Judge Theresa M. Traber, Case Number: 24STCV00385, Date: 2025-03-26 Tentative Ruling

Judge: Theresa M. Traber, Case: 24STCV00385, Date: 2025-03-26 Tentative Ruling

Case Number: 24STCV00385 Hearing Date: March 26, 2025 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: March 26, 2025 TRIAL DATE: NOT SET

CASE: Enterprise Bank & Trust v. 1775 Beloit, LLC, et al.

CASE NO.: 24STCV00385

APPLICATION FOR ORDER TO SHOW CAUSE RE: CONTEMPT OR PRELIMINARY INJUNCTION

MOVING PARTY: Receiver Stephen J. Donell

RESPONDING PARTY(S): Non-Party Meticulous Services, LLC

CASE HISTORY:

· 01/05/24: Complaint filed.

· 03/15/24: Default entered against LLC Defendants 1775 Beloit, LLC, Adam GTS 2018, LLC; Alan GTS 2018, LLC; and Alexander GTS 2018, LLC.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is an action for collection on a mortgage secured by a parcel of real property.

The appointed Receiver in this matter, Stephen J. Donell, applies for an order to show cause re: contempt as to Meticulous Services, LLC, or, in the alternative, a preliminary injunction.

TENTATIVE RULING:

The Receiver’s Application for an Order to Show Cause Re: Contempt is DENIED.

The Receiver’s Application for a Preliminary Injunction is DENIED.

The Temporary Restraining Order issued by the Court on February 27, 2025 is dissolved.

DISCUSSION:

On May 16, 2024, the Court granted Plaintiff’s motion for appointment of a receiver to manage the dealings and property of defaulted Defendant 1775 Beloit, LLC, so as to preserve the value of the LLC’s assets. (May 16, 2024 Minute Order.) Stephen J. Donell was appointed as the receiver on Plaintiff’s recommendation. (Id.) On November 4, 2024, Plaintiff stipulated to the Receiver’s authorization to employ and compensate general receivership counsel. (November 4, 2024 Stipulation.)

The Receiver brought an ex parte application for an Order to Show Cause Re: Contempt and a Preliminary Injunction on February 24, 2025, claiming that non-party Meticulous Services, LLC is engaging in unlawful subleasing activities at 1775 Beloit Avenue, Los Angeles, CA 90025, which is the primary asset of the receivership estate. The Court ordered supplemental briefing on the matter and issued a temporary restraining order restricting Meticulous from entering into any short-term rentals offering residence for 30 days or less in the interim. (February 27, 2025 Minute Order.) The parties have submitted supplemental briefing, and the Court now rules on the matter.

Evidentiary Objections

Respondent objects to portions of the Declaration of Stephen J. Donell submitted in support of the application. Respondent’s objections, although served and filed separately from other papers, are not numbered consecutively, as expressly required by Rule of Court 3.1354(b). Nevertheless, the Court addresses Respondent’s evidentiary objections as follows:

Paragraph 4: SUSTAINED as lacking foundation with respect to “significant obstacles to [his] ability to market and sell the Property.” (Evid. Code §§ 403, 702.)

Paragraph 5: SUSTAINED as an improper legal conclusion. (In Re. Marriage of Heggie (2002) 99 Cal.App.4th 28, 30, fn.3.) OVERRULED as to Exhibit 1 with respect to hearsay, as the listings are opposing party statements. (See Evid. Code § 1220.)

Paragraph 6: SUSTAINED as hearsay. (Evid. Code § 1200.)

Paragraph 7: SUSTAINED as an improper legal conclusion. (In Re. Marriage of Heggie (2002) 99 Cal.App.4th 28, 30, fn.3.) OVERRULED as to Exhibit 2 with respect to hearsay, as an opposing party statement. (See Evid. Code § 1220.)

Paragraph 8: SUSTAINED under the secondary evidence rule. (Evid. Code §§ 1520-23.)

Paragraph 9: SUSTAINED as an improper legal conclusion with respect to “significant obstacles to [his] ability to market and sell the Property” and as to Meticulous’s rights under the lease agreements. (In Re. Marriage of Heggie (2002) 99 Cal.App.4th 28, 30, fn.3.) SUSTAINED as lacking foundation with respect to whether “Meticulous has acknowledged facilitating the unauthorized use of parking spaces.” (Evid Code §§ 403, 702.)

Paragraph 10: SUSTAINED as an improper legal conclusion (In Re. Marriage of Heggie (2002) 99 Cal.App.4th 28, 30, fn.3) and as lacking foundation. The declarant offers no explanation of how he reached his conclusions regarding the impact of Meticulous’s alleged conduct.

Paragraph 11: SUSTAINED as hearsay and lacking personal knowledge. (Evid. Code § 1200.) Counsel, not the receiver, is the proper party to speak to the fees incurred.

Request for Judicial Notice

The Respondent has requested that the Court take judicial notice of the Los Angeles Housing Department’s public website. As this material is not relevant to the Court’s ruling, the Respondent’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.”].)

Order to Show Cause Re: Contempt

Receiver primarily requests that the Court issue an order to show cause why Meticulous Services, LLC should not be held in contempt for interference with the receivership estate.

Contempt is any act, in or out of court, “which tends to impede, embarrass or obstruct the court in the discharge of its duties.” (In re Shortridge (1893) 99 Cal. 526, 532.) Particular acts constituting contempt are enumerated by statute, including:¿ “(d)isobedience of any lawful ... order, or process of the court”;¿ “(d)isobedience of a subpoena duly served”; “refusing to ... answer as a witness”;¿ “(d)isorderly, contemptuous, or insolent behavior toward the judge while holding the court, tending to interrupt the due course of ... trial.” (Code Civ. Proc., § 1209(a); see also Code Civ. Proc. § 1991 [disobedience of subpoena]; and Penal Code § 166 [misdemeanor].) In addition, courts have inherent power to punish acts that interfere with the orderly conduct of proceedings. (Code Civ. Proc., § 128(a)(3); In re Buckley (1973) 10 Cal.3d 237, 247.) Any person who commits a contemptuous act may be punished for contempt, which includes attorneys (Hallinan v. Superior Court (1925) 74 Cal.App. 420, 426 [persisting in arguing objections after repeated warnings by judge]; Hanson v. Superior Court (2001) 91 Cal.App.4th 75, 84-85 [attorney misconduct during closing argument]) and parties (In re Coleman (1974) 12 Cal.3d 568, 573 [labor union violated temporary restraining order]).

The contempt at issue is “indirect,” which requires a more elaborate procedure to notify the person(s) sought to be charged and to allow him or her an opportunity to be heard. (Code Civ. Proc., §§ 1211–1218; see also Hanson v. Superior Court, supra, 91 Cal.App.4th at p. 81.) “An affidavit must be presented to the court stating the facts constituting the contempt, an order to show cause must be issued, and hearing on the facts must be held by the judge.” (Arthur v. Superior Court (1965) 62 Cal.2d 404, 407-408.) Since the acts involved did not occur in the court’s presence, the affidavit (declaration) must cover each element of the commission of the contempt. (Code Civ. Proc., § 1211.5.) This affidavit serves as the “complaint” in indirect contempt proceeding (Lyon v. Superior Court (1968) 68 Cal.2d 446, 452) and must contain factual allegations based on firsthand knowledge. Upon receipt of the affidavit, the court usually issues an order to show cause (OSC) why the person should not be held in contempt. (Code Civ. Proc., § 1212.) Although not required, the alleged contemnor may respond to the affidavit and OSC by counteraffidavits or declarations. These affidavits serve as the “answer” to the charging allegations in the original affidavit. (Lyon v. Superior Court, supra, 68 Cal.2d at p. 452.) Such affidavits are not mandatory, however. The alleged contemnor may assert his or her defenses entirely at the hearing. (Code Civ. Proc., § 1217.)

The Receiver seeks a contempt proceeding against Respondent on the grounds that Respondent’s alleged practice of offering short-term rentals and parking at the Estate premises for less than 30 days constitutes an interference with the Receiver’s ability to fulfill his duties. “A receiver is an officer of the court, his possession is that of the court, and interference with or disturbance of his possession without permission of the court, subjects one to proceedings in contempt.” (Hollar v. Superior Court (1934) 140 Cal.App. 231, 234.) The Receiver’s request is problematic in multiple respects. First, the Court cannot, by way of a contempt proceeding concerning a receivership, “take property from the actual possession of a stranger to the action in which the receiver is appointed who claims title to it or right to its possession.” (Strain v. Superior Court (1914) 168 Cal. 216, 225.) While neither party has briefed this issue, the Receiver’s request seeks to halt Meticulous and its subtenants from continuing or engaging in short-term rentals or making use of the property’s parking garage. (See Supplemental Brief p. 5:8-13.) Thus, the Receiver’s contempt application appears on its face to be in excess of this Court’s jurisdiction regarding such proceedings.

Second, jurisdictional issues notwithstanding, the request for contempt is premised entirely on the Receiver’s conclusion, without explanation or justification, that the Respondent’s short-term rental practice has interfered with the ability to market and show the property, has depressed the Property’s market value, is “likely” to deter competitive bidding by prospective purchasers, and has created “substantial logistical challenges” in the parking garage. (Declaration of Stephen J. Donell ISO Application ¶ 10.) Mere speculation and bare conclusions do not suffice to establish, even on a prima facie basis, that the Respondent’s conduct constitutes an interference with the Receiver’s duties warranting a contempt proceeding.

The Receiver’s Application for an Order to Show Cause re: Contempt is DENIED.

Preliminary Injunction

In the alternative, the Receiver requests a preliminary injunction (1) enjoining Meticulous from continuing or engaging in any short-term rentals at the property for periods of less than 30 days pending resolution of a pending unlawful detainer proceeding against Respondent; (2) enjoining Meticulous or its subtenants from making use of the parking facilities at the property without written permission; and (3) requiring Meticulous to file periodic sworn statements identifying its subtenants by name and the duration and terms of each sublease.

“An injunction is a writ or order requiring a person to refrain from a particular act.” (Code Civ. Proc. § 525.) “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.” (Code Civ. Proc.§ 527(a).) An injunction may be granted in the following cases:

(1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually.

(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.

(5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief.

. . . .

(Code Civ. Proc. § 526(a)(1)-(5).)

In deciding whether to issue a preliminary injunction, two factors must be considered prior to issuing a preliminary injunction: (1) the balance of the harm to the applicant should the injunction not issue, compared to the harm to the enjoined party should the injunction issue; and (2) whether the applicant is ultimately likely to prevail on the merits. (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 441442.) A trial court has broad discretionary powers to grant or deny a request for a preliminary injunction if it does not act capriciously. The court should exercise its judgment in favor of the party most likely to be injured. (Robbins v. Superior Court (1985) 38 Cal.3d 199, 205.) In addition, the two factors are interrelated: the greater the Plaintiff’s showing as to one of the factors, the less that must be shown as to the other factor. (Butt v. State of California (1992) 4 Cal.4th 668, 678.)

Here, the Receiver’s request for a preliminary injunction is deficient for substantially similar reasons as the application for an order to show cause re: contempt, insofar as the Receiver has failed to establish that the balance of harm favors the applicant, rather than the Respondent. As above, the Receiver’s principal contention is that the Respondent’s alleged practice of issuing short-term leases and allowing use of the property’s parking garage threatens the marketability and sale value of the Estate property. (Donell Decl. ¶ 10.) However, the Receiver’s conclusion that the Estate is threatened in this way is unsupported by any factual basis beyond the bare assertion of its existence. Although the “balance of harms” analysis is inherently forward-looking and speculative, a prediction of harm must have some factual justification and explanation of reasoning. It is not sufficient for the Receiver to simply gesture at the alleged conduct and assert that Respondent’s conduct is threatening. As the Receiver has not competently demonstrated any harm which is threatened, the Receiver has not established that the balance of harms weighs in his favor. The Court therefore declines to address the likelihood of success on any putative merits. The Receiver is not entitled to a preliminary injunction.

Accordingly, the Receiver’s request for a Preliminary Injunction is DENIED.

CONCLUSION:

Accordingly, The Receiver’s Application for an Order to Show Cause Re: Contempt is DENIED.

The Receiver’s Application for a Preliminary Injunction is DENIED.

The Temporary Restraining Order issued by the Court on February 27, 2025 is dissolved.

Moving Party to give notice.

IT IS SO ORDERED.

Dated: March 26, 2025 ___________________________________

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.