Judge Elaine W. Mandel, Case Number: 20SMCV01315, Date: 2023-10-10 Tentative Ruling

Judge: Elaine W. Mandel, Case: 20SMCV01315, Date: 2023-10-10 Tentative Ruling

Case Number: 20SMCV01315 Hearing Date: November 17, 2023 Dept: P

Tentative Ruling

Give Back, LLC v. Mohamed Hadid et al., Case No. 20SMCV01315

Hearing Date November 17, 2023

Plaintiff’s Motion for Order Charging Judgment Debtor Hadid’s Membership Interest

Evidentiary Objections

Hadid objections: OVERRULED.

Give Back Objections: Objection 7 to Hadid Declaration SUSTAINED (speculative), Objections 2-3 to Munayyer declaration SUSTAINED (Hearsay as to Lud’s opposition, speculative), other objections OVERRULED.

On May 5, 2021 plaintiff/judgment creditor Give Back, LLC prevailed on a motion for summary judgment against defendant Hadid on a claim for breach of a guaranty agreement. After granting the motion, the court entered a judgment of $26,387,498.80 against Hadid. Give Back states the judgment remains unpaid in its entirety, and now totals $32,626,514.80 after statutory interest. Give Back moves for a charging order against Hadid’s membership interest in Tree Lane, LLC and Summitridge Development II, LLC. Give Back also argues the court should allow Hadid’s interest in the LLCs’ distributions to be immediately foreclosed upon and sold.

On October 10, 2023 the court issued a tentative ruling granting the proposed charging order. Judgment Debtor Hadid stated he had not been given notice of the motion. The court continued the hearing to November 17, 2023 to give Hadid the opportunity to file an opposition.

If a money judgment is entered against a member of an LLC, the debtor’s interest in distributions may be applied toward the satisfaction of the judgment by a charging order against the debtor’s interest in the LLC. Cal. Corp. Code §17705.03. A court may also order a foreclosure sale of transferable interests (i.e. the right to distributions) in an LLC at any time after issuing a charging order. Id.

Give Back states Hadid holds all his assets in LLCs, including the two named in this motion, and argues a charging order is the only method by which it can satisfy the judgment. Though this court has twice issued charging orders against other Hadid-affiliated LLCs, the full judgment remains outstanding. See 11/12/2021 Minute Order; 8/23/2021 Minute Order.

Give Back provided adequate evidence to show Hadid is the sole member of the two LLCS and the judgment remains entirely unsatisfied more than two years after it was issued. Richards declaration ¶¶6-7, exhibits A – D.

Hadid argues other secured lenders have prior, senior rights to distributions from the LLCs. He argues these prior liens on his membership interests justify denying the charging order. In support of this argument, he cites Rice v. Downs (2021) 73 Cal.App.5th 213, 231, wherein the court held a charging order is inferior to earlier-perfected liens. Id. Rice did not hold the charging order issued by the trial court was invalid because of these prior liens, or that it should not have been issued. Under Rice, a trial court may issue a charging order while senior liens on the LLC’s distributions exist; the charging order will simply create a new lien is inferior to existing liens.

The opposition notes a foreclosure sale under §17705.03(b)(3) does not actually transfer an ownership interest in the LLC, but simply the right to receive distributions. While this is correct, it is irrelevant as to whether a charging order should issue.

Hadid does not argue the judgment has been paid. Per Rice the existence of senior liens on LLC distributions does not prevent the court from issuing a charging order. A charging order is therefore appropriate. The court will not order an immediate foreclosure, since Give Back has not adequately proved that “distributions under a charging order will not pay the judgment debt within a reasonable time[.]” GRANTED as to the charging order, DENIED as to the request for foreclosure sale.