Beatty v. PHH Mortgage Corp.

          ORDER ON DEFENDANTS' MOTION TO DISMISS RE: DKT. NO. 18

         This case arises from a mortgage and foreclosure dispute. Plaintiff Frederick James Beatty filed a complaint in Sonoma County Superior Court on July 17, 2019. [Docket No. 1-1.] Defendants PHH Mortgage Corporation (“PHH”), Western Progressive, LLC (“WP”), and Deutsche Bank Trust Company Americas as Trustee for RALI 2006-QA11 (sued as Deutsche Bank National Trust Company) (“Deutsche Bank”) removed the case to this court based on diversity jurisdiction. [Docket No. 1.] On August 23, 2019, Defendants filed a motion to dismiss Beatty's initial complaint. [Docket No. 8.] On October 10, 2019, the court held a hearing and granted the motion to dismiss on the record. [Docket No. 15.] Beatty filed a first amended complaint on October 24, 2019. [Docket No. 16 (“FAC”).] Defendants now move to dismiss Beatty's FAC. [Docket Nos. 18 (“Mot.”), 22 (“Reply”).] Beatty timely opposed. [Docket No. 21 (“Opp.”).] This matter is suitable for determination without oral argument. Civil L.R. 7-1(b). Having considered the parties' submissions, the court grants in part and denies in part Defendants' motion to dismiss.

         I. BACKGROUND

         The factual background of the case is taken from Beatty's first amended complaint. Beatty alleges that he has owned the property located at 1601 Culpepper Drive, Petaluma, CA 94956 (the “Property”) since around 2005. FAC ¶ 10. In purchasing the Property, Beatty executed a promissory note and a deed of trust. Id.; see also Docket No. 19, Defendant's Request for Judicial Notice in Support of Motion to Dismiss (“RJN”), Ex. 1 (“Deed of Trust”). Deutsche Bank is the beneficiary of the loan, PHH is the servicer, and WP is the trustee. Id.

         According to Beatty, Defendants sold the Property to a third party at a foreclosure sale approximately one year ago, but subsequently rescinded the sale. FAC ¶ 11. Beatty states that after the sale was rescinded, he was “misinformed about the procedure for making payments while involved in a lawsuit.”^[1] Id. ¶ 12. In June 2019, Beatty spoke with “someone at PHH” and asked to “make all of the payments due at that time in order to bring the loan out of foreclosure.” Id. ¶ 13. PHH directed him to contact another entity, Aldridge Pite LLP (“AP”), to make his reinstatement payment. Id. ¶ 13. Beatty alleges that he had to call AP “several times over the course of a week” before he finally spoke to someone on June 18, 2019. Id. ¶ 15. The AP representative allegedly informed Beatty that they could not find the file on his loan. Id. ¶ 16. Beatty called PHH again to relay this information, and PHH allegedly informed him that WP (not AP) was assigned to the loan. Id. ¶¶ 17-18. Beatty alleges that PHH gave him this information on June 26, 2019. Id. ¶ 18.

         Beatty states that he immediately contacted WP to ask to reinstate his loan, but WP refused on the basis that the foreclosure sale was less than five days away. FAC ¶ 19. Beatty then called PHH again and PHH informed him that he could only reinstate his loan if he obtained a reinstatement quote from WP. Id. ¶ 21. When Beatty attempted to get the quote from WP, however, WP told him that PHH had the information regarding reinstatement. Id. Beatty alleges that he found a statement from PHH from May 2019 that contained a reinstatement quote of $29, 498.35, which stated the reinstatement amount was good until July 1, 2019. Id. ¶¶ 22-23. He asked PHH if he could pay that amount to reinstate his loan and PHH initially said that he could pay the amount listed on the May 2019 statement. Id. ¶ 22. However, PHH later told him that he must make the June payment also. Id. According to Beatty, the conflicting information meant that “PHH did not know what the correct reinstatement amount was.” Id.

         PHH instructed Beatty to wire $29, 498.35 to PHH, ^[2] which he did on June 26, 2019. FAC ¶ 24. Beatty alleges that PHH confirmed it received the funds and told him that the Property was “out of foreclosure.” Id. ¶¶ 25. Despite PHH's representation, it sold the property at foreclosure on June 27, 2019. Id. ¶ 26. On June 28, 2019, two days after PHH told Beatty that the Property was “out of foreclosure, ” Beatty received “approximately a dozen harassing phone calls telling him that the Property was sold.”^[3] Id. ¶ 27. Beatty then called both PHH and WP, both of whom allegedly told him that he needed to contact the other. Id. ¶ 30. According to Beatty, WP suggested that the three of them (Beatty, PHH, and WP) have a call together to resolve the issue, but WP hung up when PHH picked up the phone. Id. ¶ 31. At some unspecified time, PHH told Beatty that he “still had the house and that no Trustee's Deed Upon Sale ha[d] been recorded”; however, PHH also told Beatty that he needed to make the July 2019 payment. Id. ¶ 32. Beatty claims that PHH would not accept that payment before July 5, 2019. Id. ¶ 33. When Beatty called PHH on July 5, 2019 to make the payment as instructed, PHH allegedly told him that it still could not accept the payment and that he must call back on July 8, 2019. Id. ¶ 34.

         According to Beatty, he called PHH every day between July 8, 2019 through July 12, 2019 (sometimes multiple times per day) in order to make the payment, but PHH refused to accept it. FAC ¶ 35. He attempted to make the payment online, but the website^[4] would not allow him to make the payment and indicated that he was current on his loan. Id. On July 10, 2019, PHH told Beatty he had to make the July 2019 payment through WP. Id. ¶ 36. Beatty states that he called WP “every day, over a dozen times, from Wednesday, July 10, 2019 through Friday, July 12, 2019, ” and each time he was put on hold for ten minutes or more and eventually was forwarded to a voicemail box that was full. Id. ¶ 37.

         With respect to damages, Beatty alleges that he was “unable to rent his rental unit” for this period of time “because Defendants left him in a state of uncertainty about whether or not he would lose his home.”^[5] FAC ¶ 38. He states that Defendant's wrongful conduct caused damage to his credit, which precludes Beatty from receiving investment loans to support his small business. Id. ¶ 39. Beatty further alleges that he “suffered the loss of his property, extreme stress and anxiety, stress to his marriage and personal life, and lost an immense amount of time and resources” as a result of Defendants' conduct. Id. ¶ 40. In addition to the above damages, Beatty states that he lost income because of the events underlying the complaint. Id.

         Beatty brings five claims against Defendants, including breach of contract; breach of the covenant of good faith and fair dealing; negligence; wrongful foreclosure; and violation of California Business and Professions Code § 17200 et seq. (“UCL”). Defendants move to dismiss all claims on the basis that they fail to state a claim on which relief can be granted.

         II. DEFENDANTS' REQUEST FOR JUDICIAL NOTICE

         Defendants filed a request for judicial notice in support of their motion to dismiss. The RJN contains the following documents, all but one of which has been recorded in the Sonoma County Recorder's Office:

1. Deed of Trust, recorded November 20, 2006;

2. Assignment of Deed of Trust, recorded August 10, 2012;

3. Notice of Default, recorded April 22, 2010;

4. Notice of Rescission of Default, recorded October 29, 2010;

5. Notice of Default, recorded December 16, 2014;

6. Notice of Rescission of Default, recorded October 4, 2016;

7. Notice of Default, recorded January 31, 2017;

8. Notice of Rescission of Default, recorded August 4, 2017;

9. Notice of Default, recorded March 21, 2018;

10. Notice of Rescission of Default; recorded August 14, 2018;

11. Notice of Default; recorded January 30, 2019;

12. Notice of Trustee's Sale, recorded May 14, 2019;

13. Notice of Rescission of Default, recorded July 26, 2019

14. Transaction History Report regarding Property (Defendants request that the court take judicial notice of the fact that no trustee's deed upon sale has been recorded against the Property)

         The court grants Defendants' RJN with respect to document numbers 1-2 and 11-13. The other documents are not relevant to the dispute and therefore the request as to those documents is denied as moot.

         III. LEGAL STANDARD FOR RULE 12(B)(6) MOTIONS

         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss a claim “only where there is no cognizable legal theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) (quotation marks omitted). A claim has facial plausibility when a plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002).

         As a general rule, a court may not consider “any material beyond the pleadings” when ruling on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However, “a court may take judicial notice of ‘matters of public record, '” id. at 689 (citing Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, ” without converting a motion to dismiss under Rule 12(b)(6) into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith, 307 F.3d at 1125-26. The court need not accept as true allegations that contradict facts that may be judicially noticed. See Mullis v. U.S. Bankr. Court, 828 F.2d 1385, 1388 (9th Cir. 1987).

         IV. DISCUSSION

         The complaint brings five claims for relief: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) negligence; (4) wrongful foreclosure; and (7) violation of the UCL. Defendants move under Rule 12(b)(6) to dismiss all of Beatty's claims.

         A. Breach of Contract

         Under California law, the elements of a breach of contract claim are “1) the existence of the contract; 2) performance by the plaintiff or excuse for nonperformance; 3) breach by the defendant; and 4) damages.” Sutcliffe v. Wells Fargo Bank, N.A., 283 F.R.D. 533, 549 (N.D. Cal. 2012) (citing First Commercial Mortgage Co. v. Reece, 89 Cal.App.4th 731, 745 (2001)). Beatty's first claim asserts that Defendants breached the express terms of the contract, and the second claim alleges violations of the terms implied by the covenant of good faith and fair dealing. These are addressed in turn.

         1. Express ...