Judge: Michael Shultz, Case: TC029030, Date: 2023-03-07 Tentative Ruling
Case Number: TC029030 Hearing Date: March 7, 2023 Dept: A
TC029030 Philip Alvarez, Successor Trustee of the Evangelina
Alvarez Living Trust of 2015 v. Westland Architecture and Development
Corporation, et al.
[TENTATIVE] ORDER
I.
BACKGROUND
The Second Amended
Complaint (“SAC”), filed on August 29, 2018, alleges that Plaintiff owns
residential real property located at 925 E. Stockton Avenue in Compton (the
Compton Property). Defendants allegedly engaged in fraudulent acts to fund
three separate loans secured by the real property at issue. Defendants
allegedly presented the loan as a non-owner-occupied transaction, although
Plaintiff resided at the home. Plaintiff alleges claims for fraud, constructive
fraud, breach of fiduciary duty, unjust enrichment, and unfair business
practices (Bus.
& Prof. Code § 17200).
II. ARGUMENTS
A.
Motion by Defendants, Ridec, LLC (“Ridec”),
Advanced Funding (“Advanced”), and California Tele Digital Specialists (“CTD”).
Defendants argue that
Plaintiff fails to state a cause of action for fraud, constructive fraud, breach
of fiduciary duty, unjust enrichment and for unfair business practices based on
Plaintiff’s deposition testimony, which contradict facts alleged in the SAC. The
Court previously overruled Defendants’ demurrer in 2018 on all grounds.
B.
Opposition
Plaintiff objects
to the Defendants’ request for judicial notice of deposition testimony and
argues that the Court cannot draw inferences from the testimony. Plaintiff also complains that Defendants did
not meet and confer as required by statute.
C.
Reply
Defendants
contend that since this motion is a non-statutory motion for judgment on the
pleading, the statutory meet and confer requirements and/or a change in the law
is not required and the Court can take judicial notice of the deposition
testimony because it contradicts the allegations of the complaint.
III. LEGAL
STANDARDS
A party can file a non-statutory or
common law motion for judgment on the pleadings. To prevail on this motion,
Defendant must establish that the complaint does not state facts to constitute
a cause of action; this is the traditional common law ground. (Korchemny v. Piterman (2021)
68 Cal.App.5th 1032, 1055). It
is a “well-established procedure with the purpose and effect of a general
demurrer … [and] the same rules apply. (Sofias v. Bank of Am. (1985)
172 Cal.App.3d 583, 586).
A non-statutory motion can be made at
any time, even when a general demurrer has been previously overruled in
furtherance of all parties’ interests “by avoiding a trial and reversal for
defect in pleadings. … And, if the demurrer was overruled by a different
judge, the trial judge is equally free to reexamine the sufficiency of the
pleading.” (Ion Equipment Corp. v. Nelson (1980)
110 Cal.App.3d 868, 877). Therefore,
while the Hon. Maurice A. Leiter previously overruled Defendants’ demurrer to
the SAC, this Court can consider Defendant’s non-statutory motion for judgment
on the pleading. (Def.’s RJN Ex. 3).
IV. DISCUSSION
A. Allegations material to Defendants’ motion
In pertinent part, Plaintiff
alleges that Defendant Ridec was the lender that funded
the May 2017 loan for $198,000.0 secured
by Plaintiff’s real property. (SAC,
¶ 78, ¶ 88, Ex. N). Advanced Funding is alleged to be a
mortgage broker who was involved in the transaction (SAC,
¶ 79).
Plaintiff alleges that Defendant CTD, acting as trustee, recorded a Notice of
Trustee’s Sale at the direction of Ridec. (SAC
¶¶ 15, 99). Together, Ridec, Advanced Funding, and CTD are
identified (among others) as “Group 3 Defendants.” (SAC ¶ 38). Plaintiff
alleges claims for fraud, constructive fraud, breach of fiduciary duty, unjust
enrichment, and unfair business practices (third through seventh causes of
action).
B.
The
Court grants Defendants’ request for judicial notice of Plaintiff’s deposition
testimony, in part.
The Court may take judicial notice
of deposition testimony as well as other discovery responses of the pleading
party “to the extent they contain statements of the [party] or his agent which
are inconsistent with the allegations of the pleading before the court.” (Bounds
v. Superior Court (2014) 229 Cal.App.4th 468, 477). Judicial
notice of discovery responses is permitted “where there is not or cannot be a
factual dispute concerning that which is sought to be judicially noticed.” (Bounds
v. Superior Court (2014) 229 Cal.App.4th 468, 478). In
taking judicial notice, the Court cannot draw inferences from those responses.
(Id.). Accordingly, the Court takes judicial
notice of the deposition testimony of Plaintiff, to the extent Plaintiff’s
testimony is inconsistent with the allegations of the SAC. (Defendant’s
RJN, Ex. 5).
The Court denies Defendants’ request
for judicial notice of recorded documents read into the record during
Plaintiff’s deposition specifically declaring that the loan was for business
purposes only. The testimony is not inconsistent with the allegations that
Defendants failed to disclose information material to obtaining the loan
despite their specific knowledge of the facts and representations made to
Plaintiff or concealment of facts from Plaintiff. (SAC
¶ 120).
C.
Plaintiff’s
deposition testimony is inconsistent with the verified allegations for fraud
and constructive fraud (third and fourth cause of action).
Fraud
claims require that Defendants make misrepresentations of fact with knowledge
of its falsity, intent to defraud, and that Plaintiff justifiably relied on the
misrepresentation. (Nagy v. Nagy (1989)
210 Cal.App.3d 1262, 1268). Plaintiff
denied knowing anyone at Ridec, Advanced Funding, or CTD; denied speaking with
anyone at these entities; and testified that no one from these entities made
any representations to him. (Defendants’
RJN, Ex. 6, 12-13, 13:14:16, 13:19-21, 14:4-6, 14:16-18). Plaintiff’s testimony expressly contradicts a
material element of the fraud claim as alleged in the SAC. Without a misrepresentation, there is no basis
for the fraud claims
Plaintiff argues that Defendants’
representations were made through co-conspirators, Westland and Valentine
(Group 1 Defendants.) (FAC ¶ 26). But, the
SAC alleges that Westland and Valentine where the mortgage originators and
brokers for the September 2016 mortgage. (SAC ¶ 39). Ridec, Advanced Funding, and
CTD were involved in the May 2017 loan. (SAC ¶¶ 15, 78, 80, 99). Plaintiff
alleges that with respect to the May 2017 loan, Vartan, Ridec, Advanced
Funding, and Fidelity Finance (Group 3) were acting as co-conspirators. (SAC ¶
28).
Constructive fraud arises where a
person in a confidential or fiduciary relationship with another breaches that
duty without fraudulent intent and gains an advantage by misleading another
person to his or her prejudice. (Civ. Code, § 1573; Tyler v. Children's Home Society (1994) 29
Cal.App.4th 511, 548). This claim is equally
contradicted by Plaintiff’s testimony admitting none of the moving parties made
any misrepresentations to him.
D.
Plaintiff fails to state a claim for breach of fiduciary duty
(fifth cause of action) against Ridec and CTD only, because as a matter of law,
neither Defendant owes a fiduciary duty to Plaintiff.
No fiduciary duty exists between a lender and borrower in an arm's
length transaction. (Ragland v. U.S. Bank National Assn. (2012) 209 Cal.App.4th 182, 206 [“[A]s a general rule, a financial institution owes no duty of
care to a borrower when the institution's involvement in the loan transaction
does not exceed the scope of its conventional role as a mere lender of money.”]).
Accordingly,
Ridec the alleged lender, does not owe a fiduciary duty to Plaintiff.
Plaintiff alleges that Defendant CTD
was the alleged trustee on the Deed of Trust. However, “[t]he trustee of a deed
of trust is not a true trustee with fiduciary obligations, but acts merely as
an agent for the borrower-trustor and lender-beneficiary.” (Citrus El Dorado, LLC v. Chicago Title Co. (2019) 32
Cal.App.5th 943, 948). Additionally, the absence of a
fiduciary duty owed by Ridec and CTD undermines Plaintiff’s claim for
constructive fraud, which requires the existence of a fiduciary relationship.
Advanced Funding is alleged to be a
real estate broker for the loan at issue. (SAC ¶ 13). The relationship between
broker and principal is fiduciary in nature “and imposes on the broker the duty
of acting in the highest good faith toward the principal.” (Twomey v. Mitchum, Jones & Templeton, Inc. (1968)
262 Cal.App.2d 690, 709). This claim
is based on Advanced Funding’s alleged failure to provide all material facts
concerning the purchase of the loan. (SAC ¶ 134). A claim for breach of
fiduciary duty requires allegations showing the existence of a fiduciary
relationship, breach of that duty, causation and damages caused by the breach. (Mosier v. Southern California Physicians Ins. Exchange (1998) 63 Cal.App.4th 1022, 1044).
Plaintiff testified that he did not
know who Advanced Funding was and did not speak with anyone at that business. (Def.’s RJN, Ex. 6, 8:24 – 9:9).
He denied that Advanced Funding ever represented him. (Id., 14:4-9). However,
Plaintiff’s lack of knowledge of Advanced Funding’s role in the transaction is
not inconsistent with the allegation that Advanced Funding, as a broker,
breached its fiduciary duty by failing to disclose material facts with respect
to the loan. Accordingly, the Court does not take judicial notice of the testimony
cited above. The motion is DENIED as to the breach of fiduciary duty claim alleged
against Advanced Funding.
F.
The sixth cause of action for unjust enrichment is not
contradicted by Plaintiff’s testimony.
Unjust
enrichment is not a cause of action but is an equitable principle that
underlies “various legal doctrines and remedies.” (County of San Bernardino v. Walsh (2007) 158
Cal.App.4th 533, 542). It involves receipt of a benefit
and unjust retention of the benefit at the expense of another. (Lectrodryer v. Seoulbank (2000) 77 Cal.App.4th 723,
726).
With respect to
moving parties, Plaintiff alleged that Ridec unjustly received proceeds from
the May 2017 loan of $29,700 and that Advanced Funding received proceeds of
$7,820.00. (FAC ¶ 154-155). Plaintiff’s testimony that he did not personally
pay money to Defendants is not inconsistent with a claim for unjust enrichment.
It is not essential that money be paid “directly to the recipient by the party
seeking restitution. The emphasis is on the wrongdoer’s enrichment, not the
victim’s loss.” (County of San Bernardino v. Walsh (2007) 158
Cal.App.4th 533, 542). Therefore, the Court does not
take judicial notice of the deposition testimony cited by Defendants, (Defendant’s RJN, Ex 6, 8:14-15; 9:7-9; 8:5-7).
G.
The motion is denied as to the
seventh cause of action for unfair competition.
As defined by statute, “unfair competition”
includes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200 “UCL”). Its purpose is
to protect both consumers and competitors by promoting fair competition in
commercial markets for goods and services.” (Gutierrez v. Carmax Auto Superstores
California (2018) 19 Cal.App.5th
1234, 1265).
Defendant contends that the UCL claim is predicated
on Defendant Western’s alleged acts, relying on this Court’s order granting
Western Architecture’s Motion for Summary Judgment. (Motion,
15:12-17; RJN Ex. 4).
The Court’s discussion of the allegations against Western in particular is not
relevant to the allegations against the moving party defendants.
Plaintiff alleges with particularity the unfair practices employed by
the Defendants with respect to the May 2017 mortgage. (SAC ¶¶ 178-182). The UCL is construed broadly to include "any unlawful, unfair
or fraudulent business act or practice. (§ 17200.) Its coverage is ‘sweeping,
embracing’ anything that can properly be called a business practice and that at
the same time is forbidden by law." (Cel-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180). Because the practices embraced by the statute is
in the disjunctive, “a practice may be deemed unfair even if not specifically
proscribed by some other law.” (Cel-Tech at 181).
Therefore, the motion is denied as to the seventh cause of action.
V.
CONCLUSION
Based on the foregoing, the motion
is GRANTED as to the third and fourth causes of action for fraud and
constructive fraud alleged against the moving party Defendants. The motion is
GRANTED as to the fifth cause of action for breach of fiduciary duty as alleged
against Ridec and CTD only. The motion is DENIED as the claim is alleged
against Advanced. The motion is DENIED as to the sixth and seventh causes of
action.