Petitioner, a company in which real party in interest investor had purchased an interest, filed a writ petition challenging an order from respondent Superior Court of Los Angeles County (California), which accepted the investor’s motion to disqualify the trial judge under Code Civ. Proc., § 170.6, in the investor’s suit alleging breach of contract and other causes of action.
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Overview
In a fraud action against the company’s principals, the investor alleged that he had invested in and worked for the company in reliance on misrepresentations and undisclosed facts. The principals’ petition to compel arbitration was granted. Thereafter, based on a finding that the two actions were related, the suit against the company was transferred to the judge who was assigned to the suit against its principals. When the investor filed his § 170.6 peremptory challenge, the company asserted that it was untimely because the judge had made a ruling on the arbitration issue. The court held that the suit against the company was not a continuation of the first suit against its principals but was a separate and independent action for purposes of § 170.6. A proceeding was a continuation under § 170.6 if it involved substantially the same issues as the original action and presented matters that were necessarily relevant and material to the issues in the original action. Although the cases were related, they involved different defendants and different causes of action, and the second suit was not brought to enforce or modify orders in the first suit. Thus, the § 170.6 motion was timely. Appellant was represented a business attorney.
Outcome
The court denied the petition for writ of mandate.
Procedural Posture
Plaintiffs, borrowers, sued defendant lender alleging violations of the Truth in Lending Act (TILA), Breach of contract and breach of the covenant of good faith and fair dealing, fraudulent omission and unfair competition (UCL), Cal. Bus. & Prof. Code § 17200. The lender moved to dismiss
Overview
The borrowers refinanced their home loans with an option adjustable rate mortgage (ARM). The option ARM had an initial low teaser interest rate with low initial payments. The loan then adjusted after one month which resulted in negative amortization. The court found that the lender’s payment schedule was deficient and the borrowers had sufficiently stated that the payment schedule was not TILA compliant. The failure to disclose the actual interest rate on the Truth in Lending Disclosure Statement (TILDS) was not actionable under the TILA. The lender’s disclosures regarding negative amortization were insufficient to disclose the effects of the payment cap option under the TILA. The lender provided an appropriately calculated composite rate in the TILDS. The breach of contract and of implied covenant of good faith and fair dealing claims failed because they relied on the incorrect contention that the note had to be interpreted to require the payments to be applied to both interest and principal. The borrowers failed to allege fraud with the particularity. Because the borrowers stated a claim for TILA violations, they successfully stated a UCL claim based on the TILA violations.
Outcome
The motion to dismiss was granted with respect to the claims alleging failure to clearly and conspicuously disclose the actual interest rate (except as to the claim that defendant failed to adequately disclose that the interest rate will increase), failure to disclose the composite interest rate, and breach of contract and implied covenant of good faith and fair dealing, and fraud. The motion to dismiss was denied in all other respects.