MEMORANDUM AND ORDER RE: MOTION TO SEVER CLAIMS AGAINST DEFENDANTS FIRST AMERICAN TITLE INSURANCE COMPANY FOR THE FUTURE AND MOTION FOR JUDGMENT ON THE PLEADINGS F/K/A THE BANK OF NEW YORK TRUST COMPANY, N.A., FINANCIAL HOPE FOR AMERICA;
Plaintiffs Bradley and Lisa Dehaven filed this lawsuit against defendants JP Morgan Chase Bank, N.A., individually and as successor to Chase Home Finance LLC ("JP Morgan Chase"), The Bank of New York Mellon Trust Company, N.A. F/K/A The Bank of New York Trust Company, N.A., as Trustee for Chase Mortgage Finance Trust Series 2007-S4 ("Mellon"), First American Title Insurance Company dba First American Loanstar Trustee Services ("First American"), and Financial Hope for America ("Financial Hope") claiming wrongful foreclosure, intentional misrepresentation, intentional concealment, fraud, negligent misrepresentation, breach of fiduciary duty, and unlawful business practices in connection with the foreclosure on plaintiffs' residence located at 5015 Stirling Street, Granite Bay, California ("Stirling residence"). Currently before the court are JP Morgan Chase's motions to sever claims brought in plaintiffs' Second Amended Complaint ("SAC") against Financial Hope and First American and for judgment on the pleadings.*fn1
I. Factual and Procedural Background
In March 2007, plaintiffs obtained a refinance loan ("Subject Loan") on the Stirling residence through lender JP Morgan Chase. (Id. ¶ 24.) The Subject Loan's original servicer was Chase Home Finance LLC ("Chase Home"), who merged into JP Morgan Chase in 2011. (Ans. to SAC ¶ 4.) JP Morgan Chase is the successor to Chase Home. (Id.) A deed of trust was recorded March 30, 2007, naming Financial Title Company as trustee and JP Morgan Chase as beneficiary. (SAC ¶ 17, Ex. A.)
JP Morgan Chase securitized the Subject Loan and pooled it into the Chase Mortgage Finance Trust Series 2007-S4 in May 2007. (Id. ¶¶ 49-50.) Mellon is the trustee of Trust Series 2007-S4. (Id. ¶ 50.)
In January 2009, plaintiffs were experiencing financial difficulties, (id. ¶ 26), and called Chase Home to discuss modifications to the Subject Loan, (id. ¶ 28). They were told by several representatives that Chase Home could not modify the Subject Loan until plaintiffs missed three mortgage payments. (Id. ¶¶ 32-33.) Plaintiffs stopped making mortgage payments in February 2009 and submitted the materials required to apply for a loan modification. (Id. ¶¶ 35-36.)
After missing three mortgage payments, plaintiffs contacted Chase Home in April 2009 to inquire as to the status of their loan modification application and were told that the application was actively in review. (Id. ¶¶ 62, 65.) Plaintiffs were told the same thing in May 2009. (Id. ¶ 65.)
A Notice of Default of the Subject Loan was recorded May 19, 2009. (Id. ¶ 67.) When plaintiffs contacted Chase Home after the notice of default was recorded, Chase Home told them that their loan was in active review and that the Stirling residence would not be foreclosed on while the loan was under review. (Id. ¶ 69.) During June and July, plaintiffs remained in contact with Chase Home and were repeatedly told that their loan modification application was under active review. (Id. ¶ 73.) During this period, plaintiffs also began resubmitting the documents required for their modification application. (Id. ¶ 71.)
On June 22, 2009, a Substitution of Trustee was filed naming First American as Trustee for the Subject Loan. (Req. for Judicial Notice in Supp. of Mot. for J. on the Pleadings Ex. 1.) On July 2, 2009, an Assignment of Deed of Trust was recorded transferring beneficial interest in the Subject Loan to Mellon. (SAC ¶ 72.) On August 26, 2009, a Notice of Trustee's Sale was recorded. (Id. ¶ 74.)
According to JP Morgan Chase, Chase Home offered plaintiffs a forebearance plan in late August 2009 to which plaintiffs never responded. (Reardon Decl. ¶ 5, Ex. C.) Chase Home then sent plaintiffs a letter confirming their failure to accept the forebearance agreement by its stated deadline. (Id. ¶ 10, Ex. F) Plaintiffs deny that they ever received such an offer or letter. (SAC ¶ 115.)
Also in August 2009, plaintiffs enlisted Financial Hope to act for them in continued negotiations with Chase Home. (Id. ¶¶ 75-77.) Plaintiffs resubmitted their loan modification documents and informed Chase Home that Financial Hope was authorized to negotiate on their behalf. (Id. ¶¶ 76-77; Ans. to SAC ¶ 77.) Plaintiffs claim that they also informed Chase Home that they wished to be informed directly of any developments regarding the Subject Loan. (SAC ¶ 77.) JP Morgan Chase denies this allegation. (Ans. to SAC ¶ 77.)
Plaintiffs claim that Financial Hope remained in contact with Chase Home on their behalf from October 2009 through February 2010. (SAC ¶¶ 81-86.) During this period, Chase Home told Financial Hope that the Subject Loan was in review and that no foreclosure sale would occur while the loan was in review. (Id.) On March 3, 2010, Chase Home informed Financial Hope that the Subject Loan was no longer being considered for modification.
(Id. ¶ 89.) Plaintiffs claim that Financial Hope did not relay this information to them. (Id. ¶ 92.)
The Stirling residence was sold at foreclosure on April 14, 2010. (Id. ¶ 99.) On April 21, a Trustee's Deed Upon Sale was recorded that vested title in Mellon, as trustee for Chase Mortgage Finance Trust Series 2007-S4. (Id. ¶ 107; id. Ex. E.)
Plaintiffs, on their own behalf and through Financial Hope, contacted Chase Home in an attempt to negotiate a post-sale resolution. (Id. ¶¶ 108-126.) These negotiations lasted from April to November of 2010. (Id.) During that ...