O'Connor-Rose v. JPMorgan Chase Bank, N.A.

Filing 25

MEMORANDUM AND ORDER Re #17 Motion to Dismiss First Amended Complaint signed by Judge William B. Shubb on 5/2/2012: Chases motion to dismiss plaintiffs claim for constructive fraud be, and the same hereby is, GRANTED. Plaintiff has twenty days from the date of this Order to file an amended complaint, if she can do so consistent with this Order. (Kirksey Smith, K)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 DONNA RUTH O’CONNOR ROSE, an individual, NO. CIV. 2:12-225 WBS CMK 13 Plaintiff, MEMORANDUM AND ORDER RE: MOTION TO DISMISS FIRST AMENDED COMPLAINT 14 v. 15 16 J.P. MORGAN CHASE, N.A., a corporation, 17 Defendant. / 18 19 ----oo0oo---- 20 Plaintiff Donna Ruth O’Connor-Rose brought an action 21 against defendant J.P. Morgan Chase (“Chase”) in state court, 22 stating claims arising from Chase’s allegedly wrongful conduct 23 related to a residential loan. 24 to this court on the basis of diversity jurisdiction. 25 No. 1.) 26 plaintiff’s claim for constructive fraud for failure to state a 27 claim upon which relief can be granted pursuant to Rule 12(b)(6). 28 (Docket No. 17.) Chase then removed the proceeding (Docket Currently before the court is Chase’s motion to dismiss 1 1 I. Factual and Procedural Background 2 In December of 2005, plaintiff obtained a loan in the 3 amount of $349,000 from Chase, which was secured by a Deed of 4 Trust encumbering property located at 3794 Mario Ave, Redding, 5 California (“the property”). 6 12:6-9, Ex. 1.)1 Plaintiff alleges that “[p]er paragraph 3 of the 7 subject loan, Chase was the trustee of an escrow account which 8 paid taxes, insurance and so forth,” and that “[f]rom that 9 position Chase had fiduciary duties over the periodic payments 10 that the plaintiff made.” (First Amended Complaint (“FAC”) at (Id. at 2:16-22, Ex. 1.)2 According to plaintiff, from August to October of 2009 11 12 she fell behind on the monthly payments due under the loan. (Id. 13 at 14:9-11.) 14 she has paid more than was required under the terms of the loan 15 agreement and is now current on her loan. 16 10:1, 11:17.) 17 payments that were more than adequate to cover the monthly 18 installments due under her loan, Chase failed to properly credit 19 payments to her account from the end of 2009 on. 20 As a result of Chase’s “crooked accounting,” plaintiff contends Apart from this period of time, she alleges that (Id. at 6:2-23, 9:22- She further alleges that although she made (Id. at 4-11.) 21 1 22 23 Plaintiff’s FAC contains numbered paragraphs, however many numbers are repeated. The court therefore will refer to page and line numbers in its citations to the FAC. 2 24 25 26 27 28 In general, a court may not consider items outside the pleadings upon deciding a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, the court may consider material that is properly submitted as a part of the complaint. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). Plaintiff attached a number of exhibits to her FAC, including the loan agreement signed by the parties. As these materials were properly submitted as a part of the complaint, the court will consider them in ruling on Chase’s motion to dismiss. 2 1 that Chase repeatedly and falsely represented that her loan was 2 in default when in fact she had paid more than was due on the 3 loan, (e.g., id. at 4:27-5:1, 7:4-8:12, 10:2-24), and caused two 4 wrongful Notices of Default to be recorded, (id. at 5:14-25, 7:4- 5 13, Exs. 8, 12; see also Def.’s Request for Judicial Notice 6 (“RJN”) Exs. B, D (Docket No. 18)).3 7 these Notices of Default. 8 15; see also RJN Exs. C, E.) 9 Chase rescinded each of (FAC at 5:29-6:1, 8:13-16, Exs. 10, Plaintiff additionally alleges that Chase has falsely 10 reported to third parties that she was late in making payments 11 under the loan and in default and that credit agencies have 12 “picked up on this reporting.” 13 30.) 14 (FAC at 11:18-20, 14:4-7, Ex. Plaintiff filed her Complaint on December 28, 2011, and 15 the proceeding was removed to this court on January 27, 2012. 16 (Docket No. 1.) 17 and granted defendant’s earlier motion to dismiss. 18 15). 19 contract and constructive fraud. 20 filed a motion to dismiss the claim for constructive fraud. 21 (Docket No. 17.) 22 II. (Docket No. Plaintiff has filed a FAC stating claims for breach of (Docket No. 16,) Defendant has Discussion To survive a motion to dismiss, a plaintiff must plead 23 24 The court denied plaintiff’s motion to remand “only enough facts to state a claim to relief that is plausible 25 3 26 27 28 Chase requests that the court judicially notice several publically recorded documents. (See FAC Exs. A-E.) The court will take judicial notice of these documents, since they are identical to materials attached to plaintiff’s FAC and are matters of public record whose accuracy cannot be reasonably questioned. See Lee, 250 F.3d at 689. 3 1 on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 2 (2007). 3 than a sheer possibility that a defendant has acted unlawfully,” 4 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and “[w]here a 5 complaint pleads facts that are ‘merely consistent with’ a 6 defendant’s liability, it ‘stops short of the line between 7 possibility and plausibility of entitlement to relief.’” 8 (quoting Twombly, 550 U.S. at 557). 9 plaintiff has stated a claim, the court must accept the This “plausibility standard,” however, “asks for more Id. In deciding whether a 10 allegations in the complaint as true and draw all reasonable 11 inferences in favor of the plaintiff. 12 U.S. 232, 236 (1974), overruled on other grounds by Davis v. 13 Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 14 (1972). 15 Scheuer v. Rhodes, 416 “It is essential to the operation of the doctrine of 16 constructive fraud that there exist a fiduciary or special 17 relationship.” 18 App. 3d 103, 116 (4th Dist. 1991). 19 relationship between two parties, “any material concealment or 20 misrepresentation will amount to fraud sufficient to entitle the 21 party injured thereby to an action.” 22 Express, Inc., 180 Cal. App. 3d 1011, 1020 (2d Dist. 1986). 23 order to state a claim for constructive fraud under California 24 law, a plaintiff must allege (1) a fiduciary or confidential 25 relationship, (2) an act, omission, or concealment involving a 26 breach of that duty, (3) reliance, and (4) resulting damages. 27 Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 414 (2d Dist. 28 2000). Peterson Dev. Co. v. Torrey Pines Bank, 233 Cal. When there is a fiduciary Ford v. Shearson Lehman Am. In Unlike an action for ordinary fraud, a constructive fraud 4 1 action does not require a showing that a defendant intended to 2 defraud the plaintiff. 3 590, 601 (9th Cir. 2010) (citing Quintilliani v. Mannerino, 62 4 Cal. App. 4th 54, 70, 72 (4th Dist. 1998)). 5 claims must still, however, be pled with particularity under the 6 higher pleading standards of Rule 9(b). 7 Mortg. Funding, Inc., 403 Fed. App’x 154, 156 (9th Cir. 2010); 8 Sonoma Foods, Inc. v. Sonoma Cheese Factory, LLC, 634 F. Supp. 2d 9 1009, 1021 (N.D. Cal. 2007). Mindys Cosmetics, Inc. v. Dakar, 611 F.3d Constructive fraud Guerrero v. Greenpoint Here, plaintiff alleges that she and Chase were in a 10 11 fiduciary relationship. 12 fiduciary obligation, he must either knowingly undertake to act 13 on behalf and for the benefit of another, or must enter into a 14 relationship which imposes that undertaking as a matter of law.” 15 Comm. On Children’s Television, Inc. v. Gen. Foods Corp., 35 Cal. 16 3d 197, 221 (1983). 17 the best interests of the beneficiary.” 18 Football League, 131 Cal. App. 4th 621, 641 (6th Dist. 2005) 19 (quoting Children’s Television, 35 Cal.3d at 222). 20 “[B]efore a person can be charged with a A fiduciary is required to give “priority to Oakland Raiders v. Nat’l Plaintiff does not allege that the lender-borrower 21 relationship imposes a fiduciary obligation on Chase as a matter 22 of law. 23 established case law providing that the ordinary lender-borrower 24 relationship does not impose any fiduciary duty on the lender. 25 See Bridgeman v. United States, No. 10–01457, 2011 U.S. Dist. 26 LEXIS 6059, at *52 (E.D. Cal. Jan. 21, 2011); Oaks Mgmt. Corp. v. 27 Superior Court, 145 Cal. App. 4th 453, 466 (4th Dist. 2006); 28 Nymark v. Heart Fed. Savs. & Loan Ass’n, 231 Cal. App. 3d 1089 Indeed, such an argument would run contrary to well- 5 1 (3d Dist. 1991). 2 a fiduciary duty under paragraph 3 of the loan agreement. 3 paragraph provides that plaintiff will pay certain funds to Chase 4 to cover taxes, insurance premiums, and other “Escrow Items,” and 5 that Chase may collect and hold these funds in escrow. 6 1 ¶ 3.) 7 Instead, plaintiff alleges that Chase owed her That (FAC Ex. “Although parties may create fiduciary relationships by 8 contract, mere contractual relationships, without more, do not 9 give rise to fiduciary relationships.” Sonoma Foods, Inc., 634 10 F. Supp. 2d at 1021 (internal quotation marks and alterations 11 omitted). 12 institution does not, as a general rule, owe a “duty of care to a 13 borrower when the institution’s involvement in the loan 14 transaction does not exceed the scope of its conventional role as 15 a mere lender of money.” 16 (citations omitted). 17 which bring it into a ‘special relationship’ with a customer,” 18 including when a bank affirmatively offers trust and other 19 specifically fiduciary services. 20 Cal. App. 3d 678, 691 n.12 (4th Dist. 1991). As alluded to above, under California law, a financial Nymark, 231 Cal. App. 3d at 1095–96 However, a bank may “undertake obligations Copesky v. Superior Court, 229 In Peterson, the plaintiff sought a construction loan 21 22 from defendant Torrey Pines Bank (“TPB”), and under the loan 23 agreement between the parties TPB provided certain escrow 24 services. 25 alleged that TPB owed him a fiduciary duty based on its escrow- 26 related conduct. 27 argument, noting that it is not uncommon for a lending 28 institution to handle escrow functions and holding that the Peterson, 233 Cal. App. 3d at 109. Id. at 116. The plaintiff The court, however, rejected this 6 1 parties’ relationship “fell into the usual category of an arm’s 2 length, adverse, ‘normal commercial banking transaction.’” 3 at 119-20; see also Hudson v. Wells Fargo Bank, N.A., No. C-11- 4 03966 JCS, 2011 WL 5882880, at *8 (N.D. Cal. Nov. 23, 2011) 5 (plaintiff’s allegations that funds from a rehabilitation loan 6 were placed into a rehabilitation escrow account pursuant to the 7 loan agreement were insufficient to give rise to fiduciary duty); 8 Palestini v. Homecomings Fin., LLC, No. 10CV1049-MMA, 2010 WL 9 3339459, at *5 (S.D. Cal. Aug. 23, 2010) (claim for breach of Id. 10 fiduciary duty dismissed with prejudice because defendant 11 responsible for an escrow account related to a home loan owed 12 plaintiff no fiduciary duty). 13 An examination of the paragraph cited by plaintiff 14 shows that while the paragraph does provide that Chase will 15 create an escrow account in which it will hold a portion of the 16 loan funds in order pay certain taxes and fees on the property, 17 it does not contain any language either referring to a trust or 18 suggesting that Chase agrees to hold funds in trust for plaintiff 19 or give priority to her interests. 20 nonconclusory allegations suggesting that defendant acted outside 21 of the conventional role of a lender or agreed to act as a 22 trustee for plaintiff, the FAC does not adequately allege a 23 fiduciary relationship. 24 fraud claim fails and the court will grant Chase’s motion to 25 dismiss the constructive fraud claim.4 Because there are no Accordingly, plaintiff’s constructive 26 27 28 4 In her Opposition, plaintiff spends a good deal of time discussing the Real Estate Settlement Procedures Act (“RESPA”). Because she does not bring any claims under RESPA, however, this 7 1 IT IS THEREFORE ORDERED that Chase’s motion to dismiss 2 plaintiff’s claim for constructive fraud be, and the same hereby 3 is, GRANTED. 4 Plaintiff has twenty days from the date of this Order 5 to file an amended complaint, if she can do so consistent with 6 this Order. 7 DATED: May 2, 2012 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 discussion is irrelevant. 8

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