Judge: Stephanie M. Bowick, Case: 23STCV30356, Date: 2025-03-11 Tentative Ruling
Case Number: 23STCV30356 Hearing Date: March 11, 2025 Dept: 19
3/11/2025
Dept. 19
Hon. Rolf Treu, Judge
presiding
UTOMO TANI aka JIMMY TANI v. KAM CHOI LIN, CHANG
HO CHEN, WEI LIN ZHENG, WAI HUNG SZETO, YAN XIAN LI (22STCV30356)
Counsel for Defendants/Cross-Complainants/moving parties:
KAM CHOI LIN, CHANG HO CHEN, WEI LIN ZHENG, WAI HUNG SZETO, YAN XIAN LI (West
Themis Law, PC)
Counsel for Plaintiff/opposing party: UTOMO TANI (Catanese
& Wells, A Law Corporation).
Also, Receiver Kevin Singer filed an opposition.
MOTION TO VACATE
& VOID THE ORDER APPOINTING THE RECEIVER KEVIN SINGER OVER GOLDEN PARTNER
GLOBAL INVESTMENT, INC. DBA NBC SEAFOOD RESTAURANT (filed 2/13/2025)
TENTATIVE RULING
Defendants/Cross-Complainants’ Motion to Vacate is
DENIED.
I. BACKGROUND
On September 15, 2022, plaintiff UTOMO TANI (“Plaintiff”)
filed this action against defendants KAM CHOI LIN, CHANG HO CHEN, WEI LIN
ZHENG, WAI HUNG SZETO, and YAN XIAN LI (“Defendants”).
The
Complaint alleges that Nominal Defendant Golden Partner Global Investment Inc.
dba NBC Seafood Restaurant was formed with Plaintiff and Defendants Kam Choi
Lin, Chang Ho Chen, Wei Lin Zheng, and Wai Hung Szeto owning shares in the company.
Plaintiff further alleges that Defendants Kam Choi Lin, Chang Ho Chen, Wei Lin
Zheng, and Wai Hung Szeto made fraudulent representations concerning the
Company’s finances to the Company’s independent outside accountants in order to
usurp corporate opportunities and deprive the Company of income rightfully due
the Company, and conspired to violate Plaintiff’s rights to agreed compensation
according to the business policy and practices to reward company officers with
bonus compensation.
On February
18, 2025, the Court’s minute order approved the Status Reports and ordered that
Superior Court Receiver Kevin Singer’s fees and expenses shall be paid the
outstanding balances for his services as of January 30, 2025.
On April 12,
2024, after a hearing on Motion for Preliminary Injunction, the Court granted a
preliminary injunction, as further detailed in the following order excerpts:
“Pursuant to Code of Civil Procedure sections 525 and 526, the Court
grants a preliminary injunction and orders the following:
1. The status quo of the business of Golden Partner Investment Inc.
d/b/a NBC Seafood Restaurant must be maintained;
2. Any named defendant or any other person or entity controlled by a
named defendant is prohibited from collecting or taking any cash derivative of
restaurant operations of the NBC Seafood Restaurant; and
3. All defendants and any
person or entity controlled by a named defendant is prohibited from taking any
monetary compensation from income derivative of restaurant operations of NBC
Seafood Restaurant.
In addition, the Court orders the appointment of a limited purpose
Receiver.
The Court orders that Plaintiff file an undertaking in support of the
preliminary injunction within ten (10) days hereof. The Court orders a bond in
the amount of $10,000. (Code of Civ. Proc. section 529).
The receiver must file an undertaking. Once a receiver is appointed
by the Court, an undertaking in the amount of $10,000 will be ordered to be
posted. (Code of Civ. Proc. sections 566 and 567).
….
i. Indispensable Party
Defendants contend that the requested preliminary injunction cannot
be granted because the Company is not a named defendant and has not been served
with the Summons and Complaint.
However, Defendants fail to provide a sufficient legal or factual
basis to conclude that the requested preliminary injunction cannot be granted
because the Company is not a named defendant and has not been served with the
Summons and Complaint. The only legal authority cited by Opposing Defendants,
Bank of California Nat. Ass'n v. Superior Court in and for City and County of
San Francisco (1940) 16 Cal.2d 516 and McPherson v. Parker (1866) 30 Cal. 455,
did not involve the issuance of a preliminary injunction preserving the status
quo before a trial can be had on the merits of a dissolution claim brought
pursuant to Corporations Code section 1800 et seq.
The Court of Appeal in TG Oceanside, L.P. v. City of Oceanside (2007)
156 Cal.App.4th 1355 summarizes the legal standards regarding nonjoinder:
Code of Civil Procedure section 389 subdivision (a) defines persons
who should be joined in a lawsuit if possible, sometimes referred to as
“necessary” parties. It provides: A person who is subject to service of process
and whose joinder will not deprive the court of jurisdiction over the subject
matter of the action shall be joined as a party in the action if (1) in his
absence complete relief cannot be accorded among those already parties or (2)
he claims an interest relating to the subject of the action and is so situated
that the disposition of the action in his absence may (i) as a practical matter
impair or impede his ability to protect that interest or (ii) leave any of the
persons already parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reason of his claimed
interest. If he has not been so joined, the court shall order that he be made a
party.” A determination that a person is a necessary party is the predicate for
the determination whether he or she is an indispensable party and requires
analysis of the three distinct clauses of the above-referenced statute. If a
necessary party cannot be joined, the court shall determine whether in equity
and good conscience the action should proceed among the parties before it, or
should be dismissed without by the court include: (1) to what extent a judgment
rendered in the person's absence might be prejudicial to him or those already
parties; (2) the extent to which, by protective provisions in the judgment, by
the shaping of relief, or other measures, the prejudice can be lessened or
avoided; (3) whether a judgment rendered in the person's absence will be adequate;
(4) whether the plaintiff or cross-complainant will have an adequate remedy if
the action is dismissed for nonjoinder. None of these factors is determinative
or necessarily more important than another. Further, the court's consideration
of these factors largely depends on the facts and circumstances of each case.
The determination of whether a party is necessary or indispensable is one in
which the court weighs factors of practical realities and other considerations.
In view of that standard, we review the trial court's ruling for abuse of
discretion.
(Id. at 1365-1366 (internal citations and quotations omitted).)
Here, Opposing Defendants fail to explain why the Company is an
indispensable party, including why, in the Company’s absence, complete relief
cannot be accorded among those already parties, or why the Company claims an
interest relating to the subject of the action and is so situated that the
disposition of the action in the Company’s absence may (i) as a practical
matter impair or impede the Company’s ability to protect that interest or (ii)
leave any of the persons already parties subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations by reason of
the Company’s claimed interest. Opposing Defendants do not identify any claim
belonging to the Company. Opposing Defendants do not explain why “a valid final
judgment cannot be rendered without [the Company’s] participation.”
Corporations Code section 1800 et seq. do not require that the
corporation itself be named as a party.
The Court notes that, in their FACC, Opposing Defendants allege that
they are shareholders of the Company, and Plaintiff asserts in Reply that “all
shareholders, officers, and directors of the Company are parties to the case….”
For these reasons, the Court fails to find persuasive Opposing
Defendants’ argument that the requested preliminary injunction cannot be
granted because the Company is not a named defendant and has not been served
with the Summons and Complaint.
….
II. APPOINTMENT OF RECEIVER
Plaintiff requests the
appointment of a receiver pursuant to Corporations Code section 1803.
Corporations Code section 1803 provides that:
If, at the time of the filing of a complaint for involuntary
dissolution or at any time thereafter, the court has reasonable grounds to
believe that unless a receiver of the corporation is appointed the interests of
the corporation and its shareholders will suffer pending the hearing and
determination of the complaint, upon the application of the plaintiff, and
after a hearing upon such notice to the corporation as the court may direct and
upon the giving of security pursuant to Sections 566 and 567 of the Code of
Civil Procedure, the court may appoint a receiver to take over and manage the
business and affairs of the corporation and to preserve its property pending
the hearing and determination of the complaint for dissolution. (Corp. Code, §
1803.)
“[T]he appointment of a
receiver is a drastic remedy to be employed only in exceptional circumstances.”
(City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744; see
Elson v. Nyhan (1941) 45 Cal.App.2d 1, 5 [“Receivers are often legal luxuries,
frequently representing an extravagant cost to a losing litigant. When it
appears that no reasonably certain benefit will result to one litigant, and a
distinct disadvantage will result to another, courts should weigh carefully the
propriety of appointing a receiver.”].)
“The appointment of a receiver
rests within the discretion of the trial court. The superior court's discretion
to determine the necessity for the appointment of a receiver to dissolve a
corporation is broad. The order appointing a receiver will be reversed on
appeal if there is a clear showing of an abuse of discretion.” (Gold v. Gold
(2003) 114 Cal.App.4th 791, 807–808 (internal citations omitted); see Chapin v.
Gritton (1960) 178 Cal.App.2d 551, 564 [“The issuance of specific orders for
winding up and dissolution is discretionary with the court which may make such
orders ‘as justice and equity require.’”].)
….
The receiver has, under the control of the Court, power to bring and
defend actions in his own name, as receiver; to take and keep possession of the
property, to receive rents, collect debts, to compound for and compromise the
same, to make transfers, and generally to do such acts respecting the property
as the Court may authorize. (Code Civ. Proc., § 568.)
Accordingly, appoints a receiver. The Court finds that absent the
appointment of a receiver, the interests of the Company and its shareholders
will suffer pending the trial and determination of the complaint for
involuntary dissolution. There is clearly substantial mistrust and intense
animosity between the shareholders, and that both sides believe the other is
harming the interests of the Company, including by misappropriating cash and/or
committing fraud against the Company. There is a clear dispute regarding cash
and shareholder holdings, and accounting related to the Restaurant. The Court
finds that Plaintiff demonstrates with a sufficient legal and factual basis
that there are “exceptional circumstances” warranting this remedy, including to
ensure no further irreparable loss of the value of the Company and the
Restaurant, including loss of income or cash. The Court considers Opposing
Defendants’ Exhibit 13, and the Declaration of Utomi Tani aka Jimmy Tani in
weighing whether to appoint a receiver. A limited purpose receiver can operate
the Restaurant to protect the interests of all shareholders pending an order
dissolution of the Company. The Court finds that the appointment of the
receiver will ensure trust and confidence over the Restaurant finances and
operations.
For the above reasons, and the reasons argued by Plaintiff and
incorporated by reference herein, the Court GRANTS the Motion and appoints a
receiver for the limited purpose to take over
defined areas of the Restaurant, as follows:
1. Access to and control over all bank and financial accounts and
records of the Company maintained at East West and Cathay Bank;
2. Power to collect income
from operations and make payments for ordinary and necessary costs and expenses
from Restaurant operations;
3. Control over cash
transactions and receipts distribution of cash, credit card payments, check
payments, bank deposits, and the accounting of such;
4. Control over all cash or compensation from Restaurant operations;
5. Collection and accounting
of all gross receipts and operations;
6. Payment to vendors;
7. Control over compensation
to Restaurant employees and other appropriate compensation; and
8. Payment to state and
federal taxing authorities.
(Minute
order entered April 12, 2024, pp. 9-17.)
Also, additional
case background is summarized regarding the Motion for Trial Preference
addressed in the minutes filed February 27, 2025.
A. The Parties’ Arguments
On February 13, 2025, Defendants filed a Motion for
vacating the order appointing the receiver, arguing:
·
The order
appointing the receiver is void due to lack of jurisdiction without service of
the summons upon the nominal defendant.
·
The motion
sought a limited receivership but the order provided for a general one.
· A General Receivership requires a bond equal to 30% of the
company’s value under CCP § 567, yet the Receiver’s bond remains only $10,000,
rendering the order defective.
·
The Receiver
exceeded his authority by interfering with shareholder voting rights
misrepresenting material facts to the Court and blocking shareholders from
exercising their legal rights.
On February 25, 2025, Plaintiff filed an opposition,
arguing:
·
The order
involving the nominal defendant is authorized. Under California Code of Civil
Procedure section 564, subdivision (b )(9), courts may appoint a court receiver
"where necessary to preserve the property rights of any party." (See
Turner v. Sup.Ct. (Cooke) (1977) 72 Cal. App.3d 804, 811; Cal. Code of Civ.
Proc. §564(b)(l) [allowing a receiver where a Plaintiff has a probable interest
and is in danger of losing the property or on dissolution of a corporation];
Baron v. Fire Ins. Exchange (2007) 154 Cal. App.4th 1184, 1191
["Subdivision (b)(9) broadly permits such appointments in any case in
which a receiver is necessary to preserve the property or rights of any
party"].”)
·
The Court's
April 12, 2024 Minute Order provides a detailed two-page explanation why the
Company is not an indispensable party. See Minute Order of April 12, 2024.
On March 4, 2025, Defendants filed a reply, stating
positions including:
·
There is a
right to file this motion to vacate as a matter of law.
· The order is a violation of due process by appointing a
Receiver as to a non-party-- Golden Partner Global Investment, Inc.
· The process has involved a knowingly false declaration made
by Plaintiff.
·
Plaintiff was
found responsible by a Motion for Summary Adjudication for creating forged
documents of the company to steal elderly Kent Tran’s 19.4% shares, in case
number 23STCV08305, in Dept 73, on December 23rd, 2024.
·
The Receiver’s opposition
is riddled with irrelevant and biased mud-slinging.
·
Sanctions are
unwarranted and unauthorized without a noticed motion.
A.
Legal
Standard
“Although
a void order of appointment of a receiver is a nullity and may be attacked in
any proceeding,1 an order may not be collaterally attacked on the
ground that no sufficient showing was made for the appointment.2 It
may be attacked collaterally only on jurisdictional grounds.3 When a
collateral attack is made, all inferences will be indulged in favor of the
court's jurisdiction to make the appointment.4 Thus, as against a
collateral attack, if the jurisdiction of the court can be upheld and its
appointment validated, this will be done though the facts showing jurisdiction
are defectively stated….” (55 Cal. Jur. 3d Receivers § 35.)
B.
Whether
the Instant Motion if Authorized Procedure
Defendants argue that the instant motion is authorized by law.
Plaintiff counters that Defendants' motion is a disguised request for
reconsideration of the April 12, 2024 Minute Order. (Opposition, 10:4.)
“An adverse party may also
attack an order appointing a receiver as void or unwarranted by bringing a
motion to vacate the order in the trial court. [See Haines v. Commercial Mortg.
Co. (1928) 206 C 10, 12, 273 P 35; Lent v. H.C. Morris Co. (1938) 25 CA2d 305,
308, 77 P2d 301, 303].” (Cal. Prac. Guide Enf. J. & Debt §4:912.)
A
treatise further summarizes law applicable to objecting to receivers’
appointments, as follows:
“An adverse party can object
to the appointment of a receiver on the grounds that:
(1) the receiver is not
necessary, and less drastic alternatives are available;
(2) the evidence offered by
the applicant is false or insufficient; and
(3) the receiver is not a
person who can be appointed without consent [Code Civ. Proc., § 566, subd.
(a)].
The adverse party does not
waive the right to object to the appointment of a receiver by suggesting in
writing names of persons to be appointed as receiver. [Cal. Rules of Court,
rule 3.1177]
Once a receiver is
appointed, the adverse party can:
(1)
move to vacate or
modify the order [Shannon v. Superior Court, 217 Cal. App. 3d 986, 266 Cal.
Rptr. 242 (5th Dist. 1990)]...”
(Cal. Civ. Prac. Procedure §
16:163.)
In light of the applicable law, the court concurs with
Defendants that this motion procedure is cognizable.
C.
Whether
the order appointing the receiver is void due to lack of jurisdiction without service
of the summons upon the nominal defendant.
The parties dispute whether the
receivership order is authorized without service of summons on the nominal
defendant.
Receivers can be appointed with authority
to preserve Defendants’ rights which can involve affecting Defendants’ related
entity, as indicated by the following treatise excerpts:
“At the time of the filing
of a complaint for involuntary dissolution or at any time afterward, the court
may appoint a receiver for the corporation if it has reasonable grounds to
believe that, unless a receiver is appointed, the interests of the corporation
and its shareholders will suffer pending hearing and determination of the
complaint. The court may appoint a receiver on the application of the
plaintiff, after a hearing on such notice to the corporation as the court
directs and on the giving of security pursuant to Code Civ. Proc. §§ 566, 567.
The receiver's function is to take over and manage the business and affairs of
the corporation and to preserve its property pending hearing and determination
of the complaint for dissolution. [Corp. Code, § 1803]
Additionally, the Code of
Civil Procedure authorizes the superior court of the county in which the
corporation carries on its business or has its principal place of business to
appoint receivers on the application of any creditor, stockholder, or member of
the corporation. Under Code Civ. Proc. § 565, the receiver takes charge of the
corporation's estate and effects, collects the corporation's debts and property,
and divides the remaining property among the stockholders or members. [For
further discussion of appointment of receivers, see California Civil Practice:
Business Litigation §§ 12:1 to 12:33]
(Cal. Civ. Prac. Business
Litigation § 13:24.)
“Receivers may be appointed
in all other cases “where necessary to preserve the property or rights of any
party.” (C.C.P. 564(b)(9).) This provision replaced former C.C.P. 564(b)(8),
which provided that receivers could be appointed in all other cases “where
receivers have heretofore been appointed by the usages of courts of equity.”
This change was intended to substitute more readily understandable language
without making a substantive change. Like the deleted language, the current
language confers broad authority to appoint a receiver, but only where other
remedies are found to be inadequate. (See, e.g., Nichols v. Superior Court
(1934) 1 C.2d 589, 598, 36 P.2d 380 [receiver could be appointed under former
C.C.P. 564(b)(8) in divorce action, and appointment could create quasi in rem
jurisdiction]; Golden State Glass Corp. v. Superior Court (1939) 13 C.2d 384,
393, 90 P.2d 75, supra, § 477; McCarthy v. Poulsen (1985) 173 C.A.3d 1212,
1219, 219 C.R. 375 [where no person would consent to act as trustee of charitable
trust, court could appoint receiver in place of trustee under former C.C.P.
564(b)(8)].) As before, the general language of C.C.P. 564(b)(9) does not
override specific requirements set forth elsewhere in the statute. (Cal. Law
Rev. Com. Comment.) (See Dabney Oil Co. v. Providence Oil Co. of Arizona (1913)
22 C.A. 233, 237, 133 P. 1155 [if case is within one of specific classes listed
in other subdivisions of C.C.P. 564, general usage theory cannot be invoked,
and plaintiff must make sufficient showing under specific section]; on effect
of clause in mortgage or trust deed authorizing appointment under catch-all
provision, see infra, § 484.)”
(6 Witkin, Cal. Proc. 6th
Prov Rem § 479 (2024).)
Here,
the subject receivership order allows the Receiver to take charge of the
corporation's finances and divide the remaining property among the Defendants,
and to protect Plaintiff’s interest as an equity shareholder and the operations
of the subject restaurant.
Thus, the Court concurs with the
extensive analyses in the appointment order and concludes that service of
summons is not required upon the nominal defendant pursuant to applicable
receivership law, as argued in the opposition.
(See minute order entered April 12, 2024, pp. 9-17.)
D.
Whether
the motion sought a limited receivership but the order provided for a general
one.
Defendants contend that the receivership
order is a general one that requires a bond equal to 30% of the
company’s value under CCP § 56. Plaintiff counters that the minimum bond or
interest ownership values are not required by applicable law.
Receivers
perform tasks specified in the appointment order and more by obtaining
instructions from the court upon noticed hearing, potentially including the
power to take and keep possession of specified property, manage the property,
make transfers in the ordinary course of business, receive rents, and collect
accounts. (Code Civ. Proc., § 568. See also generally Cal. Prac. Guide Enf. J.
& Debt Ch. 4-C.)
Treatises further summarize
law regarding receiver appointments, as follows:
“A judge may appoint a
receiver only on a ground specified by statute. Marsch v Williams (1994) 23
CA4th 238, 245–248, 28 CR2d 402. Code of Civil Procedure § 564 sets forth the
general grounds for appointment. Baron v Fire Ins. Exch. (2007) 154 CA4th 1184,
1191, 65 CR3d 502. See §§ 14.141- 14.146. Various other statutes provide for
the appointment of a receiver in particular types of actions. See § 14.147.
An order appointing a
receiver that is not based on statutory grounds exceeds the court's
jurisdiction and is void. Turner v Superior Court (1977) 72 CA3d 804, 811, 140
CR 475. The parties may not, by stipulation or consent, confer jurisdiction on
the court to appoint a receiver in a case in which such an appointment is not
provided for by statute. Marsch v Williams, supra, 23 CA4th at 245–248.
(Cal. Judges Benchbook Civ. Proc. Before Trial § 14.140.)
Here, the Court expressly stated that,
“the Court orders the appointment of a limited purpose Receiver.” (Minute
order entered April 12, 2024, pp. 9-17.) (Underscoring added.)
Hence, the Court rejects the ground of a
general receivership as any basis for requiring a higher bond or vacating the
order.
E.
Whether
the Receiver exceeded authority by interfering with shareholder voting rights
and acted pursuant to misrepresented facts to the Court.
Defendants contend that the Receiver
exceeded the accorded authority by interfering with shareholder rights and
acting pursuant to misrepresented and material facts.
The Court concurs with the Receiver’s
opposition that references order language allowing company control, and finds
that the Receiver did not exceed the authority accorded by the appointment
order and applicable law.
F.
Sanctions
Request
Plaintiff requests $15,756.75 as
sanctions against defendants and their counsel, jointly and severally, pursuant
to California Rules of Court, rule 2.30, and California Code of Civil Procedure
Section 128, et seq.
“Sanctions
must not be imposed under this rule except on noticed motion by the party
seeking sanctions or on the court's own motion after the court has provided
notice and an opportunity to be heard.” (Cal. Rules of Court, rule 2.30(c).)
Sanction
rule, Cal. Rules of Court, rule 2.30 (formerly Rule 227), is invalid to the
extent that it conflicts with the more rigorous requirements of provisions in
the Code of Civil Procedure. (Trans-Action
Commercial Investors, Ltd. v. Firmaterr, Inc. (1997) 60 Cal.App.4th 352,
371.)
Code
of Civil Procedure section 128 does not provide authority for sanctions. (Hernandez v. Vitamin Shoppe Industries, Inc.
(2009) 174 Cal.App.4th 1441, 1452; Clark
v. Optical Coating Lab. (2008) 165 Cal.App.4th 150, 164-165.)
Here, the Court concludes that the
Plaintiff’s cites authorities do not authorize sanctions award requests in opposition
to the motion that would serve as the basis for sanctions.
G.
Continuance
Request
Plaintiff’s counsel reportedly requested
Defendants and the Receiver to stipulate to the instant matter being continued
to the March 28, 2025 hearing, to efficiently combine the number of court
appearances.
Generally, continuances are
discretionary. An order denying a stipulation to
continue is governed by the abuse-of-discretion standard. (Cotton v. Starcare Medical Group, Inc. (2010) 183 Cal.App.4th 437,
444-445 [finding abuse of discretion as to denial of a continuance that
precluded the opportunity to respond to demurrers], disapproved on other
grounds by Quishenberry v. UnitedHealthcare,
Inc. (2023) 14 Cal.5th 1057, 1069.)
III. DISPOSITION
Accordingly, Defendants’ motion is DENIED.
Plaintiff’s
requests for sanctions and a continuance are denied.