Pestana v. Bank of America CA1/1

Filed 6/12/14 Pestana v. Bank of America CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

DANIEL PESTANA,

Plaintiff and Appellant,

A137566

v.

BANK OF AMERICA, N.A., (Contra Costa County

Super. Ct. No. MSC11-02600)

Defendant and Respondent.

I. INTRODUCTION AND BACKGROUND1

Plaintiff Daniel Pestana sued his mortgage loan servicers, Bank of America, N.A.,

and BAC Home Loans Servicing, LP (collectively, “Bank”) after Bank denied his

application for a loan modification under the federal Home Affordable Mortgage

Program (HAMP), and instead offered him an allegedly less favorable in-house

modification, which he accepted. In his first amended complaint (FAC), Pestana alleges

Bank representatives made misrepresentations about the requirements and availability of

a HAMP modification, breached promises to modify his loan, improperly stalled the

modification review process, and incorrectly denied his application for a HAMP

modification.

The trial court sustained Bank’s demurrer to the FAC without leave to amend,

concluding none of Pestana’s claims (for intentional misrepresentation, promissory

estoppel, unfair competition, and breach of oral agreements) stated a cause of action.

1

We provide additional background facts in the sections of this opinion addressing

the parties’ arguments on appeal.

1

Pestana appeals, contending the allegations in the FAC are sufficient to state the specified

causes of action and, in the alternative, requesting leave to amend.

We conclude Pestana stated a cause of action under the unfair competition law

(UCL) (Bus. & Prof. Code, 2 § 17200 et seq.), but the court properly sustained the

demurrer without leave to amend as to all other causes of action. We therefore affirm in

part and reverse in part.

II. DISCUSSION

A. Standard of Review

In reviewing whether the trial court erred in sustaining Bank’s demurrer without

leave to amend, we review the FAC de novo to determine whether it alleges facts

sufficient to state a cause of action under any legal theory. (McCall v. PacifiCare of Cal.,

Inc. (2001) 25 Cal.4th 412, 415.) “ ‘ “We treat the demurrer as admitting all material

facts properly pleaded, but not contentions, deductions or conclusions of fact or law.

[Citation.] We also consider matters which may be judicially noticed.” [Citation.]

Further, we give the complaint a reasonable interpretation, reading it as a whole and its

parts in their context. [Citation.] When a demurrer is sustained, we determine whether

the complaint states facts sufficient to constitute a cause of action. [Citation.] And when

it is sustained without leave to amend, we decide whether there is a reasonable possibility

that the defect can be cured by amendment: if it can be, the trial court has abused its

discretion and we reverse; if not, there has been no abuse of discretion and we affirm.

[Citations.] The burden of proving such reasonable possibility is squarely on the

plaintiff.’ ” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, citing Blank v.

Kirwan (1985) 39 Cal.3d 311, 318.)

B. Breach of Oral Agreements (Seventh Cause of Action)

In his seventh cause of action, Pestana alleges Bank’s representatives orally

promised Bank would review Pestana’s application for a loan modification and would

2

All statutory references are to the Business and Professions Code unless

otherwise stated.

2

modify his loan. Pestana claims Bank breached these oral agreements by failing to

evaluate his application in good faith and by denying his application for a HAMP

modification. The trial court correctly sustained Bank’s demurrer to this cause of action

without leave to amend.

“The statute of frauds requires any contract subject to its provisions to be

memorialized in a writing subscribed by the party to be charged or by the party’s agent.

[Citations.] An agreement for the sale of real property or an interest in real property

comes within the statute of frauds. That includes a promissory note and a deed of trust

securing performance under the note. [Citation.] ‘An agreement to modify a contract

that is subject to the statute of frauds is also subject to the statute of frauds.’ ” (Rossberg

v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1503 (Rossberg).) Under these

principles, a loan modification agreement changing the terms of the applicable note and

deed of trust must be in a writing signed by Bank. (Ibid.; accord, Secrest v. Security

National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552–553

[forbearance agreement modifying terms of note and deed of trust was subject to statute

of frauds].) Because Pestana alleges only that Bank orally promised to modify his loan,

he has failed to state a cause of action for breach of contract. Moreover, to the extent

Pestana alleges Bank promised to review his application and then to offer a loan

modification on terms to be specified in the future, such an “ ‘agreement to agree’ ” is

unenforceable. (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 213–214; Kruse

v. Bank of America (1988) 202 Cal.App.3d 38, 59; but see Copeland v. Baskin Robbins

U.S.A. (2002) 96 Cal.App.4th 1251, 1255 [recognizing cause of action for breach of

agreement to negotiate in good faith].)3

On appeal, Pestana concedes that, in general, an oral modification agreement of

the type he alleges is unenforceable under the statute of frauds. But he argues that, under

3

Pestana does not allege the parties reached an agreement to negotiate the terms of

a HAMP loan modification. Instead, Pestana alleges Bank promised to review his

application and to offer him a HAMP modification if he qualified, but then did not offer

him any HAMP modification.

3

West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780 (West), this principle

does not apply to HAMP loan modifications. Pestana is incorrect. The West court did

not enforce an oral modification agreement or state an exception to the statute of frauds.

In West, the court held that, where the plaintiff alleged she entered into a written trial plan

agreement under HAMP, and the lender failed to offer her a permanent loan modification

as required by that agreement, the plaintiff had stated a cause of action for breach of

written contract. (West, supra, 214 Cal.App.4th at pp. 789, 796, 799.) Pestana has not

alleged he and Bank entered a written trial plan agreement under HAMP. To the

contrary, Pestana concedes Bank denied his application for a HAMP modification

without offering him a trial plan agreement.

Pestana suggests that, under West, he can overcome the statute of frauds because

he alleges in the FAC that he received a letter from Bank listing the documents he needed

to submit in connection with his application for a HAMP modification. As Pestana notes,

the court in West stated that, under the bank’s interpretation of the written trial plan

agreement, a letter from the bank to the borrower constituted a modification of the

agreement. (West, supra, 214 Cal.App.4th at p. 798.) Noting that a contract in writing

may be modified by a contract in writing (see Civ. Code, § 1698, subd. (a)), the West

court stated that, although the letter was not signed by a representative of the bank, the

letter bore the bank’s letterhead, “which suffices as a signature.” (West, supra, 214

Cal.App.4th at p. 798.) This passage from West does not assist Pestana. As noted,

Pestana never entered a written trial plan agreement under HAMP; accordingly, this case,

unlike West, raises no question of whether a subsequent letter from the lender modified a

trial plan agreement. Moreover, the letter on which Pestana relies, which is attached to

the FAC, does not constitute, or specify the terms of, a loan modification. It just lists the

documents Pestana should submit in support of his application for a HAMP modification.

Finally, Pestana argues he could amend to state a cause of action for breach of

contract. Pestana states he could allege he qualified financially to be placed in a trial

payment plan under HAMP, so Bank was obligated to offer him a trial plan agreement; if

he had entered a trial plan agreement, he would have made the payments required under

4

the agreement; and Bank therefore would have been obligated to offer him a permanent

loan modification. These proposed allegations do not state a cause of action for breach of

contract. “The standard elements of a claim for breach of contract are ‘(1) the contract,

(2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and

(4) damage to plaintiff therefrom. [Citation.]’ ” (Wall Street Network, Ltd. v. New York

Times Co. (2008) 164 Cal.App.4th 1171, 1178.) Pestana’s proposed allegations do not

establish the first of these elements, i.e., that he and Bank actually entered a HAMP trial

plan agreement or other contract requiring Bank to offer him a permanent HAMP

modification.4

C. Promissory Estoppel (Fifth Cause of Action)

In his promissory estoppel cause of action, Pestana alleges he relied to his

detriment on oral promises by Bank’s representatives to evaluate his application for, and

to offer him, a loan modification. “The doctrine of promissory estoppel ‘make[s] a

promise binding under certain circumstances, without consideration in the usual sense of

something bargained for and given in exchange.’ ” (Garcia v. World Savings, FSB

(2010) 183 Cal.App.4th 1031, 1040–1041 (Garcia).) “ ‘ “The elements of a promissory

estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the

party to whom the promise is made; (3) [the] reliance must be both reasonable and

4

To the extent Pestana argues Bank was legally obligated under HAMP to enter

into a trial plan agreement with him, we note courts have held HAMP did not create a

private federal right of action for borrowers against lenders. (Bushell v. JPMorgan Chase

Bank, N.A. (2013) 220 Cal.App.4th 915, 928, fn. 9 (Bushell); Bank of America, N.A. v.

Roberts (2013) 217 Cal.App.4th 1386, 1399; but see West, supra, 214 Cal.App.4th at

p. 788 [declining to address whether HAMP creates a private right of action, because the

plaintiff asserted only California state law claims].) In any event, Pestana makes no

argument on appeal that he has standing to sue Bank for a violation of HAMP, so he has

not met his burden to show a reasonable possibility he could amend his complaint to state

such a cause of action. (See Rossberg, supra, 219 Cal.App.4th at p. 1491 [to satisfy

appellate burden of showing reasonable possibility of amendment, plaintiff must “ ‘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,’ ” as well as “ ‘factual allegations

that sufficiently state all required elements of that cause of action’ ”].)

5

foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’ ” ’ ”

(Aceves v. U.S. Bank N.A. (2011) 192 Cal.App.4th 218, 225 (Aceves).) As to the

requirement of a clear and unambiguous promise, we note that, “unlike a party seeking to

establish a promise in a pure breach of contract context, a party seeking to establish

promissory estoppel cannot rely on extrinsic evidence to explain an ambiguous

statement.” (Garcia, supra, 183 Cal.App.4th at p. 1044.)

Pestana appears to base his promissory estoppel claim on oral statements made by

Bank representatives during three telephone conversations. None of these statements

constitutes a clear and unambiguous promise supporting a claim for promissory estoppel.

Pestana first refers to an alleged oral promise by a Bank representative named Bob

(in a June 2009 telephone conversation) that, if Pestana became delinquent on his

mortgage payments, he would receive a loan modification. Notably, Pestana does not

allege Bob specifically promised that Pestana would receive a HAMP modification. And,

any such allegation would be inconsistent with Pestana’s allegation in the FAC that a

different Bank representative informed him about HAMP in a subsequent conversation.

Pestana alleges in the FAC (and reiterates in his appellate brief) that, when he spoke to a

Bank representative named Denise in March 2010 (nine months after his conversation

with Bob), Denise “informed [Pestana] of [HAMP].” Pestana does not allege he was

aware of HAMP prior to the March 2010 conversation with Denise.

Bob’s general promise of a modification provides no support for Pestana’s

promissory estoppel claim, because it was not a clear and unambiguous promise to offer a

HAMP modification. And, Bank fulfilled any general promise of a modification by

offering an in-house modification, which Pestana accepted. Finally, even if Bob had

referred to HAMP, his promise was not clear and unambiguous because it did not specify

the terms of the promised modification. (See Laks v. Coast Fed. Sav. & Loan Assn.

(1976) 60 Cal.App.3d 885, 891.)

Pestana next alleges Denise promised in the March 2010 conversation that, if

Pestana returned a HAMP application and supporting documentation, he “would be

evaluated for a HAMP modification.” The FAC’s initial description of this conversation

6

states Denise “implied” Bank’s evaluation “would be honestly conducted in good faith.”

Later portions of the FAC refer back to or summarize this conversation as including a

representation by Denise that Bank would evaluate Pestana’s application “honestly,

diligently and in good faith.” In light of Pestana’s initial concession that Denise only

implied Bank would conduct the evaluation in a certain manner, we do not construe the

FAC as alleging Denise made an express promise on this point.

Denise’s general statement that, if Pestana submitted a HAMP application, he

would be evaluated for a HAMP modification was not a clear and unambiguous promise

that Bank would conduct its evaluation in a particular manner. And, according to the

FAC, Bank fulfilled its general promise to evaluate Pestana’s application. Pestana

submitted his application and supporting documentation sometime after receiving an

application packet from Bank in April 2010. Bank evaluated the application and

concluded in August 2010 that Pestana did not qualify for a HAMP modification. This is

not a case in which a lender promised to evaluate a loan modification application and

then failed or refused to do so.

Finally, Pestana alleges that, in a May 2010 telephone conversation, a Bank

representative named Shawn stated Bank had received all the required supporting

documentation for Pestana’s HAMP application and the review process would begin

immediately. The FAC’s initial description of this conversation only mentions these

statements. Later in the FAC, in connection with the promissory estoppel cause of

action, Pestana appears to allege these express statements included an implied promise

about the manner in which Bank would evaluate Pestana’s application. Pestana alleges

Shawn’s representation that Bank had received the necessary documentation and would

begin the HAMP review process immediately “was also a promise that [Bank] would

honestly, diligently, and in good faith process his application, following the HAMP

guidelines and requirements.” Finally, elsewhere in the FAC, Pestana refers back to or

summarizes this conversation as including a representation by Shawn that the application

would be evaluated “honestly and in good faith.” Giving the FAC “ ‘a reasonable

interpretation, reading it as a whole and its parts in their context’ ” (see Melton v.

7

Boustred (2010) 183 Cal.App.4th 521, 528), we do not construe the FAC as alleging that

Shawn made an express promise as to how the review would be conducted (other than

stating the review would begin immediately).

Shawn’s general statement that Bank had received Pestana’s documentation and

would begin to review his application immediately was not a clear and unambiguous

promise that Bank would conduct its evaluation in a particular manner. Moreover, as to

the express promise Shawn allegedly did make (i.e., that Bank would begin its review

immediately), the allegations in the FAC show Bank began reviewing Pestana’s

application promptly after this conversation. Pestana spoke with Shawn on May 18,

2010. Bank next communicated with Pestana on May 24, 2010, to request additional

supporting documentation.

Aceves is distinguishable. In that case, the appellate court held a bank’s promise

to “ ‘work with [Aceves] on a mortgage reinstatement and loan modification’ if she no

longer pursued relief in the bankruptcy court” was a clear and unambiguous promise

supporting a claim for promissory estoppel. (Aceves, supra, 192 Cal.App.4th at p. 226.)

The bank’s promise in Aceves conveyed that the bank would not foreclose on Aceves’s

home without first negotiating with her to reinstate and modify the loan on mutually

agreeable terms. (Ibid.) Although Aceves did not, and could not, allege she relied on the

terms of a modified loan agreement in forgoing bankruptcy relief, she alleged she relied

on the bank’s promise to negotiate and the bank failed to negotiate. (Ibid.) Here, in

contrast, Pestana has not alleged Bank clearly and unambiguously promised to negotiate

with him to modify his loan. Instead, Bank representatives allegedly promised Bank

would review Pestana’s application for a HAMP modification, which Bank did.

Because Pestana has not alleged a clear and unambiguous promise supporting a

cause of action for promissory estoppel, the trial court correctly sustained Bank’s

demurrer to this cause of action without leave to amend.5

5

Pestana’s only proposed amendment to this cause of action, i.e., adding facts

supporting a claim that the opinions of Bank representatives may in some circumstances

be actionable as misstatements of fact (see Jolley v. Chase Home Finance, LLC (2013)

8

D. Intentional Misrepresentation (First through Fourth Causes of Action)

Pestana asserts four causes of action for “intentional misrepresentation,” or fraud,

based on alleged statements by Bank representatives. The elements of fraud are

“ ‘ “(a) misrepresentation (false representation, concealment, or nondisclosure);

(b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance;

(d) justifiable reliance; and (e) resulting damage.” ’ ” (Beckwith v. Dahl (2012) 205

Cal.App.4th 1039, 1060.)

“ ‘ “Promissory fraud” is a subspecies of fraud and deceit. 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.’ ” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951,

973.) The elements of promissory fraud are: “(1) a promise made regarding a material

fact without any intention of performing it; (2) the existence of the intent not to perform

at the time the promise was made; (3) intent to deceive or induce the promisee to enter

into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the

party making the promise; and (6) resulting damage to the promise[e].” (Behnke v. State

Farm General Ins. Co. (2011) 196 Cal.App.4th 1443, 1453.) As with any form of fraud,

each element of a promissory fraud claim must be alleged with particularity. (Rossberg,

supra, 219 Cal.App.4th at p. 1498.)

Pestana has failed to state a cause of action for fraud. As Pestana emphasizes in

his appellate brief, his first three fraud claims are based, respectively, on the above-

described statements and promises allegedly made by Bank representatives Bob, Denise

and Shawn.6 The allegations in the FAC do not establish these representatives made false

213 Cal.App.4th 872, 892), does not address his failure to allege a clear and unambiguous

promise, an essential element of a promissory estoppel cause of action. (See Aceves,

supra, 192 Cal.App.4th at p. 225.)

6

To the extent Pestana bases his fraud causes of action on more general assertions

that Bank made misrepresentations, those allegations do not satisfy the requirement that

fraud be pleaded with specificity. (See Morgan v. AT&T Wireless Services, Inc. (2009)

177 Cal.App.4th 1235, 1261–1262 (Morgan).)

9

statements or made promises without any intention of performing them. To the contrary,

as discussed above, the FAC establishes Bank fulfilled Bob’s promise to offer Pestana a

loan modification and Denise’s and Shawn’s promises to evaluate Pestana’s application

for a HAMP modification. As for Shawn’s statement that Bank had received all the

documentation needed to process Pestana’s HAMP application, Pestana alleges this was a

true statement, not a misrepresentation. To the extent Pestana characterizes Shawn’s

statement as a false representation that “nothing more would be needed from [Pestana],”

Pestana has not alleged he detrimentally relied on this statement between the time Shawn

made it on May 18, 2010, and the time Bank began asking for additional documentation

on May 24, 2010.

In his fourth cause of action for fraud, Pestana focuses on (1) oral and written

requests by Bank employees, between May and August of 2010, for additional

documentation in support of Pestana’s HAMP application, and (2) Bank’s statement in its

August 5, 2010 letter that, based on his income, Pestana was not eligible for a HAMP

modification. As to the requests for documentation, Pestana has not alleged facts

supporting a conclusion these requests constituted false representations or false promises,

and he makes no argument on this point in his appeal brief. Pestana does allege Bank’s

statement he was not eligible under HAMP was false. But Pestana does not allege he

believed or relied on this statement. To the contrary, according to the FAC, Pestana

disagreed with Bank’s conclusion and promptly (on August 23, 2010) submitted

documentation in support of his claim Bank had erroneously calculated his income. He

also appealed the decision in September 2010.

For the foregoing reasons, the court properly sustained Bank’s demurrer without

leave to amend as to Pestana’s first, second, third and fourth causes of action for fraud.7

7

Pestana presents no argument as to how he could amend his fraud claims to state

a cause of action. (See Rossberg, supra, 219 Cal.App.4th at p. 1491 [plaintiff has

appellate burden to specify how he could amend to state cause of action].)

10

E. Unfair Competition (Sixth Cause of Action)

The UCL “defines unfair competition as ‘any unlawful, unfair or fraudulent

business act or practice.’ (§ 17200.) Therefore, under the statute ‘there are three

varieties of unfair competition: practices which are unlawful, unfair or fraudulent.’ ” (In

re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) Pestana relies on the second and third

prongs of the statute, i.e., he alleges Bank engaged in unfair and fraudulent business acts

and practices.

Pestana alleges Bank made false or misleading representations to him and to other

borrowers about the availability of loan modifications and Bank’s modification review

process, and engaged in related improper conduct. Bank allegedly (1) told borrowers,

including Pestana, that, if (and only if) they stopped making mortgage payments, they

could apply for loan modifications and Bank would review their applications in good

faith, (2) promised Pestana he would be granted a modification, (3) stalled the review

process for Pestana and other borrowers, including by requesting documents Bank had

already received, and (4) falsely represented to qualified borrowers, including Pestana,

that they did not qualify for HAMP modifications.

1. Standing

Bank contends Pestana lacks standing to sue under the UCL. Section 17204, as

amended in 2004 by Proposition 64, limits private standing to bring a UCL action to “a

person who has suffered injury in fact and has lost money or property as a result of the

unfair competition.” (§ 17204.) To satisfy this standing requirement, “a party must now

(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 or false advertising that is the gravamen of the

claim.” (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322 (Kwikset), original

italics.) “A UCL claim will survive a demurrer if the plaintiff can plead ‘ “general

factual allegations of injury resulting from the defendant’s conduct.” ’ ” (Jenkins v. JP

Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 521 (Jenkins).)

11

When a plaintiff brings a claim under the fraud prong of the UCL based on alleged

misrepresentations, the limitations on standing established by Proposition 64 impose an

actual reliance requirement, because “reliance is the causal mechanism of fraud.” (In re

Tobacco II Cases, supra, 46 Cal.4th at p. 326.) In alleging reliance, the plaintiff “must

allege that the defendant’s misrepresentations were an immediate cause of the injury-

causing conduct,” but “the plaintiff is not required to allege that those misrepresentations

were the sole or even the decisive cause of the injury-producing conduct.” (Id. at p. 328.)

In his UCL cause of action (including allegations incorporated into that cause of

action by reference), Pestana alleges he incurred late fees and penalties after he stopped

making (and continued to withhold) his mortgage payments in reliance on Bank’s

representations about the availability and requirements of a loan modification. At this

stage of the litigation, these allegations satisfy the economic injury and causation

requirements of standing under the UCL. Pestana has alleged he incurred a “personal,

individualized loss of money or property in any nontrivial amount” (Kwikset, supra, 51

Cal.4th at p. 325), i.e., late fees and penalties. Pestana also has alleged this injury was

caused by Bank’s alleged unfair and fraudulent conduct, i.e., false or misleading

statements about the availability and requirements for a loan modification and the nature

of Bank’s review process. (See Gabali v. OneWest Bank, FSB (N.D.Cal. Mar. 29, 2013,

No. 5:12-CV-02901 EJD) 2013 U.S.Dist. Lexis 47193, *2-*5, *15-*20 (Gabali)8

[plaintiff adequately alleged standing under UCL where she incurred late fees, “negative

actions against property” (i.e., the bank took steps toward foreclosure), and “negative

actions against credit” after defaulting on her mortgage payments in reliance on bank

representatives’ statements about availability of loan modification].)9

8

The California Rules of Court do not prohibit citation to unpublished federal

cases, which may be cited as persuasive authority. (Nungaray v. Litton Loan Servicing,

LP (2011) 200 Cal.App.4th 1499, 1501, fn. 2.)

9

Bank suggests in a footnote that Gabali is distinguishable because the borrower

in that case initially applied for an in-house modification rather than a HAMP

modification. But the Gabali decision does not specify the type of modification the

borrower initially sought, and some of the misrepresentations the bank allegedly made in

12

Jenkins, cited by Bank, is distinguishable. In Jenkins, the court held the

impending foreclosure of the plaintiff’s home did not satisfy the causation prong of the

UCL standing test, because the plaintiff did not plead a “causal link” between that

economic injury and the six unfair or unlawful acts allegedly committed by the

defendants. (Jenkins, supra, 216 Cal.App.4th at p. 523.) Instead, the plaintiff’s default

caused her injury. The plaintiff’s default “triggered the lawful enforcement of the power

of sale clause in the deed of trust, and it was the triggering of the power of sale clause

that subjected [the plaintiff’s] home to nonjudicial foreclosure.” (Ibid.) The Jenkins

court stressed that the plaintiff’s default occurred before the six unlawful or unfair acts

she alleged as the basis of her UCL cause of action; the plaintiff therefore could not assert

the alleged wrongful acts caused her injury. (Ibid.) Here, in contrast, Pestana alleges he

stopped making his mortgage payments in January 2010, after (and in reliance on)

representations in June 2009 by a Bank representative that (1) Bank could not help him

with a loan modification as long as he was current on his payments, and (2) if he were to

miss his payments, he would receive a modification. Pestana also alleges that he

continued to withhold his mortgage payments in reliance on subsequent representations

by Bank representatives about HAMP and Bank’s review process. Pestana thus alleges

he defaulted, and incurred the resulting late fees, because of Bank’s alleged

misrepresentations. (See Gabali, supra, 2013 U.S.Dist. Lexis 47193, *2-*5, *15-*20; see

also Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 82–83

[holding that, under Jenkins, plaintiff had not alleged any causal connection between

foreclosure and defendant bank’s alleged wrongful acts, but granting plaintiff leave to

amend to allege bank’s misrepresentations or other wrongful conduct caused him to lose

his home through foreclosure].)

Bank’s remaining arguments as to standing are unpersuasive. Bank asserts late

fees and penalties cannot constitute injury for purposes of UCL standing, because Pestana

that case concerned the requirements for a HAMP modification. (Gabali, supra, 2013

U.S.Dist. Lexis 47193, *2-*5, *12-*15.)

13

was already obligated, under the applicable promissory note and deed of trust, to pay

such fees if he missed his mortgage payments. (See Auerbach v. Great Western Bank

(1999) 74 Cal.App.4th 1172, 1185, 1187 [plaintiffs who alleged they were fraudulently

induced into continuing to make mortgage payments could not recover those payments as

damages because they already were contractually obligated to make the payments].)

Assuming the note and deed of trust so provide,10 we are not persuaded such provisions

establish as a matter of law Pestana suffered no economic injury as a result of Bank’s

alleged conduct. As noted, Pestana alleges he stopped making his mortgage payments,

and incurred the resulting late fees, because of Bank’s misrepresentations. Under the

facts as alleged, Pestana would not have become obligated to pay the late fees if he had

not stopped making his payments in reliance on Bank’s representations. Further, to the

extent Bank suggests Pestana may not be entitled to recover specific amounts from Bank

(an issue we do not address), such an argument does not establish Pestana did not allege

economic injury sufficient to confer UCL standing. (See Kwikset, supra, 51 Cal.4th at

pp. 335, 337 [a plaintiff need not show he is eligible for restitution under § 17203 as a

prerequisite to establishing standing under § 17204].)

Bank also notes Pestana does not allege any Bank representative told him late fees

would be waived or forgiven if he applied for a loan modification. But Bank cites no

authority suggesting a plaintiff can only prove the causation-of-injury element of UCL

standing by showing the defendant specifically promised the plaintiff would not suffer

the alleged economic injury at issue. Instead, the UCL requires a plaintiff to present

“ ‘ “general factual allegations” ’ ” (Jenkins, supra, 216 Cal.App.4th at p. 521) showing

his 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, supra, 51 Cal.4th at p. 322,

10

In support of this argument, Bank cites documents that apparently were the

subject of a request for judicial notice in connection with Bank’s demurrer to Pestana’s

original complaint. Bank does not contend the trial court took judicial notice of these

documents in connection with Bank’s demurrer to the FAC.

14

original italics). For the reasons discussed above, we conclude Pestana’s allegations meet

this standard.

Finally, Bank contends Pestana cannot show injury because his admission he

ultimately received an in-house loan modification “suggested that his modification efforts

with [Bank] resulted in an economic benefit, not a loss.” At the demurrer stage, we may

not determine factual questions such as how the amount of economic injury Pestana

allegedly sustained as a result of Bank’s conduct compares with the amount of any

benefit he received from the in-house loan modification he accepted.

Because Pestana’s allegation he incurred late fees and penalties as a result of

Bank’s misrepresentations establishes UCL standing at the pleading stage, we need not

determine whether the other injuries alleged in the FAC (such as (1) the cost of

submitting documents to Bank and (2) costs resulting from the difference between the in-

house modification Pestana received and the HAMP modification he believes he should

have received) would be sufficient to establish standing.

2. “Fraudulent” Conduct

“The term ‘fraudulent’ as used in section 17200 ‘does not refer to the common law

tort of fraud but only requires a showing members of the public “ ‘are likely to be

deceived.’ ” ’ [Citations.] [Fn. omitted.] Unless the challenged conduct ‘ “targets a

particular disadvantaged or vulnerable group, it is judged by the effect it would have on a

reasonable consumer.” ’ ” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160

Cal.App.4th 638, 645.) “A UCL claim based on the fraudulent prong can be based on

representations that deceive because they are untrue, but ‘ “ ‘also those which may be

accurate on some level, but will nonetheless tend to mislead or deceive. . . . A perfectly

true statement couched in such manner that it is likely to mislead or deceive the

consumer, such as by failure to disclose other relevant information, is actionable under’ ”

the UCL.’ ” (Morgan, supra, 177 Cal.App.4th at p. 1255.) “ ‘[U]nless we can say as a

matter of law that contrary to the complaint’s allegations, members of the public were not

likely to be deceived or misled by [the defendant’s alleged conduct], we must hold that

[the plaintiff] stated a cause of action.’ ” (Id. at p. 1257, original italics.) The

15

requirement that a plaintiff plead fraud with specificity does not apply to causes of action

under the UCL. (Id. at p. 1256.)

Although we have concluded above that Pestana’s allegations do not satisfy the

elements of the other causes of action he asserts in the FAC, we conclude he has alleged

sufficient facts to state a cause of action under the fraudulent prong of the UCL, i.e., he

has alleged Bank made representations that were untrue or misleading and were likely to

deceive reasonable consumers. As noted, Pestana alleges Bank made false or misleading

representations and promises to him and to other borrowers about the availability and

requirements of loan modifications, including HAMP modifications. For example,

Pestana alleges Bank told him and other borrowers they would only be considered for

loan modifications if they stopped making their mortgage payments. Bank allegedly then

stalled the review process, including by requesting unneeded copies of previously-

submitted documents, but encouraged Pestana and other borrowers to wait and continue

to accrue additional late fees and penalties. Pestana alleges that, as a result of these

delays, Bank “enjoyed greater and greater profits under their servicing agreements.”

Pestana also alleges Bank falsely told him and other borrowers they did not meet the

eligibility requirements for HAMP modifications.

Bank contends Pestana has not stated a cause of action because Bank “did not say

anything about the contours of the HAMP program and borrower eligibility criteria that

was deceitful.” Bank cites an excerpt of the HAMP eligibility guidelines (included in

excerpts that are attached to the FAC) stating a loan is eligible for HAMP if the loan “is

delinquent or default is reasonably foreseeable.” The cited excerpt does not establish that

only delinquent loans are eligible, and does not establish as a matter of law that Bank’s

alleged representations that borrowers had to stop making mortgage payments to be

considered for loan modifications were accurate and not misleading.11 More generally, at

11

In its brief, Bank suggests its representations to Pestana on this issue were

accurate because Bank told Pestana “he would not qualify because he was current on his

mortgage and had expressed no concern of imminent default.” (Italics added.) This

assertion is contrary to Pestana’s allegation in the FAC (which we must accept as true)

16

the demurrer stage, we cannot determine whether Bank’s statements about this issue and

about related issues, such as the review process and the documents needed to process

applications, were accurate and not misleading.

Bank also argues that, because Pestana received a modification, Bank’s

representation that he would receive one was not false. But Pestana’s allegations, taken

as a whole, including his allegations that Bank made misleading statements about the

prerequisites for obtaining a modification and the documents needed to process

applications, are sufficient to state a cause of action under the fraudulent prong of the

UCL.

Because Pestana has stated a cause of action under the fraudulent prong of the

UCL, we need not determine whether this cause of action is also viable on the theory

Bank engaged in “unfair” business practices.

F. The Absence of a Private Federal Right of Action Under HAMP Does Not

Bar Pestana’s State Law Claims

As noted above, courts have held HAMP did not create a private federal right of

action for borrowers against lenders. (See Bushell, supra, 220 Cal.App.4th at p. 928,

fn. 9; Bank of America, N.A. v. Roberts, supra, 217 Cal.App.4th at p. 1399; but see West,

supra, 214 Cal.App.4th at p. 788 [declining to address this question].) Courts have also

held borrowers are not intended third party beneficiaries of HAMP contracts between

lenders and the United States Department of the Treasury. (See Pfeifer v. Countrywide

Home Loans, Inc. (2012) 211 Cal.App.4th 1250, 1282, fn. 17; Wigod v. Wells Fargo

Bank, N.A. (7th Cir. 2012) 673 F.3d 547, 556, 559, fn. 4 (Wigod).)

Bank argues these principles bar Pestana’s claims in this action, all of which are

California state law claims. Bank suggests that, because Pestana has no private federal

right of action against Bank under HAMP, he also may not assert state law causes of

action based on Bank’s alleged conduct in connection with Pestana’s application for a

HAMP modification.

that Bank’s representative simply told him Bank “could not help him with a loan

modification as long as he was current.”

17

We disagree. In Bushell, the appellate court (the Third District) agreed with the

conclusion of the United States Court of Appeals for the Seventh Circuit in Wigod that

the absence of a private federal remedy under HAMP does not displace state law causes

of action. (Bushell, supra, 220 Cal.App.4th at p. 928, fn. 9; see Wigod, supra, 673 F.3d

at pp. 581–585.) After concluding the plaintiffs had alleged a state law cause of action

for breach of contract arising out of their efforts to obtain a permanent loan modification

under HAMP (Bushell, supra, 220 Cal.App.4th at pp. 918–919, 928), the Bushell court

stated: “Congress did not create, in HAMP, a private federal right of action for

borrowers against lenders. (Wigod, supra, 673 F.3d at p. 559, fn. 4.) But as Wigod

explained, ‘The issue here, however, is not whether federal law itself provides private

remedies, but whether it displaces remedies otherwise available under state law. The

absence of a private right of action from a federal statute provides no reason to dismiss a

claim under a state law just because [the claim] refers to or incorporates some element of

the federal law. . . . To find otherwise would require adopting the novel presumption that

where Congress provides no remedy under federal law, [traditional] state law [principles]

may not afford one in its stead.’ (Wigod, supra, 673 F.3d at p. 581.)” (Bushell, supra,

220 Cal.App.4th at p. 928, fn. 9; accord, West, supra, 214 Cal.App.4th at p. 788 [Fourth

Dist., Div. Three] [noting the Wigod court concluded “HAMP does not preempt or

otherwise displace state law causes of action”]; Sutcliffe v. Wells Fargo Bank, N.A.

(N.D.Cal. 2012) 283 F.R.D. 533, 553–554 [rejecting defendant Wells Fargo’s argument

plaintiffs’ state law claims were barred because they constituted an “ ‘end-run’ ” around

HAMP].)

We agree with this analysis, and we hold HAMP does not displace Pestana’s state

law causes of action (although several of them fail for other reasons, as discussed above).

We are not persuaded by the federal district court decisions Bank cites for the contrary

position; most of these cases predate (and none of them cite) the appellate decisions in

Wigod, West, and Bushell. (See, e.g., Vasquez v. Wells Fargo Home Mortg. (S.D.Cal.

Mar. 22, 2012, No. 11-CV-462 L (WMC)) 2012 U.S.Dist. Lexis 39404, *10-*11; Tarsha

v. Bank of America, N.A. (S.D.Cal. Mar. 29, 2013, No. 11-CV-928 W (MDD)) 2013

18

U.S.Dist. Lexis 46255, *19-*20; Velasco v. Aurora Loan Services LLC (C.D.Cal. Feb.

21, 2012, No. 2:11-CV-04784 JHN-RZx) 2012 U.S.Dist. Lexis 21490, *6-*7.)

Bank argues Wigod and West establish only a “limited exception” to HAMP’s

general preclusion of state law claims; under this exception, a borrower who has executed

a HAMP trial period plan (TPP) may sue for breach of contract if he or she makes the

trial payments and the lender fails to offer the borrower a permanent loan modification.

We disagree with Bank’s reading of these decisions. Although Bushell, West and Wigod

involved TPP’s (see Bushell, supra, 220 Cal.App.4th at pp. 918–919, 928; West, supra,

214 Cal.App.4th at p. 786; Wigod, supra, 673 F.3d at pp. 554–555, 560), the courts in

those cases did not hold the absence of a private federal right of action under HAMP

precludes all state law claims relating to HAMP modifications except claims for breach

of a written TPP. Instead, they stated generally that the absence of a private right of

action under HAMP does not displace state law claims.12 (See Bushell, supra, 220

Cal.App.4th at p. 928, fn. 9 [“ ‘The absence of a private right of action from a federal

statute provides no reason to dismiss a claim under a state law just because [the claim]

refers to or incorporates some element of the federal law’ ”]; Wigod, supra, 673 F.3d at

p. 581 [same]; West, supra, 214 Cal.App.4th at p. 788 [noting the Wigod court’s

conclusion that “HAMP does not preempt or otherwise displace state law causes of

action”].) The absence of a private right of action under HAMP provides no basis for

dismissal of Pestana’s California state law claims.

III. DISPOSITION

The judgment of dismissal in favor of Bank is reversed. The order sustaining the

demurrer is affirmed in part and reversed in part. The order is reversed as to the cause of

12

In addition to permitting claims for breach of the TPP, each case found other

state law claims were viable as well. (See Bushell, supra, 220 Cal.App.4th at pp. 919,

928–931 [breach of contract, promissory estoppel, and promissory fraud]; West, supra,

214 Cal.App.4th at p. 786 [fraud, negligent misrepresentation, breach of written contract,

promissory estoppel, and unfair competition]; Wigod, supra, 673 F.3d at pp. 555, 559

[breach of contract, promissory estoppel, fraudulent misrepresentation, and violation of a

state consumer protection statute].)

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action for unfair competition (sixth cause of action). The order is affirmed as to the

rulings sustaining, without leave to amend, the demurrer to all other causes of action.

The parties shall bear their own costs on appeal.

______________________

Becton, J.*

We concur:

______________________

Margulies, Acting P.J.

______________________

Banke, J.

* Judge of the Contra Costa County Superior Court, assigned by the Chief Justice

pursuant to article VI, section 6 of the California Constitution.

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