Barinaga v. Jp Morgan Chase & Co.

• Decision Date: 26 October 2010
• Docket Number: Case No.: 10–CV–266–AC.
• Citation: 749 F.Supp.2d 1164
• Court: U.S. District Court — District of Oregon
• Parties: Kristin BARINAGA, Plaintiff,v.JP MORGAN CHASE & CO., a federally chartered bank, Defendant.

749 F.Supp.2d 1164

Kristin BARINAGA, Plaintiff,

v.JP MORGAN CHASE & CO., a federally chartered bank, Defendant.

Case No.: 10–CV–266–AC.

United States District Court, D. Oregon.

Oct. 26, 2010.

Phillip J. Nelson, Jason E. Hirshon, Nicholas J. Slinde, Slinde & Nelson, LLC, Portland, OR, for Plaintiff.Kevin H. Kono, Davis Wright Tremaine, LLP, Portland, OR, Frederick B. Burnside, Davis Wright Tremaine LLP, Seattle, WA, for Defendant.

OPINION AND ORDER

ACOSTA, United States Magistrate Judge:

Opinion

Plaintiff Kristin Barinaga (“Barinaga”) is one of the many Americans currently facing foreclosure on their family residence. In her complaint, Barinaga alleges that defendant JP Morgan Chase & Co, (“Chase”), failed to follow through on its promise to her to modify the terms of her mortgage to allow her to remain in her home. Barinaga alleges claims for breach contract and the duty of good faith and fair dealing, fraud in the inducement, and violation of Oregon's Unlawful Trade Practices Act. Barinaga agrees to withdraw her Trade Practices Act claim based on the holding of Lamm v. Amfac Mortgage Corp., 44 Or.App. 203, 605 P.2d 730 (1980), in which the Oregon court held that the Trade Practices Act does not cover the business of lending money. Chase moves to dismiss Barinaga's remaining three claims.

Barinaga has failed to allege facts sufficient to establish that the oral modification of the terms of her loan were supported by adequate consideration or that the parties had a meeting of the minds on all essential terms of the modification. Furthermore, the conduct she alleges to be a breach of the duty of good faith and fair dealing is specifically authorized under the terms of the written contracts and was within the contemplation of the parties at the time those contracts were signed. Accordingly, Barinaga's claims for breach of contract and the contractual duty of good faith and fair dealing are be dismissed with prejudice for failure to state a claim. With regard to Barinaga's fraud claim, the court finds that she has alleged fraud with the specificity required by Rule 9(b) and has included all of the elements of a prima facie claim for fraudulent misrepresentation. Chases's motion to dismiss Barinaga's Third Claim for Relief for fraud is be denied.

Background

Barinaga alleges in her complaint that in August 2006, she borrowed almost $1.5 million from Washington Mutual Bank at a variable interest rate starting at 7.5 % and for a term of 30 years (the “Loan”). The Loan was secured by Barinaga's residence located in Portland, Oregon (the “Property”). Under the terms of the Loan, Barinaga was to make initial monthly payments in the amount of $10,444.00.¹

The Deed of Trust ² securing the Loan obligated Barinaga to “pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note.” (Mendoza Decl. Ex. 2 ¶ 1.) The Deed of Trust provided that:

This Security Instrument cannot be changed or modified except as otherwise provided herein or by agreement in writing signed by Borrower, or any Successor in interest to Borrower and Lender. Extension of the time for payment or modification of amortization of the sums secured by the Security Instrument granted by Lender to Borrower or any Successor in Interest of Borrower shall not operate to release the liability of Borrower or any Successor in Interest of Borrower.... No waiver by Lender of any right under this Security Instrument shall be effective unless in writing. Waiver by Lender of any right granted to Lender under this Security Instrument or of any provision of this Security Instrument as to any transaction of occurrence shall not be deemed a waiver as to any future transaction or occurrence.(Mendoza Decl. Ex. 2 ¶ 12.)

Barinaga experienced financial difficulties and became unable to make her mortgage payments in October 2008. About the same time, Chase acquired the assets of failed Washington Mutual Bank, including the Loan.³ In June 2009, Barinaga asked Chase for a modification to her mortgage. Barinaga understood that Chase would study her income and financial information closely before determining if she was eligible for a modification.

In July 2009, Chase offered a trial modification arrangement to Barinaga which required her to make three agreed-upon monthly payments before a final modification would occur. According to Barinaga, Chase utilized the trial modification plan as a condition precedent to a final modification and “routinely informed its borrowers that the trial modification was a mere formality and the final modification was forthcoming.” (Compl. ¶ 6.)

By letter dated July 30, 2009, Chase formalized the trial modification offer for Barinaga. The letter stated:

WE ARE A DEBT COLLECTOR. THIS IS AN ATTEMPT TO COLLECT A DEBT.

AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

WE HAVE TOLD A CREDIT BUREAU AGENT ABOUT A LATE PAYMENT, MISSED PAYMENT

OR OTHER DEFAULT ON YOUR ACCOUNT. THIS INFORMATION MAY BE

REFLECTED IN YOUR CREDIT REPORT.

RE: Loan Number: 0705912632

Property Address: 11051 Sw Riverwood Rd

Portland OR 97219

Dear Kristin Barinaga:

We offer programs for customers who are experiencing hardships that prevent them from making their home loan payments. We may be able to assist you.

This is due to your reason for default—Loss of Income

Since you have told us you're committed to pursuing a stay-in-home option, you have been approved for a Trial Plan Agreement. If you comply with all the terms of the Agreement, we'll consider a permanent workout solution for your loan once the Trial Plan has been completed.

Please sign and return the Trial Plan Agreement. We must receive the signed Agreement at the following address on or before 08/01/09:

Washington Mutual Bank255 Baymeadows WayAttn: LMT MONITORING TEAMJacksonville, FL 32256

You may also fax your signed Agreement to us at 866.282.5682.

(Mendoza Decl. Ex. 3 at 1.) The Trial Plan Agreement, which was attached to the July 30, 2009, letter, provided:

* Your loan is now due for the months of 10/01/08 to 07/01/09.

* You must send $0.00 to reduce your total delinquency.

* We must receive the initial payment of $5124.50 along with your signed Trial Plan Agreement (“Agreement”) by 08/01/09. After that, the payment schedule outlined below must be followed, If you do not make your payments on time, or if any of your payments are returned for non-sufficient funds, this Agreement will be in breach and collection and/or foreclosure activity will resume.

Your payments must be received in our office on or before the following dates:

$5124.50 09/01/09

$5124.50 10/01/09

Payments are subject to change due to escrow analysis and or interest rate changes, if applicable. If you are notified of a payment adjustment, please contact our office immediately so we can adjust the terms of your Agreement accordingly. If all payments are made as scheduled, we will reevaluate your application for assistance and determine if we are able to offer you a permanent workout solution to bring your loan current.

All of the original terms of your loan remain in full force and effect, unless specifically mentioned within this Agreement. If any part of this Agreement is breached, Washington Mutual has the option to terminate the Agreement and begin or resume foreclosure proceedings pursuant to your loan documents and applicable law.

You acknowledge that in the event you file a petition in bankruptcy, Washington Mutual may elect to take any and all actions necessary, including, but not limited to voiding this Agreement, filing a Motion for relief from the automatic stay or a Motion to dismiss or any permitted state law remedies, which in Washington Mutual's judgment are reasonably necessary to secure or protect our security, the value of the security and/or to enforce our rights under the original terms of your loan.

(Mendoza Decl. Ex. 3 at 1.)

Barinaga alleges that Chase employees “repeatedly represented that the trial modification plan was a mere condition precedent to the final modification plan and the three months compliance with the trial modification plan would automatically result in a final modification on identical terms” (Compl. ¶ 8.) She then executed the Trial Plan Agreement on August 8, 2009, and, in “reliance Chase's representations,” began to perform under its terms. (Compl. ¶ 9.)

Barinaga made the payments for August, September, October 2009, and expected to receive final modification documents by November. When they did not arrive, she contacted Chase and was told that the delay was the result of a backlog of modification requests and was assured that the “modification was still on track and the final modification would be forthcoming.” (Compl. ¶ 10.) In reliance on Chase's representations and pursuant to its instructions, Barinaga made payments of $5,124.50 ⁴ in November and December 2009.

On December 4, 2009, Barinaga's legal counsel contacted Chase to inquire about the status of the final modification paperwork. A Chase employee represented that the paperwork would be completed by the middle of the following week. That afternoon, Barinaga received a letter from Chase notifying her that it had revoked the trial modification and would not agree to a final modification.

During the trial period, Chase contracted with a local real estate broker to perform a broker's price opinion on the value of the Property. When the broker initially contacted Barinaga in September, 2009, she represented that she had a client who was interested in purchasing the Property, which was then on the market for sale, and needed access to the Property. After being questioned by Barinaga, the broker admitted that she did not have a client and that she was there on behalf of Chase, and advised Barinaga that she, Barinaga, was required by law to give the broker access to the Property. When Barinaga refused to give the broker access, the broker photographed...