Morris v. JPMorgan Chase Bank, N.A.

78 Cal.App.5th 279

293 Cal.Rptr.3d 417

Lillian MORRIS, Plaintiff and Appellant,

v.JPMORGAN CHASE BANK, N.A., et al., Defendants and Respondents.

A155027

Court of Appeal, First District, Division 4, California.

Filed May 4, 2022

Certified for Partial Publication.^*

Bulgucheva Law, Lilia Bulgucheva, Walnut Creek, for Plaintiff and Appellant.

Dykema Gossett, Ashley R. Fickel and Cory L. Webster, Los Angeles, for Defendant and Respondent JP Morgan Chase Bank, N.A.

Kirby & McGuinn, Jana Logan, San Diego, and Matthew H. Aguirre, for Defendants and Respondents Rushmore Loan Management Services LLC; U.S. Bank, N.A. as Legal Title Trustee for Truman 2016 SC6 Legal Title Trust.

STREETER, J.

This long-running story begins in 2008 when plaintiff Lillian Morris, facing straitened financial circumstances, fell into default on her home mortgage. After negotiating a loan modification with the original lender, she once again defaulted in 2009. Morris and her late husband, Ashraf Mazhari, then filed two bankruptcy proceedings, and through those proceedings staved off foreclosure for a number of years. Mazhari died while the second bankruptcy was pending, further compromising Morris's financial condition and exposing her once again to foreclosure. Morris, on her own, tried to obtain another loan modification, but was unsuccessful.

Following the lifting of the automatic stay in a third bankruptcy in 2016, Morris's home was sold at public auction to JPMorgan Chase Bank, N.A. (Chase), the deed of trust beneficiary and successor to the original lender. In this lawsuit, Morris claims that the trustee's sale occurred without notice to her. Her core allegation is that Chase and then Rushmore Management Services, LLC (Rushmore), the loan servicer at the time of the trustee's sale, pursued foreclosure secretly while giving her false assurances that loan modification terms were forthcoming and shuttling her back and forth between uninformed representatives who gave her inconsistent information about the status of her modification request. She claims she would have qualified for a modification, and avoided foreclosure, had Chase and Rushmore dealt with her in good faith.

The operative complaint seeks various forms of postforeclosure relief, including damages, an order setting aside the trustee's sale, and a declaration quieting title. The complaint pleads 11 causes of action against Chase, Rushmore, and the subsequent purchaser of the home from Chase following the foreclosure, U.S. Bank, N.A. (U.S. Bank) (collectively, the defendants). Without detailing them all at this point, suffice it to say that Morris pleads these causes of action under the California Homeowner Bill of Rights (HBOR) ( Civ. Code,¹ §§ 2923.6, 2923.7 ) and sundry other statutory (§ 2924b; Bus. & Prof. Code, § 17200 ), common law and equitable (negligence, voiding of trustee's sale, quiet title) theories. The story ends in 2018—at least so far—with the trial court sustaining the defendants’ demurrers without leave to amend as to all claims.

After another lengthy delay occasioned by yet another bankruptcy, Morris now appeals. She limits the appeal to seven of her 11 causes of action. We reverse in part and affirm in part. In the published portion of this opinion, we reverse with directions that the trial court enter a new and different order overruling the demurrers to the first cause of action alleging failure to appoint a single point of contact ( § 2923.7 ), the second cause of action alleging dual tracking ( § 2923.6 ), and the third cause of action alleging failure to mail upon request a notice of default and notice of trustee's sale ( § 2924b ). In the unpublished portion of the opinion, we affirm on the remaining four causes of action.

I. BACKGROUND

A. Initial Complaint

Morris filed her initial complaint against Chase, Rushmore, and U.S. Bank in November 2017. Since the allegations that she later made by amendment are important to our analysis, we begin by placing the amendments in context against a baseline recitation of the facts as originally pleaded, read together with the exhibits attached to the complaint, and with various publicly filed documents that were judicially noticed at the defendants’ request.

In October 2005, Morris borrowed $934,500 from Washington Mutual Bank, F.A. (WaMu) secured by a deed of trust on her home in Lafayette. This was a refinance of a prior $535,000 loan with WaMu taken out in 1993. With her late husband, Morris lived in the home as a primary residence beginning in 1993. Morris legally changed her name in February 2005 from Shams Azar Tehrani Mazhari, which is the name shown on the title documents to the home. Over the course of the next decade, Morris defaulted; obtained a loan modification from WaMu, defaulted again, and filed for chapter 11 bankruptcy twice, preventing foreclosure while the bankruptcies were pending; WaMu went into receivership and assigned Morris's mortgage loan and deed of trust to the Federal Deposit Insurance Corporation (FDIC); and Chase, by assignment from the FDIC, stepped into WaMu's shoes as mortgagee and deed of trust beneficiary.

In early 2015 Morris applied to Chase for a loan modification. Since English is not Morris's native language, she hired an agent to assist her in communicating with Chase. But Chase took the position that she "did not need an agent and she should deal with Chase directly." "[E]very time she called asking for assistance," "[e]ach representative kept asking [Morris for] the same information and the same documents [she had] previously submitted with no progress in the status of [her] request for assistance." Whenever Morris called Chase to ask about the status of her application, she was "shuffled from one representative to another." In the course of being given the "runaround," she was given "false and inconsistent information about [her] rights" and "led to believe that her foreclosure alternative requests were being considered, and that her home would not be sold until there was a determination on her loss mitigation requests." "Chase's representatives kept providing [Morris] with positive statements and reassurances that [she] would obtain a loan modification," yet apparently denied her loan modification application at some point, without saying why. Morris admits she was verbally advised of the denial "[a]t an unknown time." But she was never given any reasons for the denial and she "never received a denial letter in writing" advising her that she had a right to appeal.

In April 2015, Chase recorded a notice of default against Morris's home for past due payments under the loan of $38,504.82, and foreclosure proceedings began. In August 2015, Chase recorded a notice of trustee's sale, noticing a foreclosure sale for September 10, 2015. One week before the scheduled foreclosure sale, Morris filed her third chapter 11 bankruptcy petition. In February 2016, the third bankruptcy case was converted to a chapter 7 proceeding. In May 2016, the bankruptcy court granted Chase relief from the automatic stay. And in September 2016, Chase recorded a notice of trustee's sale for October 18, 2016. The scheduled October 18, 2016 date of sale designated in the recorded September 2016 notice of sale was later postponed to April 27, 2017.²

In March 2017, Chase assigned its rights as servicer of the mortgage to Rushmore. After the change in servicer, Morris spoke to a person at Rushmore who was "rude to her" and said she needed to speak to a person named "Vivian," who proved to be unreachable. The day before the further postponed foreclosure sale scheduled for late April 2017, Morris filed a lawsuit against Chase and Rushmore for, among other things, violation of the HBOR and the unfair competition law (UCL).³ A trustee's deed upon sale was recorded May 4, 2017. Morris learned of the sale after it had already occurred, from a real estate broker and from her then counsel. She withdrew her lawsuit after the sale took place, and the property was resold to U.S. Bank weeks later, on July 6, 2017. There is no indication in the record that U.S. Bank had notice of the statutory violations Morris alleges took place prior to its purchase of the property.

Morris's original complaint in this case, filed on November 7, 2017, renews and expands upon the allegations she made in her abandoned lawsuit earlier that year. It recites the history of Morris's failed attempt to obtain a loan modification from Chase and Rushmore, and alleges generally that she "did everything she could to save her home, but she ... lost her home because of Defendants’ negligent handling and misrepresentations regarding her account." "[H]ad Defendants properly reviewed [her] loan modification and loss mitigation requests in a timely manner," she alleges, "[she] would have either been approved for a loan modification, or would have pursued other foreclosure alternatives, such as reinstating their Note, or a short sale."

The original complaint names all three defendants and alleges 11 causes of action against each of them. The first and second causes of action, pleaded on HBOR theories, allege Chase and Rushmore (1) failed to assign a single point of contact ( § 2923.7, subds. (a) – (e) ; Stats. 2012, ch. 86, § 9 ; Stats. 2012, ch. 87, § 9 ), and (2) recorded a notice of default or notice of sale or conducted a foreclosure sale while a "complete application" for a loan modification was pending, a practice sometimes called "dual tracking" ( § 2923.6, subds. (c) & (f) ; Stats. 2012, ch. 87, § 7 ). The third cause of action alleges Chase failed to mail Morris—by registered or certified mail ( § 2924b ), or by any other means—a copy of a notice of default filed in April 2015 or a copy of the notice of trustee's sale recorded in September 2016. The fourth cause of action pleads negligence; the eighth cause of action seeks to set aside the trustee's sale; the ninth cause of action seeks to quiet title; and the eleventh cause of action alleges...