The opinion
Filed 11/3/23
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
LORETO A. LAGRISOLA et al., D080758
Plaintiffs and Appellants,
v.
(Super. Ct. No. 37-2021-
NORTH AMERICAN FINANCIAL 00020798-CU-CO-CTL)
CORPORATION,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County,
Joel R. Wohlfeil, Judge. Affirmed.
James Swiderski for Plaintiffs and Appellants.
Greeley Thompson, David M. Greeley; Mitchell Sandler and Arielle
Stephenson for Defendant and Respondent.
In 2017, Loreto and Mercedes Lagrisola (the Lagrisolas) applied for and
obtained a loan from North American Financial Corporation (NAFC), secured
by a mortgage on their residence. In 2021, the Lagrisolas sued NAFC,
individually and on behalf of a class of similarly situated persons. In the
operative First Amended Complaint (FAC), the Lagrisolas alleged that NAFC
was not licensed to engage in lending in the state of California between 2014
and 2018 and asserted violations of Business and Professions Code section
17200 and Financial Code sections 22100 and 22751.
The trial court sustained NAFC’s demurrer to the FAC without leave to
amend, concluding that the allegations in the FAC were insufficient to
establish an actual economic injury, necessary for standing under Business
and Professions Code section 17200, and that there was no private right of
action under Financial Code sections 22100 and 22751. The Lagrisolas assert
the trial court erred in reaching each of the foregoing conclusions. On our
own de novo review, we reach the same conclusions as the trial court, and
accordingly, we affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Because this case arises from a demurrer sustained without leave to
amend, we set forth the relevant, well-pleaded factual allegations from the
FAC. (See Masters v. San Bernardino County Employees Retirement Assn.
(1995) 32 Cal.App.4th 30, 35 [“we deem all well-pleaded factual allegations of
the complaint to be true”].)
NAFC is a Nevada based business entity with offices in California. In
2017, the Lagrisolas borrowed $550,000 from NAFC, secured by real property
in San Diego. This was one of 319 loans NAFC originated to California
consumers between July 1, 2014 and August 27, 2018. NAFC acted as both
the loan broker and the lender on the loans, but was licensed in California
only as a broker. NAFC was not licensed to lend money to consumers in
California, as required by Financial Code section 22100, during the relevant
time period.
NAFC did not inform any of its prospective borrowers that it was not
licensed as a lender in California. And, according to the FAC, “NAFC’s dual
role as both loan broker and lender prevented [the Lagrisolas] from learning
about its unlicensed status as lender. Ordinarily, the loan broker would be
tasked with ensuring that Plaintiff homeowners only borrowed from lenders
2
with the proper license in the state.” The Deed of Trust securing the loan for
the Lagrisolas identified NAFC as the “Loan originator” and included a
Nationwide Multistate Licensing System and Registry (NMLS) number for
NAFC but did not specify whether NAFC was licensed as a finance lender.1
The Lagrisolas were unaware that NAFC was not licensed as a finance
lender and would “never have signed up to a loan with NAFC had they been
informed that the company was not legally permitted to make loans to them
or to any other California borrower.” They “would have gone elsewhere to
obtain their loans had they been informed that NAFC” did not hold a lending
license. NAFC resold the loans it issued, including the Lagrisolas’, into a
secondary marketplace and received compensation from the resale of each
loan.
In December 2020, California regulators entered into a settlement
agreement with NAFC to address its unlicensed lending activity. Pursuant
to the settlement agreement, included as exhibit B to the original complaint,
NAFC was ordered to “refrain from violating Financial Code section 22100,
subdivision (a), by engaging in the business of a finance lender without
obtaining a license” and to pay an administrative penalty of $75,000. The
parties acknowledged the settlement agreement was “intended to constitute a
full, final, and complete resolution of the violations.” The settlement was the
1 The NMLS is a publicly available “web-based system that allows state-
licensed non-depository companies, branches, and individuals to apply for,
amend, update, or renew licenses issued by state regulatory agencies.” (1 Res.
Mort. Lend. State Reg. Man. West California Mortgage Lending § 4:2; see
also NMLS Consumer Access portal, available at
<https://www.nmlsconsumeraccess.org>[as of Nov. 3, 2023], archived at
<https://perma.cc/LMM3-Q8PV>.)
3
“first public revelation of NAFC’s unlicensed lending activity,” and the
impetus for the current litigation.
The Lagrisolas assert three causes of action in the FAC.2 In the first
cause of action, they allege that NAFC violated Business and Professions
Code section 17200 by engaging in unlicensed lending in violation of
Financial Code sections 22100 and 22751. They contend that NAFC earned
“illegal interest” by engaging in this unlawful lending, and that the retention
of such profits “constitutes a loss of money or property” to them, and other
similarly situated plaintiffs.
In the second cause of action, the Lagrisolas assert violations of
Business and Professions Code section 17200 based on the alleged deceptive
act of failing to disclose that NAFC was not licensed to make loans in
California. They allege that NAFC’s unlicensed status was a material fact
that borrowers would want to be informed of prior to making a decision to
enter into a loan transaction and, if they had known, they “never would have
agreed to participate in NAFC’s violation of the law by paying illegal interest
and finance charges to NAFC, rewarding them for non-compliance with the
licensing requirements of California law.” And, as in the first cause of action,
they allege that NAFC earned “illegal interest which it is required to forfeit
to the borrowers.”
In the third cause of action, the Lagrisolas allege direct violations of
Financial Code sections 22100 and 22751. As in the first and second causes
of action, they assert that the “law specifically commands that an unlicensed
2 The Lagrisolas asserted only the first cause of action in their original
complaint. The trial court sustained a demurrer to the complaint with leave
to amend, and the Lagrisolas filed the FAC. They restated the first cause of
action in the FAC, “to preserve the matter for appeal,” and added the second
and third causes of action.
4
lender is to forfeit all interest and finance charges made on any unlicensed
loan.” They acknowledge that NAFC has since sold the loans, and therefore
is no longer collecting interest, but contend that NAFC must forfeit any profit
it made through the sale of the unlicensed loans to the secondary market.
NAFC filed a demurrer to the FAC. After briefing and argument, the
trial court concluded that the allegations in the FAC did not adequately
allege an injury in fact and therefore failed to establish standing to bring a
claim under Business and Professions Code section 17200, and that there is
no private right of action under Financial Code sections 22100 and 22751.
Accordingly, the trial court sustained the demurrer without leave to amend.
The Lagrisolas timely appealed from the resulting judgment.
II. DISCUSSION
The Lagrisolas challenge each of the trial court’s determinations on
appeal and contend that the court erred in sustaining the demurrer to the
FAC.
A. Standards of Review
On appeal from a judgment of dismissal after a demurrer is sustained
without leave to amend, “we review the operative complaint ‘de novo to
determine whether the complaint alleges facts sufficient to state a cause of
action under any legal theory or to determine whether the trial court
erroneously sustained the demurrer as a matter of law.’ ” (Morris v.
JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292 (Morris).) “If
the demurrer was sustained, as it was in this case, our function is to
determine whether the complaint states sufficient facts to state a cause of
action.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222
5
Cal.App.3d 1371, 1381, quoting Blank v. Kirwan (1985) 39 Cal.3d 311, 318
(Blank).)3
“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, supra, 39 Cal.3d at p. 318.) “Further,
we give the complaint a reasonable interpretation, reading it as a whole and
its parts in their context.” (Ibid.) We may “take notice of exhibits attached to
the complaints,” and “[i]f facts appearing in the exhibits contradict those
alleged, the facts in the exhibits take precedence.” (Holland v. Morse Diesel
Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.) We may also consider prior
versions of the pleadings, particularly where previous allegations are altered
or omitted without adequate explanation. (See Shoemaker v. Myers (1990)
52 Cal.3d 1, 12; Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1109.)
B. Plaintiffs Lack Standing to Assert Violations of Business and
Professions Code Section 17200
As discussed above, the FAC alleges that NAFC was unlicensed to
make loans, and that the “making of the loan by NAFC without the proper
license to do so is an unlawful business practice actionable by way of a suit
under Business & Professions Code section 17200.” It then asserts two
separate causes of action under Business and Professions Code section 17200;
3 The Lagrisolas do not argue that they could cure any deficiencies in the
FAC by amendment and do not ask for the court to find that the trial court
erred in denying leave to amend. Accordingly, we do not consider whether
the trial court should have granted them leave to amend. (See Medina v.
Safe-Guard Products Internat., Inc. (2008) 164 Cal.App.4th 105, 112, fn. 8;
Hendy v. Losse (1991) 54 Cal.3d 723, 742 [“The burden is on the plaintiff,
however, to demonstrate the manner in which the complaint might be
amended”].)
6
one based on violations of Financial Code sections 22100 and 22751, and one
based on NAFC’s allegedly deceptive act of failing to disclose that it was not
licensed as a lender.
Business and Professions Code section 17200 (commonly referred to as
the Unfair Competition Law, or the “UCL”) defines unfair competition as
“any unlawful, unfair or fraudulent business act or practice and unfair,
deceptive, untrue or misleading advertising and any act prohibited by
Chapter 1 (commencing with Section 17500).” Section 17204 further
provides, in relevant part, that “[a]ctions for relief pursuant to this chapter
shall be prosecuted exclusively in a court of competent jurisdiction by . . . a
person who has suffered injury in fact and has lost money or property as a
result of the unfair competition.” (Bus. & Prof. Code § 17204, italics added.)
The latter statute was amended in 2004 with the passage of Proposition
64. The purpose of Proposition 64 was to “materially curtail[ ] the universe of
those who may enforce” the UCL in a private action by “confin[ing] standing
to those actually injured by a defendant’s business practices,” and “to prohibit
private attorneys from filing lawsuits for unfair competition where they have
no client who has been injured in fact under the standing requirements of the
United States Constitution.” (Kwikset Corp. v. Superior Court (2011) 51
Cal.4th 310, 320–322 (Kwikset).) “To satisfy the narrower standing
requirements imposed by Proposition 64, 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, at p. 322; accord California Medical Assn.
v. Aetna Health of California Inc. (2023) 14 Cal.5th 1075, 1086.)
7
Here, NAFC contends, as it did in the trial court, that the FAC fails to
adequately allege that the Lagrisolas suffered an injury in fact or lost money
or property as a result of its licensing status. The trial court agreed. It
explained that “a loan has no subjective or intangible value,” and that the
Lagrisolas “cannot establish standing (injury in fact) by alleging that they
now possess something they would not have similarly valued or selected had
they been aware of the unlicensed status of the lender. The loan [the
Lagrisolas] obtained was identical to the terms and characteristics they
desired.”
The court in Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583
(Peterson) considered the “injury in fact” requirement for standing imposed
by Proposition 64 in a similar context—the unlicensed sale of insurance. The
plaintiffs there argued that Cellco, a communications equipment vendor
doing business as Verizon Wireless, improperly charged them an insurance
premium for cellphones they had purchased. (Peterson, at p. 1586.) As here,
Cellco did not have a license to sell insurance but was allegedly retaining a
portion of the insurance premiums paid by the plaintiffs as a “fee.” (Id. at pp.
1586–1587.) Also as here, the plaintiffs alleged violations of the UCL, but the
trial court ultimately sustained a demurrer without leave to amend, finding
that the plaintiffs “had ‘been repeatedly unable to state facts supporting the
legal requirement of actual injury and pecuniary loss as required by
Proposition 64.’ ” (Peterson, at pp. 1587–1588.)
The appellate court affirmed the trial court’s decision and, in doing so,
rejected the plaintiff’s view that they were injured “because they paid the
alleged unlawful commission that was illegally retained” by Cellco.
(Peterson, supra, 164 Cal.App.4th at p. 1591.) The court explained, “plaintiffs
here do not allege they paid more for the insurance due to defendant’s
8
collecting a commission [from the sale of the insurance]. They do not allege
they could have bought the same insurance for a lower price either directly
from the insurer or from a licensed agent. Absent such an allegation,
plaintiffs have not shown they suffered actual economic injury. Rather, they
received the benefit of their bargain, having obtained the bargained for
insurance at the bargained for price.” (Ibid.) Moreover, the plaintiffs did
“not allege they were dissatisfied with the insurance or were uninformed of
its price.” (Peterson, at p. 1592.) Rather, they acknowledged that Cellco had
“disclosed to them ‘the price and extent of the insurance coverage.’ ” (Ibid.)
In addition, the court concluded that a person has not “lost money” as
required for standing under the UCL simply because it is “ ‘no longer in their
possession.’ ” (Peterson, at p. 1592.)
Likewise, in Medina v. Safe-Guard Products, Internat., Inc. (2008) 164
Cal.App.4th 105 (Medina), the court affirmed the sustaining of the demurrer
as to a UCL action based on the alleged unlicensed sale of insurance. There,
the plaintiff alleged that a vehicle service contract he had purchased was an
insurance contract, and that the vendor, Safe-Guard, was not licensed to sell
insurance in California. (Medina, at. pp. 108, 113.) Like the reasoning in
Peterson, the Medina court noted that the plaintiff “has not alleged that he
didn’t want wheel and tire coverage in the first place, or that he was given
unsatisfactory service or has had a claim denied, or that he paid more for the
coverage than what it was worth because of the unlicensed status of Safe-
Guard. He hasn’t suffered any loss because of Safe-Guard’s unlicensed
status.” (Medina, at p. 114.) As the court explained, further, “[t]he point of
the Proposition 64 amendment was to impose additional requirements on
plaintiffs beyond merely having suffered an ‘unlawful, unfair or fraudulent
9
business act or practice,’ namely, having lost money or property as a result of
that practice.” (Medina, at p. 115, fn. omitted.)
Similarly here, the Lagrisolas do not allege that they did not want a
loan in the first instance, that they paid any more for their loan than they
otherwise would have, or that they could have obtained the loan at the same
or lower price from another lender that was licensed. Nor do they allege that
they suffered any particular harm because of NAFC’s unlicensed status.
Rather, they concede in the FAC that NAFC was licensed as a broker and,
although they set forth the additional requirements that NAFC would have
had to meet to be licensed as a lender as well, they do not contend that NAFC
would not have been able to meet those requirements. In fact, the settlement
agreement attached as an exhibit to the original complaint suggests that
NAFC did become licensed as a lender in August 2018. Thus, if anything, the
allegations suggest that NAFC simply neglected to obtain a California
lending license prior to August 2018 and, like the plaintiff in Medina, the
Lagrisolas have not alleged that they “suffered any loss because of [NAFC]’s
unlicensed status.” (Medina, supra, 164 Cal.App.4th at p. 114.)
The Lagrisolas allege that they would not have agreed to the loan, or
perhaps would have obtained a loan from another vendor if they had known
that NAFC was not licensed as a lender. The Peterson court was not
persuaded by a similar allegation that “ ‘if defendant had not offered [and]
sold . . . insurance when it was not . . . licensed to do so, plaintiffs would not
have purchased the . . . insurance from defendant,’ ” and neither are we. (See
Peterson, supra, 164 Cal.App.4th at p. 1587.) Again, the Lagrisolas do not
assert that a comparable loan was available from a licensed lender, or that
NAFC’s unlicensed status harmed them in any way. Notably, the FAC does
allege that NAFC resold the loans, but does not allege that the purchasers
10
were not licensed. Thus, at the end of the day, the plaintiffs were left with a
loan from a presumably licensed lender, at the bargained for rate. As in
Peterson, the plaintiffs here “received the benefit of their bargain, having
obtained the bargained for [loan] at the bargained for price.” (Id. at p. 1591.)
The Lagrisolas contend that this case is akin to the Kwikset case, in
which the California Supreme Court found that the plaintiffs had sufficient
standing based on allegations that Kwikset mislabeled the locks they bought
as “Made in America.” (See Kwikset, supra, 51 Cal.4th at p. 329.) As the
court in Kwikset explained:
“According to the second amended complaint, (1) Kwikset
labeled certain locksets with ‘Made in U.S.A.’ or a similar
designation, (2) these representations were false, (3) plaintiffs
saw and relied on the labels for their truth in purchasing
Kwikset’s locksets, and (4) plaintiffs would not have bought the
locksets otherwise. On their face, these allegations satisfy all
parts of the section 17204 standing requirement.”
(Kwikset, at pp. 327–328.)
Here, the Lagrisolas argue that they similarly alleged that they would
not have purchased the loan if they had realized that NAFC was unlicensed.
However, unlike the plaintiffs in Kwikset, who allegedly “saw and relied on”
the “ ‘Made in the U.S.A.’ ” labeling when purchasing the locksets (see
(Kwikset, supra, 51 Cal.4th at pp. 327–328), the Lagrisolas do not point to
any representation that NAFC made to them about its licensing status, nor
do they allege that they relied on an actual belief or understanding that
NAFC was licensed when obtaining their loan. Put more simply, the
Lagrisolas do not allege that they saw or relied on a statement that NAFC
was “licensed as a lender in California.” They allege, now, that they would
not have obtained the loan from NAFC if they had known NAFC was not a
licensed lender, but they do not allege that they did obtain the loan based
11
upon a representation by NAFC that it was a licensed lender. (See Kwikset,
at p. 326 [“a plaintiff ‘proceeding on a claim of misrepresentation as the basis
of his or her UCL action must demonstrate actual reliance on the allegedly
deceptive or misleading statements’ ”].)4
The Kwikset decision did not change Proposition 64’s requirement that
standing under the UCL requires both (1) an economic injury and (2) that the
injury be caused by “the unfair business practice or false advertising that is
the gravamen of the claim.” (See Kwikset, supra, 51 Cal.4th at p. 322.)
Rather, Kwikset held that where the gravamen of the claim is that the seller
affirmatively represented that a product had certain defined characteristics—
there, that it was “Made in the U.S.A.”—and plaintiffs allege that they chose
that product in reliance on that representation, the plaintiffs can establish
that they did not receive the benefit of their bargain, and therefore they
suffered an economic injury caused by the unfair business practice or false
advertising sufficient to confer standing. (Ibid.) As the Kwikset court put it,
“[s]imply stated: labels matter,” and a consumer that affirmatively relies on
a label in choosing one product over another suffers an economic injury when
they pay money for a product with a label that turns out to be false.
(Kwikset, at p. 328.)
The allegations set forth in the FAC at issue here do not similarly
establish an economic injury caused by an unfair business practice under the
Kwikset framework for at least two related reasons.
4 Further, as the trial court explained here, loans are not the same as
locks: “Unlike a product or consumable good, a loan has no subjective or
intangible value . . . its value is wholly dependent on its terms, such as the
interest rate, principal amount and number of payments.” And, as we have
explained here, the Lagrisolas ultimately got the loan they bargained for.
12
First, the Lagrisolas do not allege that NAFC made an affirmative
representation about the product. As we have explained, the analysis of
economic injury in Kwikset turned solely on plaintiffs’ allegations that the
defendant falsely labeled the product, affirmatively misrepresenting its
characteristics, and that they had relied on that representation when
purchasing the product. But the Kwikset court took pains to distinguish
cases in which the claims arose from the plaintiff’s reliance on false
statements from those in which the plaintiffs did not rely on any such
misrepresentation. (Kwikset, supra, 51 Cal.4th at p. 327.)
As the court explained, the complaint at issue in Hale v. Sharp
Healthcare (2010) 183 Cal.App.4th 1373 was adequate because the plaintiff
had alleged that “ ‘she was expecting to be charged “regular rates,” ’ ” as
stated in the contract that the defendant presented, and from that, one could
reasonably infer that she had relied on that affirmative representation when
entering that same contract. (Kwikset, supra, 51 Cal.4th at p. 327, citing
Hale, at pp. 1385–1386.) The Kwikset court distinguished Hale from other
cases like Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350 and Hall
v. Time Inc. (2008) 158 Cal.App.4th 847, in which the courts had properly
sustained demurrers where the plaintiffs did not “allege any reliance on
representations about rates” and, similarly, “did not allege that
misrepresentations caused him to pay money for” the product at issue.
(Kwikset, supra, 51 Cal.4th at p. 327.) In our view, the distinction is based on
the presence of an affirmative representation that was material to the
consumer’s decision to purchase a specific product or enter a specific contract.
Here, the Lagrisolas do not allege that NAFC made an affirmative
representation about its licensing status. The complaint alleges, “Financial
Code section 22162 requires all lenders to disclose their license numbers on
13
all advertisements for loans,”5 and that NAFC “did not inform any of its
prospective borrowers of its unlicensed status.” But, it does not allege that
NAFC made any affirmative statements about its licensure status or,
perhaps more importantly, that the Lagrisolas relied on any statements
NAFC made about its licensure status when choosing to enter into the loan
transaction with NAFC. The Lagrisolas later assert that NAFC’s licensure
status “was a material fact of which prospective borrowers would want to be
informed prior to making a decision to enter into a loan transaction,” but
again, they make no allegations indicating that they actually believed that
NAFC was licensed when they entered into the loan at issue, or that NAFC
told them that it was.
In their reply brief, the Lagrisolas rely on a single Federal case, Hodson
v. Mars, Inc. (2018) 891 F.3d 857, to assert that omissions may also be
actionable under the UCL, particularly where the defendant does make a
partial, deceptive disclosure. The court in Hodson did note, generally, that
an omission theory of consumer fraud may be actionable under California’s
consumer protection laws in some cases. (Hodson at p. 861.) However, the
court went on to hold that plaintiffs’ claims in that case were foreclosed
because they had not established the defendants had a duty to disclose, as
required to support a fraud theory, where the omission—that the defendant
5 The FAC further alleges that Business and Professions Code section
10235.5 requires disclosure of a Department of Real Estate license “on all
mortgage loans,” but that section actually refers to advertisements as well.
(See Bus. & Prof. Code § 12035.5, subd. (a) [“A real estate licensee or
mortgage loan originator shall not place an advertisement disseminated
primarily in this state for a loan unless there is disclosed within the printed
text of that advertisement, or the oral text in the case of a radio or television
advertisement, the Department of Real Estate number and the unique
identifier assigned to that licensee by the Nationwide Multistate Licensing
System and Registry under which the loan would be made or arranged.”].)
14
candy company sourced cocoa beans from a region known to use child labor—
concerned neither a safety defect nor a “physical product defect relating to
the central function” of the product. (Id. at p. 865.) And, as relevant here,
the court came to that conclusion despite assuming, without deciding, that
the existence of slave labor in the product’s supply chain was in fact material
to consumers. (Id. at p. 864.)
Likewise, here, the Lagrisolas have not established an actionable
omission. They assert that NAFC was statutorily required to disclose its
lending license number, that the statutory requirements to do so suggest
materiality, and that, despite this, NAFC selectively disclosed only its broker
number on the loan documents. They rely on the two statutes that are
referenced in the FAC but address only advertisements, and Financial Code
section 22337, which is not referenced in the FAC, but does appear to require
the disclosure of the “license number of the finance lender and broker, if any”
at the time a loan is made.6 They argue that the Kwikset court relied on
similar statutes to conclude that the Legislature had recognized the
materiality of the mislabeling, but, as they acknowledge, the statutes at issue
in Kwikset “specifically outlaw[ed] deceptive and fraudulent ‘Made in
America’ representations.” (Kwikset, supra, 51 Cal.4th at p. 329.) The
statutes that the Lagrisolas rely on here are not so specifically aimed at
deceptive or fraudulent statements regarding a lender’s licensing status.
Moreover, while the plaintiffs in Kwikset alleged violations of the same
fraudulent labeling statutes, the Lagrisolas only allege violations of Financial
6 Financial Code section 22337 states, in relevant part: “Each licensed
finance lender shall: (a) Deliver or cause to be delivered to the borrower, or
any one thereof, at the time the loan is made, a statement showing in clear
and distinct terms the name, address, and license number of the finance
lender and the broker, if any.”
15
Code sections 22100 and 22751, neither of which concern licensing
disclosures. (See Kwikset at p. 317.)
Further still, even if we accept that NAFC was legally required to
disclose its lender license number, and failed to do so, there are no allegations
in the complaint indicating the Lagrisolas relied on any belief or
understanding that they may have had regarding NAFC’s licensure status at
the time they entered the loan. In fact, there are no allegations suggesting
that the Lagrisolas had any belief at all regarding NAFC’s licensing status at
the time they obtained the loan. For example, there are no allegations
indicating that the Lagrisolas knew that NAFC was supposed to be licensed
in California, specifically, as both a broker and a lender; that the Lagrisolas
saw the NLMS number for NAFC that was displayed on the loan documents;
or that the Lagrisolas understood the inclusion of that number to mean that
NAFC was licensed in California as both a broker and a lender. Indeed, if
they were concerned about NAFC’s dual-license status, they could have easily
used the license number displayed on the documents to verify the same
through a readily available public database. (See fn. 1, ante.)
Thus, even if an omission could fall into the Kwikset framework, as the
Lagrisolas assert, they still have not established causation, the second
element required for standing under the UCL. As we have explained, the
Lagrisolas do not allege that they relied on either a representation or an
understanding created by an omission, and thus cannot allege that such a
representation or omission caused an economic injury to them. Kwikset noted
that “a plaintiff ‘proceeding on a claim of misrepresentation as the basis of
his or her UCL action must demonstrate actual reliance on the allegedly
deceptive or misleading statements’ ” and show that “ ‘the misrepresentation
was an immediate cause of the injury-producing conduct.’ ” (Kwikset, supra,
16
51 Cal.4th at pp. 326–327.) Proposition 64’s requirement that the plaintiff’s
economic injury be caused by the unfair competition “ ‘requires a showing of a
causal connection or reliance on the alleged misrepresentation.’ ” (Kwikset, at
p. 326.) The Lagrisolas nowhere allege that any injury to them was caused
by a misrepresentation or omission, or that they relied on any such
misrepresentation or omission. Put another way, the Lagrisolas cannot show
that they suffered any economic injury because of, or resulting from, NAFC’s
failure to inform them that it did not have a lending license.7
Instead, the Lagrisolas attempt to establish causation by alleging that
they would not have purchased the loan had they known NAFC was
unlicensed, a fact they only discovered three years later because of the public
settlement. This subjective assertion of an intangible harm falls short of
establishing the elements for standing under the UCL. As the Kwikset court
pointed out, whereas federal standing may be based on “intangible” injury
that does not involve lost money or property, UCL standing is more stringent.
(Kwikset, supra, 51 Cal.4th at p. 324.) We do not believe that the Kwikset
court intended to expand Proposition 64 to include standing to plaintiffs like
the Lagrisolas based on their intangible distaste for NAFC’s failure to
complete the licensing process in California, a failure for which the state took
appropriate action to remedy. The test for standing cannot turn on a
consumer’s post hoc belief about the seller’s status, particularly in the
absence of an affirmative misrepresentation about that status at the time the
consumer entered the transaction. Even where the consumer’s beliefs may be
7 By contrast, in Kwikset, the conduct of misrepresentation directly
caused the economic injury, because it induced the plaintiffs to purchase a
product based on the false statement on its label. (Kwikset, supra, 51 Cal.4th
at p. 327 [“plaintiffs saw and relied on the labels for their truth in purchasing
Kwikset’s locksets”].)
17
seen as reasonable, (e.g. that a business operating in California has the
proper licensing, has sufficient insurance, is in full regulatory compliance,
has laudable hiring practices, etc.), Proposition 64 did not intend to throw the
doors open to UCL lawsuits arising only from a consumer’s view of how the
company does business. And, while we agree that Kwikset stands for the
proposition that the subjective thoughts of a consumer may be material in
some cases, the plaintiff must still establish that those subjective thoughts
played some role in their decision to go through with the actual transaction.
The Lagrisolas have not done so here.
Rather, here, the Lagrisolas have conflated an actionable type of
economic injury, as described in Kwikset, with conduct by the seller that
causes such injury. In Kwikset, the actionable conduct by the seller was the
misrepresentation that the locks were “Made in America.” (Kwikset, supra,
51 Cal.4th at p. 327.) The Kwikset plaintiffs relied on that misrepresentation
in purchasing the locks, and such reliance caused them to purchase a product
that lacked a characteristic that they found desirable. Here, NAFC’s alleged
actionable conduct was the lack of a license; but NAFC made no statements
about its licensing status and the Lagrisolas do not allege that they
considered or relied on NAFC’s license status at the time they entered into
the loan. Moreover, the lack of a license did not impact the loan itself, and
the loan terms were and remained satisfactory to the Lagrisolas. Thus, they
have not established that they suffered any economic injury because of
NAFC’s unlicensed status.
Finally, the Lagrisolas assert that the court in Kwikset rejected the
“benefit of the bargain” analysis employed in Peterson and Medina. In our
view, the Kwikset court did not reject that analysis; rather, the court stated,
“Whether or not a party who actually received the benefit of his or her
18
bargain may lack standing, in this case, under the allegations of the
complaint, plaintiffs did not.” (Kwisket, supra, 51 Cal.4th at p. 332, italics
added.) As the Kwikset then explained in detail, the plaintiffs in that case
had very specifically bargained for a product that was “Made in the U.S.A.”
but had unknowingly received one that was not. (Ibid.) Therefore, just like a
consumer that specifically bargains for organic milk but receives non-organic
milk, they did not receive the benefit of their precise bargain. (Id. at pp. 332–
334.) The Lagrisolas also point to Hansen v. Newegg.com Americas, Inc.
(2018) 25 Cal.App.5th 714, in which the court noted that Peterson and
Medina were decided before Kwikset, under similar theories and by the same
appellate court that was reversed in Kwikset. (Hansen, at p. 731.) But that
fact alone does not support a conclusion that Peterson and Medina are no
longer good law. Instead, the Kwikset court cited Peterson and Medina
favorably, and simply distinguished them from a different type of case in
which the plaintiffs expressly relied on a material representation about the
product.
Here, even considering the Kwikset framework, for the reasons we have
explained, the Lagrisolas have not established that they suffered an economic
injury caused by an unfair or unlawful business practice of NAFC. Therefore,
they lack standing to assert the UCL claims, and the trial court did not err in
dismissing the first and second causes of action.
C. There Is No Private Right of Action Under Finance Code Sections
22100 and 22751
In the third cause of action in the FAC, the Lagrisolas assert violations
of Finance Code sections 22100 and 22751, based on the allegation that
“NAFC lacked a license to lend money to California borrowers.” They assert
that the “law specifically commands that an unlicensed lender is to forfeit all
interest and finance charges made on any unlicensed loan.”
19
Financial Code section 22100, subdivision (a) provides, “[n]o person
shall engage in the business of a finance lender or broker without obtaining a
license from the commissioner.” Section 22751, subdivision (a) provides, “[i]f
any amount other than or in excess of the charges permitted by this division
is charged or contracted for, or received, for any reason other than a willful
act of the licensee, the licensee shall forfeit all interest and charges on the
loan and may collect or receive only the principal amount of the loan.” And
related section 22752, subdivision (a) likewise provides that the licensee shall
forfeit all interest and charges on the loan “[i]f any provision of this division
is violated in the making or collection of a loan.”
Here, the Lagrisolas acknowledge that NAFC sold the loans and is no
longer collecting interest or charges, but assert that NAFC made a profit on
the sale of the loans, in part because the third party buyers were able to
charge interest on them. Accordingly, the Lagrisolas pray that the trial court
order NAFC “to pay to Plaintiffs’ [sic] any amounts received from either
borrowers or any third party on account of the inclusion of interest or finance
charges on the amounts loaned to Plaintiffs in each of the unlicensed loans
made to them by NAFC.”
The trial court sustained NAFC’s demurrer as to this cause of action as
well, ruling that the statutory scheme does not contemplate a private right of
action to pursue violations of the Financial Code. As noted above, we review
the trial court’s ruling on this issue de novo. (See Morris, supra, 78
Cal.App.5th at p. 292; Blank, supra, 39 Cal.3d at p. 318.) Like the trial court,
we conclude that neither Financial Code section 22100 nor Financial Code
section 22751 provide a private right of action.
A violation of a state statute does not automatically give rise to a right
of recovery by a private individual. Courts will allow a private right of action
20
only where a statute allows one. (Mayron v. Google LLC (2020) 54
Cal.App.5th 566, 571.) The statute must contain “ ‘ “ ‘clear, understandable,
unmistakable terms,’ ” which strongly and directly’ indicate a private right of
action is allowed.” (Ibid., citing Lu v. Hawaiian Gardens Casino, Inc. (2010)
50 Cal.4th 592, 596–597.) If the statue “does not contain an unmistakable
directive,” the court may consider the legislative history of the statute to
determine whether the Legislature intended to create a private right of
action. (Mayron, supra, at p. 571.)
As relevant here, Financial Code section 22713 specifically provides
that the commissioner may bring an action or request that the Attorney
General bring an action in the name of the people of the State of California.
(Fin. Code § 22713, subd. (a).) The violator may then be liable for civil
penalties, as NAFC was here. (Fin. Code § 22713, subd. (b).) Moreover, “[i]f
the commissioner determines that it is in the public interest,” the
commissioner may include “a claim for restitution, disgorgement, or
damages.” (Fin. Code § 22713, subds. (b) & (c).) Here, it is undisputed that
the commissioner resolved such an action against NAFC through a
settlement in December 2020. Despite the final resolution of that matter, the
Lagrisolas now seek to pursue damages for NAFC’s alleged Financial Code
violations in addition to those recovered by the commissioner. But, when
regulatory statutes, like the Financial Code, “ ‘ “provide a comprehensive
scheme for enforcement by an administrative agency, the courts ordinarily
conclude that the Legislature intended the administrative remedy to be
exclusive unless the statutory language or legislative history clearly indicates
an intent to create a private right of action.” ’ ” (See Noe v. Superior Court
(2015) 237 Cal.App.4th 316, 337.)
21
The Lagrisolas point to Financial Code section 22752, subdivision (a),
which provides that “the licensee shall forfeit all interest and charges on the
loan” if the licensee violates a provision of the Financial Code. However, this
language does not clearly indicate a private right of action, particularly when
read in context with Financial Code section 22713. It merely provides that
the licensee may not collect interest on the loan. This is far different from
the type of statutory language held to support a private right of action. (See
Lu, supra, 50 Cal.4th at p. 597 [listing examples of clear directives, including
language “expressly stat[ing] that a person has or is liable for a cause of
action for a particular violation”].)
The Lagrisolas rely on Goehring v. Chapman University (2004)
121 Cal.App.4th 353. There, the court found that the language of Business
and Professions Code section 6061 conferred a private right of action on
students who alleged that Chapman had not provided the disclosures
required by the statute. As relevant here, the statute provides, “[i]f any
school does not comply with these [disclosure] requirements, it shall make a
full refund of all fees paid by students.” (Bus. & Prof. Code § 6061, italics
added.) The Goehring court concluded that the statutory requirement of a
refund to students meant that the students had the right to pursue an action
for the refund due to them. (Goehring, supra, 121 Cal.App.4th at p. 377
[distinguishing cases in which the relevant statute “did not expressly entitle
individuals to a refund or any other type of payment for violation of the
statute”].)
Here, Financial Code section 22752, subdivision (a) provides for a
forfeiture of fees and interest, not a refund. Unlike Goehring, in which the
statute expressly identified both the party in violation, against whom the
claim could be asserted (there, the University) and the party to whom
22
payment should be made (there, the private-party student claimants, through
a refund to them), the Financial Code does not identify a private party to
whom the forfeited amounts would be repaid. Rather, it simply states that
the lender can only collect on the principal and must forfeit any interest.
And, as we have already noted, section 22713 specifically provides for
enforcement through action by the commissioner.
Finally, the courts can also look to a statute’s legislative history to
ascertain whether the Legislature intended to convey a private right of
action. But, here, the Lagrisolas have not identified any legislative history,
or other legal authority, to support a conclusion that the Legislature intended
that violations of the Financial Code could be pursued by a private right of
action. (See Singman v. IMDB.com, Inc. (2021) 72 Cal.App.5th 1150, 1151
[appellant bears the burden of establishing legal error through citations to
the record and relevant legal authority].)
Accordingly, we agree with the trial court’s reasoning that the
provisions of the Financial Code “do not provide ‘clear, understandable,
unmistakable terms’ for a private cause of action,” but instead provide for
enforcement of violations “via an action by the [c]ommissioner” which “is
what occurred in this case.”
23
III. DISPOSITION
The judgment of the trial court is affirmed. Respondents are entitled to
their costs on appeal.
KELETY, J.
I CONCUR:
O’ROURKE, Acting P. J.
24
Dato, J., Concurring and Dissenting.
California law expressly requires a mortgage lender to be licensed
before making home loans in this state. Between 2014 and 2018, defendant
North American Financial Corporation (North American) made more than
300 home loans without any lender’s license. Predictably, it never disclosed
to prospective borrowers that it lacked the required license. By making these
unlicensed loans, almost by definition North American engaged in an
unlawful and fraudulent business practice within the meaning of California’s
Unfair Competition Law (UCL), Business and Professions Code section 17200
et seq.1
The majority opinion endorses the trial court’s logic in sustaining North
American’s demurrer without leave to amend based on a lack of standing.
The trial court believed that because “a loan has no subjective or intangible
value,” plaintiffs got what they paid for—a loan of money on agreed-upon
terms—and accordingly suffered no “economic injury” despite the
unsurprising allegation in their complaint that they would not have entered
into the loan transactions had they known North American was unlicensed.
The trial court’s reasoning is strikingly similar to an analysis rejected by the
Supreme Court in Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310,
320–322 (Kwikset). Narrowly construing the reach of that decision, the
majority finds Kwikset distinguishable on its facts. In my view, however,
Kwikset stands for the general principle that where plaintiffs fairly allege
they would not have entered into a consumer transaction had they known of
an illegality, misrepresentation, or material omission by the defendant, they
have adequately pleaded an economic injury for the purpose of establishing
1 Subsequent statutory references are to the Business and Professions
Code unless otherwise indicated.
1
standing to sue under the UCL. Because North American’s lack of a license
would be material to a reasonable homeowner’s decision where to obtain a
home loan, I believe Kwikset controls and I respectfully dissent.2
A
The Supreme Court’s Kwikset decision provides the framework for
analysis. In that case, the defendant sold locksets labeled “Made in U.S.A.”
even though several component parts were made elsewhere, a violation of
California law, specifically section 17533.7. (Kwikset, supra, 51 Cal.4th at
p. 317.) Like the trial court in this case, the Court of Appeal in Kwikset
concluded that plaintiffs lacked standing to bring a UCL claim because they
failed to allege any loss of money or property within the meaning of section
17204. In that court’s view, the plaintiffs received just what they intended to
purchase—locksets that they did not allege were overpriced or defective.
(Kwikset, at pp. 319–320.) As a result, they lost nothing.
The Supreme Court disagreed. Reviewing the standing requirements
established by the Proposition 64 initiative in 2004, Justice Werdegar’s
opinion acknowledged the concerns of initiative proponents that prior law
had permitted UCL suits by individuals “who have not used the defendant’s
product or service, viewed the defendant’s advertising, or had any other
business dealing with the defendant.” (Kwikset, supra, 51 Cal.4th. at p. 321,
internal quotations omitted.) She explained that just as the “intent of this
2 I concur in the majority opinion to the extent it concludes there is no
private right of action under Financial Code sections 22100 and 22751. Of
course, the absence of a direct private right of action is no bar to claiming a
UCL violation based on an unlawful business practice. (Stop Youth
Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 561–567;
Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35
Cal.3d 197, 210–211.)
2
change was to confine standing to those actually injured by a defendant’s
business practices,” it was equally clear that standing was preserved “ ‘for
those who had had business dealings with a defendant and had lost money or
property as a result of the defendant’s unfair business practices.’ ” (Ibid.)
Noting that the plaintiffs’ case was “ ‘based on a fraud theory involving
false advertising and misrepresentations to consumers’ ” (Kwikset, supra, 51
Cal.4th at p. 326), the Supreme Court concluded the complaint properly
alleged standing by asserting that (1) the defendant made a representation
about the product, (2) the representation was false, (3) plaintiffs relied on the
truth of the representation, and (4) they would not have bought the product
had they known the true facts. (Id. at pp. 327–328.) Summarizing its
holding, the court stated, “A consumer who relies on a product label and
challenges a misrepresentation contained therein can satisfy the standing
requirement of section 17204 by alleging, as plaintiffs have here, that he or
she would not have bought the product but for the misrepresentation.[ ] That
assertion is sufficient to allege causation—the purchase would not have been
made but for the misrepresentation. It is also sufficient to allege economic
injury.” (Kwikset, at p. 330, italics added, fn. omitted.)
Recognizing that plaintiffs here entered into loan transactions with
North American and make a nearly identical allegation—they would not have
done so had they known it was an unlicensed lender—the majority opinion
effectively dismisses the Kwikset analysis by pointing out that this case does
not involve an affirmative misrepresentation.3 (Maj. opn., ante, at p. 13 [“the
3 It is significant that the majority opinion relies primarily on two Court
of Appeal decisions, Peterson v. Cellco (2008) 164 Cal.App.4th 1583 and
Medina v. Safe-Guard Products, Internat., Inc. (2008) 164 Cal.App.4th 105,
both of which were decided before Kwikset. (Maj opn., ante, at pp. 8–10.)
Medina, in turn, relied almost exclusively on a third case, Hall v. Time Inc.
3
analysis of economic injury in Kwikset turned solely on plaintiffs’ allegations
that the defendant falsely labeled the product, affirmatively misrepresenting
its characteristics”].) But this is a distinction without a difference. It has
been well-settled California law for decades that a UCL claim asserting a
fraudulent business practice is not limited to affirmative misrepresentations.
It can also be based on a defendant’s failure to disclose material information
if it can be fairly alleged there was an obligation to disclose the omitted fact.
(E.g., Chern v. Bank of America (1976) 15 Cal.3d 866, 876; Paduano v.
American Honda Motor Co., Inc. (2009) 169 Cal.App.4th 1453, 1469; Collins
v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 255, 258–259; Patricia A.
Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258,
271; cf. Civ. Code, § 1710, subd. (3) [defining deceit as “[t]he suppression of a
fact, by one who is bound to disclose it, or who gives information of other facts
which are likely to mislead for want of communication of that fact”].) Here,
as the majority opinion recognizes, there are statutes that require a lender to
disclose its license number. (See Fin. Code, § 22337; see also id., § 22162;
Bus. & Prof. Code, §10235.5.) That the Supreme Court’s Kwikset opinion
(2008) 158 Cal.App.4th 847. All three cases are from the same division of the
Court of Appeal that was reversed by the Supreme Court in Kwikset. As a
more recent case explains, these cases “were decided before Kwikset, which
held that the [typical] ‘benefit of the bargain’ theory has no relevance when
the misrepresentation underlying the UCL claim is material in nature.”
(Hansen v. Newegg.com Americas, Inc. (2018) 25 Cal.App.5th 714, 731.)
As Hansen explained, these earlier decisions “appear[ ] to have been based on
the same ‘benefit of the bargain’ reasoning” that was rejected by the Supreme
Court in Kwikset. (Hansen, at p. 731, fn. 6.) While it is true that Kwikset
cited both Peterson and Medina, they were cited for propositions unrelated to
the reasoning on which the majority opinion relies.
4
makes statements about the affirmative misrepresentation involved in the
case hardly means its reasoning only applies in that limited context.4
B
The majority opinion goes on to suggest that even if Kwikset is not
limited to affirmative misrepresentations, such that North American should
have disclosed its failure to obtain a lender’s license, plaintiffs have failed to
allege they relied on any belief or understanding that North American was
properly licensed. (Maj. opn., ante, at p. 16.) The problem with this
suggestion is twofold. First, reliance is inherent in the plaintiffs’ allegation
that the failure to disclose the lack of a license was a material omission,5
because it was information a reasonable borrower would consider important
in deciding whether to do business with North American. (Downey v. Public
Storage, Inc. (2020) 44 Cal.App.5th 1103, 1116.) Alleging a material
misrepresentation or omission gives rise to a presumption or inference of
4 Moreover, if North American included a license number in its loan
materials, but referenced a broker’s license rather than a lender’s license
(maj. opn., ante, at p. 15), plaintiffs could allege an affirmative representation
that was deceptive and misleading because it failed to disclose additional
information.
5 Paragraph 30 of plaintiffs’ amended complaint specifically alleges:
“[North American] was not legally allowed to be engaged in the business of
lending money to California borrowers at the time it made the loans to the
plaintiffs and to the proposed class of plaintiffs. This was a material fact of
which prospective borrowers would want to be informed prior to making a
decision to enter into a loan transaction secured by their home. Plaintiffs in
this case would not have considered borrowing money on a home loan from a
business that was operating illegally and without the proper licensure.
Plaintiff would have gone to any legal lender had they known that [North
American] was operating illegally and without oversight from the regulatory
authorities responsible for supervising the activities of licensed lenders.”
5
reliance. (Ibid., quoting In re Tobacco II Cases (2009) 46 Cal.4th 298, 327.)
And materiality is a question of fact not generally subject to resolution on
demurrer. (See, e.g., Engalla v. Permanente Medical Group, Inc. (1997) 15
Cal.4th 951, 977, citing Rest. 2d Torts, § 538, com. e, p. 82.) Second, even if
reliance were not implicit in the allegation of a material omission, the
plaintiffs here did allege they relied on North American’s failure to disclose
its unlicensed lending status by pleading that they would not have entered
into the loan transaction had they known North American was unlicensed.6
(Cf. Moore v. California State Bd. of Accountancy (1992) 2 Cal.4th 999, 1019
[the public reasonably assumes that individuals holding themselves out as
“accountants” were licensed as such in the absence of a disclosure to the
contrary].)
C
Finally, plaintiffs here allege more than simply a deceptive business
practice within the meaning of section 17200. They also allege that apart
from what it represented or failed to disclose, North American committed an
6 Reliance on a misrepresentation or material omission is typically
pleaded as plaintiffs have done here—through an allegation that they would
not have acted in the way they did (i.e., would not have hired the defendant,
would not have purchased the defendant’s product, would not have entered
into a contract with the defendant, etc.)—in the absence of the
misrepresentation or material omission. (See, e.g., Torres v. Adventist Health
System/West (2022) 77 Cal.App.5th 500, 513 [reliance properly alleged if the
complaint asserts “plaintiff would not have acted as he or she did without the
misrepresentation or the omission of fact”].) In fact, the reliance element of a
claim for fraudulent concealment—a claim of fraud when a party is obligated
to disclose a fact but intentionally conceals or suppresses it—has been stated
in precisely the same way: “the plaintiff was unaware of the fact and would
not have acted as he or she did if he or she had known of the concealed or
suppressed fact.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th
594, 606, italics added.)
6
unlawful business practice when it made a home loan without the proper
license. (See Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 604, fn. 10
[approving allegation of unlawful business practice for “[t]ransacting
insurance without a license”].) As the Supreme Court has repeatedly
emphasized, an “unlawful” business practice under section 17200 includes
“anything that can properly be called a business practice and that at the
same time is forbidden by law.” (Barquis v. Merchants Collection Assn.
(1972) 7 Cal.3d 94, 113; Bank of the West v. Superior Court (1992) 2 Cal.4th
1254, 1266; Kwikset, supra, 50 Cal.4th at p. 320.) Here, making unlicensed
loans is an unlawful business practice under this broad definition. And
again, I read Kwikset as saying that UCL plaintiffs properly plead standing—
economic injury and causation—if they allege they would not have entered
into the challenged transaction but for the actionable business practice about
which they complain.
I would reverse the judgment with directions to overrule the demurrer
as to the first and second causes of action alleging violations of the UCL.
DATO, J.
7