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
Nov-21-2011 9:18 am

Case Number: CGC-10-500934
Filing Date: Nov-21-2011 9:17
Juke Box: 001 Image: 03392538
MOTION (CIVIL GENERIC)

CATHAY BANK, A CALIFORNIA BANKING CORPORATION VS. RAYMOND XIANG ZHANC

001003392538

Instructions:
Please place this sheet on top of the document to be scanned.om YD HW Rw PB He

RN NR KY NY eG a a
BRwRFRREBREB SER DVWAREESESrS

Chijeh Hu (SBN 241271) F I L E
Law Office of Chijeh Ha M Prat so ey

456 8" Street Supaiior Court
Oakland, CA 94607 ayaa a:
Telephone: (510) 832-1686 NOY 27 2011

Fax: (510) 893-0155

CLERK f THE SourT
By: Hg Bap OS

SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN FRANCISCO-~ UNLIMTED JURISDICTION

Attorney for Defendant/Cross-Complainants,
RAYMOND ZHANG, et al.

CATHAY BANK, a California banking Case No. CGC-10-500934
corporation
NOTICE OF APPLICATION AND
Plaintiff, APPLICATION FOR LEAVE TO AMEND
SECOND AMENDED CROSS-
vs. COMPLAINT [CCP§426.50};

MEMORANDUM OF POINTS AND
RAYMOND XIANG KAI ZHANG, et al., AUTHORITIES IN SUPPORT;

Defendants.
RAYMOND ZHANG, an individual;
CINDY ZHANG, an individual; and Dept. 302
ZHANGS, LLC, a California limited Date: December 21, 2011
liability company, Time: 9:30am

Cross-Complainants,
v.

CATHAY BANK, a California banking
corporation; and DOES 201-230, inclusive,

Cross-Defendants.

XIANG KAT, LLC, a California limited
liability company,

Cross-Complainant,
v.

CATHAY BANK, a California banking
corporation; and DOES 231-260, inclusive,

Cross-Defendants.

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ZHANG APPLICATION FOR LEAVE TO AMEND

AFFIDAVIT BY ATTORNEY IN SUPPORTTO ALL PARTIES AND ATTORNEYS OF RECORD IN THIS ACTION:

PLEASE TAKE NOTICE THAT ON December 21, 2011 at 9:30am or as soon
thereafter as may be heard, in Dept. 302 in the Superior Court of California, San Francisco,
defendants/cross-complainants RAYMOND XIANG KAI ZHANG, aka RAYMOND KAI
ZHAG, aka RAYMOND ZHANG, aka XIANG KAI ZHANG, aka XIANG ZHANG, aka
ZHANG XIANG, CINDY ZHANG, DONG YING QUI, RAY KAI, LLC and ZHANG’S LLC
will move this Court to grant the cross-complainants, leave to amend their Second Amended
Cross-Complaint and to grant cross-complainant XIANG KAI, LLC leave to amend its Cross-
Complaint. RAYMOND XIANG KAI ZHANG, aka RAYMOND KAI ZHAG, aka RAYMOND
ZHANG, aka XIANG KAI ZHANG, aka XIANG ZHANG, aka ZHANG XIANG, CINDY
ZHANG, DONG YING QUI, XIANG KAI, LLC, RAY KAI, LLC and ZHANG’S LLC,
collectively, are referred to as “Cross-Complainants” thereinafter.

This motion is made pursuant to California Code of Civil Procedure §426.50 on the
grounds that as the causes of action contained in the proposed Cross-Complaint seek affirmative
claims for relief which evolve from “a series of acts or occurrences logically interrelated” and
thus are related causes of action subject to forfeiture if not pleaded in this action, and that the
moving party should be granted leave to file their proposed Cross-Complaint to avoid forfeiture
of their causes of action. Cross-Complainants are all represented by the same counsel. All cross-
complainants except XIANG KAI, LLC filed a Second Amended Cross-complaint through their
previous counsel. XIANG KAI, LLC recently filed its own separate Cross-Complaint, Cross-
complainants seek leave to amend their Second Amended Cross-complaint in order to present
new causes of action for all Cross-complainants. Cross-complainants further seek, in the interests
of justice and judicial economy, to combine XIANG KAI, LLC’s Cross-complaint into one single
cross complaint.

PLEASE TAKE FURTHER NOTICE that this Application is based upon the
accompanying Notice, the accompanying Memorandum of Points and Authorities, the

accompanying attorney affidavit, all pleadings and papers on file in the above-captioned

-2-

ZHANG APPLICATION FOR LEAVE TO AMENDaction, and other evidence that may be presented by the Plaintiffs prior to or at the hearing
hereon.

POINTS AND AUTHORITIES
I. THE COURT HAS THE DISCRETION TO GRANT CROSS-COMPLANANTS’
APPLICATION FOR LEAVE TO AMEND THE SECOND AMENDED COMPLAINT.

Courts are given the discretion to grant a party leave to amend his cross-complaint at
“any time during the course of the action.” Cal. Civ. Proc. Code § 426.50. The Code requires the
courts to grant leave of amend unless strong evidence of bad faith is demonstrated. The Code
specifically reads that courts “shall grant . . . leave to amend . . .if the party who failed to plead
the cause acted in good faith.” Id, Even reasons for failing to plead a cause of action such as
“oversight, inadvertence, mistake, neglect,” will not prevent the court from granting leave to
amend. The Court of Appeal noted that the use of the word “shall” in Section 426.50 is
mandatory with respect to allowing an amendment of a pleading and that the courts have a
“modicum of discretion” in assessing whether the moving party acted in good faith. Foot’s

Transfer & Storage Co. v. Superior Court (1981) 114 Cal. App. 3d 897, 171 Cal.Rptr. 1. Courts

liberally construe Section 426.50 in order to avoid forfeiture of causes of action. Id.

1. Good Faith Must Be Given Liberal Construction

Courts are required to give liberal construction when scrutinizing the existence of good
faith. In Dunzweiler v. Superior Court (1968) 267 Cal. App. 2d 569, 73 Cal.Rptr. 331, even a ten
month delay in filing a cross-complaint was upheld as being in good faith. This finding
reinforces the notion that unless accompanied by a strong showing of bad faith, Section 426.50
liberally favors the cross-complainant in order to avoid forfeiture of causes of action.

Here Cross-complainants acted in good faith. Cross-complainants are not sophisticated
in their English reading and writing abilities. They retained the help of a law firm through a
friend’s referral to assist them in their litigation. Cross-complainants reasonably believed that
their attorneys understood them and relied on their attorney in the course of litigation so far.

There is no evidence to suggest that any of Cross-complainants’ actions were in bad faith.

2. A Strong Showing Of Bad Faith Is Required To Deny Right To Amend The
3.

ZHANG APPLICATION FOR LEAVE TO AMENDCross-Complaint
Substantial evidence of bad faith must be demonstrated for courts to deny leave to

amend. Silver Organizations Ltd. C. Frank (1990) 217 Cal. App. 3d 94, 265 Cal.Rptr. 681. The

Court of Appeal defines bad faith as “the opposite of ‘good faith,’ generally implying or
involving actual or constructive fraud, a design to mislead or deceive another, or a neglect or
refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake. . .,

but by some interested or sinister motive.” Id. at 100. In Silver the defendants filed answers in

pro per and delayed retention of an attorney throughout their settlement efforts. The settlement
efforts failed and the defendant in Silver retained an attorney. The attorney moved to file a cross-
complaint which was denied by the trial court. The Court of Appeal reversed and found that the
record showed no evidence of bad faith. The Court found that even if defendants were viewed to
have acted as their own attorney, and that in their attorney capacity, they were subject to a court
determination of neglect, inadvertence, or oversight that delayed their bringing of a cross-
complaint, leave to amend could still not be denied under these grounds. As evidenced by this
decision, the court should not deny a motion where no evidence of improper motive, fraud, or
dishonesty can be shown. Lack of diligence by counsel should not act to forfeit a valid claim.

Here, Cross-complainants acted in good faith throughout the course of this action. There
is no evidence to suggest that Cross-complainants acted in any manner to intentionally defraud
any of the parties involved, nor did they purposely delay the bringing of the claims in the
proposed Cross-complaint.

Cross-complainants had retained an attorney who assured them that they had the
litigation under control. It was not until Cross-complainant RAYMOND ZHANG was deposed
by CATHAY recently did Cross-Complainants start to suspect that there was a communication
problem with their former counsel. It became obvious in the deposition that the language barrier
between RAYMOND ZHANG and the former counsel made their communication ineffective —
so much so to the point that CATHAY’s deposing attorney proposed to have the deposition
interpreter to assist RA YMONG ZHANG and his counsel’s communication.

It was not until Cross-Complainants retained our office in September 2011 that
-4-

ZHANG APPLICATION FOR LEAVE TO AMENDdisparities between facts and the Second Amended Complaint were discovered. Cross-
complainants should not be punished for mistakes and oversights of which they had no control or
knowledge. They did nothing in bad faith.

In the interests of justice and in efforts to have the matter resolved on its merits, Cross-
Complainants seek leave to amend their Second Amended Cross-complaint to state facts and
raises causes of action not stated and raised in the Second Amended Cross-complaint as the
proposed Third Amended Cross-complaint. There is no evidence to show that any inadvertence,
neglect, or oversight that resulted was anything but a mistake. Most importantly, the claims
raised by Cross-Complainants in their proposed Cross-complaint would be forfeited if leave to
amend is not granted.

CONCLUSION
For the foregoing reasons, Cross-complainant prays this Court for an order GRANTING

leave to amend the Second Amended Cross-Complaint.

Date: Novenber2/ 2011

Attorney for Defendants,
RAYMOND ZHANG, et al.

5.

ZHANG APPLICATION FOR LEAVE TO AMENDoo IN DN

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AFFIDAVIT BY ATTORNEY CHIJEH HU
I, Chijeh Hu, declare:
1. The following is based on my own personal knowledge and if called to testify, I could,
and would, testify competently thereto.
2, Tam the attorney for Defendant/Cross-complainant’s RAYMOND ZHANG, CINDY
ZHANG, DONG YING QUI, RAY KAI, LLC, ZHANGS, LLC and XIANG KAI, LLC in the
above-entitled action.

3. On March 3, 2011, Defendants/Cross-complainants, éxcept for RAY KAI, LLC, and

XIANG KALI, LLC, filed their Cross-complaint.

4. On April 5, 2011, Defendants/Cross-complainants, except for XIANG KAI, LLC, filed
their First Amended Cross-complaint.

5. On June 14, 2011, Defendants/Cross-complainants, except for XIANG KAI, LLC,
filed their Second Amended Cross-complaint.

6. On September 7, 2011, and having just been hired, Cross-Complainants new counsel
filed a Notice of Pendency of Action for 5530 MISSION giving notice of the real property claims
of XIANG KAI, LLC, as a trustee’s sale was scheduled for that day.

7. On October 12, 2011, Defendant/Cross-complainant XIANG KAI, LLC filed its Cross-
Complaint.

8. On October 24, 2011, Cross-Defendant CATHAY BANK demurred to the second
amended cross-complaint, to be heard November 21, 2011 in this Court.

9. On November 8, 2011, after learning that the trustee’s sale for 229-255
INTERNATIONAL had been postponed, Cross-Complainants new counsel filed a Notice of
Pendency of Action to give notice of the real property claims of RAYMOND ZHANG and
CINDY ZHANG.

10. On November 11, 2011, Cross-Complainants new counsel received an unlawful
detainer against Lavendar Casa, Inc., a leasee occupant at 5530 MISSION and filed a demurrer on

November 15, 2011.

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ZHANG APPLICATION FOR LEAVE TO AMENDo oe IN BD

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12. Cross-Complainants new counsel is bringing this motion for leave to amend the
second amended cross-complaint to protect the rights of Cross-Complainants and to present new
causes of action, different facts, and a different theory than previous counsel pled in its amended
pleadings. In opposing Cross-Defendant’s November 21, 2011 demurrer, Cross-Complainants’
new counsel realized that he was restricted by the previous counsel’s pleading, which did not
reflect the facts as Cross-Complainants believe and remember took place.

13. The gravamen of Cross-Complainant’s previous counsel’s pleadings is that Cross-
Defendant CATHAY BANK believe its loan to RAY KAI, LLC was under-secured, and so the
bank pushed Cross-Complainant’s into the various extensions and collateral agreements with bad
faith intent to get more collateral. For the first time, in their second amended cross-complaint,
Cross-Complainant’s previous counsel alleges the language difficulties of RAYMOND ZHANG
and CINDY ZHANG, and how negotiations with CATHAY BANK representative NICHOLAS
CHUNG were conducted in Cantonese/Chinese, yet the loan documents were written in English.
Yet even still, in their third attempt, previous counsel did not allege that the terms of the loans
were changed without the knowledge of Cross-Complainants. Nowhere does previous counsel
allege how the fraud was conducted in signing the loans at inception, in collecting the extension
fees, and in how the deeds of trust to the various properties were fraudulently obtained. Previous
counsel does not allege interference with the proposed sale of the condominium units at
MACARTHUR and other properties. Previous counsel sticks to the simple premise that
CATHAY BANK was unfair and acting in bad faith, but goes no farther. Previous counsel has
failed to assert all of Cross-Complainant’s claims.

14. Cross-Complainant RAYMOND told the new counsel that he was shocked at how
different the second amended complaint differed from what he thought he told the previous
counsel when the new counsel interpreted the second amended complaint to him sentence by
sentence after the substitution of counsel.

12. Leave to amend is necessary and proper because previous counsel did not understand

the true nature of Cross-Complainant’s claims, due to a language barrier and misunderstanding of

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ZHANG APPLICATION FOR LEAVE TO AMENDthe facts. The language barrier was so bad that CATHAY BANK’s own counsel took pity on
RAYMOND ZHANG during his deposition, and offered him their translator (see Cross-
Complainant’s Request for Judicial Notice, filed concurrently with this motion). It was clear that
he was not on the same page as his counsel and did not understand the true meaning of the
documents. If leave to amend is not granted, Cross-Complainants will forfeit causes of action and
valid claims for relief involving millions of dollars, an outcome judicial policy is strictly against.

13. The facts contained in new counsel’s proposed third amended cross-complaint
became available starting in early September 2011 and into October and November, specifically
after substituting in and conducting interviews with Cross-Complainants, and review of the
documents.

14. This motion was not brought earlier because previous counsel did not understand the
nature of the claims, did not understand the clients, and because the new counsel was recently
hired, and with the various entities involved and voluminous various loan documents and deeds to
review, the difficulties of obtaining documents from the previous counsel, and in a race against
time with the scheduled trustee’s sale for the remaining unsold properties. New counsel for
Cross-Complainants had moved quickly to bring this motion. While hopeful that in opposing
Cross-Defendant’s demurrer to previous counsel’s second amended cross-complaint, leave to
amend would be granted, it became clear that leave to amend to present new causes of action and
new theories would be necessary regardless of the result of Defendant’s demurrer to the second
amended cross-complaint, as most of the facts in the proposed third amended cross-complaint
were not contained in previous counsel’s second amended cross-complaint, and the Court could
not review them in ruling on the demurrer.

15. Under Cal. Civil Code of Proc. §426.50 and §473, the Court has authority to allow the
pleadings to be amended in the furtherance of justice. As Cross-Complainant’s would forfeit
valid, new causes of action and claims for relief involving millions of dollars if leave to amend is
not granted, Cross-Complainants respectfully request leave to amend the second amended cross-

complaint.

-8-

ZHANG APPLICATION FOR LEAVE TO AMEND%

1
Date: November / 2011

I declare under the penalty of perjury under the laws of the State of California that the

foregoing is true and correct.

Complainants,
RAYMOND ZHANG, et al.

-9-

ZHANG APPLICATION FOR LEAVE TO AMENDCo em YN DW Bw BP Ye

hb oN NR NR KR De ee Be ee ee ea
SB 8RkRRBSRER SSE BSREEERSHR re

Chijeh Hu (SBN 241271)
Law Office of Chijeh Hu
456 8" Street

Oakland, CA 94607

Telephone: (510) 832-1686 oo
Fax: (510) 893-0155 FE E D
gan Francisco Ceunty Superior out

Attorney for Defendant/Cross-Complainants, ey g4 batl
RAYMOND ZHANG, et al. Hv abe

CLERK QE THEDOURT
SUPERIOR COURT OF THE STATE OF CABORN TAGs Tek

FOR THE COUNTY OF SAN FRANCISCO- UNLIMTED JURISDICTION

CATHAY BANK, a California banking Case No. CGC-10-500934
corporation
REQUEST FOR JUDICIAL NOTICE IN
Plaintiff, SUPPORT OF CROSS-COMPLAINANT’S
MOTION FOR LEAVE TO AMEND
vs. CROSS-COMPLAINT

RAYMOND XIANG KAI ZHANG, et al.,

Defendants.
RAYMOND ZHANG, an individual;
CINDY ZHANG, an individual; and Dept. 302
ZHANGS, LLC, a California limited Date: December 21, 2011
liability company, Time: 9:30am

Cross-Complainants,
v.

CATHAY BANK, a California banking
corporation; and DOES 201-230, inclusive,

Cross-Defendants.

XIANG KAI, LLC, a California limited
liability company,

Cross-Complainant,
v.

CATHAY BANK, a California banking
corporation; and DOES 231-260, inclusive,

Cross-Defendants.

-1-

RAYMOND ZHANG ET AL, REQUEST FOR JUDICIAL NOTICEND WwW FB ww

Defendants/Cross-Complainant’s RAYMOND XIANG KAI ZHANG, aka RAYMOND
KAI ZHAG, aka RAYMOND ZHANG, aka XIANG KAI ZHAN! G, aka XIANG ZHANG, aka
ZHANG XIANG, CINDY ZHANG, DONG YING QUI, RAY KAI, LLC, ZHANG’S LLC, and
XIANG KAI, LLC (“Cross-Complainants”) respectfully requests that pursuant to California
Evidence Code §§451 & 452, et sec., this Court take judicial notice of records and files, its case
file in this matter, including but not limited to the pleadings and minutes therein.

Plaintiff also makes this request pursuant to Sosinsky v. Grant (1992) 6 Cal.App.4" 1561
which held that the Court may judicially notice both the existence and truth of matters asserted in
court orders, conclusions of law and judgments.

Plaintiff respectfully requests that this Court take judicial notice of the following:

1. Exhibit A: Deposition of Raymond Zhang, April 15, 2011, Pages 46-49,
2. Exhibit B: Deposition of Raymond Zhang, April 15, 2011, Pages 74-133.

Date: November— 5 2011 LAW OFEKE OF CHIJEH HU

Attorney for Defendants/Cross-
Complainants,
RAYMOND ZHANG, et al.

2-

RAYMOND ZHANG ET AL. REQUEST FOR JUDICIAL NOTICEEXHIBIT ARAYMOND XIANG KAI

ZHANG — 4/15/2011

2
2 construction budget? |

Q. When you say "redraw," you mean change the
3 A. No, Well, when we do work, we have to apply
4 with the bank before they could provide the funding.

5 Q. The phrase that you used -- and maybe it's a

6 translation issue -- was you used Mr. Langdon when you
7 had to redraw [sic] the loan documents,

8 THE WITNESS (in English): Not "redraw."
9 MR. CHEVALIER: Withdraw?
10 THE WITNESS (in English): If like I want to |

11. ty to draw the money.

12 MR. RUSSAK: Oh, withdraw, Make a draw on the
13 Ioan.

14 THE WITNESS (in English): Yeah.

15

MR. RUSSAK: Okay. A disbursement request,
16 something like that. Okay.

17 THE INTERPRETER: It's a pronunciation issue
18 nota translation issue.

19 MR. RUSSAK: Let the record so reflect. i
20 Okay. Counsel, for fear of using all of my

21. time to review compliance with the remaining categories
22 of the document request, I will ask that perhaps during
23 the lunch break you might review this, And if I would |
24 beso bold, I would even offer the services of the

25. translator, if she's willing, just to make sure

Page 46

]
1 Mr. Zhang understands the scope of his production
2 obligation, and see whether there aren't other things
3 that can be produced.
4 And maybe we can take a break afterwards and
5 you can work with him -- I don't know if it's
6 appropriate or inappropriate for you to do so -- justto |
7 translate the documents,
8 THE INTERPRETER: Yeah, I could. Although I
9 would also afterwards need my own lunch break.
10 MR. RUSSAK: Oh, absolutely. I would hope that
21 that wouldn't take too terribly long. Well, we'll talk
12 about that when --
13 THE INTERPRETER; So if we have an extended
14 funch break, then I could take part of that time to do
15 this and then have my regular lunch break.
16 MR. RUSSAK: Okay. That would be great. Let's
17 go off the record for a second. |
18 (Off the record from 11:51 until 11:53.) |
19 MR. RUSSAK: Allright. We are going totake |
20 an hour-and-a-half lunch break, the first half hour of
21 which, at least for the three people sitting on the
22 other side of the table, will be to have counsel for the
23 witness, the witness, and our translator to go through
24 the inspection demands, which are the last three pages

25. of Exhibit 1, so that the translator and the lawyer can |

| 1 make sure that the witness understands the production

| 5. to accept, that the translation services provided by our

| 22 hunch break with the assistance of the translator,

pa

i Mr. Zhang, and the significance of each of the demands

2 obligations of those demands.
3 And I have offered to stipulate, and hereby
4 renew that stipulation, which counsel I believe is happy

6 translator will be treated as confidential, that I will

7 not ask her about her conversation except whatever

8 statements we might make on the record, but that it's

9 not a waiver of the attorney-client privilege for her to
10 communicate in those communications between the lawyer
11. and his client, the witness, and that it will be treated
12 as essentially a deep dark secret.
13 MR. CHEVALIER: Yes.
14 MR. RUSSAK: So with that, it is now 11:54. We
15. will resume at 1:30 p.m. today.

16 Off the record.
17 (Recess was taken from 11:55 until 1:37.)
18 MR. RUSSAK: Let's go on the record. We are

19 back on the record. It is about 1:38, And I think
20 Mr. Chevalier has a brief statement to make about what
21 he has learned about the document production during the

23 MR. CHEVALIER: Okay. The entirety of the
24 eight special demands contained in Notice of Deposition
25 for Raymond Zhang was translated by the interpreter to

2 was explained using the assistance of the translator.
3 And following today's deposition, Mr. Zhang and I are
4 going to work together to make certain that all the
5 documents that are available are produced.
6 MR. RUSSAK: I think you also told me that, as
7 for Categories 6, 7, and 8 on Exhibit 1, that you're
8 fairly certain that there are not additional documents
9 to be produced in those categories; is that right?
10 MR. CHEVALIER: Yes.
1. MR. RUSSAK: Okay. And then J asked you during
12 the break -- and I think you agreed, but you'll take
13 your own counsel, obviously -- that what I would like to
14 see happen, if it's not terribly burdensome, would be
15 for Mr. Zhang to actually deliver the files that are
16 identified in Category 1, to the extent that he has
17 actually created or has and maintained physical files to
18 (a) the loan, (b) the bank, (c) the project, et cetera,
19 that he deliver those to you so that you can inspect
20 them and make sure that everything in there that you
21. believe is called for in the request is produced.

22 MR. CHEVALIER: Yes, correct.
23 MR. RUSSAK; Thank you.
24 In addition -- I meant to make a reservation at

25. the beginning of deposition, but especially given the
Page 49

Merrill Corporation

Page 47
800-826-0277

13 (Pages 46 to 49)

Los Angeles
www.merrillcorp.com/lawEXHIBIT BRAYMOND XIANG KAI ZHANG - 4/15/2011

1 require collateral. However, maybe I didn't remember i
2 the timing correctly. I remember that I had signed a 2
3. collateral for them in February of 2010. 3
4 Q. Do you have the correct information aydilable 4
5 5
6 6
7 7
8 . 8
9 records. 9
10 10
11 li
12 12
13 13
14 14
15 is
16 16
17 ends with the word /Project" on line 7 of page 5. (17
18 Paragraph 17, which we previous discussed, 18
19 begins with theAvords "On or about February 4, 2010," 19

the bottom of page 3 on line 27 with the words | 23
about December 3, 2009," and ends at line 3 on

1 And paragraphs 8 through 11 previously referred 1
2 to are on page 3, starting with line 2 with the words 2
3 "On or about June 4, 2008," and ending with the words | 3
4 “extended to October 1, 2009," on line 19, 4
5 Now, if you would please translate the 5
6 6
7 7
8 8

Statements made in paragraph 21 on page 5.
THE WITNESS: Are you talking about the sixth
extension or when?

9 MR. RUSSAK: Q. Mr. Zhang, these are your 9
10 words, not mine. 10
11 A, Well, could I have it read back again? fii
12 Q. Yes. 12
13 (The interpreter repeats the translation.) 13
14 THE WITNESS: So this is the first extension -- 14
15 THE INTERPRETER: He wants to ask me - 15
16 MR. RUSSAK: Q. Mr. Zhang, let me help you. 16
17 If there's a statement in here that is incorrect, it's {17
18 better to correct it now. 18
19 A. (In English): Yeah, T know. That's why I -- 119
20 Q. Okay. But if I'm overhearing your £20
21 conversations with the translator, I think what 21
22 paragraph 21 says is "Since executing the First 22
23 Extension Agreement." Okay? 23
24 A. (In English): Looks like this one not clear. 24
25 Not accurate, okay. Based on my review of the | 25

Page 75

record, I would tend to agree with you, so let's now --
‘Well, bear with me one second. I want to see -- Before
we go to the next phase, let's go off the record for a
second, please.

(Off the record from 3:14 until 3:14.)

MR. RUSSAK: Okay. Back on the record.

THE WITNESS: Maybe it's because my English
isn't that good, so when I try to explain in English,
Quinn did not completely understand.

MR. RUSSAK: That's fine. What we're trying to
do today and in connection with this lawsuit is find out
the true facts about what really happened. Okay? And
80 if we have to correct a declaration, we correct a
declaration, but we need to find out the true facts.

While we were off the record previously we
marked a series of additional documents that I'm going
to quickly identify for the record and then, with the
help of Ms, Raanan, distribute. And these are
Exhibits 9 through 13, I believe, Yes, 9 through 13.
Each of them is an Extension Maturity Date Agreement,
and they are different in that they are different dates
of execution,

Exhibit 9 is executed as of September 12, 2008.

Excuse me. Let me start over again so we have
them in the right order.

Exhibit 8 is the first, June 4, 2008.
Exhibit 9 is as of September 12, 2008. Exhibit 10 is
of December 18, 2010.

Excuse me. Did I misread a date again?

because I want this record to be clear. And
apologize.
Exhibit 8 is June 4, 2008. Exhibit is an

September 12, 2008. Exhibit 10 is
Date Agreement executed as of

legible than yours, so I've attached copies for
Page 77
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Merrill Corporation
800-826-0277

20 (Pages 74 to 77)

- Los Angeles
www.merrillcorp.com/law2

RAYMOND XIANG KAI ZHANG — 4/15/2011

1 read it,” any answer he's going to give is going to 1 You Jeamed that the bank had a deed of trust |
imply that he has read it. 2 against your Third Street property sometime after you
MR. RUSSAK: Well, let me back up, then, 3 were served with the lawsuit in June of -- in or about
because that's not quite as J understood his testinOny. 4 June of 2010; correct?
but let me see if I can clarify. 5 A. Yes.
Q. You testified earlier that you first Iparned 6 Q. And did you believe that the bank had tricked
that there was a deed of trust encumber the Third 7 you into signing the deed of trust?
Street property when you had received the Complaint. 8 A. Yes.
Did you notice that before you gave/the document to your; 9 Q. Did you tell that to your lawyer?
attorney? 10 A. Yes,
A, No. 11 Q. Do you believe your lawyer understood you when
Q How did you receive thé lawsuit in the very 12. you told him that?
first instance? 13 A. I think he understood.
A. The people from thy/bank, I don't know who it i4 MR. RUSSAK: Let's take a break for a second.
was, but the person called and sent -- and delivered it, | 15  Lwant to chat with you for a moment.
Q. Personally to you? 16 Off the record.
A. Yes, 17 (Recess was taken from 5:16 until 5:32.)
Q. Did the n who delivered it to you speak 118 MR. RUSSAK: Q. I'd like to turn your
Chinese? 19 attention back to Exhibit 6, your declaration. And I
A. Idon't, | 20. will ask the translator to read to you paragraphs 12 and
Q. Did the person who delivered it to you say 21 13 of the declaration.
anything/to you when he delivered it to you? 22 Mr. Zhang, are the statements in paragraphs 12
'o, He was just a person who delivered 23 and 13 of your declaration, which is Exhibit 6, true and
packdges. 24 correct?
. When you received Exhibit 17, what did you 25 A. 12 and 132
Page 112
think it was? 1 Q Yes,
A. We know it has to do with the bank but not what 2 A. I think that these two paragraphs are not that
it says. 3° comect,
Q. Did you know that it was a lawsuit against yéu? 4 Q. In what way are they incorrect?
A. I knew that it had to do with the bank and I 5 A. We didn't know we had to provide the Third
only knew what it was after I showed it to my augfney. | 6 Street as collateral.
Q. Se when you first received it, you did yfot 7 Q. So why did you sign a declaration that included
believe that it was a lawsuit against you? 8 this language?
A. Thad guessed that it was. 2 A. Maybe there was some places where I and the
Q. And what about it led you to that guess? 10 attorney did not quite understand each other.
A. Well, Ican't read English, but 14aw this 1i Q. J want to draw your attention back to the day
(indicating), 12 on which you signed this declaration, It was the day
Q. You know, during a bregK, Mr. Zhang, I saw you 13 before the TRO hearing.
staring very intently at a coupie of documents, flipping 14 And you know what I mean by "TRO hearing,"
through pages and compat them as if you were reading | 15 don't you?
them. Is that what you were doing? 16 A. Yes.
A. (In English): 1 jus¢’see the date and compared 17 Q, What do you understand the TRO hearing to be?
the date, 18 A. The restraining order.
(Through interpreter): I was just looking at 19 Q. For the foreclosure?
the date and com, 20 A. Yes.
Q. Interestirig, p21 Q. Okay. How did you communicate with your lawyer
MR. RYSSAK: Off the record for a second. 22 prior to the preparation of this declaration? Did you
(Off fe record from 5:13 until 5:14.) 23. sit down and have a meeting with him and talk with him
MR. RUSSAK: Q. Mr. Zhang, did you tell your | 24. about the facts?
lawyer that -- Well, strike that, (25 A. Yes.
Page 111 Page 113
29 (Pages 110 to 113)
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RAYMOND XIANG KAI

ZHANG - 4/15/2011

1 Q. And when you had that conversation with him for
2 the first time, was there already a draft declaration

3 prepared that he had written first?

4 A. Yes.

5 Q Before the draft declaration was prepared, did

6 you have any discussions with him about the facts of
7 your case?
8 A. Yes.
9 Q. And when did that conversation take place?
10 A. Before -- One week before March 9th.
1. Q. Did you have an in-person meeting with him?
12, A. Yes,
13 Q. Who else was present?
14 A. Michael.
15 Q Another lawyer?
16 A. Yes.
17 Q. Somebody who works with Mr. Chevalier?
18 A. Yes.
19° Q. Would that be Michael Schinner?
20 A. Yes.
21 Q. How do you know Mr. Schinner?
22 A. Friend introduced us.
23 MR. RAANAN: Before I forget: Bill, what's his

and Mr, Chevalier, and you discussed the facts of your
case about a week before the TRO hearing; correct?

24 last name?
25 MS. RAANAN: Langdon.
Page 114}

1 MR. RUSSAK: Q. Bill Langdon, how did you meet
2 Mr. Langdon and how did he come to be working on your
3 project?
4 A. Ttalso was a referral from a friend.
5 Q. But it was not a referral from the bank?
6 A. No.
7 Q. Okay. So you had a meeting with Mr. Schinner
8

1 A. Yes.

2 Q. What was the process by which you -- Well, back
3 up.
4 Did you review the declaration before you

5 signed it?
6 A. I did not, because I cannot read it.
7 Q. Did you spend time discussing your declaration
8 with your lawyers before you signed it?
9 A. Yes,
10 Q. How much time did you spend with them doing
11 that task?
12 A. Around half an hour.
13 Q. And who was involved in that process at your
14 lawyer's law firm?

15 A. Quinn and Michael.
16 Q. Was anyone else present at that meeting?

117 A. No.

!18  Q. Did they read each paragraph of the declaration

| 19. to you in English?

$20 A, Yes,

(21 Q. And did you understand at least as you -- At

| 22 any time did you believe that you did not understand
23 what they were saying to you?

24 A. A little bit.

25 Q. In which instances? Do you recall any specific
Page 116

1 areas where you thought you didn't understand them?
2 A. Every so often there would be something I did

3 not understand,

4 Q. Okay. But they read each and every paragraph
| 5 toyouin English?

6 A. Yes.

7 Q. On the very last page of the document, of your
8 declaration, excuse me, page 6, the words are, on line
9 17, "I declare under penalty of perjury under the laws

10 A. Yes. 10 of the State of California that the foregoing is true
qi Q. What did you tell them about the deed of trust 11° and correct.”
12 on the Third Street property? 12 Do you see that language?
13 A, I said I did not know that that was there. 13 A. I didn't really know how to read it. I just
14 Q. Did you tell them that you thought you had been | 14 signed.
15 tricked into signing it? 15 Q. No, did your lawyers read that particular
16 A. Yes. 16 sentence to you?
17 Q. Was anybody other than Mr, Schinner and 17 A. They did.
18 Mr, Chevalier with you in the meeting? 18 Q. Did you understand what they said when they
19 A. No. 19 read that sentence to you?
20 Q. Your wife wasn't there, or your son? 20 A. No.
21 A. No. 21 Q. Did you ask them to explain it to you?
22 — Q. Soafter your first meeting, your lawyers 22. A. No.
23 prepared a draft declaration. And then you came back | 23 Q. Why not?
24 later to review it and sign it maybe the day beforethe | 24 A. I trusted the attorney.
25 hearing; is that right? 25 Q. Do you understand what "penalty of perjury"
Page 115) Page 117
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ZHANG — 4/15/2011

means?

A. No.

Q. In other instances where there was something
that they read to you that you didn't understand, what
did you do?

A. If it's not that important, then it's just what
itis.

o4rnunwne

Q But did you say anything to your lawyers if you
did not understand a statement that they were reading to
10 you?

il

©

A. Yes.
Q. And were any changes made to the draft after
you started that meeting, the second meeting?
A. I don't know.
Q. Ewant to try to jog your memory just a little
bit. Okay?
It's possible that you got there and they
presented you with a document; and as they read through
the document to you, you might have interrupted them or
corrected them at some point and said, "What you said
about that thing is not quite right."
Did anything like that happen?
A. Yes, but when they read it again, sometimes I
still did not understand.
Q. But if you corrected them and said something is

1. word for you; correct?
| 2 A. Yes.
| 3 Q. And if there was something you didn't
| 4. understand, you asked them to explain it to you;
| 5 correct?
6 A. Yes.
7 Q. Do you believe that any of the statements --
8 Well, back up.
9 Were there any statements that they read to you
10 that they did not explain to your satisfaction?
11 A. I don't remember.
12 Q Did anybody attempt to translate the document
13. from English into Chinese for you while you were there?
14 A. No.
15 Q. Does Mr. Schinner speak Chinese?
16 A. No.
17 Q So your meeting with them was entirely in the
| 18 English language; is that correct?
19 A. Yes,
i 20 Q. Did they ask you whether you felt the need for
| 21 a translator to assist you in the meeting?
22 A. No.
23

Q. Did you tell them you would prefer discussing

24 {t with a translator present?

25 A. No.

Page 120

Page 118

1 wrong, you know, did they make changes to the document?
2 Did something like that happen?

3 A. If it was not correct, it was corrected.

4 Q. Did something like that happen? I'm not asking

5 you to tell me, you know, what would have happened. I'm
€ asking: Do you remember that something like that

7 actually happened where you told them to change

1 Q. And you felt comfortable, did you not, that you

2 understood what they read to you; correct?

3 A. Yes.

| 4 Q Okay. Do you recall hearing them read to you

5 the text in paragraphs 12 and 13? And now I'm going to
6 read it out loud in English after the translator

7 translates my question.

8 something? 8 Quote: "Under the terms of the Fourth
3 A. That draft was not changed. 9 Extension Agreement, Cathay Bank required
10° Q, There's no changes to the text that you had 10 that Rai Kai, LLC, provide additional
11 read to you in your second meeting before you signed if} | 11 collateral as consideration for further
12 is that what you're saying? 12 extending the maturity date. Rai Kai, LLC,
13 A. No. ;13 arranged for a third party to provide
14 Q. Whatare you saying? I think we have a jaa additional collateral."
15 double-negative problem. jis Do you remember them saying those words to you
16 ‘You showed up at a meeting, It was the day 16 in English?
17 before the hearing; is that correct? 17 THE INTERPRETER: You don't want me to
18 A. Yes. 18 translate
19 Q. March 9, 2011? 19 MR. RUSSAK: I want just the question.
20 A. Um-bum. 20 THE INTERPRETER: Just the question, okay.
21 Q, And at the beginning or near the beginning of 21 THE WITNESS: I don't remember.
22 the meeting they gave you a draft of the declaration 22 MR. RUSSAK: Q. When I said it in English, did
23> that ultimately you signed as Exhibit 6; correct? 23 you understand me?
24 A. Yes. 24 A. Half and half.
25 Q, And they read through the declaration word by 25 Q. Was there anything that your lawyers read to
Page 119 1 Page 121
31 (Pages 118 to 121)
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you where you said you felt like you understood it only
half and half?

A. Yes.

Q. Did you let them know that you only understood
some portions of what they read to you half and half? Ss

Rw NR

A. Well, I don't know if they knew. 6
Q. I'masking you: Did you tell them that some 7
things you only understood half and half? 18
A. Itold them that my English wasn't good. 9
Q. I'm going to read some more words to you. I 10
don't want the translator to translate them, but I want [| 11
you to explain to me what you understand by the words | 12
that I say, Okay? 13
A. Okay. 14
Q. "Rai Kai arranged for a third party to provide | 15
additional collateral." Do you understand what I just | 16
said? 17
MR. CHEVALIER: J just want to object just on 118

the basis -- I want to say that your voice speaking now 19
is different than my voice or Michael Schinner's voice 20
speaking at the time in our office, 21
And now she can translate. I just want that on 22

the record. 23
THE WITNESS: I don't understand that. 24

MR. RUSSAK:; Q. Nothing about it at all? 25

Page 122

A. Tonly know and understood the word 1
“collateral.” 2
Q. "Additional collateral"; right? You understand | 3
the word "additional," don't you, in the context of 4
“additional collateral"? 5
Let me rephrase the question. You understand 6
the word "collateral"; correct? 7
A. Yes. 8
Q. And you understand the word "additional"; 3
correct?
A. I think that means extra,

Q. And so when you heard the phrase “additional 12
collateral," did that mean anything to you when 13
Mr. Chevalier or Mr. Schinner said those word to you | 14
when reading this declaration? 15

A. So my understanding is that they additionally 16

took Third Street, they additionally took that property 17
of mine. | 18
Q. Who is Dong Ying Qui? jas
A. That person has 30 percent of Third Street. 20
Q. Will you turn to the signature pages of 21

Exhibit 14, which is around page 44, And there are two | 22
copies of page 44, One has and the other one doesn't 23

have the signature of Dong Ying Qui. | 24

Do you see that? ;25
Page 123 !

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A. Yes.

Q. So

A. However, I believe that he did not sign this.

Q. Well, that was my question to you: Do you
recognize that signature as the signature of Dong Ying
Qui? Are you familiar with his signature so you'd be
able to recognize it?

A. I don't think he signed --

THE INTERPRETER: "He" or "she." The
interpreter will clarify.

"I don't think she signed it."

MR. RUSSAK: Q. Who do you think signed it?

A. I don't know.

Q. Are you saying you think somebody forged her
signature?

A. Yes. Because she's not even here.

Q. So who is Dong Ying Qui?

A. She is another person who put out money to have
30 percent of this property as another partner.

Q. Other than as a partner in this property, do
you have or does your wife have any relationship of any
nature with Dong Ying Qui?

A. No.

Q. How did she come to invest in the property with
you?

A. Friend.

Q. So you have a friend relationship with her;
correct?

A. Yes.

Q. Okay. How long have you known Dong Ying Qui?

A, Ten, eleven years.

Q. And have you asked her whether she signed this
deed of trust?

A. No.

Q. Have you told her that the property is in
foreclosure?

A. No.

Q. Don't you think that's something that you would
be obligated to tell her, as your friend?

A, I don't have her phone number, She's moved to
another state. I can't find her at the moment.

Q. How did you first come to meet Dong Ying Qui?

A. She used to live in San Francisco, but she
moved to Texas around three years ago.

Q. Se before 2009 she moved?

A. Yes.

Q. When you say she lived in San Francisco, how
did her life here in San Francisco bring her into your
circle of friends?

A. Well, friends know each other. At work, a

Page 125

32 (Pages 122 to 125}

Los Angeles
www.merrillcorp.com/law1 MR. CHEVALIER: I have to object to that,
2 though, Because those phone numbers, given that those
3 ladies are so far removed from the parties here, that is
4 private, confidential. i
5 MR. RUSSAK: Well, you're welcome to make that
6 objection. 1 will move to compel if you assert that in
7 any obstructive way. It is reasonably calculated to
8 lead to the discovery of admissible evidence: the
9 address and phone number of Dong Ying Qui. If the
10 witness wants to do his own investigation and, in lieu
11. of filling our that information, give us Dong Ying Qui's
12 updated contact information, that's all I need. But
13. failing that, | need the other phone numbers.
14 MR. CHEVALIER: All right. So, yeah, I mean,
15 leave the space. I'll probably do that if we can find
16 it.
17 MR. RUSSAK: [have to tell you, these are very
18 serious allegations of potential forgery in the deed of
19 trust, and J intend to investigate them fully and I will
20 not stand still for obstruction.
al MR. CHEVALIER: Okay.
22 MR. RUSSAK: Q. Turn back to your declaration,
23 please, Exhibit 6. And if you'll turn to the fifth
24 page, and I'll ask the translator to read to you again

25 paragraph 21. I know we discussed it previously, but F
Page 130

1 want to direct your attention to it again.
2 A. Could you read that again?
3 Q. I just want the translator to read to you
4 paragraph 21 and then I'll ask you a question about it.
5 A. Notso.
6 MR. RUSSAK: You read it to him?
7 THE INTERPRETER: Yeah, and he said, "Not so."
8 MR. RUSSAK: Q. And I think earlier in our
9 deposition today you said that that paragraph was not
10 completely accurate. My question to you is: What would
11 you change in that paragraph to make it accurate?
12 A, It's the bank did not give me any since the
13° last extension.
14 — Q, Since the sixth extension agreement?
15 A. Yes.
16 Q. And that's Exhibit 13; correct?
17 A. Yeah.
18 Q. Has it given you any money since you executed
19 the fifth extension agreement, which is Exhibit 12?
A. Yes.
Q. When and how much?
A. Idon't remember when and how much.
Q. After you signed Exhibit 13, you were told by
24 Nicholas Chung that the maturity date would be extended
25 to April 1, 2010; correct?

Page 131

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A. When I signed this (indicating), I know that it
went until February; but when I signed this
(indicating), he said that along with the collateral he
will give us 18 months.

Q. The "this,"' what are you referring to? What
"this"?

A. When we signed this and this (indicating), he
said that he will give us 18 months, and that's why we
signed the collateral to the property.

Q. "This and this,” is that Exhibit 15 and
Exhibit 167

A. 14 and 15.

Q. Well, 14 was signed in 2009; correct?

14is dated as of February 26, 2009; 15 and 16

are dated as of December 3, 2009,

A. Yeah, I think that it's 15 and 16.

Q. Allright. I think we previously established
on the record that 15 was the 225 International property
and 16 is the deed of trust on the 480 Potrero property.
Okay?

A. Yes.

Q. Okay. And after you signed these two
documents -- And if you look at the notary at the back,
the notary at the back indicates that the documents were

executed on December 16 and 17 respectively by you and
Page 132

your wife,

A. Yes.

Q. Okay. Did you receive any loan disbursements
after December 17, from the bank?

A. Any disbursements?

Q. Any loan money.

A. Yes.

Q. Okay. At some point after December 17, 2010,
did you complain to Nicholas Chung or Dominic Li that
you had not gotten additional money from the bank?

A. Yes.

Q. When?

A. I think that it was February or March 2010.

Q. Again, think carefully about the year. 2010?

A. Yes.

Q. Okay, 2010. When you complained to them, did
you do so by telephone or in person or some other
manner?

A. I called; I also went to their office.

Q. And the telephone call that you had, was that a
long telephone call or was it very brief?

Or, actually, let me -- Describe for me, if you
will, the telephone call, the sum and substance of what
was said by both you and whomever it was you were
speaking to at the bank,

Page 133
34 (Pages 130 to 133)

- Los Angeles
www.merrillcorp.com/lawoO ND A RB WH PB =

RDB Be Be Be eB eB ew me Se
RRR BSRESS BAR BE BRE S

27
28

LAW OFFICE OF
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(S10) 832-1686

Chijeh Hu (Bar No. 241271)
456 8" Street

LAW OFFICE OF CHIJEH HU
Oakland, California 94607
Telephone: (510) 832-1686
Facsimile: (510) 893-0155

Attorney for Cross-Complainant,
RAYMOND ZHANG, et al.

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO

UNLIMITED JURISDICTION

CATHAY BANK, a California banking
Corporation,

Plaintiff,
Vv.
RAYMOND XIANG KAI ZHANG, et al.,
Defendants.

RAYMOND XIANG KAI ZHANG, an
individual; CINDY ZHANG, an individual;
DONG YING QUI, an individual; RAY KAI,
LLC, a California limited liability company;
and ZHANGS, LLC, a California limited
liability company,

Cross-Complainants,
v.

CATHAY BANK, a California banking
corporation; and DOES 201-230, inclusive,

Cross-Defendants.

1

Case No. CGC-10-500934

THIRD AMENDED CROSS-COMPLAINT
For Fraud in the Inception, Fraudulent
Inducement into a Contract, Breach of
Contract, Wrongful Foreclosure, Breach of
the Implied Covenant of Good Faith and Fair
Dealing, Intentional Misrepresentation,
Concealment, Negligent Misrepresentation,
Intentional Interference with Prospective
Economic Advantage, Negligent Interference
with Prospective Economic Advantage,
Violation of Bus & Prof §17200 et. seq.,
Equitable Estoppel, Restitution/Unjust
Enrichment, and Accounting

RAYMOND XIANG KAI ZHANG, et. al., THIRD AMENDED CROSS-COMPLAINT1 XIANG KAI, LLC, a California limited
2 liability company,
5 Cross-Complainant,
ve
4
CATHAY BANK, a California banking
5 corporation; and DOES 26-50, inclusive,
6 Cross-Defendants.
7 || Cross-Complainants RAYMOND ZHANG, CINDY ZHANG, DONG YING QUI, RAY KAI
8 || LLC, and ZHANGS, LLC allege as follows:
9 GENERAL ALLEGATIONS
10
ul 1. Cross-Complainant RAYMOND XIANG KAI ZHANG (“RAYMOND”) and
2 CINDY ZHANG (“CINDY”) are and were at all relevant times individuals residing in and doing
B business within the city and County of San Francisco, CA.
4 2. RAYMOND and CINDY are the rightful owners of that certain real property,
6 commonly known as 229-255 International Boulevard, Oakland, California
16 (@INTERNATIONAL”), and legally described in Exhibit 1, and incorporated herein by
7 reference, at all relevant times.
18 3. DONG YING QUI (“QUI”) is and was at all relevant times an individual residing
19 in the city of Houston, Texas.
20 4, RAYMOND, CINDY and DONG are the rightful owners of that certain real
1 property, commonly known as 4900 Third Street, San Francisco, California (“THIRD
n STREET”), and legally described in Exhibit 2, and incorporated herein by reference, at all
relevant times.
23
4 5. RAYMOND and CINDY are the only members for each of RAY KAI, LLC
95 (RAY KAI”), and ZHANGS, LLC (“ZHANGS”).
26 6. RAYMOND and CINDY created the LLCs because their trusted long time
” accountant, who is not and was not a lawyer, advised them that setting LLCs would protect them
2g from losing their personal properties for business dealings.
CHEW HU
ase 6" STREET
OAKLAND, CA 94607 2
ero esenese RAYMOND XIANG KAI ZHANG, et. al., THIRD AMENDED CROSS-COMPLAINT28

LAW OFFICE OF”
CHIJEH HU
456 8™ STREET
OAKLAND, CA 94607
(510) 832.1686

i i

7. Cross-Complainant RAY KAI is and was at all relevant times a California limited
liability comp