Judge: Andrew E. Cooper, Case: 24CHCV02955, Date: 2024-10-08 Tentative Ruling

Counsel wishing to submit on a tentative ruling may inform the clerk or courtroom assisant in North Valley Department F51, 9425 Penfield Ave., Chatsworth, CA 91311, at (818) 407-2251.  Please be aware that unless all parties submit, the matter will still be called for hearing and may be argued by any appearing/non-submitting parties. If the matter is submitted on the court's tentative ruling by all parties, counsel for moving party shall give notice of ruling. This may be done by incorporating verbatim the court's tentative ruling. The tentative ruling may be extracted verbatim by copying and specially pasting, as unformatted text, from the Los Angeles Superior Court’s website, http://www.lasuperiorcourt.org. All hearings on law and motion and other calendar matters are generally NOT transcribed by a court reporter unless one is provided by the party(ies).

Case Number: 24CHCV02955    Hearing Date: October 8, 2024    Dept: F51

PRELIMINARY INJUNCTION

Application Filed: 9/3/24

MOVING PARTY: Plaintiff Meraki Building, a California Corporation (“Plaintiff”)

RESPONDING PARTY: Defendant McMillen Capital, LLC (“Defendant”)

NOTICE: OK

RELIEF REQUESTED: A preliminary injunction restraining the foreclosure sale of the Subject Properties.

TENTATIVE RULING: The request is denied.

BACKGROUND 

This is a contract action wherein Plaintiff alleges that in December 2019, it obtained a loan from Defendant in the amount of $3,300,000.00, cross-collateralized by 13 properties. (Compl. ¶¶ 7–8.) Plaintiff alleges that the parties agreed to a loan modification that extended the loan’s maturity date indefinitely from its original maturity date of June 2021, but in February 2024, Defendant reneged “on its repeated promises over the past three years that it would accept the original monthly payment and interest rate.” (Id. at ¶¶ 9–19.) “Thereafter, McMillen recorded a Notice of Default on April 3, 2024, stating that $4,423,900.31 must be paid in 90 days, or a foreclosure sale would be scheduled.” (Id. at ¶ 21.)

On 8/19/24, Plaintiff filed its complaint, alleging the following causes of action: (1) Usury; (2) Breach of Contract; (3) Promissory Estoppel; (4) Wrongful Foreclosure; and (5) Violation of Bus. And Prof. Code § 17200.

On 9/3/24, Plaintiff filed an ex parte application for a temporary restraining order restricting the nonjudicial foreclosure sales of the subject properties, which the Court granted on 9/18/24. The Court also issued an Order to Show Cause regarding why a preliminary injunction should not be issued.

On 9/4/24 Defendant filed its opposition to the ex parte application. On 9/25/24, Defendant filed its supplemental opposition to the instant request for preliminary injunction. No reply has been filed to date.

ANALYSIS

In determining whether to issue a preliminary injunction, the Court considers two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits at trial and (2) the interim harm the plaintiff will likely suffer if the injunction does not issue as compared to the harm the defendant is likely to suffer if the injunction does issue. (White v. Davis (2003) 30 Cal.4th 528, 554; Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 749; Brown v. Pacifica Foundation, Inc. (2019) 34 Cal.App.5th 915, 925; Amgen Inc. v. Health Care Services (2020) 47 Cal.App.5th 716, 731.)

A.    Balancing of Equities

In making a determination on the issuance of a preliminary injunction, the Court must balance the equities between the parties. If denying the requested relief would result in great harm to the plaintiff, and the defendant would suffer little harm if the relief is granted, it is an abuse of discretion to deny relief. (Robbins v. Superior Court (1985) 38 Cal.3d 199, 205; Butt v. State of California (1992) 4 Cal.4th 668, 678 (the greater the plaintiff’s showing on one factor, the less that must be shown on the other to support an injunction).)

Irreparable harm (i.e., inadequate legal remedy) is one of the traditional considerations for the issuance of a preliminary injunction. (Code Civ. Proc. § 526, subd. (a)(2).) The threat of irreparable harm must be imminent and not a mere possibility of harm sometime in the future. (Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1084.) However, plaintiffs need not wait until they have suffered actual harm and may seek injunctive relief against threatened infringement of their rights. (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1292; Costa Mesa City Employees’ Assn. v. City of Costa Mesa (2012) 209 Cal.App.4th 298, 305-306.)

Where a piece of real property is under threat of sale under a deed of trust, “such damage may be considered irreparable for in equity each parcel of real property is considered unique.” (Stockton v. Newman (1957) 148 Cal.App.2d 558, 564.) Here, Plaintiff argues that “The risk of irreperable [sic] harm here is substantial given the over cross-collaterization [sic] of this loan. Plaintiff stands to lose the equity in 13 secured properties. The value of the properties is at least double what Defendant is actually owed under the loan.” (Pl.’s Ex Parte App. 6:12–14.) “Further, the harm to Defendants is minimal. Plaintiff is in the process of a sale that will pay a substantial portion of the amounts Defendant claims to be owed. Plaintiff merely seeks a stay so that can be accomplished and the parties can determine the true legal amounts owed.” (Id. at 9:3–5.)

Defendant does not dispute that Plaintiff will be irreparably harmed should be injunction be denied, but instead argues in opposition that “there has been no showing that, even with additional time, Meraki could cure the ever-escalating default it admits.” (Def.’s Supp. Opp. 2:19–21.) Defendant argues that therefore, “Meraki cannot prevail in this action if it cannot even pay off the amount it claims is due.” (Id. at 5:18.) “It is well settled that an injunction should not issue when the party seeking the injunction will not succeed on the merits, even though its issuance might prevent irreparable harm, because there is no justification in delaying that harm where, although irreparable, it is also inevitable.” (14859 Moorpark Homeowner's Ass'n v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1408.)

The Court notes that Plaintiff does not make any showing that it is able to tender the outstanding amount due under the loan. However, no tender is required where the validity of the underlying debt is challenged. (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 114–115.) Here, Plaintiff alleges that Defendant breached the underlying loan modification agreement by attempting to charge Plaintiff more than what the parties agreed upon. Based on the foregoing, the Court finds that in balancing the hardships between the parties, the potential harm to Plaintiff outweighs the potential harm to the Defendant should the injunction not be issued.

B.     Likelihood of Success on the Merits

A trial court may not issue an injunction, regardless of the amount of interim harm, “unless there is some possibility” that plaintiff will ultimately prevail on the merits of the claim. (Jamison v. Department of Transp. (2016) 4 Cal.App.5th 356, 362; Association of Orange County Deputy Sheriffs v. County of Orange (2013) 217 Cal.App.4th 29, 49.)

1.      Breach of Contract; Promissory Estoppel

Plaintiff’s second and third causes of action respectively allege against Defendant Breach of Contract and Promissory Estoppel. To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, 51 Cal.4th at 821.) “The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms, (2) reliance by the party to whom the promise is made, (3) the reliance must be both reasonable and foreseeable, and (4) the party asserting the estoppel must be injured by his reliance.” (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945.) These two causes of action are alternatively pled.

Here, Plaintiff argues that the Defendant breached the loan modification agreement by attempting to charge Plaintiff default penalties at a higher interest rate than agreed upon. (Pl.’s Ex Parte App. 3:8–10.) Plaintiff proffers an email between the parties in which Defendant’s manager stated the following:

“Per our verbal conversation of last week, I am offering the following terms.

1. By the agreement, interest goes up to 18% on June 4, 2021; however, if you continue making the $33,000 payments for up to another year, I’ll accept those payments so long as you pay in full the original principal plus the “fully earned interest” ($396,000) plus anything else owing (other than the extra 6% interest) by June 4, 2022.

2. If you miss a $33,000 payment or you don’t pay off the note by June 4, 2022; I will include the extra interest ($16,500/mo) in my payoff demand. I will only waive that increased interest if you make all monthly payments on time and pay off the loan by 06/04/22.

3. lf you don’t pay loan off by June 4, 2022, the interest rate will raise up to 18% then and I will demand the unpaid 6% interest for 06/04/21-06/04/22.” (Ex. 2 to Decl. of Rosemary Franco.)

Plaintiff further argues that it “would have paid off the loan had Defendant followed through on Defendant’s promise and charged the appropriate amounts under the agreement.” (Pl.’s Ex Parte App. 7:1–3.) Defendant argues in opposition that Plaintiff cannot succeed on the merits of its contract cause of action because “Meraki did not perform either of the conditions. Three of the payments between June 4, 2021 and June 4, 2022 were more than a week late. And, more significantly, Meraki did not pay the loan off on June 4, 2022.” (Def.’s Opp. 4:3–5, citing McMillen Decl. ¶ 6.) “Accordingly, as specifically stated in the forbearance agreement, the post-maturity interest rate was not waived and Meraki owed interest at the rate of 18% per annum from and after the maturity date.” (Id. at 4:5–8.)

The Court notes that Plaintiff has failed to file any reply to Defendant’s opposition. Based on the foregoing, the Court finds that Plaintiff has not sufficiently shown an essential element of a cause of action for breach of contract, namely that it performed under the purported loan modification agreement. Accordingly, at this juncture, the Court finds that the likelihood that Plaintiff will prevail on this cause of action is relatively low. 

2.      Usury

Plaintiff’s first cause of action alleges Usury against Defendant. “Usury is the charging of interest for a loan or forbearance on money in excess of the legal maximum.” (11 Cal. Real Est. § 37:1 (4th ed.).) “The essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction.” (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 798.)

Here, Plaintiff alleges that “Defendant McMillen engaged in usury by seeking to charge an unconscionable interest rate” and “by attempting to charge default interest across the entirety of the unpaid balance on an immature loan constituting an illegal penalty.” (Compl. ¶¶ 24–25.) Defendant argues in opposition that “nothing in McMillen Capital’s email indicates that the loan no longer has a maturity date.” (Def.’s Opp. 10:25–26.) The Court agrees, and again notes Plaintiff’s failure to file a reply argument.

Based on the foregoing, the Court finds that Plaintiff has not sufficiently shown that Defendant is liable for usury. Accordingly, at this juncture, the Court finds that the likelihood that Plaintiff will prevail on this cause of action is relatively low. 

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3.      Unfair Business Practices

Plaintiff’s fifth cause of action alleges Unfair Competition against Defendant in violation of Business and Professions Code section 17200 et seq. (the “UCL”). To succeed on a claim for unfair business practices in violation of the UCL, a plaintiff must establish that the defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.) “In essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 515.)

Here, to the extent that Plaintiff’s UCL cause of action is derivative of the foregoing causes of action, the Court finds that Plaintiff has not sufficiently shown that Defendant is liable for unfair business practices in violation of the UCL. Accordingly, at this juncture, the Court finds that the likelihood that Plaintiff will prevail on this cause of action is relatively low.

While the Court finds that Plaintiff’s interim harm outweighs the interim harm to Defendant should be injunction not be granted, the Court finds that Plaintiff has a relatively low likelihood of success on the merits of the action. Accordingly, the request for a preliminary injunction is denied.

CONCLUSION 

Plaintiff’s request for a preliminary injunction is denied.