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Way v. JPMorgan Chase Bank, N.A.

United States District Court, E.D. California

March 27, 2018

KATIE WAY, an individual; JOHN WAY, an individual; and EDDY WAY, an individual, Plaintiffs,
v.
JP MORGAN CHASE BANK, N.A., CALIBER HOME LOANS, INC., U.S. BANK, N.A., as trustee for LSF9 MASTER PARTICIPATION TRUST, and MTC FINANCIAL INC., dba TRUSTEE CORPS, Defendants.

          ORDER

          Troy L. Nunley United States District Judge.

         This matter is before the Court pursuant to Defendant MTC Financial Inc., dba Trustee Corps's (“Trustee Corps”) Motion to Dismiss the First Amended Complaint.[1] (ECF No. 28.) Plaintiffs Katie Way, John Way, and Eddy Way (collectively “Plaintiffs”) oppose this motion.[2](ECF No. 36.) Trustee Corps filed a reply. (ECF No. 40.) For the reasons set forth below, the Court hereby GRANTS IN PART and DENIES IN PART the Motion to Dismiss. (ECF No. 28.)

         I. Factual and Procedural Background

         This matter concerns the property located at 16 Nob Court, Sacramento, CA 95826 (“Subject Property”). (First Amended Complaint (“FAC”), ECF No. 21 ¶ 1.) The FAC alleges on or about September 30, 2004, Plaintiffs financed the Subject Property through a $280, 000 loan from Washington Mutual Bank (“loan”) and executed a Deed of Trust (“DOT”). (ECF No. 21 ¶ 13; ECF No. 21-2 at 2.) The DOT identifies all three Plaintiffs as borrowers to the loan. (ECF No. 21-2 at 2.) Defendant Trustee Corps (“Trustee Corps”) is the foreclosure trustee. (ECF No. 21 ¶ 14.)

         On or about July 1, 2010, Plaintiff Katie Way entered into a loan modification agreement with JP Morgan Chase (“Chase”), which she signed. (ECF No. 21 ¶ 15.) The other two Plaintiffs, who were also borrowers to the loan, never received or signed this agreement. (ECF No. 21 ¶ 15.) In or around August 2012, Plaintiffs contacted Chase regarding an issue with the Subject Property's insurance coverage. (ECF No. 21 ¶ 16.) Plaintiffs allege Chase informed them that John and Eddy Way were not borrowers on the loan, that they did not have a loan with Chase, and that Chase did not know John and Eddy. (ECF No. 21 ¶ 16.)

         On or about August 9, 2013, a “Notice of Default and Election to Sell Under Deed of Trust” (“Notice”) was issued to Plaintiffs stating that the Subject Property was in foreclosure. (ECF No. 21 ¶ 17.) Attached to the Notice was a Declaration of Compliance dated June 12, 2013, with a box checked next to the section which states, “The mortgagee, beneficiary, or authorized agent tried with due diligence but was unable to contact the borrower to discuss the borrower's financial situation and to explore options for the borrower to avoid foreclosure as required by Cal. Civ. Code Section 2923.55.” (See Ex. C, ECF No. 21-2 at 24.) On August 12, 2013, Chase sent Plaintiffs a letter confirming that all three Plaintiffs are borrowers on the loan and that it “inadvertently sent and approved the modification agreement that was only addressed to Katie Way and not all three borrowers who are on the loan.” (See Ex. D, ECF No. 21-2 at 26.) The letter further stated that Chase was unable to remove or alter the terms of the modified loan without the approval of a new modification agreement, but Plaintiffs do have the option of applying and being reviewed for a new loan modification. (See Ex. D, ECF No. 21-2 at 26.) The record is unclear as to whether Plaintiffs applied for a new loan modification or if the parties made further contact with one another to discuss the loan modification agreement. (See generally, ECF No. 21.)

         On or about May 17, 2016, a California Assignment of Deed of Trust was recorded, which assigned the beneficial interest in the loan from Chase to U.S. Bank. (ECF No. 21 ¶ 19; ECF No. 21-2 at 28.) On or about June 10, 2016, Trustee Corps recorded a “Notice of Trustee's Sale” against the Subject Property, which stated that Plaintiffs were “in default under a deed of trust.” (See Ex. F, ECF No. 21-2 at 31.)

         On August 16, 2016, Plaintiffs commenced this lawsuit in the Superior Court of California in the County of Sacramento against all Defendants. (ECF No. 1.) Defendants removed the action to this Court. (ECF No. 1.) Trustee Corps then filed a motion to dismiss. (ECF No. 10.) Pursuant to Plaintiffs' filing of a FAC, the Court denied Trustee Corps's motion to dismiss as moot. (ECF No. 22.) In their FAC, Plaintiffs assert six claims against all Defendants: (1) Breach of Contract; (2) Breach of Implied Covenant of Good Faith and Fair Dealing; (3) Intentional Infliction of Emotional Distress; (4) Violation of California Civil Code § 2923.55; (5) Negligence; and (6) Violation of Business and Professions Code § 17200. (ECF No. 21.) Defendant Trustee Corps moves to dismiss all claims in Plaintiffs' FAC. (ECF No. 28.)

         II. Standard of Law

          Federal Rule of Civil Procedure 8(a) requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” See Ashcroft v. Iqbal, 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Under notice pleading in federal court, the complaint must “give the defendant fair notice of what the claim ... is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). “This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002).

         A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a motion to dismiss, the factual allegations of the complaint are assumed to be true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the well-pleaded allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege “‘specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief.” Twombly, 550 U.S. at 570 (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 (2009)). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678-79 (citing Twombly, 550 U.S. at 556).

         Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). Additionally, it is inappropriate to assume that the plaintiff “can prove facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

         Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). While the plausibility requirement is not akin to a probability requirement, it demands more than “a sheer possibility that a defendant has acted unlawfully.” Id. at 678. This plausibility inquiry is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679.

         In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F.Supp.2d 1035, 1042 (C.D. Cal. 1998).

         If a complaint fails to state a plausible claim, “‘[a] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.'” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); see also Gardner v. Marino, 563 F.3d 981, 990 (9th Cir. 2009) (finding no abuse of discretion in denying leave to amend when amendment would be futile). Although a district court should freely give leave to amend when justice so requires under Federal Rule of Civil Procedure 15(a)(2), “the court's discretion to deny such leave is ‘particularly broad' where the plaintiff ...


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