ML Genesee Holdings, LLC v. Selene Finance, LP et. al, 24STCV02242
Tentative decision on application for preliminary injunction:  granted

 

 

           

Plaintiff ML Genesee Holdings, LLC (“Genesee”) applies for a preliminary injunction to enjoin Defendants Selene Finance LP, a Delaware limited partnership (“Selene”), Clear Recon Corp., (“Recon”), and U.S. Bank Trust National Association (“Bank”), solely as owner trustee for RCF 2 Acquisition Trust (“RCF 2”), from foreclosing on Genesee’s eight-unit apartment building of property located at 441 West Santa Cruz Street, Los Angeles, California 90731 (“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 Genesee filed the Complaint on January 29, 2024, alleging causes of action for (1) breach of contract (specific performance); and (2) declaratory injunctive relief.  The Complaint alleges in pertinent part as follows.

            On September 13, 2019, Genesee obtained a $1,395,000 loan (“Loan”) from Sharestates Investments, LLC (“Sharestates”) to refinance the Property.  In exchange for the loan, Genesee executed a Promissory Note, Loan and Security Agreement (“Loan Agreement”), and Deed of Trust (“DOT”).  The DOT was recorded against the Property to secure repayment of the Loan.  

Defendant Selene is the servicer of the Loan, Defendant Recon is the foreclosure trustee of the DOT, and Defendant Bank is the Owner Trustee for RCF 2, the beneficiary of the Loan and DOT.

            On or about July 12, 2023, Recon recorded a Notice of Default (“NOD”) for the Loan.  Genesee began negotiations with Selene for a loan modification to cure the default and prevent foreclosure on the Property.  On August 10, 2023, Genesee submitted a loan modification application to Selene.  After Genesee submitted the request documents, Selene approved Genesee for a Trial Modification Plan (“TMP”). 

Genesee signed and returned the TMP to Selene on August 24, 2023.  The TMP provided that if Genesee made three payments each of $8,152.60 on the first of September, October, and November 2023, Selene would offer Genesee a permanent loan modification.  Under this modification, the principal balance of $1,311,906.14 would incur interest at 7%, with monthly payments of $8,152.60, starting on December 1, 2023.

As part of the TMP, Selene required Genesee to sign an Authorization Agreement for Preauthorized Payments (“Preauthorization Payment Agreement”).  Genesee signed and returned the Preauthorization Payment Agreement to Selene along with the TMP on August 24, 2023.

            Selene orally represented to Genesee that by signing the Preauthorization Payment Agreement, all the required TMMP payments would be covered by ACH Debits.  This would make Genesee eligible for the permanent loan modification offer.  However, Selene did not include an authorization for the September 2023 payment in the Preauthorization Payment Agreement; only the payments for October and November 2023 were included.  This modified the Preauthorization Payment Agreement so that it no longer included the September 2023 payment.

            Due to Selene’s oral assurances that the Preauthorization Payment Agreement included all three initial payments required by the TMP, Genesee was in compliance with the TMP upon signing it.  On November 15, 2023, Michael Lerner (“Lerner”), Genesee’s Managing Member, telephonically contacted Selene to inquire as to the status of the permanent loan modification.  A Selene representative told Lerner that Selene had cancelled the TMP, and thus the offer for permanent loan modification, due to Genesee’s failure to make the September 2023 payment. In response, Lerner immediately offered to make the missed payment.  The representative responded that the TMP had been cancelled and Selene would not accept the payment.  Genesee also learned that on November 11, 2023 Recon had recorded a Notice of Trustee’s Sale (“NOS”) which scheduled a foreclosure sale of the Property for February 8, 2024.

            Genesee seeks (1) specific performance of the TMP compelling Defendants to provide the permanent loan modification, (2) a judicial declaration that the TMP is valid and enforceable, and that the Defendants must honor it by providing the permanent loan modification; (3) a preliminary and permanent injunction enjoining foreclosure of the Property; and (4) costs of suit.

 

            2. Course of Proceedings

            On February 2, 2024, Judge Curtis Kin granted Genesee’s ex parte application for a temporary restraining order (“TRO”) enjoining Defendants from foreclosing upon the Property and issued an order to show cause (“OSC”) for February 22, 2024 at 9:30 a.m.

            On February 5, 2024, Genesee personally served Defendants Recon and Bank with the Complaint and Summons.

            On February 7, 2024, Genesee personally served Defendant Selene with the Complaint and Summons.

            After the parties stipulated to continue the February 22 OSC hearing, the court continued it to the instant date.

 

            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.  Code of Civil Procedure (“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[3]

            1. Genesee’s Evidence

            Genesee purchased the Property in September 2018 and subsequently invested $339,000 to heavily refurbish it.  Lerner Decl., ¶3.  On September 13, 2019, Plaintiff obtained a $1,395,000 Loan from Sharestates to refinance the Property.  Lerner Decl., ¶3.  In exchange for the Loan, Genesee executed the Promissory Note, Loan Agreement, and DOT.  Lerner Decl., ¶3; RJN Ex. 1.  The DOT was recorded against the Property to secure repayment of the Loan.  Lerner Decl., ¶3; RJN Ex. 1. 

            In March 2020, after the COVID-19 pandemic began, six of eight tenants at the Property stopped paying rent.  Lerner Decl., ¶4.  Because of the moratorium, Genesee was unable to evict the tenants.  Lerner Decl., ¶4.  Consequently, in June 2021, Genesee was unable to make payments on the Loan.  Lerner Decl., ¶4.  On or about July 12, 2023, Recon recorded an NOD for default on the Loan.  RJN Ex. 2.

            By August 2023, after Genesee was able to evict non-paying tenants and replace their leases, the Property had six paying tenants.  Lerner Decl., ¶5.  This put Genesee in a position to resume making payments on the Loan but not to pay the missed payments accumulated during the pandemic. Lerner Decl., ¶5.  Thus, Genesee began negotiations with Selene, now the loan servicer, for loan modifications to cure the default and prevent foreclosure of the Property.  Lerner Decl., ¶6.

 

            a. The TMP

            On August 10, 2023, Genesee submitted a loan modification application to Selene, along with the requested documents.  Lerner Decl., ¶6.  On August 24, 2023, Selene approved Genesee for a TMP.  Lerner Decl., ¶7, Ex. A.  The TMP provided that if Genesee made three payments of $8,152.60 on the first of September, October, and November 2023, Selene would offer Genesee a permanent loan modification.  Lerner Decl., ¶8, Ex. A.  The loan modification would provide that the principal balance of $1,311,906.14 would incur interest at 7%, with monthly payments of $8,152.60, starting on December 1, 2023. Lerner Decl., ¶8, Ex. A.  Genesee signed and returned the TMP to Selene.  Lerner Decl., ¶6, Ex. A.

            The TMP provided the first trial payment must be made with certified funds.  Ex. A.  This could be via money order, certified bank check, or Money Gram payment using code “6440.”  Ex. A.

            As part of the TMP, Selene required Genesee to execute a Preauthorization Agreement.  Lerner Decl., ¶7, Ex. B.  Selene orally represented to Genesee that, by signing the Preauthorization Agreement, all the required TMP payments would be covered by the ACH Debits.  Lerner Decl., ¶9.  

The Preauthorization Agreement further stated that Selene would be “fully protected in complying” with its terms.  Lerner Decl., Ex. B.  The Preauthorization Agreement did not include an authorization for the September 2023 payment; only the payments for October and November 2023 were included.  Ex. B.    

Pursuant to the Preauthorization Agreement, Selene executed debits in the amounts of $8,152.60 each on October 3 and November 3, 2023.  Lerner Decl., ¶10, Ex. C. 

            On November 15, 2023, Genesee’s Managing Member Michael Lerner (“Lerner”) telephonically contacted Selene to inquire as to the status of the permanent loan modification.  Lerner Decl., ¶11.  A Selene representative told Lerner that Selene had cancelled the TMP -- and thus the offer for permanent loan modification -- due to Genesee’s failure to make the initial September 2023 payment.  Lerner Decl., ¶11.  Lerner had no prior notice that Genesee had missed a payment, and he had believed until this point that the Preauthorization Agreement included all required payments.  Lerner Decl., ¶11. 

            Lerner immediately offered to make the missed payment.  Lerner Decl., ¶11.  The representative responded that Selene would not accept such payment since the TMP had been cancelled.  Lerner Decl., ¶11.  Selene told Lerner that Genesee could reapply for the loan modification.  Lerner Decl., ¶11. 

 

            b. Second Loan Modification Application

            Genesee submitted a new loan modification packet to Selene on November 30, 2023.  Lerner Decl., ¶12. 

            On December 27, 2023, Genesee received a December 15, 2023 letter from Selene requesting one additional document to finish processing the modification application.  Lerner Decl., ¶13, Ex. D.  This document was a tenant lease agreement because the version Selene possessed had expired.  Lerner Decl., ¶13, Ex. D.  The letter said Genesee should submit the document by December 28, 2023.  Lerner Decl. ¶13, Ex D.  Genesee emailed Selene a copy of the lease on December 27, the same day it received the letter.  Lerner Decl., ¶14; Montes Decl., ¶2, Ex. E.

            By January 4, 2024, Genesee had not heard from Selene as to the status of this second loan modification application.  Lerner Decl., ¶15.  Genesee’s counsel, John Shelley, Esq. (“Shelley”), contacted Recon’s counsel to request a 90-day postponement of the foreclosure sale scheduled for February 8, 2024.  Lerner Decl., ¶15; Shelley Decl., ¶2, Ex. F.  

            On January 12, 2024, Shelley received a message from Recon’s legal counsel, Jordan Rabago, Esq. (“Rabago”).  Shelley Decl. ¶4, Ex. H.  Rabago said that Recon had responded that Genesee did not qualify for loan modification and that Recon had denied the loan modification in December 2023.  Shelley Decl. ¶4, Ex. H.  Genesee had been sent a termination letter on December 20, 2023.  Recon therefore intended to proceed on the sale date set for February 8, 2024.  Shelley Decl. ¶4, Ex. H.

            Shelley asked for a copy of the letter purportedly sent to Genesee on December 20, 2023.  Shelley Decl. ¶5, Ex. I.  Rodrigo emailed a copy on January 18.  Shelley Decl., ¶6.  This letter stated that Selene was unable to approve the loan modification request because Genesee had failed to timely provide the financial workout package and supporting documentation.  Shelley Decl. ¶6, Ex. J. 

            On January 19, 2024, Shelley told Rodrigo that Genesee did not receive the December 20 letter, but the letter was in error anyway because Genesee did timely submit the requested document on December 27, 2023.  Shelley Decl. ¶7, Ex. K.  Shelley therefore reiterated Genesee’s request for a 90-day postponement of the trustee sale.  Shelley Decl., ¶7, Ex. K.  He also requested that its application for a loan modification be reopened.  Shelley Decl., ¶7, Ex. K. 

            On January 22, 2024, Rodrigo agreed to forward the documents to his client, inquire again about the status of the loan modification application, and reiterate Genesee’s request to postpone the February 8, 2024 foreclosure sale.  Shelley Decl. ¶8, Ex. L.  On January 25, Rabago emailed Shelley that Selene had denied the postponement request and reconsideration for loss mitigation because the borrowers were already denied loss mitigation.  Shelley Decl., ¶9, Ex M.  Selene intended to move forward with the February 8 sale date.  Shelley Decl., ¶9, Ex. M.

 

            2. Defendants’ Evidence

            On approximately September 13, 2019, Genesee refinanced the Property with a commercial Loan from Sharestates in the amount of $1,395,000.  Harvey Decl., ¶¶ 3-4, 7, Exs. A-B.  The DOT was recorded to secure the Loan.  Harvey Decl., Ex. B.

            On July 29, 2021, Sharestates assigned the beneficial interest under the DOT to Bank as Trustee for GIFM Holdings Trust.  Harvey Decl., ¶8, Ex. C.  The Assignment was recorded on August 12, 2021.  Harvey Decl., ¶8, Ex. C; RJN Ex. B.  

On September 6, 2022, Selene began servicing the loan.  Harvey Decl., ¶11. 

            On December 16, 2022, Bank assigned the beneficial interest under the DOT to Pretium Mortgage Credit Partners I Loan Acquisition, LP (“Pretium”).  Harvey Decl., ¶9, Ex. D.  The Assignment was recorded on December 22, 2022.  Harvey Decl., ¶9, Ex. D; RJN Ex. C.  On May 18, 2023, Pretium assigned this interest to Bank as Trustee for RCF 2.  Harvey Decl., ¶10, Ex. E.  The assignment was recorded on June 6, 2023.  Harvey Decl., ¶10, Ex. E; RJN Ex. D. 

            On June 20, 2023, Selene acting as Bank’s attorney in fact substituted Recon as trustee under the DOT via Substitution of Trustee, recorded July 12, 2023.  Harvey Decl., ¶12, Ex. F; RJN Ex. E. 

 

            a. Default

            The August 2021 monthly payment is currently outstanding.  Harvey Decl., ¶15.  On May 13, 2022, the prior mortgage servicer sent Genesee a Repayment Plan for the Loan.  Harvey Decl., ¶16, Ex. H.  Under this plan, Genesee would make 12 monthly payments of $16,042.50 from June 17, 2022 through May 17, 2023, plus a balloon payment of $138,563.68 due on June 17, 2022.  Harvey Decl. ¶16, Ex. H. 

The Repayment Plan was terminated after Genesee failed to make the payment due on February 17, 2023.  Harvey Decl., ¶17.

            On July 12, 2023, Recon recorded an NOD asserting an outstanding Loan balance of $277,780.89.  Harvey Decl., ¶¶ 13-14, Ex. G; RJN Ex. F.  The NOD asserted that Genesee initially defaulted for failure to make the payment due on April 1, 2020.  Harvey Decl., ¶14., Ex. G; RJN Ex. F. 

 

b. The TMP

            On August 15, 2023, Selene sent Genesee the TMP requiring three payments of $8,152.60 by the first of September, October, and November 2023.  Harvey Decl., ¶18, Ex. I.  The TMP provided that the first trial payment must be made using certified funds via money order, certified bank check, or Money Gram payment using code “6440.”  Harvey Decl., ¶20, Ex. I.  The TMP also provided that if Genesee failed to comply with the terms thereof, it would constitute a default and the TMP may be void.  Harvey Decl., ¶18, Ex. I.  

The TMP included the Preauthorization Payment Agreement for the second and third payments.  Harvey Decl., Ex. I.  The cover letter explained that the Preauthorization Payment Agreement is Genesee’s agreement to establish automatic monthly transfers from its bank account on the dates and amounts shown.  Ex. I.  The amounts shown are payments on October 1 and November 1, 2023 in the amount of $8,152.60.  Ex. I.  The Preauthorization Payment Agreement stated that the authorization would remain in full force and effect until Selene receives written notice from Genesee of its termination and that, until then, Selene “shall be  fully protected in complying with the terms of our agreement.”  Ex. I.

            On August 22, 2023, Selene responded to Genesee’s August 16 inquiry about the Loan.  Harvey Decl., ¶19, Ex. J.  Selene reiterated the TMP’s three payments from September 1 through November 1, 2023.  Ex. J.  Selene explained that if Genesee successfully completed the TMP, the account may be reviewed for permanent loan modification.  Ex. J. 

            Genesee did not submit the first trial payment in certified funds.  Harvey Decl., ¶21.  Instead, it made the payment by overnight draft from its bank account, which the bank returned for non-sufficient funds.  Harvey Decl., ¶21.  The TMP was terminated on October 2, 2023 for Genesee’s failure to make the first payment.  Harvey Decl., ¶22.

 

            c. Second Loan Modification Application

            In October 2023, after the termination of the TMP, Genesee submitted a partial application for loss mitigation.  Harvey Decl., ¶23.

            On November 14, 2023, Recon recorded the NOS for the Property, scheduled for February 8, 2024.  Harvey Decl., ¶24, Ex. K; RJN Ex. G.

            On November 29, Selene advised Genesee that its mitigation application was incomplete.  Harvey Decl., ¶25, Ex. L.  Genesee had until December 28, 2023 to submit the missing documents, including any lease for the Property if applicable.  Harvey Decl., ¶25, Ex. L.  Between December 6 and 14, Lerner emailed Selene some of the missing documents.  Harvey Decl., ¶26. 

On December 19, 2023, Selene inadvertently issued a letter denying Genesee’s loan modification application for failure to provide a complete application and supporting documentation.  Harvey Decl., ¶27, Ex. M.

            On December 26, 2023, Lerner informed Selene that the rental agreement for Genesee’s tenant had expired and tenancy was now month-to-month.  Harvey Decl., ¶28.  Selene then began an extensive review of the Loan for loss mitigation alternatives.  Harvey Decl., ¶29.  It determined that the Loan was ineligible for modification because it was commercial, not residential.  Harvey Decl., ¶29. 

            On March 8, 2024, Selene sent a denial letter to Shelly explaining that the Loan was ineligible for a loan modification because it was commercial.  Harvey Decl., ¶29, Ex. N; Benbow Decl., ¶3, Ex. A.

            As of January 8, 2024, the amount required to bring the Loan current was approximately $998,152.06.  Harvey Decl., ¶32, Ex. Q.  As of March 1, 2024, the monthly payment for the Loan is $32,459.34.  Harvey Decl., ¶29, Ex. P.  Selene currently pays Plaintiff’s property taxes on the Property.  Harvey Decl., ¶30, Ex. O.

 

            3. Reply Evidence

            a. Defendant’s Failure to Act in Good Faith

            On February 9, 2024, after the court had issued the TRO, Defendant’s counsel Jillian Benbow, Esq. (“Benbow”) called Shelley.  Shelley Reply Decl., ¶2.  Benbow asked if Genesee would agree to stipulate to a continuance of the hearing on the OSC so the parties could work out the permanent loan modification.  Shelley Reply Decl., ¶2.  Because the loan modification was what Genesee sought, Shelley agreed.  Shelley Reply Decl., ¶2. 

            Later that day, Benbow sent Shelley a proposed stipulation.  Shelley Reply Decl., ¶3, Ex. A.  One of the recitals was that the parties had begun discussions to try to resolve this matter without further court intervention.  Shelley Reply Decl., ¶3, Ex. A.  Another said the parties were continuing the OSC hearing to determine whether a resolution regarding the Property was possible without further litigation.  Shelley Reply Decl., ¶3, Ex. A.  Because the terms of the permanent loan modification were already set forth in the TMP, these recitals led Genesee to believe this lawsuit was in effect resolved.  Shelley Reply Decl., ¶3. 

            Despite these representations, the Defendants never entered discussions to resolve the case.  Shelley Reply Decl., ¶4.  On February 14, 2024, Shelley asked Benbow via email about how to move forward with the loan modification process, including what additional documents Genesee needed to provide.  Shelley Reply Decl. ¶4, Ex. B.  Benbow responded that she had asked her client and would let Shelley know as soon as she had a response.  Shelley Reply Decl. ¶4, Ex. B.

            On February 21, 2024, Benbow told Shelley that Defendants had finally obtained the stipulation and order.  Shelley Reply Decl. ¶5, Ex. C.  Benbow had also followed up with her client to see if Genesee needed to provide anything for the loss mitigation review.  Shelley Reply Decl. ¶5, Ex. C.  

Defendants never asked for additional documentation.  Shelley Reply Decl. ¶6.  On March 8, 2024, the same day the opposition to this application was due, Benbow told Shelley that after review of Genesee’s modification application, Selene had concluded it could not offer a modification for the commercial loan.  Shelley Reply Decl. ¶6, Ex. D.  Benbow attached Selene’s denial letter asserting it could not approve a request for loss mitigation alternatives because the mortgage was ineligible.  Shelley Reply Decl. ¶6, Ex. D.

 

            D. Analysis

            Genesee seeks a preliminary injunction enjoining Defendants from foreclosing on the Property.

 

            1. Probability of Success

            Genesee asserts it can prevail on its breach of contract claim based on equitable estoppel, waiver, or ambiguity of terms.

 

            a. Equitable Estoppel and Contract Interpretation

            Genesee argues that Defendants should be equitably estopped from claiming that Genesee defaulted on the TMP by not making the September 1 payment.  Selene told Lerner that, upon signing the Preauthorization Payment Agreement, all required payments under the TMP would be covered by ACH debits (debits from Genesee’s account).  This is consistent with the Preauthorization Payment Agreement’s language that “Selene shall be fully protected in complying with the terms of this agreement.”  Genesee contends that language is consistent with Selene’s oral representation that all payments were covered by the Preauthorization Payment Agreement’s automatic debit.  App. at 8.  Genesee further argues that any disparity between, or ambiguity in, the TMP and Preauthorization Payment Agreement should be construed against their drafter, which was Selene.  Haris v. Bingham McCutchhen, LLP, (2013) 214 Cal.App.4th 1399, 1406.  App. at 9.[4]

            The court finds no ambiguity in, or inconsistency between, the TMP and the Preauthorization Payment Agreement.  The TMP required three payments of $8,152.60 by the first of September, October, and November 2023.  Harvey Decl., Ex. I.  The TMP provided that the first trial payment must be made using certified funds via money order, certified bank check, or Money Gram payment using code “6440.”  Ex. I.  The TMP also provided that if Genesee failed to comply with its terms, that would constitute a default and the TMP may be void.  Harvey Decl., ¶18, Ex. I.  

The Preauthorization Payment Agreement provided for automatic debit from Genesee’s account for the second and third payments.  Harvey Decl., Ex. I.  The cover letter explained that the Preauthorization Payment Agreement was Genesee’s agreement to establish automatic monthly transfers from its bank account on the dates and amounts shown.  Ex. I.  The amounts shown are payments on October 1 and November 1, 2023 in the amount of $8,152.60.  Ex. I. 

The agreements clearly provide that Genesee was required to make the first payment by certified funds and the remaining two payments would be automatically debited from its account.  The Preauthorization Payment Agreement’s language that Selene “shall be fully protected” plainly means that Selene would not be liable for taking Genesee’s funds from its account until such time as it received a written notice from Genesee that such authorization was terminated in writing.  Ex. I.

            Contrary to its argument that Selene represented that all payments would be covered by ACH debits (App. at 4),[5] Genesee clearly understood that the first payment was not included in the automatic debit.  Genesee tried to make that first payment by overnight draft from its bank account, but the bank returned it for non-sufficient funds.  Harvey Decl., ¶21. 

Moreover, Genesee, and no one else, was obligated to provide the funds for the three TMP payments.  Genesee’s contention is that it thought Selene would take all three payments from its account.  But Genesee fails to show that it had sufficient funds in its account on September 1, 2023 to do so.  Defendants’ evidence indicates to the contrary.  Selene had every right to terminate the TMP on October 2, 2023 for Genesee’s failure to make the first payment.  See Harvey Decl., ¶22. 

Equitable estoppel applies in circumstances where a party has induced another into forbearing to act.  Lantzy v. Centex Homes, (2003) 31 Cal.App.4th 363, 383.  The elements of estoppel are: (1) the party to be estopped must be appraised of the facts; (2) he must intend that his conduct shall be acted upon; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.  Driscoll v. City of Los Angeles, (1967) 67 Cal.2d 297, 305.  Equitable estoppel does not apply because Selene did not mislead Genesee as to the true facts about the manner of making the three TMP payments, Genesee was aware of the true facts, and Genesee did not rely on any statement from Selene to its detriment. 

 

b. Waiver

            Genesee argues that Selene waived its right to terminate the TMP by accepting the October and November 2023 payments.  Genesee’s tender of a late payment on or about November 15, 2023 should be deemed a cure of any default.  App. at 8.

Waiver is the intentional relinquishment of a known right after full knowledge of the facts and depends upon the intention of one party only.   Old Republic Ins. Co. v FSR Brokerage, Inc. (2000) 80 Cal.App.4th 666, 678.  Waiver requires an existing right, benefit, or advantage, actual or constructive knowledge of the right's existence, and either an actual intention to relinquish it or conduct so inconsistent with any intent to enforce the right as to induce a reasonable belief that it has been relinquished.  Utility Audit Co. v City of Los Angeles (2003) 112 Cal.App.4th 950, 959.  The waiver of a legal right cannot be established without a clear showing of intent to give up such right.  Id.  The burden is on the party claiming the waiver to prove it by clear and convincing evidence that does not leave the matter doubtful or uncertain.  Id.

            After terminating the TMP on October 2, 2023 for Genesee’s failure to make the first payment (Harvey Decl., ¶22), Selene received the October and November 2023 automatic payments.  Lerner Decl., ¶10, Ex. C.  Genesee did not know that Selene cancelled the TMP until November 15, 2023.  Lerner Decl., ¶11.

Without citing pertinent law, Defendants argue that Selene was entitled to accept the two partial payments.  Opp. at 7.

Can Selene proceed with the foreclosure sale despite accepting partial payments of the delinquent amounts noticed in the NOD?  Generally, yes.  By accepting partial payments after recording an NOD and promptly demanding the additional amounts required to reinstate, a lender does not waive its right to complete the foreclosure.  Only a full payment of the delinquent amounts and foreclosure charges reinstates the loan. Sellman v. Crosby, (1937) 20 Cal.App.2d 562, 564 (bank’s acceptance of five months of loan payments without waiving default). 

Despite this law, there are two problems with Defendants’ argument.  First, they point to no provision in the TMP, DOT, Note, or Loan Agreement that authorizes receipt of partial payment.  Second, and more important, Selene did not just passively accept partial payment.  It affirmatively debited Genesee’s account for the October and November payment.  And it did so after terminating the TMP and without notifying Genesee of the default until Lerner called on November 15, 2023, the day after the NOS was recorded.  Lerner Decl., ¶11.  Defendants provide no evidence or discussion about why this happened.

            As stated, waiver is the intentional relinquishment of a known right after full knowledge of the facts and depends upon the intention of one party only.   Old Republic Ins. Co. v FSR Brokerage, Inc., supra, 80 Cal.App.4th at 678.  Based on the facts presented, Selene’s affirmative withdrawal of funds from Genesee’s account in October and November appears to be a waiver of enforcing Genesee’s timely payment in September.  Genesee’s proffer of the September payment on or about November 15 should have been accepted.

Genessee has shown a probability of success on its breach of contract claim.  This conclusion is based only on a probability of success and is not a determination that Genesee necessarily will prevail at trial.

 

            2. Balance of Hardships

            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.

            Genesee makes a familiar argument that real property is unique and injunction to prevent its loss is more readily granted.  Upon foreclosure, it will lose the $339,000 expended in making improvements to the Property.  In contrast, Genesee contends that Defendants are fully protected by their DOT for the Property. App. at 9. 

            Defendants argue that the balance of hardships works in its favor.  Genesee’s harm is self-inflicted due to its default on the Loan.  A delay caused by a preliminary injunction will harm Defendants.  Genesee has not complied with its financial obligations for nearly three years, it waited four months after the TMP was canceled to seek a TRO, and Selene will have to advance sums for property taxes and insurance.  Opp. at 8.  Genesee replies that it did not delay in seeking a preliminary injunction because it sought another loan modification and only filed suit and sought a TRO when it had to do so.  Reply at 6.

While both residential and commercial real property are considered unique for purposes of irreparable harm (see Civil 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.  However, 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.

Genesee is in the latter category of an owner which intends to keep its property.  Therefore, it will suffer harm from the foreclosure of its unique property.  Defendants may have to advance property taxes and insurance, and they are owed the loan balance, but they do not show these amounts will exceed the equity in the Property.  Consequently, Defendants appear to be protected and the balance of harms works in Genesee’s favor.[6]