no abuse of discretion in PI requiring advertiser to terminate liens that it told homeowners weren't liens

People v. MV Realty PBC, LLC, 2025 WL 3719896, B341121 (Cal. Ct. App. Dec. 23, 2025)

Blogging more in my property law prof hat, but with false advertising. MV Realty recorded liens on its customers’ properties, but assured homeowners that these were “notices” and not “liens.” The court of appeals affirmed a preliminary injunction requiring, inter alia, that MV Realty terminate its recorded liens.

MV Realty’s “Homeowner Benefit Program” sold “Forward Listing Contracts” to California homeowners. “The program offered a cash payment to homeowners, of approximately .27 percent of their home value, in exchange for the homeowners granting MV Realty the exclusive right to sell their home.” MV Realty marketed the program as a “one-of-a-kind, innovative program that allows homeowners the chance to receive an immediate cash payment by agreeing that [MV Realty] will be your Real Estate agency if and when you decide to sell your home in the future” with “no credit check,” “[no] [r]equirement to [s]ell [y]our [h]ome,” and “no obligation to repay the money ....” This requirement applied if the homeowner sold the home within the next 40 years; if they didn’t use MV Realty, they were required to pay a three percent penalty of either the sale price or of the home’s initial valuation by MV Realty, whichever was higher, the “Early Termination Fee.”

The agreement stated that the homeowner’s “obligations hereunder shall constitute covenants running with the land” and granted MV Realty “a lien and security interest” in the property as security for the homeowner’s obligations under the contract. MV Realty promised to “consider in good faith any request from [the homeowner] to facilitate such refinancing or new mortgage by subordinating the lien of this [a]greement to the refinanced or new mortgage.”

Unsurprisingly, “[i]nternally, MV Realty referred to the memorandum as a lien and promoted it to investors as a security feature of a future revenue stream. Externally, underwriters, prospective lenders, and escrow officers treated the memorandum as a lien on the property.” But prospective customers heard a different story. “On its website and in its marketing e-mails, MV Realty stated it would not record a lien on the homeowner’s home; it would record only a memorandum to serve as public notice of the homeowner’s obligations under the agreement. MV Realty trained its telemarketers to tell homeowners it would not record a lien on their homes.”

The People sued for violations of the UCL and FAL. The People argued that MV Realty’s fraudulently placed liens caused ongoing harm to over 1,400 California homeowners who, as MV Realty explained in an investor presentation, are “unable to convey clean title without receiving a lien release from MV Realty.” The People “submitted declarations from over a dozen homeowners who contracted with MV Realty, and several more from declarants whose family members contracted with the company.” Homeowners stated that they never would have entered into the agreement if MV Realty had explained that there was a lien to them.

A few explained how the lien became an obstacle to their later obtaining a loan secured by the property, and they eventually gave up on refinancing. Others stated they were forced to pay the Early Termination Fee, which was ten times the amount of the consideration they had received from MV Realty, before they could secure refinancing. Many shared their views that MV Realty lied to them, that they no longer trusted MV Realty to sell their home, and that they felt trapped by the agreement. Almost all homeowner declarants stated they had not seen the 12-page agreement until a notary, who could not explain the terms of the agreement, brought the document to their home to be signed.

MV Realty submitted 51 declarations from California customers who stated that they were not misled by MV Realty and that they were aware that “MV Realty ha[d] the right to record th[e] [m]emorandum on my property records to provide notice of the agreement.” Its own spreadsheet showed that it did not provide the agreement to 80 percent of California homeowners who signed it until the moment a notary presented it to them. MV Realty admitted homeowners had difficulty refinancing because of the memorandum; there was evidence that some lenders rejected MV Realty’s offers to subordinate the memorandum. Its own document, “Termination of Memorandum of MVR Homeowner Benefit Agreement,” explained that the memorandum was an “encumbrance.”

The trial court found that “[MV Realty] knew the memoranda operated as liens, represented this to their investors, but materially misrepresented the effect of the memoranda to the Homeowners.” Thus, it granted the preliminary injunction, including the requirement to remove the liens.

The UCL and FAL are “broadly enforced to protect the public, including “extraordinarily broad” remedial power to enjoin prohibited business practices “in whatever context they may occur.”

Under California law, “[w]here a governmental entity seeking to enjoin the alleged violation of an ordinance which specifically provides for injunctive relief establishes that it is reasonably probable it will prevail on the merits, a rebuttable presumption arises that the potential harm to the public outweighs the potential harm to the defendant. If the defendant shows that it would suffer grave or irreparable harm from the issuance of the preliminary injunction, the court must then examine the relative actual harm to the parties.” An injunction in such circumstances is only appropriate if the trial court concludes, balancing (1) the degree of certainty of the outcome on the merits, and (2) the consequences to each of the parties of granting or denying interim relief, that an injunction is proper. The standard of review is abuse of discretion.

First, the court of appeals found there was no error on likely success on the merits. MV Realty argued that it “properly disclosed to homeowners that the memoranda would be recorded with the county recorder’s office,” so it made no material misrepresentations to homeowners, and that the “memorandum” wasn’t legally a “lien.” The court of appeals understandably disagreed. The evidence demonstrated that “[MV Realty] knew the memoranda operated as liens, represented this to [its] investors, but materially misrepresented the effect of the memoranda to the Homeowners.”

MV Realty argued that a lien has to be “a legal claim against a property to secure the payment of a debt” and the memorandum was a mere “notice disclosing its contract rights,” such that MV Realty could file a lien for 3% of the value of the property upon sale or transfer if the consumer breaches the agreement and does not use MV Realty in the real estate transaction.

Not so. “A lien is a charge imposed in some mode other than by a transfer in trust upon specific property by which it is made security for the performance of an act.” The documents called it “a lien and security interest.” More than once! MV Realty called it a lien when talking internally or to investors, and “[u]nderwriters who analyzed the memorandum instructed their agents to treat it as a lien or a mortgage.” There was substantial evidence of likely success on the merits.

What about balancing the harms? The trial court stated that it was “not persuaded that [MV Realty has] shown grave or irreparable harm to warrant denial of the preliminary injunction,” though it accepted MV Realty’s contention that if the preliminary injunction issued, it would “essentially [be] force[d] ... to cease business in California and require[d] ... to terminate thousands of [m]emoranda, which it ha[d] already provided consumers consideration for.” The court also accepted MV Realty’s contention that it would be put “ ‘in a state of financial disarray.’ ” Nonetheless, even if the district court wrongly found no grave or irreparable harm, MV Realty was not prejudiced and there was no clear error because the trial court acceptably balanced the harms to the parties. (And of course that’s one completely coherent way to read the statement that MV Realty didn’t show harm to warrant denial of the PI.)

“At this stage of the analysis, no hard and fast rule dictates which consideration must be accorded greater weight by the trial court. For example, if it appears fairly clear that the plaintiff will prevail on the merits, a trial court might legitimately decide that an injunction should issue even though the plaintiff is unable to prevail in a balancing of the probable harms.” The goal is to minimize the harm that would be caused by an erroneous interim decision.

The trial court didn’t clearly err when it found there would be imminent, irreparable harm to homeowners bound by the agreement if the preliminary injunction did not issue because each homeowner would be bound by terms they never would have knowingly accepted. Not one of the roughly 70 homeowners who submitted declarations stated that a cloud on marketable title “was something they willingly bargained for in exchange for the .27 percent of their home value they received as consideration.” (Yeah, I noticed that about the quote from MV Realty’s declarations too.)  “Even when MV Realty offers to subordinate its lien, as the evidence shows it has done in the past, many lenders will not accept the subordination. A homeowner who wishes to refinance or take a home equity loan, therefore, must pay the Early Termination Fee to clear the title.” Thus, there was no abuse of discretion in balancing the harms.

MV Realty proposed that instead of ordering it to terminate all memoranda, the trial court could order it to: provide notice to every customer, title company, and lender that the memoranda is not a lien; subordinate when requested to do so by a lender; and terminate a memorandum if a lender rejects the subordination. None of these suggestions was a deviation from what MV Realty represented was its contemporaneous practice to assist homeowners with refinancing. The People submitted evidence that homeowners nevertheless continued to suffer harm as they struggled to get in touch with the company to request subordination and complete the lengthy process of clearing title.

There was no abuse of discretion in finding these steps insufficient.