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Farber v. JPMorgan Chase Bank N.A.

United States District Court, S.D. California

January 8, 2014

STUART FARBER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, Plaintiff,
v.
JPMORGAN CHASE BANK N.A., Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS THIRD AMENDED COMPLAINT WITH LEAVE TO AMEND; DENYING DEFENDANT'S MOTION TO STRIKE AS MOOT [DKT. NOS. 31, 32.]

GONZALO P. CURIEL, District Judge.

On July 22, 2013, Plaintiff Stuart Farber ("Plaintiff") filed a third amended complaint ("TAC") and a purported class action against Defendant JPMorgan Chase Bank, N.A. ("Defendant") alleging violations of the Rosenthal Fair Debt Collection Practices Act ("RFDCPA") and California Business & Professions Code section 17200 ("section 17200" and "UCL"). (Dkt. No. 30.) On August 12, 2013, Defendant filed a motion to dismiss the third amended complaint, and alternatively, a motion to strike. (Dkt. No. 31.) Plaintiff filed an opposition to the motion on October 4, 2013. (Dkt. No. 35.) Defendant filed a reply to Plaintiff's opposition on October 18, 2013. (Dkt. No. 37.) The motions are submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). After review of the briefs, supporting documentation, and the applicable law, the Court GRANTS in part AND DENIES in part Defendant's motion to dismiss and DENIES Defendant's motion to strike as MOOT.

Factual Background

On February 25, 2004, "Stuart Farber and Janice Adair, Husband and Wife as Community Property" granted Countrywide Bank, a Division of Treasury Bank, N.A. a deed of trust against the Farber Property to secure a $581, 250.00 home loan. (Dkt. No. 31; Exh. A.) On the same day, they granted America's Wholesale Lender ("AWL") a deed of trust against the Farber Property to secure a $116, 250.00 revolving credit agreement. (Dkt. No. 31; Exh. B.) Three years later, on August 30, 2007, while occupying the entirety of the Farber Property, Mr. Farber and Ms. Adair granted Washington Mutual Bank, FA a deed of trust against the Farber Property to secure a $1, 559, 200.00 loan. (Dkt. No. 31; Exh. E.) This amount was used to pay off the two deeds of trust recorded in 2004 and the additional amounts were used to construct a new residence on the Farber Property at 8129 Willow Glen Road, Los Angeles, CA 90046 ("Farber Property"). (TAC ¶ 18.) The beneficiaries of the Countrywide and AWL Deeds of Trust executed full reconveyances of their interests in the Farber Property. (Dkt. No. 31; Exhs. C, D.) Chase acquired the loan from Washington Mutual Bank, FA on September 25, 2008. (Dkt. No. 31; Exh. F.) The terms of the loan explicitly state that the "[b]orrower [Mr. Farber] has requested and been approved for a home loan... to purchase the real property securing the loan... and construct a residence on the Farber Property." (TAC ¶ 19.) Farber used this loan in the precise manner anticipated by the parties by leveling the home previously built on the Farber Property and constructing an entirely new residence on the property. (Id.) Farber allegedly fell behind in the payments owed on the debt. ( Id. ¶ 20.)

In September 2010, Farber sold the Property by way of a "short sale" with Defendant receiving approximately $1, 139, 345.00. ( Id. ¶ 21.) In selling the Farber Property through a short sale in September 2010, he signed a short sale approval letter containing language that attempted to hold him responsible for all deficiency balances remaining on the loan which waived the protection allotted under California Civil Procedure Code section 580b ("section 580b"). ( Id. ¶ 22.) Specifically, Defendant's short sale approval letter stated, "[t]he amount paid to Chase is for the release of Chase's security interest(s) only, and the Borrower is responsible for all deficiency balances remaining on the Loan, per the terms of the original loan documents." (Id.) According to Farber, the protection under section 580b applied because the loan was a standard purchase money debt secured by his home. ( Id. ¶ 23.)

Defendant continued collection efforts on the alleged deficiency balance alleging that Farber is not protected by section 580b. ( Id. ¶ 24.) Chase contends that Farber is indebted in the amount of about $419, 855.00. (Id.) Despite Farber's repeated requests to review the validity of the purported debt, Defendant has made various reports to credit agencies that he is delinquent on this debt. ( Id. ¶ 26.)

A. Legal Standard on Federal Rule of Civil Procedure 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't., 901 F.2d 696, 699 (9th Cir. 1990). Under Federal Rule of Civil Procedure 8(a)(2), the plaintiff is required only to set forth a "short and plain statement of the claim showing that the pleader is entitled to relief, " and "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A complaint may survive a motion to dismiss only if, taking all well-pleaded factual allegations as true, it contains enough facts to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id . "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id . "In sum, for a complaint to survive a motion to dismiss, the non-conclusory 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) (quotations omitted). In reviewing a Rule 12(b)(6) motion, the Court accepts as true all facts alleged in the complaint, and draws all reasonable inferences in favor of the plaintiff. al- Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009).

B. Defendant's Request for Judicial Notice

Defendant requests judicial notice of recorded property records. (Dkt. No. 31-2, Exhs. A-F.) Plaintiff does not object to this request.

In ruling on a motion to dismiss pursuant to Rule 12(b)(6), a Court may consider exhibits attached to the complaint, matters subject to judicial notice, or documents necessarily relied on by the complaint whose authenticity no party questions. See Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); Lee v. City of Los Angeles, 250 F.3d 668, 688-689 (9th Cir. 2001); United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) ("A court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment.").

Under Federal Rule of Evidence 201(b), judicial notice may be taken of facts that are "not subject to reasonable dispute" because they are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b).

Here, Defendant requests the Court take judicial notice of (1) Plaintiff's Deed of Trust granted to Countrywide Bank, a Division of Treasury Bank, N.A. ("Countrywide Deed of Trust"), recorded by the Los Angeles County Recorder's Office ("LACR Office") on March 11, 2004 (Exh. A); (2) Plaintiff's Deed of Trust granted to America's Wholesale Lender ("AWL Deed of Trust"), recorded by the LACR Office on March 11, 2004 (Exh. B); (3) Plaintiff's full reconveyance of the Countrywide Deed of Trust recorded by the LACR Office on September 26, 2007 (Exh. C); (4) Plaintiff's full reconveyance of the AWL Deed of Trust recorded by the LACR Office on September 21, 2007 (Exh. D); (5) Plaintiff's Deed of Trust granted to Washington Mutual Bank, F.A. ("WMB Deed of Trust"), recorded by the LACR Office on September 13, 2007 (Exh. E); and (6) an affidavit of the Federal Deposit Insurance Corporation regarding JP Morgan Chase Bank, N.A.'s acquisition of Washington Mutual Bank's loans and loan commitments on September 25, 2008, recorded by the King County, WA land records (Exh. F).

Federal courts routinely take judicial notice of facts contained in publically recorded documents, including Deeds of Trust, because they are matters of public record, and are not reasonably in dispute. See e.g., Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)); Lingad v. IndyMac Fed. Bank, 682 F.Supp.2d 1142, 1146 (E.D. Cal. 2010). Accordingly, the Court finds these publicly recorded documents are not reasonably in dispute, and therefore GRANTS Defendant's request for judicial notice.

C. Section 580b application to Farber's Loan

Defendant argues that section 580b does not apply to Farber's loan because his loan was used to refinance two pre-existing loans secured by deeds of trust against the Farber Property. In opposition, Plaintiff argues that ...


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