Case Name: Armando Gonzalez, et al. v. Capital Alliance Institutional Mortgage Fund, LLC, et al.
Case No.: 1-13-CV-251709

Defendant Capital Alliance Institutional Mortgage Fund, LLC (“Defendant”) demurs to the first amended complaint (“FAC”) of plaintiffs Armando R. Gonzalez and Karla Gonzalez (collectively, “Plaintiffs”) on the grounds of failure to allege sufficient facts (to the second and third causes of action) and uncertainty (to the third cause of action). (See Code Civ. Proc. [“CCP”], § 430.10, subds. (e)-(f).)

Defendant’s demurrer to the second cause of action (a violation of the unfair competition law [“UCL”]) is OVERRULED. The UCL does not have a heightened pleading requirement. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th 26, 46-48; see also Walker v. Countrywide Home Loans (2002) 98 Cal.App.4th 1158, 1170 [“[t]o show that a business practice is deceptive, a plaintiff suing under the unfair competition law need only show that members of the public are likely to be deceived”], citations omitted.) In the FAC, Plaintiffs allege sufficient facts to demonstrate that members of the public are likely to be deceived. (FAC, ¶¶ 17-18 & 46-47.) A cause of action under the UCL may be based on allegations that the defendant’s business practice was either unlawful, unfair, or deceptive. (Shvarts v. Budget Group, Inc. (2000) 81 Cal.App.4th 1153, 1157.) Thus, Plaintiffs are not required to allege facts demonstrating that the business practice is unlawful. However, “[i]f the Legislature has permitted certain conduct or considered a situation and concluded no action should lie, courts may not override that determination. When specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair competition law to assault that harbor.” (Schnall v. Hertz Corp.(2000) 78 Cal.App.4th 1144, 1154, citations omitted.) Contrary to Defendant’s argument, Business and Professions Code section 10244.1 does not provide a “safe harbor” under the UCL because it does not authorize a lender or processor of a loan to conceal from a borrower that his or her monthly payments are for interest only. For the purposes of the UCL, an “unfair” act is one that “offends an established public policy or … is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” (Walker, supra, at p. 1170.) To determine whether alleged conduct is unfair, “the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the plaintiff a weighing process quite similar to the one enjoined on us by the law of nuisance.” (Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 740.) A complaint will survive demurrer if it “states a prima facie case of harm, having its genesis in an apparently unfair business practice.” (Id.) If “detriment to plaintiff [is] adequately pleaded, [then] the demurrer should [be] overruled to give defendant an opportunity to justify the practice.” (Id., at p. 741; see also Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 254 [borrowers’ allegation of lost home equity was sufficient].) Plaintiffs allege to have been harmed because they have to pay late fees and other charges. (FAC, ¶ 52.) This is sufficient for Plaintiff to allege an unfair business practice under the UCL.

Defendant’s demurrer to the third cause of action (fraud) for failure to allege sufficient facts is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [elements of fraud claim (misrepresentation, knowledge, intent to defraud, justifiable reliance, and damage) must be specifically alleged]; see also Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157-158 [to state a fraud claim against a company, plaintiff must allege the names of the persons who made the representations and their authority to speak].) The FAC lacks allegations identifying who made the alleged misrepresentations, the speaker’s authority to speak on Defendant’s behalf, what representations were allegedly made, when and by what means the statements were made, and to whom the statements were allegedly made.

Defendant’s demurrer to the third cause of action for uncertainty is OVERRULED. (See Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal App 4th 612, 616 [“[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures”].)