Opinion
NOT TO BE PUBLISHED
APPEAL from judgments of the Superior Court of San Diego County Super. Ct. No. GIC880968, Judith F. Hayes, Judge.
IRION, J.
Manuel Gonzalez, individually and as trustee for Laurie Valadez, and Laurie Valadez sued defendants NMS Realty/Mortgage Corporation dba Pacific Fidelity Funding and dba Access Realty ("NMS"); Elaina Maria Michelucci-Hardrick, and her husband, William Hardrick (together, "the Hardricks"); Karin Jordan; Harold Lear; GMAC Mortgage, LLC ("GMAC"); and Wells Fargo Bank, N.A. ("Wells"), alleging they were victims of a rescue/refinance equity theft scheme in which they lost their home. The trial court sustained demurrers, without leave to amend, brought by defendants to each of the causes of action of the operative amended complaint filed January 23, 2008 (the complaint). Gonzalez and Valadez appeal.
We affirm the judgment in favor of GMAC and Wells. We also affirm the judgment with respect to Valadez because she lacks standing. We conclude, however, that the complaint alleges facts sufficient for Gonzalez, individually and as trustee for Valadez, to state causes of action against Michelucci-Hardrick and NMS for breach of contract, breach of fiduciary duty, fraud, negligent infliction of emotional distress and unfair business practices, but not for violation of the Truth in Lending Act (TILA) (15 U.S.C. § 1601 et seq.) or usury. Accordingly, we reverse, in part, the judgment in favor of Michelucci-Hardrick and NMS.
I
FACTUAL AND PROCEDURAL BACKGROUND
Our factual summary is based on the material facts alleged in the complaint and judicially noticed documents. Because this appeal arises from the sustaining of a demurrer, we assume the truth of all facts properly pleaded by the appellants and treat relevant matters that were the subject of judicial notice as having been pleaded. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.)
The Parties and the Property At Issue
Gonzalez and Valadez lived in a home at 3440 Ediwhar Avenue in San Diego ("the property"). Valadez acquired title to the property in 1999. In 2004, the mortgage on the property was refinanced, and Valadez transferred title to the property to Gonzalez on instructions of the lender, Ameriquest, who is not a party to this appeal. Thereafter, Gonzalez held title to the property for himself and in trust for Valadez.
The Hardricks were employees of NMS. Although Hardrick was not a licensed real estate agent, NMS allowed him to work with Michelucci-Hardrick at Access Realty, the name under which NMS conducted its realty business. Hardrick knew Valadez's family, and knew that Gonzalez held the property in trust for Valadez. He conveyed that information to NMS and Michelucci-Hardrick.
The "Refinancing" Transactions
In December 2004, Hardrick, acting on his own behalf and as an employee of NMS, contacted Gonzalez about refinancing the property. Both Hardrick and Michelucci-Hardrick assured Gonzalez that they could assist him in finding a new loan with a better interest rate. At the time, Gonzalez owed $356,000 on the Ameriquest loan, which bore an interest rate of 10.5 percent. Hardrick told Gonzalez to stop making payments to Ameriquest because all further loan payments would be made through the refinancing transaction. However, the Hardricks could not get a new loan funded and, by May 2005, the property was in default and on the verge of foreclosure.
The Hardricks and NMS then "concocted a plan to illegally refinance" the property. The Hardricks and NMS told Gonzalez to transfer the property to defendant Jordan, who would get a loan at a 6 percent interest rate, assisted by defendant Lear. The Hardricks and NMS promised Gonzalez that he and Valadez could keep their home, that he would get title to the property after four months of making timely payments on the refinance loan and that his credit would be repaired. Pursuant to the scheme, Gonzalez signed a real estate purchase agreement with a lease-to-own option and transferred title to the property to Jordan by grant deed on May 4, 2005. The deed was recorded on June 16, 2005.
Gonzalez alleges he was not aware he was transferring title to his home and believed he was only refinancing the property. He alleges he was informed, however, that he would not receive title back to the property until he made timely payments for four months.
Thereafter, in conjunction with the purported scheme, Jordan "refinanced" the property in her name, executing a deed of trust in favor of Paul Financial, LLC, to secure a loan for $356,000 ("the Jordan loan") at a 6 percent interest rate. The deed of trust was recorded on June 16, 2005. The refinancing resulted in a prepayment penalty on the Ameriquest loan and other charges.
Jordan's "refinancing" produced $80,000 in cash proceeds from the equity in the property, after deduction of a prepayment penalty and other charges. Hardrick opened a joint bank account in his and Gonzalez's names with $20,000 of the loan proceeds, and used the funds for his personal benefit and to make payments on the Jordan loan for about eight months. The remaining proceeds were kept by NMS, Michelucci-Hardrick and others as sales and mortgage commissions.
At some point, GMAC and Wells succeeded to Paul Financial's interest on the Jordan loan, with Wells holding title as trustee. The Jordan loan was in default and GMAC/Wells initiated foreclosure proceedings on the property. GMAC allowed Gonzalez and Valadez to make a reinstatement payment of $18,650.51 to cure the default. However, after no additional payments were made on the loan, GMAC and Wells foreclosed upon the property. Wells acquired title to the property under a trustee's deed upon sale, which was recorded on October 25, 2007.
Lawsuit
Gonzalez and Valadez filed suit against NMS and the Hardricks as well as their previous lender, Ameriquest. After NMS and Michelucci-Hardrick successfully demurred to the initial and first amended complaints, Gonzalez and Valadez filed the operative second amended complaint on January 23, 2008, adding GMAC and Wells as defendants. Michelucci-Hardrick and NMS demurred, as did Wells and GMAC, and Jordan. In a minute order dated May 16, 2008, the trial court sustained the general and special demurrers of NMS, Hardrick, GMAC and Wells, and the general demurrer of defendant Jordan, all without leave to amend. The court entered judgment of dismissal as to GMAC and Wells on June 12, 2008. NMS and Michelucci-Hardrick served a "Notice of Dismissal of Complaint with Prejudice," which was not filed with the court. On June 25, 2008, they filed and served an order signed by the trial court stating NMS and Michelucci-Hardrick were dismissed from the action. On August 13, 2008, Gonzalez and Valadez filed their notice of appeal.
The complaint was captioned "Defendants' First Amended Verified Complaint," but was in fact the second amended complaint. Hardrick and Lear are also named defendants but are not parties to this appeal.
We granted NMS's request to augment the record on appeal with these two documents.
II
JURISDICTIONAL ISSUES
At the outset, we address two issues potentially affecting our appellate jurisdiction: (1) whether an appealable judgment exists as to defendant Jordan; and (2) whether the appeal was timely.
A. The Court's Jurisdiction Does Not Encompass the Nonappealable Order Sustaining Jordan's Demurrer
Gonzalez and Valadez seek review of the trial court's order sustaining Jordan's demurrer without leave to amend.
In order for this court to review that ruling, there must be an appealable judgment. (Doran v. Magan (1999) 76 Cal.App.4th 1287, 1292.) The trial court's May 16, 2008, minute order sustaining Jordan's demurrer without leave to amend was not an appealable order, as only a judgment entered on such an order can be appealed. (I. J. Weinrot & Son, Inc. v. Jackson (1985) 40 Cal.3d 327, 331; Code Civ. Proc., § 904.1.) Our independent review of the trial court record reveals no judgment or signed-and-filed dismissal order which would be considered a judgment in favor of Jordan. Accordingly, we lack appellate jurisdiction to consider the trial court's ruling as to defendant Jordan.
Similarly, contrary to Gonzalez and Valadez's suggestion, we do not consider the court's statements on the record at the case management conference on June 13, 2008, to constitute an "order" dismissing Lear or any other defendants, because there was no such written order signed and entered by the trial court. (Code Civ. Proc., § 581d [to constitute judgment, dismissal orders must be written, signed by the court and filed]; see fn. 6, post.)
B. The Appeal Is Timely as to the Order Dismissing Michelucci-Hardrick and NMS
Michelucci-Hardrick and NMS contend we should dismiss the appeal as untimely.
Under California Rules of Court, rule 8.104(a), a notice of appeal must be filed on or before the earliest of: "(1) 60 days after the superior court clerk mails the party filing the notice of appeal a document entitled 'Notice of Entry' of judgment or a file-stamped copy of the judgment, showing the date either was mailed; [¶] (2) 60 days after the party filing the notice of appeal serves or is served by a party with a document entitled 'Notice of Entry' of judgment or a file-stamped copy of the judgment, accompanied by proof of service; or [¶] (3) 180 days after entry of judgment."
All further rule references are to the California Rules of Court.
"As used in (a) and (e), 'judgment' includes an appealable order if the appeal is from an appealable order." (Rule 8.104(f).)
Courts adhere strictly to the literal requirements of the rule, consistently holding that the required " 'document entitled "Notice of Entry" '... must bear precisely that title." (Alan v. American Honda Motor Co., Inc. (2007) 40 Cal.4th 894, 903 (Alan), citation omitted [construing rule 8.104(a)(1)]; Sunset Millennium Associates, LLC v. Le Songe, LLC (2006) 138 Cal.App.4th 256, 260 [applying rule 2, predecessor to rule 8.104].) In order to trigger the 60 day period under rule 8.104(a)(2) then, the document served by the party must be entitled "notice of entry."
Michelucci-Hardrick and NMS contend the notice of appeal was untimely because it was filed more than 60 days after they served a "Notice of Dismissal" on June 13, 2008. We disagree. The notice of dismissal was not "a document entitled 'Notice of Entry,' " as the rule requires, and was insufficient to trigger the time for filing a notice of appeal. (Rule 8.104(a)(2); see Alan, supra, 40 Cal.4th at p. 903.)
The court entered judgment as to Michelucci-Hardrick and NMS by order dismissing them from the action on June 25, 2008. Gonzalez and Valadez filed their notice of appeal on August 13, 2008, within 180 days of that date. Therefore, Gonzalez and Valadez's appeal was timely filed. (Rule 8.104(a)(3).)
Because the order (1) states that NMS and Michelucci-Hardrick were dismissed from the action; (2) was signed by the trial court; and (3) was filed in the action, it constitutes a "judgment" and was therefore an appealable order. (Code Civ. Proc., § 581d; see id., § 904.1, subd. (a)(1).)
The notice of appeal erroneously designates a judgment dated July 23, 2008, but we liberally construe it to apply to the two judgments entered in the action, namely, the June 12, 2008 judgment of dismissal of GMAC and Wells, and the June 25, 2008 order sustaining the demurrer of NMS and Michelucci-Hardrick. (Rule 8.100(a)(2).)
III
DISCUSSION
A. Standard of Review
In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.... We also consider matters which may be judicially noticed.'... Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.... When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action.... And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm.... The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, citations omitted.)
B. Valadez Lacks Standing to Sue Based on the Complaint's Allegations
As a preliminary matter, NMS and Michelucci-Hardrick argue Valadez lacks standing to sue because (1) she was not the record owner of the property and no written trust agreement shows her interest in the property; and (2) she did not sign and was not an intended beneficiary of "the agreements that formed the basis of the Gonzalez-Jordan transaction." As we explain, we agree that Valadez lacks standing, but for a different reason. The complaint alleges Gonzalez held title to the property as trustee for Valadez, and Gonzalez is therefore the real party in interest with standing to bring the action on Valadez's behalf.
A demurrer properly may be sustained for failure to state a cause of action where the named plaintiff lacks standing because he or she is not the real party in interest. (O'Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1095.) "Generally, 'the person possessing the right sued upon by reason of the substantive law is the real party in interest' " with standing to bring the claim. (Del Mar Beach Club Owners Assn. v. Imperial Contracting Co. (1981) 123 Cal.App.3d 898, 906; Code Civ. Proc., § 367 ["Every action must be prosecuted in the name of the real party in interest"].) Where the right sued upon relates to trust property, the trustee is the real party in interest with standing to prosecute an action. (King v. Johnston (2009) 178 Cal.App.4th 1488, 1500; Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 427 (Saks).)
Here, the complaint alleges Gonzalez holds the property for himself and in trust for Valadez, and he sought to refinance the property for their benefit as owners of the property. Each cause of action seeks relief in connection with the ownership and financing of the property. Therefore, Gonzalez, individually and as trustee for Valadez, is the real party in interest with standing to bring the claims asserted in the complaint. (Saks, supra, 7 Cal.App.4th at p. 427 [" 'an action prosecuted for the benefit of a trust estate by a person other than the trustee is not brought in the name of a real party in interest and is demurrable' "].) The demurrers as to Valadez's claims against NMS, Michelucci-Hardrick, GMAC and Wells therefore were properly sustained without leave to amend.
Although the complaint does not allege whether the trust was based on a written instrument as required, we are satisfied the trust is adequately pleaded for the purpose of the demurrers. (See Prob. Code, § 15206 [written instrument required for trust relating to real property].) The trust is not a contract upon which the cause of action is founded, so that the statutory requirement to plead its form does not apply. (SeeCode Civ. Proc., § 430.10, subd. (g) [an action "founded upon a contract" must specify whether contract is written, oral or implied by conduct].) Rather, we may presume, for the purpose of the demurrers, that a written contract exists. (5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 977, p. 391, citing McLaughlin v. McLaughlin (1958) 159 Cal.App.2d 287, 292.)
We next determine whether, as to each cause of action asserted in the complaint, Gonzalez alleges, or shows he can amend to allege, facts sufficient to state a cause of action against NMS, Michelucci-Hardrick, GMAC and Wells.
C. The Cause of Action for Rescission under TILA
TILA requires certain disclosures to be provided in connection with consumer loans made by "creditors," and provides a right to rescind the loan if disclosures are not properly made. (15 U.S.C. §§ 1635(f), 1639(a)(1).) The second cause of action of the complaint alleges that "[a]lthough [the Jordan transaction] was disguised as a sale, the transaction... was in reality a loan and a consumer credit transaction within the meaning of [TILA]" and that defendants were required, but failed, to make required disclosures under TILA, thereby allowing Gonzalez to rescind the transaction.
The complaint asserts only a right to rescind, and makes no claim for damages, under TILA. We need not, and do not, address whether the alleged transaction was a loan and consumer transaction subject to a claim by Gonzalez under TILA because, as we will explain, even if that were the case, the claim would fail on other grounds.
1. The Second Cause of Action for Rescission Under TILA Fails to State a Claim Against NMS and Michelucci-Hardrick Because They Are Not "Creditors" Within the Meaning of the Federal Statute.
NMS and Michelucci-Hardrick argue that as real estate and mortgage brokers, they are not "creditors" subject to Gonzalez's claim for inadequate disclosures under TILA. (15 U.S.C. § 1639(a)(1).) We agree.
In order to assert a claim for rescission under TILA on the theory that a mortgage broker or real estate agent is a "creditor," a plaintiff must allege (1) that the agent or broker is "the person to whom the debt is initially payable on the evidence of indebtedness, by agreement"; and (2) that the broker or agent regularly offers credit, as defined by regulations implementing TILA. (15 U.S.C. § 1602(f) [defining " 'creditors' "]; see 12 C.F.R. § 226.1(c).)
The second cause of action does not allege that NMS or Michelucci-Hardrick was a "person to whom the debt [the Jordan loan] [was] initially payable." (15 U.S.C. § 1602(f).) Therefore, NMS and Michelucci-Hardrick are not "creditors" within the meaning of TILA. (15 U.S.C. § 1602(f).) Nor can the complaint be amended to allege that these defendants were "creditors," because the judicially noticed deed of trust shows the Lender on the Jordan loan initially was "Paul Financial, LLC." Therefore, because the second cause of action does not, and cannot, state a claim under TILA against NMS or Michelucci-Hardrick, their demurrers to this cause of action were properly sustained without leave to amend.
2.The Second Cause of Action Does Not State a Claim under TILA Against GMAC and Wells Because TILA's Statute of Limitations Bars the Claim.
The second cause of action also seeks rescission under TILA against GMAC and Wells, who were added as defendants after they foreclosed upon the property. Under TILA, the right to rescind expires "three years after the date of the consummation of the transaction or upon the sale of the property, whichever occurs first." (15 U.S.C. § 1635(f), italics added.) This limitation is absolute, and rescission is not available after it expires. (Beach v. Ocwen Fed. Bank (1998) 523 U.S. 410, 417-418 (Beach) [holding the statute's provisions completely extinguish the borrower's right of rescission].)
Here, after GMAC and Wells foreclosed upon the property, it was sold and transferred to Wells by a trustee's deed upon sale on or before October 25, 2007. Gonzalez did not file the complaint naming GMAC and Wells until January 23, 2008. The cause of action for rescission against GMAC and Wells is time-barred pursuant to 15 United States Code section 1635(f) because it was filed after the foreclosure sale of the property. (E.g., Hallas v. Ameriquest Mortg. Co. (2005) 406 F.Supp.2d 1176, 1183 [under 15 U.S.C. § 1635(f), nonjudicial foreclosure sale terminated rescission rights of borrower].)
Because the foreclosure sale of the property absolutely precludes the claim for rescission, no amendment could cure this defect, and the trial court did not err in sustaining the demurrer to the second cause of action without leave to amend as to GMAC and Wells. (Hendy v. Losse (1991) 54 Cal.3d 723, 742; Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)
Gonzalez suggests he belatedly discovered the fraud. However, the doctrine of equitable tolling does not apply to the right to rescind under TILA. (Beach, supra, 523 U.S. at pp. 417-418 [right to rescind under TILA cannot be extended].) Gonzalez also appears to suggest the claim is not barred under a state statute of limitations, which is inapplicable to this federal statutory claim.
D. Cause of Action for Breach of Contract Against NMS, Michelucci-Hardrick, GMAC and Wells
We next determine whether the complaint adequately states, or may be amended to state, a cause of action for breach of contract against NMS, Michelucci-Hardrick, GMAC or Wells, after first setting forth the applicable legal principles.
1. Applicable Law.
To state a cause of action for breach of contract, a plaintiff must allege the existence of a contract, plaintiff's performance or excuse for nonperformance, defendant's breach and plaintiff's resulting damage. (Acoustics, Inc. v. Trepte Constr. Co. (1971) 14 Cal.App.3d 887.) Furthermore, a plaintiff must specify whether the contract is oral, written or implied by conduct and show the nature of the contract with certainty. (Code Civ. Proc., § 430.10, subd. (g); 4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, §§ 515, 522, pp. 648, 652-653.)
Where an oral contract concerns sale of an interest in real property, it is unenforceable under the statute of frauds unless the plaintiff has (1) fully performed his contract obligations and (2) changed position in reliance on the oral contract such that invalidating it under the statute of frauds would result in an unjust or unconscionable loss. (Civ. Code, § 1624; Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 27; Secrest v. Security National Mortgage Loan Trust 2002 2 (2008) 167 Cal.App.4th 544, 555 (Secrest).) To enforce an oral contract subject to the statute of frauds under this exception, the plaintiff must have performed obligations involving something other than payment of money: payment of money alone does not constitute sufficient performance of contract obligations to take a contract out of the statute of frauds. (Secrest,at pp.555, 556, citing Anderson v. Stansbury (1952) 38 Cal.2d 707, 715-716.)
2. The Fourth Cause of Action Alleges Facts Sufficient to State a Claim for Breach of Contract Against NMS and Michelucci-Hardrick.
The fourth cause of action alleges an oral agreement made by NMS and Michelucci-Hardrick to refinance Gonzalez's property, improve his credit and return title to the property to him after four months of making payments on the Jordan loan. The complaint alleges NMS and Michelucci breached that oral agreement when they had Gonzalez sign a real estate purchase agreement with a lease-to-own option and grant deed transferring the property to Jordan, converted the property's equity for their own benefit, and failed to return the property or repair Gonzalez's credit.
NMS and Michelucci-Hardrick contend the alleged oral contract (1) is invalid under the statute of frauds and (2) was not breached because Jordan did obtain a refinancing loan. We disagree.
The fourth cause of action alleges an agreement that is presumptively invalid under the statute of frauds. However, it also alleges Gonzalez performed all his obligations under the oral contract, and thereby changed position in reliance on the contract, by conveying the property, opening a bank account with the equity from the property, and paying the mortgage payments and commissions to NMS and Michelucci-Hardrick on the transaction. These allegations are sufficient, for the purpose of this demurrer, to allege a contract that may be enforceable despite the statute of frauds. (Secrest, supra, 167 Cal.App.4th at p. 556.)
The alleged agreement requires a writing under the statute of frauds because it involves Gonzalez's agreement to answer for Jordan's debt, as well as the sale of the property and the employment of NMS and Michelucci-Hardrick to find a purchaser or sell real estate. (See Civ. Code, § 1624, subd. (a)(2), (3) & (4) [invalidating a "promise to answer for the debt... of another"; "the sale of... an interest in" real property; and "[a]n agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate,... or to procure, introduce, or find a purchaser or seller of real estate... for compensation or a commission"].)
The complaint also sufficiently alleges a breach of the agreement. Under the alleged agreement, NMS and Michelucci-Hardrick promised not only to obtain the Jordan loan, but also to (1) repair Gonzalez's credit and (2) return the property to him after he made timely payments for four months. The complaint alleges NMS and Michelucci-Hardrick did not fulfill these conditions. Finally, Gonzalez alleges he lost the property, thus pleading the required element of damage resulting from the breach. Therefore, the trial court erred in sustaining the demurrers to Gonzalez's breach of contract cause of action against NMS and Michelucci-Hardrick.
3. The Fourth Cause of Action Fails to State a Cause of Action for Breach of Contract Against GMAC and Wells.
Gonzalez contends the fourth cause of action states a claim for breach of an oral contract by GMAC and Wells, based on their purported agreement not to foreclose on the property if Gonzalez paid $18,650 to cure the default on the mortgage. GMAC contends that (1) appellants are not the borrowers on the Jordan loan and have failed to allege the existence of a contract with GMAC or Wells; (2) Gonzalez's single allegation that GMAC accepted a payment to cure the loan is too uncertain to create an enforceable contract; and (3) even if Gonzalez could allege an oral agreement not to foreclose on the loan against the property after he made a payment to cure the default, such an agreement would be unenforceable as the terms of a written trust deed may not be modified by an oral agreement. We need not address the merits of the first two contentions because we agree that, in any event, the oral agreement asserted by Gonzalez is unenforceable under the statute of frauds.
Like an agreement for the sale of real property, a mortgage or deed of trust is subject to the statute of frauds, and therefore may not be altered or amended by an executory oral agreement. (Secrest, supra,167 Cal.App.4th at p. 552, citing Civ. Code, §§ 1624, 1698, 2922; Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117 (Karlsen) [rejecting as unenforceable alleged oral agreement contrary to provision in written deed of trust].) Here, the judicially noticed documents show the Jordan loan was based on a written deed of trust that provided for foreclosure rights upon the happening of certain events and could not be amended by the oral agreement Gonzalez claims to have had with GMAC and Wells. (Karlsen, at p. 117.) Although Gonzalez contends he performed in reliance on the alleged contract, the only action he took was to pay money. Payment of money is not a sufficient performance of contract obligations to take the contract out of the statute of frauds. (Secrest,at p. 556.) The statute of frauds thus bars Gonzalez's breach of contract claim against GMAC and Wells and the trial court properly sustained the demurrer without leave to amend.
E. Cause of Action for Breach of Fiduciary Duty Against NMS, Michelucci-Hardrick, GMAC and Wells
The seventh cause of action attempts to assert a cause of action for breach of fiduciary duty against NMS, Michelucci-Hardrick, Wells and GMAC.
1. Applicable Law.
To plead a cause of action for breach of fiduciary duty, a plaintiff must allege facts showing the existence of a fiduciary duty owed to that plaintiff, a breach of that duty and resulting damage. (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.) A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which "confidence is reposed by persons in the integrity of others" who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150.)
Under California law, a real estate agent owes his client several fiduciary duties including the duty of " ' " 'undivided service and loyalty,' " ' " and the duty to disclose all material information. (Warren v. Merrill (2006) 143 Cal.App.4th 96, 109 (Warren).) A real estate agent engaged to market property has a fiduciary relationship with the owner of the property, and may not retain anything, even a commission, unless the agent fully discloses the nature and amount of the benefit and receives the approval of the principal. (Roberts v. Lomanto (2003) 112 Cal.App.4th 1553, 1562-1564 (Roberts).)
2. The Seventh Cause of Action States a Claim for Breach of Fiduciary Duty Against NMS and Michelucci-Hardrick as Real Estate Agents for Gonzalez.
The seventh cause of action of the complaint alleges NMS and Michelucci-Hardrick acted as real estate agents for Gonzalez by having him sign the real estate purchase agreement and transfer title to the property to Jordan, taking a commission on that transaction. As such, the complaint adequately alleges a special relationship giving rise to a fiduciary duty. (Warren, supra, 143 Cal.App.4th at p. 108 ["There should be no dispute [agent] owed a fiduciary duty to [client] once she undertook to represent him in the real estate transaction."].) The complaint alleges NMS and Michelucci-Hardrick breached their duties to Gonzalez by pursuing a plan that put their interests in commissions ahead of the interests of Gonzalez, and by failing to disclose their profits, as well as Gonzalez's costs, in the transaction. (Roberts, supra,112 Cal.App.4th at p. 1563.) Finally, the complaint alleges that defendants' nondisclosure resulted in Gonzalez's loss of equity in the property.
We therefore conclude the seventh cause of action satisfactorily alleges the elements of a cause of action for breach of fiduciary duty as to defendants NMS and Michelucci-Hardrick.
3. The Seventh Cause of Action Fails to State a Claim of Breach of Fiduciary Duty Against Wells and GMAC Because as Mere Lenders They Owed No Duty to Gonzalez.
The seventh cause of action attempts to state a cause of action against GMAC and Wells for breach of fiduciary duty, alleging in conclusory fashion that they "participated" in the refinancing scheme concocted by the other defendants and "had a duty" to Gonzalez to send Gonzalez billing statements. We need not, and do not, assume the truth of contentions, deductions or conclusions of law. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 (Moore).) Without these conclusions, the sole basis for Gonzalez's cause of action for breach of fiduciary duty as to these defendants is the allegation that GMAC accepted a payment on behalf of Gonzalez under the Jordan loan.
The facts show Gonzalez was not the borrower under the Jordan loan or a customer of GMAC or Wells. The facts alleged are therefore insufficient to show a fiduciary duty on the part of GMAC and Wells to Gonzalez. " '[A]bsent extraordinary and specific facts, a bank does not owe a duty of care to a noncustomer.' " (Karen Kane, Inc. v. Bank of America (1998) 67 Cal.App.4th 1192, 1202.) Even assuming arguendo — contrary to the facts alleged — that Gonzalez had been the borrower under a loan with GMAC or Wells, GMAC and Wells owed no fiduciary duty to Gonzalez. In the normal lender-borrower relationship, a bank has no fiduciary duty to the borrower. (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 981; Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1093, fn. 1 [stating general rule that lender in conventional loan transaction owes no duty of care to borrower].)
Gonzalez fails to state how the complaint could be amended to allege extraordinary or specific facts suggesting a special relationship with GMAC or Wells. We therefore conclude the trial court did not err in sustaining the demurrers by GMAC and Wells as to the cause of action for breach of fiduciary duty without leave to amend.
F. Cause of Action for Fraud Against NMS, Michelucci-Hardrick, GMAC and Wells
1. Applicable Law.
"The elements which must be pleaded to plead a fraud claim 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.' " (Agricultural Ins. Co. v. Superior Court (1999) 70 Cal.App.4th 385, 402.)
Claims for fraud must be pleaded with specificity to give notice to the defendant and to furnish him or her with definite charges. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216 (Committee on Children's Television), superseded by statute on other grounds as stated in Californians for Disability Rights v. Mervyn's, LLC (2006) 39 Cal.4th 223, 227.) " ' "This particularity requirement necessitates pleading facts which 'show how, when, where, to whom, and by what means the representations were tendered.' " ' " (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993 (Robinson Helicopter).)
Where the alleged fraud is based on concealment or nondisclosure, the additional element of a duty to disclose must be alleged. (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 131; Civ. Code, § 1710, subd. (3).) However, a complaint for fraudulent concealment or nondisclosure need not be pleaded with the same high level of specificity required for a claim based on a false representation where the allegations of the complaint make clear the defendant already has " 'full information concerning the facts of the controversy.' " (Committee on Children's Television, supra, 35 Cal.3d at p. 217; Turner v. Milstein (1951) 103 Cal.App.2d 651, 658.)
2. The Complaint Adequately States a Cause of Action for Fraudulent Concealment or Nondisclosure Against NMS and Michelucci-Hardrick Based on Their Duties to Disclose All Material Facts and Adverse Interests to Gonzalez.
As we concluded above, the complaint sufficiently alleges NMS and Michelucci-Hardrick concealed from, and failed to disclose to, Gonzalez the adverse interests that they, as real estate agents, had a duty to disclose. The complaint also alleges NMS and Michelucci-Hardrick intended to defraud Gonzalez and knew that Gonzalez, who believed he was refinancing and not transferring the property, would not recognize that he would be losing $100,000 equity in the property. Based on these allegations, the complaint adequately pleads five of the elements required to state a claim for fraudulent concealment or nondisclosure, namely, duty, nondisclosure, scienter, intent to defraud and justifiable reliance. (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 295 ["the question in a nondisclosure case is whether the defendant knows of material facts, and also knows that those facts are neither known nor readily accessible to the plaintiff"].) The final required pleading element, namely, damages resulting from the fraud, was adequately plead by Gonzalez's allegation that as the result of NMS and Michelucci-Hardrick's concealment or nondisclosure, he was deprived of his equity in the property.
NMS and Michelucci-Hardrick contend the fraud claim fails because it does not specify "who said what to whom and when it was said in terms of the alleged misrepresentations." However, because the fraudulent misrepresentation is based on concealment or nondisclosure, the complaint's failure to specify "who[,] what[,] and when" is not fatal. Such facts are not necessary to state a concealment or nondisclosure claim against a defendant who is alleged to have had " 'full information concerning the facts of the controversy.' " (Committee on Children's Television, supra, 35 Cal.3d at p. 217.) The trial court therefore erred in sustaining the demurrer to the fraud cause of action by Gonzalez against NMS and Michelucci-Hardrick.
3. The Complaint Does Not State a Cause of Action for Fraud Against GMAC and Wells Because It Alleges No Deceit.
GMAC contends the complaint contains no specific allegations of fraud against GMAC and Wells. We agree.
The complaint does not allege Wells or GMAC concealed, failed to disclose or misrepresented any material fact, let alone allege the specific facts required to state a misrepresentation claim. (Robinson Helicopter, supra, 34 Cal.4th at p. 993.) The demurrer was therefore properly granted as to these defendants. Gonzalez has failed to show how the complaint could be amended to state a cause of action against GMAC or Wells. We therefore conclude the trial court appropriately sustained the demurrer by GMAC and Wells to the fraud cause of action, without leave to amend.
G. Cause of Action for Negligent Infliction of Emotional Distress
In this appeal, Gonzalez contends his claim for negligent infliction of emotional distress was well pleaded against NMS and Michelucci-Hardrick based on their alleged breaches of fiduciary duty.
Because this is the only argument advanced by Gonzalez with respect to this cause of action, we conclude he has waived any challenge to the ruling on the demurrers on the claims for intentional infliction of emotional distress against NMS and Michelucci-Hardrick, and for both types of emotional distress against Wells and GMAC. (In re Marriage of Schroeder (1987) 192 Cal.App.3d 1154, 1164 [where no argument is made on appeal, issue is deemed waived].)
A claim for negligent infliction of emotional distress does not appreciably differ from a claim for negligence, in that its elements are "duty, breach of duty, causation, and damages." (Ess v. Eskaton Properties, Inc. (2002) 97 Cal.App.4th 120, 126.) "Damages for severe emotional distress... are recoverable in a negligence action when they result from the breach of a duty owed the plaintiff that is assumed by the defendant or imposed on the defendant as a matter of law, or that arises out of a relationship between the two." (Marlene F. v. Affiliated Psychiatric Medical Clinic, Inc. (1989) 48 Cal.3d 583, 590.) "The Supreme Court long ago determined 'that a plaintiff who as a result of a defendant's tortious conduct loses his property and suffers mental distress may recover not only for the pecuniary loss but also for his mental distress.' " (Jahn v. Brickey (1985) 168 Cal.App.3d 399, 406 (Jahn), quoting Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 433-434.)
As we have concluded above, the complaint sufficiently alleges tortious conduct by NMS and Michelucci-Hardrick, including allegations supporting claims for fraud and breach of fiduciary duty, that allegedly caused Gonzalez to lose the property. The complaint therefore has alleged an adequate basis upon which Gonzalez may make a claim at trial for emotional distress damages, in addition to damages for pecuniary losses. (Jahn, supra, 168 Cal.App.3d at p. 406 [upholding award of emotional distress damages based on fraud and breach of fiduciary duty].)
NMS and Michelucci-Hardrick contend that emotional distress damages are not permitted where the harm alleged is damage to property or is merely economic in nature. We disagree. Although courts have denied recovery for emotional distress in certain cases involving only breach of contract and property damage, such damages are available upon proper proof in connection with fraud claims. (Compare Erlich v. Menezes (1999) 21 Cal.4th 543, 554 [emotional distress damages cannot be recovered solely for the breach of a contract to construct a house] with Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 892, 909 [upholding jury award of damages for emotional distress for bank misrepresentations].)
Gonzalez has stated a cause of action for negligent infliction of emotional distress arising out of the actions of NMS and Michelucci-Hardrick. The trial court therefore erred in sustaining the demurrer as to this cause of action.
H. Cause of Action for Usury Against NMS, Michelucci-Hardrick, GMAC and Wells
The complaint attempts to assert a cause of action for usury against NMS, Michelucci-Hardrick, GMAC and Wells. Under California law, "[t]he essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction." (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 798.)
The complaint fails to support this cause of action against any defendant because it (1) does not allege that Gonzalez was the borrower or that the Jordan loan was absolutely repayable by Gonzalez; and (2) does not allege the interest to be paid exceeded the statutory maximum. The complaint cannot be amended to state a usury claim, because the judicially noticed Jordan loan documents show the Jordan loan bore an interest rate of 6 percent. Because Gonzalez has shown no reasonable possibility of amendment, the trial court properly sustained the demurrer without leave to amend.
"Under current California law, a loan that charges an interest rate greater than 10 percent per annum is usurious." (321 Henderson Receivables Origination LLC v. Sioteco (2009) 173 Cal.App.4th 1059, 1076.) Here, the complaint refers inexplicably to "the prime lending rate," which has nothing to do with the statutory rate.
I. Action to Quiet Title
The complaint asserts a cause of action to quiet title against GMAC and Wells. GMAC and Wells contend they are bona fide purchasers for value "who took their interest in [the property] free and clear of any alleged fraud by the other defendants." As we will explain, we need not decide whether GMAC and Wells are actually bona fide purchasers for value. Gonzalez fails to allege GMAC and Wells were not bona fide purchasers for value. Without such an allegation, he cannot state an action to quiet title.
To state an action to quiet title, the plaintiff must state some interest in the property in controversy. (Lechuza Villas West v. California Coastal Com. (1997) 60 Cal.App.4th 218, 242; Wright v. City of Morro Bay (2006) 144 Cal.App.4th 767, 773 (Wright).) Here, Gonzalez does not, and cannot, allege he has legal title to the property, because he transferred title to the property to Jordan by grant deed recorded on June 16, 2005. At most, Gonzalez retained some equitable claim to the property. However, Jordan then encumbered the property by deed of trust to Paul Financial, whose interest then passed to GMAC and Wells. In such circumstances, in order to state a claim to title as against GMAC and Wells as subsequent transferees, Gonzalez must allege they are not bona fide purchasers for value, i.e., that they did not pay value or had notice of his claim before acquiring their interest. (First Fidelity Thrift & Loan Assn. v. Alliance Bank (1998) 60 Cal.App.4th 1433, 1442 (First Fidelity); Firato v. Tuttle (1957) 48 Cal.2d 136, 139 [upholding sustaining of demurrer where plaintiffs failed to allege third party was not innocent purchaser for value]; Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1251 [a buyer is a bona fide purchaser if it (1) bought the property in good faith for value, and (2) had no knowledge or notice of the asserted rights of another].)
The complaint alleges no basis, such as forgery or other fraud in the execution, under which Gonzalez's grant deed to Jordan would be deemed void (i.e., a complete nullity) as opposed to voidable (i.e., one that may be set aside but only through the intervention of equity). (Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378-379 (Schiavon) [noting distinction between void and voidable deeds].)
The complaint fails to allege GMAC or Wells did not pay value or had notice of Gonzalez's fraud claim when they acquired their interest in the property by succeeding to Paul Financial's secured position in the Jordan property. Therefore, the complaint does not allege Wells and GMAC were not bona fide purchasers, as required to state a claim against them to quiet title. (First Fidelity, supra, 60 Cal.App.4th at p. 1441; Schiavon, supra, 84 Cal.App.4th at pp. 378-379.)
The complaint makes a bare allegation that GMAC "knew that plaintiffs were the real owners of the property." (Capitalization omitted.) This is insufficient to allege GMAC had knowledge of Gonzalez's claim at the time it acquired an interest in the property for at least two reasons, namely, (1) the allegation relates to a period of time after GMAC had acquired its interest and is alleged to have begun foreclosure proceedings; and (2) the complaint fails to specify any facts or means by which GMAC is alleged to have that knowledge, making it a conclusory allegation we need not accept. In addition, we must disregard the allegation's legal conclusion and contention that Gonzalez was a real owner. (Moore, supra, 51 Cal.3d at p. 125.)
We conclude the complaint does not adequately plead a claim to quiet title, and the trial court did not err in sustaining the demurrer to this cause of action. (Wright, supra,144 Cal.App.4th at p. 773.) Because Gonzalez has failed to meet his burden to show the complaint might be amended to cure the defects, the trial court therefore properly sustained the demurrer to the cause of action to quiet title, without leave to amend.
J. Gonzalez Fails to State a Cause of Action to Set Aside Foreclosure Against Wells
The complaint attempts to state a cause of action to set aside foreclosure against Wells.
To state such a cause of action, a plaintiff must allege he or she tendered payment of the full amount of the debt for which the property was security. " 'A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust.' " (FPCI RE-HAB 01 v. E & G Investments, Ltd. (1989) 207 Cal.App.3d 1018, 1021, quoting Karlsen, supra, 15 Cal.App.3d at p. 117; Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109 [plaintiff must allege tender of amount of debt to maintain cause of action for any irregularity in foreclosure sale procedure].)
We conclude the complaint does not, and cannot, state a claim to set aside the foreclosure, because Gonzalez has not alleged, and has not shown he could amend to allege, that he tendered payment of the full debt as required to support the cause of action. The trial court therefore did not err in sustaining the demurrer to the cause of action to set aside foreclosure without leave to amend.
K. Violation of Business and Professions Code [ Section 17200 Against NMS, Michelucci-Hardrick, GMAC and Wells
All further statutory references are to the Business and Professions Code unless otherwise specified.
The complaint seeks injunctive relief against all defendants under section 17200, which outlaws as unfair competition "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." (Ibid.)
To state a claim under section 17200, a complaint must allege a defendant's business act or practice is unlawful, unfair or fraudulent, and cause the plaintiff to suffer injury in fact and lose money or property. (Puentes v. Wells Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 643-644 (Puentes); Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1253; see § 17204.)
1. The Complaint States a Section 17200 Claim Against NMS and Michelucci-Hardrick.
The complaint attempts to state a section 17200 claim against NMS and Michelucci-Hardrick based on the allegation that they "deceived plaintiffs with a refinance scheme, which in reality was an equity skimming scheme." We have concluded above the allegations of this scheme are sufficient to state a claim for fraud and breach of fiduciary duty based on concealment of material facts by NMS and Michelucci-Hardrick. The complaint thereby alleges a " ' " 'business practice... forbidden by law,' " ' " that caused Gonzalez, individually and as trustee for Valadez, to suffer injury in fact and the loss of money through the payment of commissions and prepayment penalties. (Cel Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel Tech); cf. Progressive West Ins. Co. v. Superior Court (2005) 135 Cal.App.4th 263, 287-288 [finding no unfair business practice claim stated where plaintiff failed to state cause of action under common law doctrine for breach of covenant of good faith and fair dealing].) Those allegations are sufficient to state a section 17200 claim, and trial court therefore erred in sustaining the demurrer to this cause of action by Gonzalez, individually and as trustee for Valadez, against NMS and Michelucci-Hardrick.
Gonzalez also appears to base his section 17200 claim on NMS's employment of Hardrick as a salesperson, although he lacked a real estate license, and on violations of California's Home Equity Sales Contract Act (Civ. Code, § 1695 et seq.). These allegations are inadequate to state a section 17200 claim because they do not allege Gonzalez suffered injury in fact based on such violations. (§ 17204 [authorizing suits under § 17200 by person who has "suffered injury in fact and has lost money or property as a result of the unfair competition" (italics added)].)
2. The Complaint Fails to State a Section 17200 Claim Against GMAC and Wells.
Gonzalez bases his section 17200 claim against GMAC and Wells on their foreclosure upon the property after accepting what Gonzalez alleges was a "reinstatement" payment. As we have concluded above, the complaint does not state facts sufficient to set aside GMAC and Wells' foreclosure, nor to state a claim for violation of TILA, breach of contract or fiduciary duty, or fraud. Thus, as pleaded, the foreclosure was not an "unlawful" business act or practice on the part of GMAC and Wells. The complaint does not allege the public at large is misled by any practice on the part of GMAC or Wells, and therefore fails to allege a "fraudulent" practice within the meaning of section 17200. (Puentes, supra, 160 Cal.App.4th at p. 645; Byars v. SCME Mortgage Bankers, Inc. (2003) 109 Cal.App.4th 1134, 1147 (Byars).)
The law is not settled as to what constitutes an "unfair" business practice under section 17200. Some courts have applied to consumer cases the test formulated by the California Supreme Court in Cel Tech,a case involving business competitors. The Cel Tech test defines a business practice as unfair where it violates public policy as expressed in specific constitutional, statutory or regulatory provisions. (Byars, supra,109 Cal.App.4th at p. 1147, applying Cel Tech, supra, 20 Cal.4th at p. 187.)
As we construe the allegations of the complaint, GMAC and Wells accepted payment of overdue interest from Gonzalez and proceeded with nonjudicial foreclosure when additional payments on the loan were not made. Nothing in the complaint alleges GMAC and Wells did not perform the foreclosure properly under the "comprehensive statutory scheme regulating nonjudicial foreclosure" of deeds of trust in California. (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 334; see Civ. Code, § 2924 et seq.) Gonzalez does not allege GMAC or Wells violated the letter or spirit of any other law, regulation or constitutional provision. We therefore conclude the complaint fails to allege an "unfair" practice under the Cel Tech test. (Byars, supra,109 Cal.App.4th at p. 1147.)
The complaint alleges no facts that call into question the utility or propriety of the statutory foreclosure by GMAC and Wells. We therefore conclude the foreclosure also does not meet the tests for unfairness courts employed prior to Cel Tech, including (1) the balancing of the utility of the defendant's conduct against the gravity of the harm to the alleged victim; and (2) determining whether the practice offends an " 'established public policy,' " or is " 'immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.' " (Cel Tech, supra,20 Cal.4th at p. 184, quoting People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 530.)
Courts in consumer cases have applied an alternative test, utilizing the factors defining unfairness under section 5 of the Federal Trade Commission Act (15 U.S.C. § 45 et seq.), namely, " '(1) [t]he consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.' " (Davis v. Ford Motor Credit Co. LLC (2009) 179 Cal.App.4th 581, 597-598 (Davis), quoting Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394, 1403 (Camacho); Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1556.) Here, Gonzalez could have avoided the loss of the property to foreclosure, as the complaint indicates he was aware payments were not being made under the Jordan loan and, as is apparent from the judicially noticed trustee's deed upon sale, had not paid amounts due at the time of foreclosure. We conclude, therefore, that the facts here do not state a claim for an unfair business practice against GMAC or Wells under the alternative test. (Davis,at pp. 584-585 [applying Camacho test, rejecting claim of unfair business practice by borrower who could have avoided alleged injury had he made timely payments required under contract].) The complaint is therefore insufficient to state a claim under section 17200, and Gonzalez does not suggest it could be amended to do so. The trial court therefore did not err in dismissing this claim without leave to amend.
DISPOSITION
The judgment in favor of NMS and Michelucci-Hardrick is reversed as to the causes of action pleaded by Gonzalez, individually and as trustee for Valadez, against NMS and Michelucci-Hardrick for breach of contract; breach of fiduciary duty; fraud; violation of Business and Professions Code section 17200; and negligent infliction of emotional distress. In all other respects, the judgments are affirmed. All parties to bear their own costs on appeal.
WE CONCUR: HUFFMAN, Acting P. J., O'ROURKE, J.