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This case was last updated from Los Angeles County Superior Courts on 06/05/2021 at 01:07:36 (UTC).

DAVID REED, ET AL. VS EDDIE SALINAS, ET AL.

Case Summary

On 07/01/2020 DAVID REED filed a Contract - Other Contract lawsuit against EDDIE SALINAS. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are DAVID J. COWAN and KEVIN C. BRAZILE. The case status is Disposed - Judgment Entered.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******4898

  • Filing Date:

    07/01/2020

  • Case Status:

    Disposed - Judgment Entered

  • Case Type:

    Contract - Other Contract

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

DAVID J. COWAN

KEVIN C. BRAZILE

 

Party Details

Plaintiffs

REED CONNIE

REED DAVID

Defendants

CAL HOMES GROUP INC.

SALINAS EDDIE

Attorney/Law Firm Details

Plaintiff Attorney

DAVIDSON PERRIN

 

Court Documents

Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ORDER TO CHARGE MEMBER'S INTEREST, FILE...)

6/3/2021: Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ORDER TO CHARGE MEMBER'S INTEREST, FILE...)

Proof of Service (not Summons and Complaint)

4/19/2021: Proof of Service (not Summons and Complaint)

Declaration Pursuant to 585 CCP in Support of Default Judgment

4/19/2021: Declaration Pursuant to 585 CCP in Support of Default Judgment

Memorandum of Points & Authorities

4/19/2021: Memorandum of Points & Authorities

Judgment

4/22/2021: Judgment

Notice of Entry of Judgment / Dismissal / Other Order

4/22/2021: Notice of Entry of Judgment / Dismissal / Other Order

Minute Order - MINUTE ORDER (ORDER TO SHOW CAUSE RE: DEFAULT JUDGMENT)

2/24/2021: Minute Order - MINUTE ORDER (ORDER TO SHOW CAUSE RE: DEFAULT JUDGMENT)

Declaration Pursuant to 1717 CC re: Attorney Fees

2/16/2021: Declaration Pursuant to 1717 CC re: Attorney Fees

Declaration Pursuant to 585 CCP in Support of Default Judgment

2/16/2021: Declaration Pursuant to 585 CCP in Support of Default Judgment

Memorandum of Points & Authorities

2/16/2021: Memorandum of Points & Authorities

Request for Entry of Default / Judgment

2/16/2021: Request for Entry of Default / Judgment

Declaration Pursuant to 585 CCP in Support of Default Judgment

2/16/2021: Declaration Pursuant to 585 CCP in Support of Default Judgment

Proof of Mailing (Substituted Service)

11/2/2020: Proof of Mailing (Substituted Service)

Request for Entry of Default / Judgment

11/3/2020: Request for Entry of Default / Judgment

Civil Case Cover Sheet

7/1/2020: Civil Case Cover Sheet

Complaint

7/1/2020: Complaint

Summons - SUMMONS ON COMPLAINT

7/1/2020: Summons - SUMMONS ON COMPLAINT

Order to Show Cause Failure to File Proof of Service

7/2/2020: Order to Show Cause Failure to File Proof of Service

26 More Documents Available

 

Docket Entries

  • 06/03/2021
  • Docketat 08:30 AM in Department 20, Kevin C. Brazile, Presiding; Hearing on Motion for Order (To Charge Member's Interest, Filed by Plaintiffs) - Held - Motion Granted

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  • 06/03/2021
  • DocketRuling: June 3, 2021; Filed by Clerk

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  • 06/03/2021
  • DocketMinute Order ( (Hearing on Motion for Order To Charge Member's Interest, File...)); Filed by Clerk

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  • 05/10/2021
  • DocketMotion for Order (Charging Members Interest in LLC); Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 04/26/2021
  • DocketNotice (Entry of Judgment); Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 04/22/2021
  • Docketat 08:30 AM in Department 20, Kevin C. Brazile, Presiding; Order to Show Cause Re: (Default Judgment) - Held

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  • 04/22/2021
  • DocketMinute Order ( (Order to Show Cause Re: Default Judgment)); Filed by Clerk

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  • 04/22/2021
  • DocketRuling: April 22, 2021; Filed by Clerk

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  • 04/22/2021
  • DocketDefault Judgment; Filed by David Reed (Plaintiff)

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  • 04/22/2021
  • DocketJudgment; Filed by Clerk

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24 More Docket Entries
  • 11/03/2020
  • DocketRequest for Entry of Default / Judgment; Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 11/02/2020
  • DocketProof of Mailing (Substituted Service); Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 11/02/2020
  • DocketCase Management Statement; Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 11/02/2020
  • DocketProof of Mailing (Substituted Service); Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 07/02/2020
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 07/02/2020
  • DocketOrder to Show Cause Failure to File Proof of Service; Filed by Clerk

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  • 07/01/2020
  • DocketComplaint; Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 07/01/2020
  • DocketSummons (on Complaint); Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 07/01/2020
  • DocketCivil Case Cover Sheet; Filed by David Reed (Plaintiff); Connie Reed (Plaintiff)

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  • 07/01/2020
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

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Tentative Rulings

Case Number: 20STCV24898    Hearing Date: June 3, 2021    Dept: 20

Tentative Ruling

Judge Kevin C. Brazile

Department 20


Date: Thursday, June 3, 2021

Case Name: David Reed, et al. v. Eddie Salinas, et al.

Case No.: 20STCV24898

Motion: Charging Order on Member’s Interest in LLC

Moving Party: Plaintiffs David and Connie Reed

Responding Party: N/A (Defendant in default)

Notice: OK


Ruling: The Motion for Charging Order is GRANTED.

Plaintiffs to give notice.

If counsel do not submit on the tentative, they are encouraged to appear by LA Court Connect rather than in person.


BACKGROUND

On July 1, 2020, Plaintiffs David Reed and Connie Reed filed a Complaint against Defendants Cal. Homes Group, Inc., Eddie Salinas, and Does stating claims for breach of contract and fraudulent promise based on Defendants’ nonperformance of a Stipulation for Settlement and Mutual Release of Claims entered into by the parties on January 10, 2020. Plaintiffs sought “damages in the sum of $15,000” for the breach of contract and “general damages . . . in no event to be less than $75,000” plus punitive damages for the fraud claim. Plaintiffs also generally sought fees, costs, and interest where authorized by law.

On November 3, 2020, default was entered (separately) against Defendant Cal. Homes Group and Defendant Eddie Salinas.

On April 19, 2021, Plaintiffs filed a default judgment package seeking judgment against both Defendants for $138,844.47, consisting of $15,000.00 due under the parties’ agreement, punitive damages of $120,000.00, costs of $604.47, and attorney's fees of $3,240.00.

On April 22, 2021, the Court entered default judgment for $138,844.47 against Defendants.

On May 10, 2021 Plaintiffs filed a Motion for Charging Order on Member’s Interest in LLC. Defendants are in default and thus did not (and could not have) filed Oppositions.

DISCUSSION

Applicable Law

In cases where 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[s] 15907.3, 16504, or 17705.03 of the Corporations Code.” (CCP sec. 708.310.)

Corporations Code sec. 17705.03(a) authorizes the Court, upon “application by a judgment creditor of a member” of an LLC, to “enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment.” The “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 sec. 17705.03(a).) In order to “effectuate the collection of distributions pursuant to a charging order,” the Court has authority to “[a]ppoint a receiver of the distributions,” “foreclose the lien and order the sale of the transferable interests” if the distributions will not satisfy the judgment “within a reasonable time,” or “[m]ake all other orders necessary to give effect to the charging order.” (Corp. Code sec. 17705.03(b).) The charging order may be satisfied before foreclosure by the charged member “by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.” (Corp. Code sec. 17705.03(c).) Section 17705.03(a) provides “the exclusive remedy by which a person seeking to enforce a judgment against a member . . . may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.” (Corp. Code sec. 17705.03(f).)

Application to Facts

Plaintiffs seek an order charging Salinas’s interest in HVMJ LLC. Plaintiffs contend Salinas “is the only actual member/owner of HVMJ.” (Motion, p. 4; Davidson Decl., Exh. 3 (Statement of Information for HVMJ filed with California Secretary of State reflecting that Salinas is the sole member)) Plaintiffs contend Salinas created HVMJ "in order to avoid the past obligations to plaintiffs,” i.e., in order to avoid the parties’ January 2020 settlement. (Motion, p. 4.)

Based on the evidence before it in Plaintiffs’ default judgment application, the Court previously concluded “Salinas and Cal Homes are not insolvent but merely avoiding payment of the duly-negotiated settlement” based on evidence that (1) Salinas registered HVMJ shortly after settling, (2) Salinas continued to purchase real property after claiming Cal Homes was insolvent, and (3) that Salinas made some of those purchases through HVMJ as its sole member. (See Davidson Decl., Exh. 1 (4/22/21 Ruling); Exh. 4 (deeds reflecting purchases of real property by HVMJ) The Court found “[t]his evidence strongly supports the inference Salinas abandoned Cal Homes and created a new LLC to avoid his responsibilities under the . . . settlement,” finding the evidence indicated “Cal Homes’ claimed insolvency is a sham as well.” (Id.)

These factual conclusions support imposition of a charging order on Salinas’s interest in HVMJ under Sections 708.310 and 17705.03, which will “require[ HVMJ] to pay over to [Plaintiffs] any distribution that would otherwise be paid to [Salinas].” (Corp. Code sec. 17705.03(a).) The evidence provided to the Court indicated Salinas is using HVMJ to avoid individual liabilities and the liabilities of Cal Homes, which does not appear insolvent. A charging order is “the exclusive remedy” for Plaintiffs to attempt to “satisfy the judgment from the judgment debtor’s transferable interest” in HVMJ, which appears necessary here given that Salinas is continuing his real estate business through HVMJ. (Corp. Code sec. 17705.03(f).) There is no indication that Salinas’s interest in HVMJ as its sole member would not be subject to charging under Section 17705.03. Therefore, the Motion is GRANTED.

CONCLUSION

The Motion for Charging Order is GRANTED.

Plaintiffs to give notice.

If counsel do not submit on the tentative, they are encouraged to appear by LA Court Connect rather than in person.

Case Number: 20STCV24898    Hearing Date: April 22, 2021    Dept: 20

Ruling

Judge Kevin C. Brazile

Department 20


Date: Thursday, April 22, 2021

Case Name: David Reed, et al. v. Eddie Salinas, et al.

Case No.: 20STCV24898

Application: Default Judgment

Notice: OK


Ruling: Plaintiffs’ Plaintiffs’ request for default judgment in their favor and against Defendants Salinas and Cal Homes for $138,844.47 is GRANTED.

Plaintiffs to give notice.


 

BACKGROUND

On July 1, 2020, Plaintiffs David Reed and Connie Reed filed a Complaint against Defendants Cal. Homes Group, Inc., Eddie Salinas, and Does stating claims for breach of contract and fraudulent promise based on Defendants’ nonperformance of a Stipulation for Settlement and Mutual Release of Claims entered into by the parties on January 10, 2020. Plaintiffs sought “damages in the sum of $15,000” for the breach of contract and “general damages . . . in no event to be less than $75,000” plus punitive damages for the fraud claim. Plaintiffs also generally sought fees, costs, and interest where authorized by law.

On November 3, 2020, default was entered (separately) against Defendant Cal. Homes Group and Defendant Eddie Salinas.

On February 16, 2021, Plaintiffs filed a default judgment package seeking entry of judgment against both Defendants for $141,979.47, consisting of $15,000 for the breach of contract, $120,000 in special damages, $604.47 in costs, and $6,375 in attorney’s fees.

On February 24, 2021, the Court rejected the default judgment package for two reasons, requiring submission of an updated package. First, the request for attorney’s fees ($6,375) exceeded the limit on recoverable attorney’s fees on default judgments. Second, Plaintiffs failed to support the prayer for punitive damages of $120,000 with evidence of Defendants’ net worth or financial condition and failed to file or attach the Notice of Claim for Punitive Damages.

On April 19, 2021, Plaintiffs filed an updated default judgment package seeking judgment against both Defendants for $138,844.47, consisting of $15,000.00 due under the parties’ agreement, punitive damages of $120,000.00, costs of $604.47, and attorney's fees of $3,240.00

ANALYSIS

CCP § 585 permits entry of a judgment after a defendant’s default has been entered. CRC Rule 3.1800(a) requires a party seeking default judgment by court judgment must file a Request for Court Judgment (Form CIV-100) and: (1) a brief summary of the case; (2) declarations or other admissible evidence in support of the judgment requested; (3) interest computations as necessary; (4) a memorandum of costs and disbursements; (5) a declaration of nonmilitary status for each defendant against whom judgment is sought; (6) a proposed form of judgment (optional Form JUD-100); (7) a dismissal of all parties against whom judgment is not sought or an application for separate judgment under CCP sec. 579, supported by a showing of grounds for each judgment; (8) exhibits as necessary; and (9) a request for attorneys’ fees if allowed by statute or by the agreement of the parties.

Here, Plaintiffs have complied with all the requirements of CCP § 585 and CRC Rule 3.1800, including providing a case summary, providing supporting declarations, dismissing the Doe defendants, providing a declaration in support of the fee request (, and using mandatory form CIV-100. Plaintiffs have remedied the first issue—the request for $3,240.00 in attorney’s fees is now consistent with local fee schedules. Local Rule 3.214 limits attorney’s fees recoverable on a default judgment “[o]ver $100,000” to “$2,890 plus 1% of the excess over $100,000.” As Plaintiffs seek a (pre-fees and costs) judgment of $135,000.00 ($15,000 + $120,000), and 1% of the excess over $100,000 would be $350 (1% of $35,000), total fees recoverable are $3,240.00 ($2,890.00 plus $350.00).

Regarding the requested punitive damages, the Court previously noted “Plaintiffs’ claims are based on Defendants’ refusal to pay what is due under the settlement, claiming insolvency,” pointing out that this raises questions as to Defendants’ ability to pay $120,000 in punitive damages. While the Court recognized “some evidence that Defendants’ claimed insolvency is exaggerated,” it concluded “[s]ome further evidence of financial ability is required to substantiate an award of punitive damages” in great excess of the claimed $15,000 under the parties’ settlement.

Now, Plaintiffs argue the award of punitive damages is appropriate because Defendants and others should be “dissuade[d]” from engaging in “the business of ‘flipping homes’ for profit.” (MoA, p. 11.) Plaintiffs argue the 1-to-8 ratio of general to punitive damages “is neither disproportionate nor excessive under the Constitution/caselaw, as Defendants['] conduct was reprehensible and malicious to support a higher ratio.” (Id.; BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, 582 (“Indeed, low awards of compensatory damages may properly support a higher ratio than high compensatory awards, if, for example, a particularly egregious act has resulted in only a small amount of economic damages. A higher ratio may also be justified in cases in which the injury is hard to detect or the monetary value of noneconomic harm might have been difficult to determine.”)) Plaintiffs additionally argue punitive damages are necessary to address the true “measure of the harm [or] injury suffered by Plaintiffs” from Defendants' breach of the mediated settlement agreement, pointing out that the true value of the released claims was modulated downwards through the settlement process. Additionally, Plaintiffs have had to go to further efforts to enforce the settlement Defendants accepted.

The Court has reviewed the evidence provided and finds that it supports the claimed punitive damages. In particular, the admitted allegations of fraud against Salinas and Cal Homes support imposition of punitive damages under Civ. Code sec. 3294. (See Falahati v. Kondo (2005) 127 Cal.App.4th 823, 829 fn. 3 (“default admits the material allegations of the complaint”)) The evidence provided tends to show that Salinas and Cal Homes are not insolvent but merely avoiding payment of the duly-negotiated settlement. (See Perrin Decl., Exh. A (settlement agreement); Exh. B (2/28/20 email from Cal Homes’ former counsel claiming Cal Homes is insolvent); Exh. D (screenshots of Facebook posts by Cal. Homes Group and Salinas indicating purchases of several properties after statement of insolvency); Exh. G (Statement of Information for new LLC, HVMJ LLC, registered with Secretary of State with Salinas as sole member on June 19, 2020); Exh. H-J (“Property Information Profile” from Old Republic Title Company reflecting purchases of real property by HVMJ after Salinas and Cal Homes claimed insolvency)) Plaintiffs also introduced evidence of oppressive conduct preceding the settlement and during its negotiation. (Reed Decl., para. 2-3 (describing damages to the property), para. 4-7 (alleging disruptive conduct during mediation), para. 10-11 (alleging experience of false claim of insolvency by Cal Homes))

This evidence strongly supports the inference Salinas abandoned Cal Homes and created a new LLC to avoid his responsibilities under the duly-negotiated settlement. This is malicious. (Civ. Code sec. 3294(c)(1) (“Malice” includes conduct “which is carried on by the defendant with a willful and conscious disregard of the rights . . . of others.”)) The evidence of subsequent transactions is also indicative of Salinas’ solvency; to that extent, it is indicative that Cal Homes’ claimed insolvency is a sham as well. (See Perrin Decl., Exh. C (Statement of Information with Secretary of State for Cal Homes Group, reflecting that Salinas is the Director, CEO, and CFO))

Further, Plaintiffs filed a Proof of Service of the Statement of Damages indicating it was served on Salinas by substituted service on July 14, 2020 and on Cal Homes by substituted service on July 7, 2020. The Statement “was served within a reasonable period of time before the default was taken” on November 3, 2020 and sought punitive damages of $1,000,000.00—greater than the $120,000 sought now. (See Behm v. Clear View Technologies (2015) 241 Cal.App.4th 1, 9.) Therefore, Plaintiffs are entitled to punitive damages here.

Plaintiffs’ request for default judgment in their favor and against Defendants Salinas and Cal Homes for $138,844.47 is GRANTED.

Plaintiffs to give notice.

Case Number: 20STCV24898    Hearing Date: February 23, 2021    Dept: 20


Case Number: BC480956    Hearing Date: February 23, 2021    Dept: 20

Tentative Ruling

Judge Kevin C. Brazile

Department 20


Hearing Date: Tuesday, February 23, 2021

Case Name: Pacifica L 39 LLC v. Hormoz Abdolhosein Ramy, et al.

Case No.: BC480956

Motion: Order Assigning Rights to Payments and Restraining Judgment Debtor from Assigning Rights to Payments

Moving Parties: Plaintiff WVJP 2017-2, LP

Responding Party: Defendant Nejat Kohan

Notice: OK


Ruling: The Motion is DENIED.

Kohan to give notice.

If the parties do not submit on the tentative, they are strongly encouraged to appear remotely by LA Court Connect rather than in person.


 

BACKGROUND

On March 16, 2012, Pacifica L 39 LLC filed a Complaint against Defendants Hormoz Abdolhosein aka Hormoz Ramy, Nejatollah Kohandarvish aka Nejat Kohan (“Kohan”); Saeid Kohandarvish aka Sid Kohan (“Sid”); Massoud Ramiaka aka Massoud Ramy aka Mike Ramy; Palm Plaza Partnership; and unnamed Does. Pacifica stated claims for breach of commercial guaranties, seeking to set aside certain fraudulent conveyances and encumbrances.

On February 19, 2014, after the Court granted a motion for summary adjudication filed by Pacifica, judgment was entered “in favor of Plaintiff Pacifica L 39, LLC and against Defendants [Hormoz Ramy] and [Nejat Kohan], jointly and severally, in the total amount of $4,981,792.79.”

On August 15, 2019, Pacifica filed an Acknowledgement of Assignment of Judgment to current moving party WVJP 2017-2, LP (“Plaintiff”).

On November 10, 2020, Plaintiff filed a Motion for Order Assigning Rights to Payments and Restraining Judgment Debtor (i.e. Kohan) from Assigning Rights to Payments.

On January 11, 2021, Kohan filed an Opposition to the Motion contending his rights to certain payments were already assigned elsewhere (e.g. to Saeid Kohandarvish) and were not subject to reassignment to pay off Plaintiff’s judgment.

On January 15, 2021, Plaintiff filed a Reply to the Opposition.

On January 19, 2021, Kohan filed a Sur-Reply.

On January 20, 2021, the Court continued this Motion to February 23, 2021, requesting supplemental briefing as to certain interests and restraining transfer of those interests pending the continued hearing.

On February 4, 2021, Kohan filed a Supplemental Brief opposing the Motion.

On February 10, 2021, Plaintiff filed a Supplemental Brief in support of the Motion.

On February 16, 2021, Kohan filed a Sur-Reply to Plaintiff’ Supplemental Brief.

DISCUSSION

Applicable Law

Upon “application of the judgment creditor on noticed motion, the court may order the judgment debtor to assign to the judgment creditor . . . all or part of a right to payment due or to become due, whether or not the right is conditioned on future developments.” (CCP sec. 708.510(a)) This includes rights to payment of “[w]ages due from the federal government that are not subject to withholding under an earnings withholding order,” “[r]ents,” “[c]ommissions,” “[r]oyalties,” “[p]ayments due from a patent or copyright, and “[i]nsurance policy loan value.” The Court, in determining whether to order an assignment or in fixing the amount, “may take into consideration all relevant factors, including the following: (1) The reasonable requirements of a judgment debtor who is a natural person and of persons supported in whole or in part by the judgment debtor; (2) Payments the judgment debtor is required to make or that are deducted in satisfaction of other judgments and wage assignments, including earnings assignment orders for support; (3) The amount remaining due on the money judgment; [and] (4) The amount being or to be received in satisfaction of the right to payment that may be assigned.” (CCP sec. 708.510(c).)

When “an application is made pursuant to Section 708.510 . . . the judgment creditor may apply to the court for an order restraining the judgment debtor from assigning or otherwise disposing of the right to payment that is sought to be assigned.” (CCP sec. 708.520(a)) “The court may issue an order pursuant to this section upon a showing of need for the order. The court, in its discretion, may require the judgment creditor to provide an undertaking.” (CCP sec. 708.520(b))

Application to Facts

In its January 20 Order, the Court determined Plaintiff had standing to enforce this judgment as the assignee of record under CCP sec. 673. The Court determined that Kohan’s income from the Law Offices “is already assigned to payment of [Kohan’s brother] Sid’s judgment lien” and “is not subject to reassignment under Section 708.510(a).” However, the Court was unsure whether Plaintiff’s payments of rental income and partnership distributions to Sid were merely voluntary and therefore potentially subject to reassignment. It was “unclear to the Court whether the Deeds of Trust gave Sid the relevant rights to payment of rental income and partnership distributions, and unclear what priority Sid’s security interest would have vis-à-vis Plaintiff’s judgment under CCP sec. 697.590, which regulates priority of various interests.” The parties have now provided supplemental briefing on whether Kohan has income subject to reassignment.

Enforceability of Deeds of Trust

Previously, Kohan argued the rights to income from the Palm Plaza Partnership and Palm Springs condominium are not subject to reassignment based on two Deeds of Trust and Promissory Notes for those interests. (Kohan Decl., Ex. D, Ex. E.) In turn, Plaintiff argued the Deeds of Trusts did not encompass “rents, issues, or profits of real property.” The Court noted that the Deeds of Trust “were raised for the first time in [Kohan’s] Opposition” and so requested further input as to the Deeds of Trust.

Now, rather than arguing the Deeds of Trust do not encompass rents, Plaintiff argues the Deeds of Trusts are entirely unenforceable under CCP sec. 726. Plaintiff argues the July 1, 2018 money judgment in Sid’s favor constituted an election of “the single remedy of a personal action” under that Section, thereby waiving Sid’s security in the deeds of trust. In response, Kohan argues this is an improper attack on the validity of the judgment in Sid’s favor. Not so—the validity of the judgment is undisputed. Plaintiff attacks the continuing enforceability of the deeds of trusts securing the note upon which the judgment was rendered. Kohan does not cite any authority barring the Court from assessing the continuing enforceability of deeds of trust which are presented by the debtor as securing certain payment rights.

In O’Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, the Court of Appeal addressed CCP sec. 726, “the so-called ‘one form of action’ rule.” (Id. at 597.) This rule “is part of the statutory protections and procedures which restrict the secured creditor's remedies for notes secured by real property.” (Id.) Section 726 “is both a ‘security-first’ and ‘one-action’ rule: It compels the secured creditor, in a single action, to exhaust his security judicially before he may obtain a monetary ‘deficiency’ judgment against the debtor.” (Id.) “If a creditor . . . files suit on the note without pursuing foreclosure on the security, section 726's protections can be invoked in two distinct ways.” (Id.) “First, the debtor may raise section 726 as an affirmative defense, compelling the creditor to first exhaust the security before being entitled to a monetary judgment on the unsatisfied portion of the debt.” (Id.) “Alternatively, if the debtor elects not to raise the affirmative defense aspect of section 726, he may later invoke it as a sanction: The creditor who obtains a monetary judgment in contravention of the security-first rules of section 726 will be deemed to have forfeited his right to further pursue his security interest.” (Id.)

The issue here is whether Plaintiff, another judgment creditor, may invoke Section 726 “as a sanction” against Sid, another judgment creditor, to show that Sid “forfeited his right to further pursue his security interest.” This question was answered affirmatively in Walker v. Community Bank (1974) 10 Cal.3d 729, indicating in a footnote that the sanction may be invoked not only by the debtor but also a “successor in interest or . . . one who holds even an adverse interest.” (Id. at 739, fn. 4 (“the successor in interest or indeed one who holds even an adverse interest is protected by the sanction aspect just as much as the primary debtor.”)) The waiver of the security interest “is binding against parties in addition to the primary debtor.” (Id.) By proceeding to a confessed money judgment rather than foreclosing on the properties via the Deeds of Trust, Sid “obtain[ed] a monetary judgment in contravention of the security-first rules of section 726 [and so] will be deemed to have forfeited his right to further pursue his security interest.” (O’Neil at 597.) Thus, Plaintiff—as a creditor—is entitled to invoke Section 726 to show that the Deeds of Trust are now forfeited and unenforceable after execution of the judgment in Sid’s favor.

Kohan argues Section 726 is inapplicable because “there has been no foreclosure” here. But “Section 726 is not an isolated statute; it is part of the broader statutory scheme which regulates secured creditors' rights and remedies.” (O’Neil at 603.) “In operation, the ‘one form of action’ rule ‘applies to any proceedings or action by the beneficiary for the recovery of the debt . . . secured by a mortgage or deed of trust.” (Shin v. Superior Court (1994) 26 Cal.App.4th 542, 545.) The fact that there has been no foreclosure here is significant because the failure to foreclose triggers the application of Section 726 as a sanction. (Id. at 547 (“when the creditor recovers a personal money judgment against the debtor without first foreclosing all of the security, the sanctions of the ‘one action’ rule are applied, and the creditor loses the liens on all property not foreclosed in that action.”))

In sum, the Court concludes the assignment of interests under the Deeds of Trust do not preclude reassignment here, as Sid has no right to enforce the Deeds of Trust and so Kohan cannot use Sid as a shield against reassignment. Rather, Sid is a judgment creditor entitled to use general procedures for enforcement of a judgment rather than the deed of trust procedures in CCP sec. 726 et seq., but not to enforce the security interests reduced to judgment.

Consideration for Promissory Notes

Next, Plaintiff argues the promissory note to Sid is unenforceable because Sid “NEVER loaned any money to the Judgment Debtor,” arguing “the Judgment Debtor’s subsequent agreement to repay his brother the debts incurred by the Spanish Inn, Inc., lacked the requisite consideration.” Plaintiff argues it is irrelevant that Sid “loaned, gifted or otherwise invested $430,000 to/in the Spanish Inn” because there is no evidence Kohan “ever guaranteed any of the Spanish Inn’s debt other than the loans from East West Bank, which led to the judgment . . . in the instant case.” In brief, Plaintiff argues the promissory note was between Sid and the Spanish Inn, not between Sid and Kohan individually. (Supp. Opp., p. 4 (“ALL the evidence indicates that Sid Kohan only ever loaned money to the Spanish Inn.”))

The Court is unpersuaded—there is a March 3, 2006 agreement between Sid and Kohan in which Sid agreed to loan Kohan $400,000 “plus ten percent of all expenses incurred by Spanish Inn from April 15, 2005” to March 3, 2006 in order to pay off the existing $750,000 loan secured on the Spanish Inn property. (See Sur-Reply Kohan Decl., Ex. W.) The agreement included a guaranty, providing that “[i]n the event the project is sold for a price that does not produce sufficient profit to return [Sid’s] investment, Kohan guarantees to make up the difference, without interest. Such payment shall be made within one year of the date the project is sold or the last unit is sold.” (Id.) Thus, Sid specifically loaned more than $400,000 to Kohan, not Spanish Inn. Plaintiff’s argument is rejected—the agreement reflects a “legal obligation to repay Sid Kohan” monies loaned in connection with preexisting Spanish Inn loans.

Income

The Court, in determining whether to order an assignment or in fixing the amount, “may take into consideration all relevant factors, including the following: (1) The reasonable requirements of a judgment debtor who is a natural person and of persons supported in whole or in part by the judgment debtor; (2) Payments the judgment debtor is required to make or that are deducted in satisfaction of other judgments and wage assignments, including earnings assignment orders for support; (3) The amount remaining due on the money judgment; [and] (4) The amount being or to be received in satisfaction of the right to payment that may be assigned.” (CCP sec. 708.510(c).) Availability of rights of payment to reassign is not the sole factor.

Plaintiff previously argued there was no evidence to support Kohan’s claimed monthly expenses of $5,000, noting there was “no evidence as to what the monthly mortgage is [for his condominium] (no mortgage statement attached), what the monthly property tax is (no tax bill attached), how much the HOA dues (no statement attached) are and what other living expenses he may have.” (Reply, p. 4.) Plaintiff argued that “the monthly expense figure in the declaration was simply fabricated to coincide with what the Judgment Debtor claims he earns from his law practice . . . in an effort to demonstrate that he has no disposable income.”

Now, in the Supplemental Brief, Kohan claims his total income consists of a “$2,100 Rental & $1,500 Management fee” for Palm Plaza Center and $1,540 for rental of the condominium, while his “monthly Cost of Living and Expenses are at least $5,269, [including] $863 payments for Condo's out of pocket costs for HOA, property tax, insurance, maintenance and management fee.” (Supp. Brief, p. 4.) In particular, Kohan has provided a detailed itemization of his income and expenses in his Supplemental Declaration. (See Supp. Kohan Decl., para. 3-13.) Plaintiff did not attempt to rebut Kohan’s account of monthly expenses, and the Court does not have any basis to conclude the figures are “fabricated” as Plaintiff contends. The Court is unpersuaded that there is any income remaining to be assigned to Plaintiff’s judgment. The Motion is DENIED.

CONCLUSION

The Motion is DENIED.

Kohan to give notice.

If the parties do not submit on the tentative, they are strongly encouraged to appear remotely by LA Court Connect rather than in person.

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