Case Number: KC070578 Hearing Date: October 17, 2018 Dept: J

Re: Emani Care Homes LLC v. Esperance Mapendo, et al. (KC070578)

ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION

Moving Party: Plaintiff Emani Care Homes LLC

Respondents: No timely opposition filed

POS: Moving OK

Plaintiff alleges that on or about 3/10/17, it entered into a “Stock Purchase Agreement” (“Agreement”) with Defendants Esperance Mapendo (“Mapendo”) and Trinity A.R.F. Corporation (“Trinity”), wherein Mapendo and Trinity purported to sell 100% of Trinity’s stock shares. Plaintiff thereafter gave Mapendo and Trinity a partial payment of $62,000.00 towards the purchase price and received equitable possession of the stock and physical possession of Mapendo’s and Trinity’s business located at 1034 E. Alford Street in Azusa (the “Business”). Plaintiff subsequently discovered that, on or about 2/28/17, Mapendo and Trinity had entered into a separate written purchase agreement to sell the Business to Defendants Herbert Bagoro (“Bagoro”) and Roy Martin (“Martin”). Plaintiff alleges that Mapendo and Trinity have refused its request to rescind the Agreement on the condition that its $62,000.00 be returned. Plaintiff alleges that Mapendo and Trinity have opened up an escrow at WFG National Title Company of California (“WFG”), Escrow #17-125879 in order to consummate and close the Bagoro/Martin agreement.

The complaint, filed 8/31/18, asserts causes of action against Defendants Mapendo, Trinity, Bagoro, Martin, WFG and Does 1-30 for:

1. Fraud in the Inducement

2. Rescission for Fraud

3. Conversion

4. Breach of Written Contract

5. Breach of the Implied Covenant of Good Faith and Fair Dealing

6. Common Count for Monies Had and Received

7. Unjust Enrichment

8. Accounting/Imposition of Constructive Trust and/or Equitable Lien

9. Declaratory Relief and Injunctive Relief

On 9/5/18, a temporary restraining order was granted, per plaintiff’s ex parte application; the “Order Granting Plaintiff’s Ex Parte Application for Temporary Restraining Order Pending Hearing on Motion for Preliminary Injunction” was filed that day.

A Case Management Conference is set for 2/4/19.

Plaintiff Emani Care Homes LLC (“plaintiff”) seeks a preliminary injunction enjoining Defendants Esperance Mapendo (“Mapendo”), Trinity A.R.F. Corporation (“Trinity”), Herbert Bagoro (“Bagoro”), Roy Martin (“Martin”) and WFG National Title Company of California (“WFG”) (collectively, “defendants”), and any person acting in concert therewith, from turning over to Mapendo and Trinity out of the purchase monies paid, or to be paid, by Bagoro and Martin through that certain WFG Escrow #17-125879, or through any alternate escrow, the amount of $62,000.00, together with pre-judgment interest thereon at the rate of 7% per annum commencing from 3/10/17 pending resolution in this court of its claims against Mapendo and Trinity as set forth in plaintiff’s complaint.

SERVICE:

The OSC re: preliminary injunction and temporary restraining order originally came on calendar for hearing 9/26/18; at that time, plaintiff’s counsel requested a continuance so that the papers could be personally served. The matter was continued to 10/17/18, with the temporary restraining order remaining in effect. At that time, the court ordered plaintiff’s counsel to personally serve defendants with a copy of the summons, complaint, application for temporary restraining order, temporary restraining order and order to show cause, with service to be completed and proofs of service to be filed no later than 10/9/18.

On 10/9/18, plaintiff filed proofs of service, which reflected that WFG was personally served on 9/27/18 with, inter alia, the summons, complaint, ex parte application for temporary restraining order pending hearing on motion for preliminary injunction, order granting ex parte application for temporary restraining order pending hearing on motion for preliminary injunction and notice of continuance of hearing on plaintiff’s motion for preliminary injunction with temporary restraining order remaining in effect, that Martin was personally served with same on 9/28/18, that Trinity A.R.F. and Mapendo were each sub-served with same on 10/1/18 and that Bagoro was personally served with same on 10/2/18.

The court determines that service was properly effectuated.

MERITS:

The purpose of a preliminary injunction is to preserve the status quo pending a decision on the merits. MaJor v. Miraverde Homeowners Ass’n. (1992) 7 Cal. App. 4th 618, 623. “A trial court may grant a preliminary injunction upon a showing that (1) the party seeking the injunction is likely to prevail on the merits at trial, and (2) the ‘interim harm’ to that party if an injunction is denied is greater than ‘the [interim] harm the [opposing party] is likely to suffer is the…injunction is issued.’ (SB Liberty, LLC v. Isla Verde Assn., Inc. (2013) 217 Cal.App.4th 272, 280); see Code Civ. Proc., § 527, subd. (a)). These two showings operate on a sliding scale: ‘[T]he more likely it is that [the party seeking the injunction] will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue.’ (King v. Meese (1987) 43 Cal.3d 1217, 1227.)” Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178, 1183.

LIKELIHOOD OF SUCCESS ON THE MERITS:

Plaintiff has asserted causes of action for Fraud in the Inducement, Rescission for Fraud, Conversion, Breach of Written Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Common Count for Monies Had and Received, Unjust Enrichment, Accounting/ Imposition of Constructive Trust and/or Equitable Lien and Declaratory Relief and Injunctive Relief.

In or about March 2017, plaintiff engaged in negotiations with Mapendo, who represented herself as the purported owner and principal of Trinity, for Mapendo and Trinity to sell, and plaintiff to purchase, Trinity’s stock together with Mapendo’s and Trinity’s adult residential facility business for disabled persons. (Coats Decl., ¶ 4). On or about 3/10/17, plaintiff entered into a “Stock Purchase Agreement” (“Agreement”) with Mapendo and Trinity, whereby Mapendo and Trinity purported to sell to plaintiff “100% of the shares of stock” of Trinity. (Id., ¶ 5, Exh. A). The Agreement contained the following pertinent warranties:

“13. Sellers warrant it owns, beneficially and of record, free and clear of liens, charges, claims, equities, restrictions, or encumbrances, 100% of the shares of capital stock of the Company and has the full right, power, and authority to sell, transfer and deliver to Buyers in accordance with this Agreement.

14. Company has an authorized capital of 100% shares of common stock, of Trinity 2 shares are validly issued and outstanding, fully paid and nonassessable, all of which are currently held by Sellers…

16. The Company is not party to any actions, suits, claims, litigation affecting or against the Company.” (Id.).

In conjunction with the Agreement, plaintiff paid to Mapendo and Trinity the sum of $62,000.00 as partial payment towards the purchase price under the Agreement, which included $5,000.00 that Mapendo unilaterally withdrew from a joint account established to facilitate the transition of the business. (Id., ¶ 6). Plaintiff, in turn, received equitable possession of the stock and took physical possession of Mapendo’s and Trinity’s business located at 1034 E. Alford Street in Azusa (the “Business”). (Id.).

In or about June 2017, plaintiff discovered that, on or about 2/28/17, less than 2 weeks before the Agreement was made, Mapendo and Trinity had entered into a separate written purchase agreement to sell the same Business to Bagoro and Martin. (Id., ¶ 7). In this regard, plaintiff was provided by Bagoro and Martin with a copy of a letter from their attorney to Mapendo and Trinity dated 5/4/17, which confirmed, inter alia, that Mapendo and Trinity had previously entered into the separate Bagoro/Martin agreement to sell the Business to Bagoro and Martin on 2/28/17 and demanded specific performance from Mapendo and Trinity. (Id., ¶ 8, Exh. B).

On or about 6/21/17, plaintiff’s counsel made written demand on Mapendo and Trinity to rescind the Agreement in full, with plaintiff restoring the Business and all other consideration of any value furnished, or to be furnished, by Mapendo and Trinity in conjunction with the Agreement, and on the condition that Mapendo and Trinity restore to plaintiff all of its consideration provided, or to be provided, under the Agreement, including return of the subject purchase monies of $62,000.00. (Id., ¶ 12; Shields Decl., ¶ 3). Mapendo and Trinity refused this demand. (Id.). Plaintiff was subsequently informed that Mapendo and Trinity have opened up an escrow at WFG, Escrow #17-125879 (“Subject Escrow”), in order to consummate and close the Bagoro/Martin agreement. (Coats Decl., ¶ 13; Shield Decl., ¶ 4). Plaintiff’s counsel Jeffrey Shields (“Shields”), called Bagoro’s and Martin’s counsel, Caras, who confirmed to him that the subject escrow had been opened and that Bagoro and Martin intended to sue the Subject Escrow to consummate their purchase of the Business pursuant to the Bagoro/Martin Agreement. (Shields Decl., ¶ 4). Caras also confirmed that the amount of purchase monies which Bagoro and Martin would use to purchase the Business exceeded the amount of the $62,000.00. (Id.).

On 8/21/18, Shields sent written demand letters to Caras, to Mapendo’s and Trinity’s previously designated attorney (i.e., Michael Hailu) and to WFG. (Id., ¶ 5). Shields demanded that defendants agree to withhold from distribution to Mapendo and Trinity in the Subject Escrow out of the purchase monies paid by Bagoro and Martin the $62,000.00, together with pre-judgment interest at the rate of 7%/per annum commencing form 3/10/17 pending resolution in court of plaintiff’s claims against Mapendo and Trinity. (Id., Exs. C-E). On 8/21/18, Caras emailed Shields to let him know that his clients had not given him any direction or authority. (Id., ¶ 6). Shields has not received any further communication from Caras and/or Bagoro and Martin. On 8/22/18, Joseph McCabe (“McCabe”) called Shields and identified himself as WFG’s general counsel. (Id., ¶ 7). McCabe was in receipt of plaintiff’s demand letter. And confirmed the existence of the Subject Escrow, but stated that WFG believes it could not withhold the monies absent a court order or joint instruction of the parties to the Subject Escrow. (Id.). On 8/21/18, Mapendo’s and Trinity’s former attorney advised that he was no longer representing them and that Shields should communicate with them directly. (Id., ¶ 8). On 8/23/18, Mapendo called Shields’ office, indicating that she had received his demand letter and was calling in response to same. (Id.). Shields tried calling her back but has had no communication with her. (Id.).

Plaintiff, then, has shown a likelihood of prevailing on the merits at the time of trial.

INTERIM HARM:

Plaintiff has also shown that the interim harm that it will suffer is greater than the interim harm defendants are likely to suffer if the injunction is issued. Since the Bagoro/Martin agreement is earlier in time, plaintiff believes that, upon close of the Subject Escrow, it will necessarily have to turn over its equitable possession of the Trinity stock and physical possession of the business.

The request for a preliminary injunction is therefore granted.

BOND:

“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…” CCP § 529(a).

Counsel is instructed to come prepared to discuss the amount of the undertaking at the time of the hearing.