Feb01

A Judgment against A Trust Is Unenforceable

Posted on February 1, 2012 by Jeff Huron
The recent decision of Portico Management Group, LLC v. Harrison __ Cal.App.4th __ (2011) held that a trust is neither a person nor an entity. As such, a trust cannot sue or be sued. And a judgment against a trust is unenforceable because a judgment debtor is defined as a “person” against whom a judgment is entered. Therefore, when suing a trust, you must: (1) name the trustee in his or her representative capacity as a trustee; and (2) ensure that judgment is entered against the trustee; and not the trust itself.

The plaintiff in Portico, sued the trustees of a trust but unfortunately did nothing to correct an arbitration award and subsequent judgment entered against only the trust. Plaintiff later attempted to enforce the judgment against assets of the trust. However, the trustees of the trust claimed ownership of the trust assets and argued that no judgment had been entered against them or their predecessors. The court of appeal agreed and affirmed the trial court’s order to grant the trustees’ claim of ownership to the assets of the trust. Fortunately for the plaintiff, the court of appeal reversed (with instructions) the trial court’s orders denying leave to amend the judgment to include one of the original trustees.

Bottom line: If you have litigation involving a trust, don’t make the mistake of treating the trust as you would a person or an entity. 

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Jan23

When A Court Grants an Injunction on the Merits No Undertaking Is Required

Posted on January 23, 2012 by Jeff Huron

The Court in Bardasian v. Superior Court 201 Cal.App.4th 1371 (2011) issued a peremptory writ and reversed an order dissolving an injunction because plaintiffs failed to post a bond. The case involved a foreclosure dispute between borrowers and their lender over whether the lender complied with Civil Code section 2923.5, subd. (a). Pursuant to that section, a lender must contact the borrower to try to prevent foreclosure before recording a notice of default.

In granting the borrowers' motion for an injunction, the trial court expressly found that neither the lender nor its servicer contacted the borrowers before issuing a notice of default. The trial court, however, required plaintiffs to post a $20,000 bond and make $500 monthly payments. It later dissolved the injunction when plaintiffs failed to post the bond and make monthly payments.

The appellate court concluded that the trial court erred in requiring a bond in the first place. The trial court did not merely determine that plaintiffs had a substantial likelihood of success on the merits, but rather decided the dispute in plaintiffs' favor. The purpose of an injunction is to protect the defendant against losses incurred if the defendant later prevails on the merits. Therefore, no undertaking is required when the court grants an injunction after deciding the merits. Shahen v. Superior Court (1941) 46 Cal.App.2d, 187, 189 (bond cannot be ordered on a permanent injunction issued after a trial on the merits).

Posting bonds is often difficult and expensive for clients. Whenever you seek an injunction, try to get the court to rule on the merits. If you succeed, you remove the requirement for a bond or undertaking.

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Oct27

He Who Hesitates, May be Too Late!

Posted on October 27, 2011 by Jeff Huron

 In Trident Labs, Inc. v. Merrill Lynch Commercial Finance Corp., the Court of Appeal held that a party, who has the option to litigate in more than one forum and litigates extensively in one forum, cannot then decide to enforce its rights to litigate in another forum. Pursuant to a forum selection clause, Trident Labs agreed to waive any rights to commence an action anywhere but Illinois.  Trident nevertheless sued Merrill Lynch in California.  Merrill Lynch actively litigated the case for 19 months in California by filing a cross-complaint, conducting substantial discovery and filing motions seeking relief. Merrill Lynch then filed a motion pursuant to Code of Civil Procedure section 410.30 to stay or dismiss the lawsuit based on the forum selection clause.  Merrill Lynch contended that it had the right to make the motion "at any time," and the trial court agreed.  The Court of Appeal noted that section 410.30 does not say such motions may be made at any time. "Where no limits are stated, a reasonableness standard is inferred."  The Court of Appeal concluded that 19 months of delay, without any justification, is unreasonable as a matter of law and reversed the trial court. Moral of the story: Don't delay!

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