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Donna Ruth O'connor Rose, An Individual v. J.P. Morgan Chase


March 13, 2012



Plaintiff Donna Ruth O'Connor-Rose brought action against defendant J.P. Morgan Chase ("Chase") in state court, stating claims for breach of contract, fraud, violation of California Civil Code section 1788.2, violation of California Business and Professions Code section 17200 et seq., accounting, and injunctive relief arising from Chase's allegedly wrongful conduct related to a residential loan. After Chase removed the proceeding to this court on the basis of diversity jurisdiction, plaintiff brought a motion to remand. (Docket No. 8.) Chase has filed a motion to dismiss plaintiff's claims for fraud, violation of the Rosenthal Act, accounting, and injunctive relief for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). (Docket No. 5.)

I. Factual and Procedural Background In approximately January of 2006, plaintiff purchased a home located at 3794 Mario Ave, Redding, California (the "Mario Avenue property") with a loan of $349,400 from Chase. (Notice of Remand Ex. A ("Compl.") ¶ 6 (Docket 1).) In connection with the loan, plaintiff executed a Promissory Note in favor of Chase, which was secured by a Deed of Trust encumbering the property. (Def.'s Req. for Judicial Notice Ex. A (Docket No. 6).) As of November of 2011, the principle balance on the loan was $321,581.93. (Compl. ¶ 9.)

Plaintiff alleges that she had cured a prior deficiency on her loan, and was current with required payments as of December 2010. (Id. ¶ 10.) She further alleges that although she made payments that were more than adequate to cover the monthly installments due under her loan, defendant failed to properly credit payments to her account throughout 2011. (Id. ¶¶ 11-46.). As a result of defendant's "crooked accounting," she claims that defendant repeatedly falsely represented that her loan was in default when in fact she had paid more than was due on the loan. (Id.)

According to plaintiff, in November of 2011, she received a Notice of Default from Chase falsely indicating that $5,185.58 was past due on her loan. (Id. ¶ 39.) In reality, plaintiff contends that as of November 2011 she had paid approximately $5,000 more than was due on her loan. (Id. ¶ 40.) When she alerted Chase to its accounting errors, Chase allegedly continued to misrepresent the amount due on her loan. (Id. ¶¶ 43-44.)

On December 6, 2011, plaintiff claims that another notice of default in the amount of $5,185.58 was served on her, when in fact she had paid "at least through February 2012." (Id. ¶¶ 45-46.) When plaintiff again complained to Chase about its alleged failure to properly credit her payments to her account, she contends that it responded that it was "investigating" the matter. (Id. ¶ 47.)

Plaintiff filed her Complaint on December 28, 2011, and the proceeding was removed to this court on January 27, 2012. (Docket No. 1.) Plaintiff has filed a motion to remand and Chase has filed a motion to dismiss.

II. Discussion

A. Remand to State Court "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district . . . where such action is pending." 28 U.S.C. § 1441(a). The Ninth Circuit strictly construes the removal statute against removal jurisdiction, and the party seeking removal bears the burden of establishing federal jurisdiction. Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010) (citing Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)). Any questions regarding the propriety of removal are resolved in favor of the party moving for remand. Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003). If removal was improper, "the district court lack[s] subject matter jurisdiction, and the action should [be] remanded to the state court." Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir. 1998) (citing 28 U.S.C. § 1447(c)).

Federal courts have original jurisdiction over cases where complete diversity exists between the parties and the amount in controversy exceeds $75,000. 28 U.S.C. § 1332. Here, the parties do not dispute that diversity exists between all parties. The remaining issue, therefore, is whether the amount in controversy exceeds $75,000.

One of the remedies requested by plaintiff is a permanent injunction barring Chase from initiating or completing any foreclosure proceedings related to the Mario Avenue property. "In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation." Cohn v. Petsmart, 281 F.3d 837, 840 (9th Cir. 2002) (citing Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347 (1977)). Where the state court complaint does not specify an exact damages figure, the defendant must establish that the amount in controversy exceeds the statutory minimum by a preponderance of the evidence. Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996).

In cases where, as here, plaintiff seeks to enjoin a foreclosure sale, "the value of the property is the object of the litigation for the purposes of determining whether the amount-in-controversy requirement has been met." Reyes v. Wells Fargo Bank, N.A., No. C-10-01667, 2010 WL 2629785, at *5 (N.D. Cal. June 29, 2010); see also Garcia v. Citibank, N.A., No. 2:09--CV--03387, 2010 WL 1658569, at *2 (E.D. Cal. Apr. 23, 2010); Cabriales v. Aurora Loan Servs., No. C 10-161, 2010 WL 761081, at *4 (N.D. Cal. Mar. 2, 2010).

Chase has shown that the Mario Avenue property was used to secure a loan of $349,000. (Def.'s Req. for Judicial Notice Ex. A.) Although its property value may have decreased somewhat since then, it is likely that the Mario Avenue property's current value exceeds $75,000. See Cabriales, 2010 WL 761081, at *3 (absent evidence to the contrary, property used to secure a loan of $465,000 satisfied amount-in-controversy). The court also notes that as of November 2011, the total principle balance on the loan is over $300,000. See Reyes, 2010 WL 2629785, at *5 (noting that in foreclosure cases, some courts determine the amount in controversy according to the amount of indebtedness on the loan). This is sufficient to suggest by a preponderance of the evidence that the amount in controversy is above $75,000.

In arguing that the statutory minimum is not met, plaintiff represents that she has abandoned her requests for injunctive relief, so that the value of the house should no longer be considered in calculating the amount in controversy.*fn1

This argument fails to demonstrate that remand would be appropriate for two primary reasons. First, plaintiff has not amended the complaint or otherwise taken steps to eliminate her request for injunctive relief. Second, "diversity jurisdiction is determined at the time the action commences, and a federal court is not divested of jurisdiction . . . if the amount in controversy subsequently drops below the minimum jurisdictional level." Hill v. Blind Indus. & Servs. of Md., 179 F.3d 754, 757 (9th Cir. 1999). Plaintiff cannot rely on "[e]vents occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit" to show that removal was improper because such events "do not oust jurisdiction." Budget Rent-A-Car, Inc. v. Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997) (citing St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)). Accordingly, the court will deny plaintiff's motion to remand.

B. Motion to Dismiss

To survive a motion to dismiss, a plaintiff must 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," Ashcroft v. Iqbal, 556 U.S. 662, ---, 129 S. Ct. 1937, 1949 (2009), and "[w]here 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. (quoting Twombly, 550 U.S. at 557). In deciding whether a plaintiff has stated a claim, 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).

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(b).

Chase requests that the court judicially notice several publically recorded documents. (See Def.'s Request for Judicial Notice Exs. A-E.) The court will take judicial notice of these 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).

1. Fraud

In California, the elements of a claim for fraud are "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); e) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young, 160 Cal. App. 4th 62, 79 (4th Dist. 2008) (quoting Lazar v. Super.

Ct., 12 Cal. 4th 631, 638 (1996)) (internal quotation marks omitted). Under the heightened pleading requirement for claims of fraud under Federal Rule of Civil Procedure 9(b), "a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). A plaintiff must include the "who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997)).

Plaintiff claims that Chase engaged in fraud by making various misrepresentations related to the amount due on her mortgage. Nowhere in her Complaint, however, does she allege any facts indicating that Chase had any knowledge of the falsity of these misrepresentations or that Chase acted with an intent to defraud her. Accordingly, plaintiff has failed to state a claim for fraud.

2. Violation of the Rosenthal Act Plaintiff's third cause of action alleges that Chase violated the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"). The Rosenthal Act prohibits a variety of unfair and oppressive methods of collecting debt, but to be liable under the act, a defendant must fall under its definition of a "debt collector." Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1199 (C.D. Cal. 2008). A "debt collector" under the Rosenthal Act is "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection." Cal. Civ. Code § 1788.2(c) (2008).

A residential home loan, however, is not a "debt" under the Rosenthal Act. Morgera v. Countrywide Home Loans, Inc., No. 2:09-cv-1476, 2010 WL 160348, at *3 (E.D. Cal. Jan. 11, 2010); see also Ricon v. Recontrust Co., No. 09-937, 2009 WL 2407396, at *4 (S.D. Cal. Aug. 4, 2009) (dismissing with prejudice plaintiff's unfair debt collection claims in foreclosure case); Rosal v. First Fed. Bank of Cal., No. C 09-1276, 2009 WL 2136777, at *18 (N.D. Cal. July 15, 2009) (dismissing Rosenthal Act claim as to all defendants in foreclosure case); Pittman v. Barclays Capital Real Estate, Inc., No. 09-0241, 2009 WL 1108889, at *3 (S.D. Cal. Apr. 24, 2009) (dismissing with prejudice plaintiff's Rosenthal Act claim in foreclosure case because a "residential mortgage loan does not qualify as a 'debt' under the statute"). Since residential mortgage loans are not covered by the Rosenthal Act, the court will grant Chase's motion to dismiss plaintiff's claim for violations of the Rosenthal Act.

3. Claims for Accounting and Injunctive Relief Plaintiff's fifth and sixth causes of action are for accounting and injunctive relief. Under California law, a claim for accounting is not considered a stand-alone claim. Batt v. City & Cnty. of S.F., 155 Cal. App. 4th 65, 82 (1st Dist. 2007) (Accounting "is not an independent cause of action but merely a type of remedy, an equitable remedy at that."). Because plaintiff's accounting claim is related to her breach of contract claim, which defendant does not address in its motion to dismiss, the court will interpret this claim as a prayer for relief attached to her breach of contract claim and will not dismiss it at this time.

Claims for injunctive relief have been consistently classified under California law as remedies and not valid causes of action in their own rights. See e.g., Shell Oil Co. v. Richter, 52 Cal. App. 2d 164, 168 (4th Dist. 1942) ("Injunctive relief is a remedy and not, in itself, a cause of action."). Accordingly, the court will dismiss plaintiff's sixth cause of action.

IT IS THEREFORE ORDERED that plaintiff's motion to remand be, and the same hereby is, DENIED.

IT IS FURTHER ORDERED that Chase's motion to dismiss be, and the same hereby is, GRANTED as to plaintiff's claims for fraud, violation of the Rosenthal Act, and injunctive relief and DENIED as to plaintiff's claim for accounting.

Plaintiff has twenty days from the date of this Order to file an amended complaint, if she can do so consistent with this Order.

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