Source: http://stopforeclosurefraud.com/2013/03/13/jolley-v-chase-home-finance-llc-cal-court-of-appeal-order-modifying-opinion-and-denying-rehearing-re-secret-118-page-pa-agreement-for-the-chase-purchase-of-wamu/
Timestamp: 2017-09-26 00:19:20
Document Index: 328428580

Matched Legal Cases: ['§ 1821', '§ 542', '§ 1572', '§ 525', '§ 776', '§ 2923', '§ 2923', '§ 18', '§ 2924', '§ 17200', '§ 806', '§ 1061', '§ 819', '§ 1589', '§ 36']

Jolley v. CHASE HOME FINANCE, LLC | Cal: Court of Appeal - ORDER MODIFYING OPINION AND DENYING REHEARING - Re: Secret 118-page P&A Agreement for the Chase purchase of WaMu
Jolley v. CHASE HOME FINANCE, LLC | Cal: Court of Appeal – ORDER MODIFYING OPINION AND DENYING REHEARING – Re: Secret 118-page P&A Agreement for the Chase purchase of WaMu
No. A134019.Court of Appeals of California, First District, Division Two.
Filed March 7, 2013.Law Offices of Vernon Bradley, Vernon Bradley, Attorney for Plaintiff and Appellant.Law Offices of Sohnen & Kelly, Harvey Sohnen, Patricia M. Kelly, Attorneys for Defendants and Respondents.
It is ordered that the published opinion filed herein on February 11, 2013, be modified as follows:
1. At the top of page 6, first line, the sentence that reads,” Jolley further testified that as a result of these representations he was induced to complete construction at a cost of $100,000, borrowing from family and friends to do so” shall be deleted and replaced with the following sentence:
Jolley further testified that as a result of these representations he was induced to “borrow heavily to finish the project.”
2. On page 29, second full paragraph, first line, the sentence that reads, “He invested $100,000 in finishing construction on the property shortly before foreclosure proceedings were initiated” shall be deleted and replaced with the following sentence:
He invested funds borrowed from other sources in finishing construction on the property shortly before foreclosure proceedings were initiated.
3. On page 29, second full paragraph, the last sentence that reads, “Had Jolley known that Chase would ultimately foreclose on the property, he would have had no incentive to invest an additional $100,000 in its completion” shall be deleted. No new sentence is required.
Plaintiff Scott Call Jolley and Washington Mutual Bank (WaMu) entered into a construction loan agreement in 2006, which eventually encountered problems due to alleged failures by WaMu to properly disburse construction funds. As Jolley was continuing to attempt to salvage the transaction, WaMu went into receivership with the Federal Deposit Insurance Corporation (FDIC), and in September 2008 JP Morgan Chase[1] (Chase) bought WaMu’s assets through a purchase and assumption agreement (Agreement or P&A Agreement). Jolley soon stopped making payments on the loan, and in late 2009 Chase took steps to foreclose.
WaMu “eventually agreed to the modification . . .” and on October 5, 2006 WaMu and Jolley executed a loan modification based on an expansion of the original construction project from 2500 square feet to 5000. This was done at WaMu’s insistence, as Jolley was told that increasing the size and scope of the project would qualify him for a higher loan amount. Even at that time, Thorne warned that the loan amount needed to be increased by $400,000 to complete the enlarged project. The modification agreement itself does not specify a new maximum amount to be disbursed, but indicates the new principal amount would be “Variable: new principal amount.” And WaMu “promised that if [Jolley] increased the square footage and scope of the work that [WaMu] would supply the additional funds needed to complete the construction. . . .”
The modified agreement called for completion of construction by July 1, 2007, and required Jolley to make monthly interest and principal payments of $16,181.12 beginning August 1.[2] Exactly what transpired from October 2006 to September 2008 is somewhat hazy from the record, but construction apparently continued, with Jolley continuing to make interest payments. If we read Chase’s documents correctly, the last disbursement was in June 2008.
According to Jolley’s testimony, “Once Chase had taken over the operations of [WaMu], they continued in the construction loan department with the same people that I had been dealing with when [Wamu] still owned the loan. I had dealt with Mabette Del Rosario, Neil Lampert, and Jed Sonstrom in the legal department. . . . After the takeover by Chase, Mabette Del Rosario continued to run the construction disbursement department. I was led to believe that because Chase had taken over the loan from [Wamu], it was still going to honor the original agreement which said in the addendum Construction/Permanent Loan Part One: `When all conditions prior to rollover are met as described in the construction loan agreement, the loan will rollover to a fully amortized loan.'” Another Chase employee with whom Jolley would come to deal was Andrew North.
Ultimately, instead of agreeing to a loan modification, Chase demanded payment of the loan in full.[3] On December 29, 2009, CRC, as trustee, recorded a notice of default, and on March 30, 2010, recorded and served a notice of sale.
On April 19, 2010, two days before the scheduled foreclosure sale, Jolley filed this lawsuit. It named Chase Home Finance LLC and CRC, and alleged eight causes of action: (1) fraud and deceit—intentional misrepresentation;[4] (2) fraud and deceit—negligent misrepresentation; (3) breach of contract/promissory estoppel; (4) negligence; (5) violation of Business and Professions Code section 17200 et. seq.; (6) declaratory relief; (7) accounting; and (8) reformation. Though CRC was named as a defendant, no specific wrongdoing was alleged with respect to it.
Jolley’s lawsuit rested in part on the theory that Chase was the successor in interest to WaMu and therefore had “stepp[ed] into the shoes” of WaMu and was liable for any misrepresentation, negligence, or breach of contract on its part under California law and under the construction contract he had signed with WaMu. Jolley relied on language in paragraph 13 of his agreement with WaMu that made “the covenants and agreements” binding on “the successors and assigns of [WaMu].” Jolley also relied on Civil Code section 1589, which requires one who takes the benefit of a transaction to also assume its liabilities.[5]
On August 25, 2011, Chase[6] filed a motion for summary judgment or, in the alternative, summary adjudication, fundamentally claiming that it had no liability for borrower claims based on WaMu’s conduct prior to the FDIC receivership. It relied on federal law relating to the powers of the FDIC as receiver and on the terms of the P&A Agreement, specifically that it had acquired only the assets of WaMu in its purchase from the FDIC, not the liabilities. This contention was based on section 2.5 of the Agreement quoted above, which had also been asserted as an affirmative defense in Chase’s answer. The motion was set for hearing on November 15, 2011.
“1. On September 25, 2008, Washington Mutual Bank, _.A. (“WaMu”) was closed by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver for WaMu pursuant to its authority under the Federal Deposit Insurance Act, 12 U.S.C. § 1821(d). Pursuant to the Purchase and Assumption Agreement between the FDIC as Receiver for WaMu, and Chase, dated September 25, 2008, Chase acquired certain of the assets of WaMu, including all loans and loan commitments of WaMu. A copy of that Purchase and Assumption Agreement is attached hereto as Exhibit A and can be found on the FDIC’s website at http://www.fdic.gov/about/freedom/Washington_Mutual_P_and _ A.pdf.”[7] The attached copy was 39 pages, including exhibits. No separate points and authorities accompanied Chase’s request for judicial notice.
In November 2011, Jolley began trying to secure a copy of the 118-page agreement referred to in Thorne’s declaration. His counsel requested a copy from the FDIC, and also apparently served a subpoena duces tecum seeking production of it. According to Jolley’s counsel, the FDIC refused to produce the document unless all parties to the litigation signed a confidentiality agreement. On November 9, 2011, six days before the motion was to be heard, Jolley requested that counsel for Chase sign a confidentiality agreement. She refused to do so.[8] On or about November 14, 2011, Jolley filed an ex parte application seeking to continue the motion, to keep discovery open, and to continue the trial date so that further efforts could be made to obtain the longer agreement.[9]
“Under that Agreement, Chase expressly did not assume liability for borrower’s claims `related in any way to any loan or commitment to lend made by the Failed Bank prior to failure, . . .’ or `otherwise arising in connection with [WaMu’s] lending or loan purchase activities. . . .’ (Request to Take Judicial Notice, Ex. 1, P&A Agreement ¶ 2.5) [¶] . . . [¶]
“These hopes or expectations expressed by North do not constitute either: a clear and unambiguous promise to approve the application; nor do they evidence any terms to create an enforceable contract. (SeeLaks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d 885, 891, 893 [agreement to make construction loan was expressly conditional, and lacked essential terms of the loan, and could not support a cause of action for promissory estoppel].)
“The motion is granted on the fourth cause of action for Negligence.
“`Under California law, a lender does not owe a borrower or third party any duties beyond those expressed in the loan agreement, except those imposed due to special circumstance.’ (Sipe v. Countrywide Bank(E.D.Cal. 2010) 690 F.Supp.2d 1141, 1153, citing Nymark v. Heart Fed. Savings & Loan Assn., (1991) 231 Cal.App.3d 1089, 1096.). . . .
We collected and confirmed the applicable law in Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 253-254:
“On appeal `[w]e review a grant of summary judgment de novo; we must decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law. [Citations.]’ (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.) Put another way, we exercise our independent judgment, and decide whether undisputed facts have been established that negate plaintiff’s claims. (Romano v. Rockwell Internat., Inc., supra, 14 Cal.4th at p. 487.) As we put it inFisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 320: `[W]e exercise an independent review to determine if the defendant moving for summary judgment met its burden of establishing a complete defense or of negating each of the plaintiff’s theories and establishing that the action was without merit.’ (Accord,Certain Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945, 972.)
In claimed support, Chase first cites some cases clearly inapposite, such as cases dealing with State Bar records (In re White (2004) 121 Cal.App.4th 1453) and the “definition of `mass transportation.'” (Shaw v. People ex rel. Chiang (2009) 175 Cal.App.4th 577). Chase then goes on: “[s]imilarly, under federal law the information on government agency websites has often been treated as a proper subject for judicial notice by numerous circuits (See, e.g., Paralyzed Veterans of Am. v. McPherson, No. C 06-4670 SBA, 2008 WL 4183981, at p. *5 (N.D. Cal. Sept. 9, 2008) (and cases cited therein).) [¶] Here, the P&A Agreement is available on a public Web site maintained by the FDIC. It is not reasonably subject to dispute and is capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy. The taking of judicial notice of the terms of the P&A Agreement was not in error.”[10] (Fn. omitted.) Chase then concludes as follows: “Chase and CRC sought the taking of judicial notice of a document which is not hearsay, but which itself contains admissible evidence.”
Chase filed 62 objections to Jolley’s evidence, including 33 objections to particular aspects of Thorne’s declaration and seven objections to particular statements in his deposition. We are concerned primarily with Objections 5 and 60, objecting to Thorne’s statements that a 118-page purchase and assumption agreement exists, objections based on the best evidence rule, lack of foundation, and lack of competency.[11]
It may be true that in some extreme circumstances “a trial court may weigh the credibility of a declaration submitted in opposition to a summary judgment motion and grant the motion `where the declaration is facially so incredible as a matter of law that the moving party otherwise would be entitled to summary judgment.'” (People v. Schlimbach (2011) 193 Cal.App.4th 1132, 1142, fn. 9, quoting Estate of Housley(1997) 56 Cal.App.4th 342, 359-360.) This is not such a case.
To begin with, it is well settled that an opinion may be actionable when it is made by a party who “possess[es] superior knowledge.” (Pacesetter Homes v. Brodken (1970) 5 Cal.App.3d 206, 211.) As one Court of Appeal put it almost ninety years ago, “[W]hen one of the parties possesses, or assumes to possess, superior knowledge or special information regarding the subject matter of the representation, and the other party is so situated that he may reasonably rely upon such supposed superior knowledge or special information, a representation made by the party possessing or assuming to possess such knowledge or information, though it might be regarded as but the expression of an opinion if made by any other person, is not excused if it be false.” (Haserot v. Keller (1924) 67 Cal.App. 659, 670; Cohen v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 946; see generally Rest.2d Torts § 542; CACI No. 1904.)
Equally well recognized is that there may be liability for an opinion where it is “expressed in a manner implying a factual basis which does not exist.” (Pacesetter Homes, Inc. v. Brodkin, supra, 5 Cal.App.3d at p. 211; see generally, Crandall v. Parks (1908) 152 Cal. 772, 776; Civ. Code, § 1572; Rest.2d Torts, § 525, com. f.) Witkin explains how this rule is often applied to statements about future events, describing it this way: “(3) Future Events. As pointed out above . . ., predictions or representations as to what will happen in the future are normally treated as opinion; but sometimes they may be interpreted as implying knowledge of facts that make the predictions probable. If the defendant does not know of these facts, the statement is an actionable misrepresentation. . . . The same is true where an agent states that his or her principal will advance money to harvest a crop, or where a corporation agent represents that the corporation will lease certain property or locate a plant in a certain city. (See Eade v. Reich (1932) 120 Cal.App. 32, 35 [discussing holdings to this effect].)” (5 Witkin, Summary of California Law (10th ed. 2005) Torts, § 776, p. 1126; also see Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 241 [broker-dealer’s oral representations concerning offering of company’s bridge notes, that preferred stock offering was “done deal” and that early prepayment of notes was “guaranteed,” were actionable statements of facts, rather than opinion or prediction].)
Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465 (Price), overruled on other grounds in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association (2013) 55 Cal.4th 1169, 1182, relied on by Chase, is not to the contrary. There, the ranch owner plaintiffs took out three loans totaling $370,000 from Wells Fargo to pay off preexisting loans to other banks. (Id. at p. 471.) The notes for two of the loans called for repayment within approximately eight months; the third loan documents were less clear but appeared to call for payment at the same time. Testimony by bank officers, however, tended to support plaintiffs’ argument that the parties intended the loans to be paid off over a five-year period. (Ibid.) After seeing the early due date in the notes, plaintiffs discussed the matter with the same bank representative who had helped them with the original loans, who promised to “redo” the loans to reflect the five-year repayment period. (Price, supra, 213 Cal.App.3d at p. 472.) Plaintiffs let the eight-month maturity date pass without repaying any principal. When the bank began sending past due letters, plaintiffs did not insist that the loans be rewritten, but sought a restructuring of the repayments. For a period of time the bank negotiated with plaintiffs and established alternate repayment terms. However, when the repayment schedule was not kept, the bank initiated foreclosure proceedings. (Id. at pp. 472-473.)
Chase points particularly to the statement in Price to the effect that the bank would “redo” the loans or “work with” the borrowers, and draws a parallel between those representations and the statements made by North here. We find the analogy unpersuasive. The Price plaintiffs admitted in discovery that they understood their obligations under the original notes and never disputed that the amounts claimed by the bank were in fact owed to it. (Price, supra, 213 Cal.App.3d at pp. 472, 480-481.) And the alleged promise to “redo” the contract was never asserted during loan renegotiation as a basis for loan modification. (Id. at pp. 480-481.) In short, the plaintiffs’ own actions undermined any claim of reliance on the misstatement. This is not the situation here.
Jolley contends “Chase . . . had a direct continuing responsibility to provide necessary funding to see that the project was finished. . . .” We understand this to mean that Jolley believes Chase was obligated to disburse, but failed to disburse, additional funds under his preexisting agreement with WaMu. The fact that Thorne may have believed the loan had been fully funded by WaMu prior to the receivership (if his statement is properly so construed) does not bind Jolley to that same conclusion.
The trial court granted summary adjudication on the fourth cause of action, for negligence, essentially finding no duty. The order read as follows: “`Under California law, a lender does not owe a borrower or third party any duties beyond those expressed in the loan agreement, except those imposed due to special circumstance.’ (Sipe v. Countrywide Bank (E.D.Cal. 2010) 690 F.Supp.2d 1141, 1153, citing Nymark v. Heart Fed. Savings & Loan Assn., (1991) 231 Cal.App.3d 1089, 1096.) . . .” We conclude there was a triable issue of material fact as to a duty of care to Jolley, which potentially makes Chase liable for its own negligence.
We acknowledge that we deal with an ordinary duty of reasonable care, not a fiduciary duty. We further acknowledge the frequent observation that lenders and borrowers operate at arm’s length. (Oaks Management Corp. v. Superior Court(2006) 145 Cal.App.4th 453, 466-467; Nymark v. Heart Fed. Savings & Loan Assn., supra, 231 Cal.App.3d at p. 1093 (Nymark).) And we finally acknowledge that “as a general rule, a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” (Nymark, supra, 231 Cal.App.3d at p. 1096; see also Fox & Carskadon Financial Corp. v. San Francisco Fed. Sav. & Loan Assn. (1975) 52 Cal.App.3d 484, 488, 489; Ragland v. U.S. Bank National Association (2012) 209 Cal.App.4th 182, 206.)
Such “general rule” has often been repeated, including in federal cases involving the takeover by Chase of WaMu’s loans[12] and cases decided in the context of loan modification applications.[13] It was primarily on the basis of this general rule that the trial court below, without further analysis, granted summary adjudication of the negligence claim. And Chase relies upon such general rule here, contending it owed Jolley no duty of care. Such reliance is misplaced.
In Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 856-858 (Connor), a lender was involved in developing tract housing which proved to be faulty because the builders poured slab foundations on adobe soil, and the foundations cracked in subsequent rainstorms. (Id. at pp. 856-857.) The lender provided the money for the purchase of the land and for construction loans, and ultimately offered homebuyers long-term loans on the homes. (Id. at p. 858.) The Supreme Court held the bank was not liable as a joint venturer (id. at pp. 862-863), but further held that its role as “an active participant in a home construction enterprise” imposed upon it a duty of ordinary care to the purchasers of the homes (id. at p. 864)—a holding reached by applying the six factors identified in Biakanja v. Irving (1958) 49 Cal.2d 647, 650 (the “Biakanja factors”).[14] (Connor, supra, 69 Cal.2d at p. 865.)
We begin by identifying the specific conduct by Chase that Jolley claims was negligent so as to limit our analysis “to the specific action the plaintiff claims the particular [defendant] had a duty to undertake in the particular case.” (Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269, 280.) As we see it, Jolley claims Chase had an obligation to investigate the history of the loan and to make additional disbursements, to review his loan modification request in good faith, and to conform to standards of conduct in the industry to protect him against further losses associated with the loan. Chase allegedly acted unreasonably by failing to review Jolley’s request for a loan modification in good faith, having decided in advance it would extend no further monies in connection with WaMu’s loans.[15] Jolley also complains about specific misstatements, false assurances given by Chase personnel about the prospects for a loan modification, while different personnel at Chase—the actual decision makers—were bent on foreclosure.
We note that we deal with a construction loan, not a residential home loan where, save for possible loan servicing issues, the relationship ends when the loan is funded. By contrast, in a construction loan the relationship between lender and borrower is ongoing, in the sense that the parties are working together over a period of time, with disbursements made throughout the construction period, depending upon the state of progress towards completion.[16] We see no reason why a negligent failure to fund a construction loan, or negligent delays in doing so, would not be subject to the same standard of care.
Even when the lender is acting as a conventional lender, the no-duty rule is only a general rule. (Osei v. Countrywide Home Loans (E.D.Cal. 2010) 692 F.Supp.2d 1240, 1249.) As a recent federal case put it: “Nymark does not support the sweeping conclusion that a lender never owes a duty of care to a borrower. Rather, theNymark court explained that the question of whether a lender owes such a duty requires `the balancing of the “Biakanja factors.”‘” (Newson v. Countrywide Home Loans, Inc. (N.D.Cal. Nov. 30, 2010 No. C 09-5288) 2010 U.S. Dist. Lexis 126383, at p. *15.) Or, in the words of an even more recent case, in each case where the general rule was applied to shield a lender from liability, “the plaintiff sought to impose upon the lender liability for activities outside the scope of the lender’s conventional role in a loan transaction. It is against this attempt to expand lender liability (to that of, e.g., an investment advisor or construction manager) that the court in Nymark found a financial institution owes no duty of care to a borrower when its involvement in the loan transaction `does not exceed the scope of its conventional role as a mere lender of money.’ Nymark, 231 Cal.App.3d at 1096. Nymark and the cases cited therein do not purport to state a legal principle that a lender can never be held liable for negligence in its handling of a loan transaction within its conventional role as a lender of money.” (Ottolini v. Bank of America (N.D.Cal. Aug. 19, 2011 No. C-11-0477) 2011 U.S. Dist. Lexis 92900, at p. *16.) We agree with these observations.
Chase relies upon the historical truism that a bank as lender is entitled to pursue its own economic interest in dealing with a borrower, citing Kruse v. Bank of America(1988) 202 Cal.App.3d 38, 67. We live, however, in a world dramatically rocked in the past few years by lending practices perhaps too much colored by short-sighted self-interest. We have experienced not only an alarming surge in the number of bank failures, but the collapse of the housing market, an avalanche of foreclosures,[17] and related costs borne by all of society.[18] There is, to be sure, blame enough to go around. And banks are hardly to be excluded.
Due to the ongoing financial crisis, the federal government has adopted a voluntary incentive-based program designed to encourage lenders and borrowers to work together in the event of the borrower’s default, by establishing a home loan modification program. (See U.S. Dept. of Treasury, Supplemental Directive No. 09-01 (Apr. 5, 2009). Similarly, the California Legislature has expressed a strong preference for fostering more cooperative relations between lenders and borrowers who are at risk of foreclosure, so that homes will not be lost.[19] (Civ. Code, §§ 2923.5 & 2923.6.) These provisions, enacted in 2008, require lenders to negotiate with borrowers in default to seek loss mitigation solutions. As discussed hereafter, existing law will soon be supplemented by amendments enacted as part of the “California Homeowner Bill of Rights.” (Assem. Bill No. 278; Sen. Bill No. 900 (2011-2012 Reg. Sess.).)
Granted, these ameliorative efforts have been directed primarily at aiding resident homeowners at risk of losing their homes. (Civ. Code, §§ 2923.5, subd. (f); Assem. Bill No. 278, § 18, adding Civ. Code, § 2924.15.) We also understand there is no express duty on a lender’s part to grant a modification under state or federal loan modification statutes. And until the new legislation takes effect, no private right of action for damages is granted under the statutes. (See Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1616; Mabry v. Superior Court(2010) 185 Cal.App.4th 208, 214; Pantoja v. Countrywide Home Loans, Inc.(N.D.Cal.2009) 640 F.Supp.2d 1177, 1188.) We do not cite any of these legislative measures in reliance upon their provisions, nor do we suggest their provisions were violated in the present case. Rather, we refer to the existence—and recent strengthening—of these legislative measures because they demonstrate a rising trend to require lenders to deal reasonably with borrowers in default to try to effectuate a workable loan modification. In short, these measures indicate that courts should not rely mechanically on the “general rule” that lenders owe no duty of care to their borrowers.
One of the targets of the legislation is a practice that has come to be known as “dual tracking.” Dual tracking refers to a common bank tactic. When a borrower in default seeks a loan modification, the institution often continues to pursue foreclosure at the same time.” (Alejandro Lazo, Banks Are Foreclosing While Homeowners Pursue Loan Modifications, Los Angeles Times, (Apr. 14, 2011); see also Sen. Floor Analysis of Assem. Bill No. 278 at p. 3.) The result is that the borrower does not know where he or she stands, and by the time foreclosure becomes the lender’s clear choice, it is too late for the borrower to find options to avoid it. “Mortgage lenders call it `dual tracking,’ but for homeowners struggling to avoid foreclosure, it might go by another name: the double-cross.”[20] (Lazo, Banks Are Foreclosing.) As we understand the pleadings and proof here, this is precisely one of Jolley’s claims.[21]
We find support for our conclusion in recent federal district court cases that have found a duty of care in particular circumstances surrounding loan modification negotiations. Ansanelli v. JP Morgan Chase Bank, N.A. (N.D. Cal. Mar. 28, 2011 No. C 10-03892) 2011 U.S. Dist. Lexis 32350, p. *21, is illustrative. There, the court found a duty of care had properly been pleaded in a negligence action where the bank offered plaintiffs a trial loan modification plan, then reneged on a promise to modify the loan. The bank reported the loan as past due despite the fact that plaintiffs had made proper payments under the trial modification, thereby damaging their credit rating. (Id. at pp. *2-3.)
Similarly, Robinson v. Bank of America (N.D. Cal. May 29, 2012 No. 12-CV-00494-RMW) 2012 U.S. Dist. Lexis 74212, p. *21, decided on a motion to dismiss, held that a bank went beyond its role as a “silent” lender in its dealings with plaintiff during loan modification negotiations. There, the bank was “alleged to have executed and breached the modification agreement, then engaged in a series of contradictory and somewhat misleading communications with plaintiff—in person, in writing, and by phone—regarding the status of his loan. Under such circumstances, it was entirely foreseeable that [the bank’s] conduct could result in damage to plaintiff’s credit rating or a decrease in the value of his home.” (Ibid.; see also Crilley v. Bank of America, N.A. (D.Haw. Apr. 26, 2012 No. 12-00081) 2012 U.S. Dist. Lexis 58469 at pp. *5-12, 26 [duty of care owed where plaintiff and bank engaged in substantial negotiations regarding loan modification, finding potential liability based in part on “delays in the loan modification process”]; Watkinson v. MortgageIT, Inc. (S.D.Cal. June 1, 2010 No. 10-CV-327) 2010 U.S. Dist. Lexis 53540, pp. *23-24 [duty of care found where bank knowingly misstated borrower’s income and value of property on loan application, and where borrower sought but was denied a loan modification]; Garcia v. Ocwen Loan Servicing, LLC (N.D.Cal. May 6, 2010 No. C-10-0290) 2010 U.S. Dist. Lexis 45375 at pp. *7-11 [plaintiff’s allegations about loan modification application process sufficiently pled a duty under Biakanja factors]; but see, Ottolini v. Bank of America, supra, 2011 Dist. Lexis 92900 at pp. *18-19 [distinguishingAnsanelli, supra, 2011 U.S. Dist. Lexis 32350 where “the application for loan modification had not progressed to a concrete stage and . . . there is no indication of the likelihood that such an application would have been granted”].)
We conclude that the determination that Chase owed no duty to Jolley was error. Thus, the summary adjudication on the negligence cause of action must be reversed, as it was in Laabs v. Southern California Edison Co. (2009) 175 Cal.App.4th 1260,1269 where the Court of Appeal held as follows: “We note, however, that we do not hold that SCE owed Laabs a duty of care as a matter of law; rather, we hold that triable issues of fact exist as to the relevant considerations underlying duty in this case, and that SCE failed to establish that it was entitled to judgment as a matter of law. While we recognize that the issue of duty is a matter for the trial court, it is nonetheless a factually oriented inquiry. As stated in Burger v. Pond (1990) 224 Cal.App.3d 597, 603, `”Foreseeability” and “policy considerations” are not determined in a vacuum, but rather depend . . . upon the particular circumstances in which the purported wrongful conduct occurred.'”
Jolley claims Chase violated the unfair competition law (UCL) (Bus. & Prof. Code, § 17200), but does not specify which acts violated that provision or the nature of the violation. Again, he bases his theory of liability on the premise that Chase “must stand squarely in the shoes of WaMu for all of its criminal, fraudulent, negligent and otherwise `unfair’ practices perpetrated against Appellant and the world economy. . . .” He further claims, without specificity, that Chase is equally liable for such wrongdoing on its own part.
The UCL is broad in scope, prohibiting any “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising,” as well as any act specifically prohibited under Business and Professions Code section 17500 et seq. The statute is meant to forbid not only anti-competitive practices but also “`”`the right of the public to protections from fraud and deceit.'”‘” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 209.) An “unlawful” activity is any business activity that is forbidden by law. (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838-839.) A “fraudulent” activity includes any act or practice likely to deceive the public, even if no one is actually deceived. (Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 211.)
There is a split of authority on what constitutes an “unfair” practice. (Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1260-1261.) Some cases hold an “unfair” practice is one that offends established public policy, that is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers, or that has an impact on the victim that outweighs defendant’s reasons, justifications, and motives for the practice. (Pastoria v. Nationwide Ins. (2003) 112 Cal.App.4th 1490, 1498; Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718-719; Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647.) Others, including at least one from our district (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 853-854), hold that the public policy which is a predicate to a claim under the “unfair” prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions. (See also, Scripps Clinic v. Superior Court (2003) 108 Cal.App.4th 917, 938.) Either way, unfairness is independently sufficient to state a claim under the statute. (Allied Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432, 451; see Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 [indicating that conduct may be “unfair” without being “unlawful”].)
Civil Code section 3399 provides the authority upon which a contract may be reformed: “When, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised, on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.” (See generally, 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 806, pp. 221-222.)
The “intention of the parties,” as stated in Civil Code section 3399, refers to “a single intention which is entertained by both parties.” (Shupe v. Nelson (1967) 254 Cal.App.2d 693, 700.) “The essential purpose of reformation is to reflect the intent of the parties.” (Jones v. First American Title Ins. Co. (2003) 107 Cal.App.4th 381, 389.) “`Although a court of equity may revise a written instrument to make it conform to the real agreement, it has no power to make a new contract for the parties. . . .'” (American Home Ins. Co. v. Travelers Indemnity Co. (1981) 122 Cal.App.3d 951, 963.)
Code of Civil Procedure section 1060 authorizes actions for declaratory relief under a “written instrument” or “contract.” Declaratory relief generally operates prospectively to declare future rights, rather than to redress past wrongs. (Babb v. Superior Court (1971) 3 Cal.3d 841, 848; Gafcon, Inc. v. Ponsor & Associates(2002) 98 Cal.App.4th 1388, 1403 (Gafcon).) It serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs. In short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them. (Ibid.)
The undisputed facts show that loan modification negotiations did not result in a written instrument or contract under which the parties’ rights need to be declared. While there may be a controversy about past conduct, we see no reason why money damages would not be an adequate remedy. (See Gafcon, supra, 98 Cal.App.4th at pp. 1403-1404.) Moreover, this cause of action is redundant of Jolley’s other claims, and declaratory relief may be denied “where its declaration or determination is not necessary or proper at the time under all the circumstances.” (Code Civ. Proc., § 1061.) Where, as here, Jolley has a fully matured cause of action for money, he must seek damages, and not pursue a declaratory relief claim. (Gafcon, supra, 98 Cal.App.4th at pp. 1403-1404; Jackson v. Teachers Ins. Co. (1973) 30 Cal.App.3d 341, 344.) Summary adjudication of the sixth cause of action was proper.
An action for an accounting may be brought to compel the defendant to account to the plaintiff for money or property (1) where a fiduciary relationship exists between the parties, or (2) where, even though no fiduciary relationship exists, the accounts are so complicated that an ordinary legal action demanding a fixed sum is impracticable. (5 Witkin, Cal. Procedure, supra, Pleadings, § 819, p. 236.) “A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” (Teselle v. McLoughlin(2009) 173 Cal.App.4th 156, 179.)
[1] J.P. Morgan Chase is the successor corporation to both Chase Home Finance LLC and California Reconveyance Company (CRC). We refer to the Chase entities collectively as “Chase.”
[2] Payments on the construction loan were interest only during construction and varied in amount depending on the status of funding. Once construction had been completed, the balance of the loan was to be rolled over into a fully amortized mortgage on the home. A reserve was included to pay the interest payments during construction. Because the reserve was calculated based on the predicted length of construction, it proved to be insufficient to cover interest payments during the extended construction period.
[3] Documents submitted by Chase show the outstanding principal owing at default in December 2008 was $2,426,650, increased to $2,632,066.99 when the notice of default was recorded. By the time the motion was filed in August 2011, Chase calculated it was owed $3,019,693.29.
[4] Jolley’s complaint referred to both WaMu and Chase collectively as “the Bank,” making it difficult to ascertain which conduct was alleged with respect to which entity.
[5] That section reads: “A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.” (Civ. Code, § 1589.)
[6] The motion was actually filed on behalf of both named defendants, Chase, and CRC. As noted, no charging allegations were made in Jolley’s complaint against CRC, and his opposition to the motion said essentially nothing about it. Thus, the focus of the proceedings below, and here, is on Chase, and for ease of discussion we refer to Chase as the moving party.
[7] The remaining “facts” were four paragraphs attaching what were claimed to be “certified” or “true and correct” copies of documents recorded in Marin County.
[8] We cast no aspersions on Chase’s counsel for her position, as the confidentiality agreement prepared by Jolley’s counsel did not specify the documents requested.
[9] We find no express ruling on Jolley’s ex parte application for a continuance, but it was effectively denied by the grant of summary judgment.
[10] The referenced footnote says that “Federal Courts have taken judicial notice of the P&A Agreement and similar agreements with the FDIC. (Allen v. United Fin. Mortgage Corp., 660 F.Supp.2d 1089, 1093 (N.D. Cal. 2009) (judicial notice taken of the P&A Agreement even though a few pages missing from that offered by defendant, because the Agreement is available online, from the FDIC’s web site; In re Sharp, Case No. 09-13980 A P. No. 10-1032 (N. D. Cal. Bk.); Jarvis v. JP Morgan Chase Bank, N.A., 2010 WL 2927276, at *1, (C.D. Cal. July 23, 2010); see also Yeomalakis v. F.D.I.C., 562 F.3d 56, 60 (1st Cir. 2009.) (Resp. App. 86-89.)”
Some federal courts have taken judicial notice of the same or similar purchase and assumption agreements, frequently without discussion or analysis, either because they were deemed “public records” or because their contents could be “accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” (Fed. Rules Evid., rule 201(b)(2); Rosenfeld v. JPMorgan Chase Bank, N.A. (N.D.Cal. 2010) 732 F.Supp.2d 952, 958-960 [dismissing claims against Chase despite claim that it engaged in loan modification negotiations with plaintiff]; McCann v. Quality Loan Service Corp. (W.D.Wash. 2010) 729 F.Supp.2d 1238, 1241-1242 [in context of claims relating to WaMu refinance transaction, collecting cases holding Chase not liable for WaMu’s conduct];Cassese v. Washington Mutual et al. (E.D.N.Y. Dec. 22, 2008 No. 05 CV 2724) 2008 U.S. Dist. Lexis 111709, at pp. *6-7, 2009 [same, including claims of fraud and breach of contract]; Moncrief v. Washington Mutual (S.D.Cal. June 28, 2010 No. 10CV350) 2010 U.S. Dist. Lexis 64100 at pp. *6-7 [same for claims filed after Chase acquired WaMu’s assets].)
Some cases have found the language of section 2.1 of the P&A Agreement creates a degree of uncertainty about whether Chase assumed specific liabilities depending on whether it acted as lender, loan servicer, or both. (See Hayes-Boman v. J.P. Morgan Chase Bank (D.Minn. 2010) 724 F.Supp.2d 1003, 1015; Punzalan v. FDIC (W.D.Tex. 2009) 633 F.Supp.2d 406, 414 & fn. 5; In re Pena(Bankr. S.D.Tex. 2009) 409 B.R. 847, 859-862.)
[11] Chase also argues on appeal that Jolley’s testimony is barred by the parol evidence rule and as hearsay. These objections were not made in the trial court, and are thus inappropriate here.
[12] Rosenfeld., supra, 732 F.Supp.2d at p. 969 [claim for breach of fiduciary duty]; Argueta v. J.P. Morgan Chase (E.D.Cal. June 30, 2011 No. CIV. 2:11-441) 2011 U.S. Dist. Lexis 70756, at p. *12;Sullivan v. JP Morgan Chase Bank, NA (E.D.Cal. 2010) 725 F.Supp.2d 1087, 1094 [“Plaintiffs’ allegations that Defendant misrepresented to them that a permanent loan modification would be put into place are insufficient to form the basis of a negligence claim”].)
[13] Becker v. Wells Fargo Bank, N.A., Inc. (E.D.Cal. Mar. 22, 2011 No. 2:10-cv-02799) 2011 U.S. Dist. Lexis 29687, at pp. *67-71 [allegations about loan modification application process did not give rise to duty]; Dooms v. Fed. Home Loan Mortgage Corporation (E.D.Cal. Mar. 31, 2011 No. CV F 11-0352) 2011 Dist. Lexis 38550, at pp. *25-28; DeLeon v. Wells Fargo Bank, N.A. (N.D.Cal. Oct. 22, 2010 No. 10-CV-01390) 2010 U.S. Dist. Lexis 112941, at p. *12 [defendant did not have a duty “to complete the loan modification process”].)
[14] Connor held there was lender liability to the homeowners who bought into the housing tract. The Legislature subsequently enacted Civil Code section 3434 to restrict such liability, and to that extentConnor has been superseded by statute. (Anthony v. Kelsey-Hayes Co. (1972) 25 Cal.App.3d 442, 454, fn. 5.)
[15] We agree with Chase that no admissible evidence was submitted to support the assertion that Chase had decided in advance not to further fund any WaMu loans. The only evidence on this point was Thorne’s declaration, which lacked foundation. However, regardless whether the decision was made in advance, if it were made without due care to avoid further injury to Jolley, then Chase is potentially liable for its own negligence.
[16] Such a loan more readily gives rise to a cause of action for negligence in that contractual disbursements must be made with due care. “A lender that enters into a loan agreement to disburse the loan funds according to the terms of the loan documents, assumes a duty of care to act reasonably to abstain from injuring the borrower by its disbursal of funds. A lender may be liable to the borrower who is damaged as a result of the lender’s negligent disbursal of the loan funds.” (12 Miller & Starr, California Real Estate (3d ed. 2011) § 36:6, fns. omitted.)
[17] We quote the California Legislature: “California is still reeling from the economic impacts of a wave of residential property foreclosures that began in 2007. From 2007 to 2011 alone, there were over 900,000 completed foreclosure sales. In 2011, 38 of the top 100 hardest hit ZIP Codes in the nation were in California, and the current wave of foreclosures continues apace. All of this foreclosure activity has adversely affected property values and resulted in less money for schools, public safety, and other public services. In addition, according to the Urban Institute, every foreclosure imposes significant costs on local governments, including an estimated nineteen thousand two hundred twenty-nine dollars ($19,229) in local government costs. And the foreclosure crisis is not over; there remain more than two million `underwater’ mortgages in California.
[18] The legislative history of Assembly Bill No. 278 recognized extensive “`spillover’ costs” of “the foreclosure epidemic”: “By some estimates the foreclosure crisis will strip neighboring homeowners of $1.9 trillion in equity as foreclosures drain value from homes located near foreclosed properties by 2012. . . . Meanwhile, state and local governments continue to be hit hard by declining tax revenues coupled with increased demand for social services. In fact, the Urban Institute estimates that a single foreclosure costs $79,443 after aggregating the costs borne by financial institutions, investors, the homeowner, their neighbors, and local governments.” (Sen. Rules Com., Off. Of Sen. Floor Analyses, Conference Report on Assem. Bill No. 278 (2011-2012 Reg. Sess.) June 27, 2012, pp. 14-15.)
[19] “When a borrower is in danger of defaulting, a commonsense approach under a traditional mortgage would be for the lender and borrower to mutually agree to modify the terms of the loan. . . . [¶] Despite the apparent mutual interest of loan holders and borrowers, many distressed homeowners report obstacles when trying to obtain a loan modification or short-sale approval. (See e.g. `Loan Modifications Elude Local Homeowners,’ Sacramento Bee (January 17, 2011).). . . . [¶] . . . [¶] Some analysts and leading economists have cited a failure by banks to provide loan modifications as a single reason that the foreclosure crisis continues to drag on.” (Sen. Floor Analysis of Assem. Bill No. 278 at pp. 15-16.)
[20] According to the legislative history, “borrowers can find their loss-mitigation options curtailed because of dual-track processes that result in foreclosures even when a borrower has been approved for a loan modification.” (Sen. Floor Analysis of Assem. Bill No. 278, pp. 20-21.)
[21] Jolley alleged, inter alia, that he was told a “workable loan modification was in the works” and “[f]oreclosure proceedings would be suspended pending the outcome of the loan modification process.” He further alleged the true facts were that “a loan modification was not in the works” and “foreclosure proceedings were ongoing.” Beyond the mere allegations, Jolley testified that because of “inordinate delay” by Chase in responding to his initial contact regarding a loan modification, he “borrowed heavily from friends and family” to complete construction. And further, that had the loan modification been granted and the construction loan converted to a conventional loan, the permanent financing would have been at a “favorable rate,” making the “payments substantially less” and he “could have afforded to pay them.”
Jolley v. Chase Home Finance | CA Appeals Court – triable issues of material fact relating to the financing debacle, not just limited to the claimed inauthenticity of the Agreement but also as to misconduct Taken From The Sworn Testimony of Jeffrey Thorne involved...