Clayton v. Marin Mortgage Bankers CA1/5

Filed 4/30/14 Clayton v. Marin Mortgage Bankers CA1/5 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION FIVE

JOLENE C. CLAYTON, Plaintiff and Respondent, A138364 v. MARIN MORTGAGE BANKERS (Marin County CORPORATION et al., Super. Ct. No. CIV 1101598) Defendants and Appellants.

Plaintiff Jolene C. Clayton (plaintiff) lost her investment in a security instrument when the borrower on the underlying loan defaulted. She filed suit against the parties involved in the sale and packaging of the instrument, defendants Marin Mortgage Bankers Corporation (MMBC), Charles J. Flynn and Mik P. Flynn as trustees of the Flynn Family Living Trust dated May 7, 1999, Charles J. Flynn individually, and Glenn Larsen (Larsen). Defendants appeal from a judgment entered in plaintiff’s favor following a directed verdict on statutory claims under the Corporations Code and a jury verdict on common law causes of action for breach of fiduciary duty, negligence and negligent misrepresentation. We affirm. I. FACTS AND PROCEDURAL HISTORY Our recitation of the facts and procedural history is somewhat hamstrung by defendants’ selective designation of the documents and oral proceedings to be included in the record on appeal. The clerk’s transcript does not contain the complaint, the answer or

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the jury instructions; the reporter’s transcript is limited to the cross-examination of plaintiff at trial, the trial testimony of plaintiff’s expert, the proceedings on plaintiff’s motion for a directed verdict, and the hearing on a motion for new trial filed by defendants, even though a number of other witnesses testified at trial. A summary of the record follows. Between the late 1990s and the early 2000s, plaintiff made a series of investments in real estate notes through MMBC, “a California licensed real estate broker that makes and acquires mortgage loans in the state of California.” Larsen, a real estate broker, was the president and sole shareholder of MMBC. Charles Flynn, also a licensed real estate broker, was a sales agent for MMBC. Up until 2006, plaintiff’s investments were successful, with plaintiff receiving interest-only payments for a set period of time and then getting the principal back in a lump sum at the end of the term. In 2006, MMBC issued a private offering for fractionalized interests in a $1.27 million promissory note and deed of trust on a piece of commercial property in San Francisco, known as the “600 Alabama Note.” The summary of the offering in the memorandum prepared by MMBC states, “The Fractional Interests are undivided interests in loans secured by a deed of trust on California real property or secured by one or more promissory notes that are themselves secured by a deed of trust on California property.” Charles Flynn and Mik Flynn, as trustees of their family trust, were the original owners and holders of the 600 Alabama Note.1 Plaintiff invested $150,000. The disclosure statement given to plaintiff indicated the note was secured by three pieces of real property owned by the borrowers: the commercial property located at 600 Alabama Street, which had a stated market value of $3.5 million and a senior encumbrance of over $2.162 million; a residential duplex located on 24th Street, which had a stated market value of $3.2 million and a senior encumbrance of $1.4 million; and residential property on Portola Drive with an unspecified market value and amount of senior encumbrances. The disclosure form did not indicate the borrowers owned only a