Judge Upinder S. Kalra, Case Number: BC319672, Date: 2024-11-08 Tentative Ruling

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PETITION FOR HEARING ON THIRD PARTY CLAIM OF OWNERSHIP OF FUNDS PURSUANT TO WRIT OF EXECUTION

1. An Order determining ownership of funds levied by the Los Angeles Sheriff from City National Bank.

On August 16, 2024, Third Party Claimant Rockingham Ranch, LLC (Rockingham) filed a Third Party Claim Declaration with the Los Angeles County Sheriff’s Department.

On August 27, 2024, Plaintiff timely filed the instant Petition for Hearing on Third Party Claim and for proper disposition of the property that is the subject of the claim.

On September 6, 2024, Plaintiff served Notice of Hearing on this Petition.[1] Plaintiff also filed a memorandum of points and authorities in opposition to the third party claim.

CCP § 720.310, subdivision (a) provides:¿“Not later than 15 days after the third-party claim is filed with the levying officer pursuant to Section 720.120 or 720.220 . . . either the creditor or the third person may petition the court for a hearing to determine the validity of the third-party claim and the proper disposition of the property that is the subject of the claim.”¿ Subdivision (c) provides that “[t]he hearing shall be held within 20 days after the filing of the petition unless continued by the court for good cause shown.”¿ “At a hearing on a third-party claim, the third person has the burden of proof.” (Code Civ. Proc., § 720.360.)¿ “Once the third party establishes its entitlement to the property, the burden shifts to the creditor . . . to establish that its claim is superior.¿ [Citation.]¿ There is no requirement of a jury trial in third-party claim proceedings, and no findings are required.¿ [Citations.]”¿ (Oxford Street Properties, LLC v. Rehabilitation Associates, LLC. (2012) 206 Cal.App.4th 296, 307.)¿

“Resolving conflicting claims in the same collateral requires a three-step inquiry: First, has the security interest attached; second, has the security interest been perfected; and third, does the perfected security interest have priority.” (Id. at p. 308.) “Once a security interest has attached to the debtor’s collateral, perfection of a security interest makes it enforceable against third parties and priority determines which of competing claims to collateral will take precedence.” (Ibid.) “A security interest attaches only to whatever rights the debtor has in the collateral.” (Ibid.) Cours apply “general contractual interpretation principles” when “analyzing the scope of the security interest.” (Id. at p. 309.) Courts also rely on the California Uniform Commercial Code. (See ibid.)

Plaintiff contends that the supposed “third party” is actually a dba of Defendant/Judgment Debtor Hartunian and, as such, the court should order the Sheriff to release the funds to Plaintiff. Rockingham argues Plaintiff failed to comply with CCP § 720.140(b), and Rockingham is a Montana LLC not a dba of Defendant.

Unless the levying creditor files an adequate undertaking within the required time or obtains a restraining order, the property is automatically released (except when it is to be held under another lien or the court orders otherwise). (CCP § 720.170(a).)

As a threshold matter, there is no evidence that Plaintiff filed the requisite undertaking. (CCP § 720.140(b).) Additionally, Plaintiff did not seek an ex parte restraining order to prevent the property from being released pending the hearing. There is also no evidence that Plaintiff filed a copy of the notice of hearing with the levying officer. (CCP § 720.320.)

Still, Plaintiff’s Petition may be heard even if the property is released. (CCP § 720.170(d).) However, the court must determine that the judgment debtor has an interest in the property that may be levied upon or otherwise applied to the judgment. (CCP § 720.430.)

Here, the court agrees that Rockingham’s property was improperly levied.[2] First, Rockingham is not a judgment debtor because they are not named on the Judgment or the renewed Judgment. (Shackelford Decl., Exhibits A, B.) Additionally, Plaintiff did not seek leave to amend the Judgment to add Rockingham. Second, Rockingham provided sufficient evidence that it is a separate entity. (Hartunian Decl., Exhibits G, H.) As such, the court finds that Rockingham’s third party claim is valid.

[1] It is unclear whether Plaintiff served a copy of Rockingham. It is also unclear whether Plaintiff filed a copy of the Notice of Hearing with the Los Angeles County Sheriff’s Department since they have not filed anything with the court.

[2] Rockingham as the third party claimant as the burden of proof. (CCP § 720.360; Oxford Street Properties, LLC v. Rehabilitation Assocs., LLC (2012) 206 Cal.App.4th 296, 307.) Plaintiff would have the burden of proof if she claimed fraudulent transfer. (See Whitehouse v. Six Corp. (1995) 40 Cal.App.4th 527, 534-535.) However, upon reviewing the Opposition, Plaintiff has not alleged fraudulent transfer.