Judge Curtis A. Kin, Case Number: 24STCV21674, Date: 2025-01-30 Tentative Ruling

Judge: Curtis A. Kin, Case: 24STCV21674, Date: 2025-01-30 Tentative Ruling

Case Number: 24STCV21674 Hearing Date: January 30, 2025 Dept: 86

ORDER TO SHOW CAUSE

RE: PRELIMINARY INJUNCTION

Date: 1/30/25 (1:30 PM)

Case: SB Estates, LLC v. Davit Chitchyan et al. (24STCV21674)

TENTATIVE RULING:

Plaintiff SB Estates, LLC’s request for a preliminary injunction is GRANTED, subject to the conditions discussed below.

Defendant Davit Chitchyan’s evidentiary objections are OVERRULED.

I. FACTUAL AND PROCEDURAL BACKGROUND

This is a fraudulent transfer action. On March 26, 2024, plaintiff SB Estates, LLC obtained a default judgment against defendant Edgar Majyan in the amount of $499,322.76. (Denisov Decl. ¶ 2 & Ex. A.)

In April 2024, Majyan purchased real property located at 17350 Angelaine Way in Los Angeles (“Property”). (Denisov Decl. ¶ 3.) On May 22, 2024, Majyan recorded a Quitclaim Deed evidencing a transfer of the Property to defendant Davit Chitchyan for no consideration. (Denisov Decl. ¶ 4 & Ex. B.) On January 4, 2025, defendants signed an agreement to sell the Property to a prospective buyer. (Denisov Decl. ¶ 6.)

On August 26, 2024, plaintiff filed a Complaint. On January 8, 2025, pursuant to plaintiff’s ex parte application, the Court issued a temporary restraining order enjoining defendants from selling the Property. The Court also issued an order to show cause why a preliminary injunction ordering defendants not to sell the Property pending trial should not issue.

Defendant Chitchyan filed an opposition on January 22, 2025. No reply was filed.

II. ANALYSIS

Plaintiff seeks a preliminary injunction enjoining the sale of the Property. Plaintiff contends that defendant Majyan purchased the Property in April 2024 and transferred it the following month in order to hinder enforcement of the default judgment against him. (Denisov Decl. ¶ 4.)

Defendant Chitchyan opposes plaintiff’s request for injunctive relief on the grounds that he claims he is the equitable owner of the Property. Defendant Chitchyan contends that he wanted to buy the Property but was unable to secure financing due to having recently moved to the United States and lacking credit. (Chitchyan Decl. ¶ 3.) Majyan purportedly agreed to help Chitchyan by applying for a loan and conveying title to Chitchyan after escrow closed. (Chitchyan Decl. ¶ 3.) Chitchyan contends that Majyan has never lived in the Property or paid expenses associated with the Property. (Chitchyan Decl. ¶ 4.) Chitchyan states he has paid utilities, property insurance, solar panels, and the mortgage associated with the Property. (Chitchyan Decl. ¶¶ 4-9 & Exs. A-E.) Chitchyan now wants to sell the Property because he is 67 days behind on his payments and would rather sell the Property than fall further behind on his payments and be subject to foreclosure. (Chitchyan Decl. ¶¶ 11. 12, 13 & Ex. E.) Chitchyan contends that he did not know about the judgment against Majyan at the time Majyan obtained a loan to purchase the Property. (Chitchyan Decl. ¶ 14.)

“[T]he question whether a preliminary injunction should be granted involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative balance of harms that is likely to result from the granting or denial of interim injunctive relief.” (White v. Davis (2003) 30 Cal.4th 528, 554.)

With respect to the likelihood of prevailing on the merits, the Complaint asserts a claim for Fraudulent Transfer under the Uniform Voidable Transactions Act (“UVTA”) as the first cause of action. The UVTA, codified in Civil Code §3439, et seq., provides as follows:

“A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:

(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.

(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:

(A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.

(B) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.”

(Civ. Code § 3439.04(a).)

“A fraudulent conveyance under the [UVTA] involves a transfer by the debtor of property to a third person undertaken with the intent to prevent a creditor from reaching that interest to satisfy its claim.” (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 829, quotations omitted.) The UVTA’s purpose is “to prevent debtors from placing property which legitimately should be available for the satisfaction of demands of creditors beyond their reach.” (Chichester v. Mason (1941) 43 Cal.App.2d 577, 584.)

Actual intent may be indicated by “[w]hether the transfer or obligation was to an insider,” “[w]hether the debtor retained possession or control of the property transferred after the transfer,” “[w]hether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred,” and “[w]hether the transfer occurred shortly before or shortly after a substantial debt was incurred.” (Civ. Code § 3439.04(b)(1), (2), (8), (10).)

With respect to whether the debtor retained possession or control of the Property after the transfer, the evidence before the Court indicates that Majyan, the debtor, never occupied the Property. Chitchyan occupies the Property and appears to be paying for all related expenses. (Chitchyan Decl. ¶¶ 4-9 & Exs. A-E.)

However, the other indicators of actual intent to hinder plaintiff weigh against defendants. With respect to whether the transfer was to an insider, the Court finds it reasonably probable petitioner would so prove at trial, based on the evidence presented. Chitchyan admits that Majyan agreed to help him secure a loan and, in the absence of any other explanation or evidence, it is logical to conclude that such an undertaking by Majyan is due to his closeness and relationship with Chitchhyan. In this regard, it is hard to ignore that, as of November 2024, Majyan is on the hook for $1,086,418.07, accruing interest at a rate of 9.75%. (Chitchyan Decl. ¶ 9 & Ex. E.) On this record, the only reasonable explanation for Majyan having taken on such an obligation and entered into an arrangement with Chitchyan is due to their close relationship of trust, i.e., as insiders.

With respect to whether the debtor received reasonably equivalent value for the Property, the Quitclaim Deed indicates that Majyan transferred the Property for no consideration. (Denisov Decl. ¶ 4 & Ex. B.) With respect to whether the transfer occurred shortly before or after a substantial debt was incurred, a default judgment of nearly $500,000 was entered against Majyan on March 26, 2024. (Denisov Decl. ¶ 2 & Ex. A.) In April 2024, Majyan purchased the Property and then transferred it to Chitchyan for no consideration on May 22, 2024, less than two months after entry of the default judgment. (Chitchyan Decl. ¶ 3; Denisov Decl. ¶ 4 & Ex. B.)

Under these circumstances, the Court finds that the factors of actual intent weigh in favor of a finding that the transfer of the Property from Majyan to Chitchyan was a fraudulent transfer under Civil Code § 3439.04. Moreover, to the extent Chitchyan might have some claim to the property as an equitable owner, the UVTA appears not to contain any exception for a purported owner whose only claim to title is in equity. Chitchyan cites no authority indicating that equitable owners can prevent creditors from voiding a fraudulent transfer simply by virtue of being an equitable owner. The intent of the debtor, i.e., Majyan, is paramount in the determination of whether the transfer of the Property from Majyan to Chitchyan was a fraudulent transfer.

For the foregoing reasons, the Court finds that plaintiff is likely to prevail on the merits.

With respect to the balance of harms, plaintiff contends that, if the sale of the Property to a third party were allowed to be finalized, the proceeds could be siphoned away from plaintiff’s reach. (Denisov Decl. ¶ 6.) That is not necessarily true, as the sale proceeds would be held in escrow prior to distribution to anyone. Here, it appears undisputed that Chitchyan is unable to pay the mortgage on the Property. (Chitchyan Decl. ¶¶ 12, 13 & Ex. B.) Thus, if sale of the property were prevented, the total balance on the loan would only increase, thereby making the obligation to the lender even more onerous. As the obligation to the lender increases, any remaining equity in the Property that might be used to satisfy the default judgment against Majyan would correspondingly decrease.

Consequently, weighing the balance of harms, and considering how best to preserve the status quo so there may be something left to satisfy any judgment in favor of plaintiff if plaintiff ultimately prevails on the merits in this action, the Court exercises its discretion to GRANT IN PART the request for preliminary injunction. The Court declines to enjoin any sale of the Property but will instead enjoin the transfer, distribution, or dissipation of any assets or funds from any sale of the Property, unless made pursuant to an Order obtained from this Court.

The Court shall hear from the parties as to the appropriate amount of undertaking the Court shall order pursuant to CCP 529(a) before any injunction shall take effect.

No later than 5 court days hereof, plaintiff shall submit a proposed order that comports with the ruling herein. The Temporary Restraining Order, entered 1/8/25, shall remain in effect until the earlier of 2/10/25 or entry of the Preliminary Injunction.