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

United States District Court, S.D. Indiana, Indianapolis Division

March 10, 2014

JP MORGAN CHASE BANK, N.A., formally known as Chase Home Finances, LLC, Defendant.



This matter is before the Court on Defendant JP Morgan Chase Bank, N.A.'s ("Chase") partial Motion to Dismiss (Dkt. 14). Chase asks the Court to dismiss Counts II, III, and IV of Plaintiffs Stephen Perron's ("Mr. Perron") and Christine Jackson's ("Ms. Jackson") (collectively, "the Homeowners") Complaint (Dkt. 1) under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. For the reasons set forth below, Chase's Motion is GRANTED in part and DENIED in part.


The following facts are from the Homeowners' Complaint and are accepted as true for purposes of this motion to dismiss. Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007). The Homeowners, a married couple, have a home mortgage on their personal residence in Hamilton County, Indiana which was serviced by Chase (formerly Chase Home Financing LLC) from 2008 to present. Ms. Jackson is an attorney and Mr. Perron is a retired investigator for the Internal Revenue Service. The mortgage note at issue (the "Note") is held by the Federal National Mortgage Association ("Fannie Mae"). In 2008, the Homeowners' scheduled monthly mortgage payment, including principal, interest and escrow, was $1, 469.20, and in 2009, it was $1, 463.23. The Homeowners paid their monthly mortgage payment by automatic bank transfer.

The Homeowners' insurance premiums were paid by Chase on the Homeowners' behalf, from money held in an escrow account. Sometime in February 2009, Chase deducted $1, 422.00 from the Homeowners' escrow account and labeled the deduction as "Homeowner's Insurance." In March 2009, Chase deducted $838.00 from the Homeowners' escrow account for the Homeowners' updated insurance premium. In December 2009, Chase's automated annual escrow analysis software program calculated the Homeowners' projected 2010 insurance obligation based upon the incorrect amount of $2, 260.00, which was the sum of both amounts labeled "Homeowners' Insurance" deducted from the Homeowners' 2009 escrow account, despite the fact that the Homeowners' insurance premium was only $838.00.

Due to the incorrect projection for Homeowners' 2010 insurance premium, Chase computed that the Homeowners had an escrow "shortage" of $802.28 as of December 31, 2009. Consequently, Chase's escrow software program added an additional $66.00 to each of the Homeowners' 2010 scheduled monthly mortgage payments to recoup the 2009 escrow "shortage, " which made their monthly mortgage payment $1, 499.01. The Homeowners, however, continued to make, and Chase accepted, automatic bank transfers in the amount of $1, 469.20 each month from January 2009 through November 2011. On or about November 23, 2011, the Homeowners logged onto the Chase online account website to change the bank account from which Chase should deduct their monthly mortgage payments. At this time, they first discovered that Chase had miscalculated the amount of their 2010 scheduled mortgage payments due to the improper inclusion of the February 2009 "Homeowners' Insurance" charge of $1, 422.00 in Chase's 2010 escrow calculation. The online account information also showed that despite the failure of the Homeowners to increase their 2010 monthly payments, the Homeowners' 2010 escrow account ended the year with $250.05 of excess funds that would be refunded to Homeowners in January 2011. The online account information also showed that Chase calculated the Homeowners' 2011 scheduled monthly mortgage payment to be $1, 399.23

The Homeowners contacted a Chase representative by telephone to alert the bank to the error and to determine the correct amount they should pay for their December 2010 monthly payment. They explained the error to the Chase representative, who acknowledged that she saw how the error occurred. The Homeowners inquired as to how to pay their December 2010 payment because the online banking website would only allow them to set up an automatic payment in the amount of $1, 499.01, despite the fact that their monthly payment was only calculated to be $1, 399.23 and they had a $250.00 escrow surplus. The Chase representative told the Homeowners that he would code their account to accept a payment in the amount of $1, 399.23 for December 2010 and instructed the Homeowners to make their December payment at a bank branch. The representative also stated that the new automatic monthly electronic bank transfer from the new bank account would be effective January 2011, in the amount of $1, 399.23. The Homeowners made a payment in the amount of $1, 399.23 at a local Chase bank branch on December 3, 2010. Thereafter, on December 28, 2010, the homeowners received a check from Chase in the amount of $250.05 which represented the amount of their 2010 escrow account surplus.

On or about January 10, 2011, the Homeowners received eight form letters from Chase, which included several Presuit Notices, Notices of Intent to Foreclose, ACH Program Termination letters, and Default letters stating that their account was two months behind. The Homeowners discovered that Chase did not apply their December 2010 payment toward their December monthly payment obligation, but instead had put the Homeowners' December 2010 payment into a "suspense" account and coded the Homeowners' account as being in default. Consequently, Chase's computer system did not process their January 2011 mortgage payment, which the Homeowners did not discover until after they received the form letters from Chase.

On or about January 10, 2011, the Homeowners sent Chase a Qualified Written Request ("QWR") pursuant to the Real Estate Settlement Procedures Act ("RESPA"), informing Chase of the error and requesting that Chase reverse the error and correct the Homeowners' mortgage account. On or about January 28, 2011, Homeowners received their first "robo-call" from Chase's collection department, but Mr. Perron hung up the telephone when he heard that the call was from Chase. From February 2011 through the time the Homeowners' telephone was disconnected, Chase's automated collection "robo-call" program dialed the Homeowners' telephone at least two times per day, every day of the week. Most of the time, Homeowners did not answer the telephone.

On February 8, 2011, Ms. Jackson answered one of the collection calls from Chase. The representative informed Ms. Jackson that they had $1, 277.37 in their "suspense" account and that Homeowners were behind three payments. Ms. Jackson tried explaining the situation to the representative, but she only informed Ms. Jackson that she would face foreclosure if they did not pay all of the money that was owed. On February 24, 2011, Ms. Jackson answered another collection call from a representative in Chase's Home Department. The representative tried to convince Ms. Jackson to make at least one mortgage payment to keep the mortgage account out of foreclosure, but Ms. Jackson refused to make any payments until the account error was corrected and the default status was removed from the account. The representative also told Ms. Jackson to call Chase's Customer Service Department at least once per week to be sure that they were working on the error. Ms. Jackson responded that she would not do so, as it would be a waste of time because she believed the representatives had no authority to correct the error.

On February 28, 2011, Chase sent Homeowners a letter in response to their QWR, which was a form letter from Chase Home Lending with the Homeowners' loan history and escrow statements, but nothing specifically addressing their request. Homeowners sent another QWR on April 27, 2011, but received no response from Chase. Chase's Loss Mitigation representative continued to tell the Homeowners that Chase had a valid foreclosure against the Homeowners and it did not matter whether Chase had made an error. After Ms. Jackson spoke with the media in January 2012, the Homeowners received correspondence from Chase's Executive Office and a local attorney representing Chase. However, efforts to resolve the matter prior to litigation were unsuccessful.

On December 19, 2012 the Homeowners filed a Complaint alleging violation of RESPA, Breach of Contract, Breach of Duty of Good Faith and Fair Dealing; Negligent Training, Supervision and Retention by Chase. Specifically, the Homeowners allege they suffered significant stress and frustration as a result of the failed attempts to resolve the error on their mortgage account. They also allege that the stress adversely affected their marriage and Mr. Perron filed for divorce in March of 2012. The adverse impact on Ms. Jackson's credit has affected her law practice because she has been denied access to new credit. Ms. Jackson also alleges that she suffered from health problems due to the stress of the situation, including the prospect of losing her law practice and her home.


Pursuant to Federal Rules of Civil Procedure 12(b)(6), the Court must take the facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Mosley v. Klincar, 947 F.2d 1338, 1339 (7th Cir. 1991). The complaint must contain only "a short and plain statement of the claim showing that the pleader is entitled to relief, " (Fed. R. Civ. P. 8(a)(2)), and there is no need for detailed factual allegations. Pisciotta v. Old Nat'l Bancorp, 499 F.3d 629, 633 (7th Cir. 2007) (citation omitted). Nevertheless, the statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests" and the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. (citations and quotations omitted). "Although this does not require heightened fact pleading of ...

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