MALLANO, P.J.
In this action for wrongful foreclosure, the borrowers' causes of action assert two essential wrongs: (1) the lender negligently processed their loan application by loaning them too much money based on an overvalued property appraisal, and (2) the borrowers made a sufficient tender of the delinquent amount on the loan to stop the foreclosure.
The trial court sustained demurrers to the original and first amended complaints with leave to amend. This appeal focuses on the second amended complaint and the trial court's order sustaining the demurrer to that complaint without leave to amend.
We conclude that the lender did not owe the borrowers a duty to offer a smaller loan, and the borrowers did not satisfy the tender requirement. Accordingly, the trial court properly sustained the demurrer to the second amended complaint and dismissed the action.
The allegations in this appeal are taken from the second amended complaint. We accept them as true. (See Hensler v. City of Glendale (1994) 8 Cal.4th 1, 8, fn. 3.)
This action was filed on June 18, 2010. After two demurrers and the resulting complaints, plaintiffs filed a second amended complaint (complaint) on November 19, 2010. It alleged as follows.
In or about February 2007, plaintiffs, Grigori and Zarui Adjian, wanted to purchase property located on Awenita Court in Chatsworth, California. They submitted a loan application to Washington Mutual Bank, F.A. (WAMU). Initially, WAMU determined the value of the property to be $3.2 million. Later, WAMU valued the property at $5 million and offered to make a loan in the amount of $4 million. Based on the appraisal of $5 million, the Adjians agreed to obtain a $4 million loan and executed a note secured by a deed of trust on the property.
On or about September 25, 2008, JPMorgan Chase Bank, N.A. (JPMorgan), acquired certain assets and liabilities of WAMU through the Federal Deposit Insurance Corporation (FDIC), which was acting as a receiver for WAMU. In essence, the FDIC seized and sold WAMU to JPMorgan.
In or about June 2009, the Adjians suffered financial hardship and became delinquent in their loan obligations. In November 2009, JPMorgan initiated foreclosure proceedings. Throughout this period, the parties were engaged in negotiations to achieve a loan modification. The Adjians submitted financial data to JPMorgan and were led to believe that a tentative modification agreement had been reached. The Adjians waited for the modification documents and instructions to arrive. During the negotiations, JPMorgan assured the Adjians that the scheduled foreclosure date would be postponed or cancelled as long as the negotiations were ongoing.
In early June 2010, the Adjians contacted JPMorgan by telephone and were told that their loan modification application had been denied. They were not sent any kind of written notice to that effect. Nor did JPMorgan inform the Adjians about the scheduled trustee's sale set for July 6, 2010. That information was provided by the trustee, California Reconveyance Company, when the Adjians contacted it.
With respect to tender, the Adjians alleged: "Plaintiffs hereby offer[] to make an unconditional tender of all payments legally determined to be owed to WAMU now [JPMorgan]. At the time of the alleged default on the loan obligations on the Promissory Note and Deed[] of Trust, Plaintiffs had the ability to make an unconditional tender of a sum sufficient to cure the default, and can fully and unconditionally make a valid tender of payment or reinstatement of the amount owing under the deed[] of trust. However, because Defendants did not serve Plaintiffs with the notice that they would no longer consider Plaintiffs' loan modification application or would no longer offer any options that may be available to Plaintiffs in order to keep their Property, as they have promised and, was supposed to under President Obama's Loan Modification program, rules and regulation[s], Plaintiffs were prevented from making such unconditional tender of payment in that Plaintiffs were unable to secure available refinancing in order to cure the alleged default in Plaintiffs' loan obligation."
The complaint contained five causes of action: wrongful foreclosure, failure to exercise due care in approving the loan application, unfair business practices, quiet title, and breach of the covenant of good faith and fair dealing.
Notwithstanding the labeling of the causes of action, the banks' alleged wrongs consisted of two essential claims: (1) WAMU negligently processed the Adjians' loan application by loaning them too much money based on an overvalued property appraisal, and (2) the Adjians made a sufficient tender to JPMorgan of the delinquent amount on the loan to stop or set aside the foreclosure.
JPMorgan demurred to the complaint, arguing it owed no duty to the Adjians to make a loan in the "proper" amount, and the Adjians had not satisfied the tender rule to stop or set aside the foreclosure.
The Adjians filed opposition.
The trial court sustained the demurrer without leave to amend. On March 4, 2011, an order of dismissal was entered. The Adjians appealed.
In reviewing the ruling on a demurrer, "we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . . We also consider matters which may be judicially noticed.' . . . When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. . . . And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, citations omitted.)
On appeal, the Adjians argue again that WAMU owed them a duty to process their loan application with due care so as not to make too large a loan, and they satisfied the tender rule such that the foreclosure was wrongful. We conclude there is no merit to either contention.
"[A] financial institution acting within the scope of its conventional activities as a lender of money owes no duty of care to a borrower in preparing an appraisal of the security for a loan when the purpose of the appraisal simply is to protect the lender by satisfying it that the collateral provides adequate security for the loan." (Nymark v. Heart Fed. Savings & Loan Assn. (1991) 231 Cal.App.3d 1089, 1092 (Nymark).)
In Nymark, a borrower sued his lender for negligence over the lender's appraisal of the property securing the loan. After the loan had been approved and funded, the borrower discovered construction defects and building code violations on the property. The Court of Appeal held that the complaint failed to state a cause of action for negligence because the lender "owed no duty of care to [the borrower] in the preparation of the property appraisal." (Nymark, supra, 231 Cal.App.3d at p. 1097.) As Nymark explained: "[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money. . . . Thus, for example, a lender has no duty to disclose its knowledge that the borrower's intended use of the loan proceeds represents an unsafe investment. . . . `The success of the [borrower's] investment is not a benefit of the loan agreement which the [lender] is under a duty to protect . . . .' . . . `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."' . . .
"Here, [the lender] performed the appraisal of [the borrower's] property in the usual course and scope of its loan processing procedures to protect [its] interest by satisfying it that the property provided adequate security for the loan. The complaint does not allege . . . that the appraisal was intended to induce [the borrower] to enter into the loan transaction or to assure him that his collateral was sound. Accordingly, in preparing the appraisal, [the lender] was acting in its conventional role as a lender of money to ascertain the sufficiency of the collateral as security for the loan. `Normal supervision of the enterprise by the lender for the protection of its security interest in loan collateral is not "active participation" [in the financed enterprise beyond that of the ordinary role of a lender in a loan transaction].' . . . Thus, we must conclude that [the lender] owed no duty of care to [the borrower] in the preparation of the property appraisal." (Nymark, supra, 231 Cal.App.3d at pp. 1096-1097, citations & fn. omitted.)
Nymark pointed out that a borrower is not at the mercy of the lender in deciding whether to obtain the loan: "While it was foreseeable the appraisal might be considered by [the borrower] in completing the loan transaction, the foreseeability of harm was remote. [The borrower] was in as good a position as, if not better position than, [the lender] to know the value and condition of the property. One who seeks financing to purchase real property has many means available to assess the property's value and condition, including comparable sales, advice from a realtor, independent appraisal, contractors' inspections, personal observation and opinion, and the like. . . . We believe it is not reasonably foreseeable that a borrower will be influenced to his or her detriment by an appraisal prepared by the lender for its own benefit because the borrower is in a position in which he or she knows or should know the value and condition of the property independent of the appraisal made for the lender's protection. Stated another way, the borrower should be expected to know that the appraisal is intended for the lender's benefit to assist it in determining whether to make the loan, and not for the purpose of ensuring that the borrower has made a good bargain, i.e., not to insure the success of the investment." (Nymark, supra, 231 Cal.App.3d at p. 1099.)
The conclusion in Nymark is also supported by public policy considerations. "`[A] strong public policy exists, if our financial institutions are to remain solvent, to prevent a conventional money lender from having to insure [the success of every investment].' . . . Imposition on a lender of a duty of care in the preparation of an appraisal done solely for the lender's benefit `would drastically alter the risk undertaken by the [lender] in the loan agreement.' . . . Moreover, creation of such a duty would adversely affect consumers, particularly those seeking to acquire affordable housing. A lender which currently obtains a cursory appraisal at minimal cost to the borrower in order to satisfy itself that the collateral provides adequate security for the loan would be compelled by the threat of negligent appraisal liability to undertake a comprehensive examination of the collateral. The added cost of such a detailed appraisal undoubtedly would be passed on to the borrower. For housing loans, this consequence would be contrary to the public interest in reducing the cost of acquiring housing. . . . [¶]. . . A contrary conclusion would produce the incongruous result that a lender which conducts an appraisal for its own benefit could become responsible for guaranteeing to the borrower the adequacy and soundness of the collateral the borrower has pledged as security for the loan. Such a nonsensical result is not compelled by the law." (Nymark, supra, 231 Cal.App.3d at pp. 1099-1100, citations omitted.)
As another court has recognized: "Neither the [complaint] nor [the borrowers'] proposed amendments allege that [the lender] expressly represented to [them] that they had the ability to make the loan payments specified in the loan documents. [The borrowers] appear to conflate loan qualification and loan affordability. In effect, [they] argue that they were entitled to rely upon [the lender's] determination that they qualified for the loans in order to decide if they could afford the loans. [The borrowers] cite no authority for this proposition, and it ignores the nature of the lender-borrower relationship. `[A]bsent special circumstances . . . a loan transaction is at arm's length and there is no fiduciary relationship between the borrower and lender. . . .' . . . A commercial lender pursues its own economic interests in lending money. . . . A lender `owes no duty of care to the [borrowers] in approving their loan.' . . . A lender is under no duty `to determine the borrower's ability to repay the loan. . . . The lender's efforts to determine the creditworthiness and ability to repay by a borrower are for the lender's protection, not the borrower's.'" (Perlas v. GMAC Mortgage, LLC (2010) 187 Cal.App.4th 429, 436, citations omitted; accord, Nymark, supra, 231 Cal.App.3d at p. 1093, fn. 1 [relationship between lender and borrower is not fiduciary in nature].)
The foregoing analysis applies here. WAMU provided traditional loan services to the Adjians and determined whether the property was sufficient collateral for the loan. (See Nymark, supra, 231 Cal.App.3d at p. 1097.) It did not actively participate in the use of the funds. (See ibid.; cf. Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 866-868 [lender had duty to home buyers to prevent major structural damage in building of homes where lender, through active participation in project development, including supervision of construction, fostered building of seriously defective structures].) In addition, the Adjians were "in as good a position as, if not better position than, [WAMU] to know the value and condition of the property." (Nymark, at p. 1099.) Nor is a lender under any duty to determine the borrower's ability to repay the loan. (Perlas v. GMAC Mortgage, LLC, supra, 187 Cal.App.4th at p. 436.) The duty the Adjians seek to impose "would adversely affect consumers, particularly those seeking to acquire affordable housing." (Nymark, at p. 1100.) "Thus, we must conclude that [WAMU] owed no duty of care to [the Adjians] in the preparation of the property appraisal." (Id. at p. 1097.)
Finally, the Adjians' reliance on Civil Code section 1708 is misplaced. That statute provides: "Every person is bound, without contract, to abstain from injuring the person or property of another, or infringing upon any of his or her rights." But section 1708 "states only a general principle of law . . . [and] . . . neither authorizes a cause of action for damages nor establishes specific standards . . . ." (Ley v. State of California (2004) 114 Cal.App.4th 1297, 1306.)
"[A]n action to set aside [a foreclosure] sale, unaccompanied by an offer to redeem, would not state a cause of action which a court of equity would recognize." (Copsey v. Sacramento Bank (1901) 133 Cal. 659, 662.) "A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust." (Karlsen v. American Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117.) "[A]n action to set aside a trustee's sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security. . . . This rule is premised upon the equitable maxim that a court of equity will not order that a useless act be performed. `Equity will not interpose its remedial power in the accomplishment of what seemingly would be nothing but an idly and expensively futile act, nor will it purposely speculate in a field where there has been no proof as to what beneficial purpose may be subserved through its intervention.'" (Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, 578-579, citations omitted.) "[T]ender . . . [is] an essential element of any causes of action based upon irregularities in the sale procedure. To hold otherwise would permit plaintiffs to state a cause of action without the necessary element of damage to themselves." (Id. at p. 580.)
"`[N]othing short of the full amount due the creditor is sufficient to constitute a valid tender, and the debtor must at his peril offer the full amount.' . . . The doctrine of tender has been correctly summarized in this fashion: `The rules which govern tenders are strict and are strictly applied, and where the rules are prescribed by statute or rules of court, the tender must be in such form as to comply therewith. The tenderer must do and offer everything that is necessary on his part to complete the transaction, and must fairly make known his purpose without ambiguity, and the act of tender must be such that it needs only acceptance by the one to whom it is made to complete the transaction.'" (Gaffney v. Downey Savings & Loan Assn. (1988) 200 Cal.App.3d 1154, 1165, citations omitted.) The tendered funds must be "unconditionally available to the creditor." (Id. at p. 1167.) "[A]bsent an effective and valid tender, the sale became valid and proper. The hurdle which [the borrower] has not been able to clear either legally or financially is that he never made a valid tender." (Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.App.3d at p. 121, italics omitted.)
The Adjians did not allege they made a valid tender. They alleged only that they could tender "all payments legally determined to be owed." (Italics added.) That the delinquency be "legally determined" is not an unconditional tender. (See Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.App.3d at pp. 119-120.) Rather, it is a "substitute tender [that] is neither a tender nor a binding offer. It is a request by [the Adjians] predicated upon nothing except . . . the court [issuing a] judicial[] decree that [they are] entitled to an option indefinite in duration to buy the property embraced in the trust deed upon such terms as the court may decree to be reasonable.
". . . Even if it be assumed that [the borrower] implicitly agrees to comply with a judgment nothing is alleged which even remotely suggests [he] would have the ability to comply with the `reasonable terms' to be decreed by the court if he desired to comply.
"Implicit, too, in the request for a judicially decreed option is the solid probability that if [the borrower] is not satisfied with the terms set out in any judgment rendered, that he would, by appeal and otherwise, exhaust every legal remedy available to him until there is a final judgment.
"When that day arrives, [the borrower] may walk away from his option or assuming an implicit obligation to comply . . . there is nothing to show that he could comply with such final judgment.
"The substitute tender procedure invoked by [the borrower] literally leaves [the lender and the trustee] without a remedy. It clouds indefinitely title to the property and jeopardizes the security. Even in California, there is a probability that property may diminish in value. Knowledgeable purchasers of real property and those who accept it as security for loans know that even real estate that has a potential for appreciation must be used within a reasonable time after a purchase or a loan is made to insure the capital placed at risk. If [the borrower's] theory were accepted and the property appreciated in value, he might, depending upon the terms of the decree, exercise his option to buy. If it depreciated in value [the lender and the trustee] would have been compelled by a court of equity to hold a depreciating security and during the holding period lose accruing interest on the original loan and pay all taxes and accruing expenses.
"No such intolerable situation can be countenanced and we cannot conceive how a court of law or equity would be a party to it." (Karlsen v. American Sav. & Loan Assn., supra, 15 Cal.App.3d at pp. 119-120.)
Further, the allegations state that the Adjians "were prevented from making [an] unconditional tender of payment in that [they] were unable to secure available financing in order to cure the alleged default." This allegation alone is sufficient to show that a valid tender was never made.
The Adjians believe the notice of default overstated the amount owed by $10,246.43 and the notice of trustee's sale overstated the amount due by $634,141.66. Nevertheless, this difference of opinion did not excuse the Adjians from making a tender. As to the amount that should have been tendered in these circumstances, the parties have not briefed that issue, so we express no view on the matter. We simply hold that the discrepancy between the parties did not permit the Adjians to tender nothing.
In Onofrio v. Rice (1997) 55 Cal.App.4th 413, a real estate broker who was also a foreclosure consultant violated his statutory duties after offering to assist the plaintiff in avoiding foreclosure. But the foreclosure occurred, and the broker-consultant bought the property. In light of the statutory violations and the inequitable conduct of the broker-consultant, the Court of Appeal upheld the trial court's rescission of the sale. In doing so, the court commented that "`[a] tender may not be required where it would be inequitable to do so'" (id. at p. 424) or "`if the action attacks the validity of the underlying debt'" (ibid.). The inequity in Onofrio is not present here. Nor did the Adjians challenge the validity of the loan: They did not contend the lender violated any statutory duty. Rather, they assert only that the loan should have been for a smaller amount. Like Onofrio, none of the Adjians' other authorities justify an exception to the tender rule or indicate that they satisfied it.
Last, in their opening brief, the Adjians state that JPMorgan has not yet completed the foreclosure sale, making a tender premature. But the complaint alleges that the trustee's sale "is now scheduled for October 7, 2010," and the opening brief (the Adjians' only brief) does not seek to amend the complaint to allege a different date. Also, as JPMorgan points out, California's nonjudicial foreclosure statute (Civ. Code, §§ 2924-2924l) authorizes a lender "to accelerate the maturity date of the principal and interest on any loan secured [by a mortgage or deed of trust] . . . upon the failure of the trustor or mortgagor to pay . . . ." (Civ. Code, § 2924.7, subd. (a).)
Accordingly, the trial court properly sustained the demurrer and dismissed the action.
The order is affirmed.
CHANEY, J. and JOHNSON, J., concurs.
