Judge: Anne Richardson, Case: BC651307, Date: 2023-12-20 Tentative Ruling

Case Number: BC651307    Hearing Date: February 29, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiff/Cross-Defendant HTL Automotive, Inc. (HTL) sued Defendant/Cross Complainant  1351 Orizaba Avenue, LLC (Orizaba) pursuant to a February 22, 2017 Complaint alleging claims of (1) Breach of Written Contract and (2) Breach of the Implied Covenant of Good Faith and Fair Dealing.

In turn, Orizaba sued HTL (dba Hooman Toyota of Long Beach) and Cross-Defendants Hooman Michael Nissani (Nissani) and Does 1-100 pursuant to an April 10, 2017 Cross-Complaint alleging claims of (1) Breach of Contract and (2) Permitting Waste Upon Premises.

The claims arose from allegations related to a lease of commercial property by Orizaba from HTL Automotive and events taking place on that property.

Between May 20 and May 25, 2019, the Court held a non-jury trial.

On March 6, 2020, the Court issued a statement of decision.

That same day, the Court granted judgment in favor of Orizaba as to the Complaint and Cross-Complaint, awarding $746,830.34, jointly and severally, against Nissani and HTL.

On April 13, 2020, HTL and Nissani noticed an appeal.

On May 4, 2021, the Court signed an amended judgment, which added $190,923.75 in fees and $5,389.45 in costs to the original judgment, for a total award of $943,116.54 against HTL and Nissani.

On May 17, 2021, the appeal was dismissed based on default.

On January 12, 2022, the Court issued charging orders against twelve limited liability companies (the LLCs) in which Nissani held an interest, ordering that the LLCs make distributions allocated to Nissani to Orizaba, up to the satisfaction of judgment.

On September 24, 2021, the appeal was reinstated.

On November 15, 2022, the court of appeal affirmed the March 6, 2020 judgment and awarded costs to Orizaba on appeal.

On January 18, 2023, the court of appeal issued remittitur.

On October 19, 2023, Orizaba moved for fees and costs related to the appeal pursuant to Code of Civil Procedure sections 1717 and 685.040. The motion notes that HTL and Nissani have failed to satisfy the May 4, 2021 amended judgment.

That same day, Orizaba filed a motion for an order appointing Invenz, Inc., through its Chief Executive Officer, Richard Munro, as receiver over the interest of Cross-Defendant Nissani in nine separate limited liability companies that are subject to the January 25, 2022 charging orders.

On December 7, 2023, HTL and Nissani filed oppositions to the motions.

On December 13, 2023, Orizaba filed replies to the oppositions.

On December 20, 2023, the Court ruled on Orizaba’s motions, granting attorney’s fees in the amount of $130,565.15, denying costs of $8,798.15, and continuing the hearing on the receiver motion to January 31, 2024, with Orizaba to file further briefing by January 6, 2024 as to the bases for the authority and scope of the receiver’s powers, plus any exhibits or declarations, Nissani to oppose by January 18, 2024, and Orizaba to reply by January 24, 2024.

Motion Before the Court

On January 2, 2024, the Court entered the second amended judgment.

On January 3, 2024, the Clerk gave notice of entry of judgment.

On January 5, 2024, Orizaba filed its supplemental briefing for the receiver’s authority.

On January 22, 2024, Nissani filed an opposition.

On January 23, 2024, Nissani filed an ex parte application to continue the hearing on the motion to appoint a receiver.

That same day, Orizaba filed an opposition to the ex parte application.

On January 24, 2024, the Court granted the ex parte application and advanced and continued the hearing on the motion to appoint receiver to February 29, 2024.

That same day, Orizaba filed its reply documents.

Orizaba’s motion to appoint receiver is now before the Court.

Motion to Appoint Receiver

Legal Standard

On application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor. (Corp. Code, § 17705.03, subd. (a).)

To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subdivision (a), the court may do any of the following:

(1) Appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made.

(2) Make all other orders necessary to give effect to the charging order.

(3) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Section 17705.02.

(Corp. Code, § 17705.03, subds. (b)(1)-(3).)

Such relief does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s transferable interest. (Corp. Code, § 17705.03, subd. (e).) Neither does such relief provide the exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest. (Corp. Code, § 17705.03, subd. (f).)

Order Appointing Receiver: GRANTED [Receiver, Appointment, and Proposed Order].

I. Parties’ Initial Papers

In its initial motion, Orizaba sought an order for the appointment of a receiver over Cross-Defendant Nissani’s interests in nine limited liability companies:

(1) 737 N La Brea LLC;

(2) 3170 Cherry Avenue Property LLC;

(3) 3399 Willow Sr LLC [named 3399 E. Willow Sr LLC in the charging order];

(4) Cielo S Holding LLC;

(5) KIP Prop LLC;

(6) Redondo Prop LLC;

(7) Ridge Property LLC;

(8) SJS Long Beach LLC; and

(9) Slauson Gas Station LLC.

(Received Mot., Proposed Order [the Receiver Order LLCs].)

Orizaba filed its motion on the grounds that it has secured a $943,116.54 judgment against Nissani, which Nissani has failed to pay, despite this Court granting twelve charging orders for Nissani’s distributions, up the judgment amount, in:

(1) 737 N La Brea LLC;

(2) 3170 Cherry Avenue Property LLC;

(3) Cielo S Holding LLC;

(4) KIP Prop LLC;

(5) Lennox Car Wash Properties LLC;

(6) 3399 Willow Sr LLC [named 3399 E. Willow Sr LLC in the charging order];

(7) Playa Vista Real Estate II LLC;

(8) Redondo Prop LLC;

(9) Ridge Property LLC;

(10) SJS Long Beach LLC;

(11) Slauson Gas Station LLC; and

(12) Culver City Prop LLC.

(Receiver Mot., Cole Decl., Ex. B [1/25/22 Charging Orders; the Charging Orders LLCs]; see Receiver Mot., pp. 2-6; Receiver Opp’n, 2-3; Receiver Reply, pp. 2-6.)

II. Court’s Prior Order

On December 20, 2023, the Court issued a tentative order to appoint a receiver, but continued the hearing for further briefing.

As concluded by the moving party, “In order to facilitate the collection of the judgment in this action, the Court granted twelve charging orders on January 25, 202[2]. These orders direct the distributions that the LLCs would have paid Nissani should be paid to Orizaba, up to the satisfaction of judgment. (1/25/22 Orders.) Such distributions have not occurred. (Receiver Mot., Cole Decl., ¶ 5.) The judgment is otherwise not satisfied. (Receiver Mot., Cole Decl., ¶ 2.) Nissani has impeded discovery efforts as to whether the LLCs have paid any distributions to him. (Receiver Mot., Cole Decl., ¶ 6.) As a result, Orizaba brings this motion seeking to have a receiver appointed to ensure proper distributions to Orizaba, as well as additional powers needed to effectuate the charging orders. (See Receiver Mot., p. 6.)

Nissani—through his opposition, which is unsupported by a declaration—does not deny that he has received distributions from the LLCs despite the charging orders, instead arguing that Orizaba has not met its burden of showing evidence that any distributions were ever made. Neither has Nissani offered documents from the LLCs to show that no distributions were made to him by the LLCs as of January 25, 2022. (Receiver Opp’n, p. 3.)

Thus, to effectuate the distributions pursuant to the January 25, 2022 charging orders, the Court finds that it is appropriate to appoint a receiver, with the power to make all inquiries the judgment debtor might have made. (Corp. Code, § 17705.03, subd. (b)(1).)”

(12/20/23 Minutes, p. 11.)

However, the Court requested further briefing on the issue of electing a receiver, determining that “Orizaba need[ed] to further elaborate on the numerous grounds for additional powers conferred to the receiver in its proposed order.”

The Court tentatively granted the motion to appoint a receiver subject to further briefing on the scope of the receiver’s powers. (12/20/23 Minutes, p. 12.)

III. Supplemental Briefing

In its supplemental briefing, Orizaba argues that Corporations Code section 17705.03, subdivisions (b)(1)-(2) give courts the authority to appoint receivers in relation to charging orders, with the power to make all inquiries the judgment debtor might have made, and to make all necessary orders to give effect to those charging orders. Orizaba argues that this authority is harmonious with the trial court’s wide discretion to approve receiver powers pursuant to Code of Civil Procedure section 568. Next, Orizaba explains that the only available authority on point for the scope of receiver powers was Phillips, Spallas & Angstadt, LLP v. Fotouhi (2011) 197 Cal.App.4th 1132, 1138 (Fotouhi), which included an order to pay income directly to the judgment creditor and an appointment of a receiver and auditor to facilitate the payment, with Orizaba modeling its proposed order to contain similar powers for the proposed receiver in seeking satisfaction of judgment. Last Orizaba explains the logical relationship between the proposed order’s terms and the enforcement of the charging orders. (Supp. Mot., pp. 1-5; see 10/19/23 Proposed Order.)

In his supplemental opposition, Nissani argues that the appointment of a receiver to enforce a money judgment is a judicial error. Nissani also explains that he has not been evading service, that he is not at fault for the actions of third parties, that he has made efforts to settle this case for $500,000 and that Nissani has instituted a lawsuit against two insurers to obtain insurance coverage for the loss and payoff of the judgment. Next, Nissani argues that the supplemental documents fail to attach evidence of the qualifications of and assent to appointment as receiver. Last, Nissani argues that if the Court appoints a receiver, the powers should be limited to permitting the receiver to make inquiries from the Receiver Order LLCs as Nissani might have made, which is the alleged extent of the applicable statutory section. (Supp. Opp’n, pp. 2-4.)

In its supplemental reply, Orizaba references the Court’s December 20, 2023 order to argue that Nissani rehashes arguments that the Court previously resolved when it determined that a receiver should be appointed but asked for further briefing on the scope of permissible powers. Orizaba then argues that the only new section of briefing from Nissani is Section III of the supplemental opposition, which highlights Nissani’s initiation of a lawsuit against his insurer, attaches a copy of the draft complaint without confirmation of filing from a clerk, and which does not show good faith efforts to facilitate a settlement in this matter. Last, Orizaba argues that Code of Civil Procedure section 1858—referenced in the supplemental opposition as prohibiting courts from inserting their own provisions when interpreting statutes—does not conflict with Corporations Code sections 17705.03, subdivision (b)(2) and Code of Civil Procedure section 568, which permit courts to give receivers the additional powers necessary to effectuate charging orders. (Supp. Reply, pp. 1-3.)

IV. Discussion

The Court finds in favor of Orizaba.

The Court first adopts its discussion in the December 20, 2023 order, quoted above, to determine that the appointment of a receiver is proper here to “effectuate the distributions pursuant to the January 25, 2022 charging orders, …, with the power to make all inquiries the judgment debtor might have made. (Corp. Code, § 17705.03, subd. (b)(1).)” (12/20/23 Minutes, p. 11.)

The Court also determines that additional powers pursuant to subdivision (b) are proper given Nissani’s lack of forthcoming discovery as to distributions from the Charging Orders LLCs.

The Court also determines that the elected receiver—Invenz, Inc.—is a proper receiver for the purposes of the Court’s order, with the Declaration of Richard Munro, attached CV, and sample of a prior appointment order as receiver supporting this determination. (Supp. Mot., Munro Decl., ¶¶ 1-10, Exs. 1-3.)

The Court last determines that the powers enumerated in the proposed order are proper. (See 10/19/23 Proposed Order.) While Nissani argues that the order goes too far, the Court determines that the strict powers enumerated in the proposed order would allow the receiver to properly determine whether income is being received and properly distributed by the Receiver Order LLCs. Permitting the receiver to have full control of the LLCs and the physical items tied to the LLCs will assist in this endeavor. The Court adds that it determines the order is consistent with Fotouhi in seeking to obtain an order facilitating the enforcement of a charging order.

The Court notes that the opposition does not provide any evidence to counter the Court’s prior determination as to Nissani’s opaqueness on the question of income and distributions related to the Receiver Order LLCs, where Nissani has impeded discovery efforts as to whether the LLCs have paid any distributions to him. (Receiver Mot., Cole Decl., ¶ 6.) 

Conclusion

Defendant/Cross-Complainant 1351 Orizaba Avenue, LLC’s Supplemental Motion to Appoint a Receiver [CCC [sic] § 17705.03(b)] is GRANTED.

The proposed order lodged on October 19, 2023 will be signed by the Court, and the Court will set an OSC re: status of receivership in approximately four months.