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Junkin v. Golden West Foreclosure Service

January 5, 2010


(San Mateo County Super. Ct. No. CIV461534). Barbara Mallach, Judge.

The opinion of the court was delivered by: Jones, P.J.


In this appeal we consider whether the joint venture exception to the usury laws was properly applied by the trial court.

Appellant Donald L. Junkin III filed a complaint against respondents Golden West Foreclosure Service, Inc., and Gary Bennett, a fellow investor and acknowledged business parter, to enjoin the threatened foreclosure of an office building in San Carlos under an allegedly usurious promissory note and deed of trust held by Bennett. Ultimately, the foreclosure sale was completed. Junkin then amended his complaint to seek damages for wrongful foreclosure and usurious interest. The trial court ruled in favor of respondents, finding Junkin and Bennett were partners in a joint venture transaction, which excepted the transaction from the usury laws. On appeal, Junkin challenges this ruling. We reject his contentions and affirm.


Junkin has been a licensed real estate agent since 1993. He has extensive experience in the real estate business and has owned and operated several real estate agencies and mortgage brokerage companies.

Junkin met respondent Bennett in 1994. Bennett was a "hard money" lender who specialized in providing money quickly at high rates. Over the years, Junkin borrowed money from Bennett between 40 and 60 times. As Junkin explained, sometimes he would be presented with a "very good deal... but speed, time is of the essence, and the more conservative rates took more time." In those instances, "[Bennett] was the phone call." Junkin and Bennett also invested in property jointly on as many as a dozen occasions.

In approximately 2004, Junkin learned certain commercial property located on El Camino Real in San Carlos was available. The property was vacant and in a distressed condition. However, the property was in a good location and Junkin believed it was a good value. Junkin approached others about possibly investing in the property, but they could not come up with enough money quickly enough. Therefore, Junkin asked Bennett to provide the necessary financing. Bennett agreed.

Junkin and Bennett purchased the property for $1.975 million. $1.185 million of that amount came from an institutional lender. Junkin and Bennett were both jointly obligated on that loan. The remainder of the purchase price was provided by Bennett who contributed $856,000. In exchange for Bennett's contribution, Junkin prepared and signed a $960,000 promissory note secured by a deed of trust in favor of Bennett. The note carried an interest rate of 12 percent and required monthly payments of $9,600. The difference between the note amount and the amount Bennett contributed to the purchase price represented "points" on the loan.

Junkin and Bennett were both placed on title to the property and both considered themselves to be partners in the venture. Under the terms of their agreement, Junkin owned a 90 percent interest and Bennett owned 10 percent. Junkin agreed to make all payments on the first note and Bennett's second note, and to pay all property taxes and insurance.

Junkin did not make the payments required under the first or second notes and did not pay the insurance premiums on the property. Afraid that his second deed of trust would be wiped out if the owner of the first note foreclosed, Bennett made payments on the first note himself and paid the property taxes.

Bennett became "tired [of] paying for the building." He concluded the building was no longer a viable investment "the way it was being run and operated," and decided to disassociate himself from the building and Mr. Junkin. He quitclaimed his 10 percent interest in the property back to Junkin. Junkin then refinanced the property with another lender.

Junkin had not made any payments on his note to Bennett since December 2006. Therefore, Bennett decided to foreclose. He retained respondent Golden West Foreclosure Service, Inc. (Golden West) and authorized a non-judicial foreclosure sale. Bennett instructed Golden West to open the bidding at $700,000.

Junkin responded by filing a complaint against Bennett and Golden West. He alleged his $960,000 note in favor of Bennett was usurious and sought a temporary restraining order to prevent the foreclosure. The trial court granted Junkin a temporary restraining ...

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