This case was last updated from Los Angeles County Superior Courts on 08/14/2019 at 09:40:30 (UTC).

TODD FREALY ET AL VS RONEN ARMONY ET AL

Case Summary

On 11/04/2016 TODD FREALY filed a Contract - Other Contract lawsuit against RONEN ARMONY. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judge overseeing this case is TERESA A. BEAUDET. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****9782

  • Filing Date:

    11/04/2016

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judge

TERESA A. BEAUDET

 

Party Details

Plaintiff

FREALY TODD A. ESQ.

Defendants and Respondents

KANTER ROBERT

LAW OFFICE OF CHRISTOPHER P. WALKER P.C.

ARMONY RONEN

GRANDPOINT BANK

HARPAZ ORI

KANTER GARY

DOES 1 THROUGH 10

SHOAM DOTAN

Not Classified By Court

TEST PARTY FOR TRUST CONVERSION

Attorney/Law Firm Details

Defendant Attorneys

HAM YOON OH

FLETCHER MICHAEL GERARD ESQ.

MASHIAN BAHMAN ESQ.

NOWLAND THOMAS

WALKER CHRISTOPHER PAUL

NOWLAND THOMAS F

 

Court Documents

Response

6/25/2019: Response

Motion in Limine

7/3/2019: Motion in Limine

Notice

7/16/2019: Notice

Minute Order

12/19/2017: Minute Order

Substitution of Attorney

3/29/2019: Substitution of Attorney

NOTICE OF ACKNOWLEDGEMENT OF RECEIPT - CIVIL

12/15/2016: NOTICE OF ACKNOWLEDGEMENT OF RECEIPT - CIVIL

DEMAND FOR JURY TRIAL AND NOTICE OF POSTING OF JURY FEES PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE ? 631

2/7/2017: DEMAND FOR JURY TRIAL AND NOTICE OF POSTING OF JURY FEES PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE ? 631

STIPULATION FOR DEPOSIT OF SURPLUS PROCEEDS

2/23/2017: STIPULATION FOR DEPOSIT OF SURPLUS PROCEEDS

GARY KANTER?S ANSWER TO CROSS-COMPLAINT OF RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM FOR DISSOLUTION OF LIMITED LIABILITY COMPANY

3/3/2017: GARY KANTER?S ANSWER TO CROSS-COMPLAINT OF RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM FOR DISSOLUTION OF LIMITED LIABILITY COMPANY

ANSWER TO CROSS-COMPLAINT IN INTERPLEADER BY ROBERT KANTER, AS TRUSTEE OF THE RAMSEY IRREVOCABLE TRUST NO. 1 AND RAMSEY IRREVOCABLE TRUST NO. 2

3/6/2017: ANSWER TO CROSS-COMPLAINT IN INTERPLEADER BY ROBERT KANTER, AS TRUSTEE OF THE RAMSEY IRREVOCABLE TRUST NO. 1 AND RAMSEY IRREVOCABLE TRUST NO. 2

GARY KANTER'S VERIFIED FIRST AMENDED ANSWER TO COMPLAINT IN INTERPLEADER

5/31/2017: GARY KANTER'S VERIFIED FIRST AMENDED ANSWER TO COMPLAINT IN INTERPLEADER

DEFENDANTS AND CROSS-COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S APPENDIX OF EVIDENCE IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION

6/9/2017: DEFENDANTS AND CROSS-COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S APPENDIX OF EVIDENCE IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICATION

DECLARATION TO THOMAS TURNER IN OPPOSITION TO THE MOTION FOR SUMMARY JUDGMENT

8/10/2017: DECLARATION TO THOMAS TURNER IN OPPOSITION TO THE MOTION FOR SUMMARY JUDGMENT

GARY KANTER'S REQUEST FOR JUDICIAL NOTICE IN OPPOSITION TO DEFENDANTS AND CROSS- COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S SEPARATE STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF

8/10/2017: GARY KANTER'S REQUEST FOR JUDICIAL NOTICE IN OPPOSITION TO DEFENDANTS AND CROSS- COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S SEPARATE STATEMENT OF UNDISPUTED MATERIAL FACTS IN SUPPORT OF

NOTICE OF MANDATORY SETTLEMENT CONFERENCE

8/11/2017: NOTICE OF MANDATORY SETTLEMENT CONFERENCE

ARMONY PARTIES OPPOSITION TO GARY KANTER'S SEPARATE STATEMENT OF UNDISPUTED MATERIAL FACTS IN OPPOSITION TO DEFENDANTS AND CROSSCOMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S MOTION FOR SUMM

8/17/2017: ARMONY PARTIES OPPOSITION TO GARY KANTER'S SEPARATE STATEMENT OF UNDISPUTED MATERIAL FACTS IN OPPOSITION TO DEFENDANTS AND CROSSCOMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S MOTION FOR SUMM

SUPPLEMENTAL DECLARATION OF LAURA K. STANTON IN SUPPORT OF DEFENDANTS AND CROSS-COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJ

8/17/2017: SUPPLEMENTAL DECLARATION OF LAURA K. STANTON IN SUPPORT OF DEFENDANTS AND CROSS-COMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJ

DEFENDANTS AND CROSSCOMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S SUPPLEMENTAL REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR IN THE ALTERNATIVE, SUMMARY ADJUDICAT

8/17/2017: DEFENDANTS AND CROSSCOMPLAINANTS RONEN ARMONY, ORI HARPAZ AND DOTAN SHOHAM'S SUPPLEMENTAL REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT OR IN THE ALTERNATIVE, SUMMARY ADJUDICAT

118 More Documents Available

 

Docket Entries

  • 08/19/2019
  • Hearingat 13:30 PM in Department 50 at 111 North Hill Street, Los Angeles, CA 90012; Jury Trial

    Read MoreRead Less
  • 08/19/2019
  • Hearingat 13:30 PM in Department 50 at 111 North Hill Street, Los Angeles, CA 90012; Hearing on Motion for Summary Judgment

    Read MoreRead Less
  • 08/19/2019
  • Hearingat 13:30 PM in Department 50 at 111 North Hill Street, Los Angeles, CA 90012; Final Status Conference

    Read MoreRead Less
  • 08/09/2019
  • DocketStatement of the Case; Filed by Ronen Armony (Defendant); Ori Harpaz (Defendant); Dotan Shoam (Defendant) et al.

    Read MoreRead Less
  • 08/09/2019
  • DocketWitness List; Filed by Ronen Armony (Defendant); Ori Harpaz (Defendant); Dotan Shoam (Defendant) et al.

    Read MoreRead Less
  • 08/08/2019
  • DocketSubstitution of Attorney; Filed by Robert Kanter (Defendant)

    Read MoreRead Less
  • 08/07/2019
  • Docketat 09:30 AM in Department 50, Teresa A. Beaudet, Presiding; Jury Trial - Not Held - Continued - Stipulation

    Read MoreRead Less
  • 08/07/2019
  • Docketat 08:30 AM in Department 50, Teresa A. Beaudet, Presiding; Hearing on Motion for Summary Judgment (for Armony) - Not Held - Continued - Stipulation

    Read MoreRead Less
  • 08/07/2019
  • Docketat 1:30 PM in Department 50, Teresa A. Beaudet, Presiding; Hearing on Motion for Summary Judgment (for Armony) - Not Held - Advanced and Continued - by Court

    Read MoreRead Less
  • 08/07/2019
  • Docketat 1:30 PM in Department 50, Teresa A. Beaudet, Presiding; Jury Trial - Held - Continued

    Read MoreRead Less
241 More Docket Entries
  • 12/15/2016
  • DocketNOTICE OF ACKNOWLEDGEMENT OF RECEIPT - CIVIL

    Read MoreRead Less
  • 12/15/2016
  • DocketPROOF OF SERVICE SUMMONS

    Read MoreRead Less
  • 12/15/2016
  • DocketNOTICE OF ACKNOWLEDGEMENT OF RECEIPT - CIVIL

    Read MoreRead Less
  • 12/15/2016
  • DocketNOTICE OF ACKNOWLEDGEMENT OF RECEIPT - CIVIL

    Read MoreRead Less
  • 12/15/2016
  • DocketNotice; Filed by Todd A. Frealy, Esq. (Plaintiff)

    Read MoreRead Less
  • 12/07/2016
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

    Read MoreRead Less
  • 12/07/2016
  • DocketNotice of Case Management Conference; Filed by Clerk

    Read MoreRead Less
  • 11/04/2016
  • DocketCOMPLAINT IN INTERPLEADER

    Read MoreRead Less
  • 11/04/2016
  • DocketSUMMONS

    Read MoreRead Less
  • 11/04/2016
  • DocketComplaint; Filed by Todd A. Frealy, Esq. (Plaintiff)

    Read MoreRead Less

Tentative Rulings

b"

Case Number: BC639782 Hearing Date: July 27, 2021 Dept: 50

BECAUSE THE COURT NEEDS ADDITIONAL TIME TO CONSIDER THE MOTIONS SET ON TOMORROW'S CALENDAR, THE MOTIONS WILL BE CONTINUED AND NO APPEARANCE IS NECESSARY. THE CLERK FOR DEPT. 50 WILL CONTACT THE PARTIES TO SET A NEW DATE FOR THE HEARING ON THE MOTIONS. THE COURT NOTES THAT THE DECLARATION OF BRYAN MASHIAN IN SUPPORT OF THE OPPOSITION TO THE MOTION TO TAX COSTS IS NOT SIGNED UNDER PENALTY OF PERJURY. COUNSEL MAY FILE AND SERVE A PROPERLY SIGNED DECLARATION BY AUGUST 3, 2021.

"

Case Number: BC639782    Hearing Date: January 29, 2021    Dept: 50

 

 

Superior Court of California

County of Los Angeles

Department 50

Todd frealy,

Plaintiff,

vs.

ronen armony, et al.,

Defendants.

Case No.:

BC 639782

Hearing Date:

January 29, 2021

Hearing Time:

2:30 p.m.

[TENTATIVE] ORDER RE:

HEARING RE: APPEAL BOND

Background

Plaintiff Todd Frealy, Chapter 7 Trustee (the “Trustee”), filed this Complaint in Interpleader on November 4, 2016. The Complaint alleges that on July 29, 2014, Debtor Banning at 8th Street, LLC (“Debtor”) commenced a voluntary Chapter 7 petition in the U.S. Bankruptcy Court. Todd Frealy was appointed the Chapter 7 Bankruptcy Trustee.

At the time of the bankruptcy filing, Debtor owned real property located at 806 and 860 Ramsey Street in Banning, California (the “Banning Property”). Pursuant to the order of the Bankruptcy Court, the Trustee sold the property for $6.75 million. After distribution of the money, there remains the sum of $1,919,091.27 (the “Interpleaded Funds”). Based on conflicting claims to the remaining money due and owing, the Trustee filed this action in order to determine which claimant is rightfully and lawfully entitled to the Interpleaded Funds.

The Trustee named the following defendants in interpleader: Ronen Armony, Ori Harpaz, Dotan Shoam, Robert Kanter, the duly appointed and acting administrator of the probate estate of Ben Kanter, and as Trustee of the Ramsey Irrevocable Trust No. I and Ramsey Irrevocable Trust No. II, Gary Kanter, Grandpoint Bank, and Law Office of Christopher P. Walker.

On October 13, 2020, after a bench trial, the Court announced its tentative decision and provided all parties with its Findings for Tentative Statement of Decision. The Court found that the Interpleaded Funds are to be allocated as follows: 83.8% to Ronen Armony, 10.5% to Ori Harpaz, and 5.6% to Dotan Shoam. A proposed statement of decision was filed by the Armony Parties[1] on November 6, 2020. The Kanter Parties[2] filed objections to the proposed statement of decision on November 20, 2020. On January 19, 2021, the Court issued its rulings as to the Kanter Parties’ objections, and the Court issued the Statement of Decision on the same day. The Court ordered the Armony Parties to file and serve a proposed judgment by January 26, 2021.

The Kanter Parties indicated their intent to appeal the Court’s ruling and requested that the Court stay enforcement of the judgment and the disbursement of the Interpleaded Funds if the Kanter Parties post the requisite bond. The Interpleaded Funds are currently held by the Los Angeles Superior Court. The Court then ordered the parties to brief the issue of the amount of the requisite bond.

Discussion

Code of Civil Procedure section 917.2 provides, in pertinent part: “The perfecting of an appeal shall not stay enforcement of the judgment or order of the trial court if the judgment or order appealed from directs the assignment or delivery of personal property, . . . unless an undertaking in a sum and upon conditions fixed by the trial court, is given that the appellant or party ordered to assign or deliver the property will obey and satisfy the order of the reviewing court, and will not commit or suffer to be committed any damage to the property, and that if the judgment or order appealed from is affirmed, or the appeal is withdrawn or dismissed, the appellant shall pay the damage suffered to such property and the value of the use of such property for the period of the delay caused by the appeal.”

The Kanter Parties contend that the amount of the appeal bond should be limited to $40,000. According to the Kanter Parties, no damage of any kind can reasonably be anticipated to be caused by an appeal other than for the minimal amount necessary for the costs of those proceedings. The Kanter Parties also argue that the value of the loss of the use of the Interpleaded Funds for the period of the delay caused by the appeal would be minimal. The Kanter Parties submit that a 25-month, $2 million certificate of deposit would earn .05% interest at Bank of America, 0.75% at Comenity Bank, and 0.95% at Delta Community Credit Union. (Joens Decl., ¶ 2.) The loss of use would thus be between $10,000 and $19,000 per year, and if the appeal were to take two years, the total loss of use would be between $20,000 and $38,000. The Kanter Parties also submit that costs for the appeal would be no more than $2,500. (Joens Decl., ¶¶ 3-5.) The Kanter Parties also point out that the parties have already agreed to place the Interpleaded Funds in an interest-bearing account.

The Armony Parties contend that it is unreasonable to expect a person to simply put $2 million in a bank account and collect 1% interest, particularly when investment in the stock market could have yielded approximately a 12% return over the past two years. According to the Armony Parties, a more reasonable interest rate is 10%, which is the statutory interest rate that accrues on unpaid judgments in California. (See Code Civ. Proc., § 685.010.) The Armony Parties also agree that a two-year period for the appeal is a reasonable estimate, and based on the Armony Parties’ calculations, the loss of use of the Interpleaded Funds is $383,818 (10% interest rate equates to $191,909 per annum). The Armony Parties estimate a minimum of $30,000 in fees and costs because the Banning Operating Agreement contains an attorney’s fees clause concerning litigation involving the Banning members. The Armony Parties round their bond request to $400,000.

The Kanter Parties counter that pegging interest to the legal rate of interest for unpaid judgments (10% per annum) is unreasonable because unpaid judgments involve significant risk. The Kanter Parties argue that judgment creditors often have difficulty collecting, and there is always the risk that a judgment will never be fully satisfied. In contrast, the Interpleaded Funds are not subject to the same risk because the parties have already agreed that once released from the Court’s possession, the Interpleaded Funds will be placed in an interest-bearing account. The Kanter Parties do not address the Armony Parties’ contention regarding recoverable costs. As pointed out in the Armony Parties’ reply, the Armony Parties estimate costs closer to $40,000 in light of the attorney fee provision in the Banning Operating Agreement.

The Court finds that the Armony Parties have the better argument as to the appropriate interest rate to be considered. First, it is not reasonable to assume that an investor would put nearly $2 million in the lowest earning investment vehicle available when other alternatives exist. The Court takes judicial notice of the fact that even tax exempt municipal bonds earn more than the investments cited by the Kanter Parties. On the other hand, the Court cannot say that it is reasonable to assume that the Armony Parties would have invested the money in stocks that would yield 12%. It strikes the Court as more likely that the Armony Parties, as developers, would likely use the money in development projects. However, the Armony Parties offered no evidence of such likely investments or the returns that would likely occur. Consequently, the Court is left with the statutory interest rate that accrues on unpaid judgments in California pursuant to CCP § 685.010. Although the Kanter Parties speculate as to the purpose of the statutory rate, they offer no authority for that speculation. Moreover, if the Armony Parties succeed in defeating the appeal, the statutory interest rate will be applied to the unpaid judgment.

Based on these considerations, the Court finds that the request for a $400,000 bond by the Armony Parties to cover two years of appellate time plus anticipated attorney fees is a reasonable measure of the “value of the use” of the interpleaded funds.

Lastly, the Court notes that the Kanter Parties request that the Court enter an order staying any judgment or order calling for the disbursal of the Interpleaded Funds for a period of 70 days after the entry of any such judgment or order. The Kanter Parties argue that their appellate rights may be rendered meaningless without the extra time to post their appellate bond.

Code of Civil Procedure section 918, subdivision (a) provides that “[i]f the enforcement of the judgment or order would be stayed on appeal only by the giving of an undertaking, a trial court shall not have power, without the consent of the adverse party, to stay the enforcement thereof pursuant to this section for a period which extends for more than 10 days beyond the last date on which a notice of appeal could be filed.” The Armony Parties argue that 70 days is excessive in light of the fact that the Court’s tentative statement of decision was issued on October 13, 2020.

Conclusion

Based on the foregoing, the Court orders that in order to stay enforcement of any judgment or order entered in this matter, the Kanter Parties are required to post an undertaking in the amount of $400,000.

Upon entry of judgment, the Court orders that enforcement of the judgment shall be stayed for 70 days.

The Court orders the Armony Parties to give notice of this ruling.

DATED: January 29, 2021 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court


[1] The Armony Parties are Ronen Armony, Ori Harpaz and Dotan Shoham.

[2] The Kanter Parties are Gary Kanter, individually and as the temporary trustee of the Ramsey Irrevocable Trusts Nos. I and II, and Robert Kanter, former trustee of the Ramsey Trusts and administrator of the Ben Kanter probate estate.

Case Number: BC639782    Hearing Date: December 11, 2020    Dept: 50

Superior Court of California

County of Los Angeles

Department 50

Todd frealy,

Plaintiff,

vs.

ronen armony, et al.,

Defendants.

Case No.:

BC 639782

Hearing Date:

December 11, 2020

Hearing Time:

2:30 p.m.

[TENTATIVE] ORDER RE:

HEARING RE: NOTICE OF STAY OF PROCEEDINGS

 

Background

Plaintiff Todd Frealy, Chapter 7 Trustee (the “Trustee”), filed this Complaint in Interpleader on November 4, 2016. The Complaint alleges that on July 29, 2014, Debtor Banning at 8th Street, LLC (“Debtor”) commenced a voluntary Chapter 7 petition in the U.S. Bankruptcy Court. Todd Frealy was appointed the Chapter 7 Bankruptcy Trustee.

At the time of the bankruptcy filing, Debtor owned real property located at 806 and 860 Ramsey Street in Banning, California (the “Banning Property”). Pursuant to the order of the Bankruptcy Court, the Trustee sold the property for $6.75 million. After distribution of the money, there remains the sum of $1,919,091.27 (the “Surplus Proceeds”). Based on conflicting claims to the remaining money due and owing, the Trustee filed this action in order to determine which claimant is rightfully and lawfully entitled to the Surplus Proceeds.

The Trustee named the following defendants in interpleader: Ronen Armony, Ori Harpaz, Dotan Shoam, Robert Kanter, the duly appointed and acting administrator of the probate estate of Ben Kanter, and as Trustee of the Ramsey Irrevocable Trust No. I and Ramsey Irrevocable Trust No. II, Gary Kanter, Grandpoint Bank, and Law Office of Christopher P. Walker.

On November 23, 2020, Ramsey Irrevocable Trust No. 1 (“Ramsey Trust No. 1”) filed a Notice of Stay of Proceedings, indicating that the instant case is automatically stayed by the filing of a Chapter 7 bankruptcy petition by Ramsey Trust No. 1 on November 20, 2020.

On November 30, 2020, the Armony Parties (Ronen Armony, Ori Harpaz, and Dotan Shoham) filed an opposition to the Notice of Stay of Proceedings.

On December 8, 2020, the Kanter Parties (Gary Kanter, temporary trustee of the Ramsey Irrevocable Trusts Nos. I and II, and Robert Kanter, former trustee of the Ramsey Trusts and administrator of the Ben Kanter probate estate) filed a response to the Armony Parties’ opposition.

Discussion

The filing of a bankruptcy petition “operates as a stay, applicable to all entities, of—(1) the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title.” (11 U.S.C. § 362, subd. (a)(1).)

Here, the question is whether the Trustee’s interpleader action is an action against Ramsey Trust No. 1. The Armony Parties contend that it is not, because Ramsey Trust No. 1, to the extent that it is a named party, is only a nominal defendant and more akin to a plaintiff. The Kanter Parties disagree and argue that this action is against an asset of Ramsey Trust No. 1’s bankruptcy estate.

The Court finds Rett White Motor Sales Co. v. Wells Fargo Bank (N.D.Cal. 1989) 99 B.R. 12 instructive. There, the district court noted that an interpleader action was “not an action against the debtor” where the plaintiff, a bank, was “not suing the bankrupt plaintiff for damages or seeking a claim to the funds.” (Id. at p. 14.) Because the bankrupt party was “one of the claimants to the res,” section 362, subdivision (a)(1) of Title 11 of the Bankruptcy Code did not bar the “continuation of [the] interpleader claim.” (Ibid.) Moreover, the district court found that section 362, subdivision (a)(3) of Title 11 of the Bankruptcy Code, which operates as a stay of “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate,” did not apply because the bank was not trying to obtain possession of the property at issue or exercise control of the property at issue. (Ibid.) Thus, when the purpose of an action is “to determine title to the res, the res is not at this point, the property of any debtor within the meaning of the automatic stay provisions of Section 362(a).)” (Ibid., citing National Co-Op. Refinery Ass’n v. Rouse (D.C. Colo. 1986) 60 B.R. 857, 860; see also Liberty Mut. Ins. Co. v. Official Unsecured Creditors' Comm. of Spaulding Composites Co. (1997) 207 B.R. 899, 908 [listing several cases that found that interpleader actions are not subject to the automatic stay and stating that the “rationale for this rule is based upon the defensive nature of the suit: the nominal plaintiff in an interpleader is, in actuality, defending against multiple claims to the property, one of the claimants being the debtor”].)

The Court notes that the Kanter Parties cite to NLT Computer Services Corp. v. Capital Computer Systems, Inc. (6th Cir. 1985) 755 F.2d 1253 for the proposition that the automatic stay does apply to an interpleader action such as the instant one. But there, as noted by the Kanter Parties, the district court did not decide the issue, merely observing “tentatively” that where “there are competing claims to the property of a bankrupt, it was Congress’ probable intent to allow the adjudication of such competing claims and priorities under the Bankruptcy Act within the framework of the bankruptcy proceedings themselves to the extent that they constitutionally could be heard.” (Id. at pp. 1263-1264.) The Court does not find that this is sufficiently persuasive in light of the authorities cited above.

Accordingly, the Court finds that the automatic stay provision of 11 U.S.C. § 362(a) does not apply in this instance.

The Kanter Parties request that the Court stay enforcement of any judgment or order to disburse the funds at issue for a period of 70 days so that the Kanter Parties may have a meaningful opportunity to appeal the judgment and to post an appropriate bond pursuant to Code of Civil Procedure section 918. That section provides at subdivision (a) that “[i]f the enforcement of the judgment or order would be stayed on appeal only by the giving of an undertaking, a trial court shall not have power, without the consent of the adverse party, to stay the enforcement thereof pursuant to this section for a period which extends for more than 10 days beyond the last date on which a notice of appeal could be filed.” Here, the Armony Parties have not been given an opportunity to respond to the Kanter Parties’ request for a stay of enforcement of any judgment or order. Therefore, the Court will discuss with the parties at the hearing how best to proceed.

DATED: December 11, 2020 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court

Case Number: BC639782    Hearing Date: October 13, 2020    Dept: 50

Frealy v Armony BC639782

Findings for Tentative Statement of Decision

The Kanter Parties are Gary Kanter (“Kanter”), the temporary trustee of the Ramsey Irrevocable Trusts Nos. I and II (the “Ramsey Trusts”) and Robert Kanter, former trustee of the Ramsey Trusts and administrator of the Ben Kanter probate estate.

The Armony Parties are Ronen Armony (“Armony”), Ori Harpaz and Dotan Shoham.

The limited liability company at issue in this case is Banning at 8th Street, LLC (“BANNING”). The Operating Agreement for Banning at 8th St., LLC (the “Operating Agreement”) provides that “[w]hen there is a distribution in liquidation of the Company, . . . all items of income and loss first shall be allocated to the Member(s)’ Capital Accounts . . . and other credits and deductions to the Member(s)’ Capital Accounts shall be made before the final distribution is made. The final distribution to the Member(s) shall be made to the Member(s) to the extent of and in proportion to their positive Capital Account balances.” (Ex. 28, 4.7.)

On February 21, 2008, the real property located at 806 and 860 West Ramsey Street, Banning, CA (the Property”) was sold by BANNING to the Armony Purchasers (i.e., the Armony Family 1998 Trust and Ori Harpaz). (Ex. 1.)

On June 4, 2009, the Armony Parties became BANNING members pursuant to the Amendment to the BANNING Original Operating Agreement. (Ex. 6.)

As managing members of BANNING during the relevant time period (i.e., starting June 4, 2009 until liquidation), Kanter and his father were required to keep the capital account records for the members of BANNING. (Ex. 29, 3, p. 29-2; Ex. 28, 3.3, p. 28-10.) The Kanter Parties were not able to produce the capital account records for the members of BANNING.

The parties agree that the task before the Court is to determine what was in the capital accounts of the members of BANNING as of its liquidation so as to determine how to distribute the funds interpleaded in this case by the Bankruptcy Trustee.

The Court finds that there is no dispute as to the following:

  1. The Armony Parties contributed the Property to BANNING and received a 49% membership interest in BANNING.

  2. The promissory note in favor of BANNING in the amount of $4.8 million from the Armony Purchasers (Ex. 62) that was secured by the Property was extinguished when the Armony Parties contributed the Property to BANNING.

  3. At the time the Armony Parties contributed the Property to BANNING, $4.8 million was owed by BANNING to Preferred Bank for the construction loan made to BANNING to build the facility that Rite-Aid eventually leased.

  4. The Property is a type of permitted capital contribution pursuant to paragraph 1.7 of the Operating Agreement, and (c) paragraph 1.7 of the Operating Agreement defines “Capital Contribution” as “the Fair Market Value [“FMV”] of any property (other than money) contributed to the Company (net of liabilities secured by such contributed property that the Company is considered to assume . . . in consideration of a Percentage Interest held by such Member.” . The dispute between the parties lies in the determination of the FMV of the Property.

  5. On September 30, 2009, Armony paid Preferred Bank approximately $300,000 (the $300,000 Payment”) to reduce the amount owed on the construction loan to $4.5 million so Preferred Bank would become the “take-out” lender (i.e., Preferred Bank paid off the construction loan and made two new loans to BANNINB in the total amount of $4.5 million secured by the Property).[1]

There is a dispute between the Kanter Parties and the Armony Parties as to what, if any, was the FMV of the Property contributed by the Armony Parties to BANNING when they became members, “net of liabilities secured by” the Property (Operating Agreement, 1.7.) The Kanter Parties urge the Court to consider paragraph 1.14 of the Operating Agreement, specifically subparagraph (a) thereof which sets forth a definition of “Gross Asset Value.” The Kanter Parties contend that this paragraph is controlling with regard to the determination of the FMV of the Property. Paragraph 1.14(a) states that “‘Gross Asset Value’ means, with respect to any item of property of the Company, the item’s adjusted basis for federal income tax purposes, except as follows: (a) The Gross Asset Value of any item of property contributed by a Member to the Company shall be the fair market value of such property, as mutually agreed by the contributing Member of the Company.” (Emphasis added.) The Kanter Parties do not point to any other use of the term “Gross Asset Value” in the Operating Agreement. The Court has reviewed the Operating Agreement and has not found any other place therein that Gross Asset Value is used other than in paragraph 1.14. It is not referenced in paragraph 1.17 which sets forth the definition of “Capital Contribution,” nor is it referenced in paragraph 4.7 regarding liquidation and the final distribution to the members in proportion to their positive Capital Account balance. The Court finds that the determination of the value of the Armony’s contribution of the Property to BANNING is governed by paragraph 1.7 and not paragraph 1.14 of the Operating Agreement. (See, Civil Code § 1654 provides that “[i]n cases of uncertainty . . . the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” Here that would be the Kanter Parties.) Even if the Court were to find that paragraph 1.14 affected the determination of the FMV of the Property as a capital contribution, the result would be the same as discussed below, namely the FMV was $3 million.

The Court finds that there is no record of an express mutual agreement between BANNING (or the Kanter Parties) and the Armony Parties as to the FMV of the Property at the time it was deeded back to BANNING by the Armony Parties in exchange for their membership interest. The Kanter Parties assert that there is no evidence of any agreement as to FMV other than that the Property “had no net value above its debt.” (Reply Closing, p. 16, ll. 25-26.) However, there is no evidence of such an agreement in the record.[2] In fact, there is no evidence that the parties had any discussion of the FMV of the Property for purposes of determining the amount of the Capital Contribution of the Armony Parties at the time they became members. But there is extensive evidence that the parties agreed to have Preferred Bank value the Property in order to make the take-out loan. Thus, to the extent there needs to be a “mutual agreement” of the parties as to the FMV of the Property, that agreement is reflected in their conduct. The Court notes that paragraph 1.14(a) does not state that the “mutual agreement” must be either written or oral. There is no reason the mutual agreement cannot be reflected by conduct. (See, Civil Code § 1647 which provides that “[a] contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates.” See also, Civil Code §1636 which provides that “[a] contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.”) Here, the parties left it to the take-out lender to decide what was the FMV of the Property and they acted accordingly. (See also, Ex. 6, the Amendment to Operating Agreement for Banning at 8th St., LLC as of June 4, 2009 (the “June 4 Amendment”) wherein the parties acknowledge their contemplation of the take-out loan from Preferred Bank: “This Amendment must conform to the Preferred Bank loan documents and all Members agree to be personally responsible for the loan.”)[3]

The most persuasive evidence shows that a few months after the June 4, 2009 Amendment, Preferred Bank, the take-out lender, determined that the Property with the Rite-Aid lease was worth $7.5 million because that lender, as well as other lenders at that time, were lending up to 60 percent of the value of nonowner occupied commercial real estate. It was highly unusual to lend at 70-75% of the value of such real estate. (Brandlin testimony, 12/4/19, p. 36: 15-17; Rice testimony, 12/5/19, p. 28: 14-25, p. 29: 7-30: 5.[4]) Before the take-out loan was made, BANNIING owed $4.8 million for the construction loan obligation. Thus, in order to reduce the debt that would be secured by the Property to 60% of the Property’s value, an approximately $300,000 payment had to be made to reduce the debt to $4.5 million, the amount of the take-out loan. (9/27, p. 16 :2-9.) As noted above, that payment was made by Armony with the acquiescence of the Kanter Parties. (Id. p. 20:22- p. 21:13.). The Kanter Parties and the Armony Parties anticipated and agreed to these transactions when they entered into the June 4 Amendment. Thus, their conduct reflects a mutual agreement that the Property contributed by the Armony Parties had a FMV of $7.5 million, less the secured obligation of $4.5 million, thereby leaving a net contributed FMV of $3 million to the capital account of the Armony Parties. The payment of the $300,000 Payment by Armony did not add to the capital accounts of the Armony Parties because it already is reflected in the attribution of the $3 million to the capital account of the Armony Parties. The fact that the $300,000 Payment was made 4 months after the Armony Parties acquired their 49% percentage interest in BANNING does not negate the fact that the Armony Parties and the Kanter Parties had already mutually agreed to do the take-out lender transaction and they were aware that additional funding might be required. ( See e.g., Ex. 43 and the discussion of a possible second deed of trust and the amount of funds in the Preferred Bank accounts of the members of BANNING.)

The Court acknowledges that Armony testified that he believed the FMV had remained the same as when it was purchased, i.e. $6.1 million. (10/1, p. 7, 8-11.) The Court also acknowledges that Mr. Brandlin, the expert who testified on behalf of the Armony Parties, stated that he could have used $3 million as the value of the capital contribution of the Armony Parties, but he elected instead to use the conservative figure of $1.335 million as the FMV of the Property in making his calculations as to the capital accounts of the Armony Parties to “eliminate the argument.” (12/4, p. 37:4-23.) He explained that it was “the least arguable reflection of equity in the property in 2009” because the construction was completed and they had a long-term lease with a “very good tenant.” (10/28, p. 34:12 – p. 35:10.) His use of $1.335 was based upon the amount of profit the Kanter Parties had extracted from the original sale of the Property to the Armony Purchasers more than 15 months earlier. (12/4, p. 36:26 – p. 37:23.) The Court finds that the $3 million amount for the FMV of the Capital Contribution of the Property is more appropriate for the reasons discussed above, but also because at the time of its contribution, the construction of the facility occupied by Rite-Aid had been completed, and Rite-Aid was paying rent on a triple-net lease, a highly valued situation particularly during the early days of the recovery from the recession. (Id., p. 36:7-14; 12/5, p. 12:5-12, p.32:23 – p. 34:1; 2/14, p. 37:13 – p. 38:11.)[5]

The Court finds that the lack of documentary transfer tax is irrelevant because it simply reflects the fact that the parties believed (whether rightly or wrongly) that the transaction was between related parties and exempt from transfer tax. (Taylor, 2/14, p. 42:24-44:1), Ex. 7.)

With regard to the forgiveness of the unpaid rent due from the Kanter Parties to the Armony Purchasers (the “Rent Debt”) [6] as part of their acquisition of their membership interest in BANNING, the Court finds that the Rent Debt was owed by BANNING but it had no impact on the analysis of the Capital Contributions of the parties. Part of the price of the Armony Parties’ 49% membership interest in BANNING was the forgiveness of the Rent Debt. (See, Armony testimony regarding the conditions for the deal to receive the 49% interest in BANNING at 9/26 71:27-13.) Presumably, the Rent Debt should have been identified in the tax returns (i.e., as a negative to the capital accounts of the Kanter Parties) and forgiveness of the Rent Debt would have resulted in the elimination of that negative as to the capital accounts of the Kanter Parties. It would not have been a positive contribution to the capital accounts of the Armony Parties because debt forgiveness does not qualify as a Capital Contribution under paragraph 1.7 (i.e., money or property other than money); additionally, the Rent Debt was not an asset of the Armony Parties but was an asset of the Armony Purchasers who were not members of BANNING.

With regard to determining the value of the Capital Contributions of the Kanter Parties, the Court finds that the value at the time of the liquidation was zero or negative. The Court notes that Mr. Brandlin and Mr. Raffaele had very little information at their disposal to attempt to determine the value, if any, of the Capital Contributions of the Kanter Parties. Even though the Kanter Parties were the managing members of BANNING, they did not produce the books and records during the trial.[7] There was some suggestion during Kanter’s testimony that he did not do so because there was a receiver appointed for the Property and there also was a bankruptcy trustee. However, it was not clear that Kanter ever tried to obtain any books and records from either the receiver or the trustee. Moreover, Kanter made it abundantly clear that he had no understanding of capital contributions or capital accounts even though he was the person who signed the BANNING 2008 and 2009 tax returns in 2011 (Exhs. 306 and 307) which include entries regarding the capital accounts. (10/2, p.73:25-74:24.) The Court found those tax returns to be highly suspect and inaccurate (e.g., the Armony Parties are identified under oath as members of BANNING in 2007 despite the fact that they clearly did not become members until 2009). The Court found credible and persuasive the testimony of Armony that Kanter told him that at the time the Armony Parties were contemplating becoming members of BANNING, that the company had no assets or liabilities. (9/26, p. 70:25-71:5.) Moreover, the Court does not recall that Kanter denied making that statement. (See, Armony Parties’ Closing Argument, p. 9, n. 8.) Also, Kanter testified that as of May 2008, he did not know for sure whether BANNING had any assets other than the Property (10/2, p. 50: 25-28.) At his deposition in the bankruptcy proceeding, he testified that he didn’t think there were any other assets in BANNING besides the Property. (Id., 21-17.) This testimony seems consistent with the fact that the Kanter Parties (via the Ramsey Trusts) received $1.335 million when the Property was sold and the fact that the initial capitalization of BANNING was 1 million (i.e., $479,591.83 from Mason Ettinger, $20,408.17 from Matthew Ettinger and $500,000 by Kanter which consisted of the value of the Property) and the Ettinger interests apparently were purchased by Ben Kanter for $500,000 in 2009. In other words, once the Property was sold to the Armony Purchasers and the $1,335 million was paid out to the Kanter Parties, the only asset remaining that could be a capital contribution was the $4.8 million note from the Armony Purchasers. When the Property was deeded to BANNING by the Armony Parties, that note was extinguished leaving no other assets as capital contributions of the Kanter Parties.[8]

With regard to the testimony and reports of the two experts, the Court found Mr. Brandlin to be more persuasive and in line with testimony of Kanter that he didn’t think there were any other assets in BANNING besides the Property. Both experts felt that the 2008 and 2009 tax returns were the best place for them to use as a starting point for trying to determine what, if any, were the capital contributions that should be allocated to the Kanter Parties. (12/6, p.25:19- p. 26:4; 2/13, p. 6:15-18.) (10/28:, p. 15:10 -16:11.)

The 2008 tax return reflects $1,309,513 in the capital accounts of the members of BANNING. (Ex. 306, p. 306-007, line 21.) At that time, the Armony Parties were not members of BANNING. Consequently, Mr. Brandlin applied a “fact-based” analysis to the tax returns (see, Ex. 76-3 – “Schedule 3: Assumes Armony Parties Became Banning Members in 2009 (Fact-Based)).” Under that analysis, Kanter, his father Ben Kanter and Matthew Ettinger each were allocated $436,505 or one-third of the $1,309,513 rounded up as of January 1, 2008 and no amounts were allocated to the Armony Parties since they did not become members of BANNING until 2009. At the beginning of 2008, the $1,309,513 reflected all of the Capital Contributions made by Kanter, Ben Kanter and Mr. Ettinger, including the Property. (12/4, p. 15:13-22.) When the Armony Purchasers bought the Property, the purchase price was $6.1 million. The $6.1 million was covered by a promissory note secured by a deed of trust in the amount of $4.8 million plus cash in the amount of $1.335 million. (Ex. 2 Closing Statement.)[9]

Exhibit 306, the 2008 tax return for BANNING, does not account for the distribution of the $1,335,000 payment to the Victorville Family Partnership out of the proceeds from the purchase of the Property by the Kanter Parties. The only distribution shown in Exhibit 306-007 is at line 6 where a distribution of $715,635 is identified under Schedule M2 entitled “Analysis of Partners’ Capital Accounts.” On Exhibit 76 at page 76-3, Mr. Brandlin allocates the $1,335,00 payment to the Victorville Family Partnership out of the proceeds from the purchase of the Property by the Armony Parties to the capital accounts of the Kanter Parties (i.e., $445,000 each – see Ex. 76-3, line 9 “Distribution to Members; Ex. 2-2 Escrow Statement, Brandlin testimony, 10/28, p. 13:11- p. 14:5, and wire instructions 12/4, p. 12:6 – p. 13:3.) If the payment had not been paid directly to the Victorville Family Partnership but instead directly to the Kanter Parties who then paid it to the Victorville Family Partnership, it still would have to be subtracted from their capital accounts. Mr. Brandlin does not agree that he should have first allocated new income to BANNING for the $1,335,000 received in the sale of the Property to the Armony Purchasers because that income may have been recognized and offset against other expenses with the result appearing at line 3 “Net Income” loss of $183,764. His ability to determine for sure that this was the case was impeded by the failure of the Kanter Parties to provide the books and records that would have reflected the basis for stating a “Net Income” loss of $183,764. (12/4, p. 24:9 – p. 25:6.)

The Court does not find that there was a loan by the Victorville Family Partnership that was paid by the wire transfer of $1,335 million to the partnership. Kanter testified that, although he was a general partner in Victorville Family Partnership, he never looked for any Victorville Family Partnership records of a loan to BANNING. (12/5, p. 83:28 – 84:17.) Kanter also testified that he could not see an entry for the purported loan in the BANNING tax return for 2008, Exhibit 306 at Schedule L “Balance Sheets Per Books.” (10/8, p. 73,:1-p. 75:11; Ex. 306.) This was the tax return that he signed on June 20, 2011. (10/8, p. 73:1-14.) Mr. Raffaele testified that he did not see any “million-dollar liability to the Victorville Family Partnership” in the tax records. (2/14, p. 25:22-25.) There is no reason that Kanter could not have provided evidence of the existence of such a loan besides him just saying so. Partnerships are obligated to keep records of their business transactions, particularly those that may have tax ramifications. Kanter would have this Court believe that there were no records of a loan from the Victorville Family Partnership available to him to support his assertion that the payment to the Victorville Family Partnership of the $1,335,000 was a repayment of a loan to BANNING. Unlike the situation with BANNING, there was no evidence presented that the books and records of the Victorville Family Partnership were under the control of a bankruptcy trustee or a receiver. Consequently, the Court does not find the testimony of Kanter that there was a loan to BANNING by the Victorville Family Partnership credible.

With regard to Mr. Raffaele’s criticism of Mr. Brandlin’s purported failure to take into account any appreciated value in the Property at the time it was sold to the Armony Purchasers, the Court found that Mr. Brandlin refuted this assertion as illustrated by Exhibit 85, particularly at pages 85-1, 85-4 and 85-5. He found that there was at most, a gain of $1,169,059 (but more likely $570,693), the end result as far as the capital accounts of the Kanter Parties was a negative vs. a positive for the Armony Parties. (See also, Brandlin testimony regarding the problems with Mr. Raffaele’s analysis of appreciation in light of the construction costs exceeding the purchase price of $6.1 million, 2/20, p. 60:15 – p. 62:22.)

The other deductions made by Mr. Brandlin to the capital accounts of Kanter, Ben Kanter and Mr. Ettinger in 2008 were reflected in the 2008 tax return, Exhibit 306-007 at line 3 (a net income loss of $183,764) and line 6 (a distribution of $715,635) under Schedule M2 entitled “Analysis of Partners’ Capital Accounts.” The result of these allocations is that the capital accounts of Kanter, Ben Kanter and Mr. Ettinger were reduced to a negative $308,295 as of the end of 2008. The Court so finds; the Court found the testimony of Mr. Brandlin on these matters and the evidence and charts cited to support it persuasive.

As noted by Mr. Brandlin on Exhibit 76-3, the 2009 tax return shows that in 2009, there was net business income of $62,080 (see line 9 of Schedule M-1 on page 307-005) that added $16,141 to the capital account of Kanter, $15,520 to the capital account of Ben Kanter, and $20,797, $6,208 and $3,414 to the capital accounts of the Armony Parties. No allocation was made to Mr. Ettinger’s capital account because he no longer was a member of BANNING.[10] These allocations to the capital accounts of Kanter and Ben Kanter resulted in a reduced negative of $292,154 and $292,775. The Court so finds; the Court again found the testimony of Mr. Brandlin on these matters and the evidence and charts cited to support it persuasive.

Finally, Mr. Brandlin allocated $74,126, $75,311 and $62,265 in distributions made to the members of BANNING in 2010, 2011 and 2012 as well as $38,498, $39,662 and $90,736 in business gains identified by the Receiver for the Property in his reports, resulting in negative capital accounts for the Kanter Parties. The Court so finds; the Court again found the testimony of Mr. Brandlin on these matters and the evidence and charts cited to support it persuasive.

Based upon the findings identified above, the Court allocates the interpleaded fund as follows: 83.8% to Armony, 10.6% to Harpaz and 5.6% to Shoham.


[1] The two loans from Preferred Bank consisted of a $4.275 million loan and a $225,000 loan. (Ex. 76-4, line 18.) For ease of reference, the Court refers to the two loans together as the “take-out loan.”

[2] It is the opinion of Mr. Raffaele, the accounting expert for the Kanter Parties, that the Property had no net value above its debt at the time it was transferred to BANNING by the Armony Parties. The Court does not find that opinion persuasive.

[3] The Amended Exhibit “B” to the Amendment purported to set forth each Member’s Capital Contribution by reference to a schedule that unfortunately was never attached. Had it been attached, this lawsuit would never have been necessary.

[4] The Kanter Parties offered no experts to counter the expert testimony of Messrs. Rice and Taylor. The Court found their testimony to be persuasive.

[5] Mr. Raffaele stated as a “general premise” that you could use a loan as a proxy for the value of something. (12/14, p. 28:19-27.)

[6]The Armony Parties have asserted that the amount of the Rent Debt that was forgiven was $180,000; however, in response to the assertion by the Kanter Parties in their Closing Argument that the Closing Statement for the sale of the Property to the Armony Purchasers (Ex. 2) shows that $15,000 of the $180,000 was credited to the Armony Purchasers in escrow, the Armony Parties appear to be acknowledging that the amount of the Rent Debt that was forgiven was $165,000 not $180,000. (Armony Parties’ Reply Closing Argument, p. 11, n.19.)

[7] Mr. Raffaele acknowledged that he could not trace the tax return entries to the underlying books and records of BANNING. (2/13, p. 6:24-27.)

[8] It did not appear to the Court that there were any other funds remaining in BANNING as of the liquidation. Kanter testified that as of the close of the sale, BANNING had construction loan funds left and they were still doing construction and had construction commitments. (10/3, p. 39-40.) However, there was no similar testimony that at the time the Armony Parties became members of BANNING, any construction loan funds remained. By that point, the construction of the Rite-Aid facility had been completed.

[9] Additional cash was involved in the transaction to cover various title and escrow charges and disbursements. (Ex. 2.)

[10] At the time Mr. Ettinger left BANNING, his capital account was in the negative. Consequently, no adjustment to the analysis of the capital accounts needed to be made for the transfer of Mr. Ettinger’s interest in BANNING to Ben Kanter. Under the alternative scenario set forth in Exhibit 85-4, the capital contribution for Mr. Ettinger would have been positive, but it was offset against the negative account of Ben Kanter who purchased the Ettinger interest.

related-case-search

Dig Deeper

Get Deeper Insights on Court Cases


Latest cases where GRANDPOINT BANK is a litigant

Latest cases where TEST PARTY FOR TRUST CONVERSION is a litigant

Latest cases represented by Lawyer HAM YOON OH

Latest cases represented by Lawyer Fletcher, Michael Gerard