Filed 9/27/13 McMenamy v. Colonial First Lending Group CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                       (Nevada)



DIANA MCMENAMY et al.,                                                                       C070642

                   Plaintiffs and Appellants,                                       (Super. Ct. No. 77829)

         v.

COLONIAL FIRST LENDING GROUP, INC., et al.,

                   Defendants and Respondents.




         Defendants Colonial First Lending Group, Inc., (Colonial) et al. challenge the
personal jurisdiction of the California courts over an action by plaintiffs Diana
McMenamy et al. for fraud, breach of fiduciary duty, negligent misrepresentation, breach
of contract, and violation of California‟s unfair competition law (Bus. & Prof. Code,
§ 17200 et seq.) arising out of the purchase of their home in Grass Valley, California.
         Plaintiffs sued defendants Colonial and its loan officer Devin Jones alleging that
defendants repeatedly misrepresented that plaintiffs‟ monthly loan payments, inclusive of
principal, interest, property taxes, and insurance “would be very close to a maximum




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amount of $1,800 over the life of the loan,” when in fact the monthly payments are
$2,225.
       Appearing specially, defendants moved to quash service of summons on the
ground the court lacks personal jurisdiction over them because they “had no contacts with
plaintiffs in California, let alone the minimum contacts necessary to satisfy the due
process requirements of the U.S. Constitution.” (Code Civ. Proc., § 418.10, subd. (a)(1).)
Defendants, who are not licensed to do business in California, claim they assisted
plaintiffs with the refinance of their Idaho home, the proceeds of which were used to
purchase the home in California, and referred plaintiffs to another mortgage broker that
was licensed to do business in California for assistance in financing the California home.
       The trial court concluded there is no evidence defendants were involved in the
California transaction other than confirming that the proceeds from the Idaho refinance
were available and dismissed plaintiffs‟ complaint. Plaintiffs appeal, contending the
evidence established defendants originated the loan for their California home, had
numerous communications with plaintiffs and plaintiffs‟ agents in California about both
the refinancing of their Idaho home and the financing of their California home, and were
paid a portion of the brokerage fees collected in connection with the purchase of the
California home. For these reasons plaintiffs assert California has jurisdiction over
defendants.
       We shall conclude plaintiffs established a basis for personal jurisdiction by
demonstrating that defendants actively assisted them in obtaining financing for their
California home and were compensated for their efforts. Accordingly, we shall reverse.
                  FACTUAL AND PROCEDURAL BACKGROUND
       The evidence presented in support of and in opposition to the motion to quash
established the following: Colonial is a mortgage brokerage firm, is incorporated in
Utah, and its office is in Murray, Utah. Colonial is not licensed to do business in
California. When Colonial “came across [loans] that it was unable to do,” such as when

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it was not licensed to do business in a particular state, it referred the loans to Flagship
Financial Group (Flagship).
       Jones, a lifelong resident of Utah, is a loan officer. At all relevant times he
worked as an independent contractor for Colonial originating residential mortgage loans.
During his tenure with Colonial, Jones referred approximately 10 to 20 loans to Heather
Hodge, the loan processor at Flagship. He would personally deliver a paper copy of the
file to Hodge and say, “This person needs a loan.” Typically the referrals from Colonial
were complete loan files. At her deposition, Hodge testified that if she needed additional
information, she talked to Colonial‟s Vice President Adam Erikson or someone else at
Colonial “because they were the originator of the loan.” She “would never talk to the
borrower.”1
       When loans were referred to Flagship by Colonial, Flagship paid Colonial First
Business Development, LLC, a separate entity managed by the owners of Colonial and
owned by their wives, “50 percent plus or minus 25 percent” of “the loan brokerage fee
or loan origination fee” paid to Flagship at closing. Colonial First Business
Development, LLC, in turn, paid to Jones approximately 65 percent of the fee received
from Flagship, and the owners of Colonial First Business Development, LLC (i.e., the
wives of the owners of Colonial), retained the rest.
       In June 2008 plaintiffs moved from Idaho to California after plaintiff Michael
McMenamy got a job in Grass Valley. Prior thereto, in May 2008, Jones cold called
plaintiffs after receiving a lead through one of Colonial‟s lead systems. Jones initially
spoke to plaintiff Diana McMenamy who told him she and her husband were looking to
refinance their Idaho residence to get cash out so that they could purchase a home in



1   Hodge later testified somewhat inconsistently that she believed Flagship was the
originator of the loan because “the loan funded through Flagship,” and that Flagship was
the mortgage broker on loans referred to it by Colonial.

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California. During subsequent conversations with plaintiff Michael McMenamy, Jones
gathered information relevant to both the refinance of the Idaho home and the purchase of
the California home. Plaintiffs told Jones they could afford a loan payment of
approximately $1,800 a month on the California home.
       Jones and Colonial brokered the refinance of the mortgage on the Idaho home,
which closed on July 22, 2008. Plaintiffs received $92,006.18 in cash as a result of the
refinance, and a check for that amount was distributed at closing. Jones referred
plaintiffs‟ California loan to Hodge at Flagship because Colonial was not licensed to do
business in California.2 Hodge recalled receiving the file from Jones. While she could
not recall specifically what was in the file, she agreed that “when Colonial sent [her] the
file, the information all had to be there in order for [her] to do something.”
       Plaintiffs‟ California real estate agent Georgann Russell had numerous
communications with Jones concerning the financing of the California property and
understood Colonial was acting as the mortgage broker for the California loan.
According to Russell, Jones ordered the appraisal for the California property and
provided her with the appraiser‟s contact information. He also worked with Russell and
the escrow officer at Placer Title Company “to complete all of the documentation to close
the sale and escrow” of the California property. At no time was Russell “informed that
any person or entity other than . . . Jones at Colonial was acting as the mortgage broker
for [plaintiffs].”




2  In his declaration, Jones represents that he informed Diana McMenamy in their initial
conversation that neither he nor Colonial could broker the California loan but that he
could refer her to another mortgage broker that was licensed to do business in California.
Sometime thereafter, Diana McMenamy called Jones in Utah and said she wanted him
and Colonial to broker plaintiffs‟ Idaho refinance.

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       On July 24, 2008, two days after the Idaho refinancing closed, Russell sent an
email to Jones, inquiring: “We are trying to . . . schedule signing off buyer and seller and
wondering when you expect to send loan docs to Placer Title in Grass Valley.”
       On July 27, 2008, Russell sent an email to the escrow officer at Placer Title,
advising: “I received a call from Devin Jones . . . and he anticipates [the] loan docs will
be here by Wednesday[, July 30, 2008]. I was wondering what your availability was for
signing off the [plaintiffs].”
       On July 31, 2008, Jones sent an email to Russell, stating:
       “Our file is in line for docs to be drawn today, so they should be to the title
company this afternoon.
       “I spoke with [the escrow officer] regarding the $1,000 [security deposit paid on
the California property] and they will disburse that money back to Michael at closing.[3]
       “I will be leaving town this afternoon and will be back Monday. If you have any
questions you may try to contact me on my cell phone . . . .
       “You may also speak to my processor Heather Hodge . . . .”
       On August 7, 2008, escrow for the California property closed. The buyer‟s
closing statement for the California property identifies Flagship as the loan originator,
loan processor, and mortgage broker.4
       Plaintiffs sued Colonial and Jones in Nevada County Superior Court for fraud,
breach of fiduciary duty, negligent misrepresentation, breach of contract, and violation of
California‟s unfair competition law arising out of plaintiffs‟ purchase of their California
home. Each of these causes of action is based on the allegation defendants



3  Plaintiffs rented the California property for approximately one month before escrow
closed, thus, it can be inferred the security deposit was paid in connection therewith.
4  Jones denied he or Colonial participated in originating or closing the California loan.
According to Jones, all such work was handled by Flagship.

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misrepresented to plaintiffs that their monthly loan payments on the California home
would be approximately $1,800 over the life of the loan, when in fact the monthly loan
payments are $2,225.
       Appearing specially, defendants moved to quash service of summons on the
ground the court lacks personal jurisdiction over them because they “had no contacts with
plaintiffs in California, let alone the minimum contacts necessary to satisfy the due
process requirements of the U.S. Constitution.” Defendants claimed Flagship, not
Colonial, was the mortgage broker that originated the California loan, and Colonial was
merely a referral source for the loan. According to defendants, all of their contacts with
California were related to the refinance of the Idaho property.
       The trial court dismissed the action for lack of personal jurisdiction, ruling “[o]n
the whole, the evidence fails to show minimum contacts . . . .” The court found “the
declarations submitted in opposition do not establish that defendants conducted any
business in the state of California or engaged in any activity subjecting them to the
personal jurisdiction of California.” Rather, the court concluded the evidence “only
show[s] that Mr. Jones was aware of the plaintiffs‟ intended use of the proceeds from the
refinance of their Idaho home to make a down payment on their purchase of the home in
California and that Mr. Jones assisted the plaintiffs in coordinating the delivery of the
refinance proceeds in the Nevada County escrow that plaintiffs used to purchase their
new home in California. . . . There is no evidence whatsoever that Mr. Jones was
involved in the California transaction other than confirming that Idaho proceeds were
available.”5



5   Defendants‟ motion was initially heard on October 21, 2011. Prior thereto, the trial
court issued a tentative ruling granting the motion and dismissing plaintiffs‟ complaint.
At the hearing, however, the court granted plaintiffs‟ request for a 90-day continuance to
allow them to conduct discovery “on the sole issue of the motion to quash . . . .”
Thereafter, the parties filed supplemental briefs and supporting declarations. A hearing

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                                        DISCUSSION
       “ „California courts may exercise personal jurisdiction on any basis consistent with
the Constitution of California and the United States. (Code Civ. Proc., § 410.10.) The
exercise of jurisdiction over a nonresident defendant comports with these Constitutions
“if the defendant has such minimum contacts with the state that the assertion of
jurisdiction does not violate „ “traditional notions of fair play and substantial justice.” ‟ ”
[Citations.]
       “ „The concept of minimum contacts . . . requires states to observe certain
territorial limits on their sovereignty. It “ensure[s] that the States, through their courts,
do not reach out beyond the limits imposed on them by their status as coequal sovereigns
in a federal system.” ‟ [Citations.] To do so, the minimum contacts test asks „whether
the “quality and nature” of the defendant‟s activity is such that it is “reasonable” and
“fair” to require him to conduct his defense in that State.‟ [Citations.] The test „is not
susceptible of mechanical application; rather, the facts of each case must be weighed to
determine whether the requisite “affiliating circumstances” are present.‟ [Citation.]
       “Under the minimum contacts test, „[p]ersonal jurisdiction may be either general
or specific.‟ [Citation.]” (Snowney v. Harrah’s Entertainment, Inc. (2005) 35 Cal.4th
1054, 1061-1062 (Snowney).) Because plaintiffs do not claim general jurisdiction, we
consider only whether specific jurisdiction exists here.
       “ „When determining whether specific jurisdiction exists, courts consider the
“ „relationship[s] among the defendant, the forum, and the litigation.‟ ” ‟ ” (Snowney,
supra, 35 Cal.4th at p. 1062.) A court may exercise specific jurisdiction over a
nonresident defendant only if: (1) the defendant has purposefully availed himself or
herself of forum benefits; (2) the controversy is related to or arises out of the defendant‟s


was held on February 24, 2012. Prior thereto, the trial court issued a tentative ruling that
was identical to the tentative ruling issued by the court in October 2011. Following the
hearing, the trial court adopted the tentative ruling as its ruling.

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contacts with the forum; and (3) the assertion of personal jurisdiction would comport
with fair play and substantial justice. (Ibid.)
       A plaintiff opposing a motion to quash service of process for lack of personal
jurisdiction has the initial burden of demonstrating facts establishing a basis for personal
jurisdiction. (Snowney, supra, 35 Cal.4th at p. 1062.) If the plaintiff satisfies that
burden, the burden shifts to the defendant to show that the exercise of jurisdiction would
be unreasonable. (Ibid.)
       “ „On review, the question of jurisdiction is, in essence, one of law. When the
facts giving rise to jurisdiction are conflicting, the trial court‟s factual determinations are
reviewed for substantial evidence. [Citation.] Even then, we review independently the
trial court‟s conclusions as to the legal significance of the facts. [Citations.] When the
jurisdictional facts are not in dispute, the question of whether the defendant is subject to
personal jurisdiction is purely a legal question that we review de novo. [Citation.]‟
[Citations.] The ultimate issue of whether an exercise of jurisdiction is fair and
reasonable is a legal determination subject to de novo review on appeal. [Citation.]”
(Aquila, Inc. v. Superior Court (2007) 148 Cal.App.4th 556, 568.) Applying these
standards to the facts of this case, we conclude that California may exercise specific
jurisdiction over defendants.
       We first consider whether defendants purposefully availed themselves of forum
benefits. “ „ “The purposeful availment inquiry . . . focuses on the defendant‟s
intentionality. [Citation.] This prong is only satisfied when the defendant purposefully
and voluntarily directs [its] activities toward the forum so that [it] should expect, by
virtue of the benefit [it] receives, to be subject to the court‟s jurisdiction based on” [its]
contacts with the forum.‟ [Citations.] Thus, purposeful availment occurs where a
nonresident defendant „ “purposefully direct[s]” [its] activities at residents of the forum‟
[citation], „ “purposefully derive[s] benefit” from‟ its activities in the forum [citation],
„create[s] a “substantial connection” with the forum‟ [citation], „ “deliberately” has

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engaged in significant activities within‟ the forum [citation], or „has created “continuing
obligations” between [itself] and residents of the forum‟ [citation]. By limiting the scope
of a forum‟s jurisdiction in this manner, the „ “purposeful availment” requirement ensures
that a defendant will not be haled into a jurisdiction solely as a result of “random,”
“fortuitous,” or “attenuated” contacts . . . .‟ [Citation.]” (Snowney, supra, 35 Cal.4th at
pp. 1062-1063.)
       In our view, defendants purposefully directed their activities at residents of the
forum by playing an active role in assisting plaintiffs in obtaining a loan for their
California home after plaintiffs moved to California. According to the evidence, Jones
had numerous communications with plaintiffs while they were residing in California, as
well as with plaintiffs‟ agents. Contrary to defendants‟ claim that all of these
communications were necessary elements of Jones‟s work assisting plaintiffs with their
Idaho refinance, the evidence reveals that Jones played a significant role in originating
and closing the California loan. Among other things, he gathered information relevant to
obtaining financing for the California home, arranged for the California home to be
appraised, facilitated the preparation and delivery of loan documents, and took steps to
ensure that plaintiffs received a credit at closing for the security deposit they paid when
renting the California home prior to their purchase of the same. Significantly, plaintiffs
introduced evidence that on July 31, 2008, Jones emailed Russell and informed her: “Our
file is in line for docs to be drawn today, so they should be to the title company this
afternoon.” Because the Idaho refinance had closed nine days earlier, it would appear
that Jones was facilitating the preparation of documents for the California loan. This
conclusion is supported by Jones‟s statement in the same email that Russell could “speak
to my processor Heather Hodge” in his absence. (Italics added.) As detailed above,
Hodge was the loan processor at Flagship, and neither she nor Flagship had anything to
do with the Idaho refinance. Thus, Jones‟s reference to Hodge makes plain that he is
referring to the California loan. Jones‟s involvement in closing the California loan also is

                                              9
confirmed by his statement in the same email, “I spoke with [the escrow officer for the
California property] regarding the $1,000 [security deposit paid on the California
property] and they will disburse that money back to Michael at closing.” That security
deposit related solely to the California loan and had nothing to do with the Idaho
refinance.
       Plaintiffs also introduced evidence that defendants purposefully derived a financial
benefit from assisting plaintiffs in obtaining financing for their California home. (See
Snowney, supra, 35 Cal.4th at p. 1063.) According to Colonial‟s Vice President Adam
Erikson, when, as here, Colonial referred loans to Flagship, Flagship paid Colonial First
Business Development, LLC, an entity managed by the owners of Colonial, owned by
their wives, and with no employees of its own, a percentage of its brokerage fee or loan
origination fee, and Colonial First Business Development, LLC, passed on a portion of
that fee to the referring loan officer, in this case Jones. The fee paid to Colonial First
Business Development, LLC, was for work performed by Colonial and Jones; that
Colonial chose to have Flagship pay the fee to a shell entity does not mean that Colonial
did not purposefully derive a benefit from assisting plaintiffs.6
       That Colonial is not identified as the mortgage broker or loan officer in the loan
documents for the California loan is not dispositive where, as here, the evidence shows
Colonial and Jones played an active role in assisting plaintiffs in obtaining financing for
their California home. Hodge‟s testimony at her deposition that Flagship originated the
California loan because “the loan funded through Flagship” and that Flagship was the




6  Defendants‟ claim in their respondents‟ brief – that Colonial First Business
Development, LLC, merely received a referral fee that was not part of the closing – is
contradicted by the deposition testimony of Erikson, who, in addition to serving as a Vice
President at Colonial, is one of Colonial First Business Development, LLC‟s managing
agents. According to Erickson, Flagship paid Colonial First Business Development,
LLC, a portion of “the loan brokerage fee or loan origination fee.”

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mortgage broker on the loan, likewise, does not change the fact that defendants played an
active role in assisting plaintiffs in obtaining financing for the California home. We are
concerned with conduct, not labels, and Hodge‟s characterization of defendants‟ actions
is not evidence. Moreover, that Jones initially contacted plaintiffs while they resided in
Idaho and plaintiffs thereafter “reached out to [defendants] in Utah” does not preclude the
exercise of jurisdiction where, as here, defendants voluntarily proceeded to assist
plaintiffs, whom they knew resided in California, in obtaining financing for their
California home.
       Defendants‟ suggest “[t]he record evidence . . . demonstrates that the [plaintiffs]
were fully aware that Flagship Financial originated and brokered their California loan”
prior to that loan closing. In support of their assertion, defendants cite to evidence that in
July 2009, nearly a year after the California loan closed, plaintiffs sought to refinance
their California home through Flagship, not Colonial or Jones. Assuming for the sake of
argument that plaintiffs‟ knowledge of Flagship‟s involvement in the initial financing of
their California home is relevant, the evidence cited by defendants demonstrates only that
plaintiffs were aware of Flagship one year after the loan in question closed.
       Having concluded plaintiffs met their initial burden of introducing sufficient
evidence defendants purposefully availed themselves of the benefits of doing business in
California, we next consider whether “ „there is a substantial nexus or connection
between the defendant[s‟] forum activities and the plaintiff[s‟] claim.‟ ” (Snowney,
supra, 35 Cal.4th at pp. 1067-1068.) Defendants‟ forum activities consisted of assisting
plaintiffs in obtaining a loan for the California property, and plaintiffs claim that in the
course of rendering that assistance, defendants repeatedly misrepresented the amount of
the monthly payment plaintiffs would be required to pay under the loan. Because
plaintiffs‟ claims arise out of defendants‟ forum activities, the exercise of specific
jurisdiction is appropriate. (Id. at p. 1068.)



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       Finally, having determined that plaintiffs met their burden with respect to the first
two requirements of the specific personal jurisdiction inquiry, we must consider whether
the assertion of personal jurisdiction is fair. (Snowney, supra, 35 Cal.4th at p. 1070.) “In
making this determination, the „court “must consider the burden on the defendant, the
interests of the forum State, and the plaintiff‟s interest in obtaining relief. It must also
weigh in its determination „the interstate judicial system‟s interest in obtaining the most
efficient resolution of controversies; and the shared interest of the several States in
furthering fundamental substantive social policies.‟ ” ‟ [Citations.] „Where[, as here,] a
defendant who purposefully has directed [its] activities at forum residents seeks to defeat
jurisdiction, [it] must present a compelling case that the presence of some other
considerations would render jurisdiction unreasonable.‟ [Citation.]” (Ibid.)
       Defendants argue forcing them to defend in California would be unjust and unfair
because they lacked sufficient contacts with California to support a finding of
jurisdiction, and any contacts they did have related solely to the refinance of plaintiffs‟
Idaho home. We have concluded that defendants had significant contacts with California
through their role in assisting plaintiffs in obtaining financing for plaintiffs‟ California
home, and that the litigation bears a substantial connection to those contacts. Plaintiffs
are California residents. The conduct at issue involved their California residence. The
burden on defendants, Utah residents, to defend in California, while not inconsequential,
is not great. Plaintiffs and other witnesses reside in California, and California is a short
plane ride from Utah. Moreover, California has a strong interest in providing a forum to
its residents. (See Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434,
477.) In short, defendants have failed to demonstrate that the exercise of jurisdiction by
the California courts in this matter would be fundamentally unfair.
       Accordingly, we conclude the trial court erred in dismissing plaintiffs‟ complaint
for lack of personal jurisdiction.



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                                       DISPOSITION
       The order dismissing the complaint for lack for personal jurisdiction is reversed.
Plaintiffs shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)



                                              BLEASE                    , Acting P. J.


We concur:


         HULL                       , J.


         MAURO                      , J.




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