Judge: Curtis A. Kin, Case: 23STCV19020, Date: 2023-11-07 Tentative Ruling

Case Number: 23STCV19020    Hearing Date: November 7, 2023    Dept: 82

ORDER TO SHOW CAUSE

RE: PRELIMINARY INJUNCTION

Date:               11/7/23 (9:30 AM)

Case:                           Alex Foxman et al. v. Russell M. Frandsen et al. (23STCV19020)

TENTATIVE RULING:

Plaintiffs Alex Foxman and Michal Morey-Foxman’s request for a preliminary injunction is DENIED.

Plaintiffs seek an order enjoining defendants Russell M. Frandsen, Christine Frandsen, Andre Berger, and Tracy Berger from foreclosing on plaintiffs’ house and condominium, which currently secure a Promissory Note. (Morris Decl. ¶ 2 & Ex. 2 [Deed of Trust]; ¶ 10 & Exs. 3, 4 [Notices of Default]; ¶ 13 & Ex. 19 [Notice of Trustee Sale]; Davis Decl. ¶ 2 & Ex. 1 [Promissory Note].) In their sole cause of action for declaratory relief, plaintiffs contend that defendants are barred from foreclosure by the one action rule set forth in CCP § 726(a). (See FAC ¶¶ 22, 23 [“Plaintiffs contend…the [Deeds of Trust] are void and invalid due to violation of the One Action Rule…. Plaintiffs seek a judicial declaration of this Court that the [Deeds of Trust]…are void and invalid and that Defendants have no right to foreclose on said [Deeds of Trust]”].)

As a preliminary matter, plaintiffs are not collaterally estopped from seeking their requested declaratory relief by rulings from the U.S. Bankruptcy Court. The Bankruptcy Court adjudicated whether defendants were entitled relief from the automatic stay of plaintiffs’ bankruptcy estate. (Davis Decl. ¶ 17 & Exs. 11, 12.) The Bankruptcy Court’s ruling that defendants may “enforce its remedies to foreclose and obtain possession of” the house and condominium is not equivalent to a ruling on defendants’ right to foreclose, as such enforcement must be “in accordance with applicable nonbankruptcy law.” (Id. Ex. 12 at 2; Ex. 11 at 25, 44 [ruling that defendants “may proceed under applicable nonbankruptcy law to enforce their remedies to foreclose upon and obtain possession of” plaintiffs’ house and condominium].)

With respect to whether plaintiffs are entitled to a preliminary injunction, “[T]he question whether a preliminary injunction should be granted involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.”  (White v. Davis (2003) 30 Cal.4th 528, 554.) 

CCP § 726(a) states: “There 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.” Under CCP § 726(a), a secured creditor must “in a single action…exhaust his security judicially before he may obtain a monetary ‘deficiency’ judgment against the debtor.” (O'Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 597.) “The creditor who obtains a monetary judgment in contravention of the security-first rules of section 726 will be deemed to have forfeited his right to further pursue his security interest.” (Ibid.)

In arguing that defendants are barred from seeking a non-judicial foreclosure, plaintiffs rely on an order enforcing settlement (“Order”) entered in Andre Berger et al. v. Alex Foxman et al., LASC Case No. 19STCV00723 (“Berger Action”). (Morris Decl. ¶ 6 & Ex. 6.) In the Order, the Hon. Michael Stern held that plaintiffs owe $1,166,658.06, plus interest, as of November 16, 2022, pursuant to a Settlement Agreement and the secured Promissory Note and Deeds of Trust. (Id. at 6:7-9.)

Plaintiffs contend that the Order operates as a judgment. The Court disagrees. The Order did not resolve all issues in the Berger Action. The Berger Action is consolidated with Case No. 20STCP02611, wherein Alex Foxman asks for reimbursement of loans he purportedly had made to defendants and his share of profits to which he was purportedly entitled. (Morris Decl. ¶¶ 3, 4 & Ex. 10.) Foxman’s claims are set for trial on December 13, 2023. (Morris Decl. ¶ 4; Davis Decl. ¶ 13.)

It is also noteworthy that, in connection with their proposed order to enforce settlement, defendants confirmed that they were not seeking judgment because they would have waived their rights to enforce the Deeds of Trust under the one action rule. (Davis Decl. ¶ 11 & Ex. 7 at 2:6-12, citing In re Pajaro Dunes Rental Agency, Inc. (N.D. Cal. 1993) 156 B.R. 263, 267 [“However, Plaintiffs’ Counsel [“Berger Parties”] does not believe it can submit to the Court at this time a proposed ‘judgment’ because to do so may jeopardize Plaintiffs’ ability to enforce the deeds of trust that secure the related $881,740 promissory note signed by Defendants in favor of Plaintiffs as required under the Settlement Agreement. Specifically, it is well settled that a secured creditor’s ‘acceptance of [a] money judgment’ against a debtor prior to ‘foreclosure on the security . . . waive[s] any right to foreclose on the deed of trust at a later date’”].) Further, the Foxman plaintiffs conceded that was the case during the evidentiary hearing prior to entry of the Order, admitting that defendants were not seeking entry of a judgment. (Davis Decl. ¶ 12.)

Defendants only sought to enforce the settlement in the Berger Action because plaintiffs had filed for bankruptcy and asserted in the Bankruptcy Court that they were entitled to adjustments to the amounts due under the Promissory Note. (Davis Decl. ¶ 7.) Defendants obtained relief from the automatic stay to adjudicate the amounts owed under the Promissory Note. (Id. ¶ 8 & Ex. 4.) Defendants obtained such an adjudication with entry of the Order. Defendants did not waive their right to enforce the Deeds of Trust by seeking an adjudication of the amount owed under the Promissory Note.

Critzer v. Enos (2010) 187 Cal.App.4th 1242, cited by plaintiffs, is inapposite. In Critzer, the Court of Appeal found that the order enforcing settlement operated as a judgment and was appealable because the order “finally disposed of the litigation,” leaving “nothing left for the court to do other than enforce its order….” (Critzer, 187 Cal.App.4th at 1252.) As discussed above, plaintiffs’ affirmative claims for reimbursement remain in the Berger Action. Accordingly, the Order did not fully dispose of the Berger Action.

Having failed to show that defendants obtained a monetary judgment, which would have forfeited their right to foreclose on the Deeds of Trust, plaintiffs fail to demonstrate a likelihood that they will prevail on the merits. Accordingly, regardless of what harm may result to plaintiffs from foreclosure on their personal residence and separate condominium, a preliminary injunction cannot issue. (American Academy of Pediatrics v. Van de Kamp (1989) 214 Cal.App.3d 831, 838 [“[A]n injunction should not issue where there is no possibility of success even though its issuance might prevent irreparable harm…. Where there is indeed no likelihood that the plaintiff will prevail, an injunction favoring the plaintiff serves no valid purpose and can only cause needless harm”].)

Plaintiffs’ request for a preliminary injunction is DENIED.

The temporary restraining order entered on October 17, 2023 is hereby DISSOLVED. The

Court’s Order to Show Cause Re: Preliminary Injunction is DISCHARGED.