Judge Upinder S. Kalra, Case Number: 21STCV13991, Date: 2024-05-23 Tentative Ruling

Judge: Upinder S. Kalra, Case: 21STCV13991, Date: 2024-05-23 Tentative Ruling

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Case Number: 21STCV13991 Hearing Date: May 23, 2024 Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE: May 23, 2024

CASE NAME: Sabag Holdings, LLC v. SoCal Building Ventures, LLC

CASE NO.: 21STCV13991

PLAINTIFF’S MOTION FOR ORDER CHARGING INTEREST OF JUDGMENT DEBTOR IN SPECIFIED ENTITIES

MOVING PARTY: Plaintiff Sabag Holdings, LLC (“Judgment Creditor”)

RESPONDING PARTIES: Defendant SoCal Building Ventures, LLC (“Judgment Debtor”) and Third-Party Jason Caramanis as Trustee for Ya-Ya Legacy Trust (“Claimant”)

REQUESTED RELIEF:

1. Charging order against the transferrable interest of Defendant/Judgment Debtor SoCal Building Ventures, LLC in (1) Saticoy Property Managers, LLC; (2) 1880 Tunnel Road, LLC; and (3) Magnolia Management, LLC.

TENTATIVE RULING:

1. Plaintiff/Judgment Creditor Sabag Holdings, LLC’s Motion for Order Charging Interests of Judgment Debtor in Specified Entities is GRANTED.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On April 13, 2021, Plaintiff Sabag Holdings, LLC (“Plaintiff/Judgment Creditor”) filed a Complaint against Defendant SoCal Building Ventures, LLC (“Defendant/Judgment Debtor”), and DOES 1 through 10, inclusive for: (1) Breach of Contract on Promissory Note; and (2) Common Count.

On November 17, 2022, this Court entered Judgment pursuant to a Stipulation of Judgment and Order (“Stipulation for Judgment”), in favor of Judgment Creditor against Judgment Debtor in the amount of $9,000,000.00, including costs, interest, and attorney fees.

On March 26, 2024, Judgment Creditor filed the instant Motion for Order Charging Interest of Judgment Debtor in Specified Entities. On May 10, 2024, Third-Party Jason Caramanis as Trustee for Ya-Ya Legacy Trust (“Claimant”) filed an opposition. On May 16, 2024, Judgment Creditor filed a reply.

LEGAL STANDARD:

Pursuant to Code Civil Procedure section 708.310, “[i]f a money judgment is rendered against a partner or member but not against the partnership or limited liability company, the judgment debtor’s interest in the partnership or limited liability company may be applied toward the satisfaction of the judgment by an order charging the judgment debtor’s interest pursuant to Section 15907.03, 16504, or 17705.03 of the Corporations Code.” (Code Civ. Proc., § 708.310.)

“A lien on a judgment debtor’s interest in a partnership or limited liability company is created by service of a notice of motion for a charging order on the judgment debtor and on either of the following: (1) All partners or the partnership [or] (2) All members or the limited liability company.” (Code Civ. Proc., § 708.320, subd. (a).)

Pursuant to Corporations Code section 15907.03, subdivision (a), “[o]n application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.” (Corp. Code, §17705.03, subd. (a); see also Corp. Code, § 15907.03, subd. (a).)

Request for Judicial Notice:

1. Judgment Creditor request for judicial notice is GRANTED pursuant to Evidence Code sections 452(d) and 453.

2. Third-Party Jason Caramanis as Trustee for Ya-Ya Legacy Trust’s request for judicial notice is GRANTED pursuant to Evidence Code sections 452(d) and 453.

ANALYSIS:

Judgment Creditor moves for a charging order against the transferrable interest of Judgment Debtor in (1) Saticoy Property Managers, LLC; (2) 1880 Tunnel Road, LLC; and (3) Magnolia Management, LLC (“Specified Entities”) for the unsatisfied amount of the money judgment of $9,000,000.00 entered in favor of Judgment Creditor against Judgment Debtor. Judgment Creditor argues Judgment Debtor is a member of each of the Specified Entities and issuance of the charging order is essential to permit it to enforce the Judgment.

Claimant opposes the present motion on the grounds that he holds (1) a perfected security interest liens the Specified Entities; and (2) direct liens in the assets of 1880 Tunnel Road, LLC, thus making his position senior to that of Judgment Creditor.

In Rice v. Downs (2021) 73 Cal.App.5th 213, the court concluded that “a charging order would not take precedence over a security interest perfected before any judgment lien or charging order lien was in place.” (Rice v. Downs (2021) 73 Cal.App.5th 213, 232, fn. 9 (Rice).)

The Court finds that Judgment Debtor has failed to make any payments toward the Judgment entered against it on November 17, 2022. Furthermore, Judgment Creditor seeks merely a lien against Judgment Debtor’s membership interests in the Specified Entities. Essentially, Judgment Creditor requests a lien be issued on Judgment Debtor’s rights to distributions in accordance with the operating agreements in the Specified Entities such that no distribution payments are paid directly to Judgment Debtor. Likewise, Judgment Creditor makes no arguments or concessions that the requested charging order shall take precedence over Claimant’s lien interests in the same entities. Moreover, Claimant provides no case or statutory authority to support denial of a charging order simply because perfected security interests in the same interests of an LLC exist. By contrast, the sole case authority on such matters indicates that a charging order may be issued but would not take precedence over a security interest perfected before any judgment lien or charging order lien was in place because priority should be given to the first creditor that obtained a lien. (Rice, supra, 73 Cal.App.5th at 230.) Thus, even with a charging order in place, it is likely that Claimant would receive distributions before Judgment Creditor. Lastly, notice of the instant motion was provided to all the members of the Specified Entities, therefore it complies with the requirements of Code Civil Procedure section 708.320, subdivision (a).

Accordingly, the Motion for Order Charging Interests of Judgment Debtor in Specified Entities is warranted in this matter.

CONCLUSION:

For the foregoing reasons, the Court decides the pending motion as follows:

1. Plaintiff/Judgment Creditor Sabag Holdings, LLC’s Motion for Order Charging Interests of Judgment Debtor in Specified Entities is GRANTED.

Moving party is to give notice.

IT IS SO ORDERED.

Dated: May 23, 2024 ____________________________________________ Upinder S. Kalra

Judge of the Superior Court