Cardoni v. Wells Fargo Bank CA4/1 (2015) · DecisionDepot
Cardoni v. Wells Fargo Bank CA4/1
California Court of Appeal Mar 26, 2015 No. D066351Unpublished
Filed 3/26/15 Cardoni v. Wells Fargo Bank CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
MICHAEL CARDONI, D066351
Plaintiff and Appellant,
v. (Super. Ct. No. RIC1106554)
WELLS FARGO BANK N.A. et al.,
Defendants and Respondents.
APPEAL from judgment of the Superior Court of Riverside County, Gloria
Connor Trask, Judge. Affirmed.
Andrews Law Group and Brian C. Andrews for Plaintiff and Appellant.
Palmer, Lombardi & Donohue and Roland P. Reynolds, Frederick A. Haist for
Defendant and Respondent Wells Fargo Bank, N.A.
Hogan Lovells US and Neil R. O'Hanlon, David W. Skaar for Defendant and
Respondent Provident Funding Associates, L.P.
Michael Cardoni appeals from a judgment dismissing his action against Wells
Fargo Bank, N.A. (Wells Fargo), Provident Funding Associates, L.P. (Provident), and
NDEx West, LLC (collectively respondents), after the trial court sustained respondents'
demurrer to his operative complaint on the ground it failed to state any cause of action.1
Cardoni contends the court erred because he alleged sufficient facts to state causes of
action for breach of contract, breach of implied covenant of good faith and fair dealing,
civil conspiracy, violations of the unfair competition law (UCL; Business & Professions
Code sections 17200 et seq.), and negligence.
We affirm the judgment as to all causes of action.
FACTUAL BACKGROUND
Most of the facts are taken from Cardoni's third amended complaint; others come
from the first amended complaint. We accept as true the properly pleaded material
allegations and facts that may properly be judicially noticed. (Olszewski v. Scripps
Health (2003) 30 Cal.4th 798, 806; Debrunner v. Deutsche Bank National Trust Co.
(2012) 204 Cal.App.4th 433, 435.)2
1 Mortgage Electronic Registration Systems, Inc. (MERS) was dismissed as a defendant. NDeX West LLC (NDeX) filed a declaration of nonmonetary status under Civil Code section 2924l, subdivision (d); accordingly, it has not filed briefs in this appeal, but it is bound by this court's decision relating to the deed of trust. Provident filed a separate reply brief arguing that none of Cardoni's allegations in the operative complaint relate to it, and otherwise joining Wells Fargo's arguments.
2 At Wells Fargo's request, the trial court judicially noticed various documents including Cardoni's deed of trust recorded in November 2007, an assignment of the deed of trust recorded in April 2009, a notice of default recorded in January 2011, a notice of trustee's sale recorded in March 2011, and the trustee's deed upon sale recorded in 2
Cardoni financed his Sun City property with a promissory note for $304,000 from
lender Provident, and the property was secured by a deed of trust that was recorded in
November 2007.
In March 2009, a notice of default and election to sell was recorded under the deed
of trust. That same month, MERS substituted for the original trustee.
In April 2009, the deed of trust was recorded in the Riverside County Recorder's
office.
In August 2009, Cardoni began loan modification negotiations with Wells Fargo
under the Home Affordable Mortgage Program (HAMP).3 Cardoni completed the
process to qualify for participation in the HAMP Trial Period Plan (TPP).
Under the TPP, from September to November 2009, Cardoni paid monthly
installments of $1,926.03 to Wells Fargo. In December 2009, Cardoni spoke to Wells
December 2011. Other documents the court judicially noticed included minute orders, the parties' pleadings and other records properly admissible as court records under Evidence Code section 452.
3 HAMP has been described thusly: "As authorized by Congress, the United States Department of the Treasury implemented . . . HAMP to help homeowners avoid foreclosure during the housing market crisis of 2008. 'The goal of HAMP is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable levels, without discharging any of the underlying debt.' " (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 785 (West).) Treasury guidelines set forth threshold criteria to define the class of eligible borrowers, and those guidelines set forth accounting steps using a standardized net present value test to determine whether it is more profitable to modify the loan or to allow it to proceed to foreclosure. (Nungaray v. Litton Loan Servicing, LP (2011) 200 Cal.App.4th 1499, 1502.) "Calculations under HAMP involve assigning values to certain variables that are largely within the servicers' discretion, thus precluding any entitlement to loan modifications." (Id. at p. 1502, fn. 1.)
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Fargo supervisor Suzi Peasley in the "loss mitigation" department, who confirmed
Cardoni had met his obligations under the TPP, he would be receiving a HAMP loan
modification for the duration of the loan and the paperwork would be forthcoming.
Peasley told him to continue his monthly payments.
On or around December 23, 2009, Cardoni sent Wells Fargo a letter stating he had
not received the loan modification agreement paperwork as Peasley had promised.
Cardoni enclosed another payment for $1,926.03. Cardoni's letter stated his
understanding that after the trial period, Wells Fargo would offer him a loan modification
at 2.37 percent interest for the first five years, and then following certain incremental
increases, the interest rate would be capped at 5.25 percent from the eighth year and for
the duration of the loan.
In January 2010, Cardoni spoke to Wells Fargo loss mitigation processor Audrey
Mason, who said Wells Fargo had approved Cardoni's HAMP trial period loan
modification and it would send him a copy of the agreement in about one week. On
January 28, 2010, Cardoni wrote Wells Fargo a letter again seeking the loan modification
paperwork for a loan at an initial 2.37 percent interest rate, and enclosing another check
for $1,926.03.
In February 2010, Wells Fargo representative Josh Faber informed Cardoni he did
not qualify for a HAMP permanent loan modification. That month, Cardoni started a
new loan modification application process with Wells Fargo. However, its
representative, Nathan Ziegel, spoke with Cardoni and said the loan could not be
modified because Wells Fargo did not own the loan. Despite Cardoni's requests for an
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accounting of the combined total of $9,630.15 he had paid during the TPP and the
subsequent loan modification program, Wells Fargo did not provide one.
In April 2010, Wells Fargo sent Cardoni a second modification agreement, which
stated less favorable terms than Wells Fargo's oral offer. Specifically, the second loan
modification agreement he entered into required him to pay 4.25 percent interest for the
first 5 years and 5.25 percent interest thereafter. Cardoni signed the modified agreement
and paid Wells Fargo monthly payments of $2,063.51 for five months. During that time,
Cardoni repeatedly asked Wells Fargo for the final executed second modification
agreement, but Wells Fargo stated it would take approximately four to six weeks to
provide it to Cardoni. Wells Fargo never sent Cardoni the paperwork.
The notice of default was rescinded in June 2010.
Sometime after July 2010, Cardoni stopped paying on his loan. He explained the
reason for his actions in his complaint: "After this long pattern and series of fraudulent,
false, lying, and breaching acts and omissions by Wells Fargo, and after reading and
watching many news stories, and investigative journalist reports, and other writings on
the foreclosure crisis, [I] justifiably believed Wells Fargo had no real or true intention of
ever modifying [my] loan, and that Wells Fargo was behaving in this manner because—
by its own words!—it did not even own [my] loan and/or did not have authority to
modify the terms of the loan or the note, and that Wells Fargo was simply attempting to
induce [me] further and further into default, so that Wells Fargo could sell away [my]
family home at foreclosure auction. [¶] . . . While media reports do not affect or change
the contract, they certainly support the allegations that Wells Fargo has an unfair business
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practice of luring borrowers into default with false promises of loan modification with the
intent to deny the modification application and foreclose." (Some capitalization omitted.)
On January 3, 2011, a second notice of default was recorded indicating Cardoni
owed $7,868.00 on his loan.
On January 21, 2011, NDEx substituted as trustee under the deed of trust.
In March 2011, a notice of trustee sale was sent to Cardoni.
In August 2011, Cardoni filed a lis pendens in superior court.
On December 22, 2011, a trustee's deed upon sale was recorded of the property's
sale to TDR Servicing, LLC.
PROCEDURAL BACKGROUND
In April 2011, Cardoni sued Wells Fargo, NDEx, MERS, Provident, and Doe
defendants in a verified complaint for declaratory relief, accounting, unfair business
practices, fraud, breach of contract, unjust enrichment and quiet title. Respondents
demurred and the court sustained the demurrer with leave to amend.
Cardoni filed a first amended complaint against the same defendants and LSI Title
Company and First American Loanstar Trustee Services, alleging sixteen causes of
action: declaratory relief, accounting, breach of contract, breach of implied covenant of
good faith and fair dealings, cancellation of contract, civil conspiracy, "to void or cancel
assignment of deed of trust," violation of Civil Code sections 2923.5, 2924, 2934a,
wrongful foreclosure, slander of title, negligence, the UCL, restitution/unjust enrichment,
and quiet title.
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Respondents again demurred. As to Wells Fargo, the court sustained the demurrer
without leave to amend as to all causes of action except three: declaratory relief, breach
of contract, and the UCL. The court dismissed MERS as a defendant.
Cardoni filed a second amended complaint for declaratory relief, breach of
contract, and violation of the UCL. Respondents demurred, and the court sustained the
demurrer with leave to amend.
Cardoni filed his third amended complaint for declaratory relief, breach of
contract, and violations of the UCL. In his prayer for relief, Cardoni sought a declaration
that Wells Fargo and he had entered into the loan modification agreements that he
substantially performed upon, but Wells Fargo breached the agreements and also violated
the laws regarding foreclosures; that his foreclosure was wrongful; that title to the subject
property remained in his name; all sums he had paid should be credited to the loan; Wells
Fargo should provide an accounting, and be bound by the terms agreed to as part of the
TPP. Cardoni also sought cancellation of the deed of trust, a preliminary injunction, and
an unwinding of the foreclosure on the property.
The court sustained respondents' demurrer to the third amended complaint without
leave to amend, ruling Cardoni could not make out a cause of action for declaratory relief
on his contract claim or on claims the court had previously dismissed, including those
alleging violation of Civil Code sections 2923.5, 2932.5, 2934a, and 2924. It also ruled
Cardoni had not made out a cause of action for breach of either the TPP or the permanent
loan agreement; finally, it ruled the UCL cause of action failed because no unlawful
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actions occurred, Cardoni had alleged no fraudulent actions, and no remedy was
available. As to Provident, the court dismissed the lawsuit with prejudice.
DISCUSSION
I. Standard of Review
When reviewing a judgment dismissing a complaint after the court sustains a
demurrer, the reviewing court must assume the truth of the complaint's properly pleaded
or implied factual allegations, and also consider judicially noticeable matters. (Schifando
v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) " '[W]hen the allegations of the
complaint contradict or are inconsistent with such facts, we accept the latter and reject the
former.' " (Hill v. Roll Internat. Corp. (2011) 195 Cal.App.4th 1295, 1300.)
" 'Because a demurrer both tests the legal sufficiency of the complaint and
involves the trial court's discretion, an appellate court employs two separate standards of
review on appeal.' " (Filet Menu, Inc. v. Cheng (1999) 71 Cal.App.4th 1276, 1279.)
First, we review the complaint de novo to determine whether it alleges sufficient facts to
state a cause of action under any legal theory. (Id. at p. 1280.) We treat the demurrer as
admitting all properly pleaded and judicially noticeable material facts, " 'but not
contentions, deductions or conclusions of fact or law.' " (Blank v. Kirwan (1985) 39
Cal.3d 311, 318.) We deem the properly pleaded facts "to be true, however improbable
they may be." (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d
593, 604.) "[W]e give the complaint a reasonable interpretation, reading it as a whole
and its parts in their context." (Blank, at p. 318.) "[I]ts allegations must be liberally
construed, with a view to substantial justice between the parties." (Code Civ. Proc.,
8
§ 452.) The plaintiff "bears the burden of demonstrating that the trial court erroneously
sustained the demurrer as a matter of law" and "must show the complaint alleges facts
sufficient to establish every element of [the] cause of action." (Rakestraw v. California
Physicians' Service (2000) 81 Cal.App.4th 39, 43.)
" 'Second, if a trial court sustains a demurrer without leave to amend, appellate
courts determine whether or not the plaintiff could amend the complaint to state a cause
of action.' " (Filet Menu, Inc., v. Cheng, supra, 71 Cal.App.4th at p. 1280.) If there is a
reasonable possibility the defect can be cured by amendment, the trial court abused its
discretion by sustaining the demurrer. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.)
"The burden of proving such reasonable possibility is squarely on the plaintiff." (Ibid.)
II. Wells Fargo's Judicial Notice Request
Cardoni contends the trial court abused its discretion by taking judicial notice of
the documents Wells Fargo submitted in support of its demurrer. Without specifying
which judicially noticed documents he opposes, Cardoni states the operative complaint
"genuinely disputes the authenticity of the recorded documents and many of other [sic]
controversial documents in the Superior Court file." In turn, he asserts in his complaint:
"The original note is the only legally binding document that can evidence chain of title,
otherwise the instrument is faulty. [¶] . . . The original note was destroyed upon
securitization because the note as a standalone, two-party, negotiable instrument and a
tradable security instrument cannot exist at the same time. [¶] . . . Defendant Wells
Fargo, the purported transferee, cannot acquire rights of a holder in due course by a
transfer, directly or indirectly, from a holder in due course because the transferee engaged
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in fraud or illegality affecting the instrument . . . . [¶] . . . Therefore, all defendants lack
standing to enforce the note." (Some capitalization omitted.)
In ruling on the request for judicial notice, the court stated: "I think the record
should reflect that the court resolves any issue in the favor of the plaintiff in . . . resolving
this demurrer. So every benefit of the doubt I give to [Cardoni]. However, I have
granted the request for judicial notice. And there are documents in here that he cannot
contradict. And that's I think wherein we have the problem, is that the—that the
documents that the court has taken judicial notice of bind [Cardoni], and he can't
contradict those documents."
We review the trial court's ruling on the request for judicial notice for abuse of
discretion. " ' "Judicial notice is the recognition and acceptance by the court, for use by
the trier of fact or by the court, of the existence of a matter of law or fact that is relevant
to an issue in the action without requiring formal proof of the matter." ' " (Poseidon
Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117
(Poseidon).) Evidence Code section 452, subdivisions (c) and (h), respectively, permit a
court, in its discretion, to take judicial notice of "[o]fficial acts . . . of any state of the
United States" and "[f]acts and propositions that are not reasonably subject to dispute and
are capable of immediate and accurate determination by resort to sources of reasonably
indisputable accuracy."
Pursuant to these provisions, courts have taken judicial notice of the existence and
recordation of real property records, including deeds of trust, when the authenticity of the
documents is not challenged. The official act of recordation and the common use of a
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notary public in the execution of such documents assure their reliability, and the
maintenance of the documents in the recorder's office makes their existence and text
capable of ready confirmation, thereby placing such documents beyond reasonable
dispute. In addition, courts have taken judicial notice not only of the existence and
recordation of documents but also of a variety of matters that can be deduced from the
documents. In Poseidon, supra, 152 Cal.App.4th 1106, for example, the court affirmed
the trial court's taking judicial notice, in sustaining a demurrer, of the parties, dates, and
legal consequences of a series of recorded documents relating to a real estate transaction.
Although the court recognized it would have been improper to take judicial notice of the
truth of statements of fact recited within the documents, the trial court was permitted to
take judicial notice of the legal effect of the documents' language when that effect was
clear. Similarly, in McElroy v. Chase Manhattan Mortgage Corp. (2005) 134
Cal.App.4th 388, the court took judicial notice of the recordation of a notice of default
under a deed of trust, the date of the notice's recording, and the amount stated as owing in
the notice for the purpose of demonstrating the plaintiffs had notice of the amount
claimed to be owing and the opportunity to cure a defective tender. (Id. at p. 394.)
"Strictly speaking, a court takes judicial notice of facts, not documents. (Evid.
Code, § 452, subds. (g), (h).) When a court is asked to take judicial notice of a document,
the propriety of the court's action depends upon the nature of the facts of which the court
takes notice from the document. As noted in Poseidon,[ supra, 152 Cal.App.4th at pp.
1117-1118], for example, it was proper for the trial court to take judicial notice of the
dates, parties, and legally operative language of a series of recorded documents, but it
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would have been improper to take judicial notice of the truth of various factual
representations made in the documents. [Citations.] Taken together, the decisions
discussed above establish that a court may take judicial notice of the fact of a document's
recordation, the date the document was recorded and executed, the parties to the
transaction reflected in a recorded document, and the document's legally operative
language, assuming there is no genuine dispute regarding the document's authenticity.
From this, the court may deduce and rely upon the legal effect of the recorded document,
when that effect is clear from its face." (Fontenot v. Wells Fargo Bank, N.A. (2011) 198
Cal.App.4th 256, 264-265 (Fontenot); accord, Simons, California Evidence Manual
(2014 ed.) Judicial Notice, § 7:11.) "Where, as here, judicial notice is requested of a
legally operative document—like a contract [or documents recorded in connection with a
real property transaction]—the court may take judicial notice not only of the fact of the
document and its recording . . . but also facts that clearly derive from its legal effect . . .
[if] the fact is not reasonably subject to dispute." (Scott v. JP Morgan Chase Bank, N.A.
(2013) 214 Cal.App.4th 743, 754; see Jenkins v. JP Morgan Chase Bank, N.A. (2013)
216 Cal.App.4th 497, 537 (Jenkins) [court "may take judicial notice of the parties, dates,
and legal significance of recorded documents relating to a real estate transaction"].)
Cardoni's attempt to demonstrate that the trial court abused its discretion in taking
judicial notice as requested by Wells Fargo is not persuasive. His arguments do not raise
any "genuine dispute regarding the document[s'] authenticity." (Fontenot, supra, 198
Cal.App.4th at p. 265.) Despite Cardoni's general objection to the court's ruling, we
conclude he has offered no basis for a conclusion the court's action failed to accord with
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the principles set forth above regarding judicial notice. We conclude the court did not
abuse its discretion in granting Wells Fargo's request for judicial notice.
III. Breach of Contract
Cardoni contends that he successfully completed the TPP; therefore, he was
entitled to receive a HAMP modification of his loan, and Wells Fargo breached its
contract with him by refusing to grant him that modification. He contends the permanent
modification he entered into with Wells Fargo was not what he had bargained for.
The elements of a cause of action for breach of contract are (1) the existence and
terms of the contract, (2) the plaintiff's performance or excuse for failing to perform, (3)
the defendant's breach, and (4) plaintiff's damages. (Amelco Electric v. City of Thousand
" '[A] promise is an indispensable element of the doctrine of promissory estoppel.
The cases are uniform in holding that this doctrine cannot be invoked and must be held
inapplicable in the absence of a showing that a promise had been made upon which the
complaining party relied to his prejudice.' [Citation.] The promise must, in addition, be
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'clear and unambiguous in its terms.' " (Garcia v. World Savings, FSB (2010) 183
Cal.App.4th 1031, 1044.) For a promise to be enforceable, it 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 Cal.App.4th 199, 209.)
We have already concluded Cardoni cannot allege that he and Wells Fargo entered
into a valid contract for the lower interest rate. Rather, his allegations demonstrate he
accepted Wells Fargo's permanent loan modification agreement and started performing
on it. By so doing, he undermined any claim that he was prejudiced by Wells Fargo's
failure to grant him the loan at the lower interest rate he claims he was orally promised.
It follows that he also cannot show detrimental reliance to make out a claim for
promissory estoppel.
The plaintiff has the burden to show in what manner the pleadings may be
amended and how such amendments will change the pleadings' legal effect. (Careau &
Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) This
showing may be made for the first time on appeal, even if plaintiff made no request for
leave to amend in the trial court. (Code Civ. Proc., § 472c, subd. (a);4 Aubry v. Tri-City
Hospital Dist. (1992) 2 Cal.4th 962, 971.) Cardoni has not described, either in opposition
4 Code of Civil Procedure section 472c, subdivision (a) states: "When any court makes an order sustaining a demurrer without leave to amend the question as to whether or not such court abused its discretion in making such an order is open on appeal even though no request to amend such pleading was made."
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to the demurrer motion below or on appeal, new or more specific facts, nor how those
factual allegations would state a cause of action. Cardoni had three opportunities to
amend his complaint in the trial court, and he does not meet his appellate burden of
showing he can amend. We deny his request for leave to amend.
XII. Civil Conspiracy
Cardoni alleges he stated a cause of action for civil conspiracy, and refers to this
allegation stated in his third amended complaint: "[Cardoni] was sold an alleged loan by
[] Provident, which was not contemplated, scrutinized, underwritten, or designed by
defendants to actually benefit [Cardoni], or to maximize [his] chances of maintaining
possession of his real property, or to take into consideration [his] personal circumstances,
including [his] income, assets, ability to pay, etc.; [he] was instead sold a loan that was
contemplated, scrutinized, underwritten, and designed by defendants simply to feed
secured paper into a Ponzi scheme (now known in knowledgeable circles as mortgage
"securitization"), which scheme Defendants (including Wells Fargo) had designed and
executed knowingly, all the while knowing it would almost surely cause [Cardoni] to lose
possession of the subject real property, default on the subject loan, and would then allow
the very foreclosure—fraudulently pre-conceived, pre-planned, and invalid though it is—
which now threatens [him], and which is the primary subject and genesis of this civil
action." (Emphasis and some capitalization omitted.)
Civil conspiracy is not an independent tort. Instead, it is a theory of vicarious
legal liability under which certain defendants may be held liable for torts committed by
others. That is, all parties to a conspiracy are jointly liable for tortious acts committed by
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any of them pursuant to the conspiracy. (Okun v. Superior Court (1981) 29 Cal.3d 442,
454.) The complaint must allege acts that give rise to a tort cause of action without the
conspiracy; absent such allegation, the conspiracy allegation is meaningless. (Manor
Investment Company v. F. W. Woolworth Co. (1984) 159 Cal.App.3d 586, 595.) Thus,
respondents' demurrer was properly sustained because the allegations of Cardoni's
complaint do not show an independent potential for tort liability upon which the
conspiracy claim is based. (Chavers v. Gatke Corp. (2003) 107 Cal.App.4th 606, 614;
Abdallah v. United Savings Bank, supra, 43 Cal.App.4th at p. 1110.)
XIII. Unfair Competition Law Cause of Action
In Cardoni's third amended complaint, he alleged Wells Fargo violated the UCL,
in part by breaching the HAMP loan agreement, engaging in a "sham modification
program" in which it informed persons with loans that they needed to default before they
could get any loan modification assistance, and failing "to comply with consumer
statutory protections under [Civil Code sections] 2924 et seq., 2923.5, 2923.6, 2932.5,
2934a and 2936, as well as [Commercial Code sections] 3301-3312, among other laws."
(Italics omitted.) Cardoni also alleged respondents engaged in various other unlawful or
unfair activities. Specifically, "executing and recording false and misleading
documents"; "acting as beneficiaries without the legal authority to do so"; "acting as
trustee without the legal authority to do so"; "engaging in fraud, malfeasance, and perjury
by utilizing an assignment of deeds of trust and other documents with forged signatures";
"improperly characterizing customers' accounts as being in default or delinquent to
generate excessive and unwarranted payments and fees"; "instituting improper or
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unauthorized or unlawful foreclosure proceedings to generate unwarranted excessive
payments and fees"; "misapplying or failing to apply customer payments"; "seeking to
collect, and collecting, various improper fees, costs, and charges that are either not
legally due under the mortgage contract or California law, or that are in excess of
amounts legally due"; "mishandling borrower's loan payments and failing to timely or
properly credit payments received, resulting in late charges, delinquencies, or default;"
"treating borrower as in default on their loans even though the borrower have [sic]
tendered timely and sufficient payments or have otherwise complied with mortgage
payment requirements or California law." (Some capitalization omitted.)
In order to state a claim for a violation of the UCL, Cardoni must allege that
respondents committed a business act or practice that is fraudulent, unlawful, or unfair.
(See Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) A claim made under
Business and Professions Code section 17200 " 'is not confined to anticompetitive
business practices, but is also directed toward the public's right to protection from fraud,
deceit, and unlawful conduct. [Citation.] Thus, California courts have consistently
interpreted the language of [Business and Professions Code] section 17200 broadly.' "
(South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861,
877.)
When a plaintiff predicates a claim of an unfair act or practice on public policy, it
is not sufficient to merely allege the act violates public policy or is immoral, unethical,
oppressive or unscrupulous. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350,
1365.) This court has held on numerous occasions that to establish a practice is "unfair,"
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a plaintiff must prove the defendant's "conduct is tethered to an[] underlying
constitutional, statutory or regulatory provision, or that it threatens an incipient violation
of an antitrust law, or violates the policy or spirit of an antitrust law." (Id., at p. 1366;
Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1137; Scripps Clinic v.
Superior Court (2003) 108 Cal.App.4th 917, 940; Byars v. SCME Mortgage Bankers,
Inc. (2003) 109 Cal.App.4th 1134, 1147.)
A.
In the first amended complaint, Cardoni alleged respondents had failed to contact
him before the foreclosure as required by Civil Code section 2923.5, which states that a
mortgagee or beneficiary may not record a notice of default until it (1) has contacted the
borrower in person or by telephone to assess the borrower's financial situation and to
explore options for the borrower to avoid foreclosure, or (2) has diligently tried to make
Relying on Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872
(Jolley), Cardoni urges us to hold he has stated a cause of action for negligence, and that
Wells Fargo owed him a duty of care not to make misrepresentations to him regarding the
status of his loan modification.5
5 Jolley was decided in the context of a motion for summary judgment brought by JP Morgan Chase (Chase), which had assumed the assets of its predecessor, Washington Mutual Bank (WaMu). (Jolley, supra, 213 Cal.App.4th at pp. 877-878.) There, the plaintiff and WaMu had entered into a construction loan, which WaMu agreed to modify in 2006 to permit the plaintiff to complete construction. (Id. at pp. 877-879.) The plaintiff alleged that before the modification, WaMu made false representations about certain matters, and that there were irregularities in the loan disbursements, causing construction delays. (Id. at p. 878.) After Chase purchased WaMu's assets, the plaintiff continued to deal with the same people in the construction loan department and sought another loan modification. (Id. at p. 880.) He also dealt with a Chase employee who told him there was a " 'high probability' " Chase would be able to modify the loan so as to avoid the foreclosure, the " 'likelihood was good' ", and that it was likely when construction was complete he could roll the construction loan into a fully amortized conventional loan. (Id. at p. 881.) According to plaintiff, he was induced by these representations to borrow heavily to finish the project, and he claimed construction delays during the loan modification negotiations prevented him from selling the property before the housing market collapsed. (Ibid.) Rather than agree to a loan modification, Chase demanded payment in full and its trustee recorded a notice of default and then a notice of sale. (Jolley, supra, 213 Cal.App.4th at p. 881.) Plaintiff filed suit two days before the foreclosure sale, alleging causes of action for fraud, negligent misrepresentation, breach of contract/promissory estoppel, negligence, violation of the UCL, declaratory relief, accounting and reformation. (Ibid.) He also obtained a temporary restraining order prohibiting Chase from proceeding with the trustee's sale. (Ibid.) The trial court granted Chase's ensuing motion for summary judgment on various grounds, including that Chase, a lender, did not owe the plaintiff a duty of care. (Jolley, supra, 213 Cal.App.4th at pp. 884-885.) The appellate court reversed, however, as to the 39
"The elements of negligent misrepresentation are (1) the misrepresentation of a
past or existing material fact, (2) without reasonable ground for believing it to be true, (3)
with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance
on the misrepresentation, and (5) resulting damage. [Citation.] In contrast to fraud,
negligent misrepresentation does not require knowledge of falsity. A defendant who
makes false statements ' "honestly believing that they are true, but without reasonable
ground for such belief, . . . may be liable for negligent misrepresentation . . . . "
[Citations.]' [Citation.] However, a positive assertion is required; an omission or an
implied assertion or representation is not sufficient." (Apollo Capital Fund LLC v. Roth
Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.)
"The existence of a duty of care owed by a defendant to a plaintiff is a prerequisite
to establishing a claim for negligence." (Nymark, supra, 231 Cal.App.3d at p. 1095.)
Whether a duty to use due care exists in a particular case is a question of law to be
resolved by the court. (Quelimane Co. v. Stewart Title Guaranty Co. (1988) 19 Cal.4th
26, 57-58.)
causes of action for fraud, breach of contract/promissory estoppel, negligence, violation of the UCL, and reformation. (Id. at pp. 893-908.) In reversing summary judgment on the plaintiff's UCL cause of action, the Court of Appeal focused in part on allegations indicating Chase had subjected the plaintiff to dual tracking, the "common bank tactic" whereby the lender pursues foreclosure at the same time it engages in loan modification negotiations. (Id. at pp. 901, 904.) The court observed that the California Legislature made dual tracking illegal effective January 1, 2018. (Id. at pp. 904-905.) Though it acknowledged the law did not apply and dual tracking was not forbidden by statute at the time, the appellate court nevertheless held "the new legislation and its legislative history may still contribute to its being considered 'unfair' for purposes of the UCL." (Id. at pp. 907-908.)
40
We decline to impose a duty of due care on Wells Fargo in handling Cardoni's
loan modification. (See Wagner v. Benson (1980) 101 Cal.App.3d 27, 34-35 [lender's
liability to a borrower for negligence arises only when the lender " 'actively participates'
in the financed enterprise 'beyond the domain of the usual money lender' "]; Ragland v.
U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206 ["No fiduciary duty exists
between a borrower and lender in an arm's length transaction"].) And we agree with
federal district courts that have held that "offering loan modifications is sufficiently
entwined with money lending so as to be considered within the scope of typical money
lending activities. If money lending institutions were held to a higher standard of care by
offering a service that could benefit borrowers whose circumstances have changed, the
money lender would be discouraged from leniency and would assert their rights to
reclaim the property upon the borrower's default. The conventional-moneylender test
shall be sufficient to determine that there is no duty of care owed in servicing Plaintiff's
mortgage loan and loan modification. As the Plaintiff is unable to establish a duty, it is
unnecessary to discuss the elements of breach, causation, and damages." (Alvarado v.
(JPRx)) 2012 WL 4475330 [6]; see also Juarez v. Suntrust Mortgage, Inc. (E.D. Cal.,
May 13, 2013, No. CV F 13-0485 LJO SAB) 2013 WL 1983111.)
At oral argument, Cardoni also relied on Alvarez v. BAC Home Loans Servicing,
LP (2014) 228 Cal.App.4th 941 (Alvarez), which held that the defendant lenders "owed
[plaintiffs] a duty to exercise reasonable care in the review of their loan modification
applications once they had agreed to consider them." (Id. at pp. 944-945.) In Alvarez,
41
the plaintiffs alleged that defendants breached this duty by (1) failing to consider their
application in a timely manner, (2) foreclosing while plaintiffs were under consideration
for a modification, and (3) mishandling their application by relying on incorrect salary
information and apparently misplacing application documents. (Ibid.) The Alvarez court
reaffirmed that "As a general rule, 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." (Id. at p. 945.) Nonetheless,
the court held that on the facts of that case, the lender owed the borrower a duty of care.
(Id. at p. 949.)
The Alvarez court also noted that the plaintiff's allegation in the complaint that
defendants engaged in "dual tracking," a practice now prohibited by Civil Code sections
2923.6, and 2924.18, increased the defendants' blameworthiness. The court added:
"Much of the conduct that plaintiffs allege breached a duty of care in this case—failing to
process the applications in a timely manner, dual tracking and losing documents—is
conduct now regulated by the [Home Owner's Bill of Rights]. While the explicit
articulation of the lender's duties was not available when plaintiffs applied for loan
modification, these obligations fall well within the duty to use reasonable care in the
processing of a loan modification. Recognizing this general duty will not place an undue
burden on mortgage banks and servicers, nor will it have a chilling effect on borrowers'
ability to obtain loan modifications." (Alvarez, supra, 228 Cal.App.4th at p. 951.)
Here, Cardoni's negligence claim in his first amended complaint is focused on his
claim that respondents "owed [him] a duty of care to reasonably investigate whether
42
statutory notice requirements were met before proceeding to auction the property and to
comply with [Civil Code sections] 2923.5, 2932.5, 2934, 2934a, and 2924 et seq. [¶]
. . . [Respondents] owed [him] and the public at large a duty of care to reasonably
investigate the existence of any agreements, transactions, or conveyances concerning the
property and thereby to not expose [him] to an unreasonable risk of harm, including
deprivation of property." Cardoni alleged respondents conduct caused him harm: "As a
direct and proximate result of [respondents'] failure to exercise reasonable care, [he] was
placed in imminent peril as a foreclosure without any authority of law and without proper
notice, completely void foreclosure proceedings, were instituted against [him.] [He] has
suffered damages in an amount to be proved at trial, including reasonable attorneys' fees
and costs. [He] has further suffered equitable harm for which legal damages are
insufficient."
Having disposed of Cardoni's claims regarding alleged violations of the Civil
Code sections, we further conclude Cardoni did not allege facts sufficient to distinguish
Wells Fargo's conduct from "traditional money-lending activity," such as to impose a
duty of care on Wells Fargo. Unlike in Alvarez, supra, 228 Cal.App.4th 941, Cardoni did
not allege Wells Fargo engaged in dual tracking. Rather, as noted, the complaint
established that Wells Fargo agreed to a loan modification, which Cardoni accepted. It
was Cardoni who subsequently elected to stop payments on his mortgage. Accordingly,
the trial court did not err in dismissing Cardoni's negligence claim.
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DISPOSITION
The judgment is affirmed.
O'ROURKE, J.
WE CONCUR:
McCONNELL, P. J.
IRION, J.
44
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the dismissal of the plaintiff's action, holding that the plaintiff failed to state a cause of action for breach of contract, violation of the unfair competition law, or any other pleaded theory. The court further held that the trial court did not abuse its discretion in taking judicial notice of recorded real property documents.
Issues
Did the trial court abuse its discretion by taking judicial notice of recorded real property documents?
Did the plaintiff allege sufficient facts to state a cause of action for breach of contract regarding HAMP loan modification?
Did the trial court err in sustaining the demurrer to the third amended complaint without leave to amend?
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“We affirm the judgment as to all causes of action.”
“We conclude the court did not abuse its discretion in granting Wells Fargo's request for judicial notice.”
“The court sustained respondents' demurrer to the third amended complaint without leave to amend, ruling Cardoni could not make out a cause of action for declaratory relief on his contract claim or on claims the court had previously dismissed”