Judge: Alison Mackenzie, Case: 19STCV01616, Date: 2025-01-07 Tentative Ruling

Case Number: 19STCV01616    Hearing Date: January 7, 2025    Dept: 55

NATURE OF PROCEEDINGS: Hearing on Plaintiff's Motion for an Order Authorizing the Sale of All Rights of Debtor to Stock of Zachary Enterprises, Inc.

The Court grants Defendant Amir Sarbaz’s application to continue the hearing.

BACKGROUND

Plaintiff Thomas J. Weiss filed this action against Amir Sarbaz, Kamran Sarbaz, and Luceren Vallley, LLC (Defendants), alleging Defendants failed to pay Plaintiff for legal services rendered.

On February 15, 2023, judgment was entered in favor of Plaintiff and against Defendants Amir and Kamran Sabraz, jointly and severally, in the amount of $78,987.16. As of October 1, 2024, the amount due, including interest, was $91,704.43.

Plaintiff filed a Motion for an Order Authorizing the Sale of All Rights of Debtor Amir Sarbaz to Stock of Zachary Enterprises, Inc. Amir did not file an opposition but instead filed an application to continue the hearing.

LEGAL STANDARD

“Detailed statutory provisions govern the manner and extent to which civil judgments are enforceable. In 1982, following the recommendations of the California Law Revision Commission, the Enforcement of Judgments Law (EJL) was enacted. The EJL appears in sections 680.101 through 724.260 and is a comprehensive scheme governing the enforcement of all civil judgments in California.” Imperial Bank v. Pim Electric, Inc. (1995) 33 Cal.App.4th 540, 546.

Code of Civil Procedure section 700.130 provides, “[t]o levy upon a security, the levying officer shall comply with Section 8112 of the Commercial Code. The legal process referred to in Section 8112 of the Commercial Code means the legal process required by the state in which the chief executive office of the issuer of the security is located and, where that state is California, means personal service by the levying officer of a copy of the writ of execution and notice of levy on the person who is to be served.” Under Commercial Code Section 8112, subdivision (e), “[a] creditor whose debtor is the owner of a certificated security, uncertificated security, or security entitlement is entitled to aid from a court of competent jurisdiction, by injunction or otherwise, in reaching the certificated security, uncertificated security, or security entitlement or in satisfying the claim by means allowed at law or in equity in regard to property that cannot readily be reached by other legal process.”

ANALYSIS

I. Continuance

The Court finds that the interests of justice weigh in favor of granting a short continuance to ensure that Amir Sarbaz can obtain counsel for himself and Zachary Enterprises Inc.

II. Stock

Additionally, the Court seeks additional briefing on the significance of the fact that no stock was issued.

“A share or similar equity interest issued by a corporation, business trust, joint stock company, or similar entity is a security.” Com. Code, § 8103, subd. (a). “‘Certificated security’ means a security that is represented by a certificate.’” Com. Code, § 8102, subd. (a)(4). “‘Uncertificated security’ means a security that is not represented by a certificate. Com. Code, § 8102, subd. (a)(18). “The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subdivision (d)….” Com. Code, § 8112, subd. (a). “The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States….” Com. Code, § 8112, subd. (b).

Defendant Amir Sarbaz is the sole director and officer of Zachary Enterprises Inc., a California Corporation (Zachary). On November 12, 2024, Plaintiff conducted a judgment debtor examination of Amir Sarbaz. Amir testified that he is the sole owner of any and all interests in Zachary Enterprises Inc. and that he has never issued any shares of stock to himself or anyone else. Declaration of Thomas J. Weiss ¶ 1. Because there is no stock, it is unclear precisely what Plaintiff seeks to levy.

In his motion, Plaintiff anticipates Zachary may not have issued any stock. He argues that he can levy Amir’s interest in the corporation under Code of Civil Procedure section 701.520 as a “general intangible.” The Commercial Code defines “general intangibles” as “any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.” Com. Code, § 9102, subd. (a)(42).

Plaintiff argues that “whatever rights Sarbaz may have as a shareholder of Zachary, or as a person who has a right to any shares which may be issued, including the right to elect directors and act for the company, constitute a “general intangible” under the Commercial Code. However, the relevant definition is found in Code of Civil Procedure section 680.210, which adopts the Commercial Code definition but restricts it to those “‘general intangibles’ … consisting of rights to payment.” Code Civ. Proc., § 680.210. As the rights Plaintiff describes go beyond rights to payment, they are not general intangibles within the meaning of the EJL. Therefore, the Court need not decide if those rights are general intangibles under the Commercial Code.

It appears to the Court that in the absence of any stock owned by Amir Sarbaz, there is no property interest in Zachary on which to levy. Amir Sarbaz cannot own a corporation in which he holds no stock. Moreover, insofar as Plaintiff wishes to collect on the corporation’s underlying assets, the judgment must first be amended to add Zachary Enterprises, Inc., as a non-party alter ego. See Curci Investments, LLC v. Baldwin (2017) 14 CA5th 214, 222, 221.

CONCLUSION

Plaintiff's Motion for an Order Authorizing the Sale of All Rights of Debtor to Stock of Zachary Enterprises, Inc. is continued to a later date.