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Mendaros v. JPMorgan Chase Bank, N.A.

United States District Court, N.D. California

July 9, 2014

EDWIN MENDAROS, Plaintiff,
v.
JPMORGAN CHASE BANK, N.A., et al., Defendants.

ORDER GRANTING MOTIONS TO DISMISS

JON S. TIGAR, District Judge.

In this action for breach of contract and related claims, Defendants Quality Loan Service Corporation ("Quality") and JPMorgan Chase Bank, N.A. ("JPM") each move to dismiss the claims that Plaintiff Mendaros has asserted against them. For the reasons set forth below, their motions to dismiss are GRANTED.

I. BACKGROUND

A. The Parties and Claims

This action arises out of the foreclosure of property located at 3383 Deer Hollow Drive, which is located in Danville, California ("the property"). Compl. ¶ 1, ECF No. 1.

In 2005, Plaintiff Edwin Mendaros obtained a loan for $1, 860, 000 from Washington Mutual Bank in Stockton, California ("the loan"). Id., Ex. 2 at 1. The loan was secured by the property under a Deed of Trust, which identified the California Reconveyance Company as the trustee. Id., Ex. 2 at 1.

In 2009, Defendants JPM and Quality became the loan's beneficiary and trustee, respectively. Quality's Req. for Judicial Notice ("RJN"), ECF No. 8, Ex. B & Ex. C;[1] JPM's RJN, ECF No. 16, Ex. B & Ex. E.[2]

On March 9, 2009, Quality recorded a Notice of Default ("NOD") with the Contra Costa County Recorder Office. Compl., Ex. 1 at 1. The NOD stated that Mendaros was in default on the loan in the amount of $91, 621.35 and that a failure to pay that amount could result in the non-judicial sale of the property. Id . When Mendaros failed to cure the default, a Notice of Trustee's Sale was recorded on September 1, 2010, indicating that the unpaid balance on the loan was $2, 356, 600.29. RJN, ECF No. 16, Ex. F. An additional Notice of Trustee's Sale was recorded on October 24, 2011, indicating that the unpaid balance on the loan was $2, 528, 814.87. RJN, ECF No. 16, Ex. G. The property was sold at a public auction on December 19, 2011, and a Trustee's Deed Upon Sale was recorded on June 19, 2012. RJN, ECF No. 16, Ex. H.

Mendaros filed this action on March 18, 2014, asserting the following claims against Defendants JPM and Quality: (1) breach of contract; (2) a claim under the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691(d)(2); (3) a claim under the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681i(a) and 1681s-2(b); and (4) fraud.

Mendaros filed for Chapter 13 bankruptcy on April 16, 2014. See Notice of Stay of Proceedings, Ex. A at 1.

B. Prior Actions

Before filing this action, but after the foreclosure on the property, Mendaros filed two lawsuits against JPM and Quality in Contra Costa Superior Court concerning the events giving rise to the foreclosure.[3] RJN, ECF No. 16, Ex. I & Ex J.

Mendaros filed the first suit on May 16, 2012, against JPM, Quality, and others ("the first state court action"). RJN, ECF No. 16, Ex. I. Mendaros asserted the following claims: (1) declaratory relief; (2) injunctive relief; (3) a claim for violations of California's Unfair Competition Law; (4) a claim for violations of California Civil Code section 2923.5; (5) cancellation of a written instrument; and (6) quiet title. The gravamen of the complaint was that the defendants' foreclosure on the property was unlawful because they lacked the legal authority to execute the sale. Id . Mendaros voluntarily dismissed this action without prejudice with respect to all defendants on September 10, 2012. RJN, ECF No. 8, Ex. H at 1.

Mendaros filed the second action on December 7, 2012, against JPM, Quality, and others ("the second state court action").[4] RJN, ECF No. 16, Ex. J. Mendaros asserted the following claims: (1) fraudulent inducement to breach of contract; (2) two claims under the Truth in Lending Act; (3) fraud; (4) a claim for violations of California Civil Code section 2923.5; (5) a claim for violations of California's Unfair Competition Law; (6) a claim for violations of the FCRA; (7) defamation; (8) false light; (9) breach of contract; and (10) declaratory relief. Id . The gravamen of the complaint was that the defendants lacked the authority to foreclose on the property and that the foreclosure was therefore illegal. The court granted JPM's motion to dismiss with prejudice all claims asserted against JPM and it entered judgment in favor of JPM and against Mendaros on March 22, 2013. Id., Ex. K. Quality has not filed any documents indicating the outcome of the claims that Mendaros asserted against it in this action.

C. Jurisdiction

The court has jurisdiction over this action under 28 U.S.C. §§ 1331 and 1367.

II. STAY OF PROCEEDINGS

In lieu of filing an opposition to Quality's motion to dismiss, Mendaros filed a notice

Accordingly, the court cannot take judicial notice of this suit. stating that he is staying this action under 11 U.S.C. § 362 on the basis of the ongoing bankruptcy proceedings. ECF No. 11 at 1.

Mendaros' request for a stay under § 362 is not well taken. Section 362 permits a debtor to stay a lawsuit while bankruptcy proceedings are underway. Its purpose is to protect the debtor from creditors during the proceedings. Gordon v. Whitmore (In re Merrick) , 175 B.R. 333, 337 (9th Cir. B.A.P 1994) ("The automatic stay gives the debtor a breathing spell from his creditors and allows the trustee to marshall assets of the estate for the benefit of creditors."). Because the purpose of a stay is to protect the debtor's assets from collateral attack by creditors, the stay applies only to actions for affirmative relief filed against the debtor, and not to actions initiated by the debtor. Palmdale Hills Prop., LLC v. Lehmen Commer. Paper, Inc. (In re Palmdale Hills Prop., LLC) , 654 F.3d 868, 875 (9th Cir. 2011) ("Bankruptcy courts, therefore, differentiate between actions for affirmative relief against the debtor's estate, which are stayed, and defensive actions, which are not."). Because this action was filed by and not against Mendaros, the action cannot be stayed under § 362. Mendaro's request to stay is therefore DENIED.

III. MOTIONS TO ...


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