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1
Andrew J. Wiegel, Esq., (SBN 075204)
2 G. Ryan Patrick, Esq., (SBN 275517)
3 WIEGEL LAW GROUP, PLC
414 Gough Street
4 San Francisco, CA 94102-4464 3/5/2021
(415) 552-8230
5 andrew@wiegellawgroup.com
6 ryan@wiegellawgroup.com
7 Attorneys for Defendants:
ERNEST J. MCNABB, Individually and as
8 Trustee of the ERNEST J. MCNABB REVOCABLE
9 LIVING TRUST DATED 11/19/1990
10 SUPERIOR COURT OF CALIFORNIA
11 COUNTY OF SAN MATEO
12
PENINSULA OPEN SPACE TRUST, Case No. 20-CIV-02349
13
Plaintiff,
14 REPLY TO LAURA ARATA
vs. OPPOSITION TO CROSS-DEFENDANT
15 ERNEST J. MCNABB’S DEMURRER
REDWOOD TRUST DEED SERVICES,
16 INC., a California Corporation; ERNEST TO FIRST AMENDED CROSS-
J. MCNABB, individually and as Trustee COMPLAINT
17 of the Ernest J. McNabb Revocable
Living Trust Dated 11/19/1990; LOUIS Date: March 12, 2021
18 J. ARATA, individually; LAURA Time: 9:00 A.M.
ARATA, individually, as the Co- Dept. 21, Courtroom 2J
19 Executor and Representative of the
Estate of Gary J. Arata, Deceased, and as
20 sole successor trustee of the John and Hon. Robert D. Foiles
Grace Arata 2004 Trust Executed August
21
11, 2004; and DOES 1-20.
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Defendants.
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REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT
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1
LAURA J. ARATA, as sole and
2 successor trustee of the John and Grace
Arata 2004 Trust, dated August 11, 2004,
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Cross Complainant,
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vs.
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6
ERNEST J. MCNABB, individually and
as Trustee of the Ernest J. McNABB
7 Revocable Living Trust dated
11/19/1990; REDWOOD TRUST DEED
8 SERVICES, INC., a California
Corporation; HILLCREST REAL
9 ESTATE INC., A California
Corporation; WILLIAM JACOB
10 MAIER; and ROES 1-50, inclusive
11 Cross-Defendants.
12
13
14 In order for the exemption of Civil Code § 1916.1 to apply, all that is required is that a
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loan secured by real property be made or arranged by a California licensed real estate broker who
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acts for compensation or expectation of compensation for soliciting, negotiating, or arranging the
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loan for another. ARC Capital is the licensed real estate broker who arranged the loan
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19 transactions for the lender and received compensation for doing so. Therefore, the exemption of
20 Civil Code § 1961.1 applies and the loans are not usurious.
21
In her opposition, Laura Arata blatantly ignores the fact that the loan transactions were
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arranged by two real estate brokers, a broker who represented the lender ( i.e. ARC Capital) and
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a broker who represented the borrower (i.e. Hillcrest/Maier.)
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25 In doing so, Laura Arata does not dispute the fact that ARC Capital held a valid real
26 estate broker’s license at the time of the loan transactions. Laura Arata makes no attempt to
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explain why ARC Capital’s license information is on the loan documents. As pointed out in
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REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT
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1 McNabb’s moving papers, California law requires a broker to disclose his or her license number
2
and the license information whenever a borrower or investor signs any documents related to a
3
loan negotiated by the broker. (Bus. & Prof. Code § 10236.4(b).) Here, ARC Capital’s license
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information appears on loan documents in order to meet this requirement. (See the McNabb
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6 promissory note attached as Exhibit B to the First Amended Cross-Complaint. The First
7 Amended Cross-Complaint is attached as Exhibit C to McNabb’s Request for Judicial Notice.
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See also the Deeney promissory note which is attached as Exhibit C to the First Amended
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Petition For Removal of Trustee in San Mateo Superior Court case 19-PRO-01586. This petition
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has been provided to the court in McNabb’s Request for Judicial Notice as Exhibit H.)
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12 Furthermore, Laura Arata fails to make any attempt in her opposition to address the fact
13 that ARC Capital issued the statutory Lender/Purchaser Disclosure Statement wherein ARC
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Capital is identified as the broker acting on behalf of the lender, Ernest J. McNabb. (See RFJN,
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Exhibit D.) As pointed out in McNabb’s motion papers, Business & Profession Code §§ 10232.4
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and 10232.5, require a real estate broker, “when performing acts described in section 10131(d)”,
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18 to provide this disclosure to the prospective lender.
19 The fact that ARC Capital issued a Lender/Purchase Disclosure Statement that identifies
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ARC Capital as the broker for the lender, Ernest J. McNabb, pursuant to Bus. & Prof Code §§
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10232.4 and 10232.5, completely undermines Laura Arata’s contention that the subject loans are
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usurious. This fact also undermines Laura Arata’s assertion that, “a loan originator is not a real
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24 estate broker… A loan originator does not solicit borrowers or lenders or negotiate loans for
25 particular transactions.” (Arata Opp. At p. 5.) This assertion is further undermined by Bus. &
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Prof. Code § 10166.01, which defines “mortgage loan originator” as “an individual who takes a
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REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT
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1 residential mortgage loan application or offers or negotiates terms of a residential mortgage loan
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for compensation or gain.”
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If all ARC Capital did in these transactions was merely prepare documents, as Laura
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Arata contends, there would be no reason for ARC Capital’s license information to be included
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6 on the promissory notes. There would be no reason for ARC Capital to issue the
7 Lender/Purchaser Disclosure Statement pursuant to Bus. & Prof Code §§ 10232.4 and 10232.5.
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Furthermore, there would be no reason to pay ARC Capital a $33,000 commission in addition to
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separate fees for “document preparation” and “underwriting”. The borrower’s closing statement
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attached as Exhibit A to Laura Arata’s first amended cross-complaint and the estimate of fees
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12 and fees worksheet contained in the closing instructions attached as Exhibit D show that the real
13 estate brokers who arranged the loan were each paid a commission of 3%, which amounted to
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$33,000 commission paid to ARC Capital and ab$33,000 commission paid to Hillcrest.
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Again, Laura Arata chose to ignore this fact in her opposition and makes no attempt to
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explain why each broker arranging the loan was paid an equal commission fee.
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18 Civil Code § 1916.1 clearly exempts any loan made or arranged by any licensed real
19 estate broker and secured by real property. For purposes of this statute, a loan is arranged by a
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licensed as a real estate broker when the broker acts for compensation for soliciting, negotiating,
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or arranging the loan for another. The term “made or arranged” includes any loan made by any
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made by a person licensed as a real estate broker as a principal or as an agent for others, and
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24 whether or not the person is acting within the course and scope of such license. (Civ. Code §
25 1916.1)
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“While the allegations of a complaint must be accepted as true for purposes of demurrer,
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the facts appearing in exhibits attached to the complaint will also be accepted as true and, if
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REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT
4
1 contrary to the allegations in the pleading, will be give precedence.” (Moran v. Prime
2
Healthcare Mgmt. Inc. (2016) 3 CA 5th 1131, at p. 1146.)
3
Based on the information in the exhibits attached to Laura Arata’s first amended cross-
4
complaint and the information contained in McNabb’s Request for Judicial Notice, it is clear that
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6 ARC Capital held a valid real estate broker’s license during the loan transactions. It is also clear
7 that ARC Capital arranged the loans as the broker for the lender, and was paid a commission for
8
doing so. Therefore, the loans are exempt under Civil Code § 1916.1 and Laura Arata’s usury
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claims fail. Thus, the Court should grant McNabb’s demurrer without leave to amend.
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Respectfully submitted,
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Date: March 5, 2021 WIEGEL LAW GROUP, PLC
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By: /s/ G. Ryan Patrick
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18 G. Ryan Patrick, Esq.
ERNEST J. MCNABB, Individually and as
19 Trustee of the ERNEST J. MCNABB
REVOCABLE LIVING TRUST DATED
20 11/19/1990
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REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER
TO FIRST AMENDED CROSS-COMPLAINT
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Preview
1 Andrew J. Wiegel, Esq., (SBN 075204) 2 G. Ryan Patrick, Esq., (SBN 275517) 3 WIEGEL LAW GROUP, PLC 414 Gough Street 4 San Francisco, CA 94102-4464 3/5/2021 (415) 552-8230 5 andrew@wiegellawgroup.com 6 ryan@wiegellawgroup.com 7 Attorneys for Defendants: ERNEST J. MCNABB, Individually and as 8 Trustee of the ERNEST J. MCNABB REVOCABLE 9 LIVING TRUST DATED 11/19/1990 10 SUPERIOR COURT OF CALIFORNIA 11 COUNTY OF SAN MATEO 12 PENINSULA OPEN SPACE TRUST, Case No. 20-CIV-02349 13 Plaintiff, 14 REPLY TO LAURA ARATA vs. OPPOSITION TO CROSS-DEFENDANT 15 ERNEST J. MCNABB’S DEMURRER REDWOOD TRUST DEED SERVICES, 16 INC., a California Corporation; ERNEST TO FIRST AMENDED CROSS- J. MCNABB, individually and as Trustee COMPLAINT 17 of the Ernest J. McNabb Revocable Living Trust Dated 11/19/1990; LOUIS Date: March 12, 2021 18 J. ARATA, individually; LAURA Time: 9:00 A.M. ARATA, individually, as the Co- Dept. 21, Courtroom 2J 19 Executor and Representative of the Estate of Gary J. Arata, Deceased, and as 20 sole successor trustee of the John and Hon. Robert D. Foiles Grace Arata 2004 Trust Executed August 21 11, 2004; and DOES 1-20. 22 Defendants. 23 24 25 26 27 28 REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT 1 1 LAURA J. ARATA, as sole and 2 successor trustee of the John and Grace Arata 2004 Trust, dated August 11, 2004, 3 Cross Complainant, 4 vs. 5 6 ERNEST J. MCNABB, individually and as Trustee of the Ernest J. McNABB 7 Revocable Living Trust dated 11/19/1990; REDWOOD TRUST DEED 8 SERVICES, INC., a California Corporation; HILLCREST REAL 9 ESTATE INC., A California Corporation; WILLIAM JACOB 10 MAIER; and ROES 1-50, inclusive 11 Cross-Defendants. 12 13 14 In order for the exemption of Civil Code § 1916.1 to apply, all that is required is that a 15 loan secured by real property be made or arranged by a California licensed real estate broker who 16 acts for compensation or expectation of compensation for soliciting, negotiating, or arranging the 17 loan for another. ARC Capital is the licensed real estate broker who arranged the loan 18 19 transactions for the lender and received compensation for doing so. Therefore, the exemption of 20 Civil Code § 1961.1 applies and the loans are not usurious. 21 In her opposition, Laura Arata blatantly ignores the fact that the loan transactions were 22 arranged by two real estate brokers, a broker who represented the lender ( i.e. ARC Capital) and 23 a broker who represented the borrower (i.e. Hillcrest/Maier.) 24 25 In doing so, Laura Arata does not dispute the fact that ARC Capital held a valid real 26 estate broker’s license at the time of the loan transactions. Laura Arata makes no attempt to 27 explain why ARC Capital’s license information is on the loan documents. As pointed out in 28 REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT 2 1 McNabb’s moving papers, California law requires a broker to disclose his or her license number 2 and the license information whenever a borrower or investor signs any documents related to a 3 loan negotiated by the broker. (Bus. & Prof. Code § 10236.4(b).) Here, ARC Capital’s license 4 information appears on loan documents in order to meet this requirement. (See the McNabb 5 6 promissory note attached as Exhibit B to the First Amended Cross-Complaint. The First 7 Amended Cross-Complaint is attached as Exhibit C to McNabb’s Request for Judicial Notice. 8 See also the Deeney promissory note which is attached as Exhibit C to the First Amended 9 Petition For Removal of Trustee in San Mateo Superior Court case 19-PRO-01586. This petition 10 has been provided to the court in McNabb’s Request for Judicial Notice as Exhibit H.) 11 12 Furthermore, Laura Arata fails to make any attempt in her opposition to address the fact 13 that ARC Capital issued the statutory Lender/Purchaser Disclosure Statement wherein ARC 14 Capital is identified as the broker acting on behalf of the lender, Ernest J. McNabb. (See RFJN, 15 Exhibit D.) As pointed out in McNabb’s motion papers, Business & Profession Code §§ 10232.4 16 and 10232.5, require a real estate broker, “when performing acts described in section 10131(d)”, 17 18 to provide this disclosure to the prospective lender. 19 The fact that ARC Capital issued a Lender/Purchase Disclosure Statement that identifies 20 ARC Capital as the broker for the lender, Ernest J. McNabb, pursuant to Bus. & Prof Code §§ 21 10232.4 and 10232.5, completely undermines Laura Arata’s contention that the subject loans are 22 usurious. This fact also undermines Laura Arata’s assertion that, “a loan originator is not a real 23 24 estate broker… A loan originator does not solicit borrowers or lenders or negotiate loans for 25 particular transactions.” (Arata Opp. At p. 5.) This assertion is further undermined by Bus. & 26 Prof. Code § 10166.01, which defines “mortgage loan originator” as “an individual who takes a 27 28 REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT 3 1 residential mortgage loan application or offers or negotiates terms of a residential mortgage loan 2 for compensation or gain.” 3 If all ARC Capital did in these transactions was merely prepare documents, as Laura 4 Arata contends, there would be no reason for ARC Capital’s license information to be included 5 6 on the promissory notes. There would be no reason for ARC Capital to issue the 7 Lender/Purchaser Disclosure Statement pursuant to Bus. & Prof Code §§ 10232.4 and 10232.5. 8 Furthermore, there would be no reason to pay ARC Capital a $33,000 commission in addition to 9 separate fees for “document preparation” and “underwriting”. The borrower’s closing statement 10 attached as Exhibit A to Laura Arata’s first amended cross-complaint and the estimate of fees 11 12 and fees worksheet contained in the closing instructions attached as Exhibit D show that the real 13 estate brokers who arranged the loan were each paid a commission of 3%, which amounted to 14 $33,000 commission paid to ARC Capital and ab$33,000 commission paid to Hillcrest. 15 Again, Laura Arata chose to ignore this fact in her opposition and makes no attempt to 16 explain why each broker arranging the loan was paid an equal commission fee. 17 18 Civil Code § 1916.1 clearly exempts any loan made or arranged by any licensed real 19 estate broker and secured by real property. For purposes of this statute, a loan is arranged by a 20 licensed as a real estate broker when the broker acts for compensation for soliciting, negotiating, 21 or arranging the loan for another. The term “made or arranged” includes any loan made by any 22 made by a person licensed as a real estate broker as a principal or as an agent for others, and 23 24 whether or not the person is acting within the course and scope of such license. (Civ. Code § 25 1916.1) 26 “While the allegations of a complaint must be accepted as true for purposes of demurrer, 27 the facts appearing in exhibits attached to the complaint will also be accepted as true and, if 28 REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT 4 1 contrary to the allegations in the pleading, will be give precedence.” (Moran v. Prime 2 Healthcare Mgmt. Inc. (2016) 3 CA 5th 1131, at p. 1146.) 3 Based on the information in the exhibits attached to Laura Arata’s first amended cross- 4 complaint and the information contained in McNabb’s Request for Judicial Notice, it is clear that 5 6 ARC Capital held a valid real estate broker’s license during the loan transactions. It is also clear 7 that ARC Capital arranged the loans as the broker for the lender, and was paid a commission for 8 doing so. Therefore, the loans are exempt under Civil Code § 1916.1 and Laura Arata’s usury 9 claims fail. Thus, the Court should grant McNabb’s demurrer without leave to amend. 10 Respectfully submitted, 11 12 13 14 Date: March 5, 2021 WIEGEL LAW GROUP, PLC 15 16 By: /s/ G. Ryan Patrick 17 18 G. Ryan Patrick, Esq. ERNEST J. MCNABB, Individually and as 19 Trustee of the ERNEST J. MCNABB REVOCABLE LIVING TRUST DATED 20 11/19/1990 21 22 23 24 25 26 27 28 REPLY TO LAURA ARATA’S OPPOSITION TO CROSS-DEFENDANT ERNEST J. MCNABB’S DEMURRER TO FIRST AMENDED CROSS-COMPLAINT 5