Cruz et al v. JP Morgan Chase Bank, National Association et al

Filing 53

ORDER by Judge Claudia Wilken GRANTING IN PART, AND DENYING IN PART, DEFENDANTS 48 MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 1/3/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ARMIE CUA CRUZ; and FLORO LORENZO
CRUZ, JR.,

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United States District Court
For the Northern District of California

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v.
JP MORGAN CHASE BANK, NATIONAL
ASSOCIATION, as successor in
interest to WASHINGTON MUTUAL
BANK F.A.; QUALITY LOAN SERVICE
CORPORATION; CALIFORNIA
RECONVEYANCE COMPANY; and DOES
1-100,
Defendants.

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ORDER GRANTING IN
PART, AND DENYING
IN PART,
DEFENDANTS’ MOTION
TO DISMISS (Docket
No. 48)

Plaintiffs,

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No. C 12-3219 CW

________________________________/
Defendants JPMorgan Chase Bank, N.A. (Chase) and California
Conveyance Company (CRC) move to dismiss the second amended
complaint (2AC) of Plaintiffs Armie Cua Cruz and Floro Lorenzo
Cruz, Jr.1

Plaintiffs oppose the motion.

motion under submission on the papers.

The Court took the

Having considered the

papers submitted by the parties, the Court GRANTS Defendants’
motion in part and DENIES it in part.

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In their original complaint, Plaintiffs named Chase, CRC
and Quality Loan Service Corporations as Defendants. In their
1AC, they renamed only Chase. Accordingly, Plaintiffs have
voluntarily dismissed their claims against the other two
Defendants.

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BACKGROUND
I.

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Factual allegations
The following allegations are taken from Plaintiffs’ 2AC and

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documents of which Defendants ask the Court to take judicial

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notice, which Plaintiffs do not oppose.

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On or about October 29, 2005, Plaintiffs entered into a loan

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agreement with Washington Mutual Bank, N.A. in connection with the

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refinancing of their home, located at 23 Pinnacle Street in South

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San Francisco, California.

Request for Judicial Notice (RJN),

United States District Court
For the Northern District of California

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Docket No. 34, Ex. A; 2AC ¶¶ 9-10.

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Washington Mutual’s interest in the loan.

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Chase subsequently acquired

In February 2009, Mr. Cruz was hospitalized for blood clots

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in his brain and, as a result of his health condition, was forced

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to stop working.

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feel the pressure of living on one income.

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making their March 2009 payment, Plaintiffs contacted Chase to

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inquire about a potential loan modification or other alternative

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to foreclosure.

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alternatives available and refused to consider them for a loan

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modification or any other foreclosure alternatives.

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¶¶ 13-14.

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¶ 13.

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2AC ¶ 11.

Id.

In March 2009, Plaintiffs began to
Id. at ¶ 12.

After

Chase told Plaintiffs that there were no

Id. at

Plaintiffs were heartbroken at Chase’s refusal.

Id. at

Due to their medical emergencies, Plaintiffs were no longer

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able to afford their $4,500 per month mortgage payments.

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¶ 14.

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Id. at

On July 2, 2009, Plaintiffs received a Notice of Default

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stating that their account was in arrears for $22,870.71.

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¶ 15.

Id. at

Despite the fact that Plaintiffs made their last payment in
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March 2009 “and were only a couple of months late,” the Notice of

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Default stated that “payment has not been made of,” among other

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things, “the 01/01/2009 installment of principal and interest and

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all subsequent monthly installments of principal and interest.”

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RJN, Ex. C; 2AC ¶ 23.

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on July 3, 2008.

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Defendants recorded the Notice of Default

RJN, Ex. C.

Plaintiffs were shocked at the overestimation of the amount

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that Chase “claimed they owed for one month of non-payment of a

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$4,500 per month loan.”

2AC ¶ 16.2

However, they began to pool

United States District Court
For the Northern District of California

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money in order to reinstate their loan prior to any trustee’s

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sale.

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Id.
On October 7, 2009, Defendants recorded a Notice of Trustee’s

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Sale of Plaintiffs’ home.

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the notice on Plaintiffs’ door or anywhere on the property.

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at ¶¶ 17, 24.

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sometime later.”

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Id. at ¶ 18.

Defendants did not post
Id.

Plaintiffs “only received the notice in the mail
Id. at ¶ 17.

On October 26, 2009, less than twenty after the recording of

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the Notice of Trustee’s Sale, the property was sold in a Trustee’s

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Sale to Chase.

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willing, and able to tender payment to reinstate the loan prior to

Id. at ¶ 18; RJN, Ex. E.

Plaintiffs “were ready,

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In their first amended complaint (1AC), Plaintiffs alleged
that, as a result of “their medical emergencies, Plaintiffs missed
a few of their $4,500 per month mortgage” payments and they were
“shocked at the gross estimation of how much Defendant Chase
claimed they owed for a few months of non-payment of a $4,500 per
month loan.” 1AC ¶¶ 14, 16. These two references to “a few”
months of missed mortgage payments were removed in the 2AC and in
paragraph sixteen of the 2AC, Plaintiffs refer instead to “one
month of non-payment.” 2AC ¶ 16. However, elsewhere in the 2AC,
Plaintiffs continue to allege that they “made their last payment
in March 2009” and were “a couple of months late.” 2AC ¶ 23.
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the Trustee’s Sale,” but were not provided notice of the sale and

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were thus not given a chance to reinstate.

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II.

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2AC ¶¶ 1, 18, 22.

Procedural history
Plaintiffs initiated the instant lawsuit on June 20, 2012,

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asserting eleven claims against Defendants.

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Plaintiffs also requested a temporary restraining order on June

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20, 2012, seeking to prevent Chase from enforcing a writ of

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possession the following day.

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Docket No. 1.

Docket No. 3.

On June 21, 2012, the Court found that Plaintiffs had not

United States District Court
For the Northern District of California

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made a sufficient showing to obtain an ex parte temporary

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restraining order because, among other reasons, Plaintiffs had not

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submitted evidence that such a writ existed or that Chase intended

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to enforce it on that date.

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briefing schedule for the motion, requiring Chase to file a

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response to Plaintiffs’ motion for a temporary restraining order

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by 12:00 p.m. three court days after it had been served with

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certain documents and permitting Plaintiffs to file a reply by

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12:00 p.m. the following court day.

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Docket No. 7.

The Court set a

On June 29, 2012, Chase and CRC filed an opposition to

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Plaintiffs’ motion for a temporary restraining order.

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13.

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moot because Chase had obtained possession of the property.

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Docket No.

They argued, among other things, that Plaintiffs’ motion was

Plaintiffs did not file a reply in further support of their

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application for a temporary restraining order or otherwise

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challenge the argument that their motion was moot.

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2012, the Court denied as moot Plaintiffs’ application for a

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temporary restraining order.

Docket No. 17.

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On July 5,

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On July 16, 2012, Defendants moved to dismiss Plaintiffs’
original complaint.

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Docket No. 18.

On August 1, 2012, Plaintiffs filed their 1AC.

Docket No.

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25.

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(1) wrongful foreclosure based on the inaccuracy in the Notice of

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Default and the failure to post the Notice of Trustee’s Sale on

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Plaintiffs’ door; (2) breach of contract for thwarting Plaintiffs’

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right to reinstate the loan up to five days before the Trustee’s

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sale by not apprising them of the date of the sale; (3) invasion

In their 1AC, Plaintiffs brought four claims against Chase:

United States District Court
For the Northern District of California

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of privacy by placing Plaintiffs in a false light based on Chase’s

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representation to the credit bureaus that Plaintiffs were behind

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on their mortgage in January 2009 and thereafter; and

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(4) violation of California’s Unfair Competition Law (UCL),

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California Business and Professions Code §§ 17200, et seq.

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On August 6, 2012, the Court found Defendants’ first motion

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to dismiss to be moot.

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moved to dismiss the 1AC.

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Docket No. 26.

Thereafter, Defendants

Docket No. 34.

On October 17, 2012, the Court granted in part Defendants’

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motion to dismiss the 1AC and denied it in part.

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The Court dismissed in part Plaintiffs’ wrongful foreclosure claim

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to the extent that it was based on claimed inaccuracies in the

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Notice of Default, holding that Plaintiffs had not adequately

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alleged prejudice from those inaccuracies, and granted Plaintiffs

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leave to amend to correct this deficiency and to add allegations

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that the Trustee’s sale improperly took place less than twenty

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days after the recording of the Notice of the Trustee’s Sale and

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that they were prejudiced by this.

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motion to dismiss the wrongful foreclosure claim, finding that
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Docket No. 41.

The Court otherwise denied the

Plaintiffs had properly plead that they were prejudiced by Chase’s

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failure to post the Notice of Default as required by law and that

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an allegation of full tender was not required under the

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circumstances of the case.

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light invasion of privacy claim because the statute of limitations

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had run based on the face of the 1AC and granted Plaintiffs leave

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to amend to plead facts supporting the application of the

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discovery rule for delayed accrual of that cause of action.

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Finally, the Court denied the motion to dismiss Plaintiffs’ claims

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United States District Court
For the Northern District of California

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for breach of contract and violation of the UCL under the unlawful

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prong of that law but dismissed the UCL claim to the extent it

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arose under the unfair or fraudulent prong.

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The Court dismissed Plaintiffs’ false

On October 25, 2012, Plaintiffs filed their 2AC.

Docket No.

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45.

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wrongful foreclosure and false light invasion of privacy claims

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and have maintained in their UCL claim that Chase’s conduct

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“constitutes unlawful, unfair and/or fraudulent business

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practices.”

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In the 2AC, Plaintiffs have made certain changes to their

On November 8, 2012, Defendants filed the instant motion to

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dismiss the 2AC, seeking dismissal of the amended wrongful

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foreclosure and false light invasion of privacy claims and of the

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UCL claim to the extent it is based on unfair and fraudulent

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business practices.3

Docket No. 48.

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In their motion, Defendants also stated that they sought
dismissal of the claim under the unlawful prong of the UCL. In
their reply, Defendants acknowledge that the Court denied their
earlier motion to dismiss this portion of Plaintiffs’ claim, state
that they mistakenly included this in the instant motion and ask
the Court to “disregard the Motion with respect to the unlawful
prong of the UCL claim.” Reply at 1.
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LEGAL STANDARD

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A complaint must contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.”

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Civ. P. 8(a).

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state a claim, dismissal is appropriate only when the complaint

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does not give the defendant fair notice of a legally cognizable

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claim and the grounds on which it rests.

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Twombly, 550 U.S. 544, 555 (2007).

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complaint is sufficient to state a claim, the court will take all

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United States District Court
For the Northern District of California

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material allegations as true and construe them in the light most

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favorable to the plaintiff.

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896, 898 (9th Cir. 1986).

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to legal conclusions; “threadbare recitals of the elements of a

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cause of action, supported by mere conclusory statements,” are not

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taken as true.

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(citing Twombly, 550 U.S. at 555).

On a motion under Rule 12(b)(6) for failure to

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Bell Atl. Corp. v.

In considering whether the

NL Indus., Inc. v. Kaplan, 792 F.2d

However, this principle is inapplicable

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

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Fed. R.

DISCUSSION
I.

Wrongful Foreclosure
Defendants move to dismiss this claim to the extent that it

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is premised on the alleged inaccuracies in the Notice of Default.

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Defendants do not challenge the sufficiency of the new allegations

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that Trustee’s sale improperly took place less than twenty days

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after the recording of the Notice of the Trustee’s Sale and that

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Plaintiffs were prejudiced as a result.

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Instead, Defendants argue that, in the 2AC, Plaintiffs have

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still not alleged sufficiently that they were prejudiced by the

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purported mistakes in the Notice of Default.

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Plaintiffs plead that they were prejudiced by these inaccuracies
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In the 2AC,

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“because they were unaware of the amount they would need to tender

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in order to reinstate.”

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Plaintiffs contend that they were prejudiced because, “[w]ithout

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the Notice of Trustee’s sale, the Cruzs were not on notice that

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they even needed to request a reinstatement amount.”

2AC ¶ 23.

In their opposition,

Opp. at 5.

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In a wrongful foreclosure case, “prejudice or harm is not

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established unless Plaintiffs demonstrate that the foreclosure

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would have been averted but for the alleged deficiencies.”

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Christiansen v. Wells Fargo Bank, 2012 U.S. Dist. LEXIS 142070, at

United States District Court
For the Northern District of California

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*22 (N.D. Cal.) (internal quotation marks, citations and

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formatting omitted).

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In the prior order, the Court found that Plaintiffs had

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alleged sufficiently that they were prejudiced by the failure to

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serve properly the Notice of Trustee’s Sale because, without that

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notice, they were not aware of the deadline by which they had to

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exercise their right to reinstate.

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held that Plaintiffs had not sufficiently alleged any prejudice

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that they suffered from the claimed inaccuracies in the Notice of

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Default, which were limited to the amount of arrearages that they

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owed and the date on which they missed their first installment

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payment, and did not include the fact that they were in default.

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On the other hand, the Court

Plaintiffs have not remedied this deficiency.

Even if

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Plaintiffs “were unaware of the amount they would need to tender

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in order to reinstate” because of the incorrect amount stated in

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the Notice of Default, 2AC ¶ 23, if they had been given proper

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notice of the deadline to do so, they “could have reinstated by

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proffering the amount that they believed was correct,” as

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explained by the Court previously, Docket No. 41, 9 (citing 4
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Miller & Starr, Cal. Real Est. § 10:188 (3d ed.) (“When the

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beneficiary fails or refuses to inform the trustor or other person

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seeking reinstatement of the amount necessary to cure the default,

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or the person seeking reinstatement believes that the

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beneficiary’s demand is excessive, reinstatement can be made by a

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tender of the amount which the person reinstating believes to be

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the proper amount.”)).

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properly to be a “but for” cause of the foreclosure.

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Notice of Default itself provides instructions to contact Chase

Thus, this deficiency was not alleged
Further, the

United States District Court
For the Northern District of California

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regarding the amount due.

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request, the beneficiary or mortgagee will give you a written

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itemization of the entire amount you must pay. . . . [T]o find out

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the amount you must pay, or to arrange for payment to stop the

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foreclosure, or if your property is in foreclosure for any other

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reason, contact: JPMorgan Chase Bank, National Association at 7301

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BAYMEADOWS WAY, JACKSONVILLE, FL 32256, [phone].”).

See RJN, Ex. C (“Upon your written

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Accordingly, the Court GRANTS Defendants’ motion to dismiss

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the wrongful foreclosure claim to the extent that it is premised

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on claimed inaccuracies on the Notice of Default.

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Court has previously granted leave to amend to remedy this

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deficiency and Plaintiffs have been unable to do so, this

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dismissal is without leave to amend.

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II.

Because the

False Light Invasion of Privacy

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Defendants move to dismiss this claim on the basis that

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Plaintiffs have not sufficiently plead that the delayed discovery

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rule should extend the statute of limitations, which otherwise

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would be two years.

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As the Court explained in the prior order, “[u]nder the

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discovery rule, the statute of limitations begins to run when the

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plaintiff suspects or should suspect that her injury was caused by

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wrongdoing, that someone has done something wrong to her.”

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v. Eli Lilly & Co., 44 Cal. 3d 1103, 1110 (1988); see also Fox v.

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Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 807 (2005) (“An

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important exception to the general rule of accrual is the

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‘discovery rule,’ which postpones accrual of a cause of action

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until the plaintiff discovers, or has reason to discover, the

Jolly

United States District Court
For the Northern District of California

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cause of action.”).

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delayed accrual of a cause of action, ‘[a] plaintiff whose

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complaint shows on its face that his claim would be barred without

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the benefit of the discovery rule must specifically plead facts to

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show (1) the time and manner of discovery and (2) the inability to

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have made earlier discovery despite reasonable diligence.’”

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at 808 (citation omitted).

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“In order to rely on the discovery rule for

Id.

In the 1AC, Plaintiffs had not attempted to plead that this

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rule applied to their claim, and in their opposition to the motion

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to dismiss the 1AC, Plaintiffs did not deny that the statute of

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limitations had run on the claim on the face of that pleading and

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had requested leave to amend to allege that they had not checked

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their credit and discovered the violation until sometime after the

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report had been made.

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amend should not be granted because “the credit reports would have

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been made by 2009 and this case was not filed until June 2012,”

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and there was “no conceivable set of facts under which it would be

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reasonable for someone not to check their credit for three and a

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half years.”

In reply, Defendants argued that leave to

Docket No. 39, 5.
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In the prior order, the Court rejected Defendants’ argument

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and granted Plaintiffs’ request for leave to amend.

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held that, because the discovery rule postpones when the statute

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of limitations begins to run, Plaintiffs were not required to show

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that they had not discovered or had reason to discover the

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erroneous credit report until the date of filing of this action,

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but instead were required to make such a showing through June 20,

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2010, two years before the filing of the action.

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15.

The Court

Docket No. 41,

The Court also declined “to find that, as a matter of law,

United States District Court
For the Northern District of California

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the failure to check one’s credit report for approximately a year

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and a half is per se unreasonable,” such that amendment would be

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futile.

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limitations for a claim under the Fair Credit Reporting Act

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(FCRA), a statute not at issue in this case but which addresses

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errors in credit reports, provides that claims under that statute

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must be brought “not later than the earlier of--(1) 2 years after

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the date of discovery by the plaintiff of the violation that is

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the basis for such liability; or (2) 5 years after the date on

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which the violation that is the basis for such liability occurs.”

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Id. at 15 n.2 (quoting 15 U.S.C. § 1681p).

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that “the FCRA appears to contemplate as reasonable that

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individuals may not check their credit reports for up to three

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years.”

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Id.

In so holding, the Court noted that the statute of

Thus, the Court noted

Id.

In the 2AC, to support the application of the delayed
discovery rule, Plaintiffs plead that
Plaintiffs could not reasonably have discovered that
their credit had been damaged until after the reports
were made. Plaintiffs did not discover the damage to
their credit until nearly one [and] a half years after
the false reports were made, as they did not check their
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credit yearly. Further, a reasonable person does not
check their credit yearly, and it is not unreasonable
that Plaintiffs did not check their credit for one [and]
a half years after the false reports were made.
2AC ¶ 36.
Defendants argue that Plaintiffs have not specifically plead
facts to show that they were unable to make earlier discovery

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despite reasonable diligence, as required by California courts,

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and have instead made only conclusory statements that they acted

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reasonably.

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timely pay their creditors may not have reason to suspect that

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United States District Court
For the Northern District of California

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adverse or incorrect information is being reported about their

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creditworthiness to a credit bureau and thus may not check their

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credit reports often, individuals who have admitted that they were

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in default “have more reason to act diligently in ensuring that

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their status is being reported correctly so as to minimize any

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damage to their credit scores.”

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Defendants also argue that, although individuals who

Mot. at 7; Reply at 3.

In response, Plaintiffs argue that they have plead that the

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wrongdoing occurred in January or March of 2009 and that they did

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not discover it for one and half years until they subsequently

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checked their credit report.

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the Court has already held that this length of delay was

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reasonable in the prior order and thus that more detailed pleading

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was unnecessary.

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hold that it was per se reasonable for individuals not to check

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their credit reports for one and half years.

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declined to find, as a matter of law, that it was per se

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unreasonable for individuals to wait that long, such that

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Plaintiffs should be denied an opportunity to amend their pleading

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and attempt to show that their delay here was reasonable.

Plaintiffs appear to suggest that

However, in the prior order, the Court did not

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Instead, the Court

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Regardless, at this stage, Plaintiffs’ allegations are

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sufficient.

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a question of fact reserved for the trier of facts.

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Cal. 3d at 1112.

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of a statute of limitations, the motion can be granted “only if

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the assertions of the complaint, read with the required

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liberality, would not permit the plaintiff to prove that the

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statute was tolled.”

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682 (9th Cir. 1980) (citation omitted).

Resolution of the statute of limitations is generally
Jolly, 44

When a motion to dismiss is based on the running

Jablon v. Dean Witter & Co., 614 F.2d 677,
Here, although Plaintiffs

United States District Court
For the Northern District of California

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will be required ultimately to prove that they acted with

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reasonable diligence in investigating the factual basis of their

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claim, the allegations made in the 2AC would permit Plaintiffs to

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prove that they did so and that the statute of limitations was

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tolled for a period of time sufficient that it did not bar the

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claim.

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Accordingly, the Court DENIES Defendants’ motion to dismiss

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this claim.

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III. Violation of the UCL

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Defendants move to dismiss Plaintiffs’ UCL claim under the

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unfair and fraudulent prongs.

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claim is “tethered to Defendant’s violations of California law as

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set forth in the SAC” and do not purport to be asserting a claim

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under the unfair and fraudulent prongs of the statute.

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6-7.

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motion to dismiss this claim to the extent it was asserted under

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those two prongs and did not allow Plaintiffs leave to amend it.

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Thus, to the extent that Plaintiffs have re-asserted the UCL claim

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under the unfair and fraudulent prongs, the Court GRANTS as

Plaintiffs respond that their UCL

Opp. at

The Court also previously granted as unopposed Defendants’

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unopposed Defendants’ motion to dismiss the claim.

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does not affect Plaintiffs’ UCL claim under the unlawful prong.

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This holding

CONCLUSION
For the reasons set forth above, the Court GRANTS Defendants’

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motion to dismiss the wrongful foreclosure claim to the extent

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that it is premised on claimed inaccuracies on the Notice of

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Default and the UCL claim under the unfair and fraudulent prongs.

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Dismissal of these claims is without leave to amend.

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DENIES Defendants’ motion to dismiss the false light invasion of

United States District Court
For the Northern District of California

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The Court

privacy claim.
The case management conference currently set for Thursday,
March 7, 2013 at 2:00 p.m. is maintained.
IT IS SO ORDERED.

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Dated: 1/3/2013

CLAUDIA WILKEN
United States District Judge

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