Judge: Mary H. Strobel, Case: 22STCV17309, Date: 2022-10-04 Tentative Ruling

Case Number: 22STCV17309    Hearing Date: October 4, 2022    Dept: 82

            Plaintiff Land Developers & Associates Corporation (“Plaintiff”) seeks a preliminary injunction enjoining Defendant Robert John Tascon (“Tascon”) and “any other account owner of funds held in the name of Robert Tascon at E-Trade Securities LLC, E-Trade Bank or other financial institution affiliated with E-Trade (‘Account Owners’) including but not limited to the following accounts: account number ending in 6858 at E-Trade Securities LLC; account number ending in 9392 held at E-Trade Bank, and account number ending in 9400 held at E-Trade Bank” from “[d]irectly or indirectly withdrawing funds from these bank accounts, transferring, changing, disbursing, selling, dissipating, converting, pledging or assigning any assets in these accounts or selling or purchasing or offering to sell or purchase, investment contracts or other securities related to these accounts without further order from this court.”  (OSC re: Preliminary Injunction, signed and filed 9/13/22.) 

Factual Background

             On September 14, 2021, Plaintiff obtained fee title to real property located at 5309 Louise Ave., Encino, CA 91316 (“Property”).  Plaintiff entered into a residential real estate purchase agreement in August 2021 to purchase the Property for $1,500,000 in cash.  A grant deed for the Property was signed by Tascon and notarized by a notary public on September 14, 2021.   The grant deed was recorded on September 27, 2021. (DeJardin Decl. ¶¶ 3-4; Verified First Amended Complaint (“FAC”) ¶¶ 15-19.) 

            According to Plaintiff, Tascon has claimed that the sale and transfer of title to the Property was fraudulent.  (DeJardin Decl. ¶ 5; FAC ¶¶ 20-21.)

Through discovery, Plaintiff learned that some of the proceeds of the sale of the Property were deposited in certain bank accounts held at E-Trade Securities LLC and E-Trade Bank (“E-Trade Accounts”).   Plaintiff is informed and believes that these accounts were opened under the name of Tascon at E-Trade Securities LLC and E-Trade Bank.  Plaintiff is further informed and believes that Defendant Robert John Tascon claims that these accounts were fraudulently opened using his personal information.  (DeJardin Decl. ¶¶ 6-13, Exh. B, C, D.) 

On August 19, 2022, Plaintiff received responsive documents from E-Trade.  After review of produced documents, Plaintiff learned that on November 9, 2021, a check in the amount of $360,921.73 from proceeds of the sale of the Property was deposited in account ending in 6858 at E-Trade Securities LLC.  Plaintiff further learned of two other accounts held under the name of Tascon at E-Trade Bank: Savings Account ending in 9392 and Checking Account ending in 9400. The statements produced by E-Trade show regular transfers between all three E-Trade accounts.  (Ibid.) 

Procedural History

             On May 25, 2022, Plaintiff filed a verified complaint against Tascon and other defendants for quiet title.  On August 5, 2021, Plaintiff filed the verified FAC against Tascon and other defendants for quiet title, breach of contract, breach of implied covenant of GFFD, fraud, conspiracy to defraud, conversion, and unjust enrichment. 

            On September 13, 2022, the court granted Plaintiff’s ex parte application for a temporary restraining order and order to show cause re: preliminary injunction.  The court set the OSC for hearing on October 4, 2022, and set a briefing schedule.  The court ordered Plaintiff to serve the moving papers, summons, complaint, and OSC by September 16, 2022, and to file proof of service by September 22, 2022.

            On September 22, 2022, Plaintiff filed several proofs of service and also several declarations of non-service.

            No opposition to the OSC has been received.  No reply papers have been received.

Legal Standard for Preliminary Injunction

The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits.  (Major v. Miraverde Homeowners Ass’n. (1992) 7 Cal. App. 4th 618, 623.)  In deciding whether or not to grant a preliminary injunction, the court looks to two factors, including “(1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.”  (White v. Davis (2003) 30 Cal.4th 528, 553-54.) The factors are interrelated, with a greater showing on one permitting a lesser showing on the other.  (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.)  However, the party seeking an injunction must demonstrate at least a reasonable probability of success on the merits.  (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 73-74.)  The party seeking the injunction bears the burden of demonstrating both a likelihood of success on the merits and the occurrence of irreparable harm.  (Savage v. Trammell Crow Co. (1990) 223 Cal.App.3d 1562, 1571.) Irreparable harm may exist if the plaintiff can show an inadequate remedy at law.  (CCP § 526(a).)  “A preliminary injunction is not a determination on the merits.”  (Yee v. American National Ins. Co. (2015) 235 Cal.App.3d 363, 458.)

Analysis

Notice

On September 22, 2022, Plaintiff filed several proofs of service of the summons, first amended complaint, ex parte papers, and OSC.  The proofs of service sufficiently show personal service of the summons, complaint, ex parte application and supporting papers, and OSC on Defendants Caroline Phenix and Robert Tascon (by service on authorized agent Susan Stein.)  (See also Notice and Acknowledgement of Receipt Signed by Stein on 7/6/22, filed 8/5/22.) 

The September 22 proof of service does not show personal service on Sarkies Derbeshyan, on September 19, because there is insufficient evidence that “Armin ‘Doe’, Co-Occupant” has been actually or impliedly authorized by Derbeshyan to accept service of process for him.  (See CCP § 416.90.)  Also, the September 22 proof of service does not show substitute service of the papers on Derbeshyan by delivery to “Armin ‘Doe’, Co-Occupant” and then mailing to Derbeshyan.  While a proof of service filed August 18, 2022, may show substitute service of the first amended complaint, that proof of service does not show substitute service of the summons, ex parte application, or OSC.  Also, because substitute service is not complete until 10 days after mailing (see CCP §§ 415.20(a), 415.95(a)), substitute service of the ex parte papers and OSC on September 19 would not comply with the deadline set by the court in the OSC.

On September 22, Plaintiff also filed three declarations of non-service as to Defendants Matthew Jason Kroth, Olivia Curran, and Shawn Hassanshahi.  Plaintiff has not requested a continuance of the OSC as a result of failure to serve these Defendants.  Nor has Plaintiff shown, solely from the declarations of non-service, that the requirements for a continuance are met.   Specifically, the court cannot determine from the declarations of non-service that Plaintiff used the correct service addresses for these three defendants and could not have obtained, with reasonable diligence, the correct service addresses for timely service by September 19, 2022. (See CCP § 527(d)(5).) 

 “When the matter first comes up for hearing, … if the party has failed to effect service as required by paragraph (2), the court shall dissolve the temporary restraining order.”  (CCP § 527(d)(3).)  “If the responding party has not appeared, the OSC must be served in the same manner as a summons and complaint.”  (California Rules of Court 3.1150(a).)

Based on the foregoing, notice of the OSC was sufficient as to Defendants Caroline Phenix and Robert Tascon.  The OSC is denied for lack of service as to Defendants Sarkies Derbeshyan, Matthew Jason Kroth, Olivia Curran, and Shawn Hassanshahi.  The TRO is dissolved to the extent it applied to those Defendants.

Likelihood of Prevailing

            In its moving brief, Plaintiff states “it is likely LDA will prevail on its claims to quiet title against Defendant Robert Tascon and he would be entitled to the money in these accounts; [and] (2) if LDA is not successful in the quiet title claim, it should be successful in recouping the money from these account owners.”  (Ex parte 4.)  While not entirely clear from this statement, it appears the application for a preliminary injunction is based on Plaintiff’s causes of action for quiet title and unjust enrichment. 

“When two or more persons have adverse claims to the same property, any of the claimants may initiate a quiet title action. The purpose of the action is to eliminate an adverse claim and to establish, perfect or ‘quiet’ the title of the property in one or more of the claimants.”  (Miller & Starr, Cal. Real Estate 4th § 40:104; see CCP § 761.020.) 

“In a quiet title action the plaintiff must prove his title in order to recover.”  (Preciado v. Wilde (2006) 139 Cal.App.4th 321, 327.)  However, should Plaintiff not prevail on its cause of action for quiet title as a result of Tascon’s allegations of fraud, it naturally follows that Plaintiff would have a claim for return of monies paid for the Property.  Such claim is included in Plaintiff’s cause of action for unjust enrichment, which seeks an order “disgorging all monies paid to Defendants as a result of the illegal, deceptive, unfair and/or fraudulent conduct.”  (FAC ¶ 63.) 

Plaintiff submits sufficient evidence to establish a reasonable probability of success on this claim with respect to Tascon.  Plaintiff submits evidence that it purchased the Property for $1,500,000 in cash; that a grant deed transferring the Property was signed by Tascon and recorded in September 2021; and that Tascon has since claimed that the sale and transfer of title to the Property was fraudulent.  (DeJardin Decl. ¶¶ 3-5; Verified FAC ¶¶ 15-21.)  Through discovery, Plaintiff learned that some of the proceeds of the sale of the Property, including a check in the amount of $360,921.73, were deposited in certain bank accounts held in the E-Trade Accounts.   Plaintiff is further informed and believes that Defendant Robert John Tascon claims that these accounts were fraudulently opened using his personal information.  (DeJardin Decl. ¶¶ 6-13, Exh. B, C, D.)  While Tascon has reportedly denied opening the E-Trade Accounts himself, the evidence shows that the accounts are in his name.  (Ibid.)  Moreover, based on his claim that the transfer of the Property is fraudulent, Tascon would have no basis to transfer the sales proceeds to other persons to the extent Tascon has ownership or control of the accounts.  Thus, Plaintiff has some probability of success on its unjust enrichment claim as to Tascon. 

However, Plaintiff has not sufficiently explained the basis of its claim against Phenix and why a preliminary injunction should be issued as to Defendant Caroline Phenix.  The verified FAC alleges, as follows: “Defendant Caroline Phenix a/k/a Caroline Herrling represented herself to the Plaintiff as a licensed California attorney representing property owners in distressed situations in need to sell. Defendant Phenix acted as the ‘agent’ arranging sale of the Subject Property to Plaintiff.”  (FAC ¶ 22.)  No other evidentiary facts are alleged as to Phenix.  The FAC does not allege that Phenix is an owner of the E-Trade Accounts or allege facts suggesting that she might have access to those accounts.  Plaintiff also submits no evidence with its ex parte application to support an inference that Phenix has ownership or control of the E -Trade Accounts. 

Plaintiff shows a reasonable probability of success on its unjust enrichment claim, with respect to funds held in the E-Trade Accounts, as to Defendant Tascon.  Plaintiff has not shown a reasonable probability of success on such claim as to Phenix.

Balance of Harms

For the second factor, the court must consider “the interim harm that the plaintiff would be likely to sustain if the injunction were denied as compared to the harm the defendant would be likely to suffer if the preliminary injunction were issued.”  (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 749.)  “Irreparable harm” generally means that the defendant’s act constitutes an actual or threatened injury to the personal or property rights of the plaintiff that cannot be compensated by a damages award.  (See Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) 

While an injunction may be issued to prevent dissipation of a specific fund, it is not available for the pre-trial recovery of that specific fund.  (See Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 134-36.)  However, “[a]n injunction against disposing of property is proper if disposal would render the final judgment ineffectual.”  (Id. at 136.)  “[T]he equitable remedy of constructive trust would be ineffectual if the trustee were permitted to defeat recovery by wrongfully permitting the res to be dissipated” leaving the plaintiff with a “naked claim for damages.”  (Id. at 136.)   An injunction may also be proper to maintain the status quo where the defendant has threatened to sell or dispose of security that is at issue in the action.  (See Lenard v. Edmonds (1957) 151 Cal.App.2d 764, 769.)

Here, Plaintiff shows potential irreparable harm if the preliminary injunction is not granted.  Plaintiff submits evidence that substantial sale proceeds related to the Property were deposited in the E-Trade Accounts.  According to Plaintiff, Tascon has claimed that the sale and transfer of title to the Property was fraudulent.  Tascon has also asserted that the E-Trade Accounts were fraudulently opened in his name.  (DeJardin Decl. ¶¶ 5-8; FAC ¶¶ 20-21.)  Tascon has not filed an opposition brief to dispute this evidence.  If Tascon’s contentions are true, and if the sales proceeds are disbursed from the E-Trade Accounts, the equitable remedy of constructive trust would be rendered ineffectual and Plaintiff may be unable to recover funds it paid for the Property. 

Tascon has not opposed the OSC and has not argued he would be harmed in any way by the preliminary injunction.  Since Tascon disclaims opening the accounts, it appears he would have no reason to oppose an injunction against disbursing funds from the accounts. 

Having considered Plaintiff’s probability of success and the balance of harms, the court will grant the preliminary injunction as to Tascon. 

Preliminary Injunction Against Non-Party Account Holders

            In addition to an order enjoining Tascon from disbursing funds from the E-Trade Accounts, Plaintiff also seeks a preliminary injunction that would apply to “any other account owner of funds held in the name of Robert Tascon at E-Trade Securities LLC, E-Trade Bank or other financial institution affiliated with E-Trade (‘Account Owners’) ….”  (OSC re: Preliminary Injunction, signed and filed 9/13/22.)  Plaintiff sought and received a TRO that applied to all “account owners,” without notice, pursuant to CCP section 527(c)(1) and (2)(C).[1]  (Ex parte 6-7.)  However, section 527(c)(1) and (2)(C) only apply to the issuance of a TRO, not a preliminary injunction.

At the OSC re: preliminary injunction, the rules in CCP section 527(d) apply.  CCP section 527(d) provides in pertinent part: “The party who obtained the temporary restraining order shall, within five days from the date the temporary restraining order is issued or two days prior to the hearing, whichever is earlier, serve on the opposing party a copy of the complaint if not previously served, the order to show cause stating the date, time, and place of the hearing, any affidavits to be used in the application, and a copy of the points and authorities in support of the application.”  (CCP § 527(d)(2).)  “When the matter first comes up for hearing, … if the party has failed to effect service as required by paragraph (2), the court shall dissolve the temporary restraining order.”  (CCP § 527(d)(3).)  “Upon the filing of an affidavit by the applicant that the opposing party could not be served within the time required by paragraph (2), the court may reissue any temporary restraining order previously issued. The reissued order shall be made returnable as provided by paragraph (1), with the time for hearing measured from the date of reissuance.”  (CCP § 527(d)(5).) 

            Here, after the hearing on the TRO, Plaintiff could have identified the unnamed “account holders”; served the summons, complaint, ex parte papers, and OSC on such persons; and sought a preliminary injunction against such account holders.  However, Plaintiff does not show that it served the unnamed account holders with these papers.  Plaintiff also has not requested a continuance for additional time to identify or serve such persons pursuant to section 527(d)(5). 

            The application seeking an order as to “any other account owner of funds held in the name of Robert Tascon at E-Trade Securities LLC, E-Trade Bank or other financial institution affiliated with E-Trade (‘Account Owners’)” is DENIED.  The TRO as to those persons is dissolved. 

Undertaking

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 Code Civ. Pro. § 529(a); City of South San Francisco v. Cypress Lawn Cemetery Ass’n. (1992) 11 Cal. App. 4th 916, 920; see Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 15-16 [“the prevailing defendant may recover that portion of his attorney's fees attributable to defending against those causes of action on which the issuance of the preliminary injunction had been based”].)  

The parties do not address the appropriate amount of undertaking and should do so at the hearing.  Subject to argument, the court finds that a $10,000 undertaking is appropriate.

Conclusion

            The application for a preliminary injunction is GRANTED only as to Defendant Tascon.  Plaintiff to post an undertaking of $10,000.

            The application is DENIED in all other respects.  The TRO is dissolved to the extent it applied to any defendants other than Tascon and to “any other account owner of funds held in the name of Robert Tascon at E-Trade Securities LLC, E-Trade Bank or other financial institution affiliated with E-Trade (‘Account Owners’).”