Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC405069, David L. Manning, Judge.
Creed & Elliott and Joseph W. Creed for Plaintiffs and Appellants.
No appearance for Defendant and Respondent.
KRIEGLER, J.
Plaintiffs Adrienne and Emery Newsom, wife and husband, appeal the judgment in favor of defendant Alvin Ruiz Pates following a bench trial and the trial court’s grant of defendant’s motion for judgment under Code of Civil Procedure section 631.8 (section 631.8). Plaintiffs’ verified complaint was against defendant and two business entities, Oak Creek Investments, doing business as Elite Mortgage Financial, and Central Pacific Mortgage Company. Plaintiffs alleged fraud, breach of fiduciary duty, intentional nondisclosure of material facts, broker’s constructive fraud, negligent misrepresentation, conversion, professional negligence, and breach of the federal truth in lending act for defendant’s involvement in the refinancing of their residence.
Neither of those entities was a party at the time of trial.
Plaintiffs did not argue or assert the conversion claim at trial or on appeal. We deem it forfeited.
Plaintiffs sought to prove that defendant, acting as their mortgage broker, promised to secure a 30-year fixed rate loan but provided them with nonconforming loan documents for an adjustable rate, negative amortizing loan they could not afford. When the housing market declined and their property lost value, they could not prevent it from going into foreclosure, causing significant economic losses. At the conclusion of plaintiffs’ case, the trial court granted the section 631.8 motion, finding a lack of credible evidence as to defendant’s responsibility for providing the nonconforming loan documents to plaintiffs. On review for substantial evidence, we affirm. Plaintiffs cannot show the trial court committed legal error, while the trial court’s factual findings were supported by substantial evidence.
STATEMENT OF FACTS
Adrienne Newsom testified that in 2006, she and her husband were considering selling their home, which was subject to an adjustable rate interest loan. Their minister suggested they speak to Pates, who had helped various members of their church with refinancing their mortgages. When she met with Pates in late October or early November 2006, he represented himself as being a real estate and mortgage broker with his own company, Elite Mortgage. She told him that “the only thing [she] would be interested in would be a 30-year fixed mortgage, ” otherwise she would sell her home. Based on Pates’s representation that he was confident he could obtain “a 30-year fixed with a great interest rate, ” they agreed to have him prepare the documents to refinance their home.
On December 18, 2006, Adrienne received by electronic mail a loan application and related documents from Pates’s office at Elite Mortgage. According to those documents, the loan would have a fixed interest rate of 4.875 percent for 30 years. The loan documents listed Adrienne as the sole applicant for the loan because Pates had explained that her husband’s credit history would negatively affect the terms of the loan.
On December 23, 2007, a female notary arrived at the Newsom’s residence with loan documents. The notary told them that Pates had sent her with the documents, which were the same as the ones that had previously been sent to the Newsoms. Adrienne “glanced” at the documents before signing them but did not read the terms carefully. Adrienne trusted that terms would not be different from those in the documents she received on December 18. The documents did not identify Pates as the person who prepared them; the broker was listed as Elite Mortgage. Pates was identified as the “interviewer, ” an employee of Elite Mortgage. The final loan documents stated that the interest rate was 4.875 percent, but it did not refer to a 30-year fixed rate. Instead, it was designated as “ARM, ” stating: “5/6 LIBOR secured option ARM.” In the lender’s closing instructions, the interest rate was listed as 7.875 percent. Adrienne did not notice those discrepancies between the loan application documents and the final loan documents when she signed the latter.
Some six months later, however, when Adrienne requested a schedule for paying off the loan from the lender, she was shocked to discover the loan was not subject to a 30-year fixed interest rate provision. Rather, it was a negative amortizing loan such that their monthly payments had not decreased the principle amount. Instead, the principle had substantially increased during that period, as had the required monthly payments. When Adrienne confronted Pates with this information, he said he was surprised to hear her description of the loan and asked to see the loan documents to determine if he could help. When she spoke to him again, however, Pates offered no remedy.
Emery Newsom testified in a manner generally consistent with that of his wife. He added that Pates told him after the fact that he believed he had “put [them] in a 30-year fixed, ” not a negative amortizing loan. Emery testified that as a result of the nature of the loan they had received, they were unable to make the payments and the house went into foreclosure.
DISCUSSION
At the conclusion of plaintiffs’ case, the defense moved for judgment under section 631.8. The trial court raised its concern about the lack of evidence that defendant was responsible for the nonconforming documents the notary presented to plaintiffs. Plaintiffs’ counsel relied on plaintiffs’ testimony that the notary told plaintiffs the documents came from defendant. The trial court found the witnesses’ testimony lacked credibility and was not based on personal knowledge, since it was hearsay—the evidence consisted of what plaintiffs testified the notary said about Pates. In its statement of decision, the trial court found plaintiffs’ evidence “failed to establish that any act or omission of [defendant] was a proximate cause of any loss or element of damages suffered by Plaintiffs arising out of their execution of the loan documents in this action. Proximate cause, being an essential element of all Plaintiffs’ causes of action, and no proximate cause found, requires judgment in favor of [defendant] for all causes of action....”
“The purpose of [section] 631.8 is ‘to enable the court, when it finds at the completion of plaintiff’s case that the evidence does not justify requiring the defense to produce evidence, to weigh evidence and make findings of fact.’ (Pettus v. Cole (1996) 49 Cal.App.4th 402, 424[–425].) Under the statute, a court acting as trier of fact may enter judgment in favor of defendant if the court concludes that plaintiff failed to sustain its burden of proof. (People v. Mobil Oil Corp. (1983) 143 Cal.App.3d 261, 267.) In making the ruling, the trial court assesses witness credibility and resolves conflicts in the evidence. (Ford v. Miller Meat Co. (1994) 28 Cal.App.4th 1196, 1200; Roth v. Parker (1997) 57 Cal.App.4th 542, 550.) [¶] On appeal, we view the evidence in the light most favorable to the judgment, and are bound by trial courts’ findings that are supported by substantial evidence. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) But, we are not bound by a trial court’s interpretation of the law and independently review the application of the law to undisputed facts. (Ibid.) Also, because the trial court issued a statement of decision, we are bound by express findings supported by the evidence but will not imply other findings in support of the judgment. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.)” (People ex rel. Dept. of Motor Vehicles v. Cars 4 Causes (2006) 139 Cal.App.4th 1006, 1012; Kinney v. Overton (2007) 153 Cal.App.4th 482, 488.)
Plaintiffs contend the trial court’s factual findings as to causation resulted from legal error because the trial court failed to consider their case in light of evidence establishing defendant’s fiduciary relationship with plaintiffs, based on evidence that defendant represented himself as being a licensed real estate broker. The argument fails, however, because even if we assume defendant owed plaintiffs a fiduciary duty with regard to the loan transaction, it would not obviate or overcome the trial court’s factual finding that plaintiffs failed to establish defendant’s responsibility for providing plaintiffs with the nonconforming loan documents.
At trial, there was evidence indicating that defendant was licensed only as a real estate salesperson.
Plaintiffs seek to rely on the general proposition that “‘“[w]hen the acts of an agent have been questioned by his principal and the fiduciary relationship has been established, the burden is cast upon the agent to prove that he acted with the utmost good faith toward his principal [citations] and that he make a full disclosure prior to the transaction of all the facts relating to the transactions under attack. [Citations.]” [Citation.]’” (Timmsen v. Forest E. Olson, Inc. (1970) 6 Cal.App.3d 860, 871 (Timmsen).) Their reliance is misplaced because the Timmsen court made it clear that the existence of a fiduciary relationship does not eliminate the necessity of proving proximate causation. “‘An agent is liable on the ground of negligence only for such damages as are the natural and proximate result of his negligence, and the measure of damages is the loss or injury actually sustained by the principal as a result of such negligence, and no further damages can be recovered....’” (Id. at p. 871.)
Moreover, the Timmsen decision is distinguishable because it involved the issue of whether the trial court erred by granting a nonsuit after the plaintiffs’ opening statement, despite the plaintiffs’ representations that the defendants affirmatively misadvised and made material misrepresentations to the plaintiffs. Accordingly, the appellate court’s reversal was predicated on a standard of review that required it to accept as true “the facts set forth in the opening statement and the legitimate inferences to be drawn therefrom.” (Timmsen, supra, 6 Cal.App.3d at p. 872; see also Ulloa v. McMillin Real Estate & Mortgage, Inc. (2007) 149 Cal.App.4th 333, 339.) Here, of course, our standard of review is the opposite of that in Timmsen—we view the evidence in the light most favorable to the judgment, and defer to the trial courts’ findings that are supported by substantial evidence.
Plaintiffs’ reliance on Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555 is similarly misplaced. While that decision stated that mere negligence by a fiduciary “may be characterized as constructive fraud, ” it did not eliminate the requirement of proving a causal nexus between the broker’s representations and damages arising from the client’s detrimental reliance. (Id. at p. 563.) Indeed, in Salahutdin, the court affirmed the judgment against the broker based on the trial court’s findings that he “breached his fiduciary duty to plaintiffs by making affirmative statements as to the size, boundaries, and subdividability of the property, knowing these facts to be material to plaintiffs and by failing to disclose that he had not confirmed their accuracy. The trial court concluded that such breach constituted constructive fraud. Substantial evidence supports that determination.” (Ibid.)
Nor are plaintiffs correct in arguing recovery for constructive fraud based on breach of fiduciary duty excused them from having to prove Pates’ actions were the proximate cause of their injury. Thus, in Estate of Gump (1991) 1 Cal.App.4th 582—another authority on which plaintiffs seek to rely—the court explained that constructive fraud arises from a “‘breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice. (Civ. Code, § 1573.)’ [Citations.]” (Gump, supra, at p. 601, fn. omitted.) As the Gump court emphasized, “‘The misrepresentation must be an inducing cause of the party’s assent. [Citation.] This is so even though the defendant is in a confidential relationship....’ [Citation.]” (Ibid., fn. 21.)
Indeed, in their trial brief and on appeal, plaintiffs argued defendant breached his fiduciary duty by causing his notary to inform them “that the loan documents they were signing were the same as the loan documents [defendant] sent them on December 18, 200[6].” Again, the problem for plaintiffs is that the trial court made a factual determination that they failed to prove defendant caused the nonconforming loan documents to be presented to plaintiffs. We cannot say the trial court’s finding was unreasonable based on the evidence at trial. Neither Pates nor the notary testified at trial. There was no direct evidence of defendant’s involvement in sending those documents to plaintiffs. While a trier of fact could infer such responsibility from the circumstantial evidence, the trial court was not required to find plaintiffs’ hearsay testimony credible or otherwise convincing.
Nor do plaintiffs confront the trial court’s finding of a lack of evidence as to defendant’s responsibility for causing their damages with regard to the remaining causes of action for fraud, intentional nondisclosure of material facts, constructive fraud, negligent misrepresentation, breach of the federal truth in lending act, and professional negligence. To the contrary, they argue that all of those claims depend on a finding that defendant intended to deceive plaintiffs about the nature of the loan or that he was responsible for sending out the notary to their home with the nonconforming loan documents.
In sum, where the trial court’s assessment of witness credibility and its resolution of evidentiary conflicts was favorable to the defense, and where the evidence viewed in the light most favorable to the judgment supports those findings, we must affirm. (See People ex rel. Dept. of Motor Vehicles v. Cars 4 Causes, supra, 139 Cal.App.4th at p. 1012; Kinney v. Overton, supra, 153 Cal.App.4th at p. 488.).
DISPOSITION
The judgment is affirmed. Defendant and respondent Alvin Ruiz Pates is to recover his costs on appeal.
We concur: TURNER, P.J., MOSK, J.