Preview
Baud bf Summit
Sara M. Knowles (SBN 216139)
Supar'
F
LELAND, MORRISSEY & KNOWLES LLP Count! 0f Bum
l
1660 Humboldt Road, Suite 6
L
v
Chico, CA 95928 1/13/2021
E
Telephone: (530) 342-4500 D
Facsimile: (530) 345-6836 Ey
{LED
Attorneys for John Denton, Conservator of the Estate of
Edward F. Niderost, Individually and as Successor Trustee of
the Edward F. Niderost Revocable Living Trust Dated
November 8, 1998
SUPERIOR COURT OF CALIFORNIA,
COUNTY 0F BUTTE
WAYNE A. COOK, TRUSTEE OF THE CASE NO. 20CV00905
WAYNE A. COOK 1998 FAMILY TRUST
DATED 12/29/98, FIRST AMENDED ANSWER TO
PLAINTIFF’S COMPLAINT TO
Plaintiff, FORECLOSE DEED OF TRUST AND
FOR SPECIFIC PERFORMANCE OF
V. RENTS AND PROFITS CLAUSE.
EDWARD F. NIDEROST, INDIVIDUALLY
AND AS TRUSTEE OF THE EDWARD F.
NIDEROST REVOCABLE LIVING TRUST
DATED NOVEMBER 8, 1998, DOES l
THROUGH 10,
Defendants.
EDWARD F. NIDEROST, INDIVIDUALLY
AND AS TRUSTEE OF THE EDWARD F.
NIDEROST REVOCABLE LIVING TRUST
DATED NOVEMBER 8, 1998,
Cross-Complainant,
v.
WAYNE A. COOK, TRUSTEE OF THE
WAYNE A. COOK 1998 FAMILY TRUST
DATED 12/29/98; LAWRENCE
PATTERSON; GENE CULLEY, MID
VALLEY TITLE AND ESCRO COMPANY
and ROES 1 through 25, inclusive,
Cross-Defendants.
l
FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED OF TRUST AND FOR
SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE
Defendant and Cross-Complainant Edward F. Niderost, (“Cross-Complainant”),
individually and as Trustee of the Edward F. Niderost Revocable Living Trust Dated November 8,
I
1998, hereby responds to the Complaint to Foreclose Deed of Trust and For Specic Performance
of Rents and Prots as follows:
1. Defendant and Cross-Complainant is an individual who resides within the State of
California, County of Butte. Further, the place of administration of the Edward F. Niderost
Revocable Living Trust Dated November 8, 1998, of which Cross-Complainant is thes settlor , is
Butte County, California.
2. Defendant and Cross-Complainant’s assets are subj ect to a conservatorship, and are
held in the Edward F. Niderost Revocable Living Trust dated November 8, 1998, with the
appointed conservator and successor trustee being John Denton (“Conservator/Trustee”). At all
times relevant hereto, Conservator/Trustee was a resident of the State of California, County of
Butte.
3. The Conservator/Trustee answer this suit on behalf and in the name of Defendant
Cross—Complainant, who is the real party in interest.
4. The Conservator/Trustee reserves the right to amend this Answer as discovery and
investigation are ongoing and not complete.
5. Defendant and Cross-Complainant generally denies the allegations of the Complaint
and each and every provision therein.
First Afrmative Defense
Unclean Hands
Plaintiff had unclean hands in his course and dealing with Defendant. He intended and did
create a “Financing Scheme” as further dened below, that would allow him to unfairly benet
and prot at the expense of Defendant.
/’/
//
//
2
FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR
SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE
Second Afrmative Defense
Unconscionability
The terms and conditions of the Note and Deed of Trust originally in favor of Matthew N.
Fine, MD 401K Plan (hereinafter referred to as the “Fine Note and Deed of Trust”) and
subsequently assigned to Plaintiff, were unconscionable given Defendant’ position when made
'
s
and were unconscionably exercised, and it is unconscionable to enforce the deed of trust by
judicial or non-judicial foreclosure.
Third Afrmative Defense
Predatory Lending
Plaintiff is the predecessor in interest to the Fine Note and Trust, which was created in
violation of the Truth in Lending Act (“TILA”), and also known as 15 USC section 1601 et seq
and Regulation Z section 226 et seq by, the Dodd Frank Wall Street Reform and Consumer
Protection Act, The Higher-Priced Mortgage Loan Act (section 25 of Regulation Z) and the Real
Estate Settlement Procedure At of 1974 (12 USC 2601 et seq.) by failing to determine if
Defendant could repay the promissory note generated in favor of Plaintiff and for failure to create
an escrow account for property taxes and homeowner’s insurance, the failure to obtain a third
party appraisal, and failure to provide adequate disclosures, good faith settlement/estimate
statements, an accounting of the settlement transaction, or information booklet.
Both Mr. Cook and Dr. Fine are creditors pursuant to the Truth in Lending Act (15 USCA
§§ 1601 et. seq.) because both have regularly extended consumer credit and are the person to
Whom the debt arises from a consumer credit transaction is payable on the face of the indebtedness.
From 2010 through 2020, Mr. Cook, either as an individual or in his capacity as a trustee of the
Wayne A. Cook 1998 Family Trust, or the Wayne A. Cook Revocable Inter vivos Trust was a
party to at least 77 deeds of trust. Of these 77 transactions, on October 29, 201 8 and May 23, 2019,
two separate Deeds of Trust were recorded wherein Mr. Cook was extended consumer credit to
individuals.
Each of these two Deeds of Trust are subject to a nancial charge or is payable by a written
agreement in more than four installments, which makes Mr. Cook a creditor under the Higher-
3
FIRST AMENDED ANSWER T0 PLAINTIFF’S COMPLAINT T0 FORECLOSE DEED 0F TRUST AND FOR
SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE
Price Mortgage Loan Act (12 C.F.P. 1026)
Dr. Fine, through his 401(k) plan and through his dened benet plan has regularly
extended credit om 2010 to the present as evidenced by over 16 transactions recorded in the
Butte County Recorder’s Ofce.
Fourth Afrmative Defense
Elder Abuse
Defendant was, at the times referenced in the Complaint, 82 years old. Plaintiff wrongfully
obtained and misappropriated Defendant’s agreement to purchase the Miller Mansion, through
undue inuence. Defendant’s conduct in creating the Financing Scheme, as further described
herein, amounts to nancial elder abuse and Defendant has been harmed. Plaintiff knew or should
have known that his wrongful conduct in creating and implementing the Financing Scheme was
likely to be harmful to Defendant.
Facts in Support
Plaintiff is a sophisticated real estate developer and investor. By and through his trust and
the entities controlled by him, he owns several commercial structures, including college rentals and
the Hotel Diamond located in Chico, California. Plaintiff the owner of real property known as 2185
Esplanade, Chico, Butte County, California (APN 006-120-003-000), hereinafter referred to as the
“Miller Mansion.”
Gene Culley (“ML Culley”) is an individual who at all times referred to herein resided in
Butte County, California. Mr. Culley was an agent of and/or working in concert with Plaintiff at all
times referenced herein.
During Mrs. Niderost’s absence, Mr. Culley befriended Defendant who was, during Mrs.
Niderost’s absence, living alone. Up to approximately January of 2020, Defendant had no
relationship with Mr. Culley and had never met him. Mr. Culley, on his own accord, started
providing “caretaking” services to Defendant and learned the details of Defendant’s nances.
During Mrs. Niderost’s absence, Defendant’s cellular phone and land-line ceased to
operate. Additionally, during Mrs. Niderost’s absence, Defendant developed a bladder infection
4
FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT T0 FORECLOSE DEED OF TRUST AND FOR
SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE
which was not immediately treated. This occurred during the period that Mr. Culley was providing
caretaking services. It was discovered that Defendant landline had been tampered with during the
period of time that Mr. Culley was providing caretaking services, eliminating any ability of Mrs.
Niderost or any other third party to communicate with Mr. Niderost.
Defendant lives in a 'ugal manner, reinvesting any money that has been paid to him
through his investments and historically keeping ample savings and did not and does not have ie
nancial ability to make the payments on the Notes and Deeds of Trusts
Mr. Culley thus held a position of trust and condence with Defendant, an elderly victim.
In particular, Mr. Culley assisted with the real estate transaction between Defendant and Plaintiff
and on February 13, 2020, with the assistance, cooperation and encouragement of Plaintiff induced
Defendant to purchase the Miller Mansion for the sum of $ 1 ,500,000. Plaintiff purchased the
Miller Mansion one year prior, for the sum of $825,000. In approximately July of 2019, Plaintiff
listed the Miller Mansion for sale with Bill Chance, a local real estate broker and agent for the sum
of $1,550,000.
The Miller Mansion was not worth $1 ,500,000 at the time of sale, a fact known to Plaintiff.
The sale, however, of the Miller Mansion was originally structured, pursuant to the Real Estate
Purchase Agreement dated February 12, 2020, with Defendant providing cash in the sum of
$1 ,000,000 and obtaining a rst loan for the sum of $500,000. At the time ofthe offer, Defendant
did not have access to $1,000,000 in cash, and was not capable of making payments on a loan in
the amount of $500,000 based on his income.
When the transaction nally closed, only one week after the execution of the Real Estate
Purchase Agreement and on February 20, 2020, Defendant had emptied his savings accounts and
withdrew mds from an equity line of credit secured by Defendant’s residence and put the
approximate sum of $332,000 down. Mr. Culley and Mr. Cook structured the nancing for the
Miller Mansion by obtaining a loan from Dr. Matthew N. Fine (via a 401K plan), an individual that
was not previously known to Defendant, in the amount of $500,000. A second loan was also
issued, 'om Mr. Cook, in the amount of $674,000. Both loans were secured by Deeds of Trust on
5
FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED OF TRUST AND FOR
SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE
the Miller Mansion. Escrow closed only seven days after the execution of the Real Estate Purchase
Agreement, despite the fact that Defendant, as buyer, had 21 days to close escrow. The sale was
not made contingent upon any written appraisal (which is contrary to custom in the industry), was
not subject to any loan contingency, and Defendant was provided only one day, after acceptance of
the offer, to do any and all inspections, investigations, review any disclosures, reports or other
_
materials. The Real Estate Purchase Agreement also provided for liquidated damages in the
amount of $50,000 in the event that Defendant did not close escrow for any reason. Bill Chance
represented both parties as broker and agent.
Both loans for the Miller Mansion provide that if any amount on the Promissory Notes
were not paid when due, that the remaining principal and accrued interest should immediately
become due and payable. Both Deeds of Trust contain due on sale clauses, an assignment of rents,
and authorize the beneciary of those Deeds of Trust to commence non-judicial foreclosure
proceedings.
Due to the fact that Mr. Cook was the seller of the Miller Mansion, he was unable, pursuant
to his Promissory Note and Deed of Trust to commence a judicial foreclosure subject to the anti:
deciency statutes of the State of California. Assuming that Defendant did not reside in the Miller
Mansion, Dr. Fine, on the other hand, could attempt to judicially foreclose on the Miller Mansion
due to non-payment and potentially obtain a deciency judgment against Defendant. After the
Trustee’s Sale (either via judicial or non-judicial foreclosure), on the Dr. Fine Note and Deed of
Trust, Plaintiff would then have the ability to attempt to recover the mds allegedly due him as a
‘sold out junior’. The foregoing description of the effect of the two notes and deeds of trust, as well
as the assignment of rents and the legal remedies'are hereinafter referred to as the “Financing
Scheme”.
WHEREFORE, Defendant prays for judgment as follows:
PRAYER FOR RELIEF
Defendant prays for the following:
6
FIRST AMENDED ANSWER T0 PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR
SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE
1. That Plaintiff take nothing by virtue of his Complaint, and that Plaintiff’s Complaint
against Defendant be dismissed with prejudice;
2. For rescission of all contracts involving real property.
3. For all costs of suit incurred herein;
4. For a judgment that the Court nds, as a matter of law, that the contract for the
purchase and sale of the Miller Mansion or, alternatively, any clauses contained in the contracts for
the purchase and sale of the Miller Mansion and Deeds of Trust attendant thereto, were
unconscionable at the time such agreements were made and/or that the Court, as a result, order that
such contracts and/or Deeds of Trust are unenforceable as unconscionable.
5. For such other and further relief as the Court may deem just and proper.
6. For such other and nther relief as the Court deems just and proper.
Respectfully submitted,
LELAND, MORRISSEY & KNOWLES LLP
Dated: Janumy 13, 2021 by
'
ara M. Knowles
A .. Watt) L9
Attorneys for John Denton, Conservator of the Estate of
Edward F. Niderost, Individually and as Successor Trustee
of the Edward F. Niderost Revocable Living Trust Dated
November 8, 1998
7
FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR
SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE
PROOF OF SERVICE
I, Sarah Vercruysse, declare:
I am a citizen of the United States and a resident of Butte County, State of California. I
am over the age of 18 years and not a party to the within action. My business address is 1660
Humboldt Road, Suite 6, Chico, CA 95928.
I am familiar with the practices of Leland, Morrissey & Knowles, LL? whereby each
document is placed in an envelope, the envelope is sealed, the appropriate postage is placed
gqamhwggcwmqasmnhwnv-Io
thereon and the sealed envelope is placed in the ofce mail receptacle. Each day’s mail is
collected and deposited in a U.S. mailbox at or before the close of each day’s business.
On the date shown below, I caused to be served the FIRST AMENDED ANSWER T0
PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR SPECIFIC
PERFORMANCE OF RENTS AND PROFITS CLAUSE by:
é MAIL: Placed in the United States mail at Chico, California
Raymond L. Sandelman, Esq. Larry Lushanko, Esq.
196 Cohasset Road, Suite 225 1241 E. Mission Road
Chico, CA 95926-2284 Fallbrook, CA 92028
Ramond®sandelmanlawcom ofce@lushankolaw.com
David R. Grifth
Jameson E.P. Sheehan
Grifth Horn & Sheehan, LLP
1530 Humboldt Rd., Suite 3
Chico, CA 95928
david@davidgriithlaw.com
ELECTRONIC SER VICE: I caused a copy ofthe document(s) to be sent from e-
NNNNN
mail address svercruysse@chicolamer.com to the persons at the e—mail addresses
listed in the Service List. I did not receive, within a reasonable time after the
transmission, any electronic message or other indication that the transmission was
unsuccessful.
PERSONAL SER VICE: Delivery by hand to the addressee.
1‘
I
OVERNIGHT DELIVER Y: Using Federal Express overnight mail addressed as
follows:
I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.
Executed on January 13, 2021, at Chico, California.
Sarah Vercruysg a
Proof of Service
Preview
Baud bf Summit Sara M. Knowles (SBN 216139) Supar' F LELAND, MORRISSEY & KNOWLES LLP Count! 0f Bum l 1660 Humboldt Road, Suite 6 L v Chico, CA 95928 1/13/2021 E Telephone: (530) 342-4500 D Facsimile: (530) 345-6836 Ey {LED Attorneys for John Denton, Conservator of the Estate of Edward F. Niderost, Individually and as Successor Trustee of the Edward F. Niderost Revocable Living Trust Dated November 8, 1998 SUPERIOR COURT OF CALIFORNIA, COUNTY 0F BUTTE WAYNE A. COOK, TRUSTEE OF THE CASE NO. 20CV00905 WAYNE A. COOK 1998 FAMILY TRUST DATED 12/29/98, FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO Plaintiff, FORECLOSE DEED OF TRUST AND FOR SPECIFIC PERFORMANCE OF V. RENTS AND PROFITS CLAUSE. EDWARD F. NIDEROST, INDIVIDUALLY AND AS TRUSTEE OF THE EDWARD F. NIDEROST REVOCABLE LIVING TRUST DATED NOVEMBER 8, 1998, DOES l THROUGH 10, Defendants. EDWARD F. NIDEROST, INDIVIDUALLY AND AS TRUSTEE OF THE EDWARD F. NIDEROST REVOCABLE LIVING TRUST DATED NOVEMBER 8, 1998, Cross-Complainant, v. WAYNE A. COOK, TRUSTEE OF THE WAYNE A. COOK 1998 FAMILY TRUST DATED 12/29/98; LAWRENCE PATTERSON; GENE CULLEY, MID VALLEY TITLE AND ESCRO COMPANY and ROES 1 through 25, inclusive, Cross-Defendants. l FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED OF TRUST AND FOR SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE Defendant and Cross-Complainant Edward F. Niderost, (“Cross-Complainant”), individually and as Trustee of the Edward F. Niderost Revocable Living Trust Dated November 8, I 1998, hereby responds to the Complaint to Foreclose Deed of Trust and For Specic Performance of Rents and Prots as follows: 1. Defendant and Cross-Complainant is an individual who resides within the State of California, County of Butte. Further, the place of administration of the Edward F. Niderost Revocable Living Trust Dated November 8, 1998, of which Cross-Complainant is thes settlor , is Butte County, California. 2. Defendant and Cross-Complainant’s assets are subj ect to a conservatorship, and are held in the Edward F. Niderost Revocable Living Trust dated November 8, 1998, with the appointed conservator and successor trustee being John Denton (“Conservator/Trustee”). At all times relevant hereto, Conservator/Trustee was a resident of the State of California, County of Butte. 3. The Conservator/Trustee answer this suit on behalf and in the name of Defendant Cross—Complainant, who is the real party in interest. 4. The Conservator/Trustee reserves the right to amend this Answer as discovery and investigation are ongoing and not complete. 5. Defendant and Cross-Complainant generally denies the allegations of the Complaint and each and every provision therein. First Afrmative Defense Unclean Hands Plaintiff had unclean hands in his course and dealing with Defendant. He intended and did create a “Financing Scheme” as further dened below, that would allow him to unfairly benet and prot at the expense of Defendant. /’/ // // 2 FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE Second Afrmative Defense Unconscionability The terms and conditions of the Note and Deed of Trust originally in favor of Matthew N. Fine, MD 401K Plan (hereinafter referred to as the “Fine Note and Deed of Trust”) and subsequently assigned to Plaintiff, were unconscionable given Defendant’ position when made ' s and were unconscionably exercised, and it is unconscionable to enforce the deed of trust by judicial or non-judicial foreclosure. Third Afrmative Defense Predatory Lending Plaintiff is the predecessor in interest to the Fine Note and Trust, which was created in violation of the Truth in Lending Act (“TILA”), and also known as 15 USC section 1601 et seq and Regulation Z section 226 et seq by, the Dodd Frank Wall Street Reform and Consumer Protection Act, The Higher-Priced Mortgage Loan Act (section 25 of Regulation Z) and the Real Estate Settlement Procedure At of 1974 (12 USC 2601 et seq.) by failing to determine if Defendant could repay the promissory note generated in favor of Plaintiff and for failure to create an escrow account for property taxes and homeowner’s insurance, the failure to obtain a third party appraisal, and failure to provide adequate disclosures, good faith settlement/estimate statements, an accounting of the settlement transaction, or information booklet. Both Mr. Cook and Dr. Fine are creditors pursuant to the Truth in Lending Act (15 USCA §§ 1601 et. seq.) because both have regularly extended consumer credit and are the person to Whom the debt arises from a consumer credit transaction is payable on the face of the indebtedness. From 2010 through 2020, Mr. Cook, either as an individual or in his capacity as a trustee of the Wayne A. Cook 1998 Family Trust, or the Wayne A. Cook Revocable Inter vivos Trust was a party to at least 77 deeds of trust. Of these 77 transactions, on October 29, 201 8 and May 23, 2019, two separate Deeds of Trust were recorded wherein Mr. Cook was extended consumer credit to individuals. Each of these two Deeds of Trust are subject to a nancial charge or is payable by a written agreement in more than four installments, which makes Mr. Cook a creditor under the Higher- 3 FIRST AMENDED ANSWER T0 PLAINTIFF’S COMPLAINT T0 FORECLOSE DEED 0F TRUST AND FOR SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE Price Mortgage Loan Act (12 C.F.P. 1026) Dr. Fine, through his 401(k) plan and through his dened benet plan has regularly extended credit om 2010 to the present as evidenced by over 16 transactions recorded in the Butte County Recorder’s Ofce. Fourth Afrmative Defense Elder Abuse Defendant was, at the times referenced in the Complaint, 82 years old. Plaintiff wrongfully obtained and misappropriated Defendant’s agreement to purchase the Miller Mansion, through undue inuence. Defendant’s conduct in creating the Financing Scheme, as further described herein, amounts to nancial elder abuse and Defendant has been harmed. Plaintiff knew or should have known that his wrongful conduct in creating and implementing the Financing Scheme was likely to be harmful to Defendant. Facts in Support Plaintiff is a sophisticated real estate developer and investor. By and through his trust and the entities controlled by him, he owns several commercial structures, including college rentals and the Hotel Diamond located in Chico, California. Plaintiff the owner of real property known as 2185 Esplanade, Chico, Butte County, California (APN 006-120-003-000), hereinafter referred to as the “Miller Mansion.” Gene Culley (“ML Culley”) is an individual who at all times referred to herein resided in Butte County, California. Mr. Culley was an agent of and/or working in concert with Plaintiff at all times referenced herein. During Mrs. Niderost’s absence, Mr. Culley befriended Defendant who was, during Mrs. Niderost’s absence, living alone. Up to approximately January of 2020, Defendant had no relationship with Mr. Culley and had never met him. Mr. Culley, on his own accord, started providing “caretaking” services to Defendant and learned the details of Defendant’s nances. During Mrs. Niderost’s absence, Defendant’s cellular phone and land-line ceased to operate. Additionally, during Mrs. Niderost’s absence, Defendant developed a bladder infection 4 FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT T0 FORECLOSE DEED OF TRUST AND FOR SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE which was not immediately treated. This occurred during the period that Mr. Culley was providing caretaking services. It was discovered that Defendant landline had been tampered with during the period of time that Mr. Culley was providing caretaking services, eliminating any ability of Mrs. Niderost or any other third party to communicate with Mr. Niderost. Defendant lives in a 'ugal manner, reinvesting any money that has been paid to him through his investments and historically keeping ample savings and did not and does not have ie nancial ability to make the payments on the Notes and Deeds of Trusts Mr. Culley thus held a position of trust and condence with Defendant, an elderly victim. In particular, Mr. Culley assisted with the real estate transaction between Defendant and Plaintiff and on February 13, 2020, with the assistance, cooperation and encouragement of Plaintiff induced Defendant to purchase the Miller Mansion for the sum of $ 1 ,500,000. Plaintiff purchased the Miller Mansion one year prior, for the sum of $825,000. In approximately July of 2019, Plaintiff listed the Miller Mansion for sale with Bill Chance, a local real estate broker and agent for the sum of $1,550,000. The Miller Mansion was not worth $1 ,500,000 at the time of sale, a fact known to Plaintiff. The sale, however, of the Miller Mansion was originally structured, pursuant to the Real Estate Purchase Agreement dated February 12, 2020, with Defendant providing cash in the sum of $1 ,000,000 and obtaining a rst loan for the sum of $500,000. At the time ofthe offer, Defendant did not have access to $1,000,000 in cash, and was not capable of making payments on a loan in the amount of $500,000 based on his income. When the transaction nally closed, only one week after the execution of the Real Estate Purchase Agreement and on February 20, 2020, Defendant had emptied his savings accounts and withdrew mds from an equity line of credit secured by Defendant’s residence and put the approximate sum of $332,000 down. Mr. Culley and Mr. Cook structured the nancing for the Miller Mansion by obtaining a loan from Dr. Matthew N. Fine (via a 401K plan), an individual that was not previously known to Defendant, in the amount of $500,000. A second loan was also issued, 'om Mr. Cook, in the amount of $674,000. Both loans were secured by Deeds of Trust on 5 FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED OF TRUST AND FOR SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE the Miller Mansion. Escrow closed only seven days after the execution of the Real Estate Purchase Agreement, despite the fact that Defendant, as buyer, had 21 days to close escrow. The sale was not made contingent upon any written appraisal (which is contrary to custom in the industry), was not subject to any loan contingency, and Defendant was provided only one day, after acceptance of the offer, to do any and all inspections, investigations, review any disclosures, reports or other _ materials. The Real Estate Purchase Agreement also provided for liquidated damages in the amount of $50,000 in the event that Defendant did not close escrow for any reason. Bill Chance represented both parties as broker and agent. Both loans for the Miller Mansion provide that if any amount on the Promissory Notes were not paid when due, that the remaining principal and accrued interest should immediately become due and payable. Both Deeds of Trust contain due on sale clauses, an assignment of rents, and authorize the beneciary of those Deeds of Trust to commence non-judicial foreclosure proceedings. Due to the fact that Mr. Cook was the seller of the Miller Mansion, he was unable, pursuant to his Promissory Note and Deed of Trust to commence a judicial foreclosure subject to the anti: deciency statutes of the State of California. Assuming that Defendant did not reside in the Miller Mansion, Dr. Fine, on the other hand, could attempt to judicially foreclose on the Miller Mansion due to non-payment and potentially obtain a deciency judgment against Defendant. After the Trustee’s Sale (either via judicial or non-judicial foreclosure), on the Dr. Fine Note and Deed of Trust, Plaintiff would then have the ability to attempt to recover the mds allegedly due him as a ‘sold out junior’. The foregoing description of the effect of the two notes and deeds of trust, as well as the assignment of rents and the legal remedies'are hereinafter referred to as the “Financing Scheme”. WHEREFORE, Defendant prays for judgment as follows: PRAYER FOR RELIEF Defendant prays for the following: 6 FIRST AMENDED ANSWER T0 PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE 1. That Plaintiff take nothing by virtue of his Complaint, and that Plaintiff’s Complaint against Defendant be dismissed with prejudice; 2. For rescission of all contracts involving real property. 3. For all costs of suit incurred herein; 4. For a judgment that the Court nds, as a matter of law, that the contract for the purchase and sale of the Miller Mansion or, alternatively, any clauses contained in the contracts for the purchase and sale of the Miller Mansion and Deeds of Trust attendant thereto, were unconscionable at the time such agreements were made and/or that the Court, as a result, order that such contracts and/or Deeds of Trust are unenforceable as unconscionable. 5. For such other and further relief as the Court may deem just and proper. 6. For such other and nther relief as the Court deems just and proper. Respectfully submitted, LELAND, MORRISSEY & KNOWLES LLP Dated: Janumy 13, 2021 by ' ara M. Knowles A .. Watt) L9 Attorneys for John Denton, Conservator of the Estate of Edward F. Niderost, Individually and as Successor Trustee of the Edward F. Niderost Revocable Living Trust Dated November 8, 1998 7 FIRST AMENDED ANSWER TO PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR SPECIFIC PERFORMANCE 0F RENTS AND PROFITS CLAUSE PROOF OF SERVICE I, Sarah Vercruysse, declare: I am a citizen of the United States and a resident of Butte County, State of California. I am over the age of 18 years and not a party to the within action. My business address is 1660 Humboldt Road, Suite 6, Chico, CA 95928. I am familiar with the practices of Leland, Morrissey & Knowles, LL? whereby each document is placed in an envelope, the envelope is sealed, the appropriate postage is placed gqamhwggcwmqasmnhwnv-Io thereon and the sealed envelope is placed in the ofce mail receptacle. Each day’s mail is collected and deposited in a U.S. mailbox at or before the close of each day’s business. On the date shown below, I caused to be served the FIRST AMENDED ANSWER T0 PLAINTIFF’S COMPLAINT TO FORECLOSE DEED 0F TRUST AND FOR SPECIFIC PERFORMANCE OF RENTS AND PROFITS CLAUSE by: é MAIL: Placed in the United States mail at Chico, California Raymond L. Sandelman, Esq. Larry Lushanko, Esq. 196 Cohasset Road, Suite 225 1241 E. Mission Road Chico, CA 95926-2284 Fallbrook, CA 92028 Ramond®sandelmanlawcom ofce@lushankolaw.com David R. Grifth Jameson E.P. Sheehan Grifth Horn & Sheehan, LLP 1530 Humboldt Rd., Suite 3 Chico, CA 95928 david@davidgriithlaw.com ELECTRONIC SER VICE: I caused a copy ofthe document(s) to be sent from e- NNNNN mail address svercruysse@chicolamer.com to the persons at the e—mail addresses listed in the Service List. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. PERSONAL SER VICE: Delivery by hand to the addressee. 1‘ I OVERNIGHT DELIVER Y: Using Federal Express overnight mail addressed as follows: I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on January 13, 2021, at Chico, California. Sarah Vercruysg a Proof of Service