Jolley v. Chase Home Fin., LLC

Citation153 Cal.Rptr.3d 546,213 Cal.App.4th 872
Decision Date22 May 2013
Docket NumberA134019
CourtCalifornia Court of Appeals
PartiesScott Call JOLLEY, Plaintiff and Appellant, v. CHASE HOME FINANCE, LLC et al., Defendants and Respondents.


Affirmed in part and reversed in part.

See 6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 221 et seq.; 1 Witkin, Cal. Evidence (5th ed. 2012) Judicial Notice, § 32.

Marin County Superior Court, Honorable Lynne Duryee (Marin County Super. Ct. No. CIV1002039)

Attorney for Plaintiff and Appellant: Law Offices of Vernon Bradley, Vernon Bradley, Sausalito.

Attorneys for Defendants and Respondents: Law Offices of Sohnen & Kelly, Harvey Sohnen, Patricia M. Kelly, Orinda.

Richman, J.

Plaintiff Scott Call Jolley and Washington Mutual Bank (WaMu) entered into a construction loan agreement in 2006, which eventually encountered problems due to alleged failures by WaMu to properly disburse construction funds. As Jolley was continuing to attempt to salvage the transaction, WaMu went into receivership with the Federal Deposit Insurance Corporation (FDIC), and in September 2008 JP Morgan Chase 1 (Chase) bought WaMu's assets through a purchase and assumption agreement (Agreement or P & A Agreement). Jolley soon stopped making payments on the loan, and in late 2009 Chase took steps to foreclose.

Two days before the scheduled foreclosure sale, Jolley sued Chase and California Reconveyance Company (CRC), the trustee, alleging eight causes of action, including misrepresentation, breach of contract, and negligence. Defendants jointly moved for summary judgment or, in the alternative, summary adjudication, Chase's position based in large part on the theory that under the P & A Agreement Chase had not assumed the liabilities of WaMu. The Agreement was put before the court only in a request for judicial notice, which Agreement, an expert witness for Jolley declared, was not complete. Without addressing the expert's testimony, the trial court granted the request for judicial notice and, rejecting all of Jolley's arguments, granted summary judgment for both defendants.

Jolley appeals, arguing that there are triable issues of material fact relating to the financing debacle, not just limited to the claimed inauthenticity of the Agreement but also as to misconduct by Chase itself. We agree, and we reverse the summary judgment for Chase, concluding that six causes of action must proceed against it, all but the causes of action for declaratory relief and accounting. We affirm the summary judgment for CRC.

On September 25, 2008, WaMu was closed by the Office of Thrift Supervision, and the FDIC was appointed receiver. (U.S. Dept. of the Treasury, Office of Thrift Supervision Order No. 2008–36 (Sep. 25, 2008); 12 U.S.C. § 1821(c).) On the same date, Chase acquired certain assets of WaMu, including all loans and loan commitments. According to Chase, the acquisition was pursuant to the P & A Agreement, which agreement was between the FDIC as receiver and Chase.

Section 2.1 of the Agreement specified the liabilities Chase was assuming: “Subject to Sections 2.5 and 4.8, the Assuming Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge, all of the liabilities of the Failed Bank which are reflected on the Books and Records of the Failed Bank as of Bank Closing, including the Assumed Deposits and all liabilities associated with any and all employee benefit plans, except as listed on the attached Schedule 2.1, and as otherwise provided in this Agreement (such liabilities referred to as ‘Liabilities Assumed’). Notwithstanding Section 4.8, the Assuming Bank specifically assumes all mortgage servicing rights and obligations of the Failed Bank.” Jolley contends Chase assumed liability for WaMu's failures in servicing Jolley's loan as part of its “mortgage servicing ... obligations.”

Section 2.5 of the Agreement expressly provided, however, that Chase would assume no liabilities associated with borrower claims arising out of WaMu's lending activities: “Notwithstanding anything to the contrary in this Agreement, any liability associated with borrower claims for payment of or liability associated with borrower claims for payments of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower, whether or not such liability is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured, disputed or undisputed, legal or equitable, judicial or extra-judicial, secured or unsecured, whether asserted affirmatively or defensively, related in any way to any loan or commitment to lend made by the failed Bank prior to the failure, or to any loan made by a third party in connection with a loan which is or was held by the Failed Bank, or otherwise arising in connection with the Failed Bank's lending and loan purchase activities are specifically not assumed by the assuming Bank.” As will be seen, this paragraph played a central role in the trial court's decision granting summary judgment.

According to Jolley's testimony, “Once Chase had taken over the operations of [WaMu], they continued in the construction loan department with the same people that I had been dealing with when [WaMu] still owned the loan. I had dealt with Mabette Del Rosario, Neil Lampert, and Jed Sonstrom in the legal department.... After the takeover by Chase, Mabette Del Rosario continued to run the construction disbursement department. I was led to believe that because Chase had taken over the loan from [WaMu], it was still going to honor the original agreement which said in the addendum Construction/Permanent Loan Part One: ‘When all conditions prior to rollover are met as described in the construction loan agreement, the loan will rollover to a fully amortized loan.’ Another Chase employee with whom Jolley would come to deal was Andrew North.

In November 2008, shortly after Chase had entered the picture, Jolley made his last monthly payment on the loan, claiming he was forced to default thereafter by WaMu's breaches and negligence in the funding of the construction loan. The total amount owing on the loan by the time of Jolley's default, according to Chase's records, was $2,426,650.00. At the time of Jolley's default, construction had not been completed, but was allegedly completed sometime between April 2009 and April 2010.

After Chase's involvement Jolley tried to secure a loan modification, with Thorne continuing to advocate on Jolley's behalf that he would need an additional $400,000 to complete construction. Thorne and Jolley both told Chase “in great detail” about the prior problems with the loan.

As indicated, the original construction loan contained a rollover provision. Chase claims it was not obligated to honor it because Jolley was in default and construction had not been completed when he went into default, and thus “all conditions prior to rollover” had not been met.

But, Jolley testified, he was encouraged on many occasions by North that, in light of the history of problems with WaMu, there was a “high probability” that Chase “would be able to modify the loan so as to avoid the foreclosure.” North said the “likelihood was good,” that it was “likely” when construction was complete he could roll the construction loan into a fully amortized conventional loan. Jolley further testified that as a result of these representations he was induced to “borrow heavily to finish the project.” In addition to other damages, Jolley claims the construction delays and “inordinate delay” during the loan modification negotiations prevented him from selling the property before the housing market collapsed.

Ultimately, instead of agreeing to a loan modification, Chase demanded payment of the loan in full.3 On December 29, 2009, CRC, as trustee, recorded a notice of default, and on March 30, 2010, recorded and served a notice of sale.

On April 5, 2010 North sent Jolley an email saying he had requested the Chase foreclosure department to hold off on its planned foreclosure, “which means any future sale dates will be postpone [ sic ] to give us the opportunity to see if we can modify the collateral property.” Chase refused.

The Proceedings Below
The Complaint

On April 19, 2010, two days before the scheduled foreclosure sale, Jolley filed this lawsuit. It named Chase Home Finance LLC and CRC, and alleged eight causes of action: (1) fraud and deceit—intentional misrepresentation; 4 (2) fraud and deceit—negligent misrepresentation; (3) breach of contract/promissory estoppel; (4) negligence; (5) violation of Business and Professions Code section 17200 et. seq.; (6) declaratory relief; (7) accounting; and (8) reformation. Though CRC was named as a defendant, no specific wrongdoing was alleged with respect to it.

On April 20, 2010, Jolley obtained a temporary restraining order prohibiting Chase from going forward with the trustee's sale. And on August 20, 2010, a preliminary injunction was issued, with Jolley putting up a $50,000 bond.

Meanwhile, an answer was filed on behalf of Chase and CRC jointly.

Jolley's lawsuit rested in part on the theory that Chase was the successor in interest to WaMu and therefore had “stepp[ed] into the shoes” of WaMu and was liable for any misrepresentation, negligence, or breach of contract on its part under California law and under the construction contract he had signed with WaMu. Jolley relied on language in paragraph 13 of his agreement with WaMu that made “the covenants and agreements” binding on “the successors and assigns of [WaMu].” Jolley also relied on Civil Code section 1589, which requires one who takes the benefit of a transaction to also assume its liabilities.5

The Motion and the Request for Judicial Notice

On August 25, 2011, Chase 6 filed a motion for...

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