Judge Holly J. Fujie, Case Number: 22STCV14135, Date: 2023-08-24 Tentative Ruling

DEPARTMENT 56 JUDGE HOLLY J. FUJIE, LAW AND MOTION RULINGS. The court makes every effort to post tentative rulings by 5.00 pm of the court day before the hearing. The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)], and are also available in the courtroom on the day of the hearing [see CRC 3.1308(b)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) call Dept 56 by 8:30 a.m. on the day of the hearing (213/633-0656) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no telephone call is necessary and all parties should appear at the hearing in person or by Court Call. Court reporters are not provided, and parties who want a record of motions and other proceedings must hire a privately retained certified court reporter.

This action arises out of a dispute over the abatement of a public nuisance on real property owned by Plaintiff. The currently operative second amended complaint (the “SAC”) alleges: (1) declaratory relief; (2) breach of contract – Development Agreement; (3) breach of implied covenant of good faith and fair dealing – Development Agreement; (4) breach of contract – Settlement Agreement; (5) breach of implied covenant of good faith and fair dealing- Settlement Agreement; and (6) declaratory relief regarding ability to foreclose on deeds of trust.

On June 1, 2023, Plaintiff filed a motion for preliminary injunction (the “Motion”) seeking to enjoin Defendant from proceeding with foreclosure sales of real property located at 2537-2543 Lee Avenue (the “El Monte Property”) and 1688 West Garvey Avenue (the “Monterey Park Property”) (collectively, the “Properties”). Plaintiff argues that a preliminary injunction should be granted because of the likelihood that Plaintiff will prevail on the sixth cause of action alleged in the SAC and the irreparable injury Plaintiff will suffer if Defendant is permitted to proceed with the foreclosure sales.

Under California Code of Civil Procedure (“CCP”) section 526, subdivision (a)(3), a preliminary injunction may be granted when it appears, during the litigation, that a party to the action is doing, is threatening, or is about to do some act in violation of the rights of another party to the action concerning the subject of the action and tending to render the judgment ineffectual. (CCP § 526, subd. (a)(3).) A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefore. (CCP § 527, subd. (a).) No preliminary injunction shall be granted without notice to the opposing party. (Id.)

To obtain a preliminary injunction, a plaintiff ordinarily is required to present evidence of irreparable injury or interim harm that it will suffer if an injunction is not issued pending an adjudication of the merits. (White v. Davis (2003) 30 Cal.4th 528, 554.) A trial court must weigh two interrelated factors when deciding whether to grant a plaintiff’s motion for a preliminary injunction: (1) the likelihood that the plaintiff will prevail on the merits at trial; and (2) the relative interim harm to the parties from the issuance or nonissuance of the injunction, that is, the interim harm the plaintiff is likely to sustain if the injunction is denied as compared to the harm the defendant is likely to suffer if the preliminary injunction is issued. (SB Liberty, LLC v. Isla Verde Assn., Inc. (2013) 217 Cal.App.4th 272, 280.) The burden is on plaintiffs, as the parties seeking injunctive relief, to show all elements necessary to support issuance of a preliminary injunction. (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.)

In April 2017, Plaintiff and Defendant entered into a settlement agreement (the “Settlement Agreement”) to resolve a slope stabilization enforcement action concerning the Monterey Park Property. (See Declaration of Karrie On (“On Decl.”) ¶ 4.) The Settlement Agreement was subsequently amended twice, and under the terms of its current iteration, Plaintiff was required to record liens on the Properties and enter into deeds of trust with Defendant (collectively, the “Deeds”). (On Decl. ¶¶ 4-5, Exhibits 3-5.)

Under the Settlement Agreement, Plaintiff had two avenues to pursue to remediate and stabilize the slope on the Monterey Park Property: Plan A involved developing a residential community and required permits, and Plan B involved slope remediation without residential development. (On Decl. ¶ 6.)

“In the event that Plan B is not underway by the deadline set forth in the Amended Project Schedule, CITY may (1) enter the Property, abate the Nuisance, and/or complete Plan B, and (2) foreclose on the Liens recorded in its favor pursuant to Section 2(A)(i) to recover the cost of completing Plan B. In the event that the actual completion cost is less than the amounts recovered by CITY through the foreclosure of the Liens, CITY will return all sums recovered exceeding the actual cost of completion of Plan B to CII.” (On Dec., Exhibit 3 at p. 42.)

On June 16, 2021, Defendant adopted Resolution Number 12255, which required Plaintiff to commence substantive progress on the remediation project described in the Settlement Agreement by August 1, 2021. (See Declaration of Whitney A. Hodges (“Hodges Decl.”) ¶ 5, Exhibit 7 at § 3.B.)

On August 25, 2021, Defendant sent Plaintiff a notice of breach based on Plaintiff’s failure to obtain a grading permit, and on October 13, 2021, Defendant sent Plaintiff a Notice of Default (the “NOD”) which stated that Plaintiff breached the Settlement Agreement by not receiving a grading permit by August 1, 2021. (On Decl. ¶ 12; Hodges Decl. ¶ 8, Exhibits 10-11.) On September 20, 2022, Defendant began foreclosure proceedings on the El Monte Property, and on October 31, 2022, Defendant began foreclosure proceedings on the Monterey Park Property. (Hodges Decl. ¶¶ 13-14, Exhibits 14-15.)

To state a declaratory relief claim, the plaintiff must allege a proper subject of declaratory relief and an actual controversy involving justiciable questions relating to the party’s rights or obligations. (See Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909.)

The Motion argues that Plaintiff has a reasonable likelihood of prevailing on the merits of its declaratory relief claim because despite the reason stated by Defendant in the NOD, the timeline set forth in the Settlement Agreement does not include a deadline for obtaining a grading permit. (See On Decl., Exhibit 3 at p. 45.) Plaintiff further argues its inability to obtain a grading permit by August 1, 2021 was caused by Defendant’s delays in processing its application paperwork. (See, e.g., On Decl. ¶ 11.)

The Court finds that Plaintiff has demonstrated a reasonable possibility of prevailing on the merits of the declaratory relief claim. The reasons for the default described in the NOD do not correspond with terms in the Settlement Agreement. Further, while Resolution Number 12255 imposed an August 1, 2021 deadline for “substantive progress,” the ordinance did not otherwise purport to amend the Settlement Agreement.

“Irreparable harm” generally means that the defendant’s act constitutes an actual or threatened injury to the personal or property rights of the plaintiff that cannot be compensated by a damages award. (See Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) Courts may issue an injunction to forestall a foreclosure sale so that the facts and law may be considered to assess the suitability of the remedy. (See, e.g., Baypoint Mortgage Corp. v. Crest Premium real Estate etc. Trust (1985) 168 Cal.App.3d 818, 825.)

The Court finds that looming foreclosure sales constitute potential irreparable injury to Plaintiff’s property rights. Defendant’s argument about additional liens it has against the Monterey Park Property in connection to eminent domain proceedings it instituted in another action do not negate the risk of irreparable injury posed by the pending foreclosures against the Properties in this action. Notably, Defendant does not contend that it suffers a risk of injury if an injunction does not issue. The Court therefore GRANTS the Motion and orders that Defendant be enjoined from foreclosing on the Deeds pending the resolution of this matter.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court