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UNITED FINANCIAL MORTGAGE CORP. v. BAYSHORES FDG. CORP.

October 18, 2002

UNITED FINANCIAL MORTGAGE CORP., PLAINTIFF
V.
BAYSHORES FUNDING CORPORATION, WILLIAM KADDIS, INDIVIDUALLY AND D/B/A WM. KADDIS REALTY, RUSSELL KUHLMAN, CHRISTINA KIM, SHELLY YI A/K/A SHELLY YI SEO OR SHELLY S. SEO, PATRIZIA LANZAFAME, AND PHILLIP SAINT ANDREW, DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Judge

    MEMORANDUM OPINION AND ORDER

Defendants Bayshores Funding Corporation, Russell Kuhlmann*fn1, Christina Kim and Shelly Yi (the "Removing Defendants") have moved to dismiss this case for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2), or to transfer the case to California under 28 U.S.C. § 1404.*fn2 Because the Court finds that the Removing Defendants' argument that this Court lacks personal jurisdiction over them has merit, in the interests of justice, the Court sua sponte transfers venue of this case pursuant to 28 U.S.C. § 1406, to the Central District of California, where that court will have personal jurisdiction and venue over all the parties to the action.

BACKGROUND

Plaintiff United Financial Mortgage Corporation ("United Financial") is an Illinois Mortgage Banker, with its principal place of business located at 600 Enterprise Drive, Suite 206, Oak Brook, Illinois. (R. 1-1, Compl. ¶ 2.) United Financial is a national mortgage banker primarily engaged in the origination and funding of mortgage loans. (Id.) United Financial has a sales office located in Irvine, California. (R. 15-1, Kuhlmann Decl. ¶ 3.) United Financial initially filed this case in Illinois State Court, seeking damages arising from an alleged mortgage fraud scheme whereby the Defendants fraudulently induced United Financial to fund mortgage loans of approximately $1.3 million. (R. 1-1, Compl.) Plaintiff alleges common law fraud, civil conspiracy, fraud based upon culpable ignorance and reckless disregard, fraud, negligence and breach of contract. (Id.) Defendants Bayshores, Kuhlmann, Kim and Yi removed it to this Court as a diversity action. (R. 1-1, Pet. for Removal.)

Defendant Bayshores Funding Corporation ("Bayshores") is a California Corporation with its principal place of business in Newport Beach, California. (R. 1-1, Compl. ¶ 6). Bayshores is a licensed broker engaged in the business of originating residential mortgage loans. (Id.) Bayshores does not have any offices, employees, bank accounts, or property in Illinois. (R. 15-1, Kuhlmann Decl. ¶ 11.) It does not hold meetings in the state. (Id.)

Defendant Russell Kuhlmann is a California citizen residing and working in Newport Beach, California. (Id. ¶ 1.) Kuhlmann is the President of Bayshores. (R. 1-1, Compl. ¶ 7.) Kuhlmann has not had any contacts with Plaintiff's employees located in Illinois. (R. 15-1, Kuhlmann Decl. ¶ 10.) Furthermore, he has not traveled to Illinois in connection with any of the transactions at issue in this case. (Id.)

Defendant Christina Kim also works for Bayshores as a mortgage loan processor. (R. 12-1, Kim Decl. ¶ 2.) Kim communicated only with plaintiff's Irvine, California office in connection with the transactions at issue in this case. (Id. ¶ 9.) She did not talk to anyone in the plaintiff's Illinois office and did not travel to Illinois in connection with any of the mortgages at issue. (Id. ¶ 11.)

Defendant Shelly Yi is a licensed real estate broker who resided and worked in Glendale, California. (R. 1-1, Compl. ¶ 8.) Yi did not have any direct contacts with plaintiff. (R. 11-1, Yi Decl. ¶ 5.) Moreover, Yi did not travel to Illinois in connection with the transactions at issue. (Id. ¶ 5.) The Complaint alleges that Yi received $57,000 in proceeds from one of the loans at issue which was authorized by plaintiff's Oak Brook, Illinois office. (R. 1-1, Compl. ¶ 8.)

Defendant William Kaddis is a licensed real estate broker doing business as William Kaddis Realty. (Id. ¶ 5.) Kaddis worked in Los Angeles, California. (Id.) Kaddis served as defendant Patrizia Lazafame's real estate agent in the purchase of certain property located on Lamar Road in Los Angeles, California. (Id.) The Complaint further alleges that Kaddis served as defendant Saint Andrew's broker in the purchase of property located on Plymouth Boulevard in Los Angeles, California. (Id.)

I. The Wholesale Agreement

On approximately June 7, 2000, defendant Bayshores entered into a Wholesale Agreement with United Financial. (R. 1-1, Compl. ¶ 12.) The Wholesale Agreement specifically noted that Bayshores entered it with United Financial, "with offices at 600 Enterprise Drive, Suite #206, Oak Brook, IL 60523." (Id., Ex. A at 1.) The Wholesale Agreement also provided that "any unresolved dispute between the parties arising out of, in connection with the terms of this Agreement shall be adjudicated by arbitration in the City of Oak Brook, Illinois. . . ." (Id. ¶ 13.) Bayshores executed the Wholesale Agreement in California and forwarded it to plaintiff's Irvine, California office. (R. 15-1, Kuhlmann Decl. ¶ 4-5.) Kuhlmann, United Financial's president, executed the Wholesale Agreement in Oak Brook, Illinois. (R. 1-1, Compl., Ex. A at 6.)

II. The Real Estate Transactions

The Complaint contains allegations of fraud involving the sale of two properties: 1)2668 Lamar Road, Los Angeles, California (the "Lamar Road Property"); 2) 1101 South Plymouth Boulevard, Los Angeles, California (the Plymouth Boulevard Property). Both of these properties are located in California, and all of the Defendants were located in California.

A. The Lamar Road Property

Plaintiff contends that in April and May of 2001 Defendants Kaddis, Yi, Kim, Kuhlmann and Bayshores conspired to enter a fraudulent transaction with defendant Lanzafame for the purchase of the Lamar Road Property. (R. 1-1, Compl. ¶¶ 17-30, 49-55.) Yi allegedly sent Lanzafame to Bayshores, Kim and/or Kuhlmann to assist in the preparation of the false loan documentation, and Yi allegedly profited from the sale of the Lamar Road Property. (Id. ¶¶ 18, 19.) Plaintiff alleges that Bayshores, Kaddis, Lanzafame, Yi, Kim and Kuhlmann prepared false loan documents in connection with the sale of the Lamar Road Property. (Id. ¶ 21.) Those false documents, according to United Financial, caused them to issue two loans to Lanzafame for the purchase of the property. (Id. ¶ 25.) These loans totaled $980,000. (Id. ¶ 27.)

As the affidavits submitted by the Removing Defendants show, Bayshores, Kim, Yi and Kuhlmann did not have any direct dealings with Illinois in connection with this transaction. They dealt instead with Plaintiff's Irvine, California office. Specifically, they submitted paperwork to the Irvine, California Office and communicated with Plaintiff's employees in that office. The Lamar Road Property is located in California, and the paperwork was prepared in California. United Financial authorized and initiated the wire transfers in connection with the loans from Oak ...


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