17-CIV-02547 DERRICK BURNS, ET AL. VS. SUNEET SINGAL, ET AL.

DERRICK BURNS SUNEET SINGAL
ADAM M. FOREST ROBERT M. MERRITT

MOTION FOR POST-JUDGMENT RELIEF: (1) CHARGING JUDGMENT DEBTOR’S MEMBERSHIP INTERESTS IN TWO WHOLLY-OWNED LIMITED LIABILTY COMPANIES; AND (2) FOR AN ORDER ASSIGNING CERTAIN ASSETS TENTATIVE RULING:

Plaintiffs and Judgment Creditors Derrick Burns’ and Vince Nakayama’s Amended Consolidated Motion for Post-Judgment Relief, filed 4-16-19, is GRANTED-IN-PART and DENIED-IN-PART, as set forth below.

The Ladnier-Singal Family Trust is Revocable

The parties dispute whether the Ladnier-Singal Family Trust (Trust) is revocable, and thus subject to Probate Code § 18200 (creditors may reach its assets), or irrevocable. Based on the evidence submitted, the Court finds the Trust is revocable. See 5-22-19 Request for Judicial Notice, Ex. AB (Sacramento County Superior Court reaching the same conclusion). The evidence indicates Singal and his wife created the Trust in December 2015 expressly as a revocable trust, when they reserved to themselves (the Trustors) the right to withdraw property from the Trust estate and to revoke the Trust agreement. See 4-26-19 Singal Decl., Ex. A at 2 §§ 2.3 & 2.5. Majique Ladnier, Singal’s spouse, testified she and Singal are the Trustors, that the Trust is revocable, and that their children are the beneficiaries. 4-16-19 Amended O’Brient Decl., Ex. B at 92-93. In response, Singal offers evidence that on 1-31-19, after he had already agreed to a Stipulated Judgment against him in this case and the day before Singal was to appear for a debtor’s examination in the JFURTI case venued in Sacramento County, he and his wife appeared before a notary with a document supposedly signed in 2015 purporting to amend the Trust to make it revocable. 4-26-19 Singal Decl., Ex. B. For the reasons set forth in Plaintiffs’ moving and Reply papers, the Court finds that the purported Amendment notarized on 1-31-19 lacks validity, and the Ladnier-Singal Family Trust is revocable.

Charging Order(s)

Plaintiffs seek a charging order against the Trust’s membership interest in two limited liability companies that are wholly-owned by the Trust, specifically, (a) First Capital Master Advisor, LLC, a Delaware limited liability company (FCMA), and (b) SRS, LLC (SRS), an entity based in Gold River, Ca. Plaintiffs note in their Reply that on May 15, 2019, the Sacramento Court in the JFURTI case granted a similar request for a charging order in favor of Plaintiff JFURTI, LLC, which is seeking to collect on a judgment against Singal of over $21 million. 5-22-19 RJN, Ex. A, B.

For the reasons set forth in Plaintiffs’ moving papers, the request for an order charging the Trust’s membership interest in FCMA is GRANTED. Per Code Civ. Proc. § 708.310 and Corp. Code § 17705.03-04, the Ladnier-Singal Family Trust’s membership interest in FCMA is hereby charged with the unpaid balance of the 12-24-18 Stipulated Judgment in favor of Plaintiffs and against Defendants Suneet Singal and First Capital Real Estate Investments, LLC in the amount of $812,375.00, plus interest and costs at the rate of 10% per annum from 12-24-18. FCMA shall pay any money or property due to or to become due to the Trust directly to Plaintiffs/Judgment creditors Derrick Burns and Vince Nakayama until the amount remaining due on the Judgment, including all accrued interest and post-Judgment costs, is paid in full.

Plaintiffs’ request for an order charging the Trust’s membership interest in SRS, LLC, whose address is 2355 Gold Meadow Way, Suite 160, Gold River, CA 95670, is also GRANTED. Per Code Civ. Proc. § 708.310 and Corp. Code § 17705.03-04, the Trust’s membership interest in SRS, LLC is hereby charged with the unpaid balance of the 12-24-18 Stipulated Judgment entered in favor of Plaintiffs and against Defendants Suneet Singal and First Capital Real Estate Investments, LLC in the amount of $812,375.00 plus interest and costs at the rate of 10% per annum from 1224-18. SRS, LLC shall pay any money or property due to or to become due to the Trust directly to Plaintiffs/Judgment creditors Derrick Burns and Vince Nakayama until the amount remaining due on the Judgment, including all accrued interest and post-Judgment costs, is paid in full.

Assignment Order(s)

Plaintiffs offer evidence that third party StHealth Capital Partners LLC (StHealth) owes roughly $25 million to FCMA, and that SRS, LLC owns what Plaintiffs speculate is roughly $4.8 million in shares of third party Gadsden Growth Properties, Inc. (Gadsden), a privately held company. Plaintiffs argue that in order to make the charging orders effective, pursuant to Code Civ. Proc. § 708.510, the Court should assign FCMA’s interest in the StHealth debt and SRS’s interest the Gadsden shares to Plaintiffs. Plaintiffs note that the Sacramento Court in the JFURTI case recently granted a similar request for assigning orders. 5-22-19 RJN, Ex. A, B.

As it pertains to StHealth, Plaintiffs’ request for an assignment order is GRANTED. Code Civ. Proc. § 708.510. The monetary obligations owed by StHealth, a Delaware LLC, to First Capital Master Advisor, LLC (FCMA) (the “StHealth Obligation”) are HEREBY ASSIGNED to Plaintiffs/Judgment creditors Derrick Burns and Vince Nakayama in the sum of $812,375.00, plus interest and costs at the rate of 10% per annum from 12-24-18 until the date of payment. StHealth shall make no payments to FCMA until the unpaid balance of the 12-24-18 Judgment is paid to Derrick Burns and Vince Nakayama in full.

Per Code Civ. Proc. § 708.540, upon service of Notice of Entry of this Order on StHealth, StHealth shall pay the StHealth Obligation directly to Plaintiffs/Judgment creditors Derrick Burns and Vince Nakayama. The Judgment debtors, on behalf of themselves, their subsidiaries, affiliates, and other entities under their control, shall take all actions necessary to cause StHealth to pay the StHealth Obligation directly to Derrick Burns and Vince Nakayama.

With respect to SRS’s interest in the Gadsden shares, the request for an assignment order is DENIED WITHOUT PREJUDICE on grounds that, as Plaintiffs concede, Gadsden is a privatelyheld corporation whose share value is unknown and speculative. Further, Plaintiffs’ supporting papers do not adequately address the impact of the Sacramento Court’s 5-15-19 Order in the JFURTI case assigning all of SRS’ interest in the Gadsden shares to the Plaintiff in that case.

Additional Judgment Debtors

Plaintiffs’ motion to add additional Judgment debtors to the 12-24-18 Stipulated Judgment is GRANTED. Code Civ. Proc. § 187; Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 508. Plaintiffs do not seek to pierce a corporate veil in the traditional sense that would render Singal personally liable for an entity’s debts. Singal has already agreed to be personally liable for the 1224-18 Judgment of $812,375.00. Instead, Plaintiffs seek to add, as additional Judgment debtors, Singal and his wife in their capacity as Trustees of the Trust, and to add as Judgment debtors the two LLCs (FCMA and SRS) that the Trust wholly owns, and which Singal controls. See Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214 (discussing the concept of “reverse” veil piercing). An LLC’s separate entity status may be disregarded where it is used to perpetrate a fraud or accomplish some other wrongful or inequitable purpose. Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523, 538; Corp. Code § 17703.04(b). As stated in the more common context of piercing a corporation’s veil, there must be (a) a unity of interest and ownership between the entity and its equitable owner such that the separate personalities of the corporation and the shareholder do not in reality exist, and there must be (b) an inequitable result if the acts in question are treated as those of the corporation alone. Sonora Diamond at 538.

The evidence sufficiently establishes a unity of interest between Singal personally and in his capacity as Trustee of the Trust, and between Singal and the two LLCs that he controls. Singal testified that his personal assets, including his house and ownership interests in various companies, are held by the Trust. O’Brient Decl., Ex. D, at 24:19-30:3. Singal and his wife are both the Trustors and the co-Trustees of the Trust. Id., Ex. B, 91:13-93:3 (as stated above, the Court declines to recognize Singal’s 1-31-19 attempt to appoint two additional Trustees). Singal has provided testimony demonstrating he controls the movement of assets in and out of the Trust. See Forest Decl. Ex. C at 3. And despite recently disclaiming, under oath, virtually any knowledge of the Trust (O’Brient Decl. Ex. C at 13:11-14:13), Singal has testified he considers the assets of both FCMA and SRS as his own. Forest Decl. Ex. C at 3 (“plaintiffs are tying up all of my assets in [FCMA] and [SRS] …”).

The unity of interest between Singal and the two LLCs is also sufficiently established. There is no dispute here that the Trust, which Singal controls, wholly owns both FCMA, LLC, which in turn wholly owns SRS, LLC. Forest Decl. Ex. B at 327-31; 4-16-19 O’Brient Decl. Ex. D (Singal Tr. at 28). Singal testified he is the President, the sole employee, and the sole officer/director of FCMA, over which he has complete control. O’Brient Decl., Ex. C at 18:23-19:15. Because FCMA is the sole owner of SRS, Singal has complete control over SRS. Forest Decl. Ex. B at 32731.

Under the circumstances, the Court finds it would be inequitable to observe a separateness between Singal, the Trust, and the two LLCs that Singal controls. The Court notes that even in circumstances where all the formal elements necessary to establish alter ego liability are not present, an unnamed party/parties may nonetheless be added as a judgment debtor if the equities overwhelmingly favor the amendment and it is necessary to prevent an injustice. See Carolina Casualty Insurance Company v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181. That is the case here. The evidence strongly suggests Singal entered into a Stipulated Settlement with Plaintiffs knowing he would never comply with its terms, and knowing that the substantial assets he controls through the family Trust would be out of Plaintiffs’ reach. After agreeing to pay Plaintiffs $812,375.00, Singal testified he personally has no bank account or other assets that could be used to satisfy the Judgment, despite his apparent control over tens of millions of dollars through the Trust. O’Brient Dec., Ex. C at 107:25-108:19, 114:22-23. The Court finds the equities here overwhelmingly favor amending the Judgment as requested.

Plaintiffs may submit for the Court’s signature an amended Judgment adding Suneet Singal and Majique Ladnier in their capacities as Trustees of the Ladnier-Singal Family Trust, and adding First Capital Master Advisor, LLC and SRS, LCC as additional Judgment debtors.

Plaintiff’s Request for Judicial Notice, filed 5-22-19, is GRANTED. Evid. Code § 452(d). Defendants’ Objections thereto as OVERRULED.

Defendants’ Objections to Evidence, filed 4-26-19, are OVERRULED.

If the tentative ruling is uncontested, it shall become the order of the Court, pursuant to Rule 3.1308(a)(1), adopted by Local Rule 3.10, effective immediately, and no formal order pursuant to Rule 3.1312 or any other notice is required as the tentative ruling affords sufficient notice to the parties.