Filed 2/16/16 Samax Development v. Century Community Lending Co. CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

SAMAX DEVELOPMENT, LLC et al.,

Cross-complainants and Appellants,

v.

CENTURY COMMUNITY LENDING 

COMPANY, LLC et al.,

Cross-defendants and Respondents.

 B257652

 (Los Angeles County

 Super. Ct. No. EC051593)

APPEAL from a judgment and order of the Superior Court of 

Los Angeles County, Laura A. Matz, Judge. Judgment affirmed. Order reversed in part.

Alexander & Yong, Jeffrey S. Yong and John J. Aumer for 

Cross-complainants and Appellants.

Bergman Dacey Goldsmith, Gregory M. Bergman, Richard A. Fond and 

Mark W. Waterman for Cross-defendants and Respondents.

____________________________________
2

INTRODUCTION

In this appeal,1 Samax Development, LLC and its managing member Salah Saleh 

(Saleh) appeal from a judgment following an adverse ruling on their cross-complaint by a

referee appointed pursuant to Code of Civil Procedure section 638, and from an order by 

the trial court granting the motion by Century Community Lending Company (CCLC) 

and its parent company Century Housing Corporation (CHC) for attorneys’ fees against 

Saleh. We affirm the judgment but reverse the award of attorneys’ fees against Saleh. 

FACTUAL AND PROCEDURAL BACKGROUND

A. The Project

As the referee observed, this case involves the unfortunate demise of a 

construction project that ultimately resulted in the loss of Saleh’s business and residence. 

Saleh, who immigrated to the United States from Egypt with a degree in accounting, 

owned and operated liquor stores. One of his stores was in North Hollywood, where 

Saleh and his wife also lived in an adjacent residence. Saleh wanted to develop the 

property, and one of Saleh’s customers said he had borrowed money from CCLC, a 

subsidiary of CHC, to build an apartment building.

CHC is a non-profit organization created in 1995. Its mission is to provide 

financing for affordable housing in underserved communities. CHC initially pursued 

development opportunities, but by 2008 CHC engaged solely in lending for housing 

subsidized by government programs. CHC created CCLC in 2005 to access capital from 

 

1 This is the third appeal in this case. In Century Community Lending Co. v. Saleh

(July 24, 2013, B240487) [nonpub. opn.], we reversed the trial court’s order denying a 

motion filed by Saleh’s wife, Jackie Saleh, to vacate the entry of default and default 

judgment against her. In Century Community Lending Co. v. Saleh (Dec. 14, 2015, 

B255576) [nonpub. opn.], we affirmed the trial court’s judgment in favor of Jackie Saleh 

absolving her of liability as a guarantor of the loan at issue in this case. 
3

a consortium of commercial banks for development projects. CCLC no longer makes 

loans. 

Interested in learning more about CCLC, Saleh visited CCLC’s website, which 

stated, among other things, that CCLC “[h]elps less-experienced developers navigate the 

complicated process of getting a construction loan” and “[p]rovides technical assistance 

to borrowers to get them through the development process, from design to construction to 

lease-up, to ensure the success of their developments.” The website also stated that 

CCLC could provide “[a]ssistance in estimating the total costs of the 

project . . . [d]etermining overall project feasibility . . . [p]roviding referrals to general 

contractors . . . [resolving] operational problems and [curing] deficiencies.” Saleh had 

refurbished apartments in the past and wanted to build an apartment building on his 

property. Because he had no experience with construction loans, he thought technical 

assistance from CCLC would be helpful. Saleh asked his customer to put him in touch 

with someone at CCLC.

In 2007 Tracey Burns, a loan officer of CCLC and CHC, contacted Saleh to 

discuss his proposed project. Saleh told Burns that he did not yet have any plans for his 

project, and Burns advised him to obtain approved plans and permits before pursuing a 

loan from CCLC. Seven months later, after Saleh had retained an engineer and an 

architect to create and obtain approval for the plans, Saleh contacted Burns and they 

arranged a meeting at the project site. The plans called for demolishing the existing 

structure and building a 10-unit apartment complex. Saleh and his wife planned to live in 

one of the units and collect rent from the other units for their retirement.

Burns gave Saleh a construction loan application package, which he and his wife 

completed with the assistance of a contractor Saleh was considering hiring for the project. 

Among other questions, the application asked how Saleh intended to satisfy the “owner’s 

equity requirement,” and Saleh checked the box marked “Existing applicant equity in 

property.” In the application Saleh also stated he had $800,000 in equity in his property, 

$85,000 in debt, and no other liens on the property. The application included a personal 
4

financial statement in which Saleh reported he had $150,000 in cash, $900,000 in real 

property, $100,000 cash value in life insurance, and a net worth of $756,000. 

At trial Saleh conceded that the numbers he provided in the loan application were 

only “estimates,” a fact he never disclosed to CCLC. He further stated that he should 

have listed only $50,000 in cash reserves, roughly 90 percent of which actually belonged 

to various merchants to whom he owed money. He admitted that the life insurance policy 

identified in the loan application had no present cash value because it was payable only 

upon Saleh’s death and that the real property he listed as a personal asset was actually 

owned jointly with his sons. Finally, he admitted that he failed to disclose a prior 

bankruptcy because he believed it was related to a prior entity of his and not to him 

personally. 

B. The Loan Documents

Upon receipt of Saleh’s loan application Burns prepared several internal “credit 

memos” and proposed budgets for Stephen Peelor, Senior Vice President of Lending, to 

submit to the CCLC loan committee. A credit memo prepared on October 23, 2008 

proposed a loan amount of $1,702,000 and inaccurately stated that Saleh was operating 

two markets, had $215,000 in cash, and had a net worth of $2,924,000. Peelor signed this 

memo and submitted it to the loan committee. The committee revised the loan by, among 

other things, changing the loan to value ratio from 75 percent to 65 percent. Burns 

calculated that the loan committee’s revised terms reduced the loan amount by $95,000. 

Following the loan committee’s meeting, Burns sent Saleh a proposed budget that 

listed line item expenses for the project but did not reflect the loan committee’s revisions. 

Each expense had four corresponding columns listing its “Total Cost,” amount “Paid by 

Borrower,” amount “To be Paid by Borrower,” and “Loan Amount.” The budget did not 

include any amount under the “To be Paid by Borrower” column and identified $512,000 

as the total in the “Paid by Borrower” column, including itemized amounts for building 

permits, architectural fees, and other expenses Saleh never informed Burns he had 

actually paid. When Saleh questioned Burns about various inaccuracies in the document, 
5

she told him she was “coordinating the numbers to submit” the loan to the committee. 

Saleh did not press Burns further, assuming she knew what she was doing. 

On November 11, 2008 Burns prepared a new internal credit memo proposing a 

loan of $1,636,00 with a budget showing $95,000 “To be Paid by Borrower” and 

$512,000 already “Paid by Borrower.” She did not correct Saleh’s inaccurate financial 

information reflected in the October 23 credit memo. Peelor submitted this revised credit 

memo to the loan committee. The committee approved the loan on the condition that 

Saleh provide 30 percent equity or meet certain bonding requirements for his contractor. 

Meanwhile, Saleh had decided against using his original contractor and asked 

Burns to recommend one. Burns referred Saleh to Scott Choppin of Urban Pacific 

Construction, Inc. On December 1, 2008 Saleh signed a $1,251,750 cost-plus contract 

with Urban on behalf of Samax, a company Saleh created for the sole purpose of acting 

as the borrower and developer for the project. Saleh testified that he did not read the 

contract with Urban because Burns told him “just to sign it.” 

At the end of 2008, Burns called Saleh to tell him that the loan had been approved 

and he should move out of his residence and close the store. Saleh sold his remaining 

inventory and moved out. 

On January 21, 2009 Urban’s Accounting and Finance Manager, Lenni TrinidadGarcia, sent an email to Burns and Choppin proposing revisions to Saleh’s loan that 

would result in a hard cost “shortfall” of $99,254. Trinidad-Garcia reported to Burns that 

“Salah indicated that he doesn’t have $99,254 to put in” and that Saleh would be asking 

CCLC to increase the loan amount to cover the shortfall. Otherwise, Trinidad-Garcia 

declared the deal was a “no go.” 

On January 27, 2009 CCLC sent Saleh a commitment letter for a loan in the 

amount of $1,636,000. The letter listed the loan’s terms, including a $24,200 origination 

fee and a $2,500 deposit for costs, but did not indicate that the borrower would have to 

contribute $95,000. Nor did the letter state that the loan amount would cover 100 percent 

of project costs.
6

Saleh admitted that, although he reviewed the commitment letter, he did not read 

“every word.” He said he relied on Burns to determine the amount of the loan required to 

complete the project because CCLC stated on its website that the company would provide 

assistance in estimating the total cost of proposed projects. He made no independent 

effort to review or examine the project’s construction costs or to determine whether the 

loan amount was adequate to cover the costs. He nevertheless signed the commitment 

letter on behalf of Samax. 

In February 2009 Burns received an email from a CCLC loan administrator 

informing her that the preliminary title report on Saleh’s property included a $130,500 

trust deed instead of the expected $85,000 and a tax lien of $67,129.85. CCLC had 

originally received the title report on December 9, 2008. The record does not reveal why 

Burns did not learn of these issues or raise them with Saleh before February 2009. Saleh 

advised Burns that he could not pay the lien or make up the shortfall caused by the trust 

deed and asked Burns to increase the amount of the loan to cover these items. 

On February 26, 2009 Burns prepared a new credit memo for the loan committee 

requesting an increase of $146,500 in the loan to cover the lien and “general contractor 

fees.” Because this was an internal document, Saleh never saw it. Peelor approved the 

loan increase, explaining to Burns that approval from the loan committee was not 

required. He also told Burns that the borrower should pay 20 percent of the increase 

from its funds. Burns did not disclose this requirement to Saleh in writing but testified 

she told him about it by phone, which Peelor later stated was uncommon. 

On March 10, 2009 Burns sent Saleh a revised budget that did not conform to the 

format of the original budget from October 2008. The new budget divided project costs 

into two sections, one for hard costs, such as hardware and roofing, and another for soft 

costs, such as fees, taxes, and insurance. For each line item in each section there were 

two columns labeled “Contractor” and “Borrower.” The “Borrower” column was further 

subdivided into two columns called “Equity” and “Loan,” presumably to identify 

amounts in the budget that were to be paid from the borrower’s existing or additional 

equity and those to be covered by the loan. With regard to hard costs, the budget did not 
7

relate any specific line item to any amount in the Borrower’s Equity or Loan columns. 

The budget nevertheless included an entry at the bottom of the hard cost section called 

“Hard Cost Sub-Total” in the amount of $95,000 under Borrower’s Equity and 

$1,055,000 under Borrower’s Loan.

Saleh testified that the numbers in the revised budget were inconsistent with the 

original budget and possibly incorrect, but he never asked Burns to explain them. He 

said Burns simply sent him the document and asked him to sign it, which he did. Again, 

Saleh said he trusted CCLC to “come up with the right amount.” Burns said that in 

discussions about this budget she told Saleh he would need to pay the additional $95,000 

over the course of the loan, but Saleh denies she ever told him that he had to invest his 

own money in the project. Saleh said he wanted a loan large enough to cover all 

construction costs without any additional investment on his part, but he admitted that he 

never conveyed this expectation to Burns or anyone else at CCLC, nor did he verify 

whether the documents he signed reflected this expectation. 

On March 13, 2009 CCLC sent Saleh a commitment letter for a loan in the amount 

of $1,782,500. Like the previous commitment letter, this letter did not specify that 

Samax would have to contribute $95,000 to the project. Saleh signed the letter. On

April 8, 2009 Saleh signed the construction loan agreement on behalf of Samax. 

C. The Default and Foreclosure

Urban demolished Saleh’s liquor store and his home shortly after the loan closed. 

As early as May 12, 2009 Choppin had doubts that Samax could provide evidence of its 

ability to “put [its] 95k in the deal,” as required by the construction contract between 

Urban and Samax. On June 5, 2009, at a meeting among Choppin, Saleh, and CCLC, 

Choppin gave Saleh a letter stating that Urban had the right to discontinue work if Samax 

failed to provide such evidence by July 15, 2009. Saleh contends that this was the first 

time he learned that the loan documents required Samax to contribute funds to the 

project. Saleh said he thought the shortfall was attributable to the tax lien that the 

increased loan amount was supposed to cover. 
8

On June 3, 2009 Burns sent Saleh, Choppin, and the loan administrator an email 

explaining how she had allocated expenses to accommodate the loan. While the money 

trail is difficult to follow, the email states that Burns reduced the amount of Urban’s 

construction contract to offset the tax lien and that “all parties” agreed that “the $95,000 

would come out of the contingency of $205,215, and would be disbursed throughout the 

course of the loan,” leaving a “contingency balance of $110,215.” The email does not 

identify who was responsible for paying the contingency balance, but it does state that 

“any additional cost overruns outside of the [contingency balance] would have to be 

made whole from the Borrower.” 

On June 10, 2009 Saleh signed a revised budget that, unlike the October 2008 or 

March 2009 budgets, included among “hard costs” a line item for $95,000 in the “To be 

Paid by Borrower” column. The accompanying email from Burns explained that the 

revised budget “reflect[s] the $95,000 that will satisfy the contract price.” 

In June 2009 CCLC determined that the loan was “out of balance,” which meant 

that there were insufficient funds to complete the project based on the cost projections at 

the time. The loan assumed a project cost of $1,150,000, but by June 2009 Urban 

estimated the project would cost $1,385,000. It is unclear whether this amount included 

change orders approved after the loan had closed. Under the loan agreement, Samax was 

responsible for the shortfall. On June 16, 2009 CCLC notified Saleh and Choppin that it 

would not fund any more draws on the loan unless Samax could provide, among other 

things, proof of $95,000 in available funds by June 19, 2009. On June 17, 2009 Urban 

notified Saleh that it was going to stop work on the project “due to lack of available 

funding on the construction loan.” 

Throughout July 2009 Saleh attempted to salvage the loan and the project, meeting 

with Choppin and CCLC to discuss his options. Among other things, Saleh submitted a 

bid from another contractor, Saeid Alavi, who had allegedly agreed to cover the 

difference between his contract price and the loan. CCLC, however, refused to approve 

Alavi until he submitted a contract, which he never did. On July 20, 2009 CCLC notified 

Samax the loan was in default. 
9

On August 7, 2009 CCLC sent Samax another notice of default because Samax 

had not yet satisfied its obligation to contribute $95,000 to the project. Saleh attempted 

to borrow additional funds from CCLC or a third party to cover the shortfall and asked 

CCLC for a second deed of trust on the property. CCLC refused. 

On August 27, 2009 CCLC notified Samax that there were five “events of 

default”: (1) construction had stopped for more than 30 days; (2) the loan was out of 

balance; (3) Samax had failed to provide an amended construction contract that 

conformed with the terms of the loan; (4) Samax had not contributed the $95,000; and 

(5) Samax had not provided proof of sufficient construction insurance. CCLC demanded 

payment of $507,781.19, the full amount outstanding on the loan at the time. On 

October 27, 2009 CCLC declared the loan in default and recorded a notice of default. On 

February 19, 2010 CCLC purchased the property through a nonjudicial foreclosure sale. 

D. The Litigation

On November 24, 2009 Urban sued Samax, Saleh, CCLC, and CHC for breach of 

contract and other claims. On May 28, 2010 Saleh and Samax filed a cross-complaint 

against CCLC and CHC. On March 29, 2011 the court granted a motion by CCLC and 

CHC pursuant to Code of Civil Procedure section 638 to appoint a referee to hear and 

determine any and all issues in the case and to render a statement of decision. 

The operative first amended cross-complaint alleged causes of action for breach of 

contract, fraudulent concealment, intentional misrepresentation, breach of the implied 

covenant of good faith and fair dealing, violation of Business and Professions Code 

section 17200, and negligence.2 Most of these claims were based on the allegations that 

CCLC and CHC concealed or misrepresented the fact that the loan documents required 

Samax to invest its money in the project and that Saleh never would have signed the loan 

 

2 The first amended cross-complaint also alleged a cause of action for breach of 

fiduciary duty. The referee sustained a demurrer by CCLC and CHC to that cause of 

action without leave to amend. Samax and Saleh do not challenge that ruling on appeal. 
10

agreement on behalf of Samax had he known that fact. Saleh later testified that, because 

he had no cash to contribute to the project, he would have simply reopened his liquor 

store and continued to live on the adjacent premises. 

E. The Motion for Judgment and Statement of Decision

The referee conducted a seven-day trial in June 2013. At the close of Samax and 

Saleh’s case, CCLC and CHC made a motion for judgment pursuant to Code of Civil 

Procedure section 631.8. Following additional briefing the referee granted the motion for 

judgment on the claims by Samax and Saleh for negligence and fraudulent concealment

against CCLC and on all claims against CHC. On the remaining causes of action against 

CCLC, the referee considered all of the evidence submitted at trial and ruled in favor of 

CCLC. 

The referee stated that this case “presents the overarching issue, among other 

specific issues, of whether CCLC owed Saleh [and Samax] a duty [to] ensure the success 

of [the] project or whether Saleh abdicated his own responsibility to ensure [its] success.” 

The referee found that the testimony of Burns and Saleh was often contradictory, and that 

both witnesses were “often lacking in credibility.” The referee also found that, although 

Saleh had presented himself as “a naïve unsophisticated borrower who did whatever 

Burns advised,” his “claimed naïveté was at odds with his background and experience.” 

According to the referee, Saleh “wanted a loan where he would not be required to 

contribute to construction costs” but never conveyed this expectation to Burns or anyone 

else at CCLC. The referee noted that Saleh “never sought any advice from any third 

party and never attempted to read the documents to understand what he was signing,” 

despite the fact that emails from CCLC “routinely invited his review and comment.”

As for Burns, the referee found she probably knew that Saleh had limited cash 

resources and “attempted to juggle the budget to cover the shortfall.” The referee also 

found that the March 2009 revised budget allegedly disclosing the $95,000 contribution 

requirement was “confusing to read, and virtually impossible to understand.” The referee 

concluded that, although Burns “did not flag” the $95,000 contribution requirement for 
11

Saleh, her omission did not “relieve Saleh of his failure to read the loan documents and 

make sure he understood the details of his $1.7 million project.” Finally, the referee 

found that Burns’s efforts to accommodate Saleh were not nefarious. “Her apparent goal 

was to close the loan for Saleh, not to trick him.” 

On February 27, 2014 the trial court entered judgment against Samax and Saleh 

based on the referee’s amended statement of decision. (See Code Civ. Proc. § 644, 

subd. (a).) Samax and Saleh filed a timely notice of appeal. 

F. The Motion for Attorneys’ Fees

CCLC and CHC moved for an award of attorneys’ fees based on the attorneys’ 

fees provision in the construction loan agreement. Saleh opposed the motion to the 

extent CCLC and CHC sought to recover fees from him personally, arguing that he was 

not a signatory to the loan agreement and did not personally sue CCLC and CHC for 

breach of contract. Saleh argued that he sued CCLC and CHC only in tort, and that 

neither California law nor the loan agreement authorized an award of attorneys’ fees on 

tort claims. 

The trial court granted the motion and awarded CCLC and CHC attorneys’ fees in 

the amount of $1,220,545 against Samax. The court ordered Saleh jointly and severally 

liable with Samax for $213,688 of the total award. Saleh timely appealed, and we 

consolidated the appeal from that order with the appeal from the judgment.

DISCUSSION

A. Standard of Review

Under Code of Civil Procedure section 631.8, the court “‘“may enter judgment in 

favor of the defendant if the court concludes that the plaintiff failed to sustain its burden 

of proof. [Citation.] In making the ruling, the trial court [here, the referee] assesses 

witness credibility and resolves conflicts in the evidence. [Citations.]”’” (Plaza Home 

Mortgage, Inc. v. North American Title Co., Inc. (2010) 184 Cal.App.4th 130, 135.) 
12

“‘“The standard of review of a judgment and its underlying findings entered pursuant to 

[Code of Civil Procedure] section 631.8 is the same as a judgment granted after a trial in 

which evidence was produced by both sides. In other words, the findings supporting such 

a judgment ‘are entitled to the same respect on appeal as are any other findings of a trial 

court, and are not erroneous if supported by substantial evidence.’”’” (Ibid.; see Fink v. 

Shemtov (2012) 210 Cal.App.4th 599, 608 [“[a]n order granting a defense motion for 

judgment under Code of Civil Procedure section 631.8 in a nonjury trial is reviewed 

under the substantial evidence standard,” and “[w]e review the trial court’s express 

factual findings in the statement of decision, and any implied findings, for substantial 

evidence”].) “But we are not bound by a trial court’s interpretation of the law and 

independently review the application of the law to undisputed facts.” (People ex rel. 

Dept. of Motor Vehicles v. Cars 4 Causes (2006) 139 Cal.App.4th 1006, 1012.)

B. CCLC and CHC Were Entitled to Judgment on the Negligence Claim Because

They Did Not Owe Samax and Saleh a Duty of Care

“To state a cause of action for negligence, a plaintiff must allege (1) the defendant 

owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach 

proximately caused the plaintiff’s damages or injuries.” (Lueras v. BAC Home Loans 

Servicing, LP (2013) 221 Cal.App.4th 49, 62 (Lueras).) “The general rule in California 

is that . . . ‘each person has a duty to use ordinary care and “is liable for injuries caused 

by his failure to exercise reasonable care in the circumstances . . . .”’” (Cabral v. Ralphs 

Grocery Co. (2011) 51 Cal.4th 764, 771 (Cabral).) “[I]n the absence of a statutory 

provision establishing an exception to the general rule of Civil Code section 1714, courts 

should create one only where ‘clearly supported by public policy.’” (Ibid.) “Duty is a 

question of law for the court, to be reviewed de novo on appeal.” (Id. at p. 770; see 

Strong v. State (2011) 201 Cal.App.4th 1439, 1449.)

The ordinary lender-borrower relationship is one of the areas of negligence law 

where the courts have “carv[ed] out an entire category of cases from [the] general duty 

rule [as] justified by clear considerations of policy.” (Cabral, supra, 51 Cal.4th at 
13

p. 772.) Because “[l]enders and borrowers operate at arm’s length,” “‘[a]s a general rule, 

a financial institution owes no duty of care to a borrower when the institution’s 

involvement in the loan transaction does not exceed the scope of its conventional role as 

a mere lender of money.’” (Lueras, supra, 221 Cal.App.4th at p. 63, quoting Nymark v. 

Heart Federal Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096 (Nymark).) 

Thus, “[l]iability to a borrower for negligence arises only when the lender ‘actively 

participates’ in the financed enterprise ‘beyond the domain of the usual money lender.’” 

(Wagner v. Benson (1980) 101 Cal.App.3d 27, 35 (Wagner); see Alvarez v. BAC Home 

Loans Servicing, L.P. (2014) 228 Cal.App.4th 941, 948.) Courts have interpreted “active 

participation” to include financial participation in the borrower’s investment or project 

and the provision of “extensive” financial and legal advice after the borrower provided 

the lender confidential information. (See Ragland v. U.S. Bank Nat. Assn. (2012) 209 

Cal.App.4th 182, 207; Barrett v. Bank of America (1986) 183 Cal.App.3d 1362, 1365; 

Kinner v. World Savings & Loan Assn. (1976) 57 Cal.App.3d 724, 729 (Kinner); 

Fox & Carskadon Financial Corp. v. San Francisco Fed. Sav. & Loan Assn. (1975) 

52 Cal.App.3d 484, 489.) Active participation does not include “[n]ormal supervision of 

the enterprise by the lender for the protection of its security interest in loan collateral.” 

(Wagner, supra, 101 Cal.App.3d at p. 35.) 

Samax and Saleh argue that CCLC and CHC owed them a duty to disclose the 

equity requirement and to underwrite the loan “consistent with the source for borrower’s 

equity identified by the borrower,” or, in other words, to underwrite the loan without 

requiring Samax to contribute any cash to the project. They contend that these duties 

arose because the actions of CCLC and CHC went beyond the role of a traditional lender, 

because of the representations on CCLC’s website, and because of public policy. Samax 

and Saleh argue that the involvement of CCLC and CHC in the loan transaction exceeded 

the scope of a conventional lender because CCLC operated as if it were a Community 

Development Finance Institution (CDFI) registered with the Department of the Treasury. 

At trial Samax and Saleh introduced expert testimony explaining that CDFI’s take on risk 

by lending to inexperienced borrowers and providing them “technical assistance.”
14

CCLC’s activities in connection with the loan did not exceed those of a traditional 

lender or constitute “active participation” giving rise to a duty of care. There was no 

evidence that CCLC or CHC stood to benefit financially from the loan transaction as a 

partner in the project’s development or that they provided “extensive” financial and legal 

advice to Saleh or Samax. While CCLC may have provided Saleh some level of 

assistance with budgeting and the selection of the general contractor, such involvement 

falls “far short of the extensive control and shared profits which give rise to liability” for 

negligence. (Wagner, supra, 101 Cal.App.3d at p. 35.) This result is consistent with the 

weight of authority concluding that commercial lenders are entitled to pursue their 

economic interests without regard to their borrower’s economic success. (See

Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 59 [“[w]ith rare 

exceptions, a business entity has no duty to prevent financial loss to others with whom it 

deals directly”]; Lueras, supra, 221 Cal.App.4th at p. 68 [banks have no duty to prevent 

foreclosure]; Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th 429, 436 [“[a]

commercial lender pursues its own economic interests in lending money”]; Sierra-Bay 

Federal Land Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 334 [“[a] 

commercial lender is not to be regarded as the guarantor of a borrower’s success and is 

not liable for the hardships which may befall a borrower”]; Wagner, supra, 101

Cal.App.3d at pp. 34-35 [bank under no duty to protect the success of plaintiffs’ 

investment ]; Kinner, supra, 57 Cal.App.3d at p. 732 [lender owes borrower no duty to 

insure adequacy of construction loan].)

Samax and Saleh argue that the court must still consider the factors set forth in 

Nymark to determine whether public policy imposes a duty of care under the 

circumstances presented in this case. (See Nymark, supra, 231 Cal.App.3d at 

pp. 1098-1100.)3 They assert that a duty arises here because, among other things, the 

“negligent conduct at issue (i.e., not communicating the borrower’s equity requirement 

 

3 Those factors include: (1) the extent to which the transaction was intended to 

affect the plaintiff, (2) the foreseeability of harm, (3) the degree of certainty that the 
15

and not underwriting the loan consistent with the source for borrower’s equity identified 

by the borrower) is sufficiently likely to result in the kind of harm experienced (i.e., 

foreclosure) to impose liability.” The Supreme Court has held, however, that the court 

determines whether a duty exists by “look[ing] to the entire ‘category of negligent 

conduct,’ not to particular parties in a narrowly defined set of circumstances.” (Cabral, 

supra, 51 Cal.4th at p. 774.) Thus, where foreseeability and policy considerations justify 

“a categorical no-duty rule” (id. at p. 772), concluding otherwise by analyzing the factual 

specifics of a case would blur the distinction between the legal question whether a 

defendant owed the plaintiff a duty of care and the factual determination whether the 

defendant breached that duty. (Id. at pp. 772-774.) Nymark applied the foreseeability 

and policy considerations identified by the Supreme Court and concluded that lenders 

such as CCLC and CHC do not owe borrowers a duty of care when acting within the 

scope of traditional lending activities. (Nymark, supra, 231 Cal.App.3d at 

pp. 1098-1100.) We do not analyze the Nymark factors again to determine whether 

CCLC and CHC, which did not act outside the role of a conventional lender, nevertheless

owed Samax and Saleh a duty based on the “negligent conduct at issue” in this case.

Finally, Samax and Saleh argue that CCLC and CHC assumed a duty of care by 

making statements on CCLC’s website describing the services CCLC offers borrowers. 

These statements included representations that CCLC would “[h]elp the less-experienced 

borrower navigate the complicated process of getting a construction loan” and “[p]rovide 

technical assistance to borrowers to get them through the development process.” Citing 

Hanberry v. Hearst Corporation (1969) 276 Cal.App.2d 680, Samax and Saleh argue that 

CCLC’s website created a duty to “reasonably perform” these services. Hanberry, 

however, is distinguishable. In that case a third party magazine publisher placed its seal 

of approval and certification of quality on a product, stating that the magazine 

 

plaintiff suffered injury, (4) the closeness of the connection between the defendant’s 

conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct,

and (6) the policy of preventing future harm. (Nymark, supra, 231 Cal.App.3d at p. 1098, 

citing Biakanja v. Irving (1958) 49 Cal.2d 647, 650.) 
16

“guarantee[d]” a replacement or refund to purchasers of defective products. (Id. at 

p. 682.) The court held that the magazine publisher could be held liable to consumers 

who relied on the seal in purchasing the product. (Id. at p. 683.) In contrast, Samax and 

Saleh point only to general advertising statements on CCLC’s website that describe in 

broad terms the services CCLC offered to borrowers. CCLC’s website did not 

“guarantee” any specific result to borrowers; it did not even guarantee to make a loan to 

any specific borrowers. Samax and Saleh have not cited any authority that imposed a 

duty of care based on general advertising on a website.

C. CCLC and CHC Were Entitled to Judgment on the Fraudulent Concealment 

Claim Because Samax and Saleh Failed To Prove Fraudulent Intent

Samax and Saleh argue that the referee erred in finding on their fraudulent 

concealment claim that neither CCLC nor CHC owed them a duty to disclose the cash 

contribution requirement. To demonstrate fraudulent concealment, the plaintiff must 

show (1) the concealment or suppression of a material fact; (2) where the defendant was 

under a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed 

or suppressed the fact with the intent to defraud the plaintiff, that is, to induce reliance; 

(4) 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; and (5) resulting damages. (Bank of 

America Corp. v. Superior Court (2011) 198 Cal.App.4th 862, 870-871; Lovejoy v. 

AT&T Corp. (2001) 92 Cal.App.4th 85, 93 (Lovejoy).) Knowledge of falsity or scienter 

is an element of fraudulent concealment. (OCM Principal Opportunities Fund v. CIBC 

World Markets Corp. (2007) 157 Cal.App.4th 835, 862-863 (OCM Principal 

Opportunities Fund).)

The duty to disclose a material fact arises where there is a fiduciary relationship, 

the defendant had exclusive knowledge of material facts unknown to the plaintiff, the 

defendant actively concealed a material fact, or the defendant made partial 

representations about material facts. (Bank of America v. Superior Court, supra, 198 

Cal.App.4th at p. 871.) Samax and Saleh alleged that CCLC and CHC owed them a duty 
17

to disclose the cash contribution requirement because CCLC and CHC made partial 

representations about material terms of the loan.

4

 (See Kleffman v. Vonage Holdings 

Corp. (2010) 49 Cal.4th 334, 347 [“the term ‘misrepresent’ may encompass situations 

where someone, having undertaken to provide information regarding a matter, fails to 

disclose all facts that ‘“materially qualify” the limited facts disclosed’”]; Persson v. 

Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1164-1165 [duty to disclose arises 

“when a party to a transaction, who is under no duty to speak, nevertheless does speak 

and suppresses facts which materially qualify the facts stated”]; Vega v. Jones, Day, 

Reavis & Pogue (2004) 121 Cal.App.4th 282, 292 [having undertaken to disclose the 

terms of a transaction, a defendant “is not at liberty to conceal a material term”].)

The referee determined that Samax and Saleh failed to establish that CCLC 

“provided only incomplete information relative to the borrower equity requirement, and 

improperly concealed that Samax would need to infuse $95,000.” The referee found that, 

“[w]hile the proposed budgets . . . are arguably unintelligible insofar as identifying a cash 

infusion by borrower, . . . the number itself is undisputedly included.” The referee also 

found that CCLC supplemented the information contained in the budget with additional 

loan documents, including the loan agreement, which “fully disclose[d] the obligation to 

keep the loan in balance.” Thus, according to the referee, “[a] fair reading of the loan 

documents put Saleh on notice of his financial obligations under the loan agreement and 

specifically of his obligation to invest more equity should the loan fall out of balance.”

Samax and Saleh argue that the referee’s findings are not supported by substantial 

evidence. In particular, they contend that CCLC and CHC provided them certain 

documents purporting to comprise the “complete terms of the Construction Loan, but at 

each step failed to reveal and suppressed the fact that [CCLC] would later demand that 

[Samax] infuse $95,000 of its own cash funds after the close of escrow.” 

 

4 Samax and Saleh alleged there was a fiduciary relationship between the parties, 

but the referee rejected this claim. Samax and Saleh do not challenge this ruling on 

appeal. 
18

We do not review the referee’s finding that CCLC and CHC provided incomplete 

information, however, for substantial evidence. “‘In the case where the trier of fact has 

expressly or implicitly concluded that the party with the burden of proof did not carry the 

burden and that party appeals, it is misleading to characterize the failure-of-proof issue as 

whether substantial evidence supports the judgment . . . . [¶] [W]here the issue on appeal 

turns on a failure of proof at trial, the question for a reviewing court becomes whether the 

evidence compels a finding in favor of the appellant as a matter of law. [Citations.]

Specifically, the question becomes whether the appellant’s evidence was 

(1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave 

no room for a judicial determination that it was insufficient to support a finding.”’” 

(Dreyer’s Grand Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838

(Dreyer’s); see Sonic Mfg. Technologies, Inc. v. AAE Systems, Inc. (2011) 196 

Cal.App.4th 456, 466.) 

The uncontradicted and unimpeached evidence demonstrates here that CCLC and 

CHC suppressed facts that materially qualified the facts they did disclose to Samax and 

Saleh. Before the loan closed, CCLC gave Saleh two budgets along with the proposed 

loan documents. Neither of the proposed budgets nor any other documents CCLC gave 

Saleh before he signed the loan agreement on behalf of Samax accurately disclosed that 

the terms of the loan agreement required Samax to commit $95,000 in cash to the project,

even if project costs did not increase as a result of change orders or increases in the cost 

of materials or labor. Indeed, the budgets appear designed to obscure this fact. Although 

Burns testified that she advised Saleh of the possibility that Samax would have to 

contribute $95,000 to the project, the referee found Burns’s testimony “not credible in 

light of [her] knowledge that Saleh had insufficient cash available to address the tax lien, 

the manner in which she moved numbers around in the budget to facilitate Saleh’s cash 

shortfall through use [of] the contingency amounts, and the reasonable inference that 

Saleh likely would not have gone forward with the project if he realized he had to come 

up with $95,000 when he had no income.” Nor does the fact that the loan agreement

references Samax’s obligation to contribute an undisclosed amount to the project under 
19

some circumstances defeat the fraudulent concealment claim based on partial disclosure. 

(See Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 

226, 241 [oral representations that may have influenced investors’ decisions may be 

actionable fraud even where the written contract contradicts the alleged 

misrepresentations].) Thus, the evidence leaves no room to support the referee’s finding 

that CCLC provided “[ ]complete information relative to the borrower equity 

requirement.” Instead, the evidence compels the conclusion that CCLC and CHC had a 

duty to disclose to Samax and Saleh all of the facts regarding the cash contribution 

requirement, and that CCLC and CHC failed to do so. 

CCLC and CHC argue that, even if they were obligated to disclose the cash 

contribution requirement, the referee’s findings in connection with the intentional 

misrepresentation cause of action that CCLC and CHC did not “intend[ ] to deceive 

Samax” and that, although Burns may have been “bending over backwards to 

accommodate Saleh” she was not trying “to trick him,” preclude Samax and Saleh from 

proving the requisite intent for purposes of the fraudulent concealment cause of action. 

Samax and Saleh argue that these findings do not foreclose their fraudulent concealment 

claim because the intent required for fraudulent concealment is not the intent to deceive 

or defraud, but the “intent to induce conduct—action or inaction—that differs from what 

the plaintiff would have done if informed of the concealed fact.” (Blickman Turkus, LP 

v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 869 (Blickman).)

The legal standard the referee used for the fraudulent misrepresentation claim does 

not accurately reflect the intent requirement for fraudulent concealment. Civil Code 

section 1709 provides: “One who willfully deceives another with intent to induce him to 

alter his position to his injury or risk, is liable for any damage which he thereby suffers.” 

(Italics added.) (See Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173 [elements 

of fraud giving rise to tort action for deceit include “intent to defraud, i.e., to induce 

reliance”]; Lovejoy, supra, 92 Cal.App.4th at pp. 93-94 [“the only intent by a defendant 

necessary to prove a case of fraud is the intent to induce reliance”].) 
20

Although the referee did not apply this standard, her findings of fact nevertheless 

preclude Samax and Saleh from prevailing on their cause of action for fraudulent 

concealment. In addition to proving that CCLC and CHC intended to induce reliance, 

Samax and Saleh also had to prove that CCLC or CHC “intentionally concealed” a 

material fact to effect such reliance. (See Bank of America Corp. v. Superior Court, 

supra, 198 Cal.App.4th at pp. 870-871; Blickman, supra, 162 Cal.App.4th at p. 868.) 

The referee found that Burns neither intentionally nor recklessly concealed the cash 

contribution requirement in the March 2009 budget.5 Instead, the referee found Burns 

“was at worst negligent in juggling the numbers in the budget.” The evidence in the 

record does not compel the opposite conclusion. (See Dreyer’s, supra, 218 Cal.App.4th 

at p. 838.) For example, there is no evidence, through the testimony of Burns or 

otherwise, that CCLC or CHC knowingly withheld material facts from the March 2009 

budget. (Cf. Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, supra, 158

Cal.App.4th at pp. 240, 242 [plaintiff stated a cause of action for fraudulent concealment

by alleging the defendant investment broker knowingly disseminated report that failed to 

disclose material facts]; OCM Principal Opportunities Fund, supra, 157 Cal.App.4th at 

p. 855 [defendant had requisite scienter for concealment where banker knowingly omitted 

material facts from offering memorandum].) Because the referee properly found that 

CCLC and CHC did not have the necessary fraudulent intent, they were entitled to 

judgment on the fraudulent concealment claim.

 

5 The referee also found that there was no “proven or even implied motive for 

CCLC to deceive Saleh or Samax.” Motive, however, is not required to prove intent to 

induce action in connection with a fraudulent concealment claim. Moreover, while 

CCLC may have been motivated to make loans only to borrowers likely to repay them, 

CCLC’s interests may not have been entirely aligned with the individual interests of 

employees like Burns.
21

D. CCLC and CHC Were Entitled to Judgment on Samax’s Breach of Contract 

Claim Because CCLC and CHC Did Not Breach the Loan Agreement

Samax alleged that CCLC and CHC breached the loan agreement by declaring the 

loan “out of balance” and demanding $95,000 after the loan closed. The referee ruled 

against Samax, finding that section 3.3.1 of the loan agreement required CCLC “to 

disburse proceeds of the Loan only when the Loan is in balance,” as determined by 

CCLC in its sole discretion.6

Samax admits that the loan agreement authorized CCLC to maintain the loan in 

balance and does not dispute the facts underlying the trial court’s ruling on the breach of 

contract cause of action. Instead, Samax argues that, as a matter of law, CCLC acted 

“unreasonably” in demanding $95,000 from Samax because that amount was not tied to 

project costs that had actually been incurred. (See Storek & Storek, Inc. v. Citicorp Real 

Estate, Inc. (2002) 100 Cal.App.4th 44, 62 (Storek) [requiring lender to act reasonably in 

determining whether loan was out of balance pursuant to loan agreement].) “A decision 

is unreasonable when it is arbitrary, capricious, or lacking in evidentiary support.” (Id. at 

p. 59.)

The loan agreement authorizes CCLC to demand payment from Samax in order to 

keep the loan in balance even where project costs have not been incurred. Section 3.3.2 

provides: “The determination of whether the Loan is in balance may be made by Lender 

in its sole discretion at any time, including when a request for a disbursement of the Loan 

is made. . . . The Loan will not be in balance if funds in a single line item or category of 

the Project budget are, in Lender’s sole discretion, insufficient to complete such line item 

or category.” The loan agreement does not require CCLC to limit its calculation to 

project costs that actually have been incurred. Instead, the loan agreement states that 

CCLC may make a loan balance determination at “any time” and in its “sole discretion,” 

 

6 Section 3.3.1 of the loan agreement provides that the loan is in balance when 

“Borrower has invested sufficient funds into the payment of Project costs so that, in 

Lender’s sole judgment, the undisbursed portion of the Loan plus any funds deposited by 

Borrower with Lender shall be sufficient to fully complete and operate the Project and to 

pay all Project costs . . . until the Maturity Date.”
22

thus allowing CCLC to determine that the loan is out of balance based on either estimated 

or actual costs. Thus, CCLC’s determination was not arbitrary, but was based on

applicable language in the loan agreement. Moreover, the inclusion of such language in 

the loan agreement is not unreasonable because it allows lenders to protect their interests 

when they determine that the borrower is unlikely to complete a project within the 

approved budget. (See Perlas v. GMAC Mortgage, LLC, supra, 187 Cal.App.4th at 

p. 436.) CCLC did not act unreasonably in declaring the loan out of balance. (See

Storek, supra, 100 Cal.App.4th at p. 62.) 

Samax also argues that CCLC’s actions under the loan agreement were 

unreasonable because, if CCLC believed Samax owed $95,000 at the time the loan 

closed, then the loan was already out of balance and never should have closed. Between 

the loan’s closing on April 10, 2009 and CCLC’s demand for the $95,000 on June 16, 

2009, however, Saleh approved multiple change orders that increased the cost of the 

project by more than $40,000, and Urban notified CCLC that the cost to complete the 

project would be approximately $100,000 more than previous estimates. Thus, there was 

ample evidentiary support for CCLC’s determination that the loan became out of balance 

after it had closed. (See Storek, supra, 100 Cal.App.4th at p. 62.) CCLC’s determination 

that the loan was out of balance and its subsequent demand for payment were not 

arbitrary, capricious, or unreasonable.

E. CCLC and CHC Were Entitled to Judgment on the Claim for Breach of the 

Implied Covenant of Good Faith and Fair Dealing

Samax argues that CCLC and CHC breached the implied covenant of good faith 

and fair dealing by demanding the $95,000 and halting the project. The referee found 

that, because the loan agreement authorized CCLC to take such actions, CCLC and CHC 

did not breach the implied covenant.

“[E]very contract imposes upon each party a duty of good faith and fair dealing in 

the performance of [a] contract such that neither party shall do anything which will have 

the effect of destroying or injuring the right of the other party to receive the fruits of the 
23

contract.” (Storek, supra, 100 Cal.App.4th at p. 55.) A court, however, may not imply a 

covenant of good faith and fair dealing that contradicts the express terms of a contract. 

(Ibid.; see Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 

1120 [implied covenant may “not be read into a contract to prohibit a party from doing 

that which is expressly permitted by the agreement itself”].) 

CCLC was entitled to demand the $95,000 contribution from Samax pursuant to 

the terms of the loan agreement. Samax concedes that there can be no breach of the 

implied covenant of good faith and fair dealing where the express terms of the contract 

permit the conduct on which the alleged breach of the implied covenant is based. 

Instead, Samax argues that CCLC breached the implied covenant by acting inconsistently 

with Burns’s June 3, 2009 email stating that she had accounted for the $95,000 as a 

contingency that would be disbursed throughout the course of the loan. 

There is nothing in the record suggesting that Samax made this argument in the 

trial court, but even if it had Samax cannot base its claim for breach of the implied 

covenant on an implied obligation not to demand $95,000 when the express terms of the 

loan agreement allowed CCLC to do just that. (See Carma Developers (California), Inc. 

v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374 [covenant of good 

faith and fair dealing may not be implied to vary with express terms of contract]; Jenkins 

v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 524 [scope of conduct 

prohibited by implied covenant of good faith and fair dealing is circumscribed by the 

express terms of the contract].)7

F. The Award of Attorneys’ Fees Against Saleh Must Be Reversed

The trial court ordered Saleh to pay $213,688 in attorneys’ fees. This amount 

represented the fees CCLC and CHC incurred from February 23, 2010, when Saleh and 

 

7 Because we affirm the trial court’s judgment in favor of CCLC and CHC on all 

claims, we do not consider whether the referee erred in dismissing the claims against 

CHC under a theory of agency or respondeat superior. 
24

Samax filed the original cross-complaint, which included a cause of action by both 

Samax and Saleh for breach of contract, to August 16, 2012, when Saleh and Samax filed 

the first amended complaint, which removed Saleh as a cross-complainant on the breach 

of contract cause of action. 

CCLC and CHC requested attorneys’ fees pursuant to section 10.7 of the loan 

agreement, which provided that the prevailing party in “any lawsuit, reference or 

arbitration . . . which arises out of, or which relates to, this Agreement, the Loan 

Documents or the Loan” is entitled to recover reasonable attorneys’ fees and costs.

Although Saleh was not a party to the loan agreement, CCLC and CHC argued that he 

was liable for attorneys’ fees incurred in connection with his short-lived claim for breach 

of that agreement pursuant to Civil Code section 1717, subdivision (a), which provides: 

“In any action on a contract, where the contract specifically provides that attorney’s fees 

and costs, which are incurred to enforce that contract, shall be awarded either to one of 

the parties or to the prevailing party, then the party who is determined to be the prevailing 

party on the contract, whether he or she is the party specified in the contract or not, shall 

be entitled to reasonable attorney’s fees in addition to other costs.”

At the hearing on the motion for attorneys’ fees, counsel for Saleh argued that 

Saleh was not personally liable for the attorneys’ fees incurred by CCLC and CHC

because the first amended complaint superseded the original complaint and effectively 

dismissed his cause of action for breach of contract. The trial court disagreed, stating,

“We can’t just ignore the fact you filed a complaint and caused the other side to incur 

fees.” In its order awarding attorneys’ fees, the trial court found that CCLC and CHC 

were “prevailing parties in this action with regard to the cross-action initiated by Samax 

and . . . Saleh,” and the court ruled that Saleh was jointly and severally liable with Samax 

for $213,688 of the total award of attorneys’ fees of $1,220,545.

“’On review of an award of attorney fees after trial, the normal standard of review 

is abuse of discretion. However, de novo review of such a trial court order is warranted 

where the determination of whether the criteria for an award of attorney fees and costs in 

this context have been satisfied amounts to statutory construction and a question of law.’” 
25

(Connerly v. State Personnel Board (2006) 37 Cal.4th 1169, 1175.) Where, as here, the 

material facts relevant to the award of attorneys’ fees are undisputed and the issue is 

whether the prevailing party is entitled to attorneys’ fees under Civil Code section 1717, 

the issue is a question of law we review de novo. (See id. at p. 1176; see Morgan v. 

Imperial Irrigation District (2014) 223 Cal.App.4th 892, 929 [“[w]here the material facts 

are undisputed, and the question is how to apply statutory language to a given factual and 

procedural context, the reviewing court applies a de novo standard of review to the legal 

determinations made by the trial court”].)

Saleh argues that CCLC and CHC are not entitled to recover attorneys’ fees from 

him because the first amended complaint, which did not include a cause of action by him 

for breach of contract against CCLC and CHC, superseded the original complaint and 

operated as a voluntary dismissal of his breach of contract claim. Saleh relies on Civil 

Code section 1717, subdivision (b)(2), which provides that “[w]here an action has been 

voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no 

prevailing party for purposes of this section.”

Neither party has cited authority addressing the specific issue of whether the 

voluntary amendment of a cause of action to eliminate a plaintiff operates as a 

“dismissal” of that cause of action for purposes of section 1717, subdivision (b)(2). We 

conclude that it does.

“‘[A]n amendatory pleading supersedes the original one, which ceases to perform 

any function as a pleading.”’ (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 

884; see JKC3H8 v. Colton (2013) 221 Cal.App.4th 468, 477.) “‘The amended 

complaint furnishes the sole basis for the cause of action, and the original complaint 

ceases to have any effect either as a pleading or as a basis for judgment. [Citation.] [¶] 

Because there is but one complaint in a civil action [citation], the filing of an amended 

complaint moots a motion directed to a prior complaint.’” (JKC3H8 v. Colton, supra, 

221 Cal.App.4th at p. 477; see State Compensation Ins. Fund v. Superior Court (2010) 

184 Cal.App.4th 1124, 1130-1131.)
26

Moreover, “an amended complaint that omits defendants named in the original 

complaint operates as a dismissal as to them.” (Fireman’s Fund Ins. Co. v. Sparks 

Construction, Inc. (2004) 114 Cal.App.4th 1135, 1142.) This is so even when the 

plaintiff does not file a request for dismissal because “the first amended complaint itself 

would constitute the necessary request for dismissal.” (Ibid.; see Kuperman v. Great 

Republic Life Ins. Co. (1987) 195 Cal.App.3d 943, 947 [filing of amended complaint that

omitted a defendant as a party effected a dismissal of that defendant from the action].) 

The same reasons apply where, as here, the plaintiff files an amended complaint that 

omits a cause of action against a defendant while continuing to assert others: the omitted 

claim is effectively dismissed and “‘ceases to have any effect . . . as a basis for 

judgment.’” (JKC3H8 v. Colton, supra, 221 Cal.App.4th at p. 477.) There is no reason 

to require Saleh to file a formal request for dismissal of his breach of contract cause of 

action after withdrawing it by amendment. (See DuBois v. Workers’ Comp. Appeals Bd.

(1993) 5 Cal.4th 382, 387-388 [statutes should be interpreted to effectuate the purpose of 

the law]; Gong v. City of Rosemead (2014) 226 Cal.App.4th 363, 372 [same].)8 

Therefore, the court erred by awarding attorneys’ fees against Saleh. 

DISPOSITION

The judgment is affirmed. The order awarding attorneys’ fees is reversed as to 

Saleh. CCLC and CHC are to recover their costs on appeal from Samax.

SEGAL, J.

We concur:

PERLUSS, P. J. ZELON, J.

 

8 CCLC and CHC do not argue that Saleh is liable for attorneys’ fees as a 

nonsignatory third party beneficiary of the loan agreement or as a party who “stands in 

the shoes” of Samax. (See Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966-967.)