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Dana Y. Coward v. Jp Morgan Chase Bank

June 14, 2012


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Defendant seeks dismissal of Plaintiff's Second Amended Complaint ("SAC"), arguing "Plaintiff failed to disclose any of her claims here as assets in her bankruptcy petition, and she thereby lacks standing." (Def.'s Mot. 16:3-4.) Further, Defendant argues, "[e]ven if the Court holds the new averments sufficient to excuse [P]laintiff from her failure to schedule the claims as property of the bankruptcy estate, her substantive allegations remain unchanged and fail to state claims for relief as a matter of law." Id. 1:10-12.

Plaintiff opposes part of the motion, conceding she does not have standing to bring her second, third, fourth, fifth, sixth, and eighth claims. (Pl.'s Opp'n 3:22-26.) Therefore, these claims are dismissed. However, Plaintiff contends she "has standing to pursue both the first and seventh [claims], and both claims are . . . sufficiently pled." Id. 4:11-13.


"In reviewing the dismissal of a complaint, we inquire whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., 637 F.3d 1047, 1054 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The material allegations of the complaint are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. Al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, this tenet "is inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. Further, "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007)). "In sum, for a complaint to survive a motion to dismiss, the nonconclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).


A. Fraud Claim

Defendant seeks dismissal of Plaintiff's fraud claim, arguing, inter alia, Plaintiff lacks standing. Plaintiff rejoins, contending she has standing to bring this claim since she "had no reason to suspect the factual basis of the elements of the [fraud claim prior to her bankruptcy filing.]" (Pl.'s Opp'n 3:24-26.)

"[D]ebtor standing is ordinarily prudential . . . ." Pershing Park Villas Homeowners Ass'n v. United Pac. Ins. Co., 219 F.3d 895, 901 n.3 (9th Cir. 2000) (citing Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 708 n.1 (9th Cir. 1986)). "[T]he prudential doctrine of standing has come to encompass several judicially self-imposed limits on the exercise of federal jurisdiction. Principles of prudential standing are not ordained by the Constitution, but constitute rather rules of practice, albeit weighty ones." Id. at 899 (internal quotation marks and citations omitted). Therefore, "prudential standing [is] not a requirement of jurisdiction." Hilton v. Hallmark Cards, 599 F.3d 894, 904 n.6 (9th Cir. 2010). "For [Plaintiff] to have standing, [she], rather than the bankruptcy estate, must own the claim upon which [she] is suing." Cusano v. Klein, 264 F.3d 936, 945 (9th Cir. 2001). "An 'estate' is created when a bankruptcy petition is filed. Property of a bankruptcy estate includes 'all legal or equitable interests of the debtor in property as of the commencement of the case.' . . . [A]ssets of the estate properly included any of [a debtor's] causes of action." Id. (internal citations omitted); see also Engram v. Manera, 348 F. App'x 305, 306 (9th Cir. 2009) (applying this principle to Chapter 7 bankruptcy proceedings). Further, "[c]auses of action are separate assets which must be formally listed. Simply listing the underlying asset out of which the cause of action arises is not sufficient." Cusano, 264 F.3d at 947 (internal citations omitted).

"The bankruptcy code place[s] an affirmative duty on [a debtor] to schedule his assets and liabilities. If he failed to properly schedule an asset, including a cause of action, that asset continues to belong to the bankruptcy estate and [does] not revert to [the debtor]." Id. at 945-46 (internal citations omitted). Once causes of action belong to the bankruptcy estate, "[t]he plaintiff-debtor has no standing to bring [them] unless he can show that the claims were (1) exempt from the bankruptcy estate or (2) abandoned by the bankruptcy trustee. If neither apply, the claims belong to the bankruptcy estate and in turn must be asserted by the bankruptcy trustee rather than the debtor." Rowland v. Novus Fin. Corp., 949 F. Supp. 1447, 1453 (D. Haw. 1996); see also Fresno Rock Taco LLC v. Rodriguez, No. 1:11-cv-00622, 2011 WL 5240444, at *3 (E.D. Cal. Nov. 1, 2011) ("To prove [the bankruptcy estate does not own Plaintiffs' claims], Plaintiffs must show that the cause of action is either exempt from the bankruptcy proceedings, or was abandoned by the Trustee.").

A cause of action is exempt from the proceedings if it accrues after a debtor files for bankruptcy since "generally, a debtor has no duty to schedule a cause of action that did not accrue prior to bankruptcy." Cusano, 264 F.3d at 947 (internal citations omitted); see also In re Adair, 253 B.R. 85, 90 (9th Cir. 2000) ("The Bankruptcy Code and Rules require that a debtor supplement the information in his or her schedules only in limited circumstances."). Plaintiff and her husband filed a Chapter 7 bankruptcy petition on December 17, 2009; the claims alleged against Defendant in this action were not included in the schedules of assets. (Def.'s Req. for Judicial Notice Ex. B.)*fn1

"To determine when a cause of action accrues, we look to state law." Cusano, 264 F.3d at 947 (internal citations omitted). Under California law, "[t]he elements of fraud are: (1) a misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage." Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990 (2004). A fraud claim "is not deemed to have accrued until the discovery, by the aggrieved party, of facts constituting the fraud or mistake." Cal. Civ. Proc. Code § 338(d).

Defendant's contention that Plaintiff lacks standing is based on the argument that the loan documents at issue were provided to Plaintiff during the bankruptcy proceedings:

[P]laintiff has no good faith basis for asserting the truth of her new averment that her husband's signature was not forged until at least six months after her December 17, 2009 bankruptcy filing. Indeed, as Chase established in its original motion to dismiss, [P]laintiff at the very latest had actual or constructive knowledge of the alleged forgery at the outset of her bankruptcy proceedings. The loan documents in question were exhibits to Chase's motion for relief from the automatic stay. The note and deed of trust Chase submitted to the bankruptcy court on January 6, 2010, had both plaintiff's and her husband's signatures, duly notarized at the time of origination of the loan in 2005. . . . Thus, to the extent [P]laintiff claims she ...

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