Campbell v. First American Title

Filed 6/10/08 Campbell v. First American Title CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO

APPEAL from a judgment of the Superior Court of Los Angeles County. Wendell Mortimer, Jr., Judge. Affirmed.

Robbins Umeda & Fink, Brian J. Robbins, Kevin A. Seely, Daniel R. Forde, Rebecca A. Peterson; The Huff Law Firm and Paul R. Huff for Plaintiffs and Appellants.

Bryan Cave, Charles A. Newman, Jason E. Maschmann, James M. Weiss, H. Mark Mersel and Jennifer A. Jackson for Defendant and Respondent.

* * * * * *

Plaintiff and appellant Ardra Campbell^[1]appeals from a judgment of dismissal entered following the trial courts sustaining a demurrer without leave to amend filed by defendant and respondent First American Title Company (First American). The trial court ruled that appellant lacked standing to pursue a claim against First American under Business and Professions Code section 17200.^[2] We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On appeal from a judgment of dismissal following a demurrer sustained without leave to amend, we assume the truth of all well pleaded facts, as well as those that are judicially noticeable. (Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

In March 2006, appellant began the process of refinancing her home. She contacted a mortgage broker and authorized the broker to initiate a loan application. First American served as the title insurer and sub-escrow agent for the transaction. A sub-escrow agent receives a fee for performing limited functions, including receiving funds from the lender, recording various documents and disbursing authorized funds.

As part of the loan initiation process, appellants mortgage broker opened a title order with First American on appellants behalf. Simultaneously, the mortgage broker opened an escrow with an independent escrow agency, Nettie Becker Escrow (NBE), and instructed NBE that a title order had been placed with First American. Shortly thereafter, First American provided the mortgage broker with a preliminary title report. Appellant also entered into escrow instructions with NBE.

In early April 2006, both NBE and First American received a copy of the lenders closing instructions from the bank that was providing the loan for the refinancing. On April 12, 2006, First American sent an invoice to NBE which included an $82 charge to record a trust deed; the actual cost to record the deed was $76. The following day, First American sent a payoff proof sheet to NBE which showed that First American had deducted $100 from the loan funds for a sub-escrow fee and had also deducted $40 for a [d]isbursement fee/wire or next day charge.

Appellant filed her initial complaint for damages in July 2006 alleging that First American and two related entities had overcharged her and others similarly situated for wire and recording fees and had improperly withheld earned interest. First American demurred, asserting in part that appellant could not maintain a section 17200 claim because she had no contact with First American; all wire and recording fees were charged by NBE. Before the demurrer was heard, appellant filed a first amended complaint. She alleged that First American committed unfair and unlawful practices by: (i) charging Plaintiffs and Class wire costs when no wire costs were actually incurred by Defendant; (ii) charging Plaintiffs and Class wire and recording costs in excess of the costs actually incurred by Defendant; (iii) charging Plaintiffs and Class wire costs in addition to a sub-escrow fee that already includes fees for transferring funds; and (iv) failing to pay interest accrued on deposited funds held in trust by Defendant in sub-escrow accounts . . . . The trial court sustained First Americans demurrer with leave to amend, ruling that [t]he First Amended Complaint is uncertain and ambiguous as to whether or not plaintiff had a direct relationship with First American, whether or not First American was an escrow agent or a sub-escrow agent, and who directly received the questioned fees from plaintiff.

Appellant filed a second amended complaint (SAC) in April 2007, alleging causes of action for violation of section 17200, fraud, negligent misrepresentation and unjust enrichment. Relevant to the section 17200 claim, appellants allegations were virtually identical to those in the first amended complaint.^[3]

First American again demurred, asserting, among other arguments, that appellant lacked standing because she had no direct relationship with First American and therefore suffered no injury as a result of its conduct. In support of its demurrer, First American requested judicial notice of the two documents referenced in the complaintthe invoice to NBE and the payoff proof sheet. Appellant opposed the demurrer, asserting that a direct relationship was not a requisite element of her claim and that she adequately alleged she suffered injury by reason First Americans deducting money from the funds held in escrow.

Following a July 10, 2007 hearing, the trial court issued a minute order granting First Americans judicial notice request and sustaining the demurrer without leave to amend, stating that the SAC failed for the same reasons as previous complaints. With respect to the section 17200 claim, the trial court ruled: It is now clear that the Campbells had no direct contact or relationship with defendant First American. Plaintiffs therefore lack standing. . . . The charges were made to Nettie Becker. In August 2007, the trial court entered judgment in favor of First American. This appeal followed.

DISCUSSION

Appellant contends that the trial court erred in sustaining the demurrer without leave to amend because section 17200 contains no direct relationship requirement and, alternatively, because she adequately pleaded the existence of such a relationship.^[4] We agree with appellant that a direct relationship is not an element of a section 17200 claim. Nonetheless, appellant lacked standing to pursue her claim because she failed to demonstrate that she suffered injury as a result of any unfair, unlawful or fraudulent business practice.

I. Standard of Review.

On appeal, we review the trial courts sustaining of a demurrer without leave to amend de novo, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) We may affirm if any ground raised in the demurrer is well taken. (Hendy v. Losse (1991) 54 Cal.3d 723, 742; Hayter Trucking, Inc. v. Shell Western E&P, Inc. (1993) 18 Cal.App.4th 1, 13.) We assume the truth of properly pleaded allegations in the complaint and give the complaint a reasonable interpretation, reading it as a whole and with all its parts in their context. (People ex rel. Lungren, supra, at p. 300.) We do not, however, assume the truth of the legal contentions, deductions or conclusions; questions of law, such as the interpretation of a statute, are reviewed de novo. (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 373.) We may also disregard allegations which are contrary to law or to a fact of which judicial notice may be taken. (Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 559560.)

We apply the abuse of discretion standard in reviewing the trial courts denial of leave to amend. (Blank v. Kirwan, supra, 39 Cal.3d at p. 318; Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 14971498.) When a demurrer is sustained without leave to amend, we determine whether there is a reasonable probability that the defect can be cured by amendment. (Leibert v. Transworld Systems, Inc. (1995) 32 Cal.App.4th 1693, 1701.) Appellant bears the burden of proving the trial court erred in sustaining the demurrer or abused its discretion in denying leave to amend. (Blank v. Kirwan, supra, at p. 318; Coutin v. Lucas (1990) 220 Cal.App.3d 1016, 1020.)

II. Appellant Lacked Standing to Pursue Her Business and Professions Code Section 17200 Claim.

Californias unfair competition law (UCL) permits civil recovery for any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising. [Citations.] (Hall v. Time Inc. (2008) 158 Cal.App.4th 847, 851852.) Previously, the UCL allowed any person acting for the interests of itself, its members or the general public (former 17204) to file a civil action for relief. Standing to bring such an action did not depend on a showing of injury or damage. [Citations.] (Californians for Disability Rights v. Mervyns, LLC (2006) 39 Cal.4th 223, 228 (Mervyns).) In November 2004, the voters approved Proposition 64. (Ibid.) According to the measures preamble, the voters determined that the broad grant of standing permitted under section 17204 had encouraged frivolous lawsuits that were detrimental to the courts, taxpayers and small businesses, and that the former law had been misused by some private attorneys who [f]ile frivolous lawsuits as a means of generating attorneys fees without creating a corresponding public benefit, [f]ile lawsuits where no client has been injured in fact, [f]ile lawsuits for clients who have not used the defendants product or service, viewed the defendants advertising, or had any other business dealing with the defendant, and [f]ile lawsuits on behalf of the general public without any accountability to the public and without adequate court supervision. [Citation.] (Mervyns, supra, at p. 228.)

The voters intended to remedy such abuses by amending the UCL. As summarized in Mervyns, supra, 39 Cal.4th at pages 228 to 229: The measure amends section 17204, which prescribes who may sue to enforce the UCL, by deleting the language that had formerly authorized suits by any person acting for the interests of itself, its members or the general public, and by replacing it with the phrase, who has suffered injury in fact and has lost money or property as a result of unfair competition. The measure also amends section 17203, which authorizes courts to enjoin unfair competition, by adding the following words: Any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of Section 17204 and complies with Section 382 of the Code of Civil Procedure, but these limitations do not apply to claims brought under this chapter by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. ( 17203.) Thus, the standing requirement for a UCL claim is now comprised of a two-prong test: A private person now has standing to assert a UCL claim only if he or she (1) has suffered injury in fact, and (2) has lost money or property as a result of the unfair competition. [Citations.] (Hall v. Time Inc., supra, 158 Cal.App.4th at p. 852.)

The trial court premised its conclusion that appellant lacked standing under this test on the absence of any direct contact or a direct relationship between appellant and First American. It focused on allegations demonstrating that the charges about which appellant complained were made through its escrow agent, NBE. Seizing on the trial courts reasoning, First American asserts any recourse therefore lies against NBE, the entity that ultimately deducted First Americans charges from appellants loan funds. But according to appellants allegations, those charges were not imposed by NBE; rather, NBEs payoff proof sheet simply reflected the charges that First American imposed against appellants loan proceeds. According to the SAC: The Campbells reasonably relied on the false charges because First American, by its actions, knowingly caused the Campbells independent escrow agent to relay those improper charges to the Campbells. The Campbells were, of course, damaged by the fact that the money was taken by First American from the deposited escrow funds. Appellants allegation that First American received funds from appellants escrow account distinguishes this case from Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92, where the court concluded that the plaintiff lacked standing to pursue a section 17200 claim against three out of four defendants because he never used their services.

While we cannot conclude that the demurrer was properly sustained by reason of the trial courts articulated reason that First American imposed the charges through NBE, we are persuaded that the underlying basis for the trial courts conclusion was correct. Though couching its ruling in terms of the absence of a direct relationship, the trial court essentially concluded that nothing First American did caused appellant any injury. Construing the UCL requirement that a plaintiff must have suffered injury in fact . . . as a result of an unfair business practice, the court in OBrien v. Camisasca Automotive Manufacturing, Inc. (2008) 161 Cal.App.4th 388, 400 explained that such language unavoidably implicates causation, that is to say, the unfair business practices or false advertisement must have caused injury in fact to the plaintiff. For a plaintiff to suffer injury in fact . . . as a result of the alleged unfair business practice or false advertising [citations], necessarily the plaintiff must have actually relied on the false advertising or unfair business practice, and as a result, suffered injury therefrom. (Accord, Hall v. Time Inc., supra, 158 Cal.App.4th at p. 855.)

Appellants allegations failed to show that appellant suffered injury as a result of any unfair, unlawful or fraudulent business practice. (See First American Title Ins. Co. v. Superior Court (2007) 146 Cal.App.4th 1564, 1574 [Issues of standing are generally determined by reference to the allegations made in the complaint].) The SAC, read together with documents subject to judicial notice, established that appellant sought redress for three separate charges imposed by First American: (1) The $6 above actual cost that First American invoiced to NBE for recording the trust deed; (2) the $15 Federal Express fee that was contained in the payoff proof sheet in addition to the $100 sub-escrow fee reflected on the invoice; and (3) the $25 wire transfer fee that was contained in the payoff proof sheet in addition to the $100 sub-escrow fee reflected on the invoice. We analyze each charge in turn.

With respect to the extra $6 charge for recording the trust deed, appellant alleged: On or about April 12, 2006, First American sent an Invoice (No. 1905133482) in the amount of $732.00 to the Campbells independent escrow agent. Among other things, the Invoice stated that First American had deducted $82 from the Campbells funds to record a trust deed. The $82 charge to record a trust deed was false, and First American knew or should have known that it was false, because the actual cost to record the trust deed was, at most, $76. The Campbells reasonably relied on false statements in the false Invoice which were relayed to the Campbells by their independent escrow agent. The SAC further alleged that, without notice, First American would routinely charge more for recording documents than it would actually pay to the county recorders office. In support of its contention that this practice was unfair, unlawful or fraudulent, appellant alleged that First American charges recording costs which are supposed to represent the actual amount charged by the county recorder to record documents related to the transaction. To support the allegation that First American is supposed to charge only the actual cost charged by the county recorder, appellant further alleged that First American had agreed to be bound by the lenders terms and conditions, which included First Americans agreement to provide buyers, sellers, and refinancing parties with the actualcosts associated with their real finance [sic] transaction. Appellant did not attach a copy of the lenders instruction to the SAC.

According to the SAC, First Americans practice of invoicing more than the actual recording costs constituted unfair competition because it violated the lenders instructions. But a breach of contract is insufficient alone for a section 17200 claim. As explained in Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 645: [A] breach of contract may . . . form the predicate for Section 17200 claims, provided it also constitutes conduct that is unlawful, or unfair, or fraudulent. [Citations.] The SAC contained no allegation establishing that the $6 charge was unfair, unlawful or fraudulent. Rather, the allegations skirted the issue, indicating First Americans only obligation under the lenders instructions was to disclose the actual recording costs; the allegations did not state that the lenders instructions required First American to charge only the actual cost.

Framing the issue as one of nondisclosure or misrepresentation, appellants allegations still fall short. Appellant summarily alleged only that she reasonably relied on the charges reflected on the invoice. These circumstances are akin to those in Laster v. T-Mobile USA, Inc. (S.D.Cal. 2005) 407 F.Supp.2d 1181. There, the plaintiffs alleged that they had entered into bundled transactions with cellular telephone service providers to purchase cellular phones and acquire service, and claimed that they were provided with a telephone falsely advertised as free, when in fact, they were required to pay sales tax on the full value of the telephone. (Id. at p. 1194.) In granting the defendants motion to dismiss for lack of standing, the court found that the plaintiffs had not adequately alleged that they suffered injury as a result of the defendants practices because they did not include any allegations that they entered into the transaction as a result of the misleading advertisement. (Ibid.) Likewise, here, appellant failed to allege what injury she suffered as a result of First Americans failure to disclose that the actual recording cost was $76. (See Daro v. Superior Court (2007) 151 Cal.App.4th 1079, 1099 [[T]here must be a causal connection between the harm suffered and the unlawful business activity. That causal connection is broken when a complaining party would suffer the same harm whether or not a defendant complied with the law].)

Appellant relies on McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457 (McKell) as support for her contention that she suffered injury as a result of First Americans failure to disclose and invoice the actual cost of recording the trust deed. There, the plaintiffs alleged that their mortgage lender violated section 17200 by charging hundreds of dollars for underwriting services which cost only $20 to perform and by charging more than third party vendors billed without performing additional services. (McKell, supra, at pp. 14661467.) The appellate court reversed an order sustaining a demurrer without leave to amend, reasoning that Washington Mutuals practice of charging its customers more for services than the actual cost of those services, with no indication to the customers that they were doing so, may constitute a deceptive business practice within the meaning of the UCL [citation], as a reasonable consumer likely would believe that fees charged in connection with a home mortgage loan bore some correlation to services rendered. (Id. at p. 1472.)

Significantly, McKell did not address the question of standing. (See, e.g., San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 943 [cases are not authority for propositions not raised and resolved].) The issue resolved there was whether the defendants conduct amounted to an unfair, unlawful or fraudulent practice. (McKell, supra, 142 Cal.App.4th at p. 1488.) The question here is one of standingwhether appellant suffered injury as a result of any unfair competition. Appellant failed to allege how she suffered injury as a result of First Americans failure to disclose that the actual cost of recording the trust deed was $6 less than invoiced to NBE. (Cf. 24 C.F.R. 3500, App. A [federal regulation governing the HUD-1 form requires disclosure only of actual charges, not actual costs: This form is to be used as a statement of actual charges and adjustments to be given to the parties in connection with the settlement. . . . The settlement agent shall complete the HUD-1 to itemize all charges imposed upon the Borrower and the Seller by the Lender and all sales commissions, whether to be paid at settlement or outside of settlement, and any other charges which either the Borrower or the Seller will pay for at settlement].)

Appellants allegation that First American committed an unfair, unlawful or fraudulent business practice by charging a $15 Federal Express charge in addition to its $100 sub-escrow fee suffers from similar flaws. The SAC alleged that on or about April 13, 2006, First American sent a payoff proof sheet documenting additional charges and fees deducted from her loan funds, which indicated that First American deducted from the Campbells funds $100 for a sub-escrow fee. First American took an additional $40 from the Campbells loan funds deposit for Disbursement Fee/Wire or Next Day charges. These wire or disbursement charges were inflated beyond Defendant First Americans actual costs or were never charged to First American. Furthermore, these charges were already covered by the $100 sub-escrow fee which had been deducted from the funds. Further alleging that this practice was fraudulent, the SAC stated: Defendant First American knew or should have known that their Payoff Proof Sheet was false because it knew that the wire-related charges were inflated or were duplicative due to the fact that the Company had already deducted a sub-escrow fee.^[5] The judicially noticed payoff proof sheet reflected a $15 disbursement to First American for Federal Express charges.

The gist of appellants claim was that the $15 Federal Express charge should not have been independently billed because it was subsumed within the $100 sub-escrow fee. As explained in Daro v. Superior Court, supra, 151 Cal.App.4th at page 1098, a private person has standing to sue under the UCL only if that person has suffered injury and lost money or property as a result of such unfair competition. ( 17204, italics added.) Thus, a private person has no standing under the UCL unless [he or she] can establish that the injury suffered and the loss of property or money resulted from conduct that fits within one of the categories of unfair competition in section 17200. Appellant did not allege how she suffered injury as a result of the imposition of the $15 Federal Express fee beyond the claim that it exceeded the $100 sub-escrow fee. In Daro v. Superior Court, supra, at page 1099, the court concluded that the plaintiff tenants failed to allege a causal connection between the defendant landlords conduct and any injury they may suffer; the plaintiffs faced eviction regardless of whether the defendant engaged in the unfair business practice of failing to comply with the Subdivided Lands Act. Here, appellant did not allege that she relied on the sub-escrow fee being limited to $100 in entering into the transaction or that she was not responsible for Federal Express charges. She therefore lacked standing because she would have been in the same position whether or not the Federal Express charge was part of the sub-escrow fee. (Ibid.)

Finally, with respect to the remaining $25 wire charge that appeared on the payoff proof sheet, the escrow instructions provided that there would be a $25 fee in the event the escrow holder was instructed to wire transfer funds. The SAC did not allege that First American did not actually perform a wire transfer or that its doing so was contrary to the escrow instructions. Again, appellants complaint was that the wire transfer fee should have been subsumed within the sub-escrow fee. This allegation was directly contrary to the escrow instructions which were the subject of judicial notice requests filed in connection with First Americans earlier demurrers. While allegations of the complaint are deemed to be true in ruling on the demurrers, where an allegation is contrary to law or to a fact of which a court may take judicial notice, it is to be treated as a nullity. Any allegations in thecomplaint which are inconsistent with facts set out in an unambiguous written instrument, incorporated by reference, may be stricken. [Citations.] In other words, if there are inconsistencies between the complaint and the written instrument, the written instrument controls. [Citation.] (Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955.) In view of the escrow instructions express allowance of a $25 wire transfer fee, we cannot conclude that appellant suffered injury as a result of unfair competition by reason of the imposition of that fee.

In sum, the trial court properly determined that this was precisely the type of case that Proposition 64 was designed to address, as the SAC failed to allege that appellant lost money or was denied money to which she was otherwise entitled as a result of any unlawful, unfair or fraudulent business practice on the part of First American. The trial court also properly exercised its discretion in denying leave to amend. Appellant has not suggested how she might further amend her complaint allege standing and therefore has not met her burden to show the trial court abused its discretion in denying leave to amend. (See, e.g., Rakestraw v. California Physicians Service (2000) 81 Cal.App.4th 39, 43.) In addition, where demurrers have been sustained as a result of defects in the complaint, and the plaintiff has been provided with opportunities to correct those defects but fails to do so, it is proper to deny any further leave to amend. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091; Goodman v. Kennedy (1976) 18 Cal.3d 335, 349350.)

DISPOSITION

The judgment is affirmed. First American is entitled to its costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_____________________, J.

DOI TODD

We concur:

____________________________, P. J.

BOREN

____________________________, J.

CHAVEZ

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^[1] Former plaintiff and appellant William Campbell died during the pendency of this appeal. Though the Campbells initially brought this action jointly, we will refer to appellant singularly throughout the opinion.

^[2] Unless otherwise indicated, all further statutory references are to the Business and Professions Code.

^[3] Specifically, she alleged: First Americans acts of (i) charging Plaintiffs and the Class wire costs and related disbursement costs when no such costs were actually incurred by Defendant; (ii) charging Plaintiffs and the Class wire/disbursement and recording costs in excess of the costs actually incurred by First American; and (iii) charging Plaintiffs and the Class wire/disbursement costs in addition to other charges (such as sub-escrow fees) that already includes fees for transferring funds, were unfair, fraudulent, or unlawful business practices.

^[4] Appellant has not challenged the trial courts sustaining the demurrer as to her other causes of action or granting First Americans judicial notice request. She has therefore waived any claim of error as to those rulings. (E.g., In re Marriage of Sheldon (1981) 124 Cal.App.3d 371, 381 [well settled that appellate court may consider as waived any issue not raised in appellants opening brief].)

^[5] Appellants $40 figure is the sum of the $15 Federal Express charge and the $25 wire transfer fee charged by First American.