Judge: Armen Tamzarian, Case: 20STCP01873, Date: 2023-01-06 Tentative Ruling
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Case Number: 20STCP01873 Hearing Date: January 6, 2023 Dept: 52
Respondent’s Extended Vision, LLC, Farhad Eliasi aka Fred Eliasi, and Elad Benisti’s Motion to Extinguish Lien and Release Funds
Respondents Extended Vision, LLC, Farhad Eliasi aka Fred Eliasi, and Elad Benisti move for an order extinguishing the judgment lien recorded by the Los Angeles County Registrar-Recorder/County Clerk and returning $90,600.22 from the court’s registry to respondents.
Procedural History
Petitioner Eyal Raziel filed this action, a petition for writ of mandate to compel inspection of books, in June 2020. Respondents moved to compel arbitration, and the court ordered the parties to arbitrate this dispute.
On May 13, 2022, the arbitrator issued an award of $90,600.22 for petitioner for “Attorneys’ Fees of $78,907.50” as set forth in two orders granting attorney fees and costs (Levinson Decl. ISO Petition to Confirm Arbitration Award, Ex. B, Final Award, p. 11, ¶ 2) plus “Costs of $21,383.16” as set forth in the same two orders (id., p. 11, ¶ 3). Raziel petitioned to confirm the arbitration award. The court granted the motion and, on July 27, 2022, entered judgment of $90,600.22 for petitioner Raziel.
Respondents filed a notice of appeal of the judgment on August 23, 2022. On petitioner’s request, the court then issued a writ of execution to enforce the judgment. The Los Angeles County Sheriff ultimately levied more than the amount of the judgment from respondents. Respondents therefore applied to recall and quash the writ of execution. The court granted their application and ordered the return of the amount exceeding the judgment, but required the Sheriff to deposit $90,600.22 with the court registry.
Code of Civil Procedure § 917.1(d)
Respondents contend their appeal stayed enforcement of the judgment without requiring an undertaking. Generally, appealing a money judgment does not stay enforcement of the judgment without giving an undertaking. (CCP § 917.1(a)(1).) But “no undertaking shall be required pursuant to this section solely for costs awarded under Chapter 6 (commencing with Section 1021) of Title 14.” (CCP § 917.1(d).)
The court finds this judgment is a money judgment that requires an undertaking to stay enforcement. The Supreme Court of California has held that application of the exception under section 917.1(d) turns on whether the costs awarded are routine. (Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 802 (Bank of San Pedro).) “[N]onroutine costs must be treated differently from routine costs.” (Ibid.) Section 917.1(d) does not apply when “an award is neither routine nor incidental to the judgment.” (Id. at p. 803.) Such a “judgment is therefore not automatically stayed by the perfecting of an appeal. An undertaking consistent with the relevant statutes is required to effect a stay pending appeal.” (Id. at p. 805.)
In Bank of San Pedro, the Supreme Court of California held an award of expert witness fees to the defendant under Code of Civil Procedure section 998(c) was a money judgment not subject to the routine cost exception. (Bank of San Pedro, supra, 3 Cal.4th at p. 805.) The Court reasoned that such an award was “nonroutine in at least two key respects.” (Id. at p. 803.) “First, routine costs under section 1032, subdivision (b) are awarded only to the prevailing party,” but “a losing defendant can recover its costs” under section 998(c). (Ibid.) “Second, even when a defendant is entitled as a matter of right to other costs under section 998, subdivision (c), an award of expert witness fees is always within the trial court’s discretion.” (Ibid.)
The Court of Appeal has also held that an award of attorney fees to a defendant on a successful anti-SLAPP motion is not a routine cost and is not automatically stayed on appeal. (Dowling v. Zimmerman (2001) 85 Cal.App.4th 1400, 1431-1432 (Dowling).) The court held such an award “is not routine because it is not reciprocal”; a prevailing plaintiff “is not entitled to recover fees and costs under the anti-SLAPP statute simply by prevailing on the motion” and instead must show the motion was frivolous. (Id. at pp. 1432-1433.)
Here, the arbitrator awarded attorney fees under Corporations Code section 17704.10, subdivision (g), which provides: “[I]f the court finds the failure of the limited liability company to comply with the requirements of this section is without justification, the court may award an amount sufficient to reimburse the person bringing the action for the reasonable expenses incurred by that person, including attorney’s fees, in connection with the action or proceeding.”
Reimbursement of these expenses was not routine or incidental for two reasons. First, such an award requires a specific finding that the LLC violated the law “without justification.” (Corp. Code, § 17704.10(g).) That an LLC violated the law without justification is not a routine matter that would be “ ‘included in virtually every case’ ” (Bank of San Pedro, supra, 3 Cal.4th at p. 802), nor even in virtually every case under Corporations Code section 17704.10. Determining that requires factfinding and exercising judgment. It is not routinely awarded to the prevailing party, as under Code of Civil Procedure section 1032 or Civil Code section 1717. Second, any reimbursement is discretionary. The statute provides that, if the LLC acted without justification, “the court may award” reimbursement, not that the court shall or must do so. (Corp. Code, § 17704.10(g).)
Respondents argue the arbitrator awarded routine costs under Civil Code § 1717. The court disagrees. Initially, the arbitrator ruled, “Respondents’ failure to allow Claimant to inspect and copy the books, records, and documents long before now was unjustified, and Claimant is therefore entitled to recover an amount sufficient to reimburse him for his reasonable expenses, including attorneys’ fees, incurred in connection with inspecting and copying the Company’s records. [Corp. Code § 17704.10(g).]” (Levinson Decl. ISO Petition to Confirm Arbitration Award, Ex. E, p. 8.) Neither the final award (id., Ex. B), the order granting the petition for writ of mandate (id., Ex. E), nor the order granting Raziel’s first motion for attorney fees (id., Ex. M) relies on or even mentions the LLC operating agreement’s provision for attorney fees or Civil Code section 1717. Of the four relevant orders, only the order granting Raziel’s second motion for attorney fees relies on or refers to the contractual fee provision—and it does so only in finding that “consulting CPA charges of $2,975.00” are recoverable under the contract, if not under the Corporations Code. (Id., Ex. N, pp. 13-14.) The $90,600.22 judgment arises either entirely or almost entirely from Corporations Code section 17704.10(g).
Respondents’ reliance on Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532 is misplaced. There, the plaintiff wo a judgment of attorney fees and costs under former Civil Code 1354, subdivision (c), which provided, “In an action to enforce the governing documents” of a common interest development, “the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Id. at pp. 1541, 1546.) The court distinguished Dowling and Bank of San Pedro because “the statutory award of attorney fees under Civil Code section 1354 is expressly awarded to the prevailing party (i.e., it is reciprocal), such attorney fees are awarded as a matter of right, and there is no discretion afforded to the trial court in granting or denying such fees.” (Id. at p. 1546.)
Here, those factors are reversed. An award under Corporations Code section 17704.10(g) it is not reciprocal. It can only be awarded to an LLC’s member, not to the LLC. Reimbursement is not awarded as a matter of right, but only when the LLC violated the Corporations Code “without justification.” (Corp. Code, § 17704.10(g).) Finally, a court has discretion to deny those fees—even if the LLC acted without justification—because the statute provides that a court “may award” reimbursement. (Corp. Code, § 17704.10(g).)
The court therefore finds the judgment against respondents is a money judgment under Code of Civil Procedure section 917.1(a). The exception under section 917.1(d) does not apply. Staying the judgment pending appeal requires an undertaking.
Code of Civil Procedure § 917.9
In the alternative, assuming Code of Civil Procedure section 917.1(d) applies and the judgment is automatically stayed, the court exercises its discretion to require an undertaking under Code of Civil Procedure section 917.9. Section 917.9, subdivision (a)(3) provides: “The perfecting of an appeal shall not stay enforcement of the judgment or order in cases not provided for in Sections 917.1 to 917.8, inclusive, if the trial court, in its discretion, requires an undertaking and the undertaking is not given” when the “judgment against appellant is solely for costs awarded to the respondent by the trial court pursuant to Chapter 6 (commencing with Section 1021) of Title 14.” By enacting this statute, the Legislature recognized that “injury to the respondent [on appeal] can result from a stay even where the appellant is not required” to post an undertaking under the applicable statutes. (Estate of Murphy (1971) 16 Cal.App.3d 564, 568.)
Respondents argue Code of Civil Procedure section 917.9(a)(3) does not apply because the judgment is not “solely for costs awarded to the respondent by the trial court pursuant to Chapter 6 (commencing with Section 1021) of Title 14.” But respondents argue the opposite. They argue section 917.9(a)(3) does not apply because “The Judgment against Defendants was solely for costs awarded to the Plaintiff by the Court pursuant to Chapter 6 (commencing with Section 1021) of Title 14.” (Motion, pp. 6-7.) That is when section 917.9(a)(3) applies.
Moreover, if respondents are right that the judgment was not solely for costs, then section 917.1(d) does not apply. The judgment of $90,600.22 would therefore be a money judgment stayed only upon giving an undertaking under section 917.1(a), as the court found above.
Respondents further argue the judgment was not “solely for costs” because it also “included: 1. Defendants to produce corporate records to Plaintiff in conformity with Corporations Code, § 17704.10 (already performed).” (Reply, p. 4.) The matters embraced by the appeal do not include the impossible task of unringing that bell. This appeal concerns the money judgment, not the “already performed” inspection under Corporations Code section 17704.10.
The court finds it appropriate to require a discretionary undertaking for several reasons. First, $90,600.22 is a substantial amount, and it consists solely of reimbursement of Raziel’s expenses. There are no damages. Unlike some other cases, appellants did not pay damages while appealing only the costs. (See, e.g., Ziello v. Superior Court (1999) 75 Cal.App.4th 651, 655.)
Second, the dispute between the parties is intense. The arbitrator found respondents violated Corporations Code section 17704.10 without justification, which suggests they might act in bad faith toward Raziel. The parties are also litigating a related unlimited civil case.
Third, the $90,600.22 judgment (and initially an extra $130,000) was already levied from respondents in September 2022. The amount levied far exceeds the cost of securing a sufficient undertaking. Though respondents have been without that money for months, they do not show they have suffered any harm as a result.
After considering these and all other relevant factors, the court exercises its discretion to require an undertaking to stay the judgment pending appeal under Code of Civil Procedure section 917.9. The court, however, is holding the amount of the judgment. That is an adequate alternative to giving an undertaking.
Extinguishing Lien and Staying Judgment
In this motion, respondents also seek to extinguish Raziel’s judgment lien. “If enforcement of the judgment is stayed on appeal by the giving of a sufficient undertaking under Chapter 2 (commencing with Section 916) of Title 13: (1) Existing liens created under this division are extinguished. (2) New liens may not be created under this division during the period of the stay.” (CCP § 697.040(a).)
The levying officer levied the amount of the judgment ($90,600.22) and deposited it with the court. That is functionally equivalent to respondents giving a sufficient undertaking. There is no risk that Raziel would be unable to collect the judgment. If respondents’ appeal fails, the court will release the funds to Raziel. Thus, there is no basis for maintaining the judgment lien or permitting new liens. Moreover, Raziel stipulated that the funds would be deposited with the court instead of released to him. (Oct. 11, 2022 Stipulation and Order, ¶¶ 1, 4.) The court therefore will extinguish the judgment lien.
Raziel’s opposition does not address extinguishing the judgment lien. Raziel refers to the amount held by the court as “the current undertaking.” (Opp., p. 4.) The opposition further argues, “The judgment amount of $90,600.22 is already deposited in the Court’s registry. No affirmative action would need to be taken. The funds can remain in the registry during appeal, ensuring that amount is secured to cover payment of the judgment.” (Ibid.) The opposition implies Raziel agrees that the court keeping the funds suffices as an undertaking to stay enforcement of the judgment.
The court also finds that keeping the amount of the judgment satisfies the purpose of requiring an undertaking, so respondents have given a sufficient undertaking. The judgment is therefore stayed on appeal.
Disposition
The motion is granted in part.
The court hereby extinguishes the abstract of judgment lien recorded by the County of Los Angeles Recorder-Registrar/County Clerk on August 5, 2022, as instrument No. 20220793596. (Catanzarite Decl., Ex. C.) The court hereby orders that enforcement of the judgment is stayed and new liens may not be created during the stay.
The motion is denied in part as to releasing the $90,600.22 to respondents. In lieu of the court holding the funds, respondents may give an undertaking pursuant to Code of Civil Procedure section 917.1. If respondents do so, the court will release the funds to them.