Opinion
E068157
12-20-2018
CHEMOIL CORPORATION, a California Corporation, Plaintiff and Respondent, v. CUNNINGHAM HOLDINGS, INC., et al., Defendants and Appellants.
Walker Trial Lawyers, Barry M. Walker, Larissa A. Branes, Amy M. Oakden; Law Offices of Bill Parks and Bill Parks for Defendants and Appellants. Knapp, Petersen & Clarke, Mitchell B. Ludwig; Curtis, Mallet-Prevost, Colt & Mosle, Theresa A. Foudy and Peter J. Behmke for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. MCC1500325) OPINION APPEAL from the Superior Court of Riverside County. Daniel A. Ottolia, Judge. Affirmed. Walker Trial Lawyers, Barry M. Walker, Larissa A. Branes, Amy M. Oakden; Law Offices of Bill Parks and Bill Parks for Defendants and Appellants. Knapp, Petersen & Clarke, Mitchell B. Ludwig; Curtis, Mallet-Prevost, Colt & Mosle, Theresa A. Foudy and Peter J. Behmke for Plaintiff and Respondent.
This action involves a dispute between the members of Apex Fuels LLC (AFLLC). Plaintiff and respondent Chemoil Corporation (Chemoil) sued defendants and appellants AFLLC, Cunningham Holdings, Inc. (CHI), Gregory S. Cunningham (Cunningham), and Apex Energy Ventures LLC (AEV) to recover amounts owed to Chemoil as a secured creditor. On March 17, 2017, while the action was pending, the trial court granted Chemoil's request for a preliminary injunction and ordered defendants to pay into the court the sum of $224,500 and any other direct or indirect proceeds from the sale of an AEV asset (mandatory portion). The court further enjoined defendants from taking any action that would dispose of any assets of AEV (prohibitory portion).
Defendants only challenge the mandatory portion of the preliminary injunction contending (1) any balancing of the equities leans heavily in their favor, (2) Chemoil failed to demonstrate the likelihood of its success on its voidable transfer claim, and (3) the preliminary injunction is an unauthorized attachment. We reject the attempt to characterize the preliminary injunction as an unauthorized attachment and conclude the evidence supports the trial court's determination as to the reasonable probability of Chemoil's success and the balancing of the equities of the parties in favor of Chemoil. Because defendants have failed to establish that the trial court abused its discretion in issuing the mandatory portion of the preliminary injunction, we affirm the order.
I.
PROCEDURAL BACKGROUND AND FACTS
A. The Joint Venture.
In April 2013, Chemoil (35% interest) and CHI (65% interest) formed AFLLC, a company engaged in the business of purchasing petrochemical products for distribution to retail gas stations, gasoline and diesel fuel distributors, state and municipal agencies, power and public utility companies, and other commercial end users. CHI is owned directly or indirectly by Cunningham doing business as "Apex Fuels." Pursuant to the operating agreement, CHI contributed all of its assets, rights, business opportunities and activities to AFLLC, and Chemoil invested $4.2 million as equity and provided a $2 million loan (the loan) to AFLLC. The loan, due and payable on June 30, 2015, was secured by a first priority security interest in, inter alia, all of AFLLC's petrochemical inventories and accounts receivables, and all products and proceeds thereof (collectively collateral). AFLLC immediately distributed $4.2 million to CHI.
B. Chemoil's Complaint.
In July 2015, after AFLLC defaulted on the loan, Chemoil learned that Cunningham had been "dismantling [AFLLC], . . . dissipating assets and using Chemoil Collateral to pay non-Chemoil [AFLLC] creditors." On July 31, 2015, Chemoil initiated this action against AFLLC, CHI, and Cunningham seeking to recover, in part, the loan, and approximately $600,000 owed to Chemoil for fuel transactions, both of which were secured by AFLLC's accounts receivable. CHI cross-complained for damages based on Chemoil's alleged tortious conduct and breach of the operating agreement.
C. The Appointment of the Receiver.
On August 5, 2015, the trial court issued its order appointing a receiver to take possession, custody and control of AFLLC and its assets and property. The order also enjoined defendants from interfering with the receiver's job and transferring, directly or indirectly, any asset of AFLLC. Subsequently, the receiver's forensic accountant found that AFLLC's sales volume of $3.9 million/month dropped to $0/month in July 2015, and the loss of all revenue "appears to coincide with the transfer of the ongoing business activities of [AFLLC] to Apex Fuels, Inc." The accountant also discovered that AFLLC had been transferring its tangible and intangible assets (including $531,770.07) to Apex Fuels, Inc., receiving nothing of value in exchange. A search into the California Secretary of State's records revealed that Apex Fuels, Inc., was created on June 1, 2015, and is controlled by the Cunningham family (the statement of information lists Cunningham family members as officers and directors). A search for specific business entities transacting AFLLC's business revealed three entities registered at AFLLC's Murrieta, California, address: Apex Tank Lines, AEV, and CHI. The receiver also found transfers of assets between AFLLC and AEV. AEV was previously known as Cunningham Holdings LLC and referred to as Apex Energy.
On November 18, 2015, the receiver moved, ex parte, to enforce the receivership order and (1) stop the transfer of AFLLC's assets to Apex Fuels, Inc., (2) freeze Apex Fuels, Inc.'s accounts, and (3) enjoin Apex Fuels, Inc., and AEV's use and transfer of assets. On November 30, 2015, the trial court issued an order enjoining Apex Fuels, Inc., from further dissipation of assets and authorizing the receiver to obtain Apex Fuels, Inc.'s books and records and to conduct discovery relating to Apex Fuels, Inc.
On December 3, 2015, Chemoil added AEV as a defendant, asserting that AEV was formally known as Cunningham Holdings LLC and doing business under the fictitious names of "Apex Fuel Stations" or "Apex Stations." On February 26, 2016, Chemoil amended its complaint to allege fraudulent transfer of AFLLC's assets. (Civ. Code, §§ 3439.04, subd. (a), 3439.05.)
On July 5, 2016, the receiver submitted his report and recommendations. Among other things, the receiver and his accountants concluded that Cunningham had caused AFLLC to sell approximately $3,019,173 of fuel products to AEV without payment, and that AFLLC's books did not show any balance owing to AEV that would have enabled AEV to claim an offset. According to AEV, it owed $1,457,872 to AFLLC. Also in July 2016, Cunningham was in the process of selling AEV's gas and convenience store (AEV gas station). The seller of the AEV gas station was listed as Cunningham Holdings, LLC (AEV's former name).
D. The Writ of Attachment.
On September 12, 2016, Chemoil filed an application for a right to attach order and writ of attachment over the assets of AEV, in an effort to secure the $1,457,872 that AEV admitted it owed AFLLC and, thus, was owed to Chemoil. AEV opposed the application, contending Chemoil was not a secured creditor of AFLLC, the receiver was not objective, AEV had "no involvement in any purported contract between Chemoil and [AFLLC]," and AFLLC's performance was excused based on the unclean hands of Chemoil. According to AEV, the attachment was sought "to cripple Defendants' ability to defend the underlying lawsuit and to prosecute Cunningham, in that it seeks all income from [AEV], an entity . . . which Chemoil has no contracts with and which operates a gas station and convenience store." On November 18, 2016, the trial court granted Chemoil's application and executed the right to attach order and writ of attachment. The court found that Chemoil had established the probable validity of its claim upon which attachment was based.
E. The Preliminary Injunction.
In attempting to levy on AEV's assets, Chemoil discovered that Cunningham sold the AEV gas station in October 2016. Thus, on January 20, 2017, Chemoil moved, ex parte, for a temporary restraining order (TRO) and an order to show cause (OSC) regarding a preliminary injunction, to enjoin defendants from further transferring or dissipating the proceeds from the sale of the AEV gas station. In support of its motion, Chemoil offered bank records, garnishee memoranda from Commerce Bank of Temecula Valley and Wells Fargo Bank N.A., and documents evidencing the sale of the AEV gas station. According to these documents, Cunningham was depleting the bank accounts of AEV and sold the AEV gas station during the pendency of Chemoil's application for writ of attachment. Chemoil argued that defendants' actions, "conducted in secret and for the obvious purpose of frustrating the Court's attachment order and Chemoil's ability to obtain any recovery on the not less than $1.4 million owed by AEV to Chemoil, constitute classic avoidable transactions made with the 'actual intent to hinder, delay, or defraud' creditors." The court granted the TRO, which included authorizing Chemoil to conduct expedited discovery, and issued an OSC on the request for a preliminary injunction.
On March 6, 2017, Chemoil filed a supplemental brief detailing Cunningham's evasion of personal service of the TRO and CHI's failure to produce documents or provide substantive responses to the discovery specifically authorized by the trial court. According to the evidence obtained through discovery, Chemoil learned that Cunningham Holdings LLC was used in connection with the sale of the AEV gas station, and the proceeds from the sale went to CHI, Cunningham personally or his other companies. Cunningham acknowledged that escrow for the sale of the AEV gas station failed to close at the end of September 2016 because the buyers did not have a loan. In order to close the sale by the end of October 2016, the purchasers of the gas station obtained a $520,000 loan from Bogart Capital, a Wyoming shell company created by Cunningham in or about August 2015, after this litigation commenced. PacWest Financial Services, LLC, whose managing members are CHI and Cunningham, serviced the loan. CHI received the proceeds from the sale of the AEV gas station, then transferred them to AEV bank accounts and further diverted the money to Apex Fuels Inc., Brian Cunningham, and others. Additionally, the documents show that, during this same period of time, hundreds of thousands of dollars in revenue generated by the AEV gas station were diverted to companies affiliated with Cunningham. Cunningham admitted that he had a practice of moving cash "back and forth" among his "small family organization" of companies "to manage cash flow."
In opposing the request for preliminary injunction, defendants admitted that $224,500 (the cash proceeds from the $774,500 sale of the AEV gas station) was credited to CHI and not the trial court's registry. This was because defendants used that sum for "legitimate business expenses," and the "harm in requiring [them] to turnover funds [($224,500)] that have been spent on legitimate business expenses and which were obtained in a sale that occurred prior to the right to attach order, would be far greater than any potential harm to Chemoil." However, no invoices substantiating the claim that the money was used to pay legitimate business expenses were offered and, according to Cunningham's declaration, the transfers of money went to businesses that were owned or controlled by the Cunningham family, with the exception of $60,800 (a used copy machine ($15,000), AC Electric ($800), DiMaggio Maintenance, Inc. ($20,000), & defense counsel Walker Trial Lawyers ($25,000)). According to Cunningham, "AEV owes a debt to CHI in excess of $900,000.00 related to capital improvements to AEV stations."
Cunningham explained that the copier was purchased to make copies of the documents sought via discovery.
The record contains a document acknowledging completion of the work performed by AC Electric, with a notation "PAID IN FULL," and Cunningham stated that they paid $800 for an electrician to install the proper power source to plug in the copier.
The record contains an "A/P Invoice" dated January 27, 2016, for DiMaggio Maintenance, Inc., in the amount of $62,010.31, showing a balance due of $12,000.
On March 17, 2017, Chemoil filed its third amended complaint, and the trial court conducted a hearing on the OSC for the preliminary injunction. The court recited its understanding of plaintiff's allegations and defendants' defenses. The court noted that Chemoil added a claim for voidable transfer of AEV's business assets (Civ. Code, §§ 3439.04, subd. (a), 3439.05) in its third amended complaint based on (1) defendants' transfer of AEV's assets after they had been sued, (2) defendants' concealment of the transfer of the AEV gas station at the November 18, 2016 hearing on the attachment application, and (3) AEV's insolvency ("transfers were of substantially all of [AEV's] business assets and cash") after the sale of its gas station and transfer of funds. The trial court concluded that Chemoil was likely to prevail on the merits of its voidable transfer claim (Civ. Code, § 3439.04) and that it had established it would be irreparably harmed if the preliminary injunction was not issued. The court granted the application for preliminary injunction and ordered defendants to deposit into the court the sum of $224,500 (the amount received by defendants in connection with the sale of the AEV gas station) and any other direct or indirect proceeds from the sale. The court further enjoined defendants from taking any action that would dispose of any assets of AEV.
II.
DISCUSSION
Defendants challenge the mandatory portion of the preliminary injunction requiring their payment of $224,500 (the proceeds from the sale of the AEV gas station) into the court.
A. General Principles.
"In exercising its discretion whether to issue a preliminary injunction, 'the trial court must consider 'two interrelated factors,' specifically, the likelihood that plaintiffs will prevail on the merits at trial, and the comparative harm to be suffered by plaintiffs if the injunction does not issue against the harm to be suffered by defendants . . . if it does.' [Citations.] [¶] The likelihood of plaintiffs' ultimate success on the merits 'does affect the showing necessary to a balancing-of-hardships analysis. That is, the more likely it is that plaintiffs will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue. This is especially true when the requested injunction maintains, rather than alters, the status quo. [Citation.] . . . [I]t is the mix of these factors that guides the trial court in its exercise of discretion.' [Citations.] The presence or absence of these interrelated factors 'is usually a matter of degree, and if the party seeking the injunction can make a sufficiently strong showing of likelihood of success on the merits, the trial court has discretion to issue the injunction notwithstanding that party's inability to show that the balance of harms tips in his favor. [Citations.]'" (Right Site Coalition v. Los Angeles Unified School Dist. (2008) 160 Cal.App.4th 336, 341-342.)
"Generally, a superior court's ruling on an application for a preliminary injunction is reviewed for an abuse of discretion. . . . [¶] Notwithstanding the applicability of the abuse of discretion standard of review, the specific determinations underlying the superior court's decision are subject to appellate scrutiny under the standard of review appropriate to that type of determination. [Citation.] For instance, the superior court's express and implied findings of fact are accepted by appellate courts if supported by substantial evidence, and the superior court's conclusions on issues of pure law are subject to independent review. [Citations.] [¶] Recognition of, and deference to, implied findings is derived from the principle that an appellate court must interpret the facts in the light most favorable to the prevailing party and indulge all reasonable inferences in support of the trial court's decision regarding the preliminary injunction. [Citation.]" (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 738-739.)
B. Analysis.
In granting Chemoil's motion for a preliminary injunction, the trial court concluded that Chemoil, as to its claim for voidable transfer, demonstrated a strong likelihood of success on the merits, and the possibility of irreparable harm. On appeal, defendants contend the court abused its discretion in reaching this conclusion. They argue that (1) any balancing of the equities leans heavily in their favor, (2) Chemoil failed to demonstrate the likelihood of its success on its voidable transfer claim, and (3) the preliminary injunction is an unauthorized attachment.
1. The trial court did not abuse its discretion in finding that Chemoil would most likely suffer irreparable harm absent the preliminary injunction.
The defendants contend that the mandatory portion of the preliminary injunction requiring them to pay $224,500 into the court should be set aside because the trial court failed to consider the balance of hardships, and because the hardship resulting from this requirement outweighs any hardship that Chemoil would incur if this requirement were denied. We disagree.
Code of Civil Procedure section 526, subdivision (a), in relevant part, 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, 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." (Code Civ. Proc., § 526, subd. (a)(3); see Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 136 [injunctive relief was necessary to prevent the dissipation of profits stemming from an allegedly improper corporate takeover attempt].) "An injunction against disposing of property is proper if disposal would render the final judgment ineffectual. [Citation.]" (Heckmann, at p. 136.)
a. The trial court considered the balance of hardships.
We first address defendants' claim that the trial court failed to consider the balance of hardships. Relying on the court's summary of the "arguments set forth in the moving and opposing papers" at the hearing, defendants infer that the trial court failed to review the evidence in determining interim harm. Defendants are mistaken in their inference. According to the record, the court analyzed whether Chemoil could prevail on its voidable transfer claim. It found evidence that defendants sold the AEV gas station, transferred assets to insiders, and concealed the transfer during the hearing on the right to attach order, thereby rendering the writ of attachment meaningless. The court opined, "it appears that AEV became insolvent after the sale of the business and transfer of funds." From this evidence, the court deduced that "it is likely [Chemoil] will prevail on the merits of its" claim of voidable transfer. Given the evidence that defendants were dissipating the assets of AEV, the court found that "Chemoil cannot execute a writ of attachment which was issued to satisfy AEV's obligations to Chemoil," and "[i]t does not appear that there are any other assets to satisfy AEV's debt to Chemoil." When defense counsel pointed out that the mandatory portion of the preliminary injunction was "an extraordinary remedy," the court replied, "I realize this is quite a remedy. I agree with you in that sense. But it does appear to the Court that there's a tendency here to secrete assets. It was right before the writ of attachment hearing. You could have told the Court something. You could have warned [Chemoil's counsel] that there's a sale that's about to occur. I think that would have been different, you know, had we had the facts along those lines." Based on the record, the trial court considered the balance of hardships.
Notwithstanding the above, we find defendants' reasoning to be flawed. That the trial court did not specify all the evidence that it considered in assessing the interim harm does not mean no evidence supported the trial court's preliminary injunction ruling against defendants. Defendants cite no basis for their unstated premise that the trial court must detail the evidence supporting its ruling. (See 7 Witkin, Cal. Procedure (5th ed. 2008) Trial, § 392, pp. 460-461 [a statement of decision is not required when deciding an application for preliminary injunction].) To the contrary, the appellate posture and doctrine of implied findings require that we "must infer the trial court . . . made every factual finding necessary to support its decision." (Fladeboe v. American Isuzu Motors, Inc. (2007) 150 Cal.App.4th 42, 61.) This doctrine stems from three fundamental principles of appellate review: "(1) a judgment is presumed correct; (2) all intendments and presumptions are indulged in favor of correctness; and (3) the appellant bears the burden of providing an adequate record affirmatively proving error." (Id. at p. 58.) We therefore must presume the trial court impliedly made the requisite findings to support its ruling, and defendants' challenge based on the court's reiteration of the parties' arguments fails.
b. The balance of hardship leans in favor of Chemoil.
Substantial evidence supports the trial court's finding that the balance of hardship favored Chemoil. There was undisputed evidence that defendants moved assets between various business entities owned or controlled by Cunningham and his family, and evidence that defendants transferred assets between AFLLC and AEV and then diverted the AEV gas station's revenue to Cunningham-affiliated companies. When Chemoil moved to attach AEV's assets to secure the $1.4 million plus that AEV admitted it owed AFLLC, Cunningham failed to inform the trial court that it was in the process of selling the AEV gas station, concealing the transfer of this significant asset. When proceeds ($224,500) from the sale of the gas station were deposited into AEV bank accounts, the money was diverted to other Cunningham family members or business entities. Depletion of AEV's assets to the point where AEV becomes insolvent renders Chemoil's writ of attachment meaningless.
Defendants fault the trial court for issuing the preliminary injunction absent a "verified" showing. (Code Civ. Proc., § 527, subd. (a); see Gray v. Superior Court (2005) 125 Cal.App.4th 629, 640.) They argue that Chemoil's "complaint is not verified, and the only affidavit provided . . . in support of its preliminary injunction application was that of its counsel," which they argue failed to offer any facts supporting the conclusion that the interim harm in not issuing the preliminary injunction weighs more heavily against Chemoil. We are not persuaded by defendants' argument because the record shows that the evidentiary material offered in support of the application for preliminary injunction consisted of much more than the affidavits of Chemoil's counsel: Chemoil offered two declarations of its counsel, along with several requests for judicial notice. Counsel's declarations introduced evidence obtained through discovery (Cunningham's deposition and defendants' business records) and provided a chronology of actions taken in response to defendants' dissipation of assets. The requests for judicial notice asked the court to take notice of various documents filed with the court, such as declarations, the receiver's report, the reporter's transcript of proceedings, and documents in support of, and opposition to, the application for right to attach. In total, thousands of pages of documentation were offered in support of the application for preliminary injunction. The application was not based solely upon the declaration of Chemoil's counsel.
On appeal, defendants claim that they "made a clear showing that the money sought was no longer in their possession and that it was instead 'used for business purposes related to AEV,'" but the documents illustrate otherwise. The AEV gas station sold for $744,500, which included a $520,000 loan from Bogart Capital, a Cunningham family company, and $224,500 in cash. Except for $60,800, the proceeds from the sale of the gas station went to Cunningham family members or businesses they owned or controlled. Of the $60,800, $15,800 was for the purchase and installation of a used copier for defendants' use and $25,000 was paid to defendants' counsel. Arguably, only $20,000 was paid for "'business purposes related to AEV.'" However, whether that $20,000 came from the $224,500 as opposed to the "several hundred thousand dollars" generated by the AEV businesses that were in the same bank account is unclear. Also, while Cunningham claimed that AEV owed CHI in excess of $900,000 related to capital improvements to AEV gas stations, he offered no documentation to substantiate his claim, but admitted that he would move cash "back and forth" among his "small family organization" of companies "to manage cash flow." In short, defendants' claim that they will suffer irreparable harm if they have to pay $224,500 into the court because all of the money has already been used "to pay legitimate business expenses of AEV" is phantom.
Because the evidence showed that defendants' actions rendered the writ of attachment meaningless, the trial court reasonably determined that the possibility that Chemoil would suffer irreparable harm from further dissipation of the $224,500 supported the issuance of the mandatory portion of the preliminary injunction.
2. Chemoil demonstrated a likelihood of prevailing on the merits.
Regardless of the balance of interim harm, a trial court may not grant a preliminary injunction unless there is some possibility that plaintiff will ultimately prevail on the merits of its claim. (See Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 443.) Here, the trial court ruled that Chemoil demonstrated a likelihood of prevailing on its claim for voidable transfer. We agree.
"The Uniform Fraudulent Transfer Act . . . , codified in Civil Code section 3439 et seq., 'permits defrauded creditors to reach property in the hands of a transferee.'" (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829 (Filip).) "'A fraudulent conveyance is a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.' [Citation.] A transfer under the UFTA is defined as 'every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset . . . , and includes payment of money, release, lease, and creation of a lien or other encumbrance.' [Citation.]" (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 648.) "Whether a conveyance was made with fraudulent intent is a question of fact, and proof often consists of inferences from the circumstances surrounding the transfer." (Filip, at p. 834.)
In 2015, the former Uniform Fraudulent Transfer Act was renamed as the Uniform Voidable Transactions Act (UVTA) (Stats. 2015, ch. 44, §§ 2-3, eff. Jan. 1, 2016). (PGA West Residential Assn., Inc. v. Hulven Internat., Inc. (2017) 14 Cal.App.5th 156, 162, fn. 2.)
Civil Code section 3439.04, subdivision (b), contains a nonexclusive list of factors that may be considered in discerning a debtor's actual intent. These factors, known as "the 'badges of fraud'" (Filip, supra, 129 Cal.App.4th at p. 834), include "(1) Whether the transfer . . . was to an insider. [¶] (2) Whether the debtor retained possession or control of the property transferred after the transfer. [¶] (3) Whether the transfer . . . was disclosed or concealed. [¶] (4) Whether before the transfer was made . . . , the debtor had been sued or threatened with suit. [¶] (5) Whether the transfer was of substantially all the debtor's assets. [¶] . . . [¶] (9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made . . . . [¶] . . . [¶] (11) Whether the debtor transferred the essential assets of the business to a lienor that transferred the assets to an insider of the debtor." (Civ. Code, § 3439.04, subd. (b)). "There is no minimum number of factors that must be present before the scales tip in favor of finding of actual intent to defraud." (Filip, at p. 834.) The "confluence of several [badges of fraud] can constitute conclusive evidence of actual intent to defraud, absent 'significantly clear' evidence of a legitimate supervening purpose." (In re Acequia, Inc. (9th Cir. 1994) 34 F.3d 800, 806.) Even without an actual fraudulent intent, a transfer may be fraudulent as to present creditors if the debtor did not receive "a reasonably equivalent value in exchange for the transfer" and "the debtor became insolvent as a result of the transfer or obligation." (Civ. Code, § 3439.05, subd. (a).)
Substantial evidence supports a claim for voidable transfer. The decision to sell the AEV gas station was made in February 2016, after the complaint was filed in July 2015. Upon learning that defendants had caused AFLLC to sell more than $3 million of fuel products to AEV without payment, Chemoil applied for a right to attach order over AEV's assets. During the pendency of this application, defendants sold the gas station in October 2016; however, at the hearing on November 18, 2016, they concealed the sale of this significant asset. Cunningham admitted that proceeds from the sale were transferred to insiders (Cunningham family members or businesses they owned or controlled) instead of keeping the proceeds with AEV. By transferring the proceeds to insiders, Cunningham was able to retain possession over them, but remove them from Chemoil's reach, and render the trial court's attachment order regarding AEV's property meaningless.
Based on the evidence summarized ante, the trial court did not abuse its discretion in determining that Chemoil established a reasonable probability of prevailing on the merits of its claim of voidable transfer.
3. The preliminary injunction is not an unauthorized attachment.
Defendants contend that the preliminary injunction is an unauthorized attachment against CHI and Cunningham's assets. They argue that the mandatory portion of the preliminary injunction forces them to "replace funds used to pay legitimate business expenses of AEV, without satisfying the strict requirements for prejudgment attachment or affording [defendants] the statutory protections available under the prejudgment attachment statutes." They rely on Doyka v. Superior Court (1991) 233 Cal.App.3d 1134 (Doyka) for support. We distinguish the Doyka case from the instant case and reject defendants' contention.
In Doyka, the defendant borrowed $125,000 from the plaintiff and secured the loan with a third deed of trust on a piece of real property. (Id. at pp. 1135-1136.) Defendant spent "all but $900" on renovations to the property. (Id. at p. 1136.) At plaintiff's request, the trial court enjoined defendant from "'secreting, using, distributing, transferring, or otherwise disposing of all or any portion of funds in the sum of One Hundred Twenty-five Thousand and no/100 ($125,000.00), whether on deposit in The Pacific Bank, or in any other lending or financial institution . . . for any purpose relating to the construction, renovation, and/or sale or other disposition of all or any portion of the real property and improvements . . . , or for any other use or purpose whatsoever.'" (Ibid.) On appeal, defendant claimed that the injunction was an improper prejudgment attachment. The Court of Appeal agreed. (Id. at pp. 1136-1137.)
The following facts distinguish Doyka from the case before us. First, the plaintiff in Doyka did not dispute that all but a small fraction of the loan funds had been used to renovate the property securing the loan. (Doyka, supra, 233 Cal.App.3d at p. 1136.) Here, Chemoil disputes that the $224,500 was used for legitimate business expenses, providing evidence that it was transferred to Cunningham family members or businesses they owned or controlled. Second, the Doyka court found that the preliminary injunction imposed a prejudgment attachment upon defendant's liquid assets without satisfying the statutory requirements for an attachment, and that such requirements could not have been satisfied under the facts of the case. Here, the same prohibitions were not before the trial judge, who had already ordered the assets attached. Finally, in contrast to the facts in Doyka, the injunction sought the return of a specific asset ($224,500 in proceeds from the sale of the AEV gas station), not replacement of it with money from any of defendants' bank accounts.
Notwithstanding the above, defendants maintain that the trial court exceeded its jurisdiction in requiring them to pay $224,500 into the court when Chemoil failed to show its right to the extraordinary remedy of a mandatory injunction. (Civ. Code, § 3439.07; Code Civ. Proc., § 526, subd. (a)(3).) We disagree. Chemoil alleged claims under the UVTA. While it initially sought a right to attach order under the attachment law (Code Civ. Proc., § 482.010 et seq.), the "attachment statutes do not preclude the granting of injunctive relief [citation]." (Doyka, supra, 233 Cal.App.3d at p. 1137; see Code Civ. Proc, § 482.020.) Civil Code section 3439.07, subdivision (a), sets forth the remedies available to creditors like Chemoil: "(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim. [¶] (2) An attachment or other provisional remedy against the asset transferred or other property of the transferee . . . . [¶] (3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, the following: [¶] (A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or other property of the transferee. [¶] (B) Appointment of a receiver to take charge of the asset transferred or other property of the transferee. [¶] (C) Any other relief the circumstances may require." (Civ. Code, § 3439.07, subd. (a), italics added.)
Here, the circumstances required the mandatory portion of the preliminary injunction. As previously noted, the asset ($224,500) was "readily identifiable." It was transferred to insiders, thus removing it from Chemoil's reach while allowing defendants to retain possession over it. And, defendants' actions rendered the trial court's attachment order regarding AEV's property meaningless. Thus, by requiring defendants to pay the $224,500 (and any other proceeds from the sale of the AEV gas station) directly into the court, the trial court prevented defendants from rendering AEV insolvent. (Doyka, supra, 233 Cal.App.3d at p. 1136; West Coast Constr. Co. v. Oceano Sanitary Dist. (1971) 17 Cal.App.3d 693, 700 ["mere monetary loss is not irreparable in contemplation of the remedy of injunction unless there is an averment or a showing that parties causing the loss are insolvent or in any manner unable to respond in damages"].)
For the foregoing reasons, we conclude that the trial court did not abuse its discretion in granting the mandatory portion of the preliminary injunction.
III.
DISPOSITION
The order granting Chemoil's application for preliminary injunction is affirmed. Costs on appeal are awarded to Chemoil.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKINSTER
Acting P. J. We concur: MILLER
J.
SLOUGH
J.