Henry v. J.P. Morgan Chase Bank CA2/4

Filed 4/16/14 Henry v. J.P. Morgan Chase Bank CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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

SECOND APPELLATE DISTRICT

DIVISION FOUR

SUSAN HENRY et al., B249535
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. BC471448)

v.

J.P. MORGAN CHASE BANK et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County,
Terry A. Green, Judge. Affirmed.
Law Offices of Thomas W. Gillen, Thomas W. Gillen; Law Offices of
Lenore Albert and Lenore Albert for Plaintiffs and Appellants.
Keesal, Young & Logan, Elizabeth P. Beazley and Tara B. Voss for
Defendants and Respondents.
 Appellants Susan and Randy Henry appeal the judgment entered after the
trial court sustained a demurrer without leave to amend to their first amended
complaint (FAC) asserting claims for fraud, unfair competition, and declaratory
relief against various parties involved in the lending transactions through which
appellants purchased their home. Based on independent review, we conclude the
FAC failed to state a cognizable claim and that there is no reasonable possibility
that its defects could be cured by amendment. Accordingly, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND
A. Background Facts
The essential background facts are not in dispute. In 2007, appellants
purchased a Northridge home for $687,500. The purchase was financed with two
loans: one for $550,000 and the other for $103,125, each secured by a deed of
trust.1 Bear Stearns Residential Mortgage Corporation (Bear Stearns) was the
lender.2 The larger of the two loans was an option adjustable rate mortgage or
“option ARM.”3

1
Appellants paid approximately $60,000 cash out of pocket.
2
Respondent J.P. Morgan Chase (Chase) was alleged to be the owner of Bear
Stearns. Respondent California Reconveyance Company was alleged to be trustee on the
deeds of trust securing the property. Respondent Mortgage Electronic Registration
Systems, Inc. (MERS) was an alleged nominee of Chase. Respondent Wells Fargo Bank
N.A. allegedly claimed a beneficial interest in the property.
3
In their brief, appellants described the larger loan as a “thirty-year ARM.”
However, in their complaint and amended complaint they alleged that despite regular
payments, the balance due on the loan went up. This is characteristic of an option ARM,
a type of loan which not only has an adjustable interest rate, but also gives the borrower
the option of making a monthly payment less than the amount necessary to pay the
interest accruing on the loan principal for a certain number of years. (See Boschma v.
Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 234 (Boschma) [“[A] borrower
who elects to make only the scheduled payment during the initial years of [an] Option
(Fn. continued on next page.)

2
 On July 5, 2011, the trustee commenced a non-judicial foreclosure,
recording a notice of default and election to sell under the deed of trust securing
the larger of the loans with the Los Angeles County Recorder’s Office. On the
same date, the beneficial interest under the deed of trust was assigned to Wells
Fargo and a substitution of trustee recorded. In November 2011, the property was
sold to Wells Fargo.

B. Appellants’ Complaint
In October 2011, while the foreclosure was pending, appellants filed the
underlying complaint. The complaint contained a lengthy discussion of the factors
that contributed to the recent financial crisis and collapse of the housing market,
including the decision to compile pools of subprime loans and market them to
investors. The complaint quoted various politicians and other public officials
concerning the need to increase regulation to reduce the systemic risk and ensure
that the housing market remained strong. The complaint asserted claims for fraud,
declaratory relief/accounting, breach of contract, failure to comply with the statutes
regulating foreclosure, and unfair competition in violation of Business and
Professions Code section 17200 (section 17200). Respondents demurred,
contending among other things that the cause of action for fraud had been pled
with insufficiently specificity. Days before the demurrer was to be heard,
appellants filed the FAC.
The FAC reiterated the original complaint’s recitations of the factors
contributing to the financial crisis. The FAC omitted several causes of action pled

ARM owes more to the lender than he or she did on the date the loan was made. After an
initial period of several years . . . , a borrower’s payment schedule then recasts to require
a minimum monthly payment that amortizes the loan.”].)

3
in the original complaint, leaving fraud, unfair competition in violation of section
17200, and declaratory relief. The first cause of action for fraud alleged that “[i]n
2007, the duly authorized directors, officers, brokers, agents, [and] appraiser of
defendants Chase Bank (Bear Stearns) and Does 1-10 . . . made the following
representation to [appellants]:[4] [¶] (a) The current Market Value of the
Northridge Residence was $687,500 and; [¶] (b) By financing the major portion of
its purchase price with an ARM loan, [appellants] could keep the near term
monthly payments down, obtain several years of appreciation in the value of the
home, and sell or refinance the home at an appreciated value before having to pay
the much higher ARM payment which would be required beginning September
2011 . . . .” (Caps omitted.) The FAC went on to allege that at the time the
representations were made, these respondents “knew that the $687,500 appraisal of
the Northridge Residence was highly and outrageously speculative, and that this
loan was not in the best interests of [appellants], but rather in the best interest of
defendants . . . , and [these respondents] also knew . . . and or had constructive
notice . . . that the real estate market was in a speculative spiral.” These
respondents allegedly withheld disclosing “the speculative nature of the existing
and future values of the real property which were the direct result of the financial
institutions in creating and marketing [securitized subprime loans or loan pools].”
The FAC further alleged that the representations were false, that the persons
making the representations knew they were false, and that the representations were
made with the intent to induce appellants to enter into the loans.

4
Elsewhere the FAC alleged that the representations were made by these
respondents’ “Lending Personnel.” Although the fraud cause of action named “[a]ll
[d]efendants,” it did not identify any misrepresentations made by the agents of other
defendants.

4
 In the second cause of action for unfair competition in violation of section
17200, the FAC re-alleged the representations set forth above, but attributed them
to the lending personnel of all respondents. It asserted that the acts of
“misrepresenting the true value of [appellants’] home and luring [appellants] into
[an] expensive, negative ARM loan with the promise of a fixed fully amortized
loan in three years” were fraudulent business practices or acts prohibited by section
17200. The second cause of action further alleged that the act of “approving the
two loans for a total of $653,125 without regard to the actual fair market value of
the Northridge Residence” was a wrongful act. (Caps omitted.)
In the third cause of action for declaratory relief, appellants alleged they
were entitled to relief under a consent judgment entered in the United States
District Court for the District of Columbia and a national settlement signed by
multiple lenders, including Chase and Wells Fargo, which allegedly required
lenders to “refinance loans applicable under the specific terms of the Settlement,”
“meet certain loan modification, refinancing, or principal reduction criteria
outlined specifically in the Settlement and, in turn, credit such loan modification,
refinancing, or principal reduction to its specified quota-for-credit transfer formula
detailed in the Settlement with a specified timeline for each such modification,
refinancing, or principal reduction . . . no later than three years from the date of
execution of the consent judgment[/]Settlement date.”

C. Respondents’ Demurrer
Respondents demurred to the FAC. They contended the first cause of action
for fraud had been pled with insufficient specificity and that the representations set
forth were not actionable. They contended that the second cause of action for
unfair competition failed to identify a business practice that was unfair, fraudulent

5
or unlawful. Finally, they contended the third cause of action for declaratory relief
did not clearly identify any actual controversy.
In their opposition, appellants argued that the lack of specificity was
justified because “[the] borrower who has limited contact with the various agents
of an institution several years prior is more likely to remember those persons based
on the positions they occupied and the roles they played in the transaction rather
than by their names,” and that respondents “possess records . . . that will indicate
the identities of those persons involved in the transactions with [appellants].”
Appellants further alleged that the FAC asserted facts sufficient to set forth a claim
for fraudulent concealment of the following facts: (1) “the method for appraising
the valuation of the property was highly speculative”; (2) “the stated amount of the
monthly payment for the ARM loan would increase substantially”; and (3) “the
two loans included a negative amortizing feature, meaning that the more plaintiffs
paid, the more they owe.” (Caps omitted.) Appellants also contended that
sufficient facts had been alleged with respect to the unfair competition and
declaratory relief causes of action. The opposition did not set forth any manner in
which the FAC could be further amended to supplement any of the causes of
action.
The trial court sustained the demurrer without leave to amend. Judgment
was entered. This appeal followed.

DISCUSSION
A. Standard of Review
“‘A demurrer tests the legal sufficiency of the complaint . . . .’ [Citations.]
On appeal from a dismissal after an order sustaining a demurrer, we review the
order de novo, exercising our independent judgment about whether the complaint
states a cause of action as a matter of law. [Citations.] When the trial court
6
sustains a demurrer without leave to amend, we must also consider whether the
complaint might state a cause of action if a defect could reasonably be cured by
amendment. If the defect can be cured, then the judgment of dismissal must be
reversed to allow the plaintiff an opportunity to do so.” (Flying Dutchman Park,
Inc. v. City and County of San Francisco (2001) 93 Cal.App.4th 1129, 1134;
accord, Boschma, supra, 198 Cal.App.4th at p. 243.) Once the trial court sustains a
demurrer without leave to amend, the plaintiff’s burden on appeal is to demonstrate
“there is a reasonable possibility the defect in the pleading can be cured by
amendment. [Citation.]” “‘“. . . [The] [p]laintiff 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.)

B. Fraud
Appellants contend that liberally construed, the FAC sufficiently alleges a
fraud claim based on either affirmative misrepresentation or negative concealment.
For the reasons discussed, we disagree.

1. Affirmative Misrepresentation
To establish a claim for affirmative fraudulent misrepresentation, the
plaintiff must plead and prove: “‘(1) the defendant represented to the plaintiff that
an important fact was true; (2) that representation was false; (3) the defendant
knew that the representation was false when the defendant made it, or the
defendant made the representation recklessly and without regard for its truth; (4)
the defendant intended that the plaintiff rely on the representation; (5) the plaintiff
reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the
plaintiff’s reliance on the defendant’s representation was a substantial factor in
7
causing that harm to the plaintiff. [Citations.]’ [Citation.]” (Perlas v. GMAC
Mortgage, LLC (2010) 187 Cal.App.4th 429, 434, italics deleted, quoting
Manderville v. PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486, 1498.) Each of
the elements “must be pleaded with specificity rather than with ‘“general and
conclusory”’ allegations.” (Boschma, supra, 198 Cal.App.4th at p. 248, quoting
Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.)
Courts enforce the specificity requirement for two purposes: “The first
purpose is to give notice to the defendant with sufficiently definite charges that the
defendant can meet them. [Citation.] The second is to permit a court to weed out
meritless fraud claims on the basis of the pleadings; thus, ‘the pleading should be
sufficient “‘to enable the court to determine whether, on the facts pleaded, there is
any foundation, prima facie at least, for the charge of fraud.’”’” (West v.
JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793, quoting Committee
on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216-
217, superseded by statute on another ground as stated in Californians for
Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227.) Accordingly, the
normal policy of liberally construing pleadings against a demurrer cannot be
invoked to sustain an insufficiently specific fraud cause of action. (Lazar v.
Superior Court (1996) 12 Cal.4th 631, 645.)
As a general rule, “[t]he specificity requirement means a plaintiff must
allege facts showing how, when, where, to whom, and by what means the
representations were made, and, in the case of a corporate defendant, the plaintiff
must allege the names of the persons who made the representations, their authority
to speak on behalf of the corporation, to whom they spoke, what they said or
wrote, and when the representation was made.” (West v. JPMorgan Chase Bank,
N.A., supra, 214 Cal.App.4th at p. 793.) However, the rule may be relaxed and
less specificity may be required when “‘it appears from the nature of the
8
allegations that the defendant must necessarily possess full information concerning
the facts of the controversy.’” (Committee on Children’s Television, Inc. v.
General Foods Corp., supra, 35 Cal.3d at p. 217; see Tarmann v. State Farm Mut.
Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158 [“[T]he requirement of specificity is
relaxed when the allegations indicate that ‘the defendant must necessarily possess
full information concerning the facts of the controversy’ [citations] or ‘when the
facts lie more in the knowledge of the opposite party[.]’”].) For example, a
plaintiff could not be expected to know the precise identity of the person making
an alleged misrepresentation if it was made over the phone by an anonymous
employee or in an unsigned document. In that situation, the plaintiff must allege as
much information as he or she can, such as the date of the conversation in which
the representation was made, the title of the person making the representation and
the name of the department in which the person worked. (See, e.g., West v.
JPMorgan Chase Bank, N.A., supra, 214 Cal.App.4th at pp. 793-794 [complaint
sufficiently identified persons making representations on defendant’s behalf where
plaintiff alleged that on one date, she spoke with “a supervisor” in defendant’s
“loan modification department” and on another date, with another employee in that
department; fraud claim also supported by letter from defendant, attached to the
complaint, bearing no signature]; Boschma, supra, 198 Cal.App.4th 248 [fraud
pled with sufficient specificity where plaintiffs attached documents containing
alleged misrepresentations, although precise identities of employees responsible
for preparing documents was not clear].)
Here, appellants alleged that “lending personnel” of respondents Bear
Stearns and/or Chase made false representations regarding the fair market value of
the property, the availability of future refinancing, and the appreciation that could
be expected. They specified neither dates nor approximate dates on which the
representations were made. Nor did they specify the circumstances surrounding
9
the conversations that led to the representations, such as whether they were made
in person or telephonically. They also failed to provide any information that would
assist in identifying the speakers, such as the location of the departments or
branches in which they worked or the positions they held. Respondents would be
unable to investigate the allegations or take any meaningful steps to prepare a
defense. Reviewing the allegations, we are unable to determine whether a
sufficient foundation exists to assert a fraud claim against the named defendants.
The FAC was deficient for failing to allege fraud with sufficient specificity.
Moreover, to the extent appellants sought to base their claim of fraud on the
lender’s appraisal of the property’s fair market value, it has long been held that an
appraisal commissioned by the lender in the course and scope of processing a loan
is obtained solely “to protect [the lender’s] interest by satisfying it that the property
provide[s] adequate security for the loan” and that “it is not reasonably foreseeable
that a borrower will be influenced to his or her detriment by an appraisal prepared
by the lender for its own benefit . . . .” (Nymark v. Heart Fed. Savings & Loan
Assn. (1991) 231 Cal.App.3d 1089, 1096, 1099.) As the court explained in
Nymark: “Plaintiff [the home purchaser] was in as good a position as, if not better
position than, defendant [the lender] to know the value and condition of the
property. One who seeks financing to purchase real property has many means
available to assess the property’s value and condition, including comparable sales,
advice from a realtor, independent appraisal, contractors’ inspections, personal
observation and opinion, and the like. . . . Stated another way, the borrower should
be expected to know that the appraisal is intended for the lender’s benefit to assist
it in determining whether to make the loan, and not for the purpose of ensuring that
the borrower has made a good bargain, i.e., not to insure the success of the
investment.” (Id. at p. 1099.) Accordingly, appellants’ attempt to rely on the
lender’s appraisal to support their fraud claim is unwarranted.
10
 Finally, “[a]n essential element of a cause of action for negligent
misrepresentation is that the defendant must have made a misrepresentation as to a
past or existing material fact.” (Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816,
835.) “‘[Predictions] as to future events . . . are deemed opinions, and not
actionable fraud.’” (Nibbi Brothers. v. Home Federal Sav. & Loan Assn. (1988)
205 Cal.App.3d 1415, 1423, quoting 4 Witkin, Summary of Cal. Law (8th ed.
1974) Torts, § 447, p. 2712; accord, Cansino v. Bank of America (2014) ___
Cal.App.4th ___ [2014 Cal.App. LEXIS 277].) To the extent appellants based
their claim on the alleged statement that property values would rise in the future,
they failed to allege an actionable misrepresentation.

2. Fraudulent Concealment
Apparently cognizant of the weaknesses in their fraud claim, appellants
contend the allegations of the FAC can be read as asserting a claim for fraudulent
concealment.5 On appeal, they contend the FAC can be read to allege (1)
“[r]espondents knew that the [fair market value] for the Property was lower than
the $687,500 appraised value and that the appraisal was based on unreliable and
highly speculative methodology”; (2) “[r]espondents knew that if [a]ppellants
accepted the Loans based on the appraised value and the proposed purchase price
that [a]ppellants would realize immediate and substantial negative equity”; (3)

5
The elements of a cause of action based on fraudulent concealment are: “‘(1) the
defendant must have concealed or suppressed a material fact, (2) the defendant must have
been under a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4)
the plaintiff must have been unaware of the fact and would not have acted as he did if he
had known of the concealed or suppressed fact, and (5) as a result of the concealment or
suppression of the fact, the plaintiff must have sustained damage.’” (Boschma, supra,
198 Cal.App.4th at p. 248, quoting Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.)

11
“[r]espondents . . . knew that the appraised value was not a valid or useful
indication of the rate of appreciation that could be expected”; and (4)
“[r]espondents knew that based on the inflated appraisal and the proposed
unfavorable loan terms, subsequent refinancing of the Property would not be
available.”6
Appellants’ attempt to recast the affirmative misrepresentation claim as one
for failure to disclose or fraudulent concealment is unavailing. Each of the alleged
concealments of material fact is dependent on the reasonableness of appellants’
reliance on the lenders’ appraisal, rather than their own independent investigation,
to establish the fair market value of the property at the time of the sale. As
discussed above, under accepted California authority, a buyer’s reliance on the
lender’s appraisal of the subject property is unreasonable as a matter of law.
More fundamentally, appellants’ contentions concerning the viability of a
fraudulent concealment claim is the belief that a lender has a duty to look out for
the borrower and warn him or her when a property may not be a good investment.
This is contrary to California law, which imposes no such paternalistic duty on a
lender. (See e.g., Bily v. Arthur Young & Company (1992) 3 Cal.4th 370, 403 [“As
a matter of economic and social policy, [investors] should be encouraged to rely on
their own prudence, diligence, and contracting power, as well as other
informational tools. This kind of self-reliance promotes sound investment and
credit practices and discourages the careless use of monetary resources.”]; Nymark

6
This is in contrast to the contentions in appellants’ opposition to the demurrer that
a claim for fraudulent concealment was supported by respondents’ failure to inform
appellants that the payments on the loan would increase substantially and that the loans
had negative amortizing features. Any contention that such information was withheld
from appellants was contradicted by the FAC itself, which alleged that appellants were
told they would obtain years of appreciation “before having to pay the much higher ARM
payment which would be required beginning September 2011.”

12
v. Heart Fed. Savings & Loan Assn., supra, 231 Cal.App.3d at p. 1096 [“[A]s a
general rule, 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
conventional role as a mere lender of money.”]; Das v. Bank of America, N.A.
(2010) 186 Cal.App.4th 727, 740, quoting Sierra-Bay Fed. Land Bank Assn. v.
Superior Court (1991) 227 Cal.App.3d 318, 334 [“‘[A] commercial lender is not to
be regarded as the guarantor of a borrower’s success and is not liable for the
hardships which may befall a borrower.’”]; Oaks Management Corporation v.
Superior Court (2006) 145 Cal.App.4th 453, 466 [“[A]bsent special circumstances
. . . a loan transaction is at arm’s length and there is no fiduciary relationship
between the borrower and lender.”]; Wagner v. Benson (1980) 101 Cal.App.3d 27,
35 [where plaintiffs, self-described “inexperienced investors,” alleged they
suffered substantial harm from bank’s negligence in loaning money to them for “a
risky venture,” court held bank owed no duty of care in approving their loan].)7
This principle is illustrated by Perlas v. GMAC Mortgage, LLC, supra, 187
Cal.App.4th 429, in which the plaintiff borrowers alleged that they relied on the
lender’s determination that they qualified for a loan as an implicit representation
that they could afford the loan based on the income information provided. (Id. at
p. 434.) In holding that plaintiffs would be unable to amend to state a claim for
fraudulent misrepresentation or fraudulent concealment, the court stated:

7
Appellants’ attempt to rely on OCM Principal Opportunities Fund, L.P. v. CIBC
World Markets Corp. (2007) 157 Cal.App.4th 835 to support the existence of a duty of
care is misplaced. The defendant in that case was engaged in investment banking,
overseeing the creation of an offering memorandum for unregistered promissory notes,
acting as an initial purchaser, and reselling the notes to qualified buyers. (Id. at pp. 843,
847.) We held that the defendant had a duty to disclose material facts, such as the issuing
entity’s poor third quarter and inflated financial estimates, to purchasers of the registered
securities that replaced the notes. (Id. at pp. 859-862.) The defendant there was not
acting in a conventional role as a mere lender of money.

13
“[Plaintiffs] appear to conflate loan qualification and loan affordability. In effect,
[plaintiffs] argue that they were entitled to rely upon [the lender’s] determination
that they qualified for the loans in order to decide if they could afford the loans.
[Plaintiffs] cite no authority for this proposition, and it ignores the nature of the
lender-borrower relationship. . . . A lender is under no duty ‘to determine the
borrower’s ability to repay the loan . . . The lender’s efforts to determine the
creditworthiness and ability to repay by a borrower are for the lender’s protection,
not the borrower’s.’ (Renteria v. U.S. (D.Ariz. 2006) 452 F.Supp.2d 910, 922-923
[borrowers rely on their own judgment and risk assessment in deciding whether to
accept the loan] . . . .)” (Id. at p. 436, italics deleted.)
As the FAC asserted no cognizable claim for fraud under either an
affirmative misrepresentation or a fraudulent concealment theory, the demurrer to
that cause of action was property sustained. Ordinarily, a plaintiff would be given
at least one chance to amend to correct the defects. Here, however, appellants
were on notice of the deficiencies of the fraud claim in their original complaint and
attempted to amend the allegations in the FAC. As the deficiencies remained after
the amendment and appellants fail to show any manner in which the FAC could be
amended to cure the defects, the demurrer was properly sustained without leave to
amend.

C. Unfair Competition in Violation of Section 17200
Section 17200 et seq., California’s unfair competition law, has as its “major
purpose ‘the preservation of fair business competition.’” (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th
163, 180 (Cel-Tech), quoting Barquis v. Merchants Collection Assn. (1972) 7
Cal.3d 94, 110.) It does not proscribe specific acts, but “broadly prohibits ‘unfair
competition,’ meaning ‘any unlawful, unfair or fraudulent business act or practice
14
and unfair, deceptive, untrue or misleading advertising.’” (Dey v. Continental
Central Credit (2008) 170 Cal.App.4th 721, 726, quoting Bus. & Prof. Code,
§ 17200.) Because it is written in the disjunctive, “‘it establishes three varieties of
unfair competition -- acts or practices which are [(1)] unlawful, or [(2)] unfair, or
([3]) fraudulent. . . .’” (Cel-Tech, supra, at p. 180.) “By proscribing ‘any
unlawful’ business practice, ‘section 17200 “borrows” violations of other laws and
treats them as unlawful practices’ that the unfair competition law makes
independently actionable.” (Ibid.) For an action to constitute an unfair business
practice, “‘the public policy which is a predicate to the action must be “tethered” to
specific constitutional, statutory or regulatory provisions.’” (Scripps Clinic v.
Superior Court (2003) 108 Cal.App.4th 917, 940.)
In the FAC, appellants contended that respondents had engaged in unfair
competition by making fraudulent representations regarding the fair market value
of the property, the availability of future refinancing, and the appreciation that
could be expected. On appeal, they abandon that contention and assert for the first
time that respondents engaged in unfair competition by violating federal
regulations, specifically title 12 of the Code of Federal Regulations (12 C.F.R.),
part 34, which requires lenders to obtain appraisals for real estate related financial
transactions unless certain exceptions apply (12 C.F.R. § 34.43), and further
requires that such appraisals “[c]onform to generally accepted appraisal standards
as evidenced by the Uniform Standards of Professional Appraisal Practice
(USPAP) promulgated by the Appraisal Standards Board of the Appraisal
Foundation . . . unless principles of safe and sound banking require compliance
with stricter standards . . . .” (12 C.F.R. § 34.44(a); see also § 34.42(g) [defining
“market value” as “the most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the buyer

15
and seller each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus”].)
Preliminarily, we note that any attempt to assert a section 17200 claim
predicated on violations of federal banking regulations is likely preempted by
federal law. (See Reed v. Wells Fargo Bank (N.D.Cal., May 11, 2011) 2011 U.S.
Dist. LEXIS 65608 at *12 and cases cited therein.) We need not resolve the
preemption issue, however, as appellants failed to adequately plead an unfair
competition claim based on any alleged violation of part 34 of 12 C.F.R. (See
Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 857 [demurrer to unfair
competition claim properly sustained where complaint identified no particular
section of pertinent statutory scheme and failed to describe with reasonable
particularity facts supporting a violation].) Nor have they identified how the
defects in the pleading could be cured.
Appellants contend that respondents utilized an appraisal report prepared in
a manner not in conformance with USPAP standards. They do not state what
USPAP standards were violated, how they were violated, or how the lender would
have known they were violated, and we will not engage in speculation to cure this
omission.8 Their brief suggests that the fair market value was exaggerated by the
appraiser, but the FAC acknowledged that conditions in the financial world had
caused the price of real property to be inflated at the time they purchased their
home. Indeed, it was appellants who contracted with the sellers to purchase the

8
We note that even if an unfair competition claim predicated on violation of part 34
of 12 C.F.R. had been adequately pled, the only defendant implicated would have been
Bear Stearns, the lender, and possibly Chase, assuming it is somehow responsible for
Bear Stearns’ liabilities.

16
home for $687,500.9 The failure to foresee the collapse of the real estate market
does not constitute an unfair business practice or a violation of federal regulations.
The demurrer to the second cause of action for unfair competition was properly
sustained.10

D. Declaratory Relief
Section 1060 of the Code of Civil Procedure authorizes a party “who desires
a declaration of his or her rights or duties with respect to another” to bring an
original action “‘for a declaration of his or her rights and duties,’” and permits the
court to issue “‘a binding declaration of such rights or duties.’” “‘An essential
requirement of the procedure . . . is that there be a real controversy . . . between
parties, involving justiciable questions relating to their rights and obligations.
Facts and not conclusions of law must be pleaded which show a controversy of
concrete actuality as opposed to one which is merely academic or hypothetical
. . . .’” (Jessin v. County of Shasta (1969) 274 Cal.App.2d 737, 743, quoting
Wilson v. Transit Authority of Sacramento (1962) 199 Cal.App.2d 716, 722.)

9
Generally, before a buyer approaches a lender for a loan, the price or value of the
property is determined by negotiations between the buyer and seller, both assisted by
realtors, based on comparative sales and any other relevant conditions that prevail at the
time. Appellants do not suggest that any different procedure was followed in their case.
10
At oral argument, counsel for appellants raised legal and factual theories neither
presented to the trial court nor discussed in the briefs. We need not consider new matters
presented after the normal briefing process has concluded. (Japan Line, Ltd. v. County of
Los Angeles (1977) 20 Cal.3d 180, 184, revd. on other grounds (1979) 441 U.S. 434;
accord, In re Estate of McDaniel (2008) 161 Cal.App.4th 458, 463 [“‘It is a clearly
understood principle of appellate review . . . that contentions raised for the first time at
oral argument are disfavored and may be rejected solely on the ground of their
untimeliness.’”].) In any event, counsel did not clearly articulate any theory to support
appellants’ ability to assert a cognizable cause of action.

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 In the third cause of action for declaratory relief, appellants alleged that a
consent judgment entered in the United States District Court for the District of
Columbia and a national settlement signed by multiple lenders, including Chase
and Wells Fargo, required lenders to “refinance loans applicable under the specific
terms of the Settlement,” “meet certain loan modification, refinancing, or principal
reduction criteria outlined specifically in the Settlement and, in turn, credit such
loan modification, refinancing, or principal reduction to its specified quota-for-
credit transfer formula detailed in the Settlement with a specified timeline for each
such modification, refinancing, or principal reduction . . . no later than three years
from the date of execution of the consent judgment[/]Settlement date.” They did
not claim to be parties to the consent judgment or the settlement or allege how
either applied to their situation.11 In their brief on appeal, they state “[t]he course
of events leading to the eventual foreclosure and sale of [a]ppellants’ Property
creates a genuine legal controversy over whether or not [r]espondents have
complied with their legal obligations under the Consent Judgment and what relief
[a]ppellants may be entitled to as a result.” These vague and conclusory
allegations do not support their claim to entitlement to declaratory relief.
Respondents’ demurrer was properly sustained as to the declaratory relief cause of
action.

11
The consent judgment was entered in April 2012, months after appellants’ home
had been sold through foreclosure.

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 DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

MANELLA, J.

We concur:

EPSTEIN, P. J.

EDMON, J.*

*Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant
to article VI, section 6 of the California Constitution.

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