General Electric Capital Corporation et al v. Ten Forward Dining, Inc. et al

Filing 169

ORDER signed by Judge John A. Mendez on 7/3/2013 ORDERING Plaintiffs' motions 155 for Entry of Judgment and 159 Appointment of a Receiver are GRANTED. The Kobra Defendants are ORDERED to submit a proposed final judgment that accords with this order and is approved as to form by Plaintiffs within 10 days. (Reader, L)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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GENERAL ELECTRIC CAPITAL
CORPORATION, et al.,
Plaintiffs,

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v.

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No.

2:09-cv-03296-JAM-AC

ORDER GRANTING PLAINTIFFS’
MOTION FOR ENTRY OF FINAL
JUDGMENT, IN PART

TEN FORWARD DINING, INC., et
al.,

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Defendants.

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This matter is before the Court on Plaintiffs General

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Electric Capital Corporation, CEF Funding II, L.L.C., and CEF

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Funding V, LLC’s (“Plaintiffs”) Motion for Entry of Final

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Judgment (Doc. # 155) and Motion for Appointment of a Post-

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Judgment Receiver to Manage, Maintain and Sell (Doc. # 159).1

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Defendants Kobra Restaurant Properties, LLC and Abolghassem

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Alizadeh (collectively the “Kobra Defendants”) oppose each motion

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The motions were determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing for both
motions was originally scheduled for June 19, 2013.
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(Doc. ## 160-161).

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I.

BACKGROUND

This action originated when Plaintiffs filed their Complaint

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on November 29, 2009 (Doc. # 1).

The Complaint alleges that

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defendants Ten Forward Dining; Delightful Dining, Inc.; TGIA

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Restaurants, Inc.; Kobra Restaurant Properties, LLC; and

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Abolghassem Alizadeh defaulted on or breached seven written loan

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contracts made with Plaintiffs.

The complaint alleged that the

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loans were secured by real and physical property generally

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associated with the Kobra Defendants.

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concern what is known as the 11726 Kobra Loan and Claims 11-12

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concern what is known as the 11794 Kobra Loan.

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successfully moved for summary judgment against the Kobra

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Defendants on Claims 9-12 (Doc. # 94).

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claim is for declaratory relief against other entities who may

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claim an interest in the Kobra Properties.

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the litigation, Plaintiffs have either obtained summary judgment

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against each named entity or voluntarily dismissed outstanding

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claims.

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should be entered against the Kobra Defendants so that the two

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Kobra Properties can be foreclosed and sold in order to satisfy

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any outstanding debt.

Plaintiffs’ Claims 9-10

Plaintiffs

Plaintiffs’ twenty-fifth

Through the course of

At this point, Plaintiffs contend that final judgment

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II.

OPINION

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A.

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Pursuant to Federal Rule of Civil Procedure 54(b), “[w]hen

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Legal Standard for Entry of Final Judgment

an action presents more than one claim for relief, or when
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multiple parties are involved, the court may direct entry of a

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final judgment as to . . . fewer than all claims . . . if the

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court expressly determine that there is no just reason for

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delay.”

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“[a] district court must first determine that it has rendered a

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‘final judgment,’ that is, a judgment that is ‘an ultimate

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disposition of an individual claim entered in the course of a

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multiple claims action.’”

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878 (9th Cir. 2005) (quoting Curtiss-Wright Corp. v. Gen. Elec.

Fed. R. Civ. P. 54(b).

In order to make such a finding,

Wood v. GCC Bend, LLC, 422 F.3d 873,

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Co., 446 U.S. 1, 7 (1980)).

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determine if there is a just reason for delay before entering

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final judgment.

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B.

Then the district court must

Id.

Discussion
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Entry of Judgment

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It is undisputed that Plaintiffs have resolved each of their

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pending claims against all defendants either by obtaining summary

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judgment or voluntarily dismissing outstanding claims.

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therefore clear that an ultimate disposition of each active claim

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in this action has been issued, and there is accordingly no

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reason to delay entering a final judgment for the entire action.

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The Kobra Defendants, however, dispute what form a final judgment

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should take.

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foreclose on the 11726 and 11794 Kobra Properties at issue in

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Claims 9 through 12 and that the proposed judgment exceeds the

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scope of the complaint.

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It is

They argue that Plaintiffs have lost the right to

a. Waiver of Real Property Security Interest
The Kobra Defendants argue in opposition to the motion for
judgment that Plaintiffs are improperly seeking both a money
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judgment for breach of the underlying loan documents and

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foreclosure on two properties that secure the loans at issue in

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this suit.

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11th causes of action where Plaintiffs seek damages for breach of

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loans secured by real property and the 10th and 12th causes of

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action where Plaintiffs seek to foreclose on the real property

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securing the loans.2

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entering judgment for damages on those causes of action and

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entering judgment for Plaintiffs’ foreclosure claims on the 10th

The opposition is only directed toward the 9th and

The Kobra Defendants first argue that

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and 12th causes of action violates California Code of Civil

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Procedure § 726’s (“§ 726”) single cause of action rule.

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Kobra Defendants argue that § 726 requires a plaintiff suing to

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enforce a debt secured by real property to choose a money

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judgment for breach of contract or an action to foreclose on the

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property securing the debt, but a plaintiff cannot pursue both

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types of actions to judgment.

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that Plaintiffs already elected to pursue a money judgment when

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they sought and obtained summary judgment, and are now barred

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from foreclosing on the real property.

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Defendants seek to limit Plaintiffs to a money judgment and

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prevent entry of judgment on the foreclosure causes of action.

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The

The Kobra Defendants further argue

Accordingly, the Kobra

In reply, Plaintiffs concede that they cannot obtain both a

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personal money judgment and foreclose on the properties, and they

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argue that they never intended to seek both forms of relief.

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The 10th and 12th causes of action also seek relief related to
personal property collateral. The parties agree that Plaintiffs
are entitled to judgment with respect to the personal property
collateral, disputing only what relief is available with respect
to the real property collateral.
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Plaintiffs agree that insofar as their proposed judgment is

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unclear, it should be modified to contain only entry of judgment

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on their foreclosure cause of action along with a declaration of

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the outstanding debt owed on the loans.

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they cannot obtain a money judgment at this time, but reserve the

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right to seek a deficiency judgment in the event that the

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foreclosure sale does not net sufficient funds to cover the

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outstanding debt.

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contention that the prior summary judgment order blocks entry of

Plaintiffs concede that

Plaintiffs do oppose the Kobra Defendants’

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judgment on the 10th and 12th causes of action for foreclosure

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and replevin.

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parties agree that Plaintiffs are entitled to either foreclose on

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the properties or seek money judgment, not both.

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remaining question is whether or not Plaintiffs already elected a

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money judgment by seeking summary judgment on the 9th and 11th

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causes of action for breach of the underlying loan agreements.

Based on Plaintiffs’ reply, it is clear that the

The only

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California Code of Civil Procedure § 726(a) provides, “There

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can be but one form of action for the recovery of any debt or the

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enforcement of any right secured by mortgage upon real property

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or an estate for years therein, which action shall be in

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accordance with the provisions of this chapter.

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plaintiff pursues an action to enforce a debt secured by real

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property outside of the one authorized by CCP § 726, he is deemed

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to have waived his right to foreclose on the real property

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securing the debt.

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(1974).

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to protect the debtor from having to defend against a

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multiplicity of actions[, i.e.] ... bringing one to recover the

. . .”

If a

Walker v. Cmty. Bank, 10 Cal. 3d 729, 733

“One of the primary purposes of the one-action rule is

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setoff and defending another by the creditor.”

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Bank v. Wozab, 51 Cal. 3d 991, 1002 (1990).

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multiple actions, a creditor is permitted to bring a single

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action for both foreclosure and a deficiency judgment.

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Pajaro Dunes Rental Agency, Inc., 156 B.R. 263, 266 (N.D. Cal.

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1993).

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Sec. Pac. Nat'l

Although § 726 bars

In re

California courts have analyzed a number of types of

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actions in order to determine when the right to foreclose is

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deemed waived.

For instance, “where the creditor sues . . . and

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seeks a personal money judgment against the debtor without

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seeking . . . foreclosure . . ., he makes an election of

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remedies, electing the single remedy of a personal action, and

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thereby waives his right to foreclose . . . .”

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3d at 733.

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sufficient to waive the right to foreclose.

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Court, 26 Cal.App.4th 542, 549 (1994).

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money judgment constitutes waiver.

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276 Cal.App.2d 19, 23 (1969).

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Walker, 10 Cal.

Obtaining a pre-judgment writ of attachment is also
Shin v. Superior

Obtaining a default

James v. P.C.S. Ginning Co.,

In this case, Plaintiffs brought a single action containing

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claims for breach of the loan documents and for foreclosure on

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the real property securing the loans and they obtained summary

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judgment on both types of claims.

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cited any authority that bars such an action or limits a

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plaintiff to a money judgment under these circumstances.

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notable that § 726 is primarily concerned with preventing a

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multiplicity of suits, and Plaintiffs complied with that aspect

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of § 726 by filing a single action.

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by the Kobra Defendants only indicates that Plaintiffs cannot
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The Kobra Defendants have not

It is

The legal authority cited

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bring a separate personal action without first exhausting the

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security, but they have not done that.

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Plaintiffs seek to foreclose on their real property security

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interest and concurrently seek a determination of the

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outstanding debt due under the loan agreements for purposes of a

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deficiency judgment.

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§ 726 because it seeks to exhaust the security interest first

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through the foreclosure causes of action.

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Through the present suit

This single action is compatible with

The Kobra Defendants argument that the grant of summary

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judgment on Claims Nine and Eleven bar entry of judgment on

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Claims Ten and Twelve fails because all of the claims are

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contained in the same suit in accordance with § 726’s policy of

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preventing a multiplicity of suits.

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complaint seems to seek both a personal money judgment and

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foreclosure in violation of § 726, but Plaintiffs now elect only

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to pursue entry of judgment on Claims 9 and 11 for purposes of a

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deficiency judgment.

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accordingly give Plaintiffs the right to foreclose on the

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properties identified in Claims 10 and 12, but judgment on

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Claims 9 and 11 is limited to a declaration of the outstanding

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amount due for purposes of a deficiency judgment.

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with § 726 is therefore resolved.

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It is true that Plaintiffs’

The judgment in this case shall

Any conflict

b. Proposed Judgment and Scope of Complaint
The Kobra Defendants argue that the judgment proposed by

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Plaintiffs exceeds the scope of the complaint because it

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references cross-collateralization between all of the loans in

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this suit.

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collateralization agreement is not mentioned in the complaint,

The Kobra Defendants contend that the cross-

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and that the agreement was never perfected so it is

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unenforceable.

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complaint clearly alleges cross-collateralization between all of

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the loans in this suit.

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trust associated with the 11726 and 11794 Kobra properties

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explicitly secure “all agreements and instruments between, among

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or by (a) any of the Borrower Parties, and, or for the benefit

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of, (2) any of the Lender Entities, including, without

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limitation, promissory notes and guaranties.”

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Plaintiffs point out that paragraph 88 of the

Plaintiffs also argue that the deeds of

(Doc. # 159-1 Ex.

H, at 164 and Ex. I, at 194.)

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Based on paragraph 88 of the complaint, it is clear that

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the cross-collateralization agreement was pled by Plaintiffs,

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but Plaintiffs never moved for judgment on that issue.

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Plaintiffs’ motion for summary judgment (Doc. # 85-1) only

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sought judgment on each loan as to the corporate entity

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associated with it and Alizadeh in his personal capacity.

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motion did not include a claim that the loans were cross-

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collateralized.

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cited by Plaintiffs do not support a finding of cross-

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collaterization.

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159 Exs. H and I) are between Kobra Restaurant Properties,

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L.L.C. as Trustor and GE Capital Franchise Financing Corporation

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as Beneficiary.

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deeds of trust states that the deed of trust also secures other

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agreements between the borrower parties, i.e., Kobra, and the

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lending entity, i.e. GE Capital Francise Financing Corporation.

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Kobra is not a party to any of the other loan agreements at

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issue in this litigation, however, so the deeds of trust cannot

The

It is also notable that the loan documents

For instance, the Kobra Deeds of Trust (Doc. #

The provision relied on by Plaintiffs in the

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cross-collateralize agreements beyond those involving Kobra

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directly.

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seek summary judgment on this issue in a Rule 54(b) motion.

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This issue should have been raised in Plaintiffs’ original

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motion for summary judgment where it could have been fully

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briefed by all parties.

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litigation shows that Plaintiffs are entitled to liquidate the

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collateral guaranteeing each loan and, if the sum obtained is

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deficient, seek outstanding amounts from Alizadeh personally.

Further, it is improper for Plaintiffs to effectively

In summary, the history of this

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Plaintiffs are not entitled to use the real property collateral

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securing the Kobra deeds of trust to satisfy the Ten Forward,

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Delightful Dining, or TGIA loans; they are limited to seeking

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any deficiency from Alizadeh personally pursuant to the grant of

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summary judgment on claims 15-16, 18, 20, 22, and 23.

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2.

Appointment of a Receiver

The Kobra Defendants contend that the motion to appoint a

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receiver should be denied first because Plaintiffs’ causes of

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action for foreclosure are barred by their causes of action for

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damages and second because California law does not permit the

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appointment of a receiver who is empowered to sell the real

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property collateral.

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section, Plaintiffs are entitled to entry of judgment on their

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foreclosure actions so the Kobra Defendants’ first argument

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fails.

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§ 712.060 explicitly permits courts to “appoint a receiver . . .

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to enforce a judgment for possession or sale of property.”

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Kobra Defendants rely on Hibernia Sav. & Loan Soc. v. Belcher, 4

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Cal. 2d 268, 271 (1935), and California Code of Civil Procedure

For the reasons discussed in the preceding

Second, California Code of Civil Procedure

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The

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§ 564, but the rule from those authorities applies to pre-

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judgment appointments.

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appointment of a post-judgment receiver, meaning that § 712.060

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controls.

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trust that it would not oppose the appointment of a post-

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judgment receiver.

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Plaintiffs’ current motion seeks

Additionally, Kobra agreed in the relevant deeds of

Vangrunsven Decl. (Doc. # 159-1) ¶¶ 24-25.

It is clear from Plaintiffs’ motion on this issue that a

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post-judgment receiver will serve the interests of all parties

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by maintaining the Kobra properties pending their sale as well

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as the collateral associated with all of the loans at issue in

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this litigation.

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authority that limits the Court’s authority to appoint a

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receiver.

The Kobra Defendants have not cited any

Plaintiffs’ motion is accordingly granted.

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III. ORDER
Plaintiffs’ motions for Entry of Judgment and Appointment

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of a Receiver are GRANTED.

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submit a proposed final judgment that accords with this order

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and is approved as to form by Plaintiffs within 10 days.

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The Kobra Defendants are ordered to

IT IS SO ORDERED.
Dated: July 3, 2013

____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE

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