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Krishna R. Malhotra, Esq. SBN 113479 Miguel A. Ortiz, Esq. SBN 245137 MALHOTRA & MALHOTRA 900 Wilshire Boulevard Suite 830 Los Angeles, CA 90017 (213) 629-9222 Attorneys for Defendants and Cross-Complainants Fernanda Elizarraraz, a Minor, Israel Elizarraarz and Mercedes Lozano

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN BERNARDINO ) ) ) ) ) ) Cross-Complainants, ) ) vs. ) ) ) XX XXXXX, YY YYY, an individual, WACHOVIA MORTGAGE, FSB and Roes 1 ) ) to 20, Inclusive, ) ) ) Defendants. ) FERNANDA ELIZARRARAZ, a Minor, ISRAEL ELIZARRAARZ AND MERCEDES LOZANO Case No: CIVDS 914683 CROSS-COMPLAINT FOR :
(1) BREACH OF CONTRACT; (2) NEGLIGENT MISREPRESENTATION; (3) INTENTIONAL MISREPRESENTATION; (4) BREACH OF FIDUCIARY DUTY;

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MALHO TRA & MALHO TRA

COME

NOW

Cross-Complainants

FERNANDA

ELIZARRARAZ,

Minor,

ISRAEL

ELIZARRAARZ AND MERCEDES LOZANO, and allege as follows:

1.

COMMON ALLEGATIONS Cross-Complainants Fernanda Elizarraraz, a Minor, Israel Elizarraarz and Mercedes Lozano

(hereinafter Cross-Complainants or Fernanda, Israel and Mercedes), are individuals, and at all relevant times were residents of the County of Los Angeles.
2.

Cross-Complainants are informed and believe and thereon allege Defendant XX XXXXX.

(hereinafter XX) is a corporation organized and existing under the laws of the State of California,

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and has at all relevant times maintained an office in the County of Los Angeles, and engaged in the business of loan brokerage for residential financing and financial advice.
3.

Cross-Complainants are informed and believe and thereon allege that Defendant YY YYY

(hereinafter YY) an individual, is, and at all relevant times was employed by Defendant XX and engaged in the business of loan brokerage for residential financing and financial advice and management of monies of individuals.
4.

The true names and capacities, whether individual, corporate, associate or otherwise, of the

persons named herein as Does 1 through 20, inclusive are unknown to Cross-Complainants, who therefore sue said Defendants by such fictitious names. Cross-Complainants will amend this

Complaint to identify the true names and capacities of said factiously named Defendants when same have been ascertained. For the purposes of this Complaint, the fictitiously named Defendants shall collectively be referred to as Defendants.
5.

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Each of the Defendants, including each of the fictitiously named Defendants, is and at all

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times relevant hereto was an agent of each of the other Defendants, was acting within the actual, apparent and ostensible scope of said agency, and is liable in some manner for the events referred to herein.
6.

In or about [Need Date] 200?, Cross-Complainants entered into a contract to purchase certain

residential real estate located at 917 E. Jackson Street, Rialto, CA 92376 (hereinafter Property).
7.

In or about [Need Date] 200?, Cross-Complainants having learnt that Defendants and each of

them, were in the business of mortgage loan brokerage, approached said Defendants, seeking a home loan of $?????? for the purchase of the Property.
8.

Cross-Complainants were received by Defendants YY and Does 11 through 20 at the offices

of Defendants XX and Does 1 through 10, each of who, offered to act as their loan broker and provide them with appropriate advice in connection with their loan application.
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9.

Cross-Complainants informed Defendants, and each of them, that they wished to get a fixed

rate mortgage, and further that title was to vest in both of their names.
10.

Defendants, and each of them, informed Cross-Complainants that they had extensive

experience and access to many financial institutions, and after ascertaining his FICA credit score, which was approximately 650, assured them that they would be able to procure a good loan to suit their needs and requests, and the loan would entail a loan fee of about 1.25%.
11.

Cross-Complainants, who speak only Spanish and no English, acting in reliance upon the

assurance given to them by each of the Defendants, agreed to initiate a loan application through said Defendants, providing them with all information requested by them and assisted them in the processing of the said loan application.
12.

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Defendant YY asked Plaintiff Sanchez to give her four years of his tax returns, with which

request he complied.
13.

As the loan process approached completion, Defendant YY asked Plaintiff to bring in the

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down payment of $12,000, specifically instructing him to do so as two separate payments so that he is not asked questions.
14.

Sometime in February 2005, each of the Defendants informed Plaintiff that they had obtained

approval of a loan for them, and that the monthly payments would be $1,700, and that they should proceed with signing of the loan documents in order for the loan to fund and escrow to close. At that time Cross-Complainants again requested confirmation that they were indeed getting a fixed rate loan, which confirmation was give to them by YY and each of the remaining Defendants.
15.

Once again, acting in reliance upon the representations of each of the Defendants, Cross-

Complainants went to Defendants office to sign the loan documents and asked to be explained the terms of the loan. The loan office stated that she did not have time to go into explanations, that the

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loan was consistent with the terms explained by Defendant YY, and that they needed to sign the documents immediately for the loan to fund. 16. Acting in reliance with the information regarding the terms of the loan given to them by each

of the Defendants, and in compliance with the directions of the loan officer, Plaintiff Romano signed all the loan documents.
17.

At about the end of February or beginning of March 2005, subsequent to the close of escrow,

Cross-Complainants received a Closing Statement from escrow indicating that each of the Defendants had received a fee of approximately $9,390, which was approximately 2 points of the loan amount and almost twice the amount that Defendants had represented the fee would be.
18.

Cross-Complainants thereafter received their first statement from MIT Lending, the

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institution financing the loan (hereinafter Lender) for the purchase of their home, which disclosed that (1) title had vested only in the name of Plaintiff Romano, and not in the name of Defendant Sanchez, (2) that there were two loans, not one, (3) that the said loans were of a variable rate.
19.

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Cross-Complainants immediately contacted their lender and informed them that the loan was

at variance with his understanding of what he had requested, and asked whether he could change the terms of the loan. Plaintiffs lender thereupon advised him that he could do so but would incur a prepayment penalty of $15,000, if refinancing was done sooner than 24 months.
20.

Cross-Complainants thereafter contacted each of the Defendants and was informed that the

could not qualify for anything other than a sub prime, and said Defendants failed and refused to state why Cross-Complainants had not been informed of this prior to signing the loan documents, nor did they explain why they had got two loans instead of one, nor why Plaintiff Sanchez had not been placed on title to the Property or the loan.

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21.

In light of the penalty payment for refinancing, Cross-Complainants have not attempted to

have their loan refinanced, and have had an increase in their monthly payments pursuant to the terms of the loan procured for them by Defendants.
22.

Based upon the forgoing matters, Cross-Complainants have suffered and continue to suffer

from loss and damages, and bring the complaint herein for compensatory relief. FIRST CAUSE OF ACTION 23. (Breach of Contract as to all Defendants) 1Cross-Complainants hereby reallege and incorporate by reference all of the allegations

set forth in paragraphs 1 through 22, as if each were separately pleaded and fully set forth herein. 24. Within the two (2) years prior to the filing of this Complaint, Cross-Complainants and

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each of the Defendants entered into an oral contracts (the Contract) whereunder said Defendants agreed to get Cross-Complainants a fixed rate home loan, for a loan fee of 1.25%, as is more fully set forth herein above, with the understanding that title to the Property was to vest in the names of both Cross-Complainants. 25. Defendants procured two loans for Cross-Complainants, which loans had a variable

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rate, and received a fee of 2 points amounting to $9,390. 26. Defendants, and each of them, breached their contract with Cross-Complainants by

getting them two loans, that had a variable rate, and further have charged Plaintiff approximately 2.5% loan fee, and further failed to explain the terms of the loan when specifically requested to do so, in particular the provision of a prepayment penalty should Cross-Complainants refinance the loans obtained by Defendants, whereby Cross-Complainants have been damaged in an amount capable of being made certain.

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27.

Cross-Complainants are entitled to compensatory damages which are capable of being

made certain by calculation, such that Plaintiff is entitled to recover prejudgment interest in the amount specified in California Civil Code, Section 3287, et seq. SECOND CAUSE OF ACTION (Negligent Misrepresentation as to All Defendants) Cross-Complainants hereby reallege and incorporate by reference all of the allegations

28.

set forth in paragraphs 1 through 27, as if each were separately pleaded and fully set forth herein. 29. Defendants, and each of them, made representations and promises to Plaintiff that they

could and would procure a single fixed rate home loan for Cross-Complainants, and would charge them 1.25% of the loan amount by way of a fee. 30. Defendants, and each of them, knew at the time they made the said representations that

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they made said representations that they either could not or would not be able to procure a single loan with the said terms and/or lacked experience or skill to perform the said work, and were in fact unable to procure a loan on the promised terms to Cross-Complainants. 31. Defendants and each of them, failed to disclose to Cross-Complainants their lack of

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inability to perform the promises they had made to Plaintiff, and further failed to discharge their duties as agents for Cross-Complainants, the terms of the loan, including, but not limited to, the fact that they had got two loans for Cross-Complainants, bearing a variable rate and the provision for a prepayment penalty. 32. At the time of the retaining the services of each of the Defendants, and later at the time

of signing the loan documents Cross-Complainants did not know that the representations of Defendants, and each of them, were false, and believed them to be true, and acted in justifiable

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reliance upon the truth of the representations, agreed to have their loan application processed through said defendants and later signed the loan documents presented to them. 33. As a direct and proximate result of said fraud and deceit exercised by said Defendants,

Cross-Complainants have been damaged in an amount to be proved at the time of trial. WHEREFORE, Cross-Complainants prays for relief against Defendants as hereinafter set forth. THIRD CAUSE OF ACTION (Intentional Misrepresentation as to All Defendants) 34. Cross-Complainants hereby reallege and incorporate by reference all of the allegations

set forth in paragraphs 1 through 33, as if each were separately pleaded and fully set forth herein. 35. When they made the representations set forth in Paragraph 32 of this Complaint,

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Defendants, and each of them, knew or should reasonably have known, that they either could not or would not be able to procure a loan with the said terms and/or they lacked the experience or skill to perform the said work, and were in fact unable to procure a loan on the terms they had promised to Cross-Complainants. 36. When said Defendants engaged in the aforesaid conduct, they knew such conduct

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was false and deceitful and failed to disclose to Cross-Complainants the true facts and they conducted themselves with the intent to defraud and receive Plaintiff in getting him a loan that entailed the least amount of work for them, but gave them the highest fee, even though all of its terms were at complete variance with those that said Defendants had represented to CrossComplainants. 37. At the time Cross-Complainants did not know that the representations of Defendants,

and each of them, were false and believed them to be true, and acted in justifiable reliance upon the truth of the representations.
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38.

As a direct and proximate result of said Defendants intentional misrepresentations,

Cross-Complainants have been damaged in an amount to be proved at the time of trial.

39.

Defendants, and each of them, engaged in the aforesaid fraudulent and deceitful conduct

willfully and maliciously and with the intent to defraud Cross-Complainants, wherefore CrossComplainants are entitled to exemplary and punitive damages pursuant to Civil Code Section 3294. WHEREFORE, Cross-Complainants prays for relief against Defendants as hereinafter set forth. FOURTH CAUSE OF ACTION (Breach of Fiduciary Duty as to All Defendants) 40. Cross-Complainants hereby reallege and incorporate by reference all of the allegations set forth

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in paragraphs 1 through 29, as if each were separately pleaded and fully set forth herein. 41. By reason of the Defendants XX, YY and Does 1 through 20 were mortgage brokers and

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financial advisors to Cross-Complainants, and acted as their brokers, and their being licensed to act in such capacity by the California Department of Real Estate, and upon whom Cross-Complainants placed complete trust, confidence and reliance, said Defendants were charged with a fiduciary duty towards Cross-Complainants and to act in their best interest, and not to engage in acts or conduct where were detrimental to the best interests of Cross-Complainants. This fiduciary duty was created by the California Supreme court in Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 782 (Cal. 1979), wherein the Court imposed the duty upon mortgage loan brokers an obligation to make a full and accurate disclosure of the terms of a loan to borrowers and to act always in the utmost good faith toward their principals.

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42.

Defendants XX, YY and Does 1 through 20, breached each of their fiduciary duties to Cross-

Complainants by (1) getting two loans for Cross-Complainants for the purchase of the Property; (2) failing to inform Cross-Complainants that their mortgage was a variable rate loan and not a fixed rate loan as Cross-Complainants desired; (3) charging Cross-Complainants 2 points instead of the 1.25 points for the loan fee. As a result of the Defendants breach of fiduciary duty, CrossComplainants have suffered damages in an amount to be proved at the time of trial. 43. Defendants, and each of them acted fraudulently and maliciously, whereby Cross-

Complainants are entitled to punitive and exemplary damages pursuant to the provisions of Civil Code Section 3294. WHEREFORE, Cross-Complainants prays for relief against Defendants as hereinafter set forth. WHEREFORE, Cross-Complainants pray for judgment against Defendants, and each of them, as follows:
1.

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As to all Causes of Action: For compensatory damages against all Defendants, As to the Third and Forth Causes of Action: For punitive and exemplary For costs of the lawsuit herein; For such other and further relief as the court may deem appropriate Dated: July 27, 2007 MALHOTRA & MALHOTRA

according to proof;
2.

19 damages against all Defendants; 20 3. 21 4. 22 23 24 25 26 27 28 _________________________ Miguel A. Ortiz Attorneys for Cross-Complainants FIDEL ROMANO JESUS ISLAS SANCHEZ
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