Case Number: BC509754    Hearing Date: September 16, 2014    Dept: 46

Case Number: BC509754
ALEKSEY NESTERENKO VS BANK OF AMERICA N A
Filing Date: 05/22/2013
Case Type: Other Real Property Rights Case (General Jurisdiction)

09/16/2014
Hearing on Demurrer

TENTATIVE RULING: Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND. The motion is UNOPPOSED and the allegations in the SAC are insufficient to state any cause of action against demurring defendant. See discussion below. Matter is ordered dismissed. Defendant to lodge and serve order of dismissal. Trial and FSC dates are advanced and vacated.

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This tentative ruling is posted at 4:00 p.m. on 09/12/2014 and the matter is set for hearing on 09/16/2014 at 8:30 a.m.

If there are no parties other than Plaintiff/Petitioner, then Plaintiff/Petitioner may submit to the tentative without appearance by telephonic notification to the clerk of Dept. 46 between 8:00 a.m. and 4:30 p.m. on a date prior to the hearing or morning prior to the hearing by calling (213) 974-5665, and the court will issue the tentative ruling as the final ruling. If the other parties have appeared in the action, then the parties must first confer and all agree that the tentative ruling will be the final ruling on the matter. If the parties to the matter before the court all agree, a representative of the parties may call the clerk and submit without an appearance, and the court will issue the tentative ruling as the final ruling. If an order is required, it should be lodged directly in Dept. 46 with a copy to adverse/other parties, if any.

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1st COA: Constructive Fraud

“Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship. ‘[A]s a general principle constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal which might affect the fiduciary’s motives or the principal’s decision, which is known (or should be known) to the fiduciary, may constitute constructive fraud. Also, a careless misstatement may constitute constructive fraud even though there is no fraudulent intent.’” Assilzadeh v. California Federal Bank (2000) 82 C.A.4th 399, 415.

Plaintiff has not alleged any facts which demonstrate the existence of a confidential or fiduciary relationship between Defendant and himself. “The relationship between a lending institution and its borrower-client is not fiduciary in nature. (Price v. Wells Fargo Bank (1989) 213 C.A.3d 465, 476-478). A commercial lender is entitled to pursue its own economic interests in a loan transaction. (Kruse v. Bank of America (1988) 202 C.A.3d 38, 67). This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 C.3d 197, 221).” Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 C.A.3d 1089, 1093, fn. 1. Considering a borrower for a loan modification is a traditional money lending activity.

Additionally, as Defendant points out, even if the parties were in a fiduciary relationship, Plaintiff has not pled his cause of action with the required specificity. “The elements of actual fraud, whether as the basis of the remedy in contract or tort, have been stated as follows: There must be (1) a false representation or concealment of a material fact (or, in some cases, an opinion) susceptible of knowledge, (2) made with knowledge of its falsity or without sufficient knowledge on the subject to warrant a representation, (3) with the intent to induce the person to whom it is made to act upon it; and this person must (4) act in reliance upon the representation (5) to his or her damage.” 1 Witkin, Summary 10th (2005) Contracts, § 286, p. 315 (emphasis theirs).

“’”Every element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.”’ (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 C.A.3d 104, 109; Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 C.3d 197, 216-217; Stansfield v. Starkey (1990) 220 C.A.3d 59, 73).” Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 C.A.4th 153, 157.

“The requirement of specificity in a fraud action against a corporation requires the plaintiff to allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Archuleta v. Grand Lodge etc. of Machinists (1968) 262 C.A.2d 202, 208–209; Gautier v. General Telephone Co. (1965) 234 C.A.2d 302, 308; Mason v. Drug, Inc. (1939) 31 C.A.2d 697, 703; Sanders v. Ford Motor Co. (1979) 96 C.A.3d Supp. 43, 46; see Grossman & Van Alstyne, California Practice (2d ed. 1976) § 984, pp. 111–114.).” Id.

While Plaintiff now claims that “employees promised a modified payment would be delivered to [him] because his income met the criteria for BANA’s ‘In House’ programs” (SAC ¶ 39(1)), Plaintiff fails to allege which employees made this purported “promise,” when and by what means. Additionally, this allegation contradicts allegations made in his FAC that Defendant actually did review him for a modification multiples times but ultimately determined that he was ineligible for same. (FAC, ¶¶ 32-36). “Generally, ‘[a] plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict the facts pleaded in the original complaint or by suppressing facts which prove the pleaded facts false. [Citation.] Likewise, the plaintiff may not plead facts that contradict the facts or positions that the plaintiff pleaded in earlier actions or suppress facts that prove the pleaded facts false. [Citation.]’ (Cantu v. Resolution Trust Corp. [(1992)] 4 C.A.4th [857,] at p. 877, italics omitted.).” McClain v. Octagon Plaza, LLC (2008) 159 C.A.4th 784, 799.

To the extent Plaintiff alleges that Defendant promised not to foreclose on this home while he was in review for a loan modification (SAC, ¶ 39(2)-(4)), the allegations show that there has been no foreclosure. (Id., ¶ 36).

Plaintiff has also failed to show reliance.

The allegations of the SAC are insufficient to state a cause of action.

2nd & 3rd Causes of Action for Violation of CC §§ 2923.5 and 2923.6 (Respectively)

“California’s nonjudicial foreclosure scheme is set forth in Civil Code sections 2924 through 2924k, which ‘provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust.”’ (Moeller v. Lien (1994) 25 C.A.4th 822, 830).” Gomes v. Countrywide Home Loans, Inc. (2011) 192 C.A.4th 1149, 1154. “’Because of the exhaustive nature of this scheme, California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute.’ (Lane v. Vitek Real Estate Industries Group (E.D.Cal. 2010) 713 F.Supp.2d 1092, 1098; see also Moeller at p. 834 [‘It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate another unrelated cure provision into statutory nonjudicial foreclosure proceedings.’].).” Id.

Plaintiff claims that Defendant violated §2923.5 when it recorded a notice of default “without first making a decision on his application for mortgage assistance. (SAC, ¶ 44). However, Plaintiff concedes that Defendant had been in contact with him exploring options for Plaintiff to avoid foreclosure since 6/10 (Id., ¶¶ 29-31); as such, he cannot assert that Defendant was not in contact or trying with due diligence to contact him regarding options to avoid foreclosure at least 30 days before this recording.

Additionally, Defendant points out that the former § 2923.5 in effect at the time the notice of default was recorded did not prohibit the recording of a notice of default while a borrower was being reviewed for a loan modification. The 4th District, Division 3 Court of Appeal in Mabry v. Superior Court (2010) 185 C.A.4th 208, in fact, rejected any attempts to expansively construe the words “assess” and “explore” in the statute and determined that “[t]he statute cannot require the lender to consider a whole new loan application” or “require[e] the lender to engage in a process that would be functionally indistinguishable from taking a loan application in the first place.” Id. at 232.

Plaintiff’s Cause of Action [“COA”] under CC § 2923.6, moreover, fails, because it “does not grant a right to a loan modification. To the contrary, it ‘merely expresses the hope that lenders will offer loan modifications on certain terms’ and ‘conspicuously does not require lenders to take any action.’ (Mabry, supra, 185 C.A.4th at p. 222 & fn. 9). In other words, ‘[t]here is no “duty” under Civil Code section 2923.6 to agree to a loan modification.’ (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 C.A.4th 1602, 1617).” Intengan v. BAC Home Loans Servicing LP (2013) 214 C.A.4th 1047, 1026.

4th COA: Promissory Estoppel

“The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3)[the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” US Ecology, Inc. v. State (2005) 129 C.A.4th 887, 901.

“To be enforceable, a promise need only be ‘”definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.”’ (Bustamante v. Intuit, Inc. [(2006)] 141 C.A.4th [199,] at p. 209, quoting Ladas v. California State Auto. Assn. (1993) 19 C.A.4th 761, 770.) It is only where ‘”a supposed ‘contract’ does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.”’ (Bustamante v. Intuit, Inc., supra, quoting Weddington Productions, Inc. v. Flick (1998) 60 C.A.4th 793, 811.).” Garcia v. World Sav., FSB (2010) 183 C.A.4th 1031, 1045.

Plaintiff has not alleged a clear and unambiguous promise by Defendant. Plaintiff alleges that Defendant “promised that a modification would be forthcoming.” (SAC, ¶ 58(1)). He has not alleged, among other things, when the modification would take effect, what any of the terms of the modified loan would be, or whether Plaintiff would first receive a trial loan modification before his loan would be permanently modified.

5th COA: Negligence

“Actionable negligence is traditionally regarded as involving the following: (a) a legal duty to use due care; (b) a breach of such legal duty; (c) the breach as the proximate or legal cause of the resulting injury.” Seo v. All-Makes Overhead Doors (2002) 97 C.A.4th 1193, 1202.

Plaitniff’s COA fails, because “a financial institution owes no duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money.” Nymark, supra, 231 C.A.3d at 1096.

6th COA: Negligent Misrepresentation

The elements of a COA for negligent misrepresentation are: (1) the standard elements of negligence, duty of care, and breach; (2) the negligent misrepresentation of a material fact; (3) made with the intent to induce reliance by plaintiff; (4) reasonable actual reliance by the plaintiff on the misrepresentation; and (5) damages proximately (legally) caused by the misrepresentation and reliance. Cicone v. URS Corp. (1986) 183 C.A.3d 194, 211.

“Each element in a cause of action for…negligent misrepresentation must be factually and specifically alleged. (Small[ v. Fritz Companies, Inc. (2003)] 30 C.4th [167,] at p. 184).” Cadlo v. Owens-Illinois, Inc. (2004) 125 C.A.4th 513, 519.

Plaintiff has not pled this COA with the requisite specificity. Additionally, Defendant did not owe Plaintiff a duty of care, for the reasons set forth above.

7th COA: Violation of B&P Code §§ 17200, et seq.

“Business and Professions Code section 17200…establishes three varieties of unfair competition-acts or practices which are unlawful, or unfair, or fraudulent.” Podolsky v. First Healthcare Corp. (1996) 50 C.A.4th 632, 647. “The ‘unlawful’ practices prohibited by section 17200 are any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made. (People v. McHale (1979) 25 C.3d 626, 632).” Saunders v. Superior Court (1994) 27 C.A.4th 832, 838-839. If a business practice is alleged to be “unlawful,” then the complaint “must state facts supporting the statutory elements of the alleged violation. (See G.H.I.I. v. MTS (1983) 147 C.A.3d 256 [allegations of secret rebates, locality discrimination, sale below cost, and loss leaders; complaint was sufficient]; Khoury v. Maly’s of Calif. (1993) 14 C.A.4th 612, 619, citing the text [demurrer was properly sustained; complaint identified no particular statutory section that was violated and failed to describe with reasonable particularity facts supporting violation]…” 5 Witkin, Cal. Procedure (5th ed. 2008), Pleading, § 779, p. 196.

The “unfair” prong of the statute, when raised in the cross-complaint by a cross-complainant who claims to have suffered injury from a direct competitor’s “unfair” act or practice, “means conduct that threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.” Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 C.4th 163, 187. “[A]ny finding of unfairness to competitors under section 17200 [must] be tethered to some legislatively declared policy or proof of some actual or threatened impact on competition.” Id. at 186-187.

Lastly, “[a] fraudulent business practice under section 17200 ‘is not based upon proof of the common law tort of deceit or deception, but is instead premised on whether the public is likely to be deceived.’ (Pastoria v. Nationwide Ins. (2003) 112 C.A.4th 1490, 1498). Stated another way, ‘In order to state a cause of action under the fraud prong of [section 17200] a plaintiff need not show that he or others were actually deceived or confused by the conduct or business practice in question. “The ‘fraud’ prong of [section 17200] is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived.” [Citations.]’ (Schnall v. Hertz Corp. (2000) 78 C.A.4th 1144, 1167).” Progressive West Ins. Co. v. Yolo County Superior Court (2005) 135 C.A.4th 263, 284.

Plaintiff has not alleged any facts to demonstrate conduct by Defendant that could be classified as an unlawful, fraudulent or unfair business act or practice.

Plaintiff also appears to lack standing. “Proposition 64 amended [Business and Professions Code] section 17204 to accord standing only to certain specified public officials and to any person who ‘”’has suffered injury in fact and has lost money or property as a result of such unfair competition.’”’” Peterson v. Cellco Partnership (2008)
164 C.A.4th 1583, 1590. Plaintiff alleges that he “is facing the prospect of losing his home forever at a Trustee’s Sale” and that he “has suffered monetary damages,” including “out of pocket expenses, and legal and attorney fees to bring and maintain the instant lawsuit.” (SAC, ¶ 79). The subject property has not been foreclosed upon; moreover, P cannot assert that any impending foreclosure was caused by D’s purported misconduct in reviewing his request for a loan modification, as it was triggered by his default.

Without leave to amend

Plaintiff did not oppose the motion or show any prospect that a valid cause of action could be stated. Therefore, the demurrer is sustained without leave to amend, the action is ordered dismissed, and Defendant is ordered to prepare, serve, and lodge an order for dismissal within 10 days.

IT IS SO ORDERED:

Frederick C. Shaller, Judge