Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_13-cv-05327/USCOURTS-cand-5_13-cv-05327-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1332 Diversity-Breach of Contract

---

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

LEX DIAS, an individual, and SHERRY 

DIAS, an individual,

Plaintiffs,

v.

JP MORGAN CHASE, N.A., a national 

association; U.S. BANK, N.A., a national 

association, and Does 1-50, inclusive,

Defendants.

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’

MOTION TO DISMISS

Re: Docket No. 30

Plaintiffs Lex Dias and Sherry Dias (collectively, “Plaintiffs”) bring this suit against

Defendants JP Morgan Chase, N.A. (“Chase”) and U.S. BANK, N.A. (“U.S. Bank”) (collectively, 

“Defendants”). Presently before the court is Defendants’ Motion to Dismiss Plaintiffs’ First 

Amended Complaint (“FAC”). The Court found this matter suitable for decision without oral 

argument pursuant to Civil Local Rule 7-1(b) and previously vacated the hearing. Having 

reviewed the parties’ briefing, Defendants’ motion is DENIED for the reasons stated below. 

I. BACKGROUND

Plaintiffs own a property located in Gilroy, California (“the Property”), for which they 

secured financing by executing a Promissory Note and Deed of Trust in favor of Washington 

Mutual, F.A. (“WaMu”) in October 2004. FAC at ¶ 3, 8. Chase purchased WaMu in 2008, and 

assumed all of WaMu’s assets, including Plaintiffs’ Promissory Note and Deed of Trust. Id. at ¶

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 1 of 12
2

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

8. The Promissory Note and Deed of Trust were subsequently transferred to U.S. Bank, while 

Chase remained the loan servicer. Id. at ¶ 9. 

Plaintiffs allege that in February 2012, they were current in their loan payments when they 

went to their local Chase branch to request a loan modification. Id. at ¶ 11. Although Plaintiffs 

were able to make their mortgage payments, they were seeking a loan modification in order to 

obtain a more comfortable monthly mortgage payment. Id. Plaintiffs allegedly spoke with a 

Chase representative and were advised that they could not receive a loan modification because 

Plaintiffs were current on their mortgage payments. Id. Chase’s representative allegedly told 

Plaintiffs to stop making payments on the loan, and Plaintiffs would then receive a loan 

modification. Id. When Plaintiffs expressed concern regarding the effect of missed payments, the 

Chase representative allegedly told Plaintiffs that they need not worry because Chase and U.S. 

Bank would not initiate foreclosure proceedings against a borrower that missed payments while 

pursuing a loan modification. Id. at ¶ 12. Based on this instruction, Plaintiffs allegedly missed 

their first mortgage payment on the loan and submitted a loan modification application. Id. 

Between July 2012 and November 2012, Plaintiff alleges that Chase routinely indicated 

Plaintiffs’ applications were incomplete. Id. at ¶ 13. Although Plaintiffs had already submitted 

the requested documents on numerous occasions, they complied with each of Chase’s requests for 

additional documents. Id. Plaintiff alleges that in November 2012, Defendants recorded a Notice 

of Default against the Property, thus initiating foreclosure proceedings. Id. ¶ 14. When Plaintiffs 

inquired about the Notice, Chase allegedly told Plaintiffs to disregard the Notice because Plaintiffs 

were in loan modification review and, therefore, their property would not be sold at a Trustee’s 

Sale. Id. at ¶ 15. In December 2012, Plaintiffs allegedly received a letter from Chase confirming 

that their loan modification application was complete, and in April 2013, Plaintiffs allegedly 

entered into a final loan modification agreement with Defendants. Id. at ¶¶ 16-17. 

In May 2013, Plaintiffs allegedly submitted their first payment pursuant to the loan 

modification. Id. at ¶ 19. The payment, however, was rejected by Chase and was sent back to 

Plaintiffs uncashed. Id. When Plaintiffs asked a Chase representative for an explanation, the 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 2 of 12
3

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

representative allegedly refused to provide one and instead stated that Plaintiffs’ property was in 

foreclosure. Id. Plaintiffs further allege that in order to save their home, they were told to reapply for a new loan modification. Id. at ¶ 20. 

In June 2013, Plaintiffs allegedly submitted a second loan modification application that 

contained a documented material change in income. Id. While Chase was in possession of the 

second application, Chase recorded a Notice of Trustee Sale against the Property on June 6, 2013. 

Id. at ¶ 21. From June to September 2013, Plaintiffs allege that they frequently contacted Chase to 

inquire about their application, but were not provided with any information regarding the 

application or the trustee sale date. Id. at ¶ 22. In September 2013, Chase allegedly sent Plaintiffs 

a letter denying the application for a purported failure to submit requested documents. Id. at ¶ 23. 

Plaintiffs allege that when they contacted Defendants regarding the denial, a Chase representative 

told Plaintiffs to submit a new loan modification application. Id. at ¶ 24. 

In September 2013, Plaintiffs allegedly submitted a third loan modification application. Id. 

Although Chase allegedly confirmed the receipt of this application, Defendants recorded a second

Notice of Trustee Sale against the Property in October 2013. Id. at ¶¶ 24, 38. 

Plaintiffs commenced the instant action in November 2013. See Dkt. No. 1. The Court 

previously granted in part and denied in part Defendants’ motion to dismiss, and granted leave to 

amend. See Dkt. No. 26. Plaintiffs filed an amended complaint in July 2014 alleging the 

following claims: (1) breach of contract; (2) violation of California Civil Code § 2923.6; (3) 

breach of the implied covenant of good faith and fair dealing; and (4) violation of the California 

Business and Professions Code § 17200, et seq. See Dkt. No. 29. Defendants filed the instant 

motion to dismiss in August 2014. See Dkt. No. 30 (“Mot.”). Plaintiffs filed an opposition brief, 

and Defendants filed a reply brief. See Dkt. Nos. 32 (“Opp.”), 33 (“Reply”). 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim in the 

complaint with sufficient specificity to “give the defendant fair notice of what the . . . claim is and 

the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 3 of 12
4

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

quotations omitted). A complaint which falls short of the Rule 8(a) standard may be dismissed if 

it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Dismissal 

under Rule 12(b)(6) for failure to state a claim is “proper only where there is no cognizable legal 

theory or an absence of sufficient facts alleged to support a cognizable legal theory.” Shroyer v. 

New Cingular Wireless Servs., Inc., 606 F.3d 658, 664 (9th Cir. 2010) (quoting Navarro v. Block, 

250 F.3d 729, 732 (9th Cir. 2001)). In considering whether the complaint is sufficient to state a 

claim, the court must accept as true all of the factual allegations contained in the complaint. 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While a complaint need not contain detailed factual 

allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief 

that is plausible on its face.’” Id. (quoting Twombly, 550 U.S. at 570). However, mere 

conclusions couched as factual allegations are not sufficient to state a cause of action. Papasan v. 

Allain, 478 U.S. 265, 286 (1986).

III.DISCUSSION

A. Claim 1: Breach of Contract

In its motion, Defendants contend that Plaintiffs have not sufficiently pled a claim for 

breach of contract because Plaintiffs failed to attach a copy of the alleged contract to the 

complaint. Mot. at 3. Alternatively, they argue that Plaintiffs have selectively summarized from 

the purported contract instead of stating the salient terms of the agreement with the required 

specificity. Id. at 3-4. In opposition, Plaintiffs argue that they have pled the contract sufficiently 

because they allege the salient terms verbatim. Opp. at 5. 

To state a claim for breach of contract, a plaintiff must plead: “(1) the existence of the 

contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) 

the resulting damages to the plaintiff.” Oasis W. Realty, LLC v. Goldman, 51 Cal. 4th 811, 821 

(2011). Here, Defendants only challenge Plaintiffs’ pleading regarding the existence of a contract. 

To allege the existence of a contract, a “plaintiff may set forth the contract verbatim, attach 

it as an exhibit, or plead it according to its legal effect.” McKinnon v. Dollar Thrifty Auto. Grp., 

Inc., 2013 WL 3357929, at *6 (N.D. Cal. July 3, 2013) (Conti, J.); see also Lyons v. Bank of Am., 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 4 of 12
5

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

NA, 2011 WL 3607608, at *2 (N.D. Cal. Aug. 15, 2011) (Wilken, J.). This Court previously 

advised Plaintiffs “to attach a copy of the contract to their amended complaint, if possible.” See

Dkt. No. 26, Order Granting in Part and Denying in Part Motion to Dismiss at 5. Attaching a copy 

of the contract, however, is not required so long as Plaintiffs set forth the material terms verbatim 

or plead it according to its legal effect. 

Here, Plaintiffs allege the breach of Covenant 1 of the Deed of Trust. FAC at ¶ 29. They 

allege that Covenant 1, which was not modified by the modification agreement, provides: “Lender 

may return any payment or partial payment if the payment or partial payments are insufficient to 

bring the Loan current.” Id. at ¶ 28. Plaintiffs allege that they submitted their May 2013 payment 

pursuant to the loan modification, but the payment was inexplicably refused by Chase and sent 

back to Plaintiffs in June 2013. Id. at ¶¶ 19, 29. The alleged breach occurred when Defendants 

rejected the payment even though Plaintiffs’ payment was sufficient to bring the loan current. Id.

at ¶¶ 29-30.

Upon comparing Plaintiffs’ allegations against the Deed of Trust, the language of 

Covenant 1 provided by Plaintiffs also appears in the Deed of Trust.1 Thus, Plaintiffs sufficiently 

alleged the existence of a contract by setting forth the pertinent term verbatim. Since Defendants’ 

motion to dismiss this claim is based solely on the grounds that Plaintiffs failed to sufficiently 

plead the existence of a contract, Defendants’ motion is DENIED.2

B. Claim 2: Violation of California Civil Code § 2923.6

Plaintiffs allege that Defendants violated the California Homeowner Bill of Rights 

 

1 Defendants included a copy of the Deed of Trust to its request for judicial notice. See Dkt. No. 

31 at 8, Exh. 1. In a motion to dismiss, the court may consider documents that are not physically 

attached to the complaint if “the documents’ authenticity is not contested and the plaintiff’s 

complaint necessarily relies on them.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 

2001). Here, the Court takes judicial notice of the language in the Deed of Trust for purposes of 

comparison only, and not for the truth of the statements compared. 

2

For the first time in its reply brief, Defendants contend that Chase is not a party to the Deed of 

Trust, thus it cannot be said that it breached the contract. See Reply at 2. The Court declines to 

consider this argument because it was raised for the first time in the reply brief. See Zamani v. 

Carnes, 491 F.3d 990, 997 (9th Cir. 2007) (“The district court need not consider arguments raised 

for the first time in a reply brief.”). 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 5 of 12
6

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

(“HBOR”), specifically California Civil Code § 2923.6. The alleged violations occurred on two 

occasions: First, when Defendants recorded a Notice of Trustee Sale in June 2013, and second, 

when Defendants recorded another Notice of Trustee Sale in October 2013. See FAC at ¶¶ 37-38. 

Defendants, however, appear to only challenge the alleged June 2013 violation. 

The HBOR is a California statute that went into effect on January 1, 2013 to protect 

homeowners during the nonjudicial foreclosure process. See Cal. Civ. Code § 2923.4(a). The 

purpose of the HBOR is to ensure that borrowers are considered for and have a meaningful 

opportunity to obtain loss mitigation options, such as loan modifications, offered by the mortgage 

servicer. Id. Section 2923.6 of the HBOR attempts to eliminate “dual tracking,” a practice 

“whereby financial institutions continue to pursue foreclosure while evaluating a borrower’s loan 

modification application.” Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 941, 

950 (2014). 

Section 2923.6(c) provides in relevant part: 

If a borrower submits a complete application for a first lien loan 

modification offered by, or through, the borrower’s mortgage 

servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or 

authorized agent shall not record a notice of default or notice of sale, 

or conduct a trustee’s sale, while the complete first lien loan 

modification application is pending. A mortgage servicer . . . shall 

not record a notice of default or notice of sale or conduct a trustee’s 

sale until . . . [t]he mortgage servicer makes a written determination 

that the borrower is not eligible for a first lien loan modification, and 

any appeal period . . . has expired.

Cal. Civ. Code § 2923.6(c)(1). A limitation to the statute is Section 2923.6(g), which provides: 

In order to minimize the risk of borrowers submitting multiple 

applications for first lien loan modifications for the purpose of 

delay, the mortgage servicer shall not be obligated to evaluate 

applications from borrowers who have already been evaluated or 

afforded a fair opportunity to be evaluated for a first lien loan 

modification prior to January 1, 2013, or who have been evaluated 

or afforded a fair opportunity to be evaluated consistent with the 

requirements of this section, unless there has been a material change 

in the borrower’s financial circumstances since the date of the 

borrower’s previous application and that change is documented by 

the borrower and submitted to the mortgage servicer.

Cal. Civ. Code § 2923.6(g). 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 6 of 12
7

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

In its motion, Defendants set forth three arguments: (1) Section 2923.6 does not apply to 

the June 2013 loan modification application; (2) Plaintiffs did not sufficiently allege that the loan 

modification application was submitted prior to the recording of the Notice of Trustee Sale; and 

(3) Defendants’ denial of Plaintiffs’ application based on a failure to submit documents rebuts 

Plaintiffs’ contention that their application was complete, as required by the statute. Mot. at 4-5. 

Each argument will be addressed in turn.

First, Defendants assert that Section 2923.6 does not apply to the June 2013 loan 

modification application because Plaintiffs had already been evaluated for a loan modification. Id.

at 4. In response, Plaintiffs argue that their allegations place them within the scope of the Section 

2923.6(g) exception. Opp. at 6-7.

Plaintiffs allege they submitted a second loan modification application in early June 2013, 

according to Chase’s instruction. FAC at ¶ 37. They also allege that their application contained a 

documented material change in income due to a $2,000 decline in their monthly income. Id. at ¶ 

21, 37. Given these allegations, Plaintiffs have sufficiently pled a material change in financial 

circumstances that places them within the scope of Section 2923.6(g). Moreover, Plaintiffs allege 

they submitted the June 2013 application because Defendants refused to accept their payment 

pursuant to the final loan modification agreement and were told to re-apply for a new loan 

modification. FAC at ¶¶ 19-20. It is, thus, unlikely that Plaintiffs submitted the June 2013 

application for the purpose of delay, which Section 2923(g) is designed to protect against. 

Therefore, Defendants’ argument fails. 

Second, Defendants argue that Plaintiffs’ allegations of submitting an application with a 

documented material change in income is insufficient to state a claim because it is questionable 

whether the alleged application was submitted prior to the recording of the Notice of Trustee Sale. 

Mot. at 4. Plaintiffs allege that even though they were awaiting a response about their complete 

application, and in spite of Chase being in possession of the application, Chase recorded the 

Notice of Trustee Sale on June 6, 2013. FAC at ¶¶ 20-21. These allegations are sufficient to 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 7 of 12
8

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

assert that the loan modification application was submitted prior to the recording of the Notice of 

Trustee Sale. Therefore, Defendants’ argument fails.

Third, Defendants contend that the denial of Plaintiffs’ loan modification application on 

the grounds that Plaintiffs failed to submit required documents rebuts the contention that the 

application was “complete,” as required by Section 2923.6(c). Mot. at 5. Given this argument, 

Defendants’ interpretation of the statute appears to be that Section 2923.6 does not apply if, in 

hindsight, Defendants consider a claimant’s application to be incomplete. This is a misguided 

interpretation as it puts Defendants in control of when the statute applies. 

Pursuant to the statute, an application is “deemed ‘complete’ when a borrower has supplied 

the mortgage servicer with all documents required by the mortgage servicer within the reasonable 

timeframes specified by the mortgage servicer.” Cal. Civ. Code § 2923.6(h). Completeness of a 

loan modification application should be considered at the time the notice of trustee sale is 

recorded. 

Here, Plaintiffs allegedly submitted their application in early June 2013. FAC at ¶ 20. 

Although Chase was allegedly in possession of Plaintiffs’ application, Chase recorded a Notice of 

Trustee Sale on June 6, 2013. Id. at ¶ 21. There is no indication that Plaintiffs’ application was 

incomplete on June 6. Allowing Chase to declare three months after recording a Notice of Trustee 

Sale that a loan modification is incomplete would permit any mortgage servicer to circumvent the 

protections afforded by the statute. Mortgage servicers cannot manipulate the statute to immunize 

themselves from liability by recording a notice of trustee sale and then stating that the loan 

modification application was incomplete. To find otherwise would undermine the purpose and 

spirit of the HBOR. In this instance, Plaintiffs believed their application was complete on the date 

the Notice of Trustee Sale was recorded, thus, Section 2923.6(c) applies. Therefore, Defendants’ 

argument fails. 

In sum, Section 2923.6 applies to Plaintiffs’ June 2013 loan modification application, and 

Plaintiffs have sufficiently pled their claim for violation of the statute. Accordingly, Defendants’ 

motion as to this claim is DENIED. 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 8 of 12
9

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

C. Claim 3: Breach of the Implied Covenant of Good Faith and Fair Dealing

Plaintiffs allege that Defendants breached the implied covenant of good faith and fair 

dealing contained in Covenant 1 of the Deed of Trust that provides: “Borrower shall pay when due 

the principal of, and interest on, the debt evidenced by the [Promissory Note] and any prepayment 

charges and late charges due under the Note.” FAC at ¶ 43. To plead a breach of the implied 

covenant of good faith and fair dealing, Plaintiffs must allege that: (1) the plaintiff and the 

defendant entered into a contract, (2) that plaintiff did all, or substantially all, of the significant 

things that the contract required him to do or that he was excused from having to do those things, 

(3) that all conditions required for defendant’s performance had occurred, (4) that defendant 

unfairly interfered with plaintiff’s right to receive the benefits of the contract, and (5) that plaintiff 

was harmed by defendant’s conduct. Judicial Council of California Civil Jury Instructions § 325 

(2015). 

Under the Deed of Trust, Plaintiffs had the obligation to make timely mortgage payments. 

FAC at ¶¶ 43-44. According to Plaintiffs, Defendants allegedly interfered with this obligation 

when Defendants instructed Plaintiffs to miss payments in order to apply for a loan modification. 

Id. at ¶¶ 43, 45. Specifically, Plaintiffs allege that in February 2012, when Plaintiffs went to their 

local Chase branch to request a loan modification, Plaintiffs were “advised [by a Chase 

representative] that they could not grant [a loan modification] because Plaintiffs were current on 

their payments . . . . Chase told Plaintiffs to stop making payments on the loan and, in turn, 

Plaintiffs would receive a modification.” Id. at ¶ 45. When Plaintiffs expressed concern about 

missing payments, “Chase told Plaintiffs that they need not worry about missing payments 

because Chase and US Bank would not initiate foreclosure proceedings against a borrower that 

missed payments in order to receive a loan modification. Chase, thus, told Plaintiffs that, if they 

missed payments as instructed, they would not face the initiation of foreclosure proceedings.” Id. 

In its motion, Defendants contend that Chase did not “unfairly interfere” with Plaintiffs’ 

ability to make payments because Chase’s alleged statement of advising Plaintiffs to stop making 

payments was made in connection with Plaintiffs’ desire to modify the loan the loan. Mot. at 6. 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 9 of 12
10

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

In opposition, Plaintiffs argue that the facts in the instant action are analogous to Harvey v. Bank 

of America, N.A., 2013 WL 632088 (N.D. Cal. Mar. 6, 2013), and Harris v. Wells Fargo Bank, 

N.A., 2013 WL 1820003 (N.D. Cal. Apr. 30, 2013), where the defendants were found to interfere 

with the plaintiffs’ ability to perform because they instructed the plaintiffs to stop making 

mortgage payments. Opp. at 8-9.

This Court’s previous order states that Plaintiffs’ original allegations were deficient 

because “Plaintiffs were not encouraged or instructed to default in their loan payments; they were 

merely informed of the reason why they did not qualify for a loan modification.” Dkt. No. 26 at 6. 

Here, Plaintiffs sufficiently allege that they were told by Chase to stop making payments and that, 

in turn, Plaintiffs would receive a modification. Additionally, Plaintiffs sufficiently allege that 

they were told by Chase that they would not face foreclosure proceedings if they missed payments 

as instructed. These allegations are sufficient to state a claim based on Defendants’ alleged 

conduct in inducing Plaintiffs to stop payments under the Deed of Trust in order to be considered 

for a loan modification. Since Plaintiffs have adequately amended their complaint to correct the 

previously-stated deficiency, Defendants’ argument fails. 

Furthermore, Plaintiffs allege that their performance was excused as set forth in California 

Civil Code § 1511 because Defendants induced Plaintiffs not to perform under the contract. FAC 

at ¶ 46. In its motion, Defendants argue that Plaintiffs’ reliance on Section 1511 is misplaced 

because Plaintiffs’ claim is premised on separate promises, not on conduct related to the 

Promissory Note or the Deed of Trust. Mot. at 6. 

Section 1511 provides that performance of an obligation is excused if: 

[T]he debtor is induced not to [perform], by any act of the creditor 

intended or naturally tending to have that effect, done at or before 

the time at which such performance or offer may be made, and not 

rescinded before that time. 

Cal. Civ. Code § 1511. 

Here, Plaintiffs’ claim is premised on the alleged statement from Chase representatives 

telling Plaintiffs to stop making payments under the Deed of Trust in order to receive a loan 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 10 of 12
11

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

modification. See FAC at ¶ 45. These claims are based on Plaintiffs’ obligations to make 

payments pursuant to the Deed of Trust that was in place prior to any loan modification. Thus, 

Defendants’ argument regarding Section 1511 is unpersuasive. For this reason, Defendants 

argument fails. 

In sum, Plaintiffs have sufficiently pled a claim for breach of the implied covenant of good 

faith and fair dealing. Thus, Defendants’ motion as to this claim is DENIED. 

D. Claim 4: Violation of Business and Professions Code § 17200, et seq.

Lastly, Plaintiffs allege violation of California’s Unfair Competition Law (“UCL”), which 

prohibits “any unlawful, unfair or fraudulent” business practice. Cal. Bus. & Prof. Code § 17200. 

The statute “has a broad scope that allows for violations of other laws to be treated as unfair 

competition that is independently actionable while also sweep[ing] within its scope acts and 

practices that specifically prescribed by any other law.” Hauk v. JP Morgan Chase Bank USA, 

552 F.3d 1114, 1122 (9th Cir. 2009) (internal quotations omitted). Here, Defendants’ sole 

argument is that due to the failure of Plaintiffs’ other claims, this claim necessarily fails under the 

“unlawful business practice” prong. 

By proscribing any unlawful business practice, the UCL borrows violations of other laws 

and treats them as unlawful practices that the UCL makes independently actionable. Cel-Tech 

Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). An unlawful business 

practice under the UCL is an act or practice, committed pursuant to business activity, that is at the 

same time forbidden by law. Progressive W. Ins. Co. v. Super. Ct., 135 Cal. App. 4th 263, 287

(2005).

To the extent Defendants’ only challenge to this claim is that Plaintiffs failed to properly 

plead breach of contract, violation of California Civil Code § 2923.6, or breach of the implied 

covenant of good faith and fair dealing, Defendants’ argument fails. The Court has explained 

above why Plaintiffs have sufficiently pled those claims. Thus, Defendants’ motion as to this 

claim is DENIED. 

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 11 of 12
12

Case No. 5:13-CV-05327-EJD

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

IV.CONCLUSION

For the foregoing reasons, Defendants’ Motion to Dismiss is DENIED. Defendants shall 

file an answer within fifteen days of the date of this order. 

IT IS SO ORDERED

Dated: March 19, 2015

______________________________________

EDWARD J. DAVILA

United States District Judge

Case 5:13-cv-05327-EJD Document 41 Filed 03/19/15 Page 12 of 12