Opinion
G051243 G051895
04-07-2017
JOHN M. CLAREY et al., Plaintiffs and Appellants, v. THE BANK OF NEW YORK MELLON et al., Defendants and Respondents.
Andrews Law Group, Brian C. Andrews; Law Offices of Mary A. Lehman and Mary A. Lehman for Plaintiffs and Appellants. Barry, Gardner & Kincannon, Jeffrey B. Gardner; Robinson, Chavez, Gardner & Kincannon and Cathy Knecht Robinson for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2010-00619854) OPINION Appeals from a judgment of the Superior Court of Orange County, Deborah C. Servino, Judge. Reversed. Andrews Law Group, Brian C. Andrews; Law Offices of Mary A. Lehman and Mary A. Lehman for Plaintiffs and Appellants. Barry, Gardner & Kincannon, Jeffrey B. Gardner; Robinson, Chavez, Gardner & Kincannon and Cathy Knecht Robinson for Defendants and Respondents.
* * *
INTRODUCTION
Plaintiffs John M. Clarey and Christy J. Clarey (together, the Clareys) appeal from the judgment entered after the trial court sustained, without leave to amend, the demurrer of defendants The Bank of New York Mellon (the Bank of New York) and Bayview Loan Servicing, LLC (Bayview), to the Clareys' second amended complaint. (We refer to the Bank of New York and Bayview collectively as defendants.) The Clareys sued defendants and others, asserting claims for, inter alia, declaratory relief, negligent misrepresentation, violation of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) (RESPA), and unfair competition, based on allegations that improper and unsubstantiated fees were assessed on the Clareys' home loan and home equity line of credit accounts. The Clareys also alleged flaws in the process by which their debt had been securitized. The Clareys filed a notice of appeal from the second amended judgment, which was entered after the trial court granted defendants' motion for prevailing party attorney fees.
The Clareys failed to allege facts sufficient to state a claim for negligent misrepresentation, violation of RESPA, or unfair competition against defendants, and failed to show a reasonable possibility that the Clareys could state any such claims if granted leave to amend. Defendants' demurrer was properly sustained without leave to amend as to those claims.
We reverse the second amended judgment, however, solely because the Clareys' second amended complaint stated a claim for declaratory relief against defendants, by alleging facts showing an ongoing dispute regarding whether the Clareys had been inaccurately assessed fees on their home loan account. The second amended complaint further alleged their home loan was secured by a trust deed for which the Bank of New York was the current trustee and Bayview was the current loan servicer. Therefore, defendants' demurrer to the declaratory relief cause of action was sustained in error.
Because we reverse the judgment on the ground that the Clareys have stated a claim for declaratory relief against defendants, we do not need to decide whether the trial court properly granted defendants' motion for prevailing party attorney fees based on a provision in the deed of trust, and reverse that award.
PROCEDURAL HISTORY
I.
THE TRIAL COURT SUSTAINS DEFENDANTS' DEMURRER TO THE ORIGINAL
COMPLAINT WITH LEAVE TO AMEND; THE TRIAL COURT SUSTAINS DEFENDANTS'
DEMURRER TO THE FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND.
In December 2012, the Clareys filed a verified complaint against the Bank of New York, Mortgage Electronic Registration Systems, Inc. (MERS), Countrywide Home Loans, Inc. (Countrywide), ReconTrust Company, N.A. (ReconTrust), BAC Home Loans Servicing, LP (BAC), and Bayview. The complaint asserted claims for declaratory relief, an accounting, fraud, violation of RESPA, violation of the Truth in Lending Act (15 U.S.C. § 1601 et seq.) (TILA), negligence, violation of the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), unfair competition, quasi-contract, and quiet title. All the claims were asserted against all defendants except for the violation of RESPA claim, which was only asserted against BAC.
The trial court sustained the demurrer to the complaint filed by BAC, Countrywide, ReconTrust, and MERS, and provided the Clareys with leave to amend. The Clareys filed a verified first amended complaint containing the same claims, sans their claims for the violation of TILA and negligence. Defendants filed a demurrer to the first amended complaint, which was sustained by the trial court with leave to amend.
II.
THE CLAREYS FILE A VERIFIED SECOND AMENDED COMPLAINT.
In September 2014, the Clareys filed a verified second amended complaint against the Bank of New York, MERS, Countrywide, ReconTrust, BAC, and Bayview (the second amended complaint). As relevant to the issues on appeal, the second amended complaint contained claims against defendants for declaratory relief, negligent misrepresentation, and unfair competition. The second amended complaint also contained a claim for violation of RESPA against the Bank of New York.
In their opening brief, the Clareys state they "have since settled with and dismissed the other Defendants," presumably meaning all defendants except for the Bank of New York and Bayview.
The second amended complaint contained a claim for quiet title against defendants. The Clareys do not argue defendants' demurrer was improperly sustained as to that cause of action.
The following is a summary of the allegations of the second amended complaint. The Clareys own real property in Irvine (the property). In November 2004, the Clareys entered into a construction loan agreement with Countrywide to obtain a loan in the amount of $3,215,384 that was secured by a deed of trust (the construction loan). The deed of trust securing the construction loan stated in section 23: "Upon payment of all sums secured by this Security Instrument, Lender shall request Trustee to reconvey the Property and shall surrender this Security Instrument and all notes evidencing debt secured by this Security Instrument to Trustee. Trustee shall reconvey the Property without warranty to the person or persons legally entitled to it." The Clareys used the loan proceeds to finance the construction of a residence and make related improvements on the property.
In April 2006, after construction of the Clareys' residence was completed, Countrywide approached the Clareys about refinancing the construction loan and converting it into a home loan with a low interest rate. The Clareys accepted Countrywide's offer.
On May 9, 2006, Countrywide provided the Clareys a "Payoff Demand Statement for the Construction Loan stating that a sum of $3,207,338.07 was required to pay off the Construction Loan on or before May 31, 2006." On May 19, 2006, the Clareys entered into a home loan agreement with Countrywide, and thereby obtained a loan in the amount of $4,844,127 (the home loan).
On May 26, 2006, the final settlement statement showed the distribution at closing of the home loan documents of the Clareys' payment of $3,230,099.26 (which included $22,661.19 in interest for the month of May and $100 in "alleged uncollected fees due"), for the full satisfaction of the construction loan. The second amended complaint alleged the Clareys' "obligations to Countrywide, or to any other Defendant, under the Construction Loan were fulfilled and discharged when Defendant Countrywide recorded the Deed of Reconveyance" which was recorded in June 2006 or April 2007.
The second amended complaint further alleged that in June 2006 or April 2007 (the second amended complaint inexplicably alleged both dates), a deed of reconveyance demonstrating the Clareys' full satisfaction of the construction loan was recorded in the Orange County Recorder's Office.
The home loan was secured by a deed of trust which named MERS as the nominal beneficiary and ReconTrust as the trustee. The Clareys paid the home loan obligations on time and in the full amount as evidenced by the home loan statements from June 2006 through February 2007.
The home loan "was securitized shortly after the Home Loan was finalized." Countrywide acted as the "'seller' for the CWALT, INC., ALTERNATIVE LOAN TRUST 2007-J1, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-J1; bundling the Home Loan with other similar loans and selling those bundled loans to CWALT, Inc." CWALT, Inc., thereafter, "acting as 'Depositor,' sold the bundled loans, along with the Home Loan, to ALTERNATIVE LOAN TRUST 2007-J1, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-J1 and Defendant [the Bank of New York] as Trustee. . . . The securitization of the Home Loan was consummated on or before February 8, 2007." (Notwithstanding the second amended complaint's use of the word "consummated," as discussed post, the second amended complaint also alleged that, contrary to the timetable set forth in the pooling and servicing agreement, MERS did not assign the deed of trust to the Bank of New York until May 2011.)
The second amended complaint also alleged that the alternative loan trust and the securitization of the home loan were governed by a pooling and servicing agreement which had a closing date of on or about February 28, 2007.
In February 2007, the Clareys obtained a $756,000 home equity line of credit through Countrywide (the home equity line of credit). The Clareys executed a promissory note and a deed of trust to secure the home equity line of credit, which named MERS as the nominal beneficiary and ReconTrust as the trustee.
In 2008, John Clarey's business began to suffer and the Clareys' household income fell substantially. The Clareys reached out to BAC, the loan servicer of the home loan, for "help with their loan payments."
In January 2009, BAC offered to accept the Clareys' application for a modification of the home loan, conditioned on their entering a special forbearance agreement with BAC and making monthly trial period payments of $15,000 ending June 1, 2009. The Clareys timely made all the required trial period payments.
In July 2009, "Defendants" provided the Clareys with a loan modification offer extending the interest-only period of the home loan. The loan modification offer, however, required the Clareys' consent to an additional $394,424 "in unexplained interest, fees, and escrow to the Home Loan balance."
In November 2009, the Clareys contacted BAC and spoke with BAC senior operations analyst Melissa Henderson about the fees. The Clareys were told the disputed amounts "were fees and interest accrued during the SFA (special forbearance agreement) period." The Clareys requested a detailed accounting, clarifying the purpose of the assessment of the $394,424 in unexplained interest, fees, and escrow, which BAC and Henderson "either refused or failed to provide." After BAC refused to remove the special forbearance agreement fees, the Clareys refused to finalize the home loan modification "because doing so would convert Defendants BAC, [the Bank of New York] and/or Countrywide's errant and wrongful fees to the principal balance owed on [the Clareys'] Home Loan."
When the Clareys received their November 2009 monthly statement for the home loan from BAC, they detected that BAC had added $93,616.71 in fees to the home loan. The Clareys again contacted BAC and Henderson to inquire into the origin and purpose behind BAC's continuing assessment of unexplained fees to the home loan account. Henderson told the Clareys that the $93,616.71 represented additional fees related to the construction loan, but she was not clear as to how or why those fees were related to the construction loan. Although the Clareys asserted that they had fully satisfied the construction loan obligation and received a deed of reconveyance, BAC refused to remove the $93,616.71 in alleged fees on the construction loan.
On November 19, 2009, the Clareys made a written demand on BAC for a detailed accounting demonstrating the purpose of the fees assessed on the home loan and for confirmation whether the alleged fees were secured by the home loan deed of trust. The Clareys alleged the written demand constituted a qualified written request letter under RESPA. BAC did not provide the Clareys an accounting or an explanation for the assessment of the fees to the home loan account.
From August 2009 through April 2011, the Clareys demanded that the $93,616.71 in fees be removed from the home loan account because BAC could not substantiate them. The Clareys also continued to unsuccessfully search "for explanations from BAC regarding the substantial fees BAC, [the Bank of New York] and/or Countrywide . . . assessed to their Home Loan account." BAC, MERS, the Bank of New York, and/or Countrywide "either refused or could not substantiate the reason for the fees."
In June 2010, BAC offered the Clareys a second special forbearance agreement, which modified the Clareys' monthly payments to $28,000. "BAC, [the Bank of New York], MERS and/or DOES 1-100 continued to assess additional fees to [the Clareys'] Home Loan."
The Clareys entered into two different special forbearance agreements, which allegedly permitted them to make no payments or reduced payments until their promised loan modification was finalized. Those forbearance agreements "were overly vague, containing terms not suited for the situation between the parties. As a consequence of these pro[blems], Defendants assessed hundreds of thousands of dollars in alleged fees and related costs to [the Clareys'] Home Loan account. [¶] . . . The hundreds of thousands of dollars in fees and related costs Defendants BAC, Countrywide, and/or [the Bank of New York] wrongfully assessed to the Home Loan, caused [the Clareys] to fear the potential loss of their family home and real property."
In February 2011, BAC reported the home loan account as having a balance of $4.8 million. "Under the financial duress of fees and costs allegedly associated with the Special Forbearance plans, and induced by Defendants BAC, MERS, Countrywide and/or [the Bank of New York]'s fraudulent representations regarding the amount of fees allegedly assessed to [the Clareys'] Home Loan account, [the Clareys] entered into the Loan Modification Agreement with Defendants" (the loan modification agreement).
In the loan modification agreement, BAC purported to be the lender on the home loan with the power and authority to change the terms of the note. In the loan modification agreement, BAC stated the unpaid principal balance on the home loan, as of May 2011, was $5,642,113.66.
The Clareys made payments on the home loan, as instructed, since its origination in 2006. When told to make trial period payments in order to be considered for a loan modification agreement, the Clareys made every payment on time and in the full amount. And yet, despite the Clareys' seven years of paying on the home loan, BAC, the Bank of New York, and/or MERS "wrongfully and fraudulently induced and allegedly obligated [the Clareys] to more than $798,436.66 in additional debt. Defendants[] forced [the Clareys] to accept and agree to unconscionable financial terms, in order to receive an alleged loan modification."
In May 2011, the home loan statement again reflected the $93,616.71 in fees. Again, the Clareys demanded removal of those fees, but no action to do so was taken. The Clareys explained to BAC that the loan modification agreement was in place and the fees were not proper, but BAC continued to assert the fees were related to the construction loan refinance and would not be removed, and refused to provide an accounting or further explanation.
On May 18, 2011, MERS executed an assignment of a deed of trust purporting to assign the beneficial interest in the home loan deed of trust to the Bank of New York.
In November 2011, Bayview sent the Clareys a debt validation letter stating it would be servicing the home loan on behalf of the Bank of New York as the trustee and owner of the home loan. The letter stated, "Bayview is seeking to bring [the Clareys'] mortgage current and claiming that as of 10/30/2012 [the Clareys'] current amount due on the account is $5,618,874.36 and that this debt will continue to accrue interest . . . which may include addition[al] advances or fees."
On May 1, 2012, MERS executed an assignment of the deed of trust as to the home equity line of credit, thereby purporting to assign the beneficial interest in the home equity line of credit to the Bank of New York.
"Defendants Countrywide, MERS, and BAC are Defendant [the Bank of New York]'s agents" and that "[o]n or around 2009, when BAC and Countrywide wrongfully assessed the wrongful and erroneous fees, as described above, those wrongful and erroneous fees were assessed . . . at the direction, and for the benefit of, Defendant [the Bank of New York]."
"[I]f the Home Loan and HEL [(the home equity line of credit)] were not transferred to Defendant [the Bank of New York] in 2007, based on the facts alleged herein, neither Home Loan or HEL's promissory note or security instrument (deed of trust) was validly transferred." The pooling and servicing agreement on the home loan had a closing date of February 28, 2007, and the pooling and servicing agreement on the home equity line of credit had a closing date of March 30, 2007.
III.
DEFENDANTS DEMUR TO THE SECOND AMENDED COMPLAINT; THE TRIAL
COURT SUSTAINS THE DEMURRER TO THE SECOND AMENDED COMPLAINT
WITHOUT LEAVE TO AMEND AND ENTERS JUDGMENT; THE TRIAL COURT
GRANTS DEFENDANTS' MOTION FOR ATTORNEY FEES AND AMENDS THE
JUDGMENT TO PROVIDE FOR THAT AWARD; THE CLAREYS APPEAL.
Defendants filed a demurrer to the second amended complaint, alleging that, as to each cause of action, "[t]he pleading does not state facts sufficient to constitute a cause of action; and [¶] [t]he pleading is uncertain. As used in this subdivision, 'uncertain' includes ambiguous and unintelligible." The trial court sustained defendants' demurrer to the second amended complaint without leave to amend. Judgment was entered in favor of defendants. The judgment was amended to award defendants $2,044 in costs. The Clareys filed a notice of appeal from the judgment.
Defendants concurrently filed a motion to strike portions of the second amended complaint, which the trial court denied as moot. Defendants' motion to strike is not at issue in this appeal.
Defendants thereafter filed a motion for prevailing party attorney fees, based on a provision contained in the home loan deed of trust. The trial court granted the motion and amended the judgment to award defendants $42,971 in attorney fees (the second amended judgment). The Clareys filed a notice of appeal to challenge the attorney fees award. On our own motion and for good cause, we ordered the Clareys' two appeals consolidated for all purposes.
DISCUSSION
I.
THE TRIAL COURT ERRED BY SUSTAINING THE DEMURRER TO THE CAUSE
OF ACTION FOR DECLARATORY RELIEF; THE COURT DID NOT ERR IN
SUSTAINING THE DEMURRER TO THE OTHER CAUSES OF ACTION.
A.
Standard of Review
A judgment following the sustaining of a demurrer is reviewed under the de novo standard. (McCutchen v. City of Montclair (1999) 73 Cal.App.4th 1138, 1144; Boccato v. City of Hermosa Beach (1994) 29 Cal.App.4th 1797, 1803-1804.) Accordingly, we treat the properly pleaded allegations of a challenged complaint as true, and liberally construe them to achieve "'"substantial justice"'" among the parties. (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.)
We consider only the allegations of a challenged complaint and matters subject to judicial notice to determine whether the facts alleged state a cause of action under any theory. (American Airlines, Inc. v. County of San Mateo, supra, 12 Cal.4th at p. 1118.) "'Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]'" (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
B.
Declaratory Relief Cause of Action
Section 1060 of the Code of Civil Procedure provides: "Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought." Section 1061 of the Code of Civil Procedure provides: "The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances."
In Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 365, a panel of this court explained a conceptual framework classifying declaratory relief into three types for the purpose of determining whether the trial court erred by dismissing a declaratory relief cause of action. A "'Type 1'" declaratory relief cause of action must be dismissed because the complaint alleges only a past breach of contract, a breach of contract remedy is available, and declaratory relief is unnecessary to guide future conduct. (Id. at pp. 365, 366-368.) A "'Type 2'" declaratory relief cause of action alleges an actual and ongoing controversy, such as a continuing contractual relationship, and future consequences that depend on the court's interpretation of the contract. (Id. at pp. 369-371.) A trial court must not dismiss a Type 2 declaratory relief cause of action. (Id. at p. 365.) A "'Type 3'" declaratory relief cause of action pleads a current controversy pertaining to the parties' rights and duties under a contract in which a declaration of such rights and duties might be necessary to guide the parties' future conduct in a continuing contractual relationship. (Id. at pp. 374-376.) A trial court has discretion to dismiss a Type 3 declaratory relief cause of action. (Id. at p. 365.)
Here, the Clareys' declaratory relief claim, as set forth in the second amended complaint, appeared to seek two different judicial declarations. First, the Clareys alleged there was no basis for the addition of the $93,616.71 in purported construction loan fees to the home loan, which was secured by the deed of trust currently held by the Bank of New York. They asserted they were entitled to a judicial declaration that those fees were improperly assessed and added to the home loan and are not recoverable.
Second, the Clareys alleged that, due to flaws in the securitization process, the trust deeds securing the home loan and the home equity line of credit were not timely transferred or assigned to the Bank of New York by the closing dates as set forth in their respective pooling and servicing agreements. They contended they were therefore entitled to a declaration that neither the Bank of New York, nor any other defendant, "has a secured or unsecured legal, equitable, or pecuniary interest" in the home loan or the home equity line of credit.
In its minute order, the trial court explained its reasoning for sustaining the demurrer as to the declaratory relief cause of action, but only addressed the failure of the second of the two forms of declaratory relief sought by the Clareys, stating: "Code Civ. Proc., § 1060 permits actions for declaratory relief where there exists an 'actual controversy relating to the legal rights and duties of the respective parties.' [¶] The allegations regarding the purported invalidity of the Deed of Trust fail and there is no actual controversy based upon such allegations [citations]. [¶] The Fourth Appellate District, Division Three, however, has severely limited any possible cause of action with respect to the securitization process. The court noted that even if the asserted improper securitization occurred, the relevant parties to such a transaction were the holders (transferors) of the promissory note and the third party acquirers (transferees) of the note and further noted that as to plaintiff, an assignment merely substituted one creditor for another, without changing her obligations under the note. . . . [Citation.] As an unrelated third party to the alleged securitization, and any other subsequent transfers of the beneficial interest under the promissory note, [plaintiff] lacks standing to enforce any agreements, including the investment trust's pooling and servicing agreement, relating to such transactions. [Citation.] [¶] Therefore, [the Clareys'] claim that MERS lacked authority to assign the securitized trusts and that the resulting assignments, including to [the Bank of New York], are void is unsupported as a matter of law. [The Clareys]—third parties to the assignment—cannot make these claims when they are in default of their loan obligations as set forth in Jenkins[ v. JPMorgan Chase Bank (2013) 216 Cal.App.4th 497]. [¶] There is no actual controversy between the Moving Defendants and [the Clareys] because [the Clareys] have alleged no viable cause of action against the Moving Defendants." (Italics added.)
In Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 811, the appellate court held that the trial court properly sustained the demurrer, without leave to amend, to the plaintiff's complaint containing claims for cancellation of assignment and declaratory relief. The plaintiff's claims were based on the allegation that the assignment of a deed of trust to her home by MERS was invalid because it occurred after the closing date set forth in the pooling and servicing agreement. (Ibid.) The court held the plaintiff lacked standing to challenge MERS's assignment of the deed of trust pursuant to the pooling and servicing agreement. (Id. at pp. 814, 818.)
In Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 942-943, the California Supreme Court recognized a borrower's standing to sue for wrongful foreclosure when an alleged defect in an assignment of a trust deed renders the assignment void. The Supreme Court's holding was expressly limited to the postforeclosure context. (Id. at pp. 934-935.)
We agree with Saterbak v. JPMorgan Chase Bank, N.A., supra, 245 Cal.App.4th 808. The trial court did not err by concluding the Clareys failed to state a claim for a judicial declaration that defendants had no rights or interest as to the deeds of trust for the home loan and the home equity line of credit due to MERS's failure to assign the deeds of trust to the Bank of New York in a timely manner as required under the pooling and servicing agreements.
However, the trial court did not address the first form of declaratory relief sought by the Clareys in the second amended complaint—a declaration regarding the legitimacy and enforceability of the construction loan fees added to the home loan. The second amended complaint alleged the Bank of New York was the owner of that debt and Bayview was the current servicer of it. The second amended complaint alleged that Bayview sent the Clareys a debt validation letter that appeared to include the disputed fees.
That type of declaratory relief falls within the Type 2 declaratory relief cause of action in that it alleges an actual and ongoing controversy, in the form of a continuing contractual relationship, and future consequences that depend on the court's interpretation of the contract. As a Type 2 declaratory relief cause of action, the trial court must not dismiss it. We therefore conclude the trial court erred by sustaining the demurrer to the declaratory relief claim in the second amended complaint.
C.
Negligent Misrepresentation Cause of Action
To state a claim for negligent misrepresentation, the Clareys had to plead "'"(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage."' [Citation.]" (Wells Fargo Bank, N.A. v. FSI, Financial Solutions, Inc. (2011) 196 Cal.App.4th 1559, 1573.) Negligent misrepresentation, like fraud, must be pleaded with particularity. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 185, fn. 14.)
The trial court sustained the demurrer to the Clareys' negligent misrepresentation claim, stating: "The cause [of action] does not allege negligent misrepresentation against the moving defendants. The alleged misrepresentations regarding the fees owed by the [Clareys] with respect to the construction loan and/or home equity loan they entered into through BAC were allegedly made by BAC not these defendants. . . . The only allegations linking them to the statements are conclusory allegations that they are agents or successors in interest to Countrywide. . . . The [Clareys] ha[ve] alleged no facts to support an agency relationship such as to hold them liable for the statements made by BAC. In addition, the [Clareys] allege that [the Bank of New York] and BAC made misrepresentations in the official home loan statements to the [Clareys] regarding the amount owed by the [Clareys] for the Home Equity Loan . . . . First, the [Clareys] have not alleged sufficient facts to support a finding that BAC is or was a loan servicer for [the Bank of New York]. Second, the [Clareys] have not alleged facts which support a finding that statements were untrue, made without grounds to believe they were true or that the [Clareys] relied upon the statements resulting in damages to them. The cause of action is not sufficient as pled."
The trial court properly sustained the demurrer as to the negligent misrepresentation claim. Even if the second amended complaint alleged BAC made a misrepresentation and there were no reasonable grounds for believing it to be true, the second amended complaint did not allege that any misrepresentation was made by either the Bank of New York or Bayview. The second amended complaint cursorily alleged that BAC was acting as agent for the Bank of New York as trustee, when BAC made its misrepresentation, but the second amended complaint also alleged that the deed of trust was not assigned to the Bank of New York until 2011—long after the alleged misrepresentation occurred. There were no facts alleged showing BAC was acting in any agency capacity for the Bank of New York.
Finally, there were no facts alleged in the second amended complaint, explaining how the Clareys detrimentally relied on any alleged misrepresentation. Instead, the second amended complaint is replete with allegations that the Clareys knew the additional fees had been improperly imposed and that they repeatedly objected to them. The second amended complaint established the Clareys were never misled by any misrepresentation so as to rely on it to their detriment. The second amended complaint did not allege Bayview made any misrepresentations of any kind. The trial court properly sustained defendants' demurrer to the negligent misrepresentation claim.
D.
Violation of RESPA Cause of Action
"RESPA regulates the settlement process for real estate disputes [citation], as well as banks' servicing of mortgage loans regulated by the federal government [citation]. Any mortgage loans secured by a first or subordinate lien on residential real property are regulated by the federal government. (12 U.S.C. § 2602(1)(A).) [¶] [Civil Code s]ection 2605, part of RESPA, sets forth requirements for the servicing of mortgage loans. Among other things, this section requires a loan servicer to respond to a QWR [(qualified written request)] for information from the borrower. (12 U.S.C. § 2605(e)(1).) . . . The loan servicer was required to provide the borrower with a 'written response acknowledging receipt of the correspondence within 20 days.' (12 U.S.C. former § 2605(e)(1)(A).) Also, '[n]ot later than 60 days . . . after the receipt from any borrower of any qualified written request,' the loan servicer was required to correct the borrower's account, provide the borrower with the requested information relating to the servicing of the loan, or provide the borrower with an explanation as to why the requested information was unavailable. (12 U.S.C. former § 2605(e)(2).)" (Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 530-531, disapproved on another ground in Yvanova v. New Century Mortgage Corp., supra, 62 Cal.4th at p. 939, fn. 13.)
The Clareys' RESPA violation claim against the Bank of New York was based on the following allegations: (1) BAC charged and assessed illegal and wrongful fees to the home loan in violation of 12 United States Code section 2607; (2) those fees were not disclosed on the May 26, 2006 closing statement in violation of RESPA disclosure requirements; (3) on November 19, 2009, the Clareys sent a qualified written request to which BAC failed to provide a timely written response acknowledging receipt; (4) BAC "failed to make appropriate corrections to [the Clareys'] account in response to this QWR [(qualified written request)], or to investigate or to explain why it would not or could not do so"; and (5) BAC provided information to consumer reporting agencies "regarding overdue payments allegedly owed by [the Clareys] that were related to their [qualified written requests], many of which were improperly assessed and were neither late nor overdue." The second amended complaint stated: "Defendant BAC is the agent of [the Bank of New York]. Therefore as the principal for BAC, [the Bank of New York] is equally culpable for the actions of its agent BAC as described herein."
In sustaining the demurrer to this claim, the trial court stated: "The [Clareys] now add[] a cause of action for violation of Respa against these demurring defendants that was not previously alleged against them in the prior pleadings. The cause [of action] fails to state sufficient facts to constitute a cause [of action] because it is based upon an insufficiently pled allegation that BAC was an agent of [the Bank of New York]. . . . The Complaint alleges that the loan servicer was BAC. The Complaint does not allege facts which support a finding that BAC is or has been the loan servicer for [the Bank of New York]. To the contrary, the [second amended complaint] alleges that BAC was the servicer for Countrywide or Bank of America at the time the alleged violations occurred. As such, there is no cause [of action] pled against these defendants."
The trial court properly sustained the demurrer to this claim. As pointed out by the trial court, the Clareys' RESPA violation claim was based entirely on allegations of BAC's actions and omissions. Although the second amended complaint contained the conclusion that BAC served as agent to the Bank of New York, that conclusion was unsupported by any facts. Even if any facts had been alleged showing such an agency relationship, neither the briefing in the trial court nor the briefing on appeal analyzes how such an agency relationship in the context of a loan servicer's acts or omissions in violation of RESPA would be imputed to the assignee of a deed of trust securing the loan.
E.
Unfair Competition Cause of Action
"The UCL [(unfair competition law)] permits civil recovery for 'any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . . .' (Bus. & Prof. Code, § 17200.) '"Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent. . . ."' [Citation.] [¶] By defining 'unfair competition' to include any unlawful act or practice, the UCL permits violations of other laws to be treated as independently actionable as unfair competition. [Citation.] '"[A]n 'unfair' business practice occurs when that practice 'offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.' [Citation.]" [Citation.]' [Citation.] An unfair business practice also means '"the public policy which is a predicate to the action must be 'tethered' to specific constitutional, statutory or regulatory provisions."' [Citation.] A fraudulent practice under the UCL 'require[s] only a showing that members of the public are likely to be deceived' and 'can be shown even without allegations of actual deception, reasonable reliance and damage.'" (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 80-81.)
In sustaining defendants' demurrer to the unfair competition claim, the trial court stated in part: "[The Clareys] have not ple[d] a viable UCL [(Business and Professions Code section 17200 et seq.)] claim against these defendants. The [Clareys] allege that the Defendants violated 'RESPA, TILA, and Rosenthal Fair Debt Collections Practices Acts,' and Defendants 'unfairly, deceptively, and fraudulently assessed to [the Clareys'] Home Loan account a sum of $93,616.71' . . . . As discussed above, there are no facts allege[d] connecting these defendants to any fraudulent representations or assessments by these defendants with respect to the [Clareys'] home equity loan or any obligation for that matter. [¶] The [Clareys] have not alleged facts which support a finding that these Defendants violated the Fair Debt Collections Practices Acts because there are no facts alleged to support a finding that they are debt collectors liable under the California Fair Debt Collections Practices Act. Further, courts have held that a residential mortgage loan is not a 'debt' within the scope of the Act. [¶] As addressed above, there are no allegations that the Moving Defendants violated RESPA (the third cause of action) and there are no[] facts or cause[s of action] alleged to support a TILA claim against any defendant (there is no TILA claim in the [second amended complaint]). As such, [the Clareys] have not pled a viable cause of action under UCL against the Moving Defendants."
We agree the Clareys failed to allege facts sufficient to state a claim for unfair competition against defendants. For the reasons we discussed ante, there were no facts alleged that defendants violated RESPA, were liable for negligent misrepresentation, or otherwise engaged in any unlawful, unfair, or fraudulent practices within the meaning of the unfair competition law (Bus. & Prof. Code, § 17200 et seq.). The Clareys' grievances were based on the acts or omissions of parties other than defendants, which occurred before defendants became involved in the home loan or the home equity line of credit. Defendants' demurrer to the Clareys' unfair competition claim was properly sustained.
II.
THE CLAREYS FAILED TO SHOW THERE WAS A REASONABLE POSSIBILITY
THEY COULD AMEND THE SECOND AMEND COMPLAINT TO STATE A CAUSE
OF ACTION FOR NEGLIGENT MISREPRESENTATION, VIOLATION OF RESPA,
OR UNFAIR COMPETITION AGAINST DEFENDANTS.
The Clareys argue the trial court erred by failing to grant them leave to amend the second amended complaint. When a demurrer 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. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; see Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
"Furthermore, where the plaintiff requests leave to amend the complaint, but the record fails to suggest how the plaintiff could cure the complaint's defects, 'the question as to whether or not [the] court abused its discretion [in denying the plaintiff's request] is open on appeal . . . .' [Citation.] Because the trial court's discretion is at issue, we are limited to determining whether the trial court's discretion was abused as a matter of law. [Citation.] Absent an effective request for leave to amend the complaint in specified ways, an abuse of discretion can be found '"only if a potentially effective amendment were both apparent and consistent with the plaintiff's theory of the case." [Citation.]'" (Jenkins v. JPMorgan Chase Bank, N.A., supra, 216 Cal.App.4th at p. 507.)
In Lincoln Property Co., N.C., Inc. v. Travelers Indemnity Co. (2006) 137 Cal.App.4th 905, 916, the appellate court held: "[W]e find no abuse of discretion in the trial court's denial of leave to amend. Although [the plaintiff] has consistently requested leave to amend, it has never suggested what facts it is prepared to allege that would cure the defect in its complaint. There is nothing in the record that suggests that [the plaintiff] could amend its complaint to state a cause of action which would not similarly be barred by the judgment in the prior . . . action."
Here, the Clareys have failed to show what facts they might allege if given the opportunity to again amend their pleading. In their opening brief, the Clareys' entire argument on this point is as follows: "As explained, the trial court erroneously sustained the demurrer to the Clareys' first four causes of action. If this Court believes the allegations, especially as to the Clareys' standing to sue [the Bank of New York] and [the Bank of New York]'s ownership of the Home Loan at the pertinent times, is not adequately alleged, the Clareys request leave to amend. If this Court finds an amendment could cure the defect in the Clareys' [second amended complaint], the trial court abused its discretion and this Court must reverse. [Citation.] To the extent the Clareys have made additional allegations on appeal not supported by the [second amended complaint], the law allows the Clareys to do so and this also establishes a right to amend. [Citation.] As discussed, supra, to the extent the trial court sustained the demurrer for insufficiently alleging BAC was an agent of [the Bank of New York], the [pooling and servicing agreement] and the explanation in this brief show any deficiency can be cured."
The Clareys have failed to carry their burden of showing there is a reasonable possibility the defects in the pleading of their claims for negligent misrepresentation, violation of RESPA, and/or unfair competition against defendants can be cured by amendment. We therefore conclude the demurrers to those claims were properly sustained without leave to amend.
III.
PREVAILING PARTY ATTORNEY FEES AND COSTS AWARD
The Clareys also challenge the trial court's prevailing party attorney fees award. After the trial court sustained defendants' demurrer to the second amended complaint without leave to amend and judgment was entered and amended to award defendants' costs in the amount of $2,044, defendants filed a motion for prevailing party attorney fees based on an attorney fees provision contained in section 22 of the deed of trust securing the home loan. The trial court granted the motion, awarding defendants attorney fees in the amount of $42,971, and the judgment was again amended to include that award (the second amended judgment).
Section 22 of the home loan deed of trust, which is preceded by the language, "Borrower and Lender further covenant and agree as follows," states, "Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys' fees and costs of title evidence." (Italics added, boldface omitted.)
This case has not involved the Clareys' breach of the terms of the deed of trust, their default, acceleration of the sums secured by the deed of trust, or the sale of the property. Therefore, it does not appear section 22 of the deed of trust provides support for an award of prevailing party attorney fees pursuant to Civil Code section 1717.
In their reply filed in support of their motion for attorney fees, defendants argued the deed of trust "also contains an attorney fee provision in [section] 9." That section provides: "Protection of Lender's Interest in the Property and Rights Under this Security Instrument. If (a) Borrower fails to perform the covenants and agreements contained in this Security Instrument, (b) there is a legal proceeding that might significantly affect Lender's interest in the Property and/or rights under this Security Instrument (such as a proceeding in bankruptcy, probate, for condemnation or forfeiture, for enforcement of a lien which may attain priority over this Security Instrument or to enforce laws or regulations), or (c) Borrower has abandoned the Property, then Lender may do and pay for whatever is reasonable or appropriate to protect Lender's interest in the Property and rights under this Security Instrument, including protecting and/or assessing the value of the Property, and securing and/or repairing the Property. Lender's actions can include, but are not limited to: (a) paying any sums secured by a lien which has priority over this Security Instrument; (b) appearing in court; and (c) paying reasonable attorneys' fees to protect its interest in the Property and/or rights under this Security Instrument, including its secured position in a bankruptcy proceeding. Securing the Property includes, but is not limited to, entering the Property to make repairs, change locks, replace or board up doors and windows, drain water from pipes, eliminate building or other code violations or dangerous conditions, and have utilities turned on or off. Although Lender may take action under this Section 9, Lender does not have to do so and is not under any duty or obligation to do so. It is agreed that Lender incurs no liability for not taking any or all actions authorized under this Section 9. [¶] Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this Security Instrument. These amounts shall bear interest at the Note rate from the date of disbursement and shall be payable, with such interest, upon notice from Lender to Borrower requesting payment. [¶] If this Security Instrument is on a leasehold, Borrower shall comply with all the provisions of the lease. If Borrower acquires fee title to the Property, the leasehold and the fee title shall not merge unless Lender agrees to the merger in writing." (Boldface omitted.)
We do not need to decide whether the motion for prevailing party attorney fees was properly granted based on section 9 of the home loan deed of trust. As discussed ante, we reverse the second amended judgment, which includes the attorney fees and costs award, on the ground defendants' demurrer to the declaratory relief claim was sustained in error. As the Clareys' declaratory relief claim against defendants remains viable, an award of prevailing party attorney fees and costs, at this juncture, is premature. Accordingly, it is reversed.
DISPOSITION
We reverse the second amended judgment. For purposes of clarity in future proceedings in this case and for the reasons discussed ante, the trial court properly sustained defendants' demurrer without leave to amend with respect to all causes of action, except for the declaratory relief claim. In the interests of justice, the parties shall bear their own costs on appeal.
FYBEL, J. WE CONCUR: BEDSWORTH, ACTING P. J. IKOLA, J.