In Puentes v. Wells Fargo Home Mortgage, Inc., ___ Cal.App.4th ___ (Feb. 28, 2008), the Court of Appeal (Fourth Appellate District, Division One), held that the trial court did not err by granting the defendant's summary judgment motion as to the plaintiffs' UCL claim. The claim challenged the way the defendant mortgage company, Wells Fargo, calculated interest on plaintiffs' home loans. Slip op. at 2-3. The Court of Appeal:
Discussed the Cel-Tech "safe harbor" in some detail. Wells Fargo argued that federal Regulation Z (12 C.F.R. sections 226 et seq.) authorized their method of calculating interest. The Court, however, decided that "[w]e need not resolve the issue." Plaintiffs' challenge to the interest calculation was predicated on the deed of trust, a contract, which they said prohibited Wells from calculating interest the way it did. Quoting a federal case, Watson Laboratories v. Rhone-Poulenc Rorer, Inc., 187 F. Supp.2d 1099, 1117 n.12 (C.D. Cal. 2001), the Court said that "[a] breach of contract may ... form the predicate for Section 17200 claims, provided it also constitutes conduct that is 'unlawful, unfair, or fraudulent.'" Slip op. at 8.
The Court then applied the pre-Prop. 64 formulation of "fraudulent," and held that Wells' interpretation of the trust deed provisions respecting interest calculations was "reasonable and not likely to deceive members of the public." Slip op. at 9.
The Court then discussed the pre- and post-Cel-Tech formulations of "unfair" at some length. Slip op. at 10-12. It determined, however, that "[w]e are not required to adopt a particular definition of 'unfair' here, however, because Wells Fargo's practice is not actionable under any of the definitions." Id. at 12. The opinion concludes:
The consumer benefit of Wells Fargo's adherence to Regulation Z and Appendix J in calculating equal monthly payments — and not recalculating interest during the year of payoff to retrospectively make monthly payments unequal — far outweighs the de minimus injury to some consumers who, like the Puenteses, may pay for a day or two of additional interest than if actual days in the month were used.
Wells Fargo met its burden of persuasion that its practice is not fraudulent or unfair within the meaning of the UCL, and the Puenteses raised no triable issues of material fact in their opposing papers. Accordingly, summary judgment was proper.
Slip op. at 18-19.
The full text of the opinion appears after the jump.