Case Number: EC062630    Hearing Date: August 22, 2014    Dept: NCD

TENTATIVE RULING (8-22-14)
#16
EC 062630
MOKHTAR v. HAKEEM

Order to Show Cause Re Preliminary Injunction

TENTATIVE:
Application for preliminary injunction is DENIED. There is no proof of service showing that defendants have been served with the summons and complaint, or have notice of this hearing. See CCP §527(a) (“No preliminary injunction shall be granted without notice to the opposing party.”).

Or

If it can be established that defendants were served, unopposed Application for preliminary injunction is GRANTED. Plaintiff has presented facts which establish a probability of prevailing on a claim of conversion, and facts which suggest that defendant Hakeem is doing or about to do acts in violation of the rights of plaintiff respecting the subject of the action.

The court further finds that the harm to plaintiff if the injunction is not granted (potential loss of evidence, and risk to his business license, insurance and personal liability for conduct of the business) is greater than the harm to defendants if it is granted (loss of ability to control or manage the business in which he has a purely financial interest).

The Court will retain during the pendency of the preliminary injunction the bond filed with the court on August 15, 2014.

BACKGROUND:

Moving Party: Plaintiff Mokhatar Moheb Mokhtar
Responding Party: Defendants Hakeem Fawzy Hakeem and Basima Darwish Shilleh (NO Opposition).

RELIEF REQUESTED:
Order restraining defendant Hakeem from engaging in financial transactions in the name of plaintiff or Bambino Insurance Agency, contacting any person or company who does business with plaintiff or Bambino Insurance Agency, entering into the offices of Bambino Insurance, including its satellite offices, or interfering with mail directed to the Temple City office.

SUMMARY OF FACTS:
Plaintiff Mokhtar Mohel Mokhtar alleges that he is a licensed insurance broker, and that in 1998 he began doing business under the fictitious name Bambino Insurance Agency (“BIA”). Shortly thereafter, plaintiff entered into an agreement with defendant Hakeem Fawzy Hakeem, who is not a licensed real estate broker or agent, whereby defendant invested $50,000 in plaintiff’s business in exchange for Mokhtar’s agreement to pay defendant 50% of BIA’s net profits each month.

Plaintiff alleges that he has recently discovered a checking account established in 2008 in the name of defendant Basima Shilleh, defendant Hakeem’s wife, into which hundreds of commission checks sent from various insurance companies made payable to BIA or Mokhtar have been deposited without the knowledge or authorization of plaintiff. Plaintiff believes that defendant secretly took checks from the mail intended for Mokhtar and BIA and deposited them into the Basima account. It is also alleged that defendant has discovered four other accounts with defendant and Mokhtar as authorized signers, about which Mokhtar knew nothing, so that the Mokhtar signatures are forgeries, and that payments have been redirected from insurance companies which could only have occurred if defendant called the companies himself and falsely claimed to be plaintiff, or falsely represented that his conduct was authorized by plaintiff.

The complaint alleges causes of action for breach of contract, conversion, misappropriation of funds, conspiracy to misappropriate funds, breach of fiduciary duty, intentional interference with contract, fraud (concealment and intentional misrepresentation) and negligence.

On August 8, 2014, plaintiff brought an ex parte application for a TRO and OSC re preliminary injunction, which was heard by Judge Argento. The application was granted, the TRO issued and an OSC set.

The court order provides that the OSC and supporting papers must be served on Defendant no later than 8/15/14, with proof of service filed no later than 8/22/14, the date of the hearing, with opposition to be filed one court day before the hearing. The order provides: Bond $100,000 required.” Bond was filed on August 15, 2014.

ANALYSIS:
Procedural
It appears from the file that defendants were never served in this matter, so the question remains if this court has personal jurisdiction over defendants to issue an injunction.

Under CCP section 527(a):
“ A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor. No preliminary injunction shall be granted without notice to the opposing party.”

Here, the court order granting the TRO and setting this hearing requires proof of service to be filed by the date of the hearing, with opposition due one day before the hearing. It is accordingly possible that proof of service and opposition will be filed at the last minute. This shall be confirmed at the hearing.

If no proof of service or opposition is filed, the court may not proceed as it has no personal jurisdiction, and under statute a preliminary injunction cannot be granted without notice to the opposing party.
Substantive
Here, the moving papers argue that plaintiff must preserve the status quo so that he may bring his business and finances back into accountability, preserve evidence necessary to rectify the damage caused by defendant’s fraudulent activities, prevent intimidation of agents and employees, and prevent removal or destruction of evidence critical to plaintiff’s case.

Plaintiff to date has been unable to obtain declarations from witnesses at either Bank of America or Wells Fargo authenticating the documents they provided plaintiff which show that checks from insurance companies to BIA or Mokhtar have been deposited into accounts of which plaintiff was previously unaware. Although this evidence appears quite convincing, it is not authenticated. [See Mokhtar Decl., paras. 21-23, Exs. F-L; para. 29, Exs. M-P]. The court may certainly consider the testimony that plaintiff has discovered accounts he has reason to believe were opened by defendant without plaintiff’s permission (Mokhtar Decl., paras. 16, 17, 21) testimony from employees that defendant has been very insistent about opening all mail (Tartoussia Decl., paras. 5, 6; Stoll Decl., paras. 4-7), and testimony from the BIA accountant and defendant concerning their investigation of irregularities. Specifically, in February of 2014, the accountant, Ossama Tartoussia, noticed an envelope which had arrived in the mail at the Temple City office, before Hakeem had arrived in the office, opened it at plaintiff’s request, saw a check from National General Insurance, which he made a note of, put the check back in the envelope and returned it to the stack of mail, including the envelope containing the check. When defendant arrived, he took the stack of mail, and never returned the check to the accountant, as he was required to do to have the check input into the accounting system. [Tartoussia Decl., para. 9]. Plaintiff then testifies that he contacted National General Insurance about the check, and was informed it had been cashed at Bank of America, but it did not show up in the bank records, and plaintiff has learned it was deposited in the account of which he had no knowledge, and into which he did not authorize deposits. [Mokhtar Decl., paras. 20-21].

This evidence appears sufficient to state a claim for conversion, which requires establishment of the following elements: Ownership, or right to possession of property; wrongful disposition of property right; and damages. Imperial Valley Land Co. v. Globe Grain & Milling Co. (1921) 187 Cal.352, 354. See also 5 Witkin, Cal.Proc.3d section 654. There is therefore a likelihood of plaintiff prevailing on a claim of conversion in at least one instance.

This appears to be a situation where any harm to plaintiff from the suspected embezzlement can be compensated in pecuniary damages. However, the conduct at issue suggests that if defendant is not kept away from the premises, he may be in a position to engage in acts which could prevent plaintiff from documenting all potential losses, as if evidence on the premises is destroyed, plaintiff may not have other means of proving the extent of the problem. In addition, if any conduct with respect to the misapplication of funds continues, or employees feel coerced or intimidated, plaintiff argues that his business license, insurance coverages, and personal affairs otherwise will be placed at risk, if only because defendant is not a licensed broker or agent. [See Mokhtar Decl., paras. 3, 4, 39]. Defendant, on the other hand, is a financial partner so that any harm to him could be compensated in monetary compensation if it should turn out that there are profits due to him from the operation of the business. In sum, an injunction shall issue here.

Under CCP § 529, if the court grants the injunction it “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 the 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.”

The bond requirement is mandatory. Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 10.

The “damages” to be covered by the statute include both lost profits and the expenses incurred in having the injunction dissolved; “It is now 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. Russell v. United Pacific Ins. Co. (1963) 214 Cal.App.2d 78, 88-89.

In determining the appropriate amount of an undertaking:
“the trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party, and to set the undertaking at that sum.”
Abba, at 14.

Here, Judge Argento previously required a bond of $100,000. There is testimony of plaintiff that as of the date of the declaration, “the total value of wrongfully diverted insurance commission checks into the Basima Account alone totals nearly $100,000.” [Mokhtar Decl., para. 26]. The court is not being asked to freeze or prohibit access to accounts which belong to defendant. The damages accordingly would not likely be the loss of use of those funds alleged to have been embezzled, but the loss of use of any monies which defendant would not have access to going forward during the course of this litigation by otherwise being a part of management and permitted on the premises. These damages appear fairly minimal, and for the most part can be compensated for by a judgment with appropriate interest. However, the expenses to defend against these very serious accusations, if the injunction turns out to be wrongful, may turn out to be substantial. The court may properly require a bond in the $100,000 sum. Bond has been filed in this amount.