Green Mut. Prop. & Inv. Co. v. Wilshire Bank

Decision Date03 December 2018
Docket NumberB275613
CourtCalifornia Court of Appeals
PartiesGREEN MUTUAL PROPERTY & INVESTMENT CO., et al., Plaintiffs and Appellants, v. WILSHIRE BANK et al., Defendants and Respondents.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC515574)

APPEAL from a judgment of the Superior Court of Los Angeles County, Holly Kendig, Judge. Reversed in part and affirmed in part with directions.

Marc I. Zussman for Plaintiffs and Appellants.

Safarian Choi and Bolstad, David C. Bolstad and Jerome M. Jauffret for Defendants and Respondents James H. Ahn and Robert Ahn.

Park and Lim, Heesok Park, Jessie Y. Kim and James E. Adler for Defendant and Respondent Wilshire Bank.

Green Mutual Property Investment (GM Property), Green Mutual Equity, Inc. (GM Equity), and Ock Kun Ro appeal from a judgment of dismissal entered after the court sustained demurrers to their third amended complaint without leave to amend in favor of Wilshire Bank (Wilshire), James Hyojin Ahn, and Robert Ahn.1

Reviewing the demurrers de novo, we conclude that GM Equity and Ock Kun have failed to state a cause of action against any defendant. GM Property, however, has pleaded valid causes of action against the defendants and, therefore, the court erred in sustaining the demurrers against it. Accordingly, we affirm the judgment against GM Equity and Ock Kun and reverse the judgment as to GM Property.

FACTUAL AND PROCEDURAL BACKGROUND

In accordance with our standard of review, our factual summary is drawn from the well-pleaded facts (but not conclusions of fact or law) alleged in the operative, third amended complaint, as well as judicially noticeable facts. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

In 2007, Trimax Melrose Inc. (Trimax) borrowed $3.6 million from Saehan Bank (Saehan), Wilshire's predecessor, and executed a promissory note in that principal amount (the Trimax Note). The Trimax Note was secured by a deed of trust(the Trimax deed of trust) on certain real property (the real property). At that time, the real property had been appraised at $5.5 million.

Over the next three years, Trimax frequently missed payments and Saehan repeatedly downgraded the loan. Trimax defaulted on the property taxes assessed against the real property in 2008 and, by June 2009, the appraised value of the real property had declined to $2.2 million.

Saehan recruited James to find a buyer for the Trimax Note. James approached Ock Kun, the President of GM Property. James told Ock Kun that the Trimax Note was "a very good and safe promissory note," that there were "no problems" with the note, and the only reason Saehan was selling it was to raise capital. James also told Ock Kun that the real property was appraised at $5.5 million and that the car wash business operating on the real property had profits of $20,000 a month. These representations were false and James knew they were false when he made them. In addition, James concealed other material facts from Ock Kun, including the recent $2.2 million appraisal and the fact that the car wash business was generating low revenues.

Ock Kun lived in South Korea and had never engaged in a real estate transaction in the United States. He therefore introduced James to his son, Chahn, a Los Angeles resident, so that Chahn could "facilitate the deal on behalf of Ock [Kun] and [GM Property]." Pursuant to James's recommendation, Chahn formed GM Equity.

In late 2009, Chahn met with James and Saehan's chief credit officer, Jin Soo Kim. James and Kim were aware that Chahn was representing GM Equity, GM Property, and Ock Kun.During the meeting, Kim told Chahn that a $3.6 million return on the Trimax Note was "practically guaranteed," and assured him that the investment was safe and would be paid as reliably as a certificate of deposit. Kim also told Chahn that the real property had been appraised at $5.5 million, and that the only reason the bank was selling the note was to raise capital to improve its cash flow. Kim knew these representations were false, and he made them with the intent to induce the plaintiffs to purchase the Trimax Note. Kim also concealed from Chahn the most recent $2.2 million appraisal, Saehan's repeated downgrades of the note, Trimax's property tax default, and Trimax's history of delinquent payments, tax liens, and judgment liens.

Chahn relayed Kim's representations to Ock Kun. In reliance on these representations and James's prior representations to Ock Kun, "[p]laintiffs decided to purchase the Trimax Note" for $2.4 million. Pursuant to agreements among the plaintiffs as to how they would fund the purchase, Ock Kun transferred $1.2 million to GM Property, and GM Property transferred $1.2 million to GM Equity. GM Equity then agreed to pay Saehan $1.2 million and give Saehan a promissory note (the GM Equity Note) for the balance. Although Saehan agreed to assign the Trimax Note to GM Equity, Saehan and James understood that GM Equity would receive the assignment "on behalf of [GM Property] and Ock [Kun]."

The transaction was consummated in January 2010 in a loan assignment and assumption agreement entered into between Saehan and GM Equity. The agreement, which is attached to the third amended complaint, does not indicate thatGM Equity was purchasing the Trimax Note as an agent for another, and does not exclude that possibility.

The agreement includes provisions in which GM Equity acknowledged and represented that Saehan had made no warranty or representations with respect to the Trimax Note and that GM Equity had not relied on any information provided by Saehan or its agents in making the decision to purchase the Trimax Note.

Under the agreement, GM Equity was required to open a reserve account with Saehan into which payments on the GM Equity Note would be deposited. GM Property provided the initial deposit into the reserve account in the amount of $114,000.

In connection with the transaction, GM Equity executed a collateral assignment agreement to secure the obligations under the GM Equity Note. Under the agreement, GM Equity granted Saehan a security interest in the Trimax Note and the Trimax deed of trust. GM Equity also agreed that if it acquired the real property at a foreclosure sale under the Trimax deed of trust, it would secure the GM Equity Note obligations with a first deed of trust against the real property.

In July 2010, GM Equity assigned to GM Property its rights under the Trimax Note and GM Property assumed the obligations under the GM Equity Note.

Shortly after GM Property received the assignment, it and Robert entered into a "Management Agreement" (capitalization omitted), in which GM Property appointed Robert "the exclusive servicing agent for the [Trimax] Note." Robert's duties under the agreement included opening bank accounts and maintaining records for GM Property, and collecting the payments due under the Trimax Note. Robert was also required to deliver to Saehanthe monthly payments due on the GM Equity Note. In the event that GM Property acquired the real property, Robert would "manage and oversee all aspects" of the real property.

In early 2012, Trimax defaulted on the Trimax Note. On July 19, 2012, GM Property, as the beneficiary under the Trimax deed of trust, purchased the real property at a foreclosure sale for $2.5 million. Pursuant to the collateral assignment agreement between GM Equity and Saehan, Saehan acquired a security interest in the real property to secure the obligations under the GM Equity Note.

In October 2012, Ock Kun learned that the real property was the subject of a scheduled public auction for nonpayment of taxes that had been unpaid since 2008. James and Saehan eventually paid the taxes and penalties and the auction was cancelled.

After GM Property acquired the real property, the tenant in possession of the real property paid monthly rent payments to Robert, GM Property's property manager. Robert, however, failed to forward to Saehan the payments due under the GM Equity Note for the months of March, April, and May 2013. As a result, the GM Equity Note went into default.

In September 2013, Saehan sold the GM Equity Note to Marden Chen and Chia Yang, who had a business relationship with James. After Chen and Yang threatened to commence foreclosure proceedings against the real property, GM Property retained James as its real estate broker to sell the real property.

In November 2013, GM Property entered into an agreement to sell the real property for $2.55 million dollars. Soon afterward, James told Ock Kun that Ock Kun needed to transfer $100,000 to Chen and Yang to prevent them from initiating foreclosureproceedings. In reliance on James's representations, Ock Kun "caused [GM Property] to wire transfer $100,000.00 to" Chen and Yang. The payment, however, was not used as James had promised, but rather paid to James in "an 'under-the-table' transaction to wrongfully enrich" James.

In addition to the misappropriated $100,000, the plaintiffs allege that they were deprived of the $1.2 million profit they had been promised on the Trimax Note and recovered only $835,134.79 of their $1.2 million investment in the Trimax Note.

STANDARD OF REVIEW

In reviewing an order sustaining a demurrer, we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1230.) " 'We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the...

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