Opinion
D072893
12-06-2018
CAROLANN MCCAA et al. Plaintiffs and Appellants, v. OCWEN LOAN SERVICING LLC, Defendant and Respondent.
Golden & Cardona and Octavio Cardona-Loya II for Plaintiffs and Appellants. Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2015-00030098-CU-NP-CTL) APPEAL from a judgment of the Superior Court of San Diego County, Joan M. Lewis, Judge. Affirmed. Golden & Cardona and Octavio Cardona-Loya II for Plaintiffs and Appellants. Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendant and Respondent.
Plaintiffs and appellants Carolann McCaa and David McCaa (the McCaas or Plaintiffs) are homeowners who have sued defendant and respondent Ocwen Loan Servicing LLC (Ocwen), their former mortgage loan servicer, on breach of contract and misrepresentation theories. During the period that Ocwen serviced their loan, the McCaas applied for a loan modification that Ocwen never completed, before it was required to transfer the account to a successor loan servicer. The McCaas allege they sustained damages in connection with the Ocwen failed application, although they ultimately obtained a different loan modification from one of the successor loan servicers. (West v. JP Morgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 796-799 (West) [loan modification trial payment plan constitutes an enforceable contract, when HAMP terms apply and are considered]; Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 68-69 (Lueras) [although ordinary negligence cause of action did not lie against lender, a borrower could amend to plead negligent misrepresentation of material information regarding status of loan modification application, based on close connection between misrepresentation and the alleged injury].)
HAMP refers to the federally enacted Home Affordable Modification Program, under which the Treasury Department issued guidelines for loan servicers to process permanent loan modification requests submitted by eligible homeowner borrowers who are at risk of default. (Bushell v. JP Morgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 922-925 (Bushell); Orcilla v. Big Sur, Inc. (2016) 244 Cal.App.4th 982, 992, fn. 3 (Orcilla).)
The trial court granted Ocwen's summary judgment motion, by interpreting the undisputed transactional facts as not showing there was any binding contractual provision that required Ocwen to issue the requested permanent loan modification within a certain time period. (Code Civ. Proc., § 437c; all further statutory references are to this code unless noted.) The court concluded no breach of contract had occurred, and that the causes of action for fraud and negligent misrepresentation had no merit, because the McCaas did not produce any evidence of actionable misrepresentations causing them damage.
On appeal of the summary judgment, the McCaas contend that triable issues of material fact remain for resolution on both breach of contract and misrepresentation theories, because it is undisputed that Ocwen's internal computer coding errors operated to delay the processing of their loan modification application. We disagree and conclude the record supports the trial court's determinations. Ocwen is entitled to judgment as a matter of law, and we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Loan and Requests to Modify; Complaint
In 2009, the McCaas obtained a mortgage loan secured by the residential property they purchased. From 2011 to 2013, they encountered financial difficulties and fell behind in their payments.
In February 2013, Ocwen began work as the McCaas' loan servicer. In October 2013, the McCaas applied to Ocwen for a loan modification in order to lower their monthly mortgage payments and avoid foreclosure proceedings. This application was denied, both as to a traditional loan modification and one under HAMP, due to the purchase of the property in 2009, which was stated to make the McCaas ineligible for HAMP treatment.
In September 2014, the McCaas again applied to Ocwen for a loan modification and it was granted, in a written "Standard Trial Period Plan" (TPP) dated September 24, 2014. The TPP required that for its successful completion, the McCaas must supply Ocwen with three monthly trial payments in the amount of $1,247.40, from November 2014 through January 2015. The TPP states, "If the Trial Period Plan is successfully completed after we receive the required payments on time and the loan meets all additional eligibility requirements, you will receive a permanent modification offer." (Italics added.) Under the TPP, the McCaas agreed that the terms and provisions of their existing note and security instrument would remain effective, except for making the TPP payments in the arranged amounts.
The McCaas made the three required monthly payments, $1,247.40 each, and continued to make five more until June 2015. During that time period, they complied with Ocwen's requirements that they check in every few weeks by telephone and submit to occupancy verification visits, for which Ocwen charged a fee.
However, it turned out that during the October 2014 processing of the modification request, someone at Ocwen had made a computer coding error by first approving an alternate loan modification program (the "Streamline Trial Period Plan") but then canceling it, while leaving the original TPP (the "Standard Trial Period Plan") in place. As of March 12, 2015, an Ocwen representative, Jill Johnson, made a notation in Ocwen's internal account notes stating: "Issue: This account appears to have had the trial closed/denied for no reason. However-the [borrower] has continued to make [payments] in and wants this mod[ified]. Why was this closed down? We need to open this back up since we have been taking payments now-and extended out the trial just within the last few days. This also needs to have the trial [payments] that have posted and are visible in the [payment] history coded as trial [payments], and perm[anent] mod[ification] documents sent on the account." Apart from this computer coding problem, Ocwen did not know of any reason for canceling the account, and it accepted the monthly payments through June 2015.
At the McCaas' request, the record was augmented to include an inadvertently omitted lodged exhibit, which they had submitted in opposition to the summary judgment motion. This exhibit includes deposition excerpts and exhibits from Ocwen's designated person most knowledgeable, loan analyst Katherine Ortwerth.
Johnson and other Ocwen representatives continued to conduct routine phone calls with the McCaas from January through June 2015, telling them that Ocwen was still waiting on permanent loan modification review. Before Johnson left Ocwen's employment in May 2015, she sent an escalation e-mail within the company about the ongoing failure to provide permanent modification documentation. The response shown in Ocwen's records was that the McCaas' payments should be accepted and applied correctly. One of their payments had been rejected.
In July 2015, a new "relations manager," Chetna Kookani, was assigned to the account. Ocwen records showed that the McCaas' application was not then under active review. In July 2015, Ms. McCaa spoke with Ms. Kookani, who informed her that the modification had been cancelled two days after the initial TPP approval and the McCaas would have to re-apply for modification consideration.
In July 2015, the investor on the loan (Freddie Mac) transferred the servicing of the loan from Ocwen to a different firm, Residential Credit Solutions ("RCS"). Ocwen sent paperwork to RCS that included information about the terms it had proposed for a permanent modification. Ocwen notified RCS that the McCaas had accepted their TPP within the required time frame, but a cancellation had erroneously been recorded and the loan modification needed to be finalized. It is not disputed that no foreclosure proceedings were initiated. The McCaas did not make payments after June 2015 to Ocwen or RCS.
The McCaas filed this action on September 4, 2015 against Ocwen and RCS, alleging causes of action for breach of contract and intentional or negligent misrepresentation.
The McCaas' amended complaint was filed in March 2017. Originally, it included not only the breach of contract and misrepresentation claims, but a cause of action for unfair or unlawful business practices. (Bus. & Prof. Code, § 17200 et seq., the UCL.) The summary judgment order ruled that this claim failed, because the relief afforded under the UCL is not available to the McCaas as alleged. On appeal, the McCaas offer no argument in support of their unfair competition claim and it is deemed forfeited. (Cal. Rules of Court, rule 8.204(a)(1)(B).)
RCS attorneys sent the McCaas and their attorney a proposed loan modification document dated October 5, 2015, which showed RCS would be implementing it effective February 1, 2015, as originally anticipated by the Ocwen TPP. The RCS attorney submitted a declaration in support of Ocwen's summary judgment motion, stating that the RCS permanent loan modification offer was based on the Ocwen TPP and acquisition report, showing the same interest rate of 5.5 percent, the same monthly payment amount, and a requirement that the McCaas make the outstanding July, August, and September 2015 payments. This offer showed a "Recast Amount" of $3,628.06 was due, with a proposed new principal balance on the note of $196,003. RCS requested a response by October 27, 2015.
RCS changed its internal records in mid-October 2015 to show that all contact with the McCaas should be through their attorneys. Although the record is not entirely clear, it appears that RCS may have supplied a duplicate copy of the modification offer directly to the McCaas, with its pages marked "VOID," and it is attached to Ms. McCaa's declaration. A copy with the same date, attached to the RCS attorney's declaration as having been sent to the McCaas' attorney, is not marked as void.
By the end of October, the McCaas' attorney rejected the proposed modification, and on November 4, 2015, he sent RCS an e-mail proposing different terms, as a counteroffer. Specifically, he suggested a proposed new "balance of $191,779.99, minus the principal paid in the October 2014 through June 2015" monthly payment period. Also, he required that "any and all late fees or other charges in excess of the monthly payment from October 2014 to the present must be waived. The loan modification effective date is October 1, 2015." The RCS attorney sent a responsive e-mail noting that the McCaas had rejected the proposed modification October 27, 2015, and now RCS was rejecting their counteroffer. No resolution was reached.
Subsequently, RCS transferred the McCaas' account for servicing to Ditech, and Ditech set up a second TPP to begin in May of 2016. The new principal balance was stated as $208,688.24, which was calculated by including past due interest in the amount of $14,825.02, plus servicing expenses ($999.08), taxes, and insurance. The new total modified monthly mortgage payments were proposed to be $1,344.55. Ms. McCaa's deposition testimony stated that the Ditech monthly payments were $1,138. The McCaas complied with the new TPP and made their required payments, and Ditech approved a permanent loan modification in August 2016. In October 2016, RCS was dismissed as a defendant.
B. Summary Judgment Proceedings
Ocwen filed its motion for summary judgment or adjudication, contending it did not contractually obligate itself to provide a permanent loan modification and the McCaas had suffered no damages, because they were offered two other permanent loan modifications by other companies and accepted one. Ocwen contended it had made no false statements and no detrimental reliance could be shown. (See fn. 3, ante [no UCL issues remain].)
In support, Ocwen filed a declaration from its loan analyst Ortwerth, setting forth exhibits and giving an account of the computer coding errors and the transfer of the account to RCS. She formed the opinion that the Ditech permanent loan modification terms were more favorable to the McCaas than the proposed Ocwen one would have been, based on the slightly larger balance due as calculated by Ocwen ($209,758.76, as opposed to the Ditech $208,688.24).
Ocwen submitted an attorney declaration authenticating deposition excerpts from the McCaas, and records of the transfers of servicing from Ocwen to RCS, and then to Ditech. Ocwen relied on Ms. McCaa's deposition testimony excerpts as showing that she rejected RCS's permanent loan modification offer because she discussed it with her counsel at that time and believed that "the numbers were wrong," in that the loan balance, fees and charges were not consistent with statements she had received in the past from Ocwen.
The McCaas' opposition papers to the summary judgment motion took the position that Ocwen's erroneous computer coding resulted in delay that breached the terms of the TPP, causing them damage in the form of being placed in a state of limbo, without any modification being issued. They further contended that material facts were misrepresented to them about whether the modification would be provided, once they successfully completed the trial payment period.
In Ms. McCaa's opposing declaration, she stated that the $14,825.02 assessed past due interest and the servicing expenses "would not have been assessed had Defendant timely modified our loan following completion of their TPP. Defendant further prevented us from paying down on the principal balance with an earlier modification. We were further charged for occupancy checks." She described the stress and marital discord that the delays had caused them, including separation, and their expenditure of time and energy on telephone calls and other communications with Ocwen. They argued they detrimentally relied, by not suing earlier, on Ocwen's representations that the permanent modification would be issued. Using deposition excerpts from Ortwerth, the McCaas contended that Ocwen had admitted computer coding mistakes were made and the permanent loan modification was never issued by it, therefore causing them injury.
In reply, Ocwen submitted an evidentiary objection to the portion of Ms. McCaa's declaration that referenced the damages caused by the $14,825 assessed past due interest, etc., on grounds that it was improper opinion testimony or lacked foundation.
C. Ruling
After hearing argument, the trial court granted the motion for summary judgment. The court ruled that the breach of contract cause of action failed, because "even if the [TPP] was a binding and enforceable contract, there has been no breach," through the failure of Ocwen to offer a permanent loan modification. The court reasoned, "Although - apparently due to a 'coding' error - the permanent loan modification was not offered the Plaintiffs by Ocwen, it is undisputed that Plaintiffs did obtain a permanent loan modification. Because Plaintiffs obtained a permanent loan modification, there has been no breach of the TPP. And, in this regard, the Court notes Plaintiffs' frustrations with the delay in obtaining the permanent loan modification; however, the TPP did not contain any contractual provision requiring the permanent loan modification to be offered within a certain time period."
With regard to the separate causes of action for fraudulent and negligent misrepresentation, the trial court found each lacked merit "because there is no evidence of any actionable misrepresentation by the Defendant." Specifically, "The allegations that Defendant did not intend to provide Plaintiffs with a permanent modification are refuted by the fact that a permanent loan modification was ultimately offered to the Plaintiffs. Moreover, it is undisputed that the first note in the account history for Plaintiffs' loan received by RCS from Ocwen noted that the 'Acquisition reports indicate loan was approved for a standard Mod. . . .' " The court concluded that based on the transfer of servicing of the loan, there was no basis for injunctive or restitutionary relief, without evidence that Ocwen received any monies from the McCaas that it was not owed.
The trial court granted Ocwen's evidentiary objection to the reference in Ms. McCaa's declaration about the effect of the past due interest charged, "because it is improper opinion testimony and lacks foundation." The McCaas appeal.
DISCUSSION
I
STANDARD OF REVIEW
To obtain summary judgment, a moving defendant must show that the plaintiffs' causes of action have no merit, e.g., that the plaintiffs cannot establish one or more elements of their causes of action. (§ 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) Both at the trial and appellate levels, the courts initially identify the issues framed by the pleadings. Next, they determine whether the moving party has established facts which negate the opponents' claim, to justify a judgment in the movant's favor. Upon a sufficient showing in the summary judgment motion, " 'we determine whether the opposition demonstrates the existence of a triable, material factual issue.' " (Aetna Health Plans of Cal., Inc. v. Yucaipa-Calimesa Joint Unified School Dist. (1999) 72 Cal.App.4th 1175, 1186 (Aetna); § 437c, subd. (p)(2).)
"On appeal after a motion for summary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained." (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) The evidence is viewed in the light most favorable to the opposing party, and resolving any evidentiary doubts or ambiguities in its favor. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; see Aguilar, supra, 25 Cal.4th 826, 856 [opposing plaintiff's evidence construed for what it could show or imply to reasonable trier of fact].) An appellant must provide argument on any alleged abuse of discretion in rulings on evidentiary matters, as error will not be presumed. (Cal. Rules of Court, rule 8.204(a)(1)(B).)
Questions of law arising from the pleadings and evidence are reviewed on a de novo basis. (Aetna, supra, 72 Cal.App.4th 1175, 1187.) "The 'fact' that an allegation has been made is perhaps a fact; the legal meaning of the allegation made presents a question of law." (Id. at p. 1188.) An appellant has the burden to provide an adequate record and to show reversible error. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564; Ballard v. Uribe (1986) 41 Cal.3d 564, 574.) All intendments and presumptions are made to support the judgment on matters as to which the record is silent. (Denham, supra, at p. 564.) If the judgment or order is correct on any theory, the appellate court will affirm it regardless of the trial court's reasoning. (Estate of Beard (1999) 71 Cal.App.4th 753, 776; D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 18-19.)
II
BREACH OF CONTRACT
A. Applicable Rules
The McCaas argue that they successfully showed the existence of triable issues of material fact on their breach of contract claim, based on delay in obtaining a permanent modification from a successor loan servicer. (§ 437c, subd. (p)(2).) The elements of causes of action for breach of contract include " '(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.' " (Orcilla, supra, 244 Cal.App.4th 982, 1005.) " 'Implicit in the element of damage is that the defendant's breach caused the plaintiff's damage.' " (Ibid.)
We apply accepted contract interpretation principles to evaluate whether contract terms are reasonably certain, thus giving a basis for determining the existence of a breach and establishing an appropriate remedy. (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1173-1176 (Daniels) [alleged oral agreement by a loan servicer to modify borrower's loan was not sufficiently definite to be enforceable, without amendment].) "Typically, a contract involving a loan must include the identity of the lender and borrower, the amount of the loan, and the terms for repayment in order to be sufficiently definite. [Citation.] Preliminary negotiations or agreements for future negotiations—so-called agreements to agree—are not enforceable contracts." (Id. at p. 1174.)
For purposes of contract analysis in this loan modification context, the courts have turned to the regulations issued by HAMP to evaluate pleading requirements, where the plaintiff-borrower has been identified as being eligible for benefits under HAMP. It is well-established that for pleadings purposes, a qualified borrower who obtained a TPP subject to HAMP and then complied with it can successfully allege a claim for breach of contract, because the HAMP guidelines provide the essential or additional terms for such a requested loan modification. (Bushell, supra, 220 Cal.App.4th 915, 925-926 [TPP offered under HAMP; lender contractually required to offer permanent loan modifications to borrower in compliance with TPP]; Corvello v. Wells Fargo Bank, N.A. (9th Cir. 2013) 728 F.3d 878, 883-884 [where borrowers have fulfilled all obligations under the TPP that is subject to HAMP, but no permanent modification offered by lender, breach of contract claim can be stated]; see West, supra, 214 Cal.App.4th at p. 796 [trial loan modification under HAMP constitutes enforceable contract].)
However, where the borrowers cannot show that HAMP applies to their loan, they cannot fill in any missing contractual terms with those guidelines, "for determining the essential terms of the loan modification they were promised. Without those essential terms or a way to derive them, [borrowers] do not allege the existence of a sufficiently definite, and thus enforceable, contract requiring [a loan servicer] to permanently modify their loan." (Daniels, supra, 246 Cal.App.4th at pp. 1176-1177 [but allowing for amendment due to potentially relevant HAMP references during transaction].)
B. Analysis: Terms of Contract
When the McCaas' original application was denied, they were notified they were ineligible for either a traditional loan modification or one under HAMP. Ocwen granted their next application with a "standard" TPP, which provided that if they successfully completed the TPP by making three payments, their "loan will be eligible for an evaluation for a permanent modification." The TPP next specified that if the "loan meets all additional eligibility requirements, you will receive a permanent modification offer." Their amended complaint alleges that since they did not receive such an offer from Ocwen, they suffered damages in the form of excessive interest accruing while they were negotiating for a lower monthly mortgage payment, and negative credit reporting. They also sought compensation for the time spent in applying for the modification.
To the extent the McCaas sought emotional distress damages in this breach of contract cause of action, they have not shown that the restrictions against an award of such damages in the ordinary commercial context are inapplicable. (Ehrlich v. Menezes (1999) 21 Cal.4th 543, 558-560.) We address their misrepresentation allegations about such damages in part III, post.
In its summary judgment motion, Ocwen initially demonstrated that the TPP terms did not include any particular time provisions for providing the requested permanent loan modification, or the identity of the provider. " ' "Where a contract is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained, the contract is void and unenforceable." ' " (Daniels, supra, 246 Cal.App.4th at p. 1174.) The McCaas point out that Daniels involved an unenforceable oral contract, while their case involved a written TPP. They would have this court imply a reasonable time for performance of that contract, and argue that questions of fact were raised, "depending upon the situation of the parties, the nature of the transaction, and the facts of the particular case." (Sawday v. Vista Irrigation Dist. (1966) 64 Cal.2d 833, 836.)
The terms of the TPP anticipated that compliance would lead to eligibility for evaluation for a permanent modification, leaving open whether the McCaas' loan would meet all additional eligibility requirements. The McCaas were not shown to be eligible for the HAMP program, and we have been given no basis to determine that its regulatory scheme nevertheless supplies additional or equivalent terms, to increase the certainty required to determine the existence of a breach and any appropriate remedy. This written contract language does not support the imposition of specific duties on Ocwen to perform within a specific time frame.
The McCaas also claim that "to the extent the TPP Ocwen provided the McCaas is uncertain or indefinite, the TPP should be construed against Ocwen." (Citing, e.g., Civ. Code, § 1654; Badie v. Bank of America (1998) 67 Cal.App.4th 779, 801, holding "a contract must be interpreted most strongly against the party who prepared it.") Although Ocwen complains that no arguments about ambiguity of the TPP were offered below, we are required to conduct de novo review of the record in determining the certainty of contract obligations and whether triable issues remain about them. The plain terms of the TPP only supply an offer to make a future modification offer upon further eligibility determinations, and without HAMP guidelines, not all of the necessary terms can be read into this record. (See Bailey v. Specialized Loan Servicing, LLC (C.D. Cal. 2016) 2016 U.S. Dist. LEXIS 194987, p. 8 ["the TPP is nothing more than an offer to make a future modification offer."].)
Civil Code section 1654 indicates that in the absence of other governing rules, "the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist."
In their reply brief, the McCaas rely on Barroso v. Ocwen Loan Servicing, LLC (2012) 208 Cal.App.4th 1001, 1015, to argue that any TPP must constitute an enforceable contract, where its terms set forth basic conditions precedent that the borrower-plaintiff met. In that case, the court held the plaintiff was entitled to amend her pleadings about the enforceability of one of her three alleged contracts for modification of her loan documents, because the subject agreement did not expressly require her to have her signature notarized. (Barroso, supra, at pp. 1013-1015.) The court's analysis included as factors that the borrower had been told she was eligible for benefits under HAMP, and the loan documents (TPP and modification agreements), referenced those provisions. (Id. at p. 1005.) Thus, when the borrower signed the subject agreement and made the required payments, she could legitimately complain that the lender failed to honor the terms of the agreements and wrongfully foreclosed on the property, despite the agreement. (Id. at pp. 1012-1015.) Barroso is distinguishable from the allegations before us, because the failed loan modification contract in that case arguably included HAMP terms that potentially rendered it certain, and because the borrower had lost the property as a result of the lender's breaches of its agreements. The McCaas cannot properly rely on Barroso simply to argue that "the written terms of the TPP govern" and that here, it is certain enough to enforce, despite the lack of applicable HAMP terms.
The McCaas also cite to Oskoui v. J.P. Morgan Chase Bank, N.A. (9th Cir. 2017) 851 F.3d 851, 858-859, as a case in which the borrower was erroneously told that she did not qualify for a HAMP loan modification, but at the same time was told that she had participated in that program, all during the time that the lender was requiring further documentation from her and simultaneously foreclosing on the property. (Id. at pp. 854-857.) After a motion to dismiss was granted, the appellate court required that she be given leave to amend her complaint to plead breach of contract theories. In that case, the court primarily focused on the borrower's UCL cause of action, but also determined that the loan servicer's TPP made a clear promise that it "will send you a Modification Agreement for your signature which will modify the loan as necessary to reflect this new payment amount." This was deemed to be enough of a promise to justify allegations of a breach of contract, and the federal court ruled that the lender should not be allowed to enforce HAMP terms against the borrower, since it had misled her about whether she was eligible for a HAMP offer. (Id. at p. 859 ["What program the Agreement was part of is irrelevant. Chase must abide by its own language. It did not live up to its promise."].) This authority is distinguishable as a pleadings matter, and because the McCaas did not raise triable issues about any continuing applicability of HAMP terms to their Ocwen application, and because no foreclosure action was taken against them. The Ocwen TPP did not contain all essential terms on which to base a contract cause of action, that would allow a determination to be made on the existence of a breach. (Daniels, supra, 246 Cal.App.4th at pp. 1174-1177.)
C. Analysis: Damages Allegations
It is undisputed that the investor, Freddie Mac, appointed a new loan servicer before Ocwen successfully processed the application. Under the TPP, the McCaas agreed to continue to make payments under their original loan arrangements, including interest, and to pay servicing fees. They did not supply evidence that Ocwen received monies that it was not owed. Unlike in Daniels, supra, 246 Cal.App.4th at page 1159, where the lender told the borrower to go into default as part of the modification application procedure, the McCaas were not instructed by Ocwen to stop making payments. Ocwen's failure to provide a permanent loan modification, even in light of the computer coding errors that it admittedly made in processing it, was not shown to be a failure to timely perform within the terms of the TPP. No guarantee was made in the TPP that it would be Ocwen which made the ultimate determination of eligibility for a permanent loan modification, or that one would be forthcoming, assuming all requirements could be satisfied.
In the ruling by the trial court, it sustained Ocwen's objection to Ms. McCaa's opinion about the amount of her contract damages incurred, in the form of $14,825.02 interest accruing during the time period between February 2015 (the planned Ocwen modification upon the completion of the TPP), and August 2016 (Ditech's approval of one). The McCaas do not argue that this evidentiary ruling was wrong, but point out that similar information was made available in documents produced by Ditech, showing that it had calculated the new account balance by adding past due interest in the amount of $14,825.02, as well as servicing expenses, taxes, and insurance. Under Bushell, a HAMP borrower may plead entitlement to compensation in contract damages for the time spent fruitlessly contacting and providing documents to the loan servicer, where foreclosure has been completed. (Bushell, supra, 220 Cal.App.4th at pp. 925-928, 930-931.) The McCaas are not HAMP borrowers who have shown there are triable issues of fact on excessiveness of accrued interest, that is directly attributable to Ocwen's delay in processing their modification application.
Further, the record shows that RCS made an offer for a permanent loan modification that was based on the data provided to it by Ocwen in the acquisition report, and that would have implemented the February 2015 Ocwen effective date. The McCaas rejected that offer and made a counteroffer, which was not accepted. Ms. McCaa's deposition testimony explained they rejected RCS's offer because they discussed it with counsel at that time and concluded that "the numbers were wrong" (loan balance, late fees and other charges not consistent with past Ocwen statements). On appeal, the McCaas mainly argue that only such a proposal marked "VOID" was directly sent to them, but they do not show why it was not extremely significant (or dispositive on the point) that at the same time, their retained attorney had taken over communications with RCS and made a counteroffer about the proposed loan modification, which then fell through.
In any case, because of the TPP's lack of deadlines, and of specificity on the identity of the issuer of the requested permanent loan modification, it is not determinative of the McCaas' rights that neither RCS nor Ocwen actually issued the requested modification, or even that Ditech set up a second TPP. The record shows that the McCaas obtained a permanent loan modification from Ditech, and that the TPP issued by Ocwen did not preclude the fulfillment of those obligations through another loan servicer. Ocwen's motion accordingly made a prima facie showing that any of its own errors did not result in any causation of the claimed contract damage. (Orcilla, supra, 244 Cal.App.4th 982, 1005.)
In reaching these conclusions, we need not evaluate whether the Ditech loan modification actually provided the McCaas with a "better" deal, which Ocwen claims, based on an opinion in the declaration of its loan analyst Ortwerth. The McCaas responded that she was not shown to have the necessary expertise to render such an opinion. We are required to resolve only the essential questions of law that arise from the pleadings and evidence, on a de novo basis. (Aetna, supra, 72 Cal.App.4th 1175, 1186- 1187.) Here, the McCaas essentially are relying on the allegations of their amended complaint in an effort to show that triable issues of material fact exist, but they have not brought forward evidence that they actually incurred contract damages from any breach of the specific terms of the Ocwen TPP. (Aguilar, supra, 25 Cal.4th 826, 849.)
III
MISREPRESENTATION CAUSES OF ACTION
The gist of the McCaas' misrepresentation claims is that Ocwen intentionally and/or negligently misrepresented the modification status for six months, promising to perform if they made three timely payments, but failing to do so. To argue triable issues of fact remain on such liability, they rely on the same, equally applicable evidence they discussed for their breach of contract cause of action. Because their appellate briefing treats misrepresentations in this unified way, we need not discuss their intentional fraud (knowledge of falsity) and negligent misrepresentation causes of action separately, except to the extent their elements differ. That is, for negligent misrepresentation, we will consider whether the McCaas raised issues of fact regarding "the absence of reasonable grounds for believing the misrepresentation to be true." (Daniels, supra, 246 Cal.App.4th at p. 1166.)
"The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another's reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage." (Daniels, supra, 246 Cal.App.4th at p. 1166.)
A. Intentional Misrepresentation Arguments
First, it is important to qualify the McCaas' broad statement in their opening brief, that "[a] mortgage servicer's failure to perform on its written promises in a TPP support[s] fraud and negligent misrepresentation causes of action when the borrowers comply with the TPP" (citing West, supra, 214 Cal.App.4th at pp. 792-795; Bushell, supra, 220 Cal.App.4th at pp. 930-931). Those case authorities stand for the proposition that such causes of action can be stated through amendment, where the TPP contains all essential contract terms, such as those provided by HAMP. (Id. at pp. 926-928.) The McCaas' loan did not qualify for HAMP eligibility and the TPP did not create enforceable contract rights to obtain a permanent loan modification within a certain time frame, as we have discussed above.
The McCaas nevertheless argue that in issuing the TPP, Ocwen "intended to and did in fact induce reliance on the McCaas' part by having them make eight TPP payments when the TPP only called for three monthly payments," in order to qualify for a permanent modification, but none was provided. The McCaas challenge the ruling that there was no evidence provided of actionable misrepresentations by Ocwen, claiming that they showed it made a written promise to modify in the TPP, and its personnel made oral misrepresentations on the status of the modification during the routine updating procedures. Essentially, they are claiming that when Ocwen personnel discovered the internal computer coding error, they should have immediately revealed it to them, as well as trying to correct the problem during the company's processing of the transaction, until the investor reassigned the loan servicing to RCS.
Where a fraud or misrepresentation claim is predicated on a failure to perform contractual obligations, " 'something more than nonperformance is required to prove the defendant's intent not to perform his promise.' " (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481.) Ocwen presented evidence from its loan analyst, who analyzed its records, that a technical error was made that should not have happened (confusing the standard and streamline TPP products), and its personnel tried to fix it without jeopardizing the standard modification application. Once a transfer was made to a new servicer with recommendations to offer the same terms, Ocwen did not further participate. The McCaas have not brought forward evidence of intentional misrepresentations by Ocwen on the status of the application, but rather evidence that Ocwen's methodology and technology were inadequate. That does not amount to the necessary specific grounds for the charge of intentional fraud. (See Daniels, supra, 246 Cal.App.4th at pp. 1166-1167.)
The McCaas disagree with the trial court's ruling that "the allegations that Defendant did not intend to provide Plaintiffs with a permanent modification are refuted by the fact that a permanent loan modification was ultimately offered to the Plaintiffs." (Italics added.) However, they cannot properly rely on language in Daniels, supra, 246 Cal.App.4th at pages 1185 to 1189, discussing wrongful foreclosure claims, to argue that "a subsequent servicer's modification of a loan does not release a prior servicer from liability for its previous unlawful conduct." The court in Daniels made that comment in the context of accepting the plaintiffs' concession that no wrongful foreclosure could be pled in that case. That is an entirely different matter from proving intentional fraud occurred, as alleged here, in the summary judgment context. (Id. at p. 1185.) No further discussion of the intentional fraud claim is necessary, as Ocwen made an adequate showing of entitlement to summary judgment on it and the McCaas did not successfully refute it.
B. Negligence Compared to Negligent Misrepresentation
In the context of loan modifications where the unsuccessful borrowers are claiming ordinary negligence, the inquiry includes whether (1) the loan servicer owed a duty of care, (2) it breached that duty, and (3) the breach proximately caused the borrowers damages or injuries. (Lueras, supra, 221 Cal.App.4th at p. 62.) "Whether a duty of care exists is a question of law to be determined on a case-by-case basis." (Ibid.) In the usual lender liability context, a lender does not have "a common law duty of care to offer, consider, or approve a loan modification, or to explore and offer foreclosure alternatives" (id. at p. 67), because "a loan modification is the renegotiation of loan terms, which falls squarely within the scope of a lending institution's conventional role as a lender of money." (Id. at p. 63, citing to Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096.)
"[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 v. Heart Fed. Savings & Loan Assn., supra, 231 Cal.App.3d at pp. 1096, 1098 [relevant factors on duty are " '[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to [the plaintiff], [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm.' "].)
Nevertheless, the court in Lueras, supra, 221 Cal.App.4th 49 allowed amendment of an ordinary negligence claim, for the borrower to plead a law-imposed "duty not to make negligent misrepresentations of fact." (Id. at p. 68, citing to Civ. Code, § 1710, subd. (2).) "[A] lender does owe a duty to a borrower to not make material misrepresentations about the status of an application for a loan modification or about the date, time, or status of a foreclosure sale." (Ibid., italics added.) The court explained that harm to such a borrower was foreseeable if the lender made "an inaccurate or untimely communication about a foreclosure sale or about the status of a loan modification application, and the connection between the misrepresentation and the injury suffered could be very close." (Id. at p. 69.)
Other California courts have analyzed whether lenders owe borrowers a heightened duty of care when considering modification applications, for purposes of ordinary negligence allegations. In Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941 (Alvarez) and in Daniels, supra, 246 Cal.App.4th 1150, 1182-1183, the courts agreed that lenders can be deemed to have incurred a legal duty of care where they "allegedly agreed to consider modification of the [borrower's] loans." (Alvarez, supra, at p. 948.) Normally, when a commercial relationship between the lender and borrower begins, the transaction is an arm's length one. (Id. at p. 945.) But when borrowers are seeking to modify their existing loan, they cannot choose the loan servicer and are less able to protect their own interests. (See Meixner v. Wells Fargo Bank, N.A. (E.D. Cal. 2015) 101 F.Supp.3d 938, 954; Alvarez, supra, at p. 949 [" '[B]orrowers are captive, with no choice of servicer, little information, and virtually no bargaining power. Servicing rights are bought and sold without input and approval by the borrower. Borrowers cannot pick their servicers or fire them for poor performance.' "].)
Here, the McCaas are pleading negligent misrepresentation, not ordinary negligence. Therefore, we need not delineate the entire scope of duties owed by Ocwen to the McCaas, during the period it served as their loan servicer. Instead, we shall assume arguendo that "[t]he law imposes a duty not to make negligent misrepresentations of fact." (Lueras, supra, 221 Cal.App.4th at p. 68; Alvarez, supra, 228 Cal.App.4th at p. 947.) To prove such a cause of action, a plaintiff must show that the facts that were not accurately presented were either past or present, existing material facts. " '[P]redictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud.' " (Tarmann v. State Farm Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 158.)
C. Analysis: No Falsity of Negligent Representations Shown
The McCaas argue they raised triable material issues about Ocwen's negligent misrepresentations of fact regarding the status of their application. It was not until July 2015 that the new "relations manager" Kookani told Ms. McCaa that Ocwen's records showed a cancellation of the application and that it did not appear to be under active review, based on the (separate) product that had been cancelled two days after the initial TPP approval. At the time, that appeared to be true. Kookani next informed the McCaas that they would have to re-apply for modification consideration. This was later determined to be erroneous, by the time RCS took over processing the account. This evidence about the role of Ocwen employees in communicating to the McCaas that the application was still pending, until it was transferred to RCS, does not demonstrate that Ocwen personnel had no reasonable grounds for believing their representations to be true when made. (Daniels, supra, 246 Cal.App.4th at p. 1166.) Once the loan was transferred to RCS, the same terms that Ocwen had proposed were offered to the McCaas, but were not accepted. As discussed above, the terms of Ocwen's TPP were not so definitive as to support its purported unequivocal promise to modify the loan.
Further, the McCaas cannot properly claim that they must have received only a "VOID" offer from RCS, since Ocwen was able to provide evidence from the RCS attorney about the contemporaneous negotiations that both counsel were conducting about proposed terms for the modification, including drafts of documents. Unlike in Alvarez, supra, 228 Cal.App.4th at pages 945 and 948, the loan servicer was not factually miscalculating the borrowers' income in mishandling their modification request. In opposing the summary judgment motion, the McCaas did not identify actionable misrepresentations about factual matters during the transactions.
D. Analysis: Detrimental Reliance Not Shown
The McCaas were required to allege justifiable reliance on Ocwen's erroneous or incomplete representations, as well as causation and damages. It is usually a question of fact whether a plaintiff's reliance was reasonable. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 186; Fox v. Pollack (1986) 181 Cal.App.3d 954, 962.) In this respect, the McCaas claimed they would not have made eight payments pursuant to the TPP, but rather only the required three payments, had they known that Ocwen was misinforming them that their application was ongoing and/or canceled. They also argue they relied on Ocwen's status updates, by not bringing this action earlier. They claimed entitlement to compensation for the time spent pursuing the modification, as well as emotional distress damages. (See Bushell, supra, 220 Cal.App.4th at pp. 930-931.)
In the TPP, the McCaas agreed they would continue to comply with the conditions of the original loan, except to the extent Ocwen had renegotiated the payment amount. They have not provided a basis for showing they continued to make more than three payments on the loan because of any justifiable reliance on any misrepresentations by Ocwen. They did not show that Ocwen received any monies that it was not owed. A closer connection between a misrepresentation and an injury is required for a claim that is based on inaccurate or untimely communications about the status of a loan modification application. (See Lueras, supra, 221 Cal.App.4th 49, 69.) Unlike in Daniels, supra, 246 Cal.App.4th at page 1159, these borrowers were not instructed by the loan servicer to go into delinquency on their payments to qualify for a loan modification, as a matter of showing adequate detrimental reliance. Rather, the McCaas had already fallen behind on their payments in 2011, and then started working with Ocwen on modifying the loan in 2013.
The McCaas did not bring forward evidence of their justifiable reliance on or damage from Ocwen's negligent misrepresentations, concerning their rejection of the RCS modification offer that was based on the transmittal of information from Ocwen. They have not supported their claims of damages from delay in obtaining the Ditech modification, that were directly attributable to any misrepresentations by Ocwen. Summary judgment was appropriately granted.
DISPOSITION
The judgment is affirmed. Costs are awarded to Respondent.
HUFFMAN, Acting P. J. WE CONCUR: HALLER, J. AARON, J.