United States District Court, D. New Jersey, Camden Vicinage
FREEDOM MORTGAGE CORPORATION, Plaintiff/Counterclaim Defendant,
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
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
RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE
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,  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.
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.
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.
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.
LEGAL STANDARD FOR JUDGMENT ON THE
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)).
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.
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 ...