Judge: Curtis A. Kin, Case: 24STCV06180, Date: 2024-05-07 Tentative Ruling
Case Number: 24STCV06180 Hearing Date: May 7, 2024 Dept: 86
MOTION FOR APPOINTMENT OF RECEIVER AND FOR PRELIMINARY
INJUNCTION
Date: 5/7/24
(1:30 PM)
Case: East West Bank v.
PW Canre Holdings, LLC et al. (24STCV06180)
TENTATIVE RULING:
Plaintiff East West Bank’s Motion for Appointment of
Receiver and for Preliminary Injunction is DENIED.
I.
FACTUAL BACKGROUND
On December 21, 2021, defendant PW Canre Holdings, LLC
(“Borrower”) entered into a loan transaction (“Loan”) with plaintiff East West
Bank (“Lender”), whereby Borrower borrowed $20,000,000 from Lender. (Sui Decl.
¶ 3.) The Loan is evidenced by a written Loan Agreement and a Promissory Note
(“Note”), both dated December 21, 2021. (Sui Decl. ¶¶ 3, 4 & Exs. A, B.) The
other named defendants (collectively, “Guarantors”) guaranteed Borrower’s
performance under the Loan. (Sui Decl. ¶¶ 6-9 & Exs. D-G.)
Guarantors entered into 17 deeds of trust to secure
repayment of the indebtedness evidenced by the Note. (Sui Decl. ¶ 12 & Exs.
J-Z.) The deeds of trust granted security interests in 17 real properties. (Sui
Decl. ¶ 12 & Exs. J-Z.) The deeds of trust provide for Lender to apply to
the immediate appointment of a receiver for all or any party of the real
property and the rents. (Sui Decl. ¶ 12 & Exs. J [§ 7.4], K, Z [§ 6.3(b),
(c)], M-Y [§7.5].)
On March 13, 2023, Lender, Borrower, and Guarantors entered
into a Forbearance Agreement, wherein Borrower and Guarantors agreed that
Borrower defaulted under the Loan Agreement by failing to pay an overadvance in
the amount of $13,366,597 and failing to maintain the loan balance. (Siu Decl.
¶ 11 & Ex. I at ¶ C.)
After execution of the Forbearance Agreement, Borrower
defaulted under the Loan Agreement by: (1) failing to pay an overadvance in
violation of Sections 8.1(a), (j), and (k); (2) failing to pay interest in
violation of Section 8.1(b); (3) failing to maintain the loan in balance in
violation of Sections 4.8 and 8.1(k); and (4) failing to pay property taxes on
several of the parcels of real property constituting collateral in violation of
Sections 5.8 and 6.17. (Siu Decl. ¶ 14.) Plaintiff sent Notice of Default and
Acceleration to Borrower and Guarantors. (Siu Decl. ¶ 31 & Ex. PP.) Borrower
has refused to pay the amounts due under the Loan. (Siu Decl. ¶ 30.)
II.
REQUEST TO APPOINT A RECEIVER
Pursuant to CCP § 564(b)(2),
(b)(6), (b)(9), and (b)(11), plaintiff seeks the appointment of a receiver with
respect to various real properties. The receiver would operate the properties
and collect rents.
A receiver may be appointed in an action by a secured lender for the
foreclosure of a deed of trust and sale of the property where it appears that
the property is in danger of being lost, removed, or materially injured. (CCP §
564(b)(2).) A receiver may also be appointed where “a corporation is insolvent,
or in imminent danger of insolvency, or has forfeited its corporate rights.”
(CCP § 564(b)(6).) A court may also appoint a receiver “where necessary to
preserve the property or rights of any party.” (CCP § 564(b)(9).) Additionally,
a court may appoint a receiver “[i]n an action by a secured lender for specific
performance of an assignment of rents provision in a deed of trust, mortgage,
or separate assignment document.” (CCP § 564(b)(11).)
A receiver should not be appointed unless absolutely
essential, because no other remedy will suffice. (City & County of San
Francisco v. Daley (1993) 16 Cal.App.4th 734, 745.) This is so because the
appointment of a receiver is recognized as a drastic, time consuming, expensive,
and potentially unjust remedy to be used as a final resort. (See Weil
& Brown, Civ. Proc. Before Trial § 9:743 et seq.; see also
Alhambra-Shumway Mines v. Alhambra Gold Mine Corp. (1953) 116 Cal.App.2d
869, 873.) “The appointment of a receiver is a drastic remedy and is one which
should not be invoked unless there is an actual or threatened cessation or
diminution of the business.” (In re Jamison Steel Corp. (1958) 158
Cal.App.2d 27, 35.)
Lender contends that Guarantors are failing to pay property
taxes on the real properties serving as collateral. (Siu Decl. ¶¶ 15-29, 32
& Exs. AA-MM.) One of the real properties serving as collateral has been
the subject of a tax lien sale, which will purportedly result in a foreclosure
sale if not satisfied. (Siu Decl. ¶ 32 & Ex. QQ.) Lender also argues that
Borrower has requested funding for tenant expenses, employee expenses, utility
expenses, insurance costs, and other carry costs for the collateral real
properties. (Siu Decl. ¶ 32.) Lender seeks to have a receiver appointed to prevent
Guarantors from losing ownership of the properties. (Siu Decl. ¶ 32.)
While the deeds of trust allow for appointment of a
receiver, the Court finds that Lender is not entitled to appointment of a
receiver for several reasons. First, 16 of the 17 real properties which serve
as collateral under the deeds of trust are located outside of California. (Siu
Decl. ¶ 12.) The Court does not have jurisdiction over property outside the
state’s orders, and, since the 1800s, it has been established that a receiver
appointed by the court of one state has no rights over property found in another
state. (Booth v. Clark (1854) 17
How. 322, 328-329; see also Taylor v. Taylor (1923) 192 Cal. 71, 76
[“That the courts of one state cannot make a decree which will operate to
change or directly affect the title to real property beyond the territorial
limits of its jurisdiction must be conceded. The doctrine that a court, not
having jurisdiction of the res, cannot affect it by its decree is firmly
established”]; Melvin v Carl (1931) 118 Cal.App.249, 251 [“[A] receiver
appointed by a court of a sister state has no authority over property in California”].)
As for the one property located in the State of California (13310
Little Morongo Road, Desert Hot Springs, California 92240), Lender fails to
show a receiver is absolutely essential or that the property is in danger of
dissipation. Even if Guarantors are not paying property taxes and are
requesting funding to cover various expenses, Lender fails to show any
immediate danger of foreclosure or deterioration. Lender asserts that it
requires a receiver to determine the appropriate carry costs, as Lender lacks the
requisite expertise. (Siu Decl. ¶ 32.) However, the appointment of a receiver
is reserved as a final resort; the cost of a receiver outweighs any benefit
that might be obtained from having a receiver to determine appropriate costs of
operation.
For the foregoing reasons, the request for appointment of a
receiver is DENIED.
III.
REQUEST FOR PRELIMINARY INJUNCTION
Lender also requests a preliminary injunction preventing
Borrower, Guarantors, and their agents from the following:
1.
Commit or permit any waste of the Receivership
Property, or any part thereof, or suffer, commit or permit any act on the
Receivership Property, or any part thereof, in violation of law, or remove,
transfer, encumber or otherwise dispose of any of the Receivership Property or
any part thereof;
2.
Directly or indirectly interfere in any manner with the
discharge of the Receiver’s duties or the Receiver’s possession of and
operation or management of the Receivership Property;
3.
Expend, disburse, transfer, assign, sell, convey,
devise, pledge, mortgage, create a security interest in, encumber, conceal, or
in any manner whatsoever deal in or dispose of the whole or any part of the
Receivership Property;
4.
Withhold any Receivership Property, including any
assets, books, records, or funds from the Receiver pertaining to the
Receivership Property; and
5.
Do any act which will, or which will tend to, impair,
defeat, divert, prevent, or prejudice the preservation of the Receivership
Property.
(Notice of Motion at 3:25-4:16.)
“[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.)
To the extent that Lender is seeking a preliminary
injunction to aid a receiver (Mtn. at 22:13-14), Lender is not entitled to a
preliminary injunction for the reasons stated above with respect to the request
for appointment of a receiver. However, items 1, 3, and 5 listed above are
independent of any appointment of a receiver.
Because Guarantors guaranteed Borrower’s performance under the
Loan and have not paid the sums due under the Loan Agreement and Note, Lender
demonstrates that it is likely to prevail on its claims of breach of guaranty.
(Siu Decl. ¶¶ 30, 31; Compl. ¶¶ 90-95.) However, with respect to the relative
balance of harms, Lender’s interest is already protected by the recording of
deeds of trust against the real properties at issue in the instant motion. (Siu
Decl. ¶ 12 & Exs. J-Z.) Should the properties be foreclosed upon, Lender
would receive the proceeds in accordance with the priority of its liens. On the
other hand, should Borrower and Guarantors have a defense against Lender’s
assertions of default, a preliminary injunction would be unduly restrictive of
their rights to alienation of their land. Because a preliminary injunction is
unnecessary to protect Lender’s interests, the request for preliminary
injunction is DENIED.