Case Number: KC043737 Hearing Date: February 27, 2018 Dept: J

Re: Greengrass Furnishings Corp. v. Hai Tran (KC043737)

(1) MOTION FOR ORDER ADDING REVOLUTION INVESTMENTS, LLC AS JUDGMENT DEBTOR AND CHARGING JUDGMENT DEBTOR’S TRANSFERABLE INTEREST TO SATISFY JUDGMENT; (2) ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION

Moving Party: (1) and (2) Annex Financial, Inc., Plaintiff’s Assignee of Record

Respondent: (1) Judgment Debtor Hai Tran; (2) No timely opposition filed (due 12/26/17)

POS: (1) Moving OK; Opposing untimely[1]; (2) Moving unclear[2]

In this collection action the complaint, filed 2/20/04, asserts a cause of action against Defendants Hai Tran dba Seven Day Furniture Warehouse dba Five Day Furniture Warehouse (“Tran”) and Does 1-10 for: Common Counts. On 4/22/04, Tran’s default was entered. On 5/27/04, a clerk’s default judgment was filed.

On 5/27/14, an “Acknowledgment of Assignment of Judgment” and “Notice of Renewal of Judgment” were filed. On 12/13/17, plaintiff’s assignee, Annex Financial, Inc.’s “Ex Parte Application for Temporary Restraining Order and Order to Show Cause re Preliminary Injunction” was heard; at that time, a TRO was granted and an OSC re Preliminary Injunction was set for 1/5/18. Plaintiff was ordered to personally serve the order on both Judgment Debtor Tran and Revolution Investments, LLC by 12/18/17 and to file proof of service of this order no later than 12/21/17. On 12/20/17, plaintiff filed its proofs of service. The OSC re preliminary injunction was subsequently continued, on the court’s own motion, to 1/12/18.

On 1/12/18, the motion and order to show cause re preliminary injunction came on calendar for hearing; at that time, the court continued the hearing to 2/27/18, ordered the temporary restraining order to remain in effect through 2/27/18, and set the following briefing schedule: supplemental briefing due 2/15/18 and supplemental opposition due 2/20/18.

(1) MOTION TO ADD JUDGMENT DEBTOR AND CHARGE TRANSFERABLE INTEREST:

Plaintiff’s Assignee of Record, Annex Financial Inc. (“AFI”) moves, per CCP §§ 187 and 708.310 and Corporations Code § 17705.03, for an order (1) adding Revolution Investments, LLC (“Revolution”) as a judgment debtor and (2) charging judgment debtor’s transferrable interest to satisfy judgment, on the basis that Revolution is a sham entity that is exclusively owned and controlled by Judgment Debtor Hai Tran (“Tran”), Tran created Revolution for the sole purpose of shielding his assets and evading payment of obligations to creditors and Tran’s fraudulent transfer of his personal assets to Revolution and his failure to adhere to corporate formalities evidence such a unity of interest that the judgment obligations of Tran should be the obligations of Revolution.

AFI represents that on or about 6/16/17, it issued subpoenas to various banking institutions seeking Tran’s financial information. Copies of the subpoenas were mailed to Tran, and on 6/21/17 Tran called AFI’s counsel’s office to inquire about same; at that time, he repeatedly stated that he had never heard of the judgment and had never received any notices concerning the judgment. On 6/22/17, the court issued an Abstract of Judgment, which AFI recorded on 6/30/17. However, on 6/29/17, AFI contends that Tran fraudulently recorded a grant deed transferring his entire ownership interest in 6947 Port Rowan Dr., San Jose, CA 95119 (the “San Jose Property”) to Revolution. That same day, Tran recorded a second grant deed transferring his entire ownership interest in 6980 Monterey Road, Gilroy, CA 95020 (the “Gilroy Property”) to Revolution. Tran manually notated that “[t]he documentary transfer tax is N/A.” AFI contends that the only applicable exemption is that Tran is exempt from paying transfer taxes for both properties because the transfer was merely a change in the method of holding title and that Tran’s proportional interest in the properties remains the same. Since Tran transferred an ownership interest that represents the entire property, this necessarily presumes that he owns and controls 100% of Revolution so as to maintain the same proportional ownership interest between the transferee and transferor. AFT alleges that an investigation into Revolution shows that it was established by Tran on 11/2/15 purely as a shell entity to transfer and shelter his assets. Revolution has not filed its required “Statement of Information” or any other documents other than the LLC-1.

AFI argues that it has also learned from Trans’s “Motion to Quash” filed 9/8/17 that Tran orchestrated the fraudulent signing, notarization and recording of an “Acknowledgment of Satisfaction” (“AOS”) with the Santa Clara County Recorder. The AOS contains numerous facial defects: plaintiff’s name is misspelled, it indicates that plaintiff is in pro per, it was never filed with the court (even when AFI served Tran with the renewed judgment in 5/14), Oscar Sanchez (“Sanchez”) was not acting on behalf of plaintiff, the AOS was purportedly signed on 8/28/07 but was not notarized until 10/20/14, and plaintiff dissolved on 12/24/09, so Sanchez could not have represented to the notary that he was plaintiff’s financial officer.

“When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this code.” CCP § 187.

“If a money judgment is rendered against a partner or member but not against the partnership or limited liability company, the judgment debtor’s interest in the partnership or limited liability company may be applied toward the satisfaction of the judgment by an order charging the judgment debtor’s interest pursuant to Section 15907.3, 16504, or 17705.03 of the Corporations Code.” CCP § 708.310.

“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.” Corporations 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: (1) Appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made. (2) Make all other orders necessary to give effect to the charging order. (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.”

On 1/12/18, the court noted that it was unclear whether or not the “Acknowledgment of Satisfaction” (“AOS”) recorded 10/30/14 with the Santa Clara County Recorder (Harris Decl., ¶ 8, Exhibit “H”) is valid or not. The court noted that, while the AOS certainly appeared suspect, for the reasons articulated in the moving papers, there was no indication that AFI had made any effort to locate any individuals affiliated with plaintiff (i.e., such as former Chief Executive Officer/Chief Financial Officer/Secretary Celine Liu or agent Michael Knight [the individual who signed the 3/3/08 “Acknowledgment of Assignment of Judgment”]) to determine the validity of same. The court continued the hearing at that time to 2/27/18 to afford the parties an opportunity to provide supplemental briefing.

AFI’s counsel, Aaron Cheng (“Cheng”), attests that, following the 1/12/18 hearing, AFI made numerous unsuccessful attempts to follow up with their judgment broker contact, Michael Knight (“Knight”), to see if he could make contact with plaintiff. (Cheng Decl., ¶ 2). No declarations from anyone at AFI were furnished to this effect. Cheng then asked his paralegal to skip-trace a “Celine Liu” with a presence at 19395 E. Walnut Drive in the City of Industry (“Walnut Drive address”), but this search was unsuccessful. (Id., ¶ 4). Cheng attests that on 1/16/18, he skip-traced every single individual with any history at the Walnut Drive address and looked for any name that resembled “Celine” or anyone with the last name of “Liu.” (Id., ¶ 5). Cheng identified an individual with the name “Qian L. Liu” who was associated with the Walnut Drive address starting in 7/04. (Id., ¶ 6). This person had multiple aliases, including “Celine Liu,” and was in the business of wholesaling imported goods. (Id., Exhibit “A”). Cheng attests that on 1/16/18, he called the phone number listed on the Lexis Nexis Comprehensive Person’s Report, and the woman who picked up confirmed that she goes by “Celine Liu” and that she used to own plaintiff. (Id., ¶ 7). Cheng attests that he informed her that he was retained by AFI to enforce a judgment acquired from her company, and asked if she recalled a litigation against “Hai Tran” or “Seven Day Furniture Warehouse” or “Five Day Furniture Warehouse.” (Id., ¶ 8). Cheng attests that the woman recalled having a judgment from that case. (Id.). Cheng attests that the woman also advised him that she had never received any money in satisfaction of the judgment, that she did not know anyone by the name of “Oscar Sanchez” (“Sanchez”), and that there was no one by Sanchez’s name at plaintiff. (Id., ¶¶ 9-11). Cheng attests that when he asked the woman whether it would have been possible for someone named Sanchez to have accepted funds and signed a legal document on plaintiff’s behalf, the woman advised that it would be “impossible” because there was no one named Sanchez who was involved with the business. (Id., ¶ 12).

Cheng represents that the woman declined his request to sign a declaration attesting as to the foregoing. (Id., ¶ 13). Unfortunately, Liu’s and/or Knight’s testimony is dispositive to the validity of the AOS; without it, the motion cannot be granted. Accordingly, the motion is denied without prejudice.

(2) ORDER TO SHOW CAUSE RE PRELIMINARY INJUNCTION:

Plaintiff’s Assignee of Record, Annex Financial Inc. (“AFI”) moves for a preliminary injunction enjoining Hai Tran (“Tran”) and his alleged shell entity, Revolution Investments, LLC (“Revolution”), from the following conduct:

Liquidation of real property assets held by either Tran or Revolution

Transfer of real property assets held by either Tran or Revolution

Liquidation or transfer of Tran’s ownership interest in Revolution and the real property contained therein

Representing to any third parties, including public offices of the State of California, that the judgment issued in this matter is “satisfied” by virtue of the fraudulent “Acknowledgment of satisfaction of Judgment” dated 8/28/07 and

Continued fabrication of fraudulent evidence demonstrating satisfaction of the underlying judgment.

“An injunction may be granted in the following cases:…(3) When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual…(6) Where the restraint is necessary to prevent a multiplicity of judicial proceedings…” CCP § 526.

In deciding whether to issue a preliminary injunction, a trial court weighs two interrelated factors: the likelihood the moving party ultimately will prevail on the merits, and the relative interim harm to the parties from the issuance or nonissuance of the injunction. A trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999-1000). Proof of facts is ordinarily made by affidavits or declarations. (CCP § 2009).

Plaintiff has not shown a likelihood of success on the merits, for the reasons articulated above. The validity of the “Acknowledgment of Satisfaction” (“AOS”) has not been disproved. The request for a preliminary injunction is denied.

[1] The motion was filed 12/13/17 (served 12/12/17). On 12/13/17, moving party’s ex parte application for a temporary restraining order and order to show cause re preliminary injunction was heard; the TRO was granted and an OSC re Preliminary Injunction was set for 1/5/18 (subsequently continued to 1/12/18 on the court’s own motion). Judgment Debtor Hai Tran (“Tran”) filed his opposition on 1/5/18, alleging, in part, that plaintiff failed to personally serve the motion “as per this court’s order.” The 12/13/17 “Temporary Restraining Order and Order to Show Cause re Preliminary Injunction” (“Order”) however, only required that moving party personally serve the Order by 12/18/17. The opposition to this motion, then, was due 12/29/17, as per Code.

[2] Tran’s 1/5/18 opposition appears directed against the “Motion for Order Adding Revolution Investments, LLC as Judgment Debtor…” only. However, Tran claims that the proofs of service filed 12/20/17 reflecting service of not only the aforesaid motion but also the TRO/OSC documents are invalid. On 1/2/18, the OSC (then set for 1/5/18) was continued to 1/12/18, on the court’s own motion. Counsel for moving party was ordered to give notice.