Judge Mitchell L. Beckloff, Case Number: 23STCV09306, Date: 2023-05-19 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 23STCV09306, Date: 2023-05-19 Tentative Ruling

This action arises from a dispute between brokers over commissions owed for the sale of a business, AAA Golden Pharmacy (Pharmacy). Plaintiff, 321 Properties, Inc., seeks a court order restraining distribution of $100,100 in commission proceeds held in escrow at Central Escrow (Commission Proceeds) in Los Angeles.

Defendants, EXP Commercial of California, Inc. (EXP) and Jason Tran, oppose the motion.

The standards governing a preliminary injunction are well known. “[A] court will deny a preliminary injunction unless there is a reasonable probability that the plaintiff will be successful on the merits, but the granting of a preliminary injunction does not amount to an adjudication of the merits.” (Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 866.) “The function of a preliminary injunction is the preservation of the status quo until a final determination of the merits.” (Ibid.)

As the parties recognize, “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. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “[T]he 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].) 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.) A plaintiff seeking injunctive relief must also show the absence of adequate damages remedy at law. (Code Civ. Proc., § 526, subd. (a)(4).)

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. Proc., § 529, subd. (a); City of South San Francisco v. Cypress Lawn Cemetery Assn. (1992) 11 Cal. App. 4th 916, 920.)

Plaintiff’s complaint contains causes of action for imposition of an equitable lien, quantum meruit and declaratory relief. Plaintiff argues it is likely to prevail on the merits.

On April 12, 2022, non-party Henry Nam entered into a purchase and sale agreement for the sale of Pharmacy with the Pharmacy and Tracy Pham, the Pharmacy owner. Nam agreed to purchase Pharmacy for $1,540,000 with a commission of 10 percent of the sale price payable to Defendant EXP through Defendant Tran who was operating as an agent for both Nam (the buyer) and Pham (the seller).

Escrow did not close under the original purchase agreement between Nam and Pham.[1]

According to Plaintiff, Nam then terminated Defendants’ services his brokers. (Yi Decl., ¶¶ 6-7.) Nam thereafter hired Plaintiff with Sung Won “Sam” Yi serving as the broker for Plaintiff. (Yi Decl., ¶¶ 6-7.)

Plaintiff attests in September/October of 2022, Plaintiff (through Yi) contacted Pham (the seller) on behalf of a new buyer, Joanna Kim (Nam’s wife), to “revive” the transaction. (Yi Decl., ¶ 8.) Thereafter, Kim and Pharmacy (through Pham) entered into a sale agreement in January of 2023. The agreement between Kim and Pham provided a sales commission of 6.5 percent ($100,100) payable to Defendant EXP. (Complaint, Ex. 1 [Kim purchase agreement].) The sale agreement states the commission payment “shall satisfy any and all claims that [EXP] and/or [] Tran, . . . may have against any of the Parties herein or related to this transaction.” (Complaint, Ex. 1, p. 7.)

Thereafter, Plaintiff (through Yi) and Defendant EXP (through Defendant Tran) disputed the amounts owed to each other as a commission for the sale transaction. Defendant Tran asserted Plaintiff was not entitled to any of the commission but agreed to pay Yi .5 percent of the 6.5 percent commission.

Defendants argue Plaintiff is not likely to prevail on the merits of its claims. Defendants assert they owe nothing to Plaintiff as a sales commission relate to Pharmacy sale.

As an initial matter, Plaintiff suggests in its reply papers there is a dispute over which contract controls the purchase of Pharmacy and the commission payable. Plaintiff argues the contract attached to the complaint as Exhibit 1 and signed by Kim controls. Defendants appear to rely on the agreement signed by Nam. (Tran Decl., Ex. 7.) The court need not resolve the dispute related to which contract controls since both contracts have the same provision concerning the sale commission:[2]

“Seller shall instruct Escrow to pay to ‘eXp Commercial of California Inc.’ from the proceeds of the sale at Closing the total of 6.5% of the total Purchase Price. This payment shall satisfy any and all claims that eXp Commercial of California and/or Jason Tran, DRE Broker License Number 02134436, may have against any of the Parties herein or related to this transaction.” (Complaint, Ex. 1, p. 7; Tran Decl., Ex. 7, p. 7.)

Thus, the parties to the sale transaction agreed to pay a 6.5 percent commission to Defendant EXP. The contract does not mention Plaintiff.

There is no evidence of a contract between Defendants and Plaintiff. Thus, nothing requires Defendants to pay Plaintiff. Plaintiff has provided no evidence of an obligation to share the commission under these facts.

Defendants also argue the sale of Pharmacy was the sale of a business, not real property. Commission splitting rules do not apply to the sale of business. (While Plaintiff disputes Defendants’ position, Petitioner’s citations to the Business and Professions Code do not support its position. (See Reply 6:4-7:8 [citing Bus. & Prof. Code §§ 10130, 10131].)[3]

It appears Plaintiff’s claim is against the buyer—Nam or Kim. Defendant Tran presents evidence that although Pham’s husband advised Defendant Tran on July 11, 2022 that Pham decided to cancel the original sale to Nam—both Nam and Kim contacted Defendant Tran in January 2023. At that time, Nam and Kim advised Defendant Tran that Pharmacy’s sale was going forward with Kim as the buyer instead of Nam. (Tran Decl., ¶ 6.) To the extent Plaintiff (through Yi) became involved in the transaction, it appears that any compensation owed to Plaintiff is from the buyer (Kim or Nam), not Defendant Tran. (Tran Decl., Ex. 6 [Kim email “we will compensate him separately”].)

Based on the foregoing, it does not appear Plaintiff has any legally cognizable claim against Defendants. That is, Plaintiff has not demonstrated how he prevails in this matter against Defendants.

Further, as noted by Defendants, an equitable lien is available only in transactions related to real property, not a monetary dispute or in connection with the sale of a business.[4] An equitable lien exists where: (1) the parties erroneously created a defective mortgage; (2) the parties intended to create a security interest in property despite the lack of any formal mortgage or deed of trust; (3) the parties otherwise clearly attempted or intended to secure an

Plaintiff argues Defendants did not address his quantum meruit claim. Plaintiff, however, did not raise the issue until reply. Nonetheless, Defendants did address the claim. (Opposition 7:2-8:2.)

“Quantum meruit refers to the well-established principle that ‘the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered.’ [Citation.] To recover in quantum meruit, a party need not prove the existence of a contract [citations], but it must show the circumstances were such that ‘the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made’ [citations].” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 458.) The requisite elements of quantum meruit are (1) the plaintiff acted pursuant to “an explicit or implicit request for the services” by the defendant, and (2) the services conferred a benefit on the defendant. (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 249.)

Plaintiff’s own evidence does not demonstrate Defendants agreed to pay any amount to Plaintiff based on the sale. (Yi Decl., ¶¶ 8-13.) Further, by Plaintiff’s own admission, Plaintiff provided services on behalf of and for the buyer; it is unclear under what theory money is owed by Defendants to Plaintiff.

Based on the foregoing, the court finds Plaintiff has not demonstrated a probability of prevailing on the merits of its claims.[5]

The second part of the preliminary injunction analysis requires the court to evaluate the harm the plaintiff is likely to sustain if the preliminary injunction is denied compared to the harm the defendant is likely to suffer if the injunction is issued. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70.) “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.’ ” (Law School Admission Council, Inc. v. State of California (2014) 222 Cal.App.4th 1265, 1280 [quoting Butt v. State of California (1992) 4 Cal.4th at 678].)

In a conclusory sentence, Plaintiff states it will “suffer irreparable injury as they would lose their share of the commission proceeds if the commissions are allowed to be distributed and paid to Jason Tran.” (Ex Parte 9:23-25.) Plaintiff submits no evidence on the issue and no makes further argument about irreparable harm.

In opposition, Defendants argue denying the injunction would harm would not result in any harm to Plaintiff because Plaintiff’s theory of recovery flows from a claim against the buyer (Kim) and, as such, it should be compensated for its services by Kim—not from the commission paid to Defendants.

The court notes the issue here is one of legal damages. Neither party demonstrates any irreparable harm.

Accordingly, the court finds the balance of harms does not weigh in Plaintiff’s favor.

Based on a balance of the likelihood of success on the merits and the parties’ competing harms, the court finds Plaintiff has not demonstrated entitlement to a preliminary injunction during the pendency of the litigation.

[1] Nam did not obtain his $50,000 deposit until almost a year later in March 2023.

[2] It appears Pham cancelled the sales contract with Nam. (Cucher Decl., ¶ 3.)

[3] Plaintiff also does not cite any specific applicable regulation of the Department of Real Estate on the issue. (See Reply 4:13, 5:24-25.)

[4] Plaintiff does not address the issue in reply apparently conceding it.

[5] Plaintiff submits the Declaration of Robert D. Cucher in reply. The declaration is not appropriate as reply evidence. Nonetheless, it does not change the court’s analysis. The evidence is silent as to Defendant Tran’s understanding about any efforts by Plaintiff.