Floorit Financial, Inc. vs. Gateway One Lending & Finance, LLC

Opposition

Cal. Super. - 4th Dist.July 15, 2016

~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ADAM A. HUTCHINSON (State Bar No. 190992) aah @severson.com GREGORY E. EISNER (State Bar No. 190135) ELECTRONICALLY FILED gee @severson.com Superior Court of California, SEVERSON & WERSON MER AF drEnge A Professional Corporation T1AT2016 at 04:38:00 Pi The Atrium Clerk of the Superior Court 19100 Von Karman Avenue, Suite 700 By & Clerk, Deputy Clerk Irvine, California 92612 Telephone: (949) 442-7110 Facsimile: (949) 442-7118 Attorneys for Defendant and Cross-Complainant GATEWAY ONE LENDING & FINANCE, LLC SUPERIOR COURT OF CALIFORNIA COUNTY OF ORANGE — CENTRAL JUSTICE CENTER FLOORIT FINANCIAL, INC., Case No. 30-2016-00863874-CU-MC-CJC Plaintiff, Hon. David R. Chaffee Dept. C20 VS. GATEWAY ONE LENDING & FINANCE, GATEWAY ONE LENDING & FINANCE, LLC’S OPPOSITION TO FLOORIT LLC, a Delaware limited liability company; FINANCIAL, INC.’S MOTION TO and DOES 1-25, inclusive, STRIKE PORTIONS OF CROSS- COMPLAINT Defendants. [Filed concurrently with Request for GATEWAY ONE LENDING & FINANCE, Judicial Notice and Opposition to LLC, Demurrer] Cross-Complainant, Date: December 2, 2016 Time: 9:30 a.m. VS. Dept.: C20 FLOORIT FINANCIAL, INC., a Nevada Action Filed: July 15,2016 corporation; PCH AUTO SALES, a business Trial Date: None Set entity, form unknown; CALIFORNIA DEPARTMENT OF MOTOR VEHICLES and DOES 1-50, inclusive, Cross-Defendants. 15297.0125/9264393.1 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT ~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION The Motion to Strike (“Motion”) of Floorit Financial, Inc. (“Floorit”) improperly attempts to summarily adjudicate punitive damages. The causes of action and facts alleged support a prayer for punitive damages. Only if one accepts the arguments of Floorit’s Demurrer, does the Motion to Strike make any sense. The Demurrer should be overruled, however, and the Motion to Strike should be denied as well. IL. LEGAL STANDARDS FOR MOTIONS TO STRIKE A motion to strike lies either to strike any “irrelevant, false or improper matter inserted in any pleading” or to strike any pleading or part thereof “not drawn or filed in conformity with the laws of this state, a court rule or order of court.” (Code Civ. Proc. § 436.) In ruling on a motion to strike, the allegations in the complaint are considered in context and presumed to be true: “[J]udges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Sup.Ct. (Pedus Services, Inc.) (1998) 67 Cal.App.4th 1253, 1255.) A motion to strike punitive damages allegations may lie where the claim sued upon would not support an award of punitive damages as a matter of law: e.g., straight promissory note actions, claims against governmental entities, etc. (See Civ. Code § 3294, subd. (a); Commodore Home Systems, Inc. v. Sup.Ct. (Brown) (1982) 32 Cal.3d 211, 214-215.) III. ADEQUATE FACTS ARE ALLEGED TO PERMIT A PUNITIVE DAMAGES PRAYER Floorit argues that the Cross-Complaint does not contain sufficient facts to support a punitive damages claim. Floorit is once again wrong, both on the law and the substance of its argument. The pleading standards for punitive damages are no different than ordinary pleading, i.e., ultimate facts must be alleged. (Baldwin v. Marina City Properties, Inc. (1987) 79 Cal. App.3d 393, 409, fn. 11.) 15297.0125/9264393.1 2 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT ~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Cross-Complaint seeks punitive damages in connection with its Second Cause of Action for Conversion (Cross-Complaint, 40) and Sixth Cause of Action for Intentional Interference with Contractual Relations. (Cross-Complaint, 74.) A cause of action for conversion supports awards of exemplary damages. (Cyrus v. Haveson (1976) 65 Cal.App.3d 306, 316.) Exemplary damages are properly awardable in an action for conversion, given the required showing of malice, fraud, or oppression. (Haigler v. Donnelly (1941) 18 Cal.2d 674, 681.) Moreover, a cause of action for intentional interference supports a punitive damages prayer as well. (See Scott v. Ford Motor Company (2014) 224 Cal.App.4th 1492, 1504 (punitive damages are to punish for and deter further intentional wrongful conduct).) Floorit argues the damages are to Gateway’s customers, not Gateway, and without the customer’s harm, all that is left are the causes of action. (Motion to Strike at 7:20-25.) The punitive damages claim is based on the wrongful acts alleged throughout the Cross- Complaint. Such acts include but are not limited to: (1) that Floorit “deprived and continues to deprive GATEWAY of its possessory interest in certain of the certificates of title to vehicles financed by GATEWAY for PCH customers (Cross-Complaint 37), (2) that Floorit is knowingly interfering with Gateway’s contracts with its customers by withholding titles after its interest has been extinguished by sales to buyers in the ordinary course of business (Cross-Complaint J 22, 53), and (3) that Floorit is relying on Quartz, a decision that on its face does not apply to flooring lenders that do not own the subject vehicles (Cross-Complaint § 25). Based on these allegations, the Cross-Complaint then alleges: By engaging in the aforementioned conduct, FLOORIT is guilty of malice, fraud, and oppression within the meaning of Civil Code Section 3294. Additionally evidencing FLOORIT’s malice, fraud and oppression, FLOORIT refused and continues to refuse to release the Certificates of Title to the Vehicles even though it was and is fully aware that GATEWAY ’s customers cannot register their vehicles without them, and risk citation and potential impounding of their vehicles as a result, which negative consequences have in turn have adversely affected and disrupted the relationship between GATEWAY and its customers. Instead of unconditionally and immediately releasing the Certificates of Title as it is obligated to do, FLOORIT has instead willfully and maliciously withheld the titles from both GATEWAY and the customers, knowing the 15297.0125/9264393.1 3 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT ~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 customers have suffered and continue to suffer the adverse consequences of FLOORIT’s conduct, as alleged in this paragraph. In sum, FLOORIT is knowingly and maliciously using the threat of continued damage to GATEWAY and its customers, and the consequent damage to the relationship between GATEWAY and its customers, to extort GATEWAY into paying FLOORIT for the Certificates of Title. GATEWAY is therefore entitled to an award of punitive damages against FLOORIT in an amount to be established at trial. (Cross-Complaint 74.) First, Floorit fails to understand that it actions in willfully withholding the Titles is harmful not only to Gateway’s customers but to Gateway as well. Under the RISCs, Gateway is obligated to provide its customers with the ability to lawfully use their vehicles. Gateway is unable to perform that obligation as a result of Floorit’s intentional withholding of the titles, and the resulting inability of customers to register their vehicles with the DMV. Because the customers do not want to risk tickets or seizure of their vehicles, some have demanded rescission of their contracts, which Gateway has little choice but to provide. Rescission entails a refund of all monies paid by the customer under the RISC, including any down payment made by the customer to PCH, and as such, Gateway not only loses any profit on the deal, but has to come out of pocket and incurs a significant loss. There are other costs associated with rescission, and they include return of the customers’ payments and fees to transport and store the vehicle. Additionally, when a customer defaults, Gateway’s repossession rights are harmed by Floorit’s retention of the titles, because Gateway is unable to sell vehicles without their titles.' Gateway is instead be required to pay to store the vehicle indefinitely. In short, the harm to Gateway caused by Floorit’s wrongful conduct is clear, and more than adequately alleged in the complaint. Should the Court sustain the demurrer or grant the motion to strike, Gateway can certainly amend its Cross-Complaint to allege these specific categories of ! This makes Floorit’s attempt to separate the titles from the vehicles all the more ridiculous. It would be an absurdity to interpret the Vehicle Code or UCC in such a manner. Doing so would mean that every consumer who purchases a product does not truly own the product unless and until the flooring lender, of which the consumer has no knowledge, says so. As discussed in detail in the accompanying Opposition to Floorit’s Demurrer, that is neither the reality nor the law. 15297.0125/9264393.1 4 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT ~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 damage in greater detail. Second, based on the causes of action alleged, the punitive damage claims are proper. As discussed at length in the accompanying Opposition to Demurrer, Gateway submits that Floorit is improperly relying on inapposite case law and statutes that are clear and explicit in extinguishing Floorit’s security interest in the vehicles upon their sale to buyers in the ordinary course. Floorit is ignoring those clear and explicit statutes and reading inapplicable case law for principles for which they simply do not stand. Such conduct is intentional and sufficient to support a prayer for punitive damages as Floorit is knowingly causing Gateway to sustain harm. If Floorit questions whether it acted with the requisite knowledge and intent, then it should propound discovery to obtain evidence on the question. A motion to strike is not the proper vehicle for doing away with the claims. A sophisticated finance company like Floorit, which is knowingly holding titles to vehicles in which it has no rights, has acted with the requisite malice and oppression to support a punitive damages award. Iv. CONCLUSION Based on the foregoing and Opposition to Demurrer filed concurrently herewith, Gateway respectfully requests that the Motion to Strike be denied in its entirety. Alternatively, should the Court grant any portion of the Motion, Gateway respectfully requests leave to amend. DATED: November 17, 2016 SEVERSON & WERSON A Professional Corporation By: — Gregory E. Eisner Attorneys for Defendant and Cross-Complainant GATEWAY ONE LENDING & FINANCE, LLC 15297.0125/9264393.1 5 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT ~N O Y B A W 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE (Floorit Financial, Inc. v. Gateway One Lending & Finance, LLC, et al.) OCSC Case No. 30-2016-00863874 At the time of service, I was over 18 years of age and not a party to this action. Iam employed in the County of Orange, State of California. My business address is The Atrium, 19100 Von Karman Avenue, Suite 700, Irvine, CA 92612. On November 17, 2016, I served true copies of the following document(s): GATEWAY ONE LENDING & FINANCE, LLC’S OPPOSITION TO FLOORIT FINANCIAL, INC.’S MOTION TO STRIKE PORTIONS OF CROSS- COMPLAINT on the interested parties in this action as follows: SEE ATTACHED SERVICE LIST BY FEDEX: I enclosed said document(s) in an envelope or package provided by FedEx and addressed to the persons at the addresses listed in the Service List. 1 placed the envelope or package for collection and overnight delivery at an office or a regularly utilized drop box of FedEx or delivered such document(s) to a courier or driver authorized by FedEx to receive documents. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on November 17, 2016, at Irvine, California. Abra Huayoba Debra Edwards 15297.0125/9264393.1 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT A N nn Bk W N 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST (Floorit Financial, Inc. v. Gateway One Lending & Finance, LLC, et al.) OCSC Case No. 30-2016-00863874 Thomas J. Borchard, Esq. Attorneys for Plaintiff Janelle M. Dease, Esq. FLOORIT FINANCIAL, INC. BORCHARD & CALLAHAN, APC 25909 Pala, Suite 300 (949) 457-9505 Mission Viejo, CA 92691 (949) 457-1666 — FAX California Department of Motor Vehicles (personal service on 10/4/16) Legal Affairs 2415 First Ave., 3rd Fl. Sacramento, CA 95818 15297.0125/9264393.1 GATEWAY’S OPPOSITION TO FLOORIT’S MOTION TO STRIKE PORTION OF CROSS-COMPLAINT