Sterling Savings Bank v. Poulsen
Filing
143
ORDER by Judge Elizabeth D Laporte granting 107 Plaintiff's Motion for Summary Judgment; granting 109 Plaintiff's Motion for Summary Judgment re Counterclaims; denying 110 Defendant's Motion for Summary Judgment; granting 120 Motion to Strike ; granting in part and denying in part 121 Motion to Strike (knm, COURT STAFF) (Filed on 7/29/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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STERLING SAVINGS BANK,
Plaintiff,
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United States District Court
For the Northern District of California
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No. C -12-01454 EDL
v.
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NORMAN POULSEN,
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Defendant.
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/
ORDER GRANTING PLAINTIFF’S
MOTIONS FOR SUMMARY
JUDGMENT; DENYING DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT;
GRANTING IN PART PLAINTIFF’S
MOTION TO STRIKE THE
DECLARATION OF ROGER
BERNHARDT; AND GRANTING
PLAINTIFF’S MOTION TO STRIKE
THE DECLARATION OF WILLIAM
SARSFIELD
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Before the Court are Plaintiff’s Motion for Summary Judgment, Plaintiff’s Motion for
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Summary Judgment as to Defendant’s Counterclaims for violation of California Welfare and
Institutions Code section 15610.30 and for rescission, Defendant’s Motion for Summary Judgment,
Plaintiff’s Motion to Strike the Declaration of Roger Bernhardt and Plaintiff’s Motion to Strike the
Declaration of William Sarsfield. For the reasons stated at the July 19, 2013 hearing and in this
Order, Plaintiff’s Motions for Summary Judgment are granted, Defendant’s Motion for Summary
Judgment is denied, and Plaintiff’s Motions to Strike are granted in part.
Facts
Defendant is a real estate investor with at least forty years of experience buying, selling
and holding real estate directly and through her company, Sutter Investment Corporation (“Sutter”).
Appx Ex. 20 at 32. Sutter was created approximately fifty years ago by Defendant’s father, and as
Defendant’s father aged, Defendant took over control of the company. Appx. Ex. 20 at 26-27. After
Defendant’s father died in 1989, Defendant and her children inherited the shares of Sutter:
Defendant inherited one-third of the shares, David Poulson, Defendant’s son, inherited one-third,
and Defendant’s two daughters inherited one-third. Appx Ex. 26 at 35. Defendant and her children
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became officers of Sutter, Defendant served as President and Chief Executive Officer, David
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Poulson served as Vice President, and Kareen Poulson, one of Defendant’s daughters, was Sutter’s
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Secretary and bookkeeper. Appx Ex. 20 at 40-41; Ex. 26 at 30. David Poulson testified that
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Defendant was always the final decision-maker for Sutter. Appx Ex. 24 at 32, 39, 58.
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In 2007, Defendant’s daughters sold their shares to Defendant and David. Appx Ex. 20 at
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39-40. Although Defendant filed a declaration in support of this motion stating that she was only
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the “nominal president” of Sutter, as a result of the daughters’ sales of stock, Defendant and David
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became equal 50% owners of Sutter. Appx Ex. 20 at 39-40. In 2011, Defendant ousted David from
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his position as Vice President and locked David out of Sutter’s offices. Appx Ex. 22 at 529, 534-35;
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For the Northern District of California
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Ex. 36 at 65-66.
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Between 1999 and 2007, Sutter obtained the four loans at issue in this case from Plaintiff:
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1.
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On February 9, 2007, Plaintiff made a $1,300,000 loan to Sutter. Appx. Ex. 2 (promissory
The Elmira loan
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note), 3 (deed of trust). The deed of trust encumbered real property located at 141 Elmira Road in
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Vacaville. Id.
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On February 16, 2007, Plaintiff executed a Commercial Guaranty, unconditionally
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guaranteeing to repay any unpaid balance due under the Elmira loan. Appx. Ex. 4 at 1 (“For good
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and valuable consideration, Guarantor, absolutely and unconditionally guarantees full and punctual
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payment and satisfaction of Guarantor’s Share of the Indebtedness to Borrower to Lender, and the
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performance and discharge of all Borrower’s obligations under the Note and related documents.”).
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The “Guarantor’s Share of the Indebtedness” was defined in the Commercial Guaranty to not exceed
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$1,300,000 “of the principal amount, interest thereon to the extent not prohibited by law, and all
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collection costs, expenses, and attorney’s fees whether or not there is a lawsuit, and if there is a
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lawsuit, any fees and costs for trial and appeals.” Id. Further, the Commercial Guaranty stated:
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GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor
represents and warrants to Lender that (A) no representations or agreements of any
kind have been made to Guarantor which would limit or qualify in any way the terms
of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the
request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty . . . (J) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any
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facts, events, or circumstances which might in any way affect Guarantor’s risks under
this Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
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Appx Ex. 4 at 2. Finally, above Defendant’s signature line, the Commercial Guaranty stated:
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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN
ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY
IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER . . .
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Id. at 4. Defendant testified that she signed this document, which was notarized. Appx Ex. 20 at
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147-48.
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Sutter failed to pay on the Elmira loan, and on February 24, 2011, a Notice of Default and
United States District Court
For the Northern District of California
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Election to Sell Under Deed of Trust was sent to Sutter and recorded against the Elmira property.
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Brixey Decl. ¶ 6; Appx. Ex. 5. On July 1, 2011, the Elmira property was sold at a non-judicial
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foreclosure sale. Brixey Decl. ¶ 7. Plaintiff was the successful bidder at the non-judicial foreclosure
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sale and the amount of Plaintiff’s credit bid was applied to reduce the outstanding balance of the
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Elmira loan, for an outstanding balance as of the foreclosure sale of $454,923.58. Brixey Decl. ¶ 7.
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As of June 7, 2013, there remained $559,751.87 in principal and interest due on the Elmira loan. Id.
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¶ 8. Interest continues to accrue at the daily rate of $148.48. Id.
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2.
The Hearn loan
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On July 21, 2004, Plaintiff made a $243,750 loan to Sutter. Appx. Ex. 7 (promissory note),
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8 (deed of trust). The deed of trust encumbered real property located at 1115 Hearn Avenue in Santa
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Rosa. Id.
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On July 27, 2004, Plaintiff executed a Commercial Guaranty, unconditionally guaranteeing
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to repay any unpaid balance due under the Hearn loan up to $2,500,000. Appx. Ex. 9 at 1 (“For
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good and valuable consideration, Norma L. Poulson absolutely and unconditionally guarantees and
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promises to pay to Sonoma National Bank, its successors and/or assigns, or its order, in legal tender
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of the United States of America, the indebtedness of Sutter Investment Corporation, a California
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Corporation to Lender on the terms and conditions as set forth in this Guaranty. The obligations of
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Guarantor under this Guaranty are continuing.”). “Indebtedness” was defined as “any and all of
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Borrower’s indebtedness to Lender and is used in the most comprehensive sense and means and
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includes any and all of Borrower’s liabilities, obligations and debts to Lender, now existing or
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hereinafter incurred or created, including, without limitation, all loans advances, interest, costs
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debts, overdraft indebtedness, credit card indebtedness, lease obligations, or other obligations, and
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liabilities of Borrower . . . .” Id. Further, the Commercial Guaranty stated:
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United States District Court
For the Northern District of California
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GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor
represents and warrants to Lender that (A) no representations or agreements of any
kind have been made to Guarantor which would limit or qualify in any way the terms
of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the
request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty . . . (J) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor’s risks under
this Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
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Appx Ex. 9 at 2. Finally, above Defendant’s signature line, the Commercial Guaranty stated:
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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN
ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY
IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER . . .
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Id. at 4. Defendant testified that she signed this document, which was notarized. Appx Ex. 20 at
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108-09.
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Sutter failed to pay on the Hearn loan, and on November 16, 2011, a Notice of Default and
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Election to Sell Under Deed of Trust was sent to Sutter and recorded against the Hearn property.
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Brixey Decl. ¶¶ 13-14; Appx. Ex. 10. On March 15, 2012, the Hearn property was sold at a non20
judicial foreclosure sale. Brixey Decl. ¶ 14. Plaintiff was the successful bidder at the non-judicial
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foreclosure sale and the amount of Plaintiff’s credit bid was applied to reduce the outstanding
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balance of the Hearn loan, for an outstanding balance as of the foreclosure sale of $108,064.74.
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Brixey Decl. ¶ 14. As of June 7, 2013, there remained $122,500.39 in principal and interest due on
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the Hearn loan. Id. ¶ 15. Interest continues to accrue at the daily rate of $31.52. Id.
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3.
The Moorland loan
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On January 27, 2005, Plaintiff made a $116,000 loan to Sutter. Appx. Ex. 12 (promissory
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note), 13 (deed of trust). The deed of trust encumbered real property located at 3128 Moorland
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Avenue in Santa Rosa. Id.
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On January 28, 2005, Plaintiff executed a Commercial Guaranty, unconditionally
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guaranteeing to repay any unpaid balance due under the Moorland loan. Appx. Ex. 14 at 1 (“For
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good and valuable consideration, Norman L. Poulson absolutely and unconditionally guarantees and
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promises to pay to Sonoma National Bank, its successors and/or assigns, or its order, in legal tender
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of the United States of America, the indebtedness of Sutter Investment Corporation, a California
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Corporation to Lender on the terms and conditions as set forth in this Guaranty. The obligations of
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Guarantor under this Guaranty are continuing.”). “Indebtedness” was defined as “(a) all principal,
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(b) all interest, (c) all late charges, (d) all loan fees and loan charges, and (e) all collection costs and
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expenses relating to the Note or to any collateral for the Note. Collection costs and expenses include
United States District Court
For the Northern District of California
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without limitation, all of Lender’s attorneys’ fees.” Id. Further, the Commercial Guaranty stated:
GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor
represents and warrants to Lender that (A) no representations or agreements of any
kind have been made to Guarantor which would limit or qualify in any way the terms
of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the
request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty . . . (J) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor’s risks under
this Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
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Appx Ex. 14 at 1-2. Finally, above Defendant’s signature line, the Commercial Guaranty stated:
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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN
ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY
IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER . . .
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Id. at 4. Defendant testified that she signed this document, which was notarized. Appx Ex. 20 at
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129-31.
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Sutter failed to pay on the Moorland loan, and on January 9, 2012, a Notice of Default and
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Election to Sell Under Deed of Trust was sent to Sutter and recorded against the Hearn property.
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Brixey Decl. ¶ 20; Appx. Ex. 15. On May 24, 2012, a third party acquired title to the Moorland
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property at the non-judicial foreclosure sale with a bid in the amount of $118,370.41, which was
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credited to the amounts owed under the Moorland loan, leaving an outstanding balance as of the
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foreclosure sale of $650.48. Brixey Decl. ¶ 21. As of June 7, 2013, there remained $723.90 owing
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on the Moorland loan. Id. ¶ 22. Interest continues to accrue at the daily rate of $0.19. Id.
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4.
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On March 26, 1999, Plaintiff made a $250,000 loan to Sutter. Appx. Ex. 17 (promissory
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note), 18 (deed of trust). The deed of trust encumbered real property located at 1749 Normandie
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Road in Santa Rosa. Id.
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The Normandie loan
On April 5, 1999, Plaintiff executed a Commercial Guaranty, unconditionally guaranteeing
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to repay any unpaid balance due under the Normandie loan. Appx. Ex. 19 at 1 (“For good and
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valuable consideration, Norma L. Poulson absolutely and unconditionally guarantees and promises
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to pay to Sonoma National Bank, or its order, in legal tender of the United States of America, the
United States District Court
For the Northern District of California
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indebtedness of Sutter Investment Corporation, a California Corporation to Lender on the terms and
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conditions as set forth in this Guaranty. The obligations of Guarantor under this Guaranty are
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continuing.”). “Indebtedness” was defined as “any and all of Borrower’s liabilities, debts, and
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indebtedness to Lender, now existing or hereinafter incurred or created, including without limitation,
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all loans, advances, interest, costs, debts . . . and liabilities of Borrower . . . as guarantor or surety.”
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Id. Further, the Commercial Guaranty stated:
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GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor
represents and warrants to Lender that (a) no representations or agreements of any
kind have been made to Guarantor which would limit or qualify in any way the terms
of this Guaranty; (b) this Guaranty is executed at Borrower’s request and not at the
request of Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty . . . (j) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any
facts, events, or circumstances which might in any way affect Guarantor’s risks under
this Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or
documents acquired by Lender in the course of its relationship with Borrower.
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Appx Ex. 19 at 1-2. Finally, above Defendant’s signature line, the Commercial Guaranty stated:
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EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN
ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY
IS EFFECT UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER . . .
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Id. at 4. Defendant testified that she signed this document, which was notarized. Appx Ex. 20 at 9227
94.
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Sutter failed to pay on the Normandie loan. Brixey Decl. ¶ 27. Sutter had also defaulted on
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a loan owed to a junior lienholder who had previously foreclosed on the Normandie property as a
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result of Sutter’s default. Id. In or around September 2012, the junior lienholder paid $216,000 to
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have the Normandie Deed of Trust removed from the title. Id. The $216,000 was applied to reduce
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the Normandie loan, leaving an outstanding balance of $8,872.57. Id. As of June 7, 2013, there
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remained $9,614.89 owing on the Moorland loan. Id. ¶ 28. Interest continues to accrue at the daily
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rate of $2.92. Id.
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5.
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Earlier in this litigation, Defendant contended that she suffered from dementia or early
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Alzheimer’s disease that precluded her from understanding the guaranties that she executed. During
Additional facts
United States District Court
For the Northern District of California
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discovery, however, Defendant testified that she was not incompetent when she executed the
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guaranties. Appx Ex. 22 at 604-05. Defendant’s doctor, Tedde Rinker, testified that in 1999,
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Defendant did not have dementia or Alzheimer’s disease. Appx Ex. 23 at 35. Rinker testified that
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she has never diagnosed Defendant with dementia or Alzheimer’s disease. Id. at 70.
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Further, the Title and Escrow Officer for North Bay Title Company, Kathleen Engler, who
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was present on several occasions when Defendant signed loan documents, including the Moorland
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guaranty, testified that Defendant appeared competent when she signed documents, and had
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Defendant appeared incompetent or impaired, Engler would not have let Defendant execute the loan
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documents. Appx Ex. 27 at 92-93. She testified that she did not prevent Defendant from reading the
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documents that Defendant signed. Id. Engler testified that prior to Defendant signing documents,
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Engler would physically hand the document to Defendant, read aloud the title of the document and
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show Defendant where to sign. Appx Ex. 27 at 41. In closing its loans, Plaintiff’s practice was to
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rely on title or escrow companies to handle the execution of loan documents and verify the identity
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of signatories. Appx 28 at 25, 63-64.
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Defendant testified that she never met with anyone from the bank, including Clem Carinalli,
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a former officer with Plaintiff. Appx Ex. 22 at 612. When asked at deposition to provide facts
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regarding any alleged improper conduct by David Poulson, Defendant’s son, relating to the loans or
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guaranties, Defendant could not recall any threats or coercion. Appx Ex. 20 at 85, 155. Engler
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testified that she did not see David Poulson engage in any improper conduct against Defendant or do
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anything to prevent Defendant from reading the loan documents that were presented to her. Appx
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Ex. 26 at 93. David Poulson testified that he did not coerce Defendant into signing any guaranties or
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any other loan document. Appx Ex. 24 at 94.
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Further, Defendant never notified Plaintiff of any alleged intimidation by David Poulson or
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of any other conduct relating to an elder abuse claim. Appx Ex. 22 at 477, 494, 500, 509-10, 512-
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14. In addition, nothing prevented Defendant from going to the bank and talking to a representative
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from Plaintiff about the loans. Appx Ex. 22 at 555, 574. When Plaintiff contacted Defendant on
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several occasions after the loans went into default, Defendant refused to discuss the loans with
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Plaintiff, instead telling Plaintiff to discuss the loans with David Poulson. Appx Ex. 29 at 62-65;
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For the Northern District of California
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Def.’s Ex. 7 at 62-65; Ex. 8 at 13-14, 18-19, 22-25.
Chris Rosell was the Sonoma National Bank loan officer who was the account manager for
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Defendant and Sutter. Def.’s Ex. 5 at 50-52. Rosell had a Credit Authorization document that
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indicated Defendant’s age and that she developed real estate for many years. Def.’s Ex. 4 at
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SSB8318. According to Rosell, David Poulson told Rosell that David represented Defendant, who
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was reclusive and did not like to meet with people. Def.’s Ex. 5 at 31-32, 44-45. However, there is
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evidence that Defendant appeared at the escrow company to execute all of the guaranties before a
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notary public. Appx Ex. 27 at 41. Rosell testified that he had a banking relationship with the entire
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Poulson family. Def.’s Ex. 5 at 32.
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Defendant argued incorrectly that in October 2012, Plaintiff stated in a letter that Defendant
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“had no involvement in the operations or decisions made by Sutter Corp.” Poulson Decl. Ex. 2 at 2.
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However, Defendant acknowledged at the hearing that she was mistaken. The letter actually stated
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something quite different: “Sterling (including Sonoma) had no involvement in the operations or
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decisions made by Sutter Corp.” The letter also notes that Defendant “has run that company for
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decades, and is a sophisticated real estate investor who has bought and sold real estate for many
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years.” Id.
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Defendant argues that Plaintiff’s standard practice was to obtain guarantor’s signatures in
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advance, through a Commitment Letter. Def.’s Ex. 24 at 100-02, 118. Defendant notes that only
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one of the loans Defendant took out with Plaintiff, which is not at issue in this case, had a
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Commitment Letter, and no letters were sent out for the Hearn and Moorland loans. Def.’s Ex. 30 at
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114-18, 134, 198-99.
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David Poulson and Clam Carinalli, who was an officer at Sonoma National Bank, were
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friends. Def.’s Ex. 39 at 199-203. For example, Carinalli went to David’s home for a fundraiser,
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and supported David’s campaign for City Council. Id. at 199-203, 269-70, 272-73. As described
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below, Defendant argues that this relationship is the mechanism through which Defendant was
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subjected to elder abuse. For example, Defendant notes that Carinalli attended a loan committee
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meeting and voted to approve the Elmira loan even though the appropriate loan approval procedures
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were allegedly not followed. Def.’s Ex. 44.
United States District Court
For the Northern District of California
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Legal Standard
Summary judgment shall be granted if “the pleadings, discovery and disclosure materials on
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file, and any affidavits show that there is no genuine issue as to any material fact and that the
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movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(c). Material facts are those
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which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
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(1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury
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to return a verdict for the nonmoving party. Id. The court must view the facts in the light most
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favorable to the non-moving party and give it the benefit of all reasonable inferences to be drawn
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from those facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The
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court must not weigh the evidence or determine the truth of the matter, but only determine whether
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there is a genuine issue for trial. Balint v. Carson City, 180 F.3d 1047, 1054 (9th Cir. 1999).
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A party seeking summary judgment bears the initial burden of informing the court of the
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basis for its motion, and of identifying those portions of the pleadings and discovery responses that
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demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
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323 (1986). Where the moving party will have the burden of proof at trial, it must affirmatively
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demonstrate that no reasonable trier of fact could find other than for the moving party. On an issue
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where the nonmoving party will bear the burden of proof at trial, the moving party can prevail
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merely by pointing out to the district court that there is an absence of evidence to support the
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nonmoving party’s case. Id. If the moving party meets its initial burden, the opposing party “may
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not rely merely on allegations or denials in its own pleading;” rather, it must set forth “specific facts
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showing a genuine issue for trial.” See Fed. R. Civ. P. 56(e)(2); Anderson, 477 U.S. at 250. If the
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nonmoving party fails to show that there is a genuine issue for trial, “the moving party is entitled to
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judgment as a matter of law.” Celotex, 477 U.S. at 323.
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Motions to Strike
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Plaintiff has moved to strike the declarations of Defendant’s experts, Roger Bernhardt and
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William Sarsfield. Federal Rule of Evidence 702 requires that a testifying expert be “qualified as an
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expert by knowledge, skill, experience, training, or education.” Fed.R.Evid. 702. The threshold for
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qualification is low; a minimal foundation of knowledge, skill, and experience suffices. Hangarter v.
United States District Court
For the Northern District of California
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Provident Life & Accident Ins. Co., 373 F.3d 998, 1015–16 (9th Cir. 2004); see also Thomas v.
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Newton Int'l Enterprises, 42 F.3d 1266, 1269 (9th Cir. 1994). When faced with a proffer of expert
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testimony, a district court must determine whether the testimony is both reliable and relevant.
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Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589 (1993). The Court has broad discretion in
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assessing both requirements. See United States v. Alatorre, 222 F.3d 1098, 1100 (9th Cir. 2000).
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1.
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Plaintiff’s Motion to Strike the Declaration of Roger Bernhardt is granted in part
Bernhardt is a professor of law at Golden Gate University School of law. Berhardt Decl. Ex.
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1 at 1. He states that he has been qualified to provide an expert opinion in matters relating to
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banking customs and practices in California. Id. His expertise is in Real Estate and Mortgage Law.
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Id. In general, he opines that Plaintiff “should have made an inquiry into the circumstances of elder
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Lisa Poulson’s execution of certain guaranties which plaintiff seeks to enforce in this litigation to
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ensure that she knowingly agreed to them.” Id. at 4. He also opines that Plaintiff’s “failure to make
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any inquiry into the circumstances of elder Lisa Poulson’s execution of certain guaranties which
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plaintiff seeks to enforce in this litigation constitutes financial abuse of an elder under California
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Welfare & Institutions Code 15600.” Id.
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A.
Bernhardt may be qualified to testify as to the customs and practices in the
California banking industry, but not as to financial elder abuse.
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In his expert report, Bernhardt states that: “I have been qualified as an expert in matters
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relating to banking customs and practices in California and nationally in state and federal courts in
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California.” Bernhardt Decl. Ex. 1 at 1. Bernhardt, however, has never worked in the California
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banking industry, has never worked for a government agency that regulates the banking industry,
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and does not appear to have any other banking experience. His resume indicates that he was in
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private practice from 1964-1969 and then a law professor from 1969 to the present. Id. Ex. 1 at Ex.
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A. Bernhardt’s writings and activities in his resume focus on real property and real estate matters,
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and do not focus on banking, except as to mortgage and deed of trust practice. Id. The articles
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authored by Bernhardt that are attached to his expert report do not address the customs and practices
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in the California banking industry, although he has written about guaranties, mortgages and deeds of
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trust. Id. Ex. 1 at Ex. C; cf. United States v. Bighead, 128 F.3d 1329, 1330 (9th Cir. 1997) (the court
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qualified an expert to testify regarding common traits in child abuse victims based on the expert’s
United States District Court
For the Northern District of California
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personal observations of 1,300 child abuse victims); Ralston v. Mortgage Investors Group, Inc.,
11
2011 WL 6002640 (N.D. Cal. Nov. 30, 2011) (allowing an experienced mortgage broker to testify
12
about industry practices and general practices of and incentives affecting mortgage brokers, but
13
excluded his expert testimony about a specific loan product because there was no foundation
14
showing that he was qualified to testify about that specific loan).
15
Although Bernhardt may be qualified as an expert to address the California banking industry
16
in general terms, he is not qualified to opine as to financial elder abuse. In his report, Bernhardt
17
opines that: “the plaintiff’s failure to make any inquiry into the circumstances of elder Lisa
18
Poulson’s execution of certain guaranties which plaintiff seeks to enforce in this litigation
19
constitutes financial abuse of an elder under California Welfare and Institutions Code § 15600.”
20
Bernhardt Decl. Ex. 1 at 4. He further states that:
21
22
23
24
Given the special wording of this statute [§ 15610.30], the only circumstances under
which a taker or appropriator from an elder would be deemed to lack the requisite
statutory mental condition would be in the case that the appropriator had not been
given any information as to the elder’s age. . . . To know of an elder’s condition (age)
is to know (or be said to should have known) that the elder has a right to her property,
which means any taking can be deemed to be in bad faith, which means that the
appropriation can be for a wrongful use.
25
Id. at 7. Bernhardt lacks the “knowledge, skill, expertise, training or education” relating to elder
26
abuse. Bernhardt states that he authored an article called “Three Lessons for Lawyers” that dealt
27
with, among other things, financial elder abuse. Bernhardt Decl. Ex. 1 at Ex. D. That article was
28
co-authored by another person, and in the article, Bernhardt stated that he “gratefully acknowledges
11
1
the contributions of his colleague [and co-author] Christine Tour-Sarkissian to this portion [financial
2
elder abuse] of this issue’s Midcourse Corrections. . . .” Shin Decl. Ex. A at 5. Thus, this article
3
does not support a finding that Bernhardt has expertise with financial elder abuse. Bernhardt also
4
stated that he reviewed some materials on elder abuse, including training materials for banks
5
regarding elder abuse and articles about financial elder abuse. Id. at Ex. 1 at 2. Bernhardt’s review
6
of articles and materials about financial elder abuse appears to be his only experience with the topic.
7
Further, Bernhardt’s opinion is contrary to California law, as discussed in detail below. See Das v.
8
Bank of America, 186 Cal.App.4th 727, 741 (2010); Stebley v. Litton Loan Servicing, 202
9
Cal.App.4th 522, 527-28 (2011). Tellingly, Defendant does not respond directly to Plaintiff’s
United States District Court
For the Northern District of California
10
challenge to Bernhardt’s qualifications on this subject. Thus, Plaintiff’s motion to strike the
11
Bernhardt declaration based on a lack of qualification as to financial elder abuse is well-taken.
12
B.
13
Bernhardt’s report contains his opinions on ultimate legal issues, such as his opinion that
Bernhardt improperly opines on ultimate legal issues
14
“the plaintiff’s failure to make any inquiry into the circumstances of elder Lisa Poulson’s execution
15
of certain guaranties which plaintiff seeks to enforce in this litigation constitutes financial abuse of
16
an elder under California Welfare and Institutions Code § 15600.” Bernhardt Decl. Ex. 1 at 4; see
17
Gable v. National Broadcasting Co., 727 F. Supp. 2d 815, 835-36 (C.D. Cal. 2010) (“It is well
18
established that, ‘an expert may not state his or her opinion as to legal standards, nor may he or she
19
state legal conclusions drawn by applying the law to the facts.’”) (internal citation omitted).
20
Plaintiff’s motion to strike the Bernhardt report to the extent it contains improper opinions on
21
ultimate legal issues is well-taken.
22
C.
Conclusion
23
The motion to strike the declaration of Roger Bernhardt is granted to the extent that
24
Bernhardt opines on financial elder abuse and states legal conclusions.
25
2.
Plaintiff’s Motion to Strike the Declaration of William Sarsfield is granted
26
Sarsfield is a financial consultant and a Senior Adjunct Professor at Golden Gate University
27
School of Business. Sarsfield Decl. Ex. 1 at Ex. A. He states that he is qualified as an expert in the
28
fields of banking, financial services, securities, predictive analysis on various business transactions
12
1
and events, and preparation and analysis of causation of damages and damage modeling in state and
2
federal courts. Sarsfield Decl. ¶ 1. With respect to financial elder abuse, he opined that the elder
3
abuse law practice in the “know your customer” programs was ignored which set the stage for an
4
improper execution of guaranties. Sarsfield Decl. Ex. 1 at 7.
5
A.
6
Sarsfield has extensive experience in the banking industry, but not in financial elder abuse.
7
See Sarsfield Decl. Ex. 1 at 8 (Witness Qualifications). His resume does not indicate any expertise
8
with elder abuse or the California elder abuse act, and Defendant does not point to any relevant
9
experience. Id. Ex. 1 at Ex. A. It only appears that he read some articles about financial elder
Sarsfield is not qualified to opine as to financial elder abuse
United States District Court
For the Northern District of California
10
abuse, which is insufficient. Further, Sarsfield’s opinion as to financial elder abuse is not supported
11
by the articles that Sarsfield read in preparation for his report. Compare Sarsfield Decl. Ex. 1 at 6
12
(opining that the lack of customer contact is contrary to the requirements of the California Financial
13
Elder Abuse statutes), with, Shin Decl. Ex. B (California Bankers Association “Stop Elder Abuse”
14
brochure, which does not mention section 15610.30 or any requirement to contact elders). Thus,
15
Plaintiff’s motion to strike the Sarsfield declaration based on a lack of qualification as to financial
16
elder abuse is well-taken.
17
B.
18
Sarsfield’s report provides conclusory opinions as to the calculation on the amounts of
Sarsfield’s opinion is conclusory
19
deficiencies on the loans and on lending standards and practices. For example, he opined that the
20
Moorland loan “has been paid, and that Sterling Savings Bank has no loss per valuation, and even a
21
possible gain following a quick sale.” Sarsfield Decl. Ex. 1 at 2. With respect to the Hearn loan,
22
Sarsfield opined that it was “an example of a loan that reflects a material variance from standard
23
banking practice.” Id. at 3.
24
Plaintiff points out that Sarsfield has no experience as a loan officer or loan servicer that
25
would provide him with any specialized knowledge on lending issues. Even if Sarsfield is qualified
26
to opine as to the remaining amounts of the loans in this case, his opinions are not helpful to the
27
Court because he fails to explain how he reached his conclusions. See Beech Aircraft Corp. v.
28
United States, 51 F.3d 834, 842 (9th Cir. 1995) (affirming exclusion expert opinion regarding what
13
1
would be heard on a taped conversation: “We are of the opinion that the trial court properly
2
excluded the testimony because it did not concern a proper subject for expert testimony. Plaintiffs
3
offered Drs. Shuy and McDermott to testify as to what could be heard in a tape recorded
4
conversation, yet hearing is within the ability and experience of the trier of fact.”). Therefore,
5
Sarsfield’s opinion with respect to the loans in this case is comprised merely of a summary of emails
6
and documents regarding each loan, without explaining how he reached his conclusion.
7
C.
8
Sarsfield’s report also improperly opines on ultimate legal issues. Gable v. National
9
Sarsfield improperly opines on ultimate legal issues
Broadcasting Co., 727 F. Supp. 2d 815, 835-36 (C.D. Cal. 2010) (“It is well established that, ‘an
United States District Court
For the Northern District of California
10
expert may not state his or her opinion as to legal standards, nor may he or she state legal
11
conclusions drawn by applying the law to the facts.’”) (internal citation omitted). For example,
12
Sarsfield opined that: “The lack of customer contact is contrary not only to the requirements of
13
‘Know Your Customer,’ but also the requirements of California Financial Elder Abuse standards.”
14
D.
15
The motion to strike the declaration of William Sarsfield is granted.
16
Discussion
17
1.
Conclusion
18
There is no triable issue of fact that Defendant has breached the loan guaranties.
A claim for breach of guaranty requires: (1) the existence of a contract; (2) plaintiff's
19
performance or excuse for non-performance under the contract; (3) defendant's breach under the
20
contract; and (4) damages. See Acoustics, Inc. v. Trepte Constr. Co., 14 Cal.App.3d 887, 913
21
(1992); see also Bank of Sierra v. Kallis, No. CIV F 05-1574, 2006 WL 3513568, at *7 (E.D.Cal.
22
Dec. 6, 2006) (breach of a written guaranty is a contractual cause of action that requires proof of the
23
same elements as breach of contract). A valid contract requires: (1) parties capable of contracting;
24
(2) their consent; (3) a lawful object; and (4) sufficient cause or consideration. Cal. Civ. Code §
25
1550. Valid consent is: (1) free; (2) mutual; and (3) communicated to the other. Cal. Civ. Code §
26
1565; see also Cal. Civ. Code § 1580 (“Consent is not mutual, unless the parties all agree upon the
27
same thing in the same sense.”).
28
A.
Existence of a valid contract
14
1
i.
Parties capable of contracting
2
Defendant testified that she was competent at the time she executed the guaranties. Appx
3
Ex. 22 at 604-05. In addition, each guaranty that Defendant signed contained a warranty that she
4
had the “full power, right and authority” to enter into the guaranty and that she “read and
5
understands the terms of the” guaranties. See, e.g., Appx Ex. 14 at 3; Cal. Evid. Code § 622 (“The
6
facts recited in a written instrument are conclusively presumed to be true as between the parties
7
thereto, or their successors in interest; but this rule does not apply to the recital of a consideration.”).
8
Forgetfulness or old age is not a factor in determining the capacity to contract. See Brunoni v.
9
Brunoni, 93 Cal.App.2d 215, 218 (1949) (“It is readily apparent that the foregoing evidence does no
United States District Court
For the Northern District of California
10
more than show that the decedent was aged, suffered pain and was forgetful. . . . Old age does not
11
render a person incompetent to execute a deed. Nor will sickness, extreme distress or debility of
12
body affect the capacity of the grantor to make a conveyance if sufficient intelligence remains.” )
13
(internal citation omitted). Defendant does not dispute that the parties were capable of contracting.
14
15
ii.
Consent
Plaintiff argues that Defendants consented to the guaranties because Defendant executed the
16
guaranties, which stated the terms that govern the parties’ contract on their face. See Stewart v.
17
Preston Pipeline Inc., 134 Cal.App.4th 1565, 1587 (2005) (“Mutual assent to contract is based upon
18
objective and outward manifestations of the parties; a party's ‘subjective intent, or subjective
19
consent, therefore is irrelevant.’”) (internal citations omitted). A failure to read or understand the
20
guaranties before signing them does not create a triable issue of fact. See id. (“Plaintiff's
21
opposition—based upon nothing more than his claim that he had not read or understood the
22
agreement before signing it—raised no triable issue on the question of mutual assent.”). Although
23
Defendant contends that she did not knowingly agree to the terms of the guaranties before signing
24
them, her subjective belief is not relevant. See Marin Storage & Trucking, Inc., 89 Cal.App.4th
25
1042, 1049 (2001) (“An actual negotiation regarding every term has never been required for the
26
formation of a contract. The existence of mutual assent is determined by objective criteria, not by
27
one party's subjective intent. The test is whether a reasonable person would, from the conduct of the
28
parties, conclude that there was a mutual agreement.”).
15
1
In Stewart, the parties resolved their disputes through settlement and signed a settlement
2
agreement. The plaintiff, however, argued that there was no mutual consent to the agreement and
3
therefore, summary judgment in favor of the defendant should be denied. The court found that the
4
settlement agreement was a valid contract:
5
6
Here, the settlement agreement itself demonstrated each element of the contract. It
identified the parties, facially evidenced mutual consent, had a lawful object of
resolving litigation, and contained mutual promises (sufficient consideration).
7
Id. at 1586. In Stewart, the plaintiff argued that he did not read the settlement agreement before
8
signing it and that he “did not understand what the document meant or what the terms, conditions or
9
consequences were . . . and only signed the document because his attorney told him to do so.” Id. at
United States District Court
For the Northern District of California
10
1586. The Stewart court held that:
11
12
13
14
15
Mutual assent to contract is based upon objective and outward manifestations of the
parties; a party's “subjective intent, or subjective consent, therefore is irrelevant.”
Defendants' motion established from the face of the agreement that there was mutual
assent. It was signed by both plaintiff and his attorney, and there was no indication
from the document that it was conditional or that plaintiff did not intend to be bound
by its terms. Plaintiff's opposition—based upon nothing more than his claim that he
had not read or understood the agreement before signing it—raised no triable issue on
the question of mutual assent.
16
Id. at 1587 (internal citations omitted); see also Marin Storage, 89 Cal.App.4th at 1049 (a party
17
“who signs an instrument which on its face is a contract is deemed to assent to all its terms”).
18
Defendant argues that her failure to read the guaranties before signing them was excusable
19
because she relied on misrepresentations by others. See Rosenthal v. Great Western Financial
20
Securities Corp., 14 Cal.4th 394, 419-23 (1996). In Rosenthal, the question was whether a contract
21
was void for fraud in the execution, and the Court stated:
22
23
24
25
26
In the latter case, California law, like the Restatement, requires that the plaintiff, in
failing to acquaint himself or herself with the contents of a written agreement before
signing it, not have acted in an objectively unreasonable manner. One party's
misrepresentations as to the nature or character of the writing do not negate the
other party's apparent manifestation of assent, if the second party had “reasonable
opportunity to know of the character or essential terms of the proposed contract.” If
a party, with such reasonable opportunity, fails to learn the nature of the document he
or she signs, such “negligence” precludes a finding the contract is void for fraud in
the execution.
27
28
Rosenthal, 14 Cal.4th at 423 (emphasis added). Here, even if David Poulson or someone else made
16
1
misrepresentations to Defendant, as she argues, there is no dispute that she had a “reasonable
2
opportunity to know of the character or essential terms of the proposed contract” even if she now
3
states in her declaration that she did not know about the guaranties until she was sued, because she
4
was presented with each document at the signing, yet she did not read the documents.
5
Defendant further cites Brown v. Wells Fargo Bank, 168 Cal.App.4th 938, 952 (2008) for the
6
argument that a bank must “do more” to assist customers in reviewing and understanding documents
7
they sign. Brown, however, is distinguishable. There, the court determined that under the “unusual
8
particular facts” of the case, the bank was required to do more to assist elderly clients to understand
9
the documents they were signing. In that case, the plaintiff was ninety-three years old, in failing
United States District Court
For the Northern District of California
10
health and legally blind when he signed an agreement with the bank that allowed the bank to make
11
stock trades with the plaintiff’s stock. Id. at 946. A bank representative worked in the plaintiff’s
12
home organizing all financial paperwork and had access to all of the plaintiff’s financial
13
information; the bank representative’s job was to gather information about the plaintiff and to make
14
sure that all of their substantial assets remained under the management of the bank. Id. The bank
15
representative introduced the plaintiff to an estate attorney and a certified public accountant. Id.
16
The bank representative did not agree with the plaintiff’s investment decisions, so she started
17
advising the plaintiff to change strategies. Id. The plaintiff signed a document with an arbitration
18
provision even though the plaintiff thought he was only signing documents to open accounts with
19
the bank. Id. at 948-49. The plaintiff could not see the fine print of the agreement. Id. at 949. No
20
one explained the purpose of the documents to be signed, even though the bank’s representative
21
knew that the plaintiff could not read the document. Id.
22
Brown instead supports Plaintiff’s position. See Brown, 168 Cal.App.4th at 959 (“Generally,
23
it is not reasonable to fail to read a contract; this is true even if the plaintiff relied on the defendant's
24
assertion that it was not necessary to read the contract. Reasonable diligence requires a party to read
25
a contract before signing it.”) (internal citations omitted) (emphasis in original). Defendant testified
26
that she was competent when she signed the guaranties. Unlike Brown, here there is no fiduciary
27
relationship between Plaintiff and Defendant. While Defendant argues that a reasonable jury could
28
find that Plaintiff should have “done more” to ensure that Defendant knew what she was signing, the
17
1
unusual circumstances present in Brown are absent here. In addition, the notary public informed
2
Defendant of the titles of the documents. Appx Ex. 27 at 41 (Engler testified that prior to Defendant
3
signing documents, Engler would physically hand the document to Defendant, read aloud the title of
4
the document and show Defendant where to sign). Although Defendant points out that Engler was
5
not familiar with a commercial guaranty, there is no evidence that she therefore did not tell
6
Defendant what she was signing. Def.’s Ex. 26 at 48-49. Although Defendant is an elder (and was
7
so during the time of the majority of the loans at issue in this case), there is no evidence that she was
8
as infirm as the Brown plaintiff or that she had physical disabilities that prevented her from seeing or
9
reading the documents.
United States District Court
For the Northern District of California
10
Defendant also argues that Bruni v. Didion, 160 Cal.App.4th 1272 (2008) shows that the rule
11
that one who signs a document may not avoid the impact of its terms on the ground that he failed to
12
read it only applies in the absence of overreaching or imposition. Bruni, however, is not on point
13
because it did not involve a signed contract but instead a unilateral arbitration provision buried in a
14
thirty-page warranty booklet in ten point type which the plaintiff had not signed. Id. at 1279, 1287,
15
1293. Here, the guaranties are short documents that are expressly contracts, Defendant signed them
16
and Plaintiff would not have made the loans without the guaranties. Wright v. Lowe, 140
17
Cal.App.2d 891 (1956) is also inapposite. There, the court held that a “deposit receipt” for the
18
purchase and sale of real property could be rescinded based on mutual mistake because both parties
19
were mistaken as to the terms of the document. Here, mutual mistake is not at issue. Further, in
20
Wright, the defendant’s agent misled the seller with a “faulty explanation,” whereas here, there is no
21
allegation that anyone at Plaintiff’s bank misled Defendant with any explanation and the terms of the
22
guaranty were stated in the document.
23
Next, Defendant argues that cases involving contracts with ambiguous “dragnet” clauses
24
require courts to particularly examine mutual consent. See Gates v. Crocker-Anglo Nat. Bank, 257
25
Cal.App.2d 857, 859-61 (1968) (“The court, in so holding, first noted that ‘dragnet’ clauses were not
26
highly regarded in equity, were subject to careful scrutiny and strict construction and could be
27
overturned on a showing of concealment, haste or artifice.”); Fisher v. First Int’t Bank, 109
28
Cal.App.4th 1433, 1446-47 (2003) (“Because a dragnet clause is one of the provisions ‘least likely’
18
1
to be understood by a layperson reading the fine print of a deed of trust, California limits the
2
enforcement of such a provision ‘to those transactions where objective evidence discloses the
3
intention of the debtor and the creditor to enlarge the lien to include other obligations.’ The
4
proponent of a dragnet clause bears the burden of establishing that the parties intended all existing or
5
contemporaneous loans to be included within its scope.”) (internal citations omitted). In particular,
6
Defendant argues that the Hearn guaranty, which was for $2,500,000, ten times the value of the
7
related loan, somehow contained a dragnet clause solely based on the amount of the guaranty.
8
Defendant’s argument is not well-taken. Here, the guaranties did not contain dragnet clauses, which
9
“provide that the deed of trust secures the particular debt indicated and also all other obligations of
United States District Court
For the Northern District of California
10
the trustor, whether preexisting or subsequent to the deed of trust.” 12 Miller & Starr, Cal. Real
11
Estate (3d ed. 2001) § 10:12; see also Fisher, 109 Cal.App.4th at 1444. Plaintiff is seeking
12
enforcement of the guaranties for the specific loans at issue, not some other obligation. Thus,
13
Defendant’s dragnet argument is not persuasive.
14
Finally, Defendant argues that she relied on David Poulson’s misrepresentations that the
15
documents were simply deeds of trust or related loan documents for Sutter. She states that she
16
“mistakenly relied on David Poulson’s misrepresentations that documents I was signing at title
17
companies for Sonoma National Bank were “deeds of trust” or related documents for Sutter,” and
18
that she “did not know my personal guaranty was required or included in those documents.” Id. ¶ 7.
19
Defendant also states that David intimidated her, and “displayed tantrums including kicking boxes,
20
slamming doors, pounding my automobile, locking me out of my office, shoving documents in my
21
face and demanding I sign them, belittling me about my understanding of loans and related
22
documents, and threatening me not to go to or talk with anyone at Sonoma National Bank.” Supp.
23
Poulson Decl. ¶ 6. Defendant also argues that Plaintiff failed to obtain a commitment letter from
24
Defendant for the guaranties, and that the notary public was pressed for time. These facts, however,
25
do not raise a triable issue of fact as to Defendant’s consent to the guaranties. Even assuming that
26
Defendant had a fiduciary relationship with David Poulson, she has not cited any authority that
27
would allow her to impute that relationship to Plaintiff or rely on it to escape her obligations for her
28
own actions in signing the guaranties. Cf. Everest Investors 8 v. Whitehall Real Estate, 100
19
1
Cal.App.4th 1102, 1104 (2002) (“If the nonfiduciary is neither an employee nor agent of the
2
fiduciary, it is not liable to the plaintiff on a conspiracy theory because a nonfiduciary is legally
3
incapable of committing the tort underlying the claim of conspiracy (breach of fiduciary duty).”).
4
As described above, Defendant’s failure to read the documents she was signing does not obviate her
5
consent. Cf. Alfaro v. Community Housing Imp. Sys. & Planning Ass’n, 171 Cal.App.4th 1356,
6
1394 (2009) (“A person in a fiduciary relationship may relax, but not fall asleep. ‘[I]f she became
7
aware of facts which would make a reasonably prudent person suspicious, she had a duty to
8
investigate further, and she was charged with knowledge of matters which would have been revealed
9
by such an investigation.’”) (internal citation omitted). Even drawing all inferences in favor of
United States District Court
For the Northern District of California
10
11
12
Defendant, there is no triable issue of fact as to consent.
iii.
Lawful object
The objects of the guaranties were lawful; a guaranty is a promise to answer for the debt of
13
another. Cal. Civ. Code § 2787. Defendant argues that public policy renders the contract void
14
because it was procured through elder abuse. Defendant argues generally that a contract made in
15
violation of a statute is void and cannot be enforced. See Cal. Civ. Code §§ 1550, 1599; see also,
16
e.g., Castillo v. Barrera, 146 Cal.App.4th 1317 (2007) (oral contract to manage a boxer could not be
17
enforced by unlicensed manager in violation of state regulatory law requiring managers to be
18
licensed). But Defendant has not cited any case in which an entire contract was rescinded or held to
19
be void by a claim made under the elder abuse statute, and as set forth below, Defendant’s
20
counterclaim for elder abuse fails. See Opp. at 24-25. In Bickel, the court severed an attorney’s
21
fees provision in an agreement between a resident of a senior living facility and the senior living
22
there. See Bickel v. Sunrise Assisted Living, 206 Cal.App.4th 1, 8-13 (2012) (“‘[T]he arbitration
23
provision does provide for what is in effect a waiver of plaintiff's right to recover, under certain
24
circumstances, attorneys' fees under the Elder Abuse Act. To that extent, it is contrary to public
25
policy and unlawful. [Citation.] This does not require a finding that the arbitration agreement as a
26
whole is unlawful as it is not ‘permeated with unconscionability.’”). Bickel did not invalidate the
27
entire contract, but only severed the fees provision. Further, Bickel is inapplicable here because the
28
guaranties do not contain any provisions that are contrary to relief contained in the elder abuse
20
1
statute. Defendant has not raised a triable issue of fact as to whether the guaranties had a lawful
2
purpose.
3
iv.
4
5
Sufficient consideration
Fourth, Plaintiff argues that consideration exists because the loans were fully funded.
Defendant does not dispute there was sufficient consideration for the guaranties.
6
v.
Conclusion
Thus, there is no triable issue of fact that there was a valid contract.
8
B.
9
There is no dispute that Sutter failed to make timely loan payments, thereby triggering
10
United States District Court
For the Northern District of California
7
Defendant’s obligation to pay. Brixey Decl. ¶¶ 6-7, 13-14, 20-21, 27-28. Pursuant to the guaranties,
11
Defendant was obligated to pay Plaintiff under the loans. Shin Decl. ¶¶ 5, 10, 15, 20; Brixey Decl.
12
¶¶ 4, 11, 18, 25. It is undisputed that Defendant had not performed under guaranties.
Default of borrower and Defendant’s failure to perform
13
C.
14
Defendant argues that Plaintiff cannot establish damages for the Normandie and Moorland
15
Damages
loans, so Plaintiff cannot prevail on its breach of guaranty claims for those loans.
16
As to the Normandie loan, it is undisputed that Plaintiff received $216,000 from a junior
17
lienholder for a release of Plaintiff’s deed of trust on the property. The testimony and exhibits show
18
that the total payoff amount due for the Normandie property was $224,872.57. deVries Decl. Ex. 8
19
at 90 (Brixey Depo); Ex. 12. Therefore, as Brixey stated in his declaration, there was a balance due
20
of $8,872.57 on the Normandie loan after the $216,000 payment by another lienholder. Brixey Decl.
21
¶ 27. As to the Moorland loan, Defendant argues that Plaintiff received the entire payoff demand,
22
although Plaintiff’s evidence shows that there was an outstanding balance of $650.48. Brixey Decl.
23
¶ 21.
24
Defendant’s expert Sarsfield opined that the amounts paid on the Normandie and Moorland
25
loans covered Plaintiff’s principal balance and the out-of-pocket expenses, so there is no balance left
26
on the loan and no damages. Sarsfield Decl. Ex. 1 at 1-6.
27
the Sarsfield opiniond as to the amounts paid and remaining on the loans at issue are stricken as
28
conclusory and not of assistance to the Court in determining the remaining balances on the loan
21
However, as discussed more fully above,
1
accounts because the opinion simply recites the contents of various documents in this case without
2
any support for or explanation of his calculations or how he reached his conclusions.
3
Defendant argues that it is contrary to public policy to allow Plaintiff to recover fees against
Defendant because attorney’s fees provisions protecting elder abuse victims are intentionally one-
5
sided. See, e.g., Bates v. Presbyterian Intercommunity Hospital, Inc., 204 Cal.App.4th 210, 217
6
(2012) (“The Elder Protection Act contains attorney fee provisions that permit an award of attorney
7
fees to successful plaintiffs. Specifically, Welfare and Institutions Code sections 15657 and 15657.5
8
provide that where it is proven by a preponderance of the evidence that the defendant is liable for
9
‘physical abuse,’ ‘neglect,’ or ‘financial abuse’ as defined elsewhere in the statute, ‘[t]he court shall
10
United States District Court
For the Northern District of California
4
award to the plaintiff reasonable attorney's fees and costs.’”). Plaintiff, however, is not seeking fees
11
under the elder abuse statute, as was the question in Bates, but instead seeks fees pursuant to the
12
guaranties. The Bates court held that the attorney fee shifting statute in the elder abuse act did not
13
apply to settlement offers made under California Code of Civil Procedure section 998, and awarded
14
the defendant its costs against the plaintiff. Further, in Thompson v. Miller, 112 Cal.App.4th 327,
15
338 (2003), the court held that a contract allowed the defendants there to recover fees incurred in
16
defeating the plaintiff’s claims, including their claims under the elder abuse act.
17
Defendant also argues that because the damages for these two loans alone do not meet the
18
jurisdictional minimum for the amount in controversy for purposes of diversity jurisdiction, the
19
Court lacks subject matter jurisdiction. However, Plaintiff also seeks to recover on other loans with
20
balances due well in excess of $75,000. It is well-settled that in an action by a single plaintiff
21
against a single defendant, all claims are aggregated to assess whether the jurisdictional threshold is
22
satisfied. See Bank of Cal. Nat’l Ass’n v. Twin Harbors Lumber Co., 465 F.2d 489, 491 (9th Cir.
23
1972).
24
D.
Conclusion
25
Therefore, there are no triable issues of fact as to Plaintiff’s claims for breach of the
26
guaranties. Plaintiff’s Motion for Summary Judgment is granted.
27
2.
28
There is no triable issue of fact that Defendant’s claims under the Elder Abuse Act,
California Welfare and Institutions Code section 15610.30 are barred by the statute of
limitations.
22
1
2
3
The parties agree that the California Welfare and Institutions Code section 15610.30 as it
existed prior to amendment in 2009 applies to this case:
(a) ‘Financial abuse’ of an elder or dependent adult occurs when a person or entity
does any of the following:
4
5
(1) Takes, secretes, appropriates, or retains real or personal property of an elder or
dependent adult to a wrongful use or with intent to defraud, or both.
6
(2) Assists in taking, secreting, appropriating, or retaining real or personal property of
an elder or dependent adult to a wrongful use or with intent to defraud, or both.
7
8
(b) A person or entity shall be deemed to have taken, secreted, appropriated, or
retained property for a wrongful use if, among other things, the person or entity takes,
secretes, appropriates or retains possession of property in bad faith.
9
United States District Court
For the Northern District of California
10
11
12
13
14
15
(1) A person or entity shall be deemed to have acted in bad faith if the person or
entity knew or should have known that the elder or dependent adult had the right to
have the property transferred or made readily available to the elder or dependent adult
or to his or her representative.
(2) For purposes of this section, a person or entity should have known of a right
specified in paragraph (1) if, on the basis of the information received by the person or
entity or the person or entity's authorized third party, or both, it is obvious to a
reasonable person that the elder or dependent adult has a right specified in paragraph
(1).
(c) For purposes of this section, ‘representative’ means a person or entity that is
either of the following:
16
17
(1) A conservator, trustee, or other representative of the estate of an elder or
dependent adult.
18
(2) An attorney-in-fact of an elder or dependent adult who acts within the authority of
the power of attorney.”
19
20
deVries Decl. Ex. 22. The parties also agree that the statute of limitations is four years. Cal. Wel. &
21
Inst. Code § 15657.7 (“An action for damages pursuant to Sections 15657.5 and 15657.6 for
22
financial abuse of an elder or dependent adult, as defined in Section 15610.30, shall be commenced
23
within four years after the plaintiff discovers or, through the exercise of reasonable diligence, should
24
have discovered, the facts constituting the financial abuse.”).
25
Defendant executed the last of the four guaranties at issue in this case on February 9, 2007,
26
so the statute ran on February 8, 2011. Defendant did not file her counterclaims until May 2013.
27
Therefore, her claims are time-barred unless tolled.
28
Defendant argues that her confidential relationship with David Poulson tolled the statute of
23
1
limitations until mid-2011 because Plaintiff was aware of Defendant’s confidential relationship with
2
her son, and Plaintiff’s misconduct arose out of that knowledge. Defendant points to deposition
3
testimony of bank employees who had conversations with Defendant in which she told the
4
employees to contact David about any defaults in the loans to Sutter. See, e.g., deVries Decl. Ex. 7
5
at 64-65; Ex. 8 at 18-19; see Herbert v. Lankershim, 9 Cal.2d 409, 483 (1937) (citing jury
6
instruction: “‘The law defines a confidential relation as any relation existing between parties to a
7
transaction wherein one of the parties is in duty bound to act with the utmost good faith for the
8
benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one
9
person in the integrity of another, and in such a relation the party in whom the confidence is reposed,
United States District Court
For the Northern District of California
10
if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts
11
relating to the interest of the other party without the latter's knowledge or consent. A fiduciary
12
relation in law is ordinarily synonymous with a confidential relation. It is also founded upon the
13
trust or confidence reposed by one person in the integrity and fidelity of another, and likewise
14
precludes the idea of profit or advantage resulting from the dealings of the parties and the person in
15
whom the confidence is reposed.’”). Herbert, however, does not address tolling. Further, none of
16
the other cases that Defendant relies on for her argument that a confidential relationship tolls the
17
statute of limitations address the tolling of the statute of limitations. See, e.g., Richelle L. v. Roman
18
Catholic Archbishop, 106 Cal.App.4th 257, 271, n.4 (2003) (no discussion of tolling); Kent v. First
19
Trust & Savings Bank of Pasadena, 101 Cal.App.2d 361, 370 (1950) (no discussion of tolling);
20
Adams v. Talbott, 61 Cal.App.2d 315, 320 (1943) (no discussion of tolling).
21
Defendant’s focus on the confidential relationship between Defendant and David Poulson is
22
misplaced. Defendant has not cited any case tolling a claim against a defendant based on the
23
defendant’s confidential relationship with a third party. At the hearing, Defendant cited Hobart v.
24
Hobart Estate, 26 Cal.2d 412, 442 (1945) for the argument that tolling of the statute of limitations is
25
permitted during the period of a fiduciary relationship. See Hobart, 26 Cal.2d at 442 (“Although the
26
general rules relating to pleading and proof of facts excusing a late discovery of fraud remain
27
applicable, it is recognized that in cases involving such a relationship facts which would ordinarily
28
require investigation may not excite suspicion, and that the same degree of diligence is not required.
24
1
In Rutherford v. Rideout Bank, 11 Cal.2d 479, 486 [80 P.2d 978, 117 A.L.R. 383], it was said that
2
because of such a relationship plaintiff could not be charged with lack of diligence even though an
3
inquiry would have disclosed the true value of the property involved.”). Defendant, however, fails
4
to sufficiently connect any fiduciary relationship that she may have had with her son to Plaintiff.
5
Defendant argues that it was only after she was sued by Plaintiff in state court in September
6
2011 to pursue the Elmira guaranty that she discovered that she had executed any personal guaranty.
7
Poulson Decl. ¶ 7; Jolley v. Eli Lilly & Co., 44 Cal.3d 1103, 1109 (1988) (“The discovery rule
8
provides that the accrual date of a cause of action is delayed until the plaintiff is aware of her injury
9
and its negligent cause.”). Defendant makes a curious argument that she “did not and could not have
United States District Court
For the Northern District of California
10
known that she would be exposed to any damages or would incur elder abuse damages as against
11
[Plaintiff] SNB until the plaintiff used her to enforce these guaranties.” Opp. at 15. Therefore,
12
according to Defendant, she had no damages until she was in default in 2010 and beyond. Id. But
13
Plaintiff’s exposure to enforcement of the guaranties was readily apparent from their text.
14
Defendant has not raised a triable issue of fact as to the elements of equitable tolling, and has
15
not rebutted the presumption that she knew or could have known the facts giving rise to her claim
16
before the limitations period expired. “‘In order to rely on the discovery rule for delayed accrual of
17
a cause of action, [a] plaintiff whose complaint shows on its face that his claim would be barred
18
without the benefit of the discovery rule must specifically plead facts to show (1) the time and
19
manner of discovery and (2) the inability to have made earlier discovery despite reasonable
20
diligence.’” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 808 (2005). The doctrine “focuses
21
primarily on the plaintiff's excusable ignorance of the limitations period. [It] is not available to
22
avoid the consequences of one's own negligence.” Lehman v. U.S., 154 F.3d 1010, 1016 (9th Cir.
23
1988).
24
Even though Defendant states in her declaration in support of her motion for summary
25
judgment and the reply that she did not know that she signed personal guaranties until she was sued
26
in 2011 (Poulson Decl. ¶ 7; Supp. Poulson Decl. ¶ 7), she acknowledged in her deposition that the
27
signatures on the guaranties were hers and that she was competent at the time she signed. Defendant
28
argues that Engler, the notary public, was too busy to completely fill out her notary forms, but it is
25
1
undisputed that the notary public told Defendant the name of each document as the notary public
2
gave them to Defendant to sign. There is no evidence that Plaintiff concealed material facts from
3
Defendant. See Salondaka v. Countrywide Home Loans, Inc., 2010 WL 539261, at *3 (E.D. Cal.
4
2010) (dismissing a claim that loan terms were misrepresented: “Everything that he claims was
5
fraudulently misrepresented or concealed was right there in his loan application and loan documents.
6
A person who knows the true facts cannot be said to have reasonably relied on a misstatement of
7
those facts.”). Each document was clearly labeled as a Commercial Guaranty, so Defendant was on
8
notice as to what she was signing.
Moreover, there is no triable issue of fact that her admitted failure to read the documents was
10
United States District Court
For the Northern District of California
9
not reasonably diligent. Her failure to read the guaranties was negligent, not reasonable. See Rey v.
11
OneWest Bank, 2013 WL 127839, at *5 (E.D. Cal. Jan. 9, 2013) (“The Loan terms, which Plaintiff
12
claims had not been disclosed to him by the lender, appear clearly on the face of the pages of the
13
Loan documents that Plaintiff signed or initialed. A reasonably diligent person would have read the
14
loan's material terms upon signing, or, at a minimum, after receiving the loan documents. Thus, it
15
was not reasonable for Plaintiff to wait until the Notice of Trustee's Sale before first examining the
16
loan papers and material loan terms.”) (internal citations omitted). Accordingly, Defendant’s elder
17
abuse counterclaims are time-barred.
18
3.
19
There is no triable issue of fact as to the absence of wrongful or bad faith conduct by
Plaintiff under the elder abuse act, California Welfare and Institutions Code section
15610.30.
20
Defendant argues that Plaintiff violated California Welfare and Institutions Code section
21
15610.30 in two ways: (1) by directly taking Defendant’s property by virtue of accepting the
22
guaranties (Cal. Welf. & Inst. Code § 15610.30(a)(1)); and (2) by assisting David Poulson in taking
23
Defendant’s property by doing so (Cal. Welf. & Inst. Code § 15610.30(a)(2)). Section 15610.30
24
stated in relevant part:
25
(a) ‘Financial abuse’ of an elder or dependent adult occurs when a person or entity
does any of the following:
26
27
(1) Takes, secretes, appropriates, or retains real or personal property of an elder or
dependent adult to a wrongful use or with intent to defraud, or both.
28
(2) Assists in taking, secreting, appropriating, or retaining real or personal property of
an elder or dependent adult to a wrongful use or with intent to defraud, or both.
26
1
2
Cal. Welf. & Inst. Code § 15610.30 (2008). Both of Defendant’s financial abuse theories are based
3
on Plaintiff’s alleged wrongful, or bad faith, use. Defendant argues that Plaintiff breached its duty to
4
contact or meet with Defendant to ensure that she understood the guaranties or that the guaranties
5
were fraudulently concealed by her son.
6
As Defendant acknowledges, “no court has interpreted the Legislature’s definition of badfaith financial abuse to impose a duty of inquiry.” Def.’s Opp. at 2. Nevertheless, Defendant argues
8
that because David Poulson was Defendant’s established contact for Plaintiff, and because Carinalli
9
was on the loan committee, and because bank employee Rosell knew that Defendant was an elder,
10
United States District Court
For the Northern District of California
7
Plaintiff had a duty to contact Defendant to make sure that she knew what she was signing. This
11
argument rests on the opinions of Defendant’s two experts, Roger Bernhardt and William Sarsfield,
12
who opine that customs and practices in the banking industry require banks to inquire as to whether
13
elders understand the documents they are signing. As described above, however, the Bernhardt and
14
Sarsfield declarations are stricken to the extent that they opine on issues relating to financial elder
15
abuse and on issues of law. Further, the law is to the contrary.
16
The undisputed facts show that the guaranties were standard commercial transactions, and
17
that Defendant was competent when she signed the guaranties. See Das v. Bank of America, 186
18
Cal.App.4th 727, 744 (2010) (dismissing the plaintiff’s elder abuse claim because she failed to
19
establish that the bank “in issuing a loan to [plaintiff] and transferring his funds at his request,
20
obtained his property for an improper use, or acted in bad faith or with a fraudulent intent.”);
21
Stebley, 202 Cal.App.4th at 527-28 (2011) (dismissing a § 15610.30 claim against a lender
22
enforcing its rights under a defaulted loan because: “Foreclosing on a home is not actionable [under
23
the elder abuse act] merely because it requires the former owner to move out. . . . As we held in an
24
analogous case, ‘It is simply not tortious for a commercial lender to lend money, take collateral, or
25
to foreclose on collateral when a debt is not paid.... [A] commercial lender is privileged to pursue its
26
own economic interests and may properly assert its contractual rights.’”). The elder abuse act does
27
not impose a duty to investigate even if an entity is a mandated reporter, much less when it is not.
28
See Cal. Wel. & Inst. Code § 15630.1(e) (“An allegation by the elder or dependent adult, or any
27
1
other person, that financial abuse has occurred is not sufficient to trigger the reporting requirement
2
under this section if both of the following conditions are met: (1) The mandated reporter of
3
suspected financial abuse of an elder or dependent adult is aware of no other corroborating or
4
independent evidence of the alleged financial abuse of an elder or dependent adult. The mandated
5
reporter of suspected financial abuse of an elder or dependent adult is not required to investigate any
6
accusations. (2) In the exercise of his or her professional judgment, the mandated reporter of
7
suspected financial abuse of an elder or dependent adult reasonably believes that financial abuse of
8
an elder or dependent adult did not occur.”).
Whether a party knowingly entered into a contract is determined by objective manifestations
10
United States District Court
For the Northern District of California
9
of intent. See Stewart v. Preston Pipeline Inc., 134 Cal.App.4th 1565, 1587 (2005) (“Mutual assent
11
to contract is based upon objective and outward manifestations of the parties; a party's ‘subjective
12
intent, or subjective consent, therefore is irrelevant.’) (internal citation omitted). Defendant attempts
13
to distinguish Stewart because the parties there were represented by counsel and an insurance
14
company before signing the settlement agreement at issue in that case. Stewart, however, did not
15
base its holding on whether the parties were represented. Here, Defendant signed the guaranties
16
when she was competent, which objectively showed her intent. See Marin Storage, 89 Cal.App.4th
17
at 1049 (“Every contract requires mutual assent or consent (Civ. Code, §§ 1550, 1565), and
18
ordinarily one who signs an instrument which on its face is a contract is deemed to assent to all its
19
terms. A party cannot avoid the terms of a contract on the ground that he or she failed to read it
20
before signing.”).
21
Giordano v. Wachovia Mortg., 2011 WL 1130523, at *3 (N.D. Cal. Mar. 25, 2011) rejected
22
an elder abuse act claim predicated upon a bank’s purported “duty to provide an oral explanation of
23
the loan terms.” The plaintiff there entered into a loan agreement for a thirty-year adjustable rate
24
mortgage with an initial interest rate of 6.710%. Id. at *2. After the plaintiff defaulted, and the
25
lender attempted to foreclose, the plaintiff sued the lender alleging a claim under section 15610.30
26
that the plaintiff did not understand that the interest rate was subject to change and that the lender
27
made misrepresentations about key facts in order to induce the plaintiff to enter into the loan. Id.
28
The court held that even if the allegations were true, there was no duty by the lender to explain the
28
1
2
3
4
5
6
7
8
9
terms expressly stated in the loan:
The Giordanos do not deny—nor can they—that they signed loan documents
disclosing that “[t]he interest rate I will pay may change on the 15th day of February,
2006 and on the same day every month thereafter”; and that “[f]rom time to time, my
monthly payments may be insufficient to pay the total amount of monthly interest
that is due. If this occurs, the amount of interest that is not paid each month, called
‘Deferred Interest,’ will be added to my Principal and will accrue interest at the same
rate as the Principal.” Note, ¶¶ 2(B), 3(E) (bold type in original). They seem to be
asserting that WSB was their agent and as such had a duty to explain the loan terms
to them orally. However, “[t]he relationship between a lending institution and its
borrower-client is not fiduciary in nature.” Nymark v. Heart Fed. S & L Assn., 231
Cal.App.3d 1089, 1093 n. 1, 283 Cal.Rptr. 53 (1991). “A commercial lender is
entitled to pursue its own economic interests in a loan transaction.” Id. “This right is
inconsistent with the obligations of a fiduciary which require that the fiduciary
knowingly agree to subordinate its interests to act on behalf of and for the benefit of
another.” Id. Accordingly, the Giordanos have not alleged a basis for asserting that
WSB had a duty to provide an oral explanation of the loan terms.
United States District Court
For the Northern District of California
10
11
Id. at *3; see also Nymark v. Heart Fed. S & L Ass’n, 231 Cal.App.3d 1089, 1093, n.1 (1991) (“A
12
commercial lender is entitled to pursue its own economic interests in a loan transaction.”).
13
Defendant argues that Giordano is distinguishable because it applied the current elder abuse
14
act as amended in 2008 to eliminate the requirement of bad faith, not its predecessor applicable here.
15
Defendant also attempts to distinguish Giordano on the ground that the court there considered
16
whether the financial institution’s fraud constituted elder abuse, but Defendant is not seeking relief
17
under the fraud provision of the elder abuse act. Defendant also notes that in Giordano, the plaintiff
18
took issue with one provision of the contract, while here, Defendant takes issue with the entire
19
document. These distinctions, however, are not material. Moreover, the 2008 amendments to
20
section 15610.30 made it easier for a plaintiff to state a claim under the elder abuse act.
21
22
23
24
25
Defendant also argues that the elder abuse statute itself imposes a duty to inquire by virtue of
the use of the language “should have known” in § 15610.30(b):
A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or
retained property for a wrongful use if, among other things, the person or entity takes,
secretes, appropriates, obtains, or retains the property and the person or entity knew
or should have known that this conduct is likely to be harmful to the elder or
dependent adult.
26
(Emphasis added). However, the statute does not impose a duty to investigate whether the conduct
27
would be harmful in the absence of such reason to know. Defendant has not raised a triable issue of
28
fact that Plaintiff should have known of likely harm to Defendant.
29
1
Defendant notes that the USA Patriot Act and the Bank Secrecy Act contain a Know-Your-
2
Customer program to ensure immediate detection and identification of suspicious activities at
3
financial institutions. Defendant argues that Plaintiff did not have a Know-Your-Customer policy
4
and even if it did, it did not follow it in this case. Def.’s Ex. 53 at 48-50. However, the USA Patriot
5
Act and other federal acts cited by Defendant do not provide a private right of action. See In re
6
Agape, 681 F. Supp. 2d 352, 360-61 (E.D. N.Y. 2010) (“. . . because the Bank Secrecy Act does not
7
create a private right of action, the Court can perceive no sound reason to recognize a duty of care
8
that is predicated upon the statute's monitoring requirements.”); Sanders v. Michigan First Credit
9
Union Tellers, 2010 WL 3168636, at *2 (E.D. Mich. Aug. 10, 2010) (“But even if the Patriot Act
United States District Court
For the Northern District of California
10
and implementing regulations did require banks to review photo identification before allowing
11
withdrawals, Sanders's claim would still fail because, as various courts have routinely held, the
12
Patriot Act does not provide for a private right of action for its enforcement.”). Moreover, the
13
Know-Your-Customer program does not apply to individuals, such as Defendant, who became bank
14
customers before June 8, 2003. 31 C.F.R. § 1020.100(c)(2)(iii) (stating that a customer as defined in
15
the act does not include: “ A person that has an existing account with the bank, provided that the
16
bank has a reasonable belief that it knows the true identity of the person.”). Further, the Know-
17
Your-Customer program applies to individuals who open new accounts, not existing customers like
18
Defendant. 31 C.F.R. § 1020.100 (defining customers as: “(i) A person that opens a new account;
19
and (ii) An individual who opens a new account for: (A) An individual who lacks legal capacity,
20
such as a minor; or (B) An entity that is not a legal person, such as a civic club.”). There is no
21
dispute that Plaintiff knew the identity of the person signing the guaranties.
22
Moreover, these federal statutes do not impose any duty on banks to explain the terms of the
23
guaranties to Defendant. Finally, the purpose of the Know-Your-Customer program, as
24
acknowledged by Defendant at the hearing, is not to protect bank customers, but to the contrary, to
25
protect the banks and the government from money-laundering and other criminal activity by their
26
customers. See, e.g., In re Angulo, 2010 WL 3187638, at *2 (D. Or. Aug. 11, 2010) (“The purpose
27
of the USA Patriot Act and its attendant regulations is to protect the nation from money laundering
28
and terrorist activities.”).
30
1
2
Defendant attempts to rely on the test in Stevenson v. Superior Court, 16 Cal.4th 880, 888-90
(1997) for a tortious employment discharge claim in violation of public policy:
3
First, the policy must be supported by either constitutional or statutory provisions.
Second, the policy must be “public” in the sense that it “inures to the benefit of the
public” rather than serving merely the interests of the individual. Third, the policy
must have been articulated at the time of the discharge. Fourth, the policy must be
“fundamental” and “substantial.”
4
5
6
Id. at 889-90. Stevenson did not involve the elder abuse act or any similar facts, and was limited to
7
determining whether a policy can support a tortious employment discharge claim, not an elder abuse
8
statutory claim. Moreover, in Stevenson, the court noted that the broad policy against age
9
discrimination in employment was embodied in the Fair Employment and Housing Act (“FEHA”),
United States District Court
For the Northern District of California
10
as well as numerous other statutes. See id. at 896-97 (“. . . over 30 California code sections that
11
prohibit age discrimination or implement a policy against age discrimination in specific areas such
12
as education, health care, land use regulation, and state employment. (See, e.g., Civ. Code, § 51.2
13
[housing]; Gov. Code, § 11135 [state funded programs]; id., § 65008 [land use regulation]; Health &
14
Saf. Code §§ 1317, 1317.3, 1365.5 [health *897 care]; Ed. Code, §§ 260, 262, 262.1, 262.2, 66030,
15
69535 [education]; Gov. Code, §§ 18932, 19700, 19706, 19793 [civil service]; Lab. Code, § 1777.6
16
[public works contracts]; Unemp. Ins. Code, § 16000 et seq. [employment training for older
17
workers].) These laws provide further evidence that the Legislature regards the policy against age
18
discrimination as important and that this policy is now firmly rooted in California law.”). Here,
19
Defendant’s argument that a competent senior citizen should have been treated differently than
20
younger customers engaging in loan transactions arguably runs counter to public policy that
21
competent older adults are just as capable of managing their financial affairs as younger persons,
22
absent notice of the contrary.
23
Defendant also argues that state law imposes a duty of inquiry on Plaintiff in this case based
24
on Jolley v. Chase Home Finance, 213 Cal.App.4th 872 (2013). In Jolley, the court addressed
25
whether a bank had a duty to a borrower under a construction loan. On the issue of duty, the court
26
stated:
27
28
Even when the lender is acting as a conventional lender, the no-duty rule is only a
general rule. (Osei v. Countrywide Home Loans (E.D.Cal.2010) 692 F.Supp.2d 1240,
1249.) As a recent federal case put it: “ Nymark does not support the sweeping
31
1
2
3
4
5
6
7
8
9
United States District Court
For the Northern District of California
10
11
12
13
conclusion that a lender never owes a duty of care to a borrower. Rather, the Nymark
court explained that the question of whether a lender owes such a duty requires ‘the
balancing of the “ Biakanja factors.” ’ ” ( Newson v. Countrywide Home Loans, Inc.
(N.D.Cal. Nov. 30, 2010 No. C 09–5288) 2010 WL 4939795, at p. *5, 2010 U.S.
Dist. Lexis 126383, at p. *15.) Or, in the words of an even more recent case, in each
case where the general rule was applied to shield a lender from liability, “the plaintiff
sought to impose upon the lender liability for activities outside the scope of the
lender's conventional role in a loan transaction. It is against this attempt to expand
lender liability (to that of, e.g., an investment advisor or construction manager) that
the court in Nymark found a financial institution owes no duty of care to a borrower
when its involvement in the loan transaction ‘does not exceed the scope of its
conventional role as a mere lender of money.’ Nymark, 231 Cal.App.3d at 1096, 283
Cal.Rptr. 53. Nymark and the cases cited therein do not purport to state a legal
principle that a lender can never be held liable for negligence in its handling of a loan
transaction within its conventional role as a lender of money.” ( Ottolini v. Bank of
America (N.D.Cal. Aug. 19, 2011 No. C–11–0477) 2011 WL 3652501, at p. *6, 2011
U.S. Dist. Lexis 92900, at p. *16.) We agree with these observations.
Chase relies upon the historical truism that a bank as lender is entitled to pursue its
own economic interest in dealing with a borrower, citing Kruse v. Bank of America
(1988) 202 Cal.App.3d 38, 67, 248 Cal.Rptr. 217. We live, however, in a world
dramatically rocked in the past few years by lending practices perhaps too much
colored by short-sighted self-interest. We have experienced not only an alarming
surge in the number of bank failures, but the collapse of the housing market, an
avalanche of foreclosures, and related costs borne by all of society. There is, to be
sure, blame enough to go around. And banks are hardly to be excluded.
14
15
16
Jolley, 213 Cal.App.4th at 901-02.
Jolley is inapposite. The issue in that case was whether a construction lender was negligent
17
in performing its contractual duties to the borrower. There, the plaintiff obtained a construction loan
18
and the lender was obligated to disburse the funds as construction progressed, but the lender
19
breached its obligation to disburse funds when the lender lost the loan documents, resulting in an
20
eight month delay of construction. Jolley, 213 Cal.App.4th at 878. Under those facts, the court held
21
that there was a triable issue of fact as to whether the lender was negligent. The court emphasized
22
that the issue of negligence arose in the context of a construction loan:
23
24
25
26
We note that we deal with a construction loan, not a residential home loan where,
save for possible loan servicing issues, the relationship ends when the loan is funded.
By contrast, in a construction loan the relationship between lender and borrower is
ongoing, in the sense that the parties are working together over a period of time, with
disbursements made throughout the construction period, depending upon the state of
progress towards completion. We see no reason why a negligent failure to fund a
construction loan, or negligent delays in doing so, would not be subject to the same
standard of care.
27
28
Jolley, 213 Cal.App.4th at 901.
32
1
Here, by contrast, Defendant has not alleged negligence by Plaintiff in connection with
2
construction loans involving ongoing distributions of the proceeds over time, but is instead
3
attempting to impose a novel duty on Plaintiff. See Makreas v. First National Bank of No. Cal.,
4
2013 WL 2436589, at *14 (N.D. Cal. June 4, 2013) (“Makreas argues in response to Defendants'
5
motion that ‘a construction lender owes duties to defaulting borrowers over and beyond what a
6
traditional lender does, particularly when things have gone awry.’ Opp'n at 22. Makreas cites Jolley
7
v. Chase Home Fin., LLC, 213 Cal.App.4th 872, 153 Cal.Rptr.3d 546 (Cal.Ct.App.2013) in support
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of this argument. Jolley, however, is inapposite, as it holds that a lender owes a borrower a duty of
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care in connection with disputes arising out of the performance of a construction loan agreement. Id.
United States District Court
For the Northern District of California
10
11
at 901, 153 Cal.Rptr.3d 546. Fiduciary duties are not at issue in Jolley.”).
In her reply, Defendant also argues that Plaintiff had a duty to inquire based on “suspicious
12
circumstances,” citing Sun’n Sand, Inc. v. United California Bank, 21 Cal.3d 671 (1978). There, the
13
court noted that banks cannot ignore danger signals such as checks with large amounts drawn
14
payable to the order of a bank presented by a third party to negotiate for the personal benefit of a
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bank employee, noting: “The duty is narrowly circumscribed: it is activated only when checks, not
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insignificant in amount, are drawn payable to the order of a bank and are presented to the payee
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bank by a third party seeking to negotiate the checks for his own benefit. Moreover, the bank's
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obligation is minimal. We hold simply that the bank may not ignore the danger signals inherent in
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such an attempted negotiation. There must be objective indicia from which the bank could
20
reasonably conclude that the party presenting the check is authorized to transact in the manner
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proposed. In the absence of such indicia the bank pays at its peril.” Sun’n Sand, 21 Cal.3d at 695-96
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(emphasis added); see also Joffe v. United California Bank, 141 Cal.App.3d 541, 556 (1983) (“We
23
agree with the Joffes that the circumstances alleged in their complaint are sufficiently suspicious to
24
come within a rule similar to that imposed in Sun 'N Sand. B of A accepted Continental's
25
indorsement on a $25,000 check payable to an ‘escrow trust’ at Wells Fargo Bank. While
26
Continental's name appeared on the payee line, Continental was not the designated payee and was
27
not identified as the authorized representative of the payee.”). Here, however, Plaintiff has not come
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forward with evidence of such objective warning signs with respect to the four loans at issue.
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1
Although Defendant states in her declaration that David Poulson wrote her name on checks with
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respect to different transactions (Poulson Supp. Decl. ¶ 4; Ex. 3), there is no evidence that any of
3
Defendant’s signatures relating to the loans at issue in this case were forged or that Plaintiff had any
4
other reason to believe that there were suspicious circumstances surrounding the execution of the
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guaranties at issue.
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Thus, even if Defendant’s elder abuse claims were timely, there is no triable issue of material
7
fact as to bad faith. Therefore, the Court need not reach the other aspects of the elder abuse claim.
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Plaintiff is entitled to summary judgment as to Defendant's counterclaims based on elder abuse.
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Conclusion
United States District Court
For the Northern District of California
10
Plaintiff’s motion for summary judgment is granted because there is no triable issue of fact
11
that Defendant breached the guaranties. Plaintiff’s motion for summary judgment on the
12
counterclaims is granted and Defendant’s motion for summary judgment on the counterclaims is
13
denied because there is no triable issue of fact as to her elder abuse claims.
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IT IS SO ORDERED.
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Dated: July 29, 2013
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ELIZABETH D. LAPORTE
United States Chief Magistrate Judge
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