Rex v. Chase Home Finance LLC
905 F. Supp. 2d 1111
C.D. Cal.2012Background
- Borrowers Rex filed a putative class action against JPMorgan Chase entities related to a short sale of their California home after default on their mortgage.
- Plaintiffs allege a short sale occurred with lender consent, with promises of releasing them from deficiency obligations, which allegedly were enforced post-sale.
- Defendants allegedly promised release of the short-sale deficiency for a $3,000 payment, but later sought to collect a much larger deficiency and reported it to credit agencies.
- Plaintiffs contend the deficiency is barred by California Code of Civil Procedure §580b and that reporting the debt violated CCRAA and related statutes, as well as state consumer laws.
- The case involves federal jurisdiction questions under 12 U.S.C. §1818(i)(l), primary jurisdiction/equitable abstention defenses, and preemption concerns under the FCRA, with state-law claims including breach of contract, promissory estoppel/fraud, CLRA, Rosenthal FDCPA, CCRAA, and UCL.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1818(i)(l) divests jurisdiction | Non-parties may sue; consent order does not bar relief sought | Section 1818(i)(l) divests court jurisdiction over remedies that affect enforcement of OCC order | No jurisdiction divestment; case proceeds |
| Whether §580b applies to short sales | 580b should bar deficiency after a short sale | 580b does not apply to short sales | 580b applies to short sales; deficiency barred |
| Standing to sue | Plaintiffs have Article III and UCL statutory standing due to credit injuries | Lack of standing | Plaintiffs have standing under both Article III and the UCL statute |
| Preemption under FCRA | Not all claims preempted; some claims premised on non-FCRA theories survive | Most non-CCRAA claims are preempted by §1681t(b)(1)(F) | Preemption limited to Rosenthal and UCL claims tied to inaccurate reporting; breach of contract survives; other claims partially survive |
| CLRA viability | CLRA may apply where the lender’s actions go beyond mere loan extension | Fairbanks controls; CLRA may not apply to pure loan obligations | CLRA claim dismissed without prejudice to amend to show beyond-money services |
Key Cases Cited
- In re JPMorgan Chase Mortg. Modification Litig., 880 F.Supp.2d 220 (D. Mass. 2012) (Section 1818(i)(l) does not divest non-parties' jurisdiction; OCC consent order does not provide exclusive remedies)
- DeBerard Properties v. Lim, 20 Cal.4th 659 (Cal. 1999) (580b purposes; anti-deficiency protections and price stabilization)
- Frangipani v. Boecker, 64 Cal.App.4th 860 (Cal. App. 1990s) (580b applies to deficiency when not foreclosed; broad application to sale modes)
- Venable v. Harmon, 233 Cal.App.2d 297 (Cal. App. 1965) (580b applies regardless of prior sale status)