Filed 6/23/14 Dumas v. JPMorgan Chase Bank CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.




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



THOMAS STEVENS DUMAS,                                                                        C072651

                   Plaintiff and Appellant,                                      (Super. Ct. No. SCV27128)

         v.

JPMORGAN CHASE BANK, N.A. et al.,

                   Defendants and Respondents.




         With the assistance of defendant loan brokers J & J Lending Corporation (J&J
Lending) and Marko Acuna, plaintiff Thomas Stevens Dumas obtained a residential loan
from defendant Paramount Residential Mortgage Group, Inc. (Paramount), secured by a
deed of trust with defendant Mortgage Electronic Registration Systems, Inc. (MERS),
listed as the beneficiary. Dumas defaulted on the loan and later filed suit against the
aforementioned defendants, as well as First Northern Bank and a later assignee of the
deed of trust, defendant JPMorgan Chase Bank, N.A. (Chase). Defendants Chase and
MERS demurred to Dumas’s second amended complaint for fraud, civil conspiracy,


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negligence, violation of Business and Professions Code section 17200 et seq., violation of
Civil Code section 2923.5, and wrongful foreclosure.1
       Dumas appeals from the judgment of dismissal entered following the court’s order
sustaining the demurrer without leave to amend. We affirm.
                    FACTUAL AND PROCEDURAL BACKGROUND
       “Because this case comes before us on appeal from a judgment sustaining a
demurrer, we assume the truth of the facts alleged in the complaint and the reasonable
inferences that may be drawn from those facts. [Citations.]” (Miklosy v. Regents of
University of California (2008) 44 Cal.4th 876, 883.) We therefore take our facts from
Dumas’s complaint, submitted exhibits, and matters that we may judicially notice, as
follows:
       Dumas obtained a residential loan from Paramount for $685,000 in connection
with a refinancing of his construction loan in June 2008. The underlying construction
loan was for $500,000, and Dumas wanted to obtain financing in the form of a 30 year,
fixed-interest-rate note.
       Dumas spoke with defendants J&J Lending and Acuna between April and
June 2008 about obtaining a loan. Acuna told Dumas he had a lender he would use to
obtain financing.
       These communications led to the loan from Paramount in June 2008. The loan is a
30 year, adjustable-rate mortgage. A deed of trust, recorded in July 2008, secured the
loan. MERS is the beneficiary of the deed of trust.




1 Dumas’s initial complaint, filed in May 2010, was removed to the United States
District Court for the Eastern District of California. Eventually, the matter was remanded
to state court in April 2012. Dumas filed a second amended complaint in July 2012.

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       Dumas defaulted on the loan. A notice of default was recorded on October 27,
2009, listing the amount in arrears at $22,982.14. MERS assigned its interest in the deed
of trust to Chase. The assignment was recorded in November 2009.
       In December 2009 a substitution of trustee was recorded, substituting NDEx West,
L.L.C. (NDEx), as trustee under the deed of trust. A notice of trustee’s sale was recorded
by NDEx on April 27, 2010.
       In conjunction with the original loan, Acuna told Dumas the total monthly
mortgage payment, including principal, interest, taxes, and insurance, would be $4,000.
When Dumas asked for a lower mortgage payment, Acuna told him this was the best loan
for which he could qualify. When Dumas signed the loan documents, he found the
monthly payment was $4,949. Dumas questioned Acuna about the increase, and Acuna
told Dumas to sign the documents and “ ‘he would take care of it later.’ ”
       Acuna also told Dumas he would refinance the property in a few months for a
lower interest rate and lower mortgage payment. According to Acuna, Dumas needed to
act quickly and take the loan because Paramount was “ ‘willing to go for it.’ ”
       In February 2009 Dumas’s monthly mortgage payment increased from $4,949 to
$6,171. Dumas believed the increase in monthly payments was due to Chase’s including
principal, interest, taxes, and insurance. That same month Certified Forensic Loan
Auditors, LLC, completed a forensic audit report for Dumas. The audit revealed
numerous violations.
       The loan was an adjustable-rate mortgage; the interest rate was fixed for five years
and then would adjust to a higher amount. The initial interest rate was 6.875 percent,
which was a payment of $4,499.96. The cap or maximum rate was 11.875 percent, which
was a payment of $6,980.16. According to Dumas, his debt-to-income ratio was higher
than the normal underwriting standards when the loan originated, and after five years,
when the payment increased, his debt-to-income ratio far exceeded normal standards.



                                             3
Dumas alleged that defendants knew or should have known he would be unable to make
the payments based on his income.
       In addition, Dumas alleged defendants charged him excessive fees in the
processing of the loan. The broker defendants received $15,698 in fees, and Paramount
received $19,727.50. These totals comprise 5.17 percent of the loan amount and exceed
market standards. Paramount, Dumas asserts, departed from basic principles of loan
underwriting by lending without making a determination he could repay the loan from
resources other than the property.
       According to Dumas, there was no explanation about the full terms of the loan,
including how the interest rate would be calculated, what the payment schedule would be,
the risks and disadvantages of the loan, and the maximum amount to which the interest
rate could increase. Dumas contends he was rushed when signing the loan documents
and was pressured by Acuna into signing the documents. He did not understand what he
was signing and relied on the representations by, and trust he placed in, defendants.
       Dumas also alleges MERS is not a true beneficiary under any note or deed of trust
but is an electronic “registry” of deeds of trust that are secretly traded, bundled,
securitized, and resold. None of the defendants, Dumas contends, have any valid legal
interest in the note, the deed of trust, or the property. Defendants are not the legal trustee,
mortgagee, or beneficiary, nor are they authorized agents or entitled to payments.
       Defendants Chase and MERS filed a demurrer. The trial court sustained the
demurrer without leave to amend. Following entry of judgment, Dumas filed a timely
notice of appeal.
                                       DISCUSSION
                                     Standard of Review
       The function of a demurrer is to test the sufficiency of the complaint by raising
questions of law. We give the complaint a reasonable interpretation and read it as a
whole with its parts considered in their context. A general demurrer admits the truth of

                                              4
all material factual allegations. We are not concerned with the plaintiff’s ability to prove
the allegations or with any possible difficulties in making such proof. We are not bound
by the construction placed by the trial court on the pleadings; instead, we make our own
independent judgment. (Herman v. Los Angeles County Metropolitan Transportation
Authority (1999) 71 Cal.App.4th 819, 824.)
       Where the trial court sustains the demurrer without leave to amend, we must
decide whether there is a reasonable possibility the plaintiff can cure the defect with an
amendment. If we find that an amendment could cure the defect, we must find the court
abused its discretion and reverse. If not, the court has not abused its discretion. The
plaintiff bears the burden of proving an amendment would cure the defect. (Gomes v.
Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1153 (Gomes).)
                                            Fraud
       The elements of fraud are a false representation of a material fact, knowledge of
the falsity, intent to induce another to rely on the representation, reliance, and resulting
damage. Each element of fraud must be alleged factually and specifically. (West v.
JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 792; Tarmann v. State Farm
Mut. Auto Ins. Co. (1991) 2 Cal.App.4th 153, 157.) To assert a cause of action for fraud
against a corporation, a plaintiff must allege the name of the person who allegedly made
the fraudulent representation, his or her authority to speak, to whom he or she spoke,
what was said, and when it was said. (Tarmann, at p. 157.) General or conclusory
allegations will not suffice to plead a cause of action for fraud. (West, at p. 793.)
       Measured by these standards the fraud allegations against Chase and MERS fall
woefully short.
       All of the specific allegations of fraud concern Acuna. Dumas alleges Acuna
falsely represented the mortgage payment amount and potential interest rate increase,
cites statements made by Acuna about the subject loan, and alleges that material facts



                                              5
concerning the loan were “required to be disclosed by Acuna, J&J [Lending] and
Paramount.” Dumas also states Acuna was an employee or agent of J&J Lending.
       In contrast, allegations about MERS and Chase are vague and conclusory. Thus,
MERS “was an integral part of this scheme to defraud and ratified the wrongful acts and
participated in the fraud. MERS[’s] role in the conspiracy was to act as a nominee and
beneficiary” in the deed of trust. Therefore, MERS was a facilitator of the securitization
process. Dumas contends Chase ratified the wrongful acts of defendants by claiming to
have purchased the note and attempting to foreclose on the property. Such nonspecific,
conclusory allegations cannot support a cause of action for fraud against defendants.
Dumas provides no facts to support this assertion, nor does Dumas present any link
between Acuna and MERS.
       As the trial court observed, “Fraud must be specifically pled, with facts stating
how, when, where, to whom and by what means any misrepresentations were made to a
plaintiff. [Citation.] In addition, fraud allegations against a corporate defendant require
the names of individuals who made misrepresentations, their authority to speak on behalf
of the corporation, whom the individuals spoke to, what was said or written, and when it
was said or written.”
       In addition, Dumas contends MERS and Chase, “despite having knowledge of
these fraudulent acts, have attempted to foreclose on the Subject Property [and t]he
interest, if any, in the Subject Note, Deed of Trust, and Property, acquired by Defendants
Chase and MERS is subject to the illegality that taints the Subject Loan Transaction.”
This blanket assertion of defendants’ alleged “knowledge of . . . fraudulent acts,” without
any detail as to how the knowledge was obtained or who amongst defendants obtained it,
fails to satisfy the pleading requirements for fraud.
       Nor did Dumas state a claim for fraudulent concealment. The elements for fraud
based on concealment are concealment or suppression of material fact; the defendant
must have been under a duty to disclose the fact to the plaintiff; the defendant must have

                                              6
intentionally concealed or suppressed the fact with intent to defraud; the plaintiff must
have been unaware of the fact and would not have acted as he did had he known of the
concealment; and damages. (Bank of America Corp. v. Superior Court (2011)
198 Cal.App.4th 862, 870.) Liability for concealment is imposed where the defendant is
in a fiduciary or other confidential relationship that imposes a duty of disclosure. (OCM
Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007)
157 Cal.App.4th 835, 859.)
       The court found no such duty: “the plaintiff fails to allege conduct on the part of
the moving defendants that exceeds the normal scope of a money lender.” Dumas takes
issue with this analysis, arguing under Jolley v. Chase Home Finance, LLC (2013)
213 Cal.App.4th 872 (Jolley) that courts no longer rely on the general rule that lending
institutions do not owe a duty of care to borrowers. Instead, Dumas argues, Jolley
requires the trial court to apply the factors enunciated in Biakanja v. Irving (1958)
49 Cal.2d 647 (Biakanja) to cases involving lenders and borrowers to ascertain whether
the lender owes a duty of care to the borrower.2 We disagree.
       Jolley considered summary judgment against the borrower of a construction loan.
The original lender lost the borrower’s loan documents, made false representations about
the amount of reimbursements under the loan, and failed to make the promised
disbursements. As a result, construction was delayed. The bank that subsequently took
over the original lender made representations that it was highly probable the borrower’s
construction loan would be modified to stave off foreclosure. The bank also told the




2 Jolley sets forth the Biakanja factors: “(1) the extent to which the transaction was
intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the
degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection
between the defendant’s conduct and the injury suffered, (5) the moral blame attached to
the defendant’s conduct, and (6) the policy of preventing future harm.” (Jolley, supra,
213 Cal.App.4th at p. 899.)

                                             7
borrower it was likely that at the conclusion of the construction loan, the borrower would
be able to roll the construction loan into a fully amortized conventional loan. The
borrower, relying on those representations, borrowed heavily to finish the project.
However, construction delays during loan modification negotiations prevented him from
selling the property before the collapse of the housing market. Subsequently, the bank
foreclosed and the borrower filed suit. The trial court granted summary judgment in
favor of the lender defendants; the appellate court reversed. (Jolley, supra,
213 Cal.App.4th at pp. 877-881.)
       In reversing, the Jolley court found triable issues of fact as to whether the
defendants owed the plaintiff a duty of care. The court acknowledged that, as a general
rule, a financial institution owes no duty of care to borrowers in a loan transaction that
does not exceed the scope of its conventional role as a lender. (Jolley, supra,
213 Cal.App.4th at p. 898.) However, Jolley considered contemporary circumstances and
noted: “We live, however, in a world dramatically rocked in the past few years by
lending practices perhaps too much colored by shortsighted self-interest. We have
experienced not only an alarming surge in the number of bank failures, but the collapse of
the housing market, an avalanche of foreclosures, and related costs borne by all of
society. There is, to be sure, blame enough to go around. And banks are hardly to be
excluded.” (Id. at p. 902, fns. omitted.) The court considered recent legislative and
judicial efforts aimed at mitigating or ending some of the damage done by the housing
collapse, including dual tracking, the practice of promising loan modifications while
pursuing foreclosure. The court concluded these measures “indicate that courts should
not rely mechanically on the ‘general rule’ that lenders owe no duty of care to their
borrowers.” (Id. at p. 903.) Given the facts before it, Jolley found the general rule
inapplicable.
       The court in Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49
(Lueras) distinguished Jolley. The court concluded: “[A] loan modification is the

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renegotiation of loan terms, which falls squarely within the scope of a lending
institution’s conventional role as a lender of money. A lender’s obligations to offer,
consider, or approve loan modifications and to explore foreclosure alternatives are
created solely by the loan documents, statutes, regulations, and relevant directives and
announcements from the United States Department of the Treasury, Fannie Mae, and
other governmental . . . agencies. The Biakanja factors do not support imposition of a
common law duty to offer or approve a loan modification. If the modification was
necessary due to the borrower’s inability to repay the loan, the borrower’s harm, suffered
from denial of a loan modification, would not be closely connected to the lender’s
conduct. If the lender did not place the borrower in a position creating a need for a loan
modification, then no moral blame would be attached to the lender’s conduct.” (Lueras,
at p. 67.)
       We also find the present case distinguishable. Dumas alleges defendants
fraudulently concealed that by entering into the loan he would suffer great harm and that
his monthly payment increased because Chase included principal, interest, taxes, and
insurance. Dumas does not allege the type of misleading, specific representations the
court in Jolley found actionable.
                                    Civil Conspiracy
       Dumas contends defendants conspired to implement a scheme to defraud and
victimize him through predatory lending practices. The object of the conspiracy was to
generate a high volume of subprime loans that could be bundled and sold while insulating
defendants from the effects of default and foreclosure.
       To establish liability of a defendant for wrongs committed by another as part of a
conspiracy, a plaintiff must allege the formation and operation of the conspiracy, the
wrongful act done pursuant to the conspiracy, and resulting damage. (Kidron v. Movie
Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1581.) The conspiring defendants must



                                             9
also have actual knowledge that a tort is planned and agree to the scheme with knowledge
of its unlawful purpose. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 784-785.)
       Again, the court found Dumas’s allegations wanting: “In actuality, there is no
separate tort of civil conspiracy. This is legal doctrine that imposes liability on a person
that shares with immediate tortfeasors a common plan or design. . . . The underlying
fraud action fails to allege sufficient facts against the moving defendants; there is no
connection between the defendants and the alleged acts. Further, the [second amended
complaint] does not sufficiently allege that the moving defendants owe a duty to the
plaintiff and that such a duty was breached.”
       Dumas’s complaint fails to allege that defendants were aware of any common plan
or design to commit a tort. Instead of providing specific allegations as to the nature of
the conspiracy Dumas alleges took place, he simply states MERS “was an integral part of
this scheme to defraud and ratified the wrongful acts and participated in the fraud” and
that Chase “ratified the wrongful acts of the Defendants by claiming to have purchased
the Subject Note and having attempted to foreclose on the Subject Property.” This lack
of specific facts as to the formation and operation of the alleged conspiracy dooms
Dumas’s cause of action for civil conspiracy.
                                         Negligence
       Dumas contends his second amended complaint asserts facts in support of
successor liability sufficient to find Chase was acting as either a continuation of the
original lender, through succession, or as a servicer of the loan. According to Dumas,
Chase elected to continue the fraudulent acts of the broker and engaged in acts beyond
the scope of a regular moneylender. Dumas appears to argue these allegations support a
cause of action for negligence against Chase.
       A claim of negligence requires the plaintiff to establish the defendant’s legal duty
toward the plaintiff, the defendant’s breach of that duty, injury to the plaintiff as a result
of the breach, and damages. (Hoyem v. Manhattan Beach City Sch. Dist. (1978)

                                              10
22 Cal.3d 508, 514.) However, the court found that “[i]n the context of a lender-
borrower relationship, a lender is only liable for negligence where it ‘actively
participates’ by exceeding its scope ‘beyond the domain of the usual money lender.’
[Citation.] The allegations against the moving defendant lack sufficient facts and are
pled in a conclusory manner. Plaintiff’s allegations of possible successor liability in his
opposition are not pled in the [second amended complaint]. Further, such a theory is not
sufficiently supported in the opposition to establish a viable amendment that would allege
successor liability as to the moving defendant.”
       Faced with a lack of specific allegations of negligence against Chase, Dumas
again argues that Jolley abrogated the general rule that a financial institution owes no
duty of care to a borrower when the institution’s involvement in the loan transaction does
not exceed the scope of its role as a lender of money. Therefore, Dumas contends, he
sufficiently alleged facts sufficient to establish a cause of action for negligence.
       As discussed at pages 7 and 8, ante, Jolley considered egregious actions by a
lender involved in a construction loan. Subsequent courts have declined to expand Jolley
or to diminish the general rule of no duty of care if the lender acts within the scope of its
role as a lender of money. (See Lueras, supra, 221 Cal.App.4th at p. 67.)
       Here, Dumas’s negligence allegations revolve around the misrepresentations of
Acuna in connection with Dumas’s loan. Dumas contends he was rushed when signing
the loan documents, was provided no time to review the documents, and could not
understand the documents he signed. According to Dumas, he signed them based on
representations and the trust and confidence he placed in defendants. Again, these are not
the type of misleading, specific representations the court in Jolley found actionable.




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           Violation of Business and Professions Code Section 17200 et seq.
       Dumas contends he has adequately presented a cause of action for violation of
Business and Professions Code section 17200 et seq.3 The trial court disagreed, finding
Dumas’s amended complaint failed to sufficiently allege any unfair business practices to
support the cause of action.
       To allege a claim of unlawful business practices under section 17200 et seq., a
plaintiff must allege facts that show the practice violated a specific underlying law. (Cel-
Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th
163, 180.) In addition, the plaintiff must also allege a financial or property loss as a
result of the defendant’s unlawful acts. (Jenkins v. JPMorgan Chase Bank, N.A. (2013)
216 Cal.App.4th 497, 521-522 (Jenkins).)
       In support of his claim, Dumas incorporated all the allegations set forth elsewhere
in his amended complaint. However, we have found none of the causes of action cited
sufficient to survive demurrer. Where a section 17200 claim is based on facts supporting
other causes of action that have been found wanting, it is appropriate to also dismiss the
underlying section 17200 claim. (Keen v. American Home Mortgage Servicing, Inc.
(E.D.Cal. 2009) 664 F.Supp.2d 1086, 1102.) Accordingly, the trial court properly
dismissed the cause of action for violation of section 17200 et seq.
                                  Wrongful Foreclosure
       In alleging wrongful foreclosure, Dumas argued that since the substitution of
trustee was recorded after the notice of default, NDEx was not authorized to conduct a
sale, and therefore the foreclosure process was flawed and void. Dumas also contended




3 All further statutory references are to the Business and Professions Code unless
otherwise designated.

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MERS had no right to issue an assignment of the note and deed of trust, and wrongfully
assigned them to Chase.4
       The trial court properly noted the absence of any requirement that an instrument
must be recorded to establish an agency relationship, and in any event, Dumas cannot
show he was prejudiced by any imperfection in the foreclosure process. In Herrera v.
Federal National Mortgage Assn. (2012) 205 Cal.App.4th 1495, the homeowners alleged
a defect in the assignment of the deed of trust. The homeowners did not claim
misconduct in foreclosing on the property and admitted they were in default. The court
rejected the challenge, reasoning: “Because a promissory note is a negotiable instrument,
a borrower must anticipate it can and might be transferred to another creditor. As to
plaintiff, an assignment merely substituted one creditor for another, without changing her
obligations under the note.” (Id. at p. 1507.)
       The court in Jenkins, supra, 216 Cal.App.4th 497 reached a similar result,
rejecting a homeowner’s challenge to a foreclosure based on an improper transfer of the
promissory note. The court found the homeowner’s obligations under the note remained
the same, even if subsequent assignments were invalid. The court reasoned: “California
courts have refused to delay the nonjudicial foreclosure process by allowing trustor-
debtors to pursue preemptive judicial actions to challenge the right, power, and authority
of a foreclosing ‘beneficiary’ or beneficiary’s ‘agent’ to initiate and pursue foreclosure.”
(Id. at p. 511.) In Gomes, supra, 192 Cal.App.4th at page 1155, the court found Civil
Code section 2924 does not provide for a judicial action to determine whether the person
initiating the foreclosure process is authorized.




4 The court dismissed Dumas’s cause of action for violation of Civil Code section 2923.5
after sustaining Chase and MERS’s demurrer without leave to amend. Dumas does not
address this cause of action on appeal.

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       Here, Dumas acknowledged he ceased to make payments on the loan. He does not
allege that the assignment he challenges interfered with his ability to repay the loan.
Although Dumas presents a list of alleged damages, these damages are not connected to
the alleged irregularities in the processing of the loan. Dumas’s wrongful foreclosure
cause of action based upon alleged defects in the transfer of the note lacks merit and was
properly dismissed without leave to amend.
                                      DISPOSITION
       The judgment is affirmed.



                                                            RAYE              , P. J.



We concur:



         MAURO              , J.



         DUARTE             , J.




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