Case Number: EC062544 Hearing Date: May 25, 2018 Dept: A

Demirchyan v Sienna Reseda

APPLICATION FOR SALE OF DWELLING

Calendar: 7

Case No: EC062544

Hearing Date: 5/25/18

Action Filed: 6/2/14

MP: Judgment Creditors, Sienna Reseda, LLC, David McKinzie, and Sienna Construction, Inc.

RP: Judgment Debtors, Grigor Demirchyan and Marina Demirchyan

RELIEF REQUESTED:

Order authorizing sale of real property at 17207 Nugent Place, Granada Hills, CA 91344

DISCUSSION:

This case arises from Plaintiffs Grigor Demirchyan and Marina Demirchyan’s claim that Defendants Sienna Reseda, LLC, David McKinzie, and Sienna Construction, Inc. had mismanaged and converted Plaintiffs’ investment into a real estate investment. The dispute was submitted to binding arbitration and on December 22, 2016, the arbitrator issued an award in favor of Defendants.

On May 9, 2017, the Court granted Defendants’ motion to confirm the arbitration award and denied Plaintiffs’ motion to vacate the arbitration award.

On May 26, 2017, judgment was entered such that Plaintiffs take nothing on their complaint, and Defendants are entitled to attorney’s fees and costs in the total amount of $115,261.00, which will accrue interest at the maximum rate provided by law. On June 19, 2017, notice of entry of judgment was filed with the Court by Defendants.

On April 9, 2018, Judgment Creditors Sienna Reseda, LLC, David McKinzie, and Sienna Construction, Inc. (“Judgment Creditors”) filed an application for order for sale of dwelling. An OSC date on the matter was set for this instant hearing date.

The procedures for obtaining authorization to sell real property to enforce a judgment are enacted at CCP §§704.760 to 704.780.

CCP §704.740 provides:

(a) Except as provided in subdivision (b), the interest of a natural person in a dwelling may not be sold under this division to enforce a money judgment except pursuant to a court order for sale obtained under this article and the dwelling exemption shall be determined under this article.

(b) If the dwelling is personal property or is real property in which the judgment debtor has a leasehold estate with an unexpired term of less than two years at the time of levy:

(1) A court order for sale is not required and the procedures provided in this article relating to the court order for sale do not apply.

(2) An exemption claim shall be made and determined as provided in Article 2 (commencing with Section 703.510).

(CCP §704.740.)

Under CCP §704.760, the judgment creditor must submit an application made under oath that describes the dwelling and includes the following:

(a) A statement whether or not the records of the county tax assessor indicate that there is a current homeowner’s exemption or disabled veteran’s exemption for the dwelling and the person or persons who claimed any such exemption.

(b) A statement, which may be based on information and belief, whether the dwelling is a homestead and the amount of the homestead exemption, if any, and a statement whether or not the records of the county recorder indicate that a homestead declaration under Article 5 (commencing with Section 704.910) that describes the dwelling has been recorded by the judgment debtor or the spouse of the judgment debtor.

(c) A statement of the amount of any liens or encumbrances on the dwelling, the name of each person having a lien or encumbrance on the dwelling, and the address of such person used by the county recorder for the return of the instrument creating such person’s lien or encumbrance after recording.

(CCP §704.760.)

Upon the filing of the application, CCP §704.770 authorizes the Court to set an OSC for the judgment debtor to show cause why an order for the sale of the property should not occur. Not later than 30 days before the OSC, the judgment creditor must do both of the following:

Serve on the judgment debtor a copy of the order to show cause, a copy of the application of the judgment creditor, and a copy of the notice of the hearing in the form prescribed by the Judicial Council. Service shall be made personally or by mail

Personally serve a copy of each document listed in paragraph (1) on an occupant of the dwelling or, if there is no occupant present at the time service is attempted, post a copy of each document in a conspicuous place at the dwelling.

As noted above, on April 2018, the Court set an OSC regarding the sale, which provided notice to Judgment Debtors of their right to attend and oppose the application. A review of the papers reveals that the Judgment Creditor filed and served his application on Judgment Debtors.

The property at issues is located at 17207 Nugent Place, Granada Hills, CA 91344. It is a one story, 2,330 square foot, single family residence, with 6 bedrooms and 4 baths. It was built in 1961. (Greenbaum Decl., ¶¶13-14.)

A review of the application reveals the following:

Judgment Creditors obtained a judgment in their favor for $115,261.00 for attorney’s fees. (Greenbaum Decl., ¶3, Ex. A [Judgment].) An abstract of judgment was recorded on June 15, 2017. (Id., ¶4, Ex. B [Abstract of Judgment].)

A title report revealed that Judgment Debtors originally acquired the title to the property by Grant Deed (recorded January 30, 1987), and that on March 1, 1993, they transferred the property into their self-settled living trust (the “Grigor Demirchyan and Marina Demirchyan, Trustees of the Demirchyan Living Trust dated July 18, 2013”, and made themselves trustees. (Id., ¶¶6-8, Exs. C-D [Grant Deeds].) At the time judgment was entered, Judgment Debtors, as trustees, were the title owners of the property. (Id., ¶10.)

On January 29, 2018, Judgment Creditors obtained a writ of execution against Judgment Debtors, which was submitted to the Los Angeles County Sheriff. (Id., ¶11.) A levy was made by the Sheriff on the property. After the Sheriff’s levy was served on March 23, 2018, the Sheriff served the statutorily required notice of the levy to Judgment Creditors. (Id., ¶12, Ex. E [Notice].)

In opposition, Judgment Debtors cite to the Superior Court of California, County of Los Angeles Local Rules, Rule 3.223 regarding writs of execution on a dwelling. Rule 3.223 provides the evidence required for an application for an order for sale of a dwelling must be competent evidence showing:

(1) The fair market value of the property by a real estate expert;

(2) Litigation guarantee or title report that contains a legal description of the property, the names of the current owners, a list of all deeds of trust, abstracts of judgments, tax liens and other liens recorded against the property, whether a declaration of homestead has been recorded, whether a current homeowner’s exemption or disabled veteran’s exemption has been filed with the county assessor, and the persons claiming such exemption;

(3) The amount of any liens or encumbrances on the dwelling, and the names and addresses of the lienholders and when the judgment creditor’s lien attached. The judgment creditor must ascertain the precise amounts of obligations secured by senior liens by making a written demand for beneficiary statements from senior lienholders pursuant to Civil Code section 2943. The judgment creditor may need to conduct an examination pursuant to Code of Civil Procedure sections 708.120 or 708.130 to determine the precise amounts of the junior liens, the daily rate of interest due on the senior and junior liens, and encumbrances of record; and

(4) The date of service on the judgment creditor of the levying officer’s notice that the dwelling was levied upon.

(LASC Local Rule 3.223(a).)

Judgment Creditors have not complied with this Local Rule by supporting their application with competent evidence.

First, Judgment Creditors admit they were unable to access the property as Judgment Debtors are still in possession of the property. Thus, they estimated the appraised value of the property to be $762,000. This is based on taking comparable sales, active listing, size, location, etc. of the property. Estimates range from: $762,908 (Zillow.com), $759,645 (Trulia.com), or $763,464 (Redfin.com). (Greenbaum Decl., ¶¶19-24, Exs. F-H.) This is not sufficient to ascertain the fair market value of the property. Not only does defense counsel fail to state if he is qualified as a real estate expert to make such estimated appraisals, but the property should be appraised by an independent appraise appraiser (i.e., not by the creditor’s in-house appraiser). (Cal. Prac. Guide Enf. J. & Debt, (Rutter Guide) Ch. 6D-8, §§6:763, 6:779 [citing Local Rule 3.223(a)(1)].) Nor has Judgment Creditor requested that the Court appoint a qualified appraiser to help determine the dwelling’s fair market value. (See CCP §704.780(d).)

In the reply brief, Judgment Creditors argue that the Local Rule is outdated and that competent evidence by a real estate expert may have been the correct standard in 2011, but is not in 2018. They fail to provide any contrary Local Rule or case law on this purported outdated nature of the Local Rules. Thus, this argument is rejected.

Second, Judgment Creditors failed to attach a title report to their application. At most, Mr. Greenbaum references a “commercially-prepared title report”, this report is not provided. (See Greenbaum Decl., ¶28.) It is not until the reply that they provide the title report as Exhibit C to the reply brief.

Third, the application fails to state the precise amount of liens and encumbrances on the dwelling. According to Mr. Greenbaum, the recorded lienholders on the property include: (a) a Deed of Trust in favor of Cach, LLC in the amount of $11,883.63 (recorded May 3, 2008); (b) Judgment Creditors’ Abstract of Judgment for $115,261.00, plus accrued interest (recorded June 15, 2017); and (c) a Deed of Trust in favor of Encino Spectrum, LLC in the amount of $493,862.17 (recorded September 1, 2017, a date which is after the judgment in this action was entered). (Greenbaum Decl.., ¶¶15-18.) Mr. Greenbaum admits that he does not know the unpaid balance amounts, if any, for the Deed of Trust in favor of Cach, LLC and the Deed of Trust in favor of Encino Spectrum, LLC’s junior lien. (Id., ¶17.)

Failure to comply with Local Rule 3.223(a) is a ground to deny this application.

Next, Judgment Debtors have provided evidence showing that the Grigor Demirchyan and Marina Demirchyan, Trustees of the Demirchyan Living Trust dated July 18, 2013 is not a revocable trust, but was converted to an irrevocable trust by and through the Amended and Restated Demirchyan Living Trust, dated April 4, 2016. (G. Demirchyan Decl., Ex. 1 at §1.03].) While Judgment Creditors correctly point out that trust property of a revocable trust are subject to the claims of the settlor’s creditors to the extent of the power of revocation during the lifetime of the settlor (Prob. Code, §18200), the Demirchyan Living Trust dated July 18, 2013 was made an irrevocable trust nearly a year prior to the judgment entered in this action. As such, the assets of an irrevocable trust are not available to the creditors of the settlor. (See Laycock v. Hammer (2006) 141 Cal.App.4th 25.)

In reply, Judgment Creditors attack the validity of the amended trust terms, arguing that the trust is invalid, void, and a sham. They argue that Judgment Debtors’ obligations arose before the conveyance since this lawsuit was initiated in 2014. They also argue that the deed of trust to the property was not deeded into the name of the amended trust (Vladislav Shut, Trustee of the Amended and Restated Demirchyan Living Trust dated April 4, 2016). Although these reply arguments are responsive to the arguments in the opposition, they are raised for the first time. As such, Judgment Debtors should have the opportunity to respond to these arguments with contrary evidence.

Finally, with regard to the homestead exemption, Judgment Creditors state that a search of the Assessor’s parcel information was conducted to determine if a homeowner’s or disabled veteran’s exemption is claimed on the property. According to the Assessor’s office records, there is on file a 1992 claim for a Homeowner’s Exemption signed by Judgment Debtors. (Greenbaum Decl., ¶27, Ex. I.) Judgment Creditors state that while a commercially-prepared title report does not reflect a recording of a homestead declaration by Judgment Debtors, Judgment Creditors are informed and believe that Judgment Debtors live on the property and thus the dwelling may be a homestead. (Id., ¶28.)

Pursuant to CCP §704.780, Judgment Creditors have not established their burden of showing that the dwelling is not a homestead since the records of the county tax assessor confirmed a homeowner’s exemption. Thus, the burden does not shift to Judgment Debtors to show that the dwelling is a homestead. Even if shifted, Judgment Debtors state in their declaration that they have resided at the property since January 30, 1987, and continue to do so pursuant to the terms of the trust. (G. Demirchyan Decl., ¶11; CCP §704.710(c).)

RULING:

Deny the application for an order for sale of the dwelling.