United States District Court, N.D. California
ORDER ON DEFENDANTS' MOTION TO DISMISS RE: DKT.
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
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
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rescinded the sale.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the sale was rescinded, he was “misinformed about the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.” 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.
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.”
instructed Beatty to wire $29, 498.35 to PHH,  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.” 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.
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 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.
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.” 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.
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.
DEFENDANTS' REQUEST FOR JUDICIAL NOTICE
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
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,
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,
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
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.
LEGAL STANDARD FOR RULE 12(B)(6) MOTIONS
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).
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.
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.
Breach of Contract
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.