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Ritter v. JPMorgan Chase Bank, N.A.

United States District Court, N.D. California

November 21, 2017




         Now before the Court is the motion filed by Defendant JPMorgan Chase Bank, N.A. (“Chase”) to dismiss. Having carefully reviewed the parties' papers, considered their arguments and the relevant legal authority, the Court hereby GRANTS Chase's motion to dismiss with leave to amend.


         Plaintiffs Terry and Shamim Ritter (“Plaintiffs”), owners of the real property located at 2652 Sabercat Court in Fremont, California, bring this action for reformation of contract based on unilateral and mutual mistake. On July 30, 2002, Plaintiffs executed a Deed of Trust in favor of Washington Mutual Bank secured by the real property in the amount of $2, 300, 000. Thereafter, in September 2008, Chase entered into a Purchase and Assumption Agreement with Washington Mutual Bank wherein Chase acquire Plaintiffs' loan. (First Amended Complaint (“FAC”) ¶ 7.) Since the date of purchase, Plaintiffs have occupied the property as their principal residence.

         From 2008 to 2009, Plaintiffs experienced some financial hardships that made it difficult for them to keep up with payments on their loan. As a result, they sought to modify the loan and received a trial modification from Chase with the understanding that, after Plaintiffs complied with the temporary modification terms, a permanent modification would follow. However, after completing the trial plan, they were not offered the permanent modification. Plaintiffs then filed suit against Chase in July 2010. (Id. ¶ 8.)

         On August 22, 2013, Plaintiffs and Chase executed a Settlement Agreement and agreed that any unpaid interest and unpaid escrow items would be added to the unpaid principal balance of the loan. This agreement was reduced to a writing which provided that Plaintiffs' new unpaid principal would be $2, 450, 385.95 beginning in November 2013. “The new unpaid principal balance was purported to be based on the original unpaid principal balance of $1, 833, 925.29, ‘$450, 840.24 for accrued interest; and $163, 548.93 for escrow advances.'” (Id. ¶ 9, citing Ex. A, November 2013 Settlement Agreement.)

         Shortly after executing the Settlement Agreement, however, Plaintiffs allege that they discovered that the amount Chase had purported to be owed for unpaid interest and escrow advances were inaccurate. Plaintiffs requests an accounting and breakdown of the numbers and Chase sent Plaintiffs a statement dated December 4, 2013, in which Chase indicated repeated charges to Plaintiffs' account for county taxes from 2002 to 2007 and further purported to advance $163, 548.93 to cover these costs in November 2007, despite Plaintiffs not having an impound account and having themselves paid all the taxes and fees on their residence for that period. (Id. ¶ 10.)

         After realizing that the escrow advances which had been added to the Plaintiffs' unpaid principal balance were in error, Plaintiffs sought to determine if the unpaid interest amount that had been added to their loan was also incorrect. Plaintiffs allege that they discovered that, based on the terms of their original loan, the interest rate they should have been charged was approximately 3-4% from 2008 to 2013. Instead, they discovered that Chase had calculated Plaintiffs' interest rate at approximately 7%, resulting in an alleged error in the principal balance amount as well. (Id. ¶ 11.)

         After discovering these alleged errors, Plaintiffs repeatedly contacted Chase to address the discrepancies without response or explanation. Plaintiffs stopped making payments on the modified loan as they believed the amounts were significantly overcharged. Chase then recorded a Notice of Default on the property on April 10, 2015. In November 2016, Chase caused a Notice of Trustee's Sale to be recorded against Plaintiffs' property. The Notice of Trustee's Sale indicates the principal balance is now $2, 786, 482.38, approximately $350, 000 more than Plaintiffs' principal loan balance was in November 2013 and approximately $1, 000, 000 more than Plaintiffs' principal loan balance was prior to the November 2013 modification. (Id. ¶¶ 11-15.) This lawsuit follows. The Court shall address additional relevant facts in the remainder of its order.


         A. Legal Standard for Motion to Dismiss.

         A motion to dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. The Court's “inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff.” Lazy Y Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), “a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).

         Pursuant to Twombly, a plaintiff must not merely allege conduct that is conceivable but must instead allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. __, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556). If the allegations are insufficient to state a claim, a court should grant leave to amend, unless amendment would be futile. See, e.g., Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990); Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246-47 (9th Cir. 1990).

         As a general rule, “a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.” Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994), overruled on other grounds, Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (citation ...

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