MEMORANDUM AND ORDER RE: MOTION TO DISMISS
Plaintiff Donna Ruth O'Connor-Rose brought this action against defendant J.P. Morgan Chase ("Chase") stating claims arising from Chase's allegedly wrongful conduct related to a residential loan. Currently before the court is Chase's motion to dismiss plaintiff's constructive fraud claim in her Second Amended Complaint ("SAC") for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). (Docket No. 30.)
I. Factual and Procedural Background
In December of 2005, plaintiff obtained a loan in the amount of $349,000 from Chase, which was secured by a Deed of Trust encumbering property located at 3794 Mario Ave in Redding, California ("the property"). (SAC ¶ 84 (Docket No. 27).) Plaintiff alleges that "[p]er paragraph 3 of the subject loan, Chase was the trustee of an escrow account which paid taxes, insurance and so forth," and that "[f]rom that position Chase had fiduciary duties over the periodic payments that the plaintiff made." (Id. ¶ 7.)
According to plaintiff, from August to October of 2009 she fell behind on the monthly payments due under the loan. (Id. ¶ 88.) Apart from this period of time, she alleges that she has paid more than was required under the terms of the loan agreement and is now current on her loan. (Id. ¶¶ 28, 53, 55, 75.) As a result of Chase's "crooked accounting," plaintiff contends that Chase repeatedly and falsely represented that her loan was in default when in fact she had paid more than was due on the loan, (e.g., id. ¶¶ 16, 24, 33, 59-61, Ex. 22), and caused two wrongful Notices of Default to be recorded, (id. ¶¶ 23, 24, 32, 33, Exs. 8, 12). Chase rescinded each of these Notices of Default. (Id. ¶¶ 26, 40, Exs. 10, 15.)
On March 1, 2012, Chase allegedly sent plaintiff a statement indicating that she was two months past due on her loan, which plaintiff alleges is not correct. (Id. ¶¶ 70, 71.) On March 7, 2012, Chase caused another Notice of Default to be recorded. (Id. ¶ 73, Ex. 29.) Plaintiff alleges she is current on her loan, (id. ¶¶ 74, 75), but that since March 7, 2012, she has not received any billing or notices and the bank refused to accept a monthly payment in April 2012, (id. ¶¶ 77, 78).
Plaintiff additionally alleges that she was harmed because Chase falsely reported to third parties that she was late in making payments under the loan and in default and that credit agencies have "picked up on this reporting." (Id. ¶¶ 76, 87, Ex. 30.)
Plaintiff filed her Complaint on December 28, 2011, in state court, and the proceeding was removed to this court on January 27, 2012. (Notice of Removal, Ex. A ("Compl.") (Docket No. 1).) The court denied plaintiff's motion to remand and granted in part Chase's motion to dismiss with leave to amend. (Docket No. 15.) Plaintiff filed her First Amended Complaint, (Docket No. 16), and the court granted Chase's motion to dismiss plaintiff's constructive fraud claim with leave to amend. (Docket No. 25.) Plaintiff filed her SAC on May 5, 2012, realleging breach of contract and constructive fraud claims. (Docket No. 27.) Plaintiff's only material amendments allege that Chase did not pay plaintiff interest on her loan escrow account, with the result that her payments should be considered "special deposits." (SAC ¶¶ 7, 85.) Chase now moves to dismiss plaintiff's constructive fraud claim for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).
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, 678 (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).
To state a claim for constructive fraud under
California law, a plaintiff must allege (1) a fiduciary or confidential relationship, (2) an act, omission, or concealment involving a breach of that duty, (3) reliance, and (4) resulting damages. Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 414 (2d Dist. 2000). "It is essential to the operation of the doctrine of constructive fraud that there exist a fiduciary or special relationship." Peterson Dev. Co. v. Torrey Pines Bank, 233 Cal. App. 3d 103, 116 (4th Dist. 1991). Under California law, a financial institution does not, as a general rule, owe a "duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Savs. & Loan Ass'n, 231 Cal. App. 3d 1089, 1096 (3d Dist. 1991).
In its May 3, 2012, Order, this court held that Chase's ancillary performance of escrow services did not give rise to a fiduciary duty because Chase did not exceed its duties as a money lender and that therefore plaintiff's constructive fraud claim failed. Plaintiff now asserts that because Chase did not pay her interest, her ...