Zimmerschied v. JP Morgan Chase Bank, N.A.

49 F.Supp.3d 583

Kathleen ZIMMERSCHIED, Plaintiff

v.JP MORGAN CHASE BANK, N.A., as successor by merger to Chase Home Finance, L.L.C., Defendant.

Civil No. 13–3431 JRT/JJK.

United States District Court, D. Minnesota.

Signed Sept. 23, 2014.

Patrick M. Sutton, The Law Office of Patrick M. Sutton, St. Louis Park, MN, for plaintiff.

Marc D. Simpson and Calvin P. Hoffman, Stinson Leonard Street LLP, Minneapolis, MN, for defendant.

MEMORANDUM OPINION AND ORDER ON DEFENDANT'S MOTION TO DISMISS

JOHN R. TUNHEIM, District Judge.

This case arises out of a mortgage agreement entered into by Plaintiff Kathleen Zimmerschied that was serviced by Defendant JP Morgan Chase Bank, N.A., as successor by merger to Chase Home Finance LLC (“Chase”). In an amended complaint Zimmerschied brings various statutory and common law claims arising out of her allegation that beginning in 2006 Chase consistently withdrew multiple mortgage payments each month from her personal bank account and line of credit but failed to properly apply these payments to her mortgage account balance and charged her unnecessary fees and interest, ultimately referring her home for foreclosure, based on these failures.¹

Chase moves to dismiss Zimmerschied's claims against it. In response, Zimmerschied concedes that six of her claims are “overreach[ing].” (Pl.'s Mem. in Opp'n to Mot. to Dismiss at 1, Mar. 3, 2014, Docket No. 25.) Because Zimmerschied has made no argument in opposition to Chase's motion with respect to these claims, the Court will grant the motion and dismiss these six claims with prejudice. The Court will also grant Chase's motion to dismiss Zimmerschied's claims for fraud and fraudulent disclosure for failure to comply with the pleading requirements of Federal Rule of Civil Procedure 9(b), but will dismiss the claims without prejudice and allow Zimmerschied a final opportunity to amend these claims. Finally, the Court will deny Chase's motion with respect to Zimmerschied's breach of contract claim, as Zimmerschied's allegations, although they present a close question for purposes of Federal Rule of Civil Procedure 12(b)(6), are ultimately sufficient to state a plausible claim for relief under the liberal pleading standards of the Federal Rules.

BACKGROUND

I. THE MORTGAGES

On June 28, 2002, Zimmerschied executed a promissory note in favor of Highland Bank (“Highland”) for a $100,000 revolving line of credit. (Decl. of Kendall Bader, Ex. 1, Feb. 10, 2014, Docket No. 18.)² As security for the line of credit, Zimmerschied granted Highland a mortgage on property located at 5417 84th Avenue North, Brooklyn Park, Minnesota (“the Property”). (Id., Ex. 1 at 2.)³ This mortgage was recorded on October 28, 2002. (Id. )

On August 28, 2002, Zimmerschied entered into a Hennepin County Rehabilitation Loan Program Deferred Loan Repayment Agreement and Mortgage. (Id., Ex. 2 at 8–11.) Under the agreement, the City of Brooklyn Park provided Zimmerschied with a $20,000 interest-free loan “for rehabilitation work” on Zimmerschied's residential home located on the Property. (Id., Ex. 2 at 8.) In connection with this loan Zimmerschied granted the City of Brooklyn Park a mortgage on the Property, which was recorded on May 12, 2004. (Id., Ex. 2 at 8–9.)

On September 12, 2002, Zimmerschied refinanced one of the previous mortgages on the Property by executing a promissory note in favor of Frontline Finance, LLC (“Frontline”) in the principal amount of $143,200. (Am. Compl. ¶¶ 11–12, Jan. 20, 2014, Docket No. 11; Bader Decl., Ex. 3 at 13–21.) In connection with the loan, Zimmerschied granted a mortgage (“the Mortgage”) on the Property to Mortgage Electronic Registration Systems, Inc. as nominee for Frontline, which was recorded on October 18, 2002. (Bader Decl., Ex. 3 at 13–14.) Servicing of the Mortgage was transferred to Chase Home Finance, L.L.C., on March 5, 2003. (Am. Compl. ¶ 19.) Chase Home Finance, L.L.C. later merged with Defendant Chase, who became Chase Home Finance's successor of interest. (Id. )

On October 23, 2002, Plaintiff executed another promissory note in the principal amount of $143,000 in favor of ABN Amro Mortgage Group, Inc. (“ABN”). (Id. ¶¶ 53–54; Bader Decl., Ex. 4 at 23.) Zimmerschied granted ABN a mortgage on the Property, which was recorded in Hennepin County on November 26, 2002. (Bader Decl., Ex. 4 at 23–30.) ABN declared bankruptcy in 2007 and Citi Mortgage became the successor in interest of ABN by merger. (Am. Compl. ¶ 57.)

II. SERVICING ISSUES

Zimmerschied alleges that she made her payments on the Mortgage using personal checks written from her TCF Bank (“TCF”) checking account. (Id. ¶ 20.) Zimmerschied alleges that in June 2006

Chase began postponing payments or losing the payments until after the due dates of the payments for reasons unknown to Ms. Zimmerschied. Ms. Zimmerschied realized that the “received” dates were much later than the cleared dates, if they cleared at all, on her bank statements. In other words, Ms. Zimmerschied was sometimes given credit on her mortgage account but Chase did not give that credit for a payment until months later. In the meantime, Chase charged late fees for Plaintiff not paying her mortgage.

(Id. ¶ 21.) In August 2006, Chase notified Zimmerschied that she was delinquent on her mortgage payments. (Id. ¶ 22.) A month later Zimmerschied first noticed that Chase processed one of her payments twice—first as a paper check, and then as an Automatic Clearing House (“ACH”) debit—resulting in two separate debits to her bank account. (Id. ¶ 23 & n. 2.) Zimmerschied alleges that throughout the next year Chase continued to process payments multiple times, once even processing a single check ten times, but “did not apply Ms. Zimmerschied's payments to pay down her mortgage balance” and “continually assessed late fees to Ms. Zimmerschied's account.” (Id. ¶¶ 24–25, 27–28.) During this period of time Chase's actions of processing single checks multiple times caused Zimmerschied's TCF account to be “overdrawn on innumerable occasions.” (Id. ¶ 29.)

Zimmerschied alleges that when she contacted Chase to ask why her payments were being processed multiple times, she would either be asked for copies of the original checks, provided with a single posting date even if the payment had been submitted multiple times, the Chase representative would deny wrongdoing, or the representative would state that TCF should have reversed duplicate items. (Id. ¶ 30.) The situation of Chase processing single checks multiple times while simultaneously not crediting her mortgage account for those payments persisted when Zimmerschied switched to making payments using official bank checks, rather than personal checks. (Id. ¶¶ 31–33.) During this period of time Zimmerschied brought her concerns about Chase's practices to the Federal Trade Commission and the Office of Minnesota's Attorney General but “the investigations withered away” when Chase denied wrongdoing. (Id. ¶ 33 n. 7.)

In an effort to move away from the problematic check payment system, Zimmerschied set up a line of credit at TCF on April 18, 2007, with an original credit limit of $205,000 which was later increased to $220,000. (Id. ¶ 35.) On May 15, 2007, Zimmerschied authorized an automatic monthly payment of $893.38 to Chase from the line of credit. (Id. ¶ 36.) Zimmerschied contends that she did not receive a welcome letter from Chase regarding these automatic payments until October 14, 2009. (Id. ¶ 36, Ex. 5 at 47.)⁴ In the letter Chase indicated that it would debit $893.38 as the “total monthly payment amount” from Zimmerschied's account. (Id., Ex. 5 at 47.) Zimmerschied alleges that Chase in fact took two payments from her account each month, and starting in February 2012 began taking four payments each month. (Id. ¶ 36.) Bank records from TCF indicate that Chase at least attempted to make multiple withdrawals in a single month as alleged by Zimmerschied. (See, e.g., id., Ex. 2 at 22 (showing withdrawals of $893.38 by Chase on January 5, 2010, January 13, 2010, January 15, 2010, January 21, 2010, February 1, 2010, and February 15, 2010).) Zimmerschied alleges that since February 2012 Chase has withdrawn $108,890.67 from her TCF line of credit and “has never applied any of [its] TCF line of credit withdrawals to Ms. Zimmerschied's mortgage balance.” (Id. ¶¶ 36–37.)

When she attempted to stop the withdrawals, Zimmerschied alleges that she was unsuccessful as “[b]oth Chase and TCF National Bank denied liability for the withdrawals continuing to occur and also denied the ability to stop the withdrawals from occurring.” (Id. ¶ 39.) When Zimmerschied spoke with a Chase representative, the representative explained that each repeat withdrawal was actually a refusal by TCF to pay Chase the requested amount. (Id. ¶ 41.)

Zimmerschied was served with a notice of a foreclosure sale on December 10, 2012. (Id. ¶ 43.) Zimmerschied was served with another notice on February 21, 2013, scheduling that sale for April 20, 2013. (Id. ¶ 45; id., Ex. 6.) The sale was postponed after Zimmerschied filed a postponement affidavit, and the rescheduled sale for September 20, 2013 was also postponed “in preparation of this civil action.” (Id. ¶ 45.) Zimmerschied alleges that between April 18, 2007 and October 15, 2013, Chase has automatically withdrawn $216,096.27 from her line of credit. (Id. ¶ 47.) Zimmerschied also alleges that “Chase is still automatically withdrawing funds from the TCF line of credit account at the time of filing this Complaint.” (Id. ¶ 50.)

ANALYSIS

I. STANDARD OF REVIEW

In reviewing a motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6), the Court considers all facts alleged in the complaint as true to determine if the complaint states a “ ‘claim to relief that is plausible on its face.’ ” Gomez v. Wells Fargo Bank, N.A., 676 F.3d 655, 660 (8th Cir.2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). To survive a motion to dismiss, a complaint must...