Judge: Elaine Lu, Case: 19STCV46720, Date: 2022-09-06 Tentative Ruling

Case Number: 19STCV46720    Hearing Date: September 6, 2022    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background       

             On December 27, 2019, plaintiff David M. Wolf filed this action for unpaid legal fees against numerous defendants, including Jack Banafsheha, individually and in his capacity as successor trustee of the Banafsheha Family Trust, the Soraya Banafsheha 2011 Trust, the Banafsheha Family Trust – 1992, and Zanetti (collectively “Judgement Debtors”).  On April 13, 2021, the Court entered judgment in favor of David M. Wolf (“Judgment Creditor”) against defendants Jack Banafsheha, individually and in his capacity as successor trustee of the Banafsheha Family Trust, the Soraya Banafsheha 2011 Trust, the Banafsheha Family Trust – 1992, and Zanetti.  (Default Judgments 4/13/21.)

            On July 8, 2021, third-party Elias Aziz-Lavi (“Lavi”) was examined pursuant to an order for appearance and examination.  (Minute Order 7/8/21.)  On August 11, 2021, Judgment Creditor filed a motion to compel third-party Lavi to comply with subpoena duces tecum, which the Court denied on September 2, 2021.  (Order 9/2/21.)

            On April 1, 2022, Judgment Creditor filed the instant motion for an order determining the interest of Judgment Creditor and Lavi as to property and for an order to turnover said property to Judgment Creditor.  On April 13, 2022, Lavi filed an opposition.  On April 18, 2022, Judgment Creditor filed a reply.

            On April 25, 2022, the Court continued the instant motion to September 6, 2022 for Judgment Creditor to file proof of service of the moving papers on Judgment Debtor.  (Minute Order 4/25/22.)  On July 15, 2022, Judgment Creditor filed proof of service of the instant motion on Judgment Debtor. 

Request for Judicial Notice

Judgment Creditor requests that the Court take judicial notice of:

a.       Judgment entered in this action on April 13, 2021 in favor of judgment creditor David M. Wolf and against judgment debtors Jack Banafsheha and Zanetti, a California corporation, in the sum of $381,866.54

b.      Judgment entered in this action on April 13, 2021 in favor of judgment creditor David M. Wolf and against judgment debtors Jack Banafsheha, an individual, as successor trustee of The Banafsheha Family Trust; Jack Banafsheha, an individual, as successor trustee of the Soraya Banafsheha 2011 Trust; and, Jack Banafsheha, an individual, as successor trustee of the Banafsheha Family Trust - 1992, in the sum of $319,658.97

c.       Judgment entered on April 3, 2019, in that action entitled Mojgan Banafsheha, et al. vs. Jack Banafsheha, et al., L.A.S.C. Case No. BC431152

d.      Online docket (first three pages only) for that action entitled Mojgan Banafsheha, et al. vs. Jack Banafsheha, et al., L.A.S.C. Case No. BC431152

e.       Online docket (first three pages only) for that proceeding entitled In re Banafsheha Family Trust – 1992, L.A.S.C. Case No. BP171696

f.        Online docket (first three pages only) for that action entitled In re Soraya Banafsheha 2011 Trust, L.A.S.C. Case No. BP171695

As the court may take judicial notice of court records, (See Evid. Code, § 452(c),(d)), the unopposed request for judicial notice is granted. However, the Court will not take judicial notice of the truth of assertions within the court records. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.)

Legal Standard

            “Upon ex parte application by a judgment creditor who has a money judgment and proof by the judgment creditor by affidavit … that a third person has possession or control of property in which the judgment debtor has an interest … in an amount exceeding two hundred fifty dollars ($250), the court shall make an order directing the third person to appear before the court, or before a referee appointed by the court, at a time and place specified in the order, to answer concerning such property ….”  (CCP § 708.120(a).)

            “[I]f a third person examined pursuant to Section 708.120 claims an interest in the property adverse to the judgment debtor or denies the debt, the court may, if the judgment creditor so requests, determine the interests in the property or the existence of the debt.”  (CCP § 708.180(a).)  “Code of Civil Procedure section 708.180 provides a summary procedure by which the trial court may determine the interests in property of the judgment debtor in the hands of a third party. This summary determination, however, may not be made if the third party's claim is made in good faith, and other circumstances exist.”  (Sea Foods Co., Ltd. v. O.M. Foods Co., Ltd. (2007) 150 Cal.App.4th 769, 777.)  “[T]he purpose of the statute is ‘to preclude a third person who has acted in bad faith from delaying the matter by compelling the judgment creditor to resort to a creditor's suit to determine the existence of the debt.’ [Citation.]”  (Id. at p.783.)

            “The third party claiming an interest in the property or denying the debt has the burden of proving, by a preponderance of the evidence, that the claim is made in good faith.”  (Ibid.)  “‘An individual's personal good faith is a concept of his own mind and inner spirit and, therefore, may not be conclusively determined by his protestations alone. The existence of ... good faith as a substantive fact, therefore, necessitates an examination and evaluation of external manifestations as well. [It] may be evidenced by facts and surrounding circumstances existing prior and subsequent to the acts [at issue].’ [Citation.]”  (Evans v. Paye (1995) 32 Cal.App.4th 265, 281.)  If the evidence of good faith is credible it “preclude[s] a determination of the debt in a summary procedure under section 780.180 (assuming any of the other conditions specified in subdivision (b) is satisfied), and would require that the issue of the debt be resolved in a creditor's action.”  (Id. at p.283.)  If the court rejects the third-party's claim of good faith, it may then order that the third party's debt to the judgment debtor be applied toward satisfying the money judgment by creating a lien on the debt.  (CCP § 708.205(a).)

Discussion

On February 4, 2010, a civil action was filed in the Los Angeles Superior Court, Mojgan Banafsheha, et al., v. Jack Banafsheha, et al., LASC Case No. BC431152 (“Prior Action”).  (Stanton Decl. ¶ 2.)  In July of 2010, the parties entered into an arbitration agreement in the Prior Action.  (Stanton Decl. ¶ 2; Wolf Decl. ¶ 5, Exh. 1.)  On February 23, 2011, Lavi was appointed as the neutral arbitrator for the panel of arbitrators in the Prior Action, consisting of three arbitrators, one chosen by each of the respective parties and a neutral arbitrator.  (Stanton Decl. ¶ 3.)  Judgment Debtor Jack Banafsheha individually and as trustee of various trusts was a party to the arbitration agreement and was represented by Judgment Creditor.  (Stanton Decl. ¶ 3; Wolf Decl. ¶ 5, Exh. 1.)  Pursuant to the Arbitration order, the parties were required to hold Lavi harmless for his services as an arbitrator and to pay the attorney’s fees and expenses he incurred as the neutral Arbitrator.  (Stanton Decl. ¶ 6; Wolf Decl, Exh. 1.) 

On March 11, 2013, the Arbitration Panel issued a Partial Final Award in the arbitration proceeding, which the Court confirmed on November 12, 2013.  (Stanton Decl. ¶ 6.)  Judgment Debtor Jack Banafsheha brought petitions in In re Banafsheha Family Trust 1992, Case No. BP171696 and In re Soraya Banafsheha Trust 2011, Case No. BP171695 against Lavi attacking the Partial Final award.  (Stanton Decl. ¶ 7.)  Lavi and his counsel brought motions which resulted in the dismissal of Banafsheha’s petitions on May 21, 2020.  (Stanton Decl. ¶ 8.)

After further litigation and appeals of the partial arbitration decision, a final decision was issued on October 1, 2018, which the court confirmed on April 3, 2019.  (Wolf Decl. ¶ 6; Request for Judicial Notice “RJN” C; Stanton Decl. ¶ 10.)  However, appeals by Judgment Debtor Jack Banafsheha delayed distribution of the final award until the appeals were resolved in 2020.  (Wolf Decl. ¶ 8; RJN D, E, F; Stanton Decl. ¶ 10.)  The final judgment in the prior action specified that:

[t]he Final Award determines all issues remaining to be arbitrated, including the distribution of funds in the Reserve Accounts. The distribution of funds in the Reserve Account will occur after the Court in this action confirms the Final Award and the time for appeal has expired, or if any party appeals, the appeal is concluded. The $500,000 reserve for contingencies (“Contingency Fund”) will be distributed among the parties after all expenses have been paid and the civil arbitration proceedings have concluded as described above and the probate court proceedings have concluded, including any appeal time has expired, or if an appeal is filed, the appeal is concluded, whichever occurrence is later.

(Wolf Decl. ¶ 7, RJN C.)

As a result of Judgment Debtor Jack Banafsheha’s litigation in In re Banafsheha Family Trust 1992, Case No. BP171696 and In re Soraya Banafsheha Trust 2011, Case No. BP171695 against Lavi attacking the Partial Final Award, approximately $200,000 of the $500,000 was spent on attorney’s fees for Lavi.  (Stanton Decl. ¶ 8.)

At the July 8, 2021 examination of Lavi in the instant action, Lavi produced a general ledger that showed that as of May 28, 2021 the remaining balance in the reserve was $261,803.04.  (Wolf Decl. ¶ 16, Exh. 7.)  On June 28, 2021, a check was written out of the reserve to Lavi for $120,000 leaving a balance of $141,803.04.  (Wolf Decl. ¶ 16, Exh. 7.)  Lavi testified that he paid himself $120,000 for services rendered as arbitrator from August 2018 until June 30, 2021.  (Wolf Decl. ¶ 17, Exhs. 8-9.)

            By way of the instant motion, Judgment Creditor seeks an order finding Judgment Creditor’s interest in the reserve to be $130,901.52, consisting of half of the remaining funds and half of the funds that Lavi paid himself on June 28, 2021 for his arbitration services.

Remaining Reserve Funds of $141,803.04

Lavi does not claim an interest to the $141,803.04 remaining in the reserve fund.

            Pursuant to Code of Civil Procedure section 708.180, for the Court to make a determination of an adverse claim or denial of debt by a third-party, there must be an adverse claim or denial of the debt.  (CCP § 708.180(a), [“if a third person examined pursuant to Section 708.120 claims an interest in the property adverse to the judgment debtor or denies the debt, the court may, if the judgment creditor so requests, determine the interests in the property or the existence of the debt.”], [italics added].) 

            Here, Lavi testified that “I'm holding this money and if you go back to my e-mails, I have informed both parties that I'm not going to make any further distribution unless I have guarantees. And this guarantee, either it could be under different form, one form that I suggested was to provide me with bank letters of credit for the next five years so that I can draw on that if I'm sued.”  (Wolf Decl., Exh. 8 at p.23:5-11.)  Levi’s statement that Lavi was not going to distribute the funds to the parties in the prior litigation absent guarantees does not indicate that Lavi is making a claim to the funds himself.  Lavi further expresses this point in his opposition where he notes that “Aziz-Lavi certainly did not testify that he would not pay to Wolf any money that is ultimately determined to be owed to the judgment debtors.”  (Opposition p.5:3-4.)

            To the extent that there is a dispute, there has been no showing of good faith as to any dispute.  Lavi conceded at his deposition that Judgment Debtors are entitled to half of the remaining funds.  (Wolf Decl., Exh. 8 at p.26:3-25] [“After all the adjustment is made, he is entitled to 50 percent.”].)  Accordingly, the Court determines that 50% of the remaining reserve funds – i.e., $70,901.52 – is to be applied to Judgment Creditor’s monetary judgment.

Payment of $120,000 to Lavi

            As to the payment of $120,000 for arbitration fees, Lavi plainly shows good faith in the dispute.

“Evidence that the third person's denial of a debt owing to the judgment debtor is made in good faith can take many forms. For example, good faith could be shown by evidence that the third person genuinely believed the debt never existed or, if there was a debt, by evidence of the third person's sincere belief that the obligation to the judgment debtor was dependent on a condition yet unfulfilled; that payment on the debt had been excused by the occurrence of some event subsequent to the obligation or by the judgment debtor's failure to perform; that the obligation was incurred through mistake or fraud; that an honest dispute exists as to the amount of the debt; or that the debt already had been satisfied, in whole or in part. Such evidence, if credible, would preclude a determination of the debt in a summary procedure under section 780.180 (assuming any of the other conditions specified in subdivision (b) is satisfied), and would require that the issue of the debt be resolved in a creditor's action.”  (Evans, supra, 32 Cal.App.4th at p.283.)

Here, pursuant to the final order in the prior action, the reserve funds were to be used to cover arbitration costs and expenses.  (RJN C.)  Lavi was the neutral arbitrator appointed by the Court on February 23, 2011.  (Stanton Decl. ¶ 3; Wolf Decl. ¶ 5, Exh. 1.)  The final order for the arbitration was not entered until October 1, 2018 and was entered as a final judgment in April 3, 2019.  (Wolf Decl. ¶ 6, RJN C; Stanton Decl. ¶ 10.)  Moreover, Judgment Debtor Jack Banafsheha sued Lavi in In re Banafsheha Family Trust 1992, Case No. BP171696 and In re Soraya Banafsheha Trust 2011, Case No. BP171695, attacking the Partial Final award.  (Stanton Decl. ¶ 7.)  Lavi and counsel brought motions which resulted in dismissal of the claims against Lavi on May 21, 2020.  (Stanton Decl. ¶ 8.)  In his billing statement, Lavi states that the $120,000 was for his services as an arbitrator from January 1, 2018 to March 31, 2021.  (Wolf Decl., Exh. 9.)  This billing was approved by the arbitration panel.  Though the billing statement is minimal and lacks specificity, given the context of the arbitration, nothing indicates that the claimed $120,000 is not in good faith.  Judgment Creditor cannot dispute that Lavi was the arbitrator as Judgment Creditor was involved with the underlying arbitration.  Moreover, the claimed billing is reasonable.  The billing occurred over three years. 

Thus, Lavi has asserted a claim to the $120,000 in good faith.  Accordingly, Lavi’s claim was made in good faith, Judgment Creditor can only challenge the $120,000 payment to Lavi through a separate creditor suit.  (CCP § 708.180(b)(3).)

CONCLUSIONS AND ORDER

Based on the forgoing, Judgment Creditor David M. Wolf’s motion for an order determining the interest of Judgment Creditor and Elias Aziz-Lavi as to property and for an order to turnover said property to Judgment Creditor is GRANTED IN PART.  The Court determines that 50% of the remaining reserve funds – i.e., $70,901.52 – is to be applied to Judgment Creditor’s monetary judgment.  The remaining challenged funds have been claimed in good faith and may only be resolved through a separate creditor action.

Moving Party is to give notice of this order and file proof of service of such.

DATED: September 6, 2022                                                  ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court