Preview
Electronically
by Superior Court of California, County of San Mateo
ON 7/31/2020
GARY P. DAMBACHER, ESQ. (SBN 92141) By /s/ Mia Marlowe
Deputy Clerk
TIMOTHY T. TRUJILLO, ESQ. (SBN 198894)
FRANK L. RUSSELL, ESQ. (SBN 289335)
CARRIE M. McKERNAN, ESQ. (SBN 310253)
DAMBACHER, TRUJILLO & RUSSELL, APLC
32 N. WASHINGTON STREET
SONORA, CALIFORNIA 95370
TELEPHONE: (209) 533-1883 FAX: (209) 533-3844
Attorneys for Defendant/Cross-Complainant LAURA J. ARATA, trustee,
and Defendant MARIE JOANNE ARATA
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN MATEO
10
i PENINSULA OPEN SPACE TRUST, Case No. 20-CIV-02349
12 Plaintiff, REQUEST FOR JUDICIAL NOTICE IN SUPPORT
13 vs.
OF REPLY BY LAURA J. ARATA, TRUSTEE,
AND MARIE JOANNE ARATA TO PLAINTIFF'S
14 REDWOOD TRUST DEED SERVICES, INC., MOTION FOR PRELIMINARY INJUNCTION
a California Corporation; ERNEST J. McNABB,
15 individually and as Trustee of the Ernest J.
McNabb Revocable Living Trust Dated
16 11/19/1990; LOUIS J. ARATA, individually;
LAURA ARATA, individually, and as sole
17 successor trustee of the John and Grace Arata Date: August 20, 2020
2004 Trust Executed August 11, 2004; Time 2:00 p.m.
18 MARIE JOANNE ARATA, as the Dept: 28, Courtroom 2F
Representative of the Estate of Gary J. Arata, Judge: Hon. George A. Miram
19 Deceased; and DOES 1-20,
20 Defendants.
21
22 AND RELATED CROSS-ACTION.
2
3
24 TO THE HONORABLE GEORGE A. MIRAM, JUDGE OF THE SUPERIOR COURT OF
25 CALIFORNIA, COUNTY OF SAN MATEO:
26 Pursuant to the provisions of Evidence Code §452(d), Defendant/Cross-Complainant LAURA J.
27 ARATA, trustee, and Defendant MARIE JOANNE ARATA request that the Court take judicial notice
28 of the existence and content of the following:
1
REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY BY LAURA J. ARATA, TRUSTEE,
AND MARIE ARATA TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
1 The verified cross-complaint filed by LAURA J. ARATA, trustee, on July 24, 2020, in
San Mateo County Superior Court case number 20-CIV-02349, a true and correct copy of which is
attached hereto as Exhibit 1.
DATED: July 31, 2020 DAMBACHER, TRUJILLO & RUSSELL,
A Pfofgssional L: aw Corporation
j
/
GARY P. DAMBACHER, Attorneys for Defendani/
Cross-Complainant LAURA ARATA, and Defendant
MARIE JOANNE ARATA
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REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY BY LAURA J. ARATA, TRUSTEE,
AND MARIE ARATA TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
| Exhibit 1
Electronically
by Superior Court of California, County of San Mateo
GARY P. DAMBACHER, ESQ. (SBN 92141)
TIMOTHY T. TRUJILLO, ESQ. (SBN 198894) ON 7/24/2020
FRANK L. RUSSELL, ESQ. (SBN 289335)
CARRIE M. McKERNAN, ESQ. (SBN 310253)
DAMBACHER, TRUJILLO & RUSSELL, APLC
ny Bomnpie
—_IsL ay
32 N. WASHINGTON STREET
SONORA, CALIFORNIA 95370
TELEPHONE: (209) 533-1883 FAX: (209) 533-3844
Attorneys for Cross-Complainant LAURA J. ARATA, Trustee
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN MATEO
10 PENINSULA OPEN SPACE TRUST, ) Case No. 20-CIV-02349
11 Plaintiff,
CROSS-COMPLAINT FOR RECOVERY
12 VS. OF USURIOUS INTEREST, INJUNCTIVE
RELIEF, DECLARATORY RELIEF,
13 REDWOOD TRUST DEED SERVICES, INC., BREACH OF FIDUCIARY DUTY,
a California Corporation; ERNEST J. McNABB, DISGORGEMENT, COMMON COUNT--
14 individually and as Trustee of the Ernest J.
MONEY HAD AD RECEIVED, BREACH
McNabb Revocable Living Trust Dated
15 11/19/1990; LOUIS J. ARATA, individually; OF STATUTE, AND DAMAGES
LAURA ARATA, individually, and as sole
16 successor trustee of the John and Grace Arata
2004 Trust Executed August 11, 2004;
17 MARIE JOANNE ARATA, as the
Representative of the Estate of Gary J. Arata,
18 Deceased; and DOES 1-20,
19 Defendants.
20
LAURA J. ARATA, as sole and successor trustee )
21 of the John and Grace Arata 2004 Trust, dated
August 11, 2004,
22
Cross-Complainant,
23
Vs.
24
25 ERNEST J. McNABB, individually and as
Trustee of the Ernest J. McNabb Revocable
26 Living Trust Dated 11/19/1990; REDWOOD
TRUST DEED SRVICES, INC., a California
27 corporation; HILLCREST REAL ESTATE, INC.,
a California corporation; WILLIAM JACOB
28 MAIER; and ROES 1-50, inclusive,
Cross-Defendants.
CROSS-COMPLAINT OF LAURA ARATA
Cross-Complainant LAURA J. ARATA ("LAURA" or "Cross-Complainant"), in her capacity
as sole and successor trustee of the JOHN and GRACE ARATA 2004 Trust, dated August 11, 2004
(the "John Arata Trust"), complains of Cross-Defendants ERNEST J. McNABB, individually and as
Trustee of the Emest J. McNabb Revocable Living Trust Dated 11/19/1990; ("McNABB");
REDWOOD TRUST DEED SRVICES, INC., a California Corporation ("REDWOOD"); HILLCREST
REAL ESTATE, INC., a California corporation; ("HILLCREST") and WILLIAM JACOB MAIER,
("MAIER") an individual; and ROES 1-50, inclusive (collectively hereinafter "Cross-Defendants") and
each of them, and upon information and belief, alleges as follows:
I
10 INTRODUCTION AND FACTUAL ALLEGATIONS
11 1 REDWOOD intends to conduct a trustee sale of an undivided interest and portion of the
12 Arata Ranch, a 1,312-acre property on the San Mateo County Coast. Defendant McNABB alleges that
13 the current property owner for the parcels at issue—Cross-Complainant has failed to pay back a loan,
14 secured by a deed of trust which is allegedly in foreclosure under a Notice of Default, in the principal
15 sum of $1.1 million which McNABB made to Louie Arata, ("Louie") in 2017. Louie was a former
16 trustee of the Arata Trust but was removed for cause as trustee pursuant to a petition for removal filed
17 by LAURA.
18 2 McNABB has also recorded a Notice of Default’on a note secured by a deed of trust that
19 he acquired in the principal sum of $530,000 under which he also seeks foreclosure of the same parcels.
20 McNABB’s position is that these loans were and are secured by deeds of trust on the parcels now
21 owned by LAURA which comprise the Arata Ranch (the "Subject Property").
22 3 The date of the currently scheduled trustee’s sale under said Notices of Default, to be
23 handled and conducted by McNABB’s agent, REDWOOD, is August 26, 2020.
24 THE McNABB LOAN
25 4. McNABB is a hard money lender who, in or about April of 2017, provided funds in the
26 principal sum of $1,100,000 that were allocated to debts of Louie through an escrow held at Old
27 Republic Title Company located in Napa, California. The proceeds were used and applied in
28 accordance with a Borrower’s Closing Statement, a true and correct copy of which is attached hereto
2
CROSS-COMPLAINT OF LAURA ARATA
and incorporated herein as Exhibit A. The loan was negotiated, originated, solicited and arranged by
HILLCREST individually and/or by and through MAIER, its principal officer.
5 MAIER, who had previously arranged and negotiated prior financing in connection with
the Subject Property, worked directly with Louie in orchestrating and arranging the financing for Louie.
6 Pursuant to the terms of the McNABB loan, and as supported by the Borrower’s Closing
Statement, "Guaranteed Interest" in the amount of $99,000 was prepaid to McNABB at the close of the
transaction on April 6, 2017.
7 Additionally, at the conclusion of the transaction, Louie, in his individual capacity and
not as a trustee of the John Arata Trust, executed a promissory note payable to McNABB, (the
10 "McNabb Note") a true and correct copy of which is attached hereto and incorporated herein as Exhibit
i B. Pursuant to paragraph 2 of the note, interest was initially set at the rate of 12% per annum from the
12 date of the note until its maturity on November 1, 2018. The note also called for a 10% late charge
13 penalty on any overdue payment.
14 8 Louie, in his individual capacity and not as a trustee of the John Arata Trust, also
15S executed a document entitled, "Interest-Only Addendum to Fixed Rate Note" which called for interest
16 only payments of $11,000 per month until its maturity on November 1, 2018, which payments were
17 also subject to a Late Charge Penalty in the sum of 10% of any overdue payment. A true and correct
18 copy of this instrument is attached hereto and incorporated herein as Exhibit C.
19 9 Louie, in his individual capacity and not as a trustee of the John Arata Trust, also
20 executed a document entitled, "Guaranteed Interest Addendum to Note" dated March 28, 2017, which
21 purportedly supported the payment of $99,000 to McNABB as referenced in paragraph 4 above. A true
22 and correct copy of this instrument is attached hereto and incorporated herein as Exhibit D.
23 10. Louie, in his individual capacity and not as a trustee of the John Arata Trust, also
24 executed a document entitled "Default Rate Addendum” which called for escalation of the interest rate
25 under the note to 18% per annum upon the occurrence of an event of default. Under this instrument,
26 after the nine- (9) month period of guaranteed interest, the borrower could defer the payment of interest
27 only payments, which, in that event, would require escalation of the interest rate "from 12% to 14%."
28 A true and correct copy of this instrument is attached hereto and incorporated herein as Exhibit E.
3
CROSS-COMPLAINT OF LAURA ARATA
11. Louie also executed a document entitled, "Inter Vivos Revocable Trust As Borrower
Acknowledgment" which could only be executed by a Settlor of the John Arata Trust. Louie was not a
settlor of the John Arata Trust. The settlors were John Arata and Grace Arata. A true and correct copy
of this instrument is attached hereto and incorporated herein as Exhibit F.
12. The funds borrowed were primarily for household, family, or personal purposes.
13. MAIER is very familiar with the Arata Ranch, the partition action between the families
which resulted in an order to sell the entire ranch, and the Settlement Agreement consummated between
the Arata families which defines the terms and conditions of its sale. In an email to attorney Gary
Dambacher dated May 12, 2017, MAIER confirmed that knowledge and his involvement in obtaining
10 the McNABB loan. A true and correct copy of said email is attached hereto and incorporated herein as
1 Exhibit G.
12 14. Moreover, in a Declaration executed by MAIER on February 26, 2020 in support of a
13 petition to remove LAURA as trustee of the Arata Trust and to appoint himself as trustee, MAIER
14 testified at paragraph 5 of his declaration, and under penalty of perjury, that he originated both the
15 Deeney Loan and the McNABB Loan. A copy of that Declaration (along with its two exhibits) is
16 attached hereto and incorporated herein as Exhibit H. Notably, attached to the MAIER declaration as
17 Exhibit 2, is another declaration under penalty of perjury which MAIER furnished in conjunction with
18 the partition action (San Mateo County Superior Court Case No. CIV531627), in which he testified
19 that he originated all of the Arata loans. Therefore, no other third party could be the arranger,
20 originator, negotiator or solicitor of said loans.
21 15. As negotiator, originator, solicitor and arranger of the McNABB loan, and according to
22 the Borrower’s Closing Statement (Exhibit A), HILLCREST, an entity owned and controlled by
23 MAIER, was paid a broker’s fee of $33,000 and a "processing fee" of $3,500. However, at the time of
24 the loan, neither HILLCREST nor MAIER, as HILLCREST’s designated officer, were licensed.
25 Attached hereto and incorporated herein as Exhibit I is a true and correct copy of a printout from The
26 State of California Department of Real Estate which provides that HILLCREST’s license expired on
27 August 18, 2014, and MAIER’s license expired as of August 19, 2014. As such, McNABB is not
28 exempt from the prohibition against charging usurious interest rates and fees under Civil Code §
4
CROSS-COMPLAINT OF LAURA ARATA
1916.1 because the loan was not arranged, negotiated, solicited or originated by a licensed real estate
broker.
16. Prior to REDWOOD recording McNABB’s Notice of Default, on January 8, 2019,
McNABB sent correspondence to LAURA, Louis Arata and Marie Arata in which he demanded, in
addition to the principal amount of his loan, interest at 14% per annum to November 1, 2018,
amounting to $115,497; late fee charges of $1,283; and "Default Interest" at the rate of 18% per annum
in the amount of $40,800. A true and correct copy of his demand letter (with its attachment showing
his calculations) is attached hereto and incorporated herein as Exhibit J.
17. On February 7, 2019, McNABB, by and through his foreclosure agent, REDWOOD,
10 recorded a Notice of Default and Election to Sell Under Deed of Trust, ("the McNabb NOD") a true
il and correct copy of which is attached hereto and incorporated herein as Exhibit K. The McNabb NOD
122 set forth that the amount due to cure the alleged default was the sum of $1,279,186.48 as of February 6,
13 2019. LAURA alleges that this amount is inaccurate in that the amount stated in the McNabb NOD
14 contains usurious interest and late fee charges which were included and set forth in McNABB’s
15 demand letter of January 8, 2019. Additionally, the McNabb NOD includes a Declaration by
16 McNABB that the borrower was Louis J. Arata, surviving co-trustee, (ostensibly of the John Arata
17 Trust), which is inaccurate because Louie executed the promissory note and its addendums as an
18 individual.
19 THE DEENEY LOAN
20 18. In addition, McNABB sent a letter to Marie Arata, LAURA, and Louis Arata dated
21 January 8, 2019, in which he stated that he had acquired the beneficial interest under a purported
22 promissory note secured by a first deed of trust against the Subject Property in the principal amount of
23 $530,000 (the "Deeney Loan"). A true and correct copy of said letter is attached hereto and
24 incorporated herein as Exhibit L. In said letter, he included an Acceleration Notice in which he alleged
25 that due to the provisions of a Settlement Agreement between the two Arata families who live on the
26 ranch, that allowing Lillian Arata to "be conveyed a life estate" constituted a "violation of the
27 acceleration clauses in the First Note ...and Deed of Trust...". This Acceleration Notice is false and
28 inaccurate in that the Settlement Agreement does not constitute a conveyance, sales contract, deed, or
5
CROSS-COMPLAINT OF LAURA ARATA
escrow agreement; the description of the life estate in the Settlement Agreement did not contain a legal
description of the purported life estate fee; and to legally create the purported life estate fee would most
likely violate the Subdivision Map Act. Therefore, acceleration is improper under the provisions of the
Deeney deed of trust and note.
19, Moreover, a lis pendens was recorded against the ranch property after the partition
action between the Arata families was filed, and McNABB was therefore on constructive notice of it
and on inquiry notice of any orders or stipulations involving the partition action before he allegedly
acquired his beneficial interest of the Deeney Note. /mportantly, Lillian Arata recently passed away
curing any alleged default and rendering the Acceleration Notice moot.
10 20. Additionally, McNABB, by and through his agent, REDWOOD, recorded a Notice of
11 Default under the Deeney Note on April 10, 2019, a true and correct copy of which is attached hereto
12 and incorporated herein as Exhibit M. This Notice of Default is also inaccurate in that it is based upon
2
13 an improper notice of acceleration. Moreover, the amount set forth to cure it as set forth therein in the
14 sum of $571,519.25 is also inaccurate in that it contains alleged past due interest, extension fees, and
15 late fees which are usurious in that the initial rate of interest under the Deeney Note was 12% per
16 annum, which was increased to 14% per annum, both of which are usurious rates of interest under the
17 California Constitution. Importantly, as with the McNABB loan, the Deeney Loan was arranged,
18 originated, negotiated and solicited by MAIER and/or HILLCREST, who were not licensed real estate
19 brokers at the time that the Deeney Loan was originally consummated in December of 2014.
20 Therefore, McNABB, as the current holder of the Deeney Note, is not excused under Civil Code §
21 1916.1 from the prohibition against charging and collecting usurious interest and fees.
22 I
23 VENUE AND JURISDICTION
24 21. Venue for this action is proper in San Mateo County, California because the real
25 property (or res) that is the subject of this litigation is located in San Mateo County, California, the
26 Deeds of Trust and NODs which are encumbrances against the Subject Property were recorded in San
27 Mateo County, and the trustee’s sale is scheduled to be held in San Mateo County.
28 22. Jurisdiction is proper because the amount in controversy exceeds the sum of $25,000.
6
CROSS-COMPLAINT OF LAURA ARATA
i
PARTIES AND GENERAL ALLEGATIONS
23. Cross-Defendant McNABB is a resident of San Francisco County and, among other
things, is in the business of making "hard money" secured loans to individuals who are in financial
distress.
24, Cross-Defendant REDWOOD is a California corporation with its principal place of
business in Santa Rosa, California.
25. Cross-Defendant HILLCREST is a California corporation with its principal place of
business in Petaluma, California.
10 26. MAIER is a resident of Sonoma County, California.
11 27. Cross-Complainant is ignorant of the true names and capacities of cross-defendants sued
12 as ROES 1-50 inclusive, and therefore sues these cross-defendants by such fictitious names. Cross-
13 complainant will ask leave to amend this complaint to show their true names and capacities when the
14 same have been ascertained.
15 28. At all times mentioned herein, each of the cross-defendants named herein was the agent
16 and employee of each of the remaining cross-defendants, and in doing the things herein alleged, was
17 acting in the course and scope of such agency and employment.
18 29. LAURA has standing to bring this action as she is the current owner of the Subject
19 Property under which both the McNabb Deed of Trust and the Deeney Deed of Trust are recorded as
20 encumbrances of record against the Subject Property, and which property is the subject of the pending
21 trustee’s sale by REDWOOD.
22 Iv
23 FIRST CAUSE OF ACTION
24 AGAINST CROSS-DEFENDANT McNABB
25 (Usury Violations--Money Had and Received)
26 30. Cross-complainant realleges and incorporates Paragraphs 1 through 29, above, as though
27 set forth in full herein.
28 31. The interest payment terms of the McNabb Note and its addendums are usurious and
7
CROSS-COMPLAINT OF LAURA ARATA
violate the California Constitution, Article XV, Section 1(1), which prescribes that a contract in writing
for a loan used primarily for personal, family, or household purposes may not provide for an interest
rate that exceeds 10 percent per annum.
32. By virtue of the funds released to McNABB in the sum of $99,000 at close of escrow as
set forth in paragraphs 4 and 7 above, these payments were in excess of the maximum rate of interest
allowed by the California Constitution, Article XV, Section 1, and LAURA is therefore entitled to
recover the amount paid to McNABB as money had and received.
33. The remaining interest and fees which McNABB claims has accrued under his note is
also usurious and violates the California Constitution, Article XV, Section 1(1), which prescribes that a
10 contract in writing for a loan for use primarily for personal, family, or household purposes may not
11 provide for an interest rate that exceeds 10 percent per annum. LAURA seeks a declaration that said
12 interest and fees are usurious and cannot be collected by McNABB.
a
13 WHEREFORE, LAURA prays for judgment as hereinafter set forth.
14 SECOND CAUSE OF ACTION
15 AGAINST CROSS-DEFENDANT McNABB
16 (Declaratory Relief-McNabb Note)
17 34. Cross-complainant realleges and incorporates Paragraphs 1 through 33, above, as though
18 set forth in full herein.
19 35. An actual controversy has arisen and now exists between LAURA and Cross-Defendant,
20 McNABB concerning their respective rights and duties in that LAURA contends that there is no
21 obligation to pay any interest, late fees, attorneys fees, or other expenses under the McNABB note
22 whatsoever and therefore the interest, any attorneys’ fees, and late fee provisions should be declared
23 null and void; whereas McNABB disputes these contentions and claims that all interest, fees and late
24 charges set forth under his note are legal and valid and should be added to the principal sum and
25 collected under his note.
26 36. Additionally, by virtue of the usurious interest, fees, any attorneys! fees, and late fees
27 sought to be collected by McNABB, which sums were included in his NOD, the NOD contains
28 inaccurate amounts and therefore is not a legal basis, nor does it support any trustee’s sale based upon
8
CROSS-COMPLAINT OF LAURA ARATA
said NOD. A copy of said NOD is set forth at Exhibit K. Therefore, the pending trustee’s sale
scheduled for August 26, 2020 should be enjoined. However, McNABB contends that the interest, fees
and late fees set forth in his NOD are proper and accurate, and therefore the pending trustee’s sale
should be held as scheduled.
37. LAURA desires a judicial determination of her rights and duties, and a declaration that
the interest rate provisions of the McNabb Note are null and void, pursuant to the California
Constitution, Article XV, Section 1 and Section 2 of the Statutes of 1919, page Ixxxiii. LAURA also
desires a judicial determination that the NOD contains usurious interest, fees and late charges and is
therefore inaccurate, and not supported under the NOD, and therefore the pending trustee’s sale should
10 be enjoined.
1 38. A judicial declaration is necessary and appropriate at this time under the circumstances
122 in order that LAURA and McNABB may ascertain their respective rights and duties under the McNabb
13 Note, the NOD, and the pending trustee’s sale.
14 WHEREAS, LAURA prays for judgment as hereinafter set forth.
15 THIRD CAUSE OF ACTION
16 AGAINST CROSS-DEFENDANT McNABB
17 (eclaratory Relief—The Deeney Note)
18 39. LAURA realleges and incorporates Paragraphs 1 through 38, above, as though set forth
19 in full herein.
20 40. An actual controversy has arisen and now exists between LAURA and Cross-Defendant
21 McNABB concerning their respective rights and duties in that LAURA contends that there is no
22 obligation to pay any interest or late fees under the Deeney note whatsoever and therefore the interest
23 and late fee provisions should be declared null and void, whereas McNABB disputes these contentions
24 and claims that all interest, extension fees and late charges set forth under the Deeney Note are legal
25 and valid and should be collected under the Deeney Note.
26 Al, Additionally, by virtue of the usurious interest, extension fees and late fees sought to be
27 collected by McNABB under the Deeney Note, which sums were included in his NOD, said NOD
28 contains inaccurate amounts and therefore is not a legal basis, nor does it support any trustee’s sale
9
CROSS-COMPLAINT OF LAURA ARATA
based upon said NOD, a copy of which is set forth as Exhibit M. Therefore, the pending trustee’s sale
scheduled for August 26, 2020, will result in irreparable harm to LAURA and should be enjoined.
However, McNABB contends that the interest, fees and late fees set forth in this NOD are proper and
accurate, and therefore the pending trustee’s sale should be held as scheduled.
42. Also, for the reasons set forth in paragraph 16 above, LAURA contends that MCNABB
inaccurately and unlawfully sought to accelerate the Deeney Note and Deed of Trust, and therefore the
recording of his NOD on the Deeney Note was based upon an improper basis for acceleration, wherein
McNABB contends that his acceleration notice set forth a proper basis for the recording of the Deeney
NOD.
10 WHEREFORE, LAURA prays for judgment as hereinafter set forth.
1 FOURTH CAUSE OF ACTION
12 AGAINST CROSS-DEFENDANTS REDWOOD AND McNABB
13 (Injunctive Relief)
14 43. LAURA realleges and incorporates Paragraphs 1 through 42, above, as though set forth
15 in full herein.
16 44. REDWOOD, as trustee of the McNabb Note and Deeney Note and their respective
17 Deeds of Trust, seeks to sell the Subject Property as a trustee’s sale currently scheduled for August 26,
18 2020. The threatened sale is based upon erroneous information contained in the respective Notices of
19 Default, as set forth above, under each loan.
20 45. Because there is no adequate remedy at law for LAURA, she is entitled to an injunction
221 prohibiting defendants McNABB and REDWOOD, and their agents, servants, employees, attorneys,
22 officers, trustees, and representatives, and others acting in concert with them or on their behalf, from
23 conducting any trustee’s sale or other sale or conveyance of the Subject Property.
24 46. As a direct and proximate result of the aforementioned unlawful conduct of said cross-
25 defendants, LAURA will incur substantial damages and irreparable harm, as well as costs, expenses,
26 and attorneys’ fees according to proof at the time of trial.
27 WHEREFORE, LAURA prays for judgment as hereinafter set forth.
28 ///
10
CROSS-COMPLAINT OF LAURA ARATA
FIFTH CAUSE OF ACTION
AGAINST CROSS-DEFENDANTS HILCREST AND MAIER
(Breach of Fiduciary Duty--Disgorgement)
47. LAURA realleges and incorporates Paragraphs | through 46, above, as though set forth
in full herein.
48. HILLCREST and MAIER held themselves out as licensed real estate brokers and
represented that that they had the ability to legally arrange and initiate a loan or loans which would
result in the procurement of funds for their borrowers in distressed situations. They therefore
voluntarily accepted and knowingly undertook to act in a fiduciary capacity with Louie and Gary Arata
10 at the time that they sought funding from McNABB and Deeney. As fiduciaries, they were obligated to
11 act in the utmost good faith and the best interests of their borrowers.
12 49. HILLCREST and MAIER, as unlicensed fiduciaries, breached their fiduciary duty to the
13 borrowers in that they arranged loans, with usurious and unconscionable terms, which they knew could
14 not be paid back at maturity due to the fact that the property was in litigation under the partition action
15 at the time they were arranged. Furthermore, they knew that Louie and Gary Arata, as their borrowers,
16 did not have the financial means to pay the loans back absent a sale of the Subject Property before
17 maturity of the respective notes.
18 50. In arranging the loans, HILLCREST and MAIER held themselves out as licensed real
19 estate brokers when in fact they were not.
20 51. As a result, HILLCREST and MAIER procured terms for the both loans which were
21 usurious, unconscionable and based upon unrealistic expectations that the loans could be paid back at
22 maturity, given the partition litigation and the terms of Settlement Agreement between the Arata
23 families.
24 52. At the close of the transaction with Old Republic Title Company on April 6, 2017, and
25 as evidenced on the Borrower’s Settlement Statement, (Exhibit A), HILLCREST was paid the sum of
26 $33,000 as a mortgage broker fee, and $3,500 as a "processing fee" for a total sum of $36.500.
27 LAURA is informed and believes that HILLCREST and/or MAIER were also paid similar fees under
28 and at the close of the Deeney Loan. As neither HILLCREST nor MAIER were licensed at the time of
ll
CROSS-COMPLAINT OF LAURA ARATA
close of either transaction, they are not entitled to said fees.
53. As a result of HILLCREST’s and MAIER’s breach of the duty of care, they have placed
the Subject Property in jeopardy of being lost to foreclosure, and as unlicensed fiduciaries, their fees
should be disgorged.
WHEREFORE, cross-complainant prays for judgment against HILLCREST and MAIER as
hereinafter set forth.
SIXTH CAUSE OF ACTION
AGAINST CROSS-DEFENDANTS HILLCREST AND MAIER
(Common Count-Money Had and Received)
10 54. LAURA realleges and incorporates Paragraphs 1 through 53, above, as though set forth
i in full herein.
12 55. By virtue of the funds released to HILLCREST amounting to $36,500 at close of escrow
13 as set forth in paragraphs 4 and 7 above, these payments were wrongfully paid in that HILLCREST was
14 unlicensed, and LAURA is therefore entitled to recover the amount paid as money had and received.
15 WHEREFORE, LAURA prays for judgment as hereinafter set forth.
16 SEVENTH CAUSE OF ACTION
17 AGAINST CROSS-DEFENDANTS HILLCREST AND MAIER
18 (Breach of Statute)
19 56. LAURA realleges and incorporates Paragraphs 1 through 55 above, as though set forth
20 in full herein.
21 57. On April 6, 2017, there was in effect California Business and Professions Code § 10130
22 which provides that it is unlawful for a person to engage in the business of, or to act in the capacity of,
23 or advertise as, a real estate broker or salesperson without first obtaining a license from the Department
24 of Real Estate.
25 58. HILLCREST and MAIER were not licensed as real estate brokers at the time of close of
26 the McNABB and Deeney escrows and therefore are not entitled to compensation as real estate brokers
27 from said transactions.
28 59. HILLCREST and MAIER should therefore be disgorged of any fees or commissions
12
CROSS-COMPLAINT OF LAURA ARATA
which they collected in the capacity as real estate brokers under those transactions.
WHEREFORE, LAURA prays for judgment as hereinafter set forth.
Vv
PRAYER FOR RELIEF
WHEREFORE, LAURA demands and prays for judgment as follows:
On the First Cause of Action
1 For damages against McNABB in the sum of $99,000.
22, For interest at the highest rate allowed by law on said sum from April 6, 2017 to the date
of judgment.
10 On the Second Cause of Action
11 1 For a declaration by the court that all interest, late fees and other fees sought to be
122 collected by McNABB under the McNabb promissory note and Deed of Trust are usurious and
a
1 3 therefore uncollectible.
14 2. For a declaration that McNABB’s Notice of Default is inaccurate, erroneous and void in
15 that it contains usurious interest and fees and misstates the name of the borrower under the promissory
16 note.
17 On the Third Cause of Action
18 1 For a declaration by the court that all interest, late fees, extension fees, and other fees
19 sought to be collected by McNABB on the Deeney Note and Deed of Trust are usurious and therefore
20 uncollectible.
21 2 For a declaration that McNABB improperly accelerated the Deeney Note and Deed of
22 Trust rendering the Notice of Default void.
23 On the Fourth Cause of Action
24 1 For a temporary restraining order, and preliminary and permanent injunctions restraining
25 McNABB and REDWOOD, and their agents, servants, attorneys, employees, officers and
26 representatives, and others acting in concert with them or on their behalf, from engaging in or
27 proceeding with a trustee’s sale or other sale or conveyance of the Subject Property under McNABB’s
28 Deed of Trust and promissory note.
13
CROSS-COMPLAINT OF LAURA ARATA
On the Fifth, Sixth and Seventh Causes of Action
1 For damages against HILLCREST and MAIER in the sum of $36,500.
2. For interest on said sum at the highest rate allowed by law from April 6, 2017 to the date
of judgment.
3 For damages according to proof on any fees, commissions or amounts paid to
HILLCREST or MAIER on the close of the Deeney Loan in or about December 2014, to the date of
judgment.
On All Causes of Action
1 For reasonable attorneys fees according to statute, case law or as set forth in any of the
10 underlying instruments including, but not limited to the promissory notes or deeds of trust.
11 2 For costs of suit.
12 3 For such other and further relief that the court may deem proper.
rat
13 DATED: July L4 » 2020 DAM , TRUJILLO & RUSSELL,
A Professio! Law Col 10n
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A,
16 GARY P. DAMBACHER, Attorieys-for Defendant
and Cross-Complainant LAURA ARATA, Trustee
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CROSS-COMPLAINT OF LAURA ARATA
VERIFICATION
Tam the Cross-Complainant in this action. I have read the foregoing CROSS-COMPLAINT
FOR RECOVERY OF USURIOUS INTEREST, INJUNCTIVE RELIEF, DECL
ARATORY
RELIEF, BREACH OF FIDUCIARY DUTY, DISGORGEMENT, COMMON COUNT--
MONEY HAD AD RECEIVED, BREACH OF STATUTE, AND DAMAGES and know its
content. The matters stated in the foregoing document are true of my own
knowledge except as to
those matters which are stated on information and belief,
and as to those matters I believe them to be
true.
I declare under penalty of perjury under the laws of the State
of California that the foregoing is
10 true and correct.
ll Executed on July 2 3, 2020, at Oklahoma City, Oklahoma.
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14 LAURA ARATAS ee
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CROSS-COMPLAINT OF
LAURA ARATA
| Exhibit A
te ye
f OLD REPUBLIC TITLE COMPANY
* *
Kok A MEMBER OF THE OLD REPUBLIC TITLE INSURANCE GROUP
2140 Jefferson Street, Suite A * Napa CA + 94559 + (707) 265-9838 » FAX (707) 265-9846
The John and Grace Arata 2004 Trust executed August 11, 2004 Date: April 6, 2017
53 East Cremetti Lane Escrow No.; 0530017350-ML
Yerington, NV 89447 Escrow Officer: Mark Lyons
Settlement Date: April 6, 2017
Property: 081-240-050, San Gregorio, California 94074
Borrower's Settlement Statement
item Debits | Credits
New 2nd loan from Ernest J. McNabb, Trustee of the Ernest J. McNabb Revocable
Living Trust. 1,100,000.00
Interest, 04/05/17 to 05/01/17, 26 days @ $366.67 9,533.33,
Mortgage Broker Fee to Hillcrest Real Estate 33,000.00 i=
-t- Processing Fee to Hillcrest Real Estate 3,500.00
Tax Service to to Leteta LLC 180.00
Investor Fee to Dennis Doss 5,000.00
9 Months of Guaranteed Interest_to Ernest J. McNabb, Trustee of the Ernest J.
McNabb Revocable Living Trust 99,000.00
Lender Hold Back: Property Envi ntal Remediation to Ernest J. McNabb,
Trustee of the Ernest J. McNabb Revocable Living Trust dated'11/19/1990- 35,000.00.
Loan Origination Fee to to ARC Capital 33,000.00
(~~ Document Prep Fee to ARC Capital 1,500.00
Document Preparation to ARC Capital 500.00
Credit Report to to ARC Capital 28,50
7>_Underwriting Fee to ARC Capital 1,500.00
Loan payoff to James Richard Deeney and Jessica Ann Deeney and Daniel Ralph Ver
Linden ($185,350.00)
2016 delinquent interest payments - Deeney 48,000.00
2016 Late Fees - Deeney 4,800.00
2017 Delinquent interest payments thru March -Deeney 12,000.00
2017 Late Fees thru March - Deeney 1,200.00
9 Months Guaranteed interest (2017) - Deeney 36,000.00
9 Month Pre-paid Interest (2018) - Deeney 36,000.00
2016 Delinquent Interest Payments - Ver Linden 15,600.00
2016 Late Fees - Ver Linden 1,560.00
2017 Delinquent Interest Payments thru March - Ver Linden 3,900.00
2017 Late Fees thru March - Ver Linden 390.00
9 Months Guaranteed Interest (2017) - Ver Linden 11,700.00
9 Months Pre-paid interest (2018) - Ver Linden
Preview
Electronically by Superior Court of California, County of San Mateo ON 7/31/2020 GARY P. DAMBACHER, ESQ. (SBN 92141) By /s/ Mia Marlowe Deputy Clerk TIMOTHY T. TRUJILLO, ESQ. (SBN 198894) FRANK L. RUSSELL, ESQ. (SBN 289335) CARRIE M. McKERNAN, ESQ. (SBN 310253) DAMBACHER, TRUJILLO & RUSSELL, APLC 32 N. WASHINGTON STREET SONORA, CALIFORNIA 95370 TELEPHONE: (209) 533-1883 FAX: (209) 533-3844 Attorneys for Defendant/Cross-Complainant LAURA J. ARATA, trustee, and Defendant MARIE JOANNE ARATA SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN MATEO 10 i PENINSULA OPEN SPACE TRUST, Case No. 20-CIV-02349 12 Plaintiff, REQUEST FOR JUDICIAL NOTICE IN SUPPORT 13 vs. OF REPLY BY LAURA J. ARATA, TRUSTEE, AND MARIE JOANNE ARATA TO PLAINTIFF'S 14 REDWOOD TRUST DEED SERVICES, INC., MOTION FOR PRELIMINARY INJUNCTION a California Corporation; ERNEST J. McNABB, 15 individually and as Trustee of the Ernest J. McNabb Revocable Living Trust Dated 16 11/19/1990; LOUIS J. ARATA, individually; LAURA ARATA, individually, and as sole 17 successor trustee of the John and Grace Arata Date: August 20, 2020 2004 Trust Executed August 11, 2004; Time 2:00 p.m. 18 MARIE JOANNE ARATA, as the Dept: 28, Courtroom 2F Representative of the Estate of Gary J. Arata, Judge: Hon. George A. Miram 19 Deceased; and DOES 1-20, 20 Defendants. 21 22 AND RELATED CROSS-ACTION. 2 3 24 TO THE HONORABLE GEORGE A. MIRAM, JUDGE OF THE SUPERIOR COURT OF 25 CALIFORNIA, COUNTY OF SAN MATEO: 26 Pursuant to the provisions of Evidence Code §452(d), Defendant/Cross-Complainant LAURA J. 27 ARATA, trustee, and Defendant MARIE JOANNE ARATA request that the Court take judicial notice 28 of the existence and content of the following: 1 REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY BY LAURA J. ARATA, TRUSTEE, AND MARIE ARATA TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION 1 The verified cross-complaint filed by LAURA J. ARATA, trustee, on July 24, 2020, in San Mateo County Superior Court case number 20-CIV-02349, a true and correct copy of which is attached hereto as Exhibit 1. DATED: July 31, 2020 DAMBACHER, TRUJILLO & RUSSELL, A Pfofgssional L: aw Corporation j / GARY P. DAMBACHER, Attorneys for Defendani/ Cross-Complainant LAURA ARATA, and Defendant MARIE JOANNE ARATA 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF REPLY BY LAURA J. ARATA, TRUSTEE, AND MARIE ARATA TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION | Exhibit 1 Electronically by Superior Court of California, County of San Mateo GARY P. DAMBACHER, ESQ. (SBN 92141) TIMOTHY T. TRUJILLO, ESQ. (SBN 198894) ON 7/24/2020 FRANK L. RUSSELL, ESQ. (SBN 289335) CARRIE M. McKERNAN, ESQ. (SBN 310253) DAMBACHER, TRUJILLO & RUSSELL, APLC ny Bomnpie —_IsL ay 32 N. WASHINGTON STREET SONORA, CALIFORNIA 95370 TELEPHONE: (209) 533-1883 FAX: (209) 533-3844 Attorneys for Cross-Complainant LAURA J. ARATA, Trustee SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN MATEO 10 PENINSULA OPEN SPACE TRUST, ) Case No. 20-CIV-02349 11 Plaintiff, CROSS-COMPLAINT FOR RECOVERY 12 VS. OF USURIOUS INTEREST, INJUNCTIVE RELIEF, DECLARATORY RELIEF, 13 REDWOOD TRUST DEED SERVICES, INC., BREACH OF FIDUCIARY DUTY, a California Corporation; ERNEST J. McNABB, DISGORGEMENT, COMMON COUNT-- 14 individually and as Trustee of the Ernest J. MONEY HAD AD RECEIVED, BREACH McNabb Revocable Living Trust Dated 15 11/19/1990; LOUIS J. ARATA, individually; OF STATUTE, AND DAMAGES LAURA ARATA, individually, and as sole 16 successor trustee of the John and Grace Arata 2004 Trust Executed August 11, 2004; 17 MARIE JOANNE ARATA, as the Representative of the Estate of Gary J. Arata, 18 Deceased; and DOES 1-20, 19 Defendants. 20 LAURA J. ARATA, as sole and successor trustee ) 21 of the John and Grace Arata 2004 Trust, dated August 11, 2004, 22 Cross-Complainant, 23 Vs. 24 25 ERNEST J. McNABB, individually and as Trustee of the Ernest J. McNabb Revocable 26 Living Trust Dated 11/19/1990; REDWOOD TRUST DEED SRVICES, INC., a California 27 corporation; HILLCREST REAL ESTATE, INC., a California corporation; WILLIAM JACOB 28 MAIER; and ROES 1-50, inclusive, Cross-Defendants. CROSS-COMPLAINT OF LAURA ARATA Cross-Complainant LAURA J. ARATA ("LAURA" or "Cross-Complainant"), in her capacity as sole and successor trustee of the JOHN and GRACE ARATA 2004 Trust, dated August 11, 2004 (the "John Arata Trust"), complains of Cross-Defendants ERNEST J. McNABB, individually and as Trustee of the Emest J. McNabb Revocable Living Trust Dated 11/19/1990; ("McNABB"); REDWOOD TRUST DEED SRVICES, INC., a California Corporation ("REDWOOD"); HILLCREST REAL ESTATE, INC., a California corporation; ("HILLCREST") and WILLIAM JACOB MAIER, ("MAIER") an individual; and ROES 1-50, inclusive (collectively hereinafter "Cross-Defendants") and each of them, and upon information and belief, alleges as follows: I 10 INTRODUCTION AND FACTUAL ALLEGATIONS 11 1 REDWOOD intends to conduct a trustee sale of an undivided interest and portion of the 12 Arata Ranch, a 1,312-acre property on the San Mateo County Coast. Defendant McNABB alleges that 13 the current property owner for the parcels at issue—Cross-Complainant has failed to pay back a loan, 14 secured by a deed of trust which is allegedly in foreclosure under a Notice of Default, in the principal 15 sum of $1.1 million which McNABB made to Louie Arata, ("Louie") in 2017. Louie was a former 16 trustee of the Arata Trust but was removed for cause as trustee pursuant to a petition for removal filed 17 by LAURA. 18 2 McNABB has also recorded a Notice of Default’on a note secured by a deed of trust that 19 he acquired in the principal sum of $530,000 under which he also seeks foreclosure of the same parcels. 20 McNABB’s position is that these loans were and are secured by deeds of trust on the parcels now 21 owned by LAURA which comprise the Arata Ranch (the "Subject Property"). 22 3 The date of the currently scheduled trustee’s sale under said Notices of Default, to be 23 handled and conducted by McNABB’s agent, REDWOOD, is August 26, 2020. 24 THE McNABB LOAN 25 4. McNABB is a hard money lender who, in or about April of 2017, provided funds in the 26 principal sum of $1,100,000 that were allocated to debts of Louie through an escrow held at Old 27 Republic Title Company located in Napa, California. The proceeds were used and applied in 28 accordance with a Borrower’s Closing Statement, a true and correct copy of which is attached hereto 2 CROSS-COMPLAINT OF LAURA ARATA and incorporated herein as Exhibit A. The loan was negotiated, originated, solicited and arranged by HILLCREST individually and/or by and through MAIER, its principal officer. 5 MAIER, who had previously arranged and negotiated prior financing in connection with the Subject Property, worked directly with Louie in orchestrating and arranging the financing for Louie. 6 Pursuant to the terms of the McNABB loan, and as supported by the Borrower’s Closing Statement, "Guaranteed Interest" in the amount of $99,000 was prepaid to McNABB at the close of the transaction on April 6, 2017. 7 Additionally, at the conclusion of the transaction, Louie, in his individual capacity and not as a trustee of the John Arata Trust, executed a promissory note payable to McNABB, (the 10 "McNabb Note") a true and correct copy of which is attached hereto and incorporated herein as Exhibit i B. Pursuant to paragraph 2 of the note, interest was initially set at the rate of 12% per annum from the 12 date of the note until its maturity on November 1, 2018. The note also called for a 10% late charge 13 penalty on any overdue payment. 14 8 Louie, in his individual capacity and not as a trustee of the John Arata Trust, also 15S executed a document entitled, "Interest-Only Addendum to Fixed Rate Note" which called for interest 16 only payments of $11,000 per month until its maturity on November 1, 2018, which payments were 17 also subject to a Late Charge Penalty in the sum of 10% of any overdue payment. A true and correct 18 copy of this instrument is attached hereto and incorporated herein as Exhibit C. 19 9 Louie, in his individual capacity and not as a trustee of the John Arata Trust, also 20 executed a document entitled, "Guaranteed Interest Addendum to Note" dated March 28, 2017, which 21 purportedly supported the payment of $99,000 to McNABB as referenced in paragraph 4 above. A true 22 and correct copy of this instrument is attached hereto and incorporated herein as Exhibit D. 23 10. Louie, in his individual capacity and not as a trustee of the John Arata Trust, also 24 executed a document entitled "Default Rate Addendum” which called for escalation of the interest rate 25 under the note to 18% per annum upon the occurrence of an event of default. Under this instrument, 26 after the nine- (9) month period of guaranteed interest, the borrower could defer the payment of interest 27 only payments, which, in that event, would require escalation of the interest rate "from 12% to 14%." 28 A true and correct copy of this instrument is attached hereto and incorporated herein as Exhibit E. 3 CROSS-COMPLAINT OF LAURA ARATA 11. Louie also executed a document entitled, "Inter Vivos Revocable Trust As Borrower Acknowledgment" which could only be executed by a Settlor of the John Arata Trust. Louie was not a settlor of the John Arata Trust. The settlors were John Arata and Grace Arata. A true and correct copy of this instrument is attached hereto and incorporated herein as Exhibit F. 12. The funds borrowed were primarily for household, family, or personal purposes. 13. MAIER is very familiar with the Arata Ranch, the partition action between the families which resulted in an order to sell the entire ranch, and the Settlement Agreement consummated between the Arata families which defines the terms and conditions of its sale. In an email to attorney Gary Dambacher dated May 12, 2017, MAIER confirmed that knowledge and his involvement in obtaining 10 the McNABB loan. A true and correct copy of said email is attached hereto and incorporated herein as 1 Exhibit G. 12 14. Moreover, in a Declaration executed by MAIER on February 26, 2020 in support of a 13 petition to remove LAURA as trustee of the Arata Trust and to appoint himself as trustee, MAIER 14 testified at paragraph 5 of his declaration, and under penalty of perjury, that he originated both the 15 Deeney Loan and the McNABB Loan. A copy of that Declaration (along with its two exhibits) is 16 attached hereto and incorporated herein as Exhibit H. Notably, attached to the MAIER declaration as 17 Exhibit 2, is another declaration under penalty of perjury which MAIER furnished in conjunction with 18 the partition action (San Mateo County Superior Court Case No. CIV531627), in which he testified 19 that he originated all of the Arata loans. Therefore, no other third party could be the arranger, 20 originator, negotiator or solicitor of said loans. 21 15. As negotiator, originator, solicitor and arranger of the McNABB loan, and according to 22 the Borrower’s Closing Statement (Exhibit A), HILLCREST, an entity owned and controlled by 23 MAIER, was paid a broker’s fee of $33,000 and a "processing fee" of $3,500. However, at the time of 24 the loan, neither HILLCREST nor MAIER, as HILLCREST’s designated officer, were licensed. 25 Attached hereto and incorporated herein as Exhibit I is a true and correct copy of a printout from The 26 State of California Department of Real Estate which provides that HILLCREST’s license expired on 27 August 18, 2014, and MAIER’s license expired as of August 19, 2014. As such, McNABB is not 28 exempt from the prohibition against charging usurious interest rates and fees under Civil Code § 4 CROSS-COMPLAINT OF LAURA ARATA 1916.1 because the loan was not arranged, negotiated, solicited or originated by a licensed real estate broker. 16. Prior to REDWOOD recording McNABB’s Notice of Default, on January 8, 2019, McNABB sent correspondence to LAURA, Louis Arata and Marie Arata in which he demanded, in addition to the principal amount of his loan, interest at 14% per annum to November 1, 2018, amounting to $115,497; late fee charges of $1,283; and "Default Interest" at the rate of 18% per annum in the amount of $40,800. A true and correct copy of his demand letter (with its attachment showing his calculations) is attached hereto and incorporated herein as Exhibit J. 17. On February 7, 2019, McNABB, by and through his foreclosure agent, REDWOOD, 10 recorded a Notice of Default and Election to Sell Under Deed of Trust, ("the McNabb NOD") a true il and correct copy of which is attached hereto and incorporated herein as Exhibit K. The McNabb NOD 122 set forth that the amount due to cure the alleged default was the sum of $1,279,186.48 as of February 6, 13 2019. LAURA alleges that this amount is inaccurate in that the amount stated in the McNabb NOD 14 contains usurious interest and late fee charges which were included and set forth in McNABB’s 15 demand letter of January 8, 2019. Additionally, the McNabb NOD includes a Declaration by 16 McNABB that the borrower was Louis J. Arata, surviving co-trustee, (ostensibly of the John Arata 17 Trust), which is inaccurate because Louie executed the promissory note and its addendums as an 18 individual. 19 THE DEENEY LOAN 20 18. In addition, McNABB sent a letter to Marie Arata, LAURA, and Louis Arata dated 21 January 8, 2019, in which he stated that he had acquired the beneficial interest under a purported 22 promissory note secured by a first deed of trust against the Subject Property in the principal amount of 23 $530,000 (the "Deeney Loan"). A true and correct copy of said letter is attached hereto and 24 incorporated herein as Exhibit L. In said letter, he included an Acceleration Notice in which he alleged 25 that due to the provisions of a Settlement Agreement between the two Arata families who live on the 26 ranch, that allowing Lillian Arata to "be conveyed a life estate" constituted a "violation of the 27 acceleration clauses in the First Note ...and Deed of Trust...". This Acceleration Notice is false and 28 inaccurate in that the Settlement Agreement does not constitute a conveyance, sales contract, deed, or 5 CROSS-COMPLAINT OF LAURA ARATA escrow agreement; the description of the life estate in the Settlement Agreement did not contain a legal description of the purported life estate fee; and to legally create the purported life estate fee would most likely violate the Subdivision Map Act. Therefore, acceleration is improper under the provisions of the Deeney deed of trust and note. 19, Moreover, a lis pendens was recorded against the ranch property after the partition action between the Arata families was filed, and McNABB was therefore on constructive notice of it and on inquiry notice of any orders or stipulations involving the partition action before he allegedly acquired his beneficial interest of the Deeney Note. /mportantly, Lillian Arata recently passed away curing any alleged default and rendering the Acceleration Notice moot. 10 20. Additionally, McNABB, by and through his agent, REDWOOD, recorded a Notice of 11 Default under the Deeney Note on April 10, 2019, a true and correct copy of which is attached hereto 12 and incorporated herein as Exhibit M. This Notice of Default is also inaccurate in that it is based upon 2 13 an improper notice of acceleration. Moreover, the amount set forth to cure it as set forth therein in the 14 sum of $571,519.25 is also inaccurate in that it contains alleged past due interest, extension fees, and 15 late fees which are usurious in that the initial rate of interest under the Deeney Note was 12% per 16 annum, which was increased to 14% per annum, both of which are usurious rates of interest under the 17 California Constitution. Importantly, as with the McNABB loan, the Deeney Loan was arranged, 18 originated, negotiated and solicited by MAIER and/or HILLCREST, who were not licensed real estate 19 brokers at the time that the Deeney Loan was originally consummated in December of 2014. 20 Therefore, McNABB, as the current holder of the Deeney Note, is not excused under Civil Code § 21 1916.1 from the prohibition against charging and collecting usurious interest and fees. 22 I 23 VENUE AND JURISDICTION 24 21. Venue for this action is proper in San Mateo County, California because the real 25 property (or res) that is the subject of this litigation is located in San Mateo County, California, the 26 Deeds of Trust and NODs which are encumbrances against the Subject Property were recorded in San 27 Mateo County, and the trustee’s sale is scheduled to be held in San Mateo County. 28 22. Jurisdiction is proper because the amount in controversy exceeds the sum of $25,000. 6 CROSS-COMPLAINT OF LAURA ARATA i PARTIES AND GENERAL ALLEGATIONS 23. Cross-Defendant McNABB is a resident of San Francisco County and, among other things, is in the business of making "hard money" secured loans to individuals who are in financial distress. 24, Cross-Defendant REDWOOD is a California corporation with its principal place of business in Santa Rosa, California. 25. Cross-Defendant HILLCREST is a California corporation with its principal place of business in Petaluma, California. 10 26. MAIER is a resident of Sonoma County, California. 11 27. Cross-Complainant is ignorant of the true names and capacities of cross-defendants sued 12 as ROES 1-50 inclusive, and therefore sues these cross-defendants by such fictitious names. Cross- 13 complainant will ask leave to amend this complaint to show their true names and capacities when the 14 same have been ascertained. 15 28. At all times mentioned herein, each of the cross-defendants named herein was the agent 16 and employee of each of the remaining cross-defendants, and in doing the things herein alleged, was 17 acting in the course and scope of such agency and employment. 18 29. LAURA has standing to bring this action as she is the current owner of the Subject 19 Property under which both the McNabb Deed of Trust and the Deeney Deed of Trust are recorded as 20 encumbrances of record against the Subject Property, and which property is the subject of the pending 21 trustee’s sale by REDWOOD. 22 Iv 23 FIRST CAUSE OF ACTION 24 AGAINST CROSS-DEFENDANT McNABB 25 (Usury Violations--Money Had and Received) 26 30. Cross-complainant realleges and incorporates Paragraphs 1 through 29, above, as though 27 set forth in full herein. 28 31. The interest payment terms of the McNabb Note and its addendums are usurious and 7 CROSS-COMPLAINT OF LAURA ARATA violate the California Constitution, Article XV, Section 1(1), which prescribes that a contract in writing for a loan used primarily for personal, family, or household purposes may not provide for an interest rate that exceeds 10 percent per annum. 32. By virtue of the funds released to McNABB in the sum of $99,000 at close of escrow as set forth in paragraphs 4 and 7 above, these payments were in excess of the maximum rate of interest allowed by the California Constitution, Article XV, Section 1, and LAURA is therefore entitled to recover the amount paid to McNABB as money had and received. 33. The remaining interest and fees which McNABB claims has accrued under his note is also usurious and violates the California Constitution, Article XV, Section 1(1), which prescribes that a 10 contract in writing for a loan for use primarily for personal, family, or household purposes may not 11 provide for an interest rate that exceeds 10 percent per annum. LAURA seeks a declaration that said 12 interest and fees are usurious and cannot be collected by McNABB. a 13 WHEREFORE, LAURA prays for judgment as hereinafter set forth. 14 SECOND CAUSE OF ACTION 15 AGAINST CROSS-DEFENDANT McNABB 16 (Declaratory Relief-McNabb Note) 17 34. Cross-complainant realleges and incorporates Paragraphs 1 through 33, above, as though 18 set forth in full herein. 19 35. An actual controversy has arisen and now exists between LAURA and Cross-Defendant, 20 McNABB concerning their respective rights and duties in that LAURA contends that there is no 21 obligation to pay any interest, late fees, attorneys fees, or other expenses under the McNABB note 22 whatsoever and therefore the interest, any attorneys’ fees, and late fee provisions should be declared 23 null and void; whereas McNABB disputes these contentions and claims that all interest, fees and late 24 charges set forth under his note are legal and valid and should be added to the principal sum and 25 collected under his note. 26 36. Additionally, by virtue of the usurious interest, fees, any attorneys! fees, and late fees 27 sought to be collected by McNABB, which sums were included in his NOD, the NOD contains 28 inaccurate amounts and therefore is not a legal basis, nor does it support any trustee’s sale based upon 8 CROSS-COMPLAINT OF LAURA ARATA said NOD. A copy of said NOD is set forth at Exhibit K. Therefore, the pending trustee’s sale scheduled for August 26, 2020 should be enjoined. However, McNABB contends that the interest, fees and late fees set forth in his NOD are proper and accurate, and therefore the pending trustee’s sale should be held as scheduled. 37. LAURA desires a judicial determination of her rights and duties, and a declaration that the interest rate provisions of the McNabb Note are null and void, pursuant to the California Constitution, Article XV, Section 1 and Section 2 of the Statutes of 1919, page Ixxxiii. LAURA also desires a judicial determination that the NOD contains usurious interest, fees and late charges and is therefore inaccurate, and not supported under the NOD, and therefore the pending trustee’s sale should 10 be enjoined. 1 38. A judicial declaration is necessary and appropriate at this time under the circumstances 122 in order that LAURA and McNABB may ascertain their respective rights and duties under the McNabb 13 Note, the NOD, and the pending trustee’s sale. 14 WHEREAS, LAURA prays for judgment as hereinafter set forth. 15 THIRD CAUSE OF ACTION 16 AGAINST CROSS-DEFENDANT McNABB 17 (eclaratory Relief—The Deeney Note) 18 39. LAURA realleges and incorporates Paragraphs 1 through 38, above, as though set forth 19 in full herein. 20 40. An actual controversy has arisen and now exists between LAURA and Cross-Defendant 21 McNABB concerning their respective rights and duties in that LAURA contends that there is no 22 obligation to pay any interest or late fees under the Deeney note whatsoever and therefore the interest 23 and late fee provisions should be declared null and void, whereas McNABB disputes these contentions 24 and claims that all interest, extension fees and late charges set forth under the Deeney Note are legal 25 and valid and should be collected under the Deeney Note. 26 Al, Additionally, by virtue of the usurious interest, extension fees and late fees sought to be 27 collected by McNABB under the Deeney Note, which sums were included in his NOD, said NOD 28 contains inaccurate amounts and therefore is not a legal basis, nor does it support any trustee’s sale 9 CROSS-COMPLAINT OF LAURA ARATA based upon said NOD, a copy of which is set forth as Exhibit M. Therefore, the pending trustee’s sale scheduled for August 26, 2020, will result in irreparable harm to LAURA and should be enjoined. However, McNABB contends that the interest, fees and late fees set forth in this NOD are proper and accurate, and therefore the pending trustee’s sale should be held as scheduled. 42. Also, for the reasons set forth in paragraph 16 above, LAURA contends that MCNABB inaccurately and unlawfully sought to accelerate the Deeney Note and Deed of Trust, and therefore the recording of his NOD on the Deeney Note was based upon an improper basis for acceleration, wherein McNABB contends that his acceleration notice set forth a proper basis for the recording of the Deeney NOD. 10 WHEREFORE, LAURA prays for judgment as hereinafter set forth. 1 FOURTH CAUSE OF ACTION 12 AGAINST CROSS-DEFENDANTS REDWOOD AND McNABB 13 (Injunctive Relief) 14 43. LAURA realleges and incorporates Paragraphs 1 through 42, above, as though set forth 15 in full herein. 16 44. REDWOOD, as trustee of the McNabb Note and Deeney Note and their respective 17 Deeds of Trust, seeks to sell the Subject Property as a trustee’s sale currently scheduled for August 26, 18 2020. The threatened sale is based upon erroneous information contained in the respective Notices of 19 Default, as set forth above, under each loan. 20 45. Because there is no adequate remedy at law for LAURA, she is entitled to an injunction 221 prohibiting defendants McNABB and REDWOOD, and their agents, servants, employees, attorneys, 22 officers, trustees, and representatives, and others acting in concert with them or on their behalf, from 23 conducting any trustee’s sale or other sale or conveyance of the Subject Property. 24 46. As a direct and proximate result of the aforementioned unlawful conduct of said cross- 25 defendants, LAURA will incur substantial damages and irreparable harm, as well as costs, expenses, 26 and attorneys’ fees according to proof at the time of trial. 27 WHEREFORE, LAURA prays for judgment as hereinafter set forth. 28 /// 10 CROSS-COMPLAINT OF LAURA ARATA FIFTH CAUSE OF ACTION AGAINST CROSS-DEFENDANTS HILCREST AND MAIER (Breach of Fiduciary Duty--Disgorgement) 47. LAURA realleges and incorporates Paragraphs | through 46, above, as though set forth in full herein. 48. HILLCREST and MAIER held themselves out as licensed real estate brokers and represented that that they had the ability to legally arrange and initiate a loan or loans which would result in the procurement of funds for their borrowers in distressed situations. They therefore voluntarily accepted and knowingly undertook to act in a fiduciary capacity with Louie and Gary Arata 10 at the time that they sought funding from McNABB and Deeney. As fiduciaries, they were obligated to 11 act in the utmost good faith and the best interests of their borrowers. 12 49. HILLCREST and MAIER, as unlicensed fiduciaries, breached their fiduciary duty to the 13 borrowers in that they arranged loans, with usurious and unconscionable terms, which they knew could 14 not be paid back at maturity due to the fact that the property was in litigation under the partition action 15 at the time they were arranged. Furthermore, they knew that Louie and Gary Arata, as their borrowers, 16 did not have the financial means to pay the loans back absent a sale of the Subject Property before 17 maturity of the respective notes. 18 50. In arranging the loans, HILLCREST and MAIER held themselves out as licensed real 19 estate brokers when in fact they were not. 20 51. As a result, HILLCREST and MAIER procured terms for the both loans which were 21 usurious, unconscionable and based upon unrealistic expectations that the loans could be paid back at 22 maturity, given the partition litigation and the terms of Settlement Agreement between the Arata 23 families. 24 52. At the close of the transaction with Old Republic Title Company on April 6, 2017, and 25 as evidenced on the Borrower’s Settlement Statement, (Exhibit A), HILLCREST was paid the sum of 26 $33,000 as a mortgage broker fee, and $3,500 as a "processing fee" for a total sum of $36.500. 27 LAURA is informed and believes that HILLCREST and/or MAIER were also paid similar fees under 28 and at the close of the Deeney Loan. As neither HILLCREST nor MAIER were licensed at the time of ll CROSS-COMPLAINT OF LAURA ARATA close of either transaction, they are not entitled to said fees. 53. As a result of HILLCREST’s and MAIER’s breach of the duty of care, they have placed the Subject Property in jeopardy of being lost to foreclosure, and as unlicensed fiduciaries, their fees should be disgorged. WHEREFORE, cross-complainant prays for judgment against HILLCREST and MAIER as hereinafter set forth. SIXTH CAUSE OF ACTION AGAINST CROSS-DEFENDANTS HILLCREST AND MAIER (Common Count-Money Had and Received) 10 54. LAURA realleges and incorporates Paragraphs 1 through 53, above, as though set forth i in full herein. 12 55. By virtue of the funds released to HILLCREST amounting to $36,500 at close of escrow 13 as set forth in paragraphs 4 and 7 above, these payments were wrongfully paid in that HILLCREST was 14 unlicensed, and LAURA is therefore entitled to recover the amount paid as money had and received. 15 WHEREFORE, LAURA prays for judgment as hereinafter set forth. 16 SEVENTH CAUSE OF ACTION 17 AGAINST CROSS-DEFENDANTS HILLCREST AND MAIER 18 (Breach of Statute) 19 56. LAURA realleges and incorporates Paragraphs 1 through 55 above, as though set forth 20 in full herein. 21 57. On April 6, 2017, there was in effect California Business and Professions Code § 10130 22 which provides that it is unlawful for a person to engage in the business of, or to act in the capacity of, 23 or advertise as, a real estate broker or salesperson without first obtaining a license from the Department 24 of Real Estate. 25 58. HILLCREST and MAIER were not licensed as real estate brokers at the time of close of 26 the McNABB and Deeney escrows and therefore are not entitled to compensation as real estate brokers 27 from said transactions. 28 59. HILLCREST and MAIER should therefore be disgorged of any fees or commissions 12 CROSS-COMPLAINT OF LAURA ARATA which they collected in the capacity as real estate brokers under those transactions. WHEREFORE, LAURA prays for judgment as hereinafter set forth. Vv PRAYER FOR RELIEF WHEREFORE, LAURA demands and prays for judgment as follows: On the First Cause of Action 1 For damages against McNABB in the sum of $99,000. 22, For interest at the highest rate allowed by law on said sum from April 6, 2017 to the date of judgment. 10 On the Second Cause of Action 11 1 For a declaration by the court that all interest, late fees and other fees sought to be 122 collected by McNABB under the McNabb promissory note and Deed of Trust are usurious and a 1 3 therefore uncollectible. 14 2. For a declaration that McNABB’s Notice of Default is inaccurate, erroneous and void in 15 that it contains usurious interest and fees and misstates the name of the borrower under the promissory 16 note. 17 On the Third Cause of Action 18 1 For a declaration by the court that all interest, late fees, extension fees, and other fees 19 sought to be collected by McNABB on the Deeney Note and Deed of Trust are usurious and therefore 20 uncollectible. 21 2 For a declaration that McNABB improperly accelerated the Deeney Note and Deed of 22 Trust rendering the Notice of Default void. 23 On the Fourth Cause of Action 24 1 For a temporary restraining order, and preliminary and permanent injunctions restraining 25 McNABB and REDWOOD, and their agents, servants, attorneys, employees, officers and 26 representatives, and others acting in concert with them or on their behalf, from engaging in or 27 proceeding with a trustee’s sale or other sale or conveyance of the Subject Property under McNABB’s 28 Deed of Trust and promissory note. 13 CROSS-COMPLAINT OF LAURA ARATA On the Fifth, Sixth and Seventh Causes of Action 1 For damages against HILLCREST and MAIER in the sum of $36,500. 2. For interest on said sum at the highest rate allowed by law from April 6, 2017 to the date of judgment. 3 For damages according to proof on any fees, commissions or amounts paid to HILLCREST or MAIER on the close of the Deeney Loan in or about December 2014, to the date of judgment. On All Causes of Action 1 For reasonable attorneys fees according to statute, case law or as set forth in any of the 10 underlying instruments including, but not limited to the promissory notes or deeds of trust. 11 2 For costs of suit. 12 3 For such other and further relief that the court may deem proper. rat 13 DATED: July L4 » 2020 DAM , TRUJILLO & RUSSELL, A Professio! Law Col 10n 14 15 A, 16 GARY P. DAMBACHER, Attorieys-for Defendant and Cross-Complainant LAURA ARATA, Trustee 17 18 19 20 21 22 23 24 25 26 27 28 14 CROSS-COMPLAINT OF LAURA ARATA VERIFICATION Tam the Cross-Complainant in this action. I have read the foregoing CROSS-COMPLAINT FOR RECOVERY OF USURIOUS INTEREST, INJUNCTIVE RELIEF, DECL ARATORY RELIEF, BREACH OF FIDUCIARY DUTY, DISGORGEMENT, COMMON COUNT-- MONEY HAD AD RECEIVED, BREACH OF STATUTE, AND DAMAGES and know its content. The matters stated in the foregoing document are true of my own knowledge except as to those matters which are stated on information and belief, and as to those matters I believe them to be true. I declare under penalty of perjury under the laws of the State of California that the foregoing is 10 true and correct. ll Executed on July 2 3, 2020, at Oklahoma City, Oklahoma. 12 13 14 LAURA ARATAS ee 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 CROSS-COMPLAINT OF LAURA ARATA | Exhibit A te ye f OLD REPUBLIC TITLE COMPANY * * Kok A MEMBER OF THE OLD REPUBLIC TITLE INSURANCE GROUP 2140 Jefferson Street, Suite A * Napa CA + 94559 + (707) 265-9838 » FAX (707) 265-9846 The John and Grace Arata 2004 Trust executed August 11, 2004 Date: April 6, 2017 53 East Cremetti Lane Escrow No.; 0530017350-ML Yerington, NV 89447 Escrow Officer: Mark Lyons Settlement Date: April 6, 2017 Property: 081-240-050, San Gregorio, California 94074 Borrower's Settlement Statement item Debits | Credits New 2nd loan from Ernest J. McNabb, Trustee of the Ernest J. McNabb Revocable Living Trust. 1,100,000.00 Interest, 04/05/17 to 05/01/17, 26 days @ $366.67 9,533.33, Mortgage Broker Fee to Hillcrest Real Estate 33,000.00 i= -t- Processing Fee to Hillcrest Real Estate 3,500.00 Tax Service to to Leteta LLC 180.00 Investor Fee to Dennis Doss 5,000.00 9 Months of Guaranteed Interest_to Ernest J. McNabb, Trustee of the Ernest J. McNabb Revocable Living Trust 99,000.00 Lender Hold Back: Property Envi ntal Remediation to Ernest J. McNabb, Trustee of the Ernest J. McNabb Revocable Living Trust dated'11/19/1990- 35,000.00. Loan Origination Fee to to ARC Capital 33,000.00 (~~ Document Prep Fee to ARC Capital 1,500.00 Document Preparation to ARC Capital 500.00 Credit Report to to ARC Capital 28,50 7>_Underwriting Fee to ARC Capital 1,500.00 Loan payoff to James Richard Deeney and Jessica Ann Deeney and Daniel Ralph Ver Linden ($185,350.00) 2016 delinquent interest payments - Deeney 48,000.00 2016 Late Fees - Deeney 4,800.00 2017 Delinquent interest payments thru March -Deeney 12,000.00 2017 Late Fees thru March - Deeney 1,200.00 9 Months Guaranteed interest (2017) - Deeney 36,000.00 9 Month Pre-paid Interest (2018) - Deeney 36,000.00 2016 Delinquent Interest Payments - Ver Linden 15,600.00 2016 Late Fees - Ver Linden 1,560.00 2017 Delinquent Interest Payments thru March - Ver Linden 3,900.00 2017 Late Fees thru March - Ver Linden 390.00 9 Months Guaranteed Interest (2017) - Ver Linden 11,700.00 9 Months Pre-paid interest (2018) - Ver Linden