THE RYZMAN FOUNDATION INC. v. THE RYZMAN FOUNDATION INC.

Background

The court considered an order to show cause concerning a preliminary injunction after previously issuing a temporary restraining order. Ryzman had filed claims for fraudulent transfer, constructive fraudulent transfer, unjust enrichment, and false promise.

According to the evidence described by the court, Muza, Sandlin, and Doe defendants obtained a $7.5 million loan from Ryzman using the name of 83 NY Holding LLC as borrower. Fink allegedly assisted them. Muza represented during the loan process that she was the LLC’s managing member and had authority to pledge the LLC’s vacant property as collateral. She also represented that the loan would be used to build a single-family residence.

Muza later signed the promissory note and deed of trust while purporting to act for the LLC. Ryzman funded the loan, and escrow transferred $7,094,961 to a Bank of America account opened in the LLC’s name but allegedly controlled by Muza and/or Sandlin. Muza and the LLC did not make the required payments, and the loan went into default. Shortly before the lawsuit, the LLC’s attorney told Ryzman that the LLC had not authorized the loan and that Muza had no affiliation with or authority from the LLC.

Preliminary-Injunction Standard

The court applied the standard for a preliminary injunction, an order issued during a lawsuit to preserve the situation or prevent harm before a final judgment. Ryzman had to show a likelihood of success on the merits, a likelihood of irreparable harm without preliminary relief, that the balance of equities favored Ryzman, and that the injunction was in the public interest.

The court also explained that California law permits an injunction against further disposition of assets in an action under the Uniform Voidable Transactions Act. It noted that an asset-freezing injunction may also be available when a lawsuit seeks equitable relief, such as unjust enrichment, if the plaintiff shows that the assets are likely to be dissipated or that monetary damages may otherwise be unrecoverable.

Ruling

The court found that Ryzman had shown a likelihood of success on the merits, a likelihood of irreparable harm without preliminary relief, that the balance of equities favored Ryzman, and that the relief was in the public interest.

The court ordered that the Bank of America account remain frozen, so that no person or entity could make withdrawals, charges, debits, pledges, or transfers to or from the account. It restrained and enjoined Muza and Fink, along with their agents, employees, attorneys, and people acting in concert or participation with them, from charging, transferring, moving, using, pledging, or spending funds from that account or the loan proceeds wherever else they were located or maintained.

The court extended the temporary restraining order only as to Sandlin until Ryzman could serve him. The court also ruled that Ryzman was not required to post security for the preliminary injunction because it found no realistic likelihood of harm to the defendants from preventing use or dissipation of the funds.