Shue vs. Kush

2117, certified by the Secretary of State, is sufficient evidence of the appointment of an agent for the service of process.”

Defendant cites to Yamaha Motor Co., Ltd. v. Superior Court (2009) 174 Cal.App.4th 264, where the court held that a Japanese manufacturer could be validly served with process by serving the American subsidiary via its agent for service of process: “[S]o we now turn to whether California law, like Illinois law in Schlunk, provides for proper service of ‘process on a foreign corporation by serving its domestic subsidiary which, under state law, is the foreign corporation's involuntary agent for service of process.’ ... As we shall see, the answer is yes.” (Id. at 270). However, Yamaha Motor concerned service of the initial summons and complaint, not a subpoena. See Fujikura Ltd. v. Finisar Corporation (N.D. Cal. 2015) WL 5782351 at *6:

First, both the state statute and all of these cases pertain to service of the initial complaint and summons, see Cal. Civ. Code § 416.10 (in chapter on “Service of Summons”); see .... Yamaha Motor Co., Ltd. v. Sup. Ct., 174 Cal. App. 4th 264, 267 (2009)— not a Rule 45 subpoena, which has service requirements that courts have construed more narrowly as discussed above. While Finisar insists that the rule also applies to service of subpoenas, but it does not cite a single case that held as much, and the Court has found none.

Similarly, here, the applicable California statutes have particular requirements for serving a subpoena on an out-of-state entity, and Defendant has not cited any authority demonstrating that it may bypass these requirements by serving CT Corporation. (See Code of Civ. Proc. § 2026.010, subd. (C)).

Because Defendant failed to adequately meet and confer, and failed to establish that it properly served Engle Martin with the subpoena, the court DENIES the motion.

Defendant Spectrum shall give notice. 3 Shue vs. Kush Plaintiffs Karin Kimberly Shue and Michelle Leigh Clouser move for preliminary injunction preventing Defendants from taking any action to continue, prosecute, or complete any foreclosure activity on the real property at 398 Gullotti Place, Placentia, California 92870 and 1804 Sonata Street, La Habra, California 90631 (the “Subject Property”). For the following reasons, the motion is GRANTED in part and DENIED in part. Defendants Paul Kush, Rosalie Kush, and Prestige Default Services, LLC, are hereby enjoined from taking any action to continue, prosecute, or complete a trustee’s sale on the Subject Property.

Standard on Issuing Preliminary Injunctions

Code of Civil Procedure Section 526(a)(3) provides that an injunction may be granted: “When it appears, during the litigation, that a party to 11

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.” (See San Francisco Newspaper Printing Co., Inc. v. Superior Court (1985) 170 Cal.App.3d 438, 442.) The purpose of Section 526(a)(3) is to preserve the status quo pending litigation. (See Stockton v. Newman (1957) 148 Cal.App.2d 558, 563.) “An injunction may be granted . . . [¶] [w]hen 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.” (Code Civ. Proc., § 526(a)(2).)

In determining whether to issue a preliminary injunction, the court evaluates two interrelated factors: “(1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.” (See White v. Davis (2003) 30 Cal.4th 528, 554; Church of Christ in Hollywood v. Superior Court (2002) 99 Cal.App.4th 1244, 1251.) With respect to the first factor, the court considers whether “there is a reasonable probability that the plaintiffs will prevail on the merits.” (Robbins v. Superior Court (1985) 38 Cal.3d 199, 206.)

The plaintiff has the burden of proof to show “upon a verified complaint, or upon affidavits” both elements necessary to support the issuance of a preliminary injunction. (Code Civ. Proc., § 527(a); Butt v. State of California (1992) 4 Cal.4th 668, 678 [holding “[a] trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim”].) The court may also consider the verified complaint and other discovery. (See Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 527; see also Weil & Brown, supra, at ¶¶ 9:574 - 9:581.) If plaintiff fails to establish either element, a preliminary injunction should be denied. (See Code Civ. Proc., § 527(a).)

“The decision to grant or deny a preliminary injunction is committed to the discretion of the trial court . . . .” (Pleasant Hill Bayshore Disposal, Inc. v. Chip-It Recycling, Inc. (2001) 91 Cal.App.4th 678, 695.) “The trial court's determination must be guided by a ‘mix’ of the potentialmerit and interim-harm factors; the greater the plaintiff’s showing on one, the less must be shown on the other to support an injunction.” (Butt v. State of California (1992) 4 Cal.4th 668, 678; see also Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc. (2016) 6 Cal.App.5th 1178, 1183 [holding the two showings operate on a sliding scale].) At the same time, “[t]he scope of available preliminary relief is necessarily limited by the scope of the relief likely to be obtained at trial on the merits.” (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 441- 442.)

As the Supreme Court has explained: “The ultimate goal of any test to be used in deciding whether a preliminary injunction should issue is to minimize the harm which an erroneous interim decision may cause.” (IT Corp. v. County of Imperial (1983) 35 Cal.4th 63, 73.) “[A] court faced with the question of whether to grant a preliminary injunction cannot ignore the possibility that its initial assessment of the merits, prior to a full adjudication, may turn out to be in error.” (White v. Davis, supra, 30 Cal.4th at p. 561.) The court acts in favor of the party most likely to be injured. (McCoy v. Matich (1954) 128 Cal.App.2d 50, 52.)

Likelihood of Prevailing on the Merits

The Complaint pleads a claim for breach of contract, alleging Defendants materially breached among others, section 3.12 by failing to disclose known liabilities; section 3.13 by making inaccurate or incomplete taxrelated representations; and section 6.7(a) by failing to cure payroll tax liabilities, timely file returns, timely pay pre-closing tax liabilities. (Compl. ¶ 120.)

To succeed on a claim for breach of contract, Plaintiffs must establish: (i) existence of the contract; (ii) Plaintiffs’ performance or excuse for nonperformance; (iii) Defendants’ breach; and (iv) damage to plaintiff resulting therefrom. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811.)

Existence of Contract. Here, it is undisputed that the parties entered into a Stock Purchase Agreement (the “SPA”) and related Promissory Note No. 2. (Clouser Decl. ¶ 16(a), Ex. A-B; P. Kush Decl. ¶ 2, Ex. A.)

Excuse for Nonperformance. It is undisputed Plaintiffs failed to make timely payments in July 2024, August 2024, and September 2024 (see Clouser Decl., Ex. J), which would be considered “an automatic Default with no opportunity to cure” under the Note’s section 7(i).

Nevertheless, Plaintiffs show they were excused from performing because of the undisclosed liabilities that became due in or before that time. For instance, liability for the two coaches/buses became due in December 2023. (See Clouser Decl. ¶¶ 35-42.) While there is some evidence Plaintiffs knew of and negotiated for financing to cover the down payment (see P. Kush Decl. ¶ 36), the liability was not disclosed in the parties’ fully integrated agreement (SPA § 10.5); and there is no evidence Defendants disclosed the full extent of the future liability, including the timing and amount of the liabilities (i.e., down payments and insurance due, monthly payments, etc.). (See P. Kush Decl. ¶¶ 33-37, Ex. I; Clouser Decl. ¶¶ 8, 42.)

In addition, Plaintiffs show Defendants did not disclose a substantial federal tax liability based on missing tax forms dating back to 2016. (Shue Supp. Decl. ¶ 17.) 13

Breach. Section 6.7(a) of the SPA provides Defendants shall cure all Payroll Tax Liability, files the company’s 2021-2023 tax returns, and pay all liabilities reflected in such returns by 10/15/2024.

It is undisputed that Seller did not cure the liabilities and file the missing and delinquent returns before that deadline. In February 2025, Defendants learned they owed $130,035.41 in total federal tax liability stemming from 2012-2015 unpaid taxes. (Clouser Reply Decl., Ex. D; see also Shue Decl. ¶ 28; P. Kush Decl., Ex. M.) Defendants then paid a lesser amount, $85,960.68. (Kush Decl. ¶ 46, Ex. N.) Defendants do not explain why they did not pay the total liabilities as confirmed by Defendant Mr. Kush.

Plaintiffs also submit evidence Defendants falsely represented and warranted that the statements in Article 3, including the disclosure of all then existing liabilities, were true and correct. (SPA Art. 3.) As discussed above, Plaintiffs discovered an undisclosed coach liability of at least $447,000 and undisclosed federal tax liability estimated to be $394,114.55. (See Shue Supp. Decl. ¶¶ 6, 17.)

Damages. Plaintiffs submit credible evidence they may be entitled to offsets totaling over $950,000.

Irreparable Harm

Under California law, residential property is deemed unique. (See Civ. Code, § 3387 [providing damages presumed inadequate for breach of agreement to convey real property]; Aspen Grove Condominium Ass'n v. CNL Income Northstar LLC (2014) 231 Cal.App.4th 53, 62-64 [finding invasion of plaintiff’s land by continuous trespass of water warranted injunction regardless of damages].)

Here, the court finds the relative balance of harms that is likely to result from denying injunctive relief favors issuing the preliminary injunction. Plaintiffs’ residential property is unique as a matter of law, and it is undisputed Defendants’ have begun the non-judicial foreclosure process. (See Clouser Decl. ¶ 23, Exs. F-I.)

To the extent Plaintiffs request the court adjust the monthly installment payments going forward, Plaintiffs do not show risk of irreparable harm absent the requested adjustments to payment obligations.

Bond

A bond is required upon granting a preliminary injunction. (Code Civ. Proc., § 529.) The bond is intended to cover any damages to the defendant caused by issuance of the injunction. (Top Cat Prods., Inc. v. Michael’s Los Feliz (2002) 102 Cal.App.4th 474, 478.) In determining the bond amount, the court considers the types of 14

damages the court allows the defendant to recover in the event the injunction is determined to have been unjustifiable. (Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 14 [finding $1,000 bond inadequate where defendant shows possible lost profits of $315,000].) These may include defense costs in those cases where attorney’s fees are recoverable. (Ibid.)

While a defendant’s failure to request a bond does not waive the requirement does not waive the bond requirement (Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 10), the bond requirement may be affirmatively waived or forfeited. (Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 740, citing Civil Code section 3513 [providing that “[a]nyone may waive the advantage of a law intended solely for his benefit”], Code Civ. Proc., § 995.230 [providing the beneficiary of a bond may in writing consent to a bond in an amount less than the amount required by statute or may waive the bond].)

Here, Plaintiffs argue Defendants waived their right to demand a bond. Section 10.10 of the SPA provides in relevant part that: “the parties shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary, and permanent injunctive relief from a court of competent jurisdiction to prevent breaches or threatened breaches of the terms of this Agreement, without posting any bond or other undertaking . . . .” (SPA at § 10.10.)

The court finds a bond in the amount of $90,000 would reasonably protect Defendants against damages caused by the preliminary injunction.

Plaintiffs Shue and Clouser SHALL file and serve proof of undertaking in the amount of $90,000.

Plaintiffs to give notice. 4 Adjemian vs. Gallo Defendants Rafael Gallo’s Motion for Summary Adjudication is DENIED.

Defendant Gallo moves for summary adjudication on the issue of whether or not Plaintiff is precluded from recovering attorney’s fees due to failure to meet condition precedent (mediation) contained in the Residential Purchase Agreement.

“A party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if the party contends that the cause of action has no merit, that there is no affirmative defense to the cause of action, that there is no merit to an affirmative defense as to any cause of action, that there is no merit to a claim for damages, . . . or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. (Code Civ. Proc., § 437c, subd. (f)(1).) 15