Judge: James C. Chalfant, Case: 24STCV24832, Date: 2024-11-07 Tentative Ruling

Case Number: 24STCV24832    Hearing Date: November 7, 2024    Dept: 85

Plaintiffs Anbang Group Holdings Co. Limited, AB Stable IX LLC, and AB Stable VIII LLC (collectively, “Anbang”) apply for a preliminary injunction to enjoin Defendants Amer Group LLC, Amer Group Inc, and Worldtsing LLC (“Worldstsing”) from transferring or encumbering title to real property located in Malibu, County of Los Angeles, California, bearing the Assessor’s Parcel Number 4473-002-010 (the “Property”).

            The court has read and considered the moving papers, the opposition presented at the TRO hearing, and reply, and renders the following tentative decision.

            A. Statement of the Case

            1. The Complaint

            Plaintiffs Anbang filed the Complaint on September 24, 2024, for (1) Cancellation of Written Instrument, (2) Fraudulent Conveyance, (3) Declaratory Relief, and (4) Injunctive Relief.  The Complaint alleges in pertinent part as follows.

            Plaintiffs bring this action to cancel a fraudulent grant deed for real property owned by Defendant Amer Group LLC, a Delaware entity and judgment debtor of Plaintiffs.  Amer Group LLC owes Plaintiffs over $14.5 million in damages from a federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) lawsuit that was decided in April of 2024 against Amer Group LLC’s sole owner Haibin Zhou (“Zhou”), and several related entities (the “RICO Action”).

            Defendants Amer Group LLC, its owner Zhou, and numerous affiliated entities and coconspirators carried out a fraudulent scheme aimed at falsely claiming ownership over billions of dollars in luxury real estate properties owned by Plaintiffs.  As part of that scheme, in 2018, entities including Amer Group LLC filed false grant deeds in Los Angeles County, San Francisco County, and San Mateo County purporting to transfer to themselves Plaintiffs’ luxury properties.  Zhou was the owner and sole controller of those entities, including Amer. 

In September 2019, Plaintiffs filed quiet title actions in four California counties to clear title to their luxury properties.  None of the Defendants appeared in the cases, and Plaintiffs prevailed through default judgments in each of them.   

            Between 2019 and 2022, Amer Group LLC and its co-conspirators also filed numerous lawsuits through which they attempted to confirm several fake arbitration awards against Plaintiffs and/or their affiliates—totaling nearly $1 trillion dollars—based on a forged and fake “agreement” purportedly between Plaintiffs and Amer, among others.  Plaintiffs and/or their affiliates prevailed in litigation in Delaware, Alameda County, California, the District of Columbia, and New York.

            On March 5, 2023, Plaintiffs commenced the RICO Action against Amer Group LLC, Zhou, and their co-conspirators, asserting claims for violations of RICO (18 U.S.C. §1962(c)) and Conspiracy to Commit RICO (18 U.S.C. §1962(d)), based on predicate acts of mail fraud in violation of 18 U.S.C. section 1341, wire fraud in violation of 18 U.S.C. section 1343, and attempted extortion in violation of the Hobbs Act (18 U.S.C. §1951).  Although duly served, none of Zhou, Amer Group LLC, or any other of the entities controlled by Zhou appeared in the RICO Action.  Other defendants did appear and Plaintiffs took extensive discovery from participants in the scheme.  In the course of the RICO Action, Plaintiffs proved that Zhou operates through multiple aliases and personas (including “Mike Butler” and “Andy Bang”), uses multiple email addresses and shell companies, and has a history of filing false deeds and fake judgments while subsequently failing to appear in court to defend his filings.   A default judgment was entered against Amer Group LLC in the RICO Action on April 4, 2024. 

Amer Group LLC has attempted to thwart Plaintiffs’ attempts to collect on the RICO Judgment.  On April 11, 2024, just days after the RICO Judgment was entered, Amer Group Inc filed a false grant deed (“False Deed”) with the Los Angeles County Recorder’s Office.  The False Deed falsely states that it is a “Reconveyance upon satisfaction of a debt” under section 11911 of the California Revenue and Taxation Code.  

Amer Group Inc is a shell entity owned by Zhou, and Defendants filed the False Deed immediately after the RICO Judgment was entered to place the Property into the hands of a non-judgment debtor affiliate of Amer Group LLC and out of the reach of Plaintiffs’ lawful judgment enforcement efforts.

Upon information and belief, Plaintiffs allege that (a) the False Deed contains a forged signature of “Sang Yan,” who is falsely described as a “Trustee” of Amer Group Inc and (b) the Acknowledgement of the notary public included with the False Deed is a photocopy of an identical notarial Acknowledgment included with a completely different property filing in a different county.  

The False Deed also falsely implies that Amer Group Inc owned the Property, or some interest in it, and transferred the Property to Worldtsing LLC by virtue of the False Deed.  In fact, the Property was transferred from S&A Freshman Family Properties, LLC to Amer Group LLC in January of 2011 and was never transferred at any time thereafter.  

            2. Course of Proceedings

            On September 24, 2024, Plaintiffs filed the Complaint and Summons.

            Proofs of service on file show that Defendant Amer Group LLC was served with Summons and Complaint on September 27 and 30, 2024, Defendant Amer Group Inc was served with Summons and Complaint on September 27, 2024, and Worldtsing was served with Summons and Complaint on September 27, 2024.

On September 30, 2024, the court granted Plaintiffs’ ex parte application for a temporary restraining order (“TRO”) and order to show cause for a preliminary injunction (“OSC”).  Proofs of service on file show that Defendants Amer Group Inc, Amer Group LLC, and Worldtsing were served with the TRO/OSC on October 3, 2024.

            B. Applicable Law

            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.  Code of Civil Procedure (“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.

            C. Statement of Facts

Amer Group LLC, a Delaware entity, owes Plaintiffs over $14.5 million in damages from the RICO Action decided against it, its sole owner Haibin Zhou (“Zhou”), and several related entities (Anbang Group Holdings Co. Ltd., et al. v. Zhou, et al., No. 23-cv-00998 (N.D. Cal.).  Wagner Decl., ¶¶ 3-4, Ex. B.  As part of their efforts to satisfy the judgment in the RICO Action (the “Judgment”), Plaintiffs obtained a writ of execution and filed an abstract of judgment with the Los Angeles County Recorder’s Office.  Plaintiffs recorded their Abstract of Judgment with the Los Angeles County Recorder’s Office on May 24, 2024.  Wagner Decl., ¶5, Ex. C.

Defendant Amer Group LLC is a Delaware limited liability company.  Wagner Decl., ¶6, Ex. D. Amer Group LLC was originally formed as a Delaware corporation named “Amer Group Inc.” in 2011 and converted to Amer Group LLC on or about May 18, 2018.  Id.

Defendants Amer Group Inc (without a period after Inc) and Worldtsing LLC are Texas entities whose right to do business was revoked by the Texas Secretary of State on or about February 23, 2024.  Wagner Decl., ¶¶ 7-8, Exs. E-F. The organizer and sole director identified in the Certificates of Formation for Amer Group Inc and Worldtsing LLC is “mike butler,” an alias used by Zhou in documents obtained by Plaintiffs in the RICO Action. Id.

On April 11, 2024, just days after the RICO Judgment was entered, Defendants filed the False Deed with the Los Angeles County Recorder’s Office.  Wagner Decl., ¶9, Ex. G. The False Deed purports to transfer the Property from Amer Group Inc (the Texas company) to Worldtsing. Ex.  G.

The False Deed contains multiple pieces of false information.  First, it falsely purports to transfer the Property that Amer Group Inc never has owned.  In January 2011, the Property was transferred from S & A Freshman Family Properties, LLC to “Amer Group Inc.”, the Delaware corporation which later converted to Amer Group LLC.  Wagner Decl., ¶10, Ex. H. During the 13 years between that purchase and the time that Plaintiffs recorded their Abstract of Judgment, no transfer of the Property from Amer Group LLC or its Delaware predecessor Amer Group Inc. was ever recorded.  Wagner Decl., ¶11.

Second, the False Deed also falsely states that it is a “Reconveyance upon satisfaction of a debt” under Section 11911 of the California Revenue and Taxation Code.  Wagner Decl., Ex. G. That language falsely suggests that the document was used merely to release a security interest in the Property held by Amer Group Inc that Worldtsing had somehow previously conveyed.  In reality, Worldtsing never owned the Property, and never conveyed the Property to Amer Group Inc as a security interest such that the latter could reconvey it to Worldtsing. There are no recorded filings of any such ownership or such transactions.  Wagner Decl., ¶11.

Third, the Acknowledgement of the notary public included with the False Deed, which

purports to notarize the identity of the signatory, is an apparent photocopy of an identical notarial Acknowledgment that was included with a completely different property filing in a different county.  Wagner Decl., ¶12, Ex. I.

D. Analysis

Plaintiffs seek a preliminary injunction to enjoin Defendants from transferring, selling, or otherwise encumbering title to the Property.  Defendant Amer Group LLC filed an opposition to the TRO but has not filed an opposition to the OSC.

1. Probability of Success

Plaintiffs argue that Defendants attempted to manufacture this property transfer in order to place Amer Group LLC’s assets out of the reach of Plaintiffs as judgment creditors.  On September 24, 2024, Plaintiffs filed the instant action seeking to cancel the False Deed on the ground that it is a fraud and forgery pursuant to Civil Code section 3412, and a fraudulent conveyance pursuant to Civil Code section 3439.04.  Mem. at 7.

As judgment lien holders to the Property and judgment creditors of Amer Group LLC, Plaintiffs are entitled commence an action to cancel the False Deed recorded by Defendant Worldtsing LLC.  The False Deed falsely purports to transfer property that the supposed grantor, Amer Group Inc, did not own, it purports to be a “Reconveyance upon satisfaction of a debt” despite the fact that there are no recorded filings of any such ownership or such transactions, and the Acknowledgement of the notary public included with the False Deed is a photocopy of an identical notarial Acknowledgment that was included with a completely different property filing in a different county.  It is well-settled that “a forged document is void ab initio and constitutes a nullity.” Wutzke v. Bill Reid Painting Service Inc., (1984) 151 Cal. App. 3d 36, 43.  Because the False Deed contains numerous fraudulent representations and a forged signature, it is void and should be cancelled under Civil Code section 3412. Mem. at 7.

The False Deed is also plainly a fraudulent conveyance that should be cancelled under Civil Code section 3439.04. Defendant Worldtsing intentionally recorded the False on April 11, 2024. Filed just days after judgment was entered in the RICO Action, and purporting to effect a transfer between two shell companies owned by the same ultimate owner, the False Deed was recorded with an intent to hinder, delay, and defraud Plaintiffs. Mem. at 7.

Defendant Amer Group LLC did not substantively oppose the TRO issuance, arguing only procedural issues of inadequate service (Opp. at 3-4) and that Defendants needed more time to retain counsel (Opp. at 7).  The court overruled these objections.

Plaintiffs have made a prima facie case that Defendant Amer Group LLC has not rebutted.  The court also has reviewed the two notary Acknowledgements and agrees that the Acknowledgment on the False Deed appears to be a cut and paste.  Plaintiffs have shown a probability of success.

2. Balancing of Harms

Plaintiffs argue that, without injunctive relief, nothing prevents Defendants from attempting to illicitly transfer interest in the Property to some new shell company or a third party, causing Plaintiffs non-compensable economic harm.   The consequences of such a transfer are also potentially irreversible.  A subsequent third party that is a bona fide purchaser for value may in some cases take title free and clear of any adverse claim based on a prior deed’s being voidable, provided that the prior deed has yet to be declared void.  See Schiavon v. Aranudo Brothers, (2000) 84 Cal. App. 4th 374, 376.  If Defendants transfer the property to an unsuspecting buyer, Plaintiffs might be without any recourse to execute their valid judgment.  Mem. at 6.

Further, while financial harm is generally compensable in damages, “insolvency or the inability to otherwise pay money damages is a classic type of irreparable harm.”  See California Retail Portfolio Fund GMBH & Co. KG v. Hopkins Real Estate Grp., (2011) 193 Cal. App. 4th 849, 857; see also Friedman v. Friedman, (1993) 20 Cal. App. 4th 876, 890 (monetary loss constitutes irreparable harm where “there is some showing that one against whom injunctive relief is sought is insolvent or otherwise unable to respond in damages”).  Absent an injunction, Plaintiffs have no chance of securing their judgment of $14,656,205.91 against Amer Group LLC, which has no other known assets.  Mem. at 6.

Defendant Amer Group LLC argued at the TRO hearing that no reasonable third party would attempt to acquire the Property where an abstract of judgment was recorded against it.  Opp. at 5-6.  This may be true, but Defendants would not be prevented from performing a fraudulent transfer to a related entity without injunctive relief.  The balancing of harms weighs in Plaintiffs’ favor.

E. Conclusion

The application for a preliminary injunction is granted.  Defendants Amer Group LLC, Amer Group Inc and Worldtsing are enjoined from transferring, selling, or otherwise encumbering title to the Property.

Plaintiffs argue that no bond should be required, but a bond is mandatory.  The purpose of a bond is to cover the defendant’s damages from an improvidently issued injunction.  CCP §529(a).  In setting the bond, the court must assume that the preliminary injunction was wrongly issued.  Abba Rubber Co. v. Seaquist, (“Abba”) (1991) 235 Cal.App.3d 1, 15.  The attorney’s fees necessary to successfully procure a final decision dissolving the injunction also are damages that should be included in setting the bond.  Id. at 15-16.  While Abba reasoned that the plaintiff’s likelihood of prevailing is irrelevant to setting the bond, a more recent case disagreed, stating that the greater the likelihood of the plaintiff prevailing, the less likely the preliminary injunction will have been wrongly issued, and that is a relevant factor for setting the bond.  Oiye v. Fox, (2012) 211 Cal.App.4^th 1036, 1062. 

Given the lack of opposition, a modest bond of $5000 will be required.  The bond shall be cash or a corporate bond, posted within seven calendar days, and Plaintiffs shall provide evidence of its posting to opposing counsel.