Burke et al v. JPMorgan Chase Bank, N.A. et al

Filing 52

ORDER by Judge Samuel Conti granting in part and denying in part 43 Motion to Dismiss (sclc1, COURT STAFF) (Filed on 5/11/2015)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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DEBORAH BURKE and SEAN K.
BURKE,

)
)
)
Plaintiffs,
)
)
v.
)
)
JPMORGAN CHASE BANK, N.A; WELLS )
FARGO BANK, N.A. AS TRUSTEE FOR )
JPMORGAN MORTGAGE TRUST 2008-R2 )
MORTGAGE PASS-THROUGH
)
CERTIFICATE SERIES 2008-R2,
)
)
Defendants.
)
)
)

Case No. 13-4249 SC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS

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I.

INTRODUCTION

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Plaintiffs Deborah Burke and Sean Burke (collectively,
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"Plaintiffs") bring this action in connection with the threatened
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foreclosure of their home in Livermore, California ("the
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Property").

On January 14, 2014, the Court granted Defendants'

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motion to dismiss and gave Plaintiffs the opportunity to amend
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their complaint to "set forth specific and plausible allegations
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explaining why Defendants lack sufficient interest to foreclose on
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the Property."

ECF No. 25 ("MTD Order") at 6.

Defendants JPMorgan

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Chase Bank, N.A. ("JPMorgan") and Wells Fargo Bank, N.A. ("Wells
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Fargo") now move to dismiss Plaintiffs' first amended complaint

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("FAC") for failure to state a claim pursuant to Federal Rule of

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Civil Procedure 12(b)(6).

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fully briefed, ECF Nos. 47 ("Opp'n"), 51 ("Reply"), and appropriate

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for determination without oral argument pursuant to Civil Local

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Rule 7-1(b).

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is hereby VACATED.

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GRANTED in part and DENIED in part.

ECF No. 43 ("Mot.").

The motion is

Accordingly, the motion hearing set for May 15, 2015
For the reasons set for below, the Motion is

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United States District Court

For the Northern District of California

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II.

BACKGROUND
On August 7, 2007, Plaintiffs refinanced their existing

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mortgage on the Property, obtaining a $1,256,250 loan (the "Loan").

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ECF No. 29 ("FAC") ¶ 5, Ex. A.

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mortgage identifies Washington Mutual Bank, FA ("WaMu") as the

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lender.

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August 22, 2008, their mortgage loan was contributed to a mortgage

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backed security ("MBS") identified as JPMorgan Mortgage Trust 2008

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R-2 Pass-through Certificates Series 2008-R2 ("JPMMT 2008-R2"), of

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which Wells Fargo is the trustee.

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that WaMu sold their mortgage loan temporarily to the depositor of

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the JPMMT 2008-R2, but that the sale failed to assign the DOT.

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¶ 16.

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Plaintiff's mortgage loan, but without effectively assigning the

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[DOT] and indorsing the underlying original Promissory Note to the

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interim loan purchaser . . . ."

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Corporation "sold and securitized the pooled mortgages (including

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Plaintiffs' mortgage loan) into the JPMMT 2008-R2 Trust" on or

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before the trust's "closing date" on August 22, 2008.

Id. Ex. A ("DOT").

The deed of trust securing the

Plaintiffs allege that on or before

Id. ¶ 12.

Plaintiffs allege

Id.

As Plaintiffs, put it, "[t] his was the first sale of the

Id.

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Next, JP Morgan Acceptance

Id.

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Plaintiffs allege that this sale, too, failed to properly assign

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the DOT or original note.

Id.

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On September 25, 2008, WaMu was closed by the Office of Thrift

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Supervision, and the Federal Deposit Insurance Corporation ("FDIC")

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was named Receiver.

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certain assets and liabilities of WaMu through an asset purchase

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agreement with the FDIC.

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Plaintiffs now allege that JPMorgan does not have any legal or

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equitable interests in their loan, they applied for a loan

On September 25, 2008, JPMorgan acquired

ECF No. 17 ("RJN I") Ex. 2.

Though

United States District Court

For the Northern District of California

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modification with JPMorgan sometime in 2010.

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rejected the application in May 2010, stating that Plaintiffs'

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income was insufficient.

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modification.

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ground that Plaintiffs had the ability to pay their existing

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mortgage using cash reserves or other assets.

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Id.

FAC ¶ 21.

JPMorgan

Plaintiffs then reapplied for a loan

That application was also rejected, this time on the

Id. ¶ 22.

On October 28, 2010, a notice of default and election to sell

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("NOD") was recorded with Alameda County, stating that Plaintiffs

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were $28,024.95 in arrears.

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Id. ¶ 24, Ex. E.

Plaintiffs allege that the NOD's statement that Plaintiffs

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could contact JPMorgan about the foreclosure proceedings was false

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because JPMorgan had no right to collect mortgage payments, and

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that there is no evidence that JPMorgan is a valid loan servicer or

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beneficiary of Plaintiffs' mortgage.

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that because their loan was sold to the MBS trust before JPMorgan

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acquired the assets of WaMu, JPMorgan did not succeed to the

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servicing rights of WaMu.

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certifying that JPMorgan had complied with California law by

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contacting the borrower to discuss the borrower's financial

Id.

Id. ¶ 24.

Plaintiffs reason

The NOD contained a statement

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situation and to explore options for the borrower to avoid

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foreclosure.

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contacted by a "valid mortgagee" because Defendants JPMorgan and

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Wells Fargo were not mortgagees or authorized agents.

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Id. Ex. E.

Plaintiffs allege that they were never

In April 2011 and April 2012, notices of trustee sales were

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recorded with Alameda County.

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trustee's sale indicates that the unpaid balance on the loan was

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$1,395,095.88.

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instruments, like the NOD, are null and void.

Id. Ex. F.

Id. ¶¶ 28, 30.

The first notice of

Plaintiffs allege that these
Id. ¶ 28-31.

It is

United States District Court

For the Northern District of California

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unclear from the pleadings whether the foreclosure sale has yet

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taken place.

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III. LEGAL STANDARD

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A.

Motion to Dismiss

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A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 679 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

"Dismissal can be based

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.

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Twombly, 550 U.S. 544, 555 (2007)).

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B.

Rule 9(b)

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Claims sounding in fraud are subject to the heightened

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pleading requirements of Federal Rule of Civil Procedure 9(b),

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which requires that a plaintiff alleging fraud "must state with

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particularity the circumstances constituting fraud."

See Kearns v.

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Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009).

"To satisfy

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Rule 9(b), a pleading must identify the who, what, when, where, and

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how of the misconduct charged, as well as what is false or

United States District Court

For the Northern District of California

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misleading about [the purportedly fraudulent] statement, and why it

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is false."

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Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks

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and citations omitted).

United States ex rel. Cafasso v. Gen. Dynamics C4 Sys.,

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IV.

DISCUSSION
The gravamen of all seven of Plaintiffs' claims is that

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Defendants do not have a beneficial interest in Plaintiffs'

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mortgage either because (1) the securitization of the mortgage

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failed, or (2) Plaintiffs' mortgage was not transferred as part

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JPMorgan's purchase of WaMu's assets because the mortgage was

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securitized and sold before the agreement took effect.

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The Court already rejected Plaintiffs' first theory as legally

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unsound.

As the Court explained, "Plaintiffs lack standing to

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challenge the securitization process because they were not parties

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to the agreement that securitized the note."

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Plaintiffs have pleaded those claims again, despite the Court's

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clear holding that they fail as a matter of law.

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Opp'n at 7-10.

See MTD Order at 4.

See FAC ¶ 33;

To the extent that any of Plaintiffs' claims are

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premised on the failed securitization of their mortgage alone,

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those claims are DISMISSED with prejudice.
The Court previously rejected Plaintiffs' second theory

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because it found that the original complaint did not plausibly

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allege WaMu had transferred its interest in the DOT when it sold

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the loan.

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for wrongful foreclosure based on allegations that sale of the DOT

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precluded Defendants from retaining a beneficial interest in that

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DOT.

This Court has held that a plaintiff may state a claim

See Subramani v. Wells Fargo Bank N.A., C 13-1605 SC, 2013 WL

United States District Court

For the Northern District of California

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5913789, at *4 (N.D. Cal. Oct. 31, 2013).

Though Plaintiffs' FAC

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is verbose, unclear, and at times appears internally inconsistent,

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Plaintiffs now allege, at the very least, that:

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WAMU irrevocably sold all right, title and interest in
Plaintiffs' mortgage loan, for value received, to the
JPMorgan Mortgage Trust 2008-R2 Mortgage Pass-through
Certificates Series 2008-R2 ("JPMMT 2008-R2"), a private
label mortgage-backed securities trust with a Real Estate
Mortgage Investment Conduit election and continuing
qualification.

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FAC ¶ 12.

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process through which WaMu allegedly sold their loan.

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12-19.

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Plaintiffs provide significant detail regarding the
See id. ¶¶

It is true that "[t]here is no stated requirement in

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California's non-judicial foreclosure scheme that requires a

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beneficial interest in the Note to foreclose.

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broadly allows a trustee, mortgagee, beneficiary, or any of their

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agents to initiate non-judicial foreclosure."

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Estate Indus. Grp., 713 F. Supp. 2d 1092, 1099 (E.D. Cal. 2010).

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However, Plaintiffs now sufficiently allege that WaMu not only had

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no beneficial interest in the Loan, but that it was no longer the

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Rather, the statute

Lane v. Vitek Real

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mortgagee when JPMorgan purchased its assets.

Because Plaintiffs

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now allege that WaMu sold its entire interest in the Loan, the

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facts render plausible the possibility that Defendants lack

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standing to foreclose on the mortgage.

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WL 5913789, at *4; Javaheri v. JPMorgan Chase Bank, N.A., No. CV10-

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08185 ODW FFMX, 2011 WL 2173786, at *5 (C.D. Cal. June 2, 2011)

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("the abovementioned [similar] facts regarding the transfer of

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Plaintiff's Note prior to JPMorgan's acquisition of WaMu's assets

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raise Plaintiff's right to relief above a speculative level").

See, e.g., Subramani, 2013

United States District Court

For the Northern District of California

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Court proceeds to discuss the effect of this finding on each of

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The

Plaintiffs' claims in turn.

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A.

Wrongful Foreclosure

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Defendants argue that Plaintiffs' first cause of action must

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be dismissed because Plaintiffs do not allege any irregularity or

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illegality in the foreclosure process.

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however, the Court finds that Plaintiffs now sufficiently allege

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that WaMu ceded any interest upon which it might foreclose when it

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sold the Loan in 2008.

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wrongful foreclosure because Defendants were not the "trustee,

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mortgagee or beneficiary or any of their authorized agents,"

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Plaintiffs state a claim and Defendants' motion is DENIED.

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Cal. Civ. Code § 2924(a)(1).

As discussed above,

To the extent that Plaintiffs allege

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B.

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See

Quiet Title

Defendants argue that Plaintiffs' claim for wrongful

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foreclosure must be dismissed because "the allegations concerning

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the 'holder of the note' have been invalidated."

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Because the Court finds that Plaintiffs have sufficiently alleged

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that Defendants are not the holders of the note, this argument

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Mot at 5.

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fails.

The motion is DENIED as to Plaintiffs' second claim, to the

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extent that claim is premised on the allegations that Defendants do

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not have any interest in the note as a result of WaMu's sale of the

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Loan.

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C.

Slander of Title

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"The elements of a cause of action for slander of title are

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(1) a publication, (2) which is without privilege or justification,

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(3) which is false, and (4) which causes direct and immediate

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pecuniary loss."

Alpha & Omega Dev., LP v. Whillock Contracting,

United States District Court

For the Northern District of California

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Inc., 200 Cal. App. 4th 656, 664 (Cal. Ct. App. 2011) (internal

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quotation marks omitted) (emphasis in original).

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Code Section 47 sets out the general definition of a privileged

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publication, which includes a publication made "[i] n any (1)

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legislative proceeding, (2) judicial proceeding, (3) in any other

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official proceeding authorized by law, or (4) in the initiation or

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course of any other proceeding authorized by law and reviewable

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pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of

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Part 3 of the Code of Civil Procedure . . . ."

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47(b).

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communication, without malice, to a person interested therein, (1)

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by one who is also interested . . . ."

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California Civil

Cal. Civ. Code §

Section 47 also protects statements made "[i]n a

Plaintiffs allege that Defendants slandered their title in

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several documents, including letters regarding the loan

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modification.

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do not contest -- statements regarding the loan modification do not

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slander Plaintiffs' title.

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Plaintiffs also allege that Defendants slandered their title

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through the foreclosure documents.

FAC ¶ 47.

As Defendants point out -- and Plaintiffs

See Mot. at 6, Opp'n at 12-13.

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FAC ¶ 47.

Under California

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law, "the filing of a notice of default is privileged, except when

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published with malice."

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0572 EMC, 2013 WL 4103606, at *5 (N.D. Cal. Aug. 12, 2013).

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requires that the publication was motivated by hatred or ill will

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or that defendants lacked reasonable grounds for belief in truth of

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publication and therefore acted with reckless disregard for

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plaintiff's rights."

Malice

Id. (internal quotation marks omitted).

Plaintiffs allege that the statements in the foreclosure

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Barrionuevo v. Chase Bank, N.A., No. C-12-

documents "were made with malicious intent."

FAC ¶ 48.

That

United States District Court

For the Northern District of California

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statement alone is a conclusory assertion not entitled to an

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assumption of truth.

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allegations that Defendants knew the statements in the foreclosure

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documents to be false.

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"knowingly false"), 29 ("CHASE and WELLS FARGO knew that they are

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not valid beneficiaries or servicers"). 1

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allegations make clear that WaMu attempted to sell, and Defendants

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attempted to buy, a large portion of WaMu's assets, which purported

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to include Plaintiffs' mortgage.

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allegations that Defendants did not act in good faith in purchasing

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WaMu's assets, and there are no facts explaining why JPMorgan

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Plaintiffs briefly make more specific

See id. ¶¶ 25 (the statements were

However, Plaintiffs'

Id. at p.2.

There are no

Plaintiffs also allege that Washington Mutual Bank, FA changed
its name to Washington Mutual Bank in April of 2005. See id.
Plaintiffs apparently assert that WaMu therefore ceased to exist as
a legal entity and that JPMorgan knew it could not buy any assets
(including Plaintiffs' loan) from WaMu. Plaintiffs in foreclosure
cases like this one have repeatedly advanced that theory, and
courts have repeatedly rejected it. See, e.g., Lanini v. JPMorgan
Chase Bank, No. 2:13-CV-00027 KJM, 2014 WL 1347365, at *3 (E.D.
Cal. Apr. 4, 2014) ("Plaintiffs have cited nothing to support their
claim that the bank's change of name means the bank itself ceased
to exist."). The Court agrees with the numerous other judges who
have rejected this theory and holds that Plaintiffs' claims
regarding JPMorgan's chain of title to the mortgage and Defendants'
knowledge of their lack of interest in the Loan may not be premised
on WaMu's name change in 2005.

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should have known that WaMu lacked an interest in Plaintiffs' loan.

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The Court therefore finds implausible Plaintiffs' bare assertions

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that Defendants knew that the statements in the foreclosure

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documents were false.

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allegations render plausible the possibility that Defendants lacked

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reasonable grounds for belief in the truth of the statements

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included in the foreclosure documents.

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statements in those documents were privileged as a matter of law,

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and Plaintiffs' claim fails.

The Court cannot find that Plaintiffs'

Therefore, Defendants'

Defendants' motion is GRANTED as to

United States District Court

For the Northern District of California

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Plaintiffs' slander of title claim, and the claim is DISMISSED with

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leave to amend.

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D.

Fraud

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"The elements which must be pleaded to plead a fraud claim are

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(a) misrepresentation (false representation, concealment or

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nondisclosure); (b) knowledge of falsity (or 'scienter'); (c)

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intent to defraud, i.e., to induce reliance; (d) justifiable

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reliance; and (e) resulting damage."

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154 Cal. App. 4th 347, 363 (Cal. Ct. App. 2007).

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governed by the stricter pleading standards of Federal Rule of

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Civil Procedure 9(b).

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Philipson & Simon v. Gulsvig,
Fraud claims are

Plaintiffs allege that the notice of default and election to

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sell under deed of trust contained false statements.

Plaintiffs

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claim those statements are false because Defendants knew that they

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were not valid beneficiaries of Plaintiffs' loan or owners of

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Plaintiffs' debt.

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does not contain sufficient factual allegations to plausibly

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establish that Defendants had knowledge of WaMu's alleged sale of

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the mortgage.

For the reasons discussed above, Plaintiffs' FAC

Instead, Plaintiffs provide only bare assertions

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that Defendants had knowledge of the sale.

Plaintiffs do not

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explain when or how Defendants obtained that knowledge, nor do they

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explain why Defendants should have known that WaMu's attempt to

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sell Plaintiffs' debt to JPMorgan was null and void.

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Plaintiffs have failed to plead scienter with the requisite

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particularity.

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fraud claim, and the claim is DISMISSED with leave to amend.

Thus

Defendants' motion is GRANTED as to Plaintiffs'

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E.

Cancellation of Instruments

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Defendants' argument that Plaintiffs' cancellation of

United States District Court

For the Northern District of California

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instruments claim should be dismissed is again premised on the

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assumption that Plaintiffs fail to allege WaMu's sale of the loan.

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See Opp'n at 8-9.

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adequately allege that their loan was sold, this argument fails.

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Defendants' motion is DENIED as to the cancellation of instruments

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claim.

Because the Court finds that Plaintiffs now

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F.

Violation of Section 2923.5

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California Civil Code Section 2923.5 requires that a "mortgage

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servicer shall contact the borrower in person or by telephone in

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order to assess the borrower's financial situation and explore

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options for the borrower to avoid foreclosure" before recording a

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notice of default.

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allege that, because no defendant was a legitimate mortgagee,

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beneficiary, trustee, or authorized agent, Plaintiffs were never

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contacted by a legitimate mortgage servicer.

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Cal. Civ. Code § 2923.5(a)(2).

Plaintiffs

FAC ¶¶ 68-71.

Defendants first argue that Plaintiffs' claim fails because

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JPMorgan was the mortgagee and Wells Fargo was its authorized

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agent.

That argument is insufficient because Plaintiffs have

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pleaded that WaMu sold all of its interest in the loan before

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JPMorgan purchased WaMu's assets.
Next, Defendants argue that Plaintiffs are required to allege

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that they are willing and able to tender the amount due on the

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Loan.

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FAC does not allege tender.

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allegation of such tender in the complaint that attacks the

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validity of the sale, the complaint does not state a cause of

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action." 2

Defendants argue that Plaintiffs' claim fails because the

Opp'n at 8.

According to Defendants, "[w]ithout an

The California Court of Appeal has

United States District Court

For the Northern District of California

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explained why the tender requirement does not apply to Section

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2923.5 claims: "the whole point of section 2923.5 is to create a

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new, even if limited, right to be contacted about the possibility

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of alternatives to full payment of arrearages.

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contradictory to thwart the very operation of the statute if

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enforcement were predicated on full tender."

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Court, 185 Cal. App. 4th 208, 225 (2010).

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borrower's action attacks the validity of the underlying debt, a

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tender is not required since it would constitute an affirmation of

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the debt."

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Ct. App. 2011).

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Plaintiffs' claims allege that Defendants do not own any of

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Plaintiffs' debt.

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apply the tender requirement where plaintiff alleges that the

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defendant lacks authority to foreclose on the property and, thus,

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that any foreclosure sale would be void rather than merely

It would be

Mabry v. Superior

Moreover, "if the

Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 112 (Cal.
Thus the tender rule does not apply here, because

Additionally, "several courts have refused to

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It is unclear why Defendants make this argument only in
opposition to Plaintiffs' Section 2923.5 claim and not all of
Plaintiffs' claims. Regardless, some of the Court's reasons for
rejecting Defendants' argument apply to all of Plaintiffs' claims.

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voidable."

Rockridge Trust v. Wells Fargo, N.A., 985 F. Supp. 2d

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1110, 1147 (N.D. Cal. 2013) (collecting cases).

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to dismiss Plaintiffs' Section 2923.5 claim is DENIED.

Defendants' motion

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G.

Unfair Competition

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California's Unfair Competition Law ("UCL") prohibits unfair

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competition, which is defined as "any unlawful, unfair or

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fraudulent business act or practice."

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17200.

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Cel-Tech Comm'cns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163,

Cal. Bus. & Prof. Code §

Each one of these prongs is a different cause of action.

United States District Court

For the Northern District of California

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180.

Plaintiffs bring claim under the "fraudulent" prong of the

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UCL.

See FAC ¶¶ 74-75.

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requirements apply to claims under the UCL's fraudulent prong.

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Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009).

The Rule 9(b) heightened pleading
See

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As described above, the Court finds that Plaintiffs have

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failed to plead fraud with the specificity required by Rule 9(b).

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Consequently, Plaintiffs fail to state a UCL claim as well.

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Defendants' motion is GRANTED as to Plaintiffs' UCL claim, and this

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claim is DISMISSED with leave to amend.

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H.

Unjust Enrichment

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Defendants' arguments in favor of dismissal of the unjust

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enrichment claim are again premised on the Court's rejection of

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Plaintiffs' allegations that WaMu sold the Loan.

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motion is DENIED as to Plaintiffs' unjust enrichment claim.

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I.

Defendants'

Breach of Contract, Equal Opportunity Act, and Fair

Credit Reporting Act
Plaintiffs' breach of contract, equal opportunity act, and

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fair credit reporting act claims were not brought in the original

28

complaint.

The Court granted Plaintiffs leave to amend their

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complaint only to add facts alleging that Defendants' lack

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sufficient interest to foreclose on the Property, not to add

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additional claims.

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equal opportunity act claims are dismissed without prejudice.

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Plaintiffs may make a proper motion for leave to amend if they wish

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to add new claims.

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Credit Reporting Act claim.

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therefore DISMISSED with prejudice.

Accordingly, Plaintiffs' breach of contract and

Plaintiffs have agreed to withdraw their Fair
See Opp'n at 19.

That claim is

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United States District Court

For the Northern District of California

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V.

CONCLUSION
For the foregoing reasons, Defendants JPMorgan Chase Bank, N.A

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and Wells Fargo Bank, N.A.'s Motion to Dismiss is GRANTED in part

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and DENIED in part.

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prejudice to the extent they are premised on deficiencies in the

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securitization process.

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Fair Credit Reporting Act is DISMISSED with prejudice.

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claims for breach of contract and violation of the Equal Credit

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Opportunity Act are DISMISSED without prejudice.

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claims for wrongful foreclosure, quiet title, cancelation of

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instruments, violation of Section 2923.5, and unjust enrichment

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survive to the extent that they are premised on the theory that

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WaMu sold its entire interest in the Loan in 2008.

All of Plaintiffs' claims are DISMISSED with

Plaintiffs' claim for violation of the
Plaintiffs'

Plaintiffs'

Plaintiffs' claims for slander of title, fraud, and unfair

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competition are DISMISSED with leave to amend.

Plaintiffs may

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amend those claims to add allegations sufficient to allege fraud

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under the standards set out by Federal Rule of Civil Procedure

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9(b).

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allegations, they must do so within thirty (30) days of the

If plaintiffs choose to amend their complaint to add such

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signature date of this Order.

Failure to amend within thirty days

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may result in dismissal of those claims with prejudice.

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IT IS SO ORDERED.

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May 11, 2015

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UNITED STATES DISTRICT JUDGE

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United States District Court

For the Northern District of California

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