Villarino v. Specialized Loan Servicing LLC et al

Filing 19

MEMORANDUM and ORDER signed by Judge William B. Shubb on 10/9/2012 GRANTING defendants' 7 Motion to Dismiss. Plaintiff has 10 days from date of Order to file an Amended Complaint. Court is NOT adopting 16 Findings and Recommendations and issues this Memorandum & Order in lieu thereof. (Marciel, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MARCIAL VILLARINO III,

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NO. CIV. 2:12-cv-00889 (PS) WBS JFM

Plaintiff,
MEMORANDUM AND ORDER RE:
MOTION TO DISMISS

v.

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SPECIALIZED LOAN SERVICING LLC
(SLS), MERS, and DOES 1-100
inclusive,

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Defendants.
/

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Plaintiff Marcial Villarino III filed suit in state

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court against defendants Specialized Loan Servicing LLC (“SLS”)

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and Mortgage Electronic Registration Systems, Inc. (“MERS”),1

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bringing claims arising from defendants’ allegedly wrongful

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conduct related to a residential loan.

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the case to this court on the basis of diversity jurisdiction.

Defendants then removed

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Plaintiff erroneously sued Mortgage Electronic
Registration Systems, Inc., as “MERS.” (Notice of Removal 2:6-7
(Docket No. 2-1).)
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(Docket No. 2.)

Currently before the court is defendants’ motion

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to dismiss the Complaint in its entirety for failure to state a

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claim upon which relief can be granted pursuant to Federal Rule

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of Civil Procedure 12(b)(6).

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I.

(Docket No. 7.)

Factual and Procedural Background

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In 2005, plaintiff and his wife, Patricia Villarino,

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obtained a loan from Ameriquest Mortgage Company (“Ameriquest”)

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in the amount of $608,000.

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6 (Docket No. 2-2); Defs.’ Req. for Judicial Notice (“RJN”) Ex. 3

(Notice of Removal Ex. D (“Compl.”) ¶

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(Docket No. 9).)

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Trust recorded against the property located at 6051 Penela Way in

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El Dorado Hills, California (“the Penela Way property”).2

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Ex. 3.)

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Trust in March 2005.

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The loan agreement was secured by a Deed of

(RJN

U.S. Bank National Association was assigned the Deed of
(Id. Ex. 4.)

A Notice of Default listing the current default as

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$18,193.97 was recorded on December 13, 2011, and a Notice of

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Trustee’s Sale for April 5, 2012, was recorded on March 15, 2012.

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(Id. Exs. 5, 7.)

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In his Complaint, plaintiff alleges that he entered

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into a contract with SLS and the other defendants.

(Compl. ¶

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11.)

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on defendants’ interference with plaintiff’s “rights and benefits

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under the contract,” (id. ¶¶ 11-13), and failure to secure

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plaintiff a loan modification, (id. ¶¶ 14, 18).

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plaintiff alleges that defendants drastically inflated late fees

The allegations stemming from this contract primarily focus

In particular,

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Plaintiff and his wife obtained an additional loan for
$152,000, secured with a Deed of Trust on the same property, (RJN
Ex. 2.), which is not the subject of this action.
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and penalties, lost paperwork, and took “exorbitant” amounts of

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time to review documents.

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failed to modify plaintiff’s loan after he “made a good faith

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effort to apply for assistance” and threatened foreclosure

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proceedings and sale of his home.

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(Id. ¶ 18.)

Defendants also allegedly

(Id.)

Plaintiff next alleges that defendants breached their

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duty of care “to ensure that Plaintiff’s contractual rights would

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be protected, and specifically that the borrowers would be

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eligible for the HAMP program or any other traditional

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modification programs available.”3

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plaintiff also alleges to have suffered emotional distress.

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First, defendants are alleged to have had a duty “to honor the

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contractual rights of plaintiff to receive the benefits of the

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HAMP program” and were negligent in failing to communicate with

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plaintiff concerning modification of his loan.

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By alerting plaintiff that his home could potentially be

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foreclosed on, as well as sending letters and making phone calls

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threatening to remove him from his home, defendants led plaintiff

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to “a state of emotional panic.”

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defendants are alleged to have “engaged in a negligent and

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unlawful course of conduct solely to wrongfully obtain money and

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property from Plaintiff” that has resulted in “severe emotional

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anguish.”

(Id. ¶¶ 14-15.)

Relatedly,

(Id. ¶¶ 29-30.)

(Id. ¶¶ 29-32.)

Second,

(Id. ¶ 33.)

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3
HAMP refers to the “Home Affordable Modification
Program,” a federal loan modification program. See, e.g., Lucia
v. Wells Fargo Bank, N.A., 798 F. Supp. 2d 1059, 1062 (N.D. Cal.
2011) (explaining that HAMP “provide[s] relief to borrowers who
have defaulted on their mortgage payments or who are likely to
default by reducing mortgage payments to sustainable reduced
levels, without discharging any of the underlying debt”).

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Finally, plaintiff alleges that MERS is the vehicle

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through which “[d]efendants have accomplished their illegal

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objectives.”

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“intentionally ambiguous and infinitely malleable provisions

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pertaining to MERS” in new mortgages, (id. ¶ 21), and to ensure

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that “the average consumer, or even legal professional, can never

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determine who or what was or is ultimately receiving the benefits

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of any mortgage payments,” (id. ¶ 23).

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“artifice” of MERS, defendants are alleged to have transformed

(Id. ¶ 22)

Defendants allegedly used MERS to put

Apparently through the

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and “sabotage[d]” the legal system to prevent borrowers from

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obtaining redress.

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that MERS is neither the original lender of plaintiff’s loan nor

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its current beneficiary or servicer, he contends that MERS “has

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been and continues to knowingly and intentionally illegally and

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fraudulently record mortgages and conduct business in California”

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for some of the defendants.

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(Id. ¶¶ 25-26.)

Although plaintiff alleges

(Id. ¶ 27.)

Plaintiff brings claims for (1) breach of contract, (2)

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negligence, (3) breach of the implied covenant of good faith and

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fair dealing, (4) negligent inflection of emotional distress, (5)

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intentional inflection of emotional distress, and (6) injunctive

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relief.

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state a claim pursuant to Rule 12(b)(6).

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Plaintiff failed to file an opposition or statement of non-

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opposition as required by Local Rule 230(c).

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II.

Defendants now move to dismiss all claims for failure to
(Docket No. 7.)

Request for Judicial Notice

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In general, a court may not consider items outside the

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pleadings when deciding a motion to dismiss, but it may consider

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items of which it can take judicial notice.
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Barron v. Reich, 13

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F.3d 1370, 1377 (9th Cir. 1994).

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notice of facts “not subject to reasonable dispute” because they

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are either “(1) generally known within the territorial

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jurisdiction of the trial court or (2) capable of accurate and

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ready determination by resort to sources whose accuracy cannot

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reasonably be questioned.”

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may properly be taken of matters of public record outside the

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pleadings.

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(9th Cir. 1986).

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A court may take judicial

Fed. R. Evid. 201.

Judicial notice

See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504

Defendants request that the court judicially notice

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several recorded documents pertaining to the Penela Way property.

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(See RJN Exs. 1-7.)

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documents, since they are matters of public record whose accuracy

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cannot be questioned.

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668, 689 (9th Cir. 2001).

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notice of the plaintiff’s bankruptcy court filing, see RJN Ex. 8,

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because it likewise is a matter of public record whose accuracy

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cannot be questioned.

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F. Supp. 2d 1111, 1121 (N.D. Cal. 2009) (taking judicial notice

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of bankruptcy filings).

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III. Discussion

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The court will take judicial notice of these

See Lee v. City of Los Angeles, 250 F.3d
The court will also take judicial

See Rosal v. First Fed. Bank of Cal., 671

To survive a motion to dismiss, a plaintiff must plead

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“only enough facts to state a claim to relief that is plausible

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on its face.”

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(2007).

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than a sheer possibility that a defendant has acted unlawfully,”

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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and “[w]here a

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complaint pleads facts that are ‘merely consistent with’ a

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

This “plausibility standard,” however, “asks for more

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defendant’s liability, it ‘stops short of the line between

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possibility and plausibility of entitlement to relief.’”

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(quoting Twombly, 550 U.S. at 557).

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plaintiff has stated a claim, the court must accept the

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allegations in the complaint as true and draw all reasonable

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inferences in favor of the plaintiff.

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U.S. 232, 236 (1974), overruled on other grounds by Davis v.

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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

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(1972).

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A.

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Id.

In deciding whether a

Scheuer v. Rhodes, 416

Claims Against MERS
“MERS is a private electronic database, operated by

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MERSCORP, Inc., that tracks the transfer of the ‘beneficial

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interest’ in home loans, as well as any changes in loan

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servicers.”

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1034, 1038 (9th Cir. 2011).

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from concluding that MERS was some sort of sham organization,”

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instead determined “that MERS was a legitimate organization.”

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Velasco v. Sec. Nat. Mortg. Co., 823 F. Supp. 2d 1061, 1073 (D.

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Haw. 2011); see Cervantes, 656 F.3d at 1041-42 (dismissing with

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prejudice plaintiff’s fraud claim based on allegations “that MERS

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members conspired to commit fraud by using MERS as a sham

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beneficiary, promoting and facilitating predatory lending

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practices through the use of MERS, and making it impossible for

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borrowers or regulators to track the changes in lenders”).

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Despite the Complaint’s extended exposition of MERS and its

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alleged role in thwarting the legal system to the detriment of

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borrowers, the Complaint’s generalized and conclusory allegations

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of conspiracy and subversion are insufficient to meet federal

Cervantes v. Countrywide Home Loans, Inc., 656 F.3d
Recently, the Ninth Circuit, “far

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pleading standards.

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Moreover, plaintiff explicitly states that MERS is not

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the beneficiary of his home loan and does not allege any other

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role for MERS concerning the loan at issue, such as serving as

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the loan servicer.

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causes of action are directed at MERS, and he does not provide

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any factual allegations giving rise to any specific claim against

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MERS.

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against MERS.

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B.

(See Compl. ¶ 27.)

None of plaintiff’s six

Accordingly, the court will dismiss the Complaint as

Breach of Contract and Breach of the Implied Covenant

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of Good Faith and Fair Dealing

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The Complaint’s first and third claims are entitled,

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respectively, “Breach of Contract” and “Bad Faith/Breach of

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Contract.”

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contract with SLS and the other defendants.

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“Implicit in the contract,” he alleges, was the obligation “not

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to markup charges for work they did not perform or to seek

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payment for services which defendants were not entitled.”

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12.)

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of fair dealing, deal with plaintiff’s [sic] fair[ly] and

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honestly.”

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contract and the implied covenant of good faith and fair dealing

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by charging “marked-up fees for late charges.”

Thereunder, plaintiff alleges that he entered into a
(Id. ¶ 11.)

(Id. ¶

Moreover, defendants “would, in good faith and in exercise

(Id. at ¶ 12.)

SLS is alleged to have breached the

(Id.)

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Plaintiff also alleges that SLS drastically inflated

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late fees and penalties, lost paperwork, and took “exorbitant”

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amounts of time to review documents.

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also failed to modify plaintiff’s loan after he “made a good

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faith effort to apply for assistance” and threatened foreclosure
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(Id. ¶ 18.)

SLS allegedly

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proceedings and sale of his home.

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(Id.)

In order to state a claim for breach of contract, the

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plaintiff must allege facts that demonstrate: 1) the existence of

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the contract, 2) plaintiff’s performance or excuse for

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nonperformance of the contract, 3) defendant’s breach, and 4)

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resulting damages.

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Gas Co., 116 Cal. App. 4th 1375, 1391 n.6 (5th Dist. 2004).

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Armstrong Petrol. Corp. v. Tri Valley Oil &

It is not sufficient for a plaintiff to merely allege
conduct that could conceivably give rise to a claim.

Twombly,

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550 U.S. at 547.

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claim to relief that is plausible on its face.”

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plaintiff has failed to properly allege the basis for his

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contract claims.

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owed him a duty on the basis of the loan agreement that he

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entered into with Ameriquest.

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are construed in this manner, the court does not see how SLS can

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be said to owe plaintiff a duty based upon a contract to which it

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was not a party.

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Rather, he must allege “enough facts to state a
Id.

Here,

It is possible that he means to allege that SLS

Even if plaintiff’s bare pleadings

Nor has plaintiff identified any other specific

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agreement creating a contractual relationship between him and

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SLS.

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kind of conclusory allegation that Iqbal and Twombly disapproved.

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See Zody v. Microsoft Corp., No. Civ. 12-CV-00942-YGR, 2012 WL

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1747844, at *4 (N.D. Cal. May 16, 2012) (citing Twombly, 550 U.S.

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at 555) (“To the extent that Plaintiff simply alleges a contract

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existed, that allegation is itself conclusory because the

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contract’s formation and its terms (among other things) are

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unclear”).

To merely allege the existence of a contract is to make the

Plaintiff fails to allege “a clear articulation of
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the factual basis” for the contract, id., such as specifying its

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alleged terms or even indicating whether the contract was written

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or oral, see Snyder v. Wachovia Mortg., No. Civ. 1:10-1168 LJO

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SKO, 2010 WL 2736945, at *4 (E.D. Cal. July 12, 2010) (dismissing

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breach of contract claim where failure “to indicate whether the

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alleged agreement was written or oral . . . further doom[ed] the

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claim”); Gilmore v. Lycoming Fire Ins. Co., 55 Cal. 123, 124

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(1880) (“Where a party relies upon a contract in writing, and it

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affirmatively appears that all the terms of the contract are not

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set forth in haec verba, nor stated in their legal effect, but

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that a portion which may be material has been omitted, the

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complaint is insufficient.”).

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Plaintiff also does not specify how the actions

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allegedly taken by SLS, such as charging late fees and penalties

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or failing to modify plaintiff’s loan, breached any specific

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provision of the alleged contract.

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allegations describing what work SLS did not perform that

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plaintiff was charged for, or what activities SLS sought payment

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for that it was unentitled to.

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plaintiff cannot “nudge[] [his] claims across the line from

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conceivable to plausible.”

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The Complaint is devoid of

Without such allegations,

Twombly, 550 U.S. at 547.

“Every contract imposes upon each party a duty of good

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faith and fair dealing in its performance and its enforcement.”

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Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999)

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(quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2

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Cal. 4th 342, 371 (1992)).

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action for breach of the implied covenant of good faith and fair

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dealing is the existence of a contractual relationship between

However, a “prerequisite for any

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the parties, since the covenant is an implied term in the

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contract.”

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3d 38, 49 (1st Dist. 1990).

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failed to specify with sufficient particularity the contract

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which he alleges SLS breached.

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essential “to determine what benefits were intended to flow from

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it before deciding whether a party has acted to impair the right

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of the other to receive those benefits.”

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Bank, No. Civ. 09-2361-PHX-NVW, 2010 WL 550760, at *3 (D. Ariz.

Smith v. City & Cnty. of San Francisco, 225 Cal. App.
As just explained, plaintiff has

Identification of the contract is

Rodriguez v. OneWest

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Feb. 16, 2010).

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fail to identify a contractual relationship in which to imply the

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covenant of good faith and fair dealing.

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contractual basis for plaintiff’s claims, it is impossible to

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know whether the actions alleged to have been taken by SLS--such

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as charging late fees, losing paperwork, or delaying document

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review--injured plaintiff’s rights under the contract.

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As is, the Complaint’s conclusory allegations

Without a discernable

Accordingly, the court will grant SLS’s motion to

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dismiss plaintiff’s claims for breach of contract and breach of

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the implied covenant of good faith and fair dealing.

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C.

Negligence
To prove a cause of action for negligence, plaintiff

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must show “(1) a legal duty to use reasonable care, (2) breach of

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that duty, and (3) proximate cause between the breach and (4) the

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plaintiff’s injury.”

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App. 4th 1333, 1339 (2d Dist. 1998).

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duty to use reasonable care in a particular factual situation is

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a question of law for the court to decide.”

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Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (4th Dist.

Mendoza v. City of Los Angeles, 66 Cal.

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“The existence of a legal

Vasquez v.

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2004).

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allegations that defendants “owed a common law and statutory duty

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of care to the Plaintiff’s [sic] to ensure that Plaintiff’s

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contractual rights would be protected” and that he “would be

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eligible for the HAMP program” or other loan modification

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program.

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defendants’ “negligence due to the underwriting guidelines used

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to administer and fund their loan.”

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Plaintiff bases its negligence cause of action on

(Compl. ¶ 14.)

Plaintiff also alleges injury from

(Id. ¶ 16.)

Plaintiff cites no authority for the proposition that

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SLS owed a duty to not cause plaintiff harm in its capacity as a

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loan servicer.

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F. Supp. 2d 1191, 1198 (E.D. Cal. 2009) (concluding that a loan

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servicer owed no duty of care to the plaintiff).

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lending setting, “a financial institution owes no duty of care to

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a borrower when the institution’s involvement in the loan

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transaction does not exceed the scope of its conventional role as

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a mere lender of money.”

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231 Cal. App. 3d 1089, 1096 (3d Dist. 1991).

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extended this rule to loan servicers.

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Home Mortg. Servicing Inc., No. Civ. 2:09-CV-03516 JAM KJM, 2010

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WL 2991724, at *4 (E.D. Cal. July 29, 2010); Tsien v. Wells Fargo

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Home Mortg., No. Civ. 09-04790 SI, 2010 WL 2198290, at *5 (N.D.

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Cal. May 28, 2010).

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lender, SLS owes no duty to plaintiff.

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fails to state that SLS has breached a cognizable legal duty, the

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court will grant defendants’ motion to dismiss plaintiff’s cause

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of action for negligence.

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D.

Cf. Castaneda v. Saxon Mortg. Servs., Inc., 687

In the broader

Nymark v. Heart Fed. Sav. & Loan Assn.,
Courts have

See, e.g., Saugstad v. Am.

Thus, as the servicing company to the
Because the Complaint

Negligent Infliction of Emotional Distress
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The negligent infliction of emotional distress is not

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an independent tort, but rather derives from the tort of

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negligence.

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Inc., 48 Cal.3d 583, 588 (1989).

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elements of duty, breach of duty, causation, and damages must be

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proven by plaintiff. See id.

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Marlene F. v. Affiliated Psychiatric Med. Clinic,
Thus, all the traditional

Plaintiff styles this cause of action “Negligent

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Infliction of Emotional Anguish” and alleges that SLS breached

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its duty to plaintiff “by failing to communicate with Plaintiff

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in regards to modifying the [l]oan, acting negligent, and

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creating an alleged deficiency status,” (Compl. ¶ 30), as well as

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by putting plaintiff into a “state of emotional panic” by sending

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him “notices to accelerate the note and of his potentially being

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foreclosed upon and sold,” (id. ¶ 31).

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As explained, lender-loan servicer relations do not

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usually engender a duty supporting a negligence cause of action.

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See Palestini v. Homecomings Fin., LLC, Civ. No. 10CV1049-MMA,

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2010 WL 3339459, at *7 (S.D. Cal. Aug. 23, 2010).

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plaintiff fails to allege that SLS engaged in any conduct that

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exceeded the traditional role of a loan servicer.

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plaintiff has failed to establish the assumption of a duty of

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care on the part of SLS, the court must grant SLS’s motion to

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dismiss plaintiff’s negligent infliction of emotional distress

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claim.

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E.

Here,

Because

Intentional Inflection of Emotional Distress

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Under California law, to state a cause of action for

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intentional inflection of emotional distress, a plaintiff must

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plead: “(1) extreme and outrageous conduct by the defendant with
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the intention of causing, or reckless disregard of the

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probability of causing, emotional distress; (2) the plaintiff’s

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suffering severe or extreme emotional distress; and (3) actual

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and proximate causation of the emotional distress by the

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defendant’s outrageous conduct.”

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54 Cal. 3d 868, 903 (1991) (quoting Davidson v. City of

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Westminster, 32 Cal. 3d 197, 209 (1982)).

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and outrageous” when it “exceed[s] all bounds usually tolerated

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by a decent society.”

Christensen v. Superior Court,

Conduct is “extreme

Palestini, 2010 WL 3339459, at *5 (quoting

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Agarwal v. Johnson, 25 Cal. 3d 932, 946 (1979)).

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distress is “severe” when it is “of such substantial quantity or

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enduring quality that no reasonable man in a civilized society

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should be expected to endure it.”

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Co., 10 Cal. App. 3d 376, 397 (4th Dist. 1970).

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conduct must have been intended to inflict injury or be done with

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the realization that injury will result.

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at 903.

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“directed at the plaintiff, or occur in the presence of a

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plaintiff of whom the defendant is aware.”

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Emotional

Fletcher v. W. Nat’l Life Ins.
The defendant’s

Christensen, 54 Cal. 3d

Moreover, the defendant’s conduct must have been

Id.

Incorporating all the allegations in his Complaint,

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plaintiff entitles this claim “Intentional Infliction of Mental

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Anguish” and alleges that SLS’s conduct “was extreme and

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outrageous and an abuse of the position of the Defendants.”

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(Compl. ¶ 33.)

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negligent and unlawful course of conduct solely to wrongfully

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obtain money and property from Plaintiff.”

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Plaintiff also alleges that SLS engaged “in a

(Id.)

The Complaint fails to allege any outrageous conduct on
the part of SLS to support intentional inflection of emotional
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distress.

Plaintiff does no more than allege that SLS engaged in

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conduct that is generally accepted in debt collection and the

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foreclosure process, such as increased fees or telephone calls to

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the debtor alerting him to the risks associated with failing to

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make due payments.

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Civ. 10-1039 LJO SKO, 2010 WL 2605696, at *11 (E.D. Cal. June 28,

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2010) (noting that the conduct associated with debt collection

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and the foreclosure process “is inherently stressful for

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debtors”); Ross v. Creel Printing & Publ’g Co., 100 Cal. App. 4th

See Ramirez v. Barclays Capital Mortg., No.

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736, 745 (1st Dist. 2002) (“In the context of debt collection,

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courts have recognized that the attempted collection of a debt by

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its very nature often causes the debtor to suffer emotional

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distress.”).

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even after meeting with the borrower, does not qualify as

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outrageous behavior.

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F. Supp. 2d 862, 884 (N.D. Cal. 2010).

17

will grant SLS’s motion to dismiss plaintiff’s intentional

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infliction of emotional distress claim.

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F.

Moreover, the refusal to grant a loan modification,

Davenport v. Litton Loan Servicing, LP, 725
Accordingly, the court

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Injunctive Relief
Under California law, requests for injunctive relief

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have been consistently classified as remedies and not valid

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causes of action in their own rights.

23

v. Richter, 52 Cal. App. 2d 164, 168 (4th Dist. 1942)

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(“Injunctive relief is a remedy and not, in itself, a cause of

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action.”).

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dismiss plaintiff’s sixth cause of action.

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See, e.g., Shell Oil Co.

Accordingly, the court will grant SLS’s motion to

IT IS THEREFORE ORDERED that defendants’ motion to
dismiss be, and the same hereby is, GRANTED.
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Plaintiff has ten days from the date of this Order to

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file an amended complaint, if he can do so consistent with this

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Order.4

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DATED:

October 9, 2012

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The court does not adopt the Findings and
Recommendations of the Magistrate Judge, filed July 23, 2012
(Docket No. 16), and issues this Memorandum and Order in lieu
thereof.
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