Gateway Bank, F.S.B. v. Metaxas, A158793M

Background

Poppi Metaxas was Gateway Bank’s CEO and a director during the 2008–2010 regulatory crisis; OTS rated the bank a “troubled institution.”
In March 2009 Gateway approved (a) a $3.65M “working capital” loan to Ideal and (b) a bulk sale of REO/NPLs to three buyers allegedly procured by Ideal affiliate Michael Ashley; Ideal immediately withdrew loan proceeds that funded the buyers’ down payments (a “round‑trip” transaction).
Metaxas did not disclose known connections between Ideal/Ashley and the buyers to Gateway’s Board or to OTS; she later denied knowledge under oath; federal regulators and prosecutors investigated, and Metaxas pled guilty (2015) to conspiracy to commit bank fraud relating to these transactions.
In November 2009 Metaxas overruled the CFO and authorized a $757,000 wire to Ideal while Ideal was under government attack; Ideal was shut down days later and Gateway suffered losses from purchased mortgage portfolios.
Gateway sued Metaxas (fraud, breach of fiduciary duty, negligence). A court‑appointed referee found for Gateway (2019) and awarded $250,000 as tort‑of‑another damages (attorney fees) for the fallout from the March transactions and $132,154 for the November wire; Metaxas appealed.
On appeal the court affirmed: it rejected Metaxas’s arguments that (1) Gateway’s alleged “special benefit” from the round‑trip transaction barred tort damages and (2) she had no lawful alternative but to approve the $757,000 wire.

Issues

Issue	Plaintiff's Argument (Gateway)	Defendant's Argument (Metaxas)	Held
Whether tort‑of‑another damages must be offset by any pecuniary ‘special benefit’ Gateway received from the round‑trip transactions	Award of attorney fees as tort damages was proper; any benefit may be considered but only equitably	The bank profited overall (cash inflows exceeded outflows); equity and Restatement §920 require deduction of benefits (no discretion to ignore profits)	Affirmed for Gateway: the special‑benefit offset is discretionary; referee reasonably found equities weighed against Metaxas and did not apply a deduction
Whether Metaxas breached fiduciary duty by approving the $757,000 wire	The wire was an imprudent, self‑interested act that caused loss; she overruled CFO and acted despite directives to cease funding Ideal	The funds were Ideal’s; she had no practical or legal option but to let Ideal withdraw its money, so no additional causation/damage from her approval	Affirmed for Gateway: referee reasonably found breach of fiduciary duty and causation; Metaxas’s proffered counsel advice and necessity defense were rejected
Standard of appellate review for equity decisions about mitigation under special‑benefit doctrine	Trial court’s equitable choice reviewed for abuse of discretion	—	Abuse‑of‑discretion standard applies; referee’s conclusions sustained absent irrationality
Whether damages were limited to cash flows so netting is required	Gateway alleged non‑monetary harms (reputational, regulatory costs) beyond cash flows; these supported denial of netting	Metaxas argued cash is fungible and netting of inflows/outflows is the correct measure	Court accepted non‑monetary harms and that mitigation is not automatic; netting was not required here

Key Cases Cited

Maben v. Rankin, 55 Cal.2d 139 (1961) (special‑benefit value may be considered to mitigate damages when equitable)
Turpin v. Sortini, 31 Cal.3d 220 (1982) (value of benefit considered in mitigation to extent equitable)
Heckert v. MacDonald, 208 Cal.App.3d 832 (1989) (affirming equitable mitigation where appropriate; no automatic deduction)
Prentice v. North American Title Guaranty Corp., 59 Cal.2d 618 (1963) (explaining tort‑of‑another doctrine: attorney fees recoverable as tort damages)
Sargon Enterprises, Inc. v. University of Southern California, 55 Cal.4th 747 (2012) (standard for demonstrating abuse of discretion on appellate review)
Denham v. Superior Court, 2 Cal.3d 557 (1970) (presumption that lower‑court judgment is correct on appeal)