Judge: Mark A. Young, Case: 23SMCV01956, Date: 2023-05-08 Tentative Ruling

Case Number: 23SMCV01956    Hearing Date: May 8, 2023    Dept: M

Circleup Credit Advisors v. Fanjoy, 23SMCV01956

In its ex parte application, Plaintiff Circleup Credit Advisors seeks (1) an order appointing a temporary receiver and an OSC why a permanent receiver should not be appointed, and (2) a TRO in aid of the receiver and OSC why a preliminary injunction in aid of the receiver should not be issued.

            “In this state a receiver may be appointed only as permitted by Code of Civil Procedure section 564.” Barclays Bank of California v. Superior Court (1977) 69 Cal.App.3d 593, 597. Section 564 provides twelve instances in which a court may appoint a receiver.  Relevant here: the court may appoint a receiver (1) In an action. . . by a creditor to subject any property or fund to the creditor's claim. . . on the application of the plaintiff . . . whose right to or interest in the property or fund is probable, and where it is shown that the property or fund is in danger of being lost, removed or materially injured; (6) Where a corporation is insolvent or in immediate danger of insolvency, or has forfeited its corporate rights; or (9) In all other cases where necessary to preserve the property or rights of any party.  (Code Civ. Proc., §§ 564(b)(1, 6, 9)  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. § 564(b)(11).) 

“[A]ppointment of a receiver is a drastic remedy to be employed only in exceptional circumstances.” (City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744.) “‘[T]he availability of other remedies does not, in and of itself, preclude the use of a receivership.  [Citation.]  Rather, a trial court must consider the availability and efficacy of other remedies in determining whether to employ the extraordinary remedy of a receivership.  [Citation.]’  [Citation.]”  (Gold v. Gold (2003) 114 Cal.App.4th 791, 807.)  “The appointment of a receiver rests within the discretion of the trial court.  [Citations.]”  (Id. pp. 807–808.)  “However, such power is not entirely uncontrolled and must be exercised with due regard to the facts presented in each particular case.”  (Alhambra-Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 Cal.App.2d 869, 873.)  “[T]he power should be sparingly exercised, and never used in a doubtful case . . ..”  (Koshaba v. Koshaba (1942) 56 Cal.App.2d 302, 314.)

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.) The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. (14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396. 1402.) Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. (See, e.g., ReadyLink Healthcare v. Cotton (2005) 126 Cal.App.4th 1006, 1016; Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 150.)

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. (Code Civ. Proc. § 526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors (1967) 255 Cal.App.2d 300, 307.)

The trial court considers two factors in determining whether to issue a preliminary injunction: (1) the likelihood the plaintiff will prevail on the merits of its case at trial; and (2) 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 court grants a preliminary injunction. (Code Civ. Proc. § 526(a); Husain v. McDonald’s Corp. (2012) 205 Cal.App.4th 860, 866-67.) The balancing of harm between the parties “involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.” (Husain, supra, 205 Cal.App.4th at 867.) 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 trial court abuses its discretion in granting such a preliminary injunction when “there is no likelihood” that the movants will prevail on the merits of their claims for relief.”))  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.)

Here, Plaintiff has established that it is entitled to a receiver under Code of Civil Procedure § 564(b)(1) and (9).  Furthermore, Plaintiff has met the requirements for the ex parte appointment of a receiver set forth in Code of Civil Procedure §§ 564(c), 566 and California Rules of Court, Rule 3.1175.  With respect to the appointment of a receiver, Plaintiff has established an outstanding loan agreement in the amount of $3,250,000, which is secured by collateral that includes all of Fanboy’s property and rights and a guarantee by Defendant Vaccarino.  (Brown Decl., ¶¶ 5, 8, 12.)  Plaintiff has also established Defendants’ default on the loan agreements.  (Id. at ¶ 14.)  The Court concludes that Plaintiff has demonstrated that the money lent is in danger of being lost or removed from Defendants’ control and that a receiver is necessary to preserve the property rights of Plaintiff.

Therefore, the Court orders the appointment of a Receiver on an ex parte basis.  The Court further orders the issuance of a temporary restraining order and an Order to Show Cause as to why a permanent Receiver should not be appointed and why a preliminary injunction should not be granted in aid of the Receiver.  The TRO is narrowly drafted to ensure that the appointed receiver may perform their job duties without interference.  In addition to a strong likelihood of prevailing on the merits, the balancing of the harms weighs in favor of imposing the requested TRO.  The matter will be set for an OSC re preliminary injunction on June 14, 2023, at 8:30 a.m.  Oppositions will be due by June 1, 2023, and any reply by June 9, 2023. 

The Court finds that a bond in the amount of $10,000 will be a sufficient undertaking to protect Defendants from any potential damages as required by Code Civil Procedure section 566(b). 

The Court shall sign the proposed order submitted by Plaintiff.