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

Filing 53


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 ARMIE CUA CRUZ; and FLORO LORENZO CRUZ, JR., 8 9 United States District Court For the Northern District of California 10 11 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. 12 13 14 15 16 17 18 19 20 ORDER GRANTING IN PART, AND DENYING IN PART, DEFENDANTS’ MOTION TO DISMISS (Docket No. 48) Plaintiffs, 6 7 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. 21 22 23 24 25 26 27 28 1 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. 1 2 BACKGROUND I. 3 Factual allegations The following allegations are taken from Plaintiffs’ 2AC and 4 documents of which Defendants ask the Court to take judicial 5 notice, which Plaintiffs do not oppose. 6 On or about October 29, 2005, Plaintiffs entered into a loan 7 agreement with Washington Mutual Bank, N.A. in connection with the 8 refinancing of their home, located at 23 Pinnacle Street in South 9 San Francisco, California. Request for Judicial Notice (RJN), United States District Court For the Northern District of California 10 Docket No. 34, Ex. A; 2AC ¶¶ 9-10. 11 Washington Mutual’s interest in the loan. 12 Chase subsequently acquired In February 2009, Mr. Cruz was hospitalized for blood clots 13 in his brain and, as a result of his health condition, was forced 14 to stop working. 15 feel the pressure of living on one income. 16 making their March 2009 payment, Plaintiffs contacted Chase to 17 inquire about a potential loan modification or other alternative 18 to foreclosure. 19 alternatives available and refused to consider them for a loan 20 modification or any other foreclosure alternatives. 21 ¶¶ 13-14. 22 ¶ 13. 23 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 24 able to afford their $4,500 per month mortgage payments. 25 ¶ 14. 26 Id. at On July 2, 2009, Plaintiffs received a Notice of Default 27 stating that their account was in arrears for $22,870.71. 28 ¶ 15. Id. at Despite the fact that Plaintiffs made their last payment in 2 1 March 2009 “and were only a couple of months late,” the Notice of 2 Default stated that “payment has not been made of,” among other 3 things, “the 01/01/2009 installment of principal and interest and 4 all subsequent monthly installments of principal and interest.” 5 RJN, Ex. C; 2AC ¶ 23. 6 on July 3, 2008. 7 Defendants recorded the Notice of Default RJN, Ex. C. Plaintiffs were shocked at the overestimation of the amount 8 that Chase “claimed they owed for one month of non-payment of a 9 $4,500 per month loan.” 2AC ¶ 16.2 However, they began to pool United States District Court For the Northern District of California 10 money in order to reinstate their loan prior to any trustee’s 11 sale. 12 Id. On October 7, 2009, Defendants recorded a Notice of Trustee’s 13 Sale of Plaintiffs’ home. 14 the notice on Plaintiffs’ door or anywhere on the property. 15 at ¶¶ 17, 24. 16 sometime later.” 17 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 18 the Notice of Trustee’s Sale, the property was sold in a Trustee’s 19 Sale to Chase. 20 willing, and able to tender payment to reinstate the loan prior to Id. at ¶ 18; RJN, Ex. E. Plaintiffs “were ready, 21 22 23 24 25 26 27 28 2 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. 3 1 the Trustee’s Sale,” but were not provided notice of the sale and 2 were thus not given a chance to reinstate. 3 II. 4 2AC ¶¶ 1, 18, 22. Procedural history Plaintiffs initiated the instant lawsuit on June 20, 2012, 5 asserting eleven claims against Defendants. 6 Plaintiffs also requested a temporary restraining order on June 7 20, 2012, seeking to prevent Chase from enforcing a writ of 8 possession the following day. 9 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 10 made a sufficient showing to obtain an ex parte temporary 11 restraining order because, among other reasons, Plaintiffs had not 12 submitted evidence that such a writ existed or that Chase intended 13 to enforce it on that date. 14 briefing schedule for the motion, requiring Chase to file a 15 response to Plaintiffs’ motion for a temporary restraining order 16 by 12:00 p.m. three court days after it had been served with 17 certain documents and permitting Plaintiffs to file a reply by 18 12:00 p.m. the following court day. 19 Docket No. 7. The Court set a On June 29, 2012, Chase and CRC filed an opposition to 20 Plaintiffs’ motion for a temporary restraining order. 21 13. 22 moot because Chase had obtained possession of the property. 23 Docket No. They argued, among other things, that Plaintiffs’ motion was Plaintiffs did not file a reply in further support of their 24 application for a temporary restraining order or otherwise 25 challenge the argument that their motion was moot. 26 2012, the Court denied as moot Plaintiffs’ application for a 27 temporary restraining order. Docket No. 17. 28 4 On July 5, 1 2 On July 16, 2012, Defendants moved to dismiss Plaintiffs’ original complaint. 3 Docket No. 18. On August 1, 2012, Plaintiffs filed their 1AC. Docket No. 4 25. 5 (1) wrongful foreclosure based on the inaccuracy in the Notice of 6 Default and the failure to post the Notice of Trustee’s Sale on 7 Plaintiffs’ door; (2) breach of contract for thwarting Plaintiffs’ 8 right to reinstate the loan up to five days before the Trustee’s 9 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 10 of privacy by placing Plaintiffs in a false light based on Chase’s 11 representation to the credit bureaus that Plaintiffs were behind 12 on their mortgage in January 2009 and thereafter; and 13 (4) violation of California’s Unfair Competition Law (UCL), 14 California Business and Professions Code §§ 17200, et seq. 15 On August 6, 2012, the Court found Defendants’ first motion 16 to dismiss to be moot. 17 moved to dismiss the 1AC. 18 Docket No. 26. Thereafter, Defendants Docket No. 34. On October 17, 2012, the Court granted in part Defendants’ 19 motion to dismiss the 1AC and denied it in part. 20 The Court dismissed in part Plaintiffs’ wrongful foreclosure claim 21 to the extent that it was based on claimed inaccuracies in the 22 Notice of Default, holding that Plaintiffs had not adequately 23 alleged prejudice from those inaccuracies, and granted Plaintiffs 24 leave to amend to correct this deficiency and to add allegations 25 that the Trustee’s sale improperly took place less than twenty 26 days after the recording of the Notice of the Trustee’s Sale and 27 that they were prejudiced by this. 28 motion to dismiss the wrongful foreclosure claim, finding that 5 Docket No. 41. The Court otherwise denied the Plaintiffs had properly plead that they were prejudiced by Chase’s 2 failure to post the Notice of Default as required by law and that 3 an allegation of full tender was not required under the 4 circumstances of the case. 5 light invasion of privacy claim because the statute of limitations 6 had run based on the face of the 1AC and granted Plaintiffs leave 7 to amend to plead facts supporting the application of the 8 discovery rule for delayed accrual of that cause of action. 9 Finally, the Court denied the motion to dismiss Plaintiffs’ claims 10 United States District Court For the Northern District of California 1 for breach of contract and violation of the UCL under the unlawful 11 prong of that law but dismissed the UCL claim to the extent it 12 arose under the unfair or fraudulent prong. 13 The Court dismissed Plaintiffs’ false On October 25, 2012, Plaintiffs filed their 2AC. Docket No. 14 45. 15 wrongful foreclosure and false light invasion of privacy claims 16 and have maintained in their UCL claim that Chase’s conduct 17 “constitutes unlawful, unfair and/or fraudulent business 18 practices.” 19 In the 2AC, Plaintiffs have made certain changes to their On November 8, 2012, Defendants filed the instant motion to 20 dismiss the 2AC, seeking dismissal of the amended wrongful 21 foreclosure and false light invasion of privacy claims and of the 22 UCL claim to the extent it is based on unfair and fraudulent 23 business practices.3 Docket No. 48. 24 25 26 27 28 3 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. 6 1 LEGAL STANDARD 2 A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” 4 Civ. P. 8(a). 5 state a claim, dismissal is appropriate only when the complaint 6 does not give the defendant fair notice of a legally cognizable 7 claim and the grounds on which it rests. 8 Twombly, 550 U.S. 544, 555 (2007). 9 complaint is sufficient to state a claim, the court will take all 10 United States District Court For the Northern District of California 3 material allegations as true and construe them in the light most 11 favorable to the plaintiff. 12 896, 898 (9th Cir. 1986). 13 to legal conclusions; “threadbare recitals of the elements of a 14 cause of action, supported by mere conclusory statements,” are not 15 taken as true. 16 (citing Twombly, 550 U.S. at 555). On a motion under Rule 12(b)(6) for failure to 19 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) 17 18 Fed. R. DISCUSSION I. Wrongful Foreclosure Defendants move to dismiss this claim to the extent that it 20 is premised on the alleged inaccuracies in the Notice of Default. 21 Defendants do not challenge the sufficiency of the new allegations 22 that Trustee’s sale improperly took place less than twenty days 23 after the recording of the Notice of the Trustee’s Sale and that 24 Plaintiffs were prejudiced as a result. 25 Instead, Defendants argue that, in the 2AC, Plaintiffs have 26 still not alleged sufficiently that they were prejudiced by the 27 purported mistakes in the Notice of Default. 28 Plaintiffs plead that they were prejudiced by these inaccuracies 7 In the 2AC, 1 “because they were unaware of the amount they would need to tender 2 in order to reinstate.” 3 Plaintiffs contend that they were prejudiced because, “[w]ithout 4 the Notice of Trustee’s sale, the Cruzs were not on notice that 5 they even needed to request a reinstatement amount.” 2AC ¶ 23. In their opposition, Opp. at 5. 6 In a wrongful foreclosure case, “prejudice or harm is not 7 established unless Plaintiffs demonstrate that the foreclosure 8 would have been averted but for the alleged deficiencies.” 9 Christiansen v. Wells Fargo Bank, 2012 U.S. Dist. LEXIS 142070, at United States District Court For the Northern District of California 10 *22 (N.D. Cal.) (internal quotation marks, citations and 11 formatting omitted). 12 In the prior order, the Court found that Plaintiffs had 13 alleged sufficiently that they were prejudiced by the failure to 14 serve properly the Notice of Trustee’s Sale because, without that 15 notice, they were not aware of the deadline by which they had to 16 exercise their right to reinstate. 17 held that Plaintiffs had not sufficiently alleged any prejudice 18 that they suffered from the claimed inaccuracies in the Notice of 19 Default, which were limited to the amount of arrearages that they 20 owed and the date on which they missed their first installment 21 payment, and did not include the fact that they were in default. 22 On the other hand, the Court Plaintiffs have not remedied this deficiency. Even if 23 Plaintiffs “were unaware of the amount they would need to tender 24 in order to reinstate” because of the incorrect amount stated in 25 the Notice of Default, 2AC ¶ 23, if they had been given proper 26 notice of the deadline to do so, they “could have reinstated by 27 proffering the amount that they believed was correct,” as 28 explained by the Court previously, Docket No. 41, 9 (citing 4 8 1 Miller & Starr, Cal. Real Est. § 10:188 (3d ed.) (“When the 2 beneficiary fails or refuses to inform the trustor or other person 3 seeking reinstatement of the amount necessary to cure the default, 4 or the person seeking reinstatement believes that the 5 beneficiary’s demand is excessive, reinstatement can be made by a 6 tender of the amount which the person reinstating believes to be 7 the proper amount.”)). 8 properly to be a “but for” cause of the foreclosure. 9 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 10 regarding the amount due. 11 request, the beneficiary or mortgagee will give you a written 12 itemization of the entire amount you must pay. . . . [T]o find out 13 the amount you must pay, or to arrange for payment to stop the 14 foreclosure, or if your property is in foreclosure for any other 15 reason, contact: JPMorgan Chase Bank, National Association at 7301 16 BAYMEADOWS WAY, JACKSONVILLE, FL 32256, (877) 926-8937.”). See RJN, Ex. C (“Upon your written 17 Accordingly, the Court GRANTS Defendants’ motion to dismiss 18 the wrongful foreclosure claim to the extent that it is premised 19 on claimed inaccuracies on the Notice of Default. 20 Court has previously granted leave to amend to remedy this 21 deficiency and Plaintiffs have been unable to do so, this 22 dismissal is without leave to amend. 23 II. Because the False Light Invasion of Privacy 24 Defendants move to dismiss this claim on the basis that 25 Plaintiffs have not sufficiently plead that the delayed discovery 26 rule should extend the statute of limitations, which otherwise 27 would be two years. 28 9 1 As the Court explained in the prior order, “[u]nder the 2 discovery rule, the statute of limitations begins to run when the 3 plaintiff suspects or should suspect that her injury was caused by 4 wrongdoing, that someone has done something wrong to her.” 5 v. Eli Lilly & Co., 44 Cal. 3d 1103, 1110 (1988); see also Fox v. 6 Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 807 (2005) (“An 7 important exception to the general rule of accrual is the 8 ‘discovery rule,’ which postpones accrual of a cause of action 9 until the plaintiff discovers, or has reason to discover, the Jolly United States District Court For the Northern District of California 10 cause of action.”). 11 delayed accrual of a cause of action, ‘[a] plaintiff whose 12 complaint shows on its face that his claim would be barred without 13 the benefit of the discovery rule must specifically plead facts to 14 show (1) the time and manner of discovery and (2) the inability to 15 have made earlier discovery despite reasonable diligence.’” 16 at 808 (citation omitted). 17 “In order to rely on the discovery rule for Id. In the 1AC, Plaintiffs had not attempted to plead that this 18 rule applied to their claim, and in their opposition to the motion 19 to dismiss the 1AC, Plaintiffs did not deny that the statute of 20 limitations had run on the claim on the face of that pleading and 21 had requested leave to amend to allege that they had not checked 22 their credit and discovered the violation until sometime after the 23 report had been made. 24 amend should not be granted because “the credit reports would have 25 been made by 2009 and this case was not filed until June 2012,” 26 and there was “no conceivable set of facts under which it would be 27 reasonable for someone not to check their credit for three and a 28 half years.” In reply, Defendants argued that leave to Docket No. 39, 5. 10 1 In the prior order, the Court rejected Defendants’ argument 2 and granted Plaintiffs’ request for leave to amend. 3 held that, because the discovery rule postpones when the statute 4 of limitations begins to run, Plaintiffs were not required to show 5 that they had not discovered or had reason to discover the 6 erroneous credit report until the date of filing of this action, 7 but instead were required to make such a showing through June 20, 8 2010, two years before the filing of the action. 9 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 10 the failure to check one’s credit report for approximately a year 11 and a half is per se unreasonable,” such that amendment would be 12 futile. 13 limitations for a claim under the Fair Credit Reporting Act 14 (FCRA), a statute not at issue in this case but which addresses 15 errors in credit reports, provides that claims under that statute 16 must be brought “not later than the earlier of--(1) 2 years after 17 the date of discovery by the plaintiff of the violation that is 18 the basis for such liability; or (2) 5 years after the date on 19 which the violation that is the basis for such liability occurs.” 20 Id. at 15 n.2 (quoting 15 U.S.C. § 1681p). 21 that “the FCRA appears to contemplate as reasonable that 22 individuals may not check their credit reports for up to three 23 years.” 24 25 26 27 28 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 11 1 2 3 4 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 6 despite reasonable diligence, as required by California courts, 7 and have instead made only conclusory statements that they acted 8 reasonably. 9 timely pay their creditors may not have reason to suspect that 10 United States District Court For the Northern District of California 5 adverse or incorrect information is being reported about their 11 creditworthiness to a credit bureau and thus may not check their 12 credit reports often, individuals who have admitted that they were 13 in default “have more reason to act diligently in ensuring that 14 their status is being reported correctly so as to minimize any 15 damage to their credit scores.” 16 Defendants also argue that, although individuals who Mot. at 7; Reply at 3. In response, Plaintiffs argue that they have plead that the 17 wrongdoing occurred in January or March of 2009 and that they did 18 not discover it for one and half years until they subsequently 19 checked their credit report. 20 the Court has already held that this length of delay was 21 reasonable in the prior order and thus that more detailed pleading 22 was unnecessary. 23 hold that it was per se reasonable for individuals not to check 24 their credit reports for one and half years. 25 declined to find, as a matter of law, that it was per se 26 unreasonable for individuals to wait that long, such that 27 Plaintiffs should be denied an opportunity to amend their pleading 28 and attempt to show that their delay here was reasonable. Plaintiffs appear to suggest that However, in the prior order, the Court did not 12 Instead, the Court 1 Regardless, at this stage, Plaintiffs’ allegations are 2 sufficient. 3 a question of fact reserved for the trier of facts. 4 Cal. 3d at 1112. 5 of a statute of limitations, the motion can be granted “only if 6 the assertions of the complaint, read with the required 7 liberality, would not permit the plaintiff to prove that the 8 statute was tolled.” 9 682 (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 10 will be required ultimately to prove that they acted with 11 reasonable diligence in investigating the factual basis of their 12 claim, the allegations made in the 2AC would permit Plaintiffs to 13 prove that they did so and that the statute of limitations was 14 tolled for a period of time sufficient that it did not bar the 15 claim. 16 Accordingly, the Court DENIES Defendants’ motion to dismiss 17 this claim. 18 III. Violation of the UCL 19 Defendants move to dismiss Plaintiffs’ UCL claim under the 20 unfair and fraudulent prongs. 21 claim is “tethered to Defendant’s violations of California law as 22 set forth in the SAC” and do not purport to be asserting a claim 23 under the unfair and fraudulent prongs of the statute. 24 6-7. 25 motion to dismiss this claim to the extent it was asserted under 26 those two prongs and did not allow Plaintiffs leave to amend it. 27 Thus, to the extent that Plaintiffs have re-asserted the UCL claim 28 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’ 13 1 unopposed Defendants’ motion to dismiss the claim. 2 does not affect Plaintiffs’ UCL claim under the unlawful prong. 3 4 This holding CONCLUSION For the reasons set forth above, the Court GRANTS Defendants’ 5 motion to dismiss the wrongful foreclosure claim to the extent 6 that it is premised on claimed inaccuracies on the Notice of 7 Default and the UCL claim under the unfair and fraudulent prongs. 8 Dismissal of these claims is without leave to amend. 9 DENIES Defendants’ motion to dismiss the false light invasion of United States District Court For the Northern District of California 10 11 12 13 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. 14 15 16 Dated: 1/3/2013 CLAUDIA WILKEN United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 14

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