Judge: Competition Law Claims Proceed Against Chase For Acquired Loan

by Tara Arick on February 13, 2013 · 0 comments

in Real Estate

- From LexisNexis® Mealey’s™ Daily Legal News.

A man may pursue his California unfair competition law (UCL) claims against Chase Home Finance LLC for conduct associated with a loan it acquired after Washington Mutual Bank went into receivership, an appeals court held Feb. 11 (Scott Call Jolley v. Chase Home Finance LLC, et al., No. A134019, Calif. App., 1st Dist., Div. 2).

Scott Call Jolley took out a $ 2,256,000 construction loan with Washington Mutual Bank in 2006 for the renovation of a home he planned to use as a rental property.

Disbursement of the funds was delayed and Jolley began spending his own money on construction. After a negotiation, WaMu and Jolley agreed to a loan modification increasing the construction project from 2,500 square feet to 5,000 square feet. The new loan did not list a specific amount, listing it instead as “variable.”

Receivership

WaMu went into receivership with the Federal Deposit Insurance Corp. in September 2008 and was closed later that month. Chase Home Finance LLC acquired some of WaMu’s assets, including Jolley’s loan. Jolley defaulted on the loan shortly after Chase’s acquisition.

Jolley began working with Chase on a modification. Chase began foreclosure proceedings.

Jolley filed suit in the Marin County Superior Court, claiming that it lost loan documents, delaying financing for eight months and causing him to incur construction costs. WaMu also allegedly represented that it would reimburse him for construction costs. Jolley sued Chase as WaMu’s successor. Jolley alleged violation of the UCL, Business and Professions Code Section 17200, et seq., as well as intentional and negligent misrepresentations.

In April 2010, Jolley was granted a temporary restraining order prohibiting the sale of his property. Chase moved for summary judgment, which the judge granted, finding that Chase did not assume liability for borrowers’ claims. Jolley appealed.

Evidence

A panel of the First District Court of Appeal first noted that the judge overstepped his powers by relying on the content and legal effect of the purchase and assumption agreement to determine that Chase had not assumed WaMu’s liability. Chase requested judicial notice only for the purposes that it acquired WaMu’s loans and loan commitments, the panel said. The use of the agreement for the broader purpose employed by the judge was an error, the panel said.

Addressing the UCL claim, the panel said a split exists on what constitutes “unfair” conduct under the UCL. The panel said Jolley presents sufficient evidence from which a jury could find that Chase made misstatements of fact.

Further, the evidence could allow for finding that Chase committed conduct that was “unfair,” the panel said. Summary adjudication on the UCL cause of action was improper, the panel concluded.

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