Arefi v. JP Morgan Chase Bank, N.A.

MONIKA AREFI et al., Plaintiffs and Appellants, v. JP MORGAN CHASE BANK, N.A. et al., Defendants and Respondents.

B263947

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SEVEN

July 2, 2018

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC534591)

APPEAL from an order of the Superior Court of Los Angeles County, Barbara M. Scheper. Affirmed.

Klapach & Klapach and Joseph S. Klapach for Plaintiffs and Appellants.

Bryan Cave Leighton Paisner; Bryan Cave LLP, Bryan Cave, Glenn J. Plattner and Richard P. Steelman, Jr. for Defendants and Respondents JP Morgan Chase Bank, N.A.

Frandzel Robins Bloom & Csato, Andrew K. Alper, Hal D. Goldfam and Chanel L. Oldham for Defendant and Respondent Miracle Day Investments.

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INTRODUCTION

Monika Arefi obtained two loans, both secured by the home she and her husband, Abolhossan Arefi, shared in Beverly Hills. JP Morgan Chase Bank, N.A. acquired the loans in 2008, and the Arefis soon defaulted on both. Chase later sold the Arefis' second loan to Miracle Day Investments, LLC, which subsequently foreclosed on the property in late 2013 under the deed of trust securing the second loan, which was actually a home equity line of credit.

In early 2014 the Arefis filed this action, their fifth against Chase, Miracle Day, or both. They alleged, among other things, Chase violated its duty under the recently-enacted California Homeowner Bill of Rights (HBOR) to review the Arefis' application for a loan modification in good faith. The Arefis also alleged Miracle Day's foreclosure sale under the deed of trust securing the second loan was improper and violated HBOR because the Arefis had a pending application with Chase to modify the first loan.

The Arefis appeal from the trial court's order dismissing their action after the court sustained demurrers by Chase and Miracle Day to the Arefis' second amended complaint without leave to amend. The Arefis also appeal the trial court's order granting Miracle Day's motion for attorneys' fees. We consolidated the two appeals, and now affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. A Tale of Two Loans

In September 2006 Monika Arefi borrowed $4,810,000 from Washington Mutual Bank, evidenced by a promissory note secured by a deed of trust on the home she and her husband, Abolhossan Arefi, owned in Beverly Hills (the first loan). In November 2006 Ms. Arefi obtained a $750,000 line of credit from Washington Mutual, secured by a second deed of trust on the property (the second loan). In September 2008 Chase acquired substantially all of Washington Mutual's assets and liabilities, including the Arefis' two loans.

In early 2010 the Arefis fell behind on their payments under both loans. In April 2010 the Arefis applied to Chase for a modification of the first loan. A Chase representative initially indicated the bank would reduce the interest rate on the loan, but the loan modification Chase ultimately offered—and the Arefis alleged they accepted "under duress"—significantly increased the Arefis' monthly payments. The Arefis made three monthly payments under the modified terms of the first loan, and defaulted again.

B. A Series of Lawsuits, Some Federal, Some State

In March 2012 Ms. Arefi filed an action in federal court against Chase, alleging, among other things, Chase "misrepresented its status as owner of the loan," "engaged . . . in a pattern and practice of defrauding" her, and entered into the 2010 loan modification without "actual or legal authority." On August 3, 2012 the federal district court dismissed the action with prejudice.

In November 2012 Chase recorded a notice of default under the deed of trust securing the first loan, stating the Arefis were $544,127.98 in arrears. In February 2013 Chase recorded a notice of trustee's sale under the deed of trust securing the first loan and scheduled a foreclosure sale for March 22, 2013.

On March 15, 2013, one week before the scheduled foreclosure sale, Ms. Arefi sued Chase again, this time in state court. She sought to rescind the promissory note evidencing the first loan because the loan broker allegedly did not provide her with a translation of the loan documents in German, her primary language. The trial court dismissed the case several months later for failure to prosecute.

In April 2013 the Arefis sued Chase again in state court, alleging Chase had employed a "bait and switch" tactic in connection with the 2010 loan modification. The Arefis acknowledged they had accepted the loan modification agreement Chase had offered them, despite the fact its terms were "shockingly different" from the terms Chase had initially promised. The trial court in that action eventually sustained Chase's demurrer to the Arefis' first amended complaint without leave to amend and dismissed the action with prejudice, in part because the court ruled the judgment in the Arefis' federal action barred the Arefis from relitigating claims relating to the 2010 loan modification.

According to the Arefis' allegations in this action, it was during this time, in approximately April 2013, that Chase, with the Arefis' second state court action pending and Chase anticipating the Arefis would apply for an additional loan modification, "devised a fraudulent scheme" with Miracle Day. Pursuant to this alleged scheme, Chase agreed to sell the second loan and assign the deed of trust securing the second loan toMiracle Day at "a significantly discounted price," so that Miracle Day could foreclose while Chase was reviewing the Arefis' upcoming request for another loan modification. The Arefis alleged Chase received "some form of compensation" from Miracle Day in exchange.

On May 3, 2013 Chase assigned the deed of trust securing the line of credit to Miracle Day and recorded an "Assignment of Mortgage."¹ The assignment misidentified the instrument number of the deed of trust securing the line of credit by addingan extra "8."² On May 3, 2013 Miracle Day recorded a notice of default under the deed of trust securing the second loan, which stated the principal balance on the line of credit was "being declared all due and payable" based on the Arefis' default in September 2009. Miracle Day demanded the full sum due under the line of credit: $822,635.41.

On June 26, 2013 Ms. Arefi submitted to Chase another application to modify the terms of the first loan. On July 16, 2013 Chase advised the Arefis it had denied her application. Chase's denial stated: "After completing two reviews of the information you sent us, we determined that you are not eligible for a modification under the Home Affordable Modification Program (HAMP) or under any other modification programs." Chase also stated Ms. Arefi was not eligible for a loan modification because "[t]he unpaid principal balance on [the promissory note] is higher than the programs allow" and because the investors "have not approved a modification under these programs." On August 7, 2013, Ms. Arefi "appealed" Chase's denial of her loan modification request.

On August 28, 2013 Miracle Day recorded a notice of trustee's sale under the deed of trust securing the second loan and scheduled the foreclosure sale for September 20, 2013. OnSeptember 19, 2013, the day before the scheduled sale, Ms. Arefi filed a petition for bankruptcy under Chapter 11. In her verified bankruptcy schedules, filed in October 2013, she identified Chase as the secured creditor on the first loan, with a lien of over $6 million, and Miracle Day as the secured creditor on the second loan, with a lien of $822,500. On December 5, 2013 the bankruptcy court granted Miracle Day's motion for relief from the automatic stay under 11 U.S.C. § 362, thus allowing Miracle Day to "enforce its remedies to foreclose" on the property. The next day, Miracle Day foreclosed on the property. Meanwhile, Ms. Arefi filed another state court action against Miracle Day.

C. Yet Another Lawsuit (This One)

On January 28, 2014 Ms. Arefi filed this action against Chase, alleging causes of action for declaratory relief under Civil Code section 2924.12,³ violations of sections 2923.55 subdivision (b) and former 2923.6, and unfair business practices. After Chase successfully demurred, the Arefis filed a first amended complaint naming Miracle Day as an additional defendant, adding a cause of action for "conspiracy to commit fraud," and including allegations that Chase sold the second loan to Miracle Day "to avoid the restrictions/limitations imposed by the Homeowner Bill of Rights." The trial court sustained demurrers by Chase and Miracle Day with leave to amend.

The Arefis' operative second amended complaint, which included Mr. Arefi as a plaintiff, alleged causes of action for declaratory relief under section 2924.12, violation of former section 2923.6, fraud, and unfair business practices, and to setaside the trustee's sale, cancel the trustee's deed, and quiet title. Chase and Miracle Day demurred again. The trial court sustained both demurrers without leave to amend and awarded Miracle Day its attorneys' fees under the deed of trust securing the second loan.

The Arefis timely appealed from the trial court's order dismissing their action with prejudice. They challenge the trial court's ruling dismissing their causes of action for violation of former section 2923.6, fraud, and unfair competition. The Arefis also appealed from the trial court's order granting Miracle Day's motion for attorneys' fees.

DISCUSSION

A. Standard of Review

"In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal...