Argueta v. J.P. Morgan Chase
2011 U.S. Dist. LEXIS 41300
| E.D. Cal. | 2011Background
- Plaintiff refinanced in 2007 with Washington Mutual for a $320,000 loan secured by a deed of trust on her home.
- Plaintiff alleges the loan terms were unclear, with pre-calculation based on future-determined rates and improper underwriting.
- Defendants allegedly failed to verify income using IRS Form 4506-T, suggesting improper qualification for the loan.
- FDIC, as receiver, and Chase executed a purchase and assumption agreement allocating WaMu's assets and liabilities in 2008.
- Notice of Default was recorded in 2009, with substitution of trustee and later a Notice of Trustee Sale in 2010.
- Plaintiff sought loan modification but alleges repeated delays and denial; a quitclaim deed to a relative was recorded after the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of implied covenant during origination or modification | Plaintiff asserts implied covenant coverage of origination and modification. | No duty during origination; modification not sufficiently alleged. | Dismissed; no implied covenant duty during origination or modification. |
| Fraud and intentional misrepresentation | WaMu misrepresented affordability and property value to plaintiff. | Allegations lack the who/what/when/where/how and requisite facts. | Dismissed for failure to plead with particularity. |
| California UDAP/UCL claim | Defendants engaged in unfair, deceptive, and predatory lending practices. | Allegations are conclusory and lack particularized factual support. | Dismissed for lack of plausible, particularized facts. |
| Unconscionability claim | Loan agreement and trust deed are unconscionable due to deception and predatory practices. | Unconscionability fact-finding is premature and terms undisclosed in complaint. | Dismissed at motion to dismiss stage. |
| California Civil Code § 2923.6 and § 2923.5 claims | Defendants failed to offer a loan modification and failed due diligence before foreclosure. | § 2923.6 imposes no private right to modification; § 2923.5 requires due diligence, may delay foreclosure. | § 2923.6 and related claim dismissed; § 2923.5 claim survives. |
Key Cases Cited
- Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (Cal. 1999) (unlawful, unfair, or fraudulent prong of UCL requires reasonable particularity)
- Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir. 2003) (Rule 9(b) requires who, what, when, where, and how of fraud)
- Khoury v. Maly's of Cal., Inc., 14 Cal.App.4th 612 (Cal. App. 2d Dist. 1993) (UCL requires reasonable particularity of violations)
- McKell v. Wash. Mut., Inc., 142 Cal.App.4th 1457 (Cal. App. 2d Dist. 2006) (unfairness standard under the UCL; balancing public policy)
- Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976 (9th Cir. 2007) (unconscionability analysis; procedural vs substantive)
- Racine & Laramie, Ltd. v. Dep't of Parks & Recreation, 11 Cal.App.4th 1026 (Cal. App. 4th Dist. 1992) (implied covenant does not create obligations beyond contract)
- In re Estate of Young, 160 Cal.App.4th 62 (Cal. App. 4th Dist. 2008) (elements of fraud in California)