Judge: Joseph Lipner, Case: 23STCV25080, Date: 2024-05-14 Tentative Ruling

Case Number: 23STCV25080    Hearing Date: May 14, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant Movement Mortgage, LLC (“Defendant”) moves for judgment on the pleadings as to the Complaint filed by Plaintiff Brittany Lattimor (“Plaintiff”).

The Court DENIES the motion.

Background

This case relates to a real estate loan transaction. The following facts are taken from the Complaint, and the Court accepts them as true for the purposes of the motion for judgment on the pleadings.

Plaintiff is a disabled U.S. Veteran. In January 2022, Plaintiff decided to sell her home in Sacramento and move to Los Angeles. Plaintiff engaged Defendant to obtain financing for the purchase of a home in Los Angeles for Plaintiff to reside in.

Plaintiff wanted to use Veteran Affairs (“VA”) financing. Defendant’s loan officer told Plaintiff that VA financing would be a good option for her.

Plaintiff then found a property located at 999 North Doheny Drive 207, West Hollywood, California 90069 (the “Property”), with a purchase price of $695,000.00.

The Property had been approved for VA financing since 2019, on the condition that the buyer not lease the property for one year. Plaintiff had no intention of leasing the property, as she planned to use it as her primary residence.

Defendant knew that the Property was approved for VA financing with conditions. However, Defendant told Plaintiff that the Property was “not approved” for VA financing, and that Plaintiff had the option to instead seek a conventional loan. Defendant later admitted in response to Plaintiff’s Consumer Financial Protection Bureau complaint that it was Defendant’s internal policy to treat the VA’s ‘accepted with conditions’ status as ‘not approved,’ which was why Defendant told Plaintiff that the property was not approved for VA financing.

Defendant also represented to Plaintiff that she could attempt to refinance using VA financing in the future by applying for an exception as to the Property.

In reliance on Defendant’s representations, Plaintiff obtained a conventional loan through Defendant.

Defendant’s process for obtaining the conventional loan required that Plaintiff provide documentation including a letter detailing sensitive personal information regarding her time serving in the U.S. military. Defendant also required that Plaintiff’s parents be co-signers on the loan and co-owners of the property. This process caused Plaintiff, who has PTSD as a result of her military service, to suffer flashbacks, anxiety, and other emotional distress.

Plaintiff filed this action on October 13, 2023, raising claims for (1) intentional misrepresentations; (2) fraud/concealment; (3) intentional infliction of emotional distress (“IIED”); and (4) violation of unfair competition laws, Business & Professions Code, sections 17200, et seq.

Defendant answered on November 30, 2023.

Defendant filed this motion on February 21, 2024. Plaintiff filed an opposition and Defendant filed a reply.

Legal Standard

Either prior to trial, but after the time to answer or demur has passed, or at the trial, the plaintiff or the defendant may move for judgment on the pleadings and that the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791; See also Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586 [The non-statutory motion for judgment on the pleadings can be made at any time, even during trial, since the grounds for a general demurrer are never waived.], see also Code Civ. Proc., §438(f).)  

A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed. (See, e.g., Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (TRG 1998) §§ 7:275, 7:322; Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198.) Presentation of extrinsic evidence is therefore not proper on a motion for judgment on the pleadings. (Id.; Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) Both a demurrer and a motion for judgment on the pleadings accept as true all material factual allegations of the challenged pleading, unless contrary to law or to facts of which a court may take judicial notice. (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677; Edwards v. Centex Real Estate Corp, (1997) 53 Cal.App.4th 15, 27.) 

The motion may be made only after one of the following conditions has occurred: (1) If the moving party is a plaintiff, and the defendant has already filed his or her answer to the complaint and the time for the plaintiff to demur to the answer has expired; (2) If the moving party is a defendant, and the defendant has already filed his or her answer to the complaint and the time for the defendant to demur to the complaint has expired. (Code Civ. Proc., § 438(f).) The motion provided for in Code of Civil Procedure section 438 may be made even though either of the following conditions exist:  (1) The moving party has already demurred to the complaint or answer, as the case may be, on the same grounds as is the basis for the motion provided for in this section and the demurrer has been overruled, provided that there has been a material change in applicable case law or statute since the ruling on the demurrer; (2) The moving party did not demur to the complaint or answer, as the case may be, on the same grounds as is the basis for the motion provided for in this section. (Code Civ. Proc., § 438(g).) No motion may be made pursuant to Code of Civil Procedure section 438 if a pretrial conference order has been entered pursuant to Code of Civil Procedure section 575, or within 30 days of the date the action is initially set for trial, whichever is later, unless the court otherwise permits. (Code Civ. Proc., § 438(e).)   

Discussion

Intentional Misrepresentation – First Claim

“The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another’s reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

            Defendant argues that it has an internal policy of treating properties that are VA-approved with conditions as ‘not approved,’ and that Defendant’s representation that the Property was not approved was therefore not false. “Rather, as confirmed by [Defendant], based upon their internal policies, [Plaintiff] was ‘not approved’ because [Defendant] treats ‘accepted with conditions’ status as a non-approval. So, [Defendant’s] statement about the fact that it had not approved her for a loan was in fact accurate.” (Motion at p. 8:25-28.)

Defendant’s alleged statement was not accurate in a manner that entitled Defendant to judgment as a matter of law.  This is a matter of logic.  The statement that “you may have a cookie if you do your chores first” is materially different from the statement that “you may not have a cookie.” In the first case, there is a very real possibility of obtaining a cookie. In the second case, there is no such possibility. Here, Plaintiff, like many home buyers, intended to live in the home that she was buying. The assertion that a condition that she not rent out her new home for one year rendered VA financing essentially unavailable does not entitle Defendant to judgment.

Nor does the fact that Defendant had enshrined this conflation in its internal policy excuse it from fraud claims. If that were the case, any company could routinely avoid fraud claims by creating an internal policy of making misrepresentations to customers, which it would then claim it honestly believed to be true based on the internal policy.

Furthermore, insofar as Defendant seeks a factual determination of the truth of its representations or its knowledge of their truth or falsity, the Court rejects such an argument at this stage. Plaintiff has adequately pled that Defendant’s representations about VA approval were false and that Defendant knew they were false. It is not proper to challenge the truth of well-pleaded allegations at the pleading stage.

Defendant argues that it did not represent that Plaintiff needed to pursue a conventional loan, but rather that she had the option to do so. This is a factual issue not proper for determination at the pleading stage.

Defendant argues that its representation that Plaintiff could refinance in the future is not actionable fraud because it is based upon future events. However, Plaintiff has alleged that the representation was presently false at the time Defendant made it – the Property had already been approved for VA financing, with particular conditions. Plaintiff could not have approved for an exception to the ‘unapproved’ status, because the Property was not unapproved.

The Court denies the motion as to this claim.

Fraud/Concealment – Second Claim

“[T]he elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Lovejoy v. AT&T Corp. (2004) 119 Cal.App.4th 151, 157–158.)

A duty to disclose arises when “[1] a defendant owes a fiduciary duty to a plaintiff … [2] when the defendant has exclusive knowledge of material facts not known to the plaintiff; [3] when the defendant actively conceals a material fact from the plaintiff; or [4] when the defendant makes partial representations but also suppresses some material facts.” (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199 [internal citations and quotation marks omitted; cleaned up].)

Defendant argues that it had no duty to disclose the approval with conditions because it did not have a fiduciary relationship with Plaintiff. “[A]bsent special circumstances … a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender.” (Oaks Management Corporation v. Superior Court (2006) 145 Cal.App.4th 453, 466.)

Without evaluating whether a fiduciary relationship existed, the Court finds that Plaintiff has adequately alleged each of the remaining three circumstances. Plaintiff alleged that Defendant had exclusive knowledge that the Property was approved with conditions. Plaintiff alleged that Defendant concealed the fact that the Property was approved with conditions by stating that it was unapproved. Finally, even if the non-rental condition had been a potential deal-breaker for Plaintiff, Defendant made a partial representation but omitted key facts by stating that the Property was unapproved rather than conditioned on non-rental.

The Court denies the motion as to this claim.

IIED – Third Claim

“The elements of a prima facie case for the tort of intentional infliction of emotional distress are: (1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate causation of the emotional distress by the defendant’s outrageous conduct. Conduct to be outrageous must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.” (Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1009, citation and ellipses omitted.)

Defendant argues that Plaintiff has not adequately identified information Defendant sought regarding Plaintiff’s service. Plaintiff, however, is not obligated to plead evidentiary facts; it is sufficient that she plead ultimate facts that support her claims. While the allegation that Defendant sought sensitive information regarding Plaintiff’s service is relatively vague, it is sufficient at the pleading stage.  Defendant can learn additional facts in discovery and if appropriate challenge this claim at the summary judgment or trial stage.

Defendant argues that Plaintiff has not alleged that Defendant sought information regarding her service for an improper purpose. However, an improper purpose is not required – reckless disregard to the probability of causing emotional distress is sufficient. Depending on the types of information Defendant sought, Plaintiff may be able to plead reckless disregard.

Defendant argues that Plaintiff has not alleged that her information was disclosed to a third party or used for a purpose other than to evaluate her loan. Defendant provides no authority indicating that this is necessary to sustain an IIED claim.

The Court denies the motion as to this claim.

Unfair Competition Law – Fourth Claim

To set forth a claim for a violation of Business and Professions Code section 17200 (“UCL”), Plaintiff must establish Defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) A cause of action for unfair competition “is not an all-purpose substitute for a tort or contract action.” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173.)

            Defendant argues that Plaintiff’s UCL claim fails because it is derivative of her other claims. Because Plaintiff’s first two claims survive, Plaintiff’s UCL claim survives.

            The Court denies the motion as to this claim.