Willis v. JPMorgan Chase Bank, N.A.

Filing 12

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 4/5/2017 re 3 Defendant's Motion to Dismiss: IT IS ORDERED that defendant's Motion to dismiss be, and the same hereby is, GRANTED. Plaintiff has twenty days from the date this Order is signed to file a First Amended Complaint, if she can do so consistent with this Order. (Kirksey Smith, K)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
----oo0oo----

11
12

ELIZABETH A. WILLIS,
Plaintiff,

13
14
15
16

CIV. NO. 2:17-00366 WBS AC
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.
JPMORGAN CHASE BANK, N.A.;
and DOES 1-20 inclusive,
Defendants.

17
18

----oo0oo----

19

Plaintiff Elizabeth A. Willis brought this action

20
21

against JPMorgan Chase Bank, N.A. (“Chase”) for violation of the

22

California Homeowner’s Bill of Rights (“HBOR”) and negligence

23

arising out defendant’s alleged mishandling of plaintiff’s loan

24

modification requests.

25

defendant’s Motion to dismiss for failure to state a claim upon

26

which relief can be granted pursuant to Federal Rule of Civil

27

Procedure 12(b)(6).

28

///

The matter is now before the court on

(Def.’s Mot. (Docket No. 3).)

1

1

I.

Factual and Procedural Background

2

Plaintiff refinanced her residential mortgage loan with

3

Chase in 2006.

(Compl. ¶ 7 (Docket No. 1-1).)

She refinanced

4

her home mortgage with a first lien mortgage loan and also

5

obtained a home equity line of credit (“HELOC”).

6

for Judicial Notice (“RJN”) Exs. 1-2 (Docket Nos. 3-2, 3-3).)1

(Def.’s Request

7

Plaintiff alleges that she requested a loan

8

modification application in May 2016 and submitted a completed

9

loan modification application on July 8, 2016.

(Compl. ¶¶ 8-9,

10

12.)

Chase allegedly lost plaintiff’s documents on several

11

occasions and required plaintiff to resubmit several documents.

12

(Id. ¶¶ 13-14.)

13

Chase allegedly denied plaintiff’s loan modification on

14

the HELOC but did not make a decision on the first lien loan.

15

(Id. ¶ 14.)

16

correspondence that foreclosure proceedings were being initiated”

17

against her.

18

application on October 24, 2016, but never received any

19

information regarding her first lien loan modification

Shortly thereafter, plaintiff allegedly “received

(Id. ¶ 15.)

Plaintiff allegedly resubmitted her

20
1

21
22
23
24
25
26
27
28

A court may take judicial notice of facts “not subject
to reasonable dispute” that are “accurately and readily
determined from sources whose accuracy cannot reasonably be
questioned.” Fed. R. Evid. 201. “[A] court may take judicial
notice of ‘matters of public record.’” Lee v. City of Los
Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (citing Mack v. S. Bay
Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)). Defendants
request that the court judicially notice two recorded documents-the deed of trust for the first lien mortgage and the California
open-end deed of trust for the HELOC. (See RJN Exs. 1-2.) The
court will take judicial notice of these documents because they
are matters of public record whose accuracy cannot be questioned.
See Thompson v. Residential Credit Sols., Civ. No. 2:11-2261 WBS
DAD, 2011 WL 5877075, at *2 (E.D. Cal. Nov. 22, 2011).
2

1

application.

2

(Id. ¶¶ 17-18.)

Plaintiff initiated this action in state court against

3

Chase on January 12, 2017, alleging (1) violation of the HBOR,

4

Cal. Civ. Code § 2923.6(c)-(d); and (2) negligence.

5

subsequently removed this case to federal court.

6

II.

7

Defendant

(Docket No. 1.)

Discussion
On a motion to dismiss under Rule 12(b)(6), the court

8

must accept the allegations in the complaint as true and draw all

9

reasonable inferences in favor of the plaintiff.

Scheuer v.

10

Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by

11

Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S.

12

319, 322 (1972).

13

must plead “only enough facts to state a claim to relief that is

14

plausible on its face.”

15

544, 570 (2007).

16

‘probability requirement,’ but it asks for more than a sheer

17

possibility that a defendant has acted unlawfully.”

18

Iqbal, 556 U.S. 662, 678 (2009).

19

plausibility when the plaintiff pleads factual content that

20

allows the court to draw the reasonable inference that the

21

defendant is liable for the misconduct alleged.”

22

standard, “a well-pleaded complaint may proceed even if it

23

strikes a savvy judge that actual proof of those facts is

24

improbable.”

25

To survive a motion to dismiss, a plaintiff

Bell Atl. Corp. v. Twombly, 550 U.S.

“The plausibility standard is not akin to a

Ashcroft v.

“A claim has facial

Id.

Under this

Twombly, 550 U.S. at 556.

“Threadbare recitals of the elements of a cause of

26

action, supported by mere conclusory statements, do not suffice.”

27

Iqbal, 556 U.S. at 678; see also Iqbal, 556 U.S. at 679 (“While

28

legal conclusions can provide the framework of a complaint, they
3

1
2

must be supported by factual allegations.”).
A.

3

California Civil Code § 2923.6(c)-(d)
In her first cause of action, plaintiff alleges

4

defendant violated California Civil Code § 2923.6(c)-(d) by

5

failing to provide a determination on her first lien mortgage

6

modification application prior to initiating foreclosure

7

proceedings.

8

claim because plaintiff does not allege that defendant recorded a

9

notice of default.

Defendant argues the court must dismiss plaintiff’s

10

Section 2923.6 prohibits “dual tracking,” in which a

11

lender proceeds with the foreclosure process while reviewing a

12

loan modification application.

13

“If a borrower submits a complete application for a first lien

14

loan modification offered by, or through, the borrower’s mortgage

15

servicer, a mortgage servicer . . . shall not record a notice of

16

default, or conduct a trustee’s sale, while the complete first

17

lien loan modification application is pending.”

18

added).

19

shall have at least 30 days from the date of the written denial

20

to appeal the denial and to provide evidence that the mortgage

21

servicer’s determination was in error.”

22

Section 2923.6(c)-(d) thus “prohibits recording a notice of

23

default or sale and conducting that sale” while a loan

24

modification application is pending.

25

Case No. CV16-06658 JAK (Ex), 2016 WL 2885857, at *7 (N.D. Cal.

26

May 16, 2016); see Shupe v. Nationstar Mortg. LLC, Civ. No. 2:16-

27

1221 MCE CMK, 2017 WL 431083, at *2 (E.D. Cal. Jan. 31, 2017)

28

(“California Civil Code § 2923.6 places restrictions on the

See Cal. Civ. Code § 2923.6(c).

Id. (emphasis

Section 2923.6(d) further provides that the “borrower

4

Id. § 2923.6(d).

Marquez v. U.S. Bank, N.A.,

1

recording of Notices of Default or Notices of Trustee’s Sale

2

while a loan modification application is pending.”).

3

Plaintiff allegedly submitted a complete loan

4

modification application for her first lien mortgage loan and

5

HELOC on July 8, 2016.

6

“commenc[ed] foreclosure before it gave Plaintiff a fair

7

opportunity to be reviewed for a loan modification” and “fail[ed]

8

to provide Plaintiff a determination in writing (or otherwise) on

9

the first lien mortgage modification application before starting

(Compl. ¶ 20.)

10

foreclosure proceedings.”

11

that defendant told her in September 2016 “that she did not

12

qualify for a modification on the HELOC,”2 she “was not advised

13

that she had the right to appeal the decision,” and she never

14

“received any information regarding the first lien loan

15

modification application.”

16

(Id. ¶ 23.)

Chase allegedly

Plaintiff further alleges

(Id. ¶ 22.)

Plaintiff does not, however, allege that defendant

17

recorded a notice of default or sale, even though subsections (c)

18

and (d) are causes of action that trigger once notices of default

19

or sale are recorded.

20

2016 WL 2885857, at *7.

21

recorded a notice of default or notice of sale while the first

22

lien loan modification was pending, plaintiff’s section 2923.6

23

claim must fail.

24

No. 2:15-cv-08870-ODW-KS, 2016 WL 777862, at *3 (C.D. Cal. Feb.

25

26, 2016) (finding a mortgage servicers is not liable under

26
27
28

2

See Cal. Civ. Code § 2923.6(c); Marquez,
Absent an allegation that defendant

See Castaneda v. Wells Fargo Home Mortg., Case

Plaintiff’s allegations regarding the loan modification
of the HELOC is inapplicable to section 2923.6(c)-(d) Section
2923.6(c)-(d) is specifically limited to a “first lien loan
modification.” See Cal. Civ. Code § 2923.6(c)-(d).
5

1

section 2923.6(c) if a potential violation is remedied “prior to

2

the recordation of a trustee’s deed upon sale”); Tuan Anh Le v.

3

Bank of N.Y. Mellon, 152 F. Supp. 3d 1200, 1211 (N.D. Cal. 2015)

4

(finding defendant did not violate section 2923.6(d) because it

5

did not record a notice of default).

6

dispute that “a ‘dual tracking’ claim could not survive without a

7

filing of a [Notice of Default].”

8

No. 7).)

9

Lastly, plaintiff does not

(Pl.’s Opp’n 6:21-22 (Docket

Because plaintiff does not allege that defendant

10

recorded a notice of default or sale, plaintiff does not allege a

11

violation of California Civil Code § 2923.6(c)-(d).

12

the court must dismiss plaintiff’s first cause of action.

13

B.

14

Accordingly,

Negligence
In her second cause of action, plaintiff alleges

15

defendant was negligent when it failed to properly handle her

16

loan modification application, failed to keep her informed of the

17

status of her loan modification application, and engaged in dual

18

tracking.

19

plaintiffs must show that defendants owed them a legal duty, that

20

defendants breached that duty, and that the breach proximately

21

caused their injuries.”

22

Inc., 32 Cal. 4th 1138, 1145 (2004).

23

duty to use reasonable care in a particular factual situation is

24

a question of law for the court to decide.”

25

Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (4th Dist.

26

2004).

27
28

“[I]n order to prevail in a negligence action,

Wiener v. Southcoast Childcare Ctrs.,
“The existence of a legal

Vasquez v.

Plaintiff alleges that defendant “owe[d] Plaintiff a
duty of care to reasonably and fairly review her loan
6

1

modification.”

2

negligence claim fails because it did not owe plaintiff a legal

3

duty of care under California law.

4

(Compl. ¶ 25.)

Defendant argues plaintiff’s

(Def.’s Mot. 5:24-27.)

“[A]s a general rule, a financial institution owes no

5

duty of care to a borrower when the institution’s involvement in

6

the loan transaction does not exceed the scope of its

7

conventional role as a mere lender of money.”

8

Fed. Savings & Loan Ass’n, 231 Cal. App. 3d 1089, 1096 (3d Dist.

9

1991).

Nymark v. Heart

“This general rule also applies to loan servicers.”

10

Argueta v. J.P. Morgan Chase, Civ. No. 2:11-441 WBS GGH, 2011 WL

11

2619060, at *4 (E.D. Cal. June 30, 2011).

12

However, this rule is not a “sweeping conclusion that a

13

lender never owes a duty of care to a borrower.”

14

Countrywide Home Loans, Inc., No. C 09-5288 SBA, 2010 WL 4939795,

15

at *5 (N.D. Cal. Nov. 30, 2010) (emphasis in original); see

16

Jolley v. Chase Home Fin., LLC, 213 Cal. App. 4th 872, 901 (1st

17

Dist. 2013) (“Even when the lender is acting as a conventional

18

lender, the no-duty rule is only a general rule.”).

19

test for determining whether a lender owes a duty of care to a

20

borrower involves balancing the following factors:

21
22
23
24
25

Newson v.

Rather, the

[1] the extent to which the transaction was
intended to affect the plaintiff, [2] the
foreseeability of harm to him, [3] the degree
of certainty that the plaintiff suffered
injury, [4] the closeness of the connection
between the defendant’s conduct and the
injury suffered, [5] the moral blame attached
to the defendant’s conduct, and [6] the
policy of preventing future harm.

26

Nymark, 231 Cal. App. 3d at 1096 (alterations in original)

27

(quoting Biakanja v. Irving, 49 Cal. 2d 647, 650 (1958)).

28

California Courts of Appeal are split regarding whether
7

1

lenders owe borrowers a duty of care when considering loan

2

modification applications.

3

L.P., 221 Cal. App. 4th 49, 67-68 (4th Dist. 2013), the court

4

held that a lender “did not have a common law duty of care to

5

offer, consider, or approve a loan modification” because “a loan

6

modification is the renegotiation of loan terms, which falls

7

squarely within the scope of a lending institution’s conventional

8

role as a lender of money.”

9

regarding loan modifications and other foreclosure alternatives

In Lueras v. BAC Home Loans Servicing

Instead, a lender’s obligations

10

“are created solely by the loan documents, statutes, regulations,

11

and relevant directives and announcements from . . . governmental

12

or quasi-governmental agencies.”

13

Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal. App. 4th 941,

14

948 (1st Dist. 2014), the court held that lenders have a legal

15

duty of care where they “allegedly agreed to consider

16

modification of the [borrower]s’ loans.”

17

Alvarez was recently adopted in Daniels v. Select Portfolio

18

Servicing, Inc., 246 Cal. App. 4th 1150, 1182-83 (6th Dist.

19

2016).

20

Id. at 67.

In contrast, in

The reasoning in

Judges in this district are divided on this question.

21

Compare Shupe, 2017 WL 431083, at *4-5 (finding loan

22

modifications impose no common law duties on lenders), with

23

Martinez v. Flagstar Bank, FSB, Civ. No. 2:15-1934 KJM CKD, 2016

24

WL 3906810, at *8 (E.D. Cal. July 19, 2016) (finding that a

25

lender owes a duty of care “not to make material

26

misrepresentations about the status of an application for a loan

27

modification”).

28

Lueras line of cases more persuasive.

However, the Ninth Circuit appears to find the

8

See, e.g., Anderson v.

1

Deutsche Bank Nat’l Trust Co. Ams., 649 F. App’x 550, 552 (9th

2

Cir. 2016) (“[W]e conclude that application of the Biakanja

3

factors does not support imposition of such a duty where, as

4

here, the borrowers’ negligence claims are based on allegations

5

of delays in the processing of their loan modification

6

applications.”); Deschaine v. IndyMac Mortg. Servs., 617 F. App’x

7

690, 693 (9th Cir. 2015) (“IndyMac did not have a common law duty

8

of care to offer, consider, or approve a loan modification, or to

9

explore and to offer [Deschaine] foreclosure alternatives.”

10
11

(alteration in original)).
This court has previously concluded that financial

12

institutions do not owe a common law duty of care to borrowers.

13

See Jent v. N. Trust Corp., Civ. No. 2:13-1684 WBS CKD, 2013 WL

14

5806024, at *3 (E.D. Cal. Oct. 28, 2013).

15

subsequent Alvarez and Daniels California Court of Appeals

16

decisions do not change the court’s view.

17

transaction between lender and borrower does not create an

18

actionable duty of care,” including when considering a loan

19

modification.

20

v. Wilshire Credit Corp., 711 F. Supp. 2d 1126, 1132 (E.D. Cal.

21

2010) (O’Neill, J.)).

22

and obligations “[a]re set forth in the note and deed of trust,

23

the Forbearance Agreement, federal and state statutes and

24

regulations, and the directives and announcements of the United

25

States Department of the Treasury and Fannie Mae.”

26

Cal. App. 4th at 68.

27

borrower a common law duty of care in processing a loan

28

modification application.

The reasoning in the

“An arm’s length

See Jent, 2013 WL 5806024, at *3 (citing Saldate

A borrower and lender’s rights, duties,

Lueras, 221

Thus, a loan servicer does not owe a

See Anderson, 649 F. App’x at 552.
9

1

Plaintiff’s sole allegation regarding defendant’s duty

2

of care is that defendant had an obligation to reasonably and

3

fairly review plaintiff’s loan modification application.

4

¶ 25.)

5

establish defendant owed plaintiff a duty of care.

6

the court must dismiss plaintiff’s second cause of action.

7

(Compl.

Under Lueras, this allegation is insufficient to
Accordingly,

Plaintiff’s opposition also discusses defendant’s

8

alleged violation of California Civil Code § 2923.7 for failure

9

to properly provide a single point of contact.

(See Pl.’s Opp’n

10

5:11-6:25.)

11

of action for negligence and violation of California Civil Code §

12

2923.6(c)-(d); it does not include a cause of action under

13

California Civil Code § 2923.7.

14

wishes to bring a claim under section 2923.7, she should clear

15

identify such a claim in her First Amended Complaint.

16
17

Plaintiff’s complaint clearly stated only two causes

(See Compl.)

If plaintiff

IT IS THEREFORE ORDERED that defendant’s Motion to
dismiss be, and the same hereby is, GRANTED.

18

Plaintiff has twenty days from the date this Order is

19

signed to file a First Amended Complaint, if she can do so

20

consistent with this Order.

21

Dated:

April 5, 2017

22
23
24
25
26
27
28
10