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Benefield v. Bryco Funding, Inc.

United States District Court, N.D. California

August 14, 2014

DANIEL BENEFIELD, et al., Plaintiffs,
v.
BRYCO FUNDING, INC., et al., Defendants.

ORDER GRANTING MOTIONS TO DISMISS

PHYLLIS J. HAMILTON, District Judge.

Before the court are the motions of defendants JPMorgan Chase Bank, N.A.; Chase Home Finance, LLC; and Mortgage Electronic Registration Systems, Inc. (collectively, "JPMorgan/MERS"), and defendant Deutsche Bank National Trust Company as Trustee for Long Beach Mortgage Loan Trust 2006-7 ("Deutsche Bank"), for an order dismissing the second amended complaint for failure to state a claim. Under Civil Local Rule 7-3, plaintiffs' opposition to the Chase/MERS motion was due on August 4, 2014, and their opposition to the Deutsche Bank motion was due on August 11, 2014. Plaintiffs did not file an opposition to either motion. Having read defendants' papers and carefully considered their arguments and the relevant legal authority, the court hereby GRANTS the motions.

BACKGROUND

Plaintiffs filed this action in Alameda County Superior Court on April 22, 2013. On March 24, 2014, JPMorgan Chase Bank, N.A. (the sole defendant who had been served as of that date) removed the case to this court, alleging federal question jurisdiction. Chase/MERS and Deutsche Bank then filed a motion to dismiss the complaint for failure to state a claim. On June 10, 2014, the court issued an order granting the motion, dismissing four causes of action with prejudice (claims under the Truth in Lending Act ("TILA") and the Fair Credit Reporting Act ("FCRA"), and claims for declaratory and injunctive relief), and dismissing the remaining nine causes of action with leave to amend, and issuing detailed instructions as to what must be alleged in any amended complaint.

In the order granting the motion, the court stated that the complaint was "largely incomprehensible." The court was "unable to ascertain exactly what plaintiffs' claims [were]" and found that while it appeared that plaintiffs were attempting to allege wrongful foreclosure, it was clear from the documents attached to defendants' request for judicial notice that no foreclosure had taken place. Order at 3-4.

Plaintiffs filed a second amended complaint ("SAC") on July 11, 2014, asserting two causes of action - fraudulent inducement to breach contract (formerly the first cause of action), and fraud and conspiracy to commit fraud (formerly the third cause of action).

In the June 10, 2014 order, the court dismissed the claim of fraudulent inducement to breach contract with leave to amend to "allege facts as to each defendant, showing that the defendant fraudulently induced plaintiffs to breach a contract." Order at 4. The court explained that

[t]he elements of a claim of fraudulent inducement to enter into a contract or breach a contract are (a) a misrepresentation, false representation, concealment or nondisclosure; (b) knowledge of falsity; (c) intent to defraud or to induce plaintiff to enter into a contract or breach a contract; (d) justifiable reliance; and (e) resulting damage. See Lazar v. Superior Court , 12 Cal.4th 631, 638 (1996). Plaintiffs must identify the contract and the parties to the contract. They must also allege "an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP , 476 F.3d 756, 764 (9th Cir. 2007). Mere conclusory allegations of fraud will not suffice. Moore v. Kayport Package Express, Inc. , 885 F.2d 531, 540 (9th Cir. 1989); Das v. WMC Mortgage Corp. , 831 F.Supp.2d 1147, 1166 (N.D. Cal. 2011).

Order at 4.

In the SAC, the first cause of action for fraudulent inducement to breach contract alleges that "defendants... engaged in egregiously unfair and deceptive lending practices to steer [p]laintiff [sic] into a loan that was engineered to fail from inception." SAC ¶ 28. They allege that they "have been trying to secure a modified/amended loan agreement" that would reduce their monthly payment, but that the "nature of our current contract" was designed to "mechanically create economic hardship" and to "systematically force default." Id . The remainder of this cause of action is premised on alleged violations of California Business and Professions Code § 17200. See SAC ¶¶ 28-37.

In the June 10, 2014 order, the court dismissed the cause of action for fraud and conspiracy to commit fraud with leave to amend to "allege particularized facts as to each defendant, showing that the elements of fraud are met (misrepresentation, knowledge of falsity, intent to defraud, justifiable reliance by the plaintiffs and resulting damages)" as stated with regard to the cause of action for fraudulent inducement of breach of contract.

In the SAC, the second cause of action for fraud and conspiracy to commit fraud alleges that "[d]efendants impliedly covenanted to deal with [p]laintiff [sic] in good faith and fairly;" that plaintiffs "detrimentally relied on "[d]efendant's mortgage loan broker's professional opinion that home prices would continue to rise and the equity value would not drop below the loan value;" and that "[t]his same position was taken by the lender, owner, and underwriter's analysis, all of whom gave approval for disbursement of the loan funds into the real property investment, " all of which constituted a breach of the implied covenant of good faith and fair dealing. SAC ¶¶ 38-42.

This cause of action also references - without any supporting facts - violations of California Civil Code § 1572 (definition of actual fraud), § 1709 (fraudulent deceit), § 1710 (deceit); violations of 15 U.S.C. § 78ff (penalties for violations of federal Securities Exchange Act of 1934); violations of 15 U.S.C. § 1692e (Fair Debt Collection Practices Act ("FDCPA")); violations of 18 U.S.C. § 1001 (federal criminal code provision relating to criminal liability for making false statements with respect to matters within jurisdiction of executive, legislative, or judicial branch of United States Government). SAC ¶¶ 43-50. Finally, this cause of action also alleges that the assignment of the deed of trust was "invalid" because MERS and JPMorgan Chase Bank lacked the authority to assign the deed of trust. SAC ¶¶ 51-66.

On August 13, 2014, the court dismissed defendant Bryco Funding, Inc. pursuant to Federal Rule of Civil Procedure 4(m). JPMorgan/MERS and Deutsche Bank now move for an order dismissing the SAC pursuant to Federal Rule ...


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