Case Name: Leire Funk aka Leire Ferro v. Ocwen Loan Servicing, LLC, et al.
Case No.: 2016-CV-303934

Motion for Judgment on the Pleadings to the Second Amended Complaint by Defendants Nationstar Mortgage LLC and NRZ Pass-Through Trust V, U.S. Bank National Association as Trustee

Factual and Procedural Background

This is an action for breach of contract, fraud, and wrongful foreclosure. On September 24, 2002, plaintiff Leire Funk aka Leire Ferro (“Plaintiff”) and her ex-husband, Rick Funk, financed real property located at 172 French Court in San Jose, California (“Subject Property”). (Second Amended Complaint [“SAC”] at ¶ 17.) As evidence of the loan, Plaintiff executed a promissory note (“Note”) and concurrently executed a Deed of Trust as security for the Note. (Ibid.) The Deed of Trust for the Subject Property was recorded as Document Number 16496636 in the County Recorder’s Office. (Ibid.)

In March 2008, Plaintiff reached out to defendant Homecomings Financial LLC (“Homecomings”) to apply for a loan modification. (SAC at ¶ 18.) Up until September 2009, Homecomings, through their representative, instructed Plaintiff not to make any payments toward the mortgage because they were trying to finalize the loan modification. (Id. at ¶ 30.) Plaintiff made monthly payments to defendants in the amount of $2,500 every month. (Id. at ¶ 32.) These funds were to be put into a trust account until the Plaintiff was reviewed for a loan modification. (Ibid.) Upon completion of the loan modification review, if Plaintiff was approved, the monthly payments were to be applied to her mortgage or, if she was denied, the payments were to be given back to Plaintiff. (Ibid.)

Plaintiff alleges that she made several payments to defendants and the money was neither applied to the mortgage nor returned to her. (SAC at ¶ 33.) In fact, Plaintiff claims that defendants never intended on offering her an opportunity to modify her loan and forbear on the foreclosure proceedings. (Id. at ¶ 45.) Instead, Plaintiff alleges that defendants repeatedly filed Notices of Default and tried to foreclose on her property while making her think she was getting a loan modification. (Ibid.) As a result of defendants’ actions, Plaintiff has suffered extreme emotional distress. (Id. at ¶ 46.)

On July 11, 2017, Plaintiff filed the operative SAC setting forth causes of action for: (1) breach of contract; (2) breach of implied covenant of good faith and fair dealing; (3) promissory estoppel; (4) intentional infliction of emotional distress; (5) negligence; (6) unfair business practices; (7) fraud and intentional misrepresentation; and (8) negligent misrepresentation.

On September 6, 2017, defendants Nationstar Mortgage LLC and NRZ Pass-Through Trust V, U.S. Bank National Association as Trustee (collectively, “Defendants”) filed an answer to the SAC.

Motion for Judgment on the Pleadings

Currently before the Court is Defendants’ motion for judgment on the pleadings to the SAC on the ground that each claim fails to state a valid cause of action. (Code Civ. Proc., § 438.) Plaintiff filed written opposition. Defendants filed reply papers. No trial date has been set.

Legal Standard

“Judgment on the pleadings is akin to a demurrer and is properly granted only if the complaint does not state facts sufficient to state a cause of action against that defendant. The grounds for the motion must appear on the face of the complaint, and in any matters subject to judicial notice. The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254 [internal citations omitted].)

First Cause of Action: Breach of Contract

To state a cause of action for breach of contract, a party must plead the existence of a contract, his or her performance of the contract or excuse for nonperformance, the defendant’s breach and resulting damage. (Lortz v. Connell (1969) 273 Cal.App.2d 286, 290.) Further, the complaint must indicate on its face whether the contract is written, oral or implied by conduct. (Code Civ. Proc., § 430.10, subd. (g); Otworth v. Southern Pacific Transportation Co. (1985) 166 Cal.App.3d 452, 458-459.) If the action is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference. (Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 59 [disapproved on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503].)

Here, Plaintiff’s breach of contract claim is based on alleged “Payment Arrangement Agreements.” (SAC at ¶ 50.) As a preliminary matter, Plaintiff fails to allege whether the Payment Arrangement Agreements are oral, written or implied by conduct. Furthermore, Plaintiff fails to allege the material terms of any Payment Arrangement Agreements. Finally, Defendants persuasively argue that there are no underlying facts showing that Plaintiff entered into such contracts with Defendants. Instead, the SAC suggests that any negotiations regarding Plaintiff’s loan modification were conducted with Homecomings and other defendants. (See SAC at ¶¶ 18, 19, 22, 24, 25, 26, 30, 34, 36, 38, 39.) The SAC thus fails to allege that Plaintiff entered into any Payment Arrangement Agreements with Defendants to support a claim for a breach of contract.

Therefore, the motion for judgment on the pleadings to the first cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim. (See Virginia G. v. ABC Unified School Dist. (1993) 15 Cal.App.4th 1848, 1852 [on a motion for judgment on the pleadings, leave to amend should be granted if there is any reasonable possibility that the plaintiff can state a good cause of action].) Having granted the motion on this ground, the Court declines to consider the remaining grounds based on statute of limitations and damages.

Second Cause of Action: Breach of the Covenant of Good Faith and Fair Dealing

The second cause of action is a claim for breach of the covenant of good faith and fair dealing. “The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties, since the covenant is an implied term in the contract.” (Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49; see Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1032 [there is no obligation to deal fairly or in good faith absent an existing contract].) As stated above, Plaintiff has failed to plead a valid claim for breach of contract. Thus, there is no contractual relationship between the parties to support a claim for breach of the implied covenant of good faith and fair dealing.

Consequently, the motion for judgment on the pleadings to the second cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim.

Third Cause of Action: Promissory Estoppel

The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. (Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.4th 411, 416.)

“[A] promise is an indispensable element of the doctrine of promissory estoppel. The cases are uniform in holding that this doctrine cannot be invoked and must be held inapplicable in the absence of a showing that a promise had been made upon which the complaining party relied to his prejudice. [Citation.] The promise must, in addition, be ‘clear and unambiguous in its terms.’ [Citation.] ‘Estoppel cannot be established from … preliminary discussions and negotiations.’ [Citation.]” (Garcia v. World Sav., FSB (2010) 183 Cal.App.4th 1031, 1044.)

Here, Defendants persuasively argue that Plaintiff fails to allege any clear and unambiguous promise to support a claim for promissory estoppel. (See Memo of P’s & A’s at p. 9:19-21.) Plaintiff appears to concede this argument as she fails to address it in opposition to the motion.

Therefore, the motion for judgment on the pleadings to the third cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim.

Fourth Cause of Action: Intentional Infliction of Emotional Distress

To state a claim for intentional infliction of emotional distress, a plaintiff must allege: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct.” (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.)

Here, Plaintiff claims that defendants failed to refund or apply her monthly payments and made her believe that she would receive a loan modification. (See SAC at ¶ 81.) As a result of this conduct, Plaintiff alleges that she suffered severe emotional distress consisting of anxiety and depression. (Id. at ¶ 82.) As an initial matter, Defendants were not involved in the loan modification process as Plaintiff was negotiating with Homecomings and other defendants. (See SAC at ¶¶ 18, 19, 22, 24, 25, 26, 30, 34, 36, 38, 39.) For that reason alone, Defendants did not commit any actions to cause Plaintiff to suffer any emotional distress. Even if they did, the law is clear in California that Plaintiff cannot recover emotional damages based on property damages. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 554-555 [“No California case has allowed recovery for emotional distress arising solely out of property damage; moreover, a preexisting contractual relationship, without more, will not support recovery for mental suffering where the defendant’s tortious conduct has resulted only in economic injury to the plaintiff.”]; Cooper v. Super. Ct. (1984) 153 Cal.App.3d 1008, 1012 [same]; see also Mercado v. Leong (1996) 43 Cal.App.4th 317, 324 [emotional distress damages are unlikely when the interests affected are merely economic].) Plaintiff appears to concede this argument as she fails to address it in her opposition.

Therefore, the motion for judgment on the pleadings to the fourth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim.

Fifth Cause of Action: Negligence

“To state a cause of action for negligence, a plaintiff must allege (1) the defendant owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach proximately caused the plaintiff’s damages or injuries. [Citation.] Whether a duty of care exists is a question of law to be determined on a case-by-case basis.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 62.)

Here, the duty of care alleged by Plaintiff to support negligence is based on the loan modification conduct of Homecomings and the other defendants. (See SAC at ¶¶ 86-88.) As stated above, Plaintiff fails to allege facts showing that Defendants were involved in any loan modification activities concerning the Plaintiff. Thus, Plaintiff fails to establish a duty of care to support negligence. (See Hegyes v. Unjian Enterprises, Inc. (1991) 234 Cal.App.3d 1103, 1111 [“A complaint which lacks allegations of fact to show that a legal duty of care was owed is fatally defective.”].) Even if there was a duty of care, there is no breach of duty to support negligence with respect to Defendants. Instead, Plaintiff claims that defendants breached a duty in failing to abide by the 2009 trial payment plan agreement and failing to review her for a loan modification. (SAC at ¶ 89.) Plaintiff however fails to allege that Defendants were parties to any trial payment plan or that they were otherwise involved in the loan modification process. Therefore, there is no breach of duty or supporting damages to state a claim for negligence.

Accordingly, the motion for judgment on the pleadings to the fifth cause of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim. Having granted the motion on these grounds, the Court declines to address the statute of limitations argument.

Sixth Cause of Action: Unfair Business Practices

The motion for judgment on the pleadings to the sixth cause of action [unfair business practices] is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim. The UCL claim is based on Defendants’ alleged misconduct in the prior causes of action. (See SAC at ¶ 92.) Since Plaintiff’s other claims fail to state a cause of action, the UCL claim also fails. (See Krantz v. BT Visual Images, LLC (2001) 89 Cal.App.4th 164, 178 [the viability of a UCL claim stands or falls with the antecedent substantive causes of action].)

Seventh and Eighth Causes of Action: Fraud/Intentional Misrepresentation and Negligent Misrepresentation

“The elements of fraud are (1) the defendant made a false representation as to a past or existing material fact; (2) the defendant knew the representation was false at the time it was made; (3) in making the representation, the defendant intended to deceive the plaintiff; (4) the plaintiff justifiably relied on the representation; and (5) the plaintiff suffered resulting damages.” (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792 (West) [citation omitted].)

“Fraud must be pleaded with specificity rather than with general and conclusory allegations. The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.” (West, supra, 214 Cal.App.4th at p. 793 [citation and quotation marks omitted].)

Courts enforce the specificity requirement in consideration of its two purposes. (West, supra, 214 Cal.App.4th at p. 793.) The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Ibid.) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. (Ibid.)

Here, Plaintiff’s fraud claims are based on representations made by defendants regarding her loan modification. (See SAC at ¶¶ 99-115.) As stated above, Plaintiff fails to allege facts showing that Defendants were involved in any loan modification activities concerning the Plaintiff. Moreover, as Defendants argue, the fraud claims are made generally against all defendants thus lacking the required specificity to state a cause of action.

Therefore, the motion for judgment on the pleadings to the seventh and eighth causes of action is GRANTED WITH 30 DAYS’ LEAVE TO AMEND, after written notice of entry of the signed order, for failure to state a claim. Having granted the motion on these grounds, the Court declines to address the statute of limitations argument.

The Court will prepare the order.