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  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
  • Gary Polder, et al vs Jerome L. Dodson, Trustee of the Jerome L Dodson Revocable Trust of 2012, et al(37) Unlimited Other Contract document preview
						
                                

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ELECTRONICALLY FILED Superior Court of California County of Santa Cruz 12/19/2018 1:40 PM Alex Calvo, Clerk Jason Lee Weisberg, Esq. (Bar No. 150436) 5 japéSalsedo, Deputy SISBERG LAW OFFI 24013 Ventura Boulevard, Suite 200 Calabasas, Califomia 91302 Telephone: (818) 925-7400 Jason@WeisbergLaw.net Attomeys for Defendant Jerome L Dodson Trustee of the Jerome L. Dodson Revocable Trust of 2012 SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SANTA CRUZ 10 SANTA CRUZ COURTHOUSE 11 12 GARY L. POLDER,; DONNA M. CASE NO. 18CV03599 STODDARD, 13 Division 5 Plaintiffs, Hon. Paul Burdick, PJ. 14 VS. MEMORANDUM OF POINTS AND 15 AUTHORITIES IN OPPOSITION TO EROME L. DODSON, TRUSTEE OF THE ORDER TO SHOW CAUSE RE: 16 JEROME L. DODSON REVOCABLE PRELIMINARY INJUNCTION TRUST OF 2012; SUN PACIFIC 17 MORTGAGE & REAL ESTATE; and DOES Date: December 27, 2018 1 through 50, inclusive Time: 8:30A.m. 18 Dept:5 Defendants. 19 Complaint Filed: December 13, 2018 Trial Date: None Set 20 21 Defendant Jerome Dodson, Trustee of the Jerome L. Dodson Revocable Trust Dated 2012, respectfully submits this Memorandum of Points and Authorities in Opposition to the Court’s Order 23 to Show Cause Re: Preliminary Injunction. 25 26 27 i MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION TABLE OF CONTENTS TABLE OF AUTHORITIES MEMORANDUM OF POINTS AND AUTHORITIES I INTRODUCTION Factual Summary b. The Temporary Restraining Order Should Be Allowed to re and No Preli: junction Should Issue Il. IS NO EVIDEN i RE WAS ANY VIOLATION OF TILA OR HOEPA THE FIVE FACTORS ARTICULATED IN THORNS V. SUNDANCE PROPERTIES ALL COMPEL A FINDING THIS WAS A BUSINESS LOAN TO WHICHTILA AND HOEPA DO NOT APPLY 10 A Mr. Polder’s Occupationas a Real Estate Broker Who 11 Loans Secured Apartment Building Is Very Highly Related to Saving 12 Foi rele ad Rol ay itera Pre it 13 The Plaintiffs Have Co ete Control Over the Vacant. Land,and Thus, Perso! ly Manage the Acquisition 14 The Plaintiffs Potential Profit of $4 Million Dwarves 15 Their Stated Annual Income of $273,600. 16 $1.5 Million Is Not Pocket Change and Indicates this Was a Business 17 E. The Plaintiffs Expressly Represented the Loan Was for 18 Busi PLAINIT HAVE NOT SHOWN THAT DODSON IS A 19 “CREDITOR” UNDER TILA TILA AND HOEPA ARE NOT FORECLOSURE PREVENTION 20 STATUTES, INSTEAD THEY ALLOW CONSUMER BORROWERS TO RESCIND. AN APPLICABLE TRANSACTION AND REQUIRE THE BORROWER TO TENDER 21 THE PROCEEDS OF THE LOAN BACK TO THE LEND VI EVEN IF TILA APPLIED, THE FIRST PRIORITY TRUST DEED AGAINST THE VACANT FLORA LINDA PROPERTY CANNOT BE RESCINDED 10 ESTMENT IN VACANT LAND IS NOT SUBJECT TO TILA. 1 VIII. IF ANY INJUNCTION IS GRANTED, A SUBSTANTIAL BOND SHOULD BE REQUI wll CONCLUSION, 12 25 26 27 ii MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION TABLE OF AUTHORITIES Cases Am Mortg. Network, Inc. v. Shelton (4th Cir 2007) 486 F.3d 815 Corcoran v. Saxon Mo! . Servs., Inc. (D. Mass. 2) Civ. No. 09-11468-NMG, 3010 US. Dist. LEXIS 511 2010 WL 2106179, Estillorev. Co ide Bank FSB (E.D. Cal. St 2011 U.S. Dist. LEXIS 13530 B In re Booth (5th Cir. 1988) 858 F. 1051 -8- Pacific Shore Funding v. Lozo (2006) 138 Cal. A Ath 1342 -5- Powers v. Sims & Levin (4th Cir. 1976) 542 F.2d 13 Tachibanav. Colo. Mt. Dev., Inc. (D. Haw. 2010) 2010 U.S. Dist. LEXIS 101988 14 ns v. Sundance Pro) Cir. 1984) 726 F.2d 1417 -9- Yamamoto v. Bank of New York (9th Cir. 2003) 329 F.3d 1167 13 Statutes 1S5U.S.C. § 1602(17)(v) -7- 15 U.S.C. § 1602(h) -6- ISUS.C. § 1603(1) -6- 15U.S.C. § 1635 12 10 ISUS.C. § 1635(a) -5- ISUS.C. § 1639(a) -5- 11 Regulations 12 CER. § 1026.1 -8- CER. § 1026.2(a 12 13 12CER. § 1026.23(a) _7- 12C.ER. § 1026.23(a)(1) 13 14 12 CER. § 226.23(b) -5- 12 CER § 226.3 -6- 15 12C.FR. 1026.2(17)( -6- 16 17 18 19 20 21 23 25 26 27 iii MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION MEMORANDUM OF POINTS AND AUTHORITIES I INTRODUCTION A. Factual Summary Most of the pertinent facts are not in dispute. Plaintiff Gary L. Polder has been a licensed. teal estate broker since 1979, and maintains a website, nationalapartmentlending.com, which. advertises, “Fixed Rate Multi Family Loans Available Now at Only 3.75% to 4.5%.” Exhibit 2. In 2014, Plaintiffs sold the property located at 500 Flora Linda Lane, Watsonville, Califomia, Assessor’ s Parcel Numbers 10908101 and 10907117 (the “Flora Linda Property”) to Randa Chahwan Hadaiya for $3,000,000, which was financed by a $1,100,000 loan from Robert 10 Bass, LLC, and a second priority $1,900,000 loan carried back by Mr. Polder. Both loans went into 11 default, and Plaintiffs took back the Property on March 19, 2018. 12 On Apmil 24, 2018, Mr. Polder filed a Chapter 13 Bankruptcy, case number 18-50906, which 13 ‘was dismissed on May 9, 2018 for failure to file the appropriate documents. On information and 14 belief, the foreclosure sale on the Robert Bass, LLC trust deed was scheduled for May 16, 2018. 15 The Plaintiff’ s needed aloan, and they needed it quick. They submitted a “Business 16 Purpose/Commercial Loan Application” [Exhibit 1] to Sun Pacific Mortgage and Real Estate (“Sun 17 Pacific’). The application indicated they had a monthly income of $28,200 from National 18 Apartment Lending Inc. Plaintiff's also submitteda “Loan Purpose Declaration” [Exhibit 5] in 19 which they were asked whether the loan would be for “personal use of purpose, “business use or 20 purpose, or “agricultural purpose.” They wrote: 21 USE: Personal = “P’ ITEMIZED PURPOSE (INTENDED USE) OF NET LOAN AMOUNT (Total should Business ="B" PROCEI equal the) Agricultural = [Further =xplanation of “P,” “B,” and/or "A") approximate net loan proceeds) { Reet F ey $C TE IPB) tora. | 78927 25 26 See, Danielsv. SCME Mortg. Bankers, Inc. (C.D. Cal. 2010) 680 F.Supp.2d 1126, 1130 27 (Plaintiff checking “investment” as purpose of loan precluded the possibility the loan was subject to 28 TILA).. 1 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION Based on these representations, Sun Pacific arrangeda $1.5 million loan from Jerome L. Dodson, Trustee of the Jerome L. Dodson Revocable Trust of 2012 (“Dodson”) that would be secured by a first position trust deed on the Flora Linda Property [Exhibit 6], and a third position trust deed on Plaintiffs’ residence [Exhibit 7]. $1,138,602.29 from the proceeds of the loan were used to prevent foreclosure of the Flora Linda Property [Exhibit 8], which is presently for sale for $5.9 million. $78,937.37 was distributed to the Borrowers [Exhibit 8]. The remainder of the loan. consisted or points and other origination charges. The Plaintiffs defaulted on their second payment. By bringing the instant proceeding, the Plaintiffs are attempting to continue to use the 10 Defendant’ s money without paying contractual interest for an indefinite period until the Flora Linda 11 Property sells. 12 B The Temporary Restraining Order Should Be Allowed to Expire and No 13 Preliminary Injunction Should Issue 14 1. Thereis no evidence of a Truth in Lending Act (“TILA”) orthe Homeowners’ Equity 15 Protection Act (“HOEPA”) violation. “TILA requires that specific disclosures be 16 provided to bomowers of qualifying consumer credit transactions that are secured by the 17 borrowers’ residence, including that borrowers have a right to rescind the transaction 18 until midnight of the third business day following consummation of the transaction.” 19 Pacific Shore Funding v. Lozo (2006) 138 Cal. App. 4th 1342, 1349 (citing 15 U.S.C. § 20 1635(a); 12 C.E.R. § 226.23(b) (emphasis added)). HOEPA similarly requires additional 21 disclosures. 15 U.S.C. § 1639(a)(1) & (a)(2). The Declaration of Gary L. Polder, which is the only Plaintiff’s evidence before this court, does not discuss whether any 23 disclosures were made when the loan was originated or not. There are no Exhibits attached to his declaration. Mr. Polder's declaration is silent with regard to what he was 25 provided by Sun Pacific or what he signed. He does not declare that he and his wife 26 were consumers or that the loan was “primarily for personal, family, or household 27 purposes.” In the absence of such documents or declarations, it is impossible to 2 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION determine whether the loan complied with TILA or HOEPA, and it cannot therefore be said that the plaintiff has established the probability of prevailing on the merits. The closest Mr. Polder comes to alleging a TILA or HOEPA violation is to say there were “oppressive terms and many defects in the loan agreement.” Polder Dec. 3:9 (emphasis added). This does not even come close to even a threshold showing there were TILA or HOEPA violations. This was a big “swing and a miss” on the part of Plaintiffs. Put colloquially, “Where's the beef?” TILA and HOEPA are only applicable to consumer loans, in which “the money, property, or services which are the subject of the transaction are primarily for personal, 10 family, or household purposes.” 15 U.S.C. § 1602(h) (emphasis added). As a corollary, 11 15 U.S.C. § 1603(1) provides that TILA “does not apply to ... [clredit transactions 12 involving extensions of credit primarily for business, commercial, or agricultural 13 purposes.” (Emphasis added.) As an amendment to TILA, HOEPA also does not apply 14 to extensions of credit primarily for business or commercial purposes. See 12 C.F.R. § 15 226.3; Provencherv. T&M Mortg. Solutions, Inc. (D. Me. June 18, 2008) 2008 U.S. 16 Dist. LEXIS 47616; Dunn v. Meridian Mortgage (W.D. Va. 2009) 2009 U.S. Dist. 17 LEXIS 37593, *6. Here, the loan in question was used to “pay off the first [$1, 100,000, 18 Polder Dec. 2:21-24] mortgage to Robert Bass, LLC on the Flora Linda Property” 19 [Polder Dec. 3:5-6] to “prevent losing the Flora Linda Property,” [Complaint 22-23] 20 which “had been listed for sale by Polder for $4,950,000,” [Complaint 18-20] and is “is 21 presently listed for sale at $5.9! ” [Plaintiffs’ Memorandum of Points and Authorities 3:10.] The profit motivation behind the taking out of the instant loan negates the 23 possibility that this was a consumerloan. This was a business loan and TILA and HOEPA are not applicable here. 25 The Plaintiffs have made no attempts whatsoever to substantiate that Dodson is a 26 “creditor” within the meaning of TILA or HOEPA. A “creditor” is “[a] person who 27 regularly extends consumer credit...” 12 C.F.R. 1026.2(17)(i). “A person regulary extends consumer credit only if it extended credit (other than credit subject to the 3 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION requirements of § 1026.32) more than 25 times (or more than 5 times for transactions secured by a dwelling) in the preceding calendar year. If a person did not meet these mumerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is subject to the requirements of § 1026.32 or one or more such credit extensions througha mortgage broker.” 15 U.S.C. § 1602(17)(v). Plaintiffs have supplied no evidence of this whatsoever. 4. The Truth in Lending Act (“TILA”) and the Homeowners’ Equity Protection Act 10 (“HOEPA”) are not foreclosure prevention statutes, they are disclosure and rescission 11 statutes. 12 C.F.R. § 1602(a). As such, restoration of the status quo ante requires the 12 plaintiffs tender the $1.5 million loan proceeds to Defendant Jerome L. Dodson, Trustee 13 of the Jerome L. Dodson Revocable Trust (“Dodson”) as a an absolute pre-condition of 14 the Plaintiffs’ alleged right of rescission. In the absence of such a meaningful tender, the 15 Plaintiffs’ attemptto invoke TILA and HOEPA are “doomed.” Estillorev. Countrywide 16 Bank FSB (E.D. Cal. 2011) 2011 U.S. Dist. LEXIS 13530, *24-25. 17 5. To the extent that TILA or HOEPA may apply, “[tJhe right of rescission applies only to 18 the addition of the security interest [in a consumer's principal dwelling] and not the 19 existing obligation.” 12 C.F.R. § 1026.23(a). As such, evenif TILA or HOEPA 20 applied, which they do not, only the Valley View Property would be protected. The 21 Flora Linda Property is fair game. 22 Insum, the Plaintiffs have not put forth any evidence that the loan was subject to TILA or 23 HOEPA, that the loan documents were not compliant with TILA or HOEPA, or that they can tender 24 back the loan proceeds to Dodson. This was a complete “swing and a miss” on the Plaintiffs’ part, 25 and Dodson should not be enjoined from foreclosing his security interest on the Flora Linda 26 Property. 27 4 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION II. THERE IS NO EVIDENCE THERE WAS ANY VIOLATION OF TILA OR HOEPA Lenders to consumers secured by a lien on a consumer borrower's primary residence must provide a TILA disclosure statement that includes information about the amount of the loan, the annual percentage rate (A PR), finance charges (including application fees, late charges, prepayment penalties), a payment schedule and the total repayment amount over the lifetime of the loan. Consumer borrowers must also be notified that there is a three day period in which a loan may be rescinded. Se 12 C.F.R. § 1026.1, et seq. The Plaintiffs advance dramatic and sweeping claims, but the only evidence before this Court is the Declaration of Gary L. Polder. Mr. Polder’s declaration does not state that he and his wife were consumers. Mr. Polder's 10 declaration does not state that the proceeds of the loan were used primarily for personal, family, or 11 household purposes. Mr. Polder’s declaration does not state that any right of rescission was not 12 disclosed. Mr. Polder’s declaration does not state that the APR of the loan was not disclosed. Mr. 13 Polder’s declaration does not state that the finance charges were not disclosed. Mr. Polder’s 14 declaration does not state that a payment schedule was not provided. Mr. Polder's declaration does 15 not state the total amount of payments over the lifetime of the loan was not disclosed. 16 Instead, the only evidence conceming TILA or HOEPA consist of vague statements about 17 undated hiking across the Flora Linda Property and, there were “oppressive terms and many defects 18 in the loan agreement.” Polder Dec. 2:19; 3:9. 19 Plaintiffs have failed to establish even the barest outlines of a TILA or HOEPA violation. 20 Plaintiffs have not shown they have a likelihood of prevailing on the merits and a preliminary 21 injunction should not be issued. 23 IlL.THE FIVE FACTORS ARTICULATED IN THORNS V. SUNDANCE PROPERTIES ALL COMPEL A FINDING THIS WAS A BUSINESS LOAN TO WHICH TILA 25 AND HOEPA DO NOT APPLY 26 As ageneral matter, when a party obtains a loan in order to make a profit, that loan is not 27 considered a “perso! ” loan under TILA. See, e.g., In re Booth (5th Cir. 1988) 858 F.2d 1051, 5 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION 1054-55 (“Cases decided under the Truth in Lending Act indicate that when the credit transaction involves a profit motive, it is outside the definition of consumer credit.”) In Corcoran v. Saxon Mortg. Servs., Inc. (D. Mass. 2010) Civ. No. 09-11468-NMG, 2010 US. Dist. LEXIS 51040, 2010 WL 2106179, at *3, the court held TILA inapplicable where “[alt the time the plaintiff obtained the loan, he represented to the lender that it would be used to purchase an ‘investment property’ and that he did not intend to occupy the premises personally.” Defendant respectfully askes the court to recall that the Plaintiffs expressly represented this would be a business loan and the proceeds were used to prevent foreclosure of a $1.1 million loan against the Flora Linda Property, “121 acres of completely undeveloped and unmanaged costal 10 wildemess,” so Plaintiffs could put it on the market for $5.9 million. Polder Dec. 2:16-17. If the 11 property were to be sold at that price, the Plaintiffs could net $4 million profit after repayment of 12 the subject loan and real estate commissions. 13 Courts have developed a formula to determine whether a loan is characterized as a 14 “business” loan or as a “consumer” loan, which involves a “fact based analysis” carried out on a 15 case by case basis. Thorns v. Sundance Properties (9th Cir. 1984) 726 F.2d 1417, 1419. 16 The Thorns court set forth a five part analysis that must be undertaken in determining 17 whether a loan is a personal or business loan. The factors are: 18 1 The relationship of the borrower's primary occupation to the acquisition. The more 19 Closely related, the more likely it is to be business purpose. 20 2. The degree to which the borrower will personally manage the acquisition. The more 21 personal involvement there is, the more likely it is to be business purpose. 3, The ratio of income from the acquisition to the total income of the borrower. The 23 higher the ratio, the more likely it is to be business purpose. 4. The size of the transaction. The larger the transaction, the more likely it is to be 25 business purpose. 26 5, The borrower's statement of purpose for the loan. 27 6 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION A Mr. Polder’s Occupation as a Real Estate Broker Who Arranges Loans Secured by Apartment Building Is Very Highly Related to Saving Vacant Property from Foreclosure and Reselling it for a Profit Although Mr. Polder claims to have been retired for the past four years, he has been, and still is, licensed as a Real Estate Broker since 1979. On his loan application, which was completed in May 2018, he claimed to have an income of $22,800 per month from National Apartment Lending, Inc. It is clear the Plaintiffs knew what they were doing. They had nominal title to the Flora Vista Property, but were about to lose it to a senior creditor who was owed $1.1 million plus 10 accrued charges and interest within the seven (7) day period between the dismissal of Mr. Polder’s 11 bankruptcy on May 9, 2018 and the impending foreclosure sale on May 16, 2018. They took outa 12 hard money $1.5 million loan from Dodson, paid off the senior lien, pocketed $78,937.37 from the 13 transaction, and are seeking to sell the Flora Linda Property for $5.9 million. 14 As a Real Estate Broker with 39 years’ experience, borrowing against and selling real estate 15 for his own account in order to make approximately $4 million is closely related to his profession of 16 17 B. The Plaintiffs Have C omplete C ontrol Over the Vacant Land, and Thus, 18 Personally Manage the Acquisition 19 With the satisfaction of the Robert Bass, LLC trust deed, the Plaintiffs have complete 20 21 control over the vacant land. They can sell it. They can develop it. They can further encumbrance it. They are free to use it for any legal purpose. 23 Cc The Plaintiffs Potential Profit of $4 Million Dwarves Their Stated Annual Income of $273,600 25 The Vacant Land is encumbered with a first trust deed of $1.5 million. Defendant is aware 26 of ajunior encumbrance, but is not privy to the details. The most recent sale price was $3 million in 27 a slower real estate market. If the Plaintiffs are retired, as they claim, the yield from the sale of the 7 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION Vacant Land would dwarf their annual income. Even if they make $28,500 per month, as they Claimed in their loan application, if they receive their asking price of $5.9 million, their net profit will be asale price for the Flora Linda Property, 120 acres with a spring and a lake stocked with fish, could easily yield the Plaintiffs $4 million after repayment of the Dodson loan and payment of real estate commissions. This was no consumer loan transaction. D $1.5 Million Is Not Pocket C hange and Indicates this Was a Business Loan $1.5 million is more money than many people will eam ina lifetime. Usually, the largest purchase a person makes in a lifetime is a house. In most areas, $1.5 million would buy a very nice house. $1.5 million is almost enough to buy five (5) brand new Rolls Royces. In fact, the loan 10 proceeds were used to prevent foreclosure of a vacant parcel that is worth much more than that. 11 The size of the transaction show that this was no consumer loan. 12 E The Plaintiffs Expressly Represented the Loan Was for Business Purposes 13 The Plaintiffs took out aloan, representing that it was for business purposes and that they 14 15 had the abilityto make monthly payments. Recall that Plaintiff Gary Polder is a highly experienced Real Estate Broker and mortgage lender who took out a loan, expressly representing it was for 16 17 business purposes, and then tumed around and is trying to assert a TILA violation. It does not 18 appear the Plaintiffs had any intention of making payments on the loan. Notwithstanding that, the Plaintiffs expressly represented this was a business transaction and 19 20 they should be held to their word. Taken together, every one of the Thomes factors indicates this was a business loan that was 21 not subject to TILA or HOEPA. 23 IV. PLAINTIFF’S HAVE NOT SHOWN THAT DODSONISA “CREDITOR” UNDER TILA 25 Not all lenders are subject to TILA. 26 (17) Creditor means: 27 (i) A person who regularly extends consumer credit that is subject to a finance charge or is payable itten in more than four installments (not including a ywn payment), and to whom the obligation is 8 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION initially payabl ‘al le, either on the face of the note or contract, or by agreement no note or contract. >koK (v) A person (other than eats larly extends consumer credit only if it extended credit it subject to the requirementsof § 1026.32) more than 25 times (or more than 5 times for transactions secured by a dwelling) in the ing calendar year. If a person did not meet these numerical standards in the preceding calendar year, the numerical standards shall be applied to the current calendar year. A person regularly extends consumer credit if, in any 12-month period, the person originates more than one credit extension that is ject to the requirements of § 1026.32 or one or more such credit extensions through a mortgage broker. 12 CFR. § 1026.2(a)(17)(i), (v). Plaintiffs have made no attempt to prove that Dodson falls within any of the categories that would make hima “creditor” subject to TILA. 10 V. TILA AND HOEPA ARE NOT FORECLOSURE PREVENTION STATUTES, 1 INSTEAD THEY ALLOW CONSUMER BORROWERS TO RESCIND AN 12 APPLICABLE TRANSACTION AND REQUIRE THE BORROWER TO TENDER THE 13 PROCEEDS OF THE LOAN BACK TO THE LENDER 14 TILA provides a potent remedy to consumers for violations of certain disclosure provisions - 15 rescission. 15 U.S.C. § 1635. “[A]s with any rescission remedy, the intent is to retum the parties to 16 the status quo ante.” U.S. Bank National Assn. v. Naifeh (2016) 1 Cal. App. 5th 767, 780. 17 A timely notice of rescission automatically renders the security interest void 18 under section 1635(b), where the creditor acquiesces in the rescission or ignores it. However, once the creditor contests the notice of rescission, the 19 court may alter the procedure otherwise dictated by the TILA, determine there were inadequate disclosures that would extend the rescission 20 period to three years, and decide whether equity compels a requirement that the borrower tender the loan proceeds before the lender retums the amounts 21 paid and releases respond to Sm none its securi interest. This accomplishes the legislative goals of protecti the borrower nondisclosures, motivating the lender to bomower's concems, and the parties to the status quo ante in a manner consistent with the facts and equities of the particular 23 situation. Id. at 784. 25 In Yamannto v. Bank of New York (9th Cir. 2003) 329 F.3d 1167, 1170-1173, the borrowers 26 sent the lender a notice of rescission and then sued, seeking damages and rescission. The district 27 court ruled that the borrowers had to tender the loan proceeds; when they were unable to do so, the 9 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION court dismissed their lawsuit. Noting that section 1635(b) expressly permits a court to modify the procedures set forth in that section, the Ninth Circuit Court of Appeals held that the trial judge had the discretion to “condition” rescission on the borrower's tender. In Powersv. Sims & Levin (4th Cir. 1976) 542 F.2d 1216, 1220, the Court rejected the argument that § 1635 compelled a creditor to remove a mortgage lien in the absence of the debtor's tender of the loan proceeds. The Powers Court held that, “when rescission is attempted under circumstances which would deprive the lender of its legal due, the attempted rescission will not be judicially enforced unless it is so conditioned that the lender will be assured of receiving its legal due.” Id. at 1222. 10 “Clearly it was not the intent of Congress to reduce the mortgage companyto an unsecured 11 creditor or to simply penmit the debtor to indefinitely extend the loan without interest.” Am Mortg. 12 Network, Inc. v. Shelton (4th Cir. 2007) 486 F.3d 815, 820-21 (emphasis added). “Without [the 13 borrower's] meaningful tender, his purported [TILA] claims are doomed.” Estillorev. Countrywide 14 Bank FSB (E.D. Cal. 2011) 2011 U.S. Dist. LEXIS 13530, *24-25. 15 In the absence of the Plaintiffs showing they have the ability to tender $1.5 million to the 16 Defendant, their TILA claim should fail. However, the Plaintiffs have made it abundantly clear that 17 they will not, or cannot, tender the loan proceeds back to Dodson. Dodson should therefore not be 18 enjoined from foreclosing on a defaulted loan in the absence of a meaningful tender. 19 VI.EVEN IF TILA APPLIED, THE FIRST PRIORITY TRUST DEED AGAINST THE 20 VACANT FLORA LINDA PROPERTY CANNOT BE RESCINDED 21 12 C.ER. § 1026.23(a)(1) (emphasis added) provides: Consumer's right to rescind. 23 dn @ treet gemscicon in weblion huss or will be retained or in aconsumer's |, each consumer whose ownership Sniest is or wil De ealject to the Soouity iferest all howe the right to 25 rescind the transaction, except for transactions described in paragraph (f) of this section. For purposes of this section, the addition to an existing 26 obligation of a security interest in a consumer's isa transaction. The right of rescission applies only to the addition of the security 27 interest and not the existing obligation. The creditor shall deliver the notice 10 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION required by paragraph (b) of this section but need not deliver new material disclosures. Delivery of the required notice shall begin the rescission period. In light of this regulation, even if TILA applied to this loan transaction, which it does not, Plaintiffs’ right of rescission would only apply to the third priority trust deed against their principal residence. Defendant Dodson’s first trust deed against vacant Flora Linda Property is not subject to rescission under TILA. VII AN INVESTMENT IN VACANT LAND IS NOT SUBJECT TO TILA In Tachibana v. Colo. Mt. Dev., Inc. (D. Haw. 2010) 2010 U.S. Dist. LEXIS 101988, the Plaintiffs borrowed money to purchase residential lots in a subdivision in Lone Oak, Texas, but the subdivision was never built. They sued, in part, fora violation of TILA. The lender moved for 10 summary judgment. The Court emphasized that TILA was intended to protect only consumers. 11 Plaintiffs do not dispute that all of Plaintiffs' loans were secured vacant lots—lots that did not contain residential structures. At best, Plaintiffs 12 intended to build structures on the vacant land. BOA's loans to Plaintiffs allowed them to the land, not fund the construction of the intended 13 structures. Had BOA's loans to Plaintiffs been for construction of principal dwellings on the vacant lots, TILA would have applied. 14 Id. at *23. 15 Just as in Tachibana, the Plaintiffs in this case took out a loan to invest in vacant land, 16 which they intended to resell fora profit. This was not a consumer transaction. This was a business 17 transaction, and TILA has no application here. 18 19 VIII IF ANY INJUNCTION IS GRANTED, A SUBSTANTIAL BOND SHOULD BE 20 REQUIRED 21 At this point, the Loan has been in default for approximately six (6) months. When the payoff was last calculated, as of September 10, 2018, the payoff amount was $1,651,789.66. Since 23 that time, an additional $51,000 in interest has accrued on the loan. Assuming this case is resolved within one year, another $204,000 in interest will have accrued. That does not include late charges 25 or other fees. 26 27 11 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION Defendant is secured for $1.5 million, but it is not clear what a foreclosure sale will yidd enough to satisfy that amount, let alone accrued interest and fees. As such, Defendant requests that the posting of a bond in the amount of $1,925,000. IX.CONCLUSION In May 2018, Plaintiffs were desperate to prevent the Flora Linda Property from being sold at a foreclosure sale scheduled for May 16, 2018. They approached Sun Pacific, and applied fora business loan. They executed a Declaration of Loan Purpose, under penalty of perjury, attesting to the fact that the loan proceeds would be used for business purposes. Based on their representations, Defendant Dodson extended Plaintiffs a $1.5 million loan secured by a first trust deed against the 10 Flora Linda Property and a third trust deed against their residence. 11 The loan proceeds were used to discharge the then existing $1.1 million first trust deed 12 against the Flora Linda Property, and a portion of the proceeds were pocketed by the Plaintiffs. 13 Plaintiffs took out this loan to prevent foreclosure of and retain the Flora Linda Property, which is 14 now on the market for $5.9 million. 15 Tt takes real chutzpah for a real estate broker who has been licensed since 1979 to attempt to 16 fashion this as a consumer transaction, but that is what the Plaintiffs are doing here. 17 Plaintiffs seek to prevent foreclosure of either of the trust deeds held by Dodson. They are 18 taking the position that a purported TILA violation allows them to retain Dodson’s $1.5 million 19 indefinitely, without interest, while they try to eam a profit of approximately $4 million from this 20 “consumer” transaction. The Plaintiffs are wrong. 21 First, the Plaintiffs have not introduced any evidence that there has been a violation of TILA orHOEPA. The Polder declaration does not describe any of the documents that were signed when 23 this loan was originated. The declaration does not state facts sufficient to establish even a threshold. TILA violation. The best the plaintiffs can do is say there were “oppressive terms and many defects 25 in the loan documents.” Again, the declarant has been a licensed real estate broker for nearly 40 26 years and has been in the lending business himself, and that conclusory statement is the best he can 27 do. 12 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION Second, this was no consumer loan, which precludes the application of TILA to it. The transaction fell squarely within Polder’ s profession as a real estate broker. The Plaintiffs have complete control over the Flora Linda Property. The potential profit to the Plaintiffs from the sale of that property would dwarf theirincome. The loan was large, $1.5 million. Hardly a consumer amount. And the Plaintiffs expressly represented under penalty of perjury that the loan was a business loan. Third, there is no showing whatsoever that Dodson is a “creditor” within the meaning of TILA. Fourth, the Plaintiffs are unable or unwilling to tender the amount due to Dodson. They are 10 holding his money hostage while they make specious claims in this lawsuit and try to hold his 11 money indefinitely without interest. 12 Fifth, even if the Plaintiffs were to be proven to be totally right, any right of rescission 13 would apply only to the third trust deed against their residence. The Flora Linda Property is vacant, 14 and vacant land cannot be the subject of a TILA claim. 15 Injunctions are a matter of equity, and this Honorable Court should consider whether the 16 Plaintiffs are acting in good faith. A highly experienced real estate broker with extensive lending 17 experience took out a significant hard money loan to preserve an investment property, declaring 18 under penalty of perjury that it was fora business purpose. Dodson’s loan saved the investment 19 property from foreclosure and the Plaintiffs are marketing it for $5.9 million, which would net them 20 in the neighborhood of $4 million. Then the highly experienced real estate broker tumed around. 21 and is now playing the aggrieved consumer, despite all indications under any applicable test that this was a business loan. The equities in this case weigh heavily against injunctive relief. 23 Respectfully submitted. 25 26 27 13 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION EISBER‘ES LAW OF! iy Dated: December 19, 2018 By tions Weisbebg,gs Esq Xttoprieys for Defendant Jerome 1, Dodson dstee of the Jerome L. Dodsofi Revocab Trust of 2012 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO OSC RE: PRELIMINARY INJUNCTION PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF LOS ANGELES I amemployed in the County of Los Angeles, State of Califomia. I am over the age of 18 and not a party to the within action; my business address is: 24013 Ventura Blvd., Ste. 200, Calabasas, CA 91302. On December 19, 208,1 I served the foregoi document described as: MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO ORDER TO SHOW CAUSE RE: PRELIMINARY INJ UNCTIO