George Adam Adamian, et al. v. Paul Krzemuski, et al., 22STCV29709

Tentative decision on application for preliminary injunction: granted

 

           

Plaintiff George Adam Adamian (“George”), individually and as trustee of the George Adamian Living Trust (the “Adam Trust”) applies for a preliminary injunction enjoining Defendants Paul Krzemuski (“Paul”), as trustee of the Violette Krzemuski (“Violette”), AKA Violette Adamian 2013 Family Trust (the “Violette Trust”) and Total Lender Solutions, Inc. (“Trustee”) from foreclosing on the property located at 2709 E. South, Long Beach, CA 90805 (“South Property”).

            The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

 

            A. Statement of the Case

            1. Complaint

            Plaintiff George commenced this action on September 12, 2022, alleging causes of action for (1) quiet title, (2) declaratory relief, (3) injunctive relief, and (4) slander of title.  The verified Complaint alleges in relevant part as follows.

            George is the owner of the South Property.  He acquired the South Property in his individual capacity on April 8, 1985.  On May 21, 2009, George transferred his interest in the South Property to the Adam Trust by quitclaim deed, which was recorded on June 2, 2009.

            In May 2001, George refinanced his loans secured by three properties in Inglewood, California: 520 Olive Street, 235 W. Regent Street, and 210 N. Eucalyptus Avenue (the “Inglewood Properties”).  George delivered deeds of trust for the Inglewood Properties to Point Center Financial, Inc. (“Point Center”) and they were recorded on July 26, 2001.  In July 2001, George obtained $66,000 in additional financing from Point Center and the Inglewood Properties secured the financing.  George executed and delivered to Point Center a deed of trust against the Inglewood Properties that was recorded on July 26, 2001.

            On July 26, 2001, a defective and fraudulent deed of trust (the “Violette DOT”) was recorded against the South Property and Inglewood Properties, which references a promissory note in the amount of $161,000 (the “Note”).  The Violette DOT lists George as the Trustor and Violette (George’s sister) as the beneficiary.  The “purpose of securing” listed in the Violette DOT includes “[p]ayment of the indebtedness evidenced by one promissory note of even date herewith, and any extension or renewal thereof, in the principal sum of $161,000.00 executed by Trustor in favor of Beneficiary or order.”

            While George recalls receiving loan proceeds or refinancing benefits in connection with the Inglewood Properties, George did not borrow money in any amount from Violette, did not sign a promissory note for her benefit, and did not knowingly execute the Violette DOT.

            In 2012 and 2014, George sold the Inglewood Properties through two separate transactions.  One of the properties was sold in November 2012, and it was insured by Lawyers Title Company, which did not use funds to pay off the Violette DOT despite the fact that it showed on title, suggesting that Lawyers Title Company did not find the lien legitimate.   George sold the other two Inglewood Properties in November 2014, and it was insured by Progressive Title Company, which did not use funds to pay of the Violette DOT despite the fact that it showed on the title, again suggesting that Progressive Title Company did not find the lien to be legitimate.

            On March 22, 2013, Violette passed away.  On the day that Violette passed away, she signed the Violette Trust, and Paul was appointed the trustee.  Violette’s estate went through probate in Estate of Violette Krzemuski, Case No. BP149738 (the “Probate Case”), and her son Paul was appointed as the representative of her estate.  The Violette DOT was identified as an asset in Paul’s Inventory and Appraisal in the Probate Case.   In the Inventory and Appraisal, Paul represented that the Note has not been located and he assumed that it was non-interest bearing since George and Violette were related. 

            From the time the Violette DOT was recorded until Violette’s death, George did not receive any written demands for payments on the Note.  In the eight years following Violette’s death until late 2021, George did not receive any written demands for payments.  In December 2021, George approached Paul and requested that the Violette DOT be removed from the public record.  Paul initially agreed to relinquish in the Note and any property encumbered by the Violette DOT but later changed his mind and sought to enforce it.

            On May 31, 2022, Paul and his Trustee commenced a non-judicial foreclosure under the Violette DOT by recording a Notice of Default (“NOD”).  The NOD was recorded against the South Property, which George owns, and the Inglewood Properties, which are now owned by third parties, and cloud titles to all of the properties.  In connection with the foreclosure, Paul signed an Affidavit of Lost Promissory Note (“Affidavit”) wherein he stated that the Note was lost or destroyed.  Paul also contended that the original trustee on the Violette DOT, Escrow Professionals, Inc. (“EP”), went out of business in 2009, but that he contacted EP and was informed that the Note was destroyed before the company ceased its operations.

            Paul now contends that the Note carries a 10% interest rate per year and calls for late fees of 5% per late payment missed.  Paul fails to explain how these rates and fees were determined.  Based on the alleged interest rates, George contends that the payoff amount as of June 30, 2022 was $518,679.04 ($161,000 (principal), $338,541.10 (accrued interest), and $16,904.16 (late charges).

           

            2. Course of Proceedings

            On September 20, 2022, the court granted George’s ex parte application for temporary restraining order (“TRO”) enjoining Defendants from proceeding with the Trustee’s Sale of the South Property, and set an order to show cause re: preliminary injunction (“OSC”) for October 11, 2022. 

            On September 21, 2022, the court found that this matter was related to Hollywood Lanai Apartments LLC v. Paul Krzemuski, et al., (“Hollywood”) case number 22STCV29769, with this matter serving as the lead case.

            On September 30, 2022, the court granted George’s ex parte application to reissue the TRO and set an OSC for October 20, 2022.  The court denied George’s ex parte application for an order allowing service on Paul by publication.  The court ordered George to send a notice and acknowledgement of receipt to Paul’s new counsel to see whether he will accept service on behalf of Paul or whether Paul would sign the notice of acknowledgment.

            According to proof of service on file, Trustee was served with the Summons, Complaint, moving papers, and related documents on September 19, 2022 by substituted service.  On October 5, 2022, George filed a notice and acknowledgment of receipt reflecting Paul’s signature and his acknowledgment of receiving the Summons, Complaint, Moving Papers, and related documents.

            On October 11, 2022, Trustee filed a declaration of non-monetary status of trustee pursuant to Civil Code section 29241, where it agreed to be bound by whatever order or judgment issued by the court regarding the deed of trust and NOD.

 

            B. Applicable Law

            An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court.  CCP §525.  An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act.  See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[1]  It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right.  Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

            The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial.  See Scaringe v. J.C.C. Enterprises, Inc., (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623.  The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy.  Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

            A preliminary injunction is issued after hearing on a noticed motion.  The complaint normally must plead injunctive relief.  CCP §526(a)(1)-(2).[2]  Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief.  See e.g. Ancora-Citronelle Corp. v. Green, (1974) 41 Cal.App.3d 146, 150.  Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts.  See CCP §527(a).  For this reason, a pleading alone rarely suffices.  Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007).  The burden of proof is on the plaintiff as moving party.  O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

            A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law.  CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.  The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff.  Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

            In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.  CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636.  Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief.  Doe v. Wilson, (1997) 57 Cal.App.4th 296, 304.  The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion.  Thornton v. Carlson, (1992) 4 Cal.App.4th 1249, 1255.

            A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction.  See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

 

C. Statement of Facts

1. George’s Evidence[3]

On April 8, 1985, George acquired the South Property in his individual capacity.  George Decl., ¶1.  

George also owned the three Inglewood Properties.  Id., ¶3.  In May 2001, George refinanced his loans on the Inglewood Properties through Point Center.  George Decl., ¶4.  The refinancing was secured by three deeds of trust, one for each of the Inglewood Properties, recorded on or about July 26, 2001.  George Decl., ¶4.

Around July 2001, George obtained an additional $66,000 loan from Point Center, secured by a single deed of trust against all three Inglewood Properties.  George Decl., ¶5.

On May 21, 2009, George transferred the South Property to the Adam Trust.  Id.  

On July 26, 2001, the Violette DOT was recorded against the South Property and the Inglewood Properties.  George Decl., ¶6, Ex. 1.  The Violette DOT is dated June 21, 2001 and lists George as Violette as beneficiary.  Ex. 1.  The “purpose of securing” listed in the Violette DOT includes “[p]ayment of the indebtedness evidenced by one promissory note of even date herewith, and any extension or renewal thereof, in the principal sum of $161,000.00 executed by Trustor in favor of Beneficiary or order.”  Id.   

George disputes the Note’s validity.  George Decl., ¶8.  He did not knowingly execute the Violette DOT and did not receive any loan proceeds from Violette, in the amount of $161,000 or otherwise.  George Decl., ¶7.  George has searched his records for the Note or evidence of the loan’s proceeds and has not found any such documents.  Id., ¶9. 

            In March 2005, George refinanced the Point Center loans through Lone Oak Mortgage Fund, LLC (“Lone Oak”).  George Decl., ¶11.  During the escrow for the refinancing, George’s Point Center loans secured by the Inglewood Properties were paid in full.  George Decl., ¶11.  Title for the loan was insured by Stewart Title of California, Inc. (“Stewart Title”).  George Decl., ¶12.  Stewart Title fully insured the refinancing and did not pay the loan secured by the Violette DOT.  Id.

In November 2006, George refinanced the Lone Oak loan through East West Bank.  George Decl., ¶13.  During that refinancing escrow, the Lone Oak loan was paid in full.  Id.  Ticor Title Company (“Ticor”) fully insured the East West refinance and did not pay the loan secured by the Violette DOT.  Id.  

In 2012 and 2014, George sold the Inglewood Properties in two separate transactions.  George Decl., ¶¶ 14-16.  Each of the transactions were insured by title insurance companies -- Lawyers Title Company and Progressive Title Company, respectively -- yet the debt secured by the Violette DOT was not paid.  Id.

            On March 22, 2013, Violette passed away.  George Decl., ¶17.  During the approximate 12 years between the recording of the Violette DOT and Violette’s death, George did not receive any demands for payment of the loan from Violette or anyone on her behalf.  Id.  

            On the day she passed away, Violette signed the Violette Trust.  George Decl., ¶19.  Paul was appointed Trustee of the Violette Trust.  Id.  Violette’s estate went through probate in the Probate Case and Paul was appointed as the personal representative.  George Decl., ¶17.  On June 22, 2015, Paul filed an Inventory and Appraisal in the Probate Case in which he stated under penalty of perjury that “[n]o note has been located” and he “is assuming that the note was non-interest bearing since the parties are related”.  George Decl., ¶18, George RJN Ex. 1.   

In the eight years following Violette’s death, George did not receive any written demands for payment of the loan until late 2021.  George Decl., ¶20.

Although George knew that the Violette DOT existed, he never felt the need to remove it from title of the Inglewood Properties or the South Property for three reasons.  George Decl., ¶21.  First, the Violette DOT never affected any of the refinancing or sale transactions for the properties.  Id.  Second, George believed that he could easily resolve any potential issues with the Violette DOT because the beneficiary was George’s sister or his niece and nephew.  Id.  Third, the existence of the Violette DOT was effectively a harmless error.  Id.

            Around October 2021, George decided to take action to clear title to the South Property in connection with a contemplated transaction.  George Decl., ¶22.  He approached Paul and requested his help in removing the Violette DOT.  Id.  Paul initially agreed to relinquish any interest in both the Violette DOT and any property encumbered by the Violette DOT.  Id.  Paul later reneged on his agreement and stated that he would be enforcing the Violette DOT.  Id.  

George also approached Natalia Krzemuski (“Natalia”), Paul’s sister and Violette’s daughter and second heir, and requested her cooperation in getting the Violette DOT removed from the public record.  George Decl., ¶23.  Natalia agreed and signed a notarized statement, affirming that the Violette DOT “was forged to make a lien”.  Id., Ex. 2.

            On April 1, 2022, Paul and his then trustee, First American Title Insurance Company (“First American”), recorded a Notice of Default (“NOD”) claiming that the amount due as of March 14, 2022 was $663,445.  George Decl., ¶24, Ex. 3.  On May 3, 2022, Paul sent a payoff demand to George claiming that the amount to cure the default as of May 2, 2022 was $513,001.18.  George Decl., ¶25, Ex. 4.  This amount included $334,075.83 in interest and $16,703.75 in late fees.  Id.  

On May 31, 2022, Paul and Trustee commenced foreclosure under the Violette DOT by recording a NOD against the South Property.  George Decl., ¶26, Ex. 5.  In the NOD, Paul represents that the payoff for the alleged $161,000 debt as of May 26, 2022 was $516,506.28.  Id.  

Trustee provided a notice of debt collection, dated June 7, 2022, claiming that the payoff amount as of June 30, 2022 was $518,679.04, which included accrued interest at a rate of 10%, late charges at a rate of 5%, and foreclosure fees and costs.  George Decl., ¶27, Ex. 6.

            In connection with the foreclosure, Paul signed the Affidavit of Lost Promissory Note dated May 23, 2022 (“Affidavit”) in which he represented that the Note was destroyed.  George Decl., ¶28, Ex. 7.  Paul also represented that the Note “carries an interest rate of ten percent (10%) per year and calls for late fees of five percent (5%) per late payment missed,”.  George Decl., ¶18; George RJN Ex. 1. 

On September 6, 2022, Trustee filed a Notice of Trustee’s Sale (“NOS”), whereby it seeks to conduct a non-judicial foreclosure of the South Property and the Inglewood Properties.  George Decl., ¶29, Ex. 8.  Trustee claims that the amount to cure the default as of September 29, 2022 is $528,460.24.  Id.

 

            2. Paul’s Evidence[4]

            George previously owned several Texaco gas stations.  Paul Decl., ¶6.  He collected sales tax on gasoline purchases without remitting the tax to the Franchise Tax Board (“FTB”).  Paul Decl., ¶6.   In 2001, he was under criminal investigation and the FTB seized his possessions, including several expensive automobiles, for his failure to remit sales tax.  Paul Decl., ¶6.  To prevent his automobiles from being auctioned, Violette loaned him $161,000 in June 2001 to pay the FTB.  Paul Decl., ¶6.

            George secured this loan with two deeds of trust securing five properties.  Paul Decl., ¶7, Paul RJN Exs. 1-2.  The first deed of trust was the Violette DOT signed on June 27, 2001 and recorded on July 26, 2001, against the South Property and the Inglewood Properties (520 Olive Street, 210 N. Eucalyptus, and 235-43 West Regent Street).  Paul Decl., ¶¶ 8, 10; Paul RJN Ex. 1.  The Violette DOT states that it is notarized by Melvin Rabow, who also notarized other documents for George around this time.  Paul Decl., ¶9; see Paul RJN Exs. 3-5.  The Violette DOT states that it is for the purpose of securing a promissory note with principal of $161,000.  Chrisman Decl., ¶4, Ex. 2.  

Also on July 26, 2011, George signed the other deed of trust securing the Violette loan for 5011 Crescent Avenue, La Palma, California (“La Palma”).  Paul Decl., ¶11; Paul RJN Ex. 2.

            Paul is unable to locate the Note which the Violette DOT secures, but he has found copies of the title insurance policies issued by First American Title Insurance Company (“First American”) for both deeds of trust securing the Note.  Paul Decl., ¶12, Exs. 1-2. 

            Throughout the years, Violette told Paul several times about her loan to George and her frustration that he failed to repay it.  Paul Decl., ¶13.  While Violette was alive and for nearly a decade after her death, George never asserted to Paul that Violette did not loan him $161,000 or that his signature on either deed of trust was forged.  Paul Decl., ¶¶ 14, 29. 

As far back as 2005, in connection with obtaining a post-petition financing while in Chapter 11 Bankruptcy, George affirmed the validity of both the Note and the Violette DOT against the South Property.  Paul RJN Ex. 6.  On March 28, 2005, George’s bankruptcy counsel recorded the Bankruptcy Order which states that Violette DOT securing Violette’s loan shall be subordinated to the Lone Oak liens and that there will be sufficient equity in the “Properties” to secure the approximately $211,000 indebtedness to Violette and another lienholder.  Id.

In 2017, George had a second deed of trust recorded against the South Property in favor of Theroul Corporation to secure a $200,000 promissory note.  Paul Decl., ¶15; Paul RJN Ex. 7.  The terms of the Theroul deed of trust included an acknowledgment that the Violette DOT had priority over the Theroul deed of trust.  Paul Decl., ¶15; Paul RJN Ex. 7.

            On February 22 and July 10, 2017, George executed a Request For Notice under Civil Code section 2924b, in which he asked that any NOD or NOS recorded pursuant to the Violette DOT be sent to Oakwood Financial Group (“Oakwood”).  Paul RJN Exhs. 8-9.  In both recorded documents, George acknowledged that he signed the Violette DOT.  Paul RJN Exs. 8-9. 

            On September 5, 2019, the court in the Probate Case entered an order that distributed the $161,000 Note and the Violette DOT to Paul.  Paul Decl., ¶16; Paul RJN Exh. 10.

            In October 2021, George and his two sisters, Marie Adamian (“Marie”) and Yvette Adamian (“Yvette”), told Paul that Marie’s home at 801 Westholme Avenue, Los Angeles, California 90024 (“Westholme Property”) was in foreclosure.  Paul Decl., ¶17.  George asked Paul to forgive the Violette loan – acknowledging again that it was valid – so that he could borrow against the properties secured by the Violette DOT to prevent the foreclosure of Aunt Marie’s home.  Paul Decl., ¶17.  George did not inform Paul that he had already sold three of the properties and still owned only the South Property.  Paul Decl., ¶18.  

Paul initially agreed to release the Violette DOT against all four properties therein if George had a new deed of trust recorded on the Westholme Property once George brought it out of arrears.  Paul Decl., ¶19.  However, on October 12, 2021, Paul sent an email to the lender for the Westholme Property, Deutsche Bank National Trust Company (“Deutsche Bank”).  Paul Decl., ¶20, Ex. 3.  Deutsche Bank informed Paul that the note was not for sale because the account was current.  Paul Decl., ¶20, Ex. 3.  Paul then told Marie that he would not release any properties encumbered by the Violette DOT.  Paul Decl., ¶21.

            George then called Paul on the telephone and asserted for the first time that the signature on the Violette DOT was a forgery, although he did not claim that he never received the loan.  Paul Decl., ¶22.  Paul responded that he would have an expert verify the authenticity of George’s signature, which made George belligerent.  Paul Decl., ¶22. 

On October 5, 2021, Paul’s sister Natalia signed a notation that conceded that the signatures of George and Violette on La Palma deed of trust were forgeries.  Natalia Decl., ¶5, Ex. 1.  Natalia has no personal knowledge whether this is true because she was not a witness to the signing of this deed of trust.  Natalia Decl., ¶8.  She signed this at George’s and Marie’s request because they said it was the only way to prevent Marie from losing her home.  Natalia Decl., ¶¶ 6-9.  Natalia did not know that they would use her notation to prevent Paul from enforcing the deed of trust against the South Property; she would not have signed it if she did.  Natalia Decl., ¶10.

A handwriting expert confirmed on December 4, 2021 that George’s signature on the Violette DOT is genuine.  Chrisman Decl., ¶¶ 3, 5, Exs. 1, 3; Paul Decl., ¶23. 

George then retained Oakwood to raise the funds necessary to pay off the Loan.  Paul Decl., ¶ 24.  The Statement of Information for Theroul Corporation lists Barry Levine (“Levine”) as its CEO, CFO, and Secretary.  Paul Decl., ¶26, Ex. 6.  The Secretary of State website shows that it suspended Theroul Corporation’s corporate status on August 28, 2018.  Paul Decl., ¶26, Ex. 7. 

On April 19, 2022, Levine, on behalf of Oakwood, sent a letter to First American stating that it wanted to arrange financing for George to cure default on a loan called “TS #1117835.”  Paul Decl., ¶24, Ex. 4.  The letter alleged that Paul had been uncooperative and/or unresponsive in George’s efforts to cure the default, possibly because of the familial relationship.  Paul Decl., ¶24, Ex. 4.

            On June 2, 2022, Levine sent a letter to Trustee.  Paul Decl., ¶25, Ex. 5.  The letter requested that Trustee confirm the correct payoff amount, effective until June 30, 2022, for “TS #220525132.”  Paul Decl., ¶25, Ex. 5. 

            On June 14, 2022, Levine sent an email to Paul that said that he wanted to provide George with the $518,000 needed to pay Paul for the note.  Paul Decl., ¶27, Ex. 8.  However, the foreclosure trustee could not find the promissory note and claimed that Paul had provided it with the Affidavit instead.  Paul Decl., ¶27, Ex. 8.  Levine needed either that affidavit or the note before he could lend George $500,000, and Levine had asked Paul for either one several times before.  Paul Decl., ¶27, Ex. 8.

            On June 15, 2022, Paul sent Levine the Affidavit and both deeds of trust to demonstrate George’s indebtedness.  Paul Decl., ¶28, Ex. 9.  The email reminded Levine that because Theroul Corporation’s corporate status was suspended, the junior Theroul Deed of Trust was unenforceable for the South Property; Theroul Corporation and Levine would receive nothing if a foreclosure sale occurred.  Paul Decl., ¶28, Ex. 9. 

            After Paul’s email on June 15, 2022, George asserted for the first time that Violette never made a loan secured by the Violette DOT.  Paul Decl., ¶29.

 

            3. Reply Evidence

            During George’s bankruptcy proceedings in 2005, he had evidence that some liens claimed against him were invalid, but he did not have such evidence for the Violette DOT.  George Reply Decl., ¶3.  As a result, the other liens were expunged but he asked the court to subordinate the Violette DOT.  George Reply Decl., ¶3. 

            In various conversations with Wendy Pino (“Pino”), the escrow officer who handled two property sales in 2012 and 2014, George disputed the debt underlying Violette’s Note.  George Reply Decl., ¶2.  Because of this assertion, the title company did not require him to pay the Note before it insured each of the transactions.  George Reply Decl., ¶2. 

            The language in the Theroul second deed of trust referencing the Violette DOT is standard language acknowledging the Violette DOT as a cloud on title to the South Property; it does not assume that the underlying debt is valid.  Levine Reply Decl., ¶5.

            In 2021, George asked for Paul’s help in getting the Violette DOT removed from the public record in anticipation of a financial transaction that required a clear title for the South Property.  George Reply Decl., ¶4.  These conversations were not an admission from George that the lien was valid.  George Reply Decl., ¶4.

            Over the years, Levine has helped George finance transactions related to his real property.  Levine Decl., ¶2.  Any conversations he had about financing for George hinged on a settlement between George and Paul of the contested debt.  Levine Reply Decl., ¶3.  If they never came to an agreement, Levine would not provide financing.  Levine Reply Decl., ¶4.  To prepare for such financing, Levine asked for both (1) a breakdown of the dollar amount cited in the Notice of Default, and (2) a copy of the Note.  He only received the breakdown.  Levine Reply Decl., ¶3. 

 

            D. Analysis

            George applies for a preliminary injunction enjoining Defendants from proceeding with the Trustee’s sale of the South Property.  Paul opposes.

 

            1. Paul’s Standing

            Foreclosure proceedings can only be commenced or directed by “the person or entity that currently holds the note and the beneficial interest under the deed of trust—the original beneficiary or its assignee . . . .”  Yvanova v. New Century Mortg. Corp., (2016) 62 Cal.4th 919, 927.

George contends that Paul does not have the authority to foreclose on the South Property because the Violette DOT identifies Violette as the beneficiary.  Yet, the NOD and NOS were recorded on behalf of Paul as the trustee of the Violette Trust.  App. at 16, n. 1.

            Contrary to George’s contention, Paul provided evidence that on September 5, 2019, the Note and the Violette DOT were distributed to him as trustee of Violette’s Trust by the court in the Probate Case.  Paul RJN 10.  No assignment is necessary where a court order transferred the Violette DOT to him.  Paul has standing to foreclose on the South Property.

 

            2. Probability of Success

            George contends that he is likely to succeed as to his second cause of action for declaratory relief, wherein he seeks a determination whether the Note and Violette DOT are enforceable.  App. at 15-17.  To establish a declaratory relief claim, the plaintiff must show a proper subject of declaratory relief and an actual controversy involving justiciable questions relating to the party’s rights or obligations.  See Jolley v. Chase Home Finance, LLC, (2013) 213 Cal.App.4th 872, 909.)

            George also contends that he is likely to succeed as to his first cause of action for quiet title because the Note never existed and therefore, the Violette DOT, NOD, and NOS are fatally flawed.  App. at 20-21.  A complaint for quiet title shall be verified and include: (1) a description of the property that is the subject of the action, including both the legal description and its street address or common designation if the subject property is real property; (2) the plaintiff’s title as to which determination is sought and basis of the title; (3) the adverse claims to the plaintiff’s title against which determination is sought; (4) the date of which the determination is sought; and (5) a prayer for the determination of the title of the plaintiff against the adverse claims.  CCP §761.020.

            The court agrees that George has shown that a controversy exist between himself and Paul with respect to whether the Note and Violette DOT are enforceable.  There are two elements raised by George: (a) the Note never existed, the loan was never made, and the Violette DOT is invalid; and (b) the amounts sought in the NOD and NOS are unsupported.

 

            a. The Validity of the Loan, Note, and Violette DOT

            George contends that the Note never existed.  George Decl., ¶¶ 7-9.  He contends that no loan money changed hands between Violette and himself, and he has no documentary support of a cancelled check or wire transfer for the loan.  He points to Paul’s Inventory and Appraisal in the Probate Case in which Paul stated under penalty of perjury that “[n]o note has been located”.  Id., ¶18, George RJN Ex. 1. 

During the approximate 12 years between the recording of the Violette DOT and Violette’s death, George did not receive any demands for payment of the loan from Violette or anyone on her behalf.  George Decl., ¶18.  In the eight years following Violette’s death, George did not receive any written demands for payment of the loan from Paul until late 2021.  George Decl., ¶20.  

Although George knew that the Violette DOT existed, he never felt the need to remove it from title of the Inglewood Properties or the South Property because it never affected any of the refinancing or sale transactions for the properties and he believed that he could easily resolve any potential issues with Violette because she was his sister.  George Decl., ¶21.  George also points the court to Natalia’s statement that the Violette DOT was “forged to make a lien.”  Id. at ¶ 23, Ex. 2.  App. at 17-19.

            Paul has the better evidence.  He provides a handwriting expert who states that George’s signature on the Violette DOT is genuine.  Chrisman Decl., ¶¶ 2-3, Exs. 2-3.  On July 26, 2011, George also signed a deed of trust for 5011 Crescent Avenue, La Palma, California (“La Palma”) securing the Violette loan.  Paul Decl., ¶11; Paul RJN Ex. 2.  Both deeds of trust were signed by the same notary, who also notarized other documents for George.  See Paul RJN Exs. 2-5. 

Paul also provides evidence that in 2005, while George in Chapter 11 Bankruptcy, he affirmed the validity of both the Note and the Violette DOT against the South Property when his bankruptcy counsel recorded the Bankruptcy Order stating that Violette DOT securing Violette’s loan shall be subordinated to the Lone Oak liens and that there will be sufficient equity in the “Properties” to secured the approximately $211,000 indebtedness to Violette and another lienholder.  Paul RJN Ex. 6. 

George states that he agreed to the Bankruptcy Order because while he had evidence that some liens claimed against him were invalid, he did not have such evidence for the Violette DOT.  George Reply Decl., ¶3.  As a result, the other liens were expunged but he asked the court to subordinate the Violette DOT.  Id.  The obvious response is why did he not have evidence that the Violette DOT was invalid?  All he had to do was ask his sister to provide a declaration to that effect. 

George also executed and recorded the Theroul Deed of Trust, which expressly states that it was “subject and subordinate” to the Violette DOT.  See Paul RJN Ex, No. 7.[5]  Paul states that Violette made repeated attempts to get George to repay the loan, all to no avail.  Paul Decl., ¶13.  Moreover, on both February 22, 2017, and July 10, 2017, George executed separate Request(s) For Notice Under California Civil Code Section 2924b, in which he requested that any Notice(s) of Default or Notice(s) of Sale recorded pursuant to the Violette DOT be sent to Oakwood Financial Group (“Oakwood”).  Paul RJN Exhs. 8-9.

            This evidence clearly shows that George signed the Violette DOT, and it is good evidence that the $161,000 loan actually was made.  There is also evidence that George’s denial of the debt lacks credibility. 

First and foremost, George never provides any explanation why he signed the Violette DOT.  Natalia’s notation suggests that he signed the La Palma deed of trust to create a fake lien to defraud creditors hardly reflects well on George’s credibility. 

            Second, George initially denied signing the Violette DOT.  After Paul declined to release the Violette DOT, George called Paul on the telephone and asserted for the first time that his signature on the Violette DOT was a forgery.  Paul Decl., ¶22.  This was false and Paul proved it through a handwriting expert. 

Third, in October 2021, George and his two sisters, Marie and Yvette, told Paul that Marie’s home at the Westholme Property was in foreclosure.  Paul Decl., ¶17.  George asked Paul to forgive the Violette loan – acknowledging again that it was valid – so that he could borrow against the properties secured by the Violette DOT to prevent the foreclosure of Marie’s home.  Paul Decl., ¶17.  George did not inform Paul that he previously had sold the Inglewood Properties and still owned only the South Property.  Paul Decl., ¶18.  When Paul emailed the lender for the Westholme Property, Deutsche Bank, he was informed that note was current.  Paul Decl., ¶20, Ex. 3.  Paul believes this was an attempt to defraud him into releasing the Violette DOT.  Opp. at 9-10.

             Fourth, on October 5, 2021, Natalia signed a notation conceding that the signatures of George and Violette on the deed of trust for La Palma were forgeries.  Natalia Decl., ¶5, Ex. 1.  Natalia now states that she has no personal knowledge on this issue and that she signed this notation at George’s and Marie’s request because they said it was the only way to prevent Marie from losing her home.  Natalia Decl., ¶¶ 6-9.  This, too, affects George’s credibility.

Additionally, Paul points out that George retained Oakwood to raise the funds necessary to pay off Violette’s loan.  Paul Decl., ¶ 24.  In April 2022, Levine sent a letter to First American stating that it wanted to arrange financing for George to cure default on the Violette loan.  Paul Decl., ¶24, Ex. 4.  On June 2, 2022, Levine sent a letter to Trustee that Trustee confirm the correct payoff amount for the Violette loan.  Paul Decl., ¶25, Ex. 5.  On June 14, 2022, Levine sent an email to Paul that said that he wanted to provide George with the $518,000 needed to pay Paul for the Note.  Paul Decl., ¶27, Ex. 8. 

            In reply, George undermines this evidence somewhat.  He notes that Levine’s conversations hinged on a settlement between George and Paul of the contested debt.  Levine Reply Decl., ¶3.  If they never came to an agreement, Levine would not provide financing.  Levine Reply Decl., ¶4. 

            Based on the current state of the evidence, George has not shown a probability that Violette did not loan him $161,000, the Note is invalid, or the Violette DOT is invalid.

 

            b. Material Variance in the Amount Owed

“[T]he law for obvious public policy reasons wishes to give a debtor the opportunity to avoid forfeiture.  Pursuing that policy, the courts have fashioned rules to protect the debtor, one of them being that the Notice of Default will be strictly construed and must correctly set forth the amount required to cure the default.”  Sweatt v. Foreclosure Co., (1985) 166 Cal.App.3d 273, 278.  Pursuant to Civil Code section 2924c(b)(1), the lender must provide the borrower with accurate information in regard to any inquiry regarding amount necessary to cure default so as to avert foreclosure on property.  Anderson v. Hart Federal Sav. & Loan Assn., (1989) 208 Cal.App.3d 202, 216.  A trustee’s sale based on a statutorily deficient notice of default is invalid.  Miller v. Cote, (1982) 127 Cal.App.3d 888, 894.  If a notice of default is defective, a trial court may properly enjoin the sale.  Id. at 896.  This includes a notice defective because there is a material variance in the amount due.  See Anderson, supra, 208 Cal.App.3d at 216-17.

            George contends that there is a material variance in the amount Paul claims is owed.  App. at 16, 19-20.  He presents evidence that on June 22, 2015, Paul filed an Inventory and Appraisal report in the Probate Case in which he stated under penalty of perjury that “[n]o note has been located” and he “is assuming that the note was non-interest bearing since the parties are related”.  George Decl., ¶18, George RJN Ex. 1.   Yet, in connection with the foreclosure, Paul signed the Affidavit in which he represented that the Note was destroyed, and that it “carries an interest rate of ten percent (10%) per year and calls for late fees of five percent (5%) per late payment missed,”.  George Decl., ¶18; George RJN Ex. 1. 

            On April 1, 2022, Paul recorded a NOD claiming that the amount due was $663,445.  George Decl., ¶24, Ex. 3.  On May 3, 2022, Paul sent a payoff demand claiming that the amount due was $513,001.18, which included $334,075.83 in interest and $16,703.75 in late fees.  George Decl., ¶25, Ex. 4.  On May 31, 2022, the NOD stated that the payoff required was $516,506.28.  George Decl., ¶26, Ex. 5.  On June 7, 2022, Trustee claimed that the payoff amount was $518,679.04, which included accrued interest at a rate of 10%, late charges at a rate of 5%, and foreclosure fees and costs.  George Decl., ¶27, Ex. 6.  On September 6, 2022, the NOS claims that the amount to cure the default is $528,460.24.  George Decl., ¶29, Ex. 8.

Paul provides no explanation for the interest rate or late fees.  Nonetheless, he clearly uses them in his payment demands.  George has demonstrated that the amount claimed in the NOD, NOS, and payoff demands is unsupported by any facts.  George is entitled to know the basis for Paul’s claim and the lack of foundation for interest and late charges makes the amount sought a material variance.

             George has shown that he is likely to succeed on his claim that there is a material deficiency in the amount Paul claims is owed.

            3. Balance of Hardships

            In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.  Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177.  This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.  Id.

            George contends that he will suffer irreparable harm if the preliminary injunction is not issued because the South Property is advantageously located near the 710 and 91 freeways and he places great personal value in it.  George Decl., ¶31. 

            Paul points out in his opposition that George does not provide evidence that the South Property is being rented or that he receives income from the South Property.  Paul contends that in the current “declining real estate market” each day that he is prevented from foreclosing on the South Property, the security for the Loan evaporates.  Opp. at 15.

While both residential and commercial real property are considered unique for purposes of irreparable harm (see Civ. Code §3387), damages may adequately compensate property owned for investment property which has an established value and the foreclosing entity is solvent.  Jessen v. Keystone Savings & Loan Assn., (1983) 142 Cal.App.3d 454, 458.  Where the owner intends to use the investment property and not simply sell it, money damages may not suffice and irreparable harm may justify injunctive relief.  Id.