D declaration with many documents submitted at trial by Anthony Wilson

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Mark J. Warfel #197874 LAW OFFICES OF MARK J. WARFEL 234 East Foothill Blvd. Arcadia, CA 91006-2508 (626) 301-9327 FAX (626) 609-0413 Mwarfel@gmail.com Attorneys for Defendants and cross-complainants, TARGET MORTGAGE, INC. and NILDA ANN MARIE MEG

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SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO

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CASE: 37-2016-00003885-CU-FR-CTL JOHN SCOFIELD HAGE and BONNIE GRACE HAGE, individually and as TRUSTEES OF THE J. SCOFIELD AND BONNIE GRACE FAMILY TRUST and Co-Managers of SB 32nd STREET APARTMENTS, LLC, a California Limited Liability Company,

) ) ) ) ) ) ) ) ) ) Plaintiffs, ) ) vs. ) ) GOTMORTGAGE.COM, a ) California corporation; JAMES ) M. OSBORN, Jr., an individual; ) TARGET MORTGAGE, INC., a ) California corporation; ANDREA ) HAEWON PARK, an individual; ) THOMAS IPING LO, an ) individual; NILDA ANN MARIE ) MEG, an individual, et al. ) ) Defendants. ) ___________________________) and related cross-actions. )

DECLARATION OF MARK WARFEL IN SUPPORT OF TARGET MORTGAGE, INC., AND NILDA MEG’S MOTION FOR NEW TRIAL [NOTICE; MEMORANDUM OF POINTS AND AUTHORITIES FILED SEPARATELY] [C.C.P. § 657 ET SEQ.; § 662] DEPT:

C-73

LAST TRIAL DATE: JUNE 29, 2017 DATE OF VERDICT: AUGUST 29, 2017 [HON. JOEL R. WOHLFIEL]

27 28

1 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

1 2

I, MARK WARFEL, declare: 1.

I am an attorney duly licensed to practice law before all courts of the State

of California. My law firm, Law Offices of Mark J. Warfel, is counsel for the moving

parties, Target Mortgage, Inc., and Nilda Meg, in this action. The following facts are

within my personal knowledge and, if called as a witness herein, I can and will

competently testify thereto. This declaration is submitted in support of defendants’

motion, pursuant to Code of Civil Procedure, section 657, et seq., for a new trial and an

order vacating the Judgment rendered on August 29, 2017, and for a new and further

trial on the issue of (1) damages and (2) the affirmative defense of consent.

In a ruling that may thrill plaintiff’s lawyers around the country and late

night advertising firms, but result in a death blow to the commercial real estate loan

industry, Judge Joel Wohlfeil, ruled that John Scofield Hage, a non-borrower, former

commercial loan officer and senior bank executive for 38 years specializing in

commercial loans - who knowingly gave $329,000 to James Osborn (previously

convicted of 76 counts of financial fraud), agreed to accept $100,000 in illegal kickbacks

and a 40% rebate on unspecified future loans to be brokered by Osborn’s employer,

Got Mortgage (GM), and who hired Osborn to render financial services including

seeking out loans on his behalf - can sue in his own name for loans brokered by a

different loan broker, Target Mortgage, to an LLC and two trusts. Neither the LLC nor a

trust that received half of the proceeds on one of the loans sued. Imposing a duty on

loan brokers to safeguard trust beneficiaries of trusts that own an LLC borrower on a

commercial loan, if permitted to stand, will import all the requirements for residential

loans into commercial lending when the loan broker may have no idea of the identity of

the trust beneficiaries. Here, Judge Wohlfeil ruled that Target, the loan broker, had a

duty to discover the criminal background of the con artist (facts already known to the

plaintiff) and then to refuse to broker the loan to the LLC so that the LLC could not pass

loan proceeds on to the bank executive. The bank executive was a beneficiary of the

trust that owned the LLC borrower.

1 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

The complaint in this matter was filed February 4, 2016, by plaintiffs John

Hage and Bonnie Hage, naming GotMortgage and its employees and principals, Target

Mortgage and its broker, Nilda Meg, and James Osborn as defendants. A copy of the

complaint, pages 1 and 3, is attached as Exhibit 1.

The complaint alleged negligence and breach of fiduciary duty with regard

to loans secured by three investment properties. The properties are located on

Tennyson, Kansas, Elliott street, respectively, in San Diego. The complaint admits that

the Tennyson and Kansas properties are owned by SB 32nd Street Apartments, LLC,

and the Elliott property is co-owned by the plaintiffs through their Family Trust, and one-

10 11

half by an irrevocable Survivor’s Trust dated 1981 (“1981 Trust). 5.

On March 30, 2017, the plaintiffs dismissed all claims except negligence

and breach of fiduciary duty against the defendants. On February 23, 2017, Target and

Meg filed a First Amended cross-complaint against the Hages and others, and on July

1, 2016, the Hages filed their answer.

Thereafter, Got Mortgage settled with the plaintiffs for $500,000, and a

good faith settlement was approved by the court. James Osborn did not make an

appearance, and his default was taken, though no judgment was entered against him.

18 19 20

The matter proceeded to trial on June 5, 7, 8, 12-15, 19, 20, and 29, 2017,

the Honorable Joel Wohlfeil presiding. 8.

Judge Wohlfeil issued a Statement of Decision on July 6, 2017 (attached

as Exhibit 14), and after objections thereto the Statement was revised on August 11,

2017 (attached as Exhibit 15).

Judge Wohlfeil found that the defendants Target and Meg were entitled to

an offset of $500,000, in the amount of Got Mortgage’s settlement. The court found that

James Osborn’s conduct was a superseding cause, in part, of plaintiffs’ alleged

damages against Target and Meg. SOD 40:18-20. The court found that “In view of

Plaintiff John Hage’s acknowledgement that he was aware, prior to his introduction to

Defendants [Target and Meg], of Osborn’s felonious past, plaintiff’s payments of

2 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

$367.227.44 to Osborn after October 14, 2014 (and prejudgment interest of $57,596.04)

will not be charged against Defendants.” SOD 42:21-24.

10.

The plaintiffs’ damages expert, Richard Holstrom, calculated damages on

the three loans brokered by Target Mortgage in October of 2014, and secured by the

Kansas, Tennyson, and Elliott properties. He also included as damages the money that

the Hages gave to James Osborn after October of 2014 – but not the more than

$300,000 they had given to Osborn prior to seeking loans through Target.

11.

The Kansas, Tennyson and Elliott properties were all encumbered by

loans previously brokered by Got Mortgage obtained prior to the Hage’s introduction to

Target Mortgage. The Target-brokered loans secured by Kansas and Elliott properties

resulted in a lower interest rate by 1, 2 to 3%, a 30-year mortgage amortization replaced

a two-year balloon payment, and more than $650,000 in cash was placed in the hands

of the borrowers. The Tennyson property loan was originally declined by Target, but

after John Hage insisted that the SB 32nd Street Apartments LLC needed to borrow

$50,000 to repay a personal loan it had received from John Hage, to avoid destroying a

future 1031 exchange, and to keep from piercing the corporate veil, the lender offered a

loan of 7.99% and $50,000 in cash out – but conditioned it on both the Hages writing

out in their own hand-writing that they understood this commercial loan carried a higher

interest rate than what they had previously. The LLC took the loan.

12.

The method of calculating damages was straight-forward, though bizarre.

“He assumed that the Kansas and Elliott properties were free and clear prior to the

October 2014 loans. His calculations did not take into consideration the Hages existing

loans on the properties. On the Kansas property, the Hages were paying an interest

rate of 10.99% interest rate. The refinance resulted in a lower interest rate.” SOD 25:6-

10. “He essentially calculated the difference between the refinance loans and no loans

on the Kansas and Elliott properties.” SOD 25:19-20. “The purpose of the Tennyson

loan was different than the purpose of the refinance loans on the Kansas and Elliott

3 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

properties. The interest rate on the rate on refinance loan on the Tennyson property

increased from the Hageâ&#x20AC;&#x2122;s existing loan.â&#x20AC;? SOD 25:14-15

3 4 5

13.

The Honorable Joel Wohlfeil ruled in favor of the plaintiffs on the cross-

complaint, and that portion of the judgment is not the subject of this motion. 14.

Judgment was entered in favor of the plaintiffs in the amount of $601,000

in economic damages, plus $75,000 in non-economic damages and against Target and

Meg, jointly and severally. A copy of the Judgment entered August 29, 2017, is

attached as Exhibit 16.

15.

It is clear from the Statement of Decision that Judge Wohlfeil accepted the

calculation of damages as being comparing having NO loan on the properties as

compared to the refinanced loans, ignoring the pre-existing 10% interest rate loans

already encumbering the properties. He then assumed that the loans would not be paid

off for 30 years, resulting in Target and Meg paying 100% of the interest, plus the costs

of obtaining the loans. This results in the borrowers being bailed out from having taken

out prior loans, and knowingly giving the money to a man they knew as a convicted

felon and con artist. And yet, the court admits that since the Hages knew that James

Osborn was a felon (they had been notified by their lender in February and October of

2014) and unlicensed, Target and Meg cannot be held responsible for the money the

Hages gave to Osborn. Somehow, though, they can be held responsible for 100% of

the interest on the loans taken for the next 30 years.

16.

The liability expert testified that the Hages could make the payments on

the loans indefinitely based on the $705,000 in cash received, but that they were

inappropriate and exceeded their ability to pay from ongoing cash flow. The Hages had

no responsibility to repay the loans secured by property owned by the LLV, and their

Family Trust was required to pay only its portion of the proceeds secured by the Elliott

property, since the 1981 Trust received half of the loan proceeds. No evidence was

presented as to the financial affairs of either trust or the LLC. Therefore, judgment on

these loans should have been rendered in favor of Target and Meg.

4 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

17.

The basis for Judge Wohlfeil’s decision, then, is the cost of the loans

obtained by SB 32nd Street Apartments, LLC and the co-owners of the Elliott property –

the Hage Family Trust and the 1981 Trust. Only the Trustees of the Hage Family Trust

sued.

18.

Therefore, Defendants and cross-complainants, TARGET MORTGAGE,

INC. and NILDA ANN MARIE MEG (collectively, TARGET), intend to and will move this

court for an order to set aside and vacate the judgment entered herein on August 29,

2017, and for a new trial on the issues of damages, consent, and standing.

19.

The plaintiffs are John Hage and Bonnie Hage, individually, as co-trustees

of their Family Trust, and as co-managers of the SB 32nd Street Apartments, LLC.

Many of the documents they served in this matter referred to them only in their

individual capacity. Exhibit 1 is a copy of pages 1 and 3 of the complaint, showing the

plaintiffs in the caption and the owner of the properties at page 3.

20.

James Osborn and John Hage spoke by phone virtually every day for

more than a year prior to Target’s involvement. SOD 26:11-12. Hage knew that

Osborn had been convicted of 76 counts of financial fraud. Exhibit 2 is a copy of the

newspaper article that John Hage received in February of 2014 detailing Osborn’s

background, - eight months prior to obtaining the Target loans. John Hage’s Family

Trust purchased a residence on Savoy Street in October of 2013 with payments of

$9,500 per month, 9.9% interest, and a balloon payment in three years. Complaint ¶

17, SOD 26:17-18.

21.

The SB 32nd Street Apartments LLC (the LLC) purchased rental property

on Tennyson Street in July of 2013, borrowing $511,000 at 5.25% interest with a 30-

year loan. SOD 26:1-4. The LLC refinanced in October of 2013, lowering the interest

rate to 5%. Complaint ¶¶ 13-14. The same month the LLC obtained a cash-out loan of

$375,000 secured by its rental property on Kansas Street - a negative amortization loan

at 9.9% per year, all due and payable in three years. In February of 2014, the LLC

obtained a second loan for $100,000 cash out secured by its Kansas property at

5 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

10.99% interest, due in two and a half years. Complaint ¶¶ 18-19. Trial Exhibit 196 is

attached as Exhibit 3, showing the February 2014 HUD-1.

22.

The Hages Family Trust owned a half-interest in rental property on Elliott

Street. SOD, 32:17-18. Exhibit 4 is trial exhibit 722, showing the Borrower’s Final

Statement for March 4, 2014, and showing the borrowers on the Elliott Street property.

Exhibit 5 is an e-mail chain in which John Hage insists on keeping the vesting in the

name of both trusts, and consists of select pages from Trial Exhibit 716. In March of

2014, the Family Trust and a Survivor’s Trust of 1981 pulled a total of $130,000 in cash

out at a 9% interest rate, on a loan brokered by Got Mortgage.

23.

Later that summer, the LLC, and the co-owners of Elliott, attempted

through Got Mortgage to refinance the commercial loans and pull as much cash as

possible out of the Kansas and Elliott properties, and to refinance the Tennyson

property. When Got Mortgage could not do so, it referred the borrowers to Target.

24.

Target successfully brokered the loans to Velocity Commercial Capital,

who sold to the borrowers 30-year loans at 7.99% interest, allowing the borrowers to

pull a total of $705,000 in cash out while eliminating the balloon payment. Exhibits 6

through 8 are the Semi-Annual Adjustable Term Notes secured by the Kansas, Elliott,

and Tennyson properties, evidencing the money borrowed from Velocity Commercial

Capital in October of 2014. The borrowers are shown on the first page. These loans

lowered the interest rate as well as giving those entities significant cash, which they

claimed would be used for investments. As the court noted in its Statement of Decision:

“The refinance rate resulted in a lower interest rate.” SOD 25:10.

25.

The LLC falsely told Target that the interest on the Tennyson property

loans was 10%, rather than 5%. When the falsehood was discovered upon receipt of

the loan payoff demand, Target unilaterally canceled the loan. Later that same day,

John Hage, who had been consulting with his personal CPA and the law firm of Higgs

Fletcher and Mack throughout the loan process, stated that the LLC needed at least

$50,000 to repay a personal loan made to it by Hage, to avoid compromising his future

6 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

complex 1031 tax exchange, and to avoid piercing the corporate veil. Target, as it was

obligated to do, relayed the request to Velocity. Velocity then offered a commercial loan

to the LLC at 7.99%, with $52,000 in cash out. After its managers wrote out in their own

handwriting that they understood the interest rate would be increasing, the LLC

accepted the loans. Exhibit 12 is John Hage’s deposition testimony read at trial, page

137, in which he admits the reason for the Tennyson loan was to pull $50,000 out to

repay himself for improvements he had paid for from his personal account.

26.

Exhibit 9 is the hand-written letter created and signed by the Hages

regarding the Tennyson loan, reflecting their understanding that the interest rate will

increase from 5% to 7.9%, and was trial exhibit 262. Exhibit 10 is a series of e-mails

during the loan process in which John Hage admitted he was obtaining assistance from

his attorneys, whom he identified as Higgs, Fletcher and Mack, regarding ensuring that

the loans would be made to the LLC. It was trial exhibit 716.

27.

ohn Hage testified that he understood the rate, terms, and cost of all loans

brokered by Target, and is not claiming that any terms were misrepresented. Exhibit 11

is the relevant pages from John Hage’s deposition that was read into the record during

the trial, pages 87-90 of his deposition, in which Mr. Hage made clear that the rate,

terms, expenses and costs of the loans for the Target loans were expected, and that he

was not claiming that the terms were not fully disclosed to him. He was acting as a co-

manager of the LLC at the time.

28.

Target and Meg pointed out to Judge Wohlfeil that it if anyone had

standing to complain about loans that reduced the prior interest rates by 2 and 2.5%

and put $705,000 in the pockets of the LLC and Trust it was the LLC and Trust that

received the loans – not the managers who siphoned off over $700,000 for their own

purposes, including an elaborate scheme to transfer $669,000 to James Osborn, a man

they knew had been convicted of 76 counts of financial fraud. Judge Joel Wohlfeil

found otherwise, in a decision that is contrary to the facts and well-established

California law. SOD 42:7-10.

7 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

29.

It is undisputed that the Hages were co-managers of the LLC. E-mails

and other documents at trial showed that during the loan process and prior to the loans

being accepted, the Hages admitted they obtained legal services from Higgs, Fletcher

and Mack to obtain legal advice about adding Bonnie Hage as a co-manager of the

LLC. In other words, the Hages received extensive legal services from Higgs, Fletcher

& Mack prior to accepting the loans on behalf of the borrowers for the express purpose

of ensuring that they would never have any liability for repaying the loans if their

scheme went wrong. See, e.g., Exhibit 10.

30.

The scheme, John Hage admitted, was to give checks of hundreds of

thousands of dollars to third parties, including a pawn shop, so that the third parties

could cash the checks and give cash to James Osborn, the convicted con man who

testified he spoke daily with John Hage. John Hage admitted that he and Osborn

agreed that Osborn would hold the money in trust for John Hage, even depositing the

money into an account for the benefit of the Hages to make it easier for the Hages to

qualify for a loan on their personal residence. John Hage admitted that for his services

Osborn would keep 60% of the money, with 40% eventually to be rebated back to John

Hage. Exhibit 13 consists of excerpts of John Hage’s deposition testimony that was

read at trial in which he admitted the scheme that Judge Wohlfeil said constituted

“unreasonable judgment” by John Hage, but nonetheless Judge Joel Wohlfeil found

John Hage to be blameless. SOD 39:17. Bonnie Hage admitted she knew money was

being given to James Osborn, though not the exact amount or every detail.

31.

As its co-managers, Bonnie Hage and John Hage owed fiduciary duties to

the LLC. By finding that the individuals were the real parties in interest, and not the

borrowers or the entity that owned the property, Judge Wohlfeil made their breach of

duties owed to those entities legally disappear. Judge Joel Wohlfeil’s bizarre holding

that it was the manager of the LLC, rather than the LLC itself, that could sue for loans

taken out by the LLC made it legally impossible to apportion fault to John Hage who in

the year after the Target brokered loans were obtained by the LLC wrote personal

8 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

checks of over $300,000 to third parties, including pawn shops, with the specific

intention that those funds be paid over to the unlicensed convicted felon, James

Osborn. By leaving the LLC out of the equation, Judge Wohlfeil made it impossible to

apportion damages based on Bonnie Hage’s admission that she did not rely on James

Osborn in signing the loan documents, and her admission that she had ample

opportunity to obtain legal advice from Higgs, Fletcher & Mack prior to accepting the

loans on behalf of the LLC, and could have stopped the loans from going forward had

she only sought the proper advice from her lawyers whom she was consulting at the

time. SOD 32:10-11. Nor could Judge Wohlfeil apportion damages based on Bonnie

Hage’s admission that though she intended to bind the corporation such that it would

accept the benefits and burdens of the loans, she nonetheless failed to read the loan

documents or discuss the advisability of the loans while she was consulting with Higgs

Fletcher & Mack during the loan process. SOD 32.

32.

Nor could Judge Wohlfeil apportion damages for the breach of fiduciary

duty to the LLC based on the intentional concealment from Target by John Hage of his

intent to pay half of the loan proceeds to a convicted felon, while claiming the loans

were for investments by the LLC. See Exhibit 13. By not forcing the LLC to sue if it felt

damaged by the lower interest rate cash-out loans, Judge Wohlfeil blinded himself to

the admission that prior to their referral to Target, John Hage and Bonnie Hage had

already given $300,000 to the convicted felon James Osborn from loan proceeds

borrowed 9.9% interest, despite knowing Osborn was a con man convicted of 76 counts

of financial fraud. Judge Wohlfeil’s decision not to consider the LLC the real party in

interest prevented apportioning to the Hages responsibility for buying a million dollar

home shortly after retirement with a hard money loan at 10% interest, a balloon

payment due in three years, and increased debt service of $9,500 per month. John

Hage admitted that trying to quality to refinance his residential loan was his primary

motivation for causing the LLC to seek cash-out loans.

9 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

33.

By refusing to force the LLC to sue, Judge Wohlfeil made it impossible for

him to consider the breach of fiduciary duty by John Hage to the LLC based on John

Hage’s 38 years as a relationship manager, who advised high net worth individuals and

who was responsible for assisting in obtaining commercial loans for his clients, a man

who was acting as a paid professional trustee of other family trusts at the time, and who

testified that he fully understood the rate, terms, and conditions of the loans, and who

had been warned repeatedly not to associate with the convicted felon James Osborn,

yet stubbornly continued to pay him hundreds of thousands of dollars, even going so far

as to write checks to pawn shops and strangers who would cash the check and funnel

the cash to James Osborn – and even after the security personnel at his own US Bank

branch refused to give him any more cashier’s checks made payable to James Osborn.

The decision prevented Judge Wohlfeil from acknowledging that in breach of his

fiduciary duties John Hage had a scheme to pull money from the LLC he was

managing, give the money to someone he knew had been convicted of 76 counts of

financial fraud, who would then funnel 40% of the money back into John Hage’s hands,

all while John Hage and Bonnie Hage consulted with their legal team at Higgs, Fletcher

& Mack regarding the affairs of the LLC.

34.

In short, by permitting the improper party to act as plaintiff, Judge Joel

Wohlfeil legally prevented himself from properly evaluating the egregious exercise of

unreasonable judgment by the Hages. This lapse also allowed Judge Wohlfeil to accept

testimony as to the personal finances of the Hages, while hearing no testimony

regarding the financial affairs of the actual borrowers. Judge Wohlfeil found that the

Hages personally, not the LLC or the irrevocable trust, might have trouble making the

additional monthly payment of $6,200 on their $1.2 million in loans, of which $705,000

was cashed out and in their pocket – money the borrowers claimed was going to be

invested, not given away to third parties to give to a con man who would then give it

back to the Hages personally.

10 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

35.

Exhibit 17 is true and correct copies of relevant pages of John Hage’s

deposition testimony, which were played or read at trial. The page and line numbers of

the deposition testimony are identified in the Exhibit, just as they were at trial. The

testimony of John Hage is shown as follows: At pages 2, his testimony regarding

keeping meticulous records, and his intention to give Osborn $269,200 of the net loan

proceeds, pages 3-5 concerning his keeping a running total of all monies given to

Osborn, pages 6 concerning what monies were intended to remain with Osborn and

which to be deposited with PNC Bank, pages 7 through 10 his agreement to give money

to Osborn and keep it secret from Target and Meg. At page 11, the testimony that the

PNC loan was not going to be brokered by Target. Pages 12 through 14 concern

Hages understanding of the purpose of the monies he funneled to Osborn. At page 15,

Hage’s testimony that he took out loans brokered by GM to handle his cash flow. At

page 17-18, Hage testified about improvements made to the Savoy property. Page 19

is Hage’s testimony regarding his meticulous record-keeping. At pages 20-22, Hage’s

testimony regarding his relationship with Osborn. At pages 23 and 24 is Hage’s

testimony regarding his understanding that Osborn worked for GM, and the PNC bank

loan was about to close. Pages 25 through 28 are Hage’s testimony regarding his

understanding of the PNC Bank loan. Pages 29 through 31 is Hage’s testimony about

the two trusts that own the Elliott property. Pages 32 through 37 are Hage’s testimony

regarding monies he paid to Osborn. Page 38 is Hage’s testimony that he never told

Target about the agreement to give money to Osborn.Pages 39 through 44 are Hage’s

testimony about monies he gave to Osborn, and his belief Osborn was working for GM.

Pages 67 through 70 are Hage’s testimony that Osborn was working for Hage and

working for GM, and had authority to contact lenders on Hage’s behalf. Page 72 is

Hage’s testimony about the purpose of the loan secured by the Tennyson property.

26 27

36.

The moving parties timely filed and served their Notice of Intention to

Move For a New Trial on September 8, 2017, which fully designates the grounds upon

11 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

which the motion is made and specifies the particulars in which the legal basis for the

decision is not consistent with or supported by the facts or the law.

37.

The loans in question lowered the interest rate on pre-existing loans

obtained through GM, Osbornâ&#x20AC;&#x2122;s employer, converted interest only and negative

amortization loans with rapidly approaching balloon payments to 30-year amortized

loans, and put $705,000 in cash on the balance sheet of the borrowers. The Judgment

by Judge Wohlfeil ruled that the broker that helped the borrowers obtain these loans

must pay a beneficiary of the trust that owns the LLC borrower 100% of the initial loan

costs, and 100% of the interest on the loans for 30-years â&#x20AC;&#x201C; 100% of the refinanced prior

loan balances, 100% of the money retained by the borrower, and 100% of the maximum

amount that could have been given to the con artist - $705,000 in cash out but only

$329,000 paid to the con artist in the year following the loans, though there was no

attempt to trace any of the loan proceeds to the con artist. The judge awarded only one

year of interest on a property one borrower sold prior to trial, but ruled the borrowers

had no duty to mitigate damages by selling or refinancing the other two properties

because the new loans carried a 3% prepayment penalty for the first three years on any

amounts over 20% of the loan balance that were repaid in any one year. The annual

interest on the loans is 7.99%, so Judge Wohlfeil ruled the borrower did not have to

incur a one-time 2% cost (i.e., 3% of 80%) to eliminate further damages of 7.99% for 30

years - $1.2 million. The prepayment penalty would amount to only about $25,000.

38.

In other words, the borrower received loans at no initial cost, and will pay

zero interest on the amounts borrowed, plus 30 years of interest even if the properties

are sold or refinanced the day after the trial. Because the former Senior Bank executive

(who was the co-manager of the borrower and a beneficiary of a trust that owned one of

the properties) gave $329,000 in personal checks to third parties who then funneled the

cash to the con man in the year after these loans were made, the judge ruled that the

money could not have been given away had it not been borrowed in the first place, and

that there was no need to trace the funds from the borrowers into the personal account

12 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

of the plaintiff out of which the funds were paid. As a result, Judge Joel Wohlfeil gave

judgment to the plaintiff of $1.2 million – enough to immediately pay off the loans in full.

39.

Judge Wohlfeil recognized that the payments to third parties by the 38-

year former bank executive John Scofield Hage to funnel money to Osborn after having

been warned by US Bank and others several times to avoid Osborn constituted

“unreasonable judgment” for which Target could not be held responsible. But it turns

out that with the assistance of Judge Wohlfeil the “unreasonable judgment” was actually

a risky but shrewd investment with an ROI of 400% - less costs, hidden and otherwise.

The loan broker, Target, could not have known about Hage and Osborn’s secret

scheme to funnel the loan proceeds to Osborn via third party checks, ruled Judge

Wohlfeil, but since the money could not have been given out had it not been borrowed,

the judge rewarded the prominent San Diego socialite Hage for conspiring with Osborn.

Judge Wohlfeil even made Target pay the loan costs and 30 years of interest on an

unrelated loan to the LLC, insisted upon by Hage apparently based on the legal advice

of his attorneys at Higgs Fletcher & Mack (HFM) – the prominent law firm located a

block from the courtroom that also represented Hage in this lawsuit and no doubt

received more in legal fees than the amount given to Osborn. Only $50,000 in cash

was borrowed against the third property, and the plaintiff testified that the LLC needed

the proceeds in order to repay a personal loan for property improvements it had

received from the plaintiff to avoid legal and tax problems with a 1031 exchange an

issues that Hage believed could result in piercing the veil of the LLC. Target initially

canceled the loan, but Hage insisted, and hand wrote a note to the lender that the LLC

would agree to pay 2% higher interest on its prior loan balance if the lender would

refinance and give the LLC the $50,000 it needed to repay a personal loan to Hage.

Now, the LLC is still stuck with the loan, but Hage personally will immediately receive a

windfall of 2% on the amount the LLC borrowed calculated over a 30-year period – and

he presumably also received the repayment of the $50,000 personal loan he had made

to the LLC.

13 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

The loan to the LLC secured by the Kansas property that lowers the interest rate

on the $475,000 in existing loans, converts interest only hard money loans with

balloon payments to 30-year amortized loans, and adds $159,000 to the balance

sheet of the LLC.

40.

SB 32nd Street Apartments LLC obtained two loans secured by its

commercial property on Kansas Street through GotMortgage (hereinafter GM), the

entity that employed James Osborn (Osborn). The first loan brokered by GM in October

of 2013 was for $375,000, at 9.9% interest, negative amortization terms, all due and

payable in October of 2016. Complaint, ¶ 18. $218,000 of the loan proceeds was wired

to another escrow and applied towards the purchase of the Hage residence on Savoy

Street. Trial Exhibits 179 and 182 are attached hereto as Exhibits 19 and 20,

respectively. The second loan brokered by GM in February of 2014 was for $100,000,

at 10.99% interest with a balloon payment also due in 2016. Total loans prior to the

LLC requesting Target broker a loan - $475,000. Trial Exhibit 196 is attached hereto as

exhibit 20

41.

In October of 2014, the LLC refinanced both loans with a 30-year loan

from Velocity Commercial Capital brokered by Target Mortgage reducing the interest to

7.99%, and taking $159,000 in cash out, for a total loan of $661,500.

42.

The beneficiaries of the trust that owned the LLC, the plaintiffs John and

Bonnie Hage, relied on the LLC’s income generated from its rental properties for their

living expenses, which included monthly dues to the San Diego Country Club and a

$9,500 payment on their $900,000, 9.99% interest-only loan with a 2016 balloon

payment secured by their residence on Savoy Street in Point Loma.

43.

The Hage’s expert witness testified that prior to the LLC obtaining this

commercial loan, the Hages’ monthly debt service exceeded their income, even

excluding living expenses and country club dues. Since meeting James Osborn in July

of 2013, and prior to the LLC receiving $159,000 from the October 2014 loan brokered

by Target, Hage had given James Osborn cashier’s checks of more than $300,000.

14 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

Hage testified that he knew that James Osborn had been convicted of 76 counts of

financial fraud, was unlicensed and had been ordered to cease and desist from

engaging in any loan activities that required a license. Hage testified that when Hage

took out the $900,000 loan to purchase his residence, Osborn had promised him

$100,000 in kickbacks on future loans. He admitted he knew that to pay an unlicensed

person fees to obtain a loan was illegal and spoke with Osborn on a daily basis.

44.

John Hage, who supposedly could not afford the Target-brokered loans,

testified that he gave $650,000 to Osborn for what Hage believed was advance loan

fees, though he also claimed that much of the cash funneled through third parties to

Osborn was going to be deposited with PNC Bank in Hage’s name. Hage claimed he

gave money to Osborn, whom he knew was employed at GM, so that Osborn could

open a bank account with PNC Bank for the benefit of Hage. The PNC Bank account

would show on Hage’s balance sheet when he applied for what he expected to be a 3%

loan from PNC Bank to refinance the $900,000 purchase money loan secured by his

residence on Savoy. The loan was to be brokered by GM. Joh Hage admitted he

expected to receive loan rebates in connection with the alleged PNC bank loan of 40%

of the $650,000, or almost $250,000, while Osborn would keep a substantial portion.

45.

Hage testified that during the two years he was funneling cash to Osborn,

he thought the PNC loan was “right around the corner” and going to close at any time.

But the 38-year commercial banking executive also testified that he had never signed a

loan application with PNC Bank, and in 38 years had never heard of anyone obtaining a

loan without applying for it. In his entire career Hage never opened a bank account for

anyone without the participation of that person, yet claimed that funneling cash to

Osborn to be deposited into a phantom PNC Bank account would make it easier to

qualify to refinance his $900,000 residential loan. Hage admitted nothing prevented him

from opening an account at PNC Bank and directly depositing funds there, admitted he

never saw a bank statements, made no inquiries to PNC Bank, and didn’t list the

phantom account on his loan applications. This is the alleged felonious scheme that

15 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

Judge Wohlfeil ruled could not have been carried out if only Target, the loan broker, had

been more careful. Judge Wohlfeil also ruled that Hage bore no responsibility for it. For

it is only if Judge Wohlfeil believes that Hage is telling the truth about the circumstances

and reasons he gave so much money to Osborn that Hage can be seen as a victim.

46.

Hage admitted he kept meticulous track of all his expenses, including

postage stamps, and claimed he kept a running total of all the monies paid to Osborn.

Though he thought he was doing nothing wrong, Hage admitted he kept the running

total on a notebook hidden in a bank bag, rather than on his computer like all his other

expenses. Hage, a professional trust and former Senior bank executive, listed his self-

employment as “real estate investor” on the loan application. The relevant page of Trial

Exhibit 229 is attached as Exhibit 21.

47.

In short, Hage claimed to have paid Osborn $650,000 in advance loan

fees over a two-year period in order to refinance the $900,000 mortgage on his

residence, and kept it a secret from every acquaintance, his loan broker, his CPA, his

wife and son, and his advisors at Higgs Fletcher & Mack (HFM), and bore no

responsibility for his actions. Hage testified that he could think of no way that Target

could possibly have known he had already given Osborn $300,000, nor that he intended

to give money to Osborn in the future.

19 20 21

48.

Hage admitted that prior to seeking loans through Target he had already

devised the entire scheme to borrow money to give to Osborn. 49.

The manager of the LLC admitted he understood the loan terms, rate, and

cost, was a professional trustee, had more than 38 years of banking experience,

including serving as Senior Vice President and Regional Manager and whose jobs

required him to expand the commercial business portfolio of banks while fostering

relationships with high net worth individuals.

50.

The Hage’s own expert testified that based on their financial situation, the

Hages had two options – to sell properties or to refinance and take cash out to manage

their cash flow to buy time.

16 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

51.

After the LLC received its $159,000 in cash from the loan, the LLC not

only made every loan payment on time until it decided to sell the property, but John

Hage transferred more than $329,000 from his personal bank account to James

Osborn. The LLC and Trust also kept the other commercial properties, and never

missed a payment. Nilda Meg testified the Hage adjusted gross income for 2014, the

year of the loans, was $184,000 according to Hage-produced documents. 52.

Almost immediately after the LLC received the loan proceeds in October

of 2014, US Bank security personnel warned John Hage that Osborn was a convicted

felon. In a meeting between its security personnel and John Hage, US Bank insisted

that no more cashier’s checks be paid to Osborn. To keep the payments a secret from

his own bank, John Hage over the next six months wrote checks drawn on his personal

account to third parties totaling $329,000. Those third parties, including a Newport

Watch & Jewelry, cashed the checks and gave the cash to Osborn. Trial Exhibit 329 is

attached hereto as Exhibit 22, and contains the cashier’s checks and personal checks.

Because John Hage had been warned as early as February of 2014 that Osborn was a

convicted felon, unlicensed, and a con artist, and then warned again in October of 2014,

Judge Wohlfeil held that Target was not responsible for the money given to the con

artist. Osborn and John Hage testified that they kept the payments secret from Target

Mortgage, because they feared Target would stop the scheme. 53.

So immediately after receiving the loan proceeds, John Hage is warned

about Osborn by his own bank, after having been warned by his lender in February of

2014.

54.

Judge Joel Wohlfeil ruled that the loans would not have occurred but for

the negotiations engaged in by Osborn, and that but for Target making its license

available, Osborn would not have been able to feloniously manipulate the Hages as he

did, despite Hage having given $300,000 to Osborn prior to Target’s involvement, the

entire plan having been hatched prior to Target’s involvement, Hage paying Osborn

money to find loans for him from any broker he could, Osborn never stepping foot in the

17 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

Target’s offices, admitting he knew nothing of their loan programs or procedures, and

next to nothing about loan underwriting, and having no contact with the lender. SOD.

Judge Wohlfeil made this ruling despite also ruling that Target could not have known

about the scheme because the Hages intentionally hid it from Target, and despite Hage

having been warned immediately after the loans and prior to his giving any further

money to Osborn. SOD.

55.

There was no testimony that any other broker could have obtained a lower

interest rate, better terms, or lower cost for the borrower, or that Osborn had any

influence on the rate, terms, or cost of any of the loans made by Velocity Commercial

Capital. Rather, Osborn was kept in the loop during the loan process at Hage’s

insistence, and Osborn was asked a couple of times via e-mail to ask Hage to send

additional documentation directly to Target, which he did.

56.

Hage was paying Osborn hundreds of thousands of dollars to seek out

loans on his behalf, had previously given Osborn all of his tax and financial information,

and insisted that Osborn be copied on communications with Target. Target told Hage to

e-mail financial documents directly to Target.

57.

Osborn was at all times an employee of Got Mortgage. See Exhibit 17,

the excerpts of Hage’s deposition testimony. Hage spoke with Osborn daily for two

years, caught Osborn in significant lies, was warned twice by financial institutions to

have nothing to do with Osborn, gave Osborn more than $300,000 prior to asking

Target to broker a loan, then concocted a detailed plan to get money to Osborn through

third parties to keep it secret from his bank, his advisors at Higgs Fletcher & Mack

(HFM), the lender and the loan broker, but somehow but for Target having brokered the

loan Osborn could not have swindled the Hages.

58.

It is in my opinion prejudicial to Target and Meg, and utterly nonsencial

that Target and its broker, Meg, are not responsible for the monies Hage secretly

funneled to Osborn, but is liable for 100% of the interest on the money borrowed for the

next 30 years or until the property is sold – a huge sum that must be paid immediately

18 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

whether the loans are ever refinanced or the properties sold – whether that money was

paid to Osborn, retained by the borrower, or paid off higher interest loans already

obtained. Target and Meg are also responsible for 100% of the loan costs.

59.

In a move that can only have been taken straight from a Quantum

Mechanic’s Theory of Damages, Judge Joel Wohlfeil ruled that even though the broker

is not responsible for the commercial borrower giving its money to a known felon, the

broker is responsible for 100% of the cost of the loans, plus 100% of the interest on the

loans for the next 30 years or until the property was sold. This includes 100% of the

interest on the $475,000 in existing loans that had been refinanced on better terms and

at a significantly reduced interest rate, $216,000 of which had been used to purchase

the Hages’ residence on Savoy. SOD, Judgment.

60.

The plaintiffs’ own expert witness, Richard Holstrom, testified that this

calculation ignores the loans that already encumbered the property. He also testified

that this would make sense only if one assumed that 100% of the $671,000 borrowed

against the Kansas property had been borrowed for the sole purpose of being given to

James Osborn, that the property was owned free and clear at the time of the loan, and

that it was somehow the fault of Target and Meg. Despite these qualifiers, Judge Joel

Wohlfeil ruled that the damages’ calculation was uncontradicted.

61.

As it turns out, the LLC did sell the Kansas property within two years, and

prior to the trial. The absurd damage calculation was thus limited. Rather than rule that

the other property formerly with a balloon payment due could have been sold to mitigate

damages, Judge Wohlfeil decided the Hages were entitled to a huge windfall, discussed

below. SOD

The loan to the Hage Family Trust and 1981 Survivor’s Trust secured by the Elliott

property that lowers the interest rate on the $130,000 in existing loans, converts

interest only hard money loans with balloon payments to 30-year amortized

loans, and adds $247,338 to the balance sheet of the irrevocable 1981 Survivor’s

Trust and the $247,338 to the balance sheet of the Hage Family Trust.

19 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

62.

On March 13, 2014, the Hage Family Trust and 1981 Survivor’s Trust

obtained a loan brokered by GM secured by their rental property on Elliott Street, in San

Diego, taking $130,000 in cash out at 9% interest. The irrevocable 1981 Survivor’s

Trust and the J Scofield Hage and Bonnie Hage Family Trust are co-owners of the

property. Trial exhibits 716, 722.

63.

In October of 2014, the co-owners refinanced both loans with a 30-year

loan from Velocity Commercial Capital brokered by Target Mortgage reducing the

interest to 7.99%, while adding $494,676.34 to their balance sheets, $247,338 to the

Hage Family Trust and $247,338 to the 1981 Survivor’s Trust. The total loan was

10 11

$644,000. Warfel Decl., Trial exhibits 265, 716. 64.

After the Hage Family Trust received its $247,338 in cash from the loan, a

loan that Judge Wohlfeil ruled the beneficiaries could not afford, what happened? Every

loan payment was made on time, and the Hages still have the property and their country

club membership. John Hage also wrote $329,000 in checks to third parties to cash

and funnel the money to Osborn, as discussed above, all from his personal account.

65.

As for the irrevocable 1981 Survivor’s Trust which also received $247,338

in cash and had a duty to repay half of the loan, no evidence was presented as to

whether it could afford the loan payments, or what it did with the money.

66.

Based on the same reasoning he applied to the LLC’s loans secured by

the Kansas property, Judge Joel Wohlfeil ruled that Target and its designated broker

are responsible for paying 100% of the loan costs, and 100% of the interest on the loan

for 30 years, including the $130,000 previously borrowed at 9% interest – and including

the money that went to the irrevocable 1981 Survivor’s Trust, not a party to the lawsuit.

Target is responsible for 30 years of interest on the loan balance even if the trusts that

own the rental property decide to sell the property or refinance in the future. SOD

67.

Since $494,000 in cash was added to the balance sheet of the two trusts,

while $329,000 was funneled to Osborn over the following year, the two co-owners

received $165,000 above and beyond the total monies John Hage chose to funnel to

20 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

Osborn (and, of course, assuming 100% of the money to Osborn came from this loan,

and zero from the other two loans).

68.

The note contained a 3% pre-payment penalty for any amounts over 20%

of the loan paid back in each of the first three years, so $125,000 or so can be repaid

without penalty each year. Even repaying the entire loan the first year would have

resulted in penalties of 3% of 80% of $644,000, or $15,456. Nothing other than the 3%

prepayment penalty stood in the way of the Hages selling the commercial property, just

as they sold the Kansas and Savoy properties. This would have eliminated their cash

flow problem as well as any interest charges. They can give back any of the monies

they don’t want at any time, and avoid any interest on that money. Instead, they choose

to retain the money, and have Target pay the interest on it.

69.

Judge Wohlfeil did not explain the connection between the interest on the

monies not paid to Osborn and the damages he calculated. This may have been

because the plaintiffs made no attempt to actually trace any of the loan proceeds given

to the borrowers into the personal account out of which the Hages wrote checks to third

parties. But Judge Wohlfeil’s refusal to focus on the actual use to which the loan

proceeds were put does not mean that Judge Wohlfeil’s ruling can itself avoid scrutiny.

Judge Wohlfeil made no attempt to explain how reducing the interest rate on a prior

loan balance by 2% can possibly be considered “damage” to the borrower. The

plaintiffs’ own expert, Richard Holstrom, testified that these loans “reduced the

damages” the Hages had incurred from the prior loans.

70.

Assuming that the Hages took cash out of $494,000 in part to pay Osborn,

the Elliott loan at least has the possibility of being connected to Osborn in some way.

The third loan, secured by the Tennyson property owned by the LLC, had nothing to do

with Osborn and everything to do with the tax and legal advice the Hages received from

their attorneys at Higgs Fletcher & Mack (HFM) and heir CPA regarding complex 1031

tax exchanges and maintaining the integrity of the LLC, to avoid piercing the corporate

veil. Exhibit 37.

21 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

The loan to the LLC secured by the Tennyson property canceled by Target to

save the LLC money, revived by the borrower to repay a $50,000 personal loan

from Hage, retain a complex 1031 exchange planned for the future, and avoid

piercing the corporate veil, all of which had nothing to do with Osborn.

71.

The LLC purchased the Tennyson property in 2013 for $730,000, and took

out a loan of $511,000 at 5.25%, then in October of 2013 refinanced into a 5% 30-year

amortized loan.

8 9

72.

By July of 2014, the property appraised at $825,000. The meticulous,

experienced John Hage inexplicably and, in hindsight, rather suspiciously

misrepresented to Target that same month that the loan on Tennyson was at 10%

interest. Hage claimed the LLC wanted to refinance to lower the interest rate. Target

matched the LLC with a lender, Velocity Commercial Capital, that offered to refinance

the loan at 7.99%, a 2% interest rate reduction similar to the other loans. On this loan

there was to be no cash out.

73.

During the loan process, John Hage met with his attorneys at Higgs

Fletcher & Mack (HFM) and HFM even prepared documents adding Bonnie Hage as a

co-manager of the LLC. Hage also met with the CPA who was working on his 100-page

2013 personal tax returns. See e-mails attached.

74.

After the loan was approved by the lender, Target received the loan payoff

demand, and at that time discovered the interest rate on the prior loan was actually 5%,

not the 10% misrepresented by John Hage. Target immediately e-mailed the lender to

cancel the loan, and notified John Hage of his mistake.

75.

After being notified Target had canceled the loan, John Hage vehemently

insisted the LLC wanted to refinance anyway and demanded Target see if the lender

would allow the LLC to take $50,000 cash out. Cash out is considered a â&#x20AC;&#x153;benefit to the

borrowerâ&#x20AC;? and if a commercial borrower shows a need for the cash a lender may

approve a loan that carries a higher interest rate. For 38 years, Hage arranged

commercial loans for customers of the bank he was employed at. John Hage testified

22 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

the reason the LLC wanted this money was to repay a personal loan it had obtained

from Hage for improvements. Hage had met with his lawyers at HFM during the loan

process to add Bonnie Hage as a co-manager of the LLC, and believed that repaying

this loan was necessary to avoid disturbing a complex 1031 exchange he planned for

the future, and to avoid piercing the corporate veil of the LLC. Exhibit 17.

76.

With 38 years of experience arranging commercial loans, Hage knew

Target had a fiduciary duty to pass his request on to the lender. After she did so,

Velocity Commercial Capital notified Target it would approve a loan at 7.99% interest,

with approximately $50,000 cash out (less loan costs), and insisted the co-managers of

the LLC, John and Bonnie Hage, hand-write a letter stating they understood the LLC

would be obtaining cash but that the interest rate on the loan being refinanced would

increase. After the Hages wrote and signed the letter, the lender made the loan on the

terms the LLC agreed to.

14 15 16

77.

There was no testimony as to what the LLC actually did with the money it

received from this loan. The LLC still owns the property, and never missed a payment. 78.

The plaintiffâ&#x20AC;&#x2122;s expert testified that since the loan refinanced was

essentially a purchase money loan the original proceeds could not have been borrowed

to give cash to James Osborn. But he testified that if, and only if, the $50,000 was

borrowed for the purpose of being giving to Osborn, the Hages would have been

damaged by the amount given to Osborn, plus the cost of borrowing the money and any

interest thereon.

79.

Despite John Hageâ&#x20AC;&#x2122;s admission that the cash out was decided at the last

minute based on legal and tax reasons after he had consulted with his HFM legal team

and added a co-manager to the LLC, Judge Wohlfeil ruled otherwise. There was no

testimony that $50,000 cash out from this loan were intended to go to, or ever went to,

James Osborn. There was no evidence Osborn had anything whatsoever to do with

this loan.

23 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

1 2

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed September 14, 2017, at Arcadia, California.

3 4

__________________________

MARK J. WARFEL

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

24 DECLARATION OF MARK WARFEL IN SUPPORT OF MOTION FOR NEW TRIAL

EXHIBIT 1

·..

1 2 3

4 5 6

PHILLIP C. SAMOURIS, ESQ. (Bar No. 163303) samouris@higgslaw.com RABIL K. SWIGART, ESQ. (Bar No. 225881) swigart@higgslaw.com HIGGS FLETCHER & MACK LLP 401 West "A'' Street, Suite 2600 San Diego, CA 92101-7913 TEL: 619.236.1551 FAX: 619.696.1410 Attorneys for Plaintiffs JOHN SCOFIELD HAGE and BONNIE GRACE HAGE

SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO

10 11

13 14

¥~:~if~~w£~:d!~!Lm~~ BONNIEGRACEHAGEFAMILYTRUST '' ·.:, .,,,.,,·,,.,. ,, ................. ············ and Co-Managers of SD 32ND STREET APARTMENTS, LLC, a California limited liability company,

15 16

17 18 19 20

Plaintiffs,

v. GOTMORTGAGE.COM, a Califomia corporation; JAMES M. OSBORN, JR., an individual; TARGET MORTGAGE INC., a California corporation; ANDREA HAEWON PARK, an individual; THOMAS IPING LO, an individual; NILDA ANN MARIE MEG, an individual, and_ DOES 125, inclusive, Defendants.

22 23

Plaintiffs, JOHN SCOFIELD HAGE ("Scody") and BONNIE GRACE HAGE ("Bonnie,"

24 25

collectively with Scody, "Hage" or "Plaintiffs"), submit this Complaint against Defendants

GOTMORTGAGE.COM ("GotMortgage"), JAMES M. OSBORN, JR. ("Osborn"}, TARGET

MORTGAGE ("Target"), ANDREA HAEWON PARK, THOMAS !PING LO, NILDA ANN

MARIE MEG, and Does 1-25 (collectively "Defendants"). Plaintiffs allege as follows:

lJGGS FLETCHER&: MACKLLP ATTOlt.NEYS AT LAW SAN DIP.GO

5435738.2

COMPLAINT FOR DAMAGES

property located in San Diego that were financially detrimental to the Plaintiffs for the :financial

benefit of Target and its principals 6.

or representative of the other Defendants and/or is responsible in some way for the dam.ages

and/or conduct herein alleged.

II.

FACTUAL ALLEGATIONS

Properties Owned By The Plaintiffs 7.

The Tennyson Street Property is located at 3746-48 Tennyson Street in the City of

San Diego ("Tennyson Property"). The Plaintiffs purchased the property in July 2013 and

transferred the property to SB 32nd Street Apartments LLC, a California limited liability company

("SB 32nd"). Plaintiffs are the sole members and sole co-managers of SB 32nd â&#x20AC;˘ 8.

The Kansas Property is located at 4167-71 Kansas Street in the City of San Diego

(the "Kansas Property"). The Kansas Property was purchased in January 2010 and in February

2010, the Plaintiffs transferred title of the Kansas Property to SB 32nd ; the Kansas Property was

owned free and clear of any debt. 9.

17 18

The Savoy Property is located on Savoy Street in the City of San Diego ("Savoy

Property"). The Plaintiffs purchased the Savoy Property in October 2013. 10.

The Elliott Property is located at 3510 Elliott Street in San Diego ("Elliott

Property"). The Plaintiffs, through their family trust, The J. Scofield and Bonnie Grace Hage

Family Trust, own a one-half interest in the Elliott Street Property. The other one-halfinterest is

owned by the John Scofield Hage Trust under the Survivors Trust of the Fred Scofield Hage Trust

Dated March 25, 1981 ("1981 Trust"). Scody is a beneficiary and trustee of the 1981 Trust.

In or about July of 2013 > Scody contacted GotMortgage to obtain a loan in

connection with the prospective purchase of the Tennyson Street Property, In response,

GotMortgage assigned its "Vice President of Sales" and ''Senior Account Executive," Osborn, to

assist the Hages in obtaining the loan. The Plaintiffs had not previously met or dealt with Osborn.

:1GGS FL!TCHER & MACKLLP AnoK)UlYt AT LAW

Introduction To GotMortgage and Osborn 11.

SAN 011!.CO

In doing the things alleged herein, each of the Defendants was an agent, employee

5435738.2

3 COMPLAINT FOR DAMAGES

·-~, L0"4JW 1 2 3 4

5 6 7

,i:;zf

PHILLIP C. SAMOURIS, ESQ. (Bar No. 163303) samouris@higgslaw.com RAHIL K. SWIGART, ESQ. (Bar No. 225881) swigart@)1iggslaw.com HIGGS FLETCHER & MACK LLP 401 West "A" Street, Suite 2600 San Diego, CA 92101-7913 TEL: 619.236.1551 FAX: 619.696.1410

:IZ],

Scan \ '

Client

~· Calendar

CZJ·

Attorneys for Plaintiffs JOHN SCOFIELD HAGE and BONNIE GRACE HAGE

FIie Bill

D-

SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO 9

CENTRAL DIVISION

10 11 12

JOHN SCOFIELD HAGE; and BONNIE GRACE HAGE, Plaintiffs,

13 14

GO1MORTGAGE.COM, a California corporation; JAMES M. OSBORN, JR., an individual; TARGET MORTGAGE INC., a California corporation; ANDREA HAEWON PARK, an individual; THOMAS IPING LO, an individual; NILDA ANN MARIE MEG, an inoividual, and DOES 125, inclusive,

16 17 18 19

CASE NO. 37-2016-00003885-CU-FR-CTL

NOTICE TO APPEAR AT TRIAL TO NILDA ANN MARIE MEG [C.C.P. §1987 (b)] DEPT.: IC JUDGE:

C-73 Hon. Joel R. Wohlfeil

Defendants.

20 21

TO NILDA ANN MARIE MEG AND TO HER ATTORNEYS OF RECORD:

NOTICE IS HEREBY GIVEN that, pursuant to California Code of Civil Procedure

§1987(b), PLAINTIFFS JOHN SCOFIELD HAGE and BONNIE GRACE HAGE, hereby

24 request your attendance at the trial of this matter, currently scheduled to begin on March 24, 25 26 27

Ill

HICCS PLETCHER &

MACKLLP AffOKNIYI AT LAW SAN OIECO

2017, at 8:30 a.m., in Department C-73, (Hon. Joel R. Wohlfeil) of the above-entitled court,

7870962.1

NOTICE TO APPEAR AT TRIAL (NILDA MEG)

EXHIBIT 2

Print Article: Portrait of a scam artist

Page 1 of 3

ORANGE COUNTY

2008-08-15 03:00:00

First of two parts. To be successful, a con man needs to make people believe in him.

J\mrny 0'5oom \Yao \ha\ a'DW.t-J. "One day, out of the clear blue sky, he caHed, and that's how itaH starited," said Rodney Fowle.r, who losta house in Rialto because of Osborn's lies. Osborn, 45, was a mortgage salesman. He would later admit in court that between 2003 and 2007, he stole more than $500,000 from people who were seeking to refinance their home loans. He caused 10 families to lose their homes to foreclosure, prosecutors said. ~

Court records show Osborn, who lived in Trabuco Canyon, had a series of encounters with local law enforcement over the past decade. He was convicted of offenses including insurance fraud, carrying a loaded firearm in a vehicle and driving while his license was suspended or revoked because of driving under the influence. He was ordered in 2004 by the California Department of Real Estate to "desist and refrain" from arranging mortgage loans without a real estate license. Yet despite his criminal record and the Department of Real Estate order, Osborn apparently had little trouble finding employment with Orange County mortgage companies such as Avrek Financial of Santa Ana and HomeloanAdvisors.com of Costa Mesa. Even after the police caught up with him and he was awaiting trial, he was hired by a Newport Beach firm, Worldwidesavers.com, where he continued his crimes. California's system for regulating real estate transactions, where responsibility is divided between multiple agencies, seems designed to allow the unscrupulous to slip through the loopholes. If not for the persistence of one of Osborn's victims in trying to. bring him to the attention of authorities, and some dogged police work by a Santa Ana detective, he probably wouldn't be serving a 10-year sentence in state prison today. Here's how Osborn operated: He found people, often with damaged credit, who badly needed a new loan. He'd promise he could cut their monthly payments or get them cash out of their homes. He demanded that they send him money in advance, in cash, purportedly for appraisals, loan processing costs and other fees, prosecutors and victims said. He'd string them along for months or years, often telling them to stop paying their current mortgage while he negotiated a new one. In most cases, he never delivered a new loan. "He made the world very rosy and sunny," said Kim Koslovic, an Ohio mother of three who turned to Osborn to refinance her house when her husband was out of work. "The man can talk the talk, that's for sure. Pretty much we handed ourselves over to him, and in the end he pretty much took everything we had, or caused it to be taken."

..-,_

"He was pressuring me for money," said Grace Festa, who was looking to refinance her Pennsylvania home. "(He said he) had to get the house appraised, had to investigate and see where he could get the loans, and he said I had to pay to set up the loans because he was working with someone else. aâ&#x201A;Ź1 He needed $500 at first. Then he needed another $1,000. Then $1,200."

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1/19/2017

Print Article: Portrait of a scam artist

Page2of3

When Festa protested that she was unemployed and didn't have the money, Osborn told her to borrow from friends. Then he told her to stop paying her mortgage. "He said, 'If you keep making the payments and I'm working on this loan for you, the numbers will keep changing,'" Festa recalled. Osborn got sales leads from his employers, who bought them through sites like LendingTree.com and LowerMyBills.com, said George Mcfetridge, a deputy district attorney in Orange County who prosecuted Osborn. Osborn seemed to have a knack for finding folks he could manipulate. "These people were In trouble. They were in financial straits. They needed to refinance. They were persuaded to go with Osborn, who then proceeded to loot them when they were vulnerable," Mcfetridge said. "Many were persuaded to send payments via Western Union or MoneyGrams..That might be a red flag, (but) he was so persuasive. I think he was giving them stories like 'I'll front this money but you've got to pay me back.' I kept telling (the) victims, 'Don't feel like a fool. He was a very, very smooth talker."'

BAD FAITH Nobody believed in Osborn more than Steve Ryancarz. Ryancarz, 62, an Ohio businessman, wanted to refinance his 5,000-square-foot luxury house on a 5-acre lot to get some cash out for his refrigeration company. A major customer had gone belly up, owing Ryancarz's firm $1.2 million, he said. Ryancarz wasn't just trying to get a loan for himself. He also was trying to do a favor for a friend, Kirn Koslovlc. Ryancarz was engaged to Koslovic's mother. Koslovic, 38, and her husband had filed for Chapter 13 bankruptcy protection while he was unable to work because of an injury. In order to keep her modest, $107,000 house, she needed to refinance, but she couldn't find a lender in Ohio who would take a chance on her. Ryancarz said he found Osborn online in 2003 through HomeLoanAdvisors.com. Ryancarz, who had good credit, figured that by bundling a loan for himself with one for Koslovic, Osborn might find a lender willing to take both. "No matter how much money I had, I always help people out," Ryancarz said. "That's just how I am. Everybody needs a break. What I could do to help them - could help them get to a point where they tum their lives around, it's worth it." There were warning signs, even early on. The first loan Osborn delivered for Ryancarz was bungled, resulting in much higher payments than Ryancarz had expected. Osborn blamed the problem on his boss. Ryancarz said he called Osborn's boss, but the man wouldn't speak to him, so Ryancarz believed Osborn. "It just snowballed after that," Ryancarz said. Osborn said he would help Ryancarz sue the first lender, but he wanted money up front to pay for the lawsuit. Ryancarz sent thousands In fees. Here's how much sway Osborn was able to exert over his victim: Ryancarz sent Osborn money to ball him out of jail when he was arrested for driving without a license. He also sent Osborn money to pay off a purported fine from the Department of Real Estate, according to records Ryancarz provided. Ryancarz even sent $5,000 to pay for Osborn, his gir1friend and their children to take mini-vacations at the Loews Coronado Bay Resort. "He said, 'I've done all this work for you. You owe me a favor. How about putting us up for the weekend?"' Ryancarz recalled. Ryancarz said he believed that Osborn was working very hard trying to get loans for him and Koslovic, and if these loans didn't come through, well, that was understandable. "I just thought they were axing the loans because of Kim's credit," he said.

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Print Article: Portrait of a scam artist

Page 3 of3

Ryancarz never met Osborn in person. Over the phone, he sometimes heard Osborn use abusive language to office assistants, calling them nasty names if they made a mistake or didn't have the right paperwork. (

"He was smooth to the clients, but as far as the people that done his work for him, he wasn't too kind," Ryancarz said. To dispel any doubts about Osborn, Ryancarz would call the lenders that Osborn said he was worl<ing with. Each time, Ryancarz said, he got confirmation. "You gotta figure he's gotta be on the up and up. He's not going to be jeopardizing his reputation talking to these people or lying to you and saying he did," Ryancarz said. "You fall back on the sense of well, he's doing his job, it's just a little tougher than you thought it would be and blah blah blah." Or, as Koslovic put it, "It's easy to push time away with the excuse of paperwork and glitches and technicalities, with all those words that everyone uses." Ultimately, Ryancarz and Koslovic lost their houses. It turned out that Ryancarz could have done a much better deed for Koslovic if he'd simply paid off her mortgage rather than trying to get her a new loan through Osborn. Her house was worth $107,000. Ryancarz paid Osborn more than $370,000, court records show. "I almost done it and I decided, no, that's not getting them where they want to be," Ryancarz said. "So I didn't do that. Hindsight indicates I should have."

Coming tomorrow: How the cops nabbed Jimmy Osborn. Contact the writer: 714-796-6045 or aqalvin@ocreqister.com ÂŠ Copyright 2017 Freedom Communications. All Rights Reserved. Privacy Policy & Terms of Service I Copyriaht I Site Mao

http://www.ocregister.corn/common/printer/view .php?db=ocregister&id= 190164

1/19/2017

EXHIBIT 3

•

0MB Approval No. :&l2-92Gi •.\,

· A. Settlethenlltatciment (HUD-1)

FINAL ,l}'poott.oan"',

RHS

Con,•, Jns.

IRJ Conv, Unln.,

· ·... •,,!:~_... ,, ;·: 6.

FIie Numoar.

24(1.1400292-KM

··.

·.-·

·• ·.::.• · :

7, Loan Numbor:

Mortgage Insurance Caso Number:

201<.12

C. Nole: This fonn Js furnished to 111vo you o stotomonl of actual ••tuomont co,1s. Amounts paid to and by th• liBlllomenl aoont aro ~hown. flsmsm•rl<•d '{p.o.oJ' won, pa1doutslds Iha closlnu: th,y aro shown hora for/,ilonr.sllonaf pu,posoiond er, not lno/Udod In lho

O, Name and A:!::!ro,a of Barrowor: SB 32nd Strool Apartment.; LLC

E. Name and ,\Cdicss of So1Je::

4167-4111 Kmas st

LOTS 7 ¥, B DLK 154 TR LP0008PG

F. Name und Address ;:if Leridar: Alliance Portfolb

120 Vont!s suite 515

San Diego, CA 92104

G, Property Locotlorc 4167-4171 Kansat Street San Ole;o, CA 921 Ol San Olepo County, Colllornla

lo/1~~... ~oom•••mi

Allso Vlo)o, CA 92556 H. Sottlument Agen~ TJ!le,:365 Ccmpany_

949475395 L S811omenl Palo:

5000 Birc.'i s:roa~ Sulle 300 Newport Sc•oh, CA S2G60

Place oC Se-ttt0mant 5000 Birch $!root Suito 300 t~a~JJOr1 Bta:h, CA $2650

fu,~rdln;Oale:: F•btulll\' 11,2014

Dl1tx.tmim1nl 01tr.

Certified lo bo a true and correct copy of the signed original. Tllle365 Company

av:

t'at<a ;/ft,.owt

P/ovtous edlflon!I tire o!),olefo

p,nt,d m11,112ou· ,,, 2:1:twM

2~0.1«o1t2,XWJS HU0.1,P•;t1

HAG/ALLl/001890

3000,00

211.65

...,;. . ... ,..

·.,

98.DO

...

:IDD.00 liSD.00 450.DO 245.00 liQ,ll()

3,DOD.llO

541.117 29.1111

........._. ...·~"I!.

. . .., ··\."t.'!.o• ~

.,. .......

1 14.211

Cenllled to be a true and eorreot copy of !he signed origlna~ 1lllu365 Company

BY:

t'ar-a ;f,/rg~~t

HAGIALU/001891

•••J••. f

•L•

•,

# 805 ti 1201

Talul Increase bolwaflll GFE and HUl>-1 Chargva

ga,•:::;:;.,.-.,. . ., ....,11"....,.·-::•

Loan Terms

' \00,00oa,b . , ~ .....,.. r, : ,

2.50 years

·-·

10,t!ID.OO'l't 4·91§,_n-·

• ..

•t4-:·

Includes

D Principal l!l lnteteal D Mortgage 1nsmanoe . Ii] No D Yea, II can rise to a lllllldmwn of

%, lh• 11111

dnu1ia wll be and can change aguln DVGIY after , Ewiy chen!la dlllu, your lntenist rat, can tncruaaa ar dacieaa ~ "'· over tho llfe af the loan, your lnlaresl 111111 la guaranlaed to never ba llllver1han % ot higher than % 00 No O Yea, llcan rlaa to a maximum of$

to,

Iii No D Yea, the ftrat tnarease can be on

and the monthly amount owed c:un d&e The maximum ncan evar r1ae to ta s D No Iii Yes, yout maximum prepaymenl panal'° 11 $~.II~.

D Na 'due!n

Iii

Yaa, you have a balloDII payment or$ yearaon

-:,(p~P.i,~

Ii] You do net have a numthly e8CIOW payment for llams, auch aa property laxBII Bild horn,owne,. lnf\ll'UICD, You naist psry lhesa

Hems dttecllyyouraalf,

•

' D You have an addlUonal monthly oacrow payment af, that IIISU!is In a !Dial lnlllal monlhl)' amount owsd of$ _Thia Includes pllnclpal, lnlorest. any martgage 1n1urance and 11111 • • Items chsdald bBICIW:

! .•

'":

Cort!lled to be e true and correct copy of the signed original. 11lle366 Company _ • BY:

~ #~ze-t

-~ Note: If you hllVo any 9uestl'0111 about 'tho seWemsnt C)uirges and Loan Terma &tad on lhls fonn. pl118se contBOI yaur lender, f'1'Ylolll odltlon•.,.. ob50Je11

-oo,ilv,111'11111...,,.

•-™ IIU0-1..... 1

HAGIALU/00189.Z

EXHIBIT 4

CANYON ESCROW, INC. 1669 East Lincoln Avenue, Orange CA 92865 • Tel: (714) 279-9082 • Fax: (714) 279-9089 BORROWER STATEMENT Final

Escrow Number: Escrow Officer. Borrower:

Property:

Title Order Number: 00224096-997-CF

1S255-CD Claudia De Anda

Date: Closing Date:

03/27/2015 03/1212014

John Scofield Rago, Trustee oftbe John Scofield Hage Trust under the Survivors Trust of the Fred Scofield Hsgo Trust dated March 25, 1981, as to an undivided 50% Interest, and and J. Scofield Hage snd Bonnie Grace Hage. Co-Trustees of the 1. Scofield and Bonnie Grace Hage family Trust dated October 8, 2002, as to an undivided 50% interest 3510 Elliot Street. San Diego, CA 92106

f!;:1J11.:'_;]_Z~lr: ···.:::i· ::_ ;~}i~.t,~Xf~ffgi]!fil;~~t~;::t:::~~t~

·~

" "•

110

•

I'; ..

~ti~, t ;..,]!' ~~\-..~{i';aN,tfftf.G~·..:L~ '' :.. • 1 i<>1•• ~ • l : ~ :;_~J:,-""Y ,.\:-.!,

~...,;,,

•~I

.,,,m;~ .

,-._.

~~!,j/1 i ~t.l }t.--.')!::.: .. J ~ • .s -.:.::.·1~..... .:

TOTAL CONSIDERATION TITLE CHARGES Lcnder/Mormuco Premium for 156 000,00: Ticor Title 2nd 1/2 Taxes 2013-14: Ti.cor Title Reoordin2 Peca: Ticor Title Endorsement: Tloor Title 1 ¥/Sitmin!Z Fee: Safe SiminllS Escrow & Lender Services, LLC ESCROW CHARGES T01 Canvon Escrow Inc. Escrow Fee Messcnecr Fee Wire Fee LENDER CHARGES New Deed of Trust to Darius Ouernsev Jr.: Intcrost Adjustment From 3/11/2014 To 4/01/2014, 20 Days, @ 32.0548/per day: Darius

425.00 672.78 88.00 25.00

17.S.OO 675.00 75.00 35.00 130,000.00 641.10

Oucmsev Ir.

OrlirlnAtion Fee: T.D. Co. Tax Service: T.D. Co. Morll!B.2e Broker F~: OotMorts!:lle:e.Com Dooament Pre11aration: Don J. DoHadwa.v Insoeotlon Fee: Don I. DuHadwav Wire Fee: New Lcndc:r BALANCE DUE YOU

TOTALS

5.200.00 100.00 7,800.00 525.00 325.00 35,00 113,203.12 no,000.00 I

130,000.00

E,XHIBIT_~..J.--

_W_TT_N_ES_S ~ b!I ~Ge

OATE:J-1\--J 1 C, 0A"IS, CSR 1:W10 Ex722

EXHIBIT 5

Message

From: Sent:

Nilda Meg [targetmortgage@yahoo.com]

To: CC: Subject:

Scody.hage@cox.net

10/2/2014 12:30:09 PM occloser@gmail.com

Elliott St

scody do you want to keep the vesting with the two trust if so we need a copy of the second trust

Elliot: per current vesting on prelim, there are 2 trusts, but we received only 1 trust cert. We need to know if borr wants to keep the vesting as is, if so, we need 2 trust certs or if borr would like to put it in 1 trust per the trust cert provided, we need a grant deed reflecting this change for the underwriter to review and approve prior to sending the loan to closing.

HAGE - 010223

Ex. 716 42 of 71

3/1(g)16

Cc: occloser@gmail.com Subject: RE: Elliott St Scody Here is a copy of your current vesting we need a copy of the other trust. We have the 1. Scofield and Bonnie Grace Hage Family Trust dated October 8, 2002

-------On Thu, 1012/14, Hage <scody.ha.ge@cox.net> wrote: Scody

Subject: RE: Elliott St To: '"Nilda Meg111 <targetmortgage@yahoo.com> Date: Thursday, October 2, 2014, 2:28 PM Nilda, To reco~ the vesting of the 3510 Elliott Street property must remain in the vesting as it is today. As you will see, it is the Survivors Trust out of my tathets estate, which is the restated trust following my mother's death. This abstract was written to cover the trust certifications following my father's death. Please have the title company draw up a certification with the appropriate infonnation to attach to this abstract and include it in the documents for signature at the time of signing. Please acknowledge to me that this is acceptable to the title company's needs.

~codyHage Cell: Phone: PAX: Bmail:

(619) 865-8672 (619) 222-5425 (619) 86S-8672 Scody.hage@cox.net

--original Message-

From: Nilda Meg [mailto:targetmortgage@yahoo.com] Sent: Thursday, October 02, 2014 12:30 PM To: Seedy.bage@cox.net Cc: occloser@gmail.com Subject: Elliott St

Scody

do you want to keep the vesting with the two trust if so we need a copy of 213

IRGI PEI 000942 Ex. 716 38 of 71

3{1Q.l2018

the second trust

Billot: per current vesting on prelim, there are 2 trusts, but we received only 1 trust cert. We need to know ifborr wants to keep the vesting as is, if so, we need 2 trust certs or if borr would like to put it in 1 trust per the 1l'Ust cert provided. we need a grant deed reflecting this change for the underwriter to review and approve prior to sending the loan to

closing.

ara

TR'9T DFT 9980..9 Ex. 716 39 of 71

EXHIBIT 6

¥velocity ...--//~"commercial capital LoanNo.-

SEMI-ANNUAL ADJUSTABLE TERM NOTE October 13, 2014

$661,500.00 For value received, the undersigned SB 32nd Street Apartments, LLC, a California llmlted liabillly company (the "Borrower"), promises to pay to lhe order of Velocity Commercial Capital, LLC (together with its successors and assigns, the "Lender"), the principal amount of Six Hundred Sixty-One Thousand, Five Hundred Dollars and Zero Cents ($661,600.00) on or before November 1, 2044 (the "Maturity Date"), as set forth below, together with Interest from the date hereof on the unpaid principal balance from time to time outstanding until paid In full. The Borrower shall pay consecutive monthly Installments of principal and Interest, as follows: $4,849.24 commencing on December 1, 2014, and the same amount (except the last Installment which shall be the unpaid balance) on the 1st day of each month thereafter. The aggregate principal balance outstanding shall Initially bear Interest thereon at a fixed rate equal to Seven and Ninety-Nine Hundredths Percent (7.990%) per annum. The Interest rate on the aggregate principal balance shall change on November 1, 2017 (the "Special Change Date") to a fixed rate equal to Four Percent (4.00%) above the Wall Street Journal Prime Rate (as hereinafter defined) as of 30 days prior to such Special Change Date, except that In no case shall the Interest rate on the Special Change Date be greater than Two Percent (2%) above the Initial rate. The Interest rate on the aggregate principal balance shall change again on May 1 1 2018 and on the 1st day of each month every sixth month thereafter (each a "Change Date'') to a fixed rate equal to Four Percent (4.00%) above the Wall Street Journal Prime Rate as of 30 days prior to such Change Date. On the Special Change Date and each Change Date each monthly installment due and payable until the next Change Date shall be recalculated (Increased or reduced) to reflect the adjusted Interest rate, the outstanding principal balance at such time and the remaining term of the 360 month amortization period commencing on the date of this Note In accordance with the Lender's calculation In the Lender"s sole discretion. The calculation of the payment amount Is based on a 360 month amortization period. Notwithstanding anything to the contrary In this Note, the interest rate on this Note Is limited by a floor and a ceiling as follows: (I) the maximum Interest rate (i.e. celling) Is 13.990% per annum and (Ii} the minimum Interest rate (I.e. floor) Is 7 .990% per annum. In addition, on each Change Date the Interest rate on this Note shall be changed (Increased or reduced) by no more than 1% per annum. Wall Street Journal Prime Rate means the rate published from time to time by the Wall Street Journal as the Prime Rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, or, In the event the Wall Street Journal ceases publication of the Prime Rate, the base, reference or other rate then designated by the Lender, In Its sole discretion, for general commercial loan reference purposes, It being understood that such rate is a reference rate, not necessarily the lowest, established from time to time, which serves as the basis upon which effective interest rates are calculated for loans making reference thereto. The effective Interest rate applicable to the Borrower's loans evidenced hereby shall be rounded to the nearest One·Elghth Percent (.125%). Principal and interest shall be payable at the Lender's main office or at such other place as the Lender may designate In writing in immediately available funds In lawful money of the United States of America without set--off, deduction or counterclaim. Interest shall be calculated monthly on the basis of a 360.day year based on twelve (12) thirty (30) day months except that Interest due and payable for a period of less than a full month shall be calculated by multiplying the actual number of days elapsed In such period by a dally rate based on said 360-day year.

Ex 767

HAGE· 002424

Borrower:

401 West A Street, Suite A San Diego, California

92101

Ex 76iiinlssory Notes

ÂŠ 2014 Medici, a c!Mslon of Wolters Kluwer Financial Services

EXHIBIT 7

LoanNo.-

SEMI-ANNUAL ADJUSTABLE TERM NOTE October7, 2014 $577,500.00 For value received, the undersigned SB 32nd Street Apartments, LLC, a California llmlted llablllly company (the "Borrower'?, promises to pay to the order of Velocity Commercial CapHal, LLC (together with 11s successors and assigns, the aLende(?, the principal amount of Five Hwtdred SuvunfySeven Thousand, Five Hundred Dollars and Zero Cents ($577,500.00) on or before November 1, 2044 (lhe aMaturily Date"), as set forth below, together With Interest from the date hereof on the unpaid principal balance from time to time outstanding until paid In full. The Borrower shall pay consecutive monthly Installments of principal and Interest, as follows: $4,233A7 commencing on December 1, 2014, and the same amount (except the last Installment which shall be the unpald balance) on the 1st day of each month thereafter. The aggregate principal balance outstanding shall lnltlally bear frtterest thereon at a fixed rate equal to Seven and Nlnefy-Nlne Hundredths Percent (7.990%) per annum. The Interest rate on the aggregate princfpal balance shall change on November 1, 2017 (the 0 Special Change Date") to a fliced rate equal to Four Pen:ent {4.00%) above the Wall Stleet Journal Prime Rate {as hereinafter defined) as of 30 days prior to such Speclal Change Date, except that In no case shall the Interest~ on the Special Change Date be greater than Two Percent (2%) above the Initial rate. The Interest rate on the aggregate princfpal balance shall change again on May 1, 2018 and on the 1st day of each month every sixth month thereafter (each a "Change Date") to a fixed rate equal to Four Pereent (4.00%) above the Wall Street Journal Prime Rate as of 30 days prior to such Change Date. On the Special Change Date and each Change Date each monthly Installment due and payable until the next Change Date shaU be recalculated (Increased or reduced) to reflect the adjusted interest rate, the outstandfng principal balance at such time and the remaining tenn of the 380 month amortization perfod commencing on the date of this Note In accordance with the lender's calculatlon In the lender's sole discretion. The calculation of the payment amount Is based on a 360 month amortization pertocl. Notwithstanding anythrng to the contrary In this Note, the Interest rate on this Note Is limited by a floor and a celling as follows: (I) the maximum Interest rate (i.e. ceUlng) Is 13.980% per annum and (i0 the minimum Interest rate (I.eâ&#x20AC;˘.floor) Is 7.990% per annum. In addition, on each Change Date the fnterest rate on this Note shall be changed (Increased or reduced) by no more than 1% per annum.

::Âˇ

Wall Street Journal Prime Rate means the rate published from 11me to time by the wall Street Journal as the Prime Rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, or, In the event the Wall Street Journal ceases publication of the Prfme Rate, the base, reference or other rate then di3Slgnated by the Lender, In its sole discretion, for general commercial loan reference purposes, it being understood that such rate Is a reference rate, not necessarily the lowest, es1abllshed from time to time, which serves as the basis upon whfch effective interest rates are calculated for loans making reference thereto. The effective Interest rate applicable to the Borrower's loans evidenced hereby shall be rounded to the nearest One-Eighth Percent (.125%). Principal and Interest shall be payable at the Lender's main office or at such other place as the Lender may designate In writing In immediately avallable funds in lawful money of the United States of America Without set-off, deduction or counterclaim. Interest shall be calculated monthly on the basis of a 360-day year based on twelve (12) thirty (30) day months except that Interest due and payable for a period of less than a full month shall be calculated by multiplying the actual number of days elapsed In such period by a daily rate based on said 360-day year.

HAGE - 002692

Ex 768

Borrower:

=~~ ~z::~:c;:=/41 Bonnie Grace Hage, Manager

401 WestA Street, Suite A San Diego, California 92101

7 Promissory Notes(2}

Ex768

ÂŠ 2014 Medici, a division of Wolters Kluwer Financial Services

EXHIBIT 8

SEMI-ANNUAL ADJUSTABLE TERM NOTE

LoanNo.October 7, 2014

$644,000.00 For value received, the undersigned John Scofield Hage, Co-Trustee and Bonnie Grace Hage, Co-Trustee of J. Scofield and Bonnie Grace ijage Family Trust dated October 8, 2002, a Callfomfa trust (the "Borrower"), promises to pay to the order of Velocity Commercial Capital, LLC (together with Its successors and assfgns, the "Lender',, the principal amount of Six Hundred Forty-Four Thousand Dollars and Zero Cents ($644,000.00) on or before November 1, 2044 (the ÂˇMaturity Date"), as set forth below, together with Interest from the date hereof on the unpaid principal balance from time to time outstanding until paid In full. The Borrower shall pay consecutive monthly Installments of principal and Interest, as follows: $4,720.96 commenc!ng on December 1, 2014, and the same amount (except the last installment which shall be the unpaid balance) on the 1st day of each month thereafter. The aggregate prfnclpal balance outstanding shall Initially bear Interest thereon at a fixed rate equal to Seven and Ninety-Nine Hundredths Percent (7,990%) per annum. The Interest rate on the aggregate principal balance shall change on November 1, 2017 (the "Special Change Date'? to a fixed rate equal to Four Percent (4.00%) above the Wall Street Journal Prime Rate (as hereinafter defined) as of 30 days prior to such Special Change Date, except that in no case shall the Interest rate on the Special Change Date be greater than Two Percent (2%) above the Initial rate. The Interest rate on the aggregate principal balance shall change again on May 1, 201 B and on the 1st day of each month every sixth month thereafter (each a "Change Date'? to a fixed rate equal to Four Percent (4.00%) above the Wall Street Journal Prime Rate as of 30 days prior to such Change Date. On the Speclal Change Date and each Change Date each monthly Installment due and payable until the next Change Date shall be recalculated (Increased or reduced) to reflect the adjusted Interest rate, the outstanding principal balance at such time and the remaining term of the 360 month amortization period commencing on the date of this Note In accordance with the Lendel's calculation in the Lendel's sole discretion. The calculation of the payment amount Is based on a 360 month amortization period. Notwithstanding anything to the contrary In this Note, the interest rate on this Note Is llmlted by a floor and a celling as follows: (I) the maximum Interest rate (I.e. ceiling) Is 13.990% per annum and (II) the minimum interest rate (I.e. floor) is 7.990% per annum. In addition, on each Change Date the Interest rate on this Note shall be changed (Increased or reduced) by no more than 1% per annum, Wall Street Journal Prime Rate means the rate published from time to time by the Wall Street Joumal as the Prfme Rate on corporate loans posted by at least 70% of the 10 largest U.S. banks, or, In the event the Wall Street Journal ceases publication of the Prime Rate, the base, reference or other rate then designated by the Lender, In its sole discretion, for general commercial loan reference purposes, it being understood that such rate Is a reference rate, not necessarily the lowest, established from t!me to time, which serves as the basis upon which effective Interest rates are calcula1ed for loans making reference thereto. The effective interest rate applicable to the Borrower's loans evidenced hereby shall be rounded to the nearest One-Eighth Peroent (.125%). Principal and Interest shall be payable at the Lendel's main office or at such other place as the Lender may designate In writing In immediately available funds In lawful money of the United States of America without set-off, deduction or counterdalm. Interest shall be calculated monthly on the basis of a 360-day year based on twelve (12) thirty (30) day months except that interest due and payable for a period of less than a full month shall be calculated by multiplying the actual number of days elapsed In such period by a dally rate based on said 360-day year.

HAGE - 004176

7t 1

Ex 769

Borrower:

1125 Savoy Street San Diego, California 92107-3914

7 Promissory Notes(2)

Ex 769

Ci' 2014 Medld, a division of Wolters Kluwer Financial Services

EXHIBIT 9

MEG OFT 000725 ....

·-·--·--·-··-

-·---·--'

.....

----··-

0~ .Ll81HX3

3.110121>18

Subject: Fwd: cash-out Letters for Kansas From:

Nilda Meg (nildameg@yahoo.ccm)

To;

MJWarfel,LaserJet@hpeprfnt.com;

Date:

Wednesday, Maroh 9, 2016 9:13 PM

Sent ftom my iPhone Begin forwarded message: From: Target <t@metmortpge@yahoo.com> Date: February 22, 2016 at 9:00:58 PM PST To: N"tlda Meg <njldamcg@yahoo.com> Subject: Fwd: Cash-out Letters for Kansas

Sent from my iPad Begin forwarded message:

From: "Scody Hage" <scody.hage@cox.net> Date: September 22, 2014 at 2: 16: 18 PM PDT To: 11Nilda Meg" <targetmortgage@3ahoo.com> Subject: Cash-out Letters for Kansas

Nilda,

Attached are the letters requested today. I have also asked our attorney to prepare the changes in the LLC papers to comply with your request. I am hopeful that these letters will be available today, if not they should be here tomorrow. Next, I am trying to make an appointment to get together with my banker to take care of the additional payments being required to get this loan closed before the end of the month. I will keep you posted with the progress of those items still in progress.

Scody

Cell:

(619) 86S-8672

abau1:blan1c

Ex. 716 33 of 71

TRGT DFT 00095a

311012D16

Subject Fwd: Amendment to LLC Operating Agreement From:

Nilda Meg (nfldameg@yahoo.com)

To:

MJWarfel.LaserJet@hpeprint.com;

Date:

Wednesday, March 9, 2016 9:00 PM

Sent from my iPhone Begin forwarded message: From: Target <tamebnQrtsa,ie@Jrahoo.com> Date: February 22, 2016 at 9:01:20 PM PST To: Nilda Meg <nildameg@yahoo.com> Subject: Fwd: Amendment to LLC Operating Agreement

Sent from my iPad Begin forwarded message: From: "Scody Hage" <scody.ha,ge@cox.net> Date: September 23, 2014 at 8:23:01 AM PDT To: ''Nilda Meg" <tarptmortgage@yahoo.com> Subject: Amendment to LLC Operating Agreement Attached is the First Amendment to the LLC operating Agreement appointing Bonnie as co-manager. I will be sending documents to the State today for :filing and registration with the Secretary of State of California.

Scody

Cell:

(619) 865-8672

Phone: (619) 222-542S PAX:

(619) 865-8672

TRGT OFT 00098Q Ex. 716 34 of 71

Message From:

Sent:

To: Subject:

Nilda Meg [targetmortgage@yahoo.com] 9/22/2014 12:14:53 PM Scody.hage@cox.net; occloser@gmail.com Kansas

Entity Documents for SB 32nd street Apartments, LLC: a) amendment to the operating agreement to change section 5.1 from one manager to one or More Manager's b) provide a notice signed by all members where Bonnie Grace Hage was added as additional manager c) amendment to the articles of organization to change the management from "ALL MEMBERS" to More than one Manager - we just need a copy of the to be filed form and notice from them that they will file it...

Also need the same handwritten letter for cash out and typed letter for cash out the same one you did for the other properties.

HAGE-010243

Ex. 716 32 of 71

3'111r'2D16

Phone: (619) 222-5425

FAX:

(619) 86S-8672

Email: Scody.bage@cox.net

From: Target [Jnailto;targetmortgage@yahoo,cOJJil Sent: Wednesday, September 10, 2014 3:SS PM To: Scody.ha,ge@cox.net Subject: Fwd: SB 32ND STREET APARTMENTS LLC ( HAGE)

~~~~

Begin forwarded message:

From: Suzie Archuleta <suziea@designescrow.com> Date: September 10, 2014 at 2:41:03 PM PDT To: 'Tasha Riclnnond1 <tasha,targetmortp.ge@yahoo.com>, 'Nilda Meg'

l 'I

;

<tar,getmortgage@yahoo.com>

Subject: SB 32.ND STREET APARTMENTS LLC ( HAGE) Hi,

l ,\

Attached please find the demands. Is the borrower staying in the LLC? Ifs , please orward the Ope'8ling Agreement and LLCI. 'lbankyou

Sincerely,

Suzie Archuleta Design Escrow Inc 128 B. Huntington Dr Arcadia. CA 91006 626-44S-6137 626-445-1380 fax Please be advised that this private and confidential communication (and any .attacbmeo.t) is intended only for the addressee and may not be forwarded to any other party-without qiy express written consent. I am not an attorney, accountant or financial advisor and ther+fore : nothing contained herein shall be considered legal, tax or financial advice. :

I ~

-rkoTi Ex. 716 17 of 71

9F1i ooogas

3'10/2018

Subject: Fwd: conditions for loan

From:

Nnda Meg (nildameg@yahoo.com)

To:

MJWarfeJ.LaserJet@hpeprfnt.com;

Date:

Wednesday, March 9, 2016 9:32 PM

Sent from my iPhone Begin forwarded message:

From: Target <targebnortgage@yahoo.com> Date: February 22, 2016 at 8:57:12 PM PST To: Ntlda Meg <nildameg@yahoo.com> Subject: Fwd: conditions for loan

Sent from my iPad Begin forwarded message: From: "Scody Hage" <scody.hage@cox.net> Date: September 16, 2014 at 10:44:51 AM PDT To: "'Nilda Meg'" <targetmortga,ge@yahoo.com> Subject: RE: conditions for loan Nilda,

Attached is the package you sent me yesterday completed except for the "Certification of Trust by Trustees" and the "Certificate of Good Standing" from the State of California". My attorney Is working on both of the previously n:ientioned documents. I hope to have both documents today. The one that may not come that quickly, Is the Certificate of Good Standing, which may take an additional day or two.

The following Evidence of Insurance documents are as follows: 1.) 3510 Elllott Street's Is renewing on 10/01/2014 for another 12 months (a copy of the new policy Is attached with Invoice and I believe I forward~d the existing policy to you earlier ••• If you do not have It, let me know and I -!viii forward another copy to you.);

TRGT OFT 00089a Ex. 716 18 of 71

3110f2018

Subject Fwd: Department of Treasury Taxpayer EIN Letter for SB 32nd Street LLC

From:

NJlda Meg (nlldameg_@yahoo.com)

To:

MJWarfeU.aserJet@hpeprfnt.com;

Date:

Wednesday. March 9. 2016 9:12 PM

Sent from my iPhone Begin forwarded message: From: Target <tar,getmortgase@yahoo.com> Date: Fobrwuy 22, 2016 at 8:59:20 PM PST To: Nilda Meg <nildameg@yahoo.com> Subject: Fwd: Department of Treasury Taxpayer EIN Letter for SB 32nd Street LLC

Sent from my iPad Begin forwarded message:

From: 11Scody Hage" <,cody.ha,ge@cox,net> Date: September 18, 2014 at 10:37:47 PM PDT To: ''Nilda Meg" <tar.gettnortgage@yahoo.com> Subject: Department of Treasury Taxpayer EIN Letter for SB 32nd Street LLC

Nilda,

I believe the attached letter is what you were looking for from SB 32nd Street Apartments, LLC. Please let me know ifthis satisfies the final conditions for which you were requesting earlier today.

ScodyHage

Cell:

(619) 86S-8672

ab0utblank

Ex. 716 22 of 71

TRGT OFT 00096i

EXHIBIT 11

1 2

And then do you compare them when the loan

actually closes to make sure that it's in the ballpark? A

I don't look at it that closely, but I know that

those were not shown on the closing statements because of

the size of the checks.

6 7

The moneys to Osborn.

So is it fair to say that you didn't see any of the checks that you paid to Mr. Osborn on any of the Target closing statements?

No.

Okay.

Well --

I may be going a little fast.

I'm talking about

excluding that.

8 9

Right.

Which

I'm sorry.

Let

me slow down a little bit. So the loans were in close proximity.

16 17

why I'm asking them all together.

it one by one, we can do that.

No.

Okay.

That's

So if you want to do

We don't have to do that. So my question is did you expect to see

as expenses on any of the Target loans any of the moneys

you had paid to Osborn prior to that time?

MR. SAMOURIS:

Did you have an expectation at that time?

THE WITNESS:

California Deposition Reporters

Calls for speculation.

No. Page: 87

BY MR. WARFEL: Q

Were you surprised that none of the moneys you

had paid to Osborn were disclosed on the closing

statements for the Target Mortgages -- Target Mortgage

loans?

No.

Other than the money that you paid to

Mr. Osborne, were there any expenses that you can recall

that were disclosed on the final closing statement that

had not been previously disclosed when you first applied

for the loan

or before you accepted the loan?

Repeat the question, please.

Okay.

Yeah.

So what I'm trying to figure out is whether in

Here's what I'm trying to get at.

your opinion, based on your review of the document and

your experience, if the rate terms and expenses and costs

of the loans that you applied for with Target were

accurately disclosed -- accurately and fully disclosed by

Target in the paperwork they gave you prior to your

accepting the loan? (Mr. Williams exits the room)

MR. SAMOURIS:

23 24

speculation.

Ill

California Deposition Reporters

Objection.

Calls for

Page:88

1 2

BY MR. WARFEL: Q

And so I'm just asking for whether or not you

believe that there was some additional discrepancy, other

than the fact that the $300,000 you had paid to

Mr. Osborn weren't disclosed on there?

MR. SAMOURIS:

You can answer if you understand the question.

THE WITNESS:

Calls for speculation.

The expenses that were on the

closing statement were direct expenses that I would have

expected to have seen on the closing statement, yes.

BY MR. WARFEL:

Okay.

So I just wanted to clarify, your not --

and I believe -- just tell me if I'm wrong -- you're not

claiming that Target misrepresent those types of cost,

are you -- the normal costs?

MR. SAMOURIS:

You can answer if you understand.

THE WITNESS:

19 20 21

Calls for speculation.

Those were expected charges.

BY MR. WARFEL: Q

Okay.

And did you feel misled by Target as to

the charges and the costs?

No.

Did you understand what the fees would be that

you would be paying to Target if the loan were

accepted -- before you accepted the loan?

California Deposition Reporters

Page:89

Outside of the fees --

Out of anything to Mr. Osborn?

They appeared to be in line.

Okay.

Can you think of a way that Target

Mortgage could have possibly known that you were sending

cashier's checks to James Osborn's at his personal

residence made payable to him?

8 9

MR. SAMOURIS:

Argumentative.

Calls

for speculation. THE WITNESS:

10 11

Objection.

No.

BY MR. WARFEL: Q

Can you think of any way that Target could have

known about the personal checks that you began writing

after all the Target loans had closed to all of the

people at the bottom of page 1 and then continuing onto

two and three?

17 18

MR. SAMOURIS:

speculation.

Calls for

It's also argumentative.

THE WITNESS:

Same objections.

No.

MR. WARFEL: Q

When did you first become aware that your son

knew you were writing checks -- or had written checks to

James Osborn?

MR. SAMOURIS:

When did he first become aware

that his son became aware?

California Deposition Reporters

Page:90

EXHIBIT 12

these conversations without knowing what was going on

around me.

Well, these were not directed to you.

I'm just

asking -- I'm just using this as something to hopefully

refresh your recollection. Is there anything that would refresh your

6 7

recollection as to whether you pulled $50,000 out in

October 2014 from the Tennyson property refinance?

Okay.

Yes.

Because that $52,000 was

reimbursing me for costs of improvements on that property

that I had taken out of my personal checking.

So you increased the basis?

That's right.

property.

exchange, and I didn't want to pierce that veil of going

over what the costs were in that property.

And I was very careful on this

Because, again, this was the subject of 1031

Okay.

And the initial cost was improvements.

And so you wanted to get as much out as you

could at that time?

Yes.

Okay.

The next one --

MR. SAMOURIS:

And so --

Well, hold on.

That's not what

he said. MR. WARFEL:

California Deposition Reporters

He just said yes. Page: 137

MR. SAMOURIS:

I think he said that he wanted to

take out as much as he could, without piercing the veil.

He wanted to be really careful about doing that. MR. WARFEL:

4 5

That's right.

Well, up to that

point, he wanted to get as much out as -THE WITNESS:

And no more than what was invested

in the property as additional cost basis on the property.

BY MR. WARFEL:

Because that would affect your taxes on a

complex 1031 exchange

Yes.

Correct.

Exhibit 19 is an e-mail from you to Nilda Meg.

to later do it in the future?

(Exhibit 19 marked)

MR. CHO:

MR. WARFEL:

What's the dates? Dated January 13, 2016.

It's

Hage-11710 at the bottom. Can you review that please.

20 21

document.

BY MR. WARFEL:

Do you recall --

Wait a minute.

Thank

you.

Okay.

It's a two-page

I'm trying to figure out what

transaction we're in the midst of here in 2015.

California Deposition Reporters

Page: 138

EXHIBIT 13

Case

Hage V Got Mortgage Depos

Issue Code

FRAUD - PURPOSE

HAGE, JOHN 5/2/17 VOL 1 1

036:02 - 036:17

036:02 03

269,200,

do you see that?

Subtract --

Right.

And then, "minus 58,500," do you see

Yes.

So I'm guessing the 269,200 is the amount

04 05 06

that you gave to Jimmy, because earl- -- above the

page, I see the arrow to Jimmy. MR. SAMOURIS:

10:59:29

You mean gave to Jimmy or

planned to give to Jimmy.

BY MR. CHO:

Planned to give to Jimmy.

Yes.

Do you see that?

That's correct.

040:02

Well, let's -- let's lay the foundation.

10:59:36

What was the plan when you minus 269,200 with an

arrow to Jimmy?

Objection.

Lacks

THE WITNESS:

BY MR. CHO:

Okay.

To go to the reserve fund.

That's what you intended when you

wrote that, right?

11:04:11

That's correct.

Right below it, that amount that went

into the reserve fund, now you're subtracting

$58,500 from that.

15 16 17

Do you see that?

Yes.

That was intended to go to Jimmy or to

11:04:23

the reserve fund?

To the reserve fund.

So you're going to get it back, and then

20 21 22

Created with TranscriptPad for iPad

11:04:03

foundation, assumes facts not in evidence.

What was the purpose of that?

MR. SAMOURIS:

05 06

10:59:11

that?

040:02 - 041:17

Look a little bit lower from the same

page.

put it back in?

No.

11:04:30

That's additional money coming out of

the 200 -- that's -- that is coming out of the 269.2,

6/17/17

Page 6 of 72

additional money coming out, which leaves

210,000

041:01

about?

transactions that were -- that -- that we had talked

about.

to go into the reserve fund, and then an additional

58,500 that was going into the reserve fund. Q

Ultimately, yes.

Do you

That's the net that's going into the

044:01

11:05:26

Do you see -- you said that rebate and

reserves are synonymous, right?

Right?

Yes or no?

The way -- the way I look at this today,

So I think I'm understanding you, so I

want to make sure I understand you -- understanding

you correctly in that when i t -- when we're talking

about the cashout loan from Target Mortgage, the

proposed plan was that 269,200 was going to go to

Jimmy for the purposes of the reserve fund, true?

Correct, yes.

We're in agreement on that?

Yes.

045:09

You see the 269,200 in the page going

into the reserve account?

Yes.

Do you see that?

Yes.

And i t has an arrow to Jimmy.

And your

testimony is that that is for the purposes of

building up a reserve account?

That's correct.

098:02

Okay.

11:09:15

11:10:25

11:10:31

Now, one of these documents, you

testified to that you were going to give a certain

amount of money to Osborne after he

loan brokered from Velocity Commercial Capital by

Created with TranscriptPad for iPad

11:05:44

yes.

098:02 - 098: 16

That's --

reserve fund.

Do you see where it says?

11:04:59

But then you see how it has 210,700 goes

back to Scody?

045:09 - 045:17

There was a 269,200 that was going to Jimmy

11:04:47

There were

Going into the reserve fund.

two trans- -- two -- obviously, two different

044:01 - 044:09

What additional money are you talking

a net 210,700 that stays with me.

6/17/17

you got a 12:29:45

Page 7 of 72

Nilda Meg.

I don't.

Do you recall making an agreement with

Mr. Osborne that's reflected in these notes that

1.0

you were going to give him several hundred thousand

1.1.

dollars after you got the proceeds of a loan

1.2

brokered by Nilda Meg?

1.3

MR. SAMOURIS:

099:02 - 100:23

Objection.

foundation, assumes facts not in evidence,

1.5

argumentative.

099:02 03 04

12:30:16

THE WITNESS: Q

THE VIDEOGRAPHER:

MR. SAMOURIS: MR. WARFEL:

09 1.0

We're down to five

minutes left.

No.

Please look at Hage 15984.

15984?

12:30:41

Yes, sir.

BY MR. WARFEL: Q

Does that document accurately reflect a

conversation that you had with James Osborne?

Four years later being able to testify how

1.1.

accurate this is, my recollection,

1.2

They're numbers that I wrote down on a piece of paper

1.3

in a conversation I had with him.

1.4

BY MR. WARFEL:

1.5 1.6 1. 7 1.8

1.9

And did you have that conversation on

That's what the notes say.

I'm asking you if you had the

conversation on October 3rd at 8:40? A

That's what these notes say.

I know that.

notes say.

I can too.

Right.

So why -- can you answer my

question, please?

12:31:30

1.00:01.

What's the question?

The question is:

Did you make these

notes on October 3rd at -- 201.4 at 8:40 a.m. in the

morning?

Yes.

And i t says, "Total cashout from Nilda on

Created with TranscriptPad for iPad

12:31:20

I'm not asking what the

I can read the notes.

12:31:12

October 3rd at 8:40 a.m. --

21.

12:30:59

I -- I don't know.

12:30:00

Lacks

1.4

1.6

Do you recall that document?

12:31:44

10/12/2014," does i t not?

6/17/17

Page 8 of 72

EXHIBIT 14

-ft·,

'· 1

2 3 4

JUL

-a 2017

By: J, CERDA

6 7 8

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SAN DIEGO

11 12 13

JOHN SCOFIELD HAGE and BONNIE GRACE HAGE, individually and as TRUSTEES OF THE J. SCOFIELD AND BONNIE GRACE HAGE FAMILY TRUST and Co-Managers of SD 32 10 STREET APARTMENTS, LLC, a California limited liability company,

Plaintiffs,

16 17 18 19 20 21

Case No. 37-2016-00003885-CU-FR-CTL

STATEMENT OF DECISION Hon. Joel R. Wohlfeil Dept. 73

GOTMORTGAGE.COM, a California corporation; JAMES M. OSBORN, JR.; TARGET MORTGAGE INC., a California corporation; ANDREA HAEWON PARK; THOMAS IPING LO; and NILDAANNMARIEMEG, Defendants. AND ALL RELATED CROSS-ACTIONS.

22 23

24 25 26 27 28

This case came on regularly for trial on June 5, 7, 8, 12 - 15, 19, 20 and 29, 2017 before the Honorable Joel R. Wohlfeil, Judge presiding. Plaintiffs and Cross-Defendants John Hage, Bonnie Hage, both individually and as Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD 32nd Street Apartments, LLC ("Plaintiffs") were represented by Phillip C. Samouris and Rabil Swigart of HIGGS FLETCHER & MACK LLP; Defendants and CrossComplainants Target Mortgage, Inc. and Nilda Meg ("Defendants") were represented by Mark J.

STATEMENT OF DECISION

Warfel and Desiree Meguerditchian of LAW OFFICES OF MARK J. WARFEL. The Court, after

hearing testimony of witnesses (James Osborn, Thelma Herrera, Ocie Smith, Nilda Ann Marie

Meg, Joffrey Long, Richard Holstrom, John Scofield Hage, Bonnie Grace Hage, Alexis Olstensen,

Lydia Ortega, Richard Davidson, Henry Park, William Burch, David Bilandzija and LaTasha

Richmond), receiving exhibits into evidence (Exhibits "l, 2, 6, 8, 9, 13, 6, 27, 61, 93 -97, 101,

6Âˇ

102,105,108,111,126,133,166,178,179,182,193,196,198,202,203,207,208,225,227,228,

231,232,237,240,242,245,248, 250-252, 254,255,257,263 -271, 284-287, 327, 329-331,

339, 347, 348, 354- 357, 360, 701, 704- 707, 711, 713, 715, 716, 719, 723 - 730, 732, 733, 736,

739, 740, 742, 745, 747, 749, 750, 753, 755 (pages 2 -11, 20, 44- 46, 53, 54, 66, 70, 154 and 282

only), 756 (pages 3 - 7 and 27 only), 757 (pages 2, 6 - 10, 23, 27 and SO - 52 only), 764, 767 -

769, "), hearing arguments of counsel, reading Plaintiffs and Defendants' respective briefs and

motions, and good cause appearing therefore, hereby issues this Statement of Decision ("SOD").

Introduction

This case starts with Plaintiffs Scody and Bonnie Hage, a couple in their 70's, whose lives

appear to have been characterized by devotion, service and community. Zealous advocacy has

spotlighted their aging, capacity to deliberate and, at times, exercise of unreasonable judgment; the

latter of which has been, from the Court's perspective, difficult to divine plausible economic

motivation.

Defendant Nilda Meg is a mature person, with astute business skills, who prides herself in

the endurance of her referral network, the fuel for her 30-year old real estate brokerage company,

Defendant Target Mortgage, Inc.

The bridge between Plaintiffs and Defendants was Defendant Jam.es (aka "Jimmy") Osborn,

a convicted felon, with no moral compass, whose only objective was to prey on vulnerable people

of means. The inevitable result of Osborn's felonious manipulation was two-fold: I) to

compromise the fidelity of his brokers, like Defendants, for honesty and good faith; and 2) to leave

his victims, like Plaintiffs, less prosperous if not approaching destitution.

27 28 -2STATEMENT OF DECISION

The ultimate question is whether Defendants engaged in conduct to enable Osborn to

accomplish his felonious scheme to harm Plaintiffs. The answer is "Yes;" however, the much

harder question is to quantify the hann caused by Defendants' conduct.

Operative Pleadings

On February 4, 2016, Plaintiffs filed a Complaint for claims of breach of fiduciary duty,

violation of Civil Code 2923 .1, negligence, elder abuse, violation of Business & Professions Code

17200 and fraud against Defendants. ROA # 1.

8 9 10 11 12 13 14 15

On July 1, 2016, Plaintiffs filed a Cross-Complaint for claims of fraud, promissory estoppel, breach of fiduciary duty and breach of written contract against Defendants. ROA# 55. On June 1, 2016, Defendants filed Answers to Plaintiffs' Complaint and asserted twentyfour (24) affirmative defenses. ROA# 45, 46. On August 22, 2016, Defendants filed their General Denials to Plaintiffs' Cross-Complaint and asserted four (4) affirmative defenses. ROA# 89, 90. On March 30, 2017, Plaintiffs dismissed all claims, except for negligence and breach of fiduciary duty, against Defendants. ROA# 291.

On February 23, 2017, Defendants filed their First Amended Cross-Complaint for claims of

breach of written contract (against both Plaintiffs JOHN SCOFIELD HAGE and BONNIE GRACE

HAGE) and negligence and equitable indemnity (against Plaintiff Bonnie Hage only). ROA #171.

At trial, the Court granted Defendants' Motion for leave to amend their Cross-Complaint to

conform to proof at trial, the effect of which was to name all Plaintiffs as Cross-Defendants to

Defendants' claims for negligence and equitable indemnity.

22 23 24 25

On July 1, 2016, Plaintiffs filed their Answer to Defendants' operative Cross-Complaint and asserted nineteen (19) affirmative defenses. ROA # 54. Joint Trial Readiness Conference {"TRC") Report/ Advance Trial Review Order (" ATRO")

In their TRC Report (ROA # 219), which was prepared and filed before Plaintiffs settled

their claims with Defendants Attorney for GOTMORTGAGE.COM, ANDREA HAEWON PARK,

HENRY PARK and THOMAS LO, the parties described the nature of this dispute as follows: -3STATEMENT OF DECISION

1 2

3 4

7 8 9

10 11 12 13 14 15 16 17 18

19 20 21 22 23 24 25 26

"Plaintiffs John and Bonnie Hage were clients of Defendants Gotmortgage.com, Inc. and Target Mortgage, Inc., mortgage brokers. Gotmortgage is owned and managed by Defendants Henry and Andrea Park in Fountain Valley, Orange County, California. Defendant James Osborn was a 'Sr. Account Executive' and a 'VicePresident of Sales and Marketing' at GotMortgage. Defendant Thomas Lo was the designated broker of record for Gotmortgage. Defendant Target Mortgage is owned and managed by Defendant Nilda Meg, its designated broker of record, in Arcadia, California. While working as a mortgage salesman in Orange County between 2003 and 2007, James Osborn stole more than $550,000 from people who were seeking to refinance their homes. Osborn was convicted of 76 felony counts of grand theft in 2008 for which he was sentenced to serve 10 years in prison. Osborn was released from prison in 2011 and was hired by GotMortgage in late 2011. Plaintiffs, who were over the age of 65, procured numerous mortgage loans through Gotmortgage and Target Mortgage. James Osborn dealt with Plaintiffs on these loans. Plaintiffs allege that Osborn, through undue influence, induced Plaintiffs to obtain numerous mortgage loans that were :financially detrimental to Plaintiffs and to pay more than $650,000 to Osborn to refinance their mortgage loans. Osborn has pied guilty to numerous felony counts of "theft from an elder" based on his treatment of Plaintiffs and is in jail and awaiting sentencing. Plaintiffs contend that Gotmortgage breached its fiduciary duty to Plaintiffs by negligently hiring and failing to properly supervise James Osborn. Plaintiffs :further allege that Defendants Gotmortgage and Target Mortgage breached their fiduciary duties to Plaintiffs by improperly arranging mortgage loans that were financially detrimental to Plaintiffs. Plaintiffs :further allege that all Defendants acted negligently and caused Plaintiffs to incur serious financial losses. Finally, Plaintiffs allege that the conduct of Defendants Osborn, GotMortgage, Henry Park and Andrea Park constitutes elder abuse. Defendants deny Plaintiffs' claims and allege that Defendants acted reasonably. Target Mortgage contends that Plaintiffs breached a real estate listing agreement and seeks monetary damages from Plaintiffs. Plaintiffs deny Target Mortgage's claim and allege that the listing agreement was rescinded and unenforceable."

27 28 -4STATEMENT OF DECISION

1 2

Plaintiffs and Defendants identified the legal issues in dispute as follows: "Liability. Causation. Damages."

After the parties filed the TRC Report, the Court entered the ATRO (ROA# 218).

Non-Jury Trial

Plaintiffs agreed to waive their right to a jury trial. Defendants failed to deposit jury fees

and waived their right to a jury trial. ROA # 368.

Witnesses and Exhibits at Trial

James Osborn, Thelma Herrera, Ocie Smith, Nilda Meg, John Hage, Bonnie Hage, Alexis

Olstensen, Lydia Ortega, Richard Davidson, Henry park, David Bilandzija and LaTasha Richmond

testified to their recollection of events which took place years ago. The recollection of these

witnesses have been influenced by his or her bias, prejudice or personal stake in how this case is

decided. If for no reason other than the passage of time, the Court questions the capacity of these

witnesses to accurately recollect and communicate his or her perception of the events. They have

"testified untruthfully about some things but told the truth about others" and, accordingly, the Court

has accepted the part it perceives to be true and has ignored the rest. CACI 107,211,212.

16 17

James Osborn through his depositions taken on February 21, March 1, March 6 and March 9, 2017 and trial testimony taken on March 20 and 21, 2017:

He is currently incarcerated in County Jail as a result of multiple felony convictions

involving Plaintiff Scody Hage while he worked at Gotmortgage.com between 2013 and 2015. He

was convicted of felonies for work as a mortgage salesperson in 2003. He has never been a real

estate licensed person in the State of California. He described his fraud of Steve Ryancarz, a

sophisticated business person in Ohio, while at Homeloanadvisors. He also worked at Avrick

Financial and Worldwide Savers in Orange County. He previously pied guilty to 76 felony counts.

He served nearly 5 years in state prison. He was released from prison on August 19, 2011. He

reported to his parole officers, Agents Ruiz and Witzel. He worked at Gotmortgage.com from

December 2011 to November 2015. He described his duties in return for which he was paid wages

and commissions. His supervisors included Thelma Herrera and OC Smith. He disclosed his

felony history to Smith. He disclosed his felony convictions to Henry Park. He saw them with an

-5STATEMENT OF DECISION

article of him in the Orange County Register "Portrait of a Scam Artist." Kim Williams was

Smith's administrative assistant. Smith was director ofGotmortgage.com's finance. He saw that

Andrea Park observed his conversation with Smith and Henry Park. His superiors also included

Larry Evans and Mike Daniels. Herrera also had a criminal background. He told Smith that he has

never been licensed. His duties included cold calling brokers, one of whom was Nilda Meg. He

considered Meg to be a "beautiful princess." He told Meg of his criminal background over dinner

at Meg's house. He estimated that the dinner meeting with Meg took place around a year after he

started with Gotmortgage.com. He recognized his July 25, 2012 email exchange with Meg (in

which he identified himself as VP of Sales & Marketing at Gotmortgage.com). He solicited

mortgage broker from the beginning at Gotmortgage.com. Gotmortgage.com's management

allowed him "to run in sales." Thomas Lo was his broker. When in his "sales mode," he was "like

a tiger in a cage." Lo worked closely with him to develop a pre-approval letter for Hage. He

reviewed Hage' s August 2, 2013 financial statement. He considered himself a "mortgage

professional" and recognized the opportunity in Hage's free and clear properties ... "it's cha-ching,

equity, money. There is money there." He recognized his July 10, 2013 email exchange in which

he described his "business friendship" with Hage. He was paid a commission from the refinancing

ofHage's Tennyson property. His agreement with Gotmortgage.com was that he be paid 50% of

the broker fees "on every Hage deal." His practice is to sell the highest, maximum rate to the

borrowers. He was paid a commission from the refinancing ofHage's Kansas property. He spoke

to Hage at least once a day. He developed a relationship with Hage in which he believed Hage

trusted him. Augue Quintero was a secondary marketing manager at Gotmortgage.com. He and

Hage openly discussed their faith and prayed together. Kathey Kemp was a broker on the sale of

Rage's Savoy home. Jackie Heydari was Gotmortgage.com's underwriter. He repeatedly told

Hage that the interest only loan on the Savoy property could be refinanced with a two percent thirty

year fixed loan. He told Hage "lies and deception" to persuade Hage to give him "cash payments."

He considered Hage to be accommodating, cordial, non-argumentative and trusted him. He

represented that, in return for the payments, the Hages would receive a two percent, thirty year

fixed loan and all of his properties would be paid off. He did all of the Hages' loans through -6STATEMENT OF DECISION

Gotmortgage.com and Target Mortgage. He characterized the short term loans "as a deceptive

bridge ... to get to the end of the rainbow." In February 2014, he told Hage that he was a convicted

felon. He told Hage he has made mistakes in the past, he has paid for his mistakes which is why he

is still in the "mortgage business." In March 2014, he persuaded Hage to refinance the Elliot street

property. He assured Hage that he would "end up with a 1.85 percent, 30 year fixed with a

payment of only $2,000 per month, all properties paid off." He orchestrated Hage's last three loans

to "Alternative B, Target Mortgage." In October 2014, Hage told him about Hage's meeting with

representatives of US Bank. US Bank told Hage to be careful with Osborn. He wanted to distance

Hage from US Bank. Hage said US Bank would no longer allow Hage to draw cashier's checks

payable to him. He helped Hage close three loans with Target Mortgage in October 2014. Meg

encouraged him to bring Target Mortgage loans, and agreed to pay him commissions. He helped

Target Mortgage generate about $70,000. He made about $50,000 from loans with Target

Mortgage. His SOP with Meg was to send her the criteria of the loans and she would approve, or

not, the deal. Meg never told him not to send her any deals. He heard Meg say that Hage would be

in a "financial mess" or "a nightmare." After he was arrested, the DA's office took possession of

his cell phone. He authenticated the accuracy of the transcript of his cell phone's text messages.

Exh. "330." He identified Hage's cell phone number as 619-865-8672. Counsel stipulated that

Osborn was arrested in early November 2015. Seneca was a collection company which contacted

Hage in November 2015 with the Elliot loan. Hage texted him about the status of the PNC loan

documents. Hage said he and Bonnie were "suffering from declining health throughout this

process." Hage said he was upset ("blood boil") because Alliance threatened to serve a NOD.

Hage was beginning to get a barrage of collection calls. He told Hage he was working on Hage's

credit rating with B of A. Hage said that no one at Seneca or Alliance was aware a payoff was in

process. Hage expected the Seneca collection to be paid off with PNC loan. His reference to Bank

of America was a stall tactic, a lie. Hage believed he was working on a PNC loan until he was

arrested. In September 2015, Meg emailed Hage a loan application (Fannie Mae Form 1003). He

recognized Meg's cell phone to be 626-484-8884. Meg texted him to say she needed Rage's

updated social security award letter and pension. He told Hage that a fictitious person by the name

-7STATEMENT OF DECISION

of Steve Forsyth from PNC was working with Seneca. In October 2015, Hage demanded the return

of his funds and ''the house of cards for the last three years crumbled." He and Hage were not

involved in money laundering. Hage followed his recommendations based on his false promises.

Meg confirmed her intention to squeeze as much out of the loans with Hage to the max. He asked

Meg to help the Hages sell their Kansas Street property. Meg sent Hage a listing agreement to sell

the Kansas Street property. He and Meg considered themselves to be a part of the same team. Meg

confirmed her expectation that Hage would have "financial difficulties with these loans." Meg

knew from day one of their relationship that he was a convicted felon. As a salesman, he

embellished to the max. Meg always honored her agreement to pay him. He told Meg that he was

in direct contact with Hage to advise him as the client. He described his use of the $650,000 he

took from the Hages. He gave the Parks $100,000 from the funds he took from the Hages. He did

not tell Meg that he took money from the Hages. Hage never lied to him. Hage never asked him to

break the law. He persuaded Hage to pull out an additional $100,000 from a refinance of the

Kansas Street property. Hage then paid him $63,412 from the Kansas Street refinance. He

considered the $63,412 "my Hail Mary of all time." He told Hage he would deposit the $63,412

into a reserve account. He received a $1,500 commission from American Warehouse Lenders

which Henry Park said he created to "protect himself." He could not have arranged the loans for

the Hages without "a broker to work for." In October 2014, he persuaded Hage to take out three

more loans. On November 3, 2015, he was arrested. The three loans, which were arranged through

Target Mortgage, were on the Elliott, Kansas and Tennyson properties. Hage was under severe

pressure which included, but was not limited to, caring for his spouse. Hage did not forget things.

Meg consistently encouraged him to bring her business. His agreement with Meg was to pay him

45% of each deal. Meg encouraged him to solicit loans on her behalf. Meg paid him eight

commission checks and once in cash. He authenticated the commission checks Meg paid him. He

did not perform any clerical work for Target Mortgage. He did not work as a clerk. Meg told him

that "we were both money-driven people." Meg is "all about money." He did not want Meg to

probe Hage and be "overly honest." Meg never turned him down on a request for a commission.

He never heard Hage say he needed the money from the loans. He did not agree to be Rage's -8STATEMENT OF DECISION

employee. He did not try to inflate Rage's qualifications to borrow money. He asked for a Form

W-9 from Hage to protect himself ("cover my ass"). Meg insisted that he complete a Form W-9

with Target Mortgage. He has never paid truces to the IRS. He proposed to pay Hage a rebate of

$100,000 to persuade him to sign documents. He misled Hage the entire time ... down the line.

Exh.'s "9, 13, 26, 27, 61, 93 -97, 101, 102, 108, 126, 133,193,207,208,271,329, 330." He

started his "crimes" with Hage "the very day I first spoke" to Hage. He served nearly 5 years in

prison for his prior felony convictions. He discussed his felony convictions with Hage. He

considered Hage to be an intelligent person. He assured Hage he had "learned his lesson." He has

been convicted of 76 counts of grand theft. He corrected his testimony that he was charged with 76

counts of grand larceny but only convicted of one felony, involving 16 persons. He met with

Samouris three times in jail. He considered himself to be "mortgage buddies" with Meg. He

considered Meg to be "a very intelligent, successful business person" and not to be "a criminal."

He reviewed the rough drafts of his prior depositions. He considered the connection of the "victim

impact report" on his sentence. He believes he can return to work with Orange County brokers and

"can start immediately sending the Hages money that I owe them that I took from them." He

agreed to a sentencing range of 6 to 11 years in prison. He has not made any deals with the Hages.

He talked to Samouris because he understood he "had to cooperate." He did not tell Meg he took

money from the Hages. He elicited a promise from Hage that Hage would not contact Meg about

the money the Hages were giving to him. He told Hage that the PNC loan would be lost (or

"killed") if Hage contacted Meg about the money Hage was giving to him. He wanted Hage to

keep "secret" the money Hage was giving to him. Meg was paid $70,000 and he was paid $50,000

from the three loans which Target Mortgage brokered in October 2014. He lost money in a start-up

company known as Taco Ninja, the source of which was money he misappropriated from Hage. He

Âˇ 24

repaid loans from the Parks with cash he had stolen from the Hages. He repaid loans fr~m Lo with

cash he had stolen from the Hages. He mixed the amounts he sought from Hage to avoid Hage

from becoming suspicious that the amounts were too rounded and that, instead, the amounts "made

more sense." He brought the Hages to Gotmortgage as his clients, "a retail deal," "a jumbo." He

accurately estimated there to be "a lot of phone calls" on his cell with Hage. Meg told him she had -9STATEMENT OF DECISION

a good reputation as "an extremely good loan person." Meg "knows exactly what she's doing and

she's a professional." He never stepped foot inside Target Mortgage's office. He described his

limited social contact with Meg. He texted and emailed Meg. On November 3, 2015, he was

arrested. Meg said she did not think he had any idea what he was doing. Meg had dinner with him

at his house. Meg submitted two or three loans to him at Gotmortgage. Meg used other

representatives at Gotmortgage. He discussed with Meg that the two of them were Catholics. He

understood the notation "Outside Services" on one of Meg's checks to him to mean "Outside sales

rep." He described the "concern" Hage communicated to him from his associates at US Bank about

the checks Hage was giving to him. US Bank characterized the checks Hage was giving to him as

"a red flag." Hage sent him a $250,000 cashier's check which he FedEx'ed back to Hage out of

concern of "getting arrested." US Bank, out of concern for Hage, asked Hage why he was giving so

much money to Osborn. He told Hage that Hage must have "misunderstood what I said" and

returned the two large cashier's checks of $150,000 each to Hage. He told "Scody, we had a

miscommunication" and he returned the cashier's checks to Hage. Hage sent him the large

cashier's checks after the Tennyson, Kansas and Elliott loans in October 2014. Hage told US Bank

that Hage had "a close relationship ... business relationship" with him. He is "computer illiterate."

Augie Quintero is a secondary marketing manager for Gotmortgage. He did not understand ''the

nuts and bolts of the actual loans." He did not know that SFD means "single family dwelling."

Jackie Heydari was an underwriter at Gotmortgage. Meg made clear she would give him an answer

on a potential deal right away and not "waste her time." He did not know how to read a rate sheet.

He did "sales" and the brokers "loved" his enthusiasm. He did not understand the Frank Dodd Act.

Once he "had a deal," he would turn the processing over to the brokers. He did not know how to

complete the loan applications. He kept the loans moving by eliciting missing information from the

applicants. He described his understanding of hard money loans. He emphasized that, when he

talked to Hage about specific terms, he would refer Hage to "the good faith estimate, full

disclosure." He kept telling Hage that Hage would get a "two percent from PNC bank, 30-year

fixed, $2,000 a month payment." He did not understand a 1031 exchange. The loan applications

were completed by obtaining the information from the clients over the phone, then provided to the -10STATEMENT OF DECISION

broker's underwriter. He considered Target Mortgage to be one of the "shops" in the broker

business. He was not aware of Target Mortgage's loan products. He started a business with Lo

called Centurion Alliance Recovery. He was unable to arrange the last three loans through

Gotmortgage in October 2014, so he arranged the loan through Target Mortgage. Ricardo

Talamentes is a loan officer at Gotmortgage. Hage never told him he needed the money from the

loans. Jim Perry refused to work with Osborn. None of the Hages' properties were in foreclosure

in October 2015. By October 2015, he was "desperate" and believed he was running out of time.

He relied on a friend's advice to send Hage a Form W-9, a form he understood "has something to

do with income taxes," the purpose of which was "to cover myself." He has never reported the

income he stole from the Hages. He has never filed tax returns. He developed a "rapport" with

Hage. He believed he had Rage's ''trust ... after the first loan." He described the purpose of the

payments Hage made to him starting with the first payment in August 2013 to include handling

fees, "getting his credit up into the 800's and ... part of the cost" of getting him all loans paid off ...

and all of his current mortgages paid off." Gotmortgage fired Larry Evans for selling loans to a

competitor. Hage insisted on doing "everything by the book." He engaged in "a lot of risk taking

in deceptive sales tactics." In 2014, Hage was under heavy "stress" with lots of "sleepless nights."

He did about 15 loans other than Gotmortgage and Target Mortgage but whose memory of the

identity of the brokers was suspiciously vague (although one was Richard at All American Funding

in Riverside County). He estimated that 90% of his and Rage's calls or texts were on their cell

phones. In the beginning, Hage said he preferred to give Hage a personal check and was not

comfortable with giving him a cashier's check. He was not present when the Hages signed their

loan documents with Meg. Meg said she would arrange for the Hages to sign the loan documents.

He acknowledged that his "crimes are my dark side." He encouraged Hage to contact him once he

got the GFE from Meg. He dissuaded Hage from any objections he had to the terms in the GFE.

Hage asked him about how to identify the "cash out" on the loan applications. He discouraged

Hage from mentioning the PNC loan. He told Hage that Hage would be paid approximately 60% of

the payments made to him as a "rebate" from the PNC loan. He described the purpose of the

"reserve account." He proposed to arrange a "jumbo loan" for Hage. He considered Hage to be -11STATEMENT OF DECISION

"an A+ credit" client. He considered Hage to have "a good memory." He agreed that Target

Mortgage would know about a PNC loan for the Hages which was brokered by Target Mortgage.

He described his explanation of the "Portrait of a Scam Artist" article to Hage. His only

explanation for sending Hage a Form W-9 was to protect himself but he was unable to explain how

a W-9 would protect him. He admitted to stealing money from Hage between August 1, 2013 and

October 2015. Hage said he "tells his wife everything that he has a good marriage." He said that

"it was causing (Bonnie) a great deal of stress." He identified the Form W-9 he got from Target

Mortgage. He initiated allÂˇofthe loans he arranged for the Hages. He testified as an integral

witness in a homicide case as a result of information he acquired while in custody at Bailey. He

agreed to swap information with the DA's office in return for consideration at his sentencing in this

case. After he was arrested, the police confiscated his phone and downloaded all of his incoming,

outgoing and missed calls. In 2004, Osborn was ordered to "cease and desist" from any mortgage

activities. He made sales presentations to Hage, which were motivated by Hage's financial

condition. He was not licensed to act as a real estate agent or broker. He was employed with

Gotmortgage until he was arrested in November 2015. He participated in all of Gotmortgage' s

employee activities and considered himself to be an executive. He worked regular hours at

Gotmortgage. He described the nature of Centurion Alliance's business with Lo. He was identified

as a director and officer with Centurion. He never paid the IRS any taxes. He described his recall

of the terms of his plea agreement which includes consideration of a positive impact statement from

Hage. The potential impact on his sentence appears to be a bias to influence his testimony in favor

of the Hages. He turned to Meg when Gotmortgage would not do any more loans with the Hages.

Counsel for the parties have met with him in jail.

Thelma Herrera:

Thelma Herrera worked as an account executive at Gotmortgage.com from 2009 to

February 2013. She interviewed with QC Smith and met Henry Park. She was uncomfortable with

Smith. Smith was very strict. She worked with Osborn, both of whom reported to Smith. She and

Osborn moved to the main corporate office. Osborn became her team leader. Osborn told her he

28 -12STATEMENT OF DECISION

was a convicted felon. Sh_e helped Osborn write an email to Osborn's parole agent. Exh. "8." She

spoke to Phillip Samouris after her deposition. Samouris scared her.

Ocie Smith through his deposition taken on February 28, 2017:

Ocie Smith is an entrepreneur and, formerly, worked at Gotmortgage.com. He worked at

Gotmortgage.com from 2008 to late 2013. He was senior director of finance at Gotm.ortgage.com.

He described his duties as director of fmance. He was licensed in real estate in California, though

he appeared to change his testimony to say he was not licensed. Before Gotmortgage.com, he

worked as an information analyst. He expressed impatience at being asked questions about his life.

He interviewed Jimmy Osborn for a telemarketer' s position. Osborn said he had been arrested and

he had cleaned up his life. His boss was Henry Park. Osborn "dazzled" him by auditioning on the

telephone. Osborn said he had a probation officer. He spoke to Osborn's probation officer on the

telephone. He hired Osborn to meet and introduce brokers to Gotmortgage.com. He told Osborn to

act as a cheerleader only. Osborn was not "vice president of anything." Thelma Herrera worked as

a telemarketer. He did not send anything to Agent Witzel. He became increasingly intolerant and

less credible as his examination unfolded. He did not have any knowledge that Osborn's past had

"anything to do with this." He considered Osborn's method as "very aggressive." Thomas Lo was

Gotmortgage.com's broker. Exh. 's "6, 203."

Nilda Ann Marie Meg:

Nilda Ann Marie Meg is the sole owner and broker for Target Mortgage. In March 2012,

Target Mortgage entered into a broker agreement with Gotmortgage.com. She met Jimmy Osborn

in or about March 2012. Osborn became Target Mortgage's account executive. She developed a

social relationship with Osborn. Osborn called her Princess Nilda. They talked while Osborn went

on his nightly walks. As of July 2012, she did not want Osborn to be "my account rep." Osborn

told her that Gotmortgage.com needed underwriters and she submitted an application as an

underwriter. Gotmortgage.com offered her a job but she declined. At that time, business was slow

at Target Mortgage. Osborn visited her at her home on two occasions. Osborn spent the night at

her home. Osborn did not tell her about his past legal problems. Osborn told her that he had had

"problems with the subprime market." She did not check Osborn's background. Her denial of -13STATEMENT OF DECISION

Osborn's legal background was not credible. She did not discuss with Osborn his previous

employment or experience. She never asked Osborn for references. Osborn is the only account rep

she has loaned $16,000 to. She never knew whether Osborn had a real estate license. Osborn

introduced the Hages to her. She would not have met the Hages but for Osborn. She denied that, in

July 2013, Osborn referred Hage to her for a loan on the Savoy property. She authorized Mark

Warful, as her attorney, to send Exh. "285" to Samouris. She did a second review of whether the

Hages qualified for a loan to purchase the Savoy property. She agreed with Gotmortgage.com that

the Hages did not qualify for a purchase loan. She has reviewed Osborn's text messages in Exh.

"330." She denied that the three loans Target Mortgage arranged for the Hages in October 2014

were "hard money loans." She described the Hages as having "expensive tastes." She visited the

Hages at their home. She ran the Hages' credit. In 2014, she predicted that the Hages would

experience a financial "burden" from the loans she brokered for them. Osborn asked her to

evaluate three loans on separate properties for the Hages. She authenticated Exh. "225" as the

disclosure of her fiduciary duty to the Hages as her borrowers. She agreed that her duty was to

insure that the Hages could afford the loans and steer them away from loans they could not afford.

She knew that the sources of the Hages' income was social security, pension and rental income.

She authenticated Exh. "265" as the final settlement statement for the Elliott property loan. She

took the loan application and put the Hages and the lender together. She believed that the Hages'

Trust had the ability to repay the loan. She believed that the Hages' rental income was sufficient to

repay the loan. She believed that the Savoy house was under the Hages' individual names. She

denied that the Hages' Trust is treated as a "disregarded entity." The Hages received approximately

$494,000 from the Elliott property loan. Exh. "265." She was paid a commission of $16,795 from

the Elliott property loan. Exh. "266." She authenticated Exh. "228" as the Hages' Elliott property

loan application. The amount of the Elliott property loan was $644,000. The amount of the

monthly payment on the Elliott loan was $4,917. The Elliott property rental income was $3,672 per

month, net after payments. She believed that, after the loans, the Hages had net rental income of

$3,672. The net rental monthly income on all of the Hages' properties was $4,500. The rental

income on the Elliott property was $2,666 per month compared to a monthly payment of $4,917. -14STATEMENT OF DECISION

She denied that she owed the same duty on commercial property, like the Elliott property, as she

did to the Hages on their primary residence. Exh.'s "26,111,225,227,228,231,232,264,265,

266,267,269,270,285, 330." The Elliott loan was for the total amount of $644,000 with "cash

out" of$494,000. Her commission was $16,795. She authenticated Exh. "263" as the Elliott Street

loan application. The Kansas Street loan was for the total amount of $612,050 with "cash out" of

$159,350. Her commission was $18,886.25. The Kansas Street loan payment was $4,764 per

month. The total amount of the Tennyson Street loan was $577,500. The monthly loan payment

was $4,233. Her commission was $12,245. She completed the loan applications with the Hages by

way of email and telephone. The total monthly payments of the Hages after the loans, including the

Savoy property, was more than $21,000. The Hages' net annual income was approximately

$184,000, or approximately $15,000 per month. She authenticated Exh. "250" as her email to Davd

Bilandzija on the subject of his questions about the transaction. She authenticated Exh. "257" in

which she confirmed that Bonnie Hage was in the hospital. She authenticated her receipt ofExh.

"251" which confirmed the maximum amount of the Hages' loans. She received Osborn's October

2, 2014 text in which he said Hage wanted to "max cash out" of the loans. Exh. "330." She

responded affirmatively on the same day. Exh. "330." She authenticated Osborn's 2015 texts in

which he said the Hages want to refinance the loans once again. She texted that Hage was "going

to get in financial problems." Exh. "330." She agreed to "move on the loans." She was aware that

the Hages were "late on all" of the loans. At her deposition, she denied any discussions about the

20 .Hages with Osborn. Her testimony is inconsistent with the multiple texts she exchanged with 21

Osborn about the Hages. Exh. "330." She inconsistently testified about whether Osborn asked her

out on a date. She received more than $47,000 in commissions from the Hage loans. She

authenticated her preparation of a Form W-9 which she sent to Osborn, Osborn completed and

returned to her. On October 17, 2014, the same day as escrow closed on the Hages' loans, she

issued four checks to Osborn. Exh. "271." She denied that the checks were commission payments

to Osborn. She denied that Osborn acted as her agent. Her testimony on the character of the checks

was not credible. In discovery, she denied any agreements with Osborn existed, any business

relationship with Osborn existed and any commissions were paid to Osborn, and produced no -15STATEMENT OF DECISION

documents. In discovery, she identified only two payments she made to Osborn, the purpose of

which were loans to Osborn. In discovery, she produced the two checks in a supplemental

document production, both of which were in her files since 2014. Exh. "314." She printed a copy

of the two checks by going online with her account at Wells Fargo. Counsel stipulated that she

produced the two checks from her account at Wells Fargo which appears to be inconsistent with her

discovery responses that the source of the checks were her files. Counsel stipulated that Meg

produced the two checks to Plaintiffs in discovery in November 2016. At her deposition, she

testified that she made total payments of$16,000 as loans to Osborn. She testified that her loans to

Osborn were interest free and have not been re-paid. She acknowledged that it is illegal for her to

pay commissions to an unlicensed agent. She provided a listing agreement, at Osborn's request, to

the Hages. She authorized her lawyer to confirm to the Hages' counsel that the listing agreement

was cancelled and released. Exh. "287." The Hages' taxable income, after expenses, was

$185,0000. She authenticated Exh. "704" as a good faith estimate for the Tennyson loan. The

Tennyson loan had an adjustable interest rate and a prepayment penalty, both of which were

inconsistent with representations in Exh. 's "704 and 757." She admitted that the Hages' income

was a factor in making the loans. The Kansas and Elliott loans had an adjustable interest rate and a

prepayment penalty, both of which were inconsistent with representations in Exh.'s "755 and 756."

She is 62 years old. She has been in business for herself since 1988. 100% of her business is from

referrals. She has done no advertising. She initially sought to obtain better loans for the Hages

with a fixed interest rate and no prepayment penalty. The loans she ultimately obtained from

Velocity Commercial Capital included terms not disclosed on the good faith estimates. The lenders

are now responsible for making the disclosures to the borrowers. Latasha Richmond, her loan

processor, prepared the disclosures. She described the purpose of the good faith estimates to the

Hages. She denied that the Hages were locked into the terms of the good faith estimates. The

Hages reported adjusted gross income of$184,000. The adjusted gross income was arrived at after

the Hages had deducted the Schedule E expenses. The Hages' home mortgage was identified on

Schedule A. The source of the Hages' income included, but were not limited to, rental income.

The Kansas loan had an interest only payment provision with a balloon payment in 2016. The -16STATEMENT OF DECISION

refinance loan replaced the existing loan with a thirty year amortized loan. The Elliott loan also

had a balloon payment due in 2016. The Hages lived in the Savoy residence with a balloon

payment due in 2016. The Hages benefitted from the refinance loans with better interest rates plus

$700,000 in cash. Hage said the purpose of the cash "future investments." After the October 2014

loans, Hage approached her about refinancing the Savoy property. Hage applied for a loan with

another broker for the Savoy property. She was not surprised when Hage approached her about

refinancing the Savoy property. She has four children and seven grandchildren. She is solicited

almost daily by persons like Osborn. She did not treat Osborn any different than any other referral

source in the last 28 years. Hage said he wanted "Jimmy" involved. She denied that she told the

Hages that Osborn worked for her. In 2012, she first met Osborn at Gotmortgage. She has attended

conventions to meet lenders. She described the process of becoming an "approved lender." She

described her standard commission rate to be 2.5%. She described the distinction in compensation

rates between residential and commercial loans. The compensation rates are higher with a

commercial loan than a residential loan. She considered the Hages' loans to be commercial loans.

Velocity does not do any residential loans. She denied that Hage complained about the rates she

charged on the loans. In September 2015, Hage again applied for loans from her. Her initial

impression of Osborn was that he was flamboyant, loud and unknowledgeable. Osborn was her

contact person at Gotmortgage. She was dissatisfied with the first two loans she arranged through

Gotmortgage. Osborn never stepped foot inside of her office. She arranged for Osborn not to be

her contact person at Gotmortgage. She is solely dependent on the accuracy of the information she

gets from the borrowers. She described the purpose of providing good faith estimates to the

borrowers. She has not made loans to any other account representatives. She has made loans to

other persons but, like with Osborn, did not memorialize the loans. Osborn said he and his brother

were opening up a taco shop, and that's why he obtained loans from her. He retrieved cancelled

checks from her online account at Wells Fargo. She denied that she tried to hide any checks. She

believed that Osborn worked for Gotmortgage. Lenders encourage her, as a broker, to "sign up

with them." The mortgage broker association hosts an annual meeting. She issued a W-9 to

Osborn, at Osborn's request. She sent him a blank form which she arranged for Richmond to send -17STATEMENT OF DECISION

to Osborn. Richmond and Jorge Abich report to her at Target Mortgage. She commonly receives

referrals from people in the real estate industry. She did not consider Osborn's referrals to be

unusual. She authenticated Exh. "707" as the Truth-in-Lending statement signed by the Hages on

August 6, 2014. She denied that the Hages complained they did not receive the same loan reflected

in Exh. "707." She described the circumstances under which Osborn stayed the night at her house.

He could not start his motorcycle, and she did not want him traveling on a freeway if the

motorcycle broke down. She denied that Osborn disclosed he had been convicted of any financial

crimes. In October 2013, she reviewed Gotmortgage's underwriting on the Hages' application for a

loan on the Savoy property. She decided not to accept an underwriting job at Gotmortgage. She

considers herself an experienced underwriter and can "review a file pretty quickly." She

acknowledged that she owed a fiduciary duty and a duty of loyalty to the Hages as borrowers. In

her opinion, she complied with her fiduciary duty to the Hages. She authenticated Exh. 's "767 and

768" as the notes of 32nd Street Apartments LLC with Velocity Commercial Capital LLC. The

notes were signed by the Hages on behalf of 32nd Street Apartments LLC. She authenticated Exh.

"769" as the note of J. Scofield and Bonnie Grace Hage Family Trust dated October 8, 2002 with

Velocity Commercial Capital. She denied that the Hages complained to her about the terms of the

loans with Velocity. She understood that the Hages had two separate Trusts, both of which Hage

made clear to escrow. Before the Hages refinanced their loans in October 2014, they were already

paying $21,000 in monthly payments. In addition to receiving $700,000, the Hages obtained 30-

year amortized notes instead of interest only loans. Hage's $184,000 in adjusted gross income was

inconsistent with his income representation in his application. He observed the Hages sign their

closing documents. She denied that Osborn provided any documents from the Hages for their

loans. She described the duties Richmond performed as a loan processor. She worked as an

underwriter with a lender for 10 years. She described underwriting as the person who makes the

decision on the loan. She described a "conditional loan approval." She described the term "loan

docs." The escrow company which handled the Hages' loans was located in Arcadia. She drove

with a notary to obtain the Hages' signatures at a restaurant in San Diego. The second set ofloan

documents were not signed until after Bonnie Hage' s surgery. She and a notary traveled to San -18STATEMENT OF DECISION

Diego, met the Hages at their residence on Savoy, and obtained their signatures at that time. Hage

said he wanted the loan documents to be signed quickly and, if possible, before Bonnie Hage's

surgery. All of her communications were with Hage. Osborn texted or called her to ask if she

needed anything. She did not inform Osborn of Target Mortgage's loan programs, the terms of

which change daily. He spoke to Hage about the purpose of the loans. She denied that Hage said

Osborn had anything to do with his decision making, which appeared to be inconsistent with

Hage's references to "Jimmy." She denied she paid Osborn anything in connection with the loans

to the Hages, which testimony is not credible. She received the listing agreement from the Hages

on Columbus Day. She traveled to San Diego to pick up the listing agreement. The Hages signed a

listing agreement on both the Kansas and Savoy street properties. She observed the Hages sign the

listing agreement at their Savoy residence. Hage showed her and her former spouse - John - their

residence. After picking up the listing agreement, Hage refused to return her calls. Sandicor said

that the Hages wanted Target Mortgage to de-list the Savoy property. The Hages re-listed the

Savoy property within a few days. Within few more days, the Savoy property was de-listed

because the property was sold. She agreed to cancel the Savoy property listing agreement. She

cancelled her listing agreement while reserving her right to be paid a commission. Her commission

percentage was 3%. The Hages' loans were increased to the maximum amount permitted by

Velocity. The Hages' 2014 tax returns were not available to her at the time the October 2014 loans

were issued. She understood that the Hages were her clients. She identified the borrowers as the

Hages. Exh.'s "704, 732, 739, 740, 750." The Hages were identified as the loan applicants. Exh.

"707." She provided disclosure of her fiduciary duty to the Hages. Exh. "225." She completed

loan applications for the Hages on each of the three loans. The Hages are identified as the

borrowers in each of the applications. She authenticated Exh. "237" as among her earlier her email

exchanges with David Bilandzija at Velocity. The disclosure statements mistakenly represented

that the loans will have fixed interest rates and no prepayment penalties. She did not have an office

in San Diego and has had no employees in San Diego. The Hages' Savoy property is the only

property she has listed in San Diego. The Court admitted Exh.'s "284, 284A, 285,286 and 287" for

the limited purpose of establishing the complete context in which Target Mortgage represented that -19STATEMENT OF DECISION

it would cancel the Hages' listing agreement. She cancelled her listing agreement on October 29,

2015. Exh. "347." Kathy Kemp listed the Savoy property on November 5, 2015. Exh. "348." She

obtained conditional loan approval from Velocity on August 29, 2014. She has listed property in

San Diego County, which appeared to be inconsistent with his earlier denial that she has listed

property in San Diego. She sought loan approvals from both Mega Capital and Velocity, the

purpose of which was to obtain a better loan for the Hages. She tried to cancel her listing

agreement subject to a reservation of right to collect a commission. Hage did not say he was

confused by her disclosures. The Hages did not disclose their intention to obtain the loans in the

name of a Trust or an LLC until later in the process. She did not know, before she agreed to cancel

the listing agreement, that the Hages had already engaged Kemp to list their property. She

recognized Exh. "268" as the Fonn W-9 dated October 16, 2014 Target Mortgage sent to Osborn.

She did not send Osborn a Form 1099. Exh. "268" reflects a fax number in the upper left comer.

She caused a blank Form W-9 to be sent to Osborn. Counsel stipulated that he first date of

Osborn's deposition was February 21, 2017. Osborn asked to borrow money after he injured

himself. She initially declined to make him a loan. She declined Osborn's proposal that she invest

in one of his business endeavors with Lo. She has loaned money to her family. She agreed to loan

money to Osborn when she thought he was going into business with his brother. Osborn never paid

her back. She mailed the loan checks to Osborn. She was very critical of Osborn and

Gotmortgage's business skills. Osborn referred clients, including the Hages, to her. She described

her conversations with Hage including her request for documents from Hage. Richmond is

licensed. She directed Osborn to follow up with Hage to obtain documents. Hage was motivated to

close the loans because of upcoming commitments. She described the benefits to the Hages from

the loans. When she discovered that the Hages' interest rate was lower than he said it was, she

cancelled the loan. Hage said he was disappointed because he needed the money. The Hages

incurred a net increase in their mortgage payments of $5,800 per month. The Hages received

$707,000 in cash from the loans. She denied any concerns that the Hages could not meet the

increased mortgage payments from the loans. She denied that Hage complained about the loans or

that he could not afford to re-pay the loans. The Savoy loan was a 10% interest rate only. Hage -20STATEMENT OF DECISION

could have used the cash out to pay down the Savoy loan. Hage immediately wanted to refinance

the Savoy loan after the October 2014 loans had closed. She denied that the Hages disclosed the

$700,000 in liquid assets on his loan application. She wondered what happened to the cash out.

The Savoy loan application was denied. In 2015, Hage applied for more loans, after Osborn told

her to call Hage. Hage said that the values of his properties had increased but, upon review, she

was not persuaded that the values had increased. She determined that Hage's credit scores had

dropped. She was shocked. She also learned that the Hages were behind by 2 payments. In 2015,

Osborn said that the Hages wanted to sell the Kansas property. She spoke to Hage and sent him a

listing agreement. Hage said that they wanted to sell the Savoy property instead of the Kansas

property. She sent him a listing agreement for the Savoy property. She arranged to meet the Hages

at the Savoy house, take photos and pick up the listing agreement. She recommended that the

Savoy property be listed in the same amount as the appraisal. She described the required real estate

disclosures she made to the Hages. She made the disclosures in the presence of both of the Hages.

She saw Bonnie Hage sign the Kansas listing agreement. With the Hages' consent, she walked

around the house and took photos. They agreed to show the house by appointment only. She listed

the Savoy property and received interest from approximately 5 people. The Hages did not tell her

that they had gone to the DA's office, and they stopped returning her calls. She considered the

Savoy property to be beautiful. She recognized Exh. "728" which reflected that the Kansas

property was not habitable. Hage explained that they were renovating the Kansas property and

emphasized they did not want any "delay." Velocity caused a delay in funding by adding

conditions to the loan. She denied that Osborn was the primary conduit between Target Mortgage

and Hage. She asked Hage to send their 2012 and 2013 tax returns. Exh. "716." She explained the

printing problem she encountered when producing documents in discovery to Plaintiffs. She re-

iterated that she reminded "Jimmy" to follow-up with the Hages to encourage them to return

documents to Target Mortgage. She spoke to Hage about questions she had about their rental

agreements. She explained that Velocity followed standard procedure by obtaining the Hages'

authorization to run their credit. Hage said he wanted the borrowers to be the Trust and the LLC.

She provided LOE's to the Hages which needed to be in their "own handwriting." Velocity -21STATEMENT OF DECISION

required a letter that the LLC was in good standing. Hage provided the taxpayer identification

number for the LLC. She reviewed the bank statements Hage provided to Target Mortgage. She

denied that she saw any of the checks Hage gave to Osborn on the bank statements. She started the

loan process in August and the loans closed in October 2014, during which time, Hage did not

complain or say he felt rushed. Hage met with his lawyer and banker during the loan process. She

asked Hage to provide her with a copy of the second of the 2 Trusts. Hage mentioned that he got

documents from her while he was in the hospital because of Bonnie Hage's surgery in October

2014. Hage emailed that he did not want to "hold up the funding" because he would not get home

from the hospital until later in the day. She denied she sent any emails only to Osborn asking him

to do anything in connection with the Hages' loans. Within a couple of weeks after the October

2014 closings, Hage provided her with bank statements on a loan for the Savoy property. She

denied that the Hages intended to take cash out of the Savoy loan. Hage provided her with 12

months of bank statements on the Savoy re-financing loan. She recognized Hage's handwritten

note in Exh. "757;" however, upon review, the Court notes that the handwriting appears to be a bit

difficult to interpret if not strained. She described the loans made to the Hages as "asset based."

She had no doubt that Hage knew what he was doing with the loans. On October 20, 2015, she

learned of a problem with the Hages' loans. Exh. "284." She described the emotional and physical

distress she sustained from the Hages' complaints. She incurred legal expenses of approximately

$20,000 to respond to the Hages' complaints before they filed this lawsuit. The complaints have

affected her ability to work. Her denial she could have done anything differently with the Hages

struck the Court as unreasonable in view of her relationship with Osborn and the real estate

activities she paid him in connection with the Hages. She denied that she paid Osborn an illegal

kickback which the Court finds to be unreasonable. She evaluated the Hages' applications to

determine whether they "qualified for the loan based on the program." She authenticated Exh.

"755" page 70 as an underwriting summary of the Hages' loan on the Kansas property. The Hages'

obligations to income was 146.884%. She authenticated Exh. "228" as the Hages' loan application

on the Elliott property. The Hages' mortgage payment was $975 per month on the Elliott property,

$4,036 per month on the Kansas property and $2,743 per month on the Tennyson property for a -22STATEMENT OF DECISION

total of$7,754 per month which, after the October 2014 loans, became a total of approximately

$13,900 per month. Exh. 's "767, 768, 769." The Hages' debt service, after the loans, exceeded the

rental income on the properties. Osborn emailed the W-9 to her which is inconsistent to her

deposition and trial testimony. She never spoke to Osborn's brother, David, but she agreed to loan

Osborn money for them to start.a restaurant business. By October 8, 2015, she was aware from

Osborn that the Hages were behind on "all" of their mortgage payments. As of September 29,

2015, she was attempting to arrange more loans on the Kansas and Elliott properties for the Hages.

The Hages were already under water "before they came" to her. The text messages admitted into

evidence do not include the universe of messages she exchanged with Hage.

Joffrey Long:

Joffrey Long's occupation is in mortgage lending. He has worked in the industry for 40

years. He originates hard money loans. He identified his trade association memberships. His

qualifications as a mortgage lending expert are adequate. Most of his income is generated from

originating and servicing loans. He identified the materials he reviewed as part of his engagement.

The foundation on which he based his opinions is adequate. He defmed a hard money loan. He

opined that the three loans brokered by Target Mortgage are hard money loans. Osborn's

interactions with the Hages and the compensation paid to Osborn fell below the standard of care.

The payments to Osborn appeared to be commissions. He referred to his notes to identify his

opinions. The loan terms were not properly disclosed to the Hages. The good faith estimates

needed to be updated and re-provided to the Hages as the terms of the loans changed. The loans

were unsuitable for the Hages. Target Mortgage "churned" loans with the Hages. The Hages' 2013

monthly income was approximately $15,600. The Hages' 2013 tax return reflects that their taxable

gross income was approximately $122,000. The Hages' 2012 monthly income was approximately

$9,100. Without a mortgage company, like Target Mortgage, Osborn could not have set up the

loans with the Hages. He disagreed that, in business purpose loans, the broker is not required to

consider the borrower's ability to pay a loan. The churning of the loans consumed a larger

proportion of the Hages' monthly income. He expressed his criticism of the opinions of Target

Mortgage's mortgage lending expert. Target Mortgage's failure to follow "proper procedures" by -23STATEMENT OF DECISlON

allowing Osborn to interact with the Hages would have prevented the Hages' losses. He did not see

any evidence that Hage did not understand the loan terms. He emphasized that Target Mortgage

should have provided the Hages with an updated and accurate good faith estimate of the loans as

the terms changed. He acknowledged that Hage was aware of Osborn's criminal history. Target

Mortgage should not have allowed Osborn to interact with the Hages, whether he was a convicted

felon or not, and whether Osborn was licensed or not. He is aware that Hage interacted with

Osborn daily and he trusted Osborn. Target Mortgage, as the licensee, had a duty to use utmost

care. He agreed that Target Mortgage could not have stopped Osborn from interacting with the

Hages. Osborn's name pops up on the BRE licensing website. Target Mortgage should not have

proceeded with the loans without "precautions and safeguards" to avoid the Hages from being

subjected to fraud by Osborn. He analyzed the Hages' monthly income before the loans from

Target Mortgage. He disagreed that the Hages would necessarily have lost the properties without

the Target Mortgage loans. He was equivocal about how to consider Rage's mortgage banking

experience. He disagreed that the Hages should have used the $700,000 in cash to repay the Target

Mortgage loans. He understood that the Hages had upcoming balloon payments in 2016. He

deferred in answering any questions about the tax consequences of the Hages' sale of the properties

in advance of the balloon payments. He also deferred in answering any questions about the

potential of the Hages filing for bankruptcy. The prepayment penalties from the Target Mortgage

loans were a deterrent for the Hages to sell the properties. Osborn performed loan origination

services for Target Mortgage.

Richard Holstrom:

Richard Holstrom is a CPA and a forensic accountant. He has been associated with RGL

Forensics. He described his education and his expert witness experience. He was engaged by

Plaintiff's counsel to prepare a damages calculation based on his review of the loan documents. His

qualifications are adequate. The foundation on which he based his opinions is adequate. The

Hages' total damages are $1,522,275.06. The past losses include interest and closing costs on the

Kansas, Elliott and Tennyson loans. The Hages sold the Kansas property on September 6, 2016.

The past loss on the Kansas property is $113,679.70. The past loss on the Elliott property is -24STATEMENT OF DECISION

$149,840.99. The past loss on the Tennyson property is $55,708.66. His damage calculation

includes payments to Osborn after October 14, 2014. His damages calculation includes a total past

loss of$740,170.96 and future losses, reduced to present cash value as of June 12, 2107, in the

amount of $782,04.10. He applied a present day calculation of 5%. He applied a 7% simple

interest rate of return dating back to October 2014. He does not know if the Kansas property

resulted in a profit to the Hages. He assumed that the Hages owned the Kansas and Elliott

properties free and clear prior to the October 2014 loans. His calculations did not take into

consideration the Hages' existing loans on the properties. On the Kansas property, the Hages were

paying an interest rate of 10.99% interest rate. The refinance loan resulted in a lower interest rate.

The proceeds from the refinance loan were, in part, paid to Osborn. He assumed that the Hages

paid Osborn $367, 227 after October 2014, which is the basis of his calculations. He did not

express any opinion on the issue of fault or cause of the Hages' damages. The purpose of the

Tennyson loan was different than the purpose of the refinance loans on the Kansas and Elliott

properties. The interest rate on the refinance loan on the Tennyson property increased from the

Hages' existing loan. He has not evaluated the Hages' revocable and irrevocable Trusts. He made

an alternative calculation based on the differential in the principal amounts of the loans before and

after Target Mortgage, and on the interest paid on the additional principal of the loans. The

additional interest on the Kansas property is $42,567 and on the Elliott property is $122,451. He

made the new calculations over the past weekend. He essentially calculated the difference between

the refinance loans and no loans on the Kansas and Elliott properties.

John Scofield Hage:

John Scofield Hage is retired and 70 years of age. He was born in San Diego. He graduated

from Point Loma HS in 1965. He married Bonnie Hage in 1972. He worked in banking for 38

years and retired in 2007. He described his experience including business origination. He did not

work within the lending department. In 2008, he became the CEO of the San Diego Food Bank.

His primary duties were to raise money for the food bank. In 2013, he retired from the food bank.

He has been active in community affairs, his favorite one of which is the Boy Scouts. He and his

wife sold their home and moved into their son's home on Elliott street. They sold a rental property -25STATEMENT OF DECISION

and were looking for a 1031 exchange. In March 2013, his wife fell and hurt herself. He took care

of her. In 2013, he located a replacement property on Tennyson Street. He met Jimmy Osborn at

Gotmortgage. He owned the Kansas and Elliott Street properties free and clear. In July 2013, they

purchased the Tennyson Street property. He met Osborn at a UTC restaurant. He told Osborn that

they wanted to purchase a new home and their price range of approximately $1,300,000. He wrote

Osborn a check for him to assist them with credit services. Exh. "329." Osborn said he could help

them lower their interest rate on the Tennyson property. Osborn gave him Exh. "133" as an interest

rate reduction agreement. He located the residence on Savoy Street as a family home. They used

Kathy Kemp to locate the Savoy residence. Osborn called him frequently and solicited their real

estate business. He authenticated Exh.'s "122 and 125" as preapproval loan letters from Osborn.

He believed they could afford the Savoy residence. He communicated with Osborn on a daily

basis. In 2013, he wrote Osborn a checks for mortgage fees ''to build liquidity for our balance

sheets." Exh. "329." He mailed the checks to Osborn at Gotmortgage. At Osborn's request, he

started to send Osborn cashier's checks. His memory that the purpose of the numerous checks was

for "processing or mortgage fees" struck the Court as genuine but curious. He authenticated his

email exchange in Exh. "166." He had not known of Alliance Portfolio's involvement. Osborn

said he had approached other lenders, like Sun West and PNC, "to take us out." He closed hard

money loans on the Kansas and Savoy properties. They took out a second hard money loan on the

Kansas property. Exh. "196." In February 2014, he gave Osborn a cashier's check for $63,412, the

purpose of which to set up a reserve fund at PNC Bank. Osborn said they would get "most of the

money back." Jim Perry at Alliance told him that Osborn had a criminal conviction which was the

first he had heard of Osborn's criminal background. In February 2014, he received an email with

an article which described Osborn as a scam artist. He confronted Osborn who said he had

straightened his life out. He forgave Osborn and did not expect him to re-offend after having

already served jail time. He continued to trust Osborn. Osborn discussed his Christian faith. They

prayed together about his wife's health. In March 2014, Osborn persuaded him to refinance the

Elliott property. He gave Osborn a cashier's check for $60,000 to continue building a reserve for

the PNC loan. Osborn always told him that the PNC would close within the next 45 to 60 days. -26STATEMENT OF DECISION

The close was always "right around the comer." The close of the PNC loan was a "constant

concern" of his. He described his wife's health issues in 2014. Osborn suggested that they do

additional financing by building up reserves for the PNC loan. He pulled more than $700,000 in

equity out of the three rental properties they re-financed with Target Mortgage in October 2014.

Osborn said the funds he paid to Osborn would come back to them and reduce the debt on the other

loans. Osborn referred to Meg as a "beautiful lady" who had access to financing beyond

Gotmortgage. He read and relied on Target Mortgage's fiduciary duties to them. Exh. "225." He

did not believe Osborn was working on behalf of Target Mortgage. Osborn relayed daily

information from Meg to him. He believed the information Osborn provided to him from Meg was

accurate. Osborn's style of business always contained a sense of"urgency." He denied that Meg

counseled him on the suitability of the loans. He frequently discussed his balance sheets with Meg

but did not discuss their ability to pay the debt service. His conversations with Meg were limited to

completing the loan applications. He identified Exh. "339" as handwritten notes he took of his

conversations with Osborn. He expected that, after the PNC loan closed, they would get a "rebate"

of a portion of the funds he had paid to Osborn to build up a reserve fund. In April 2014, Osborn

said he could get a 30-year term, "all inclusive" loan. In July 2014, Osborn said he would get a

"rebate" of $130,000 from the funds he had paid Osborn. In October 2014, Osborn said he would

get a "rebate" of $157,200 from the funds he had paid Osborn. Osborn said that a portion of the

funds from the Target Mortgage loans in October 2014 would be paid to Osborn for the reserve

funds for the PNC loan. He noted "Jimmy's Birthday" among a series of calculations. He noted

that Osborn's representation that the PNC loan would reduce the Savoy loan by $200,000 because

of the reserve funds. He noted Osborn's representation that Osborn would arrange for late fees with

Sun West and Alliance be waived. He noted Osborn's request that he issue Osborn a 1099 which

he did not do. In October 2014, his goal was to complete the loan process, "getting the PNC loan,"

but he was getting frustrated at "the delays that I couldn't reconcile." Osborn talked about the

Hamp legislation which favored people with high interest rates. He thought Osborn's explanations

made sense but he was overwhelmed and Osborn dictated "everything that was going on." Meg did

not counsel him on the subject of the increased interest rate on the Tennyson property refinance -27STATEMENT OF DECISION

loan. Osborn suggested that he do the refinancing loans. He recommended the refinancing to

increase the Hages' cash liquidity and strengthen their balance sheets. He described his

conversation with Jim Perry at US Bank. US Bank told him they would no longer issue cashier's

checks payable to Osborn. His meeting with US Bank took place shortly before November 11,

2014. Exh. "329," page 54. He described Osborn's recommendation that he use Meg to list the

Kansas and Savoy properties for sale. Meg drove to San Diego and took photos of the houses on

her smartphone. He had previously listed homes for sale with Kemp. He denied he had any

interview with Meg about the properties. He told his wife they were having "some problems" and

they needed to list the properties quickly. They held title to the Savoy property in their revocable

Family Trust. He described their meetings with their son and their lawyer before meeting with the

DA's office. He has been diagnosed with cognitive impairment with symptoms of memory loss

and confusion. They sold the Savoy home. They sold the Kansas property. The Elliott property has

a $600,000 mortgage on it after they had owned it free and clear. This ordeal has been

"devastating" to his family financially. This ordeal has been devastating to him physically and he

wakes up in the mornings in tears. He has read Osborn's testimony and considers the testimony to

be credible. He was surprised by the terms of Osbornâ&#x20AC;˘ s proposed loan before accepting the

purchase loan for Savoy. He has had a lot of experience in reviewing balance sheets. He expected

to pay the loan payments from his cash flow and not from assets on his balance sheet. He does not

understand the term "seasoning funds." He wrote more than $400,000 in personal checks to third

parties with cash returned to him and he provided cash to Osborn. He had a personal relationship

with PNC Bank for a number of years. He agreed that he has not heard of any bank which refused

to make a loan to a customer who also had an account at the bank. He understood that Osborn was

a felon. In February 2014, he understood Osborn was a felon and unlicensed. He believed that the

funds he provided to Osborn were going to Gotmortgage. Before October 2014, he understood that

the address he sent checks to was not Gotmortgage's address. He did not contact Gotmortgage

because of Osborn's assurances he was acting on their behalf. He met with Osborn at

Gotmortgage's address, he had a business card from Gotmortgage and he expected Gotmortgage to

act on behalf of his interests. He expected a loan from PNC which Gotmortgage brokered. He -28STATEMENT OF DECISION

expected that the funds he paid to Osborn would be deposited into a reserve account at PNC. He

kept track of all household expenses but did not keep track of the checks he paid to Osborn on his

computer, which was out of character for him. He denied he invested his funds into a business with

Osborn. He never applied for a loan from PNC. He expected to receive an application for a loan

from PNC. He understood he could have contacted PNC directly to obtain a loan application. He

denied that he applied for a refinancing loan for $900,000 on Savoy. Interest rates were declining

in the 2014-2015 time period. He skipped a couple of payments in 2015 in anticipation of the

PNC loan. He has spoken to the CEO of Alliance - Jim Perry. He asked Perry to reverse late fees

on 2 payments. Osborn said that Alliance was in Court ready to file a notice of default. ("NOD").

He followed Osborn's Friday afternoon suggestions to list the Savoy property with Meg. He had

already given Osborn $650,000, had been waiting for the PNC loan to close for 2 years, knew

Osborn was a con man and a convicted felon, and knew that Osborn was the subject of a cease and

desist order to engage in real estate activities as of September 2015. He still believed Osborn and

followed his instructions. He believed the funds he gave to Osborn were building a reserve

account, paying for mortgage fees and were in anticipation of the PNC loan. He and Osborn

developed a financial plan which, at the time, made sense to him. The plan involved the

refmancing of the properties and taking equity out of the properties. He relied on Osborn's

employers to exercise their fiduciary duties to oversee Osborn's activities. He was blinded by

Osborn. He denied that he discussed with Target Mortgage that Osborn was a convicted felon.

Before the Target Mortgage loans funded in October 2014, he had agreed to pay Osborn $269,000.

He understood he was obligated to complete a loan application accurately. He did not reflect the

reserve account funds on his balance sheet. He believed the reserve account funds existed but he

did not have corroboration of the account funds. He did not know the name under which the

reserve account funds were held. He identified all assets under his control on the Target Mortgage

loan applications. He provided Meg with bank statements to corroborate the funds he represented

on the loan applications. In reviewing Exh. "339," he cannot recall if Osborn asked him for a 1099.

Osborn provided him with financial services. He believed that Stephen Forsythe was Osborn's

contact at PNC, although he noted Sun West next to Forsythe's name in Exh. "339." He noted that -29STATEMENT OF DECISION

he expected to pay $269,200 to "Jimmy" for the reserve with $359,800 to be paid to him for the

total financing from ''Nilda." He consistently talked about his expectation to receive a "rebate" of

money he had paid to Osborn. He denied that he funded "real estate loans" to Osborn. Counsel

stipulate that he gave checks to Osborn exceeding $300,000 after the October 2014 loans. He

denied that Osborn gave him any money back. He interpreted a handwritten reference to be

"means" instead of"names" in context of comments he memorialized form Osborn (Exh. "339" at

page 70) in response to a cross-examination question that "Hage will be finalized by all names with

all documentation 2/1/2015." Hage kept US mail slips and kept track of all expenses in his

accounts, while expecting to be reimbursed. He denied that he paid funds to Osborn as a business

investment, and that he told Meg he had an agreement with Osborn. He made improvements of

approximately $130,000 on the Savoy property. His relationship with Osborn before the October

2014 loans was strictly over the telephone, and he declined to socialize with Osborn. Sending

Osborn checks to his residence was inconsistent with his own business experience. Osborn did not

give him "a straight answer'' when he asked Osborn about the change from Gotmortgage to Target

Mortgage. The PNC loan was strictly for the Savoy property. He drove up to meet Osborn 6 to 8

times in Orange County. The Hage Survivors Trust is different that the Hage Family Trust, the

distinctions between which he described, but which, he acknowledged, are "confusing." He

authorized Osborn to contact any lender to obtain the refinancing loans. He considered Osborn to

be his "relationship manager." He considered Osborn to be his "financial advisor" in searching for

loans for him. He reimbursed himself$52,000 for improvements to the Tennyson property while

not compromising a potential 1031 exchange. Osborn introduced Forsythe to him over the

telephone as a representative of PNC. He later learned from the DA's office that Forsythe did not

exist. He denied any discussion or agreement with Osborn about profit from any business activities

together. His first meeting with Osborn was after the Tennyson loan closing in or around July

2013. In September 2015, Meg emailed him with a request that he sign a blank residential loan

application and return it to her. He authenticated Exh. "770" as an email exchange with Meg on her

request to "just sign" and provide her with "updated retirement and social security income." He

agreed that he never completed a loan application with PNC. In September 201 S, he stopped -30STATEMENT OF DECISION

making mortgage payments at Osborn's instructions. Counsel stipulated that the checks in Exh.

"329" are organized in chronological order. He understood that the funds he paid to Osborn for the

reserve account were required by PNC. He believed that the Savoy property would be refinanced

through a PNC loan. He did not know whether Target Mortgage would be brokering the PNC loan.

He authenticated Exh. "727" as his 2015 email exchange with Robert Mallison to refinance the

Savoy property.

Bonnie Grace Hage:

Bonnie Grace Hage is 74 years old and has been married to Scody Hage for 45 years. They

were married in 1972. She described her trust in her husband based, in part, on his 38 years of

banking experience. In 2013, she broke her back from a fall while living in their home on Elliott

Street. They sold their home on Carlton Square in Point Lorna to downsize, and moved into the

home on Elliott Street. Her husband took care of her including laundry, cooking and cleaning. In

2014, she had six "major operations" and was in the hospital for 6 days. In 2013, she noticed a

change in her husband's cognitive ability- easily confused, very forgetful. She and their son

thought it was because of stress. She had two interactions with Jimmy Osborn, the first one of

which was in early fall 2014 and the second in the DA's office. She usually did not overhear her

husband's conversations with Osborn. She heard her husband talk about the PNC loan, the purpose

of which was to reduce the interest rate. Her husband did not disclose that he had written checks to

Osborn. She called her son when she learned from her husband that Meg was coming to San Diego

to list the Savoy and Kansas properties, which caused them to contact the DA's office. She met

Meg twice. The first time she met Meg was for her and her husband to sign documents in 2014.

She does not recall the type of documents. The second time was when Meg appeared at their home

to take photos to list their home for sale. Meg was accompanied by a man. Her friend, Kathy

Kemp, has listed their properties in the past. She had limited conversation with Meg. Her husband

communicated with Ann Navarra in an attempt to arrange a short term loan. They obtained a loan

from Navarra and have since repaid the loan. She observed her husband talk to Osborn while they

were meeting with the DA's office. Exh. "327." In the conversation, Osborn kept repeating that he

had explained the PNC loan hundreds of times, raised his voice and did his best to put the Hages on -31STATEMENT OF DECISION

the defensive, all of which struck the Court as very manipulative. Osborn kept representing that

their payments would reduce their principal balances and, in exasperation, directed them to "write it

down." After the conversation, she wanted nothing more to do with Osborn and decided to engage

Kemp the Savoy property. They did not list the property with Kemp until after Meg had cancelled

her listing with Savoy property. She had no contact with Meg. They contacted their attorney, met

with the DA's office and, within a week, had decided to file this lawsuit. Her husband had her

authority to act on her behalf. They had 2 properties free and clear and she had no idea that

mortgages had been placed on them. She described the business of 32nd Street Apartments LLC

which owned their rental properties. She is not sure "what an LLC does." She authenticated her

and her husband's signatures on behalf of 32nd Street Apartments LLC in Exh. "767." She did not

take any steps to verify the accuracy of the loan information with any of the loans in October 2014.

She signed the loan documents at her husband's request based on her trust in him. She

authenticated her and her husband's signatures on behalf of 32nd Street Apartments LLC in Exh.

"768." Like with Exh. "767:' she signed the documents because she trusted her husband. They had

an accountant. Bruce Orona is their property manager. Kemp is her long-time friend. She

authenticated her and her husband's signatures on beh~f of the Hage Family Trust dated October 8,

2002 in Exh. "769." The Elliott property was owned one half by a revocable Trust and the other

half by an irrevocable Trust. She did not know what a co-trustee is. She believed her husband was

capable of"running the household finances," but she had concerns about his memory and

confusion. She found herself asking him to do something 2 or 3 times. Her husband kept detailed

financial records. Her husband has managed the Hamilton Trust for his Aunt and her 3 children.

He has also managed his sister's Trust which is also managed by the Trust department at US Bank.

She had called his doctor to express her concerns about her husband. She was aware that he had

made some payments to Osborn but she thought they were "real estate fees." She thought that the

PNC loan was expected to close before October 2014. She agreed that she had not signed a loan

application. After she confirmed the Savoy residence was listed by Meg on the MLS, they turned

the matter over to their attorney. After turning the matter over to the DA's office, her husband said

he had paid checks of more than $650,000 to Osborn. Her husband said he "felt really badly about -32STATEMENT OF DECISION

what he had done." She has never been involved in the family finances. He later described the

conversation he had had with US Bank about being leery of him writing checks to Osborn. He later

described him learning that Osborn had a criminal past. He wrote checks to third parties in return

for cashier's checks he paid to Osborn. In 2015, she heard her husband complain of how long the

PNC loan was taking to close. She was not aware of "what documents I had signed." Before

meeting with the DA's office, she did not know that Osborn had asked her husband for large

amounts of money. She did not know they were applying for loans. Richard Shaw has been their

estate lawyer for 35 years. She later learned that her husband was sending Osborn payments to

Osborn's house rather than Gotmortgage's address. He understood that the Tennyson and Savoy

house had high interest loans, and the PNC loan would combine the two loans into a single loan

with a lower interest rate. She denied her husband complained that Osborn was demanding too

much money. She heard her husband say he was mailing checks to "Jimmy." She denied that she

heard her husband raise his voice while speaking to Osborn. She understood that Meg was going to

list both the Kansas and Savoy Street properties for sale. She signed loan documents while she was

in the hospital but she cannot say whether it was a Target Mortgage loan. She heard her husband

promote Meg's services. Her husband said Osborn said to stop making their mortgage payments.

She considered the listing with Meg to be "a kind of bogus-type listing." She considered the listing

with Meg to be "a fake listing agreement for the purpose of satisfying a lender." Kemp said she

had wanted to list the Savoy house for "weeks and weeks." Kemp was ''very careful" not to take

the listing until after Target Mortgage had dropped the listing. She spoke to Kemp about her being

"very careful" about taking the listing before Target Mortgage dropped the listing on the MLS. She

recognized their listing Agreement with Target Mortgage dated October 9, 2015, to sell the Savoy

house. The Savoy house sold for more than the property was listed for on the MLS. The property

sold one day after the property was listed. On October 13, 2015, Scody and Will Hage went to the

DA's office. By that time, they had contemplated filing a criminal complaint and civil lawsuit.

The Savoy house sold for $1,550,000. They hired Kemp from Pacific Real Estate Center. They

gave the buyer $45,000 in concessions to sell the Savoy house. They did not sign an agreement

with Kemp until after Target Mortgage had dropped the listing agreement. She did not see the -33STATEMENT OF DECISION

MLS listing. Kemp's photographer took photos of the Savoy house, which were not published

before the house sold. She became aware that her husband sent Osborn two checks for $250,000

each. She did not want to sell the Kansas street property.

Alexis Olstensen:

Alexis Olstensen has been an escrow officer since 1987. Her company is known as Design

Escrow. She was the escrow officer for the 3 loans in October 2014, one of which involved the

Elliott property. She did not consider these escrows to be unusual. She was paid a flat fee. She

makes referrals to her brokers and agents, including Meg. She considers Meg to be knowledgeable.

She has heard no complaints about Meg. She does not recall receipt ofExh. "248," but identifies

the recipient to her assistant. She prepared the HUD 1 based on the GFE's from the broker. Exh.

"252." Target Mortgage has been a customer for almost 20 years. Meg has not paid her any

referral fees. Exh. "354" identified the Hage Family Trust as the borrower on the Elliott loan.

Lydia Ortega:

Lydia Ortega has been a traveling notary for 25 years. She has been notarizing real estate

documents for Target Mortgage and Meg since 1995. She has not questioned Meg's integrity in

any of the transactions. In October 2014, she met the Hages at a restaurant to sign loan documents.

She was accompanied by Meg. The Hages offered to buy her and Meg lunch but they declined.

The conversation was casual. The meeting lasted an hour or more. She does not recall Osborn's

name. She saw Bonnie Hage review the documents. She identifies October 7, 2014 to be the exact

date based on her review of her notary book. Meg was pleasant and helpful in answering questions.

On October 14, 2014, she met with the Hages at their residence to sign another set ofloan

documents. She was accompanied by Meg. The meeting lasted about an hour. She saw the Hages

sign the loan documents. She noticed that the chandelier was "really big." She heard Scody Hage

ask when the money would be available. Bonnie Hage participated in the tour of the house

including the upstairs. She saw Bonnie Hage "take breaks to sign slowly." She has referred

business to Target Mortgage and Meg. She trusts Meg's "integrity and her knowledge." She

considers Meg to be a friend. She recalls the Hage notaries based, in part, on the distance she

traveled to meet the Hages. She authenticated the notarizations in Exh.'s "355 and 356."

-34STATEMENT OF DECISION

Richard Davidson:

Richard Davidson has been a loan officer with US Bank for 6 Â˝ years. Hage is one of his

clients. He is a relationship manager. He authenticated the cashier's checks as US Bank cashier's

checks in Exh. "329." In October 2014, he talked to Hage about Osborn's attempt to cash 2 large

cashier's checks issued by US Bank. Hage told him that Osborn could cash the checks. US Bank

refused to allow Osborn to cash the checks. Four representatives of US Bank met with Hage to

discuss their concerns about Osborn. They told Hage that Osborn had a background in mortgage

fraud and cautioned Hage to be careful in dealing with Osborn. They advised Hage not to do

business with Osborn. Hage appeared to be surprised about Osborn's background. Hage said he

would talk to Osborn and try to get the checks back. Hage said the purpose of the checks were for

property refinancing.

Henry Park through his deposition taken on January 16, 2017:

Henry Park described the compensation Gotmortgage paid to Osborn in 2014 and believed

that Osborn was cheating on Gotmortgage with Meg and Target Mortgage.

William Burch:

William Burch has worked in the mortgage business for 29 years. His qualifications are

adequate. The purpose of his engagement was to evaluate whether Target Mortgage processed the

loans in a manner consistent with the standard of care. The foundation on which he based his

opinions is questionable in view of his failure to review Meg and Osborn's depositions. The hard

money loans were subject to a lower level of regulation. Hard money loans are only available for

investment property. The rates and terms of the hard money loans were typical. Target Mortgage

was not obligated to assess the borrowers' business decision. Osborn did not act as an agent of

Target Mortgage. The Hages failed to disclose material facts, like payments they made to Osborn,

to Target Mortgage. He works at Residential Wholesale Mortgage in San Diego. He did not

review the depositions of Meg and Osborn before he wrote his report. He did not review Ex:h. 's

"268 and 271" before he prepared his report. He denied any connection between Osborn and

Target Mortgage in processing the Hages' loans. He agreed that, hypothetically, Meg and Target

Mortgage's conduct fell below the standard of care if they used an unlicensed, convicted felon to -35STATEMENT OF DECISION

solicit loans on their behalf. He disagreed that Osborn perfonned any activities for which a license

was required. Referral sources are not considered agents of the broker, and are generally not paid.

He agreed that Target Mortgage and Meg owed the borrowers a fiduciary duty. Underwriting

considers reserves in an institution under the borrower's name only, the inference of which is that

underwriting does not consider reserves not on deposit at an institution and not under the

borrower's name. The borrower is obligated to disclose reserves not on deposit at an institution and

not under the borrower's name, as an asset on the loan application. Exh. "228" on page 3, section

6. He discussed his decision not to review Osborn's deposition with Defendants' counsel, and

considered Osborn's testimony not to be useful. He considered Osborn, as a felon, not to be

"sufficiently reliable." His later review of Meg's deposition did not change his opinion that Osborn

did not act as Target Mortgage's agent. Loan brokers own multiple fiduciary duties to every

borrower ... honesty, good faith, integrity, following instructions. He agreed that the broker owes

no duty to "someone not involved in the transaction." Underwriters consider more liquid assets to

be a favorable factor. He denied that Osborn had any effect on the terms of the loans to the Hages.

The broker provides the lender with initial set of disclosures but, ultimately, the lender is

responsible for making the disclosures to the borrower. The broker is obligated to make accurate

disclosures to the borrower.

David Bilandziia:

David Bilandzija has worked as an account executive at Velocity Commercial Capital.

Velocity makes business loans. He has the ability to communicate directly with the borrower but

usually does not. The broker is Velocity's primary contact. Velocity insists on accurate

information from the broker on behalf of the borrower. Velocity has a "zero fraud tolerance" with

its brokers. Velocity requires a handwritten business letter. Velocity's lending decisions are based

on full disclosure of the borrower's assets and reserves. The Hages did not disclose their payments

to Osborn. He authenticated Exh. "357" as Velocity's 2014 broker agreement with Target

Mortgage. Velocity required that Target Mortgage comply with all of the state's licensing

requirements. He denied that he was aware that Target Mortgage made payments to Osborn. Exh.

"271." He denied that he has seen Exh. "268." He does not recall his receipt ofExh. "242," but -36STATEMENT OF DECISION

does not doubt that the email with Meg is genuine. He authenticated Exh. 's "254 and 255" as his

email exchanges with Meg. Meg is one of Velocity's clients, and he is her account representative at

Velocity. He has had a relationship with Meg for 4 years. He authenticated the uniform

underwriting summary on page 70 of Exh. "707." He is familiar with the "debt to income rate

ratio." Velocity made the final decision to make the loans to the Hages.

LaTasha Richmond:

LaTasha Richmond has worked as a loan processor for 14 years at Target Mortgage. She Âˇ

described her loan processing duties. She has a real estate license. Target Mortgage has had

approximately 3 staff in the office. In 2014, she emailed a Form W-9 to Osborn. She described the

process by which she printed and emailed the W-9 to Osborn. She authenticated Exh. "70 l" as the

loan submission checklist from Velocity. She referred to the loan officer as "LO." She described

her communications with Hage who provided her with the requested documents. She authenticated

Exh. "705" as the loan fraud zero tolerance signed by the Hages. She agreed that, if Target

Mortgage submits false information to lenders, Target Mortgage's license may be at risk. She

authenticated Exh. "706" as Velocity's underwriting conditions to the loan approval. Exh. "706"

required the Hages to "detail the specific use of cash out proceeds.'? She authenticated Exh. "713"

as the loan submission for the Hages to Mega Capital. Target Mortgage was looking for the "best

possible rate and terms for the borrower." She authenticated Exh. "729" as the Hages' first

payment letter. She authenticated Exh. "730" as the Hages' handwritten note identifying the

Tennyson property as a rental property and that the loan proceeds would be used for business

purposes only. She authenticated Exh. "732" as the references provided by Bonnie Hage. She

authenticated Exh. 's "733 and 750" as the affidavits of the Hages on Target Mortgage's status as

the broker. She authenticated Exh. "736" as the Hages' certification that they made no

misrepresentations to obtain the loans. She authenticated Exh. "742" as a description of the

fiduciary duties Target Mortgage owed to the Hages, including care, integrity, honesty and loyalty.

She denied that Target Mortgage provides or tax or business advice to the borrowers. She

authenticated Exh. 's "745 and 749" as the Hages' cash out explanations that the cash out will be

used for "future investments." Osborn called her to introduce himself as an account executive on -37STATEMENT OF DECISION

behalf of Gotmortgage. She denied any other calls with Osborn. She prepared draft letters of

explanations ("LOE's") for Meg to review for the Hages to sign. Exh. "245." She authenticated

Exh. "357" as Target Mortgage's broker agreement with Velocity. Target Mortgage agreed to

comply with all real estate licensing laws as a condition of its broker agreement with Velocity. She

estimated that, on average, she deals with 10 borrowers per week, the signatures for every one she

can recognize. She denied she is aware of any outside services Osborn performed for Target

Mortgage. She denied she was aware of any of the checks to Osborn in Exh. "271."

8 9

1. Plaintiffs John Hage, Bonnie Hage, both individually and as Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD 32nd Street

Apartments, LLC were harmed by Defendants Target Mortgage, Inc. and Nilda Meg's

negligence (CACI 400).

Defendants negligently employed and compensated Osborn who was not licensed and, in

Meg's opinion, was not competent to perform the services for which a license was required. Meg's

denial that she employed and compensated Osborn, as her agent, for the work he did with Plaintiffs

is not credible. CACI 3701, 3710. Exh.'s "268 and 271." With Meg's knowledge, Osborn did

much more than find Plaintiffs and bring Plaintiffs and Defendants together. The loans which

Defendants ultimately brokered for Plaintiffs would not have occurred but for the negotiations

engaged in by Osborn. CACI 418. Business & Profession Code Section 10137. Preach v. Monter

Rainbow (1993) 12 Cal. App. 4th 1441, 1452 ("If the broker takes any part in the negotiations, no

matter how slight, he is not a middleman but a broker. Rees v. Department of Real Estate (1977)

76 Cal.App.3d 286, 295.")

22 23

Plaintiffs were harmed by Defendants' employment of and compensation paid to Osborn, the nature and amount of which is discussed below.

Defendants' negligence was a substantial factor in causing Plaintiffs' harm. CACI 430.

The Court agrees with Plaintiffs that, but for Defendants making their license available, Osborn

would not have been able to feloniously manipulate Plaintiffs as he did. Ultimately, the source

from which Osborn defrauded Plaintiffs were the funds Defendants brokered on behalf of Plaintiffs.

28 -38STATEMENT OF DECISION

2. The alleged negligence of Plaintiffs John Hage, Bonnie Hage, both individually and

as Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD

32nd Street Apartments, LLC did not contribute to their harm caused by Defendants Target

Mortgage, Inc. and Nilda Meg (CACI 405).

Defendants' theory is that Plaintiffs breached their duty by submitting "materially false and

misleading" loan applications based, in part, on Plaintiff's Bonnie Hage's failure to adequately

monitor and disclose Plaintiff's John Hage's "diminished mental capacity and judgment." ROA#

171, par. 59. The Court recognizes the ages and diminishing faculties of Plaintiffs, and empathizes

with the challenges John Hage was confronted with during the Osborn era; however, the Court also

appreciates Defendants' argument that John Hage has 38 years of banking experience and, before

Osborn introduced Plaintiffs to Defendants, John Hage was aware of Osborn's felonious past. The

Court also agrees with Defendants that part, if not much, of John Hage's explanation of why he

gave so much money to Osborn is difficult to make sense of. Though the plausibility of his

explanation is questionable, the Court does not find, in the slightest, that John Hage engaged in

wrongdoing. The Court rejects Defendants' argument that John Hage participated in a money

laundering scheme. True, under challenging circumstances, John Hage exercised, at times,

unreasonable judgment, the price for which is discussed below; however, the Court is not persuaded

that Defendants have carried their burden to show that Plaintiffs submitted "materially false and

misleading" loan applications, or that Bonnie Hage failed to adequately monitor and disclose John

Hage's "diminished mental capacity and judgment."

3. The alleged negligence of Kathy Kemp, Bruce Orona and Gotmortgage.com did not

contribute to the harm to Plaintiffs John Hage, Bonnie Hage, both individually and as

Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD

32nd Street Apartments, LLC caused by Defendants Target Mortgage, Inc. and Nilda Meg

(CACI 406).

26 27

Defendants have not carried their burden to show that Kathy Kemp and Bruce Orona were negligent, much less that any conduct they engaged in was a substantial factor in causing to harm to

28 -39STATEMENT OF DECISION

Plaintiffs. None of Plaintiffs' damages will be reduced because of any conduct engaged in by

Kathy Kemp and Bruce Orona.

Based on this limited record - recognizing that Defendants Gotmortgage.com and its

principals entered into a settlement with Plaintiffs before trial - the Court questions the propriety of

the conduct engaged in by Gotmortgage.com and its relationship with Osborn vis-a-vis Plaintiffs;

however, Gotmortgage.com's allegedly questionable conduct involved multiple loans which took

place prior to the three loans Defendants brokered for Plaintiffs. None of Gotmortgage.com's

questionable conduct was a substantial factor in causing the harm to Plaintiffs at issue in this trial,

and none of Plaintiffs' damages will be reduced because of any conduct engaged in by

10 11

Gotmortgage.com 4. The negligence of Defendant James Osborn contributed to Plaintiffs John Hage,

Bonnie Hage, both individually and as Trustees of the J. Scofield and Bonnie Grace Hage

Family Trust and Co-Managers of SD 32nd Street Apartments, LLC's harm caused by

Defendants Target Mortgage, Inc., Nilda Meg (CACI 406).

Defendant Osborn negligently performed services for which he was not licensed in

connection with the multiple loans he referred to, negotiated and was paid for by Defendants.

Defendant Osborn's negligence was a substantial factor in causing harm to Plaintiffs;

however, Osborn's misconduct was, in part, a superseding cause of Plaintiffs' alleged damages

against Defendants Target Mortgage, Inc. and Nilda Meg (CACI 432 and 433), the allocation of

which is attributable solely to Osborn and not to Defendants as explained below.

S. Plaintiffs John Hage, Bonnie Hage, both individually and as Trustees of the J.

Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD 32nd Street

Apartments, LLC were harmed by Defendants Target Mortgage, Inc. and Nilda Meg's

breach of the fiduciary duty to use reasonable care (CACI 4101).

25 26 27 28

Defendants acted as Plaintiffs' mortgage broker on the Kansas, Elliott and Tennyson property loans. Defendants acted on behalf Plaintiffs for the purpose of brokering the Kansas, Elliott and Tennyson property loans for Plaintiffs. -40STATEMENT OF DECISION

Defendants failed to act as a reasonably careful mortgage broker would have acted under the

same or similar circumstances by employing and compensating Osborn who was not licensed and,

in Meg's opinion, was not competent to perform the services for which a license was required.

Meg's denial that she employed and compensated Osborn as her agent for the work he did with

Plaintiffs is not credible. CACI 3701, 3710. Exh.'s "268 and 271." With Meg's knowledge,

Osborn did much more than find Plaintiffs and bring Plaintiffs and Defendants together. The loans

which Defendants ultimately brokered for Plaintiffs would not have occurred but for the

negotiations engaged in by Osborn. Business & Profession Code Section 10137. Preach v. Monter

Rainbow (1993) 12 Cal. App. 4th 1441, 1452 ("If the broker takes any part in the negotiations, no

matter how slight, he is not a middleman but a broker. Rees v. Department of Real Estate (1977)

76 Cal.App.3d 286, 295.")

12 13

Plaintiffs were harmed by Defendants' employment of and compensation paid to Osborn, the nature and amount of which is discussed below.

Defendant's conduct was a substantial factor in causing Plaintiff's harm. The Court agrees

with Plaintiffs that, but for Defendants making their license available, Osborn would not have been

able to feloniously manipulate Plaintiffs as he did. Ultimately, the source from which Osborn

defrauded Plaintiffs were the funds Defendants brokered on behalf of Plaintiffs.

6. Defendants Target Mortgage, Inc. and Nilda Meg did not carry their burden on

their affirmative defense of unclean hands to show that Plaintiffs John Hage, Bonnie Hage,

both individually and as Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and

Co-Managers of SD 32nd Street Apartments, LLC violated conscience or good faith towards

Defendants.

Defendants did not carry their burden on their affirmative defense of unclean hands to show

Plaintiffs engaged in misconduct which affected the relations between Plaintiffs and Defendants.

Firebrand Paper Products Corporation v. East Bay Union of Machinists, Local 1304, United

Steelworkers of America, AFL-CIO (1996) 227 Cal. App. 2nd 675, 728, 729.

27 28

7. The damages sustained by Plaintiffs John Hage, Bonnie Hage, both individually and as Trustees of the J. Scofield and Bonnie Grace Hage Family Trust and Co-Managers of SD

-41STATEMENT OF DECISION

32nd Street Apartments, LLC as a result of the wrongful conduct of Defendants Target

Mortgage, Inc. and Nilda Meg.

Plaintiffs John Hage and Bonnie Hage as Trustees of the J. Scofield and Bonnie Grace Hage

Family Trust and Co-Managers of SD 32nd Street Apartments, LLC claim economic damages, and

Plaintiffs Bonnie Hage and John Hage claim economic damages and emotional distress damages.

CACI 3900, 3903 and 3905.

During trial, Defendants suggested that Plaintiffs J. Scofield and Bonnie Grace Hage Family

Trust and SD 32nd Street Apartments, LLC were the only real parties in interest; and Plaintiffs John

and Bonnie Hage were not the real parties in interest and, therefore could not have been damaged

by Defendants' misconduct. The briefing by both Defendants and Plaintiffs on this issue is

woefully inadequate, and is frustratingly difficult for the Court to discern without more assistance

from the parties. Defendants' counsel appeared to acknowledge the insufficiency of the briefing

during closing argument. The Court finds that Defendants' representations of "utmost care,

integrity, honesty and dealing with the borrower" were intended to influence, and were in fact relied

upon by, John and Bonnie Hage (Exh.'s "225 and 742"). John and Bonnie Hage are real parties in

interest, and therefore entitled to recover damages to the extent they have been damaged by

Defendants' misconduct.

Plaintiffs presented their economic damages through their accounting expert, Richard

Holstrom. Though Defendants challenged Holstrom's damages analysis on cross-examination,

Defendants elected not to call their own accounting expert. The Court, except as noted, has

accepted Holstrom's un-contradicted opinions. In view of Plaintiff John Hage's acknowledgment

that he was aware, prior to his introduction to Defendants, of Osborn's felonious past, Plaintiffs'

payments of$367,227.44 to Osborn after October 14, 2014 (and prejudgment interest of

$57,596.04) will not be charged against Defendants. They are recoverable against Osborn but not

against Defendants herein. The Court awards a total past loss in the amount of $319,229.35, and a

total future loss in the amount of $782,104.10, the total amount of which is $1,101,333.40 against

Defendants jointly and severally.

-42STATEMENT OF DECISION

Plaintiff John Hage credibly testified to what the Court perceived to consist of mental

suffering, loss of enjoyment of life, inconvenience, anxiety, humiliation and emotional distress

(CACI 3905A). The Court awards John Hage non-economic damages in the amount of$150,000;

however, the Court apportions 50% of John Rage's hann to Osborn's responsibility and,

accordingly, reduces his net non-economic recovery to $75,000. Civil Code section 1431.2; Aetna

Health Plans of Calif. v. Yucaipa-Calimesa Joint Unified School Dist. (1999) 72 Cal. App. 4th

1175, 1190.

8 9 10 11 12 13

Plaintiff Bonnie Hage did not introduce much, if any, evidence of her emotional distress and, therefore, did not carry her burden warranting a recovery of non-economic damages. Finally, the Court emphasizes that Plaintiffs' damages against Osborn, arising from the totality of the harm he caused Plaintiffs, will be determined at a future hearing. 8. Cross-Complainant Target Mortgage, Inc. did not carry its burden to show that Cross-Defendants John Hage and Bonnie Hage breached the listing agreement (CACI 303).

Cross-Complainant and Cross-Defendants entered into a contract for Cross-Complainant to

sell the residence located at 1125 Savoy Street, San Diego, California 92107, as Cross-Defendants'

broker. Exh. "715."

Cross-Complainant did not do all, or substantially all, of the significant things that the

contract required it to do, and it was not excused from doing those things in the contract, in that

Cross-Complainant employed Osborn, an unlicensed agent, to induce Cross-Defendants to enter

into the agreement, and to assist Cross-Complainant to perform its obligations under the agreement.

Cross-Defendants did not fail to do something that the contract required them to do, and

Cross-Defendants did not do something that the contract prohibited them from doing. Cross-

Defendants were entitled to demand that Cross-Complainant relieve Cross-Defendants from their

obligations, if any, under the agreement, and Cross-Complainant understandably agreed to "cancel

the listing agreements." Exh. "287." Cross-Complainant's argument that its agreement to "cancel"

Exh. "715" was vitiated by Cross-Defendants' alleged misconduct is without merit. As reflected by

the Court's findings and orders herein, and as corroborated by Osborn's felony plea agreement,

Osborn "stole or embezzled money from the Hages," the sole basis Cross-Complainant's -43STATEMENT OF DECISION

"cancellation of both listings." Exh. "287." Cross-Complainant freely and knowingly gave up its

right to have Cross-Defendants perform their obligations, if any, by terminating the agreement.

CACI 336.

9. Cross-Defendants John Hage and Boonie Hage's affirmative defense of equitable estoppel is moot.

Equitable Estoppel is whenever a party has, by his own statement or conduct, intentionally

and deliberately led another to believe a particular thing true and to act upon such belief, he is not

permitted to contradict it, the specific elements of which are (1) a representation or concealment of

material facts, (2) made with knowledge, actual or virtual, of the facts, (3) to a party ignorant,

actually and permissibly, of the truth, (4) with the intent, actual or virtual, that the latter act upon it,

and (5) the party must have been induced to act upon it. Bailey v. Outdoor Media Grp. (2007) 155

Cal. App. 4th 778, 790.

In view of the Court's findings that Cross-Complainant Target Mortgage, Inc. did not carry

its burden to show that Cross-Defendants John Hage and Bonnie Hage breached the listing

agreement, and that Cross-Defendants carried their burden on their afflI'lllative defense of waiver to

show they did not have to pay Cross-Complainant any commission, Cross-Defendants' affirmative

defense of equitable estoppel is moot.

10. Cross-Complainants Target Mortgage, Inc. and Nilda Meg did not carry their

burden to show that they were harmed by the negligence of Cross-Defendants John Hage,

Boonie Hage, both individually and as Trustees of the J. Scofield and Bonnie Grace Hage

Family Trust and Co-Managers of SD 32nd Street Apartments, LLC, and are not entitled to

equitable indemnity from Cross-Defendants.

Cross-Defendants were not negligent. CACI 400. Cross-Complainants' theory is that

Cross-Defendants breached their duty by submitting "materially false and misleading" loan

applications based, in part, on Bonnie Hage's failure to adequately monitor and disclose John

Rage's "diminished mental capacity and judgment." ROA# 171, par. 59. The Court recognizes

the ages and diminishing faculties of the Hages, and empathizes with the challenges John Hage was

confronted with during the Osborn era; however, the Court also appreciates Cross-Complainants' -44STATEMENT OF DECISION

argument that John Hage has 38 years of banking experience and, before Osborn introduced the

Hages to Cross-Complainants, John Hage was aware of Osborn's felonious past. The Court also

agrees with Cross-Complainants that part, if not much, of John Hage's explanation of why he gave

so much money to .Osborn is difficult to make sense of. Though the plausibility of his explanation

is questionable, the Court does not find, in the slightest, that John Hage engaged in wrongdoing.

The Court rejects Cross-Complainants' argument that John Hage participated in a money

laundering scheme. True, under challenging circumstances, John Hage exercised, at times,

unreasonable judgment; however, the Court is not persuaded that Cross-Complainants have carried

their burden to show that Cross-Defendants submitted "materially false and misleading" loan

applications, or that Bonnie Hage failed to adequately monitor and disclose John Rage's

"diminished mental capacity and judgment."

Further, in view of the Court's findings and orders that Cross-Defendants did not engage in

wrongful conduct, Cross-Complainants are not entitled to be equitably indemnified by Cross-

Defendants. CACI 406, 3800.

11. Cross-Defendants Bonnie Hage and John Hage claim that Cross-Complainants

Target Mortgage, Inc. and Nilda Meg's own negligence contributed to their harm is moot.

In view of the Court's findings that Cross-Complainants Target Mortgage, Inc. and Nilda

Meg did not carry their burden to show that they were harmed by Cross-Defendants' negligence,

Cross-Defendants' claim that Cross-Complainants' own negligence contributed to their harm is

moot. CACI 405.

Conclusion

The Court finds, as set forth above, in favor of Plaintiffs and Cross-Defendants and against

Defendants and Cross-Complainants. The parties are directed to serve their objections, if any, to

the Court's SOD within the time required by law. The Court sets a Status Conference on August

10, 2017 at 3:00 pm for the purpose of hearing the objections, if any, to the Court's SOD. If there

Ill

Ill -45STATEMENT OF DECISION

are no objections, the Court directs Plaintiffs and Cross-Defendants to prepare a Judgment

consistent with the Court's SOD.

IT IS SO ORDERED.

5 6 7 8

9 10

11 12

13 14

15 16 17 18 19

20 21 22

23 24

25 26 27

28 -46STATEMENT OF DECISION

EXHIBIT 15

SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO CENTRAL MINUTE ORDER

DATE: 08/11/2017

TIME: 11 :16:00 AM JUDICIAL OFFICER PRESIDING: Joel R. Wohlfeil CLERK: Juanita Cerda REPORTER/ERM: Not Reported BAILIFF/COURT ATTENDANT:

DEPT: C-73

CASE NO: 37-2016-00003885-CU-FR-CTL CASE !NIT.DATE: 02/04/2016 CASE TITLE: HAGE vs. Gotmortgage.com [IMAGED] CASE CATEGORY: Civil - Unlimited CASE TYPE: Fraud APPEARANCES

The Court, having taken the above-entitled matter under submission on- 8/10/17 and having fully considered the arguments of all parties, both written and oral, as well as the evidence presented, now rules as follows: The Court has reflected on the arguments of counsel and re-reviewed Defendants' objection, Plaintiffs' response and Defendants' reply papers. The Court confirms, except as modified at the hearing on August 10, 2017, its tentative ruling as the Court's order to OVERRULE Defendants' objection, DENY Defendants' Motion for a further Statement of Decision ("SOD"}, and GRANT Defendants' request for an offset in the amount of $500,000, which was paid by the settling co-Defendants Gotmortgage.com, Thomas Lo and the Parks to Plaintiffs. The Court directs that Plaintiffs and Cross-Defendants to prepare a Judgment, consistent with the Courts' findings and orders in the Court's SOD (ROA# 430) and as modified herein.

Judge Joel R. Wohlfeil

DATE: 08/11/2017 DEPT: C-73

MINUTE ORDER

Page 1 Calendar No.

EXHIBIT 16

Clerk ol the Sup1rlor Court

AUG 2 9 2017

By: J. CERDA

6 7

SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO

CENTRAL DIVISION

10 11 12 13 14

JOHN SCOFIELD HAGE and BONNIE GRACE HAGE, individually and as TRUSTEES OF THE J. SCOFIELD AND BONNIE GRACE HAGE FAMILY TRUST and Co-Managers of SD 32ND STREET APARTMENTS, LLC, a California limited liability company,

GOTMORTGAGE.COM, a California corporation; JAMES M. OSBORN, JR., an individual; TARGET MORTGAGE INC., a California corporation; ANDREA HAEWON PARK, an individual; THOMAS IPING LO, an individual; NILDA ANN MARIE MEG, an individual, and DOES 125, inclusive,

[P~08:ED] JUDGMENT DEPT: IC JUDGE:

C-73 Hon. Joel R. Wohlfeil

Plaintiffs,

CASE NO. 37-2016-00003885-CU-FR-CTL

21 Defendants.

22 23

AND ALL RELATED CROSS-CLAIMS.

Plaintiffs and Cross-Defendants JOHN SCOFIELD HAGE and BONNIE GRACE HAGE,

BOTH INDIVIDUALLY AND AS TRUSTEES OF THE J. SCOFIELD AND BONNIE GRACE

HAGE FAMILY TRUST AND CO-MANAGERS OF THE SB 32ND STREET APARTMENTS,

LLC ("Plaintiffs") appeared in person and by their counsel ofrecord, Phillip C. Samouris and 8118537.1

JUDGMENT

Rabil K. Swigart of Higgs Fletcher & Mack LLP. Defendants and Cross-Complainants NILDA

ANN MARIE MEG ("Meg") and TARGET MORTGAGE, INC. (collectively the "Subject

Defendants") appeared in person and by their counsel of record, Mark J. Warfel of the Law

Offices of Mark J. Warfel and Desiree Meguerditchian of Foothill Law Group. After a three-

week trial, where oral and documentary was presented and the matter argued and submitted, and

pursuant to the Court's Statement of Decision filed July 6, 2017 (ROA #430, as modified after the

hearing on August IO, 2017, per the Minute Order dated August 11, 2017), and good cause

appearing, therefore,

IT IS HEREBY ORDERED AS FOLLOWS:

On Plaintiffs complaint, Judgment is entered in favor of Plaintiffs and against the

Subject Defendants, jointly and severally, for "economic" damages in the amount of

$1,101,333.40-less the $500,000 offset for the settlement of defendant GotMortgage.com, for a

net award of economic damages of $601,333.40 against the Subject Defendants. The Court

further awards plaintiff John Hage "non-economic" damages in the amount of $150,000;

however, the court apportions 50% of plaintiff John Hage's non-economic harm to defendant

James M. Osborn's responsibility and, accordingly, reduces plaintiff John I-Iage's net non-

economic recovery to $75,000 against the Subject Defendants, jointly and severally.

Meg shall be identified as "NILDA ANN MARIE MEG aka NILDA MEG aka

NILDA ANN MARIE MEGERDICIAN aka NILDA MEGERDICHIAN aka NILDA

MERGEDICIAN aka NILDA MEGUERDITCHIAN".

The Subject Defendants shall take nothing by way of their cross-complaint.

Plaintiffs shall recover from the Subject Defendants their costs in the amount of

$- - - - -

Plaintiffs shall recover from the Subject Defendants their attorney's fees in the

amount of$- - - -

26 27

DATED: _......:.[?'_•_2-----'--9'.....:...•/_,__7_ _

JUDGE OF THE SUPERIOR COURT 28 8118537.1

2 JUDGMENT

EXHIBIT 17

Case

Hage V Got Mortgage Depos

Issue Code

FELON - RUNNING TOTAL

HAGE, JOHN 5/2/17 VOL 1 1

019:23 - 020:16

019 23

slips?

25 020 01 02

I keep records of every expense that I make whether it's groceries, whether it's loan

payments that are not related to this.

expenses that I make, any income that I make, I have

a record of every transaction that I do in my â&#x20AC;&#x201D; my

bank accounts.

Why did you keep the U.S. mail slips?

I just told you.

Well, you told me about the FedEx slips.

I'm asking is that the same reason, same answer? A

Because I keep records.

Were you expecting to be reimbursed for

these expenses?

10:39:26

Yes.

034: :09

Look a little bit below that.

That were related to this, yes. You see

where it has "$269,200 to Jimmy"?

10:56:18

Yes.

And so I'm presuming that the $628,000

was the loan cashout loan you received from Target?

629.

Yes.

Out of the $629,000 cashout loan you

Is that correct?

10:56:37

received from Target Mortgage on or about October

2014, you write â&#x20AC;&#x201D; you distributed or proposed to

distribute 269,200 to Jimmy; is that right? MR. SAMOURIS;

21 22

Objection.

You can answer.

THE

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10:56:53

Lacks

foundation.

035:02

10:38:58

10:39:14

035:02- 035:12

Any kind of

10:38:35

bank account that I spent money on FedEx expenses.

It was part of the transaction, because I

034:09 - 034:24

"Why did you keep the FedEx

kept the FedEx slips so that I could record in my

Thank you.

WITNESS:

Yes.

Below that, $359,800 with an arrow that

6/17/17

Page 2 of 72

request that he had made for the 269.2.

to Jimmy 2- — giving to Jimmy $269,200?

093:10 - 094:24

That was to go to the — that was money

that was going into the — the fund that he was

building, the — for the PNC loan refinance.

088 20

Well, I'm just clarifying what — you're

not saying that the sum total of all your

calculations is in this bag?

had with Osborne are in that bag.

on the telephone and talk about the running total.

089 01

We would compare notes, and they would relate with

090 10

So if you were keeping a running total.

093: :10

Did you ever tell your wife that the

reason you were taking this bank bag with you to

the bank was because you were getting cashier's

checks for James Osborne?

doing carrying a bank bag to the bank and what

purpose it was for. Q

Okay.

bank bag as opposed to putting them in a file

folder?

That's my file folder.

Okay.

25 094:01

And is there a running total

Yes.

And it's been submitted as — in our

previous depositions. Q

Okay.

And there was a — I'm sorry.

12:25:40

Then I — let me clarify my question.

Was there a running total that you were keeping that has been produced?

Yes.

In what form was it?

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