Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.

Contreras v. JPMorgan Chase

United States District Court, Central District of California

November 6, 2014

Ramiro Contreras
JPMorgan Chase, et al



Proceedings: Order (1) GRANTING Defendants' Motion to Dismiss IN PART and DENYING in PART (Doc. No. 23); (2) VACATING the November 10, 2014 hearing (IN CHAMBERS)

Before the Court is a Motion to Dismiss filed by Defendants Federal National Mortgage Association (" Fannie Mae") and JPMorgan Chase, N.A. (" JPMorgan"). (Doc. No. 23.) After considering the papers timely filed in support of and in opposition to the Motion, the Court GRANTS IN PART and DENIES IN PART the Motion.


A. Procedural History

Ramiro Contreras (" Plaintiff") filed the initial Complaint in this action in the Superior Court of California, County of Riverside, on March 5, 2014, alleging, inter alia, that JPMorgan, Fannie Mae, and co-defendant NDEX West LLC (" NDEX"), wrongfully foreclosed on his property because they were " third-party strangers to his mortgage loan." (Not. of Removal, Doc. No. 1, Exh. A.) An amended complaint was filed on May 7, 2014. (" FAC, " Not. of Removal, Exh. B.)

On June 6, 2014, JPMorgan and Fannie Mae removed the action to this Court on the basis of diversity. (Not. of Removal.) On June 13, 2014, JPMorgan and Fannie Mae filed a motion to dismiss. (Doc. No. 9.) On June 17, 2014, Plaintiff filed a motion to remand. (Doc. No. 12.) The Court granted in part the motion to dismiss and denied the motion to remand. (" FAC Dismissal, " Doc. No. 20.)

On September 17, 2014, Plaintiff filed a Second Amended Complaint alleging claims for: (1) breach of security instrument, (2) wrongful foreclosure, and (3) violation of California Business and Professions Code § 17200. (" SAC, " Doc. No. 21.) On October 6, 2014, JPMorgan and Fannie Mae filed a Motion to Dismiss the SAC.[1] (" Motion, " Doc. No. 23.) Plaintiff opposed on October 10, 2014. (" Opp'n, " Doc. No. 25.) JPMorgan and Fannie Mae replied on October 27, 2014. (" Reply, " Doc. No. 27.)

B. Requests for Judicial Notice

Along with the Motion, JPMorgan and Fannie Mae filed Requests for Judicial Notice (" RJN, " Doc. No. 23-2). In the RJN JPMorgan and Fannie Mae request the Court take judicial notice of:

(1) the Deed of Trust encumbering Contreras's property, recorded on April 24, 2007; (2) a Corporate Assignment of Deed of Trust, in which Mortgage Electronic Registration Systems, Inc. (" MERS"), acting as nominee for former defendant Land Home Financial, transferred its interest in the property to Chase, dated October 20, 2011; (3) a Notice of Default and Election to Sell Under Deed of Trust, recorded by NDEX, as an agent for Chase, on January 20, 2012; (4) a Substitution of Trustee, naming NDEX as trustee, recorded on June 1, 2012; (5) a Notice of Trustee's Sale recorded on June 19, 2012; (6) a Notice of Trustee's Sale, recorded on March 6, 2013; (7) a Notice of Trustee's Sale, recorded on May 17, 2013; (8) a Notice of Trustee's Sale, recorded on August 17, 2013; (9) a Trustee's Deed Upon Sale, indicating that the property was conveyed by NDEX as trustee to Defendant Fannie Mae on September 19, 2013, recorded on October 29, 2013; and (10) an Assignment of Deed of Trust, also recorded on October 29, 2013, in which JPMorgan assigned its interest in the property to Fannie Mae.

A court may take judicial notice of court filings and other matters of public record. See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (citing Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998)). Accordingly, the Court grants the RJN and takes judicial notice of these documents.[2]

C. Allegations in the FAC

On April 24, 2007, Plaintiff obtained a loan for $215, 500.00 from Land Home Financial. (SAC ¶ 20; RJN Exh. 1.) The loan note was secured by a Deed of Trust on the property in favor of Land Home Financial. (Id. ¶ 21) MERS was named as nominal beneficiary and assigned its interest to JPMorgan in 2011. (Id. ¶ ¶ 21-22; RJN Exh. 2.) Plaintiff alleges this assignment was void and improper because MERS had no right or interest to assign. (Id. ¶ 21.)

On January 20, 2012, NDEX recorded a Notice of Default (" NOD") with the Recorder's Office for Riverside County. (SAC ¶ 24; RJN Exh. 3.) The NOD stated Plaintiff was $69, 575.77 in arrears. (RJN Exh. 3.) NDEX attached to the NOD a declaration of compliance, dated May 5, 2011. (Id.) The declaration states the mortgagee, beneficiary, or authorized agent contacted the borrower to explore foreclosure prevention options and thus complied with California Civil Code § 2923.5. (Id.) Plaintiff alleges that no one contacted him and the declaration is therefore false. (SAC ¶ 25-26.) Plaintiff also alleges JPMorgan breached Section 22 of the Deed of Trust. (SAC 27-28.) Section 22 requires the lender give notice to Plaintiff before accelarating repayment of the loan. (RJN Exh. 1.)

NDEX recorded a Notice of Trustee's Sale (" NOTS") on June 19, 2012. (SAC ¶ 30.) The NOTS asserts Plaintiff's unpaid balance to be $280, 632.41. (RJN Exh. 5.) NDEX recorded three more NOTS between March and August 2013. (SAC ¶ ¶ 32-34.) Plaintiff alleges he submitted a full loan modification application on August 1, 2013. (SAC ¶ 41.) This application was denied on September 23, 2013. (Id.; Exh. N, Doc. No. 21-14.) On September 19, 2013, the trustee's sale of the subject property took place. (RJN Exh. 9.) On October 29, 2013, NDEX recorded a Trustee's Deed Upon Sale (" TDUS") conveying the subject property to Fannie Mae. (SAC ¶ 36; RJN Exh. 9.)

Plaintiff further alleges various defects in the chain of title. As an example, Plaintiff claims that a Corporate Assignment of Deed of Trust purporting to pass title from MERS to JPMorgan was improper because MERS had previously assigned that interest to JPMorgan. (SAC ¶ 31.) Moreover, Plaintiff asserts that at the time the Trustee's Sale was completed, Fannie Mae was listed as the beneficiary under the Deed of Trust, but Fannie Mae only entered the chain of title after the sale was complete. (See id. ¶ ¶ 47-48.)


Federal Rule of Civil Procedure 12(b)(6) allows a party to bring a motion to dismiss for failure to state a claim upon which relief can be granted. Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2); Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (holding that the Federal Rules require that a plaintiff provide " 'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." (quoting Fed.R.Civ.P. 8(a)(2))); Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). When evaluating a Rule 12(b)(6) motion, a court must accept all material allegations in the complaint -- as well as any reasonable inferences to be drawn from them -- as true and construe them in the light most favorable to the non-moving party. See Doe v. United States, 419 F.3d 1058, 1062 (9th Cir. 2005); ARC Ecology v. U.S. Dep't of Air Force, 411 F.3d 1092, 1096 (9th Cir. 2005); Moyo v. Gomez, 32 F.3d 1382, 1384 (9th Cir. 1994).

" While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citations omitted). Rather, the allegations in the complaint " must be enough to raise a right to relief above the speculative level." Id.

To survive a motion to dismiss, a plaintiff must allege " enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570; Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). " The plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.'" Iqbal, 129 S.Ct. at 1949 ( quoting Twombly, 550 U.S. at 556). The Ninth Circuit has clarified that (1) a complaint must " contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively, " and (2) " the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

Although the scope of review is limited to the contents of the complaint, the Court may also consider exhibits submitted with the complaint, Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990), and " take judicial notice of matters of public record outside the pleadings, " Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988).


In the Motion, Defendants[4] contend that all the claims contained in the SAC should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.[5]

A. Breach of Security Instrument

Plaintiff's breach of contract claim rests on Defendants' failure to give Plaintiff notice related to his default as required by Section 22 of the Deed of Trust. (SAC ¶ ¶ 45-52.) Section 22 provides:

Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property.

(RJN, Exh. 1 at 11-12 (" Section 22").)

The Court previously denied Defendants' motion to dismiss this claim, but Defendants now present a new ground for dismissal. While the Court could deny this portion of Defendants' Motion under Rule 12(g)(2), the Court chooses to consider it on the merits for the sake of judicial economy. See Kilopass Tech. Inc. v. Sidense Corp., 2010 WL 5141843, at *3 (N.D. Cal. Dec. 13, 2010); Nat. City Bank, N.A. v. Prime Lending, Inc., 2010 WL 2854247, at *2 (E.D. Wash. July 19, 2010) (finding that judicial economy favored ignoring 12(g) deficiencies because defendants would simply be able to renew their motion as a 12(c) motion for judgment on the pleadings after filing an answer)

Defendants argue Plaintiff cannot allege that Defendants' breach of Section 22 was a " substantial factor" in causing Plaintiff's injury, and therefore Plaintiff cannot establish liability for a breach of contract. (Motion at 4.) Defendants argue Plaintiff was aware of the foreclosure proceedings before the trustee sale occurred, and that the cause of the foreclosure was Plaintiff's default, rather than Defendants' conduct. (Motion at 5.) Defendants do not contest that they failed to send the required notice.

In California, " [c]ausation of damages in contract cases, as in tort cases, requires that the damages be proximately caused by the defendant's breach, and that their causal occurrence be at least reasonably certain." Vu v. California Commerce Club, Inc., 58 Cal.App.4th 229, 233, 68 Cal.Rptr.2d 31 (1997). " The test for causation in a breach of contract ... action is whether the breach was a substantial factor in causing the damages." U.S. Ecology, Inc. v. State, 129 Cal.App.4th 887, 909, 28 Cal.Rptr.3d 894 (2005). " The term 'substantial factor' has no precise definition, but 'it seems to be something which is more than a slight, trivial, negligible, or theoretical factor in producing a particular result." Id. (quoting Espinosa v. Little Co. of Mary Hospital, 31 Cal.App.4th 1304, 1314, 37 Cal.Rptr.2d 541 (1995)). Failure to give contractually required notice before beginning foreclosure proceedings has been found to be a " substantial factor" in causing damages. Siqueiros v. Federal Nat. Mortg. Ass'n, 2014 WL 3015734, at *4 (C.D. Cal. June 27, 2014).

In Siqueiros, the plaintiff's deed of trust also contained a notice requirement clause. Id. The defendants foreclosed on plantiff's property without giving plaintiff notice. Id. at *1 Defendants argue that Siqueiros is distinguishable because the plaintiff was notified her property was in foreclosure after the foreclosure sale was completed, while in this case Plaintiff was aware before. (Motion at 5.) However, while the foreclosure sale had not occurred in this case, Defendants -- like the defendants in Siqueiros -- took an action harmful to Plaintiff's interest without notice to him; here, Defendants accelerated the repayment of the loan. If Defendants had complied with Section 22, Plaintiff would have had the opportunity to cure his initial default before acceleration suddenly made the entire amount of the loan due. Furthermore, if Plaintiff had been notified as required under the contract, he may have been able to mitigate his damages, even if he was not able to forestall foreclosure completely. Thus, the Court finds Plaintiff has sufficiently alleged facts to allow the Court to infer Defendants' failure to send the required notice was more than a slight or trivial factor in producing Plaintiff's damages.

Accordingly, Defendants' Motion to Dismiss the breach of security instrument cause of action is DENIED.

B. Wrongful Foreclosure

Plaintiff's second cause of action alleges Defendants failed to comply with a series of California Civil Code sections relating to the nonjudicial foreclosure process. (SAC ¶ ¶ 53-78.) Defendants contend that Plaintiff's claim should be dismissed because (1) it is predicated in part on claims that have been dismissed with prejudice, (2) Plaintiff has failed to alleged tender, (3) Plaintiff has failed to allege the requisite elements of California Civil Code Section 2923.6, and (4) Plaintiff has failed to adequately allege damages relating to his Section 2923.7 claim.

1. Previously Dismissed Claim

Defendants correctly argue that the Court previously dismissed Plaintiff's claim based on California Civil Code § 2923.5 without leave to amend. (Motion at 5-6.) The Court found Plaintiff's claim failed since Plaintiff's property was sold before the lawsuit and the private right of action that § 2923.5 confers " is limited to obtaining a postponement of an impending foreclosure to permit the lender to comply with section 2923.5." Mabry v. Superior Court, 185 Cal.App.4th 208, 214, 110 Cal.Rptr.3d 201 (2010). Notwithstanding the dismissal, the SAC again contains allegations based on breaches of Section 2923.5. (See SAC ¶ ¶ 55, 57, 58). These claims have already been dismissed, and Plaintiff is instructed not to allege them again.

2. Failure to Allege Tender

The Court previously dismissed with leave to amend Plaintiff's wrongful foreclosure claim due to Plaintiff's failure to allege tender. (FAC Dismissal at 9.) The SAC again fails to allege tender. Plaintiff instead argues the tender rule does not apply because the foreclosure sale was void, not voidable. Plaintiff also argues applying the tender rule would be inequitable. (Opp'n at 5-6.) Each argument will be addressed in turn.

" An allegation of tender of the indebtedness is necessary when the person seeking to set aside the foreclosure sale asserts the sale is voidable due to irregularities in the sale notice or procedure." West v. JPMorgan Chase Bank, N.A., 214 Cal.App.4th 780, 801, 154 Cal.Rptr.3d 285 (2013). Plaintiff tries to skirt West's holding by arguing the foreclosure sale of his property was void, not voidable.

Plaintiff relies on Dimock v. Emerald Properties LLC, 81 Cal.App.4th 868, 97 Cal.Rptr.2d 255 (2000), which found a foreclosure sale void where the beneficiary of a deed substituted a new trustee but the old trustee conducted the trustee's sale. 81 Cal.App.4th at 878. The court found, therefore, that the plaintiff was not required to allege tender. Id. Plaintiff argues that Dimock should control because " Plaintiff alleges that the Assignment of DOT to Fannie Mae was void." (Opp'n at 5.) However, Plaintiff provides no support or further explanation for this nebulous and conclusory argument. Furthermore, NDEX, not Fannie Mae, served as the trustee. (SAC ¶ 36.) Plaintiff fails to persuade the Court that Dimock is apposite.

Plaintiff next argues that requiring tender would be inequitable. (Opp'n at 6-7.) Plaintiff appears to contest the amount of tender required. (Id.) However, Plaintiff has failed to allege any tender whatsoever. (See generally SAC.)

Accordingly, Plaintiff's wrongful foreclosure claim, insofar as it includes violations not discussed below, is DISMISSED WITH LEAVE TO AMEND.

3. Plaintiff's Section 2923.6 claim

Plaintiff also alleges JPMorgan violated California Civil Code § 2923.6, a provision added by the California legislature as part of the California Homeowner's Bill of Rights (" HBOR"). The Court previously found this claim did not require Plaintiff to allege tender. (FAC Dismissal at 9.)

HBOR, which took effect January 1, 2013, reformed aspects of the state's nonjudicial foreclosure process by amending the California Civil Code to prohibit deceptive and abusive home foreclosure practices. See Flores v. Nationstar Mortgage LLC, 2014 WL 304766, at *3 (C.D. Cal. Jan. 6, 2014). Before these amendments, California Civil Code Section 2923.6 " merely express[ed] the hope that lenders will offer loan modifications on certain terms." Mabry v. Superior Court, 185 Cal.App.4th 208, 222, 110 Cal.Rptr.3d 201 (2010). HBOR added, among others, the following provision:

If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale, or conduct a trustee's sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee's sale until any of the following occurs:
(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired.
(2) The borrower does not accept an offered first lien loan modification within 14 days of the offer.
(3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower's obligations under, the first lien loan modification.

Plaintiff alleges he submitted a full loan modification application on August 1, 2013. (SAC ¶ 41.) The trustee's sale occurred on September 19, 2013. (SAC ¶ 36; RJN Exh. 9 at 2.) Plaintiff then received a letter from JPMorgan, dated September 22, 2013. (SAC ¶ 40, Exh. M, (" Response Letter, " Doc. No. 21-13.) The letter stated JPMorgan was " investigating the correspondence" it had received from Plaintiff, and that it would provide a timely response. (Id.) Plaintiff received another letter -- dated September 23, 2013 -- denying his loan modification application because JPMorgan received Plaintiff's " initial application too close to the date of the scheduled foreclosure." (SAC ¶ 41, Exh. N, (" Denial Letter") Doc. No. 21-14.)

Defendants argue Plaintiff has not sufficiently alleged he submitted a " complete" loan modification application. (Motion at 7.) As seen in the statutory excerpt above, to trigger the protections afforded under Section 2923.6 a plaintiff must have submitted a " complete" application. An application is " complete" only once an applicant has submitted " all documents required by the mortgage servicer." Cal. Civ. Code § 2923.6(h).

Nevertheless, Section 2923.6 must be read in conjunction with Section 2924.10, another HBOR statutory provision which Plaintiff alleges JPMorgan violated. (SAC ¶ ¶ 61-62.) Section 2924.10 requires a mortgage servicer to take certain steps upon receiving a loan modification application -- or any part of a loan modification application -- from a borrower. Cal. Civ. Code § 2924.10(a)(1)-(4). The servicer must respond to the borrower within five business days, and the response must inform the borrower of any deficiency in the borrower's application and provide a deadline to submit missing documentation. Cal. Civ. Code § § 2924.10(a), (a)(2), (a)(4). Thus, to comply with HBOR, the servicer must tell the borrower how to complete a deficient application.

Here, Plaintiff alleges he submitted a complete loan application on August 1, 2013. (SAC ¶ 41.) Section 2924.10 required JPMorgan to respond to Plaintiff's application, complete or not. Cal. Civ. Code § 2924.10(a). This response should have informed Plaintiff of any deficiency in his application. See Cal. Civ. Code § 2924.10(a)(4). JPMorgan's September 22 response was over a month late. (Response Letter.) The response did not identify any missing documents Plaintiff needed to supply. (Id.) Moreover, JPMorgan's Denial Letter to Plaintiff also failed to mention any missing documents. Thus, it may be inferred that Plaintiff submitted a complete loan modification application on August 1, 2013.

Defendants also argue that Plaintiff's Section 2923.6 claim should be dismissed because Plaintiff has not alleged that he had not previously been evaluated for a loan modification. (Motion at 8.) Defendants present no argument to the contrary, however, nor do Defendants cite any authority demonstrating that a plaintiff bringing a Section 2923.6 claim must specifically state the application at issue was the first application filed. The Court finds Defendants' argument for dismissal to be without merit. See Stokes v. CitiMortgage, Inc., 2014 WL 4359193, at *7 (C.D. Cal. Sept. 3, 2014) (finding similar argument meritless).

Accordingly, Defendant's Motion to Dismiss Plaintiff's 2923.6 cause of action is DENIED.

4. Damages related to Plaintiff's 2923.7 claim

Defendants next argue Plaintiff has failed to allege damages specifically flowing from his Section 2923.7 claim.

Section 2923.7 requires mortgage servicers to provide a single point of contact (" SPOC") to borrowers who request loan modifications. Cal. Civ. Code § 2923.7(a). The SPOC's responsibilities include: telling the borrower about the loan modification process, coordinating receipt of the borrower's application, notifying the borrower of any missing documents necessary to complete the application, and ensuring the borrower is considered for all foreclosure prevention alternatives offered by the servicer. Cal. Civ. Code § 2923.7(b)(1)-(2), (4).

Plaintiff alleges he was not provided with a SPOC. (SAC ¶ 68.) Plaintiff also alleges he never received written acknowledgment of the receipt of his loan modification application and that the foreclosure sale occurred while his loan modification application was pending. (Id. ¶ 62, 64.) These two allegations concern violations closely tied to the SPOC's statutory responsibilities. Plaintiff also alleges, albeit in a different section and incorporated by reference, that he suffered damages including losing his right to the subject property, having to retain an attorney to defend against foreclosure, and emotional distress. (SAC ¶ 52.) Taken together, these allegations are sufficient to overcome Defendants' argument.

Accordingly, Defendants' Motion to Dismiss Plaintiff's Section 2923.7 claim is DENIED.


For the forgoing reasons, the Court GRANTS IN PART and DENIES IN PART Defendants' Motion to Dismiss. Plaintiff may file a Third Amended Complaint that attempts to correct the deficiencies identified in this Order. The Third Amended Complaint must be filed on or before November 24, 2014. If Plaintiff chooses to file a Third Amended Complaint, he is instructed to clearly delineate his claims and which specific damages he seeks as a result of each claim.

If Plaintiff chooses instead to proceed on the valid portions of the Complaint, he should so notify the Court.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.