Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. 37-2009-00063539-CU-OR-EC, Eddie C. Sturgeon, Judge.
AARON, J.
I.
INTRODUCTION
Plaintiff Michael A. LaPorte appeals from an order dissolving a preliminary injunction that had prohibited defendants from conducting a trustee's sale of the property on which LaPorte had constructed his residence using proceeds from a loan funded by defendants. Defendants Pacific Shores Development, Inc. (Pacific Shores), Ballast Point Holdings Limited (Ballast Point), Konstantin Zecevic, Strahinja Zecevic, Ivan Prokic, Ana Trombley, Ginny Jones, Stephen Clark (on behalf of his individual retirement account (IRA)), Marianne Steele (on behalf of her IRA), Johanna S. Jans (on behalf of her IRA), and Richard and Pina Cianfaglione as trustees of the Bi-Coastal Revocable Living Trust, requested that the court dissolve the preliminary injunction after the trial court indicated that it intended to grant defendants' motion for summary judgment of LaPorte's complaint.
In 2006, Pacific Shores entered into a construction loan agreement (CLA) with LaPorte to enable LaPorte to build a house. The note that LaPorte signed for the loan was secured by a deed of trust on the property.
Pacific Shores funded LaPorte's loan through investments supplied by the other defendants in this action. After LaPorte defaulted on the loan, defendants commenced foreclosure proceedings. LaPorte filed this action in an attempt to prevent a trustee's sale of the property. During the proceedings in the trial court, at LaPorte's request, the court entered a preliminary injunction enjoining defendants from going forward with a trustee's sale of the property.
After the court granted summary judgment in favor of defendants on LaPorte's complaint, the court dissolved the preliminary injunction.
On appeal, LaPorte contends that the trial court abused its discretion in dissolving the preliminary injuction. LaPorte maintains that the trial court improperly granted summary judgment, and, since the court dissolved the preliminary injunction based entirely on the improper grant of summary judgment, the dissolution of that injunction must be reversed. LaPorte's arguments as to why summary judgment was inappropriate can be categorized into four general claims of error: (1) that there was a partial failure of consideration for the loan because Pacific Shores did not place the full loan amount into a construction account immediately upon the close of escrow; (2) that the beneficial interest that an anticipated investor held in the note and deed of trust could not have been validly transferred to individuals or entities who ultimately contributed money to fund LaPorte's loan when that anticipated investor backed out; (3) that the deed of trust is void because it does not sufficiently describe the subject property and/or that the notice of trustee's sale is void because its description of the property differs from the description in the deed of trust; and (4) that the trustee who recorded the notice of trustee's sale was not adequately substituted in for Pacific Shores because, according to LaPorte, not all of the parties who were required to consent in writing to the substitution did so.
We conclude that LaPorte's contentions are meritless. We therefore affirm the trial court's order dissolving the preliminary injunction.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual background
In 2006, Pacific Shores brokered a $945,000 construction loan for LaPorte. LaPorte intended to use the proceeds of the loan to build a house on land that he already owned. LaPorte and Pacific Shores signed a CLA which required LaPorte to execute a promissory note secured by a deed of trust encumbering the property.
Pacific Shores arranged for defendants Konstantin Zecevic, Strahinja Zecevic, Ana Trombley, Ivan Prokic, Ginny Jones, and nondefendant Laborie Investment, Ltd. (Laborie) (together "Anticipated Investors"), to provide the money that Pacific Shores would lend to LaPorte.
On June 15, 2006, LaPorte signed a promissory note, which he was to repay by July 1, 2007. The note identified the Anticipated Investors as the payees. That same day, LaPorte also executed a deed of trust, the beneficiaries of which were the Anticipated Investors.
According to the note, the investors were supposed to fund the loan in the following amounts:
The loan escrow closed on July 20, 2006, and the deed of trust was recorded on that day.
Sometime after LaPorte executed the note and deed of trust, Laborie backed out of the deal and declined to invest in the loan. Pacific Shores arranged for other investors, including some of the original investors, to make up the amount that Laborie was going to invest. Laborie assigned its beneficial interest in the note and deed of trust to the following investors: Bi-Coastal Revocable Living Trust (with Richard and Pina Cianfaglione as trustees); Equity Trust Company (as custodian of the IRAs of Stephen Clark, Johanna S. Jans, and Marianne Steele); Ballast Ltd.; Ginny Jones; Ivan Prokic; and Strahinja Prokic.
We will refer to the collection of parties who actually invested in LaPorte's loan as the "Ultimate Investors."
The initial assignment was oral. Approximately two years later, a written assignment of Laborie's interests to the other investors was recorded. The written assignment memorialized the oral assignment that was entered into on or about July 20, 2006.
Each of the Ultimate Investors signed a loan servicing agreement with Pacific Shores, authorizing Pacific Shores to act as his, her or its agent with respect to LaPorte's loan.
The CLA between LaPorte and Pacific Shores provided that Pacific Shores would maintain a trust account in which it would deposit the loan proceeds (the construction deposit account or CDA), and that it would disburse the funds to LaPorte after he submitted—and Pacific Shores approved—his draw requests.
Specifically, the CLA provided the following with respect to disbursement of the loan funds:
Pacific Shores paid all of the vouchers that LaPorte submitted. LaPorte ultimately received the full loan amount of $945,000.
The note became due and payable on July 1, 2007. LaPorte was apparently unable to obtain other financing that would enable him to repay the loan, and he defaulted.
On March 18, 2008, a notice of default was recorded. Statewide Reconveyance Group, Inc. (Statewide) recorded a notice of trustee's sale on August 7, 2008. Also recorded on August 7, 2008, were consent forms signed by each of the Ultimate Investors, approving of the substitution of Statewide as trustee in place of Pacific Shores.
In an attempt to prevent foreclosure, LaPorte initiated this lawsuit in January 2009, seeking the cancellation of instruments, as well as declaratory and injunctive relief.
On February 6, 2009, the trial court issued a preliminary injunction prohibiting the defendants from moving forward with a trustee's sale of the subject property.
The investor defendants (i.e., the defendants other than Statewide and Pacific Shores) filed a cross-complaint against LaPorte.
The record does not include a file-stamped or signed copy of the cross-complaint. However, the parties do not appear to dispute that the cross-complaint was filed, or that the investor defendants' claims are still pending.
Defendants moved for summary judgment on LaPorte's complaint. The parties fully briefed the matter, and, after a hearing, the court indicated its intention to grant defendants' motion for summary judgment. The court directed counsel for defendants to prepare an order for the court to sign.
Defendants subsequently filed an application requesting dissolution of the preliminary injunction that had enjoined them from proceeding with a trustee's sale.
On April 15, 2010, the trial court issued an order granting the motion for summary judgment. The court also issued an order dissolving the preliminary injunction. Pursuant to the parties' stipulation, the court ordered that no trustee's sale was to be conducted prior to June 11, 2010.
LaPorte filed a timely notice of appeal from the order dissolving the preliminary injunction.
LaPorte also filed a petition for a writ of mandate and a separate petition for a writ of supersedeas and a request for a stay in this court. This court denied both petitions and the request for a stay.
Statewide conducted a nonjudicial foreclosure sale of the subject property on July 8, 2010. The investor defendants apparently purchased the property at the foreclosure sale.
In his opening brief, LaPorte states that this is what occurred. However, he cites to nothing in the record to support this assertion. In response to LaPorte's assertion—on which he relies in arguing that the instant appeal is not moot because the property was not sold to a bona fide purchaser—defendants offer no other explanation of what occurred, and implicitly concede the correctness of LaPorte's position with respect to mootness by making no argument to the contrary, and instead directly addressing the merits of LaPorte's contentions on appeal.
III.
DISCUSSION
LaPorte appeals from the trial court's order dissolving the preliminary injunction that prohibited defendants from foreclosing on the property. An order dissolving a preliminary injunction is appealable, and we review such an order for an abuse of discretion. (Code Civ. Proc., § 904.1, subd. (a)(6); Loeffler v. Medina (2009) 174 Cal.App.4th 1495, 1505.)
LaPorte notes, and the defendants agree, that the trial court's decision to dissolve the preliminary injunction was based solely on the fact that the court granted the defendants' motion for summary judgment. LaPorte contends that the trial court erred in granting the defendants' motion for summary judgment because there remain triable issues of material fact with respect to his causes of action, and that the court therefore necessarily abused its discretion in dissolving the preliminary injunction. We conclude that the trial court did not abuse its discretion in dissolving the preliminary injunction based on its granting summary judgment in favor of defendants on LaPorte's complaint.
LaPorte appeals from the trial court's order dissolving a preliminary injunction—an order that is appealable. Although the court granted summary judgment with respect to LaPorte's complaint against defendants, that judgment is not yet final because a number of the defendants filed a cross-complaint against LaPorte, and the cross-complaint was still being litigated at the time LaPorte filed his notice of appeal of the order dissolving the preliminary injunction. LaPorte thus does not attempt to appeal directly from the court's order granting summary judgment in favor of defendants on his complaint (an order that would not itself be appealable, but would be subject to review on appeal from a judgment), but, rather, appeals only from the court's order dissolving the preliminary injunction.
A. LaPorte's arguments
1. There was no partial failure of consideration
LaPorte argues that there was a partial failure of consideration because at the time escrow closed, the entire $945,000 had not been placed in the CDA. According to LaPorte, under his agreement with Pacific Shores, the $945,000 in loan funds was "due" at the time the loan escrow closed, and because all of the funds had not been deposited into the CDA when escrow closed, he " 'has a defense to the extent performance of the promise is due and the promise has not been performed.' " (Italics omitted.) LaPorte contends that when escrow closed and the note was delivered, only $160,000 was in the CDA, and, therefore, the note is enforceable only up to $160,000.
Pacific Shores agreed to loan LaPorte $945,000 so that LaPorte could build a home. In exchange, LaPorte agreed to pay back $945,000, plus annual interest at a rate of 13 percent. Citing Uniform Commercial Code section 3303 and Advance Hardware Co. v. Comras (1957) 149 Cal.App.2d 137, 140, LaPorte asserts that " '[p]artial failure of consideration is a pro tanto defense in a suit on a note.' "
LaPorte's contention that the note may be enforced only up to $160,000 might have merit if Pacific Shores had ultimately loaned LaPorte only $160,000, despite having promised to loan him $945,000. However, LaPorte does not deny that he ultimately received the entire $945,000 that Pacific Shores agreed to loan him. LaPorte attempts to avoid the consequences of his promise to repay the full amount of the loan, plus interest, by complaining that the full amount of the loan had not been deposited into the CDA by the time escrow closed. Even if we were to assume that the loan documents required that Pacific Shores place all $945,000 in the CDA by the close of escrow (which is not at all clear), Pacific Shores's failure to meet this timing requirement did not amount to a partial failure of consideration, since it is undisputed that LaPorte received all $945,000 that was promised him. The note that LaPorte signed agreeing to repay $945,000, plus interest, is therefore fully enforceable.
2. Laborie could validly assign its interest in the note and deed of trust to other investors
LaPorte contends that since Laborie never loaned him any money, it never had any interest in the note, and, therefore, it could not validly assign any interest in the note to any other party. According to LaPorte, because Laborie's assignment of its interest to the parties who took Laborie's place as investors in the loan was a nullity, those parties also have no interest in the note and deed of trust. LaPorte argues in the alternative that, at a minimum, there remain triable issues of fact as to when Laborie orally assigned its interest in the loan to these parties, and whether any such assignment was valid. LaPorte contends that the timing of the assignment is significant because it is possible that if the assignment occurred after the new investors had given money to Pacific Shores to fund LaPorte's loan, those new investors would have no interest in the note. LaPorte maintains that the new investors would have only "equitable claims for recovery of funds advanced as strangers to the Note, " but "no viable claims on the Note." LaPorte contends that if no oral assignment occurred before September 2006, then "Laborie could not have transferred an executory right to participate in the loan transaction since the loan escrow had already closed—the loan transaction was no longer executory."
LaPorte fails to acknowledge the relationships among the parties, and specifically, the fact that Laborie's beneficial interest in the note and deed of trust was not based on any contractual duty owed to LaPorte. None of the investors, including Laborie, ever made any promise to LaPorte to loan him money, nor did any of them enter into a contract with LaPorte. LaPorte's only contract was with Pacific Shores, and Pacific Shores is the only entity that promised to loan LaPorte the $945,000. Pacific Shores required LaPorte to execute a promissory note that identified Laborie and other investors as the beneficiaries of the note, rather than itself, which it was free to do. As a beneficiary of the note, Laborie possessed a beneficial interest that it was free to assign to another investor, and Laborie did just that. When Laborie decided not to give Pacific Shores the money to invest in LaPorte's loan, Pacific Shores found other investors, and had Laborie transfer its interest in the note and the deed of trust to those investors. There is nothing unusual or improper about an assignment of a beneficial interest in a note or deed of trust to another party. (See Monterey S. P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 457 [describing real estate transaction in which a deed of trust named Party A as trustor, Party B as trustee, and Party C as beneficiary; Party C subsequently assigned its beneficial interest in the deed of trust to 252 other individuals or entities].)
3. Neither the deed of trust nor the notice of trustee's sale is void as a result of errors in the property description in the deed of trust
LaPorte contends that the deed of trust is void because the description of the property in the deed is uncertain and unidentifiable. The deed of trust states, "BORROWER, in consideration of the indebtedness herein recited and the trust herein created, irrevocably grants, transfers, conveys and assigns to Trustee, in trust, with power of sale, the following described property located in the county of San Diego, State of California: see preliminary title report, which has the address of Higland Valley Rd. Ramon CA 92605...." LaPorte notes that the correct address of the property is 17412 Highlander Drive, Ramona, CA 92065.
" ' "To be valid on its face, a deed must contain such a description of the real property thereby intended to be conveyed as will enable the property to be readily located by reference to the description."... [I]f the writing itself does "not furnish the means whereby the description may be made sufficiently definite and certain readily to locate the property, then the instrument must be held void, since the imperfections of the description cannot be supplied through evidence extrinsic to the writing itself without running up against the positive mandate of the rule that a conveyance of real property must be in writing." ' [Citation.]" (Saterstrom v. Glick Bros. Sash, Door & Mill Co. (1931) 118 Cal.App. 379, 380-381.)
According to LaPorte, because the address referenced on the first page of the deed of trust does not describe any existing real property, let alone the subject property, the deed of trust should be declared void. LaPorte fails to acknowledge that the last page of the deed of trust provides a legal description of the property by reference to government maps. The deed of trust includes an exhibit that contains the following description of the subject property: "Parcel A: [¶] Lot 3 of County of San Diego Tract No. 4783-1, in the County of San Diego, State of California, according to Map thereof No. 13492, filed in the Office of the County Recorder of San Diego County, October 30, 1997." This is a sufficient description of the property that is the subject of the deed of trust, and clearly allows one to locate the property.
LaPorte further argues that because the description of the property in the deed of trust does not match the description of the property identified in the notice of trustee's sale, the notice of trustee's sale was invalid and any subsequent sale of the property should be voided. However, both the deed of trust and the notice of trustee's sale include the legal description of the property, and those descriptions are identical. There is thus no basis for voiding the trustee's sale on the ground that the street address of the property in the deed of trust differs from the street address in the notice of trustee's sale.
4. Statewide was sufficiently substituted in as a trustee
LaPorte contends that "[i]n order for Statewide to have authority to notice a trustee's sale, and to conduct the sale, it must have been effectively substituted for Pacific Shores, the original trustee." He argues that Statewide was not effectively substituted as trustee for Pacific Shores prior to the recording of the notice of trustee's sale.
Civil Code section 2934a, subdivision (a)(1) describes how beneficiaries may effectuate the substitution of a trustee under a trust deed:
"The trustee under a trust deed upon real property or an estate for years therein given to secure an obligation to pay money and conferring no other duties upon the trustee than those which are incidental to the exercise of the power of sale therein conferred, may be substituted by the recording in the county in which the property is located of a substitution executed and acknowledged by: (A) all of the beneficiaries under the trust deed, or their successors in interest, and the substitution shall be effective notwithstanding any contrary provision in any trust deed executed on or after January 1, 1968; or (B) the holders of more than 50 percent of the record beneficial interest of a series of notes secured by the same real property or of undivided interests in a note secured by real property equivalent to a series transaction, exclusive of any notes or interests of a licensed real estate broker that is the issuer or servicer of the notes or interests or of any affiliate of that licensed real estate broker."
The record includes signed and recorded approvals of the substitution of Statewide as trustee by all who invested in LaPorte's loan and who were beneficiaries of the note and deed of trust. LaPorte maintains that some of the consent forms were signed by the wrong parties—i.e., parties who had no legal interest in the note or deed of trust, and further contends that at least two of the entities that did have a legal interest in the note and deed of trust did not sign and record the necessary consent forms.
LaPorte takes issue with the consent forms signed by Jans, Steele, and Clark, all of whom invested in LaPorte's loan through their retirement accounts. LaPorte contends that none of these individuals had a legal interest in the note or deed of trust because their money was invested by Equity Trust Company, the administrator of their IRAs. According to LaPorte, Equity Trust Company should therefore have been the entity to sign the consent to substitution of trustee on behalf of Jans, Steele, and Clark. We disagree. Ultimately, the persons who decided to invest in LaPorte's loan and who had an interest in that loan were the individuals who owned the retirement accounts, not the custodian of those accounts. Thus, it is the individuals, and not Equity Trust Company, who had the right to substitute Statewide as trustee, which they did. It is therefore sufficient that Jans, Steele, and Clark consented to the substitution of trustee.
LaPorte also contends that no consent to substitution form was signed or recorded by Ballast Ltd. This is yet another red herring. LaPorte acknowledges that a consent form was signed by someone representing Ballast Point. However, LaPorte contends that Ballast Point did not have any interest in the note or deed of trust, and instead, the entity that held an interest was Ballast Ltd. Ballast Ltd., however, is "merely a d/b/a of Ballast Point." The individual who signed the consent to substitution of trustee form on behalf of Ballast Point attested that Ballast Point "is the present Beneficiary under said Deed of Trust." Every indication is that Ballast Ltd. and Ballast Point are, effectively, the same entity, and LaPorte has pointed to no evidence that would suggest otherwise. Thus, the consent to substitution of trustee signed on behalf of Ballast Point constitutes sufficient consent on behalf of the interested Ballast entity.
5. LaPorte's other arguments fail
LaPorte sets forth a number of additional arguments in which he attempts to undermine the enforceability of the note and deed of trust, and thereby demonstrate that summary judgment was improper. However, all of these subsidiary arguments are premised on LaPorte's meritless contentions that he owes only $160,000 on the note, that the defendants who want to enforce the note and deed of trust have no interest in the note and deed of trust because any assignment to them was invalid, or that the deed of trust does not adequately describe the subject property. Because we have rejected all of these arguments, we also reject LaPorte's remaining contentions.
IV.
DISPOSITION
The order of the trial court dissolving the preliminary injunction is affirmed. Respondents are to recover costs on appeal.
WE CONCUR: HALLER, Acting P. J., McDONALD, J.
Laborie $767,000 — 81.164%
Konstantin Zecevic $40,000 — 4.233 %
Strahinja Zecevic $20,000 — 2.116%
Ana Trombley $20,000 — 2.116%
Ivan Prokic $3,000 —.317%
Ginny Jones $95,000 — 10.053%
"Upon the close of escrow, Lender and/or Lender's agent shall maintain an account in Lender's trust account held with a federal insurance financial institution ('Bank') for the purpose of depositing and disbursing the Loan proceeds to the Borrower pursuant to the terms of the Agreement (the 'Disbursement Account')....
"[¶]... [¶]
"... Subject to the fulfillment of the conditions set forth in paragraph 6 below, each disbursement from the Disbursement Account by Lender shall be made on the basis of a draw request submitted by the Borrower to Lender in the form attached hereto as Exhibit D ('Draw Request'). Upon Lender's approval of the Draw Request, the payment for such Draw Request shall be issued by Lender from the Disbursement Account for use by the Borrower (a 'Disbursement'). A Disbursement may be made, at Lender's option, directly to Borrower, Borrower's general contractor (if any), or to subcontractors, laborers or material providers, or jointly to one or more of the foregoing, or to other persons designated by the Borrower, or in such manner as the Lender may approve or require."