ROBYN PEARLMAN, AN INDIVIDUAL, VS SHATS INVESMENTS, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY,, ET AL.

Tentative Rulings

Case Number: *******9548 Hearing Date: April 12, 2023 Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein. As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue. Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776. If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff alleges that Defendants advised Plaintiff and her mother to represent that the underlying loan was a commercial mortgage, even though it was a consumer credit transaction, which rendered the Truth in Lending Act inapplicable to the loan. Defendants allegedly knew Plaintiff did not qualify and could not afford the loan, which was for 11 months of interest only payments with a final balloon payment of $705,250.

Defendant UMRO Realty Corp., dba The Agency moves for judgment on the pleadings as to the Fourth Amended Complaint.

TENTATIVE RULING

Defendant UMRO Realty Corp., dba The Agency’s for judgment on the pleadings as to the Fourth Amended Complaint is GRANTED as to the third and sixth causes of action without leave to amend.

ANALYSIS

Motion For Judgment On The Pleadings

Meet and Confer

The Declaration of Jamileh Hawatmeh reflects that Plaintiff’s counsel did not respond to meet and confer efforts. This satisfies Civ. Proc. Code, 439(a)(3)(B).

Discussion

1. Third Cause of Action (Violation of 12 C.F.R. 1026.32(a)(4); Sixth Cause of Action (Violation of 12 C.F.R. 1026.32(a)(5)—Failure To Obtain Written Confirmation of Pre-Loan Counseling).

Defendant moves for judgment on the pleadings as to these causes of action on the ground that 12 C.F.R. 1026.32 only applies to creditor/lenders, and moving defendant is not alleged to be a creditor/lender of Plaintiff.

On a motion for judgment on the pleadings, the same rules applicable on demurrer apply. (County of Orange v. Association of Orange County Deputy Sheriffs (2011) 192 Cal.App.4th 21, 32-33.)

Here, Plaintiff filed a notice of non-opposition, thereby conceding the merit of the motion. As such, Defendant’s motion for judgment on the pleadings as to the 4AC is GRANTED as to the third and sixth causes of action without leave to amend.

Case Number: *******9548 Hearing Date: October 19, 2022 Dept: 76

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein. As required by Rule 3.1308(a)(2), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue. Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776. If notice of intention to appear is not given and the parties do not appear, the Court will adopt the tentative ruling as the final ruling.

Plaintiff alleges that Defendants advised Plaintiff and her mother to represent that the underlying loan was a commercial mortgage, even though it was a consumer credit transaction, which rendered the Truth in Lending Act inapplicable to the loan. Defendants allegedly knew Plaintiff did not qualify and could not afford the loan, which was for 11 months of interest only payments with a final balloon payment of $705,250.

Defendant UMRO Realty Corp., dba The Agency moves to enforce the settlement agreement between Plaintiff Robyn Pearlman and the Settling Defendants Alex Nelson and 1^st Point Lending.

TENTATIVE RULING

Defendant UMRO Realty Corp., dba The Agency’s motion to enforce the settlement agreement is DENIED.

ANALYSIS

Motion To Enforce Settlement

Defendant UMRO Realty Corp., dba The Agency moves pursuant to CCP 664.6 to enforce the settlement agreement between Plaintiff Robyn Pearlman and the Settling Defendants Alex Nelson and 1^st Point Lending to extend to non-signatories to the settlement agreement, Defendant April Lopez and UMRO Realty, Inc.

Defendant argues that the settlement agreement contained a release of 1^st Point Lending and its representatives and agents, and since Plaintiff has alleged that Lopez and UMRO are agents of 1^st Point Lending, Plaintiff has released Lopez and UMRO from this action. Defendant requests that the Court enforce the settlement agreement and dismiss Lopez and UMRO from this action, who are the only parties remaining in this action.

Defendant points to allegations in the 4AC which allege that Lopez was acting as agent and on behalf of Nelson and 1^st Point Lending. (4AC, 31 – 33, 36, 109, 112, 119.) Defendant also points to Plaintiff’s discovery responses that Lopez worked in conjunction with Nelson and 1^st point to present the loan closing documents to Plaintiff at the loan closing. (Exh. C to Hawatmeh Decl., Response to SROG, Set One, Nos. 4 and 5.)

Defendant argues that, because Plaintiff has asserted in her pleadings and under oath in discovery responses that Lopez and UMRO are agents of the 1^st Point Defendants, the Settlement Agreement released Lopez and UMRO as such agents. Defendant argues that Plaintiff is bound by the admissions in the 4AC.Defendant points to the language in the Settlement Agreement whereby Plaintiff agreed to:

“forever release, discharge and acquit 1ST POINT LENDING… and its respective successors, assigns, heirs, executors, representatives, … employees, agents, … of and from, any and all claims, suits, actions, causes of action, judgments, demands, liabilities, obligations, rights, damages, costs, attorney’s fees, loss of service, loss of use, loss of profits, expenses and compensation whatsoever …” (emphasis added.)

(Declaration of Alex Nelson, Exh. A, 1, Page 2.)

However, an allegation of agency has been held to be a conclusion of law:

"In the case at bench we are dealing with an allegation of agency which amounts to a conclusion of law and is not only subject to differing constructions but it is one which in the original pleadings was coupled with an allegation that the party or parties in question were retailers and other facts indicating that Nonkeloid, the original source, sold its products only through certain outlets." ( Id. at p. 184.)

(Berman v. Bromberg (1997) 56 Cal.App.4th 936, 949.)

Where there is a conclusion of law or mixed factual-legal conclusion in a complaint, it is not a binding judicial admission:

On the other hand, a mere conclusion, or a “mixed factual-legal conclusion” in a complaint, is not considered a binding judicial admission. (Bahan, supra, 98 Cal. App. 3d at p. 812.) A mixed factual-legal conclusion may be contradicted by a declaration or other evidence in order to overcome a motion for summary judgment. (Ibid.)

(Castillo v. Barrera (2007) 146 Cal.App.4th 1317, 1324.)

As such, Plaintiff’s allegations regarding Lopez and UMRO being agents of the 1^st Point Defendants are not binding upon Plaintiff. Thus, the question becomes whether the settling parties, Plaintiff Robyn Pearlman and Defendants Alex Nelson and 1^st Point Lending, intended to release non-signatories Lopez and UMRO as part of the Settlement Agreement.

As discussed above, a settlement agreement may be enforced under section 664.6 by the parties who signed it. But the statute does not require that the agreement be executed by every party to the action who benefits from it, even if indirectly, such as a third party beneficiary. “‘The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract. [Citation.] If the terms of the contract necessarily require the promisor to confer a benefit on a third person, then the contract, and hence the parties thereto, contemplate a benefit to the third person. The parties are presumed to intend the consequences of a performance of the contract.’ [Citations.] In other words, ‘the doctrine presupposes that the defendant made a promise which, if performed, would have benefited the third party.’ [Citation.]” (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1022 [90 Cal. Rptr. 3d 453].) “It is not necessary that the contract identify the third party by name as long as such third party can show that it is one of a class of persons for whose benefit it was made. [Citation.]” (General Motors Corp. v. Superior Court (1993) 12 Cal.App.4th 435, 444 [15 Cal. Rptr. 2d 622] [agreement that clearly released every party from liability arising out of automobile accident applied even to parties not named in document].) These rules apply to settlement agreements. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 810–811 [71 Cal. Rptr. 2d 265] [“legal principles which apply to contracts generally apply to settlement contracts”].) In this case the language of the stipulated settlement demonstrates it was made for the benefit of the individual defendants. , “[t]he case is settled as to all claims …” and the “entire action [is] dismissed [with] prejudice.” (Italics added.) Performance of those acts disposes of the case against all parties, even without the signatures of the individual defendants on the stipulated settlement.

(Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1299 [bold emphasis and underlining added].)

Here, the language of the Settlement Agreement does not clearly intend to benefit a class of persons to which Defendants Lopez and UMRO belong. The Settlement Agreement identifies the parties thereto as 1^st Point Lending, Inc. and Alex Nelson, on the one hand, and Robyn Pearlman on the other hand. Defendants Lopez and UMRO are not mentioned as parties to the agreement, nor are they express third party beneficiaries. Nowhere do the settling parties identify Lopez and UMRO as “agents” for purpose of the release.

Further, to the extent that it is ambiguous whether Lopez and UMRO were also released, 11 of the Settlement Agreement indicate that Nelson as an individual and on behalf of 1^st Point Lending, Inc. agree to have accepted service of the trial subpoena and these FPL Defendants agree to appear at trial. As Plaintiff points out, this contemplates a trial against remaining Defendants Lopez and UMRO, not an intent to release them as well, which would obviate the need for trial.

Further, 12 of the Settlement Agreement only requires that, upon clearance of the payment by 1^st Point, Plaintiff file a dismissal with prejudice as it pertains to 1^st Point. There is no agreement to dismiss Defendants Lopez and UMRO.

As such, the Court finds that the language of the Settlement Agreement does not evidence the parties’ intent to release Defendants Lopez and UMRO upon payment of the settlement amount.

The motion to enforce the settlement agreement is DENIED.

Case Number: *******9548 Hearing Date: August 23, 2022 Dept: 76

Plaintiff alleges that Defendants advised Plaintiff and her mother to represent that the underlying loan was a commercial mortgage, even though it was a consumer credit transaction, which rendered the Truth in Lending Act inapplicable to the loan. Defendants allegedly knew Plaintiff did not qualify and could not afford the loan, which was for 11 months of interest only payments with a final balloon payment of $705,250.

Defendant UMRO Realty Corp., dba The Agency moves for summary judgment or, in the alternative, summary adjudication.

Plaintiff Robyn Pearlman moves for a continuance of the trial date.

TENTATIVE RULING

Defendant April Lopez and Defendants Alex Nelson, an Individual and 1^st Point Lending, Inc.’s notices of joinder in the motion for summary judgment/summary adjudication filed by Defendant UMRO Realty Corp., dba The Agency are DENIED.

Defendant UMRO Realty Corp., dba The Agency’s motion for summary judgment is DENIED.

Defendant’s motion for summary adjudication is DENIED as to Issues Nos. 1 – 4 and GRANTED as to Issue No. 5 re: punitive damages.

Plaintiff Robyn Pearlman’s motion to continue the trial date is GRANTED. The trial date is CONTINUED to April 10, 2023 at 8:30 AM. The final status conference is set for March 27, 2023 at 8:30 AM. All motion and discovery cutoff dates shall remain as set relative to the November 23, 2022 trial date.

ANALYSIS

Notices of Joinder

Defendant April Lopez and Defendants Alex Nelson, an Individual and 1^st Point Lending, Inc.’s notices of joinder in the motion for summary judgment/summary adjudication filed byDefendant UMRO Realty Corp., dba The Agency are DENIED.

First, neither party filed a separate statement. A court may not grant summary judgment in favor of a party who only files a notice of joinder in another party’s motion for summary judgment. (Village Nurseries v. Greenbaum (2002) 101 Cal.App.4th 26, 46-47.) CCP 437c requires that a party moving for summary judgment or summary adjudication must file a motion supported by evidence and a separate statement. (Id.)

Second, the Court is not convinced that these Defendants are similarly situated to UMRO/The Agency, as their liability may be independent from The Agency’s.

Motion For Summary Judgment

Documents Lodged Conditionally Under Seal

The documents lodged by Plaintiff conditionally under seal shall immediately be placed in the public record, as no motion to seal was filed. (Cal. Rules of Court, Rule 2.551(b)(3)(B).

Plaintiff’s Evidentiary Objections

Pursuant to CCP 437c(q), the Court only rules upon the following objections to evidence which the Court deems to be material to the disposition of this motion:

Declaration of April Lopez

No. 4: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

No. 5: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

No. 6: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

Declaration of Doug Sandler

No. 9: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

No. 11: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

No. 12: OVERRULED. Permissible testimony of lay witness based on industry usage of terms; goes to weight.

No. 13: OVERRULED. The lack of foundation may be remedied before trial. (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 947-49.)

Defendant’s Evidentiary Objections

Pursuant to CCP 437c(q), the Court only rules upon the following objections to evidence which the Court deems to be material to the disposition of this motion:

Declaration of Robin Pearlman

No. 2: SUSTAINED as to “all the way”—improper lay opinion. Otherwise, OVERRULED. Relevant; hearsay exception—admission by party opponent (Evid. Code 1220.)

No. 3: OVERRULED. Relevant; hearsay exception—authorized admission (Evid. Code 1222.); not an improper legal conclusion; best evidence rule was repealed in 1998.

No. 4: OVERRULED. Relevant; hearsay exception—authorized admission (Evid. Code 1222.); not an improper legal conclusion.

No. 5: OVERRULED. Relevant; hearsay exception—authorized admission (Evid. Code 1222.); lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.) Permissible lay opinion; goes to weight.

No. 6: OVERRULED. Relevant,.

No. 7: OVERRULED. Relevant; permissible lay opinion, as the term “agent” may be understood in lay terms; goes to weight.

No. 8: OVERRULED. Relevant; permissible lay opinion; goes to weight.

No. 9: OVERRULED. Lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.) Permissible lay opinion; goes to weight.

No. 10: OVERRULED. This generalized objection to two pages of a declaration is not specific enough to formulate an objection.

No. 21: OVERRULED. Relevant; not hearsay; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.)

No. 22: OVERRULED. Relevant; not hearsay; permissible lay opinion; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.); goes to weight.

No. 23: OVERRULED. Relevant; not hearsay; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.); goes to weight.

No. 24: OVERRULED. Relevant; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.); goes to weight.

No. 25: OVERRULED. Relevant; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.); goes to weight.

No. 26: OVERRULED. Relevant; lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.); goes to weight.

No. 27: OVERRULED. Relevant.

No. 28: OVERRULED. Authorized admission (Evid. Code 1222.); lack of foundation may be remedied before trial. (Sweetwater Union High School Dist., supra, 6 Cal.5th at 947-49.)

No. 29: OVERRULED. Relevant.

No. 30: OVERRULED. Relevant; not hearsay; goes to weight.

Request For Judicial Notice

Defendant requests that the Court take judicial notice of the following:

(1) Docket for U.S. Bankruptcy Court for the Central District for Case No. 2:17-bk-18835 WB, attached to the Compendium of Declarations and Exhibits (“Compendium”) as Exhibit V; (2) March 20, 2018, Grant Deed, attached to the Compendium as Exhibit W; (3) March 20, 2018, Deed of Trust, attached to the Compendium as Exhibit X; (4) Plaintiff’s original Complaint filed on March 20, 2019, attached to the Compendium Exhibit Y, taken from its own file in this case; (5) LexisNexis, Business and Professionals Code section 10166.02, attached to the Compendium as Exhibit Z.

Requests Nos. 1 and 4 are GRANTED. (Evid. Code 452(d)(court records). Requests Nos. 2 and 3 are GRANTED. The Court may take judicial notice of recorded documents. (Evans v. California Trailer Court, Inc. (1994) 28 Cal.App.4th 540, 549, overruled on other grounds in Black Sky Capital, LLC v. Cobb (2019) 7 Cal.5th 156, 165; Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 263, 274). Request No. 5 is GRANTED. (Evid. Code 452(b)(legislative enactments).

Discussion

Defendant UMRO Realty Corp., dba The Agency (hereinafter, “UMRO,” as referred to in the 4AC, or “The Agency” as referred to in the moving papers) moves for summary judgment or, in the alternative, summary adjudication.

The causes of action asserted against moving party The Agency are: (1) first cause of action (violation of TILA, 15 U.S.C., 1639b and 1639c, et seq.—failure to conduct an ability to repay analysis); (2) second cause of action (violation of TILA, 15 U.C.S. 1639b(c)(3), et seq.—steering); (3) third cause of action (violation of 12 C.F.R. 1026.32(a)(4)—credit extended without regard to the consumer’ repayment ability); (4) fourth cause of action (violation of 12 C.F.R. 1026.32(a)(8)—impermissible late fee); (5) fifth cause of action (violation of 12 C.F.R. 1026.32(d)(1)(i)—impermissible balloon payment); (6) sixth cause of action (violation of 12 C.F.R. 1026.32(a)(5)—failure to obtain written confirmation of pre-loan counseling); (7) seventh cause of action (fraud); (8) eighth cause of action (negligent misrepresentation); (9) ninth cause of action (breach of fiduciary duty); (10) tenth cause of action (professional negligence); (11) eleventh cause of action (predatory lending; B & P Code 17200); (12) twelfth cause of action (unfair and deceptive business act practices (UDAP); B & P Code 17200).

(1) Plaintiff’s entire Fourth Amended Complaint Fails as a matter of law due to The Doctrine Of Unclean Hands.

Defendant argues that summary judgment is appropriate because Plaintiff comes to court with unclean hands in that she knowingly applied for a commercial mortgage loan based on misrepresentations in the loan application when she knew it was not for a business purpose, but rather, that the property was Plaintiff’s residence.

“To prevail on a summary judgment motion . . . the defendant must show conclusively that all of the plaintiff's causes of action or legal theories fail as a matter of law.” (Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1526.)

"'The [unclean hands] rule is settled in California that whenever a party who, as actor, seeks to set judicial machinery in motion and obtain [*290] some remedy, has violated conscience, good faith or other equitable principle in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf to acknowledge his right, or to afford him any remedy.'" (Moriarty v. Carlson (1960) 184 Cal.App.2d 51, 55 [7 Cal.Rptr. 282], citing Lynn v. Duckel (1956) 46 Cal.2d 845, 850 [299 P.2d 236].)

The rule is qualified by the requirement that the party against whom the doctrine is sought to be invoked directly "infected" the actual cause of action before the court, and is not merely guilty of unrelated improper past conduct. ( Moriarity v. Carlson, supra, 184 Cal.App.2d at p. 57.) The actions of the party alleged to have soiled hands must relate "directly to the transaction concerning which the complaint is made; i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants." (Fibreboard Papers Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 728 [39 Cal.Rptr. 64].) The doctrine is not restricted, however, to defense of suits in equity, but applies as well to suits at law. (Ibid.)

(Pond v. Ins. Co. of N. Am. (1984) 151 Cal.App.3d 280, 289-90.)

The unclean hands defense cannot wholly defeat a B & P Code 17200 claim which is based on violation of a statute, although it may be considered in fashioning a remedy:

[T]he equitable defense of unclean hands is not available in this UCL action based on violation of statutes, namely, sections 10113, 10381.5, and 10384. Courts have long held that the equitable defense of unclean hands is not a defense to an unfair trade or business practices claim based on violation of a statute. To allow such a defense would be to judicially sanction the defendant for engaging in an act declared by statute to be void or against public policy. (See Kofsky v. Smart & Final Iris Co. (1955) 131 Cal. App. 2d 530, 532 [281 P.2d 5] [holding unclean hands defense not available in an unfair practices act violation under Bus. & Prof. Code, 17000 et seq.].) It has long been the law that H “[t]he equitable doctrine of the refusal of aid to anyone with ‘unclean hands,’ does not, as such, apply to actions under [the unfair practices act].” (Page v. Bakersfield Uniform etc. Co. (1966) 239 [*544] Cal. App. 2d 762, 770 [49 Cal. Rptr. 46].) Kofsky points out that the doctrine of refusing to aid a party with unclean hands has no application where, as here “the failure to restrain an act because the parties are in pari delicto would result in permitting an act declared by statute to be void or against public policy. [Citations.]” (Kofsky, supra, at p. 532; see also Stern, Bus. & Prof. C., 17200 Practice, supra, 5:302, pp. 5-87 to 5-88; cf. Fletcher v. Security Pacific National Bank (1979) 23 Cal.3d 442, 446 [153 Cal. Rptr. 28, 591 P.2d 51] [holding court may order defendant bank to disgorge gains obtained from fraudulent business practice, even without individualized proof of deception to prevent bank from retaining benefits of its wrong and being insulated from any damages].)

More recently, our Supreme Court explained that “equitable defenses may not be asserted to wholly defeat a UCL claim [under Business and Professions Code section 17200] since such claims arise out of unlawful conduct. …” (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 179 [96 Cal. Rptr. 2d 518, 999 P.2d 706].) In Cortez, the plaintiff brought an action under the UCL seeking restitution of overtime wages withheld from her and other employees. The defendant argued that where the UCL sounded in equity, the trial court was obligated to consider equitable defenses. The Supreme Court held that the equities may be considered when the trial court exercises its discretion to fashion a remedy under Business and Professions Code section 17203. (23 Cal.4th at p. 179.) But, equitable defenses may not be used to defeat the cause of action under the UCL. As more fully explained by Justice Werdegar in her concurrence in Cortez, “in general, as between a person who is enriched as the result of his or her violation of the law, and a person intended to be protected by the law who is harmed by its violation, for the violator to retain the benefit would be unjust.” (Cortez, supra, at p. 182 (conc. opn. of Werdegar, J.).)

Accordingly, Blue Shield Life should not be entitled to raise the equitable defense of unclean hands to defeat plaintiff's motion for class certification. To allow an insurer to argue as a defense to the UCL claim that putative class plaintiffs have unclean hands because they misrepresented material medical information on unattached and unendorsed insurance applications, would be potentially to sanction the insurer's unlawful and unfair conduct. (Cortez v. Purolator Air Filtration Products Co., supra, 23 Cal.4th at p. 182 (conc. opn. of Werdegar, J.); Page v. Bakersfield Uniform etc. Co., supra, 239 Cal. App. 2d at p. 770; Kofsky v. Smart & Final Iris Co., supra, 131 Cal. App. 2d at p. 532.) Of course, the trial court has the discretion to consider [*545] equitable defenses such as unclean hands in creating the remedies authorized by Business and Professions Code section 17203. (Cortez, supra, at p. 179.) Such defenses may not be used, however, to wholly defeat the UCL cause of action (Cortez, supra, at p. 179), and so they may not be used to prevent class certification.

(Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 543-45 [bold emphasis added].)

As such, this ground for summary judgment is not persuasive.

(2) Plaintiff’s entire Fourth Amended Complaint Fails as a matter of law because April Lopez acted outside the scope of her employment with The Agency.

Defendant argues that Lopez acted outside the scope of her employment as a licensed real estate agent, so the entire action against The Agency on the ground of vicarious liability fails.

This argument ignores the concept of ostensible authority which does not require that the agent be acting within the scope of actual authority. The question is whether The Agency was at least negligent in permitting Lopez to hold herself out as having authority as an MLO working for The Agency.

Appellant concedes that it is an independent contractor. However, as independent contractor and agent are not mutually exclusive legal categories, our inquiry does not end here. ( City of Los Angeles v. Meyer Bros. Parking System, Inc. (1975) 54 Cal. App. 3d 135, 138 [126 Cal.Rptr. 545].) In Meyer Bros. it was held an independent contractor is also an agent when it contracts to act on behalf of a "principal" and is subject to the "principal's" control except with respect to the "agent's" physical conduct. ( Id. at p. 138.)

(APSB Bancorp v. Thorton Grant (1994) 26 Cal.App.4th 926, 930.)

“An agent represents his principal for all purposes within the scope of his actual or ostensible authority, and all the rights and liabilities which would accrue to the agent from transactions within such limit, if they had been entered into on his own account, accrue to the principal.” Civil Code 2330. “Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess.” Civil Code 2317. “A principal is bound by acts of his agent, under a merely ostensible authority, to those persons only who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith thereof.” Civil Code 2334.

Ostensible authority is created when the acts of the principal, either intentionally or by want of ordinary care, cause a third person to believe another to be the agent of the principal. (Civ. Code, 2300; 2 Witkin, Summary of Cal. Law (9th ed. 1987) Agency and Employment, 40, p. 52.) . . . "Ostensible agency cannot be established by the representations or conduct of the purported agent; the statements or acts of the principal must be such as to cause the third party to believe that the agency exists." (2 Witkin, Summary of Cal. Law, supra, Agency and Employment, 40, p. 53, italics in original.)

(Milrot v. Stamper Medical Corp. (1996) 44 Cal.App.4th 182, 187 [italics in original].)

In applying the above provisions of the Civil Code, the courts of this state have adopted the principles expressed in sections 261 and 262 of the Restatement Second of Agency ( Rutherford v. Rideout Bank, 11 Cal.2d 479, 482-483 [80 P.2d 798, 117 A.L.R. 383]). Section 261 provides: "A principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud." The principal is subject to liability although he is entirely innocent and has received no benefit from the transaction. He is not relieved from liability by the fact that the servant or other agent acts entirely for his own purposes, unless the party defrauded has notice of this ( Rest.2d Agency, 262).

Liability is based upon the fact that the agent's position facilitates the consummation of the fraud in that from the point of fact of the third person, the transaction seems regular on its face and the agent appears to be acting in the ordinary course of the business confided to him (Blackburn v. Witter, 201 Cal.App.2d 518, 521 [19 Cal.Rptr. 842]).

Partake's contention that there can be no liability for the acts of an ostensible agent unless there is some actual authority is entirely without merit. The doctrine establishing the principles of liability for the acts of an ostensible agent rests on the doctrine of estoppel ( Lee v. Helmco, Inc., 199 Cal.App.2d 820, 834 [19 Cal.Rptr. 413]). The essential elements are representations by the principal, justifiable reliance thereon by a third party, and change of position or injury resulting from such reliance ( Reusche v. California Pac. Title Ins. Co., 231 Cal.App.2d 731 [42 Cal.Rptr. 262].) Before recovery can be had against the principal for the acts of an ostensible agent, the person dealing with an agent must do so with belief in the agent's authority and this belief must be a reasonable one. Such belief must be generated by some act or neglect by the principal sought to be charged and the person relying on the agent's apparent authority must not be guilty of neglect ( Hill v. Citizens Nat. Trust & Sav. Bank, 9 Cal.2d 172 [69 P.2d 853]). Ostensible agency cannot be established by the representations or conduct of the purported agent; the statements or acts of the principal must be such as to cause the third party to believe the agency exists ( Lee v. Helmco, supra, p. 834).

(Hartong v. Partake, Inc. (1968) 266 Cal. App. 2d 942, 960 [bold emphasis added].)

The gist of Plaintiff’s allegations against Defendants, including moving Defendant The Agency, is that Defendants advised Plaintiff to misrepresent and acknowledge what is in fact a consumer credit transaction as a commercial mortgage. Specifically, defendants advised Plaintiff (a) to have [her mother] Cynthia transfer the home to Plaintiff and (b) to state in Plaintiffs’ loan application and other loan documents that she did not live in the home, that the home was a rental and that the loan was therefore obtained for a business purpose. (4AC, 1.) Plaintiff and her mother followed defendants' advice, even though Defendant allegedly knew they lived in the home and did not rent the home to anyone at all. (Id. at 2.)

Defendants allegedly concealed from Plaintiff that by following Defendants' recommendations i.e., if the loan the loan were regarded 18 as a commercial loan for business purposes, Plaintiff would be deprived of her consumer protections

under the law, primarily those deriving from the Truth in Lending Act ("TILA"). (2AC, 3.) Defendants allegedly knew that they would be putting Plaintiff in an entirely unsuitable mortgage loan that she could not afford, that the loan terms would violate limitations and protections provided by TILA and consumer protection laws, and that the loan inevitably would result in the very foreclosure that Plaintiff wanted to avoid. (Id. at 3.)

Plaintiff alleges at 4 that: Defendants allegedly received substantial fees, onerous interest and other charges, all at Plaintiffs’ expense. Ultimately, it was the lender defendants who threatened foreclosure. As a result, on or about July 30, 2019, Plaintiff was forced to sell the home. The lender defendants conditioned the reconveyance of their deed of trust on a payoff demand determined pursuant to the loan documents. The payment to defendants of the entire amount asserted in their payoff demand was permitted by Plaintiff under protest.

Regarding Lopez as agent for Defendant UMRO/The Agency, 18 alleges:

i. UMRO actually employed LOPEZ as a representative, employee and agent of UMRO in real estate and real estate related transactions;

ii. UMRO entrusted to LOPEZ authority to act as UMRO's agent by

providing her with an office operated under the UMRO dba, 'The Agency;" the office had no indicia available or apparent to the customer that the scope of LOPEZ's agency was in any way limited and did not indicate to PLAINTIFF or to any other customer that it was limited in any way or that LOPEZ was anything other than an agent and representative of The Agency, and thereby also of UMRO, in all real estate and real estate related transactions including in brokering, arranging and otherwise acting on behalf of the customer as an agent of UMRO and as the customer's agent with respect to mortgage loans.

iii. UMRO entrusted LOPEZ with the indicia that, she was, in all of her real estate dealings, an authorized agent of UMRO, by providing to her an office at The Agency, which PLAINTIFF is informed and believes and thereupon alleges, was and is located at 331 Foothill Road, #100, Beverly Hills, CA 90210. In providing the office to LOPEZ, UMRO did not provide any indication visible or available to customers or to PLAINTlFF that scope of LOPEZ's agency was an any way limited and did not indicate to PLAINTIFF or to any other customer that it was limited in any way or that LOPEZ was anything other than an agent and representative of The Agency, and thereby also of UMRO, in all real estate and real estate related transactions including in brokering, arranging and otherwise acting on behalf of the customer as an agent of UMRO and as the customer's agent with respect to mortgage loans.

iv. UMRO entrusted LOPEZ with the stationery of The Agency, in letter, email and text message formats, which represented LOPEZ to be an agent of The Agency and which did not indicate any limitation whatsoever to the scope of said agency; in providing its stationery for use by LOPEZ, UMRO did not provide any indication visible or available to customers or to PLAINTIFF that scope of LOPEZ's agency was an any way limited and did not indicate to PLAINTIFF or to any other customer that it was limited in any way or that LOPEZ was anything other than an agent and representative of The Agency, and thereby also of UMRO, in all real estate and real estate related transactions including in brokering, arranging and otherwise acting on behalf of the customer as an agent of UMRO and as the customer's agent with respect to mortgage loans.

v. UMRO entrusted LOPEZ with an office phone number at The Agency, which, when used, did not indicate to PLAINTIFF or to any other customer that it was limited in any way or that LOPEZ was anything other than an agent and representative of The Agency, and thereby also of UMRO, in all real estate and real estate related transactions including in brokering, arranging and otherwise acting on behalf of the customer as an agent of UMRO and as the customer's agent with respect to mortgage loans.

vi. At all times herein material, UMRO knew, or should have known, that that there was a substantial risk that LOPEZ would use her apparent and/or ostensible authority as an agent of UMRO with respect to mortgage loan transactions because she had in the past acted as a Mortgage Loan Originator ("MLO") and had been licensed and/or endorsed as such.

vii. At all times herein material, PLAINTIFF (ROBYN) was in the business of retail jewelry sales, was not in the business of, or in any business related to, real estate or mortgage lending and had no knowledge or awareness of licensing or other requirements for MLOs and no awareness of DRE, NMLS or any other real estate related sources or references.

viii.. At all times material herein, PLAINTIFF reasonably assumed that LOPEZ, as an agent of The Agency (and therefore as an agent of UMRO) was acting within the scope of her agency and authority. PLAINTIFF reasonably relied upon the indicia of authority described in i. through vii. above and was unaware of any limitation as to the scope of LOPEZ'S authority to act as an agent and employee of The Agency that would in any way affect her authority to act on PLAINTIFF's behalf as an agent of the Agency in connection with the LOAN herein.

ix. PLAINTIFF's reasonable reliance on the indicia of authority described in, inter alia, i through vii above was reinforced by the fact that, subsequent to the closing of the LOAN and as a result of PLAINTIFF being unable to make the payments on the LOAN, LOPEZ assisted PLAINTIFF, arranged for and acted as a broker and MLO for an additional mortgage loan secured by the condominium that was owned by PLAINTIFF but which, at all times material herein, was rented to a third party. Said mortgage loan was arranged by LOPEZ in the same manner in which she had arranged the LOAN herein and was accompanied by all of the indicia described in, inter alia, i through vii above that LOPEZ was acting as an agent and employee of The Agency, and therefore UMRO, and that LOPEZ was acting within scope of said agency.

(4AC, 18(i)-(ix) [bold emphasis added].)

A summary judgment or summary adjudication motion must address the “issues framed by the pleadings since it is these allegations to which the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent's pleading.” (Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 753 [bold emphasis and underlining added].)

Here, Defendant The Agency presents evidence that it never authorized Lopez to give Plaintiff, or any part, loan related advice, originate a loan, procure a loan or conduct any loan related activities. (UF No. 39; Sandler Decl., 8.) This goes to whether Lopez had actual authority, but not whether Lopez had ostensible authority.

As to whether Defendant The Agency was at least negligent in allowing Plaintiff to believe that Lopez was an ostensible agent with authority to engage in mortgage loan transactions, Defendant’s evidence is that when Lopez initially introduced herself to Plaintiff, she told her she was a real estate agent with The Agency, and Plaintiff already had a copy of her business card that showed she was a real estate agent only with The Agency. (UF No. 27; Lopez Decl., 8; Exhibit T (April Lopez’s Business Card).) Lopez holds only her real estate license with The Agency. (UF No. 33; Lopez Decl., 15; Sandler Decl., 2 and 8.) Lopez does not and did not provide loan services on behalf of The Agency, nor has she registered an MLO license with the Agency. (UF No. 34; Lopez Decl., 15; Sandler Decl., 2.)

Moreover, Defendant cites evidence that Lopez referred Plaintiff to 1^st Point to secure the loan, but she never acted as the loan originator. (UF No. 25; Lopez Decl., 1, 10; Exhibit T (April Lopez’s Business Card); Exhibit K – Bates Stamp page LOP000383, LOP000400-401, LOP000427, LOP000431.) Neither Lopez nor The Agency drafted or signed any loan documents or received a commission from the loan. (UF No. 35; Lopez Decl., 16, 18; Sandler Decl., 9-11.) The Agency has established policies, rules, procedures and systems to monitor the conduct and actions of its agents, including without limitation, the submission of documentation for each transaction by its agents. Lopez never submitted any documentation with the Agency regarding this matter because The Agency does not handle loans. (UF No. 36; Sandler Decl., 12.) The Agency was not aware of Plaintiff’s loan or the subject property, nor was The Agency aware of any alleged advice (or any aspect of it) that Lopez allegedly gave to Plaintiff. (UF No. 37; Sandler Decl., 7.) The Agency’s files are completely void of any reference to the subject property. (UF No. 38; Sandler Decl., 13.)

The foregoing evidence is sufficient to demonstrate that Lopez did not provide any loan services to Plaintiff, nor did The Agency act negligently in permitting Lopez to hold herself out as offering loan services. As such, Lopez did not act as an actual or ostensible agent providing loan services for which The Agency would be vicariously liable. The burden shifts to Plaintiff to demonstrate that a triable issue of material fact exists in this regard.

At Opp. Fact Nos. 24, 25 Plaintiff indicates that: Lopez is the only profession with whom Plaintiff dealt regarding the subject loan from the outset of the transaction on February 21, 2018 to the day of closing on March 21, 2018, when she met and spoke with Alex Nelson for the first time. The agreements cited by The Agency were not signed until the date of closing. Plaintiff argues that Lopez performed mortgage loan origination activities on the subject loan starting about a month before closing and at least through the funding of the Loan on March 30, 2018, and received a $7,000 check from Nelson. Plaintiff argues that Lopez shopped around for a loan for Plaintiff, took the loan application form, negotiated the loan terms on behalf of Plaintiff, acted as liaison for Plaintiff with escrow, Nelson and the lender. Plaintiff argues that the foregoing establishes that Lopez acted as an MLO on the loan. (Pearlman Decl., 24-25; Exhs. 1009, 1011, 1012, 1014, 1015, 1017, 1018, 1020, 1024, 1025, 1026, 1030, 1041, 1058; Exh. 3 – Nelson Tr. 175.)

The foregoing evidence raises a triable issue of material fact as to whether Lopez was involved in providing loan services to Plaintiff. As to whether Lopez, in performing these loan services, was acting as an ostensible agent on behalf of The Agency, Plaintiff cites the following evidence:

The Agency did not publish any policy prohibiting its sales persons from engaging in loan origination activities, touted Lopez’s lending experience on The Agency’s website, and failed to reasonably supervise its agents to not engage in lending activities. (UF No. 31; Pearlman Decl., 17-20; Ex. 1007 (“real estate finance industry” [bold emphasis added]; touting Lopez’s 21 years of experience in mortgage lending and banking); Ex. 4 – Sandler Tr. 36-37, 40-42, 43:6-14, 44, 55, 61-63, 68, 77-78, 80, 103-104, 175, 179, 181 Ex. 1 - Lopez Tr. 55-56, 59, 62-64, 93, 103-04.

The foregoing evidence is sufficient to raise a triable issue of material fact as to whether The Agency acted negligently in permitting Lopez to hold herself out as offering loan services, and thus acted as an ostensible agent providing loan services for which The Agency would be vicariously liable.

As such, this ground for summary judgment is not persuasive.

Conclusion

As neither ground for summary judgment is persuasive, the motion for summary judgment is DENIED.

Motion For Summary Adjudication

1. ISSUE 1: Plaintiff cannot allege any violation of the Consumer Protection Laws by The Agency.

The Court has discretionary power to deny summary adjudication for failure to comply with CRC Rule 3.1350. (Truong v. Glasser (2009) 181 Cal.App.4th 102, 118.)

This issue is not framed in a manner which identifies as to which causes of action it is directed, as is required by CRC Rule 3.1350(b), which provides:

If made in the alternative, a motion for summary adjudication may make reference to and depend on the same evidence submitted in support of the summary judgment motion. If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.

(Calif. Rules of Court, Rule 3.1350(b)[bold emphasis and underlining added].)

As such, the motion for summary adjudication as to unspecified causes of action is DENIED.

2. ISSUE 2: Plaintiff’s Ninth and Tenth causes of action for Breach of Fiduciary Duty and Professional Negligence fail as a matter of law because The Agency did not owe a Fiduciary Duty to Plaintiff.

First, whether or not The Agency owed a fiduciary duty to Plaintiff would not dispose of the tenth cause of action for professional negligence because the relevant duty for a professional negligence cause of action is a duty of care of a reasonable professional, not a heightened fiduciary duty.

The elements of a cause of action for professional negligence are (1) the existence of the duty of the professional to use such skill, prudence, and diligence as other members of the profession commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional negligence. (Ibid.)

(Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Moreover, as discussed above re: the motion for summary judgment, there is a triable issue of material fact as to whether Lopez engaged in loan activities for which Defendant The Agency could be held vicariously liable. The professional duty of care imposed upon Lopez in such a circumstance would be imputed to The Agency.

On the other hand:

A fiduciary must give “priority to the best interest of the beneficiary. [Citation.]” (Committee on Children‘s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 222 [197 Cal. Rptr. 783, 673 P.2d 660] (Children’s Television).) In addition to this duty of preference toward the beneficiary, the fiduciary also is required to manage the subject matter of the relationship (or res) with due care, must account to the beneficiary, and must keep the beneficiary fully informed as to all matters pertinent to the beneficiary's interest in the res. (See Chodos, The Law of Fiduciary Duties (2000) pp. LIV-LV.)

(Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 631.)

As such, the motion for summary adjudication as to Issue No. 2 re: the tenth cause of action is DENIED.

As to the ninth cause of action, it alleges that fiduciary duty arose out of Defendants acting as brokers or agents of Plaintiff, and allegedly breached that duty by

failing to advise or notify Plaintiff when Defendants knew or should have known that Plaintiff will or has a likelihood of defaulting on the loan. With said knowledge, the Defendants allegedly had a fiduciary duty to the Plaintiff not to place her in the loan. (2AC, 23, 24.)

Here, Defendant has provided evidence that it did not enter into any contract with Plaintiff. UF No. 38 is that “The Agency’s files are completely void of any reference to the Subject Property.” (Sandler Decl., 13.) According to the Declaration of Doug Sandler, the only agreement Plaintiff entered into with The Agency was a listing agreement for the sale of a separate property, which Plaintiff entered into with The Agency after Plaintiff entered into the loan agreement for the subject loan. (Sandler Decl., 9.) As such, Defendant The Agency did not directly undertake a fiduciary obligation to Plaintiff.

Second, as the Lopez’s activities as a possible loan originator would not impose fiduciary duties upon her or, vicariously, The Agency.

It is appropriate to look to the terms of the Agreement because "[u]nlike the automatic, status-based fiduciary duty which exists, for example, between attorney and client, fiduciary duties among loan participants depend upon the terms of their contract." ( First Citizens Federal Sav. and Loan v. Worthen Bk. (9th Cir. 1990) 919 F.2d 510, 513 (hereafter Worthen).)

(S. Pac. Thrift & Loan Ass'n v. Sav. Ass'n Mortg. Co. (1999) 70 Cal.App.4th 634, 638.)

Lopez states in her Declaration that Plaintiff did not sign an agreement with Lopez or The Agency for the subject loan, and the only agreement Plaintiff ever signed with Lopez and The Agency was a listing agreement at a later point in time for the sale of her condo. (Lopez Decl., 14.) Thus, there is not contract regarding loan activities which would give rise to a fiduciary duty owed by Lopez and thus, vicariously, by The Agency.

As such, the burden shifts to Plaintiff to demonstrate that a triable issue of material fact exists as to the existence of a fiduciary duty owed by The Agency.

In the Opposition, Plaintiff cites case law whereby Lopez can be found to have acted as a mortgage loan broker on behalf of Plaintiff, thereby owing her a fiduciary duty. The Court incorporates by reference its discussion regarding the motion for summary judgment above, whereby the Court found that a triable issue of material fact exists as to whether Lopez engaged in loan activities for which The Agency could be held vicariously liable. Given the authorities cited by Plaintiff, a triable issue of material fact also exists as whether Lopez can be found to have acted as a mortgage loan broker on behalf of Plaintiff, thereby owing her a fiduciary duty, which would be imputed to The Agency as well.

A mortgage loan broker is customarily retained by a borrower to act as the borrower's agent in negotiating an acceptable loan. All persons engaged in this business in California are required to obtain real estate licenses. (Bus. & Prof. Code, 10130 and 10131, subd. (d).) Thus, general principles of agency (Civ. Code, 2228 and 2322, subd.) combine with statutory duties created by the Real Estate Law (see Bus. & Prof. Code, 10176, subds. (a), (i)) to impose upon mortgage loan brokers an obligation to make a full and accurate disclosure of the terms of a loan to borrowers and to act always in the utmost good faith toward their principals. "The law imposes on a real estate agent 'the same obligation of undivided service and loyalty that it imposes on a trustee in favor of his beneficiary.' [Citations.] This relationship not only imposes upon him the duty of acting in the highest good faith toward his principal but precludes the agent from obtaining any advantage over the principal in any transaction had by virtue of his agency. [Citation.]" ( Batson v. Strehlow (1968) 68 Cal.2d 662, 674-675 [68 Cal. Rptr. 589, 441 P.2d 101].) A real estate licensee is "charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal's decision. [Citations.]" ( Rattray v. Scudder (1946) 28 Cal.2d 214, 223 [169 P.2d 371, 164 A.L.R. 1356]; see also Realty Projects, Inc. v. Smith (1973) 32 Cal. App. 3d 204, 210 [108 Cal. Rptr. 71]; Smith v. Zak (1971) 20 Cal. App. 3d 785, 792-793 [98 Cal. Rptr. 242].)

(Wyatt v. Union Mortg. Co. (1979) 24 Cal.3d 773, 782.)

(a) A mortgage broker providing mortgage brokerage services to a borrower is the fiduciary of the borrower, and any violation of the broker’s fiduciary duties shall be a violation of the mortgage broker’s license law. This fiduciary duty includes a requirement that the mortgage broker place the economic interest of the borrower ahead of his or her own economic interest. A mortgage broker who provides mortgage brokerage services to the borrower owes this fiduciary duty to the borrower regardless of whether the mortgage broker is acting as an agent for any other party in connection with the residential mortgage loan transaction.

(Civ. Code 2923.1(a).)

A mortgage loan broker owes a fiduciary duty of the "highest good faith toward his principal" and "is 'charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal's decision.'" ( Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 782 [157 Cal.Rptr. 392, 598 P.2d 45], citations omitted.)

(Barry v. Raskov (1991) 232 Cal.App.3d 447, 455.)

As such, Plaintiff has demonstrated that a triable issue of material fact exists as to the existence of a fiduciary duty owed by The Agency.

The motion for summary adjudication as to Issue No. 2 re: the ninth and tenth causes of action is DENIED.

3. ISSUE 3: Plaintiff’s Fraud and [Negligent] Misrepresentation Claims [Seventh and Eighth Causes of Action] Fail Because Plaintiff Cannot Show Reasonable Reliance.

Defendant argues that Plaintiff’s alleged reliance was not reasonable because she cannot ignore the facts around her and fail to read documents, participate in a fraudulent loan she believes will improve her situation, then claim reliance and blame Defendants.

To recover for fraud in any case the plaintiff must show that he reasonably relied on the defendant's misrepresentations. The plaintiff cannot recover if his reliance was not justified or reasonable. (Citations omitted.)

(Phillippe v. Shapell Indus. (1987) 43 Cal.3d 1247, 1270.)

[T]he elements of a cause of action for fraud based on concealment are: “ ‘(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. [Citation.]’ [Citation.]” (Citation omitted.)

(Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850.)

"One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated, . . . facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts." (Rest.2d Torts, 551, subd. (2)(e); Wells v. John Hancock Mut. Life Ins. Co. (1978) 85 Cal.App.3d 66, 72, fn. 8 [149 Cal.Rptr.171]; Westrick v. State Farm Insurance (1982) 137 Cal.App.3d 685, 691, fn. 3 [187 Cal.Rptr.214].)

(Eddy v. Sharp (1988) 199 Cal.App.3d 858, 864.)

Here, the seventh cause of action for fraud is based upon a failure to disclose material facts to Plaintiff, namely, that the misrepresentation that Plaintiff did not reside in the family home/the subject property, would cause Plaintiff to lose the benefits of the consumer protection laws. (4AC, 104.) Plaintiff alleges that she suffered exorbitant interest finance charges, late charges and default finance interest, and delay of at least a year in the opportunity to sell the subject property. (Id. at 105.)

Defendants also allegedly concealed that Defendants concealed from Plaintiff that Defendants were required by law to conduct an ATR (ability to repay) analysis, but did not conduct an ATR analysis. (4AC, 105.ii.) Defendants allegedly concealed that, had an ATR analysis been conducted, it would be apparent that Plaintiff could not be expected to be able to repay the loan. (Id.) Defendants also allegedly steered Plaintiff to a “hard money,” high interest loan that would maximize Defendants’ profits rather than disclosing other possibility that might be more advantageous to Plaintiff. (Id. at 105.iii.) Defendants allegedly concealed the true costs and risks of the loan they provided to Plaintiff. (Id.)

The eighth cause of action for negligent misrepresentation is based upon similar allegations. (See 4AC, 115 – 116.)

Reliance exists when the misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction. ( Spinks v. Clark (1905) 147 Cal. 439, 444 [82 P. 45]; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, 711, p. 810.) "Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact." ( Blankenheim v. E. F. Hutton & Co. (1990) 217 Cal. App. 3d 1463, 1475 [266 Cal. Rptr. 593]; Gray v. Don Miller & Associates, Inc. (1984) 35 Cal. 3d 498, 503 [198 Cal. Rptr. 551, 674 P.2d 253, 44 A.L.R.4th 763] ["[w]hether reliance is justified is a question of fact for the determination of the trial court"]; Guido v. Koopman (1991) 1 Cal. App. 4th 837, 843 [2 Cal. Rptr. 2d 437] ["the reasonableness of the reliance is ordinarily a question of fact"].) "However, whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts." ( Guido v. Koopman, supra, 1 Cal. App. 4th at p. 843.)

(Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)

Here, Defendant’s Separate Statement at Issue No. 3 does not cite any evidence whereby the question of Plaintiff’s reliance on the nondisclosure of the material facts pled was unreasonable as a matter of law. In other words, triable issues of such material fact exist, and a jury must determine the reasonableness of Plaintiff’s reliance on Defendants’ alleged nondisclosure of material facts.

As such, the motion for summary adjudication as to Issue No. 3 re: the seventh and eighth causes of action is DENIED.

4. ISSUE 4: The Eleventh and Twelfth causes of action for Predatory Lending and Unfair and Deceptive Business Act Practices also fail.

Defendant simply argues that these causes of action fail because “[a]ll the defenses discussed herein apply to these claims and serve to eliminate these causes of action.” (MSJ, Page 20:10-11.) For the reasons discussed above, this argument is not persuasive.

The motion for summary adjudication as to Issue No. 4 re: the eleventh and twelfth causes of action is DENIED.

5. ISSUE 5: Plaintiff cannot recover punitive damages from The Agency.

A defendant is entitled to summary adjudication on “one or more claims for [punitive] damages” if he establishes “there is no merit to [the claim], as specified in Section 3294 of the Civil Code . . . .” (Code Civ. Proc., 437c, subd. (f)(1)). A defendant establishes a claim has no merit by showing that an element of the claim cannot be established. (Code Civ. Proc., 437c, subd. (p)(2).) To do so, a defendant must show that the plaintiff does not possess, and cannot reasonably obtain, needed evidence. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) To meet its burden, a defendant must present evidence; he may not simply point out that the plaintiff does not possess, and cannot reasonably obtain, needed evidence. (Id. at 854-55.) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists . . . .” (Code Civ. Proc., 437c, subd. (p)(2).)

“In the usual case, the question of whether the defendant's conduct will support an award of punitive damages is for the trier of fact, ‘since the degree of punishment depends on the peculiar circumstances of each case.’ [Citations.] [ ] But the issue may be resolved on summary judgment, giving due regard to the higher proof standard. While ‘the “clear and convincing” evidentiary standard is a stringent one, it does not impose on a plaintiff the obligation to “prove” a case for punitive damages at summary judgment.’ (American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton [(2002)] 96 Cal.App.4th [1017,] 1049 [117 Cal. Rptr. 2d 685].) ‘However, where the plaintiff's ultimate burden of proof will be by clear and convincing evidence, the higher standard of proof must be taken into account in ruling on a motion for summary judgment or summary adjudication, since if a plaintiff is to prevail on a claim for punitive damages, it will be necessary that the evidence presented meet the higher evidentiary standard.’ (Ibid.; [citations].) … [S]ummary judgment ‘on the issue of punitive damages is proper’ only ‘when no reasonable jury could find the plaintiff's evidence to be clear and convincing proof of malice, fraud or oppression.’ (Hoch v. Allied-Signal, Inc.[ (1994) 24 Cal.App.4th 48,] 60–61 [29 Cal. Rptr. 2d 615].)” (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1053 [90 Cal. Rptr. 3d 453].) In reviewing the trial court's denial of petitioners' motion for summary adjudication, we view the evidence with the higher burden of proof in mind.

(Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 762.)

Given the above discussion re: summary judgment, the Court finds that there is no triable issue of material fact as to whether Plaintiff can present clear and convincing evidence that an officer, director or managing agent of Defendant The Agency acted with malice, oppression or fraud toward Plaintiff, nor that it employed Lopez with advance knowledge of her unfitness and in conscious disregard of the rights of Plaintiff, nor that it ratified Lopez’s conduct in which she engaged with malice, oppression or fraud.

(b) An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice. With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.

(Civ. Code 3294(b).)

Plaintiff’s argument that Defendant ratified Lopez’s conduct by failing to discipline her after being served with this lawsuit in March 2019 is not persuasive. There is no evidence that The Agency received any benefits from Lopez allegedly engaging in loan activities. As such, there can be no ratification if The Agency received no benefit that it could repudiate:

There is no ratification if, at the time it becomes known that the agent exceeded his authority, the principal has put it beyond his power to return or restore the benefits received, or if without his fault conditions are such that he cannot be placed in statu quo or repudiate the entire transaction without loss, or if the continued enjoyment of the benefits by the principal is unavoidable." Again, as stated in said section, the rule of ratification by the acceptance of benefits implies the power of agents to accept or reject what has been received.

(Pac. Bone Coal & Fertilizer Co. v. Bleakmore (1927) 81 Cal.App. 659, 664.)

As such, the motion for summary adjudication as to Issue No. 5 re: punitive damages is GRANTED.

Motion To Continue Trial Date

Plaintiff Robyn Pearlman moves for a continuance of the trial date from November 28, 2022 to April 3, 2023, or a later date that is convenient for the Court, with a corresponding continuance of the Final Status Conference. Plaintiff is not seeking a continuance of discovery and motion cut-off dates.

The basis for this motion is that Plaintiff’s counsel, Mr. Lefkowitz, is scheduled to be out of town on a long-planned 30^th anniversary and 60~ Birthday trip with his wife (that has been postponed for two years due to the pandemic) during the time that the Court set this case for trial (sua sponte and without hearing). (Declaration of David Lefkowitz ("Lefkowitz Decl."), generally, and 4.)

Trial dates are firm and a request for continuance of trial is disfavored. (Cal. Rules of Court, Rule 3.1332(a) & (c).) CRC Rule 3.1332(c) requires an affirmative showing of good cause requiring the continuance.

Plaintiff has demonstrated the “unavailability of trial counsel because of . . . other excusable circumstances.” (Cal. Rules of Court, Rule 3.1332(c)(3).)

The Court finds that good cause exists for the requested trial continuance.

In ruling on a motion for continuance of the trial date, among the other factors the court is to consider are set forth in CRC Rule 3.1332(d)(1)-(11), and include as relevant to this motion:

• The proximity of the trial date – Here, the trial date is currently set for November 28, 2022—about three months from the date this motion is heard. This factor is neutral, given that the trial date is set to begin during counsel’s period of unavailability.

Whether there was any previous continuance, extension of time, or delay of trial due to any party – The trial date was originally set for July 25, 2022 (April 29, 2021 minute order), then to November 28, 2022 (June 8, 2022 minute order).

The length of the continuance requested – about 4 months—from November 28, 2022 to April 3, 2023, which is the earliest date all parties’ counsel are available. The Court is dark the week of April 3, 2023, so the continuance will have to be thereafter.

The availability of alternative means to address the problem that gave rise to the motion or application for a continuance – There does not appear to be any feasible means to address the problem.

The prejudice that parties or witnesses will suffer as a result of the continuance – There does not appear to be any prejudice which would result from the continuance.

Whether all parties have stipulated to a continuance – All parties have stipulated to the requested continuance.

Whether the interests of justice are best served by a continuance, by the trial of the matter, or by imposing conditions on the continuance – This factor appears to be neutral.

Any other fact or circumstance relevant to the fair determination of the motion or application – This action was filed on March 20, 2019. A trial date of April 3, 2023 would be 4 years and 14 days from the date of commencement.

Conclusion:

Given the existence of good cause for the continuance, and taking into consideration the additional factors, the motion to continue the trial date is GRANTED. The trial date is CONTINUED to April 10, 2023 at 8:30 AM. The final status conference is set for March 27, 2023 at 8:30 AM. All motion and discovery cutoff dates shall remain as set relative to the November 23, 2022 trial date.

Case Number: *******9548    Hearing Date: November 17, 2020    Dept: 76

Plaintiff alleges that Defendants advised Plaintiff and her mother to represent that the underlying loan was a commercial mortgage, even though it was a consumer credit transaction, which rendered the Truth in Lending Act inapplicable to the loan. Defendants allegedly knew Plaintiff did not qualify and could not afford the loan, which was for 11 months of interest only payments with a final balloon payment of $705,250.

Plaintiff moves for leave to file a “Third” (actually Fourth) Amended Complaint.

TENTATIVE RULING

Plaintiff Robyn Pearlman’s motion for leave to file a Fourth Amended Complaint is GRANTED. Plaintiff is to file and serve a re-titled “Fourth” Amended Complaint within 5 days. Because this is Plaintiff’s Fourth Amended Complaint, further leave to amend will not be granted absent extraordinary circumstances.

ANALYSIS

Motion For Leave To File “Third” (actually Fourth) Amended Complaint

Plaintiff moves for leave to file a “Third” (actually Fourth) Amended Complaint. Plaintiff filed the original Complaint on March 20, 2019. Plaintiff filed a First Amended Complaint on June 18, 2019. Then, on July 5, 2019, Plaintiff filed a second document captioned as a First Amended Complaint, which should have been styled as a Second Amended Complaint. On August 5, 2019, Plaintiff filed a “Second” (actually the Third) Amended Complaint. The Court will address this as a motion for leave to file a Fourth Amended Complaint (“4AC”).

CRC Rule 3.1324 provides:

(a) Contents of motion. A motion to amend a pleading before trial must:

(1) Include a copy of the proposed amendment or amended pleading, which must be serially numbered to differentiate it from previous pleadings or amendments;

(2) State what allegations in the previous pleading are proposed to be deleted, if any, and where, by page, paragraph, and line number, the deleted allegations are located; and

(3) State what allegations are proposed to be added to the previous pleading, if any, and where, by page, paragraph, and line number, the additional allegations are located.

(b) Supporting declaration. A separate declaration must accompany the motion and must specify:

(1) The effect of the amendment;

(2) Why the amendment is necessary and proper;

(3) When the facts giving rise to the amended allegations were discovered; and

(4) The reasons why the request for amendment was not made earlier.

(Bold emphasis added.)

The proposed additions are set forth at Pages 3-5 of the Motion. In light of the fact that Plaintiff’s counsel substituted in on May 20, 2020 following the death of Plaintiff’s prior counsel in December 2019, the Court finds that the Declaration of David Lefkowitz sufficiently complies with CRC Rule 3.1324.

“Leave to amend is in general required to be liberally granted (citation omitted), provided there is no statute of limitations concern. Leave to amend may be denied if there is prejudice to the opposing party, such as delay in trial, loss of critical evidence, or added costs of preparation. (Citation omitted.)” (Kolani v. Gluska (1998) 64 Cal.App.4th 402.)

Here, there is no trial date currently set, so there is no obvious prejudice to Defendants in granting leave to amend.

The motion for leave to file a Fourth Amended Complaint is GRANTED. Plaintiff is to file and serve a re-titled “Fourth” Amended Complaint within 5 days. Because this is Plaintiff’s Fourth Amended Complaint, further leave to amend will not be granted absent extraordinary circumstances.