Preview
Elattmnically
GARY P. DAMBACHER, ESQ. (SBN 92141)
H
by Superior Court of Calll‘orn Ia,CauntyloI‘San Ham
TIMOTHY T. TRUJILLO, ESQ. (SBN 198894)
FRANK L. RUSSELL, ESQ. (SBN 289335) UN 3/1/2021
DAMBACHER, TRUJILLO & RUSSELL, APLC By Is! Joel La cev
32 N. WASHINGTON STREET Deputy fruit
SONORA, CALIFORNIA 95370
TELEPHONE: (209) 533—1883 FAX: (209) 533-3844
Attorneys for Defendant/Cross—Complainant LAURA J. ARATA, trustee
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN MATEO
PENINSULA OPEN SPACE TRUST, ).Case No. 20-CIV-02349
' )
Plaintiff, ) OPPOSITION T0 DEMURRER TO FIRST AMENDED
CROSS-COMPLAINT BY LAURA ARATA
VS.
REDWOOD TRUST DEED SERVICES, INC., a
California Corporation; ERNEST J. MCNABB,
individually and as Trustee of the Ernest J. McNabb
Revocable Living Trust Dated 11/19/1990; LOUIS
J. ARATA, individually; LAURA AMTA, DATE. March 12, 2021
individually, and as sole successor trustee of the TM: 9:00 a.m.
John and Grace Arata 2004 Trust Executed August DEPT. 21
11, 2004; MARIE JOANNE ARATA, as the JUDGE: Hon. Robert D. Foiles
Representative of the Estate of Gary J. Arata,
Deceased, and DOES 1-20,
Defendants.
LAURA J. ARATA, as sole and successor trustee
of the John and Grace Arata 2004 Trust, dated
August 11, 2004
Cross-Complainant,
vs.
ERNEST J. MCNABB, individually and as Trustee
of the Ernest J. McNabb Revocable Living Trust
Dated 11/19/1990; REDWOOD TRUST DEED
SERVICES, INC., a California Corporation;
IHLLCREST REAL ESTATE, INC., a California
corporation; WILLIAM JACOB MAIER and
ROES 1-50, inclusive,
Cross-Defendants.
H
OPPOSITION T0 DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
Cross-Complainant LAURA J. ARATA ("LAURA" or "Cross-Complainant"), in her capacity as
sole and successor trustee of the JOHN and GRACE ARATA 2004 Trust, dated August 11, 2004 (the
"John Arata Trust"), submits the following memorandum of points and authorities in opposition to the
demurrer of Cross-Defendants ERNEST J. McNABB, individually and as Trustee of the ERNEST J.
McNABB REVOCABLE LIVING TRUST DATED 11/19/1990 (collectively "McNABB") to
LAURA's First Amended Cross-Complaint led November 3, 2020.
It should be noted that this is the second demurrer led by McNABB as the rst demurrer
resulted in the ling of a First Amended Cross-Complaint by LAURA.
I _
SUMMARY OF ARGUMENT
In her First Amended Cross-Complaint, LAURA pleads that certain secured loans (the "Subject
Loans" dened more specically below) are usurious on their face.
In response, private lender, ERNEST J. McNABB ("McNABB"), demurs on the ground that
LAURA has failed to state a cause of action based on usury. However, the Ely argument McNABB
offers in support of his demurrer is that the Subject Loans are exempt from usury laws because they
were arranged, for compensation, by William S. Maier and Peter Carl Foppiano dba ARC Capital who
were both licensed real estate brokers.
However, the nal written closing statement and other important documents prepared by the
title company in its duciary capacity which are attached to the First Amended Cross-Complaint,
clearly state that Hillcrest Real Estate Inc. (a suspended and unlicensed entity at the times the Subject
Loans were made) was the actual broker for the subject loans and that Hillcrest Real Estate Inc.
received of the broker’s monetary compensation for arranging the Subject Loans. In fact, it is
undisputed that Hillcrest Real Estate Inc. did actually receive all broker compensation for arranging the
Subject Loans. Those same documents clearly indicate that ARC Capital "originated" the subject loans
and that neither William S. Maier nor ARC Capitol were the broker for the Subject Loans. A mere
originator’s status as licensed or unlicensed has no bearing on whether the Subject Loans are exempt
from usury regulations because the Business and Professions Code requires that only the mortgage
broker, who for compensation, solicits the lender or negotiates the loan, exempts the transaction from
2
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
the usuary laws.
Therefore, there is a factual dispute between LAURA and McNABB, based on documentary
evidence, as to whether the Subject Loans were arranged by a licensed real estate broker and, whether,
of law, the Subject Loans are therefore exempt from usury regulations despite being
by operation
usurious on their face.
The fact that there is documentary and purported testimonial evidence as to who
conicting
Court cannot sustain McNabb’s demurrer because such a
"brokered" the Subject Loans means that this
Court that one entity, person or the other, as a matter of law,
ruling would necessitate a nding by this
arranged the Subject Loans despite actual conicting factual allegations supported by written evidence
and witness testimony. Instead, this is clearly a factual dispute which should be adjudicated by a trier of
fact.
McNABB’s demurrer is procedurally defective because he did not comply with the
Finally,
requirements of CCP 430.41 (a)(3).
[\JNNNNNNNNr—r—Ar—np—Ap—ap—tp—Ip—AHH
II
ARGUMENT
A. INTRODUCTION
McNABB demurs to the First Amended Cross-Complaint led by LAURA on the basis that it
a cause of action. Thus, the sole issue raised by a general demurrer is whether the facts
fails to state
state a valid cause of action, not whether they are true. (Del E. Webb Corp. v. Structural
pleaded
Materials Co. (1981) 123 CA3d 593; Hacker v. Homeward Residential, Inc. (2018) 26 CA 5th 270).
However, as will be shown, the factual allegations plead by LAURA, when considered as a whole, are
not only true, but provide a legal basis for asserting a valid cause of action under the usury statutes and
cases.
Therefore, for purposes of testing the legal sufciency of the cause of action, the demurrer
admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital District (1992) 2
C4th 962)
LAURA’s First Amended Cross-Complaint alleges that HILLCREST REAL ESTATE INC., a
California corporation ("HILLCREST"), was the real estate broker for the loan transactions at issue.
3
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
McNABB and to assert, by way of Judicial Notice, that WILLIAM J. MAIER
p—t
disagrees attempts
("MAIER") and Arc Capital were the brokers for the loan. Thus, McNABB attempts to challenge the
First Amended Cross-Complaint in a way that is analogous to a motion for summary judgment.
LAURA contends herein that the demurrer should be denied because 1) HILLCREST was
identied as the real estate broker in both the McNABB and Deeny Loan Documents; 2) HILLCREST
a real estate broker in both the McNABB and Deeny loans; and 3) HILLCREST
was compensated as
was and is unlicensed and suspended; and 4) that McNABB has not offered any evidence to controvert
any of the points set forth above.
B. HILLCREST IS IDENTIFIED AS THE REAL ESTATE BROKER IN THE SUBJECT LOANS
facts in exhibits attached to a complaint are given precedence over
Notably, appearing
inconsistent in the complaint (Moran v. Prime Healthcare Mgmt. Inc. [2016] 3 CA 5th
allegations
Exhibit A to LAURA’s First Amended Cross-Complaint, which is the Borrower’ Closing
1131).
Statement for the McNABB loan issued and prepared by Old Republic Title Company which handled
the escrow, clearly identies HILLCREST as the "Mortgage Broker." Additionally, at Exhibit D of the
First Amended Cross-Complaint, which is an Estimate of Fees and Costs for the McNABB loan,
HILLCREST is identied as the Mortgage Broker. On yet a third document entitled "Fees
again
Workshee
"
which was also prepared by Old Republic Title Company, HILLCREST is again identied
Broker. Arc is identied as the "Loan Originator" in this document not the
as the Mortgage Capital
mortgage broker.
Under Exhibit F to the First Amended Cross Complaint, which is a document prepared by Old
Republic Title Company under the 2014 Deeny Loan documents, HILLCREST is identied as the
mortgage broker and Arc Capital is identied at the loan originator.
Nowhere in either of the escrow les is either MAIER or Arc Capital identied as the mortgage
broker for these transactions.
C. HILLCREST WAS COMPENSATED AS THERTGAGE BROKER FOR EACH 0F THE SUBJECT LOANS
Referencing Exhibit A to the First Amended Cross—Complaint again, HILLCREST was
compensated $33,000 as and for a "Mortgage Broker’s Fee" as evidenced by the Borrower’s Settlement
Statement. It was also paid a "processing fee" of $3,500. These fees were again identied under
4
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
Exhibit D under the "Estimate of Fees and Costs" and again under the "Fees Worksheet." Also, under
H
the document entitled "Addendum to Closing Instructions" under the McNABB loan, this closing
instruction specically sets forth the following:
At closing, you will issue 6 checks...one to Hillcrest Real Estate Inc. for $36,500 (to be
overnighted to Hillcrest Real Estate Inc. at 1930 Primrose Drive in Petaluma, CA
94945...
Furthermore, under the Specic Closing Instructions for the Deeny loan under Exhibit F to the
First Amended Cross-Complaint, it provides for a payment of $16,500 to HILLCREST as the
"mortgage broker."
D. NEITHER WILLIAM MAIER NOR ARC CAPITAL RECEIVED COMPENSATION AS A MORTGAGE BROKER
FOR EITHER OF THE SUBJECT LOANS
Arc Capital is identied as a "loan originator" in the escrow documents. A "loan originator" is
not a real estate broker. A "real estate broker" is by Business and Profession Code §10131as
dened
follows:
A real estate broker within the meaning of this part is a person who, for a compensation
or in expectation of a compensation, regardless of the form or time of payment, does or
or others:
negotiates to do one or more of the following acts for another
Solicits borrowers or lenders for or negotiate loans or collects payments or
...(d)
services for borrowers or lenders or note owners in connection with loans
performs
secured directly or collaterally by liens on real property or on a business opportunity.
(Emphasis added.)
As a "broker’s Arc received what was identied as a loan origination
opposed to fee," Capital
fee. This is typically a fee to prepare the documents for the transaction. A loan originator does not
solicit borrowers or lenders or negotiate loans for the particular transaction. The real estate broker does
that. Therefore, even if Arc Capital had a broker’s license, it was not one identied in the loan
documents which undertook the duties of a broker in the subject transactions, nor did it get paid a
broker’s fee.
Additionally, MAIER did not get paid any type of fee in either the McNABB loan or the Deeny
loan despite his declarations that he acted as the broker for those loans.
///
5
OPPOSITION TO DEMURRER T0 FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
E. THE FIRST AMENDED CROSS-COMPLAINT IS SUFFICIENTLY CLEAR IN ITS ALLEGATIONS
There is no question that the amount of interest charged by McNABB under both loan
transactions is usurious because the loans initially call for 12% interest, which, under the McNABB
loan, escalates to 18% under its default provisions. Theses rates Violate Article XV, Section 1(1) of the
California Constitution which a 10% interest rate. The only issue in this case is whether
species
McNABB can escape liability for clear usury violations under Civil Code Section 1916.1 because a
licensed real estate broker "made or arranged" the loans at issue.
In the initial cross-complaint, LAURA plead that MAIER and/or HILLCREST arranged the
loans at issue. There are declarations in other pleadings by MAIER that he did so. However, the
was to support the premise that,
allegation that MAIER arranged the loans in the initial cross-complaint
based MAIER’S declaration, Arc Capital could not have arranged the loans. In the First
upon
LAURA attached further escrow documents which support that
Amended Cross-Complaint,
MAIER received for both the McNABB and Deeny loans which
HILLCREST, not compensation
NNNNNNNNNHr—‘Hr—tt—ip—Ap—ap—ap—tp—a
that HILLCREST made or arranged the loans because it was compensated as
buttress her allegations
the broker under both loans. This is the explanation that this factual allegation is omitted from the First
Amended Cross-Complaint.
Moreover, it should be noted that in both cross-complaints, there is a cause of action for
injunctive relief. The original pleading was veried in the event LAURA proceeded with injunctive
relief to enjoin the foreclosure sale. That was not necessary as POST proceeded, and successfully
obtained, a preliminary injunction against McNABB s scheduled foreclosure
sale.
F. HILLCREST IS DISQUALIFIED AS THE MORTGAGE BROKER BECAUSE AT ALL RELEVANT TIMES, IT WAS
NOT LICENSED AND WAS A SUSPENDED CORPORATION
HILLCREST was identied and paid as the mortgage broker in both the Deeny and McNABB
transactions. The exhibits to LAURA’s First Amended Cross-Complaint clearly show that: Yet, at the
time of both transactions, HILLCREST was not licensed as a real estate broker, and was also a
suspended corporation, which means it could not legally carry on business. The exhibits to LAURA’s
First Amended Cross-Complaint show that Hillcrest was suspended and unlicensed. Moreover, Maier
6
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
his license to "revive" Hillcrest.1 Hillcrest is therefore a legal "dead duck" for
H
cannot use personal
of qualifying as a mortgage broker under Civil Code Section 1916.1, yet it was identied and
purposes
paid as such.
G. THERE ARE TRIABLE ISSUES WHICH WOULD DEFEAT A MOTION FOR SUMMARY JUDGMENT WHICH
MCNABB ATTEMPTS T0 DO WITH HIS DEMURRER
In a at a motion for summary judgment, MCNABB seeks to attack the First
disguised attempt
Amended Cross-Complaint by demurrer. Obviously; McNABB’s defense is that there were others m
documents
could have made or arranged the loans at issue clearly ignoring the facts supporting the loan
in the proffered exhibits to the First Amended Cross-Complaint? In Gibbo v. Berger (2004) 123 Cal.
a real estate broker’s license, did not
App4th 396, the court held that a person, even one who possesses
arrange a loan within the meaning of Civil Code Section
1916.1 by merely preparing documents for the
a licensed real estate broker must undertake such duties as procuring or obtaining
transaction. Rather,
NNNNNNNNNu—IHr—An—Ir—t—‘r—Iy—dr—AH
the loan, setting the interest rate and points to be paid, or drafting the terms of the loan---all for
These are factual issues which must be resolved at a trial,not at the demurrer stage.
compensation.
Whether a particular transaction is usurious is a question of fact. Wheeler v. Superior Mortgage Ca, et
al (1961) 196 Cal.App.2d 822.
McNABB’s that another person or persons really acted as the mortgage
Therefore, position,
broker for the transactions, is one that he may attempt to assert at trial, but not in the demurrer stage
of
in an effort to the First Amended Cross-Complaint. Moreover, it is
the litigation entirely torpedo
that this would even support a motion for summary judgment or summary
unlikely, position
as there are clearly triable issues of fact which should be left for a trial on the merits. This
adjudication
is not a classroom where the teacher states: “Raise your hands if you’re a mortgage broker.”
H. THE DEMURRER IS PROCEDURALLY DEFECTIVE BASED UPON CCP SECTION 430.41
MCNABB initially demurred to the original cross-complaint. As a result of that process,
1
Pursuant to the Department of Real Estate rules and regulations, a license as an individual broker and a license as a broker-
officer of a corporation are separate entities and the status is not transferable from one to the other. (RE 218 [Rev. 7/18]
2
The mortgage broker has to be the one who makes or arranges the loan for compensation to qualify under Civil Code
Section 1916. 1. The factthatothers, who simply may be involved in the transactionand who have theirbroker’s licenses,is
not enough for usurious interest to be excluded under this section.
7
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
LAURA served a First Amended However, no meet and confer process
H
led and Cross-Complaint.
occurred after the amended complaint was Rather, McNABB led a second demurrer and did
led.
not le or serve the mandatory declaration required under CCP Section 430.41(a)(3). This is because
McNABB’s counsel did not meet or telephone an attorney in our ofce as required by CCP Section
at time to discuss the merits of the First Amended Cross-Complaint. The demurrer
430.41(a) any
should therefore be denied on these procedural grounds as well.
III
CONCLUSION
For the reasons set forth above, the First Amended Cross-Complaint states a legal and factual
cause of action under which Civil Code Section 1916.1 should not apply in this case, and LAURA
respectfully requests that this Court deny McNABB's demurrer.
Additionally, LAURA requests and the Court order that McNABB be made to answer the First
Amended and that LAURA be awarded her reasonable attorneys fees and costs for
Cross-Complaint
the in view of the fact that no meet and confer process occurred after
defending demurrer, especially
the ling of LAURA’s First Amended Cross—Complaint.
Respectfully submitted,
DATED: March 1, 2021
GARE? P. DAMBACHER, Attomenyendant/
Cross-Complainant LAURA AMTA
25
26
27
28
8
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
PROOF OF ELECTRONIC SERVICE
Peninsula Open Space Trust v. Redwood Trust Deed Services, et a|.
San Mateo County Superior Court, No. 20-CIV-02349
I,Tricia Lenox, hereby declare:
business address is 32 N. Washington Street, Sonora, California
I am employed in the County of Tuolumne; my
and not a to the action. On March 1,2021, l served the
95370. l am over the age of 18 years party foregoing
foregoing OPPOSITION TO DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA:
as set forth below, in accordance with Code of Civil Procedure §1005(c)*:
Parties sewed:
For Plaintiff: For Defendant Redwood Trust Deed Services:
Tamara S. Galanter, Esq. Benjamin R. Levinson, Esq.
Sara A. Clark, Esq. Law Office of Benjamin R. Levinson
Shute, Mihaly & Weinberger 46 N. Second Street, Suite A
396 Hayes Street Campbell, California 95008
San Francisco, California 94102
Facsimile: (408) 866-2992
Facsimile: (41 5) 552-5816
OOQONUl-bUJNr—‘OOOOQQUI-PUJNI—lo
For Defendant Ernest J. McNabb: For Cross-Defendants Maier and Hillcrest:
Andrew J. Wiegel, Esq. William W. Hatcher, Jr., Esq.
G. Law Ofces of William W. Hatcher
Ryan Patrick, Esq.
114 Pierce Street
Wiegel Law Group
414 Gough Street, Suite 1 Santa Rosa, California 95404
San Francisco, California 94102
Facsimile: (707) 545-0220
Facsimile: unavailable
Email: andrew@wiegellawgroup.com
Email: ryan@wiegellawgroup.com
of perjury under the laws of the State of California that the foregoing is true and
| declare under penalty
correct, and that this document was executed on March 1, 2021, in Sonora, California.
TRICIA LENox
" /
be served by
*CCP §1005(c): “Notwithstanding any other provision of this section, all papers opposing a motion and all reply papers shall
or other means consistentwithSections 1010, 1011, 1012, and 1013, and
personal facsimile
delivery, transmission, express mail,
taterthan the close ofthe next business day afterthe
reasonably calculated to ensure delivery to the other party or parties not
fiied.This subdivision to theservice of and reply
time the opposing papers or reply papers, as applicable, are applies opposition
in addition to the motions listed in subdivision (3).“
papers regarding motions for summary judgment or summary adjudication.
9
OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA
Preview
Elattmnically GARY P. DAMBACHER, ESQ. (SBN 92141) H by Superior Court of Calll‘orn Ia,CauntyloI‘San Ham TIMOTHY T. TRUJILLO, ESQ. (SBN 198894) FRANK L. RUSSELL, ESQ. (SBN 289335) UN 3/1/2021 DAMBACHER, TRUJILLO & RUSSELL, APLC By Is! Joel La cev 32 N. WASHINGTON STREET Deputy fruit SONORA, CALIFORNIA 95370 TELEPHONE: (209) 533—1883 FAX: (209) 533-3844 Attorneys for Defendant/Cross—Complainant LAURA J. ARATA, trustee SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN MATEO PENINSULA OPEN SPACE TRUST, ).Case No. 20-CIV-02349 ' ) Plaintiff, ) OPPOSITION T0 DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA VS. REDWOOD TRUST DEED SERVICES, INC., a California Corporation; ERNEST J. MCNABB, individually and as Trustee of the Ernest J. McNabb Revocable Living Trust Dated 11/19/1990; LOUIS J. ARATA, individually; LAURA AMTA, DATE. March 12, 2021 individually, and as sole successor trustee of the TM: 9:00 a.m. John and Grace Arata 2004 Trust Executed August DEPT. 21 11, 2004; MARIE JOANNE ARATA, as the JUDGE: Hon. Robert D. Foiles Representative of the Estate of Gary J. Arata, Deceased, and DOES 1-20, Defendants. LAURA J. ARATA, as sole and successor trustee of the John and Grace Arata 2004 Trust, dated August 11, 2004 Cross-Complainant, vs. ERNEST J. MCNABB, individually and as Trustee of the Ernest J. McNabb Revocable Living Trust Dated 11/19/1990; REDWOOD TRUST DEED SERVICES, INC., a California Corporation; IHLLCREST REAL ESTATE, INC., a California corporation; WILLIAM JACOB MAIER and ROES 1-50, inclusive, Cross-Defendants. H OPPOSITION T0 DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA Cross-Complainant LAURA J. ARATA ("LAURA" or "Cross-Complainant"), in her capacity as sole and successor trustee of the JOHN and GRACE ARATA 2004 Trust, dated August 11, 2004 (the "John Arata Trust"), submits the following memorandum of points and authorities in opposition to the demurrer of Cross-Defendants ERNEST J. McNABB, individually and as Trustee of the ERNEST J. McNABB REVOCABLE LIVING TRUST DATED 11/19/1990 (collectively "McNABB") to LAURA's First Amended Cross-Complaint led November 3, 2020. It should be noted that this is the second demurrer led by McNABB as the rst demurrer resulted in the ling of a First Amended Cross-Complaint by LAURA. I _ SUMMARY OF ARGUMENT In her First Amended Cross-Complaint, LAURA pleads that certain secured loans (the "Subject Loans" dened more specically below) are usurious on their face. In response, private lender, ERNEST J. McNABB ("McNABB"), demurs on the ground that LAURA has failed to state a cause of action based on usury. However, the Ely argument McNABB offers in support of his demurrer is that the Subject Loans are exempt from usury laws because they were arranged, for compensation, by William S. Maier and Peter Carl Foppiano dba ARC Capital who were both licensed real estate brokers. However, the nal written closing statement and other important documents prepared by the title company in its duciary capacity which are attached to the First Amended Cross-Complaint, clearly state that Hillcrest Real Estate Inc. (a suspended and unlicensed entity at the times the Subject Loans were made) was the actual broker for the subject loans and that Hillcrest Real Estate Inc. received of the broker’s monetary compensation for arranging the Subject Loans. In fact, it is undisputed that Hillcrest Real Estate Inc. did actually receive all broker compensation for arranging the Subject Loans. Those same documents clearly indicate that ARC Capital "originated" the subject loans and that neither William S. Maier nor ARC Capitol were the broker for the Subject Loans. A mere originator’s status as licensed or unlicensed has no bearing on whether the Subject Loans are exempt from usury regulations because the Business and Professions Code requires that only the mortgage broker, who for compensation, solicits the lender or negotiates the loan, exempts the transaction from 2 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA the usuary laws. Therefore, there is a factual dispute between LAURA and McNABB, based on documentary evidence, as to whether the Subject Loans were arranged by a licensed real estate broker and, whether, of law, the Subject Loans are therefore exempt from usury regulations despite being by operation usurious on their face. The fact that there is documentary and purported testimonial evidence as to who conicting Court cannot sustain McNabb’s demurrer because such a "brokered" the Subject Loans means that this Court that one entity, person or the other, as a matter of law, ruling would necessitate a nding by this arranged the Subject Loans despite actual conicting factual allegations supported by written evidence and witness testimony. Instead, this is clearly a factual dispute which should be adjudicated by a trier of fact. McNABB’s demurrer is procedurally defective because he did not comply with the Finally, requirements of CCP 430.41 (a)(3). [\JNNNNNNNNr—r—Ar—np—Ap—ap—tp—Ip—AHH II ARGUMENT A. INTRODUCTION McNABB demurs to the First Amended Cross-Complaint led by LAURA on the basis that it a cause of action. Thus, the sole issue raised by a general demurrer is whether the facts fails to state state a valid cause of action, not whether they are true. (Del E. Webb Corp. v. Structural pleaded Materials Co. (1981) 123 CA3d 593; Hacker v. Homeward Residential, Inc. (2018) 26 CA 5th 270). However, as will be shown, the factual allegations plead by LAURA, when considered as a whole, are not only true, but provide a legal basis for asserting a valid cause of action under the usury statutes and cases. Therefore, for purposes of testing the legal sufciency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital District (1992) 2 C4th 962) LAURA’s First Amended Cross-Complaint alleges that HILLCREST REAL ESTATE INC., a California corporation ("HILLCREST"), was the real estate broker for the loan transactions at issue. 3 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA McNABB and to assert, by way of Judicial Notice, that WILLIAM J. MAIER p—t disagrees attempts ("MAIER") and Arc Capital were the brokers for the loan. Thus, McNABB attempts to challenge the First Amended Cross-Complaint in a way that is analogous to a motion for summary judgment. LAURA contends herein that the demurrer should be denied because 1) HILLCREST was identied as the real estate broker in both the McNABB and Deeny Loan Documents; 2) HILLCREST a real estate broker in both the McNABB and Deeny loans; and 3) HILLCREST was compensated as was and is unlicensed and suspended; and 4) that McNABB has not offered any evidence to controvert any of the points set forth above. B. HILLCREST IS IDENTIFIED AS THE REAL ESTATE BROKER IN THE SUBJECT LOANS facts in exhibits attached to a complaint are given precedence over Notably, appearing inconsistent in the complaint (Moran v. Prime Healthcare Mgmt. Inc. [2016] 3 CA 5th allegations Exhibit A to LAURA’s First Amended Cross-Complaint, which is the Borrower’ Closing 1131). Statement for the McNABB loan issued and prepared by Old Republic Title Company which handled the escrow, clearly identies HILLCREST as the "Mortgage Broker." Additionally, at Exhibit D of the First Amended Cross-Complaint, which is an Estimate of Fees and Costs for the McNABB loan, HILLCREST is identied as the Mortgage Broker. On yet a third document entitled "Fees again Workshee " which was also prepared by Old Republic Title Company, HILLCREST is again identied Broker. Arc is identied as the "Loan Originator" in this document not the as the Mortgage Capital mortgage broker. Under Exhibit F to the First Amended Cross Complaint, which is a document prepared by Old Republic Title Company under the 2014 Deeny Loan documents, HILLCREST is identied as the mortgage broker and Arc Capital is identied at the loan originator. Nowhere in either of the escrow les is either MAIER or Arc Capital identied as the mortgage broker for these transactions. C. HILLCREST WAS COMPENSATED AS THERTGAGE BROKER FOR EACH 0F THE SUBJECT LOANS Referencing Exhibit A to the First Amended Cross—Complaint again, HILLCREST was compensated $33,000 as and for a "Mortgage Broker’s Fee" as evidenced by the Borrower’s Settlement Statement. It was also paid a "processing fee" of $3,500. These fees were again identied under 4 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA Exhibit D under the "Estimate of Fees and Costs" and again under the "Fees Worksheet." Also, under H the document entitled "Addendum to Closing Instructions" under the McNABB loan, this closing instruction specically sets forth the following: At closing, you will issue 6 checks...one to Hillcrest Real Estate Inc. for $36,500 (to be overnighted to Hillcrest Real Estate Inc. at 1930 Primrose Drive in Petaluma, CA 94945... Furthermore, under the Specic Closing Instructions for the Deeny loan under Exhibit F to the First Amended Cross-Complaint, it provides for a payment of $16,500 to HILLCREST as the "mortgage broker." D. NEITHER WILLIAM MAIER NOR ARC CAPITAL RECEIVED COMPENSATION AS A MORTGAGE BROKER FOR EITHER OF THE SUBJECT LOANS Arc Capital is identied as a "loan originator" in the escrow documents. A "loan originator" is not a real estate broker. A "real estate broker" is by Business and Profession Code §10131as dened follows: A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or or others: negotiates to do one or more of the following acts for another Solicits borrowers or lenders for or negotiate loans or collects payments or ...(d) services for borrowers or lenders or note owners in connection with loans performs secured directly or collaterally by liens on real property or on a business opportunity. (Emphasis added.) As a "broker’s Arc received what was identied as a loan origination opposed to fee," Capital fee. This is typically a fee to prepare the documents for the transaction. A loan originator does not solicit borrowers or lenders or negotiate loans for the particular transaction. The real estate broker does that. Therefore, even if Arc Capital had a broker’s license, it was not one identied in the loan documents which undertook the duties of a broker in the subject transactions, nor did it get paid a broker’s fee. Additionally, MAIER did not get paid any type of fee in either the McNABB loan or the Deeny loan despite his declarations that he acted as the broker for those loans. /// 5 OPPOSITION TO DEMURRER T0 FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA E. THE FIRST AMENDED CROSS-COMPLAINT IS SUFFICIENTLY CLEAR IN ITS ALLEGATIONS There is no question that the amount of interest charged by McNABB under both loan transactions is usurious because the loans initially call for 12% interest, which, under the McNABB loan, escalates to 18% under its default provisions. Theses rates Violate Article XV, Section 1(1) of the California Constitution which a 10% interest rate. The only issue in this case is whether species McNABB can escape liability for clear usury violations under Civil Code Section 1916.1 because a licensed real estate broker "made or arranged" the loans at issue. In the initial cross-complaint, LAURA plead that MAIER and/or HILLCREST arranged the loans at issue. There are declarations in other pleadings by MAIER that he did so. However, the was to support the premise that, allegation that MAIER arranged the loans in the initial cross-complaint based MAIER’S declaration, Arc Capital could not have arranged the loans. In the First upon LAURA attached further escrow documents which support that Amended Cross-Complaint, MAIER received for both the McNABB and Deeny loans which HILLCREST, not compensation NNNNNNNNNHr—‘Hr—tt—ip—Ap—ap—ap—tp—a that HILLCREST made or arranged the loans because it was compensated as buttress her allegations the broker under both loans. This is the explanation that this factual allegation is omitted from the First Amended Cross-Complaint. Moreover, it should be noted that in both cross-complaints, there is a cause of action for injunctive relief. The original pleading was veried in the event LAURA proceeded with injunctive relief to enjoin the foreclosure sale. That was not necessary as POST proceeded, and successfully obtained, a preliminary injunction against McNABB s scheduled foreclosure sale. F. HILLCREST IS DISQUALIFIED AS THE MORTGAGE BROKER BECAUSE AT ALL RELEVANT TIMES, IT WAS NOT LICENSED AND WAS A SUSPENDED CORPORATION HILLCREST was identied and paid as the mortgage broker in both the Deeny and McNABB transactions. The exhibits to LAURA’s First Amended Cross-Complaint clearly show that: Yet, at the time of both transactions, HILLCREST was not licensed as a real estate broker, and was also a suspended corporation, which means it could not legally carry on business. The exhibits to LAURA’s First Amended Cross-Complaint show that Hillcrest was suspended and unlicensed. Moreover, Maier 6 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA his license to "revive" Hillcrest.1 Hillcrest is therefore a legal "dead duck" for H cannot use personal of qualifying as a mortgage broker under Civil Code Section 1916.1, yet it was identied and purposes paid as such. G. THERE ARE TRIABLE ISSUES WHICH WOULD DEFEAT A MOTION FOR SUMMARY JUDGMENT WHICH MCNABB ATTEMPTS T0 DO WITH HIS DEMURRER In a at a motion for summary judgment, MCNABB seeks to attack the First disguised attempt Amended Cross-Complaint by demurrer. Obviously; McNABB’s defense is that there were others m documents could have made or arranged the loans at issue clearly ignoring the facts supporting the loan in the proffered exhibits to the First Amended Cross-Complaint? In Gibbo v. Berger (2004) 123 Cal. a real estate broker’s license, did not App4th 396, the court held that a person, even one who possesses arrange a loan within the meaning of Civil Code Section 1916.1 by merely preparing documents for the a licensed real estate broker must undertake such duties as procuring or obtaining transaction. Rather, NNNNNNNNNu—IHr—An—Ir—t—‘r—Iy—dr—AH the loan, setting the interest rate and points to be paid, or drafting the terms of the loan---all for These are factual issues which must be resolved at a trial,not at the demurrer stage. compensation. Whether a particular transaction is usurious is a question of fact. Wheeler v. Superior Mortgage Ca, et al (1961) 196 Cal.App.2d 822. McNABB’s that another person or persons really acted as the mortgage Therefore, position, broker for the transactions, is one that he may attempt to assert at trial, but not in the demurrer stage of in an effort to the First Amended Cross-Complaint. Moreover, it is the litigation entirely torpedo that this would even support a motion for summary judgment or summary unlikely, position as there are clearly triable issues of fact which should be left for a trial on the merits. This adjudication is not a classroom where the teacher states: “Raise your hands if you’re a mortgage broker.” H. THE DEMURRER IS PROCEDURALLY DEFECTIVE BASED UPON CCP SECTION 430.41 MCNABB initially demurred to the original cross-complaint. As a result of that process, 1 Pursuant to the Department of Real Estate rules and regulations, a license as an individual broker and a license as a broker- officer of a corporation are separate entities and the status is not transferable from one to the other. (RE 218 [Rev. 7/18] 2 The mortgage broker has to be the one who makes or arranges the loan for compensation to qualify under Civil Code Section 1916. 1. The factthatothers, who simply may be involved in the transactionand who have theirbroker’s licenses,is not enough for usurious interest to be excluded under this section. 7 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA LAURA served a First Amended However, no meet and confer process H led and Cross-Complaint. occurred after the amended complaint was Rather, McNABB led a second demurrer and did led. not le or serve the mandatory declaration required under CCP Section 430.41(a)(3). This is because McNABB’s counsel did not meet or telephone an attorney in our ofce as required by CCP Section at time to discuss the merits of the First Amended Cross-Complaint. The demurrer 430.41(a) any should therefore be denied on these procedural grounds as well. III CONCLUSION For the reasons set forth above, the First Amended Cross-Complaint states a legal and factual cause of action under which Civil Code Section 1916.1 should not apply in this case, and LAURA respectfully requests that this Court deny McNABB's demurrer. Additionally, LAURA requests and the Court order that McNABB be made to answer the First Amended and that LAURA be awarded her reasonable attorneys fees and costs for Cross-Complaint the in view of the fact that no meet and confer process occurred after defending demurrer, especially the ling of LAURA’s First Amended Cross—Complaint. Respectfully submitted, DATED: March 1, 2021 GARE? P. DAMBACHER, Attomenyendant/ Cross-Complainant LAURA AMTA 25 26 27 28 8 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA PROOF OF ELECTRONIC SERVICE Peninsula Open Space Trust v. Redwood Trust Deed Services, et a|. San Mateo County Superior Court, No. 20-CIV-02349 I,Tricia Lenox, hereby declare: business address is 32 N. Washington Street, Sonora, California I am employed in the County of Tuolumne; my and not a to the action. On March 1,2021, l served the 95370. l am over the age of 18 years party foregoing foregoing OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA: as set forth below, in accordance with Code of Civil Procedure §1005(c)*: Parties sewed: For Plaintiff: For Defendant Redwood Trust Deed Services: Tamara S. Galanter, Esq. Benjamin R. Levinson, Esq. Sara A. Clark, Esq. Law Office of Benjamin R. Levinson Shute, Mihaly & Weinberger 46 N. Second Street, Suite A 396 Hayes Street Campbell, California 95008 San Francisco, California 94102 Facsimile: (408) 866-2992 Facsimile: (41 5) 552-5816 OOQONUl-bUJNr—‘OOOOQQUI-PUJNI—lo For Defendant Ernest J. McNabb: For Cross-Defendants Maier and Hillcrest: Andrew J. Wiegel, Esq. William W. Hatcher, Jr., Esq. G. Law Ofces of William W. Hatcher Ryan Patrick, Esq. 114 Pierce Street Wiegel Law Group 414 Gough Street, Suite 1 Santa Rosa, California 95404 San Francisco, California 94102 Facsimile: (707) 545-0220 Facsimile: unavailable Email: andrew@wiegellawgroup.com Email: ryan@wiegellawgroup.com of perjury under the laws of the State of California that the foregoing is true and | declare under penalty correct, and that this document was executed on March 1, 2021, in Sonora, California. TRICIA LENox " / be served by *CCP §1005(c): “Notwithstanding any other provision of this section, all papers opposing a motion and all reply papers shall or other means consistentwithSections 1010, 1011, 1012, and 1013, and personal facsimile delivery, transmission, express mail, taterthan the close ofthe next business day afterthe reasonably calculated to ensure delivery to the other party or parties not fiied.This subdivision to theservice of and reply time the opposing papers or reply papers, as applicable, are applies opposition in addition to the motions listed in subdivision (3).“ papers regarding motions for summary judgment or summary adjudication. 9 OPPOSITION TO DEMURRER TO FIRST AMENDED CROSS-COMPLAINT BY LAURA ARATA