Court Opinion

ID: 4152066
Source: CourtListenerOpinion
Date Created: 2017-03-13 17:01:04.123249+00
Date Added: 2024-06-11T14:29:08.386187
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

MAHIN OSKOUI, an                    No. 15-55457
individual,
        Plaintiff-Appellant,           D.C. No.
                               2:12-cv-03511-FMO-AGR
             v.

J.P. MORGAN CHASE                    OPINION
BANK, N.A.; U.S. BANK,
N.A., as Trustee, Successor
in Interest to Bank of
America, National
Association as successor by
merger to LaSalle Bank
NA as Trustee for WAMU
Pass-Through Certificates
Series 2007-HY06 Trust
Erroneously Sued As U.S.
Bank, N.A.,
      Defendants-Appellees.

      Appeal from the United States District Court
         for the Central District of California
     Fernando M. Olguin, District Judge, Presiding

        Argued and Submitted January 13, 2017
                 Pasadena, California

                  Filed March 13, 2017
2            OSKOUI V. J.P. MORGAN CHASE BANK

    Before: Stephen S. Trott, M. Margaret McKeown, and
               Paul J. Watford, Circuit Judges.

                      Opinion by Judge Trott

                            SUMMARY*

                        Loan Modification

    The panel reversed the district court’s summary judgment
in favor of J.P. Morgan Chase Bank, N.A. in Mahin Oskoui’s
action seeking damages she allegedly suffered when she
unsuccessfully attempted to modify the loan on her home.

    The panel held that the facts plainly demonstrated a viable
claim under California’s Unfair Competition Law on the
ground that Oskoui was a victim of an unconscionable
process.

    The panel also held that the district court erred in failing
to acknowledge Oskoui’s claim for breach of contract in her
pro se complaint. The panel remanded with instructions to
permit Oskoui to amend if necessary and to proceed with her
complaint for a breach of contract.

   The panel also remanded with instructions to permit
Oskoui to amend her complaint to allege a right to rescind
pursuant to Jesinoski v. Countrywide Home Loans, Inc., 135
S. Ct. 790 (2015) (holding that the Truth in Lending Act

    *
      This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
           OSKOUI V. J.P. MORGAN CHASE BANK                  3

gives a borrower the right to rescind certain loans),
conditioned on Oskoui’s delivery of a rescission letter.

                         COUNSEL

Richard L. Antognini (argued), Law Office of Richard L.
Antognini, Grass Valley, California, for Plaintiff-Appellant.

Richard P. Steelman, Jr. (argued) and Glenn J. Plattner, Bryan
Cave LLP, Santa Monica, California, for Defendants-
Appellees.

                         OPINION

TROTT, Circuit Judge:

    Mahin Oskoui sued defendant J.P. Morgan Chase Bank,
N.A. (“Chase”) for damages allegedly suffered when she
unsuccessfully attempted over a two-year period to modify
the loan on her home. Acting as her own attorney, she
asserted inter alia claims for a breach of contract, “breach of
implied covenant of good faith and fair dealings,” and a
violation of California’s Unfair Competition Law (“UCL”),
CAL. BUS. & PROF. CODE § 17200, the latter based on an
assertion that she had been victimized by Chase’s unfair or
fraudulent business acts or practices. She also attempted to
sue Chase for a violation of 15 U.S.C. § 1601, the Truth in
Lending Act (“TILA”). Without argument, the district court
declined to consider Oskoui’s breach of contract claim and
granted summary judgment to defendant Chase.
4          OSKOUI V. J.P. MORGAN CHASE BANK

   We have jurisdiction over this timely appeal pursuant to
28 U.S.C. § 1291. We reverse and remand.

                              I

   In reviewing de novo the district court’s decision, we
view the evidence in the light most favorable to the
nonmoving party. Olson v. Idaho State Bd. of Med., 363 F.3d
916, 922 (9th Cir. 2004).

    In 1990, Mahin Oskoui, a registered nurse, purchased a
single-family home for herself in Los Angeles, California.
Her down payment on the property was $250,000. In 2007,
the appraised value of the property was $1,250,000. On
March 27, 2007, she refinanced her acquisition with a loan
from Washington Mutual Bank (“WaMu”). As security, she
executed a promissory note and a deed of trust securing the
note with the property. At that time, WaMu was the United
States’ largest savings and loan association until it imploded
in 2008 during the subprime mortgage crisis and the collapse
of the so-called “housing bubble.” In turn, this debacle
triggered massive loan defaults and a severe national
economic recession. The Office of Thrift Supervision closed
WaMu on September 25, 2008, naming the Federal Deposit
Insurance Corporation (“FDIC”) as WaMu’s receiver. On
September 25, 2008, the FDIC transferred WaMu’s assets to
defendant Chase.

     In November 2008, Oskoui missed a loan payment, as did
many homeowners in similar dire straits. In January 2009,
not knowing about WaMu’s demise, she applied to WaMu for
a loan modification. On May 21, 2009, Chase sent her a
letter offering her a “Trial Plan Agreement.” The letter did
not advise her of what was required of a borrower or of a loan
           OSKOUI V. J.P. MORGAN CHASE BANK                 5

for approval under the applicable modification rules,
regulations, and guidelines. The letter did advise her that
“[i]f you comply with all the terms of this Agreement, we’ll
consider a permanent workout solution for your loan once the
Trial Plan has been completed.” The only specified term of
the Agreement was that Oskoui remit three equal payments
of $3,280.05 to Chase between July and September 2009.
Oskoui signed the Agreement on June 1, 2009.

    Oskoui fully complied with the Agreement’s payment
term by timely sending $9,840.15 to Chase, only to be
informed on November 10, 2009, that she did not qualify “at
this time” for a modification under either the federal Making
Home Affordable Program (“HAMP”), 12 U.S.C. § 5219(a),
or the Chase Modification Program (“CHAMP”) because
“[y]our income is insufficient for the amount of credit you
have requested.” Her monthly income during that period was
$10,575.00. Chase gave Oskoui no additional reasons for its
denial even though its internal paperwork reveals two others,
each apparently fatal to her attempt to modify her loan. One
barrier was the unpaid principal balance on the loan –
$833,000 – which was higher than the amount allowed under
the HAMP Guidelines. This factor rendered her ineligible for
a HAMP modification. The other barrier, which made her
ineligible for CHAMP relief, was the loan’s failure to satisfy
Chase’s net present value test (“NPV”). Chase’s internal
modification documents reveal that a person identified as
“CHANG” determined on November 10, 2009 that Oskoui’s
application should be rejected. The document says, “denied
– income insufficient and did not pass the npv calc test.”

   This test, which Chase did not reveal or explain in its
November 10, 2009 letter, compares the NPV expected from
a modification to the NPV of the unmodified loan. The test
6          OSKOUI V. J.P. MORGAN CHASE BANK

compares cash flow from the modification to the cash flow
expected from the absence of a modification. If the cash flow
from a viable modification exceeds that of a non-modified
loan, HAMP requires a servicer to offer a modification to a
borrower. If the NPV test generates a negative result,
modification is optional.

    Not only did Chase fail to advise Oskoui that she was not
eligible for these modifications, it told her instead that “we
may be able to offer other alternatives to help avoid the
negative impact” of foreclosure and a deficiency judgment.
Chase failed to explain what its “other alternatives” were or
what Oskoui would be required to demonstrate to qualify for
them.

    Given this enticing invitation, Oskoui tried again, by
submitting in January 2010 another application for a loan
modification. She had no inkling that Chase had already
determined that she was not eligible because of the amount of
the unpaid balance of the loan and the NPV problems with it.

     On March 1, 2010, Chase responded by letter to Oskoui’s
new application. This letter said Chase “wants to help you
stay in your home” and confirmed receipt and review of
“your verification of income documentation.” Included with
the letter were three payment coupons and three return
envelopes, each coupon in the amount of $2,988.49, and due
on April 1, May 1, and June 1, 2010. The March 1, 2010
letter also stated on the first page: “After successful
completion of the Trial Period Plan, CHASE will send you a
Modification Agreement for your signature which will
modify the Loan as necessary to reflect this new payment
amount.” (emphasis added). Chase said not a word about any
concerns about her income and did not specify anything in
            OSKOUI V. J.P. MORGAN CHASE BANK                      7

that regard as a condition precedent to a modification. The
March 1, 2010 letter says on page 2, however, that “[i]f all
payments are made as scheduled, we will consider a
permanent workout solution for your Loan.” This language
on page 2, which is followed by bold type detailing the
manner in which she should remit her payments, when read
in the light of Chase’s promise on page 1 creates at best a
misleading ambiguity. Page 2 attempts to temper what Chase
offered and promised on page 1: a Modification Agreement
for her signature. Once again, as with Chase’s November 10,
2009 letter, its March 1, 2010 letter, which Oskoui appended
to her complaint as “Exhibit A,” failed to alert her to her
apparent ineligibility for a modification.

      The next event in this drawn-out process came as quickly
as night extinguishes the day. On March 2, 2010, one day
after Chase’s letter welcoming Oskoui for a second time to
its Trial Period Plan (“TPP”) and acknowledging receipt of
her income verification documents, Chase sent her another
letter telling her for the first time that she was not eligible for
a federal HAMP modification “because the current unpaid
principal balance on your Loan is higher than the program
limit . . . .” Not only did the letter omit any reference to the
fatal NPV test, it said that Chase was “happy” to tell Oskoui
that she “may be eligible for other modification programs”
and that Chase may be able to offer “other alternatives” to
stave off “the negative impact a possible foreclosure may
have on [her] credit rating, the risk of a deficiency judgment
. . . and the possible adverse tax effects of a foreclosure . . . .”
Oskoui took these consequences as menacing threats, not
friendly legal advice. Chase’s letter did not explain what its
“other alternatives” were or what it would take to qualify for
them. Also, Chase made no mention of the payments it had
requested the previous day in its March 1, 2010 letter.
8          OSKOUI V. J.P. MORGAN CHASE BANK

Because Chase had left the door open to relief and even urged
her to do so, Oskoui diligently made – and Chase accepted –
her monthly payments as solicited, not just for three, but for
seven months.

    On October 1, 2010, Oskoui sent a $2,988.49 payment to
Chase. Nevertheless, on October 25, 2010, a foreclosure
notice appeared on her front door, listing a foreclosure sale
date of November 18, 2010. Remarkably, Chase allegedly
sent her another letter dated November 1, 2010 encouraging
her to continue to seek a modification. Chase even told her
she might “qualify for monetary incentives that will be used
to pay down the principal balance of your loan if you make
your modified payments on time.” At this point, Oskoui
withdrew from the process. She was now $33,738.00 poorer
with nothing to show for her efforts to comply with Chase’s
requests.

   In a signed pro se declaration submitted to the district
court in connection with Chase’s motion for summary
judgment, Oskoui explained her reluctance to continue the
process any further.

       Defendants’ actions have proven their lack of
       intention in modifying plaintiff’s loan and
       putting her through an intense, stressful 2
       years of agony and fear of losing her home
       which was not an ethical or just thing to do.
       The [October] payment was the last one
       plaintiff made, and she had stopped following
       the modification program that seemed to be a
       way for Chase to extract more money with the
       only purpose in mind of “[s]elf-enrichment.”
       She had lost faith in Chase’s modification
           OSKOUI V. J.P. MORGAN CHASE BANK                 9

       game and was also completely exhausted
       emotionally and physically between handling
       Chase’s never-ending documents requests,
       foreclosure threats, her highly demanding job
       as a registered [n]urse and daily life’s
       responsibilities . . . .

                            ***

       In fact, because of Plaintiff’s advanced age,
       the damage done by Defendants has been
       more severe than it might have been for a
       younger person. Since her profession requires
       emotional wellbeing in order to carry out her
       duty as RN. She felt less than qualified to
       deal with other people’s pain and life & death
       situations. After 2 long years of modification
       drama, she still was put through the horrors
       and nightmares of post foreclosure ordeal.
       Fear of homelessness, and embarrassment in
       the closely-knit homeowners’ community of
       her 25 year lived neighborhood. Not to
       mention the trauma of this litigation. All this,
       just because defendants’ insatiable appetite
       for ENRICHMENT.

    On January 4, 2011 – two years after her first application
– Chase sent Oskoui a final letter denying her application,
stating, “We are unable to offer you a modification through
the federal Home Affordable Modification Program (HAMP)
or any Chase modification programs . . . because you did not
provide us with the documents we requested.”
10         OSKOUI V. J.P. MORGAN CHASE BANK

                             II

     Notwithstanding Oskoui’s explanation of her
understandable withdrawal from the exhausting two-year
process, the district court granted Chase’s motion for
summary judgment on the ground that she had failed in late
2010 to provide Chase with the “requested documentation to
support her loan modification request.” The court declined to
entertain her contractual claim because she had only
“conclusorily” asserted that the “modification back-and-forth
ripened into a contract with Chase” and remarked that she
“sensibly” had not included a breach of contract claim in her
first amended complaint.

                             III

    In denying Chase’s Fed. R. Civ. P. 12(b)(6) motion to
dismiss as to Oskoui’s UCL claim, Judge George Wu
remarked that Oskoui had indeed presented the court with a
viable claim under California law for a fraudulent and an
unfair business practice. Citing Davis v. HSBC Bank Nev.,
N.A., 691 F.3d 1152, 1169 (9th Cir. 2012) (“A business
practice is fraudulent under the UCL if members of the public
are likely to be deceived.”), Judge Wu said,

       Although Defendants express some
       uncertainty concerning the nature of
       Plaintiff’s claims, she expressly includes a
       claim for unfair business practices, which the
       Court presumes (and Defendants have
       presumed) refers to a claim under California
       Business and Professions Code § 17200. The
       Court can conceive of Plaintiff’s allegations
       satisfying both the “fraudulent” and “unfair”
           OSKOUI V. J.P. MORGAN CHASE BANK               11

       prongs of a section 17200 claim. If what
       Plaintiff alleges is true – that Chase’s left
       hand sought payments from Plaintiff pursuant
       to a plan designed to give her an opportunity
       to modify her loan while, notwithstanding
       Plaintiff’s payment in accordance with that
       plan, Chase’s right hand continued all along
       with foreclosure proceedings and both hands
       should have known from the start that
       Plaintiff’s loan would not be eligible for
       modification in any event – the Court can
       conceive of such allegations stating a section
       17200 claim.

Minutes of Hearing on Defendants’ Motion to Dismiss
Plaintiff’s First Amended Complaint, Oskoui v. JPMorgan
Chase Bank, N.A., No. 2:12-cv-03511-FMO-AGR (C.D. Cal.
Oct. 4, 2012), ECF No. 23 (footnote omitted).

    We agree with Judge Wu’s analysis. The facts we have
arrayed plainly demonstrate a viable UCL claim.

    The published HAMP Guidelines disqualified Oskoui
from HAMP relief. In an age of computerized records, Chase
no doubt had this disqualifying information at its fingertips
and could have made this simple determination within a
matter of minutes. But instead of determining eligibility
before asking for money – a logical protocol called for by
HAMP as of January 28, 2010 – Chase asked Oskoui for
more payments. See Bushell v. JPMorgan Chase Bank, N.A.,
220 Cal. App. 4th 915, 924 n.4 (Cal. Ct. App. 2013) (citing
U.S. Dep’t of Treasury, HAMP Supplemental Directive No.
10-01 (Jan. 28, 2010)). And even when Chase told Oskoui
the next day that she did not qualify for HAMP, it did not
12         OSKOUI V. J.P. MORGAN CHASE BANK

inform her of her precarious situation concerning unexplained
“other alternatives,” preferring instead to accept payments for
seven additional months.

     Moreover, in Chase’s words, she was “not eligible” for
proprietary CHAMP modification because her debt to income
ratio was “well over the 31% limit.” Chase did not timely
alert Oskoui to this problem or explain it in its March 2, 2010
letter. Two years after she began this journey and $33,738.00
out of pocket, Oskoui received nothing for her efforts. She
argues that “[i]f Chase had told her she was not eligible for a
loan modification, she never would have made those
payments.” This option should have been hers to exercise.

    It boils down to this. With its March 1, 2010 letter, Chase
deceptively enticed and invited Oskoui into a process with the
demonstrably false promise that a loan modification was
within her reach if she were to make three monthly payments
of $2,988.49 each. The next day – and for the first time –
Chase eliminated a HAMP modification from its menu, but
neither advised Oskoui what the CHAMP Guidelines required
nor suspended additional payments until it could determine
her CHAMP eligibility. Chase now says in its brief that the
CHAMP Guidelines did not have the HAMP loan balance
limitation, but conspicuous by its absence in Chase’s
representation is any reference to the NPV test. Chase’s
counsel suggested during oral argument that Chase had a
valid reason for continuing the process as it did, i.e., that
Oskoui’s income situation might have improved. On this
record, any such expectation would have been patently
unreasonable.

    We can discern no acceptable utility in Chase’s alluring
“other alternatives” strategy or tactics. Whether Chase’s
           OSKOUI V. J.P. MORGAN CHASE BANK                  13

Kafkaesque conduct was intentional or the result of corporate
ineptitude – as suggested by Judge Wu – the result is the
same: The facts in this record would amply support a verdict
on this claim in Oskoui’s favor on the ground that she was the
victim of an unconscionable process. Chase knew that she
was a 68 year old nurse in serious economic and personal
distress, yet it strung her along for two years, kept moving the
finish line, accepted her money, and then brushed her aside.
During this process, Oskoui made numerous frustrating
attempts in person and by other means to seek guidance from
Chase, only to be turned away.

                               IV

   The district court erred in failing to acknowledge
Oskoui’s claim for breach of contract in her pro se complaint.
She explicitly styled her complaint on its first page as one for
“BREACH OF CONTRACT AND BREACH OF IMPLIED
COVENANT OF GOOD FAITH AND FAIR DEALINGS.”
On page 4, she averred that:

        Once an offer of TPP was made to Plaintiff,
        Chase entered into a contract which was
        binding, superseding and implicitly having the
        effect of suspending the default condition that
        had existed between Plaintiff (alleged
        borrower) and Defendants . . . . Plaintiff
        successfully executed and met all terms
        outlined in the TPP and far exceeded all her
        obligations . . . . Plaintiff not only met all the
        financial obligations required by Chase
        but most importantly, provided ample
        documentation demonstrating her financial
        ability to qualify for a modification loan . . . .
14         OSKOUI V. J.P. MORGAN CHASE BANK

On page 11, she said,

        In the absence of a valid reason for refusing to
        modify, it can logically be inferred, through
        Defendant’s breach of the TPP contract, that
        it was simply extracting additional payments
        under the guise of a loan modification offer
        while still intending to foreclose.

    Moreover, Oskoui attached to her complaint Chase’s
March 1, 2010 letter containing its representation that upon
her successful completion of the TPP, Chase “will send you
a Modification Agreement for your signature which will
modify the loan as necessary to reflect this new payment
amount.”

    The Seventh Circuit’s opinion in Wigod v. Wells Fargo
Bank, N.A., 673 F.3d 547 (7th Cir. 2012), which we identified
in Corvello v. Wells Fargo Bank, NA, 728 F.3d 878, 880 (9th
Cir. 2013) (per curiam) as “the leading federal appellate
decision” on this issue of contract, illuminates the viability of
Oskoui’s claim. As in the case now before us, Wells Fargo
argued in Wigod that its TPP language was not an enforceable
offer because it was conditioned on Wells Fargo’s further
review of Wigod’s financial information to ensure that she
qualified under HAMP. Wigod, 673 F.3d at 561. The
Seventh Circuit dismissed this contention as an unreasonable
reading of the TPP. The court pointed out that the TPP
spelled out two conditions precedent to Wells Fargo’s
obligation to offer a permanent modification, and that Wigod
alleged that she fulfilled both conditions. Id. at 560–61. The
court refused to allow other language in the TPP to nullify
Wells Fargo’s clear promise of an offer of a permanent
           OSKOUI V. J.P. MORGAN CHASE BANK                 15

modification if Wigod complied with its conditions. Id. at
562–63.

    In Bushell, the California Court of Appeal identified
Wigod as “provid[ing] guidance,” and it followed the Seventh
Circuit’s approach to this issue. 220 Cal. App. 4th at 918–19.
We also noted in Corvello that there is “no material
difference” between California and Illinois law. 728 F.3d at
884.

    Although its letter of November 3, 2010 thanks Oskoui
for participating in the HAMP program, Chase now protests
that it never offered a HAMP modification to Oskoui.
There’s the rub. Once Oskoui made her three payments,
Chase was obligated by the explicit language of its offer to
send her an Agreement for her signature “which will modify
the loan as necessary to reflect this new payment amount.”
Chase did not call it either a HAMP agreement or a CHAMP
agreement, just an “Agreement.” What program the
Agreement was part of is irrelevant. Chase must abide by its
own language. It did not live up to its promise. If Oskoui did
not consider the offered modification to be acceptable, at that
point she could have extracted herself from this aspect of her
difficult situation instead of soldiering on towards a
beckoning mirage.

    Accordingly, we remand this issue to the district court
with instructions to permit Oskoui to amend if necessary and
to proceed with her complaint for a breach of contract. See
Bushell, 220 Cal. App. 4th 915. See also Corvello, 728 F.3d
878; Wigod, 673 F.3d 547.
16         OSKOUI V. J.P. MORGAN CHASE BANK

                              V

    In her original complaint, Oskoui included a claim for a
violation of the Truth in Leading Act. Judge Wu dismissed
this allegation pursuant to Fed. R. Civ. P. 12(b)6 for failure
to state a claim. Subsequently, the Supreme Court decided
Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790
(2015). The Court held that TILA gives a borrower the right
to rescind certain loans, and that this right may be exercised
by a written notice from the borrower to the lender within
three years after the consummation of the transaction. Oskoui
now asks for leave to amend her operative complaint to
articulate a claim for rescission. She asserts that she sent a
TILA rescission letter to Chase in December 2009, within the
three years required by the statute. 15 U.S.C. § 1635(f).
Chase responds that its agreement with the FDIC protects it
from any liability WaMu may have had in connection with its
previous business. Oskoui says not so because she sent her
rescission letter to Chase, not to WaMu.

    This dispute is best resolved in the district court.
Accordingly, we remand with instructions to permit Oskoui
to amend her complaint to allege a right to rescind pursuant
to Jesinoski. However, this permission to amend is
conditional on her prompt delivery to the court of the
“rescission” letter of December 2009 to which she refers in
her brief.

     REVERSED and REMANDED for further proceedings.