Judge: Erick L. Larsh, Case: 2023-01315632, Date: 2023-06-15 Tentative Ruling
Plaintiff Commercial Funding, LLC’s (plaintiff) request for preliminary injunction is DENIED.
The court hereby discharges the 4/4/23 TRO and the OSC re: preliminary injunction.
Plaintiff’s request for preliminary injunction is based on its 1st, 3rd, 4th, and 5th causes of action for breach of contract – specific performance, declaratory relief, cancelation of instruments, and unjust enrichment. (See Ex Parte Memo. P&As at pp. 10-13.)
Plaintiff has failed to demonstrate a probability of prevailing on these claims. (See Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178, 1183 [to obtain a preliminary injunction, moving party must demonstrate, inter alia, a probability of prevailing on the merits]; O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481 [same].)
Each of these causes of action depends on:
Specific performance. Plaintiff has failed to demonstrate a probability of prevailing on the merits of its base claim for specific performance because the terms of the Assignment Agreement are not sufficiently definite for specific enforcement. (See Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409, fn. 5 [elements]; see Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463, 472 [elements].) An agreement will not be specifically enforced unless its terms are complete and certain in all particulars essential to its enforcement. (See Civ. Code, § 3390, subd. (e); Mueller v. Chandler (1963) 217 Cal.App.2d 521, 524.)
Plaintiff claims that on 12/9/21, Colony and Global entered into the subject Assignment Agreement, whereby Global agreed to release/reconvey its DOT “contingent upon” (1) Colony securing funding to cure Dan and Joanna Kloss’s (hereinafter, the Klosses) default with senior lienholder Fullerton Community Bank, FSB (FC Bank) and stop FC Bank’s pending foreclosure sale of the property; (2) Colony securing the payment of $25,000 to Global; and (3) Colony obtaining an assignment of Shek Fund, LLC’s (Shek) “blanket lien” to Global. (Compl. ¶¶ 24-26, Ex. 9; see Dawood Decl. ¶ 15; ROA No. 20–Pltf. Ex. 9.)
The third contingency—the assignment of Shek’s blanket lien to Global, and a material component of the consideration for the agreement—is wholly uncertain. (See Morris Decl. ¶ 7; Bolduc Decl. ¶¶ 4-12, Exs. 1-18; see also ROA No. 20–Pltf. Ex. 9.)
As an initial matter, Jamal “Jimmy” Dawood aka J. Dawood or J.N. Dawood (Dawood), who negotiated the Assignment Agreement on behalf of both plaintiff and Colony (Dawood Decl. ¶ 13; see ROA No. 20–Pltf. Ex. 10), represented to Global that the “blanket lien” covered, among other things, all of Precision Forging Die, Inc.’s (Precision) equipment located at the Sessler property (where Precision operated its business), with the exception of certain equipment financed by Shek’s loan and the Sessler property itself. (Morris Decl. ¶ 5.)
But what the blanket lien actually covered was the Klosses’ property, and not Precision’s property. Specifically, the Shek note, in which the blanket lien appears, grants a “blanket lien” as security for the note “upon all of Borrower’s real and personal property.” And the “Borrower” or “Maker” under the Shek note is identified as Dan and Joanna Kloss. (See ROA No. 20–Pltf. Ex. 2 [Shek note].) Precision is only a party to this note as a guarantor. (See ibid.)
Furthermore, and in any event, the evidence also shows that Global did not even know who or what entity held the blanket lien until 12/13/21, i.e., days after the Assignment Agreement was allegedly entered into on 12/9/21. (See Bolduc Decl. ¶¶ 5-6, Ex. 7 [12/13/21 email from Global’s counsel to plaintiff/Colony/Dawood’s counsel, asking for the name of the entity that holds the blanket lien].) “To this point in time [12/13/21], [plaintiff/Colony’s counsel] had failed to provide any details regarding the blanket lien, [i.e.] who had it, who would be assigning it to Global, and how it would be made enforceable.” (Id. ¶ 6.)
Colony/plaintiff further failed to produce a copy of the blanket lien to Global at any time prior to 1/28/22 (Bolduc Decl. ¶ 12, Exs. 15-18; Morris Decl. ¶ 8), despite the fact that Global had been asking copies of the notes for the then-unidentified lender(s) that Dawood was representing since at least 12/7/21. (See ROA No. 20–Pltf. Ex. 9.)
The foregoing shows the parties did not have a meeting of the minds as to the assignment of the blanket lien at the time they purportedly entered into the Assignment Agreement on 12/9/21, and that, at best, this term was left exceedingly uncertain.
Indeed, it is still, to this day, uncertain as to what this term means or how it is supposed to be enforced. The details of the assignment-of-blanket-lien term should theoretically be easiest to ascertain from the “Assignment of Blanket Lien” agreement meant to effectuate this assignment, even if only post hoc. But even the “Assignment of Blanket Lien” is uncertain. (See ROA No. 70–Pltf. Reply Ex. D [Assignment of Blanket Lien].)
Importantly, the blanket lien appears in the Shek note. (Compl. ¶ 12, Ex. 2 [Shek note]; ROA No. 20–Pltf. Ex. 2 [same].) The Shek note memorializes a $600,000 revolving line of credit/loan made by lender Shek to borrowers Dan and Joanna Kloss. The Shek note is secured by (1) Shek’s DOT to the Sessler property, (2) Shek’s UCC equipment lien, and (3) the subject blanket lien. (See ibid.) To be clear, the blanket lien secures the Shek note, i.e., the Klosses’ payments due on the Shek note. (Ibid.) It does not purport to secure any other obligation. (See ibid.)
The document that purports to assign this blanket lien, i.e., the “Assignment of Blanket Lien,” begins by stating it “is entered into this 13th day of December 2021 by and between Colony Capital, LLC (Assignor) and Global Finance Group, Inc. (‘Assignee’).” (ROA No. 70–Pltf. Ex. D.) This date is interesting, since Colony/plaintiff’s counsel did not send a draft of this document to her client until 12/14/21, and did not sent a copy of it to Global until 12/23/21. (See Bolduc Decl. at Exs. 9-10, 14.)
The fact that Colony is specifically identified as the “assignor” is also interesting, since it is Shek who holds the blanket lien, and Colony is merely Shek’s trustee/agent. Although the Assignment of Blanket Lien mentions the fact that Colony is Shek’s trustee within the body of the document, it also specifically identifies the “assignor” as Colony only, with no other qualifiers, such as, for example, Colony “on behalf of” or “as trustee” for Shek. The signature line does the same. (ROA No. 70–Pltf. Ex. D.) The proper identification of the assignor and the capacity in which it is executing the agreement is no small matter. Plaintiff and Colony’s other documents show they how to properly designate the contracting parties and their capacities when they want to (see, e.g., ROA No. 20–Ex. 10), and the failure to do so in the Assignment of Blanket Lien is disconcerting.
The Assignment of Blanket Lien contains other errors as well. For example, it goes on to identify the subject Shek note and Shek DOT, which it claims was recorded on 10/18/18. (ROA No. 70–Pltf. Ex. D.) But the Shek note was not in fact recorded along with the Shek DOT, and the Shek DOT was recorded on 10/30/18. (See Pltf. RJN at p. 1; ROA No. 20–Pltf. Ex. 1; see also Bolduc Decl. ¶ 12.)
Most problematic of all, however, is what the Assignment of Blanket Lien does not provide or explain. It purports to assign Shek’s rights and interests in the blanket lien to Global—but the blanket lien secures Shek’s note only, and not any other note. And, as noted above, Shek’s note is secured not only by the blanket lien, but also Shek’s DOT and a UCC equipment lien, which were to remain with Shek.
Because the power to enforce the blanket lien relies on the power to collect on the Shek note, it is entirely uncertain as to what interest the parties are attempting to assign here, how the assignment has any value to Global, how Global is supposed to enforce this blanket lien, or what it is even supposed to secure and how. The Klosses did not give Shek the blanket lien as security for a Global note or other obligation to Global. And the naked assignment of Shek’s blanket lien without the Shek note in which it appears, does not somehow magically transfer the lien from Shek’s note to some unidentified note with Global, or otherwise create new obligations on the part of the Klosses (the borrowers) to now submit all of their property as security for some other obligation.
In sum, the assignment-of-blanket-lien term was uncertain at the time the Assignment Agreement was purportedly entered into on 12/9/21, and remains uncertain to this day. Plaintiff has therefore failed to demonstrate that the terms of the Assignment Agreement are sufficiently definite for specific enforcement, a necessarily element of the claim.
Recording of DOT in violation of dissolution proceeding TRO. As noted above, plaintiff also claims the Global DOT is invalid/void because it was obtained and recorded against the subject property by only one spouse, Dan Kloss, during the pendency of the Klosses’ marital dissolution proceeding while automatic TROs were in place prohibiting the encumbrance.
This argument fails. As an initial matter, there is no evidence before the court that Dan Kloss was ever served with the petition for dissolution of marriage. The “proof of service” of the summons and petition for dissolution on Dan Kloss only attests to service of a notice and acknowledgment of receipt, and does not attach a copy of any such form executed by Dan Kloss and/or his attorney. (See Compl. ¶ 16, Ex. 5; ROA No. 10–Pltf. Ex. 5; see also Code Civ. Proc., § 415.30, subd. (c) [service of a summons pursuant to an acknowledgment and receipt is deemed complete on the date a written acknowledgment of receipt of summons is executed].)
Even if plaintiff had demonstrated service of the summons and petition for dissolution of marriage on Dan Kloss, however, plaintiff’s contentions would still fail. It is true that, upon service of the summons and petition for dissolution, both Dan and Joanna Kloss would have been subject to a TRO against the transferring, encumbering, or disposing of any property, “whether community, quasi-community, or separate,” without an order of the court or written consent of the other party. (Fam. Code, § 2040, subd. (a).)
However, Dan Kloss’s quitclaim deed severing the Klosses’ joint tenancy into a tenancy-in-common (ROA No. 20–Pltf. Ex. 6) would not have violated the TRO. (See Fam. Code, § 2040, subd. (b)(3); Estate of Mitchell (1999) 76 Cal.App.4th 1378, 1381–1382 [recording declaration severing joint tenancy into a tenancy-in-common does not violate either the automatic temporary restraining order in a dissolution proceeding or a similarly worded court-ordered temporary restraining order or preliminary injunction].)
And while Dan Kloss’s loan from Global and resulting Global DOT (see ROA No. 20–Pltf. Ex. 7) probably would have violated the TRO, this does not necessarily render the DOT void. Indeed, Global declares it was not aware of any such TROs when it issued the underlying loan to Dan Kloss secured by the subject DOT (Morris Decl. ¶ 3; Toon Decl. ¶ 6), which leaves the DOT intact. (See Fam. Code, § 2041 [“Nothing in Section 2040 adversely affects the rights, title, and interest of a purchaser for value, encumbrancer for value, or lessee for value who is without actual knowledge of the restraining order.”].)
Finally, even assuming arguendo Global knowingly recorded its DOT in violation of the TRO, plaintiff also fails to establish its standing to enforce the TRO, which was created for the benefit of the parties to the marital dissolution proceeding (the Klosses), and not for the benefit of any creditors/potential creditors such as plaintiff. Such an encumbrance recorded in violation of the provisions of the Family Code “are not void, but voidable, and this only at the instance of the other spouse...” (Clar v. Cacciola (1987) 193 Cal.App.3d 1032, 1036), and neither spouse is a party to this litigation.
Plaintiff has therefore also failed to demonstrate that the Global DOT is void/invalid merely because it was issued during the pendency of the Klosses’ marital dissolution proceeding, or its standing to void the Global DOT on this basis.
Requests for judicial notice. Plaintiff’s requests for judicial notice are GRANTED. (See Yvanova v. New Century Mortg. Corp. (2016) 62 Cal.4th 919, 924, fn. 1 [court may take judicial notice of the existence and contents of recorded documents, though not of disputed or disputable facts stated therein]; Evid. Code § 452, subd. (d) [court records]; see also Kilroy v. State (2004) 119 Cal.App.4th 140, 146-147 [“while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files,” unless an independent hearsay exception exists].)
Global’s request for judicial notice is DENIED. (See Rosen v. St. Joseph Hospital of Orange County (2011) 193 Cal.App.4th 453, 457, fn. 3 [although a court may judicially notice a variety of matters, only relevant material may be noticed].)
Objections. Plaintiff’s objections are all OVERRULED.
Plaintiff shall give notice.