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Willis v. JPMorgan Chase Bank N.A.

United States District Court, E.D. California

April 5, 2017

JPMORGAN CHASE BANK, N.A.; and DOES 1-20 inclusive, Defendants.



         Plaintiff Elizabeth A. Willis brought this action against JPMorgan Chase Bank, N.A. (“Chase”) for violation of the California Homeowner's Bill of Rights (“HBOR”) and negligence arising out defendant's alleged mishandling of plaintiff's loan modification requests. The matter is now before the court on defendant's Motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Def.'s Mot. (Docket No. 3).)

         I. Factual and Procedural Background

         Plaintiff refinanced her residential mortgage loan with Chase in 2006. (Compl. ¶ 7 (Docket No. 1-1).) She refinanced her home mortgage with a first lien mortgage loan and also obtained a home equity line of credit (“HELOC”). (Def.'s Request for Judicial Notice (“RJN”) Exs. 1-2 (Docket Nos. 3-2, 3-3).)[1]

         Plaintiff alleges that she requested a loan modification application in May 2016 and submitted a completed loan modification application on July 8, 2016. (Compl. ¶¶ 8-9, 12.) Chase allegedly lost plaintiff's documents on several occasions and required plaintiff to resubmit several documents. (Id. ¶¶ 13-14.)

         Chase allegedly denied plaintiff's loan modification on the HELOC but did not make a decision on the first lien loan. (Id. ¶ 14.) Shortly thereafter, plaintiff allegedly “received correspondence that foreclosure proceedings were being initiated” against her. (Id. ¶ 15.) Plaintiff allegedly resubmitted her application on October 24, 2016, but never received any information regarding her first lien loan modification application. (Id. ¶¶ 17-18.)

         Plaintiff initiated this action in state court against Chase on January 12, 2017, alleging (1) violation of the HBOR, Cal. Civ. Code § 2923.6(c)-(d); and (2) negligence. Defendant subsequently removed this case to federal court. (Docket No. 1.)

         II. Discussion

         On a motion to dismiss under Rule 12(b)(6), the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff must plead “only enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Under this standard, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable.” Twombly, 550 U.S. at 556.

         “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678; see also Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”).

         A. California Civil Code § 2923.6(c)-(d)

         In her first cause of action, plaintiff alleges defendant violated California Civil Code § 2923.6(c)-(d) by failing to provide a determination on her first lien mortgage modification application prior to initiating foreclosure proceedings. Defendant argues the court must dismiss plaintiff's claim because plaintiff does not allege that defendant recorded a notice of default.

         Section 2923.6 prohibits “dual tracking, ” in which a lender proceeds with the foreclosure process while reviewing a loan modification application. See Cal. Civ. Code § 2923.6(c). “If a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer . . . shall not record a notice of default, or conduct a trustee's sale, while the complete first lien loan modification application is pending.” Id. (emphasis added). Section 2923.6(d) further provides that the “borrower shall have at least 30 days from the date of the written denial to appeal the denial and to provide evidence that the mortgage servicer's determination was in error.” Id. § 2923.6(d). Section 2923.6(c)-(d) thus “prohibits recording a notice of default or sale and conducting that sale” while a loan modification application is pending. Marquez v. U.S. Bank, N.A., Case No. CV16-06658 JAK (Ex), 2016 WL 2885857, at *7 (N.D. Cal. May 16, 2016); see Shupe v. Nationstar Mortg. LLC, Civ. No. 2:16-1221 MCE CMK, 2017 WL 431083, at *2 (E.D. Cal. Jan. 31, 2017) (“California Civil Code § 2923.6 places restrictions on the recording of Notices of Default or Notices of Trustee's Sale while a loan modification application is pending.”).

         Plaintiff allegedly submitted a complete loan modification application for her first lien mortgage loan and HELOC on July 8, 2016. (Compl. ¶ 20.) Chase allegedly “commenc[ed] foreclosure before it gave Plaintiff a fair opportunity to be reviewed for a loan modification” and “fail[ed] to provide Plaintiff a determination in writing (or otherwise) on the first lien mortgage modification application before starting foreclosure proceedings.” (Id. ¶ 23.) Plaintiff further alleges that defendant told her in September 2016 “that she did not qualify for a modification on the HELOC, ”[2] she “was not advised that ...

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