Complete Escrow Service v. Flagstar Bank
Filed 11/19/13 Complete Escrow Service v.
Flagstar Bank CA4/3
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opinion has not been certified for publication or ordered published for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.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
COMPLETE ESCROW SERVICE
CORPORATION,
Plaintiff and Appellant,
v.
FLAGSTAR BANK, FSB,
Defendant and Respondent.
G047905
(Super. Ct. No.
30-2011-00449134)
O P I N I O N
Appeal
from a judgment of the Superior Court
of
County, Franz E. Miller, Judge. Reversed with directions.
Stocker & Lancaster
and Michael J. Lancaster for Plaintiff and Appellant.
Palmer, Lombardi &
Donohue, Roland P. Reynolds and Alison R. Kalinski for Defendant and
Respondent.
*
* *
Introduction
Mortgage
lender Flagstar Bank, FSB (Flagstar), decided in early 2011 to make licensed escrow
agent Complete Escrow Service Corporation (Complete) ineligible to do business
with Flagstar. Flagstar included
Complete’s name on a list of ineligible escrow agents; the list was made
available to the mortgage brokers with whom Flagstar does business. Flagstar also told one mortgage broker that
Flagstar had “blacklisted†Complete.
Complete
sued Flagstar for intentional interference
with contractual relations and with prospective economic advantage, unfair
business practices, and defamation. The
trial court entered a stipulated summary judgment in favor of Flagstar. With respect to the first cause of action for
intentional interference with contractual relations, Complete showed the
existence of a triable issue of material fact as to the elements of Flagstar’s
knowledge of and intent to induce the breach of three executed escrow
agreements. As a result, the cause of
action for intentional interference with contractual relations survives summary
judgment. We conclude, however, that
there was no triable issue of material fact as to Complete’s second and fourth
causes of action for intentional interference with prospective economic
advantage and defamation because the evidence shows Flagstar’s actions were
privileged, and Complete failed to show malice.
We further conclude there was no triable issue of material fact as to the
third cause of action for unfair business practices.
We
therefore reverse the judgment with directions to the trial court to (1) deny
Flagstar’s motion for summary judgment, (2) deny Flagstar’s motion for
summary adjudication of the first cause of action for intentional interference
with contractual relations, and (3) grant Flagstar’s motion for summary
adjudication of the second, third, and fourth causes of action for intentional
interference with prospective economic advantage, unfair business practices, and
defamation, respectively. We note that,
given Complete’s evidence that it would have realized $560 on each closed
escrow, the total potential compensatory damages available to Complete on the
cause of action for interference with contract are $1,680 for the three escrow
agreements with which Flagstar allegedly interfered.
Statement of Facts and Procedural History
Flagstar
is a federal savings bank and mortgage lender, based in Troy,
Michigan.
It funds residential mortgage loans secured by properties in California,
as well as in other states. Flagstar
enters into agreements with mortgage brokers, allowing those brokers to submit
loan applications on behalf of the brokers’ borrower-clients. If approved, Flagstar makes loans directly to
the borrower-clients. The mortgage loan
transactions are completed by escrow agents.
Flagstar maintains a list of eligible escrow agents with which it will
do business, as well as a list of ineligible escrow agents with which it will
not do business. Flagstar maintains
these lists to minimize its risk of exposure to fraudulent transactions. The lists of eligible and ineligible escrow agents
are available on Flagstar’s password‑protected Web site, and can
only be viewed by Flagstar employees and Flagstar-approved mortgage brokers.
Complete
is an escrow agent licensed to do business in the State of California. Before January 2011, Complete was on the list
of escrow agents eligible to do business with Flagstar.
Optimum
First Mortgage (Optimum) is a mortgage broker.
Optimum and Complete had an oral agreement that Optimum would refer
escrow business to Complete. Flagstar
began an investigation of Optimum when it discovered an altered employment
verification in a loan application (which verification was ultimately proven to
be false) and unexplained cash payments.
Flagstar reviewed 20 loans brokered by Optimum, all of which had used
either Complete or Integrity Escrow, Inc. (Integrity), as the escrow
agent. During the investigation,
Complete’s status was changed from eligible to ineligible to do business with
Flagstar.
During
Flagstar’s investigation, Jennifer Kolp, Flagstar’s vice‑president and
manager for the financial investigations unit, made findings that caused her to
determine that the level of risk of continuing to do business with Complete was
too high. Those findings included (1)
Complete lacked sufficient internal controls; (2) one of Complete’s escrow officers
was potentially not qualified; (3) Complete had employed an escrow officer
who had previously been employed by an escrow company that had closed under
allegations of embezzlement and other inappropriate activity; and (4) the
executives in charge of Complete appeared to be disconnected from the company’s
daily operations. Therefore, Kolp
determined that Complete’s status should remain as ineligible.
Following
the investigation, Kolp decided not to change Complete’s status from ineligible
back to eligible. Flagstar updated its Web site
to reflect Complete’s ineligible status.
On January 19, 2011,
Flagstar advised Optimum that Complete’s status had been changed to ineligible,
and further advised Optimum that it would not fund any loans on which Complete
was the escrow agent. As of that time, Complete
had been referred by Optimum as the escrow agent for 20 mortgage loans
that were going to be funded by Flagstar.
Each of those escrows was transferred from Complete to another escrow
agent. Complete would have realized a
fee of $560 on each of those escrows, for a total claimed loss of $11,200.
Complete
also claimed damages for other escrow business it did not receive from Optimum
because Optimum was seeking to obtain funding from Flagstar and, therefore,
could not use Complete as the escrow agent due to its ineligible status with
Flagstar. Complete also claimed that,
more than a year after Flagstar changed Complete’s status to ineligible, one of
its escrow officers resigned, due to the loss of business from one mortgage
broker that would not refer escrows to Complete because Flagstar would not work
with Complete.
Complete
sued Flagstar for intentional interference with contractual relations,
intentional interference with prospective economic advantage, unfair business
practices, and defamation. Flagstar
moved for summary judgment or, in the alternative, summary adjudication of all
of the causes of action. The trial court
denied the motion for summary judgment, but granted the motion for summary
adjudication of the causes of action for intentional interference with prospective
economic advantage and defamation. The
parties stipulated to the entry of summary judgment in order to hasten the
appeal, obtain review of the issues, and preserve resources. (Norgart
v. Upjohn Co. (1999) 21 Cal.4th 383.)
Judgment was entered, and Complete timely appealed. (Integrity also sued Flagstar, and Flagstar
also filed a motion for summary judgment against Integrity’s causes of
action. The judgment entered against Integrity
is the subject of a separate appeal, Integrity
Escrow, Inc. v. Flagstar Bank, FSB, No. G047937.)
Discussion
I.
of Review
We review an order granting summary judgment de novo. (Saelzler v.
Advanced Group 400 (2001) 25 Cal.4th
763, 767; Village Nurseries v. Greenbaum (2002) 101 Cal.App.4th 26, 35.) A motion for summary judgment is properly
granted if the moving papers establish there is no triable issue of material
fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic
Richfield Co. (2001) 25 Cal.4th 826,
843.) “To prevail on the motion,
a defendant must demonstrate the plaintiff’s cause of action has no merit. This requirement can be satisfied by showing
either one or more elements of the cause of action cannot be established or
that a complete defense exists. [Citations.]
If the defendant meets this requirement, the burden shifts to the
plaintiff to demonstrate a triable issue of material fact exists. [Citations.]â€
(We Do Graphics, Inc. v. Mercury Casualty Co. (2004) 124 Cal.App.4th 131, 135-136.)
The summary judgment is appealable, despite the
parties’ stipulation to its entry. The
parties’ stipulation makes clear that it was entered, not to settle their
dispute fully and finally, but rather to facilitate an appeal following an
adverse determination on a critical issue.
Therefore, the rule that a party may not appeal from a consent judgment
does not apply. (Norgart v. Upjohn Co., supra,
21 Cal.4th at pp. 400-401.)
Additionally, the doctrine of invited error does not bar either party
from raising any arguments on appeal. (
We review the trial court’s evidentiary rulings
for abuse of discretion. (
(2011) 201 Cal.App.4th 1475, 1481.)
II.
Intentional Interference with Contractual
Relations
“The elements of a cause of action for
interference with contractual relations are: (1) the existence of a valid contract
between the plaintiff and a third party; (2) the defendant’s knowledge of
this contract; (3) the defendant’s intentional acts designed to induce a
breach or disruption of the contractual relationship; (4) actual breach or
disruption of the contractual relationship; and (5) resulting
damages. [Citation.] Proof the interfering conduct was wrongful,
independent from the interference itself, is not required to recover for
interference with contractual relations.
[Citation.]†(
(2005) 128 Cal.App.4th 212, 237-238.)
A. Existing
Escrow Instructions
In
its second amended complaint, Complete alleged Flagstar interfered with 20
pending escrows, identifying each by number and the name of the potential
borrower. The complaint alleged a single
cause of action for interference with all 20 escrows. Therefore, in order to obtain judgment on
this cause of action based on the lack of a valid, enforceable contract,
Flagstar was required to disprove the validity or existence of all 20 alleged
escrow instructions.
In
its motion for summary judgment, Flagstar established that there were not valid,
enforceable contracts for 17 of those 20 escrows because there was no signed
escrow agreement or escrow instructions.
Flagstar failed to establish the lack of signed escrow agreements or
instructions with respect to the three other escrows identified in the second
amended complaint. Flagstar’s motion
papers simply failed to address those three escrows. While Flagstar’s counsel’s declaration
attached unsigned escrow agreements or instructions for 17 escrows, Flagstar made
no mention of the three other escrows in its separate statement or
otherwise.
Carol
Blain, Complete’s president, testified at her deposition that signed escrow
instructions existed for at least two of the three escrows Flagstar failed to
address; this deposition testimony was offered by Flagstar in support of its
motion for summary judgment, not by Complete in its opposition papers.
In
opposition to the motion for summary judgment, Complete’s counsel submitted a
declaration in which he stated that he had caused the production to Flagstar of
the files for all 20 of the escrows identified in Complete’s complaint: “Flagstar requested that Plaintiffs in both
cases produce all escrow instructions for all of the borrowers listed in
paragraph 7 of the First Amended Complaint.
In fact, I produced all escrow instructions. This consisted of the 20 escrow files for
Complete Escrow . . . .
I am the one who arranged for the production and service on
[Flagstar’s counsel] by personal service using DDS Attorney Service.†(Some capitalization omitted.) In neither its motion papers nor reply papers
did Flagstar ever counter or challenge Complete’s counsel’s contention that the
entire files for all 20 of the cancelled escrow instructions had been produced,
or explain why it had not offered any evidence relating to three of the
20 escrows. For purposes of summary
judgment, Flagstar failed to disprove the element of the existence of a valid
contract as to the three remaining sets of escrow instructions.
B. Parties
to the Escrow Instructions
Flagstar
argues that it cannot be liable for intentional interference with contractual
relations because it was a party to, or had a direct interest and involvement
in, the escrow instructions. As the
California Supreme Court has explained: “[C]onsistent with its underlying policy of
protecting the expectations of contracting parties against frustration by outsiders who have no
legitimate social or economic interest in the contractual relationship, the
tort cause of action for interference with a contract does not lie against a
party to the contract. [Citations.] [¶] . . . One
contracting party owes no general tort duty to another not to interfere with
performance of the contract; its duty is simply to perform the contract
according to its terms. The tort duty
not to interfere with the contract falls only on strangers—interlopers who have
no legitimate interest in the scope or course of the contract’s performance.†(Applied
Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503,
514.)
Flagstar
is not a party to the escrow instructions; the parties are Complete and the
borrowers.
role as a fiduciary in the escrow process, the different agreements involved in
an escrow become parts of one whole contract, to which both Complete and
Flagstar would be parties. It is true
that “[a]n escrow holder is an agent and fiduciary of the parties to the
escrow.†(Summit Financial Holdings, Ltd. v. Continental Lawyers Title Co.
(2002) 27 Cal.4th 705, 711; see Virtanen
v. O’Connell (2006) 140 Cal.App.4th 688, 702-703; Kangarlou v. Progressive Title Co., Inc. (2005) 128
Cal.App.4th 1174, 1179.) Flagstar
fails to explain, however, how a fiduciary duty Complete may have owed to
Flagstar can make Flagstar a party to contracts between Complete and the
borrowers.
“Courts appear to distinguish between escrow
instructions and closing instructions.
‘Escrow instructions’ are considered an agreement between the escrow
holder and the parties to the escrow (e.g., buyer and seller).
‘Closing instructions’ constitute a
setting out the terms and conditions for closing the lender’s loan as well as
the escrow holder’s duties and responsibilities in connection with closing the
loan, separate and apart from closing the escrow.
Where the escrow instructions direct the escrow holder to comply with
lender closing instructions, and the escrow holder has agreed to abide by the
lender’s closing instructions in closing a loan involved in the escrow, the
escrow holder’s duties will be dictated by both instructions, although
different standards may apply.†(3 Miller
& Starr, Cal. Real Estate (3d ed. 2010) § 6:12, fns. omitted; see
Title Co., Inc. (2010) 184 Cal.App.4th 130, 136; Money Store Investment Corp. v. Southern Cal. Bank (2002) 98
Cal.App.4th 722, 728.) The unsigned
escrow instructions included in the appellate record make reference to separate
instructions by the lender. For purposes
of the motion for summary judgment, the record shows the transaction by which
the borrower financed or refinanced a loan had (or would have had) at least two
separate contracts—escrow instructions between the borrower and the escrow
agent, and closing instructions between the escrow agent and Flagstar. There are no closing instructions in our
appellate record.
Flagstar next argues that the closing instructions
from Flagstar to the escrow agent would constitute a contract, which Complete
does not appear to refute. However,
Flagstar extrapolates from there that because it was a party to a contract with
the escrow agent, it cannot be liable for inducing a breach of a different contract
between the escrow agent and the borrower.
We reject Flagstar’s unsupported leap in logic.
Flagstar relies on the declaration of its
expert witness, Guy Puccio, for the proposition that the lender is a principal
in a real estate sale escrow, and that all documents involved in the real
estate sale are essential to the escrow.
conclude they do not support an inference that the lender thus becomes a party
to the escrow instructions between the borrower and the escrow agent, or that
the lender’s closing instructions and the escrow instructions become a single
contractual document.
Finally, Flagstar relies on several federal
cases for the proposition that it cannot be liable for interference with
contractual relations because it has a direct interest and involvement in the
escrow relationship between the escrow agent and the borrower. We find each of these cases to be
distinguishable. In Marin Tug & Barge v. Westport Petroleum (9th. Cir. 2001) 271
F.3d 825, 834, the federal appellate court found that Shell Oil Products
Company was not a stranger to a prospective economic relationship between Marin
Tug & Barge, Inc., and buyers of Shell Oil products because “Shell and
Marin Tug had a mutual economic interest in delivering the oil safely and
cleanly, and were dependent upon each other to do so.†The same type of mutual economic interest and
codependence does not exist between Flagstar and the escrow agents involved in
the loans Flagstar funds. In
(C.D.Cal. 2003) 319 F.Supp.2d 1059, 1068-1073, the court found that a third
party beneficiary to a contract could not be liable for interfering with that
same contract. In ViChip Corp. v. Lee (N.D.Cal. 2006) 438 F.Supp.2d 1087, 1097-1098,
the court found that a joint venture, established by means of a joint venture
agreement, could not be liable as a matter of law for intentionally interfering
with the joint venture agreement. Flagstar
is neither a third party beneficiary of, nor a joint venture created by, the
contractual relationship between Complete and the borrowers.
We conclude, based on the record before us,
that Flagstar failed to meet its initial burden to show it was a party to the
contracts with which it allegedly interfered, and that it was not entitled to
summary judgment or summary adjudication on that issue.
In
its motion for summary judgment, Flagstar also argued that the elements of
knowledge of the existence of a contract and intent to disrupt that contract
could not be established. Kolp, who
decided to make Complete ineligible as an escrow agent, testified she “had no
idea what else was going on with Complete Escrow and their other business†at
the time she made that decision. In
opposition, Complete offered evidence that, as of February 1, 2011, Kolp was
aware of the pending escrows that had been in existence. This does not establish that, as of the
unspecified date in January 2011, when the decision was made to list Complete as
ineligible, Kolp was aware of the escrows Complete had pending.
However,
Complete offered into evidence the declaration of an Optimum employee that, on
January 19, 2011, Flagstar “instructed [Optimum] to switch all of [its] current
escrows with Complete Escrow . . . to another escrow company.†It is reasonable to infer from that statement
that Flagstar knew of the existence of Complete’s signed escrow agreements and
intended to disrupt them. (
212 Cal.App.4th 1510, 1529-1530 [inference must be reasonable to raise
triable issue of material fact on summary judgment].) We acknowledge this evidence barely satisfies
the standard. Our decision is without
prejudice to Flagstar’s showing in a later motion or at trial that valid,
signed contracts do not exist for the three remaining escrows identified in
Complete’s second amended complaint.
Obviously, if Flagstar had
addressed all 20 of the escrows referenced in that complaint in its motion
papers, both the trial court and this court would have had a better record on
which to decide the case.
For these
reasons, Flagstar was not entitled to summary judgment or summary adjudication on
the first cause of action for intentional interference with contractual
relations.
III.
Intentional Interference with Prospective
Economic Advantage
“The elements
of a cause of action for interference with prospective economic advantage are: (1) an economic relationship between the
plaintiff and a third party, with the probability of future economic benefit to
the plaintiff; (2) the defendant’s knowledge of the relationship;
(3) the defendant’s intentional and wrongful conduct designed to interfere
with or disrupt this relationship; (4) interference with or disruption of
this relationship; and (5) economic harm to the plaintiff proximately
caused by the defendant’s wrongful conduct.
[Citation.] [¶] To establish
intentional interference with prospective economic advantage, a plaintiff must
plead and prove the defendant ‘engaged in conduct that was wrongful by some
legal measure other than the fact of interference itself.’ [Citation.]
An act is independently wrongful ‘if it is unlawful, that is, if it is
proscribed by some constitutional, statutory, regulatory, common law, or other
determinable legal standard.’
[Citation.]†(
In
its cause of action for intentional interference with prospective economic
advantage, Complete alleged Flagstar interfered with its prospective contracts
with the 20 escrows identified ante,
as well as Complete’s relationship with Optimum, which allegedly refused to do
business with Complete after it was placed on Flagstar’s ineligible list. The independently wrongful conduct alleged by
Complete was (1) informing escrow customers and mortgage brokers that
Complete was ineligible to serve as an escrow agent on loans funded by Flagstar,
or that Complete was blacklisted, and (2) prohibiting escrow customers and
loan brokers from completing escrow agreements with Complete if they wanted
Flagstar to fund the loan.
Complete did not offer any admissible evidence
disputing Flagstar’s argument that, in the absence of any contractual
arrangement between Flagstar and Complete, Flagstar had the right to decide with
whom it would do business. (See
38 Cal.App.4th 242, 266 [“If a party has no liability in tort for
refusing to perform an existing contract, no matter what the reason, he or she
certainly should not have to bear a burden in tort for refusing to enter into a contract where he or
she has no obligation to do soâ€];
57 Cal.App. 366, 370-371 [“It is the right of every man to engage to work for
or to deal with, or to refuse to work for or to deal with, any man or class of
men as he sees fit, whatever his motive or whatever the resulting injury,
without being held in any way accountable therefor. [Citations.] These rights may be exercised in
association with others so long as they have no unlawful object in viewâ€];
Bureau (9th Cir. 1983) 701 F.2d 1276, 1292 [business arrangement “was
simply an exercise of its freedom to contract with whomever it chose in order
to sustain itself in the marketplaceâ€]; Klamath-Lake
Pharm., supra, at p. 1292,
fn. 16 [“This freedom extends to the manufacturer who for any lawful
reason terminates one distributor or supplier and puts another in its place,
even if the terminated businessman is put out of businessâ€].)
Complete admits the truth of this rule of law in
its opening brief on appeal, where it asserts:
“You can cho[o]se not to do business with someone. However, you cannot tell everyone in the
neighborhood they can’t do business with the person you chose not to do
business with.†The fallacy in Complete’s
argument is that Complete failed to offer any admissible evidence that Flagstar
told anyone not to do business with Complete.
The undisputed evidence shows that Flagstar advised mortgage brokers,
including, but not limited to, Optimum, that Flagstar would no longer do
business with Complete. Any mortgage
broker remained free to use Complete as an escrow agent, as long as the loan
was to be funded by a company other than Flagstar. Alternatively, a mortgage broker who desired
to have Flagstar fund a loan would be required to select an escrow agent other
than Complete.
name="_ftnref3" title="">[3] Nothing
in the appellate record even hints that Flagstar was the only lender making the
types of loans involved here. The
undisputed evidence shows that Complete did not lose any business as the escrow
agent on mortgage loans funded by lenders other than Flagstar. Therefore, Flagstar’s identification of
Complete as an ineligible escrow agent was not independently wrongful conduct.
Complete claimed that the independent wrongful
conduct was Flagstar’s alleged defamation and violation of the Real Estate
Settlement Procedures Act of 1974, 12 United States Code section 2601 et
seq. (RESPA).
A.
“The elements of a defamation claim are
(1) a publication that is (2) false, (3) defamatory,
(4) unprivileged, and (5) has a natural tendency to injure or causes
special damage.†(Wong v. Jing (2010) 189 Cal.App.4th 1354, 1369; see
Cal.4th 683, 720; Civ. Code, §§ 44, 45, 45a, 46, 47.) Complete failed to offer admissible evidence
creating a triable issue of material fact as to the falsity or lack of
privilege in Flagstar’s publications, whether verbal or on its Web site.
1.
The publication of Complete’s name on the
ineligible list rather than on the eligible list was not false, and Complete
did not dispute that material fact.
Truth is an absolute defense to a defamation claim. (Ringler
Associates Inc. v. Maryland Casualty Co. (2000) 80 Cal.App.4th 1165,
1180.) On appeal, Complete argues that
placing it on the ineligible list was untruthful because only the California
Department of Corporations can make Complete ineligible to serve as an escrow
agent. Flagstar’s Web site only
identifies which escrow agents are eligible or ineligible “to handle Flagstar
mortgage loan transactions.†Complete
did not offer any evidence that Flagstar’s Web site said anything other
than that Complete was not eligible to handle Flagstar loans. Optimum’s president testified that Flagstar’s
list of approved escrow agents meant “you can do business with these escrow
companies if you choose to take a loan to Flagstar Bank.â€
Matthew
Dohman, an officer of Optimum, submitted a declaration in opposition to
Flagstar’s motion for summary judgment, reading in relevant part as
follows: “Tim Kearney is employed by
Flagstar Bank. He is the Flagstar Bank
Account Executive for Optimum First Mortgage.
[¶] . . . On January 19, 2011, I received a call
from Tim Kearney at approximately 3:00 p.m.
During the call, Tim Kearney stated to me that Flagstar Bank had audited
about twenty (20) Optimum loan files. He
said that Flagstar Bank had Blacklisted[
both Complete Escrow and Integrity Escrow, and instructed me to switch all of
our current escrows with Complete Escrow and Integrity Escrow to another escrow
company. He said Complete Escrow and
Integrity Escrow were no longer eligible to act as escrow agents on any
Flagstar Bank loans.
[¶] . . . [¶] . . . I asked Tim Kearney if he
knew the reason Flagstar Bank was Blacklisting Complete Escrow and Integrity
Escrow. He said he did not. He said he was just instructed to inform me
of the action taken by Flagstar Bank and to make it clear that Flagstar Bank
would not allow any loans to close if we used Complete Escrow or Integrity
Escrow. [¶] . . . I
asked Tim Kearney about the status of Complete Escrow and Integrity Escrow
several times during 2011. I asked why
they are listed as ‘ineligible’ and if there had been any change. Each time Tim Kearney advised me he still
does not know any reasons, and they are both still listed on Flagstar Bank[’]s
website as ‘ineligible’ escrow agents.â€
2.
Civil Code section 47, subdivision (c)
provides, in relevant part: “A
privileged publication or broadcast is one made: [¶] . . . [¶] (c) In a
communication, without malice, to a person interested therein, (1) by one who
is also interested, or (2) by one who stands in such a relation to the
person interested as to afford a reasonable ground for supposing the motive for
the communication to be innocent . . . .â€
To determine the applicability of the common
interest privilege as a defense to defamation, the defendant (in this case,
Flagstar) bears the burden of proof on the issue of the existence of the
privilege, and the plaintiff (here, Complete) bears the burden of proof on the
existence of malice. (
1193, 1205‑1213.) Flagstar met its
burden of proving it had a common interest with those who heard or read its
allegedly defamatory statements.
Flagstar had a common interest with Optimum and the other mortgage
brokers that had access to Flagstar’s Web site listing the escrow agents
with which it would do business; the process of residential mortgage approval
and funding will be expedited and more cost efficient if the mortgage broker
working with a borrower‑client is aware of which combination of lender
and escrow agent will be able to complete the process together.
Flagstar was entitled to refuse to do business
with any entity it believed would subject it to a risk of financial or
reputational harm, and well‑settled law supports this conclusion. (Family
Home and Finance Ctr. v. Federal Home Loan (9th Cir. 2008) 525 F.3d 822,
827 [common interest privilege defeats defamation claim by mortgage broker
against Federal Home Loan Mortgage Corporation (Freddie Mac); Freddie Mac
placed mortgage broker on exclusionary list, which was published “only to its
lenders, with whom it shares a business relationship and common interest in
dealing with investment quality loansâ€]; Walton
v. Freddie Mac (FHLMC) (S.D.Ind., Mar. 22, 2013, No. 3:12-cv-00116-RLY-WGH)
[letter from Freddie Mac advising appraisal management company that Freddie Mac
would place it on an exclusionary list was “nothing more than [a] standard
business letter[] issued by Freddie Mac when it has cause to believe that doing
business with a particular business will subject it to an undue risk of harmâ€];
Prime Time Mortgage, Co. v. Flagstar
Bank, FSB (S.D. Ohio, May 4, 2005, No. 3:03-cv-337) 2005 U.S.Dist.
Lexis 9354, p. *6 [Flagstar published to Mortgage Asset Research Institute
(MARI) that the plaintiff had misrepresented the appraised value of a property;
qualified privilege defeats defamation claim because Flagstar and MARI shared
interest of providing mortgage professionals with whom they both do business
information to prevent fraud].)
In addition, Complete failed to meet its burden
of establishing the existence of malice.
In the context of the common interest privilege, malice is not inferred
from the communication; rather, Complete was required to establish actual
malice by showing that Flagstar’s statements were motivated by hatred of or ill
will towards Complete. (
113 Cal.App.4th 1363, 1370.)
offered evidence that Kolp changed Complete’s status from eligible to
ineligible because of irregularities discovered during an investigation, which
caused Kolp “to determine that the level of risk with Complete Escrow was too
high.†Flagstar also offered evidence
that the president of Complete did not have any reason to believe that Flagstar
decided to change Complete’s status due to hatred, an evil intention, or an
evil motive.
In opposition, Complete submitted evidence that
Kolp learned of the escrows Complete had in process when she received a letter
from Complete’s counsel, after the
decision had been made to place Complete on the ineligible list; that Kolp
intentionally placed Complete on the ineligible list; that other Flagstar
employees were unaware of Kolp’s reasons for placing Complete on the ineligible
list; and that Flagstar had no justification or legal cause to change Complete’s
status from eligible to ineligible. None
of the evidence to which Complete points establishes a triable issue of
material fact that Flagstar acted with actual malice in placing Complete on the
ineligible list. (Complete also
submitted the declaration of its counsel of record, who opined that Kolp had
only “lame excuses†for placing Complete on the ineligible list. Counsel’s opinions, rather than admissible
evidence, are insufficient to meet Complete’s burden on summary judgment.)
3.
Blain, Complete’s president, testified in her
deposition that Optimum continued to refer business (other than Flagstar
business) to Complete after January 2011; Optimum had a good relationship with
Complete; Optimum would probably continue to refer business to Complete in the
future; Flagstar never told Optimum that it could not use Complete to close non‑Flagstar
loans; and Complete did not lose any business other than business from
Flagstar. In particular, she testified
in her deposition as follows regarding business with lenders other than
Flagstar:
“Q Right. I meant, you know—I understand you can’t do
the business when they’re Flagstar loans, you know?
“A Okay.
“Q But I’m
talking about any other business you didn’t get that were not Flagstar loans.
“A
No. Why would we lose—no.â€
Blain further testified as follows:
“Q I
understand you might not know that you lost business if it was never presented
to you.
“A Yes.
“Q Same as
anyone would. [¶] But I’m asking you if
you know, for example, let’s say Citibank or CitiMortgage said, ‘Oh, you know
what? We heard that you’re
ineligible. We’re not giving you any
business.’ Are you aware of anything
like that happening?
“A No.
“Q
Okay. Can you identify any—are
there any specific lenders that you’re aware of that won’t refer business to
Complete?
“A No.
“Q Or any
mortgage brokers?
“A No.
“Q Or real
estate agents?
“A No.â€
B.
With regard to the alleged RESPA violation,
Complete’s expert witness on escrow practices declared: “[I]t is not an industry practice for
institutional mortgage lenders to maintain a ‘blacklist’ or ‘exclusionary list’
applicable to escrow companies. Many
lenders and other companies have ‘preferred lists[,’] which are companies they
have prior experience doing business with.
These are established business relationships just like the one between
[Complete] and Optimum First Mortgage.
Flagstar Bank does not have the right to exclude any licensed escrow
company in the State of California from any escrow transaction. In fact, Flagstar Bank does not have the
right to choose or direct who the escrow company will be. With respect to residential loans, RESPA and
HUD require that the borrower be given the right to choose the escrow company. There is a form supplied and used in almost
every residential loan transaction and sale transaction, which contains the
requirements. [Attached hereto as
Exhibit ‘2’ is a true and correct copy of the standard form.] By intentionally excluding [Complete] from
escrow transactions, it is my opinion that Flagstar Bank is engaging in a
violation of RESPA Regulations. [Title
24, CFR Section 3500, Appendix C.]â€
(Some capitalization omitted.)
Complete failed to raise a triable issue of
material fact regarding an alleged violation of RESPA. The settlement service provider list attached
to the declaration of Complete’s expert witness does not create an obligation
on the part of a lender to permit a borrower to use any escrow agent of the
borrower’s choosing. The form advises
the borrower of the contact information for various providers of settlement
services, which are being recommended by the loan originator, and advises the
borrower that it is not required to use those service providers. (The types of providers listed on the form
are title insurance and settlement agent; survey; and pest inspection.) Complete did not identify any specific
section of title 12 of the United States Code, or any specific part of title 24
of the Code of Federal Regulations, which creates an inalienable right of the
borrower to select the escrow agent to be used in a mortgage transaction if the
lender with whom the borrower wishes to work refuses to do business with that
escrow agent. Indeed, Complete does not
pursue this argument on appeal, other than to quote the expert witness’s
declaration in both its opening and reply briefs. Without any further explanation or analysis, Complete
failed to meet its burden in opposition to the summary judgment motion.
IV.
Unfair Business Practices
As to the third cause of action for unfair
business practices, the trial court’s minute order reads, in relevant
part: “The third cause of action for
unfair business practices is based on the same facts alleged under the other
causes of action in [the second amended
complaint]. . . . Because the court denies summary adjudication
as to the cause of action for interference with a contract, summary
adjudication is not proper for this cause of action.†While the unfair business practices claim might
have been based on the same underlying facts as the claim for interference with
contractual relations, that does not necessarily mean it stands or falls with
that claim.
The
evidence does not support an unfair
business practices claim. In its second
amended complaint and in briefing in the trial court and on appeal, Complete
referred to several different statutes as the basis for its unfair business
practices claim. Under Business and
Professions Code section 17200, “unfair competition shall mean and include any
unlawful, unfair or fraudulent business act or practice and unfair,
deceptive, untrue or misleading advertising and any act prohibited by Chapter 1
(commencing with Section 17500) of Part 3 of Division 7 of the Business and
Professions Code [(which involves advertising)].†The purpose of section 17200 is to protect
consumers and competitors against the creation or perpetuation of monopolies
and to promote fair competition. (
Cellular Telephone Co. (1999) 20 Cal.4th 163, 179.) “‘Because Business and Professions Code
section 17200 is written in the disjunctive, it establishes three varieties of
unfair competition—acts or practices which are unlawful, or unfair, or
fraudulent.’†(Id. at p. 180.)
The
evidence established that Flagstar did not violate any law. The evidence also established Flagstar did
not act fraudulently. As used in Business
and Professions Code section 17200, a fraudulent act is one that would be
likely to deceive members of the public.
(Daugherty v. American Honda Motor
Co., Inc. (2006) 144 Cal.App.4th 824, 838.)
The evidence established the statements on Flagstar’s Web site and
to Optimum, regarding Complete’s ineligible status, were true, and, therefore,
even if they were disseminated to the public, they would not have deceived
anyone. Finally, the evidence showed
that Flagstar’s actions were not unfair, within the meaning of section 17200. Because Flagstar had a legitimate business
reason for placing Complete on its ineligible list, Complete’s claim under the
unfairness prong of section 17200 failed.
(Family Home and Finance Ctr. v.
Federal Home Loan, supra, 525
F.3d at p. 826.) Complete failed to
offer admissible evidence creating a triable issue of material fact as to any
prong of the section 17200 test.
Complete
also raised its unfair business practices claim under Business and Professions
Code section 17046, which makes it “unlawful for any person to use any threat,
intimidation, or boycott, to effectuate any violation of this chapter.†Flagstar offered evidence that it did not
threaten, intimidate, or boycott anyone; to the contrary, Flagstar offered
evidence that Complete continued to do business with Optimum as well as other
mortgage brokers. Complete did not
create a triable issue of material fact as to any alleged threats,
intimidation, or boycotts.
Finally,
Complete alleged its unfair business practices claim arose under Business and
Professions Code section 17500, which prevents false advertising. Flagstar established it had not done any
advertising, and Complete failed to offer admissible evidence to create a
triable issue of material fact as to any advertising, false or otherwise, by
Flagstar.
V.
Defamation
As
explained ante, Flagstar met its
initial burden to establish one or more of the elements of Complete’s cause of
action for defamation could not be proven.
Complete failed to demonstrate a triable issue of material fact in
opposition to the motion for summary judgment.
Therefore, the trial court properly determined Flagstar was entitled to summary
adjudication on this cause of action as well.
VI.
of Puccio and Kolp
Complete
argues the declarations of Puccio and Kolp should have been excluded in their
entirety. In its written evidentiary
objections, Complete argued the Puccio declaration should be excluded in its
entirety because, in reaching his opinions, Puccio relied on the first amended
complaint and on an earlier version of the Kolp declaration. If the bases for an expert witness’s opinions
are faulty, that goes to the weight of the opinions, not their
admissibility. The trial court did not
abuse its discretion in denying Complete’s request to strike the Puccio
declaration.
In
the trial court, Complete did not move to strike Kolp’s declaration in its
entirety. Complete fails to provide any
grounds for doing so on appeal. Rather,
Complete challenges the correctness of the statements in Kolp’s declaration and
attacks her credibility. These
challenges do not make Kolp’s declaration inadmissible, however, nor do they
affect the propriety of the summary judgment.
(See Code Civ. Proc., § 437c, subd. (e) [“summary judgment may
not be denied on grounds of credibilityâ€]; Trujillo
v. First American Registry, Inc. (2007) 157 Cal.App.4th 628, 632.). We find no grounds for refusing to consider
Kolp’s declaration.
In
opposition to the motion for summary judgment, Complete’s specific objections
to the Puccio and Kolp declarations were numerous and generally
inapplicable. As but one example,
Complete objected to Puccio’s declaration that he was the author or editor of
certain real‑estate-related books as lacking sufficient foundation,
lacking personal knowledge, and being speculative, based on hearsay, overbroad,
compound, and vague and ambiguous. On
appeal, Complete fails to point to a single item of evidence and explain why
the trial court abused its discretion in overruling Complete’s objection to
that evidence. Complete has failed to
establish any error in the trial court’s evidentiary rulings.
Complete
asks us to strike the unpublished opinions from other jurisdictions cited in
Flagstar’s respondent’s brief, and to strike the cases and authorities cited in
the respondent’s brief, which were not cited in Flagstar’s memorandum of points
and authorities in support of the motion for summary judgment. In addition to violating California Rules of
Court, rule 8.54 (which requires all motions in a reviewing court to be
accompanied by a separate memorandum), Complete’s requests are without
merit. While unpublished California
opinions generally may not be cited or relied upon (Cal. Rules of Court, rule
8.1115(a)), this rule does not apply to cases from other jurisdictions. Further, while a party may generally not
raise new theories or arguments for the first time on appeal, this does not prevent
a party from providing additional authority (especially newly decided cases)
that bolster the arguments previously raised in the trial court. Complete fails to show that any of the cases
cited by Flagstar for the first time on appeal addresses wholly new issues that
were not raised in the trial court.
Disposition
The
judgment is reversed with directions to enter an order (1) denying the motion
for summary judgment, (2) denying the motion for summary adjudication of the
first cause of action for intentional interference with contractual relations,
and (3) granting the motion for summary adjudication of the second cause
of action for intentional interference with prospective economic advantage, the
third cause of action for unfair business practices, and the fourth cause of
action for defamation. Respondent to
recover costs on appeal.
FYBEL,
J.
WE CONCUR:
O’LEARY, P. J.
BEDSWORTH, J.
instructions we are considering at this point are the three escrow instructions
that Flagstar failed to prove had not been signed. These allegedly signed escrow instructions,
however, are not included in the appellate record. We have reviewed the unsigned escrow instructions
for the other 17 escrows to determine the likely terms of the signed escrow
instructions.
this portion of Puccio’s declaration were overruled. Complete does not argue on appeal that the
trial court abused its discretion in this evidentiary ruling.
