Saghian v. U.S. Bank National Assn. CA2/3 ( 2024 )

Filed 10/17/24 Saghian v. U.S. Bank National Assn. CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
RICHARD SAGHIAN, B333544
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 22STCV25038)
v.
U.S. BANK NATIONAL
ASSOCIATION,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Barbara Scheper, Judge. Affirmed.
Kibler Fowler & Cave, Michael Kibler, Stephen Raiola, and
Adam C. Pullano for Plaintiff and Appellant.
Buchalter, Douglas C. Straus, Robert S. Addison, and Efrat
M. Cogan for Defendant and Respondent.
Plaintiff Richard Saghian appeals from a judgment of
dismissal following a successful demurrer to his second amended
complaint brought by defendant U.S. Bank National Association
(the Bank).1 Plaintiff argues he sufficiently alleged causes of
action for promissory estoppel, fraud, and negligent
misrepresentation. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND2
I. Prior Relationship Between the Parties
In 2015, plaintiff became a high-net worth client of the
Bank, and by 2022, plaintiff had “long-standing business
relationships” with the Bank and the Bank’s director, Nader
Razavi. During this time, plaintiff obtained two loans from the
Bank through Razavi. Plaintiff alleges that in each of these prior
transactions, rather than issue a formal commitment letter,
Razavi “would communicate with [plaintiff] regarding his needs,
discuss loan terms with management, and then return with
offered material terms, including the interest rate. [Plaintiff]
then locked the interest rate by moving forward with the
document collection and underwriting process.”
II. The 2022 “Rate Commitment”
In 2022, plaintiff sought a loan of approximately
$30 million, making inquiries with multiple banks.3 Plaintiff
1 The Bank was formerly known as MUFG Union Bank, N.A.
2 Consistent with the applicable standard of review, we draw
our statement of facts from the allegations of plaintiff’s second
amended complaint and matters properly subject to judicial
notice. (Rallo v. O’Brian (2020) 52 Cal.App.5th 997, 1002.)
3 All subsequent dates are in 2022 unless otherwise stated.
2
intended to use the loans for “investment activities.” Plaintiff
first contacted First Republic Bank, which offered him a loan
with a ten-year term fixed at 1.7 percent, followed by a 20-year
term at a variable rate. Through his business manager, plaintiff
then asked the Bank if it could offer a loan with similar or better
terms.
On April 4, Razavi called plaintiff and informed him the
Bank could loan him approximately $30 million to be repaid over
30 years, with a 10-year interest-only term at a fixed 2.25 percent
rate, followed by a 20-year variable rate term pegged to a
benchmark rate, with an option to pre-pay the loans. Razavi
identified by street address three properties allegedly owned by
plaintiff—two residential properties in Los Angeles and one in
Malibu—as the loan collateral. The loan amounts were “[s]ubject
to [the] appraised values of [the] properties, [and] if the
appraised values did not support a $30 million loan, the highest
supported loan amount would be provided.” According to
plaintiff, he and Razavi “mutually agreed to all of the above-
stated terms.”
Two days later, on April 6, Razavi “further documented the
terms of the offered loan” in an email to plaintiff and his business
manager, Melissa Morton, which stated as follows:4
4 In support of its demurrer, the Bank requested judicial
notice of Razavi’s April 6 email and plaintiff’s responsive email.
Plaintiff did not object to the court taking judicial notice of the
emails; in fact, plaintiff quotes part of Razavi’s email in his
complaint and alleges that Razavi “further documented the terms
of the offered loans” in that email. Because these April 6 emails
are not in dispute and are material to our inquiry, we take
judicial notice of them. (Evid. Code, § 452 [judicial notice may be
3
“Good morning Melissa – I would like to introduce you to
Rafael Mendez who has worked with [plaintiff] for many years
on . . . residential mortgages. Rafael is my right hand partner
and our most senior and experienced mortgage officer. He is very
familiar with [plaintiff] and will make sure the 3 mortgage
requests are done promptly and seamlessly as possible. Rafael
will be submitting the 3 mortgages based on the values below.
All mortgages are being offered at 2.25% on the 10 [year] fixed,
interest only program. Congratulations to Richard and the team!
“1. Primary Home – [address], LOS ANGELES, CA 90069
– [v]alued at $25,000,000
“2. Rental – [address], Los Angeles, CA 90069 – valued at
$5,500,000
“3. Vacation Home – [address,] Malibu, 90265 – [v]alued at
$17,000,000”
Later that day, plaintiff emailed back, stating “I think [the
vacation home] is worth 20m and [rental] is 6m.” Razavi
responded, “I will gladly give you the max loan I can based on the
appraised values.”
Plaintiff “understood the expression of ‘Congratulations’ by
Mr. Razavi as that they had a deal regarding the loan,” and he
“did not continue conversations with First Republic Bank or
[seek] any other alternative sources of financing and forwent the
opportunity to pursue and close on the First Republic Bank loan.”
taken of “[f]acts and propositions that are not reasonably subject
to dispute”]; Performance Plastering v. Richmond American
Homes of California, Inc. (2007) 153 Cal.App.4th 659, 670 [“we
take judicial notice of the transcript . . . even though it is outside
the four corners of the complaint, as there is and can be no
factual dispute concerning the contents of [it]”].)
4
On April 7 and 26, the Bank requested financial records,
forms, and authorizations to complete the loan transaction. On
April 26, plaintiff’s representative responded with the requested
documents.
In the interim, “[u]nbeknownst to [plaintiff], on or around
April 13, 2022, [the Bank] internally decided to not honor its rate
commitment.”5 However, Razavi did not tell plaintiff that the
Bank “would not be honoring the Rate Commitment it had made”
until early May, after “the Federal Open Market Committee
raised the federal funds rate by 50 basis points.” Due to the
change in the federal funds rate, plaintiff could not obtain a
“materially similar loan anywhere else in the market.”
III. The Lawsuit
In August 2022, plaintiff sued the Bank for “breach of loan
commitment,” promissory estoppel, fraud, negligent
misrepresentation, unfair competition, and intentional
interference with contractual relations. Plaintiff alleged that the
Bank “committed to lend up to $30 million to [plaintiff] at an
interest rate of 2.25% but reneged on that commitment.” The
Bank moved for judgment on the pleadings as to all causes of
action in the complaint, and the trial court granted the motion
with leave to amend.
Plaintiff then filed a first amended complaint (FAC),
asserting claims for breach of loan commitment, promissory
estoppel, intentional misrepresentation, negligent
misrepresentation, and intentional interference with contractual
relations. The Bank demurred to the FAC on the same grounds
5 Plaintiff cited the Bank’s internal communications,
obtained through discovery, as a basis for this date.
5
it asserted in its motion for judgment on the pleadings. The trial
court sustained the Bank’s demurrer to all causes of action in the
FAC with leave to amend, again concluding that plaintiff had not
sufficiently alleged promissory estoppel, fraud, or
misrepresentation because the parties had not identified the loan
amounts, and thus there was no clear and unambiguous promise
alleged on which plaintiff could have justifiably relied.
IV. Second Amended Complaint
In May 2023, plaintiff filed the second amended complaint
(SAC), the operative pleading in this appeal. The SAC asserted
three causes of action: (1) promissory estoppel, (2) fraud, and
(3) negligent misrepresentation. The gist of the SAC’s factual
allegations were largely unchanged from those in plaintiff’s prior
pleadings. However, plaintiff recast the “loan commitment” as a
“rate commitment.”
In his first cause of action for promissory estoppel, plaintiff
alleged the Bank “made a promise to [plaintiff] that it would
process three loans for [plaintiff], all of which ‘are being offered at
2.25% on the 10 [year] fixed, interest only program’ (the ‘Rate
Commitment’).” The three loans were to be secured by the
properties mentioned in the email. Plaintiff alleged that the
Bank “reasonably expected and knew that the Rate Commitment
would induce action or forbearance” by plaintiff and did induce
plaintiff to “discontinu[e] discussions with third parties regarding
alternative loan options.”
In his second cause of action for fraud, plaintiff alleged that
the Bank “made a representation to [plaintiff] that it would offer
[plaintiff] three loans in a total of approximately $30 million at
an interest rate of 2.25%.” The SAC stated: “From mid April to
early May, [the Bank] concealed and suppressed a material fact
6
to [plaintiff] regarding its cancellation on the rate commitment it
ha[d] previously made to [plaintiff].” Plaintiff alleged the Bank
withheld the information so that he “would continue to rely on its
promise and representations and would not engage his business
with other competitor banks.”
The third cause of action for negligent misrepresentation
asserted the Bank “made an affirmative representation that it
would offer [plaintiff] three loans at an interest rate at 2.25%. [¶]
When [the Bank] made that representation regarding the
commitment to an interest rate at 2.25%, it was false. [¶] [The
Bank] had no reasonable grounds to believe that representation
was true when it made that representation to [plaintiff]. [¶]
[The Bank] made that representation with the intent that
[plaintiff] would rely on it. [¶] [The Bank] knew that [plaintiff]
would reasonably rely on its representation and would
reasonably expect that [the Bank] honor the rate commitment.”
V. Demurrer to the SAC and the Trial Court’s Decision
The Bank demurred to the SAC. The Bank contended that
plaintiff could not reasonably have relied on the alleged loan/rate
commitment because it was missing material terms and was
conditional, citing Peterson Development Co. v. Torrey Pines Bank
(1991) 233 Cal.App.3d 103 (Peterson) and other authorities. The
Bank likewise contended that both the fraud and negligent
misrepresentation causes of action failed because plaintiff could
not allege justifiable reliance. In support of its motion, the Bank
sought judicial notice of, among other things, the April 6 email
communications referenced in the SAC.
The trial court sustained the Bank’s demurrer without
leave to amend. The trial court concluded:
7
“As in the prior complaints, Plaintiff’s cause of action for
promissory estoppel fails for lack of reasonable reliance. ‘Under
the usual principles of lender liability, “[a] loan commitment is
not binding on the lender unless it contains all of the material
terms of the loan, and either the lender’s obligation is
unconditional or the stated conditions have been satisfied. When
the commitment does not contain all of the essential terms . . .
the prospective borrower cannot rely reasonably on the
commitment, and the lender is not liable for either a breach of
the contract or promissory estoppel.” [Citation.] The material
terms of a loan include the identity of the lender and borrower,
the amount of the loan, and the terms for repayment.’ (Peterson[,
supra,] 233 Cal.App.3d [at p.] 115.) Defendant’s alleged
commitment to Plaintiff did not specify the amount of the loans,
as the amount was contingent on the appraised values of the
properties. (SAC ¶ 17.)
“Plaintiff cannot avoid the failure to plead reasonable
reliance by characterizing Defendant’s alleged promise as a ‘Rate
Commitment’ rather than a loan commitment. If a loan
commitment that lacks all essential terms of the loan cannot
induce reasonable reliance as a matter of law, a commitment to
only a single term of the loan – the interest rate – is necessarily
insufficient.
“The lack of reasonable reliance also precludes Plaintiff’s
claims for fraud and negligent misrepresentation. . . .
“Again, Plaintiff has not pled justifiable reliance, because
Defendant’s representations did not include all material terms of
the loan[s] and the promise of an interest rate alone cannot
induce reasonable reliance. (SAC ¶ 17.) ‘When the commitment
does not contain all of the essential terms . . . the prospective
8
borrower cannot rely reasonably on the commitment. . . .’
(Peterson Development Co., [supra,] 233 Cal.App.3d at 115.)
“At oral argument, Plaintiff’s counsel argued that the
holding of the Peterson court was not as broad as the Court
suggests and that Peterson is distinguishable on its facts.
Plaintiff’s counsel argued that in Peterson, the plaintiff had only
a blank document entitled ‘letter of commitment’ for permanent
financing on which to base his action. In contrast, in the instant
action, Plaintiff has e-mail exchanges with Razavi setting forth
the interest rate, a loan term, and the three properties that
would secure the loan[s]. The Court does not agree with
Plaintiff’s counsel’s characterization of the facts of Peterson. In
Peterson, plaintiff had actually signed the letter of commitment
and paid the fee to secure the commitment through escrow. The
Court of Appeal found that required terms were not present in
the letter of commitment including the identity of the potential
borrower, the amount of the loan and the terms of repayment.
Here, the amount of the loan[s] w[ere] not stated other than in
reference to the three properties and no repayment terms were
discussed other than there would be a ten-year fixed term with
interest only payments.
“The Court finds that Peterson is controlling and therefore
sustains the demurrer without leave to amend.”
On August 29, 2023, the court entered judgment dismissing
the case. Plaintiff timely appealed.
DISCUSSION
Plaintiff asserts the trial court erred in sustaining the
demurrer because the SAC sufficiently pled promissory estoppel,
fraud, and negligent misrepresentation. Plaintiff’s contentions
lack merit.
9
I. Standard of Review
“We review an order sustaining a demurrer de novo,
applying our independent judgment to assess whether the
complaint states a cause of action. (Minton v. Dignity Health
(2019) 39 Cal.App.5th 1155, 1161.) We assume the truth of all
properly pleaded facts, as well as all facts that may be implied or
reasonably inferred from those expressly alleged, but we do not
assume the truth of contentions, deductions, or conclusions of fact
or law.” (Sonoma Luxury Resort LLC v. California Regional
Water Quality Control Bd. (2023) 96 Cal.App.5th 935, 940.) “We
also ‘consider judicially noticed matters.’ ” (E-Fab, Inc. v.
Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.)
“ ‘In order to prevail on appeal from an order sustaining a
demurrer, the appellant must affirmatively demonstrate error.
Specifically, the appellant must show that the facts pleaded are
sufficient to establish every element of a cause of action and
overcome all legal grounds on which the trial court sustained the
demurrer.’ ” (Save Lafayette Trees v. East Bay Regional Park
Dist. (2021) 66 Cal.App.5th 21, 35.)
II. Loan Commitments
The process of applying for and obtaining a loan, has “four
fundamental stages:” (1) “loan application,” (2) “lender’s
acceptance of the application and offer to make the loan (the ‘loan
commitment,’ . . .),” (3) “preparation and finalization of the loan
documentation (promissory note, deed of trust and various other
security instruments, . . .); and” (4) “loan closing (funding).”
(Greenwald & Bank, Cal. Prac. Guide: Real Property Trans. (The
Rutter Group 2024) “Loan Applications and Loan Commitments”
Ch. 6-C, ¶ 6:100.) The loan commitment stage is at issue here.
“Once the lender approves the borrower’s application, it will
10
typically (but not necessarily) send the borrower some form of
written ‘commitment’ to make the loan. A written commitment
sets forth the fundamental terms and conditions upon which the
lender will make the loan and provides that the lender will hold
its commitment open for a certain period of time. [¶] So long as
it contains the minimum essential terms (identity of lender and
borrower, amount of the loan and repayment terms, . . .), a
written loan commitment is binding on the lender, subject to any
conditions precedent stated in the commitment.” (Id. at ¶ 6:130.)
Courts have routinely refused to enforce purported loan
offers that did not contain all the essential terms of the loans.
In Peterson, for example, a builder alleged that a lender orally
promised both to make a construction loan to finance a housing
project and to provide long-term financing (referred to as a
“permanent loan”) upon the project’s completion. (Peterson,
supra, 233 Cal.App.3d at p. 109.) The builder subsequently
signed construction loan documents prepared by the lender that
identified the lender’s wholly owned subsidiary, TPEC, as the
“permanent lender.” The builder also signed a “letter of
commitment” for long-term financing with TPEC, which stated
that a payment of $4,920 would be required for the commitment
to provide permanent financing, and construction loan
disbursement instructions that allocated a “permanent loan
commitment fee” of $4,920 to TPEC. (Id. at pp. 108–109.)
The lender issued the builder a $492,000 construction loan
pursuant to the construction loan documents. Approximately a
year later, when that loan was coming due, the builder asked
whether TPEC or its parent would supply the long-term
financing for the project; the lender’s representative responded
that the lender had decided not to offer long-term financing.
11
(Ibid.) Ultimately, the builder was unable to obtain long-term
financing, and the lender foreclosed on the property. (Peterson,
supra, 233 Cal.App.3d at p. 110.)
The builder sued the lender and TPEC for breach of
contract, breach of the implied covenant of good faith and fair
dealing, breach of fiduciary duty, and constructive fraud,
asserting that it entered into the construction loan agreement
because of the representation that long-term financing would be
provided for the project, and the letter of commitment constituted
a binding contract that was breached when TPEC refused to
provide that financing. (Peterson, supra, 233 Cal.App.3d at
p. 110.) The builder noted that the construction loan agreement
required by its terms “ ‘a letter or other written acknowledgment
from the Permanent Lender that the Permanent Commitment is
in full force and effect,’ ” and it defined the “permanent lender” as
TPEC. The builder thus urged that the letter of commitment
should be deemed an enforceable agreement when read in light of
the construction loan agreement. (Id. at p. 113.)
The trial court granted summary judgment for the lender
and TPEC, and the Court of Appeal affirmed. The appellate
court explained that a letter of commitment for which a fee is
paid generally constitutes an option for the applicant to obtain a
loan at the specified terms, but “[u]nder the usual principles of
lender liability, ‘[a] loan commitment is not binding on the lender
unless it contains all of the material terms of the loan, and either
the lender’s obligation is unconditional or the stated conditions
have been satisfied. When the commitment does not contain all
of the essential terms . . . the prospective borrower cannot rely
reasonably on the commitment, and the lender is not liable for
either a breach of the contract or promissory estoppel.’ (9 Miller
12
& Starr, op. cit. supra, § 28.4, at p. 8, fn. omitted.) The material
terms of a loan include the identity of the lender and borrower,
the amount of the loan, and the terms for repayment.” (Peterson,
supra, 233 Cal.App.3d at p. 115, italics added.)
The court concluded that TPEC’s letter of commitment was
not binding because it did not include all the material terms of
the loan. The court explained: “First, the identity of the
potential borrower is not made clear; the letter contemplates
offering financing either to Peterson or to its individual
prospective home buyers in the project. Next, the amount of the
loans is not specified; a blank appears where the letter requires
specification that ‘the aggregate amount of all loans shall not
exceed $ _______.’ It is also generally stated that the amount of
the loan(s) ‘shall be up to 90% of Lender’s appraisal or the
purchase price, whichever is less.’ The terms of repayment of the
loan(s) are nowhere specified in the letter, except that the
lender’s ‘standard interest rate quoted from time to time during
the term hereof for comparable loans as of the date the loans are
approved by Lender’ shall be used. Similarly vague provisions
are stated with regard to amortization and adjustable rate
mortgages, while standard provisions are included concerning
closing costs, insurance, and documentation.” (Peterson, supra,
233 Cal.App.3d at p. 115.) Accordingly, the court said, “[n]o
enforceable contract to provide permanent financing” had been
created. (Ibid.)
The court similarly concluded there was no enforceable
promise in Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60
Cal.App.3d 885, 891 (Laks). There, the plaintiffs received a
conditional commitment letter (letter) from the defendant bank
for a loan to finance the construction of a hotel. The letter
13
identified the lender, the maximum amount of the loan, “which
must be supported by appraised value with resulting loan to
value ratio not in excess of 75%,” the interest rate, the loan term,
and the applicable fees. (Id. at p. 887.) The letter stated,
however, that the percentages of financing to be provided by the
lender and two other banks was still being negotiated, and who
owned the proposed project needed “to be clarified.” (Id. at
p. 888.) When no loan ultimately was consummated, the
plaintiffs sued the lender for promissory estoppel, contending
that the bank had promised an interim loan to finance
construction and a long-term loan. The trial court sustained the
lender’s demurrer, and the plaintiffs appealed. (Id. at pp. 888–
889.)
The Court of Appeal affirmed, holding that the letter was
not a clear and unambiguous promise on which the plaintiffs,
sophisticated parties, could reasonably rely. (Laks, supra, 60
Cal.App.3d at p. 893.) The court explained that the letter
expressly stated that it was a “conditional commitment,” and it
was silent as to material terms of the loan, including the loan
amount, payment schedules, identification of the security,
prepayment conditions, terms for interest calculations, and loan
disbursement procedures, and rights and remedies of the parties
in case of default. (Id. at p. 891.) Although “[n]one of these,
standing alone, would necessarily make the offer conditional if
missing[,] . . . the fact that so many important conditions are
absent . . . emphasizes the conditional nature of the letter and
strengthens the argument that the parties were still in the
negotiation stage.” (Ibid.) The court concluded: “[The plaintiffs]
appear, from the record, to be experienced businessmen. . . . We
cannot believe that they did not understand the conditional offer
14
to be just that—and that the many essentials referred to were
missing. They should have resolved the ambiguities and obtained
a finalized agreement and not relied on the [letter]. In other
words, they could not have had legitimate expectations that this
was a binding offer; therefore, they could not reasonably have
relied on it.” (Id. at p. 893.)
With these legal principles in mind, we turn to the
allegations of the present complaint.
III. Plaintiff Failed to State a Cause of Action for
Promissory Estoppel
The first cause of action alleges a claim for promissory
estoppel. “ ‘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 foreseeable; and (4) the party asserting the
estoppel must be injured by his reliance.” ’ ” (Jones v. Wachovia
Bank (2014) 230 Cal.App.4th 935, 945.) “ ‘ “Promissory estoppel
applies whenever a ‘promise which the promissor should
reasonably expect to induce action or forbearance on the part of
the promisee or a third person and which does induce such action
or forbearance’ would result in an ‘injustice’ if the promise were
not enforced. . . .” ’ ” (Aceves v. U.S. Bank N.A. (2011)
192 Cal.App.4th 218, 227 (Aceves).) A “ ‘plaintiff’s misguided
belief or guileless action in relying on a statement on which no
reasonable person would rely is not justifiable reliance. . . . “If
the conduct of the plaintiff in the light of his own intelligence and
information was manifestly unreasonable, . . . he will be denied a
recovery.” ’ [Citation.] A mere ‘hopeful expectation[ ] cannot be
equated with the necessary justifiable reliance.’ ” (Ibid.)
15
Plaintiff contends that Razavi’s April 6 email constituted a
clear and unambiguous loan offer on which he reasonably relied.6
But as in Peterson and Laks, Razavi’s April 6 email did not state
the amount of the proposed loans. At most, the email set forth
the purported values of the three properties that would
collateralize the loans—but as the Bank points out, the email did
not specify what percentage of the properties’ values (the so-
called “loan-to-value ratio”) the Bank was willing to loan.7 Thus,
it is uncertain on the face of the email how the property values
were to be converted into loan amounts. Further, even had a
6 We note that the SAC recast the alleged “loan commitment”
as a “rate commitment.” Labels aside, plaintiff’s allegation that
the Bank committed to giving him loans is central to all of his
claims. Therefore, we evaluate the SAC through this lens.
7 “A ‘loan to value ratio’ is a comparison between the amount
to be loaned and the appraised value of the property.”
(Greenwald & Bank, Cal. Prac. Guide: Real Property Trans. (The
Rutter Group 2024) “Loan Applications and Loan Commitments”
Ch. 6-C, ¶ 6:109.) “Lenders are concerned about loan to value
ratios because they want to loan only a portion of the total value
of the property. The difference between the amount of the loan
and the appraised value provides the lender with an equity
cushion so that, in the event the lender forecloses and takes back
the property, there is sufficient equity to cover expenses—such as
costs of foreclosure, lost interest on the loan, the lender’s carrying
charges while the property is being marketed (taxes,
maintenance and insurance, etc.), and the cost of reselling the
property (broker commissions and escrow charges). [¶] This
equity cushion also provides the lender with some comfort that,
even if the property should decrease in value, the loan amount
will not exceed the value of the property.” (Id. at § 6:110.)
16
loan-to-value ratio been specified, the emails state that the loan
amounts would be based not on the values set forth in the emails,
but on the properties’ appraised values, which had not yet been
determined.
Plaintiff suggests that the April 6 emails must be
considered in light of the April 4 phone call, during which Razavi
allegedly said the Bank would extend loans totaling $30 million.
But while considering the April 4 phone call and the April 6
emails together arguably clarifies the loan amounts, it renders
the loan terms fatally ambiguous. That is, while the April 6
email specifies a 10-year repayment term with an interest rate of
2.25 percent, the SAC alleges that Razavi offered a longer
repayment term on April 4—namely, that the loan could be
repaid over 30 years, at a fixed 2.25 percent rate for 10 years,
followed by a variable rate for 20 years. Plaintiff does not explain
the discrepancy between the length and terms of the loans
discussed on April 4 and April 6, nor does he allege on which
terms he allegedly relied. And, significantly, neither the April 4
phone call nor the April 6 emails purport to specify how long the
Bank would allow plaintiff to take advantage of these rate terms.
In short, plaintiff did not allege that the Bank made an
enforceable promise to loan a certain sum. As such, it was
manifestly unreasonable for plaintiff, who was a sophisticated
businessperson with previous experience in obtaining
multimillion dollar loans, to rely on the Bank’s “rate
commitment.” The trial court did not err in so concluding.
Plaintiff attempts to distinguish Laks by pointing out that
Laks involved an expressly conditional offer that had many
missing loan terms because the parties were still in negotiations.
Plaintiff references Razavi’s email to him, which wished him
17
“Congratulations,” as an indication that the parties were no
longer in negotiations. But as we have said, the loan amounts
described in the April 6 email were expressly contingent on
future appraisals of plaintiff’s properties and were ambiguous as
to the repayment periods and terms. Further, Razavi’s April 6
email stated that the mortgage officer “will make sure the 3
mortgage requests are done promptly and seamlessly as possible.
[The mortgage officer] will be submitting the 3 mortgages based
on the values below.” (Italics added.) When read as a whole, the
email leads to the inevitable conclusion that the Bank had not
promised loans to plaintiff. Rather, the bank communicated to
plaintiff that his requests for mortgages were being submitted for
approval. Like the financing at issue in Laks, the terms
remained subject to negotiation.
Plaintiff also argues we should not apply Peterson8 to bar
his cause of action for promissory estoppel because “holding that
it is unreasonable to rely on any promise that lacks a contract’s
essential terms would be inconsistent with California law by
standing for the proposition that a promissory estoppel claim
fails whenever a breach of contract claim fails, rather than
creating a separate equitable remedy to cover situations when no
contract exists.” We do not agree. It is well established that
promissory estoppel generally affords the plaintiff equitable relief
when there is a clear and unambiguous verbal promise by the
8 Peterson did not involve a promissory estoppel claim and
disposed of plaintiffs’ breach of contract claim at summary
judgment. (Peterson, supra, 233 Cal.App.3d at p. 107.) That
said, we find it instructive with regard to its discussion of lender
liability and the reasonable expectations of borrowers.
18
defendant, but a breach of contract cause of action is barred by
the statute of frauds or by a failure of consideration. (See Allied
Grape Growers v. Bronco Wine Co. (1988) 203 Cal.App.3d 432,
444 [“In California, the doctrine of estoppel is proven where one
party suffers an unconscionable injury if the statute of frauds is
asserted to prevent enforcement of oral contracts.”]; Money Store
Investment Corp. v. Southern California Bank (2002) 98
Cal.App.4th 722, 732 [“The doctrine of promissory estoppel
provides a substitute for consideration to allow enforcement of a
promise.”].) In other words, promissory estoppel remains a viable
cause of action even where a breach of contract cause of action
fails, as long as the plaintiff can allege all the elements of
promissory estoppel.
Significantly, plaintiff fails to cite a case on point that
shows that a loan commitment lacking material loan terms can
be considered a clear, unambiguous, and reliable promise to
support a promissory estoppel claim. Instead, plaintiff cites cases
like Aceves, supra, 192 Cal.App.4th 218, West v. JP Morgan
Chase Bank, N.A. (2013) 214 Cal.App.4th 780 (West), and Garcia
v. World Savings, FSB (2010) 183 Cal.App.4th 1031 (Garcia).
In Aceves, the plaintiff filed for bankruptcy protection
under chapter 7 of the Bankruptcy Code after falling behind on
her monthly mortgage payments. (Aceves, supra, 192
Cal.App.4th at p. 223.) Although she had intended to convert the
bankruptcy to a chapter 13 proceeding, she decided not to do so
after her lender, the defendant bank, promised to work with her
on a loan reinstatement and modification if she would not oppose
its motion to lift the bankruptcy stay. (Ibid.) The plaintiff kept
her end of the bargain, but the bank still sold her home at a
trustee’s sale without ever negotiating with her for the
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reinstatement and modification of her loan. (Ibid.) In reversing
a judgment dismissing the plaintiff's promissory estoppel claim,
the Aceves court concluded the promise was “sufficiently concrete
to be enforceable.” (Id. at p. 222.)
In West, the defendant bank promised the plaintiff
homeowner that it would review her financial data to determine
whether she qualified for a loan modification, and the bank
assured the homeowner that no foreclosure sale was pending.
(West, supra, 214 Cal.App.4th at pp. 788–790, 804.) Two days
later, the bank sold her home at a trustee’s sale. (Id. at p. 790.)
The appellate court concluded that plaintiff sufficiently alleged
promissory estoppel. (Id. at p. 804.)
In Garcia, the plaintiffs contacted their lender to ask for a
postponement of a foreclosure sale while they obtained funds to
cure their default by refinancing other property they owned. The
lender assured them that the foreclosure would not occur without
his approval and agreed to extend the deadline if they needed
more time. (Garcia, supra, 183 Cal.App.4th at p. 1035.) The new
loan took longer than expected, so the plaintiffs left messages for
the lender to let him know. (Id. at p. 1036.) The foreclosure took
place on the original date, unbeknownst to the plaintiffs, who
went ahead with the refinancing of their other property. (Ibid.)
When they contacted the representative, he stated that there had
been a mistake and the foreclosure should not have occurred. On
appeal, this court reversed the trial court’s summary adjudication
of the plaintiffs’ promissory estoppel claim, concluding that
plaintiffs had sufficiently shown an enforceable promise. (Id. at
p. 1046.)
These cases all involve denials of loan modifications and
wrongful foreclosures with regard to plaintiffs who already had
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loans with the banks. These cases do not address ambiguous
communications missing essential loan terms between lenders
and borrowers prior to funding new loans.
Based on the foregoing, we conclude plaintiff has failed to
plead both a clear and unambiguous promise, and reasonable
reliance.
IV. Plaintiff Failed to State a Cause of Action for Fraud
Plaintiff next asserts he sufficiently pled fraudulent
concealment. “As with all fraud claims, the necessary elements
of a concealment/suppression claim consist of
‘ “(1) misrepresentation (false representation, concealment, or
nondisclosure); (2) knowledge of falsity (scienter); (3) intent to
defraud (i.e., to induce reliance); (4) justifiable reliance; and
(5) resulting damage.” ’ ” (Hoffman v. 162 North Wolfe LLC
(2014) 228 Cal.App.4th 1178, 1185–1186.)
Here, the SAC alleged that (1) the Bank made a rate
commitment to plaintiff on April 6; (2) the Bank decided not to
honor its rate commitment to plaintiff on April 15; (3) but it was
not until May 6, 2022, after the federal funds rate increased, that
the Bank told plaintiff that it would not honor its alleged rate
commitment. As with the promissory estoppel claim, plaintiff’s
fraud cause of action hinges on whether plaintiff reasonably
relied on the alleged rate commitment. Plaintiff argues, “[f]or the
reasons discussed with respect to his promissory estoppel claim,
[plaintiff] has sufficiently alleged justifiable reliance, which is a
question of fact that should be properly decided by the jury.”
We disagree. As explained above, plaintiff could not
reasonably rely on the Bank’s April 4 and 6 statements regarding
rates because the loan amounts and period for which the rates
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would be offered were not specified. As plaintiff cannot allege
justifiable reliance, he fails to state a cause of action for fraud.
V. Plaintiff Failed to State a Cause of Action for
Negligent Misrepresentation
Justifiable reliance on the defendant’s alleged
misrepresentation is also an essential element of negligent
misrepresentation. (National Union Fire Ins. Co. of Pittsburgh,
PA v. Cambridge Integrated Services Group, Inc. (2009) 171
Cal.App.4th 35, 50.) As with the fraud claim, plaintiff argues he
alleged adequate reliance based on his promissory estoppel
allegations. For the reasons stated above, plaintiff could not
reasonably rely on the alleged rate commitment. Plaintiff
therefore cannot state a claim for negligent misrepresentation.9
9 Plaintiff “concedes that any further amendment would be
futile if this Court agreed with the Trial Court’s interpretation of
Peterson.” As we agree with the trial court’s interpretation of
Peterson and we conclude that plaintiff cannot plead a clear and
unambiguous promise and reasonable reliance, we do not address
the trial court’s denial of leave to amend.
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DISPOSITION
The judgment is affirmed. Respondent U.S. Bank National
Association is awarded its costs on appeal.
EDMON, P. J.
We concur:
EGERTON, J.
BERSHON, J.*
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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