Judge: Barbara M. Scheper, Case: 22STCV25038, Date: 2023-05-18 Tentative Ruling
Case Number: 22STCV25038 Hearing Date: May 18, 2023 Dept: 30
Dept. 30
Calendar No.
Saghian vs. MUFG
Union Bank, N.A., et. al., Case
No. 22STCV25038
Tentative Ruling
re: Defendant’s Demurrer to First
Amended Complaint; Motion to Strike
Defendant MUFG Union Bank, N.A.
(Defendant) demurs to the First Amended Complaint (FAC) of Plaintiff Richard
Saghian (Plaintiff) and moves to strike portions of the FAC. The demurrer is
sustained. The motion to strike is denied as moot.
In reviewing the legal sufficiency of a complaint against a demurrer, a
court will treat the demurrer as admitting all material facts properly pleaded,
but not contentions, deductions, or conclusions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co.
v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062.) It is well settled
that a “demurrer lies only for defects appearing on the face of the
complaint[.]” (Stevens v. Superior Court
(1999) 75 Cal.App.4th 594, 601.) “The rules by which the sufficiency of a
complaint is tested against a general demurrer are well settled. We not only
treat the demurrer as admitting all material facts properly pleaded, but also
give the complaint a reasonable interpretation, reading it as a whole and its
parts in their context.” (Guclimane Co.
v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes
omitted).) For purposes of ruling on a demurrer, the complaint must be
construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78
Cal.App.4th 952, 958.)
When ruling
on a demurrer, the Court may only consider the complaint’s allegations or
matters which may be judicially noticed. (Blank,
supra, 39 Cal.3d at 318.) The Court may not consider any other extrinsic
evidence or judge the credibility of the allegations plead or the difficulty a
plaintiff may have in proving his allegations. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) A
demurrer is properly sustained only when the complaint, liberally construed,
fails to state facts sufficient to constitute any cause of action. (Kramer v. Intuit Inc. (2004) 121
Cal.App.4th 574, 578.)
Plaintiff’s claims in this action arise from Defendant’s alleged breach
of a loan commitment made to Plaintiff in April 2022, and reneged on by
Defendant in May 2022. 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. (FAC ¶ 13.) Specifically, Razavi confirmed that the
loan to Plaintiff would be at a 2.25%
interest rate for ten years, followed by a 20-year variable rate term pegged to
a benchmark rate. The collateral for the loans were three specified residential
properties in Los Angeles and Malibu. (FAC ¶ 13.) The amount of the loan would be the highest amount supported by the
appraised values of the properties, up to $30 million. (FAC ¶ 13(e).) Plaintiff
had entered into two prior loans with Defendant on similar terms, and the
parties understood that the new loans would operate in the same way. (FAC ¶
15.) Two days later, on April 6, 2022, Razavi “documented the terms of
the Loan Commitment in correspondence with Melissa Morton [Plaintiff’s business
manager].” (FAC ¶ 16.) 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.” (FAC ¶ 16.)
Razavi then connected Morton to one
of Defendant’s mortgage officers, and in the following weeks the parties
exchanged paperwork and financial information to complete the transaction. (FAC
¶¶ 18-20.) However, on May 6, 2022, two days after the Federal Open Market
Committee raised the federal funds rate by 50 basis points, Razavi called
Plaintiff and told him that Defendant would not be honoring the Loan
Commitment. (FAC ¶ 24.) Due to further increases in the federal funds rate,
Plaintiff was unable to obtain a materially similar loan elsewhere in the
market. (FAC ¶ 27.)
The FAC asserts five causes of action against Defendant, for: (1)
Breach of Loan Commitment; (2) Promissory Estoppel; (3) Fraud; (4) Negligent
Misrepresentation; and (5) Intentional Interference with Contractual Relations.
First Cause of Action for Breach of Contract – Loan
Commitment; Second Cause of Action for Promissory Estoppel
Defendant 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).) "For
purposes of this section, a contract, promise, undertaking, or commitment to
loan money secured solely by residential property consisting of one to four
dwelling units shall be deemed to be for personal, family, or household
purposes.” (Ibid.) 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.)
Plaintiff alleges that each of the residential
properties used to secure the loan consisted of no more than four dwelling
units. (FAC ¶ 17.) Accepting these allegations as true, the commitment "shall
be deemed to be for personal, family, or household purposes,” and so is
excepted from Section 1624. (Civ. Code,
§ 1624, subd. (a)(7).)
Plaintiff argues that Section 2922 does not
apply because he has not alleged a “mortgage,” but only a loan commitment. “A
mortgage is a contract by which specific property, including an estate for
years in real property, is hypothecated for the performance of an act, without
the necessity of a change of possession.” (Civ. Code § 2920, subd. (a).)
Plaintiff alleges that the breached commitment was for a loan secured by real
property, which is a mortgage. (FAC ¶ 13.) Plaintiff has pled neither
satisfaction of Section 2922 nor a binding loan commitment, because the alleged
commitment did not state all material terms of the loan.
“Letters of commitment, for which a fee is
paid, constitute an option to the applicant to obtain the loan at the specified
terms. [Citations.] 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.)
Here, Plaintiff concedes that the April 6,
2022 email from Razavi to Plaintiff did not contain all material terms of the
loan, but suggests that Razavi stated all material terms of the loan in the
parties’ April 4, 2022 telephone call. (Opposition, p. 9:9.) This contention is
not supported by either the allegations or the parties’ emails requested for
judicial notice. The FAC alleges that the
amount of the loan confirmed by Razavi on April 4 would be subject to the
appraised values of the properties, up to $30 million. (FAC ¶ 13(e).) Likewise,
in the parties’ emails requested for notice, Razavi wrote to Plaintiff on April
6, 2022, “I will gladly give you the max loan I can based on the appraised
values.” (RJN, Ex. A.) The amount of the loan is an essential term, and “[w]hen
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.” (Peterson
Development Co., 233 Cal.App.3d at 115.) Because the amount of the loan was
not provided in the alleged commitment, Plaintiff’s first cause of action for
breach of contract and second cause of action for promissory estoppel fail.
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.” (FAC ¶ 42.) “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.” (FAC ¶¶ 43-45.) The negligent
misrepresentation claim is also based on the allegation that Defendant
misrepresented that the Loan Commitment offered included a 2.25% interest rate.
(FAC ¶ 47.)
The FAC
has not pled any specific conduct taken by Plaintiff in reliance on Defendant’s
misrepresentation that the Loan Commitment would include a 2.25% interest rate.
Rather, Plaintiff only alleges that he relied upon Defendant’s Loan Commitment
itself: “During this time, [Plaintiff] relied
on [Defendant’s] Loan Commitment and did not continue conversations with First
Republic Bank or any other alternative sources of financing and forwent the
opportunity to pursue and close on the First Republic Bank loan.” (FAC ¶ 21.) However,
as discussed above, Plaintiff could not have reasonably relied on the Loan
Commitment because it did not contain all material terms of the loan. “When the commitment does not contain all of the essential
terms ... the prospective borrower cannot rely reasonably on the commitment…” (Peterson
Development Co., 233 Cal.App.3d at 115.) Because
Plaintiff has not pled the element of justifiable reliance, the demurrer is
sustained as to the third and fourth causes of action.
Fifth 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 between Plaintiff and First Republic Bank. (FAC ¶ 58.)
Plaintiff received 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. (FAC ¶ 12.)
As the Court found with respect to the
Complaint, the cause of action for interference with contract fails because
Plaintiff has not alleged the existence of any valid contract between himself
and a third party. The alleged loan commitment from FRB was an offer, not a
contract. (FAC ¶ 12.) Plaintiff has also pled no facts showing “intentional
acts designed to induce a breach of disruption of the contractual relationship”
by Defendant. Accordingly, the demurrer is sustained as to the fifth cause of
action.
Defendant moves to strike the allegations in
the FAC related to recovery of attorney’s fees and punitive damages. (FAC ¶¶
47, 56, 62; Prayer ¶¶ 2, 4.) The demurrer is sustained as to all causes of
action, and so the motion to strike is denied as moot.