Gateway Bank, F.S.B. v. Metaxas

Filed 6/3/21
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

GATEWAY BANK, F.S.B.,
Plaintiff and Respondent,
A158793
v.
POPPI METAXAS, (San Mateo County
Super. Ct. No. CIV 534510)
Defendant and Appellant.

Appellant Poppi Metaxas was the president and chief executive officer
of Gateway Bank (Gateway or the bank) in 2008 when the subprime
mortgage market collapsed, leading to the financial crisis. Following their
examination of Gateway, federal regulators categorized it as a “troubled
institution,” and in response the bank set out to raise more capital and deal
with its troubled assets. Certain transactions caused the regulators to be
suspicious, leading to a lengthy investigation. Along the way, the United
States Attorney also became involved, causing another investigation, which
culminated in Metaxas being indicted—and in 2015 to her pleading guilty to
conspiracy to commit bank fraud.
Shortly thereafter, the bank sued Metaxas based on two transactions
involving Ideal Mortgage Brokers: (1) a March 2009 $3.65 million working
capital loan; and (2) a November 2009 $757,000 wire transfer. Following a
lengthy trial, the court-appointed referee found for the bank, awarding it
$250,000 in tort of another damages arising from “the fallout” from the first

1
transaction, and $132,000 in damages for the second. Metaxas appeals,
asserting two arguments: (1) the tort of another damages must be reversed
because the first transaction resulted in “substantial benefit” (Rest.2d Torts,
§ 920) to Gateway, and (2) the award for the second transaction was error
because Metaxas had no alternative but to approve the wire transfer. We
reject both arguments and affirm.
BACKGROUND
The Parties and the General Setting
Plaintiff and respondent Gateway is a community bank headquartered
in Oakland.
Defendant and appellant Poppi Metaxas joined Gateway in 1993 as a
compliance officer. She was quickly promoted, to the dual position of chief
compliance officer and chief lending officer, and promoted again in 1996, to
president and chief executive officer (CEO). She also became a member of the
Board of directors.
In 2008, the subprime mortgage market collapsed, and widespread
defaults caused a chain reaction leading to a global financial crisis. It was a
challenging time in the banking industry, and regulators pressured banks to
improve their balance sheets. Gateway was no exception, and it became the
subject of federal oversight.
The federal regulatory body overseeing Gateway was the Office of
Thrift Supervision (OTS), an agency of the Department of Treasury.
Following its examination, in late 2008 the OTS advised Gateway officials
that the bank’s financial condition had to be improved, and in February 2009,
the OTS issued its formal conclusions and rating, categorizing the bank as a
“troubled institution.”

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 In response, the bank’s Board embarked on a campaign to raise more
capital and shed many of its “troubled assets,” which consisted of real
property Gateway had acquired through foreclosure (known as real estate
owned or “REOs”) and non performing loans (“NPLs”) in various stages of
default. What the bank—and Metaxas—did in connection with the effort
became the subject of a lengthy investigation, as set forth in detail below.
Suffice to say here that the investigation led to the OTS demanding in early
2010 that Gateway fire Metaxas, who in fact left the bank in May. The OTS
investigation continued.
Then, in 2011, a New York Federal Grand Jury issued a subpoena to
Gateway requiring documents and testimony, which resulted in an additional
investigation, one that lasted several years. This investigation led to a
March 2014 indictment charging Metaxas with three crimes: (1) conspiracy
to commit bank fraud; (2) bank fraud; and (3) perjury, lying under oath to the
OTS. And in 2015, Metaxas pled guilty to the conspiracy charge, and was
sentenced to 18 months in prison.
This lawsuit followed.
The Proceedings Below
Gateway’s Lawsuit
In July 2015, Gateway filed a complaint against Metaxas. It alleged
eight causes of action, for fraud, breach of fiduciary duty, and negligence
based on the two transactions with Ideal Mortgage Brokers.
In September, Metaxas filed an answer and in November, a cross-
complaint, which she would come to dismiss in February 2016.
At a November 2015 case management conference, the case was set for
jury trial for September 2016. Due to various motions, and stipulations, and
numerous contested and uncontested matters held before several different

3
judicial officers, trial was continued several times, ultimately to be heard as a
court trial in March 2019.
The parties wanted the trial to be before the Honorable Robert Baines,
a retired superior court judge. And in October 2018, the superior court filed
an order pursuant to Code of Civil Procedure section 638 appointing retired
Judge Baines to serve as referee, to hear and determine all issues of fact and
law and to report a statement of decision. As the referee would later put it,
at the parties’ request he was to decide five causes of action, three involving
the working capital loan (the first, for fraud; the second, for concealment; and
the fourth, for breach of fiduciary duty), and two involving the wire transfer
(the fifth, for breach of fiduciary duty; and the sixth, for negligence).1
The Trial and the Statement of Decision
Trial began on March 11, 2019, and took place over eight days, with the
referee hearing from eight witnesses, five on behalf of Gateway and three on
behalf of Metaxas. The five Gateway witnesses were Metaxas; James Keefe,
a former Gateway director; Timothy Green, former Gateway chief financial
officer (CFO); Grant Stifel, an expert on legal fees; and Brian Kelley, an
expert on banking. The three Metaxas witnesses were herself; Joseph
Anastasi, an expert on accounting; and James Wagstaffe, an expert on legal
fees. The parties introduced 202 exhibits.
Following trial, the parties entered into a “Stipulation and Order
Modifying the Order Appointing Referee” to address various posttrial
procedures, including the schedule for submitting posttrial briefs and the
timing and procedure for rendering the statement of decision. And the
parties requested a statement of decision on whether Metaxas was liable to
Gateway on its various causes of action; the amount of damages; whether

1 In October 2017, Gateway had dismissed some causes of action.

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Gateway’s claims were barred by various affirmative defenses; and whether
Metaxas was liable to Gateway for attorney fees and costs.2
On May 17, both sides filed lengthy posttrial briefs, to which each side
filed replies.
On July 3, the referee served his proposed statement of decision,
indicating his intent to rule for Gateway and to award tort of another
damages for its legal costs in defending itself and its Board members, and
damages in connection with the wire transfer.
The last day to file objections to the proposed statement of decision was
July 17. No objections were filed by Metaxas. However, on July 29, Metaxas
filed a nine-page brief constituting her objections to the proposed statement,
arguing that California’s “special benefit” doctrine required the referee to
offset Gateway’s purported gains against its tort of another losses. Gateway
agreed to allow the referee to consider Metaxas’s belated objections.
On August 5, the referee filed an amended statement of decision, a
comprehensive 28-page decision, whose substance begins with eight pages of
“facts” pertinent to the two transactions in issue. Metaxas spends many
pages in her brief focusing on her lengthy experience at the bank, and various
claimed successes. And as to the referee’s facts, Metaxas’s brief asserts there
were “conflicts” or “competing” evidence. She also accuses an expert witness
for the bank of “guessing” and “surmise.” This, of course, is improper, as it
disregards a fundamental rule of appellate review, that we view the facts

2The parties also: waived the issuance of a tentative decision under
California Rules of Court (CRC), rule 3.1590(a)–(c); were deemed to have
requested a proposed statement of decision and judgment under CRC
3.1590(d)–(f); and agreed to follow the procedures set forth in CRC 3.1590(g)
and (h) regarding objections to the proposed statement of decision and
judgment.

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favorably to the judgment (David v. Hernandez (2014) 226 Cal.App.4th 578,
581), under the principle requiring us to presume the lower court’s judgment
is correct, and drawing all inferences and presumptions necessary to support
it. (Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532,
1535, citing In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.)
Thus, and because we can hardly improve on the referee’s excellent
exposition of the facts, we quote liberally from his statement of decision
(deleting all citations), adding our embellishments where appropriate. And
we begin with the facts after the OTS rated Gateway as a “troubled
institution”:
“The Gateway Board and Metaxas knew the OTS rating and the
proposed cease and desist order could spell disaster for the bank. As the
Board noted at its February 26, 2009 meeting, ‘[t]he Capital infusion,
accompanied by a meaningful reduction of the Bank’s NPAs will also result in
the removal of the troubled designation, something the management and the
Board consider key and critical to the institution’s soundness and success.’
The Board set a deadline, March 31, 2009, to turn matters around.
“To raise capital, the Board authorized the issuance of a round of
preferred shares. All Board members and bank executives were encouraged
to find buyers, including themselves. The Board also requested that all
attempt to find buyers for the troubled assets.
“For a number of years, Gateway had enjoyed a very close working
relationship with Ideal Mortgage Bankers, Ltd., of New York, d/b/a Lend
America (‘Ideal’). Gateway was the warehouse lender for Ideal’s mortgage
loans; it had granted Ideal a $100,000,000 warehouse loan ‘facility’ or line of
credit. Gateway was also the main purchaser of the loans made by Ideal. In
essence, Gateway provided the funds for Ideal’s mortgages, then bought those

6
mortgages and resold them on the secondary market to ‘takeout lenders,’
making a profit at each stage. Ideal was Gateway’s largest and most
profitable customer.
“Upon receiving the February 5, 2009 downgrading from OTS, the
Board instructed Metaxas to approach Ideal for possible assistance.
Accordingly, Metaxas and Michael Kenny, Gateway’s Senior Vice President
(‘Kenny’) flew to New York on February 12, 2009. They met with Michael
Ashley, who held various titles at Ideal, including those of Executive Vice
President and Chief Business Strategist[fn.] (‘Ashley’) and Helene DeCecillis,
Ideal’s Chief Operating Officer.” The footnote stated that “Ashley’s various
titles at Ideal were not entirely clear. Ashley had previously been convicted
of wire fraud in the mortgage business and, as a result, was precluded from
holding certain positions at financial institutions.”

“Ideal obviously had a vested interest in the survival of its warehouse
lender, and was more than willing to assist. Ideal offered to help locate
buyers for Gateway’s troubled assets,[fn.] and for its preferred shares.
Immediately following the February 12 meeting, Metaxas happily reported
these developments to Board members.” The footnote stated that “The assets
in question were 25 REOs with a ‘book value’ of $7,993,368 and 27 NPLs with
a ‘book value’ of $7,278,180.”
“Ashley found buyers for $6.9 million of shares, and suggested possible
purchasers for Gateway’s troubled assets. In addition, he put together his
own group of asset buyers, comprised of three New York companies: Cooper
Capital Group, Ltd. (‘Cooper’), Empower International, Inc. (‘Empower’), and
the Steve Menna Group (‘Menna’). These three entities were closely tied to
Ashley; Ashley owned Cooper, his father owned Empower, and the owner of
Menna Group was affiliated with Ashley.” In March 2009, Metaxas learned

7
that Ashley, owner of Cooper, along with his father Kenneth, owner of
Empower, had been convicted of federal wire fraud in connection with illegal
mortgage activity. The credit memoranda failed to mention those
convictions, and Metaxas did not inform the Board of these facts.3
“By March 11, less than 30 days after the New York meeting, Metaxas
announced to the OTS that Gateway had an asset sale in place. She eagerly
reported that, although ‘not fully consummated yet,’ ‘we have now secured
agreement’ and she expected to complete the logistics of the sale the following
week (‘the purchasers of these assets are expected in our offices Tuesday—
Wednesday of next week’), and she expected to close the sale by March 25th,
the day before the next Board meeting. Metaxas also reported to the OTS
that the purchase price represented over 95 percent of book value of the
troubled assets. It was clear from our evidence that Metaxas was referring to
the three buyers assembled by Ashley.
“Although Metaxas had announced on March 11th that an asset sale
was close at hand, it appeared that this deal may have been somewhat of a
‘fallback’ deal, to be used in the event other buyers could not be found.
Indeed, Gateway continued to look for other possible buyers. One potential
buyer was Waterfall Capital (‘Waterfall’). On March 17th, Waterfall made a
$5,000,000 offer for the troubled assets. Gateway declined the offer, as the
Bank had determined its bottom line was $8,000,000. When Ashley was
informed that Waterfall’s purchase would not occur, he indicated that ‘It’s my
headache,’ and that he would still be meeting with other potential buyers.
Not long afterwards, the initial three buyers (Cooper, Empower, and Menna)

3 At trial, Metaxas tried to justify the nondisclosure by claiming it “was
not a matter that would have any bearing on the Board’s decision approving
or declining the loan.”

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travelled to Gateway Bank in California to finalize the deal. Metaxas
testified that the meeting took place and that despite her March 11th
communication to the OTS regarding the meeting, the OTS did not send a
representative to that meeting.
“The deal with the three buyers was that each would purchase a share
of the 25 REO properties and each would purchase some of the 27 NPLs, for a
combined purchase price of $15,271,548. Under the terms of that sale, the
three buyers would each make a twenty-five percent down payment (for a
total down of $3,817,887) and each would then borrow the balance of the
purchase money (totaling approximately $11.2 million) from Gateway under
a ‘loan to facilitate.’ To secure these loans, Gateway was to retain a security
interest in the transferred assets.
“The deal with the three buyers was soon finalized and then scheduled
for consideration by Gateway’s Executive Loan Committee (‘ELC’) and its full
Board on March 26. If approved, the sales were to close by March 31.
“Also on the agenda for March 26, at both the ELC and Board
meetings, was approval of a large ($3.65 million) ‘working capital’ loan to
Ideal. According to Metaxas, Ideal had requested this loan earlier in 2009,
and it had been discussed at the February 12th meeting in New York.
“Metaxas helped present both matters to the ELC and the Board on
March 26. When doing so, she did not tell the Board of any connection
between the two agenda items, or that Ideal had procured these three buyers.
She testified that on March 26, she was aware that Ideal owed money to
Cooper, and suspected that some of the working capital loan might be used to
pay down that debt; however, she did not share her suspicion with the ELC
or her Board.

9
 “The ELC and the Board were quite excited about the asset sale. One
Board member remarked, rather prophetically, that it was ‘too good to be
true.’ After all, the Bank was selling its troubled assets for nearly twice the
amount of its $8 million bottom line, and was receiving a substantial
(twenty-five percent) down payment, with the assets remaining pledged as
security for the loans.
“Although the Gateway Board was advised that the three buyers were
not well-funded and thus would need to borrow their down payments, the
Board found the sale very attractive, and approved it. When discussing how
the buyers might obtain their down payment loans, Board member Baxter
apparently quipped that he didn’t care where they got their down payment as
long as it was from a lawful source (i.e., ‘not from drug dealers or Al-Queda’).
There was no discussion that the down payments might actually be coming
from Gateway, via the working capital loan to Ideal.
“At those same meetings, the ELC and the Board approved the
‘working capital’ loan to Ideal for $3.65 million. The Board was unaware of
any connection between the two transactions.
“Soon after obtaining the Board’s approval, Metaxas happily reported
to the OTS on this sale of the troubled assets, hoping to start the process for
receiving a better rating and avoiding the proposed cease and desist order.
“However, her hopes were soon dashed; less than a week later, the OTS
made an inquiry about the March 26 transactions, asking for more details.
The OTS clearly was concerned about this deal in which buyers had paid
nearly full book value for troubled assets. The OTS asked about any possible
connections between Gateway and the buyers or entities affiliated with the
buyers. It also asked for the documentation on the loan to Ideal. Metaxas
responded that there were no relevant connections between Gateway and the

10
asset buyers or their affiliates. She did not reveal that Ashley of Ideal had
procured the three buyers and that he was closely involved with the three
buyers.”
On March 30, Ideal withdrew from Gateway the full proceeds of the
$3.6 million working capital loan, which was unusual, as most such loans are
revolving lines of credit to be drawn down as funds are needed, not funded on
the very first day. Ideal transferred the funds to Cooper, Empower, and
Menna, and the next day, the three of them made down payments equal to 25
percent of the purchase price of the toxic assets, i.e., $3.8 million. Thus, the
proceeds from the working capital loan made what came to be called at trial a
“round trip” to Gateway, disguised as part of the down payments for the toxic
assets.
On March 31, Metaxas sent this email to the Board celebrating her
accomplishment in organizing the transactions: “Dear Directors: Just a
quick note to confirm that we manged [sic] to complete the three bulk sales of
REOs and NPAs that we discussing [sic] at our last Board meeting. . . . With
our capital fully raised and our NPAs reduced so significantly, now we all
have good reason to be proud of our Bank and celebrate our blessings.”
Metaxas’s celebration was short lived.
George Lim, the OTS field examiner assigned to Gateway, questioned
the asset sale, and on April 6, asked Metaxas whether those sales were in
any way connected to the working capital loan. Metaxas denied any
connection between the transactions, and on April 8, wrote to Lim’s boss that
the sale prices were real, that there were no connections between Gateway
and the asset buyers or their affiliates. This is how she put it: “Responding
to Mr. Lim’s inquiry, I hereby wish to certify . . . there are no existing and/or
proposed business or other relationships between the purchasers (including

11
the respective companies’ owners and affiliated entities) and Gateway and its
directors, senior officers, and principal shareholders.”
What Metaxas did not reveal was: that Ashley, whom she knew to be
the owner of one of the buyers, Cooper, also ran Gateway’s largest customer
and mortgage partner, Ideal; that Ashley’s father Kenneth owned one of the
buyers, Empower; that the owner of the third buyer, Menna, was closely
affiliated with Ashley; and that Ashley had procured the three buyers at
Gateway’s request.
“At the same time the OTS was scrutinizing Gateway’s actions, other
federal agencies were investigating Ideal’s lending practices. On October 20,
2009, the United States Attorney’s office filed a civil suit against Ideal,
alleging fraudulent loan origination practices and seeking to enjoin Ideal
from making any further FHA-insured loans. The suit alleged that Ideal had
falsified loan applications to make borrowers appear eligible for FHA-insured
loans.
“When informed of the complaint against Ideal, Metaxas issued a
strong directive to all Gateway employees that same day, October 20, 2009.
It basically ordered Gateway to cease dealings with Ideal.4
“The next day, October 21st, Metaxas testified before the OTS
regarding Gateway’s March 26th transactions. She testified, under oath,
that the troubled asset sale was an ‘arms-length’ transaction, that there was
no connection between Gateway and the three buyers, and that she didn’t
know the source of the buyers’ down payments.”5

Metaxas’s directive commanded her staff to “Stop funding requests
4

until proof has been provided that the matter with HUD and/or the U.S.
Attorney’s office is resolved satisfactorily.”
5 Metaxas’s testimony included this question and her answer:

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 On November 27, and over the objections of Gateway CFO Green,
Metaxas personally directed Gateway’s wire room to transfer $757,000 from
Ideal’s account at Gateway to Ideal’s payroll account at another bank—this,
at a time when Ideal was not only in litigation with the government for civil
fraud, but also owed Gateway approximately $55 to $60 million. In short,
Metaxas overruled the Gateway CFO and personally directed the $757,000
wire transfer to Ideal, a company on the verge of collapse.
And collapse it did, as on the next business day, November 30, the
government revoked Ideal’s license to make mortgage loans. Ideal shut down
and went out of business.
Thus, and in disregard of her own directive, Metaxas caused Gateway
to buy a portfolio of mortgages from Ideal that, due to fraudulent practices at
Ideal, included worthless mortgages, which came to be referred to at trial as
“air loans.”
On December 30, Metaxas sent an email to the Board that Ideal had
closed its business, that Gateway had been unable to perfect its security
interest in Ideal’s Ginnie Mae mortgage servicing rights, and that the entire
working capital loan balance of $3.65 million would be written off no later
than December 31. This, Metaxas claimed, was the amount of Gateway’s
loss.

“Q. The agreement to purchase the REO required 25 percent down
payment. Do you know where that 25 percent source of funds for that 25
percent down payment from the Steve Menna Group came from?
“A. No sir. One of the things that is demonstrated very clearly by
looking at—at each one of the underwritings, say, perhaps, for the Cooper
Group, is that our underwriting was significantly more gratuitous than it
would have been for a regular loan, a regular commercial loan that we would
have made in accordance with our—our—with our bank standards. So one of
the things that we did not do is verify source of down payment.”

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 On January 4, 2010, Gateway sent Ideal a notice of default accelerating
the working capital loan and demanding repayment of the unpaid balance.
The loan was never repaid.
Meanwhile, the OTS investigation continued, to Metaxas’s chagrin. On
January 14, Metaxas sent a letter to OTS senior management complaining
about Lim. The letter insisted Lim be removed from the Gateway
investigation, and be replaced with another examiner, in Metaxas’s words, “to
resolve the painful and unnecessary difficulties caused by [his] behavior,” and
“to ensure the elimination of poisonous interference that has now become
intensely personal.”6
In March 2010, the OTS contacted Larry Wang, chairman of the
Gateway Board, and directed him to call a meeting of the Board without
Metaxas being present. At this meeting the OTS provided evidence that
Metaxas had engaged in fraudulent transactions with Ideal and demanded
that she be removed from the bank. And in May 2010, Metaxas left the
Bank.7
“In 2010, it was determined that some of the loans purchased by
Metaxas from Ideal on November 27, 2009, were bogus ‘air loans,’ i.e., Ideal
had not paid off the original lender despite receiving the funds to do so.

6 Among other things, Metaxas’s letter objected to Lim’s questioning
the veracity of the Board minutes from the March 20, 2009 meeting; to his
inquiry into a loan “made to several entities to facilitate the sale of REO”;
and to his concern “with the valuation of the loans included in [the toxic asset
sale] and the subsequent selling price,” including his belief that “the assets
were sold well above fair market value and therefore the transaction made no
sense.”
7Metaxas’s brief says that the “Board permitted Metaxas to resign in
the midst of her battle with cancer.”

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FNMA, which purchased these mortgages from Gateway, required Gateway
to repurchase the bad loans; Gateway did in April 2010.
“In February 2011, a federal criminal Grand Jury issued a subpoena to
Gateway, requiring documents and testimony. The Grand Jury apparently
was looking into a variety of alleged wrongdoings by Ideal, Gateway, and
possibly others. At that stage, it was unclear exactly what wrongdoings were
being investigated, and who were the targets of the investigation. The
Bank’s response to this criminal investigation was to fully cooperate and
attempt to convince the Grand Jury that Gateway may have been a victim of
a crime, but was not a perpetrator. The investigation, and the subpoenas,
continued for the next three years.
“Ideal had been forced into bankruptcy in 2010. In late 2012, the
bankruptcy Trustee commenced adversary proceedings against Gateway,
seeking to recover $50 million because of Gateway’s alleged failure to honor
funding commitments it had made to Ideal. After defending against the
Trustee’s action for almost two years, Gateway settled for $225,000 in
September of 2014.”
Meanwhile, the United States Attorney for the Eastern District of New
York began investigating Gateway as part of its ongoing investigation of
Ideal. In connection with this investigation, Gateway received four grand
jury subpoenas between 2011 and 2014, causing Gateway to hire criminal
defense counsel to defend itself and respond to the subpoenas. Doing so,
Gateway’s counsel reviewed some 12,000 emails for privilege and relevance;
produced over 40,000 pages of documents and emails; interviewed over 25
bank officers, directors, and employees; conducted an internal investigation of
Gateway; and prepared 22 bank employees to be interviewed by prosecutors.

15
The result of all this was that Gateway incurred millions of dollars in legal
fees.
In March 2014, Metaxas was indicted on three counts: (1) conspiracy to
commit bank fraud in connection with the round trip transaction; (2) bank
fraud in connection with this transaction; and (3) perjury, lying under oath to
the OTS when she claimed she did not know the source of the down payments
for the toxic asset sale.
In April 2015, Metaxas pled guilty to conspiracy to commit bank fraud.
Doing so, she acknowledged under oath in open court that she intentionally
concealed from the Board the true facts about the round trip transaction. As
Metaxas’s own brief describes it, “[h]er plea included an admission that she
knew in advance that the working capital loan and the troubled asset sale
were connected but did not communicate that to the Gateway Board.”8

The relevant colloquy, some of which was quoted by the referee,
8

included this:
“THE COURT: Ms. Metaxas, at this point I need you to tell me in your
own words what you did that makes you guilty of Count One. . . .
“THE DEFENDANT: From 1996 until approximately March of 2010 I
was the president and CEO of Gateway Bank, a federally chartered savings
bank in California. In 2009, I acted and agreed with others to arrange
certain transactions that would help make Gateway’s books look more
acceptable to the regulators. One set of transactions included a loan to
Gateway’s biggest customer which in [sic] your Honor it was used to fund
payments back to the bank in the form of down payments from three other
entities that purchased certain assets that the regulators wanted off the
bank’s books.
“I knew that the customers used the money from the loan to fund the
down payment to Gateway for the purchase of the assets.
“Taken together, these transactions did not actually improve the
condition of the bank, and I did not provide the complete information about
these transactions to Gateway’s Board which ultimately had to approve
them. [¶] . . . [¶]

16
 At her sentencing hearing, Metaxas also apologized for her failure to
disclose the source of the down payment for the toxic assets, telling the court,
“It was wrong of me not to share the information that I had with the Board,
and for that I am truly very sorry,” “I know I will be haunted by this non-
disclosure until the day I die,” and “I wonder how I will ever be able to forgive
myself.” And, she added, “I am determined to make things right to the best
of my ability. I understand that this court will order me to pay restitution. I
welcome that. I want to do my best to make amends with Gateway.”

“THE COURT: When you agreed with others to commit, to be involved
in this fraudulent scheme, did you do so knowingly and intentionally?
“THE DEFENDANT: Yes.
“THE COURT: And you knew it was against the law to commit a
fraudulent scheme like this, didn’t you?
“THE DEFENDANT: Yes. [¶] . . . [¶]
“THE COURT: All right. Ms. Metaxas, please stand. How do you now
plead to Count One of the indictment 14-109, conspiracy to commit bank
fraud, guilty or not guilty?
“THE DEFENDANT: Guilty.
“THE COURT: Did you do what you are charged with doing in Count
One, Ms. Metaxas?
“THE DEFENDANT: I did.
“THE COURT: Are you pleading guilty because you are guilty?
“THE DEFENDANT: Yes.
“THE COURT: Are you pleading guilty voluntarily and of your own
free will?
“THE DEFENDANT: Yes.”
As the referee described, “Metaxas was sentenced on December 2, 2015.
She served her 18-month sentence, but currently is challenging her
conviction, alleging that she received erroneous legal advice from her counsel,
which advice caused her to enter a guilty plea.”

17
 Following his exhaustive recitation of facts, and a discussion of the
parties’ contentions, the referee’s statement of decision turned to his analysis
of liability, beginning with that for the working capital loan. After a brief
description of the issue, the referee described the essence of it: “The crucial
legal questions regarding Metaxas’s liability for the March 26 transactions
are: (1) did she know the ‘actual deal’ when she presented those matters to
the Board; (2) if so, did she intentionally not reveal that knowledge; if so,
(3) did she intend to deceive her Board into thinking these were legitimate
and unrelated transactions that the Board ought to approve; if so, (4) did the
Board reasonably rely on her representations and omissions when approving
these two transactions, and, finally, if so, (5) was the Bank damaged as a
result of entering into those transactions.” And, the referee said, he “is
satisfied that the answer to all of these questions is ‘yes.’ ”
The referee then spent over four pages explaining in detail the reasons
for his “yes” response, concluding as follows: “The Bank clearly changed its
position (i.e., it entered into the March 26 transactions) in reasonable
reliance on Metaxas’s representations and omissions, and did so to its
detriment. . . . As such, the Bank has proven, by a preponderance of the
evidence, all the essential elements of the First Cause of Action (fraud),
Second Cause of Action (fraudulent omission/non-disclosure), and the Fourth
Cause of Action (intentional breach of fiduciary duty) with regard to the
March 26 transactions. Given this finding that Metaxas’s actions were
intentional, the question of whether she might have been negligent in those
matters (as alleged in the Sixth Cause of Action) is moot.”
The referee then turned to Metaxas’s liability for the $757,000 wire
transfer. And following a four-paragraph analysis, he concluded Metaxas
was liable because she breached her fiduciary duty.

18
 The referee then discussed for some eight pages the issue of damages,
at the conclusion of which he awarded Gateway damages totaling $382,154,
$250,000 of which was tort of another damages.9 As he described, Gateway
“clearly was damaged by the ‘fallout’ from being induced to enter into the
March 26 transactions,” going on to decide that “some portion” of the almost
$1,500,000 in attorney fees defending the criminal investigations was
appropriate, concluding as follows: “Metaxas’s tortious conduct on March
26th clearly caused the bank to hire counsel to defend itself, and its Board
members, in the Grand Jury investigations. The undersigned’s best
approximation of the amount of fees reasonably incurred by the Kilpatrick &
Townsend firm for work related to the events of March 26, 2009, is
$250,000.00, and that amount is awarded.” The referee also awarded

9 The tort of another doctrine, sometimes called the third-party tort
doctrine, provides that a party may be awarded attorney fees in a situation
where one person commits a wrongful act that he or she can reasonably
foresee would cause another to have to defend or prosecute a lawsuit
involving a third party. As the Supreme Court has described it: “A person
who through the tort of another has been required to act in the protection of
his interests by bringing or defending an action against a third person is
entitled to recover compensation for the reasonably necessary loss of time,
attorney’s fees, and other expenditures thereby suffered or incurred.”
(Prentice v. North American Title Guaranty Corp. (1963) 59 Cal.2d 618, 620.)
The doctrine is not an exception to the rule that parties bear their own
attorney fees, “but an application of the usual measure of tort damages. The
theory of recovery is that the attorney fees are recoverable as damages
resulting from a tort in the same way that medical fees would be part of the
damages in a personal injury action. In such cases there is no recovery of
attorney fees qua attorney fees. . . . [¶] [N]early all of the cases which have
applied the doctrine involve a clear violation of a traditional tort duty
between the tortfeasor who is required to pay the attorney fees and the
person seeking compensation for those fees.” (Sooy v. Peter (1990)
220 Cal.App.3d 1305, 1310.)

19
Gateway $132,154 for the breach of fiduciary duty in connection with the
wire transfer.
Following all that, the referee turned to Metaxas’s claim of “special
benefit,” rejecting it with this analysis: “As for Metaxas’s argument that the
above damages (both for the March 26 transactions and the November 27
transfer) should be offset by the ‘special benefit’ her tortious conduct
conferred on the Bank (by way of the amounts it realized when all three asset
purchasers as well as Ideal defaulted on their loans), the cases make it clear
that this offset is an equitable process, to be applied in the discretion of the
fact finder: ‘. . . consideration may be given, where equitable, to the value of
any special benefit conferred by that act . . . .’ (Maben v. Rankin (1961)
55 Cal.2d 139, 144 (italics added)); ‘. . . the value of the benefit conferred is
considered in mitigation of damages, to the extent that this is equitable.’
(Turpin v. Sortini (1982) 31 Cal.3d 220, 236 (italics added).) Metaxas’s
conduct overall in these matters, including the harm to the Bank’s overall
business reputation, dictates against the exercise of equitable discretion in
her favor.”
The Motion to Vacate
The amended statement of decision was filed on July 26, and judgment
entered that same day. On August 13, Metaxas filed a motion to vacate
judgment, arguing that the referee had no authority to exercise equitable
discretion in his application of the special benefit doctrine. The Bank filed
opposition, Metaxas a reply, and the motion came on for hearing on October
11. On October 14, the referee filed his order denying the motion in two
thoughtful paragraphs. The first paragraph distilled the law. The second
said this:

20
 “2. The Equities in This Case Did not Favor Defendant Metaxas:
Because her only argument on this motion was that application of the Special
Benefit Doctrine could not include equitable considerations, she did not
address whether the undersigned was wrong in the equity determination he
made. However, even if she had challenged the equity determination, the
undersigned stands by his earlier conclusions as to where the equities lay.
Defendant Metaxas’s intentional tortious conduct caused the Bank years of
unnecessary legal battles with federal regulators and federal criminal
prosecutors, not to mention the reputational harm that obviously flowed from
having its former President and CEO charged with bank fraud. Even if the
phony round-trip transactions she induced resulted in some financial gain to
the Bank, that gain was clearly outweighed by the years of troubles her
actions caused the Bank, financial and otherwise.”
On October 29, Metaxas appealed.
DISCUSSION
The Referee’s Award of $250,000 Tort of Another Damages is
Supported by the Record
As noted, Metaxas makes two arguments on appeal, the first of which
is that “because Gateway profited overall from the round trip transaction, the
trial court erred in awarding Gateway compensatory damages for that
transaction.” Metaxas contends Gateway benefited pecuniarily from the
transaction, and thus under the “special benefit” doctrine, the referee could
not award any damages. Or, to put it in the words of Metaxas’s sub-
argument, the referee “lacked discretion to award compensatory damages
without taking into account the profits Gateway earned from the round trip
transaction.”
Metaxas is wrong for several reasons, beginning with the law of special
benefit.

21
 The special benefit doctrine is based on section 920 of the Restatement
Second of Torts (section 920). Section 920 is entitled “Benefit to Plaintiff
Resulting From Defendant’s Tort,” and provides in its entirety as follows:
“When the defendant’s tortious conduct has caused harm to the plaintiff or
his property, and in so doing has conferred a special benefit to the interest of
the plaintiff that was harmed, the value of the benefit conferred is considered
in mitigation of damages, to the extent that this is equitable.”
Metaxas argues that the referee had “no discretion to disregard
Gateway’s profits.” In the words of Metaxas’s brief, the reference to
“equitable” in section 920 “merely provides courts with flexibility in the
unusual case where deducting benefits does not place the injured person in
the position they would have occupied absent the tort. (Rest.2d Torts, §920,
com. f.) That exceptional circumstance occurs when the tort causes a ‘benefit’
the injured party never wanted:
“f. Equitable considerations. The rule stated in this section is limited
by the general principle underlying the assessment of damages in tort cases,
which is that an injured person is entitled to be placed as nearly as possible
in the position he would have occupied had it not been for the plaintiff’s tort.
This principle is intended primarily to restrict the injured person’s recovery
to the harm that he actually incurred and not to permit the tortfeasor to force
a benefit on him against his will.”
In other words, Metaxas reads comment f. to mean that a court may
exercise its equitable discretion only in the “exceptional circumstance” where
a “non-cash benefit” is foisted upon an unwilling plaintiff, when the tort
caused a “benefit” the injured party never wanted. And, Metaxas asserts,

22
where “cash outflows and inflows” are concerned, “both the law and equity
require the deduction of benefits.”10
To begin with, Gateway did not ask for any purported “benefit.” As the
referee found, the evidence showed that the Board would not have approved
either the toxic asset sale or the working capital loan if Metaxas had
disclosed the true facts. So, any benefit Gateway obtained as a result of
Metaxas’s fraud were obtained against the Board’s will, a “benefit” the bank
never wanted. Thus, even under Metaxas’s own view of the law, she would
not be entitled to an offset.
In any event, Metaxas cites no case supporting her contention. And her
argument ignores the last seven words of section 920, essentially arguing
that the plain language of section 920 does not mean what it says.
While comment f. endorses the basic tort principle that meritorious
plaintiffs should be placed in the position they would have occupied had it not
been for defendant’s wrongdoing, it does not compel a court to disregard
equitable considerations when assessing damages. To the contrary, any
decision to mitigate damages is only “to the extent that it is equitable.”

10 We are constrained to note that Metaxas’s citation to comment f. is
less than candid, as it omits the language that follows her quotation, which is
this: “Thus, when a person has land or chattels that he has devoted to a
particular purpose, he is entitled to continue to use them for that purpose,
and the person who interferes with the use is not entitled to have damages
mitigated by the fact that he has added to their market value. In these cases
the good faith, and reasonableness of the attitudes, of the parties are factors
in determining the measure of recovery. Thus unless the plaintiff is
capricious or spiteful and the defendant has acted by mistake, so that his
conduct was not knowingly tortious . . . , the damages may not be diminished
by the fact that the defendant’s interference has increased the monetary
value of the property. On the contrary, if the owner has acted reasonably in
restoring the property to its original condition, he may recover the cost of
doing so.”

23
 The referee noted this has been the rule in California since at least
1961. As indeed it has, as expressly set forth in the cases that discuss the
special benefit doctrine, including cases cited by Metaxas. The following are
illustrative:
Maben v. Rankin (1961) 55 Cal.2d 139, 144: “[C]onsideration may be
given, where equitable, to the value of any special benefit conferred by that
act to the interest which was harmed.”
Turpin v. Sortini (1982) 31 Cal.3d 220, 236: “ ‘the value of the benefit
conferred is considered in mitigation of damages, to the extent that this is
equitable.’ ”
Heckert v. MacDonald (1989) 208 Cal.App.3d 832, 839: “ ‘the value of
the benefit conferred is considered in mitigation of damages, to the extent
that this is equitable.’ ”
Heckert v. MacDonald, supra, 208 Cal.App.3d 832, a decision of this
court, is instructive. There, the buyer of an apartment building sued the
sellers and their broker for structural defects the broker failed to disclose; the
sellers cross-complained against the broker for their attorney fees. The trial
court held that the sellers were entitled to recover their attorney fees under
the tort of another doctrine, but that the fees should be mitigated because the
sellers benefited from the broker’s conduct by realizing an inflated profit from
the sale. We affirmed, expressly noting the “incestuous relationship”
between the sellers and their broker, thus concluding the lower court’s
decision was “equitable in the circumstances of this case.” (Id. at p. 840,
italics added.) So, far from requiring an automatic deduction where “cash
profits” are concerned, as Metaxas contends, Heckert reinforces the rule that
the value of the benefit conferred is considered in mitigation of damages “to
the extent that this is equitable.”

24
 In short, the rule is 180 degrees from that of what Metaxas asserts: the
equitable nature of the special benefit doctrine means that the value of the
benefit may be considered. Or, as Witkin succinctly states it, mitigation
under the special benefit doctrine is “sometimes” appropriate: “If the
defendant’s tort causes injury to the plaintiff, but also confers a special
benefit on the plaintiff, the value of the benefit may sometimes be considered
and the plaintiff’s recovery limited to the net loss. (Maben v. Rankin (1961)
55 Cal.2d 139, 144 [‘In determining the damages suffered as a result of a
tortious act, consideration may be given, where equitable, to the value of any
special benefit conferred by that act to the interest which was harmed’];
Rest.2d, Torts § 920; see Dakota Gardens Apartment Investors “B” v. Pudwill
(1977) 75 Cal.App.3d 346, 352, 354, citing the text [defendant cannot
diminish amount of damages by paying debt of plaintiff without plaintiff’s
consent; mitigation will be denied where it is inequitable]; 22 Am.Jur.2d
(2013 ed.). [Citations.])” (6 Witkin, Summary of Cal. Law (11 ed. 2021) Torts,
§1803.) “Mitigation of damages in tort cases is restricted by principles of
equity.” (Dakota Gardens Apartment Investors “B” v. Pudwill, supra,
75 Cal.App.3d at p. 352.)
In light of the equitable nature of the analysis, the observation by our
colleagues in Division Four is apt, this in Richardson v. Franc (2015)
233 Cal.App.4th 744, 751: “After the trial court has exercised its equitable
powers, the appellate court reviews the judgment under the abuse of
discretion standard. [Citation.] ‘Under that standard, we resolve all
evidentiary conflicts in favor of the judgment and determine whether the trial
court’s decision “ ‘falls within the permissible range of options set by the legal
criteria.’ ” ’ ” (Accord, Hirschfield v. Schwartz (2001) 91 Cal.App.4th 749,
771.) And to demonstrate such abuse, Metaxas must show that the referee’s

25
decision “ ‘is so irrational or arbitrary that no reasonable person could agree
with it.’ ” (Sargon Enterprises, Inc. v. University of Southern California
(2012) 55 Cal.4th 747, 773.) This, she has not done.
As quoted above, the referee held in the statement of decision that
“Metaxas’s conduct overall in these matters, including the harm to the bank’s
overall business reputation, dictates against the exercise of equitable
discretion in her favor.” And as the referee later put it in his order denying
the motion to vacate, Metaxas’s “intentional tortious conduct caused the bank
years of unnecessary legal battles with federal regulators and federal
criminal prosecutors, not to mention the reputational harm that obviously
flowed from having its former President and CEO charged with bank fraud.
Even if the phony round-trip transactions she induced resulted in some
financial gain to the bank, that gain was clearly outweighed by the years of
troubles her actions caused the bank, financial and otherwise.” The referee’s
conclusions are fully supported. They are equitable. And they are correct.
We note that Metaxas makes no attempt to show that the equities
favored her, thus running afoul of the most fundamental principle of
appellate review: “ ‘A judgment or order of the lower court is presumed
correct. All intendments and presumptions are indulged to support it on
matters as to which the record is silent, and error must be affirmatively
shown.’ ” (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Were that principle not dispositive, Metaxas’s argument fails because it
has no merit. Metaxas’s entire argument is that the referee’s reasons for
ruling for Gateway were “unreasonable,” assertedly on two grounds: (1) it
was unreasonable for the referee to rely on the nature of her “intentional
tortious conduct,” which “is relevant only in the punitive damages context,”
and (2) it was unreasonable for the referee to rely on the harm she caused,

26
because the referee “unreasonably double-counted some harm and relied on
other harm that was unproven.”
To begin with, Metaxas cites nothing in support of her claim that her
“intentional tortious misconduct” is “relevant only in the punitive damages
context.”11 But beyond that, the referee could properly rely on Metaxas’s
conduct—more accurately, misconduct—to exercise his equitable discretion
against her.
Metaxas’s “intentionally tortious misconduct” withheld the true
information from the Board, to deceive the Board into thinking the
transactions were such that the Board ought to approve them—a fact, not
incidentally, she expressly admitted when she entered her guilty plea.
Metaxas’s “intentionally tortious conduct” included lying to the OTS
about her knowledge and involvement in the fraudulent transactions.
Indeed, Metaxas, who knew the OTS was investigating the legitimacy of the
March transactions, including the source of the down payments, point blank
told the investigators there were no connections among the purchasers and
she did not know the source of the down payments.
Metaxas also obstructed the OTS’s investigation. But not only did
Metaxas obstruct, she personally attacked OTS examiner Lim and demanded
he be fired, causing more problems for Gateway. Banking expert Kelley, who
had personally dealt with regulators in this situation, testified that a CEO is
the face of the bank to the regulators, and should foster an open and

11Metaxas overstates the effect of the referee’s refusal to award
punitive damages. That is, she asserts that the referee “reasoned that
Metaxas’s conduct leading to the round trip transaction was not particularly
egregious.” The referee made no such ruling. Rather, he declined to award
punitive damages because Metaxas had already received and served an 18-
month prison term for her wrongful actions, and that “further punishment,
by way of punitive damages, does not appear necessary at this juncture.”

27
cooperative relationship with them. By excoriating Mr. Lim for investigating
the very transactions Metaxas later admitted were fraudulent, she “almost
openly declared war on the OTS”; it was a “death sentence” to the
relationship.12
As noted, the referee expressly concluded that Metaxas’s actions
damaged Gateway’s reputation. As it did. Again, expert Kelley’s testimony
is apt: “[W]hen the federal government issues a press release and says that
your former president is accused of fraud and has been sentenced to a jail
sentence, that has an impact on the bank’s reputation in the community. It

12 This was the relevant testimony from Kelley:
“Q. How would writing a letter like that January 2010 letter that Ms.
Metaxas sent concerning . . . Lim affect the compliance costs that the bank
would incur going forward?
“A. Oh, I think it would immensely. I think at that point the OTS—
when you get to the stage where you absolutely feel that management is not
being truthful or cooperative, you know, you take no—you make no
exceptions, you demand everything, you assume the bank is lying to you
about everything they provide you. Again, it’s just a—it’s complete lack of
trust.
“In my experience, when you have that lack of trust, the outcome is
that you all of a sudden now have to have legions of attorneys and
accountants that have to support the bank’s position, that have to defend the
bank to the regulators, that have to be in place to respond to examination
questions. It’s just a Pandora’s box that you open.
“Q. Have you dealt with regulators in that situation?
“A. I have. I’ve dealt with—again, been engaged by the FDIC to work
with them in suing management and directors of failed banks, and
unquestionably, that management and directors often times, accuse them of
bias or being unfair or not behaving appropriately.
“What I’m telling you is that I haven’t seen certainly in my own career
ever the need to send out this kind of letter. To me, it would have again been
a death sentence on my relationship with the regulators.”

28
has undoubtedly an impact on the bank’s marketing efforts, on its ability to
hire and retain qualified officers, probably even has an impact on the amount
of interest they have to pay for deposits that the bank raises. Those are
significant.”13
The referee’s equitable decision is fully supported here.

13 Kelley’s testimony began with this hyperbolic description: “I think
when you’re talking about reputational and franchise costs, they are
significant. They are harder to quantify, obviously, but, you know, when your
CEO is led off in handcuffs, that has an impact on the bank’s perception
within their community.” This exchange then occurred:
“[COUNSEL FOR METAXAS]: Objection, your Honor. That never
happened. This is just fabricated testimony.
“[THE REFEREE]: You want to clarify what you mean by ‘led off in
handcuffs?’
“[KELLEY]: Yeah. I was speaking figuratively. When you’re—when
the federal government issues a press release and says that your former
president is accused of fraud and has been sentenced to a jail sentence, that
has an impact on the bank’s reputation in the community. It has
undoubtedly an impact on the bank’s marketing efforts, on its ability to hire
and retain qualified officers, probably even has an impact on the amount of
interest they have to pay for deposits that the bank raises. Those are
significant.”
Metaxas’s counsel moved to strike Kelley’s testimony. The referee
denied the motion, noting that, it’s “common sense” that the government’s
accusations and Metaxas’s guilty plea would affect Gateway’s reputation: “I
don’t see any harm in [Kelley] saying you can’t quantify it, but obviously
those events hurt a bank’s image. It’s not rocket science.”
Now on appeal, Metaxas first describes Kelley’s testimony about harm
to reputation as a “guess.” She then goes on to argue that Gateway “forfeited
its right to be compensated for reputational harm by not pleading that type of
injury,” that Kelley’s opinion had “no evidentiary value,” and that Gateway
failed to prove “the extent of such damage.”
As Gateway puts it, this is a “red herring.” The referee did not award
any damages for reputational harm, and Metaxas’s counsel had every
opportunity to cross-examine Kelley on his opinion.

29
 But even assuming Metaxas’s reading of the special benefit doctrine
were correct—which it is not—her argument would nevertheless fail for the
fundamental reason that the evidence did not undisputedly show a special
benefit.
It is probably enough to quote from Metaxas’s own opening brief, which
has a boldface heading that “Experts Disagree About Whether Gateway
Incurred Damages Due To The Round Trip Transaction.” Such
“disagree[ment]” must be interpreted in favor of the bank.
As to Gateways “profits,” Metaxas asserts that the referee “found that
Metaxas’s presentation to the Board” caused Gateway to receive “$634,000 in
payments for the working capital loan and loans to facilitate.” The bank’s
respondent’s brief takes issue with this, asserting that, “[w]hat the Referee
actually said is that Gateway ‘retained the asset buyers’ $3.8 million down
payment; retained (and resold) the troubled assets themselves, retained the
interest it received on all the loans, and received a $220,000 discount on
certain of Ideal’s servicing rights.’ [Citation.] While earlier in [his] decision
the Referee noted that Metaxas claimed that Gateway received interest
payments totaling $469,000 on the Toxic Assets and $165,000 on the working
capital loan [citation], the statement of decision does not include a factual
finding about the specific amount of interest Gateway received and retained.
Nor did Metaxas request a finding on that issue.”
Confronted with this, Metaxas’s reply brief says that the referee
“implicitly found that Gateway received a cash benefit from the round trip
transaction that was larger than the $250,000 tort of another damages
award.” And Metaxas goes on for the next several pages to attempt to
support the referee’s “implicit” finding.

30
 Metaxas cites nothing to support that one can imply a finding against a
statement of decision. To the contrary, as we ourselves have put it, “ ‘Where
[a] statement of decision sets forth the factual and legal basis for the decision,
any conflict in the evidence or reasonable inferences to be drawn from the
[evidence] will be resolved in support of the . . . trial court decision.’ ” (In re
Marriage of Davenport (2011) 194 Cal.App.4th 1507, 1531, quoting In re
Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358.) “In support of” the
decision. Not “against” it.
At oral argument, counsel for Metaxas referred to one sentence in the
referee’s 32-page statement of decision, a sentence that reads, “treating the
March 26th transactions as a whole, it is clear the bank was not damaged
financially by the defendant overall.” Being “not damaged” is not saying that
Gateway “profited.” Indeed, in discussing the March 26 transactions, the
referee found that under what he called the “actual deal”—as contrasted to
what he called the “Metaxas version”—“the bank’s financial condition was
not improved.”
Another, and independent, basis why Metaxas’s argument fails is that
it is based on another false premise—that Gateway’s only damages were
monetary. As Metaxas puts it at one point, “But when a plaintiff’s losses and
benefits are merely cash outflows and inflows—as here—both the law and
equity require the deduction of benefits. Because cash is fungible, the most
accurate way to reverse the impact of the tort is to credit the plaintiff for
their losses and debit them for their gains. (See In re De Lavega’s Estate
[(1958)] 50 Cal.2d [480] at pp. 488–489.)”
As quoted above, and as the referee found, Gateway was damaged in
ways that went beyond “cash,” including, for example, suffering harm to its

31
reputation and “the years of troubles [Metaxas’s] actions caused the bank,
financial and otherwise.”
The Referee’s Finding That Metaxas Breached Her Fiduciary
Duty To Gateway by Directing the $757,000 Wire Transfer is
Supported by the Record
The second issue before the referee was Metaxas’s liability for the
November 2009 wire transfer. The referee found Metaxas liable based on
breach of fiduciary duty, with this four-paragraph analysis:
“The timing of the events surrounding Metaxas’s approval of payment
for a group of Ideal mortgages on November 25, 2009, is highly suspicious;
Metaxas describes the timing simply as ‘unfortunate.’ [Citation.] The federal
government had just filed a lawsuit seeking to enjoin all of Ideal’s FHA
lending because of fraudulent loan practices. As a result of that lawsuit,
Metaxas had immediately issued an order within Gateway, stopping all
transactions with Ideal. Yet, on Wednesday, November 25, 2009, Metaxas,
over the objection of her own CFO, approved the payment for Ideal
mortgages, and then on Friday the 27th specifically ordered the transfer of
$757,000 to Ideal as part of that purchase. The next working day (Monday,
November 30) the authorities shut Ideal down.
“At the time of the order to transfer the $757,000, Metaxas obviously
knew of Ideal’s dire financial situation resulting from the federal lawsuit.
She may also have learned from Ideal, or from other contacts in the banking
industry, that a shut-down order was imminent.
“Her November 27 transfer appears to have been more of a return favor
to Ideal than a sound business decision. And, this purchase clearly worked to
Gateway’s detriment, as some of the loans indeed were bogus, causing
Gateway to lose money on this purchase.

32
 “There is little doubt that this rushed transfer, under the
circumstances present at that time, was a breach of Metaxas’s fiduciary
duties. As such, the allegations of the Fourth Cause of Action (intentional
breach of fiduciary duty) have been established regarding this November 25
to 27, 2009 payment to purchase Ideal loans. Her argument that the Bank
was legally obligated to transfer the money to Ideal on November 27 is
rejected.”
Asserting, however inappropriately, things such as her “personal role
in the wire transfer was not suspicious,” and the “timing of the wire transfer
is not suspect,” Metaxas contends the referee erred in finding her liable. Her
argument is that “she had to let Ideal withdraw its own money and the wire
transfer caused no additional damages”; or, as a sub-argument puts it,
“Metaxas had no legal option but to approve Ideal’s wire transfer request
because the requested funds were Ideal’s free and clear.”
As noted, the referee “rejected” the argument. So, Metaxas has to
demonstrate error. She has not.
Metaxas knew by October 2009 that the federal government had sued
Ideal for mortgage fraud and was trying to shut it down. In response, on
October 20, Metaxas directed her staff to stop all funding requests from Ideal
and place a hold on all its checking and any other accounts, testifying at trial
that her instructions were to decline all funding requests until there was
“proof” that the government’s suit against Ideal was “resolved satisfactorily.”
Despite that, Metaxas approved the wire transfer on the last business day
before Ideal was shut down by the federal government, expressly—and
angrily—overruling CFO Green in doing so.
Metaxas argues that she did what she did based on the advice of
outside corporate counsel, Barry Hovis. But her testimony on this point was

33
hardly consistent, and on cross-examination she hedged as to whether Mr.
Hovis actually gave her that specific advice. This was the exchange:
“Q. Ms. Metaxas, you testified yesterday that sometime between
October 21, 2009 and November 27, 2009, you were advised by attorney
Barry Hovis to release the hold on Ideal Mortgage’s accounts except to the
extent of $757,000?
“A. Sir, attorney’s advice was obtained by the Bank in reference to the
handling of the total Ideal matter, many different things, some of which were
referred to in Mr. Green’s memo. That information was then taken to the
Board that had a Sunday meeting, as you recall, that provided directions to
management as to what was appropriate action there. [¶] . . . [¶]
“Q. Exhibit 52 is your email dated October 20, 2009 to the bank’s
senior management, its directors, and Mr. Hovis, correct? . . . This is
directed to the people indicated on the email, correct? [¶] . . . [¶]
“A. That is correct. That is fair.
“Q. That includes all the Bank’s senior management at the time?
“A. Correct.
“Q. And Mr. Hovis?
“A. Correct. . . . [¶] . . . [¶]
“Q. And the day before the OTS meeting, he received Exhibit 52,
correct?
“A. Correct. [¶] . . . [¶]
“Q. And your testimony is that Mr. Hovis advised you to modify that
direction sometime in between October 20 and November 27 when you sent
the wire. Isn’t that right?
“A. The recommendation Mr. Hovis made to the Board is—was to be
careful in cutting off all fundings, as I had proposed in here, sir. [¶] . . . [¶]

34
 “Q. And he advised you to reduce the amount of the hold to $757,000?
“A. He did not say that, sir.
“Q. He didn’t say that you needed to honor any funding requests, did
he?
“A. Mr. Hovis directed—advised is a better word, that unless the Bank
has legal reason to really hold onto all of Ideal’s money, the Bank should not
do so.
“Q. And he put that advice in writing to you? He sent you an email
that says that?
“A. Okay. No. He did not put it in writing, sir.”
Moreover, when Metaxas overruled CFO Green and directed the wire
transfer herself, she did not tell him that Mr. Hovis had instructed Gateway
to honor Ideal’s funding request. Not only that, when Green was questioned
about the intensity of Metaxas’s position, and what reasons she offered to
justify her decision, he testified that she talked of “customer loyalty” and
“platitudes.”
Also suspicious is that Metaxas’s action was contrary to her position at
trial, where she testified it was not her job to be involved in the day-to-day
operations of the bank. Despite that, Metaxas took it upon herself to take the
“very rare” step to personally direct the $757,000 wire transfer.14 Nor did
Metaxas explain why Gateway had to make the payment that very day, the

Banking expert Kelley described the highly unusual nature of
14

Metaxas’s actions this way: “I don’t believe in 12 years as president of a
community bank that I ever authorized a wire or signed a wire. It is not my
function remotely, and I certainly wouldn’t have dreamed of doing so over the
objections of my CFO. I mean, that is the person within the bank that is
really tasked with maintaining financial integrity within the bank in terms of
the systems and practices of the bank. So yeah, for her to do that, to me,
would be very rare in my experience.”

35
rushed timing of which, the referee noted, was “highly suspicious,” coming as
it did on the eve of Ideal’s collapse. The referee could, as he did, reasonably
infer that the transfer was more of a “return favor to Ideal than a sound
business decision.” The referee could, as he did, “reject” Metaxas’s argument
that “the Bank was legally obligated to transfer the money to Ideal.”
Metaxas has shown no error.
DISPOSITION
The judgment is affirmed. Gateway shall recover its costs on appeal.

36
 _________________________
Richman, Acting P.J.

We concur:

_________________________
Stewart, J.

_________________________
Miller, J.

Gateway Bank, F.S.B. v. Metaxas (A158793)

37
Trial Court: San Mateo County Superior
Court

Trial Judge: Honorable Robert Baines

Attorney for Plaintiff and Kirschenbaum Law, PC,
Respondent, Gateway Bank, Jeffrey B. Kirschenbaum,
F.S.B.: Raymond E. Loughrey, Kristin
L. Williams

Attorney for Defendant and Katz Appellate Law, Paul J.
Appellant, Poppi Metaxas: Katz.

38