Judge: Daniel M. Crowley, Case: 21SMCV00756, Date: 2023-03-29 Tentative Ruling

Case Number: 21SMCV00756    Hearing Date: March 29, 2023    Dept: 207

Background

This case arises from the sale of real property located at 2478 Glyndon Avenue, Los Angeles, CA 90291. Defendant Allstar Financial Services, Inc., the lender on a loan secured by the property, sought to sell the property at a non-judicial foreclosure sale. Plaintiff Sunrise Projects, LLC (“Sunrise”) claims it was the highest bidder for the property under the provisions of a recently enacted statutory scheme which changes the procedures for certain non-judicial foreclosure sales as codified by the Legislature at Civil Code § 2924m. The property and Defendant Allstar’s attempted sale have given rise to multiple lawsuits which have been consolidated in whole or in part with this action.

Allstar brings this motion under Code Civ. Proc. § 1030 to require Sunrise to post security as a nonresident plaintiff. Sunrise opposes the motion.

Objections to Evidence

Sunrise’s objections to the declarations of Alfred Haberstroh and Brianna Milligan are OVERRULED.

Legal Standard

In an action brought by a nonresident plaintiff, the defendant may at any time move for an order requiring the plaintiff to post security. (C.C.P. § 1030(a).) The stated grounds for the motion are that the plaintiff resides out of state or is a foreign corporation, and there is a reasonable possibility that the moving defendant will obtain a favorable judgment. (C.C.P. § 1030(b).) The motion can be brought at any time. (C.C.P. § 1030(a).) The trial court has no authority to deny the motion on the ground that it is untimely. (Heffron v. Los Angeles Transit Lines (1959) 170 Cal.App.2d 709.) The motion must be accompanied by a supporting affidavit or declaration which establishes the stated grounds for the motion and sets forth the nature and amount of the costs and attorney fees the defendant has incurred and expects to incur until the action is concluded. (C.C.P. § 1030(b).) It must also be accompanied by a memorandum of points and authorities. (C.C.P. § 1030(b).)

The plaintiff may pursue a number of tactics in opposing a motion for security. These may include:

(1)        proof that the plaintiff is not a nonresident;

(2)        showing the plaintiff's indigency (CCP §995.240); and

(3)        arguing the defendant's failure to make an adequate prima facie showing of a reasonable possibility of success in the action.

A plaintiff can also challenge the amount of the costs and attorney fees requested by the defendant. The security can be ordered only for “reasonable” costs, and the defendant must be otherwise entitled to recover those fees by contract or by another statutory provision. (C.C.P. § 1030(a).)

To succeed on its motion, a defendant is not required to show there is no possibility the plaintiff can win at trial, or that it is reasonably likely that the defendant will prevail, only that it is reasonably possible that the defendant will win. (Baltayan v. Estate of Getemyan (2001) 90 Cal.App.4th 1427, 1432-33.)

Analysis

Allstar argues it has a reasonable possibility of success in this action because Sunrise’s claims arise under Civil Code § 2924m and (1) section 2924m does not apply to the subject property, and (2) Sunrise does not meet the requirements of an eligible bidder under section 2924m even if that statute does apply. In support of this assertion, Allstar has provided a declaration from its Senior Underwriter which merely asserts in conclusory fashion that section 2924m does not apply “because the Property is a construction project and does not contain 1-4 residential units.” (Haberstroh Decl. at ¶7.) This declaration further claims “Sunrise is not an eligible bidder under Section 2924m(a)(3)(F). Sunrise's filings with the California Secretary of State confirm that Sunrise was not registered to do business in California and its managing member was neither a corporation, nor based in California.” (Id. at ¶9.) Allstar does not attach the filings which supposedly demonstrate Sunrise is not an eligible bidder under section 2924m.

The Court already considered and rejected each of these arguments in ruling on Allstar’s motion for summary judgment. In its March 14, 2023, ruling the Court found “It is undisputed the property previously satisfied the requirements of section 2924m(c) and contained one single story residential unit. The redevelopment of that unit into a two-story structure, while currently incomplete, does not take the property beyond the ambit of section 2924m.” (Order at 6.) The Court also found Sunrise’s filings with the Secretary of State did not show Sunrise was not an eligible bidder under the statute. (Id. at 8-9.) Allstar has not put forth any new evidence or argument on this point which would lead the Court to find a reasonable possibility of success on these arguments. The Court notes these arguments are legal arguments, not factual ones, and Allstar has given the Court no basis to reconsider its prior legal determinations on these points. Accordingly, the Court finds Allstar has failed to show a reasonable possibility of success on the merits.

Sunrise also argues Allstar has failed to demonstrate the reasonableness of the costs claimed by Allstar. The Court agrees. As set forth above, security under Code Civ. Proc. § 1030(a) can be ordered only for “reasonable” costs. Allstar has not provided the Court with sufficient information to determine the reasonableness of its claimed costs.

Allstar claims it has “incurred $44,629.58 in costs derived from first appearance fees for around 56 defendants, depositions transcripts, court reporters, filing fees, and other recoverable litigation costs pursuant to California Code of Civil Procedure §1033.5.” (Milligan Decl. at ¶4.) Allstar does not provide any specific explanation of how it reached this figure, or the specific costs which form the basis of this $44,629.58. Allstar also claims “An additional $16,000.00 in costs are expected to be incurred by Allstar through trial for experts, filing fees, trial binders, travel, transportation, and a court reporter, for a 5–7 day trial which is set for April 17, 2023, less than 90 days away.” (Id. at ¶7.) Allstar does not provide any explanation as to how it estimated this additional $16,000 in costs or whether Allstar could in fact recover them from Sunrise. For example, Allstar suggests some of these costs will be incurred because it “intends to retain a minimum of 2 experts for trial and depose such experts.” (Id. at ¶5.) However, Allstar does not show it would be entitled to recover its expert fees from Sunrise. Under Code Civ. Proc. § 1033.5(b)(1), Allstar’s expert fees are not allowable as prevailing party costs “except when expressly authorized by law.” Allstar has not shown its recovery of expert fees is expressly authorized by law, and thus has not demonstrated these costs would be properly included in an undertaking pursuant to Code Civ. Proc. § 1030.

It is also not clear whether these costs were incurred by Allstar in connection with these consolidated proceedings, rather than in defense of Sunrise’s specific claims. Allstar has thus failed to show the $60,629.58 it claims in past and future costs were or would be reasonably incurred in defense of Sunrise’s action.

For these reasons, Allstar’s motion is DENIED.

Conclusion

Allstar’s motion for an undertaking under Code Civ. Proc. § 1030 is DENIED.