Farm Credit Services of America, PCA v. Samra ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 FARM CREDIT SERVICES OF No. 2:20-cv-01142-TLN-DB AMERICA, PCA, 12 Plaintiff, 13 ORDER v. 14 STEVEN SINGH SAMRA, individually 15 and as trustee of The Steven Singh Samra Revocable Trust; and TRANQUILITY 16 PISTACHIO, LLC, a limited liability company, 17 Defendants. 18 19 20 This matter is before the Court on Farm Credit Services of America, PCA’s (“Plaintiff”) 21 Ex Parte Application for a Writ of Possession and Seeking a Turnover Order and Private Place 22 Order, or, in the alternative, Motion for Temporary Restraining Order. (ECF No. 6.) After 23 carefully considering Plaintiff’s briefing and for the reasons set forth below, the Court hereby 24 GRANTS Plaintiff’s Motion for Temporary Restraining Order and further orders Defendants to 25 file any opposition to the application for writ of possession within ten (10) days of electronic 26 filing of this Order. 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 On August 31, 2018, September 10, 2018, September 12, 2018, September 25, 2018, and 3 January 25, 2019, Plaintiff issued five separate loans to Defendant Steven Singh Samra (“Samra”) 4 on behalf of Defendant The Steven Singh Samra Revocable Trust and Defendant Tranquility 5 Pistachio, LLC (“Tranquility”) (jointly, “Defendants”) for the purchase of various items of farm 6 equipment. (ECF No. 1 at ¶¶ 10, 24, 38, 51, 65.) These loans were secured by granting Plaintiff 7 a first priority interest in the equipment purchased with the loan. (Id. at ¶¶ 14, 28, 42, 55, 69.) 8 Ultimately, Defendants defaulted on the loans and filed for Chapter 12 bankruptcy on January 13, 9 2020. (Id. at ¶ 4.) Plaintiff asserts Tranquility failed to list the equipment in its bankruptcy 10 schedules as part of its bankruptcy estate, concealing it from their creditors. (ECF No. 6-2 at 3.) 11 Plaintiff was granted relief from the automatic stay in the bankruptcy proceeding. (ECF No. 6-3 12 at 109–103.) 13 Plaintiff filed its Complaint on June 5, 2020, alleging breach of contract, claim and 14 delivery, and conversion regarding the five loans issued to Defendants for the purchase of various 15 pieces of farm equipment. (ECF No. 1.) On June 10, 2020, Plaintiff filed the instant Ex Parte 16 Application for a Writ of Possession, a Turnover Order, and a Private Place Order, or, in the 17 alternative, a Temporary Restraining Order (“TRO”) pending a hearing on the application for writ 18 of possession.1 (ECF No. 6.) Plaintiff asserts there is an immediate danger that the equipment 19 will become unavailable for levy because: (1) there is no insurance for the equipment; (2) 20 Tranquility never notified Plaintiff of its bankruptcy filing; (3) Tranquility never listed the 21 equipment in its bankruptcy schedules; (4) Defendants moved the equipment without advising 22 Plaintiff against the terms of the loans; (5) Plaintiff was unable to locate the equipment when 23 given access to the property where it was located; (6) Samra only disclosed the location of the 24 equipment after being deposed; and (7) Samra disclosed at deposition that some of the equipment 25 had been stolen, but never reported it as lost to Plaintiff. (ECF No. 6-2 at 3.) 26 /// 27 1 Plaintiff seeks a writ of possession only in regard to four of the five underlying loans. The 28 September 25, 2018 loan is not at issue in this application. 1 Plaintiff estimates that the collateral equipment may be worth up to $352,962.40 and that 2 Defendants owe over $388,000 on the loans at issue in the instant Application. Plaintiff lists the 3 collateral for the loans as follows: 4 Collateral Description Serial Number 5 6 2012 COE C-7 Tree Shaker T04039D573087 7 2012 COE C-7 Tree Shaker T04039D548601 8 2018 Weldcraft BD40 Bin Dumper BD-40-18 9 Weldcraft BD41 Bin Dumper BD-41-18 10 Weldcraft BD42 Bin Dumper BD-42-18 11 2018 Ram 2500 pickup truck 3C6UR5NL8JG322820 12 Caterpillar D7F-93N Bulldozer 8A438 13 Caterpillar D6D-SA Bulldozer 5X3871986 14 2010 Wilcox PRF 3-60 Performer HD Bedder 7016 15 2007 Wilcox PRF 3-60 HD Performer Bedder 0091 16 17 II. STANDARD OF LAW 18 Under Federal Rule of Civil Procedure 64, “[a]t the commencement of and during the 19 course of an action, all remedies providing for seizure of person or property for the purpose of 20 securing satisfaction of the judgment ultimately to be entered in the action are available under the 21 circumstances and in the manner provided by the law of the state in which the district court is 22 held, existing at the time the remedy is sought.” Fed. R. Civ. P. 64. 23 “California’s Claim and Delivery Law (Code of Civ. Proc., §§ 511.010–516.050) 24 authorizes the issuance of a pre-judgment writ of possession for specific personal property.” Sea 25 Rail Truckloads, Inc. v. Pullman, Inc., 131 Cal. App. 3d 511, 514 (Ct. App. 1982). A plaintiff 26 may bring an application for a writ of possession upon the filing of the complaint or at any time 27 thereafter. Cal. Civ. Code § 512.010(a). The application must include: 28 1 (1) A showing of the basis of the plaintiff's claim and that the plaintiff is entitled to possession of the property claimed. If the basis of the 2 plaintiff's claim is a written instrument, a copy of the instrument shall be attached. 3 (2) A showing that the property is wrongfully detained by the 4 defendant, of the manner in which the defendant came into possession of the property, and, according to the best knowledge, 5 information, and belief of the plaintiff, of the reason for the detention. 6 (3) A particular description of the property and a statement of its 7 value. 8 (4) A statement, according to the best knowledge, information, and belief of the plaintiff, of the location of the property and, if the 9 property, or some part of it, is within a private place which may have to be entered to take possession, a showing that there is probable 10 cause to believe that such property is located there. 11 (5) A statement that the property has not been taken for a tax, assessment, or fine, pursuant to a statute; or seized under an 12 execution against the property of the plaintiff; or, if so seized, that it is by statute exempt from such seizure. 13 Cal. Civ. Proc. Code § 512.010 (West) 14 15 California Civil Code § 512.020(b) provides, in relevant part, that a writ of possession 16 may be issued ex parte if probable cause appears that the “defendant acquired possession of the 17 property in the ordinary course of his trade or business for commercial purposes” and: 18 (i) The property is not necessary for the support of the defendant or his family; and 19 (ii) There is an immediate danger that the property will become 20 unavailable to levy by reason of being transferred, concealed, or removed from the state or will become substantially impaired in 21 value by acts of destruction or by failure to take care of the property in a reasonable manner; and 22 (iii) The ex parte issuance of a writ of possession is necessary to 23 protect the property. 24 Cal. Civ. Proc. Code § 512.020(b)(3). 25 Additionally, a plaintiff may apply for a TRO at or after the time he files his application 26 for writ of possession. Cal. Code Civ. Pro. § 513.010(a). The TRO may be granted ex parte if all 27 of the following are found: 28 /// 1 (1) The plaintiff has established the probable validity of his claim to possession of the property. 2 (2) The plaintiff has provided an undertaking as required by Section 3 515.010. 4 (3) The plaintiff has established the probability that there is an immediate danger that the property claimed may become unavailable 5 to levy by reason of being transferred, concealed, or removed or may become substantially impaired in value. 6 7 Cal. Code Civ. Pro 513.010(b). 8 III. ANALYSIS 9 A. Application for Writ of Possession 10 Plaintiff asserts it is entitled to a writ of possession on an ex parte basis pursuant to Cal. 11 Civ. Code § 512.020. However, “[a]n ex parte writ of possession is a drastic remedy which is 12 disfavored except in the narrowly drawn, exigent circumstances set forth in this statute. The 13 California Supreme Court stated in Blair v. Pitchess (1971) 5 Cal.3d 258, that an ex parte writ of 14 possession can issue only if it is justified by weighty state or creditor interests.” Sea Rail 15 Truckloads, Inc. v. Pullman, Inc., 131 Cal. App. 3d 511, 515–16 (Ct. App. 1982). The statute 16 itself requires Plaintiff to establish probable cause that “[t]he ex parte issuance of a writ of 17 possession is necessary to protect the property.” Cal. Civ. Code § 512.040(b)(3)(iii). Plaintiff 18 has not provided sufficient evidence that a TRO would not be sufficient to protect its interest in 19 the collateral equipment. Indeed, Plaintiff cites essentially the same facts in support of the 20 request for a TRO as it does for the application for writ of possession. The imposition of a TRO 21 would be sufficient in the short term to protect Plaintiff’s interests without the drastic remedy of 22 granting a writ of possession before Defendants have the opportunity to oppose. 23 B. Temporary Restraining Order 24 In the alternative to a writ of possession, Plaintiff seeks a TRO ensuring that the collateral 25 equipment is not sold, transferred, destroyed, removed, or otherwise made unavailable. In order 26 to issue a TRO under Cal. Civ. Code § 513.010, the Court must find: (1) the Plaintiff has 27 established the probable validity of his claim; (2) the Plaintiff has provided an undertaking or has 28 established that one is not necessary; and (3) there is a probability that there is an immediate 1 danger the property may become unavailable. These factors roughly correspond to the federal 2 standard for granting TROs and preliminary injunctions: (1) that plaintiff is likely to succeed on 3 the merits; (2) that plaintiff is likely to suffer irreparable harm in the absence of preliminary 4 relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public 5 interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). 6 i. Probable Validity of the Claim 7 Plaintiff attaches the loan documents associated with the loans at issue to the instant 8 application. These documents include the Promissory Note, Loan Agreement, and Security 9 Agreement for the August 31, 2018, September 10, 2018, September 25, 2018, and January 25, 10 2019 loans. (ECF No. 6-3 at 22–72.) Under the terms of these agreements, Defendants agreed to 11 repay the principal balance plus interest on the outstanding principal. (Id.) The agreements 12 further indicate that, upon default, the interest rate would increase, and late charges may be 13 assessed when any scheduled payment is past due. (Id.) To secure the loan, Defendants granted 14 Plaintiff a first priority interest in the listed collateral for each loan. (Id.) 15 Defendants defaulted on each loan between September 1, 2019 and February 1, 2020. On 16 November 7, 2019, Plaintiff sent a notice of default to Defendants. (ECF No. 6-3 at 73–75.) On 17 January 6, 2020, Plaintiff sent Defendants a Notice of Acceleration, notifying Defendants of 18 Plaintiff’s election to declare the unpaid balance of the loans immediately due and payable as 19 allowed under the loan agreements. (ECF No. 6-3 at 76–78.) Despite these notices, Defendants 20 have not paid the amounts due under the loans. 21 As of June 9, 2020, Plaintiff alleges Defendants owe the following amounts on each loan: 22 August 31, 2019 Loan Agreement: 23 a. Unpaid principal in the amount of $159,510.00; plus 24 b. Accrued interest in the amount of $20,297.64; and 25 c. Late charges in the amount of $743.64. 26 September 10, 2018 Loan Agreement: 27 a. Unpaid principal in the amount of $19,119.72; and 28 b. Accrued interest in the amount of $1,484.60. 1 September 25, 2018 Loan Agreement: 2 a. Unpaid principal in the amount of $54,876.68; and 3 b. Accrued interest in the amount of $3,848.85. 4 January 25, 2019 Loan Agreement: 5 a. Unpaid principal in the amount of $111,906.64; plus 6 b. Accrued interest in the amount of $8,498.74. 7 (ECF No. 6-3 at 80.) In total, Plaintiff claims Defendants owe $380,286.51.2 (Id.) 8 The evidence submitted by Plaintiff is substantial and supports its claim to recover the 9 property in question. Based on the loan documents and declarations, there is a high probability 10 that this claim is valid. In other words, Plaintiff is likely to succeed on the merits of its 11 Application. Therefore, Plaintiff has met its burden in establishing this first element. 12 ii. Undertaking 13 California Civil Code § 513.010 requires the plaintiff seeking a TRO to provide an 14 undertaking as required in Cal. Civ. Code § 515.010. Section 515.010 in turn instructs the court 15 to waive the requirement of an undertaking if the court finds that the defendant has no interest in 16 the property. Plaintiff submits the declaration of Michael Spence wherein he attests that the total 17 value of the equipment Plaintiff seeks to reclaim as collateral for the loans is $352,962.40. (ECF 18 No. 6-3 at 18–20.) This valuation is based on the purchase price and an estimated percentage 19 reduction for depreciation based on the acquisition date. As discussed above, Plaintiff asserts 20 Defendants owe it $380,286.51 as of June 9, 2020. Because the amount owed to Plaintiff is more 21 than the value of the collateral, Defendants have no remaining interest in those items. Therefore, 22 Plaintiff need not provide an undertaking for this Court to issue the requested TRO. Even without 23 the undertaking, the balance of the equities weighs in Plaintiff’s favor. Should the equipment 24 become unavailable to Plaintiff, it will have a limited ability to recover the amounts due on the 25 loans. However, issuing the TRO will simply enforce the status quo, preventing Defendants from 26 27 2 This number represents the sum of the amounts indicated above, however, elsewhere in Plaintiff’s briefing it indicates Defendants owe “in excess of $388,000.” (ECF Nos. 6-2 at 2; 6-3 28 at 20.) 1 selling or otherwise disposing of the equipment. Plaintiff has therefore met its burden under the 2 second element for issuing a TRO under Cal. Civ. Code § 513.010(b). 3 iii. Probability of Immediate Danger 4 California Civil Code § 513.010(b) requires Plaintiff to make a showing that there is a 5 substantial and immediate danger “that the property claimed may become unavailable to levy by 6 reason of being transferred, concealed, or removed or may become substantially impaired in 7 value.” Cal. Civ. Proc. Code § 513.010(b)(3). Plaintiff asserts a number of factors indicating 8 there is an immediate danger of loss or damage to the collateral property. While some of these 9 factors, including not acquiring insurance on the equipment in question, are simply violations of 10 the loan agreement, other factors — such as the movement of the equipment to new locations 11 without informing Plaintiff — raise significant concerns that Defendants might dispose of or hide 12 the collateral. Of particular concern to the Court is Samra’s deposition testimony that some of the 13 equipment has already been stolen. (ECF No. 6-5 at 19–20.) Samra also failed to disclose the 14 identity of the individuals who had possession of the bulldozer and “bedder.” (ECF No. 6-5 at 9– 15 10.) These incidences, when considered in light of Defendant Tranquility Pistachio’s failure to 16 list this debt in its bankruptcy schedules, indicate a desire to hide or otherwise impair Plaintiff’s 17 ability to reclaim the equipment. 18 This element corresponds to the federal TRO application requirement that a plaintiff show 19 it is likely to suffer irreparable harm in the absence of preliminary relief. Winter, 555 U.S. at 22. 20 Defendants’ actions and attempts to conceal their debt to Plaintiff and hide the collateral show 21 that Plaintiff is in danger of losing access to the property it is seeking to repossess. Should this 22 property become unavailable, Plaintiff is highly unlikely to be able to recover the money it loaned 23 Defendants, especially considering Defendant Tranquility’s bankruptcy. 24 Plaintiff has therefore made a sufficient showing that there is a probability of immediate 25 danger, and that it is likely to suffer irreparable harm, to warrant the issuance of a TRO pending 26 the resolution of the application for writ of possession. 3 27 3 The final federal element required in an application for TRO is a showing that an 28 injunction is in the public interest. Winter, 555 U.S. at 22. While not a required element under 1 IV. CONCLUSION 2 For the reasons set forth above, Plaintiff’s Motion for TRO (ECF No. 6) is GRANTED. 3 Defendants and their agents are hereby enjoined from transferring any interest in the property 4 referred to in this Order by: sale, pledge, or grant of security interest or otherwise disposing of or 5 encumbering it; concealing or otherwise removing the property in such a manner as to make it 6 less available to seizure by the levying officer; impairing the value of the property either by acts 7 of destruction or by failure to care for the property in a reasonable manner. No bond shall be 8 required. 9 Defendants are further ordered to file any opposition to Plaintiff’s Application for Writ of 10 Possession, a Turnover Order, and a Private Place Order within ten (10) days of the electronic 11 filing of this order. Plaintiff shall file any reply not later than five (5) days after Defendants file 12 their opposition. This matter will then be considered submitted on the briefs. If the Court 13 determines Plaintiff is not entitled to a writ of possession, the TRO shall be dissolved; otherwise, 14 the Court will issue a preliminary injunction to remain in effect until the property claimed is 15 seized pursuant to the writ of possession. 16 IT IS SO ORDERED. 17 DATED: June 22, 2020 18 19 20 21 22 23 24 25 the California law, it is nonetheless met here. Issuing a TRO wherein a lender is attempting to secure the collateral on a defaulted loan supports the lending industry and gives lenders 26 confidence that, should a borrower default, there is still recourse to recover money owed. This, in 27 turn, encourages lenders to continue lending money and for borrowers to be able to secure the loans necessary in their businesses and lives. Therefore, issuing the TRO in this case is in the 28 interest of the public.