Baypoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust

• Decision Date: 28 May 1985
• Citation: 168 Cal.App.3d 818,214 Cal.Rptr. 531
• Court: California Court of Appeals Court of Appeals
• Parties: BAYPOINT MORTGAGE, a California corporation, Plaintiff and Respondent, v. CREST PREMIUM REAL ESTATE INVESTMENTS RETIREMENT TRUST, Defendant and Appellant. B006342.

Page 531

214 Cal.Rptr. 531

168 Cal.App.3d 818

BAYPOINT MORTGAGE, a California corporation, Plaintiff and Respondent, v. CREST PREMIUM REAL ESTATE INVESTMENTS RETIREMENT TRUST, Defendant and Appellant.

B006342.

Court of Appeal, Second District, Division 7, California.

May 28, 1985.

As Modified on Denial of Rehearing June 27, 1985.

Review Denied Aug. 14, 1985.

Iungerich & Huang and Russell Iungerich and Jack Oswald, Los Angeles, for defendant and appellant.

Cedric Troncoso, Pasadena, for plaintiff and respondent.

JOHNSON, Associate Justice.

In this case the trial court granted a preliminary injunction against the foreclosure of a number of trust deeds. The principal legal issue is whether a beneficiary of a trust deed can foreclose for tardy payment of an installment during the period before late payment charges accrue. We conclude the trial court did not abuse its discretion in finding the balance of hardships burdened the party against whom foreclosure was sought. We likewise conclude the court did not abuse its discretion

in finding this same party has a reasonable probability of prevailing on the merits in its attempt to stop the foreclosure. Accordingly, we affirm the order granting the preliminary injunction.

FACTS AND PROCEEDINGS BELOW

Baypoint Mortgage Corporation (Baypoint) is in the business of buying trust deeds. Crest Premium Real Estate Investments Retirement Trust (Crest Premium) is the ERISA Pension Plan of Western States Title Company. Crest Premium is the beneficiary on 23 All-Inclusive Deeds of Trust. On or about November 1982 Baypoint acquired junior deeds of trust which were part of these 23 All-Inclusive Deeds of Trust. Baypoint thereby assumed the obligation of the trustor on the deeds of trust and obligor on the 23 notes secured by these deeds.

The underlying promissory notes provide that principal and interest is " 'payable ' on the first day of each calendar month.... Payor herein agrees to pay to the beneficiary herein a late payment penalty of 10% of the monthly payment on any payment not received by beneficiary within ten (10) days from the due date. At the option of the payor herein said late charge will be paid in cash or added to the principal balance of the note and thereafter bear like interest as the principal." (Italics added.)

Meantime each of the deeds of trust states:

"F. In the event Trustor [Baypoint] fails to meet the payments required under the Promissory Note secured hereby, then such failure shall constitute a default under this All-Inclusive Deed of Trust entitling Beneficiary to all of the rights and remedies hereunder."

The deeds of trust provide:

"(7) That by accepting payment of any sums secured hereby after its due date, Beneficiary does not waive his right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay." (Italics added.)

Crest Premium alleges that from November 1982 through December 1983 Baypoint was habitually tardy in making its monthly payments on these trust deeds. The payments were never received by Crest Premium on the first day of the month. On the other hand, they were never received later than the thirteenth day of the month. According to Crest Premium's own allegations the monthly installment payments ranged from five to twelve days late with five of those payments received ten or more days after the first of the month and nine installments received nine or fewer days after the first of the month. These payments were mailed to a post office box since Crest Premium did not have an office address. Thus, although Crest Premium claims not to have received payment until five to twelve days after the first of the month, the installments actually may have been mailed several days earlier in each instance. In any event, Crest Premium periodically sent notices to Baypoint asserting it had incurred late charges and enclosing a statement of the total amount of late charges which had accrued.

Then on November 17, 1983, Crest Premium sent a certified letter to Baypoint. This letter warned Baypoint Crest Premium expected Baypoint to send its monthly installments so that they were received by Crest Premium no later than 5 p.m. on the first day of each month. In the event payments were not received by that date and time, Crest Premium indicated it would commence foreclosure proceedings against the trust deeds. Shortly thereafter, a Baypoint official telephoned Crest Premium and advised it could not pay the loan installments on the first of the month because it first had to collect from its own debtors on junior loans.

December 1, 1983, came and went without the installment payments being received. True to its warning, on December 5, 1983, Crest Premium recorded notices of default on all 23 deeds of trust. On December 6, 1983, Baypoint mailed the December installment payments. (The envelope containing these payments was postmarked December 7, 1983.) Crest Premium On January 25, 1984, Baypoint filed a complaint seeking various forms of relief connected with the Crest Premium's attempted foreclosure action. The complaint seeks declaratory relief, a permanent injunction, an accounting, damages for bad faith conspiracy, damages for bad faith foreclosure and unfair competition/business practices. Baypoint applied for a temporary restraining order which the court denied. However, the court did not hold a hearing on an application for preliminary injunction on February 28, 1984. The court granted this preliminary prohibitory injunction in an order filed March 6, 1984. The injunction prohibits Crest Premium from proceeding with any further action under the notices of default, from filing notices of trustee sales or selling the real property secured by the trust deeds. Before issuing the injunction, the trial court required Baypoint to file a bond in the amount of $39,000.

however, alleges it did not receive these checks until December 12, 1983, and thus late charges accrued for this December 1983 installment as well as the five earlier installments allegedly not received within ten days of the first of the month. Despite its claim the December payments were late and its pending foreclosure action for, among other things, non-payment of those installments, Crest Premium accepted the December checks and deposited them in its account.

Crest Premium filed a timely notice of appeal from the order granting the preliminary injunction. Briefing was completed on November 15, 1984.

DISCUSSION

I. STANDARD OF REVIEW

This appeal is from a grant of a preliminary prohibitive injunction. The grant of this form of injunction does not determine any of the merits of the controversy. (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528, 67 Cal.Rptr. 761, 439 P.2d 889; State Bd. of Barber Examiners v. Star (1970) 8 Cal.App.3d 736, 740, 87 Cal.Rptr. 450.) Nor does it require a finding the party seeking the preliminary injunction will necessarily prevail on the merits. Instead trial courts in California apply a two part test: "1) are the plaintiffs likely to suffer greater injury from a denial of the injunction than the defendants are likely to suffer from its grant; and 2) is there a reasonable probability that the plaintiffs will prevail on the merits.... ' "[By] balancing the respective equities of the parties, [the court] concludes that, pending a trial on the merits, the defendant should or that he should not be restrained from exercising the right claimed by him." ' " (Citations omitted.) (Robbins v. Superior Court (1985) 38 Cal.3d 199, 206, 207, 211 Cal.Rptr. 398, 695 P.2d 695.) Generally speaking, the grant or refusal of a preliminary injunction is within the discretion of the trial court and its order may be reversed on appeal only if abuse of discretion is shown. (Gosney v. State of California (1970) 10 Cal.App.3d 921, 924, 89 Cal.Rptr. 390.) Discretion is abused in the legal sense " ' "whenever it may be fairly said that in its exercise the court ... exceeded the bounds of reason or contravened the uncontradicted evidence." ' " (Citations omitted.) (Continental Baking Co. v. Katz, supra, 68 Cal.2d 512, 527, 67 Cal.Rptr. 761, 439 P.2d 889.)

Under this standard, then, we as the reviewing court must merely determine whether the trial court "exceeded the bounds of reason" in determining Baypoint has a "reasonable probability of prevailing on the merits" and that the "balance of hardships" favors Baypoint. We can reverse the order only if appellant demonstrates an abuse of discretion in resolving these two issues. (Gosney v. State of California, supra, 10 Cal.App.3d 921, 924, 89 Cal.Rptr. 390.) For reasons set forth below, we find no such abuse has been shown.

II. BAYPOINT WAS THREATENED WITH GREATER HARDSHIP FROM REFUSAL OF A PRELIMINARY INJUNCTION THAN CREST PREMIUM FACES FROM GRANT OF THE INJUNCTION

As to the balance of hardships we have no trouble finding the court properly

exercised its discretion when it concluded the plaintiff faces greater harm from denial of the injunction than defendant would from its issuance. Here, the defendant seeks to foreclose several hundred thousand dollars worth of trust deeds. Should the defendant prevail at trial the worst that it will have suffered will have been some delay in foreclosure. The bond will secure it against any additional or further losses. Moreover defendant will be in a position at that time to recoup any late fees which the court determines were actually owed. The plaintiff, on the other hand, stands to lose all of its trust deeds as well as being chargeable with the foreclosureexpenses [168 Cal.App.3d 825] which may amount to $15,000 or so unless the foreclosure is restrained. His prayer for a permanent injunction against the foreclosure, if granted, would be useless since the trust deeds already would have been sold. Much of the other relief he seeks in the main action likewise would be rendered irrelevant. Given the drastic...