Case Number: EC062927    Hearing Date: September 12, 2014    Dept: B

. EC062927
ZUBAIR KAZI vs WASHAKIE RENEWABLE ENERGY, LLC
OSC Re: Preliminary Injunction

This case arises from the Plaintiffs’ claim that there is a dispute whether they have breached a loan agreement. The Plaintiffs claim that they have not breached the agreement and that the Defendants are improperly attempting to recover the debt by foreclosing on their real property. The Plaintiffs seek declaratory relief regarding the controversy regarding their alleged breach.
On August 19, 2014, the Plaintiff appeared with an ex parte application for a temporary restraining order and to set an OSC regarding a preliminary injunction to bar the Defendants from selling the Plaintiffs’ real property. The Court issued the requested temporary restraining order and set the OSC for September 12, 2014.

CCP section 527(a) requires a motion for a preliminary injunction to establish with facts in affidavits or in a verified complaint that there are grounds to issue a preliminary injunction. Declarations may be used under CCP section 2015.5 because they are equivalent to an affidavit.
Under CCP section 526(a), a preliminary injunction may be issued in the following cases:

1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually.
2) When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.
3) When 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.
4) When pecuniary compensation would not afford adequate relief.
5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief.
6) Where the restraint is necessary to prevent a multiplicity of judicial proceedings.
7) Where the obligation arises from a trust.

The Plaintiffs have the burden of establishing grounds exist for the injunction with evidence offered under oath. Ancora-Citronelle Corp. v. Green (1974) 41 Cal. App. 3d 146, 148. The granting or denial of a preliminary injunction rests in the sound discretion of the Court and is based upon a consideration of all the particular circumstances of each individual case. Froomer v. Drollinger (1960) 183 Cal. App. 2d 787, 788-789. If granted, the preliminary injunction does nothing more than to preserve the status quo until the merits of plaintiffs’ claim can be adjudicated. Id.
The Plaintiffs’ motion concerns the sale of their real property. Injunctive relief may be available to prevent an improper private sale of encumbered property on such grounds as that there is no actual default justifying the sale, Bisno v. Sax (1959) 175 Cal App 2d 714, that the secured transaction is itself invalid, Daniels v. Williams (1954) 125 Cal App 2d 310, or that inadequate notice of default was given, Lupertino v. Carbahal (1973) 35 Cal App 3d 742. If this is established, a preliminary injunction is appropriate to maintain the status quo pending the trial on the merits because the loss of residential real property is assumed to be an irreparable harm and the loss cannot be compensated in monetary damages. Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454.

The Plaintiffs argue that there is no actual default justifying the sale of their property. The Plaintiff, Zubair Kazi, provides the following facts in his declaration:

1) Jacob Kingston, the CEO of Defendant, Washakie Renewable Energy, agreed to loan $11,226,211.21 to Zubair Kazi;
2) Zubair Kazi agreed to repay the loan when he obtained repayment from a creditor;
3) the date by which the loan would be repaid would be the date on which Mr. Zubair was repaid by the creditor with funds sufficient to repay the loan;
4) the loan was interest free;
5) the agreement was oral and it was the only agreement regarding repayment of the loan, i.e., there is no promissory note or other written agreement regarding the repayment of the loan;
6) the loan was secured by a deed of trust that encumbers the Plaintiffs’ property; and
7) the creditor has not repaid Zubair Kazi.

These facts indicate that the parties entered into an oral agreement under which the Defendants made an interest free loan of $11,226,211.21 to the Plaintiff and the Plaintiff agreed to repay the loan when he received money from a creditor. The loan was secured by a deed of trust.
Further, these facts indicate that the condition of repayment has not occurred, i.e., that the Plaintiff has not received payment from the creditor. Under the Plaintiff’s facts regarding the terms of the oral agreement, the Plaintiff is not in breach. Accordingly, the Plaintiff’s facts demonstrate that there is no actual default justifying the sale of the Plaintiff’s property under the deeds of trust.

The Defendants submitted declarations from Jacob Kingston, who is the CEO of the Defendant, Washakie Renewable Energy LLC, and from Levon Termendzhyan, who is the principle of the Defendant, Lions Aviation LLC. Mr. Kingston and Mr. Termendzhyan offers facts to demonstrate that the oral agreement included a term that repayment would be no later than October 31, 2013 and that the Plaintiffs have made no payments towards the loan.
The Defendants’ facts indicate that the parties disagree about the terms of an oral loan agreement, i.e., the time for repayment. Since the agreement is oral, this dispute must be resolved by the trier-of-fact, notwithstanding that the terms of the oral agreement set out by the Plaintiff may lack practical credibility.
This establishes that there are grounds to issue a preliminary injunction to bar the Defendants from selling the real property to maintain the status quo until the merits of the Plaintiffs’ claims can be adjudicated.

Therefore, the Court grants the Plaintiffs’ application for a preliminary injunction because the Plaintiffs have offered facts to demonstrate that they can establish their claim that the Court should issue declaratory relief that they are not in breach of the oral loan agreement. The preliminary injunction will preserve the status quo until the merits of the Plaintiffs’ claim can be adjudicated.

Finally, in order to obtain the preliminary injunction, CCP section 529 requires the Plaintiffs to provide an undertaking to the effect that the Plaintiffs will pay to the Defendant any damages, not exceeding an amount to be specified, the Defendant may sustain by reason of the injunction, if the Court finally decides that the Plaintiffs were not entitled to the injunction. Here, the Defendants’ damages would be the loss of the use of the money they would have obtained from the sale of the property.
The loan amount is $11,226,211.21. It is undisputed that the Plaintiffs have not repaid any amount. The Defendants’ damages would be the loss of the use of this amount because they would have obtained this amount in the sale of the Plaintiffs’ real property. A method for calculating the loss of use of money is the interest rate that the Defendants could charge if they loaned out the money during the pendency of this case.
This case should proceed to trial within one year. If the Court decides that the Plaintiffs were not entitled to the injunction, then the Defendants’ damages would be the loss of the use of $11,226,211.21 for one year. Under CCP section 685.010, Courts use an interest rate at 10% per annum on unsatisfied amounts of monetary judgments. Since the Legislature has identified 10% per annum as reasonable rate of interest, the Court uses this rate.
The interest that would accrue on $11,226,211.21 at 10% interest for one year is $1,226,211.21. Since this is the interest that the Defendants would have obtained on the amount claimed to be due and owing from the Plaintiffs under the Legislature’s 10% per annum rate, the amount of $1,226,211.21 is the damages that the Defendants will suffer from the loss of the use of their money, if the Court finds that the Plaintiffs were not entitled to their injunction.
Therefore, the Court orders the Plaintiffs to file an undertaking for $1,226,211.21 to obtain their requested preliminary injunction to bar the Defendants from selling the Plaintiffs’ real property to recover the loan under the oral agreement.
The undertaken is to be filed with the Court no later than 30 days from the date of the hearing.