Opinion
B221658 Los Angeles County Super. Ct. No. VC050471
12-13-2011
PRASONG SUTHIPRASERT et al., Plaintiffs and Appellants, v. ING BANK, FSB, Defendant and Respondent.
Law Offices of Darlene Allen and Darlene Allen for Plaintiffs and Appellants. Malcom ? Cisneros and Anthony C. Haynes for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from a judgment of the Superior Court of Los Angeles County, Raul A. Sahagun, Judge. Affirmed.
Law Offices of Darlene Allen and Darlene Allen for Plaintiffs and Appellants.
Malcom ? Cisneros and Anthony C. Haynes for Defendant and Respondent.
INTRODUCTION
Plaintiffs Prasong Suthiprasert and Chitraporn Suthiprasert, husband and wife, appeal from a summary judgment in favor of defendant ING Bank, FSB doing business as ING DIRECT. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiffs purchased a house located at 8730 Stewart and Gray Road (Property) in Downey in 1999. In May 2004, their son, Patarapol Suthiprasert (Patarapol), convinced plaintiffs to refinance their mortgage on the Property. He obtained the assistance of a loan broker who put together two loan application packages: one for Bank of the West and the other for ING Bank. Patarapol and the loan broker represented to plaintiffs that the loan from ING Bank would only be funded if the loan application submitted to the Bank of the West was denied and that only one of the loans would be funded. As part of their ING Bank loan application, plaintiffs provided ING Bank with a blank, voided check drawn on their checking account at the Rancho Federal Credit Union in Downey, account number XX407.
On June 1, 2004, two deeds of trust, each dated May 26, 2004, were recorded against the Property: one trust deed between plaintiffs, as trustors, and Bank of the West, as beneficiary, securing a $250,000 loan (Bank of the West loan) and the other trust deed between plaintiffs, as trustors, and ING Bank, as beneficiary, securing a $135,000 home equity line of credit (ING Bank loan). Plaintiffs signed both trust deeds. Plaintiffs never told ING Bank that its loan should fund only if the Bank of the West loan was denied.
The total amount of the $135,000 line of credit from ING Bank was disbursed. The initial disbursement of $35,000 was to Rancho Federal Credit Union Account XX166. An escrow instruction dated May 24, 2004, with the name of plaintiff Chitraporn Suthiprasert handwritten in the signature block, authorized and instructed that loan proceeds be wired to that account. The instruction showed the name of plaintiff Prasong Suthiprasert as the beneficiary for the account.
Request for disbursement of the amount of $100,000 was made on October 6, 2004 in an online transaction. The email address listed on the transaction detail was that of Pataropol. The $100,000 went into plaintiffs' bank account.
Plaintiffs made payments on the Bank of the West loan, but eventually, they discontinued doing so. Bank of the West recorded a notice of default on December 1, 2006.
Plaintiffs failed to make payment on the ING Bank loan. On February 7, 2007, ING Bank recorded a notice of default.
A foreclosure sale of the Property was held on October 18, 2007 under the Bank of the West deed of trust. In order to protect its interest in the Property, ING Bank purchased the Property at the sale. On November 2, ING Bank recorded its trustee's deed upon sale.
In March 2008, plaintiffs filed the instant action against Patarapol and ING Bank. In July 2008, plaintiffs filed the verified first amended complaint (FAC), the operative complaint herein. Plaintiffs alleged five causes of action: fraud and deceit, against Patarapol (first); conspiracy to defraud, against Patarapol and ING Bank (second); negligence, against ING Bank (third); quiet title, against ING Bank (fourth); and constructive trust, against ING Bank (fifth).
Patarapol is not a party to this appeal.
Only their third cause of action, negligence, against ING Bank is at issue in this appeal.
In April 2009, ING Bank filed a motion for summary judgment or, alternatively, summary adjudication. In opposition, plaintiffs submitted a declaration of an expert witness, Anthony S. Rand (Rand), with a report entitled "Forensic Loan Audit & Documentation Review" attached as an exhibit. They opposed the summary judgment motion on the ground that the duty of ING Bank at issue was contained in the laws and regulations cited in the Rand declaration and the Rand declaration established the breach of the duty and causation. In their papers and argument at the summary judgment hearing, plaintiffs asserted a new theory regarding the nature of the duty that ING Bank allegedly breached. Plaintiffs claimed that the bank negligently made a loan to their son, Patarapol, in that the bank did not confirm whether plaintiffs were the persons applying for the loan, Patarapol received the loan proceeds, and plaintiffs never received the money. ING Bank objected to the Rand declaration as containing impermissible legal conclusions and inadmissible unreliable, unsworn hearsay.
Following a hearing, the trial court granted the motion. The court found that ING Bank met its initial burden to produce evidence that plaintiffs could not prove that ING Bank was negligent in processing and approving plaintiffs' loan application, as plaintiffs alleged in their cause of action. The court noted that plaintiffs had extensively relied upon the Rand declaration. The court ruled that the declaration was inadmissible and that plaintiffs had failed to meet their burden to produce sufficient evidence that ING Bank handled plaintiffs' loan application "in a manner which fell below the applicable standard of care."
Plaintiffs' counsel asserted that the court's latter ruling was irrelevant, in that their opposition was based on a different theory which they did not plead in the FAC. Counsel said that the court should allow plaintiffs to amend their complaint to plead the new theory, rather than grant the summary judgment motion. The trial court did not grant leave to amend.
Plaintiffs filed a motion for a new trial, claiming errors of law. Plaintiffs again claimed that ING Bank's disbursement of the loan proceeds fell below the standard of care for the loan industry. As new matter supporting their claim, plaintiffs cited Shames-Yeakel v. Citizens Financial Bank (N.D.Ill. 2009) 677 F.Supp.2d 994 and asserted that the case held that plaintiffs who had funds stolen from their online home equity account could sue their bank for failing to implement adequate security measures. Plaintiffs reiterated that the court should permit them to amend their complaint according to proof.
The trial court denied plaintiffs' motion for a new trial. In its ruling, the court stated that the Shames-Yeakel case did not constitute new matter warranting a new trial, in that the case had no precedential value and its holding was inapplicable.
DISCUSSION
Grant of Summary Judgment
Plaintiffs primarily contend that summary judgment must be reversed, in that triable issues of material facts existed regarding the negligence cause of action. Plaintiffs also claim the trial court erred in excluding the Rand declaration and in failing to allow plaintiffs to amend their complaint to allege expressly their new theory that ING Bank breached its duty to protect plaintiffs' equity line of credit against unauthorized access by Patarapol.
Code of Civil Procedure section 437c, subdivision (c), requires the trial court to grant a summary judgment motion if the papers submitted by the parties on the motion show that no triable issue exists as to a material fact and the moving party is entitled to judgment as a matter of law; that is, "there is no issue requiring a trial as to any fact that is necessary under the pleadings and, ultimately, the law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)
When, as here, plaintiffs appeal from a summary judgment in favor of a defendant, we perform a de novo review of the record, viewing the evidence in the light most favorable to plaintiffs by liberally construing plaintiffs' evidence and strictly scrutinizing defendant's evidence. (O'Riordan v. Federal Kemper Life Assurance Co. (2005) 36 Cal.4th 281, 284.) Our task involves three steps. First, we review the pleadings and identify the factual issues which are delimited by them. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381-382; see also Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663-1664.) Second, we determine if the moving defendant has met its initial burden of production of evidence negating the plaintiffs' causes of action or showing that the plaintiffs do not have and cannot reasonably obtain evidence to establish one or more elements of a cause of action. (Aguilar v. Atlantic Richfield Co, supra, 25 Cal.4th at p. 850.) "A cause of action 'cannot be established' if the undisputed facts presented by the defendant prove the contrary of the plaintiffs' allegations as a matter of law." (Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1597.) Third, if the defendant has met its burden, then the burden of production shifts to the plaintiffs and we determine whether the plaintiffs have set forth evidence establishing "specific facts showing that a triable issue of material fact exists as to that cause of action." (Code Civ. Proc., § 437c, subd. (p)(2); Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 780.) A genuine issue of material fact exists only if "'"the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." [Citation.].'" (Mammoth Mountain Ski Area v. Graham (2006) 135 Cal.App.4th 1367, 1371.)
Plaintiffs contend that the trial court erred in ruling that they failed to meet their burden to produce evidence which raised triable issues of material fact. ING Bank counters that, not only did plaintiffs fail to meet their burden, but also that plaintiffs' opposition to the summary judgment motion was based solely upon breach of a duty to disburse loan funds properly, which they conceded was not a theory pled in the complaint. We agree with ING Bank.
The essential elements of a cause of action for negligence are: "(1) the defendant owed the plaintiff a legal duty, (2) the defendant breached that duty, and (3) the breach was a proximate or legal cause of the plaintiff's injuries." (Gilmer v. Ellington (2008) 159 Cal.App.4th 190, 195; see also Civ. Code, § 1714, subd. (a).) In the negligence cause of action, plaintiffs alleged that ING Bank breached its "duty to plaintiffs to act competently, promptly, and in the highest good faith in approving plaintiff[s'] loan application and verifying the employment and financial information contained therein." The negligent acts plaintiffs alleged were that ING Bank "negligently fail[ed] to reasonably investigate and process plaintiff[s'] loan application and verify[] the employment and financial information contained therein." Plaintiffs alleged that, but for ING Bank's negligent failure, there would have been no foreclosure and sale of the Property, in that "plaintiffs would have been alerted to the existence of the ING mortgage loan in time to take appropriate steps to prevent the funding of the ING loan."
ING Bank presented undisputed evidence that plaintiffs knew about the approval of the ING Bank loan as well as the Bank of the West loan prior to the time of funding, and did not instruct ING Bank to fund the loan only if the Bank of the West loan was not approved. According to their separate statement, plaintiffs did not dispute the following facts: (1) the deed of trust, dated May 26, 2004, for the ING Bank loan showing plaintiffs as the trustors and ING Bank as beneficiary and securing the $135,000 loan was recorded against the Property on June 1, 2004, (2) the deed of trust, dated May 26, 2004, for the Bank of the West loan showing plaintiffs as the trustors and Bank of the West as beneficiary and securing the $250,000 loan was recorded against the Property on June 1, 2004, (3) plaintiffs signed the deeds of trust, (4) plaintiffs never told ING Bank to fund the loan only if the Bank of the West loan application was denied, and (5) the total amount of the ING Bank loan, $135,000, was disbursed.
As plaintiffs conceded, their complaint did not allege that ING Bank was negligent in disbursing the loan funds, in that the bank disbursed the funds to Patarapol and plaintiffs did not receive them. Even if we assume that plaintiffs had pled such allegations, however, evidence in the record shows that the loan proceeds were deposited in credit union accounts with account numbers that plaintiffs gave ING Bank prior to funding and identified as their accounts. In their separate statement, plaintiffs disputed that $35,000 of the proceeds was disbursed to them and claimed the money went into a certain credit union account. The record shows, however, that the account belonged to them. As to the remaining $100,000, the record reveals the proceeds were deposited in a different credit union account, which plaintiffs had represented to the bank was their account.
Plaintiffs claimed the $35,000 was disbursed to a Rancho Federal Credit Union account number XX166. In the record, an exhibit to the supporting declaration of plaintiffs' counsel was a copy of an escrow instruction to wire funds to that same account number, XX166. In addition, the instruction identified the account beneficiary as plaintiff Prasong Suthiprasert, and the signature on the instruction is that of plaintiff Chitraporn Suthiprasert, dated May 24, 2004.
In their separate statement, plaintiffs do not dispute the fact that, as part of their ING Bank loan documentation, they provided a blank, voided check drawn on their checking account at the Rancho Federal Credit Union, account number XX407. Attached to the declaration of plaintiffs' counsel filed in support of the motion for new trial was a statement identified as being for plaintiffs' Rancho Federal Credit Union account number XX407 showing an October 7, 2004 deposit of $100,000 by ING Direct, the name under which ING Bank was doing business.
By contrast, the record reveals that plaintiffs presented virtually no evidence supporting the negligence allegations in their complaint or their new theory. They relied heavily on the Rand declaration as expert testimony to identify the specific duties ING Bank owed to plaintiffs and ING Bank's acts and omissions constituting breach of each duty. Plaintiffs contend that the trial court erred in excluding the declaration. We disagree.
We review a trial court's ruling on the admissibility of expert testimony under the abuse of discretion standard. (Easterby v. Clark (2009) 171 Cal.App.4th 772, 778.) That an evidentiary ruling is erroneous is an insufficient basis for reversal. The erroneous ruling "is not reversible absent a miscarriage of justice. [Citations.] '[A] "miscarriage of justice" should be declared only when the court, "after an examination of the entire cause, including the evidence," is of the "opinion" that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.' [Citation.]" (Id. at p. 783; see also Blank v. Kirwan (1985) 39 Cal.3d 311, 331.)
The only relevant substantive portion of the declaration was Rand's statement that he had "reviewed many of the documents in this matter" and had completed a report entitled "Forensic Loan Audit & Documentation Review" which was attached as an exhibit "and incorporated herein by reference." The report listed the titles of purportedly loan-related documents obtained from ING Bank. For each document, the report presented notes about ostensible deficiencies with regard to specific information included or omitted from the document. In some cases, the notes referred to purported factual matters other than the document content or included speculative statements.
For example, one note states: "ING loan history log reflects that an appraisal appointment was set for May 17, 2004, yet no appraiser visited and inspected the subject property. If an appraiser had visited the subject property, the Plaintiff would have been alarmed that an unauthorized application had been made."
None of the documents was authenticated. The content of the report, including the purported facts, was unsworn. Hence, the report content was unreliable and, therefore, insufficient for admission as expert testimony. "[A]ny material that forms the basis of an expert's opinion testimony must be reliable." (People v. Gardeley (1996) 14 Cal.4th 605, 618; see also Evid. Code, § 801.) Further, "it is settled that an expert's report . . . 'cannot be used to prove the existence of facts set forth therein,'" and, if the report is offered for such purpose, the report is inadmissible hearsay. (Eddins v. Redstone (2005) 134 Cal.App.4th 290, 317, fn. 24; see also Evid. Code, § 1200.) While an expert may rely on inadmissible hearsay in forming an opinion and may state the matters on which he or she relied, the expert may not testify as to the details of those matters which are inadmissible hearsay. (People v. Coleman (1985) 38 Cal.3d 69, 92; Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 788-789.)
There is no merit to plaintiffs' claim that the report consisted of sworn statements, in that the report was incorporated by reference into Rand's sworn declaration. Rand did not claim to have personal knowledge of the authenticity of the documents or of the factual and speculative statements included in the report; he was an independent third party and not a party or an agent of a party to the ING Bank loan transaction. (Evid. Code, § 801.) Plaintiffs' reliance on Holly Sugar Corp. v. Johnson (1941) 18 Cal.2d 218 is misplaced. Holly held that, under the narrow facts of that case, a written instrument on which a cause of action is based may be made a part of the allegations in a complaint by attaching a copy as an exhibit to the complaint and incorporating it by proper reference. (Id. at pp. 225-226.) The Holly holding has no applicability to the facts in the instant case.
Furthermore, the Rand declaration did not state any opinions of the expert. Where its exhibit, the report, purported to express the expert's opinion, the content was more properly characterized as impermissible legal conclusions. Evidence Code section 805 permits otherwise admissible expert testimony on factual issues, but it does not authorize an expert to present legal conclusions under the guise of expert opinion. (WRI Opportunity Loans II, LLC v. Cooper (2007) 154 Cal.App.4th 525, 532, fn. 3; Downer v. Bramet (1984) 152 Cal.App.3d 837, 841.) "The manner in which the law should apply to particular facts is a legal question and is not subject to expert opinion." (Ferreira v. Workmen's Comp. Appeals Bd. (1974) 38 Cal.App.3d 120, 126.)
Examples of impermissible statements of legal conclusions are as follows: (1) "In the opinion of this reviewer, ING Bank . . . employed practices well below the standard of care for a home mortgage lender and caused damage to the Plaintiff through the concurrent closing to two mortgage transactions . . . ."; (2) "In truth, based on the laws of title established in the State of California, the Defendant was unaware that they did not have to compensate Bank of the West to obtain title to the subject property."; (3) "The reviewed documents also revealed that . . . the Defendant failed to comply with federal and state laws regarding regulatory compliance, . . . and safety and soundness."
In a summary judgment proceeding, inadmissible hearsay and other inadmissible material in an expert's declaration cannot be considered in determining whether triable issues of material fact exist. (Code Civ. Proc., § 437c, subds. (c), (d); Evid. Code, § 1200; Hayman v. Block (1986) 176 Cal.App.3d 629, 639.) The trial court did not abuse its discretion by ruling that the Rand declaration, including the report, was inadmissible.
For the foregoing reasons, we conclude that plaintiffs did not have, and could not reasonably obtain, evidence to establish a triable issue of material fact regarding their negligence cause of action. The trial court properly granted ING Bank's motion for summary judgment. (Code Civ. Proc., § 437c, subd. (p)(2); Saelzler v. Advanced Group 400, supra, 25 Cal.4th at p. 780; Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.)
Denial of Leave to Amend
Plaintiffs next contend that the trial court erred in refusing to allow them to amend their complaint to allege their new theory, and if the court had done so, plaintiffs would have been able to produce evidence that a triable issue of fact existed as to whether ING Bank breached a duty it owed to plaintiffs. We disagree.
On appeal, as they did in the proceedings below, plaintiffs assert that Shames-Yeakel v. Citizens Financial Bank, supra, 677 F.Supp.2d 994 supports their new theory regarding negligent disbursement of loan proceeds. We agree with the trial court, however, that the case is inapposite and is not binding authority (Flynt v. California Gambling Control Com. (2002) 104 Cal.App.4th 1125, 1132; Smith v. County of Los Angeles (1994) 24 Cal.App.4th 990, 997, fn. 2).
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It is a well-established principle that a motion for summary judgment cannot be defeated on grounds not raised by the pleadings. (Knapp v. Doherty (2004) 123 Cal.App.4th 76, 90; Bostrom v. County of San Bernardino, supra, 35 Cal.App.4th at p. 1663.) For summary judgment purposes, the pleadings "'delimit the scope of the issues'" and measure "the materiality of the facts tendered in a defendant's challenge to the plaintiff's cause of action." (FPI Development, Inc. v. Nakashima, supra, 231 Cal.App.3d at p. 381; see also Bostrom, supra, at pp. 1663-1664.) For this reason, "[a] plaintiff wishing 'to rely upon unpleaded theories to defeat summary judgment' must move to amend the complaint before the hearing." (Knapp, supra, at p. 90.)
Plaintiffs claim that they did request leave to amend and the trial court erred in concluding that they had not made a valid request. During the summary judgment hearing, plaintiffs point out, plaintiffs' counsel said that "plaintiffs are allowed to amend their complaint according to proof," and rather than grant the summary judgment, "the court should grant plaintiff[s] leave to amend their complaint" to allege the new theory. Even assuming, without deciding, that counsel's statement constituted a valid request for leave to amend, however, plaintiffs' request was untimely, in that it was not made before the summary judgment hearing. (Distefano v. Forester (2001) 85 Cal.App.4th 1249, 1264-1265 [in a summary judgment proceeding, if an "opposing party's evidence would show some . . . legal theory . . . or claim not yet pleaded," the time to "seek leave to amend the pleadings [is] before the hearing"].)
The supporting authority plaintiffs cite, State Medical Education Bd. v. Roberson (1970) 6 Cal.App.3d 493, is distinguishable on the facts. The Roberson court held that, in the summary judgment proceeding, the trial court properly granted the plaintiff's motion to amend according to proof. The amendment, however, was limited to changing a date from the date pleaded to the date proved, which the court concluded was not a material variance and did not prejudice the defendant. (Id. at p. 502.) Here, plaintiffs were seeking leave to make a material variance in their compliant, that is, to allege facts constituting a new theory of liability which, as plaintiffs concede, was not pled prior to the hearing on the summary judgment motion.
Lastly, there is no merit to plaintiffs' contention that, in any event, no amendment was necessary, in that their new theory was implied by, and thus constituted a part of, the pleading. They first point out that their complaint included the general allegation that "[p]laintiff[s are] informed and believe[] . . . that this defendant has been negligent by other acts or omissions of which plaintiff is presently unaware and which will be shown according to proof at the time of trial." They contend that, from the stated allegation that ING Bank approved the loan, it could be inferred that the negligence cause of action alleged that ING Bank had a duty to disburse the loan proceeds properly and protect the equity line account from unauthorized access.
As support for permissibility of inferring a duty from facts already pled, plaintiffs cite Vescovo v. New Way Enterprises, Ltd. (1976) 60 Cal.App.3d 582. The Vescovo court stated that facts essential to a negligence cause of action include facts which cause a duty to arise or from which a duty is inferred. (Id. at p. 589.) In Vescovo, the court held that an allegation that defendants negligently injured "a young housewife" at a specified address was sufficient to give rise to the inference that a child might be at the address also and suffer injury. The alleged negligent act was publication of a classified advertisement touting a "[s]exy young bored housewife" lived at the address. (Id. at p. 585.) In the instant case, there is no such readily discernible relationship between the pleaded facts and the facts plaintiffs ask us to infer as constituting the duty breached. There is authority that negligence may be generally pleaded, as plaintiffs assert, but even so, sufficient facts must be alleged to inform the defendant of the nature of the alleged negligent act, particularly where, as here, the plaintiffs know the details involved. (Pultz v. Holgerson (1986) 184 Cal.App.3d 1110, 1117 and fn. 7.) We disagree with plaintiffs and conclude that their allegation of negligence in loan processing and approval does not give rise to the inference of an allegation of negligence in disbursing loan proceeds.
In sum, we conclude that the trial court did not abuse its discretion in denying plaintiffs leave to amend their complaint to allege the new theory. Even if we assume, arguendo, that the court's ruling was an abuse of discretion, it was harmless error. (Blank v. Kirwan, supra, 39 Cal.3d at p. 331.) As we previously explained, the record reveals that ING Bank disbursed funds to plaintiffs' accounts and, therefore, did not breach any duty of care owed to plaintiffs with respect to disbursement of the loan proceeds.
DISPOSITION
The judgment is affirmed. ING Bank shall recover its costs on appeal.
JACKSON, J. We concur:
PERLUSS, P. J.
WOODS, J.