NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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OPINION

FYBEL, J.

INTRODUCTION

Following a bench trial, the trial court found that plaintiffs, cross-defendants, and respondents Firouzeh Gharaee and Ruth Cea (together, Respondents) made a loan to defendant Jose Luis Ramirez, Sr., and his business entities and the loan was secured by a deed of trust on real property. The court found that the loan was memorialized by a writing that satisfied the statute of frauds. The judgment awarded money damages of $393,000 based on claims the loan was not repaid and included a decree of judicial foreclosure of the deed of trust.

Appellants are Jose Luis Ramirez, Sr., Ramirez Family Trust, the Olimpia Family Revocable Trust, Dated October 13, 2014 (the Olimpia Trust), and Rosalva Ramirez1 (collectively, Appellants). They contend (1) substantial evidence did not support a finding that Respondents made a loan rather than purchased stock in Ramirez's business, (2) the memorandum memorializing the loan did not satisfy the statute of frauds, (3) Respondents violated the "one form of action" rule (Code Civ. Proc., § 726, subd. (a)) and waived the security for the loan by obtaining a money judgment, (4) the trial court erred by awarding prejudgment interest at the legal rate, and (5) the trial court erred by awarding Respondents attorney fees as prevailing parties.

We conclude substantial evidence supported the finding that Respondents made a loan to Ramirez and did not purchase shares of stock in his company. We do not address the statute of frauds issue because we conclude Respondents waived the security by obtaining a money judgment for the full amount of the indebtedness. In addition, we conclude the trial court did not err by awarding prejudgment interest at the legal rate. As we are reversing the judgment for judicial foreclosure, we reverse that portion of the judgment awarding Respondents their attorney fees because the only basis for recovering attorney fees was a provision of the deed of trust.

FACTS

I.

The $50,000 Loan

Gharaee and Ruth Cea are business partners. Defendant Herman F. Cea is Ruth Cea's brother and had known Gharaee for about 15 years. Herman Cea worked as the controller for United Enterprise Group (UEG) and Family Steel Corporation (Family Steel), businesses owned by Ramirez.2

In December 2012, Herman Cea introduced Respondents to Ramirez. Herman Cea told Respondents that Ramirez had 30 years of experience in the steel business and had built a company called Ramcast that was worth about $300 million. Ramirez's brothers had kicked him out of the company and he wanted to start a new one.

Ramirez asked Respondents for a $50,000 loan, which would be repaid in two weeks with $5,000 interest. Herman Cea said that Ramirez had a $2.5 million home in Irvine (the Irvine Home) that could serve as security for the loan. The Irvine Home had been purchased by Ramirez and his wife, Rosalva Ramirez, in 1993 or 1994. They initially took title as joint tenants. In 2013, title to the Irvine Home was held either by Rosalva Ramirez or the Ramirez Family Trust.

Respondents made the loan by cashier's check payable to UEG, which was the new business owned by Ramirez. Herman Cea and Ramirez offered the Irvine Home as collateral for the loan. Ramirez signed and delivered to Respondents a promissory note dated January 17, 2013 with a face amount of $50,000 (the Promissory Note). The Promissory Note called for payment of $55,000 on January 31, 2013. The Promissory Note stated it "may serve as a lien against" the Irvine Home. The proceeds of the loan from Respondents were deposited into a checking account held in the name of Family Steel.

II.

The $343,000 Loan

The Promissory Note was not paid on January 31, 2013. In February 2013, Herman Cea sent an e-mail to Ruth Cea, asking her to invest "in a start up company" and stating, "NO more short term loans only long term loan at 12-15% max or buy in. Please review and take a chance." The e-mail stated that $100,000 "buys in 1%."

Respondents met with Ramirez and Herman Cea at Family Steel. Ramirez and Herman Cea wanted Respondents to buy shares in the company. Respondents were not interested in buying into the company because they knew nothing about the steel business. Ruth Cea told Ramirez, "you need to appraise the company if you want to sell shares."

Respondents agreed to make a loan of additional money to Ramirez's company (the record is not clear whether UEG or Family Steel) that would be repaid within six months. The Irvine Home would be used as security for the loan. The term of the loan would be six months.

On February 25 and March 6, 2013, Respondents made loans totaling $343,000. A wire transfer of $243,000 was made to the Family Steel checking account on February 25. Two wire transfers totaling $100,000 were made to the Family Steel checking account on March 6.

Herman Cea prepared a document called "Purchase Note of Stock of UEG Inc." (the March Note) which was signed by Ramirez and dated March 6, 2013. The full text of the March Note is as follows:

Gharaee was happy to receive the March Note because it meant "I had something in my hand that shows that they owe [$]400,000 and the house in Irvine is used as collateral." Ruth Cea was "happy that they mentioned the [Irvine Home] and the 400." From March 13, 2013 to August 12, 2013, Respondents worked in the accounts receivable department of UEG.

A deed of trust against the Irvine Home (the deed of trust) was made on March 6, 2013. The deed of trust named Respondents as beneficiaries and stated it is made "for the purpose of securing . . . payment of the sum of $400,000.00 with interest thereon according to the terms of a promissory note or notes of even date herewith made by Trustor." Though made in March, the deed of trust was signed by Ramirez, notarized, and recorded in July 2013.

PROCEDURAL HISTORY

Respondents initiated this lawsuit in January 2014. Their complaint included causes of action for declaratory relief (against Ramirez), breach of contract (against Ramirez, the Ramirez Family Trust, and UEG), judicial foreclosure (against Ramirez, the Ramirez Family Trust, and the trustee of the deed of trust), money had and received (against Ramirez, the Ramirez Family Trust, UEG, and Family Steel), and account stated (against Ramirez, the Ramirez Family Trust, UEG, and Family Steel). Respondents alleged the March Note was a promissory note in the amount of $400,000 and was secured by the deed of trust, the March Note was payable on demand, they had made demand for payment, and Ramirez had not paid. In the breach of contract, money had and received, and account stated causes of action, Respondents sought $400,000 in damages. Respondents sought a judicial foreclosure of the deed of trust.

The trial court granted a motion by Rosalva Ramirez and the Olimpia Trust to intervene and file a cross-complaint against the other parties. The cross-complaint alleged the Olimpia Trust was the current owner of the Irvine Home and that Ramirez breached the terms of a separation agreement and his fiduciary duties by executing the deed of trust. The cross-complaint sought to quiet title to the Irvine Home in the name of the Olimpia Trust.

In April 2015, a bench trial was conducted on all the claims among the parties. Defaults were entered against Herman Cea and Family Steel for failure to appear for trial. The trial court ruled in favor of Respondents and against all other parties. The court issued a statement of decision with these findings:

The judgment awarded Respondents money damages in the amount of $393,000 against Ramirez, Herman Cea, the Ramirez Family Trust, and Family Steel. The judgment included a decree of foreclosure that the Irvine Home "be sold in accord with the provisions of Code of Civil Procedure Section 726 et seq. and the net proceeds after payment of senior indebtedness be applied in satisfaction of this judgment." The judgment awarded prejudgment interest at an annual rate of 10 percent.

DISCUSSION

I.

Substantial Evidence Supports the Finding of a Loan.

The trial court found that the $50,000 cashier's check and the funds transferred from Respondents into the Family Steel checking account constituted a loan and not a stock purchase. We review the trial court's express findings, and any implied findings, under a substantial evidence standard of review. (Apex LLC v. Sharing World, Inc. (2012) 206 Cal.App.4th 999, 1009; C9 Ventures v. SVS-West, L.P. (2012) 202 Cal.App.4th 1483, 1499.)

"We emphasize that the test is not the presence or absence of a substantial conflict in the evidence. Rather, it is simply whether there is substantial evidence in favor of the respondent. If this `substantial' evidence is present, no matter how slight it may appear in comparison with the contradictory evidence, the judgment must be upheld. As a general rule, therefore, we will look only at the evidence and reasonable inferences supporting the successful party, and disregard the contrary showing. [Citations.] In short, even if the judgment of the trial court is against the weight of the evidence, we are bound to uphold it so long as the record is free from prejudicial error and the judgment is supported by evidence which is `substantial,' that is, of `"ponderable legal significance,"' `"reasonable in nature, credible, and of solid value. . . ."' [Citations.]" (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 631.)

"The material terms of a loan include the identity of the lender and borrower, the amount of the loan, and the terms for repayment." (Peterson Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 115.) The Promissory Note was exactly that—a promissory note setting forth the names of the borrowers, the names of the lenders, the amount of the loan, and the terms of repayment.

As to the $343,000 that was wire transferred into the Family Steel checking account, Respondents testified those funds were a loan. Respondents met with Ramirez and Herman Cea at Family Steel. Ramirez and Herman Cea wanted Respondents to buy shares in the company. Both Gharaee and Ruth Cea testified they did not want to buy stock. Ruth Cea testified they were not interested in buying into the company because they knew nothing about the steel business. Both Gharaee and Ruth Cea testified the loan would be repaid within six months. Gharaee testified: "I wasn't interested in owning any stock. My agreement with Mr. Ramirez and Mr. Cea was going to be a six-month loan. And after that I would get my money back." Ruth Cea testified: "[W]e knew that he wanted to start this company, and were willing to risk giving a loan. [¶] But we told them six months. They wanted to sell some shares, and they didn't even have a value on the company."

The evidence established the loan was requested by Ramirez, and the money was wire transferred into a Family Steel checking account. Family Steel and UEG were the same enterprise. Thus, substantial evidence supported an implied finding the borrower was Ramirez, Family Steel, and UEG.3

The March Note, when read together with the deed of trust, also supports the finding of a loan. Although the March Note refers to both an investment loan and a purchase of stock, the deed of trust states it is made for the purpose of securing payment of $400,000 "according to the terms of a promissory note . . . of even date herewith made by Trustor." The deed of trust is dated March 6, 2013, and the only other relevant document also dated March 6, 2013 is the March Note. The makers of the deed of trust (Ramirez and Family Steel) therefore believed the March Note represented a loan and treated it as such. It is significant too that no evidence was presented of any shares being issued to Gharaee or Ruth Cea.

Appellants describe the testimony of Respondents as self-serving.4 The trial court, as the trier of fact, was the exclusive judge of witness credibility. (Leff v. Gunter (1983) 33 Cal.3d 508, 518; Bookout v. Nielsen (2007) 155 Cal.App.4th 1131, 1141 ["It was for the trial court to weigh the evidence and consider the demeanor and credibility of the witnesses."].) The trial court accepted the testimony of Respondents and, in doing so, found them to be credible.

The trial court found that the March Note "identifies the loan in the amount of $400,000" but found Respondents suffered $393,000 in damages and ordered judgment in that amount. Such findings may appear to be inconsistent. Rosalva Ramirez, the Olimpia Trust, and the Ramirez Family Trust filed objections to the proposed statement of decision but did not raise the matter of inconsistency between the findings and the amount of damages. Once the statement of decision was signed and issued, none of the Appellants brought any omissions, ambiguities, or inconsistencies to the trial court's attention. (Fladeboe v. American Isuzu Motors Inc., supra, 150 Cal.App.4th at pp. 58-59.) None of the Appellants moved for a new trial, in which they might have asserted the decision was "`"against law"'" because the findings were irreconcilable. (Schmeltzer v. Gregory (1968) 266 Cal.App.2d 420, 423.) On appeal, Appellants do not assert or address any inconsistencies in the statement of decision; instead, they argue substantial evidence does not support a finding that Respondents made a loan as opposed to purchased stock.

We conclude the finding of a $400,000 loan is reconcilable with a finding and award of $393,000 in damages. The trial court apparently considered the March Note as evidence of a loan but relied on other evidence, specifically the amount of the cashier's check and wire transfers, to find the amount of the loan was $393,000. Based on the lack of any specific mention of an interest rate, the trial court apparently found the loan was interest free. As a result, the damages suffered by Respondents for the failure to repay the loan when due was $393,000.

II.

Respondents Waived the Security by Obtaining a Money Judgment.

Appellants argue Respondents violated the one form of action rule and waived the real property security by obtaining a money judgment for the full amount of the indebtedness. We agree.

Code of Civil Procedure section 726, subdivision (a) states in relevant part, "[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein, which action shall be in accordance with the provisions of this chapter." Section 726 sets forth the one form of action rule, which restricts the secured creditor's remedies for notes secured by real property. (Walker v. Community Bank (1974) 10 Cal.3d 729, 733.) "This provision was first enacted in substantially similar form more than a century ago, and its general operation has long been clear. A secured creditor can bring only one lawsuit to enforce its security interest and collect its debt." (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 997, fn. omitted.) Under the one form of action rule, a secured creditor must proceed against the security before enforcing the underlying debt. (Ibid.)

The one form of action rule of Code of Civil Procedure section 726 operates in two ways. First, the debtor may assert the one form of action rule as an affirmative defense. (Walker v. Community Bank, supra, 10 Cal.3d at p. 734.) If the debtor successfully raises the one form of action rule as an affirmative defense, the creditor must exhaust the security before obtaining a money judgment against the debtor for any deficiency. (Ibid.) Second, if the debtor does not raise the one form of action rule as an affirmative defense, the debtor may yet invoke it against the creditor on the basis that the creditor, by not foreclosing on the security in the action brought to enforce the debt, has made an election of remedies and has waived the security. (Ibid.; see O'Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 598 [creditors waived security by obtaining deficiency judgment without first exhausting security].)

A judicial foreclosure action constitutes an action under the one form of action rule (Code Civ. Proc., § 726, subd. (a); see Bernhardt et al., Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (Cont.Ed.Bar 4th ed. 2017) §§ 3.12, 4.13), as does a lawsuit for recovery of the secured debt (id., § 4.16).

Here, the lawsuit brought by Respondents asserted causes of action both for recovery of the secured debt and for judicial foreclosure of the deed of trust on the Irvine Home. The one form of action rule required Respondents to proceed first against the security. Respondents obtained both a personal money judgment for the full amount of the debt and a decree of judicial foreclosure of the deed of trust. Although none of the Appellants asserted the one form of action rule as an affirmative offense, they do invoke it now.

The effect of the one form of action rules is as follows. "`If the creditor sues on the note, disregarding the security, and the debtor allows personal judgment to go against him without objecting on that ground, (1) the debtor waives the protection of [Code of Civil Procedure section] 726, and (2) the creditor elects the single remedy of a personal action and cannot thereafter foreclose or sell the security under a power of sale. [Citations.]'" (Scalese v. Wong (2000) 84 Cal.App.4th 863, 869.)

In Scalese v. Wong, supra, 84 Cal.App.4th at pages 866-867, a creditor brought an action to foreclose a deed of trust and for a money judgment against debtors on the secured indebtedness. The debtors did not assert the one form of action rule as an affirmative defense. (Id. at p. 870.) When forced by the trial court to make an election of remedies, the creditor selected a personal judgment against the debtors. (Id. at pp. 869-870.) The Court of Appeal concluded that both sides gave up some of their respective rights. (Id. at p. 870.) "[The creditor] has for all time waived its right to have the property serve as security for the note. [The debtors] have given up their right to have the security exhausted before becoming . . . personally liable for any shortfall." (Ibid.)

Respondents did not obtain a judgment for any deficiency that might remain after foreclosure of the deed of trust. Rather, Respondents sought and obtained both a money judgment for the full amount of the debt and obtained a decree of foreclosure of the deed of trust. By doing so, Respondents violated the one form of action rule and, as a consequence, waived the security. The judicial foreclosure portion of the judgment must be reversed.

III.

The Trial Court Did Not Err by Awarding Prejudgment Interest at the Legal Rate.

The judgment recites: "Plaintiffs recover prejudgment interest against the defendants calculated at the rate of 10% per annum from September 1, 2013 in the amount of $73,216.44 through July 13, 2015 plus the sum of approximately $107.67 per day thereafter to the date of entry of judgment."

A person entitled to recover "damages certain, or capable of being made certain by calculation," is also entitled to recover interest from the time the recovery arose. (Civ. Code, § 3287, subd. (a).) "Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation." (Id., § 3289, subd. (a).) The legal rate of prejudgment interest for breach of contract is 10 percent per year after breach. (Id., § 3289, subd. (b).)

Appellants argue the trial court erred by awarding the statutory prejudgment interest rate of 10 percent because the loan from Respondents bore an effective interest rate of about 1 percent. Their interest calculation is based on (1) a total loan amount of $398,000, (2) the March Note having an amount of $400,000, and (3) repayment due in six months. The trial court, however, awarded $393,000 in damages, which was the total amount of the cashier's check ($50,000) and the wire transfers ($343,000). As we have explained, by awarding $393,000 in damages, the court implicitly found that Respondents had made an interest-free loan.

In Puppo v. Larosa (1924) 194 Cal. 717, 720-721, the California Supreme Court held that an interest-free promissory note bears interest at the legal rate from the date of maturity pursuant to Civil Code section 3289. "The fact that the contract provides for no interest has nothing whatever to do with the damages due after the breach of the condition for payment on the due date of the note." (Puppo v. Larosa, supra, at p. 720; see Epstein v. Frank (1981) 125 Cal.App.3d 111, 123 ["The payee of a noninterest-bearing note is entitled to interest at the legal rate from the date the note matures until the date of judgment."].) The award of prejudgment interest at the statutory rate is affirmed.

IV.

Attorney Fees

The judgment awarded Respondents their attorney fees. The only basis identified by Respondents for recovery of attorney fees is subdivision A.3 of the deed of trust, which provides for recovery of costs and attorney fees "in any suit brought by Beneficiary to foreclose this Deed." As we are reversing the judgment on the judicial foreclosure cause of action, no basis remains for recovery of attorney fees. (See Code Civ. Proc., §§ 1021, 1033.5, subd. (a)(10).) Accordingly, that portion of the judgment awarding Respondents their attorney fees is reversed.

DISPOSITION

The judgement is reversed as to the cause of action for judicial foreclosure (Judgment, page 3, lines 7 through 20) and as to the award of attorney fees (Judgment, page 3, line 28 from the phrase "plus attorney's fees" through page 4, line 2). In all other respects, the judgment is affirmed.

Appellants Rosalva Ramirez and the Olimpia Trust prevailed on the judicial foreclosure cause of action, the only cause of action applicable to them, and therefore shall recover their costs on appeal. In the interest of justice, no other party shall recover costs on appeal.

O'LEARY, P. J. and BEDSWORTH, J., concurs.