Judge: Layne H. Melzer, Case: 2020-01173844, Date: 2023-07-27 Tentative Ruling

Assignee of Record Asset Liquidation Group, Inc.

1. Motion for Charging Order of Judgment Debtor Tylor Johnson's Interest In Keystone Industries LBC, LLC

2. Motion for Assignment Order and for Order Restraining Judgment Debtor

(1)MOTION FOR CHARGING ORDER

Judgment Creditor Asset Liquidation Group, Inc.’s motion for an order charging Judgment Debtor Tylor Johnson’s membership interest in Keystone Industries LBC, LLC is granted.

Judgment Creditor seeks an order charging Judgment Debtor’s membership interest in Keystone Industries LBC, LLC with payment of the unpaid balance of the outstanding Judgment entered on 12/9/20, which amounts to $439,928.70.

As evidence to support the motion, Judgment Creditor attaches the Judgment, and states that $7,301.59 has been paid on the judgment, and the current balance with interest is $439,928.70 as of 4/8/23. (Miller Decl., ¶¶ 2, 4, Ex. A.)

Counsel declares that Judgment Debtor, as well as Robert Prada, are members of Keystone Industries and attaches the CA Secretary of State, Statement of Information filed 6/23/22. (Miller Decl., ¶¶ 5-6, Ex. B.)

Judgment Debtor’s argument in opposition - that his interest in Keystone cannot be subject to a charging order, because Keystone is a licensed cannabis business – is unavailing. As confirmed in the Reply, Judgment Creditor is not seeking Judgment Debtor’s license or membership interest.  Rather, it is only seeking Defendant's entitlement to distributions from Keystone.

Relevantly, Corp. Code, § 17705.03(a) states in pertinent part: “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.”

Judgment Creditor has provided evidence of the Judgment as well as the CA Secretary of State printout showing that Judgment Debtor has an interest in Keystone Industries.  Judgment Debtor has not stated any justification for denying the motion.  As a result, the motion is granted.

(2)MOTION FOR ASSIGNMENT ORDER

Judgment Creditor Asset Liquidation Group, Inc.’s motion for an order assigning Judgment Debtor’s interest in Keystone Brands, LLC and all rights to payment thereunder to Judgment Creditor is denied.  Judgment Creditor’s request for an order restraining Judgment Debtor and his father, Doran Wade Johnson from encumbering/transferring all assets of Keystone is also denied.

Code Civ. Proc., § 708.510(a) provides:

“Except as otherwise provided by law, upon application of the judgment creditor on noticed motion, the court may order the judgment debtor to assign to the judgment creditor or to a receiver appointed pursuant to Article 7 (commencing with Section 708.610) all or a part of a right to payment due or to become due, whether or not the right is conditioned on future developments...”

Judgment Creditor cites to Code Civ. Proc., § 708.510, and includes an attorney declaration as evidence. 

In moving for an assignment order, Counsel for Judgment Creditor declares that the current balance due on the judgment is $439,928.70. (Miller Decl., ¶ 3.)  In addition, he declares that he is “informed and believe[s] that the following right of payments are due and will become due to the Judgment Debtor: The right to payment for product sold during the normal course of business, for royalties and payments related to licensing agreements to which Keystone Branding, LLC, is a party and for payments of bonuses, commissions and other distributions to be taken in the normal course of business of Keystone Branding, LLC (a Michigan based limited liability company).” (Miller Decl., ¶ 5.)

In support of the request for a restraining order, counsel declares that there “is a need to restrain the Judgment Debtor from encumbering, assigning, disposing of, or spending the assets of the limited liability company subject to the assignment herein because Judgment Debtor has exhibited a pattern of evading known creditors through the creation of new business entities in which to hide assets.” (Miller Decl., ¶ 7.)

No other evidence is provided with the moving papers.

While Judgment Creditor did not file a Reply, on 7/6/23, Judgment Creditor filed a Request for the court to take judicial notice of an IRS record evidencing the ownership interest of Judgment Debtor in Keystone Branding, LLC. (ROA 393.)  The document indicates that Tylor Johnson is the “sole MBR” of Keystone Branding, LLC.

The request does not cite to any legal authority to support it.  Also, the request does not identify the motion to which it presumably relates. And, there is no evidence that Judgment Debtor’s membership interest is current, given that the date on the IRS document is 4/16/21.  For these reasons, the Court denies Judgment Creditor’s request for judicial notice.

The Court also denies the motion for an assignment order, because is not supported with any admissible evidence that shows that Judgment Debtor has an assignable interest in Keystone Branding.   

The request for a restraining order(s) is also be denied.

 Code Civ. Proc., § 708.520 states in part (emphasis added):

(a)  When an application is made pursuant to Section 708.510 or thereafter, the judgment creditor may apply to the court for an order restraining the judgment debtor from assigning or otherwise disposing of the right to payment that is sought to be assigned. The application shall be made on noticed motion if the court so directs or a court rule so requires. Otherwise, it may be made ex parte.

(b)  The court may issue an order pursuant to this section upon a showing of need for the order. The court, in its discretion, may require the judgment creditor to provide an undertaking.

Judgment Creditor has not made any showing of need; i.e., that the assets of the company are likely to be transferred or encumbered.