On 07/12/2013 MIKE GALAM filed a Property - Other Property Fraud lawsuit against ABRAHAM ASSIL. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are ERNEST HIROSHIGE, BARBARA M. SCHEPER, HOLLY E. KENDIG, LUIS A. LAVIN and EDWARD B. MORETON. The case status is Disposed - Judgment Entered.
Disposed - Judgment Entered
BARBARA M. SCHEPER
HOLLY E. KENDIG
LUIS A. LAVIN
EDWARD B. MORETON
RHINO BARE PROJECTS LLC
DOES 1 - 25
SN & GE L.L.C.K.
WEST BEST CAPITAL GROUP L.L.C.
KLAUSNER ALYSSA ESQ.
CANICO CAPITAL GROUP LLC
BERKOWITZ STEVEN ESQ.
BUBMAN MICHAEL E. ESQ.
EDMONDSON J. CURTIS
GALAM MIKE GEORGE ESHAGHIAN ESQ.
LEBEDEV GENNADY L. ESQ.
NOVIAN FARID ESQ.
PHILIP W. GREEN
STANTON MITCHEL T. ESQ.
STEVEN R. MEEKS
GALAM MIKEGEORGE ESHAGHIAN ESQ.
ADESKO KEITH A.
9/24/2019: Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE THIRD PARTY CLAIMANTS REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF OPPOSITION TO MOTION TO FORECLOSE ON CHARGING ORDER AGAINST LIMITED LIABILITY
9/30/2019: Request for Judicial Notice
12/24/2019: Notice of Lodging - NOTICE OF LODGING OF TRANSCRIPT OF OCTOBER 31, 2019 HEARING ON CANICO CAPITAL COMPANYS MOTION FOR ORDER TO FORECLOSE ON CHARGING ORDER AGAINST LIMITED LIABILITY COMPANY INTEREST
7/9/2019: Response - RESPONSE JUDGMENT DEBTOR RHINO BARE'S RESPONSE TO MOTION FOR ORDER TO CHARGE TRANSFEREE'S INTEREST IN A LIMITED LIABILITY COMPANY
8/1/2016: NOTICE OF ADDRESS CHANGE
DocketAcknowledgment of Satisfaction of Judgment; Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketWrit of Execution ((Los Angeles)); Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketProof of Service (not Summons and Complaint); Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
Docketat 09:30 AM in Department 44; Hearing on Motion for Attorney Fees - Held - Motion GrantedRead MoreRead Less
DocketNotice (OF ENTRY OF ORDER GRANTING JUDGMENT CREDITOR CANICO CAPITAL GROUP, LLC?S MOTION FOR ORDER TO FORECLOSE ON CHARGING ORDER AGAINST LIMITED LIABILITY COMPANY INTEREST PURSUANT TO CORPORATIONS CODE SECTION 117705.03(b)); Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketMinute Order ( (Hearing on Motion for Attorney Fees)); Filed by ClerkRead MoreRead Less
DocketReply (JUDGMENT CREDITOR CANICO CAPITAL GROUP, LLC?S REPLY BRIEF IN SUPPORT OF MOTION FOR AWARD OF POST-JUDGMENT ATTORNEYS? FEES AND COSTS; SUPPLEMENTAL DECLARATION OF ANDREW W. ZEPEDA); Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketOpposition (Judgment Debtor Rhino Bare LLC Opposition to Motion for Award or Post Judgment Attorneys Fees and Costs); Filed by Rhino Bare Projects, LLC (Plaintiff)Read MoreRead Less
DocketMotion for Attorney Fees; Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketMemorandum of Costs After Judgment, Acknowledgment of Credit, and Declaration of Accrued Interest; Filed by Canico Capital Group, LLC (Non-Party)Read MoreRead Less
DocketMinute OrderRead MoreRead Less
DocketMinute order entered: 2013-08-30 00:00:00; Filed by ClerkRead MoreRead Less
Docketat 4:00 PM in Department 54; Unknown Event Type - HeldRead MoreRead Less
DocketMinute OrderRead MoreRead Less
DocketMinute order entered: 2013-08-07 00:00:00; Filed by ClerkRead MoreRead Less
DocketChallenge To Judicial Officer - Peremptory (170.6); Filed by Plaintiff/PetitionerRead MoreRead Less
DocketAFFIDAVIT OF PREJUDICE PEREMPTORY CHALLENGE TO JUDICIAL OFFICERRead MoreRead Less
DocketSUMMONSRead MoreRead Less
DocketComplaint; Filed by Rhino Bare Projects, LLC (Plaintiff)Read MoreRead Less
DocketCOMPLAINT FOR: [1) BREACH OF FIDUCIARY DUTY; ETCRead MoreRead Less
Case Number: BC514908 Hearing Date: October 31, 2019 Dept: 44
CASE NAME: Mike Galam, et al. v. Abraham Assil, et al.
MOVING PARTY: Judgment Creditor CANICO CAPITAL GROUP, LLC
RESPONDING PARTY: Judgment Debtor RHINO BARE, LLC
Third-Party Claimants EL MARINO LLC, KNOTTING HILL, LLC, IJ PROPERTIES LLC, SEFOX INVESTMENT, LLC, S DOUBLE, LLC
MOTION: Motion for Order to Foreclose on Charging Order against LLC
The motion is denied without prejudice because moving party has not met its burden of demonstrating that the judgment cannot be satisfied in a reasonable time. This is particularly so in light of questions concerning the profitability and ability to make distributions of judgment creditor Canico, and whether the management of Canico is avoiding making distributions, or inaccurately portraying Canico’s financial condition, for the purpose of providing a basis for foreclosing on the charging order. Among the specific issues insufficiently addressed by Canico are the following: (1) the absence of any income in the 2018 profit and loss statement for Canico, when the 2015-2017 profit and loss statements for Canico show income of over $700,000 in each year, and (2) whether Third-Party Claimants’ security interests have senior priority to Canico’s judgment lien.
These issues are discussed below.
On April 22, 2016, the court entered judgment in favor of Plaintiff Canico Capital Group, LLC and Industrial Road 2440-2497, LLC against Defendants Rhino Bare Projects LLC and Michael Galam. The court held that a 59.933% membership interest in Canico to Rhino Bare was only a transfer of an economic interest and did not provide for voting rights in Canico. The court awarded damages in favor of Canico and Industrial Road against Defendants Rhino Bare and Galam in the amount of $2,335,976.76.
On July 22, 2019, the court granted Judgment Creditor Canico Capital Group, LLC’s motion to charge Judgment Debtor Rhino Bare, LLC’s transferee interest in Canico. The order stated: “the 59.933% transferee interest in Canico held by Rhino Bare is to be charged with payment of the unsatisfied amount of the Judgment in favor of Canico in the above referenced case. Canico and its members are hereby ordered to pay directly to Canico any money or
property due or to become due to Rhino Bare until the Judgment, plus all accrued interest and post judgment costs, is paid in full.”
Judgment Creditor Canico Capital Group, LLC (“Canico”) moves for an order to foreclose the lien created by the 7/22/19 charging order and to order the sale of the transferable interest held by Judgment Debtor Rhino Bare, LLC (“Rhino Bare”) because distributions under the charging order will not pay the judgment debt within a reasonable time. Canico contends Rhino Bare has not paid any of the judgment debt from the 4/22/16 judgment. Rhino Bare opposes. Third-Party Claimants EL MARINO LLC, KNOTTING HILL, LLC, IJ PROPERTIES LLC, SEFOX INVESTMENT, LLC, S DOUBLE, LLC (“Third-Party Claimants”) oppose. Canico filed a reply to each opposition.
“On 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(a).)
“To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subdivision (a), the court may do any of the following:
(3) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Section 17705.02.” (Id. at subd. (b).)
Request for Judicial Notice
Canico’s request for judicial notice of records of this court and the court of the United States is GRANTED. (Evid. Code, § 452(d)(1), (2).)
Third-Party Claimants’ request for judicial notice of records file with the Secretary of State (RJN, Exhs. 1-6) and records of this court (RJN, Exhs. 7, 8) is GRANTED. (Evid. Code, § 452(c), (d)(1).) The court notes Canico’s objections filed in reply to the RJN, but they are OVERRULED.
Canico’s supplemental request for judicial notice of records file with the Secretary of State is GRANTED. (Evid. Code, § 452(c).)
Canico’s evidentiary objections filed in reply to the declaration of Mike Galam (nos. 1-11) are OVERRULED, except with respect to the objections to paragraphs 9, 10, and the first sentence of paragraph 11.
Canico contends the distributions under the charging order will not pay the judgment debt within a reasonable time because the anticipated distributions by Canico to Rhino Bare will be insufficient to satisfy the Judgment within a reasonable time.
Canico relies on the declaration of Abraham Assil to show that Canico’s distributions to Rhino Bare will be insufficient to satisfy the judgment within a reasonable time. Canico contends that a failure to satisfy the judgment within 10 years is unreasonable per se. (Code Civ. Proc., § 685.010 [“Except as otherwise provided by statute, upon the expiration of 10 years after the date of entry of a money judgment or a judgment for possession or sale of property: (a) The judgment may not be enforced….].)
Assil states that in 2018 Canico had a net income of $219,910.45, but in the two previous years, Canico had a net loss in each year. (Assil Decl. ¶ 6.) Going forward, Assil expects a lower net income next year. (Ibid.) Canico has to satisfy the Russell Road Settlement Obligation of $185,000 per year. (Id. at ¶¶ 13-16.) Also, Canico’s members are entitled to past and future compensation for their services. (Id. at ¶ 17.) Canico contends it must pay these obligations before it can pay distributions to members. (Mot. 12:3-21.) Based on the foregoing, Canico concludes that Rhino Bare will not receive sufficient distributions to satisfy the judgment before one decade has passed.
Thus, Canico appears to show the distributions will not satisfy the judgment in a reasonable time. But, the court reviews the opposition arguments below.
Issues Raised by Judgment Debtor Rhino Bare’s Opposition
In Rhino Bare’s opposition, it challenges the calculation of Canico’s yearly profits and evaluation of assets.
Rhino Bare points out two annual expenses found in the profit and loss statements for 2015 through 2017 that it contends should not be there or should be lowered: depreciation expenses ($140,000) and legal expenses ($175,000). (Assil Decl. Exh. B.)
In reply, Canico points out that the depreciation expense is not included in Canico’s 2018 profit and loss statement. (Reply, 5:12.) But a review of that statement shows Canico made no income for the 2018 year. (Assil Decl. Exh. C [2018 profit and loss statement], p. 1.) In comparison, Canico reported $703,115.17, $789,529.85, and $844,765.96, for 2015, 2016, and 2017, respectively. (Assil Decl. Exh. B, p. 1.)
This discrepancy warrants raises questions as to the reliability of Canico’s assertions. An explanation is needed especially in these circumstances where the judgment creditor here is a member in the LLC that is the subject of the charging order; in other words, Canico has direct influence over the distributions that will be directed to Rhino Bare.
Although Canico asserts, without dispute, that the settlement obligation and other members’ compensation should be paid before distributions, the discrepancy in the financial papers causes the court to conclude that Canico has not met its burden of proof.
Issues Raised by Third-Party Claimants’ Opposition
In Third-Party Claimants’ opposition, they contend the following: (1) they have a senior security interest on Rhino Bare’s transferable interest in Canico, (2) Third-Party Claimants are members in Canico, and thus, Canico needed their permission to file this motion, and (3) the charging order is not valid because the motion for charging order was not served on Third-Party Claimants, who are members in Canico.
Canico’s reply persuasively shows that its notice of judgment lien (based on the 4/22/16 judgment) was filed before the Third-Party Claimants’ security interest on Rhino Bare’s transferable interest was filed. The court agrees with Rhino Bare that the Affirmation and Assumption Agreement does not appear relevant to determining priority. But, as discussed below, the court would require additional briefing to determine which interest (i.e., Canico’s judgment lien or Third-Party Claimants’ security interests) has priority.
“[P]riority between a judgment lien on personal property and a conflicting security interest or agricultural lien in the same personal property shall be determined according to this subdivision. Conflicting interests rank according to priority in time of filing or perfection. In the case of a judgment lien, priority dates from the time filing is first made covering the personal property. In the case of a security interest or agricultural lien, priority dates from the earlier of the time a filing is first made covering the personal property or the time the security interest or agricultural lien is first perfected, if there is no period thereafter when there is neither filing nor perfection.” (Code Civ. Proc., § 697.590(b).)
(A) With respect to a judgment lien on personal property, the filing of a notice of judgment lien in the office of the Secretary of State to create a judgment lien on personal property under this article.
(B) With respect to a security interest …, the filing of a financing statement pursuant to Division 9 (commencing with Section 9101) of the Commercial Code.”
(Code Civ. Proc., § 697.590(a)(1).)
Thus, to establish Third-Party Claimants’ priority, the filing of the financing statements, not the Affirmation and Assumption Agreement, is relevant. For Canico, the filing of a notice of judgment lien with the Secretary of State is relevant.
Here, Canico filed the notice of judgment lien in connection with the 4/22/16 judgment with the California Secretary of State on May 16, 2019. (Reply, RJN, Exh. 1.) Third-Party Claimants filed their financing statements in connection with Rhino Bare’s membership interest in Canico on June 27, 2019. (Opp., RJN, Exhs. 3-6.)
Thus, it would appear that Canico has senior priority to Third-Party Claimants because Canico filed its notice of judgment lien before Third-Party Claimants filed their financing statements.
But, there is an issue that is not sufficiently resolved for the moving party to meet its burden: whether the lien created by the charging order made on July 22, 2019 has senior priority to the Third-Party Claimants’ security interests.
“A charging order constitutes a lien on a judgment debtor’s transferable interest….” (Corp. Code, § 17705.03(a).) “If any interest in personal property on which a judgment lien could be created under subdivision (a) is acquired after the judgment lien was created, the judgment lien attaches to the interest at the time it is acquired.” (Code Civ. Proc., § 697.530(b).)
One the one hand, Canico first filed a notice of judgment lien against Rhino Bare. Thus, any security interest on Rhino Bare’s interests thereafter do not have senior priority.
On the other hand, Third-Party Claimants filed their financing statements with the California Secretary of State with respect to Rhino Bare’s transferable interest in Canico before Canico obtained the subject charging order on July 22, 2019. Thus, Cancio’s judgment lien attached to Rhino Bare’s interest at the time it is acquired (July 22, 2019). Therefore, Third-Party Claimants’ security interests have senior priority.
Based on the foregoing, the motion leaves unresolved the question as to whether Third-Party Claimants’ security interest have senior priority to Canico’s judgment lien.
Permission to File Motion
Third-Party Claimants argue they are members in Canico and therefore their permission was required to file this motion. Their permission was not given, so the motion is invalid, they argue.
Third-Party Claimants assert this argument without authority. Thus, the court is not persuaded the argument has merit.
Validity of Charging Order
Third-Party Claimants contend the charging order is not valid because it was not served on them. They contend service on them was required because they are members of Canico.
“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.
(2) All members or the limited liability company.”
(Code Civ. Proc., § 708.320(a).)
A review of Canico’s motion for charging order filed on June 21, 2019 shows it was only served on counsel for Rhino Bare.
Third-Party Claimants contend they have retained membership with voting rights based on the following portion of the court’s 4/22/16 order:
“That the attempted transfer of 59.933% membership interest in Canico Capital Group LLC from former Canico members to Rhino Bare Projects LLC was ineffective, but resulted only in a transfer of an economic interest in Canico Capital Group LLC, to Rhino Bare Projects LLC that provides for no voting rights.” (Third-Party Claimants’ RJN, Exh. 7 [4/22/16 judgment] ¶ 1(b).)
A citation to the 4/22/16 order, which refers to “former members”, on its own is not enough to establish Third-Party Claimants’ status as members for purposes of section 708.320(a).
Accordingly, this argument is insufficient.
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