Judge: Curtis A. Kin, Case: 24STCV01692, Date: 2024-06-06 Tentative Ruling

Case Number: 24STCV01692    Hearing Date: June 6, 2024    Dept: 86

ORDER TO SHOW CAUSE

RE: PRELIMINARY INJUNCTION

Date:               6/6/24 (1:30 PM) 

Case:                           Ladder Capital Realty III LLC v. 13001 Vanowen LLC, et al. (24STCV01692) 

TENTATIVE RULING:

Defendants 13001 Vanowen LLC, 15042 Dickens LLC, and 21133 Saticoy LLC’s request for a preliminary injunction is DENIED.

Defendants seek a preliminary injunction enjoining plaintiff and cross-defendant Ladder Capital Realty III, LLC, cross-defendant Ladder Capital Finance LLC, and cross-defendant Chicago Title Company (collectively, “Lender”) and any agents from undertaking any activity to continue with the pending non-judicial foreclosure proceeding and trustee’s sale relating to defendants’ properties located at 13001 Vanowen Street in North Hollywood (“Vanowen Property”), 15042-15046 Dickens Street in Los Angeles (“Dickens Property”), and 21133 Saticoy Street in Los Angeles (“Saticoy Property”) (collectively, “Properties”).

With respect to whether defendants 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.) 

Defendants argue that Lender should be enjoined from foreclosing on the Properties because they are likely to prevail on their implied covenant and wrongful foreclosure causes of action asserted against Lender in their Cross-Complaint. Defendants maintain that, after they requested funding from Lender, Lender delayed and ultimately denied the requests under the pretext of needing “unreasonably excruciating detail.” (Farahi Decl. ¶¶ 8-13.) Under the Loan Agreement, defendants are entitled to disbursement of funds to renovate the Properties subject to satisfaction of specified conditions. (Farahi Decl. ¶ 6 & Ex. A at § 2.12(a), (e).) Defendants fail to explain why Lender’s request for additional information, including a breakdown between the anticipated renovation and capital improvement expenses and a reason why defendants were using different general contractors for each building, was unreasonable or not required under the Loan Agreement. (Farahi Decl. ¶¶ 8, 11.)  A review of the communications and correspondence between the parties regarding the funding requests does not, without more, appear to establish the unreasonableness claimed by defendant. (See Farahi Decl. ¶¶ 9-12 & Exs B, C, D, E.) Indeed, Lender’s Managing Director contends, albeit in largely conclusory fashion, that Lender funded every request defendants made in accordance with the loan documents and that defendants’ funding requests were deficient in several identified respects.  (Supp. Alexander Decl. ¶¶ 35-38.) On this record, the Court cannot find defendants have established a likelihood of success on their claims based on Lender’s purportedly unreasonable conduct.

Even assuming Lender’s conditions were unreasonable, defendants waived any implied covenant or wrongful foreclosure claim by agreeing to the terms of the Modification, Amendment to Loan Agreement and Other Loan Documents, Release and Ratification Agreement (“Modification and Release Agreement”) on June 23, 2023. Specifically, defendants agreed that “[a]ll indebtedness created under the Loan Documents is validly and unconditionally owing in full to Lender, in accordance with the terms thereof, as modified hereby, and Borrower does not have any…claims against Lender or any employee, officer, director, agent or attorney of Lender in connection with any of the Loan Documents.” (Supp. Alexander Decl. ¶ 17 & Ex. A at § 3(iv); see also §§ 5, 14, 15 [provisions waiving claims connected arising out of Loan].) “It is, of course, well settled that a contracting party may waive provisions placed in a contract solely for his benefit.” (Isaacson v. G.D. Robertson & Co. (1948) 85 Cal.App.2d 71, 75.)

Defendants argue that they did not waive their claims against Lender because they entered into the Modification and Lease Agreement under economic duress and due to promissory fraud. (See Civ. Code § 1689(b)(1) [party to contract may rescind contract in cases of duress, mistake, undue influence, economic duress, or fraud].)

“The doctrine of ‘economic duress’ can apply when one party has done a wrongful act which is sufficiently coercive to cause a reasonably prudent person, faced with no reasonable alternative, to agree to an unfavorable contract. [Citation.]  The party subjected to the coercive act, and having no reasonable alternative, can then plead ‘economic duress’ to avoid the contract.” (CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 644.) Defendants contend that Lender first funded tenant buyouts in the first three quarters of 2022 but, when defendants sought advances to renovate the Properties, Lender unreasonably denied their funding requests. (Farahi Decl. ¶¶ 8-13; Supp. Farahi Decl. ¶¶ 6, 13.) Lender’s denial of funding purportedly caused defendants to sustain vacancy losses through June 2023. (Supp. Farahi Decl. ¶ 12.) Defendants were purportedly coerced into agreeing to the Modification and Release Agreement after they complained to Lender about having been stonewalled from completing their business plan, after which Lender threatened to withdraw the opportunity to modify the Loan. (Farahi Decl. ¶ 16; Supp. Farahi Decl. ¶ 12.) However, defendants had a reasonable alternative—to obtain alternative financing or rescue lending, which they resolved to do by the end of 2022. (Supp. Farahi Decl. ¶ 8.) Although defendants state they were unable to secure alternative financing or rescue lending (Reply at 18:18-19), defendants fail to provide any meaningful evidence of this assertion. (Hebberd-Kulow Enterprises, Inc. v. Kelomar, Inc. (2013) 218 Cal.App.4th 272, 283 [“An attorney's argument in pleadings is not evidence”].) Defendants only indicate their plan to obtain alternate financing and sell the Vanowen Property. (Supp. Farahi Decl. ¶¶ 8, 9.) Although defendants set forth their unsuccessful efforts to sell the Vanowen Property (Supp. Farahi Decl. ¶¶ 9-11), they do not set forth their efforts to obtain alternate financing. The Court is unable to find on this record that defendants had “no reasonable alternative” but to agree to the Modification and Release Agreement.

Defendants also argue that Lender made promises that they would quickly distribute funds that they needed for renovation work after signing the Modification and Release Agreement. (Supp. Farahi Decl. ¶ 13.) Defendants contend that Lender had no intention of granting their funding requests based on notices of default filed after defendants agreed to the Modification and Release Agreement. (Supp. Farahi Decl. ¶ 13.) However, under the Modification and Release Agreement, defendants agreed to release Lender from any and all representations and promises arising out of or relating to the Loan and Loan Documents, including the Modification and Release Agreement. (Supp. Alexander Decl. ¶ 17 & Ex. A at §§ 2(b), 15, 15(b).) “The general rule is that when a person with the capacity of reading and understanding an instrument signs it, he is, in the absence of fraud and imposition, bound by its contents, and is estopped from saying that its explicit provisions are contrary to his intentions or understanding [Citations].” (Larsen v. Johannes (1970) 7 Cal.App.3d 491, 501.) Having signed and received the benefits of the Modification and Release Agreement, defendants cannot argue that they were fraudulently induced into entering into its terms.

For the foregoing reasons, defendants have not demonstrated that they are likely to prevail on their breach of the implied covenant and wrongful foreclosure claims.

Having failed to show a likelihood of prevailing on any cause of action, defendants’ request for a preliminary injunction is DENIED, notwithstanding any harm that may result from the denial of defendants’ request. (Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 459 [“In a practical sense it is appropriate to deny an injunction where there is no showing of reasonable probability of success, even though the foreclosure will create irreparable harm, because there is no justification in delaying that harm where, although irreparable, it is also inevitable”].)

For the foregoing reasons, defendants’ request for a preliminary injunction is DENIED. The Court’s Order to Show Cause Re: Preliminary Injunction is DISCHARGED.