Judge Teresa A. Beaudet, Case 21STCP00556 2022-09-14 Tentative Ruling

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 objects to the Undertaking. Respondents oppose. On August 2, 2022, the Court issued a minute order following a hearing on Petitioner’s objections to the Undertaking. The minute order provides, inter alia, “Petitioner may file a response to Respondent’s opposition to the objections by August 9, 2022 of up to and including 15 pages. Respondent may reply thereto by August 16, 2022 with up to and including 15 pages and Petitioner may reply by August 23, 2022 with up to and including 10 pages.” The August 2, 2022 minute order further provides, “Parties are to address interalia the issues raised at the hearing regarding LLC ownership and the requirements of CCP 995.510(a).”

On August 9, 2022, Petitioner filed a “Further Objection to Respondents’ Proposed Undertaking and Response to Respondents’ Opposition.” On August 16, 2022, Respondents filed a “Supplemental Brief in Further Support of Undertaking.” On August 23, 2022, Petitioner filed a “Reply in Support of Further Objection to Respondents’ Undertaking.”

The Court rules on Petitioner’s evidentiary objections to the Declaration of Linda Biron as follows:

The Court rules on Respondents’ “Evidentiary Objections in Support of Undertaking” as follows:[2]

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 Qualification by Individual Surety Linda Jacobs Biron” (“Biron Declaration”), and a “Declaration of Qualification by Individual Surety Jeffrey H. Schwartz” (“Schwartz Declaration”).

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 also notes that pursuant to Code of Civil Procedure section 995.510, subdivision (a), “[a] personal surety on a bond is sufficient if all of the following conditions are satisfied: (1) The surety is a person other than the principal. No officer of the court or member of the State Bar shall act as a surety. (2) The surety is a resident, and either an owner of real property or householder, within the state. (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.”

First, Petitioner objects that the Biron Declaration attached to the Notice of Undertaking 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). As Respondents note, it appears Petitioner is referring to subdivision (a)(3) of Section 995.510. As Respondents further 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 Declaration, ¶ 3.)

Petitioner’s second objection is that the Biron Declaration fails to evidence that Ms. Biron in an owner of real property or a householder in California. The Biron Declaration lists three properties that Ms. Biron indicates she owns. (Biron Declaration, ¶ 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 Declaration, ¶ 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 second 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. (Second Biron Decl., ¶ 5, Ex C.)

Petitioner asserts that this evidence makes clear that Ms. Biron does not personally own any real property. But as Respondents note, a personal surety on a bond is sufficient if certain conditions are satisfied, including that “[t]he surety is a resident, and either an owner of real property or householder, within the state.” (Code Civ. Proc., § 995.510, subd. (a)(2), emphasis added.) In addition, Ms. Biron states that she is “[a] resident of the state of California and owner of real property in California,” and that she is “a semi-retired real estate agent working from my home. My residential address is 5916 S. Village Drive, Playa Vista, California 90094.” (Biron Declaration, ¶ 2.) Respondents assert that Ms. Biron is thus both an owner of real property and a “householder” for purposes of Section 995.510(a)(2). Petitioner argues that Ms. Biron “does not provide any information as to whether she owns this house or is the head of the household of the property.” (Reply at p. 2:21-22.) The Court notes that neither Petitioner nor Respondents cite to any case law or other authority discussing the meaning of “householder.” Although Petitioner argues that Ms. Biron does not provide any information as to whether she owns the house at 5916 S. Village Drive or that she is the “head of the household of the property,” Petitioner does not cite to any legal authority demonstrating that she must do so to qualify as a “householder” under Section 995.510(a)(2).

Petitioner also cites to Kwok v. Transnation Title Ins. Co . (2009) 170 Cal.App.4th 1562, 1570-1571, where the Court of Appeal found that the appellants in that case “disregard[ed] the legal significance of a limited liability company. As members of the LLC, appellants never held an ownership interest in the property to which the LLC held title. Corporations Code section 17300 provides: A membership interest and an economic interest in a limited liability company constitute personal property of the member or assignee. A member or assignee has no interest in specific limited liability company property…a limited liability company is a hybrid business entity formed under the Corporations Code consisting of at least two members who own membership interests. The company has a legal existence separate from its members. While members actively participate in the management and control of the company, they have limited liability for the company’s debts and obligations to the same extent enjoyed by corporate shareholders.” (Internal quotations and citations omitted.) Petitioner asserts that accordingly, “all Biron has is the personal property value of her LLC(s) membership interests.” (Petitioner’s Further Objection and Response to Opposition at p. 9:1.)

But as Respondents note, a personal surety on a bond is sufficient if certain conditions are satisfied, including that “[t]he 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.” (Code Civ. Proc., § 995.510, subd. (a)(3), emphasis added.) Respondents assert that therefore, regardless of whether some of Ms. Biron’s real property is held by her LLC, the value in the real property still qualifies Ms. Biron as a personal surety because it is reflected in her personal property.[3]

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.) Petitioner counters that “[a] leasehold estate gives the lessee the exclusive possession of the premises against all the world, including the owner, for the term of the lease. While the lessee has a present possessory interest in the premises, the lessor has a future reversionary interest and retains fee title.” (Avalon Pacific—Santa Ana, L.P. v. HD Supply Repair & Remodel, LLC (2011) 192 Cal.App.4th 1183, 1190 [internal citations omitted].) This assertion does not demonstrate that an interest in a lease of real property is not an interest in real property.

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 in support of this assertion. As set forth above, the Court sustains Respondents’ evidentiary objections to the Declaration of Nathan Reeves. Petitioner also submits the Declaration of David Berg for the first time in connection with the reply to support the assertion that the value of the Glendale Property is $2,900,000-$3,100,000. The Court notes that “[p]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.” (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.)

Respondents state that on June 20, 2022, the Glendale Property was appraised and valued at $5,900,00, and that this property alone is thus sufficient to support the Undertaking. (Biron Decl., ¶ 5, Ex. D.) Respondents note that pursuant to Evidence Code section 813, subdivision (a), “[t]he value of property may be shown only by the opinions of any of the following: (1) Witnesses qualified to express such opinions. (2) The owner or the spouse of the owner of the property or property interest being valued. (3) An officer, regular employee, or partner designated by a corporation, partnership, or unincorporated association that is the owner of the property or property interest being valued, if the designee is knowledgeable as to the value of the property or property interest.”

Fourth, Petitioner objects that the Biron Declaration fails to disclose whether Ms. Biron is married and whether any of the assets identified in the Biron Declaration 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.

Fifth, Petitioner objects that the Schwartz Declaration 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 Declaration, ¶ 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 Second Decl., ¶ 3, Ex. 1.)

Petitioner asserts that “Schwartz has no real property interest in the Hatteras Property. Instead, the Hatteras Property is owned by his corporation, in which he has an ownership interest. As such, Schwartz’s interest is solely that of a personal property interest in the corporate stock.” (Petitioner’s Further Objection and Response to Opposition at p. 9:22-24.) But as discussed above, a personal surety on a bond is sufficient if certain conditions are satisfied, including that “[t]he 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.” (Code Civ. Proc., § 995.510, subd. (a)(3), emphasis added.)

Sixth, Petitioner objects that the Schwartz Declaration 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 Declaration, ¶ 4(a).)

Seventh, Petitioner objects that the 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 in support of this assertion. As set forth above, the Court sustains Petitioner’s evidentiary objections to Mr. Reeves’s declaration. Mr. Schwartz also asserts under penalty of perjury that the estimated fair market value of the Le Sage Property exceeds $1,125,000. (Schwartz Declaration, ¶ 4(a).)

Eighth, Petitioner objects that the Schwartz Declaration 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, and submits the declaration of Mr. Reeves in support of this objection. 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 Declaration, ¶ 4(b).)

Tenth, Petitioner objects that the Schwartz Declaration fails to disclose whether Mr. Schwartz is married and whether any of the assets identified in the Schwartz Declaration 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 Declaration, ¶ 4.)

Eleventh, in its further objection and response to Respondents’ opposition, Petitioner asserts that the Biron Declaration and Schwartz Declaration lack information as to the liabilities of Ms. Biron or Mr. Schwartz. (See Code Civ. Proc. § 995.510, subd. (a)(3), “[t]he 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.”) But as set forth above, 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 Declaration, ¶ 3.) In addition, Mr. Schwartz asserts that he 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.” (Schwartz Declaration, ¶ 3.)[4]

Based on a consideration of the argument and evidence presented by the parties, the Court does not find that Petitioner has demonstrated that the proposed Undertaking is insufficient.

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

[1]The Court notes that “[t]aking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 113 [internal citations omitted.])

[2]The Court notes that Mr. Reeves’ declaration attaches a “Comparative Market Analysis” for three of the subject properties. Respondents submit the Declaration of Jay Hibert, who states that a “Comparative Market Analysis” (“CMA”) is a tool used by licensed real estate professionals to help determine an initial face value of a property, and that CMA is a tool that accesses the multiple listing services (“MLS”). (Hibert Decl., ¶¶ 5, 6.) Mr. Hibert states that he “[w]as not able to verify that Nathan Reeves is licensed with the state of California as an agent or broker authorized to access the MLS, nor was I able to verify that he is a licensed property appraiser or valuation professional.” (Hibert Decl., ¶ 7.) This does not appear to be disputed by Petitioner. Mr. Hibert also asserts that a CMA is not a legitimate appraisal or valuation method recognized by a lender. (Hibert Decl., ¶5.)

[3] In her Declaration attached to the Notice of Undertaking, Ms. Biron gives her opinion of the value of the Glendale Property. Even though the Court sustained Petitioner’s objection to the admission of the appraisal itself, she is still able to provide her opinion of value pursuant to Evidence Code sections 811 and 813.

[4]As discussed above, Respondents assert that regardless of whether some of Ms. Biron and Mr. Schwartz’s real property is held by their respective real estate holdings companies, the value in the real properties still qualifies them as personal sureties because it is reflected in their personal property.

Superior Court of California

County of Los Angeles

Department 50