Judge James C. Chalfant, Case 23STCV07931 2023-05-04 Tentative Ruling

Plaintiffs Jong Uk Byun (“Byun”) and Central Metal, Inc. (“CMI”) apply for a preliminary injunction enjoining Defendants Packo Investments, Inc., (“Packo”), M&A Equities, LLC, (“M&A”), Allen H. Park (“Allen”), Daniel E. Park (“Daniel”), Christine Chong (“Chong”), and Jennifer and Young Bae as Trustees for the Bae Family Trust (collectively “Bae Trustees”) from auctioning, selling, causing to be sold, foreclosing on, or transferring interest in real property known as the Alameda Property.

The court has read and considered the moving and supplementary papers, opposition, and reply, and renders the following tentative decision.

Plaintiffs commenced this proceeding on April 11, 2023 against Defendants Packo, M&A, Allen, Daniel, Chong, Bae Trustees, and Mohamed Sanfaz (“Sanfaz”) alleging (1) fraud and deceit, (2) fraud in the execution, (3) elder financial abuse, (4) cancellation of written instruments per Civil Code section 3412, (5) quiet title, (6) breach of fiduciary duty, (7) usury, (8) conversion, (9) violation of Penal Code section 496, (10) civil conspiracy, (11) aiding and abetting, and (12) unfair business practices under Business and Professions Code section 17200. The Complaint alleges in pertinent part as follows.

Byun is CMI’s owner and President. Plaintiffs were obligors under Promissory Notes and secured by Deeds of Trust for four different sets of property in San Diego (“San Diego Property”), Riverside (“Riverside Property”), El Monte (“El Monte Property”), and Hinkley (“Hinkley”). Compl., ¶16. The notes (collectively, “Wilshire Loan Documents”) were payable to Wilshire State Bank (“Wilshire”). Compl., ¶16.

In 2016, Allen expressed interest in purchasing the Wilshire Loan Documents. Compl., ¶17. Daniel and Chong, then counsel for Plaintiffs, represented that Allen was a trustworthy and respected businessperson, and dealing with him was better than taking these liabilities to the open market. Compl., ¶17. Because Byun is a native Korean speaker who can’t understand English, Daniel and Chong assured him they would handle and translate any negotiations and transactions on his behalf and on the most competitive terms possible. Compl., ¶17. Byun had no reason to believe otherwise. Compl., ¶17.

Allen, Daniel, and Chong represented that they would restructure the Wilshire Loan Documents to reflect a new total balance of $1.4 million, which was the purchase price Allen would pay. Compl., ¶18. The real property used as collateral would remain the same. Compl., ¶18. In return, Defendants asked that Plaintiffs execute and enter a Settlement and Loan Assignment Agreement (“Assignment”) where they agree to pay the amounts due under the loans. Compl., ¶18. Byun agreed and signed signature pages for the Assignment and Deeds of Trust, which he believed would allow Allen to acquire the Wilshire Loan Documents through his entity M&A for $1.4 million. Compl., ¶18. Byun signed the signature pages presented to him with the belief that his lawyers would attach them to an Assignment with the terms to which he agreed on. Compl., ¶19.

From November 2016 thereafter, on Defendants’ request, Plaintiffs paid $16,666.67 per month. Compl., ¶23. Defendants stated that these payments would be applied to reduce the principal amount due. Compl., ¶23.

In 2017, Allen and Byun agreed that Allen would foreclose on select properties under the Assignment to satisfy the amount owed and any excess proceeds would belong to Plaintiffs. Compl., ¶24.

In late 2022, Byun obtained a copy of the Assignment and Deeds of Trust, with his signature pages attached but terms different from those he agreed to (“Fraudulent Agreement”). Compl., ¶20. The Fraudulent Agreement alleged that the principal amount was $2 million and that the loan encumbered the Alameda Property and property in San Bernadino (“San Bernadino Property”). Compl., ¶¶ 20, 22.

Plaintiffs believe that Allen as sold the El Monte, San Diego, and Riverside Properties for over $2.6 million. Compl., ¶24. Although this $2.6 million is greater than the amount owed under the Assignment, Plaintiffs have not received any of the proceeds. Compl., ¶24. Between the proceeds from the foreclosure sales and the monthly payments Allen said he would apply to the principal amount owed, Defendants owe Plaintiffs over $3.35 million. Compl., ¶25.

In 2017, Allen, M&A, Daniel, and Chong obtained a short-term, high-interest loan for Plaintiffs with the Bae Family Trust (“Bae Note”). Compl., ¶27. Allen’s relatives own and control the Bae Family Trust. Compl., ¶27. Plaintiffs had no reason to doubt that Daniel and Chong were complying with their fiduciary duty to him. Compl., ¶27. The Bae Note was only necessary because of Allen’s misconduct as to the Fraudulent Agreement. Compl., ¶27. Allen has since obtained all right and interest in the Bae Note. Compl., ¶31.

The Bae Note was for a principal of $1,290,000. Compl., ¶28. A monthly interest payment of $10,750 was due on August 27, 2017, and the principal balance was due on September 1, 2017. Compl., ¶28. The Bae Note was secured by real property in Santa Fe (“Santa Fe Property”). Compl., ¶28.

Overpayment of the notes under the Fraudulent Agreement left Plaintiffs unable to pay the Bae Note. Compl., ¶29. On October 31, 2017, Plaintiffs agreed to a First Amendment to the Bae Note, which retroactively increased the interest to 15% and extended the principal’s due date to April 1, 2018. Compl., ¶29.

After sale of the Santa Fe Property in December 2021, Allen directed that a portion of the $3.2 million sale proceeds go to Defendants. Compl., ¶30. Defendants advised Plaintiffs that this amount paid down obligations owed under the various promissory notes. Compl., ¶30. Plaintiffs have since learned that the sale proceeds were in excess of the obligations such that it should have satisfied the Bae Note in full. Compl., ¶30.

On January 4, 2023, Defendants had a Notice of Default (“Bae NOD”) recorded against a parcel of the Alameda Property, APN No. 5167-015-068 (“068 Property”). Compl., ¶32. The NOD alleged that Plaintiffs owed $2,022,735.35 under various notes. Compl., ¶32. Plaintiffs are only in default on those notes because Defendants have been overpaid by virtue of fraudulent notes as well as failure to give proper credit for payments on loans. Compl., ¶32. Plaintiffs are ready and willing to repay any amounts lawfully owed. Compl., ¶33.

In 2017, Allen and M&A obtained a short-term, high interest loan with Sanfaz (“Sanfaz Note”) for a principal of $500,000. Compl., ¶35. The loan would incur monthly interest payments of $4,166.67 beginning October 15, 2017, with the principal due on December 31, 2017. Compl., ¶35. Allen has since obtained all right and interest in the Sanfaz Note. Compl., ¶37.

As with the Bae Note, overpayment of the notes under the Fraudulent Agreement left Plaintiffs unable to pay the amount owed under the Sanfaz Note. Compl., ¶36. On December 21, 2022, Defendants had a Notice of Default (“Sanfaz NOD”) recorded against the Alameda Property with the exception of the 068 Property. Compl., ¶38. The Sanfaz NOD alleged that Plaintiffs owed $686,365.34 under various notes. Compl., ¶38. Plaintiffs are only in default on those notes because Defendants have been overpaid by virtue of fraudulent notes as well as failure to give proper credit for payments on loans. Compl., ¶38. Plaintiffs are ready and willing to repay any amounts lawfully owed. Compl., ¶39.

Plaintiffs seek (1) determination of title to all properties in Plaintiffs’ favor, free and clear of Defendants’ wrongful adverse claims; (2) over $3.5 million in damages; (3) injunctive relief enjoining Defendants from enforcing the Bae Note, Sanfaz Note, or related deeds of trust and NODs and from proceeding with non-judicial foreclosure of the properties; (4) punitive and exemplary damages; (5) restitution; (6) treble damages; and (7) attorney’s fees and costs.

On April 12, 2023, Plaintiffs served Defendants Daniel, Chong, and counsel for Packo, M&A, Allen, Bae Trustees, and Sanfaz by mail with an ex parte application for a temporary restraining order (“TRO”) and order to show cause re: preliminary injunction (“OSC”).

On April 13, 2023, the court granted the ex parte application based solely on a theory of material variance. The court ordered Plaintiffs to file a supplemental brief discussing why there was a material variance and a declaration demonstrating an ability to pay the correct amount for both loans.

On April 20, 2023, Plaintiffs served Defendant Daniel with the Complaint, Summons, and ex parte application and opposition by substitute service, effective April 30, 2023.

On April 25, 2023, counsel for Defendant Allen, Sanfaz, Packo, M&A, and Bae Trustees signed an Acknowledgement of Receipt for the Complaint, Summons, and ex parte application.

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act. See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[1] It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. See Scaringe v. J.C.C. Enterprises, Inc., (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).[2] Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. Ancora-Citronelle Corp. v. Green, (1974) 41 Cal.App.3d 146, 150. Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. See CCP §527(a). For this reason, a pleading alone rarely suffices. Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007). The burden of proof is on the plaintiff as moving party. O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565. The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636. Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. Doe v. Wilson, (1997) 57 Cal.App.4th 296, 304. The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Thornton v. Carlson, (1992) 4 Cal.App.4th 1249, 1255.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

Plaintiff Byun relies on the allegations of the verified Complaint and both Plaintiffs rely on the following.

In 2016, Plaintiffs Byun, CMI, and related entities had loans with Wilshire State Bank secured by various properties. Compl., ¶16. Allen expressed interest in purchasing the Wilshire Loan Documents and restructuring the loans. Pastore Ex Parte Decl., ¶4. Daniel and Chong, then counsel for Plaintiffs, represented that Allen would offer a better deal than the open market. Pastore Ex Parte Decl., ¶4.

On March 7, 2016, Wilshire’s assignee VFC Partners 7, LLC (“VFC”) agreed to assign the Wilshire Loan Documents to M&A. Pastore Ex Parte Decl., ¶4. A provision of the assignment required Plaintiffs to acknowledge and agree to amounts due under the loans. Pastore Ex Parte Decl., ¶4. M&A and Plaintiffs agreed to a reduced principal of $1,400,000. Pastore Ex Parte Decl., ¶4.

In August 2016, Byun started to make monthly interest payments of $9,166.67. Pastore Ex Parte Decl., ¶4. From November 2016 thereafter, at Defendants’ request, Plaintiffs paid $16,666.67 per month. Pastore Ex Parte Decl., ¶4. Defendants stated that the monthly payments would be applied to reduce the principal amount due. Pastore Ex Parte Decl., ¶4.

On July 27, 2017, Allen, Daniel, and Chong represented that they would restructure the Wilshire Loan Documents to reflect a new total balance of $1.4 million as agreed. Pastore Ex Parte Decl., ¶4. Byun agreed and signed signature pages for the Fraudulent Agreement, a promissory note in favor of Packo (“Packo Note”). Pastore Ex Parte Decl., ¶4. Byun did not know that the note was for $2,000,000. Pastore Ex Parte Decl., ¶4. The Fraudulent Agreement also encumbered the Alameda Property in addition to the property encumbered under the Wilshire Loan Documents. Pastore Ex Parte Decl., ¶4.

Also in 2017, Allen and Byun agreed that Allen would foreclose on select properties under the Assignment to satisfy the amount owed thereunder. Pastore Ex Parte Decl., ¶4. Any excess proceeds would belong to Plaintiffs. Pastore Ex Parte Decl., ¶4. Allen sold the El Monte, San Diego, and Riverside Properties for over $2.6 million. Pastore Ex Parte Decl., ¶4. Although this amount was greater than the amount owed under the Packo Note, Plaintiffs have not received any of the proceeds. Pastore Ex Parte Decl., ¶4.

On August 27, 2017, Allen, Daniel, and Chong obtained the Bae Note for Plaintiffs for a principal of $1,290,000. Pastore Ex Parte Decl., ¶4. The Bae Family Trust secured the Bae Note with the Santa Fe Property. Pastore Ex Parte Decl., ¶4. A 10% monthly interest payment of $10,750 was due on August 27, 2017, and the principal balance was due on September 1, 2017. Pastore Ex Parte Decl., ¶4.

On October 15, 2017, Allen and M&A obtained the Sanfaz Note for a principal of $500,000. Pastore Ex Parte Decl., ¶4. The loan required monthly interest payments of $4,166.67 beginning October 15, 2017, with the principal due on December 31, 2017. Pastore Ex Parte Decl., ¶4.

Depletion of funds left Plaintiffs unable to pay the amounts owed under the Bae Note. Pastore Ex Parte Decl., ¶4. On October 31, 2017, Plaintiffs agreed to a First Amendment to the Bae Note, which retroactively increased the interest to 15% and extended the principal’s due date to April 1, 2018. Pastore Ex Parte Decl., ¶4. Sometime after that, Allen through M&A acquired the Bae Note and Sanfaz Note. Pastore Ex Parte Decl., ¶4.

In late 2022, Byun learned that the terms of the Fraudulent Agreement were not as agreed. Pastore Ex Parte Decl., ¶4. Defendants had attached Byun’s signature pages to an agreement with materially different terms. Pastore Ex Parte Decl., ¶4.

On December 21, 2022, Defendants had the Sanfaz NOD recorded against the Alameda Property, with the exception of the 068 Property. Pastore Ex Parte Decl., ¶4; RJN Ex. 3. The Sanfaz NOD alleged that Plaintiffs owed $686,365.34 as of December 19, 2022. RJN Ex. 3. Plaintiffs had until five business days before the sale of the property to pay all amounts owed plus permitted costs. RJN Ex. 3. These include attorney’s fees and costs, real or personal property taxes, and cost of compliance with any applicable laws or regulations. RJN Ex. 3.

On January 4, 2023, Packo had the Bae NOD recorded against the 068 Property. RJN Ex. 2. The Bae NOD alleged that Plaintiffs owed $2,022,735.35 as of December 29, 2022. RJN Ex. 2. The Bae NOD explained that Plaintiffs had until five business days before the sale of the 068 Property to pay all amounts owed plus permitted costs. RJN Ex. 2.

On March 24, 2023, Defendants had a NOS recorded for the Alameda Property with the exception of the 068 Property (“Sanfaz NOS”), to be held on April 17, 2023. RJN Ex. 4. The Sanfaz NOS listed the unpaid balance for the Sanfaz Note, with reasonable estimated costs as of the notice’s publication, as $715,760.01. RJN Ex. 4.

For the Sanfaz Note, through June 1, 2018, Plaintiffs made no payment on the $500,000 principal. Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1. The Note accrued interest and penalties of $170,833 through February 5, 2020, after which the sale of the San Bernadino Property would pay $250,000. Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1. This leaves an outstanding principal of $420,833. Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1. Additional interest of $266,995 would then accrue by March 23, 2023, which brings the total Plaintiffs owe to $687,829. Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1.

For the Bae Note, on July 7, 2017 Allen, Daniel, and Chong obtained the note for Plaintiffs with a principal owed of $1,290,000. Pastore Supp. Decl., ¶3, Ex. B. Interest and penalties of $440,750 accrued through February 5, 2020. Pastore Supp. Decl., ¶3, Ex. B. On that day, through the sale of San Bernadino Property, Pastore paid $350,000. Pastore Supp. Decl., ¶3, Ex. B.

From then to April 21, 2022, additional interest and penalties of $577,633 accrued for a total debt of $1,958,383. Pastore Supp. Decl., ¶3, Ex. B. Plaintiffs then made a payment of $48,568. Pastore Supp. Decl., ¶3, Ex. B. An additional $619,815 accrued through June 27, 2022, at which point Plaintiffs paid another $147,496. Pastore Supp. Decl., ¶3, Ex. B. Interest and penalties of $132,583 have since accrued. Pastore Supp. Decl., ¶3, Ex. B.

The $1,290,000 principal has remained unpaid, as all payments went towards the interest and late penalties. Pastore Supp. Decl., ¶4, Ex. B. The remaining outstanding balance on the Bae Note is $1,942,919 as of December 29, 2022. Pastore Supp. Decl., ¶5, Ex. B. This is $79,816 less than the $2,022,735 the Bae NOD asserts was due on that date. Pastore Supp. Decl., ¶6, Ex. B.

Plaintiffs have retained a financial consultant and they are working to obtain financing to satisfy any and all amounts lawfully due under the Bae Note and Sanfaz Note by May 4, 2023. Byun Decl., ¶3.

On January 1, 2018, Plaintiffs Byun and CMI signed the Sanfaz Note for principal of $500,000. Lee Decl., ¶9, Ex. A. Plaintiffs were required to make monthly interest payments of $4,166.67 on the first day of the month for six months. Lee Decl., ¶9, Ex. A. The loan matured, and the outstanding principal was due, on June 30, 2018. Lee Decl., ¶9, Ex. A.

Paragraph 5 allows Sanfaz and assignees to recover collection costs if Plaintiffs do not pay the note in full when due. Lee Decl., ¶8, Ex. A. If legal action becomes necessary to enforce the Note, Paragraph 6 allows Sanfaz to recover reasonable attorneys’ fees. Lee Decl., ¶8, Ex. A. Under Paragraph 7, any rights and obligations under the Sanfaz Note inure to the benefits of successors and assigns. Lee Decl., ¶9, Ex. A.

Pastore’s calculation that Plaintiffs owe only $687,829 under the Sanfaz Note as of March 23, 2023 (Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1) does not account for legal fees and foreclosure costs. Lee Decl., ¶7. A law firm invoice dated April 4, 2019 shows legal fees of $6,296, which Sanfaz paid in full. Lee Decl., ¶11, Ex. C. On August 9, 2022, Packo created a report that identified $14,217.49 in legal fees paid by Sanfaz to Blank Rome, LLP for enforcement of promissory notes herein. Lee Decl., ¶12, Ex. D. A total of $20,513.49 in legal fees have been paid with respect to the Sanfaz Note. Lee Decl., ¶13.

As of December 19, 2022, Plaintiffs owed $420,833.33 in principal, $245,018.52 in interest, and $20,513.49 in legal fees for the Sanfaz Note. Lee Decl., ¶13. This total of $686,365.34 was listed on the Sanfaz NOD. Lee Decl., ¶13.

The Sanfaz NOS (RJN Ex. 4) states that the amount owed as of March 24, 2023 is $715,760.01. Lee Decl., ¶14. This includes $420,833.33 in principal, $266,995.37 in interest, $20,513.49 in legal fees, and estimated foreclosure costs of $7,417.82. Lee Decl., ¶14.

On January 1, 2018, Plaintiffs signed the Bae Note for a principal of $1,290,000. Lee Decl., ¶17, Ex. E. Plaintiffs were required to make monthly interest payments of $10,750 on the first day of the month for six months. Lee Decl., ¶17, Ex. E. The loan matured, and the outstanding principal was due, on June 30, 2018. Lee Decl., ¶17, Ex. E.

Paragraph 6 allows the Bae Family Trust and assignees to recover collection costs if Plaintiffs do not pay the note in full when due. Lee Decl., ¶17, Ex. E. If legal action becomes necessary to enforce the Note, Paragraph 7 allowed Bae Family Trust to recover reasonable attorneys’ fees. Lee Decl., ¶17, Ex. E. Under Paragraph 8, any rights and obligations under the Bae Note inure to the benefits of successors and assigns. Lee Decl., ¶17, Ex. E.

Pastore’s calculation that Plaintiffs owe only $1,942,919 on the Bae Note as of December 29, 2022 (Pastore Supp. Decl., ¶5, Ex. B) does not account for attorney’s fees. Lee Decl., ¶16. However, a review has revealed that $8,508.50 of the $79,816.03 in legal fees on the Bae NOD (RJN Ex. 2) had already been paid as part of Byun’s bankruptcy proceedings. Lee Decl., ¶19, Ex. G. The Bae NOS will reflect the proper amount of fees. Lee Decl., ¶20.

On March 29, 2022, Byun, Packo, Allen, Bae Trust, and Sanfaz moved to dismiss Byun’s second Chapter 11 bankruptcy case. Meadows Decl., ¶22, Ex. 19. In a declaration in support of the motion, Byun admitted that his properties in Los Angeles suffered from environmental issues that limited the purchase price. Meadows Decl., ¶22, Ex. 19, p. 19. After he sold most of it, he explored options to refinance the remaining properties. Meadows Decl., ¶22, Ex. 19, p. 19. He could not raise enough money to pay his outstanding debts, pay for the remaining assets, and pay the capital gains tax on the sale of the other property. Meadows Decl., ¶22, Ex. 19, p. 19. Leasing the properties was the best way to pay the remaining creditors, albeit through monthly installments over years. Meadows Decl., ¶22, Ex. 19, p. 19.

On May 6, 2022, the parties to the bankruptcy case executed a settlement agreement (“Settlement”). Meadows Decl., ¶25, Ex. 21. Under this Settlement, Byun could satisfy all amounts owed to Sanfaz and the Bae Trust if he paid a total of (1) $2.1 million by June 30, 2022, (2) $2.125 million by July 16, 2022, (3) $2.175 million by August 16, 2022, and (4) $2.2 million by August 30, 2022. Meadows Decl., ¶25, Ex. 21, p. 3.

On September 21, 2022, Sanfaz assigned Packo its interest in the Sanfaz deed of trust secured by the Alameda Property, with the exception of the 068 Property. Reply RJN Ex. 1.

Plaintiffs seek a preliminary injunction enjoining Defendants from foreclosing on the Alameda Property based on a theory of material variance.[4] When the court issued the TRO, it limited the OSC to Plaintiff’s material variance theory, ordering Plaintiffs to file a supplementary brief showing that Bae Trust has material variance and provide a declaration that Plaintiffs could pay the amount actually owed.[5]

“[T]he law for obvious public policy reasons wishes to give a debtor the opportunity to avoid forfeiture. Pursuing that policy, the courts have fashioned rules to protect the debtor, one of them being that the Notice of Default will be strictly construed and must correctly set forth the amount required to cure the default.” Sweatt v. Foreclosure Co., (1985) 166 Cal.App.3d 273, 278. Pursuant to Civil Code section 2924c(b)(1), the lender must provide the borrower with accurate information in regard to any inquiry regarding amount necessary to cure default so as to avert foreclosure on property. Anderson v. Hart Federal Sav. & Loan Assn., (“Anderson”) (1989) 208 Cal.App.3d 202, 216. A trustee’s sale based on a statutorily deficient notice of default is invalid. Miller v. Cote, (1982) 127 Cal.App.3d 888, 894. If a notice of default is defective, a trial court may properly enjoin the sale. Id. at 896. This includes a notice defective because there is a material variance in the amount due. See Anderson, supra, 208 Cal.App.3d at 216-17.

The Bae NOD for foreclosure of the 068 Property asserts that Plaintiffs owed $686,365.34 as of December 19, 2022. RJN Ex. 3. Defendants admit that amount this includes $8,508.50 in attorney’s fees that were paid in Byun’s bankruptcy. Lee Decl., ¶19. They assert that they will remedy this in any notice of sale based on the Bae NOD. Opp. at 4-5; Lee Decl., ¶20.

This is insufficient. The point of an NOD is to provide the borrower with accurate information in regard to any inquiry regarding amount necessary to cure default so as to avert foreclosure. Anderson, supra, 208 Cal.App.3d at 216. The Bae NOD explained that Plaintiffs had until five business days before the sale of the 068 Property to pay all amounts owed plus permitted costs. RJN Ex. 2. Listing the accurate amount on a NOS does not provide the borrower with sufficient notice as to how much it must pay to cure the default. There is a variance in the Bae NOD.

The Sanfaz NOD states that Plaintiffs owe $686,365.34 on the Sanfaz Note as of December 19, 2022. RJN Ex. 3. Plaintiffs calculate that the amount actually owed as of that date is $687,829. Pastore Ex Parte Decl., ¶11, Ex. B, Schedule 1. Defendants assert that legal fees and foreclosure costs account for the difference. Lee Decl., ¶7.

Defendants present an April 4, 2019 invoice that shows legal fees of $6,296 to the law firm of Raines Feldman, LLP, which Sanfaz paid. Lee Decl., ¶11, Ex. C. A separate report identified a total of $14,217.49 Sanfaz paid another law firm, Blank Rome, LLP, for enforcement of promissory notes herein. Lee Decl., ¶12, Ex. D. This total is $20,513.49 in legal fees. Lee Decl., ¶13.

Plaintiffs assert that Defendants cannot include in the NOD those amounts that were incurred by their predecessor-in-interest Sanfaz. Reply at 1-2. Not so. Under Paragraph 7 of the Sanfaz Note, any rights and obligations inure to the benefits of successors and assigns. Lee Decl., ¶9, Ex. A. If Sanfaz could recover costs under the Sanfaz Note, Defendants have the same right.

Plaintiffs then assert that Paragraph 6 only allows the prevailing party to recover reasonable attorney’s fees in a legal action necessary to enforce the Note and there has been no legal action in which Defendants were found to be the prevailing party. Reply at 2; Lee Decl., ¶8, Ex. A. However, Paragraph 5 allows Sanfaz’s assignees to recover collection costs if Plaintiffs do not pay the note in full when due. Lee Decl., ¶8, Ex. A. If authorized by the deed of trust, attorney’s fees incurred to protect the security of the deed of trust may be considered collateral advances which may be added to the claim and required to be paid as a condition of reinstatement. Buck v. Barb, (1983) 147 Cal.App.3d 920, 925. The collection costs can include legal fees not eligible for recovery under Paragraph 6.

Plaintiffs argue that it is unclear what work was done four years ago and how they relate to the notes at issue or the foreclosure. Reply at 1. In the context of fee motions, competent evidence as to the nature and value of attorney’s fees rendered is required. Martino v. Denevi, (1986) 182 Cal.App.3d 553, 559. This evidence may consist of testimony by an attorney as to the number of hours worked; detailed time records are not required. Id. However, more recent case law indicates that fee motions must be supported by detailed time records. Crespin v. Shewry, (2004) 125 Cal.App.4^th 259, 271.

This is not a fee motion; it is an attack on the amount of attorney’s fees sought in the NOD. At this stage Defendants are not required to prove the legitimacy of the fees and costs included in the NOD. They need only set forth the basis on which the numbers in the NOD were calculated. The redacted invoices do not explain how they are related to the Sanfaz Note, but Defendants’ evidence is that they were incurred for legal work associated with enforcement of the notes herein. Lee Decl., ¶¶ 11-12, Exs. C-D. Defendants’ evidence suffices for this purpose.

The court ordered Plaintiffs to show that they have the ability to pay the amounts actually owed under the Sanfaz and Bae Notes. Plaintiffs’ supplemental brief asserts that, although tender is required to set aside a foreclosure sale, courts have not required tender before foreclosure. Pfeifer v. Countrywide Home Loans, Inc., (2012) 211 Cal. App. 4th 1250, 1280. Supp. Br. at 3. As Defendants respond (Opp. at 8), the issue is not whether Plaintiffs tender the amount due, but whether they are able to do so. A material variance is significant only insofar as it impedes a borrower from paying the NOD. Opp. at 8.

Plaintiffs also argue that no tender is required where the borrower attacks the underlying debt or a claim of offset exceeds the amount due. See Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-113. Plaintiffs have alleged that Allen, Daniel, and Chong defrauded Byun and, without the Fraudulent Agreement and Packo Note, Plaintiffs would not have incurred the Bae Note because the amount due would have been paid off. Supp. Br. at 3. The court previously determined that Plaintiffs had not shown their fraud claim with sufficient evidence and need not consider this argument further.

Plaintiffs attempt to meet the ability to pay requirement by stating that they have retained a financial consultant to obtain financing to satisfy any and all amounts lawfully due. Byun Decl., ¶3. This is insufficient to show prejudice from the variance in the Bae NOD.

In fact, Defendants present evidence suggesting that Plaintiffs do not have an ability to pay. On May 6, 2022, the parties entered a Settlement in Byun’s bankruptcy case that allowed Plaintiffs to satisfy all amounts owed to Sanfaz and the Bae Trust if it paid (1) $2.1 million by June 30, 2022, (2) $2.125 million by July 16, 2022, (3) $2.175 million by August 16, 2022, and (4) $2.2 million by August 30, 2022. Meadows Decl., ¶25, Ex. 21, p. 3. Plaintiffs failed to obtain funding to pay the settlement, which suggests that they cannot do so now.

Plaintiffs have failed to demonstrate prejudice from the variance in the Bae NOD by showing that they have the ability to pay the correct amount owed.

In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177. This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo. Id.

Real property is a unique asset. Where land, or any estate therein, is the subject matter, the inadequacy of the legal remedy is well settled, and the equitable jurisdiction is firmly established. Stockton v. Newman, (1957) 148 Cal. App. 2d 558, 564. While investment property is less subject to protection than a residence, the balance of hardships would favor a preliminary injunction.

[1] The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction — one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

[2] However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).

[3] In their ex parte application, Plaintiffs request judicial notice of (1) the Complaint (Ex. 1); (2) the Bae NOD for the 068 Property, dated January 4, 2023 (Ex. 2); (3) the Sanfaz NOD for the Alameda Properties except for the 068 Property, dated December 21, 2022 (Ex. 3); and (4) a Notice of Trustee’s Sale (“NOS”) dated March 24, 2023 (Ex. 4). The court need not judicially notice the Complaint, as it is always free to review past filings in the case as issue. The other requests are granted. Evid. Code §452(c).

In reply, Plaintiffs request judicial notice of the Assignment of Deed of Trust, Assignment of Rents, and Promissory Note for the Alameda Properties except for the 068 Property, recorded September 29, 2022. Reply Ex. 1. The request is granted. Evid. Code §452(c).

[4] Only the Allen Defendants oppose. Defendant Park specially appeared to oppose the ex parte application but has not filed an opposition to the OSC.

[5] Plaintiffs’ fraud theory is that Byun would not have needed the Bae Trust and Sanfaz loans but for Park's fraud. The problem for purposes of injunction is that the fraud is not adequately shown. Plaintiffs rely on the verified Complaint which pleads ultimate facts and attaches no exhibits. As a result, the court did not issue a TRO based on fraud.