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

California Court of Appeals, Fourth District, Third Division

May 17, 2013

DIANE JENKINS, Plaintiff and Appellant,
JP MORGAN CHASE BANK, N.A. et al., Defendants and Respondents.

Ordered Date Filed 6/12/13


On the court’s own motion, we modify the opinion by deleting the sentence on page 10, stating, “Additionally, the debtor has the right to postpone the foreclosure sale for one day to pay off the outstanding debt. (Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 317-320.)”

Appeal from a judgment of the Superior Court of Orange County, Super. Ct. No. 30-2011-00438159 William M. Monroe, Judge. Affirmed.

Law Offices of Patricia Rodriguez and Patricia Rodriguez for Plaintiff and Appellant.

Bryan Cave, Stuart W. Price, Sean D. Muntz and Brett N. Taylor for Defendants and Respondent JP Morgan Chase Bank N.A. and Bank of America N.A.

McCarthy & Holthus, Matthew Podmenik and Melissa Robbins Coutts for Defendant and Respondent Quality Loan Service Corporation.



Diane Jenkins (Jenkins) requests the reversal of the trial court’s dismissal of her lawsuit after it sustained the two separate demurrers of (1) JPMorgan Chase Bank N.A. (Chase) and Bank of America, N.A. (B of A) and (2) Quality Loan Service Corporation (Quality). (These entities will collectively be referred to as Defendants, unless the context indicates otherwise.) In 2007, Jenkins executed a promissory note and deed of trust in order to refinance her condominium. After she failed to obtain refinancing for the same loan in 2008 and 2009, she defaulted on the loan and thereafter brought suit to avoid nonjudicial foreclosure and collect monetary damages.

Jenkins voluntarily amended her initial complaint, which she filed in propria persona, after she retained counsel. The court sustained Defendants’ demurrers to Jenkins’s first amended complaint (FAC) with leave to amend four of her five causes of action. Jenkins’s second amended complaint (SAC) raised five causes of action. Two of the causes of action relate to her overarching assertion the secured interest created by her execution of the deed of trust in 2007 was extinguished by purportedly improper actions taken by Defendants and, consequently, Defendants should be prevented from foreclosing on her home. The other three causes of action relate to her allegations Defendants violated numerous state and federal laws with regard to the origination and servicing of her loan and the initiation of nonjudicial foreclosure. The court, finding Jenkins’s SAC failed to allege a valid cause of action, sustained Defendants’ demurrers without leave to amend. None of Jenkins’s contentions have merit and we affirm the judgment.


In March 2007, Jenkins obtained an adjustable rate loan in the amount of $375, 500 from Washington Mutual Bank, F.A. (WaMu). She executed a promissory note for this amount. The loan was secured by a deed of trust, which encumbered her residence located in Laguna Niguel, California. The deed of trust identified WaMu as the beneficiary and California Reconveyance Company as the trustee. In January 2008, Jenkins requested WaMu refinance the loan. She alleges Chris Rogella, a WaMu loan officer, gave her “the run around” for nearly two years and failed to assist her with refinancing her loan.

Meanwhile, in September 2008, WaMu financially collapsed and the United States Office of Thrift Supervision (OTS) seized the defunct bank and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). FDIC succeeded to “all rights, titles, powers, and privileges” of the bank. (12 U.S.C. § 1821(d)(2)(A)(i).) Soon thereafter, FDIC, by way of a purchase and assumption agreement executed on September 25, 2008, transferred certain assets and liabilities of WaMu, including the defunct bank’s loan portfolio, to Chase. Under the terms of the purchase and assumption agreement, Chase did not assume any liability for WaMu’s lending or loan purchasing activities prior to September 25, 2008.

Jenkins alleges Rogella advised her, sometime after September 2009, to cease making payments on her loan to qualify for a loan modification and to obtain a more favorable interest rate. Subsequently, Jenkins defaulted on her loan, and on April 30, 2010, Quality recorded a notice of default. At this point in time, Jenkins was more than $9, 199 in arrears. Her extensive efforts to negotiate a reduction of her loan payments were unsuccessful.

On June 11, 2010, Chase, acting as the “present Beneficiary” of the deed of trust, recorded a substitution of trustee designating Quality as trustee. Two months later, Quality recorded a notice of trustee’s sale, seeking the unpaid balance of $392, 314.77. The foreclosure sale was subsequently postponed and has not been rescheduled.

On January 5, 2011, Jenkins, acting in propria persona, filed her initial complaint against Chase, WaMu, and Quality. Chase, on behalf of itself and as the acquirer of WaMu, responded by filing a demurrer. Before the matter could be heard, Jenkins hired an attorney and filed her FAC on April 20, 2011. The FAC alleged five causes of action: (1) lack of standing to foreclose; (2) unfair business practices in violation of Business and Professions Code section 17200 et seq., and Penal Code section 115.5 [fraudulently procured documents] (hereafter unfair business practices); (3) contractual breach of good faith and fair dealing; (4) violation of the Truth in Lending Act, 15 U.S.C. section 16.01 et seq. (TILA); and (5) violations of the Real Estate Settlement and Procedures Act, 12 U.S.C. section 2601 et seq. (RESPA).

The crux of Jenkins’s lawsuit is based on her theory her loan was pooled with other home loans in a securitized investment trust, which is purportedly now managed by B of A, as the acting trustee, without proper compliance with the investment trust’s pooling and servicing agreement. Her FAC alleged the failure to comply with the pooling and servicing agreement extinguished the security interest created by her execution of the deed of trust in 2007 and, therefore, Defendants now have no secured interest to foreclose upon. Additionally, Jenkins’s FAC alleged Defendants violated numerous state and federal laws with regard to the servicing of her loan and the initiation of nonjudicial foreclosure.

Chase demurred to the FAC, asserting Jenkins had not stated a valid claim as a matter of law. The court sustained the demurrers to the first, second, third, and fifth causes of action, but gave Jenkins leave to amend these four claims. The court also sustained the demurrer to the TILA cause of action without leave to amend.

Jenkins filed her SAC on July 20, 2011, which again alleged causes of action for: (1) unfair business practices; (2) breach of good faith and fair dealing; and (3) violations of RESPA. She replaced the cause of action for lack of standing to foreclose in her FAC with claims for declaratory relief and a violation of Civil Code section 2932.5.[1]

Jenkins’s SAC, like her FAC, focused on the alleged improper securitization and lack of compliance with the securitized investment trust’s pooling and servicing agreement. Chase and B of A filed a joint demurrer and Quality filed its own separate demurrer to the SAC. The court sustained both demurrers without leave to amend.

The court offered several reasons for its ruling. It explained Jenkins failed to state a basis for declaratory relief because: (1) production of the note is not required to perfect foreclosure; (2) Jenkins was not a party or a third party beneficiary to the securitized investment trust’s pooling and servicing agreement; and (3) California does not recognize a preemptive suit challenging a foreclosing party’s right or ability to foreclose.

The court reasoned Jenkins’s claim for violation of section 2932.5 lacked merit because the statute applies only to a mortgage and not to a deed of trust. In light of Jenkins’s admission the note was secured by a deed of trust on her property and not a mortgage, the court concluded the statute was inapplicable.

The court determined Jenkins’s claim for breach of the implied covenant of good faith and fair dealing lacked merit because Jenkins failed to allege the existence of a contract. Moreover, the court found there is generally no implied covenant relating to the decision to extend or not to extend (i.e., refinance) a loan. And to the extent the alleged breach related to underwriting, lending, and/or servicing errors by WaMu, those alleged liabilities were never assumed by Chase or Quality.

The court rejected Jenkins’s Business and Professions Code section 17200 cause of action on the grounds she failed to allege facts to support her claim Defendants prepared and publicly recorded false documents. Finally, the court sustained the demurrer to Jenkins’s RESPA claim because she failed to allege damages from Chase’s delayed response, or a pattern or practice of noncompliance to support the statutory de minimus penalty.


A. Defendants’ Demurrers were Properly Sustained Without Leave to Amend.

1. Standard of Review

When reviewing a court’s dismissal of a lawsuit following an order sustaining a demurrer without leave to amend, we initially review the complaint de novo to determine whether, as a matter of law, the complaint alleges a valid cause of action. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 (Gomes).) We assume the truth of all properly pleaded and judicially noticeable material facts within the complaint, but we do not assume “‘“‘contentions, deductions or conclusions of fact or law.’”’” (Herrera v. Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, 1501 (Herrera).) We must read the complaint “‘“‘as a whole and its parts in their context’”’” in order to ensure that “‘“‘we give the complaint a reasonable interpretation.’”’” (Ibid.)

If we conclude the complaint fails on any grounds stated in the demurrer, we must then consider whether there is a “‘reasonable possibility’” the complaint’s defect(s) can be cured by an amendment. (Gomes, supra, 192 Cal.App.4th at p. 1153.) If it is apparent the complaint’s defects can be cured, the trial court has abused its discretion and we will reverse the judgment. (Ibid.) Alternatively, if it is apparent the complaint’s defects cannot be cured, no abuse of discretion has occurred and we will affirm the judgment. (Ibid.) The burden of proving the reasonable possibility of such a curative amendment falls “‘“squarely on the plaintiff.” [Citation.]’ [Citations.]” (Herrera, supra, 205 Cal.App.4th at p. 1501.)

Furthermore, where the plaintiff requests leave to amend the complaint, but the record fails to suggest how the plaintiff could cure the complaint’s defects, “the question as to whether or not [the] court abused its discretion [in denying the plaintiff’s request] is open on appeal....” (Code Civ. Proc., § 472c, subd. (a).) Because the trial court’s discretion is at issue, we are limited to determining whether the trial court’s discretion was abused as a matter of law. (Herrera, supra, 205 Cal.App.4th at p. 1501.) Absent an effective request for leave to amend the complaint in specified ways, an abuse of discretion can be found “‘only if a potentially effective amendment were both apparent and consistent with the plaintiff’s theory of the case.’ [Citation.]” (Ibid.)

2. Applicable Law

The financing or refinancing of real property in California is generally accomplished by the use of a deed of trust.[2] (Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 125.) The California Civil Code does not provide a statutory form for a deed of trust, nor do the statutes set forth the provisions such an instrument must include to be effective. However, the validity of trust deeds as real property security devices is clearly implied by the nonjudicial foreclosure statutes regulating their enforcement. (§ 2924 et seq.) Also, despite the absence of express statutory provisions setting forth the requirements of trust deeds, it is beyond dispute a deed of trust must be in writing to be valid, as any conveyance of real property must fulfill the statute of frauds requirement. (Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552.)

A deed of trust, by way of a written instrument, conveys title to real property from the trustor-debtor to a third party trustee to secure the payment of a debt owed to the beneficiary-creditor under a promissory note. (See 13 Am. Jur. Legal Forms 2d (2013) Mortgages and Trust Deeds, § 179:69 [sample deed of trust form used in California]; 3 Miller & Starr, Cal. Real Estate Forms (3d ed. 2012) § 3:8 [sample California deed of trust].) The customary provisions of a valid deed of trust include a power of sale clause, which empowers the beneficiary-creditor to foreclosure on the real property security if the trustor-debtor fails to pay back the debt owed under the promissory note. (Ibid.)

Despite the existence and validity of the secured interest created by a deed of trust, the trustor-debtor retains all incidents of ownership with regard to the real property, including the rights of possession and sale. (Hagge v. Drew (1945) 27 Cal.2d 368, 376.) “The trustee of a deed of trust is not a true trustee, and owes no fiduciary obligations; he merely acts as a common agent for the trustor and the beneficiary of the deed of trust. [Citation.]” (Vournas v. Fidelity Nat. Tit. Ins. Co. (1999) 73 Cal.App.4th 668, 677.) Furthermore, an enforceable deed of trust requires the trustee to execute only one of the following mutually exclusive duties: (1) should the trustor-debtor default on the debt, the trustee must initiate foreclosure on the property for the benefit of the beneficiary-creditor; or (2) should the trustor-debtor satisfy the secured debt, the trustee must reconvey title to the real property back to the trustor-debtor, extinguishing the security device. (Ibid.)

Interestingly, although the deed of trust technically conveys title to the real property from the trustor-debtor to the trustee, the extent of the trustee’s interest in the property is limited to what is necessary to enforce the operative provisions of the deed of trust. (Monterey S. P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 460.) Consequently, California courts have described the security interest created by a deed of trust as the functional equivalent of “a lien on the property.” (Ibid.)

Upon a trustor-debtor’s default on a debt secured by a deed of trust, the beneficiary-creditor may elect to judicially or nonjudicially foreclose on the real property security. Sections 2924 through 2924k set forth a “comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.” (Moeller v. Lien (1994) 25 Cal.App.4th 822, 830, italics added (Moeller).)

Pursuant to this statutory scheme, the beneficiary-creditor under a deed of trust may declare a default and proceed with a foreclosure sale if the trustor-debtor defaults on the secured loan. (§ 2924.) To initiate the nonjudicial foreclosure process, the “trustee, mortgagee, or beneficiary, or any of their authorized agents, ” must record a notice of default and election to sell. (§ 2924, subd. (a)(1).) Except for one limited exception, the notice of default must be recorded for at least three months before the next step in the foreclosure process may proceed, presumably to make sure the debtor has notice of the impending sale and has time to pursue opportunities to cure the default. (§ 2924, subd. (a)(2).) After the three-month period has elapsed, a notice of sale must be published, posted, recorded and mailed 20 days before the foreclosure sale. (§§ 2924, subd. (a)(3), 2924f.)

Notably, as has occurred in the present case, the foreclosure sale may be postponed at any time before the sale is completed. (§ 2924g.) If the foreclosure sale is postponed, the statutes require that proper notice be given before the sale may be conducted at a later date. (§ 2924g, subd. (d).) Should the foreclosure sale occur after proper notice has been provided, the statute requires the foreclosed property be sold at public auction to the highest bidder. (§ 2924g, subd. (a); Homestead Savings v. Darmiento (1991) 230 Cal.App.3d 424, 433.)

The statutory scheme also provides the debtor with several opportunities throughout the foreclosure process to cure the default and avoid the sale of the property. First, the debtor is entitled to a period of reinstatement, during which the trustor-debtor may bring the loan payments up to date and have the terms of the loan reinstated. (§ 2924c, subd. (a)(1); Napue v. Gor-Mey West, Inc. (1985) 175 Cal.App.3d 608, 614.) This period of reinstatement continues until five business days prior to the date of the foreclosure sale, and takes into account any postponements in the sale. (§ 2924c, subd. (e).) In addition to the right of reinstatement, the debtor may invoke the equity of redemption, which allows the debtor to avoid foreclosure by paying the total outstanding debt prior to the sale of the property. (§§ 2903, 2905.) Additionally, the debtor has the right to postpone the foreclosure sale for one day to pay off the outstanding debt. (Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 317-320.)

Importantly, the provisions setting forth California’s nonjudicial foreclosure scheme (§§ 2924-2924k) “‘cover every aspect of [the] exercise of [a] power of sale contained in a deed of trust.’ [Citation.] ‘The purposes of this comprehensive scheme are threefold: (1) to provide the [beneficiary-creditor] with a quick, inexpensive and efficient remedy against a defaulting [trustor-debtor]; (2) to protect the [trustor-debtor] from wrongful loss of the property; and (3) to ensure that a properly conducted sale is final between the parties and conclusive as to a bona fide purchaser.’ [Citation.]” (Gomes, supra, 192 Cal.App.4th at p. 1154.) “Significantly, ‘[n]onjudicial foreclosure is less expensive and more quickly concluded than judicial foreclosure, since there is no oversight by a court, “[n]either appraisal nor judicial determination of fair value is required, ” and the debtor has no postsale right of redemption.’ [Citation.]” (Id. at p. 1155.)

Although a defaulting debtor is free to pursue a judicial action for “misconduct arising out of a nonjudicial foreclosure sale when [such a claim is] not inconsistent with the policies behind the statutes” (California Golf, L.L.C. v. Cooper (2008) 163 Cal.App.4th 1053, 1070, italics added), due to the “‘exhaustive nature’” of this scheme, California appellate courts have refused to read any additional requirements into the nonjudicial foreclosure statute. [Citations.]” (Gomes, supra, 192 Cal.App.4th at p. 1154, fn. omitted.) As one appellate court stated: “It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings.” (Moeller, supra, 25 Cal.App.4th at p. 834.)

3. First Cause of Action—Declaratory Relief

Jenkins’s first cause of action in her SAC requests declaratory relief on the issue of whether Defendants have the authority to initiate nonjudicial foreclosure on her home. Jenkins asserts Defendants do not have the right to initiate nonjudicial foreclose because they do not have a secured interest in her home to foreclose upon. Based on “information and belief, ” Jenkins contends Defendants do not have a secured interest in her home, despite her admitted execution of the deed of trust in 2007, because the terms of the investment trust’s pooling and servicing agreement were not complied with when her loan was pooled with other home loans and securitized. More specifically, Jenkins asserts the terms of the pooling and serving agreement were violated because: (1) the promissory note was not transferred into the investment trust with a complete and unbroken chain of endorsements and transfers; and (2) the trustee of the investment trust did not have actual physical possession of the note and deed of trust prior to the closing date of the investment trust.

In an attempt to allege facts to support her contentions, Jenkins’s SAC states her assertions are evidenced by: (1) her contention Defendants “cannot produce any evidence that the promissory note has been transferred”; (2) the fact the recorded “Notice of Default does not establish that endorsements [of the promissory note] were made”; and (3) her contention “there [are not] any other notices which establish that the original lender endorsed and sold the note to another party.” Furthermore, in her opening brief, Jenkins says she will allege “additional facts regarding Defendants’ involvement in the improper securitization of this mortgage” if given the opportunity to amend her complaint; however, her opening brief does not explain or suggest what those additional facts may be.

Jenkins’s first cause of action also alleges—based on her above assertion Defendants do not have a secured interest to foreclose upon—the notice of default, substitution of trustee, and additional documents recorded by Defendants after she defaulted on her loan were “falsely or fraudulently” prepared by Defendants. Moreover, Jenkins alleges Quality did not have standing to commence nonjudicial foreclosure by filing the notice of default on April 30, 2010, because Quality was not the trustee under the deed of trust until the substitution of trustee was recorded on June 11, 2010. Also, for the first time in her opening brief, Jenkins alleges Defendants violated 15 U.S.C. section 1641(g), when the promissory note was allegedly transferred to Freddie Mac.

Based on these contentions, Jenkins’s SAC requests: (1) a court order stating there is “no enforceable secured or unsecured claim against the Home”; (2) a court order declaring any assignment(s) of the promissory note subsequent to the “closing date” of the investment trust “void and a legal nullity, in willful violation of New York trust law and of relevant portions of the [investment trust’s pooling and servicing agreement]”; (3) a “[p]reliminary and [p]ermanent [i]njunction enjoining any and all [t]rustee [s]ales which may be scheduled by the Defendants”; (4) a court order prohibiting the “filing [of] an unlawful detainer action or any other action” against Jenkins by Defendants; and (5) the “[c]ancelation of the [d]eed of [t]rust pursuant to [section] 3412.” In essence, Jenkins’s first cause of action seeks a judicial order directing Defendants to prove they possess the promissory note, with endorsements, before they are allowed to proceed with the nonjudicial foreclosure on her home.

a. Jenkins cannot identify a legal basis for an action to challenge Defendants’ authority to initiate nonjudicial foreclosure.

California courts have refused to delay the nonjudicial foreclosure process by allowing trustor-debtors to pursue preemptive judicial actions to challenge the right, power, and authority of a foreclosing “beneficiary” or beneficiary’s “agent” to initiate and pursue foreclosure. (See Debrunner v. Deutsche Bank National Trust Co. (2012) 204 Cal.App.4th 433, 440-442 (Debrunner); Gomes, supra, 192 Cal.App.4th at pp. 1154-1157.) In Gomes, our colleagues in Division One considered whether California’s nonjudicial foreclosure statutes allow a defaulting trustor-debtor, before his or her property is sold, to bring a preemptive judicial action to challenge whether the person initiating the foreclosure is, or is duly authorized to do so by, the person who possesses a secured interest in the property. (Gomes, supra, 192 Cal.App.4th at p. 1152.) Much like Jenkins’s first cause of action, the appellant in Gomes alleged, “on information and belief, ” the entity who initiated the ...

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