Paulhus, et al v. Fay Servicing LLC, et al

Filing 45

MEMORANDUM and ORDER granting 35 Motion to Dismiss signed by Senior Judge William B. Shubb on 8/5/14: Plaintiffs' claims against defendant Fay Servicing, LLC are hereby DISMISSED WITH PREJUDICE. (Kaminski, H)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---11 12 SCOTT PAULHUS and LYNETTE PAULHUS, CIV. NO. 2:14-736 WBS AC 13 MEMORANDUM AND ORDER RE: MOTION TO DISMISS Plaintiffs, 14 v. 15 16 17 FAY SERVICING, LLC; VERICREST INSURANCE SERVICES, aka VERICREST FINANCIAL; SUMMIT MANAGEMENT COMPANY, LLC; and DOES 1 through 20, inclusive, 18 Defendants. 19 20 21 22 ----oo0oo---Plaintiffs Scott Paulhus and Lynette Paulhus brought 23 this action against defendants Fay Servicing, LLC (“Fay”), 24 Vericrest Insurance Services, LLC, and Summit Management Company, 25 LLC, arising out of the foreclosure of plaintiffs’ home. 26 moves to dismiss plaintiffs’ First Amended Complaint (“FAC”) for 27 failure to state a claim upon which relief can be granted 28 1 Fay now 1 pursuant to Federal Rule of Civil Procedure 12(b)(6).1 2 I. Factual & Procedural History 3 In 2004, plaintiffs entered into a mortgage loan for 4 $850,000, which was secured by a Deed of Trust to their home in 5 Granite Bay, CA. 6 Deed of Trust names Vitek Real Estate Industries Group, Inc., dba 7 Vitek Mortgage Group as the “Lender” and Stewart Title Company as 8 the “Trustee.” 9 became the trustee in 2011, that Vericrest acted as the mortgage 10 servicer for several years, and that Fay is the current mortgage 11 servicer. 12 (FAC ¶ 17; id. Ex. A (Docket No. 32).) (Id. Ex. A.) The Plaintiffs allege that Summit (Id. ¶ 18.) On December 14, 2011, Summit recorded a Notice of 13 Default reflecting that plaintiffs were $16,384.82 in arrears on 14 their loan.2 15 Notice of Default on February 17, 2012. 16 17 (Fay RJN Ex. D.) Summit subsequently rescinded the (Fay RJN Ex. E.) 1 Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 230(g). 18 2 19 20 21 22 23 24 25 26 27 28 Although a court generally may not consider items outside the pleadings when deciding a motion to dismiss, it may consider items of which it can take judicial notice, Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994), including matters of public record, MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Fay requests that the court judicially notice several recorded documents pertaining to plaintiff’s property. (Docket No. 36.) Those items include the Deed of Trust, (Fay Req. for Judicial Notice (“Fay RJN”) Ex. A (Docket No. 36-1)), the Assignment of Deed of Trust, (id. Ex. B.), the Substitution of Trustee, (id. Ex. C), a Notice of Default, (id. Ex. D), a Rescission of Notice of Default, (id. Ex. E), and an Assignment of Mortgage/Deed of Trust, (id. Ex. F). The court will take judicial notice of these documents because they are matters of public record whose accuracy cannot be questioned. See Fed. R. Evid. 201; Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). 2 1 On March 16, 2012, plaintiffs allegedly received a 2 monthly statement from Vericrest for $5,993.27 instead of their 3 usual payment of $3,973.16 per month. 4 subsequently contacted Vericrest to inform them that the amount 5 stated was “unjustified and erroneous.” 6 plaintiffs received a billing statement for $4,020.01, and 7 concluded that Vericrest had amended the statement to reflect the 8 amount that was actually due. 9 that they paid that amount each month for over a year and that 10 (Id. ¶ 19.) (Id.) (Id. ¶ 20.) The next month, Plaintiffs allege Vericrest continued to accept their payments. 11 Plaintiffs (Id.) On September 1, 2013, Fay sent plaintiffs a billing 12 statement for $5,513.13. 13 they contacted Fay to correct the bill and that Fay informed them 14 that they did not have their complete loan file because of the 15 “servicer change.” 16 to a Fay employee on December 3, 2013, who represented that 17 plaintiffs would not be considered in default if they submitted 18 proof of income and two payments for $3973.16. 19 plaintiffs submitted those payments, Fay allegedly rejected them 20 and stated that they were insufficient to satisfy the full amount 21 owed. 22 “forced into default.” 23 (Id. ¶ 22.) (Id.) (Id. ¶ 21.) Plaintiffs allege that Plaintiffs also allege that they spoke (Id.) When As a result, plaintiffs allege, they were (Id. ¶ 23.) Plaintiffs brought this action in Placer County 24 Superior Court on February 18, 2014. 25 removed to this court on the basis of diversity jurisdiction, 28 26 U.S.C. § 1332, (id.), and moved to dismiss the Complaint. 27 29, 2014, the court granted defendants’ motions to dismiss and 28 allowed plaintiffs leave to amend. 3 (Docket No. 1.) (Docket No. 31.) Defendants On May 1 Plaintiffs timely filed the FAC, in which they assert 2 only two claims: (1) breach of the covenant of good faith and 3 fair dealing; and (2) unlawful, unfair, and fraudulent business 4 practices in violation of the UCL. 5 settled their claims against Summit and Vericrest, leaving only 6 their claims against Fay. 7 dismiss the FAC for failure to state a claim upon which relief 8 can be granted. 9 II. On July 30, 2014, plaintiffs (Docket No. 41.) Fay now moves to (Docket No. 35.) Discussion 10 On a motion to dismiss, the court must accept the 11 allegations in the complaint as true and draw all reasonable 12 inferences in favor of the plaintiff. 13 U.S. 232, 236 (1974), overruled on other grounds by Davis v. 14 Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 15 (1972). 16 plead “only enough facts to state a claim to relief that is 17 plausible on its face.” 18 544, 570 (2007). 19 for more than a sheer possibility that a defendant has acted 20 unlawfully,” and where a complaint pleads facts that are “merely 21 consistent with” a defendant’s liability, it “stops short of the 22 line between possibility and plausibility.” 23 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 556–57). 24 25 A. Scheuer v. Rhodes, 416 To survive a motion to dismiss, a plaintiff needs to Bell Atl. Corp. v. Twombly, 550 U.S. This “plausibility standard,” however, “asks Ashcroft v. Iqbal, Covenant of Good Faith and Fair Dealing California, like the majority of states, recognizes an 26 implied covenant of good faith and fair dealing. 27 Interactive Data Corp., 47 Cal. 3d 654, 683 (1988) (citing 28 Restatement of Contracts (2d) § 205). 4 Foley v. However, that covenant 1 only applies to promises “arising out of the contract itself.” 2 Id. at 690; accord Racine & Laramie, Ltd. v. Dep’t of Parks & 3 Recreation, 11 Cal. App. 4th 1026, 1031 (4th Dist. 1992) (“The 4 implied covenant of good faith and fair dealing rests upon the 5 existence of some specific contractual obligation.”). 6 corollary to this rule is that a claim for breach of the implied 7 covenant of good faith and fair dealing requires a plaintiff to 8 identify a contract to which both the plaintiff and the defendant 9 were parties. 10 A See Champlaie v. BAC Home Loan Servicing, LP, 706 F. Supp. 2d 1029, 1063 (E.D. Cal. 2009) (Karlton, J.). 11 Like plaintiffs’ first Complaint, the FAC fails to 12 identify any contract to which Fay was a party. 13 plaintiffs allege that they “entered into a contract with 14 Defendants for mortgage financing,” (FAC ¶ 27), the Deed of Trust 15 makes clear that Fay was not a party to plaintiffs’ loan 16 agreement. 17 accept plaintiffs’ conclusory allegation of a contractual 18 relationship between them and Fay as true. 19 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001) (“The 20 court need not . . . accept as true allegations that contradict 21 matters properly subject to judicial notice . . . .”). 22 (See Fay RJN Ex. A.) Although The court therefore need not See Sprewell v. Plaintiffs also allege the existence of a contract with 23 Fay on the theory that Fay assumed contractual obligations to 24 service plaintiffs’ loan. 25 agreed to service plaintiffs’ loan, that agreement does not 26 entail a contractual relationship with plaintiffs themselves. 27 See, e.g., Conder v. Home Sav. of Am., 680 F. Supp. 2d 1168, 1174 28 (C.D. Cal. 2010) (“The fact that [a servicer] entered into a (FAC ¶ 28.) 5 But even if Fay had 1 contract . . . to service Plaintiff’s loan does not create 2 contractual privity between [the servicer] and Plaintiff.”); 3 Lomboy v. SCME Mortg. Bankers, Civ. No. 09-1160 SC, 2009 WL 4 1457738, at *5 (N.D. Cal. May 26, 2009); Connors v. Home Loan 5 Corp., Civ. No. 08-1134 L LSP, 2009 WL 1615989, at *6 (S.D. Cal. 6 June 9, 2009). 7 Likewise, even if Fay had entered into a contract to 8 service plaintiffs’ loan, plaintiffs have not alleged that they 9 were the intended beneficiaries of any such contract. Plaintiffs 10 therefore cannot state a claim premised on violation of any 11 contractual duty contained therein. 12 Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th Cir. 13 2000) (“Before a third party can recover under a contract, it 14 must show that the contract was made for its direct benefit--that 15 it was an intended beneficiary of the contract.” (citation 16 omitted)). 17 See Klamath Water Users Accordingly, because plaintiffs have failed to allege 18 the existence of a contract with Fay so as to support a claim for 19 breach of the implied covenant of good faith and fair dealing, 20 see Champlaie, 706 F. Supp. 2d at 1063, the court must grant 21 defendants’ motion to dismiss this claim. 22 23 B. Unfair Competition Law The UCL prohibits “any unlawful, unfair, or fraudulent 24 business act or practice.” 25 UCL claim may be brought only “by a person who has suffered 26 injury in fact and has lost money or property as a result of the 27 unfair competition.” 28 Court, 51 Cal. 4th 310, 320-21 (2011). Cal. Bus. & Prof. Code § 17200. A Id. § 17204; Kwikset Corp. v. Superior 6 In its previous Order, 1 the court dismissed plaintiffs’ UCL claim on the basis that they 2 had failed to allege economic injury. 3 (Docket No. 31.) Like the initial Complaint, the FAC alleges that 4 plaintiffs were “asked to make payments” that were based on an 5 inaccurate accounting of the amount due on their loan, but it 6 does not allege that plaintiffs actually made these payments. 7 (FAC ¶ 50.) 8 wrongful fees, back dues, and interest, but it does not allege 9 that plaintiffs paid any of these fees.3 It alleges that plaintiffs have been charged (FAC ¶ 51.) And while 10 the FAC alleges that plaintiffs were “forced into default” as a 11 result of Fay’s alleged misconduct, it does not allege that 12 plaintiffs have lost their home. 13 (FAC ¶ 50.) Absent any allegation that plaintiffs have suffered 14 economic injury as a result of Fay’s alleged misconduct, the 15 possibility that their purported “default” may result in the 16 foreclosure of their home is insufficient to establish that they 17 have lost money or property. 18 Serv. Corp., 702 F. Supp. 2d 1183, 1199 (E.D. Cal. 2010) (Wanger, 19 J.) (holding that plaintiff’s allegation that “he ‘will’ lose his 20 personal residence if a non-judicial foreclosure occurs’ was 21 insufficient to allege that plaintiff had lost money or 22 property); Jurewitz v. Bank of Am., N.A., 930 F. Supp. 2d 994, See, e.g., Jensen v. Quality Loan 23 3 24 25 26 27 28 Plaintiffs also allege that they “incurred the cost and expense of the instant litigation” and argue that this cost constitutes economic injury. (FAC ¶ 51.) This argument is meritless. The cost of filing a claim under the UCL cannot also constitute economic injury under the UCL. Allowing it to do so “would effectively eviscerate the heightened standing requirements of Proposition 64.” In re Google Inc. Street View Elec. Commc’ns Litig., 794 F. Supp. 2d 1067, 1086 (N.D. Cal. 2011). 7 1 999-1000 (S.D. Cal. 2013) (holding that plaintiff had not alleged 2 that he lost money or property, even though “a foreclosure sale 3 was scheduled,” because he had not lost his home or suffered 4 other economic injury). 5 motion to dismiss this claim. 6 C. Accordingly, the court must grant Fay’s Leave to Amend 7 “Although leave to amend should be given freely, a 8 district court may dismiss without leave to amend where a 9 plaintiff’s proposed amendments would fail to cure the pleading 10 deficiencies and amendment would be futile.” 11 Countrywide Home Loans, Inc., 656 F.3d 1034, 1041 (9th Cir. 2011) 12 (citation omitted). 13 plaintiffs to amend their pleadings, plaintiffs have not remedied 14 the deficiencies the court highlighted in their initial 15 Complaint. 16 state a viable claim against Fay, the court dismisses plaintiffs’ 17 claims against Fay with prejudice and without leave to amend. Cervantes v. Although the court has already permitted Because it appears that plaintiffs are unable to 18 IT IS THEREFORE ORDERED that defendant Fay Servicing, 19 LLC’s motion to dismiss plaintiffs’ First Amended Complaint be, 20 and the same hereby is, GRANTED. 21 defendant Fay Servicing, LLC are hereby DISMISSED WITH PREJUDICE. 22 Dated: Plaintiffs’ claims against August 5, 2014 23 24 25 26 27 28 8

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