Opinion
CIV. NO. S-10-2889 KJM GGH PS.
September 9, 2011
JOHN M. SORICH (CA Bar No. 125223), S. CHRISTOPHER YOO (CA Bar No. 169442), CHRISTOPHER J. DONEWALD (CA Bar No. 255454), ALVARADOSMITH, A Professional Corporation, Santa Ana, California, Attorneys for Defendants, JPMORGAN CHASE BANK, N.A., individually and successor by merger to CHASE HOME FINANCE LLC, erroneously sued as CHASE HOME MORTGAGE LLC, and FEDERAL NATIONAL MORTGAGE ASSOCIATION.
ORDER
This action was referred to the undersigned pursuant to Local Rule 302(c)(21). On August 4, 2011, this court issued findings and recommendations, recommending that this action be dismissed for plaintiff's failure to oppose defendants' motion to dismiss. On August 11, 2011, plaintiff filed objections, which state that he did not receive a court order regarding the July 21, 2011 hearing until days after the hearing. He claims he also did not receive the motion to dismiss and was unaware of the hearing or the motion. Although the excuses for non-performance by plaintiff in this action are beginning to wear thin at this point, plaintiff will be given the opportunity to oppose the motion. However, he will not be granted any further extensions.
Accordingly, IT IS ORDERED that:
1. The findings and recommendations issued August 4, 2011, (dkt. no. 36), are vacated.
2. Plaintiff shall file and serve an opposition to defendants' motion to dismiss on or before September 23, 2011. No extensions will be granted. Once the opposition has been filed, the motion will be taken under submission without a hearing.
3. The Clerk of the Court shall serve plaintiff with defendants' motion filed June 17, 2011, (dkt. no. 29), along with this order.
NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT; PROPOSED ORDER
Action Filed: September 27, 2010TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE THAT on July 14, 2011 at 10:00 a.m., or as soon thereafter as the matter may be heard in Courtroom "9, 13th Floor" of the above-entitled Court located at 501 I Street, Suite 4-200, Sacramento, California, defendants JP Morgan Chase Bank, N.A., individually and as successor by merger to Chase Home Finance LLC, erroneously sued as Chase Home Mortgage LLC ("JPMorgan"), and Federal National Mortgage Association ("Fannie Mae," collectively as "Defendants"), will move the Court to dismiss the action pursuant to Federal Rules of Civil Procedure ("FRCP") 12(b)(6) on the grounds that the First Amended Complaint ("FAC") of Floyd Knapp ("Plaintiff") fails to state a claim upon which relief can be granted.
This Motion is based on the following grounds:
1. The first claim for "Breach of Contract" fails to state facts sufficient to constitute a claim for relief pursuant to FRCP 12(b)(6);
2. The second claim for "Quiet Title" fails to state facts sufficient to constitute a claim for relief pursuant to FRCP 12(b)(6).
The motion will be based on this Notice of Motion, the Memorandum of Points and Authorities filed herewith, the Request for Judicial Notice, and the pleadings and papers filed herein.
DATED: June 17, 2011
MEMORANDUM OF POINTS AND AUTHORITIES
Defendants JP Morgan Chase Bank, N.A., individually and as successor by merger to Chase Home Finance LLC, erroneously sued as Chase Home Mortgage LLC ("JPMorgan"), and Federal National Mortgage Association ("Fannie Mae," collectively as "Defendants"), submit the following Memorandum of Points and Authorities in support of their Motion to Dismiss the First Amended Complaint ("FAC") of Plaintiff Floyd Knapp ("Plaintiff").I. SUMMARY OF ARGUMENT
Plaintiff's FAC is based entirely on the assertion that Defendants breached contract by failing to modify his loan. However, Plaintiff also admits in the FAC that no contract was ever formed. Further, Plaintiff fails to allege the material terms of the contract, and does not attach a copy of the alleged contract to his FAC. Taken as pleaded, Defendants are left to guess at what contract they allegedly breached and how. Plaintiff also seeks to quiet title to the Subject Property. However, the recorded Trustee's Deed Upon Sale submitted in support of this Motion demonstrates conclusively that Plaintiff no longer holds title to the Subject Property and cannot assert any claim to title. Further, Thus, Plaintiffs fail to allege any fact as to how Defendants could be liable to Plaintiff under any of the alleged claims.
II. SUMMARY OF RELEVANT FACTS
The following are the relevant allegations in the FAC and judicially noticeable facts set forth in the documents included in the Request for Judicial Notice ("RJN"):
• The real property that is the subject of this dispute is located at 2921 Roc Road, Placerville, California 95667 ("Subject Property"). See FAC, ¶ 1. See also, RJN, Exhibit 1.
• Plaintiffs obtained a residential loan in the sum of $151,000.00 ("Loan"). The Loan was secured by a deed of trust ("DOT") encumbering the Subject Property that was recorded on or about October 21, 2002, with the El Dorado County Recorder's Office as instrument number 2002-0080159-00. The DOT identifies Washington Mutual Bank, FA, as the lender and beneficiary, California Conveyance Company ("CRC") as trustee, and Plaintiff as the borrower. See, RJN, Exhibit 1.
• Plaintiff defaulted under the terms of his mortgage Loan. A Notice of Default and Election to Sell ("Notice of Default") was recorded in connection with the DOT on July 1, 2009, with the El Dorado County Recorder's Office as instrument number 2009-0032441-00. According to the NOD, Plaintiff was $5,415.71 in arrears as of June 30, 2009. See RJN, Exhibit 2.
• A Substitution of Trustee ("SOT") was recorded in connection with the DOT on August 13, 2009, with the El Dorado County Recorder's Office as instrument number 2009-0041435-00. The SOT memorialized the substitution of Quality Loan Service Corporation as the new trustee under the terms of the DOT in place of CRC. See RJN, Exhibit 3.
• A Notice of Trustee's Sale was recorded in connection with the DOT on October 5, 2009, with the El Dorado County recorder's Office as instrument number 2009-0050010-00. See RJN, Exhibit 4.
• An Assignment of the DOT was recorded in connection with the DOT on August 19, 2009, with the El Dorado County Recorder's Office as instrument number 2010-0038335-00. The Assignment identities Federal National Mortgage Association as the new beneficiary under the terms of the DOT. See RJN, Exhibit 5.
• Plaintiff failed to cure the default on his mortgage Loan. The Subject Property was sold at public auction on August 13, 2010. A Trustee's Deed Upon Sale was recorded in connection with the Subject Property on August 19, 2010, with the El Dorado County Recorder's Office as instrument number 2010-0038336-00. See RJN, Exhibit 6.
III. STANDARD FOR A MOTION TO DISMISS
IV. PLAINTIFF'S CLAIM FOR BREACH OF WRITTEN CONTRACT/WRONGFUL FORECLOSURE FAILS
Bell Atlantic Corp. v. Twombly 127 S.Ct. 19551959Id. A. Plaintiff Fails to Allege the Elements of a Breach of Contract Claim
The elements for breach of contract are: (1) The existence of a [valid] contract between the parties; (2) Plaintiffs performance, [unless excused]; (3) Defendant's [unjustified] [or] [unexcused] failure to perform; and (4) Damages to Plaintiff caused by the breach. Careau Co. v. Security Pacific Business Credit, Inc., 222 Cal.App.3d 1371, 1388 (1990), BAJI No. 10.85 (8th ed.).
Here, Plaintiff fails to allege the requisite elements of a cause of action for breach of contract/wrongful foreclosure. Plaintiff fails to allege that there is a contract between Defendants and Plaintiff. Plaintiff fails to allege the material terms of the contract and does not attach a copy of the signed and executed contract to the FAC. See Otworth v. Southern Pacific Transp. Co., 166 Cal.App. 452, 458-459 (1985) (complaint pleading breach of contract must indicate on its face whether contract is written, oral, or implied by conduct and if action is based on written contract, terms must be set out verbatim in body of complaint or a copy of written instrument must be attached and incorporated by reference). Plaintiffs claim fails on this basis alone.
While it appears from the FAC that Plaintiff and Defendants were in discussions regarding a possible loan modification, Plaintiff admits that no contract was ever formed with any of the named Defendants. See FAC, ¶ 19. Interestingly, Plaintiff appears to admit that no contract was ever formed but that Defendants were nonetheless contractually obligated to modify his loan. Id. Regardless, although the Court must construe the facts in the light most favorable to the non-moving party, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Associated Gen. Contrs. of Am. v. Metropolitan Water Dist., 159 F.3d 1178, 1181 (9th Cir. 1998). "[T]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). Indeed, "the pleading standard Rule 8 announces does not require `detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).
Because Plaintiff fails to plead the existence of a valid contract between Plaintiff and Defendants, Plaintiff cannot maintain a cause of action for breach of contract and the Motion to Dismiss should be granted without leave to amend.
B. Without a Valid Written Agreement, Plaintiff's Claim Fails for Violating California's Statute of Frauds
Further, an agreement by which a lender agrees to forbear from exercising the right to foreclose upon a deed of trust securing an interest in real property comes within the statute of frauds, and therefore must be in writing. See, e.g., Secrest v. Security National Mortgage Loan Trust 2002-2, 167 Cal.App.4th 544, 547 (2008); see also Cal. Civ. Code § 1698(a); Stafford v. Russell, 117 Cal.App.2d 326, (1953) (oral agreement to postpone payment on note and deed of trust until pending litigation was completed must be in writing to be enforceable); Karlsen v. American Savings And Loan Association, 15 Cal.App.3d 112, 121 (1971) (oral agreement to postpone trustee's sale must be in writing to be enforceable).
In this case, Plaintiff has not alleged a valid, signed contract with any of the named Defendants giving rise to a breach of contract claim. Without that, any agreement to postpone the foreclosure sale or "permanently modify" Plaintiff's loan comes within the statute of frauds because it is an agreement for an interest in real property, and therefore must have been in writing. See, Secrest, 167 Cal.App.4th at 547. Numerous California courts have refused to recognize oral agreements to modify loan agreements, for lack of consideration and/or a writing in the promissory note and deed of trust context. Stafford v. Clinard, 87 Cal.App.2d 480, 481 (1948) (alleged agreement to defer payment on property until pending litigation regarding property is resolved unenforceable absent a written modification, as required by California Civil Code Section 1698); Stafford v. Russell, 117 Cal.App.2d 326, (1953) (oral agreement to postpone payment on note and deed of trust until pending litigation was completed must be in writing to be enforceable); Karlsen v. American Savings And Loan Association, 15 Cal.App.3d 112, 121 (1971) (oral agreement to postpone trustee's sale must be in writing to be enforceable); Hunt v. Smyth, 25 Cal.App.3d 807, 819-822 (1972) (past acceptance of lower payments is not enough to establish oral modification of written payment terms of promissory note); Stroud v. Thomas, 139 Cal. 274, 276 (1903) (agreement to extend time for payment on promissory note for one year unenforceable as lacking consideration because debtor merely agreed to pay the note which he was already obligated to do); Henehan v. Hart, 127 Cal. 656, 658 (1900) (alleged oral agreement to extend time for payments on promissory note unenforceable because such agreement must be in writing); Columbia Cas. Co. v. Lewis, 14 Cal.App.2d 64, 76 (1936) (alleged oral agreement to modify terms of promissory note unenforceable as lacking consideration because performance under original and alleged oral modification was the same); Smith v. Paroier Winery, 7 Cal.App.2d 357, 360-361 (1935) (oral agreement to extend time for payment on promissory note unenforceable as lacking consideration because debtor merely agreed to pay the note which it was already obligated to do); Henry H. Cross Co. of California v. Prentice, 137 Cal.App. 497, 500 (1934) (oral agreement to extend time for payment of indebtedness unenforceable as lacking consideration because debtor merely agreed to pay the indebtedness which it was already obligated to do); Middlecamp v. Zumwalt, 100 Cal.App. 715, 721, 723 (1929) (oral agreement to extend time for payment of promissory note unenforceable because it must be in writing, and lacked consideration because debtor merely agreed to pay the promissory note which it was already obligated to do); Rottman v. Hevener, 54 Cal.App. 474, 478 (1921) (oral agreement to extend payment for promissory note unenforceable because it must be in writing); Dean v. Sedan Milling Co., 19 Cal.App. 28, 34-35 (1912) (extension of time for payment on promissory note unenforceable as lacking consideration because debtor merely agreed to pay the promissory note which it was already obligated to do).
Thus, as a matter of law, Plaintiff cannot state a claim for breach of contract based upon the purported breach of an alleged agreement by Defendants (collectively) to provide a loan modification because such agreement must be in writing. Accordingly, this claim is subject to dismissal.
To the extent that Plaintiff attempts to plead a claim for wrongful foreclosure, that claim is wholly dependent on the existence and breach of a contract. For the same reasons Plaintiff cannot state a claim for breach of contract, the Court should dismiss any possible claim for wrongful foreclosure.
V. PLAINTIFF FAILS TO STATE A CLAIM FOR QUIET TITLE
Plaintiff's claim to "Quiet Title" also fails. In order to successfully allege a cause of action for quiet title, the complaint must be verified and allege: (1) a legal description of the property and its street address or common designation; (2) the title of the Plaintiff and the basis of the title; (3) the adverse claims to the title of the Plaintiff; (4) the date as of which the determination is sought; and (5) a prayer for the determination of the title of the Plaintiff against the adverse claims. Cal. Civ. Proc. § 761.020.
As a preliminary matter, Plaintiff fails to allege the date as of which the determination is sought. See FAC, ¶¶ 29-32. On this ground alone, Plaintiff's claim fails. Second, Plaintiff fails to allege his own basis for title to the Subject Property — nor can he. The foreclosure sale has already taken place and Defendant Fannie Mae holds title to the Subject Property. See RJN, Exhibit 6. Last, the right of the beneficiary to invoke the power of sale contained in the deed of trust was expressly agreed to by Plaintiff when he signed the deed of trust in 2002. See RJN, Exhibit 1. Thus, Plaintiff cannot state the elements of a claim to quiet title.
Moreover, the action to determine adverse claims is an equitable action, and, generally, equitable principles apply. Thomson v. Thomson, 7 Cal. 2d 671 (1936); Perkins v. Wakeham, 86 Cal. 580 (1890); Medeiros v. Medeiros, 177 Cal. App. 2d 69 (3d Dist. 1960). Based on such equitable principals, a quiet title claim may be denied where a borrower does not offer to reimburse the lender for the unpaid debt in seeking to quiet title against the lender's security interest. Aguilar v. Bocci, 39 Cal.App.3d 475 (1974); see Dool v. The First National Bank Of Calexico, 207 Cal. 347, 351-352 (1929) (affirming decision of court to require reimbursement of monies advanced by bank to deceased, incompetent mortgagor under a deed of trust in an action to quiet title); O'Brien v. O'Brien, 197 Cal. 577, 585 (1925) (finding that, in an action to quiet title, a mortgagor may be required to reimburse the mortgagee for the unpaid debt based upon a purportedly invalid mortgage). Similarly, Plaintiff should be required to tender the amount of the Loan.
Although Plaintiff alleges that "he is willing able [sic] to tender all amounts due under the Note[,]" that allegation is simply insufficient to plead tender adequately. Plaintiff must allege facts supporting his present ability to tender all amounts owing under the Loan. In Karlsen v. American Savings Loan Association, 15 Cal. App. 3d 112 (1971), the Court stated that "a valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust. [] A tender of payment is of no effect if the of ferer does not have the present ability to make the tender good." (Emphasis added.) The reason why the Subject Property was foreclosed on is precisely because Plaintiff defaulted on his payment obligations. Unless Plaintiff alleges how he intends immediately to tender all amounts owing under the Loan, it would be an exercise in futility to allow his quiet title claim to proceed.
See FAC, ¶ 34.
To be sure, Plaintiff has not alleged that he, in fact, has attempted to tender all amounts due under the Loan.
Finally, the statutory quiet title remedy is cumulative of other equitable remedies to remove a cloud on title. Code Civ. Proc., § 760.030(a); see, e.g., Marra v. Aetna Const. Co., 15 Cal. 2d 375 (1940); Ephraim v. Metropolitan Trust Co. of Cal., 28 Cal. 2d 824 (1946). While a quiet title action may be brought in conjunction with another equitable action, it too should fail if the underlying theory of relief, or other equitable claims, is not properly pled. Thus, since Plaintiff fails to plead an underlying theory of relief in his breach of contract claim, Plaintiffs claim for quiet title fails.
For these reasons, the quiet title claim is subject to dismissal without leave to amend.
VI. CONCLUSION
For the foregoing reasons, Defendants respectfully request that the Court grant the motion to dismiss without leave to amend as to all claims asserted.
DATED: June 17, 2011
PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF ORANGE Floyd Knapp v. JPMorgan Chase Bank, N.A., et al., USDC Case No.: 10-CV-02889-FCD-GGH
I am employed in the County of Orange, State of California. I am over the age of 18 years and not a party to the within action. My business address is ALVARADOSMITH, 1 MacArthur Place, Santa Ana, CA 92707. ON JUNE 17, 2011, I SERVED THE FOREGOING DOCUMENT DESCRIBED AS NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT; PROPOSED ORDER ON THE INTERESTED PARTIES IN THIS ACTION. SEE ATTACHED SERVICE LIST BY REGULAR MAIL: BY THE ACT OF FILING OR SERVICE, THAT THE DOCUMENT WAS PRODUCED ON PAPER PURCHASED AS RECYCLED. BY FACSIMILE MACHINE: BY OVERNIGHT MAIL: BY PERSONAL SERVICE:
[X] by placing the original and/or a true copy thereof enclosed in (a) sealed envelope(s), addressed as follows: [X] I deposited such envelope in the mail at 1 MacArthur Place, Santa Ana, California. The envelope was mailed with postage thereon fully prepaid. I am "readily familiar" with the firm's practice of collection and processing correspondence for mailing. It is deposited with the U.S. Postal Service on that same day in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one (1) day after date of deposit for mailing in affidavit. [] I Tele-Faxed a copy of the original document to the above facsimile numbers. [] I deposited such documents at the Overnite Express or Federal Express Drop Box located at 1 MacArthur Place, Santa Ana, California 92707. The envelope was deposited with delivery fees thereon fully prepaid. [] I caused such envelope(s) to be delivered by hand to the above addressee(s). [X] (Federal) I declare that I am employed in the office of a member of the Bar of this Court, at whose direction the service was made. Executed on June 17, 2011, at Santa Ana, California.