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Hardy v. America's Best Home Loans

California Court of Appeals, Fifth District

December 22, 2014

KNOWLEDGE HARDY, Plaintiff and Appellant,
v.
AMERICA’S BEST HOME LOANS et al., Defendants and Respondents.

APPEAL from a judgment of the Superior Court of Stanislaus County, No. 651557 Timothy W. Salter, Judge.

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COUNSEL

Knowledge Hardy, in pro. per., for Plaintiff and Appellant.

Carlson Law Group, Mark C. Carlson, Adam L. Pedersen; Manning & Kass, Ellrod, Ramirez, Trester and Darin L. Wessel for Defendants and Respondents.

OPINION

OLIVER, J. [*]

Plaintiff Knowledge Hardy sued defendants Joe Gardella (Gardella) and America’s Best Home Loans (ABHL) (collectively America’s Best) in state court for fraud, breach of contract, negligence, breach of fiduciary duty, and violations of California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.). On the first day of trial, America’s Best successfully moved for judgment on the pleadings on the ground of collateral estoppel. On appeal, Hardy, who is acting in propria persona (in pro. per.), contends the trial court erred by dismissing the complaint because the prior action was not terminated by a judgment on the merits and the issues therein were not actually litigated. We agree and reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In July 2009, Hardy filed an action in the United States District Court for the Eastern District of California against IndyMac Federal Bank (IndyMac), Stearns Lending, Inc., Quality Loan Service Corp., Mortgage Electronic Registration System (MERS), ABHL and Gardella (the federal action). As pertinent here, jurisdiction was asserted over America’s Best based on a federal question, namely alleged violations of the Real Estate Settlement Procedures Act of 1974, title 12, section 2601 et seq., of the United States

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Code (RESPA), and its implementing regulations; Hardy included additional state law claims against America’s Best of negligence, breach of fiduciary duty, fraud, violations of the UCL, breach of contract, and breach of the implied covenant of good faith and fair dealing.

The claims against America’s Best in the federal action arose from Hardy’s refinance of a loan secured by real property on Cardinal Flower Way in Modesto. Hardy alleged that in April 2006, Gardella, a licensed real estate broker and a loan officer for ABHL, solicited Hardy to refinance his residence, telling him he could get Hardy the “best deal” and “best interest rates” available on the market. Although Hardy wanted a fixed rate, 30-year loan, Gardella advised him the only loan program available for him was an adjustable rate loan, but “the interest rate would be low and affordable.” Gardella sold Hardy a “Pick-a-Pay” loan that carried an interest rate of approximately 6.875 percent, which would adjust to nearly 10 percent. The loan also had the option to pay at a rate of 1 percent, commonly referred to as a negatively amortizing loan. Hardy alleged that Gardella’s representations were false and had he known of the negative amortization term, he would not have agreed to accept the loan.

Hardy further alleged that America’s Best failed to provide him with a copy of the loan application, and that Gardella inflated both Hardy’s income, which Hardy alleged was approximately $3, 200 per month, and his assets without his knowledge so he would qualify for the loan. Hardy alleged that, after the loan was completed in June 2006, the payments increased to over $3, 700 per month—an amount that exceeded underwriting guidelines and Hardy’s income. Quality Loan filed a notice of default in February 2009, and Hardy was sent a notice of trustee sale in May 2009.

In the federal action, America’s Best moved to dismiss some of Hardy’s claims and to strike certain portions of the complaint, while MERS moved to dismiss four of the claims alleged against it. (Hardy v. IndyMac Federal Bank (E.D.Cal. 2009) 263 F.R.D. 586, 588 (Hardy I).) On September 15, 2009, the district court denied America’s Best’s motion as to Hardy’s claim based on RESPA and his claims for fraud and violations of the UCL; granted the motion as to his claims for breach of contract and breach of the implied covenant of good faith and fair dealing; and denied the motion to strike Hardy’s claims for attorney fees and punitive damages. (Hardy I, supra, at pp. 590-592.) The district court granted MERS’s motion as to all four claims. The ...


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