Lori Townsend, Trustee of the Lori Townsend Trust dated May 24, 2001, a California Trust v. Assured Lender Services, Inc. et al

B. LEGAL STANDARD

“A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor.” (Code Civ. Proc., § 527, subd. (a).) “‘[T]he question whether a preliminary injunction should be granted involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits; and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.’” (Jay Bharat Developers, Inc. v.

Minidis (2008) 167 Cal.App.4th 437, 443 (quoting White v. Davis (2003) 30 Cal.4th 528, 554).) A court’s determination must be guided by a “mix” of the potential-merit and interim-harm factors; the greater plaintiff’s showing on one, the less must be shown on the other to support an injunction. (Butt v. State of Calif. (1992) 4 Cal.4th 668, 678.) The burden is on the plaintiff to show all elements necessary to support issuance. (O’Connell v. Sup. Ct. (2006) 141 Cal.App.4th 1452, 1481; Citizens for Better Streets v.

Bd. of Supervisors (2004) 117 Cal.App.4th 1, 6.)

C. DISCUSSION

1. Plaintiff Has Not Shown a Likelihood to Prevail on the Merits

Plaintiff’s Verified Complaint asserts seven causes of action against Defendants: (1) Wrongful Foreclosure, (2) Breach of Contract, (3) Cancellation of Instruments, (4) Declaratory Relief (CCP § 1060), (5) Quiet Title (CCP §§ 760.010 et seq.), (6) Violation of California Civil Code section 2923.55, and (7) Financial Elder Abuse (Welf. & Inst. Code § 15600 et seq.).

Defendants contend that the crux of the Complaint rests on two premises. The first premise is that the Property is protected by rights pursuant to Civil Code section 2923.55 because (1) the Deed of Trust is a first lien on the Property which is residential property containing no more than four dwelling units and which Plaintiff occupies as her residence and (2) the loan secured by the Deed of Trust was made primarily for personal, family, or household purposes of buy out her brother’s interest in the Property.

The second premise is a claim that the Notice of Default contains a beneficiary (U.S. Bank Trust Company, National Association, as Trustee for Velocity Commercial Capital Loan Trust 2024-4) and trustee (Assured Lender Services, Inc.) who are not identified in the Deed of Trust and therefore lack authority to conduct a foreclosure. Rather the Deed of Trust identifies the beneficiary as Velocity Commercial Capital, LLC, and the trustee as First American Title Insurance Company.

Plaintiff’s ex parte papers are consistent with Defendants’ contention that these two premises are the crux of all causes of action in her Complaint. Moreover, the Court’s review of the Complaint confirms that (1) the first premise is the basis for the Sixth Cause of Action, (2) the second premise is the basis for the First through Fifth Causes of Action, and (3) both premises serve as the bases for the Seventh Cause of Action. (Compl., ¶¶ 2-5, 10, 16, 29-31 [First Cause of Action], 36-37 [Second Cause of Action], 44 [Third Cause of Action], 46-48

[Fourth Cause of Action], 55 [Fifth Cause of Action], 59-77 [Sixth Cause of Action], 85 [Seventh Cause of Action].) Moreover, Plaintiff in Reply does not dispute that all causes of action depend on the foregoing premises.

As to the first premise, Civil Code section 2923.55 is categorically inapplicable to the subject loan on the Property. Civil Code section 2923.55 applies only to mortgages or deeds of trust described in section 2924.15. (Civ. Code, § 2923.55, subd. (h).) Section 2924.15 applies only to a first lien secured by owner-occupied residential real property, and ‘owner-occupied’ means both that the property is the borrower’s principal residence and that the loan was made for personal, family, or household purposes. (Civ. Code, § 2924.15, subds. (a), (b); Adams v. Bank of America, N.A. (2020) 51 Cal.App.5th 666, 672.)

While the Verified Complaint and Declaration of Lori Townsend ISO Ex Parte Application (“Townsend Ex Parte Decl.”) contend that the Property meets the criterion under Civil Code section 2924.15 (see Compl. ¶¶ 65-69; Townsend Ex Parte Decl., ¶¶ 15), Defendants submit evidence showing that Plaintiff, when applying for the loan (expressly titled “commercial loan application”) and executing the Deed of Trust, certified that (1) all loan proceeds were for business purposes and that no part of the loan proceeds was intended for a non-business or consumer purpose and (2) her principal residence was 1616 E.

Street, Napa CA 94558, that the Property was not her principal residence, and that she had no intention ever to make the Property her principal residence. (Declaration of Sandie Lawrence ISO Opposition to Ex Parte (“Lawrence Ex Parte Decl.”), ¶¶ 5-6, Exhs. A-B; Declaration of Sandie Lawrence in Oppostion (“Suppl. Lawrence Decl.”), ¶¶ 5-9, Exhs. A-E.) The business-purpose disclosure executed by Plaintiff expressly stated: “Because the loan will be made exclusively for business purposes, certain federal, state, and/or local laws applicable to consumer purpose loans will not be applicable to this loan.” (Suppl.

Lawrence Decl., Exh. B, p. 1.) To corroborate Plaintiff’s investment (non-residential) use of the Property, Defendants show that Plaintiff provided proof of a lease showing tenancy of the Property by third parties. (Opposition, 2:1-2, 6:14-16; Suppl. Lawrence Decl., ¶ 10, Exh. F.)

Plaintiff’s ex parte papers and Complaint completely omit these facts. In Reply, Plaintiff argues that “Plaintiff was duped into signing the contradictory documents offered by Defendants” and “Plaintiff unquestionably owns and occupies the Property as her principal residence.” (Reply, p. 1.) Plaintiff suggests that, even though she signed multiple documents under oath certifying that the loan was for non-residential use, the Property was not her principal residence, and Civil Code section 2923.55 does not apply, the undisclosed fact that she, in actuality, resided at the Property at all relevant times transforms the loan and Property into “owner-occupied” subject to Civil Code section 2923.55 (Ibid., citing Adams, supra, 51 Cal.App.5th at 673.) Adams does not stand for that proposition, and it strains reason.

Plaintiff submits a supplemental declaration with her Reply. This submission is inappropriate. (See Valentine v. Plum Healthcare Group, LLC (2019) 37 Cal.App.5th 1076, 1089 [“New evidence is generally not permitted with reply papers.”].) Even were the Court to consider it, Plaintiff presents no evidence of ever disclosing, at the time the loan was made, her contrary intentions to Defendants. As Defendants’ aver in Opposition, “the language of the statute refers to the purpose the loan was made; not the secret intent of the recipient.” (Opposition, p. 6.) The

fact that Plaintiff now purportedly blames her mortgage broker for “duping” her into signing “more than a score of documents” does not change the facts as relevant to Defendants here.

The evidence submitted by Defendants tends to show that Plaintiff previously verified the opposite of what she contends in her Verified Complaint and ex parte declaration. Although an OSC directs the defendant “to show cause” why a preliminary injunction should not issue, the burden is on plaintiff (moving party) to show all elements necessary to support the issuance of a preliminary injunction. (See O’Connell v. Sup.Ct. (Valenzuela) (2006) 141 Cal.App.4th 1452, 1481.) Here, Plaintiff’s signing of the certifications attached to the Lawrence Ex Parte Decl. and Lawrence Suppl.

Decl. would prevent application of Civil Code section 2923.55, and Plaintiff’s failure to address this evidence in her initial moving papers fails to meet her burden to show a likelihood of prevailing. As discussed above, Plaintiff’s attempt to cast aside these certifications in Reply is unsuccessful for purposes of her claims against Defendants.

As to the second premise, Defendants show that the beneficiary identified in the Notice of Default—U.S. Bank Trust, Company, National Association, as Trustee for Velocity Commercial Capital Loan Trust 2024-4 (“Velocity Trust”) c/o Assured Lender Services, Inc.— has authority to conduct the foreclosure sale. (RJN, Exh. 4 [Notice of Default].) Specifically, the trustee identified in the Deed of Trust—Velocity Commercial Capital, LLC (“Velocity”)—is the authorized agent and sub-servicer for Velocity Trust. (Lawrence Decl., ¶¶ 2, 4.)

Moreover, the Assignment of Deed of Trust from Velocity to Velocity Trust was recorded on October 2, 2024.1 (RJN, Exh. 3.) Civil Code section 2924 authorizes a trustee, beneficiary, mortgagee, or any authorized agent to record a notice of default and proceed. (Civ. Code, § 2924, subds. (a)(1), (a)(6).) Thus, Velocity Trust has authority as assigned beneficiary and as an authorized agent of Velocity. Plaintiff implicitly concedes this by failing to address or dispute it through her Reply.

Plaintiff contends that the Notice of Default includes Assured Lender Services, Inc. (“Assured”) as “either the original trustee, the duly appointed substituted trustee or acting as agent for the Beneficiary,” which is inconsistent with the Deed of Trust naming First American Title Insurance Company as trustee. This contention lacks merit. It is clear to the Court that Assured is included in the Notice of Default as the authorized foreclosure trustee on behalf of Velocity Trust, the assigned beneficiary. This is confirmed by Defendants in Opposition. (Opposition, 5:21-27.) Thus, Assured has authority under the Notice of Default under Civil Code section 2924, subdivisions (a)(1) and (a)(6). Plaintiff implicitly concedes this by failing to address or dispute it through her Reply.

Even assuming there are “serious questions” (as claimed by Plaintiff) regarding Defendants’ authority to conduct the foreclosure sale, the right of a plaintiff to file a preemptive lawsuit “to test whether the person initiating the foreclosure has the authority to do so” has been rejected by California courts. (Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154-55; Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 [limiting its holding to maintain Gomes as good law] [“We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing

1 No further notice of the assignment to Plaintiff is necessary. (See Civ. Code, § 2934 [providing that an assignment of beneficial interest may be recorded and, once recorded, operates as constructive notice to all persons including the trustor]; Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 927.)

party’s right to proceed.”].) Defendants raised this point in Opposition, and Plaintiff fails to address or dispute it in Reply, thereby implicitly conceding she has no right to file a preemptive lawsuit.

Defendants further argue that Plaintiff is barred from relief because she has not tendered the amount due. (Opposition, 7:13-23, citing Karlsen v. Am. Sav. & Loan Assn. (1971) 15 Cal.App.3d 112, 117; Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109; Turner v. Seterus, Inc. (2018) 27 Cal.App.5th 516; Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-113.) Plaintiff implicitly concedes this by failing to address or dispute it through her Reply.

For all the foregoing reasons, Plaintiff has failed to meet her burden to establish a likelihood of prevailing on her Complaint.

2. Plaintiff Has Not Satisfied the Strong Showing of Interim Harm

Under the second prong of its preliminary injunction analysis, the court evaluates the harm the plaintiff is likely to sustain if the preliminary injunction is denied compared to the harm the defendant is likely to suffer if the injunction is issued. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70.)

Although the foregoing finding prevents the Court from issuing an injunction, the Court considers the second prong. (Jamison v. Dept. of Transp. (2016) 4 Cal.App.5th 356, 362 [“[A] trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim.”].) Even assuming arguendo that Plaintiff had made a showing that she is likely to prevail on the merits of her Complaint, Plaintiff has not made a strong showing that interim harm will flow from an order denying her request for a preliminary injunction.

A consideration of interim harm to the plaintiff includes (1) the inadequacy of other remedies, (2) the degree of irreparable injury the denial of the injunction would cause, and (3) the necessity of preserving the status quo. (Take Me Home Rescue v. Luri (2012) 208 Cal.App.4th 1342, 1350.)

As to the first factor, when an award of damages constitutes an adequate legal remedy, a court may not issue a preliminary injunction. (Tahoe Keys Prop. Owners’ Ass’n v. State Water Resources Control Bd. (1994) 23 Cal.App.4th 1459, 1471.) Here, Defendants argue that, because the Property is non-residential, Plaintiff’s interest in the Property is merely its market value and is therefore compensable by money. (Ex Parte Opp., 4:6-11, citing Jessen v Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 457-60.)

The Court does not find Jessen to support Defendants’ position. Jessen recognizes the general principle that real property is deemed unique so that injury or loss cannot be compensated in damages, which general principle applies to both commercial and noncommercial real property without difference between a buyer’s desire to reside upon or to use the property for investment purposes. (Id., at 458.) Jessen held that the property at issue in that case

was not subject to the presumption because the property had “an established sales price and [was] being openly marketed.” (Ibid.) Thus, “[t]heir maximum value to [the plaintiff] is precisely his current sales price.” (Id.) These are not the circumstances here. The pending nonjudicial foreclosure sale cannot reasonably be assimilated to an openly marketed property.

Thus, the Court does not find the general principle—that real property is unique and cannot be adequately remedied by monetary damages—inapplicable here.

As to the second and third factors, Plaintiff generally argues that she faces the loss of title, possession, equity, and ownership rights in the Property. (Ex Parte Mem., p.12; Townsend Ex Parte Decl., ¶ 6.)

In Opposition, Defendants argue that the equities and doctrine of unclean hands weigh against Plaintiff. Specifically, Defendants argue that Plaintiff cannot obtain a commercial loan by swearing the collateral is not her residence and the proceeds are business-purpose only, then seek relief on grounds available only to owner-occupants by swearing the opposite. (Ex Parte Opp., pp. 5-6, citing Kendall-Jackson Winery, Ltd. v. Sup. Ct. (1999) 76 Cal.App.4th 970, 978; Evid. Code, § 623; see also Opposition, 7:24-8:23.) Velocity argues that it was induced to make a $725,000 commercial loan in reliance on Plaintiff’s sworn statements that the loan was for commercial purposes only, and that she did not occupy the Property. (Ex Parte Opp.) Plaintiff is now asserting the opposite position to her benefit and to Defendants’ detriment following her default on the loan.

In Reply, Plaintiff makes the cursory remarks that “Plaintiff in this case did not ‘intentionally and deliberately’ seek to deceive Velocity” and “[t]he injunctive relief sought in this instance does not rely upon the court’s equitable powers. Rather it is a statutorily mandated remedy.” (Reply, p. 1.) However, the second prong of a preliminary injunction analysis necessarily involves equitable considerations of interim harm.

The Court agrees with Defendants. Allowing Plaintiff to proceed under her inconsistent statements and positions solely to the detriment of Defendants while the merits of the case are pending, combined with the established law preventing a defaulting party from pursuing a preemptive lawsuit, constitutes a harm to Defendants should the OSC issue that outweighs the harm to Plaintiff should the OSC not issue.

Based on this conclusion and the Court’s previous conclusion regarding Plaintiff’s showing of the likelihood of prevailing on the claims, the request for a preliminary injunction is DENIED.

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