Case Number: BC712644 Hearing Date: October 04, 2018 Dept: 85

Bighorn Ventures, LLC v. Lacern Performance Golf Cars, Inc. et al., BC 712644

Tentative decision on application for preliminary injunction: granted

Plaintiff Bighorn Ventures, LLC (“Bighorn”) applies for a preliminary injunction against Defendant Lacern Performance Golf Cars, Inc. (“Lacern”) enjoining it from selling or disposing of any inventory which was stored at the Rancho Mirage facility located at 71587 Hwy 111, Rancho Mirage, California 92270 (“Rancho Mirage Facility”) between March 27, 2017 and October 4, 2018.

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

  1. Statement of the Case
  2. Complaint

Plaintiff Bighorn commenced this proceeding on July 5, 2018, alleging causes of action for (1) breach of written contract, (2) account stated, (3) money had and received, (4) fraud, and (5) negligence. The verified Complaint alleges in pertinent part as follows.

On March 27, 2017, Bighorn and Lacern executed a “Security Agreement”. Defendant Randy Glessner (“Glessner”) in his capacity as Chief Executive Officer (“CEO”) of Lacern, signed the Security Agreement. The Security Agreement expressly acknowledges a Line of Credit Promissory Note (“Note”) by which Bighorn “has loaned $500,000 to” Lacern. The Security Agreement states in pertinent part that in consideration of the loan, Lacern granted to Bighorn a security interest in Lacern’s inventory, furniture, fixtures, and equipment located at its Rancho Mirage Facility.

On March 31, 2017, Gessner signed the Note for Lacern. The Note provides that Lacern could request advances up to the principal amount of $500,000 and expressly designates Defendant Michael Booth (“Booth”) with the power to request the advances. The Note requires Lacern to pay Bighorn (1) $12,500 upon execution of the Note (“Execution Payment”), (2) $12,500 on the date when each advance is made under the Note (“Advance Payment”), and (3) the unpaid balance of the Note plus interest within 45 days of the advance. The Note provides that in the event the Note’s principal and interest are not paid within 45 days of the advance, the interest on the past due advance shall cause a 5% penalty payment for the unpaid balance owing (“Penalty Payment”).

On March 31, 2017, Glessner executed a document entitled “Personal Guaranty” under which Glessner agreed to personally guarantee Lacern’s obligations under the Note (“Personal Guaranty”).

At or about the time that Lacern executed the Security Agreement, Lacern requested an advance on the Note in the full amount of $500,000. On April 3, 2017, Bighorn advanced the amount to Lacern. Lacern paid Bighorn the Execution Payment on April 3, 2017. Lacern failed to pay Bighorn the Advance Payment and failed to provide the balance of the Note when it became due on May 18, 2017. At that time, Lacern had tendered only two payments beyond the Execution Payment totaling $50,000 which reduced the principal and interest on the Note to $471,746.58. Lacern’s failure to pay the amount advanced triggered a Penalty Payment of $23,587.32.

Between May 26 and October 30, 2017, Lacern made five additional payments on the Note totaling $125,000. Since then, Lacern has failed to make any further payments on the Note. Glessner also has failed to honor the Personal Guaranty.

  1. Course of Proceedings

On July 13, 2018, the court denied without prejudice Plaintiff Bighorn’s ex parte application for a temporary restraining order (“TRO”) and order to show cause re: preliminary injunction (“OSC”). On September 13, 2018, the court granted Bighorn’s ex parte application for a TRO and OSC.

Defendant Lacern was served by personal service with the Summons and Complaint on July 6, 2018, by mail with the moving papers on September 13, 2018, and by mail with the court order on September 17, 2018.

  1. Applicable Law

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. 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. See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[1] It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

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. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).[2] Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. 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 CCP §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. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565. The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636. 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 CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

  1. Statement of Facts
  2. Plaintiff’s Evidence[3]

Lacern is in the business of selling performance golf carts to in-person and online customers. Morley Decl. ¶7. It has two brick and mortar locations: the Rancho Mirage Facility and a Coachella Valley showroom. Ibid.

On approximately March 27, 2017, Bighorn’s president visited the Rancho Mirage Facility. Reply Morely Decl. ¶2. He entered the showroom and saw that Lacern had a large inventory of high-end calf carts on display for purchase. Ibid.

On March 27, 2017, Bighorn and Lacern executed the Security Agreement. Morley Decl. ¶3, Ex. B. Glessner signed the document in his capacity as Lacern’s CEO. Ibid. The Security Agreement states in pertinent part that Bighorn “has loaned $500,000 to Debtor [Lacern] on the terms and conditions as stated in the Note.” Ibid. The Security Agreement also provides: “In consideration of the loan, Debtor [Lacern] hereby grants to Secured Party [Bighorn] a security interest in the following assets of Debtor: All inventory, furniture, fixtures and equipment hereinafter acquired located at Debtor’s address above [i.e., the Rancho Mirage Facility]” (“Inventory”). Morley Decl. Ex. B. . Bighorn’s president insisted that the Security Agreement identify the Inventory at the Rancho Mirage Facility because that was Lacern’s main location for selling golf carts. Reply Morely Decl. ¶3.

On the same day, Glessner executed the Personal Guaranty and delivered the copy to Bighorn. Morley Decl. ¶4, Ex. C. The Personal Guaranty states in pertinent part: “On March 31, 2017, Lacern became obligated to pay Bighorn … the sum of $500,000, as evidenced by the [Note]…, and Guarantor [Glessner] has agreed to personally guarantee that obligation.” Ibid.

On March 31, 2017, Glessner executed the Note and delivered it to Bighorn. Morley Decl. ¶5, Ex. D. The Note provides that Lacern must pay Bighorn $12,500 upon execution of the Note, $12,500 upon each additional advance made under the Note, and the unpaid balance of the Note within 45 days of each advance made. Morley Decl. Ex. D. The Note also states that, in the event that the principal advance and interest are not paid within 45 days of the advance, the interest on the past due advance shall cause a 5% penalty payment for the unpaid balance owing. Ibid.

On April 3, 2017, Bighorn advanced $500,000 to Lacern via a Cashier’s Check pursuant to the Note. Morley Decl. ¶2, Ex. A. The Note was made out to DMB-BT per Lacern’s agent’s express instruction. Ibid. That same day, Lacern tendered the Execution Payment in the amount of $12,500 to Bighorn. Morley Decl. ¶6, Ex. E. The Note became due and payable on May 18, 2017. See Morley Decl. ¶2, Ex. D. Between April 3 and October 30, 2017, Lacern made seven $25,000 payments to Bighorn. Ibid. Since October 30, 2017, Lacern has failed to make any further payments. Ibid.

Between March 2017 and the late Spring 2018, Bighorn’s president visited the Rancho Mirage showroom on multiple occasions. Reply Morely Decl. ¶4. Each time he visited, the location was open to the public and selling high-end golf carts. Ibid.

On June 26, 2018, Bighorn’s president tried to visit the Rancho Mirage Facility, but noted that the facility’s storefront indicated that it was currently under construction. Morley Decl. ¶7. Morley then visited Lacern’s Coachella Valley showroom, which remains open. Morley Decl. ¶8. Morley noted that a large portion of the inventory previously been stored at the Rancho Mirage Facility had been moved to the Coachella Valley showroom. Ibid. Morley suspects that Lacern moved the inventory in order to circumvent Bighorn’s security interest per the Security Agreement. Ibid.

On July 13, 2018, Bighorn’s counsel drafted a letter to Lacern’s counsel requesting a list of Lacern’s inventory, furniture, fixture, and equipment that passed through its Rancho Mirage Facility. Lapine Decl. ¶7, Ex. 6. Lacern’s counsel, after requesting a continuation, never provided Bighorn’s counsel with the requested list. Lapine Decl. ¶9.

After receiving notice of Bighorn’s first ex parte application, Lacern positioned a large moving truck outside the Rancho Mirage showroom in an apparent purpose of removing articles from it. Lapine Decl. ¶4, Ex. 3.

  1. Defendant’s Evidence

On March 27, 2017, Lacern and Bighorn entered into the Security Agreement. Glessner Decl. ¶2.

Lacern currently operates two locations: (1) the Rancho Mirage Facility and (2) a Palm Desert showroom. Glessner Decl. ¶3. Lacern currently uses the Rancho Mirage Facility as a storage facility for approximately 50 vehicles owned by its customers. Glessner Decl. ¶4. Lacern allows customers to store their vehicles there as a customer perk because many customers do not use their vehicle during the summer months and need a place to store them. Ibid. Lacern will continue to utilize the Rancho Mirage facility as a storage facility because it is a poor retail location. Glessner Decl. ¶6. All equipment, inventory, furnishing, and fixtures at the Rancho Mirage Facility has remained as it was in March 27, 2017. Glessner Decl. ¶8.

On September 26, 2017, Glessner made an inventory list of the items located at the Rancho Mirage Facility. Glessner Decl. ¶10, Ex. A.

  1. Analysis

Plaintiff Bighorn seeks a preliminary injunction restraining Lacern from selling any Inventory that was located at the Rancho Mirage Facility between Marcy 27, 2017 and September 14, 2018 (the date the OSC was issued). Bighorn’s claim is based on Lacern’s breach of the Security Agreement and Note.

  1. Probability of Success

The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) resulting damages to plaintiff. Oasis West Realty, LLC v. Goldman, (2011) 51 Cal.4th 811, 821.

Bighorn has presented undisputed evidence of the Note between Bighorn and Lacern. Morley Decl. ¶5, Ex. D. Bighorn performed its obligations under the Note by loaning Lacern $500,000. Morley Decl. ¶2, Ex. A. Lacern breached the Note by failing to make complete payments when they became due and owing. Morley Decl. ¶6, Ex. E. Bighorn has suffered damages equal to the amount owed. See ibid.

Bighorn also has presented undisputed evidence of the Security Agreement. The Security Agreement provides Bighorn a security interest in Lacern’s Inventory located at the Rancho Mirage Facility on or after March 27, 2017. Morley Decl. Ex. B. A large portion of the inventory previously been stored at the Rancho Mirage Facility has been moved to the Coachella Valley showroom. Morley Decl. ¶8. This is a breach of the Security Agreement.

Bighorn contends that, if a preliminary injunction is not granted, Lacern will continue to sell off or otherwise dispose of the Inventory in the Rancho Mirage facility in violation of the Security Agreement. App. at 10. Bighorn argues that Lacern cannot dispute that it received a $500,000 loan and knowingly pledged the Inventory to secure that debt. App. at 11.

Bighorn essentially seeks a preliminary injunction to compel specific performance of the Security Agreement.[4] An injunction may be issued to restrain a breach of contract where specific performance of the contract would be available for the protection of the legal right and the prevention of irreparable mischief. Voorhies v. Greene, (1983) 139 Cal.App.3d 989, 996. An injunction precluding Lacern from selling or disposing of the Inventory located in its Rancho Mirage Facility between March 27, 2017 and September 14, 2018 preserves Bighorn’s security interest under the Security Agreement. This security interest is important to Bighorn because Lacern has defaulted under the Note.

Bighorn has a reasonable prospect of success on its claim for breach of contract/specific performance.

  1. Balance of Hardships

In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177. This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo. Ibid.

Lacern argues that Bighorn has failed to evince irreparable harm warranting injunctive relief. Opp. at 3. Lacern cites to CCP section 526(a)(4) and 526(a)(5)[5], and argues that money damages would be an adequate remedy for this straight-forward breach of contract matter. Opp. at 3-4.

Lacern is incorrect. It is true that damages will often be an adequate remedy for contract breach, and the mere difficulty of determining damages is not sufficient to warrant injunctive relief. Voorhies v. Greene, supra, 139 Cal.App.3d at 996 (where law partnership broke up, portion of injunction providing for former partner’s access to corporate books was appropriate, but injunction directing continued access to office and continued employment by firm was not). However, Lacern is looking at the wrong contract. The Security Agreement, not the Note, is the basis for preliminary injunction. Damages are not an adequate remedy for breach of the Security Agreement. CCP section 526(a)(3) provides: “An injunction may be granted … (3) [w]hen it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do … 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.” (Emphasis added.) By showing that Lacern has harmed its security interest in the Inventory, Bighorn has shown that Lacern is engaging in actions that tend to render a judgment on the Note and Security Agreement ineffectual. Bighorn has therefore established irreparable harm.

Lacern argues that Bighorn has failed to present any evidence that Lacern intends to undermine Bighorn’s security interest. Opp. at 4.

“An injunction cannot issue in a vacuum based on the proponents’ fears about something that may happen in the future. It must be supported by actual evidence that there is a realistic prospect that the party enjoined intends to engage in the prohibited activity.” Korean Philadelphia Presbyterian Church v. California Presbytery, (2000) 77 Cal.App.4th 1069, 1084 (citing CCP §526(a)(3)). The greater the plaintiff’s showing on the likelihood of prevailing on the merits, the less it must show with respect to relative interim harm to support an injunction. Butt v. State of California, (1992) 4 Cal.4th 668, 678.

Bighorn has made a strong showing of likelihood of prevailing on its breach of contract claim, and therefore need not show more than a slight degree of irreparable harm. While Bighorn’s evidence that Lacern has moved the Inventory is not overwhelming – as Lacern points out, Bighorn has no photographs or documentary evidence showing actual movement of the Inventory – Bighorn nonetheless has met its burden by showing as follows: (1) the Rancho Mirage Facility was one of Lacern’s two showrooms and Bighorn relied on this fact for the security interest (see Morley Decl. ¶7); (2) between March 2017 and the late Spring 2018, Bighorn’s president visited the Rancho Mirage showroom on multiple occasions and saw a location open to the public and selling high-end golf carts. Reply Morely Decl. ¶4; (3) at some unspecified point after late Spring 2018, Lacern converted the showroom into a storage facility and moved a portion of the Inventory (ibid.), (4) on June 26, 2018, Bighorn’s president visited Lacern’s Coachella Valley showroom and saw that a large portion of the inventory previously stored at the Rancho Mirage Facility had been moved to it (Morley Decl. ¶8); (5) despite an express request, Lacern failed to provide Bighorn with an Inventory list until its opposition was filed. Lapine Decl. ¶¶ 7-9, Ex. 6; and (6) after notice of Bighorn’s first ex parte application, Lacern positioned a large moving truck outside the Rancho Mirage showroom in an apparent purpose of removing articles from it. Lapine Decl. ¶4, Ex. 3. This evidence indicates shows a reasonable prospect that Lacern is impairing Bighorn’s security interest by moving the Inventory.

To counter this conclusion, Lacern provides evidence that (1) the Rancho Mirage Facility is presently a storeroom, not a showroom (Glessner Decl. ¶7), (2) Glessner’s belief that all equipment, inventory, furnishing, and fixtures at the Rancho Mirage Facility remains as it was on the date of the Security Agreement (Glessner Decl. ¶¶ 8-9), and (3) an inventory list dated September 26, 2018.

The first item is unhelpful because Lacern does not state when it converted the Rancho Mirage Facility into a storeroom. See Glessner Decl. Ex. A. Bighorn’s evidence is that it was a showroom until at least Spring 2018. The second item is of limited value because it is a conclusion unsupported by any other facts. The inventory list is helpful, but it does not show the location of those portions of the Inventory that had been stored at the Rancho Mirage Facility on March 27, 2017 and were moved. Lacern’s evidence has not refuted Bighorn’s irreparable harm showing.[6]

Lacern argues that injunctive relief will cause immense harm and shut down Lacern’s business. Opp. at 4. It is unclear why preventing Lacern from selling or otherwise disposing of the Inventory from the Rancho Mirage Facility would shut down Lacern’s business when it is free to operate out of its Palm Desert location. Additionally, if Lacern wants to sell any portion of the Inventory that is or was located at the Rancho Mirage Facility during the pertinent period, it need only contact Bighorn, obtain its agreement for the sale, and then transfer the sales proceeds to Bighorn in payment on the Note.

The balance of hardships tips in favor of Bighorn.

  1. Conclusion

The application for a preliminary injunction is granted. Lacern will be restrained from selling any Inventory that was located at the Rancho Mirage Facility between Marcy 27, 2017 and September 14, 2018, including but not limited to the inventory list that is Glessner Exhibit A, without Bighorn’s permission and subject to the conditions it imposes.[7]

The court must impose a bond on Bighorn for the preliminary injunction. The purpose of the bond is to protect Lacern in the event that the court has improvidently issued the preliminary injunction. It must be based on the damages Lacern will incur from complying with the injunction, as well as attorney’s fees necessary to set aside the preliminary injunction. The court will discuss the amount of the bond with counsel at hearing.

[1] The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction — one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

[2] However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).

[3] The court has ruled on Lacern’s evidentiary objections by placing “S” for “sustained” and “O” for “overruled next to the objection. One objection was overruled under Fibreboard Paper Products Corp. v. East Bay Union of Machinists, Local 1304, Seelworkers of America, AFL-CIO, (1964) 227 Cal.App.2d 675, 712 (court may overrule objection if any portion of objected to material is admissible).

In reply, Bighorn asks the court to judicially notice an unconfirmed document from federal district court. Ex. A. As the document is not authenticated by stamp, the request is denied.

[4] Although the Complaint does not state a cause of action for breach of the Security Agreement, the facts alleged in the Complaint do so.

[5] “An injunction may be granted in the following cases: … (4) When pecuniary compensation would not afford adequate relief [or] (5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief.” CCP §526(a)(4)-(5).

[6] Lacern notes that, even if Inventory has been moved, Bighorn still has a security interest in it. Opp. at 1. That is true, and Bighorn wants to ensure that security interest continues.

[7] In reply, Bighorn seeks to expand the injunction to include all of Lacern’s inventory, whether or not it was at the Rancho Mirage Facility. Reply at 8. The court cannot expand the injunction beyond the OSC.