KRIEGLER, J.
In this breach of brokerage agreement action, defendants and appellants John Hnatio and Powerhouse Associates, Inc. (brokers), appeal from a $291,885.55 judgment against them in favor of plaintiff and respondent AmericaHomeKey, Inc., after the trial court granted AmericaHomeKey's motion for summary adjudication of the first seven causes of action of the second amended complaint.
AmericaHomeKey filed the operative second amended complaint alleging seven causes of action against brokers. AmericaHomeKey was in the residential home financing business. Powerhouse was a mortgage brokerage company. Hnatio was a mortgage broker employed by Powerhouse. On May 30, 2006, AmericaHomeKey and Powerhouse entered into a Mortgage Loan Brokerage Agreement (the Agreement) under which Powerhouse was to locate and qualify prospective borrowers for conventional residential mortgage loans and submit loan applications from prospective borrowers to AmericaHomeKey. Upon AmericaHomeKey's satisfaction with the credentials of the prospective borrowers, AmericaHomeKey would underwrite and close the mortgage loans and then sell them on the secondary mortgage market. By submitting a loan application to AmericaHomeKey, Powerhouse warranted that it verified all information on the loan application in accordance with prudent underwriting standards, all documents submitted were genuine, and all representations were true. Powerhouse would indemnify AmericaHomeKey against loss resulting from any breach by Powerhouse.
The first cause of action was against Powerhouse for breach of written contract. It alleged that between June 2006 and June 2007, Powerhouse submitted loan applications from Marlon Sipin. In reliance on those applications, AmericaHomeKey underwrote and closed mortgage loans Nos. 4024481 and 4024483. AmericaHomeKey paid $13,210.00 in commissions and costs to Powerhouse for brokering these loans. In breach of the Agreement, the loan applications misrepresented the source and amount of Sipin's income, causing AmericaHomeKey to incur losses of $67,655.62 plus attorney fees and costs.
The second cause of action was also against Powerhouse for breach of written contract. AmericaHomeKey alleged that Powerhouse submitted loan applications from Sipin between June 2006 and June 2007 for loans to be secured by different real property than that in the first cause of action. In reliance on those applications, AmericaHomeKey underwrote and closed mortgage loan No. 4026668. AmericaHomeKey paid $19,922.80 in commissions and costs to Powerhouse for brokering this loan. In breach of the Agreement, the loan applications misrepresented the extent of Sipin's financial obligations under unrelated loan agreements, causing AmericaHomeKey to incur losses of $141,966.25 plus attorney fees and costs.
The third and fourth causes of action were against Hnatio for breach of guaranty. AmericaHomeKey alleged that on May 30, 2006, Hnatio executed the Agreement as a personal guarantor of Powerhouse's performance of the Agreement. Hnatio breached the Agreement by submitting loan applications on loan Nos. 4024481 and 4024483 that misrepresented Sipin's financial status and on loan No. 4026668 that misrepresented Sipin's financial obligations, causing AmericaHomeKey $67,655.62 in damages on the first two loans and $141,966.25 in damages on the third loan.
The fifth cause of action was against brokers for intentional misrepresentation. It was alleged that brokers knowingly made false and fraudulent representations to AmericaHomeKey about Sipin's income and financial obligations in connection with the three loans from May 30, 2006, through the end of 2007. In reasonable and justifiable reliance on the representations, AmericaHomeKey underwrote and closed the loans causing it to sufferer damages in the amount of $209,621.87.
The sixth cause of action was against brokers for negligent misrepresentation. It alleged that brokers knew or should have known the representations concerning Sipin's income and financial obligations in the applications for the three loans were false. The representation that Sipin earned $10,200 per month from Sipin Medical Billing was false. He was employed by Pacific Consolidated Industries as a medical assembler and never earned $10,200 per month from any source. Sipin had more financial obligations under unrelated loan agreements than he disclosed in the loan applications. Reasonably and justifiably relying on the negligent misrepresentations, AmericaHomeKey was damaged in the amount of $209,621.87.
The seventh cause of action was against brokers for declaratory relief. AmericaHomeKey sought a declaration of right of the parties' respective rights under the Agreement.
On December 9, 2009, brokers denied the allegations of the second amended complaint and interposed affirmative defenses.
On November 20, 2009, AmericaHomeKey filed a motion for summary adjudication of the seven causes of action. AmericaHomeKey contended that undisputed facts and supporting evidence established each element of the causes of action. Evidence filed in support of the motion is as follows.
Leahy was senior risk manager for AmericaHomeKey and custodian of AmericaHomeKey's records regarding the Agreement. Her declaration was based on her review of the documents attached as exhibits to her declaration. Sipin defaulted on the loans. Sipin's representations that he earned $10,200 per month from Sipin Medical Billing and his only real estate liability was on his home in Prather, California (the Prather residence) were false. AmericaHomeKey had loan purchase agreements with Countrywide Home Loans and CitiMortgage. As a result of the misrepresentations concerning Sipin's income and liabilities, AmericaHomeKey entered into confidential settlement agreements to pay Countrywide $54,445.62 in lieu of repurchasing loan Nos. 4024481 and 4024483 and to pay CitiMortgage $122,043.45 in lieu of repurchasing loan No. 4026668. Attached to Leahy's declaration were the following documents.
The Agreement was entered into on May 30, 2006, between AmericaHomeKey and Powerhouse, by Hnatio as owner of Powerhouse and personal guarantor of Powerhouse's obligations. It provides that Powerhouse "may locate and qualify potential borrowers for conventional residential mortgage loans, which AmericaHomeKey will underwrite, close and sell into the secondary mortgage market." "By submitting a loan application to AmericaHomeKey, [Powerhouse] shall warrant and represent . . . [¶] [that it] . . . verified all information on loan applications submitted by [Powerhouse] in accordance with prudent underwriting standards; . . . [a]ll documents submitted to AmericaHomeKey were genuine; [and] . . . all representations with respect to the application were true[.]" Powerhouse agreed to "indemnify AmericaHomeKey against and hold AmericaHomeKey harmless from all liability, loss, cost, and expense, including without limitation, reasonable attorney[] fees and costs of investigation resulting from any breach of [Powerhouse's] warranties, representations, or covenants herein or from any acts or omission of [Powerhouse] or its agents or employees." "Any action to enforce or interpret this Agreement shall be resolved by binding arbitration conducted in Dallas, Texas under the commercial arbitration rules of the American Arbitration Association then in force. The prevailing party in any such proceedings shall be entitled to recover its reasonable attorney[] fees as part of any award."
On May 23, 2006, Sipin applied for two loans: (1) a $360,000 conventional mortgage loan to refinance $370,399 in existing liens on the Prather residence, at an initial interest rate of 1.75 percent with "option arm MTA" amortization;
On August 11, 2006, Sipin applied for a conventional mortgage loan in the amount of $118,000 at a fixed interest rate of 8.922 percent as secondary financing to purchase property at 29112 Mammoth Lane, Canyon Country, California (Mammoth Lane residence). Sipin stated in the application that his total liabilities were $409,867, and his monthly base employment income was $12,400. Sipin stated that the only real estate he owned was the Prather residence. He represented he was liable on the Prather residence for two mortgages owned by Countrywide totaling $405,000 and that the Prather Residence produced $2,500 monthly rental income. Attached to the application was a copy of a rental agreement entered into September 1, 2006, between Sipin and Marlon Mored for a month-to-month tenancy of the Prather residence at $2,500 per month.
The first two loans were funded on June 1, 2006. The third loan funded on August 16, 2006.
According to Sipin's credit report, he was employed by "Pacific Consolidated-Industries, occupation unknown" in September 2005. The credit report does not indicate Sipin was self-employed as owner of Sipin Medical Billing or mention Sipin Medical Billing. In March 2005, Sipin received a total of $349,000 from Greenpoint in a conventional real estate mortgage loan and home equity loan. The accounts were closed in December 2005. In November 2005, Sipin received $371,178 from Washington Mutual in a conventional real estate mortgage and home equity loan. Sipin's address was reported as the Prather residence in August 2005 and as the Mammoth Lane residence in May 2006.
On March 31, 2006, Sipin sold the Mammoth Lane residence to Josefina C. Sipin in an interfamily transfer and dissolution that was recorded April 5, 2006. On June 1, 2006, a mortgage on the Prather residence was recorded, listing Sipin as the borrower. On August 16, 2006, a mortgage on the Mammoth Lane residence was recorded, listing Sipin as the borrower. On October 13, 2006, Sipin and Philip Sobrepena sold the Mammoth Lane residence to Emily Joy Sobrepena, in an interfamily transfer and dissolution that recorded on March 9, 2007. In April 2007, Sipin sold the Prather residence to Federal National Mortgage Association for $308,526.
Exhibit I to Leahy's declaration is a one-page list of loan numbers blacked out or illegible, except a line showing Sipin as borrower and indicating a total of $54,445.82.
Exhibit J is another one-page list of loan numbers blacked out, except the line indicating the settlement of a claim of misrepresentation regarding Sipin's $118,000 loan, which was 31-60 days delinquent. The new due amount was $122,043.45.
Isbell, an associate with the law firm representing AmericaHomeKey in this litigation, declared as follows. The law firm served requests for admission on Powerhouse and Hnatio. Upon Powerhouse's and Hnatio's failure to respond to the requests, the trial court, on April 13, 2009, ordered the matters specified in the requests for admission to be deemed admitted as true.
The facts admitted by Powerhouse as true include the following. The Agreement required Powerhouse to verify all information on loan applications and all documents submitted with loan applications. Powerhouse agreed to indemnify AmericaHomeKey for any damages incurred as a result of Powerhouse's breach of Agreement. AmericaHomeKey's efforts to review a loan application did not relieve Powerhouse of its obligation to indemnify AmericaHomeKey for damages resulting from Powerhouse's breach of Agreement. Powerhouse submitted loan
The facts admitted as true by Hnatio include the following. Hnatio is Powerhouse's sole sponsoring broker. Hnatio executed the Agreement on behalf of Powerhouse and personally guaranteed Powerhouse's performance. The Agreement required Hnatio to verify all information on loan applications and all documents submitted with loan applications and to indemnify AmericaHomeKey for any damages incurred as a result of Powerhouse's breach of Agreement. AmericaHomeKey's efforts to review a loan application did not relieve Hnatio of its obligation to indemnify AmericaHomeKey for damages resulting from Hnatio's breach of Agreement. Powerhouse submitted loan applications on behalf of Sipin, but Hnatio failed to verify all information, representations, and documents and refused to reimburse AmericaHomeKey for damages incurred by AmericaHomeKey. For loans Nos. 4024481 and 4024483, Hnatio failed to verify whether Mored would be leasing the Prather residence as indicated in the monthly rental agreement enclosed in conjunction with Sipin's loan application. For loan Nos. 4024481 and 4024483, Hnatio failed to disclose Mored was related to Sobrepena. Hnatio alone was responsible for supervising broker Sobrepena. Hnatio failed to adequately supervise Sobrepena with regard to the Sipin loans. For loan Nos. 4024481 and 4024483, Hnatio failed to disclose that Sipin also owned the Canyon Rim Place property. For loan Nos. 4024481 and 4024483, Powerhouse failed to verify Sipin's stated employment and assets.
Brokers contended AmericaHomeKey failed to prove they were solely liable for the three defaulted loans as a matter of law, in that AmericaHomeKey failed to independently verify the loan applications and brokers reasonably relied on the representations of Sobrepena, an independent contractor.
Hnatio's declaration was submitted in support of the opposition. Sobrepena worked as an independent contractor for Powerhouse, performing tasks as a mortgage broker and sales agent. He assisted Sipin, his client, to obtain the three loans. He was to verify all information in the loan application and submit it to AmericaHomeKey for approval. Sipin appeared to qualify for the loans per AmericaHomeKey's guidelines, Powerhouse did the groundwork, and thereafter AmericaHomeKey conducted its own investigation and quality control. AmericaHomeKey "has provided no solid evidence that [brokers] are wholly or partially responsible for the defaulted loans."
In their separate statement of disputed facts, brokers argued the trial court's April 13, 2009 order, deeming admitted all matters in the requests for admissions, should not be considered as evidence, because the request for admissions related to the original complaint, not the second amended complaint.
AmericaHomeKey filed evidentiary objections to Hnatio's declaration but did not obtain a ruling from the trial court.
The hearing on the motion was held on February 5, 2010. Concluding brokers' admissions were binding, the trial court granted the motion for summary adjudication and gave judgment to AmericaHomeKey, and against brokers, in the amount of $209,621.87 plus attorney fees and costs. The judgment was dated March 15, 2010.
On March 30, 2010, AmericaHomeKey filed a motion for contractual attorney fees. Brokers opposed the motion on the ground that attorney fees were not authorized. On July 27, 2010, finding AmericaHomeKey was the prevailing party and legally and contractually entitled to attorney fees and costs, the trial court awarded AmericaHomeKey $81,316.43 in attorney fees and $947.25 in costs,
A notice of appeal from the judgment of March 15, 2010, was filed on April 29, 2010. A notice of appeal from the July 27, 2010 award of attorney fees and costs was filed on August 10, 2010.
Brokers contend AmericaHomeKey failed to establish the absence of triable issues of material fact concerning (1) whether Sipin misrepresented his income and liabilities, and (2) proof of causation and damages. We disagree.
"`[T]he party moving for summary [adjudication]
"The party opposing the summary [adjudication] must make an independent showing by a proper declaration or by reference to a deposition or another discovery product that there is sufficient proof of the matters alleged to raise a triable question of fact if the moving party's evidence, standing alone, is sufficient to entitle the party to judgment. [Citations.] To avoid summary [adjudication], admissible evidence presented to the trial court, not merely claims or theories, must reveal a triable, material factual issue. [Citation.] Moreover, the opposition to summary [adjudication] will be deemed insufficient when it is essentially conclusionary, argumentative or based on conjecture and speculation. [Citations.]" (Wiz Technology, Inc. v. Coopers & Lybrand LLP (2003) 106 Cal.App.4th 1, 10-11("Wiz Technology").)
"Any matter admitted in response to a request for admission is conclusively established against the party making the admission in the pending action[.]" (§ 2033.410, subd. (a).) "[A]dmissions [in response in requests for admission] are binding." (Applera Corp. v. MP Biomedicals, LLC (2009) 173 Cal.App.4th 769, 788.) An admission precludes a party from introducing evidence contrary to its response in a request for admission, thus "`setting at rest a triable issue so that it will not have to be tried.' [Citation.]" (Mardirossian & Associates, Inc. v. Ersoff (2007) 153 Cal.App.4th 257, 271.)
Brokers' deemed admitted facts and Leahy's declaration are sufficient to entitle AmericanHomeKey to judgment on each cause of action. (See Wiz Technology, supra, 106 Cal.App.4th at p. 10-11.) AmericaHomeKey alleged the applications for loan Nos. 4024481 and 4014483 misrepresented the amount and source of Sipin's income,
AmericaHomeKey established that the applications for loan Nos. 4024481 and 4014483 misrepresented the amount and source of Sipin's income by the following deemed admitted facts: the Agreement required brokers to verify all information on and documents submitted with loan applications and to indemnify AmericanHomeKey for damages for breach; by submitting a loan application, brokers warranted they verified all information on the loan application and all representations were true; brokers failed to verify all information, representations, and documents submitted in loan applications Nos. 4024481 and 4014483 on behalf of Sipin, and refused to reimburse AmericaHomeKey for damages; brokers failed to verify Sipin's stated employment and assets; brokers failed to verify the lease between Mored and Sipin for the Prather residence; brokers did not disclose that Mored was related to Powerhouse's broker, Sobrepena; and Hnatio was responsible for supervising Sobrepena. The credit report submitted by Leahy showed that Sipin worked for Pacific Consolidated-Industries, not Sipin Medical Billing.
AmericaHomeKey established that the application for loan No. 4026668 misrepresented the extent of Sipin's financial obligations under unrelated loan agreements by the admitted fact that Sipin owned the Canyon Rim Place property and the fact such property was not disclosed in the application.
AmericaHomeKey proved that these misrepresentations caused AmericaHomeKey to incur damages by: the admission that brokers were not relieved of their duty to indemnify AmericaHomeKey for damages resulting from breach by any efforts by AmericanHomeKey to review loan applications; and Leahy's declaration that the three loans were sold to Countrywide and CitiMortgage, Sipin subsequently defaulted, and because of these misrepresentations, AmericanHomeKey was contractually obligated to pay damages to Countrywide and CitiMortgage in lieu of repurchasing the loans.
Brokers' argue that AmericanHomeKey failed to carry its burden because Leahy's declaration was inadmissible. Brokers did not file an evidentiary objection to Leahy's declaration, thereby forfeiting the issue. (Vikco Ins. Services, Inc. v. Ohio Indemnity Co. (1999) 70 Cal.App.4th 55, 66-67 ["As a general rule, issues or theories not properly raised or presented before the trial court will not be considered on appeal."].) The further argument that brokers were not liable because AmericaHomeKey reviewed Sipin's credit report is without merit because brokers admitted AmericaHomeKey's effort to review the loan applications did not relieve brokers of their obligation to indemnify AmericaHomeKey for damages for breach of the Agreement.
Thus, AmericaHomeKey satisfied its burden on summary adjudication, which shifted the burden to brokers to make an evidentiary showing of a triable issue of material fact. Brokers do not argue on appeal that they carried their burden, and understandably so. Brokers did not produce evidence that the applications and supporting documents accurately reflected Sipin's income, employment, and liabilities, or that brokers used reasonable efforts to confirm the information. Nor did brokers present any evidence showing that the loans did not go into default or that AmericaHomeKey did not suffer damages. Brokers failed to carry their burden of producing evidence creating a triable issue of material fact.
To the extent brokers contend that their commissions should not have been included in the damage award because the commissions were paid by the borrower, Powerhouse's admission that AmericaHomeKey paid all commissions to brokers conclusively establishes that the borrower did not pay the commissions. The trial court correctly granted summary adjudication.
Brokers contend the award of contractual attorney fees was an abuse of discretion, because the attorney fee provision in the Agreement was limited to binding arbitration proceedings. Interpretation of a contract is reviewed de novo. (See City of El Cajon v. El Cajon Police Officers' Assn. (1996) 49 Cal.App.4th 64, 71.) We hold that contractual attorney fees were properly awarded.
The Agreement provided: "Any action to enforce or interpret this Agreement shall be resolved by binding arbitration conducted in Dallas, Texas under the commercial arbitration rules of the American Arbitration Association then in force. The prevailing party in any such proceeding shall be entitled to recover its reasonable attorney[] fees as part of any award."
The attorney fee award provision was not waived by the parties' waiver of the arbitration provision. The language, "any such proceeding," in the attorney fee provision, refers to "[a]ny action to enforce or interpret this Agreement." This civil action is an action to enforce the Agreement. As the Agreement does not provide that an entire provision is unenforceable if one part of it is not enforced, the parties' waiver of the arbitration provision by proceeding with this civil action did not waive the attorney fee provision. (Cf. Cohen v. DIRECTV, Inc. (2006) 142 Cal.App.4th 1442, 1446-1447 ["[b]ecause [the] agreement expressly prohibit[ed] the severance of [part of the unenforceable clause] from the remainder of the . . . clause, the entire . . . clause is unenforceable"].)
Further, in the Agreement, Powerhouse agreed to indemnify AmericanHomeKey for "all . . . cost[] and expense, including . . . reasonable attorney's fees . . . resulting from any breach of Broker's warranties, representations, or covenants herein or from any acts or omissions of Broker or its agents or employees." Contractual attorney fees were properly awarded under this provision, as well.
The judgment and award of attorney fees are affirmed. Costs on appeal are awarded to AmericaHomeKey.
ARMSTRONG, Acting P. J. and MOSK, J., concurs.
