Judge Ralph C. Hofer, Case Number: 22AHCV00519, Date: 2024-12-20 Tentative Ruling

Judge: Ralph C. Hofer, Case: 22AHCV00519, Date: 2024-12-20 Tentative Ruling

Case Number: 22AHCV00519 Hearing Date: December 20, 2024 Dept: D

TENTATIVE RULING

MOTION FOR NEW TRIAL

Calendar: 5

Date: 12/20/2024

Case No: 22 AHCV00519

Case Name: Vartanian, et al. v. Dourbetas, et al.

MOVING PARTY: Plaintiffs Richard M. Vartanian and Elvira P. Vartanian

RESPONDING PARTY: Defendants and Cross-Defendants Lazaros Georgiadis, Gersom Ivan Torres, Gabriel Albanez dba The Lending Capital and Lending Star Capital LLC

RELIEF REQUESTED:

New trial

FACTUAL AND PROCEDURAL BACKGROUNG:

Plaintiffs Richard Vartanian and Elvira Vartanian allege that they are an elderly couple and that in December of 2019 defendant Lazaros Georgiadis (Lazaros), on behalf of defendant Lending Star Capital, offered plaintiffs an attractive reverse mortgage on their real property located in Altadena. At the time plaintiffs were in active Chapter 13 bankruptcy due to the fact that the subject property was under foreclosure by the second lienholder. Plaintiffs allege that Lazaros falsely represented himself as a licensed mortgage broker, sent a loan package, and, together with defendant Ivan Torres, proposed that plaintiffs could be provided with a bridge second mortgage loan until plaintiffs could obtain a reverse mortgage to pay off the second deed of trust, provided the plaintiffs would first exit Chapter 13 bankruptcy.

Plaintiffs allege that in January of 2020, Lazaros sent plaintiffs a quote for a reverse mortgage, which was a fabrication since defendants did not open any reverse mortgage case with any reverse mortgage lender, and that plaintiffs were pushed to obtain mandatory counseling and sign the mortgage loan documents, although plaintiffs informed defendants repeatedly that they had no ability to repay the proposed loan.

In February of 2020, upon receiving the escrow papers, plaintiffs learned the identity of the investors, defendants Alex Dourbetas and Christina Dourbetas, who were not licensed mortgage brokers, and it became clear to plaintiffs that the transaction was not a bridge loan at all, but a second mortgage backed by a deed of trust. Plaintiffs then noticed that the payee in the escrow documents had been left blank, and brought that to the attention of Jamie Aguilar, who emailed plaintiffs with a copy of the escrow documents with the Dourbetas defendants typed in as payee.

Plaintiffs allege that at the insistence of defendants they filed a motion for voluntary dismissal of their bankruptcy case. Over the next several months, Lazaros attempted to get plaintiff Richard Vartanian to sign reverse loan documents, falsely assuring plaintiff that his wife could be added later on, when she could not. Plaintiffs learned that Lazaros never opened a reverse mortgage application for them.

In March of 2021, defendant Alex Dourbetas called plaintiffs and left a message stating, “we have a loan on your property, and you cannot pay for some time.” Dourbetas indicated he was considering foreclosing on the property in the next couple of days and wanted to give plaintiffs the opportunity to come up with some arrangement to pay the loan. Plaintiffs attempted to meet with Dourbetas to come to an arrangement, but Dourbetas refused, stating that the account had been transferred to a collection agency, and on March 2, 2022, Dourbetas issued a notice of default, with a sale date set for July 12, 2022, which date has been postponed to August 2, 2022. Plaintiffs allege causes of action for elder abuse, IIED, fraud, cancellation of deed of trust, and quiet title.

The file shows that on August 16, 2022, the court, Judge Leis presiding, signed and filed an Order to Show Cause re Preliminary Injunction and Temporary Restraining Order, and issued an order restraining defendants from proceeding with the trustee’s sale scheduled for August 17, 2022. On September 6, 2022, the court signed and filed an order granting plaintiffs’ unopposed motion for preliminary injunction.

On February 15, 2023 the Dourbetas defendants, as cross-complainants, filed and served a cross-complaint against their co-defendants, alleging that the cross-complainants lent money to plaintiffs at the recommendation of the cross-defendants, who represented they had done proper due diligence as to plaintiffs’ suitability as borrowers, and falsely represented they were licensed to handle this sort of investment placement. Cross-complainants also allege that at no time prior to the subject transaction did the cross-complainants know that the Vartanian plaintiffs had requested a reverse mortgage from cross-defendants. The cross-complaint alleges causes of action for declaratory relief, fraud and concealment, and negligence.

On July 11, 2023, counsel for defendants and cross-complainant Alex Dourbetas filed a Request for Dismissal without prejudice of the Cross-complaint filed in this matter as to “Jaime Aguilar, an individual.” The dismissal was entered by the court as requested the same date.

The matter went to a court trial in November and December of 2023.

On June 21, 2024, the court filed its Tentative Statement of Decision.

Judgment has not yet been entered.

On August 12, 2024, defendants and cross-complainants filed a motion to expunge lis pendens, which was granted, and defendants ordered to serve and file a proposed order. The court at the hearing on September 18, 2024 noted that plaintiff had filed a motion for new trial, and ordered a briefing schedule, as well as an OSC re Entry of Final Judgement and an OSC re Entry of Expungement of Lis Pendens. On September 30, 2024, the court signed and filed an Order Granting Expunging Lis Pendens Filed by Plaintiffs.

On October 25, 2024, the matter was called for hearing on the motion for new trial and Orders to Show Cause. The court vacated its order expunging lis pendens from September 30, 2024, and set the case for hearing on the motion for new trial for December 20, 2024, and set a supplemental briefing schedule. The OSCs were discharged based on the court having set the case for hearing on the motion for new trial. Supplemental briefs have been timely filed and have been considered by the court.

ANALYSIS:

Plaintiffs Richard M. Vartanian and Elvira P. Vartanian move for a new trial, arguing that plaintiffs have obtained newly discovered evidence which was hidden by defendants, which could not have been previously discovered with reasonable diligence, and which would be material to plaintiffs’ case.

CCP section 657, governing motions for a new trial, provides, in pertinent part:

“The verdict may be vacated and any other decision may be modified or vacated, in whole or in part, and a new or further trial granted on all or part of the issues, on the application of the party aggrieved, for any of the following causes, materially affecting the substantial rights of such party:…

CCP § 657 provides:

4. Newly discovered evidence, material for the party making the application, which he could not, with reasonable diligence, have discovered and produced at the trial….

In considering a motion for a new trial, the evidence must be construed in favor of the prevailing party and all reasonable inferences must be presumed in favor of the judgment. Kuhn v. Department of General Services (1994) 22 Cal. App. 4th 1627, 1632. A new trial may only be granted on a finding of prejudicial error, and there is no discretion to grant a new trial for harmless error. Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 1161.

The granting or denial of a motion for new trial on the ground of newly discovered evidence is generally a matter within the discretion of the trial court, “and such an order will be affirmed unless a clear abuse of discretion is shown.” Slemons v. Paterson (1939)14 Cal.2d 612, 615.

The California Supreme Court in Slemons also observed:

“It is a matter of public interest that there be an end to litigation and that a new trial should not be granted for the purpose of enabling a party to produce further evidence unless he has shown some legally justifiable excuse for not having produced such evidence at the former trial. (Sec. 657, subd. 4, Code Civ. Proc.) The affidavits supporting the motion must show that there has been no lack of diligence. (Estate of Cover, 188 Cal. 133, 149 [204 Pac. 583]; People v. Byrne, 160 Cal. 217, 225 [116 Pac. 521]; Maunder v. Pozzo, 175 Cal. 740 [167 Pac. 145]; Smith v. Schwartz, 14 Cal. App. (2d) 160, 166 [57 Pac. (2d) 1386]; Vertson v. City of Los Angeles, 116 Cal. App. 114, 119 [2 Pac. (2d) 411].)”

Slemons, at 616.

The newly discovered evidence relied upon here is an Order to Desist and Refrain issued by the State of California Department of Real Estate, on March 9, 2023. Plaintiffs rely on the declaration of plaintiff Richard Vartanian, in which he indicates that after he received the court’s tentative statement of decision in this case, on September 10, 2024, plaintiff emailed Commissioner Chika Sundquist and requested the government step up and protect plaintiff and his wife. [Vartanian Decl., paras. 2, 3, Ex. A]. Plaintiff on September 12, 2024 contacted Jesus Munoz, Special Investigator, Department of Real Estate, requesting the final disposition on Case Number 1-20-1007-002, and on September 17, 2024 received a copy of the Cease and Desist Order entered March 9, 2023. [Vartanian Decl., paras. 4, 5, Exs. B, C]. The Order, an “Order to Desist and Refrain (Business & Professions Code section 10086)” was filed on March 9, 2023, by the State of California Department of Real Estate, and indicates that the Commissioner of the California Department of Real Estate (DRE) caused an investigation to be made of the activities of Lazaros Georgiadis, Ivan Gersom Torres and Lending Star Capital and determined that they “have engaged in, or are attempting to engage in, acts or practices constituting violations of the California Business and Professions Code (Code), including violating Code Section 10130 by engaging in the business of, acting in the capacity of, and/or advertising or assuming to act as a real estate broker (REB) or real estate salesperson (RES) in the State of California…” [Ex. C, pp. 1-2].

The Order states that according to DRE records, Lazaros Georgiadias, Torres and Lending Star Capital are not now, and have never been, licensed in any capacity under the Real Estate Law. [Ex. C, p. 3, paras. 1, 2, 3].

The Order states:

“At all times mentioned, in the State of California, unlicensed LSC and/or unlicensed GEORGIADIAS and unlicensed TORRES, conducted licensed activities within the meaning of Code Section 10131 and performed real estate sales activities, which require a real estate license, when they were not licensed by the DRE.”

[Vartanian Decl., Ex. C, p. 5, para. 10].

As support for this finding, the Order references a Los Angeles County Sheriff’s Department supplemental report of April 21, 2021, “regarding a complaint filed by Richard V.” regarding Lazaros Georgiadias and Lending State Capital, and describing the transaction which is the subject of this lawsuit. [Vartanian Decl., Ex. C, pp. 6-8, paras. 13-18].

The report also details a complaint to the department of business oversight, by “Rene D.” concerning a transaction with LSC and Torres. [Vartanian Decl., Ex. C, pp. 8, 9, paras. 19-22].

The Order then states as conclusions of law that each of the parties, Lavaros Georgiadias, Torres, and LSC:

“engaged in the business of, acted in the capacity of, and/or advertised or assumed to act as a real estate broker or a real estate salesperson in the State of California within the meaning of Code Section 10131(d), by soliciting borrowers or lenders for or negotiating loans or collecting payments or performing services for borrowers or lenders or note owners in connection with loans secured directly or collaterally by liens on real property or on a business opportunity, which acts require a real estate broker license under Section 10130 of the Code, during a period of time when” they were “not licensed by the Department in any capacity, in violation of Section 10130 of the Code.”

[Vartanian Decl., Ex. C, pp. 10, 11, paras. 23-25].

The Order then states:

“DESIST AND REFRAIN ORDER

Based upon the Findings of Fact and Conclusions of Law stated herein, LAZAROS GEORGIADIAS, IVAN GERSOM TORRES and LENDING STAR CAPITAL, whether doing business under their own name(s) or any other name(s) or fictitious name(s), ARE HEREBY ORDERED to immediately desist and refrain from performing any acts within the State of California for which a real estate license and/or mortgage loan originator license endorsement is required. LAZAROS GEORGIADIAS, IVAN GERSOM TORRES and LENDING STAR CAPITAL are ORDERED TO DESIST AND REFRAIN from:

1. performing any acts within the State of California for which a real estate broker license is required, unless and until each obtains the required license from the Department and is in compliance with Business and Professions Code Section 10130; and

2. performing any acts within the State of California for which a mortgage loan originator license endorsement is required, unless and until each obtains the required license endorsement from the Department and is in compliance with Business and Professions Code Section 10166.03.”

[Vartanian Decl., Ex. C, p. 12].

Plaintiffs also argue that plaintiffs’ counsel on September 24, 2024 received an email from an attorney indicating that the attorney’s clients were also suing LSC, Torres and Albanez, and that in plaintiffs’ counsel’s research to find the case, counsel found other cases involving defendants. [Frazee Decl., paras. 2, 3]. Plaintiffs argue that in a new trial plaintiff could bring all of these parties in the other actions to testify.

Plaintiffs argue that all three elements of establishing entitlement to a new trial on the ground of newly discovered evidence have been satisfied here, as the evidence is newly discovered, there was reasonable diligence exercised in discovery of the evidence, and the evidence is material to plaintiffs’ case.

Specifically, plaintiffs argue that the newly discovered evidence is the Order, that plaintiffs could not have produced the Order prior to trial as they did not receive it until September 17, 2024, and that plaintiffs were unaware of existence of the Order until plaintiff Richard Vartanian received a copy of the Order from the DRE.

Plaintiffs argue that plaintiff propounded discovery to Lazaros Georgiadias in June of 2023, including Form Interrogatory No. 14.2, which asks, “Was any PERSON cited or charged with a violation of any statute, ordinance, or regulation as a result of this INCIDENT?” [Second Amended Reply Frazee Decl., Ex. G, Interrogatory 14.2] In a response dated August 16, 2023, Lazaros Georgiadias responded, “No.” [Second Amended Reply Frazee Decl., Ex. H, Response to Form Interrogatory No. 14.2]. Plaintiffs argue that this response was false, as the Order issued by the DRE is dated March 9, 2023, and expressly references plaintiff’s complaint to the Los Angeles Sheriff’s Department, and Lazaros Georgiadias must have been aware of this Order when responses were made to the Form Interrogatory.

Plaintiff also argues that the Order is material to this case because the Court in its tentative statement of decision expressly found that Lazaros Georgiadias and Torres were not acting as mortgage brokers when they assisted plaintiff in procuring a hard money loan, but were paid a “finders fee,” and did not generate the loan documentation. [Tentative Statement of Decision, filed 06/21/2024, pp. 34-35, 42-43]. This finding is contrary to the findings of the DRE, which in its Order found that the loan was originated by Lazaros Georgiadias, Torres, and LSC, not Lending Capital and that those parties violated Business & Professions Code section 10130 by acting as mortgage brokers without a license. [Vartanian Decl., Ex. C, pp. 10, 11]. The new evidence is material to the fourth cause of action of the Amended Complaint (FAC) in this action, for Cancellation of Deed of Trust Pursuant to California Financial Code (“FC”) Section 22750 and Quiet Title. As argued by plaintiffs, the new evidence is relevant because Financial Code section 22750(b) requires proof that a provision of the statute was “willfully violated.” It is clear that the evidence included in the Order would materially effect this case.

Defendants in opposition argue that the argument that newly discovered evidence was purportedly hidden by defendants is not supported by admissible evidence. However, the Second Amended Reply Declaration of counsel Frazee includes copies of the subject discovery and discovery responses. [See Second Amended Reply Frazee Decl., Exs. G, H, Form Interrogatory No. 14.2, Response to Form Interrogatory No. 14.2].

It is also argued that the newly discovered evidence offered in any case is not material, as the evidence would constitute inadmissible character evidence, in effect, arguing that defendants are bad people, and other people believe the same. The evidence to the extent it is offered concerning the very transaction at issue here, would not constitute character evidence that defendants behaved badly in other cases, so must have done so here, but pertains specifically to the report submitted to the agency by Richard V., defendant here, and the conduct of defendants in connection with this particular incident. The argument might apply to the argument that witnesses in other cases should now be permitted to testify. However, because the complaint includes allegations that defendants engaged in willful violation of statute, repeated conduct violating the statute in connection with other parties would be considered material.

Defendants do not in opposition or the supplemental opposition sufficiently address the circumstance that defendant suppressed the evidence concerning the Order when responding to discovery after the Order had been served. The argument is briefly that the Order does not constitute defendant being “cited or charged with a violation of any statute, ordinance, or regulation as a result of this INCIDENT,” as requested in the form interrogatory. As set forth above, the Order expressly finds that in connection with this transaction and another transaction each of the parties, Lazaros Georgiadias, Torres, and LSC violated a specific statute:

[Vartanian Decl., Ex. C, pp. 10, 11, paras. 23-25, emphasis added].

The Order then includes a very specific Desist and Refrain Order. [Ex. C, p. 12].

Under these circumstances, and given the breadth of discovery, the contents of the Order clearly fell within the information called for by the interrogatory.

There is no clear explanation from defendant why the Order was not disclosed. There is no evidence offered, for example, from defendant Lazaros Georgiadias indicating that defendant was not in fact served with the Order, or from the attorney who prepared the discovery responses explaining why the Order was not disclosed. This inadequacy suggests that the evidence was suppressed and withheld from plaintiffs as argued, so that plaintiffs’ argument that they exercised diligence but were unable to discover the Order because it was being actively suppressed is strengthened.

Hence, the court finds that plaintiffs have established that a further trial should be granted on the issues presented by the “Order to Desist and Refrain (Business & Professions Code section 10086)” filed on March 9, 2023, by the State of California Department of Real Estate on the ground the Order represents newly discovered evidence, material for plaintiffs, which they could not, with reasonable diligence, have discovered and produced at the trial, and that this circumstance materially affected the substantial rights of plaintiffs. A further trial will be granted pursuant to CCP § 657, subdivision 4 to permit plaintiffs to introduce as evidence the Order itself, and any matter included in the Order, including, if admissible evidence can be located and introduced, evidence concerning the complaint to the department of business oversight, by “Rene D.” concerning a business transaction with LSC and Torres. [Vartanian Decl., Ex. C, pp. 8, 9, paras. 19-22]. The supplemental papers indicate that plaintiffs intend to call as witnesses Dawn A. and Rene D. to testify about their claims covered in the Order, and the Custodian of Records of the Real Estate Commissioner or Douglas R. McCauley, California Real Estate Commissioner. This approach appears appropriate and is within the order granting a new or further trial.

This posture leaves the argument that counsel for plaintiffs since the close of evidence, and issuance of the Tentative Statement of Decision, has been contacted by another attorney indicating that the attorney’s clients were also suing LSC, Torres and Albanez, and that in plaintiffs’ counsel’s research to find the case, counsel found other cases involving defendants. [Frazee Decl., paras. 2, 3]. As to these other cases, the supplemental briefing indicates that there are two other cases, one in Los Angeles Superior Court filed on August 13, 2024, and one in Orange County filed on April 4, 2024. [Supplemental Brief, pp. 4-5]. As to this new evidence the court finds that this evidence is admissible subject to potential evidentiary objections on the merits at trial. Plaintiff’s attorney would have investigated the defendants further if the attorney had known that Georgiadias, Torres, and LSC could be characterized as “bad actors”.

RULING:

Motion for New Trial is GRANTED in part.

The Court finds, pursuant to CCP § 657 subdivision 4, that plaintiffs have established that a further trial should be granted on the issues presented by the “Order to Desist and Refrain (Business & Professions Code section 10086)” filed on March 9, 2023, by the State of California Department of Real Estate (Order) on the ground the Order represents newly discovered evidence, material for plaintiffs, which they could not, with reasonable diligence, have discovered and produced at the trial, and that this circumstance materially affected the substantial rights of plaintiffs. A further trial will be granted pursuant to CCP § 657 subdivision 4 to permit plaintiffs to introduce as evidence the Order itself, and any matter included in the Order, including, if admissible evidence can be located and introduced, evidence concerning the complaint to the department of business oversight, by “Rene D.” concerning a business transaction with LSC and Torres. [Vartanian Decl., Ex. C, pp. 8, 9, paras. 19-22]. The supplemental papers indicate that plaintiffs intend to call as witnesses Dawn A. and Rene D. to testify about their claims covered in the Order, and the Custodian of Records of the Real Estate Commissioner or Douglas R. McCauley, California Real Estate Commissioner. This appears appropriate and within this order granting a new or further trial.

The Court further finds that plaintiffs may introduce as new evidence the existence of at least two other civil lawsuits on file against Georgiadias, Torres and LSC, subject to evidentiary objections on the merits at trial.

Request for Judicial Notice In Support of Motion for New Trial:

Request No. 1 is GRANTED

Requests Nos. 2-4 are GRANTED, but appear to be irrelevant.

Defendants’ Objections to Roseanne Frazee Declaration in Support of Motion for New Trial are OVERRULED.

Defendants’ Objections to Richard M. Vartanian Declaration are OVERRULED. With respect to Objection No. 5, the Court has not considered any lay opinion testimony in the declaration concerning the ultimate legal issues in this matter.

Defendants/Cross-Complainants Dourbetas’ Joinder to Defendants/Cross-Defendant’s Opposition and Supplemental Opposition to Plaintiff’s Motion for New Trial is DENIED. No authority for such a joinder is cited, and the joinder is not supported by a memorandum of points and authorities supporting the document’s “separate ground” for opposing the motion.

DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE

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