Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_15-cv-00809/USCOURTS-caed-1_15-cv-00809-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

NORMA MADRIGAL,

Plaintiff,

v.

NATIONSTAR MORTGAGE LLC, et al.,

Defendants.

Case No. 1:15-cv-00809-SAB

ORDER PARTIALLY GRANTING

NATIONSTAR‟S MOTION TO DISMISS

ECF NO. 15

On June 19, 2015, Defendant Nationstar Mortgage LLC (“Nationstar”) filed a motion to 

dismiss the First Amended Complaint. (ECF No. 15.) Plaintiff Norma Madrigal (“Plaintiff”) 

filed an opposition on June 25, 2015. (ECF No. 18.) Nationstar filed a reply on June 30, 2015. 

(ECF No. 19.) Defendant Barrett Daffin Frappier Treder & Weiss LLP (“Barret Daffin”) filed a 

joinder to the motion to dismiss on July 1, 2015. (ECF No. 20.) All parties have consented to 

the jurisdiction of a United States Magistrate Judge for all purposes. (ECF Nos. 3, 7, 12.)

The hearing on Nationstar‟s motion to dismiss took place on July 22, 2015. Bryan M. 

Leifer appeared on behalf of Nationstar. Lauren Rode appeared on behalf of Plaintiff. James T. 

Lee appeared on behalf of Barrett Daffin.

For the reasons set forth below, the Court partially grants Nationstar‟s motion to dismiss 

and dismisses Plaintiff‟s breach of contract claims with leave to amend.

/ / /

Case 1:15-cv-00809-SAB Document 22 Filed 07/23/15 Page 1 of 7
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I.

BACKGROUND

The operative complaint is the First Amended Complaint filed on June 17, 2015. (ECF 

No. 11.) The First Amended Complaint names Nationstar and Barret Daffin as defendants. 

Plaintiff raises four causes of action: 1) for breach of contract, 2) for breach of the covenant of 

good faith and fair dealing, 3) for violation of California Business and Professions Code § 

17200, and 4) for declaratory and injunctive relief.

Plaintiff alleges that she owns the real property located at 2433 N. Oak Park Ct., Visalia 

CA 93291 (“the Subject Property”). The original lender for the property was Countrywide 

Home Loans, Inc. Plaintiff was awarded interest in the home during her divorce from her exhusband.

Plaintiff alleges that at some point in time unknown to Plaintiff, the beneficial interest in 

the loan and the servicing of the loan was transferred to Nationstar, with Barrett Daffin acting as 

the foreclosure trustee.

In March 2014, Plaintiff‟s monthly mortgage payments were $605.74, which consisted of 

$119.13 in payments toward the principal, $339.26 in interest, and $147.35 going into escrow for 

taxes and insurance.

In April 2014, Plaintiff made a payment for $605.74. However, Plaintiff was told that the 

payment would not be credited toward the loan balance and was instead held in “suspense.” 

(First Am. Compl. ¶ 20.) In May 2014, Plaintiff was told that her escrow payments changed 

from $147.35 to $546.17. In July and August 2014, Nationstar informed Plaintiff that it had not 

received payments for July and August. However, Plaintiff alleges that she made those 

payments. Plaintiff subsequently made payments for September and October 2014, but 

Nationstar returned those payments and refuses to accept them.

On or around January 21, 2015, Nationstar caused Barrett Daffin to record a Notice of 

Default against the Subject Property. On or around April 27, 2015, Nationstar caused Barrett 

Daffin to record a Notice of Trustee‟s Sale against the Subject Property. A foreclosure auction is 

scheduled for July 14, 2015 at 1:00 p.m.

Case 1:15-cv-00809-SAB Document 22 Filed 07/23/15 Page 2 of 7
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Plaintiff contends that Nationstar breached the terms of the loan agreement by claiming 

that the balance is past due on the loan, even though Plaintiff tendered all payments required by 

the loan. Plaintiff further alleges that Nationstar changed the escrow amount without cause or 

notice.

Nationstar‟s motion to dismiss argues that Plaintiff‟s contract claims fail because Plaintiff 

was not a party to any contract with Nationstar. Nationstar further argues that Plaintiff‟s claims 

under California Business & Professions Code § 17200 and Plaintiff‟s claims for declaratory and 

injunctive relief fail because they are premised upon the same breach of contract theories.

II.

LEGAL STANDARDS FOR MOTIONS TO DISMISS

Under Federal Rule of Civil Procedure 12(b)(6), a party may file a motion to dismiss on 

the grounds that a complaint “fail[s] to state a claim upon which relief can be granted.” A 

complaint must contain “a short and plain statement of the claim showing that the pleader is 

entitled to relief.” Fed. R. Civ. P. 8(a)(2). “[T]he pleading standard Rule 8 announces does not 

require „detailed factual allegations,‟ but it demands more than an unadorned, the-defendantunlawfully harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell 

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In assessing the sufficiency of a 

complaint, all well-pleaded factual allegations must be accepted as true. Iqbal, 556 U.S. at 678-

79. However, “[t]hreadbare recitals of the elements of a cause of action, supported by mere 

conclusory statements, do not suffice.” Id. at 678.

III.

DISCUSSION

A. Plaintiff’s Breach of Contract Claim

At the outset, the Court notes that the facts alleged in Plaintiff‟s complaint present a 

rather unusual scenario. Plaintiff alleges that she received the Subject Property from her exhusband during divorce proceedings and there was a pre-existing mortgage on the Subject 

Property. Plaintiff made timely payments on the loan, but for reasons unspecified in the 

complaint, Nationstar refused to accept those payments and chose to initiate foreclosure 

Case 1:15-cv-00809-SAB Document 22 Filed 07/23/15 Page 3 of 7
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proceedings. In its motion to dismiss, Nationstar contends that the original loan agreement was 

between Plaintiff‟s ex-husband and the original lender and Plaintiff has no right to sue for any 

breach of contract.

Nationstar argues that Plaintiff‟s contract theories fail because Plaintiff was not a party to 

the loan agreement securing the Subject Property. As a general proposition, “someone who is 

not a party to the contract has no standing to enforce it or to recover extra-contractual damages 

for the wrongful withholding of benefits to the contracting party.” Jones v. Aetna Casualty & 

Surety Co., 26 Cal. App. 4th 1717, 1722 (1994) (citing Hatchwell v. Blue Shield of California, 

198 Cal. App. 3d 1027, 1034 (1988)). However, this general proposition is not without 

exceptions. For example, California law permits a third party beneficiary to enforce the terms of 

a contract made for their benefit. Cal. Civ. Code § 1559; see also Spinks v. Equity Residential 

Briarwood Apartments, 171 Cal. App. 4th 1004, 1021-22 (2009). Contractual rights may also be 

assigned from an original party to the contract to another, see Restatement (Second) of Contracts 

§ 317 (1981), as was presumably the case with Nationstar, who was not the original lender in the 

loan agreement. California law also treats a cause of action for breach of contract as property 

which may be transferred from one entity to another. Cal. Civ. Code § 954; Morris v. Standard 

Oil Co., 200 Cal. 210, 214 (1926).

However, in this case, the First Amended Complaint is devoid of any allegations 

establishing Plaintiff‟s standing to sue for Nationstar‟s breach of the loan agreement. The First 

Amended Complaint alleges, in conclusory fashion, that “Plaintiff is party to the loan, of which 

Nationstar is the servicer and beneficiary to the loan.” (First Am. Compl. ¶ 28.) However, the 

First Amended Complaint does not allege how Plaintiff is a party to the loan. The closest 

Plaintiff comes to explaining how she is a party to the loan is Plaintiff‟s allegation that she “was 

awarded interest in and liability for the home during her divorce from her ex-husband.” (First 

Am. Compl. ¶ 17.)

Plaintiff‟s vague allegation pertaining to the divorce proceedings is insufficient to 

establish standing in this action. The fact that Plaintiff received the Subject Property via divorce 

proceedings does not explain how she is also a party to a loan agreement secured by the Subject 

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Property. Plaintiff does not allege facts which plausibly support the conclusion that she should 

be treated as a third party beneficiary to the loan agreement. Plaintiff does not allege facts which 

demonstrate that the original signatory to the loan agreement, her husband, made an assignment 

of his contractual rights to Plaintiff.1 Plaintiff does not allege that her ex-husband transferred his 

cause of action for breach of contract to Plaintiff. These facts may be alleged via amendment, 

but they are not sufficiently alleged at this point in the First Amended Complaint before the 

Court. As it is, it is unclear how Plaintiff has standing.

Based upon the foregoing, the Court will grant Nationstar‟s motion to dismiss the breach 

of contract claim and claim for breach of the covenant of good faith and fair dealing. However, 

the Court will grant Plaintiff leave to amend the complaint to allege facts establishing her 

standing to bring these claims.

B. Plaintiff’s Unfair Competition Claims

Nationstar contends that Plaintiff‟s remaining claims fail because they are premised upon 

Plaintiff‟s breach of contract claim. However, unfair competition claims under California 

Business and Professions Code § 17200 are not necessarily premised upon breach of contract. In 

this case, Plaintiff argues that Nationstar‟s fraudulent conduct is the basis of the unfair 

competition claim.

California Business and Professions Code § 17200 states:

As used in this chapter, unfair competition shall mean and include

any unlawful, unfair or fraudulent business act or practice and 

unfair, deceptive, untrue or misleading advertising and any act 

prohibited by Chapter 1 (commencing with Section 17500) of Part 

3 of Division 7 of the Business and Professions Code.

California‟s unfair competition law prohibits three broadly defined categories of “unfair 

competition”: acts or practices which are unlawful, or unfair, or fraudulent. Davis v. HSBC 

Bank Nevada, N.A., 691 F.3d 1152, 1168 (9th Cir. 2012). “Because the statute is written in the 

disjunctive, it is violated where a defendant‟s act or practice violates any of the foregoing 

prongs. Id.

 

1 At oral argument, Plaintiff‟s counsel stated that there had been no “official” assignment of contractual rights to 

Plaintiff.

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In this case, Plaintiff relies upon the “fraudulent” prong, though the Court notes that the 

“unfair” prong might also apply. “The term „fraudulent‟ as used in section 17200 „does not refer 

to the common law tort of fraud but only requires a showing members of the public “„are likely 

to be deceived.‟”‟ Puentes v. Wells Fargo Home Mortg., Inc., 160 Cal. App. 4th 638, 645 (2008) 

(quoting Saunders v. Superior Court, 27 Cal. App. 4th 832, 839 (1994); Byars v. SCME 

Mortgage Bankers, Inc., 109 Cal. App. 4th 1134, 1147 (2003)). Much of the conduct alleged in 

the First Amended Complaint meets this definition. Plaintiff alleged that after she was awarded 

the Subject Property from the divorce, she continued to make payments on the loan, which 

Nationstar accepted and processed without objection. It was not until early 2014 that Nationstar 

began rejecting payments and eventually initiating foreclosure proceedings against the Subject 

Property. Under a motion to dismiss standard, this can certainly be deceptive from the 

perspective of Plaintiff, as she had made several monthly payments to no avail. Furthermore, 

Plaintiff alleges that Nationstar increased the escrow payments required under the loan without 

cause or explanation. Finally, Plaintiff alleges that Nationstar initiated foreclosure proceedings 

by claiming Plaintiff was behind on payments when in fact Plaintiff was not—Plaintiff made 

timely payments but Nationstar had rejected them. This conduct could be “fraudulent” within 

the meaning of California‟s unfair competition laws, and hence, defeats a motion to dismiss. 

Irrespective of Plaintiff‟s standing to sue in a court of law for a breach of contract, it would be 

deceptive and unfair to reject loan payments without cause and foreclose on Plaintiff‟s house, 

forcing her to move. Accordingly, irrespective of Plaintiff‟s standing or lack of standing to bring 

a claim for breach of contract, Plaintiff possesses a valid claim under Section 17200.2

IV.

CONCLUSION AND ORDER

Based upon the foregoing, the Court finds that Plaintiff‟s First Amended Complaint does 

not state sufficient facts to plausibly support a claim for breach of contract or breach of the 

covenant of good faith and fair dealing because Plaintiff did not allege sufficient facts to 

 

2 The Court further notes that equitable relief, such as injunctive relief, is authorized under California‟s unfair 

competition law. Cal. Bus. & Prof. Code § 17203. Accordingly, Plaintiff‟s claims for declaratory and injunctive 

relief remain viable.

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establish her standing to sue under those theories. The Court will grant Plaintiff leave to amend 

her complaint to allege additional facts to establish standing. The Court further finds that 

Plaintiff‟s First Amended Complaint states cognizable claims under California‟s unfair 

competition law.

Accordingly, it is HEREBY ORDERED that:

1. Nationstar‟s motion to dismiss is PARTIALLY GRANTED;

2. Plaintiff‟s claim for breach of contract and claim for breach of the covenant of 

good faith and fair dealing are DISMISSED, with leave to amend;

3. Nationstar‟s motion to dismiss Plaintiff‟s claim for violation of California‟s unfair 

competition law and Plaintiff‟s claims for injunctive and declaratory relief are 

DENIED;

4. Plaintiff shall file an amended complaint on or before August 5, 2015.

IT IS SO ORDERED.

Dated: July 22, 2015 

UNITED STATES MAGISTRATE JUDGE

Case 1:15-cv-00809-SAB Document 22 Filed 07/23/15 Page 7 of 7