Judge Salvatore Sirna, Case 22PSCV02516 2023-01-06 Tentative Ruling

Judge: Salvatore Sirna, Case: 22PSCV02516, Date: 2023-01-06 Tentative Ruling

The Court may change tentative rulings at any time. Therefore, counsel are advised to check this website periodically to determine whether any changes or updates have been made to the tentative ruling. Counsel may submit on the tentative rulings by calling the clerk in Department G at (909) 802-1104 prior to 8:30 a.m. the morning of the hearing.

Case Number: 22PSCV02516 Hearing Date: January 6, 2023 Dept: G

Plaintiff Jaime A. Pinedo’s Application for a Preliminary Injunction

Respondent: Defendant Trinity Financial Services, LLC

TENTATIVE RULING

Plaintiff Jaime A. Pinedo’s Application for a Preliminary Injunction is GRANTED subject to Plaintiff’s posting of a $50,000.00 undertaking.

BACKGROUND

This is an action arising from a 2006 deed of trust. On April 27, 2006, a deed of trust was recorded for real property in El Monte that secured repayment of a $58,500 promissory note by naming Lexington Capital Corp. (Lexington Capital) as beneficiary and Daniel P. Garcia (Garcia) as the trustor. On April 21, 2018, Plaintiff Jaime A. Pinedo purchased the El Monte property from Garcia. Because Lexington Capital was an inactive corporation that had been suspended by the California Secretary of State on July 9, 2009, and the California Franchise Tax Board on January 4, 2010, Plaintiff and a title company were unable to locate the 2006 deed of trust’s beneficiary. Thus, Garcia contracted with SureTec Insurance Company (SureTec Insurance) to take out a bond in the amount of $117,000 pursuant to Civil Code section 2941.7 that was recorded on November 21, 2018.

On July 12, 2022, Quality Loan Service Corporation (Quality Loan) recorded a notice of default and election to sell under deed of trust against the El Monte property on the behalf of Defendant Trinity Financial Services, LLC, claiming Garcia owed $120,388.82. On November 15, Quality Loan recorded a notice of trustee’s sale that listed a foreclosure date of December 15.

On December 12, 2022, Plaintiff filed a complaint against Defendant, Quality Loan, SureTec Insurance, and Does 1-10, alleging causes of action for (1) injunctive relief/declaratory relief against all defendants and (2) interpleader against SureTec Insurance and Does 1-10.

On December 12, 2022, Plaintiff also filed an ex parte application for a temporary restraining order (TRO) and an order to show cause why a preliminary injunction should not be issued. On December 13, the court granted Plaintiff’s ex parte application for a TRO and scheduled a hearing for a preliminary injunction on January 6, 2023.

REQUEST FOR JUDICIAL NOTICE

Plaintiff asks the court to take judicial notice of ten documents: (1) a grant deed recorded November 21, 2018; (2) a deed of trust recorded April 27, 2006; (3) screenshots of search results on the California Secretary of State’s website; (4) a consent order filed August 15, 2011 by the Washington State Department of Financial Institutions, Division of Consumer Services; (5) a recorded bond for lost trust deed/note and/or missing beneficiary; (6) a substitution of trustee recorded February 26, 2020; (7) a substitution of trustee recorded November 19, 2020; (8) a substitution of trustee recorded July 7, 2022; (9) a notice of default and election to sell under deed of trust recorded July 12, 2022; and (10) a notice of trustee’s sale recorded November 15, 2022.

The existence and factual contents of documents including recorded deeds of trust, notices of default and trustee’s sale, and trustee’s deeds upon sale can be noticed under Evidence Code sections 452, subdivisions (c) and (h), and 453. (Yvanova v. New Century Mortgage Corp., 62 Cal.4th 919, 924, fn. 1.) The court may also take judicial notice of records by the California Secretary of State as well as official acts of the legislative, executive, and judicial departments of any other U.S. state. (Evid. Code, § 452, subd. (c).) Thus, the court GRANTS Plaintiff’s request for judicial notice.

ANALYSIS

Plaintiff seeks a preliminary injunction to prevent Defendant and Quality Loan from proceeding with the foreclosure sale until the disposition of this action. For the following reasons, the court GRANTS Plaintiff’s request.

“[A] court will deny a preliminary injunction unless there is a reasonable probability that the plaintiff will be successful on the merits, but the granting of a preliminary injunction does not amount to an adjudication of the merits.” (Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 866.) “The function of a preliminary injunction is the preservation of the status quo until a final determination of the merits.” (Ibid.)

In evaluating a party’s request for a preliminary injunction, courts consider “(1) how likely it is that the moving party will prevail on the merits, and (2) the relative harm the parties will suffer in the interim due to the issuance or nonissuance of the injunction.” (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “[T]he greater the . . . showing on one, the less must be shown on the other to support an injunction.” (Ibid, quoting Butt v. State of California (1992) 4 Cal.4th 668, 678.) The balancing of harm between the parties also “involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.” (Husain v. McDonald’s Corp. (2012) 205 Cal.App.4th 860, 867, quoting Abrams v. St. John’s Hospital & health Center (1994) 25 Cal.App.4th 628, 636.)¿The burden of proof is on the plaintiff as the moving party “to show all elements necessary to support issuance of a preliminary injunction.” (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.)

Probability of Prevailing on the Merits

Plaintiff argues there is a reasonable probability of Plaintiff succeeding on the merits of Plaintiff’s claim for declaratory relief. The court agrees.

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.) “The courts do not issue advisory opinions about the rights and duties of the parties under particular agreements, if no actual, justiciable controversy has yet developed.” (Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 563.)

In this case, there is little dispute that a controversy exists between Plaintiff and Defendant. Instead, the parties disagree on the issue of Plaintiff’s chances of success. First, Plaintiff argues there is a reasonable probability of success on the merits because there is no evidence Defendant received a valid assignment as beneficiary of the 2006 deed of trust. Defendant responds with the argument that it is the holder of the underlying promissory note and that it is not required to record an assignment of a deed of trust. The court agrees with Defendant and finds Plaintiff’s argument without merit as it is well established that beneficiaries of deeds of trust do not have to record an assignment of their interest. (Haynes v. EMC Mortgage Corp. (2012) 205 Cal.App.4th 329, 336 [“[W]here a deed of trust is involved, the trustee may initiate foreclosure irrespective of whether an assignment of the beneficial interest is recorded.”]; see also Calvo v. HSBC Bank USA, N.A. (2011) 199 Cal.App.4th 118, 122.)

Second, Plaintiff points to the bond as a complete remedy for Defendant in lieu of the sale of the El Monte property. Defendant responds that the bond is invalid pursuant to Civil Code section 2941.7. Generally, Civil Code section 2941.7 allows a trustor to record a bond in cases where the beneficiary cannot be located and if no objection is received from the beneficiary within 30 days of the recording of the bond, the trustee must reconvey the deed to the trustor. The section provides specific requirements for the bond, including that it must be two times the original obligation secured by the deed of trust (Civ. Code, § 2941.7, subd. (a)) and that it must be recorded with a declaration that includes a statement that the declarant mailed notices “to the last address of the person to whom payments under the mortgage or deed of trust were made and to the last mortgagee or beneficiary of record at the address for such mortgagee or beneficiary shown on the instrument creating, assigning, or conveying the interest” and lists the date notices were mailed as well as the names and addresses of the parties receiving notice. (Civ. Code, § 2941.7, subd. (b)(5).)

In this case, the declaration provided with the recorded bond states notices were mailed to Lexington Capital but fails to provide a date for when the notice was mailed or the address to which the notice was mailed. (Request for Judicial Notice (RJN), Ex. E.) Because Civil Code section 2941.7, subdivision (c) states “[a] bona fide purchaser or encumbrancer for value shall take the interest conveyed free of such mortgage, provided there has been compliance with subdivisions (a) and (b) and the deed to the purchaser recites that no objections by the mortgagee have been recorded,” Defendant argues Plaintiff did not take interest in the El Monte property free of the 2006 deed of trust because the bond was not compliant with Civil Code section 2941.7, subdivision (b).

The court rejects Defendant’s argument as it misconstrues the statute. In relevant part, Civil Code section 2941.7, subdivision (c) states as follows:

“With respect to a deed of trust, after the expiration of 30 days following the recording of the corporate bond and accompanying declaration provided in subdivisions (a) and (b), and delivery to the trustee of the usual reconveyance fees plus costs and a demand for reconveyance under this section, the trustee shall execute and record, or otherwise deliver as provided in Section 2941, a reconveyance in the same form as if the beneficiary had delivered to the trustee a proper request for reconveyance, provided that the trustee has not received a written objection to the reconveyance from the beneficiary of record. No trustee shall have any liability to any person by reason of its execution of a reconveyance in reliance upon a trustor's or trustor's successor's in interest substantial compliance with this section. The sole remedy of any person damaged by reason of the reconveyance shall be against the trustor, the affiant, or the bond. With respect to a mortgage, a mortgage shall be satisfied of record when 30 days have expired following recordation of the corporate bond and accompanying declaration, provided no objection to satisfaction has been recorded by the mortgagee within that period. A bona fide purchaser or encumbrancer for value shall take the interest conveyed free of such mortgage, provided there has been compliance with subdivisions (a) and (b) and the deed to the purchaser recites that no objections by the mortgagee have been recorded.” (Civ. Code, § 2941.7, subd. (c) [emphasis added].)

As demonstrated above, Defendant pulled its citation from the second part of the paragraph that referred to mortgages, not the first part relating to deeds to trust as involved in this case. In fact, the first part makes clear that “[t]he sole remedy of any person damaged by reason of the reconveyance shall be against the trustor, the affiant, or the bond” and that the trustee is not liable if trustor substantially complied with this section. (Civ. Code, § 2941.7, subd. (c).) Thus, even if accepting arguendo that omitting Lexington Capital’s address and date of notice did not substantially comply with the statute, Defendant’s sole remedy appears to be an action against Garcia as trustor/affiant, the trustee, or the bond.

The sole case interpreting this provision further supports this conclusion. In Carter v. Continental Land Title Co. (1991) 233 Cal.App.3d 1597, the court held the trustee has the duty to determine if the bond is acceptable and can be held liable for accepting an inadequate bond. (Id., at p. 1600.) Thus, Plaintiff has demonstrated a likelihood of prevailing on the merits and obtaining a declaratory judgment that Defendant’s interest in the El Monte property was extinguished.

Balance of Harms

Plaintiff argues the balance of harm favors Plaintiff as Plaintiff will lose the El Monte property to a foreclosure sale while Defendant faces little harm if the foreclosure sale is postponed. In response, Defendant claims other remedies exist for Plaintiff’s alleged harm as Plaintiff could be indemnified through title insurance. Ultimately, the court finds a significant risk of harm to Plaintiff if the El Monte property is sold in a foreclosure sale while Defendant faces little harm in a delayed sale, especially given the likelihood that such a sale will never take place due to Plaintiff’s likelihood of prevailing on the merits.

Undertaking

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 Code Civ. Proc., § 529, subd. (a); City of South San Francisco v. Cypress Lawn Cemetery Ass’n. (1992) 11 Cal.App.4th 916, 920.)

Plaintiff argues that an undertaking in the amount of $30,000.00 is sufficient to cover any damages or costs incurred by Defendant. Defendant requests an undertaking in the amount of $182,879.47, representing the amount due on the underlying promissory note.

The court finds an undertaking posted by Plaintiff in the amount of $50,000.00 is adequate, taking into account accrued interest and potential attorneys’ fees and costs to which Defendant would be entitled if the court finally decides that Plaintiff was not entitled to the injunction.

Accordingly, the court will require Plaintiff to post a undertaking in the amount of $50,000.00.

CONCLUSION

Based on the foregoing, Plaintiff’s request for a preliminary injunction is GRANTED subject to Plaintiff’s posting of a $50,000.00 undertaking.