NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Anna Mackey appeals from a judgment entered in favor of defendants Bank of America, N.A. (BANA) and Bank of New York Mellon (Mellon, together defendants) after the trial court sustained a demurrer to her operative complaint without leave to amend. Mackey concedes the trial court properly sustained the demurrer, but contends it abused its discretion by not allowing leave to amend. We reverse the judgment and remand with directions for the trial court to enter a new order sustaining the demurrer with leave to amend.
FACTUAL AND PROCEDURAL BACKGROUND
In accordance with our standard of review, we summarize the facts based on the properly pleaded allegations, information in materials attached to the complaint, and matters subject to judicial notice. (Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.)
In March 2006 Mackey obtained a $1.2 million loan secured by a deed of trust on a house located in San Diego. BANA serviced the loan on behalf of Mellon. After Mackey defaulted on her monthly payments, a notice of default was recorded, followed by a notice of trustee's sale.
In October 2014 BANA sent Mackey a two-page letter regarding a loan modification program (the trial plan letter). The trial plan letter announced that BANA had approved her for a "trial modification" and was making her an "offer" for the "Bank of America Loan Modification Program" that she could accept by making three monthly payments of about $6,800 each. The trial plan letter informed her that "[i]f you continue to meet all of the eligibility requirements after you make all trial period payments on time, and in the exact amount that is due, your mortgage will be permanently modified." Along with the trial plan letter, BANA enclosed documents titled "Frequently Asked Questions," "Results of the Evaluation," "Net Present Value (NPV) Data Input Values Chart," "Additional Trial Period Plan Information and Legal Notices," and "Trial Period Mortgage Payment Coupons."
The "Results of the Evaluation" document informed Mackey that she had been approved for the Bank of America Loan Modification Program. It also listed a number of programs she did not qualify for and explained the reasons why she did not qualify for the particular program. With respect to the National Mortgage Settlement Loan Modification Program, the "Results of the Evaluation" document explained that she was not eligible for this program because:
The "Net Present Value (NPV) Data Input Values Chart" listed 42 different input values that were, or might have been, used to compute the net present value (NPV) of a National Mortgage Settlement Program modification of Mackey's loan. Input values 28-42 appear under the title "Proposed Modification Information" and the following general description: "The fields below describe the proposed modification that was calculated by us according to the program guidelines (subject to investor restrictions) that were used in your Net Present Value (NPV) evaluation." Input data fields 34 and 36 stated:
Mackey reviewed the NPV chart (mistakenly) believing it laid out what would be the terms of her permanent modification under the Bank of America Loan Modification Program, including the forgiveness of $703,596.10 of the principal. Mackey accepted BANA's offer by making the three payments, for a total of $20,355. In February 2015 BANA sent Mackey a letter informing her that she was approved for a loan modification (the approval letter). BANA enclosed a modification agreement that listed the terms of the modified mortgage that would go into effect after it received her completed documents. The modification agreement offered an interest-free deferral of about $143,367 of the total principal balance of about $1.9 million.
Mackey notes that the modification agreement did not mention "`the amount of principal your investor was willing to forgive under the proposed modified mortgage of $703,596.10' which was clearly and unequivocally stated in the trial plan contract." (Italics omitted.) Mackey alleged that the difference in the contracts was a "`bait and switch' "tactic. Mackey contacted BANA when she noticed the discrepancy. BANA representatives told her that if she did not agree to the terms of the permanent modification BANA would foreclose on the property. Instead of succumbing to BANA's threats, Mackey sought legal representation. Mackey's property was foreclosed upon and Mellon acquired it at the trustee's sale.
Mackey initiated this action by filing a Judicial Council form complaint. The following month, Mackey filed a first amended complaint asserting eight causes of action: breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, negligent misrepresentation, violation of Business and Professions Code
The trial court entered judgment in favor of defendants and Mackey timely appealed.
I. STANDARD OF REVIEW
We independently review the superior court's ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action. (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 (Schifando).) We review the trial court's refusal to permit an amendment under the abuse of discretion standard. (Ibid.) The court abuses its discretion if there is a reasonable possibility an amendment would cure the defects. (Ibid.) The appellant has the burden of proving that an amendment would cure the defect. (Ibid.)
An appellant can meet this burden by identifying new facts or theories on appeal. (Code Civ. Proc., § 472c, subd. (a) ["When any court makes an order sustaining a demurrer without leave to amend the question as to whether or not such court abused its discretion in making such an order is open on appeal even though no request to amend such pleading was made."]; Sanowicz v. Bacal (2015) 234 Cal.App.4th 1027, 1044.) Specifically, appellant "must clearly and specifically set forth the `applicable substantive law' [citation] and the legal basis for amendment, i.e., the elements of the cause of action and authority for it. Further, [she] must set forth factual allegations that sufficiently state all required elements of that cause of action. [Citations.] Allegations must be factual and specific, not vague or conclusionary." (Rakestraw v. California Physicians' Service (2000) 81 Cal.App.4th 39, 43.) If the appellant "has not had an opportunity to amend the complaint in response to the demurrer, leave to amend is liberally allowed as a matter of fairness, unless the complaint shows on its face that it is incapable of amendment." (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 747.)
Mackey concedes that the trial court properly sustained the demurrer because BANA did not make any false statements in its trial plan letter; rather, she had been mistaken about the terms disclosed in the trial plan letter and accompanying enclosures. The sole issue before us is whether the trial court abused its discretion by not allowing Mackey leave to amend. On this issue, as a matter of fairness to the trial court, we note that while Mackey requested leave to amend should the trial court find her pleading defective, she did not specify how she proposed to amend the complaint to state valid claims.
On appeal, Mackey asserts she can amend her complaint to state valid claims for restitution based on mistake or, alternatively, for rescission if a valid contract was formed. She also claims she can state a valid claim for a violation of section 17200. Finally, she argues that BANA's actions and inactions after sending her the approval letter support causes of action for intentional and negligent misrepresentation, negligence, and violation of section 17200. Accordingly, we examine each proposed cause of action to determine whether it is reasonably possible for Mackey to state a valid claim. (Schifando, supra, 31 Cal.4th at p. 1081.)
Mackey contends she should be allowed to plead a cause of action for restitution of the three payments she made under the trial plan letter because she and BANA did not have an enforceable contract. Specifically, she claims there was no meeting of the minds or consent as to the essential terms of the agreement because the trial plan letter did not contain the terms of the mortgage modification. Defendants disagree, arguing that Mackey's unilateral mistake when reading the trial plan letter did not prevent the formation of a contract. Even assuming Mackey could avoid the trial plan agreement, defendants argue she would not be entitled to restitution because they were not unjustly enriched by receiving her three trial plan payments.
The equitable remedy of restitution "`is an obligation (not a true contract [citation]) created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his or her former position by return of the thing or its equivalent in money.'" (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 346.) Unjust enrichment is synonymous with restitution. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387.) "[R]estitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. [Citations.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or similar conduct." (Id. at p. 388.) "Under the law of restitution, `[a]n individual is required to make restitution if he or she is unjustly enriched at the expense of another. [Citations.] A person is enriched if the person receives a benefit at another's expense. [Citation.]' [Citation.] However, `[t]he fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiving the benefit is required to make restitution only if the circumstances are such that, as between the two individuals, it is unjust for the person to retain it.'" (Id. at p. 389.)
"As a matter of law, an unjust enrichment claim does not lie where the parties have an enforceable express contract." (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1370 (Durell).) To form a valid and enforceable contract, it is essential that there be: (1) parties capable of contracting, (2) their consent, (3) a lawful object, and (4) sufficient consideration. (Civ. Code, § 1550.) Mutual assent is accomplished when a specific offer is communicated to the offeree, and an acceptance is subsequently communicated to the offeror. (Russell v. Union Oil Co. (1970) 7 Cal.App.3d 110, 114.) Unilateral mistake will not prevent formation of a contract. "Under the objective test of contract formation, a `meeting of the minds' is unnecessary. A party is bound, even if he misunderstood the terms of a contract and actually had a different, undisclosed intention." (Blumenfeld v. R. H. Macy & Co. (1979) 92 Cal.App.3d 38, 46.) A contract is void and unenforceable if it "is so uncertain and indefinite that the intention of the parties in material particulars cannot be ascertained." (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 481.) "`The law does not favor but leans against the destruction of contracts because of uncertainty; and it will, if feasible, so construe agreements as to carry into effect the reasonable intentions of the parties if that can be ascertained.'" (Ibid.)
Here, Mackey asserts the parties did not mutually assent to a sufficiently definite set of terms to constitute an enforceable contract. She points out that BANA offered to permanently modify her mortgage on unknown terms if she made the three payments, while she mistakenly believed that BANA made an offer based on the terms in the NPV chart. Thus, she claims there was no contract because the parties did not assent to the same thing and there was no meeting of the minds on all material matters. As we shall explain, Mackey should be allowed leave to amend to allege a claim for restitution.
The question presented is whether the trial plan letter contained sufficient terms to constitute an enforceable contact. On this point, we note that under the federal Home Affordable Modification Program (HAMP), banks are contractually required to offer permanent loan modifications to borrowers who have complied with the requirements of a trial period plan (TPP). (Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 305-306.) Accordingly, "compliance with a TPP can give rise to an enforceable agreement to permanently modify a loan." (Id. at p. 307.) Critical to this conclusion, however, are the existence of HAMP guidelines. (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1174 (Daniels).) "Absent those guidelines for determining the essential terms of a permanent loan modification, the terms of the alleged agreement are not sufficiently definite to render it enforceable." (Ibid.)
Here, the trial plan letter did not offer Mackey a loan modification under HAMP; rather, it specifically stated that she did not qualify for a loan modification under HAMP. Accordingly, Mackey should be allowed leave to amend to allege a claim for restitution on the ground the trial plan letter did not create an enforceable contract because the essential terms of the contract were unknown. To establish entitlement to restitution, Mackey must show (1) she conferred a benefit on defendants and (2) it would be unjust for defendants to retain that benefit. (Durell, supra, 183 Cal.App.4th at p. 1370.)
Assuming the trial plan letter created an enforceable contract, Mackey argues she should be allowed leave to amend to allege an alternative claim for rescission—and recover her $20,000 in payments—based on her mistaken belief that the trial plan letter meant that if she made three payments to BANA, she would receive a permanent mortgage modification with the terms in the NPV Chart.
While a unilateral mistake will not prevent contract formation (Blumenfeld v. R. H. Macy & Co., supra, 92 Cal.App.3d at p. 46), a "unilateral mistake affords a ground for rescission in some circumstances." (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278.) A unilateral mistake is a ground for rescission if the nonmistaken party has reason to know of or causes the other party's unilateral mistake. (Id. at p. 281.) Where the nonmistaken defendant has no reason to know of and does not cause the plaintiff's unilateral mistake, the mistaken plaintiff must establish the following facts to obtain rescission of the contract: "(1) the [plaintiff] made a mistake regarding a basic assumption upon which [the plaintiff] made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the [plaintiff]; (3) the [plaintiff] does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable." (Id. at p. 282.)
Defendants assert Mackey cannot allege a claim for rescission because she delayed in seeking rescission and cannot restore everything of value she received under the trial plan agreement. Generally, a party seeking to avoid a contract must "provide the other party to the agreement with `"prompt notice"' and an "`"offer to restore the consideration received."'" (Village Northridge Homeowners Assn. v. State Farm Fire & Casualty Co. (2010) 50 Cal.4th 913, 921.) Relief based on rescission will not be denied because of delay in giving notice or delay in tendering restoration "unless such delay has been substantially prejudicial to the other party" (Civ. Code, § 1693), and the court may make granting relief conditional on "tender of restoration." (Ibid.) Whether the right to rescind has been waived is a question of fact for the trier of fact to pass upon. (Bank of America v. Lamb Finance Co. (1956) 145 Cal.App.2d 702, 719.)
Mackey should be allowed leave to amend to allege an alternative claim for rescission on the theory that defendants did not know of and did not cause Mackey's unilateral mistake.
C. Violation of Section 17200
Mackey asserts she can allege a violation of section 17200 because the trial plan letter and enclosures are misleading to homeowners and constitute an unfair practice under section 17200. She claims that defendants presented information in the trial plan letter in a very confusing fashion and this, coupled with the absence of any material terms in the trial plan letter, is sufficient to allege a violation of section 17200. Defendants disagree, arguing that reasonable consumers would not be misled by the trial plan letter and enclosures.
Under California's unfair competition law (UCL) (§ 17200 et seq.), unlawful, unfair and fraudulent business acts or practices may constitute unfair competition. (Rose v. Bank of America, N.A. (2013) 57 Cal.4th 390, 394.) California courts interpret the language of section 17200 broadly. (Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1007.) "By proscribing `any unlawful' business practice, `section 17200 "borrows" violations of other laws and treats them as unlawful practices' that the unfair competition law makes independently actionable." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180.) A fraudulent practice under the UCL "require[s] only a showing that members of the public are likely to be deceived" and "can be shown even without allegations of actual deception, reasonable reliance and damage." (Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 838.) The proper definition of the term "unfair" in a consumer action under the UCL is uncertain. (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 646.) Different courts have applied different tests. (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 252 [listing three different tests].) This court has adopted a narrow test for unfairness requiring the plaintiff to prove that the defendant's "`conduct is tethered to an[ ] underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.'" (Wilson v. Hynek, at p. 1008.) To bring a private action under section 17200 a party 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 at economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim." (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322; § 17204.)
Here, the trial court sustained defendants' demurrer to all causes of action, including Mackey's claim alleging a violation of section 17200, because Mackey based all of her claims on her mistaken reading of the trial plan letter. At this stage, we cannot conclude that Mackey will not be able to state a valid claim for a violation of section 17200. Accordingly, Mackey is allowed leave to amend to allege a violation of section 17200 based on her proposed new allegations.
D. New Claims
Mackey seeks leave to amend to add claims for intentional and negligent misrepresentation, negligence, and violation of section 17200 based on BANA's conduct after sending its approval letter. BANA asserts the request should be denied because the proposed new claims exceed the scope of permitted amendment on appeal and Mackey failed to show that she can allege facts satisfying each element of her proposed three new claims.
"The power to permit amendments is interpreted very liberally as long as the plaintiff does not attempt `to state facts which give rise to a wholly distinct and different legal obligation against the defendant.'" (Herrera v. Superior Court (1984) 158 Cal.App.3d 255, 259.) Here, Mackey's operative complaint mentioned BANA's conduct after BANA sent its approval letter. Namely, Mackey alleged that BANA representatives told her that if she did not agree to the terms of the permanent modification BANA would foreclose on her property. Mackey's attorney sent a dispute letter to BANA with regard to the differing loan modification contracts offered to Mackey, but BANA did nothing when informed of the discrepancies. Mackey left messages but no one at BANA returned the messages. After BANA informed Mackey that the loan servicing was being transferred to a new servicer, the new servicer never contacted her.
Any new legal theories based on these facts do not change the nature of the dispute. Accordingly, we reject BANA's argument that Mackey based her new claims on a wholly distinct and different legal obligation from those alleged in her operative complaint. We next turn to defendants' argument that Mackey failed to show she can allege facts satisfying each element of her proposed new claims.
1. Intentional and negligent misrepresentation
"The elements of a cause of action for intentional misrepresentation are (1) a misrepresentation, (2) with knowledge of its falsity, (3) with the intent to induce another's reliance on the misrepresentation, (4) actual and justifiable reliance, and (5) resulting damage. [Citation]. The elements of a claim for negligent misrepresentation are nearly identical. Only the second element is different, requiring the absence of reasonable grounds for believing the misrepresentation to be true instead of knowledge of its falsity." (Daniels, supra, 246 Cal.App.4th at p. 1166.)
"Causes of action for intentional and negligent misrepresentation sound in fraud and, therefore, each element must be pleaded with specificity." (Daniels, supra, 246 Cal.App.4th at p. 1166.) "`The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made.'" (Id. at pp. 1166-1167.)
Mackey's proposed new misrepresentation claim is based on a letter dated May 22, 2015 (the transfer letter) that Mackey received from BANA informing her that the servicing of her loan would transfer to a new servicer on a particular day and the new loan servicer would complete the loan modification process. Specifically, the transfer letter informed Mackey that the new loan servicer was aware of her status in seeking a loan modification, the new loan servicer would have all her documents, and she should contact the new loan servicer to complete the process. Mackey claims she relied upon that representation, waiting to act on her mortgage until she contacted the new servicer. She also justifiably relied on these statements in forgoing other means of remedying her mortgage issue.
Mackey has alleged what was said, to whom it was said, and when it was said. Although Mackey does not allege the name of the BANA employee who made the alleged misrepresentation, or his or her authority to speak for BANA, this information should be within BANA's knowledge. (Daniels, supra, 246 Cal.App.4th at p. 1167 ["'requirement of specificity is relaxed when the allegations indicate that "the defendant must necessarily possess full information concerning the facts of the controversy"'"].) Mackey has alleged sufficient facts showing she can possibly state valid claims for intentional or negligent misrepresentation. Although Mackey did not state when she contacted the new loan servicer or provide details regarding her reliance or damages, it is likely Mackey can allege such facts if given an opportunity to do so.
To avoid this result, BANA argues the statements in the transfer letter cannot support an intentional or negligent misrepresentation claim because they are about a future event, not a past or existing fact. "Generally, an actionable misrepresentation must be made as to past or existing facts. `[Predictions] as to future events, or statements as to future action by some third party, are deemed opinions, and are not actionable fraud.'" (Borba v. Thomas (1977) 70 Cal.App.3d 144, 152.) An exception exists where the speaker holds herself out to be specially qualified and the recipient is so situated that she may reasonably rely on the speaker's superior knowledge. (Ibid.) This exception applies. Who Mackey's new loan servicer would be and what the new loan servicer could do assist Mackey in the loan modification process was a matter peculiarly within BANA's knowledge. Accordingly, that the representations in the transfer letter pertained to the future does not preclude liability in this instance. Mackey should be allowed leave to file an amended complaint adding these causes of action.
To state a negligence claim Mackey must allege (1) that defendants owed her a duty of care, (2) they breached that duty, and (3) the breach proximately caused her damages or injuries. (Lueras, supra, 221 Cal.App.4th at p. 62.) "Whether a duty of care exists is a question of law to be determined on a case-by-case basis." (Ibid.) "[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096.) To determine whether a duty of care exists, courts should consider six factors. (Id. at p. 1098.) Those factors are "(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to [the plaintiff], (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." (Ibid.)
Courts are split regarding whether lenders owe borrowers a duty of care when considering loan modification applications. In Lueras, the court held that a lender did not have "a common law duty of care to offer, consider, or approve a loan modification, or to explore and offer foreclosure alternatives" because "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." (Lueras, supra, 221 Cal.App.4th at p. 67.) In contrast, in Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941 (Alvarez) and Daniels, supra, 246 Cal.App.4th 1150 the courts held that lenders have a legal duty of care where they "allegedly agreed to consider modification of the [borrower's] loans." (Alvarez, at p. 948; Daniels, at pp. 1182-1183.) Significantly, the Alvarez court identified an important distinction not addressed by Lueras; namely, that the relationship between the lender and borrower when the borrower first obtains a loan is significantly different from the relationship existing when a borrower seeks to modify an existing loan. In a loan modification setting, "[t]he parties are no longer in an arm's length transaction and thus should not be treated as such." (Meixner v. Wells Fargo Bank, N.A. (E.D.Cal. 2015) 101 F.Supp.3d 938, 954; Alvarez, supra, 228 Cal.App.4th at p. 949 [noting that a borrowers' ability to protect his or her own interests in the loan modification process "`[is] practically nil'"].)
Defendants argue that Mackey does not fall within the Alvarez and Daniels exception. Mackey argues that she does. We need not, and do not, decide this issue. The sole question is whether Mackey should be given an opportunity to allege a duty under the six factors identified in Nymark and whether she can allege the remaining elements to state a valid claim for negligence. Mackey should be allowed leave to file an amended complaint adding this cause of action
3. Violation of section 17200
Mackey also seeks to allege a violation of section 17200 based on the allegedly false information that BANA representatives could assist her, defendants were transferring the servicing of her loan, and defendants' failure to give her a final notice that BANA would not reconsider the modification based on her and her attorney's mistaken protests. As addressed ante, Mackey should be allowed leave to amend to allege a violation of section 17200 based on her proposed new allegations. (Ante, pt. II.C.)
On remand, Mackey will have the opportunity to amend her complaint if she believes she can allege the necessary factual and legal allegations to state valid claims in a manner consistent with the legal principles we have discussed. We express no opinion as to whether Mackey will be able to state valid claims.
The judgment is reversed and the matter is remanded for the trial court to enter a new order sustaining the demurrer with leave to amend. Each party shall bear its own costs on appeal.
McCONNELL, P. J. and DATO, J., concurs.