Judge: Stephen I. Goorvitch, Case: 23STCV12237, Date: 2024-05-03 Tentative Ruling

Case Number: 23STCV12237    Hearing Date: May 3, 2024    Dept: 82

Elshir Enterprises, L.P. v. House of Abundance WeHo LLC, et al.

Case No. 23STCV12237

Ex Parte Application for Writ of Attachment

            Elshir Enterprises, L.P. (“Plaintiff”) filed this action against House of Abundance WeHo LLC (“House of Abundance”) and a series of individuals (the “Individual Defendants”) asserting causes of action for fraudulent transfer and conspiracy to defraud, asserting an alter ego theory of liability and damages. 

            The Individual Defendants owned and operated Defendant Team MWB-LA, LLC (“MWB”).  (Complaint, ¶ 17.)  MWB operated the “Gym Sports Bar” in West Hollywood, California.  (Id., ¶¶ 15-16.)  MWB held a “California On-Sale General Public Premises [liquor] license.”  (Id., ¶ 19.)  The Gym Sports Bar rented space from Plaintiff.  (Declaration of Richard Schmutzler, ¶ 2.)  MWB closed the Gym Sports Bar during the pandemic, purportedly because “Plaintiff was unwilling to work with [MWB] to allow it to weather the shutdown.”  (Id., ¶ 5.)  MWB vacated Plaintiff’s premises on July 27, 2020, and is no longer in business.  (Id., ¶ 6; see also Complaint, ¶ 21.)   

            On July 28, 2020, the Individual Defendants looked for a new location to start a new business and created a new limited liability corporation.  (Declaration of Richard Schmutzler, ¶ 7.)  In September 2020, Defendants found a new location and open escrow for the purpose of transferring their liquor license.  (Id., ¶¶ 9-10.)  This process was initiated before Plaintiff filed a lawsuit against Defendants for the unpaid rent.  (Id., ¶¶ 10, 13.)  This lawsuit was not filed until May 4, 2021.  (Id., ¶ 13.)  On August 20, 2021, Alcohol Bureau Control approved the transfer of the liquor license, which allowed the new restaurant to open.  (Id., ¶ 15.)  The parties resolved the lawsuit with a stipulated judgment in April 2023.  (Id., ¶ 19.)  On March 18, 2024, Defendants agreed to sell the restaurant to BraveCott Ventures, LLC, and the liquor license is in the process of being transferred as part of the sale.  (See id., ¶ 23; see also Declaration of Roy C. Manukyan, ¶¶ 10-11.)  The sale has been completed; the funds are in escrow; and escrow will close once Alcohol Bureau Control approves the transfer of the liquor license.   

            Now, Plaintiff seeks a writ of attachment by way of an ex parte application.  In the alternative, Plaintiff seeks a temporary restraining order (and order to show cause why a preliminary injunction should not issue) to enjoin the escrow company from distributing any proceeds of the sale to HOA and its members until this lawsuit is resolved.  The court denies this ex parte application for multiple reasons. 

            First, the court cannot issue a writ of attachment over proceeds from the sale of a liquor license.  (See Grover Escrow Corporation v. Joseph G. Cole (1969) 71 Cal.2d 61, 63-64.)  Rather, Business and Professions Code section 24074 governs the priority of such claims, and a creditor cannot establish priority over another creditor through a writ of attachment.  (Id., p. 62.)  Specifically, the California Supreme Court has held that “section 24074 represents a mandatory and exclusive scheme for payment of creditors of liquor license transferors, giving creditors who comply with this section priority over those who employ any form of levy on the proceeds.”  (Id., p. 62.)  Simply, Plaintiff must submit a claim in escrow. 

            Second, in the alternative, Plaintiff’s counsel does not demonstrate the “probable validity” of the claim upon which the attachment is based.  A claim has probable validity where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.  (See Code Civ. Proc. § 481.190.)  In this case, Plaintiff alleges that the transfer of the liquor license was part of a fraudulent transfer and related conspiracy.  In order to prevail, Plaintiff must prove that there was a transfer “with the intent to prevent a creditor from reaching that interest to satisfy its claim.”  (Nautilus, Inc. v. Yang (2017) 11 Cal.App.5th 33, 39.)  Plaintiff fails to do so.    

            Third, in the alternative, Plaintiff’s counsel does not demonstrate irreparable harm.  Plaintiff’s counsel does not demonstrate that the funds will concealed, substantially impaired in value, or unavailable to levy for some other reason.  The mere fact that Plaintiff’s counsel may have to undertake collection efforts is not a basis to grant the requested relief.

            Based upon the foregoing, Plaintiff’s ex parte application is denied.  Plaintiff’s counsel shall provide notice and file proof of service with the court.