Judge: Ralph C. Hofer, Case: 24NNCV01147, Date: 2024-05-24 Tentative Ruling
Case Number: 24NNCV01147 Hearing Date: May 24, 2024 Dept: D
TENTATIVE URLING
Calendar: 11
Date: 5/24/2024
Case No: 24 NNCV01147 Trial Date: None Set
Case Name: Hou v. Jin
MOTION FOR PRELIMINARY INJUNCTION
Moving Party: Plaintiff Jilian Hou
Responding Party: Defendant Wenlong Jin (No Opposition)
RELIEF REQUESTED:
Preliminary Injunction ordering Cathy Bank to transfer $500,000 into plaintiff’s account from funds currently held by defendant Wenlong Jin, directing defendant to refrain from any further dissipation of up to $500,000.00.
FACTUAL AND PROCEDURAL BACKGROUND:
Plaintiff Jilian Hou alleges that in March of 2024, plaintiff met defendant Wenlong Jin, who proposed borrowing $500,000 from plaintiff to purchase a house. On March 14, 2024, in the presence of witness Pingjiang Li, plaintiff and defendant signed a loan agreement stating that the loan period would be from March 21, 2024 to April 20, 2024, and including a clause stating that if the loan was not repaid within the deadline, defendant would voluntarily assume all losses incurred by plaintiff in recovering the loan.
Plaintiff alleges that on March 21, 2024, plaintiff transferred $500,000 from her account at Cathy Bank to defendant’s account. Subsequently, defendant issued three checks to the Bellagio casino to gamble, and then traveled to the casino to gamble, where he lost $100,000. The casino issued defendant a $400,000 cashier’s check to defendant, who returned to Los Angeles on April 14, 2024, and deposited the cashier’s check into his account at Cathy Bank. On April 16, 2024, defendant issued a $400,000 check to plaintiff, but when plaintiff attempted to deposit the check into her account, the check bounced.
The complaint alleges that since then, plaintiff has lost contact with defendant, the repayment date specified in the loan agreement has passed, and defendant has not repaid any amount. The complaint alleges causes of action for fraud and deceit, breach of contract, conversion, violation of Penal Code section 496, breach of fiduciary duty, account stated, unjust enrichment and IIED.
The file shows that on May 1, 2024, the court heard an ex parte application brought by plaintiff for a Temporary Restraining Order. The application was granted, and the court signed and filed an order restraining defendant and those acting in concert with defendant from withdrawing, transferring, spending, encumbering, concealing or in any way disposing of any funds up to the amount of $500,000 in any accounts at Cathy Bank or other financial institutions in which defendant has an interest. Defendant was also enjoined from opening any new accounts or safe deposit boxes at any bank or financial institution without prior approval from this court. The court also ordered that all banks and financial institutions where defendant holds any assets were directed to immediately freeze all such assets up to the amount of $500,000 pending further order of the court.
The matter was set for hearing on this motion for preliminary injunction for this date.
On May 8, 2024, the court heard an ex parte application brought by plaintiff for an order for inspection of defendant’s bank records, which was denied.
There has been no timely opposition filed to this motion. The notice of motion expressly specifies the date by which opposition papers were to be filed and served, May 17, 2024. No timely opposition papers have been filed by that date.
ANALYSIS:
Under CCP § 526, an injunction may be granted in cases, including,
“(a):
…
(2) “When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.
(3) When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action and tending to render the judgment ineffectual.
(4) When pecuniary compensation would not afford adequate relief.”
An application for a preliminary injunction is considered a motion procedure and must be supported by affidavits or declarations which provide evidentiary facts under CCP § 2009. CCP section 527(a) (“A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor.”) See also Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 149-150. The burden is on the party seeking injunctive relief “to show all elements necessary to support issuance of a preliminary injunction.” O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.
Granting or denying a preliminary injunction is within the sound discretion of the trial court and will be upheld on appeal absent an abuse of discretion. Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 458. Such a remedy is generally intended to preserve the status quo until a full trial on a permanent injunction may be conducted.
The motion here is not as clear as it could be, as it seeks in the notice of motion initially a preliminary injunction ordering Cathy Bank to transfer $500,000 into plaintiff’s account from funds currently held by defendant. This preliminary injunction would not preserve the status quo, as the status quo is that funds are in defendant’s account, and, prior to the issuance of the TRO, defendant had exclusive control over them. In this respect the motion would be seeking a mandatory injunction, that is, an injunction which does not prohibit one party from acting to disturb the status quo, but which requires a party to perform an affirmative act, in this case, for defendant or a third party to transfer defendant’s funds to plaintiff.
The notice of motion seeks in its conclusion what appears to be alternative relief, a preliminary injunction directing defendant “to refrain from any further dissipation of up to $500,000, ensuring that these funds are preserved while the action is pending.” This request appears more in the nature of a prohibitive injunction, and one which would preserve the status quo while this action is proceeding to a determination on its merits.
While an injunction is statutorily defined under CCP section 525, as, “a writ or order requiring a person to refrain from a particular act,” it is held:
“While the statute seems to limit that definition to prohibitory injunctions, an injunction may also be mandatory, i.e., may compel the performance of an affirmative act. In short, an injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act.”
McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1160, citations omitted.
An injunction which necessarily contemplates a change in the relative positions or rights of the parties is categorized as mandatory and faces a higher burden of persuasion. See In re Donovan (1949) 94 Cal.App.2d 399, 410.
With respect to mandatory injunctions, the Second District has observed:
“Where, as here, the preliminary injunction mandates an affirmative act that changes the status quo, we scrutinize it even more closely for abuse of discretion. 'The judicial resistance to injunctive relief increases when the attempt is made to compel the doing of affirmative acts. A preliminary mandatory injunction is rarely granted, and is subject to stricter review on appeal.' " (Board of Supervisors v. McMahon (1990) 219 Cal. App. 3d 286, 295 [268 Cal. Rptr. 219], fn. omitted.) The granting of a mandatory injunction pending trial " 'is not permitted except in extreme cases where the right thereto is clearly established.' " (Ibid., quoting Hagen v. Beth (1897) 118 Cal. 330, 331 [50 P. 425].)”
Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625.
Plaintiff in this case argues that plaintiff is likely to succeed on her claim for conversion, as defendant has admitted to using the funds in a manner not authorized by the parties’ agreement, and that there is irreparable harm threatened here because the funds are at a significant risk of further dissipation or loss, given defendant’s previous conduct and current financial activities.
Plaintiff argues that immediate action is necessary to preserve these funds during the pendency of the litigation.
In Butt v. State of California, (1992) 4 Cal.4th 668, the California Supreme Court set the following criteria in connection with preliminary injunction applications under subdivision (a) (1):
“In deciding whether to issue a preliminary injunction, a court must weigh two ‘interrelated’ factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction.”
Butt, at 677-678.
To establish a cause of action for conversion, plaintiff must prove the following elements: Ownership, or right to possession of property; wrongful disposition of property right; and damages. Imperial Valley Land Co. v. Globe Grain & Milling Co. (1921) 187 Cal. 352, 354-355.
In Cerra v. Blackstone (1985) 172 Cal.App.3d 604, it was observed:
“Unjustified refusal to turn over possession on demand constitutes a conversion even where possession by the withholder was originally obtained lawfully…”
Cerra, at 609, citations, internal citations, omitted.
Plaintiff indicates that the parties agreed that the funds which plaintiff transferred to defendant were loaned for the purchase of a house, but that defendant, instead of using the funds for the agreed purpose, used the entire amount to gamble at the Bellagio Casino in Las Vegas, and despite attempts to recover these funds, defendant has failed to return the misappropriated amount and engaged in activities suggesting he is attempting to dissipate the remaining assets. [Deng Decl., p. 2:9-16].
It appears that this conduct would likely lead to plaintiff prevailing on a conversion cause of action against defendant. The conduct also suggests that defendant may continue to engage in conduct which would harm plaintiff’s ability to recover the converted funds. It is clear that the relative interim harm to plaintiff if the injunction is not issued, the risk that the funds will be dissipated and no longer available for return to plaintiff, far outweighs any relative interim harm to defendant, the loss of the opportunity for a limited time to use the funds, which can be compensated for in a monetary award of interest, if the injunction is issued.
The showing is sufficient to support the issuance of a prohibitory injunction, that is, an injunction enjoining defendant from further disposing of or encumbering the converted funds.
With respect to the request for a mandatory injunction requiring a third party financial institution to transfer funds to plaintiff, or to freeze or place a hold on accounts, the showing does not meet the higher burden to justify such a mandatory injunction, and there is no legal authority cited under which this court has authority to order Cathy Bank or any other financial institution to do anything in connection with this action, when they are not parties to the action.
It would appear that the mandatory relief is not available on a motion for a preliminary injunction in this action. The court is prepared, however, to issue the requested injunction directed at enjoining defendant from dissipating the allegedly converted funds.
Defendant has failed to file opposition to the motion, and so has failed to challenge plaintiff’s showing of harm or show any direct harm to defendant from permitting the preliminary injunction to issue as requested. It is clear that the balance of harms in this matter on the evidentiary showing presented strongly favors plaintiff and the issuance of an injunction.
The motion is granted in this respect. The court will issue an order enjoining and restraining defendant from transferring, dissipating, concealing, or in any other way disposing of assets up to the amount of $500,000 pending the outcome of this action.
The relief is granted without prejudice to plaintiff seeking in the future, as more facts are developed, to modify, amend or extend the preliminary injunction, based on an appropriate legal basis and procedure and based on an appropriate evidentiary showing, through witnesses with personal knowledge of essential facts. This relief is also without prejudice to plaintiff seeking through business records subpoenas to financial institutions and/or through appropriate petitions to an appropriate tribunal for orders to freeze defendant’s bank accounts.
To the extent plaintiff appears to seek in the proposed order an order that defendant provide a detailed report of his financial accounts and assets held for the benefit of plaintiff, this is not discussed in the legal or factual analysis in the papers, there is no legal authority cited under which such an order is available on a preliminary injunction, and such relief would appear to also be in the nature of a mandatory injunction, requiring defendant to affirmatively prepare an accounting, without any attempt to make the required heightened showing in support of such an injunction. The complaint does not allege a cause of action for an accounting. The preliminary injunction is issued without prejudice to plaintiff seeking this information from defendant through the procedural mechanisms of formal discovery in this matter.
Bond
Under CCP § 529 (a), if the court grants the injunction it “must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.”
Because the bond requirement is mandatory, it is held that defendant’s failure to request a bond does not waive the requirement. Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 10.
The “damages” to be covered by the statute include both lost profits and the expenses incurred in having the injunction dissolved:
“It is now well settled that reasonable counsel fees and expenses incurred in successfully procuring a final decision dissolving the injunction are recoverable as ‘damages’ within the meaning of the language of the undertaking, to the extent that those fees are for services that relate to such dissolution.”
Russell v. United Pacific Ins. Co. (1963) 214 Cal.App.2d 78, 88-89.
In determining the appropriate amount of an undertaking:
“the trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party, and to set the undertaking at that sum.”
Abba, at 14.
The standard of review is clear abuse of discretion:
“That estimation is an exercise of the trial court’s sound discretion and will not be disturbed on appeal unless it clearly appears that the trial court abused its discretion by
arriving at an estimate that is arbitrary or capricious, or is beyond the bounds of reason.”
Id., citation omitted.
The court in Abba concluded:
“Thus, in calculating the amount of the undertaking to be required in this case, the trial court should have considered at least (1) the profits to be lost by the defendants from the elimination of the vast majority of their existing customers, and (2) the attorney’s fees and expenses to be incurred in either prosecuting an appeal of the preliminary injunction, or defending at trial against those causes of action upon which the preliminary injunctive relief had been granted.”
Abba, at 16.
Here, the motion does not address the issue of the mandatory bond, and the proposed order simply proposes that no bond shall be required. As noted above, the bond requirement is mandatory.
It appears that if the injunction is issued, defendant may suffer some loss of use of the funds while the case is pending. Applying a 2% interest rate, defendant may reasonably suffer a loss of $10,000. With respect to the attorney’s fees to defend against plaintiff’s claims, the conversion claim appears appropriate for early and efficient resolution by a motion for summary judgment, and the costs to defend will probably involve some written discovery, two depositions, and responding to a summary judgment motion. This could require roughly 20 hours of attorney time at a reasonable rate of $300 per hour, for an additional $6,000, for a total bond in the neighborhood of $15,000.
RULING:
[No Opposition]
UNOPPOSED Motion for Preliminary Injunction through the Ruling of the Court is GRANTED.
Plaintiff has presented evidence which this Court finds clearly establishes a probability of prevailing on a claim that defendant has engaged in conduct consisting of conversion with respect to the funds transferred by plaintiff to defendant for the specified purpose of purchasing a house.
The Court further finds that the harm to plaintiff if the injunction is not granted (loss of possession and control over the allegedly converted funds, and the probability of those funds being dissipated) is greater than the harm to defendant if the injunction is issued (loss of control over the allegedly converted funds until this matter is resolved, which can be compensated for in money).
The Court will issue a preliminary injunction enjoining and restraining defendant Wenlong Jin from transferring, dissipating, concealing, or in any other way disposing of assets up to the amount of $500,000 held for the benefit of plaintiff pending the outcome of this action.
The Court will not issue an affirmative mandatory preliminary injunction concerning transfer or freezing of assets, or the preparation of an accounting, but this order is made without prejudice to plaintiff seeking in the future, as the facts and evidence develop, to amend, modify or extend the preliminary injunction.
Plaintiff is ordered to post a bond in the sum of $15,000 with the court by 4:00 p.m. on May 31, 2024 (following second Friday). (See CCP section 529 (“On granting an injunction, the court or judge must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction….”) In determining the amount of the undertaking, the “trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party, and to set the undertaking at that sum.” Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14. The damages in this case include the loss of use of funds, as well as the expenses and attorneys’ fees incurred in successfully procuring a final decision dissolving the injunction. Russell v. United Pacific Ins. Co. (1963) 214 Cal.App.3d 78, 88-89; Abba Rubber Co., supra, 235 Cal.App.3d at p. 16. Here, the court estimates loss of use of funds in the reasonable sum of $10,000.00 and also estimates it will take approximately 20 hours [30 hours] @ the approximate rate of $300 an hour in attorney’s fees (total $6,000) to defend against the cause of action upon which the preliminary injunction is based. Accordingly, the court sets the sum of the bond at $15,000.
If no bond is posted on or before 4:00 p.m. on May 31, 2024, the injunction will dissolve automatically.
DEPARTMENT D IS CONTINUING TO CONDUCT AND ENCOURAGE
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