Mastantuono v. Creedside Financial CA2/6

Filed 4/17/14 Mastantuono v. Creedside Financial CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

PASQUALE MASTANTUONO et al., 2d Civil No. B244966 (Super. Ct. No. CV098199) Plaintiffs, Cross-defendants and (San Luis Obispo County) Respondents,

v.

CREEKSIDE FINANCIAL, INC. et al.,

Defendants, Cross-complainants and Appellants.

Plaintiffs invested in a construction loan that was arranged and administered by a real estate broker. The loan went into default. Plaintiffs foreclosed and invested additional money to complete the project. Plaintiffs sued the broker for breach of fiduciary duty and other causes of action. Third parties claiming to be additional investors in the project cross-complained to quiet title to an interest in the land. The trial court, sitting without a jury, found the defendant broker committed numerous breaches of fiduciary duties owed to plaintiffs and awarded damages. The court also found plaintiffs were the only investors, and quieted title in plaintiffs against cross-complainants. We affirm.

FACTS Hubert La Prade is a licensed real estate broker and the sole shareholder and employee of Creekside Financial, Inc. (Creekside), a licensed real estate broker corporation. La Prade spoke to Pasquale and Karen Mastantuono about investing in a trust deed. La Prade told them he was collecting funds to finance the construction of a house on a parcel of property in Templeton. David Graves would be the homebuilder. La Prade represented that the property would be worth over a million dollars when the house was completed. La Prade asked the Mastantuonos to invest $300,000. Pasquale Mastantuono asked La Prade if $500,000 "would do the whole thing." La Prade said it would. The loan was to be for the construction of the house, not for the purchase of the property. The Mastantuonos believed Graves already owned the property. The Mastantuonos gave La Prade a check for $500,000 made out to Creekside. La Prade prepared a note and deed of trust for $700,000 in favor of the Mastantuonos and Creekside. The deed of trust showed the Mastantuonos holding a 71.429 percent interest and Creekside holding a 28.571 percent interest. The Mastantuonos thought the loan was for $500,000, not $700,000. La Prade did not tell them that the loan was not fully funded or that he intended to bring in other investors. The note bore interest at 12.5 percent. La Prade told the Mastantuonos that they would receive 12 percent interest. La Prade testified that the extra half percent was his loan servicing fee. Loan disclosure documents stated there would be no loan servicing fee. A disclosure statement lists Graves's monthly income at $20,900 per month. Under expenses it states "N/A." The statement discloses no debt. La Prade testified he assumed Graves's income was $20,900 per month based on what other contractors were making. La Prade testified he was unaware of any debts owed by Graves. The evidence showed Graves had liabilities of $7 million. The loan escrow closed with the Mastantuonos' $500,000 as the only funding for the $700,000 loan. Business and Professions Code section 10238,