Judge: Theresa M. Traber, Case: 22STCV29709, Date: 2023-04-28 Tentative Ruling

Case Number: 22STCV29709    Hearing Date: April 28, 2023    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     April 28, 2023                        TRIAL DATE: NOT SET

CASE:                         George Adam Adamian, individually and as Trustee of the George Adamian Living Trust v. Paul Krzemuski, as Trustee of the Violette Krzemuski AKA Violette Adamian 2013 Family Trust

CASE NO.:                 22STCV29709           

MOTION TO MODIFY PRELIMINARY INJUNCTION

MOVING PARTY:               Defendant Paul Krzemuski, as Trustee of the Violette Krzemuski AKA Violette Adamian 2013 Family Trust

RESPONDING PARTY(S): Plaintiff George Adam Adamian, individually and as Trustee of the George Adamian Living Trust

CASE HISTORY:

·         09/12/22: Complaint filed.

·         04/18/23: First Amended Complaint filed.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

            This is a quiet title action. Plaintiff alleges that Defendants improperly foreclosed on a parcel of real property owned by Plaintiff through the use of a fraudulent deed of trust.

Defendant moves to modify the Court’s October 25, 2022 Preliminary Injunction to permit Defendant to record a new notice of default on the subject property.

TENTATIVE RULING:

Defendant’s Motion to Modify Preliminary Injunction is DENIED.

DISCUSSION:

            Defendant moves to modify the Court’s October 25, 2022 Preliminary Injunction to permit Defendant to record a new notice of default on the subject property.

Request for Judicial Notice

            Defendant requests that the Court take judicial notice of (1) the Declaration of Plaintiff in support of the Application for TRO and OSC Re: Preliminary Injunction in this case; (2) an “Order (1) Authorizing The Debtors To Obtain Postpetition Financing On A Secured Senior Lien Basis; (2) Subordinating Certain Presently Existing Junior Liens; and, (3) Expunging Certain Liens From Title,” signed by the Bankruptcy Court in United States Bankruptcy Court Case No. LA 03-37003, In Re George Adamian and Alice Adamian, and recorded on March 28, 2005, as Instrument No. 05-0701621 in the Office of the Recorder of the County of Los Angeles; (3) A Second Deed of Trust With Assignment of Rents and Fixture Filing, recorded on February 22, 2017, as Instrument No. 20170208975 in the Office of the Recorder of the County of Los Angeles; (4) the Court’s October 20, 2022 Order on the Application for Preliminary Injunction; (5) The Court’s October 20, 2022 Minute Order; (6) the Court’s October 25, 2022 Injunction; (7) the Debtors’ First Amended Chapter 11 Plan of Reorganization, filed on or about July 8, 2005 in the Bankruptcy matter; (8) the Bankruptcy Court’s order confirming that Reorganization Plan; (9) the Motion for Entry of Final Decree Closing Debtors’ Chapter 11 Case in the bankruptcy action; (10) Plaintiff’s Reply in support of the application for the Preliminary Injunction: and (11) the accompanying Declaration from Plaintiff.

            With respect to request No. 3, Defendant’s request is GRANTED pursuant to Evidence Code section 452(c) (official acts.) With respect to the remaining requests, Defendant’s request is GRANTED pursuant to Evidence Code section 452(d) (court records.)

Supplemental Request for Judicial Notice

            Defendant requests that the Court take judicial notice of additional documents in support of the reply brief. As this material is not relevant to the Court’s ruling, Defendant’s request is DENIED. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [“[J]udicial notice . . . is always confined to those matters which are relevant to the issue at hand.”].) 

Statutory Basis

            Although Defendant does not identify a statutory basis for this motion in his moving papers, the notice of motion states that it requests a modification of the Preliminary Injunction issued by the Court on October 25, 2022. Code of Civil Procedure section 533 expressly authorizes such a motion upon a showing “that there has been a material change in the facts upon which the injunction or temporary restraining order was granted, that the law upon which the injunction or temporary restraining order was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction.” (Code Civ. Proc. § 533.) Further, the principal authority on which Defendant relies is an appellate opinion concerning a motion brought under this section. (New Tech Development v. Bank of Nova Scotia (1987) 191 Cal.App.3d 1065, 1068.) Indeed, Plaintiff cites this statute as the controlling authority on which their opposition is based. Accordingly, the Court construes this motion as a motion to modify the preliminary injunction under section 533.

Legal Standard

            As discussed above, Code of Civil Procedure section 533 states:

In any action, the court may on notice modify or dissolve an injunction or temporary restraining order upon a showing that there has been a material change in the facts upon which the injunction or temporary restraining order was granted, that the law upon which the injunction or temporary restraining order was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction or temporary restraining order.

(Code Civ. Proc. § 533.) Modification of a preliminary injunction “rests in the sound discretion of the trial court upon a consideration of all the particular circumstances of each individual case.” (Union Interchange, Inc. v. Savage (1959) 52 Cal.2d 601, 606.) The party seeking modification has the burden of proving that the request is justified. (See Loeffler v. Medina (2009) 174 Cal.App.4th 1495, 1504.)

Analysis

            Defendant Krzemuski seeks to modify a preliminary injunction issued by the Court on October 20, 2022 which enjoined Defendants from foreclosing on the property located at 2709 E. South, Long Beach, CA 90805 unless foreclosure was based on the principal amount of $161,000 plus attorney fees incurred in connection with the deed of trust.

            Defendant argues that there has been a material change in the facts before the Court upon which the injunction was initially granted. At the heart of this matter is a dispute between the parties as to the existence and validity of a promissory note issued by Plaintiff’s sister (and Defendant Krzemuski’s mother) Violette Krzemuski, nee Adamian, with the subject property as collateral, in the amount of $161,000. Defendants contend that the note was valid, but has since been lost, that Plaintiff has never paid any portion of the obligation stated in that note, and that Defendants are entitled to foreclose on the subject property.

            Plaintiff applied for a preliminary injunction which was granted on October 20, 2022. (RJN Exh. 4.) In granting that application, the Court concluded that Plaintiff did not demonstrate a probability that Violette did not loan him $161,000, that the purported promissory note was invalid, or that the deed of trust recorded in 2001 on the basis of that note was invalid (RJN Exh. 4. p. 12.) The Court found, however, that there was a dearth of evidence as to the interest rate and late charges claimed by Defendants, and therefore concluded that Plaintiff showed a material deficiency in the amount Defendants claimed to be owed. (Id.) The Court also concluded that the balance of hardships favored Plaintiff because Plaintiff has owned the subject property for four decades and has developed it in the interim. (Id. p. 13.) The Court ordered that foreclosure “is enjoined unless foreclosure is based on the principle amount of $161,000 plus attorney fees incurred in connection with the deed of trust.” (RJN Exh. 5.)

            Defendant states that, since that hearing, he was able to retrieve the full case file from Plaintiff’s 2005 bankruptcy proceeding, and uncovered Plaintiff’s First Amended Chapter 11 Plan of Reorganization, filed with the bankruptcy court on October 12, 2005. (RJN Exh. 7.) In that plan, Plaintiff agreed that Violette would be entitled to interest at the rate of 10% per year on her loan, and proposed to make monthly interest payments at the rate of $1,416.66 per month, reflecting the 10% annual interest rate on the $161,000 principal for 10 years, followed by a balloon payment for the principal. (Id pp. 7-8.) This plan was approved on December 1, 2005, and the Bankruptcy Court expressly ordered that payment on Violette’s Loan be made according to the proposed terms. (RJN Ex. 8 p.4.)

            In opposition, Plaintiff first contends that Violette’s lien was extinguished under the 2005 Reorganization plan. Under federal law, “after confirmation of a plan, the property dealt with by the plan is free and clear of all claims and interests of creditors, equity security holders, and of general partners in the debtor.” (11 U.S.C. § 1141(c).) Plaintiff contends that extinguishment of a lien under this section is governed by the Second Circuit opinion, In re N. New England Tel. Operations LLC, (2d. Cir. 2015) 795 F.3d 343, 347. In that case, the Second Circuit stated:

[A] reorganization plan has extinguished a lien pursuant to § 1141(c) only if four conditions are satisfied: (1) the text of the plan does not preserve the lien; (2) the plan is confirmed; (3) the property subject to the lien is “dealt with” under the terms of the plan; and (4) the lienholder has participated in the bankruptcy proceedings.

(In re N. New England Tel. Operations LLC, (2d. Cir. 2015) 795 F.3d 343, 347.) Plaintiff cites no authority applying this holding in the Ninth Circuit, where the bankruptcy action was brought. Further, even if the Court applies this test to these facts, Plaintiff has not shown that the lien was extinguished by the Reorganization Plan.

Neither party disputes that the plan was confirmed or that Violette participated in the bankruptcy proceedings. Instead, Plaintiff’s argument that the Plan extinguished the lien is based on the contention that the Plan did not preserve the lien by its text and dealt with the subject property under the Plan’s terms. Plaintiff reaches this conclusion from the text of the Plan which identifies a secured pre-petition claim by Violette Adamian on “the Three Inglewood Properties.” (RJN Exh. 7.) Plaintiff contends that the lien on these properties was not preserved because the Plan does not explicitly say so. (Id.) This argument is not compelling with respect to the subject property. It is not apparent to the Court how a Reorganization Plan concerning properties in Inglewood could be said to have dealt with a lien on a property in Long Beach.

Plaintiff next contends that enforcement of the loan is barred by the statute of limitations for a contract. Plaintiff argues that, once a Reorganization Plan is complete, each claimant’s claim transforms into a contractual claim, subject to state law for actions in contract. (See, e.g., Hillis Motors, Inc. v. Hawaii Auto. Dealers' Ass'n (9th Cir. 1993) 997 F.2d 581, 588.) A contractual claim has a four-year statute of limitations. (Code Civ. Proc. § 337.) A lien is extinguished by the lapse of time within which an action can be brought upon the principal. (Code Civ. Proc. § 2911.) However, as Defendant correctly states in reply, “the running of the statute of limitations does not extinguish a power of sale conferred on a trustee by a deed of trust.” (Nicolopulos v. Superior Court (2003) 106 Cal.App.4th 304, 309.) Defendant is not seeking judicial enforcement of a claim, but instead attempting to exercise a putative power of sale as trustee. Plaintiff’s statute of limitations argument is, thus, unpersuasive.

Plaintiff’s final argument, however, is more compelling.  Plaintiff argues that Defendant’s new evidence effectively confirms the Court’s prior ruling that Plaintiff was likely to prevail based on a material variance in the amount due. The Notice of Default demanded $516,506.28, based on 10% annual interest since the issue date of 7/26/2001, plus additional late fees and balloon payments. (FAC Exh. 4.) Defendant offers no evidence of the existence of any late fees, and freely admits that annual interest should be counted from 2006, not from 2001. Thus, Defendant’s new evidence has not cured the defects in the Notice of Default which led to issuance of the Court’s current preliminary injunction. The Court therefore finds that Defendant has not demonstrated a material change in the facts underlying the Court’s injunction.

            Defendant also argues that the interests of justice require modification of the injunction because Plaintiff repeatedly denied the validity of the loan despite having conceded its existence in the bankruptcy proceeding. The Court does not find this contention sufficiently persuasive to overcome the defects in the Notice of Default.

CONCLUSION:

            Accordingly, Defendant’s Motion to Modify Preliminary Injunction is DENIED.

            Moving Party to give notice.

IT IS SO ORDERED.

Dated: April 28, 2023                         ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.