McMahon v. JPMorgan Chase Bank, N.A. et al

Filing 82

ORDER signed by District Judge John A. Mendez on 12/7/18 DENYING the reasons set forth above, Plaintiff's motion to amend (ECF No. 77 ). (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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GORDON MCMAHON, an individual,

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No.

2:16-cv-01459-JAM-KJN

Plaintiff,

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v.

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JPMORGAN CHASE BANK, N.A.;
SELECT PORTFOLIO SERVICING,
INC.; and DOES 1 through 10
inclusive,

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ORDER DENYING PLAINTIFF’S
MOTION TO AMEND

Defendants.

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In June 2016, Gordon McMahon (“Plaintiff” or “McMahon”) sued

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Defendants Select Portfolio Servicing (“SPS”) and JPMorgan Chase

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Bank (“Chase”) seeking to save his home from foreclosure.

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No. 1.

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seeks leave to amend his complaint to include a cause of action

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for wrongful foreclosure and related facts.

McMahon

Mot., ECF No. 77.

For the reasons set forth below, the Court DENIES Plaintiff’s

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The foreclosure sale occurred on March 29, 2018.

ECF

motion to amend.1

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for December 4, 2018.
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I.

FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

Gordon McMahon obtained a mortgage loan in April 2005.

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First Amended Compl. (“FAC”), ECF No. 26, ¶ 23.

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later, the interest rate and monthly payment increased and

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McMahon could no longer make his loan payments.

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About two years

Id. ¶¶ 1, 25–26.

SPS began servicing McMahon’s loan in June 2013.

FAC ¶ 49.

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McMahon then began submitting loan modification requests to SPS.

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Each of McMahon’s six applications was denied.

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(August 2013 application); ¶¶ 63–76 (January 2014 application);

FAC ¶¶ 52–61

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¶¶ 77–83 (November 2014 application); ¶¶ 84–95 (May 2015

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application); ¶¶ 96–101 (June 2016 application); and ¶¶ 102 –107

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(November 2016 application).

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to properly consider certain relevant circumstances in his

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applications and to provide him with information necessary to

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determine whether Defendants were using the proper loss

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mitigation procedures in reviewing his applications.

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McMahon alleges Defendants failed

FAC ¶ 1.

SPS initially did not respond to McMahon’s June 2016

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application, and so McMahon filed this suit seeking a temporary

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restraining order (“TRO”) and preliminary injunction to prevent a

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scheduled June 29, 2016 foreclosure sale.

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Court granted the TRO, enjoining SPS from foreclosing on

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McMahon’s property.

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Court stayed the case pending the outcome of McMahon’s June 2016

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application.

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later, and subsequently denied McMahon’s appeal.

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See FAC ¶ 98.

6/28/2016 Order, ECF No. 7.

ECF No. 10.

This

On July 11, the

SPS denied the application ten days
FAC ¶¶ 99–101.

Thereafter, the Court granted McMahon’s motion for

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preliminary injunction.

8/22/2016 Order, ECF No. 17.

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then filed another modification application, his sixth to SPS, in
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McMahon

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November 2016.

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appeal.

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the preliminary injunction.

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FAC ¶ 102.

FAC ¶¶ 103, 107.

SPS denied that application and the
Upon motion, the Court then dissolved
8/24/2017 Order, ECF No. 65.

McMahon’s First Amended Complaint alleges seven causes of

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action: (1) violation of California’s Homeowners Bill of Rights

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(“HBOR”) at California Civil Code § 2924.12; (2) violation of the

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Equal Credit Opportunity Act (“ECOA”) at 15 U.S.C. § 1691(d)(1);

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(3) violation of the Real Estate Settlement Procedures Act

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(“RESPA”) at 12 U.S.C. § 2605(e); (4) violation of RESPA

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Regulation X at 12 C.F.R. § 1024.41; (5) violation of RESPA

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Regulation X at 12 C.F.R. §§ 1024.35, 1024.36; (6) negligence;

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and (7) violation of California Business and Professions Code

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§ 17200.

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action solely against Chase.

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McMahon’s case against Chase entirely.

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54.

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claims against SPS with prejudice.

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About a month later, the Court revised its 4/25/2017 Order and

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denied SPS’s motion to dismiss McMahon’s second claim.

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Order, ECF No. 53.

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the dismissal of his first and fourth claims against SPS, which

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the Court denied.

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FAC at 19–28.

McMahon brought his third cause of
Id. at 21–22.

The Court dismissed

5/30/2017 Order, ECF No.

The Court also dismissed McMahon’s first, second, and fourth
4/25/2017 Order, ECF No. 44.

5/25/2017

McMahon later moved the Court to reconsider

8/23/2017 Order, ECF No. 64.

The foreclosure sale of McMahon’s home took place on March

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29, 2018.

Mot. at 5.

McMahon now seeks leave to file a Second

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Amended Complaint to include supplemental facts regarding the

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foreclosure sale and to add a new cause of action for the tort of

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wrongful foreclosure.

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ECF No. 78.

Id. at 4.

SPS opposes the motion.

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Opp’n,

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II.

OPINION

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A.

Legal Standard

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Under Federal Rule of Civil Procedure 15(a)(2), “the court

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should freely give leave [to amend] when justice so requires.”

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Rule 15’s policy of favoring amendments to pleadings “is to be

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applied with extreme liberality.”

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Angeles, 754 F.3d 1147, 1154 (9th Cir. 2014) (internal quotations

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and citation omitted).

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a court considers “bad faith, undue delay, prejudice to the

Desertrain v. City of Los

In deciding a request for leave to amend,

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opposing party, futility of amendment, and whether the plaintiff

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has previously amended the complaint.”

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Buckley, 356 F.3d 1067, 1077 (9th Cir. 1999)).

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argue bad faith.

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B.

Id. (quoting Johnson v.
SPS does not

The remaining factors are evaluated in turn.

Analysis
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Undue Delay

In general, “delay alone no matter how lengthy is an

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insufficient ground for denial of leave to amend.”

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v. Webb, 655 F.2d 977, 980 (9th Cir. 1981).

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inapplicable California case law, argues undue delay because

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McMahon filed his initial Complaint over two years ago and the

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foreclosure sale of his home occurred more than seven months

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prior to his motion.

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and cause of action for which McMahon seeks leave to amend did

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not arise until the foreclosure and the seven-month time gap does

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not constitute an undue delay.

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2.

Opp’n at 4.

United States

SPS, citing

However, the additional facts

Prejudice to Defendants

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The consideration of prejudice to the opposing party is the

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“touchstone” inquiry in determining a motion for leave to amend.
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Owens v. Walgreen Co., No. 2:12-419-WBS-JFM, 2012 WL 2359996, at

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*2 (E.D. Cal. June 20, 2012).

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will significantly hinder a defendant’s ability to defend against

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the plaintiff’s claims, as in cases where the defendant has no

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notice, discovery has already been completed, or when the

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amendment will require relitigation of significant issues.”

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(citing Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1161

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(9th Cir. 1989)).

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rather cabins the prejudice argument within the undue delay

“Prejudice exists where amendment

Id.

SPS does not argue prejudice itself, but

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argument and fails to explain how the proposed amendment would

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hinder its ability to defend against McMahon’s claims.

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4.

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not yet issued a scheduling order, no discovery has occurred, and

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no trial date has been set.

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the Court grants McMahon leave to amend.

Moreover, as of filing of the instant motion, the Court has

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Opp’n at

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SPS would not suffer prejudice if

Previous Amendment

McMahon previously amended his Complaint, as of right, in

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February 2017, within 21 days of Defendants filing motions to

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dismiss.

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foreclosure sale did not arise before that first amendment.

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Thus, this factor does not weigh against granting leave to amend.

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The facts and cause of action related to the

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Futility of Amendment

Futility of amendment can, by itself, justify the denial of

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a motion for leave to amend.

Nunes v. Ashcroft, 375 F.3d 805,

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808 (9th Cir. 2004).

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facts can be proved under the amendment to the pleadings that

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would constitute a valid and sufficient claim or defense.”

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Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656

An amendment is futile when “no set of

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(9th Cir. 2017) (quoting Miller v. Rykoff–Sexton, Inc., 845 F.2d

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209, 214 (9th Cir. 1988)).

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Complaint premises the cause of action for wrongful foreclosure

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on Defendants’ alleged failures to properly perform an evaluation

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for loss mitigation and to provide a permanent loan modification

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prior to the foreclosure sale.

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Ex. 1 to ECF No. 77, ¶¶ 173–185.

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opposing leave to amend is that such amendment is futile because

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“this Court has already ruled on the merits of the allegations

Plaintiff’s proposed Second Amended

Proposed Second Amended Compl.,
SPS’s primary argument in

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that Plaintiff seeks to add in the proposed SAC” and a wrongful

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foreclosure claim would fail.

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Opp’n at 5.

The elements of a wrongful foreclosure claim are: “(1) the

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trustee or mortgagee caused an illegal, fraudulent, or willfully

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oppressive sale of real property pursuant to a power of sale in a

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mortgage or deed of trust; (2) the party attacking the sale

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(usually but not always the trustor or mortgagor) was prejudiced

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or harmed; and (3) in cases where the trustor or mortgagor

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challenges the sale, the trustor or mortgagor tendered the amount

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of the secured indebtedness or was excused from tendering.”

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Miles v. Deutsche Bank Nat’l Tr. Co., 236 Cal. App. 4th 394, 408

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(Cal. Ct. App. 2015) (quoting Lona v. Citibank, N.A., 202 Cal.

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App. 4th 89, 104 (Cal. Ct. App. 2011)).

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SPS argues that McMahon’s wrongful foreclosure claim fails

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to allege an illegal, fraudulent, or willfully oppressive sale.

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Opp’n at 6.

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claim is premised on Defendants’ alleged violations of HBOR (Cal.

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Civ. Code § 2923.6(c),(d),(f)(2)) and RESPA Regulation X (12

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C.F.R. § 1024.41).

The Court agrees.

First, the wrongful foreclosure

Proposed Second Amended Compl., ¶¶ 173–185.
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However, the Court has already dismissed McMahon’s claims as to

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those alleged violations.

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Second, McMahon also argues the foreclosure was wrongful because

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it violated rules prohibiting dual tracking—the practice by which

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a lender processes a loan modification while simultaneously

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commencing foreclosure.

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Majd v. Bank of Am., N.A., 243 Cal. App. 4th 1293, 1302–1307

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(Cal. Ct. App. 2015), as modified (Jan. 14, 2016)).

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reliance on Majd, however, is misplaced.

4/25/2017 Order; 5/30/2017 Order.

Reply, ECF No. 80, at 6–7 (discussing

McMahon’s

In Majd, the

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foreclosure took place while the servicer was reviewing the loan

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modification application.

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modification request to SPS had already been resolved and denied

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at the time of the foreclosure sale.

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Id.

Here, McMahon’s sixth

FAC ¶¶ 103, 107.

Thus, because the proposed pleading would fail to state a
claim for wrongful termination, amendment is futile.

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III.

ORDER

For the reasons set forth above, the Court DENIES
Plaintiff’s motion to amend (ECF No. 77).
IT IS SO ORDERED.
Dated: December 7, 2018

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