United States District Court, E.D. California
KATIE WAY, an individual; JOHN WAY, an individual; and EDDY WAY, an individual, Plaintiffs,
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.
L. NUNLEY UNITED STATES DISTRICT JUDGE
matter is before the Court pursuant to Defendant JP Morgan
Chase Bank, N.A.'s Motion to Dismiss (ECF No. 29) and
Defendants Caliber Home Loans and U.S. Bank's separate
Motion to Dismiss (ECF No. 31-1). Plaintiffs Katie Way, John
Way, and Eddy Way (collectively “Plaintiffs”)
oppose both motions. (ECF Nos. 37 & 38.) For the reasons
set forth below, the Court hereby GRANTS in part and DENIES
in part Defendants' Motions to Dismiss. (ECF Nos. 29
FACTUAL AND PROCEDURAL BACKGROUND
facts of this case were addressed in great detail in this
Court's prior Order and are incorporated herein by
reference. (See Order, ECF No. 56.) Therefore, the facts
outlined here are meant to describe how the moving Defendants
fit into those facts. Defendant JP Morgan Chase
(“Chase”) is the loan's former servicer. (ECF
No. 21 ¶ 14.) Defendant Caliber Home Loans
(“Caliber”) is the loan's current servicer.
(ECF No. 21 ¶ 14.) Defendant U.S. Bank (“U.S.
Bank”) is the loan's beneficiary. (ECF No. 21
STANDARD OF LAW
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
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).
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).
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.
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.
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 has
previously amended its complaint[.]” Ecological
Rights Found. v. Pac. Gas & Elec. Co., 713 F.3d 502,
520 (9th Cir. 2013) (quoting Miller v. Yokohama Tire
Corp., 358 F.3d 616, 622 (9th Cir. 2004)).
allege six causes of action: (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.) Defendants move to dismiss
all claims. Caliber and U.S. Bank specifically ask this Court
to dismiss Plaintiffs' FAC for failure to allege tender.
(ECF No. 31-1 at 10.) The Court addresses the arguments
collectively and in turn.
First Claim: Breach of Contract
contend that Plaintiffs' breach of contract claim should
be dismissed for failure to state a claim because Plaintiffs
failed to allege damages. (ECF No. 29 at 10; ECF No. 31-1 at
5.) Defendants further argue that Plaintiffs are the
breaching party by virtue of their failure to pay their debt.
(ECF No. 29 at 10; ECF No. 31-1 at 5.) Chase specifically
argues that because it is unclear whether Plaintiffs allege a
breach of the note and deed of trust or a breach of the loan
modification agreement (“LMA”), the claim fails
for uncertainty. (ECF No. 29 at 10.) Chase further argues
that because there is no provision in the deed of trust that
prohibits Chase from entering the LMA with one borrower,
Plaintiffs cannot amend their complaint to point to a
provision of the deed of trust that was breached and all
Plaintiffs are still obligated under the terms of the
original note and deed of trust. (ECF No. 29 at 10.)
state a cause of action for breach of contract, a plaintiff
must plead the following elements: (1) the existence of a
contract, (2) plaintiff's performance or excuse for
nonperformance, (3) defendant's breach, and (4) resulting
damage to the plaintiff. Reinhardt v. Gemini Motor
Transp., 879 F.Supp.2d 1138, 1143 (E.D. Cal. 2012).
on the exhibits attached to the FAC,  there are at least three
contracts that may be at issue in this case: the Deed of
Trust, the Promissory Note, and the Loan Modification
Agreement. As the Court noted in its previous Order, it is
unclear from the FAC which contract Plaintiffs allege
Defendants breached - the Deed of Trust, the Promissory Note,
or the Loan Modification Agreement, or all three. (ECF No. 21
¶¶ 13, 24.) Because the Court is unable to
determine which alleged contract serves as the basis for the
first cause of action, the Court dismisses this claim. As the
first element for a breach of contract claim has not been
met, the Court need not discuss the other elements.
Therefore, Defendants' motion to dismiss is granted with
leave to amend. Plaintiffs may file a Second Amended
Complaint consistent with this Court's Order identifying
the specific contract at issue as to the first claim.
Second Claim: Violation of the Covenant of Good Faith and
argue Plaintiffs fail to allege an underlying breach of
contract claim and thus cannot allege a violation of the
covenant of good faith and fair dealing. (ECF No. 29 at 11
& ECF No. 31-1 at 6.) Chase further argues that because
Plaintiffs fail to identify a “special
relationship” between Plaintiffs and Chase, which they
allege is a prerequisite to asserting a tort claim for breach
of implied covenant in a commercial context, this claim also
fails. (ECF No. 29 at 11.) Plaintiffs argue Chase violated
the implied covenant of good faith and fair dealing when it
prevented them from “taking advantage of the benefits
of the contract, i.e., to keep their loan in good standing
for the benefit of their property to avoid
foreclosure.” (ECF No. 37 at 7 & ECF No. 38 at 6.)
is an implied covenant of good faith and fair dealing in
every contract that neither party will do anything which will
injure the right of the other to receive the benefits of the
agreement.” Kransco v. American Empire Surplus
Lines Ins. Co., 23 Cal.4th 390, 400 (2000) (quoting
Comunale v. Traders & General Ins. Co., 50
Cal.2d 654, 658 (1958)). “The prerequisite for any
action for breach of the implied covenant of good faith and
fair dealing is the existence of a contractual relationship
between the parties, since the covenant is an implied term in
the contract.” Smith v. City and County of San
Francisco, 225 Cal.App.3d 38, 49, 275 (1990).
“Without a contractual relationship, [plaintiffs]
cannot state a cause of action for breach of the implied
covenant.” Saldate v. Wilshire Credit Corp.,
268 F.R.D. 87, 105 (E.D. Cal. 2010). “In essence, the
covenant is implied as a supplement to the express
contractual covenants, to prevent a contracting party from
engaging in conduct which frustrates the other party's
rights to the benefits of the contract.” Love v.
Fire Ins. Exch., 221 Cal.App.3d 1136, 1153, 271
Cal.Rptr. 246 (1998), Carson v. Bank of Am., N.A.,
No. 2:12-CV-01487-MCE, 2013 WL 394867, at *5 (E.D. Cal. Jan.
30, 2013), aff'd sub nom. Carson v. Bank of Am.
NA, 611 Fed.Appx. 379 (9th Cir. 2015). More importantly,
“to state a claim for breach of the implied covenant of
good faith and fair dealing, a plaintiff must identify the
specific contractual provision that was frustrated.”
Plastino v. Wells Fargo Bank, 873 F.Supp.2d 1179,
1191 (N.D.Cal.2012) (quoting Perez v. Wells Fargo Bank,
N.A., No. 11-02279, 2011 WL 3809808, at *18 (N.D.Cal.
Aug.29, 2011), Gilliland v. Chase Home Fin., LLC,
No. 2:13-CV-02042 JAM-AC, 2014 WL 325318, at *4 (E.D. Cal.
Jan. 29, 2014)).
first argues that “it is unclear as to whether
Plaintiffs are basing the breach of the implied covenant on
the note and deed of trust or on the LMA.” (ECF No. 29
at 11). However, Plaintiffs explicitly state in their FAC
that the loan modification agreement is the contract at issue
in this claim. (See FAC, ECF No. 21 ¶ 33.)
Thus, in this respect Chase's argument is at a minimum a
bad misstatement and at the most deliberately disingenuous.
Further, Defendants mistakenly state that because Plaintiffs
fail to allege an underlying breach of contract claim, their
claim for breach of implied covenant fails. However, the
implied covenant of good faith and fair dealing is implied in
every contract, and one does not need allege or
prove a breach of contract claim in order to bring a breach
of implied covenant claim. Thrifty Payless, Inc. v. The
Americana at Brand, LLC, 218 Cal.App.4th 1230, 1244
(2013) (“‘[B]reach of a specific provision of the
contract is not…necessary' to a claim for breach
of the implied covenant of good faith and fair
dealing.”) citing Carma Developers (Cal.), Inc. v.
Marathon Development California, Inc., 2 Cal.4th 342,
373, n.12 (1992). All that is required for an implied
covenant claim is the existence of a contractual
relationship between the parties. Smith v. City and
County of San Francisco, 225 Cal.App.3d 38, 49, 275
(1990). Moreover, Defendants do not deny the fact that they
were parties to the LMA. (ECF No. 29; ECF No. 31-1.) Because
Plaintiffs adequately allege the existence of a contractual
relationship, Plaintiffs may bring forth a claim for breach
of implied covenant.
Chase cites Bionghi v. Metropolitan Water Dist. of So.
California, 70 Cal.App.4th 1358, 1370 (1999), to assert
that a “special relationship” is a necessary
prerequisite to asserting a tort claim for breach of implied
covenant in a commercial context. (ECF No. 29 at 11.) The
Court agrees that recovery for breach of the implied covenant
claim is generally only available in limited circumstances
where there is a special relationship between contracting
parties. Bionghi, 70 Cal.App.4th at 1370 (1999),
Carson v. Bank of Am., N.A., No. 2:12-CV-01487-MCE,
2013 WL 394867, at *6 (E.D. Cal. Jan. 30, 2013),
aff'd sub nom. Carson v. Bank of Am.
NA, 611 Fed.Appx. 379 (9th Cir. 2015). Plaintiffs do not
allege any facts indicating a special relationship between
them and Defendants. (ECF No. 21 ¶¶ 31-38.)
Instead, “Plaintiffs' alleged breach arises out of
a normal commercial transaction, a mortgage loan, and the
California courts have ...