Opinion
A146236
01-02-2018
ROBERT MARTIN, et al., Plaintiffs and Appellants, v. NATIONSTAR MORTGAGE LLC, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG13685812)
Plaintiffs Robert Martin and Hannah Martin (the Martins or plaintiffs) appeal a judgment in favor of defendant NationStar Mortgage LLC (NationStar) after the trial court sustained NationStar's demurrer to plaintiffs' fourth amended complaint. The Martins and NationStar entered into a written agreement modifying the Martins' mortgage loan. After sending their first monthly payment, the Martins began to receive account statements showing a deficiency. Plaintiffs inquired, and NationStar responded that the Martins were obligated to remit amounts sufficient not just to cover their principal and interest obligation, but also for "Escrow Items" (which they had not done). The Martins nonetheless continued to pay NationStar for principal and interest, only, and after a few months, NationStar issued a notice of default. When foreclosure proceedings were initiated, the Martins sued, alleging among other things that foreclosing on the loan was wrongful, and asserting causes of action for breach of contract, breach of the covenant of good faith and fair dealing, elder abuse, and intentional and negligent infliction of emotional distress.
At the hearing, we were informed that Mr. Martin recently passed away and Mrs. Martin remains in possession of the subject property, which is now held in trust. As we have not received any formal request to abate the action or effect a party substitution, we have retained the original title of the case.
Like the trial court, we conclude that the fourth amended complaint fails to plead sufficient facts to support any cause of action and we affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. The Martins Apply for and Obtain a Loan Modification Agreement (LMA)
The Martins, who at the time they filed the complaint were in their mid-90's, own a home at 361 Carswell Avenue in Oakland, California (the property) where they have lived for more than 50 years. They allege that in February 2005, they entered into a mortgage agreement with SunTrust Mortgage, Inc., secured by a deed of trust on the property, in the amount of $210,000. In January 2011, SunTrust Mortgage, Inc. transferred its interest in the mortgage agreement and deed of trust to NationStar. The Martins then sought a loan modification from NationStar. NationStar approved the Martins for a permanent modification of their loan, subject to completion of a trial payment program, which included three monthly trial payments of $1,064.91. During the trial period, NationStar posted a Notice of Trustee's Sale on the property; however, after the Martins tendered the first two of three trial payments, NationStar postponed the sale.
We summarize the allegations as they were set forth in the operative complaint, before Mr. Martin died.
On or about September 12, 2011, about a month after the Martins made their third trial payment, NationStar sent them a letter stating they had received final approval for a permanent loan modification and enclosing the proposed Loan Modification Agreement (LMA). NationStar's transmittal letter instructed the Martins to "continue to make the same payments made during the trial period." Paragraph 2 of the LMA, however, required the Martins to pay "principal and interest" in the lower monthly amount of $766.32 for the first five years beginning October 2011. The Martins allege that, despite a discrepancy between the LMA (requiring payment of $766.32) and NationStar's transmittal letter (demanding $1,064.91 monthly), they executed the LMA. The Martins allege that they relied upon the LMA in determining their payment obligation to NationStar. We therefore discuss the terms of the LMA. B. The LMA and Security Instrument Require Payment for Escrow
The LMA is attached as the only exhibit to the Fourth Amended Complaint.
NationStar also executed the document.
The LMA is a brief document that "amends and supplements (1) the Mortgage, Deed of Trust, or Security Deed (the 'Security Instrument') . . . and (2) the Note, bearing the same date as, and secured by, the Security Instrument" covering the property. Among its terms, the LMA recites that the "[b]orrower understands and agrees" that all of the agreements and conditions set forth in the Note and Security Instrument shall "remain in full force and effect, except as herein modified."
With the demurrer, NationStar sought judicial notice of the Deed of Trust, which the LMA refers to as the "Security Instrument." The trial court did not expressly rule on the unopposed request. The terms of the Security Instrument were expressly incorporated into the LMA and the Security Instrument was recorded with the County of Alameda. As such, it was properly considered by the trial court and we do so, here. (Civ. Code, § 1642 [where a transaction is covered by multiple writings, court considers them together]; Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 130 [where plaintiffs pleaded only some of the terms of a written agreement, court properly took judicial notice of all of its provisions]; Evid. Code, § 452, subd. (h); Schep v. Capital One, N.A. (2017) 12 Cal.App.5th 1331, 1337 [propriety of taking judicial notice of deed of trust, even where trial court did not do so].)
Paragraph 2 of the LMA obligates the Martins "to pay the Unpaid Principal Balance, plus Interest, to the order of Lender," specifies the applicable interest rate for each loan period, and then calculates the monthly dollar amount of "principal and interest" to be paid during each loan period. For the first loan period, years one through five commencing October 2011, the LMA requires "monthly payments of principal and interest" of $766.32.
The LMA also addresses escrow: Paragraph 4 stipulates in pertinent part (with certain exceptions not applicable here) that the Martins "also will comply with all other covenants, agreements, and requirements of the Security Instrument, including without limitation, Borrower's covenants and agreements to make all payments of taxes, insurance premiums, assessments, escrow items, impounds, and all other payments that Borrower is obligated to make under the Security Instrument." (Italics added.) Paragraph 6 addresses any prior waiver of the escrow obligation, "notifying Borrower that any prior waiver by Lender of Borrower's obligation to pay to Lender Funds for any or all Escrow Items is hereby revoked, and Borrower has been advised of the amount needed to fully fund the Escrow Items."
The Security Instrument sets forth the escrow requirement. Section 3 requires the borrower to pay "to Lender" sufficient funds for "Escrow Items," which are defined to include, inter alia, "taxes and assessments and other items which can attain priority over this Security Instrument as a lien or encumbrance on the Property," premiums for any property insurance required by the lender, and community association dues. Section 4 obligates the borrower to pay all taxes, assessments, charges or other impositions attributable to the property "which can attain priority over this Security Instrument," and reiterates that to the extent such items are "Escrow Items," they shall be paid as provided for in section 3.
The LMA, in addition to addressing the borrower's payment obligations, escrow and other modifications to the Security Instrument, expressly preserves the lender's remedies in the event of a default, stating in paragraph 5, "All of the rights and remedies, stipulations, and conditions contained in the Security Instrument relating to default in the making of payments under the Security Instrument shall also apply to default in the making of the modified payments hereunder." In turn, the Security Instrument permits the lender to accept a deficient payment "without waiver of any rights hereunder or prejudice to its rights to refuse such payment or partial payments in the future, but Lender is not obligated to apply such payments at the time such payments are accepted. . . . Lender may hold such unapplied funds until Borrower makes payment to bring the Loan current. If Borrower does not do so within a reasonable period of time, Lender shall either apply such funds or return them to Borrower." Where a borrower is in default, the Security Instrument also provides that, after satisfying certain conditions, the lender may accelerate the loan and invoke the power of sale. C. Plaintiffs Fail to Pay NationStar for Escrow Items; NationStar Initiates Foreclosure
Notwithstanding the foregoing terms regarding the Martins' payment obligations and NationStar's instruction, at the outset, that the Martins continue to remit the same amount that they had paid during the trial period ($1,064.91), the Martins paid NationStar $766.32 each month. NationStar responded by sending billing statements showing a deficiency, which the Martins allege were inconsistent with the LMA and therefore "made no sense" to them. They continued paying $766.32 to NationStar each month; paid their property tax and insurance separately to their assessor's office and insurance broker, respectively; and asked NationStar for an explanation. NationStar responded that escrow was a requirement of loan modification. The Martins objected and NationStar reiterated that escrow was a condition of the LMA.
In December 2011, NationStar issued a notice of default on the Martins' loan. The Martins objected, and NationStar responded in January 2012 by proposing a new loan modification agreement. Plaintiffs did not accept the offer and, in March 2012, NationStar sent another notice of default and demand for payment of the deficiency. Six months later, NationStar sent yet another notice of default.
The Martins allege that during this time, NationStar accepted their payments, which they had submitted in the form of Chase Bank money orders. In November 2012, however, NationStar began to return the money orders, indicating they were insufficient to resolve the Martins' delinquency.
NationStar's loan servicer, T.D. Service Company, then recorded a notice of default and notice of trustee's sale. The Martins responded by filing this lawsuit and the trustee's sale was postponed. Plaintiffs then re-tendered the returned payments in the same form (money orders) and asked for the sale to be postponed further, which defendants did. Then, NationStar returned the Martins' money order payments for September and October 2013. D. The Martins Sue NationStar and T.D. Service Company
The Martins' lawsuit against NationStar and T.D. Service Company initially sought damages for financial elder abuse, breach of fiduciary duty, and constructive fraud and a judgment to quiet title. Plaintiffs alleged that after they entered into the LMA with NationStar and made several payments, "for reasons unknown but of a nefarious purpose," NationStar "deliberately or negligently refused to honor the [LMA] and after accepting several payments form [sic] Plaintiffs wrongfully returned payments for the loan modification so that [NationStar] could acquire" the property. T.D. Service Company was alleged to have acted in concert with NationStar.
In short order, a First Amended Complaint was filed, and then a Second and Third Amended Complaint. A demurrer to the Third Amended Complaint was sustained with leave to amend.
In the Fourth Amended Complaint (the complaint), the Martins asserted claims against NationStar for elder financial abuse under Welfare and Institutions Code sections 15610.30, subdivisions (a)(1) and (3); breach of contract; breach of the covenant of good faith and fair dealing; intentional infliction of emotional distress; and negligent infliction of emotional distress. Central to these claims is the Martins' contention that they fully performed by submitting a monthly payment of $766.32, such that the defendants' notices of default and pursuit of nonjudicial foreclosure were wrongful. The Martins also allege that, in an effort to deprive them of their rights, NationStar responded to their inquiries about the status of their loan by providing them with inaccurate, misleading, and confusing information. E. NationStar Demurs to the Fourth Amended Complaint
The Martins alleged a sixth, quite title, cause of action, which is not the subject of this appeal.
T.D. Services is named in the complaint but not a party to this appeal.
NationStar demurred on the grounds that the complaint failed to state facts to support any cause of action. Mainly, NationStar asserted that it had committed no "wrong" in seeking to enforce the provisions of the LMA and Security Instrument because the Martins were in default. It argued the Martins had duly paid principal and interest (in a monthly amount of $766.32) but had not remitted sufficient amounts to cover escrow items, as required by the LMA. Although the Martins admit having received NationStar's instruction to continue to pay the same monthly amount they had paid during the trial plan, they nonetheless elected to pay only the principal and interest as calculated in section 2 of the LMA. Accordingly, NationStar was well within its rights to take all of the actions the Martins alleged to be "wrongful" in the complaint.
The Martins opposed the demurrer, mainly emphasizing their allegations that, despite their faithful performance, NationStar attempted to add "undisclosed" and "intentionally concealed" escrow fees to the LMA so that it could force the plaintiffs into default and, ultimately, foreclose on their property. They also cited the allegation that NationStar never advised them, as required by the LMA, of any amount for escrow or established any escrow account. Thus, they argued, NationStar's wrongful foreclosure and related loan-servicing conduct (such as holding and returning payments instead of crediting their account) supported their claims. The Martins did not request leave to amend or proffer any allegations to cure the infirmities identified by NationStar. F. The Demurrer is Sustained without Leave to Amend
The trial court sustained NationStar's demurrer without leave to amend, observing that the complaint did "not accurately explain how defendants breached a contract." It rejected the Martins' overarching "premise that plaintiffs were not required to make escrow payments, and that the foreclosure following their failure to make such payments was wrongful." The court found the complaint contained no facts to support plaintiffs' position that escrow payments were not, in fact, required. Similarly, the court found that the Martins had not alleged any wrongdoing that would satisfy the "factual requirement of th[e] elder abuse claim" or that anything had been "taken" from plaintiffs. As to the negligent infliction of emotional distress claim, the trial court ruled that plaintiffs had not pleaded facts to establish any legal duty. All claims against NationStar were dismissed and this appeal was timely filed.
II. DISCUSSION
A. Standard of Review
We review the trial court's order sustaining the demurrer de novo, " ' "exercising our independent judgment about whether the complaint states a cause of action as a matter of law. [Citations.]" ' " (Chiatello v. City & County of San Francisco (2010) 189 Cal.App.4th 472, 480.) " ' " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]' " ' " (Ibid.) We also consider matters subject to judicial notice. (Ibid.) Further, we construe the complaint in a reasonable manner, reading it as a whole and its parts in their context. (Ibid.) Likewise, we assume the truth of facts that are reasonably implied or inferred from the express allegations. (Ibid.) We do not, however, accept at true allegations which are contradicted or negated by judicially noticed facts. (Schep v. Capital One, N.A., supra, 12 Cal.App.5th at p. 1335.) "Thus, a pleading valid on its face may nevertheless be subject to demurrer when matters judicially noticed by the court render the complaint meritless." (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604.)
When the complaint incorporates the terms of a contract, "we consider those terms as part of the pleading." (Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1120.) If " 'the complaint fails to allege that the terms of the contract have any special meaning, a court will construe the language of the contract on its face to determine whether, as a matter of law, the contract is reasonably subject to a construction sufficient to sustain a cause of action . . . .' " (Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 472.) If a plaintiff alleges a particular construction of the complaint, we must accept the pleaded meaning unless it is clearly erroneous. (Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 400.)
With these standards in mind, we consider whether the Martins have stated any cause of action. We must affirm the judgment if any one of the several grounds of the demurrer is well taken. (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 391.) B. Breach of Contract Claim
The 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.) The Martins' breach of contract cause alleges numerous breaches, including that NationStar wrongfully required Escrow Items to be paid "to the Lender" without informing them of this obligation, apprising them of the amount to be paid monthly for Escrow Items, or establishing an escrow account. Further, they allege that, because the Martins' loan was not in arrears, NationStar breached the LMA when it issued default notices and initiated foreclosure.
The Martins first contend that neither the LMA nor any other documents provided by NationStar obligated them to pay NationStar for Escrow Items. They allege that they were entitled to rely exclusively upon paragraph 2 of the LMA, which only required payment for principal and interest and, by implication, that they were free to ignore the other provisions of the LMA and Security Instrument concerning escrow. This, however, is not a reasonable or cognizable method of construing a contract. The Martins' obligations can only be properly ascertained by reading all of the provisions of both the LMA and Security Instrument. (Civ. Code, §§ 1641-1642 [requiring reader to give effect to all parts of a contract and, where several instruments cover a transaction, to consider them all]; Nevin v. Salk (1975) 45 Cal.App.3d 331, 338 [where multiple documents are part of an agreement, even if they are not executed contemporaneously, they are to be construed together].)
For the reasons set forth in footnote 5, supra, we take judicial notice of the terms of the Security Instrument executed by the Martins.
By its terms, the LMA requires the borrower to pay principal and interest in a specific amount monthly and to comply with all covenants in the Security Instrument, which, in turn, requires payment "to the Lender" for Escrow Items. The Security Instrument defines "Escrow Items" to include property taxes and homeowner's insurance. Together, these terms unambiguously obligated the Martins to remit to NationStar sufficient amounts, each month, to cover principal, interest, and Escrow Items. As the Martins' contention that the LMA did not obligate them to pay NationStar for escrow amounts is clearly erroneous, the trial court correctly rejected it. (Martinez v. Socoma Companies, Inc., supra, 11 Cal.3d at p. 400.)
To the extent there was any ambiguity regarding escrow, the LMA states "that any prior waiver by Lender of Borrower's obligation to pay to Lender Funds for any or all Escrow Items is hereby revoked . . . ." (Italics added.)
To the extent the Martins were unaware of some of the relevant terms because they failed to read the LMA and Security Instrument before signing them, this does not relieve them of their contractual obligations. (See Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158, 163; 1 Witkin, Summary of Cal. Law (11th ed. 2017) Contracts, § 118.)
The Martins further allege that they were never advised of the amounts due monthly for Escrow Items and, as such, NationStar breached a recital in the LMA stating, "Borrower has been advised of the amount needed to fully fund the Escrow Items." However, the Martins' complaint admits that, before executing the LMA, they received NationStar's transmittal letter instructing them to "continue to make the same payments made during the trial period," and they did not do so. Although the Martins contend otherwise, the facts alleged in the complaint admit they were effectively "advised" of their total monthly payment obligation, and thus "the amount needed to fully fund Escrow Items," before they signed the LMA. As such, the Martins' erroneous contention cannot form the basis for a claimed breach of contract.
To the extent that the Martins needed to know the amount for Escrow Items, as opposed to their total monthly liability, they only needed to subtract $766.32 from their total monthly payment obligation of $1,064.91.
Plaintiffs also allege that NationStar failed to "establish an escrow account." The complaint does not identify the origin (contractual or otherwise) of such an obligation. Nor does it describe the nature of the obligation or recite facts to show that NationStar fell short, causing them harm. As pleaded, this claim rests solely upon contentions or conclusions of fact, which we need not accept as true on demurrer. (Chiatello v. City & County of San Francisco, supra, 189 Cal.App.4th at p. 480.) As the Martins' appellate briefs are equally conclusory on this point, we cannot discern any obligation which was breached. (People v. Morse (1993) 21 Cal.App.4th 259, 275 [a reviewing court need not address a mere assertion, unaccompanied by any argument or authority]; Brown v. Deutsche Bank National Trust Co. (2016) 247 Cal.App.4th 275, 282 [contention that trial court erred in failing to grant leave to amend was unsupported by legal argument and thus forfeited].)
The Martins' other claimed breaches mainly consist of loan-servicing conduct which the Martins contend was wrongful because they were not in default. It includes: sending account statements erroneously showing a deficiency; demanding additional payments to bring the Martins' loan account current; holding and, in some cases, returning loan payments that were insufficient to cover the outstanding loan balance; issuing notices of default; and, ultimately, instituting foreclosure proceedings.
As discussed, ante, however, the Martins' own factual allegations conclusively establish they were in default from their very first payment. As such, NationStar was contractually entitled to send the Martins account statements showing a deficiency, to demand additional payments, to hold and/or return insufficient payments without applying them to the borrower's balance, and, after meeting certain conditions, to accelerate and foreclose on the loan. As each of these actions was expressly authorized under the LMA and Security Instrument, none could constitute a breach. (Burke v. TV Guide Magazine Group, Inc. (9th Cir. 2011) 442 F.Appx. 356, 358 [claim for breach of contract fails when it is based upon conduct specifically authorized by the agreement]; Zamora v. Solar (C.D. Cal. June 27, 2016) 2016 WL 3512439, at *3-*4 [same, collecting cases].) Accordingly, the trial court correctly concluded that plaintiffs failed to state a claim for breach of contract. C. Breach of the Covenant of Good Faith and Fair Dealing
The Martins do not allege that NationStar failed to satisfy any conditions precedent, and they admit that NationStar provided them with multiple opportunities to cure the default before deciding to return deficient payments, and gave notice of the default and opportunity to cure before instituting foreclosure proceedings, as required by the LMA and Security Instrument.
On appeal, the Martins also move to augment the record with new evidence that NationStar "accepted" certain money orders but did not apply the funds to the Martins' account; instead, it held, and then, after the notice of appeal was filed, returned the uncashed money orders to the Martins. The Martins' request is improper on review of an order sustaining a demurrer, where we are charged with testing the legal sufficiency of the pleadings—not the evidence or other extrinsic matters. (Southern Pacific Land Co. v. Westlake Farms, Inc. (1987) 188 Cal.App.3d 807, 817.) Judicial notice may not be used to turn the inquiry into a "contested evidentiary hearing." (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114.)
Furthermore, the Martins have already pleaded that NationStar engaged in this "hold and return" practice. (See, e.g., Complaint ¶ 36.) The requested finding that the "hold and return" occurred to a greater extent than already alleged does not affect our determination that, in light of plaintiffs' default, the practice was expressly authorized by the LMA and Security Instrument and, as such, cannot constitute a breach of contract or predicate "wrong" for the purposes of plaintiffs' other claims. We therefore deny the motion.
In claiming a breach of covenant of good faith and fair dealing, the Martins primarily allege that NationStar's conduct in servicing their loan and initiating foreclosure deprived them of the benefits of the LMA. However, some of the Martins' claims fail due to their admission that they did not remit sufficient amounts, monthly, to fulfill their payment obligations under the LMA. For example, they allege that NationStar's "demands, letters and statements" were "misleading" or "nonsensical" and thus, constituted a breach of the duty to act in good faith. However, this allegation rests solely upon the conclusion that NationStar was improperly demanding higher payments than required under the LMA, when the facts pleaded establish the contrary - that NationStar's demands were lawful and appropriate because the Martins were in arrears. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373-374 ["We are aware of no reported case in which a court has held the covenant of good faith may be read to prohibit a party from doing that which is expressly permitted by an agreement"]; Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 479 [a lender owes no duty of good faith to forbear from foreclosure when the borrower is in default], overruled on other grounds in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1176-1182.) For the same reason, the other alleged "breaches" arising out of NationStar's attempts to bring the loan current were in fact contractually-permitted attempts to enforce the LMA. (See Complaint ¶¶ 106(c), (d), (e), (f), (g), (h), (j), (k)].) As such, they are not actionable.
Plaintiffs also allege that NationStar breached the covenant of good faith and fair dealing by neglecting to "inform plaintiffs about Escrow Items" or to establish an escrow account. However, as discussed ante, we may disregard plaintiffs' conclusory allegations which are contradicted by the factual allegations of their complaint and/or judicially-noticed facts. (See § II.B., ante.) Here, the obligation to pay the lender for Escrow Items was disclosed by the judicially-noticed Security Instrument executed by the Martins and the amount was disclosed by NationStar's transmittal letter plaintiffs received before executing the LMA.
Moreover, the Martins' vague "escrow account" allegations fail here for the same reasons discussed, ante, as to the breach of contract claim.
Finally, the Martins have not pleaded causation, that is, facts to show that any alleged breach interfered with their rights or frustrated their ability to receive the benefits of the LMA. (Thrifty Payless, Inc. v. Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244 [elements of claim]; Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal.App.4th 525, 541 [in breach of covenant action, it is " 'essential to establish a causal connection between the breach and the damages sought' "].) For example, the Martins claim that NationStar breached the covenant when it declared them to be in default and initiated foreclosure proceedings. However, the Martins admit facts showing they defaulted and NationStar complied with the conditions precedent in the Security Instrument. Thus, they had no right (absent cure) to continued possession of their home. Under these circumstances, NationStar's loan-servicing actions did not interfere with any rights the Martins held under the LMA or "frustrate" their ability to obtain the benefits of their agreement.
Similarly, the complaint lacks any factual allegations from which we may infer that the remaining alleged breaches somehow deprived the Martins of any contractual benefit. This includes the Martins' claims that NationStar failed to establish an escrow account; misidentified the program under which their loan modification was issued; stated an incorrect date of default; and submitted a false declaration regarding its efforts to contact the Martins. (Thompson Pacific Construction, Inc. v. City of Sunnyvale, supra, 155 Cal.App.4th at p. 541; Vu v. California Commerce Club, Inc. (1997) 58 Cal.App.4th 229, 233-234 [where alleged causal connection between breach of covenant and harm is speculative, element of causation is not established].)
Therefore, the demurrer to this cause of action was properly sustained. D. Elder Financial Abuse (Welf . & Inst. Code , § 15610.30)
Plaintiffs also contend that the trial court mischaracterized the basis for their contractual claims. This argument is unavailing so long as we affirm the trial court's ruling on any ground. (Lewis v. Safeway, Inc., supra, 235 Cal.App.4th at p. 391.)
To state a claim for elder financial abuse, plaintiffs must allege facts showing that a defendant appropriated an elder's real or personal property "for a wrongful use or with intent to defraud, or both." (Welf. & Inst. Code, § 15610.30, subd. (a)(1).) The Martins contend that because they were fully performing under the LMA, NationStar's refusal to apply their payments to the account balance constitutes the appropriation of their personal property "for a wrongful purpose," and that its foreclosure proceedings "improperly threaten[] the title and sale of Appellants' home," constituting a taking of real property rights.
As we discuss, however, once the Martins defaulted on their loan, NationStar was entitled to retain and return insufficient payments and, after fulfilling certain conditions precedent, to foreclose. (Sierra-Bay Federal Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334-335 ["in this state a commercial lender is privileged to pursue its own economic interests and may properly assert its contractual rights" and thus may not be subject to tort liability for legitimate assertion of those rights]; Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 525, 527 [where elder plaintiffs fell behind in their mortgage payments, defendants' decision to foreclose, without more, could not support an elder abuse claim].) Accordingly, plaintiffs have not pleaded that money or property was taken "for a wrongful use" and the demurrer was properly sustained. (Welf. & Inst. Code, § 15610.30, subd. (a)(1), (b).) E. Intentional Infliction of Emotional Distress
In light of our conclusion that plaintiffs did not plead any "wrongful" taking, we need not reach their contentions regarding NationStar's intent.
At the conclusion of oral argument, plaintiffs' counsel stated that the Martins had elected not to contest the demurrer as to the intentional infliction of emotional distress claim. While the trial court's order sustaining the demurrer mentioned such a concession, it also ruled on the merits. Nor was this concession mentioned in plaintiffs' written opposition, below, or on appeal. We therefore address the sufficiency of the pleadings.
To plead intentional infliction of emotional distress, a plaintiff must plead facts showing " ' " ' "(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct." ' " ' [Citations.]" (Hughes v. Pair (2009) 46 Cal.4th 1035, 1050.)
For purposes of this cause of action, we conclude, as with the Martins' other causes of action, NationStar did not breach, but rather adhered to, the provisions of the LMA and Security Agreement. It follows, then, that the facts pleaded do not amount to sufficiently extreme and outrageous conduct which " ' " 'exceed[s] all bounds of that usually tolerated in a civilized community.' " ' " (Hughes v. Pair, supra, 46 Cal.4th at pp. 1050-1051; Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1009 [exercise of creditor's rights under loan agreement, absent more (such as threats, insults, abuse or humiliating conduct), not "outrageous"]; see also Sierra-Bay Fed. Land Bank Assn. v. Superior Court, supra, 227 Cal.App.3d at pp. 334-35 [generally, legitimate foreclosure efforts cannot be the source of tort liability].)
Newby v. Alto Rivera Apartments (1976) 60 Cal.App.3d 288, 297 is unavailing, as there the landlord was held to have abused its position of power over its tenants by threatening plaintiff with bodily harm and engaging in a consistent course of harassment and intimidation. No facts are alleged to show that NationStar's communications with the Martins were abusive or wrongful.
Further, because the complaint effectively admits the Martins caused their own harm by defaulting on their loan obligations, plaintiffs have not pleaded that NationStar's outrageous conduct caused their emotional distress. (McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 294 [outrageous conduct must be the actual and proximate cause of plaintiff's severe emotional distress].) Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, cited by plaintiffs, involved a foreclosure "without right" and is therefore inapposite. (Id. at p. 408.) F. Negligent Infliction of Emotional Distress
In light of the foregoing, we need not decide whether the Martins have alleged adequate facts regarding NationStar's state of mind.
The Martins contend that NationStar negligently inflicted severe emotional distress by falsely declaring that they were in default and wrongfully initiating foreclosure proceedings. However, California law imposes no duty to avoid negligently causing emotional distress to another; i.e., "negligent infliction of emotional distress" does not exist independently of the tort of negligence. (Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 984 (Potter); see also Hecimovich v. Encinal School Parent Teacher Organization (2012) 203 Cal.App.4th 450, 477.) Accordingly, damages for emotional distress are recoverable only if the defendant has breached some duty (other than a purported duty not to inflict emotional harm) to the plaintiff: a duty imposed by law, assumed by the defendant, or created by virtue of a special relationship. (Potter, supra, 6 Cal.4th at p. 985.) The existence of a "duty of care" is primarily a question of law. (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095.)
The Martins argue two sources of a duty. First, they allege that a duty of care arose due to the "special relationship" between a lender and borrower/loan servicer. (Aguirre-Alvarez v. Regents of University of California (1998) 67 Cal.App.4th 1058, 1063-1064, 1066.) However, the Martins plead no facts that could possibly give rise to a fiduciary or other "special" relationship with NationStar. (Price v. Wells Fargo Bank, supra, 213 Cal.App.3d at pp. 476-477 [ordinary lender-borrower relationship is not fiduciary in nature], overruled on other grounds in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., supra, 55 Cal.4th at p. 1179; American Express Bank, FSB v. Kayatta (2010) 190 Cal.App.4th 563, 570 [absent evidence that plaintiff relied upon advice from credit card issuer or that issuer fraudulently induced him to make choices that led him to incur debt, no special or fiduciary relationship existed].)
Second, the Martins contend that because they had fully performed under the LMA, NationStar had an independent duty not to declare the loan in default or to initiate foreclosure proceedings. We agree that a lender or loan servicer owes the borrower a duty to exercise reasonable care and skill in processing and accounting for the borrower's loan payments. (See, e.g., Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 901 [in dicta, suggesting that loan servicer has a duty of care in residential loan servicing]; Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 948-949 [finding duty to exercise reasonable care in servicing of loan and processing loan modification]; Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1184 [loan servicer breached duty of care to borrowers when it did not accurately account for their payments].)
However, the Martins' contentions that NationStar failed to carefully and accurately process and account for their payments are contradicted by their own factual allegations. First, as we have discussed, the complaint admits facts showing that the Martins had defaulted on the LMA. It also admits that NationStar repeatedly clarified the Martins' payment obligations and provided multiple opportunities to bring their account current, as required by the LMA, before declaring default and initiating foreclosure proceedings. As the complaint identifies no errors in servicing or other instances in which NationStar exceeded its contractual authority, it fails to identify any conduct by NationStar which fell below the applicable standard of care. As such, the demurrer to this cause of action was properly sustained.
III. DISPOSITION
The order sustaining demurrer and dismissing all claims against NationStar is affirmed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
/s/_________
Miller, J. We concur: /s/_________
Richman, Acting P.J. /s/_________
Stewart, J.