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Tollette v. JPMorgan Chase Bank, N.A.

United States District Court, Ninth Circuit

January 21, 2014

JEFFREY TOLLETTE, an individual, Plaintiff,


DEAN D. PREGERSON, District Judge.

Presently before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint (the "Motion"). For the reasons stated in this order, the Motion is GRANTED.

I. Background

Plaintiff Jeffrey Tollette ("Plaintiff") brings this action against Defendants JP Morgan Chase, N.A. and U.S. Bank, N.A.[1] ("Defendants"), alleging various causes of action relating to the foreclosure of the single family residence located at 926 W. Hillcrest Blvd., Monrovia, CA 91016 (the "Property"). (Complaint ¶ 6.)

On November 15, 2006, Plaintiff executed a promissory note in the amount of $855, 000 (the "Loan") on the Property. (Id. ¶ 12.) The original lender of the note was Fieldstone. (Id.) However, at some point Fieldstone transferred its assets, including the Loan, to EMC, a subsidiary of Bear Stearns. (Id. ¶ 13.) Plaintiff alleges that shortly after EMC obtained the Loan, it sold or transferred the Loan through a process known as "QSPE Bank Securitization." (Id. ¶ 14.)

On March 16, 2008, Defendant Chase acquired all of Bear Stearns' loans. (Id. ¶ 17.) Plaintiff alleges that this occurred after EMC transferred its interest in the Loan through the QSPE Bank Securitization. (Id. ¶ 16.) As a result, Plaintiff alleges that Chase did not own the Loan at any time because EMC no longer owned the Loan when it transferred its loan interests to Chase. (Id. ¶¶ 16, 18.)

On or about February 14, 2008, "Defendant"[2] recorded a Notice of Default against the Property. (Id. ¶ 20.) Plaintiff alleges that he attempted on several occasions to obtain evidence from Chase that it was the holder in due course of the note on the Loan, but Plaintiff never received any validation that Chase was the holder. (Id. ¶¶ 24-25.) Plaintiff then mailed a "rescission letter regarding tender" and a Qualified Written Request to Chase. (Id. ¶¶ 25-26.)

Chase purportedly sold the Property to U.S. Bank without a valid security interest in the Property on September 9, 2010. (Id. ¶ 27.) Plaintiff claims that this sale was therefore invalid. (Id.) Plaintiff also alleges that Chase failed to properly consider a loan modification or other alternatives to foreclosure prior to foreclosing on the Property in violation of Cal. Civ. Code § 2923.5.[3] (Id. ¶¶ 22-23, 32.)

Plaintiff alleges six causes of action arising out of these facts: (1) wrongful foreclosure; (2) negligence against Chase; (3) negligence against U.S. Bank; (4) fraud; (5) unfair business practices in violation of Cal. Bus. & Prof. Code § 17200; and (6) quiet title. (Id. ¶¶ 28-54.) Defendants have moved to dismiss Plaintiff's complaint for failure to state a claim on which relief can be granted pursuant to Rule 12(b)(6). (Dkt. 11.)

II. Legal Standard

A complaint will survive a motion to dismiss when it contains "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes , 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations, " it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal , 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions, " a "formulaic recitation of the elements, " or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly , 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal , 556 U.S. at 679.

III. Discussion

A. Wrongful Foreclosure[4]

Defendants argue that Plaintiff's claim for wrongful foreclosure should be dismissed for three reasons. First, they argue that Plaintiff fails to allege tender of the amount due on the Loan. Second, they argue that California law does not require possession of the note in order to institute a non-judicial foreclosure. Third, they argue that they fully complied with the requirements of Cal. Civ. Code § 2923.5, and that even if they did not, the remedy for a violation of that code section is only postponement of the foreclosure sale.

Plaintiff offers no argument in opposition to Defendants' tender argument. Defendants are correct that Plaintiff fails to allege tender, a threshold requirement for bringing a wrongful foreclosure claim. See Karlsen v. Am. Sav. & Loan Ass'n , 15 Cal.App.3d 112 (1971); Alicea v. GE Money Bank , 2009 U.S. Dist. LEXIS 60813, *7-8 (N.D. Cal. 2009).

Even were Plaintiff able to allege tender or the Court were to excuse such a requirement, Defendants' second argument also warrants dismissal of this cause of action. Plaintiff alleges that "EMC in fact sold or transferred the Loan through a process commonly referred to as QSPE Bank Securitization'" and that "Chase acquired plaintiff's Loan only to the extent such Loan was (at that time) owned by EMC, which it was not." (Complaint ¶¶ 14, 18.) Plaintiff argues that, as a result, Chase did not have the authority to initiate foreclosure proceedings. (Id. ¶¶ 30-31.)

While it is true that if Chase did not have any interest in the Loan, it would not have the power to foreclose on the Property, Plaintiff premises his assertion that Chase did not own an interest in the Loan on the fact that the Loan was securitized by EMC prior to Chase's acquisition of EMC's loan interests. However, "[t[he argument that parties lose their interest in a loan when it is assigned to a trust pool has... been rejected by many district courts." Lane v. Vitek Real Estate Indus. Group , 713 F.Supp.2d 1092, 1099 (E.D. Cal. 2010); see also Hafiz v. Greenpoint Mortgage Funding, Inc. , 652 F.Supp.2d 1039, 1043 (N.D. Cal. 2009); Chan Tang v. Bank of America, N.A. , 2012 WL 960373, at *7 (C.D. Cal. 2012). "It does not follow that any of the other entitlements of the lender of the Deeds of Trust, including the power to declare default, are transferred or lost because of the transfer or sale of the cash flow due from the mortgage." Jones v. Countrywide Homeloan, 2011 WL 2462845 (E.D. Cal. 2011). Therefore, Plaintiff's allegation that EMC no longer held an interest in the Loan after securitization is contrary to law and implausible. Absent additional facts regarding the particular securitization process utilized here that would establish that EMC in fact completely transferred its interest in the Loan to a trust pool, Chase acquired EMC's remaining interest in the Loan, including the power to declare default and initiate the foreclosure process. See Nardico v. J.P. Morgan Chase and Co., 2013 WL 1856683, at *6 (N.D. Cal. 2013).[5] Therefore, the Court GRANTS the Motion and dismisses Plaintiff's wrongful foreclosure claim WITHOUT PREJUDICE. Plaintiff may amend only if he can plead specific facts demonstrating why the loan securitization process used here is atypical such that the usual rule that a lender retains an interest in the securitized loan does not apply.

To the extent that Plaintiff bases his wrongful foreclosure claim on Cal. Civ. Code § 2923.5, Plaintiff fails to oppose Defendants' argument that Defendants fully complied with the obligations under that code section and that, even in the event that Defendants' actions were deficient, the sole remedy for a violation of § 2923.5 is postponement of the foreclosure sale. Mabry v. Superior Court , 185 Cal.App.4th 208, 223 (2010). Because Plaintiff does not oppose Defendants' arguments here, the Court GRANTS Defendants' Motion WITH PREJUDICE as to any cause of action under Cal. Civ. Code § 2923.5.

B. Negligence

Defendants argue that Plaintiff's second and third causes of action for negligence fail as a matter of law because Plaintiff does not and cannot plead that Defendants owed Plaintiff a duty of care.

In order to state a claim for negligence, a plaintiff must show: (1) defendant owed plaintiff a legal duty, (2) defendant breached the duty, (3) defendant's breach was the actual and proximate cause of plaintiff's injury, and (4) damages. Merrill v. Navegar, Inc. , 26 Cal.4th 465, 477 (2001). In California, as a general rule, "a financial institution owes no 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 money lender." Nymark v. Heart Fed. Savs. & Loan Ass'n , 231 Cal.App.3d 1089, 1096 (1991).

Plaintiff argues that because Chase has no right to enforce the Loan, the rule that a lender owes no duty of care to a borrower should be disregarded. However, because the Court has determined that Plaintiff's pleadings are deficient in failing to plausibly plead facts showing that Chase did not obtain EMC's lender rights, Plaintiff's argument is unavailing. Therefore, the Court GRANTS the Motion with respect to Plaintiff's negligence claims WITHOUT PREJUDICE.

C. Fraud

In California, the elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) justifiable reliance, and (5) damages. Agosta v. Astor , 120 Cal.App.4th 596, 603 (2004). When pleading a fraud claim, Rule 9(b) requires the party alleging fraud to state with particularity the circumstances constituting the fraud. Fed. R. Civ. Proc. 9(b).

Defendants argue that Plaintiff's claim for fraud is not sufficiently pled because (a) the circumstances of the misrepresentations are not pled with specificity, (b) Plaintiff cannot show that any representation made by either Defendant was false, and (c) Plaintiff cannot allege that he justifiably relied on the alleged misrepresentation and thereby suffered harm.

Plaintiff's complaint does not contain specific factual allegations sufficient to satisfy the requirements of Rule 9(b). Plaintiff merely states that "Chase continues to misrepresent that it was in fact the owner of the Loan and in fact had the authority to foreclose on plaintiff's home." (Complaint ¶ 44.) This allegation does not state with any specificity when such misrepresentations were made to Plaintiff, the person who made the allegedly false statements, or the form that such misrepresentations took. See, e.g., Neubronner v. Milken , 6 F.3d 666. 672 (9th Cir. 1993) ("The complaint must specify such facts as the times, dates, places, benefits received, and other details of the alleged fraudulent activity."). Further, Plaintiff pleads no facts demonstrating how he relied on the alleged misrepresentations to his detriment. As a result, Defendants' Motion is GRANTED as to this cause of action WITHOUT PREJUDICE. Plaintiff may amend his complaint to provide specific facts regarding the alleged misrepresentations and how he relied on those misrepresentations to his detriment. Plaintiff will also need to demonstrate that Chase's alleged misrepresentation that it owned an interest in his loan was false.

D. Violation of Cal. Bus. & Prof. Code § 17200

Cal. Bus. & Prof. Code § 17200 prohibits any "unlawful, unfair or fraudulent business act or practice." This cause of action is typically derivative of other wrongful or illegal conduct. Plaintiff appears to base his § 17200 claim on his fraud claim. Because the Court has determined that Plaintiff's other causes of action, including his claim for fraud, should be dismissed for failure to state a claim, there are no remaining underlying causes of action that may be used as a basis for Plaintiff's § 17200 claim. Further, Plaintiff does not allege that Defendants' acts, while not technically illegal, were nevertheless "unfair" because they "violate[] established public policy or [are] immoral, unethical, oppressive or unscrupulous." McKell v. Washington Mutual, Inc. , 142 Cal.App.4th 1457, 1473 (2006). Therefore, the Court GRANTS the Motion with respect to this cause of action.

E. Quiet Title

Defendants argue that Plaintiff's claim to quiet title without alleging tender should be dismissed. As noted above, Plaintiff fails to allege tender, which means that his claim fails. In addition, Plaintiff fails to oppose the dismissal of this cause of action. This failure may be deemed consent to granting the motion Therefore, this cause of action is dismissed.

IV. Conclusion

For the foregoing reasons, the Court GRANTS the Motion and DISMISSES all causes of action. Plaintiff may amend his complaint but only to the extent that he can plead sufficient facts to correct the deficiencies identified in this order. Any amended complaint must be filed, in accordance with the Clerk's Office procedures, by February 4, 2014.


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