Judge: Barbara M. Scheper, Case: 22STCV25038, Date: 2023-02-13 Tentative Ruling
Case Number: 22STCV25038 Hearing Date: February 13, 2023 Dept: 30
Dept. 30
Calendar No.
Saghian vs. MUFG
Union Bank, N.A., et. al., Case
No. 22STCV25038
Tentative Ruling
re: Defendant’s Motion for Judgment on
the Pleadings
Defendant MUFG Union Bank, N.A.
(Defendant) moves for judgment on the pleadings against the Complaint of
Plaintiff Richard Saghian (Plaintiff). The motion is granted.
A motion for judgment on the pleadings may be made
after the time to demur has expired and an answer has been filed. (Code Civ.
Proc., § 438, subd. (f).) A motion by a defendant may be made on the grounds
that the complaint or cross-complaint “does not state facts sufficient to
constitute a cause of action against that defendant.” (Code Civ. Proc., § 438,
subd. (c)(B)(ii).) A motion for judgment on the pleadings has the same function
as a general demurrer but is made after the time for demurrer has expired.
Except as provided by statute, the rules governing demurrers apply. (Cloud v. Northrop Grumman Corp. (1998)
67 Cal.App.4th 995, 999.)
Like a general demurrer, “ordinarily, a [motion for
judgment on the pleadings] does not lie as to a portion of a cause of action,
and if any part of a cause of action is properly pleaded, the [motion] will be
overruled.” (Fire Ins. Exchange v.
Superior Court (2004) 116 Cal.App.4th 446, 452.) In considering a motion
for judgment on the pleadings, courts consider whether properly pled factual
allegations—assumed to be true and liberally construed—are sufficient to
constitute a cause of action. (Stone
Street Capital, LLC v. Cal. State Lottery Com’n (2008) 165 Cal.App.4th 109,
116.)
Plaintiff alleges that in April of 2022, Defendant made a loan commitment
to Plaintiff for three 10-year, fixed rate mortgages at 2.25%. (Comp. ¶¶ 12-19.) In May 2022, after significant
changes in market conditions, Defendant informed Plaintiff that it would not
honor its loan commitment. (Comp. ¶¶ 20-25.) Plaintiff asserts six causes of action against Defendant based
on Defendant’s alleged failure to honor its loan commitment, for: (1)
Breach of Loan Commitment; (2) Promissory Estoppel; (3) Fraud; (4) Negligent
Misrepresentation; (5) Violation of Bus. & Prof. Code sec. 17200; and (6)
Intentional Interference with Contractual Relations.
First Cause of Action for Breach of Contract – Loan
Commitment
Plaintiff alleges that Nader
Razavi, a Director of Defendant, first confirmed the terms of the loan
commitment in a call to Plaintiff on April 4, 2022. (Comp. ¶ 13.) Razavi told
Plaintiff that Defendant would loan Plaintiff “up to $30 million, secured by
the three residential properties, at a fixed interest rate of 2.25% for a
10-year-interest only-term followed by a 20-year variable rate term, with the
option to pre-pay. (the ‘Loan Commitment’).” (Comp. ¶ 13.) Two days later, on
April 6, 2022, Razavi “documented the terms of the Loan Commitment in
correspondence with Melissa Morton [Plaintiff’s business manager].” (Comp. ¶
15.) This correspondence confirmed “the 10-year interest-only loan term, with a
fixed interest rate of 2.25%,” “the addresses of the three subject properties
that would secure the loans,” and “the value of each property.” (Comp. ¶ 15.) Razavi then connected Morton to
a mortgage officer, and in the following weeks the parties exchanged paperwork
and financial information to complete the transaction. (Comp. ¶¶ 16-18.)
However, on May 6, 2022, Razavi called Plaintiff and told him that Defendant
would not be honoring the Loan Commitment. (Comp. ¶ 22.)
Defendant first argues that
Plaintiff’s claim for breach of the loan commitment is barred by the statute of
frauds.
“A general demurrer may be interposed when the
complaint shows on its face that the agreement sued on is within the statute of
frauds and does not comply with its requirements.” (Parker v. Solomon
(1959) 171 Cal.App.2d 125, 136.) Contracts subject to the statute of frauds are
invalid “unless they, or some note or memorandum thereof, are in writing and
subscribed by the party to be charged or by the party's agent.” (Civ. Code, §
1624, subd. (a).) Section 1624 applies the statute of frauds to “[a] contract,
promise, undertaking, or commitment to loan money or to grant or extend credit,
in an amount greater than one hundred thousand dollars ($100,000), not
primarily for personal, family, or household purposes, made by a person engaged
in the business of lending or arranging for the lending of money or extending
credit.” (Civ. Code, § 1624, subd. (a)(7).)
Additionally, Civil Code § 2922 provides that
“[a] mortgage can be created, renewed, or extended, only by writing, executed
with the formalities required in the case of a grant of real property.” As a
result, “[a] mortgage or deed of trust also comes within the statute of
frauds.” (Secrest v. Security National Mortgage Loan Trust 2002-2 (2008)
167 Cal.App.4th 544, 552.)
Here, the
alleged loan commitment falls within both Section 1624 and Section 2922, as a
loan for over $100,000 made by one “engaged in the business of lending,”
secured by real property. While Plaintiff argues that the loan commitment is
not subject to Section 1624 because it was made “primarily for personal,
family, or household purposes,” (Civ. Code § 1624, subd. (a)(7)), there are no
allegations showing that the loan was made for those purposes. Accordingly, to
satisfy the statute of frauds under Section 1624, the agreement “or some note
or memorandum thereof,” must be “in writing and subscribed by the party to be
charged or by the party's agent.” To satisfy Section 2922, the agreement must
have been in writing, and “executed with the formalities required in the case
of a grant of real property.” “An effective deed must be in writing and
indicate who is granting the property, to whom it is granted, and
what the property is. Apt words of grant are of course also essential.” (26
Cal. Jur. 3d Deeds § 19.)]
The Court
finds that Plaintiff’s first cause of action is barred by the statute of frauds
under Section 2922, because the writing allegedly memorializing the loan
commitment was not “executed with the formalities required in the case of a
grant of real property.” Plaintiff alleges only that correspondence from Razavi
confirmed “the 10-year interest-only loan term, with a fixed interest rate of
2.25%,” “the addresses of the three subject properties that would secure the
loans,” and “the value of each property.”
(Comp. ¶ 15.)
Plaintiff’s claim also fails for
failure to plead the essential terms of the contract breached. “A written
contract may be pleaded either by its terms—set out verbatim in the complaint
or a copy of the contract attached to the complaint and incorporated therein by
reference—or by its legal effect. In order to plead a contract by its legal
effect, plaintiff must ‘allege the substance of its relevant terms. This is
more difficult, for it requires a careful analysis of the instrument, comprehensiveness
in statement, and avoidance of legal conclusions.’” (McKell v. Washington
Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)
“Under the usual principles of lender
liability, ‘[a] loan commitment is not binding on the lender unless it contains
all of the material terms of the loan, and either the lender's obligation is
unconditional or the stated conditions have been satisfied. When the commitment
does not contain all of the essential terms ... the prospective borrower cannot
rely reasonably on the commitment, and the lender is not liable for either a
breach of the contract or promissory estoppel.’ [Citation.] The material terms
of a loan include the identity of the lender and borrower, the amount of the
loan, and the terms for repayment.” (Peterson Development Co. v. Torrey
Pines Bank (1991) 233 Cal.App.3d 103, 115.)
Plaintiff’s failure
to plead the essential terms of the loan commitment is fatal to both the first
cause of action and the second cause of action for promissory estoppel. (Peterson
Development Co., supra, 233 Cal.App.3d at 115 [“When the commitment does
not contain all of the essential terms ... the lender is not liable for either
a breach of the contract or promissory estoppel.’”].)
Accordingly,
the motion is granted as to the first and second causes of action.
Third Cause of Action for Fraud; Fourth Cause of Action
for Negligent Misrepresentation
The elements of fraud are: (1) misrepresentation
(false representation, concealment, or nondisclosure); (2) knowledge of falsity
(scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance;
and (5) damages. (See Civil Code §1709.) Fraud actions are subject to strict
requirements of particularity in pleading. (Committee on Children’s
Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) “The particularity requirement demands that a plaintiff
plead facts which show how, when, where, to whom, and by what means the
representations were tendered.” (Cansino v. Bank of America (2014) 224
Cal.App.4th 1462, 1469.)
“[T]here are two causation elements in a fraud cause of
action. First, the plaintiff's actual and justifiable reliance on
the defendant's misrepresentation must have caused him to take a detrimental
course of action. Second, the detrimental action taken by the plaintiff must
have caused his alleged damage.” (Beckwith v. Dahl (2012) 205
Cal.App.4th 1039, 1062.) “In addition to pleading
actual reliance, the plaintiff must set ‘forth
facts to show that his or her actual reliance
on the representations was justifiable, so that the cause of the damage was the
defendant's wrong and not the plaintiff's fault.’ [Citation.] There must be
more pled than a simple statement plaintiff
justifiably relied on the statements.” (Id.
at 1066-67.)
To plead fraud by negligent
misrepresentation, a plaintiff must allege: (1) a misrepresentation of a past
or existing material fact; (2) made without reasonable grounds for believing it
to be true; (3) made with the intent to induce another’s reliance on the fact
misrepresented; (4) justifiable reliance on the misrepresentation; and (5)
resulting damage. (Ragland v. U.S.
National Bank Assn. (2012) 209 Cal.App.4th 182, 196.)
Plaintiff’s
fraud cause of action alleges that Defendant “made a representation to
Plaintiff that the Loan Commitment offered to Plaintiff included a 2.25%
interest rate.” (Comp. ¶ 40.) “When [Defendant] made that representation, it
was false,” Defendant “made that representation with the intent that Plaintiff
would rely on it and with an intent to defraud Plaintiff,” and Plaintiff “did
reasonably rely on that representation.” (Comp. ¶¶ 41-43.)
Plaintiff’s
fraud and negligent misrepresentation claims fail because he has not pled any
specific conduct taken in reliance on Defendant’s misrepresentations. Plaintiff’s
general allegations that he relied on the misrepresentations are insufficient.
(Comp. ¶¶ 43, 51.) Furthermore, because there are no facts pled regarding the
nature of Plaintiff’s reliance, Plaintiff has also failed to plead that his reliance
was caused by the misrepresentations or that his reliance was justifiable. The motion is therefore granted as to the third and fourth causes
of action.
Fifth Cause of Action for Violation of Bus. & Prof.
Code § 17200
California’s
Unfair Competition Law (UCL) prohibits unlawful, unfair, or fraudulent business
acts or practices. (Bus. & Prof. Code, § 17200 et seq.) “An
‘unlawful business activity’ includes ‘anything that can properly be called a
business practice and that at the same time is forbidden by law.’” (People
v. McKale (1979) 25 Cal.3d 626, 632.) “Virtually
any law or regulation—federal or state, statutory or common law, can serve as a
predicate for a Business and Professions Code section 17200 ‘unlawful’
violation. [Citation.]” (Paulus v. Bob Lynch Ford, Inc. (2006) 139
Cal.App.4th 659, 681 [internal quotations omitted].)
“While the scope of conduct covered by the UCL
is broad, its remedies are limited. [Citation.] A UCL action is equitable in
nature; damages cannot be recovered. [Citation.] . . . [U]nder the UCL,
‘prevailing plaintiffs are generally limited to injunctive relief and
restitution.’ [Citation.]” (Korea Supply Co. v. Lockheed Martin Corp.
(2003) 29 Cal.4th 1134, 1144.) “The object of restitution is to restore the
status quo by returning to the plaintiff funds in which he or she has
an ownership interest.” (Id. at 1149.)
Plaintiff
alleges that Defendant committed an unlawful, unfair, and fraudulent business
practice when it reneged on its loan commitment to Plaintiff. (Comp. ¶¶ 56-57.)
Plaintiff “suffered an injury in fact because he is not, due to changed market
conditions, able to obtain a loan from another financial institution at the
interest rate previously promised by [Defendant].” (Comp. ¶ 58.)
Plaintiff’s UCL claim fails because
he has failed to plead entitlement to equitable relief. The Court previously
granted Defendant’s motion to strike as to Plaintiff’s prayer for equitable
relief, finding that Plaintiff failed to plead facts showing inadequacy of
legal remedy. Plaintiff has also pled no facts showing grounds for restitution;
there are no allegations that Plaintiff ever gave money to Defendant.
Accordingly, the motion is granted as to the fifth cause of action.
Sixth Cause of Action for
Intentional Interference with Contractual Relations.
“To prevail on a cause of action for
intentional interference with contractual relations, a plaintiff must plead and
prove (1) the existence of a valid contract between the plaintiff and a third
party; (2) the defendant's knowledge of that contract; (3) the defendant's
intentional acts designed to induce a breach or disruption of the contractual
relationship; (4) actual breach or disruption of the contractual relationship;
and (5) resulting damage.” (Reeves v. Hanlon (2004) 33 Cal.4th 1140,
1148.)
Plaintiff’s claim for Intentional Interference
with Contractual Relations is based on Defendant’s alleged interference with a
loan commitment made by First Republic Bank (FRB) to Plaintiff, for a “10-year
term at 1.70% followed by a 20-year term at a variable rate.” (Comp. ¶ 12.)
Plaintiff had secured the loan commitment from FRB prior to the alleged loan
commitment from Defendant, and informed Defendant of the FRB offer in order to
secure terms from Defendant. (Comp. ¶ 12.)
The sixth cause of action fails because Plaintiff
has not alleged the existence of any valid contract between himself and a third
party. The allegations indicate that the purported loan commitment from FRB was
an offer for a loan, not a contract. (Comp. ¶ 12.) There are also no
allegations showing that Defendant committed “intentional acts designed to
induce a breach or disruption of the contractual relationship.” The motion is
therefore granted as to the sixth cause of action.