Judge Teresa A. Beaudet, Case Number: 24STCV08113, Date: 2025-01-14 Tentative Ruling

FARIBA SHAYESTEH POORSAEED, et al.

Plaintiffs,

vs.

TY INVESTMENT LLC, et al.

Defendants.

Case No.:

24STCV08113

Hearing Date:

January 14, 2025

Hearing Time: 10:00 a.m.

[TENTATIVE] ORDER RE:

MOTION TO COMPEL ARBITRATION;

DEMURRER OF LIL’ WAVE FINANCIAL, INC. TO PLAINTIFFS’ COMPLAINT

On March 29, 2024, Plaintiffs Fariba Shayesteh Poorsaeed and Esmaeil Khorram (jointly, “Plaintiffs”) filed this action against a number of defendants. The Complaint alleges causes of action for (1) fraud and deceit, (2) promissory estoppel, (3) breach of contract, (4) rescission,

(5) financial elder abuse, (6) civil theft, and (7) unfair competition and deceptive business practices.

In the Complaint, Plaintiffs allege, inter alia, that “[t]his action involves a fraudulent, highly predatory, and unlawful home equity loan (the ‘Loan’) claimed by Defendants to be secured by a purported deed of trust on Plaintiffs’ residence located at 22233 Buena Ventura Street, Woodland Hills, California 91364, Los Angeles County Assessor Parcel Number 2170-005-012 (the ‘Property’).” (Compl., ¶ 35.) Plaintiffs allege that “Esmaeil, who did not speak or understand English with the requisite ability to comprehend what he was purportedly authorizing or transacting, was induced to unwittingly borrow substantially less than the represented Loan principal amount of $149,000 from Defendants as a short–term (two–year) second mortgage against the Property…In seeking to borrow funds for urgent personal and family medical expenses, Esmaeil had no understanding of the Loan terms or conditions, or of any Loan or related documents it is purported that he signed.” (Compl., ¶¶ 37-38.)

Plaintiffs allege that “[t]he Loan is purported to be evidenced by a certain ‘PROMISSORY NOTE SECURED BY DEED OF TRUST’ (the ‘Note’) and purported to be secured by a certain ‘DEED OF TRUST AND ASSIGNMENT OF RENTS,’ recorded against the above–referenced Property, in the official records of the County of Los Angeles, California on or about October 30, 2017 (the ‘Deed of Trust’). Neither original nor copies of these documents were provided to Plaintiffs at the time of the putative Loan closing.” (Compl., ¶ 45.)

Plaintiffs allege that Fariba explained to Defendant Hu Qi Qiang (“Hu”) “that the Plaintiffs were severely ill, they had borrowed for basic subsistence and medical bills, that the Plaintiffs had no understanding of the terms of the borrowing, that they could not make the payments at the rate that had been asserted by the Defendants, and that the Plaintiffs thus desired, indeed needed, immediately to reverse or refinance the Loan. Fariba said the Plaintiffs would need to ask a lawyer regarding how to reverse the transaction.” (Compl., ¶ 50.)

Plaintiffs allege that Hu represented that “by working with Hu alone he, Hu, on behalf of the Defendants, promised and assured the Plaintiffs that the Defendants would allow the Plaintiffs to defer the payments on the Loan at the ‘base, lowest rate’ of interest, no greater than the nondefault interest rate stated in the Loan documents, that no interest would compound, and that the Loan need not be repaid for at least five years. (Compl., ¶ 51.) Plaintiffs allege that “Hu, on behalf of Defendants, also promised the Plaintiffs (through Fariba) that they would under no circumstance foreclose on the Property and that the mortgage deed of trust was just for purposes of ‘security’ until the Loan would be repaid whenever the Plaintiffs would ultimately decide to sell the Property. Hu said he would do this if the Plaintiffs did not then ‘involve’ any lawyers or attempt to reverse the transaction.” (Compl., ¶ 51.) Plaintiffs allege that relying on these representations, they “did not retain, or incur the cost of retaining, a lawyer, did not pursue any rescission, refinancing, or replacement of the Loan, and they ceased making current Loan payments, being assured of, among other things, that they would not pay compounding or default interest, that they had at least five years to refinance the Loan, and that they had no risk of any foreclosure upon their home, the Property.” (Compl., ¶ 52.)

Plaintiffs allege that “on December 30, 2022, the Defendants recorded a purported ‘NOTICE OF DEFAULT AND ELECTION TO SELL UNDER DEED OF TRUST’ against title to the Property (the ‘Notice of Default’ or ‘NOD’) thereby commencing foreclosure proceedings against the Plaintiffs and their Property on the claim that the Plaintiffs were in default of the Loan and owed $506,442.06 on the Loan as of December 29, 2022—the Loan for which proceeds aggregated, at most, $135,377.68.” (Compl., ¶ 54.) Plaintiffs allege that “the amounts purported to be owed by the Plaintiffs, as set forth in the Notice of Default, not only breached [Hu’s representations], but exceeded the amounts purported to be authorized by the applicable written Loan documents, even, assuming arguendo, they would have been enforceable and unmodified.” (Compl., ¶ 56.)

Defendants TY Investment LLC, Qi Hu (sued as “Hu Qi Qiang also known as Qi Q. Hu, also known as Qi Q. Hu”), and Lil’ Wave Financial, Inc. doing business as Superior Loan Servicing (collectively, “the “Moving Parties”) now move to “[c]ompel [a]rbitration of the dispute at issue in the Complaint of Plaintiffs and to Stay Proceedings.” Plaintiffs oppose.

In addition, Lil’ Wave Financial, Inc. doing business as Superior Loan Servicing (“Lil’ Wave”) demurs to each of the causes of action of the Complaint. Plaintiffs oppose.

In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). ((Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414.) Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. ((Code Civ. Proc., § 1281.2); (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” ((Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. section 2, et seq.; (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

The Moving Parties submit the Declaration of Qi Hu, who is the Managing Member and Chief Executive Officer of Defendant TY Investment. (Hu Decl., ¶ 2.)

Qi Hu indicates that “[a]s a private money lender, TY Investment is often approached by California licensed real estate brokers offering business purpose loan opportunities. In the fall of 2017, TY Investment was contacted by California licensed broker Rushmyfile, Inc. (California Lic. Id. 01893519) with a proposed business-purpose loan to a married couple, Esmaeil Khorram and Fariba Poorsafed (also known as ‘Fariba Poorsaeed’) (‘Plaintiffs” and “Borrowers’), to be secured by a junior deed of trust on their rental income property located at 22233 Buena Ventura Street, Woodland Hills, CA 91364 (the ‘Property’). The Property had a senior lien from Nationstar Mortgage LLC in the original principal amount of $352,000 (from a loan made in 2010). TY Investment expressed interest and was provided copies of the proposed loan documents which had been executed by Borrowers. A true and correct copy of the loan documents is attached as Exhibit 1.” (Hu Decl., ¶ 4.)

The Moving Parties’ Exhibit 1 includes a “Borrower/Broker Agreement Commercial Property/Business Purpose Loan Transactions Only.” (Hu Decl., ¶ 4, Ex. 1, p. 61.) This agreement provides, inter alia, that “[t]his Agreement entered into this 19th day of OCTOBER, 2017 by and between Esmaeil Khorram and Fariba Poorsafed (herein referred to as ‘Borrower’), and RUSHMYFILE, INC., a California Corporation, BRE LICENSE #01893519 and NMLS Endorsement #396905, and its officers, directors, employees and licensed agents (herein referred to as the MLB), is made with reference to the following facts and upon the terms and conditions set forth herein.” (Ibid.)

The Agreement provides, inter alia, that “[i]f the Borrower elects Binding Arbitration as the dispute resolution mechanism, the box following ‘Yes’ should be checked. If the Borrower elects not to select Binding Arbitration as the dispute resolution mechanism, then the box following ‘No’ should be checked.” (Hu Decl., ¶ 4, Ex. 1, p. 66.) The box stating “Yes” is checked. (Ibid.) In addition, the agreement provides as follows:

“Mutual Agreement To Arbitrate Disputes: The undersigned (‘BORROWER’) has, or intends to, obtain a mortgage loan, made or arranged by MLB/MLO secured by real property (‘Loan’). BORROWER and MLB/MLO agree that any and all disputes involving the Loan including, but not limited to, claims arising from the making, arranging, origination, documentation, disclosures, valuation of the security, servicing, collection or any other aspect of the Loan transaction or the coverage or enforceability of this Agreement, shall be resolved exclusively by binding arbitration under the terms of this Agreement. This Agreement shall also be binding on the agents, spouses, executors, administrators, successors and assigns of the parties. ‘Dispute’ shall include, but not limited, to: (1) Any claimed wrongdoing including, but not limited to, misrepresentation, negligence, breach of contract, breach of fiduciary duty, unconscionability, fraud in the inducement, rescission, breach of the covenant of good faith and fair dealing and unfair business practices; and (2) Any claimed violation of local, state or federal laws, including, but not limited to consumer credit, truth-in-lending, civil rights, equal opportunity, real estate settlement laws, real estate law and regulations, housing discrimination laws, fair lending acts, licensing, loan regulation and unfair business practices acts.” (Hu Decl., ¶ 4, Ex. 1, p. 66.)

The Moving Parties assert that “[a]ll seven of Plaintiffs’ causes of action asserted stem from the loan documents and the attempt of TY Investment to enforce its rights under those documents. Thus, on their face, all of Plaintiffs’ causes of action fall squarely within the provisions of the agreement to arbitrate…” (Mot. at pp. 12:27-13:2.)

As an initial matter, Plaintiffs assert in the opposition that “no moving defendant is party to the putative agreement.” (Opp’n at p. 15:2.) Plaintiffs cite to Marenco v. DirecTV LLC (2015) 233 Cal.App.4th 1409, 1416, where the Court of Appeal noted that “[b]ecause arbitration is a matter of contract, generally one must be a party to an arbitration agreement to be bound by it or invoke it.” (Internal quotations omitted.)

Indeed, as set forth above, the subject “Borrower/Broker Agreement Commercial Property/Business Purpose Loan Transactions Only” provides, inter alia, that “[t]his Agreement entered into this 19th day of OCTOBER, 2017 by and between Esmaeil Khorram and Fariba Poorsafed (herein referred to as ‘Borrower’), and RUSHMYFILE, INC., a California Corporation, BRE LICENSE #01893519 and NMLS Endorsement #396905, and its officers, directors, employees and licensed agents (herein referred to as the MLB), is made with reference to the following facts and upon the terms and conditions set forth herein.” (Hu Decl., ¶ 4, Ex. 1, p. 61, emphasis added.) However, as discussed, the moving parties that filed the instant motion to compel arbitration are TY Investment LLC, Qi Hu, and Lil’ Wave Financial, Inc. doing business as Superior Loan Servicing.

Plaintiffs note that “exceptions to the general rule that one must be a party to an arbitration agreement to invoke it or be bound by it generally are based on the existence of a relationship between the nonsignatory and the signatory, such as principal and agent or employer and employee, where a sufficient identity of interest exists between them.” ((DMS Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1353 [internal quotations omitted].) As noted by Plaintiffs, the Moving Parties do not appear to provide any argument as to the existence of such a relationship here. In addition, the Moving Parties did not file any reply in support of the motion. Thus, the Moving Parties do not dispute Plaintiffs’ point that “no moving defendant is party to the putative agreement.” (Opp’n at p. 15:2.)

Based on the foregoing, the Court does not find that the Moving Parties have demonstrated that an arbitration agreement exists between the Moving Parties and Plaintiffs that covers the claims alleged in the Complaint. Thus, the Court denies the Moving Parties’ motion to compel arbitration.

A pleading is uncertain if it is ambiguous or unintelligible. (¿Code Civ. Proc., § 430.10, subd. (f)¿.) A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to.¿ (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, footnote 2¿.) However, “¿[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.¿” (¿Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616¿.)¿¿¿

Lil’ Wave asserts that “Plaintiffs’ Complaint fails to contain any allegations against Lil’ Wave as to any action, inaction, or as to any other relationship at all to the claims in the Complaint.” (Demurrer at p. 2:11-12.) Lil’ Wave asserts that “[n]one of the seven causes of action mentions Lil’ Wave at all. Plaintiffs’ Complaint has no allegations against Lil’ Wave which would inform it as to why it is named in this lawsuit.” (Demurrer at p. 2:15-17.) Lil’ Wave asserts that the only allegation of the Complaint that mentions Lil’ Wave is paragraph 22, which alleges that “Defendant LIL’ WAVE FINANCIAL, INC. doing business as SUPERIOR LOAN SERVICING holds itself out as a loan servicing company for the private lending industry, and having a principal place of business in Canoga Park, California.” (Compl., ¶ 22.)

In the opposition, Plaintiffs assert that “[t]he Demurrer…disregards…the allegations of the Complaint against the ‘Defendants,’…” (Opp’n at p. 9:14-15.) Plaintiffs argue that “the Demurrer makes no contention that there are insufficiencies or uncertainties in allegations of an actionable fraudulent lending scheme perpetrated by a cabal of Defendants, and it cannot genuinely claim that demurring Defendant Lil’ Wave is not identified in the Complaint as a member of that cabal…” (Opp’n at p. 14:18-22.) Plaintiffs also note that the Complaint alleges that “[a]t all times herein mentioned, each of the Defendants was the agent, employee, partner, and representative of each of the other Defendants, and in doing the things herein alleged, was acting within the authorized course and scope of this agency, employment, partnership, and representation with the full knowledge and consent of the remaining Defendants. Further, each and all of the acts herein alleged as to each of the Defendants was authorized and directed by the remaining Defendants, who ratified, adopted, condoned, and approved said acts with full knowledge of the consequences thereof, and memorialized the authority of the agent in a writing subscribed by the principal.” (Compl., ¶ 26.)

Lil’ Wave did not file any reply in support of the demurrer and thus does not address the foregoing points. Lil’ Wave does not address the allegations in the Complaint against the “Defendants.” Based on the foregoing, the Court does not find that Lil’ Wave has demonstrated that any of the causes of action of the Complaint fail to state facts sufficient to constitute a cause of action or that such causes of action are uncertain.

Based on the foregoing, the Moving Parties’ motion to compel arbitration is denied.

In addition, based on the foregoing, Lil’ Wave’s demurrer is overruled in its entirety. The Court orders Lil’ Wave to file and serve an answer to the Complaint within 10 days of the date of this Order.¿

Superior Court of California

County of Los Angeles

Department 50