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Cecilia Argueta, An Individual v. J.P. Morgan Chase

April 11, 2011



Plaintiff Cecilia Argueta brought this action against defendants J.P. Morgan Chase ("Chase") d/b/a Washington Mutual F.S.B. ("Washington Mutual" or "WAMU"), Quality Loan Service Corporation ("Quality Loan"), and Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac"), arising from defendants' allegedly wrongful conduct related to a loan. Chase and FHLMC have filed a joint motion to dismiss the Complaint in its entirety for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket No. 4.)

I. Factual and Procedural Background

In January of 2007, plaintiff refinanced an existing loan and signed a promissory note with Washington Mutual for a $320,000.00 loan, which was secured by a deed of trust for plaintiff's primary residence. (Notice of Removal Ex. A ("Compl.") ¶¶ 1, 11 (Docket No. 1); Req. for Judicial Notice in Supp. of Defs.' Mot. to Dismiss ("Defs.' Req. for Judicial Notice") Ex. A (Deed of Trust) (Docket No. 4-2).) The Complaint alleges that "[t]he terms of the finance transaction with WAMU are neither clear nor conspicuous, nor are they consistent; for example the pre-calculation of payments based on interest rates to be determined in the future, . . . ." (Id. ¶ 12.) The loan was allegedly "underwritten without proper due diligence by WAMU as evidenced by their failure to verify borrower's income utilizing IRS Income Tax Disclosure Form 4506T which would have provided past borrower tax returns." (Id.)

Washington Mutual allegedly knew or should have known that plaintiff did not qualify for and could not afford the loan. (Id. ¶ 13.) Plaintiff alleges that had Washington Mutual "used a more accurate and appropriate qualifying procedure, such as the use of tax forms or a higher level of scrutiny of determining the debt to income ratio," plaintiff would not have qualified for the loan. (Id.)

"Defendants, each of them, neither explained the workings of the entire mortgage loan transaction, how the rate, finance charges, costs and fees were computed, nor the inherent volatility of the loan product(s) provided by Defendants." (Id. ¶ 15.) The Complaint alleges that the purpose of the transaction was for plaintiff "to benefit from a better interest rate and consolidate consumer debt," but the purpose was "knowingly and intentionally thwarted and indeed made impossible by Defendants' actions." (Id. ¶ 22.)

On September 25, 2008, the Federal Deposit Insurance Corporation ("FDIC"), acting as receiver for Washington Mutual following its closure, and Chase signed a purchase and assumption agreement ("P & A agreement") allocating Washington Mutual's assets and liabilities. (Defs.' Req. for Judicial Notice Ex. E.) The Complaint alleges that FHLMC "is the purported current beneficiary under assignment of the Trust Deed." (Id. ¶ 2.) Chase "is acting as the current servicer." (Id.) Quality Loan "is or was acting as agent to the trustee." (Id.)

A Notice of Default and Election to Sell Under Deed of Trust was recorded on April 24, 2009, in the Recorder's Office of San Joaquin County. (Defs.' Req. For Judicial Notice Ex. B.) A Substitution of Trustee listing Chase as the beneficiary and Quality Loan as the substitute trustee was recorded on June 5, 2009. (Id. Ex. C.)

On August 26, 2010, Quality Loan served plaintiff with a Notice of Trustee Sale, reflecting a September 16, 2010, sale date. (Compl. ¶ 28; see Defs.' Req. for Judicial Notice Ex. D (Notice of Trustee Sale).) The Complaint details a series of interactions between plaintiff and Chase from September to December of 2010 in which plaintiff requested a loan modification, the trustee sale date was extended, and ultimately Chase did not give plaintiff a loan modification. (See Compl. ¶¶ 27-40.)

In early January of 2011, Chase told plaintiff that the sale date was scheduled for January 27, 2011, and requested that plaintiff send another "Hardship letter and additional proof of income." (Id. ¶ 40.) The Complaint alleges that "[d]espite Plaintiff's requests for additional time for Defendant to act in good faith and review the documentation requested and submitted, Defendants have outright refused to postpone the sale date, forcing Plaintiff into filing the instant complaint." (Id. ¶ 41.)

The Complaint asserts nine claims against all defendants: (1) declaratory judgment that the "Contract is void on the ground that the contract is contrary to public policy and is unconscionable" and declaratory judgment related to loan modification, (2) breach of the implied covenant of good faith and fair dealing, (3) fraud, (4) intentional misrepresentation of fact, (5) "Unfair and Deceptive Business Act Practices (UDAP),"

(6) "unconscionability," (7) "Predatory Lending; California Business and Professions Code § 17200," (8) violation of California Civil Code section 2923.6, and (9) violation of California Civil Code section 2923.5.

On February 16, 2011, Chase and FHLMC removed this action to federal court.*fn1 Defendants have subsequently provided a quitclaim deed purportedly signed by plaintiff conveying her interest to a third party sharing plaintiff's last name, which was recorded on March 21, 2011, following the filing of the instant motion.*fn2 (Reply to Non-Opp'n to Mot. to Dismiss Pursuant to Rule 12(b)(6) Ex. A (Docket No. 7).)

Plaintiff did not file an opposition or statement of non-opposition to the moving defendants' motion to dismiss. Nor did counsel for plaintiff bother ...

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