Judge Barbara M. Scheper, Case Number: 22STCV25038, Date: 2023-08-24 Tentative Ruling

Judge: Barbara M. Scheper, Case: 22STCV25038, Date: 2023-08-24 Tentative Ruling

Case Number: 22STCV25038 Hearing Date: August 24, 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 Second Amended Complaint; Motion to Strike

Defendant MUFG Union Bank, N.A. (Defendant) demurs to the Second Amended Complaint (SAC) of Plaintiff Richard Saghian (Plaintiff) and moves to strike portions of the SAC. The demurrer is sustained without leave to amend and 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.)

The factual allegations in the SAC are unchanged from those in Plaintiff’s prior complaints. Again, Plaintiff’s claims arise from Defendant’s alleged breach of a loan commitment to Plaintiff made in April 2022. On April 4, 2022, Nader Razavi, a Director of Defendant, confirmed the terms of three loans to Plaintiff; specifically, Razavi stated that the loans would be to Plaintiff individually, at a 2.25% interest rate for ten years, followed by a 20-year variable rate term pegged to a benchmark rate. (SAC ¶ 17.) The collateral for the loans would be three specified residential properties in Los Angeles and Malibu. (SAC ¶ 17(d).) The amount of the loan would be the highest amount supported by the appraised values of the properties, up to $30 million. (SAC ¶ 17(e).)

Plaintiff had entered two prior loans with Defendant on similar terms, and the parties understood that the new loans would operate in the same way. (SAC ¶ 19.) Two days after the call, on April 6, 2022, Razavi “documented the terms of the Loan Commitment in correspondence with Melissa Morton [Plaintiff’s business manager].” (SAC ¶ 20.) 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. Razavi also wrote to Morton, “Congratulations to Richard and the team!” (Ibid.)

Razavi 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. (SAC ¶ 24.) Relying on Defendant’s representations, Plaintiff did not continue conversations he had been conducting with other banks for alternative sources of financing. (SAC ¶ 25.)

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 its promise. (SAC ¶ 37.) Due to further increases in the federal funds rate, Plaintiff was unable to obtain a materially similar loan elsewhere in the market. (SAC ¶ 41.)

The SAC asserts three causes of action against Defendant, for Promissory Estoppel, Fraud, and Negligent Misrepresentation.

“The elements of promissory estoppel are (1) a clear and unambiguous promise by the promisor, and (2) reasonable, foreseeable and detrimental reliance by the promisee.” (Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 929.) “The promise must . . . be ‘clear and unambiguous in its terms.’ [Citation.] ‘Estoppel cannot be established from ... preliminary discussions and negotiations.’ [Citation.]” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044.)

Plaintiff’s promissory estoppel claim is based on Defendant’s alleged breach of its promise to Plaintiff “that it would process three loans for PLAINTIFF, all of which ‘are being offered at 2.25% on the 10 fixed, interest only program.’ ” (SAC ¶ 45.) The SAC alleges that Defendant’s promise of a 2.25% interest rate detrimentally induced Plaintiff to “[d]iscontinue[e] discussions with third parties regarding alternative loan options and rely[ ] on [Defendant] to complete the loan transaction at an interest rate of 2.25%.” (SAC ¶ 49.)

As in the prior complaints, Plaintiff’s cause of action for promissory estoppel fails for lack of reasonable reliance. “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.) Defendant’s alleged commitment to Plaintiff did not specify the amount of the loan, as the amount was to be contingent on the appraised values of the properties. (SAC ¶ 17.) “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.” (Peterson Development Co., 233 Cal.App.3d at 115.)

Plaintiff cannot avoid the failure to plead reasonable reliance by characterizing Defendant’s alleged promise as a “Rate Commitment” rather than a loan commitment. If a loan commitment that lacks all essential terms of the loan cannot induce reasonable reliance as a matter of law, a commitment to only a single term of the loan – the interest rate – is necessarily insufficient.

The lack of reasonable reliance also precludes Plaintiff’s claims for fraud and negligent misrepresentation. “[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.)

Again, Plaintiff has not pled justifiable reliance, because Defendant’s representations did not include all material terms of the loan and the promise of an interest rate alone cannot induce reasonable reliance. (SAC ¶ 17.) “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.) Accordingly, the demurrer is sustained. The motion to strike is denied as moot.