Beatty v. PHH Mortgage Corporation ( 2019 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 FREDERICK JAMES BEATTY, Case No. 19-cv-05145-DMR 8 Plaintiff, ORDER ON DEFENDANTS’ MOTION 9 v. TO DISMISS 10 PHH MORTGAGE CORPORATION, et al., Re: Dkt. No. 18 11 Defendants. 12 This case arises from a mortgage and foreclosure dispute. Plaintiff Frederick James Beatty 13 filed a complaint in Sonoma County Superior Court on July 17, 2019. [Docket No. 1-1.] Defendants 14 PHH Mortgage Corporation (“PHH”), Western Progressive, LLC (“WP”), and Deutsche Bank Trust 15 Company Americas as Trustee for RALI 2006-QA11 (sued as Deutsche Bank National Trust 16 Company) (“Deutsche Bank”) removed the case to this court based on diversity jurisdiction. 17 [Docket No. 1.] On August 23, 2019, Defendants filed a motion to dismiss Beatty’s initial 18 complaint. [Docket No. 8.] On October 10, 2019, the court held a hearing and granted the motion 19 to dismiss on the record. [Docket No. 15.] Beatty filed a first amended complaint on October 24, 20 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 21 suitable for determination without oral argument. Civil L.R. 7-1(b). Having considered the parties’ 22 submissions, the court grants in part and denies in part Defendants’ motion to dismiss. 23 I. BACKGROUND 24 The factual background of the case is taken from Beatty’s first amended complaint. Beatty 25 alleges that he has owned the property located at 1601 Culpepper Drive, Petaluma, CA 94956 (the 26 “Property”) since around 2005. FAC ¶ 10. In purchasing the Property, Beatty executed a 27 1 Notice in Support of Motion to Dismiss (“RJN”), Ex. 1 (“Deed of Trust”). Deutsche Bank is the 2 beneficiary of the loan, PHH is the servicer, and WP is the trustee. Id. 3 According to Beatty, Defendants sold the Property to a third party at a foreclosure sale 4 approximately one year ago, but subsequently rescinded the sale. FAC ¶ 11. Beatty states that after 5 the sale was rescinded, he was “misinformed about the procedure for making payments while 6 involved in a lawsuit.”1 Id. ¶ 12. In June 2019, Beatty spoke with “someone at PHH” and asked to 7 “make all of the payments due at that time in order to bring the loan out of foreclosure.” Id. ¶ 13. 8 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” 9 before he finally spoke to someone on June 18, 2019. Id. ¶ 15. The AP representative allegedly 10 informed Beatty that they could not find the file on his loan. Id. ¶ 16. Beatty called PHH again to 11 relay this information, and PHH allegedly informed him that WP (not AP) was assigned to the loan. 12 Id. ¶¶ 17-18. Beatty alleges that PHH gave him this information on June 26, 2019. Id. ¶ 18. 13 Beatty states that he immediately contacted WP to ask to reinstate his loan, but WP refused 14 on the basis that the foreclosure sale was less than five days away. FAC ¶ 19. Beatty then called 15 PHH again and PHH informed him that he could only reinstate his loan if he obtained a reinstatement 16 quote from WP. Id. ¶ 21. When Beatty attempted to get the quote from WP, however, WP told him 17 that PHH had the information regarding reinstatement. Id. Beatty alleges that he found a statement 18 from PHH from May 2019 that contained a reinstatement quote of $29,498.35, which stated the 19 reinstatement amount was good until July 1, 2019. Id. ¶¶ 22-23. He asked PHH if he could pay that 20 amount to reinstate his loan and PHH initially said that he could pay the amount listed on the May 21 2019 statement. Id. ¶ 22. However, PHH later told him that he must make the June payment also. 22 Id. According to Beatty, the conflicting information meant that “PHH did not know what the correct 23 reinstatement amount was.” Id. 24 PHH instructed Beatty to wire $29,498.35 to PHH,2 which he did on June 26, 2019. FAC ¶ 25 26 1 The FAC uses the passive voice so it is unclear which of the Defendants, if any, misinformed Beatty about the payment process. Beatty also does not describe the allegedly incorrect information 27 he received. 1 24. Beatty alleges that PHH confirmed it received the funds and told him that the Property was “out 2 of foreclosure.” Id. ¶¶ 25. Despite PHH’s representation, it sold the property at foreclosure on June 3 27, 2019. Id. ¶ 26. On June 28, 2019, two days after PHH told Beatty that the Property was “out of 4 foreclosure,” Beatty received “approximately a dozen harassing phone calls telling him that the 5 Property was sold.”3 Id. ¶ 27. Beatty then called both PHH and WP, both of whom allegedly told 6 him that he needed to contact the other. Id. ¶ 30. According to Beatty, WP suggested that the three 7 of them (Beatty, PHH, and WP) have a call together to resolve the issue, but WP hung up when 8 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 9 Beatty that he needed to make the July 2019 payment. Id. ¶ 32. Beatty claims that PHH would not 10 accept that payment before July 5, 2019. Id. ¶ 33. When Beatty called PHH on July 5, 2019 to 11 make the payment as instructed, PHH allegedly told him that it still could not accept the payment 12 and that he must call back on July 8, 2019. Id. ¶ 34. 13 According to Beatty, he called PHH every day between July 8, 2019 through July 12, 2019 14 (sometimes multiple times per day) in order to make the payment, but PHH refused to accept it. 15 FAC ¶ 35. He attempted to make the payment online, but the website4 would not allow him to make 16 the payment and indicated that he was current on his loan. Id. On July 10, 2019, PHH told Beatty 17 he had to make the July 2019 payment through WP. Id. ¶ 36. Beatty states that he called WP “every 18 day, over a dozen times, from Wednesday, July 10, 2019 through Friday, July 12, 2019,” and each 19 time he was put on hold for ten minutes or more and eventually was forwarded to a voicemail box 20 that was full. Id. ¶ 37. 21 With respect to damages, Beatty alleges that he was “unable to rent his rental unit” for this 22 period of time “because Defendants left him in a state of uncertainty about whether or not he would 23 lose his home.”5 FAC ¶ 38. He states that Defendant’s wrongful conduct caused damage to his 24 credit, which precludes Beatty from receiving investment loans to support his small business. Id. ¶ 25 26 3 At the hearing on Defendants’ original motion to dismiss, Beatty’s counsel represented that Beatty 27 was contacted by the purchasers of his property. 1 39. Beatty further alleges that he “suffered the loss of his property, extreme stress and anxiety, 2 stress to his marriage and personal life, and lost an immense amount of time and resources” as a 3 result of Defendants’ conduct. Id. ¶ 40. In addition to the above damages, Beatty states that he lost 4 income because of the events underlying the complaint. Id. 5 Beatty brings five claims against Defendants, including breach of contract; breach of the 6 covenant of good faith and fair dealing; negligence; wrongful foreclosure; and violation of 7 California Business and Professions Code § 17200 et seq. (“UCL”). Defendants move to dismiss 8 all claims on the basis that they fail to state a claim on which relief can be granted. II. DEFENDANTS’ REQUEST FOR JUDICIAL NOTICE 9 Defendants filed a request for judicial notice in support of their motion to dismiss. The RJN 10 contains the following documents, all but one of which has been recorded in the Sonoma County 11 Recorder’s Office: 12 1. Deed of Trust, recorded November 20, 2006; 13 2. Assignment of Deed of Trust, recorded August 10, 2012; 14 3. Notice of Default, recorded April 22, 2010; 15 4. Notice of Rescission of Default, recorded October 29, 2010; 16 5. Notice of Default, recorded December 16, 2014; 17 6. Notice of Rescission of Default, recorded October 4, 2016; 18 7. Notice of Default, recorded January 31, 2017; 19 8. Notice of Rescission of Default, recorded August 4, 2017; 20 9. Notice of Default, recorded March 21, 2018; 21 10. Notice of Rescission of Default; recorded August 14, 2018; 22 11. Notice of Default; recorded January 30, 2019; 23 12. Notice of Trustee’s Sale, recorded May 14, 2019; 24 13. Notice of Rescission of Default, recorded July 26, 2019 25 14. Transaction History Report regarding Property (Defendants request that the court 26 take judicial notice of the fact that no trustee’s deed upon sale has been recorded 27 against the Property) 1 The court grants Defendants’ RJN with respect to document numbers 1-2 and 11-13. The 2 other documents are not relevant to the dispute and therefore the request as to those documents is 3 denied as moot. 4 III. LEGAL STANDARD FOR RULE 12(B)(6) MOTIONS 5 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in 6 the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When 7 reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the 8 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” 9 or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” 10 Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft 11 v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) 12 (quotation marks omitted). A claim has facial plausibility when a plaintiff “pleads factual content 13 that allows the court to draw the reasonable inference that the defendant is liable for the misconduct 14 alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must 15 demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause 16 of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. 17 Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001), 18 overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). 19 As a general rule, a court may not consider “any material beyond the pleadings” when ruling 20 on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However, 21 “a court may take judicial notice of ‘matters of public record,’” id. at 689 (citing Mack v. S. Bay 22 Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose 23 contents are alleged in a complaint and whose authenticity no party questions, but which are not 24 physically attached to the pleading,” without converting a motion to dismiss under Rule 12(b)(6) 25 into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled 26 on other grounds by Galbraith, 307 F.3d at 1125-26. The court need not accept as true allegations 27 that contradict facts that may be judicially noticed. See Mullis v. U.S. Bankr. Court, 828 F.2d 1385, 1 1388 (9th Cir. 1987). 2 IV. DISCUSSION 3 The complaint brings five claims for relief: (1) breach of contract; (2) breach of the implied 4 covenant of good faith and fair dealing; (3) negligence; (4) wrongful foreclosure; and (7) violation 5 of the UCL. Defendants move under Rule 12(b)(6) to dismiss all of Beatty’s claims. 6 A. Breach of Contract 7 Under California law, the elements of a breach of contract claim are “1) the existence of the 8 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 9 First Commercial Mortgage Co. v. Reece, 89 Cal. App. 4th 731, 745 (2001)). Beatty’s first claim 10 asserts that Defendants breached the express terms of the contract, and the second claim alleges 11 violations of the terms implied by the covenant of good faith and fair dealing. These are addressed 12 in turn. 13 1. Express Contract Terms 14 The complaint alleges that Defendants breached paragraph 19 of the Deed, which provides: 15 “Upon reinstatement by Borrower, this security Instrument and obligations secured hereby shall 16 remain fully effective as if no acceleration had occurred.” Deed of Trust ¶ 19; see FAC ¶ 44. Beatty 17 contends that Defendants violated this provision by selling the property at foreclosure after Beatty 18 reinstated the loan. FAC ¶ 45. 19 Beatty omits other relevant provisions in paragraph 19. Specifically, that paragraph requires 20 the borrower to “meet[] certain conditions” before he is eligible to invoke his right to prevent 21 enforcement of the Deed: 22 Borrower shall have the right to have enforcement of this Security 23 Instrument discontinued at any time prior to the earliest of: (a) five days 24 before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify 25 for the termination of Borrower’s right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. 26 Deed of Trust ¶ 19. In order to reinstate the loan as provided by paragraph 19, the borrower must 27 complete the following requirements: (a) pay[] Lender all sums which then would be due under this Security 1 Instrument and the Note as if no acceleration had occurred; (b) cure[] any 2 default of any other covenants or agreements; (c) pay[] all expenses incurred in enforcing this Security Instrument . . .; and (d) take[] such actions as 3 Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s 4 obligation to pay the sums secured by this Security Instrument, shall continue unchanged. 5 Id. 6 Defendants argue that Beatty failed to comply with the requirements listed in paragraph 19 7 because he did not pay the money due under the contract prior to five days before the sale of the 8 property. Mot. at 4. According to the complaint, Beatty tendered the amount due to PHH on June 9 26, 2019, the day before the sale occurred. FAC ¶ 24. Neither the complaint nor the opposition 10 dispute that Beatty did not bring the loan current more than five days before the foreclosure sale. 11 Because the language of the Deed expressly conditions the right to reinstatement on the borrower’s 12 completion of their obligations, and because the complaint does not allege that Beatty complied with 13 the Deed’s requirements, Beatty has failed to allege that Defendants breached the express terms of 14 the contract. 15 Defendant’s motion to dismiss the first claim is granted. 16 2. Implied Contract Terms 17 Under California law, “[e]very contract imposes on each party a duty of good faith and fair 18 dealing in each performance and its enforcement.” Herskowitz v. Apple, Inc., 301 F.R.D. 460, 473 19 (N.D. Cal. 2014) (quoting Carson v. Mercury Ins. Co., 210 Cal. App. 4th 409, 429 (2012)). In order 20 to state a claim for breach of the implied covenant of good faith and fair dealing, a plaintiff must 21 allege the following elements: “(1) the parties entered into a contract; (2) the plaintiff fulfilled his 22 obligations under the contract; (3) any conditions precedent to the defendant’s performance 23 occurred; (4) the defendant unfairly interfered with the plaintiff’s rights to receive the benefits of 24 the contract; and (5) the plaintiff was harmed by the defendant’s conduct.” Rosenfeld v. JPMorgan 25 Chase Bank, N.A., 732 F. Supp. 2d 952, 968 (N.D. Cal. 2010). Courts turn to the duty of good faith 26 to “fill gaps and qualify or limit rights and duties otherwise arising under rules of law and specific 27 contract language.” Foley v. Interactive Data Corp., 47 Cal. 3d 654, 684 (1988) (quoting Summers, 1 812 (1982)). In evaluating an implied covenant claim, the court must consider whether a party’s 2 conduct, though not prohibited by the express terms of the contract, is “nevertheless contrary the 3 contract’s purposes and the parties’ legitimate expectations.” Carma Developers (Cal.), Inc. v. 4 Marathon Dev. California, Inc., 2 Cal. 4th 342, 373 (1992). However, the covenant may not be 5 read to contradict the express terms of an agreement. Id. at 374. 6 Beatty alleges that Defendants breached the covenant of good faith and fair dealing by failing 7 to provide him with “accurate information to allow him to exercise his right of reinstatement.” FAC 8 ¶ 53. He asserts that Defendants’ failure to furnish accurate information “materially hindered his ability to perform under the contract and thereby caused his breach thereof and subsequent loss of 9 any benefits thereunder.” Id. ¶ 54. In addition, Defendants allegedly breached the covenant to 10 accept Beatty’s “fully and timely monthly payment.” Id. ¶ 55. 11 The Deed does not contain an express term that Defendants are required to furnish accurate 12 information about payments owed, nor does it contain any provision that explicitly requires 13 Defendants to accept full and timely payments. However, the implied terms Beatty alleges also do 14 not contradict the written terms of the agreement. Paragraph 19 contains detailed requirements a 15 borrower must meet in order to reinstate his loan and it is reasonable to expect that a lender will not 16 hinder the borrower’s attempts to comply with those provisions. The reinstatement provision might 17 fairly imply that the lender must furnish information within its control to the borrower when that 18 information is necessary for the borrower to reinstate his loan. The amount due, for example, should 19 be readily available to the lender but may not be available to the borrower. Allowing the lender to 20 withhold that information could frustrate the purpose of paragraph 19, which is to provide a remedy 21 to defaulting borrowers. Similarly, the purpose of the reinstatement provision would be completely 22 undermined if the lender were allowed to refuse full and timely payments. 23 Defendants do not contest that the terms suggested by Beatty are fairly implied within the 24 contract; they instead argue that they did not violate those terms. Mot. at 5. With respect to the 25 implied requirement that Defendants furnish accurate information about payments owed, 26 Defendants assert that Beatty already had the necessary information to reinstate his loan because he 27 received a statement with the amount due in May 2019. Id. at 5; see FAC ¶ 23. The letter itself 1 stated that the reinstatement quote was valid until July 1, 2019. FAC ¶ 23. Therefore, Defendants 2 argue, Beatty had the necessary information to reinstate his loan within the time limit specified by 3 the Deed. Mot. at 5. 4 Defendants’ argument eschews other relevant allegations in the complaint. Beatty alleges 5 that he attempted to make a payment sometime before June 18, 2019 (more than five days prior to 6 the foreclosure sale), but PHH incorrectly directed him to AP. FAC ¶ 13. He also asserts that PHH 7 did not tell him which entity would accept the payment until the day before the foreclosure sale. Id. 8 ¶ 18. Presumably, Beatty would have to know the correct payee in order to tender the reinstatement payment. Further, while the complaint does allege that Beatty received a May 2019 statement with 9 the amount owed, Beatty also claims that PHH verbally instructed him that he would have to make 10 the June 2019 payment in addition to the amount listed on the May 2019 statement. Id. ¶ 22. 11 Because the statement itself represented that the quote was valid until July 1, 2019, PHH’s alleged 12 representations to the contrary could reasonably create confusion as to the correct amount owed. In 13 sum, Beatty has adequately alleged that PHH failed to furnish the information necessary to exercise 14 his right to reinstatement under the contract. 15 Beatty also alleges that PHH violated its obligation to accept full and timely payments. He 16 asserts that PHH initially him he could make the July 2019 payment on July 5, 2019. FAC ¶ 33. 17 When Beatty attempted to pay on that date, PHH then informed him he must call back on July 8, 18 2019. Id. ¶ 34. Beatty claims that he tried to make the payment at that later date, but PHH again 19 refused to accept it. Id. ¶ 35. PHH finally told Beatty that he had to make the July 2019 payment 20 through WP. Id. ¶ 36. According to Beatty, he “called WP every day, over a dozen times, from 21 Wednesday, July 10, 2019 through Friday, July 12, 2019” and that every time he called, he was put 22 on hold before his call was forwarded to a voicemail box that was full. Id. ¶ 37. 23 Defendants argue that they did not breach their obligation to accept payments. They point 24 to the Rescission of Notice of Default, dated July 24, 2019 and recorded July 26, 2019, and state 25 that the Rescission “would only be executed and recorded after the Loan was brought current.” Mot. 26 at 5; see id., Ex. 13. Neither party is explicit on this point, but the court infers that Beatty was 27 eventually able to make the July 2019 payment, which allowed the Rescission to be executed and 1 recorded. However, Defendants’ argument is not convincing. They essentially posit that they are 2 permitted to refuse a payment and give inaccurate and conflicting information over a period of at 3 least a week as long as they eventually accept it. The purpose of the contract would be undermined 4 by permitting this course of conduct; a borrower can reasonably expect the ability to make full and 5 timely payments without enduring prolonged uncertainty and confusion. Accordingly, Beatty has 6 adequately alleged that Defendants breach their obligation to accept full and timely payments.6 7 3. Damages 8 For his two contract claims, Beatty alleges that he suffered credit damage, loss of income, loss of rental income, loss of his home, and emotional distress.7 FAC ¶¶ 48, 56. Defendants seek to 9 dismiss Beatty’s first and second causes of action on the basis that he does not properly allege 10 damages. Mot. at 6. For the reasons described above, Beatty’s breach of contract claim is dismissed 11 on other grounds, and so the court evaluates damages only as to the breach of covenant claim. 12 First, Defendants assert that Beatty is not entitled to claim damage to his credit. They claim 13 that any damage to his credit resulted from his breach of the payment obligations on the loan and 14 not from the foreclosure sale, which they assert was not reported on his credit record. Mot. at 6. 15 This argument goes to the merits. Beatty has adequately alleged that Defendants breached the 16 covenant of good faith and fair dealing by failing to provide him with accurate information to 17 reinstate his loan and by refusing to accept his July 2019 payment. Whether he can prove that 18 Defendants caused damage to his credit is a question for another day. 19 20 6 It is unclear whether the FAC alleges a breach of this obligation solely based on the July 2019 21 payment or whether it is also meant to encompass Defendants’ conduct in 2018. For the earlier events, Beatty summarily alleges that he was “misinformed about the procedure for making 22 payments while involved in a lawsuit.” FAC ¶ 12. He does not explain how he was misinformed, allege that Defendants were responsible for his misunderstanding, or clearly assert that Defendants 23 failed to accept full and timely payments prior to July 2019. The court previously noted the prior complaint’s vague allegations regarding past payments in the hearing on Defendants’ first motion 24 to dismiss and instructed Beatty to amend his complaint to clarify those allegations. Beatty added no additional facts as to prior payments in his amended complaint. Therefore, to the extent that 25 Beatty’s breach of covenant claim is based on Defendants’ previous failures to accept full and timely payments, that portion of the claim is dismissed with prejudice. 26 7 Defendants argue that Beatty cannot recover attorneys’ fees as damages. Mot. at 6. Beatty appears to concede this point but asserts that he is not seeking attorneys’ fees as damages. Opp. at 9. Rather, 27 he is seeking fees under the two-way fee shifting provision in the parties’ contract. Id. Defendants 1 Second, Defendants argue that Beatty cannot recover damages for loss of income or rental 2 income because “any alleged loss in income resulted from Plaintiff’s failure to reinstate the Loan 3 before the statutory deadline.” Mot. at 9. This argument also fails. Beatty has alleged that as a 4 result of Defendants’ conduct in providing inaccurate information and refusing to accept his July 5 2019 payment, he “lost an immense amount of time and resources.” FAC ¶ 40. The complaint 6 describes the amount of time Beatty expended because of Defendants’ alleged breaches and is 7 enough to plead that he lost income as a result. Beatty also alleges that he lost rental income because 8 he could not rent out his rental while it was unclear whether he would lose his home. Id. ¶ 38. Whether Beatty actually suffered economic damages is a question of fact, but as a pleading matter, 9 Beatty has adequately alleged loss of income. 10 Third, Defendants assert that Beatty did not lose the property because the foreclosure sale 11 and Notice of Default were rescinded. Id., Ex. 13. In the hearing on Defendants’ first motion to 12 dismiss, the court noted that the complaint was vague on this claim for damages because it appeared 13 that Beatty never lost possession of the Property. Beatty’s counsel represented that Beatty had not 14 lost possession of the house but that the foreclosure sale went forward and Beatty suffered damages 15 as a result. Defendants responded then and in the current motion that the trustee’s deed upon sale 16 was never recorded8 and therefore the sale was not perfected. See Reply at 2. They cite California 17 Civil Code 2924h(c), which states that a trustee’s sale is deemed perfected if the deed is recorded 18 within 15 calendar days after the sale. Cal. Civ. Code 2924h(c). Defendants appear to imply that 19 Beatty could not have lost his home because the deed was not recorded within 15 days of the sale 20 and the sale cannot now be perfected. 21 Section 2924h(c) also provides that “a trustee’s sale shall be deemed final upon the 22 acceptance of the last and highest bid.” Cal. Civ. Code 2924h(c). “The concepts of ‘finalizing’ and 23 ‘perfecting’ a sale are different.” In re Engles, 193 B.R. 23, 27 (Bankr. S.D. Cal. 1996). Although 24 these concepts appear to be central to this case, neither party provided an analysis of section 25 26 8 Defendants request that the court take judicial notice of the fact that no deed upon sale was ever 27 recorded. As noted above, the court denies this request as moot. As explained below, whether the 1 2924h(c) and its impact on their positions, instead leaving it to the court to figure out. The 2 distinction between “finalizing” and “perfecting” arises because “[t]itle to a property is both legal 3 and equitable.” In re Reginald Escobar Silva & Carlita Marie Silva, 2015 WL 13345614, at *5 n. 4 6 (C.D. Cal. Apr. 24, 2015). Equitable title passes to a foreclosure purchaser upon conclusion of a 5 trustee’s sale, but legal title remains with the debtor until perfection of the deed upon sale. Id.; see 6 Engles, 193 B.R. at 26 (“[A] purchaser receives equitable title at a [foreclosure] sale, but legal title 7 remains in a debtor . . . .”) (internal quotation marks and citations omitted); In re RW Meridian LLC, 8 564 B.R. 21, 30 (B.A.P. 9th Cir. 2017) (“In an involuntary sale such as foreclosure, equitable title is transferred to the purchaser at the foreclosure auction with acceptance of the highest bid and it is 9 at that time a trustee’s sale is ‘complete.’”). Equitable title is a “beneficial interest” and “one stick 10 in the bundle of full legal rights to real property.” RC Royal Dev. & Realty Corp. v. Standard Pac. 11 Corp., 177 Cal. App. 4th 1410, 1419 (2009). Based on the court’s own cursory review of the 12 caselaw, it appears that equitable title to the Property passed to the foreclosure purchaser upon 13 conclusion of the foreclosure sale. The parties do not explain the legal effect of transferring 14 equitable title. See Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 61 (2013) 15 (declining to find that a borrower’s claims were mooted when a foreclosure sale was allegedly 16 rescinded because neither party “briefed the legal consequences of a rescission on possible future 17 attempts to foreclose”). Therefore, as a pleading matter, Beatty has sufficiently alleged that he lost 18 some interest in the Property and is entitled to damages as a result. 19 Finally, Defendants argue that Beatty is not entitled to emotional distress damages arising 20 from a breach of contract claim. Mot. at 6. This argument is addressed below in connection with 21 Beatty’s negligence claim. 22 In sum, Beatty has adequately alleged damages as a result of Defendants’ alleged breach of 23 the covenant of good faith and fair dealing. Defendants’ motion to dismiss that claim is denied. 24 B. Negligence 25 Under California law, “[t]he elements of negligence are: (1) defendant’s obligation to 26 conform to a certain standard of conduct for the protection of others against unreasonable risks 27 (duty); (2) failure to conform to that standard (breach of the duty); (3) a reasonably close connection 1 between the defendant’s conduct and resulting injuries (proximate cause); and (4) actual loss 2 (damages).” Corales v. Bennett, 567 F.3d 554, 572 (9th Cir. 2009) (quoting McGarry v. Sax, 158 3 Cal. App. 4th 983, 994 (2008)). 4 Defendants argue that Beatty’s negligence claim fails because he did not adequately plead 5 either that Defendants owed him a duty or that Defendants’ conduct caused Beatty’s damages, if 6 any. Defendants also invoke the economic loss rule, contending that Beatty cannot seek tort 7 damages because the relationship between the parties is governed by contract law. 8 1. Duty 9 California courts have held that “as a general rule, a financial institution owes no duty of 10 care to a borrower when the institution’s involvement in the loan transaction does not exceed the 11 scope of its conventional role as a mere lender of money.” Nymark v. Heart Fed. Sav. & Loan Assn., 12 231 Cal. App. 3d 1089, 1096 (1991). The general rule applies to loan servicers, such as PHH. See 13 Lingad v. Indymac Fed. Bank, 682 F. Supp. 2d 1142, 1149-50 (E.D. Cal. 2010). “[A]bsent special 14 circumstances . . . a loan transaction is at arms-length and there is no fiduciary relationship between 15 the borrower and lender.” Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 16 (2006). This rule has also been applied in California federal courts. See, e.g., Benson v. Ocwen 17 Loan Servicing, LLC, 562 F. App’x 567, 570 (9th Cir. 2014) (“The duty of care imposed on 18 construction lenders . . . does not apply in the residential loan context.”); Taylor v. Bosco Credit, 19 LLC, No. 18-cv-06310-JSC, 2018 WL 6511150, at *4 (N.D. Cal. Dec. 11, 2018) (finding that a loan 20 servicer did not have a duty of care to a mortgagor); Villanueva v. Select Portfolio Servs., Inc., No. 21 14-cv-05238-BLF, 2015 WL 2199340, at *2 (N.D. Cal. May 11, 2015) (same). 22 Courts in this district have applied a six-factor test laid out in Biakanja v. Irving, 49 Cal. 2d 23 657, 650 (1958) to determine whether a duty is owed under a narrow exception to the general rule 24 (“Biakanja factors”). These factors are: 25 (1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that 26 the plaintiff suffered injury, (4) the closeness of the connection between the defendant's conduct and the injury suffered, (5) the moral blame attached to 27 the defendant’s conduct, and (6) the policy of preventing future harm. 1 of duty in the context of loan modifications, with varying results. See Rowland v. JPMorgan Chase 2 Bank, N.A., No. 14-cv-00036-LB, 2014 WL 992005, at *8 (N.D. Cal. Mar. 12, 2014) (citing cases). 3 a. Alvarez and Lueras 4 One line of cases stems from Lueras. There, a home purchaser requested a loan modification 5 from the lender when he and his wife began experiencing financial hardship. Lueras, 221 Cal. App. 6 4th at 56. The purchaser submitted to the lender all information required to determine whether he 7 qualified for a loan modification. Id. at 58. While he was waiting for a decision on his application, 8 the trustee served him with a notice of default. Id. He contacted the lender several times asking 9 about the status of his loan modification application and was told at least once that his application 10 had been approved, pending approval by the Federal National Mortgage Association (“Fannie 11 Mae”). Id. He never received notice from either Fannie Mae or the lender that his application had 12 been denied, and his home was sold in a foreclosure sale. Id. at 59. He brought a complaint against 13 the lender, alleging a cause of action for negligence. The superior court granted the defendants’ 14 motion to dismiss the negligence claim on the basis that they did not owe plaintiff a duty of care. 15 On review, the appellate court cited the general rule that a financial institution does not owe a duty 16 of care to a borrower when the lender does not act outside the scope of “its conventional role as a 17 mere lender of money.” Id. at 63 (quoting Nymark, 231 Cal. App. 3d at 1096). Using the Biakanja 18 factors, the court concluded that the lender did not owe the plaintiff a duty of care to modify his 19 loan. Id. at 63-64. It found that renegotiating loan terms “falls squarely within the scope of a lending 20 institution’s conventional role as a lender of money” and the lender’s obligations to “offer, consider 21 or approve loan modifications” arises solely from the parties’ contracts and relevant statutes, not 22 from a common law duty. Id. at 67. However, the court also determined that there is a duty to “not 23 make negligent misrepresentations of fact.” Id. at 68. It implied that the plaintiff may have a cause 24 of action for negligence if he alleged that the defendants “caused or exacerbated his initial default 25 by negligently servicing the loan.” Id. Because the borrower had alleged that the lender 26 misrepresented the status of the loan application and the date and time of the foreclosure sale, the 27 court reversed the judgment against him so that he could amend the complaint to plead a cause of 1 The other line of cases comes from Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. 2 App. 4th 941 (2014). In that case, the plaintiff homeowners alleged that a lender and loan servicer 3 of their residential mortgages failed to review their loan modification applications in a timely 4 manner; foreclosed on their properties while they were under consideration for a modification; and 5 mishandled the applications by relying on incorrect information. 228 Cal. App. 4th at 945. For 6 example, the defendants rejected one of the applications based on their mistake about the borrower’s 7 monthly gross income. Id. Alvarez examined Lueras and agreed with its conclusion that financial 8 institutions do not owe borrowers a common law duty to “offer, consider or approve” a loan 9 modification. Id. at 946 (quoting Lueras, 221 Cal. App. 4th at 67). However, the court also noted 10 that Lueras granted the plaintiff leave to amend to allege a cause of action for negligent 11 misrepresentation. Id. Applying the same principle, the court found that the loan modification 12 transaction was “intended to affect the plaintiffs and it was entirely foreseeable that failing to timely 13 and carefully process the loan modification applications could result in significant harm to the 14 applicants.” Id. at 948 (applying the Biakanja factors). The court accordingly held that the plaintiffs 15 sufficiently alleged that defendants owed the plaintiffs a duty of care to properly review their 16 applications. Id. at 951. 17 The apparent conflict between Lueras and Alvarez was recently examined in Sheen v. Wells 18 Fargo Bank, N.A., 38 Cal. App. 5th 346 (Ct. App. 2019), which is the key case relied upon by 19 Defendants in this case. There, a homeowner obtained a first mortgage through the defendant 20 lender, which was secured by a deed of trust. Id. at 348. He subsequently obtained two junior loans 21 through the same lender and defaulted on both. Id. at 348-49. With respect to one of the junior 22 loans, the borrower received correspondence from the lender that it was placing his account with an 23 “outside collection agency.” Id. at 349. The borrower interpreted the letter to mean that the 24 mortgage had been converted into an unsecured loan and the outstanding debt would be collected 25 through “standard collection practices” rather than foreclosure. Id. A representative of the lender 26 also called his wife and told her there would not be a foreclosure sale. Id. That mortgage was later 27 sold to a different investment firm, which foreclosed on the house. Id. at 350. The borrower sued 1 process, review, and respond carefully and completely to the loan modification applications” and to 2 “refrain from engaging in unfair and offensive business practices that confused [him] and prevented 3 him from pursuing all options to avoid foreclosure.” Id. The trial court sustained the defendant’s 4 demurrer, finding that the lender did not owe a tort duty of care to the borrower. Id. at 351. On 5 appeal, the court noted that California state courts were divided in applying Lueras and Alvarez in 6 the loan modification context, with some courts following Lueras in finding that a lender does not 7 owe a borrower a duty of care and some citing Alvarez in finding a duty. 38 Cal. App. 5th at 353. 8 After reviewing those cases and the subsequent conflicting case law, the court disagreed with 9 Alvarez and held that “a lender does not owe a borrower a tort duty of care during a loan modification 10 negotiation.” Id. at 352. It accordingly affirmed the trial court’s dismissal of the negligence count. 11 Sheen is not persuasive in this case. Although it putatively adopted Lueras, it did not address 12 or even mention Lueras’s holding that “[t]he law imposes a duty not to make negligent 13 misrepresentations of fact.” See Lueras, 221 Cal. App. 4th at 68. Nor did Sheen acknowledge that 14 Lueras held the door open for a negligence claim based on “negligent servicing,” where a servicer’s 15 conduct “caused or exacerbated [the] initial default.” See id. A handful of courts (including the 16 Ninth Circuit, in unpublished opinions) have since recognized the viability of a negligence claim 17 based on negligent servicing, although none have analyzed the theory outside of the loan 18 modification context. See, e.g., Deschaine v. IndyMac Mortg. Servs., 617 F. App’x 690, 693 (9th 19 Cir. 2015) (recognizing a possible exception for conduct that causes or exacerbates a default); 20 Anderson v. Deutsche Bank Nat. Tr. Co. Americas, 649 F. App’x 550, 552 (9th Cir. 2016) (same); 21 Vazquez v. Wells Fargo Bank, N.A., 2016 WL 7486605, at *3 (C.D. Cal. Oct. 19, 2016); In re 22 Residential Capital, LLC, 523 B.R. 24, 48–49 (Bankr. S.D.N.Y. 2014) (dismissing a borrower’s 23 negligence claim because the plaintiff “failed to provide evidence that it was the [d]ebtors’ conduct 24 that led her to default on her [l]oan”) (applying Lueras). The court undertakes that analysis now. 25 b. Negligent Servicing Claim 26 Beatty alleges that Defendants, as the servicer and beneficiary of the loan, have a duty to 27 provide him with accurate information regarding reinstatement and payments. He argues that the 1 payments, reinstatement, and foreclosure are clearly intended to affect Plaintiff, it is readily 2 foreseeable that he would be harmed by Defendants’ refusal to accept his payments and to stop the 3 foreclosure sale, he was in fact injured as a direct result of this incompetent, and there is a legitimate 4 policy interest in preventing future harm from such actions.” Opp. at 14-15. Defendants do not 5 address the Biakanja factors in their reply. 6 Under the first Biakanja factor, the reinstatement procedures provided by the Deed and 7 California law are unquestionably intended to benefit the borrower. See Deed of Trust ¶ 19; Cal. 8 Civ. Code § 2924c; see also Magnus v. Morrison, 93 Cal. App. 2d 1, 3 (1949) (“The purpose of the 9 [reinstatement statute] [is] to save equities in homes, in many instances built up through years of 10 monthly payments.”). Likewise, the ability to make timely payments benefits both the borrower 11 and the lender, as the borrower has an interest in avoiding default and disclosure. Beatty has alleged 12 facts sufficient to meet the first factor. 13 The second and third Biakanja factors are also established here. With respect to the second 14 factor, it is foreseeable that failure to provide accurate information during foreclosure proceedings 15 can harm the defaulting borrower, as he is in immediate danger of losing his property. The third 16 factor, the degree of certainty that the plaintiff suffered injury, is addressed above with respect to 17 Beatty’s alleged damages. For the reasons previously stated, the third factor is satisfied for the 18 purposes of this motion. 19 The fourth Biakanja factor looks at the “closeness of the connection between defendant’s 20 conduct and the injury suffered.” Biakanja, 49 Cal. 2d at 650. Beatty alleges that he lost an interest 21 in his home as a result of the foreclosure sale, and that the sale would not have happened if 22 Defendants provided him with accurate information about reinstating his loan. Similarly, Beatty 23 alleges that Defendants failed to provide him with accurate information on making his July 2019 24 payment. His resulting uncertainty about the status of his housing allegedly caused him to lose 25 income and rental income. These allegations are enough to plead a close connection between 26 Defendants’ alleged conduct and Beatty’s injuries because the injury was a direct result of the 27 conduct. Vazquez, 2016 WL 7486605, at *3 (finding a borrower stated a claim for negligence where 1 The fifth factor examines “the moral blame attached to the defendant’s conduct” and the 2 sixth considers the “policy of preventing harm.” Biakanja v. Irving, 49 Cal. 2d at 650. With respect 3 to these factors, Alvarez noted that the modern loan servicing industry has “positive incentives to 4 misinform and under-inform borrowers” because it allows servicers to “save money on customer 5 service . . . [and] collect late fees and other penalties from confused borrowers.” Alvarez, 228 Cal. 6 App. 4th at 949 (quotations omitted). Borrowers also “cannot pick their servicers or fire them for 7 poor performance.” Id. (quotations omitted). Given the power imbalance between the parties, the 8 potential for harm to the borrower, and the servicers’ positive incentives to mislead, there is a strong 9 public policy in imposing a duty of care on servicers during default and foreclosure proceedings.9 10 Correspondingly, a servicer’s failure to use due care incurs moral blame because of the potentially 11 devastating harm that may result to a borrower. 12 In sum, the court finds that application of the Biajanka factors weigh in favor of imposing 13 negligence liability under the specific facts of this case, which establish as a matter of pleading that 14 the servicer’s conduct “caused or exacerbated” a mortgage default and an ensuing foreclosure sale. 15 See Lueras, 221 Cal. App. 4th at 68. 16 2. Economic Loss Rule 17 The California Supreme Court has cautioned against the “mere rote application” of the 18 Rowland factors10 in deciding whether an entity has a duty of care. S. California Gas Leak Cases, 19 7 Cal. 5th 391, 399 (2019) (“Gas Leak Cases”). Another pertinent consideration, the court explained, is the application of the “economic loss rule,” which states that “economic losses not 20 flowing from conventional injury to person or property, such as physical damage, are ordinarily not 21 recoverable in tort.” Id. at 397. The purpose of the economic loss rule is to carefully delineate 22 between contract and tort law. In re iPhone Application Litig., 844 F. Supp. 2d 1040, 1064 (N.D. 23 24 25 9 The public policy considerations exemplify why loan servicing deserves a different analysis than loan modification. In the loan modification context, “imposing negligence liability for the 26 mishandling of loan modification applications could be a disincentive to lenders from ever offering modification.” Ottolini v. Bank of Am., No. 11-cv-0477 EMC, 2011 WL 3652501, at *7 (N.D. Cal. 27 Aug. 19, 2011). There are not comparable disincentives in the loan servicing context that would 1 Cal. 2012) (“Purely economic damages to a plaintiff which stem from disappointed expectations 2 from a commercial transaction must be addressed through contract law; negligence is not a viable 3 cause of action for such claims.”). The rationale behind the economic loss rule is that “[c]onsumers 4 can thus protect themselves from economic losses by negotiating the terms of the contract.” Tasion 5 Commc’ns, Inc. v. Ubiquiti Networks, Inc., No. 13-cv-1803-EMC, 2013 WL 4530470, at *4 (N.D. 6 Cal. Aug. 26, 2013). However, a breach of contract may also be tortious if “some independent duty 7 arising from tort law is violated.” UMG Recordings, Inc. v. Glob. Eagle Entm’t, Inc., 117 F. Supp. 8 3d 1092, 1103 (C.D. Cal. 2015) (quoting Erlich v. Menezes, 21 Cal. 4th 543, 554 (1999)); see also Tasion, 2013 WL 4530470, at *10 (citing cases). 9 In this case, Defendants argue that Beatty is precluded from recovering on his negligence 10 claim because the economic loss rule prohibits the application of tort liability in a financial 11 transaction. Mot. at 8 (“The economic loss doctrine is routinely applied to bar tort claims that are 12 merely recast contract claims.”). Beatty responds that the economic loss rule does not apply to 13 injury to property. Opp. at 10-11; see Gas Leak Cases, 7 Cal. 5th 391. Defendants argue that Beatty 14 did not suffer such loss because the sale of his home was rescinded and because he does not allege 15 physical injury to the Property. Reply at 4. 16 The court previously found that Beatty has adequately pleaded that he lost an equitable 17 interest in his home as a result of the foreclosure sale. As noted above, the parties did not explain 18 the nature of the interest at stake; in fact, neither party even mentions the distinction between legal 19 and equitable title. In support of their motion, Defendants summarily assert that Beatty did not 20 suffer an injury to property but provide no authority that loss of equitable title constitutes a purely 21 economic loss. See Reply at 4. As Defendants did not explain or support this argument, the court 22 declines to reach the issue of whether the property loss allegedly suffered by Beatty constitutes an 23 injury to property within the meaning of the economic loss rule. 24 3. Emotional Distress Damages 25 Beatty seeks emotional distress damages as a result of Defendants’ alleged negligence. 26 Compl. ¶ 57. “Recovery for emotional distress in negligence cases is generally not available unless 27 malice, breach of a fiduciary duty, physical injury or impact, or some other unusually extreme or 1 outrageous circumstance, can be shown.” Varnado v. Midland Funding LLC, 43 F. Supp. 3d 985, 2 990 (N.D. Cal. 2014) (quoting Miranda v. Field Asset Servs., 2013 WL 3283701, at *5 (S.D. Cal. 3 June 27, 2013)) (internal quotation marks and further citations omitted). Defendants argue that 4 Beatty has failed to plead facts showing that any of those factors apply in this case. Mot. at 9-11. 5 The only authority Beatty offers on this point is Miles v. Deutsche Bank Nat’l Tr. Co., 236 6 Cal. App. 4th 394 (2015), which he argues stands for the proposition that “all proximately caused 7 damages” are available in tort. See Opp. at 13; 236 Cal. App. 4th at 409. However, Miles addressed 8 a wrongful foreclosure action, not a negligence claim. Beatty offers no other argument that an exception to the general rule applies in this case. Accordingly, Defendants’ motion to dismiss is 9 granted as to Beatty’s alleged emotional distress damages arising from his negligence claim.11 10 However, Beatty may plead emotional distress damages for his wrongful disclosure claim, which is 11 discussed in the following section. 12 In sum, the court holds that Beatty has adequately alleged that Defendants owed him a duty 13 of care under a negligent servicing theory but dismisses Beatty’s claim for emotional damages as to 14 this claim. 15 C. Wrongful Foreclosure 16 To state a claim for wrongful disclosure, a plaintiff must allege that “(1) the trustee or 17 mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a 18 power of sale in a mortgage or deed of trust; (2) plaintiffs were prejudiced or harmed; and (3) they 19 tendered the amount of the secured indebtedness or were excused from tendering.” Cervantes v. W. 20 End 3199 REO LLC, No. 17-cv-06100-VKD, 2018 WL 6727823, at *9 (N.D. Cal. Dec. 21, 2018). 21 Defendants argue that this cause of action is moot because “any foreclosure sale that might 22 have occurred was immediately rescinded.” Mot. at 11. Again, authorities identified by the court 23 indicate that a debtor loses equitable title to a property upon conclusion of a foreclosure sale 24 regardless of whether a deed upon sale has been recorded. See In re RW Meridian LLC, 564 B.R. 25 at 30 (“In an involuntary sale such as foreclosure, equitable title is transferred to the purchaser at 26 27 1 the foreclosure auction with acceptance of the highest bid and it is at that time a trustee’s sale is 2 ‘complete.’”). Beatty adequately alleges that the foreclosure sale took place. Defendants do not 3 argue or present authority that loss of equitable title does not constitute a “sale” for the purposes of 4 a wrongful foreclosure case or that they have cured that loss. 5 The court denies Defendants’ motion to dismiss Beatty’s wrongful foreclosure claim. 6 D. UCL 7 Beatty’s final claim seeks relief for Defendant’s alleged violations of California’s UCL. 8 Under the UCL, unfair competition is defined as “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising.” See Cal. Bus. & Prof. Code § 9 17200. A business practice is “unlawful” under section 17200 if it violates an underlying state or 10 federal statute or common law. See Cal-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 11 Cal. 4th 163, 180 (1999). An act is “unfair” if the act “threatens an incipient violation of a 12 [competition law],or violates the policy or spirit of one of those laws because its effects are 13 comparable to or the same as a violation of the law.” Id. at 187. To the extent the claims sound in 14 fraud, they are subject to the heightened pleading standards of Rule 9(b). See Kearns v. Ford Motor 15 Co., 567 F.3d 1120, 1125 (9th Cir. 2009). Additionally, “[a] plaintiff alleging unfair business 16 practices under the unfair competition statutes ‘must state with reasonable particularity the facts 17 supporting the statutory elements of the violation.’” Silicon Knights, Inc. v. Crystal Dynamics, Inc., 18 983 F. Supp. 1303, 1316 (N.D. Cal. 1997) (quoting Khoury v. Maly’s of California, 14 Cal. App. 19 4th 612, 619 (1993)). 20 Defendants argue that Beatty’s UCL claim fails because he has not adequately pleaded a 21 predicate cause of action. Mot. at 12. This argument fails, as the court has found Beatty has 22 adequately pleaded causes of action for breach of the implied covenant of good faith and fair dealing, 23 negligence, and wrongful foreclosure. Each of these may serve as a predicate cause of action for a 24 UCL claim based on the unlawful and unfair prongs. However, to the extent that Beatty bases his 25 UCL claim on the “fraudulent” prong, that claim fails. “Fraud” is an “intentional misrepresentation, 26 deceit, or concealment of a material fact known to the defendant with the intention on the part of 27 the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” 1 Cal. Civ. Code § 3294 (c)(3). Beatty has not alleged that Defendants intentionally harmed him. 2 Moreover, claims fraud must meet the heightened pleading standards of Rule 9(b). Kearns v. Ford 3 Motor Co., 567 F.3d at 1125. The complaint is devoid of allegations that suggest fraudulent conduct 4 by the Defendants; therefore, Beatty’s UCL claim may proceed only under the unlawful and unfair 5 prongs. 6 Defendants also argue that Beatty cannot recover relief under the UCL because the only 7 remedies available under the UCL are injunctive relief and restitution, and Beatty is not entitled to 8 either. Stone v. Advance Am., 278 F.R.D. 562, 564 (S.D. Cal. 2011). The court rejects this argument. Beatty adequately alleged that a foreclosure sale occurred, which entails a loss of equitable title. 9 Defendants have not explained whether and how Beatty recovered this loss. If the loss has not been 10 remedied, injunctive relief and/or restitution may be an appropriate remedy. In absence of evidence 11 to the contrary, Beatty may be entitled to relief under the UCL. 12 Finally, Defendants assert that Beatty lacks standing to bring a UCL claim because he has 13 not alleged that he suffered damages as a result of Defendants’ alleged conduct. This argument 14 fails. As discussed above, Beatty adequately pleaded that he suffered damages as a result of 15 Defendants’ conduct. 16 Accordingly, Defendants’ motion to dismiss Beatty’s UCL claim is denied. 17 V. CONCLUSION 18 For the reasons stated above, the court grants in part and denies in part Defendants’ motion 19 to dismiss. Beatty’s breach of express contract claim is dismissed. To the extent that Beatty alleges 20 breach of the covenant of good faith and fair dealing as a result of Defendants’ conduct prior to May 21 2019, that claim is also dismissed. Beatty is not entitled to emotional distress damages for his breach 22 of covenant and negligence claims, and his prayer for recovery as to those damages is dismissed. 23 To the extent that his UCL claim relies on the “fraudulent prong,” that claim is dismissed. Given 24 that these pleading deficiencies were addressed by the court in connection with Defendants’ first 25 motion to dismiss, and the court admonished Beatty to “plead his best case,” these claims are 26 dismissed with prejudice. 27 The court will conduct a case management conference on February 5, 2020 at 1:30 p.m. The 1 parties shall file an updated joint case management conference statement by January 29, 2020. 2 3 IT IS SO ORDERED. 4 Dated: December 10, 2019 5 ______________________________________ Donna M. Ryu 6 United States Magistrate Judge 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27