Joseph Starkey, et al v. JP Morgan Chase Bank, NA

Filing

OPINION filed : AFFIRMED, decision not for publication. R. Guy Cole , Jr., Circuit Judge; John M. Rogers, Authoring Circuit Judge, and Arthur L. Alarcon, Senior Judge for The U.S. Court of Appeals for the Ninth Circuit, sitting by designation.

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NOT RECOMMENDED FOR PUBLICATION
File Name: 14a0534n.06

FILED

No. 14-3046

Jul 21, 2014
DEBORAH S. HUNT, Clerk
UNITED STATES COURTS OF APPEALS
FOR THE SIXTH CIRCUIT
JOSEPH A. STARKEY; BARBARA STARKEY,
Plaintiffs-Appellants,
v.
JPMORGAN CHASE BANK, NA,
Defendant-Appellee.

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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE SOUTHERN
DISTRICT OF OHIO

BEFORE: COLE, ROGERS, and ALARCÓN,* Circuit Judges.
ROGERS, Circuit Judge.

Joseph and Barbara Starkey appeal the district court’s

dismissal of several state law claims that they brought against JPMorgan Chase. This dispute
arises out of a 2012 letter the Starkeys received from Chase concerning the National Mortgage
Settlement. The letter said that Chase was releasing the Starkeys’ mortgage loan associated with
an account number ending with x2307 as a part of the settlement. That account number referred
to an old mortgage that the Starkeys allege had been discharged in bankruptcy. But the Starkeys
also had a new mortgage loan with Chase associated with an account number ending in x5399.
The Starkeys believed that the letter must have referred to the newer loan. They called Chase,
and a representative allegedly confirmed that Chase was discharging their new loan.

The

Starkeys stopped paying their mortgage, but soon began receiving delinquency notices. In
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The Honorable Arthur L. Alarcón, Senior Judge, United States Court of Appeals for the Ninth Circuit, sitting by
designation.

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response, the Starkeys filed this lawsuit alleging common law fraud, conversion, and unjust
enrichment, as well as federal statutory claims no longer pursued on appeal. However, the
Starkeys’ fraud claim is implausible, and their conversion and unjust enrichment claims are timebarred. Furthermore, the district court did not err in dismissing the Starkey’s complaint with
prejudice.
The Starkeys bought property in Cincinnati in 1999. To pay for their new home, the
Starkeys executed a note and mortgage in favor of Bank One, N.A. The Starkeys entered
bankruptcy in September 2001. The Starkeys’ bankruptcy lawyer learned that Bank One had
failed to record the mortgage, and so Bank One was treated like a general, unsecured creditor
during the bankruptcy.

The trustee paid Bank One approximately $45,000 in bankruptcy

disbursements. Following the Starkeys’ discharge in 2004, they executed a new note and
mortgage on their property in Cincinnati, this time with Integrity Funding Corporation. Integrity
recorded the mortgage, and eventually transferred it to Chase Manhattan Mortgage, a
predecessor to JPMorgan Chase. The Starkeys filed a second bankruptcy in 2007, but that
proceeding had no effect on their 2004 mortgage obligation. Meanwhile, Chase purchased and
merged with Bank One.
On September 12, 2012, the Starkeys received a letter from Chase. In the letter, Chase
explained that, as a part of the National Mortgage Settlement, Chase was cancelling a loan the
Starkeys had with the bank. The letter further explained that the release applied to the loan
associated with an account number ending in x2037. The Starkeys believed that the letter
referred to the 2004 mortgage, although exactly why they held that belief is unclear. According
to their Reply Brief, due to the 2001 bankruptcy, the Starkeys “were unclear which mortgage

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loan” Chase meant to release in the September 2012 letter. The Starkeys called Chase for
clarification. The complaint says:
Upon information and belief, Plaintiffs via only telephonic communications with
[Chase] customer service, were told their [2004] mortgage obligation . . . had
been released. Based on this Information, Plaintiffs did cease to make mortgage
payments to Chase.
In early 2013, Chase began sending delinquency notices to the Starkeys. These notices
referred to a mortgage loan associated with an account number ending in x5399. Confused, the
Starkeys contacted the Ohio Attorney General and the Consumer Financial Protection Bureau.
In response to those inquiries, Chase explained that it had “released the mortgage recorded in
1999,” “asserted [its] rights to continue to collect on the 2004 mortgage,” and sent the Starkeys
an account history for the 1999 mortgage, which was apparently associated with the account
number ending in x2037.
The Starkeys sued Chase in federal district court in September 2013. The complaint
included two federal claims—violations of the Real Estate Settlement Procedures Act and the
Home Affordable Modification Program—and four state-law claims—common law fraud,
conversion, unjust enrichment, and an action to quiet title. Chase filed a motion to dismiss that
the district court granted. The district court dismissed the fraud claim because the Starkeys
failed to allege plausibly that Chase acted knowingly or recklessly and because they failed to
make a plausible allegation of detrimental reliance on any false statement made by Chase. The
district court held that conversion and unjust enrichment claims, which involve payments that
Bank One allegedly collected after the 1999 mortgage was discharged in bankruptcy, were timebarred. The Starkeys appeal the dismissal of only these three claims, and also argue that the
district court abused its discretion by dismissing their complaint with prejudice.

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The Starkeys’ complaint fails to allege a plausible fraud claim. “The elements of fraud
under Ohio law are: ‘(a) a representation or, where there is a duty to disclose, concealment of a
fact, (b) which is material to the transaction at hand, (c) made falsely, with knowledge of its
falsity, or with such utter disregard and recklessness as to whether it is true or false that
knowledge may be inferred, (d) with the intent of misleading another into relying upon it,
(e) justifiable reliance upon the representation or concealment, and (f) a resulting injury
proximately caused by the reliance.’” Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 449
(6th Cir. 2012) (quoting Gaines v. Preterm–Cleveland, Inc., 514 N.E.2d 709, 712 (1987)). The
Starkeys contend that Chase committed fraud by “misrepresent[ing] that the September 2012
letter pertained to the Starkeys’ 2004 Mortgage Loan.”
However, the Starkeys’ theory is implausible. They allege that Chase, seeking to trick
them into defaulting on their mortgage, sent the couple a release letter pertaining to their
1999 mortgage. Over the phone, Chase representatives misled the Starkeys into believing the
letter concerned their 2004 mortgage. The Starkeys fell for the ruse and stopped paying their
mortgage. Putting aside the improbability of this theory, the allegations describing the alleged
phone call are inadequate. The paragraph of the complaint addressing the phone call with Chase
representatives says: “Upon information and belief, Plaintiffs via only telephonic
communications with customer service, were told their [2004] mortgage obligation . . . had been
released.” It is true that pleading on information and belief may be permissible in certain
circumstances. For example, sometimes a plaintiff may lack personal knowledge of a fact, but
have “sufficient data to justify interposing an allegation on the subject” or be required to “rely on
information furnished by others.” Wright & Miller, 5 Fed. Prac. & Proc. Civ. § 1224 (3d ed.
2012). “However, pleading on information and belief is not an appropriate form of pleading if

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the matter is within the personal knowledge of the pleader.” Id. Because one of the Starkeys
was on the other end of line when he or she spoke with Chase representatives, the Starkeys must
have had personal knowledge of whether Chase said the September 2012 letter pertained to the
2004 mortgage or not. Pleading this allegation on information and belief was improper under
these circumstances.
Absent the deficient allegations regarding the phone call, all of the facts in the complaint
indicate that the September 2012 Letter concerned the 1999 mortgage. The September 2012
letter referred to a loan associated with an account number ending in x2037. Nothing in the
complaint suggests that this account number is associated with the 2004 mortgage. In fact, the
Starkeys themselves appear to recognize that this account number pertains to the 1999 mortgage
based on their argument that the September 2012 letter proved that Chase wrongfully tried to
collect on the 1999 mortgage after it was discharged. Furthermore, the delinquency notices
concerned account number x5399, which was not the number listed in September 2012 letter.
And Chase confirmed all of this in letters responding to the Ohio Attorney General and the
CFPB. “To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face. 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.
662, 678 (2009) (internal quotation marks and citations omitted). The facts of this complaint
indicate that the letter pertained to the 1999 mortgage. The only possible misrepresentation
occurred during the phone call, but because those allegations were pled on information and
belief, it appears that not even the Starkeys are sure whether Chase told them the September

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2012 letter pertained to the 2004 mortgage or not. This court cannot reasonably draw an
inference that Chase knowingly or reckless made a false statement on these facts.
The Starkeys’ conversion and unjust enrichment claims are time-barred. According to
their complaint, Bank One, Chase’s predecessor, accepted payments on the 1999 mortgage up
until 2005 even though the 2001 bankruptcy discharged that obligation. This court need not
address whether that conduct could support a claim for conversion or unjust enrichment because
these claims are time-barred. Ohio has a four-year statute of limitations for conversion, O.R.C.
§ 2305.09, and a six-year period for unjust enrichment claims, O.R.C. § 2305.07.1 Furthermore,
the “discovery rule” applies to the Starkeys’ conversion claim. Toledo Museum of Art v. Ullin,
477 F. Supp. 2d 802, 807 (N.D. Ohio 2006). This means that the statute of limitations began
running when the Starkeys knew or should have known that their property was being converted.
Hambleton, 465 N.E.2d at 1301.
The Starkeys’ conversion claim accrued in 2005 at the latest. The Starkeys contend that
they “could not have known that Chase Bank should not have been collecting amounts on their
1999 Mortgage until after receipt of the September 2012 Letter.” This argument is implausible
considering the fact that the Starkeys elsewhere contend that their 2001 bankruptcy discharged
their 1999 mortgage as an unsecured debt. A reasonable person would have inquired into why
he was being billed for and paying a debt he no longer owed. Thus the Starkeys’ conversion
claim accrued when they began paying Bank One for a debt they believed had been discharged.

1

The parties argue and the district court held that the statute of limitations for unjust enrichment claims is
four years in Ohio. However, O.R.C. § 2305.07, which has a six-year period, governs unjust enrichment claims.
See U.S. Bank v. Graham, 923 N.E.2d 699, 701 (Ohio Ct. App. 2009).
The confusion below may have arisen because Ohio courts will look “to the actual nature or subject matter
of the case, rather than the form in which the action is pleaded” to determine which statute of limitations applies.
Hambleton v. R.G. Barry Corp., 465 N.E.2d 1298, 1302 (Ohio 1984). In other words, if the Starkeys had brought a
tort claim in contract clothing, then the four-year period should apply. However, this court need not address this
issue because the Starkey’s unjust enrichment claim is barred even if the longer six-year period applies.

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At the very latest, their claim accrued in 2005, when those payments stopped. Thus the statute of
limitations period elapsed in 2009 at the latest.
The district court reasoned along these lines, but the Starkeys say the court
misapprehended their argument. Rather, “the Complaint is actually alleging that Chase Bank
converted the Starkeys’ funds by accepting payments on the 1999 mortgage even though, as
revealed in the September 2012 Letter, Chase Bank has no right to payment on the
1999 Mortgage.” Exactly how the district court misconstrued the Starkeys’ argument is unclear.
But even if the district court did misread the Starkeys’ arguments, nothing in the letter indicates
that Chase acted improperly in the past. The September 2012 letter states in large, bold letters:
“We are cancelling the remaining amount you owe Chase!” (emphasis added) The letter further
states that, “you will owe nothing more on the loan.” (emphasis added) Both statements clearly
imply that the Starkeys would owe Chase nothing else going forward, not that Chase wrongfully
collected money in the past.
The unjust enrichment claim is also time-barred. The parties and district court assumed
that the discovery rule applies to unjust enrichment claims. However, the Ohio courts actually
apply a similar but slightly different rule. In Ohio, an unjust enrichment claim does not accrue
“until the last point in time that the plaintiff conferred and a defendant unjustly received a
benefit.” Desai v. Franklin, 895 N.E.2d 875, 885 (Ohio Ct. App. 2008); see also Med. Mut. of
Ohio v. K. Amalia Enters. Inc., 548 F.3d 383, 393 n.6 (6th Cir. 2008). The Starkeys’ unjust
enrichment claims would accrue on the date of the last unjust payment, i.e. sometime in 2005.
Thus the statute of limitations period ended sometime in 2011, two years before the Starkeys’
suit was filed.

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Finally, the district court did not abuse its discretion in dismissing the Starkey’s
complaint with prejudice. This court’s “default rule is that ‘if a party does not file a motion to
amend or a proposed amended complaint’ in the district court, ‘it is not an abuse of discretion for
the district court to dismiss the claims with prejudice.’” Ohio Police & Fire Pension Fund v.
Standard & Poor’s Fin. Servs. LLC, 700 F.3d 829, 844 (6th Cir. 2012) (quoting CNH Am. LLC
v. UAW, 645 F.3d 785, 795 (6th Cir. 2011)). The Starkeys could have amended their complaint
under Rule 15, moved to vacate or set the district court’s judgment after it granted Chase’s
motion to dismiss under Rule 59 or 60, Morse v. McWhorter, 290 F.3d 795, 799 (6th Cir. 2002),
or at least requested that the district court not dismiss their complaint with prejudice in their brief
in opposition. Because the Starkeys took none of those steps, the district court did not abuse its
discretion in dismissing their complaint with prejudice.
The judgment of the district court is AFFIRMED.

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