regarding leave to amend. A version of the FAC that
includes these additional allegations would still be deficient as
a matter of law because, for example, it still would not identify
a crucial element of a loan modification—the interest rate to be
paid. Thus, for the reasons discussed above, Zambrano could not
have reasonably relied on Ocwen’s alleged statements as the
sole basis for understanding the loan modification to which he
ultimately agreed.
13
DISPOSITION
The judgment is affirmed. Respondents are awarded their
costs on appeal.
NOT TO BE PUBLISHED.
ROTHSCHILD, P. J.
We concur:
CHANEY, J.
CRANDALL, J.*
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
14