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Roy D. Oppenheim, Geoffrey E. Sherman, Jacquelyn Trask, and Yanina Zilberman of Oppenheim Pilelsky, P.A., Weston, for appellants.

Elliot B. Kula, W. Aaron Daniel, and William D. Mueller of Kula & Associates, P.A., Miami, for appellee, The Bank of New York Mellon.

PER CURIAM.

This is a foreclosure case complicated by multiple transfers of the mortgage and note and by the fact that the original note was lost. The complexity of the case caused the trial to extend over four days between February and June, 2016. Because the appellee Bank^[1] failed to comply with the requirements of the lost note statute, we reverse the final judgment of foreclosure.

The plaintiff in a foreclosure case “must tender the original promissory note to the trial court or seek to reestablish the lost note under section 673.3091, Florida Statutes.” Servedio v. U.S. Bank Nat. Ass’n, 46 So. 3d 1105, 1107 (Fla. 4th DCA 2010). Here, because the Bank did not tender the original promissory note, it could not enforce the note unless it reestablished the note pursuant to the lost note statute.

Section 673.3091(1), Florida Statutes (2016) provides:

(1) A person not in possession of an instrument is entitled to enforce the instrument if:

(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;

(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and

(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

Thus, subsection 673.3091(1)(a) required that the Bank prove one of two things, that it either

1. “was entitled to enforce the instrument when loss of possession occurred,”

or

2. “has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.”

The Bank did not know when the note was lost, so it could not establish that it was entitled to enforce the instrument when loss of possession occurred. See Peters v. Bank of New York Mellon, 227 So. 3d 175, 179 (Fla. 2d DCA 2017). Under the Uniform Commercial Code, the term “person entitled to enforce” an instrument means

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or s. 673.4181(4).

§ 673.3011, Fla. Stat. (2016).

Here, the original lender was Washington Mutual Bank. Because the note was not indorsed, later transferees were not entitled to enforce it as holders. § 671.201(21)(a), Fla. Stat. (2016). The Bank was then required to comply with the second option in section 673.3091(1)(a) set forth above—the Bank had to establish the chain of transactions leading to its acquisition of ownership, so that it could show that it “acquired ownership” from a person “entitled to enforce the instrument when loss of possession occurred.”

A party seeking to reestablish a lost note may meet the statutory requirements “either through a lost note affidavit or by testimony from a person with knowledge.” Home Outlet, LLC v. U.S. Bank Nat’l Ass’n, 194 So. 3d 1075, 1078 (Fla. 5th DCA 2016).

The only affidavit placed into evidence was the affidavit from an employee of Chase (the entity that took over servicing in 2012). “If the party relies on a lost-note affidavit, the affidavit must establish that whoever lost the note “was entitled to enforce it when the loss of possession occurred; the loss of the note was not the result of a transfer or lawful seizure; and [the bank] cannot reasonably obtain possession of the note because of the loss.”” Id. (quoting Figueroa v. Federal National Mortgage Ass’n, 180 So. 3d 1110, 1114 (Fla. 5th DCA 2015)). The lost note affidavit placed into evidence in this case contained this language:

6. Upon information and belief, the loss of possession is not the result of the original note being canceled or transferred to by the party seeking to enforce the note.

(emphasis added). In addition, the affidavit was admitted for the sole purpose of establishing that Chase searched its own business records. The affidavit made no reference to “whoever lost the note,” did not state that any of the putative transferees, Countrywide, CWALT, Inc., or the Bank, were ever entitled to enforce the note, and did not state unequivocally that the note was not lost as the result of transfer or lawful seizure. In short, the affidavit fell short of the statutory requirements for reestablishing a lost note.

While a lost note may also be reestablished by testimony from a person with knowledge, the Bank’s witness was an employee of Chase — a servicer that took over in 2012. By that time, the note had theoretically changed hands three times. The witness did not establish that Countrywide or CWALT were ever entitled to enforce the note.

It was not necessary for the Bank to establish “exactly when, how, and by whom the note was lost.” Boumarate v. HSBC Bank USA, N.A., 172 So. 3d 535, 537 (Fla. 5th DCA 2015). The plaintiff was required, however, to prove that it “acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” § 673.3091(1)(a). As in Beaumont v. Bank of New York Mellon, 81 So. 3d 553, 555 (Fla. 5th DCA 2012), the Bank “offered no proof of anyone’s right to enforce the note when it was lost.” See also Wells Fargo Bank, N.A. v. Robinson, 168 So. 3d 1279, 1279 (Fla. 5th DCA 2015)(finding reversible error in admitting a copy of the note into evidence where “Wells Fargo failed to prove who lost the note, when it was lost, and who had the right to enforce the note when it was lost. Wells Fargo also failed to produce any evidence of ownership at the time of the loss.”).

Because of a failure of proof under the lost note statute, we reverse and remand for dismissal.

GROSS, MAY and KLINGENSMITH, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

[1] According to the answer brief, the appellee is “The Bank of New York Mellon f/k/a The Bank of New York, Successor to JP Morgan Chase Bank, National Association, as Trustee for CWalt, Inc., Alternative Loan Trust 2007-J1.”

H/T DUBIN LAW OFFICES

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

ESPERANZA CORRAL; DIANA
BALGAS,
Plaintiffs-Appellants,

v.

SELECT PORTFOLIO SERVICING, INC.;
U.S. BANK,
Defendants-Appellees.

15-16574 by DinSFLA on Scribd

Michigan Radio-

A new lawsuit says Michigan’s property tax foreclosure laws are unconstitutional and amount to “government sanctioned theft.”

The case was filed this week on behalf of two men who lost Oakland County properties to foreclosure.

One of the men, Uri Rafaeli, lost a rental property in Southfield when he miscalculated the amount of interest he owed on 2011 property taxes by $8.41. Oakland County foreclosed, then sold the home for $24,500.

[Michigan Radio]

Metro Times-

The annual wave of displacement that’s been devastating Detroit neighborhoods for nearly a decade is rolling right along, with this coming year shaping up to look much like the last.

About 36,000 Detroit properties that are at least two years behind on their taxes have received foreclosure notices ahead of next year’s tax auction, according to the Wayne County Treasurer’s Office. Last year, the office says about 39,000 properties received such notices ahead of the tax auction that took place this fall.

Though Wayne County officials do not yet know how many of the of the foreclosed properties are homes where people live, Detroit-based data mapping company Loveland Technologies says that, during the 2017 auction cycle, 32,000 properties turned out to be occupied. Some 2,000 of those homes went on to be entered into the fall foreclosure auction to be sold to the highest bidder. The majority of remaining homeowners were able to avoid the forfeiture list by making payment arrangements with the county.

[METRO TIMES]

U.S. BANK TRUST NATIONAL ASSOCIATION, as Owner Trustee
for Queen’s Park Oval Asset Holding Trust,
Plaintiff-Appellee,

v.

JOSE HERNANDEZ and MARIA HERNANDEZ,
Defendants-Appellants.

Us Bank v Hernandez by DinSFLA on Scribd

Times Ledger-

Two Independent Democratic Committee members released an in-house report claiming Queens is experiencing a foreclosure crisis alongside dropping property values as some banks act as “nightmare neighbors”in some communities.

State Sens. Tony Avella (D-Bayside) and Jose Peralta (D-East Elmhurst) found that five banks oversee “dilapidated” foreclosed properties across the city which contribute to about $54 million in depreciation to surrounding homes.

The report, “Nightmare Neighbors: How Badly Maintained Homes Damage Neighborho­ods,” found Queens had the highest number of bank-owned homes with standing violations.

“The mortgage crisis wreaked havoc across my district and the rest of the state and the country, a tsunami that left an adverse effect in so many of our hard-working and immigrant communities,” Peralta said. “Foreclosed homes became eyesores in our neighborhoods when banks failed to maintain their properties, not only affecting the property values but also creating health and public safety risks. Banks have to be accountable, and this is why financial institutions should face stiffer penalties in order for us to stop the despair of our communities.”

[TIMES LEDGER]

Lexology-

In a case of first impression, the North Carolina Court of Appeals recently held that a creditor’s fraudulent conveyance claim was time-barred, even though the creditor did not know about the fraudulent nature of the transfer. The Court of Appeals elected to adopt the minority position held by other courts across the country which have reviewed when the statute of limitations begins to run on a claim under the Uniform Voidable Transactions Act, formerly known as the Uniform Fraudulent Transfer Act (“UFTA”).

The case of KB Aircraft Acquisition, LLC v. Jack M. Berry and 585 Goforth Road, LLC involved a workout of a distressed aircraft loan. Mr. Berry, a guarantor of the loan, owned a vacation mountain home in North Carolina. The value of the house was substantial and it was not encumbered by any debt. In 2008, the aircraft loan went into default. The creditor worked with the borrower from 2008-2010 to restructure the loan, modifying the loan on four separate occasions in an attempt to give the borrower breathing room to service the loan. Unbeknownst to the lender, Mr. Berry transferred his mountain house to a limited liability company, 585 Goforth Road, LLC, (“LLC”) at the beginning of the workout negotiations. The LLC was owned by Mr. Berry and his wife. Mr. Berry would later testify that this mountain house was the sole remaining asset in his name and that he intentionally transferred the mountain house out of his name so that he would have no assets in his name. Each of the modification agreements provided, among other things, there had been no material change in the financial condition of the borrower or the guarantor Mr. Berry.

[LEXOLOGY]

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Nevada)
—-

ANTOINETTE ROSSETTA,
Plaintiff and Appellant,
v.
CITIMORTGAGE, INC. et al.,
Defendants and Respondents.

Date: 12-18-2017

Case Style: Antoinette Rossetta v. Citimortgage, Inc.

Case Number: C078916

Judge: Renner

Court: California Court of Appeals Third Appellate District on appeal from the Superior Court, Nevada County

Plaintiff’s Attorney: Danny A. Barak and Jonathan A. Sanders

Defendant’s Attorney: Aldridge Pite, Duncun Peterson, Christopher L. Peterson, Danielle M. Graham and
Cuong M. Nguyen

Description: Plaintiff Antoinette Rossetta appeals from a judgment dismissing her second
amended complaint1 after the trial court sustained a demurrer by defendants
CitiMortgage, Inc. (CitiMortgage) and U.S. Bank National Association as Trustee for
Citicorp Residential Trust Series 2006-1 (2006-1 Trust). The complaint asserts causes of
action for intentional misrepresentation, negligent misrepresentation, breach of contract,
promissory estoppel, negligence, intentional infliction of emotional distress, and unlawful
business practices in violation of the Unfair Competition Law arising from loan
modification negotiations spanning more than two years. Rossetta also appeals from the
trial court’s dismissal of a cause of action for conversion that appeared in an earlier
iteration of the complaint to which CitiMortgage and the 2006-1 Trust (collectively,
CitiMortgage, unless otherwise indicated) also successfully demurred.
We conclude (1) the trial court erred in sustaining the demurrer to the causes of
action for negligence and violations of the Unfair Competition Law, (2) the trial court
properly sustained the demurrer to the causes of action for intentional misrepresentation
and promissory estoppel, but should have granted leave to amend to give Rossetta an
opportunity to state a viable cause of action based on an alleged oral promise to provide
her with a Trial Period Plan (TPP) under the Home Affordable Mortgage Program
(HAMP) in April 2012, and (3) the trial court properly sustained the demurrer to the
causes of action for negligent misrepresentation, breach of contract, intentional infliction
of emotional distress and conversion without leave to amend. Accordingly, we affirm in
part and reverse in part.
1 Unless otherwise indicated, all subsequent references to the “complaint,” are to the
second amended complaint filed on August 11, 2014.
2

I. BACKGROUND
A. The Loan and Deed of Trust
Rossetta purchased a home in Grass Valley in 2001. She refinanced the purchase
through American Brokers Conduit (ABC) in 2005.
2 The new loan was secured by a
deed of trust designating Mortgage Electronic Registration Systems, Inc. (MERS) as the
beneficiary acting as the nominee for ABC and ABC’s successors and assigns.3 The loan
was subsequently sold to CitiMortgage.4
Although CitiMortgage started accepting Rossetta’s mortgage payments in March
2006, MERS did not record an assignment of deed of trust until October 12, 2012. As we
shall discuss, Rossetta challenges the assignment of the deed of trust.
B. Rossetta Defaults
Rossetta was laid off from her job on or about March 1, 2010. Approximately two
weeks later, she learned she had a recurrence of breast cancer. Rossetta made complete
payments on her mortgage during this difficult period using severance pay from her
former job. In May 2010, Rossetta contacted CitiMortgage to discuss other options.
According to the complaint, Rossetta “was told that [CitiMortgage] would be unable to
2 ABC is not a party to this appeal.
3 “ ‘MERS is a private corporation that administers a national registry of real estate debt
interest transactions. Members of the MERS System assign limited interests in the real
property to MERS, which is listed as a grantee in the official records of local
governments, but the members retain the promissory notes and mortgage servicing rights.
The notes may thereafter be transferred among members without requiring recordation in
the public records. [Citation.] [¶] Ordinarily, the owner of a promissory note secured by
a deed of trust is designated as the beneficiary of the deed of trust. [Citation.] Under the
MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting
as “nominee” for the lender, and granted the authority to exercise legal rights of the
lender.’ ” (Saterbak v. JPMorgan Chase, N.A. (2016) 245 Cal.App.4th 808, 816, fn. 6.)
4 The operative complaint alleges that CitiMortgage was “the servicer of the Subject
Loan.”
3

assist her unless she was at least three months delinquent in her monthly mortgage
payments, and thus in default.”
Rossetta went into default in June 2010. Around the same time, she executed a
power of attorney authorizing her fiancé, Brian Roat, to act on her behalf.
C. Rossetta Attempts to Secure a Loan Modification
Rossetta or Roat telephoned CitiMortgage in July 2010. Either Rosetta or Roat
spoke with a CitiMortgage representative named Brian (last name unknown) or Charlie
Welch. The representative told Rossetta or Roat that “nothing could be done to assist
[Rossetta] with a HAMP loan modification until she was three months delinquent and
therefore in [d]efault.”5 On July 23, 2010, Rossetta received a letter from CitiMortgage
stating she was not eligible for a HAMP modification because “ ‘default is not
imminent.’ ” By then, however, Rossetta was already in default, and had even received
correspondence to this effect from CitiMortgage.
Roat telephoned CitiMortgage again on August 1, 2010. A customer service
representative collected basic information from Roat and informed him that Rossetta may
now qualify for a HAMP modification. The following day, Rossetta received an
electronic communication from CitiMortgage regarding a permanent loan modification.
The complaint describes the communication as an email, and attaches a copy as Exhibit
B.
The complaint alleges: “[Rossetta] has attached as Exhibit ‘B’ an email from
[CitiMortgage] stating the specific terms of the permanent loan modification agreement.”
Elsewhere, the complaint alleges: “[O]n August 2, 2014[,] [CitiMortgage] emailed
[Rossetta that] the terms of the permanent loan modification were as follows: (1) 480
month term; (2) .02% interest rate; (3) a principal reduction in the amount of $95,477.81.
5 We describe the relevant features of HAMP below.
4

(See Exhibit ‘B’). The email also stated that the loan modification documents were being
sent to [Rossetta].” As we shall discuss, Exhibit B does not support Rossetta’s
characterization.
On August 3, 2010, Rossetta spoke with Helen, a CitiMortgage representative who
declined to give her last name. The complaint is ambiguous as to what, precisely, Helen
said. At one point, the complaint suggests that Helen told Rossetta “she was approved
for a trial plan modification and a permanent loan modification upon successful
completion of the trial plan payments.” Later, the complaint suggests that Helen told
Rossetta she “would be approved for a permanent loan medication [sic] upon completion
of the trial modification plan payments/repayment plan payments.” Later still, the
complaint suggests that Helen told Rossetta “she was approved for a HAMP loan
modification.”
On August 9, 2010, CitiMortgage sent Rossetta a letter stating, in part: “Your
request for a repayment plan has been approved.” The letter attaches an agreement
contemplating three monthly payments of $1,209 for September, October and November
2010. Rossetta agreed to the terms of the repayment plan on August 15, 2010. Neither
the letter nor accompanying agreement makes any mention of HAMP or any other loan
modification program. Nevertheless, the complaint alleges that Rossetta believed she
would receive a permanent loan modification upon completion of the repayment plan.
Rossetta made the three monthly payments contemplated by the repayment plan.
She did not receive a permanent loan modification. When Rossetta approached
CitiMortgage, she was told to continue making monthly payments of $1,209.
On January 3, 2011, Rossetta received a letter from CitiMortgage stating that her
application for a HAMP modification had been denied for failure to provide necessary
documentation. Rossetta alleges she provided all requested documents. She also alleges
that CitiMortgage lost or mishandled her loan modification application, causing
significant delays and increasing fees and penalties.
5
Around this time, Roat spoke with an unidentified CitiMortgage representative
and learned that Rossetta’s application was denied because she failed to produce a
statement from the State of California declaring her permanently disabled. Rossetta
contends the State of California does not issue such a statement, adding that
“[CitiMortgage] requested a nonexistent document to further delay the process and
frustrate [Rossetta].”
Rossetta entered into forbearance agreements with CitiMortgage in January and
February 2011. She applied for another HAMP modification in July 2011. Rossetta
alleges that CitiMortgage requested the same documents over and over again, confirming
her suspicion that application materials had been misplaced or mishandled. Among other
things, Rossetta notes that CitiMortgage demanded she produce her entire loan
application on two separate occasions, requesting duplicates of other previously
submitted documents by fax. Rossetta alleges she promptly responded to all such
requests. She further alleges that CitiMortgage lost or mishandled her documents,
delaying the loan modification process and causing her harm.
Rossetta’s personal circumstances changed during the pendency of the application.
Specifically, she stopped receiving disability insurance and began receiving
unemployment insurance. As a result, CitiMortgage demanded that Rossetta submit a
new application and supporting documents. Rossetta complied and submitted the
requested documents on October 12, 2011.
On November 1, 2011, Rossetta returned to work at a reduced salary. Once again,
the change in circumstances prompted a demand for additional documents. Once again,
Rossetta complied.
On January 18, 2012, Rossetta received a letter stating that her application for a
HAMP modification had been denied. This time, Rossetta was told that she had an
excessive forbearance amount ($33,000) on her account. Rossetta alleges the forbearance
6
amount would have been significantly less had she been given a permanent loan
modification “over a year earlier as had been represented.”
Rossetta continued to seek mortgage relief. On April 6, 2012, Roat spoke with
CitiMortgage representative Konnor Sincox. According to the complaint, Sincox told
Roat that Rossetta “was approved for another trial loan modification and that upon
completion, [she] would receive a permanent loan modification with a 2% fixed interest
rate for five years and a principal reduction.” Elsewhere, the complaint alleges that
Sincox represented that Rossetta “had been approved for another trial loan modification
and that she would receive it as soon as the loan modification application and required
documents were received from [her].” Although Sincox did not specifically say so,
Rossetta believed she would be receiving a trial period plan under HAMP (HAMP TPP),
as she had previously been under consideration for a HAMP modification. According to
the complaint, “Sincox indicated that the loan modification documentation would not be
provided in advance, but rather, would come after the trial payment period.”
Following Roat’s conversation with Sincox, Rossetta once again sent the
requested documents. Despite Roat’s conversation with Sincox, CitiMortgage never sent
Rossetta a HAMP TPP or permanent loan modification agreement. According to the
complaint, Rossetta and Roat continued their effort to obtain a permanent loan
modification for the rest of the year, without success. Rossetta filed for bankruptcy
protection in December 2012.
D. Assignment of Deed of Trust
On October 12, 2012, MERS assigned its interest in the deed of trust to
CitiMortgage. Approximately one year later, Rossetta commissioned a “forensic audit”
of the loan. According to the complaint, “[t]he audit revealed that the Assignment of
Deed of Trust to [d]efendant [CitiMortgage] was invalid as void because the [2006-1
Trust] had a closing date of August 30, 2006.” Although the first amended complaint and
second amended complaint identify the 2006-1 Trust as a “purported beneficiary of the
7
[s]ubject [l]oan,” neither pleading alleges that CitiMortgage or any other entity ever
attempted to assign the loan to the 2006-1 Trust.
CitiMortgage assigned the deed of trust to U.S Bank National Association, as
Trustee for Prof-2013-M4 REMIC Trust I (M4 REMIC Trust 1) on April 1, 2012.
Rossetta challenges the assignment from CitiMortgage to the M4 REMIC Trust 1 on the
sole ground that the earlier assignment from MERS to CitiMortgage was void.
E. The Instant Action
Rossetta commenced this action against CitiMortgage and its successor in interest,
Fay Servicing, LLC (Fay) on January 27, 2014.6 Rossetta filed a first amended
complaint on April 24, 2014. The first amended complaint asserted causes of action for
intentional misrepresentation, negligent misrepresentation, breach of contract, promissory
estoppel, negligence, intentional infliction of emotional distress, conversion, violations of
the Unfair Competition Law and conspiracy. The first amended complaint also sought
declaratory relief.7 CitiMortgage demurred.
The trial court sustained the demurrer without leave to amend as to the cause of
action for conversion and request for declaratory relief, both of which were based on the
allegation that the assignment of the deed of trust to CitiMortgage was void. The trial
court sustained the demurrer to Rossetta’s remaining causes of action with leave to
amend, observing:
6 During the pendency of this appeal, the parties filed a stipulation and request for
dismissal as to Fay and M4 REMIC Trust 1, which we have granted.
7 “Conspiracy is not a cause of action, but a legal doctrine that imposes liability on
persons who, although not actually committing a tort themselves, share with the
immediate tortfeasors a common plan or design in its perpetration.” (Applied Equipment
Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.)
8

“[T]he tenor of the demurrer is not so much what the pleading says, as what it
does not. Plaintiff’s counsel, who successfully prevailed in Bushell v. JPMorgan Chase
Bank, N.A. (2013) 220 Cal.App.4th 915 [(Bushell)], cited by them in their opposition, is
certainly conversant about the requirements of pleading a similar case such as this one.
Notwithstanding, the allegations here fail to properly differentiate between and/or
connect the trial payment plans and forbearance agreements alleged with HAMP
modification, rendering analysis incomplete because the parties and court cannot
determine if, for example, the Bushell / West [v. JPMorgan Chase Bank, N.A. (2013) 214
Cal.App.4th 780 (West)] line of cases applies (HAMP cases) or whether the analysis must
be done without reference to HAMP under traditional common law principles. As argued
by the defendants, forbearance plans do not create a binding contract for modification.
Of course, this Court cannot determine whether such obscurity is intentional or
inadvertent. However, in permitting amendment, the Court can state its expectation that
plaintiff clearly set forth the context of each representation and agreement in any further
pleading, or risk suffering the conclusion that further amendment would be pointless.”
(Italics added.)
Rossetta filed the operative complaint on August 11, 2014. As noted, the
complaint asserts causes of action for intentional misrepresentation, negligent
misrepresentation, breach of contract, promissory estoppel, negligence, intentional
infliction of emotional distress, violations of the Unfair Competition Law, and
conspiracy. CitiMortgage demurred to the complaint on September 15, 2014. The trial
court sustained the demurrer without leave to amend. This appeal followed.
II. DISCUSSION
A. Home Affordable Mortgage Program
We begin with an overview of HAMP, which informs our analysis of the
complaint. “As authorized by Congress, the United States Department of the Treasury
implemented [HAMP] to help homeowners avoid foreclosure during the housing market
9
crisis of 2008. ‘The goal of HAMP is to provide relief to borrowers who have defaulted
on their mortgage payments or who are likely to default by reducing mortgage payments
to sustainable levels, without discharging any of the underlying debt.’ ” (West, supra,
214 Cal.App.4th at p. 785.) Under HAMP, qualifying homeowners may obtain
permanent loan modifications that reduce their mortgage payments. (Bushell, supra, 220
Cal.App.4th at p. 923.) Lenders receive incentives from the government for each HAMP
modification. (Id. at p. 923.)
HAMP Supplemental Directive No. 09-01, issued by the Department of the
Treasury, sets forth eligibility requirements and modification procedures under HAMP.
(U.S. Depart. Treasury, HAMP Supplemental Directive No. 09-01 (Apr. 6, 2009) pp. 2-
18 (Supplemental Directive 09-01).) Lenders must perform HAMP loan modifications in
accordance with Treasury Department regulations. (West, supra, 214 Cal.App.4th at p.
787; see also Wigod v. Wells Fargo Bank, N.A. (7th Cir. 2012) 673 F.3d 547, 556
(Wigod).)
Under Supplemental Directive 09-01, the lender initially determines whether a
borrower satisfies certain threshold requirements regarding the amount of the loan
balance, monthly payment, and owner occupancy. (West, supra, 214 Cal.App.4th at pp.
787-788; Wigod, supra, 673 F.3d at pp. 556-557, 565; Supplemental Directive 09-01,
supra, pp. 2-5, 8-10, 14-18.) Once the lender determines that the borrower qualifies for
HAMP (assuming the borrower’s representations remain accurate), the lender implements
a two stage process. (Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 306
(Rufini); Bushell, supra, 220 Cal.App.4th at p. 923.) In the first stage, the lender (1)
provides the borrower with a HAMP TPP setting forth trial payment terms, (2) instructs
the borrower to sign and return the HAMP TPP and other documents, and (3) requests the
first trial payment. (Bushell, supra, at p. 924.) In the second stage, if the borrower has
made all required trial payments and complied with all of the HAMP TPP’s other terms,
and if the borrower’s representations remain correct, the lender must offer the borrower a
10
permanent loan modification. (Id. at pp. 924-925; West, supra, at pp. 786, 788; Wigod,
supra, at p. 557.) If the lender does not do so, the borrower may sue the lender for breach
of contract and related causes of action. (Bushell, supra, at pp. 928-931.)
B. Standard of Review
“A general demurrer searches the complaint for all defects going to the existence
of a cause of action and places at issue the legal merits of the action on assumed facts.”
(Carman v. Alvord (1982) 31 Cal.3d 318, 324.) On appeal from the sustaining of a
demurrer without leave to amend, we must consider two issues: the sufficiency of the
operative pleading and the plaintiff’s ability to amend.
1. Sufficiency of the Pleading
To assess the pleading’s sufficiency, “we independently review the complaint to
determine whether the facts alleged state a cause of action under any possible legal
theory.” (Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 998;
see Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 986.) We will affirm “if proper
on any grounds stated in the demurrer, whether or not the court acted on that ground.”
(Carman v. Alvord, supra, 31 Cal.3d at p. 324.) On appeal, “the plaintiff bears the
burden of demonstrating that the trial court erred” in sustaining the demurrer. (Cantu v.
Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879.)
“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.’ ” (Blank
v. Kirwan (1985) 39 Cal.3d 311, 318; accord, Schifando v. City of Los Angeles (2003) 31
Cal.4th 1074, 1081.) In addition to the complaint’s allegations, we consider matters
subject to judicial notice. (Blank v. Kirwan, supra, at p. 318; Schifando v. City of Los
Angeles, supra, at p. 1081; Code Civ. Proc., § 430.30.) We also consider exhibits
incorporated into a complaint. (Dodd v. Citizens Bank of Costa Mesa (1990) 222
Cal.App.3d 1624, 1627; 108 Holdings, Ltd. v. City of Rohnert Park (2006) 136
11
Cal.App.4th 186, 193.) “If facts appearing in the exhibits contradict those alleged [in the
complaint], the facts in the exhibit take precedence.” (Holland v. Morse Diesel Internat.,
Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated
in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521; see also Dodd v. Citizens
Bank of Costa Mesa, supra, 222 Cal.App.3d at p. 1627 [“[F]acts appearing in exhibits
attached to the complaint will also be accepted as true and, if contrary to the allegations
in the pleading, will be given precedence”].)
In undertaking our independent review, “we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan,
supra, 39 Cal.3d at p. 318; see Schifando v. City of Los Angeles, supra, 31 Cal.4th at
p. 1081.) “If the complaint states a cause of action under any theory, regardless of the
title under which the factual basis for relief is stated, that aspect of the complaint is good
against a demurrer.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26,
38.)
2. Leave to Amend
“If the court sustained the demurrer without leave to amend, as here, we must
decide whether there is a reasonable possibility the plaintiff could cure the defect with an
amendment.” (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) “The
burden of proving such reasonable possibility is squarely on the plaintiff.” (Blank v.
Kirwan, supra, 39 Cal.3d at p. 318.)
“As a general rule, if there is a reasonable possibility the defect in the complaint
could be cured by amendment, it is an abuse of discretion to sustain a demurrer without
leave to amend.” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc.
(1998) 68 Cal.App.4th 446, 459.) “Nevertheless, where the nature of the plaintiff’s claim
is clear, and under substantive law no liability exists, a court should deny leave to amend
because no amendment could change the result.” (Ibid.)
12
C. Intentional and Negligent Misrepresentation
“The elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3)
intent to induce reliance on the misrepresentation, (4) justifiable reliance on the
misrepresentation, and (5) resulting damages. [Citation.] Fraud allegations ‘ “involve a
serious attack on character” ’ and therefore are pleaded with specificity. [Citation.]
General and conclusory allegations are insufficient. [Citation.] The particularity
requirement demands that a plaintiff plead facts which ‘ “ ‘show how, when, where, to
whom, and by what means the representations were tendered.’ ” ’ ” (Cansino v. Bank of
America (2014) 224 Cal.App.4th 1462, 1469; see Conroy v. Regents of University of
California (2009) 45 Cal.4th 1244, 1255; Graham v. Bank of America, N.A. (2014) 226
Cal.App.4th 594, 605-606.) “A plaintiff’s burden in asserting a fraud claim against a
corporate employer is even greater. In such a case, the plaintiff must ‘allege the names of
the persons who made the allegedly fraudulent representations, their authority to speak, to
whom they spoke, what they said or wrote, and when it was said or written.’ ” (Lazar v.
Superior Court (1996) 12 Cal.4th 631, 645 (Lazar).)
“[A] claim for negligent misrepresentation requires the plaintiff to prove each of
the following: ‘(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.’ ” (Public Employees’ Retirement System v. Moody’s Investors
Service, Inc. (2014) 226 Cal.App.4th 643, 661.) “ ‘The tort of negligent
misrepresentation, a species of the tort of deceit [citation], does not require intent to
defraud but only the assertion, as a fact, of that which is not true, by one who has no
reasonable ground for believing it to be true.’ ” (Jolley v. Chase Home Finance, LLC
(2013) 213 Cal.App.4th 872, 892 (Jolley).) Like fraud, negligent misrepresentation must
be pleaded with particularity. (Charnay v. Cobert (2006) 145 Cal.App.4th 179, 185, fn.
14.)
13
The complaint asserts causes of action for intentional misrepresentation and
negligent misrepresentation based on four alleged misrepresentations. On appeal,
Rossetta contends the trial court erred in considering each alleged misrepresentation
individually. She correctly observes that a general demurrer may not be sustained as to a
portion of a cause of action. (Kong v. City of Hawaiian Gardens Redevelopment Agency
(2002) 108 Cal.App.4th 1028, 1047 [“a demurrer cannot rightfully be sustained to part of
a cause of action”]; PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682
[“demurrer does not lie to a portion of a cause of action”].) She also observes that the
appropriate procedural device for challenging a portion of a cause of action is a motion to
strike (Code Civ. Proc., § 435), which CitiMortgage failed to file.
Applying the foregoing rule, we must determine whether the complaint states a
cause of action for intentional or negligent misrepresentation based on any of the alleged
misrepresentations. (See Daniels v. Select Portfolio Servicing, Inc. (2016) 246
Cal.App.4th 1150, 1167 (Daniels) [“the question for this court is whether appellants
stated a claim for intentional or negligent misrepresentation based on any of the alleged
misrepresentations”].) If any of the alleged misrepresentations supports a cause of action,
we must reverse. In making this determination, however, we necessarily consider each
alleged misrepresentation separately. We do not follow a gestalt approach to fraud-based
causes of action, clumping all alleged misrepresentations into a single undifferentiated
mass.8 Rather, we examine each alleged misrepresentation in turn, reviewing the
8 Arguing by analogy to Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403
(Fleet) and Chavez v. Indymac Mortgage (2013) 219 Cal.App.4th 1052 (Chavez),
Rossetta insists the complaint describes a scheme to defraud borrowers by unnecessarily
prolonging the loan modification process, allowing lenders to charge increased fees and
penalties, and plunging borrowers deeper and deeper into default. Although Fleet and
Chavez describe similar schemes, neither relieves Rossetta of the obligation to plead
every element of a cause of action for intentional or negligent misrepresentation—
including the alleged misrepresentation—factually and specifically. (Cadlo v. Owens-
14

allegations as a whole to determine whether the complaint states facts sufficient to
constitute a cause of action. (State ex rel. Metz v. CCC Information Services, Inc. (2007)
149 Cal.App.4th 402, 412.) With this framework in mind, we now consider the alleged
misrepresentations.
1. July 2010 Representations
Rossetta alleges CitiMortgage misrepresented its ability to consider her for a loan
modification on two occasions. First, she alleges a CitiMortgage representative named
either Brian or Charlie Welch told either Rossetta or Roat in a July 2010 telephone
conversation that “nothing could be done to assist [Rossetta] with a HAMP loan
modification until she was three months delinquent and therefore in [d]efault.” Second,
Rossetta alleges CitiMortgage misrepresented in a July 2010 letter that she “could not
qualify for a HAMP loan modification or other modification program because [her]
default was not imminent.” These representations were false, Rossetta says, because
HAMP and other loan modification programs do not require a borrower to default to
qualify for a loan modification.
The complaint alleges Rossetta relied on CitiMortgage’s alleged
misrepresentations in deciding to go into default on her mortgage. However, the
complaint also alleges that Rossetta was already in default at the time the alleged
misrepresentations were made. Specifically, the complaint alleges that Rossetta defaulted
in June 2010, before the telephone conversation with Brian or Charlie Welch or
CitiMortgage’s letter. Reading the complaint as a whole, we conclude that Rossetta fails
to allege reliance on the July 2010 misrepresentations or resulting damages.
Illinois, Inc. (2004) 125 Cal.App.4th 513, 519.) Rossetta’s reliance on Fleet and Chavez
is unavailing.
15

Rossetta struggles to avoid this conclusion by arguing the trial court ignored the
purportedly “crucial” allegation that an unidentified person, presumably connected with
CitiMortgage, made a similar misrepresentation some two months earlier. As noted, the
complaint alleges Rossetta contacted CitiMortgage in May 2010 and “was told that
[CitiMortgage] would be unable to assist her unless she was at least three months
delinquent in her monthly mortgage payments, and thus in [d]efault.” Although the
complaint alleges the May 2010 statement was false, the complaint does not offer the
statement as a basis for her intentional and negligent misrepresentation causes of action.9
Rossetta does not explain, and we cannot conceive, how the alleged
misrepresentation in May 2010 establishes her reliance on the alleged misrepresentations
in July 2010. Although not alleged in the complaint, we assume for the sake of argument
that Rossetta relied on the May 2010 statement in deciding to default. Even so assuming,
we perceive no way Rossetta could have relied on the July 2010 statements in deciding to
default, since she was already in default at the time the July 2010 statements were
made.10 We therefore conclude, as the trial court did, that the complaint fails to allege
reliance on the July 2010 statements or resulting damage. Having so concluded, we
decline to reach the trial court’s alternative ruling that Rossetta’s causes of action for
intentional and negligent misrepresentation are partially time-barred to the extent they are
based on the July 2010 statements.
2. August 2010 Representations
Next, the complaint alleges that Rossetta was deceived by means of a series of
written and spoken misrepresentations in August 2010. First, the complaint alleges that
9 Rossetta does not seek leave to amend the complaint to state a cause of action for
intentional or negligent misrepresentation based on the May 2010 statement.
10 The complaint does not allege—and Rossetta does not contend—that the alleged
misrepresentations in July 2010 induced her to become more delinquent.
16

Rossetta received an “email” from CitiMortgage, “stating the specific terms of the
permanent loan modification agreement” and indicating that “the loan modification
documents were being sent.” Second, the complaint alleges that Helen (last name
unknown) misrepresented in a telephone conversation that Rossetta was approved for
either a HAMP modification or a “trial plan modification,” and “would be approved for a
permanent loan medication [sic] upon completion of the trial modification plan
payments/repayment plan payments.” Third, the complaint alleges that Rossetta received
a repayment plan, which she mistook for a HAMP TPP.11 These representations were
false, the complaint alleges, because CitiMortgage failed to grant Rossetta a permanent
loan modification. Thus, Rossetta’s fraud cause of action appears to be based on a theory
of promissory fraud, “a subspecies of the action for fraud and deceit.” (Lazar, supra, 12
Cal.4th at p. 638 [“A promise to do something necessarily implies the intention to
perform; hence, where a promise is made without such intention, there is an implied
misrepresentation of fact that may be actionable fraud”].)
We perceive three overarching problems with Rossetta’s allegations. First, they
cannot support a cause of action for negligent misrepresentation. A representation is
generally not actionable unless it concerns “past or existing facts.” (Neu-Visions Sports,
Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, 309, 310.) Although a false
promise to perform in the future can support a cause of action for intentional
misrepresentation, it does not support a cause of action for negligent misrepresentation.
(Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158, 159
[“Simply put, making a promise with an honest but unreasonable intent to perform is
11 The complaint does not specifically identify the repayment plan as an alleged
misrepresentation. Nevertheless, Rossetta suggests she was deceived by the repayment
plan, which she received instead of a HAMP TPP. We consider the possibility that the
repayment plan constitutes an actionable misrepresentation as part of our obligation to
liberally construe the pleadings.
17

wholly different from making one with no intent to perform and, therefore, does not
constitute a false promise. . . . [W]e decline to establish a new type of actionable deceit:
the negligent false promise”].) An alleged promise to grant a loan modification does not
concern past or existing facts, and thus cannot be the basis for a negligent
misrepresentation cause of action.
Second, any fraud cause of action based on the August 2010 statements appears to
be time-barred. The statute of limitations for fraud is three years. (Code Civ. Proc.,
§ 338, subd. (d).) Rossetta tries to avoid the statute of limitations by invoking the
discovery rule. Specifically, she alleges she did not discover the alleged fraud until 2012,
“when she began to uncover media articles . . . about the HAMP programs revealing a
widespread practice among lending institutions and mortgage servicers of delaying the
loan modification process and of wrongfully denying loan modifications.” Although
Rossetta may not have known the full extent of the alleged fraud until 2012, she knew
that CitiMortgage did not intend to honor the alleged promise to grant her a permanent
loan modification by January 3, 2011, when her application for a HAMP modification
was denied. Thus, the complaint suggests that Rossetta was on notice of the facts
constituting the alleged promissory fraud by January 3, 2011, more than three years
before she filed suit. (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 [the
delayed discovery rule “only delays accrual until the plaintiff has, or should have, inquiry
notice of the cause of action”]; Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d
1125, 1150 (Mangini) [“If a person becomes aware of facts which would make a
reasonably prudent person suspicious, he or she has a duty to investigate further and is
charged with knowledge of matters which would have been revealed by such an
investigation”], superseded by statute on other grounds as stated in Rufini, supra, 227
Cal.App.4th at p. 311.)
Third, even assuming the allegations are timely, Rossetta fails to adequately allege
a false promise. Rather than argue that any particular statement was false, Rossetta
18
appears to argue that all of the August 2010 statements, taken together, amount to a
representation that, “she was approved for a HAMP TPP, and that upon completion of the
TPP, she was also approved for a permanent loan modification.” We reject this
impressionistic approach to pleading fraud, and reiterate that every element of a cause of
action for fraud must be alleged factually and specifically, including the alleged
misrepresentations. (Cadlo v. Owens-Illinois, Inc., supra, 125 Cal.App.4th at p. 519.) As
we shall discuss, none of the alleged misrepresentations in August 2010 amount to a false
promise that Rossetta would receive a permanent loan modification.
a. Exhibit B
As noted, the complaint characterizes Exhibit B as “an email from [CitiMortgage]
stating the specific terms of the permanent loan modification agreement.” The complaint
alleges that Exhibit B reflects a false promise to grant Rossetta a permanent loan
modification. This theory runs aground on Exhibit B itself, which contains no such
promise.
As the trial court observed, Exhibit B is a printout of a webpage, not an email.
Exhibit B features a heading entitled, “Your Mortgage Modification.” Under the
heading, Exhibit B states, “View the terms of your modification which will make your
payments more affordable. Check your status often to ensure that your paperwork has
been accepted and find new requests for additional documentation.” Exhibit B then
displays a heading entitled, “Modification Status.” Under the heading, Exhibit B states:
“07/30/2010 Alert! Your mortgage modification document has been sent. Review, sign
and return as instructed.” Exhibit B then displays a heading entitled, “Modification
Details.” Under the heading, Exhibit B displays a chart setting forth current and
proposed loan terms, followed by the notation, “The sample chart above is based on an
interest rate reduction or a principal reduction. Total monthly payments are based on an
estimated mortgage balance including interest, taxes and insurance. The final
modification may vary depending on the review and verification of the financial
19
information you have provided and other restrictions. A mortgage modification may be
reported to credit reporting agencies.” Exhibit B then displays a final heading, entitled
“Document Summary.” Under the heading, Exhibit B displays a link, entitled “View the
status of pending documentation.” Contrary to the complaint, Exhibit B cannot
reasonably be characterized as a representation that Rossetta would be offered a HAMP
TPP, much less a permanent loan modification. Although Exhibit B refers to “proposed”
loan terms, the document does not say anything about a HAMP TPP (or any other trial
period plan), and does not represent that Rossetta will receive a permanent loan
modification with those or any other terms. If anything, by instructing the borrower to
“Check your status often” and warning that, the “final modification may vary,” Exhibit B
makes clear that the loan modification application process is not complete. No
reasonable borrower would interpret Exhibit B as a representation that she would receive
a HAMP TPP or other trial period plan, let alone a permanent loan modification.
In apparent recognition of the foregoing, Rossetta argues the alleged
misrepresentation was contained in another document, an actual email, which she failed
to attach to her pleading. She notes that she was not required to attach the purported
email to the complaint, adding, “The allegation of the existence of the email by itself
should have been enough, as this was not a summary judgment motion.”
Rossetta’s argument runs counter to what she told the trial court. During the trial
court proceedings, Rossetta consistently identified Exhibit B as “an email” reflecting an
alleged misrepresentation. What matters, for our purposes, is not the characterization of
Exhibit B as an email, but the designation of Exhibit B as an alleged misrepresentation.
The complaint clearly identifies Exhibit B as an alleged misrepresentation.
Consequently, we focus on whether Exhibit B contains an actionable misstatement. As
we have already established, it does not.
20
b. Helen’s Remarks
Next, the complaint alleges that Helen misrepresented that Rossetta was approved
for either a HAMP modification or a “trial plan modification,” and “would be approved
for a permanent loan medication [sic] upon completion of the trial modification plan
payments/repayment plan payments.” We perceive two glaring problems with these
allegations.
First, Rossetta fails to adequately allege what Helen actually said. As previously
discussed, a HAMP modification is a particular type of loan modification, governed by
uniform rules set forth in Supplemental Directive 09-01, and other guidelines and
procedures promulgated by the Department of the Treasury. (West, supra, 214
Cal.App.4th at p. 787.) A HAMP TPP is an enforceable contract, giving the borrower a
right to sue for breach of contract if the lender fails to grant a permanent loan
modification. (Bushell, supra, 220 Cal.App.4th at p. 928.) By contrast, a non-HAMP
trial period plan may or may not obligate the lender to grant a permanent loan
modification, depending on the terms of the parties’ agreement. (See, e.g., Morgan v.
Aurora Loan Services, LLC (C.D. Cal. Oct. 7, 2013, No. CV 12-4350-CAS (MRWx))
2013 U.S. Dist. LEXIS 145623, *10 [distinguishing non-HAMP agreements from HAMP
TPPs, and noting that non-HAMP agreements “expressly disclaimed any promise of a
permanent modification”].) Likewise, a repayment plan may or may not entitle the
borrower to a permanent loan modification, depending on the terms of the plan. Here, of
course, we have been provided with a copy of the repayment plan, which says nothing
about a permanent loan modification.
Recognizing the significant differences between various types of mortgage relief,
the trial court, in sustaining the demurrer to the first amended complaint, expressed “its
expectation that plaintiff clearly set forth the context of each representation and
agreement in any further pleading, or risk suffering the conclusion that further
amendment would be pointless.” Rossetta failed to comply with the trial court’s
21
instruction. If anything, the new allegations are even more opaque, conflating “HAMP
loan modifications” and “trial plan modifications,” and “trial modification plan
payments” and “repayment plan payments.” These nebulous allegations do not plead an
alleged misrepresentation with the required specificity.
Second, to the extent Rossetta claims to have relied on Helen’s representations as
a promise that she would eventually obtain a permanent loan modification from
CitiMortgage, she fails to plead with particularity that Helen had the authority to commit
CitiMortgage to granting such a loan modification. The complaint alleges that Helen was
an “employee/representative/agent” of CitiMortgage, but offers no allegations concerning
her authority to make binding promises or any facts indicating it would be reasonable to
rely on Helen’s statements as creating a binding promise to eventually provide a
permanent loan modification, especially in light of Helen’s refusal to give her last name.
Therefore, with respect to Helen’s statements, Rossetta fails to satisfy the pleading
requirements for alleging a fraud cause of action against a corporate defendant. (Lazar,
supra, 12 Cal.4th at p. 645.)
c. Repayment Plan
Following her conversation with Helen, Rossetta received a letter from
CitiMortgage stating, in part: “Your request for a repayment plan has been approved.”
The letter attaches an agreement contemplating three monthly payments of $1,209 for
September, October and November 2010. Rossetta agreed to the terms of the repayment
plan on August 15, 2010. Neither the letter nor accompanying agreement makes any
mention of HAMP or any other loan modification program, and Rossetta does not argue
that the repayment plan can or should be construed as a HAMP TPP or other trial period
plan. Nevertheless, Rossetta argues she believed she would receive a permanent loan
modification upon completion of the repayment plan.
Contrary to Rossetta’s apparent belief, her confusion surrounding the significance
of the repayment plan cannot transform Exhibit B into a promise to grant a permanent
22
loan modification. Furthermore, though Rossetta’s confusion may explain her inability to
specify what Helen said, it does nothing to cure that pleading failure. We therefore
conclude, as the trial court did, that Rossetta cannot premise a cause of action for
intentional misinterpretation on the August 2010 statements. Having so concluded, we
decline to consider the alternative ruling that the complaint fails to allege resulting
damages because Rossetta’s income was unstable.
3. April 2012 Representations
Finally, the complaint alleges that Sincox made two false promises to Rossetta in
April 2012. First, the complaint alleges that Sincox misrepresented that Rossetta had
been approved for another trial loan modification, which she would receive as soon as
CitiMortgage received an application and other documents from her.12 Second, the
complaint alleges that Sincox misrepresented that, “upon successful completion of the
trial plan payments, she would receive a permanent loan modification with a 2% interest
rate fixed for [five] years . . . [and] a principal reduction.”
With respect to both allegations, the complaint alleges that Rossetta understood
Sincox to mean she would be receiving a HAMP TPP, as she was under consideration for
a HAMP modification at the time. The complaint further alleges, “Sincox indicated that
the loan modification documentation would not be provided in advance, but rather, would
come after the trial payment period.” The complaint does not specify which “loan
modification documentation” would not be provided in advance, however, we understand
the allegation to refer to a permanent loan modification agreement, as such an agreement
would naturally follow the successful completion of a HAMP TPP. The complaint
alleges that Rossetta submitted another loan modification application and related
12 Rossetta does not allege that she had not been approved for another trial loan
modification.
23

documents, but did not receive a HAMP TPP or other trial period plan. The complaint
does not allege that Rossetta made any trial period payments.
We agree with the trial court that the second alleged misrepresentation (that
Rossetta would receive a permanent loan modification upon successful completion of the
trial plan agreement) fails to state facts sufficient to constitute a cause of action, as
Rossetta fails to allege reliance. Rossetta does not challenge this conclusion. Instead,
she focuses on the first alleged misrepresentation (that Rossetta would receive a trial
period plan upon receipt of her application and related documents), which the trial court
appears to have overlooked.13 Exercising our independent judgment, and reading the
complaint liberally, as we must, we perceive a reasonable possibility that Rossetta could
amend the complaint to state a cause of action for intentional misrepresentation based on
the alleged false promise to provide her with a HAMP TPP. We perceive no possibility
that Rossetta could amend the complaint to state a cause of action for negligent
misrepresentation based on the alleged false promise, since, as discussed, a false promise
to perform in the future cannot support a cause of action for negligent misrepresentation.
(Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at pp. 158-159.)
Reading the complaint as a whole, Rossetta adequately alleges that Sincox
promised to provide her with a HAMP TPP as soon as she submitted an updated loan
modification application and supporting documents.14 The complaint also adequately
13 The oversight was understandable. The complaint specifically identifies the second
alleged misrepresentation as the basis for the intentional misrepresentation cause of
action. Although the complaint alleges that Sincox misrepresented that Rossetta would
receive a HAMP TPP, that allegation does not appear in the “Intentional
Misrepresentation” section of the complaint.
14 Although we have some difficulty believing a lender would make an unconditional
offer of a HAMP TPP to a distressed borrower prior to receiving a current loan
modification application, we accept the allegation as true, as we must.
24

alleges that Sincox made the promise without any intention of performing it, with the
intent to induce Rossetta to submit another application, thereby prolonging the loan
modification process and allowing CitiMortgage to charge additional interest, fees, and
penalties. The complaint founders, however, on the element of damages.
The complaint alleges Rossetta was injured in maintaining her delinquent status,
forbearing from pursuing other options to save her home, and spending “over two years
attempting to obtain a loan modification while her arrearages, late fees and penalties
continued to accumulate.” Elsewhere, the complaint alleges Rossetta suffered injury to
her credit and unspecified harm as a result of granting CitiMortgage access to her
personal financial information.15 However, the complaint fails to allege facts
demonstrating that any of these damages were the result of her reliance on the alleged
misrepresentation by Sincox. For example, the complaint alleges Rossetta might have
pursued unspecified “alternate remedies” had she not relied on the false promise that she
would receive a HAMP TPP. Not only does Rossetta fail to identify any of these
“alternate remedies,” she also fails to allege they were available to her in April 2012 and
would have helped to avoid the damage she allegedly suffered as a result of the
misrepresentation. If anything, the complaint suggests Rossetta had no alternative
remedies. According to the complaint, “The only avenue for [Rossetta] to remain in her
permanent residence since 2001, through two [b]reast [c]ancer battles, was for
[CitiMortgage] to fulfill its promises to modify the loan, thus lifting the hardship in a
manner only [CitiMortgage] had the power to do, but failed to do so.” Thus, the
15 The complaint also identifies Rossetta’s attorneys’ fees in this action as damages.
Rossetta’s attorneys’ fees are not recoverable as damages. (Khajavi v. Feather River
Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 62 [“ ‘In the absence of a statute
authorizing attorneys’ fees as an element of damages, or of a contract to pay such fees in
event of the party’s recovery, attorneys’ fees paid by a successful party in an action are
never recoverable against the unsuccessful party’ ”].)
25

complaint expressly disclaims the possibility that Rossetta could have pursued other
options.
Similarly, though Rossetta alleges she suffered damage to her credit and incurred
increased arrears, fees and penalties during the period in which she fruitlessly pursued a
loan modification, she fails to explain why these damages were the result of any false
promise by Sincox, rather than her own default. In this regard, we note that Rossetta
could not have spent two years pursuing a loan modification in reliance on a false
promise by Sincox, as the promise was not even made until April 2012, some twenty-two
months after her default. Furthermore, even assuming arguendo that she incurred such
amounts in reliance on the alleged false promise, Rossetta fails to allege that she actually
paid them.
Finally, Rossetta alleges she spent time and energy on the loan modification
process. In Bushell, another panel of this court concluded that time spent “repeatedly”
responding to a lender’s requests could constitute a cognizable theory of damages, when
combined with other things, like “discontinuing efforts to pursue a refinance from other
financial institutions or to pursue other means of avoiding foreclosure (such as
bankruptcy restructuring, or selling or renting [the borrower’s] home); by having their
credit reports further damaged; and by losing their home and making it unlikely they
could purchase another one.” (Bushell, supra, 220 Cal.App.4th at p. 928.) By contrast,
in Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49 (Lueras), the
court concluded that, “Time and effort spent assembling materials for an application to
modify a loan is the sort of nominal damage subject to the maxim de minimis non curat
lex—i.e., the law does not concern itself with trifles.” (Id. at p. 79.) The damages
alleged in connection with the alleged false promise in April 2012 are more akin to those
in Lueras. Even liberally construed, the complaint fails to allege that Rossetta sustained
more than nominal damage as a result of the time and effort she spent submitting a loan
26
modification application to CitiMortgage in reliance on the alleged false promise in April
2012. We therefore conclude the complaint fails to allege resulting damages.
Not surprisingly, given the trial court’s failure to consider the alleged false
promise to provide a HAMP TPP, Rossetta does not address the pleading failures
discussed above or suggest additional facts that might be alleged to overcome them.
Because she has not had an opportunity to address these issues, and because we see a
reasonable possibility Rossetta can amend to state a viable cause of action for intentional
misrepresentation based on the alleged false promise in April 2012, we conclude the trial
court erred in sustaining the demurrer without leave to amend. (See City of Stockton v.
Superior Court (2007) 42 Cal.4th 730, 747 [as a matter of fairness, a plaintiff who has
not had an opportunity to amend her complaint in response to a demurrer should be
allowed leave to amend unless the complaint shows on its face it is incapable of
amendment].) We therefore reverse to give Rossetta an opportunity to amend to allege
she suffered damages as a result of her reliance on an alleged false promise by Sincox to
provide her with a HAMP TPP in April 2012.
D. Breach of Contract
“A cause of action for damages for breach of contract is comprised of the
following elements: (1) the contract, (2) plaintiff’s performance or excuse for
nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.”
(Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371,
1388.) The complaint alleges that CitiMortgage breached two contracts: a written
contract and an oral one. As we shall discuss, Rossetta fails to state a cause of action
under either theory.
1. Written Contract
The complaint alleges CitiMortgage and Rossetta entered into a written contract
under which CitiMortgage agreed to grant Rossetta “a permanent loan modification with
the terms identified in Exhibit [B]” upon completion of “the 2010 trial/repayment plan.”
27
The complaint further alleges Rossetta performed the agreement “by making all of the
trial/repayment plan payments of the written contract,” and CitiMortgage breached the
agreement by failing to grant Rossetta a permanent loan modification with the terms
stated in Exhibit B. The trial court rejected these allegations, ruling that the complaint
fails to adequately allege the existence of a written contract. We agree with the trial
court.
On appeal, Rossetta argues that Exhibit B and the repayment plan together
constitute a trial plan agreement. We are not persuaded. As previously discussed, neither
document says anything about a HAMP TPP or other trial period plan. Although Exhibit
B contemplates the possibility of a permanent loan modification, nothing in Exhibit B
suggests Rossetta would be entitled to a permanent loan modification upon the happening
of any particular condition. Similarly, though the repayment plan contemplates that
Rossetta would make three monthly payments, nothing in the repayment plan suggests
she would be entitled to a permanent loan modification upon completion of the plan.
Thus, neither document can reasonably be construed as an agreement to grant Rossetta a
permanent loan modification upon the completion of the repayment plan.
Rossetta argues she believed the repayment plan constituted a HAMP TPP,
because the monthly payments were roughly the same as the “proposed” payments in
Exhibit B, and her total payments pursuant to the plan were approximately half of her
accumulated arrears. However, as previously suggested, Rossetta’s unfounded belief
cannot transform the repayment plan into HAMP TPP. “Contract formation requires
mutual consent, which cannot exist unless the parties ‘agree upon the same thing in the
same sense.’ [Citations.] . . . ‘Mutual assent is determined under an objective standard
applied to the outward manifestations or expressions of the parties, i.e., the reasonable
meaning of their words and acts.’ ” (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th
199, 208.) Here, nothing in Exhibit B or the repayment plan suggests that CitiMortgage
and Rossetta mutually agreed to enter into a trial period plan whereby CitiMortgage
28
would offer Rossetta a permanent loan modification upon completion of the repayment
plan. The trial court correctly concluded that Rossetta failed to allege the existence of a
written contract.
2. Oral Contract
Next, the complaint alleges that Rossetta and CitiMortgage entered into an oral
agreement under which Rossetta “would receive a trial plan modification and upon
completion would receive a permanent loan modification with 2% interest fixed for five
years, which would then increase by 1% a year thereafter but would be no greater than
the current market rate.” The complaint alleges Rossetta performed the oral agreement
by sending CitiMortgage documents, and CitiMortgage breached the oral agreement “by
failing to send [Rossetta] the trial plan or permanent loan modification agreement with
the terms represented by Sincox.” The trial court rejected these allegations on the
grounds that, “The alleged oral contract has no terms for a TPP, the condition predicate to
modification.”
Rossetta does not challenge, and we do not reach, the trial court’s conclusion that
the complaint fails to adequately allege an oral TPP or other trial plan agreement.
Instead, she argues the trial court examined the wrong oral contract. According to
Rossetta, the relevant contract was not a TPP, but an oral agreement to provide a TPP.
The trial court overlooked this theory, which is only obliquely alleged in the complaint.
Exercising our independent judgment, we conclude that Rossetta’s newly
developed theory does not save her breach of contract cause of action, as an agreement to
provide a TPP on terms to be specified in the future amounts to an unenforceable
“agreement to agree.” (Bustamante v. Intuit, Inc., supra, 141 Cal.App.4th at pp. 213,
213-214 [“ ‘Preliminary negotiations or [agreements] for future negotiations are not the
functional equivalent of a valid, subsisting agreement’ ”]; see also Daniels, supra, 246
Cal.App.4th at p. 1176 [alleged oral agreement in which lender agreed to grant borrower
a loan modification and borrower agreed to submit documents and make monthly
29
payments of $1000 was unenforceable “agreement to agree”].) We therefore conclude
the trial court properly sustained the demurrer to the breach of contract cause of action.
As noted, the trial court overlooked the allegation that CitiMortgage breached an
oral agreement to provide Rossetta with a TPP. Consequently, Rossetta has not had an
opportunity to address this issue. Nevertheless, we see no reasonable possibility that
Rossetta could amend the complaint to allege an enforceable agreement to provide a TPP.
We therefore conclude the trial court properly sustained the demurrer to the cause of
action for breach of contract without leave to amend.
E. Promissory Estoppel
Promissory estoppel requires: (1) a promise that is clear and unambiguous in its
terms, (2) reliance by the party to whom the promise is made, (3) the reliance must be
reasonable and foreseeable, and (4) the party asserting the estoppel must be injured by his
or her reliance. (Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225.) Rossetta
premises her promissory estoppel cause of action on two alleged promises: (1) an alleged
promise in 2010 to grant her a loan modification with the terms set forth in Exhibit B, and
(2) an alleged oral promise in 2012 to grant her a trial plan and permanent loan
modification. Neither alleged promise supports a cause of action for promissory
estoppel.
As we have discussed, neither Exhibit B nor the repayment plan can be construed
as a promise to grant Rossetta a permanent loan modification. Rossetta does not suggest
any other factual basis for an alleged promise to grant her a permanent loan modification
in 2010. We therefore conclude that Rossetta’s first promissory estoppel theory fails for
lack of a clear and unambiguous promise.
Rossetta’s second theory does not fare much better. Rossetta alleges Sincox
promised to send a trial period plan or a HAMP TPP. However, a general promise to
send some sort of trial loan modification agreement does not constitute a clear and
unambiguous promise to provide any kind of mortgage relief. Furthermore, to the extent
30
Rossetta alleges a promise to send a trial loan modification agreement on any terms, she
fails to allege reasonable reliance on such a promise. (Cf. Daniels, supra, 246
Cal.App.4th at p. 1179 [no borrower could reasonably rely on an alleged promise to offer
a loan modification on any terms, as the offered modification might not lower their
monthly payments sufficiently to allow her to avoid default].) To the extent Rossetta
alleges a promise to provide a permanent loan modification, she fails to allege actual
reliance, as she does not allege she made any trial plan payments. We therefore conclude
the complaint fails to state a cause of action for promissory estoppel.
The trial court properly sustained the demurrer to the cause of action for
promissory estoppel. Nevertheless, the trial court does not appear to have considered the
alleged promise to send Rossetta a HAMP TPP. We reverse to give Rossetta an
opportunity to amend to state a viable cause of action based on the alleged oral promise
in April 2012, if she can.
F. Negligence
Next, the complaint alleges CitiMortgage negligently mishandled Rossetta’s loan
modification applications. The elements of a cause of action for negligence are (1) the
existence of a duty to exercise due care, (2) breach of that duty, (3) causation, and (4)
damages. (See Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 500.) Whether a duty of
care exists is a question of law to be decided on a case-by-case basis. (Lueras, supra, 221
Cal.App.4th at p. 62.)
As a “general rule,” lenders do not owe borrowers a duty of care unless their
involvement in a transaction goes beyond their “conventional role as a mere lender of
money.” (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089,
1096 (Nymark).) “Even when the lender is acting as a conventional lender,” however,
“the no-duty rule is only a general rule.” (Jolley, supra, 213 Cal.App.4th at p. 901.)
Thus, “ ‘Nymark does not support the sweeping conclusion that a lender never owes a
duty of care to a borrower.’ ” (Ibid.)
31
In order to determine whether a duty of care exists, courts balance the Biakanja16
factors, “among which are [(1)] the extent to which the transaction was intended to affect
the plaintiff, [(2)] the foreseeability of harm to him, [(3)] the degree of certainty that the
plaintiff suffered injury, [(4)] the closeness of the connection between the defendant’s
conduct and the injury suffered, [(5)] the moral blame attached to the defendant’s
conduct, and [(6)] the policy of preventing future harm.” (Nymark, supra, 231
Cal.App.3d at p. 1098, citing Biakanja, supra, 49 Cal.2d at p. 650.)
California courts of appeal have not settled on a uniform application of the
Biakanja factors in cases that involve a loan modification. Although lenders have no
duty to offer or approve a loan modification (Lueras, supra, 221 Cal.App.4th at p. 68;
Jolley, supra, 213 Cal.App.4th at p. 903), courts are divided on the question of whether
accepting documents for a loan modification is within the scope of a lender’s
conventional role as a mere lender of money, or whether, and under what circumstances,
it can give rise to a duty of care with respect to the processing of the loan modification
application. (Compare Lueras, supra, 221 Cal.App.4th at p. 67 [residential loan
modification is a traditional lending activity, which does not give rise to a duty of care]
with Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 948
(Alvarez) [servicer has no general duty to offer a loan modification, but a duty may arise
when the servicer agrees to consider the borrower’s loan modification application],
Daniels, supra, 246 Cal.App.4th at pp. 1180-1183 [following Alvarez and applying
Biajanka factors to conclude that lender owed borrowers a duty of care in the loan
modification process] and Jolley, supra, at p. 906 [commercial lending creates a special
relationship, thereby creating a duty of care].) Federal district courts in California have
also reached different results. (Compare, e.g., Marques v. Wells Fargo Bank, N.A. (N.D.
16 Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja)
32

Cal. Oct. 13, 2016, No. 16-cv-03973-YGR) 2016 U.S. Dist. LEXIS 142193, *19
[servicers do not owe borrowers a duty of care in processing loan modification
applications], Garcia v. PNC Mortgage (N.D. Cal. Sept. 16, 2015, No. 14-cv-3543-PJH)
2015 U.S. Dist. LEXIS 123920, *9 [“a servicer, as any financial institution, owes no duty
of care to a borrower in the provision of ordinary financial services such as loan
modifications”], Hernandez v. Select Portfolio, Inc. (C.D. Cal. June 25, 2015, No. CV
15-01896 MMM (AJWx)) 2015 U.S. Dist. LEXIS 82922, *56 [“a lender that agrees to
consider a borrower’s loan modification application does not act outside its conventional
role as a money lender and does not owe a duty of care”]) with Segura v. Wells Fargo
Bank, N.A. (C.D. Cal. Sept. 26, 2014, No. CV-14-04195-MWF (AJWx)) 2014 U.S. Dist.
LEXIS 143038, *32-33[a duty of care exists once the lender offers a borrower the
opportunity to apply for a loan modification], Penermon v. Wells Fargo Home Mortgage
(N.D. Cal. Aug. 28, 2014, No. 14-cv-00065-KAW) 2014 U.S. Dist. LEXIS 121207, *13-
14 [“once [defendant] provided Plaintiff with the loan modification application and asked
her to submit supporting documentation, it owed her a duty to process the completed
application once it was submitted”), and Johnson v. PNC Mortgage (N.D. Cal. 2015) 80
F.Supp.3d 980, 985-986 [“Once PNC offered the Johnsons an opportunity to modify their
loan, it owed them a duty to handle their application with ordinary care”].) Although the
Ninth Circuit has signaled that it may view the “no duty” line of cases as more persuasive
(see, e.g., Anderson v. Deutsche Bank Nat’l Trust Co. Ams. (9th Cir. 2016) 649 Fed.
Appx. 550, 552 [loan servicer has no common law duty to approve application within a
particular time frame]), the federal appellate court has declined to certify the question to
our Supreme Court, which has yet to speak to the issue. (Id. at p. 552, fn. 1.)
The trial court relied on Lueras to hold that “lenders do not have a common law
duty of care . . . to offer, consider, or approve a loan modification, to offer foreclosure
alternatives, or to handle loans so as to prevent foreclosure.” In Lueras, the plaintiff
borrower alleged the defendant lender breached its duty of care by “ ‘failing to timely and
33
accurately respond to customer requests and inquiries,’ by ‘failing to comply with state
consumer protection laws, properly service the loan, and use consistent methods to
determine modification approvals,’ ” among other things. (Lueras, supra, 221
Cal.App.4th at p. 63.) The Court of Appeal for the Fourth District, Division Three,
concluded that lenders do not owe a duty of care in considering or approving loan
modification applications, reasoning that “a loan modification is the renegotiation of loan
terms, which falls squarely within the scope of a lending institution’s conventional role as
a lender of money.” (Id. at p. 67.)
Applying the Biakanja factors, the court explained: “If the modification was
necessary due to the borrower’s inability to repay the loan, the borrower’s harm, suffered
from denial of a loan modification, would not be closely connected to the lender’s
conduct. If the lender did not place the borrower in a position creating a need for a loan
modification, then no moral blame would be attached to the lender’s conduct.” (Lueras,
supra, 221 Cal.App.4th at p. 67.) Accordingly, the court concluded the Biakanja factors
weighed against the imposition of a common law duty of care. (Ibid.) However, the
court recognized that “a lender does owe a duty to a borrower to not make material
misrepresentations about the status of an application for a loan modification or about the
date, time, or status of a foreclosure sale.” (Id. at p. 68.)
Rossetta contends the trial court erred in relying on Lueras, claiming that Alvarez
is the better reasoned decision. In Alvarez, the plaintiffs alleged the lender breached its
duty of care by failing to review their loan modification applications in a timely manner,
foreclosing on their properties while they were under consideration for a HAMP
modification, misplacing their applications, and mishandling them by relying on incorrect
salary information. (Alvarez, supra, 228 Cal.App.4th at p. 945.) The Court of Appeal for
the First District, Division Three, acknowledged the general rule, but observed that,
“ ‘ “Nymark and the cases cited therein do not purport to state a legal principle that a
lender can never be held liable for negligence in its handling of a loan transaction within
34
its conventional role as a lender of money.” ’ ” (Id. at p. 946, citing Jolley, supra, 213
Cal.App.4th at p. 902.)
Applying the Biakanja factors, the court found: “The transaction was intended to
affect the plaintiffs and it was entirely foreseeable that failing to timely and carefully
process the loan modification applications could result in significant harm to the
applicants.” (Alvarez, supra, 228 Cal.App.4th at p. 948.) With regard to the connection
between the defendant’s conduct and the injury suffered, the court found: “ ‘Although
there was no guarantee the modification would be granted had the loan been properly
processed, the mishandling of the documents deprived [the plaintiffs] of the possibility of
obtaining the requested relief.’ ” (Id. at p. 949.) With respect to blameworthiness, the
court found: “The borrower’s lack of bargaining power, coupled with conflicts of interest
that exist in the modern loan servicing industry, provide a moral imperative that those
with the controlling hand be required to exercise reasonable care in their dealings with
borrowers seeking a loan modification.” (Ibid.) Finally, the court found that the policy
of preventing future harm strongly favored the imposition of a duty of care after the
California Homeowner Bill of Rights was effectuated on January 1, 2013. (Id. at p. 950.)
Accordingly, the court concluded that when a lender agrees to consider a borrower’s
application for a loan modification, the Biakanja factors weigh in favor of imposing a
duty of care. (Id. at p. 948.)
Pending guidance from our Supreme Court, we are persuaded by the reasoning in
Alvarez. We find support for our conclusion in Meixner v. Wells Fargo Bank, N.A. (E.D.
Cal. 2015) 101 F.Supp.3d 938, in which the federal district court, addressing the split in
authority, observed: “Alvarez identified an important distinction not addressed by the
Lueras reasoning—that the relationship differs between the lender and borrower at the
time the borrower first obtained a loan versus the time the loan is modified. The parties
are no longer in an arm’s length transaction and thus should not be treated as such. While
a loan modification is traditional lending, the parties are now in an established
35
relationship. This relationship vastly differs from the one which exists when a borrower
is seeking a loan from a lender because the borrower may seek a different lender if he
does not like the terms of the loan.” (Id. at p. 954.)
Based on the foregoing, we are convinced that a borrower and lender enter into a
new phase of their relationship when they voluntarily undertake to renegotiate a loan, one
in which the lender usually has greater bargaining power and fewer incentives to exercise
care. (See Alvarez, supra, 228 Cal.App.4th at p. 949 [during loan modification
negotiations, “ ‘borrowers are captive, with no choice of servicer, little information, and
virtually no bargaining power . . . [while] servicers may actually have positive incentives
to misinform and under-inform borrowers’ ”].) We do not hold that a duty of care arises
merely because a lender receives or considers a loan modification application. Nor do we
hold, as the concurring opinion suggests, that a duty of care may arise solely by virtue of
the parties’ changing relationship. Rather, we conclude that the change in the parties’
relationship can and should be factored into our application of the Biakanja factors. To
this end, we find it significant that CitiMortgage allegedly refused to consider Rossetta’s
loan modification application until she was three months behind in her mortgage
payments. By making default a condition of being considered for a loan modification,
CitiMortgage did more than simply enhance its already overwhelming bargaining power;
it arguably directed Rossetta’s behavior in a way that potentially exceeds the role of a
conventional lender. (See, e.g., Gerbery v. Wells Fargo Bank, N.A. (S.D. Cal. July 31,
2013, No. 13-CV-614-MMA (DHB)) 2013 U.S. Dist. LEXIS 107744, *32-33.) At a
minimum, the alleged policy of making default a condition of being considered for a loan
modification informs our application of the Biakanja factors (see Ko v. Bank of America,
N.A. (C.D. Cal. Oct. 19, 2015, No. SACV 15-00770-CJC (DFMx)) 2015 U.S. Dist.
LEXIS 142040, *28-99 (Ko)), to which we now turn.
With respect to the first factor, the loan modification transaction was plainly
intended to affect Rossetta. CitiMortgage’s decision on her application for a
36
modification plan would likely determine whether or not Rossetta could keep her house.
(Alvarez, supra, 228 Cal.App.4th at p. 948; Daniels, supra, 246 Cal.App.4th at p. 1182.)
We conclude the first Biakanja factor weighs in favor of finding a duty of care.
With respect to the second factor, the potential harm to Rossetta was readily
foreseeable. “ ‘Although there was no guarantee the modification would be granted had
the loan been properly processed, the mishandling of the documents deprived Plaintiff of
the possibility of obtaining the requested relief.’ ” (Alvarez, supra, 228 Cal.App.4th at p.
948, citing Garcia v. Ocwen Loan Servicing, LLC (N.D. Cal. May 10, 2010, No. C 10-
0290 PVT) 2010 U.S. Dist. LEXIS 45375, *9.) Furthermore, by making default a
condition of being considered for a loan modification, CitiMortgage increased the
likelihood that Rossetta would incur additional expenses of default during the lengthy
loan modification process, thereby increasing the foreseeable potential harm. (Ko, supra,
2015 U.S. Dist. LEXIS 142040, *29-30 [“By creating an inducement for plaintiffs to
default (and incur associated fees and interest payments) for there to be even a possibility
of a modification, [the lender] has increased the foreseeability that a borrower would be
harmed by the additional expenses of default incurred during a negligent implementation
of the modification”].) We conclude the second Biakanja factor weighs in favor of
finding a duty of care.
With respect to the third factor, Rossetta alleges she suffered injury in the form of
damage to her credit, increased interest and arrears, and foregone opportunities to pursue
unspecified other remedies. These allegations adequately establish injury at this stage of
the proceedings. (See Daniels, supra, 246 Cal.App.4th at p. 1182.) We conclude the
third Biakanja factor weighs in favor of finding a duty of care.
We have difficulty evaluating the fourth factor—the closeness of the connection
between CitiMortgage’s conduct and Rossetta’s injuries—on the pleadings. On the one
hand, the complaint alleges Rossetta’s default was “imminent,” suggesting she would
have suffered damage to her credit and increased interest and arrears regardless of
37
CitiMortgage’s conduct. On the other hand, the complaint alleges Rossetta was current
on her mortgage payments through May 2010, when she learned she could not be
considered for a loan modification unless she defaulted. We do not know when Rossetta
would have defaulted if left to her own devices, and “it is very likely that a borrower
induced to default before it becomes absolutely necessary suffers associated injuries
involving increased fees and an increased possibility of losing the home.” (Ko, supra,
2015 U.S. Dist. LEXIS 142040, *30.) Construing the complaint liberally, as we must, we
conclude the fourth Biakanja factor weighs in favor of finding a duty of care.
With respect to the fifth factor, we agree with the Alvarez court’s analysis.
Although the court was unable to assess the lender’s blameworthiness on the pleadings,
the court nevertheless found it “highly relevant” that the borrowers’ “ ‘ability to protect
[their] own interests in the loan modification process [was] practically nil’ ” and the bank
held “ ‘all the cards.’ ” (Alvarez, supra, 228 Cal.App.4th at p. 949.) There, as here, the
borrowers were “ ‘captive, with no choice of servicer, little information, and virtually no
bargaining power.’ ” (Ibid.) Following Alvarez, we conclude the borrower’s lack of
bargaining power, coupled with the lender’s alleged incentive to unnecessarily prolong
the loan modification process, “provide a moral imperative that those with the controlling
hand be required to exercise reasonable care in their dealings with borrowers seeking a
loan modification.” (Ibid.) Additionally, we note that “the moral blame attached to the
defendant’s conduct . . . is heightened when the defendant first induces a borrower to take
a vulnerable position by defaulting and then subjects the borrower’s loan application to a
review process that does not meet the standard of ordinary care.” (Ko, supra, 2015 U.S.
Dist. LEXIS 142040, *30.) Accordingly, we conclude the fifth Biakanja factor weighs in
favor of finding a duty of care.
Finally, with respect to the sixth factor, the legislature has enacted the California
Homeowner Bill of Rights, which “demonstrates ‘a rising trend to require lenders to deal
reasonably with borrowers in default to try to effectuate a workable loan modification’ ”
38
and “ ‘expressed a strong preference for fostering more cooperative relations between
lenders and borrowers who are at risk of foreclosure, so that homes will not be lost.’ ”
(Alvarez, supra, 228 Cal.App.4th at p. 950; see also Civ. Code, § 2923.6 [encouraging
lenders to offer loan modifications to borrowers in appropriate circumstances].)
Imposing a duty of care in the particular circumstances of this case would serve the
policies underlying these legislative preferences, and prevent future harm to borrowers,
by giving lenders an incentive to handle loan modification applications in a timely and
responsible manner. (Alvarez, supra, at p. 950.) We conclude the sixth Biakanja factor
weighs in favor of finding a duty of care.
The complaint alleges CitiMortgage acted unreasonably by dragging Rossetta
through a seemingly endless application process, requiring her to submit the same
documents over and over again (including a “nonexistent” statement of permanent
disability income), losing or mishandling documents, misstating the status of various
applications, and ultimately denying them for bogus reasons. Having carefully weighed
the Biajanka factors, we conclude these allegations adequately allege a cause of action
for negligence that is sufficient to survive demurrer.
Relying on Civil Code section 2923.6, subdivision (g), CitiMortgage argues:
“[CitiMortgage] was under no duty to review further loan modification application [sic]
from [Rossetta] after it denied [Rossetta] for a HAMP loan modification in writing in
2012, which [Rossetta] failed to appeal.” We assume without deciding that Civil Code
section 2923.6, subdivision (g), offers an affirmative defense to negligence in loan
modification cases. 17 Even so assuming, facts necessary to establish the affirmative
17 Civil Code section 2923.6, subdivision (g), which has an effective date of January 1,
2013, provides: “In order to minimize the risk of borrowers submitting multiple
applications for first lien loan modifications for the purpose of delay, the mortgage
servicer shall not be obligated to evaluate applications from borrowers who have already
been evaluated or afforded a fair opportunity to be evaluated for a first lien loan
39

defense do not appear in the complaint. CitiMortgage’s contention that Rossetta failed to
appeal from the denial of her loan modification applications suffers from the same defect.
Whatever the merits of these arguments, they are inappropriate for resolution at the
demurrer stage. (Noguera v. North Monterey County Unified Sch. Dist. (1980) 106
Cal.App.3d 64, 66 [matters outside the complaint will not be considered in evaluating a
demurrer]; see also Matteson v. Wagoner (1905) 147 Cal. 739, 744 [where only part of
the facts necessary to an affirmative defense appear in a complaint, the complaint is not
rendered vulnerable to a general demurrer].) We therefore conclude the trial court erred
in sustaining the demurrer to Rossetta’s negligence cause of action.
G. Intentional Infliction of Emotional Distress
Rossetta contends the alleged mishandling of her application for a loan
modification gave rise to a cause of action for intentional infliction of emotional distress.
“The elements of a prima facie case for the tort of intentional infliction of emotional
distress are: ‘ “ (1) extreme and outrageous conduct by the defendant with the intention of
causing, or reckless disregard of the probability of causing, emotional distress; (2) the
plaintiff’s suffering severe or extreme emotional distress; and (3) actual and proximate
causation of the emotional distress by the defendant’s outrageous conduct.’ ” (Melorich
Builders, Inc. v. Superior Court (1984) 160 Cal.App.3d 931, 935-936.)
“The standard set for measuring outrageous conduct indicates the qualifying
conduct must be so outrageous in character and so extreme in degree as to go beyond all
possible bounds of decency and to be regarded as atrocious and utterly intolerable in a
civilized community.” (Melorich Builders, Inc. v. Superior Court, supra, 160
modification prior to January 1, 2013, or who have been evaluated or afforded a fair
opportunity to be evaluated consistent with the requirements of this section, unless there
has been a material change in the borrower’s financial circumstances since the date of the
borrower’s previous application and that change is documented by the borrower and
submitted to the mortgage servicer.”
40

Cal.App.3d at p. 936.) The complaint alleges CitiMortgage acted outrageously by
leading Rossetta, a cancer survivor, to believe she would receive a loan modification,
making material misrepresentations concerning the status of her loan modification
applications, and mishandling her application materials.
The mishandling of a loan modification may, in some circumstances, constitute
conduct so outrageous as to allow a cause of action for intentional infliction of emotional
distress. (See, e.g., Ragland v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 188-
189 [denying summary judgment on cause of action for intentional infliction of emotional
distress where a trier of fact could find the lender induced the borrower to default,
purposefully refused payment, then sold the home in foreclosure].) But Rossetta’s
allegations do not rise to that level. (See, e.g., Helmer v. Bank of America, N.A. (E.D.
Cal. Mar. 22, 2013, No. CIV S-12-0733 KJM-GGH) 2013 U.S. Dist. LEXIS 40707, *16-
17 [allegation that lender induced borrower to default was not sufficient to show reckless
or intentional behavior]; Becker v. Wells Fargo Bank, N.A. (E.D. Cal. Nov. 30, 2012, No.
2:10-cv-02799 LKK KJN PS) 2012 U.S. Dist. LEXIS 170729, *48 [allegation that lender
failed to make good on alleged promise to grant loan modification quickly if borrower
followed certain instructions was not sufficiently outrageous to support cause of action
for intentional infliction of emotional distress]; Mehta v. Wells Fargo Bank, N.A. (S.D.
Cal. 2010) 737 F.Supp.2d 1185, 1204 [allegation that mortgage lender broke a promise
not to foreclose during pendency of an application for a loan modification was not
sufficiently outrageous to support cause of action for intentional infliction of emotional
distress].)
Although Rossetta undoubtedly suffered frustration and anxiety in her attempts to
secure a loan modification, the alleged mishandling of her loan modification applications
does not constitute conduct so extreme, outrageous, or outside the bounds of civilized
society as to support a cause of action for intentional infliction of emotional distress, even
assuming CitiMortgage knew she was battling cancer. The trial court properly sustained
41
the demurrer to the cause of action for intentional infliction of emotional distress without
leave to amend.
H. Unfair Competition Law
Next, Rossetta argues the trial court erred in sustaining the demurrer to her cause
of action for violations of the Unfair Competition Law, Business and Professions Code
section 17200 et seq. The trial court sustained the demurrer on the grounds that the
complaint fails to allege an underlying unfair practice and fails to allege facts establishing
that Rossetta has standing to bring an Unfair Competition Law cause of action. Rossetta
challenges both of these determinations. We address them, as Rossetta does, in reverse
order.
1. Standing
A private party has standing to bring a Unfair Competition Law action only if he
or she “has suffered injury in fact and has lost money or property as a result of the unfair
competition.” (Bus. & Prof. Code, § 17204 (section 17204).) To plead standing, a
plaintiff must “(1) establish a loss or deprivation of money or property sufficient to
qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was
the result of, i.e., caused by, the unfair business practice . . . that is the gravamen of the
claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322.) There are
“innumerable ways in which economic injury from unfair competition may be shown. A
plaintiff may (1) surrender in transaction more, or acquire in a transaction less, than he or
she otherwise would have; (2) have a present or future property interest diminished; (3)
be deprived of money or property to which he or she has a cognizable claim; or (4) be
required to enter into a transaction, costing money or property, that would otherwise have
been unnecessary.” (Id. at p. 323.) “It suffices to say that . . . a private plaintiff filing
suit . . . must establish that he or she has personally suffered [economic] harm.” (Ibid.)
Relying on Bushell Rossetta argues she suffered economic harm as a result of the
time and money she spent responding to CitiMortgage’s demands. CitiMortgage
42
responds that Bushell does not address standing under section 17204 and, in any case,
wasted time does not constitute an economic injury. These points, though well-taken, do
not resolve the question of standing as they do not address the argument that Rossetta
spent money pursuing a loan modification. (See Reichman v. Poshmark, Inc. (S.D. Cal.
Jan. 3, 2017, No. 16-cv-2359 DMS (JLB)) 2017 U.S. Dist. LEXIS 36371, *16 [“waste of
time, aggravation, and stress do not constitute loss or deprivation of money or property
sufficient to satisfy the economic injury requirement”].)
As previously discussed, costs incurred in preparing and assembling materials for
a single loan modification application (e.g., copy costs and postage) fail to establish the
element of damages under the maxim de minimis non curat lex—the law does not
concern itself with trifles. (See Lueras, supra, 221 Cal.App.4th at p. 79.) But the
question of injury-in-fact is different from the question of damages. (See Clayworth v.
Pfizer, Inc. (2010) 49 Cal.4th 758, 789 [section 17204 does not require “that plaintiffs
prove compensable loss at the outset”].) To establish standing under section 17204, a
plaintiff need only “allege an ‘ “identifiable trifle” ’ [citation] of economic injury.”
(Kwikset Corp. v. Superior Court, supra, 51 Cal.4th at p. 330, fn. 15.) We conclude the
complaint adequately alleges the required trifle.18
The complaint alleges Rossetta spent “a significant amount of time, energy and
resources in her attempts to obtain the loan modifications.” (Italics added.) The term
“resources” encompasses both economic and non-economic losses, and is therefore vague
as to whether Rossetta suffered the requisite economic harm. (See Meriam-Webster’s
18 The Lueras court concluded that costs incurred in preparing and assembling materials
for a loan modification application are “de minimis” and “not sufficient to qualify as
injury in fact under section 17204.” (Lueras, supra, 221 Cal.App.4th at p. 82.) Although
we agree with the court’s characterization of such costs as “de minimis,” we respectfully
disagree with the conclusion that “de minimis” costs cannot constitute injury-in-fact for
purposes of section 17204.
43

Collegiate Dict. (11th ed. 2006) p. 1061, col. 2 [defining “resource” to include “a source
of supply or support,” “a natural source of wealth or revenue,” “a natural feature or
phenomenon that enhances the quality of human life,” “something to which one has
recourse in difficulty,” “a possibility of relief or recovery” and “an ability to meet and
handle a situation”].) However, the complaint also alleges Rossetta repeatedly sent
documents to CitiMortgage via United Parcel Service (UPS), and attaches the relevant
invoices. Reading these allegations liberally, and construing them in the context of the
complaint as a whole, we conclude Rossetta sufficiently alleges she suffered economic
harm as a result of the alleged mishandling of her loan modification application
materials.19 We therefore conclude Rossetta adequately alleges standing to pursue a
cause of action under the Unfair Competition Law.
2. Fraudulent and Unfair Practices
Having concluded that Rossetta has standing, we next consider whether the
complaint alleges a cause of action under the Unfair Competition Law. The Unfair
Competition Law prohibits any “unlawful, unfair or fraudulent business act or practice.”
(Bus. & Prof. Code, § 17200.) Because the statute is written in the disjunctive, it
prohibits three separate types of unfair competition: (1) unlawful acts or practices, (2)
unfair acts or practices, and (3) fraudulent acts or practices. (Cel-Tech Communications,
Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) The
trial court concluded the complaint fails to allege a cause of action under any prong.
Relying on Majd v. Bank of America, N.A. (2015) 243 Cal.App.4th 1293 (Majd),
Rossetta argues the complaint alleges a cause of action under the “fraud” and “unfair”
prongs. Specifically, Rossetta argues CitiMortgage violated the fraud and unfair prongs
19 We decline to consider Rossetta’s alternative argument that she incurred economic
harm as a result of having incurred fees and penalties which are not alleged to have been
paid.
44

by denying her application for a loan modification on the “false” grounds that she failed
to submit necessary documents. The trial court did not consider this theory, which
Rossetta offers for the first time on appeal. (See Dudley v. Department of Transportation
(2001) 90 Cal.App.4th 255, 259 [appellant may advance a new theory as to why the
allegations of the complaint state a cause of action on appeal from a demurrer dismissal
without leave to amend].) We conclude the complaint adequately alleges a cause of
action under the “fraud” and “unfair” prongs of the Unfair Competition Law.
20
“A business practice is ‘fraudulent’ within the meaning of [Business and
Professions Code] section 17200 if it is ‘likely to deceive the public. [Citations.] It may
be based on representations to the public which are untrue, and “ ‘also those which may
be accurate on some level, but will nonetheless tend to mislead or deceive. . . . A
perfectly true statement couched in such a manner that is likely to mislead or deceive the
consumer, such as by failure to disclose other relevant information, is actionable under’ ”
the [Unfair Competition Law]. [Citations.] The determination as to whether a business
practice is deceptive is based on the likely effect such practice would have on a
reasonable consumer.’ ” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342,
1380.) “A ‘fraudulent’ activity includes any act or practice likely to deceive the public,
even if no one is actually deceived.” (Jolley, supra, 213 Cal.App.4th at p. 907; see
Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 772 [“ ‘Unlike common
law fraud, a Business and Professions Code section 17200 violation can be shown even
without allegations of actual deception, reasonable reliance and damage’ ”].)
Our Supreme Court has not yet established a test for determining whether a
business practice in a consumer case is “unfair.” (See Zhang v. Superior Court (2013) 57
20 Rossetta does not contend—and we do not consider—whether the complaint
adequately alleges a cause of action under the “unlawful” prong of the Unfair
Competition Law.
45

Cal.4th 364, 380, fn. 9 [“The standard for determining what business acts or practices are
‘unfair’ in consumer actions under the [Unfair Competition Law] is currently
unsettled”].) Prior to the Supreme Court’s opinion in Cel-Tech, courts applied a
balancing test to determine whether a practice was “unfair” under the Unfair Competition
Law. (See, e.g., Klein v. Earth Elements, Inc. (1977) 59 Cal.App.4th 965, 969-970.)
Specifically, courts would balance the impact of the practice on the alleged victim,
against the reasons, justifications and motives of the alleged wrongdoer. (Ibid.) The
Supreme Court rejected this approach in Cel-Tech, an anti-competitive practices case,
holding that a cause of action for unfair business practices must “be tethered to some
legislatively declared policy or proof of some actual or threatened impact on
competition.” (Cel-Tech, supra, 20 Cal.4th at pp. 186-187.) Although Cel-Tech
disapproved of consumer cases applying the balancing test, the Supreme Court expressly
limited its holding to anti-competitive practices cases, stating: “Nothing we say relates to
actions by consumers.” (Id. at p. 187, fn. 12.) Following Cel-Tech, a split in authority
has developed concerning the standard for consumer claims under the “unfair” prong of
the Unfair Competition Law. (Compare Smith v. State Farm Mutual Automobile Ins. Co.
(2001) 93 Cal.App.4th 700, 718-719 [adopting the balancing test] with Gregory v.
Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 854 [adopting the “tether[ing]” test]; see
also Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394,
1403 [adopting the test for unfairness set forth in 15 U.S.C. § 45(n)].) Another panel of
this court has adopted the balancing test (Progressive West Ins. Co. v. Superior Court
(1999) 135 Cal.App.4th 263, 285-286) and, in the absence of any discussion of the
appropriate standard by the parties, we do the same.
The complaint alleges CitiMortgage subjected Rossetta to a fraudulent application
process, stringing her along with false assurances that a loan modification would be
forthcoming, and then claiming, also falsely, that Rossetta failed to supply requested
documents. The complaint further alleges that CitiMortgage intentionally delayed the
46
application process by demanding that Rossetta submit the same documents over and
over again, all in an attempt to increase arrears, penalties, and fees, resulting in an
incurable default. These allegations adequately support a cause of action under the
“fraudulent” and “unfair” prongs of the Unfair Competition Law. (See Rufini, supra, 227
Cal.App.4th at p. 310 [allegation that lender “pretended to engage in loan modification
efforts while actually intending to foreclose” stated Unfair Competition Law cause of
action under “fraudulent” and “unfair” prongs]; Majd, supra, 243 Cal.App.4th at p. 1304
[borrower sufficiently alleged violation of the Unfair Competition Law based, in part, on
lender’s false assertion that he failed to provide required documentation].) We therefore
conclude the trial court erred in sustaining the demurrer to the Unfair Competition Law
cause of action.21
I. Conversion
Finally, Rossetta contends the trial court erred in sustaining the demurrer to the
cause of action for conversion in the first amended complaint.
22 Rossetta’s conversion
cause of action is based on the theory that the assignment of the deed of trust to
CitiMortgage in October 2012 was invalid. The trial court correctly sustained the
demurrer to Rossetta’s conversion cause of action.
21 We reject CitiMortgage’s argument, based on Mangini, supra, 230 Cal.App.3d at pp.
1155-1156, that the Unfair Competition Law only applies to ongoing conduct. As the
Court of Appeal for the First District, Division Three, has explained, in rejecting an
identical argument: “That was the state of the law when Mangini was decided, but the
following year the Legislature amended [Business and Professions Code] section 17200
to state that it applies to any unlawful ‘ “act or practice,” presumably permitting
invocation of the [Unfair Competition Law] based on a single instance of unfair
conduct.’ ” (Rufini, supra, 227 Cal.App.4th at p. 311.)
22 During oral argument, Rossetta’s counsel informed the court that the claim for
declaratory relief was “moot.” Without deciding whether this claim is properly
characterized as moot, we accept Rossetta’s representation that the claim has been
abandoned.
47

“An essential step in the process of securitizing a loan is the transfer of the
promissory note and deed of trust into a trust.” (Mendoza v. JPMorgan Chase Bank, N.A.
(2016) 6 Cal.App.5th 802, 806.)23 The complaint implies that Rossetta’s loan, which
closed in September 2005, was eligible for inclusion in the 2006-1 Trust, which closed on
August 30, 2006. However, there is nothing in the record to suggest that CitiMortgage
attempted or intended to securitize the loan. To the contrary, the judicially noticeable
assignments reveal that MERS assigned the deed of trust to CitiMortgage on October 12,
2012, and CitiMortgage assigned the deed of trust to the M4 REMIC Trust 1 on April 1,
2014. The complaint does not allege—and nothing suggests—that CitiMortgage
attempted or intended to securitize the loan by transferring the promissory note and deed
of trust to the 2006-1 Trust.
The parties devote considerable attention to the question, left open by our
Supreme Court’s recent opinion in Yvanova v. New Century Mortgage Co. (2016) 62
Cal.4th 919, as to whether a borrower has standing to bring a preemptive action
challenging the validity of a deed of trust assignment to a foreclosing party. (Id. at pp.
924, 943 [holding that a borrower has standing to challenge a nonjudicial foreclosure
based on errors in the assignment by which the foreclosing party purportedly took a
beneficial interest in the deed of trust, but leaving open the question whether a borrower
has standing in the pre-foreclosure context]; and compare Saterbak v. JPMorgan Chase
Bank, N.A., supra, 245 Cal.App.4th at p. 815 [holding California law precludes borrowers
23 “Mortgage-backed securities are created through a complex process known as
‘securitization.’ (See Levitin & Twomey, Mortgage Servicing (2011) 28 Yale J. on Reg.
1, 13 [‘a mortgage securitization transaction is extremely complex . . .’].) In simplified
terms, ‘securitization’ is the process where (1) many loans are bundled together and
transferred to a passive entity, such as a trust, and (2) the trust holds the loans and issues
investment securities that are repaid from the mortgage payments made on the loans.
[Citation.] Hence, the securities issued by the trust are ‘mortgage-backed.’ ” (Glaski v.
Bank of America (2013) 218 Cal.App.4th 1079, 1082, fn. 1.)
48

from bringing preemptive actions to determine whether foreclosing parties have authority
to foreclose because such actions “ ‘would result in the impermissible interjection of the
courts into a nonjudicial scheme [i.e. nonjudicial foreclosures] enacted by the California
Legislature’ ”] with Lundy v. Selene Finance, LP (N.D. Cal. Mar. 17, 2016, No. 15-cv-
05676-JST) 2016 U.S. Dist. LEXIS 35547, *39-40 [predicting that the California
Supreme Court would likely limit a bar on pre-foreclosure suits only to “plaintiffs who
lack any ‘specific factual basis’ for bringing their claims”].) We need not decide whether
Rossetta has standing to challenge alleged deficiencies in the assignment of the deed of
trust from MERS to the 2006-1 Trust because, on the face of the complaint, there was no
such assignment. We therefore conclude the trial court properly sustained the demurrer
to the cause of action for conversion without leave to amend.

Outcome: The judgment of dismissal in favor of CitiMortgage is reversed. The order
sustaining the demurrer is affirmed in part and reversed in part. The order is reversed as to the causes of action for negligence (fifth cause of action) and violations of the Unfair Competition Law (seventh cause of action). The trial court is directed to grant Rossetta leave to amend the causes of action for intentional misrepresentation (first cause of action) and promissory estoppel (fourth cause of action). In all other respects, the judgment is affirmed. The parties shall bear their own costs on appeal.

c 078916 by DinSFLA on Scribd

Pushard v. Bank of America N.A.

Court: Maine Supreme Judicial Court

Citation: 2017 ME 230

Opinion Date: December 12, 2017

Judge: Humphrey

Areas of Law: Banking, Real Estate & Property Law

In this appeal arising from a foreclosure action, the Supreme Judicial Court vacated the judgment in favor of Bank on Plaintiffs’ claim for declaratory relief and remanded the case for entry of summary judgment in favor of Plaintiffs on that claim. Plaintiffs filed claims against Bank for declaratory and injunctive relief, slander of title, and damages pursuant to Me. Rev. Stat. 33, 551. The business and consumer docket entered judgment in favor of Bank. The Supreme Judicial Court affirmed in part and vacated in part, holding (1) Plaintiffs’ claims presented a justiciable controversy; (2) the trial court did not err by granting Bank’s motion for summary judgment on Plaintiffs’ section 551 claim or slander-of-title claim; but (3) Plaintiffs were entitled, as a matter of law, to the declaratory relief they sought.

CBS-

Imagine paying your mortgage on time every month, and your bank takes your home away anyway.

It may not make any sense, but it’s happening to some homeowners.

Since 2004, Kim Shibles’ beloved home has been the backdrop for everything from holidays to proms and more.

“I would like to have back what they took,” Shibles said.

That is until she was forced out of the house in 2016, after the bank foreclosed.

[CBS]

Law360-

Units of Wells Fargo and other banks went back to New York state court Friday to ask for guidance on how they, as trustees for a slew of residential mortgage-backed securities trusts, should distribute the $4.5 billion they expect to receive soon from a settlement between JPMorgan and a group of investors in the trusts.

The settlement, which resolved the investor group’s claims that JPMorgan Chase & Co. misled them into buying defective mortgage bonds in the lead-up to the financial crisis of 2007, received approval…

[LAW 360]

EVERY SUNDAY
3:00 PM HAWAII 
5:00 PM PACIFIC
8:00 PM EASTERN
ON KHVH-AM
(830 ON THE DIAL)
AND ON
iHEART RADIO

CNN-

The Navajo Nation has sued Wells Fargo, claiming the bank targeted tribal members with “predatory sales tactics.”

In a federal lawsuit filed Tuesday, the tribe alleged that Wells Fargo — the only national bank that services its territory — preyed on people by opening unauthorized bank accounts and debit cards, and by pressuring people, particularly the elderly, to enroll in services they did not need.

“Under intense pressure from superiors to grow sales figures, Wells Fargo employees lied to Navajo consumers, telling elderly Navajo citizens who did not speak English that in order to have their checks cashed, they needed to sign up for savings accounts they neither needed nor understood,” the Navajo Nation said in its complaint.

[CNN]

Bangor Daily News-

The Treasury Department is investigating the expenditures of housing agencies in 18 states and the District of Columbia that used federal funds aimed at bailing out homeowners in danger of losing their properties to foreclosure, alleging that some misspent the money and will have to repay it.

So far, the Treasury’s Office of Special Inspector General has identified $3 million in questionable expenses that include bonuses, barbecues and a vehicle allowance. But Treasury officials say that a review of the expenses is ongoing, and that the figure could increase or even decrease because some housing agencies are disputing the charges.

The allegations are contained in a 93-page audit that Treasury’s inspector general issued in August on the Troubled Asset Relief Program (TARP), which the government established in 2010 during the Great Recession.

[BANGOR DAILY NEWS]

Clarion Ledger-

A Eupora widow has filed for a temporary restraining order and injunction against Wells Fargo Bank accusing the banking giant of initiating a foreclosure sale of her home prior to telling her.

Sandra Cummings and her attorney say a Wells Fargo Home Mortgage official in correspondence dated Oct. 13, but not received via fax until Nov. 3, said there was no sale date at that time for the property.

However, Cummings’  lawsuit says Wells Fargo had already instituted a foreclosure sale of the property with an initial publication date of Nov. 1 and an ultimate sale date of Nov. 22. The loan was for more than $114,000.

The lawsuit says it is without question and dispute that Wells Fargo didn’t comply with the dictates of the state foreclosure law in that it failed to mail a notice letter at least 45 days before a foreclosure sale is conducted.

[CLARION LEDGER]

Forbes-

Almost everyone agrees that the Great Recession was triggered largely by the U.S. housing bubble bursting in 2007. For years beforehand, lenders had been giving out riskier and riskier mortgages, including waiving or lowering down payment requirements.

Ten years later, low- or no-down-payment mortgages may be making a comeback. Several private banks are now offering various zero-down mortgage programs or down payment assistance programs for higher-risk borrowers. While they are not identical to the adjustable-rate mortgages that were given out like candy in the runup to 2007, they may herald a worrisome trend that could lead to a repeat of our last housing crisis.

Michigan’s largest bank, Flagstar, is offering a new programto “low-income and moderate-income” borrowers that essentially pays their 3% down payment, plus up to $3,500 for closing costs, for them. Sounds generous, but buyers should be careful to read the fine print: The down payment and closing costs can be taxed as income by the IRS.

[FORBES]

WALTOGUY ANFRIANY and MIRELLE ANFRIANY, Appellants,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee, In Trust for the Registered Holders of Argent Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-W4, Appellee.

Brian K. Korte and Scott J. Wortman of Korte & Wortman, P.A., West Palm Beach, for appellants.

Julissa Rodriguez and Stephanie L. Varela of Greenberg Traurig, P.A., Miami, and C. Wade Bowden and Tyrone Adras of Greenberg Traurig, P.A., West Palm Beach, for appellee.

CONNER, J.

The appellants (collectively “Anfriany”) petitioned for certiorari to review the trial court’s order vacating their entitlement to attorney’s fees and costs in the underlying foreclosure action initiated by the appellee, Deutsche Bank National Trust (“the Bank”). This Court ordered that the case be treated as a final appeal pursuant to Florida Rules of Appellate Procedure 9.110 and 9.030(b)(1)(A).

Anfriany raises substantive issues regarding the application of judicial estoppel to bar his entitlement to fees and costs, and a procedural issue. Because the trial court applied the wrong standard in dismissing the entitlement based on judicial estoppel, we reverse and remand for further proceedings. We do not address the procedural issue raised.

Background

The Bank filed the underlying foreclosure action against Anfriany and others in 2008. The trial court granted the Bank’s voluntary dismissal without prejudice. In May 2011, Anfriany, through foreclosure counsel, moved to tax attorney’s fees and costs. In May 2012, the trial court granted the motion and ordered that Anfriany was entitled to reasonable attorney’s fees and costs (“the fee entitlement order”), and if the parties could not agree on the amount, Anfriany would set the matter for an evidentiary hearing.

In May 2013, Anfriany filed a Chapter 11 voluntary bankruptcy petition, represented by separate bankruptcy counsel. The petition included bankruptcy schedules and a statement of financial affairs, which required Anfriany to disclose and list the value of “all personal property of the debtor of whatever kind,” including “contingent and unliquidated claims of every nature, including tax refunds, counterclaims of the debtor, and rights to setoff claims.” Anfriany did not list any assets in the contingent claims category. When Anfriany amended his personal property schedule later that year, he again did not list such assets. In 2014, the bankruptcy court confirmed Anfriany’s reorganization plan based on his affidavits and disclosures. Subsequently, the bankruptcy court granted Anfriany’s motion to temporarily and administratively close the case. Because it was a Chapter 11 bankruptcy, Anfriany’s debts were not discharged under the approved reorganization plan.

In October 2015, Anfriany requested the trial court in the foreclosure action to hold an evidentiary hearing on his motion for attorney’s fees and costs. The purpose of the hearing was “to determine the reasonable amount of attorney’s fees and costs.”

In September 2016, the Bank moved to vacate the fee entitlement order. In the motion, the Bank asserted that Anfriany’s claim for attorney’s fees was barred by judicial estoppel because Anfriany failed to disclose in his bankruptcy case his award of entitlement to attorney’s fees and costs, which was a contingent and unliquidated asset. The Bank argued that Anfriany therefore misled “the bankruptcy court and creditors to believe that he had fewer assets from which he could pay his creditors.” Thus, because Anfriany was taking inconsistent positions before the bankruptcy and foreclosure courts, the Bank asserted that judicial estoppel should bar his recovery.

In his written response to the motion, Anfriany argued that judicial estoppel did not bar his claim for fees and costs. Anfriany asserted that, because a Chapter 11 bankruptcy petition does not discharge his debts, he did not deprive any creditors of their rights to collect amounts owed; thus, no parties were prejudiced by his omission. Additionally, Anfriany argued that he himself was unaware that attorney’s fees are legally classified as an “asset” and his bankruptcy counsel was unaware of the attorney’s fees claim; thus, the omission was not an attempt to conceal assets.

A hearing was held on the Bank’s motion to vacate, and the trial court made the following conclusion:

Okay. Relying upon the case of Coastal Plains, which is 179 F.3d 197,which says, “Considering judicial estoppel for bankruptcy cases,” it doesn’t say Chapter 7. It says for bankruptcy cases. “The debtor’s failure to satisfy statutory disclosure is `inadvertent’ only when in general, the debtor either lacks knowledge of the undisclosed claims or has no motive for their concealment.”

That seems to very clearly apply to the facts of this case, so I believe the Court has no discretion. But under a common sense interpretation of that language, even if the Court had discretion, it seems like its discretion is limited.

Because the record states in this case that — well, the record does not indicate that the debtor lacked knowledge of the undisclosed claims. Clearly, the debtor had no motive for concealment, whether it’s inadvertent or not, it doesn’t carry any weight, and the Court is obligated to find that judicial estoppel applies and bars the further pursuit of the attorney’s fees claims.

As such, the trial court granted the Bank’s motion.

Anfriany gave notice of appeal.

Appellate Analysis

We employ a mixed standard of review of a judicial estoppel claim. See Bueno v. Workman, 20 So. 3d 993, 997 (Fla. 4th DCA 2009). “To the extent the trial court’s order is based on factual findings, [the appellate court] will not reverse unless the trial court abused its discretion; however, any legal conclusions are subject to de novo review.” Id. (quoting Foreclosure FreeSearch, Inc. v. Sullivan, 12 So. 3d 771, 774 (Fla. 4th DCA 2009)).

Anfriany raises two substantive issues regarding the application of judicial estoppel to bar his claim for fees and costs. First, he argues that the fee award was not his asset, but an asset of his attorney. Second, he argues the trial court improperly failed to consider the nature of the bankruptcy filing (reorganization of debt versus discharge of debt) and whether his failure to disclose was inadvertent. We affirm without discussion the first argument; we address the second argument.

“Judicial estoppel is an equitable doctrine that is used to prevent litigants from taking totally inconsistent positions in separate judicial, including quasi-judicial, proceedings.” Blumberg v. USAA Cas. Ins. Co., 790 So. 2d 1061, 1066 (Fla. 2001)(quoting Smith v. Avatar Props., Inc., 714 So. 2d 1103, 1107 (Fla. 5th DCA 1998)). This Court has explained that judicial estoppel “protects the integrity of the judicial process and prevents parties from making a mockery of justice by inconsistent pleadings and playing fast and loose with the courts.” Grau v. Provident Life & Accident Ins. Co., 899 So. 2d 396, 400 (Fla. 4th DCA 2005) (internal quotations and citations omitted). Judicial estoppel is imposed because “intentional self-contradiction is being used as a means of obtaining an unfair advantage in a forum provided for suitors seeking justice.” Scarano v. Cent. R. Co. of N.J., 203 F.2d 510, 513 (3d Cir. 1953) (emphasis added).

Our supreme court in Blumberg described the doctrine of judicial estoppel under Florida law as follows:

In order to work an estoppel, the position assumed in the former trial must have been successfully maintained. In proceedings terminating in a judgment, the positions must be clearly inconsistent, the parties must be the same and the same questions must be involved. So, the party claiming the estoppel must have been misled and have changed his position; and an estoppel is not raised by conduct of one party to a suit, unless by reason thereof the other party has been so placed as to make it to act in reliance upon it unjust to him to allow that first party to subsequently change his position. There can be no estoppel where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel; where the conduct relied on to create the estoppel was caused by the act of the party claiming the estoppel, or where the positions taken involved solely a question of law.

Blumberg, 790 So. 2d at 1066 (emphasis added) (quoting Chase & Co. v. Little,156 So. 609, 610 (1934)).

In Grau, we noted that Blumberg “reshaped” and “broadened” the Florida doctrine of judicial estoppel announced in 1934 by the court in Chase & Co. in three ways. Grau, 899 So. 2d at 399. The court: (1) recognized an exception to the general rule that there be mutuality of parties between an earlier proceeding and the later one in which judicial estoppel is applied; the court held that mutuality of the parties is not required where “special fairness and policy considerations” compel application of the doctrine; (2) “appears to have dispensed with the Chase & Co.requirement that the `party claiming the estoppel must have been misled and have changed his position’ by the other party’s conduct in the earlier suit”;^[1] and (3) held that a jury verdict met the requirement of successfully maintaining a position in a prior suit, even though no final judgment was entered. Id. at 399-400.

Grau described the post-Blumberg rule of judicial estoppel as follows:

A claim or position successfully maintained in a former action or judicial proceeding bars a party from making a completely inconsistent claim or taking a clearly conflicting position in a subsequent action or judicial proceeding, to the prejudice of the adverse party, where the parties are the same in both actions, subject to the “special fairness and policy considerations” exception to the mutuality of parties requirement.

Id. at 400 (footnotes omitted). Additionally, we observed in Grau that “[t]he `prejudice’ component of judicial estoppel occurs when `the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.‘” Id. at 400 n.3 (emphasis added) (quoting New Hampshire v. Maine, 532 U.S. 742, 751 (2001)); see also S. Fla. Coastal Elec., Inc. v. Treasures on Bay II Condo Ass’n, 89 So. 3d 264, 269 (Fla. 3d DCA 2012) (stating that the positions must be “inherently inconsistent”).

In this case, the trial court erred by failing to properly apply the Florida doctrine of judicial estoppel. Instead, the trial court relied on In re Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999), a Fifth Circuit case, to conclude that judicial estoppel applied. Below, both parties cited to Florida and federal cases discussing judicial estoppel, but failed to alert the trial court that “the elements of judicial estoppel under federal law in such cases `may not be identical to the elements usually required under state law in Florida.'” Montes v. Mastec N. Am., Inc., 132 So. 3d 1195, 1198 n.2 (Fla. 3d DCA 2014) (quoting Losacano v. Deaf & Hearing Connection, 988 So. 2d 66, 70 n.2 (Fla. 2d DCA 2008)).

Thus, because the trial court did not apply the Florida judicial estoppel doctrine as iterated in Blumberg and Grau, we are compelled to reverse. We conclude that judicial estoppel does not bar the claim for attorney’s fees for two reasons.

First, as stated in Blumberg, “[t]here can be no estoppel where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel.” 790 So. 2d at 1066 (quoting Chase & Co., 156 So. at 610). Here, the Bank was a creditor in the bankruptcy proceeding and was as aware of the fee entitlement order as Anfriany.

Second, Anfriany’s asserted inconsistent position of not disclosing the fee entitlement order in the bankruptcy proceeding did not “derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.” Grau, 899 So. 2d at 400 n.3 (quoting New Hampshire, 532 U.S. at 751). In other words, the record fails to show any prejudice to the Bank. Anfriany’s entitlement to fees had already been fully litigated, and no assertions by Anfriany in the bankruptcy proceeding were inconsistent with the facts justifying the fee entitlement order. The trial court made a specific finding that Anfriany had no motive to conceal the fee entitlement order in the bankruptcy proceeding.^[2] If there was no motive to conceal, the facts do not support either a finding or conclusion that “intentionalself-contradiction is being used as a means of obtaining an unfair advantage in a forum provided for suitors seeking justice.” Id. at 401 (emphasis added) (quoting Scarano, 203 F. 2d at 513).

Instead, the record before us leads us to the same conclusion this Court reached in Grau: To apply judicial estoppel to Anfriany’s entitlement to fees and costs would bestow a windfall in favor of the Bank. Therefore, we quash the trial court order vacating and dismissing Anfriany’s entitlement to attorney’s fees and costs based on judicial estoppel and remand the case to the trial court for further proceedings.

Reversed and remanded.

DAMOORGIAN and FORST, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

[1] We note that the case law from this and other districts after Grau contends that judicial estoppel has an element of misleading the other party on a factual matter upon which the other party relied. See Bueno, 20 So. 3d at 997 (“The elements of judicial estoppel are the same as equitable estoppel, with the added elements of successfully maintaining a position in one proceeding, while taking an inconsistent position in a later proceeding, in which the same parties and questions are involved.”) Fintak v. Fintak, 120 So. 3d 177, 186 (Fla. 2d DCA 2013) (holding that for judicial estoppel to apply, “the party claiming estoppel must have relied on or been misled by the former position” and “the party seeking estoppel must have changed his or her position to his or her detriment based on the representation”).

[2] In his reply brief, Anfriany raises issues regarding the lack of “evidence” to support the trial court’s decision and the burden of proof for judicial estoppel. However, because these two issues were never raised below or in the initial brief, we state no opinion on these issues. See United Auto. Ins. Co. v. Hollywood Injury Rehab Ctr., 27 So. 3d 743, 744 n.1 (Fla. 4th DCA 2010) (“That issue was not raised in this case until the filing of the reply brief. Matters argued for the first time therein will not be considered by the reviewing court.”).

THE HILL-

The acting head of the Consumer Financial Protection Bureau (CFPB) is reportedly mulling whether to go ahead with a multimillion-dollar penalty for alleged mortgage fraud by Wells Fargo.

Reuters reported that the CFPB and Wells Fargo had been hashing out a settlement over the bank charging potentially more than 100,000 mortgage borrowers unnecessary fees to lock in low mortgage rates.

Acting CFPB Director Mick Mulvaney, the White House budget director, said last week he’d review each of the 14 pending enforcement actions left to him by former Director Richard Cordray.

[THE HILL]