Galvan, Jr. v. JPMorgan Chase Bank, N.A., et al.

Filing 11

ORDER signed by District Judge Troy L. Nunley on 9/10/18 ORDERING for the reasons set forth above, Defendants' Motion to Dismiss is hereby GRANTED without leave to amend. (ECF No. 4 .) The Clerk of Court is directed to close the case. CASE CLOSED(Becknal, R)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 FELIPE HALILI GALVAN, JR., 12 Plaintiff, 13 14 No. 2:17-cv-01823-TLN-EFB v. ORDER JPMORGAN CHASE BANK, N.A., et al., 15 Defendants. 16 17 This matter is before the Court pursuant to Defendant JPMorgan Chase Bank, N.A. 18 (“Chase”) and U.S. Bank, N.A.’s (“U.S. Bank”) (collectively referred to as “Defendants”) Motion 19 to Dismiss. (ECF No. 4.) Plaintiff Felipe Halili Galvan, Jr. (“Plaintiff”) opposes Defendants’ 20 Motion. (ECF No. 6.) After carefully considering the parties’ briefing and for the reasons set 21 forth below, the Court hereby GRANTS Defendants’ Motion to Dismiss. (ECF No. 4). 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 1 FACTUAL AND PROCEDURAL BACKGROUND1 1 I. 2 In June 2006, Plaintiff executed a 40-year adjustable rate mortgage relating to real 3 property at 489 Arguello Drive in Benicia, California (“Property”). (Compl., ECF No. 1-1 at 11, 4 ¶ 6.) The Deed of Trust identifies Washington Mutual Bank F.A. as the lender (“Washington 5 Mutual”). (ECF No. 1-1 at 11, ¶ 6.) Washington Mutual failed in 2008, and Chase acquired the 6 company from the FDIC in 2008. (ECF No. 1-1 at 13, ¶ 10.) Thus, Chase acquired Washington 7 Mutual’s ownership and servicing obligations as to Plaintiff’s loan. (ECF No. 1-1 at 13, ¶ 10.) 8 In February 2009, LSI Title Company, as an agent for the beneficiary, issued Plaintiff a 9 Notice of Default. (ECF No. 1-1 at 13, ¶ 13.) In the fall of 2009, Plaintiff started a three-month 10 Trial Payment Plan with Chase Home Finance, the arm of Chase that financed the loan. (ECF 11 No. 1-1 at 14, ¶ 16.) Plaintiff made payments in November and December 2009, but Chase 12 Home Finance advised Plaintiff that his January 2010 payment was overdue. (ECF No. 1-1 at 15, 13 ¶ 17.) Plaintiff alleges he contacted Chase Home Finance and was given a grace period to submit 14 the final check. (ECF No. 1-1 at 15, ¶ 17.) In February 2010, Plaintiff alleges Chase Home 15 Finance returned all three of Plaintiff’s uncashed checks. (ECF No. 1-1 at 15, ¶ 19.) Plaintiff 16 alleges Chase had no intention of honoring the terms of the payment plan or providing Plaintiff 17 with a permanent loan modification. (ECF No. 1-1 at 15, ¶ 19.) Rather, Plaintiff alleges Chase 18 acted in bad faith while it continued to pursue foreclosure of Plaintiff’s home. (ECF No. 1-1 at 19 15, ¶ 19.) Chase sold the property in a foreclosure sale on February 24, 2010. (ECF No. 1-1 at 20 15–16, ¶ 20.) Plaintiff also alleges Washington Mutual securitized Plaintiff’s loan through sale to 21 22 WaMu Mortgage Pass-Through Certificates Series 2006-AR17 (“WaMu 2006-AR17”) in 2008. 23 (ECF No. 1-1 at 17, ¶ 30.) In other words, Plaintiff alleges Washington Mutual sold Plaintiff’s 24 loan to WaMu 2006-AR17 before Chase acquired Washington Mutual’s assets. (ECF No. 1-1 at 25 17, ¶ 30.) Therefore, according to Plaintiff, Chase had no authority to foreclose. (ECF No. 1-1 at 26 17, ¶ 30.) 27 The Court takes the following recitation of facts, sometimes verbatim, from Plaintiff’s Complaint. (ECF No. 1-1 at 10–25.) 1 28 2 1 Plaintiff further alleges that any applicable statute of limitations is subject to equitable 2 tolling because he is not in the banking industry and knew nothing about the securitization of 3 mortgage loans until 2016. (ECF No. 1-1 at 18, ¶ 33.) In the fall of 2016, Plaintiff alleges a 4 friend introduced Plaintiff to a forensic mortgage loan auditor. (ECF No. 1-1 at 18, ¶ 33.) The 5 auditor issued Plaintiff a report allegedly showing Plaintiff’s mortgage had been securitized, and 6 thus, Chase held no interest in his loan at the time of foreclosure. (ECF No. 1-1 at 18, ¶ 33.) 7 Plaintiff filed his Complaint on August 2, 2017. (ECF No. 1-1 at 10.) He alleges four 8 causes of action: 1) wrongful foreclosure; 2) violation of California Business & Professions Code 9 § 17200 (“Cal. Bus. & Prof. Code § 17200”); 3) negligence; and 4) unjust enrichment. (ECF No. 10 1-1 at 10.) Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) 11 (“Rule 12(b)(6)”). (ECF No. 4.) Defendants challenge Plaintiff’s Complaint on several grounds, 12 but their threshold argument is that the applicable statute of limitations bars each of Plaintiff’s 13 claims. (ECF No. 4 at 13–15.) 14 II. 15 A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 16 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Federal Rule of 17 Civil Procedure 8(a) requires that a pleading contain “a short and plain statement of the claim 18 showing that the pleader is entitled to relief.” See Ashcroft v. Iqbal, 556 U.S. 662, 678–79 19 (2009). Under notice pleading in federal court, the complaint must “give the defendant fair notice 20 of what the claim . . . is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 21 544, 555 (2007) (internal quotations omitted). “This simplified notice pleading standard relies on 22 liberal discovery rules and summary judgment motions to define disputed facts and issues and to 23 dispose of unmeritorious claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002). 24 STANDARD OF LAW On a motion to dismiss, the factual allegations of the complaint must be accepted as true. 25 Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every 26 reasonable inference to be drawn from the “well-pleaded” allegations of the complaint. Retail 27 Clerks Int’l Ass’n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege 28 “‘specific facts’ beyond those necessary to state his claim and the grounds showing entitlement to 3 1 relief.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads 2 factual content that allows the court to draw the reasonable inference that the defendant is liable 3 for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. 544, 556 (2007)). 4 Nevertheless, a court “need not assume the truth of legal conclusions cast in the form of 5 factual allegations.” United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 6 1986). While Rule 8(a) does not require detailed factual allegations, “it demands more than an 7 unadorned, the defendant–unlawfully–harmed–me accusation.” Iqbal, 556 U.S. at 678. A 8 pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the 9 elements of a cause of action.” Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678 10 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory 11 statements, do not suffice.”). Moreover, it is inappropriate to assume that the plaintiff “can prove 12 facts that it has not alleged or that the defendants have violated the . . . laws in ways that have not 13 been alleged[.]” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 14 459 U.S. 519, 526 (1983). 15 Ultimately, a court may not dismiss a complaint in which the plaintiff has alleged “enough 16 facts to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 697 (quoting 17 Twombly, 550 U.S. at 570). Only where a plaintiff has failed to “nudge[] [his or her] claims . . . 18 across the line from conceivable to plausible[,]” is the complaint properly dismissed. Id. at 680. 19 While the plausibility requirement is not akin to a probability requirement, it demands more than 20 “a sheer possibility that a defendant has acted unlawfully.” Id. at 678. This plausibility inquiry is 21 “a context–specific task that requires the reviewing court to draw on its judicial experience and 22 common sense.” Id. at 679. 23 If a complaint fails to state a plausible claim, “‘[a] district court should grant leave to 24 amend even if no request to amend the pleading was made, unless it determines that the pleading 25 could not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 203 F.3d 1122, 26 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United States, 58 F.3d 484, 497 (9th Cir. 1995)); 27 see also Gardner v. Marino, 563 F.3d 981, 990 (9th Cir. 2009) (finding no abuse of discretion in 28 denying leave to amend when amendment would be futile). Although a district court should 4 1 freely give leave to amend when justice so requires under Rule 15(a)(2), “the court’s discretion to 2 deny such leave is ‘particularly broad’ where the plaintiff has previously amended its 3 complaint[.]” Ecological Rights Found. v. Pac. Gas & Elec. Co., 713 F.3d 502, 520 (9th Cir. 4 2013) (quoting Miller v. Yokohama Tire Corp., 358 F.3d 616, 622 (9th Cir. 2004)). 5 III. ANALYSIS 6 Plaintiff’s Complaint alleges four separate causes of action against Defendants: 1) 7 wrongful foreclosure; 2) violation of Cal. Bus. & Prof. Code § 17200; 3) negligence; and 4) 8 unjust enrichment. (ECF No. 1-1 at 10.) Defendants’ move to dismiss all Plaintiff’s causes of 9 action for failure to state a claim under Rule 12(b)(6). (Defs’ Mot. to Dismiss, ECF No. 4 at 16– 10 22.) Defendants further argue this Court should dismiss the Complaint because the applicable 11 statute of limitations bars each of Plaintiff’s claims. (ECF No. 4 at 13–15.) Plaintiff counters that 12 the statute of limitations for each claim was equitably tolled under the discovery rule. (Pl’s 13 Opp’n to Def’s Mot. to Dismiss, ECF No. 6 at 12–14.) Because the Court finds the statute of 14 limitations issue to be dispositive in this case, it does not address the parties’ remaining 15 arguments. Under California law,2 a cause of action accrues upon completion of all its elements, 16 17 which usually occurs upon the date of a plaintiff’s injury. Platt Elec. Supply, Inc. v. EOFF Elec., 18 Inc., 522 F.3d 1049, 1054 (9th Cir. 2008). But this general rule is subject to the discovery rule 19 exception, which tolls a statute of limitation until the plaintiff either discovers or has reason to 20 discover the existence of a claim. Id. At that point, the plaintiff must conduct a reasonable 21 investigation and will be charged with knowledge that would have been revealed upon such 22 investigation. Id. 23 Defendants argue that the statute of limitations is 1) three years for a wrongful foreclosure 24 under California Code of Civil Procedure (“CCP”) § 338; 2) four years for a violation of Cal. 25 Bus. & Prof. Code § 17200; 3) two years for negligence under CCP § 335.1; and 4) three years 26 2 27 28 The substantive law of the forum state applies to an action removed to federal district court for diversity jurisdiction. Stanford Ranch, Inc. v. Maryland Cas. Co., 89 F.3d 618, 624 (9th Cir. 1996). The instant action was removed from California state court to federal court based on diversity jurisdiction under 28 U.S.C. § 1332. (ECF No. 1.) Therefore, California law applies. 5 1 for unjust enrichment under CCP § 338. (ECF No. 4 at 13–15.) Plaintiff only disputes the statute 2 of limitations for negligence, stating it should be three years under CCP § 338 because his claim 3 is rooted in fraud. (ECF No. 6 at 12.) Regardless of the dispute, neither party alleges that any of 4 Plaintiff’s claims have a statute of limitations running longer than four years. Plaintiff’s claims 5 stem from allegations that Chase proceeded with loan modification in bad faith and did not have 6 an interest in Plaintiff’s loan at the time of foreclosure. (ECF No. 6 at 8–11.) The wrongful 7 foreclosure was completed by the foreclosure sale on February 24, 2010, but Plaintiff did not file 8 suit until over seven years later, on August 2, 2017. Thus, the Court finds that the Plaintiff’s 9 claims are time-barred unless the discovery rule applies. 10 The Court now turns to the discovery rule. Plaintiff argues that the discovery rule tolled 11 the statute of limitations for each claim because he did not discover and had no reason to suspect 12 the wrongful nature of the foreclosure until 2016, when he hired a forensic mortgage loan auditor. 13 (ECF No. 6 at 13.) The audit allegedly revealed for the first time that Chase did not have an 14 interest in Plaintiff’s loan at the time of foreclosure. (ECF No. 6 at 13.) Plaintiff asserts he could 15 not have discovered this injury sooner because he is unfamiliar with the banking industry and 16 securitization of loans. (ECF No. 6 at 13.) Defendants argue that Plaintiff’s explanation for 17 delayed discovery is inadequate, and the claims accrued in 2010 because Plaintiff was aware of 18 his injury upon the foreclosure of the property. (ECF No. 4 at 13–15.) 19 The instant case mirrors another case recently decided in this district. Herfurth v. 20 CitiMortgage, Inc., No. 2:14-cv-01037-JAM-CKD, 2014 WL 5797446, *1 (E.D. Cal. 2014). In 21 Herfurth, the plaintiffs obtained a loan for real property through CitiMortgage (“defendant”) in 22 2005. Id. at *1. In 2008, the plaintiffs sought a loan modification, but the defendant informed the 23 plaintiffs that they would only be considered for modification if they stopped making loan 24 payments. Id. After the plaintiffs defaulted on the loan, the defendant sold the property in a 25 foreclosure sale in 2009. Id. The plaintiffs further alleged that an improper securitization attempt 26 took place before the foreclosure, which failed to conform to statutorily and contractually 27 required procedure. Id. 28 /// 6 1 The plaintiffs did not file a complaint until 2014, over five years after the foreclosure 2 sale. Id. at *2. They explained that they had no way of knowing about the securitization of their 3 loan until 2013, when they hired a securitization auditor to investigate the history of the loan. Id. 4 at *1. The complaint alleged 1) wrongful foreclosure, 2) conversion, and 3) a violation of Cal. 5 Bus. & Prof. Code § 17200, all stemming from the alleged securitization of the plaintiffs’ loan. 6 Id. at *2. 7 The issue before the district court was whether the plaintiffs’ claims were time-barred, or 8 whether the discovery rule tolled the statute of limitations for each claim. Id. When explaining 9 the discovery rule, the Herfurth court noted, “we look to whether the plaintiffs have reason to at 10 least suspect that a type of wrongdoing has injured them.” Id. at *3 (quoting Platt Elec. Supply, 11 Inc., 522 F.3d at 1055) (emphasis added). The court then stated, “the Ninth Circuit has rejected a 12 ‘hypertechnical approach to the application of the discovery rule:’ a plaintiff is ‘required to 13 conduct a reasonable investigation after becoming aware of an injury,’ even if it is not ultimately 14 that specific injury which gives rise to her cause of action.” Herfurth, 2014 WL 5797446 at *3 15 (quoting Platt Elec. Supply, Inc., 522 F.3d at 1055). 16 The Herfurth court found that the plaintiffs became aware of an injury during the failed 17 loan modification and subsequent foreclosure in 2009, and a securitization audit would have been 18 part of a reasonable investigation in response to that injury. Herfurth, 2014 WL 5797446 at *3–4. 19 Furthermore, the court emphasized that nothing prevented plaintiffs from investigating the issue 20 or retaining counsel at a sooner date. Id. at *4. The court determined that had the plaintiffs 21 reasonably investigated after the injury in 2009, they would have discovered the securitization- 22 based causes of action and could have filed a complaint within the statute of limitations period. 23 Id. Therefore, the Herfurth court declined to apply the discovery rule and held that the statute of 24 limitations barred each of the plaintiffs’ claims. Id. 25 This Court agrees with the reasoning from Herfurth and Platt and now applies that 26 reasoning to the instant case. A statute of limitations is triggered when a plaintiff at least suspects 27 an injury. Platt Elec. Supply, Inc., 522 F.3d at 1054. By Plaintiff’s own admission, he was aware 28 of an injury in 2010. (ECF No. 6 at 10.) Like the Herfurth plaintiffs, Plaintiff here alleges his 7 1 attempted loan modification failed due to bad faith by the lender. (ECF No. 6 at 10.) According 2 to Plaintiff, he started a three-month Trial Payment Plan in 2009. (ECF No. 6 at 10.) Plaintiff 3 alleges he made payments in November and December 2009, but was advised that his January 4 2010 payment was overdue. (ECF No. 6 at 10.) Despite submitting the third check for the 5 payment plan, Plaintiff alleged Chase Home Finance returned all three of Plaintiff’s uncashed 6 checks, and Chase sold the property in a foreclosure sale shortly thereafter. (ECF No. 6 at 10.) 7 As Plaintiff put it, he believed Chase acted in “bad faith” and “had no intention of honoring the 8 terms [of the payment plan] or providing Plaintiff with a permanent loan modification.” (ECF 9 No. 6 at 10.) Thus, based on the Plaintiff’s own words, the Court finds that he discovered or at 10 least suspected an injury prior to the foreclosure sale in February 2010. 11 The discovery rule requires that a plaintiff proceed with a reasonable investigation upon 12 discovering or suspecting an injury, as the plaintiff will be charged with knowledge that would 13 have been revealed upon such investigation. Platt Elec. Supply, Inc., 522 F.3d at 1054. As the 14 court found in Herfurth, a securitization audit falls within the scope of a reasonable investigation 15 after Plaintiff’s failed loan modification and subsequent foreclosure in 2010. Herfurth, 2014 WL 16 5797446 at *4. Nothing prevented Plaintiff from seeking counsel sooner than 2016, and 17 Plaintiff’s previous unfamiliarity with the banking industry and securitization loans does not 18 excuse his inaction. Like Herfurth, had Plaintiff commenced an audit sooner, he would have 19 discovered the alleged injury with sufficient time to file a complaint within the statute of 20 limitations for each claim. Id. Yet Plaintiff waited until 2016 to hire a forensic mortgage loan 21 auditor and did not file a complaint until 2017. The allegations in Plaintiff’s Complaint suggest 22 that the information giving rise to his claims was available upon reasonable investigation after his 23 foreclosure in 2010, which was seven years before he filed the complaint and well within the 24 longest statute of limitations of four years. For the foregoing reasons, the Court finds that 25 Plaintiff cannot invoke the discovery rule, and the applicable statute of limitations bars each of 26 Plaintiff’s claims. Therefore, Defendants’ Motion to Dismiss is granted. Based on these 27 findings, the Court concludes that amendment of the complaint would be futile. Thus, it declines 28 to grant Plaintiff leave to file an amended complaint. 8 1 IV. 2 For the reasons set forth above, Defendants’ Motion to Dismiss is hereby GRANTED 3 4 5 CONCLUSION without leave to amend. (ECF No. 4.) The Clerk of Court is directed to close the case. IT IS SO ORDERED. Dated: September 10, 2018 6 7 8 9 Troy L. Nunley United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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