Hearing: CATHAY BANK, A CALIFORNIA BANKING CORPORATION VS. RAYMOND XIANG ZHANG et al

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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO

Document Scanning Lead Sheet
Aug-14-2012 11:58 am

Case Number: CGC-10-500934
Filing Date: Aug-14-2012 11:52
Filed by: MARYANN E. MORAN
Juke Box: 001 Image: 03723850
MOTION FOR SUMMARY JUDGMENT

CATHAY BANK, A CALIFORNIA BANKING CORPORATION VS. RAYMOND
XIANG ZHANG et al

001003723850

Instructions:
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Michael Gerard Fletcher (State Bar No. 070849)
mfletcher@frandzel.com

Kenneth N. Russak (State Bar No. 107283)
krussak@franzel.com

Hanna B. Raanan (State Bar No. 261014)
hraanan@frandzel.com

FRANDZEL ROBINS BLOOM & CSATO, L.C.

6500 Wilshire Boulevard

Seventeenth Floor

Los Angeles, California 90048-4920

Telephone: (323) 852-1000

Facsimile: (323) 651-2577

Attorneys for Plaintiff and Cross-Defendant
CATHAY BANK

@ ORIGINAL

Yr oh. X& of | K.P

‘aunty of San Francisco,

AUG 14 2012

CLERK OF THE COURT
Man Om

By
Deputy Clerk

SUPERIOR COURT OF CALIFORNIA

COUNTY OF SAN FRANCISCO

CATHAY BANK, a California banking
corporation,

Plaintiff,
v.

RAYMOND XIANG KAI ZHANG, aka
RAYMOND KAI ZHANG, aka RAYMOND
ZHANG, aka XIANG KAI ZHANG, aka
XIANG ZHANG, aka ZHANG XIANG, an
individual; CINDY ZHANG, an individual;
DONG YING QUI, an individual; XIANG
KAI, LLC; a California limited liability
company; RAY KAI, LLC , a California
limited liability company; ZHANGS, LLC, a
California limited liability company; and
DOES 1 through 200, inclusive,

Defendants.

AND RELATED CROSS-ACTIONS

1053334.2 | 023000-0790

CASE NO. CGC-10-500934

NOTICE OF MOTION AND MOTION .
FOR SUMMARY JUDGMENT AS TO

t-XIANG KAI LLC'S CROSS-COMPLAINT,~

OR IN THE ALTERNATIVE, SUMMARY
ADJUDICATION; MEMORANDUM OF
POINTS AND AUTHORITIES IN
SUPPORT THEREOF

[Filed concurrently with Separate Statement of
Undisputed Material Facts and Declarations of
Gregory Badura and Hanna B. Raanan in
support of Motion for Summary Judgment; and,
Request for Judicial Notice in Support Thereof]

Date: October 29, 2012
Time: 9:30 a.m.
Dept.: 302

400 McAllister Street

San Francisco, CA 94102

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CSATO, L.C.
6500 WILSHIRE BOULEVARD, | 7TH FLOOR
LOS ANGELES, CALIFORNIA 90048-4920
(323) 852-1000

TO ALL PARTIES AND TO THEIR RESPECTIVE ATTORNEYS OF RECORD:

PLEASE TAKE NOTICE that on October 29, 2012, at 9:30 a.m. or as soon thereafter as
counsel can be heard, in Department 302 of the above-entitled Court, located at 400 McAllister
Street, San Francisco, California 94102, Plaintiff and cross-defendant Cathay Bank ("Bank") will
move the Court for summary judgment in its favor on the Cross-Complaint filed by Xiang Kai,
LLC ("Cross-Complaint"), or in the alternative summary adjudication in favor of the Bank, of the
following causes of action:

ISSUE No. 1: The first cause of action for fraud in the inception is without merit as to the
Bank. (See Separate Statement of Undisputed Facts and Supporting Evidence ("SSUF")).

ISSUE No. 2: The second cause of action for fraud in the inducement is without merit as
to the Bank. (See SSUF.)

ISSUE No. 3: The third cause of action for breach of contract (loan agreement) is without
merit as to the Bank. (See SSUF.)

ISSUE No. 4: The fourth cause of action for breach of contract (deed of trust) is without
merit as to the Bank. (See SSUF.)

ISSUE No. 5: The fifth cause of action for wrongful foreclosure (fraud in the inception) is
without merit as to the Bank. (See SSUF.)

ISSUE No. 6: The sixth cause of action for wrongful foreclosure (fraudulent inducement)
is without merit as to the Bank. (See SSUF.)

ISSUE No. 7: The seventh cause of action for breach of the implied covenant of good faith
and fair dealing is without merit as to the Bank. (See SSUF.)

ISSUE No. 8: The eighth cause of action for intentional misrepresentation is without merit
as to the Bank. (See SSUF.)

ISSUE No. 9: The ninth cause of action for fraud-concealment is without merit as to the
Bank. (See SSUF.)

ISSUE No. 10: The tenth cause of action for negligent misrepresentation is without merit

as to the Bank. (See SSUF.)

1053334.2 | 023000-0790

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NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT9

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ISSUE No. 11: The eleventh cause of action for intentional interference with prospective
economic advantage is without merit as to the Bank. (See SSUF.)

ISSUE No. 12: The twelfth cause of action for negligent interference with prospective
economic advantage is without merit as to the Bank. (See SSUF.)

ISSUE No. 13: The thirteenth cause of action for violation of business and profession
17200 is without merit as to the Bank. (See SSUF.)

ISSUE No. 14: The fourteenth cause of action for equitable estoppel is without merit as to
the Bank. (See SSUF.)

ISSUE No. 15: The fifteenth cause of action for accounting is without merit as to the
Bank. (See SSUF.)

This Motion is made pursuant to Code of Civil Procedure, Section 437c on the ground that
there is no merit to the Cross-Complaint or any of the causes of action alleged therein, in that there
is no triable issue as to any material fact and the Bank is entitled to judgment in its favor as a
matter of law.

This Motion is based upon this notice, the Separate Statement of Undisputed Material
Facts filed concurrently herewith, the memorandum of points and authorities, the declaration of
Gregory Badura and all other pleadings and documents in the Court's file, and on such oral and

documentary evidence as may be presented at the time of the hearing on this Motion.

DATED: August 13, 2012 FRANDZEL ROBINS BLOOM & CSATO, L.C.
MICHAEL GERARD FLETCHER
KENNETH RUSSAK
HANNA B. RAANAN

» Jen fuer
[ANNA B. N.

Attorneys for Plaintiff and Cross-Defendant
Cathay Bank

1053334.2 | 023000-0790 2

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOoM & CsarTo, L.C.

6500 WILSHIRE BOULEVARD, | 7TH FLOOR

LOS ANGELES, CALIFORNIA 90048-4920,

(323) 852-1000

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RN NY NY NN N NY KY Se HY Be Be Be Se ese Be Se
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TABLE OF CONTENTS
Page
MEMORANDUM OF POINTS AND AUTHORITIES ..0......::sesscescesssecseesesssessesseesareesessseesnesseeesnees 1
I. INTRODUCTION AND SUMMARY OF ARGUMENT. .........0:scsssssssessecssesssessetssecssneesneene 1
Il. STATEMENT OF FACTS ........cssscssssessssssesssssessscssessnssscssessncsacssscesssssesecseesseessessnesseessvessnesss 3
A. Loan History ........cescsessesssessesssessessnessrssseseessesssssessessessnecseesecsasssesassssessusesessnecsnecsseessees 3
1. 2006 Loan for $1,277,500..
2. 2007 Loan for $1,500,000 0.00... cecsessessessesssssssssessesessecssesseeseessecsseeneesseeseee 4
TH. ARGUMENT ou. ececsecssessessesssessessesssessuessessesssessessassessseesaessecseesnsensssesssessnecseesneeeneesneessees 6
A. Standards For Summary Judgment .........cccccecsssesssssssessesssssesssssensecssssssserssssesssseseceees 6
B. The Motion Should be Granted Because the Cross-Complaint is Premised
on a Demonstrably False Set of Facts ......c.cssssessssssessesessessssessestessssessesseseesessesseese 7
1. The Bank's Evidence Shifts to Xiang Kai the Burden of Coming
Forward with Contrary Evidence ........c.cecsesssssesssessssesssssseesessesseesssesseessees 8
TV. — CONCLUSION 00... ceceescesssesssessessscssessessesenessessssssessesssecsecsesnsssecsnesnssssessessecsuesseanecanecssecssees 9
1053334.2 | 023000-0790 i

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CSATO, L.C.
6500 WILSHIRE BOULEVARD, | 7TH FLOOR
LOS ANGELES, CALIFORNIA 90048-4920

(323) 852-1000

N

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TABLE OF AUTHORITIES
Page(s)

STATE CASES
Aguilar v. Atlantic Richfield Co.,

25 Cal.4th 826 (2001).....scscsscscesssesssessesesssseseeesessessessuessesssssessessesenesseeseessessessecssresuesseessensnesseease 8
Brantley v. Pisaro,

42 Cal. App.4th 1591 (1996)....ccccccsscesssesscssssssssssessessesessestesssecsessessesneseesssussesseesesseasesseeneasensees 8
College Hosp., Inc. v. Sup.Ct. (Crowell)

8 Cal.4th 704 (1994).....cccccsssssssssssssesessesssssseessessessecssecsessesssscssesssssesseesucssessecssesssessesesesseeeseessness 9
Krasley v. Superior Court

101 Cal.App.3d 425 (1980)..cssssssesssssssvessevsessssssssssssssssssssssssssssssssssssssssssssssssssnssessseeeseeneeseeesenss 6

Saelzler v. Advanced Group 400,

25 Cal.4" 763 (2001)
Salma v. Capon

161 Cal-App.4th 1275 (2008).........sessesessessessssstssesstsstssuessessessssssssassssessessnesscsssesseerssenseenneesee 9
Snider v. Snider

200 Cal.App.2d 741 (1962)....ccscesssessescssssesssessessesstessessessessessesssessessnsssessessesssessussssaseeseeensenssess 9
Tuchscher Develp. Enterprises, Inc. v. San Diego Unified Port Dist.

106 Cal-App.4th 1219 (2003)... cescessssssessessessesssessesssessessessessussutssuesuessessuessssssesaeenseenseeseeeneetae 9
STATE STATUTES
Code of Civil Procedure § 437¢ ......cessessssesssssessssesseseesesssssesseessseeseseesssessssesssesssnessssesseesesessnsseesesnees 6
Code of Civil Procedure § 437¢(p)(2) .....s:ssssssssecssessssessssecsssecsseecsaesssessseessueessseessusessneceesseessneessaneetsae 9
1053334.2 | 023000-0790 ii

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTLOS ANGELES, CALIFORNIA 90048-4920
(323) 852-1000

FRANDZEL ROBINS BLoom & CsaTo, L.C.
6500 WILSHIRE BOULEVARD, | 77H FLOOR

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NR NY NY NY NY NNN HY Be ee we ewe ewe Be eB
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MEMORANDUM OF POINTS AND AUTHORITIES
Plaintiff and Cross-Defendant Cathay Bank (the "Bank") respectfully submits the
following memorandum of points and authorities in support of its Motion for Summary Judgment
and its alternative motion for partial summary adjudication (together, the "MSJ") on the Xiang

Kai, LLC Cross-Complaint (the "Cross-Complaint").

lL INTRODUCTION AND SUMMARY OF ARGUMENT

The Cross-Complaint in this action alleges fifteen causes of action against the Bank; but all
of them are based upon the same, very simple alleged fact pattern.' Xiang Kai LLC ("Xiang
Kai"), an entity owned by Raymond and Cindy Zhang (the "Zhangs"), alleges that in 2006 the
Bank made a $1,500,000 loan ("2006 Loan") to the Zhangs, due in ten years. Although the Cross-
Complaint makes no mention of collateral given at that time, the 2006 Loan was in fact secured by
a junior deed of trust on a building owned by the Zhangs located at 7276-7289 Mission Street,
Daly City California ("Daly City Property").? Xiang Kai further alleges that, in 2007, it and the
Zhangs signed papers ("2007 Documents") which (1) shortened the maturity of the 2006 Loan by
seven years, such that it would become all due and payable in 2009 and (2) granted the Bank a lien
on a building owned by Xiang Kai located at 5530 Mission Street, San Francisco ("San Francisco
Property") as security for the 2006 Loan.

They say that they were tricked into signing the 2007 documents; that they never agreed to
shorten the maturity of the 2006 Loan and that they never agreed to give the Bank a lien on the

San Francisco Property to secure the 2006 Loan. Xiang Kai alleges that it and the Zhangs were

' This action was commenced by the Bank to enforce its rights under several loans,
including a $7,238,000 construction loan ("Construction Loan") made by the Bank to Ray Kai,
LLC, an entity owned by Raymond and Cindy Zhang. Inasmuch as the facts pertaining to the
other loans are at best relevant only as context—if that—for the loans alleged in the subject Cross-
Complaint, they are not summarized here.

? As set forth more fully below, the 2006 Loan was actually a loan for $1,277,500. As
used herein, the term "2006 Loan" means the 2006 Loan as it was actually made; i.e., a loan in the
amount of $1,277,500, with a ten-year maturity, secured by a deed of trust on the Daly City
Property.

1053334.2 | 023000-0790 1

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CsaTo, L.C.

6500 WILSHIRE BOULEVARD, | 77H FLOOR

LOS ANGELES, CALIFORNIA 90048-4920

(323) 852-1000

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NY NNN NN NN NY He Be Be Be Be Be eB eB eB em
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told the 2007 documents were "standard and routine papers required by the government and [the
Bank" in connection with the 2006 Loan; but that the documents would have "no substantive
effect on their rights" in connection with the 2006 Loan. They say they were damaged by the
trickery because, as a result, they only had two—instead of nine—remaining years to repay the
Loan; and, to make matters worse, Xiang Kai's ownership of the San Francisco Property was
placed at risk of foreclosure, if the 2006 Loan were not repaid within that much shortened time
period.

From these basic alleged "facts," the Cross-Complaint crafts fifteen alleged causes of
action; none of which add any material additional facts but, instead, incorporate by reference the
general allegations of fact summarized above, recast as fifteen different theories of recovery,
including fraud in the inception, fraud in the execution, various breach of contract theories related
to the loan documents, including the San Francisco deed of trust, improper business practices,
wrongful foreclosure, misrepresentation, and interference with economic relations.

These would be troubling allegations if they were true, but they are not. The Cross-
Complaint alleges there was only one loan—made in 2006—that was fraudulently modified by
documents executed in 2007. Not so. In fact, there were two separate loans, memorialized by two
separate sets of loan documents, neither of which had anything to do with the other. The 2006
Loan— identified as "Loan Number 628500246"—was a ten-year loan of $1,277,500—not
$1,500,000—secured by a deed of trust on the Daly City Property and memorialized by a set of
loan documents that never were modified in any respect. Xiang Kai never pledged the San
Francisco Property as collateral for the 2006 Loan. The 2007 documents were executed in
connection with an entirely new, separate and additional loan of $1,500,000, identified in the
Bank's records as "Loan Number 128600368." That is to say, the Bank actually disbursed to the
Zhangs a total of $2,777,500 under two separate promissory notes: $1,277,500 was disbursed in
2006 under a $1,277,500 promissory note ("2006 Note") executed in 2006 and $1,500,000 was
disbursed in 2007 under a separate $1,500,000 promissory note ("2007 Note") executed in 2007.

1053334.2 | 023000-0790 2

NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CSATO, L.C.
6500 WILSHIRE BOULEVARD, | 77H FLOOR
LOS ANGELES, CALIFORNIA 90048-4920

(323) 852-1000

The maturity of the 2006 note never was changed. It always remained due and payable on
November 20, 2016.? The 2006 Note was secured by only the deed of trust on the Daly City
Property. It never was secured by the San Francisco Property. The 2007 Note was secured by
only the San Francisco Property. It never was secured by the Daly City Property.

Summary judgment is proper because the alleged fact on which the entire Cross-
Complaint is based—the supposed modification of the 2006 Loan Documents by documents
executed in 2007 (or by any other documents, for that matter)—never happened. The Cross-

Complaint is entirely without merit and the Bank is entitled to judgment as a matter of law.

Il. STATEMENT OF FACTS
A. Loan History

1. 2006 Loan for $1,277,500

On or about November 16, 2006, the Bank and/or the Zhangs executed a series of
documents dated that day in connection with a new loan ("2006 Loan") to be made by the Bank to
them in the amount of $1,277,500, including a "Business Loan Agreement" ("BLA"), a
"Promissory Note" bearing "loan number 628500246" (the "2006 Note" discussed above) and a
Deed of Trust ("Daly City Deed of Trust") encumbering the Daly City Property (together, the
"2006 Loan Documents").4 (SSUF Nos. 1-6) On November 20, 2006, the Bank disbursed the sum
of $1,270,489.50, to Old Republic Title Company ("Old Republic"), which served as escrow
agent in a refinancing transaction funded by the 2006 Loan. Old Republic paid that sum to
Oceanic Bank, the prior lender, to refinance the Daly City Property. (The $1,277,000 was debited

on account of various fees, including the escrow fee, wire transfer fee, and other miscellaneous

3 Once the Bank began enforcement proceedings, it declared the 2006 Note due and
payable as it was entitled to do under the 2006 Loan Documents as they were originally executed.

* The Daly City Deed of Trust was recorded in the official records of San Mateo County on
November 21, 2006 as instrument number 2006-176968.

5 The funds were wired to Old Republic's escrow account at City National Bank.
1053334.2 | 02300-0790

3
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTLOS ANGELES, CALIFORNIA 90048-4920,
(323) 852-1000

FRANDZEL ROBINS BLOOM & CSATO, L.C.
6500 WILSHIRE BOULEVARD, 1 77H FLOOR

Co oem ND HW BF WN

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fees related to the loan transaction.) (SSUF No. 7-9) The original maturity date of the 2006 Note

was November 20, 2016 and, as set forth more fully below, was never modified.®
2. 2007 Loan for $1,500,000

On or about June 6, 2007, the Zhangs and Xiang Kai executed a $1,500,000 "Promissory
Note" bearing "loan number 128600386" (the "2007 Note" discussed above) in connection with a
new loan ("2007 Loan") to be made by the Bank to the Zhangs in the amount of $1,500,000, and, a
part of the same transaction, Xiang Kai executed a Deed of Trust ("San Francisco Deed of Trust")”
encumbering the San Francisco Property. (SSUF Nos. 14-19) On September 12, 2007, the
Zhangs made their first draw of the 2007 Loan and the Bank disbursed the sum of $1,000,000, to
the Zhangs' checking account. (SSUF Nos. 21-22) On December 21, 2007, the Zhangs made their
second draw on the 2007 Loan, and the Bank disbursed the sum of $200,000 to the Zhangs'
checking account. (SSUF Nos. 23-24) On January 15, 2008, the Zhangs made their final draw on
the 2007 Loan, and the Bank disbursed the sum of $298,000 to the Zhangs' checking account.
(SSUF No. 25-26) The remaining balance of the $1,500,000 was used to pay various fees
associated with the transaction. The original maturity date of the 2007 Note was June 15, 2009.
(SSUF No. 16)

On June 15, 2009, the Zhangs failed to pay the full principal amount and accrued interest
as required under the 2007 Note. Following discussions with the Zhangs, the Bank agreed to
extend the maturity date for 60 days (SSUF Nos. 28-29) and, in connection therewith, on or about
June 12, 2009, the Bank and the Zhangs executed a "Loan Extension Agreement and Modification

of Note" ("First Extension"), which extended the maturity date of the 2007 Note to August 14,

6 Eventually, after the Zhangs failed to cure a multiple defaults, the Bank declared the 2006
Loan in default and demanded payment in full as it was entitled to do; and this constituted an
“acceleration” of the maturity of the 2006 Loan. That being said, at no time did any document
signed by the Zhangs or by Xiang Kai change the contractually specified November 20, 2016
maturity date of the 2006 Loan.

7 It was recorded in the Official Records of San Francisco County of June 12, 2007 as
instrument number 2007-1401335.

1053334.2 | 023000-0790

4
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CsaTo, L.C.
6500 WILSHIRE BOULEVARD, | 7TH FLOOR
LOS ANGELES, CALIFORNIA 90048-4920
(323) 852-1000

CoO ND DH BF YW NY

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2009. (SSUF No. 29).

The Zhangs failed to pay the 2007 Note on August 14, 2009; and the Bank again agreed to
extend the maturity date pursuant to a September 21, 2009 "Loan Extension Agreement and
Modification of Note" ("Second Extension") (SSUF Nos. 31-32). The Second Extension extended
the maturity date of the 2007 Note from August 14, 2009 to October 15, 2009. No other changes
to the 2007 Note were made by the Second Extension. (SSUF No. 32)

The Zhangs missed the October 15, 2009 maturity date payment. On or about December
28, 2009, Xiang Kai executed a Modification of Business Loan Agreement ("2009 Modification"),
dated December 18, 2009, wherein Xiang Kai agreed to execute a guaranty prior to any further
modifications. Subsequent to the Zhangs' missed maturity date payment, the Bank again agreed to
give the Zhangs more time, pursuant to a new Change in Terms Agreement, this one dated
December 28, 2009 ("Third Extension") (SSUF Nos. 33-36) which, among other things, extended
the maturity date of the 2007 Loan to January 15, 2010. As part of the same transaction, Xiang
Kai executed a Commercial Guaranty pursuant to which Xiang Kai guaranteed payment of the
2007 Note. (SSUF No. 37)

The pattern repeated itself again after the Zhangs failed to make the January 15, 2010
maturity date payment. Thereafter, the Bank agreed yet one more time to extend the maturity of
the 2007 Loan ("Fourth Extension"), whereby the Bank agreed to extend the maturity date a final
time to April 30, 2010, at which point, the entire unpaid principal balance and accrued interest was
to become due and payable. (SSUF Nos. 38-39)

Neither the original loan documents executed in connection with the 2007 Loan nor any of
the four extension agreements even purported to, much less had the effect of, modifying the ten-
year maturity date of the 2006 Note. At no time was the maturity of the 2006 Note ever changed.
The First through Fourth Extensions and the 2009 Modification each specifically states that it
modifies the 2007 Loan and makes no mention of the 2006 Loan.

1053334.2 | 023000-0790 5
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTLOS ANGELES, CALIFORNIA 90048-4920

FRANOZEL ROBINS BLOom & CSATO, L.C.
6500 WitsHiRE BOULEVARD, | 77H FLOOR

(323) 852-1000

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On or about April 30, 2010, the Zhangs defaulted on the 2007 Note.’ The Bank recorded
its Notice of Default under the San Francisco Deed of Trust on or about June 4, 2010. (SSUF
Nos. 40-41). In addition, on June 22, 2010, the Bank filed its Verified Complaint for Judicial
Foreclosure and Deficiency Judgment, etc ("Complaint").? (See Verified Complaint).

On or about June 30, 2011, the Bank sold the 2007 Loan, including the San Francisco
Deed of Trust, to a third party purchaser of the Note, which, it appears, foreclosed on the San
Francisco Property after it purchased the 2007 Loan. (SSUF No. 52-53)

Ill. ARGUMENT

A. Standards For Summary Judgment

Code of Civil Procedure § 437c provides, in relevant part:

(a) Any party may move for summary judgment in any action or

proceeding if it is contended that the action has no merit or that there

is no defense to the action or proceeding.

(c) The motion for summary judgment shall be granted if all the

papers submitted show that there is no triable issue as to any

material fact and that the moving party is entitled to a judgment as a

matter of law.
Courts have no discretion to refuse summary judgment when the evidence before them discloses
there exists no triable issue of material fact and the moving party is entitled to judgment as a
matter of law. (Krasley v. Superior Court (1980) 101 Cal.App.3d 425, 432.) In addition, if the
Cross-defendant can show that one or more elements of a cause of action cannot be established, or

that there is a complete defense to that cause of action, summary judgment must be granted.

Specifically, once a defendant meets this burden, the burden shifts to the plaintiff to prove the

5 The Zhangs defaulted on the 2006 Loan in November 2010. The Bank subsequently
foreclosed on the Daly City Property and filed its Unlawful Detainer action to evict Z-Line
Supply, another entity owned by Raymond and Cindy Zhang, Case No. CLJ 203356.

° The omission from this summary of facts relating to the Construction Loan is for the sake
of simplicity and relevance. The Bank, however, reserves all of its rights, remedies, claims and
contentions in connection with the Construction Loan, and otherwise.

1053334.2 | 023000-0790 6
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTLOS ANGELES, CALIFORNIA 90048-4920
(323) 852-1000.

6500 WitshiRe BouLevaRD, | 77H FLOOR

FRANDZEL ROBINS BLOOM & CsaTo, L.C.

oD Om ND WH BF Bw NY

NN YN NY NN NY Dw ee ee a ea ek
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existence of a triable issue of fact regarding that element of its cause of action or that defense. If
the plaintiff is unable to do so, the defendant is entitled to judgment as a matter of law. Saelzler v.

Advanced Group 400, 25 Cal.4th 763, 780-781 (2001).

B. The Motion Should be Granted Because the Cross-Complaint is Premised on a

Demonstrably False Set of Facts

The Cross-Complaint is predicated on the proposition that there was only one loan—made
in 2006—that was fraudulently modified by documents executed in 2007. This is an
incontrovertibly false proposition. In fact, there were two separate loans, memorialized by two
separate sets of loan documents, neither of which had anything to do with the other.!°

The 2006 Loan was a ten-year loan of $1,277,500, secured by a deed of trust on the Daly
City Property and memorialized by a set of loan documents that were never modified in any
respect. The 2007 documents concerned an entirely new, separate and additional loan of
$1,500,000. That is to say, the Bank actually disbursed to the Zhangs a total of $2,777,000 under
two separate promissory notes: $1,277,500 was disbursed in 2006 under the 2006 Note and an
additional $1,500,000 was disbursed in 2007 under the 2007 Note" The maturity of the 2006 note
never was changed. It always remained due and payable on November 20, 2016. The 2006 Note
was secured by only the deed of trust on the Daly City Property. It never was secured by the San
Francisco Property. The 2007 Note was secured by only the San Francisco Property. It never was
secured by the Daly City Property. Other than a provision in the 2007 Note to the effect that the
general terms and conditions of the 2006 Loan Agreement generally governed the 2007 Note,
nothing in the 2007 Loan Documents even mentioned any of the 2006 Loan Documents. Nothing

in the 2007 Loan Documents either purported to modify or had the effect of modifying the

'° The general terms and conditions for each loan are set forth in the same "Business Loan
Agreement," executed as part of the 2006 Loan transaction, which sets forth the generally
applicable terms and conditions under which the Bank agreed to make loans to the Borrower,
whether such loans were "now or hereafter existing." SSUF No. 1. As a master loan agreement,
however, the BLA does not set forth the terms and conditions that are unique to any given loan,
such as the principal amount, interest rate or maturity date.

1053334.2 | 023000-0790 7
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOOM & CSATO, L.C.

6500 WILSHIRE BOULEVARD, | 7TH FLOOR

LOS ANGELES, CALIFORNIA 90048-4920

(323) 852-1000

oO ND HW PF WN |

RN YB NY NY NR NY NY KY He B&B Be Be we Be eB Be ewe
ot DA HA BF wWwNH |= SOD we AR DH PB YW HY FSF SS

maturity date—or any other provision of—the 2006 Loan. After execution of the 2007 Loan
Documents, the maturity of the 2006 Loan remained October 20, 2016.

The Bank has, thus, disproven an essential element of each and every cause of action
alleged in the Cross-Complaint, even though it is not required to do so in order to prevail on the
motion. Accordingly, the Bank is entitled to summary judgment in its favor on the Cross-
Complaint:

Neither does summary judgment law in this state any longer require a defendant

moving for summary judgment to conclusively negate an element of the plaintiffs

cause of action. ... All that the defendant need do is to "show[ ] that one or more

elements of the cause of action ... cannot be established" by the plaintiff. (Code

Civ. Proc., § 437c, subd. (0)(2).) In other words, all that the defendant need do is

to show that the plaintiff cannot establish at least one element of the cause of

action—for example, that the plaintiff cannot prove element X. Although he

remains free to do so, the defendant need not himself conclusively negate any such

element—for example, himself prove not X. ... The [cross-]defendant must -

]show that the [cross-]plaintiff does not possess needed evidence, because

otherwise the [cross-]plaintiff might be able to establish the elements of the cause

of action; the defendant must also show that the plaintiff cannot reasonably obtain

needed evidence, because the plaintiff must be allowed a reasonable opportunity to

oppose the motion .. .

Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826, 851 (2001) (internal quotations and citations
omitted). Even though the Bank is not required to disprove Xiang Kai's factual assertions in order
to obtain summary judgment, it has done so. Moreover, having affirmatively proven that the 2007
Loan Documents did not alter any of the substantive rights created by the 2006 Loan Documents,
the Bank has met its burden of showing that Xiang Kai has no ability to obtain - much less a
reasonable chance of obtaining - evidence proving any modification of the 2006 Loan Documents.
The Bank has presented "evidence that would require a reasonable trier of fact not to find the
underlying fact [in this case, the alleged modification of the 2006 Loan Documents] more likely

than not." Aguilar, supra, at id.

1. The Bank's Evidence Shifts to Xiang Kai the Burden of Coming
Forward with Contrary Evidence
More to the point, a cause of action cannot be established if, as here, the undisputed facts

presented by a cross-defendant prove to the contrary of Plaintiff's allegations as a matter of law.

1053334.2 | 023000-0790

8
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTLos ANGELES, CALIFORNIA 90048-4920
(323) 852-1000

FRANDZEL ROBINS BLOOM & CsarTo, L.C.
6500 WILSHIRE BOULEVARD, | 77H FLOOR

COD mem NIN DH BF WN

Brantley v. Pisaro, 42 Cal.App.4th 1591, 1597 (1996). Once the moving cross-defendant has met
its burden, the burden shifts to the cross-complainant to establish by competent evidence that a
triable issue exists as to one or more of the material facts. The cross-complainant may not rely upon
the mere allegations of its pleadings but must instead "set forth the specific facts showing that a
triable issue of material fact exists." Code of Civil Procedure § 437c(p)(2).

“Evidentiary facts are required to support a summary judgment. Conclusions of fact or law
are not sufficient. Allegations that might be sufficient for pleading purposes (so called “ultimate
facts” to state a cause of action or defense) are not sufficient as evidence.” Snider v. Snider (1962)
200 Cal.App.2d 741, 751; Tuchscher Develp. Enterprises, Inc. v. San Diego Unified Port Dist.
(2003) 106 Cal.App.4th 1219, 1240. “Neither party can rely on its own pleadings, even if
verified, as evidence to support or oppose a motion for summary judgment or summary
adjudication.” See College Hosp., Inc. v. Sup.Ct. (Crowell) (1994) 8 Cal.4th 704, 720. CCP
§437c(b)(1) requires moving party to demonstrate the presence or absence of a genuine triable
issue by “affidavits, declarations, admissions” or other competent evidence. College Hosp., Inc.,

supra at id.; Salma v. Capon 161 Cal.App.4th 1275, 1290 (2008) .

Iv. CONCLUSION

The Bank filed its complaint against Xiang Kai on June 22, 2010, over two years ago.
Xiang Kai filed its cross-complaint against the Bank on October 12, 2011, almost a year ago.
Trial is set for December 3, 2012. Xiang Kai has had more than ample opportunity to develop
substantial evidence to support its Cross-Complaint. This Motion challenges Xiang Kai to come
forward with any evidence that would justify taking its Cross-Complaint to trial. The Bank is
confident that it will not be able to do so because, put simply, the maturity of the 2006 Loan never

was shortened and Xiang Kai never pledged collateral to secure the 2006 Loan.

1053334.2 | 023000-0790

9
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORTFRANDZEL ROBINS BLOoM & CsaTo, L.C.
6500 WILSHIRE BOULEVARD, | 7TH FLOOR
LOS ANGELES, CALIFORNIA 90048-4920

(323) 852-1000

0 ON DA WH BF WN |

RYN YN NN NR NY NY Be Be Be we ewe Be ewe Se ee
ec QO DA BF BH =F SO we KR DA BF YW NH = SS

9 ®

The Cross-Complaint is pure fiction. There is no triable issue of fact and the Bank is
entitled to judgment as a matter of law.

DATED: August 13, 2012 Respectfully submitted,

FRANDZEL ROBINS BLOOM & CSATO, L.C.
MICHAEL GERARD FLETCHER

KENNETH RUSSAK

HANNA B. RAANAN

By:

|A B. RAANAN
lorneys for Plaintiff and Cross-Defendant
Cathay Bank

1053334.2 | 023000-0790

10
NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT AS TO XIANG KAI LLC'S
CROSS-COMPLAINT; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT