Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_09-cv-04025/USCOURTS-cand-5_09-cv-04025-7/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1442 Petition for Removal

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confusion the court will refer to it as a “cross-complaint,” as that is the designation used by the parties.

ORDER, page 1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

MARIO FEDERICI, et al.,

Plaintiffs,

v.

JESSE MONROY, et al.,

Defendants.

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AND RELATED THIRD PARTY CLAIMS

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Case No.: C 09-4025 PVT

ORDER DISMISSING WITH PREJUDICE

ALL CROSS-CLAIMS AGAINST JPMORGAN

CHASE BANK, N.A.

On January 22, 2010, Cross-Defendant JPMorgan Chase, N.A. (“JPMorgan”) filed a Motion 1

to Dismiss First Amended Cross-Complaint, seeking dismissal of the third and fourth causes of

action in the First Amended Cross-Complaint. Cross-Complainants Jesse and Lupita Monroy

opposed the motion. On March 25, 2010, the court issued an order to show cause why all crossclaims against JPMorgan should not be dismissed with prejudice (the “OSC”), setting a deadline of

April 5, 2010 for the Cross-Complainants to respond. The Cross-Complainants did not file any

response to the OSC. Therefore, based on the original moving, opposition and reply papers, the OSC

and the Cross-Complainants’ lack of response thereto, and the file herein, 

IT IS HEREBY ORDERED that all cross-claims against JPMorgan are DISMISSED with

Case 5:09-cv-04025-PVT Document 77 Filed 04/06/10 Page 1 of 6
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ORDER, page 2

prejudice, because they are all based solely on JPMorgan’s status as successor in interest to

Washington Mutual Bank, N.A. (“WaMu”), and in purchasing WaMu’s assets JPMorgan did not

assume any liability in connection with the kind of lending activities at issue in this lawsuit.

I. FACTUAL BACKGROUND

On March 24, 2006, Enedina Salgado Madrigal granted certain real property located at 657

Stanford Avenue, Redwood City, California (the “Redwood City Property”) to Lupita Leal

Benavides (aka Lupita L. Monroy). On April 14, 2006, that grant deed was recorded in the official

records of San Mateo County.

In August 2006, the Monroys asked Plaintiff Federici (who at the time was 88 years old) to

be a co-signer on a $475,000 loan from WaMu, which they represented would enable them to

purchase the Redwood City Property. On August 24, 2006, Federici executed a deed of trust in favor

of WaMu for a loan in the original principal amount of $475,000, which was secured by Federici’s

residence located at 1436 Brookmill Road, Los Altos, California (the “Federici Property”). The deed

of trust was recorded in the official records of the Santa Clara County Recorder on September 1,

2006.

On or about August 28, 2006, Ms. Monroy executed a deed of trust with assignment of rents

encumbering the Redwood City Property for the benefit of Federici. On September 5, 2006, that deed

of trust with assignment of rents was recorded in the official records of San Mateo County.

On September 25, 2008, the Federal Deposit Insurance Corporation (“FDIC”) was appointed

receiver over WaMu. The FDIC sold certain assets and liabilities of WaMu to JPMorgan pursuant to

a Purchase and Assumption Agreement (the “P&A Agreement”) that allocated WaMu’s assets and

liabilities between the FDIC and JPMorgan. (See P&A Agreement, available at

http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf). As part of the P&A

Agreement, JPMorgan expressly disclaimed assumption of liability “arising in connection with

[WaMu’s] lending or loan purchase activities.” (See P&A Agreement, § 2.5.)

On October 23, 2008, Federici filed a complaint against the Monroys in Santa Clara County

Superior Court, alleging causes of action for breach of contract, fraud, and elder financial abuse,

Case 5:09-cv-04025-PVT Document 77 Filed 04/06/10 Page 2 of 6
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ORDER, page 3

among other things. The Monroys originally cross-complained against WaMu, Carol Weber and

JPMorgan, and later filed a First Amended Cross-Complaint (the “FACC”) to add the FDIC as an

additional Cross-Defendant. The FDIC then removed the action to federal court.

In their FACC, the Monroys allege that Carol Weber, an employee of WaMu, negligently

prepared the loan documents by improperly failing to list Federici as the guarantor on a loan to

purchase the Redwood City Property, and by improperly causing the loan documents to be recorded

against the Federici Property, instead of against the Redwood City Property. They allege negligent

misrepresentations were made to them regarding these events, and that the Cross-Defendants

breached fiduciary duties and engaged in unfair business practices.

II. LEGAL STANDARDS ON MOTION TO DISMISS

A. DISMISSAL FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE

GRANTED

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the

sufficiency of the complaint. Dismissal is warranted where the complaint lacks a cognizable legal

theory. See Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9 Cir. 1984); see also

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Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a claim

on the basis of a dispositive issue of law”). 

A complaint may also be dismissed where it presents a cognizable legal theory, but fails to

plead facts essential to the statement of a claim under that theory. Robertson, 749 F.2d at 534. The

Supreme Court has held that, while a complaint does not need detailed factual allegations:

“[a] plaintiff’s obligation to provide ‘grounds’ of his ‘entitle(ment) to relief’ requires

more than labels and conclusions . . . . Factual allegations must be enough to raise a

right to relief above the speculative level . . . .” See Bell Atlantic Corp. v. Twombly,

550 U.S. 544, 555 (2007), quoting Conley v. Gibson, 355 U.S. 41, 47 (1957).

B. LEAVE TO AMEND

Leave to amend must “be freely given when justice so requires.” Fed.R.Civ.P. 15(a). This

policy is applied with “extraordinary liberality”. Morongo Band of Mission Indians v. Rose, 893

F.2d 1074, 1079 (9 Cir. 1990). “[T]here exists a presumption under Rule 15(a) in favor of granting th

Case 5:09-cv-04025-PVT Document 77 Filed 04/06/10 Page 3 of 6
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ORDER, page 4

leave to amend.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9 Cir. 2003). th

However, leave to amend may be denied if amendment would be futile. See, e.g., Reddy v. Litton

Indus., Inc., 912 F.2d 291, 296 (9 Cir. 1990). th

III. DISCUSSION

A. THE FACC DOES NOT STATE ANY CLAIM UPON WHICH RELIEF CAN BE GRANTED

AGAINST CROSS-DEFENDANT JPMORGAN

All of the claims in the FACC against JPMorgan are based solely on its status as successor in

interest to WaMu. See FACC, ¶ 5. All of the alleged wrong-doing purportedly occurred in

connection with WaMu’s processing of its loan to Plaintiff Federici (which the Monroys claim

should have been a loan to them). Pursuant to the P&A Agreement, JPMorgan explicitly did not

assume any liability related to WaMu’s lending activities. (P&A Agreement, § 2.5.) Specifically,

Section 2.5 of the P & A Agreement states:

2.5 Borrower Claims. Notwithstanding anything to the contrary in this

Agreement, any liability associated with borrower claims for payment of or

liability to any borrower for monetary relief, or that provide for any other form

of relief to any borrower, whether or not such liability is reduced to judgment,

liquidated or unliquidated, fixed or contingent, matured or unmatured,

disputed or undisputed, legal or equitable, judicial or extra-judicial, secured or

unsecured, whether asserted affirmatively or defensively, related in any way to

any loan or commitment to lend made by the Failed Bank prior to failure, or to

any loan made by a third party in connection with a loan which is or was held

by the Failed Bank, or otherwise arising in connection with the Failed Bank’s

lending or loan purchase activities are specifically not assumed by the

Assuming Bank.” (Emphasis added.)

Because all of the claims against Cross-Defendant JPMorgan are based on WaMu’s lending

activities, the liability for which was explicitly not assumed by JPMorgan in its purchase of WaMu’s

assets, the FACC does not state any claims upon which relief could be granted against JPMorgan. 

See Yeomalakis v. F.D.I.C., 562 F.3d 56 (1 Cir. 2009) (denying borrower’s motion to substitute st

JPMorgan for the FDIC and/or add JPMorgan as a necessary Defendant as the successor in interest to

Washington Mutual based on the FDIC-JPMorgan P&A Agreement); see also, e.g., Molina v.

Washington Mut. Bank, 2010 WL 431439, *4 (S.D.Cal. 2010) (taking judicial notice of the FDICJPMorgan P&A Agreement, and finding that “any of Plaintiffs’ claims arising out of JPMorgan’s

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ORDER, page 5

alleged status as successor in interest to Plaintiffs’ borrower claims against WaMu must fail”). Thus,

dismissal of all claims against JPMorgan is warranted.

C. LEAVE TO AMEND IS NOT WARRANTED

Cross-Complainants have not requested leave to amend, and it is not warranted in any event

because it would be futile. The P&A Agreement precludes any claims against JPMorgan based on

WaMu’s lending activities. While some courts have left open the question of whether the P&A

Agreement precludes claims based on WaMu’s loan servicing activities (see, e.g., Johnson v.

Washington Mut., 2010 WL 682456, *4 (E.D.Cal. 2010)), no such claims appear to be available to

Cross-Complainants under the circumstances of the present case. Cross-Complainants never became

the borrowers on the WaMu loan at issue in this action, and thus cannot have any claims against

JPMorgan based on WaMu’s loan servicing activities. 

The Monroys’ claims against JPMorgan are based entirely on the fact they have been sued by

Plaintiff in connection with the events surrounding the origination of the WaMu loan and the

recording of the corresponding deed of trust against Plaintiff’s property. Plaintiff has not asserted

any claims against the Monroys based on WaMu’s loan servicing activities. Because Plaintiff’s

claims against the Monroys do not implicate any loan servicing activities by WaMu, the Monroys

cannot amend their FACC to bring their claims within the scope of liabilities that JPMorgan

assumed under the P&A Agreement. Leave to amend would thus be futile. See Biggins v. Wells

Fargo & Co., 2009 WL 2246199 (N.D.Cal. July 27, 2009) (granting motion to dismiss by JPMorgan

without leave to amend where lending-related claims were asserted against JPMorgan based solely

on its status as WaMu’s “successor in interest,” and no issues regarding loan servicing were raised).

IV. CONCLUSION

Cross-Complainants have asserted claims against JPMorgan based solely on its status as

WaMu’s “successor in interest.” The only claims asserted in the FACC relate to WaMu’s actions in

connection with the origination of the WaMu loan at issue in this action. Pursuant to Section 2.5 of

the P&A Agreement, JPMorgan explicitly did not assume liability for any such claims. Thus, CrossComplainants have not stated any claims upon which relief could be granted against CrossCase 5:09-cv-04025-PVT Document 77 Filed 04/06/10 Page 5 of 6
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ORDER, page 6

Defendant JPMorgan. Cross-Complainants did not request leave to amend, and it would be futile in

any event under the present circumstances. Thus, dismissal of Cross-Complainants’ claims against

JPMorgan with prejudice is warranted.

Dated: 4/6/10

 

PATRICIA V. TRUMBULL

United States Magistrate Judge

Case 5:09-cv-04025-PVT Document 77 Filed 04/06/10 Page 6 of 6