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Smith v. JPMorgan Chase Bank, N.A.

United States District Court, C.D. California

November 26, 2014


Attorneys for Plaintiffs: Not Present.

Attorneys for Defendants: Not Present.



Proceedings: (IN CHAMBERS) Order re: Defendant's Motion to Dismiss (DE 19)


On January 17, 2014, Kelly A. Smith (" Kelly A.") and Kelly C. Smith (" Kelly C.") (collectively, " Plaintiffs") filed a Complaint against JPMorgan Chase Bank, N.A. (" Defendant") in San Bernardino Superior Court. On August 11, 2014, Defendant removed the action to this Court on the basis of diversity jurisdiction pursuant to 28 U.S.C. § 1332. Plaintiffs allege the following claims: (1) intentional infliction of emotional distress; (2) fraud; (3) breach of contract; and (4) negligence.

Presently before the Court is Defendant's Motion to Dismiss pursuant to Federal Rule of Civil Procedure (" Rule") 12(b)(6). For the following reasons, the Court GRANTS in part Defendant's Motion.


Plaintiffs allege as follows:

On April 20, 2000, Plaintiff Kelly C. purchased a parcel of real property located at 227 Plaza Serena, Ontario, California 91764 (" Subject Property"). In connection with this purchase, Kelly C. obtained a mortgage loan from Chase Manhattan Mortgage Corporation (" Chase Manhattan") in the principal sum of $105, 978.00. On July 29, 2008, Kelly C. refinanced the subject property through Quicken Loans, Inc. (" Quicken Loans"), and in doing so the Chase Manhattan loan was paid in full and the Deed of Trust was reconveyed to Quicken Loans. On May 9, 2009, Kelly C. married Kelly A.

On July 20, 2012, Defendant purchased the Subject Property mortgage (the " Mortgage") from Quicken Loans and the Deed of Trust securing the Mortgage was assigned to Defendant. Subsequently, on January 17, 2013, Plaintiffs received a telephone call from Jennifer Wilson, an agent acting on behalf of Defendant. Ms. Wilson informed Plaintiffs that their Mortgage was sixty days delinquent and in default. This was quite alarming to Plaintiffs, as they had been making timely payments on their Mortgage and had not previously been made aware of any late or missed payments. Plaintiffs explained this to Ms. Wilson, who confirmed that there had been a mistake.

Following and in response to Plaintiffs' conversation with Ms. Wilson, Plaintiffs received a letter from Ms. Wilson confirming that the Mortgage was erroneously placed in default, all payments were received on time and in full, and the reason Plaintiffs had not been contacted earlier was due to a system error.[1] In the letter, Ms. Wilson explained that due to an error,

[o]ur system recognized two different mortgage accounts under your name for the same property. Unfortunately, when you refinanced your mortgage with Quicken Loans your old mortgage account . . . was not closed but issued as a second mortgage. As a second mortgage, a payment schedule was issued and since we were not receiving payments it was sent into default.

(Compl. ¶ 12.) The letter also assured Plaintiffs that this matter would be resolved. However, unbeknownst to Plaintiffs and contrary to Ms. Wilson's letter, this matter was not being resolved. On January 18, 2013, Defendant executed a Declaration of Compliance with the State of California, certifying that in an effort to assist Plaintiffs in avoiding foreclosure, Defendant had diligently attempted, but failed, to contact Plaintiffs and that more than 30 days had elapsed since this effort was made. Then, several days later, Defendant initiated nonjudicial foreclosure proceedings and filed a Notice of Default with the County Recorder's Office. The Notice of Default falsely stated that Plaintiffs' Mortgage was in default and past due in the sum of $10, 900.96. Plaintiffs were not made aware of the Notice of Default.

On March 4, 2013, Plaintiffs received a letter from Defendant stating that Plaintiffs' property had erroneously been placed in default and that foreclosure proceedings had been terminated. However, despite Defendant's claim that foreclosure proceedings had been terminated, on April 24, 2013, Plaintiffs came home to find a Notice of Trustee's Sale, with a sale date of May 14, 2013, taped to their door. This Notice of Trustee's sale was subsequently published in a local newspaper on May 1, 2013. The Trustee sale was postponed several times and ultimately set for July 15, 2013. Because the second mortgage continued to incur tax and account charges during this time, Plaintiffs were forced to obtain a $19, 697.74 loan from a family member in order to reinstate their mortgage and stop the foreclosure. After paying Defendant the $19, 697.74, which Plaintiffs did not owe in the first place, foreclosure proceedings were finally terminated.


The federal pleading standard states in relevant part that " a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Under Rule 12(b)(6), a party may move to dismiss for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In deciding a Rule 12(b)(6) motion, the court must assume allegations in the challenged complaint are true, and construe the complaint in the light most favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, a court need not accept as true unreasonable inferences, unwarranted deductions of fact, or conclusory legal allegations cast in the form of factual allegations. See W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Furthermore, a pleading must contain sufficient factual matter that, if accepted as true, states a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim is facially plausible when there are sufficient factual allegations to draw a reasonable inference that the defendant is liable for the misconduct alleged. Id.


Defendant moves to dismiss Plaintiffs' Complaint in its entirety on the ground that it fails to state a claim for which relief can be granted. The Court addresses each claim in turn.

A. Intentional Infliction of Emotional Distress

Defendant argues that the Complaint does not allege facts sufficient to maintain a cause of action for intentional infliction of emotional distress (" IIED"). The Court disagrees.

To adequately state a claim for IIED, a plaintiff must plead the following elements: " (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff's suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct." Wilson v. Hynek, 207 Cal.App.4th 999, 1009, 144 Cal.Rptr.3d 4 (2012). For conduct to meet the level of extreme and outrageous, it " must be so extreme as to exceed all bounds of that usually tolerated in a civilized community." Id. " Whether conduct is outrageous is usually a question of fact." Ragland v. U.S. Bank Nat'l Ass'n, 209 Cal.App.4th 182, 204, 147 Cal.Rptr.3d 41 (2012).

Deeming the allegations in the Complaint as true and drawing all reasonable inferences in Plaintiffs' favor, the Court finds that Plaintiffs have alleged sufficient facts to sustain a cause of action for IIED. Plaintiffs allege Defendant initiated foreclosure proceedings upon Plaintiffs' home even though Plaintiffs had made timely payments on their mortgage. (Compl. ¶ 19.) Plaintiffs also allege that Defendant was aware of, and even admitted that, Plaintiffs' payments on their mortgage were up-to-date and, therefore, the foreclosure proceedings should be terminated. (Compl. ¶ ¶ 12, 17.) Further, Plaintiffs allege that Defendant continued to foreclose upon their home, despite the fact that Defendant was aware that the foreclosure proceedings were improper and should have been terminated. ( See Compl. ¶ ¶ 18-22.) In order to prevent foreclosure, Plaintiffs allege that they were left with no other choice but to borrow nearly $20, 000 from a family member and pay this un-owed sum to Defendant. (Compl. ¶ 25.) As a result of the foreclosure on their home, Plaintiff Kelly C. was so stressed and concerned that he required a prescription for anti-anxiety and sleeping pills. (Compl. ¶ 23.)

Defendant argues that, as a matter of law, " merely attempting to collect a debt" does not rise to the level of extreme and outrageous conduct. (Def.'s Mot. 4:22-24.) However, to support this argument, Defendant relies on cases involving the collection of a debt that was actually owed or believed to be owed. See Wilson, 207 Cal.App.4th at 1009; Davenport v. Litton Loan Servicing, LP, 725 F.Supp.2d 862, 884 (N.D. Cal. 2010); Javaheri v. JPMorgan Chase Bank, N.A., No. CV10-08185 ODW (FFMx), 2011 WL 2173786, at *7 (C.D. Cal. June 2, 2011). The present case is distinguishable. Here, not only was Defendant attempting to collecting a debt that was not actually owed, but, after realizing that Plaintiffs had not missed any payments on their mortgage, Defendant still continued to foreclose on their home.

Contrary to Defendant's contentions, the Court finds that under certain circumstances, such as those alleged, the improper foreclosure of a home can rise to the level of extreme and outrageous conduct. In Ragland v. U.S. Bank National Association, the California Court of Appeals reversed the trial court's grant of summary judgement and held that the defendant's conduct in foreclosing on the plaintiff's home, if proved to be true, " was so extreme as to exceed all bounds of decency in our society." 209 Cal.App.4th at 205. There, the plaintiff contacted her bank regarding an issue with her mortgage. Id. at 188. The bank informed her that it would investigate the issue and that she was not required to make payments on her mortgage during the pendency of the investigation. Id. at 188-89. Despite this, the bank continued to foreclose on plaintiff's home when she did not make her monthly payments. Id. at 189. The court found that the bank's conduct qualified as extreme and outrageous. Id. at 205.

Here, Defendant's actions, if proven, were at least as " extreme and outrageous" as the actions of the bank in Ragland . Defendant admitted that Plaintiffs were not in default on their mortgage and told Plaintiffs that the foreclosure proceedings had been terminated. Unbeknownst to Plaintiffs, Defendant continued to foreclose on Plaintiffs' home. Defendant's act of continuing to foreclose on Plaintiffs' home despite its alleged knowledge that such foreclosure was improper is extreme and outrageous conduct. As a result of Defendant's misrepresentation, by the time Plaintiffs became aware that Defendant had not terminated the foreclosure proceedings, Plaintiffs' only choices were to pay Defendant $20, 000 which they did not owe or to lose their home. The Court finds Defendant's alleged conduct to be comparable to that of the bank's conduct in Ragland .

Defendant argues that Ragland is inapplicable to the present case because here, unlike in Ragland, no foreclosure took place. In support of this argument, Defendant relies upon a single, unpublished district court case in which the court dismissed a wrongful foreclosure claim on the basis that the " plaintiff cited to no decision authorizing emotional distress damages for wrongful foreclosures claims, 'much less one in which the foreclosure sale was never consummated.'" (Def.'s Reply at 3:1-8 (citing Tamburri v. Suntrust Mort., Inc., No. 11-CV-02899-JST, 2013 WL 4528447, at *6 (N.D. Cal. Aug. 26, 2013)).) The Court finds this argument unpersuasive. In Taburri, the fact that no foreclosure took place was relevant only because the claim at issue was a cause of action for wrongful foreclosure. It is clear that a cause of action for wrongful disclosure cannot be maintained when no foreclosure actually took place. Here, unlike in Tamburri, the fact that no foreclosure was consummated is not dispositive of Plaintiffs' claim for IIED.

Defendant also argues that Plaintiffs fail to allege facts sufficient to establish that Defendant acted with the intent to cause mental distress, or with reckless disregard of that probability. The Court disagrees. As California courts have noted, " [c]ommon sense dictates that home foreclosure is a terrible event and likely to be fraught with unique emotions and angst." See Davenport, 725 F.Supp.2d at 884. By alleging that Defendant continued to foreclose on Plaintiffs' home despite Defendant's knowledge that foreclosure was improper, Plaintiff has sufficiently pled that Defendant acted with reckless disregard of the probability of causing emotional distress. See KOVR-TV, Inc. v. Superior Court, 31 Cal.App.4th 1023, 1031, 37 Cal.Rptr.2d 431 (1995) (" [I]t is not essential to liability that a trier of fact find a malicious or evil purpose. It is enough that defendant devoted little or no thought to the probable consequences of his conduct.").

B. Fraud

Defendant argues that Plaintiffs' Complaint fails to adequately state a claim for fraud. The Court agrees.

To adequately state a claim for fraud a plaintiff must plead: " (1) misrepresentation (false representation, concealment, or nondisclosure), (2) knowledge of falsity or scienter, (3) intent to defraud or to induce reliance, (4) justifiable reliance, and (5) resulting damage." McClain v. Octagon Plaza, LLC, 159 Cal.App.4th 784, 71 Cal.Rptr.3d 885 (2008). Additionally, " [i]n alleging fraud . . . a party must state with particularity the circumstances constituting fraud[.]" Fed.R.Civ.P. 9(b). To survive a motion to dismiss, " the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered." Stansfield v. Starkey, 220 Cal.App.3d 59, 73, 269 Cal.Rptr. 337 (1990).

Plaintiffs base their claim for fraud on two alleged false statements. The first is the Declaration of Compliance issued by Defendant on January 18, 2013. (Compl. ¶ 13.) Regardless of whether this statement was false, Plaintiffs fail to establish that Defendant made the statement with the intent to deceive Plaintiffs. The Declaration of Compliance was not a statement directed, nor made available, to Plaintiffs; it was recorded with the State of California. ( See Compl. ¶ 13.) Moreover, Plaintiffs fail to explain how they relied upon the Declaration of Compliance. In their Opposition, Plaintiffs argue that Defendant " executed the false Declaration with the intent for others to justifiably rely on same in furtherance of the wrongful foreclosure by Defendant of Plaintiffs' home." (Pls.' Opp'n 16:8-11.) Plaintiffs provide no additional explanation as to how they or " others" relied upon the Declaration of Compliance. In fact, Plaintiffs allege that they were unaware that the Declaration of Compliance had even been issued. ( See Compl. ¶ 13.) As such, the Court finds that Plaintiffs could not have relied upon this statement, and therefore cannot base their claim for fraud on this alleged misrepresentation.

The second statement upon which Plaintiffs base their fraud claim is the letter sent by Defendant to Plaintiffs on March 4, 2013. In this letter, Defendant falsely informed Plaintiffs that their house was no longer being foreclosed on. (Compl. ΒΆ 17.) Unlike the previous statement, this was directed at ...

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