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Ulvila v. Steffens

November 9, 2006

ALAN R. ULVILA, AN INDIVIDUAL, PLAINTIFF,
v.
LADDIE BUCK STEFFENS, ET. AL, DEFENDANTS.



The opinion of the court was delivered by: Hon. Barry Ted Moskowitz United States District Judge

ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

On June 22, 2004, Plaintiff Alan Ulvila filed a complaint against multiple defendants alleging twenty-six claims for relief arising from two loans Plaintiff received in 2002. Plaintiff later filed an amended complaint on July 13, 2005. In addition, by orders filed June 22, 2005 and September 20, 2005, this Court dismissed with prejudice Plaintiff's action against many of the Defendants, including Wells Fargo Bank and Russell & Davis Enterprises, LLC. Plaintiff's suit continues with respect to several remaining defendants, including Empire Equity Group, Inc. d.b.a. 1st Metropolitan Mortgage d.b.a. 1st Metro d.b.a. First Metro (hereinafter "Empire"). On March 1, 2006, Empire filed a motion for summary judgment.*fn1

For the reasons discussed below, the Court DENIES Defendant's motion.

I. FACTUAL BACKGROUND

In 2002, Plaintiff claims to have been facing foreclosure on his home and Chapter 13 bankruptcy. (Decl. of Alan Ulvila in Support of Opposition to Def.'s Motion for Summary Judgment (hereinafter "Ulvila Decl.") ¶ 3.) On or about July 12, 2002, Plaintiff alleges that Defendant Buck Steffens visited him at his home, offering brokerage services to help him obtain a loan to pay off Plaintiff's first and second mortgages, as well as his bankruptcy debts. (Ulvila Decl. ¶¶ 4-6.) Plaintiff further alleges that Buck Steffens gave him a business card representing that he was employed as a mortgage broker for 1st Metro. (Id. ¶ 7.)

Plaintiff initially agreed to obtain a loan only if it would be enough to cover all of his debts and include some extra spending money, which would require a total of $230,000. (Id. ¶ 5.) Though he initially indicated that Wells Fargo would be willing to make such a loan, Buck Steffens ultimately secured only a $187,000 commitment from Wells Fargo. (Id. ¶ 8.) The Wells Fargo loan was processed at 1st Metro's branch in Oceanside, CA by Defendant Donna Steffens, who was the branch manager at that time. (See Def.'s Lodgment of Exhibits in Support of Motion for Summary Judgment, Ex. F at 3 [Donna Steffens Dep. at 87]; Pl.'s Evidence in Support of Opposition for Motion for Summary Judgment, Ex. C [Buck Steffens Dep. at 18].) Plaintiff was told by Buck Steffens that he would need to obtain an additional $15,000 loan in order to pay off all of his debts. (Ulvila Decl. ¶ 8.) Approximately one month later, Mr. Steffens told Plaintiff that he would actually need an additional $40,000 loan, not $15,000, in order to pay off all his debts. (Id. ¶ 9.) In reliance upon Mr. Steffens' representations, in early November 2002, Plaintiff executed a $40,000 promissory note to Russell & Davis Enterprises, LLC ("R&D"). (Id.) Plaintiff also unknowingly executed a grant deed conveying his home to R&D, although Mr. Steffens had represented that the documents would only convey a security interest in the home to secure the mortgage. (Id. ¶ 11-13.) R&D never paid any funds to Plaintiff, but an entity known as Gold Coast Management deposited $26,688.83 into the escrow account established for Plaintiff through Old Republic Title Company. (Id. ¶ 15.)

Meanwhile, approximately six weeks earlier, on September 20, 2002, Empire closed its purchase of 1st Metropolitan Mortgage Co. (aka 1st Metro). (Supp. Aff. of Daniel Jacobs, Ex. D (hereinafter "Purchase Agreement") § 2.05, at 12.) The agreement provides for the immediate transfer of all 1st Metropolitan Mortgage Co.'s "right, title and interest in, to [sic] the assets, properties, goodwill and business of every kind and description and wherever located, whether tangible or intangible, real, personal or mixed, belonging to or used or intended to be used in [1st Metro's mortgage loan brokerage and origination business] other than the Excluded Assets . . .." (Id. § 2.01, at 7.) The "Excluded Assets" included 1st Metro's state licenses and, as Empire did not yet have the required regulatory licenses to operate in all the states in which 1st Metro had branch offices, the assignment of the leases for 1st Metro's branch offices would not be effective until Empire obtained the required approvals. (Id. §§ 2.01(a)(x),(c)(v) and 6.04(b), at 8-9, 43.)

During this "Transition Period", Empire and 1st Metro agreed to operate under an Interim Branch Operations Agreement, which provided that 1st Metro would continue to conduct the branch operations. (Supp. Aff. of Daniel Jacobs, Ex. E (hereinafter "IBO Agreement") ¶ 2, at 1.) The IBO Agreement states that the Transition Period would end upon Empire's receipt of the necessary regulatory licenses, but in no event later than January 31, 2003. (Id.) During this period, 1st Metro branch employees would continue to be employees of 1st Metro and they would be supervised by Eli Mellul "in his capacity as an officer of [1st Metropolitan Mortgage Co.] in a manner consistent with his duties contemplated in his employment agreement with Empire."*fn2 (Id. ¶ 4, at 2.) The salaries of 1st Metro employees would be paid from an account funded by Empire and over which Empire held ultimate authority. (Id. ¶¶ 3(b), 4, at 2.) In addition, all funds relating to 1st Metro's business that were received by the branches during the Transition Period were to be deposited into a bank account designated and controlled by Empire. (Id. ¶ 3(a), at 2.)

Empire was ultimately licensed as a California Residential Mortgage Lender on July 10, 2003. (Def.'s Lodgment of Exhibits in Support of Motion for Summary Judgment, Ex. C.)

Plaintiff claims that Empire is vicariously liable for the actions of Donna and Buck Steffens in connection with the two mortgage loans brokered by the Steffens in late 2002. (Pl.'s Memorandum of Points and Authorities in Support of Opposition for Motion for Summary Judgment (hereinafter "Opposition") ¶¶ 7-8.) Although it is undisputed that 1st Metro processed the Wells Fargo loan, Empire claims that Buck Steffens arranged the R&D loan under the auspices of his own company, Ameriteam, USA, and that 1st Metro did not process or receive any money from that loan. (Def.'s Separate Statement of Undisputed Facts in Support of Motion for Summary Judgment, Nos. 11-12.)

II. LEGAL STANDARD

Summary judgment is appropriate if the moving party demonstrates that "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. See Anderson, 477 U.S. at 248; Freeman v. Arpaio,125 F.3d 732, 735 (9th Cir. 1997). A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party. See Anderson, 477 U.S. at 248.

A party seeking summary judgment always bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. Although the nonmoving party may bear the burden of proof on a matter at trial, the moving party bears the burden of demonstrating to the Court that there is insufficient evidence to support the nonmoving party's case. Id. at 325. The moving party can satisfy this burden in two ways:

(1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to establish an essential element of the nonmoving party's case on ...


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