Filed 4/21/16 Highbarger v. Pentagon Federal Credit Union CA1/2
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION TWO


DAVID HIGHBARGER et al.,
         Plaintiffs and Appellants,
                                                                     A142404
v.
PENTAGON FEDERAL CREDIT UNION                                        (Alameda County
et al.,                                                              Super. Ct. No. HG12642986)
         Defendants and Respondents.


         Plaintiffs David and Mayumi Highbarger appeal from the judgment dismissing
their third amended complaint, a judgment entered after the trial court sustained general
demurrers by defendants Pentagon Federal Credit Union (PenFed) and PNC Bank (PNC)
without granting further leave to amend. Plaintiffs contend that all of the ten causes of
action they alleged are sufficient to survive the demurrers. We conclude otherwise, but
with the proviso that plaintiffs should be afforded a second, and quite possibly final,
opportunity to file another amended pleading demonstrating in detail why the respective
statutes of limitation for each of their causes of action was tolled by reason of the delayed
discovery of the harm they allegedly suffered. Thus, we reverse the judgment of
dismissal.
                                                 BACKGROUND
                                   The First Complaint and Demurrers
         Plaintiffs filed their initial complaint in August 2012 with causes of action styled:
(1) Unjust Enrichment; (2) Violation of RESPA (Real Estate Settlement and Procedures


                                                             1
Act enacted by Congress in 1974 [12 U.S.C. § 2601 et seq.]); (3) Fraud and
Concealment; (4) Declaratory and Injunctive Relief; (5) Intentional Infliction of
Emotional Distress; (6) Negligence; (7) Breach of the Duty of Good Faith and Fair
Dealing; and (8) Violation of Unfair Competition Law (Bus. & Prof. Code, § 17200 et
seq.). The complaint named PenFed and PNC, each of which filed a general demurrer.
However, no ruling was made on either demurrer because plaintiffs filed an amended
complaint.1
                    The First Amended Complaint and Demurrers
       Plaintiffs filed their first amended complaint in January 2013. In addition to the
same eight causes of action in their original complaint, plaintiffs alleged the following:
(9) Constructive Fraud; (10) Violation of California Civil Code section 2923.5; (11)
Unfair Debt Collection Practices under state and federal law; (12) Fraudulent
Nondisclosure in violation of Civil Code sections 1709 and 1710; and (13) Loss of Credit
Expectancy. The factual underpinnings of the pleading may be summarized as follows:
       Plaintiffs have owned a home in Pleasanton since 1998. Plaintiffs’ first
refinancing in 2003 was with National City Bank, which was acquired by PNC in 2008.
The “mortgage lending business” so acquired is now handled by PNC Mortgage, a PNC
subsidiary. Plaintiffs refinanced again in 2004, this time with PenFed, and the following
year undertook a new obligation with PenFed. Specifically, plaintiffs alleged that PNC

       1
          “ ‘When [a party] amended his complaint . . . he in effect admitted that the
demurrer was good and that his complaint was insufficient . . . .’ [Citation.]” (Anmaco,
Inc. v. Bohlken (1993) 13 Cal.App.4th 891, 900.) This is the basis for principle of
appellate practice that “ ‘an amend[ed] pleading supersedes the original one, which
ceases to perform any function . . . . [Citations.]’ ‘Such amended pleading supplants all
prior complaints. It alone will be considered by the reviewing court. [Citations.]’
[Citation.]” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884.) Just as the
filing of plaintiffs’ amended complaint mooted any defects or issues concerning their
original complaint, it likewise made academic any faults in defendants’ demurrers to that
initial pleading. We therefore do not address the arguments in plaintiffs’ brief purporting
to persuade that the “trial court didn’t recognize and address an invalid demurrer to the
Original Complaint.” We do note that the asserted defects are not substantive and could
not in any way impact the validity of plaintiffs’ final pleading, their third amended
complaint.

                                             2
“considers itself as holder of a claim pursuant to a loan agreement incurred around 2004
(‘First Agreement’).” PenFed “considers itself as holder of a claim pursuant to a loan
agreement dated August 30, 2004 (‘Second Agreement’)”, and also “as holder of a claim
pursuant to a HELOC [Home Equity Line Of Credit] agreement incurred in July 2005
(‘Third Agreement’).” PNC was the “servicer” of the First Agreement, and PenFed
provided plaintiffs “a credit card which was established and maintained independent of
the Second and Third Agreement[s].”
       “In Summer 2004, Plaintiff [Mr. Highbarger2] contacted a representative at
PenFed about obtaining a loan. The PenFed representative offered to help Plaintiff find
the best loan for them, including ‘shopping it around’ with competitors to get the best rate
and terms. The PenFed representative said based on current rates and terms, a 15-year
fixed loan by PenFed would offer Plaintiff the best deal. . . . PenFed . . . assured Plaintiff
he could afford the loan. Based on these assurances, Plaintiff, along with his wife, signed
the Second Agreement.

       2
         Up to this point, Mr. Highbarger was the sole plaintiff. However, in the same
ruling sustaining PenFed’s general demurrer, the trial court stated: “[W]ith regard to
Defendant’s argument that Plaintiff’s failure to join his wife as an indispensable party is
SUSTAINED WITH LEAVE TO AMEND. Under the current circumstances, the court
finds that complete relief cannot be accorded among those already parties in the absence
of Mayumi Highbarger. Thus, the disposition of the action may still subject Defendant to
risk of incurring double, multiple, or otherwise inconsistent obligations. Plaintiff has
leave to amend to add his wife as a Plaintiff in this action or explain the reason(s) why
she is not a necessary party or face dismissal of causes of action on which she is deemed
as an indispensable party pursuant to CCP 389.” Ms. Highbarger was thereafter added as
a plaintiff in the second and third amended complaints. For purposes of simplicity, Ms.
Highbarger has been treated as a plaintiff from the beginning of this litigation, and
henceforth quoted references to “he”—meaning Mr. Highbarger—are understood to
include both.
        Plaintiffs argue that Ms. Highbarger was not served with PenFed’s demurrer to the
second amended complaint, and that their objection to this omission was “ignored” by the
trial court in ruling on the demurrer. But no such argument is made with respect to the
third amended complaint. As already shown (see fn. 1, ante), it is the third amended
complaint, and the demurrers thereto, that are dispositive for this appeal. The claimed
omission is not germane to the issue of whether the third amended complaint states a
claim to relief.

                                              3
       “In Summer 2005, Plaintiff again contacted a PenFed representative about
obtaining another loan. The PenFed representative once again offered to help Plaintiff
find the best loan for him, including determining if other lenders had better rates or terms.
The PenFed representative suggested a Home Equity Line of Credit (HELOC) offered by
PenFed provided both the best rate and terms compared to other lenders. Plaintiff then
asked the PenFed representative to proceed with . . . an application for a PenFed loan, and
to also lock in the rate. Plaintiff called up approximately two days later to confirm the
loan was submitted to PenFed by the PenFed representative, and to confirm the locked in
rate. Plaintiff was informed that they submitted the paperwork to PenFed, but that the
rate wasn’t locked in since they felt the rates would go down. However, the rates went
up. Plaintiff then asked them to lock in the rate at the new, current and higher rate to
avoid it going up any further. Further, PenFed representative offered to submit Plaintiff
for the maximum amount possible—$197,200.00 based on [the] home
appraisal . . . Plaintiff was led to believe he could afford this amount and based upon this
representation by the PenFed representative, agreed to apply for this amount.”
       In the summer of 2011, plaintiffs encountered financial difficulties. The
Highbargers “reached out to PenFed,” which “suggested he apply for a loan modification,
which he did.” PenFed responded: “The documentation provided indicates that you have
the capacity to repay the original terms of the loan(s) that you presently have with
[PenFed].” PenFed also stated: “Please note all lines of credit have been closed.” (Italics
omitted.) “Both the credit card and credit line . . . associated with the Third Agreement
were cancelled without prior notification . . . in response to Plaintiff filing a request for a
loan modification in July 2011.” By the time plaintiffs filed for bankruptcy protection in
February 2012, 60% of their income went to “monthly mortgage debt . . . . With these
debt-to-income ratios alone, Plaintiff would have easily qualified for a loan modification
if he were properly considered as PenFed promised.” “At the time of the filing for
bankruptcy, Plaintiff was either fully current on [their] loans or only 2-3 weeks late
[their] payments.”



                                               4
       About the time they were discharged from bankruptcy in June 2012, plaintiffs
“made numerous attempts to contact PenFed to once again discuss a loan modification,
however, PenFed refused to discuss any loan modification . . . .”
       Plaintiffs alleged that “PenFed breached a contract with Plaintiff by charging a
higher interest rate but refused to provide the corresponding services which the higher
interest rate was intended to pay.” PenFed’s failure to respond to plaintiffs’ requests for
information and modification of their obligations not only violated the RESPA, but also
invalidated “the purported power of sale contained in the First
Agreement . . . .” Numerous and material misstatements and omissions made by PenFed
and PNC amounted to fraud, constructive fraud, and the intentional infliction of
emotional distress. Omissions by PenFed and PNC amounted to negligence. All of this
made a violation of the covenant of good faith and fair dealing causing “loss of credit
expectancy.” And a claimed violation of the Unfair Competition Law (UCL), Civil Code
sections 2923.5, 1709–1710, 1788.2 et seq., and 15 U.S.C. section 1692 et seq. In
addition to general and exemplary damages, plaintiffs prayed for declaratory and
injunctive relief.
       Again, both defendants demurred. Following an unreported hearing, the trial court
sustained both demurrers with a detailed order, the pertinent language of which reads:
       “The Demurrer in its entirety is SUSTAINED WITH LEAVE TO AMEND to
state facts sufficient to constitute a cognizable cause of action against this Defendant. In
amending, Plaintiff shall take note of the arguments asserted by Defendant in their
demurrer as to the purported substantive flaws in their fraud causes of action, and
Plaintiff shall have a good faith basis in fact and law for asserting this cause of action
against Defendant in an amended complaint. (See C.C.P. § 128.7(b).)
       “Specifically, to the extent fraud-related causes of action are alleged (see for
example the 17200 claim), fraud claims must be pled with the required particularity. (See
5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts § 676, p. 778; Lazar v. Superior
Court (1996) 12 Cal.4th 631, 645 [‘This particularity requirement necessitates pleading
facts which “show how, when, where, to whom, and by what means the representations


                                              5
were tendered” ’]; Medallion v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1818
[‘Whatever form it takes, the injury or damage must not only be distinctly alleged but its
causal connection with the reliance on the representations must be shown.’]; Tarmann v.
State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157-158 [‘The requirement of
specificity in a fraud action against a corporation requires the plaintiff to 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.’])
       “Most importantly, Plaintiff shall allege facts in support of (a) any cognizable
cause(s) of action which is not barred by the applicable statute of limitations, or (b) any
cognizable cause(s) of action and reasons why the applicable statute of limitations do not
apply thereto. Specifically, Plaintiff shall allege facts as opposed to conclusion[s] to
show that the applicable statute of limitations was effectively tolled or does not apply.
       “Plaintiff shall entitle the new complaint as the ‘Second Amended Complaint’ and
make sure that they are filing a complete document that conforms to California Rule of
Court 2.111. Moreover, Plaintiff is restricted to amending the complaint in the manner
specified here. In other words, Plaintiff is not granted leave to amend to allege a
completely new set of facts or causes of action not raised in the original complaint.
Specifically, as to the claims that Defendant argues are invalid in California or are
otherwise barred based on the arguments asserted[.] Plaintiff shall amend the cause of
action to either state a valid claim or delete it from the second amended complaint.
Plaintiff is also free to delete and/or take away as many allegations as deemed
necessary.”
                   The Second Amended Complaint and Demurrers
       Plaintiffs’ first amended complaint had 36 pages; their second had 51. Again, a
number of supposed defects were identified by PenFed and PNC in their demurrers.
Following another unreported hearing, the trial court sustained each demurrer with a
detailed order that was virtually identical to the ones filed in connection with plaintiffs’
first amended complaint.



                                              6
                     The Third Amended Complaint and Demurrers
       Plaintiffs’ third amended complaint had 52 pages, one more than their second
amended complaint.
       Following an unreported hearing, the trial court sustained each demurrer “in its
entirety” because “After several opportunities to amend, plaintiffs still fail to allege
sufficient facts to state a timely and cognizable claim against this defendant.”3 Judgment
was entered dismissing plaintiffs’ complaint “in its entirety.” The trial court dissolved
the preliminary injunction halting a foreclosure sale of plaintiffs’ home, and declined
plaintiffs’ request for a stay.
                                           REVIEW
                                  Introduction to Our Analysis
       It is appropriate to begin with comments delineating some features of what
follows.
       First, the record before us does not show that a foreclosure occurred prior to entry
of the judgment we are to review. Indeed, the record shows rather conclusively that a
forced sale did not occur, and, by reason of the injunction, was never an imminent
possibility. Therefore, the threat of such a sale is not relevant to our analysis.
       Second, plaintiffs continue to act to represent themselves. Their in propria
persona status brings them no special privileges. “A lay person . . . who exercises the
privilege of trying his own case must expect and receive the same treatment as if
represented by an attorney—no different, no better, no worse.” (Taylor v. Bell (1971)
21 Cal.App.3d 1002, 1009.) Plaintiffs are “ ‘ “restricted to the same rules of evidence
and procedure as is required of those qualified to practice law before our courts.” ’ ”
(City of Los Angeles v. Glair (2007) 153 Cal.App.4th 813, 819.) “[T]he rules of civil




       3
         Read in its entirety, and when considered with the two prior orders, this order
leaves no doubt the trial court was ruling that the general demurrers were being sustained
as to each and every cause of action alleged by plaintiffs. Plaintiffs’ claim to the contrary
is simply wrong.

                                               7
procedure must apply equally to parties represented by counsel and those who forgo
attorney representation.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 984–985.)
         Third, “[b]ecause this case comes to us on a demurrer for failure to state a cause of
action, we accept as true the well-pleaded allegations in plaintiffs’ first amended
complaint. ‘ “We treat the demurrer as admitting all material facts properly pleaded, but
not contentions, deductions or conclusions of fact or law. [Citation.] We also consider
matters which may be judicially noticed.” [Citation.] Further, we give the complaint a
reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]’
[Citation.] ‘ “[A] complaint otherwise good on its face is subject to demurrer when facts
judicially noticed render it defective.” [Citation.]’ [Citations.]”4 (Evans v. City of
Berkeley (2006) 38 Cal.4th 1, 6.)
         We now proceed to an examination of those causes of action plaintiffs have
elected to contest on this appeal, in the order plaintiffs present them in their opening
brief.
                                             Fraud5
         “ ‘ “The elements of fraud . . . are (a) misrepresentation (false representation,
concealment, or nondisclosure); (b) knowledge of falsity . . . ; (c) intent to defraud, i.e., to
induce reliance; (d) justifiable reliance; and (e) resulting damage.” ’ ” (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 173.) More specifically, “[t]he required elements
for fraudulent concealment are: (1) concealment or suppression of a material fact; (2) by

         4
         PNC devotes several references in its brief to the role of judicial notice. But the
trial court was only asked to take judicial notice of one document—a relief from stay
order of the bankruptcy court—submitted by PenFed in connection with its demurrer to
plaintiffs’ first amended complaint, and there is nothing in the record before us indicating
that PenFed’s request was granted. PNC also points out that our review could include
any exhibits attached to a complaint, and both PNC and PenFed obliquely fault plaintiffs
for not attaching various writings and documents referred to in the third amended
complaint. But plaintiffs were under no obligation to do so. (See 4 Witkin, Cal.
Procedure (5th ed. 2008) Pleading, § 427, p. 562.)
         5
        This includes plaintiffs’ third cause of action (“Fraud and Concealment”), the
seventh (“Constructive Fraud”), and the tenth (“Fraudulent Nondisclosure-Violations of
Section 1709 and 1710 of the California Civil Code”).

                                                8
a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to
defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff
was unaware of the fact and would not have acted as he or she did if he or she had known
of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the
concealment or suppression of the fact.” (Graham v. Bank of America, N.A. (2014)
226 Cal.App.4th 594, 606.)
       The statute of limitation for fraud is three years, measured from “the discovery, by
the aggrieved party, of the facts constituting the fraud . . . .” (Code Civ. Proc., § 338,
subd. (d)), subject to this qualification: “the defendant’s fraud in concealing a cause of
action against him tolls the applicable statute of limitations, but only for that period
during which the claim is undiscovered by plaintiff or until such time as plaintiff, by the
exercise of reasonable diligence, should have discovered it.” (Sanchez v. South Hoover
Hospital (1976) 18 Cal.3d 93, 99.)
       The gist of plaintiffs’ allegations are that since they bought their residence in
1998, they have refinanced three times. The first time was in 2003, with National City
Bank, which was acquired by PNC in 2008. The second time was in 2004, with PenFed,
and the third was in 2005, when plaintiffs made the line of credit agreement with PenFed.
Both of these loans were concluded after “the PenFed representative assured Plaintiffs
they could . . . afford the loan.” Plaintiffs have also had a credit card since 1996 that was
provided by PenFed.
       According to plaintiffs: “In Summer 2011, Plaintiffs found themselves
increasingly struggling to come up with the money to make the needed payments, both
for their mortgages as well as the credit cards. Plaintiffs tried various means to address
this negative cash flow,” without success. They asked PenFed for a “loan modification,”
which was denied. Apparently at the same time, “[p]laintiffs’ credit card and credit
line . . . were cancelled by PenFed without prior notification.” When plaintiffs were
driven to seek bankruptcy protection in February 2012, plaintiffs were “either fully
current on their loans or only 2-3 weeks late on the payments.”



                                               9
       While still in bankruptcy, plaintiffs “made numerous attempts to contact PenFed to
discuss a loan modification.” These attempts were unsuccessful until “[i]n or about April
2012, Mr. David N. LeGrande, a ‘Bankruptcy Specialist’, for PenFed, contacted
Plaintiffs. Plaintiffs and Mr. LeGrande spoke on the phone and communicated via email.
Plaintiffs expressed concern that another loan modification request to PenFed would not
be performed with any reasonable due diligence. Plaintiffs noted that they are were [sic]
in better financial condition due to the credit card debt being discharged in by [sic] the
bankruptcy Court, yet due to large amount of mortgage debt, Plaintiffs’ financial
condition didn’t significantly improve. Mr. LeGrande acknowledged Plaintiffs’ concern
and said he’d get back to Plaintiffs on that concern and requested a property appraisal be
conducted. PenFed did not discuss, ask, or perform any appraisal in response to
Plaintiffs’ 2011 request for a loan modification. Soon thereafter, LeGrande responded,
stating that the Plaintiff had to submit another loan modification request, and that the
request would receive proper due diligence. LeGrande again requested that a property
appraisal be completed, but he refused to further discuss Plaintiffs concern that a loan
modification would be done with proper due diligence.”
       Plaintiffs alleged that PenFed, acting through “Sam Feldman,” made four
misrepresentations and omissions “[i]mmediately prior to Plaintiffs entering into the
Second Agreement on or about August 2004,” “Plaintiffs . . . were ignorant of Sam
Feldman’s representations and omissions and believed them to be true. In reliance upon
these representations and omissions, Plaintiffs took certain actions, including but not
limited to, signing the Second Agreement. Had Plaintiffs known the actual facts, they
would not have taken such action. Plaintiffs’ reliance on the Sam Feldman’s
representations were justified and Plaintiffs sustained damages.”
       Plaintiffs alleged that PenFed employee “Cheryl Brand” made four
misrepresentations and omissions “[i]mmediately prior to Plaintiffs entering into the
Third Agreement in or about June 2005.” Plaintiffs believed these representations and
omissions to be true, and, in justifiable reliance thereon, “took certain actions, including
but not limited to, signing the Third Agreement.”


                                             10
       Essentially the same allegations were made concerning what PenFed employee
Gina Tejral said or did not say in connection with plaintiffs’ “June 2011 Loan
Modification Request.”
       The following paragraph is the fulcrum of this appeal:
       “Plaintiffs have filed the cause of action within the applicable statute of limitations
pursuant to the delayed discovery rule, as Plaintiff had no knowledge, nor should they
have, of the wrongdoing of PenFed, the effects of said conduct, and/or that said conduct
was the cause of their injuries as alleged herein, until within the applicable statute of
limitations for the filing of this cause of action. Based on the delayed discovery rule,
Plaintiffs’ failure to discover their cause of action against PenFed, prior to this time is
reasonable and justifiable and not a result of Plaintiffs’ failure to investigate or to act.
Specifically, when Plaintiffs obtained their loans in 2004 and 2005, PenFed agents
represented that they were professionals, that they had evaluated Plaintiffs qualifications,
and Plaintiffs were able to afford the loans. At all relevant times neither Plaintiff was an
expert or professional in the lending and/or mortgage field. Neither Plaintiff had the
knowledge or professional ability to analyze and determine whether a loan was affordable
to them. As such, Plaintiff accepted and did not question the representations of PenFed’s
agents. Further, Plaintiffs did not significantly utilize the HELOC agreement of 2005
until the Summer of 2010, as such there was never any indication that they could not
afford the loans until after 2010. Plaintiffs did not suspect that PenFed had allowed them
to enter a loan agreement that they could not afford until the Spring 2011 when they
started to experience severe financial distress.”
       Concerning PNC and the “First Agreement,” plaintiffs alleged that “[i]n and
around February 2003 Galen Leeks,” “an underwriter for National City Mortgage,” had a
telephone conversation with plaintiffs. During the course of that conversation, Leeks
“told Plaintiffs via the telephone as well as in loan documentation . . . that the market rate
given Plaintiffs’ financial condition was 7.875%.” Through Leeks, PNC “failed to
disclose the [unspecified but higher] true market rate and closing costs for Plaintiff’s
loans” they eventually secured from National City Mortgage. Leeks’s representations


                                               11
were false. “PNC continues to engage in this concealment by refusing to respond to
qualified written requests, in violation of RESPA.” Again, plaintiffs alleged that they
justifiably replied upon Leeks’s misrepresentations.
          “In or around May 2012,” PNC employee Jennifer Key “failed to inform Plaintiffs
they were eligible to apply for modification of their PNC loans. Plaintiffs didn’t apply
for a loan modification, to their detriment. As a result, Plaintiffs incurred damages
associated with continuing with a loan above the appropriate market rate, accrual of
interest rates, late fees and other costs.” With respect to PNC, plaintiffs reiterated their
allegations concerning the delayed discovery of their cause of action.
          In their seventh cause of action for “Constructive Fraud,” plaintiffs essentially
repeated the allegations concerning PenFed employees Feldman, Brand, and Tejral and
their part in the plaintiffs’ entering into the “Second Agreement,” the “Third Agreement,”
and the “June 2011 Loan Modification Request.” Plaintiffs also realleged the claims
against PNC employees Leeks and Kay concerning the “First Agreement” and the May
2012 solicitation to plaintiffs “to apply for modification of their PNC loans.” Plaintiffs
once again reiterated their allegations concerning the delayed discovery of their cause of
action.
          Plaintiffs’ tenth cause of action (styled, “Fraudulent Nondisclosure—Violations of
Section 1709 and 1710 of the California Civil Code”) against PenFed alone, was a
reframing of the same allegations concerning Feldman, Brand, and Tejral. It too had the
delayed discovery allegations.
                                      Breach of Contract
          “A cause of action for breach of contract requires pleading of a contract, plaintiff’s
performance or excuse for failure to perform, defendant’s breach and damage to plaintiff
resulting therefrom. [Citation.] A written contract may be pleaded either by its
terms—set out verbatim in the complaint or a copy of the contract attached to the
complaint and incorporated therein by reference—or by its legal effect. [Citation.] In
order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its
relevant terms. This is more difficult, for it requires a careful analysis of the instrument,


                                                12
comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]”
(McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) The applicable
statute of limitations for “[a]n action upon any contract, obligation or liability founded
upon an instrument in writing” is four years. (Code Civ. Proc., § 337, subd. (1).) When
fraud and contract are linked, this period does not commence until the fraud is
discovered. (Souza & McCue Const. Co. v. Superior Court (1962) 57 Cal.2d 508, 511.)
       Plaintiffs alleged this cause of action only as to PenFed based on their credit card
account. They alleged that “[o]n or about December 1996, PenFed issued Plaintiffs a
credit [card] with their lowest interest with no incentives or rewards. [¶] . . . In or about
December 1998, PenFed, pursuant to a written ‘AGREEMENT’ assigned to Plaintiffs a
new premium credit card that replaced the credit card issued in 1996. . . . The terms of
the AGREEMENT are as follows: [¶] (a) In return for paying a premium interest rate
on unpaid balances, Plaintiffs would receive cash back on purchases. [¶] (b) In return
for paying a premium interest rate on unpaid balances, Plaintiffs would also receive
‘points’ and other rewards associated with this higher interest rate. [¶] (c) Plaintiff may
elect to switch to a credit card with a lower interest rate at any time, that is, one that
offered none of the services associated with the premium interest rate. [¶] . . . [¶]
       “. . . PenFed has breached the AGREEMENT with Plaintiffs in one or more of the
following respects, including but not limited to: [¶] (a) Charging a premium interest
rate but refusing to allow Plaintiffs to receive cash back on purchases, through the
unilateral canceling of the credit card. [¶] (b) Charging a premium interest rate but
refusing to allow Plaintiffs to receive points and other rewards. [¶] (c) Refusing to
allow Plaintiffs to switch to a lower interest rate, one that would correspond to the
eliminated services associated with the premium interest rate.”
       “Plaintiffs have fully performed all the terms and conditions of the AGREEMENT
with PenFed, except those which have been excused by reason of the multiple breaches
of the contract by PenFed, including but not limited to being current on all payments at
the time PenFed canceled the credit card.”



                                               13
                                           RESPA
       “RESPA regulates the settlement process for real estate disputes [citation], as well
as banks’ servicing of mortgage loans regulated by the federal government [citation].
Any mortgage loans secured by a first or subordinate lien on residential real property are
regulated by the federal government. (12 U.S.C. § 2602(1)(A).) [¶] Section 2605, part
of RESPA sets forth requirements for the servicing of mortgage loans. Among other
things, this section requires a loan servicer to respond to a QWR [Qualified Written
Request] for information from the borrower. (12 U.S.C. § 2605(e)(1).) RESPA defines a
QWR as a written correspondence that ‘(i) includes, or otherwise enables the servicer to
identify, the name and account of the borrower; and [¶] (ii) includes a statement of the
reasons for the belief of the borrower, to the extent applicable, that the account is in error
or provides sufficient detail to the servicer regarding other information sought by the
borrower.’ (12 U.S.C. § 2605(e)(1)(B).) The loan servicer was required to provide the
borrower with a ‘written response acknowledging receipt of the correspondence within
20 days.’ (12 U.S.C. former § 2605(e)(1)(A).) Also, ‘[n]ot later than 60 days . . . after the
receipt from any borrower of any qualified written request,’ the loan servicer was
required to correct the borrower’s account, provide the borrower with the requested
information relating to the servicing of the loan, or provide the borrower with an
explanation as to why the requested information was unavailable. (12 U.S.C. former
§ 2605(e)(2).)” (Jenkins v. JP Morgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497,
530–531; disapproved on another ground in Yvanova v. New Century Mortgage Corp.
(2016) 62 Cal.4th 919.)
       “RESPA empowers borrowers to pursue damage remedies in the event a loan
servicer fails to comply with RESPA’s provisions. (12 U.S.C. § 2605(f).) An individual
borrower asserting a RESPA claim may recover ‘[a]ny actual damages to the borrower as
a result of the failure’ and ‘any additional damages, as the court may allow, in the case of
a pattern or practice of noncompliance with the requirements of [RESPA], in an amount
not to exceed $1,000.’ (12 U.S.C. former § 2605(f)(1), italics added.) Also, the statutes
authorize an individual borrower to recover the costs, including attorney fees, incurred in


                                              14
connection with a successful action under the statute. (12 U.S.C. § 2605(f)(3).)” (Jenkins
v. JP Morgan Chase Bank, N.A., supra, 216 Cal.App.4th 497, 531.)
       A cause of action for violation of RESPA’s provisions must be brought within
three years “from the date of the occurrence of the violation.” (12 U.S.C. § 2614.) The
date of the “occurrence” is ordinarily the date the transaction closed, that is, when the
loan was completed (Snow v. First American Title Ins. Co. (5th Cir. 2003) 332 F.3d 356,
359; Jensen v. Quality Loan Service Corp. (E.D. Cal. 2010) 702 F.Supp.2d 1183, 1195),
or the date the disclosures should have been made. (Moore v. Mortgage Electronic
Registration Systems (D.N.H. 2012) 848 F.Supp.2d 107, 120.)
       Plaintiffs alleged this cause of action only as to PNC because it is the loan
servicer. As relevant here, they alleged on information and belief that “PNC engaged in a
practice referred to as yield spread premium (‘YSP’),” and “falsified the interest rate on
the terms for the loan, which did not reflect the market rate. As a direct consequence of
PNC’s actions, Plaintiffs were required to pay excessive interest rates.”
       “Starting in on or about March 2005, Plaintiffs began making biweekly payments
instead of a single monthly payment on their note with PNC. PNC advertised and
encouraged Plaintiff to take this action, as a means of reducing overall cost of the loan.
Specifically, Plaintiffs were told by PNC that they would save on interest because half
their monthly payment would be paid early. Plaintiffs contacted PNC in or about August
2005, and made an oral inquiry as to how much money that had saved with this method.
PNC informed Plaintiffs that the funds paid early were not credited to their account until
the second half of the payment was received [at/by] PNC.
       “. . . [O]n or about April 10, 2012 and on or about June 4, 2012 Plaintiffs sent
PNC written requests that PNC provide the following information . . . : [¶] (a) Whether,
and if charged, how much of a penalty was charged for having a homeowners policy with
a high deductible [¶] (b) Whether PNC has placed their own forced home owner’s
policy on the house, and if so, total costs, fees and penalties . . . . [¶] (c) Whether any
late fees were charged when Plaintiffs conducted split payments, and if so, how much
was charged and when [¶] (d) Identification of all fees and penalties and there [sic]


                                             15
cause. [¶] (e) The Current owner of the loan, including contact information, dates and
authorized individuals [¶] (f) Who or what is the current legal owner of the mortgage?
If it was PNC, to provide proof of the proper transfer of the mortgage to PNC? [¶] (g)
Does PNC have the original paperwork that established and created the mortgage? [¶]
(h) Provide copies of all written agreements that established the mortgage. [¶] (i)
Provide a complete list of all owners of the mortgage, including the date of transfers or
assignments of the debt. [¶] (j) Provide an accounting of all payments made against the
debt and an accounting of all fees, charges, costs, legal fees, penalties, and interest
charged because of the debt. [¶] (k) Provide a verification or copy of all legal papers
filed against Plaintiffs. In each request Plaintiffs specifically stated that the request was a
qualified written request under RESPA. PNC failed to respond to Plaintiffs’ written
requests and failed [to] provide the information . . . requested . . . . [¶] . . . [¶]
       “PNC continues to refuse to provide an accounting of the money paid, as well as
to disclose the interest rate for Plaintiffs’ loans. By reason of PNC’s actions, Plaintiffs
suffered, and continue to suffer, substantial damages . . . including, but not limited to the
fact that Plaintiffs continued to pay an excessive interest rate . . . .”
                                           Negligence
       “ ‘Actionable negligence involves a legal duty to use due care, a breach of such
legal duty, and the breach as the proximate or legal cause of the resulting injury.’ ”
(Beacon Residential Community Assn. v. Skidmore, Owings & Merrill, LLP (2014)
59 Cal.4th 568, 573.) Such an action ordinarily must be filed within two years of
“the . . . neglect of another” (Code Civ. Proc., § 335.1), but this period does not start until
the plaintiff discovered, or had reason to discover, the factual basis of the claim. (Fox v.
Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806–807 (Fox).)
       As against PenFed, plaintiffs alleged: “At all relevant times, PenFed, as a
mortgage broker, owed Plaintiffs a fiduciary responsibility to ensure Plaintiffs could
afford the loan with PenFed. [¶] . . . Plaintiffs were never in a position to afford the loan
provided by PenFed. PenFed knew, or should have known that Plaintiffs could not afford
the at issues loan. PenFed breached its duty to ensure Plaintiffs could afford this loan, as


                                                16
recently as June 2011. [¶] . . . Defendant knew, or should have known, that their failure
to exercise due care in the performance of the loan modification/servicing would result in
the foreclosure process . . . . [¶] . . . Defendant breached the duty to Plaintiffs when they
failed to provide the reasonable care required of them as a servicer by failing to conduct
due diligence in Plaintiffs’ loan modification request, and continued to breach this duty
when Plaintiffs asked for assurances that his loan modification would be conducted with
reasonable due diligence. [¶] . . . These breaches of duty caused Plaintiffs to take out
loans they could not afford, causing Plaintiffs extreme financial distress, bankruptcy,
humiliation, embarrassment, anxiety, and significant emotional distress.”
       As against PNC, plaintiffs alleged: “Pursuant to RESPA, at all relevant times
PNC had a duty to exercise due care of the servicing of Plaintiffs’ loan associated with
the First Agreement. [¶] . . . Defendants breached this . . . duty under RESPA by
ignoring Plaintiffs’ repeated QWR and VOD6 requests . . . . [¶] . . . Defendants had the
duty of care and to be honest with Plaintiffs. PNC is in a position of authority and
uneven bargaining power and was required to provide Plaintiffs with the necessary
information that would allow Plaintiffs to make prudent and beneficial decisions
regarding his loan modification or paying off his loan. PNC is aware that Plaintiffs were
paying above the market rate, yet have refused to disclose per HUD requirements what
the true market rate is. Further, by refusing to respond to QWR and VOD letters, they are
ignoring their duty to provide Plaintiffs an accounting of their payments, which would
clearly demonstrate the extent of damages they have caused Plaintiffs. [¶] . . . By reason
of PNC’s negligence, Plaintiffs have suffered, and continues to suffer, substantial
damages. . . .”
                           Violation of Civil Code section 2923.5
       Plaintiffs alleged against PenFed: “California Civil Code section 2923.5 holds
that a mortgagee, trustee, beneficiary, or authorized agent may not file a notice of




       6
           This abbreviation is not explained in the third amended complaint.

                                              17
default . . .until 30 days after initial contact is made or 30 days after satisfying the due
diligence requirements.” The purpose of this statute “is for the authorized agent to assess
the borrower’s financial situation and explore options for the borrower to avoid
foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent
shall advise the borrower that he or she has the right to request a subsequent meeting and,
if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to
occur within 14 days.” PenFed violated this statute in that it “failed to inform Plaintiffs
they had the right to request a subsequent meeting,” “failed to access Plaintiffs’ financial
situation in order to prevent foreclosure,” and “failed to notify Plaintiffs of options to
avoid foreclosure.”
       “In 2008, the Legislature enacted Civil Code section 2923.5 in response to the
foreclosure crisis. [Citation.] It prohibits filing a notice of default until 30 days after the
lender contacts the borrower ‘to assess the borrower’s financial situation and explore
options for the borrower to avoid foreclosure.’ (Civ. Code, § 2923.5, subds. (a)(1),
(a)(2); . . . .) [7] [¶] However, Civil Code section 2923.5 does not provide for damages, or
for setting aside a foreclosure sale, nor could it do so without running afoul of federal
law, that is, the Home Owners Loan Act [citation], and implementing regulations
[citation]. [Citations.] The statute was ‘carefully drafted to avoid bumping into federal
law’ regulating home loans. [Citation.] As a result, the sole available remedy is ‘more
time’ before a foreclosure sale occurs. [Citation.] After the sale, the statute provides no
relief. [Citations.] Further, the statute does not—and legally could not—require the
lender to modify the loan. [Citation.]” (Stebley v. Litton Loan Servicing, LLP, supra,
202 Cal.App.4th at pp. 525–526.)




       7
        “The statute applies to owner-occupied residences . . . that are secured by
‘mortgages or deeds of trust recorded from January 1, 2003, to December 31, 2007.’
(Civ. Code, § 2923.5, subd. (i).)” (Stebley v. Litton Loan Servicing, LLP (2011)
202 Cal.App.4th 522, 526, fn. 3.)


                                              18
                                   Violation of the UCL
       Plaintiffs alleged that defendants’ “conduct as alleged in [the] first, second, third,
eighth, ninth and tenth causes of action [i.e., for breach of contract, violation of RESPA,
fraud and concealment, violation of Civil Code section 2923.5, unfair debt collection
practices, and fraudulent nondisclosure] as set forth above [sic] constitutes an unfair and
unlawful business practice within the meaning of the California Business and Professions
Code section 17200, et seq. Plaintiffs seek restitution and disgorgement from Defendants
of all monies received.” They also prayed for defendants to be enjoined “from
committing such practices in the future.” The UCL’s statute of limitations is four years
(Bus. & Prof. Code, § 17208), but this period may be tolled under the discovery rule
(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1189, 1195–1196.)
                            Declaratory and Injunctive Relief
       According to plaintiffs: “An actual controversy has arisen and now exists between
Plaintiffs and Defendants concerning their respective rights and duties. Plaintiffs
maintain that the ‘Notice of Default’ executed by Defendant PenFed on July 23, 2013 and
recorded with the Alameda County Recorder on July 25, 2013 is invalid, in that, the
Defendant PenFed failed to meet the notification and good faith requirements for filing a
Notice of Default. PenFed maintains that the July 23, 2013 ‘Notice of Default’ satisfied
the notification and good faith requirements for filing a Notice of Default, and is valid
under California statute.” Plaintiffs explicated a myriad of disadvantages that would
befall them from defendants’ actions “unless . . . restrained by order of this Court” from
conducting a foreclosure sale.
       It seems clear that the underpinning for this cause of action is PenFed’s alleged
noncompliance with Civil Code section 2923.5 and the Rosenthal Fair Debt Collection
Practices Act, and PNC’s noncompliance with RESPA. A cause of action for declaratory
relief would adopt the different statutes of limitation for the underlying violations.
(Maguire v. Hibernia Savings & Loan. Soc. (1944) 23 Cal.2d 719, 733–734.) In a like
vein, there is no separate statute of limitation for seeking an injunction because that is
merely a species of a remedy, not a substantive cause of action. (Shamsian v. Atlantic


                                              19
Richfield Co. (2003) 107 Cal.App.4th 967, 984.) Both declaratory and injunctive relief
are equitable remedies, and thus within the rule that “the running of an applicable statute
of limitations will also bar equitable relief.” (Troeger v. Fink (1958) 166 Cal.App.2d 22,
28; see also id. at p. 29 [“it is settled that where the statute of limitations has barred any
right to ‘coercive’ relief, declaratory relief designed to vindicate the same asserted right is
likewise barred”].)
                             Unfair Debt Collection Practices
       Plaintiffs alleged against PenFed that “On July 25, 2012, PenFed filed a
SUBSTITUTION OF TRUSTEE, Instrument Number 2012237360, appointing
QUALITY LOAN SERVICE CORPORATION (hereinafter ‘QLSC’) as the Trustee on
PenFed’s behalf. . . . [¶] . . . QLSC is a ‘debt collector’ engaging in ‘debt collection’
practices under the Rosenthal Fair Debt Collections Practices Act . . . .”
       “. . . PenFed, through its agent QLSC, violated the Rosenthal Act by using false,
deceptive, and misleading statements and deceptive omissions in connection with its
collection of Plaintiffs’ mortgage debt . . . . Specifically, Plaintiffs were told by a PenFed
agent that they still owed a debt to PenFed despite all liability for any debt being removed
by Plaintiffs’ successfully discharged Chapter 7 bankruptcy.
       “. . . Despite PenFed receiving notification of the Plaintiffs’ bankruptcy
proceeding, Plaintiffs received letters on multiple occasions stating that QLSC was
demanding payment and reimbursement on the debt. Their frequent
letters . . . consistently stated in bolded capitals ‘WE ARE ATTEMPTING TO
COLLECT A DEBT, AND ANY INFORMATION WE OBTAIN WILL BE USED FOR
THAT PURPOSE.’ Such statements were included in mailings including a July 23,
2012, a full 4 months after Plaintiffs filed for bankruptcy and a full month after the
bankruptcy court successfully discharged Plaintiffs’ case on June 26, 2012.” This
conduct caused plaintiffs “damages and harm” in the form of “personal humiliation,
embarrassment, mental anguish, anxiety, and emotional distress.”
       Actions for violation of the Rosenthal Act “may be brought . . . within one year
from the date of the occurrence of the violation.” (Civ. Code, § 1788.30, subd. (f).)


                                               20
       Although it cannot be ascertained with certainty, it seems likely that the issue of
delayed discovery tolling various statutes of limitation arose in connection with the
demurrers to plaintiffs’ second amended complaint.
       At first glance, and even making allowance for adversarial slant, there appears
considerable force to how PenFed characterized the third amended complaint:
“Plaintiffs’ argument seems to be that they stuck their heads in the sand for six and seven
years by borrowing money they had no idea if they could pay back, and made payments
without regard to their financial condition. It is absurd to suggest that reasonable people
acting diligently in determining their financial condition would be unable to determine
that loans from six and seven years earlier, that they paid on time for that period of time
without issue, would suddenly discover a fraud when their financial condition changed.
Instead, the reasonable explanation is that the loans were affordable when made, but the
change in plaintiffs’ financial condition led to the inability to pay.” Many of the statutes
of limitation do indeed appear to have long elapsed. But that appearance cannot be
accepted.
       This action has not progressed beyond the pleading stage, when review is heavily
slanted towards the pleader, at least insofar as factual allegations are judged. Allegations
that may seem improbable on their face must be accepted as true. We do not concern
ourselves with whether the plaintiffs can prove those allegations, only whether the third
amended complaint “makes out a claim for some relief, even if . . . less than alleged.”
(Caldera Pharmaceuticals, Inc. v. Regents of University of California (2012)
205 Cal.App.4th 338, 350.) None of the relevant documents are properly before us (see
fn. 4, ante), so plaintiffs’ characterization of those instruments cannot be impeached at
this time. And whether PenFed and PNC actually complied with the various statutes
plaintiffs allege were violated presents questions of fact that cannot be resolved by
demurrer. (See, e.g., Intengan v. BAC Home Loans Servicing LP (2013) 214 Cal.App.4th
1047, 1058; Skov v. U.S. Bank Nat. Assn. (2012) 207 Cal.App.4th 690, 696–697.)
       A major thrust of PNC’s and PenFed’s general demurrers to the third amended
complaint is that all of plaintiffs’ cause of actions were barred by the governing statutes


                                             21
of limitation. And plaintiffs are in error when they state in their brief that “it is
questionable whether the Highbargers needed to address the statute of limitations at the
demurrer stage . . . .” “ ‘The defense of statute of limitations may be asserted by general
demurrer if the complaint shows on its face that the statute bars the action.’ [Citations.]
There is an important qualification, however: ‘In order for the bar of the statute of
limitations to be raised by demurrer, the defect must clearly and affirmatively appear on
the face of the complaint; it is not enough that the complaint shows merely that the action
may be barred.’ [Citations.] ‘The ultimate question for review is whether the complaint
showed on its face that the action was barred by a statute of limitations, for only then may
a general demurrer be sustained and a judgment of dismissal be entered thereon.’
[Citation.]” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308,
1315–16.)
       Plaintiffs should be under no illusion how close they come to failing this test. By
putting at issue their first refinancing more than a dozen years ago, plaintiffs test the
limits of facial credulity. But there is one legal doctrine that may help them—the
doctrine of delayed discovery.
                                            Tolling
       Ordinarily, a period of limitations begins, or “accrues,” at the time the obligation
or liability arises regardless of the plaintiff’s ignorance of the legal significance of known
facts. (Utility Audit Co., Inc. v. City of Los Angeles (2003) 112 Cal.App.4th 950, 962;
Hogar Dulce Hogar v. Community Development Commission (2003) 110 Cal.App.4th
1288, 1296–1297; Naftzger v. American Numismatic Society (1996) 42 Cal.App.4th 421,
428.) However, under the delayed discovery rule, a claim does not accrue until the
plaintiff discovers or through the exercise of reasonable diligence could have discovered
the cause of his or her injury. In Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397–398
(Norgart) our Supreme Court described the discovery rule thusly: “[T]he plaintiff
discovers the cause of action when he at least suspects a factual basis, as opposed to a
legal theory, for its elements, even if he lacks knowledge thereof-when, simply put, he at
least ‘suspects . . . that someone has done something wrong’ to him [citation], ‘wrong’


                                               22
being used, not in any technical sense, but rather in accordance with its ‘lay
understanding’ . . . .” (See also, e.g., Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103,
1110; Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 179.)
Norgart further explained: “[Plaintiff] has reason to discover the cause of action when he
has reason at least to suspect a factual basis for its elements. [Citation.] He has reason to
suspect when he has ‘ “ ‘ “notice or information of circumstances to put a reasonable
person on inquiry ” ’ ” ’ [citation]; he need not know the ‘specific “facts” necessary to
establish’ the cause of action; rather, he may seek to learn such facts through the ‘process
contemplated by pretrial discovery’; but, within the applicable limitations period, he must
indeed seek to learn the facts necessary to bring the cause of action in the first place-he
‘cannot wait for’ them ‘to find’ him and ‘sit on’ his ‘rights’; he ‘must go find’ them
himself if he can and ‘file suit’ if he does [citation].” (Norgart v. Upjohn Co., supra, at
p. 398; Jolly v. Eli Lilly & Co., supra, at p. 1110.) In short, the limitations period under
the discovery rule begins to run when plaintiff had information that would put a
reasonable person on inquiry. (Utility Audit Co., Inc. v. City of Los Angeles, supra, 112
Cal.App.4th 950, 962; Prudential Home Mortgage Co. v. Superior Court (1998)
66 Cal.App.4th 1236, 1247; Community Cause v. Boatwright (1981) 124 Cal.App.3d 888,
900.)
        But delayed discovery allegations are subject to distinct pleading requirements.
(Kirby v. Albert D. Seeno Construction Co. (1992) 11 Cal.App.4th 1059, 1068; Mangini
v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1150; Bradler v. Craig (1969)
274 Cal.App.2d 466, 471.) In the classic formulation, “it is the complainant’s burden to
plead not merely the ultimate fact of reasonable delay in discovery, but specific facts
which allow a legitimate inference that the delay was reasonable.” (Saliter v. Pierce
Brothers Mortuaries (1978) 81 Cal.App.3d 292, 299.) This can be almost as tough as
alleging fraud: “In order to invoke this special defense to the statute of limitations, the
plaintiff must specifically plead facts which show (1) the time and manner of discovery
and (2) the inability to have made earlier discovery despite reasonable diligence.” (Id. at
p. 297; accord, e.g., Camsi IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525,


                                              23
1536–1537; Mangini v. Aerojet-General Corp., supra, 230 Cal.App.3d 1125, 1150; see
Barrington v. A.H. Robins Co. (1985) 39 Cal.3d 146, 154 [citing Saliter for “plaintiff
must specifically plead facts which show the time and manner of discovery and plaintiff’s
inability to have made an earlier discovery despite reasonable diligence”].)
       And yet, in terms of actual living persons, the discovery rule is not as demanding
as the pleading requirements for fraud. Explaining what it means by discovering, or
having reason to, discover a cause of action, our Supreme Court explained: “A plaintiff
has reason to discover a cause of action when he or she ‘has reason at least to suspect a
factual basis for its elements.’ [Citations.] Under the discovery rule, suspicion of one or
more of the elements of a cause of action, coupled with knowledge of any remaining
elements, will generally trigger the statute of limitation period [Citations.] Norgart
explained that by discussing the discovery rule in terms of a plaintiff’s suspicion of
‘elements’ of a cause of action, it was referring to the ‘generic’ elements of wrongdoing,
causation, and harm. [Citation.] In so using the term ‘elements,’ we do not take a
hypertechnical approach to the application of the discovery rule. Rather than examining
whether the plaintiffs suspect facts supporting each specific legal element of a particular
cause of action, we look to whether the plaintiffs have reason to at least suspect that a
type of wrongdoing has injured them. [¶] The discovery rule . . . allows accrual
[commencement] of the cause of action even if the plaintiff does not have reason to
suspect the defendant’s identity. . . . [¶] The discovery rule only delays accrual until the
plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule
does not encourage dilatory tactics because plaintiffs are charged with presumptive
knowledge of an injury if they have ‘ “ ‘information of circumstances to put [them] on
inquiry’ ” ’ or they have ‘ “ ‘the opportunity to obtain knowledge from sources open to
[their] investigation.’ ” ’ [Citations.] In other words, plaintiffs are required to conduct a
reasonable investigation after becoming aware of an injury, and are charged with
knowledge of the information that would have been revealed by such an investigation.”
(Fox, supra, 35 Cal.4th 797, 807–808, fn. omitted; Jolly v. Eli Lilly & Co., supra,



                                             24
44 Cal.3d 1103, 1111 [“So long as a suspicion exists, it is clear that the plaintiff must go
find the facts; she cannot wait for the facts to find her”].)
       The Supreme Court went on to reiterate the burden on the plaintiff seeking to
come within the discovery rule: “In order to rely on the discovery rule for delayed
accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his
claim would be barred without the benefit of the discovery rule must specifically plead
facts to show (1) the time and manner of discovery and (2) the inability to have made
earlier discovery despite reasonable diligence.’ [Citation.] In assessing the sufficiency of
the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show
diligence’; ‘conclusory allegations will not withstand demurrer.’ [Citation.]
       “Simply put, in order to employ the discovery rule to delay accrual of a cause of
action, a potential plaintiff who suspects that an injury has been wrongfully caused must
conduct a reasonable investigation of all potential causes of that injury. If such an
investigation would have disclosed a factual basis for a cause of action, the statute of
limitations begins to run on that cause of action when the investigation would have
brought such information to light. In order to adequately allege facts supporting a theory
of delayed discovery, the plaintiff must plead that, despite diligent investigation of the
circumstances of the injury, he or she could not have reasonably discovered facts
supporting the cause of action within the applicable statute of limitations period.” (Fox,
supra, 35 Cal.4th 797, 808–809.)
       Fox is not only relevant doctrinally, but also factually. In Fox, the issue of
delayed discovery until the plaintiff’s first amended complaint, in which she alleged
“there was no way ‘through which her reasonable diligence would have revealed, or
through which she would have suspected the [defendant’s product] as a cause of her
injury.’ ” This was “insufficient to withstand demurrer because it failed to allege specific
facts supporting the allegations,” but the plaintiff was given a second chance to bring
herself within the delayed discovery rule. (Fox, supra, 35 Cal.4th 797, 811.) We
conclude plaintiffs also deserve a second chance on this issue, just as they were given a
second chance at pleading fraud.


                                              25
       When a general demurrer is sustained without leave to amend, the reviewing court
“decide[s] whether there is a reasonable possibility that the defect can be cured by
amendment: if it can be, . . . we reverse.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318;
see Fox, supra, 35 Cal.4th 797, 810 [“ ‘[I]t is error for a . . . court to sustain a demurrer
when the plaintiff has stated a cause of action under any possible legal theory’ ”, [italics
added].) So it is here: plaintiffs have a possible legal theory that may permit them to
escape the statutes of limitation arrayed against them. We are required to respect that
possibility. Both PNC and PenFed point out in their respective briefs just how
inadequate plaintiffs’ first effort was. With this opinion, plaintiffs have now been
advised how significantly much more detail than the nonspecific generalities alleged in
the third amended complaint will be expected.8
                                       DISPOSITION
       The judgment of dismissal is reversed. The parties shall bear their respective costs
on appeal. Plaintiffs’ request for statutory attorney fees is denied because they have not
yet obtained any substantive relief. (See Civ. Code, § 2924.12, subd. (i); 12 U.S.C.
§ 2607(d).)




       8
        PNC and PenFed are entirely at liberty to seek judicial notice of documents or
materials which may assist in establishing that plaintiffs are not entitled to have one or
more statutes of limitation tolled, or are relevant to other issues PenFed or PNC may
submit are germane to resolving this action at the pleading stage.

                                              26
                                            _________________________
                                            Richman, J.


We concur:


_________________________
Kline, P.J.


_________________________
Miller, J.




A142404; Highbarger v. Pentagon Federal Credit Union




                                       27
