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James Sorrels and Jodi Sorrels v. J.P. Morgan

February 14, 2011


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


Defendants J.P. Morgan Chase Bank, N.A.*fn1 and EMC Mortgage Corporation ("defendants") move to dismiss plaintiffs' complaint. The motion has been fully briefed and considered without oral argument.


On March 13, 2007, plaintiffs signed their final loan documents with Equipoint Financial Network, Inc. ("Equipoint") that served to refinance their residential property. Plaintiffs received a letter dated May 1, 2007, from Equipoint that indicated EMC Mortgage Corporation ("EMC") would begin serving the loan on June 1, 2007. When reviewing the first EMC statement dated May 7, 2007, plaintiffs noted that the interest rate on the loan was incorrect. Plaintiffs allege they neither agreed to the higher interest rate nor signed any documents reflecting this change. In response to the allegedly erroneous statement, plaintiffs sought documents from EMC. The documents EMC provided to plaintiffs with the higher interest rates indicated are dated April 24, 2007, and appear to contain plaintiffs' signatures but plaintiffs assert they are forgeries because they only signed one set of documents on March 13, 2007. In the complaint, plaintiffs allege, inter alia, on information and belief, that all of the defendants intentionally and knowingly forged plaintiffs signatures on the new documents in a conspiracy to defraud the plaintiffs. (Compl., ¶34.) Plaintiffs also allege on information and belief, "JPMorgan is the beneficiary and/or assignor [sic] of the Deed of Trust" and "EMC is servicer and/or beneficiary and/or assignee of Deed of Trust . . . ." (Compl., ¶¶ 2, 3.)

Plaintiffs filed the present complaint on December 23, 2009, against defendants*fn2 alleging the following causes of action: violation of the Truth in Lending Act, breach of written contract, breach of the implied covenant of good faith and fair dealing, negligence, fraud, conspiracy to defraud, forgery, unjust enrichment, and negligent misrepresentation. The complaint also seeks declaratory judgment and rescission/cancellation of the current mortgage loan.

B. Legal Standard

A plaintiff must "plead a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). This statement must be sufficient to "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). Rule 12(b)(6) provides that a complaint may be dismissed for "failure to state a claim upon which relief may be granted." FED. R. CIV. P. 12(b)(6). A complaint may be dismissed as a matter of law if it lacks a cognizable legal theory or states insufficient facts under a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.1984).

The factual allegations of a complaint must be "enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007). A plaintiff must plead more than conclusory allegations to show "plausible liability" and avoid dismissal. at 1966 n. 5. The pleading standard of Rule 8 "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" and a complaint does not suffice "if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 127 S. Ct. at 1966).

In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint for additional facts, e.g., facts presented in plaintiff's memorandum in opposition to a defendant's motion to dismiss or other submissions. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998); see also 2 OORE'S FEDERAL PRACTICE, § 12.34[2] (Matthew Bender 3d ed.) ("The court may not . . . take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a).").

A court may, however, consider items of which it can take judicial notice without converting the motion to dismiss into one for summary judgment. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). Judicial notice may be taken 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. Additionally, a court may take judicial notice of "'matters of public record' without converting a motion to dismiss into a motion for summary judgment.'" Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)). Under the incorporation by reference doctrine, courts may also consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir.1999) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (alteration in original)); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).



a. Liability Under TILA

Liability under TILA applies to creditors and their assignees. See 15 U.S.C. §§ 1640, 1641. Loan servicers cannot be held liable under TILA unless they owned the loan obligation at some point. 15 U.S.C. § 1641(f)(1) ("A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as an assignee of such obligation for purposes of this section unless the servicer is or was the owner of the obligation."); see also Mulato v. WMC Mortg. Corp., 2009 WL 3561536 *6 (N.D. Cal., Oct. 27, 2009) ("As a loan servicer that has not been alleged to own Plaintiff's mortgage notes, Chase cannot be held liable for TILA violations.").

As noted above, plaintiffs allege that JP Morgan and EMC are the beneficiary or assignee of the Deed of Trust, with EMC also acting as the loan servicer. Both defendants assert that neither has ever had any interest in the loan or Deed of Trust as demonstrated by the recorded instruments. (Reply at 2.) The Court cannot consider defendants' own representations at the motion to dismiss stage.

In their complaint, plaintiffs point to Exhibit G as forming the basis for their assertion that Bear Stearns and ultimately JP Morgan owned the note. Exhibit G is the first statement plaintiffs received from EMC dated May 7, 2007. Because Exhibit G is attached to the complaint, the Court may consider it as incorporated into the complaint. The May 7, 2007 Statement includes a small, set off section entitled "Important Messages" and states "Why wait? Start saving today with a Bear Stearns Residential Mortgage Refinance. Call us at 1-866-658-BEAR today!" (Exh. G to the l. (emphasis in original)) This statement cannot be read as anything other than an advertisement or solicitation for business. It does not suggest or imply that plaintiffs' loan with Equipoint had been transferred, sold or assigned ...

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