Judge: Michael Shultz, Case: BC651307, Date: 2025-01-07 Tentative Ruling

Case Number: BC651307    Hearing Date: January 7, 2025    Dept: 40

BC651307 HTL Automotive, Inc. v. 1351 Orizaba Avenue, LLC

Tuesday, January 7, 2025

 

[TENTATIVE] ORDER GRANTING RECEIVER’S MOTION FOR INSTRUCTIONS AND AN ORDER REGARDING THE APPEAL FILED BY JUDGMENT DEBTORS

 

I.        BACKGROUND

This action, filed on February 22, 2017, arises from the Defendant’s alleged failure to comply with its lease obligations that denied Plaintiff lessee, the sole and exclusive possession of the premises for the duration of the lease, among other things. Plaintiff alleges claims for breach of contract and breach of the implied covenant of good faith and fair dealing.

On April 10, 2017, Defendant filed a cross-complaint against Plaintiff alleging breach of contract and for committing waste upon the premises.  

On March 6, 2020, the Hon. David Sotelo rendered a judgment after trial against Plaintiff (“Judgment Debtors”) and in favor of Defendant Orizaba (“Judgment Creditor”). On the cross-complaint, the court found in favor of cross-complainant, Judgment Creditor in the amount of $746,803.34. (Jgmt. 3/6/20.)

On March 11, 2024, the Hon. Ann Richardson issued an order granting Judgment Creditor’s motion to appoint Invenz, Inc., through its Executive Officer, Richard Munro, to act as a receiver over the Judgment Debtor’s interests in nine limited liability companies (“LLCs”), including seizing the LLCs property; gaining control of the property; and to demand, collect, and receive all moneys owed to the LLCs. The Receiver filed a bond of $5,000. (Order 3/11/24.)

On August 5, 2024, the parties settled this action pursuant to a confidential settlement agreement and stipulated to winding down the receivership. (M.O. 8/5/24.)

On November 8, 2024, over four years after judgment was entered, Judge Richardson granted the Receiver’s motion for approval of the final report and account, for discharge of the receiver, and for exoneration of the Receiver’s bond and related relief. (M.O. 11/8/24, “November 8th Order”.) In relevant part, the order required Receiver to send a written demand for payment of $300,000 to Judgment Creditor’s counsel, who held the funds in its client trust account. (Id.) The court ordered Judgment Creditor’s counsel to wire the funds to the Receiver within one business day of the demand. (Id.)

On November 14, 2024, Judgment Debtor filed a notice of stay of execution of the November 8th order pending its appeal of that order approving the Receiver’s final account. (Notc. 11/14/24.) As the stay was purportedly “automatic” Judgment Debtor asserted that it was not required to post a bond or undertaking. (Id.)

II.      ARGUMENTS

       The Receiver requests an order for instructions confirming that the November 8th order is not stayed, or alternatively, instructions as to the amount of the undertaking required to be posted by Judgment Debtor, and an order authorizing the Receiver to collect the $300,000 currently held by Judgment Creditor’s counsel. Receiver contends the November 8th order is not automatically stayed because it is not a “costs only judgment”. Rather, Judgment Debtor must seek an order staying the November 8th order and post an undertaking.  The Receiver argues that Judgment Debtor lacks standing to dispute the part of the November 8th order requiring Judgment Creditor to pay $300,000 to the Receiver.  

       In opposition, Judgment Debtor argues that execution of the November 8th order is stayed automatically upon Judgment Debtor’s filing of the notice of appeal. The court should not exercise its discretion to require Judgment Debtor to file an undertaking since neither the Receiver nor its counsel will suffer any harm or prejudice. The propriety of turning over the funds held in Judgment Creditor’s trust account is at issue in Judgment Debtor’s appeal.

       In reply, the Receiver argues Judgment Debtor’s are attempting to delay payment for the Receiver’s fees. Given the Judgment Debtor’s conduct attempting to delay the Receiver’s fees and its denied application to surcharge the Receiver, the court should exercise its discretion and require Judgment Debtor to post an undertaking.

III.    DISCUSSION

       As a preliminary matter, the court does not issue “instructions” or guidance; the court can decide whether Judgment Debtor is entitled to an automatic stay without the posting of an undertaking which is an issue presented by Judgment Debtor’s “Notice of Automatic Stay.” The court construes the Receiver’s motion as a motion for determination that Judgment Debtor is not entitled to an automatic stay by fiat as it declares in its notice. In that respect, the court GRANTS the motion pursuant to its inherent powers to “provide for the orderly conduct of proceedings before it, or its officers; to compel obedience to its judgments, orders, and process, and to the orders of a judge out of court, in an action or proceeding pending therein." (Code Civ. Proc., § 128 subd (a)(3), (4); Cottle v. Superior Court (1992) 3 Cal.App.4th 1367, 1377

[Courts have inherent equity, supervisory and administrative … as well as inherent power to control litigation before them which are “derived from the state Constitution and are not confined by or dependent on statute."].)

       Except for certain statutory exceptions, the perfecting of an appeal "stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order." (Code Civ. Proc., § 916.) As Judgment Debtor concedes, if the judgment or order is for money, or the payment of money, the perfecting of an appeal does not stay enforcement, unless the appellant posts an undertaking. (Opp. 11:9-14; Code Civ. Proc., § 917.1 ["(a) Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following: (1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action."].)

       However, Judgment Debtor argues there is a recognized rule to that exception, namely that a judgment consisting only of costs is not a money judgment for purposes of Code Civ. Proc., § 917.1 requiring an undertaking. Judgment Debtor’s case authority is not persuasive since “costs” are defined by Code Civ. Proc., § 1032, et seq, which permits an award of costs and fees to the prevailing party unless otherwise provided for by statute. (Quiles v. Parent (2017) 10 Cal.App.5th 130, 139.) Here, the parties settled their disputes, and there is no “prevailing party” as defined by the Code of Civil Procedure. (Code Civ. Proc., § 1032.)

       Costs of suit are awarded to the prevailing party in nearly every civil action or proceeding. (Quiles v. Parent (2017) 10 Cal.App.5th 130, 139; Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 800 [“This reality arises from section 1032, subdivision (b), which states, ‘Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.’”].) As Judgment Debtor acknowledges, in Quiles, the appellant had fully satisfied in full all of the damages portion of the judgment, and only appealed a component of the judgment that awarded fees and costs. (Opp. 11:22-24.) Judgment Debtor is not appealing a judgment as the parties settled their disputes.

       A receivership is a provisional remedy that is ancillary and does not affect the outcome of an action, rather,“[i]t preserves the status quo of property while litigation is pending.” (Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 925.) Judgment Debtor cites Sunbelt Developers for the proposition that a mediator’s and receiver’s fees may be considered a “cost” under Code Civ. Proc., § 1032. The opinion underscored that the court had the discretion to consider costs incurred for court-appointed assistants as a recoverable cost under section 1033.5 by the prevailing party. (Southern California Sunbelt Developers, at 932.) The Receiver’s motion is not a motion for costs to be awarded to a prevailing party, and therefore, there are no facts upon which the court can exercise its broad discretion to award such costs to a prevailing party where there is none.

       Accordingly, Judge Richardson’s order requiring Judgment Creditor’s counsel to pay $300,000 held in its trust account one day after the Receiver’s demand for payment is not a “costs-only judgment,” and the perfecting of Judgment Debtor’s appeal of that order does not trigger an automatic stay as expressly stated in Code Civ. Proc., § 917.1. Judge Richardson did not require the turnover of funds by the Judgment Debtor to the Judgment Creditor as the prevailing party. (11/8/24 order 4:13-21.) Moreover, a post-judgment proceeding such as the Receiver’s underlying motion here, is ancillary or collateral to the appeal despite its potential effect on the appeal and is not stayed by the appeal. (Gridley v. Gridley (2008) 166 Cal.App.4th 1562, 1587.)

       Finally, as Judgment Debtor is not making a motion for a stay, none is granted.

IV.    CONCLUSION

       Accordingly, the Receiver’s motion as construed above is GRANTED. An automatic stay is not affected by the Judgment Debtor’s perfecting of an appeal. Judgment Creditor is ordered to abide by Judge Richardson’s order to pay the amount of $300,000 to the Receiver one day after demand.