Ponce

*255 Plaintiffs and appellants Antonio and Imelda Aranda and their son-in-law, Heriberto Ponce, (together, Ponce and Aranda) appeal from the trial court's entry of a judgment of dismissal following an order imposing both terminating and monetary sanctions against them and their attorneys under Code of Civil Procedure section 128.7. 1 The trial court found that Ponce and Aranda's complaint was presented primarily for an improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation. ( § 128.7, subd. (b)(1).)

On appeal, Ponce and Aranda argue that the claims asserted in their complaint were not frivolous and therefore, could not have been asserted for an improper purpose. We agree. We therefore reverse the trial court's entry of judgment based on terminating sanctions against Ponce and Aranda and entry of monetary sanctions against Ponce and Aranda and their attorneys.

I. BACKGROUND

Ponce and Aranda obtained a $280,000 loan to purchase a home in Woodland *239 (property). The loan was secured by a deed of trust recorded on February 14, 2008, in favor of respondent and defendant Wells Fargo Bank. *256 Ponce and Aranda applied for a loan…