Judge: Joseph Lipner, Case: 24STCV34249, Date: 2025-04-03 Tentative Ruling
Case Number: 24STCV34249 Hearing Date: April 3, 2025 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
JEFF THOMPSON, et al., Plaintiffs, v. DON F. KING, et al., Defendants. |
Case No:
24STCV34249 Hearing Date: April 3, 2025 Calendar Number: 11 |
Defendant Don F. King, Trustee of the Don F. King Separate
Property Revocable Trust Established September 30, 2010 (“King”) demurs to the
First Amended Complaint (“FAC”) filed by Plaintiffs Jeff Thompson (“Thompson”)
and 795 Fairfield Circle, LLC (“Fairfield”) (collectively, “Plaintiffs”). King
separately moves to strike certain portions of the FAC relating to punitive and
treble damages.
The Court is inclined to SUSTAIN the demurrer WITHOUT LEAVE
TO AMEND. However, King has submitted a
Note with legal significance to the demurrer with its reply brief. If
Plaintiffs wish to address the Note in writing, the Court will continue this
hearing and allow further briefing.
This is a usury action between Plaintiffs Thompson and
Fairfield and Defendants King and Ashwood TD Services, LLC (“Ashwood”)
(collectively, “Defendants”). Except where otherwise noted, the following facts
are taken from the allegations of the FAC, which the Court accepts as true for
the purposes of the demurrer.
Fairfield holds title to the real property located at 795
Fairfield Circle, Pasadena, CA 91106 (the “Property”). Thompson lives and
resides in the Property as his primary residence.
In July 2022, Fairfield and King entered into a secured
mortgage transaction (the “Note”) for “$150,0000.00” [sic]. (FAC ¶ 15.) The
Note provided for monthly payments in the amount of $2,250.00 and carried an
interest rate of 18 percent per annum. The Note provided for a maturity date of
August 1, 2023. The Note was secured by a Deed of Trust against the Property
(the “DOT”). (FAC ¶¶ 5-6, see also Request for Judicial Notice, Ex. 1.)
Plaintiff does not allege that this loan was usurious at the time that it
originated.
Plaintiffs made the monthly payments of $2,250.00. On August
2, 2023, King offered Plaintiffs a 6-month forbearance with an agreement to
give another 6-month forbearance if needed. Plaintiffs agreed and paid a
$15,000.00 fee as part of the forbearance. The forbearance agreement also
contained a 7 percent default interest rate to be applied in addition to the 18
percent interest rate under the Note. The forbearance was not
broker-negotiated. Plaintiff contends that this forbearance agreement rendered
the loan usurious.
King increased the interest rate to 25 percent by adding on
a default interest rate charge of 7 percent.
When the initial forbearance period ran, the parties
attempted to negotiate a further forbearance, but we unable to reach an
agreement.
On July 11, 2024, King caused a Notice of Default to be
recorded against the Property.
On October 29, 2024, King caused a Notice of Trustee’s Sale
to be recorded for the Property, seeking foreclosure of the Property.
On January 2, 2025, Thompson provided Ashwood a Residential
Listing Agreement (the “Listing Agreement”) which granted Realty World
California Properties the exclusive right to sell the Property for the period
of January 2, 2025 until June 30, 2025. On January 2, 2025, the foreclosure
sale of the Property was scheduled for January 9, 2025.
Thompson has subsequently declared under penalty of perjury
in this case that the foreclosure sale was postponed to February 25, 2025.
(Thompson Decl. filed February 14, 2025 at ¶ 15.)
Plaintiff filed this action on December 27, 2024, raising
claims for (1) violation of Civil Code, section 2924f, subd. (e); (2) violation
of California usury law; (3) recovery of usury interest; (4) declaratory
relief; (5) violation of Civil Code, section 2924, subds. (c) – (d); (6) unfair
business practices; and (7) cancellation of instruments.
King filed the demurrer and motion to strike on February 24,
2025. Plaintiffs filed an opposition and King filed a reply.
On March 24, 2025, Ashwood filed a notice of joinder to both
the demurrer and motion to strike.
The Court grants King’s request for judicial notice and
takes notice of the submitted recorded deed of trust as a public record.
“With respect to residential real property containing no
more than four dwelling units that is subject to a power of sale contained in
any deed of trust or mortgage, a sale of the property under the power of sale
shall not be conducted until the expiration of an additional 45 days following
the scheduled date of sale pursuant to subdivision (a) or (c) of Section 2924g
if the trustee receives, at least five business days before the scheduled date
of sale, from the mortgagor or trustor, by certified mail with the United States
Postal Service or by another overnight mail courier service with tracking
information that confirms the recipient’s signature and the date and time of
receipt and delivery, a listing agreement with a California licensed real
estate broker to be placed in a publicly available marketing platform for the
sale of the property at least five business days before the scheduled date of
sale. The provisions of this paragraph shall not be used to postpone the
scheduled sale date more than once.” (Civ. Code, § 2924f, subd. (e)(1).)
King argues that this claim is moot because the foreclosure
sale was postponed to February 25, 2025, as stated in a declaration by Thompson
in support of his separate ex parte application for a temporary restraining
order. (Thompson Decl. filed February 14, 2025 at ¶ 15.) Thompson provides no
response to this argument in his opposition. This claim is therefore moot.
The Court therefore sustains the demurrer to this claim
without leave to amend.
“The essential elements of usury are: (1) The transaction
must be a loan or forbearance; (2) the interest to be paid must exceed the
statutory maximum; (3) the loan and interest must be absolutely repayable by
the borrower; and (4) the lender must have a willful intent … to take the
amount of interest which he receives[.]” (Ghirardo v. Antonioli (1994) 8
Cal.4th 791, 798.) “A transaction is rebuttably presumed not to
be usurious.” (Ibid. [emphasis in original].)
“California Constitution, article XV, section I limits the
interest rate for a “loan or forbearance” of money not primarily for personal,
family or household purposes, to the higher of: (1) 10 percent per annum or (2)
5 percent plus the rate of interest prevailing on the 25th day of the month
preceding the earlier of the date of the extension of the contract to make the
loan or forbearance or the date of making the loan or forbearance, established
by the Federal Reserve Bank of San Francisco on advances to member banks under
section 13 and 13(1) of the Federal Reserve Act.” (DCM Partners v. Smith
(1991) 228 Cal.App.3d 729, 733.)
“However, none of the above restrictions shall apply to any
obligations of, loans made by, or forbearances of, … any duly licensed
pawnbroker or personal property broker, or any loans made or arranged by any
person licensed as a real estate broker by the State of California and secured
in whole or in part by liens on real property, or any bank as defined in and operating
under that certain act known as the “Bank Act,” approved March 1, 1909, as
amended, or any bank created and operating under and pursuant to any laws of
this State or of the United States of America … or to any successor in interest
to any loan or forbearance exempted under this article, nor shall any such
charge of any said exempted classes of persons be considered in any action or
for any purpose as increasing or affecting or as connected with the rate of
interest hereinbefore fixed.” (Cal. Const. Art. XV, § 1(2).)
This
dispute is over whether the forbearance agreement, which was not
broker-negotiated, rendered the loan usurious. Plaintiff contends both that (1)
the extension agreement rendered the underlying 18 percent rate usurious
because it was not broker-negotiated; and (2) the additional 7 percent default
interest rate was usurious.
“[A] contract, not usurious in its inception, does not
become usurious by subsequent events.” (Strike v. Trans-West Discount Corp.
(1979) 92 Cal.App.3d 735, 745.)
Here, no party contends that the underlying loan agreement
was usurious. The extension thus could not have rendered the initial 18 percent
rate usurious.
Plaintiffs contend that the 7 percent default interest rate
was usurious. King argues that the 7 percent default interest rate was a term
in the original Note and was not new to the forbearance agreement. King provides an unauthenticated copy of the
Note as an exhibit to his reply. (Reply, Ex. 1.) Where “the contents of
[documents not attached to the complaint] form the basis of the allegations in
the complaint, it is essential that [the court] evaluate the complaint by
reference to these documents.” (Ingram v. Flippo (1999) 74 Cal.App.4th
1280, 1285, fn. 3 disapproved of on other grounds by Leon v. County of
Riverside (2023) 14 Cal.5th 910.) Here, King provides this new exhibit in
his reply. Plaintiff therefore has not had a chance to dispute the attached
copy’s accuracy.
The Court provisionally sustains the demurrer to this claim
without leave to amend, subject to further written or oral argument by
Plaintiffs about the content of the Note.
The Court provisionally sustains the demurrer to this claim
without leave to amend, contingent on further argument about the Note attached
to the reply.
Plaintiff seeks determinations that (1) the interest rates
in the forbearance agreement is null and void; (2) payments made by Plaintiffs
are properly credited to the principal value of the loan; and (3) King cannot
use a nonjudicial foreclosure because King is identified as both the
beneficiary and the trustee in the Deeds of Trust.
The first two bases of relief are unavailable because the
forbearance/extension agreement was not usurious.
The third basis does not appear available either. First,
Plaintiff does not provide a legal basis for the claim. Second, the Deed of
Trust shows that the trustee is Ashwood, not King. (Request for Judicial
Notice, Ex. 1 at p. 1.)
The Court provisionally sustains the demurrer to this claim
without leave to amend, subject to further argument about the Note attached to
the reply.
The parties agree that Plaintiff mistakenly raised this
claim under the wrong section, and intended to raise it under section 2924c,
subds. (c) and (d).
In any event, the alleged basis for the violation is that
King charged usurious interest in the loan extension. Because the extension was
not usurious, this claim fails.
The Court provisionally sustains the demurrer to this claim
without leave to amend, subject to further argument about the Note attached to
the reply.
The Unfair Competition Law (“UCL”) “bars ‘unfair
competition’ and defines the term as a ‘business act or practice’ that is (1)
‘fraudulent,’ (2) ‘unlawful,’ or (3) ‘unfair.’ … Each is its own independent
ground for liability under the [UCL], but their underlying purpose ‘is to
protect both consumers and competitors by promoting fair competition in
commercial markets for goods and services’ … .” (Shaeffer v. Califia Farms,
LLC (2020) 44 Cal.App.5th 1125, 1135, citations omitted.) “[T]he UCL is a
chameleon. … Depending on which prong is involved, a UCL claim may most closely
resemble, in terms of the right asserted, an action for misrepresentation …,
misappropriation …, price fixing …, interference with prospective economic
advantage …, or any of countless other common law and statutory claims.” (Aryeh
v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1196.)
This claim is premised on King’s alleged usurious conduct,
as discussed above. It thus fails for the same reasons as the usury claims.
The Court provisionally sustains the demurrer to this claim
without leave to amend, subject to further argument about the Note attached to
the reply.
The basis for this claim is that the Notice of Default was
improperly recorded due to the allegedly usurious interest rate.
Because the loan extension was not usurious, this claim
fails.
The Court provisionally sustains the demurrer to this claim
without leave to amend, subject to further argument about the Note attached to
the reply.
The court denies the motion to strike as moot.