Judge Stephen I. Goorvitch, Case Number: 24STCV05644, Date: 2024-04-19 Tentative Ruling

Judge: Stephen I. Goorvitch, Case: 24STCV05644, Date: 2024-04-19 Tentative Ruling

Plaintiff Matthew Abdolmohammadiyon (“Plaintiff”) filed this action against Fidelity Recovery LLC (“Fidelity” or “Defendant”), as well as Jack Shut, Oleysa Shut, and Real Property Trustee, Inc. (“Real Property Trustee”) (collectively, “Defendants”), asserting the following causes of action:

Plaintiff owns real property located at 1456 South Bonnie Beach Place, Commerce, California 90023 (the “Property”), and seek to stop the foreclosure by Fidelity. Plaintiff moves for a preliminary injunction to stop the foreclosure pending the resolution of this case. Fidelity opposes the motion, which is granted in that the court stays the foreclosure pending resolution of this case.

Plaintiff owns the Property and stays there when he visits California. (See Plaintiff’s Decl. ¶ 3.) Plaintiff declares that his “business and personal life required that I lived at the Bonnie Property and alternate with living in Florida.” (Declaration of Plaintiff, ¶ 3.) However, in a complaint filed in Florida in December 2023, Plaintiff admitted that he resides in Fort Lauderdale, Florida. (Declaration of Jack Shut, ¶ 7; Declaration of Gregory Bodell, ¶ 3 & Exh. 10.)

For many years, Plaintiff has borrowed money from Defendant Jack, a pawn shop owner. (Declaration of Jack Shut, ¶ 4.) Plaintiff declares that he borrowed $100,000 at 10% interest from Jack in December 2018. (Declaration of Plaintiff, ¶ 4.) Jack declares that he did not loan $100,000 to Plaintiff in December 2018 and that Plaintiff does not owe him any money. (Declaration of Jack Shut, ¶ 5.)

Plaintiff declares that Jack later requested that Plaintiff execute a promissory note, which Plaintiff did, but the promissory note “contained other terms” not agreed to by Plaintiff. (Declaration of Plaintiff, ¶ 6.) Plaintiff declares that “[t]o assuage my concerns, Jack reassured me that our agreement (i.e., $100,000 at 10% interest) was controlling” and that these were just “typographical errors.” (Ibid.)

On December 12, 2018, Plaintiff executed a promissory note for $120,000, at 12% interest, in favor of Defendant Fidelity (the “Promissory Note”). (Declaration of Olesya Shut, ¶ 2 & Exh. 1.) The Promissory Note states a maturity date of January 1, 2020. (Ibid.) Fidelity’s manager, Olesya, declares that Plaintiff complained about the interest rate and monthly payments to Jack. Olesya declares that she “spoke with Jack and authorized him, on behalf of Fidelity, to modify the terms of the loan with Fidelity to 10% interest with monthly payments of $1,000.” (Id. ¶ 4.) Plaintiff does not dispute that he signed the Promissory Note. (Declaration of Plaintiff, ¶¶ 5-6.)

On December 17, 2018, Plaintiff signed a Short Form Deed of Trust and Assignment of Rents (the “Deed of Trust”), which granted a security interest in the Property to Fidelity. The Deed of Trust includes an acknowledgement by notary public Jeffery Gauvin that Plaintiff executed the Deed of Trust on December 17, 2018, in Gauvin’s presence, in Broward County, Florida. (Declaration of Olesya Shut, ¶ 3, Exh. 2; Declaration of Plaintiff, ¶ 7 & Exh. A.) Plaintiff acknowledges that he signed the Deed of Trust, but declares that he “did not sign the Deed of Trust in the presence of Jeffery Gauvin or any other notary public.” (Declaration of Plaintiff, ¶¶ 7-8.)

Plaintiff declares that “[i]n about January 2019 and continuing through October 2023, each month, I deposited $1,000 into Jack’s TD Ameritrade account pursuant to the terms of the agreement for the $100,000 hard money loan.” (Id. ¶ 10.) Plaintiff submits some of the deposit slips and checks evidencing his monthly payments to Jack. (Id. ¶10, Exh. B.) Plaintiff declares that Jack closed his TD Ameritrade account in November 2023, so that Plaintiff could not deposit funds. (Id. ¶ 11.)

On January 4, 2024, Fidelity, through its agent Real Property Trustee, caused a Notice of Default and Election to Sell Under Deed of Trust (the “Notice of Default”) to be sent to Plaintiff. The Notice of Default specified a default of $126,579.99 as of December 27, 2023. (Declaration of Olesya Shut, ¶ 7 & Exh. 4.) Plaintiff declares that before the Notice of Default was issued, he did not receive any other notice of default or other indication from Defendants that he had missed payments. (Declaration of Plaintiff, ¶ 12.)

Plaintiff filed this action on March 6, 2024, and sought a temporary restraining order to prevent the foreclosure. The Court (Beckloff, J.) held a hearing on March 12, 2024, at which Judge Beckloff raised concerns about the sufficiency of the accounting and itemization of debt on the Promissory Note that had been provided by Defendants. (See Mot. Exh. I.) Judge Beckloff elected to proceed with Plaintiff’s motion for preliminary injunction, set for hearing on April 19, 2024. On March 25, 2024, at 3:02 pm, Fidelity provided a schedule of payments and other loan events on the Promissory Note. (Declaration of Olesya Shut, ¶ 9 & Exh. 7; see also Declaration of Gregory Bodell, ¶¶ 2-3 & Exhs. 7, 10.)

The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits. (Major v. Miraverde Homeowners Ass’n. (1992) 7 Cal. App. 4th 618, 623.) In deciding whether or not to grant a preliminary injunction, the court looks to two factors, including “(1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.” (White v. Davis (2003) 30 Cal.4th 528, 553-54.) The factors are interrelated, with a greater showing on one permitting a lesser showing on the other. (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) However, the party seeking an injunction must demonstrate at least a reasonable probability of success on the merits. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 73-74.) The party seeking the injunction bears the burden of demonstrating both a likelihood of success on the merits and the occurrence of irreparable harm. (Savage v. Trammell Crow Co. (1990) 223 Cal.App.3d 1562, 1571.) Irreparable harm may exist if the plaintiff can show an inadequate remedy at law. (Code Civ. Proc. § 526(a).)

As an initial matter, Fidelity argues that Plaintiff has not stated valid causes of action against Fidelity. Fidelity relies on the following holding: “A preliminary injunction is an interim remedy designed to maintain the status quo pending a decision on the merits. [Citation.] It is not, in itself, a cause of action. Thus, a cause of action must exist before injunctive relief may be granted.” (Korean American Legal Advocacy Foundation v. City of Los Angeles (1994) 23 Cal.App.4th 376, 398-399.) In that case, however, the trial court had already sustained a demurrer without leave to amend, leaving no predicate causes of action. Here, Fidelity never filed a demurrer, notwithstanding having had an opportunity to do so. Nevertheless, the court will consider the relevant issues in evaluating Plaintiff’s reasonable likelihood of success on each claim.

In the first cause of action, Plaintiff alleges: “[I]n violation of Civil Code § 2924.17, the Notice of Default and Beneficiary Declaration are not supported by competent and reliable evidence because PROPERTY TRUSTEE failed to attach a promissory note to the Notice of Default or Deed of Trust and failed to an itemization of debt after numerous requests.” (Compl. ¶ 43; see also Motion for Preliminary Injunction (“Mot.”) 13.) Section 2924.17 states, in pertinent part, as follows:

(a) A declaration recorded pursuant to Section 2923.5 or pursuant to Section 2923.55, a notice of default … or a declaration or affidavit filed in any court relative to a foreclosure proceeding shall be accurate and complete and supported by competent and reliable evidence.

(b) Before recording or filing any of the documents described in subdivision (a), a mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower's default and the right to foreclose, including the borrower's loan status and loan information.

Sections 2924.12 and 2924.19 state, in pertinent part, that “if a trustee’s deed upon sale has not been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of … 2924.17.” (§ 2924.12(a); § 2924.19(a).)

These statutes are part of California’s Homeowner Bill of Rights (“HBOR”). “[T]he HBOR [is] a complex set of enactments focused specifically on residential mortgages ….” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 295 [bold italics added].) Thus, section 2924.15(a) states in pertinent part as follows:

(1)(A) The first lien mortgage or deed of trust is secured by owner-occupied residential real property containing no more than four dwelling units.

(B) For purposes of this paragraph, “owner-occupied” means that the property is the principal residence of the borrower and is security for a loan made for personal, family, or household purposes.

In the instant case, Plaintiff alleges that the Notice of Default was defective, and he seeks to enforce sections 2923.5 and/or 2923.55, which apply to notices of default. However, Plaintiff has not shown a likelihood that his mortgage is “residential” within the meaning of section 2924.15, i.e., that it is Plaintiff’s “principal residence.” To the contrary. Although Plaintiff claims that he “live[s] at the Bonnie Property,” he also acknowledges that his “business and personal life required that I lived at the Bonnie Property and alternate with living in Florida.” (See Declaration of Plaintiff, ¶ 3.) In a complaint filed in Florida in December 2023, Plaintiff admitted that he resides in Fort Lauderdale, Florida. (Declaration of Jack Shut, ¶ 7; Declaration of Gregory Bodell, ¶ 3 & Exh. 10.) Plaintiff does not address these issues in his reply brief.

Nor does Plaintiff establish that the loan was “made for personal, family, or household purposes.” Plaintiff admits that the purported first loan for $100,000 was a “hard money loan.” (See, e.g., Compl., ¶ 12.) The promissory note for the $120,000 loan states that it was a “business loan.” (See Declaration of Olesya Shut, Exh. 1.)

Plaintiff does not response to Defendant’s argument that the Notice of Default contained the declaration required by section 2924.17. (Oppo. 16; Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1345, fn. 16 [failure to address point is “equivalent to a concession”].)[1] In Lucioni v. Bank of America, N.A. (2016) 3 Cal.App.5th 150, discussed at length by Defendant, the Court of Appeal summarized the legal duty created by section 2924.17, as follows: “Sections 2924.17 and 2923.55, then, place a burden on the foreclosing party to file a declaration with the notice of default, and provide requirements for the lender’s diligence prior to filing that declaration. Those provisions do not create a burden on the foreclosing party to prove anything in court, other than that the declaration required by section 2923.55, subdivision (c) was filed, and that necessary steps were taken before filing it.” (Id. at 163.)

In the instant case, the Notice of Default contained the required declaration by the trustee that the “mortgage service/lender has supplied reliable and competent evidence to substantiate the borrower’s default and its right to foreclose.” (Declaration of Olesya Shut, ¶ 7; Exh. 4, p. 6; Exh. 6, p. 6.) Contrary to Plaintiff’s assertion, section 2924.17 does not require Defendants to produce an “itemization of debt.” (Compl. ¶ 43.)

Based upon the foregoing, Plaintiff has not demonstrated a reasonable likelihood of success on the merits of the first cause of action.

In the second cause of action, Plaintiff alleges that the Deed of Trust “is facially invalid as the notary public’s signature does not attest to a witness being present” and that “Plaintiff did not sign the Deed of Trust in the presence of a notary public.” (Compl. ¶¶ 51-52.) Significantly, Plaintiff acknowledges that he signed the Deed of Trust. (Declaration of Plaintiff, ¶¶ 7-8.) In his briefing, Plaintiff does not demonstrate that notarization is required for the Deed of Trust to be valid. Plaintiff relies on Civil Code section 2922 and section 2920, but neither of those statutes require notarization. (See Mot. 14.) Fidelity argues: “The purpose of an acknowledgment to a mortgage on real estate is merely to obviate proof of its execution when it is offered in evidence and to entitle it to be recorded, but the mortgage itself is valid between the parties ….” (Williams v. Nieto (1929) 98 Cal.App. 615, 619; see Oppo. 17.) Simply, the purpose of a notarization is to prove that Plaintiff executed the Deed of Trust. Plaintiff admits that he signed the document.

Further, Defendant presents evidence that undermines Plaintiff’s allegation that the Deed of Trust does not identify any person who appeared before the notary, Jeffrey Gauvin, at the time of notarization. Specifically, Defendant submits a complete copy of the Deed of Trust, which was recorded and states on page three that Plaintiff appeared before Gauvin on December 17, 2018, to sign the Deed of Trust. (Declaration of Olesya Shut, ¶ 3 & Exh. 2.) In reply, Plaintiff declares that he has been unable to locate Gauvin, more than five years later, but he does not present evidence that would raise a serious question about the authenticity of the Deed of Trust offered by Defendant. (See Declaration of Plaintiff in Support of Reply Brief.)

Based upon this record, Plaintiff cannot demonstrate a reasonable likelihood of success on the merits of the second cause of action.

In the third cause of action—titled “Wrongful Foreclosure Misrepresentation of Loan—Plaintiff alleges that he only agreed to a $100,000 loan at 10% interest with Defendant Jack, not the $120,000 loan at 12% interest reflected in the Promissory Note. Plaintiff also alleges that “Defendants have not provided Plaintiff with any credit for the nearly $60,000 that Plaintiff has paid and have not even acknowledged Plaintiff’s monthly payments.” Plaintiff further alleges that Defendants “are pursuing the foreclosure, not because it is proper, but because they intend to defraud, oppress, and substantially interfere with Plaintiff’s livelihood.” (Compl. ¶¶ 62-67.)

Plaintiff cites no statutory authority for this cause of action in the complaint. In the motion, Plaintiff suggests that the third cause of action was based on alleged violations of Civil Code section 2824.17 and an alleged failure to base the foreclosure on “competent and reliable evidence to support a foreclosure.” (Mot. 14-15.) Plaintiff argues:

Property Trustee waited until February 8, 2024, to send Plaintiff’s counsel the requested Promissory Note. Instead of an itemization of the alleged debt owed, Property Trustee sent a Payoff Statement. Unfortunately, neither the Notice of Default nor the Payoff Statement applies the nearly $60,000 Plaintiff has paid towards the underlying loan (assuming the loan, as represented in the Promissory Note, is accurate). Absent an itemization or credits of the monies paid, Plaintiff cannot verify the actual debt owed, if any, or if/when Plaintiff breached his obligation. The Schedule provided on the day of filing this motion continues to highlight the woefully insufficient accounting.

(Mot. 15:1-5.) However, as discussed, Plaintiff does not demonstrate a reasonable likelihood of success on the merits of claims under section 2924.17. Plaintiff makes additional arguments, but they appear relevant to the court’s analysis of the sixth cause of action.

Plaintiff’s fourth cause of action is for “preliminary injunction.” Plaintiff’s fifth cause of action is for “accounting.” These claims, which are remedial in nature, cannot support a request for a preliminary injunction.

Plaintiff’s sixth cause of action is for conversion. The elements of conversion are as follows: (1) The plaintiff’s ownership or right to possession of the property; (2) The defendant’s conversion by a wrongful act or disposition of property rights; and (3) Damages. (See Welco Electronics, Inc. v. Mora (2013) 223 Cal.App.4th 202, 208.)

Plaintiff alleges that he agreed to borrow $100,000 at an interest rate of 10% from Jack Shut, and he made $60,000 in payments towards that loan. (Compl., ¶¶ 21, 102-103.) Plaintiff alleges: “On January 4, 2024, Property Trustee recorded the Notice of Default on the Bonnie Property under the contention that Plaintiff has not made a single payment under the promissory note since 2019.” (Id., ¶ 103.) Plaintiff’s theory is that Defendants manufactured the default in order to foreclose on the Subject Property. (Id., ¶¶ 106-107.) Plaintiff seeks injunctive relief to stop the foreclosure. (Id., ¶ 93 & Prayer, ¶ 6.)

Jack Shut disputes that he made this purported loan to Plaintiff. “Plaintiff’s statement that I loaned him $100,000 in December 2018 at 10% interest, with no maturity date is false. Plaintiff does not owe me any money.” (Declaration of Jack Shut, ¶ 5.) Instead, Defendants allege that there was one loan between Plaintiff and Fidelity in the amount of $120,000, which forms the basis of the foreclosure action. (Declaration of Oleysa Shut, Exh. 1; see also Declaration of Plaintiff, Exh. E.) There is a “Promissory Note Secured By Deed of Trust” in the amount of $120,000 signed by Plaintiff. (See Declaration of Amy A. Mousavi, Exh. E.) Plaintiff admits he signed the Promissory Note and includes a copy with his moving papers. (See Declaration of Plaintiff, ¶ 5.) There is a “Short Form Deed of Trust and Assignment of Rents” reflecting the Promissory Note in the “principal sum of $120,000” signed by Plaintiff. (See id., Exh. A.) Plaintiff admits that he signed this Deed of Trust. (See id., ¶ 7.) According to Plaintiff, Jack Shut asked him to sign this document as a “formality” to memorialize the terms of the purported loan. (See id., ¶ 9.) According to Plaintiff, the Promissory Note “did not reflect the agreement,” but Jack Shut claimed these were just “typographical errors.” (Id., ¶ 6.)

However, there are discrepancies in the documentation. The Promissory Note reflects an interest rate of 12 percent. (See Declaration of Amy E. Mousavi, Exh. E.) According to Jack and Oleysa Shut, the interest rate was reduced to 10 percent at Plaintiff’s request, i.e., the interest was $1,000 per month. (See Declaration of Jack Shut, ¶ 6; Declaration of Oleysa Shut, ¶ 4.) This purported change in the interest rate was not done in writing.

Perhaps most important, Defendants provide no evidence that Fidelity actually transferred $120,000 to Plaintiff. The only evidence of a money transfer to Plaintiff comes from Plaintiff himself. Plaintiff represents that Exhibit AA to his declaration “is a screenshot of [his] text message with Jack [Shut] showing the balance of $100,000 to be transferred.” (Declaration of Plaintiff, ¶ 4.) The screen shots appear to show $100,000 being transferred. (See id., Exh. AA.) While this text message is not the model of clarity, Defendants do not explain or dispute the text message. This failure is telling, given the ease with which Defendants could have provided evidence of a transfer of $120,000, as well as Judge Beckloff’s prior admonitions on the importance of an accounting and supporting documentation. (See Declaration of Jesus Hinojosa, Exh. I.)

Defendants argue that even if Plaintiff borrowed only $100,000 at an interest rate of 10 percent, he still owes money. That may be true, but that would mean that the Notice of Default and accounting are incorrect and therefore would not support the foreclosure.

Based upon the foregoing, the court finds that Plaintiff has demonstrated a reasonable likelihood of success on the merits.

The court also must consider “the interim harm that the plaintiff would be likely to sustain if the injunction were denied as compared to the harm the defendant would be likely to suffer if the preliminary injunction were issued.” (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 749.) “Irreparable harm” generally means that the defendant’s act constitutes an actual or threatened injury to the personal or property rights of the plaintiff that cannot be compensated by a damages award. (See Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.)

Real property is generally considered “unique” so that injury cannot be compensated in damages. (See Civ. Code § 3387.) An injury to a plaintiff’s rights to real property often will be irreparable. (See Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach (2014) 232 Cal.App.4th 1171, 1184-85; Christopher v. Jones (1964) 231 Cal.App.2d 408, 416; Civ. Code § 3387.) Plaintiff also relies on evidence that he stays at the Property when he visits California. (See Declaration of Plaintiff, ¶ 3.)

Olesya declares that “[n]o date of sale for the Bonnie Property has been set and it has not been sold.” (Olesya Decl. ¶ 8.) Nevertheless, it appears that Defendants intend to foreclose on this property, which may occur before trial in this matter. (See Olesya Decl. ¶ 7 and Exhs. 4, 5.) Defendants’ counsel argues that Plaintiff has “falsely alleged” in his complaint that he resides in California and has also “testified falsely” that he currently lives in the Property. (Oppo. 10-11.) Although the argument is not fully developed, Defendants’ counsel suggests that Plaintiff’s alleged lack of candor is an equitable factor that the court should consider in balancing the harms and deciding whether to grant equitable relief. However, Plaintiff did not represent that he lives exclusively or primarily at the Property. Rather, Plaintiff represented that he lives in both California and Florida, and he resides at the Property when he is in California. This record does not support an adverse credibility finding. Even the pleading identified by Defendants does not state that Plaintiff relies exclusively in Florida. (See Declaration of Gregory Bodell, Exh. #10.) The court will not make an adverse credibility finding based upon this record.

Notably, Defendant has not shown any irreparable harm from the grant of a preliminary injunction. Defendant states that it “likely will lose the principal it loaned to Plaintiff in 2018 if an injunction is granted.” (Oppo. 19.) There is no evidence to support that contention. Indeed, Fidelity still has a lien against the Property. If Defendants prevail at trial, they will be able to proceed with the foreclosure—potentially recovering additional interest—and recoup their losses.

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 Ass’n. (1992) 11 Cal. App. 4th 916, 920; see Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 15-16 [“the prevailing defendant may recover that portion of his attorney's fees attributable to defending against those causes of action on which the issuance of the preliminary injunction had been based”].)

Neither party addresses the appropriate amount of undertaking. Defendants will likely incur attorney’s fees litigating the causes of action on which a preliminary injunction would be based. The court finds that an undertaking of $100,000 is required should the court grant the motion.

1. Plaintiff’s motion for a preliminary injunction is granted in part and denied in part.

2. Pending resolution of this case, Defendants are restrained and enjoined from foreclosing on the real property located at 1456 South Bonnie Beach Place, Commerce, California 90023.

3. The court denies the motion to the extent Plaintiff seek to “enjoin[] and restrain[] [Defendants] from withholding itemization of debt associated with the foreclosure.” This issue should be resolved in discovery.

4. The court denies the motion to the extent Plaintiff seeks an order that “Defendants must provide a valid Deed of Trust authorizing a non-judicial foreclosure.” This issue should be resolved in discovery.

5. The court orders Plaintiff to post an undertaking of $100,000 on or before ________, 2024. If Plaintiff does not post the required undertaking, Defendants may ask the home court to dissolve this preliminary injunction.

6. Plaintiff’s counsel shall provide notice and file proof of service with the court.

[1] Plaintiff argues that the wrongful foreclosure actions are “rooted in mitigation of damages to conserve judicial resources.” (Reply 4.) This does not obviate Plaintiff’s obligation to demonstrate a likelihood of success on the merits.