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Summary of this case from New Mexico ex rel. Balderas v. Real Estate Law Ctr., P.C.Opinion
Case No. CV 13-00919 DDP (OPx)
10-14-2014
KEVIN J. DUNNE, an individual and CATHERINE M. DUNNE, an individual, Plaintiffs, v. JPMORGAN CHASE BANK, N.A., a National Banking Association, Defendant.
ORDER GRANTING MOTION TO DISMISS
[Dkt. No 46]
Presently before the court is Defendant JPMorgan Chase Bank, N.A. ("Bank")'s Motion to Dismiss. Having considered the submissions of the parties and heard oral argument, the court is grants the motion and adopts the following order.
I. Background
Plaintiffs intended to build a single-family home on a piece of property they owned, then sell the house for a profit. (Third Amended Complaint ("TAC") ¶¶ 1-2, 26.) Plaintiffs contacted David Jaffe ("Jaffe"), a Bank manager, to discuss a construction loan. (Id. ¶¶ 25, 27). Plaintiffs told Jaffe that they did not have construction permits, and would need several months to obtain the permits. (Id. ¶ 29.) Plaintiffs estimated that it would take at least eighteen months to complete the construction project. (Id. ¶ 30.)
Plaintiffs entered into a $1 million Construction Loan Agreement ("the Agreement") on March 18, 2009. (TAC ¶ 28.) Under the Agreement, the Bank would make several disbursements of "such sums as requested in [Plaintiffs'] Draw Request or such sums as in [the Bank's] sole . . . discretion are warranted . . . ." (Agreement § 6.) The Agreement also stated that construction must be completed in one year, by March 17, 2010. (Id. § 1.2.)
The Agreement included an integration clause, which stated that the Agreement constituted the entire understanding between Plaintiffs and the Bank. (Agreement § 15.5.) Under the Agreement, events of default included any misrepresentations made by Plaintiffs in the Agreement, future material misrepresentations relied upon by the Bank, failure to maintain necessary permits, and abandonment of construction. (Id. §§ 12.4, 12.10, 12.12, 12.14.) Plaintiffs warranted that they had obtained all necessary construction permits, and that the Agreement contained no untrue statements of material fact. (Id. §§ 10.4, 10.5.) The following day, the parties executed a written addendum to the Agreement, which extended the term of the loan to eighteen months. (TAC ¶ 30; Addendum § 7.)
Plaintiffs made fifteen draw requests, only one of which was fully funded. (TAC ¶ 35.) In November 2009, Chase stopped advancing loan funds and issued a Notice of Default because Plaintiffs failed to "diligently pursue completion" of the construction project. (TAC ¶ 32.) Though the Bank eventually resumed funding, it forced Plaintiffs to accept a completion date of July 1, 2010, notwithstanding the Addendum completion date of September 18, 2010. (Id. ¶ 33.)
On January 15, 2010, the Bank "collapsed" the loan and demanded full repayment within thirty days. (Id. ¶ 35.) Plaintiffs obtained funding from another bank and repaid the loan. (Id. ¶ 37.) The Bank nevertheless reported to credit-rating agencies that Plaintiffs failed to make timely payments on their construction loan.
Plaintiffs' TAC alleges a single contract claim for breach of the implied covenant of good faith and fair dealing. The Bank now moves to dismiss the TAC.
II. Legal Standard
A complaint will survive a motion to dismiss when it contains "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a Rule 12(b)(6) motion, a court must "accept as true all allegations of material fact and must construe those facts in the light most favorable to the plaintiff." Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000). Although a complaint need not include "detailed factual allegations," it must offer "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 556 U.S. at 678. Conclusory allegations or allegations that are no more than a statement of a legal conclusion "are not entitled to the assumption of truth." Id. at 679. In other words, a pleading that merely offers "labels and conclusions," a "formulaic recitation of the elements," or "naked assertions" will not be sufficient to state a claim upon which relief can be granted. Id. at 678 (citations and internal quotation marks omitted).
"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement of relief." Id. at 679. Plaintiffs must allege "plausible grounds to infer" that their claims rise "above the speculative level." Twombly, 550 U.S. at 555. "Determining whether a complaint states a plausible claim for relief" is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
III. Discussion
A breach of contract claim may be based upon the breach of an express provision of a contract or the breach of the implied covenant of good faith and fair dealing. McNeary-Calloway v. JPMorgan Chase Bank, NA, 863 F.Supp.2d 928, 954 (N.D. Cal. 2012). Thus, Plaintiffs here must show (1) the existence of a contract, (2) their performance or excuse for nonperformance, (3) breach by the Bank, and (4) damages. Id. The Bank argues that Plaintiffs cannot satisfy the second element because the TAC itself alleges that Plaintiffs failed to perform their obligations under the Agreement.
Specifically, the Bank points to Plaintiff's allegations that at the time the Agreement was executed, and contrary to the express representations contained in the Agreement, Plaintiffs had not obtained all of the necessary building permits. (Motion at 7.) The Bank argues that that failure, and Plaintiffs' misrepresentation related thereto, each constitute a separate event of default under the Agreement.
Plaintiff's assertion that the Bank's "entire motion is anchored to alleged 'misrepresentations'" (Opp. at 9) is incorrect. Under the Agreement, Plaintiffs' failure to maintain permits was itself a listed event of default, regardless of any related misrepresentations. (Agreement § 12.12.)
Plaintiffs contend that the TAC alleges both performance and excuse for nonperformance. Indeed, the TAC does allege that Plaintiffs "did all or substantially all of the significant things that the contract required them to do or, in the alternative, [Plaintiffs] were excused from having to do those things." (TAC ¶ 43.) That conclusory assertion, however, is not entitled to the presumption of truth. Iqbal, 556 U.S. at 679.
Plaintiffs' brief argument regarding parol evidence, relying upon Riverisland Cold Storage v. Fresno-Madera Prod. Credit Assoc., 55 Cal. 4th 1169 (2013), is somewhat unclear. As an initial matter, Plaintiffs assert that their intent is not to rely upon parol evidence to excuse their failure to perform. (Opp. at 12.) Furthermore, unlike the plaintiffs Riverisland, Plaintiffs here do not allege fraud, nor do they seek to rescind a contract.
Alternatively, Plaintiffs argue that the Bank waived Plaintiffs' defaults. (Opposition at 8, 15, 18.) Plaintiffs contend that the Bank knew, or should have known, that Plaintiffs did not have the requisite building permits because Plaintiffs told Jaffe about the lack of permits before the parties executed the Agreement. The TAC alleges that the Bank nevertheless entered into the Agreement and made several, albeit incomplete, disbursements in response to Plaintiffs' draw requests. (TAC ¶¶ 32, 35.)
Waiver is an intentional relinquishment of a known right, whether express or implied. Supervalu, Inc. v. Wexford Underwriting Managers, Inc., 175 Cal.App.4th 64, 77 (2009). The waiver doctrine operates defensively only. Id. While waiver "can preclude the assertion of legal rights, it cannot be used to impose legal duties." Groves v. Prickett, 420 F.2d 1119, 1125 (9th Cir. 1970); Peasley v. Verizon Wireless LLC, 364 F.Supp.2d 1198, 1201 (S.D. Cal. 2005).
Notably, the Agreement contains an express anti-waiver provision. (Agreement § 15.2)
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Here, Plaintiffs attempt to use the Bank's alleged waiver of Plaintiffs' default to impose a contractual duty upon the Bank where, in the absence of Plaintiffs' performance or excused nonperformance, none would otherwise exist. Plaintiffs may not rely upon the waiver doctrine for this purpose. The TAC does not allege any other facts suggesting Plaintiffs' performance or any excuse for their nonperformance. The TAC therefore fails to state a cause of action for breach of the implied covenant of good faith and fair dealing.
IV. Conclusion
For the reasons stated above, Defendant's Motion to Dismiss this TAC is GRANTED. Plaintiffs' TAC is DISMISSED, with prejudice.
IT IS SO ORDERED.
Dated: October 14, 2014
/s/
DEAN D. PREGERSON
United States District Judge