Judge Stephen Morgan, Case Number: 23AVCV00247, Date: 2023-08-08 Tentative Ruling

Judge: Stephen Morgan, Case: 23AVCV00247, Date: 2023-08-08 Tentative Ruling

Case Number: 23AVCV00247 Hearing Date: October 31, 2023 Dept: A14

Background

This is an action regarding real property. Plaintiff Dennis Bretches (“Plaintiff”) alleges that on or about January 02, 2009, he took out a mortgage loan against the real property located at 1910 Shamrock Avenue Palmdale, California 93550 (the “Property”) from Instamortgage.com in the amount of $199,350.00. Plaintiff further alleges that in or around June 2020, he entered into a forbearance agreement to last 18 months and, on or around December 2021, the forbearance ended. Plaintiff presents that he continued to make his regularly scheduled mortgage payments starting in December 2021. Plaintiff contends that on or around August 2022, Defendant Nationstar Mortgage, LLC dba Mr. Cooper (“Defendant”) stopped accepting payments from Plaintiff. Plaintiff alleges that over the next several months, he would regularly seek non-foreclosure alternatives from various agents of Defendants, but all efforts were rebuffed and, on or around January 2023, Plaintiff submitted a complete loss mitigation application to Defendant for review and is still awaiting the results.

On March 06, 2023, Plaintiff filed his Complaint alleging four causes of action for: (1) Negligent Misrepresentation, (2) Intentional Misrepresentation, (3) Violation of Business and Professions Code § 17200, and (4) Promissory Estoppel.

On April 13, 2023, Defendant filed a Demurrer, subsequently granted.

On June 13, 2023, Plaintiff filed his First Amended Complaint (“FAC”).

On July 11, 2023, Defendant filed a Demurrer to the FAC, subsequently granted.

On September 08, 2023, Plaintiff filed his Second Amended Complaint (“SAC”), alleging the same four causes of action as the Complaint and FAC.

On October 04, 2023, Defendant filed a Demurrer to the SAC.

On October 18, 2023, Plaintiff filed his Opposition.

On October 23, 2023, Defendant filed his Reply.

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Legal Standard

Standard for Demurrer – 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.¿ (Taylor v. City of Los Angeles Dept. of Water and Power¿(2006) 144 Cal. App. 4th 1216, 1228.)¿ In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.¿ (Cal. Code Civ. Proc. § 430.30(a).)¿A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.¿ (SKF Farms v. Superior Court¿(1984) 153 Cal.App.3d 902, 905.)¿ Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.¿¿(Ibid.)¿¿The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.¿ (Hahn,¿supra,¿147 Cal.App.4th at 747.)¿¿¿¿¿¿¿¿

¿¿¿¿¿¿¿¿

A general demurrer admits the truth of all factual, material allegations properly pled in the challenged pleading, regardless of possible difficulties of proof.¿¿(Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿ Thus, no matter how unlikely or improbable, plaintiff’s allegations must be accepted as true for the purpose of ruling on the demurrer.¿¿(Del E. Webb Corp. v. Structural Materials Co.¿(1981) 123 Cal.App.3d 593, 604.)¿ Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken.¿¿(Vance v. Villa Park¿Mobilehome¿Estates¿(1995) 36 Cal.App.4th 698, 709.)¿A general demurrer does not admit contentions, deductions, or conclusions of fact or law alleged in the complaint; facts impossible in law; or allegations contrary to facts of which a court may take judicial notice.¿¿(Blank,¿supra, 39 Cal.3d at p. 318.)¿¿¿¿¿¿¿¿¿

¿¿¿¿¿¿¿¿¿

Pursuant to¿Code Civ. Proc.¿§430.10(e), the party against whom a complaint has been filed may object by demurrer to the pleading on the grounds that the pleading does not state facts sufficient to constitute a cause of action.¿ It is an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable probability that the defect can be cured by amendment.¿¿(Schifando¿v. City of Los Angeles¿(2003) 31 Cal.4th 1074, 1082,¿as modified (Dec. 23, 2003).)¿¿¿¿¿¿¿¿¿

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Meet and Confer Requirement – Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Cal. Code Civ. Proc. §§ 430.41 and 435.5.)

The Court notes that Defendant, the moving party, attempted to meet and confer via email correspondence on September 18, 2023; however, no agreement was reached between counsels. (Decl. Jared D. Bissell ¶¶ 3-4.)

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Discussion

Defendant demurs to all four causes of action.

As an initial matter, Defendant argues that the causes of action are time-barred.

The SAC alleges:

In June 2020, MR. COOPER made the following representations: (1) at the end of the 2020 FORBEARANCE, PLAINTIFF would simply need to resume making regular monthly mortgage payments, (2) any and all payments made after December 2021 would be accepted so long as PLAINTIFF makes regular monthly mortgage payments, and (3) if PLAINTIFF is unable to make the monthly payments after the expiration of the 2020 FORBEARANCE, then MR. COOPER would automatically place PLAINTIFF into loan modification review or other non-foreclosure alternatives.

(SAC ¶ 13.)

Plaintiff argues that his cause of action is not time barred by the statute of limitations as a contract cause of action does not accrue until the breach occurs and the statute of limitations for written contracts is four years.

Defendant’s Reply argues that Plaintiff cannot point to any representation of a past or existing material fact made in June 2020 and that Plaintiff has failed to provide that the representations were made in writing to allow for a four-year statute of limitations period.

First, the argument that Plaintiff cannot point to any representation of a past or existing material fact made in June 2020 was not presented in moving papers.” It is well established that new arguments presented in reply briefs will not be considered. (See In re Marriage of Khera & Sameer (2012) 206 Cal.App.4th 1467, 1477-78 [“ ‘Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant. [Citations.]”]; Varjabedian v. City of Madera (1977) 20 Cal.3d 285, 295, fn. 11 [. . .“Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant.”]; People v. Smithey (1999) 20 Cal.4th 936, 1017, fn. 26 [“ ‘[T]he rule is that points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before. [Citations.]’ [Citation.]”].) Defendant had only discussed this argument as to the Negligent Misrepresentation claim. As such, the Court will not consider this new argument for the purposes of the time-barred argument.

The Court notes that Defendant’s Reply argument concedes that, at most, Defendant failed to disclose the alleged impact of Plaintiff’s 2020 forbearance on future mortgage payments after the end of the forbearance period. Disclosure is discussed, infra.

It is unclear why both parties are arguing that the misrepresentation claims are covered under contract law. The SAC does not allege a breach of contract nor does it indicate any written instrument is involved.

Discussing negligent misrepresentation, the Second District Court of Appeal stated: “Negligent misrepresentation is born of the union of negligence and fraud. If negligence is the mother and misrepresentation the father, it more closely resembles its mother.” (Ventura County Nat. Bank v. Macker (1996) 49 Cal.App.4th 1528,1531.) The statute of limitations for negligence is two years from injury. (Ibid; see also So v. Shin (2013) 212 Cal.App.4th 652, 662 [“The limitations period for a cause of action for ordinary negligence is two years (Code Civ. Proc., §§ 335, 335.1)”]. Regarding intentional misrepresentation, the statute of limitations for fraud is three years. (Code Civ. Proc. § 338(d).)

Here, it is alleged that the discovery of the misrepresentation occurred in August 2022. Two years from August 31, 2022, the last date in August, is August 2024, and three years from August 31, 2022 is August 31, 2025. Plaintiff filed his Complaint on March 06, 2023. Accordingly, the misrepresentation actions are not time barred.

i. First Cause of Action (Negligent Misrepresentation)

Defendant argues that there is no misrepresentation as: (1) Plaintiff does not identify any alleged misrepresentation of a past or existing material fact; and (2) Plaintiff concedes that Defendant accepted payments after the end of the forbearance and reviewed Plaintiff’s loan modification application, meaning that Plaintiff was placed into loan modification review; (3) the SAC lacks specificity as it does not identify the individual who made the misrepresentation or a date upon which the misrepresentation was made; and (3) a financial defendant does not owe a duty of care to a borrower when the institution’s involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. Defendant presents that the SAC is contradictory because it alleges that Defendant did not allow Plaintiff to resume making regular mortgage payments, but accepted payments from Plaintiff after the end of the forbearance. Defendant believes that this amendment is precluded under the sham pleading doctrine.

Plaintiff presents that he has alleged a misrepresentation in the SAC and that the pleadings show that there was an oral agreement that was broken, so there is no contradiction; that all facts were pled with specificity; and that Defendant does owe Plaintiff a duty of care because Defendant is a financial institution and its representations created a reliance by Plaintiff.

Defendant reiterates that the sham pleading doctrine applies as Plaintiff has conceded that certain payments were accepted and that a false promise to perform in the future does not support a cause of action for negligent misrepresentation as there was no representation of a past or material fact when the representations were made in June 2020.

Regarding whether there was no representation of past or material fact, Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159 (“Tarmann”) states:

Certain broken promises of future conduct may, however, be actionable. Civil Code section 1710, subdivision (4) defines one type of deceit as "A promise, made without any intention of performing it." As Witkin explains, "A false promise is actionable on the theory that a promise implies an intention to perform, that intention to perform or not to perform is a state of mind, and that misrepresentation of such a state of mind is a misrepresentation of fact. The allegation of a promise (which implies a representation of intention to perform) is the equivalent of the ordinary allegation of a representation of fact." (5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 670, p. 120, italics in original.)

To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing. ( Hills Trans. Co. v. Southwest Forest Industries, Inc. (1966) 266 Cal.App.2d 702, 708 [72 Cal.Rptr. 441]; Regus v. Schartkoff (1957) 156 Cal.App.2d 382, 389 [319 P.2d 721].) CA[5b] [5b] Given this requirement, an action based on a false promise is simply a type of intentional misrepresentation, i.e., actual fraud. The specific intent requirement also precludes pleading a false promise claim as a negligent misrepresentation, i.e., "The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true." ( Civ. Code, § 1710, subd. (2).) Simply put, making a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise. Moreover, we decline to establish a new type of actionable deceit: the negligent false promise.

The factual allegations presented by Plaintiff are:

On or about January 2, 2009, PLAINTIFF took out a mortgage loan against the PROPERTY from Instamortgage.com in the amount of $199,350.00 (the “LOAN”). (A true and correct copy of the Deed of Trust (“DOT”); recorded on January 9, 2009 with the Los Angeles County Recorder’s Office as Document Number 2009-0029965; is attached hereto as Exhibit A and is herein incorporated by reference. See Exhibit A.

In or around June 2020, PLAINTIFF entered into a forbearance agreement offered by Mr. Cooper to last 18 months (“2020 FORBEARANCE”).

The above representations were not true because (1) at the end of the 2020 FORBEARANCE, DEFENDANTS did not allow PLAINTIFF to resume making regular mortgage payments, but rather gave PLAINTIFF the following ultimatum: make a lump sum payment of the entire past due balance or face foreclosure; (2) some of the payments made after December 2021 were rejected, specifically Defendants rejected any payments made by PLAINTIFF after August 2022; (3) MR. COOPER failed to place PLAINTIFF into loan modification review or other nonforeclosure alternative, rather MR. COOPER proceeded with the foreclosure process and as a result PLAINTIFF was forced to sell his home for undervalue so as to avoid foreclosure.

MR. COOPER made the above representations without reasonable ground for believing them to be true.

MR. COOPER made these representations, in order to induce PLAINTIFF into accepting the 2020 FORBEARANCE. The 2020 FORBEARANCE was designed to lull PLAINTIFF into inaction and to face foreclosure.

On or around December 2021, the 2020 FORBEARANCE ended.

PLAINTIFF continued to make his regularly scheduled mortgage payments starting December 2021.

On or around August 2022, MR. COOPER stopped accepting payments from PLAINTIFF.

Over the next several months, PLAINTIFF would regularly seek non-foreclosure alternatives from various agents of Defendants. However, PLAINTIFF’s efforts to seek non-foreclosure alternatives were systematically rebuffed by Defendants’ agents.

On or around January 2023, PLAINTIFF submitted a complete loss mitigation application to MR. COOPER for review (“JANUARY 2023 APPLICATION”).

PLAINTIFF did not receive notification from MR. COOPER that any additional documents were required for review during the application process, leading PLAINTIFF to believe that a complete loss mitigation application had been provided.

PLAINTIFF is still awaiting the results of the JANUARY 2023 APPLICATION.

On or around May 15, 2023, PLAINTIFF was forced to sell the PROPERTY at a low rate due to the damage in equity caused by MR. COOPER.

(SAC ¶¶ 11-24.)

Thus, at issue, is a case of intentional misrepresentation, not negligent misrepresentation.

ii. Second Cause of Action (Intentional Misrepresentation)

Defendant reiterates similar arguments to the Second Cause of Action as to the First Cause of Action:

· There was no misrepresentation as Defendant allegedly promised to allow Plaintiff to forbear some of the loan, accept post-forbearance payments, and put the loan into a loan modification review, which it did.

· Defendant did not promise to forgo its rights to reject Plaintiff’s payments if the payments were insufficient to bring the loan current.

· The SAC lacks specificity as it is s devoid of supporting allegations that reflect what, exactly, Defendant’s employees conveyed that constituted misrepresentations.

Plaintiff reiterates his previous arguments: (1) there has been a misrepresentation, and (2) Plaintiff has pled all facts with specificity.

Defendant in Reply, once again, argues that there has been no misrepresentation or past or existing fact. The Court has addressed this ante.

Defendant’s Reply next argues that Plaintiff is presenting a false narrative that Defendant failed to place Plaintiff into a loan modification while admitting that Plaintiff submitted a loan modification application that was being reviewed at the time of the lawsuit. The Court reiterates that the allegations are such that Defendant informed Plaintiff that he would “automatically” be placed into a loan modification or review. (SAC ¶ 13.) Based on the allegations, this was not the case as Plaintiff himself had to complete and submit a loss mitigation application to Defendant. (SAC ¶ 21.)

Finally, Defendant’s Reply argues that (1) Plaintiff’s Opposition does not address specificity, including the names of the individual who made the representation and their authority to speak; and (2) Defendant never promised to forgo its rights to reject Plaintiff’s payments if they were insufficient to bring the loan current.

Defendant is Nationstar who does business as Mr. Cooper. It is apparent that Defendant had authority to speak.

“The elements of fraud that will give rise to a tort action for deceit 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.’ ” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974 [internal quotation marks omitted].)

Plaintiff, in the Intentional Misrepresentation Cause of Action states, in relevant part:

In June 2020, MR. COOPER made the following representations to PLAINTIFF that: (1) at the end of the 2020 FORBEARANCE, PLAINTIFF would simply need to resume making regular monthly mortgage payments, (2) any and all payments made after December 2021 would be accepted so long as PLAINTIFF makes regular monthly mortgage payments, and (3) if PLAINTIFF is unable to make the monthly payments after the expiration of the 2020 FORBEARANCE, then MR. COOPER would automatically place PLAINTIFF into loan modification review or other non-foreclosure alternatives.

The above representations made by MR. COOPER were false because (1) at the end of the 2020 FORBEARANCE, DEFENDANTS did not allow PLAINTIFF to resume making regular mortgage payments, but rather gave PLAINTIFF the following ultimatum: make a lump sum payment of the entire past due balance or face foreclosure; (2) some of the payments made after December 2021 were rejected, specifically Defendants rejected any payments made by PLAINTIFF after August 2022; (3) MR. COOPER failed to place PLAINTIFF into loan modification review or other non-foreclosure alternative, rather MR. COOPER proceeded with the foreclosure process and as a result PLAINTIFF was forced to sell his home for undervalue so as to avoid foreclosure.

MR. COOPER knew that the representation was false when they made it, or that they made the representation recklessly and without regard for its truth.

MR. COOPER intended to make these representations, in order to induce PLAINTIFF into accepting the 2020 FORBEARANCE. The 2020 FORBEARANCE was designed to lull PLAINTIFF into inaction and to face foreclosure.

PLAINTIFF was harmed in that he was forced to sell his house for undervalue to avoid foreclosure.

PLAINTIFF’S reliance on MR. COOPER’S representation was a substantial factor in causing him harm. Had PLAINTIFF not relied on MR. COOPER’S representation, he would have been able to refinance while his credit was still good, and while the interest rates were better; or in the alternative he would have listed the PROPERTY way in advance of the foreclosure proceedings and would have avoided the urgent undervalue sale of the PROPERTY.

(SAC ¶¶ 35-40.)

The Court notes that whether Defendant had a right to reject Plaintiff’s payments if the payments were insufficient to bring the loan current is not an issue for this Demurrer.

The Court has reviewed the Complaint, the FAC, and the SAC. There does not appear to be an application of the sham pleading doctrine as the new allegations regarding the specifics of the misrepresentation were absent from the previous pleadings.

First, the Court must address several of Defendant’s arguments in conjunction with the Complaint:

· A demurrer admits all factual allegations of the pleading; however, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken.¿¿(Vance v. Villa Park¿Mobilehome¿Estates¿(1995) 36 Cal.App.4th 698, 709.) Though Defendant asserts that the statement “On or around January 2023, PLAINTIFF submitted a complete loss mitigation application to MR. COOPER for review” is conclusory, Defendant has not provided exhibits to contradict the statement.

· Though Defendant argues that Plaintiff fails to identify the person that purportedly made the misrepresentations, all pleadings clearly identify “Mr. Cooper” as the individual making these representations.

The various pleadings concede that Defendant accepted mortgage payments from December 2021 to August 2022. (Complaint ¶¶ 14-15, FAC ¶¶ 15-16, 25-26; SAC ¶¶ 18-19.) The Court notes that the SAC includes some conflicting allegations. Specifically, despite stating that certain payments were accepted, the SAC also states “at the end of the 2020 FORBEARANCE, DEFENDANTS did not allow PLAINTIFF to resume making regular mortgage payments, but rather gave PLAINTIFF the following ultimatum: make a lump sum payment of the entire past due balance or face foreclosure.” (SAC ¶ 14.) The Court will consider the December 2021 to August 2022 payments as received as that is what is alleged and has been alleged in various iterations of the pleadings.

Based on the Court’s analysis of the pleadings, the SAC states: (1) Defendant made a representation that “any and all” payments made after the end of the 2020 forbearance would be accepted so long as they were regular monthly mortgage payments and if Plaintiff was unable to do so, he would place automatically into a loan modification review of other non-foreclosure alternative and this representation was false as payments stopped being accepted in August 2022 and Plaintiff was not placed into a loan modification review or other non-foreclosure alterative as Cooper proceeded with the foreclosure process (SAC ¶¶ 13-24, 25-32); (2) Defendant made the representation without reasonable ground for believing it to be true (SAC ¶ 28); (3) Plaintiff justifiably relied on the representation because Defendant is experienced in real estate matters as a lending dealer and had the loan account for the Property (SAC ¶ 29); and (5) Plaintiff suffered resulting damages in the form of selling the Property at a low rate (SAC ¶ 24, 31).

Regarding intent to deceive Plaintiff, the SAC pleads: “MR. COOPER made these representations, in order to induce PLAINTIFF into accepting the 2020 FORBEARANCE. The 2020 FORBEARANCE was designed to lull PLAINTIFF into inaction and to face foreclosure.” (SAC ¶ 30.) Read liberally, the Court believes that this is sufficient to show intent.

As to duty, Defendants’ cases are distinguished. Eddy v. Sharp (1988) 199 Cal. App. 3d 858 discusses the duty of care an insurance broker has when undertaking to prepare an insurance proposal. Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal. App. 3d 1089 has been superseded by statute. (See Hatton v. Bank of Am., N.A. (E.D. Cal. July 08, 2015) 2015 U.S. Dist. LEXIS 89448 at *26 [discussing California law; “While Nymark is still good law, it was decided in 1991, long before the California Legislature passed the Homeowner Bill of Rights in 2013, which enunciated a ‘rising trend to require lenders to deal reasonably with borrowers in default to try to effectuate a workable loan modification.’ Jolley, 213 Cal.App.4th at 903 (‘these measures indicate that courts should not rely mechanically on the “general rule” that lenders owe no duty of care to their borrowers’)”].) Sheen holds:

Specifically, plaintiff asserted a negligence claim against Wells Fargo, alleging that the bank “owed Plaintiff a duty of care to process, review and respond carefully and completely to the loan modification applications Plaintiff submitted.” Plaintiff alleged that Wells Fargo breached this duty, causing him to “forgo alternatives to foreclosure,” and hence Wells Fargo is liable for monetary damages relating to the loss of his house, including the value of the home, the hotel and storage costs plaintiff incurred when he had to vacate the property, and the damage to his credit rating. Wells Fargo demurred, arguing that it owed plaintiff no such duty. The Court of Appeal affirmed the lower court‘s decision to sustain the demurrer but noted that “[t]he issue of whether a tort duty exists for mortgage modification has divided California courts for years.” (Sheen v. Wells Fargo Bank, N.A. (2019) 38 Cal.App.5th 346, 348 [250 Cal. Rptr. 3d 677] (Sheen).)

In this case, we address the issue dividing the lower courts: Does a lender owe the borrower a tort duty sounding in general negligence principles to (in plaintiff's words) “process, review and respond carefully and completely to [a borrower's] loan modification application,” such that upon a breach of this duty the lender may be liable for the borrower's economic losses—i.e., pecuniary losses unaccompanied by property damage or personal injury? (See, e.g., Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 398 [247 Cal. Rptr. 3d 632, 441 P.3d 881] (Gas Leak Cases).) We conclude that there is no such duty, and thus Wells Fargo's demurrer to plaintiff's negligence claim was properly sustained.

Neither plaintiff's assertion of a “special relationship” between himself and Wells Fargo nor his invocation of the factors articulated in Biakanja v. Irving (1958) 49 Cal.2d 647, 650 [320 P.2d 16] (Biakanja) provides a compelling basis to recognize such a duty. Plaintiff's claim arises from the mortgage contract he had with Wells Fargo, and as such, falls within the ambit of the economic loss doctrine. That judicially created doctrine bars recovery in negligence for pure economic losses when such claims would disrupt the parties' private ordering, render contracts less reliable as a means of organizing commercial relationships, and stifle the development of contract law. (See, e.g., Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988–989 [22 Cal. Rptr. 3d 352, 102 P.3d 268] (Robinson); Rest.3d Torts, Liability for Economic Harm (June 2020) § 3, com. b., p. 13 (Restatement).)

(Sheen, supra, 12 Cal.5th 905.)

However, though the context of Eddy is different from the action at hand, the Eddy holding made clear that negligent misrepresentation may be imposed by contract. (Eddy, supra, 199Cal.App.3d at 864.) The question that remains is whether, in the context of the interactions between the parties, a legal duty for negligent misrepresentation exists. “The determination of whether a duty exists is primarily a question of law. [Citation.]” (Ibid. [internal citations omitted].) “ ‘One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated, . . . facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.’ (Rest.2d Torts, § 551, subd. (2)(e); Wells v. John Hancock Mut. Life Ins. Co. (1978) 85 Cal.App.3d 66, 72, fn. 8 [149 Cal.Rptr.171]; Westrick v. State Farm Insurance (1982) 137 Cal.App.3d 685, 691, fn. 3 [187 Cal.Rptr.214].)” (Ibid.)

In this case, both parties describe the underlying misrepresentation as an oral contract. The Court believes a duty is imposed as (1) such an oral contract would be part of the parties’ private ordering, (2) the statement by Defendant was in addition to the written mortgage contract, and (3) the circumstances between the two parties would lead to an expectation of disclosure of Defendant’s ability to reject payments despite the oral agreement. Further, as discussed ante, “the California Legislature has expressed a strong preference for fostering more cooperative relations between lenders and borrowers who are at risk of foreclosure, so that homes will not be lost. (Civ. Code, §§ 2923.5, 2923.6.) These provisions, enacted in 2008, require lenders to negotiate with borrowers in default to seek loss mitigation solutions[]” (i.e., a residential lender owes a common law duty of car to offer, consider, or approve loan modification, or to explore and offer foreclosure alternatives). (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 903-05 (“Jolley”).) While Jolley has been questioned by federal courts, it has not been questioned by California courts and this Court is bound by it. That is, Defendant went beyond his role as a silent lender in dealings with Plaintiff during negotiations and the oral contract made was somewhat misleading to Plaintiff regarding the status of his loan.

Unlike the First Cause of Action, the Second Cause of Action focuses solely on the issue of acceptance of payments. Thus, it appears the alleged misrepresentation at issue is the representation that Defendant would accept the resumed mortgage payments. Plaintiff concedes in the SAC that Defendant accepted payments until August 2022. (SAC ¶¶ 19, 36.) Here, because Plaintiff alleges that the misrepresentation included a statement that “any and all payments made after December 2021 would be accepted so long as PLAINTIFF makes regular monthly mortgage payments,” there appears to be a misrepresentation. (See SAC ¶ 13.)

The SAC states: “MR. COOPER intended to make these representations, in order to induce PLAINTIFF into accepting the 2020 FORBEARANCE. The 2020 FORBEARANCE was designed to lull PLAINTIFF into inaction and to face foreclosure.” (Complaint ¶ 38.) Unlike the previous statement the Court found conclusory (“When aforesaid Defendants made these representations, they knew them to be false and made these representations with the intention to deceive and defraud PLAINTIFF and induce PLAINTIFF to act in reliance on these representations in the manner hereinafter, or with the expectation that PLAINTIFF would act.”), there is a showing that such actions were done with an expectation as to how Plaintiff would act in regards to the forbearance to support an inference that the misrepresentation was made with the intent to defraud. It is the province of the jury to find intent. (See Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, 1061 [“[F]raudulent intent is an issue for the trier of fact to decide.”].)

Accordingly, Plaintiff has sufficiently pled the Second Cause of Action (Intentional Misrepresentation) as the pleadings allege: (1) Defendant made a misrepresentation (SAC ¶¶ 13, 26), (b) Defendant knew the misrepresentation to be false (SAC ¶ 37); (c) Defendant had intent to defraud, i.e., to induce reliance; (d) Plaintiff relied on Defendant’s misrepresentation because Defendant is a lender dealing with the loan of the Property (SAC ¶ 29); and (e) resulting damage in the form of a forced sale of the Property (SAC ¶ 40).

i. Third Cause of Action (Violation of California Business & Professions Code § 17200)

Defendant argues that Plaintiff lacks standing as he cannot establish that Defendant’s conduct caused any pending foreclosure as he had been delinquent on the loan since 2020. Further Defendant presents that it has not acted unlawfully, fraudulently, or unfairly as here is no predicate act upon which to base a violation of Business & Professions Code § 17200.

Plaintiff argues that the argument that he lacks standing is moot as he has established valid claims. Plaintiff further argues that he has alleged the elements of an unfair, unlawful, and/or fraudulent business practice. Plaintiff presents that the Demurrer should be overruled as it fails to raise any legitimate objections to the SAC.

Defendant argues that the UCL does not apply as Plaintiff was already in default at the time of the purported misrepresentation, so Plaintiff has admitted that he lacks standing.

“Unfair competition” includes any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by the Business and Professions Code. (See Cal. Bus. & Prof. Code § 17200.)

“ ‘The scope of the UCL is quite broad. [Citations.] Because the statute is framed in the disjunctive, a business practice need only meet one of the three criteria to be considered unfair competition. [Citation.]’ (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1471 [49 Cal. Rptr. 3d 227] (McKell).) In addition to pleading facts sufficient to show that the defendant's acts constituted an unlawful, unfair, or fraudulent business practice, a plaintiff alleging a UCL cause of action must also plead facts sufficient to establish he or she has standing to bring an action under the UCL as amended by Proposition 64.” (Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1253.)

“A private plaintiff has standing to bring a UCL claim if the plaintiff ‘has suffered injury in fact and has lost money or property as a result of the unfair competition.’ (Bus. & Prof. Code, § 17204.) In other words, the plaintiff must have suffered a ‘loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury … .’ (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322 [120 Cal. Rptr. 3d 741, 246 P.3d 877] (Kwikset)). . .‘There are innumerable ways in which economic injury from unfair [**19] competition may be shown. A plaintiff may (1) surrender in a transaction more, or acquire in a transaction less, than he or she otherwise would have; (2) have a present or future property interest diminished; (3) be deprived of money or property to which he or she has a cognizable claim; or (4) be required to enter into a transaction, costing money or property, that would otherwise have been unnecessary.’ (Id. at p. 323.)” (Moore v. Centrelake Medical Group, Inc. (2022) 83 Cal.App.5th 515, 527.)

The SAC states, in various paragraphs, that the actions of Defendant resulted in a forced sale of the Property due to the damage in equity. (SAC ¶¶ 14, 24, 27, 31, 36, 39, 53.)

It appears the SAC alleges an economic injury as a result of the misrepresentation(s) by Defendant. As mentioned, ante, a demurrer admits all factual allegations of the pleading; however, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. The exhibits of which the Court took notice show: (1) Assignment of DOT to MERS on May 27, 2022; Grant Deed from Plaintiff and his wife to Paiz Investments, a California Corporation; (3) Transfer of Rights in the Property signed by borrower Paiz Investments, a California Corporation; and (4) Full Reconveyance of Title to First American Title. The Court cannot address the issue of standing as nothing in the Requests for Judicial Notice contradict Plaintiff’s allegations that the economic loss suffered by Plaintiff was caused by the misrepresentations of Defendant.

The SAC alleges:

Defendants violated the Unfair Competition Law by engaging in unlawful, unfair, and fraudulent business acts or practices, including but not limited to:

a. Breaching their duties to collect mortgage loan payments after August 2022 by refusing to accept payment from PLAINTIFF; and

b. Failing to provide Plaintiff with various loss mitigation options after the expiration of the 2020 FORBEARANCE;

(SAC ¶ 43.)

It appears that the “conduct” that Plaintiff is alleging to be unfair, deceptive, untrue, and/or misleading may be the purported misrepresentations.

a. Unfair

“In consumer cases, the [California] Supreme Court has not established a definitive test to determine whether a business practice is unfair. [Citations.]” (Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 256.) There are three types of tests for unfairness in consumer cases: (1) “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions[;]” (2) “whether the alleged business practice ‘is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim[;]’ ” and (3) a three-part test that requires the consumer injury be substantial, that the injury must not be outweighed by any countervailing benefits to consumers or competition, and the injury must be an injury that consumers themselves could not reasonably have avoided. (Id. at 256-57.)

Applying the first test, no specific constitutional, statutory, or regulatory provisions is alleged in the Third Cause of Action. In discussing the second test, the Court must look to case law. The court in Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 719 stated “ ‘[e]xamples of unfair business practices include: charging a higher than normal rate for copies of deposition transcripts (by a group of certified shorthand reporters), where the party receiving the original is being given an undisclosed discount as the result of an exclusive volume-discount contract with two insurance companies [citation]; placing unlawful or unenforceable terms in form contracts [citation]; asserting a contractual right one does not have [citations]; systematically breaching a form contract affecting many consumers [citation], or many producers [citation]; and imposing contract terms that make the debtor pay the collection costs [citation].’ ” Here, it is alleged that Defendant entered into an oral agreement regarding the forbearance and breached that agreement. However, there is no showing that the conduct affected many consumers. As to the third test, a reasonable conclusion can be made that the injury was substantial as Plaintiff had to sell the Property, there has been no presentation that there are any countervailing benefits to consumers or competition, and the injury is one that Plaintiff could not have avoided as it involved reliance on Defendant’s representation.

Accordingly, the allegations satisfy the third test for an unfair business practice.

b. Fraudulent

Case law has held “ ‘In order to state a cause of action under the fraud prong of [section 17200] a plaintiff need not show that he or others were actually deceived or confused by the conduct or business practice in question. ‘The “fraud” prong of [section 17200] is unlike common law fraud or deception. A violation can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. Instead, it is only necessary to show that members of the public are likely to be deceived.’ [Citations.] (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1167–1168 [93 Cal. Rptr. 2d 439].)” (Progressive West Ins. Co. v. Superior Court, 135 Cal.App.4th 263, 284.) “Unless the challenged conduct ‘ “targets a particular disadvantaged or vulnerable group, it is judged by the effect it would have on a reasonable consumer.” ’ [Citation.]” (Puentes, supra, 160 Cal.App.4th 638, 645 [citing Aron v. U-Haul Co. of California (2006) 143 Cal.App.4th 796, 806].)

Proposition 64 was passed on November 2, 2004 in an effort to curb “ ‘[f]rivolous unfair competition lawsuits [that] clog our courts[,] cost taxpayers” and “threaten[] the survival of small businesses. . .’ [Citations.] ” (Californians for Disability Rights v. Mervyn's LLC (2006) 39 Cal. 4th 223, 228.) Current law requires that one “suffer[] injury in fact and has lost money or property as a result of such unfair competition” to have standing to bring a UCL claim. (Id. at 227.) “Therefore, the holding that “damages are unnecessary” is no longer good.” (Sanchez v. Bear Stearns Residential Mortg. Corp. (2010) 2010 U.S. Dist. LEXIS 46043, 18, fn 4.)

There has been no presentation that members of the public are likely to be deceived as the focus on Plaintiff’s damages. (See SAC ¶¶ 41-44.)

c. Unlawful

An unlawful business practice under section 17200 is “ ‘an act or practice, committed pursuant to business activity, that is at the same time forbidden by law. [Citation.]’ ” (Bernardo v. Planned Parenthood Federation of America (2004) 115 Cal.App.4th 322, 351; See also Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 717-718; Progressive West Ins. Co., supra, 135 Cal.App.4th 263 at 287.)

As mentioned, ante, no specific constitutional, statutory, or regulatory provisions is alleged in the Third Cause of Action. Thus, there has been now showing that the alleged misrepresentations are part of a business activity that is forbidden by law.

Accordingly, Plaintiff has sufficiently pled a UCL cause of action as to only unfair business practices.

ii. Fourth Cause of Action (Promissory Estoppel)

Defendant argues that Plaintiff cannot allege a cause of action for Promissory Estoppel as Plaintiff fails to detail a promise as Plaintiff’s SAC fails to detail a promise (i.e., Plaintiff has failed to attach the purported promise—if it was in writing—to the SAC, detail how the promise was relayed, indicate by whom it was relayed, and provide an accounting of when it was relayed). Defendant highlights that Plaintiff has conceded acceptance of payments after the forbearance and that Plaintiff has suffered no injury because the need to avoid foreclosure is separate and distinct from a foreclosure process.

Plaintiff argues that the agreement offered by Defendant and accepted by Plaintiff is clear and unambiguous on its terms, Defendant rejected after the forbearance, and Plaintiff suffered injury by selling the Property at a low rate due to the damage in equity caused by Defendant.

Defendant argues on Reply that the Opposition attempts to amend the SAC by altering the basis of the fourth cause of action and highlights that “the only promise detailed in the fourth cause of action in SAC was made from Plaintiff to Defendant regarding Plaintiff’s ongoing mortgage payments after the end of the forbearance.” (Reply 5:17-19.) Defendant believes that the SAC does not provide any kind of promise from Defendant to Plaintiff. Alternatively, Defendant further argues that it kept its promise by accepting payments after the forbearance. Defendant also reiterates that damage in equity without a foreclosure does not constitute damages.

The Court notes that Defendant has an argument that Plaintiff attempts to go beyond the pleadings by asserting that “the JANUARY 2023 application was never answered to the PLAINTIFF[]” in lines 25-26 of page 15. However, the SAC states clearly: “PLAINTIFF is still awaiting the results of the JANUARY 2023 APPLICATION.” (SAC ¶ 23.)

The elements of an action for promissory estoppel are: (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his or her reliance. (Granadino v. Wells Fargo Bank, N.A. (2015) 236 Cal.App.4th 411, 416.)

While it appears, the SAC describes a promise from Plaintiff to Defendant regarding Plaintiff’s ongoing mortgage payments, it also reflects two statements by Defendant’s agent, Mr. Cooper: (1) acceptance of “any and all” mortgage payments after the forbearance ended, and (2) automatic placement into loan modification review or other non-foreclosure alternatives.

Plaintiff’s SAC states, in relevant part:

PLAINTIFF claims he was harmed, because MR. COOPER made a false promise.

Defendants made PLAINTIFF a promise that was clear and unambiguous on its terms, to wit: PLAINTIFF would resume his monthly mortgage payments after the 2020 FORBEARANCE ended.

MR. COOPER did not intend to perform this promise when they rejected mortgage payments starting August 2022.

The true facts are as follows: (1) PLAINTIFF made his regular mortgage payments starting December 2021; (2) MR COOPER accepted the payments starting December 2021; and (3) MR COOPER stopped accepting payments starting August 2022.

MR. COOPER intended to make these promises, in order to induce PLAINTIFF into accepting the 2020 FORBEARANCE. The 2020 FORBEARANCE was designed to lull PLAINTIFF into inaction and to face foreclosure.

PLAINTIFF was harmed in that he was forced to sell his house for undervalue to avoid foreclosure.

(SAC ¶¶ 48-54.)

Accordingly, the Demurrer is Plaintiff detailed that Defendant made a promise in clear and unambiguous terms, detailing the acceptance of “any and all” mortgage payments after the forbearance ended and automatic placement into loan modification review or other non-foreclosure alternatives; reliance by Plaintiff due to Defendant’s standing as a lender involved with the Property; the reliance was reasonable and foreseeable, again due to Defendant’s position; and injury in the form of the sale of the house. Neither party cites to case law to show whether selling a house to avoid foreclosure constitutes injury. However, at the pleading stage, the Court finds the allegations sufficient to proceed as the general principles underlying damages would seem to support financial loss as damage.

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Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy¿(1976), 18 Cal.3d 335, 348.) While under California law leave to amend is liberally granted, “leave to amend should not be granted where, in all probability, amendment would be futile.” (Vaillette v. Fireman's Fund Ins. Co. (1993), 18 Cal. App. 4th 680, 685).¿ “A trial court does not abuse its discretion when it sustains a demurrer without¿leave to amend¿if either (a) the facts and the nature of the claims are clear and no liability exists, or (b) it is probable from the nature of the defects and previous unsuccessful attempts to plead that the plaintiff cannot state a claim.” (Cantu v. Resolution Trust Corp.¿(1992)¿4 Cal.App.4th 857, 889.)¿¿¿

The Demurrer was sustained as to the First Cause of Action (Negligent Misrepresentation). Based on the Tarmann holding, an amendment would not rectify this deficiency.

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Conclusion

Defendant Nationstar Mortgage LLC dba Mr. Cooper’s Motion Demurrer is SUSTAINED in part as the First Cause of Action (Negligent Misrepresentation) without leave to amend and OVERRULED in part as to the Second Cause of Action (Intentional Misrepresentation), Third Cause of Action (Violation of California Business & Professions Code § 17200), and Fourth Cause of Action (Promissory Estoppel).