Judge Kerry Bensinger, Case Number: 24STCV34202, Date: 2025-02-19 Tentative Ruling

CASE: Wilmington Trust, National National Association, as Trustee for the Benefit of the Registered Holders of Bank 2021-BNK34, Commercial Mortgage Pass-Through Certificates, Series 2021-BNK34 v. 928 North San Vicente, LLC, et al.

MOTION FOR : (1) APPOINTMENT OF RECEIVER, AND; (2) PRELIMINARY INJUNCTION IN AID OF RECEIVER

MOVING PARTY: Plaintiff Wilmington Trust, National Association, as Trustee for the Benefit of the Registered Holders of Bank 2021-BNK34, Commercial Mortgage Pass-Through Certificates, Series 2021-BNK34

This case arises from a defaulted loan. In 2021, Morgan Stanley Bank, N.A. (“Original Lender”), made a $4,900,000.00 loan (the “Loan”) to defendant 928 North San Vicente, LLC (“Borrower”). The Loan is evidenced by a Promissory Note (the “Note”) executed by Borrower in favor of Original Lender in the principal sum of $4,900,000. The Loan is secured by a Deed of Trust and Security Agreement (the “Deed of Trust”), executed by Borrower, as trustor, in favor of Stewart Title Guaranty Company, as trustee, for the benefit of Original Lender, as beneficiary. The Deed of Trust was recorded on June 2, 2021. Later, the Note and Deed of Trust (collectively, the “Loan Documents”) were assigned to plaintiff Wilmington Trust, National Association, as Trustee for the Benefit of the Registered Holders of Bank 2021-BNK34, Commercial Mortgage Pass-Through Certificates, Series 2021-BNK34 (“Plaintiff”). Under the Loan Documents, Borrower agreed to make monthly payments. Borrower defaulted. Due to the default, Plaintiff intends to commence a non-judicial foreclosure of the real property located at 928 North San Vincente Boulevard, West Hollywood, California (the “Property”).

On December 26, 2024, Plaintiff commenced this action against Borrower for (1) Appointment of Receiver, Accounting, and Specific Performance of Rents-and-Profits Clause; and (2) Injunctive Relief.

On January 3, 2025, Plaintiff filed this motion for (1) appointment of receiver, and (2) preliminary injunction in aid of receiver. On the same day, Plaintiff filed a proof of service showing that Borrower was served with the summons, complaint, and this motion by personal service.

Plaintiff moves this court for entry of an order: (1) appointing a receiver to take possession, custody, and control of the Property to operate, manage, maintain, and lease the Property, and to demand and collect any and all revenues, rents and profits from the Property; (2) for specific performance of the right to possession clause in the Deed of Trust; and (3) enjoining Borrower from interfering with the receiver’s operation and management of the Property during the pendency of these proceedings. Plaintiff propose Robert C. Warren as receiver.

A receiver may be appointed by the court in cases where necessary to preserve the property or rights of any party, or in an action by a secured lender for specific performance of an assignment of rents provision in a deed of trust, mortgage, or separate assignment document. The appointment may be continued after entry of a judgment for specific performance if appropriate to protect, operate, or maintain real property encumbered by a deed of trust or mortgage or to collect rents therefrom while a pending nonjudicial foreclosure under power of sale in a deed of trust or mortgage is being completed. (Code Civ. Proc. (CCP) § 564(b)(9), (11).) Courts have authorized the appointment of a receiver when a deed of trust that allows the beneficiary to take possession of the property through a receiver upon the trustor’s default. (See Mines v. Superior Court (1932) 216 Cal. 776; Kinnison v. Guaranty Liquidating Corp. (1941) 18 Cal.2d 256, 260–61; Snyder v. Western Loan and Building Co. (1934) 1 Cal.2d 697, 702; America Security Co. v. Van Loben Sels (1933) 218 Cal.662, 664; Turner v. Superior Court (1977) 72 Cal.App.3d 804, 812.) This contractual remedy permits specific performance of the rents-and-profits clause and confers jurisdiction upon the court to appoint a receiver in favor of its application. (See Mines, supra, 216 Cal. at pp. 778–79; Barclays Bank of California v. Superior Court (1977) 69 Cal.App.3d 593, 600; Turner, supra, 72 Cal.App.3d at pp. 812–13.)

Here, the Deed of Trust expressly provides for the appointment of a receiver for the Property upon a default under the Loan Documents. Section 11.1 of the Deed of Trust states, in pertinent part:

“[u]pon the occurrence of any Event of Default, Borrower agrees that Lender may or acting by or through Trustee may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, without limitation . . . apply for the appointment of receiver, trustee, liquidator or conservator of the Property, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Borrower, any Guarantor, Indemnitor or of any Person liable for the payment of the Debt.”

(Stephens Decl., Ex. C, Deed of Trust, § 11.1.) Further, under the Deed of Trust, the Borrower made an absolute and unconditional assignment to the Plaintiff of all the Rents and Profits of the Property. (Id., Deed of Trust, § 1.2.) Moreover, it is undisputed the Loan is in default with the amounts delinquent under the Loan as of December 11, 2024 totaling $99,514.10 and that Borrower has failed to pay the full indebtedness of the Loan despite continuing to collect the rents from the Property during this period. (Stephens Decl., ¶¶ 19-20.)

Given the foregoing, and the absence of opposition, the court finds that the Borrower does not have the financial resources to properly maintain the Property pending the Lender’s non-judicial foreclosure sale. Appointment of a receiver to take care of and manage the Property is therefore warranted as is specific performance of the assignment of rents provision in the Deed of Trust. Further, the court accepts Plaintiff’s proposal of Robert C. Warren to act as receiver for the Property.

(b) The receiver shall give an undertaking to the State of California, in such sum as the court or judge may direct, to the effect that the receiver will faithfully discharge the duties of receiver in the action and obey the orders of the court therein. The receiver shall be allowed the cost of the undertaking.

Here, Plaintiff proposes the Receiver’s bond be set at $40,000, which approximates one-month’s rent. The court accepts the proposal. The Receiver’s bond is set at $40,000.

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; and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. (CCP §526(a); 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.)

The court’s determination is guided by a “mix” of the potential-merit and interim-harm factors; the greater the plaintiff’s showing on one, the less must be shown on the other to support an injunction. (Butt v. State of California (1992) 4 Cal.4th 668, 678.) However, a trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim. (Ibid.)

The court must consider both factors. The two factors are a sliding scale – the stronger the showing of probability of prevailing, the lesser showing is required for irreparable harm. (Butt, supra, 4 Cal.4th at p. 678; The Right Side Coalition v. Los Angeles Unified School District (2008) 160 Cal.App.4th 336 (reversing denial of preliminary injunction based solely on balancing of hardships without considering probability of prevailing). The plaintiff must make some showing of each factor. (Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 459.) A court may not issue a preliminary injunction if the plaintiff cannot possibly prevail on the merits even if a strong showing of irreparable harm has been made. (Butt, supra, 4 Cal.4th at pp. 677-78.)

The court’s ruling on a preliminary injunction is not an adjudication of the merits, is not a trial, and does not require a statement of decision. (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286; People v. Landlords Professional Services, Inc. (1986) 178 Cal.App.3d 68, 70-71.) The court is not required to state its reasons for granting or denying a preliminary injunction; a cursory statement is sufficient. (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198.)

After consideration of the relevant factors, the court finds Plaintiff is entitled to a preliminary injunction to enjoin Borrower and its officers, directors, employees and agents from doing any act which will, or which will tend, to impair, defeat, divert, prevent or prejudice the preservation of the Property, including the preservation of the Lender’s interest in the Property.

Plaintiff brings two causes of action for appointment of receiver and injunctive relief. Pursuant to the Deed of Trust, Plaintiff seeks appointment of a receiver for the Property pending the commencement of a non-judicial foreclosure of the Property and a preliminary injunction to aid the receiver. (See Complaint, ¶¶ 32, 33, 43.) Accordingly, the injunction sought in the instant application is based on Plaintiff establishing a reasonable probability of prevailing on this cause of action.

Plaintiff establishes a probability of prevailing on this claim. In support, Plaintiff offers the declaration of Ryan Stephens, the managing director at Greystone Servicing Company LLC (“GSC”). GSC is the special servicer for the holder of the loan that is the subject of the litigation. Mr. Stephens states the following:

On September 19, 2024, Plaintiff filed an action against Borrower for failing to pay its regularly scheduled monthly payment from April 2024 to September 2024. The Borrower thereafter reinstated the Loan.

The Borrower, however, once again failed to pay its regularly scheduled monthly paymen on November 1, 2024, and has continued to fail to pay its regularly scheduled monthly payment since then. Accordingly, the Loan is in default and an Event of Default has occurred.

Attached hereto as Exhibit F is a true and complete copy of a letter Plaintiff, through counsel sent to the Borrower on December 4, 2024, providing formal notice to the Borrower of its Event of Default, accelerating all amounts due under the Loan Documents and demanding payment.

Since receiving the foregoing letter, Borrower has failed to pay off the accelerated Loan or even to make any further payments due under the Loan Documents. The Borrower has continued to the collect the rents from the Property since November 2024.

Accordingly, the Loan is in default, the amounts delinquent under the Loan as of December 11, 2024 are $99,514.10, and due to the acceleration of the Loan, all amounts owing under the Loan, including all principal are now due and owing.

Due to the Events of Default under the Loan Documents, Plaintiff intends to commence a non-judicial foreclosure on the Property by recording a Notice of Default and Election to Sell under the Deed of Trust and Security Agreement.

The court finds the balance of harms weighs in Plaintiff’s favor. Plaintiff submitted evidence to show Borrower has defaulted on the Loan and, despite continuing to collect rent on the Property during the ongoing default period, Borrower has not made any payments on the amount due of $99,514.10. (Stephens Decl., ¶ 19.)

In order to obtain the preliminary injunction, CCP section 529 requires the Plaintiff to provide an undertaking. (See ABBA Rubber Co. v. Seaquist (1991) 2 Cal.App.3d 1, 10 (finding that bond is an “indispensable prerequisite to the issuance of a preliminary injunction” and the duty to order a bond is “mandatory, not discretionary.”).) In addition, an injunction is void without an undertaking. (See Federal Automotive Services v. Lane Buick Co. (1962) 204 Cal.App.2d 689, 695 (holding injunction inoperative and of no effect because the order did not require a bond).)

Section 529 identifies the amount of the undertaking to be any damages, not exceeding an amount to be specified, the defendant may sustain by reason of the injunction, if the court finally decides that the Plaintiff was not entitled to the injunction.

Here, Plaintiff requests that the court not require an undertaking because the Borrower is unlikely to suffer any interim harm as a result of the preliminary injunction since it simply requires Borrower to comply with its obligations under the Loan Documents. Namely, to cooperate with the Receiver and to refrain from interfering with the Receiver’s duties. However, as stated above, the bond requirement is mandatory, not discretionary. (ABBA Rubber Co., 2 Cal.App.3d at p. 10.) Without the bond, the injunction would have no effect. Further, Plaintiff does not demonstrate that any of the exceptions delineated in CCP section 529(b) apply. Accordingly, the court requires that a bond be posted in the amount of $40,000.

Accordingly, the unopposed Motion for (1) Appointment of Receiver, and (2) Preliminary Injunction in Aid of Receiver is GRANTED.

Bond for the receiver is set at $40,000. Bond for the preliminary injunction is set at $40,000.

Kerry Bensinger

Judge of the Superior Court