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Freedom Mortgage Corp. v. LoanCare, LLC

United States District Court, D. New Jersey, Camden Vicinage

November 30, 2018

FREEDOM MORTGAGE CORPORATION, Plaintiff/Counterclaim Defendant,
v.
LOANCARE, LLC Defendant/Counterclaim Plaintiff.

          LANDMAN CORSI BALLAINE & FORD, P.C. By: Jerry A. Cuomo, Esq.; Timothy J. Collazzi, Esq.; Mark S. Landman, Esq. (pro hac vice) Counsel for Freedom Mortgage Corp.

          FRIEDMAN KAPLAN SEILER & ADELMAN LLP By: Robert J. Lack, Esq.; Ricardo Solano, Jr., Esq. Counsel for LoanCare, LLC

          BOIES SCHILLER FLEXNER LLP By: Stuart H. Singer, Esq. (pro hac vice); Sabria A. McElroy, Esq. (pro hac vice); Pascual A. Oliu, Esq. (pro hac vice) Counsel for LoanCare, LLC

          OPINION

          RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court upon a Motion for Judgment on the Pleadings, filed by Plaintiff/Counterclaim Defendant Freedom Mortgage Corporation (“Freedom”)[Dkt. No. 56], seeking dismissal of Counts One (Fraud), Two (Conversion), Three (Tortious Interference), and Five (Unjust Enrichment) from the Amended Counterclaim of Defendant/Counterclaim Plaintiff LoanCare, LLC(“LoanCare”)[Dkt. No. 68]. Because Virginia law governs the dispute between the parties, [1] Freedom contends that LoanCare's tort and unjust enrichment claims are subsumed by LoanCare's Breach of Contract claim (Count Four) under Virginia's “source of duty” rule. This Court agrees.

         I. FACTUAL BACKGROUND

         For approximately 15 years, LoanCare, a mortgage subservicer, worked with Freedom, a full-service residential mortgage lender, to service various mortgage loans. From February 2010 through June 2016, the terms of the parties' relationship was governed by the Amended and Restated Subservicing Agreement, effective February 1, 2010 (the “Subservicing Agreement”). In January 2016, Freedom advised LoanCare that it planned to terminate the Subservicing Agreement on June 30, 2016. In anticipation of the termination date, Freedom instructed LoanCare that it should transfer any loans that LoanCare was servicing back to Freedom by May 3, 2016. In the Amended Counterclaim, LoanCare alleges that all loans it was servicing for Freedom were transferred back by May 3, 2016. Between May 4 and 5, 2016, LoanCare alleges that it wired a total of $78, 041, 076.81, to Freedom, reflecting remaining borrower escrow balances on the transferred loans.

         While transferring all loans and remaining escrow balances back to Freedom, LoanCare contends that it also attempted approximately 20 debits, totaling $111, 687, 983.53, from Freedom's Custodial Accounts to pay/reimburse LoanCare for Advances and amounts sent to Freedom associated with borrowers' escrow funds. LoanCare alleges that these debits were submitted in accordance with past practices and the terms of the Subservicing Agreement. Freedom, however, allegedly instructed the banks holding its Custodial Accounts to refuse the debits. LoanCare alleges that Freedom eventually wired $66, 134, 172.36 to LoanCare on May 12, 2016, and then wired another $17, 961, 071.64 on May 17, 2016. LoanCare claims that Freedom never remitted the remaining $23, 876, 799.71.

         In May 2016, Freedom commenced this suit against LoanCare, claiming, among other things, breach of contract, unjust enrichment, and other misconduct by LoanCare. On July 8, 2016, LoanCare filed an Answer and Counterclaim to Freedom's Complaint [Dkt. No. 17]. Subsequently, LoanCare filed the Amended Counterclaim on June 4, 2018 [Dkt. No. 68]. Now, Freedom moves for Judgment on Pleadings [Dkt. No. 56], seeking dismissal of LoanCare's fraud, tort, and unjust enrichment claims from the Amended Counterclaim.

         II. LEGAL STANDARD FOR JUDGMENT ON THE PLEADINGS

         Under Rule 12 of the Federal Rules of Civil Procedure, a party may move for a judgment on the pleadings after the pleadings are closed, but early enough not to delay trial. Fed.R.Civ.P. 12(c). Rule 12(c) is designed to eliminate excessive litigation when material facts are not in dispute and a judgment on the merits may be derived solely from the content of the pleadings. See 5C Fed. Prac. & Proc. Civ. § 1367 (3d ed.). In order to grant a motion for judgment on the pleadings, the moving party must clearly demonstrate that there are no issues of material fact and that it is entitled to judgment as a matter of law. See Rosenau v. Uniford Corp., 539 F.3d 218, 221 (3d Cir.2008) (citing Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir.1988)).

         The standard of review for a motion for judgment on the pleadings under Rule 12(c) is identical to that for a motion to dismiss under Rule 12(b)(6). See Zimmerman v. Corbett, 873 F.3d 414, 417 (3d Cir. 2017). “Dismissal of a complaint pursuant to Rule 12(b)(6) is proper ‘only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'” Hackensack Riverkeeper, Inc. v. Del. Ostego Corp., 450 F.Supp.2d 467, 484 (D.N.J. 2006) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). In considering this motion for judgment on the pleadings, the court must accept all of the allegations in the pleadings of the non-moving party as true and draw all reasonable inferences in favor of the non-moving party. Zimmerman, 873 F.3d at 417.

         III. ANALYSIS

         Freedom moves for judgment on the pleadings, arguing that LoanCare's fraud, tort, and unjust enrichment claims are barred by Virginia's “source of duty” rule. To avoid turning every breach of contract into a tort claim, the source of duty rule bars tort claims that implicate a duty owed solely through contract. See Augusta Mut. Ins. Co. v. Mason, 274 Va. 199, 205 (2007) (citing Richmond Metro. Auth. v. McDevitt St. Bovis, Inc., 256 Va. 553, 558 (1998)). Freedom argues that LoanCare's fraud, tort, and unjust enrichment claims must be ...


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