O'Connor-Rose v. JPMorgan Chase Bank, N.A.
Filing
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MEMORANDUM and ORDER signed by Judge William B. Shubb on 08/02/2012 GRANTING re #30 Defendant's Motion to Dismiss Plaintiff's Second Cause of Action. (Streeter, J)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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DONNA RUTH O’CONNOR ROSE, an
individual,
NO. CIV. 2:12-225 WBS CMK
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Plaintiff,
MEMORANDUM AND ORDER RE:
MOTION TO DISMISS
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v.
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J.P. MORGAN CHASE, N.A., a
corporation,
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Defendant.
/
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Plaintiff Donna Ruth O’Connor-Rose brought this action
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against defendant J.P. Morgan Chase (“Chase”) stating claims
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arising from Chase’s allegedly wrongful conduct related to a
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residential loan.
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to dismiss plaintiff’s constructive fraud claim in her Second
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Amended Complaint (“SAC”) for failure to state a claim upon which
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relief can be granted pursuant to Rule 12(b)(6).
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30.)
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Currently before the court is Chase’s motion
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(Docket No.
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I.
Factual and Procedural Background
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In December of 2005, plaintiff obtained a loan in the
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amount of $349,000 from Chase, which was secured by a Deed of
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Trust encumbering property located at 3794 Mario Ave in Redding,
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California (“the property”).
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Plaintiff alleges that “[p]er paragraph 3 of the subject loan,
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Chase was the trustee of an escrow account which paid taxes,
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insurance and so forth,” and that “[f]rom that position Chase had
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fiduciary duties over the periodic payments that the plaintiff
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made.”
(SAC ¶ 84 (Docket No. 27).)
(Id. ¶ 7.)
According to plaintiff, from August to October of 2009
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she fell behind on the monthly payments due under the loan.
(Id.
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¶ 88.)
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paid more than was required under the terms of the loan agreement
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and is now current on her loan.
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result of Chase’s “crooked accounting,” plaintiff contends that
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Chase repeatedly and falsely represented that her loan was in
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default when in fact she had paid more than was due on the loan,
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(e.g., id. ¶¶ 16, 24, 33, 59-61, Ex. 22), and caused two wrongful
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Notices of Default to be recorded, (id. ¶¶ 23, 24, 32, 33, Exs.
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8, 12).
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¶¶ 26, 40, Exs. 10, 15.)
Apart from this period of time, she alleges that she has
(Id. ¶¶ 28, 53, 55, 75.)
Chase rescinded each of these Notices of Default.
As a
(Id.
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On March 1, 2012, Chase allegedly sent plaintiff a
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statement indicating that she was two months past due on her
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loan, which plaintiff alleges is not correct.
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On March 7, 2012, Chase caused another Notice of Default to be
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recorded.
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on her loan, (id. ¶¶ 74, 75), but that since March 7, 2012, she
(Id. ¶ 73, Ex. 29.)
(Id. ¶¶ 70, 71.)
Plaintiff alleges she is current
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has not received any billing or notices and the bank refused to
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accept a monthly payment in April 2012, (id. ¶¶ 77, 78).
Plaintiff additionally alleges that she was harmed
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because Chase falsely reported to third parties that she was late
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in making payments under the loan and in default and that credit
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agencies have “picked up on this reporting.”
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30.)
Plaintiff filed her Complaint on December 28, 2011, in
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(Id. ¶¶ 76, 87, Ex.
state court, and the proceeding was removed to this court on
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January 27, 2012.
(Notice of Removal, Ex. A (“Compl.”) (Docket
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No. 1).)
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granted in part Chase’s motion to dismiss with leave to amend.
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(Docket No. 15.)
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(Docket No. 16), and the court granted Chase’s motion to dismiss
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plaintiff’s constructive fraud claim with leave to amend.
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(Docket No. 25.)
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realleging breach of contract and constructive fraud claims.
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(Docket No. 27.)
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that Chase did not pay plaintiff interest on her loan escrow
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account, with the result that her payments should be considered
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“special deposits.”
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plaintiff’s constructive fraud claim for failure to state a claim
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under Federal Rule of Civil Procedure 12(b)(6).
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II.
The court denied plaintiff’s motion to remand and
Plaintiff filed her First Amended Complaint,
Plaintiff filed her SAC on May 5, 2012,
Plaintiff’s only material amendments allege
(SAC ¶¶ 7, 85.)
Chase now moves to dismiss
Discussion
To survive a motion to dismiss, a plaintiff must plead
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“only enough facts to state a claim to relief that is plausible
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on its face.”
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(2007).
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
This “plausibility standard,” however, “asks for more
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than a sheer possibility that a defendant has acted unlawfully,”
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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and “[w]here a
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complaint pleads facts that are ‘merely consistent with’ a
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defendant’s liability, it ‘stops short of the line between
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possibility and plausibility of entitlement to relief.’”
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(quoting Twombly, 550 U.S. at 557).
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plaintiff has stated a claim, the court must accept the
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allegations in the complaint as true and draw all reasonable
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inferences in favor of the plaintiff.
Id.
In deciding whether a
Scheuer v. Rhodes, 416
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U.S. 232, 236 (1974), overruled on other grounds by Davis v.
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Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322
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(1972).
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A.
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Constructive Fraud
To state a claim for constructive fraud under
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California law, a plaintiff must allege (1) a fiduciary or
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confidential relationship, (2) an act, omission, or concealment
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involving a breach of that duty, (3) reliance, and (4) resulting
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damages.
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(2d Dist. 2000).
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doctrine of constructive fraud that there exist a fiduciary or
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special relationship.”
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233 Cal. App. 3d 103, 116 (4th Dist. 1991).
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law, a financial institution does not, as a general rule, owe a
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“duty of care to a borrower when the institution’s involvement in
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the loan transaction does not exceed the scope of its
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conventional role as a mere lender of money.”
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Fed. Savs. & Loan Ass’n, 231 Cal. App. 3d 1089, 1096 (3d Dist.
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1991).
Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 414
“It is essential to the operation of the
Peterson Dev. Co. v. Torrey Pines Bank,
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Under California
Nymark v. Heart
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In its May 3, 2012, Order, this court held that Chase’s
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ancillary performance of escrow services did not give rise to a
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fiduciary duty because Chase did not exceed its duties as a money
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lender and that therefore plaintiff’s constructive fraud claim
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failed.
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interest, her payments were special deposits that created a
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fiduciary relationship between her and Chase.
Plaintiff now asserts that because Chase did not pay her
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“The payment of money may create either a debt or a
trust, depending upon the intention of the parties.”
Abrams v.
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Crocker-Citizens Nat’l Bank, 41 Cal. App. 3d 55, 59 (1st Dist.
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1974).
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the type of deposit made -- whether it is a general deposit or a
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special one.”
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858 (2d Dist. 1988).
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relationship wherein the bank owes a fiduciary duty towards the
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depositor.
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1997).
Whether a deposit creates a trust or a debt “depends upon
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Van de Kamp v. Bank of Am., 204 Cal. App. 3d 819,
Special deposits may create a trust
Goldblatt v. F.D.I.C., 105 F.3d 1325, 1329 (9th Cir.
When money is deposited in a bank without any special
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agreement, the deposit is general and California law assumes a
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creditor-debtor relationship is created between the bank and the
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depositor.
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on the depositor to overcome this presumption.
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F.3d at 1328 (citing Thompson v. Beitia, 69 F.2d 356, 358 (9th
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Cir. 1934)).
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showing that “the parties’ agreement provides that the exact
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amount of money deposited was to be returned or the money was to
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be paid out by the bank for a specific purpose, the money was to
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be segregated from other assets rather than available for the
Van de Kamp, 204 Cal. App. 3d at 858.
The burden is
Goldblatt, 105
The depositor may overcome this presumption by
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bank’s general use, and the lender was not required to pay
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interest to the depositor in consideration of its use of the
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funds.”
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of Am. Nat’l Trust & Savs. Ass’n v. Cal. Savs. & Commercial Bank,
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218 Cal. 261, 272-79 (1933)).
Id. (citing Van de Kamp, 204 Cal. App. 3d at 858; Bank
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In Goldblatt, the court found that although the parties
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agreed that the plaintiff’s deposit would be used by the bank for
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a specific purpose, the plaintiff was unable to overcome the
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presumption that his deposits were general because he allowed his
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deposits to commingle with the bank’s general funds.
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105 F.3d at 1328.
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California law, “[m]oney deposited with a bank for a particular
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purpose but, with the depositor’s consent, commingled with other
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funds is a general deposit.”
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& Savs. Ass’n v. Bd. of Supervisors of L.A. Cnty., 93 Cal. App.
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2d 75, 80 (2d Dist. 1949)).
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Goldblatt,
The Ninth Circuit explained that under
Id. (quoting Bank of Am. Nat. Trust
In Petherbridge v. Prudential Savings & Loan Ass’n, 79
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Cal. App. 3d 509 (4th Dist. 1978), the plaintiff alleged that a
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non-interest bearing impound account set up by her lender in her
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Deed of Trust created a trust relationship.
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The plaintiff asserted that her Deed of Trust created a fiduciary
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relationship because it stated her deposits would be “held in
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trust.”
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duty depended on “whether the parties intended a trust or debtor-
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creditor relationship.”
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plaintiff paid the impounds and the short time between the bank’s
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receipt of payments and payment of taxes, interest, and insurance
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premiums all supported the conclusion that “the relationship
Id.
Id. at 516, 518.
The court stated that whether there was a fiduciary
Id. at 517.
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The manner in which the
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intended was that of debtor-creditor, not trustee-beneficiary.”
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Id. at 522-24.
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general funds and that, contrary to the purpose of a trust, the
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impound account, which was put in place to enhance the security
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of the Deed of Trust, was established for the security of the
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defendant rather than for the security of the plaintiff further
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evidenced that a trust was not created.
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That the funds were commingled with defendant’s
Id.
The facts alleged here are similar to those alleged in
Petherbridge, where the court found that the parties did not have
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a fiduciary relationship.
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held onto her deposits for an extended period of time before
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paying taxes, interest, and insurance premiums and, as in
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Petherbridge, the purpose of the escrow account is to secure the
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Deed of Trust and not to financially benefit plaintiff.
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there is no allegation that plaintiff’s funds were to be
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segregated from Chase’s general funds.
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The SAC does not allege that Chase
Further,
In Marsh, on which plaintiff relies, the court noted
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that a provision in a loan agreement stating that interest would
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not be paid on impound account deposits supported the conclusion
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that the parties intended to create a trust.
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Savs. & Loan Ass’n, 66 Cal. App. 3d 674, 683 (4th Dist. 1977).
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In Marsh, however, the court found that the express language in
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the Deed of Trust and the parties’ conduct indicated intent to
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form a trust.
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Deed of Trust indicating intent to form a trust.
Id.
Marsh v. Home Fed.
Here, there is no language in plaintiff’s
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Plaintiff fails to allege facts sufficient to meet her
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burden of demonstrating that her deposits were special deposits.
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The creation of the escrow agreement to pay taxes and other
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necessary fees did not give rise to a fiduciary relationship
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between Chase and plaintiff because Chase’s conduct did not
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exceed the conventional role of a money lender.
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plaintiff’s constructive fraud claim fails and the court will
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grant Chase’s motion to dismiss the constructive fraud claim.
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B.
Accordingly,
Leave to Amend
“Valid reasons for denying leave to amend include undue
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delay, bad faith, prejudice, and futility.”
Cal. Architectural
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Bldg. Prods. v. Franciscan Ceramics, 818 F.2d 1466, 1472 (9th
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Cir. 1988).
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given, the court is not required to allow futile amendments.
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DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.
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1992); Klamath-Lake Pharm. Ass’n v. Klamath Med. Serv. Bureau,
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701 F.2d 1276, 1293 (9th Cir. 1983); see also Reddy v. Litton
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Indus., Inc., 912 F.2d 291, 296-97 (9th Cir. 1990); Rutman Wine
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Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987).
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Furthermore, while leave to amend must be freely
See
This is the second time that the court has dismissed
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plaintiff’s claim for constructive fraud for failure to state a
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claim because plaintiff failed to allege a fiduciary duty.
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court also dismissed plaintiff’s earlier fraud claim.
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has therefore been given three chances to plead a claim alleging
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some form of fraud, but is apparently unable to do so.
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without leave to amend is therefore appropriate.1
The
Plaintiff
Dismissal
IT IS THEREFORE ORDERED that Chase’s motion to dismiss
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At oral argument, plaintiff’s counsel expressed an
interest in amending the SAC to include a new and different cause
of action based on recently discovered facts. The court
expresses no position on the merits of any such claim or the
process by which plaintiff could seek to bring such a claim.
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plaintiff’s constructive fraud claim be, and the same hereby is,
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GRANTED WITH PREJUDICE.
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DATED:
August 2, 2012
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