Kouzine v. Countrywide Home Loans CA2/8

Filed 4/30/14 Kouzine v. Countrywide Home Loans CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 EIGHT

ANATOLI KOUZINE, B249022

Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC485902)
v.

COUNTRYWIDE HOME LOANS, INC.
et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Los Angeles County.
Elizabeth Allen White, Judge. Affirmed in part, reversed and remanded with directions.

Ronald D. Tym; The Law Offices of Uri Litvak and Uri Litvak for Plaintiff and
Appellant.
Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendants and
Respondents.

____________________________________
 This appeal arises from an action alleging wrongs by a loan broker and a bank in
connection with a residential loan transaction. The defendant bank filed a demurrer and
conjoint motion for judgment on the pleadings which together addressed all of the causes
of action in plaintiff’s second amended complaint. The trial court sustained the demurrer
and granted the motion for judgment on the pleadings, without leave to amend. Plaintiff
appeals from the ensuing judgment of dismissal. We reverse the judgment, and remand
the case with directions to the trial court to deny the bank’s motion for judgment on the
pleadings as to plaintiff’s cause of action alleging violation of the Unfair Competition
Law (UCL; see Bus. & Prof. Code, § 17200 et seq.) The trial court’s order sustaining the
bank’s demurrer is affirmed.
FACTS
As always in the context of reviewing a demurrer we treat the facts alleged in the
operative pleading to be true. (Moore v. Regents of University of California (1990)
51 Cal.3d 120, 125.) We may also consider matters that are judicially noticed.
(Serrano v. Priest (1971) 5 Cal.3d 584, 591.) We review the granting of a motion for
judgment on the pleadings in much the same fashion, treating as true all properly pleaded
facts. (Soco West, Inc. v. California Environmental Protection Agency (2013) 213
Cal.App.4th 1511, 1514.) Examined in light of these rules, the facts in this case are as
follows.
Background
In 2005, plaintiff and appellant Anatoli Kouzine owned residential real property
encumbered by a short-term construction loan with an interest rate of 5.5 percent per
annum. At that time, Kouzine’s construction loan was about to mature, and he knew
interest rates were “headed upwards,” so he wanted to refinance into a long-term, fixed
interest rate loan. Kouzine had “substantial income” and a “very high credit score.”
He was “qualified as a prime borrower.” But he was a Russian immigrant and not

2
proficient at reading English,1 and did not have much experience in mortgage loan
financing. Due to these factors, Kouzine engaged defendant Chandler Funding Group,
Inc. (not a party to the current appeal) to act as his mortgage broker to assist him in
understanding any loan financing and loan documents.2
Chandler arranged for Countrywide Home Loans, Inc. to make a loan to Kouzine.
Based on a “Good Faith Estimate”3 that Kouzine received from Countrywide in February
2006, and representations from Chandler (Latt) and Brian Whitcanack at Countrywide,
Kouzine “was led to believe that he was going to receive” a 30-year, fixed interest rate
loan from Countrywide, with an interest rate of between 1 to 2 percent per annum.4
The representations by Chandler and Countrywide induced Kouzine to sign loan
documents in March 2006.

1
Specifically, Kouzine alleged he understood English on a sixth grade level.
2
Sheldon Latt of the Chandler firm handled the loan transaction for Kouzine. In his
operative pleading, Kouzine predominantly refers to “Chandler” as the actor in the role of
loan broker. We follow Kouzine’s lead, and our references to Chandler hereafter include
acts and statements by Latt, who is not individually named as a defendant.
3
In general terms, a lender is required by law to provide a good faith estimate to a
borrower which itemizes the fees and costs associated with a loan, e.g.., fees for property
inspections, appraisals, title insurance and other like charges. Kouzine does not allege
what information in the good faith estimate that he received led him to have any beliefs
about the terms of any loan. A copy of the good faith estimate is attached to Kouzine’s
operative pleading. It shows closing costs totaling $4,441. It also shows an “interest
rate” of “1.000%,” with a “term of loan” of “30 years,” and a total monthly loan payment
of $7,949.59.
4
Kouzine’s pleading does not explain how –– accepting as true the pleaded fact that
he knew interest rates were “headed upward” –– it could be that he believed he was going
to be able to replace his then-existing short-term 5.5 percent interest rate loan with a 30-
year fixed interest rate loan at 1 to 2 percent.

3
The Loan Documents and Loan History
Kouzine signed a “Uniform Residential Loan Application”5 for a $2.1 million
loan. The loan application was prepared by Brian Witcanack of Countrywide. The first
section of the loan application signed by Kouzine described the “TYPE OF MORTGAGE
AND TERMS OF LOAN” for which Kouzine was applying. Within this section, a fill-
in-the-blanks line reads as follows:

Interest Rate No. of Months Amortization Fixed Rate Other
2.000% 360 Type:
GPM X NCARM MTA
1mo Intro PO
1yr HPP

In March 2006, Kouzine signed a promissory note6 and deed of trust. Kouzine
also signed an “Adjustable Rate Rider” to the deed of trust. The rider document indicated
that it was amending and supplementing the deed of trust given to secure an “Adjustable
Rate Note” signed by Kouzine. In the middle of the first page of the rider document, the
following language was printed in bold-face, all capital letters: “THE NOTE
CONTAINS PROVISIONS THAT WILL CHANGE THE INTEREST RATE AND THE
MONTHLY PAYMENT. THERE MAY BE A LIMIT ON THE AMOUNT THAT THE

5
The Uniform Residential Loan Application was a standard form of “Freddie Mac,”
the Federal Home Loan Mortgage Corporation.
6
Kouzine’s operative pleading cites an Exhibit C as the promissory note, but the
attached documents are plainly a note related to a prior loan transaction, and not the note
for his March 2006 loan from Countrywide. Other documents (e.g., Exhibit E) that are
attached to Kouzine’s operative pleading, and which plainly do relate to the March 2006
Countrywide loan, refer to an “adjustable rate note.” Kouzine has not attached any such
adjustable rate note in his operative pleading.

4
MONTHLY PAYMENT CAN INCREASE OR DECREASE. . . .” The text of the rider
document included a provision reading as follows: “The interest rate I pay may change
on the first day of May, 2006, and on that day every month thereafter. . . . .”
Kouzine also received a “Truth in Lending Disclosure Statement” around the time
he signed the loan documents. The disclosure statement set forth the following schedule
of monthly payments:

No. of Payments Amount of Payments Payments are due monthly beginning
12 $7,762.01 May 1, 2006
12 $8,344.00 May 1, 2007
12 $8,969.00 May 1, 2008
12 $9,642.00 May 1, 2009
7 $10,365.00 May 1, 2010
18 $18,332.00 December 1, 2010
1 $18,331.00 April 1, 20367

At the time Kouzine signed and received the various loan documents, he relied on
Chandler’s oral representations as to what the loan documents stated. Chandler told
Kouzine that he was receiving a fixed interest rate loan.

7
Although many of the loan documents from Kouzine’s March 2006 loan are
attached to his pleading as exhibits, there is no copy of the Truth in Lending Disclosure
Statement attached as an exhibit. The payment figures stated here are from the text of
Kouzine’s pleading. Either the disclosure statement contained an error, or Kouzine has
incorrectly stated the payment figures that from the disclosure statement, because the
payment figures do not show 360 payments.

5
 As indicated on the face of the loan documents summarized above, the loan that
Kouzine actually received from Countrywide had a higher initial interest rate than the one
to two percent that he had been promised, and had included an adjustable, variable
interest rate, rather than the fixed interest rate that he had been promised.
Chandler (Latt) “acted in concert” with Countrywide in arranging and making the
loan actually made to Kouzine. Countrywide knew that Kouzine was executing loan
documents under the belief that he was receiving a loan with a two percent fixed interest
rate. Countrywide profited from the loan that it actually made to Kouzine because it was
able to sell the loan, which was an “above market rate loan,” in the secondary market at a
premium.
The interest rate on the loan actually made to Kouzine changed after one month,
but his monthly loan payment stayed the same for one year, with negative amortization.
Because the monthly payment did not change, Kouzine had no knowledge that his loan’s
interest rate had changed.
In March 2007, Kouzine learned (from whom is not alleged) that his monthly loan
payment was about to increase. Kouzine made inquiries (to whom is not alleged) why his
monthly loan payments were increasing. Both defendants Chandler (Latt) and Bank of
America (Whitcanack and Pamela Constantino), a successor of defendant Countrywide,
told Kouzine that the payment change was due to the need for a larger escrow for taxes
and insurance, and because the loan was amortizing more quickly than 30 years and the
increased payments were going toward a quicker reduction of principal.
The Litigation
“By virtue of Defendants’ concealment and representations to [Kouzine, he], could
not and did not discover Defendants’ actions until 2009.” In May 2011, Kouzine retained
attorneys to review the loan documents that he executed and received in March 2006.

6
 In June 2012, Kouzine commenced his current action against defendants Bank of
America (nee Countrywide),8 Chandler and others. Kouzine’s operative pleading is his
second amended complaint filed in January 2013. Kouzine’s second amended complaint
alleged five causes of action against The Bank, listed respectively, as follows: rescission
of his loan contract on the ground of fraud in the inducement; fraud; violation of Civil
Code section 2923.1 based on breach of fiduciary duty; violation of the UCL; and
tortious breach of the implied covenant of good faith and fair dealing. The Bank filed a
joint demurrer and motion for judgment on the pleadings. The Bank’s demurrer attacked
the sufficiency of all of Kouzine’s causes of action except for his cause of action alleging
violation of the UCL; The Bank’s motion for judgment on the pleadings challenged
Kouzine’s cause of action under the UCL.9
At a hearing on March 8, 2013, the trial court entered a five-page minute order
sustaining The Bank’s demurrer and granting its motion for judgment on the pleadings.
On April 3, 2013, the court entered a formal order on the demurrer and motion for
judgment on the pleadings, including an order of dismissal.
Kouzine filed a timely notice of appeal.
DISCUSSION
I. Loan Origination –– Rescission, Fraud, and Breach of Fiduciary Duty
Kouzine contends the trial court erred in ruling that his causes of action for
rescission based on fraud in the inducement, fraud, and breach of fiduciary duty were
barred by the statute of limitations. His arguments on appeal as to each cause of action
are premised on the discovery rule employed in determining the date of accrual of a cause
of action. He does not argue on appeal that the running of the limitations period, once

8
We hereafter refer to Countrywide and Bank of America collectively as The Bank.
9
Earlier, the trial court had overruled a demurrer to Kouzine’s UCL cause of action.
An order overruling a demurrer does not necessarily bar a subsequent motion for
judgment on the pleadings on the same grounds. (See, e.g., Pavicich v. Santucci (2000)
85 Cal.App.4th 382, 389, fn. 3; Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d
868, 877.)
7
triggered by the accrual of his causes of action, was tolled for any length of time.
We find no error in the trial court’s ruling.
a. Rescission based on Fraud in the Inducement
It is undisputed that Kouzine and The Bank entered their loan contract in March
2006. The trial court ruled that Kouzine’s cause of action against The Bank for rescission
of their loan contract based on fraud in the inducement accrued on the date of the loan’s
inception. The court reached this conclusion because the terms of the loan documents
were “inconsistent on their face” with the loan that Kouzine had been promised. In other
words, the court ruled that Kouzine knew or should have known, as a matter of law, at the
time he signed the loan documents that he did not receive the fixed interest rate loan that
he had had been promised. In support of its conclusion, the court cited the long-standing
cardinal rule of contract law that a party’s failure to read a contract before signing it is no
defense to the contract’s enforcement. (See Desert Outdoors Advertising v. Superior
Court (2011) 196 Cal.App.4th 866, 872 and cases cited therein.) On appeal, Kouzine
argues this is incorrect because he was “tricked” at the time he signed the loan documents
as to what those documents stated.10
Kouzine’s argument may have legs as to his claims against his own loan broker,
Chandler, but not as to The Bank on his claim for rescission. Kouzine’s argument does
not support a ruling that his cause of action against The Bank for rescission of their loan
contract may ultimately be found –– as a disputed factual issue –– to have been delayed
to a date after the date that he signed the loan contract documents.
It is undisputed that the loan contract between Kouzine and The Bank which he
seeks to undo by his claim for rescission was created by the loan documents he signed,
and Kouzine did not allege that The Bank misrepresented what those loan documents

10
Kouzine’s first argument is that the prescribed statute of limitations under Code of
Civil Procedure section 337(3) for a cause of action for rescission based on fraud in the
inducement is four years, not three years as stated by the trial court. The Bank agrees a
four year limitations period governs, and so do we. Thus, we address the issues raised on
appeal in light of a four-year, not three-year, statute of limitations.
8
stated. Instead, Paragraphs 28, 29 and 30 of Kouzine’s operative pleading exclusively
allege that Chandler misrepresented what the loan documents stated. Accordingly,
whatever other claims that Kouzine may have against The Bank, their loan contract is
what it is for purposes of its rescission, i.e, for undoing the loan contract in total and
returning the parties to their pre-contract positions. Stated in other words, regardless of
what The Bank told Kouzine about what he “was going to get,” he got something quite
different in the end. Kouzine has essentially alleged a species of bait and switch fraud as
to The Bank; he did not allege that The Bank misrepresented the substance of the
switched loan product that it actually delivered to Kouzine.
Given this pleading context, and assuming that Kouzine stated a cause of action
against The Bank for rescission of their loan contract based on a claim of fraud in the
inducement, the cause of action had to accrue as a matter of law on the date the loan
documents were signed, i.e., on the date he got a loan product that was not what he had
been promised by The Bank. This must be true as a matter of law as to The Bank, for
purposes of the undoing of the loan contract, because the face of the loan documents
showed as to The Bank that Kouzine did not get the loan that The Bank had promised
him. Because the loan documents on their face show the loan that Kouzine actually got,
his bait and switch type claim as to the Bank accrued on the date he got a “switched” loan
product. The allegation that Chandler hid the true nature of the loan from Kouzine does
not mean as to The Bank that Kouzine stated a cause of action for getting out their loan
contract that did not accrue until he discovered Chandler’s actions. The focus of the
statute of limitations as to The Bank must be based on Kouzine’s allegations concerning
The Bank.
It cannot be factually disputed that Kouzine began to suffer measurable financial
injury from The Bank’s alleged fraud immediately upon the issuance of Kouzine’s loan
because interest on the principal began being incurred at a considerably higher rate than
the two percent fixed rate which he alleged he had been promised. Further, he
immediately became subject to a variable rate of interest, rather than a fixed interest rate.

9
All of the elements of Kouzine’s cause of action for rescission based on fraud ––
wrongdoing and damages –– were in place in March 2006. Thus, the limitations period
began running. (See Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185,
1192.) Kouzine filed his action against The Bank in June 2012. Kouzine’s operative
complaint, on its face, shows that his cause of action for rescission based on was time-
barred under the applicable four-year statute of limitations unless he pleaded sufficient
facts to invoke the benefit of delayed accrual under the discovery rule.
“‘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. . . . [Citations.]’” (E-Fab, Inc. v. Accountants, Inc. (2007)
153 Cal.App.4th 1308, 1319.) Mere conclusory averments of a date of discovery are not
sufficient; a plaintiff must plead facts showing the time and manner of discovery in order
that a court may determine whether or not the discovery was made at the time alleged.
(Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 442-443.) Also, plaintiffs must
plead facts showing an inability to make earlier discovery because the discovery rule only
delays accrual of a cause of action “‘until the plaintiff discovers, or has reason to
discover, the cause of action. . . . [Citations.] [¶] 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.’” (Doe v. Roman Catholic Bishop of Sacramento (2010)
189 Cal.App.4th 1423, 1431, quoting Fox v. Ethicon Endo-Surgery, Inc. (2005) 35
Cal.4th 797, 806-807; and see e.g., McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 108
[when a person becomes aware of facts which would make a reasonably prudent person
suspicious, he or she has a duty to investigate further and is charged with knowledge of
matters which would have been revealed by such an investigation].)

10
 We agree with The Bank that Kouzine’s second amended complaint alleges little
more than an isolated conclusory statement to the effect that he “did not discover [The
Bank’s] actions until 2009.” There are no facts stating the circumstances of discovery.
We also agree with The Bank that Kouzine’s second amended complaint does not allege
facts explaining why he could not have discovered The Bank’s possible bait and switch
wrongdoing earlier than 2009. The only fact alleged in this regard is that, in March 2007,
he asked The Bank and Chandler why his monthly loan payment was being increased.
This single alleged fact is not sufficient to show that his cause of action for rescission
against The Bank did not accrue in March 2006.
Further, we agree with the trial court’s alternative ruling that Kouzine’s cause of
action for rescission accrued, if not in March 2006, then no later than March 2007, when
he learned that his monthly loan payment was being increased. In this vein, even if we
indulged that Kouzine was excused from even the most cursory, rudimentary review of
his loan documents in March 2006, such laxity cannot be indulged after March 2007.
By his own judicial admission in his pleading, he knew that something was not in sync
with the loan he thought he had obtained – his monthly loan payment was increasing.
Indeed, Kouzine pleaded that his concern prompted him to make an inquiries of Chandler
and The Bank. He was told that the loan was being amortized more quickly. This
allegation is not grounds for further delaying accrual of his cause of action for rescission
of his loan with The Bank. On the contrary, the statements that Kouzine allegedly heard
in March 2007 are even stronger grounds for concluding as a matter of law that discovery
occurred at that time. Any reasonable person would have or should have as a matter of
law investigated further into whether he or she had a fixed interest rate loan as a change
in the pace of amortization cannot be harmonized with a fixed rate loan. Further, it is
inescapable as a matter of law that, had Kouzine conducted even a minimal investigation
in March 2007, he would have learned that he did receive a fixed interest rate loan as he
had allegedly been promised.

11
 b. Fraud
Kouzine contends the trial court erred in ruling that his second cause of action for
fraud as to The Bank is barred by the statute of limitations. The statute of limitations is
three years from the date of discovery of the fraud. (Code Civ. Proc., § 338, subd. (d).)
At issue here is again the discovery rule for the date of accrual of a cause of action as to
The Bank. For all of the reasons explained above, we reject Kouzine’s discovery rule
arguments as to his cause of action for fraud as well. As to The Bank, Kouzine should
have discovered his fraud claim –– he did not get the loan he had been promised –– as a
matter of law upon signing the loan documents in March 2006 or in March 2007 when he
was told that his loan was amortizing more quickly than before.
c. Breach of Fiduciary Duty
Kouzine also contends the trial court erred in ruling that his third cause of action
for breach of fiduciary duty is barred by the statute of limitations. Again, the issue is the
discovery rule for the date of accrual of a cause of action. We find no error.
Kouzine asserts that that the catch-all, four-year statute of limitations prescribed
by Code of Civil Procedure section 343 applies. Section 343 provides: “An action for
relief no hereinbefore provided for must be commenced within four years after the cause
of action shall have accrued.” Assuming without deciding that Kouzine can state a cause
of action against The Bank, a lender, for breach of fiduciary duty based on acts before the
January 2013 effective date of the California Homeowner Bill of Rights (“Homeowner
Bill”)11 (see Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089,
1093, fn. 1 [relationship between a lender and borrower is not fiduciary in nature]; and
see also Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 476 [accord]; Kim v.
Sumitomo Bank (1993) 17 Cal.App.4th 974, 984 [accord]; and Downey v. Humphreys
(1951) 102 Cal.App.2d 323, 332 [“A debt is not a trust and there is not a fiduciary duty
relation between debtor and creditor as such.”]), we reject Kouzine’s arguments that the

11
We discuss the Homeowner Bill more extensively below.
12
trial court erred in finding his fiduciary duty cause of action time-barred. For the reasons
explained above, we find Kouzine’s cause of action for breach of fiduciary duty as to The
Bank accrued in March 2006, or, alternatively, no later than March 2007. And, he may
not invoke the discovery rule as to The Bank because he did not allege facts showing
when and how he discovered facts of The Bank’s alleged breach of fiduciary duty, or
why he could not have discovered the breach earlier than 2009.
II. Loan Foreclosure –– The UCL
Kouzine next contends the trial court erred in ruling that his fourth cause of action
as to The Bank for relief under the UCL failed because he lacked standing. Specifically,
Kouzine argues the court erred in ruling that he did not allege that he suffered injury in
fact caused by an unfair or unlawful business practice of The Bank within the limitations
period. Kouzine’s arguments implicate two elements – (1) injury in fact; and (2) the
nature of his claim as to the Bank, and whether The Bank’s alleged acts were beyond the
statute of limitations. Further, Kouzine contends he should have been granted leave to
amend to allege his UCL cause of action more plainly. We agree with Kouzine that leave
to amend is appropriate in his case.
a. Trial Court Proceedings
Kouzine’s cause of action for relief as to the Bank under the UCL alleged that The
Bank engaged in “unfair” business practices within the meaning of the UCL in two ways.
First, Kouzine reiterated his fraud in the inducement allegations, i.e., his claims regarding
the origination of his loan in March 2006. Second, Kouzine alleged the Bank engaged in
unfair12 business practices “with respect to mortgage loan servicing, assignments of notes
and deeds of trust, [and] foreclosure of residential properties . . . .” Within the sphere of
the broadly identified area of loan foreclosure, Kouzine alleged that The Bank instituted
“improper or premature foreclosure proceedings to generate unwarranted fees,” executed

12
Kouzine’s complaint actually used the work “deceptive,” rather than unfair.
13
and recorded false and misleading documents, and executed and recorded documents
without the legal authority to do so.
The Bank’s motion for judgment on the pleadings challenged the sufficiency of
Kouzine’s cause of action under the UCL from two different directions. First, The Bank
argued that Kouzine’s claims related to the origination of his loan were time-barred.
As to Kouzine’s post-origination claims, The Bank claimed his allegations were no more
than a “blind contest” to a lender’s right to pursue foreclosure proceedings for which
Kouzine lacked standing because he had not alleged that he suffered any injury in fact
and that he lost money or property from such foreclosure proceedings. (See Bus. & Prof.
Code, § 17204.) Specifically, the Bank argued Kouzine did not allege he had paid any
“unwarranted fees” connected with mortgage servicing or a foreclosure, or that The Bank
had actually foreclosed upon his property.
Kouzine’s opposition did not address the legal merits of The Bank’s challenges to
his cause of action under the UCL. Instead, Kouzine argued procedurally that The Bank
was improperly seeking reconsideration of a prior demurrer which the trial court had
overruled. Further, Kouzine argued that a motion for judgment on the pleadings did not
lie because there had not been a material change in the applicable law since the demurrer
had been overruled. (Citing Yancey v. Superior Court (1994) 28 Cal.App.4th 558, 562.)13
The trial court granted The Bank’s motion for judgment on the pleading for the
following stated reason: “[Kouzine] does not allege that he suffered an injury in fact as a
result of any alleged unfair or unlawful business practices which are not time-barred (i.e.,
related to origination of the loan). As such, [Kouzine] does not have standing to bring a
[UCL] cause of action.”

13
The record before us on appeal, an appellant’s appendix prepared by Kouzine,
does not contain a copy of The Bank’s demurrer to Kouzine’s first amended complaint,
nor a copy of the trial court’s ruling on the demurrer. However, there are indications in
the record on appeal that The Bank did not raise a UCL standing argument in its prior
demurrer.
14
 b. Injury in Fact Standing
In November 2004, California voters passed Proposition 64, amending Business
and Professions Code section 17204 to limit standing under the UCL. (See Troyk v.
Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1335.) Under section 17204, a cause
of action for violation of the UCL “shall be prosecuted exclusively . . . by the Attorney
General or a district attorney or by a county counsel . . . or by a city attorney . . . or by a
person who has suffered injury in fact and has lost money or property as a result of the
[alleged] unfair competition.” (Italics added.)
To the extent Kouzine’s UCL claim is premised on alleged wrongs at the time of
loan origination, we agree that he has alleged injury within the meaning of section 17204
in that he incurred higher interest rate payments. Accordingly, as to claims associated
with loan origination, standing is not an issue. The issue as to loan origination wrongs is
the bar of the statute of limitations. For the reasons explained above, we find as to The
Bank that UCL claims associated with loan origination are time-barred because Kouzine
knew or should have known of claims as to The Bank in March 2006 or March 2007 at
the latest.
Kouzine’s more developed argument on appeal is that the trial court did not
recognize that his cause of action under the UCL is not only based on alleged
wrongdoing by The Bank at the origination stage of his loan, but is also based on alleged
wrongdoing by The Bank much later, i.e., in association with its foreclosure practices.
Kouzine argues on appeal that his operative pleading included allegations that The Bank
engaged in the practice of “dual tracking” -- considering Kouzine for a loan modification
while at the same time moving forward with foreclosure proceedings.14 Kouzine argues
that such a practice may be considered to be an “unfair” business practice within the

14
The paragraphs that Kouzine points to in his second amended complaint to support
his “dual tracking” theory are not in his UCL claim; they are found in his cause of action
for breach of the covenant to good faith and fair dealing.
15
meaning of the UCL, and that, at a minimum, he should be granted leave to amend to
allege more plainly that his UCL claim is based on a dual tracking theory.
Kouzine observes that the Legislature enacted the Homeowner’s Bill in July 2012,
and that it bans dual tracking. (See Singh v. Bank of America, N.A. (E.D. Cal. May 2,
2013, No. 2:13-cv-00729-MCE-AC) 2013 WL 1858436 [not reported in F.Supp.2d].)
Kouzine forthrightly acknowledges he “did not directly” plead a violation of the
Homeowner’s Bill by name or statutory provision in his UCL claim, or anywhere else in
his second amended complaint. Instead, he argues that even before the Homeowner’s
Bill was enacted, our state had long-required lenders and loan servicers to deal fairly with
borrowers in home loan agreements as a matter of public policy. Kouzine argues the trial
court should have granted him leave to allege his dual tracking theory more clearly as an
unfair business practice in violation of such public policy.
Given the focus of Kouzine’s arguments on appeal, the first issue we must address
is whether he alleged sufficient facts to show that he suffered injury in fact and lost
money or property as a result of The Bank’s alleged unfair dual tracking practices to
establish standing under the UCL. (Bus. & Prof. Code, § 17204.) And, if not, whether he
showed or has shown on appeal a reasonable possibility that he will be able to allege facts
for standing under the UCL. (see, e.g., Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th
962, 967.) A bald allegation that a lender engaged in dual tracking, without facts alleging
a plaintiff has suffered injury in fact and loss of money or property from the practice will
not be sufficient under the UCL.
In Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, the Court
of Appeal held that a plaintiff has standing under the UCL when he or she alleges a
lender has commenced the foreclosure process. (Id. at p. 522.) Under Jenkins, the future
potential loss of plaintiff’s property is an injury in fact and loss of money or property
within the meaning of Business and Professions Code section 17204. Kouzine’s pleading
alleges that a trustee sale was scheduled at some point. Specifically, Kouzine’s operative
second amended complaint alleged a trustee sale was “scheduled for June 7, 2012.”

16
The allegation concerning a scheduled trustee sale is confusing given that the second
amended complaint was filed in January 2013. Also, Kouzine does not allege that the
trustee sale in fact has occurred, or its current status. Despite the problems with the
current state of Kouzine’s pleadings, we are satisfied that there is a reasonable possibility
he may be able to amend his allegations to state facts showing injury in fact related to a
foreclosure of his loan with The Bank under Jenkins. Accordingly, we remand the case
with directions to allow Kouzine another attempt to allege his UCL cause of action.
c. UCL Cause of Action based on Dual Tracking
This brings us to the issue whether a reasonable possibility that he will be able
allege injury in fact as a result of an unfair business practice as defined under the UCL.
In other words, may dual tracking allegations support a UCL cause of action. Although
Kouzine has not offered any amended pleading language in his opening brief on appeal,
we are satisfied by his argument that a cause of action under the UCL may, in theory, be
based on alleged dual-tracking. Accordingly, we find it appropriate to allow him an
opportunity to attempt to allege such a claim.
Neither party questions that the Homeowner’s Bill is not retroactive, and that the
law will not save Kouzine’s UCL cause of action unless he can allege a violation of the
Bill after the date it became effective. This still leaves the further issue whether Kouzine
may nonetheless be able, without invoking the Homeowner’s Bill, to state a claim under
the UCL based on dual tracking allegations.
In Jolley v. Chase Home Finance (2013) 213 Cal.App.4th 872 (Jolley), Division
Two of the First District Court of Appeal reversed a summary judgment in favor of a
lender in an action attempting to state a claim under the UCL based on dual tracking.
The court acknowledged that the provisions of the Homeowner’s Bill do not apply to a
case where a homeowner faced foreclosure before its effective date. However, the court
ruled that a plaintiff may be able to state a cause of action under the UCL based on dual
tracking even when the conduct occurred before the effective date of the law. The court
reasoned that, while dual tracking was not forbidden by statute prior to the Homeowner

17
Bill, “the new legislation and its legislative history may still contribute to its being
considered ‘unfair’ for purposes of the UCL.” (Id. at pp. 907-908.) Jolley thus supports
the proposition that a UCL claim based on an unfair business practice need not be
tethered to a specific existing constitutional, statutory or regulatory provision, but may be
based on established public policy that a certain business practice is unfair in a moral or
ethical sense. Further, that legislation and legislative history may be used as evidence of
a public policy existing before the legislation was enacted. Jolley essentially ruled that a
lender’s practice of dual tracking may be found to satisfy these criteria.
We are satisfied that, under Jolley, Kouzine may be able to state a cause of action
for violation of the UCL based on a dual tracking theory. Presently, Kouzine’s cause of
action under the UCL is insufficient (see footnote 13, ante), but we find it a reasonable
possibility that he will be able to submit an amended pleading correcting the defects in
his pleadings. Kouzine, of course, will need to allege as to The Bank that it engaged in
the practice of dual tracking as to him, and that he suffered injury in fact from such dual
tracking. Further, that The Bank’s actions occurred within the applicable limitations
period.
In the final analysis, it appears that the trial court’s decision to grant judgment on
the pleadings was based on its understanding that Kouzine’s UCL cause of action relied
on his loan origination claims, and that, to that extent, his UCL claim was time-barred.
The trial court’s perspective is understandable given some of the holes in Kouzine’s
operative pleading, but we have been satisfied by Kouzine’s arguments on appeal that
there is a reasonable possibility that he will be able to amend his pleadings to allege facts
stating a cause of action under the UCL premised on actions which occurred long after
the time of loan origination, i.e., in connection with foreclosure. Such claims, if properly
alleged, would not necessarily be time-barred.

18
III. Loan Foreclosure –– Breach of the Covenant of Good Faith and Fair Dealing
Kouzine next contends the trial court erred in ruling that his fifth cause of action
for tortious breach of the implied covenant of good faith and fair dealing was lacking.
Kouzine argues he alleged sufficient facts to show that The Bank breached its duty to act
fairly in that it engaged in dual tracking in connection with the parties’ loan contract.
Kouzine argues that, even before the effective date of the Homeowner’s Bill, the public
policy of California deemed dual tracking to be outside the bounds of fair dealing by
lenders and loan servicers, supporting a claim in tort for breach of the implied covenant
of good faith and fair dealing. We find no error.
Every contract in California imposes upon the parties a duty of good faith in its
performance. This implied covenant of good faith and fair dealing assures “compliance
with the express terms of the contract, and cannot be extended to create obligations not
contemplated in the contract.” (Racine & Laramie, Ltd. v. Department of Parks &
Recreation (1992) 11 Cal.App.4th 1026, 1032.) In this vein, the implied covenant of
good faith and fair dealing cannot be invoked to prohibit a contracting party from doing
something that the parties’ contract expressly allows the party to do. (See Carma
Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342,
374.) And, of course, outside the insured-insurer relationship and other relationships
with similar qualities, breach of the implied covenant of good faith and fair dealing
ordinarily does not give rise to a claim for tort damages. (See, e.g., Ragland v. U.S. Bank
National Assn. (2012) 209 Cal.App.4th 182, 206.)
There is no dispute in Kouzine’s current case that his loan contract with The Bank
expressly granted The Bank the contract right to pursue foreclosure. The issue presented
by Kouzine’s attempt to allege a cause of action for tortious breach of the covenant of
good faith and fair dealing is whether, prior to the effective date of the Homeowner’s
Bill, all loan contracts included an implied obligation recognized by law, imposing on
lenders and or loan servicers, a duty to refrain from dual tracking during the foreclosure
process, and, if so, whether a breach of that duty would give rise to a claim in tort.

19
 Kouzine’s reliance on Jolley, supra, 213 Cal.App.4th 872 in support of his
argument that he stated a claim for tortious breach of the implied covenant of good faith
and fair dealing is not persuasive. In Jolley, the plaintiff took a construction loan from
Washington Mutual Bank (WaMu). WaMu thereafter allegedly failed to disburse the
construction loan funds properly. As the plaintiff was working with WaMu on the
situation, WaMu went into FDIC receivership. Later, the FDIC transferred WaMu’s
assets to Chase Home Finance. When the plaintiff stopped making payments on the
original loan, Chase moved to foreclose. Plaintiff filed suit, alleging causes of action for
fraud, negligence, breach of contract/promissory estoppel and related claims. There was
no claim for breach of the implied covenant of good faith and fair dealing. (Id. at
pp. 878-881.) The trial court granted a motion for summary judgment in favor of Chase.
One of the primary issues on appeal was whether Chase assumed liability for
WaMu’s conduct under the asset purchase agreement between the FDIC and Chase.
Any discussion on this issue is not helpful to Kouzine in this current case. Kouzine cites
to a statement in Jolley that recognized a “rising trend to require lenders to deal
reasonably with borrowers in default to try to effectuate a workable loan modification.”
(Jolley, supra, 213 Cal.App.4th at p. 903.) We find this generality unhelpful to
Kouzine’s current appeal. The Court of Appeal’s statement was no more than its
recognition that federal and state legislation in recent years reflects significant changes in
lending laws. Jolley does not address whether, prior to the enactment of the
Homeowner’s Bill, lenders were under an implied contractual obligation to refrain from
dual tracking which would support a claim in tort. That the Homeowner’s Bill made dual
tracking unlawful tends to suggest in our view that, prior to the law’s enactment, the
practice of dual tracking during foreclosure was not precluded by contractual provision
implied by law. For these reasons, we are not persuaded that we should find Kouzine
stated a cause of action for tortious breach of the implied covenant of good faith and fair
dealing based on the alleged act of dual tracking. While we have determined that
Kouzine should be granted leave to attempt to allege a claim that dual tracking is an

20
unfair business practice under the UCL, does not mean that dual tracking is a breach of a
loan contract.
DISPOSITION
The judgment of dismissal entered April 3, 2013 is reversed, as is the trial court’s
order granting The Bank’s motion for judgment on the pleadings as to Kouzine’s cause of
action for violation of the UCL, without leave to amend. The case is remanded to the
trial court with direction to enter a new and different order granting The Bank’s motion
for judgment on the pleadings, with leave to amend. The trial court’s underlying order
sustaining The Bank’s demurrer is affirmed. Each party to bear its own costs on appeal.

BIGELOW, P. J.
We concur:

RUBIN, J.

FLIER, J.

21