Opinion
D072986
03-27-2018
PAVONE & FONNER, LLP, Plaintiff and Appellant, v. JERNE WILLIS et al., Defendants and Respondents.
Law Offices of Benjamin Pavone and Benjamin Pavone for Plaintiff and Appellant. Jeffrey B. Bohrer for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2017-00007364-CU-BC-CTL) APPEAL from an order of the Superior Court of San Diego County, Kenneth J. Medel, Judge. Affirmed. Law Offices of Benjamin Pavone and Benjamin Pavone for Plaintiff and Appellant. Jeffrey B. Bohrer for Defendants and Respondents.
Pavone & Fonner, LLP (P&F) appeals from an order denying a preliminary injunction that it sought in its lawsuit asserting claims of theft, conversion and receiving stolen property against Jerne Willis (Jerne) and McCall Prentice (McCall), who received funds from a sale of real property by their sister, Myzsa Willis (Myzsa). As a basis for its claims, P&F alleges that the real property sold by Myzsa was subject to a lien held by P&F to secure payment for attorney fees owed by Myzsa to P&F, and that Jerne and McCall wrongly received the funds knowing of P&F's lien. At issue in this appeal is the denial of a preliminary injunction against Jerne and McCall that would have enjoined them from "divesting themselves of the funds [from the sale of the real property] and/or transferring, encumbering or disposing of any assets obtained from those funds."
For the sake of clarity, we refer to the three sisters by their first names, and we intend no disrespect by doing so.
As we will explain, we conclude that the trial court did not abuse its discretion in denying the preliminary injunction because it determined that monetary damages are an adequate remedy, and we accordingly affirm the order.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A. P&F's Representation of Myzsa and the Retention Agreement
As alleged in the operative first amended complaint (the complaint), on September 24, 2015, Myzsa retained P&F (through P&F principal Benjamin Pavone) to represent her in a case involving the disappearance of her elderly grandmother and the protection of her grandmother's trust (the Trust), of which Myzsa was the sole beneficiary. The grandmother had been taken to Indiana by the grandmother's sister. In addition, litigation had been filed in the grandmother's name accusing Myzsa and her sisters of financial abuse. The real property held by the Trust consisted of a home on Mt. Aladin Avenue in San Diego (the Mt. Aladin Avenue property) and a multi-unit residential property on Oliver Street in San Diego (the Oliver Street property). P&F alleges that, collectively, the real property in the Trust was worth approximately $2 million.
As P&F states in the complaint, after being retained by Myzsa, "P&F subsequently litigated a protracted, complex, multi-forum, daily legal battle to determine what happened to the grandmother, challenge her competence and return her to California, and otherwise protect the real property estate." As P&F alleges, as a result of its efforts, the grandmother was returned to California and the two-parcel estate was recovered intact.
According to P&F's opening brief, the grandmother died on June 21, 2016, shortly after she returned to California, so that the ownership of the real property and the assets in the Trust passed to Myzsa following certain probate proceedings. According to P&F, "[a]fter accounting for the expenses relating to the pre-existing bank encumbrances (about $176,000), [the grandmother's] personal expenses (about $70,000), and the $160,000 in fees paid to the probate professionals, Myzsa recovered a net estate worth about $1,600,000."
At the conclusion of P&F's representation of Myzsa, it had billed a total of approximately $650,000 for its work on the matter. According to P&F, it sent detailed bills to Myzsa throughout the representation showing the attorney fees as they were incurred, although it was understood that Myzsa would not have the funds to pay P&F until she took possession of the assets in the Trust.
When retaining P&F to represent her, Myzsa signed a written retention agreement on September 24, 2015 (the Agreement). The Agreement stated that "[t]his is an hourly case" and set forth the hourly rates for P&F's attorneys. As disclosed in the Agreement, "Attorney has estimated that Client could incur $100K (or conceivably more) for the serious litigation effort that is needed . . ."
Paragraph 6.0 of the Agreement addressed possible sources of payment and collateral for Myzsa's obligation to P&F:
"Client does not have liquid assets in their possession in order to pay Attorneys for the fees that will be generated for these various legal efforts. Therefore, in order to protect against the risk of non-payment, the following forms of recourse and collateral will be granted to Attorneys:
"(a) to the extent that Attorneys can seek fees under the estate documentation by filing a fee application with the probate court, they will pursue that as one avenue of being compensated;
"(b) if Attorneys file damage claims and are able to recover monetary damages or their fees from third parties, they will also be entitled to seek remuneration in this manner. Attorneys will have a lien against any recovery in actions in which damages are sought.
"(c) Attorneys will record a 'charging lien' against any real property belonging to Clients. This is a filing with the San Diego County Recorder's office where Clients grant a lien against any real property that Clients have an interest in.
"(d) Clients will be personally liable for the fees generated.
"(e) If the avenues stated above are not working to result in compensation for attorney's effort in a reasonable and timely fashion, Attorneys may insist that Clients begin efforts, as are possible, to refinance any real property they have an interest in."
"The liens referenced above will attach to any recovery you may obtain, whether by arbitration award, judgment, settlement or otherwise. The effect of such a lien is that we may be able to compel payment of fees and costs from any such funds recovered on your behalf even if we have been discharged before the end of the case. Your initials indicate your understand that lien protection will exist . . . ."
As an attachment to the Agreement, Myzsa signed and had notarized an "Attorney Charging Lien" on September 24, 2015 that provided:
"As explained in paragraphs 3.1 and 6.0 of the Attorney-Client fee agreement, the fees to pursue various legal efforts in this case will be collateralized. In order to assure recovery of compensation for Attorney's services, Clients hereby grant a lien on any real property interests they may have for the outstanding balance of fees generated by Pavone & Fonner, LLP or Benjamin Pavone as follows:B. Myzsa's Partial Payment to P&F and Her Sale of the Oliver Street Property
"To the extent they have an interest in it, or to the extent that Myzsa as trustee of the McClain trust has the power and obligation to protect Teresa's estate and can create a lien to retain counsel to undertake that protection, Clients, individually and as trustees, agree to grant Attorneys a lien against any property owned by the trust or owned personally.
"This attorney lien is further granted by Clients in favor of Attorney to the extent of any recovery any of them may be entitled to in any court action, particularly In re McClain, presently in San Diego Superior Court . . . ."
According to P&F, in September 2016 after Myzsa obtained ownership of the Mt. Aladin Avenue property, she borrowed approximately $225,000 against that property and paid $158,382 to P&F.
P&F continued to have discussions with Myzsa about how she would pay the remaining balance she owed to P&F, which was $507,361 according to a P&F billing statement dated February 28, 2017. P&F alleges that when Pavone met with Myzsa on January 9, 2017, she stated that her plan was to pay the remainder of P&F's bill by refinancing the Oliver Street property. According to P&F, Myzsa's equity in the Oliver Street property was approximately $950,000 based on a property value of $1.5 million.
However, as shown by documentation attached to P&F's complaint, Myzsa did not refinance the Oliver Street property. Instead, she entered into a purchase and sale agreement for the Oliver Street property on January 11, 2017 for $1.2 million, two days after the meeting with Pavone. According to escrow documentation, on February 27, 2017, the sale of the Oliver Street property closed and a grant deed in favor of the purchaser was recorded on February 27, 2017. Myzsa signed amended escrow instructions dated February 23, 2017, directing that her sisters Jerne and McCall both receive $293,442.93 from the sale proceeds of the Oliver Street property. Cashier checks dated February 28, 2017, were sent to Jerne and McCall in that amount.
P&F alleges that the sale closed without its knowledge or consent "and in derogation of a written lien P&F had on all of Myzsa's assets including the Oliver [Street] property." P&F further alleges that its lien "also necessarily included, and attached to, the proceeds from the sale of the Oliver [Street] property." According to P&F, when it found out about the sale, it sent a letter to Myzsa by e-mail on the morning of March 1, 2017, which was copied to Jerne and McCall. In the letter, P&F stated that if Myzsa disposed of the assets she received when she sold the Oliver Street property, she would violate P&F's lien with respect to those assets. The letter also stated that it "serve[d] as due warning to all other interested parties." C. P&F's Complaint
P&F then filed the instant lawsuit. The operative first amended complaint filed July 13, 2017, asserts causes of action against Myzsa, Jerne and McCall. As relevant here, the causes of action asserted against Jerne and McCall are (1) theft (Pen. Code, § 496); (2) receiving stolen property (Ibid.); (3) aiding a violation of Penal Code section 496; (4) conversion; (5) conspiracy to violate Penal Code section 496; and (6) conspiracy to commit conversion. P&F sought damages against Jerne and McCall in the amount of $293,558.23 each, trebled to a total amount of $880,674.69 each, as well as punitive damages. D. The Temporary Restraining Order Against Jerne and McCall
Penal Code section 496, subdivision (a) states in relevant part: "Every person who . . . receives any property that has been . . . obtained in any manner constituting theft . . . knowing the property to be so stolen or obtained . . . shall be punished . . . ." The cause of action in P&F's complaint is based on Penal Code section 496, subdivision (c), which states that "[a]ny person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees."
On the cause of action for conspiracy to violate Penal Code section 496, P&F sought an award in the total amount of $1,522,083, which would be the joint liability of Jerne, McCall and Myzsa.
P&F filed an application for a temporary restraining order (TRO) against Jerne and McCall on August 2, 2017. In the TRO application, P&F summarized the relief it sought as follows: "a TRO prohibiting Jerne and McCall from divesting themselves of the Oliver funds and/or transferring, encumbering or disposing of any assets obtained from those funds."
In the TRO, P&F also described the relief it sought as "a temporary restraining order prohibiting [Jerne and McCall] from any further major transactions and to prevent further dissipation of the fund." In its reply brief for the TRO, P&F stated it wanted the court to "[f]reeze both Jerne Willis and McCall Prentice from selling, disposing or encumbering any interest, or any asset, derived from the Oliver sale proceeds, including cash or other property." In P&F's briefing for the preliminary injunction it does not restate the nature of the relief sought.
In the TRO application, P&F argued it had discovered information leading it to believe that Jerne had used the money she received from the sale of the Oliver Street property to buy a home in Hawaii "through a straw person, one Thomas Joseph Shea." The evidence supporting this belief consists of documents showing that the house where Jerne appears to currently reside was purchased for $295,000 on February 27, 2017, which is the same day that the sale of the Oliver Street property closed. Further, documents show that Shea and Jerne have historically shared the same address.
P&F also stated that "[i]t is not known what McCall did with the money sent to her, but it is presumed she will deplete it in an effort to avoid collection."
Later, in connection with the preliminary injunction, P&F submitted discovery responses from McCall in which she stated that some or all of the funds from the sale of the Oliver Street property had been used for various purchases, including horses and vehicles, and some was in a bank account with her other money.
In opposition to the TRO, Jerne and McCall argued that P&F would not be able to prevail on the merits for various reasons, including (1) P&F's final bill was unreasonable because it was much greater than the $100,000 identified in the Agreement; (2) Jerne and McCall were not parties to the Agreement; (3) Myzsa signed the Agreement under circumstances suggesting undue influence and unconscionability; and (4) P&F's lien would attach only to real property that Myzsa owned before the representation began.
The trial court issued a TRO on August 11, 2017. The order states, "McCall Prentice and Jerne Willis are hereby enjoined and restrained from disposing of any personal assets, including any assets obtained from the sale of the property located at 1560/1562 Oliver Avenue in Pacific Beach, until further order of this Court."
The trial court scheduled a preliminary injunction hearing for September 15, 2017, and provided the parties with a briefing schedule for any supplemental briefing that they decided to file. P&F did not supplement its moving papers, and Jerne and McCall did not file a further opposition. However, P&F filed a reply brief in support of its motion for a preliminary injunction. In the reply brief, P&F pointed out that a bond is needed for the issuance of a preliminary injunction (Code Civ. Proc., § 529) and suggested a bond amount of $10,000. E. Denial of the Motion for a Preliminary Injunction
The trial court held a hearing on the motion for a preliminary injunction on September 15, 2017, and then took the matter under submission. The hearing was apparently not reported and accordingly, no reporter's transcript is available.
P&F has attempted to include in the appellate record a document that it titles "Declaration of Benjamin Pavone re Oral Proceedings on September 15, 2017," in which Pavone describes what he remembers occurring at the hearing on the motion for a preliminary injunction. It appears that Pavone's declaration was not filed in the trial court, but instead was included by P&F as part of the appellant's appendix. P&F has identified no legal basis for the inclusion of such a document in the appellate record, and we will therefore not consider it. The proper procedure for submitting evidence of what occurred during an unreported hearing is to obtain a settled statement or an agreed statement (Cal. Rules of Court, rules 8.130, 8.134, 8.137), but P&F did not follow that procedure.
After receiving a supplemental declaration from P&F regarding an issue that was apparently discussed during the hearing, the trial court denied the preliminary injunction. The trial court's order stated: "Plaintiffs' Motion for Preliminary Injunction is DENIED. As to moneys allegedly transferred to Jerne, they allegedly have been used to purchase property in Hawaii. This property was purchased by a non-party, Joseph Shea. The Court lacks jurisdiction over Mr. Shea and also does not have jurisdiction over the property in another state. Thus, any injunction issued as to moneys transferred to Jerne would be ineffective. As to monies allegedly transferred to McCall, plaintiff admits that he does not know where the moneys are. Any injunction would be unclear. Further, after closely reviewing all the evidence presented, the Court concludes that plaintiff has not established that he has an inadequate remedy at law. Normally, an injunction will not issue where only money is involved. Monetary losses are compensable in damages. [¶] The TRO in place is dissolved immediately."
The supplemental declaration attached McCall's discovery responses, which we have referenced ante, in which she described the disposition of the funds she received from the sale of the Oliver Street property.
P&F appeals from the order denying the preliminary injunction.
II.
DISCUSSION
"The general purpose of [a preliminary] injunction is the preservation of the status quo until a final determination of the merits of the action." (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528.) "In deciding whether to issue a preliminary injunction, a court must weigh two 'interrelated' factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction." (Butt v. State of California (1992) 4 Cal.4th 668, 677-678.) " 'The party challenging an order granting or denying a preliminary injunction has the burden of making a clear showing of an abuse of discretion. [Citation.] An abuse of discretion will be found only where the trial court's decision exceeds the bounds of reason or contravenes the uncontradicted evidence.' " (Jay Bharat Developers, Inc. v. Minidis (2008) 167 Cal.App.4th 437, 443.)
Here, the trial court's order denying the preliminary injunction did not discuss whether P&F was likely to prevail on the merits of its claims against Jerne and McCall. Instead, the trial court focused on the second part of the inquiry, namely the relative harm from issuance or nonissuance of the injunction. More specifically, the trial court denied the injunction because P&F would have an adequate remedy at law by obtaining a monetary judgment against Jerne and McCall for any funds that they improperly took from P&F.
Because the trial court did not comment on the merits of the lawsuit, we need not and do not reach the merits in deciding whether the trial court was within its discretion to deny preliminary injunctive relief on the grounds it identified.
The generally applicable rule is that "if monetary damages afford adequate relief and are not extremely difficult to ascertain, an injunction cannot be granted." (Thayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal.App.2d 300, 306.) Here, P&F seeks a specific monetary amount as damages from Jerne and McCall, and the amount is easily ascertainable. Therefore, money damages would afford adequate relief in the event P&F prevails against Jerne and McCall.
Case law provides that money damages may not be adequate when the defendant is insolvent, but there has been no allegation or evidence regarding Jerne's and McCall's insolvency. (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"].) P&F contends that damages will be an inadequate remedy because the funds from the Oliver Street property are "almost certainly going to be dissipated or disposed of." However, that argument fails because money is fungible. As long as Jerne and McCall are solvent and have assets against which P&F can execute should it obtain a judgment, a monetary recovery will not be ineffectual.
P&F acknowledges, as we have explained above, that "[t]raditionally, courts do not issue injunctive orders to protect the collectability of a monetary claim." It also acknowledges that "[p]rotection for typical damage claims are available through other methods, such as prejudgment writs of attachment or other provisional remedies." Nevertheless, P&F relies on Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1047-1049 (Oiye) to argue that the trial court should have ordered an asset freeze against Jerne and McCall in this case to preserve the effectiveness of any future monetary judgment in favor of P&F.
A prejudgment writ of attachment is not available here. By statute, an attachment is available "only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney's fees." (Code Civ. Proc., § 483.010, subd. (a).) Further, "[i]f the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession." (Code Civ. Proc., § 483.010, subd. (c).) Here, P&F's underlying claims against Jerne and McCall are not based on any contract between them and P&F, but instead on tort-based theories of recovery. In addition, Jerne and McCall are natural persons, and the lawsuit is not based on their conduct of a trade, business or profession. Case law holds that it is improper to issue a preliminary injunction freezing a defendant's monetary funds if such an order "effectively imposes a prejudgment attachment upon all of [the defendant's] liquid assets without satisfying the statutory requirements for an attachment." (Doyka v. Superior Court (1991) 233 Cal.App.3d 1134, 1136.)
P&F also cites Code of Civil Procedure section 526, subdivision (a)(3), which states that an injunction may be granted "[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." However, as we have explained, case law establishes that when monetary damages are at issue, an eventual monetary judgment is usually not ineffectual. Thus, this provision is inapplicable here.
Oiye is inapposite because in that case "a preliminary injunction . . . prohibiting defendant and his agents from concealing, encumbering, impairing the value, transferring, or disposing of any of defendant's assets except in the usual course of business or for the necessities of life" was "sought and obtained under the Uniform Fraudulent Transfer Act (UFTA) (Civ. Code, § 3439 et seq.)." (Oiye, supra, 211 Cal.App.4th 1045, 1057) In 2015, the former UFTA was renamed as the Uniform Voidable Transactions Act (UVTA) (Stats. 2015, ch. 44, § 2). Under the UVTA, a "creditor" may bring an action to obtain relief for a fraudulent transfer of an asset by a debtor. (Civ. Code, § 3439.07, subd. (a).) The transfer of an asset is fraudulent under the UVTA if it was made "[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[,]" or "[w]ithout receiving a reasonably equivalent value in exchange for the transfer. . . ." (Civ. Code, § 3439.04, subd. (a)(1), (2); Reddy v. Gonzalez (1992) 8 Cal.App.4th 118, 122-123.) The UVTA "sets forth creditors' remedies, which include avoidance of a transfer, attachment, and the equitable remedies of injunction and receivership as well as " '[a]ny other relief the circumstances may require.' " ([Civ. Code,] § 3439.07, subd. (a)(3)(C).)" (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 830.)
We will refer to the act by its current name, although some of the authorities we cite refer to the former name.
P&F has not asserted a claim under the UVTA; nor did it cite the UVTA as a basis for the preliminary injunction that it sought against Jerne and McCall. As it does not identify the UVTA as a basis for its motion for a preliminary injunction, P&F also does not attempt to establish that it is a creditor with a claim under the UVTA to enjoin Jerne and McCall from fraudulently transferring assets. As the preliminary injunction in Oiye was authorized only because it was sought under the predecessor to the UVTA, we find P&F's reliance on Oiye to be unpersuasive in this case where the UVTA is not at issue.
P&F cites Code of Civil Procedure section 564, subdivision (b)(1) and (9), to support its argument that "special steps may be necessary to protect property while a claim for money is pending." However, those provisions are not applicable here because they deal solely with the appointment of a receiver. P&F is not seeking the appointment of a receiver, but rather an injunction freezing Jerne's and McCall's assets.
Although acknowledging that a preliminary injunction freezing a defendant's assets does not usually issue when money damages are an adequate remedy, P&F argues that it would be good policy to allow a law firm in its position to obtain a preliminary injunction to preserve the possibility of recovering on a lien given by a client. Among other things, P&F argues that a preliminary injunction freezing Jerne's and McCall's assets would "advance the policy of deterring theft and promoting the availability of counsel to persons of limited means." It points out, "there was no way P&F would have advanced this quantum of effort without comprehensive lien protection against any recovery." According to P&F, "[w]ithout zealous protection by the courts for hard-earned compensation obtained for victorious clients, especially in cases like this one . . . the willingness of attorneys to take difficult cases with clients of limited means will be undermined." We understand P&F's policy argument, and we are sympathetic to the need to promote legal representation for persons of limited means. However, P&F's policy argument is misplaced in an appeal in which our role is to determine whether the trial court abused its discretion. Here, as we have explained, the trial court relied on well-established law that a preliminary injunction freezing a defendant's assets is not normally warranted when money damages are an adequate remedy. Policy arguments notwithstanding, the trial court was within its discretion to deny the preliminary injunction.
We therefore conclude that P&F has not established that the trial court abused its discretion in denying the preliminary injunction.
DISPOSITION
The order denying the preliminary injunction against Jerne and McCall is affirmed.
IRION, J. WE CONCUR: HUFFMAN, Acting P. J. HALLER, J.