Filed 4/3/13 Tostado v. Rehabbers Financial CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts a nd parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

TERESA TOSTADO et al.,
Plaintiffs and Appellants,

v.
REHABBERS FINANCIAL, INC.,
Defendant and Respondent. B240628
(Los Angeles County Super. Ct. No. GC047462)

APPEAL from a judgment of the Superior Court of Los Angeles County, C. Edward Simpson, Judge. Affirmed in part and reversed in part. The Business Legal Group and Russell M. Fr andsen for Plaintiffs and Appellants
Teresa Tostado and Roberto Tostado.
Bruce B. Paller for Defendant and Re spondent Rehabbers Financial, Inc.

——————————2 Plaintiffs Teresa Tostado and Robert Tostado obtained a loan from Rehabbers Financial, Inc., dba Aztec Financial (Azt ec) to construct a home on a vacant lot for
Teresa Tostado’s mother. Plaintiffs claim th at Aztec failed to disclose to them several
material terms of the loan and filed this acti on asserting claims for violations of the Truth in Lending Act (15 U.S.C. § 1601 et seq.) (T ILA) and other California statutory and common law provisions. The trial court su stained Aztec’s demurrer on statute of limitations and substantive grounds. We reverse on plaintiffs’ claims for violations of the
Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.) (Rosenthal Act) and Unfair Competition Law (Bus. & Prof. C ode, § 17200 et seq.) (UCL), breach of the implied covenant of good faith and fair deali ng, and declaratory relief, and affirm on the remaining claims.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY 1. Plaintiffs’ First Amended Complaint Plaintiffs’ operative first amended comp laint (complaint), filed December 20, 2011, alleged that plaintiffs owned an unenc umbered vacant lot in South Pasadena. In September 2006, plaintiffs and Aztec entere d into a loan agreement for $475,000 secured by a deed of trust for the purpose of permitti ng plaintiffs to build a house on the lot for
Teresa Tostado’s mother to live in. 1
Plaintiffs contended that Aztec deceived them about the nature of the loan in several respects. When plaintiffs entered into the loan with Aztec, they claim Aztec told them that they would pay only interest on loan amounts that were drawn down for construction. In addition, plaintiffs repeated ly told Aztec that the loan was to construct their residence, but in reality, the loan was a commercial loan: Aztec falsely and fraudulently included in the loan papers a document stating that the property was nonowner occupied investment property and told plaintiffs not to worry about the document

1 The loan documents were not attached to the complaint. A written contract may be pleaded “word for word” or generally accor ding to “its legal intendment and effect.” ( Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.)3 because it was “‘just a document the lender need s.’” By so doing, Aztec intended to have plaintiff fraudulently waive their rights under TILA, which does not apply to commercial loans. Further, Aztec falsely told plaintiffs that it was charging them the lowest rate, telling plaintiffs that all construction loans were higher-interest rate loans. On September 9, 2010, when Aztec filed a notice of default and election to sell, plaintiffs discovered that their loan was not subject to TILA. 2 In the fall of 2009, Aztec began calling plaintiffs about payments due under the loan and stated that $620,000 was owed. Plaintiffs allege Aztec fraudulently added charges to the note and in October 2011, claimed that $800,000 was now due. Az tec repeatedly called plaintiffs and
threatened to foreclose. Plaintiffs belie ved Aztec had made a mathematical error in calculating the interest owed, and tried to c ontact Aztec to get an explanation for the charges, but never recei ved any explanation. Plaintiffs alleged that Aztec’s misreprese ntations were discovered within the year before the filing of their complaint. Plaintiffs first amended complaint alleged 11 claims for relief: violation of TILA; violations of the UCL; violations of the Fa ir Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) (FDCPA); violations of the Rosenthal Act; negligence; breach of fiduciary duty (Civ. Code, § 2923.1); fraud; breac h of the covenant of good faith and fair dealing; negligent infliction of emotional di stress; intentional infliction of emotional distress; and declaratory relief. Plaintiffs sought an injunction, damages, disgorgement, attorneys’ fees and costs, punitive damages, and a declaration of the true amounts plaintiffs owed to Aztec. 2. Aztec’s Demurrer Aztec demurred to all causes of action on the basis they were barred by the applicable statutes of limitations and they did not state a claim for relief. Aztec argued that the loan originated in September 2006, but plaintiffs attempted to rely on the discovery rule by alleging Az tec’s wrongdoings had only been discovered within the year

2 The record does not disclose whether a foreclosure took place.4 preceding the filing of the original complain t on June 1, 2011. However, plaintiffs did not show that they were unable to uncove r Aztec’s wrongdoing earlier despite exercising due diligence. Further, Aztec argued plainti ffs lacked standing due to the October 12, 2010 filing of their chapter 7 bankruptcy proc eedings, and their claims were barred by judicial estoppel because they failed to list the lawsuit as an asset in their bankruptcy schedules. On the merits of plaintiffs’ cl aims, Aztec argued (1) plaintiffs’ claim under TILA was barred because TILA did not apply to commercial loans; (2) plaintiffs’ claim for negligence failed because a lender doe s not owe a borrower a duty of care; (3) plaintiffs’ claim for breach of fiduciary duty failed because a lender does not owe a borrower a duty of care; (4) plaintiffs’ claim for negligent infliction of emotional distress failed because Aztec had no duty to plainti ffs; (5) plaintiffs’ claim for intentional
infliction of emotional distress failed be cause Aztec’s conduct was not extreme or outrageous; (6) plaintiffs’ claim for declarat ory relief failed because it was duplicative of their other claims and plaintiffs had not te ndered payment required on the defaulted loan. 3. Plaintiffs’ Opposition Plaintiffs argued in opposition that they were willing to pay amounts owed to Aztec, but that their action sought a determin ation of the amounts they were obligated to pay; their loan was to build a single-family residence and thus subject to TILA; Aztec misrepresented the interest rate, claiming it was the best rate available when in fact it was not; plaintiffs did not discover Aztec had faile d to comply with TILA until the notice of default was recorded on September 9, 2010; statutes of limitations did not apply to actions for offset or recoupment under TILA; Aztec relied on facts not set forth in the complaint as a basis for demurrer; and plai ntiffs amended their schedules to list the lawsuit, and the claim reverted to them upon the granting of their discharge in bankruptcy. 3 Plaintiffs asserted that Aztec’s to rts were continuing, and commenced with the initial violations of TILA, fraud in th e inducement in entering into the loan,

3 Plaintiffs received a bankruptcy discharg e on April 6, 2011, prior to the filing of their initial complain t in this action.5 continuing efforts to collect illegal intere st rates, the sending of “dunning notices,” sending of false loan statements, accruals of illegally imposed penalties, and the
recordation of a notice of default and sale. 4. Plaintiffs’ Surreply Plaintiffs filed a surreply to Aztec’s re ply to their opposition to its demurrer in
which it reasserted that Aztec’s torts were c ontinuing, plaintiffs did not discover Aztec’s wrongdoing with the exercise of reasonable dilig ence, the loan was for a residence, not a business, and Aztec falsely claimed they c ould not exercise their right of setoff and
recoupment. 4 5. Hearing on Demurrer; Plain tiffs’ Posthearing Brief; Ruling The transcript of the hearing held Marc h 6, 2012 on the demurrer is not part of the record. However, plaintiffs filed a postheari ng brief to address what they believed was
Aztec’s misstatement of the law at the heari ng regarding damages under TILA. Plaintiffs asserted that because double damages were available under title 15 United States Code section 1640(a)(2)(A)(i), plaintiffs were entitle d to offset those damages against amounts Aztec claimed were owed. Further, such a claim for setoff would not be barred by the
statute of limitations under title 15 United Stat es Code section 1640(e). The trial court
sustained the demurrer without leave to ame nd “for the reasons set forth in the moving papers.” On April 2, 2012, Aztec filed a noti ce of ruling. Plaintiffs appeal the order sustaining the demurrer. 5

4 Aztec’s reply is not part of the record.

5 We treat the order as appealable, despite the absence of a judgment of dismissal. The general rule of appealability is that “[ a]n order sustaining a demurrer without leave to amend is not appealable, and an appeal is proper only after entry of a dismissal on such an order.” ( Sisemore v. Master Financial, Inc . (2007) 151 Cal.App.4th 1386, 1396.) However, “‘when the trial court has sustained a demurrer to all of the complaint’s causes of action, appellate courts may deem the or der to incorporate a judgment of dismissal, since all that remains to make the order appe alable is the formality of the entry of a dismissal order or judgment.’” Here, we ac cordingly deem the order on the demurrer to6 DISCUSSION
I. Standard of Review “[T]he function of a demurrer is to test the sufficiency of a pleading as a matter of law,” and “we apply the de novo standard of re view in an appeal following the sustaining of a demurrer without leave to amend.” ( California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247; Holiday Matinee, Inc. v. Rambus, Inc . (2004) 118 Cal.App.4th 1413, 1420.) A complaint “is suffi cient if it alleges ultimate rather than evidentiary facts,” but the plai ntiff must set forth the essential facts of his or her case “‘“‘with reasonable precision and with particul arity sufficient to acquaint [the] defendant with the nature, source, and extent’”’” of th e plaintiff’s claim. Legal conclusions are insufficient. ( Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550 & 551, fn. 5.) “We assume the truth of the allegations in the complaint, but do not assume the truth of contentions, deductions, or conc lusions of law.” The trial court errs in sustaining a demurrer “if the plaintiff has stated a cause of action under any possible legal theory, and
it is an abuse of discretion for the court to sustain a demurrer without leave to amend if the plaintiff has shown there is a reasona ble possibility a defect can be cured by amendment.” ( California Logistics, Inc. , at p. 247.) “Where a complaint shows on its face th at the action is barred by the statute of limitations, a general demurrer for failure to st ate a cause of action will lie. [Citations.]” ( Kendrick v. City of Eureka (2000) 82 Cal.App.4th 364, 367–368.) The running of the statute must appear “clearly and affirmativ ely” from the dates alleged; it is not enough that the complaint may be time-barred. ( Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.) To survive a demu rrer on statute of limitations grounds where the facts pleaded disclose the action is time-ba rred, the plaintiff must plead facts showing that the statute does not apply based on the discovery rule. ( CAMSI IV v. Hunter Technology Corp . (1991) 230 Cal.App.3d 1525, 1536.) In particular, the plaintiff must

incorporate a judgment of dismissal and will review the order. ( Melton v. Boustred (2010) 183 Cal.App.4th 521, 527–528, fn.1.)7 plead “the time and manner of discovery” a nd “the inability to have made earlier discovery despite reasonable diligence.” ( Id . at p. 1536.) Generally, a limitations period begins to run “‘upon the occurrence of the last fact essential to the cause of action.’” ( DeRose v. Carswell (1987) 196 Cal.App.3d 1011, 1017.) However, where a tort involves a c ontinuing wrong, the statute of limitations does not begin to run until the date of the last injury or when the tortious acts cease. ( Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1192.)
II. Plaintiffs’ Claims The statutes of limitations applicable to plaintiffs’ claims range from one to four years. We conclude that certain of plaintiffs ’ claims are time-barred, certain others fail to
state a cause of action under the substantive la w, and the trial court erred in reversing plaintiffs’ claims for violation of the Rosent hal Act and UCL, and breach of the implied covenant of good faith and fair dealing and declaratory relief.
A. TILA Plaintiffs’ first cause of action allege d that Aztec breached TILA by failing to provide required disclosures in writing, failed to deliver required timely notices, failed to disclose all finance charge details, failed to disclose the annual percentage rate, failed to provide a good faith estimate or a consum er handbook on adjustable rate mortgages before the loan application. (15 U.S.C. §§ 1602(u), 1638(a), (b); 12 C.F.R. §§ 226.5(a)(1), 226.19(a)(1), (b)(1), 226.22(a)(4) (2012).) Plaintiffs sought expungement of the notice of default and other negative credit reports. Claims under TILA for damages are subject to a one-year statute of limitations (15 U.S.C. § 1640(e).) There is disagreement whether the period of limitations commences on the date the credit contract is executed ( Wachtel v. West (6th Cir. 1973) 476 F.2d 1062, 1065), or at the time the plaintiff discove red, or should have discovered, the acts constituting the violation ( NLRB v. Don Burgess Construction Corp . (9th Cir. 1979) 596 F.2d 378, 382). “[T]he doctrine of equita ble tolling, may, in the appropriate circumstances, suspend the limitations pe riod until the borrower discovers or had8 reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action.” ( King v. State of Cal. (9th Cir. 1986) 784 F.2d 910, 915.) King emphasized that in determining whether or not a limitations period should be tolled, a court should assess “whether tolling the stat ute [would] effectuate the congressional purpose of the Truth-in-Lending Act.” ( Ibid. ) “‘[T]he doctrine of equitable tolling may, in the appropriate circumstances, suspe nd the limitations period until the borrower discovers or had reasonable oppor tunity to discover the fraud or nondisclosures that form the basis of the TILA claim.’ [Citation.] Equitable tolling is ‘appropriate where the plaintiff is actively misled by the defendant a bout the cause of action or is prevented in some extraordinary way from asserting hi s [or her] rights.’ [Citation.]” ( Deaville v. Capital One Bank (W.D.La. 2006) 425 F.Supp.2d 744, 752; see also Baker v. Beech Aircraft Corp . (1974) 39 Cal.App.3d 315, 323.) TILA “specifically exempts from its scope extensions of credit for business or commercial purposes.” ( Poe v. First Nat. Bank of DeKalb Cty. (5th Cir. 1979) 597 F.2d 895, 896.) TILA applies to transactions in wh ich “the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household pur poses.” (15 U.S.C. § 1602(h).) In evaluating whether a certain loan was made for commercial purposes, the emphasis is on the purpose of the transaction and not the categorization of the properties
used to secure the loan. “W hether an investment loan is for a personal or a business purpose requires a case by case analysis.” ( Thorns v. Sundance Properties (9th Cir. 1984) 726 F.2d 1417, 1419.) Here, even assuming TILA applied to plaintiffs’ loan (although Aztec allegedly fraudulently made the loan as a commercial lo an), plaintiffs’ claims are time-barred.
Plaintiffs should have discove red, by reading their loan doc uments and reviewing Aztec’s disclosures, Aztec’s violation of TILA prior to the foreclosure in September 2010. Thus, they cannot rely on the discovery doctrine to delay the running of the statute, which commenced with the origination of the loan in September 2006.9 Further, they cannot rely on a recoupmen t claim under TILA to avoid the bar of the statute of limitations. Generally, “a de fendant’s right to plead ‘recoupment,’ a ‘“defense arising out of some feature of th e transaction upon which the plaintiff’s action is grounded,”’ [citation] survives the e xpiration” of the limitations period. ( Beach v.
Ocwen Fed. Bank ) (1998) 523 U.S. 410, 415 [118 S. Ct. 1408, 140 L.Ed.2d 566].) To avoid dismissal at this stage, plaintiffs must show that “(1) the TILA violation and the debt are products of the same transaction, (2 ) the debtor asserts the claim as a defense, and (3) the main action is timely.” ( Moor v. Travelers Ins. Co . (5th Cir. 1986) 784 F.2d 632, 634.) TILA (15 U.S.C. § 1640(e)) makes recoupment available only as a defense in “an action to collect [a] debt.” Here, plaintiffs cannot use a recoupment cl aim to escape the bar of the statute. Although plaintiffs’ TILA claim satisfies the firs t prong of the test as it is related to the mortgage debt, the action here fails the sec ond prong because plaintiffs attempt to use a recoupment claim affirmatively, and not as a de fense, and thus exceed the scope of TILA.
B. UCL Plaintiffs’ second cause of action alleged that Aztec violated the UCL by inserting into the loan documents the provision th at the loan was for a nonowner occupied investment property, and Aztec made untrue or misleading statements and falsified the loan documents. Plaintiffs alleged that Azt ec violated TILA, FDCPA, the Rosenthal Act, and the Mortgage Brokers and Bankers Fiduciary Duty Law, which predicates satisfy the
UCL. “[U]nfair competition shall mean and in clude any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . . .” (Bus. & Prof. Code, § 17200.) “The UCL de fines unfair competition as ‘any unlawful, unfair or fraudulent business act or practice.’ [Citation.] Therefore, under the statute ‘there are three varieties of unfair competiti on: practices which are unlawful, unfair or fraudulent.’” ( In re Tobacco II Cases (2009) 46 Cal.4th 298, 311.) For unfair business practices actions under the unlawful pr ong, “‘an action based on Business and10 Professions Code [section] 17200 to redre ss an unlawful business practice “borrows”
violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct reme dies provided thereunder.’” ( Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383.) The focus of the UCL is “on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.” ( In re Tobacco
Cases II , at p. 312.) The remedies available under the UCL are limited to injunctive, restitutionary and related relie f (Bus. & Prof. Code, § 17203; State of California v. Altus
Finance (2005) 36 Cal.4th 1284, 1303.) However, re stitutionary or injunctive relief is not mandatory; rather, equitable considera tions may guide the court’s discretion in fashioning a remedy for a UCL violation. ( Cortez v. Purolator Air Filtration Products
Co. (2000) 23 Cal.4th 163, 180.) The statute of limitations on UCL claims is four years from the date of accrual. (Bus. & Prof. Code, § 17208.) Here, as discussed below, plaintiffs ha ve stated a claim for violation of the Rosenthal Act upon which they can base their UCL claim. As a result, the trial court erred in sustaining the demurrer to this cause of action.
C. FDCPA
Plaintiffs’ fourth cause of action 6 alleged that Aztec violated the FDCPA by using
unfair and unconscionable means to collect its debt, including sending deceptive letters and making phone calls to plaintiffs, maki ng false reports to credit agencies, and increasing the amount of the mortgage.
The term “debt collector” is defined in title 15 United States Code section 1692a(6) as follows: “The term ‘debt co llector’ means any person who uses any instrumentality of interstate commerce or th e mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” The

6 The complaint omitted a third cause of action.11 courts which have looked at th e definition of “debt collector” have uniformly held that the FCDPA does not apply to a bank acting to collect a debt owed to itself. (See Thomasson v. Bank One, Louisiana, N.A . (E.D.La. 2001) 137 F.Supp.2d 721, 724 [in collecting on its own debts, a bank does not meet the criteria of a ‘debt collector’ pursuant to the FDCPA “because as a bank it pr imarily loans money to consumers rather than collects outstanding debts”].) Here, pl aintiffs’ complaint alleges that Aztec was attempting to collect a debt on its own beha lf; under the FDCPA, Aztec is not a debt collector. Therefore, the claim fails as a matter of law.
D. Rosenthal Act Plaintiffs’ fifth cause of action alleged that Aztec violated the Rosenthal Act by using unfair and unconscionable means to co llect its debt, including sending deceptive letters and making phone calls to plaintiffs, making false reports to credit agencies, and increasing the amount of the mortgage. The Rosenthal Act “was enacted ‘to pr ohibit debt collectors from engaging in unfair or deceptive acts or practices in the co llection of consumer de bts, and to require debtors to act fairly in entering into and honoring such debts. [Citation.] . . . A debt collector violates the act when it engages in harassment, threats, the use of profane language, false simulation of the judicial proce ss, or when it cloaks its true nature as a licensed collection agency in an effort to collect a consumer debt.” ( Sipe v. Countrywide
Bank (E.D.Cal. 2010) 690 F.Supp.2d 1141, 1151.) The Rosenthal Act defines a debt collector as “any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.” (Civ. Code, § 1788.2, subd. (c).)
The statute of limitations on a Rosenthal Act claim is one year. (Civ. Code, § 1788.30, subd. (f).) Here, plaintiffs alleged that Aztec was a “debt collector” within the meaning of the
Rosenthal Act and that Aztec commenced harassi ng them about their debt in or about fall 2009, and that the calls continued. Although not specifically pleaded, we can assume for
the sake of demurrer that Aztec’s calls c ontinued at least until the commencement of12 foreclosure in September 2010; under the conti nuing tort doctrine, the statute did not run until this time, which is less than a year before the filing of plaintiffs’ initial complaint in June 2011. Thus, the trial court erred in su staining a demurrer to this claim. We note that the trial court in ruling on the demurrer only reached the statute of limitations issue with respect to this claim, and did not address the merits. E. Negligence Plaintiffs’ sixth cause of action for neg ligence alleged that Aztec had a duty to perform acts as a lender in a manner not to cause plaintiffs harm, and breached those duties by failing to make required disclosures, taking fees to which it was not entitled, wrongfully making negative reports about plai ntiffs’ credit, and taking payments to
which it was not entitled. A financial institution owes no duty of ca re to a borrower when the transaction does not exceed the scope of the mere lending of money. ( Nymark v. Heart Fed. Savings
& Loan Assn. (1991) 231 Cal.App.3d 1089, 1096–1097.) Here, plaintiffs have not alleged any conduct by Aztec that goes beyond th e scope of lending money to plaintiffs. Thus, plaintiffs’ claim for negligence fails. F. Breach of Fiduciary Duty
Plaintiffs’ seventh cause of action for br each of fiduciary duty alleged that Aztec owed a fiduciary duty to plaintiffs under Civil Code section 2923.1, which imposes a duty on mortgage brokers, and that Aztec brea ched that duty by obtaining a mortgage for plaintiffs that had unfavorable terms and which they ultimately could not afford, by securing for itself a secret profit, by fals ely documenting the nature of the loan by surreptitiously inserting a statement that the loan was nonresidential when in fact it was residential, and charging a commercial rate of interest for a residential loan. A lender owes no fiduciary duty of care to a borrower in an arm’s length financial transaction. ( Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 206.) However, Civil Code section 2923.1, subdivision (a), provides: “[a] mortgage broker providing mortgage brokerage serv ices to a borrower is the fi duciary of the borrower.” A13 mortgage loan broker is customarily a pe rson “retained by a borrower to act as the borrower’s agent in negotiati ng an acceptable loan.” ( Wyatt v. Union Mortgage Co

. (1979) 24 Cal.3d 773, 782, italics omitted; se e also Civ. Code, § 2923.1, subd. (b) [“‘Mortgage broker’ means a licensed pe rson who provides mo rtgage brokerage services. . . .’ . . . ‘Mortgage brokerage services’ means arranging or attempting to arrange, as exclusive agent fo r the borrower or as dual agen t for the borrower and lender, for compensation or in expectation of comp ensation, paid directly or indirectly, a residential mortgage loan made by an unaffiliated third party”].) Here, Aztec owed no fiduciary duty to plain tiffs as their lender. Further, plaintiffs have not pleaded that Aztec acted as a mortga ge broker in procuring their loan, and thus Civil Code section 2923.1 does not apply to thei r loan. The trial court property sustained
Aztec’s demurrer on this cause of action.
G. Fraud Plaintiffs’ eighth cause of action for fraud alleged that Aztec misrepresented material facts, including that the interest rate on the loan was the lowest rate available, that interest would accrue only from the date of disbursement of funds, and by inserting documents specifying that the loan was nonresidential. Plaintiffs alleged the representations were false when made, were ma de with the intent that plaintiffs rely thereon, and that plaintiffs re lied on them to their detriment. “‘The elements of fraud, which give ri se to the tort action for deceit, are (a) misrepresentation (false representa tion, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” ( Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) A necessary element of the defense of fraud in the execution is reasonable reliance. That is, when a plaintiff asserts th at the defendant misrepresented the nature of the contract, the contract is not considered void due to the fraud if the plaintiff had a reasonable opportunity to discover the true term s of the contract. The contract is only14 considered void when the plaintiffs’ failure to discover the true nature of the document executed was without negligence on the plaintiff’s part. ( Rosenthal v. Great Western Financial Securities Corp. (1996) 14 Cal.4th 394, 419–420.) Th is issue usually arises when the plaintiff failed to read the term s of the contract, relying instead on the defendant’s representation as to the effect of the contract. It is not reasonable to fail to read a contract; this is true even if the pl aintiff relied on the defendant’s assertion that it was not necessary to read the contract. ( Id . at pp. 423–424.) Reasonable diligence requires a party to read a contract before signing it. ( Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1674.) This pres umes, however, that the parties were dealing at arm’s length. When the parties are in a fiduciary relationship, the same degree of diligence is not required of the nonfiduciary party. ( Stafford v. Shultz (1954) 42 Cal.2d 767, 777.) If the defendant is in a fiduc iary relationship with the plaintiff which requires the defendant to explain the terms of a contract between them, the plaintiffs’ failure to read the contract could be reasonable. ( Lynch v. Cruttenden & Co. (1993) 18 Cal.App.4th 802, 808–809.) In such a situati on, the defendant fiduciary’s failure to perform its duty would cons titute constructive fraud ( Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 854), the plaintiff’s failure to read the contract would be justifiable ( Twomey v. Mitchum, Jones & Templeton, Inc. (1968) 262 Cal.App.2d 690, 715), and constructive fraud in the execution would be established. A cause of action for fraud is governed by a three-year statute of limitations. (Code Civ. Proc., § 338, subd. (d).) The action accrues when the aggrieved party discovers the facts constituting the fraud. ( Ibid .) “The courts interpret discovery in [the] context [of fraud] to mean not when the pl aintiff became aware of the specific wrong alleged, but when the plaintiff suspected or should have suspected that an injury was caused by wrongdoing. The statute of limitations begins to run when the plaintiff has information [that] would put a reasonable pe rson on inquiry. A plaintiff need not be aware of the specific facts necessary to estab lish a claim since they can be developed in pretrial discovery. Wrong and wrongdoing in th is context are understood in their lay and15 not legal senses. [Citation.] [¶] . . . ‘“Unde r this rule constructive and presumed notice or knowledge are equivalent to knowledge. So, when the plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources ope n to [her] investigation (such as public records or corporation books), the statute commences to run.” [Citation.]’” ( Kline v.
Turner (2001) 87 Cal.App.4th 1369, 1374.) Here, plaintiffs cannot state a claim fo r fraud based upon the asserted execution of
the loan documents based on nondisclosures of the loan’s characterization as a commercial loan, the interest rate charged, or the accrual date of interest because those terms were presumably contained in the loan doc uments plaintiffs failed to attach to their complaint. Further, as Aztec owed no fiducia ry duty, plaintiffs cannot rely on such a duty to excuse their failure to read the loan documents. H. Breach of the Implied Covenan t of Good Faith and Fair Dealing
Plaintiffs’ ninth cause of action for br each of the implied covenant of good faith and fair dealing alleged that Aztec had a duty to pay at least as much regard to plaintiffs’ financial interests as its own; Aztec had a duty to comply with the laws of California; and Aztec had a duty to act fairly towards plainti ffs in connection with the loan. Plaintiffs alleged that Aztec breached that duty by failure to disclose to plaintiffs the true nature of the loan, failing to give plaintiffs required di sclosures, and demanding that plaintiffs pay more interest than they were required to pay. A cause of action for breach of the implie d covenant of good faith and fair dealing is premised on the breach of a specific contractual obligation. ( Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4t h 1026, 1031–1032 [the purpose of the implied covenant is to “‘prevent a contracting party fro m engaging in conduct which . . . frustrates the other party’s rights to the benefits of the contract’”].) “Every contract contains an implied covenant of good faith and fair de aling providing that no party to the contract will do anything that woul d deprive another party of the benefits of the contract. [Citations.] The implied cove nant protects the reasonable expectations of16 the contracting parties based on their mutual promises. [Citations.] The scope of conduct prohibited by the implied covenant depends on the purposes and express terms of the contract. [Citation.] Although breach of the implied covenant often is pleaded as a separate count, a breach of the implied covenant is necessarily a breach of contract.” ( Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885.) The claim is controlled by the f our-year statute of limitations applying to contracts. ( Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 220– 221.) Here, plaintiffs essentially allege th at Aztec breached the loan contract by charging more interest and principal than le gally was due and by failing to comply with applicable laws. The complaint alleges that Aztec first breached the loan in fall 2009 by making calls to collect what it asserted was ow ed to it and which plaintiffs assert Aztec was not owed. At that time, the statute of limitations would have begun to run. The complaint filed in June 2011 was therefore tim ely on plaintiffs’ claim for breach of the implied covenant of good faith a nd fair dealing. We note that the trial court in ruling on the demurrer only reached the statute of limitati ons issue with respect to this claim, and
did not address the merits. I. Negligent Infliction Of Emotional Distress
Plaintiffs’ 10th cause of action for ne gligent infliction of emotional distress alleged that as a result of Aztec’s neglig ence, plaintiffs had suffered from severe
emotional distress. Negligent infliction of emotional distress is not an independent tort; it is the tort of negligence. ( Burgess v. Superior Court (1992) 2 Cal.4th 1064, 1072.) Damages for emotional distress are recoverable only if the defendant has breached a duty to the plaintiff. “[T]his indepe ndent duty may be imposed by law, be assumed by the defendant, or exist by virtue of a specia l relationship” between the parties. ( Potter v.
Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 984–985.)17 Here, as plaintiffs cannot state a claim fo r negligence, they cannot state a claim for negligent infliction of emotional distress. T hus, the trial court did not err in sustaining
Aztec’s demurrer without leave to amend. J. Intentional Inflictio n Of Emotional Distress
Plaintiffs’ 11th cause of action for inte ntional infliction of emotional distress alleged that as a result of Aztec’s conduct, plaintiffs had suffered from severe emotional
distress.
To recover on a claim for intentional inf liction of emotional distress, the plaintiff must demonstrate (1) outrageous conduct by the defendant, (2) directed at the plaintiff with the intent of causing extreme emotiona l distress, (3) actually and proximately causing emotional distress to the plaintiff, and (4) plaintiff’s severe or extreme emotional distress. ( Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883.) Outrageous conduct is conduct which exceeds the bounds of that usually tolerated in civilized society. Such conduct must be directed at the plaintiff or occur in the plaintiff’s presence. ( Christensen v. Superior Court (1991) 54 Cal.3d 868, 903.) The statute of
limitations for an intentional infliction of em otional distress claim is two years. (Code Civ. Proc., § 335.1.) The claim accrues wh en the tortfeasor’s conduct first causes emotional distress. ( Kiseskey v. Carpenters’ Trust for So. California (1983) 144 Cal.App.3d 222, 232 [tort complete when effect of defendant’s conduct results in severe emotional distress].) Plaintiffs’ complaint does not allege when they suffered severe emotional distress, but does allege that the intentional inflicti on of emotional distress was caused by all of Aztec’s conduct. Assuming that Aztec’s attemp ts to collect its loan in fall 2009 started the clock ticking on allegedly extreme and outrageous conduct, the two-year statute would not bar plaintiffs’ claim. However, re covery on this theory requires a showing of “‘outrageous’” conduct which is “‘so extrem e as to exceed all bounds of that usually
tolerated in a civilized comm unity.’” “An assertion of legal rights in pursuit of one’s own economic interests does not qualify as ‘outrageous’ under this standard.” ( Yu v.18 Signet Bank/Virginia (1999) 69 Cal.App.4th 1377, 1397–1398.) Thus, Aztec’s attempts to collect its loan would not support a claim for emotional distress. K. Declaratory Relief
Plaintiffs’ twelfth cause of action for d eclaratory relief sought a declaration of the rights and duties of the parties under the loan documents, a declaration that plaintiffs did not owe Aztec the amounts it claimed, and a decl aration of the amounts plaintiffs owed to
Aztec. Code of Civil Procedure section 1060 pr ovides in relevant part: “Any person interested under a written instrument . . . , or under a contract, or who desires a declaration of his or her rights or duties with respect to another . . . may, in cases of actual controversy relating to the legal rights a nd duties of the respective parties, bring an original action . . . for a declaration of his or her rights and duties in the premises, including a determination of any question of cons truction or validity arising under the instrument or contract.” Declaratory re lief operates prospectively, serving to set controversies at rest before obligations ar e repudiated, rights are invaded or wrongs are committed. Thus the remedy is to be used to advance preventive justice, to declare rather than execute rights. ( Baxter Healthcare Corp. v. Denton (2004) 120 Cal.App.4th 333, 360.) Resort to declaratory relief therefore is a ppropriate to attain judicial clarification of the parties’ rights and obligations under the applicable law. ( Id . at p. 362.) The limitations period for declaratory re lief claims depends on “the right or obligation sought to be enforced, and the [sta tute of limitations’] application generally follows its application to actions for da mages or injunction on the same rights and obligations.” ( Howard Jarvis Taxpayers A ssn. v. City of La Habra (2001) 25 Cal.4th 809, 821.) “A four-year statute of limitations applies to obligations or liabilities founded upon an instrument in writing.” (C ode Civ. Proc., § 337, subd. (1); Ginsberg v. Gamson (2012) 205 Cal.App.4th 873, 883.) The limitati ons period does not begin to run until a breach occurs. ( Romano v. Rockwell Internat., Inc . (1996) 14 Cal.4th 479, 489.) A party may seek declaratory relief before there has be en an actual breach of an obligation; in19 such cases the limitations period still does not begin to run until the breach occurs. ( Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal.2d 719, 734.) Here, plaintiffs dispute the amounts ow ed under the loan documents, meaning a four-year statute applies to their contract cl aims. According to the allegations of the complaint, the dispute arose sometime time in the fall of 2009 when Aztec began to call about the loan. Thus, plaintiffs’ claim for declaratory relief is not time-barred.
DISPOSITION The judgment is reversed on plaintiffs’ clai ms for violations of the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), and plaintiffs’ claims for breach of the implied covenant of good faith and fair dealing and for declaratory relief. In all other respects, the judgment is affirmed. The parties are to bear their own costs on appeal.
NOT TO BE PUBLISHED.

JOHNSON, J.

We concur:

ROTHSCHILD, Acting, P. J.

CHANEY, J.