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Date: 08-06-2019

Case Style:

Kwang K. Sheen v. Wells Fargo Bank, N.A.

Case Number: B289003

Judge: Wiley, J.

Court: California Court of Appeals Second Appellate District, Division Eight on appeal from the Superior Court, County of Los Angeles

Plaintiff's Attorney: Noah Grynberg

Defendant's Attorney: Kutak Rock, Jeffrey S. Gerardo, and Steven M. Dailey


Homeowners in mortgage trouble may try to negotiate a
better deal. If mortgage modification negotiations fail and the
borrower falls behind, the lender may foreclose, sell the house, and
evict the homeowner. In a nutshell, this happened to borrower
Kwang Sheen with his lender Wells Fargo Bank, N.A. (Wells).
Sheen sued Wells in tort for negligent mortgage modification and
other claims. The trial court sustained Wells’s demurrer, partly
because Wells did not owe Sheen a duty in tort during contract
The issue of whether a tort duty exists for mortgage
modification has divided California courts for years. The California
Supreme Court has yet to resolve this division. We must take sides.
We join with the old rule: no tort duty during contract
negotiations. Our small contribution to this extensive debate is to
use the general approach of the recent Supreme Court decision in
Southern California Gas Leak Cases (2019) 7 Cal.5th 391 (Gas Leak
Cases). The Gas Leak Cases decision was not about mortgage
modifications, but it gives us guiding sources of law about whether
to extend tort duties when, as here, there is no personal injury or
property damage. Seeking wisdom, the Supreme Court considered
decisions from other states as well as the Restatement of Torts. We
do likewise.
These sources of law decisively weigh against extending tort
duties into mortgage modification negotiations. The majority of
other states are against it, and the most recent Restatement
counsels against this extension because other bodies of law—breach
of contract, negligent misrepresentation, promissory estoppel,
fraud, and so forth—are better suited to handle contract negotiation
issues. We therefore affirm.
We recount Sheen’s allegations from the operative pleading:
his second amended complaint, which was skillfully drafted and is
26 pages long. Sheen attached no documents to this unverified
complaint. In the trial court, able counsel represented Sheen. The
same counsel appeared for oral argument in this court.
Sheen’s complaint tells of a homeowner who borrowed money
on his house three times, defaulted on all three loans after the
subprime meltdown, sought loan modifications, declared
bankruptcy, and emerged from bankruptcy. In the end, Sheen lost
his house to foreclosure.
The complaint begins with Sheen’s home purchase in 1998.
Sheen got a $500,000 loan secured by a deed of trust. This first
loan is not at issue here.
In 2005, Sheen obtained two junior loans from Wells, in the
amounts of $167,820 and $82,037. Sheen had financial troubles
during the 2008 financial crisis and missed payments on the second
and third loans. In September 2009, Wells recorded a notice of
default on the second loan. The beneficiary of the first loan
recorded a notice of default a few months later.
Sheen sought to modify all his home loans. Sheen’s previous
representative contacted Wells in January 2010 seeking
forbearance and modifications to the second and third loans. Sheen
himself submitted loan modification requests about both loans on
January 29, 2010.
Wells sent Sheen two letters on March 17, 2010. One letter
concerned the second loan. It stated Wells was accelerating Sheen’s
payments due under the second loan. Sheen alleges this letter led
him to believe his mortgages were converted into unsecured loans
because the letter stated Wells may “plac[e] your account with an
outside collection agency.” Around this time, a Wells representative
called Sheen’s wife and told her there would be no foreclosure sale.
Instead, the representative allegedly explained, Wells was simply
trying to recover money through standard collections practices.
Sheen received an additional letter from Wells on April 23,
2010 concerning the second loan in which Wells offered to charge off
50% of the balance if Sheen and Wells could come to a satisfactory
arrangement. This letter reinforced Sheen’s belief Wells had
converted his mortgage into an unsecured loan because the letter
did not explicitly mention a possible foreclosure sale.
In November 2010, Wells sold Sheen’s defaulted second loan
in the secondary market for distressed mortgage debt. After the
second loan passed through two investment entities, Mirabella
Investments Group, LLC (Mirabella) ultimately bought it in
November 2013.
Meanwhile, Argent Mortgage Company, LLC, the holder of
the first loan, recorded a notice of trustee sale in April 2012. Sheen
succeeded in modifying this loan and Argent rescinded its notice of
default in August 2013.
Wells ultimately cancelled the third loan in March 2014.
Mirabella moved forward on the second loan and recorded a
notice of default in April 2014. Sheen began making modification
requests to Mirabella in August 2014, but Mirabella did not tell
Sheen whether it would modify this loan. Instead Mirabella wrote
Sheen in August 2014 stating it sold its servicing rights for the
second loan to FCI Lender Services, LLC (FCI).
Sheen made another modification request directly to FCI that
month, but it rejected the application because Sheen had too little
income. Ten days later Sheen filed for Chapter 7 bankruptcy relief.
Sheen made two more requests for modification while his
bankruptcy was pending. FCI rejected each of these applications,
again citing Sheen’s low income.
Sheen made a third modification request in October 2014
with the assistance of a legal aid society representative. FCI
allegedly informed this representative it considered Sheen’s second
loan to no longer be in “active foreclosure.” Sheen also contacted
Mirabella directly. Mirabella allegedly told Sheen and his wife it
would consider modification in lieu of foreclosure.
The bankruptcy court dismissed Sheen’s bankruptcy case on
October 24 and vacated the bankruptcy stay. Sheen got a phone
call five days later that his home would be sold that day. Surprised,
Sheen immediately followed up with FCI, which confirmed the
Mirabella bought Sheen’s home at the auction later that day.
Mirabella then sold the home to Equity Investments Group, Inc.
and Compass Alternative Investments, LLC. Sheen then lost an
unlawful detainer action.
We describe this case’s procedural posture.
Sheen sued Wells and others in 2016. Sheen’s first count was
for negligence. He alleged Wells owed him a duty of care to process,
review, and respond carefully and completely to the loan
modification applications he submitted to Wells. Additionally,
Wells allegedly owed him a duty to refrain from engaging in unfair
and offensive business practices that confused Sheen and prevented
him from pursuing all options to avoid foreclosure. Sheen alleged
Wells breached its duty by failing to respond to his applications, by
sending two letters suggesting loans had been modified and his
house would not be sold, by phoning his wife to say there would be
no foreclosure sale of his home, by confirming Sheen’s
interpretation of these letters with a further letter that read like it
was sent in connection with an unsecured debt rather than a
secured mortgage loan, and by assigning a loan without notifying
the assignor that Sheen’s modification application was pending.
Sheen also sued Wells for intentional infliction of emotional
distress, alleging Wells knew he was in a state of financial
difficulty. Yet Wells failed to respond to his modification
application, sent him misleading letters, and suggested to Sheen’s
wife the house would not be sold in foreclosure. Wells further
confirmed Sheen’s understanding of the letter with a further letter
that made no mention of a foreclosure sale. These alleged actions,
Sheen claimed, stated a claim for intentional infliction of emotional
Sheen’s final claim against Wells was for violating the unfair
competition law, Business & Professions Code section 17200 et seq.
(section 17200). Sheen alleged that, under section 17200, Wells’s
acts violated the laws against negligence and intentional infliction
of emotional distress. Sheen claimed Wells’s conduct had been
unfair because it was immoral, unethical, and unscrupulous.
Finally, Sheen alleged Wells’s conduct was fraudulent because it
was likely to have deceived members of the public.
Wells demurred to Sheen’s second amended complaint.
Sheen’s counsel stressed to the trial court that “we are not
alleging fraud, and we are not alleging breach of contract . . . .”
Rather, Sheen limited his claims against Wells to three counts
described above: negligence, intentional infliction of emotional
distress, and violations of section 17200.
The trial court sustained Wells’s demurrer against Sheen’s
three causes of action without leave to amend. The court dismissed
the negligence cause of action because Sheen had not pleaded facts
supporting a tort duty of care by Wells to Sheen regarding loan
modification. The court dismissed the intentional infliction of
emotional distress claim for failure to plead outrageous conduct.
And the court dismissed Sheen’s section 17200 claim for want of an
underlying claim. The court entered judgment for Wells.
Wells’s successful demurrer did not affect Sheen’s suit against
other defendants, which proceeded. Sheen appealed the trial court’s
judgment for Wells. Wells is the lone defendant in this court, and
Sheen is the lone plaintiff.
The trial court was right to sustain the demurrer.
We independently review an order dismissing a complaint.
(Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1500–1501.)
We begin by noting the claims Sheen did not bring. Sheen did
not sue Wells for common law:
1. Breach of contract,
2. Negligent misrepresentation,
3. Promissory estoppel, or
4. Fraud.
Neither did Sheen claim a statutory breach of the following:
1. California Foreclosure Prevention Act (Civ. Code,
§ 2924 et seq.),
2. California Homeowner Bill of Rights (Civ. Code, § 2920
et seq.),
3. Perata Mortgage Relief Act (Civ. Code, § 2923.5),
4. Real Estate Settlement Procedures Act (12 U.S.C.
§ 2601 et seq.),
5. Home Affordable Modification Program (12 U.S.C.
§ 5201 et seq.), or
6. Truth in Lending Act (15 U.S.C. § 1601 et seq.).
These omissions were well counseled and not inadvertent.
During oral argument on the demurrer, Sheen’s counsel—an expert
in this field of law—stressed to the trial court the suit’s limited and
precisely targeted nature. The implication is Sheen did not attempt
these other theories because, in his attorney’s estimation, they did
not or could not offer him the type of relief he wanted. So Sheen
turned to common law negligence to fill the gap.
Sheen told the trial court he was bringing his negligence
claim on an Alvarez and Daniels theory. (See Alvarez v. BAC Home
Loans Servicing, L.P. (2014) 228 Cal.App.4th 941 (Alvarez); Daniels
v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150
We respectfully disagree with Alvarez and Daniels. In our
view, the trial court correctly sustained Wells’s demurrer because a
lender does not owe a borrower a tort duty of care during a loan
modification negotiation.
The 2014 Alvarez decision sharpened a conflict in California’s
state courts. Alvarez ruled lenders do owe borrowers a duty of care
in tort during mortgage modification negotiations. The Alvarez
opinion rejected the 2013 decision in Lueras v. BAC Home Loans
Servicing, LP (2013) 221 Cal.App.4th 49, 67 (Lueras), which held a
lender does not owe a borrower a common law duty “to offer,
consider, or approve” a loan modification. (See also Nymark v.
Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1096
[“Liability to a borrower for negligence arises only when the lender
‘actively participates’ in the financed enterprise ‘beyond the domain
of the usual money lender.’”].)
The Alvarez opinion stressed that “the bank holds ‘all the
cards’” and that borrowers are captive, with virtually no bargaining
power. (Alvarez, supra, 228 Cal.App.4th at p. 949.) The opinion
noted the “moral imperative that those with the controlling hand be
required to exercise reasonable care in their dealings with
borrowers seeking a loan modification.” (Ibid.) The decision
reasoned recent legislation demonstrated “‘a rising trend to require
lenders to deal reasonably with borrowers in default to try to
effectuate a workable loan modification.’” (Id. at p. 950.) In careful
detail, Alvarez explained why it took a view conflicting with Lueras.
(Id. at pp. 947–951.)
This conflict persists. The Daniels court followed Alvarez,
while other courts have aligned with Lueras. The unpublished
Fourth Appellate District decision in Lacken v. Select Portfolio
Servicing, Inc. (Feb. 20, 2018 G053997) 2018 Cal.App.Unpub. Lexis
1163, pp. *18–*22, 2018 WL 948198, pp. *6–*8, reviewed the debate
and continued the rift, as do numerous federal decisions. (See
Anderson v. Deutsche Bank Nat. Trust Co. Americas (9th Cir. 2016)
649 Fed.Appx. 550, 552; Deschaine v. IndyMac Mortgage Services
(9th Cir. 2015) 617 Fed.Appx. 690, 693; Hackett v. Wells Fargo Bank
(C.D. Cal. Mar. 5, 2018, 2:17-CV-7354) 2018 U.S.Dist. Lexis 38412,
pp. *22–*26, 2018 WL 1224410, pp. *8–*9; Cruz v. Freedom
Mortgage Corporation (C.D.Cal. May 3, 2018, CV 18-1438) 2018 WL
6118532, pp. *5–*6.)
Our list of cases in conflict is hardly exhaustive but the extent
and duration of this conflict shows the governing test does not yield
predictable and uniform results.
That governing test stems from Biakanja v. Irving (1958) 49
Cal.2d 647 (Biakanja). How one views this test apparently depends
on the beholder. (Compare Alvarez, supra, 228 Cal.App.4th at pp.
948–951 [Biakanja dictates duty] with Lueras, supra, 221
Cal.App.4th at p. 67 [Biakanja dictates no duty].) Our view is that
Lueras and allied opinions correctly analyzed the Biakanja factors.
Rather than rely on this debatable test alone, we seek added
certainty by turning to the latest word from the California Supreme
Court in its Gas Leak Cases opinion. This case concerned the issue
of tort duty, albeit not in the mortgage modification context.
Rather, Gas Leak Cases arose when a utility accidentally let
methane escape, which caused nearby businesses to lose money.
Like Sheen, these businesses suffered neither personal injury nor
property damage. Their losses were purely economic. The question
in Gas Leak Cases was whether the utility owed these businesses a
tort duty of care. The High Court said no. The economic loss rule
means there is no such tort duty.
The Gas Leak Cases quoted a legal test called the “Rowland
factors” that derived from and is nearly identical to the Biakanja
test. (See Gas Leak Cases, supra, 7 Cal.5th at p. 398 [citing
Rowland v. Christian (1968) 69 Cal.2d 108, 113, which in turn cited
Biakanja]; id. at p. 400 [analyzing and applying Biakanja]; id. at p.
401 [the Biakanja test involved “a subset of the Rowland factors”].)
But the High Court eschewed “rote application of these separate socalled
Rowland factors” and instead took a comprehensive look at
the total considerations at play. (Id. at p. 399.)
One fundamental consideration was that economic losses
flowing from “a financial transaction gone awry” are “‘primarily the
domain of contract and warranty law or the law of fraud, rather
than of negligence.’” (Gas Leak Cases, supra, 7 Cal.5th at p. 402.)
Here we have a financial transaction gone awry and nothing more:
Sheen suffered neither personal injury nor property damage.
The Gas Leak Cases decision also considered the views of
other jurisdictions and of the Restatement of Torts. (Gas Leak
Cases, supra, 7 Cal.5th at pp. 403–407.) We follow this lead.
Decisions from other jurisdiction form a consensus that “cuts
sharply against imposing a duty of care to avoid causing purely
economic losses in negligence cases like this one . . . .” (Gas Leak
Cases, supra, 7 Cal.5th at p. 403.)
Courts in at least 23 states have refused to impose tort duties
on lenders about loan modifications. (See Prickett v. BAC Home
Loans (N.D.Ala. 2013) 946 F.Supp.2d 1236, 1244–1245 [applying
Alabama law]; Miller v. Bank of New York Mellon (Colo.Ct.App.
2016) 379 P.3d 342, 345–348; Burdick v. Bank of America, N.A.
(S.D.Fla. 2015) 99 F.Supp.3d 1372, 1377–1378 [applying Florida
law]; Chung v. JPMorgan Chase Bank, N.A. (N.D.Ga. 2013) 975
F.Supp.2d 1333, 1344–1346 [applying Georgia law]; Wigod v. Wells
Fargo Bank, N.A. (7th Cir. 2012) 673 F.3d 547, 567–568 [applying
Illinois law]; Jaffri v. JPMorgan Chase Bank, N.A. (Ind.Ct.App.
2015) 26 N.E.3d 635, 638; Legore v. OneWest Bank, FSB (D.Md.
2012) 898 F.Supp.2d 912, 918–919 [applying Maryland law]; Afridi
v. Residential Credit Solutions, Inc. (D.Mass. 2016) 189 F.Supp.3d
193, 199 [applying Massachusetts law]; Polidori v. Bank of America,
N.A. (E.D.Mich. 2013) 977 F.Supp.2d 754, 763–764 [applying
Michigan law]; Wivell v. Wells Fargo Bank, N.A. (8th Cir. 2014) 773
F.3d 887, 900 [applying Missouri law]; Anderson v. ReconTrust
Company, N.A. (Mont. 2017) 390 Mont. 12, 20; McGee v.
CitiMortgage (D.Nev. May 31, 2013, 2:12-CV-2025) 2013 U.S.Dist.
Lexis 76675, pp. *16–*17, 2013 WL 2405301, p. *6 [applying
Nevada law]; Schaefer v. Indymac Mortgage Services (1st Cir. 2013)
731 F.3d 98, 103–107 [applying New Hampshire law]; Patetta v.
Wells Fargo Bank, N.A. (D.N.J. Sep. 10, 2009, 3:09–CV–2848) 2009
U.S.Dist. Lexis 82338, pp. *30–*32, 2009 WL 2905450, p. *8
[holding no fiduciary duty exists between borrowers and lenders
that would support non-contractual liability under New Jersey law];
Dooley v. Wells Fargo Bank, Nat. Ass’n (S.D.Ohio 2013) 941
F.Supp.2d 862, 866–867 [applying Ohio law]; Medici v. JP Morgan
Chase Bank, N.A. (D.Or. Jan. 15, 2014, 3:11–CV–00959) 2014
U.S.Dist. Lexis 4928, pp. *9–*10, 2014 WL 199232, pp. *3–*4;
Bordoni v. Chase Home Finance LLC (E.D.Pa. 2019) 374 F.Supp.3d
378, 384–386 [applying Pennsylvania law]; Henderson v. Wells
Fargo Bank, N.A. (N.D.Tex. 2013) 974 F.Supp.2d 993, 1010–1012
[applying Texas law]; Needham v. Fannie Mae (D.Utah 2012) 854
F.Supp.2d 1145, 1153 [applying Utah law]; Parks v. BAC Home
Loan Servicing, LP (E.D.Va. 2011) 825 F.Supp.2d 713, 716
[applying Virginia law]; Srok v. Bank of Am. (E.D.Wis. Nov. 6, 2015,
15-CV-239) 2015 U.S.Dist. Lexis 151025, pp. *17–*21, 2015 WL
6828078, pp. *7–*8 [applying Wisconsin law]; McNeely v. Wells
Fargo Bank, N.A. (S.D.W.Va. Dec. 10, 2014, 2:13-CV-25114) 2014
U.S.Dist. Lexis 170784, pp. *12–*20, 2014 WL 7005598, pp. *5–*7;
Powell v. Ocwen Loan Servicing, LLC (D.Wyo. Aug. 7, 2014, 14-CV-
113) 2014 U.S.Dist. Lexis 187163, pp. *12–*16, 2014 WL 11498232,
pp. *5–*6 [applying Wyoming law].)
This 23-state bloc is the dominant position, but there may be
a contrary minority view. An unpublished 2014 federal district
court opinion reported two dissenting cases: one unpublished
decision from Arizona and another from Mississippi. (See Powell v.
Ocwen Loan Servicing, LLC, supra, 2014 U.S.Dist. Lexis 187163, p.
*13, 2014 WL 11498232, pp. *5–*6 [citing McIntosh v. IndyMac
Bank, FSB (D.Ariz. Jan. 10, 2013, CV-11-1805) 2013 U.S.Dist. Lexis
3959, pp. *6–*7, 2013 WL 135315, p. *2; Montgomery v.
CitiMortgage, Inc. (S.D.Miss. 2013) 955 F.Supp.2d 640, 649–650
So perhaps Arizona and Mississippi support Alvarez. We are
The pertinent law in Arizona appears to be a bit of a mixed
bag. (Compare Snyder v. HSBC Bank, USA, N.A. (D.Ariz. 2012)
913 F.Supp.2d 755, 775–776 [noting relevant Arizona law “is not
well-settled”] with id. at p. 776 [concluding bank owed no duty to
borrower] and Zazueta v. Nationstar Mortg., LLC (D.Ariz. Apr. 1,
2014, (CV-13-1415), 2014 U.S.Dist. Lexis 189627, pp. *16–18, 2014
WL 12527708, pp. *6–*7 [apparently holding no tort duty exists
between a financial institution and a borrower].)
We have similar uncertainty about the law of Mississippi.
(Compare Poppelreiter v. GMAC Mortg., LLC (N.D.Miss. Dec. 7,
2011, 1:11CV008) 2011 U.S.Dist. Lexis 140957, pp. *8–*9, 2011 WL
6100440, p. *3 [relationship between a mortgagor and mortgagee is
not a fiduciary one but rather an arms-length business transaction
involving a normal debtor-creditor relationship] with Montgomery,
supra, 955 F. Supp.2d at 649 [under Mississippi law a negligence
claim may be founded on the breach of a legal duty arising from a
contract between parties].)
Our uncertainty about Arizona and Mississippi does not
matter. Whether the tally is 23 to zero or 23 to two, the
overwhelming supermajority of states disagree with Alvarez.
The dominant position is there is no tort duty during
mortgage modification negotiations. This consensus is “a striking
degree of unanimity.” (Gas Leak Cases, supra, 7 Cal.5th at p. 407.)
It weighs against Alvarez.
Turning next to the Restatement of Torts, it supports Lueras
and opposes Alvarez, as we explain.
There is “[l]ittle wonder” the Restatement “takes the
dominant view. Although acknowledging that ‘[d]uties to avoid the
unintentional infliction of economic loss’ exist in certain recognized
circumstances, the latest Restatement provides that there is ‘no
general duty to avoid the unintentional infliction of economic loss
on another.’ (Rest.3d, Torts, Liability for Economic Harm (Tent.
Draft. No. 1, Apr. 4, 2012) § 1 (Restatement T.D. 1).)” (Gas Leak
Cases, supra, 7 Cal.5th at p. 407.)
Specifically, the most recent Restatement explains there can
be no liability in tort for economic loss caused by negligence in the
performance or negotiation of a contract between its parties.
(Rest.3d Torts, Liability for Economic Harm (Tent. Draft No. 1, Apr.
4, 2012) § 3.) Certain exceptions exist but do not apply here.
The Restatement gives its rationale. “When a party’s
negligence in performing or negotiating a contract causes economic
loss to the counterparty, remedies are determined by other bodies of
law: principally the law of contract, though sometimes also the law
of restitution or relevant statutes. The law of contract and the law
of restitution have been developed for the specific purpose of
allocating economic losses that result from the negotiation and
performance of contracts. They provide a more extensive and finely
tuned apparatus for the purpose than the law of torts, which has
developed primarily to address injuries that occur outside
contractual relationships. [¶] [This approach] serves several
purposes. When a dispute arises, the rule protects the bargain the
parties have made against disruption by a tort suit. Seen from an
earlier point in the life of a transaction, the rule allows parties to
make dependable allocations of financial risk without fear that tort
law will be used to undo them later. Viewed in the long run, the
rule prevents the erosion of contract doctrines by the use of tort law
to work around them. The rule also reduces the confusion that can
result when a party brings suit on the same facts under contract
and tort theories that are largely redundant in practical effect.”
(Rest.3d Torts, Liability for Economic Harm (Tent. Draft No. 1, Apr.
4, 2012) § 3, com. b., p. 22.)
The Restatement rebuts factors that may have contributed to
Alvarez’s result. “Pressure to find a tort claim arises because the
stakes are high and the plaintiff’s position is sympathetic . . . . But
if denying relief to the plaintiff seems to produce an injustice on
those grounds, a better response is to reconsider the application of
. . . the other doctrines of contract law that are responsible for the
result. Using tort law to bypass those doctrines weakens them and
retards their development. It also interferes with the ability of
others to make reliable agreements in the future. In the
alternative, a result unappealing on its equities may call for a
statutory solution. Statutes can impose responsibility on sellers for
certain risks without distorting widely applicable legal principles to
reach the desired outcome. . . . When two parties negotiate over a
contract, the amount of care they are expected to show for each
other’s interests will often be unclear or significantly less than the
care expected in a situation involving strangers or the risk of
physical injury. That is among the reasons why the duties of care
between parties who negotiate contracts are not governed by the
law of tort.” (Rest.3d Torts, Liability for Economic Harm (Tent.
Draft No. 1, Apr. 4, 2012) § 3, com. d., pp. 27–28.)
The Restatement is definitive: it “eliminates tort claims
based on a defendant’s negligent statements of intent to make a
contract, predictions about the likelihood of a contract, or mistaken
suggestions that a contract has been formed.” (Rest.3d Torts,
Liability for Economic Harm (Tent. Draft No. 1, Apr. 4, 2012) § 3,
com. e., p. 29.)
“Detailed doctrines in the law of contract, of restitution, and
of estoppel have developed to provide relief in such cases where
necessary. If those bodies of law fall short, the appropriate
response again is to reform them, not to use the law of tort to
supply their deficiencies.” (Rest.3d Torts, Liability for Economic
Harm (Tent. Draft No. 1, Apr. 4, 2012) § 3, com. e., p. 29.)
In sum, the consensus of other jurisdictions and of the
Restatement cuts against Alvarez and similar decisions.
Logic points to the same conclusion: “it is strange to impose a
negligence duty on lenders to carefully review modification
applications when there is no such tort duty to approve applications
as a result of that review.” (Carbajal v. Wells Fargo Bank, N.A.
(C.D.Cal. Apr. 10, 2015, CV 14-7851) 2015 U.S.Dist. Lexis 47918, p.
*15, 2015 WL 2454054, p. *6, affd. (9th Cir. 2017) 697 Fed.Appx.
555, original italics.)
Finally, the Gas Leak Cases opinion noted the ability of
legislatures to craft remedies beyond the ken of courts.
Legislatures, both state and federal, have responded to problems in
the mortgage modification field. “[T]hrough the democratic process,
the Legislature can bring to bear a mix of expertise while
considering competing concerns to craft a solution in tune with
public demands.” (Gas Leak Cases, supra, 7 Cal.5th at p. 413.)
In the mortgage modification field, legislatures have been
active, and their results have been designedly limited in time and
scope. Neither legislators nor borrowers (nor others) want to
increase mortgage costs or to limit the availability of mortgages and
mortgage modifications. (Cf. Daniels, supra, 246 Cal.App.4th at p.
1183 [absent a duty in the first place to modify a loan or even to
evaluate such an application, imposing negligence liability for the
mishandling of loan modification applications could discourage
lenders from offering modification].)
After fair notice, legislators can hear from disinterested
experts and from all affected sectors before acting. After hearings
and reports, legislatures can craft broadly acceptable compromises
and can enact limited and experimental pilot programs.
Legislatures can adjust policy swiftly in the face of change and
Courts can do none of these things well. The complexity and
importance of financial markets gives special force to the law of
unintended consequences.
We conclude we should follow Lueras, not Alvarez. Under this
view, the trial court properly dismissed Sheen’s negligence count
because a lender does not owe a borrower a common law duty to
offer, consider, or approve a loan modification.
Sheen’s other claims are meritless. We agree with the trial
court the intentional infliction of emotional distress claim is
frivolous. Wells’s alleged responses to Sheen’s loan modification
requests may have been confusing, confused, tardy, or flat wrong,
but this alleged conduct was not so extreme as to exceed all bounds
of what a civilized society usually tolerates. (Vasquez v. Franklin
Management Real Estate Fund, Inc. (2013) 222 Cal.App.4th 819,
The trial court also was right to dismiss Sheen’s section 17200
claim. (See, e.g., AMN Healthcare, Inc. v. Aya Healthcare Services,
Inc. (2018) 28 Cal.App.5th 923, 950.)

Outcome: The judgment is affirmed. Wells is entitled to its costs on

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