IN THE SUPREME COURT OF 

CALIFORNIA

KWANG K. SHEEN,

Plaintiff and Appellant,

v.

WELLS FARGO BANK, N.A.,

Defendant and Respondent.

S258019

Second Appellate District, Division Eight

B289003

Los Angeles County Superior Court

BC631510

March 7, 2022

Chief Justice Cantil-Sakauye authored the opinion of the 

Court, in which Justices Corrigan, Liu, Kruger, Groban, 

Jenkins, and McConnell*concurred.

Justice Liu filed a concurring opinion.

Justice Jenkins filed a concurring opinion.

* Administrative Presiding Justice of the Court of Appeal, 

Fourth Appellate District, Division One, assigned by the Chief 

Justice pursuant to article VI, § 6 of the California Constitution.
1

SHEEN v. WELLS FARGO BANK, N.A.

S258019

Opinion of the Court by Cantil-Sakauye, C. J.

Several years after purchasing his house, plaintiff Kwang 

K. Sheen used the home as collateral for two loans he took from 

defendant Wells Fargo Bank, N.A. (Wells Fargo). Plaintiff 

subsequently suffered financial setbacks and missed payments 

on these junior loans. He submitted applications to Wells Fargo 

to modify the loans, but Wells Fargo did not respond. Instead, 

it sent plaintiff letters informing him of the actions it might take 

because of the delinquency of his accounts. The letters did not 

specifically mention foreclosure. Plaintiff alleges that because 

“Wells Fargo did not provide [him] with a written determination 

regarding his eligibility for modification” of the loans prior to 

sending him the letters, plaintiff “believed the letters meant 

that the . . . Loans had been modified such that they were 

unsecured loans” and his house “would never be sold at a 

foreclosure auction.” Eventually, Wells Fargo sold plaintiff’s 

debt. Four years later, the owner of the debt foreclosed on 

plaintiff’s home. Plaintiff sued Wells Fargo.

Specifically, plaintiff asserted a negligence claim against 

Wells Fargo, alleging that the bank “owed Plaintiff a duty of care 

to process, review and respond carefully and completely to the 

loan modification applications Plaintiff submitted.” Plaintiff 

alleged that Wells Fargo breached this duty, causing him to 

“forgo alternatives to foreclosure,” and hence Wells Fargo is 

liable for monetary damages relating to the loss of his house, 

including the value of the home, the hotel and storage costs 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

2

plaintiff incurred when he had to vacate the property, and the 

damage to his credit rating. Wells Fargo demurred, arguing 

that it owed plaintiff no such duty. The Court of Appeal 

affirmed the lower court’s decision to sustain the demurrer but 

noted that “[t]he issue of whether a tort duty exists for mortgage 

modification has divided California courts for years.” (Sheen v. 

Wells Fargo Bank, N.A. (2019) 38 Cal.App.5th 346, 348 (Sheen).)

In this case, we address the issue dividing the lower 

courts: Does a lender owe the borrower a tort duty sounding in 

general negligence principles to (in plaintiff’s words) “process, 

review and respond carefully and completely to [a borrower’s]

loan modification application,” such that upon a breach of this 

duty the lender may be liable for the borrower’s economic 

losses — i.e., pecuniary losses unaccompanied by property 

damage or personal injury? (See, e.g., Southern California Gas 

Leak Cases (2019) 7 Cal.5th 391, 398 (Gas Leak Cases).) We

conclude that there is no such duty, and thus Wells Fargo’s 

demurrer to plaintiff’s negligence claim was properly sustained.

Neither plaintiff’s assertion of a “special relationship” 

between himself and Wells Fargo nor his invocation of the 

factors articulated in Biakanja v. Irving (1958) 49 Cal.2d 647, 

650 (Biakanja) provides a compelling basis to recognize such a 

duty. Plaintiff’s claim arises from the mortgage contract he had 

with Wells Fargo, and as such, falls within the ambit of the 

economic loss doctrine. That judicially created doctrine bars 

recovery in negligence for pure economic losses when such 

claims would disrupt the parties’ private ordering, render 

contracts less reliable as a means of organizing commercial 

relationships, and stifle the development of contract law. (See, 

e.g., Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

3

34 Cal.4th 979, 988–989 (Robinson); Rest.3d Torts, Liability for 

Economic Harm (June 2020) § 3, com. b., p. 3 (Restatement).)

There is good reason to adhere to the economic loss rule in 

this case, given the nature of the parties’ contractual 

relationship and how that relationship might be disrupted by 

recognition of the duty plaintiff advances. In addition, we 

recognize the role of the Legislature, which is better positioned 

to act in this extensively regulated area. Plaintiff’s rationale for 

imposing a duty cannot easily be cabined to the mortgage

context and there are real costs associated with the duty 

plaintiff proposes — costs that, among other things, pit the 

interests of homeowners in default against those seeking 

affordable home loans. Such a balancing of interests, and more 

generally of the “social costs and benefits” (Aas v. Superior Court

(2000) 24 Cal.4th 627, 652 (Aas)) implicated by plaintiff’s 

contentions, is best performed by the Legislature.

Meanwhile, because plaintiff does not assert an action for 

negligent misrepresentation nor one for promissory estoppel, we 

have no reason to consider whether either or both of these claims 

might be viable given the facts he alleges. More generally, 

nothing we say in this opinion should be understood to 

categorically preclude those claims in the mortgage modification 

context.

The Court of Appeal came to the same conclusion that we 

do — there is no duty of the sort pressed by plaintiff. We 

therefore affirm the judgment below.

I. BACKGROUND

Because this case comes to us after the trial court 

sustained Wells Fargo’s demurrer, we take as true all properly 

pleaded material facts, but not conclusions of fact or law 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

4

asserted in the complaint. (See, e.g., Gas Leak Cases, supra, 

7 Cal.5th at p. 395; Moore v. Regents of University of California

(1990) 51 Cal.3d 120, 125.)

Plaintiff alleges that in 1998, he purchased a home (“the 

Property”) in Los Angeles using a “first-lien mortgage loan . . . 

secured by the Property.” That loan is not at issue in this case. 

Seven years later, plaintiff obtained two loans from Wells Fargo 

secured by the same property. These two loans, which the 

complaint refers to as the “Second Loan” and the “Third Loan,”

were in the amounts of $167,820 and $82,037.14, respectively.

Beginning in 2008 or 2009, plaintiff missed a number of 

payments on the Second and Third Loans because of financial 

difficulties he experienced “in the wake of the global financial 

crisis.” Wells Fargo recorded notices of default in connection 

with the loans and scheduled a foreclosure sale of the Property 

for early February 2010.

Plaintiff and his legal representative subsequently 

contacted Wells Fargo “regarding the possibility of cancelling 

the foreclosure sale . . . so that Plaintiff could apply and be 

considered for modification for the Second and Third Loans.” In 

late January 2010, plaintiff submitted applications to modify 

the Second and Third Loans. About a week thereafter, Wells 

Fargo cancelled the February foreclosure sale date.

Plaintiff alleges that “Wells Fargo never contacted 

Plaintiff about the status of his mortgage applications” nor 

informed him “whether his applications for modification of the 

Second and Third Loans had been approved or rejected.” On or 

about March 17, 2010 — a month and a half after plaintiff 

submitted his applications — Wells Fargo sent plaintiff two 

almost identical letters, one in connection with each of the loans. 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

5

Although the complaint does not attach a copy of the letters, it 

does quote a paragraph from the communications, which reads:

“Due to the severe delinquency of your account, it 

has been charged off and the entire balance has been 

accelerated. Accordingly, your entire balance is now 

due and owing. In addition, we have reported your 

account as charged off to the credit reporting 

agencies to which we report. As a result of your 

account’s charged off status, we will proceed with 

whatever action is deemed necessary to protect our 

interests. This may include, if applicable, placing 

your account with an outside collection agency or 

referring your account to an attorney with 

instructions to take whatever action is necessary to 

collect this account. Please be advised that if Wells 

Fargo elects to pursue a legal judgment against you 

and is successful, the amount of the judgment may 

be further increased by court costs and attorney 

fees.”

Also pursuant to the complaint, the letters advised plaintiff “to 

call Wells Fargo immediately if he had any questions.”

Plaintiff alleges he “believed the letters meant that the 

Second and Third Loans had been modified such that they were 

unsecured loans . . . and that the Property would never be sold 

at a foreclosure auction in connection with either the Second or 

the Third Loan as a result of these modifications.” Plaintiff 

based this belief not just on the letters themselves, but also on 

the fact that they had been sent when Wells Fargo had not yet 

responded to his mortgage modification applications. According 

to plaintiff, he “received the March 17, 2010 letters while his 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

6

applications for mortgage modification were still pending, as 

Wells Fargo did not provide Plaintiff with a written 

determination regarding his eligibility for modification of the 

Second and Third Loans prior to March 17, 2010. [¶] Plaintiff 

therefore believed that Wells Fargo sent the March 17, 2010 

letters in response to the applications for mortgage modification 

that he had submitted to Wells Fargo in or about January 2010. 

He believed that the letters meant that the Second and Third 

Loans had been modified such that . . . the Property would never 

be sold at a foreclosure auction.”

Plaintiff alleges that subsequent events corroborated his 

understanding of the letters. First, sometime in March 2010, 

Wells Fargo called plaintiff’s wife. According to plaintiff, 

“During this phone call, a Wells Fargo representative told Ms. 

Sheen that there would be no . . . foreclosure sale of Plaintiff’s 

home but that Wells Fargo would continue to attempt to collect 

money Plaintiff owed to Wells Fargo.” Second, Wells Fargo sent 

plaintiff a letter offering to reduce by half the amount owing on 

the Second Loan if plaintiff would pay the entire amount. 

Because the letter “made no direct mention of a possible 

foreclosure sale and instead referred directly to the intervention 

of a collection agency in connection with the Second Loan,” it 

“further confirmed Plaintiff’s understanding that the Second 

Loan had been modified such that it was now unsecured.” Third, 

five years after these communications — in November 2015 —

Wells Fargo informed plaintiff that it had cancelled (discharged) 

the Third Loan. Per the complaint, “The November 16, 2015 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

7

letter . . . indicated to Plaintiff that . . . the Second Loan, like the 

Third Loan, had been modified in some way.”1

In November 2010, Wells Fargo sold plaintiff’s Second 

Loan to another entity. Specifically, it assigned away both its 

beneficial (ownership) interest and servicing rights.2 Plaintiff 

makes no further allegations of improper conduct by Wells 

Fargo after it sold the loan.

In 2014, four years after Wells Fargo sold plaintiff’s 

Second Loan, the new owner of the loan — Mirabella 

Investment Group, LLC — foreclosed on the Property. Plaintiff 

sued, naming both Mirabella and the entity servicing the loan 

at the time of foreclosure — FCI Lender Services, Inc. (FCI) —

as defendants, along with Wells Fargo. In addition to his 

1 Wells Fargo had cancelled the Third Loan a year prior, in 

March of 2014, and informed plaintiff of the fact at that time. It 

conveyed the same message again in 2015 “in response to a 

complaint Plaintiff had submitted to the Consumer Financial 

Protection Bureau.” Plaintiff offers no explanation concerning 

how a letter that was sent after plaintiff’s house was foreclosed 

upon (see post) corroborated his belief that both the Second and 

Third Loans had become unsecured.

2 The entity holding the servicing rights to a mortgage loan 

is known as a servicer. A servicer is “responsible for account 

maintenance activities such as sending monthly statements to 

mortgagors, collecting payments from mortgagors, keeping 

track of account balances, handling escrow accounts, calculating 

interest-rate adjustments on adjustable-rate mortgages, 

reporting to national credit bureaus, and remitting funds 

collected from mortgagors to the [owners of the beneficial 

interest in the loans].” (Levitin & Twomey, Mortgage Servicing

(2011) 28 Yale J. on Reg. 1, 23 (Levitin).) “Servicers also are 

responsible for handling defaulted loans, including prosecuting 

foreclosures and attempting to mitigate investors’ losses.” 

(Ibid.)
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

8

negligence claims, plaintiff advanced causes of action for 

promissory estoppel (against Mirabella and FCI), intentional 

infliction of emotional distress, and violation of the unfair 

competition law (Bus. & Prof. Code, § 17200 et seq.).

Defendants demurred. The trial court sustained Wells 

Fargo’s demurrer to plaintiff’s negligence claim, finding that 

there was no duty on the part of the bank to “respond timely to 

[plaintiff’s] request to modify the second trust deed.”

The Court of Appeal affirmed. The court concluded that 

the relevant authorities “decisively weigh against extending tort 

duties into mortgage modification negotiations.” (Sheen, supra, 

38 Cal.App.5th at p. 348.) It found instructive the position taken 

by other states and the fact that “the most recent Restatement 

counsels against this extension because other bodies of law —

breach of contract, negligent misrepresentation, promissory 

estoppel, fraud, and so forth — are better suited to handle 

contract negotiation issues.” (Ibid.)

We granted review.

II. DISCUSSION

As previously explained, the specific question we address 

in this case is whether Wells Fargo owes plaintiff a duty “to 

process, review and respond carefully and completely to [his] 

loan modification applications” so as to avoid causing plaintiff 

pure monetary loss through a lack of care in handling his 

applications. Plaintiff does not point to any specific language in 

his contract — which evidently contains no provisions obligating 

Wells Fargo to review or respond to plaintiff’s modification 

application — as the source of this duty. Instead, he claims that 

the duty arises as a matter of law when a borrower submits a 

loan modification application to a lender, and that a lender’s 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

9

failure “to process, review and respond carefully and completely” 

to the application is actionable in tort.

Whether such a tort duty exists is an issue upon which the 

Courts of Appeal are divided. (Compare Sheen, supra, 

38 Cal.App.5th at p. 358, and Lueras v. BAC Home Loans 

Servicing, LP (2013) 221 Cal.App.4th 49, 68 (Lueras) 

[concluding that the defendants “did not have a common law 

duty of care to offer, consider, or approve a loan modification”] 

with Weimer v. Nationstar Mortgage, LLC (2020) 47 Cal.App.5th 

341, 347–348 (Weimer) [recognizing a duty of care in handling a 

loan modification application]; Rossetta v. CitiMortgage, Inc.

(2017) 18 Cal.App.5th 628, 641 (Rossetta) [same, at least when 

the lender allegedly is “making default a condition of being 

considered for a loan modification”]; Daniels v. Select Portfolio 

Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1183 (Daniels) 

[recognizing a duty of care]; Alvarez v. BAC Home Loans 

Servicing, L.P. (2014) 228 Cal.App.4th 941, 944, 948 (Alvarez) 

[recognizing a duty owed by the defendant financial institutions 

to “exercise reasonable care in the review of [the borrower’s] loan 

modification applications” when the “defendants allegedly 

agreed to consider modification of the plaintiffs’ loans”]; see also, 

e.g., Hernandez v. Select Portfolio Servicing, Inc. (C.D.Cal., June 

25, 2015, No. CV 15-01896 MMM (AJWx)) 2015 U.S.Dist. Lexis

82922, pp. *54–*56 [documenting a similar split within the 

federal district courts applying California law]; see also Jolley v. 

Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 901–906 

(Jolley) [in a construction loan appeal, court expressed in dicta 

skepticism regarding “a no-duty rule” within the home 

residential lending context].)

“Duty is not universal; not every defendant owes every 

plaintiff a duty of care. A duty exists only if ‘ “the plaintiff’s 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

10

interests are entitled to legal protection against the defendant’s 

conduct.” ’ [Citation.] Whether a duty exists is a question of law 

to be resolved by the court.” (Brown v. USA Taekwondo (2021) 

11 Cal.5th 204, 213 (Brown).) “A duty of care may arise through 

statute” or by operation of the common law. (J’Aire Corp. v. 

Gregory (1979) 24 Cal.3d 799, 803 (J’Aire).) Below, we consider 

whether either of these sources of law recognizes a duty “to 

process, review and respond carefully and completely to . . . loan 

modification applications” as urged by plaintiff.

A. Statutory Law

Plaintiff does not identify any statute or regulation that 

requires Wells Fargo to treat his modification applications with 

due care. Plaintiff does not rely on the language of Civil Code 

section 1714, which sets out the “ ‘general rule’ governing duty” 

(Brown, supra, 11 Cal.5th at p. 213), as establishing this duty. 

Despite its broad language, section 1714 does not impose a 

general duty to avoid purely economic losses. In relevant part, 

that provision states, “Everyone is responsible, not only for the 

result of his or her willful acts, but also for an injury occasioned 

to another by his or her want of ordinary care or skill in the 

management of his or her property or person . . . .” (Civ. Code, 

§ 1714, subd. (a).) As we have recently explained, “liability in 

negligence for purely economic losses . . . is ‘the exception, not 

the rule,’ under our precedents. [Citation.] And that holds true 

even though Civil Code section 1714 does not, by its terms, 

‘distinguish among injuries to one’s person, one’s property or 

one’s financial interests.’ ” (Gas Leak Cases, supra, 7 Cal.5th at 

p. 400 [so observing in the context of local businesses’ suit for 

damages reflecting the income lost due to the defendant’s 

alleged negligence in allowing a massive gas leak to occur, 

driving away the businesses’ customers]; see also id. at p. 399 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

11

[“What Civil Code section 1714 does not do is impose a 

presumptive duty of care to guard against any conceivable harm 

that a negligent act might cause”]; accord, Quelimane Co. v. 

Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 58 

(Quelimane).)

Nor does plaintiff identify any other statute or regulation 

as imposing the duty he asks us to recognize. He does not 

ground such a duty in the extensive body of state and federal 

legislation and regulations that address mortgage servicing and, 

more specifically, the process mortgage servicers must follow 

with regard to handling modification applications, including the 

California Homeowner Bill of Rights (HBOR). (Civ. Code, 

§ 2923.4 et seq.) As Wells Fargo points out, “where they apply,” 

HBOR and complementary federal legislation specify various 

affirmative actions a servicer is obligated to take when receiving 

modification applications. For example, HBOR specifies that 

upon receiving certain modification applications, “the mortgage 

servicer shall provide written acknowledgment of the receipt of 

the documentation” and must include in that acknowledgement 

“an estimate of when a decision on the loan modification will be 

made,” “deadlines to submit missing documentation,” “[a]ny 

expiration dates for submitted documents,” and “[a]ny 

deficiency in the . . . modification application.” (Civ. Code,

§ 2924.10, subd. (a)(1)–(4); see also 12 C.F.R. 

§ 1024.41(b)(2)(i)(B), (c)(3) (2013).) In addition, the servicer is 

required to apprise the borrower of any foreclosure prevention 

alternative it offers before foreclosing, cannot foreclose while a 

modification application is pending (Civ. Code, §§ 2924.9, subd. 

(a), 2923.6, subd. (c)), and must give “written notice to the 

borrower identifying the reasons” for denying an application if 

it does so (Civ. Code, § 2923.6, subd. (f)).
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

12

Yet neither HBOR nor any other state or federal statute 

or regulation applies here to impose a duty along the lines 

sketched by plaintiff. By its plain terms, HBOR’s provisions 

apply only to first lien mortgages. (See Civ. Code, § 2924.15, 

subd. (a) [“Unless otherwise provided, paragraph (5) of 

subdivision (a) of Section 2924, and Sections 2923.5, 2923.55, 

2923.6, 2923.7, 2924.9, 2924.10, 2924.11, and 2924.18 shall 

apply only to a first lien mortgage or deed of trust that meets 

either of the following criteria”]; see also, e.g., Civ. Code,

§ 2924.10, subd. (a) [specifying requirements applicable “[w]hen 

a borrower submits a complete first lien modification application 

or any document in connection with a first lien modification 

application”].) Because the loans at issue in this case were 

junior loans — the second and third loans that plaintiff secured 

using the Property as collateral — HBOR does not apply. 

Likewise, plaintiff does not bring a claim under any other state 

or federal law governing mortgage loan modifications, such as 

the California Foreclosure Prevention Act (Civ. Code, § 2924 et 

seq.), the Real Estate Settlement Procedures Act (12 U.S.C. 

§ 2601 et seq.), or the Home Affordable Modification Program 

(12 U.S.C. § 5201 et seq.). Plaintiff has determined that these 

laws “did not or could not offer him the type of relief he wanted” 

(Sheen, supra, 38 Cal.App.5th at p. 352), and we have no reason 

to revisit this assessment.

B. Common Law

Rather than focusing on any statute, plaintiff grounds his 

negligence claim in the common law. We conclude that this 

effort fails in light of the economic loss rule. Nor can a duty to 

“process, review, and respond carefully and completely to 

Plaintiff’s loan modification applications” be justified by 

reference to the Biakanja factors. Those factors are commonly 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

13

employed to ascertain whether a court should recognize a duty, 

but are useful and appropriate for that purpose only in 

situations involving parties that are not in privity with one 

another. Finally, the policy justifications plaintiff advances for 

the recognition of a duty are unpersuasive — and in any event, 

the policy considerations implicated here are better left to the 

Legislature.

1. Economic Loss Rule

We begin with a review of the contours of the economic loss 

rule. The rule itself is deceptively easy to state: In general, 

there is no recovery in tort for negligently inflicted “purely 

economic losses,” meaning financial harm unaccompanied by 

physical or property damage. (Gas Leak Cases, supra, 7 Cal.5th 

at p. 400; see also Aas, supra, 24 Cal.4th at p. 636 [“In actions 

for negligence, a manufacturer’s liability is limited to damages 

for physical injuries; no recovery is allowed for economic loss 

alone. [Citation.] This general principle [is] the so-called 

economic loss rule”]; Seely v. White Motor Co. (1965) 63 Cal.2d 

9, 18 (Seely) [similar]; Rest., § 1 [“An actor has no general duty 

to avoid the unintentional infliction of economic loss on 

another”].)

The economic loss rule has been applied in various 

contexts. First, it carries force when courts are concerned about 

imposing “ ‘liability in an indeterminate amount for an 

indeterminate time to an indeterminate class.’ ” (Gas Leak 

Cases, supra, 7 Cal.5th at p. 414, quoting Ultramares Corp. v. 

Touche (N.Y. 1931) 174 N.E. 441, 444.) 

In another recurring set of circumstances, the rule 

functions to bar claims in negligence for pure economic losses in 

deference to a contract between litigating parties. (See 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

14

Robinson, supra, 34 Cal.4th at p. 988 [“Quite simply, the 

economic loss rule ‘prevent[s] the law of contract and the law of 

tort from dissolving one into the other’ ”]; Aas, supra, 24 Cal.4th 

at pp. 635–636; accord, Erlich v. Menezes (1999) 21 Cal.4th 543, 

550–551 (Erlich); Bily v. Arthur Young & Co. (1992) 3 Cal.4th 

370, 398 (Bily); Foley v. Interactive Data Corp. (1988) 47 Cal.3d 

654, 683 (Foley).) Regarding this latter branch of the doctrine, 

one scholar has stated, “Using contract law to govern 

commercial transactions lets parties and their lawyers know 

where they stand and what they can expect to follow legally from 

the words they have written. But if a disappointed buyer has 

the option of abandoning the contract and suing in tort, the 

significance of the contract is diminished and the doctrines that 

protect the integrity of the contractual process are reduced in 

importance. Parties wrangle over integration clauses to make 

clear that their obligations are the ones stated in the contract 

and nothing else; the point of bothering about such matters 

becomes unclear if a disappointed party can later invoke an 

outside set of obligations that are imposed on the promisor and 

defined by the law of tort.” (Farnsworth, The Economic Loss 

Rule (2016) 50 Val.U. L.Rev. 545, 553–554 (Farnsworth).) The 

Restatement states this form of the economic loss rule thusly: 

“[T]here is no liability in tort for economic loss caused by 

negligence in the performance or negotiation of a contract 

between the parties.” (Rest., § 3.)

Because it involves parties who are in contractual privity, 

this strand of the economic loss rule is sometimes referred to as 

the “contractual economic loss rule,” “contractual rule,” or 

“consensual paradigm.” (See, e.g., Sharkey, In Search of the 

Cheapest Cost Avoider: Another View of the Economic Loss Rule

(2018) 85 U.Cin. L.Rev. 1017, 1018–1019 (Sharkey); Dobbs, An 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

15

Introduction to Non-Statutory Economic Loss Claims (2006) 

48 Ariz. L.Rev. 713, 714.) The Restatement offers an 

illuminating explanation of this form of the economic loss rule. 

According to the Restatement, the principle that “there is no 

liability in tort for economic loss caused by negligence in the 

performance or negotiation of a contract between the parties” 

(Rest., § 3 at p. 2) “serves several purposes.” (Id., com. b., p. 3.) 

For one, it “protects the bargain the parties have made against 

disruption by a tort suit.” (Ibid.) For another, “the rule allows 

parties to make dependable allocations of financial risk without 

fear that tort law will be used to undo them later.” (Ibid.) 

“Viewed in the long run,” therefore, “the rule prevents the 

erosion of contract doctrines by the use of tort law to work 

around them.” (Ibid.)

Not all tort claims for monetary losses between 

contractual parties are barred by the economic loss rule. But 

such claims are barred when they arise from — or are not 

independent of — the parties’ underlying contracts. (See 

Robinson, supra, 34 Cal.4th at p. 991 [holding that “the 

economic loss rule does not bar [the plaintiff’s] fraud and 

intentional misrepresentation claims because they were 

independent of [the defendant’s] breach of contract”]; Erlich, 

supra, 21 Cal.4th at pp. 551, 552 [explaining that “[t]ort 

damages have been permitted in contract cases” when “the duty 

that gives rise to tort liability is either completely independent 

of the contract or arises from conduct which is both intentional 

and intended to harm”].) Plaintiff’s claim here arises from, and 

is not independent of, the mortgage contract.
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

16

a. The Economic Loss Rule Bars Plaintiff’s 

Negligence Claim

Plaintiff and Wells Fargo had a contract. Plaintiff’s 

complaint alleges that he “obtained a second-lien residential 

mortgage from Wells Fargo” that was “secured by the Property 

pursuant to a deed of trust.”3 Plaintiff thus had an agreement 

with Wells Fargo that specified the parties’ rights and 

obligations with respect to the mortgage loan and the collateral 

securing the loan. In particular, the fact that the mortgage was 

“secured by the Property pursuant to a deed of trust” (impliedly 

with the power of sale) means the parties agreed that Wells 

Fargo would have the right to seize and sell the property in 

satisfaction of the debt should plaintiff stop making payments 

on the loan. (See, e.g., Trustors Security Service v. Title Recon 

Tracking Service (1996) 49 Cal.App.4th 592, 595; 5 Miller & 

Starr, Cal. Real Estate (4th ed.) Deeds of Trusts and Mortgages, 

§ 13.1, p. 13-16.) These were the terms of the parties’ 

agreement.

Plaintiff and Wells Fargo did not agree that should 

plaintiff default and attempt to renegotiate his loan by 

submitting a modification application, Wells Fargo would 

“process, review and respond carefully and completely to the . . . 

applications Plaintiff submitted,” and could foreclose only after 

discharging such obligations.4 (Accord, Copeland, supra, 96 

3 Plaintiff makes similar allegations with respect to the 

Third Loan, but we focus here on the Second Loan because the 

Third Loan ultimately was discharged.

4 Plaintiff’s briefs at times appear to argue that even if 

Wells Fargo had no initial obligation to handle the requested 

loan modifications with due care, such an obligation arose once 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

17

Cal.App.4th at pp. 1257–1259 [discussing and upholding the 

validity of a contract to negotiate, or an agreement to negotiate 

the terms of a future contract].)5 To impose a tort duty in such 

Wells Fargo “agree[d] to consider a modification of an 

applicant’s loan.”

Plaintiff’s complaint, however, is devoid of any allegation 

that Wells Fargo actually agreed to consider his applications. 

Plaintiff’s pleading merely alleges that he submitted the 

applications and then did not receive a response or a “written 

determination” from Wells Fargo. These allegations do not give 

rise to a reasonable inference that Wells Fargo agreed to 

“consider a modification of [the] applicant’s loan.”

Furthermore, even if Wells Fargo did accept the 

applications for consideration, it is unclear why mere acceptance 

of the applications would give rise to a tort duty to “process, 

review, and respond carefully and completely to the loan 

modification applications.” As the Restatement makes clear, 

even when parties are actively negotiating a contract, “there is 

no liability in tort for economic loss caused by negligence” during 

such negotiations. (Rest., § 3; see also id., com. b., p. 2; accord,

Copeland v. Baskin Robbins U.S.A. (2002) 96 Cal.App.4th 1251, 

1260 (Copeland) [“When two parties, under no compulsion to do 

so, engage in negotiations to form or modify a contract neither 

party has any obligation to continue negotiating or to negotiate 

in good faith. Only when the parties are under a contractual 

compulsion to negotiate does the covenant of good faith and fair 

dealing attach”]; Racine & Laramie, Ltd. v. Department of Parks 

& Recreation (1992) 11 Cal.App.4th 1026, 1031 [explaining that, 

absent an express agreement to the contrary, a defendant had 

no contractual obligation to “negotiate new terms of the 

concession contract, [and] that its commencement and 

continuance of negotiations over a long period of time had no 

effect upon this lack of obligation”].)

5

In part II.B.2.b, post, we address the Attorney General’s 

argument that due to imperfect rationality, understanding, or 

attention, a borrower is unlikely to bargain regarding terms that 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

18

circumstances would go further than creating obligations 

unnegotiated or agreed to by the parties; it would dictate terms 

that are contrary to the parties’ allocation of rights and 

responsibilities. The proposed duty would impede Wells Fargo’s 

right to foreclose by permitting foreclosure only after Wells 

Fargo discharges a tort duty to “process, review and respond 

carefully and completely to [a borrower’s] loan modification 

application[s].”

Put differently, plaintiff’s claim here is not independent of 

the original mortgage contract, not because his claim merely 

relates to the subject of that agreement, but because it is based 

on an asserted duty that is contrary to the rights and obligations 

clearly expressed in the loan contract. If we are to give deference 

to the parties’ agreement — and more generally to accord 

respect to contract doctrines — we cannot sustain a tort duty in 

such circumstances. (Accord, e.g., Robinson, supra, 34 Cal.4th 

at pp. 992–993 [“ ‘ “[W]hen two parties make a contract, they 

agree upon the rules and regulations which will govern their 

relationship; the risks inherent in the agreement and the 

likelihood of its breach. . . . Under such a scenario, it is 

appropriate to enforce only such obligations as each party 

would become relevant only in the event the borrower needed to 

modify a loan. We note, however, that this is different from an 

argument that a borrower could not as a matter of law have 

negotiated over such terms. As the Copeland court explained, 

there is “no reason why in principle the parties could not enter 

into a valid, enforceable contract to negotiate the terms” of 

contract that is neither “illegal [n]or immoral.” (Copeland, 

supra, 96 Cal.App.4th at p. 1257.) A mortgage contract is 

obviously legal, as are modifications of such contracts.
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

19

voluntarily assumed, and to give him only such benefits as he 

expected to receive; this is the function of contract law” ’ ”].)

b. Opinions from Other Jurisdictions Support the 

Approach We Adopt Today

The application of the economic loss rule to bar plaintiff’s 

asserted tort claim is consistent with well-reasoned decisions 

from other federal and state courts, including the views of other 

state supreme courts that have addressed the issue before us.

In Wigod v. Wells Fargo Bank, N.A. (7th Cir. 2012) 673 

F.3d 547, 558 (Wigod), the plaintiff homeowner applied to 

modify her mortgage loan. The defendant bank “determine[d] 

that Wigod was eligible” for modification under the federal 

Home Affordable Mortgage Program (HAMP) and sent her an 

agreement known as a Trial Period Plan (TPP). (Ibid.) When 

the bank ultimately failed to offer Wigod a loan modification, 

Wigod sued in contract and in tort. The circuit court, applying 

Illinois law, held that Wigod had stated a valid breach of 

contract claim under the TPP.6

The court rejected Wigod’s negligence claim, however, 

concluding that it was foreclosed by the economic loss rule. 

(Wigod, supra, 673 F.3d at pp. 555, 567.) Wigod had argued that 

the bank had a duty to hire qualified customer service 

employees and train them to implement HAMP effectively. (See 

6

In part II.B.1.e., post, we discuss the significance — or 

lack thereof — of whether plaintiff has a viable contract claim 

against Wells Fargo. Here, we note that Wigod’s contract cause 

of action was based on an asserted breach of the TPP, and not of 

the original mortgage agreement. (Wigod, supra, 673 F.3d at 

pp. 558–561.) With regard to the original mortgage contract, 

therefore, Wigod’s position was not materially different from 

plaintiff’s.
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

20

Wigod, at p. 567.) The court disagreed, explaining that “[t]o the 

extent Wells Fargo had a duty to service Wigod’s loan 

responsibly and with competent personnel, that duty emerged 

solely out of its contractual obligations.” (Id. at p. 568.) “Wigod’s 

rights,” continued the court, “are contractual in nature. If [the 

defendant bank] failed to honor their agreement — whether by 

hiring incompetents or simply through bald refusals to 

perform — contract law provides her remedies.” (Ibid.) That 

contract itself, the court continued, “ ‘cannot give rise to an 

extra-contractual duty without some showing of a fiduciary 

relationship between the parties,’ and no such relationship 

existed here.” (Ibid.) Because Wigod had alleged only economic 

injury and the bank’s duty did not exist “independent of the 

contract,” Wigod’s negligence claim was barred by the economic 

loss rule. (Id. at p. 567.)

The Supreme Court of Connecticut has similarly declined 

to “recognize a common-law duty requiring a loan servicer to use 

reasonable care in the review and processing of a mortgagor’s 

loan modification applications.” (Cenatiempo v. Bank of 

America, N.A. (Conn. 2019) 219 A.3d 767, 791 (Cenatiempo).) 

The court’s analysis began with the premise that “the law does 

not impose a duty on lenders to use reasonable care in its 

commercial transactions with borrowers because the 

relationship between lenders and borrowers is contractual and 

loan transactions are conducted at arm’s length.” (Id. at p. 792.) 

It then reasoned there was no “ ‘strong showing of policy 

reasons’ ” to warrant different treatment of “a relationship 

between an investor’s loan servicer and a mortgagor [due to] the 

former’s review and processing of a loan modification 

application.” (Id. at pp. 795, 793.) Accordingly, the court 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

21

concluded the servicer owed no “common-law duty of care to the 

plaintiff[] [borrowers].” (Id. at p. 795.)

Likewise, in House v. U.S. Bank Nat. Association (Mont. 

2021) 481 P.3d 820, 828, the Montana Supreme Court reiterated 

that “[u]nless otherwise provided by contract, a lender generally 

has no duty to modify, renegotiate, waive, or forego enforcement 

of the terms of a mortgage loan in order to assist a borrower to 

avoid a default or foreclosure.” Therefore, “[a]lleged errors or 

omissions by a lender in the servicing or administration of a 

mortgage loan [are] . . . generally compensable only in 

contract . . . .” (Ibid.; see also Flagstaff Housing v. Design 

Alliance (Ariz. 2010) 223 P.3d 664, 670 [stating that in the 

construction defect context “if the parties do not provide 

otherwise in their contract, they will be limited to contractual 

remedies” for pure economic loss].) The Montana high court did 

note that “if the lender gives extraordinary advice . . . beyond 

that customary in arms-length lending and loan servicing 

transactions,” such “extraordinary circumstances . . . may . . . 

independently give rise to a special common law fiduciary duty 

of care.” (House, at pp. 828–829; see also id. at p. 829 [“However, 

. . . merely offering, administering, or providing general 

information regarding program eligibility, requirements, or 

process for a distressed loan modification . . . is insufficient 

alone to give rise to a special fiduciary relationship or duty 

between a lender and borrower”].) As we explain below, such a 

rule — which may be restated as “a lender owes no duty of care 

to a borrower when the lender’s involvement in the loan 

transaction does not exceed its customary role in arms-length 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

22

lending and servicing” — is consistent with case law from our 

Courts of Appeal.7

c. Our Courts of Appeal Have Recognized the 

Economic Loss Rule Within the LenderBorrower Context

Our rejection of plaintiff’s arguments as incompatible with

the economic loss rule also harmonizes with a well-established 

principle of state law commonly attributed to Nymark v. Heart 

Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089 

(Nymark). In Nymark, the court stated a “general rule” 

precluding certain tort claims in the lender-borrower context: 

“[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.” (Id. at p. 1096.) We understand this general principle 

(which is distinct from Nymark’s additional assessment that 

Biakanja “support[ed] [its] conclusion that [the] defendant did 

not owe a duty of care to [the] plaintiff” (Nymark, at p. 1099)) as 

a refinement of the contractual economic loss rule in the lenderborrower context, which asks in the first instance whether the 

alleged negligence occurred within the scope of the parties’ 

contractual relationship. In the time since Nymark articulated 

this rule, it has been uniformly accepted among our Courts of 

Appeal, even by those that have held financial institutions owe 

7

In contrast to the above views, plaintiff points to no state 

supreme court that has embraced the duty he now urges upon 

us. Although a minority few opinions by state intermediate 

courts may have recognized a duty within the loan modification 

context (see, e.g., Sheen supra, 38 Cal.App.5th at pp. 355–356

[collecting out-of-state and federal cases]), we regard those 

decisions declining to do so as more persuasive.
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

23

their borrowers a duty of care in the loan modification context. 

(See Weimer, supra, 47 Cal.App.5th at pp. 355–356; Rossetta, 

supra, 18 Cal.App.5th at p. 637; Daniels, supra, 246 Cal.App.4th 

at pp. 1180–1182; Alvarez, supra, 228 Cal.App.4th at pp. 945–

946; accord, Jolley, supra, 213 Cal.App.4th at p. 898.)

None of these courts, however, have regarded the general 

rule stated in Nymark, supra, 231 Cal.App.3d 1089 as 

compelling in the loan modification context, concluding instead 

that Biajanka sets the appropriate standard to determine 

whether a duty of care exists in this setting. (See Weimer, supra, 

47 Cal.App.5th at pp. 355–356; Rossetta, supra, 18 Cal.App.5th 

at p. 637; Daniels, supra, 246 Cal.App.4th at pp. 1180–1182; 

Alvarez, supra, 228 Cal.App.4th at pp. 945–946, 948; Jolley, 

supra, 213 Cal.App.4th at pp. 899–902.) We shall turn to 

Biakanja and its application below. For now, we note that the 

Nymark general rule ordinarily applies “when the institution’s 

involvement in the loan transaction does not exceed the scope of 

its conventional role as a mere lender of money.” (Nymark, 

supra, 231 Cal.App.3d at p. 1096.) 

Plaintiff maintains that the affirmative duty to act — to 

process, review, and respond to the loan modification 

applications — is outside Nymark’s reach because that 

decision’s holding “is limited to the loan origination context.” 

Yet, plaintiff evades the central question relevant to the 

applicability of Nymark’s general principle: whether the 

handling of a loan modification application is within the scope 

of Wells Fargo’s role as a lender. We believe it is. A lender’s 

handling of a modification application is part of a process by 

which the lender decides whether it should adhere to the 

existing contract or offer a new agreement (and if so, under what 

terms). It is a step in the lender’s determination concerning how 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

24

best to collect the money it had dispersed under the loan, 

whether that be by foreclosing (seizing and selling the collateral 

to pay back the loan) or offering new terms that are less 

favorable to the lender than the original contract but that 

potentially improve the odds of the borrower paying. In short, a 

lender’s involvement in the loan modification process —

specifically whether it “process[es], review[s] and respond[s] 

carefully and completely to the loan modification applications [a 

borrower] submitted” — is part and parcel of its assessment 

regarding how best to recoup the money it is owed.

Such involvement, without more, does not “exceed the 

scope of [an institution’s] conventional role as a mere lender of 

money.” (Nymark, supra, 231 Cal.App.3d at p. 1096; see Lueras, 

supra, 221 Cal.App.4th at p. 67 [“a loan modification is the 

renegotiation of loan terms, which falls squarely within the 

scope of a lending institution’s conventional role as a lender of 

money”]; Armstrong v. Chevy Chase Bank, FSB (N.D.Cal., Oct. 

3, 2012, No. 5:11-cv-05664 EJD) 2012 U.S.Dist. Lexis 144125, 

pp. *11–*12 [“a loan modification . . . is nothing more than a 

renegotiation of loan terms. . . . Outside of actually lending 

money, it is undebatable that negotiating the terms of the 

lending relationship is one of the key functions of a money 

lender. For this reason, ‘[n]umerous cases have characterized a 

loan modification as a traditional money lending activity’ ”]; 

Carbajal v. Wells Fargo Bank, N.A. (C.D.Cal., Apr. 10, 2015, No. 

CV 14-7851 PSG (PLAx)) 2015 U.S.Dist. Lexis 47918, p. *13 [“In 

a modification application mishandling case, there is no ‘active 

participation’ in the borrower’s financed enterprise that 

demonstrates that the lender is acting outside the scope of 

conventional arms-length lending activity”].) In sum, although 

“ ‘ “Nymark does not support the sweeping conclusion that a 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

25

lender never owes a duty of care to a borrower” ’ ” (e.g., Rossetta, 

supra, 18 Cal.App.5th at p. 637), it does support the conclusion 

that a lender owes no duty to a borrower in its processing of a 

loan modification application.

d. Cases Not Applying the Economic Loss Rule 

Are Inapposite

It is true that we have, in certain contexts, allowed tort 

actions to proceed even though they arise from, and are not 

independent of, a contract, despite the economic loss rule. 

Specifically, we have allowed for tort recovery in some cases 

involving insurance policies and contracts for professional 

services. (See, e.g., Jonathan Neil & Assoc., Inc. v. Jones (2004) 

33 Cal.4th 917, 923 (Jonathan Neil) [“The remedy for breach of 

[the implied] covenant [of good faith and fair dealing] is 

generally limited to contract damages, but we have recognized 

an exception to this rule when the breach occurs in the context 

of an insurance company’s failure to properly settle a claim 

against an insured, or to resolve a claim asserted by the 

insured”]; Neel v. Magana, Olney, Levy, Cathcart & Gelfand

(1971) 6 Cal.3d 176, 180–181 (Neel) [“Legal malpractice” “gives 

rise to an action in tort”].) But there are good reasons for 

treating modification negotiations between mortgage lenders 

and borrowers differently.

(i) Mortgage lending and modification do not 

share the special characteristics associated 

with contexts exempted from the reach of the 

economic loss rule

As we have recognized, “[t]he insurance cases . . . were a 

major departure from traditional principles of contract law.” 

(Foley, supra, 47 Cal.3d at p. 690; see also Cates Construction, 

Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 43 (Cates 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

26

Construction).) We therefore must “consider with great care 

claims that extension of the exceptional approach taken in those 

cases is automatically appropriate if certain hallmarks and 

similarities can be adduced in another contract setting.” (Foley, 

at p. 690.) Exercising the necessary care, we have rejected 

arguments that employment contracts, performance bonds, or 

even “an insurance company’s breach of the covenant [of good 

faith and fair dealing] when it retroactively overcharges a 

premium it knows is not owed” are sufficiently analogous to the 

core insurance cases to warrant extension of tort remedies into 

those areas. (Jonathan Neil, supra, 33 Cal.4th at p. 923; see also 

Foley, at p. 693 [concluding that “the employment relationship 

is not sufficiently similar to that of insurer and insured to 

warrant judicial extension of the proposed additional tort 

remedies”]; Cates Construction, at p. 60 [holding that tort 

recovery is inappropriate “for a breach of the implied covenant 

of good faith and fair dealing in the context of a construction 

performance bond” because “a construction performance bond is 

not an insurance policy”].)

We come to the same conclusion here regarding mortgage 

contracts and modification applications. In examining the 

“particular characteristics” of insurance policies that justify the 

“exceptional approach” we have taken in the insurance setting 

(Cates Construction, supra, 21 Cal.4th at pp. 45, 46), we see that 

a number of those characteristics do not inhere in the mortgage 

modification context. Within the insurance context, these 

special characteristics include the fact that “when an insurer in 

bad faith refuses to pay a claim or to accept a settlement offer 

within policy limits,” “the insured cannot turn to the 

marketplace to find another insurance company willing to pay 

for the loss already incurred.” (Foley, supra, 47 Cal.3d at p. 692.) 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

27

Moreover, “insurance policies are not purchased for profit or 

advantage; rather, they are obtained for peace of mind and 

security in the event of an accident or other catastrophe” (Cates

Construction, at p. 44), thus making the role of the insurance 

companies “with whom individuals contract specifically in order 

to obtain protection from potential specified economic harm” 

quasi-public in nature. (Foley, at p. 692; see also Egan v. Mut. 

of Omaha Ins. Co. (1979) 24 Cal.3d 809, 819 (Egan); Love v. Fire 

Ins. Exchange (1990) 221 Cal.App.3d 1136, 1148 (Love) 

[“Insurance contracts are unique in nature and purpose. . . . 

Because peace of mind and security are the principal benefits 

for the insured, the courts have imposed special obligations, 

consonant with these special purposes, seeking to encourage 

insurers promptly to process and pay claims”].) In addition, “the 

insurer’s and insured’s interest are financially at odds,” because 

paying a claim directly harms an insurer’s bottom line. (Foley, 

supra, 47 Cal.3d at p. 693.) Because of these characteristics, the 

insurer and insured are said to be in a “special” or quasifiduciary relationship. (See, e.g., Egan, supra, 24 Cal.3d at 

p. 820; McCormick v. Sentinel Life Ins. Co. (1984) 153 

Cal.App.3d 1030, 1050 (McCormick) [“the considerations 

involved in imposing liability on an insurer for unreasonably 

and in bad faith denying coverage under a policy” include “the 

quasi-public nature of the insurance industry, the quasifiduciary relationship between insurer and insured, and 

significantly, the purpose of purchasing insurance — ensuring 

that the insured will be protected against losses incident to a 

disability or other catastrophe”].)

For present purposes, lenders are not akin to insurers 

when they contract with consumers for mortgage loans. 

Although in extending mortgage loans banks may be facilitating 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

28

home ownership in a broad sense, they are not providing 

protection or insurance. Mortgage loans (especially nonpurchase or junior loans like those at issue in this case) are not 

typically taken “for peace of mind and security in the event of an 

accident or other catastrophe” but for “profit or advantage” —

the lender gets paid interest and the borrower gets access to 

money. (Cates Construction, supra, 21 Cal.4th at p. 44.) This 

difference means that as compared to the quasi-public nature of 

insurance, mortgage contracts more closely resemble “a typical 

commercial contract.” (Foley, supra, 47 Cal.3d at p. 692; see also 

Voris v. Lampert (2019) 7 Cal.5th 1141, 1162 [rejecting a 

conversion claim for nonpayment of wages when the availability 

of such a claim would “transform a category of contract claims 

into torts, and pile additional measures of tort damages on top 

of statutory recovery”].)

Given the mutual advantages of mortgage loans, lenders 

and borrowers are not “financially at odds” to the same degree 

as insurers and insureds. (Foley, supra, 47 Cal.3d at p. 693.) 

Even within a modification context, the relationship between 

the borrower and lender is more analogous to that of an 

employee and employer. Similar to how paying salary typically 

benefits both the worker being paid and the employer who gets

work done (see Foley, at p. 693), a loan modification benefits 

both the borrower, who receives a lower payment obligation, and 

the lender, who receives repayment that may not otherwise be 

forthcoming. True, not every modification application results in 

a successful modification, but the possibility of benefiting from 

the transaction means a lender normally has an incentive to 

engage in the negotiation. As such, “there is less inherent 

relevant tension between the interests of [lenders and 

borrowers] than exists between that of insurers and insureds,” 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

29

and “the need to place disincentives on [a lender’s] conduct in 

addition to those already imposed by law simply does not rise to 

the same level as that created by the conflicting interests at 

stake in the insurance context.” (Ibid.)

(ii) Plaintiff’s claim is not similar to those in 

which tort recovery has been allowed 

despite the existence of a contract

Even when tort relief is available within the insurance 

and professional service contexts, we have limited recovery to 

specific claims intended to ensure the consumer receives the 

benefits or services for which he or she has contracted. It would 

therefore constitute a significant extension of the law to 

recognize a negligence claim in the mortgage modification 

context when, as here, the loan agreement does not specify that 

the lender must duly engage with the borrower’s attempt to 

renegotiate the contract.

To elaborate, one rationale offered for recognizing tort 

claims in the insurance context is that insurers, who act as 

gatekeepers to a benefit owed to insureds, should not be allowed 

to use that power to unreasonably withhold those benefits. (See 

Love, supra, 221 Cal.App.3d at pp. 1151–1153.) This 

justification recognizes the vulnerability of the insured in 

receiving the benefits for which the insured has contracted. In 

other words, we recognize the bad faith tort as a tool to 

effectuate the purpose of insurance contracts. (See McCormick, 

supra, 153 Cal.App.3d at p. 1050.) Fittingly, we have denied 

tort relief when insureds’ claims are not closely tied to this 

vulnerability. (See Jonathan Neil, supra, 33 Cal.4th at p. 941 

[declining to extend tort recovery against excessive retroactive 

premium charges because the plaintiffs were “not in the same 

vulnerable position as those who suffer from the insurer’s bad 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

30

faith claims and settlement practices [because] they were not 

denied the benefits of the insurance policy”].)

As especially relevant here, lower courts have denied bad 

faith tort actions for processing delays in the insurance context 

when benefits were not otherwise due to the insured. (See Love, 

supra, 221 Cal.App.3d at p. 1152 [explaining that a processing 

delay was not “an independent ground for recovery of 

damages”].) Yet, this is precisely the nature of plaintiff’s claim 

in the present case. As discussed, plaintiff is seeking only a 

processing duty with regard to his loan modification 

applications. He does not urge us to recognize a duty to process, 

review and respond carefully and completely to his loan 

modification application in order to secure the benefit of a 

bargained-for provision of his loan agreement. He pursues such 

a duty as an extra-contractual obligation, all the while 

conceding that his agreement with Wells Fargo confers upon 

him no right to receive either a loan modification or a specific 

standard of care in the handling of any modification application. 

It does not appear that courts have recognized this sort of 

freestanding process-related duty, even in the insurance bad 

faith context. To permit tort recovery when it may not be 

available in the analogous insurance scenario would extend

even farther the “major departure from traditional principles of 

contract law” represented by the insurance cases. (Foley, supra, 

47 Cal.3d at p. 690.)

Similar considerations distinguish this case from the 

recognized exception to the economic loss rule for consumers 

who contract for certain kinds of professional services. In that 

context, as in the insurance setting, a cause of action for 

negligence ensures that the consumer receives the services the 

professional agreed to provide. In such settings, professionals 
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Opinion of the Court by Cantil-Sakauye, C. J.

31

generally agree to provide “careful efforts” in rendering 

contracted-for services, but “most clients do not know enough to 

protect themselves by inspecting the professional’s work or by 

other independent means.” (Rest., § 4, com. a, p. 22; see also 

Neel, supra, 6 Cal.3d at p. 188.) Given this disparity, a claim for 

professional negligence can serve the important purpose of 

ensuring that professionals render the “careful efforts” they 

have contracted to provide. (Rest., § 4, com. a, p. 22.)

In the present case, again, plaintiff is not simply asking to 

receive a benefit or service he has contracted for. Instead, he 

seeks a duty that appears to cover everything the lender does 

during the pendency of a loan modification application — from 

how it manages paperwork to how clearly it communicates with 

borrowers — that would be difficult to adjudicate in any clear 

and consistent way across cases. To recognize a duty of this 

indefiniteness and breadth seems out of step with our previous 

exceptions to the contractual economic loss rule, which permit 

much more cabined relief to ensure, in effect, that contracting 

parties get what they have contracted for.

In sum, our precedents in the insurance and professional 

services field do not justify recognition of the duty pressed by 

plaintiff, which is both more expansive and less well justified 

than the limited duties answerable in negligence that have been 

imposed in other spheres.

e. Plaintiff’s Efforts to Distinguish Nymark and 

the Economic Loss Rule Are Unpersuasive

Plaintiff advances two arguments why neither Nymark 

nor the economic loss rule applies in this case. First, he asserts 

that because he is not claiming a breach of contract, the 

economic loss doctrine is inapplicable. According to plaintiff, 
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Opinion of the Court by Cantil-Sakauye, C. J.

32

because Wells Fargo did not “breach its underlying loan 

agreements with [plaintiff],” his tort claim is not precluded by 

the economic loss rule. Under plaintiff’s framing, the economic 

loss rule applies only when there is a breach of the underlying 

contract.

The better view, however, is that there does not need to be 

a viable breach of contract claim for the economic loss rule to 

apply. This is the view endorsed by the Restatement. The 

Restatement recognizes that when a contract claim fails because 

of, say, the parol evidence rule or an integration clause, 

“[p]ressure to find a tort claim arises because the stakes are high 

and the plaintiff’s position is sympathetic.” (Rest., § 3, com. d., 

p. 4.) Yet, “[u]sing tort law to bypass [the parol evidence rule or 

other doctrines of contract law] weakens and retards their 

development.” (Ibid.) It also “interferes with the ability of 

others to make reliable agreements in the future.” (Ibid.) The 

better alternative, suggests the Restatement, is to “reconsider 

the application of the parol-evidence rule or other doctrines of 

contract law” or to look for statutory solutions that “impose 

responsibility on sellers for certain risks without distorting 

widely applicable legal principles to reach the desired outcome.” 

(Ibid.; see also Farnsworth, supra, 50 Val.U. L.Rev. at p. 558.)

In this case, plaintiff has no viable contract claim against 

Wells Fargo because the mortgage contract between plaintiff 

and Wells Fargo did not obligate the bank to review or respond 

to plaintiff’s modification application as a precondition to 

foreclosure. Plaintiff argues that recognition of a tort claim thus 

would not infringe on the parties’ bargain and so would not 

implicate the economic loss rule’s rationale of protecting private 

ordering. Plaintiff’s premise fails. Contrary to his assertion, 

permitting him to bring a tort claim on the theory that Wells 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

33

Fargo owes him a duty to carefully process his modification 

applications would tend to “ ‘disrupt’ the bargain [Wells Fargo 

and plaintiff] made when they entered into the original loan 

agreement.” Specifically, it would distort Wells Fargo’s 

bargained-for contractual right to foreclose by rendering 

foreclosure permissible only after Wells Fargo has discharged a

tort duty to review, process, and respond to plaintiff’s 

modification application(s). In other words, plaintiff’s tort 

claim — premised on a duty to “process, review, and respond 

carefully and completely” to a borrower’s modification 

application — is not “independent of the [underlying] contract 

arising from principles of tort law.” (Erlich, supra, 21 Cal.4th 

at p. 551.) Rather, because the imposition of such a duty would 

impede the bank’s contractual right to foreclose, plaintiff’s claim 

arises from the original mortgage contract.

Plaintiff’s second argument concerning why the economic 

loss rule (and Nymark) do not apply in this case fares no better. 

His contention is that at the loan modification stage, borrowers

are “captive,” meaning they “cannot choose who will service 

their loans” or handle their requested loan modifications. 

Moreover, plaintiff’s argument goes, borrowers depend “entirely 

on information from the servicer about whether the loan is likely 

to be modified, and on the status of the modification.” Yet, at 

the point at which borrowers need to modify their loans, i.e., 

when they have either defaulted or are on verge of default, they 

are without the bargaining power to force servicers to provide 

the information or the level of service they need. Moreover, 

servicers have their own incentives — for example, cost 

minimization — which may not align with those of borrowers. 

These factors, according to some courts, “provide a moral 

imperative that those with the controlling hand [i.e., the lender 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

34

or servicer] be required to exercise reasonable care in their 

dealings with borrowers seeking a loan modification.” (Alvarez, 

supra, 228 Cal.App.4th at p. 949; see also Weimer, supra, 47 

Cal.App.5th at pp. 362–363 [adopting Alvarez’s reasoning]; 

Rossetta, supra, 18 Cal.App.5th at p. 642 [same].) 

The difficulty with the argument is that the duties these 

courts have identified arise precisely because the parties are in 

a preexisting contractual relationship, one in which their 

agreement presumably outlined each party’s risks, benefits, and 

obligations to their mutual satisfaction at the time the contract 

was made. The reason plaintiff is completely dependent on 

Wells Fargo is because Wells Fargo is his counterparty to the 

mortgage loan contract. As such, only Wells Fargo has the 

power to release plaintiff from his existing contractual 

obligations on the loans plaintiff took from the bank.8 Having 

taken a loan from Wells Fargo, plaintiff is “ ‘captive,’ ” as he puts 

it, to the extent that he now cannot ask another bank or servicer 

to rewrite the terms of his contract with Wells Fargo. (Alvarez, 

supra, 228 Cal.App.4th at p. 949 [quoting from an amicus curiae 

brief the argument that “ ‘borrowers are captive, with no choice 

of servicer’ ” and “ ‘cannot pick their servicers or fire them’ ”].) 

Similarly, plaintiff has no power “ ‘to hire [or] fire’ ” Wells Fargo 

after submitting his loan modification applications, because 

8 To the extent Wells Fargo has assigned such rights to 

another entity by selling its beneficial interest or servicing right, 

thus giving the assignee the power to modify (or not) plaintiff’s 

loan terms, it is the mortgage contract itself that gives Wells 

Fargo the ability to do so. In other words, plaintiff, by that 

contract, agreed that Wells Fargo was free to assign its interests 

thusly. (See, e.g., Levitin, supra, 28 Yale J. on Reg. at p. 83 

[observing that “[f]ree assignability is a standard term” in 

mortgage loan contracts].)
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

35

when he entered into a mortgage loan with Wells Fargo, he 

agreed to have it — or its choice of assignees — service the loan.9 

(Ibid.) Having so agreed, plaintiff lacks the power to fire Wells 

Fargo in favor of another servicing entity. In short, parties find 

themselves in this position because of the contract.

None of this is to deny the difficulties borrowers face in the 

loan modification context. One such difficulty is that, if 

borrowers have agreed that lenders may freely assign loans, 

borrowers are not thereafter entitled to choose if, when, to 

whom, and to what extent lenders may assign rights to those 

loans. In particular, borrowers do not choose who may 

subsequently service their loans, and thus who will be the 

entities with which they will interact in any loan modification 

attempt. (See, e.g., Alvarez, supra, 228 Cal.App.4th at p. 949.) 

To compound the problem, a borrower may face bargaining or 

information asymmetries in the loan modification process. (See, 

e.g., Jolley, supra, 213 Cal.App.4th at p. 900 [in applying the 

Biakanja factors, asserting that the borrower’s “ability to 

protect his own interests in the loan modification process was 

practically nil”].)

Yet, without denying the quandary of borrowers in 

distress, we see no sound basis for recognizing a tort duty 

limited to this situation. Plaintiff’s rationale for bypassing the 

economic loss rule has no apparent endpoint. Plaintiff does not 

articulate any persuasive basis for treating mortgage contracts 

(and particularly junior-lien loans) differently from various 

other types of agreements. (Accord, Foley, supra, 47 Cal.3d at 

pp. 693, 696 [despite recognizing “[t]he potential effects on an 

9 Plaintiff does not argue that the assignability provision 

contained in his contract was nonnegotiable.
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

36

individual caused by termination of employment,” holding that 

“contractual remedies should remain the sole available relief for 

breaches of the implied covenant of good faith and fair dealing 

in the employment context”]. He has offered no guidance 

concerning how the modification attempts at issue are to be 

distinguished from, say, renegotiations of existing employment 

contracts. (Accord, id. at p. 693.) Regardless of the 

circumstances, whenever parties attempt to modify an existing 

contract, they cannot choose with whom to bargain, because the 

only persons with whom to negotiate are the signatories to the 

original contract (or their choice of assignees, if the contract 

permits reassignments). Thus, to embrace plaintiff’s proposed 

duty would open the door to a potentially enormous expansion 

of tort law. Plaintiff has not persuaded us to take such a leap.

2. Biakanja

Plaintiff also argues that “[i]f the lower court had 

considered the Biakanja factors, it would have seen that they 

squarely point toward a duty of care in the mortgage servicing 

context.” This argument presumes the multifactor approach 

articulated in Biakanja for ascertaining a duty of care applies in 

this context. We conclude it does not.

a. Biakanja Does Not Apply Here

We begin with Biakanja itself. That case involved a will, 

through which the plaintiff’s brother sought to “bequeath[] all 

his property to [the] plaintiff.” (Biakanja, supra, 49 Cal.2d at 

p. 648.) But because the defendant notary public failed to have 

the will properly attested, the brother’s estate passed by 

intestate succession. (Ibid.) The plaintiff, upon receiving “only 

one-eighth of the estate,” sued to recover “the difference between 

the amount which she would have received had the will been 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

37

valid and the amount distributed to her.” (Ibid.) “The principal 

question” raised by the case, we said, “is whether [the] 

defendant was under a duty to exercise due care to protect [the] 

plaintiff from injury and was liable for damage caused [the] 

plaintiff by his negligence even though they were not in privity 

of contract.” (Ibid.) After reviewing case law bearing on this 

question, we articulated the following rubric for resolving the 

issue: “The determination whether in a specific case the 

defendant will be held liable to a third person not in privity is a 

matter of policy and involves the balancing of various factors, 

among which are the extent to which the transaction was 

intended to affect the plaintiff, the foreseeability of harm to him, 

the degree of certainty that the plaintiff suffered injury, the 

closeness of the connection between the defendant’s conduct and 

the injury suffered, the moral blame attached to the defendant’s 

conduct, and the policy of preventing future harm.” (Id. at 

p. 650, italics added.)

Biakanja itself thus makes clear that its multifactor test 

finds application only when the plaintiff is a “third person not 

in privity” with the defendant. (Biakanja, supra, 49 Cal.2d at 

p. 650.) Under its terms, Biakanja does not apply when the 

plaintiff and defendant are in contractual privity for purposes of 

the suit at hand. (Cf. Brown, supra, 11 Cal.5th at p. 218 [in 

holding that the largely similar multifactor test set forth in 

Rowland v. Christian (1968) 69 Cal.2d 10 “serve[s] to determine 

whether an exception to [Civil Code] section 1714’s general duty 

of reasonable care is warranted,” observing that “Rowland itself 

referred to this multifactor test as a guide for determining 

whether to recognize an ‘exception’ to the general duty of care”].)

This limitation makes sense, because as Wells Fargo 

explains, the Biakanja framework does “nothing to pinpoint 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

38

whether imposing a general duty of care would upset the parties’ 

contractual expectations and ‘dissolv[e]’ the boundary between 

tort and contract.” Put differently, Biakanja does not displace 

the contractual economic loss rule when that rule squarely 

applies. (See Stop Loss Ins. Brokers, Inc. v. Brown & Toland 

Medical Group (2006) 143 Cal.App.4th 1036, 1042 [“Contrary to 

[the plaintiff’s] assumption, courts have not applied the 

Biakanja factors to create broad tort duties in arms-length 

business dealings whenever it is convenient to resort to the law 

of negligence”]; Body Jewelz, Inc. v. Valley Forge Ins. Co. 

(C.D.Cal. 2017) 241 F.Supp.3d 1084, 1093 (Body Jewelz); 

Elsayed v. Maserati N. Am., Inc. (C.D.Cal. 2016) 215 F. Supp.3d 

949, 963 (Elsayed); United Guar. Mortg. Indem. Co. v. 

Countrywide Fin. Corp. (C.D.Cal. 2009) 660 F.Supp.2d 1163, 

1180; City & Cty. of San Francisco v. Cambridge Integrated 

Servs. Grp., Inc. (N.D.Cal., Nov. 29, 2006, No. C 04-1523 VRW) 

2006 U.S.Dist. Lexis 103853, pp. *9–*12; Department of Water 

Los Angeles v. ABB Power T&D (C.D.Cal. 1995) 902 F.Supp. 

1178, 1189; see also Rest., § 1, com. c, p. 3.)

Subsequent to Biakanja, we have repeatedly stated that 

its factors are used to determine whether persons must exercise 

reasonable care to avoid negligently causing economic loss to 

others with whom they were not in privity (sometimes referred 

to as third parties). (See, e.g., Centinela Freeman Emergency 

Medical Associates v. Health Net of California, Inc. (2016) 

1 Cal.5th 994, 1013–1014 (Centinela) [“ ‘[r]ecognition of a duty 

to manage business affairs so as to prevent purely economic loss 

to third parties in their financial transactions is the exception, 

not the rule, in negligence law’ . . . . The test for determining 

the existence of such an exceptional duty to third parties is set 

forth in the seminal case of Biakanja” (citation omitted)]; Aas, 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

39

supra, 24 Cal.4th at pp. 643–644 [“In Biakanja, we held that a 

defendant’s negligent performance of a contractual obligation 

resulting in damage to the property or economic interests of a 

person not in privity could support recovery if the defendant was 

under a duty to protect those interests”]; Quelimane, supra, 19 

Cal.4th at p. 58 [discussing Biakanja in the context of “existence 

of a duty to third parties”]; Bily, supra, 3 Cal.4th at p. 397 [“We 

have employed a checklist of factors [laid out in Biakanja] to 

consider in assessing legal duty in the absence of privity of 

contract between a plaintiff and a defendant”]; J’Aire, supra, 24 

Cal.3d at p. 804 [“Where a special relationship exists between 

the parties, a plaintiff may recover for loss of expected economic 

advantage through the negligent performance of a contract 

although the parties were not in contractual privity. Biakanja 

. . . [so] held”]; Connor v. Great Western Sav. & Loan Assn. 

(1968) 69 Cal.2d 850, 865 (Connor) [“The fact that Great 

Western was not in privity of contract with any of the plaintiffs 

except as a lender does not absolve it of liability for its own 

negligence in creating an unreasonable risk of harm to them [for 

the role it played in the construction of the properties]. . . . The 

basic tests for determining the existence of such a duty are 

clearly set forth in Biakanja”]; cf. Brown, supra, 11 Cal.5th at 

pp. 217–218 [in holding the multifactor test set forth in Rowland

was intended “as a means for deciding whether to limit a duty 

derived from other sources” finding relevant the fact that “in 

numerous cases since Rowland, we have repeated that the 

Rowland factors serve to determine whether an exception to 

[Civil Code] section 1714’s general duty of reasonable care is 

warranted”].)

In contrast, we have never done what plaintiff now asks 

us to do: rely on Biakanja to impose a tort duty on a contracting 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

40

party to avoid negligently causing monetary harm to another 

party to that contract. (Cf. Brown, supra, 11 Cal.5th at p. 219 

[in rejecting a litigant’s argument, finding significant the fact 

that no “decision of this court has done what [the litigant] asks 

us to do”].) Neither Connor, supra, 69 Cal.2d 850, nor Aas, 

supra, 24 Cal.4th 627, reaches a contrary conclusion. Plaintiff 

relies heavily on this pair of cases, arguing they show that 

Biakanja “is not limited to ‘stranger’ cases where the parties are 

not in privity.” A careful reading of these authorities reveals 

they do not bear the weight plaintiff places on them.

In Connor, the defendant Great Western Savings and 

Loan Association (Great Western) was involved in both the 

construction of a residential tract development and lending 

funds to eventual buyers of the residences. (Connor, supra, 

69 Cal.2d at pp. 857–862.) When the buyers of the homes —

some of whom were in contractual privity with Great Western

in its capacity as a mortgage lender — discovered “serious 

damages from cracking caused by ill-designed foundations,” 

they sued Great Western along with other parties. (Id. at 

p. 856.) In determining whether Great Western could be held 

liable for its negligence in connection with the construction of 

defective homes, we emphasized: “Great Western voluntarily 

undertook business relationships with [a development company] 

to develop the Weathersfield tract and to develop a market for 

the tract houses in which prospective buyers would be directed 

to Great Western for their financing. In undertaking these 

relationships, Great Western became much more than a lender 

content to lend money at interest on the security of real 

property. It became an active participant in a home 

construction enterprise. It had the right to exercise extensive 

control of the enterprise.” (Id. at p. 864.) We also stressed 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

41

aspects of Great Western’s role as a construction lender, i.e., its 

function as a lender of funds to the developing company, “which 

made the enterprise possible.” (Ibid.) In contrast, we had little 

to say about Great Western’s loans to the eventual home 

buyers — the individuals with whom Great Western had a 

contractual relationship — other than that Great Western 

extracted certain concessions from the development company to 

ensure that its loans to the buyers would be profitable. (Ibid.)

We proceeded to apply the Biakanja factors and concluded 

from this exercise that Great Western owed a duty to the home 

buyers “to exercise reasonable care to protect them from 

damages caused by major structural defects.” (Connor, supra, 

69 Cal.2d at p. 866.) “The fact that Great Western was not in 

privity of contract with any of the plaintiffs except as a lender,” 

we said, “does not absolve it of liability for its own negligence in 

creating an unreasonable risk of harm to them.” (Id. at p. 865.)

Seizing on the language within Connor, supra, 69 Cal.2d 

850 acknowledging that Great Western was “in privity of 

contract with [some] of the plaintiffs . . . as a lender” (id., at 

p. 865) plaintiff argues that Biakanja is applicable even when 

the litigating parties are contracting partners. Plaintiff ignores 

the fact that Great Western was not sued for conduct it engaged 

in as a residential lender, but for its role in developing the tract 

housing. In other words, the Connor plaintiffs’ claim was 

independent of the lending contract they had with the 

defendant. For the purpose of the suit, the plaintiffs and the 

defendant in Connor were economic strangers. It is for this 

reason that we have since characterized Connor as a case in 

which “[w]e found that a construction lender had a duty to third 

party home buyers . . . .” (Quelimane, supra, 19 Cal.4th at p. 58, 

italics added [“We found that a construction lender had a duty 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

42

to third party home buyers in Connor . . . , because the lender 

had control over the quality of construction but failed to prevent 

major construction defects in the homes whose construction it 

financed”].) In such cases, there is no reason that Biakanja, 

under its plain terms, would be inapplicable.

Aas is likewise unhelpful to plaintiff, although for a 

different reason. In Aas, the question was “whether 

homeowners and a homeowners association may recover 

damages in negligence from the developer, contractor and 

subcontractors who built their dwellings for construction defects 

that have not caused property damage.” (Aas, supra, 24 Cal.4th 

at p. 632.) The litigants in Aas were contracting parties for the 

purposes of the suit. Because they were contracting parties, Aas 

recognized a concern that counseled against allowing the 

plaintiffs to recover in tort — namely, such recovery would 

result in an expansion of tort at the expense of contract 

principles. (See id. at pp. 635–636.) This was the same concern 

underlying Seely, supra, 63 Cal.2d 9, the matter in which we 

first articulated the contractual economic loss rule, and the Aas 

court discussed Seely and its progeny at length. (See Aas, supra, 

24 Cal.4th at pp. 639–643.) Based on Seely, Aas concluded that 

the economic loss rule barred the plaintiffs’ tort claim. (Aas, at 

p. 632 [“Applying settled law limiting the recovery of economic 

losses in tort actions (Seely . . .), we answer the question 

[presented] in the negative”]; id. at p. 636.)

In addition to explaining that the plaintiffs were 

precluded from recovering in tort by the economic loss rule, the 

Aas court engaged the plaintiffs’ contentions on their own terms. 

The plaintiffs in Aas asserted that J’Aire, a decision for which 

Biakanja served as the “acknowledged basis” (Aas, supra, 24 

Cal.4th at p. 638), “displace[d] the general rule” of Seely. (Aas, 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

43

at p. 645.) In grappling with this argument, Aas noted that 

“[w]hile the court in J’Aire purported only to address duties 

owed to persons not in contractual privity with the defendant 

[citation], [California appellate] courts subsequently have 

applied J’Aire to cases in which privity did exist.” (Aas, at 

p. 645.) Although Aas was critical of the “subjective” 

“multifactor balancing test set out in J’Aire,” it nonetheless 

explained why even if that test — identical to that found in 

Biakanja — applied “to cases in which privity did exist,” no duty 

would be found. (Aas, at pp. 646, 645.)

Thus, in addressing and ultimately rejecting the plaintiffs’ 

negligence theory, Aas did consider, in a belt-and-suspenders 

fashion, how the Biakanja factors applied to the facts before it. 

(Aas, supra, 24 Cal.4th at pp. 646–649; see also Brown, supra, 

11 Cal.5th at p. 219 [explaining that although a case from this 

court may have considered a set of factors in a “belt-andsuspenders fashion” to “ ‘explain further why we should not 

impose a duty,’ ” this does not mean that those factors constitute 

the sole mode of analysis to determine whether a duty exists].) 

But Aas never squarely addressed the proper role of Biakanja in 

a case involving contractual parties. Its engagement with the 

Biakanja factors simply responded to the plaintiffs’ argument, 

as well as a separate opinion embracing that argument, rather 

than amounting to a reasoned extension of Biakanja to a new 

context. (See Aas, at pp. 665–673 (conc. & dis. opn. of George, 

C. J.).) Indeed, Aas itself offers no explanation regarding why 

Biakanja ought to “address duties owed to persons . . . in 

contractual privity with the defendant.” (Aas, at p. 645.) 

Furthermore, no subsequent case has interpreted Aas as 

sanctioning an expansion of the Biakanja factors to determine 

whether one contractual party owes another a tort duty. Aas
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

44

therefore cannot be properly understood as endorsing the 

Biakanja factors as applicable to fact patterns such as the one 

before us.

Finally, there is good reason that our precedents have 

applied the Biakanja multifactor test to find liability only when 

the parties to a proceeding are contractual strangers. Recall 

that the six (nonexclusive) Biakanja factors are: “[1] the extent 

to which the transaction was intended to affect the plaintiff, [2] 

the foreseeability of harm to him, [3] the degree of certainty that 

the plaintiff suffered injury, [4] the closeness of the connection 

between the defendant’s conduct and the injury suffered, [5] the 

moral blame attached to the defendant’s conduct, and [6] the 

policy of preventing future harm.” (Biakanja, supra, 49 Cal.2d 

at p. 650.) The first, second, and fourth Biakanja factors are 

heavily skewed in favor of liability in cases where the litigants 

are contractual partners and the alleged duty arises from the 

underlying contract. (See Elsayed, supra, 215 F.Supp.3d at 

p. 963 [“The first, second, and fourth [Biakanja] factors would 

almost always find a special relationship between directlycontracting parties: the transaction would always be intended 

to affect the plaintiff, the harm would nearly always be 

foreseeable, and the connection between the defendant’s conduct 

and the injury would always be close”]; Body Jewelz, supra, 241 

F.Supp.3d at p. 1093 [same]; Sharkey, supra, 85 U.Cin. L.Rev.

at p. 1034.) Applying Biakanja in this and other similar 

contexts thus would unduly tip the scale in favor of finding a tort 

duty and subvert the economic loss rule in a class of cases in 

which that principle clearly applies. (See, e.g., Seely, supra, 63 

Cal.2d at p. 18; Sharkey, supra, 85 U.Cin. L.Rev. at p. 1034.)

Even in the present case, in which the negligence claim 

arises out of a contract between the parties if not from the 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

45

breach of an obligation provided for in the contract, the Biakanja

test cannot be coherently applied. Consider, for example, the 

first of the Biakanja factors, “the extent to which the transaction 

was intended to affect the plaintiff.” (Biakanja, supra, 49 Cal.2d 

at p. 650.) What is the relevant transaction between plaintiff 

and Wells Fargo for purposes of this factor? None of our prior 

cases applying Biakanja had to confront such an issue because 

in those cases, the defendants had a preexisting duty to fulfill 

specified responsibilities and the question before the courts was 

whether a failure to satisfy these obligations allowed the 

plaintiffs to sue the defendants in tort. For instance, in 

Biakanja, the defendant notary was under an obligation to the 

plaintiff’s brother to properly prepare his will and the issue was 

whether the plaintiff could sue in light of the notary’s negligence 

in failing to have the will attested. (See Biakanja, at p. 648 

[“The court found that defendant agreed and undertook to 

prepare a valid will”].) In Bily, the accounting firm owed to a 

client company a “duty of care in the preparation of an 

independent audit of [the] client’s financial statements,” and we 

determined whether individuals other than the client may sue 

the firm when it allegedly botched the audit. (Bily, supra, 

3 Cal.4th at p. 375.) In J’Aire, the defendant contractor 

undertook “construction work pursuant to a contract with the 

owner of premises” that it had to finish “within a reasonable 

time,” and the inquiry was whether the contractor “may be held 

liable in tort for business losses suffered by a lessee when the 

contractor negligently fails to complete the project with due 

diligence.” (J’Aire, supra, 24 Cal.3d at p. 802.) Similarly, in Aas, 

the issue was whether the plaintiffs “may recover damages in 

negligence from the developer, contractor and subcontractors 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

46

who built their dwellings for construction defects that have not 

caused property damage.” (Aas, supra, 24 Cal.4th at p. 632.)

The “transaction” in all of the aforementioned cases was 

thus the task — the preparation of a will, an audit of a client’s 

business, the construction of a dwelling, etc. — that the 

defendants already were lawfully obligated to carry out. Here, 

the analogous agreement is the original mortgage contract 

between plaintiff and Wells Fargo. But plaintiff is not making 

an argument that Wells Fargo’s failure to fulfill its duties under 

that agreement entitles him to sue it in tort; indeed, he disavows 

any reliance on the mortgage contract, repeating that he (the 

counterparty to the agreement) has no contract claim. He 

argues instead that a loan modification, if it had been agreed 

upon, would have been intended to benefit him. Plaintiff offers 

no explanation why the loan modification he sought is the 

relevant “transaction” for purposes of the first Biakanja factor. 

This uncertainty illustrates how Biakanja, as we have 

understood and applied it, is a poor framework for assessing 

whether there is a duty in a situation such as this.

Therefore, on both doctrinal and pragmatic grounds, we

conclude that the Biakanja factors are not applicable when, as 

here, the litigants are in contractual privity and the plaintiff’s 

claim is not “independent of the contract arising from principles 

of tort law.” (Erlich, supra, 21 Cal.4th at p. 551.)

b. Policy Considerations

As previously discussed, the rationales behind the 

economic loss rule provide a compelling basis to reject “a duty of 

care to process, review and respond carefully and completely to 

. . . loan modification applications.” Plaintiff, however, argues 

that the “policy of preventing future harm” (Biakanja, supra, 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

47

49 Cal.2d at p. 650) — and more generally the “ ‘ “sum total” ’ ” 

of policy considerations (Goonewardene v. ADP, LLC (2019) 

6 Cal.5th 817, 841) — require the recognition of his claim. We 

cannot agree.

Plaintiff raises two broad policy arguments. First, he 

argues that without the ability to bring a negligence claim, he 

would be left “without any remedy at all” and as such, a viable 

tort claim is needed to prevent injury to borrowers like himself. 

Yet there are causes of action other than a general claim of 

negligence for failing to exercise reasonable care in processing, 

reviewing, and responding to a borrower’s loan modification 

application that may offer recourse to borrowers who suffer 

injury due to missteps by a lender (or loan servicer) in 

connection with the handling of a mortgage modification 

application.10 Two such causes of action are negligent 

misrepresentation and promissory estoppel. (See, e.g., Apollo 

Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 

10 And of course, in situations when a borrower has been 

injured by a lender’s intentional conduct during the loan 

modification process, the borrower may pursue various 

intentional tort theories, such as fraud and intentional 

misrepresentation. (See, e.g., Robinson, supra, 34 Cal.4th at 

p. 984 [holding that the economic loss rule does not apply to 

claims for intentional misrepresentation or fraud]; see also 

Meixner v. Wells Fargo Bank, N.A. (E.D.Cal. 2015) 101 

F.Supp.3d 938, 955–957 [finding that the plaintiff had properly 

pleaded an intentional misrepresentation claim against a bank 

for conduct taken in a loan modification process]; McGee v. 

Citimortgage (D.Nev., May 31, 2013, No. 2:12-CV-2025 JCM 

(PAL)) 2013 U.S.Dist. Lexis 76675, pp. *14–*15 [finding that the 

plaintiff had stated a fraud claim].)
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

48

Cal.App.4th 226, 243; C & K Engineering Contractors v. Amber 

Steel Co. (1978) 23 Cal.3d 1, 6.)

Regarding the former, although plaintiff purports to bring 

only a negligence claim, his allegations to some degree focus on 

alleged misrepresentations. He pleads, for example, that Wells 

Fargo called and spoke to his wife, informing her “there would 

be no . . . foreclosure sale of Plaintiff’s home.” He also alleges 

that the telephone call further convinced him that his “home 

was no longer collateral for any debt Plaintiff owed to Wells 

Fargo” and the debt had been “modified such that it was now 

unsecured.” Based on such a belief, plaintiff allegedly forwent 

pursuing alternatives to foreclosure and, as a result, eventually 

lost his house to foreclosure. Because “[n]egligent 

misrepresentation is a separate and distinct tort” from 

negligence (Bily, supra, 3 Cal.4th at p. 407), plaintiff is not 

estopped from asserting a negligent misrepresentation claim 

merely because his negligence claim fails.

As for promissory estoppel, plaintiff argues that he could 

not bring such a claim because the elements of that claim “are 

difficult to establish in the mortgage modification context.” Yet, 

plaintiff did assert a claim for promissory estoppel against the 

entities that foreclosed on his home, Mirabella and FCI, and we 

perceive no reason why such claims would be generally 

unavailable to borrowers in the modification context. (Cf.

Wigod, supra, 673 F.3d at p. 566 [holding that a borrower has 

“adequately alleged her claim of promissory estoppel” by 

pleading that the bank promised her that “if she made timely 

payments and accurate representations during the trial period, 

she would receive an offer for a permanent loan modification 

calculated using [certain] methodology”]; accord, Sheen, supra, 

38 Cal.App.5th at p. 348 [court below concludes that extension 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

49

of “tort duties into mortgage modification negotiations” is 

unwarranted, in part, because “other bodies of law — breach of 

contract, negligent misrepresentation, promissory estoppel, 

fraud, and so forth — are better suited to handle contract 

negotiation issues”]; Rest., § 3, com. e, p. 4 [“A party may be 

injured by reliance on another’s negligent statements in the 

course of negotiating a contract that is never concluded. . . . 

Detailed doctrines in the law of contract, of restitution, and of 

estoppel have developed to provide relief in such cases where 

necessary”].)

Furthermore, even taking at face value plaintiff’s 

argument that “no other source of law addresses the harm that 

[he] identifies,” plaintiff is not limiting the sought-for tort duty 

to only those instances when other sources of law fall short. As 

plaintiff acknowledges, he is asking this court to “recognize a 

negligence-based duty of care that would cover all types of 

mortgage loans,” “including . . . those [already] covered by 

[HBOR].” “That duty,” stresses plaintiff, “would be broader than 

the narrow affirmative duties imposed by HBOR.” In essence, 

even if plaintiff has identified a gap in the law, he is not 

proposing to fill that gap. Instead, he seeks to layer a new and 

expansive negligence cause of action atop all existing laws, 

imposing a tort duty with indefinite boundaries.

We are unpersuaded that such a remedy should be created 

by judicial fiat. Plaintiff recognizes that lawmakers at both the 

state and federal levels have been active in regulating the 

mortgage loan modification process. As one amicus curiae 

observes, during the past 10 years, “[t]here has been an 

extraordinary profusion of new, robust and still-expanding 

consumer laws, regulations and enforcement authority” in the 

mortgage service industry, especially with regard to the 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

50

regulation of “the conduct of mortgage servicers in distressed 

loan situations.” To be sure, these laws and regulations do not 

occupy the field and preclude us from acting. (See, e.g., Civ. 

Code, § 2924.12, subd. (g) [specifying that “[t]he rights, 

remedies, and procedures provided by [HBOR] are in addition to 

. . . any other rights, remedies, or procedures under any other 

law”].) Nonetheless, they counsel against our taking action 

merely because we may. (Cf. Connor, supra, 69 Cal.2d at p. 868 

[“There is no assurance, however, that the Legislature will 

undertake such a task [to regulate the challenged industry]. In 

the absence of actual or prospective legislative policy, the court 

is free to resolve the case before it . . . in terms of common law”].) 

This is especially so given that each time that Congress or our 

state Legislature has acted, it has passed detailed regulations 

specifying in minutia the obligations of lenders who handle 

mortgage modification applications. In contrast with such 

detailed schemes, tort liability — with a yet-to-be articulated 

standard of care — is ill defined and amorphous. We remain 

uncertain how such differing regulatory and statutory 

frameworks will function in practice, much less that they might 

operate together to better serve the interests of borrowers, 

lenders, or the public at large. The vagueness and breadth of 

plaintiff’s proposed duty thus counsel against imposing that 

duty to correct for the problems he contends exist.

Plaintiff’s second argument, that allowing his tort claim to 

go forward will “prevent[] future harm,” relies on asserted 

market failures within the mortgage industry. (Biakanja, 

supra, 49 Cal.2d at p. 650.) The main alleged market failure on 

which plaintiff focuses is a principal-agent problem whereby 

servicers (the agents) do not act in the best interests of the loan 

owners (their principals) and in the process, cause harm to 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

51

borrowers. Plaintiff’s argument is as follows. Unlike 

“[t]raditional mortgage lending” in which a single bank would 

both originate the loan and service it, “[i]n modern mortgage 

servicing,” “these tasks have been dispersed among different 

actors.” Now, plaintiff asserts, it is frequently the case that an 

entity that services a loan does not own the loan. And as 

“modern mortgage servicing has become divorced from loan 

ownership,” the servicer develops interests that diverge from the 

loan owner’s. Because the fee a servicer collects “does not 

depend on loan performance, nor on maximizing net present 

value through a modification,” servicers seek neither to ensure 

that loans perform nor to modify the loans when doing so would 

be profitable to the loan owners (i.e., when it would “maximiz[e] 

[the] net present value” of the loan). Instead, “servicers have 

incentives to charge borrowers unnecessary fees and to extend 

default,” presumably because such actions inflate the servicing 

fees. Such market failures, plaintiff argues, justify judicial 

intervention.

We observe at the outset that insofar as plaintiff has 

identified a problem, he is not proposing to tailor his proposed

solution to the problem in any way. Here, Wells Fargo was the 

originator, owner, and servicer of plaintiff’s loans at the time of 

the challenged conduct. There could be no principal-agent 

problem in such circumstances because Wells Fargo was both 

the principal (owner) and agent (servicer) in managing 

plaintiff’s loans. (Accord, e.g., Levitin, supra, 28 Yale J. on Reg. 

at p. 11 [“A traditional portfolio lender has an undivided 

economic interest in the loan’s performance and therefore fully 

internalizes the costs and benefits of its management decisions, 

such as whether to restructure or foreclose on a defaulted 

loan”].) Despite the fact that Wells Fargo was behaving much 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

52

as banks involved in “[t]raditional mortgage lending” do, 

plaintiff would have us impose a duty on Wells Fargo regardless. 

It is difficult to see how doing so would be justified when the 

asserted basis for the duty is that servicers do not act in the 

owners’ interests.

Moreover, even taking the principal-agent problem at face 

value, plaintiff has not supplied a convincing reason why tort 

law is the right approach to correct such a problem. Some of the 

problems plaintiff perceives have been anticipated and (at least 

partially) addressed by the principals and agents themselves. 

For example, although plaintiff claims that servicers have 

incentives to “extend default” because such extensions generate 

additional fees for servicers, he does not mention that as long as 

the borrowers are in default, the servicers are obligated by their 

agreements with loan owners to advance the payments that the 

borrowers are missing. (See Odinet, Foreclosed: Mortgage 

Servicing and the Hidden Architecture of Homeownership in 

America (2019) pp. 53–54 (Odinet) [“The mortgage middlemen 

pick up the tab when homeowners default, meaning that the 

servicer is responsible for making principal and interest 

payments to the [loan owners] when monthly mortgage 

payments from borrowers are not forthcoming”].) Plaintiff does 

not explain why such private ordering is inadequate or 

unsatisfactory.11 And it is unclear how allowing borrowers to 

11 Nor does plaintiff satisfactorily explain how imposing the 

duty he presses here would encourage servicers to engage in the 

modification process rather than simply foreclose. After all, if a 

servicer proceeds immediately to foreclosure instead of 

accepting or processing a modification application, it (and the 

lender) presumably cannot be held negligent for having failed to 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

53

bring lawsuits against servicers and lenders indiscriminately is 

likely to properly adjust the incentives between those entities.

The Attorney General, in his briefing in support of 

plaintiff, points to another source of asserted market failure. He 

argues that residential borrowers suffer from optimism bias and 

therefore do not bargain over obligations that would arise only 

when they default. But if the problem is undue optimism, then 

legislation requiring information to temper that optimism — or 

a new mandatory insurance scheme, whereby all homeowners, 

no matter how optimistic, are forced to pay for the cost of “help 

from their servicers to avoid foreclosure” — would seem more 

appropriate and directly responsive than tort liability.

C. The Role of the Legislature

This brings us to the fact that recognizing a duty of the 

sort plaintiff presses for here would impose real costs — and 

challenging decisions to be made about who should bear those 

costs. As one commentator reports, “the cost of servicing a 

default mortgage loan was 15 times higher than the cost of 

managing one that was not in default ($2,537 compared to 

$156).” (Odinet, supra, at pp. 119–120.) Any changes to the 

mortgage industry that require servicers to raise the level of the 

service they provide — to “process, review and respond [more] 

carefully and completely to the loan modification applications” 

than they are currently doing — will likely raise the cost of 

exercise a specific standard of care in handling any such 

application. (Accord, Cenatiempo, supra, 219 A.3d at p. 793 [“If 

the court were to recognize a common-law duty of care, . . . it 

could result in loan servicer liability for isolated violations or far 

less consequential violations of the loan modification process, 

which would hinder servicer participation in the modification 

process”].)
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

54

providing that service as well. (Levitin, supra, 28 Yale J. on Reg. 

at p. 89 [“It bears emphasis that changes to the servicing market 

could result in higher mortgage costs”].) “This reality is a policy 

tradeoff . . . .” (Ibid.) In particular, “[a]ny reform of mortgage 

servicing to make it more conducive to loss mitigation via loan 

restructuring could add to the cost of mortgage finance and 

thereby discourage new homeownership. Thus, any mortgage 

servicing reform must be considered as part of a trade-off 

between making home purchases more affordable and ensuring 

sustainable, long-term homeownership levels.” (Id. at p. 8.)

This is far from suggesting that reforms to the mortgage 

service industry would not be worthwhile. Instead, it is to 

emphasize the tradeoffs and policy judgments underlying such 

reforms. These are policy choices that the judiciary is poorly 

positioned to make. The Legislature, on the other hand, “has at 

its disposal a wider range of options and superior access to 

information about the social costs and benefits of each” policy. 

(Aas, supra, 24 Cal.4th at p. 652 [“ ‘Legislatures, in making such 

policy decisions, have the ability to gather empirical evidence, 

solicit the advice of experts, and hold hearings at which all 

interested parties may present evidence and express their 

views’ ”]; see also Gas Leak Cases, supra, 7 Cal.5th at p. 413 

[“[T]he Legislature can bring to bear a mix of expertise while 

considering competing concerns to craft a solution in tune with 

public demands”].) With these tools at its disposal and acting 

“through the democratic process” (Gas Leak Cases, at p. 413), 

the Legislature can best decide what additional protection 

homeowners in California should be afforded. (See Aas, at 

pp. 652, 653 [observing “[h]ome buyers in California already 

enjoy protection” under various bodies of law for the harms 

alleged and concluding that “the Legislature may add whatever 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

55

additional protections it deems appropriate” but that we should 

not “preempt the legislative process with a judicially created 

rule of tort liability”].) In particular, should it choose to the 

Legislature can both prescribe whether a lender must act 

“reasonably” and (in some detail, if it chooses) what constitutes

“reasonable” behavior within this sphere. Because such 

decisions carry “[t]he potential for . . . broad-ranging economic 

consequences,” including the possibility of “increas[ing] the 

already prohibitively high cost of housing in California,” 

“affect[ing] the availability of” cheap financing options for 

would-be homeowners, and “greatly diminish[ing] the supply of 

affordable housing,” the task of making such policy decisions 

“should be left to the Legislature.” (Erlich, supra, 21 Cal.4th at 

p. 560; see also Cates Construction, supra, 21 Cal.4th at pp. 60–

61; Foley, supra, 47 Cal.3d at p. 694.)

In sum, the Legislature is better situated than we are to 

tackle the “[s]ignificant policy judgments affecting social policies 

and commercial relationships” implicated in this case. (Foley, 

supra, 47 Cal.3d at p. 694; see also Aas, supra, 24 Cal.4th at 

p. 652.) In recognition of the institutional competence of our 

coequal branch of government, we decline plaintiff’s invitation 

to become the first state high court to create a judicial rule 

imposing a duty on lenders to exercise due care in processing, 

reviewing and responding to loan modification applications.12

12 To the extent they are inconsistent with our opinion, we 

disapprove of Weimer v. Nationstar Mortgage, LLC, supra, 

47 Cal.App.5th 341; Rossetta v. CitiMortgage, Inc., supra, 

18 Cal.App.5th 628; Daniels v. Select Portfolio Servicing, Inc., 

supra, 246 Cal.App.4th 1150; and Alvarez v. BAC Home Loans 

Servicing, L.P., supra, 228 Cal.App.4th 941. We have no 
SHEEN v. WELLS FARGO BANK, N.A.

Opinion of the Court by Cantil-Sakauye, C. J.

56

III. CONCLUSION

We hold that when a borrower requests a loan 

modification, a lender owes no tort duty sounding in general 

negligence principles to “process, review and respond carefully 

and completely to” the borrower’s application. Because the 

Court of Appeal’s decision is in accord, we affirm the judgment 

below.

CANTIL-SAKAUYE, C. J.

We Concur:

CORRIGAN, J.

LIU, J.

KRUGER, J.

GROBAN, J.

JENKINS, J.

McCONNELL, J. *

occasion to consider the viability of claims other than the 

negligence cause of action presented in these cases. In 

particular, nothing we say should be understood to address 

whether some of the conduct considered by the Courts of Appeal 

would support negligent misrepresentation or promissory 

estoppel claims.

* Administrative Presiding Justice of the Court of Appeal, 

Fourth Appellate District, Division One, assigned by the Chief 

Justice pursuant to article VI, section 6 of the California 

Constitution.
SHEEN v. WELLS FARGO BANK, N.A.

S258019

Concurring Opinion by Justice Liu

The question in this case is whether defendant Wells 

Fargo Bank owed plaintiff Kwang K. Sheen a “duty of care to 

process, review and respond carefully and completely to the loan 

modification applications” Sheen submitted. The court answers 

no to this question, and I concur with this limited holding. 

Sheen sought modification of two junior loans from Wells Fargo, 

a lender that made no representations or assurances regarding 

the modification. Wells Fargo had no obligation to accept, 

consider, or approve the modification, and mere receipt of 

Sheen’s application did not give rise to a tort duty of care in the 

circumstances here.

But this case calls our attention to an important area that 

may warrant further consideration by the Legislature. As many 

reported decisions detail, borrowers seeking mortgage loan 

modifications may be strung along by loan servicers’ 

incompetence, pursuit of fees, or improper incentives over the 

course of years, leading borrowers to forgo other remedies. 

According to Sheen, the California Homeowner Bill of Rights 

(HBOR), designed “to ensure that . . . borrowers are considered 

for, and have a meaningful opportunity to obtain, available loss 

mitigation options” (Civ. Code, § 2923.4), “imposes a narrow set 

of duties on servicers”; its “protections are insufficient to cover 

the myriad ways in which a servicer’s negligence can injure 

borrowers when it comes to loan modification.” The frequency 

with which these issues are making their way through the
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

2

courts — along with what the Civil Justice Association of 

California, California Chamber of Commerce, and Western 

Bankers Association as amici curiae call the “Damoclean repeat 

of the 2008–2012 foreclosure crisis [that] looms on the 

horizon” — suggests that legislative action may be warranted. 

I.

Today’s opinion holds that Wells Fargo owed Sheen no 

“ ‘duty of care to process, review and respond carefully and 

completely to the loan modification applications’ ” he submitted. 

(Maj. opn., ante, at p. 1.) Sheen alleged that “Wells Fargo never 

contacted [him] about the status of his mortgage modification 

applications, or to inform his as to whether his applications for 

modification . . . had been approved or rejected.” He did not 

allege that Wells Fargo made the type of representations or 

exhibited the affirmative conduct relating to modification that 

courts have relied on in finding a duty in related contexts. (See, 

e.g., Weimer v. Nationstar Mortgage, LLC (2020) 47 Cal.App.5th 

341, 348–350, 359, 362 (Weimer) [borrower alleged Nationstar,

in order to continue collecting fees from servicing a delinquent 

account, forced him to submit the same applications and 

documents on multiple occasions and instructed him to apply for 

a program he was ineligible for]; Rossetta v. CitiMortgage, Inc.

(2017) 18 Cal.App.5th 628, 643 (Rossetta) [borrower alleged 

CitiMortgage told her that she needed to be at least three 

months delinquent for it to assist her and required her to submit 

the same documents over and over again, lost or mishandled 

documents, misstated the status of various applications, and 

ultimately denied them for “bogus reasons”]; Daniels v. Select 

Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1158 

[borrowers alleged Bank of America advised them to miss 

payments to qualify for modification, told them to make reduced 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

3

monthly payments, assured them they would be granted a 

modification if they complied with the bank’s instructions, and 

required them to submit duplicative documentation after 

assuring them that the necessary documents had been received]; 

Alvarez v. BAC Home Loans Servicing, L.P. (2014) 228 

Cal.App.4th 941, 944–945, 948–949 (Alvarez) [borrowers alleged 

servicers agreed to consider their modification applications, 

relied on incorrect information and mishandled submitted 

documents, prevented the applications from being processed in 

a timely manner, and deterred borrowers from seeking other 

remedies]; see also Jolley v. Chase Home Finance, LLC (2013) 

213 Cal.App.4th 872, 881 (Jolley) [borrower testified that Chase 

reassured him on many occasions that there was a high 

likelihood it would be able to modify the loan, which he relied on 

in borrowing heavily to finish the project].) 

Instead, Sheen alleged that because Wells Fargo failed to 

respond to his applications, subsequent communication 

concerning the delinquency on his accounts led him to believe 

that his loans had been modified. (Maj. opn., ante, at pp. 4–6.) 

Sheen also alleged that Wells Fargo told his wife “there would 

be no more foreclosure sale” of the home. While these 

allegations may support a claim for negligent misrepresentation 

(maj. opn., ante, at p. 48), failure to respond to an application 

falls short of the type of affirmative conduct and ongoing 

interaction with lenders or servicers regarding modification that 

lead borrowers to believe they just need to keep working with 

servicers to secure modification and avoid foreclosure. 

Recognizing a duty of care may well be justified where a 

lender or servicer makes assurances that an application is being 

considered or advises an applicant on a certain course of action,

and then proceeds to mishandle documents, misstate the 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

4

application’s status, require an applicant to submit duplicate or 

nonexistent documents, or otherwise string the applicant along 

and cause the applicant to forgo alternative remedies. (See 

Rossetta, supra, 18 Cal.App.5th at p. 645 (conc. opn. of Mauro, 

Acting P. J.) [emphasizing that the duty of care arose not from 

the “lender’s mere receipt or review of [the] borrower’s loan 

modification application” but from the allegations concerning 

CitiMortgage’s conduct]; Jolley, supra, 213 Cal.App.4th at 

p. 898 [“where specific representations were made by a Chase 

representative as to the likelihood of a loan modification, a cause 

of action for negligence has been stated that cannot be properly 

resolved based on lack of duty alone”].) But such allegations are 

not before us in this case. While disapproving Weimer, Rossetta, 

Daniels, and Alvarez “to the extent they are inconsistent with” 

today’s opinion (maj. opn., ante, at p. 55, fn. 12), the court does 

not address whether a lender’s or servicer’s affirmative conduct 

may give rise to a duty to process the application with due care. 

Today’s opinion also leaves for another day the 

applicability of other causes of action to servicer misconduct and 

the scope of related doctrines. The court highlights that 

negligent misrepresentation and promissory estoppel “may offer 

recourse to borrowers who suffer injury due to missteps by a 

lender (or loan servicer) in connection with the handling of a 

mortgage modification application.” (Maj. opn., ante, at p. 47.) 

While Sheen did not seek leave to amend his complaint to state 

either of these causes of action, today’s opinion makes clear that 

“nothing we say . . . should be understood to categorically 

foreclose those claims in the mortgage modification context.” 

(Id. at p. 3; see id. at p. 48 [“we perceive no reason why such 

claims would be generally unavailable to borrowers”].) Nor does 

today’s opinion consider whether the doctrine of promissory 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

5

estoppel or negligent misrepresentation may require 

clarification or reform to respond effectively in this context. (See 

Rest.3d Torts, Liability for Economic Harm (June 2020) § 3, 

com. d., p. 4 (Restatement) [“if denying relief to the plaintiff 

seems to produce an injustice,” it may be necessary “to 

reconsider the application” of doctrines “responsible for the 

result”]; maj. opn., ante, at p. 32 [reciting the Restatement’s 

view].)

Today’s opinion also restates the “ ‘general rule’ ” that “ ‘a 

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

involvement in the loan transaction does not exceed its 

customary role in arms-length lending and servicing.’ ” (Maj. 

opn., ante, at pp. 21–22; see Nymark v. Heart Fed. Savings & 

Loan Assn. (1991) 231 Cal.App.3d 1089, 1096.) The court states 

that “without more,” a “lender’s handling of a modification 

application” “does not ‘exceed the scope of [an institution’s] 

conventional role as a mere lender of money.’ ” (Maj. opn., ante,

at p. 24, italics added.) But the court expresses no view on what 

constitutes “ ‘extraordinary advice . . . beyond that customary in 

arms-length lending and loan services transactions’ ” (id. at 

p. 21) such that it may give rise to a duty of care. (See, e.g., 

Rossetta, supra, 18 Cal.App.5th at p. 646 (conc. opn. of Mauro, 

Acting P. J.) [“agree[ing] with the majority that CitiMortgage 

engaged in acts and omissions that went beyond the scope of 

conventional lending”]; Weimer, supra, 47 Cal.App.5th at p. 362 

[concluding that the type of lender activity alleged places it 

“beyond the mere consideration of [the borrower’s] loan 

modification applications”]; see also Jolley, supra, 213 

Cal.App.4th at p. 902 [“ ‘Nymark . . . do[es] not purport to state 

a legal principle that a lender can never be held liable for 

negligence in its handling of a loan transaction within its 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

6

conventional role as a lender of money.’ ”]; Nymark, at pp. 1098–

1099.)

The court today also restates the so-called economic loss 

rule. In a future case, we may need to grapple with the 

boundaries of the rule and its application to contexts where 

parties cannot “reliably be counted on to protect their interests.” 

(Farnsworth, The Economic Loss Rule (2016) 50 Val.U. L.Rev.

545, 546 (Farnsworth); see Rest., § 3, com. c., p. 3 [“the purpose 

of this Section is to protect the bargain the parties made”].) 

Private ordering through contracts as an alternative to 

negligence liability through tort is generally more compelling 

with a “ ‘more sophisticated class of plaintiffs . . . e.g., business 

lenders and investors,’ ” as opposed to “the average home buyer 

[who] is more akin to ‘the “presumptively powerless 

consumer” ’ ” with little to no means to alter the agreement in 

the first place. (Beacon Residential Community Assn. v. 

Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 579, 

584, quoting Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370,

398, 403.) But today’s opinion does not state a broad rule 

against recovery for pure economic loss in tort in the context of 

a contractual relationship (maj. opn., ante, at p. 15), and courts 

should not invoke the rule without considering the basis for its 

application. (See Farnsworth, supra, 50 Val.U. L.Rev. at p. 550 

[“Stating a broad rule against recovery for pure economic loss in 

tort has [a] worrisome consequence . . . [:] It creates a 

presumption against liability in cases that don’t fit into one of 

the well-defined exceptions. This can cause legitimate claims to 

be snuffed out inadvertently by the sweep of the rule in the 

background. Trouble predictably results when a rule is recited 

and extended without attention to its rationale.”]; see also, e.g., 

Tiara Condo. Ass’n. v. Marsh & McLennan Co. (Fla. 2013) 110 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

7

So.3d 399, 407 [“limit[ing] the application of the economic loss 

rule to cases involving products liability” in light of “the 

unprincipled extension of the rule” to new domains].)

Moreover, in restating these general rules, today’s opinion 

takes care to consider the policy concerns at play. (Maj. opn., 

ante, at pp. 46–53.) After recognizing that the factors set out in 

Biakanja v. Irving (1958) 49 Cal.2d 647, 650, do not provide the 

proper framework for considering the policy concerns present in 

this case (maj. opn., ante, at p. 46), the court proceeds to consider 

the relevant concerns, as we must in any case claiming a duty of 

care in tort. (See, e.g., Southern California Gas Leak Cases

(2019) 7 Cal.5th 391, 399 [“the inquiry hinges . . . on a 

comprehensive look at ‘ “the sum total” ’ of the policy 

considerations at play in the context before us”]; Erlich v. 

Menezes (1999) 21 Cal.4th 543, 552 [“ ‘ “Whether a defendant 

owes a duty of care is a question of law. Its existence depends 

upon the foreseeability of the risk and a weighing of policy 

considerations for and against imposition of liability.” ’ ”]; see 

also Flagstaff Housing v. Design Alliance (Ariz. 2010) 223 P.3d 

664, 669 [“The economic loss doctrine may vary in its application 

depending on context-specific policy considerations.”].)

II.

Importantly, today’s opinion recognizes that while 

“lawmakers at both the state and federal levels have been active 

in regulating the mortgage loan modification process” (maj. 

opn., ante, at p. 49), borrowers continue to face serious 

difficulties with servicers and the loan modification process (id.

at p. 35).

When borrowers first seek a loan, they are generally able 

to choose among various lenders. But, practically speaking, 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

8

they have little ability to negotiate terms. As the Attorney 

General appearing as amicus curiae states, “[m]ost homeowners 

do not have the technical knowledge of mortgage servicing that 

would be necessary to request meaningful, consumer-protective 

contract terms.” And “[e]ven if homeowners are knowledgeable 

and concerned about management of their loan upon default, 

they cannot know or choose whether their loan will be 

securitized, who will be the servicer, and what contractual 

provisions will govern the servicing of their loan.” (Levitin & 

Twomey, Mortgage Servicing (2011) 28 Yale J. on Reg. 1, 83 

(Levitin).) 

In this context, “ ‘borrowers are captive, with no choice of 

servicer, little information, and virtually no bargaining power. 

. . . Borrowers cannot pick their servicers or fire them for poor 

performance. The power to hire and fire is an important 

constraint on opportunism and shoddy work in most business 

relationships. But in the absence of this constraint, servicers 

may actually have positive incentives to misinform and underinform borrowers. Providing limited and low-quality 

information not only allows servicers to save money on customer 

service, but increases the chances they will be able to collect late 

fees and other penalties from confused borrowers.’ ” (Alvarez, 

supra, 228 Cal.App.4th at p. 949.)

As Sheen describes, “[d]uring the modification process, the 

homeowner has to rely entirely on information from the servicer 

both about whether the loan is likely to be modified, and on the 

status of the modification, to make life-changing decisions such 

as whether to file for bankruptcy, sell the home, or give up the 

home through foreclosure or deed in lieu of foreclosure.” 

Alternatives to foreclosure may include obtaining alternate 

funding, refinancing, or receiving modification of other loans 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

9

under other programs or with other servicers. Some 

alternatives may also present less damage to a borrower’s credit 

report than a foreclosure. But these alternatives can become 

more difficult or impossible to obtain if a servicer mishandles 

the modification application process. Borrowers have reported 

accruing “additional arrears, penalties, fees, and harm to [their] 

credit,” potentially affecting their eligibility for alternatives 

they otherwise would have qualified for. (Weimer, supra, 47 

Cal.App.5th at p. 361.) And at some point, it simply becomes too 

late to pursue alternatives. (See Lueras v. BAC Home Loans 

Servicing, LP (2013) 221 Cal.App.4th 49, 59 [borrower alleged 

Bank of America continued to make representations regarding 

modification within just two weeks of the foreclosure sale].) 

It is questionable whether the relationship between 

lenders or investors and servicers is sufficient to ensure that 

servicers exercise due care and avoid “unnecessary home 

foreclosures, to the detriment of homeowners and mortgage 

investors alike.” (Levitin, supra, 28 Yale J. on Reg. at p. 4; see

id. at p. 1 [describing servicers’ cost and income structure as 

“skewed toward foreclosure” and the dysfunctional nature of the 

loss mitigation component of servicing]; Thompson, Foreclosing 

Modifications: How Servicer Incentives Discourage Loan 

Modifications (2011) 86 Wash. L.Rev. 755, 761 [“the incentive 

structure for the servicers . . . generally favors foreclosures over 

modifications”]; Note, Mortgage Loan Modification: Barriers to 

Use (2009) 28 Rev. Banking & Fin. L. 426, 429–430 [describing 

servicers’ and investors’ incentives as not always aligned, 

leading to a suboptimal number of loan modifications even 

where there is an agreement requiring a servicer to take actions 

to maximize the net present value of a securitized portfolio].) 

Moreover, the loss to the lender or investor fails to reflect the 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

10

magnitude of the potential harm foreclosure can have on the 

individual and broader community. (See, e.g., Sen. Rules Com., 

Off. of Sen. Floor Analyses, Conf. Rep. on Sen. Bill No. 900

(2011–2012 Reg. Sess.) as amended June 27, 2012, p. 14 

[“Foreclosures blight neighborhoods, put financial pressure on 

families and drive down local real estate values, and consumers, 

made more cautious by a crippled housing market, spend less 

freely, curbing the economy’s growth.”].) Private ordering does 

not fully account for these externalities.

HBOR provides a number of procedural protections in the 

context of first-lien mortgage servicing. It prevents “dualtracking” of foreclosure and loan modification, and requires 

servicers to assign applicants a single point of contact who must 

communicate the process to apply for loan modification, notify 

the borrower of missing documents, adequately inform the 

borrower of the status of her or his application, and ensure the 

borrower is considered for all alternatives to foreclosure, if any,

offered by the servicer. (Civ. Code, §§ 2923.6, 2923.7, 2924.18.) 

A servicer must also identify in writing reasons for a denial and 

give an applicant a chance to appeal before proceeding with a 

foreclosure. (Id., § 2923.6.) The Legislature may wish to 

consider whether any of these standards should be extended to 

servicers of second- or third-lien mortgages. (See Sen. Rules 

Com., Off. of Sen. Floor Analyses, Conf. Rep. on Sen. Bill 900

(2011–2012 Reg. Sess.) as amended April 26, 2012, p. 26; U.S. 

Dept. of Treas., Making Home Affordable: Program Update

(Apr. 28, 2009) p. 2, available at “Second Lien Program Fact 

Sheet” <https://www.treasury.gov/press-center/press-releases/

Pages/tg108.aspx> [as of Mar. 7, 2022] [“Even if a first lien is 

modified to create an affordable payment, second liens can 

contribute to much higher foreclosure rates if not addressed.”]; 
SHEEN v. WELLS FARGO, N.A.

Liu, J., concurring

11

the Internet citation in this opinion is archived by year, docket 

number, and case name at <http://www.courts.ca.gov/

38324.htm>.)

In sum, numerous cases demonstrate “the difficulties 

borrowers face in the loan modification context.” (Maj. opn., 

ante, at p. 35.) These difficulties have particular salience as 

pandemic relief programs wane and foreclosure rates rise. In 

some instances, a judicial remedy may be available. But given 

the limitation on common law negligence claims explained in 

today’s opinion, whether the mortgage market and affected 

communities would benefit from additional protections for 

borrowers against manipulative practices and “bargaining or 

information asymmetries” (ibid.) continues to be ripe for 

legislative consideration.

LIU, J.
1

SHEEN v. WELLS FARGO BANK, N.A.

S258019

Concurring Opinion by Justice Jenkins

I write separately to address my participation in Alvarez 

v. BAC Home Loans Servicing, L.P. (2014) 228 Cal.App.4th 941 

(Alvarez), a Court of Appeal opinion I joined, but which the court 

now, following a robust discussion of the economic loss rule and 

the scope of Biakanja v. Irving (1958) 49 Cal.2d 647, partially 

disapproves.

In Alvarez, plaintiff borrowers alleged their loan servicers 

owed them “a duty to exercise reasonable care in the review of 

their loan modification applications once they had agreed to

consider them.” (Alvarez, supra, 228 Cal.App.4th at p. 944.) The 

servicers, after they “undertook to review” loan modifications 

available under the federal Home Affordable Modification 

Program (HAMP), allegedly breached a duty of care by “(1) 

failing to review plaintiffs’ applications in a timely manner, (2) 

foreclosing on plaintiffs’ properties while they were under 

consideration for a HAMP modification and (3) mishandling 

plaintiffs’ applications by relying on incorrect information.” 

(Alvarez, at p. 945.) “Much of th[is]” was “conduct now regulated 

by the HBOR” — that is, the then recently enacted California 

Homeowner Bill of Rights. (Alvarez, at p. 951; see maj. opn., 

ante, at pp. 11–12.)

Alvarez recognized a duty of care. In doing so, it first 

restated the general rule of Nymark v. Heart Fed. Savings & 

Loan Assn. (1991) 231 Cal.App.3d 1089, that “a financial 

institution owes no duty of care to a borrower when the 
SHEEN v. WELLS FARGO BANK, N.A.

Jenkins, J., concurring

2

institution’s involvement in the loan transaction does not exceed 

the scope of its conventional role as a mere lender of money.” 

(Alvarez, supra, 228 Cal.App.4th at p. 945.) After citing Nymark

and Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 

872, Alvarez noted an exception to the general no-duty rule if 

the factors set forth in Biakanja pointed towards a duty. 

(Alvarez, at p. 945; see Nymark, at p. 1098 [California’s “test for 

determining whether a financial institution owes a duty of care 

to a borrower-client ‘ “involves the balancing of [the Biakanja] 

factors” ’ ”]; see maj. opn., ante, at p. 22.) Alvarez concluded the 

Biakanja factors, given the plaintiffs’ allegations, favored a 

duty. (Id. at p. 948–951.)

Alvarez discussed the Biakanja factors at length but did 

not scrutinize on what basis that multifactor test should apply, 

if at all, in determining a lender’s or servicer’s duties towards 

borrowers. Critically, Alvarez did not have occasion to address 

the contractual economic loss rule or Biakanja’s relationship to 

that rule. In light of the parties’ arguments here that crystalize 

the significance of these important preliminary questions, I 

agree with the resolution the court reaches today.

Furthermore, the duty Kwang K. Sheen here seeks to 

impose on Wells Fargo Bank, N.A. — to reasonably “process, 

review, and respond” to loan modification applications — is not 

premised on a lender or servicer first agreeing to do those things, 

which was part of the analysis in Alvarez. (Alvarez, supra, 228 

Cal.App.4th at p. 948 [“because defendants allegedly agreed to 

consider modification of the plaintiffs’ loans, the Biakanja

factors clearly weigh in favor of a duty”].) The court, today, does 

not address what liability might ensue, whether for negligence 

or some other theory such as negligent misrepresentation or 

promissory estoppel, if a lender or servicer more than merely 
SHEEN v. WELLS FARGO BANK, N.A.

Jenkins, J., concurring

3

agrees to consider a loan modification. (Maj. opn., ante, at pp. 

16–17, fn. 4, 47–48.)

With these observations, I concur in the well-reasoned 

majority opinion.

JENKINS, J.
See next page for addresses and telephone numbers for counsel who 

argued in Supreme Court.

Name of Opinion Sheen v. Wells Fargo Bank, N.A.

__________________________________________________________ 

Procedural Posture (see XX below)

Original Appeal

Original Proceeding

Review Granted (published) XX 38 Cal.App.5th 346

Review Granted (unpublished) 

Rehearing Granted

__________________________________________________________ 

Opinion No. S258019

Date Filed: March 7, 2022

__________________________________________________________ 

Court: Superior

County: Los Angeles

Judge: Robert Leslie Hess

__________________________________________________________ 

Counsel:

Los Angeles Center for Community Law and Action, Noah Grynberg; 

Public Justice, Leslie A. Brueckner and Adrienne H. Spiegel for 

Plaintiff and Appellant.

Huddleston & Sipos Law Group and Robert A. Huddleston for John A. 

Phillips as Amicus Curiae on behalf of Plaintiff and Appellant.

Xavier Becerra, Attorney General, Nicklas A. Akers, Assistant 

Attorney General, Michele Van Gelderen and Amy Chmielewski, 

Deputy Attorneys General, for Attorney General as Amicus Curiae on 

behalf of Plaintiff and Appellant.

Arbogast Law, David M. Arbogast; Smoger & Associates and Gerson H. 

Smoger for Consumer Attorneys of California as Amicus Curiae on 

behalf of Plaintiff and Appellant.
Lisa Sitkin; Law Office of Eric Andrew Mercer and Eric Mercer for 

National Housing Law Project and Eric Mercer as Amici Curiae on 

behalf of Plaintiff and Appellant.

Kutak Rock, Jeffrey S. Gerardo, Steven M. Dailey; Munger, Tolles & 

Olson, David H. Fry, Benjamin J. Horwich and Rachel G. MillerZiegler for Defendant and Respondent.

Fred J. Hiestand for the Civil Justice Association of California, the 

California Chamber of Commerce and the Western Bankers 

Association as Amici Curiae on behalf of Defendant and Respondent.

Wright, Finlay & Zak, Jonathan D. Fink, T. Robert Finlay; Kirby & 

McGuinn, Martin T. McGuinn and Michael R. Pfeifer for California 

Mortgage Association, California Mortgage Bankers Association, 

Mortgage Bankers Association and United Trustees Association as 

Amici Curiae on behalf of Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for 

publication with opinion):

Leslie A. Brueckner

Public Justice, P.C.

475 14th Street, Suite 610

Oakland, CA 94612

(510) 622-8205

Benjamin J. Horwich

Munger, Tolles & Olson LLP

560 Mission Street, 27th Floor

San Francisco, CA 94105

(415) 512-4066