Judge: Ronald F. Frank, Case: 23TRCV00253, Date: 2023-03-29 Tentative Ruling
Case Number: 23TRCV00253 Hearing Date: March 29, 2023 Dept: 8
Tentative Ruling¿
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HEARING DATE: March 29, 2023
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CASE NUMBER: 23TRCV00253
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CASE NAME: HL Group 2 Limited Partnership v. Pacific
Point Fund 1, LP
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MOVING PARTY: Plaintiff HL Group 2 Limited
Partnership
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RESPONDING PARTY: Defendant Pacific Point Fund 1, LP
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TRIAL DATE: NOT SET
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MOTION:¿ (1) Motion for Preliminary
Injunction
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Tentative Rulings: (1) Plaintiff’s Motion for
Preliminary Injunction is DENIED. Having received supplemental evidence and briefing
from both sides, the bases for the Court’s original tentative ruling is confirmed. Plaintiff has not carried its burden of proof
of substantial likelihood of success on
the merits of its case at trial, and has not carried its burden of proving that
the balance of hardships/ equities tips in Plaintiff’s direction
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I. BACKGROUND¿¿
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A. Factual¿¿
This is one
of two lawsuits pending in the Southwest District concerning the same parcel of
real property. The first lawsuit, filed and pending in Torrance before Judge
Hill, is Case No 22TRCV01540. It does not name PPF. This second lawsuit was
filed on January 27, 2023, by Plaintiff, HL Group 2 Limited Partnership
(“Plaintiff”) and is pending in Inglewood. The Inglewood complaint alleges a
cause of action for promissory estoppel. This cause of action is based on the
following asserted facts: In September 2020, Borrower LOANCO allegedly took out
a business-purpose loan for $1,360,000 from Defendant PPF as first lien secured
by the Property. In December 2020, Borrower LOANCO apparently entered into an
agreement with Plaintiff HGL2 under which Plaintiff would manage the subdivision
of the Property into three residential condominium units that, upon development
completion, would be sold. Pursuant to this agreement, LOANCO quitclaimed the
Property to Plaintiff. PPT’s loan went into default and it exercised its
contractual right to commence a nonjudicial foreclosure sale. The initial
Notice of foreclosure sale was recorded on October 12, 2022 with the sale date
was initially scheduled for November 2, 2022.
With the
November foreclosure sale date pending, Plaintiff asserts that it contacted PPF
requesting that the foreclosure be stayed. Plaintiff alleges that it had
entered into sales agreements for three parcels, and PPF agreed to extend the
date of the non-judicial foreclosure sale. Plaintiff contends in Paragraph 12
of its Verified Complaint (attached as Exhibit A to the motion) that the
parties entered an oral agreement which provided that HLG2: (1) would pay the
real estate tax arrearages and keep all tax payments current; (2) would
complete the work necessary for the City of Inglewood to approve the
subdivision of the Property into three condominium parcels; (3) would complete
all the necessary work to complete the renovation and/or conversion of the
property to the three condominium units; and (4) market and sell the three proposed
condominiums to willing buyers.”
Based on
Plaintiff’s representation of imminent sales of the subdivisions, Plaintiff
contends that PPF agreed to delay the foreclosure sale. PPF first extended the
sale from November 2 to November 30, and then again from November 30 to
December 28. Apparently, on December 16, 2022, agents for LOANCO recorded a
deed purporting to quitclaim the Property from Plaintiff back to LOANCO.
Plaintiff claims this deed was false and further that it prevented the arranged
sales from being completed on the subdivisions. Plaintiff filed suit on
December 20, 2022, against LOANCO based thereon with Case No. 22TRCV01540 (the
“First Action”). Plaintiff moved ex parte in the First Action for a TRO, which
the Torrance Court granted. Plaintiff claims that it amended its purported
foreclosure delay agreement with PPF, such that PPF’s name would be omitted
from the restraining order request if PPF agreed to postpone the sale. PPF in
its opposition brief -- but not in any declaration yet filed -- denied that
there was any such agreement, however PPF in its opposition brief concedes that
it extended the foreclosure sale yet again until January 18, 2023. When PPF
refused to provide Plaintiff an extension of the nonjudicial foreclosure past January
18, 2023, the foreclosure sale occurred on that date. On January 27, 2023
Plaintiff filed this lawsuit against PPF and filed first an ex parte
application for a TRO which the parties then stipulated would be treated as a
motion for a preliminary injunction.
B. ¿ Procedural
On
January 21, 2023, Plaintiff filed an Ex Parte Application for Temporary
Restraining Order to Show Cause Re Preliminary Injunction. On February 21,
2023, Defendant filed an opposition. On February 27, 2023, Plaintiff filed a reply
brief. Neither party initially provided witness declarations or evidence
supporting or opposing the motion. At the March 2, 2023 hearing, the Court,
following oral argument, granted a Temporary Restraining Order, but requested
supplemental briefing and declarations so that the parties could provide
evidence addressing the question of whether there was an oral agreement by PPF
to refrain from any foreclosure sale “until such time as the issue was resolved
either by court action or by the parties.” Plaintiff filed a single supporting
declaration on March 10, 2023. Defendant served its supplemental opposition
briefing on March 15, 2023, and filed it the next day, March 16. Plaintiff
served and filed its reply brief on March 22, 2023.
¿II. ANALYSIS¿
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A.
Legal
Standard ¿
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.) Injunctive relief may be
granted based on a verified complaint only if it contains sufficient
evidentiary, not ultimate, facts. (See Code Civ. Proc. § 527(a).) For this
reason, a pleading alone rarely suffices. (Weil & Brown, California
Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007).) 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 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.)
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(a);
Cal. Rules of Court, rule 3.1150(f); City of South San Francisco v. Cypress
Lawn Cemetery Assn. (1992) 11 Cal.App.4th 916, 920.)
B.
Discussion
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Likelihood of Success on the Merits
Plaintiff’s
instant action alleges a single cause of action for promissory estoppel arising
from the alleged wrongful conduct of defendant in allegedly breaching an
apparently oral agreement to postpone indefinitely the foreclosure sale of the
property through the judicial resolution of a title dispute described in the
Torrance action. “The elements of a promissory estoppel claim are (1) a promise
clear and unambiguous in its terms; (2) reliance by the party to whom the
promise is made; (3) the reliance must be both reasonable and foreseeable; and
(4) the party asserting the estoppel must be injured by his reliance.” (Flintco
Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727,
734, quotation marks and brackets omitted.)
In the Court’s March 2, 2023 ruling,
the Court stated that it “maintain[ed] an open mind but express[ed] its healthy
skepticism” as to the likelihood of Plaintiff’s success on the merits of this
single cause of action. Neither party initially provided any declarations or
exhibits in support of their position, and the key paragraph of the Complaint,
as the Court stated previously, was “thin on specifics as to the essential
element of a clear and unambiguous promise, i.e., on what date did which representative of PPF say what specific things
that led Plaintiff to conclude that PPF had agreed
to an unlimited duration delay of its demonstrated efforts to foreclose promptly
on the property?” The parties have since
filed supplemental evidence in support of their respective positions. Because of the claimed financial consequences
of denying the injunction, the Court essentially gave Plaintiff a second chance
to prove its entitlement to the requested injunction.
In support
of its, position, Plaintiff submitted the Declaration of Craig Chang, President
of Plaintiff’s sole general partner. In that Declaration, Mr. Chang states that,
at some point during the period between “mid December 2022 through
approximately January 9, 2023,” Mr. Chang requested a modification of the
agreement between the parties to postpone the foreclosure sale date until
resolution of the title dispute created by the fraudulent grant deed.”
(Declaration of Craig Chang ¶ 25.) According to Mr. Chang, Jagdish “Jay”
Sitlani, COO and CFO of PPF’s General Partner, agreed to this modification
request, with the same condition that Plaintiff proceed expeditiously to
informal or court resolution of the title dispute, and extending the
foreclosure sale date from January 10, 2023 to January 18, 2023. (Id.)
However, the email correspondence included only references the extension of the
sale date, and not the central issue on which the Court sought clarification: the
open-ended, unlimited duration extension. (See Chang Decl. Exh. K.) In the Court’s view, the exchanges of emails
are inconsistent with the declaration’s assertion of an oral postponement agreement
until the title issue was resolved or until the court proceedings are concluded. Specifically, the emails all reference very
finite extension dates, never reference Mr. Chang’s claim of an oral agreement to
delay foreclosing until resolution of the title dispute, and in fact Plaintiff seeks
extension of the foreclosure sale in small increments of time rather than until
an indefinite future date.
In
opposition, PPF provided a declaration from Mr. Sitlani in which he
affirmatively states, under penalty of perjury, that neither he nor anyone else
on behalf of PPF promised any stay of foreclosure proceedings beyond the
specific short-term extensions identified, and that he never agreed, during the
time period identified by Mr. Chang or at any other time, that the foreclosure
would be stayed until resolution of the controversy in the underlying First
Action. (Declaration of Jagdish “Jay” Sitlani ¶¶ 16-19.) Mr. Winship’s
declaration also specifically denies any open-ended extension of the foreclosure
sale, and like Mr. Sitlani Winship asserts that only a series of brief,
short-term extensions were agreed upon to a specific date certain.
(Declaration of Henry
“Jay” Winship ¶¶ 12-19.) Mr. Sitlani’s
and Mr. Winship’s declarations are consistent with the e-mail exchanges
provided to the Court as exhibits to the Chang declaration, and they contradict
Mr. Chang’s open-ended oral extension claim.
Other than
Mr. Chang’s declaration, Plaintiff’s evidence does nothing to explain or cure
the inconsistency between Plaintiff’s claims and the overt acts taken by PPF. The email chains provided by Plaintiff
corroborates Defendant’s version of events, not Plaintiff’s. Further, Mr.
Sitlani, the person whom Mr. Chang claims orally agreed to an unlimited
duration delay of the foreclosure sale, explicitly denies having ever made such
an offer or promise, stating that he and PPF only ever agreed to brief
extensions to dates certain. Both sides’ evidence supports Plaintiff’s theory that
PPF kept Plaintiff on a short leash, and used its right to foreclose as
leverage to monitor and ensure progress towards satisfying Plaintiff’s desire
to finalize sales of the subject properties and satisfy the debt. But this evidence is not sufficient to
establish that Plaintiff is likely to prevail on the merits of its promissory
estoppel claim because it is not readily apparent that Defendant ever promised
an indefinite delay of the foreclosure sale pending resolution of the
underlying title dispute. In short,
Plaintiff has failed to prove that it probably will be able to prove the first element
of the promissory estoppel claim, i.e., a promise clear and unambiguous
in its terms.
Balance of Harms to Parties
In its
previous ruling, the Court stated that the parties had not provided sufficient
evidence concerning the balance of harms or equities to each party for the
Court to comment on this issue. When there is an adequate remedy at law, equitable
relief such as an injunction is not warranted.
The parties have since provided supplemental evidence to address this
issue.
A claimed civil injury is not
irreparable when it can be adequately compensated in damages. (E.g., Helms
Bakeries v. State Bd. of Equalization (1942) 53 Cal.App.2d 417, 425.) That
said, damages are generally considered inadequate to compensate for certain
harms related to real property. (E.g., Civil Code § 3387 [providing that
damages are presumed inadequate for breach of an agreement to convey real
property]; Aspen Grove Condominium Ass’n v. CNL
Income Northstar LLC (2014) 231 Cal.App.4th 53, 62-64 [upholding injunction based
on continuous trespass of water].) On the other hand, the same is not
necessarily true for all real estate-related claims, such as those involving
real estate with an established market price – that is, those real
estate-related claims that can be adequately compensated in damages. (Jessen
v. Keystone Sav. & Loan Ass’n (1983) 142
Cal.App.3d 454, 458 [concluding that the loss of certain condo units could be
“adequately compensated in damages” because those units had an “established
sale price”].)
Plaintiff
argues that, if the foreclosure sale is permitted to be perfected, Plaintiff
will have lost the three condo units of the subject property for which there
were pending sales for fixed prices set forth both in the Complaint and in the
motion. (See Complaint Exhs. 4-6.) Mr. Chang also declares that Plaintiff had
invested some $162,500 into the property as a result of the agreement. (Chang
Decl. ¶ 28.) Plaintiff thus implicitly concedes that the harm threatened by the
foreclosure sale is not irreparable, because Plaintiff has identified a fixed
dollar value of its injury for which it could be adequately compensated upon a determination
by the Court or a jury that Plaintiff is the prevailing party in this action
and one entitled to relief.
In
opposition, Defendant argues that Plaintiff has admitted an absence of
irreparable injury. Defendant also states that the foreclosure sale has gone
forward, thereby implicating the rights and obligations of the both the Trustee
and the winning bidder. Defendant has provided the testimony of John Goldberg,
the aforementioned bidder, in support of this claim. (Declaration of John
Goldberg ¶¶ 3-4.) The Court must also take into account the asserted injury to the
winning bidder in the balance of hardships.
In reply, Plaintiff does not challenge either of these contentions,
instead asserting that Defendant’s loss of the benefits on interest from the
proceeds of the foreclosure sale, as identified in Defendant’s opposition to
Plaintiff’s ex parte application, is not superior to Plaintiff’s
injuries. However, this argument does not bear on whether Plaintiff would
suffer an irreparable injury absent injunctive relief.
As
Plaintiff has failed to show a likelihood of success on the merits and failed
to show that the balance of equities favors injunctive relief, the Court
concludes that a preliminary injunction is not warranted in this case.
Posting of A Bond
As the
Court has concluded that a preliminary injunction is not warranted, the Court
declines to further address the issue of whether Plaintiff should be required
to post a bond.
IV. CONCLUSION¿¿
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¿ For the foregoing reasons, Plaintiff’s Motion for a Preliminary
Injunction is DENIED.
Counsel for PPF shall give written
notice of the ruling.