Judge: Stephen P. Pfahler, Case: 20STCV07831, Date: 2024-06-07 Tentative Ruling

Case Number: 20STCV07831    Hearing Date: June 7, 2024    Dept: 68

Dept. 68

Date: 6-7-24 c/f 4-30-24

Case 20STCV07831

Trial Date: 8-26-24 c/f 6-3-24

SUMMARY JUDGMENT

MOVING PARTY: Defendants, Civic Financial Services, LLC, et al.

RESPONDING PARTY: Plaintiff Michael Williams

RELIEF REQUESTED

Motion for Summary Judgment/Summary Adjudication on the Fifth Amended Complaint

·         9^th Cause of Action: Predatory Lending

·         10^th Cause of Action: (10) Violation of Civil Code § 1785.20.3

·         11^th Cause of Action:  Violation of Cal. Civil Code 2923, et seq.

·         12^th Cause of Action: Violation of Homeowner Bill of Rights

·         13^th Cause of Action: Violation of TILA 15 U.S.C. 1601 et al.

·         15^th Cause of Action: Unfair Business Practices

SUMMARY OF ACTION

Plaintiff Michael Williams alleges the purchase of 2086-2088 Santa Rosa Ave., Alta Dena, in August 2022. Plaintiff requested help with a loan modification, due to affordability concerns. Plaintiff was convinced to take out a $134,000 loan for a construction project that would increase rental income to the property. Plaintiff signed certain documents without understanding the agreements.

Withdrawals from Plaintiff’s subsequently began occurring from a separate annuity account, and were transferred to an account not opened by Plaintiff. A second “hard money” loan from defendant Civic for $787,500 was also executed on the property, which Plaintiff alleges was fraudulently acquired. Plaintiff also discovered the loan was for $150,000, without any receipt of the proceeds from said loan. Plaintiff contends the loan contained false income information and violated state and federal disclosure laws. Plaintiff also maintains identity theft. The delinquent loans subsequently led to a non-judicial foreclosure sale.

On February 28, 2020, Plaintiff filed a complaint for Identity Theft (Civil Code § 1798.93), Fraud, Penal Code § 496, Negligence, Notary Fraud (Civil Code § 1189), Broker Liability for Fraudulent Concealment, Cancellation of Instruments, Quiet Title, Unjust Enrichment, Unfair Business Practices, and Injunctive Relief. On February 28, 2020, the court issued a temporary restraining order. On June 23, 2020, the court denied the motion for preliminary injunction.

On August 5, 2020, Plaintiff filed a 19 cause of action first amended complaint for (1) Identity Theft (Civil Code § 1798.93) (2) Fraud (3) Breach Of Fiduciary Duty (4) Negligence (5) Notary Fraud (6) Broker Liability and Fraudulent Concealment (7) Penal Code § 496 (8) Conversion (9) Predatory Lending (10) Civil Code § 1785.20.3 (11) Civil Code § 2923 (12) Violation Of Homeowner Bill Of Rights (13) Cancellation Of Instruments (14) Quiet Title (15) Unjust Enrichment (16) Unfair Business Practices (17) Injunctive Relief (18) Wrongful Foreclosure, and (19) Set Aside Trustee Sale. On January 5, 2021, the court granted Plaintiff leave to file the already filed first amended complaint.

On March 24, 2021, the court sustained the demurrer of Fay Servicing, LLC to the first, second, fourth, fifteenth, eighteenth, and nineteenth causes of action. The court overruled the demurrer to the eleventh, twelfth, and sixteenth causes of action.

On F. Alexander Middleton, III, answered and filed a cross-complaint against Williams for Quiet Title, Cancel Instruments, and Declaratory Relief. On May 3, 2021, Plaintiff filed a 20 cause of action second amended complaint for (1) Identity Theft (Civil Code § 1798.93) (2) Fraud (3) Fraud (4) Fraud (5) Aiding and Abetting (6) Notary Fraud (7) Negligence (8) Notary Fraud (9) Penal Code § 496 (10) Conversion (11) Predatory Lending (12) Civil Code § 1785.20.3 (13) Civil Code § 2923 (14) Violation Of Homeowner Bill Of Rights (15) Violation of TILA 15 U.S.C. 1601, et seq. (16) Quiet Title (17) Restitution (18) Unfair Business Practices (19) Wrongful Foreclosure, and (20) Set Aside Trustee Sale. On May 21, 2021, Plaintiff dismissed the sixteenth and twentieth causes of action, and F. Alexander Middleton, III.

On July 15, 2021, the court sustained the demurrer of Civic Financial Services and Civic Securitization Trust II to the first, fourth, seventh, ninth, and nineteenth causes of action was sustained without leave to amend. The court granted the motion to strike portions of the fifth, seventh, ninth, fifteenth, and seventeenth causes of action. Civil Financial Services and Civil Securitization Trust II answered and filed a cross-complaint for 1. Fraud 2. Negligent Misrepresentation 3. Comparative Indemnity 4. Equitable Indemnity 5. Contribution 6. Declaratory Relief, and 7. Cal. Penal Code § 496(C).

On September 9, 2021, the court granted Plaintiff leave to file a third amended complaint For (1) Fraud (2) Fraud (3) Aiding and Abetting (4) Breach of Fiduciary Duty (5) Negligence (6) Notary Fraud (7) Penal Code § 496 (8) Conversion (9) Predatory Lending (10) Violation of Civil Code § 1785.20.3 (11) Violation Of Cal. Civil Code 2923 Et Seq (12) Violation of Homeowner Bill Of Rights (13) Violation Of TILA 15 U.S.C. 1601 Et Al (14) Quiet Title (15) Unfair Business Practices (16) Wrongful Foreclosure and (17) Set Aside Trustee Sale.

On September 17, 2021, the court granted the motion of Contempo Escrow, Inc. and Shanshan Xu for determination of good faith settlement based on payment of $20,000. Plaintiff dismissed of Contempo Escrow, Inc. and Shanshan Xu on October 12. On October 14, 2021, Civic Holdings III Trust dismissed Contempo Escrow, Inc. and Shanshan Xu from its cross-complaint.

On March 16, 2022, the clerk entered a default against Drake Buchanan and Plaintiff Williams on the cross-complaint of Civic Holdings III Trust. On May 23, 2022, the court sustained the demurrer of Fast Action Mortgage to the third amended complaint with five days leave to amend. On June 6, 2022, Plaintiff filed fourth amended complaint for (1) Fraud (2) Fraud (3) Aiding and Abetting (4) Breach of Fiduciary Duty (5) Negligence (6) Notary Fraud (7) Penal Code § 496 (8) Conversion (9) Predatory Lending (10) Violation of Civil Code § 1785.20.3 (11) Violation Of Cal. Civil Code 2923 Et Seq (12) Violation of Homeowner Bill Of Rights (13) Violation Of TILA 15 U.S.C. 1601 Et Al (14) Quiet Title (15) Unfair Business Practices (16) Wrongful Foreclosure and (17) Set Aside Trustee Sale.

On September 8, 2022, the court granted the motion to strike of Civic Financial Services and Civic Securitization Trust II without leave to amend as to the negligence claim, and part of the fourth cause of action.

On September 21, 2022, the court granted the motion for terminating sanctions of Fay Servicing. On November 23, 2022, the court sustained the demurrer of Fast Action Mortgage, Inc. to the second, without leave to amend, the fifth, seventh, and thirteenth causes of action with leave to amend, and overruled the demurrer to the ninth cause of action. On January 24, 2023, Plaintiff filed the fifth amended complaint for 1) Fraud (2) Fraud (3) Aiding and Abetting (4) Breach of Fiduciary Duty (5) Negligence (6) Notary Fraud (7) Penal Code § 496 (8) Conversion (9) Predatory Lending (10) Violation of Civil Code § 1785.20.3 (11) Violation Of Cal. Civil Code 2923 Et Seq (12) Violation of Homeowner Bill Of Rights (13) Violation Of TILA 15 U.S.C. 1601 Et Al (14) Quiet Title (15) Unfair Business Practices (16) Wrongful Foreclosure and (17) Set Aside Trustee Sale.

RULING: Granted in Part/Denied in Part.

Request for Judicial Notice: Granted.

Evidentiary Objections to the Declaration of Thomas French: Overruled.

Evidentiary Objections to the Declaration of Michael Anderson: Overruled/Not Relied Upon (Code Civ. Proc., 437c, subp. (q).)

Evidentiary Objections to the Declarations of Michael Williams: Overruled.

Evidentiary Objections to the Declarations of Andrea McNichol: Overruled/Not Relied Upon (Code Civ. Proc., 437c, subp. (q).)

Defendants Civic Financial Services, Civic Securitization Trust II, and Civic Holdings III Trust (Civic) move for summary judgment as to the ninth, tenth, eleventh, twelfth, thirteenth, and fifteenth causes of action in the fifth amended complaint. Plaintiff in opposition challenges the right to enforce a fraudulently obtained loan in that Civic intentionally disregarded “red flags” indicating a fraudulent loan application. Civic in reply maintains no triable issues of material fact exist regarding classification of the loan as anything other than a business transaction.

The pleadings frame the issues for motions, “since it is those allegations to which the motion must respond. (Citation.)”  (Scolinos v. Kolts (1995) 37 Cal. App. 4th 635, 640-641; FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 382-383; Jordan-Lyon Prods., LTD. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1472.) The purpose of a motion for summary judgment or summary adjudication “is to provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atl. Richfield Co. (2001) 25 Cal.4th 826, 843.)  “Code of Civil Procedure section 437c, subdivision (c), requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”  (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) 

“On a motion for summary judgment, the initial burden is always on the moving party to make a prima facie showing that there are no triable issues of material fact.” (Scalf v. D.B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519.) A defendant moving for summary judgment “has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action . . . cannot be established.”  (Code Civ. Proc., § 437c, subd. (p)(2).) “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 as to the cause of action or a defense thereto.” (Ibid.) 

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inference that may be drawn form that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi v. Centro Medico Urgente Medical Center (2008) 159 Cal.App.4th 463, 467; see also Code Civ. Proc., § 437c, subd. (c).) “An issue of fact can only be created by a conflict in the evidence.  It is not created by speculation, conjecture, imagination or guesswork.”  (Lyons v. Security Pacific National Bank (1995) 40 Cal.App.4th 1001, 1041 (citation omitted).)

The Civic defendants are named in this action solely as funders of a certain loan. Civic maintains it only takes in information presented, and makes its funding decisions from the applications. Civic only makes commercial loans for nonowner occupied properties. Civic denies any signs of a fraudulent or unauthorized loan on behalf of Plaintiff. [Declarations of Thomas French and Joan Spaeder-Younkin, and Compendium of Exhibits.] Plaintiff counters that internal standards followed by Civic, as established in the deposition of Person Most Knowledgeable (PMK) Sean Daily, required verification as to the accuracy and veracity of the loan. Plaintiff contends Civic disregarded its own standards in approving the loan without sufficient verification. [Declaration of Michael Anderson, Appendix of Evidence, Ex. A: Deposition of Sean Daily.]

While the entire complaint arises out of the course of conduct leading to the funding of the loan, the individual causes of action present varying claims for recovery. The court therefore individually addresses each item.

9^th Cause of Action, Predatory Lending: Granted.

Civic challenges the claim for predatory lending on grounds that the underlying loan remains outside the statutory scope of protection for pleading the subject cause of action. The cause of action is governed by California Financial Code section 4970, et seq. The section begins with definitions:

“(b) ‘Covered loan’ means a consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association in the case of a mortgage or deed of trust, and where one of the following conditions are met:

(1) For a mortgage or deed of trust, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

(2) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount.

...

“(d) ‘Consumer loan’ means a consumer credit transaction that is secured by real property located in this state used, or intended to be used or occupied, as the principal dwelling of the consumer that is improved by a one-to-four residential unit. “Consumer loan” does not include a reverse mortgage, an open line of credit as defined in Part 1026 of Title 12 of the Code of Federal Regulations (Regulation Z), or a consumer credit transaction that is secured by rental property or second homes. “Consumer loan” does not include a bridge loan. For purposes of this division, a bridge loan is any temporary loan, having a maturity of one year or less, for the purpose of acquisition or construction of a dwelling intended to become the consumer's principal dwelling.”

(Fin. Code, § 4970.)

Civic offers no argument over the conforming limit applicable at the time, or the interest rate and fees, and instead challenges the term “consumer loan.” The application itself identifies the purpose of the loan as one for investment purposes as a nonowner occupied property. The declaration of French attests that Civic only made the loan because of the commercial nature of the transaction, and company policy against underwriting residential, consumer loans. [French Decl., ¶¶ 4-5.] French also represents “due diligence” in accepting the application and approving the loan. [French Decl., ¶¶ 6-8, 12-14.] Civic disputes any claims of a fraudulent signatures. [French Decl., ¶¶ 9-10.]

Civic PMK Sean Daily confirms lending business practices for nonowner occupied business purpose investment loans. [Spaeder-Younkin Decl., ¶ 9, Compendium of Exhibits, Ex. 9, Deposition of Sean Daily, Director of Underwriting, 56:2-4.] Daily reviewed the application and notes both the represented revenue and income valuation. [Daily Depo., 58:7-59:4.] In response to the question regarding the verification process for nonowner occupied claims, Daily references database resources for proof of representation in order to ascertain any potential “red flags” or “anomalies” rendering the loan unreasonable or fraudulent. On the instant loan, Daily specifically considered the existence of a third party tenant lease,; the stated income; and, an investor statement regarding an “exit strategy” upon completion of redevelopment/conversion of the property into a triplex for the purpose of a sale. [Daily Depo., 59:23-60:25, 61:5-10, 84:14-23.]

Plaintiff in opposition challenges the content of the application as both forged, and incorporating false information. [Anderson Decl., Appendix of Evidence, Ex. 2: Declaration of Michael Williams.] Plaintiff in fact admits to signing a series of documents presented at a Starbucks on Lake Avenue to which he lacked knowledge and understanding, while also categorially maintaining the loan application documents for the underlying $787,500 loan were forged. [Williams Decl., ¶¶ 7, 9.] Plaintiff appears to at least in part suggest the forgery/fraudulent application based on the provision of a phone number, residential and e-mail address not related to Plaintiff in any way. The statement of $117,000 in income, “strategy letter,” and “Letter of Explanation” regarding development plans, are also categorically disputed. [Williams Decl., ¶¶ 10-16.]

The court finds no factually supported dispute regarding the representation that Civic in fact considered the application submitted on behalf of Williams by the broker defendant. Given the admission to signatures, albeit without making an effort to read or understand the documents, the court declines to examine the credibility Plaintiff’s declaration for purposes of determining the existence and/or scope of fraudulent conduct by the broker. (See Code Civ. Proc., § 437c, subd. (e); Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866, 872.)

The court therefore lacks the ability to definitively determine the existence of actual forged signatures given the admission of signing documents at the Starbucks location with the notary present.

Nevertheless, accepting the statements of inflated income, nonowner occupied, and intent to build a triplex and sell the premises as an income property as misrepresentation of fact placed by the broker, the court can and will consider the content from the perspective of the reasonableness of Civic in approving the loan application. Plaintiff seeks to establish triable issues of material fact on grounds that Civic effectively breached an unarticulated standard of care for review based on certain questionable entries admitted by Sean Daily in deposition. More specifically, Civic improperly reviewed the loan application in that it failed to sufficiently authenticate the application, thereby funding an unaffordable loan based on inflated stated income, false declarations of non-owner occupied, and future income property development plans. [Anderson Decl., Appendix of Evidence, Ex, 2: Deposition of Sean Daily, 24:11-13, 29:4-19, 30:4-15, 34:2-24, 48:21-49:9, 51`:3-18, 57:21-24, 59:5-9, 74:23-75:4, 80:2-15, 99:8-11, 115:16-20, 120:5-25, 121:8-9, 125:7-11, 132:5-8.]

Plaintiff presents no legal foundation for such an argument however, including a basis for imposing a duty of care on potential lenders to determine whether underwriting verification requirements impose a burden of confirmation distinguishing a consumer residential versus a non-covered commercial loan notwithstanding the purported representation on the application. Although not cited by Plaintiff, the anti-predatory lending statute prohibits a lender from making an unaffordable “covered” loan, which squarely address the claims raised in the opposition, if the subject loan in fact constitutes a covered loan.

“(1) A person who originates covered loans shall not make or arrange a covered loan unless at the time the loan is consummated, the person reasonably believes the consumer, or consumers, when considered collectively in the case of multiple consumers, will be able to make the scheduled payments to repay the obligation based upon a consideration of their current and expected income, current obligations, employment status, and other financial resources, other than the consumer's equity in the dwelling that secures repayment of the loan. In the case of a covered loan that is structured to increase to a specific designated rate, stated as a number or formula, at a specific predetermined date not exceeding 37 months from the date of application, this evaluation shall be based upon the fully indexed rate of the loan calculated at the time of application.

“The consumer shall be presumed to be able to make the scheduled payments to repay the obligation if, at the time the loan is consummated, the consumer's total monthly debts, including amounts owed under the loan, do not exceed 55 percent of the consumer's monthly gross income, as verified by the credit application, the consumer's financial statement, a credit report, financial information provided to the person originating the loan by or on behalf of the consumer, or any other reasonable means.

“(2) No presumption of inability to make the scheduled payments to repay the obligation shall arise solely from the fact that at the time the loan is consummated, the consumer's total monthly debts, including amounts owed under the loan, exceed 55 percent of the consumer's monthly gross income.

“(3) In the case of a stated income loan, the reasonable belief requirement in paragraph (1) shall apply, however, for stated income loans that belief may be based on the income stated by the consumer, and other information in the possession of the person originating the loan after the solicitation of all information that the person customarily solicits in connection with loans of this type. A person shall not knowingly or willfully originate a covered loan as a stated income loan with the intent, or effect, of evading the provisions of this subdivision.”

(Fin. Code, § 4973, subd. (f).)

The statute also provides liability for broker related conduct, though it remains unclear whether Civic constitutes a “person” under the statute. “If a person who originates covered loans makes a loan where the person knew of and showed reckless disregard for a violation of this division by a broker, the person and broker shall be jointly and severally liable for all damages awarded under this division with respect to the broker's unlawful conduct.” (Fin. Code, § 4974, subd. (b).)

The motion for summary adjudication to the subject cause of action itself relies on statutory inapplicability, while Plaintiff relies on a required finding of a covered consumer loan. In considering the unmade arguments, the court fist cites to the general rule: a financial institution owes no duty of care above and beyond the role as a lender, unless the bank undertakes additional duties. “Liability to a borrower for negligence arises only when the lender ‘actively participates’ in the financed enterprise ‘beyond the domain of the usual money lender.’” (Nymark v. Heart Federal Savings & Loan Association (1991) 231 Cal.App.3d 1089, 1096; Das v. Bank of America, N.A. (2010) 186 Cal.App.4th 727, 741.)

A lender can arguably be found liable for knowingly aiding and abetting a fraudulent actor, like a broker, in making an unaffordable loan. (See Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1145; see also Chance World Trading E.C. v. Heritage Bank of Commerce (N.D. Cal. 2005) 438 F.Supp.2d 1081, 1084, aff'd (9th Cir. 2008) 263 Fed.Appx. 630 [“California courts have acknowledged that the tort of aiding and abetting is at odds with statutory limitations on bank liability”].) Plaintiff makes no such claim or showing of knowledge, and instead depends on circumstance, speculation, negligence, or even mistake to establish the claim for a predatory loan.

The cause of action therefore relies on a finding for a standard of care specifically addressing the determination of the veracity of the loan application submitted from a broker without any outside knowledge or information of wrongful conduct. Plaintiff only relies on circumstances described as “red flags” as a substitute.

The court finds a lack of support imposing such a requirement under the statute or the governing law on money lending. Nothing in the opposition supports a finding of activity above and beyond the role of a traditional money lender. The court declines to make a determination that potential inconsistencies in the application described as “red flags” equate to a new standard of care for money lending without any further basis linking said practices with a common law and/or statutory duty. Thus, even with the suggestion of insufficient adherence to loan review compliance standards occurring during the underwriting process, without sufficient underpinning legal support establishing both a legal standard and evidence of knowledge regarding the fraudulent representations into some form of arguable (albeit unmade) claim for aiding and abetting, the court lacks a basis for any finding of triable issues of material fact. (Das v. Bank of America, N.A., supra, 186 Cal.App.4th at p. 742.)

While the court finds the circumstances sympathetic to Plaintiff, the lack of an underlying nexus between the statute and a fundamental basis of duty, precludes any finding of statutory liability under the predatory lending act. The motion for summary adjudication on the instant cause of action is therefore granted.

10^th Cause of Action, Violation of Civil Code § 1785.20.3: Denied.

Civic challenges the subject cause of action on grounds that Plaintiff lacks evidence of any violation of the statute. Plaintiff counters that Civic failed to adhere to the statutory standard thereby violating the section. Civic in reply reiterates the lack of any evidence of a breach of due diligence requirements.

The section provides in relevant part:

“a) Any person who uses a consumer credit report in connection with the approval of credit based on an application for an extension of credit, and who discovers that the consumer's first and last name, address, or social security number, on the credit application does not match, within a reasonable degree of certainty, the consumer's first and last name, address or addresses, or social security number listed, if any, on the consumer credit report, shall take reasonable steps to verify the accuracy of the consumer's first and last name, address, or social security number provided on the application to confirm that the extension of credit is not the result of identity theft, as defined in Section 1798.92.

...

“(c) Any consumer who suffers damages as a result of a violation of this section by any person may bring an action in a court of appropriate jurisdiction against that person to recover actual damages, court costs, attorney's fees, and punitive damages of not more than thirty thousand dollars ($30,000) for each violation, as the court deems proper. ...”

(Civ. Code, § 1785.20.3.)

Civic maintains sufficient diligence in the review, and maintains that all signatures were from Plaintiff and notarized. Plaintiff specifically cites to the credit report, whereby the credit report specially states: “ADDRESS DISCREPANCY: THERE IS A DIFFERENCE BETEWEEN THE ADDRESS SUBMITTED IN THE INQUIRY AND THE ADDRESS(ES) ON FILE.” [Declaration of Michael Anderson, Appendix of Evidence, Ex, D.]

Again, neither party offers legally supported argument beyond the plain language of the statute. Subdivision (a) specifically imposes a standard of verification, where a discrepancy appears. While the purpose ostensibly refers to identity theft, the court finds the purportedly fraudulent submission of the broker at a minimum renders a valid claim under the section. Thus, unlike the predatory lending claim, the court finds a basis of duty sufficiently established to render triable issues of material fact regarding adherence to the standard of care on the basis of address verification, given the specific notice in the credit report regarding an address discrepancy. The motion for summary adjudication, and therefore summary judgment are denied.

11^th Cause of Action:  Violation of Cal. Civil Code 2923, et seq.: Granted

12^th Cause of Action: Violation of Homeowner Bill of Rights: Granted.

Civic jointly challenges the subject causes of action on grounds that the foreclosure protections never applied given the property was never identified as owner occupied. Plaintiff in opposition maintains the property meets the subject criteria, and Civic improperly relied on fraudulent documents. Plaintiff contends the prior noted issues with the application constitute “competing evidence” and therefore establish triable issues of material fact regarding the existence of an owner occupied property, which provides protection under the statutory sections.

Statutory liability depends on two criteria: owner occupied and a first lien or deed of trust securing the property. (Civ. Code, § 2924.15, subd. (a).) Again, the parties simply challenge the statute based on proper or fallible reliance on the broker submitted application and subsequent follow through on the foreclosure.

Consistent with the considerations in the ninth cause of action, the court finds no underpinning legal basis requiring Civic to verify the veracity of the broker submitted loan application without further evidence of misconduct, thereby automatically establishing a finding of owner occupied protections. The court finds no triable issues of material fact regarding a violation of the statute. The motion is therefore granted as to the subject causes of action.

13^th Cause of Action, Violation of TILA 15 U.S.C. 1601 et al.: Denied.

Civic challenges the subject cause of action on grounds of no basis of liability under the exemption governing language. Plaintiff counters with citation to the prior argument regarding the insufficient review of the application to determine a consumer versus commercial loan. Civic in reply reiterates the lack of any evidence of a breach of due diligence requirements.

The Truth in Lending Act, or TILA exists under 15 U.S.C.A. § 1601, et seq. The statute specifically exempts certain transactions:

“(1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.

...

“(3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer and other than private education loans (as that term is defined in section 1650(a) of this title), in which the total amount financed exceeds $50,000.”

(15 U.S.C.A. § 1603.)

Plaintiff additionally presents legally supported argument regarding the determination for review of a consumer versus commercial loan. The court considers the Federal District Court and Ninth Circuit authority. “[T]he decisions of the lower federal courts, while persuasive, are not binding on us. (Citation.) Thus, in the absence of a controlling United States Supreme Court [or California Supreme Court] opinion, we make an independent determination of federal law. … In short, the presence or absence of a decision by the Ninth Circuit on this issue is not determinative.” (Forsyth v. Jones (1997) 57 Cal.App.4th 776, 782–783; Thurston v. Midvale Corp. (2019) 39 Cal.App.5th 634, 640.) The court declines to consider the unreported cases. (Cal. Rules of Court, rule 8.1115(a); Rittiman v. Public Utilities Com. (2022) 80 Cal.App.5th 1018, 1043 (footnote 18).)

“In determining whether credit to finance an acquisition...is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.

The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.

The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.

The size of the transaction. The larger the transaction, the more likely it is to be business purpose.

The borrower's statement of purpose for the loan.”

Thorns v. Sundance Properties (9th Cir. 1984) 726 F.2d 1417, 1419; Gallegos v. Stokes (10th Cir. 1979) 593 F.2d 372, 375 [The commercial use exception constitutes “a factual issue to be resolved by the trier of fact]; Mauro v. Countrywide Home Loans, Inc. (E.D.N.Y. 2010) 727 F.Supp.2d 145, 153 [“Most other courts that have addressed the issue have held that a court must look at the entire transaction and surrounding circumstances to determine a borrower's primary motive”].)

The court finds the case law persuasive and the criteria articulated renders triable issues of material fact regarding TILA compliance. [Anderson Decl., Appendix of Evidence, Ex, 2: Deposition of Sean Daily, 24:11-13, 29:4-19, 30:4-15, 34:2-24, 48:21-49:9, 51:3-18, 57:21-24, 59:5-9, 74:23-75:4, 80:2-15, 99:8-11, 115:16-20, 120:5-25, 121:8-9, 125:7-11, 132:5-8; [Spaeder-Younkin Decl., ¶ 9, Compendium of Exhibits, Ex. 9, Deposition of Sean Daily, Director of Underwriting, 56:2-4.] The motion for summary adjudication is therefore denied.

15^th Cause of Action, Unfair Business Practices: Denied.

Civic challenges the subject cause of action on grounds that Plaintiff fails to state an basis of injury as a result of the commercial loan. Plaintiff cites to the prior statutory claims as a basis for linking liability under the unfair practices act. Civic in reply challenges any reliance on credibility, and otherwise lack of evidence establishing a wrongful act under the statute.

“The UCL does not proscribe specific acts, but broadly prohibits ‘any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising....’” [¶] “‘A private plaintiff must make a twofold showing: he or she must demonstrate injury in fact and a loss of money or property caused by unfair competition.’ (Citation.)” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1359.) Fact specific pleading is not required in order to allege an unfair business practice. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 46–47.

An “unlawful” practice “means any practices forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulatory, or court-made.… ‘Unfair’ simply means any practice whose harm to the victim outweighs its benefits. (Citation.) ‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘“are likely to be deceived.”’” (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838–839.) “[A]n unfair business practice also means” the relied upon public policy provision is “tethered” to a specific regulatory provisions. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81.) Fundamentally, recovery requires a direct harm to the consumer, and actual reliance. (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326–327.)

Given the triable issues of material fact on the Violation of Civil Code § 1785.20.3 and TILA causes of action, the court finds triable issues of material fact at least partially joined under the “unfair” prong of the unfair practices act, thereby precluding complete resolution of the subject cause of action. The court therefore denies summary adjudication on the subject cause of action based on triable issues of material fact in the Violation of Civil Code § 1785.20.3 and TILA causes of action. The court cannot as a matter of law balance the public policy considerations regarding the potentially unfair business practices in reviewing the loan application and subsequent harms to Plaintiff, versus potential statutory protections in relying upon the submitted application for purposes of the subject claim.

In summary, the motion for summary judgment is DENIED. The motion for summary adjudication is granted as to the ninth, eleventh, and twelfth, causes of action, and denied as to the tenth, thirteenth, and fifteenth causes of action.

Trial currently set for August 26, 2024.

Moving Defendants to give notice to all parties.