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French v. JP Morgan Chase Bank, N.A.

United States District Court, Ninth Circuit

November 25, 2013

JP MORGAN CHASE BANK, N.A.; and DOES 1-50, inclusive, Defendants.


ROGER T. BENITEZ, District Judge.

Before this Court is the Motion to Dismiss (Docket No. 3) filed by Defendant JP Morgan Chase Bank, N.A. (Chase). After full review of the record and the briefing in this matter, this Court GRANTS the Motion to Dismiss.


On October 5, 2006 Plaintiffs William Scott French and Jamie Raspberry French executed a promissory note in the amount of $2, 012, 000.00 which was secured by a Deed of Trust in real property located in La Mesa, CA. (Compl. ¶ 13). The Deed of Trust lists Washington Mutual (WaMu) as the lender and Fidelity National Title Insurance Company as the trustee. ( Id. ¶ ¶ 14; Pl's Exh. A).

In September 2008, the Office of Thrift Supervision closed Washington Mutual and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Chase entered into a Purchase and Assumption Agreement with the FDIC which allowed it to acquire certain assets of Washington Mutual. (RJN, Ex. B)[1].

Plaintiffs claim that Chase does not have "a legal, equitable, or pecuniary interest in the Note and Deed of Trust." (Compl. ¶ 15). Plaintiffs contend "[o]n information and belief" that Chase sold their loan to another entity or entities. ( Id. ¶ 17). Plaintiffs do not allege who those entities are, but claim they will identify them during discovery. (Id.)

"[O]n or around the latest part of the year 2012, " Plaintiffs allege that they contacted Chase in an effort to modify their loan to reduce their monthly payments. ( Id. ¶ 20). Plaintiffs allege that they relied on representations that Chase had power to collect payments and modify their Loan, but that they have learned that Chase had no authority to do so. ( Id. ¶ 23). Plaintiffs also claim that they did not receive certain documents and disclosures. ( Id ¶¶ 26, 27).

Plaintiffs allege seven causes of action. (1) violation of 15 U.S.C. § 1601, et seq. by providing false or misleading representation in handling and servicing Plaintiffs' loan, (2) violation of 15 U.S.C. § 1639 by failing to disclose credit information, (3) violation of Regulation Z by failing to disclose credit information and/or cancellation rights and/or give conspicuous warning, (4) violation of Regulation X by failing to give a good-faith estimate and certain disclosures, (5) violation of the California Business and Professions Code by engaging in unfair, unlawful, and fraudulent business practices, (6) breach of contract, (7) breach of the implied covenant of good faith and fair dealing.[2]

On May 29, 2013, Chase filed a Motion to Dismiss for Failure to State a Claim, seeking dismissal of all counts. (Docket No. 3).


Under Federal Rule of Civil Procedure 12(b)(6), dismissal is appropriate if, taking all factual allegations as true, the complaint fails to state a plausible claim for relief on its face. FED. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (requiring plaintiff to plead factual content that provides "more than a sheer possibility that a defendant has acted unlawfully"). Under this standard, dismissal is appropriate if the complaint fails to state enough facts to raise a reasonable expectation that discovery will reveal evidence of the matter complained of, or if the complaint lacks a cognizable legal theory under which relief may be granted. Twombly, 550 U.S. at 556.


A. Plaintiffs Insufficiently Allege Transfer of the Note

To the extent that Plaintiffs' claims are based on the allegation that Chase acted improperly in 2012 during their attempted loan modification because Chase did not own the loan, they have failed to sufficiently allege a factual basis for their claims.

To survive a Rule 12(b)(6) motion, a complaint "does not need detailed factual allegations, " but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Although this court must accept as true well-pleaded factual allegations, a court is not "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

Here, Plaintiffs allege on "information and belief" that shortly after the origination of the loan, Chase sold the loan to another entity or entities. (Compl. ¶ 17) Plaintiffs state that those entities are currently unknown, but will be identified through discovery. ( Id ) Plaintiffs state that this "information and belief" is based on (1) a title report and analysis of the property's county records; (2) direct written and oral communication with "Defendant(s), " (3) Plaintiffs' counsel's research, experience, and extensive review of depositions, case law, amicus briefs, correspondence, news articles, reports, complaints by Attorneys General from various states, and publicly available securitization documents and practices. ( Id. ¶ 19). Plaintiffs state that they relied on Chase's representations that it had the power to collect payments and modify the loan, but "Plaintiffs has [sic] learned" that Chase had no authority to collect on the loan, service the loan, or make derogatory credit reports. ( Id. ¶ 23).

At the outset, this Court notes that Plaintiffs' assertions regarding the alleged transfer contradict other information before this Court. Plaintiffs claim the loan was sold by Chase "shortly after" it was originated in October 2006, but Chase only acquired WaMu assets in September 2008. Additionally, Plaintiffs claim to rely on research by counsel, but Plaintiffs proceeded before this Court without counsel until after Plaintiffs had filed the complaint and their opposition in this matter.

This Court finds that Plaintiffs' allegations are insufficient to raise a plausible claim that Chase did not have authority to service or modify the loan. Plaintiffs' claims that their mortgage was sold to an unknown entity lacks the necessary factual support. Plaintiffs do not make any factual allegations, plausible or otherwise, that affirmatively support its contention that a transfer to another entity occurred. For instance, there is no allegation that any documents or statements by Chase employees support the existence of a sale. Plaintiffs claim to have conducted a title report and county records search, but do not make any mention of what they found or how any of these records support their speculation that the loan was sold. Plaintiffs generally reference research done on other cases of misconduct. Alleged instances of misconduct regarding loans in other cases may generally make misconduct by Chase more plausible, ...

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