Jolley v. Chase Home Finance, LLC

In Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, the plaintiff and WaMu had entered into a construction loan, which WaMu agreed to modify in 2006 to permit the plaintiff to complete construction. (Id. at pp. 877-879.) The plaintiff alleged that before the modification, WaMu made false representations about certain matters, and that there were irregularities in the loan disbursements, causing construction delays. (Id. at p. 878.) After Chase purchased WaMu's assets, the plaintiff continued to deal with the same people in the construction loan department and sought another loan modification. (Id. at p. 880.) He also dealt with a Chase employee who told him there was a "'high probability'" Chase would be able to modify the loan so as to avoid the foreclosure, the "'likelihood was good'", and that it was likely when construction was complete he could roll the construction loan into a fully amortized conventional loan. (Id. at p. 881.) According to plaintiff, he was induced by these representations to borrow heavily to finish the project, and he claimed construction delays during the loan modification negotiations prevented him from selling the property before the housing market collapsed. (Ibid.) Rather than agree to a loan modification, Chase demanded payment in full and its trustee recorded a notice of default and then a notice of sale. (Jolley, supra, 213 Cal.App.4th at p. 881.) Plaintiff filed suit two days before the foreclosure sale, alleging causes of action for fraud, negligent misrepresentation, breach of contract/promissory estoppel, negligence, violation of the UCL, declaratory relief, accounting and reformation. (Ibid.) He also obtained a temporary restraining order prohibiting Chase from proceeding with the trustee's sale. (Ibid.) The trial court granted Chase's ensuing motion for summary judgment on various grounds, including that Chase, a lender, did not owe the plaintiff a duty of care. (Jolley, supra, 213 Cal.App.4th at pp. 884-885.) The appellate court reversed, however, as to the causes of action for fraud, breach of contract/promissory estoppel, negligence, violation of the UCL, and reformation. (Id. at pp. 893-908.) In reversing summary judgment on the plaintiff's UCL cause of action, the Court of Appeal focused in part on allegations indicating Chase had subjected the plaintiff to dual tracking, the "common bank tactic" whereby the lender pursues foreclosure at the same time it engages in loan modification negotiations. (Id. at pp. 901, 904.) The court observed that the California Legislature made dual tracking illegal effective January 1, 2018. (Id. at pp. 904-905.) Though it acknowledged the law did not apply and dual tracking was not forbidden by statute at the time, the appellate court nevertheless held "the new legislation and its legislative history may still contribute to its being considered 'unfair' for purposes of the UCL." (Id. at pp. 907-908.)