Case Number: BC538488    Hearing Date: July 09, 2014    Dept: 34

Moving Party: Plaintiff Tammy Sedin (“plaintiff”)

Resp. Party: Defendant Mindy S. Bish (“defendant” or “Bish”)

Plaintiff’s request to dissolve the preliminary injunction is GRANTED.

Plaintiff’s request to exonerate or reduce the undertaking is DENIED.

Plaintiff’s Objections to Declaration of Mindy Bish:

Objection
1 OVERRULED
2 OVERRULED
3 SUSTAINED
4 OVERRULED
5 OVERRULED

Plaintiff’s Objections to Declaration of William Litvak:

Objection
1 OVERRULED

BACKGROUND:

Plaintiff commenced this action on 3/6/14 against defendants for: (1) accounting; (2) breach of fiduciary duty; (3) aiding and abetting breach of fiduciary duty; (4) fraud; (5) aiding and abetting fraud; (6) breach of contract; (7) breach of contract; (8) declaratory relief; (9) declaratory relief; (10) judicial dissociation; (11) conversion; (12) conversion; and (13) declaratory relief. Plaintiff and Bish were partners in two partnerships – a law partnership and real estate investment partnership. Plaintiff alleges that Bish abused her position of trust and converted partnership income and assets for her own purposes and usurped partnership business for her own profits. As a result, the partnerships are subject to wind up and dissolution.

On 3/25/14, the Court, the Hon. Luis A. Lavin presiding, granted plaintiff’s application for a preliminary injunction enjoining Bish from the transfer or destruction of assets from the partnership, the destruction of documents or writings related to the partnerships, and the withdrawal of any funds held by the partnership, unless agreed to in writing by the plaintiff. The Court ordered plaintiff to post an undertaking in the amount of $100,000.00.

On 4/9/14, plaintiff posted the $100,000.00 undertaking, which was obligated by American Contractors Indemnity Company as surety.

Defendant Bish filed a cross-complaint on 5/5/14 against plaintiff for: (1) accounting; (2) declaratory relief; (3) money had and received; (4) dissolution of partnership; (5) extortion; and (6) IIED.

ANALYSIS:

Plaintiff moves to dissolve the 3/25/14 preliminary injunction and to exonerate the supporting $100,000.00 undertaking posted on 4/9/14.

Plaintiff’s Request to Dissolve the Preliminary Injunction:

“In any action, the court may on notice modify or dissolve an injunction or temporary restraining order upon a showing that there has been a material change in the facts upon which the injunction or temporary restraining order was granted, that the law upon which the injunction or temporary restraining order was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction or temporary restraining order.” (Code Civ. Proc., § 533.)

Plaintiff argues that there has been a material change in the circumstances which makes the continued existence of the injunction unnecessary. Plaintiff declares that, following the issuance of the injunction, several partnership disputes were resolved. (Sedin Decl., ¶ 12.) Plaintiff and defendant agreed on a procedure to distribute a portion of the law partnership fees derived from a major client settlement. (Ibid.) The law partnership clients were notified of the dissolution of the partnership and provided an opportunity to select counsel going forward. (Ibid.) Plaintiff’s counsel attempted to obtain a stipulation to dissolve the injunction and exonerate the undertaking, but defense counsel refused. (See Thompson Decl., ¶¶ 5-7.)

Plaintiff’s evidence is sufficient to support her request to dissolve the injunction. In the opposition, defendant asserts that she does not oppose the dissolution of the injunction. Accordingly, plaintiff’s request to dissolve the preliminary injunction issued on 3/25/14 is GRANTED.

Plaintiff’s Request to Exonerate or Reduce the Undertaking:

The only dispute in this motion is whether the undertaking should be exonerated.

When granting the preliminary injunction, the Court stated:

“‘Thus, the trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party, to set the undertaking at that sum.’ [Citation.] It is well settled that reasonable counsel fees and expenses incurred in successfully procuring a final decision dissolving the injunction are recoverable as “damages” within the meaning of the language of the undertaking, to the extent that those fees are for services that relate to such dissolution. [Citation.]”

“Plaintiff shall post an undertaking in the amount of $100,000 to cover Bish’s reasonable attorneys’ fees and costs to dissolve the injunction.” (Order, 3/25/14, p. 7.)

(Thus, the Court notes that while Judge Lavin stated that the purpose of the undertaking was to “cover Bish’s reasonable attorneys’ fees and costs to dissolve the injunction,” he states that the purpose of the undertaking is much larger, i.e., to cover “the harmful effect which the injunction is likely to have on the restrained party.”)

“On granting an injunction, the court or judge must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.” (Code Civ. Proc., § 529(a).) “An original bond or undertaking may be withdrawn from the files and delivered to the party by whom it was filed on order of the court only if all parties interested in the obligation so stipulate, or upon a showing that the purpose for which it was filed has been abandoned without any liability having been incurred.” (Cal. Rules of Court, rule 3.1130(c).) “A bond given in an action or proceeding may be withdrawn from the file and returned to the principal on order of the court only if one of the following conditions is satisfied: [¶] (a) The beneficiary so stipulates. [¶] (b) The bond is no longer in force and effect and the time during which the liability on the bond may be enforced has expired.” (Code Civ. Proc., § 995.360.)

A bond remains in force and effect until the earliest of the following events:
(a) The sureties withdraw from or cancel the bond or a new bond is given in place of the original bond.
(b) The purpose for which the bond was given is satisfied or the purpose is abandoned without any liability having been incurred.
(c) A judgment of liability on the bond that exhausts the amount of the bond is satisfied.
(d) The term of the bond expires. Unless the statute providing for the bond prescribes a fixed term, the bond is continuous.

(Code Civ. Proc., § 995.430.)

As an initial matter, defendant is incorrect in her assertion that plaintiff now admits that the injunction was unnecessary. Plaintiff makes no such admission in her moving papers. Instead, plaintiff states that the facts and circumstances changed after the injunction was issued. (See Sedin Decl., ¶¶ 12-13.) The fact that the parties were able to resolve disputes after the injunction was issued does not mean that plaintiff had no basis for seeking the injunction at the time it was issued.

Defendant argues that the Court does not have jurisdiction to exonerate the undertaking until after a final decision on the merits in this action. The language of CCP section 529 provides that a court must require an undertaking to pay damages the enjoined party may sustain “if the court finally decides that the applicant was not entitled to an injunction.” This language only goes to the final decision regarding injunctive relief.

In Satinover v. Dean (1988) 202 Cal.App.3d 1298, the plaintiff (Satinover) filed a complaint for damages and injunctive relief against the defendants. (Id. at pp. 1299-1300.) Satinover obtained a temporary restraining order, a condition of which was Satinover’s posting of a $22,000.00 deposit. (Id. at p. 1300.) The trial court thereafter denied Satinover’s application for a preliminary injunction and, several months later, ordered the clerk to pay the defendants $14,718.85 from the deposit for the defendants’ attorney’s fees incurred in opposing the application for the TRO and preliminary injunction and damages incurred as a result of the TRO. (Ibid.) The trial court found that the dissolution of the TRO and denial of the preliminary injunction constituted a final determination. (Ibid.) The appellate court agreed with Satinover’s contention that the motion to enforce liability on the bond was premature. (Ibid.) The court looked to CCP section 996.440, which provides that a motion as to the liability on a bond is not to be made until after entry of the final judgment in the action or proceeding on which the bond is given and the time for appeal has expired. (Id. at pp. 1300-1301.) “The dissolution of the temporary restraining order or the refusal to grant a preliminary injunction is not enough. The main action has to be terminated before an action to recover an undertaking may be brought.” (Id. at p. 1301.)

In Nuclear Electronic Laboratories, Inc. v. William C. Cornell Co. (1965) 239 Cal.App.2d 8, the plaintiff obtained a TRO and OSC re injunction, with a bond of $10,000.00. (Id. at p. 9.) The defendants thereafter applied for a preliminary injunction and moved to dissolve the TRO. (Ibid.) The parties’ applications for preliminary injunctions were both denied by the trial court, which also determined that the TRO should be dissolved, that there was probable cause for the TRO, and that the bond should be exonerated. (Id. at pp. 9-10.) The defendants appealed this decision, arguing that a trial court could not determine by way of motion prior to the termination of the action that the TRO was properly issued and may not exonerate the bond on such TRO. (Id. at p. 10.)

It is settled that recovery upon a bond supporting a temporary injunction or restraining order must be had by way of independent action brought after the termination of the action in which the injunction was issued. [Citations.] In order to recover upon the bond, the plaintiff must show that he sustained damages as the result of a temporary injunction or restraining order issued in a prior action and that such action resulted in a final judgment determining that the party who obtained the injunctive relief was not entitled thereto. [Citations.] Where a preliminary injunction supported by a bond has been issued and dissolved but the action in which it was granted is still pending for trial, an independent action brought upon the bond is premature and the defendant in such action is entitled to move for a nonsuit. [Citation.] Even though the trial court which issued a preliminary injunction or temporary restraining order supported by a bond has subsequently rendered judgment in favor of the party enjoined, such party cannot bring suit upon the bond while an appeal from the judgment is pending. [Citation.]

(Id. at pp. 10-11.) The appellate court determined that the trial court’s ruling could not be deemed a final decision abolishing a cause of action on the bond. (Id. at p. 12.) “By exonerating the bond prior to any such final adjudication, the trial court improperly sought to relieve the obligor of his contractual duties and destroy defendants’ cause of action on the bond before it ever arose.” (Id. at p. 13.)

In the reply, plaintiff argues that it is not necessary to wait until a final decision in this action before exonerating the undertaking. The only case cited by plaintiff is Broccoli v. Golden Rule Church Assoc. (1977) 73 Cal.App.3d 342. However, this case is not citable – a hearing on this case was granted a few months after the appellate court’s decision was published, and the appeal was dismissed a year later. An opinion is not citable after review is granted. (See Cal. Rules of Court, rules 8.532, 8.1105, 8.1115; In re Jesse C. (1989) 215 Cal.App.3d 1384, 1387, fn.2; Barber v. Sup. Ct. (1991) 234 Cal.App.3d 1076, 1082.)

Even if the Court could make a determination at this time, it would deny plaintiff’s request to exonerate the undertaking because defendant has shown that she did incur some damages as a result of the injunction. (See Code Civ. Proc., §§ 995.360, 995.430; Cal. Rules of Court, rule 3.1130(c) [an undertaking may be withdrawn where no liability has been incurred].) Plaintiff herself quotes this language from CRC Rule 3.1130(c): “an original bond or undertaking may be withdrawn from the files and delivered to the party by whom it was filed on order of the court . . . upon a showing that the purpose for which it was filed has been abandoned without any liability having been incurred.” (See Reply, p. 3:14-16.) The evidence before the Court is that some liability has been incurred.

A party asserting a claim against a surety on an injunction bond “is not limited to damages accruing during the time the injunction was operative but is entitled to damages flowing directly from the wrongful injunction for a period of time beyond the date of its dissolution.” (Russell v. United Pac. Ins. Co. (1963) 214 Cal.App.2d 78, 88. Accord Allen v. Pitchess (1973) 36 Cal.App.3d 321, 328. See also Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14 [“The sole limit imposed by the statute is that the harm must have been proximately caused by the wrongfully issued injunction.”].)

Defendant presents evidence that she incurred costs in opposing plaintiff’s 4/4/14 ex parte application to hold defendant in contempt of the injunction, which the Court denied. (See Litvak Decl., ¶¶ 7, 9. Bish Decl., ¶ 3.) Defendant declares that counsel in another action, in open court, called defendant’s character and credibility into question while holding the injunction. (Id., ¶ 5.) Defendant declares that she has suffered great harm to her professional reputation as a result of the injunction. (Ibid.) Defendant’s evidence is sufficient to show that she could have a claim against the surety for harm proximately caused by the injunction.

Accordingly, plaintiff’s request to exonerate or reduce the undertaking is DENIED.