Filed 8/27/15 R.E. Loans v. Investors Warranty of America CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified 

for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for 

publication or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

R.E. LOANS, LLC,

 Plaintiff and Appellant,

v.

INVESTORS WARRANTY OF 

AMERICA, INC., et al.,

 Defendants and Respondents.

2d Civil No. B256149

(Super. Ct. No. CV090732)

(San Luis Obispo County)

In R.E. Loans v. Investors Warranty of America (2013) 212 

Cal.App.4th 1432 (RE-1), the trial court granted summary judgment to a lender 

seeking to avoid a subordination agreement on the ground that the senior lender 

breached the agreement. We reversed. We determined that a senior lender did not 

breach the subordination agreement; that the subordinated junior lender was 

subordinated only to a loan in the amount of $4,006,600, not the entire $21 million 

in loans held by the senior lender; and that the junior lender could have prevented 

foreclosure of the senior loan by tendering the amount sufficient to cure the default 

on the $4,006,600 senior loan.
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On remand, the subordinated lender amended its complaint to allege 

the senior lender prevented it from curing the default on the $4,006,600 loan. 

Nevertheless, the trial court sustained the senior lender's demurrer on the ground 

that the subordinated lender did not allege tender of payment to cure the default. 

But as alleged, the subordinated lender was prevented from doing so. We reverse 

again.

FACTS

Martin Weyrich Winery, LLC and related entities (collectively 

Weyrich) owned a parcel of real property in San Luis Obispo County known as 

"Jack's Ranch." The ranch was encumbered by a number of loans, including a third 

trust deed held by R.E. Loans, LLC (RE), securing a loan of $6.5 million.

In 2006, Weyrich refinanced the loans secured by Jack's Ranch. 

Weyrich paid the first two loans and paid RE $3.5 million on its existing loan. In 

return, RE subordinated its existing deed of trust to a new loan from Transamerica 

Financial Life Insurance Company (Transamerica) in the amount of $4,006,600.

The subordination agreement provides that RE will subordinate its 

trust deed to "a new loan in the principal sum of $4,006,600[] secured by [a] new 

first deed of trust . . . in favor of [Transamerica]."

After RE recorded the subordination agreement, Transamerica 

recorded a trust deed encumbering Jack's Ranch in April 2007. The trust deed 

recites that it secures a note in the principal amount of $4,006,600. It also recites 

that it secures "any and all obligations and covenants of Trustor under . . . any other 

agreement . . . including without limitation . . . that certain . . . Loan Agreement 

dated as of even date herewith between Trustor and Beneficiary."

The loan agreement between Weyrich and Transamerica provides 

that the trust deed not only secures a note in the amount of $4,006,600, but also 

notes in the amount of $11,227,500 and $5,912,750. The loan agreement states 

that the loans are intended to be "cross-defaulted." A default under any of the loans 

is a default under all the loans. The loan agreement also states that the loans are 
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"cross-collateralized." The loans are secured by trust deeds encumbering two 

properties in addition to Jack's Ranch.

Transamerica assigned its interest in the trust deed to Investors

Warranty of America, Inc. (Investors).

On July 23, 2009, the trustee recorded a notice of default. The notice 

informed Weyrich that the amount necessary to cure the default is $26,307,307.93. 

The notice states the obligation secured is a note for $4,006,600. 

The notice of sale estimated the principal, interest and fees to be paid 

under the sale as $5,135,945.51. Investors bid $4.625 million at the trustee's sale 

and received a deed to Jack's Ranch.

RE brought an action against Investors and others for declaratory 

relief. RE asked the court to declare its trust deed to be a first lien on Jack's Ranch 

and that its first trust deed was not affected by the trustee's sale. RE's theory was 

that Investors breached the subordination agreement by using its trust deed to secure 

three loans totaling $21,196,850, instead of one loan in the amount of $4,006,600. 

Investors cross-complained for declaratory relief. Investors asked the court to 

declare the subordination agreement valid and enforceable and that RE's interest in 

Jack's Ranch has been extinguished. The parties made cross-motions for summary 

judgment.

The trial court granted RE's motion for summary judgment and denied 

Investors' motion. In granting RE's motion, the court concluded Transamerica 

failed to comply with the terms of the subordination agreement. RE agreed to 

subordinate its trust deed to a loan in the principal sum of $4,006,600. Instead, 

Transamerica's trust deeds secured loans in excess of $21 million.

We reversed. In reversing, we stated:

"Here Investors' trust deed secured three notes, one of which was for 

$4,006,600. RE agreed to subordinate its trust deed to a trust deed securing a note 

in that amount. To the extent Investors' trust deed secured a note in the amount of 

$4,006,600, it was senior to RE's trust deed. To the extent Investors' trust deed 
4

secured other notes it is junior to RE's trust deed. That would be the result had each 

note been secured by its own trust deed. There is no reason why a different result 

should pertain because the notes are secured by a single trust deed.

"The transaction between Weyrich and Transamerica did not breach 

the subordination agreement because RE's trust deed was subordinate only to the 

$4,006,600 loan. Nothing in the subordination agreement prohibits the creation of 

the liens junior to RE's trust deed.

"Nor did the transaction between Weyrich and Transamerica breach 

the subordination agreement's prohibition on modifying the principal amount of the 

loan. RE's trust deed was subordinate only to the $4,006,600 loan. It is true that the 

agreement between Weyrich and Transamerica called for all three loans to be 

"cross-defaulted." But the agreement between Weyrich and Transamerica was not 

binding on RE." (RE-1, supra, 212 Cal.App.4th at p. 1437.)

Investors petitioned for rehearing, requesting that we direct the trial 

court to enter judgment in its favor. We denied the petition.

On remand, RE made a motion in the trial court to amend its 

complaint. The trial court granted the motion over Investors' objection.

In its first amended complaint, RE alleged that after Investors issued 

the notice of default, Investors insisted the entire $26 million in default under its 

deed of trust was senior to RE's trust deed; that RE pay that amount; that Investors 

refused to allow RE to reinstate the $4,006,600 loan; and that based on documents 

acquired in discovery, the amount necessary to reinstate the $4,006,600 loan was 

approximately $320,000. The complaint requested damages for breach of contract,

declaratory relief and the imposition of an equitable lien.

Investors demurred to the complaint. The trial court sustained the 

demurrer on the ground that RE did not allege tender of payment to cure the default.
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DISCUSSION

I.

The function of a demurrer is to test whether, as a matter of law, the 

facts alleged in the complaint state a cause of action under any legal theory. 

(Intengan v. BAC Home Loans Servicing, LP (2013) 214 Cal.App.4th 1047, 1052.) 

We assume the truth of all facts properly pleaded, as well as facts of which the trial 

court properly took judicial notice. (Ibid.) But we do not assume the truth of 

contentions, deductions or conclusions of law. (Ibid.) Our review of the trial 

court's decision is de novo. (Ibid.)

II.

In RE-1, we determined that the subrogation agreement made RE's 

trust deed junior only to Investors' trust deed securing a $4,006,600 loan. RE's trust 

deed was not junior to Investors' trust deed to the extent it secured the entire $26 

million package of loans. The agreement cross-collateralizing and cross-defaulting 

Investors' loans was between Transamerica and Weyrich, and not binding on RE.

That is the law of the case. The decision of an appellate court stating 

a rule of law necessary to a decision in the case makes that rule determinative of the 

rights of the parties in any subsequent proceeding in the same case. (9 Witkin, Cal.

Procedure (5th ed. 2008) Appeal, § 459, p. 515.)

Here it follows from the law of the case that RE had the right to 

protect its loan by curing any default in the $4,006,600 senior loan. (Civ. Code, 

§ 2924c, subd. (a)(1).)1 RE alleges, however, that Investors took the position that 

RE's loan was subject to loans in the amount of $26 million and that Investors 

refused to allow RE to reinstate the $4,006,600 loan. That is sufficient to state a 

cause of action for breach of the subrogation agreement as well as a violation of 

section 2924c, subdivision (a)(1).

 

1 All statutory references are to the Civil Code.
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Investors' reliance on the final paragraph of our opinion in RE-1 is 

misplaced. There we stated: "There is nothing in law or logic that would require 

RE to cure the default under all of Weyrich's loans in order to protect its interest. 

RE could have protected its interest by tendering the amount necessary to cure the 

default under the $4,006,600 note alone, the only note to which its trust deed was 

subordinate. RE points to no evidence it attempted to do so." (RE-1, supra, 212 

Cal.App.4th at p. 1438.)

The paragraph assumes that Investors did nothing to prevent RE's 

right to cure the default. RE's first amended complaint, however, alleges that 

Investors refused to allow RE to reinstate the loan.

Ordinarily, an action to set aside a foreclosure sale requires tender of 

the amount owed on the secured debt. (Fonteno v. Wells Fargo Bank, N.A. (2014) 

228 Cal.App.4th 1358, 1367.) But tender is not required where it would be a futile 

act. (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 

313.) RE's first amended complaint alleges that Investors insisted RE tender an 

amount to cure the entire $26 million in default. That is sufficient to allege a tender 

of the amount to cure the default in the $4,006,600 loan would have been futile.

Investors contend that RE is judicially estopped from arguing that its 

motion for summary judgment resolved in RE-1 did not dispose of the case.

Judicial estoppel prevents a party from asserting a position that is 

contrary to a position taken in the same or some earlier proceeding. (Jackson v. 

County of Los Angeles (1997) 60 Cal.App.4th 171, 181.) The doctrine applies when 

the same party has taken inconsistent positions in a judicial or quasi-judicial 

proceeding, the tribunal adopted or accepted the first position as true, and the first 

position was not taken as a result of ignorance, fraud or mistake. (Ibid.)

Here RE's position is, now and has always been, that its trust deed 

was subject only to a loan in the amount of $4,006,600. The doctrine of judicial 

estoppel does not apply.
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The allegations of RE's first amended complaint, if proved, entitle RE 

to money damages for breach of the subrogation agreement and section 2924c, 

subdivision (a)(1). They may also entitle RE to equitable relief to effectuate the 

parties' expectations under the terms of the subrogation agreement and prevent 

unjust enrichment. (See Jones v. Sacramento Sav. & Loan Assn. (1967) 248 

Cal.App.2d 522, 529 [where construction lender did not fully comply with terms of 

subordination agreement, equity imposed a lien to prevent unjust enrichment].) The 

appropriate remedy is left to the trial court.

The judgment is reversed. Costs are awarded to respondents.

NOT TO BE PUBLISHED.

GILBERT, P. J.

We concur:

YEGAN, J.

PERREN, J.
Martin J. Tangeman, Judge

Superior Court County of San Luis Obispo

______________________________

James P. Ballantine for Plaintiff and Appellant.

Buchalter Nemer, PC, John L. Hosack, Robert M. Dato, Jason E. 

Goldstein for Defendants and Respondents.