Judge Christopher K. Lui, Case Number: 24STCV07745, Date: 2024-09-10 Tentative Ruling

Plaintiff alleges that Defendants wrongfully foreclosed on property which secured loans made by Defendant Tolbex, Inc. to Plaintiff.

Defendant Tolbex, Inc. demurs to the Complaint and moves to strike portions thereof. Defendant also moves to expunge lis pendens.

Defendant Tolbex, Inc.’s demurrer to the Complaint is OVERRULED as to the first, second and third causes of action and SUSTAINED with leave to amend as to the fourth cause of action and without leave to amend as to the fifth cause of action. However, injunctive relief may be more fully pled as a remedy in conjunction with one of the other causes of action upon amendment.

Defendant’s motion to strike is GRANTED with leave to amend as to the request for punitive damages at ¶ 26 of the Complaint and the Prayer, ¶ 2 at Page 8.

Defendant’s motion to expunge lis pendens and request for attorney’s fees is DENIED. Defendant’s request that Plaintiff post an undertaking pursuant to Civ. Proc. Code, § 405.34 is DENIED.

The form declaration of Brianna Milligan reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 430.41.

Defendant requests that the Court take judicial notice of the following: (1) Deed of Trust, dated March 10, 2022, against the Properties, in favor of Tolbex, which was recorded in the Official Records Recorder’s Office, Los Angeles County, California on March 29, 2022, as Document No. 2022034559; (2) Notice of Default and Election to Sell under Deed of Trust recorded in the Official Records of County of Los Angeles County on January 12, 2023, Document No. 20230025098; (3) Notice of Trustee’s Sale in the Official Records of County of Los Angeles, Document No. 20230238951; (4) Debtor, Sirak Minasyan’s Voluntary Chapter 13 Bankruptcy Petition filed in the Central District of California in the bankruptcy case entitled In re: Sirak Minasyan Case Number 2:23-bk-14538-SK; (5) Debtor, Sirak Minasyan’s Motion for Order Authorizing the Sale of 7224 Lucky Way, Tujunga, CA, 91042 filed on January 15, 2024, in the bankruptcy case entitled In re: Sirak Minasyan Case Number 2:23-bk-14538-SK; (6) Debtor, Sirak Minasyan’s Motion for Order Authorizing the Sale of 7225 Lucky Way, Tujunga, CA, 91042 filed on January 15, 2024, in the bankruptcy case entitled In re: Sirak Minasyan Case Number 2:23-bk-14538-SK; (7) Order from the Bankruptcy Court for the Central District entered on March 1, 2024 in the bankruptcy case entitled In re: Sirak Minasyan Case Number 2:23-bk-14538-SK dismissing the bankruptcy action and denying the sale motions; (8) Notice of Trustee’s Sale recorded in the Official Records of County of Los Angeles County on March 1, 2024, Document No. 20240137605; (9) Notice of Trustee’s Sale recorded in the Official Records of County of Los Angeles County on March 5, 2024, Document No. 20240142125; (10) Trustee’s Deed Upon Sale recorded in the Official Records of County of Los Angeles County on, Document No. 20240204521 on March 29, 2024; (11) Trustee’s Deed Upon Sale recorded in the Official Records of County of Los Angeles County on, Document No. 20240318811 on May 15, 2024.

Requests Nos. 1, 2, 3, 8, 9, 10, 11 are GRANTED. Requests Nos. 4, 5, 6, 7 are GRANTED per Evid. Code, § 452(d)(court records).

Defendant argues that this cause of action is duplicative of the claim for wrongful foreclosure and cancellation of instruments.

This argument is not persuasive, as declaratory relief is a cumulative remedy and may be based upon the same facts as other theories justifying additional relief.

The remedies provided by this chapter [pertaining to declaratory relief] are cumulative, and shall not be construed as restricting any remedy, provisional or otherwise, provided by law for the benefit of any party to such action, and no judgment under this chapter shall preclude any party from obtaining additional relief based upon the same facts.

Moreover, a cause of action is stated whether Plaintiff is entitled to declaratory relief in her favor or not. (Columbia Pictures Corp. v. DeToth (1945) 26 Cal.2d 753, 760 [“It is not essential, to entitle a plaintiff to seek declaratory relief, that he should establish his right to a favorable declaration.”])

Defendant makes a lengthy argument about the alleged description of the real property not being validity set forth in the Deed of Trust. However, this is only one basis for the alleged invalid sale, and thus is more properly the subject of a motion to strike, not a demurrer. A demurrer does not lie to only part of a cause of action or a particular type of damage or remedy. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2003) 108 Cal.App.4^th 1028, 1046; PH II, Inc. v. Superior Court (Ibershof) (1995) 33 Cal.App.4^th 1680, 1682.) The proper procedure is to bring a motion to strike the substantively defective allegation. (Id. at 1682-83.)

Moreover, the cancellation cause of action only seeks cancellation the Notices of Default and Notice of Trustee’s Sale “because they are of record but are legally invalid.” (Complaint, ¶ 21.) As to the Notices of Default and Notices of Trustee’s Sale, Plaintiff alleges as to the 7224 Lucky Way Property that:

[T]he January 12, 2023 Notice of Default and Election to Sell Under Deed of Trust was invalid because it substantially demand more monies than were due and did not credit Plaintiff for the October and November 2022 payments that were made; that Defendant TOLBEX (through its owner Mark Morris a.k.a. Richard Morris entered into an agreement that TOLBEX would cancel and rescind the foreclosure and extend the loan extension through November 2023 upon Plaintiff paying $163,945.74 to TOLBEX which Plaintiff did and cured the default; the May 17, 2023 payment cured any defaults and rescinded the foreclosure sale; that Plaintiff did not receive notice of the March 12, 2024 Trustee’s Sale; and that the purported March 12, 25 2024 Trustee’s Sale is invalid.

[T]he January 12, 2023 Notice of Default is invalid because it improperly demanded substantially more monies than were due under the Deed of Trust and did not give Plaintiff credit for the October/November payments made; the May 17, 2023 payment cured any defaults and rescinded the foreclosure sale; that Defendant TOLBEX (through its owner Mark Morris a.k.a. Richard Morris entered into an agreement that TOLBEX would cancel and rescind the foreclosure and extend the loan extension through November 2023 upon Plaintiff paying $ 163,945.74 to TOLBEX which Plaintiff did and cured the default.

Defendant argues that the Complaint contradicts itself as to the amount of default being incorrect in the Notice of Default and Election to Sell, but Plaintiff also alleging a substantially higher amount was paid to cure any arrearages or defaults. However, this is a question of fact to be determined by the jury, and is outside the scope of the demurrer. “Questions of fact may be resolved on demurrer only when there is only one legitimate inference to be drawn from the allegations of the complaint. (Citation omitted.)” (TracFone Wireless, Inc. v. County of Los Angeles (2008) 163 Cal.App.4th 1359, 1368.)

“A written instrument, in respect to which there is a reasonable apprehension that if left outstanding it may cause serious injury to a person against whom it is void or voidable, may, upon his application, be so adjudged, and ordered to be delivered up or canceled.” (Civ. Code, § 3412.) A note which the maker has been fraudulently induced to execute is voidable in the hands of all except one who takes it as a holder in due course for value before maturity without notice of any infirmity or defect. (Citations omitted.) A note which the maker executes as a result of fraud and without any knowledge of the nature of the instrument, believing it to be something else, is wholly void. (Citations omitted.)

In obtaining rescission or cancellation, the rule is that the complainant is required to do equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the plaintiff has received in the transaction. (Citations omitted.) The rule applies although the plaintiff was induced to enter into the contract by the fraudulent representations of the defendant. [*797] (Citations omitted.) In the application of equitable principles, however, it would seem that the basic distinction between the cancellation of a void instrument and the rescission or cancellation of a voidable contract or instrument must be recognized, and the rule should have no application where the instrument is void. “There is a manifest distinction between fraud in the execution -- in the fact of whether or not an instrument has been executed at all, and fraud in the inducement, that is, where because of the fraudulent representation of the payee, the maker knowingly and voluntarily executes the note, but it is voidable because of the fraud inducing him to execute it. In the former there is no contract whatever. In the latter there is a contract which is voidable for fraud.” (Citation omitted.)

If, as Plaintiff alleges, the default was cured, then the trustee’s sale was invalid, and this would render the Notices of Default subject to cancellation.

We agree with Bisno. A power of sale in a deed of trust is a creature of contract, arising from the parties’ agreement. “The power of sale only exists if it is expressly granted by the trustor in the security documents.” (4 Miller & Starr, Cal. Real Estate (3d ed. 2003) § 10:123, p. 381.) The statutory scheme governing nonjudicial foreclosures does not expand the beneficiary’s sale remedy beyond the parties’ agreement, but instead provides additional protection to the trustor: “Statutory provisions regarding the exercise of the power of sale provide substantive rights to the trustor and limit the power of sale for the protection of the trustor.” (Ibid.) As is typical, the deed of trust involved in this case allows the beneficiary to exercise its power of sale only if an “event of default” occurs. If, after a default, the trustor and beneficiary enter into an agreement to cure the default and reinstate the loan, no contractual basis remains for exercising the power of sale.

In this case, it is undisputed that the trustor and beneficiary entered into an agreement to cure the default. It follows that the beneficiary had no right to sell afterward. Therefore, the foreclosure sale was invalid.

Because Plaintiff does not allege that he was fraudulently induced into signing any of the subject documents, there are no void instrument and thus, the Notices of Default and Notice of Trustee’s Sale are merely voidable, but subject to cancellation.

Defendant argues that Plaintiff has not pled tender or an exception to the tender rule.

Because the action is in equity, a defaulted borrower who seeks to set aside a trustee’s sale is required to do equity before the court will exercise its equitable powers. (Citation omitted.) Consequently, as a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. (Abdallah, supra, 43 Cal.App.4th at p. 1109; Onofrio, supra, at p. 424 [the borrower must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before commencing the action].) “The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].” (Citation omitted.)

Here, because Plaintiff alleges that he in fact paid an agreed-upon amount to cure all arrearages and defaults. (Complaint, ¶ 13.) As such, tender is not required because it would be inequitable to impose such a condition on Plaintiff where he alleges that he already paid an agreed-upon amount to cure the default. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 113.)

A wrongful foreclosure is a common law tort claim. It is an equitable action to set aside a foreclosure sale, or an action for damages resulting from the sale, on the basis that the foreclosure was improper. (See Miles, supra, 236 Cal.App.4th at pp. 408–409.) The elements of a wrongful foreclosure cause of action are: “‘(1) [T]he trustee or mortgagee caused an illegal, fraudulent, [*562] or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.’” (Id. at p. 408.) “[M]ere technical violations of the foreclosure process will not give rise to a tort claim; the foreclosure must have been entirely unauthorized on the facts of the case.” (Id. at p. 409.) “[A]ll proximately caused damages may be recovered.” (Id. at p. 410.)

As noted above re: the second cause of action, a wrongful foreclosure claim is stated where there was an agreement to cure the default, pursuant to which Plaintiff allegedly paid the agreed-upon amount. (Bank of America, supra, 129 Cal.App.4th at 710-17.)

Defendant argues this cause of action is not pled with particularity as to the unlawful, unfair or fraudulent business practice.

Unfair competition under the UCL includes “any unlawful, unfair or fraudulent business act or practice.” (Bus. & Prof. Code, § 17200.) “Because the statute ‘“is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.”‘” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 610 [172 Cal. Rptr. 3d 218] (Graham).)

“[S]tatutory causes of action must be pleaded with particularity.” (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.) Here, ¶¶ 27 – 29 do not specify an unlawful, unfair or fraudulent business practice which forms the basis of this claim.

Defendant argues that injunctive relief is a remedy not a cause of action and is derivative of the other claims which fail. Defendant also argues that injunctive relief is moot because the sale already occurred.

“Correctly, the respondents state that a request for injunctive relief is not a cause of action. ( [*985] Shell Oil Co. v. Richter (1942) 52 Cal. App. 2d 164, 168 [125 P.2d 930].) Therefore, we cannot let this ‘cause of action’ stand.” (Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 984-985.)

Accordingly, the demurrer to the fifth cause of action is SUSTAINED without leave to amend. However, injunctive relief may be more fully pled as a remedy in conjunction with one of the other causes of action upon amendment.

The form declaration of Brianna Milligan reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 435.5.

The Court incorporates by reference its ruling on the request for judicial notice as to the demurrer.

Defendant moves to strike the request for punitive damages at ¶ 26 of the Complaint and the Prayer, ¶ 2 at Page 8.

The motion to strike is GRANTED with leave to amend as the punitive damage requests. There are insufficient facts to support a finding of malice, oppression or fraud for purposes of the imposition of punitive damages against moving Defendant.

Civil Code § 3294(c) defines malice, oppression and fraud for purposes of the imposition of punitive damages:

(1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) ‘Fraud’ means an intentional misrepresentation, desceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

To withstand a motion to strike punitive damages allegations, the complaint must set forth facts supporting a claim for punitive damages:

The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. (Citation omitted.) Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim.

(Grieves v. Superior Court (Fox) (1984) 157 Cal.App.3d 159, 166 [emphasis added].)

(See also Clauson v. Superior Court (Pedus Services, Inc.) (1998) 67 Cal.App.4^th 1253, 1255 [“[T]o survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.”])

No. 3: OVERRULED. Objections are inapplicable (although the evidence seems to be irrelevant).

No. 5: OVERRULED as to agreement on the amount to cure—legal effect of words spoken is not hearsay: “[W]ritten or oral utterances, which are acts in themselves constituting legal results in issue in the case, do not come under the hearsay rule. (Citation omitted.) (Zuckerman v. Pac. Sav. Bank (1986) 187 Cal.App.3d 1394, 1404.) Also, what Defendant said is an admission by party opponent. (Evid. Code, § 1221.); OVERRULED as to printout—document was attached as Pltf’s Exh. 9.

Defendant’s request for judicial notice is GRANTED for the same reasons as set forth in the request for judicial notice in support of the demurrer and motion to strike.

The motion to expunge lis pendens is not rendered moot by the filing of a first amended complaint. On a motion to expunge lis pendens, the court shall order the notice of lis pendens expunged if the court finds that the pleading on which the notice is based does not contain a real property claim (Civ. Proc. Code§ 405.31) or if claimant has not established by a preponderance of the evidence the probable validity of the real property claim (Civ. Proc. Code, § 405.32). A real property claim means the cause of action in a pleading would, if meritorious, affect title to, or the right to possession of, specific real property or the use of an easement. (Civ. Proc. Code, § 405.4.)

Defendant Tolbex, Inc. moves to expunge lis pendens on the grounds that the Complaint does not state any claim affecting the title to the real property at issue in this motion and, alternatively, the real property claims lack probable validity.

In proceedings under this chapter, the court shall order the notice expunged if the court finds that the pleading on which the notice is based does not contain a real property claim. The court shall not order an undertaking to be given as a condition of expunging the notice where the court finds the pleading does not contain a real property claim.

In making this determination, the court must engage in a demurrer-like [*648] analysis. “Rather than analyzing whether the pleading states any claim at all, as on a general demurrer, the court must undertake the more limited analysis of whether the pleading states a real property claim.” (Code com., 14A West’s Ann. Code Civ. Proc., supra, foll. § 405.31, at p. 342.) Review “involves only a review of the adequacy of the pleading and normally should not involve evidence from either side, other than possibly that which may be judicially noticed as on a demurrer.” (Code com., 14A West’s Ann. Code Civ. Proc., supra, foll. § 405.30, at p. 337.) Therefore, review of an expungement order under section 405.31 is limited to whether a real property claim has been properly pled by the claimant. (Code com., 14A West’s Ann. Code Civ. Proc., supra, foll. § 405.31, at p. 342.)

“Real property claim” means the cause or causes of action in a pleading which would, if meritorious, affect (a) title to, or the right to possession of, specific real property or (b) the use of an easement identified in the pleading, other than an easement obtained pursuant to statute by any regulated public utility.

Because Plaintiff’s wrongful foreclosure claim survives demurrer, the Complaint states a real property claim. This ground to expunge is not persuasive.

In proceedings under this chapter, the court shall order that the notice be expunged if the court finds that the claimant has not established by a preponderance of the evidence the probable validity of the real property claim. The court shall not order an undertaking to be given as a condition of expunging the notice if the court finds the claimant has not established the probable validity of the real property claim.

On a motion to expunge, the burden is on the claimant to prove the probable validity of the real property claim under Civ. Proc. Code, § 405.32: “Evidence or declarations may be filed with the motion to expunge the notice. The court may permit evidence to be received in the form of oral testimony, and may make any orders it deems just to provide for discovery by any party affected by a motion to expunge the notice. The claimant shall have the burden of proof under Sections 405.31 and 405.32.” (Civ. Proc. Code, § 405.30.) “ ‘Probable validity,’ with respect to a real property claim, means that it is more likely than not that the claimant will obtain a judgment against the defendant on the claim.” (Civ. Proc. Code, § 405.3.) “If conflicting evidence is presented, the judge must weigh the evidence in deciding whether plaintiff has sustained its burden.” (Weil & Brown et al., Cal. Prac. Guide: Civ. Pro. Before Trial [The Rutter Group 2018], § 9:436.2.)

Defendant argues that tender by Plaintiff is required. However, as discussed above re: the demurrer, an equitable exception to the tender requirement applies. The Court will address whether Plaintiff can demonstrate the probable validity of the cancellation of instruments or wrongful foreclosure cause of action.

If, as Plaintiff alleges, the default was cured, then the trustee’s sale was invalid, and this would render the Notices of Default subject to cancellation.

Plaintiff’s claim regarding the 7225 Property Notice of Trustee’s Sale recorded on March 1st NOS and the March 5th NOS are simply Plaintiff’s attempts at a “hail-Mary” to make a claim. The two Notices of Sale recorded against the 7225 Property is easily explained. Tolbex had initially recorded the April 2023 NOS against the Properties setting the sale date for May 16, 2023. (Decl. Michael Morris, ¶17-19). Plaintiff requested a postponement of that sale date by 30 days in exchange for consideration in the amount of $163,945.74. Id. ¶20. Tolbex kindly continued to postpone the sale dates until approximately July 20, 2023, to afford the Plaintiff more time to sell or refinance the Properties. Id. ¶27. Plaintiff ultimately ended up filing bankruptcy on the same date as the foreclosure sales of the Properties. Id. ¶28. However, the foreclosure trustee did not receive notice of Plaintiff’s bankruptcy filing until after the auction of the 7225 Property had occurred but did receive notice of the filing just before the auction of the 7224 Property. Id. ¶29. Therefore, the foreclosure trustee rescinded the sale of the 7225 Property due to Plaintiff’s bankruptcy filing even though the auction had already occurred. Id. ¶30. The 7224 Property sale date was simply postponed since the auction had not yet taken place. Id. ¶31. Because the 7225 Property April 2023 NOS was actually rescinded, Tolbex caused the March 1st NOS to be recorded but ended up recording the March 5th NOS due to an administrative issue and out of an abundance of caution. Id. ¶34. Plaintiff’s wrongful foreclosure allegation is only alleged against Tolbex, not the Trustee, further supporting Tolbex’s claim that there was no irregularity in the foreclosure process.

Plaintiff alleges that (1) his payment of $33,774.50 for October and November of 2022 was not credited (2) his payment of $163,945.74 to Tolbex cured the default, acted to extend the loan, and rescinded the Notice of Trustee’s Sale of the Properties and (3) that Tolbex “was not and is not a lender licensed to lend monies secured by real estate” (Complaint, ¶18). These allegations are all misleading and lack validity.

While Plaintiff did make a payment of $33,774.50 for October and November of 2022, Tolbex did credit that payment. (Decl. Michael Morris, ¶12). However, Plaintiff’s payment due for December 1, 2022, and January 1, 2023, bounced and as a result, Plaintiff owed 2 months of past-due payments in addition to default interest under the terms of the Note. (Id. at ¶13). After Plaintiff defaulted and Tolbex had noticed the sales of the Properties, Plaintiff contacted Tolbex to request a postponement of the foreclosure sale of the Properties for a total of 30 days past the originally scheduled sale dates of May 16, 2023. (Decl. Richard Morris, ¶7). Tolbex advised Plaintiff that in exchange for a partial payment of $163,945.74 which consisted of outstanding interest and expenses that Tolbex would postpone the sale dates for 30 days. Id. at ¶7-9. Tolbex never agreed to enter into a forbearance agreement with Plaintiff in exchange for the payment from Plaintiff. (Id. at ¶11; Decl. Michael Morris, ¶25). The $163,945.74 payment from Plaintiff did not cure the default, but merely served as consideration for a 30-day postponement. (Decl. Michael Morris, ¶19-21).

Due to financial issues resulting from the Covid 19 Pandemic, Plaintiff was unable to pay the December 1, 2022 installment, and Defendant Tolbex immediately proceeded to commence non-judicial foreclosure by recording a Notice of Default and Election to Sell Under Deed of Trust on January 12, 2023, without first complying with the requirements of the California Homeowner Bill of Rights contained in California Civil Code Sections 2923.4 and 2923.5, et seq[1].

This was the first of a series of fraudulent and wrongful conduct by Defendant Tolbex in an attempt to steal the Properties from Mr. Minasyan by foreclosing on the Properties and giving conflicting and incorrect amounts to cure, unlawfully charging 18% “default” interest on the entire $2.250 million principal balance when the contract rate was only 8.5%[2], failing to give proper notice of postponement of the trustee’s sale and eventually failing to give notice of the Trustee’s sale on the 7224 Property.

Plaintiff alleges that he and Defendant Tolbex agreed to a 6-month extension until November 15, 2023. (Complaint, ¶ 13.)

Defendant secretly purchased the 7224 Property by submitting a credit bid on March 12, 2024 without giving notice of the postponed trustee’s sale. Plaintiff filed the within action on March 27, 2024 prior to the March 28, 2024 Trustee’s Sale of the 7225 Property, and recorded a notice of pending action (“Lis Pendens”) on March 27, 2024 (See Exhibit 1 as part of Plaintiff’s separately concurrently filed Exhibits in Opposition to Motion to Expunge (“Opp. Exhibits”).

While Plaintiff does not articulate this point clearly, loan maturity date was originally April 1, 2023 pursuant to Section 2.1 of the Note. (Morris Decl., ¶ 15; Exh. A thereto.) Plaintiff failed to cure the December 1, 2022 and January 1, 2023 payment defaults, by April 1, 2023. (Morris Decl., ¶¶ 13 – 16.)

Tolbex then caused the trustee under the Deed of Trust to record, against the Properties, a Notice of Trustee’s Sale on April 14, 2023. (Morris Decl., ¶ 17; Exh. D.) Morris indicates as follows:

19. The April 2023 NOS indicated that a foreclosure sale of the Properties was scheduled take place on May 16, 2023.

20. It is my understanding that Plaintiff contacted Tolbex to discuss a 30-day postponement of the May 16, 2023, foreclosure sale in exchange for valuable consideration in the amount of approximately $163,945.74 which consisted of outstanding interest and expenses.

21. Around May of 2023, Plaintiff paid the $163,945.74 in exchange for a 30-day postponement of the May 16, 2023, foreclosure sale. This amount did not cure default.

22. Tolbex only agreed to accept this payment as consideration for a 30-day postponement after representations were made by the Plaintiff that he needed additional time to sell or refinance the Properties.

23. I have never personally spoken with Plaintiff regarding any extension of the Loan, nor did I speak with him regarding these postponements of the foreclosure sales of the Properties.

27. Tolbex further delayed the sale beyond the initial 30-day postponement, until approximately July 20, 2023, to afford Plaintiff even more time to sell or refinance the Properties. Plaintiff’s efforts to sell or refinance the Properties failed.

emails with Tolbex’ President Michael Morris. In or early May 2023, Plaintiff spoke with Richard Morris about extending the loan so he could sell the property and pay off Tolbex in full. On or about May 12, 2023, Plaintiff received an email from Michael Morris of TOLBEX stating [t]hat the amount due as of May 15, 2023 was $233,276.00 and mentioning a loan extension until November 15, 2023. (Opp. Exhibit 8.)

8, Plaintiff told Richard Morris that the amount was incorrect and they orally agreed that the amount to cure was $163,945.74 and TOLBEX would cancel the May 16 Foreclosure Sale

9. On May 17, 2023, Plaintiff wire transferred $163,945.74 to TOLBEX which was accepted by TOLBEX; at this time, Plaintiff had paid TOLBEX a total of $459,530.24 (Opp. Exhibits 10 and 11].

10. On or about July 18, 2023, Plaintiff received an email from Michael Morris of TOLBEX (emphasis in original) stating that the “Total due to May 15, 2023 $389,625.00”. Since Plaintiff paid the $169,945.74 on May 17, this was incorrect and Plaintiff notified Richard Morris. Opp. Exhibit 12].

11. TOLBEX postponed the May 16 Foreclosure Sale of the properties to approximately July 20, 2023. Deel. of Michael Morris, Page 4, Lines 18 to 19. However, notice of the postponements were not given as required by Civil Code Section 2924g.

12. On July 20, 2023 due to certain financial issues, Plaintiff had to file a Voluntary Chapter 13 Bankruptcy Petition (which was converted to a Chapter 11) toprotect his properties and stop the foreclosure; and offers to purchase the Properties in bankruptcy. On or about January 3, 2024, Vaagn Arakelyan offered to purchase the Properties for $2, 500,000.00 each, for a total of $5,000,000.00. Plaintiff’s Bankruptcy attorney Summer Shaw filed Bankruptcy Court Motions to Sell both Properties and Order Authorizing Sales. True and correct copies of which Motions are attached to Defendant TOLBEX’S Request for Judicial Notice (“RJN”) as Opp. Exhibits 5 and 6. Plaintiff and the brokers were working with Tolbex to sell the property and avoid foreclosure.

13. On March 1, 2024, the Bankruptcy Court issued an order that with the consent of the debtor and Tolbex, the Court found that dismissal was in the best interest of the Estate and creditors, and therefore denied all sale motions, dismissed the bankruptcy, provided that the debtor may not file another bankruptcy for a period of 180 days and that no foreclosure on the debtor’s interest in the real properties may occur before March 9, 2024. Exhibit 7 to RJN; Exhibit “G” to Deel. of Michael Morris.

14. TOLBEX proceeds with foreclosures, give notice for March 28 sale of 7225 no notice for March 12 sale for 7224. On March 1, 2024, Defendant TOLBEX recorded a Notice of Trustee’s Sale setting the sale date 3/28/2024 for $2,616,113.53 listing only the 7225 Property. Opp. Exhibit 13; attached as Exhibit 8 to RJN. On March 5, Defendant TOLBEX recorded another Notice of Sale only for the 7225 Property. Opp. Exhibit 14; Exhibit 9 to RJN. Opp. Exhibit 15.

15. Plaintiff was proceeding with the sale of both of the 7224 and 7225 properties and the was issued a loan commitment subject to minor conditions.

16. Plaintiff discovered that without any notice, Defendant sold the 7224 Property at a foreclosure sale on March 12, 2024, which was before the March 28 date that was listed in the March 1 and 5 Notices of Sale for 7225 even though both properties were listed together in the original April 2023 Notice of Sale and set for the same sale date. See Trustee’s Deed Upon Sale recorded March 29, 2024 listing a March 12, 2024 sale date, attached as Exhibit 10 to the RJN.

TOLBEX was the foreclosing beneficiary and submitted a credit bid for $1,314,000.00 for the property. Plaintiff was never given notice that the 7224 Property would be sold on March 12, 2024 and no documents show that notice to him was ever given.

17. As a result of Defendant’s fraudulent actions, I suffered severe emotional distress, damage to my credit and loss of my credit cards.

The question arises as to whether the parties agreed to extend the maturity date by 6 months or only 30 days in exchange for Plaintiff’s $163,945.74 payment. If the maturity date was extended to November 15, 2023—as Plaintiff alleges in the Complaint at ¶ 13—then the Notice of Trustee’s sale recorded on April 14, 2023 should have been rescinded. The Court finds Plaintiff’s version of the facts to be more credible, as Plaintiff submits a letter dated May 12, 2023 from Tolbex, Inc., signed by Michael Morris, indicating that a loan extension would be provided until November 15, 2023 if the appropriate payments were made. (Opp. Exh. 8.) This contradicts Defendant’s claim of only a 30-day postponement of the sale. Moreover, implicit in this extension is that the payment would cure defaults as of the date of the letter, with monthly payments to be made going forward.

This issue does not appear to be determinative because Plaintiff filed for bankruptcy on July 30, 2023 (Minasyan Decl., ¶ 12), which culminated in the bankruptcy court issuing an order on March 1, 2024 that no foreclosure on the debtor’s interest in the real properties may occur before March 9, 2024 (Def’s RJN, 7; Morris Decl., Exh. G.) Implicit in this order is that Defendant could proceed with foreclosure after March 9, 2024.

The main issue for purposes of the wrongful foreclosure analysis is, thus, whether Tolbex failed to given notice of the March 12, 2024 sale for the 7224 property. (Def’s RJN, Exh. 7.) Plaintiff admits that Tolbex gave notice of the March 28, 2024 sale for the 7225 property.) plaintiff cites Opp. Exhs. 13, 14 (see also Def’s RJN, Exhs. 8, 9), which reflect that Notices of Trustee’s Sale were recorded on March 1, 2024 and March 5, 2024 as to the 7225 property only.

Plaintiff also attaches a notice of Trustee’s Deed Upon Sale recorded on March 29, 2024 as to the 7224 property, reflecting that the sale of that property occurred on March 12, 2024. (Opp. Exh. 16; Def’s RJN Exh. 10.) (A Trustee’s Deed Upon Sale as to the 7225 property reflecting a March 28, 2024 sale was recorded on May 15, 2024.)

Critically, in Defendant’s RJN, Defendant did not attach any documents demonstrating that Notice of Trustee’s Sale was issued for the March 12, 2024 sale of the 7224 property after the bankruptcy court issued its order.

The only Notice of Trustee’s Sale pertaining to the 7224 property indicates that the sale would occur on May 16, 2023 (recorded on April 14, 2024)(Def’s RJN, Exh. 3.) Defendant did not submit any evidence demonstrating notice of the March 12, 2024 Trustees sale was published as set forth in Civil Code § 2924f. As such, the evidence demonstrates that the 7224 property was sold on March 12, 2024 without proper notice of the trustee’s sale having been given.

As such, Plaintiff has demonstrated the probable validity of the wrongful foreclosure cause of action. As such, the motion to expunge and request for attorney’s fees is DENIED.

Defendant requests that Plaintiff be required to post an undertaking as condition of maintaining the notice in record title, as set forth in Civ. Proc. Code, 405.34 which provides in pertinent part as follows:

Subject to the provisions of Sections 405.31 and 405.32, at any time after a notice of pendency of action has been recorded, and regardless of whether a motion to expunge has been filed, the court may, upon motion by any person with an interest in the property, require the claimant to give the moving party an undertaking as a condition of maintaining the notice in the record title. . . . The court may permit evidence to be received in the form of oral testimony and may make any orders it deems just to provide for discovery by any affected party. An undertaking required pursuant to this section shall be of such nature and in such amount as the court may determine to be just. In its order requiring an undertaking, the court shall set a return date for the claimant to show compliance and if the claimant fails to show compliance on the return date, the court shall order the notice of pendency of action expunged without further notice or hearing.

Recovery on an undertaking required pursuant to this section may be had in an amount not to exceed the undertaking, pursuant to Section 996.440, upon a showing (a) that the claimant did not prevail on the real property claim and (b) that the person seeking recovery suffered damages as a result of the maintenance of the notice. In assessing these damages, the court shall not consider the claimant’s intent or the presence or absence of probable cause.

Defendant argues that Tolbex seeks to sell the Properties, and the lis pendens is clouding title. Should the lis pendens not be expunged, any prospective sale will not likely go through and Tolbex will lose out on the proceeds from the sale. Tolbex therefore requests that the undertaking be sufficient to fully compensate Tolbex for all damages proximately resulting from the maintenance of the lis pendens if Plaintiff does not prevail on the real property claim.

Tolbex requests that this Court order Plaintiff to post an undertaking of at least $3,475,000.00, which is the total appraised amount of the Properties as of February 2022. (Decl. Michael Morris, ¶39, Exhs. K-L). Alternatively, Tolbex requests this Court order Plaintiff to post an undertaking in the amount of the total balance on the Loan at the time of the foreclosure sales of the Properties which was approximately $2.7 million. (Decl. Michael Morris, ¶38).

The request is DENIED. The amount of damages Tolbex would suffer if the lis pendens was wrongfully maintained based upon an unsuccessful real property claim would be the change in market price from the date the lis pendens was recorded until the date when Tolbex was able to actually sell the subject properties.

[1] Plaintiff did not plead this in the Complaint.

[2] Again, Plaintiff did not plead this in the Complaint.