Judge James C. Chalfant, Case Number: 20STCV33044, Date: 2023-10-10 Tentative Ruling

Myra Myra, et al. v. Maple and Vail, LLC, et al., 20STCV33044

Tentative decision on motion for further instructions: denied

Receiver Gary Haddock (“Receiver”) moves for instructions authorizing the Receiver to (1) perform capital repairs at 856, 856 1/2, and 856 3/4 South Vail Avenue, Montebello, California 90640 (“856 South Vail”) to avoid cancellation of an insurance policy, (2) perform capital repairs at 900 and 902 South Vail Avenue, Montebello, California 90640 (“900 South Vail”) and apply for insurance, (3) commence eviction proceedings against the tenant living at 900 South Vail, (4) lease the vacant office and parking lot at 1133 South Maple Avenue (“1133 South Maple”) and 1129 South Maple Avenue, Montebello, California 90640 (“1129 South Maple”) pursuant to an open offer, (5) file federal and state taxes for all commercial properties under the receivership, (6) retain outside counsel for the preparation of this motion, and (7) reimburse the Receiver for such repairs either from proceeds of sale of the Maple Vail Properties, loans Receiver may make and secure with the Maple Vail Properties, or through orders for parties to directly reimburse the Receiver within 30 days of an invoice’s receipt.

The court has read and considered the moving papers, the limited oppositions of Myra Weiss (“Myra”), individually and as Trustee of the David E. Weiss Family Revocable Living Trust and Defendant/Cross-Complainant Bernard Michlin (“Bernard”), individually and as trustee of the Bernard A. Michlin Trust (no reply to either was filed),[1] and renders the following tentative decision.

Plaintiff Myra filed her Complaint on August 31, 2020. The operative pleading is the First Amended Complaint (“FAC”), filed on March 1, 2021, alleging causes of action for (1) partition of real property, (2) financial elder abuse, (3) elder abuse via pain and mental suffering, and (4) unjust enrichment. The FAC alleges in pertinent part as follows.

The FAC concerns the four Maple Vail Properties: (1) 1133 South Maple; (2) 1129 South Maple; (3) 856 South Vail Avenue, Montebello, California 90640 (“856 South Vail”); and (4) 900 South Vail.

Bernard, Willard Michlin (“Willard”), Myra, and Sybil Flom (“Sybil”) are the four children of Decedent Abe Michlin (“Abe”), who bequeathed a quarter interest in the properties to each as tenants-in-common. David E. Weiss (“David”), Myra’s husband, was named trustee of a trust to manage the real property interests of all four heirs. Willard sold his interest to the other three, making Bernard, Myra, and Sybil tenants-in-common with one-third interest each in the Maple Vail Properties.

Noah Flom (“Noah”), Sybil’s son, was not a beneficiary but founded a company, Maple & Vail, LLC (“Maple & Vail”) for his benefit and for that of his trust, SF-Apex Trust. In the year prior to establishing Maple & Vail, Noah accused Myra’s husband David of self-dealing, fraud, and serious mismanagement of the Maple Vail Properties to the detriment of their co-tenants. Sybil’s audits of the bank statements found nothing to justify those claims.

Noah’s accusations and harassment caused Myra great mental stress and ruined her relationship with her sister Sybil. She refuses to let Noah manage the Maple Vail Properties on her behalf or to transfer her interest to Maple & Vail. Noah falsely claims to have the right to manage the properties. While he represented that he would not divert funds from the Maple Vail Properties, he used funds from the rents to pay for the attorney’s fees incurred in Maple & Vail’s creation and other expenses that solely benefit him and his related Defendants.

Noah has engaged in a course of conduct that has deprived Myra from the rents, profits, use, and control of the Maple Vail Properties. He has collected the rents from one property without accounting for it or raising the rent to the fair market value so long as Noah’s employees occupy the building. Even then, the tenant has failed to pay the rent owed. The net losses from this decision are at least $200,000. Separately, Noah rented another of the lots to a Hollywood studio and received $25,000 without informing the tenants-in-common. Noah has refused to provide a full accounting of rents and profits that were paid, or should have been paid, by SF-Apex Trust.

Myra seeks (1) partition by sale of the Maple Vail Properties, (2) an order that the costs of partition be paid by the tenants-in-common in proportion to their respective interests, (3) an expert appraisal of the Maple Vail Properties, (4) an accounting by Noah and SF-Apex Trust for the rents collected and profits generated by the Maple Vail Properties, (5) payment to Myra of one-third of said rent and profits, (6) establishment of a constructive trust over Noah’s assets and property, (7) appointment of a receiver for the Maple Vail Properties, (8) an order charging Sybil’s share of the sale of the Maple Vail Properties in an amount equal to two-thirds of the fair rental value of the Maple Vail Properties during the period those properties have been under Noah’s control, (9) damages, (10) attorney’ fees and costs, and (11) punitive and exemplary damages.

On December 18, 2020, Bernard filed a Cross-Complaint against Cross-Defendants Maple & Vail, Noah, individually and as trustee of the SF-Apex Trust, Sybil, individually and as trustee of the Sybil Flom Trust, and Myra. The operative pleading is the First Amended Cross-Complaint (“Bernard FACC”) filed January 28, 2022, alleging causes of action for (1) declaratory relief; (2) quiet title, (3) partition, (4) non-statutory ouster, (5) quasi-contract, (6) financial elder abuse, (7) breach of fiduciary duty, (8) recission, and (9) conversion. The Bernard FACC alleges in pertinent part as follows.

David oversaw the Maple Vail Properties. When David conveyed one-third ownership of the Maple Vail Properties to Bernard, Myra, and Sybil following Willard’s decision to sell his interest, the remaining three owners agreed that David would remain authorized to manage the Maple Vail Properties and invest their profits.

Either SF-Apex Trust is the only member of Maple & Vail or the only other member is Noah or Sybil.

On October 15, 2019, Bernard transferred his interest in the Maple Vail Properties to his trust.

In March 2019, Bernard, Sybil, and Noah executed a variety of agreements pertaining to the transfer of Bernard’s interest in the Maple Vail Properties to Noah and Maple & Vail. The parties’ rights under these agreements came into dispute and Noah and Maple & Vail filed suit against Bernard. The court ordered arbitration of some of the claims and on December 30, 2021, the arbitrator found that Noah, Sybil, and Maple & Vail (the “Sybil Parties”) sought to evade payment of taxes and violated state and federal securities laws. The arbitrator’s award invalidated the March 2019 agreements and recognized Bernard as the owner of one-third interest in the Maple Vail Properties.

Both before and after the March 2019 agreements, Noah claimed to be entitled to manage the Maple Vail Properties. Neither Myra nor Bernard consented to this management. Noah has engaged in a course of conduct that has deprived Bernard of the rents, profits, use, and control of the Maple Vail Properties. Noah has diverted some rent from those properties to pay personal expenses such as the attorney’s fees incurred in the creation of Maple & Vail. Noah has commingled this revenue with personal assets and those of his trusts. Noah has refused upon request to provide a full accounting of rents and profits, including rents collected and that should have been paid by SF-Apex Trust. The Sybil Parties refuse to distribute Michelin’s interest in the net profits in the Maple Vail Properties from 2020 and 2021.

On June 10, 2020, Maple & Vail entered into a lease with Apex Drum Company, Inc. (“Apex Drum”) for portions of the Maple Vail Properties. Noah negotiated this lease despite the fact that he is Maple & Vail’s trustee and the trustee of SF-Apex, the sole shareholder of Apex Drum. Noah did not advise Bernard or Myra that he was negotiating a long-term lease and he only provided a copy of the Apex Drum lease after the court ordered it. The terms were not comparable to those in a lease that a disinterested landlord and tenant would negotiate at arm’s length.

The Sybil Parties refuse to provide a full accounting of profits, rents collected, and expenses paid, with respect to The Maple Vail Properties while under their purported management.

Bernard seeks (1) confirmation of the arbitration award and injunctive relief enforcing it, (2) quiet title to his undivided one-third fee simple interest in the Maple Vail Properties, (3) an accounting for the Maple Vaile Properties, (4) an appointment of a receiver to take possession of the Maple Vail Properties, (5) damages, (5) establishment of a constructive trust over the rents and profits from the Maple Vail Properties, (6) recission of the Apex Drum Lease, (7) attorney’s fees and costs, and (8) interests at the legal rate.

On June 23, 2023, Noah, Sybil, Apex Drum, and Maple & Vail filed a Cross-Complaint (“Flom Cross-Complaint”) alleging (1) quiet title, (2) embezzlement, (3) conversion, (4) unjust enrichment, (5) financial elder abuse, and (6) pain and mental suffering elder abuse. The Flom Cross-Complaint alleges in pertinent part as follows.

In December 2018, Noah executed a California Secretary of State Statement of Information for Maple & Vail identifying himself as its manager. Sybil and Bernard signed its operating agreement, which gave each a one-third share and acknowledged Noah as manager.

On December 17, 2018, in her capacity as Trustee of the Sybil Flom Trust, Sybil signed two deeds transferring her one-third interest in the Maple Vail Properties to Maple & Vail. On December 20, 2018, Bernard signed the same deeds and transferred his one-third interest in the Maple Vail Properties to Maple & Vail. Myra declined to sign her set of deeds, and the sets signed by Sybil and Bernard remained unrecorded.

On March 1, 2019, Sybil and Bernard signed a revised Maple & Vail operating agreement that made them each a 50% owner but still named Noah as manager. In March 2019, Sybil and Bernard signed a new set of deeds transferring their one-third interest each in the Maple Vail Properties to Maple & Vail. These deeds again made Maple & Vail the owner of two-thirds of the interest in the Maple Vail Properties.

Sometime before April 11, 2019, Noah accidentally destroyed these deeds before they could be recorded. Noah asked Sybil and Bernard to sign and deliver new deeds. Although Sybil did so on April 22, Bernard refused. Maple & Vail was still the owner of Bernard’s one-third interest through the previous deeds.

On May 1, 2019, Noah and Sybil amended Maple & Vail’s operating agreement to replace Bernard with SF-Apex Trust as a one-third member. It now shared two-thirds interest in the Maple Vail Properties with Sybil.

On or about February 24, 2022, an arbitrator voided all the agreements under which Bernard had agreed to become a Maple & Vail member, transferred his one-third interest in the Maple Vail Properties to it, or sold his interest in Maple & Vail to SF-Apex Trust. On March 8, 2023, the April 22, 2019 deed was recorded. Maple & Vail now owns one-third interest in the Maple Vail Properties, and through it Sybil and SF-Apex Trust each own a one-sixth interest. Noah is SF-Apex Trust’s sole beneficiary.

David was Trustee of Morning Family Trust No. 2, which held the Maple Vail Properties until its termination in 1996. David then was the property manager. In both capacities, he had a fiduciary duty to distribute accrued rental income to the Maple Vail Properties’ owners. Despite this, both David and Myra have refused Sybil’s demands to distribute her share of the accrued rental income.

In 2017, David took $225,000 of revenue from the Maple Vail Properties out of the trust account. Myra knew he did this, and neither sought Sybil’s permission. David and Myra used this money to buy a parcel of real property and sell it at a profit. They returned the $225,000 to the trust account but did not pay any interest or share the profits from the sale of real property.

David also took funds from Sybil, Apex Drum, and SF-Apex Trust without consent from Apex Drum. In 2018, they also used funds to renovate a building on the Maple Vail Properties for the use of their daughter and her business. Sybil never gave permission to use this money.

On June 19, 2009, Bernard signed an agreement pursuant to which he agreed to sell his one-third interest in the Maple Vail Properties to Sybil upon the death of their father Abe at a fair market value. On June 25, 2009, Sybil signed the 2009 Agreement.

In May 2017, Sybil sent Bernard a formal agreement that reflected the combined terms of the 2009 agreement and a 2017 agreement. David advised Bernard to not sign the combined agreement and to drag out the negotiation process. Bernard complied. By November 19, 2017, Bernard still had not executed the documents needed to effectuate the sale.

Noah, Sybil, Apex Drum, and Maple & Vail seek an order quieting title to the Maple Vail Properties, compensatory damages, unjust enrichment damages, damages sustained by Sybil as an elder, punitive and exemplary damages, and attorney’s fees and costs.

The Sybil Parties demurred to the Complaint. On January 19, 2021, Dept. 73 (Hon. Rafael Ongkeko) overruled the demurrer for two causes of action, sustained with leave to amend for two causes of action, and sustained without leave to amend for another cause of action.

On January 14, 2021, Bernard filed his Cross-Complaint and an Answer to the Complaint.

On February 24, 2021, Bernard filed a motion for a stay or consolidate arbitration and the litigation. On February 26, 2021, Maple & Vail filed a motion to compel arbitration and stay the case.

On April 30, 2021, the Sybil Parties demurred to the FAC’s third cause of action for elder abuse. On June 11, 2021, Dept. 73 (Hon. Timothy Dillon) sustained the demurrer to this cause of action without leave to amend.

On October 26, 2021, Myra moved to bifurcate the trial so that the FAC’s partition cause of action was tried first. Dept. 73 (Hon. Timothy Dillon) granted the motion on December 7, 2021.

On January 11, 2022, the Sybil Parties filed a notice of a related case, Sybil Flom v. Bernard et al. (21STCV43024). Dept. 73 (Hon. Timothy Dillon) related the two cases on January 12, 2022.

On January 24, 2022, Myra amended the FAC to add Apex Drum as a named Defendant. Myra subsequently amended the FAC to add Leonard Fowle (“Fowle”), Ignacio Flores (“Flores”), Complete Demolition Inc. (“Complete Demolition”), Cecilia Enriquez (“Enriquez”), Leonardo Leon (“Leon”), and Jaime Martell Ramirez (“Ramirez”) as named Defendants.

On January 28, 2022, Bernard filed the Bernard FACC. On March 30, 2022, Bernard amended the Bernard FACC to add Enriquez, Fowle, and Ramirez as named Cross-Defendants.

On March 1, 2022, Bernard moved to confirm the final arbitration award and enter separate judgment. The Sybil Parties moved to vacate the award. On May 20, 2022, Dept. 73 (Hon. Timothy Dillon) confirmed the arbitration award.

On April 15, 2022, the parties stipulated that (1) Sybil and Bernard would arbitrate the cause of action for unjust enrichment in Sybil Flom v. Bernard et al., (2) any allegations by Bernard or Sybil of elder abuse should be dismissed with prejudice, and (3) Sybil’s cross-action will be stayed while the balance of the action and all of Myra’s claims are tried. Dept. 73 (Hon. Timothy Dillon) approved the order on April 18, 2022.

On May 5, 2022, Bernard amended the Bernard FACC to add Flores, Complete Demolition, and Leon as Cross-Defendants.

On May 27, 2022, Bernard filed a motion to appoint a receiver over the Maple Vail Properties in Dept. 73 (Hon. Timothy Dillon). On June 13, 2022, Bernard took the motion of calendar for refiling with this department.

On August 9, 2022, this court granted Bernard’s motion to appoint a receiver over the Maple Vail Properties.

On December 19, 2022, Myra filed notice of related cases Myra v. Sybil, (“Myra v. Sybil”) Case No. 22STCV35252; and Myra v. Noah et al. (“Myra v. Noah”) Case No. 22STCV38782. On January 4, 2023, the cases were related and assigned to Dept. 73.

On January 6, 2023, on Myra’s request, Dept. 73 entered dismissal of the case against Noah without prejudice.

On January 12, 2023, Dept. 73 entered default against Enriquez, Leon, Fowle, and Ramirez.

On March 30, 2023, Dept. 73 granted Myra’s motion for summary adjudication against Sybil and Noah on their sixth, seventh, eighth, and ninth affirmative defenses in their answers to the FAC.

On May 24, 2023, Myra amended the FAC to add Maple & Vail as a Defendant. On May 26, 2023, Myra amended the FAC to add Noah as a Defendant.

On June 8, 2023, Dept. 73 granted an ex parte application for service of the Bernard FACC on all unknown defendants.

On June 10, 2023, Bernard served Maple & Vail with the Bernard FACC and Summons by posting. On June 11, 2023, Bernard served Maple & Vail with those documents by mail.

On June 23, 2023, Maple & Vail and Noah filed an amended Answer to the FAC and the Flom Cross-Complaint.

Throughout June and July 2023, Bernard served Maple & Vail and Noah with the Bernard FACC and Summons via publication in the Los Angeles Daily Journal.

On September 12, 2023, Dept. 73 granted Myra’s motion for summary judgment on the ninth affirmative defense in Noah and Maple & Vail’s answer to the FAC but not the sixth, seventh, and eighth affirmative defenses; denied Bernard’s motion for summary adjudication; and sustained Myra’s demurrer to the first and sixth causes of action to the Flom Cross-Complaint and to the SF-Apex Trust as a cross-complainant.

On September 28, 2023, Myra and David filed general denials to the Flom Cross-Complaint.

The insurance company which insures the 850 South Vail Properties has informed the Receiver that it must complete certain repairs to keep the insurance policy in force. Receiver Decl., ¶4, Ex. 1. Receiver has completed most of them, but he believes that two exceed the scope of his authority under the court order appointing him receiver. Receiver Decl., ¶4, Ex. 1. This includes the repair or replacement of the roof and the painting of the exterior on 856 South Vail. Receiver Decl., ¶4, Ex. 1.

An insurance company has deemed the 900s South Vail Properties uninsurable in their current state. Receiver Decl., ¶4, Ex. 1. At minimum, Receiver needs to replace the roofs, paint the exteriors, possibly upgrade the electric service, and remove the clutter and unpermitted interior before the insurance company will provide a quote. Receiver Decl., ¶4, Ex. 1. Receiver believes these improvements are also beyond the scope of his authority under the court order appointing him receiver. Receiver Decl., ¶4, Ex. 1.

The listed capital improvements are necessary to obtain and maintain insurance for the Maple Vail Properties. Receiver Decl., ¶7.

A residential tenant is living in 900 South Vail, a commercial property. Receiver Decl., ¶4, Ex. 1. This poses both a threat to that tenant and a potential liability to the owner. Receiver Decl., ¶4, Ex. 1. The tenant must be evicted, and an attorney must be retained to litigate the eviction. Receiver Decl., ¶8.

An unstated party has expressed interest in renting the office and parking lot on 1129 and 1133 South Maple. Receiver Decl., ¶4, Ex. 1. Receiver has already obtained comparable rentals to provide an estimated market value of the building if it were available to lease. Receiver Decl., ¶4, Ex. 1. He told the interested party that although Receiver does not have the authority to lease the building, he could forward any letter of intent to the parties. Receiver Decl., ¶4, Ex. 1. After a tour of the building, the interested party submitted the letter of intent. Receiver Decl., ¶4, Ex. 1. Letting this property would benefit the Maple Vail Properties and provide a way to pay for the capital repairs. Receiver Decl., ¶9.

Receiver also requests additional direction from the court as to how to carry out his duties with regards to tax returns for the Maple Vail Properties. Receiver Decl., ¶10.

Receiver also requests authority to retain counsel when necessary to perform the other requested actions. Receiver Decl., ¶11. The court should also issue an order outlining appropriate methods to pay for the costs and repairs. Receiver Decl., ¶11.

Bernard and Myra seek partition of the Maple Vail Properties, which they own as equal tenants-in-common along with Sybil. David Decl., ¶2. Myra recorded her lis pendens on the Maple Vail Properties when litigation began in 2020. Garcia Decl., ¶2. Bernard recorded his in 2021. Garcia Decl., ¶3.

Barnard’s motion for this receivership was based on the owners’ inability to agree on management. David Decl., ¶3. Another reason was that Noah purportedly signed the Apex Drum lease for much of the Maple Vail Properties on both the landlord and tenant’s behalf. David Decl., ¶3. This lease had a term of ten years with three five-year options. David Decl., ¶3. Noah has also admitted the $3,000 monthly rent is less than the contractual rent under leases executed in 1984. David Decl., ¶3.

The Apex Drum lease has been and will continue to be the source of substantial litigation. David Decl., ¶5. Department 73 has expressed concern about the effect of this lease on efforts to partition to Maple Vail Properties, and of Noah and Sybil’s attempt to transfer the value of the Maple Vail Properties to themselves through the Apex Drum Lease. David Decl., ¶5. The parties have already spent tens of thousands of dollars litigating the issue, and Department 73 will continue to have to deal with it. David Decl., ¶¶ 6-7.

Receiver moves for instructions authorizing him to (1) commence capital repairs at 850 South Vail to avoid cancellation of the insurance policy, (2) commence capital repairs at 900 South Vail and apply for insurance; (3) commence eviction proceedings against the tenant living at 900 South Vail; (4) lease the vacant office and parking lot at 1133 and 1129 South Maple pursuant to an open offer; (5) file federal and state taxes for all Maple Vail Properties, (6) retain outside counsel for the preparation of this motion, and (7) reimburse Receiver for such repairs either from proceeds of sale of the Maple Vail Properties, loans Receiver obtains secured by the Maple Vail Properties, or orders for parties to directly reimburse Receiver within 30 days of an invoice’s receipt. Receiver Decl., ¶4, Ex. 1.

Bernard and Myra only oppose the request for an order to lease the vacant office and parking lot at 1133 and 1129 South Maple. Bernard Opp. at 2; Myra Opp. at 2. Neither would object to a month-by-month lease. Bernard Opp. at 2; Myra Opp. at 2.

Receiver’s motion is bare-bones. He was appointed by the court on August 9, 2022 as a rents and profits receiver for the Maple Vail Properties. He now seeks to convert the Receivership into a capital receivership, which is something normally one or more parties would do. Trial of the partition portion of the case is set for October 27, 2023.

Receiver provides no information about the Receivership’s progress, rents collected, or how much money he has for the current requests. He provides no actual evidence about the insurance company, his contacts with it, or the perceived threat for insurance cancellation. He fails to estimate what the roof replacement, painting, and electrical upgrades will cost. He fails to explain who the third party is that seeks to lease 1133 and 1129 South Maple and on what proposed terms. He fails to explain who has the role of preparing federal and state tax returns for specific entities and why that task has not been fulfilled. Finally, he fails to explain who the tenant is living in a commercial space, how the tenant was put in place, how long the tenant has lived there, and whether the tenant claims to have leased the space. The court also needs to evaluate the requests with reference to the October 27, 2023 partition trial and when the remaining claims would be tried.

The requested instructions are denied -- i.e., the requested actions are not authorized. The parties may stipulate to a capital receivership or alternatively one or more parties may move through a noticed motion containing more detail to convert the Receivership to a capital receivership.

[1] Receiver failed to lodge a courtesy copy of his moving papers in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. He is admonished to provide courtesy copies of all papers in future filings.