In Boschma v. Home Loan Center, Inc., ___ Cal.App.4th ___ (Aug. 10, 2011), the Court of Appeal (Fourth Appellate District, Division Three) reversed the judgment entered after an order sustaining a demurrer to UCL "fraudulent" and "unfair" prong claims without leave to amend. The Court of Appeal also reversed as to the common-law fraud claims.
The claims were predicated on partial omissions by a lender in connection with option adjustable rate mortgage loans ("Option ARM" loans). The Court criticized the lender's "byzantine descriptions" of the loan terms, which were "hidden in the complexity" of the various loan documents and TILA disclosures. Slip op. at 23, 29. In other words, although the material facts were, technically speaking, fully disclosed, the deceptive manner in which they were allegedly disclosed made them actionable:
Keeping in mind the procedural posture of this case, we conclude plaintiffs have adequately pleaded that material facts were concealed by inaccurate representations and half-truths. If plaintiffs can show defendant intentionally used its Option ARM forms to deceive borrowers, plaintiffs may be able to establish a fraud claim. Plaintiffs’ actual interest rates and monthly payments sufficient to amortize the loan (or at least pay the accruing interest) were hidden in the complexity of the Option ARM contract terms. “‘The fact that a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced. There is no duty resting upon a citizen to suspect the honesty of those with whom he [or she] transacts business. Laws are made to protect the trusting as well as the suspicious. [T]he rule of caveat emptor should not be relied upon to reward fraud and deception.’” (Thompson v. 10,000 RV Sales, Inc. (2005) 130 Cal.App.4th 950, 976.)
Slip op. at 23.
The opinion also discusses the three-way split in authority over the proper formulation of the UCL's "unfair" prong. Id. at 27. While the opinion is a little ambiguous, the Court appears to hold that the allegations satisfied all three formulations. See id. at 29.