Judge: Gail Killefer, Case: BC666680, Date: 2022-10-24 Tentative Ruling

Case Number: BC666680    Hearing Date: October 24, 2022    Dept: 37

HEARING DATE:                 October 24, 2022   

CASE NUMBER:                  BC666680

CASE NAME:                        Wael HH Awad, et al. v. Harry Nadjarian, et al. 

MOVING PARTIES:             Defendants, Harry Nadjarian, Industrial Motor Power Corporation, and IMP Energy Solutions, LLC 

OPPOSING PARTIES:          Plaintiffs, Wael HH Awad and Al Qastal Heavy Equipment and Spare Parts Trading

TRIAL DATE:                        Post Judgment –Judgment entered February 4, 2022

PROOF OF SERVICE:          OK

MOTION:                               Defendants’ Motion for Charging Order  

OPPOSITION:                       None as of October 21, 2022.

REPLY:                                  No opposition filed.

TENTATIVE:                         Plaintiff’s motion is granted as to the request for a charging order. Plaintiff’s motion is otherwise denied without prejudice. Plaintiff is to give notice.

Background

This action arises in connection with the sale of Caterpillar (“CAT”) generators from Harry Nadjarian ("Nadjarian"), Industrial Motor Power Corporation ("IMP"), and IMP Energy Solutions, LLC ("IMPES") (collectively “Defendants”) to Al Qastal Heavy Equipment and Spare Parts Trading (“Al Qastal”) and its owner, Wael Awad (collectively “Plaintiffs”), in exchange for a forty percent (40%) stake in IMPES.

Plaintiffs filed their operative Complaint on June 28, 2017. Plaintiffs’ Complaint alleges TEN causes of action: (1) fraud; (2) rescission based on Fraud in the Inducement of a Contract (Civ. Code § 1689(b)(1)); (3) rescission based on unilateral mistake (Civ. Code § 1689(b)(1)); (4) recission based on mutual mistake (Civ. Code § 1689(b)(1)); (5) rescission based on failure of consideration (Civ. Code § 1689(b)(2), (4)); (6) breach of fiduciary duty against Nadjarian; (7) conversion; (8) dissolution of limited liability company (Corp. Code § 17707.03) against IMPES; (9) accounting against IMPES; and (10) dissolution of partnership (Corp. Code § 16801) against Nadjarian.

On January 20, 2022, Plaintiffs failed to appear at the Final Status Conference, and trial documents were not filed pursuant to this department’s Trial Preparation Order. On January 25, 2022, Plaintiffs failed to appear at the Order to Show Cause set by the court, and the court instructed Defendants to prepare a proposed Order to Dismiss. On February 4, 2022, the court granted Defendants’ proposed order and dismissed Plaintiffs’ complaint with prejudice.

On August 1, 2022, the court granted Defendants’ motion for attorney fees pursuant to CCP § 1717.

Defendants now move for the following order, pursuant to CCP §§ 708.310 and Corp. Code §§ 16502, 16504, 15907.03, and 17705.03:

1.      Charging the Plaintiffs’ interest of Defendant IMPES and the partnership interest of Plaintiffs in partnership with Defendant Nadjarian.

2.      Orders for the sale of the same interests.

(Notice of Motion, 2-3.) No opposition has been filed to the instant motion.

Discussion

I.                   Legal Authority

CCP § 708.310 provides as follows:

“If a money judgment is rendered against a partner or member but not against the partnership or limited liability company, the judgment debtor's interest in the partnership or limited liability company may be applied toward the satisfaction of the judgment by an order charging the judgment debtor's interest pursuant to Section 15907.3, 16504, or 17705.03 of the Corporations Code.” 

Additionally, Corp. Code § 16504 permits a court having jurisdiction to “charge the transferable interest of the judgment debtor to satisfy the judgment” on application by a judgment creditor. (Corp. Code § 16504(a).) Such a charging order “constitutes a lien on the judgment debtor’s transferable interest in the partnership.” (Corp. Code § 16504(b).) Further, the court may order foreclosure of the interest subject to the charging order at any time. (Id.) However, “at any time before foreclosure,” an interest may be redeemed in any of the following ways:

“(1) By the judgment debtor.

(2) With property other than partnership property, by one or more of the other partners.

(3) With partnership property, by one or more of the other partners with the consent of all of the partners whose interests are not so charged.”

II.                Analysis

Defendants correctly explain they were awarded attorney fees and costs in the amounts of $389, 411.00 and $11,263.44, respectively, and that these costs have not yet been paid. (Motion, 4.) Defendants also correctly explain that Plaintiff owns 40% interest of Defendant IMPES, and Plaintiff owns another 50% interest of an unnamed partnership described in Paragraph 31 and the Tenth Cause of Action of the Complaint. (Id.)

Defendants then point to relevant portions of the Corporations Code, which provide:

15907.03 (a) On application to a court of competent jurisdiction by any judgment creditor of a partner or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of a transferee. . . . (b) A charging order constitutes a lien on the judgment debtor's transferable interest. The court may order a foreclosure upon the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee. . . .

16504 (a) On application by a judgment creditor of a partner or of a partner's transferee, a court having jurisdiction may charge the transferable interest of the judgment debtor to satisfy the judgment. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or that the circumstances of the case may require.

(b) A charging order constitutes a lien on the judgment debtor's transferable interest in the partnership. The court may order a foreclosure of the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.

17705.03 (a) 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.

(b) 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.

(C) At any time before foreclosure under paragraph (3) of subdivision (b), the member or transferee whose transferable interest is subject to a charging order under subdivision (a) may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.

(d) At any time before foreclosure under paragraph (3) of subdivision (b), a limited liability company or one or more members whose transferable interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order.

(e) This title does not deprive any member or transferee of the benefit of any exemption laws applicable to the member's or transferee's transferable interest.

(f) This section provides 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. (Motion, 4-5.)

Defendants point to an apparent split of authority requiring the consent of partners, but further contend that the split is a moot issue “as all of the other members of [IMPES] have consented to the sale, and [Nadjarian] has consented to foreclosure of Mr. Award’s partnership interest.” (Motion, 5.)

Defendants’ motion is granted. Defendants have demonstrated that a judgment has been entered against Plaintiff and that Plaintiff has not made any progress towards satisfying the judgment to date. Additionally, Defendants have demonstrated that Plaintiff has an interest in IMPES and the second unnamed partnership with Nadjarian which may be charged to satisfy the judgment pursuant to CCP § 708.310 and Corp. Code § 16504.

Conclusion

Defendants’ motion is granted. Defendants are to give notice.