Court Opinion

ID: 1037268
Source: CourtListenerOpinion
Date Created: 2013-08-12 16:05:38.979617+00
Date Added: 2024-06-11T09:57:32.850993
License: Public Domain

Filed 6/24/13 (unmodifed opn. and 5/29/31 pub. order attached)
                                CERTIFIED FOR PUBLICATION

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                 THIRD APPELLATE DISTRICT
                                                    (Butte)
                                                      ----

MICHAEL FULLER et al.,                                                     C070452

                 Plaintiffs and Appellants,                         (Super. Ct. No. 152324)

        v.                                                       ORDER MODIFYING OPINION
                                                                  AND DENYING PETITION
FIRST FRANKLIN FINANCIAL                                             FOR REHEARING
CORPORATION et al.,

                 Defendants and Respondents.                     [NO CHANGE IN JUDGMENT]

THE COURT:

        The nonpublished opinion in the above-entitled matter filed on May 1, 2013, was
ordered certified for publication in the Official Reports on May 29, 2013. For good cause
it now appears that the opinion should be modified in the following particulars and it is so
ordered.

1.      On page 13 of the slip opinion, second full paragraph that begins “First Franklin
contends”, omit the last three sentences of the paragraph (e.g., beginning with “All three
of these arguments entirely . . . ” and ending with “We therefore reject these grounds

                                                       1
. . . .”) and replace them with the following, including at the end of the last sentence a
new, final footnote 8:
       This is true with respect to plaintiffs’ theories of negligence and breach of
       fiduciary duty. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd.
       (1994) 7 Cal.4th 503, 514 [party to contract cannot be liable for conspiring
       to interfere with it because no duty to refrain from interference]; Doctors’
       Co. v. Superior Court (1989) 49 Cal.3d 39, 44 [noninsurer defendants
       cannot be liable for conspiring to breach duty of good faith because that
       duty is owed only by insurer]; Chavers v. Gatke Corp. (2003)
       107 Cal.App.4th 606, 614 [no duty to plaintiffs, so defendant cannot be
       liable under a conspiracy theory for negligence or strict liability]; Everest
       Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002)
       100 Cal.App.4th 1102, 1107 [no conspiracy liability where no fiduciary
       duty owed to plaintiff].)
               However, all three of these arguments entirely disregard the
       allegations that First Franklin conspired with SMF—plaintiffs’ broker—to
       deceive plaintiffs. As a federal trial court has noted in distinguishing the
       principle derived from these cases, “everyone owes a duty not to commit an
       intentional tort against anyone.” (Qwest Communs. Corp. v. Weisz
       (S.D. Cal. 2003) 278 F.Supp.2d 1188, 1193, fn. 4 [conspiracy liability
       proper for defrauding creditor].) Thus, there can be liability for conspiring
       to commit an intentional tort even absent any duty. (Kesmodel v. Rand
       (2004) 119 Cal.App.4th 1128, 1141 [false arrest/imprisonment]; Shafer v.
       Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003)
       107 Cal.App.4th 54, 84 [duty to refrain from injuring plaintiff through
       express misrepresentations].) Indeed, in Chavers, the defendant did not
       challenge an instruction on a theory of conspiracy with respect to theories
       of concealment and intentional misrepresentation. (See Chavers v. Gatke
       Corp., supra, 107 Cal.App.4th at p. 611.) Thus, under this theory, First
       Franklin can be liable for SMF’s intentionally tortious conduct. We
       therefore reject these grounds for sustaining the demurrer as to the theory of
       deceit.8

       _________________
       8 Because a demurrer lies only as to an entire complaint or a count
       (5 Witkin, supra, Pleading, § 957, p. 371), and we have upheld First
       Franklin’s liability to plaintiffs on a conspiracy theory for deceit, we do not
       need to consider First Franklin’s arguments in its petition for rehearing
       regarding vicarious liability on an agency theory.

                                              2
2.     On page 14 of the slip opinion, in the first sentence of the Disposition, after the
words “First Franklin” insert the following parenthetical: “(as to the counts of deceit and
UCL violations)” so that the sentence now reads:
              The judgments of dismissal are reversed with directions to enter
       orders overruling the demurrers of First Franklin (as to the counts of deceit
       and UCL violations) and SFM.

       The petition for rehearing of respondents First Franklin Financial Corporation and
Bank of America is denied. There is no change in judgment. (CERTIFIED FOR
PUBLICATION.)

FOR THE COURT:

            ROBIE                   , Acting P. J.

            BUTZ                    , J.

            DUARTE                  , J.

                                              3
Filed 5/1/13 Certified for publication 5/29/13 (order attached)

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                   THIRD APPELLATE DISTRICT
                                                      (Butte)
                                                        ----

MICHAEL FULLER et al.,                                                   C070452

                  Plaintiffs and Appellants,                      (Super. Ct. No. 152324)

         v.

FIRST FRANKLIN FINANCIAL
CORPORATION et al.,

                  Defendants and Respondents.

         Plaintiffs Michael Fuller and Karen Gehrig, a married couple living in Oroville,
initiated this action in November 2010 against First Franklin Financial Corporation (First
Franklin), Bank of America, and Sacramento First Mortgage (SFM).1 SFM was plaintiffs’
loan broker, First Franklin was the original lender funding the purchase of their home in

1 Another original defendant, Mortgage Electronic Registration Systems, Inc., is not a
party to the action any longer.

                                                          1
June 2006, and Bank of America is First Franklin’s successor in interest on the loan.2 In
their fourth effort at stating a cause of action, under direction from the trial court “to
provide further allegations of late discovery of the [actionable] facts,” plaintiffs alleged
defendants First Franklin and SFM, pursuant to a scheme of predatory lending, made
material misrepresentations and fraudulent concealments of circumstances in
the appraisal of the residence and in the terms of the loan in order to maximize their
profit, which the plaintiffs did not discover until late 2009. Plaintiffs listed several counts
(inexactly denominated “causes of action” (see Cullen v. Corwin (2012) 206 Cal.App.4th
1074, 1076, fn. 1)) that included theories of deceit, negligence, unfair business practices,
and SFM’s breach of its fiduciary duty to them, and civil conspiracy (which is not an
independent cause of action in any event but only a theory for establishing vicarious
liability (3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 557(1), p. 706 (Witkin)).

       First Franklin and SFM separately demurred. Basing its January 2012 rulings on
the statute of limitations, the trial court issued an order of dismissal in favor of First
Franklin, and an order sustaining SFM’s demurrer as to all causes of action without leave
to amend.

       Plaintiffs filed notices of appeal from the two orders. SFM subsequently moved
for judgment on the pleadings on the count of negligence.3 The trial court granted the
motion for lack of opposition, and entered a judgment of dismissal as to SFM in June

2 The allegations assert that Bank of America is named as a defendant (including its status
as a coconspirator with the other two defendants) not on the basis of any conduct of its
own but strictly on the basis of its status as First Franklin’s successor in interest. We thus
will not expressly refer to Bank of America in this opinion.
3 This was a superfluous action. Even though SFM had not included the count of
negligence in its demurrer to this pleading (or the prior one), it is premised on the same
factual basis as the other counts and the trial court could properly include it in its ruling
on SFM’s demurrer. (5 Witkin, supra, Pleading, § 955, p. 370.)

                                               2
2012. We deem the premature notice of appeal from the trial court’s order sustaining
SFM’s demurrer to have been filed immediately after the subsequently entered judgment
for SFM. (Cal. Rules of Court, rule 8.308(c); see In re Gray (2009) 179 Cal.App.4th
1189, 1197 [this court discusses equities in favor of deeming notice to be “premature”
once record prepared and briefing completed after entry of judgment].)

       Plaintiffs argue that they had sufficiently alleged delayed discovery of facts that
defendants had purposely withheld from them in order to induce them to enter into the
now defaulted loans. We agree. We shall thus reverse the judgments of dismissal with
directions to overrule the demurrers.

        FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
                                 A. The Pleading at Issue
       In an appeal from a judgment resulting from the sustaining of a demurrer without
leave to amend, we assume the truth of well-pleaded factual allegations in the subject
pleading, shorn of any legal conclusions. (Fogarty v. City of Chico (2007)
148 Cal.App.4th 537, 540 (Fogarty).)

       Dennis Graves was an employee of SFM and purported to be a mortgage broker,
but was in fact not licensed as a broker in California. SFM and its broker (Graves) were
both agents of First Franklin, which comprehensively directed their conduct. First
Franklin and SFM solicited the business of plaintiffs, who met with the ostensible broker
at a real estate seminar. This resulted in plaintiffs applying for a residential home loan
with SFM. They wanted a 30-year fixed-rate mortgage.

       The broker hired an appraiser to value the property that plaintiffs wanted to buy.
Pursuant to a common scheme with First Franklin and SFM, the appraiser chose outdated
sales of homes that were not truly comparable in value (having greater square footage,
more rooms, and other added amenities), resulting in a significantly inflated appraisal
of the subject property of which defendants were aware.

                                              3
       The broker told plaintiffs that they did not qualify for any loan with better terms
than the one he then offered them. He did not discuss that the terms of the $435,000 loan
included a first mortgage (carrying a 30-year amortization) with an adjustable interest
rate and with payments limited to interest for the first three years, and a second mortgage
(carrying a 20-year amortization and a balloon payment) with a fixed rate of 9.5 percent.
He did not explain any consequences of the terms of the loans.

       In truth, plaintiffs had credit scores that qualified them for more favorable loans,
but the broker did not inform them of this in order to receive a hidden kickback from
First Franklin as part of the closing costs of the loan. As a result, plaintiffs were unaware
of their qualification for more favorable loans, the actual terms of the loan into which
they entered in June 2006 (and the risk of foreclosure that the terms caused), or the actual
value of their home. This stemmed from their status as first-time buyers who were not
experienced in real estate transactions, and defendants were aware of their naïveté.
Because defendants presented themselves as experts, plaintiffs relied on them. SFM and
First Franklin concealed the specified information in order to induce plaintiffs to enter
into the First Franklin loan, and plaintiffs would not have done so if they had been aware
of the true facts. At the June 2006 closing, they “had a few questions about the
prepayment penalty and other [unspecified] details,” but the broker was not present and
the notary did not have any answers for them.

       In November 2009, the business plaintiffs owned was experiencing a “massive”
diminution in earnings, so they sought to discuss a modification of their loans with First
Franklin. This is when they first learned of the actual terms of the two loans. First
Franklin initially refused to consider any modification. Plaintiffs had believed that they
would be able to refinance the mortgage if they had difficulties with payments—based on
a representation from SFM to this effect, in accordance with First Franklin’s directives—
but the absence of any real equity in the home precluded them from doing so. They were

                                              4
also unable to negotiate a refinancing with another bank, which had their home appraised
in November 2009, and then sought a “short” refinance (i.e., a reduction in the principal
amount of the loan to reflect the present value of the property) with First Franklin, which
failed to cooperate. First Franklin eventually agreed to grant a forbearance under which
plaintiffs could make reduced payments of 50 percent for six months in mid-2010. After
the end of that payment holiday, both plaintiffs eventually ceased making any payments
on the loans in the fall of 2010.

       Plaintiffs consulted with counsel at that point, and first learned (in an unspecified
manner) of the inflated nature of their original appraisal (which is somewhat at odds with
their allegation that the November 2009 appraisal had revealed their lack of equity in the
home). They also first learned of the reputation of First Franklin as the largest provider
of loans to unqualified borrowers, and marketer of these subprime loans to investors.
Pursuant to its business scheme, First Franklin ignored standard underwriting protocols—
creating a high risk that plaintiffs and many others would face foreclosure under the loans
and inflated home appraisals—in order to maximize its market share of loans, deflecting
any risk to itself by selling off these so-called subprime mortgages to investors.
                             B. Procedural Route to Dismissal
       Defendants filed challenges to the original complaint. The record does not contain
any rulings on them (First Franklin asserting in its briefing that the filing of an amended
pleading “moot[ed]” them). SFM filed a motion to strike and a demurrer (on grounds
other than the limitations period). The trial court struck prayers for legal fees and
punitive damages and sustained the demurrer with leave to amend. Plaintiffs filed an
amended pleading before the hearing on First Franklin’s demurrer, apparently mooting it.

       In response to the filing of this pleading, SFM and First Franklin both filed
motions to strike prayers for punitive damages and legal fees. SFM apparently demurred
on grounds other than the statute of limitations; First Franklin included that as a basis.

                                              5
The trial court issued a lengthy order. It overruled SFM’s demurrer to all causes of
action (which did not include the count of negligence). The court found that the
overstatement of the appraisal value, the concealment of plaintiffs’ eligibility for more
favorable loans, and the hidden kickbacks paid to SFM stated a claim against SFM for
deceit, that this conduct (along with the failure to explain the terms of the loans to
plaintiffs) stated a claim against SFM for breach of fiduciary duty, and that this conduct
also stated a claim against SFM for unfair business practices. However, the court
sustained First Franklin’s demurrer on the ground of the statute of limitations, finding
plaintiffs had failed to establish with adequate specificity their assertion of reasonably
delayed discovery of the facts supporting their claims against the financial institutions.
(The trial court thus did not discuss the substantive sufficiency of the allegations against
First Franklin.) It granted SMF’s motion to strike the prayer for legal fees, but denied it
as to the prayer for punitive damages.

       In sustaining the demurrers to the present pleading that asserted the expiration
of the limitations period (First Franklin also asserting other grounds), the trial court
adopted its tentative decision in the absence of a request for oral argument. The court did
not elaborate on its underlying reasoning in ruling that the statute of limitations was a bar.

                                       DISCUSSION

                                   I. General Principles

       We review an order sustaining a demurrer de novo. (Fogarty, supra,
148 Cal.App.4th at p. 542.) A complaint disclosing on its face that the limitations period
has expired in connection with one or more counts is subject to demurrer. (ABF Capital
Corp. v. Berglass (2005) 130 Cal.App.4th 825, 833.) Under the discovery rule, which
delays accrual of a cause of action until a party discovers or has reason to discover the
cause of action (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1192
(Aryeh)), if the party has notice of facts that would put a reasonable person on inquiry, or

                                              6
has the reasonable opportunity to obtain information from sources open to investigation,
the limitations period begins to run (Community Cause v. Boatwright (1981)
124 Cal.App.3d 888, 902 (Boatwright). If a demurrer demonstrates that a pleading is
untimely on its face, it becomes the plaintiff’s burden “even at the pleading stage” to
establish an exception to the limitations period. (Aryeh, supra, 55 Cal.4th at p. 1197.)
One of these is the doctrine of fraudulent concealment, which tolls the statute of
limitations if a defendant’s deceptive conduct “has caused a claim to grow stale.” (Id. at
p. 1192; Regents of University of California v. Superior Court (1999) 20 Cal.4th 509,
533.) In support of this doctrine, a plaintiff must allege the supporting facts—i.e., the
date of discovery, the manner of discovery, and the justification for the failure to discover
the fraud earlier—with the same particularity as with a cause of action for fraud.
(Boatwright, supra, 124 Cal.App.3d at pp. 900-902.)

         It is the plaintiff’s burden on appeal to show in what manner it would be possible
to amend a complaint to change the legal effect of the pleading; we otherwise presume
the pleading has stated its allegations as favorably as possible. (Boatwright, supra,
124 Cal.App.3d at pp. 900-902; Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Code.
Civ. Proc., § 472c.4) At this stage in the proceedings, we are concerned only with whether
a plaintiff has stated a hypothetical case; whether or not it can be proven is beyond our
review. (Aryeh, supra, 55 Cal.4th at p. 1202 [plaintiff is “master” of complaint, and court
must accept allegations “at face value”]; Nagy v. Nagy (1989) 210 Cal.App.3d 1262,
1267.)

         The limitations period for a cause of action under the unfair competition law
(UCL) is four years. (Bus. & Prof. Code, §§ 17200, 17208; see Burger v. Kuimelis

4 Undesignated statutory references are to the Code of Civil Procedure.

                                              7
(N.D. Cal. 2004) 325 F.Supp.2d 1026, 1045.)5 The limitations period is three years for a
cause of action for deceit (§ 338, subd. (d); Krieger v. Nick Alexander Imports, Inc.
(1991) 234 Cal.App.3d 205, 219), as it is for a cause of action for breach of fiduciary
duty where the gravamen of the claim is deceit, rather than the catchall four-year
limitations period that would otherwise apply (Thomson v. Canyon (2011)
198 Cal.App.4th 594, 606-607).6 Finally, a cause of action for negligence in the form of a
failure to meet a standard of reasonable care on the part of a real estate broker is two
years. (198 Cal.App.4th at p. 606; § 339.) The allegation of a conspiracy in a civil action
does not affect the limitations period for the substantive theory of liability involved.
(Maheu v. CBS, Inc. (1988) 201 Cal.App.3d 662, 673.)

                                II. Statute of Limitations

       To recap: In connection with plaintiffs’ purchase of their home in June 2006,
SFM, acting at the direction of First Franklin, procured an artificially inflated appraisal
that used stale sales of properties that were not truly comparable. Neither SFM nor First
Franklin disclosed this fact to plaintiffs. Although plaintiffs thus lacked any true equity
in their home even at the time of purchase, SFM represented that plaintiffs would be able
to refinance their mortgage terms if they had difficulties making payments in the future,

5 First Franklin asserts that this four-year limitations period is not subject to the common
law rule of fraudulent concealment, citing Snapp & Associates Ins. Services, Inc. v.
Robertson (2002) 96 Cal.App.4th 884, 891. However, that case (and others like it) relied
on the opinion of a federal trial court that the California Supreme Court has found to have
misread California law; disapproving the reasoning, it concluded to the contrary that
“the UCL is governed by common law accrual rules to the same extent as any other
statute” if appropriate to the underlying nature of the UCL claim. (Aryeh, supra,
55 Cal.4th at pp. 1194, 1196.)
6 This may be the basis for the holding in the case SFM cites, UMET Trust v. Santa
Monica Medical Investment Co. (1983) 140 Cal.App.3d 864, 872-873, 874, which does
not explain its application of a three-year limitations period to a breach of a broker’s
fiduciary duty beyond a citation to section 338.

                                              8
which would not in fact be true unless the actual value of the residence increased enough
to exceed the outstanding principal on the mortgage. SMF also falsely represented to
plaintiffs that the loans it offered to them were the only ones for which they could
qualify, and falsely concealed other more favorable loans for which plaintiffs in fact
qualified. Neither SFM nor First Franklin disclosed these true facts to plaintiffs. SMF
and First Franklin also failed to disclose that the closing costs of the mortgage chargeable
to plaintiffs included an illegal kickback from First Franklin to SMF for its securing
plaintiffs as First Franklin’s customers on the unfavorable terms of the First Franklin
loans. SMF and First Franklin were aware that plaintiffs were unsophisticated first-time
home buyers, but failed to explain the structure of the combined loans or the risk to
plaintiffs of foreclosure that these terms posed (e.g., the risk of increased payments from
an adjustable rate, the failure to acquire any equity as a result of interest-only payments,
the risk in facing a balloon payment) in their dealings as real estate professionals with
plaintiffs. Only in late 2009, when a severe reduction in their income first impelled them
to seek relief from First Franklin, were plaintiffs put on the path leading them to file their
complaint a year later (well within any of the pertinent limitations periods) for the
misrepresentations that induced them to enter into the unfavorable loans and left them at
risk of foreclosure.

       Noting that all of these misrepresentations and concealments predated the June
2006 purchase (the point at which plaintiffs began to incur damages as a result), SFM
and First Franklin assert even the longest of the pertinent limitations periods had expired
as of the filing of the November 2010 original pleading. Based merely on the plaintiffs’
allegation that they had a question about a provision for a prepayment penalty at closing,
defendants argue this question was enough to indicate plaintiffs had inquiry (if not actual)
notice of the web of deceit enveloping the transaction. SMF separately argues that
plaintiffs’ receipt of a copy of the appraisal at closing was sufficient to put them on notice

                                              9
of the misrepresentations contained in it because “the appraisal details all this
information” (an assertion made necessarily in abstract about a document that is neither
appended to the pleading nor incorporated in it by reference), and also asserts plaintiffs
could have obtained their own appraisal at the time (see Nymark v. Heart Fed. Savings &
Loan Assn. (1991) 231 Cal.App.3d 1089, 1099 (Nymark) ).7

       Although ordinarily a party to a contract cannot justifiably claim unawareness of
the express provisions of the contract (Rosenthal v. Great Western Fin. Securities Corp.
(1996) 14 Cal.4th 394, 423-424; see Riverisland Cold Storage, Inc. v. Fresno-Madera
Production Credit Assn. (2013) 55 Cal.4th 1169, 1183-1184, fn. 11), this is not the basis
of plaintiffs’ causes of action. It is the failure of SMF, a mortgage broker which owed
them a fiduciary duty, to explain the possibility that the terms of the loans might increase
the risk of foreclosure. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 783-784
[duty can extend beyond mere disclosure of written terms, requiring mortgage broker to
counsel about true rate of interest, penalties, and swollen size of balloon payment that
were all unfavorable terms]; Paper Savers, Inc. v. Nacsa (1996) 51 Cal.App.4th 1090,
1103-1104 [issue of reasonability of reliance on agent is “complex” and ordinarily must
be determined as question of fact on particular circumstances].) The same is true of the
appraisal. That plaintiffs were aware of the contents of the appraisal does not of itself
provide any notice to first-time buyers that the appraisal’s bases were improper (or alert

7 SMF also separately argues that its representations regarding plaintiffs’ ability to get a
refinancing of the loan (despite the overvaluation in the appraisal) were mere opinions
regarding the future appraisals of the property and therefore were not actionable.
However, the opinions of those who have special expertise can be actionable; this is
ordinarily a question of fact (Furla v. Jon Douglas Co. (1998) 65 Cal.App.4th 1069,
1080-1081; Blankenheim v. E. F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1474-1475)
and therefore not subject to demurrer unless the allegations are capable of only one
interpretation. The present allegations do not negate plaintiffs’ reliance as first-time
buyers on their mortgage broker’s representations regarding loan refinancing (and failure
to disclose the overvaluation of their property in the appraisal) as a matter of law.

                                             10
them to the right or need to conduct their own appraisal) where their broker does not
discuss these issues with them. (Arthur L. Sachs, Inc. v. City of Oceanside (1984)
151 Cal.App.3d 315, 323-324 [not unreasonable as matter of law to rely on fraudulent
appraisal where party does not have expertise, other party has superior knowledge, and
nothing facially alerts party to need for independent evaluation].) That plaintiffs had
questions about the unrelated prepayment penalty provision (which may have been a
function of their particular interest in the availability of refinancing) or other unspecified
questions does not establish—at least in the context of a demurrer—that they actually or
should have had suspicions regarding the adjustable nature of the interest rate (or the rate
itself), the amortization period, the balloon payment, the interest-only payments, their
ability to refinance the loan, or the transaction as a whole.

       Nor, for that matter, do defendants explain how an inexperienced buyer should
have been aware of the relationship between a credit score and the terms of loans absent
disclosures from the broker to this effect, or been able to investigate on their own exactly
what loans terms were available to them with their score, given the representation from
their broker that the loan presented to them had the best terms available. Finally, SMF
and First Franklin simply overlook the failure to disclose a hidden kickback in the closing
costs that increased plaintiffs’ payment, let alone explain why it was unreasonable as a
matter of law for plaintiffs to fail to uncover this extraction from them. In short, nothing
in the circumstances surrounding the closing of the loan makes plaintiffs’ unawareness of
the true circumstances unreasonable.

       Alternately, SFM and First Franklin make the conclusory assertion that even if
plaintiffs had been reasonable in relying on information from a mortgage broker at the
outset, they have failed to allege a reasonable basis for performing their obligations under
the loans for over three years rather than earlier discovering the true facts about the
transaction, because their attorney was able to discern the remainder of the true facts

                                              11
promptly after they consulted with him. First Franklin adds a conclusory argument that
the delay from November 2009 until the commencement of this action in November 2010
was unreasonable.

       The fact that their attorney (a trained professional), rather than the inexperienced
plaintiffs, was able to determine the true circumstances of the loan in short order does not
have any bearing on the failure of plaintiffs to have had any qualms about the loans until
financial ill winds first made the loans an issue of importance for them, impelling them to
revisit the loans in the course of seeking a reduction in payments. Defendants do not
point to any fact alleged in the complaint occurring between June 2006 and late 2009
representing any sort of “red flag” as a matter of law putting plaintiffs on notice that their
home was overvalued for the amount of indebtedness, that their “best” loan was in fact
more unfavorable than it needed to be, that their broker had siphoned off part of their
closing costs, that they would not be able to seek to reduce their payments through
refinancing, and that they would face foreclosure as a result. As for the delay between
late 2009 and the commencement of this action, the pleading does not provide an exact
timeline, but it does reveal unsuccessful negotiations with First Franklin, negotiations
with a different lender with which First Franklin refused to cooperate, and then a period
in mid-2009 during which First Franklin briefly accommodated plaintiffs by allowing
reduced payments. We do not believe it was unreasonable as a matter of law for them to
have initially explored these alternatives before seeking out an attorney for purposes of
litigation.

       As we emphasized at the outset, it may be that evidentiary facts will ultimately
demonstrate the untimeliness of plaintiffs’ delayed discovery, once plaintiffs’ actual
knowledge and expertise (and defendants’ actual representations) come to light. But the
allegations establish with adequate specificity nondisclosures and misrepresentations
from a broker (acting as First Franklin’s agent in this respect), and the absence of any

                                              12
circumstances to trigger plaintiffs’ reasonable inquiry into available facts revealing the
true nature of the loans. We therefore conclude defendants have failed to establish the
expiration of the limitations period on the face of the pleading, and we cannot sustain the
demurrer on this basis as a result.

                            III. Other First Franklin Claims

       First Franklin also renews alternative grounds it had raised in the trial court as
bases for its demurrer. (Sui v. Price (2011) 196 Cal.App.4th 933, 939 [must determine if
any grounds asserted in demurrer will support ruling other than those on which trial court
relied]; B & P Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 959
[because demurrer raises only pure question of law, may consider even new theories on
appeal].)

       First Franklin contends “There are no specific allegations of any deceitful conduct
by [First Franklin]. Rather, the only specific conduct alleged . . . was done by . . . an
employee of [SFM].” It also asserts that it cannot be responsible for any nondisclosures
to plaintiffs because it was not in a fiduciary relationship with them and did not have any
obligation to disclose facts to them as a result. (Long v. Walt Disney Co. (2004)
116 Cal.App.4th 868, 874-875 [absent fiduciary relationship, there must be active
prevention of the plaintiff’s discovery, not mere nondisclosure of facts]; Nymark, supra,
231 Cal.App.3d at p. 1093, fn. 1 [lender not in fiduciary relationship with borrower].) In
this vein, First Franklin claims it did not have any duty to plaintiffs on which they may
premise negligence because it did not actively participate in the loan transaction beyond
its role as a lender. All three of these arguments entirely disregard the allegations that
First Franklin conspired with SMF—plaintiffs’ broker—and that SMF was acting as First
Franklin’s agent in procuring the loans. Under either theory, First Franklin can be liable
for SMF’s negligence, misrepresentations, and nondisclosures. We therefore reject these
grounds for sustaining the demurrer.

                                             13
       First Franklin also argues it cannot be vicariously liable for any UCL practices in
which it did not directly participate (Emery v. Visa Internat. Service Assn. (2002)
95 Cal.App.4th 952, 960), asserting the pleading does not contain allegations of any
unfair, unlawful, or fraudulent conduct on First Franklin’s part. As plaintiffs point out in
response, this disregards the allegations that First Franklin acted pursuant to a business
plan under which it obtained overvalued appraisals to make loans to otherwise
unqualified borrowers in order to maximize the volume of loans available for sale to
investors who would bear the resulting high risk of foreclosure (along with the
borrowers). It also disregards the allegation that First Franklin agreed to remit an
undisclosed kickback to SMF for securing the loan out of proceeds First Franklin
received from plaintiffs. These also, contrary to First Franklin’s conclusory invocation of
the principle of specific pleading of UCL violations (Khoury v. Maly’s of California, Inc.
(1993) 14 Cal.App.4th 612, 619), are sufficiently detailed allegations. We thus reject this
ground for sustaining the demurrer as well.

                                       DISPOSITION

       The judgments of dismissal are reversed with directions to enter orders overruling
the demurrers of First Franklin and SFM. Plaintiffs shall recover their costs on appeal.
(Cal. Rules of Court, rule 8.278(a)(1), (2).)

                                                               BUTZ                    , J.

We concur:

         ROBIE                      , Acting P. J.

         DUARTE                     , J.

                                                14
Filed 5/29/13
                            CERTIFIED FOR PUBLICATION

         IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                             THIRD APPELLATE DISTRICT
                                             (Butte)
                                              ----

MICHAEL FULLER et al.,                                           C070452

                Plaintiffs and Appellants,                (Super. Ct. No. 152324)

       v.                                              ORDER CERTIFYING OPINION
                                                           FOR PUBLICATION
FIRST FRANKLIN FINANCIAL
CORPORATION et al.,                                    [NO CHANGE IN JUDGMENT]

                Defendants and Respondents.

      APPEAL from judgments of dismissal of the Superior Court of Butte County,
Sandra L. McLean, Judge. Reversed.

       United Law Center, John S. Sargentis, Stephan J. Foondos and Janet S. Manrique
for Plaintiffs and Appellants.

      Wolfe & Wyman, Brian H. Gunn, W. Brian Jones and Marcus T. Brown for
Defendants and Respondents First Franklin Financial Corporation and Bank of America.

      Hansen, Kohls, Sommer & Jacob, Jason J. Sommer and Jeffrey J.A. Hinrichsen for
Defendant and Respondent Sacramento First Mortgage.

                                               1
THE COURT:
       The opinion in the above-entitled matter filed on May 1, 2013, was not certified
for publication in the Official Reports. For good cause it now appears that the opinion
should be published in full in the Official Reports and it is so ordered. There is no
change in judgment. (CERTIFIED FOR PUBLICATION.)

FOR THE COURT:

            ROBIE                  , Acting P. J.

            BUTZ                   , J.

            DUARTE                 , J.

                                             2