Court Opinion

ID: 2658014
Source: CourtListenerOpinion
Date Created: 2014-03-26 20:04:41.051379+00
Date Added: 2024-06-11T09:11:32.591189
License: Public Domain

Filed 3/26/2014
                           CERTIFIED FOR PUBLICATION

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             SIXTH APPELLATE DISTRICT

CARLOS CANSINO et al.,                              H038713
                                                   (Santa Clara County
        Plaintiffs and Appellants,                  Super. Ct. No. 1-11-CV-204887)

        v.

BANK OF AMERICA et al.,

        Defendants and Respondents.

        Plaintiffs Carlos and Resurreccion Cansino appeal from a judgment of dismissal
sustaining defendant’s demurrer to a second amended complaint without leave to amend.
Because plaintiffs’ complaint fails for lack of specificity, and because the trial court did
not abuse its discretion in denying leave to amend the complaint, we will affirm the trial
court’s judgment.
                             I. FACTUAL BACKGROUND1
        In 2000, plaintiffs obtained a $280,000 mortgage loan from National City
Mortgage Company dba Accubanc Mortgage. The record does not reveal whether the
loan was for the purchase or a refinance of their Milpitas home. The $280,000 adjustable
rate note provided for a five-year fixed interest rate of 8 percent followed by a variable
interest rate never to exceed 13 percent. Plaintiffs refinanced in 2002 with another
adjustable rate loan from National City Mortgage Company, borrowing $386,000 against
their property. The 2002 loan fixed interest at 4.875 percent for three years followed by a
variable rate not to exceed 10.875 percent. Plaintiffs again refinanced in August 2005,

        1
        We draw our facts from the properly pleaded allegations in the second amended
complaint and the deeds of trust judicially noticed by the trial court.
borrowing more money against the property ($496,000) using a new lender, America’s
Wholesale Lender. The loan document stated that the borrower “will pay interest at a
yearly rate of 1.000 %,” and that “[t]he interest rate I will pay may change.” It also stated
that minimum monthly payments for the initial five years would result in negative
amortization if the minimum payment was insufficient to cover the interest due. The
interest rate on the 2005 loan was capped at 9.95 percent.
       In approximately July 2005 in connection with the August 2005 loan, a loan
broker and an appraiser working for America’s Wholesale Lender appraised plaintiffs’
home at a fair market value of $620,000. Based on that appraisal and other
representations by lending personnel, plaintiffs elected to refinance their home with a
$496,000 adjustable rate mortgage. Lending personal told plaintiffs their home would
appreciate and they would be able to sell or refinance the home at a later date before
having to make higher monthly loan payments or pay an increased principal of $620,000
which would result from negative amortization.
       In 2010, plaintiffs discovered that their home was valued between $350,000 and
$400,000. Soon thereafter they stopped making payments on the 2005 loan and sought a
loan modification. As of the filing of the second amended complaint (March 2012) the
monthly payments were approximately $1,960, the balance due on the loan was
approximately $626,000, and the fair market value of the home was approximately
$350,000.
                         II. TRIAL COURT PROCEEDINGS
       In October 2011, plaintiffs filed a first amended complaint against Bank of
America Corp., CTC Foreclosure Services Corp., and Mortgage Electronic Registration
System, Inc. for damages and specific performance arising out of the 2005 refinancing of
their Milpitas home. Plaintiffs sued Bank of America in its individual capacity and as the
owner of subsidiary and acquired entities including America’s Wholesale Lender. The
complaint included causes of action for fraud and violation of California’s unfair
competition law (UCL) (Bus. & Prof. Code, § 17200). The trial court sustained
defendant’s demurrer to the first amended complaint with leave to amend on the fraud
and UCL claims. The court found the fraud claim deficient for failure to allege each
element with specificity and the UCL claim deficient for failure to allege injury. Citing
Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 (Fox), the court also ruled
that plaintiffs failed to state sufficient facts to justify tolling the three-year statute of
limitations for fraud and the four-year statute of limitations for the UCL claim.
       Plaintiffs filed a second amended complaint against defendants realleging fraud
and UCL violations.2 In their first cause of action, titled “Negative Fraud, Actual Fraud,
and Deceit Vitiating Loan and Deed of Trust As Against All Defendants,” plaintiffs
alleged that “Defendants’ lending personnel” made two false representations to plaintiffs
during their 2005 refinancing process: (1) “The current market value of the real property
was $620,000 and appreciating;” and (2) “By refinancing with the ARM loan being
offered to plaintiffs, plaintiffs could bring the early monthly payments down, obtain
several years of appreciation to the value of the home, and sell or refinance the home at
an appreciated value before having to pay the then due principal of $620,000 and before
having to pay the much higher monthly payments.” The second amended complaint
further alleged that defendants knew plaintiffs were unaware of the speculative and/or
false nature of the two representations, and that the speculative and/or false nature of the
representations could not be discovered by plaintiffs’ diligent attention.
       Plaintiffs alleged that they acted in reasonable reliance on the “presumed truth of
the representations,” were justified in doing so, and were damaged as a result of that
reliance. Plaintiffs alleged that defendant’s lending personnel had an affirmative duty to

       2
          The second amended complaint alleged a third cause of action labeled “Plaintiff
as Third Party Beneficiary Against Defendant Bank of America.” The trial court struck
this claim as exceeding the scope of permissible amendment. Plaintiffs do not challenge
that ruling on appeal.
disclose these matters to plaintiffs, who were unsophisticated borrowers, and that
defendants were “charged with knowledge of the speculative nature of the existing and
future values of the real property [sic] were the direct result of an artificial market created
by the financial institutions in creating and marketing the GSEs and Tranches as herein
alleged in paragraph 11.”3 Finally, plaintiffs alleged that the falsity of the two
representations “[was] not discovered until sometime in 2010 when plaintiffs realized
that their home was now valued at $350,000 to $400,000.” Plaintiffs sought cancellation
of the $496,000 note and deed of trust, refinancing of the loan at the current fair market
value of the property, and unspecified damages.
       In their second cause of action for violation of the UCL against Bank of America
only, plaintiffs alleged that the misrepresentations set forth in their fraud cause of action,
as well as the terms of the August 2005 loan, constituted unfair, deceptive, false and
misleading business practices. Plaintiffs alleged money damages as a result of
defendant’s unfair business practices, including “drastically increasing negative equity as
a result of defendants’ loan package financing” and the difference between the ultimate
principal amount of $620,000 and the current $350,000 fair market value of their home.
Plaintiffs further alleged that they discovered their UCL claim within the last four years,
with “reasonable diligence of an ordinary borrower of little sophistication . . . .”
       Defendants demurred to the second amended complaint arguing that the cause of
action for fraud was time-barred, fraud was not pleaded sufficiently or with particularity,
and plaintiffs failed to allege actionable misrepresentation. As to the UCL claim,
defendants alleged that it was time-barred, failed for lack of standing, and failed because
the underlying fraud violation was inadequately pleaded.

       3
          The trial court denied plaintiffs’ request for judicial notice of the facts alleged in
paragraph 11 of the second amended complaint, and it granted defendants’ motion to
strike paragraphs 8 through 11 as irrelevant. On appeal, plaintiffs do not challenge either
ruling. We therefore do not consider the stricken paragraphs in our review.
       The trial court sustained defendants’ demurrer to the second amended complaint
without leave to amend. The court concluded that plaintiffs failed to allege each element
of fraud with the requisite specificity despite having been given the opportunity to
amend. The court also found that the UCL claim was premised on the same alleged
misrepresentations as pleaded in the fraud cause of action. Thus, the UCL claim also
failed for lack of specificity.
       Plaintiffs filed a timely notice of appeal from the court’s order of dismissal
entering judgment in favor of defendants.
                                    III. DISCUSSION
A.     STANDARD OF REVIEW
       We review de novo the trial court’s order sustaining a demurrer. (Moore v.
Regents of University of California (1990) 51 Cal.3d 120, 125.) We assume the truth of
all facts properly pleaded, and we accept as true all facts that may be implied or
reasonably inferred from facts expressly alleged, unless they are contradicted by
judicially noticed facts. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 (Evans); B & P
Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 953.) Inconsistent
general statements are modified and limited by specific factual allegations. (B & P
Development Corp. at p. 953.) We give the complaint a reasonable interpretation and we
read it in context. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081
(Schifando).) But we do not assume the truth of contentions, deductions or conclusions
of fact or law. (Evans at p. 6.) We will affirm an order sustaining a demurrer on any
proper grounds, regardless of the basis for the trial court’s decision. (Buckland v.
Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 806, disapproved on another
ground in Kwikset Corp. v Superior Court (2011) 51 Cal.4th 310, 337.)
       When the trial court sustains a demurrer without leave to amend, we review the
determination that no amendment could cure the defect in the complaint for an abuse of
discretion. (Schifando, supra, 31 Cal.4th at p. 1081.) The trial court abuses its discretion
if there is a reasonable possibility that the plaintiff could cure the defect by amendment.
(Ibid.) The plaintiff has the burden of proving that amendment would cure the legal
defect, and may meet this burden on appeal. (Ibid.; Smith v. State Farm Mutual
Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 711.)

B.     DISMISSAL OF DEFENDANTS CTC FORECLOSURE SERVICES CORPORATION
       AND MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC.

       Defendants CTC Foreclosure Services Corporation (CTC) and Mortgage
Electronic Registration System, Inc. (MERS) argue that the demurrer was properly
sustained against them because they are not implicated in the second amended complaint.
CTC and MERS observe that plaintiffs’ complaint is directed at alleged
misrepresentations made by the loan originator, America’s Wholesale Lender, and that
neither CTC nor MERS played a role in the origination of plaintiffs’ loan. We agree with
CTC’s and MERS’s characterization of the second amended complaint, and we note that
plaintiffs do not dispute the position of CTC and MERS in their reply brief. Even though
CTC and MERS did not seek dismissal in the trial court based on plaintiffs’ failure to
state a claim against them, we will uphold the demurrer as to CTC and MERS on that
basis. (Schifando, supra, 31 Cal.4th at p. 1081.)
C.     FRAUD
       The elements of fraud are (1) misrepresentation, (2) knowledge of falsity, (3)
intent to induce reliance on the misrepresentation, (4) justifiable reliance on the
misrepresentation, and (5) resulting damages. (Lazar v. Superior Court (1996) 12 Cal.4th
631, 638 (Lazar).) Fraud allegations “involve a serious attack on character” and
therefore are pleaded with specificity. (Hills Trans. Co. v. Southwest Forest Industries,
Inc. (1968) 266 Cal. App.2d 702, 707.) General and conclusory allegations are
insufficient. (Lazar at p. 645.) The particularity requirement demands that a plaintiff
plead facts which “ ‘ “show how, when, where, to whom, and by what means the
representations were tendered.” ’ ” (Ibid.) Further, when a plaintiff asserts fraud against
a corporation, the plaintiff must “allege the names of the persons who made the allegedly
fraudulent representations, their authority to speak, to whom they spoke, what they said
or wrote, and when it was said or written.” (Tarmann v. State Farm Mut. Auto Ins. Co.
(1991) 2 Cal.App.4th 153, 157.) Less specificity in pleading fraud is required “when ‘it
appears from the nature of the allegations that the defendant must necessarily possess full
information concerning the facts of the controversy . . . .’ ” (Committee on Children’s
Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 217.)
       1.     The Future Appreciation Representation
       Plaintiffs allege that, prior to their August 2005 loan refinancing, defendants’
“lending personnel” represented that plaintiffs’ property was appreciating and that
plaintiffs could obtain several years of appreciation in their property so that they could
sell or refinance before having to make higher monthly payments or pay a future
accumulated principal of $620,000.
       Defendants argue that the alleged representations regard the future of the real
estate market. As such, they are forecasts of future events and not actionable
misrepresentations. We agree. The law is well established that actionable
misrepresentations must pertain to past or existing material facts. (Gentry v. eBay, Inc.
(2002) 99 Cal.App.4th 816, 835.) Statements or predictions regarding future events are
deemed to be mere opinions which are not actionable. (Neu-Visions Sports, Inc. v.
Soren/McAdams/Bartells (2000) 86 Cal.App.4th 303, 309-310; Nibbi Brothers, Inc. v.
Home Federal Sav. & Loan Assn. (1988) 205 Cal.App.3d 1415, 1423; 5 Witkin,
Summary of Cal. Law (10th ed. 2005) Torts, § 744, pp. 1123-1125.)
       Plaintiffs contend that whether defendants’ representations regarding the future
market value of their home constitute fact or opinion is a factual question that is not
appropriate for resolution at the demurrer stage of proceedings. We agree with plaintiffs
that the actionable nature of some statements may not readily be determined on demurrer.
(Furla v. Jon Douglas Co. (1998) 65 Cal.App.4th 1069, 1080-1081). But plaintiffs
provide no authority for their position that a prediction about future market conditions
constitutes an actionable misrepresentation, and we have found none.
       Plaintiffs cite Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408 (Bily), which
recognizes that in certain circumstances a representation made by someone possessing
superior knowledge or expertise may be regarded as fact. Bily involved a fraud claim
rooted in an opinion paragraph in an accounting firm’s audit report. The paragraph read:
“[T]he CPA firm’s opinion that the audited financial statements, taken as a whole, are in
conformity with GAAP [the accounting profession’s generally accepted accounting
principles] and present fairly in all material respects the financial position, results of
operations, and changes in financial position of the client in the relevant periods.” (Id. at
pp. 381-382.) The court in Bily found that the paragraph referred to a business’s financial
statements during a discrete period covered by the audit; it was making no prediction of
the business’s future performance. In contrast, defendants’ alleged statements predicting
future appreciation of plaintiffs’ property and plaintiffs’ ability to sell or refinance the
home are statements regarding future events, readily distinguishable from those in Bily,
and not actionable in fraud.
       In Finch v. McKee (1936) 18 Cal.App.2d 90, an appeal from a dismissal entered
upon a demurrer, the court rejected as inactionable a vendor’s statements that a building
was constructed “earthquake proof.” Finch’s reasoning is applicable here: “Every
person of common understanding knows it is impossible to estimate the destructive forces
of nature accompanying earthquakes, tornadoes, cyclones, storms or floods. No human
being could have prophesied the serious damages which resulted to first-class buildings
in San Francisco, Santa Rosa and San Jose from the earthquake of 1906. . . . Such
statements were pure speculations upon which no purchaser had a right to rely.” (Id. at p.
94.)
       Like acts of nature and their consequences, the future state of a financial market is
unknown. Any future market forecast must be regarded not as fact but as prediction or
speculation. (Gentry v. eBay, Inc., supra, 99 Cal.App.4th at p. 835 (describing vague,
highly speculative statement on demurrer as “not the sort of statement that a consumer
would interpret as factual or upon which he or she could reasonably rely.”].) As a matter
of law, defendants’ alleged representations-that plaintiffs’ property would continue to
appreciate in the future and that plaintiffs could then sell or refinance their home based
on this forecasted future appreciation-are not actionable in fraud.
       2.     The Fair Market Appraisal Representations
       Plaintiffs allege that a loan broker and an appraiser working for American’s
Wholesale Lender appraised their residence in July 2005 to have a fair market value of
$620,000, and that defendants’ lending personnel represented to plaintiffs that the market
value of the real property at that time was $620,000. These allegations are deficient
under Lazar because they do not specify “ ‘ “how, when, where, to whom, and by what
means the representations were tendered.” ’ [Citation.]” (Lazar, supra, 12 Cal.4th at p.
645.) Plaintiffs’ fraud allegations do not identify who prepared the appraisal or made the
representations. Absent such allegations, defendant Bank of America has no real way to
dispute the fraud claim.
       Plaintiffs argue that they should be relieved of specifying the identity of the
individuals making the representations because “as the borrowers, [plaintiffs] are always
identified by their names in all relevant documents, however, those same documents
indicate that [plaintiffs] were involved in transactions with corporations, institutions, and
entities, but not with any particular individual acting on behalf of these entities.” Based
on the facts alleged in the second amended complaint, the relevant document would
appear to be the appraisal; plaintiffs could have but did not provide the trial court with
this document, or with any documents supporting the alleged misrepresentations of the
value of the home in July 2005. (C.f. West v. JPMorgan Chase, N.A. (2013) 214
Cal.App.4th 780, 793 [attaching relevant written document to complaint]; Boschma v.
Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 (Boschma) [same].) Further,
to the extent any misrepresentation was verbal, the complaint fails to demonstrate why
defendants would “necessarily possess full information” regarding their employees’
conversations with plaintiffs. (Committee on Children’s Television, Inc. v General Foods
Corp., supra, 35 Cal.3d at p. 217.)
       The second amended complaint also fails to allege how the July 2005 appraisal
was a misrepresentation of the current market value of the property. Plaintiffs allege that
the home was valued between $350,000 and $400,000 in 2010, but that allegation does
not support plaintiffs’ claim that the 2005 appraisal was a misrepresentation. (C.f. Fuller
v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 959 [alleging fraudulent
appraisal based on using outdated home sales that were not comparable in value, square
footage, number of rooms and other amenities].) Nor is the knowledge element of fraud
satisfied by the complaint’s conclusory statement that defendants “knew that the . . .
[r]epresentation[] [was] either false or at least highly speculative” because the allegation
does not identify how defendants knew that the 2005 appraisal misrepresented the market
value of the property at the time the property was appraised.
       Finally, the allegations in the second amendment complaint fail to state a claim for
fraudulent concealment, since the requirement that “[f]raud must be pleaded with
specificity” applies equally to a cause of action for fraud and deceit based on
concealment. (Boschma, supra, 198 Cal.App.4th at p. 248.)
       3.     Statute of Limitations
       The statute of limitations for fraud is three years. (Code Civ. Proc., § 338, subd.
(d).) Although a cause of action generally accrues, triggering the statute of limitations,
when it “ ‘is complete with all of its elements,’ ” accrual is postponed until a plaintiff
discovers, or has reason to discover, the cause of action. (Fox, supra, 35 Cal.4th at p.
806.) The discovery rule is applied to fraud actions by statute. (Code Civ. Proc., § 338,
subd. (d). [“The cause of action . . . is not deemed to have accrued until the discovery, by
the aggrieved party, of the facts constituting the fraud or mistake.”].)
       Because the discovery rule operates as an exception to the statute of limitations,
“if an action is brought more than three years after commission of the fraud, plaintiff has
the burden of pleading and proving that he did not make the discovery until within three
years prior to the filing of his complaint.” (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d
412, 437 (Hobart).) To excuse failure to discover the fraud within three years after its
commission, a plaintiff also must plead “facts showing that he was not negligent in
failing to make the discovery sooner and that he had no actual or presumptive knowledge
of facts sufficient to put him on inquiry.” (Ibid.; Johnson v. Ehrgott (1934) 1 Cal.2d 136,
137.) To that end, a plaintiff must allege facts showing “the time and surrounding
circumstances of the discovery and what the discovery was.” (Hobart at p. 441.)
Conclusory allegations will not withstand a demurrer. (Fox, supra, 35 Cal.4th at p. 808.)
The discovery related facts should be pleaded in detail to allow the court to determine
whether the fraud should have been discovered sooner. (Davis v. Rite-Lite Sales Co.
(1937) 8 Cal.2d 675, 681.)
       Like the first amended complaint, the second amended complaint is deficient for
the additional reason that plaintiffs failed to establish the timeliness of the fraud claim.
(Fuller v. First Franklin Financial Corp., supra, 216 Cal.App.4th at p. 962.) Plaintiffs
alleged that the misrepresentations on which their fraud claim was based occurred in July
2005. They filed their initial complaint six years later, in July 2011. The second
amended complaint alleged that “[t]he falsity of the [two] Representations [was] not
discovered until sometime in 2010 when plaintiffs realized that their home was now
valued at $350,000 to $400,000,” and that the falsity of the two representations “could
[not] . . . be discovered by the diligent attention of plaintiffs.”
       These allegations are insufficient to establish the timeliness of plaintiffs’ fraud
claim. As we have already explained, plaintiffs’ realization that their home, in 2010, was
worth $350,000 to $400,000” does not explain how plaintiffs made the discovery or how
it demonstrates that the 2005 appraisal was a misrepresentation. “[S]ometime in 2010”
also is vague. Without knowing the specifics of plaintiffs’ discovery, the trial court could
not determine when plaintiffs had actual or presumptive knowledge of the alleged
misrepresentations and whether plaintiffs should have made the discovery sooner.
       On appeal, plaintiffs argue that “discovery of the falsity of [defendants’]
statements could not readily be identified until a significant amount of time had passed.”
They also argue that they had “no reason to question the value of their home until the
time came to make a decision regarding refinancing.” In the same vein, they contend that
defendants concealed the fraud which “could not be discovered until after the statute of
limitations had run.” These conclusory arguments miss the point. The basis of the
discovery must be pleaded with specificity, and the second amended complaint falls short
of this pleading requirement.
D.     THE UCL CLAIM
       California’s unfair competition law prohibits “any unlawful, unfair or fraudulent
business act or practice and unfair, deceptive, untrue or misleading advertising.” (Bus. &
Prof. Code, § 17200.) “ ‘ “Because . . . section 17200 is written in the disjunctive, it
establishes three varieties of unfair competition-acts or practices which are unlawful, or
unfair, or fraudulent. ‘In other words, a practice is prohibited as “unfair” or “deceptive”
even if not “unlawful” and vice versa.’ ” ’ ” (Puentes v. Wells Fargo Home Mortgage,
Inc. (2008) 160 Cal.App.4th 638, 644.) A claim made under section 17200 “ ‘is not
confined to anticompetitive business practices, but is also directed toward the public’s
right to protection from fraud, deceit, and unlawful conduct. [Citation.] Thus, California
courts have consistently interpreted the language of section 17200 broadly.’ ” (South Bay
Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 877.)
       Plaintiffs’ second amended complaint alleges that Bank of America violated the
UCL in three ways. In paragraph 29, they allege that the two misrepresentations
constitute an unlawful business practice. We agree with the trial court that this allegation
fails to state a claim for relief due to lack of specificity, in the same way plaintiffs’ fraud
claim based on the same misrepresentations is deficient. (See Krantz v. BT Visual Images
(2001) 89 Cal.App.4th 164, 178.)
       In paragraph 30, plaintiffs allege that “Defendant financial institutions” violated
the UCL by “colluding” with others in the housing industry to inflate the value of real
estate “to entice plaintiffs and others into ‘top loaded’ or ‘leveraged’ homes,” and then
later refusing to refinance based on the true value of the homes. While we are required to
assume the truth of properly pleaded facts at the demurrer stage, we reject the allegation
that plaintiffs were “entice[d]” into a “top-loaded” or “leveraged house” by collusion as
described in paragraph 30. This allegation is inconsistent with the loan documents
judicially noticed by the trial court showing plaintiffs’ borrowing history. (Evans, supra,
38 Cal.4th at p. 20 [rejecting allegation contradicted by judicially noticed facts].) The
judicially noticed deeds of trust show that plaintiffs did not borrow $496,000 to purchase
their home. Plaintiffs borrowed $280,000 in 2000 to either purchase or refinance their
home, and they borrowed an additional $216,000 against the home over the course of two
refinances. When plaintiffs refinanced their mortgage in 2005 with America’s Wholesale
Lender, they were not purchasing but rather were once again refinancing debt and
continuing to borrow against the value of their home. Because the judicially noticed loan
documents contradict plaintiffs’ allegation that they were “entice[d]” to purchase a “top
loaded” or “leveraged” home, this allegation cannot form the basis for the UCL claim.
       Plaintiffs also allege in paragraph 30 that “Defendant financial institutions”
“erroneously misstate on the face of the loan document that borrowers (plaintiffs) will
only pay a yearly rate of 1%, and other such similar language.” The second amended
complaint demonstrates that plaintiffs were aware of the negative amortization terms of
the loan,4 but they accepted these terms in reliance on representations that their home was

       4
         Plaintiffs’ knowledge of negative amortization and its consequences is
established through paragraph 16(b), where plaintiffs allege defendants told them in 2005
valued at $620,000 and would continue to appreciate. Plaintiffs argue on appeal that their
injury resulted from the negative amortization of their loan combined with the failure of
their home to appreciate as represented to them in 2005. They do not allege, however,
that such an injury resulted from any misstatements contained on the face of the loan
document.
       The facts here are notably different from the facts in Boschma, supra, 198
Cal.App.4th 230, where the court reversed a dismissal after a demurrer to a complaint
alleging fraud and UCL violations. In Boschma, the plaintiffs alleged within the UCL’s
four-year statute of limitations that defendant’s loan documents failed to adequately and
accurately disclose that plaintiffs would suffer negative amortization if they made
monthly payments according to the only payment schedule provided to them before the
closing of their loans. (Id. at p. 234.) In contrast, the allegations indicate that plaintiffs
here were aware that their indebtedness would increase through negative amortization,
but they wagered their ability to manage that debt on the home’s value continuing to
increase, as allegedly promised by defendants.
       The statute of limitations for a UCL violation is four years. (Bus. & Prof. Code, §
17208.) Plaintiffs failed to plead facts to invoke the discovery rule to establish the
timeliness of their claim because they have not alleged when they discovered that they
were paying an interest rate other than one percent per annum. (Hobart, supra, 26 Cal.2d
at p. 443.) Like the fraud claim, the UCL claim fails as untimely given the statute of
limitations.
       Arguing for the first time on appeal that the UCL claim is for unlawful business
practices, plaintiffs list a host of state and federal laws which Bank of America allegedly
violated. But plaintiffs failed to identify these laws in the second amended complaint,

that they could sell or refinance an appreciated home before having to pay what would
grow to a $620,000 principal.
and failed to show on appeal how the second amended complaint could be amended to
state actionable claims under these statutes.
E.     LEAVE TO AMEND
       Although plaintiffs contend that any deficiencies in the second amended complaint
could readily be addressed by the filing of a third amended complaint, they have failed to
establish abuse of discretion by the trial court, or otherwise provide this court with any
basis to allow amendment. Plaintiffs have the burden to prove that an amendment would
cure any defect (Schifando, supra, 31 Cal.4th at p. 1081), and they failed to do so. We
therefore find no abuse of discretion in the trial court’s refusal to allow plaintiffs to
amend again.
                                    IV. DISPOSITION
       The judgment is affirmed.

                                            ____________________________________
                                            Grover, J.

WE CONCUR:

____________________________
Bamattre-Manoukian, Acting P. J.

____________________________
Márquez, J.
Trial Court:                        Santa Clara County Superior Court
                                    Superior Court No. 1-11-CV-204887

Trial Judge:                        Hon. Peter H. Kirwin

Counsel for Plaintiffs/Appellants   Thomas W. Gillen
Carlos T. Cansino, Jr. and          Law Offices of Thomas Gillen
Resurreccion G. Cansino

Counsel for Defendant/Respondent    Jan T. Chilton
Bank of America, N.A.               M. Elizabeth Holt
                                    Severson & Werson