Chan v.Val-Chris Investments, Inc

Background

Suzanne Nagy Chan and David Chan alleged that Val-Chris Investments, Inc. violated an agreement concerning a loan secured by their home. The loan was for $500,000, and Val-Chris remained its servicer after the loan was assigned to the Felton Family Trust. A notice of default was recorded in November 2023. The property was sold at a non-judicial foreclosure auction on April 26, 2024, but the trustee’s deed had not yet been recorded.

The Chans relied on a forbearance and settlement agreement sent by Val-Chris. An initial version required a signed and notarized document by April 19, 2024. After that date, Val-Chris sent another version on April 22 without a stated deadline. Suzanne Chan signed and notarized the agreement and returned it on April 26. The agreement required, among other things, proof that property taxes and fire insurance were current and a $9,000 payment. It stated that Val-Chris would instruct its trustee not to proceed with the sale upon receiving the signed agreement and the required items. The court found no evidence that Suzanne Chan made the $9,000 payment before the sale.

David Chan’s standing

Standing is the requirement that a plaintiff show a legally sufficient injury and, where applicable, that the relevant statute gives that plaintiff the right to sue. Although the complaint alleged that both Chans owned the property, the deed of trust identified only Suzanne Chan and the forbearance agreement also referred only to her. The court found no evidence that David Chan had a monetary interest in the home or was a party to the relevant agreements. It also found that the plaintiffs had not explained how he had statutory standing. The court therefore ruled that David Chan lacked standing and dismissed him as a plaintiff.

Suzanne Chan’s likelihood of success

The court considered Suzanne Chan’s claims only for purposes of deciding whether to issue preliminary relief.

For the Fair Debt Collection Practices Act claim, the court ruled that Val-Chris was not a “debt collector” under the statute because, according to the allegations, it began servicing the loan before the loan went into default. The court also relied on Ninth Circuit precedent holding that actions taken to carry out a non-judicial foreclosure generally are not attempts to collect a debt under the Act’s provisions at issue. An employee’s email stating that it was an attempt to collect a debt did not change that conclusion. The court found no likelihood of success on this claim.

For the breach-of-contract claim, the court found that the April 22 communication created a second offer and that Suzanne Chan accepted it by returning a signed and notarized copy on April 26. But the court found that she had not shown that she performed the agreement’s requirements or had an excuse for not doing so. In particular, she provided no evidence that she paid the required $9,000 before the foreclosure sale. The court therefore found no likelihood of success on the contract claim.

The court reached the same preliminary conclusion on the implied covenant of good faith and fair dealing claim because that covenant could not contradict the agreement’s express terms. The agreement required the $9,000 payment and other items before Val-Chris had to delay the sale. The court also found no likelihood of success on the California Unfair Competition Law claim because Suzanne Chan had not shown an underlying violation of another law.

Irreparable harm

The court rejected Suzanne Chan’s argument that the property sale itself established irreparable harm. It found that she had already lost her interest in the property through the April 26 auction and had not shown how delaying recordation of the trustee’s deed would return the property or prevent additional harm. The court also noted that the new owner was not a party to the lawsuit and that Suzanne Chan had not shown that any of her claims could rescind the sale.

Disposition

The court denied the plaintiffs’ motion for a preliminary injunction. It did not address the balance of equities or public-interest factors because David Chan lacked standing and Suzanne Chan had not shown either a likelihood of success on the merits or likely irreparable harm. The order resolved Docket No. 9.