Tawfik v. Select Portfolio Servicing, Inc.

• Court: District Court, N.D. California
• Decided: August 26, 2020
• Docket: 3:20-cv-02946
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 HUSSEIN TAWFIK, et al., Case No. 20-cv-02946-JSC

8 Plaintiffs, ORDER RE DEFENDANTS’ MOTIONS 9 v. TO DISMISS

10 JPMORGAN CHASE BANK, N.A., et al., Re: Dkt. Nos. 10 & 14 Defendants. 11

12 Plaintiffs bring state law claims against JPMorgan Chase Bank, N.A. (“Chase”), Select 13 Portfolio Servicing, Inc. (“SPS”) and U.S. Bank, NA (“U.S. Bank”) (collectively “Defendants”).1 14 Now before the Court are Defendants’ motions to dismiss Plaintiffs’ claims pursuant to Federal 15 Rule of Civil Procedure 12(b)(6). After careful consideration of the parties’ briefing, and having 16 had the benefit of oral argument on July 26, 2020, the Court GRANTS Chase’s motion to dismiss, 17 and GRANTS in part and DENIES in part SPS and U.S. Bank’s motion to dismiss. 18 BACKGROUND 19 I. The Parties 20 A. Defendants 21 Chase is a national banking association, organized under the laws of the United States, 22 with its main office in Columbus, Ohio. (Dkt. No. 1 ¶ 10).2 SPS is a corporation with its principle 23 place of business in Utah. (Dkt. No. 1 ¶ 11). U.S. Bank is a national banking association “formed 24 pursuant to the laws of the law of the State of Minnesota.” (Dkt. No. 13 at 2.) 25 Chase, SPS, and U.S. Bank are engaged in, among other enterprises, “residential mortgage 26 1 All parties have consented to the jurisdiction of a magistrate judge pursuant to 28 U.S.C. § 27 636(c). (Dkt. Nos. 8, 19, 21.) 1 banking[.]” (Dkt. No. 1-1 ¶ 4-6.) On September 25, 2008, Chase completed a Purchase and 2 Assumption Agreement with the Federal Deposit Insurance Corporation (“FDIC”), through which 3 Chase acquired assets of Washington Mutual, FA (“Washington Mutual”) after Washington 4 Mutual was taken into receivership by the FDIC. These assets included “mortgage servicing 5 rights and obligations” previously held by Washington Mutual. (Dkt. No. 10 at 4.) Similarly, 6 U.S. Bank, NA, “successor trustee to Bank of America, NA, successor in interest to LaSalle Bank 7 NA, as trustee, on behalf of the holders of the Wa[shington Mutual] Mortgage Pass-Through 8 Certificates, Series 2006-AR9” acquired certain loans from Washington Mutual. (See Dkt. No. 9 14.) At all relevant times, SPS operated as U.S. Bank’s loan servicing agent. (See Dkt. No. 14-1.) 10 B. Plaintiffs 11 Hussein Tawfik and Heidi Tawfik are residents of California. (Dkt. No. 1-1 ¶ 2.) In or 12 around July 1977, Plaintiffs purchased the property located at 660 Greenwich Lane, Foster City, 13 California 94404 (the “Foster City Property”). (Dkt. No. 18 at 5-6.) On September 14, 2006, 14 Plaintiffs took out a $960,000.000 loan executing a Deed of Trust and Promissory Note (the 15 “Foster City Loan”) in favor of Washington Mutual. (Dkt. No. 1-1 ¶ 10; Dkt. No. 10 at 3.) Chase 16 eventually acquired Washington Mutual and the loan. (Dkt. No. 10 at 4.) In August 2013, after 17 defaulting on the Foster City Loan, Plaintiffs entered into a Loan Modification Agreement with 18 Chase, who had acquired certain Washington Mutual assets. (Dkt. No. 10 at 4.) 19 On May 18, 2006, Plaintiffs purchased property located at 492-496 N. Whisman Road, 20 Mountain View, California 94043 (the “Mountain View Property”). (Dkt. No. 1-1 ¶ 11; Dkt. No. 21 14 at 3.) To secure the financing, Plaintiffs executed a Deed of Trust and Promissory Note (the 22 “Mountain View Loan”) on the property in favor of Washington Mutual. (Dkt. No. 1-1 ¶ 11.) 23 U.S. Bank, NA, acquired certain loans from Washington Mutual, including the Mountain View 24 Loan. (See Dkt. No. 14.) A Notice of Default was recorded against the Mountain View Property 25 on January 12, 2010. (Dkt. No. 14 at 3.) At all relevant times, SPS operated as U.S. Bank’s loan 26 servicing agent. (See Dkt. No. 14-1.) 27 On March 11, 2014, Plaintiffs filed for bankruptcy. (Id.) The Bankruptcy Court of the 1 1-1 ¶ 13.) 2 II. Complaint Allegations 3 A. Chase 4 Chase refuses to abide by the contractual terms that govern its relationship with Plaintiffs, 5 insisting instead that the total principle balance on the Foster City Loan is approximately 6 $106,000.00 more than it actually is. Additionally, Chase has not been reporting to credit agencies 7 that Plaintiffs have been making monthly payments on their mortgage.3 8 B. SPS and U.S. Bank 9 SPS and U.S. Bank (collectively “SPS”) have for years demanded more than is required 10 under the Mountain View Loan. SPS has charged Plaintiffs $4,370.89 monthly, despite monthly 11 principle and interest payments being fixed at $4,300.70. SPS has also failed to properly apply 12 Plaintiffs’ payments to the Mountain View Loan such that, in January 2016, SPS claimed its 13 unpaid principal balance was $1,032,335.91. This amount does not account for approximately 14 $80,000.00 in payments Plaintiffs made toward the loan. As such, SPS has for years claimed 15 Plaintiffs owe an inflated amount on the Mountain View Loan and charged interest on an amount 16 not actually owed under it. SPS has not reported Plaintiffs’ monthly payments to credit agencies, 17 despite explicitly stating on monthly statements sent to Plaintiffs that it reports the payments to 18 credit agencies; this has severely damaged their credit rating. 19 III. Procedural History 20 Plaintiffs filed their original complaint in the Superior Court of the State of California for 21 the County of San Mateo on March 25, 2020, asserting multiple claims under California law 22 against Chase, SPS, and U.S. Bank. (See Dkt. No. 1-1.). The complaint asserts a claim for 23 declaratory relief, as well as claims for breach of contract, unjust enrichment, fraud, and violations 24 of California’s Unfair Competition Law, California Business & Professions Code § 17200 25 (“UCL”). (Id.) Chase removed the case to this district on April 29, 2020 on diversity jurisdiction 26

27 3 While Plaintiffs allege that Chase has not been reporting to credit agencies that they have been 1 grounds. (Dkt. No. 1 at 4.) Chase filed its motion to dismiss on May 6, 2020. (See Dkt. No. 10.) 2 SPS and U.S. Bank filed their motion to dismiss on May 18, 2020. (See Dkt. No. 14.) The 3 motions are fully briefed. (See Dkt. Nos. 18 & 22; 23 & 24.) 4 REQUEST FOR JUDICIAL NOTICE 5 Generally, “district courts may not consider material outside the pleadings when assessing 6 the sufficiency of a complaint under Rule 12(b)(6).” Khoja v. Orexigen Therapeutics, Inc., 899 7 F.3d 988, 998 (9th Cir. 2018). When such materials “‘are presented to and not excluded by the 8 court,’ the 12(b)(6) motion converts into a motion for summary judgment under Rule 56.” Id. 9 (quoting Fed. R. Civ. P. 12(d)). There are, however, “two exceptions to this rule: the 10 incorporation-by-reference doctrine, and judicial notice under Federal Rule of Evidence 201.” Id. 11 Pursuant to the Federal Rules of Evidence, courts may judicially notice an adjudicative fact 12 if it is not subject to reasonable dispute because it: “(1) is generally known within the trial court's 13 territorial jurisdiction; or (2) can be accurately and readily determined from sources whose 14 accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). 15 In support of its motion to dismiss, Chase requests judicial notice of six exhibits: (1) 16 “Bankruptcy Petition Filed by Hussein and Heidi Tawfik in In re Tawfik, No. 14-30367 (Bankr. 17 N.D. Cal.) on March 11, 2014”; (2) “Proof of Claim Filed by Chase on July 14, 2014 in In re 18 Tawfik, No. 14-30367 (Bankr. N.D. Cal.),” containing “Plaintiffs’ Promissory Note, Deed of 19 Trust, and Loan Modification Agreement”; (3) “Purchase and Assumption Agreement (“P&A 20 Agreement”) between Federal Deposit Insurance Corporation (“FDIC”) and Chase, dated 21 September 25, 2008;” (4) “Proposed Chapter 11 Plan Filed By Hussein and Heidi Tawfik in In re 22 Tawfik, No. 14-30367 (Bankr. N.D. Cal.) on June 3, 2015”; (5) “Stipulation between Chase and 23 Plaintiffs filed in In re Tawfik, No. 14-30367 (Bankr. N.D. Cal.) on July 28, 2015”; and (6) 24 “Order Approving Plan Issued in In re Tawfik, No. 14-30367 (Bankr. N.D. Cal.) on August 4, 25 2015.” 26 SPS and U.S. Bank request judicial notice of four exhibits in support of their motion to 27 dismiss: (1) “Exhibits to the Motion to Approve Stipulation on Value, Use of Cash Collateral, and 1 Mountain View, CA 94043, filed October 24, 2014 in the case of In Re: Hussein Hussein Tawfik, 2 et al., U.S.D.C., Northern District Bankruptcy Court No. 14-30367 HLB [ECF Doc. 77-1,] and 2) 3 the order entering the stipulation filed November 24, 2014 in the same case [ECF Doc. 92]”; (2) 4 “Notice of Default recorded January 12, 2010”; (3) Order Approving Disclosure Statement and 5 Confirming Plan filed August 4, 2015, in the case of In Re: Hussein Hussein Tawfik, et al., 6 U.S.D.C., Northern District Bankruptcy Court No. 14-30367 HLB [ECF Doc. 146]”; and (4) 7 “Proposed Combined Plan of Reorganization filed June 3, 2015, in the case of In Re: Hussein 8 Hussein Tawfik, et al., U.S.D.C., Northern District Bankruptcy Court No. 14-30367 HLB [ECF 9 Doc. 132].” 10 Plaintiffs do not oppose judicial notice of the exhibits offered by Defendants, or otherwise 11 dispute their authenticity. Accordingly, the Court grants judicial notice of those documents 12 pursuant to Federal Rule of Evidence 201(b). See Harris v. Cty. of Orange, 682 F.3d 1126, 1132 13 (9th Cir. 2012) (noting that judicial notice is appropriate for “undisputed matters of public record, 14 including documents on file in federal or state courts.”) (internal citation omitted); Barron v. 15 Reich, 13 F.3d 1370, 1377 (9th Cir. 1994) (noting that district courts may take judicial notice of 16 “[r]ecords and reports of administrative bodies”). 17 DISCUSSION 18 I. Chase’s Motion to Dismiss 19 Plaintiffs’ claims against Chase arise from the same theory: Chase incorrectly insists that 20 Plaintiffs owe approximately $106,000 more in principal under the Foster City Loan than they 21 actually do. Because Plaintiffs’ theory fails as a matter of law, all of their claims against Chase 22 must be dismissed. 23 First, Plaintiffs contend that the balance Plaintiffs owed following the confirmation of their 24 bankruptcy plan was $1,044,680.00, but that Chase nonetheless insists that the amount owed is 25 $106,000 more than that amount. Chase responds that under the plain terms of the Loan 26 Modification Agreement there is an interest-bearing principal amount plus $108,000 in deferred, 27 non-interest bearing principal and that Plaintiffs still owe this amount. The Court agrees. 1 secured claim under the Chapter 11 reorganization plan; specifically, they stipulated that 2 “[Chase’s] legal, equitable, and contractual rights shall remain unchanged with respect to its 3 security interest in the [Foster City] Property.” (Dkt. No. 11, Ex. E at 3.) The confirmation plan 4 did not alter the stipulation; to the contrary, the confirmation plan specifically provides that “the 5 Debtors’ COMBINED PLAN OF REORGANIZATION AND PROPOSED DISCLOSURE 6 STATEMENT . . . is confirmed . . . as modified by . . . the changes to the treatment of Class 1A 7 set forth in debtors’ stipulation with JPMorgan Chase Bank[.]” (Dkt. No. 11, Ex. F (emphasis 8 added).) In its Class 1A table, Plaintiffs’ Proposed Chapter 11 Plan listed Chase as the creditor of 9 “first mortgage on 660 Greenwich Lane, Foster City, CA[.]” (Dkt. No. 11, Ex. D. at 3.) 10 Therefore, the confirmation plan specifically adopted the parties’ stipulation under which Chase’s 11 rights remained unchanged, including its right to the $108,000 in deferred non-interest bearing 12 principal. Thus, to the extent Plaintiffs’ claims rest on the bankruptcy confirmation plan erasing 13 the additional $108,000 debt they fail as a matter of law. 14 Second, Plaintiffs also assert that—notwithstanding the Loan Modification Agreement— 15 the Foster City Property is bound by an Adjustable Rate Rider in the Foster City Loan that limits 16 the unpaid principal balance to $1,056,000.000, or 110% of the original $960,000.000 loan. (Dkt. 17 No. 1-1 ¶ 10; Dkt. Nos. 18 at 13, 11-2 at 13.) Given this limitation, Plaintiffs allege that the 18 deferred principal balance included in the Loan Modification Agreement amounts to an 19 approximately $106,000.00 overcharge beyond the terms of the Adjustable Rate Rider in the 20 Foster City Loan. While the Foster City Loan was modified by the 2013 Loan Modification 21 Agreement, Plaintiffs argue that this principal balance cap was never removed by the Loan 22 Modification Agreement and, as such, Chase’s security instrument is limited by the terms of the 23 Adjustable Rate Rider despite the new principal balance listed in the Loan Modification 24 Agreement. This argument, too, fails. 25 The 2013 Loan Modification Agreement overrides Plaintiffs’ Adjustable Rate Rider under 26 its plain and unambiguous terms. The Loan Modification Agreement states that its provisions 27 amend and supplement both the Foster City Property’s mortgage, as well as the Note secured by 1 “promise[d] to pay monthly payments according to [a listed] schedule with respect to [the 2 Modification Agreement’s] Interest Bearing Principal Balance.” (Id. at 48.) The Agreement 3 continues: “The above terms [] shall supersede any provisions to the contrary in the [Mortgage and 4 Note], including, but not limited to, provisions for an adjustable or step interest rate.” (Id.) 5 Further, the Agreement also states that Plaintiffs agree to “pay in full [] the Deferred Principal 6 Balance” listed in the Modification Agreement of $108,100.00. (Id.) Accordingly, the terms of 7 the Loan Modification Agreement supersede the Foster City Property’s Adjustable Rate Rider. 8 *** 9 Plaintiffs’ contention that the $108,000 in deferred principal on the Chase loan was 10 eliminated by confirmation of the bankruptcy plan is belied by the plan itself and the parties’ 11 stipulation. Similarly, their insistence that the Adjustable Note Rider survived the Loan 12 Modification Agreement is contradicted by the plain and ambiguous language of the Loan 13 Modification Agreement. Accordingly, all of Plaintiffs’ claims against Chase must be dismissed. 14 The dismissal shall be with prejudice as leave to amend would be futile given the plain language 15 of the documents upon which Plaintiffs’ claims depend. 16 II. SPS and U.S. Bank’s Motion to Dismiss 17 Plaintiffs’ claims against SPS and U.S. Bank arise from their allegations that for years SPS 18 has overcharged Plaintiffs for their monthly loan payments on the Mountain View Loan, have 19 failed to credit Plaintiffs for approximately $80,000 in payments made, have charged Plaintiffs 20 interest on amounts not actually owed, and have failed to report the payments Plaintiffs have made 21 to credit reporting agencies. 22 A. Statute of Limitations 23 SPS first argues that Plaintiffs’ claims are time-barred. The longest statute of limitations 24 that applies to any of Plaintiffs’ claims is four years for the breach of contract claim and four years 25 for the UCL claims. See Cal. Civ. Proc. Code § 337; Cal. Bus. & Prof. Code § 17208. SPS 26 contends that Plaintiffs’ claims arising from their allegation that SPS has been overcharging them 27 approximately $70 per month more than the bankruptcy plan allows arose in August 2015—more 1 to credit them for $80,000 in payments arose in January 2016 at the latest, again more than four 2 years before this lawsuit was filed. 3 A defendant bears the initial burden of proving a plaintiff’s claims are time-barred due to a 4 statute’s limitations period. See Aryeh v. Canon Bus. Sols., Inc., 55 Cal. 4th 1185, 1197 (2013). 5 Typically, a cause of action for breach of contract accrues “at the time of the breach of contract, 6 and the statute of limitations begins to run at that time regardless of whether any damage is 7 apparent or whether the injured party is aware of his right to sue.” Alta Devices, Inc. v. LG Elecs., 8 Inc., 343 F. Supp. 3d 868, 885 (N.D. Cal. 2018) (citation omitted). 9 1. Monthly Overcharges 10 SPS has met its initial burden of showing that claims based on the overcharges are time- 11 barred. Plaintiffs allege that following the confirmation of the bankruptcy plan, SPS charged 12 Plaintiffs $4,370.89 in principal and interest payments, despite the confirmed plan setting those 13 payments at $4,300.00. (Dkt. No. 1-1 ¶ 18.) It follows that no later than September 2015 SPS’s 14 overcharging caused Plaintiffs’ injury and their claims arising from that injury accrued. See 15 Aryeh, 55 Cal. 4th at 1191. As this lawsuit was not filed until more than four years later, 16 Plaintiffs’ claims are time-barred unless they show that one of the non-statutory exceptions to the 17 statute of limitations applies. See id. at 1197 (holding that plaintiff’s claims regarding defendant’s 18 overcharges for copy services accrued and statute of limitations began to run when the defendant 19 first began overcharging for copies, and that plaintiff bears burden of showing application of non- 20 statutory exception to statute of limitations). 21 Plaintiffs argue that under the continuing violation doctrine or the continuous accrual 22 doctrine they may sue on all of the overcharges. The Court agrees that the continuing accrual 23 doctrine applies here. Under the theory of continuous accrual, “a series of wrongs or injuries may 24 be viewed as each triggering its own limitations period, such that a suit for relief may be partially 25 time-barred as to older events but timely as to those within the applicable limitations period.” 26 Aryeh, 55 Cal. 4th at 1192 (citation omitted). Cases in which the theory of continuous accrual 27 have been applied include a variety of instances in which the plaintiff asserted a right to, or 1 Here, each of SPS’s overcharges triggers its own limitations period such that claims based on 2 overcharges made outside the statute of limitations are barred, but claims based on overcharges 3 imposed during the limitations period—of which there are many—are not. See id. 4 The continuing violation doctrine concerns “injuries [that] are the product of a series of 5 small harms, any one of which may not be actionable on its own,” from which “allegations of a 6 pattern of reasonably frequent conduct” may “justify treating the acts as an indivisible course of 7 conduct actionable in its entirety,” notwithstanding that some of the alleged conduct occurred 8 beyond the limitations period. Aryeh, 55 Cal. 4th at 1197-98. Unlike the continual accrual 9 doctrine, the continuing violation doctrine is inapplicable where a complaint identifies “a series of 10 discrete, independently actionable alleged wrongs[;]” rather, it applies in cases where a “wrongful 11 course of conduct became apparently only through the accumulation of a series of harms[.]” Id. at 12 1198. Because each of SPS’s monthly overcharges constitutes a “discrete, independently 13 actionable” wrong, and because SPS’s wrongful course of conduct was not made apparent to 14 Plaintiffs only through an accumulation of overcharges—a single overcharge on its own revealed 15 SPS’s wrongful conduct—the doctrine is inapplicable. As in Aryeh, Plaintiffs concede they were 16 aware of conduct they recognized as wrongful “for years.” (Dkt. No. 1-1 ¶ 18; Dkt. No. 23 at 5.) 17 This further supports the conclusion that the continuing violation doctrine does not apply here. 18 2. Failure to Credit 19 As with Plaintiffs’ claims based on the alleged overcharges, SPS have met their initial 20 burden of showing that claims based on their failure to credit the $80,000 in payments toward the 21 loan in January 2016 are time-barred. Plaintiffs allege that, following this initial failure to credit, 22 SPS has “for years” improperly charged interest on an inflated amount not actually owed. (Dkt. 23 No. 1-1 ¶¶ 19-21.) However, these interest charges originate from the unacknowledged $80,000 24 payment in January 2016—thus it follows that, as with the overcharges, no later than January 2016 25 SPS’s failure to credit caused Plaintiffs’ injury and their claims arising from that injury accrued. 26 See Aryeh, 55 Cal. 4th at 1191. As the lawsuit was filed over four years later, Plaintiffs’ claims 27 are time-barred unless they meet their burden of showing that a non-statutory exception to the 1 For the same reasons the continuous accrual doctrine applies to Plaintiffs’ claims based on 2 the overcharges, the continuous accrual doctrine applies to their claims based on SPS’s failure to 3 credit the $80,000 payment in January 2016 and subsequent interest charged on the loan amount 4 inflated by this failure to credit. Here, as with SPS’s overcharges, each month SPS improperly 5 charged interest on the amount inflated by SPS’s failure to credit the $80,000 triggers its own 6 statute of limitations period such that claims based on improper interest charges made outside the 7 statute of limitations period are barred, but claims based on charges imposed during the limitations 8 period are not barred. SPS’s argument to the contrary—that the failure to credit Plaintiffs’ 9 $80,000 is a discrete injury whose statute of limitation has lapsed—overlooks how it continues to 10 charge monthly interest on the loan amount inappropriately inflated by this failure to credit. 11 Again as with the overcharge claims, the continuous violation doctrine does not apply. 12 Each month Plaintiffs were aware that the interest charged was based on a loan amount improperly 13 inflated by SPS’s failure to credit Plaintiffs’ $80,000 of payments in January 2016. Because these 14 monthly interest charges constitute “discrete, independently actionable” wrongs, the continuous 15 violation doctrine does not apply to Plaintiffs’ claims based on the improperly charged interest and 16 disregard for Plaintiffs’ $80,000 in payments. See Aryeh, 55 Cal. 4th at 1198. 17 The question remaining is how the statute of limitations applies to the actual failure to 18 credit the $80,000 as opposed to later-charged interest based on the failure to credit. Applying the 19 continuous accrual doctrine to Plaintiffs’ declaratory relief and breach of contract claims based on 20 SPS’s failure to credit, the originating uncredited $80,000 remains outside the statute of 21 limitations.4 However, absent SPS’s failure to credit Plaintiff’s $80,000 payment, the 22 subsequently improper and inaccurate interest charges would not exist. Therefore, resolution of 23 the interest charges necessarily requires resolving the $80,000 failure to credit. The nature of 24 SPS’s breach subsumes the failed $80,000 credit in January 2016 within each interest charge 25 4 The limitations period for declaratory relief claims depends on “the right or obligation sought to 26 be enforced, and the statute of limitations generally follows its application to actions for damages or injunction on the same rights and obligations.” Ginsberg v. Gamson, 205 Cal. App. 4th 873, 27 883 (2012) (internal quotations and citations omitted) (holding that the statute of limitations for a 1 whose miscalculations depend on it. As such, any declaratory relief action addressing monthly 2 interest miscalculations predicated on the January 2016 failure to credit brought within the statute 3 of limitations established by Plaintiffs’ continual accrual theory would necessarily require 4 resolution of the January 2016 failed $80,000 credit. Accordingly, SPS has not shown as a matter 5 of law that should Plaintiffs’ allegations of failing to credit $80,000 in payments be proven true, 6 any remedy that involves crediting them for those payments would be time-barred. 7 3. Failure to Report Monthly Mortgage Payments 8 SPS has not met its burden in showing that Plaintiffs’ claims based on SPS’s failure to 9 report Plaintiffs’ payments to credit agencies are time-barred. The complaint does not allege when 10 SPS began not reporting to credit agencies that Plaintiffs have been making payments on their 11 mortgage. SPS argues that Plaintiffs should have known the credit reporting was awry on the basis 12 of SPS’s January 2016 failure to credit, and that this inaccuracy in crediting payments 13 demonstrates an inaccuracy in what SPS would have been reporting to credit agencies. (Dkt. No. 14 24 at 4.) Thus, according to SPS, its improper or failed credit reporting began at least that early 15 and at that time was readily apparent, such that Plaintiffs’ injury and their claims arising from this 16 injurious failure to report began to accrue in January 2016. See Aryeh, 55 Cal. 4th at 1191. The 17 difficulty with this argument is that it assumes Plaintiffs’ failure to report to credit agencies theory 18 is based on the January 2016 failure to credit $80,000 in payments, but the vague complaint does 19 not so allege, which is a problem different from the statute of limitations. 20 *** 21 In sum, Plaintiffs’ challenges to monthly overcharges that occurred outside the limitations 22 period are barred, but SPS has not met its burden of showing that Plaintiffs cannot challenge 23 monthly overcharges made within four years of the complaint’s filing or the failure to credit for 24 $80,000 in payments. Further, it has not shown as a matter of law that the claim based on the 25 failure to report mortgage payments to credit reporting agencies is time barred. 26 27 1 B. Failure to State a Claim 2 1. Monthly Overcharge Claims 3 a. Breach of Contract 4 Regarding the breach of contract claim, SPS argues that Plaintiffs’ allegations are directly 5 refuted by the bankruptcy plan because the plan approved a stipulation between the parties that set 6 forth an approximate monthly payment amount based on Plaintiffs’ outstanding loan amount. In 7 other words, the plan merely confirmed that the monthly payment would be based on the amount 8 owed at the time of plan confirmation, a fixed interest rate, and the loan’s length. Under this 9 formulation, the monthly charge on the Mountain View Property is $4,370.89 rather than 10 $4,300.70. Because the bankruptcy plan approved the parties’ stipulation, SPS contends the plan 11 did not fix the monthly charge in the amount of $4,300.70. 12 The Bankruptcy Court approved the parties’ Stipulation and incorporated its terms through 13 the confirmation plan. (See Dkt. No. 14-1 at 38-39; 53.) The Stipulation lists the amount due on 14 the Mountain View Property as $1,029,026.46, its interest rate at four percent, and Plaintiffs’ 15 monthly payment as $4,300.70 “plus $1,128.81 for tax impound” to be paid, as the Stipulation 16 states, through August 1, 2047. (Dkt. No. 14-1 at 7 ¶ 6; 52-53.) The Stipulation itself set the 17 monthly payment on the Mountain View Property at $4,300.70, and no adjustments to either the 18 Stipulation’s enumerated $4,300.70 or the bases on which it was calculated were made during the 19 plan’s confirmation. (Dkt. No. 14-1 at 7 ¶¶ 4-8.) SPS’s interpretation of the confirmation plan— 20 that it did not fix the Stipulation’s monthly payment—is belied by the confirmation plan’s 21 incorporation and adoption of the Stipulation’s terms that themselves state the $4,300.70 monthly 22 payment amount. (Dkt. No. 14-1 at 52-53.) While the proposed bankruptcy plan states that 23 payments on the Mountain View Property contractually due “[are] debtors’ estimates of the 24 amounts due at confirmation,” (Id. at 53), thus supporting SPS’s argument that Plaintiffs’ monthly 25 payment amounts were approximate, this language is contradicted by the Stipulation’s plain 26 language that set the monthly principal and interest payments at $4,300.70 per month. 27 Therefore, drawing all reasonable inferences in Plaintiffs’ favor, the Court cannot conclude 1 that the breach of contract claim fails as a matter of law.5 See Navarro v. Block, 250 F.3d 729, 2 732 (9th Cir. 2001). 3 b. Unjust Enrichment 4 A claim for unjust enrichment fails where parties have an enforceable, binding agreement. 5 See Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996) (citation 6 omitted). Plaintiffs’ claim for unjust enrichment is therefore dismissed with prejudice, given that 7 the nature of the parties’ contractual dispute is one of interpretation. As a matter of law, the 8 existence of the parties’ valid contract—its disputed interpretation notwithstanding—precludes 9 Plaintiffs from bringing an unjust enrichment claim. 10 c. UCL 11 The UCL is written disjunctively and establishes “three varieties of unfair competition— 12 acts or practices which are unlawful, or unfair, or fraudulent.” Hodsdon v. Mars, Inc., 891 F.3d 13 857, 865 (9th Cir. 2018) (internal quotations and citation omitted). The UCL’s unlawful prong 14 requires an underlying violation of state or federal law—a claim for breach of contract is 15 insufficient to give rise to a violation of its unlawful prong. See Boland, Inc. v. Rolf C. Hagen 16 (USA) Corp., 685 F. Supp. 2d 1094, 1110 (E.D. Cal. 2010) (“A breach of contract . . . is not itself 17 an unlawful act for purposes of the UCL” because contractual duties are “voluntarily undertaken 18 by parties to the contract, and not imposed by state or federal law.”) (internal quotations and 19 citations omitted). Because Plaintiffs’ underlying claim is one for breach of contract, their claim 20 under the UCL’s unlawful prong fails as a matter of law. While courts have developed three tests 21 for analyzing claims under the UCL’s unfairness prong, see Drum v. San Fernando Valley Bar 22 Ass’n, 182 Cal. App. 4th 247 (2010), the Court need not reach these tests because Plaintiffs’ 23 allegation that SPS violated the UCL under this prong is no more than a “legal conclusion couched 24 5 A valid contract exists between the parties, see Cal. Civ. Code § 1550, and so SPS’s alleged 25 overcharges constitute a breach as required under the cause of action for breach of contract. See Troyk v. Farmers Group, Inc., 171 Cal. App. 4th 1305, 1352 (2009). Because a controversy exists 26 regarding the parties’ duties under it, Plaintiffs’ claim for declaratory relief based on the overcharges is likewise appropriate. See Brownfield v. Daniel Freeman Marina Hosp., 208 Cal. 27 App. 3d 405, 410 (1989); see also Gilkyson v. Disney Enterprises, Inc., 244 Cal. App. 4th 1336, 1 as a factual allegation,” see Twombly, 550 U.S. at 555. Plaintiffs allege only that SPS’s conduct 2 amounted to “unfair” business practices, and that SPS’s fraud “constitutes unfair business 3 practices” in violation of the UCL. (Dkt. No. 1-1 ¶¶ 62-64.) As such, Plaintiffs have offered no 4 more than “naked assertion[s] devoid of factual enhancement,” Iqbal, 556 U.S. at 678, and their 5 claim under the UCL’s unfairness prong must be dismissed. 6 Accordingly, the Court dismisses Plaintiffs’ UCL claims with leave to amend. 7 2. Failure to Report Fraud Claim 8 Federal Rule of Civil Procedure 9(b) requires that “in alleging fraud or mistake, a party 9 must state with particularity the circumstances constituting fraud or mistake.” In particular, the 10 complaint’s “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and 11 how’ of the misconduct charged.” Vess v. Ciba–Geigy Corp. USA, 317 F.3d 1097, 1106 (9th 12 Cir.2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir.1997)). 13 Simply put, Plaintiffs’ fraud claim is insufficiently particularized. Plaintiffs claim only 14 that SPS made a false promise when it said in its monthly statements that it reported to credit 15 agencies, even though “it did not and did not intend to.” (Dkt. No. 1-1 ¶ 56.) Plaintiffs fail to 16 state when or where specifically SPS made its allegedly fraudulent statements; the dates, and 17 whether the statements were made on paper or electronically, for instance, are not pled in the 18 complaint. Furthermore, Plaintiffs do not allege any facts to support their contention that SPS did 19 not intend to report Plaintiffs’ payments to credit reporting agencies. Indeed, Plaintiffs do not 20 provide sufficient allegations to discern whether they are alleging SPS did not report any 21 payments at all, or whether they only reported partial amounts. Fundamentally, Plaintiffs do not 22 provide SPS with a sufficient explanation of why SPS’s statements regarding the credit reporting 23 were fraudulent.6 See Vess, 317 F.3d at 1106. The Court grants SPS’s motion to dismiss 24 Plaintiffs’ fraud claims with leave to amend. 25 26

27 6 Because claims under the UCL’s fraudulent prong are subject to Rule 9(b)’s heightened pleading 1 CONCLUSION 2 For the reasons set forth above, the Court GRANTS Chase’s motion to dismiss with 3 || prejudice. The Court GRANTS in part and DENIES in part SPS and U.S. Bank’s motion to 4 || dismiss. Plaintiffs’ unjust enrichment claim is dismissed with prejudice, whereas Plaintiffs’ UCL 5 and fraud claims are dismissed with leave to amend. Plaintiffs’ claims for declaratory relief and 6 || breach of contract are not dismissed. Plaintiffs’ amended complaint against SPS, if they choose to 7 amend, must be filed within 21 days of this Order. Plaintiffs may not add any new claims to the 8 || amended complaint without first seeking leave of Court. 9 The Court will hold and an initial case management conference with Plaintiffs and 10 SPS/U.S. Bank on October 29, 2020 at 1:30 p.m. A joint case management conference statement 11 is due one week in advance. 12 This Order disposes of Docket Nos. 10 & 14.

IT IS SO ORDERED. 3 15 Dated: August 26, 2020 Deg Setinly ne

JACQUELINE SCOTT CORLE Z 18 United States Magistrate Judge 19 20 21 22 23 24 25 26 27 28