Bustamante et al v. J.P. Morgan Chase, N.A. et al

Filing 10

ORDER Dismissing Fair Debt Collection Practices Act Claim and ORDER of Remand. The Bustamantes' FDCPA claim is DISMISSED WITH PREJUDICE. Pursuant to § 1367(c), the Court declines to exercise supplemental jurisdiction over the Bustamantes� 39; negligence and UCL claims, and these are REMANDED to the Superior Court of California for the County of San Diego. All dates are vacated and all other pending motions and requests are denied as moot. Signed by Judge Larry Alan Burns on 3/4/14. (cc: Superior Court of CA, San Diego) (kaj)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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CESAR BUSTAMANTE and CYNTHIA
BUSTAMANTE,

CASE NO. 13-cv-1123-LAB (DHB)

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Plaintiffs,
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vs.

ORDER DISMISSING FAIR DEBT
COLLECTION PRACTICES ACT
CLAIM; AND

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J.P. MORGAN CHASE N.A., as
successor in interest to EMC
MORTGAGE CORPORATION;
NATIONAL DEFAULT SERVICING
CORPORATION; WELLS FARGO
BANK, N.A., AS TRUSTEE FOR THE
CERTIFICATE HOLDERS OF
CARRINGTON MORTGAGE LOAN
TRUST, SERIES 2007-FRE1 ASSET
BACKED PASS-THROUGH
CERTIFICATES; and DOES 1 through
50, inclusive,

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ORDER OF REMAND

Defendants.

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I.

Background.

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Plaintiffs Cesar Bustamante and Cynthia Bustamante filed this action in the Superior

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Court of California for the County of San Diego on August 28, 2012. The Bustamantes

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initially named as defendants Fremont Investment and Loan, Fremont Credit Corporation,

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Wells Fargo Bank, N.A., EMC Mortgage Corporation, and 50 unnamed defendants. The

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Bustamantes amended their complaint on November 21, 2012, naming the current

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defendant, J.P. Morgan Chase, N.A. (Chase), which is the successor in interest to some of

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the originally named Defendants, along with Wells Fargo Bank, N.A. The Bustamantes filed

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their second amended complaint (SAC) on February 8, 2013, this time adding a claim under

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the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692–1692p.1 Chase

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removed the action to federal court under 28 U.S.C. § 1441,2 and has moved to dismiss for

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failure to state a claim.

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Neither party’s pleadings or briefing is as clear or accurate as it might be, but it

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appears to be clear enough that additional briefing or clarification is unnecessary.

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II.

Discussion

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A.

Overview of Claims

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This dispute arises from a home loan that is now in default.3 (SAC, Dkt. No. 1-6 at

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¶ 14.) EMC Mortgage Corporation originated the loan on December 22, 2006. Id. at ¶ 2.

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Chase is its successor. Id. The $420,750 loan was for a property located at 14211 Halper

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Road, Poway, California 92064 (Poway Property). Id. at ¶ 7-8. Mortgage payments began

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at $1,947.66. Id. at ¶ 8. The Bustamantes owned two other properties, from which they

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collected rental income, id. at ¶ 9, though the Poway Property was their home. Id. at ¶ 13.

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Together, the Bustamantes earned about $14,300 per month. Id. at ¶ 21. Around the time

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The Bustamantes’ complaint refers to 15 U.S.C. § 1692(d), but it appears they mean
15 U.S.C. § 1692d. The SAC also attributes quotations to the incorrect subsections. For
example, it cites § 1692(d)(5), saying that the FDCPA prohibits “false, deceptive, or
misleading representations in connection with the collection of any debt.” (SAC, Dkt. No. 1-6
at ¶ 74.) The Court assumes the Bustamantes are actually referring to § 1692e, which reads
slightly differently: “A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e
(Emphasis added).
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Chase’s notice of removal states that this action is removed under 28 U.S.C.
§ 1441(b) (Dkt. No. 1 at ¶ 9), which provides for removal of cases in which the parties are
diverse. The parties do not appear to be diverse and the notice of removal does not allege
their citizenship. The pleadings allege facts showing the Bustamantes are California citizens
because they live and work in California. Wells Fargo is also a California citizen. See Ellis
v. Wells Fargo Bank, N.A., 2014 WL 585627 (S.D.Cal., Feb. 14, 2014) (finding that Wells
Fargo was a California citizen for purposes of diversity jurisdiction). But the action is properly
removed under § 1441(a). The Court has original jurisdiction over the complaint as
amended because it presents a federal question, satisfying 28 U.S.C. § 1331.
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The facts recited herein are taken from the SAC, and are taken as true for the
purpose of Chase’s Motion to Dismiss.
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when the Bustamantes took out the home loan, Cesar Bustamante’s mother became sick,

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and required treatment in the Philippines.4 Id. at ¶ 10. The Bustamantes paid about $2,000

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to $3,000 per month for the treatment, id. at ¶ 22, and eventually began missing mortgage

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payments. Id. at ¶ 10–11. The cost of medical care for the mother combined with at least

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three mortgage payments prompted the Bustamantes to tap into their savings. Id. at ¶ 12.

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The Bustamantes were also paying between $4,000 and $4,900 per month to maintain a

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different property that was not generating income.5 Id. at ¶ 23. In February 2012, the

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Bustamantes’ mortgage payments on the Poway Property increased to $2,921.46. Id. at ¶

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15. That same month, the Bustamantes attempted to get a loan modification. Id. at ¶ 16.

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Because they found the paperwork confusing, they did not list certain expenses, which they

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believe led to denial of the loan modification. Id. at ¶ 17–18. The Bustamantes again

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applied for a loan modification in April 2012 and were denied. Id. at ¶ 19–20. Meanwhile,

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they were being saddled with fees, arrears, and growing interest. Id. at ¶ 20. Sometime

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later in 2012, Cesar Bustamante’s sister had triple bypass surgery, which the Bustamantes

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helped pay for.6 Id. at ¶ 27. Amid this financial stress, exacerbated by frequent phone calls

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from Chase, Cesar Bustamante began having panic attacks, memory loss, palpitations, body

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shakes, and bouts of hyperventilation, and had difficulty concentrating. Id. at ¶ 26.

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A notice of sale on the Poway Property was recorded on June 29, 2012. Around the

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same time, the Bustamantes were “bombarded with calls and notices from Chase and EMC.”

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Id. at ¶ 30. Cesar Bustamante received some of these calls at work, and was nearly

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disciplined by his employer. Id. at ¶ 30. The Poway Property was put up for sale on

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December 31, 2012. Id. at ¶ 31. In early 2013, Cesar Bustamante’s panic attacks and

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health problems grew to the point that he left his employment on disability and sought

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medical and psychiatric care, and now requires prescription drugs. Id. at ¶ 32.

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///

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The SAC does not specify when Cesar Bustamante’s mother was diagnosed.

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It appears the Bustamantes owned at least four properties.

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The SAC does not specify how much the Bustamantes paid for this procedure.

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13-cv-1123-LAB (DHB)

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The Bustamantes are bringing three claims, for: (1) negligence; (2) violations of

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California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (3)

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violations of the FDCPA. The Court has original jurisdiction over the FDCPA claim under 28

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U.S.C. § 1331, and supplemental jurisdiction over the state law negligence and UCL claims

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under 28 U.S.C. § 1367, because the state law claims arise from the same nucleus of

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operative facts as the FDCPA claim. See Bahrampour v. R.O. Lampert, 356 F.3d 969, 978

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(9th Cir. 2004).

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B.

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A 12(b)(6) motion to dismiss for failure to state a claim challenges the legal sufficiency

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of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Federal Rule of Civil

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Procedure 8 governs the pleading standards for a complaint, and requires “a short and plain

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statement of the claim showing that the pleader is entitled to relief.” Requiring only a short

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and plain statement does not mean that a complaint may be bereft of specific facts; rather,

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it must contain enough detail to state a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S.

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662, 663 (2009). For the purpose of a motion to dismiss, facts pled in a complaint are taken

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as true. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007). However, conclusions,

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labels, or “‘naked assertion[s] devoid of ‘further factual enhancement’” are not taken as true.

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Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). Similarly, merely reciting the

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elements of a claim is not enough to avoid dismissal, because the court does not accept the

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truth of “threadbare recitals of a cause of action’s elements, supported by mere conclusory

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statements.” Iqbal at 663; Twombly at 555. Altogether, a complaint must include facts that,

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taken as true, plausibly entitle a party to relief. Iqbal at 663; Twombly at 570. Plausibility

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means that it is not merely possible that the facts alleged in the complaint amount to a claim

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for which relief can be granted, but that, based on the reviewing court’s experience and

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common sense, the pleaded facts cross the line from a possible violation of the law to a

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plausible one. Iqbal, 556 U.S. 663–64.

Legal Standards

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In their Opposition, (Dkt. No. 5 at 6), the Bustamantes cite the standard for dismissal

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iterated in Conley v. Gibson, that a complaint should only be dismissed if “it appears beyond
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doubt that the plaintiff can prove no set of facts in support of his claim which would entitle

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him to relief.” 355 U.S. 41, 45-46 (1957). But Twombly makes clear that this standard no

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longer governs. 550 U.S. at 563.

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Because jurisdiction over the state law claims is predicated on the FDCPA claim, the

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Court will consider that claim first. Under 28 U.S.C. § 1367(c), if the one federal claim is

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dismissed, the Court has discretion to remand state claims. And in fact, federal courts are

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ordinarily expected to decline to exercise supplemental jurisdiction over state law claims

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under these circumstances. United Mine Workers v. Gibbs, 383 U.S. 715, 726–27 (1966);

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Notrica v. Bd. of Supervisors, 925 F.2d 1211, 1213–14 (9th Cir.1991).

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C.

Judicial Notice

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As part of their Motion to Dismiss, Defendants ask the Court to take judicial notice of

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several documents, among which are the deed of trust in favor of Fremont Investment and

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Loan, and the assignment of the deed of trust to Wells Fargo. The SAC relies on these

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documents to show why Wells Fargo, the beneficiary under the deed of trust, is liable. The

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Bustamantes do not contest the documents’ authenticity, and, as discussed below, they are

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relevant. The deed and assignment are therefore subject to judicial notice under Fed. R.

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Evid. 201(c)(2), and the request for notice of these documents is GRANTED. The Court may

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therefore consider the deed of trust and assignment when ruling on the motion to dismiss,

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without converting it to a motion for summary judgment. See Skilstaf, Inc. v. CVS Caremark

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Corp., 669 F.3d 1005, 1016 n. 9 (9th Cir. 2012).

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D.

Merits

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The SAC identifies the FDCPA claim as being brought against all Defendants, but the

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claim in fact arises from efforts by Chase and its predecessor EMC to collect the debt by

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calling Cesar Bustamante on the phone. The SAC also alleges, without specifying which

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Defendant did it, that a notice of sale was recorded for the property, although the allegations

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seem to imply it was Chase. Although the remaining Defendant, National Default Servicing

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Corporation, has not appeared in this action, no allegations connect it with the FDCPA claim.

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As a threshold matter, to state a claim under the FDCPA, a plaintiff must plead facts

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showing that a defendant is a “debt collector” within the scope of the FDCPA. Izenberg v.

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ETS Servs., LLC, 589 F. Supp. 2d 1193, 1198–99 (C.D. Cal. 2008); Scott v. Wells Fargo

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Home Mortgage Inc., 326 F. Supp. 2d 709, 718 (E.D. Va. 2003) aff'd sub nom. Scott v. Wells

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Fargo & Co., 67 F. App'x 238 (4th Cir. 2003); see also Heintz v. Jenkins, 514 U.S. 291, 294

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(1995). The Bustamantes will not be able to make this showing because mortgagees and

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mortgage servicing companies are not debt collectors within the meaning of the FDCPA, and

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are statutorily excluded from liability under that act. Anbar v. Deutsche Bank Nat’l Trust Co.,

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2013 WL 5937274, slip op. at *2 (S.D.Cal., Nov. 4, 2013); Scott, 326 F. Supp. 2d at 718.

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With regard to the posting of a notice of sale, or other actions that are part of the foreclosure

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process, “foreclosing on a property pursuant to a deed of trust is not the collection of a debt

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within the meaning of the FDCPA.” Anbar at *2 (quoting Izenberg, 589 F. Supp. 2d at 1199).

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The SAC alleges generally that Chase and EMC were acting as Wells Fargo’s agents

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(SAC, ¶¶ 35–37), and the Motion to Dismiss does not address the issue of whether the

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FDCPA claim might be valid against Wells Fargo. But even accepting this conclusory

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allegation as true, the SAC makes clear that Wells Fargo was the beneficiary under the deed

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of trust (id., ¶ 35), and thus not a debt collector. See Wise v. Wells Fargo Bank, N.A., 850

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F. Supp. 2d 1047, 1053 (C.D.Cal., 2012) (holding that mortgage loan beneficiaries are not

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debt collectors under the FDCPA).7

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Even if Chase were a debt collector within the meaning of the FDCPA, the

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Bustamantes still do not state a plausible claim for relief under any federal law. The

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Bustamantes allege that Chase was calling Cesar Bustamante at work “relentlessly,” which

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had negative consequences for him. (SAC, Dkt. No. 1-6 at ¶ 80.) Assuming, arguendo, that

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was enough to show that Chase violated a portion of § 1692d(5) by “by causing a telephone

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There is an exception to this rule for beneficiaries or assignees who obtain their
interest after the debt is in default, but the SAC’s allegations together with the assignment
to Wells Fargo make clear this was not the case here. See Skelley v. Bank of America, N.A.,
2012 WL 6608719, at *3 (S.D.Cal., Dec. 17, 2012) (“By Plaintiffs' own argument, Bank of
America acquired the debt obligation before the Notice of default was filed. Plaintiffs have
not plausibly alleged that Defendants are debt collectors.”)
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to ring . . . repeatedly or continuously,” the Bustamantes still do not plead any facts to satisfy

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the next portion of the provision: “. . . with intent to annoy, abuse, or harass any person at

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the called number.” 15 U.S.C. § 1692d(5). Nothing in the SAC suggests that Chase had any

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malicious intent. The SAC says that Chase called Cesar Bustamante at work, but it is not

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clear whether they called him on his work line or his cell phone, in which case Chase may

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have been oblivious to whether he was at work. In any event, the purpose of the FDCPA is

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to prevent “abusive debt collection practices by debt collectors,” not to prevent debt

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collection altogether. 15 U.S.C. § 1692(e). The closest the Bustamantes come to pleading

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facts that would make the phone calls abusive is through characterizations of the

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communications, such as “bombarded with calls and notices” and saying that Chase called

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“relentlessly.” That, of course, is not enough; if repeated calling were necessarily abusive

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or harassing, the limiting phrase “with intent to annoy, abuse, or harass” would be nugatory.

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There are other deficiencies as well, but detailing them all would be pointless; it is clear

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enough that the claim must be dismissed.

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When faced with these and other arguments in the Motion to Dismiss, the

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Bustamantes merely reiterated the factual allegations in the complaint instead of addressing

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the adverse case law or explaining how the facts show a plausible claim for relief. They

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have pointed to no authority suggesting that a mortgagee such as Chase is a debt collector

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within the meaning of the FDCPA. Thus, even if the Bustamantes could cure some of the

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factual deficiencies in the complaint, they would not be able to make the threshold showing

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that either Chase or Wells Fargo is a debt collector as defined by the FDCPA.

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III.

Conclusion and Order

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The Court’s jurisdiction in this case is predicated on the existence of a claim arising

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under federal law. Because the Bustamantes cannot get past the threshold obstacle of

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showing that Chase or Wells Fargo is the sort of party that may be sued under the FDCPA,

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there exists no federal claim from which the state claims my derive supplemental jurisdiction.

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See 28 U.S.C. § 1367. This is not the complaint’s only defect, but unlike the other defects,

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it cannot be remedied by amendment.
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The Bustamantes’ FDCPA claim is, therefore, DISMISSED WITH PREJUDICE.

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Pursuant to § 1367(c), the Court declines to exercise supplemental jurisdiction over the

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Bustamantes’ negligence and UCL claims, and these are REMANDED to the Superior Court

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of California for the County of San Diego. All dates are VACATED and all other pending

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motions and requests are DENIED AS MOOT.

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IT IS SO ORDERED.
DATED: March 4, 2014

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HONORABLE LARRY ALAN BURNS
United States District Judge

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