TENTATIVE RULING

Plaintiffs John Gallagher and Juliana Gallagher’s Request for a Preliminary Injunction is DENIED.

Plaintiffs John Gallagher and Juliana Gallagher to give notice.

REASONING

Plaintiffs John Gallagher and Juliana Gallagher (“Plaintiffs”) move the Court for an order restraining any party from further transferring any ownership interest in the subject property located at 11657 Chenault Street, Apartment 301, Los Angeles, California 90049 until this matter is adjudicated on the merits and that Defendants Wilshire Investment Group, LLC and Brentwood Real Estate Group (“Defendants”) be stayed from prosecuting any unlawful detainer proceedings against Plaintiffs while this litigation is pending.

Legal Standard

The function of a preliminary injunction is the preservation of the status quo until a final determination of the merits.” (Beehan v. Lido Isle Cmty. Ass’n (1977) 70 Cal.App.3d 858, 866.) “Trial courts traditionally consider and weigh two factors in determining whether to issue a preliminary injunction. They are (1) how likely it is that the moving party will prevail on the merits, and (2) the relative harm the parties will suffer in the interim due to the issuance or nonissuance of the injunction.” (Dodge, Warren & Peters Ins. Servs., Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “The greater the showing on one, the less must be shown on the other to support an injunction.” (Ibid., quoting Butt v. State of California (1992) 4 Cal.4th 668, 678, brackets and ellipses omitted.) The burden of proof is on the plaintiff as the moving party “to show all elements necessary to support issuance of a preliminary injunction.” (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.)

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 [injunction erroneously granted without verified complaint, affidavits, or declarations to support injunctive relief].) Injunctive relief may be granted based upon a verified complaint only if it contains sufficient evidentiary, as opposed to ultimate, facts. (Code Civ. Proc., § 527, subd. (a).) A plaintiff seeking injunctive relief must also show the absence of an adequate damages remedy at law. (Code Civ. Proc., § 526, subd. (a)(4).)

A preliminary injunction may be classified as either a prohibitory injunction, which requires parties “to refrain from a particular act,” or a mandatory injunction, which requires parties to perform “an affirmative act that changes the position of the parties.” (Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446.) Mandatory preliminary injunctions are rarely granted. (Teachers Insurance & Annuity Association v. Furlotti (1999) 70 Cal.App.4th 1487, 1493.) More specifically, “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” (Ibid.)

Background

Plaintiffs allege that they have been tenants at 11657 Chenault Street, Apartment 301, in Los Angeles since November 2021, and the property owner defaulted on a loan secured by the property in 2023, but Plaintiffs were informed of the default or a pending foreclosure sale. (Compl. ¶¶ 8-10.) On December 12, 2023, a trustee’s sale took place, and Plaintiffs only learned the day after the sale, such that they were unable to bid at the foreclosure sale, but they intended to bid after the sale pursuant to Civil Code section 2924m, which gives a right of first refusal to tenants to purchase a foreclosed property. (Compl. ¶¶ 11-12.) Plaintiff John Gallagher learned the property was sold to a third-party investment group, and he was informed by Defendant Trustee Corps. of everything that needed to be submitted in a Notice of Intent to Bid and Affidavit. (Compl. ¶¶ 13-17.) Plaintiff submitted the Notice of Intent to Bid, Affidavit, and supporting documentation on December 21, 2023, and he later called to confirm receipt, but he was incorrectly told the notice was submitted after the deadline, and he was informed on January 4, 2024, that the winning bidder at auction had submitted their own affidavit, which closed the sale immediately, thereby allowing for the deed to be transferred, and Plaintiffs did not tender the funds required to complete their bid and take title to the property. (Compl. ¶¶ 18-27.) Plaintiffs allege claims for (1) violation of Civil Code section 2924m, (2) declaratory relief, (3) injunctive relief, (4) quiet title, (5) violation of Business and Professions Code section 17200, and (6) negligence. As to Defendants Wilshire Investment Group, LLC and Brentwood Real Estate Group, Plaintiffs assert claims for declaratory relief, injunctive relief, and quiet title.

Plaintiffs seek a preliminary injunction on the grounds that an eligible tenant buyer has a right to complete a bid 45 days after the trustee’s sale; Defendant Trustee Corps.’ delivery of the deed to Defendants denied Plaintiffs’ rights as eligible tenant buyers; and Plaintiff will incur irreparable harm without the granting of an injunction. Defendants oppose the issuance of a preliminary injunction on the grounds that Wilshire Investment Group, LLC (“Wilshire”) is a bona fide purchaser without notice of Plaintiffs’ claims, which bars all causes of action against Wilshire; the plain language of Civil Code section 2924m indicates no intent that the statute should trump bona fide purchaser status; the claim for quiet title cannot succeed because the complaint is not verified and Plaintiffs cannot prove title superior to Wilshire; the claims for declaratory relief and injunctive relief must fail because they are equitable remedies, not independent causes of action, and Plaintiffs’ claim for declaratory relief seeks to redress an alleged past wrong; and the balancing of irreparable harm favors Wilshire.

Analysis

“Under [Civil Code] section 2924, there is a conclusive presumption created in favor of a [bona fide purchaser] who receives a trustee’s deed that contains a recital that the trustee has fulfilled its statutory notice requirements.” (Melendrez v. D & I Investment, Inc. (2005) 127 Cal.App.4th 1238, 1250.) A bona fide purchaser “is one who pays value for the property without notice of any adverse interest or of any irregularity in the sale proceedings.” (Ibid.) The two elements required to make a buyer a bona fide purchaser “are that the buyer (1) purchase the property in good faith for value, and (2) have no knowledge or notice of the asserted rights of another.” (Id. at p. 1251, italics omitted.)

Here, the evidence shows that Wilshire purchased the property at a public trustee’s sale following a nonjudicial foreclosure, paying the amount of $875,644.90, and Wilshire received a recorded copy of the Trustee’s Deed Upon Sale from Trustees Corps. on January 12, 2024. (Opp’n, Abrahams Decl. ¶ 2, Ex. A.) Defendants provide evidence that they were not involved with or relation to Trustees Corp., no personal knowledge relating to Plaintiffs’ claims against Trustees Corp., Wilshire was unaware of Plaintiffs’ claims prior to paying value for the property and receiving the deed, Wilshire has no personal knowledge as to any irregularities with the sale bid process, and the first time Defendants were made aware of Plaintiffs’ claims was when they were served with the complaint in February 2024. (Opp’n, Abrahams Decl. ¶ 3.) The deed states as follows:

This deed is made pursuant to the authority and powers given to Trustee (or to Successor Trustee) by law and by that certain Deed of Trust dated December 16, 2015, made to ADAM JOANNES, A SINGLE MAN and recorded on December 22, 2015, as Instrument No. 20151607322 of Official Records in the office of the Recorder of Los Angeles County, CA Trustee (or Successor Trustee) having complied with all applicable statutory provisions and having performed all of his duties under the said Deed of trust.

All requirements of law and of said Deed of Trust relating to this sale and to notice thereof having been complied with. Pursuant to the Notice of Trustee’s Sale, the above described property was sold by Trustee (or Successor Trustee) at public auction on December 12, 2023 at the place specified in said Notice, to Grantee who was the highest bidder therefore, for $875,644.90, in lawful money of the United States, which has been paid.

(Opp’n, Abrahams Decl. ¶ 2, Ex. A, capitalization and bolding in original.)

There are no facts in the complaint upon which the trier of fact could conclude that Wilshire did not purchase the property in good faith for value, or that it had knowledge or notice of the asserted rights of another. Plaintiffs provide evidence here that Plaintiffs’ counsel was in touch with Paul Skikne, a representative of Wilshire, on January 17, 2024, regarding Plaintiffs’ claims to the property and their intent to file this action, and email following up on the conversations was sent to Keith Abrahams, principle of Brentwood Real Estate Group, Inc., the managing member of Wilshire, on January 23, 2024. (Reply, Perez Decl. ¶¶ 4-5, Ex. 1.) Notably, this does not show that Wilshire had knowledge of Plaintiffs’ claims because this communication occurred after the sale and after receipt of the deed on January 12, 2024. Plaintiffs also argue that the transfer was void because it was prohibited by Civil Code section 2924m, but there is no indication in the statute that the presumption created in favor of a bona fide purchaser will be set aside in favor of Civil Code section 2924m. Whether Defendants had notice is something that is not clear at this juncture with the evidence provided, and while discovery may show that Defendants had notice, such that Plaintiffs may prevail on their claim, the Court will not issue a preliminary injunction based on what future evidence may show. 

The Court finds that Plaintiffs have not demonstrated a likelihood that they will prevail on the merits of their claims because the evidence shows that Wilshire was a bona fide purchaser of the property. Accordingly, Plaintiffs John Gallagher and Juliana Gallagher’s Request for a Preliminary Injunction is DENIED.

Evidentiary Objections

The Court declines to rule on Defendants’ objections to the declarations of John Gallagher, as the evidence was not material to the Court’s ruling herein.