Case Name: Loh v. JP Morgan Chase Bank, N.A., et al.
Case No.: 1-13-CV-256623
Defendants JP Morgan Chase Bank, N.A. (‘Chase”) and California Reconveyance Company (collectively, “Defendants”) demur to the second amended complaint (“SAC”) filed by plaintiff Fu-Meh Loh (“Plaintiff”) and move to strike portions contained therein.
This is an action arising out of a foreclosure. In 1998, Plaintiff and her then-husband obtained a loan in the amount of $832,000 (the “Loan”) from Home Savings of America FSB, secured by a deed of trust on a property located at 20651 Leonard Road in Saratoga (the “Property”). (SAC at ¶¶ 1, 2; Defendants’ Request for Judicial Notice (“RJN”), Exhibit A.) At some point in time unknown to Plaintiff, Chase became the servicer on the Loan. (SAC at ¶ 3.)
In February 2011, Plaintiff, who was divorced, submitted a loan modification application to Chase. (SAC at ¶ 4.) After approximately 22 months of reviewing Plaintiff’s application, during which Chase refused to accept her loan payments, Chase offered her a loan modification in December 2012. (Id., Exhibit B.) Pursuant to the terms of the modification proposal, if Plaintiff complied, Chase would modify the Loan but would also add interest in the amount of $71,322.88 and escrow advances in the amount of $25,078.62 to generate a new principal balance of $780,515.17. (Id. at ¶ 6.) Plaintiff contends that had Chase timely reviewed her application, the increase in her principal balance could have been avoided. (Id.) Alternatively, she alleges that if Chase had reviewed the application in a timely manner and denied her request, the arrearage on her account would have been in an amount that was more affordable to her. (Id.)
Chase mistakenly prepared a loan modification agreement and related documents which required her ex-husband’s signature. (SAC at ¶ 9.) Plaintiff made three timely trial loan payments as indicated by the terms of the Loan Workout Plan that was provided to her. (Id. at ¶ 10.)
Plaintiff attempted to execute the modification agreement in March 2013 with a notary, as required, at her local Chase Bank but was unable to do so after the notary would not permit her to execute the agreement without the presence of her ex-husband, who was also listed as a borrower. (Id. at ¶ 12; RJN, Exhibit A.) Due to her ex-husband’s unavailability, a Chase representative instructed Plaintiff to make an additional payment under the Loan Workout Plan in order to provide her with additional time to get her ex-husband to execute the agreement. (Id.) at ¶ 14.) Consequently, Plaintiff tendered payment in the amount of $2,475.54 for April 2013, but her payment was returned. (Id. at ¶ 15.)
Plaintiff was unable to obtain her ex-husband’s signature as he had relocated to Taiwan. (SAC at ¶ 16.) In April 2013, a Chase representative advised Plaintiff in a phone conversation that her ex-husband did not need to execute the loan modification agreement because Chase had received a copy of her divorce decree. (Id. at ¶ 17.) In the same conversation, the representative also communicated to Plaintiff that Chase was refusing to honor the modification agreement because of her failure to submit the executed document. (SAC at ¶ 18.) In a letter dated June 5, 2013, Chase stated that Plaintiff’s ex-husband was not required to sign the loan modification agreement. (Id.at ¶ 19, Exhibit C.) Chase subsequently initiated foreclosure proceedings on the Property.
On June 23, 2014, Plaintiff filed the SAC asserting the following causes of action: (1) negligence; (2) implied contract; (3) fraudulent concealment; (4) negligent misrepresentation; (5) intentional misrepresentation; and (6) violation of Business & Professions Code § 17200.
On July 28, 2014, Defendants filed the instant demurrer to each of the six causes of action asserted in the SAC on the on the ground of failure to state facts sufficient to constitute a cause of action and to the fourth and fifth causes of action on the ground of uncertainty. (Code Civ. Proc., § 430.10, subds. (e) and (f).) Defendants also filed the motion to strike the second, fourth and fifth causes of action. (Code Civ. Proc., §§ 435 and 436.)
Defendants’ request for judicial notice is GRANTED. (See Evid. Code, § 452, subd. (h); see Alfaro v. Committee Housing Imp. System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1382; Evans v. Cal. Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549; see also Fontenot v. Wells Fargo, N.A. (2011) 198 Cal.App.4th 256, 264-265 [stating that “a court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in the recorded document, and the document’s legally operative language … [and,f]rom this, the court may deduce and rely upon the legal effect of the recorded document”].)
Defendants’ motion to strike the second (breach of implied contract), fourth (negligent misrepresentation) and fifth (intentional misrepresentation) causes of action is GRANTED. Based on the Court’s prior order on Defendants’ demurrer to the first amended complaint (“FAC”), these claims are beyond the scope of permissible amendment. When a demurrer is sustained with leave to amend, the leave must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action. (See Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) The prior order specifically permitted Plaintiff leave to amend her claims for negligence, promissory estoppel, fraudulent concealment and violation of Business and Professions Code section 17200 only. Nevertheless, Plaintiff added three additional causes of action. This is improper. Accordingly, the newly added claims are struck.
Give the ruling on Defendants’ motion to strike, their demurrer is MOOT as to the second, fourth and fifth causes of action.
Defendants’ demurrer to the first cause of action (negligence) on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED. Plaintiff has sufficiently stated a claim for negligence by alleging that Defendants failed to timely consider her loan modification application (and rejected interim payments during that time), resulting in the accrual of an arrearage that she was unable to pay in order to make her loan current. While is true as a general rule that 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 (see Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1095-1096), Nymark “does not support the sweeping conclusion that a lender never owes a duty of care to a borrower.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 901.) Rather, the question of whether a lender owes a duty requires “the balancing of the [Biakanja v. Irving (1958) 49 Cal.2d 647] factors.” (Id.) Here, because Defendants purportedly agreed to consider modification of Plaintiff’s Loan, the Biakanja factors weigh in favor of a duty as the transaction was intended to affect Plaintiff and it was foreseeable that failing to timely process her application could result in significant harm to Plaintiff. (See Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 944-952.)
Defendants’ demurrer to the third cause of action (fraudulent concealment) on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND. The elements of a claim for fraud are “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.) “Fraud actions are subject to strict requirements of particularity in pleading.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) The specificity requirement has two purposes: to apprise the defendant of certain definite accusations against him so that he can intelligently respond to them, and also to weed nonmeritorious actions on the basis of the pleadings. (Id. at 216-217.)
In its prior order on the demurrer to this cause of action in the FAC, the Court held that Plaintiff had failed to plead with any specificity or clarity what exactly was concealed by Chase from her and by whom. Plaintiff has not amended this cause of action at all, barring the removal of once paragraph. Thus, it is still unclear what was fraudulently concealed from Plaintiff and therefore she has not stated a claim for fraudulent concealment.
Defendants’ demurrer to the sixth cause of action (violation of Business & Professions Code § 17200) on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND. In order to have standing to pursue a cause of action under the UCL, a plaintiff must have suffered an “injury in fact and [have] lost money or property as a result of the unfair competition.” (Bus. & Prof., § 17204.) Plaintiff fails to plead facts which demonstrate that she suffered an actual, realized injury. There are no allegations that the Property has been sold at a foreclosure sale. Finally, Plaintiff’s assertion that she realized an actual injury by making $7,426.62 in payments based on the alleged representation that her loan would be modified is unavailing as those were amounts she was already obligated to pay under her loan agreement.
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