Judge: Helen Zukin, Case: 21SMCV00756, Date: 2022-09-27 Tentative Ruling

Case Number: 21SMCV00756    Hearing Date: September 27, 2022    Dept: 207

Background

This case arises from the sale of real property located at 2478 Glyndon Avenue, Los Angeles, CA 90291. Plaintiff Sunrise Projects, LLC (“Plaintiff”) claims to have been the successful bidder for the property at a trustee’s sale following a foreclosure by lender Defendant Allstar Financial Services, Inc. (“Defendant”). Defendant asserts it properly rescinded the sale to Plaintiff and sought to hold a new sale for the property. The Court issued a TRO enjoining the sale pending hearing on a preliminary injunction. On May 26, 2021, the Court granted Plaintiff’s request for a preliminary injunction, setting the bond at $250,000. Defendant brings this motion to modify or, alternatively, dissolve the preliminary injunction based on what it contends is a material change in the facts underlying the injunction. Plaintiff opposes Defendant’s motion.

The hearing on this motion was originally set for June 21, 2022, and the motion was fully briefed by Plaintiff and Defendant in advance of the hearing. The Court posted a tentative ruling denying Defendant’s motion, but ultimately the hearing did no go forward on June 21 and was continued by the Court to September 15, 2022.

On September 12, 2022, Defendant filed a notice withdrawing the motion. At the September 15, 2022, hearing, Plaintiff requested the Court nonetheless adjudicate Defendant’s motion on its merits regardless of the notice of withdrawal filed by Defendant, and the Court continued the hearing to September 27, 2022, to accommodate Plaintiff’s request.

Standard to Modify Preliminary Injunction

“In any action, the court may on notice modify or dissolve an injunction or temporary restraining order upon a showing that there has been a material change in the facts upon which the injunction or temporary restraining order was granted, that the law upon which the injunction or temporary restraining order was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction or temporary restraining order.” (Code Civ. Proc., § 533; see People ex rel. Feuer v. Progressive Horizon, Inc. (2016) 248 Cal.App.4th 533, 540.)

Analysis

Defendant asks the Court to either dissolve the preliminary injunction or to increase the bond from $250,000 to $1,700,000 based on a March 2022 appraisal which values the subject property at $1,700,000. Defendant claims this valuation “is a material change in the facts upon which the injunction was granted such that the end of justice would be served by the modification or dissolution of the injunction.” (Motion at 5.) However, Defendant offers no explanation as to why this valuation should lead the Court to modify or dissolve the preliminary injunction. Defendant generally claims the current bond “is insufficient to protect Allstar against the harm which may occur should [Plaintiff] fail to prevail on the merits” without elaboration. (Id.)

In opposing Plaintiff’s request for a preliminary injunction, Defendant submitted a declaration from its senior underwriter, Al Haberstroh, valuing the property at $1,600,000. (Haberstroh Decl. at ¶ 7.) This was noted by the Court in the May 26, 2021, minute order granting Plaintiff’s request. (Order at 1 [“Somehow, the trustee accepted a bid of only $364,770. Defendant contends (and not without some force) that this was grossly under market value (which defendant claims is about $1.6 million)”].) Defendant offers no explanation as to why this $100,000 increase in the value of the property merits a nearly $1.5 million increase in the bond, much less complete dissolution of the preliminary injunction in its entirety.

In setting the bond at $250,000, the Court rejected Defendant’s request to set the bond at $2 million, as well as Plaintiff’s request for a nominal bond of $10,000. The Court found Defendant was advocating for an excessivly high bond “to provide itself with a back door win by making the bond so extreme that it will dissuade plaintiff from pursuing the case.” (Order at 7.) The Court then turned to Plaintiff’s proposal, and found for a nominal bond of $10,000 to be inappropriate “one would have to assume that the property will continue to appreciate in excess of the combination of the time value of money and necessary expenses. The Court cannot so assume.” (Id.) Ultimately, the Court determined $250,000 was sufficient “to cover the carrying costs plus the risk of a reasonable drop in value” of the property. (Id.) Inherent in this determination is the conclusion that an increase in the property’s value would benefit Defendant, not harm it. Indeed, in determining the balance of hardships favored entry of the preliminary injunction, the Court reasoned “On the other side of the ledger, however, the Court does not see the huge harm in issuing the injunction. If defendant prevails, then a new sale will be had and it will get its higher price. If defendant does not prevail, then it is a good thing that the injunction was not denied.” (Id. at 4.) Applying this reasoning to the facts here, if defendant ultimately prevails, then a new sale will be had and the sales price will reflect the increase in the value of the property reflected in the March 2022 valuation. In other words, the increase in the property’s value benefits, rather than burdens, Defendant.

At the time the preliminary injunction was entered, this case was pending before Judge Epstein. Judge Epstein’s May 26, 2021, order granting Plaintiff’s request for a preliminary injunction is a detailed and thorough examination of the evidence put before the Court, the recently enacted legislation that forms the basis of the dispute, and applicable case law and legal standards governing applications for preliminary injunctions. Defendant has not set forth any evidence or argument which leads this Court to a different result than was reached by Judge Epstein in considering Plaintiff’s original request. Defendant merely states a recent appraisal shows the property has increased in value from $1.6 million to $1.7 million without offering any showing as to why this increase merits modification or reversal of the preliminary injunction. The May 26, 2021, order provided “If defendant later concludes that the bond is inadequate, it can always move to increase the bond upon a proper showing.” (Order at 7.) Simply claiming the property has continued to appreciate in value is not the “proper showing” contemplated by the order. The Court finds no basis to modify or dissolve the preliminary injunction either in the interest of justice or as a result of a change in material facts.

On August 19, 2022, Gregory Scott Demos (“Demos”) filed an objection to the Court’s tentative ruling. Demos’ filing was unauthorized supplemental briefing. If Demos wanted to be heard on the merits of Defendant’s motion, the proper avenue would be to file a responsive brief within the time period set out by Code Civ. Proc. § 1005(b). Demos objects to the reasoning quoted from Judge Epstein’s May 26, 2021, Order which found Defendant was not harmed by the preliminary injunction because if it ultimately prevailed on Plaintiff’s claims then a new sale will be had and it would get its higher price. Demos argues Defendant would not obtain the benefit of the higher price because Demos has filed an action seeking to enforce an agreement to purchase the property for $1.65 million. In essence, Demos is claiming the Court should have assumed he would prevail on the merits of his claim against Defendant if Plaintiff does not.

The Court offers no opinion as to whether Demos will ultimately prevail on his claim. However, even if the Court were to assume Demos is correct, it would not change the result reached on Defendant’s motion. The reasoning of the Court’s May 26, 2021, order applies with equal force to Demos’ claim. Any increase in the property’s market value would be rendered irrelevant if either Plaintiff or Demos succeeds, as in either scenario Defendant would be forced to sell at a set price. If Defendant ultimately prevails on both Plaintiff’s and Demos’ claims, then the increase in market value would only benefit Defendant.

Accordingly, Defendant’s motion is DENIED.

Conclusion

Defendant Allstar Financial Services, Inc.’s motion to modify or dissolve the protective order is DENIED.