Thompson

BACKGROUND

I. The Underlying Real Estate Transaction and

Proceedings Luther Burbank Savings (LBS) loaned 620 Third Street, LLC (the LLC) $3,945,100 to purchase real property (the property) in Sonoma County. The loan was evidenced by a promissory note dated January 3, 2007, as modified in March 2008 (collectively, the Note), and secured by a deed of trust to the property (the Deed of Trust). Paul Thompson was the manager of PK Property LLC, which was the sole member of the LLC. The Thompsons executed a repayment guarantee for the loan (the Guaranty).

A. LBS’s Complaint, the Foreclosure Proceedings, and the

Thompsons’ Cross-Complaint In early 2009, the LLC defaulted on the loan, and the Thompsons did not repay it. LBS sued the LLC and the Thompsons seeking judicial foreclosure and damages for breach of the Guaranty. Thereafter, LBS substituted TDS as the trustee under the Deed of Trust. A services agreement governed the relationship between LBS and TDS, and TDS agreed therein to indemnify

3 LBS for attorney fees incurred by LBS “to the extent caused by [TDS’s] breach of this Agreement or by the negligence or willful misconduct of [TDS].” TDS initiated nonjudicial foreclosure…