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Molina v. Washington Mutual Bank

January 29, 2010


The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court


Presently before the Court is Defendants JPMorgan Chase Bank, N.A. and California Reconveyance Company's Motion to Dismiss Plaintiffs' Complaint. (Doc. No. 29.) Defendant Wilshire Credit Corporation joins in the motion. (Doc. No. 35.) Plaintiffs filed an opposition, and Defendant filed a reply.

The Court finds Defendant's motion suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the Court GRANTS the motion to dismiss.


The following facts are drawn from the Complaint. This matter involves a loan obtained by Plaintiffs Iris Molina and Rene Molina ("Plaintiffs"), secured by property located at 39878 Millbrook Way Unit B, Murrieta, County of Riverside, California.

Plaintiffs allege Defendant State Mortgage & Finance, Inc. sold them the loan and Defendant Ed Akel was the purported loan officer. Defendant Akel allegedly told Plaintiffs he was the Operations Manager for State Mortgage & Finance, Inc., but in fact was not even registered with the Department of Real Estate. Defendant Akel advised Plaintiffs he could get them the "best deal" and the "best insurance rates" available on the market. Defendant Akel also assured Plaintiffs they would receive a loan with a fixed rate for 30 years, as they had repeatedly requested. The only financial documents Defendant Akel requested were Plaintiffs' bank statements. Plaintiffs allege they primarily speak and read Spanish, but that the loan documents and their conversations with Defendant Akel were not translated into Spanish.

Plaintiffs consummated the loan on June 16, 2006. According to Plaintiffs, Defendant Akel did not explain any of the documents, and simply asked them to sign and initial the documents. Plaintiffs allege they did not receive the required documents and disclosures when the loan was consummated, as required by TILA. The Deed of Trust identified California Title Co. as trustee and Defendant Meritage Mortgage as the lender. Subsequently, Defendant Mortgage Electronic Registration Systems, Inc. became nominee for Meritage Mortgage and its successors and assigns.

On July 24, 2008, Defendant California Reconveyance Company ("CRC") filed a Notice of Default, and on or about October 27, 2008, CRC sent Plaintiffs a Notice of Trustee Sale.

On April 17, 2009, Plaintiffs mailed a Qualified Written Request to Defendant Washington Mutual Bank ("WAMU"), which included a demand to cancel the pending Trustee Sale and to rescind the loan under TILA. WAMU allegedly has not responded. Plaintiffs have sued JPMorgan Chase Bank, N.A. ("JPMorgan") as successor in interest to WAMU.


On April 28, 2009, Plaintiffs filed the Complaint. Plaintiffs name nine defendants and set forth tencauses of action: (1) violation of the Truth in Lending Act, (2) violation of the California Rosenthal Fair Debt Collection Practices Act, (3) wrongful foreclosure, (4) violation of the Real Estate Settlement Procedures Act, (5) breach of fiduciary duty, (6) fraud, (7) violation of California Business and Professions Code § 17200, (8) breach of contract, (9) breach of the implied covenant of good faith and fair dealing, and (10) violation of California Civil Code § 2923.5.

On November 23, 2009, Defendants JPMorgan and CRC filed this motion to dismiss the Complaint for failure to state a claim upon which relief may be granted, seeking dismissal of all ten causes of action. (Doc. No. 29.) On December 29, 2009, Defendant Wilshire Credit Corporation ("Wilshire") filed a notice of joinder in the motion to dismiss.*fn1 (Doc. No. 35.)


I. Legal Standard

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pled in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996).

To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1939 (2009) (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 1949 (citing Twombly, 550 U.S. at 556). "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (citing Twombly, 550 U.S. at 557).

Furthermore, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (citation omitted). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. (citation omitted). In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that 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). Also, the court need not accept "legal conclusions" as true. Iqbal, 129 S.Ct. at 1949. However, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity." Id. at 1941.

II. Request for Judicial Notice

In ruling on a motion to dismiss for failure to state a claim, "a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A fact properly subject to judicial notice is one "not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201 (2009). Accordingly, a court may consider matters of public record on a motion to dismiss, and in doing so "does not convert a Rule 12(b)(6) motion to one for summary judgment." Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986), abrogated on other grounds by Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 111 (1991).

Defendants request judicial notice of the following documents recorded with the Riverside County Recorder's Office: (1) Deed of Trust, recorded on or about June 26, 2006; (2) Second Deed of Trust, recorded on or about June 26, 2006; (3) Notice of Default and Election to Sell Under Deed of Trust, recorded on or about July 24, 2008; (4) Substitution of Trustee, recorded on or about October 29, 2008; and (5) Notice of Trustee's Sale, recorded on or about October 29, 2008. These documents are public records and the Court takes judicial notice of them pursuant to Federal Rule of Evidence 201.

Defendants also request judicial notice of (1) the Purchase and Assumption Agreement among Federal Deposit Insurance Organization, Receiver of Washington Mutual Bank, Henderson, Nevada ("FDIC") and JPMorgan, dated September 25, 2008, available on the FDIC's website, and (2) the Order from the Office of Thrift Supervision ("OTC") appointing the FDIC as Receiver of Washington Mutual Bank, available on OTC's website. The Court grants Defendants' request for judicial notice of these documents. Information on government agency websites has often been treated as properly subject to judicial notice." Paralyzed Veterans of Am. v. McPherson, 2008 U.S. Dist. LEXIS 69542, at *5 (N.D. Cal. Sept. 8, 2008); see also United States ex rel. Dingle v. BioPort Corp., 270 F. Supp. 2d 968, 972 (W.D. Mich. 2003) ("Public records and government documents are generally considered 'not to be subject to reasonable dispute.' This includes public records and government documents available from reliable sources on the Internet.") (citing Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999)).

III. Analysis A. JPMorgan's Assumption of Liability

As an initial matter, JPMorgan argues that Plaintiffs incorrectly sue JPMorgan as successor in interest to WAMU. JPMorgan argues that the Purchase and Assumption Agreement entered into with the FDIC establishes that JPMorgan expressly did not assume WAMU's liabilities relating to borrower claims.

On September 25, 2008, the Office of Thrift Supervision closed WAMU and appointed the FDIC as WAMU's receiver. On the same day, JPMorgan acquired certain assets and liabilities of WAMU pursuant to the Purchase and Assumption Agreement. (Def.'s Req. for Jud. Notice in Supp. of Mot. to Dismiss ("RJN"), Exhibit 6.) Section 2.5 of the agreement provides: "any liability associated with borrower claims, . . . related in any way to any loan or commitment to lend made by the Failed Bank prior to failure, . . . are specifically not assumed by the Assuming Bank."*fn2 (RJN, Exhibit 6, at 5.) This provision establishes that JPMorgan has expressly not assumed WAMU's liabilities relating to borrower claims. See Yeomalakis v. F.D.I.C., 562 F.3d 56, 62 (1st Cir. 2009) (finding that Section 2.5 of JPMorgan's agreement with the FDIC retained for the FDIC "any liability associated with borrower claims"); Hilton v. Wash. Mut. Bank., 2009 WL 3485953, at *2 (N.D. Cal. October 28, 2009) (same); Cassese v. Wash. Mut. Bank, 2008 WL 7022845, at *2-3 (E.D.N.Y. Dec. 22, 2008) (same).

Accordingly, any of Plaintiffs' claims arising out of JPMorgan's alleged status as successor in interest to Plaintiffs' ...

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