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Wilson v. JPMorgan Chase Bank

June 25, 2010



Plaintiff Connie J. Wilson brought this action against defendant JPMorgan Chase Bank, NA alleging various federal and state claims arising out of plaintiff's mortgage transaction. Presently before the court is defendant's motion to dismiss the Second Amended Complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(6).

I. Factual and Procedural Background

On October 20, 2005, plaintiff alleges that her now deceased husband, James B. Wilson, entered into a loan with Long Beach Mortgage Company ("Long Beach") to refinance plaintiff's property at 10787 Oakton Way, Rancho Cordova, California. (SAC ¶ 15) This loan was secured by a Deed of Trust on the property. (Id.) The Deed of Trust listed plaintiff and her husband as the borrower, as joint tenants. (Def.'s Req. for Judicial Notice Ex. 2.) The Deed of Trust also listed Long Beach as trustee and lender. (Id.)

Plaintiff alleges that her husband obtained the credit to refinance their home without her credit information. (SAC ¶ 38.) Plaintiff's husband was allegedly the sole borrower when the loan was consummated. (Id.) The SAC alleges that Long Beach required plaintiff to sign the Deed of Trust because plaintiff was listed as a joint owner of the property and her signature was necessary to perfect Long Beach's security interest in the property. (Id. ¶¶ 17, 39.) Plaintiff allegedly did not execute a promissory note and only signed the security instrument at the behest of Long Beach. (Id.)

Plaintiff alleges that Long Beach never provided her with two copies of a completed Notice of Right to Cancel at the time of consummation of the loan, in violation of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f. (SAC ¶¶ 29-30.) Plaintiff further alleges that First American Title Insurance Company actually provided plaintiff the Notice of Right to Cancel on October 26, 2005, and instructed plaintiff to back date the document to the date of the loan transaction. (Id. ¶ 58.)

Plaintiff's husband allegedly began negotiating with Washington Mutual to modify the loan sometime before July 2008.*fn1

(Id. ¶ 32.) On September 10, 2008, plaintiff sent a Qualified Written Request ("QWR") under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, to Long Beach and Washington Mutual that included demands to rescind the loan and disclose the holder of her mortgage note in accordance with TILA. (Id. ¶ 28.) In this letter, plaintiff also allegedly demanded that all communications relating to collection of the outstanding balance of her loan cease, pursuant to the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civ. Code § 1788.2. (Id. ¶ 119.) On September 25, 2008, defendant purchased the assets of Washington Mutual from the Federal Deposit Insurance Corporation ("FDIC") Receiver. (Def.'s Req. for Judicial Notice Ex. 7.) Plaintiff alleges that defendant failed to respond to her QWR, rescind the loan, or cease contacting her in an attempt to collect her outstanding payments. (SAC ¶¶ 71, 100, 119.) Plaintiff allegedly attempted to follow up on her request with Washington Mutual and Long Beach by mail on November 17, 2008, November 21, 2008, and December 19, 2008. (Id. ¶ 119.)

A Substitution of Trustee was recorded in Sacramento County on December 23, 2008, which listed defendant as the beneficiary of the Deed of Trust and substituted California Reconveyance Company ("CRC") as the new trustee. (Def.'s Req. for Judicial Notice Ex. 4.) After the loan went into default, a Notice of Default and Election to Sell Under Deed of Trust was filed in Sacramento Country by CRC on December 23, 2008. (Id. Ex. 5.) A Notice of Trustee's Sale was then recorded by CRC in Sacramento County on March 25, 2009. (Id. Ex. 6.)

In her SAC, plaintiff asserts causes of action against defendant for violations of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f, the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601-3619, TILA, RESPA, RFDCPA, and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210, as well as breach of the covenant of good faith and fair dealing, slander of credit, and intentional infliction of emotional distress. Defendant moves to dismiss all causes of action in Plaintiff's SAC for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6).

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only 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). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57).

In general a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are 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.

Defendant requests that the court take judicial notice of a number of publically recorded instruments relating to plaintiff's mortgage and the P&A Agreement between defendant and the FDIC. (See Docket No. 22.) The court will take judicial notice of the mortgage documents, since they are matters of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The court will also take judicial notice of the P&A Agreement because it is a governmental source whose accuracy cannot be questioned. See Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866 n.1 (9th Cir. 2004) (taking judicial notice of agreements to which the government was a party).

A. Liability Under the P&A Agreement

Defendant contends that it cannot be liable for plaintiff's claims because liability for claims related to Washington Mutual's lending practices remained with the FDIC when defendant purchased Washington Mutual's assets. (See Def.'s Supp. Brief (Docket No. 31) at 2:10-21.)*fn2

Under the Federal Deposit Insurance Act, 12 U.S.C. §§ 1811-1832(d), the FDIC may accept appointment as a receiver for any closed insured depository institution. 12 U.S.C. § 1821(c). As receiver, the FDIC succeeds to "all rights, titles powers and privileges of the insured depository institution" and may "take over the assets of and operate" the bank. Id. §§ 1821(d)(2)(A)(i), (B)(i). When appointed as receiver, "the FDIC . . . 'steps into the shoes' of the failed [financial institution]" and operates as its successor. O'Melveny & Myers v. FDIC, 512 U.S. 79, 86 (1994). The FDIC may transfer the failed bank's assets to another bank, separate the failed bank's assets from liabilities, or retain these liabilities through a P&A Agreement. See, e.g., W. Park Assocs. v. Butterfield Sav. & Loan Ass'n, 60 F.3d 1452, 1458-59 (9th Cir. 1995); Kennedy v. Mainland Sav. Ass'n, 41 F.3d 986, 990-91 (5th Cir. 1994); Payne v. Sec. Sav. & Loan Ass'n, 924 F.2d 109, 111 (7th Cir. 1991). No liability is transferred from a closed bank to an assuming bank without an express transfer of liability. See Kennedy, 41 F.3d at 990-91; Payne, 924 F.2d at 111; Vernon v. Resolution Trust Corp., 907 F.2d 1101, 1109 (11th Cir. 1990); Village of Oakwood v. State Bank & Trust Co., 519 F. Supp. 2d 730, 739 (N.D. Ohio 2007), aff'd 539 F.3d 373 (6th Cir. 2008).

On September 25, 2008, approximately two weeks after plaintiff sent a QWR to Washington Mutual, the Office of Thrift Supervision ("OTS") closed Washington Mutual and appointed the FDIC as receiver for the bank. (See Def.'s Req. for Judicial Notice Ex. 7.) On the same day the FDIC and Chase signed a P&A Agreement, which allocated Washington Mutual's assets and liabilities among the FDIC in its corporate capacity, the FDIC acting as receiver for Washington Mutual, and Chase. (Id.) In the P&A Agreement, Chase explicitly did not assume any liability related to "borrower claims." (Id. § 2.5.) Specifically, section 2.5 of the P&A Agreement states:

Notwithstanding anything to the contrary in this Agreement, any liability associated with borrower claims for payment of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower . . . related in any way to any loan or commitment to lend made by the Failed Bank prior to failure, or to any loan made by a third party in connection with a loan which is or was held by the Failed Bank, or otherwise arising in connection with the Failed Bank's lending or loan purchase activities are specifically not assumed by [Chase]. (Id.)

In Williams v. FDIC, No. Civ. 2:07-2418 WBS GGH, on limited remand from the Ninth Circuit, this court was asked to determine whether the FDIC or defendant was the appropriate successor-in-interest to claims against Washington Mutual for its credit card business practices under the same P&A Agreement presently before the court. The court found that the Williams plaintiff's claims were "borrower claims" within the meaning of section 2.5 of the P&A Agreement because they were related to related to a "commitment to lend" by Washington Mutual, therefore leaving liability for the claims with the FDIC. Williams, No. Civ. 2:07-2418 WBS GGH, 2009 WL 5199237, at *6 (E.D. Cal. Dec. 23, 2009); see also Yeomalakis v. FDIC, 562 F.3d 56, 60 (1st Cir. 2009).

A number of other district courts have held that the FDIC retained liability for claims relating to mortgage loans held by Washington Mutual before September 25, 2008 under the P&A Agreement. See, e.g., Biggins v. Wells Fargo & Co., No. Civ. 09-01272-JSW, 2009 WL 2246199, at *12 (N.D. Cal. July 27, 2009); Grealish v. Wash. Mut. Bank FA, No. Civ. 08-763-TS, 2009 WL 2170044, at *1 (D. Utah July 20, 2009); Cassese v. Wash. Mut., Inc., No. Civ. 05-2724-ADS-ARL, 2008 WL 7022845, at *3 (E.D.N.Y. Dec. 22, 2008). Under the terms of the P&A Agreement, defendant clearly and explicitly did not assume any liability for claims related to loans purchased by Washington Mutual from third parties or claims arising in connection with Washington Mutual's lending activities. (See Def.'s Req. Judicial Notice Ex. 7 ยง 2.5.) Liability ...

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