## Facts

- Donald and Helen Flores obtained a reverse-mortgage loan from Transamerica HomeFirst, Inc. (HomeFirst), under which HomeFirst made monthly principal advances and the borrowers would repay the full balance, plus interest and fees, when the loan matured (commonly on death or sale of the home).
- The reverse mortgage was paired with a deferred annuity that was described as providing monthly payments for life, even though the reverse-mortgage balance could still become due at maturity.
- HomeFirst met with the Floreses and their daughter, Maria Trigueros, and reviewed written materials describing the reverse mortgage, the annuity, the interest rates, and a good-faith estimate of overall costs.
- The written materials disclosed an “interest charge” equal to 50% of any increase in the home’s value during the loan term (an appreciation-sharing feature).
- HomeFirst provided federally required disclosures, including Regulation Z and a Total Annual Loan Cost (TALC) disclosure with multiple repayment scenarios (nine examples), and warnings that costs could be higher for shorter loan durations.
- The Floreses had the documents for about 30 days before closing. HomeFirst advised them in writing to consult independent counsel, but they did not do so.
- HomeFirst again reviewed the disclosures at closing before the Floreses executed the reverse mortgage.
- About two-and-a-half years later, the Floreses sold their home for about $150,000 more than its earlier value, after receiving about $30,000 in reverse-mortgage monthly advances.
- The sale triggered maturity of the reverse mortgage. HomeFirst demanded about $172,139 to pay off the loan, including repayment and interest for the advances, 50% of the $150,000 appreciation, and about $38,000 in annuity-related costs.
- The Floreses and Trigueros sued HomeFirst and related Transamerica entities, alleging (among other theories) that defendants committed financial elder abuse and other wrongful conduct by failing to disclose material facts about the transaction’s potentially severe economic consequences.

## Issues

1. Whether plaintiffs could prevail on claims based on nondisclosure or concealment without proving that the alleged omissions caused them to enter the reverse-mortgage/annuity transaction (i.e., reliance/causation).
2. Whether the reverse-mortgage/annuity disclosures (including TALC and Regulation Z materials) adequately communicated the appreciation-sharing feature and the possibility of high payoff costs if the loan ended after a short period.
3. Whether the reverse-mortgage/annuity agreement was unenforceable as unconscionable under California law.
4. Whether the trial court properly sustained demurrers to plaintiffs’ Consumers Legal Remedies Act (CLRA) and financial elder-abuse causes of action.

## Decision

- The Court of Appeal affirmed.
- The court upheld the trial court’s rulings sustaining demurrers to the CLRA and financial elder-abuse claims.
- The court also affirmed the judgment for defendants after the bench trial on remaining claims.
- The court agreed that the key price term—HomeFirst’s right to 50% of the home’s appreciation—was disclosed in the written materials.
- The court relied on the TALC and Regulation Z disclosures and the multiple repayment examples as support for the conclusion that plaintiffs were told that shorter loan terms could result in higher effective costs.
- The court concluded plaintiffs did not establish actionable wrongdoing based on nondisclosure, and the challenged terms were not unconscionable on this record.

## Legal Principles

- Fraud-based nondisclosure/concealment theories require causation: the plaintiff must show the alleged omission was a substantial factor in the decision to enter the transaction.
- Detailed written disclosures, including federally mandated reverse-mortgage materials (such as TALC and Regulation Z), can defeat claims that a lender hid a loan’s basic price structure or payoff risk when the challenged terms are stated in the documents and explained through examples.
- Unconscionability under California law requires both procedural and substantive unconscionability; neither a complex consumer financial product nor a harsh economic outcome alone establishes unconscionability.
- A price term is not invalid merely because it is expensive; substantive unconscionability generally requires an allocation of benefits and burdens that is extreme rather than simply unfavorable in hindsight.
- Financial elder abuse requires a “wrongful” taking or retention of an elder’s property (for example, through fraud, undue influence, or other improper conduct); entering a disclosed contract, without more, does not satisfy that standard.
- CLRA liability depends on deceptive practices and resulting harm; allegations centered on disclosed contract terms generally do not state a CLRA claim.

## Conclusion

The court affirmed all rulings for Transamerica/HomeFirst, holding that plaintiffs’ challenges to the reverse-mortgage/deferred-annuity product failed because the appreciation-sharing and cost consequences were disclosed through extensive written materials (including TALC and Regulation Z), plaintiffs did not show the required causal link between any alleged omission and their decision to borrow, and the agreement was not unconscionable under California law.


Trigueros v. Transamerica Corporation, 2006 WL 2724034 (2006)