Judge: Mark A. Young, Case: SC129804, Date: 2022-08-02 Tentative Ruling
Case Number: SC129804 Hearing Date: August 2, 2022 Dept: M
CASE NAME: Roberts, et al., v. Bank of America, N.A., et al.
CASE NO.: SC129804
MOTION: Demurrer to the Fourth Amended Complaint
HEARING DATE: 8/2/2022
Legal Standard
A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (CCP §§ 430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
A special demurrer for uncertainty is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)
Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)
“Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to show in what manner plaintiff can amend the complaint, and how that amendment will change the legal effect of the pleading. (Id.)
MEET AND CONFER
Before filing a demurrer or motion to strike, the moving party must meet and confer in person or by telephone with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading. (CCP §§ 430.41, 435.5.) Counsel’s declaration satisfies the meet and confer requirement. (O’Brien Decl. ¶¶ 2-5.)
Analysis
Defendant Bank of America (BANA) demurs to the fraud cause of action. The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud must be pled with specificity. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity 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.)
“A plaintiff asserting fraud by misrepresentation is obliged to plead and prove actual reliance, that is, to “ ‘establish a complete causal relationship’ between the alleged misrepresentations and the harm claimed to have resulted therefrom.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835.) Aside actual reliance, a plaintiff must also show “justifiable” reliance, i.e., “circumstances were such to make it reasonable for [the] plaintiff to accept [the] defendant's statements without an independent inquiry or investigation.’” (Id. at 864.) The relevant intent is to induce reliance on the representation, not to defraud, deceive or produce a particular harm. (Small v. Fritz Cos., Inc. (2003) 30 Cal.4th 167, 173-174.)
On April 1, 2018, representatives of BANA made the following material misrepresentations over the phone directly to plaintiff. The employees represented there would be a 2% reduction in the mortgage rate over the 30-year loan. (4AC ¶ 18.) The employees told plaintiff on a weekly basis since April 2018 that plaintiff would get a loan modification and there would be no foreclosure and there would not be a notice of foreclosure. (Id.)
The Court previously found that the allegations regarding reliance were inadequate. Plaintiff offers the following new allegations. In reliance on this representation, Plaintiff: 1) never sought alternative financing offered by Fred Roberts; 2) did not file bankruptcy after consulting with counsel; 3) did not sell the property, as it had offers; 4) did not look to sell part of the property to raise cash as the plaintiff had investors ready too invest and help cure any default; 5) did not rent part of the property to raise money to pay the loan; and 6) would have obtained a loan from her sister, who agreed to loan money to cure any default “if there was no modification of the loan”. (4AC ¶ 19.) Plaintiff alleges that BANA never intended to make any loan modification, reduce the loan rate by 2%, or work with Plaintiff to pay down the subject note without foreclosure. (4AC ¶ 20.) Instead, BANA denied the loan modification and filed a notice of foreclosure. (4AC ¶ 21.) Plaintiff was therefore damaged by the difference between her modified and unmodified loan. (4AC ¶¶ 20, 22.) Moreover, the Notice of Foreclosure impacted Plaintiff’s credit capacity. (Id.)
The Court agrees with Plaintiff that the above reliance could provide sufficient “reasonable reliance” to sustain a fraud claim. For instance, in Bushell, a lender bank promised the plaintiff-homeowners that if they complied with the terms of a temporary mortgage plan, they would be offered a permanent loan modification and not be foreclosed. (Bushell v. JPMorgan Chase Bank, N.A. (2013) 220 Cal.App.4th 915, 923, 930-931.) Homeowners reasonably and detrimentally relied on these representations by complying with the plan. Homeowners made all payments under the program. They also repeatedly contacted the bank and prepared documents at the bank’s request, The homeowners also discontinued efforts to pursue a refinance or other means of avoiding foreclosure. (Id.) The bank instituted foreclosure proceedings anyway and thereby subjected itself to a fraud cause of action for false promise. (Id.)
Similarly, Plaintiff relied on multiple representations that her loan would be modified on certain terms. Just as the homeowners in Bushell, if not for the promise of a modification, Plaintiff would have sought alternative financing which would have prevented default. (4AC ¶ 19.) Plaintiff also worked “over 100 hours” on the loan modification, though it is unclear whether this was at BANA’s request. (4AC ¶ 22.) BANA also filed a notice of foreclosure despite the proffer of a modification. (4AC ¶ 21.) Thus, the allegations concerning Plaintiff’s reliance are sufficiently stated for pleading purposes. With that said, the Court does agree that Plaintiff’s reliance in other instances are insufficient. For instance, Plaintiff pleads that she can still cure the default using the cited alternative financing despite not obtaining the modification. Also, Plaintiff has not pled that her reliance on the modification prevented her sister from loaning funds to her, especially considering that the funds were conditional on the modification being denied.
Plaintiff, however, fails to plead that BANA intended to induce Plaintiff to act in reliance on the misrepresentations. Plaintiff pleads that when defendant made the promises regarding the modification, “defendant should [have] reasonably expect[ed] to induce the action taken by the plaintiff[.]” (4AC ¶ 19.) Plaintiff has framed the allegations in terms of negligence (i.e., “should reasonably expect”) rather than an intentional fraud. Plaintiff must plead that BANA intended to induce reliance on their statement.
As this is curable, the Court finds leave to amend appropriate despite the numerous pleadings filed in this action. The Court is not inclined to grant any further leave. Accordingly, BANA’s demurrer is SUSTAINED with leave to amend.