Wakefield

I. FACTS AND PROCEDURAL BACKGROUND

The Wakefields are husband and wife, and owners of a property located in

Murrieta, California. In 2010, to fund building a house on the property, the Wakefields

took out two construction loans. The first construction loan, in the amount of

$2,200,000, was from the D&E Five Trust, of which the Wakefields are the beneficiaries.

The second construction loan, in the amount of $375,000, was from defendants. Both

construction loans were secured by promissory notes and deeds of trust with the power to

sell. And both the construction loans were subordinate to a first loan, in the amount of

$670,000, which the Wakefields took out in purchasing the property (purchase loan).

In 2011, an additional $355,000 was added to the principal of the construction

loan from defendants, for the purpose of completing construction, as well as paying

property taxes and insurance. In exchange, the promissory note securing the loan from

defendants, now with a total principal balance of $730,000, was made superior to the

promissory note securing the D&E Five Trust loan. The loan from defendants was not

made superior to the purchase loan.

On May 8, 2013,…