Court Opinion

ID: 9556574
Source: CourtListenerOpinion
Date Created: 2023-08-17 18:03:45.726903+00
Date Added: 2024-06-11T08:09:56.442861
License: Public Domain

Filed 8/17/23 Fuchs v. PHH Mortgage Corp. CA4/1
                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

JOHN R. FUCHS et al.,                                                D082259

         Plaintiffs and Appellants,

         v.                                                          (Super. Ct. No. CVRI2101104)

PHH MORTGAGE CORPORATION et
al.,

         Defendants and Respondents.

         APPEAL from a judgment of the Superior Court of Riverside County,
Godofredo Cuison Magno, Judge. Affirmed.

         Fuchs Law Group, John R. Fuchs and Gail S. Gilfillan, for Plaintiffs
and Appellants.
         Houser, Robert W. Norman, Jr. Emilie K. Edling and Neil J. Cooper for
Defendants and Respondents.
                              INTRODUCTION

      This appeal arises out of a loan (the Loan) John R. Fuchs1 obtained to
purchase a second home in Palm Desert, California (the Property). At all
relevant times, the Loan was held by Wells Fargo Bank, National
Association, as Trustee of Option One Mortgage Loan Trust 2006-3, Asset-
Backed Certificates, Series 2006-3 (Wells Fargo), which initially was serviced
by Ocwen Loan Servicing, Inc. (Ocwen) and later by PHH Mortgage

Corporation.2
      John filed a chapter 11 bankruptcy petition in June 2017. Ocwen filed
a claim for pre-petition arrearages on the Loan, composed of two missed
monthly payments, assessed foreclosure fees, and an escrow deficiency.
During the bankruptcy, John’s missed monthly payments and Ocwen’s
bankruptcy fees became post-petition arrearages. Although the bankruptcy
plan provided for payment in full of arrearages on Ocwen’s secured claim,
Ocwen received only the amount necessary to cure the arrearages on John’s
post-petition missed payments.
      Following the bankruptcy, the loan servicers continued to pursue the
unpaid arrearages. John made only regular payments on the Loan, disputing
that he owed any additional amount. Based on this dispute, the Fuchses filed
a complaint for damages and temporary, preliminary and permanent

1     Robyn R. Fuchs is also an appellant. For clarity, but intending no
disrespect, we use the names John and Robyn for individual references.

2      John and Robyn took title to the Property, but only John signed the
promissory note (the Note). They both signed the deed of trust (the Deed of
Trust) and a subsequent loan modification; however, because only John was
listed on the mortgage statements, we write assuming he was the borrower.

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injunctive relief (the Complaint) against PHH Mortgage Corporation, Ocwen,
and Wells Fargo alleging causes of action for breach of contract, breach of
covenant of good faith and fair dealing, violation of the Business and
Professions Code, section 17200, et seq., and declaratory relief. The trial
court granted summary judgment in favor of PHH, Ocwen, and Wells Fargo
on all causes of action. The Fuchses appeal as to PHH Mortgage Corporation,
individually and as successor to Ocwen, and Wells Fargo (collectively PHH).
      On appeal, the Fuchses argue: (1) John’s bankruptcy plan barred PHH
from collecting pre-petition arrearages; and (2) a dispute of material fact
exists as to the proper unpaid pre-petition arrearage amount.
      We limit our review to the boundaries established by the Complaint. In
the Complaint, the Fuchses argued that John did not owe pre-petition missed
payments or any fees on the Loan contracts. The Complaint did not include
allegations based on John’s bankruptcy plan; consequently, we decline to
consider these arguments.
      We conclude that there is no triable issue of material fact that two pre-
petition monthly payments and the assessed fees remained unpaid until the
payoff of the Loan, at which time PHH properly collected them. With this
undisputed factual basis, we agree with the trial court that PHH is entitled
to judgment as a matter of law on all causes of action. We thus affirm the
judgment.
                                       I.
              FACTUAL AND PROCEDURAL BACKGROUND
A. The Loan
      In August 2006, the Fuchses purchased the Property as a second home.
John obtained the Loan with the Note secured by the Deed of Trust on the
Property. At all relevant times, the Loan was held by Wells Fargo. Ocwen

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became the loan servicer on March 1, 2013. On May 1, 2019, PHH Mortgage
Corporation took over as the loan servicer.
      The Deed of Trust provides that the borrower shall reimburse the
lender for “costs, fees and expenses . . . arising out of or in connection with
this Security Instrument” and any note secured by it, including “appraisal
fees, inspection fees, legal fees, . . . foreclosure fees and costs arising from
foreclosure of the Property and protection of the security . . . .” The Deed of
Trust also states: “If Borrower fails to perform the covenants and
agreements contained in this Security Instrument, or there is a legal
proceeding that may significantly affect Lender’s rights in the Property (such
as a proceeding in bankruptcy . . . ), then Lender may do and pay for
whatever is necessary to protect the value of the Property and Lender’s rights
in the Property. Lender’s actions may include . . . appearing in court, paying
reasonable attorneys’ fees . . . . Any amounts disbursed by Lender under this
paragraph 7 shall become additional debt of Borrower secured by this
Security Instrument.” (collectively, the Fee Clauses).
      In 2016, John fell behind on his Loan payments. Ocwen recorded a
Notice of Default in August 2016 and a Notice of Trustee’s Sale in January
2017. Shortly thereafter, John paid the past due amount required to prevent
foreclosure, and Ocwen recorded a notice rescinding the default. Although
Ocwen rescinded the default, it assessed additional fees of $2,171.51 for
foreclosure costs it had expended, as permitted by the Fee Clauses. Ocwen
later assessed an additional $13.25 fee for a property inspection (collectively,

the Foreclosure Fees).3
      John failed to make his May and June 2017 mortgage payments.

3    Although Ocwen may have intended to waive this fee, the Fuchses
waived that argument by failing to raise and develop it specifically.
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B. The Bankruptcy
      On June 13, 2017, John filed an individual chapter 11 bankruptcy
proceeding. Ocwen filed a proof of claim for $11,109.03 (the Proof of Claim),
representing the amount necessary to cure the pre-petition arrearages. The
Proof of Claim amount included: the $3,248.98 in unpaid principal and
interest, the $2,171.51 in Foreclosure Fees, a $3,752.50 existing escrow
deficiency, and a $1,936.04 projected escrow shortage for the following year.
Ocwen attached receipts for the Foreclosure Fees incurred. John did not
object to the Proof of Claim.
      During the bankruptcy, Ocwen incurred attorneys’ fees and costs for
review of the file and payment history ($250), preparing and filing the Proof
of Claim ($350), and review of the bankruptcy plan ($400) (collectively, the
Bankruptcy Fees). Pursuant to the Fee Clauses, Ocwen assessed the
Bankruptcy Fees against John.
      The Fuchses sold their primary residence in late 2017. John deposited
the proceeds from the sale into the bankruptcy court’s registry as required.
      On July 11, 2018, the bankruptcy court granted John’s motion for
approval of a chapter 11 plan. The plan provided for funding through the
registry funds and a portion of John’s income over a five-year period. The
plan included Ocwen as an unimpaired secured creditor, requiring John to
“cure any default that occurred before or after the petition date in this case,”
with arrearages “paid in full,” and without altering Ocwen’s “legal, equitable,
or contractual rights.” The bankruptcy court order confirming the plan
explains that, under the terms of the plan, unpaid arrearages, including to
Ocwen, would be paid “in full . . . via proceeds on deposit in the Court’s
registry.”

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      On July 20, 2018, the bankruptcy court issued an order to disburse
funds out of its registry. The order provided for a disbursement of $17,373.07
to Ocwen. Ocwen received that amount on August 2, 2018.
      Despite the possible intention of the plan, the payment of $17,373.07

only cured the post-petition arrearages.4 John made four post-petition
payments for a total of $8,740.40, which was a $693.64 overpayment for those
months. The $17,373.07 represents nine missed post-petition payments:
seven payments of $2,011.69 and two payments of $1,992.44, less the $693.64
post-petition overpayment.
      The post-confirmation chapter 11 monthly operating report filed by
John likewise states that $17,373.07 was the amount of post-petition
arrearages.
      On September 17, 2018, the bankruptcy court issued an “Order of Final
Decree Closing Case.” John did not receive a discharge but retained the
ability to reopen the bankruptcy proceeding in order to obtain a discharge
upon completion of plan payments.
C. Post-Bankruptcy Payments
      After bankruptcy, Ocwen’s mortgage statements showed a $11,109.03
pre-petition arrearage amount due, but John only paid the regular amount
due each month.
      Upon transfer of the account to PHH for servicing on May 1, 2019, PHH
sent John a transfer statement showing that the account had an escrow
deficiency of $4,536.13, along with unpaid principal and interest of $4,187.26
and $3,184.76 in fees. PHH’s regular mortgage statements likewise included
the $3,184.76 as Assessed Expenses. The mortgage statements also showed a
Past Unpaid Amount each month. John continued sending the regular post-

4     We do not consider or determine the meaning of the plan.
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petition monthly payment amount through December 2020 but did not pay
the Assessed Expenses or Past Unpaid Amount.
      Between mid-2019 and early 2021, John sent two letters and made
multiple phone calls to PHH to dispute the Assessed Expenses and Past
Unpaid Amount. In response, PHH stated that it had researched the matter,
determined that the bankruptcy was only administratively closed, and
determined there was no error. It advised John to contact its bankruptcy
counsel with further questions and provided relevant contact information.
The Fuchses did not contact the bankruptcy counsel.
D. Sale of the Property
      The Fuchses voluntarily sold the Property in April 2021. To close
escrow, PHH required a payoff amount that included unpaid principal,
interest on the principal, the escrow deficiency, the Foreclosure and

Bankruptcy Fees, and two small administrative fees.5 The principal balance
and escrow deficiency were derived from PHH’s Customer Account Activity
Statement for 2019–2021, which provided an accounting of the transactions
on John’s account during PHH’s servicing. The PHH accounting was a
continuation of Ocwen’s Payment Reconciliation History beginning in

5      The amount in each category was: $345,844.69 in unpaid principal;
interest of $7,847.15 from October 1, 2020, though the April 12, 2021, loan
payoff; an unpaid escrow balance of $6,390.76; the $3,184.76 in Foreclosure
and Bankruptcy Fees; a $15 lien release fee; and a $201 recording fee.
Interest ran from October 1, 2020, because PHH applied each of John’s post-
petition regular payments to the past due amount, rather than to the present
month. John was two payments behind from the pre-petition missed
payments and his last payment was for December 2020. The Fuchses do not
contest the interest or two administrative fees. They contest the two missed
pre-petition payments (part of the principal and unpaid escrow) and the
Foreclosure and Bankruptcy Fees.
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February 2013 when it became the loan servicer (collectively, the
Accounting).
      The Accounting traces John’s mortgage payments from Ocwen’s
servicing to the transfer of service to PHH to loan payoff, applying portions of
each payment to principal, interest, and escrow. The Accounting reflects that
John failed to make the May and June 2017 payments and did not
subsequently make these payments. Throughout the Accounting, the Escrow
Balance decreased with each contribution and increased once taxes were
paid. The Foreclosure Fees and Bankruptcy Fees also appear in the
Accounting.
      On April 12, 2021, PHH received the outstanding balance to pay off the
loan and reconveyed the Deed of Trust.
E. The Present Lawsuit
      Prior to the sale, on February 3, 2021, the Fuchses filed the Complaint
against PHH, Ocwen, and Wells Fargo, alleging four causes of action: (1)
PHH breached the Note and Deed of Trust by improperly demanding
payments of $7,307.42, composed of the $4,122.66 Past Unpaid Amount and
the $3,184.76 Assessed Expenses; (2) PHH violated the covenant of good faith
and fair dealing implied in the Note and Deed of Trust by making false
payment demands, failing to accurately account for the amount due, failing to
negotiate the dispute as to the proper payment amount in good faith,
promising to resolve the dispute and not doing so, and failing to abide by
statutory requirements for lenders and loan servicers; (3) PHH committed
unlawful, unfair, and fraudulent business practices (Bus. and Prof. Code,
§§ 17200 et seq.) by violating California Civil Code sections 2923.5 and
2923.6, by violating the Note and Deed of Trust and duty of good faith and
fair dealing, by making misrepresentations regarding dispute resolution, and

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by failing to provide a detailed and accurate accounting; and (4) declaratory
relief was proper because the Past Unpaid Amount and Assessed Expenses
were false charges that must be removed from PHH’s mortgage statements.
      PHH moved for summary judgment on the basis that no triable issue of
material fact existed, arguing PHH properly collected the unpaid funds.
Along with the motion, PHH requested the trial court take judicial notice of
the Deed of Trust and relevant bankruptcy documents, which the trial court
granted.
      The Fuchses opposed the motion, arguing that 11 U.S.C. § 1141 and res
judicata bar PHH’s collection of the $11,109.03 in pre-petition past due
amounts because Ocwen failed to demand payment of that amount from the
bankruptcy court register.
      On April 28, 2022, the trial court issued an order granting PHH’s
motion for summary judgment, finding that PHH met its initial burden to
show that the charges were proper. The Fuchses then failed to provide
evidence that the $17,373.07 amount included the $11,109.03 in pre-petition
arrears shown in Ocwen’s Proof of Claim. The bankruptcy court’s order
confirming the bankruptcy plan required John to pay the arrearages in full
on the Ocwen claim, which included pre-petition and post-petition
arrearages. Because the plan and confirmation order required John to pay
the arrearages in full to Ocwen, the trial court held: (1) PHH’s act of
collecting pre-petition arrearages was not a breach of the Note or Deed of
Trust; (2) PHH’s act of collecting pre-petition arrearages was not a violation
of the duty of good faith and fair dealing; (3) the Fuchses did not suffer injury
in fact as required by Business and Professions Code section 17204;
additionally, Civil Code section 2024.15, subdivision (a)(1) makes Civil Code
sections 2923.5 and 2923.5 applicable only to an owner-occupied principal

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residence; and (4) the cause of action for declaratory relief was moot because
the pre-petition arrearages had been paid.
      The Fuchses timely appealed the judgment.
                                         II.
                                  DISCUSSION
      On appeal, the Fuchses argue: (1) PHH’s demand and collection of
$11,109.03 in pre-petition arrearages was improper because it failed to seek
them in his confirmed bankruptcy plan (11 U.S.C. § 1141, subd. (a)); and (2) a
dispute of material fact exists as to the calculation of the $11,109.03 in pre-
petition arrearages claimed and whether that was the amount PHH required
John to pay.
      PHH responds: (1) the Fuchses’ bankruptcy theories were outside the
pleadings; (2) no triable issue of fact exists; and (3) the trial court properly
granted summary judgment based on the undisputed facts and claims in the
Complaint. PHH also disputes the merits of the Fuchses’ bankruptcy claims
and jurisdiction in state court to decide them.
      We conclude that the Fuchses’ bankruptcy arguments were outside the
pleadings and decline to consider them. We further conclude that no dispute
of material fact exists as the unpaid amount due to PHH at loan payoff and
thus affirm the judgment for PHH.
A. Summary Judgment Standard
      A trial court properly grants summary judgment when “all the papers
submitted show that there is no triable issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.” (Code Civ.
Proc., § 437c, subd. (c).) “[T]he party moving for summary judgment bears
the burden of persuasion” on both points. (Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 850 (Aguilar).)

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      We review the trial court’s grant of summary judgment de novo based
on the evidence that was before the trial court, “ ‘ “liberally constru[ing] the
evidence in support of the party opposing summary judgment and resolv[ing]
doubts concerning the evidence in favor of that party.” ’ ” (Hampton v.
County of San Diego (2015) 62 Cal.4th 340, 347.) “ ‘[T]he relevant facts are
limited to those set forth in the parties’ statements of undisputed facts,
supported by affidavits and declarations, filed in support of and opposition to
the motion in the present case, to the extent those facts have evidentiary
support.’ ” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 175.)
      In our independent summary judgment review, we “ ‘employ[] the same
process as the trial court.’ ” (Clark v. Baxter Healthcare Corp. (2000) 83
Cal.App.4th 1048, 1054.) That process begins with “identif[ying] the issues
framed by the pleadings.” (Ibid.) Indeed, the pleadings “ ‘set the boundaries
of the issues to be resolved at summary judgment.’ ” (Conroy v. Regents of
University of California (2009) 45 Cal.4th 1244, 1250.) As to each cause of
action in the pleadings, “the party moving for summary judgment bears an
initial burden of production to make a prima facie showing of the
nonexistence of any triable issue of material fact.” (Aguilar, supra, 25
Cal.4th at p. 850.) To satisfy the initial burden of production, a moving
defendant must present evidence “that the plaintiff cannot establish at least
one element of the cause of action.” (Id. at pp. 853–854.) The defendant’s
evidence must “show[] that the plaintiff does not possess, and cannot
reasonably obtain, needed evidence.” (Ibid.) Once the defendant has done so,
the burden of production shifts to the plaintiff to present evidence “to make a
prima facie showing of the existence of a triable issue of material fact.” (Id.
at p. 850.)

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      Then “we must decide independently whether the facts not subject to
triable dispute warrant judgment for the moving party as a matter of law.”
(Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.)
B. Boundaries Set by the Pleadings
      The Complaint alleged improper charges of $7,307.42, composed of the
$4,122.66 “Past Unpaid Amount” and the $3,184.76 “Assessed Expenses” as
demanded in the December 2020 mortgage statement. The Complaint does
not reference the $11,109.03 Proof of Claim figure or contain any allegation
that the escrow deficiency was improperly calculated. Except to the extent
these amounts make up part of the $7,307.42, they fall outside the scope of
this appeal.
      None of the allegations in the Complaint are based on John’s
bankruptcy plan. Consequently, we decline to consider any such arguments
in reviewing the judgment. (Zimmerman, Rosenfeld, Gersh & Leeds LLP v.
Larson (2005) 131 Cal.App.4th 1466, 1489 [“Moreover, if ZRG&L wished to
pursue Larson under the terms of the plan, the plan should have been raised
as a basis for its claims in its complaint.”].)
C. Undisputed Facts
      No triable dispute of material fact exists that the two pre-petition
missed payments and the Foreclosure and Bankruptcy Fees remained unpaid
when PHH collected the loan payoff. The Proof of Claim and the Accounting
demonstrate that these two payments and the Foreclosure Fees were unpaid
when John filed for bankruptcy. The Accounting shows the additional post-
petition Bankruptcy Fees. The Accounting and John’s post-confirmation
bankruptcy Monthly Operating Report demonstrate that the $17,373.07
payment paid only post-petition arrearages. And John admittedly made only
regular payments post-petition through December 2020.

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      PHH thus provided sufficient evidence that it only collected the proper
outstanding amount at loan payoff, shifting the burden to the Fuchses to
provide evidence otherwise. In response, the Fuchses provided John’s
declaration without evidentiary support, which fails to create a dispute of
material fact.
      The Fuchses cannot simply create a disputed material fact by feigning
ignorance of undisputed facts or arguing that “PHH’s numbers do not add
up.” PHH presented the Accounting to demonstrate the accuracy of its loan
payoff calculation through tracing principal and interest amounts, escrow
advances, and assessed fees. The Fuchses have not presented evidence that
the Accounting is inaccurate.
      In particular, the Fuchses argue that there is a dispute as to the
calculation of the $11,109.03 figure from the Proof of Claim. This argument
falls outside of the Complaint. Regardless, this figure is immaterial because
the Accounting independently calculated the loan payoff amount without
relying on the $11,109.03 pre-petition arrearage figure (though some of the
same unpaid principal and interest amounts, escrow advances, and assessed
fees certainly were part of both the loan payoff amount and the pre-petition
arrearages). PHH only required payment of amounts John had not
previously paid.
      The Fuchses briefly argue that a disputed fact exists as to the pre-

petition Foreclosure Fees due to “a lack of documentary evidence.”6 We
conclude that the Fuchses have not sufficiently developed this argument for
our consideration. (See Nelson v. Avondale Homeowners Assn. (2009) 172

6     The Fuchses did not make any argument as to the documentation of
post-petition fees.
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Cal.App.4th 857, 862.) The record contains the Deed of Trust permitting the
fee assessment and the Proof of Claim containing receipts for these fees.
      In sum, there is no triable dispute of material fact that the pre-petition
missed payments and fees were unpaid until loan payoff.
D. Judgment as a Matter of Law
      Based on the undisputed fact that the pre-petition missed payments
and fees remained unpaid when collected at loan payoff, PHH is entitled to
judgment as a matter of law on all causes of action.
      Because the amount PHH charged was authorized by the Note and
Deed of Trust, PHH did not breach the contract by collecting and the Fuchses
suffered no damages by paying that amount. “[T]he elements of a cause of
action for breach of contract are (1) the existence of the contract, (2) plaintiff's
performance or excuse for nonperformance, (3) defendant’s breach, and (4)
the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman
(2011) 51 Cal.4th 811, 821.) Ocwen was contractually permitted to shift fees
incurred due to the Fuchses’ default to their debt. PHH was entitled to
collect the unpaid principal, escrow shortage, and properly assessed fees.
      PHH likewise did not breach the implied covenant of good faith and fair
dealing by collecting these unpaid, properly demanded amounts. The
covenant requires that neither party to a contract, including lenders and
borrowers, “do anything which will injure the right of the other to receive the
contract’s benefits.” (Bushell v. JPMorgan Chase Bank, N.A. (2013) 220
Cal.App.4th 915, 928–929.) The covenant “cannot impose substantive duties
or limits on the contracting parties beyond those incorporated in the specific
terms of their agreement.” (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317,
349–350.) Neither party has an “obligation in California to bargain for a new
or amended contract in good faith.” (Racine & Laramie, Ltd. v. Department of

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Parks & Recreation (1992) 11 Cal.App.4th 1026, 1035.) PHH was entitled to
the full benefit provided under the Note and Deed of Trust and had no duty
to negotiate for less than the contractual amount owed.
      Because it is undisputed that the Fuchses paid only previously unpaid,
contractually due amounts, the Fuchses lack standing to bring a cause of
action for unlawful, unfair, or fraudulent business acts and practices because
they have not “suffered injury in fact” or “lost money or property as a result of
the unfair competition” as required for individuals to bring such actions.
(Bus. & Prof. Code, § 17204.)
      Finally, the Fuchses’ cause of action for declaratory relief to remove the
charges from the mortgage statements and account is moot because the Loan
has been paid in its entirety.
                                 DISPOSITION
      The judgment is affirmed. PHH is entitled to costs on appeal.

                                                            McCONNELL, P. J.

WE CONCUR:

KELETY, J.

CASTILLO, J.

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