APPEAL from the Superior Court of San Bernardino County. Christopher Warner (Judge of the Municipal Court, assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) and Duane M. Lloyd and Joseph E. Johnston, Judges. Affirmed.

Albert E. Mead, Jr., for Plaintiffs and Appellants.

White & Case, John A. Sturgeon and John D. Early for Defendant and Respondent.

The owners of a parcel of bare land signed a long-term ground lease with a developer, who planned to improve the property with a commercial building. To facilitate that construction, the owners executed a deed of trust in favor of the developer’s construction lender. Ultimately, the developer defaulted on the construction loan and the assignee of the lender foreclosed on the owner’s fee interest.

The owners sued the developer, the lender, and the lender’s assignee for damages and other relief. As to the lender, their theories primarily relied upon their assertion that the deed of trust was, in substance, a surety agreement. Their action against the lender was dismissed when they declined to amend their complaint after a demurrer was sustained to each count alleged. The owners appeal from the order of dismissal and from the post-judgment order awarding attorney’s fees to the lender.

While we agree that the owners sufficiently pleaded that they were sureties rather than principal obligors, the owners did not ultimately demonstrate that the trial court erred in sustaining the demurrers and awarding attorney’s fees. Accordingly, we affirm.

In evaluating an order sustaining a demurrer to a pleading, we give the pleading a reasonable interpretation by reading it as a whole and all of its parts in their context. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) We assume the truth of all material facts which have been properly pleaded, of facts which may be inferred from those expressly pleaded, and of any materials facts of which judicial notice has been requested and may be taken. (Crowley v. Katleman (1994) 8 Cal.4th 666, 672; Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.)

When considering the legal effect of those facts, we disregard any erroneous or confusing labels employed by the plaintiff. (Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908.) A complaint is sufficient if it alleges facts which state a cause of action under any possible legal theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) However, because it is not a reviewing court’s role to construct theories or arguments which would undermine the judgment (People v. Stanley (1995) 10 Cal.4th 764, 793), we consider only those theories advanced in the appellant’s briefs.

The operative pleading is the first amended complaint, filed in April of 1996. It alleges the following facts.

Albert E. Mead and Barbara Duque Mead are the trustees of the Albert E. Mead and Barbara Duque Mead Revocable Inter Vivos Trust. (The complaint refers to the individuals and the trust collectively as the "‘Meads.’") The Meads bought an undeveloped parcel of property from Theodore B. Zwicker in 1988. Simultaneously, the Meads executed a 30-year ground lease to Cooley Executive Plaza II ["Cooley"], a limited partnership of which Zwicker was the general partner. The lease required the Meads to "‘subordinate’ [their] interest in the Property to an anticipated construction lender’s deed of trust" by executing the deed of trust, but not the promissory note which the deed of trust would secure.

In 1989, Zwicker arranged for Sanwa Bank California to provide the construction financing. The construction loan agreement and the promissory note for $1,020,000 were signed solely by Cooley. However, the deed of trust securing the performance of the obligations of Cooley under the loan agreement and the promissory note was executed by both Cooley and the Meads, and encumbered both Cooley’s leasehold interest and the Meads’ fee interest in the property. The deed of trust identifies the Meads and Cooley jointly as "‘Trustor’" and imposes a variety of obligations upon the Trustor. On the other hand, it provides that the Meads assumed "no personal liability for the performance of the obligations of Cooley under this Deed of Trust" and could not be held personally liable by Sanwa.

Cooley defaulted on its obligations under both the ground lease and the promissory note in 1993. In August of that year, Sanwa commenced nonjudicial foreclosure proceedings by recording a notice of default. The Meads urged Sanwa to either seek the appointment of a receiver or allow the Meads to assume Cooley’s obligations. Sanwa assured the Meads that a receiver would be appointed. The Meads also filed an unlawful detainer action to remove Cooley from possession of the property. The action was dismissed in 1994, after Sanwa made the dismissal a condition of a forbearance agreement by which Sanwa agreed to postpone publication of its notice of sale.

In August of 1995, the last of numerous extensions of the maturity date of the promissory note expired, and the note became due. Sanwa started a new foreclosure proceeding, but assured the Meads that it would proceed only against Cooley’s leasehold interest. Sometime thereafter, Sanwa reversed itself and informed the Meads that it intended to foreclose on its security interest in the fee as well as the leasehold.

In December of 1995, the Meads formally demanded that Sanwa exhaust all remedies against Cooley prior to exercising any right under the deed of trust against the Meads. In particular, they demanded that Sanwa terminate the pending foreclosure proceedings as to the Meads’ fee interest in the property.

Further allegations will be discussed in connection with individual counts.

Also in December of 1995, the Meads filed suit against Sanwa, Zwicker, and Cooley. A demurrer by Sanwa was sustained with leave to amend. Thereafter, the Meads filed their first amended complaint. As to Sanwa, it asserts claims for damages on the basis of: breach of fiduciary duty (first count); breach of the covenant of good faith and fair dealing (second count); fraud (third count); negligent misrepresentation (fourth count); waste (fifth count); rescission and restitution (sixth count); negligence (seventh count); and breach of written contract (eighth count).

Sanwa again demurred: generally as to all counts, and specially as to the misrepresentation counts. The trial court sustained the demurrers to all counts, but granted leave to amend the third, fourth, fifth and sixth. When the Meads declined to amend, the complaint was dismissed and judgment was entered in favor of Sanwa.

Thereafter, Sanwa moved for attorney’s fees pursuant to Civil Code section 1717. Over the Meads’ opposition, the trail court granted the motion and awarded fees and costs in the sum of $45,870.29.

The Meads separately appealed from the order of dismissal and the order granting the attorney’s fees. We consolidated the two appeals for decision.

A. THE COMPLAINT SUFFICIENTLY ALLEGES THAT THE MEADS

ARE SURETIES.

"The suretyship relation . . . arises where two persons are under obligation to the same obligee, who is entitled to but one performance, as between the two who are bound, and one of them should ultimately bear the burden of the obligation. The obligor ultimately responsible for the debt is the principal and the other is the surety." (Everts v. Matteson (1942) 21 Cal.2d 437, 447.)

A suretyship may result from different types of promises: "A surety . . . is one who promises to answer for the debt, default, or miscarriage of another, or hypothecates property as security therefor." (Civ. Code, § 2787.) Those promises may be made in an express agreement or may be implied by law. (See, e.g., Braun v. Crew (1920) 183 Cal. 728, 731 [mortgagor and maker of secured note becomes surety when the property is sold and buyer assumes the debt].)

Because the parties focus primarily upon whether the Meads are sureties or principal obligors, we address that issue first. Have the Meads adequately pleaded the existence of a suretyship relationship between themselves and Sanwa?

The Meads repeatedly allege that they were the sureties of Cooley’s debt, not principal obligors. Sanwa dismisses those allegations on the ground that unsupported factual conclusions are disregarded when ruling on a demurrer. (Moore v. Regents of University of California, supra, 51 Cal.3d at p. 125.) However, the Meads pleaded a variety of facts to support that conclusion, including the following: only Cooley signed the note; the deed of trust recites that it secures the performance by Cooley of his obligations under the construction loan agreement and the note; the certificate of authority given by the Meads to Sanwa reiterates that the deed of trust is given to secure repayment of Cooley’s obligations; the deed of trust recites that the Meads shall have no personal liability for the payment of Cooley’s obligations; Sanwa excluded the Meads from negotiations concerning both the initial terms of the loan and its subsequent extensions; Sanwa extended the loan three times without the Meads’ knowledge or consent; and Sanwa considered the Meads to be third parties rather than borrowers or principal obligors.

Sanwa challenges the sufficiency of those factual allegations by arguing that they are contradicted and thus superseded by the terms of the deed of trust appended to the complaint, and that in any event the facts alleged by the Meads are insufficient as a matter of law to establish that they were only sureties. It is mistaken on both grounds.

1. The Recital in the Deed of Trust that the Meads Are Trustors Does Not

Conflict With Allegations in the Body of the Complaint that They Are

Sureties.

For purposes of a demurrer, we accept as true both facts alleged in the text of the complaint and facts appearing in exhibits attached to it. If the facts appearing in the attached exhibit contradict those expressly pleaded, those in the exhibit are given precedence. (Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1626-1627.) Pointing out that the Meads are identified as trustors in the deed of trust appended to the complaint, Sanwa argues that those "specific averments in the Deed of Trust" must control over any "contrary" allegations in the text of the complaint that the Meads are sureties.

It is mistaken. Because sureties include those who hypothecate their property as security for the debt of another (Civ. Code, § 2787), the allegation in the text that they are sureties is not inconsistent with the allegation in the deed of trust that they are trustors.

Even if "trustor" and "surety" were inconsistent, the rule giving precedence to allegations in exhibits could not have had any application in this context. Civil Code section 2832 provides that "[o]ne who appears to be a principal, whether by the terms of a written instrument or otherwise, may show that he is in fact a surety, except as against persons who have acted on the faith of his apparent character of principal." If written instruments attached to a pleading were always given precedence, then a supposed principal would be foreclosed from exercising the statutory right to prove that he or she was actually a surety.

2. The Meads Have Pleaded Sufficient Fact to Support their Allegation that

They Are Sureties rather than Principals.

Sanwa relies on Matthews v. Hinton (1965) 234 Cal.App.2d 736 [hereinafter, "Matthews"]) for the proposition that, as a matter of law, the facts alleged establish that the Meads are principal obligors rather than sureties. It reasons that (1) although Sanwa knew that, as between Cooley and the Meads, the Meads were acting as sureties, (2) Matthews holds that that fact is insufficient to establish the Meads’ suretyship status vis-à-vis Sanwa.

That analysis fails because Matthews was incorrectly decided.

Like the present case, Matthews arose from an agreement by property owners and their long-term lessees to subordinate the owners’ reversionary interest in the fee to a construction loan. The owners did not sign the promissory note made by the lessees, but did execute a deed of trust along with the lessees. (Id., 234 Cal.App.2d at pp. 738-739.) The lessees defaulted on the note, and the lender foreclosed upon the property. Contending that they were only sureties, the owners sued the lender for damages for the wrongful sale of the property. (Id., p. 739.)

The lender in Matthews moved for summary judgment, offering evidence that there was no agreement between itself and the owners except the deed of trust, and arguing that the deed of trust showed that the owners were principal obligors. (Id., p. 739.) In their opposition to the motion, the owners neither controverted the lack of a separate agreement nor offered any other evidence except that the lender knew of the lease. (Id., pp. 739, 742.) Finding no triable issues of fact, the trial court granted the lender’s motion for summary judgment. (Id., p. 739.)

The appellate court affirmed. (Matthews, p. 742.) It noted that every indication from the face of the deed of trust was that the owners had subjected their reversionary interest to primary liability for the lessees’ debt. For instance, "[t]here was nothing in the trust deed to tell the lender that its power of sale was limited to the sublessees’ estate for years." (Id., p. 741.) Therefore, the owners appeared to have signed the deed of trust as principal obligors. (Ibid.)

Citing Civil Code section 2832, the court acknowledged that the owners "had a right to show, if they could, that they were actually sureties even though they signed the trust deed as apparent principals." (Matthews, p. 742.) Although they were given the opportunity to make that showing in their opposition to the motion for summary judgment, the court held that they had failed to do so. The evidence offered by the owners—the lender’s knowledge of the relationship between the owners and the lessees—was insufficient to show that the owners were sureties (id., p. 742) because "[o]ne who signs a security document or other contract as a principal will be held as such even though the creditor knows that as between the signer and his fellow obligor, the former is only a surety" (id., p. 741). Because the owners presented no other evidence, they failed to support their characterization of their relationship with the lender. Accordingly, they raised no triable issue of fact, and the relationship of the parties could be determined as a matter of law solely from the documents. (Id., p. 742.)

Thus, Matthews’s conclusion that the owners failed to create a triable issue of fact regarding their relationship with the lender is premised upon its assertion that a creditor’s knowledge of the existence of a surety relationship between the two obligors does not tend to show the existence of a surety relationship between an obligor and the creditor. However, the California decisional law supporting that premise was statutorily overruled in 1939.

"The rule at common law [is] that a party apparently bound on a written contract as a principal may show by evidence aliunde that he signed the contract as a surety for the principal debtor, and, if such fact is known to the creditor, such party will be bound [to the creditor] as a surety only . . . ." (Granger v. Harper (1932) 217 Cal. 16, 19.) In 1850, the Legislature adopted the common law as the law of the state when not inconsistent with constitutional or statutory law. (Stats. 1850, ch. 95, p. 219.) Nevertheless, prior to 1872, California did not follow the common-law rule on this subject. (Granger, p. 19.) Instead, the Supreme Court adopted a rule that the maker of an apparently direct and absolute obligation could not vary its terms by parol evidence showing that the maker is merely a surety. (See, e.g., Shriver v. Lovejoy (1867) 32 Cal. 574, 576-577; Aud v. Magruder (1858) 10 Cal. 282, p. 289.)

In 1872, the Legislature codified the common-law rule in the form of Civil Code section 2832, which at the time consisted of a single sentence: "‘One who appears to be a principal, whether by the terms of a written instrument or otherwise, may show that he is in fact a surety, except as against persons who have acted on the faith of his apparent character of principal.’" (Granger v. Harper, supra, 217 Cal. at p. 19, quoting the statute.) The effect of that enactment was to statutorily overrule the decisional law announced in cases such as Shriver v. Lovejoy. (Eppinger v. Kendrick (1896) 114 Cal. 620, 626.)

Nevertheless, the Supreme Court continued to restrict the ability of an apparent principal to prove that he or she was actually a surety. It did so by first observing that it was possible for a person who has agreed with a creditor that he and a co-obligor will be liable to the creditor as principals to at the same time agree with his co-obligor that, as between the two of them, the co-obligor would be primarily liable for the debt. (Harlan v. Ely (1880) 55 Cal. 340, 342.) Therefore, the court reasoned, evidence of the creditor’s knowledge of the surety relationship between the two obligors was not enough, by itself, to bind the creditor to treat the surety as such. (California Nat. Bank v. Ginty (1895) 108 Cal. 148, 150-151.) It adopted the rule that alleged sureties must "aver and prove that the payee of the note not only knew of the fact of suretyship betwen [sic] them and their co-obligor, but consented to deal with them in that capacity . . . ." (Farmers’ Nat. Gold Bank v. Stover (1882) 60 Cal. 387, 392; accord, Granger v. Harper, supra, 217 Cal. at pp. 19-20; Casey v. Gibbons (1902) 136 Cal. 368, p. 371.)

In 1939, the Legislature rejected that interpretation by amending Civil Code section 2832 to add a second sentence: "It is not necessary for him [i.e., the apparent principal who claims to be a surety] to show that the creditor accepted him as surety." (Stats. 1939, ch. 453, § 28, p. 1799.) That amendment therefore statutorily overruled Farmers’ Nat. Gold Bank v. Stover and its progeny, which said that the alleged surety must prove that the creditor agreed to treat him as a surety.

It also overruled Harlan v. Ely and its progeny, which held that proof of the creditor’s knowledge of the surety arrangement between the obligors was not enough because the creditor might have a contrary agreement. If the alleged surety need no longer affirmatively disprove the existence of a contrary agreement, then there is no reason why proof of the creditor’s knowledge is not sufficient to allege a prima facie case. For instance, when a principal sells property securing a debt to a buyer who agrees to assume liability for the debt, the buyer becomes the principal and the seller is relegated to the status of a surety. After receiving notice of the assumption, the creditor must afford the former principal the rights of a surety. (Everts v. Matteson, supra, 21 Cal.2d at pp. 447-448; Westinghouse Credit Corp. v. Wolfer (1970) 10 Cal.App.3d 63, 67-68.)

Despite the 1939 statutory amendment and its rejection of the rules stated in prior decisions such as California Nat. Bank v. Ginty and Casey v. Gibbons, those are exactly the out-dated cases upon which Matthews relies for the proposition that an apparent principal must be held to be a principal rather than a surety even though the creditor knew that the obligors intended that person to be merely a surety. (See Matthews at p. 741, citing, inter alia, California Nat. Bank and Casey along with Estate of Chamberlain (1941) 44 Cal.App.2d 193, 200, which in turn relies entirely upon California Nat. Bank.) Accordingly, Matthews is, in our view, wrongly decided, and we decline to follow it.

As the result of the 1939 amendment to Civil Code section 2832, California has fully adopted the common-law rule described in Granger v. Harper: If a creditor knows that its obligors have agreed between themselves that one will be the principal and the other will be the surety, the latter is bound to the creditor as a surety only, even though he or she appears from the written instruments to be a principal. (Id., 217 Cal. at p. 19; 72 C.J.S., Principal & Surety, § 28, p. 188.) Therefore, if an apparent principal alleges both that his or her relationship with a co-obligor is one of surety and principal and that the creditor knows of that agreement between the two obligors, he or she has alleged sufficient facts to support the allegation that he or she is bound to the creditor as a surety only.

The Meads pleaded that they were sureties of Cooley. Sanwa’s knowledge of the fact that the Meads were hypothecating their property to secure Cooley’s debt is demonstrated by the loan documents Sanwa prepared: the construction loan agreement and the note are signed by Cooley alone; the deed of trust identifies the secured obligation as being that of Cooley; and the deed of trust expressly provides that the Meads shall have no personal liability for that debt. The complaint also alleges that Sanwa’s officer considered the Meads to be third parties rather than principal obligors. These facts are sufficient to support their allegation that they are bound to Sanwa as sureties only.

By itself, however, that allegation does not demonstrate that the trial court erred by sustaining the demurrers. As will be seen, while the Meads have sufficiently pleaded their status as sureties, they have not demonstrated that their complaint pleads sufficient facts to constitute a cause of action against Sanwa.

B. THE MEADS HAVE FAILED TO DEMONSTRATE THAT THE TRIAL

COURT ERRED BY SUSTAINING THE DEMURRERS.

We will evaluate the specific counts of the Meads’ complaint in light of their allegations that they were sureties. For the sake of convenience, we address them in a different order than that employed in the complaint.

1. The Eighth Count, for Breach of Contract

The Meads alleged: that they agreed to act as sureties by pledging their property as security for the payment of Cooley’s debt; that as sureties they were entitled to certain rights enumerated by statute; and that Sanwa breached that agreement by failing to honor those statutory rights, resulting in damage to the Meads. In particular, the complaint alleges two specific rights that Sanwa violated. "One of these rights is the right to exoneration if Sanwa modifies the Deed of Trust or the obligations of Cooley, without the Trust’s prior written consent." Sanwa is alleged to have modified Cooley’s obligations three times without the Meads’ consent. Another right of sureties is to have the creditor proceed first against the property of the principal obligor before proceeding against the surety’s property. The complaint alleges that Sanwa violated that right by initiating foreclosure against both the Meads and Cooley simultaneously, resulting in damage to the Meads.

As will be explained, the Meads failed to plead facts constituting a breach of the surety contract. Accordingly, the general demurrer to the eighth count was properly sustained.

a. The General Allegations of Breach

When alleging a breach of contract, "‘sufficient facts should be alleged to apprise the defendant of the specific conduct which the plaintiff assigns as violative of the contract.’" (Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 60, quoting what is now 8 Cal Practice (2d ed. 1981) Pleading - Civil Actions, § 1025, p. 239; accord, 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 495, pp. 585-586.) Under this standard, the Meads’ allegation that they have "certain legally protected rights" which "Sanwa has failed and continues to fail to honor" is insufficient. (Id., § 498, p. 587.)

b. The Alleged Modifications Without Consent

As the Meads note, sureties are entitled to a long list of statutory protections. (See generally Civ. Code, §§ 2819 - 2850.) Among these is the rule that "[a] surety is exonerated . . . if by any act of the creditor, without the consent of the surety the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, in any way impaired or suspended." (Civ. Code, § 2819, emphasis added.) However, there is no exoneration if the alteration is made with the surety’s consent, and that consent may be given in advance of the alteration of the principal’s obligation. (Bloom v. Bender, supra, 48 Cal.2d at pp. 800-801; State Bd. of Equalization v. Carleton (1990) 223 Cal.App.3d 1607, 1610.)

By signing the deed of trust, the Meads encumbered their property to secure the payment, not only of the promissory note in its original form, but also "all modifications, extensions and renewals thereof." Thus, they consented in advance to secure any extensions to which Cooley and Sanwa agreed. Accordingly, Sanwa did not breach the surety contract by extending the maturity of Cooley’s obligations.

c. The Right to Have the Principal’s Property Pursued First

"A surety may require the creditor . . . to proceed against the principal, or to pursue any other remedy in the creditor’s power which the surety cannot pursue, and which would lighten the surety’s burden; and if the creditor neglects to do so, the surety is exonerated to the extent to which the surety is thereby prejudiced." (Civ. Code, § 2845.) The remedies which the creditor must first exercise against the principal specifically include the foreclosure of security interests: "A surety is entitled to the benefit of every security for the performance of the principal obligation held by the creditor . . . ." (Civ. Code, § 2849.)

If the creditor has received security interests in property of both the principal and the surety, the creditor must proceed against the property of the principal first: "Whenever property of a surety is hypothecated with property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation." (Civ. Code, § 2850.) If the creditor holds a deed of trust encumbering two parcels of or interests in property, one owned by the principal and one by the surety, the trustee must honor the demand of the surety to conduct the sale of the principal’s property first. (Humboldt Sav. Bank v. McCleverty (1911) 161 Cal. 285, 290 [single deed of trust encumbering separate parcels]; accord, Bechtel v. Wier (1907) 152 Cal. 443, 446 [separate mortgages on separate parcels]; Raun v. Reynolds (1858) 11 Cal. 14, 20 [same]; and see Commercial Bank v. Kershner (1898) 120 Cal. 495, 500-501 [separate interests in same parcel].) If the trustee disregards that demand and sells both parcels simultaneously, the sale is voidable and may be set aside (Humboldt Sav. Bank, p. 290) unless separate sales would have been less beneficial to the surety (Bechtel, p. 447).

Therefore, if the Meads are proven to be sureties, then they were entitled to have the lien on Cooley’s leasehold interest foreclosed by sale first, before any sale was conducted concerning their fee interest. However, the Meads concede that the foreclosure sale of their property was conducted, not by Sanwa, but by Sanwa’s assignee. Therefore, they have pleaded a breach of the contract by Sanwa only if Civil Code section 2850 not only requires the creditor to sell the property of the principal first, but also requires the creditor to postpone the initiation of proceedings to foreclose on the surety’s property until the principal’s property has been foreclosed upon and sold.

2. The Second Count, for Breach of Covenant of Good Faith and Fair Dealing

"In all suretyship relations, the creditor owes to the surety a duty of continuous good faith and fair dealing." (Sumitomo Bank of Cal. v. Iwasaki (1968) 70 Cal.2d 81, 85.) That means that the creditor must refrain from doing anything that would possibly injure the interests of the surety, unless it is necessary to secure the creditor’s own interests. (County of Glenn v. Jones (1905) 146 Cal. 518, 520; Ely v. Liscomb (1914) 24 Cal.App. 224, 228-229.)

In the second count, the Meads allege that Sanwa breached that duty by a variety of actions and omissions. However, in their opening brief, the Meads argue only that Sanwa breached it "by repeatedly suppressing key information and by modifying and extending the Loan without the Meads’ knowledge or consent."

A modification of the principal’s obligation may be against the surety’s interests. An adverse modification would not only violate the creditor’s duty of good faith, it would also exonerate the surety if, as explained above, the surety had not consented to it. (Civ. Code, § 2819.) Here, the Meads consented in advance to any extensions to which Cooley and Sanwa agreed. The implied covenant of good faith and fair dealing does not prohibit any conduct which is clearly permitted by the express terms of the contract. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373-374.) Therefore, in the absence of allegations that the terms of the extensions were themselves unreasonable and in bad faith, the mere fact that Sanwa made the extensions without seeking the contemporaneous consent of the Meads did not violate its duty of good faith.

The other fact upon which the Meads rely in arguing the sufficiency of this count is that Sanwa suppressed "key information . . . ." The complaint alleges that Sanwa failed and refused "to provide any information to the Trust regarding the deteriorating condition of Cooley, the Loan and the Property, or regarding the additional detriments which could result to the Trust by its solicitous actions toward Cooley" and that Sanwa denied "the Meads any meaningful access to information about the Loan or Cooley’s management of the Property."

However, "[a] creditor, such as a bank, does not . . . owe an absolute duty to the surety to disclose, without request by the surety, all facts within its knowledge which may materially affect the surety’s risk." (Sumitomo Bank of Cal. v. Iwasaki, supra, 70 Cal.2d at p. 87.) Here, there is neither an allegation of a request for the "suppressed" information, nor an explanation of the source and nature of a duty to disclose that information without a request. Therefore, the Meads have failed to plead facts showing that Sanwa breached a duty of disclosure.

For these reasons, the Meads have failed to demonstrate that the trial court erred by sustaining the demurrer to the second count.

3. The Seventh Count, for Negligence

The Meads’ seventh count purports to be one for damages for negligence. Their sole argument in their opening brief to support their conclusion that the trial court erred in sustaining the general demurrer to that count is comprised of one sentence: "Because the Meads have alleged sufficient facts to show a strong argument that they are guarantors, all causes of action premised on the Meads’ allegations (including the . . . Seventh . . .) must also stand."

That single conclusory statement fails to explain how the complaint alleges the elements of negligence: a duty of care toward the plaintiff, a negligent act or omission which breaches that duty, and damages proximately caused by that act or omission.

(4 Witkin, Cal. Procedure, supra, Pleading, § 537, p. 624.) Since the Meads have not bothered to try to demonstrate that the count pleads sufficient facts to establish each of those elements, we decline to do so ourselves. The contention is waived.

4. The First Count, for Breach of Fiduciary Duty

In their first count, entitled breach of fiduciary duty, the Meads allege that, because they were sureties, a fiduciary relationship existed between the Meads and Sanwa, and that Sanwa breached its fiduciary duties by failing to protect the Meads’ interests, by withholding material information, and by seeking nonjudicial foreclosure.

As Sanwa points out, however, even assuming that the Meads were sureties, a "creditor does not stand as a fiduciary in his relation to the surety." (Sumitomo Bank of Cal. v. Iwasaki, supra, 70 Cal.2d at p. 85, fn. 3.) Therefore, there was no fiduciary relationship between Sanwa and the Meads, and Sanwa owed no fiduciary duties to them.

Since a fiduciary relationship is the only legal theory upon which the Meads have advanced the sufficiency of the first count, they have failed to show that the trial court erred by sustaining the demurrer to that count.

5. The Third Count, for Fraud

The third count, for fraud, alleges both affirmative representations and suppressions of fact.

The elements of fraud based upon an affirmative representation are a representation which is false, made by the defendant with knowledge that it is false and with the intent to deceive the plaintiff, on which the plaintiff reasonably relies, causing damage to the plaintiff. (5 Witkin, Cal. Procedure, supra, Pleading, § 668, p. 123.) Every element must be factually and specifically alleged. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216; 5 Witkin, Cal. Procedure, supra, Pleading, § 669, pp. 125-127.) Accordingly, the plaintiff must plead facts which show when, to whom, and by what means the representations were made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 644.) When the fraud is alleged to have been committed by a corporation or other artificial entity, "the plaintiff must ‘allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’" (Ibid., quoting Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

The Meads alleged a variety of misrepresentations made by named representatives of Sanwa, but they did not allege when those misrepresentations were made. While that omission would not affect the sufficiency of the count in the face of only a general demurrer (5 Witkin, Cal. Procedure, supra, Pleading, § 670, pp. 127-128), Sanwa also specially demurred to this count on the grounds of uncertainty. That demurrer was sustained with leave to amend, to permit the Meads to cure that uncertainty. Since they chose not to do so, we must conclude that the Meads were unable to cure that omission. (Truta v. Avis Rent A Car System, Inc. (1987) 193 Cal.App.3d 802, 816.) Having elected to stand on their complaint, their belated representation in their opening brief that they can now cure that defect is of no avail. Therefore, they fail to state a claim for damages for intentional affirmative misrepresentations.

A defendant’s failure to disclose a material fact constitutes deceit if the defendant is under a duty to disclose it. (Civ. Code, § 1710, subd. 3.) Generally, therefore, the failure to disclose facts known to the defendant but not to the plaintiff is not actionable fraud unless there is a fiduciary or other confidential relationship between them which imposes a duty of disclosure. (La Jolla Village Homeowners’ Assn. v. Superior Court (1989) 212 Cal.App.3d 1131, 1151; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 697, p. 799.)

But even in the absence of a fiduciary relationship, a defendant may be under a duty to disclose "if material facts are known only to the defendant and the defendant knows that the plaintiff does not know or cannot reasonably discover the undisclosed facts." (Karoutas v. HomeFed Bank (1991) 232 Cal.App.3d 767, 771.) The elements of a cause of action for damages for fraud, based upon nondisclosure of material facts in the absence of a fiduciary or other confidential relationship, are: (1) knowledge by the defendant of facts material to a decision facing the plaintiff; (2) knowledge by the defendant either that the plaintiff is unaware of those facts or that they are inaccessible to the plaintiff; (3) nondisclosure of those facts by the defendant; (4) an intention by the defendant to induce the plaintiff to act or refrain from acting; (5) reliance by the plaintiff upon the absence of the nondisclosed facts by acting or refraining from action; and (6) damage to the plaintiff as a result of that action or failure to act. (La Jolla Village Homeowners’ Assn. v. Superior Court, supra, 212 Cal.App.3d at pp. 1151-1152.)

In their brief, the Meads focus entirely on the alleged affirmative representations, and thus never explain how each of the elements of the fraudulent suppression of fact is satisfied by the complaint. For example, while the complaint alleges that Sanwa failed to provide them with a certain exhibit to the construction loan agreement which described the monthly fees that Cooley would assess against the property, the Meads do not identify the facts demonstrating that Sanwa was under a duty to disclose that information. The complaint does not allege, for instance, that Sanwa knew that the information was unknown or inaccessible to the Meads. And while the complaint alleges that Sanwa failed to inform the Meads that Cooley was diverting and misusing funds belonging to the Meads, it also alleges that the Meads suspected Cooley to be doing so, suggesting both that the information was accessible to the Meads and that the Meads did not rely on Sanwa’s failure to disclose that information.

In short, the Meads have failed to demonstrate that the trial court erred by sustaining the general and special demurrers against the fraud count.

6. The Fourth Count, for Negligent Misrepresentation

The fourth count, labeled as one for negligent misrepresentation, alleges certain affirmative misrepresentations and failures to disclose certain facts. It suffers from the same defects as the fraud count. For instance, the complaint does not allege when the affirmative misrepresentations were made. Nor does the complaint allege that Sanwa knew that the Meads were unaware that the maturity date of the promissory note was being extended. Moreover, given that the Meads had consented to such extensions in advance, there are no allegations that such information was material to the Meads.

7. The Sixth Count, for Rescission and Restitution

In their sixth count, the Meads argue that they were fraudulently induced to enter into the surety agreement and are therefore entitled to rescission and restitution. However, since the fraud count upon which they rely fails to plead sufficient facts to constitute a cause of action for fraud, it similarly fails to state facts sufficient to justify equitable relief on the basis of that fraud.

8. The Fifth Count, for Waste

The fifth count of the complaint alleges that Cooley and Sanwa damaged the value of the property by allowing the diversion of funds from the property to unrelated purposes and neglecting and mismanaging the property, constituting waste. For example, Sanwa promised to seek the appointment of a receiver to take charge of the property, and then failed to do so despite repeated requests from the Meads. When the Meads sought to take control of the property by filing an unlawful detainer action, Sanwa forced them to dismiss it.

The common-law doctrine of waste is defined as "‘conduct . . . on the part of the person in possession of land which is actionable at the behest of, and for protection of the reasonable expectation of, another owner of an interest in the same land.’" (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 597-598, quoting from 5 Powell on Real Property (1974) § 636, pp. 5-6.) However, statutory rights in California are not so limited. Civil Code section 826 provides: "A person having an estate in fee, in remainder or reversion, may maintain an action for any injury done to the inheritance, notwithstanding an intervening estate for life or years, and although, after its commission, his estate is transferred, and he has no interest in the property at the commencement of the action." In an action under this statute, the defendant need have no possessory interest in the injured property. (Smith v. Cap Concrete, Inc. (1982) 133 Cal.App.3d 769, 776.) Therefore, the Meads could state a cause of action for waste against Sanwa even though there is no allegation that Sanwa ever had either a possessory interest in or actual possession of the property.

However, the Meads’ claim fails for a different reason. Both common-law waste and Civil Code section 826 concern physical injury to the real property. (Dieterich Internat. Truck Sales, Inc. v. J. S. & J. Services, Inc. (1992) 3 Cal.App.4th 1601, 1610-1611; Rowe v. Wells Fargo Realty Services, Inc. (1985) 166 Cal.App.3d 310, 320.) No physical injury having been alleged here, no cause of action for waste has been stated.

C. THE MEADS WERE NOT DEPRIVED OF A FAIR HEARING.

From selected comments of the trial court during hearings on the demurrers to the amended complaint and on an application for a temporary restraining order and request for preliminary injunction, the Meads conclude that the trial court did not adequately study the pleadings or research the issues, but rather relied excessively on the reasoning of the judge who ruled on the demurrer to the original complaint and on the trial court’s research attorneys. On that factual basis, the Meads make two arguments, neither of which is meritorious.

First, they ask us to direct that, upon reversal and remand, this matter be assigned to a different judge. That request is moot, because the judgment has not been shown to be erroneous and thus will not be reversed.

Next, they argue that they were denied a fair hearing. Having reviewed the transcripts, we see no evidence of unfairness. Moreover, even if there were, it is difficult to understand how the nature of the hearing could have been prejudicial to the Meads. On appeal, we conduct a de novo review. The Meads had the opportunity to present to this court any argument that they would have presented to the trial court but for the perceived unfairness.

D. THE TRIAL COURT PROPERLY AWARDED ATTORNEY’S FEES TO

SANWA.

Finally, the Meads contend that the trial court erred in awarding attorney’s fees because there was no attorney’s fees provision in the deed of trust, the only agreement between themselves and Sanwa. They are mistaken. In their breach-of-contract count, they expressly allege: "The Deed of Trust provides for the award of reasonable attorneys’ fees to the prevailing party in the event of legal action arising in connection with enforcement of the Deed of Trust." That this allegation was not inadvertently made is confirmed by the prayer regarding that count, which asks "[f]or reasonable attorneys’ fees and costs, in an amount to be determined at trial."

This allegation constitutes a judicial admission that the deed of trust contains a provision entitling the prevailing party to recover its attorney’s fees. (Smith v. Walter E. Heller & Co. (1978) 82 Cal.App.3d 259, 269.) As such, it is a conclusive concession of the truth of the matter and removes it from the issues to be decided. (Ibid.; 1 Witkin, Cal. Evidence (3d ed. 1986) The Hearsay Rule, § 644, p. 630; 4 Witkin, Cal. Procedure, supra, Pleading, §§ 413-416, pp. 510-513.)

Since the supposed absence of such a provision is the only ground upon which the Meads challenge the attorney’s fee award, they fail to demonstrate that the trial court erred by awarding those fees.

The judgment of dismissal and the post-judgment order awarding attorney’s fees are affirmed. Sanwa shall recover its costs on appeal.

CERTIFIED FOR PARTIAL PUBLICATION.

McKINSTER

Acting P. J.

We concur:

J.

J.