Judge: Teresa A. Beaudet, Case: 21STCP00556, Date: 2022-08-02 Tentative Ruling

Case Number: 21STCP00556    Hearing Date: August 2, 2022    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Background 

            Petitioner David Wherly (“Petitioner”) commenced this action on February 19, 2021 to confirm an arbitration award issued on February 9, 2021 in a commercial arbitration proceeding. Subsequently, Petitioner filed an amended petition on March 9, 2021, to correct a typographical issue on the caption of the court form. The arbitration award was for $701,098.00 as well as injunctive relief, attorney’s fees in the amount of $247,054.10, costs of suit in the amount of $80,030.00, legal interest at the statutory rate, and discovery sanctions in the amount of $3,228.00.

On October 1, 2021, the Court issued a Statement of Decision granting the petition and confirming the arbitration award in the amount of $701,098.00 as well as injunctive relief, attorney’s fees in the amount of $247,054.10, and legal interest at the statutory rate against Respondents Hawthorne Hangar Operations, LP (“HHO”) and Dan Wolfe as Trustee of the Wolfe Family Trust of 1992 (jointly “Respondents”). The Court reduced the award of costs against Respondents from $80,030.00 to $69,060.50. In addition, the Court confirmed the arbitration award of discovery sanctions in the amount of $3,228.00 against Messina & Hankins LLP.

On May 13, 2022, Judgment was entered in this action. The Court’s May 13, 2022 Judgment provides, inter alia, that in total, through May 13, 2022, the Judgment amount in favor of Petitioner and against Respondents is $1,200,439.73 and the Judgment amount in favor of Petitioner and against Messina & Hankins LLP is $3,633.93. Both Judgment amounts shall each accrue post-judgment interest, as provided in the Judgment. The Judgment also provides for injunctive relief. 

On June 10, 2022, the Court issued an order on Respondents’ motion to stay enforcement of the May 13, 2022 Judgment and Petitioner’s objection to Respondents’ initial proposed undertaking. The Court’s Order provides, inter alia, “[t]he Court grants Respondents’ motion to stay the injunctive relief portion of the May 13, 2022 Judgment pending their appeal of the Court’s order confirming the arbitration award in this matter. Respondents’ motion was otherwise denied; however, the parties agreed as follows: Petitioner agrees to forbear further actions to enforce the Judgment through 6/24/22 while Respondent obtains proper undertakings.”

On June 24, 2022, Respondents filed a “Notice of Undertaking in the Amount of $2,400,880” (the “Undertaking”). 

Petitioner now objects to the Undertaking. Respondents oppose.[1] 

Request for Judicial Notice

Petitioner’s request for judicial notice is granted.[2]

Discussion

            Respondents’ June 24, 2022 Undertaking provides, inter alia, that “the undersigned, Linda Jacobs Biron, of Los Angeles County and Jeffrey H. Schwartz, of Los Angeles County do hereby acknowledge themselves, jointly and severally bound in the sum of $2,400,880, to guarantee that, in the event that this Judgment so appealed, or any part, is affirmed, or if the appeal from this Judgment is withdrawn or dismissed, Respondents will pay the amount directed to be paid by such Judgment, or the part of such amount as to which the Judgment is affirmed if affirmed only in part.” (Undertaking at p. 2:9-15.) The Undertaking attaches a “Declaration of Qualifications by Individual Surety Linda Jacobs Biron” (“Biron Affidavit”), and a “Declaration of Qualification by Individual Surety Jeffrey H. Schwartz”  (“Schwartz Affidavit”).  

            Petitioner notes that under Code of Civil Procedure section 995.920, “[t]he beneficiary may object to a bond on any of the following grounds: (a) The sureties are insufficient. (b) The amount of the bond is insufficient. (c) The bond, from any other cause, is insufficient.”

In addition, “[t]he undertaking shall be for double the amount of the judgment or order unless given by an admitted surety insurer in which event it shall be for one and one-half times the amount of the judgment or order.” (Code Civ. Proc., § 917.1, subd. (b).) The total amount of the Judgment entered against Respondents is $1,200,439.73, and double this amount is $2,400,879.46. As set forth above, Respondents’ Undertaking is in the amount of 2,400,880.

Petitioner objects to the Undertaking on ten separate grounds.

First, Petitioner objects that the Biron Affidavit fails to evidence that Ms. Biron meets the minimum net worth of the Undertaking required by Code of Civil Procedure section 995.510, subdivision (a)(2).[3] As Respondents note, it appears Petitioner is referring to subdivision (a)(3) of Section 995.510, which provides that “(a) A personal surety on a bond is sufficient if all of the following conditions are satisfied:…(3) The surety is worth the amount of the bond in real or personal property, or both, situated in this state, over and above all debts and liabilities, exclusive of property exempt from enforcement of a money judgment.” As Respondents note, Ms. Biron asserts that she is “worth in excess of $2,400,880, the amount of the undertaking, in real property that is situated in California, over and above all my debts and liabilities, exclusive of property

exempt from enforcement of a money judgment.” (Biron Affidavit, ¶ 3.) 

Petitioner’s second objection is that the Biron Affidavit fails to evidence that Ms. Biron in an owner of real property or a householder in California. The Biron Affidavit lists three properties that Ms. Biron indicates she owns. (Biron Affidavit, ¶ 4.) These properties are located at (1) 120 Aspen Oak Lane, Glendale, CA 91207 (the “Glendale Property”), (2) 4316 Marina City Drive, Unit #101G, Marina Del Rey, CA 90292, and (3) 4316 Marina City Drive, Unit #102G, Marina Del Rey, CA 90292 (the second and third properties are referred to jointly as the “Marina Properties”). (Biron Affidavit, ¶ 4.)

Petitioner cites to Exhibit A of his request for judicial notice in support of the assertion that the Glendale Property is owned by 120 Aspen Oak Lane, LLC. Petitioner asserts that the most recent Statement of Information for that entity in the California Secretary of State’s online records makes no reference to Ms. Biron and lists “Jason Gulvartian” as the manager/member. (Petitioner’s RJN, Ex. B.) Respondents submit a declaration of Ms. Biron in support of their opposition, in which Ms. Biron indicates that the Statement of Information on file with the California Secretary of State demonstrates that Ms. Biron is the Chief Executive Officer and sole Manager/Member of 120 Aspen Oak Lane, LLC. (Biron Decl., ¶ 5, Ex C.)

Petitioner also asserts that the Marina Properties are owned by the County of Los Angeles, citing to Exhibit “C” of Petitioner’s request for judicial notice, which consists of a Second Amended Lease between the County of Los Angeles and J.H. Snyder Company. In support of the opposition, Ms. Biron indicates that she is the sole owner of the Marina Properties, and that while Los Angeles County is the fee owner of the land, she is free to transfer and sell her interest in these condominium units freely during her leasehold. (Biron Decl., ¶ 6.)

Third, Petitioner objects that the Glendale Property is worth $2.9 million less than the

$5,900,00 amount claimed by Ms. Biron for this property. Petitioner submits the declaration of Nathan Reeves, the “Senior Director of Regional Operations for Los Angeles, Orange, Riverside and San Bernadino Counties for Wedgewood LLC,” who asserts that the estimated value of the Glendale Property is around $3,000,000. (Reeves Decl., ¶ 5.) Respondents counter that on June 20, 2022, the Glendale Property was appraised and valued at $5,900,00. (Biron Decl., ¶ 5, Ex. D.)  Respondents assert that the Glendale Property alone is thus sufficient to support the Undertaking.

            Fourth, Petitioner objects that the Biron Affidavit fails to disclose whether Ms. Biron is married and whether any of the assets identified in the Biron Affidavit are held as community property. Petitioner fails to cite to any legal authority demonstrating that this information must be provided in order for Ms. Biron to qualify as a personal surety. In addition, as Respondents note, Ms. Biron indicates that she is the sole owner of the properties listed in her affidavit. (Biron Affidavit, ¶ 4.)

            Fifth, Petitioner objects that the Schwartz Affidavit fails to provide any supporting information on the ownership, management, assets, liabilities, or income of Harmony Place, “JMG Investments, Inc.” and “23041 Hatteras, Inc.” However, Mr. Schwartz states that he is the owner of a drug rehabilitation center known as Harmony Place. (Schwartz Affidavit, ¶ 2.)

            Mr. Schwartz also indicates that he is the sole owner of property at 23041 Hatteras Street, Woodland Hills, CA 91367 (the “Hatteras Property”). Petitioner contends that according to the Deed of Trust obtained for the Hatteras Property, it is owned by 23041 Hatteras LLC, which was converted to 23041 Hatteras, Inc., on June 1, 2022. (Petitioner’s RJN, Ex. D.) The Court notes that no evidence of such deed of trust was provided by Petitioner. Petitioner also asserts that according to Harmony Place’s National Provider Identifier Number which is issued by the Centers for Medicare and Medicaid Services, Harmony Place is owned by JMG Investments, Inc. (Petitioner’s RJN, Exs. E, F.) Respondents counter that the Statements of Information on file with the California Secretary of State indicate that Mr. Schwartz is the Chief Executive Officer, Secretary, Chief Financial Officer and Director/Officer of JMG Investments, Inc., as well as the Chief Executive Officer of 23401 Hatteras, Inc. (Schwartz Decl., ¶ 3, Ex. 1.)

            Sixth, Petitioner objects that the Schwartz Affidavit fails to provide any supporting information for Mr. Schwartz’s personal assets, other than that he owns Harmony Place. But   Mr. Schwartz also indicates that he owns property located at 5742 Le Sage Avenue, Woodland Hills, CA, 91367 (the “Le Sage Property”). (Schwartz Affidavit, ¶ 4(a).) 

            Seventh, Petitioner objects that Le Sage Property is worth approximately $175,000 to $225,000 less than the amount claimed by Mr. Schwartz. Petitioner submits the declaration of Nathan Reeves, who asserts that the estimated value of the Le Sage Property is between $900,000 and $950,000. (Reeves Decl., ¶ 6.) Mr. Schwartz asserts under penalty of perjury that the estimated fair market value of the Le Sage Property exceeds $1,125,000. (Schwartz Affidavit, ¶ 4(a).)

            Eighth, Petitioner objects that the Schwartz Affidavit fails to disclose that there is a tax lien against the Le Sage Property. The Court notes that Petitioner does not cite to any evidence in support of this assertion. Mr. Schwartz asserts that as of the date of his declaration filed in support of Respondents’ opposition, he is not aware of any current existing tax lien on the        Le Sage Property. (Schwartz Decl., ¶ 4.) 

            Ninth, Petitioner objects that the Hatterras Property is worth $1.79 million less than the amount claimed by Mr. Schwartz. Mr. Schwartz indicates that he is the sole owner of the Hatteras property and that his estimate of the fair market value of the property exceeds $4,790,000. (Schwartz Affidavit, ¶ 4(b).) Petitioner submits the declaration of Mr. Reeves, who asserts that the estimated value of the Hatteras Property is about $3,000,000. (Reeves Decl., ¶ 8.) 

            Tenth, Petitioner objects that the Schwartz Affidavit fails to disclose whether               Mr. Schwartz is married and whether any of the assets identified in the Schwartz Affidavit are held as community property. Petitioner fails to cite to any legal authority demonstrating that this information must be provided in order for Mr. Schwartz to qualify as a personal surety. In addition, Mr. Schwartz indicates that he is the sole own of the Le Sage Property and the Hatteras Property. (Schartz Affidavit, ¶ 4.)

Conclusion

            In light of the foregoing, Petitioner’s objection to the Undertaking is overruled. 

Respondents are ordered to provide notice of this ruling.

DATED:  August 2, 2022                               ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court