Judge: Virginia Keeny, Case: 22VECV01224, Date: 2022-10-13 Tentative Ruling

Case Number: 22VECV01224    Hearing Date: October 13, 2022    Dept: W

leonid kamenetsky, et al. v. easy financial, llc., et al.

application for preliminary injunction

Date of Hearing:          October 13, 2022                                Trial Date:       None set.  

Department:               W                                                         Case No.:         22VECV01224

Moving Party: Plaintiffs Leonid Kamenetsky; Friar Street Property, LLC; 14554 Friar, LLC.; et al. Responding Party: Defendants Easy Financial, LLC; Easy Realty and Loan, Inc.

BACKGROUND 

This is a dispute over a mortgage and a subsequent settlement agreement regarding the mortgage. Defendants have foreclosed on a commercial property owned by Plaintiffs. On August 25, 2022, Plaintiffs Leonid Kamenetsky, Tanya Kurlyand, Friar Street Property, LLC, and 14554 Friar, LLC (“Plaintiffs”) filed their complaint against Defendants Easy Financial, LLC, Sunset Equity Group, Easy Reality and Loan, Inc., Sunset Equity Funding, Benjamin Donel, Best Alliance Foreclosure and Lien Services Corp., and Does 1 through 100, alleging causes of action for (1) rescission, (2) conspiracy, (3) fraud, (4) intentional infliction of emotional distress, (5) unjust enrichment, (6) accounting, and (7) declaratory relief.

On the same day of their complaint Plaintiffs filed an ex parte application for a temporary restraining order enjoining Defendants from furthering the foreclosure sale or charging further fees or interest on the note secured by the subject property. On August 29, 2022, the Court denied their application but set the matter for hearing on the request for a preliminary injunction.  That matter has been continued to October 13, 2022. 

Tentative Ruling:  Deny

LEGAL STANDARD

“An injunction may be granted in the following cases:

…

(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.”

Code Civ. Proc. § 526.

“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. No preliminary injunction shall be granted without notice to the opposing party.”

Code Civ. Proc. § 527(a).

“A trial court may grant a preliminary injunction upon a showing that (1) the party seeking the injunction is likely to prevail on the merits at trial, and (2) the ‘interim harm’ to that party if an injunction is denied is greater than ‘the [interim] harm the [opposing party] is likely to suffer if the ... injunction is issued.’ [citation.] These two showings operate on a sliding scale: ‘[T]he more likely it is that [the party seeking the injunction] will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue.’” [citation.] (Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178, 1183.)

ANALYSIS

Plaintiffs—the parties seeking the preliminary injunction—filed a verified complaint along with declarations in support of their application. Defendants were provided with notice and have filed opposing papers and declarations. The procedural requirements have been met.

Regarding the substantive requirements: Plaintiffs argue they will be irreparably harmed should the Defendants be allowed to proceed with the foreclosure sale during the course of this litigation, as Plaintiffs have invested significant resources into the building and currently operate a bail bonds business out of the building with developed goodwill among its customers. Defendants do not appear to address the balance of harms but instead offer compelling arguments for why Plaintiffs are unlikely to succeed on the merits.

Irreparable Harm

Plaintiffs have invested significant resources into the building and currently operate a bail bonds business out of the building with developed goodwill among its customers.

Defendants do not appear to dispute this harm. Rather, in their opposition to the TRO application, Defendants argued there was no emergency since a Notice of Sale had yet to be posted and a foreclosure sale cannot legally happen until 20 days after a Notice of Sale has been posted. However, Plaintiff states that since then, on August 31, 2022, a Notice of Sale was posted on the subject property. (Leonid Kamenetsky Decl. ¶ 11.) Defendants do not appear to dispute this.

It appears clear that Defendants intend to proceed with the foreclosure sale and Plaintiffs will likely lose their building.

Merits

Defendants present strong arguments for why Plaintiffs’ case will not succeed on the merits. Most notably, Defendants point to the Settlement Agreement between the parties executed in October of 2020. The Settlement Agreement, in relevant part, reads:

“The total amount for settlement of all claims between the Parties and relating to the Property and the Dispute relating to the Property shall be $400,000, payable as follows:

(i)                 Leonid Kamenetsky shall pay to EASY, on or before, November 30, 2020 the sum of $200,000.

(ii)              (ii) EASY shall extend to 14554 Friar LLC a loan for the sum of $200,000, under the terms and conditions as the Assumption Agreement, for a period of two (2) years from the date of this Settlement Agreement. Upon the repayment of the $200,000 loan, Easy Financial LLC shall be deemed as paid in full under the Subject Loan…”

(Ex Parte TRO Application, Ex. 1.)

In other words, Plaintiff Leonid Kamenetsky was to pay $200,000 up front, and another $200,000 was to be financed for two years according to the terms of the Assumption Agreement previously executed between the parties. The terms of the Assumption Agreement call for:

 “[A]n ongoing interest rate to the outstanding indebtedness to be 12% per annum fixed interest only payable on the first day of each month with a balloon payment for the total indebtedness due and payable on or before March 11, 2018. The default rate shall be 5% over and above the effective interest rate.

(Ex Parte TRO Application, Ex. 2, ¶ 8.1.) In other words, the additional $200,000 would be financed by monthly interest only payments with the principal $200,000 due at the end. Except the principal (balloon) payment would be due two years after the execution of the Settlement Agreement, or on October 25, 2022.

Defendants state that Plaintiffs made late payments of $150,000 and $50,000 in December of 2022 to satisfy the initial, upfront obligation for $200,000. (Benjamin Donel Decl. ¶ 8.) Plaintiffs do not dispute this. However, after that Plaintiffs only made one monthly interest payment for $2,000 ($200,000 @ 12% annual interest = $2,000/month) in January of 2021. (Benjamin Donel Decl. ¶ 12.) This was despite numerous attempts to notify Plaintiffs of their obligations to make monthly payments and the late status of those payments. (Matthew Matoesian Decl., Exs. 1-7.) According to Defendants, they even offered to waive the default fees from the failed payments if Plaintiffs would begin making the required monthly interest payments. (Benjamin Donel Decl. ¶ 11.) This establishes that Plaintiffs knew they needed to make monthly interest payments and failed to do so.

Plaintiffs argue they were not required to make monthly payments—only installment payments for the remaining $200,000 principal. Plaintiffs further argue that the remaining principal is not due until October 25, 2022, and therefore they are not in default and a foreclosure sale is improper. Plaintiffs claim they never received any of the emails regarding the late monthly payments. (Leonid Kamenetsky Decl. ¶ 2.) Plaintiffs also claim that Defendant Benjamin Donel—CEO of Easy Financial—agreed to modify the Settlement Agreement and verbally implied that he would prefer lump sum payments as opposed to monthly interest payments. (Leonid Kamenetsky Decl. ¶ 9.) The only evidence Plaintiffs offer for this claim is a chain of text messages between the two where in December of 2020 Mr. Donel says he will send an email to his coworker to amend the settlement. (Leonid Kamenetsky Decl., Ex. 1.) Plaintiffs do not offer a written amended settlement agreement.

The court finds that plaintiffs are unlikely to prevail on the merits.  Based on the plain language of the Settlement Agreement, defendants are likely to establish that plaintiffs have been in default under the terms of the parties’ settlement agreement since February 2021.   Given the low chance of prevailing on the merits, the court finds a preliminary injunction unsupported by the facts and law in this case.