Palmisano v. JPMorgan Chase Bank National Association

Filing 24

ORDER - IT IS ORDERED that Defendant's Motion to Dismiss the First Amended Complaint, (Doc. 19 ) is GRANTED. The Clerk of the Court shall, with prejudice, DISMISS this case in its entirety and enter judgment accordingly. (See document for further details). Signed by Senior Judge James A Teilborg on 7/12/17. (LAD)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Joseph Palmisano, No. CV-16-03026-PHX-JAT Plaintiff, 10 11 v. 12 JPMorgan Association, ORDER 13 Chase Bank National Defendant. 14 15 Pending before the Court are: (1) Defendant’s Motion to Dismiss Plaintiff’s First 16 Amended Complaint (“Motion to Dismiss”), (Doc. 19); (2) Plaintiff’s Response to 17 Defendant’s Motion to Dismiss (“Response”), (Doc. 22); and (3) Defendant’s Reply in 18 Support of Defendant’s Motion to Dismiss (“Reply”), (Doc. 23). 19 I. Background 20 The Court assumes the facts alleged in the First Amended Complaint (“FAC”), 21 (Doc. 16), are true for purposes of deciding the pending Motion to Dismiss. See Shwarz 22 v. United States, 234 F.3d 428, 435 (9th Cir. 2000). For an unspecified amount of time, 23 Defendant held a promissory note, the repayment of which was secured by a Deed of 24 Trust recorded against Plaintiff Joseph Palmisano’s Gilbert, Arizona property. 25 (FAC at ¶ 5). Around June 28, 2013, Plaintiff attempted to sell the property to a 26 third-party for $850,000.00. 1 (Id. at ¶ 6; see also Doc. 22 at 1) (“Palmisano . . . attempted 27 1 28 Plaintiff’s FAC appears to have a typo stating that “Defendant and a third-party entered into a contract for the sale of the property,” (see FAC at ¶ 6), however the remainder of the record indicates Plaintiff attempted to sell the property, (see Id. at ¶ 29; 1 to sell his residence.”). Plaintiff requested a payoff demand statement to Jason P. 2 Sherman, counsel for Defendant in a Chapter 11 Bankruptcy Case in which Plaintiff was 3 the debtor. (FAC at ¶¶ 7, 13). Plaintiff alleges that his attorney believed that he was 4 ethically prohibited from issuing a payoff demand directly to Defendant. (Id. at ¶ 14). 5 After at least four written requests to Mr. Sherman between July and August 2013, 6 (id. at 19), Plaintiff never received a payoff demand statement, (id. at ¶ 12). Plaintiff was 7 unable to sell the property until May 2016 for $720,000.00. (Id. at ¶ 15). As a result, 8 Plaintiff alleges that he has suffered damages in the amount of $130,500.00. 9 (Id. at ¶¶ 16, 25). 10 On November 2, 2016, Plaintiff filed his FAC alleging that Defendant violated 11 Ariz. Rev. Stat. Ann. § 33-715(A) and 15 U.S.C. § 1639g by not delivering a timely 12 payoff demand statement and further asserting claims of negligence and negligence per 13 se against Defendant for violating the state and federal statutes. (Id. at ¶¶ 17–36). 14 II. Motion to Dismiss 15 Defendant moves to dismiss Plaintiff’s FAC for failing to state a claim under 16 Federal Rule of Civil Procedure (“Federal Rule”) 12(b)(6) because Plaintiff failed to 17 comply with the Arizona statute for requesting a payoff demand statement, Section 1639g 18 took effect after the events occurred, and the negligence claims are untimely. 19 (Doc. 19 at 1–5). 20 A. 21 The Court may grant a motion to dismiss a complaint for failure to state a claim 22 under Federal Rule 12(b)(6) for two reasons: (1) lack of cognizable legal theory; or 23 (2) insufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police 24 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To survive a Federal Rule 12(b)(6) motion for 25 failure to state a claim, a complaint must meet the requirements of Federal Rule 8(a)(2), 26 which requires a “short and plain statement of the claim showing that the pleader is 27 entitled to relief,” so that the defendant has “fair notice of what the . . . claim is and the Legal Standard 28 Docs. 19 at 2–3; 22 at 1). -2- 1 grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) 2 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). 3 Although a complaint does not need detailed factual allegations, the pleader’s 4 obligation to provide grounds for relief requires “more than labels and conclusions, and a 5 formulaic recitation of the elements of a cause of action will not do.” Id. at 555 6 (internal citations omitted). Federal Rule 8(a)(2) “requires a ‘showing,’ rather than a 7 blanket assertion, of entitlement to relief. Without some factual allegations in the 8 complaint, it is hard to see how a claimant could satisfy the requirement of providing not 9 only ‘fair notice’ of the nature of the claim, but also ‘grounds’ on which the claim rests.” 10 Id. at 555 n.3 11 Procedure § 1202 at 94, 95 (3d ed. 2004)). Thus, Federal Rule 8’s pleading standard 12 demands more than “an unadorned, the defendant-unlawfully-harmed-me accusation.” 13 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). (citing 5 C. Wright & A. Miller, Federal Practice and 14 In deciding a motion to dismiss under Federal Rule 12(b)(6), the Court must 15 construe the facts alleged in the complaint in the light most favorable to the drafter of the 16 complaint and the Court must accept all well-pleaded factual allegations as true. See 17 Shwarz, 234 F.3d at 435. Nonetheless, the Court does not have to accept as true a legal 18 conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286 (1986). 19 B. 20 Defendant argues that the Court should grant Defendant’s Motion to Dismiss 21 because Plaintiff’s “claims fail under the terms of the statutes themselves.” 22 (Doc. 19 at 1, 5). Specifically, Defendant contends that (1) the payoff demand was not 23 filed with the branch as required under Ariz. Rev. Stat. Ann. § 33-715(G); (2) the payoff 24 statement provision in 15 U.S.C. § 1639g took effect after the events giving rise to this 25 case occurred; and (3) Plaintiff’s negligence and negligence per se claims are untimely. 26 (Id. at 3–5). 27 28 Analysis 1. Ariz. Rev. Stat. Ann. § 33-715 Claim Count One of the FAC asserts a violation of Ariz. Rev. Stat. Ann. § 33-715(A) by -3- 1 Defendant for failing to produce a payoff demand statement in response to Plaintiff’s 2 requests. (FAC at ¶¶ 18, 22). The Arizona statute provides that “[o]n the written demand 3 of an entitled person or that person’s authorized agent, a secured lender shall prepare and 4 deliver a payoff demand statement to the person who has requested it within fourteen 5 days after receipt of the demand.” Ariz. Rev. Stat. Ann. § 33-715(A) (2014). The statute 6 requires that “[i]f the secured lender has more than one branch, office or other place of 7 business, the payoff statement demand shall be made to the branch or office address 8 provided in the payment billing notice or payment book.” Id. at § 33-715(G). A lender 9 who fails to the deliver the statement within fourteen days is liable “for all damages 10 sustained for failure to deliver the statement” and “for five hundred dollars whether or not 11 actual damages were sustained.” Id. at § 33-715(F). 12 First, the Court must determine whether an Exhibit attached to the Response 13 (the “Exhibit”) can be considered in this Motion to Dismiss. (Doc. 22-1 at 2–5). The 14 Exhibit contains emails between the parties’ attorneys in the bankruptcy matter that 15 discuss the status of the “payoff information.” (Id.). Plaintiff relies on the Exhibit to 16 argue that Plaintiff made an adequate payoff demand giving rise to this case. 17 (Doc. 22 at 3–4 (“[Defendant’s] Counsel received the request. Counsel conveyed it. 18 Counsel confirmed that management was reviewing it, and that he anticipated a response 19 soon. At no point did Chase or its counsel inform Palmisano that it could not accept his 20 payoff request because it did not comply with the statute.”); see also FAC at ¶¶ 19–22)). 21 On a motion to dismiss for failure to state a claim, the scope of review is generally 22 “limited to the contents of the complaint.” Marder v. Lopez, 450 F.3d 445, 448 23 (9th Cir. 2006) (citing Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1141 n.5 24 (9th Cir. 2003)). However, the Court may also consider any evidence upon which the 25 complaint “necessarily relies.” Id. (citing Branch v. Tunnell, 14 F.3d 449, 453–54 26 (9th Cir. 1994), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 27 307 F.3d 1119 (9th Cir. 2002)). A complaint “necessarily relies” on evidence if: “(1) the 28 complaint refers to the document; (2) the document is central to the plaintiff’s claim; and -4- 1 (3) no party questions the authenticity of the copy attached to the [Federal Rule] 12(b)(6) 2 motion.” Id. 3 Having reviewed the FAC and the Exhibit, (Doc. 22-1 at 2–5), the Court finds that 4 the FAC “necessarily relies” on the Exhibit. First, the FAC explicitly refers to the 5 Exhibit, asserting “Palmisano or his authorized agent, Brown, demanded, in writing, a 6 written payoff demand statement multiple times in July and August of 2013.” 7 (FAC at ¶ 19). Second, the written payoff demands are central to Plaintiff’s claim. The 8 Arizona statute requires that once a payoff demand is issued, a lender has fourteen days 9 to respond. Ariz. Rev. Stat. Ann. § 33-715(A). Plaintiff relies on the Exhibit to allege that 10 Defendant received the payoff demand through counsel and asserts it proves adequate 11 notice, such that Plaintiff is entitled to relief. (FAC at ¶¶ 19–22, 25). The case turns on 12 whether the Exhibit suffices as a payoff demand under the Arizona statute. Without an 13 adequate payoff demand, no Arizona claim would remain. Finally, neither party questions 14 the authenticity of the Exhibit attached to the Response. Defendant’s Reply does not 15 admit that Defendant received the notice stating “Chase allegedly received the payoff 16 statement request.” (Doc. 23 at 4). However, Defendant does not question the authenticity 17 of the emails that were sent between Plaintiff’s counsel and Mr. Sherman. 18 (Doc. 22-1 at 2–5). Accordingly, the FAC necessarily relies upon the Exhibit, and the 19 Court will consider it. See Kachlic v. Bursey & Assoc., P.C., CV-12-1111-PHX-JAT, 20 2013 WL 820375, at *3 n.3 (D. Ariz. Mar. 5, 2013) (considering a defendant’s letter 21 referred to in the complaint in adjudicating a Federal Rule 12(b)(6) motion to dismiss). 22 As noted above, the Arizona statute requires that the payoff statement demand be 23 made to the branch or office address provided in the payment billing notice or payment 24 book. Ariz. Rev. Stat. Ann. § 33-715(G). Plaintiff claims in his FAC that all demands for 25 a payoff statement were sent from Plaintiff’s authorized agent, James E. Brown, to 26 Defendant’s attorney in a bankruptcy action between the same parties, Mr. Sherman. 27 (FAC at ¶¶ 7–14). Plaintiff claims his counsel was ethically prohibited from issuing the 28 -5- 1 demand directly to Defendant because of the pending bankruptcy action. 2 2 (Id. at ¶¶ 14, 20). Plaintiff asserts “there are no Arizona cases which have analyzed the 3 issue of whether a payoff demand that was undisputedly received by a lender could be 4 deemed invalid because it was sent to the wrong address.” (Doc. 22 at 4). Plaintiff argues 5 “it should be left for the jury to determine whether this hyper-technical reading of the 6 statute should trump the parties’ actions and, in reliance thereon, expectations.” (Id.). 7 Defendant replies that interpretation of law is a matter for the Court to decide. 8 (Doc. 23 at 3). 9 Under Arizona common law, “interpretation of a statute is a question of law.” 10 State ex rel. Thomas v. Ditsworth, 166 P.3d 130, 132 (Ariz. Ct. App. 2017) (citing State 11 v. Wilson, 26 P.3d 1161, 1164 (Ariz. Ct. App. 2001)). If “statutory language is clear and 12 unambiguous, [courts] give effect to it and do not use other methods of statutory 13 interpretation.” Mathews ex rel. Mathews v. Life Care Ctrs. of Am., Inc., 14 177 P.3d 867, 869 (Ariz. Ct. App. 2008) (citing Fragoso v. Fell, 111 P.3d 1027, 1030 15 (Ariz. Ct. App. 2005)). When “a statute details the method of giving notice, the 16 requirements must be strictly followed.” Main I Ltd. P’ship v. Venture Capital Constr. & 17 Dev. Corp., 741 P.2d 1234, 1236 (Ariz. Ct. App. 1987) (citing Yuma Cty. v. Ariz. Edison 18 Co., 180 P.2d 868, 870 (Ariz. 1947)). Thus, “[a]ny means of providing notice other than 19 that prescribed is ineffective.” Id. (citing Hart v. Bayless Inst. & Trading Co., 20 346 P.2d 1101, 1108 (Ariz. 1959)). 21 Here, the Arizona statute is unambiguous requiring that the payoff statement 22 demand shall be made to the specific branch or office address provided. See Lewis v. 23 JPMorgan Chase Bank, N.A., CV-12-8054-PCT-NVW, 2012 WL 2513530, at *1–2 24 (D. Ariz. June 29, 2012) (granting the plaintiff leave to amend to clarify her allegation 25 26 27 28 2 Plaintiff alludes to Rule 4.2 of the Arizona Rules of Professional Conduct providing that a lawyer cannot communicate about the subject of the representation with the opposing party without consent of the other lawyer or authorization. Ariz. R. Prof’l Conduct 4.2. Although the Court questions Plaintiff’s assertion that his counsel was ethically prohibited and, alternatively, whether Plaintiff could have sent the demand himself, the Court need not determine these issues. -6- 1 that written demands for the payoff amount were made to the lender’s branch at the 2 address in the payment billing notice or payment book). Section 33-715 provides no 3 exception allowing a payoff demand to be sent to the counsel of the lender. Although the 4 Defendant does not refute the claim that the email was received, an email to counsel does 5 not satisfy the plain text of the statute. Thus, Plaintiff must have sent the payoff demands 6 to Defendant’s particular branch or office and not to Defendant’s counsel in an unrelated 7 action. Because Plaintiff fails to allege that his payoff demand was in compliance with 8 Section 33-715, the claim under the Arizona statute necessarily fails. 9 2. Truth in Lending Act Claim 10 Plaintiff asserts that Defendant violated 15 U.S.C. § 1639g by failing to provide a 11 payoff statement within a reasonable amount of time. 3 The relevant portion of the Truth 12 in Lending Act (“TILA”) provides “a creditor or servicer of a home loan shall send an 13 accurate payoff balance within a reasonable time, but in no case more than 7 business 14 days, after the receipt of a written request for such balance from or on behalf of the 15 borrower.” 15 U.S.C. § 1639g (2012 & Supp. 2017). Section 1639g became effective on 16 January 10, 17 2014 WL 3845802, at *3 (S.D. Ohio Aug. 5, 2014). Both parties acknowledge that 18 effective date, however Plaintiff argues that this claim is governed by the statute because 19 damages accrued in 2016, when the property sold for a reduced price. (Doc. 22 at 3). 20 In the FAC, the payoff demands Plaintiff references were sent in 2013 and 21 the correspondence in question between parties’ counsel took place in 2013. 22 (FAC at ¶¶ 7–11, 19). The Supreme Court has established a presumption against 23 retroactive application of legislation, which can only be overcome “where Congress 24 expresses a clear and unambiguous intent to do so.” Talaie v. Wells Fargo Bank, NA, 25 808 F.3d 410, 411–12 (9th Cir. 2015) (citing Landgraf v. USI Film Prods., 2014. See Hittle v. Residential Funding Corp., 2:13-CV-353, 26 27 28 3 Although Plaintiff does not assert an independent 15 U.S.C. § 1639g claim in the FAC, Plaintiff’s negligence per se claim in Count Three relies on a violation of the statute. (FAC at ¶ 32). Therefore, the Court considers an independent claim under Section 1639g. -7- 1 511 U.S. 244, 265 (1994)). 2 Here, the Court finds nothing to suggest Congress intended for the statute to apply 3 retroactively, and Plaintiff provides no justification for applying the law retroactively. 4 Plaintiff only argues that the claim arose in 2016 when damages accrued as a result of the 5 sale of the property. (Doc. 22 at 3). However, this interpretation is incorrect because the 6 statute itself states that “any action under this section may be brought . . . within one year 7 from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e) 8 (2012 & Supp. 2017). Because the statute relies on the occurrence of the violation—and 9 not damages—any claim would have arisen seven days after a payoff demand was made 10 with no response from the lender. Assuming there was a violation by Defendant, the 11 latest a violation could have occurred based on the FAC was in September 2013 (seven 12 days after the latest payoff demand noted in the FAC). (FAC at ¶ 11). Therefore, the 13 events giving rise to this claim took place in 2013 before the statute’s effective date in 14 2014, and the Court will not apply the statute retroactively. Because the Court does not 15 apply the statute retroactively, the TILA claim necessarily fails. 16 3. Negligence and Negligence Per Se Claims 17 Count Two of Plaintiff’s FAC asserts a negligence claim, arguing that Defendant 18 breached a duty to provide a payoff demand statement within fourteen days of the written 19 request. (Id. at ¶ 28). Plaintiff provides no support in Arizona common law to 20 establish this duty. The alleged duty appears to arise from the Arizona statute requirement 21 in Section 33-715(A), which would be considered a negligence per se claim. Because the 22 Court found that the Arizona statute violation claim fails, the negligence claim also fails. 23 Relatedly, Count Three raises negligence per se claims under both the Arizona 24 statute and TILA. Plaintiff alleges that Defendant is liable for negligence per se based on 25 violation of both Ariz. Rev. Stat. Ann. § 33-715 and 15 U.S.C. § 1639g. (Id. at ¶¶ 32–35). 26 Because both claims related to statutory violations necessarily fail, the negligence per se 27 claims that relate to violations of the statutes also fail. 28 Defendant argues that Plaintiff’s negligence and negligence per se claims are -8- 1 untimely. Because both claims related to statutory violations fail, the negligence and 2 negligence per se claims also fail. Therefore, the Court need not analyze the untimeliness 3 argument raised by Defendant. 4 III. Leave to Amend 5 Having found that Plaintiff’s FAC fails to state a claim, the Court must now 6 consider whether to grant Plaintiff leave to amend. Plaintiff does not request leave to 7 amend. Therefore, the Court will review leave to amend sua sponte. Plaintiff has 8 amended the complaint once already as was his right. The first complaint was filed in 9 September 2016. (Doc. 1). Plaintiff’s FAC was filed in November 2016. (Doc. 16). 10 A. 11 The Court should freely give leave to amend “when justice so requires.” Fed. R. 12 Civ. P. 15(a). This includes granting leave “sua sponte, when dismissing a case for failure 13 to state a claim, unless the court determines that the pleading could not possibly be cured 14 by the allegation of other facts.” Ewing v. Wells Fargo Bank, No. CV 11-8194-PCT-JAT, 15 2012 WL 4514055, at *5 (D. Ariz. Oct. 2, 2012) (citing Lopez v. Smith, 16 203 F.3d 1122, 1127 (9th Cir. 2000)). Federal Rule 15’s policy regarding leave to amend 17 “is to be applied with extreme liberality.” Desertrain v. City of L.A., 754 F.3d 1147, 1154 18 (9th Cir. 2014) (citing Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 19 (9th Cir. 1990)). In determining whether to allow leave to amend, a court considers five 20 factors: “(1) bad faith; (2) undue delay; (3) prejudice to the opposing party; (4) futility of 21 amendment; and (5) whether the plaintiff has previously amended his complaint.” Nunes 22 v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2004). Legal Standard 23 Futility alone is enough to deny a motion for leave to amend. Id. A proposed 24 amendment is futile only if “no set of facts can be proved under the amendment to the 25 pleadings that would constitute a valid and sufficient claim.” Miller v. Rykoff-Sexton, 26 Inc., 845 F.2d 209, 214 (9th Cir. 1988). The party opposing amendment bears the burden 27 of proving futility. Rodriguez v. City of Phx., N. CV 11-01992-PHX-JAT, 28 2014 WL 1053602, at *3 (D. Ariz. Mar. 19, 2014). -9- 1 B. 2 Having considered the claims alleged in Plaintiff’s FAC, the Court concludes that 3 it would be futile to permit amendment. First, Plaintiff acknowledges that the payoff 4 demand was not conveyed correctly under the Arizona statute. (Doc. 22 at 3). Here, the 5 failure to file the payoff demand in accordance with the statue cannot be corrected 6 because the property was sold in May 2016. (FAC at ¶ 15). Plaintiff cannot go back in 7 time and properly file the payoff demand with the correct branch. Further, Plaintiff cited 8 no new dates or facts to suggest that the payoff demand was properly filed. The only 9 justification for the incorrect filing was the ethical claim, but the Arizona statue provides 10 no such alternative means of requesting a payoff statement. Therefore, it would be futile 11 to allow an amendment on the state law claim. Next, the TILA claim cannot be amended 12 to show the statute was effective before the events giving rise to this action took place. 13 Both parties acknowledge the effective date of the statute, and neither party raises 14 objections to the timeline alleged in the FAC. Plaintiff has not cited any dates in the 15 record to suggest that an alleged violation took place after TILA’s effective date. Plaintiff 16 acknowledged that the alleged violations took place in 2013, (Doc. 22 at 2), while he 17 argued damages in 2016 could delay his claim. Because the Court rejected this argument, 18 Plaintiff cannot make a claim on a law that was not effective when the events took place. 19 It would be futile to allow amendment for the TILA claim. All other legal arguments 20 advanced by the Plaintiff have been rejected by this Court and additional facts could not 21 save the theories. Because amendment would be futile, this Court will grant Defendant’s 22 Motion to Dismiss with prejudice and without leave to amend. Lopez, 203 F.3d at 1127 23 (stating that courts are not required to grant leave to amend if the complaint could not 24 possibly be cured by allegation of other facts). 25 /// 26 /// 27 /// 28 /// Analysis - 10 - 1 IV. Conclusion 2 Based on the foregoing, 3 IT IS ORDERED that Defendant’s Motion to Dismiss the First Amended 4 Complaint, (Doc. 19) is GRANTED. The Clerk of the Court shall, with prejudice, 5 DISMISS this case in its entirety and enter judgment accordingly. 6 Dated this 12th day of July, 2017. 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 11 -

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