Filed 8/6/13 Sedewick v. Bank of America CA4/3




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE


STEPHEN SEDGWICK et al.,

     Plaintiffs and Appellants,                                        G047001

         v.                                                            (Super. Ct. No. 30-2011-00503519)

BANK OF AMERICA CORPORATION et                                         OPINION
al.,

     Defendants and Respondents.



                   Appeal from a judgment of the Superior Court of Orange County, William
M. Monroe, Judge. Affirmed.
                   Gordon C. Strange for Plaintiffs and Appellants.
                   McGuire Woods and Leslie M. Werlin for Defendants and Respondents.


                                          *                  *                  *
              Plaintiffs Stephen and Robin Sedgwick appeal from a judgment in favor of
defendants Bank of America Corporation, Bank of America, N.A., Countrywide
Financial Corporation, Countrywide Home Loans, Inc., Mortgage Electronic Registration
Systems, Inc., and MERSCORP Holdings, Inc. (collectively defendants). Judgment was
entered after the court sustained defendants‟ demurrer to the fraudulent concealment
cause of action in the second amended complaint (SAC) without leave to amend. In
sustaining defendants‟ demurrer to the causes of action in the first amended complaint for
which it allowed leave to amend, the court limited the length of the SAC to 15 pages.
              Plaintiffs argue the court abused its discretion in sustaining the demurrer to
the SAC and in imposing the page limitation. They also maintain the court erred in
ruling the fraudulent concealment cause of action was barred by the statute of limitations
because defendants‟ conduct tolled its accrual. They further assert Stephen‟s failure to
disclose potential claims against defendants on his Chapter 7 bankruptcy petition does not
estop him from proceeding on the complaint. Finally, they contend they should have
been given leave to amend.
              We conclude there is no basis to reverse based on the page limitation, nor
did the court err in sustaining the demurrer to the fraudulent concealment cause of action
without leave to amend. Because we decide the case on these grounds we have no need
to and do not address any of the other issues raised.


                            RULES OF COURT VIOLATIONS


              As a preliminary matter we must note plaintiffs‟ numerous violations of the
California Rules of Court. First, rule 8.204(a)(1)(A) requires a brief to include a table of
authorities listing cases, statutes, and other authorities. Although plaintiffs provide a list,
they fail to include page numbers where the authorities are discussed, making the list
essentially worthless.

                                               2
              Likewise, in setting out their 30-page statement of facts, with a few
exceptions plaintiffs failed to provide record references, in violation of California Rules
of Court, rule 8.204(a)(1)(C) that requires a brief to “[s]upport any reference to a matter
in the record by a citation to the volume and page number of the record where the matter
appears.” We will generally disregard facts and arguments not supported by adequate
citations to the record. (Provost v. Regents of University of California (2011) 201
Cal.App.4th 1289, 1294.) Moreover, we do not consider any claims not included under a
separate heading or subheading summarizing the argument. (Cal. Rules of Court, rule
8.204(a)(1)(B); Evans v. CenterStone (2005) 134 Cal.App.4th 151, 160.)


                        FACTS AND PROCEDURAL HISTORY


              According to the respondents‟ brief, in a 93-page complaint plaintiffs sued
defendants, among others, for fraudulent concealment, intentional and negligent
misrepresentation, invasion of privacy, violation of the California Financial Information
Privacy Act (Fin. Code, § 4050 et seq.) and Civil Code section 1798.82, unfair
competition, rescission based on fraud, and “conspiracy,” seeking damages, restitution,
and injunctive relief. Subsequently plaintiffs filed a 110-page first amended complaint
(FAC), adding other parties as defendants and eliminating the causes of action for
statutory violations and unfair competition.
              Defendants‟ demurrer to the FAC was sustained with leave to amend as to
the fraudulent concealment, intentional and negligent misrepresentation, and rescission
causes of action and without leave to amend as to the invasion of privacy, conspiracy,
and injunctive relief claims. In the tentative ruling the court put a limit on the second
amended complaint of 12 pages, noting the FAC contained “rhetoric” and “hyperbole[]”
and pointing out “[h]yperbole is never important. It‟s superfluous.” Plaintiffs‟ counsel
asked for “at least . . . 30 pages,” noting he could not replead in 12. He also stated he

                                               3
would not eliminate all the rhetoric and hyperbole, although he would “try to truncate it,”
claiming it was important as part of the fraud claim. He explained he needed additional
pages to allege three causes of action, fraudulent concealment and intentional and
negligent misrepresentation, in the SAC. The court allowed him 15 pages.
              The SAC ultimately contained two causes of action, one for fraudulent
concealment against defendants. The second cause of action, for breach of fiduciary
duty, was against Bayside First Mortgage, Inc., a brokerage company on which plaintiffs
allegedly have relied for 10 years to recommend real estate purchases and loan
refinances.
              In the fraudulent concealment count, plaintiffs plead that despite Stephen‟s
purchase of four pieces of real estate and multiple refinances, and his 25 successful years
in business, he “is not a sophisticated real estate investor or business person” (boldface,
capitalization, and underscoring omitted) because his education stopped after high school.
He claims he has always relied on lenders and brokers, in this case Bayside, who
“matched” him with Countrywide for the past 10 years. He alleges his limited education
and reliance on this “matching” created a “„special relationship‟” that required
Countrywide to disclose everything about its underwriting and business practices that
plaintiffs might think material.
              Plaintiffs allege that in 2004 they purchased their residence in Coto de Caza
for $3.2 million with a $2 million loan from Washington Mutual. In 2005 Bayside
“steer[ed]” them into a refinance of this loan with Countrywide and urged plaintiffs to
agree to a jumbo loan despite the fact it was “clear[]” plaintiffs did not qualify based on
their $170,000 annual income.
              In 2006, in spite of plaintiffs‟ limited income, Bayside encouraged
plaintiffs to enter into three additional jumbo, negative adjustable rate mortgage loans
with Countrywide, refinancing two investment properties in Hawaii and the Coto de Caza
residence, for which plaintiffs were not qualified. Plaintiffs are in default on one of the

                                              4
Hawaii properties and the Coto de Caza residence for the loans “they never wanted, nor
qualified for, [having] concerns from the very beginning of the loan process that they did
NOT have the financial resources sufficient to qualify and successfully maintain
payments” on those notes. Allegedly defendants also refused to modify the two loans.
Plaintiffs plead they were damaged by the loss of down payments and equity in those two
properties plus a decline in their credit rating.
              The court sustained defendants‟ demurrer without leave to amend and
entered judgment against plaintiffs.


                                        DISCUSSION


1. Standard of Review
              An order sustaining a demurrer without leave to amend is reviewed de
novo. (Del Cerro Mobile Estates v. City of Placentia (2011) 197 Cal.App.4th 173, 178.)
“„[W]e treat the demurrer as admitting all material facts properly pleaded, but do not
assume the truth of contentions, deductions or conclusions of law [citations]‟” (National
Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc.
(2009) 171 Cal.App.4th 35, 43) or speculative allegations (Rotolo v. San Jose Sports &
Entertainment, LLC (2007) 151 Cal.App.4th 307, 318).


2. Demurrer to First Amended Complaint
              In one of their main headings plaintiffs state the court abused its discretion
in sustaining the demurrer to the FAC. In the discussion they fail to specify whether they
are referring to the causes of action where the demurrer was sustained without leave to
amend or with leave to amend or both. In fact, they do not challenge the ruling as to the
substance of any of the causes of action. The only claim made as to the first amended
complaint concerns the page limit for the second amended complaint. As such, any

                                               5
contention plaintiffs may have as to the sustaining of the demurrer to any cause of action
in the first amended complaint is forfeited for failure to make reasoned legal argument.
(Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)


3. Page Limit
              Plaintiffs assert the court abused its discretion in fixing a 15-page limit for
the SAC. They requested 30 pages at the hearing on the demurrer but in their brief they
asked that there be no limit, or what they deem “reasonable,” 60 pages.
              Even assuming the page limit was an abuse of discretion, plaintiffs were
not prejudiced. The effect of the limitation was to sustain the demurrer without leave to
amend as to the intentional and negligent misrepresentation and rescission causes of
action. To challenge a demurrer sustained without leave to amend, a plaintiff has the
burden to show how the complaint could have been amended to state a legitimate cause
of action. (Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 320.)
              In plaintiffs‟ discussion of why the court abused its discretion by limiting
the brief to 15 pages, they focus solely on their inability to include the “detailed
discussions, examination and analysis of the historical framework and the genesis and
evolution of the financial collapse of 2007” as a basis for pleading why defendants‟
“actions [were] illegal and fraudulent.” (Boldface omitted.) Plaintiffs say nothing about
what additional facts they would have alleged in the fraudulent concealment or omitted
causes of action. These omissions forfeit any claim of error as to the page limit.


 4. Fraudulent Concealment Cause of Action
              Plaintiffs contend the fraudulent concealment claim was well pleaded based
on defendants‟ alleged duty to disclose the following facts: 1) the appraisals of the
properties were inflated; 2) defendants violated their own underwriting guidelines; 3)
defendants intended to sell plaintiffs‟ mortgages in excess of their actual value, thereby

                                              6
defrauding investors; 4) defendants knew that as a result of the first three acts, the
housing market would be “destroy[ed],” eliminating plaintiffs‟ ability to sell or refinance
two of their properties and “destroying [p]laintiffs‟ equity”; and 5) defendants “bet[]” on
plaintiffs‟ defaults by entering into credit-default swaps that would garner defendants
hundreds of millions of dollars. In addition, plaintiffs allege defendants concealed
general lending information, including use of mortgage pools as collateral, their high
percentage of sub-prime loans, their definition of “„prime‟ loans‟” was below industry
standards, and their practice of “„steering‟ borrowers into [their] loans when other less
expensive alternatives were available.”
              An essential element of a fraudulent concealment cause of action is the
defendant‟s duty to disclose a material fact. (Boschma v. Home Loan Center, Inc. (2011)
198 Cal.App.4th 230, 248.) In Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th
429 the plaintiff borrowers sued a mortgage lender after a foreclosure sale, alleging,
among other things, fraudulent misrepresentation. The plaintiffs had refinanced their
home loan with the defendant, receiving a line of credit as part of the refinance. But their
income was insufficient for them to make the payments. The complaint alleged that
when the defendant approved the loan, it knew or should have known of the plaintiffs‟
inability to service the loan and fraudulently concealed that fact from them. After the
defendant demurred to the complaint, the plaintiffs maintained they could amend to
allege, among other things, that the defendant‟s approval of the loan was a
misrepresentation the defendant believed the plaintiffs could afford the payments.
              On appeal, the court disagreed and further confirmed that “„[a]bsent special
circumstances . . . a loan transaction is at arm‟s length and there is no fiduciary
relationship between the borrower and the lender.‟ [Citations.] [Citation.] A
commercial lender pursues its own economic interest in lending money. [Citation.]”
(Perlas v. GMAC Mortgage, LLC, supra, 187 Cal.App.4th at p. 436.)



                                              7
              In Bank of America v. Superior Court (2010) 198 Cal.App.4th 862, the
plaintiffs sued for fraudulent concealment, alleging the lender failed to disclose the loan it
was making to the borrowers was part of a huge scheme to defraud its investors because
it was offering to them pooled mortgages at inflated amounts, knowing this would cause
the borrowers to lose their equity and substantially harm their credit ratings. The lender‟s
actions destroyed home values. The court ruled that, although the lender “had a duty to
refrain from committing fraud, it had no independent duty to disclose to its borrowers its
alleged intent to defraud its investors.” (Id. at pp. 872-873.)
              Plaintiffs argue these cases do not apply because of the allegations of the
credit default swaps and “steering” of loans. But they have not shown why defendants
had a duty to reveal this information.
              Plaintiffs also argue there is a fiduciary duty here, giving the parties more
than a normal borrower-lender relationship. They allege Stephen is not a sophisticated
businessman and has always relied on brokers and lenders, here, Bayside and its alleged
business partner Countrywide. Plaintiffs point to three letters they received from
Countrywide after they submitted an application to refinance, where Countrywide
referred to Bayside as its business partner. As a result, they allege, Countrywide had a
duty to disclose everything about its underwriting and business practices that plaintiffs
might think material. But an allegation of “special relationship” with defendants does not
make it so. This is not a fact but a contention or a conclusion that we are not bound to
accept as true.
              We likewise reject plaintiffs‟ argument defendants owe a fiduciary duty
because a “borrower almost totally relies on what the [l]ender is offering as a fair and
reasonable offer” and “[m]any borrowers have very little or even NO knowledge of loan
terms and conditions and blindly sign whatever documents are placed in front of
them . . . .” This is not alleged in the SAC and even if it were, again, it is merely a
contention and speculative at that.

                                              8
              Further, plaintiffs cite no cases imposing a duty on lenders to disclose “any
and all facts about [a lender‟s] loan underwriting and business practices” that a borrower
“might” believe are material. This suggested duty is exceptionally broad and ill-defined,
which likely would lead to lenders‟ inability to discern its duties and cause additional
turmoil in the financial sector. This does not serve any public policy. In sum, plaintiffs
have not alleged and cannot allege a duty to disclose.
              Another element of a fraudulent concealment cause of action is damage due
to the concealment. (Boschma v. Home Loan Center, Inc., supra, 198 Cal.App.4th at p.
248.) Plaintiffs plead they only had an income of $170,000 per year and no other assets
but they took on debt of over $1.5 million. If they were damaged it was not due to
concealment of any facts. It was because they entered into the loans without the income
to pay for them. Plaintiffs plead they had “obvious financial limitations” at the time the
three loans were made. They knew their own income and defendants did not conceal it
from them. So whatever other information defendants may have concealed, the
concealment did not cause plaintiffs‟ damages as a matter of law.
              If the court sustains a demurrer without leave to amend, on appeal plaintiff
has the burden to demonstrate “there is a reasonable possibility the defect in the pleading
can be cured by amendment. [Citation.] „“. . . Plaintiff must show in what manner he
can amend his complaint and how that amendment will change the legal effect of his
pleading. . . .” [Citation.]‟ [Citation.]” (Palm Springs Tennis Club v. Rangel (1999) 73
Cal.App.4th 1, 7-8.) Although plaintiffs make a general reference to amendment, the vast
majority of their argument concerns why the allegations in the SAC were sufficient. The
only additional facts they suggest they could plead are the specifics of who allegedly
concealed facts. But these are not sufficient to cure the cause of action because the
defects are not factual. Thus, plaintiffs have not met their burden to show they can
amend.



                                             9
                                   DISPOSITION


            The judgment is affirmed. Defendants are entitled to costs on appeal.




                                              THOMPSON, J.

WE CONCUR:



MOORE, ACTING P. J.



FYBEL, J.




                                         10
