Case Number: BC597720??? Hearing Date: May 05, 2016??? Dept: 82
Randy Taylor, et al.
v.
Stephen Forde
Judge Mary Strobel
Hearing: May 5, 2016
BC597720 Tentative Decision on Order to Show Cause re: Preliminary Injunction: Granted in part, denied in part
Court-appointed receiver Kevin Singer (?Receiver?) seeks a preliminary injunction enjoining Defendants Thomas V. Brazil and Stephen Forde and their agents, attorneys, and all persons acting in concert with them, from: (1) demanding, collecting, receiving, or in any other way diverting or using rents or other income or payments emanating from property located at 22634 Maple Avenue, Torrance, CA 90505 (the ?Property?); (2) communicating with the tenants at the Property designed to collect rent; (3) taking any legal action, including unlawful detainer actions, concerning collection of rents or tenancy against the tenants at the Property; (4) transferring, encumbering, or otherwise disposing of the Property; and (5) terminating or otherwise affecting the utilities which service the Property. Receiver also seeks an injunction compelling Brazil and Forde to return to Receiver rents collected from tenants at the Property since April 1, 2016.
Statement of the Case
The verified complaint alleges that Plaintiffs Randy Taylor, Reyna Taylor, and Steve Hawrylack (?Plaintiffs?) and Defendant Stephen Forde (?Defendant? or ?Forde?) are co-owners of two real properties located in Torrance, CA. The first property is known as 22704 Maple Ave., Torrance, CA 90505. (Verified Compl. ? 9.) The second property is known as 22634 Maple Ave., Torrance, CA 90505. (Id. ? 10.) Defendant owns a 33.3% interest in each property. (Id. ?? 14, 22.) In 2012, the parties entered into a settlement agreement related to management of the properties. The complaint alleges that Defendant breached the agreement by, inter alia, collecting rents and converting them to his personal use, failing to pay mortgages and other expenses for the properties, failing to account to Plaintiffs, and failing to properly maintain the properties. (Id. ? 12.)
On November 12, 2015, the court granted in part Plaintiffs? motion for appointment of a receiver as to the property located at 22634 Maple Ave., Torrance, CA 90505. The court appointed Kevin Signer as the receiver. The court?s Order Appointing Receiver states, in part: ?Pending the determination of this action, the receiver shall manage, control, care for, preserve, maintain, and incur the expenses necessary for the management, control, care, preservation, and maintenance of the Maple Property, and, specifically, shall collect the rents, issues, and profits therefrom, to pay any loans, taxes or assessments falling due during the period of receivership?.?
Subsequent to the appointment of Receiver, Defendant Forde filed two involuntary bankruptcies on behalf of Plaintiff Randall Taylor. Both bankruptcy cases have been dismissed. (Singer Decl. ? 2.)
On or about March 7, 2016, Thomas V. Brazil, who claims to be the successor in interest to the Christine Brazil Family Trust (the ?Brazil Trust?) and a second trust deed holder on the Property, sent the tenants of Unit 1 of the Property, Agnes and Abhi Patil, a letter demanding that they pay rent to attorney Carol Unruh, Esq. (Singer Decl. ? 3.) In the letter, Brazil represented that the second deed of trust contains an assignment of rents clause. Brazil specifically instructed the tenants not to pay rent to the Receiver and that Brazil?s ?assignment of rents is superior to a receiver.? (Ibid.; see Singer Decl. Exh. 4.)
On March 29, 2016, attorney Unruh sent an email to Agnes Patil informing her that Brazil?s assignment of rents is superior to a receiver. (Singer Decl. ? 4, Exh. 5.) According to Receiver, Agnes Patil also informed him that she received multiple phone calls from Forde demanding rent and threatening to file an eviction action if he did not receive her rent payment. (Ibid.)
Receiver submits evidence that the Menke Law Firm, which represents Forde, prepared a three day notice to pay rent or quit that was apparently served on the Patils. (Singer Decl. ? 5, Exh. 7.) The three day notice was signed by Brazil. (Ibid.) On April 12, 2016, another tenant at the Property, Gene Kim, contacted Receiver and informed him that Forde was threatening to bring an eviction action against her if she did not pay her rent to Forde. (Id. ? 6.)
Procedural History
On October 13, 2015, Plaintiffs filed a complaint against Defendant Forde for (1) partition of real property; (2) partition of real property; (3) breach of contract; (4) accounting; (5) waste, and (6) conversion.
On November 12, 2015, the court granted in part Plaintiffs? motion for appointment of a receiver as to the property located at 22634 Maple Ave., Torrance, CA 90505.
On March 21, 2016, Plaintiffs filed a verified first amended complaint for (1) partition of real property; (2) partition of real property; (3) breach of contract; (4) accounting; (5) waste, and (6) conversion.
On April 14, 2016, Plaintiffs filed an amendment to complaint naming Thomas Brazil as Doe Defendant No. 1.
On April 15, 2016, the court deemed Receiver?s ex parte application to be for a temporary restraining order and OSC re: preliminary injunction. The court issued a TRO against Defendants Forde and Brazil and set an OSC re: preliminary injunction for May 5, 2016.
On April 18, 2016, Receiver filed a declaration stating that the ex parte papers and OSC were served by personal service on counsel for Forde and Brazil on April 18, 2016.
On April 20, 2016, Plaintiffs filed proof of service showing that Defendant Brazil was served with the verified first amended complaint and Doe amendment by personal service, in Woodland Park, CO, on April 15, 2016.
On April 29, 2016, Defendant Forde filed an opposition to the ex parte application and OSC re: preliminary injunction.
On May 2, 2016, Receiver filed a reply.
No opposition brief has been received from Defendant Brazil. The opposition brief was due April 28, 2016.
Summary of Applicable Law
The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits. (Major v. Miraverde Homeowners Ass?n. (1992) 7 Cal. App. 4th 618, 623.) In deciding whether or not to grant a preliminary injunction, the court looks to two factors, including ?(1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.? (White v. Davis (2003) 30 Cal.4th 528, 553-54.) The factors are interrelated, with a greater showing on one permitting a lesser showing on the other. (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) However, the party seeking an injunction must demonstrate at least a reasonable probability of success on the merits. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 73-74.) The party seeking the injunction bears the burden of demonstrating both a likelihood of success on the merits and the occurrence of irreparable harm. (Savage v. Trammell Crow Co. (1990) 223 Cal.App.3d 1562, 1571.) Irreparable harm may exist if the plaintiff can show an inadequate remedy at law. (CCP ? 526(a).)
Analysis
Notice
Code of Civil Procedure section 527(d) provides in pertinent part: ?The party who obtained the temporary restraining order shall, within five days from the date the temporary restraining order is issued or two days prior to the hearing, whichever is earlier, serve on the opposing party a copy of the complaint if not previously served, the order to show cause stating the date, time, and place of the hearing, any affidavits to be used in the application, and a copy of the points and authorities in support of the application.? (CCP ? 527(d)(2).) ?When the matter first comes up for hearing, ? if the party has failed to effect service as required by paragraph (2), the court shall dissolve the temporary restraining order.? (CCP ? 527(d)(3).)
?An OSC must be used when a temporary restraining order (TRO) is sought, or if the party against whom the preliminary injunction is sought has not appeared in the action. If the responding party has not appeared, the OSC must be served in the same manner as a summons and complaint.? (California Rules of Court 3.1150(a).)
Here, the proofs of service show proper service of the ex parte papers and OSC on Defendant Forde. He has also responded on the merits in an opposition brief.
On April 18, 2016, Receiver filed declarations stating that the ex parte papers and OSC were served by personal service on counsel for Brazil on April 18, 2016, but not directly on Brazil. On April 20, 2016, Plaintiffs filed proof of service showing that Defendant Brazil was served with the verified first amended complaint and Doe amendment, but not the ex parte papers and OSC, by personal service, in Woodland Park, CO, on April 15, 2016.
The court?s April 15, 2016 minute order ordered Receiver to serve all papers by personal service. The court?s minute order and the OSC do not show evidence that Brazil agreed that the OSC could be served directly on his attorney.
Because Brazil has not yet appeared, Receiver was required to serve the OSC by personal service on Brazil. (See California Rules of Court 3.1150(a).) Brazil has not opposed the OSC and therefore has not waived the defect in service. Receiver?s papers show that Brazil is claiming an assignment of rents, and that Brazil contends that his rights are superior to those of a receiver. Although that statement has not been substantiated, an injunction against Brazil cannot be issued until proper service of the OSC has been established.
The motion is tentatively denied as to Defendant Brazil for improper service of the OSC. Receiver should be prepared at the hearing to show that Brazil agreed that the OSC could be served directly on his attorney.
Injunctive Relief against Defendant Forde?s Interference with Receiver?s Duties
On November 12, 2015, the court granted in part Plaintiffs? motion for appointment of a receiver as to the property located at 22634 Maple Ave., Torrance, CA 90505. The court?s Order Appointing Receiver states that Receiver shall collect the rents at the Property, among other actions. Counsel for Defendant Forde attended the November 12, 2015 hearing and waived further notice of the order.
As discussed above, undisputed evidence reflects that Defendant Forde has interfered with the Receiver?s duties to collect rents at the Property. Brazil sent correspondence to tenants demanding payment of rent, and referring the tenants to Defendant Forde and his attorney, Carol Unruh. (Singer Decl. ? 3, Exh. 4.) According to Receiver, tenant Agnes Patil also informed him that she received multiple phone calls from Forde demanding rent and threatening to file an eviction action if he did not receive her rent payment. (Id. ? 4, Exh. 5.) Receiver submits evidence that the Menke Law Firm, which represents Forde, prepared a three day notice to pay rent or quit that was apparently served on the Patils. (Id. ? 5, Exh. 7.) On April 12, 2016, another tenant at the Property, Gene Kim, contacted Receiver and informed him that Forde was threatening to bring an eviction action against her if she did not pay her rent to Forde. (Id. ? 6.) Based on the foregoing, Receiver submits evidence that Forde has interfered with Receiver?s court-appointed duties.
In opposition, Defendant Forde does not respond to the evidence discussed above. Rather, Defendant Forde argues that both deeds of trust on the Property contain an assignment of rents provision which permits the secured lender, upon compliance with Civil Code section 2938(c), to have the rents paid directly to them. Defendant Forde does not submit, or cite in the record, to evidence to establish that Brazil has an enforceable assignment of rents. Brazil is concededly a second trust deed holder, and Forde does not explain why Brazil would be entitled to an assignment of rents before the interest of the first trust deed holder is satisfied. Defendant Forde also does not submit evidence that Brazil has complied with the procedures of section 2938(c) to enforce an assignment of rents.
More importantly, even assuming arguendo Brazil does have an enforceable assignment of rents (which has not been shown), Defendant Forde does not claim that he himself has any rights under the assignment of rents. Therefore, Defendant Forde?s opposition provides no justification for his acts to interfere with Receiver?s court-appointed duties.
As to the balance of harms, an injunction is necessary to prevent interference with the court?s order appointing a receiver and to allow the Receiver to perform his duties. In opposition, Defendant Forde has not shown that he himself would suffer any harm if the injunction is granted.
The motion is granted to enjoin Defendant Forde, and his agents, attorneys, and all persons acting in concert with him, from: (1) demanding, collecting, receiving, or in any other way diverting or using rents or other income or payments emanating from property located at 22634 Maple Avenue, Torrance, CA 90505 (the ?Property?); (2) communicating with the tenants at the Property designed to collect rent; (3) taking any legal action, including unlawful detainer actions, concerning collection of rents or tenancy against the tenants at the Property; (4) transferring, encumbering, or otherwise disposing of the Property; and (5) terminating or otherwise affecting the utilities which service the Property.
Injunctive Relief Compelling Return of Rents from Defendant Forde
Receiver also seeks an injunction compelling Forde to return to Receiver rents collected from tenants at the Property since April 1, 2016. As discussed above, Receiver submits evidence that Forde has made attempts to cause the tenants at the Property to pay rent to Brazil, Forde, or Unruh, and not to the Receiver. However, Receiver, who has communicated with some of the tenants, does not submit evidence that any tenants paid rents to Forde since April 1, 2016. Accordingly, Receiver fails to show a likelihood of establishing that Forde violated the Order Appointing Receiver by causing tenants to pay rents directly to him since April 1, 2016.
The motion for an injunction compelling Forde to return to Receiver rents collected from tenants at the Property since April 1, 2016 is denied.
Undertaking
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. Pro. ? 529(a); City of South San Francisco v. Cypress Lawn Cemetery Ass?n. (1992) 11 Cal. App. 4th 916, 920.)
However, here, the court is issuing an injunction to prevent interference with its Order Appointing Receiver and with the Receiver?s duties, and not based on a cause of action in Plaintiffs? complaint. Under those circumstances, the court finds no basis to require Receiver or Plaintiffs to file an undertaking. The court already ordered Receiver to file a receiver?s undertaking of $10,000 when it granted the Order Appointing Receiver. Receiver filed the $10,000 undertaking on December 15, 2015.
Conclusion
The motion is granted to enjoin Defendant Forde, and his agents, attorneys, and all persons acting in concert with him, from: (1) demanding, collecting, receiving, or in any other way diverting or using rents or other income or payments emanating from property located at 22634 Maple Avenue, Torrance, CA 90505 (the ?Property?); (2) communicating with the tenants at the Property designed to collect rent; (3) taking any legal action, including unlawful detainer actions, concerning collection of rents or tenancy against the tenants at the Property; (4) transferring, encumbering, or otherwise disposing of the Property; and (5) terminating or otherwise affecting the utilities which service the Property.
The motion for an injunction compelling Defendant Forde to return to Receiver rents collected from tenants at the Property since April 1, 2016 is denied.
The motion is denied as to Defendant Brazil because he has not yet appeared in this action, and the OSC was not served on Brazil by personal service. (California Rules of Court 3.1150(a).) The TRO against Brazil is dissolved.