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Cansino v. Bank of America

California Court of Appeals, Sixth District

March 26, 2014

CARLOS CANSINO et al., Plaintiffs and Appellants,
BANK OF AMERICA et al., Defendants and Respondents.

Santa Clara County Superior Court No. 1-11-CV-204887 Hon. Peter H. Kirwin.

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[Copyrighted Material Omitted]

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Law Offices of Thomas Gillen and Thomas W. Gillen for Plaintiffs and Appellants.

Severson & Werson, Jan T. Chilton and M. Elizabeth Holt for Defendants and Respondents.



Plaintiffs Carlos and Resurreccion Cansino appeal from a judgment of dismissal sustaining defendant’s demurrer to a second amended complaint without leave to amend. Because plaintiffs’ complaint fails for lack of specificity, and because the trial court did not abuse its discretion in denying leave to amend the complaint, we will affirm the trial court’s judgment.

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In 2000, plaintiffs obtained a $280, 000 mortgage loan from National City Mortgage Company doing business as Accubanc Mortgage. The record does not reveal whether the loan was for the purchase or a refinance of their Milpitas home. The $280, 000 adjustable rate note provided for a five-year fixed interest rate of 8 percent followed by a variable interest rate never to exceed 13 percent. Plaintiffs refinanced in 2002 with another adjustable rate loan from National City Mortgage Company, borrowing $386, 000 against their property. The 2002 loan fixed interest at 4.875 percent for three years followed by a variable rate not to exceed 10.875 percent. Plaintiffs again refinanced in August 2005, borrowing more money against the property ($496, 000) using a new lender, America’s Wholesale Lender. The loan document stated that the borrower “will pay interest at a yearly rate of 1.000 %, ” and that “[t]he interest rate I will pay may change.” It also stated that minimum monthly payments for the initial five years would result in negative amortization if the minimum payment was insufficient to cover the interest due. The interest rate on the 2005 loan was capped at 9.95 percent.

In approximately July 2005 in connection with the August 2005 loan, a loan broker and an appraiser working for America’s Wholesale Lender appraised plaintiffs’ home at a fair market value of $620, 000. Based on that appraisal and other representations by lending personnel, plaintiffs elected to refinance their home with a $496, 000 adjustable rate mortgage. Lending personal told plaintiffs their home would appreciate and they would be able to sell or refinance the home at a later date before having to make higher monthly loan payments or pay an increased principal of $620, 000 which would result from negative amortization.

In 2010, plaintiffs discovered that their home was valued between $350, 000 and $400, 000. Soon thereafter they stopped making payments on the 2005 loan and sought a loan modification. As of the filing of the second amended complaint (March 2012) the monthly payments were approximately $1, 960, the balance due on the loan was approximately $626, 000, and the fair market value of the home was approximately $350, 000.


In October 2011, plaintiffs filed a first amended complaint against Bank of America, CTC Foreclosure Services Corp., and Mortgage Electronic Registration System, Inc. for damages and specific performance arising out

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of the 2005 refinancing of their Milpitas home. Plaintiffs sued Bank of America in its individual capacity and as the owner of subsidiary and acquired entities including America’s Wholesale Lender. The complaint included causes of action for fraud and violation of California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200). The trial court sustained defendant’s demurrer to the first amended complaint with leave to amend on the fraud and UCL claims. The court found the fraud claim deficient for failure to allege each element with specificity and the UCL claim deficient for failure to allege injury. Citing Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 [27 CaI.Rptr.3d 661, 110 P.3d 914] (Fox), the court also ruled that plaintiffs failed to state sufficient facts to justify tolling the three-year statute of limitations for fraud and the four-year statute of limitations for the UCL claim.

Plaintiffs filed a second amended complaint against defendants realleging fraud and UCL violations.[2] In their first cause of action, titled “Negative Fraud, Actual Fraud, and Deceit Vitiating Loan and Deed of Trust As Against All Defendants, ” plaintiffs alleged that “Defendants’ lending personnel” made two false representations to plaintiffs during their 2005 refinancing process: (1) “The current market value of the real property was $620, 000 and appreciating;” and (2) “By refinancing with the ARM loan being offered to plaintiffs, plaintiffs could bring the early monthly payments down, obtain several years of appreciation to the value of the home, and sell or refinance the home at an appreciated value before having to pay the then due principal of $620, 000 and before having to pay the much higher monthly payments.” The second amended complaint further alleged that defendants knew plaintiffs were unaware of the speculative and/or false nature of the two representations, and that the speculative and/or false nature of the representations could not be discovered by plaintiffs’ diligent attention.

Plaintiffs alleged that they acted in reasonable reliance on the “presumed truth of the representations, ” were justified in doing so, and were damaged as a result of that reliance. Plaintiffs alleged that defendant’s lending personnel had an affirmative duty to disclose these matters to plaintiffs, who were unsophisticated borrowers, and that defendants were “charged with knowledge of the speculative nature of the existing and future values of the real property [sic] were the direct result of an artificial market created by the financial institutions in creating and marketing the GSEs and Tranches as

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herein alleged in paragraph 11.”[3] Finally, plaintiffs alleged that the falsity of the two representations “[was] not discovered until sometime in 2010 when plaintiffs realized that their home was now valued at $350, 000 to $400, 000.” Plaintiffs sought cancellation of the $496, 000 note and deed of trust, refinancing of the loan at the current fair market value of the property, and unspecified damages.

In their second cause of action for violation of the UCL against Bank of America only, plaintiffs alleged that the misrepresentations set forth in their fraud cause of action, as well as the terms of the August 2005 loan, constituted unfair, deceptive, false and misleading business practices. Plaintiffs alleged money damages as a result of defendant’s unfair business practices, including “drastically increasing negative equity as a result of defendants’ loan package financing” and the difference between the ultimate principal amount of $620, 000 and the current $350, 000 fair market value of their home. Plaintiffs ...

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