Employers Assurance Company vs Santa Barbara Shellfish Co et al

Case Number

23CV03393

Case Type

Hearing Date / Time

Mon, 04/08/2024 - 10:00

Nature of Proceedings

Motion: Order

Tentative Ruling

Employers Assurance Co. v. Santa Barbara Shellfish Co., et al.                                                                               

Case No. 23CV03393

           

Hearing Date: April 8, 2024                                                    

HEARING:              Plaintiff’s Motion for Order Applying Proceeds from Sale of Liquor Licenses in Satisfaction of Judgment and Injunctive Relief in Aid of Receiver

ATTORNEYS:        For Plaintiff Employers Assurance Company:                       Timothy Carl Aires

                                    For Defendant Santa Barbara Shellfish Company:                       No appearance

                                    For Defendant Death Star, LLC:                                                              No appearance

                                   

TENTATIVE RULING:

Plaintiff’s motion is denied.

Background:

This action was commenced on August 4, 2023, by the filing of the complaint by plaintiff Employers Assurance Company (“EAC”) against defendants Santa Barbara Shellfish Co. (“SBSC”) and Death Star LLC (“DS”) for breach of contract.

As alleged in the complaint:

Plaintiff provided defendants with an Insurance Policy for the period of March 3, 2021 through March 3, 2022, which was subject to an audit and re-computation of its premium. (Complaint, ¶ 9.) “Plaintiff is authorized under the Policy to examine and audit all records that relate to the Policy during the policy period. The Policy provides that the final premium will be determined by using the actual premium basis and the proper classifications and rates as determined by an audit. The Policy further obligated Defendants to pay the difference between the estimated and actual premiums after the audit and final premium determined by Plaintiff.” (Ibid.)

“After audit, Plaintiff has determined the total premium and fees for the effective period for the Policy to be an additional $73, 240.00, which became fixed or readily ascertainable on August 16, 2022 . . .. Defendants waived any challenge to the amount determined to be the premium owed on the Policy through the audit process, and as described on the final premium audit endorsement, by failing to pursue the administrative remedy set forth in the Policy.” (Complaint, ¶ 10.)

“After August 16, 2022, Defendants refused to make any further payments toward the policy premium due for the Policy. Thus, within the past four years, Defendants have breached the terms of the Policy by failing and refusing to satisfy the amount outstanding on the Policy of $73,240.00.” (Complaint, ¶ 12.)

Defendants were served with the summons and complaint on October 16, 2023.

No answers to the complaint being filed or served, on December 6, 2023, plaintiff took the defaults of SBSC and DS. Default judgment was entered in the amount of $83,493.62.

Plaintiff now moves the court for the following orders:

“(1) An order applying proceeds from sale of one or more liquor licenses issued by the California Department of Alcoholic Beverage Control, to wit: No. 352645 [101 E Cabrillo Blvd, Santa Barbara, CA 93101] and No. 366340 [230 Stearns Wharf, Santa Barbara, CA 93101] (the “ ‘Liquor Licenses’ ”);

“(2) Appointment of a receiver in aid of enforcement of judgment (the “ ‘Receiver’ ”) for the purpose of transferring by sale the interest of Defendant/Judgment Debtor The California Spirits Company LLC in the Liquor Licenses [Note: This appears to be a typographical error as The California Spirits Company, LLC is not a defendant in this case.];

“(3) Fixing the Receiver’s undertaking at $2,500.00 and his or her daily fee at $0.00, with the Receiver to receive as his or her compensation from the gross proceeds recovered from the disposition of the Liquor Licenses according to the following schedule: 25 percent on the first $5,000.00 or less, plus 15 percent on any amount in excess of $5,000.00 but not in excess of $50,000.00, plus 10 percent on any amount in excess of $50,000.00 but not in excess of $1,000,000.00, and plus 2 percent of such moneys in excess of $1,000,000.00.

“(4) Authorizing the Receiver to employ any licensed escrow holder to serve as escrow agent in connection with any sale of the Liquor Licenses (fees and expenses not to exceed the usual and customary fees for similar services offered by other escrow agents);

“(5) Authorizing the Receiver to employ any other persons whose services are required, in the Receiver’s discretion, to consummate a sale of the Liquor Licenses, provided, however that in no event shall the Receiver enter into any single contract with a fixed price in excess of $15,000.00;

“(6) Authorizing the Receiver to apply to this Court at a future date, if the need arises, for authority to borrow funds and issue receivership certificates secured by a super-priority lien on the Liquor Licenses;

“(7) Restraining, enjoining and prohibiting Defendants/Judgment Debtors Santa Barbara Shellfish Co., a corporation and dba Santa Barbara Fishouse; Death Star LLC and dba Santa Barbara Fishouse, and all those acting in concert with any of them, from undertaking any act of whatever type or nature, directly or indirectly, either by themselves or by an agent, employee or by servant or by any other person whatsoever, which would have the effect, either in part or in whole, of causing the bargain, sale, assignment, transfer, alienation, disposition, lien, encumbrance, mortgage, waste, damage, destruction, diminution in value, or any other act which would affect the legal, equitable or beneficial title to the Liquor Licenses, the Liquor Licenses themselves or their contents, other than as provided by the terms and conditions of this order;

“(8) Restraining, enjoining and prohibiting Defendants/Judgment Debtors Santa Barbara Shellfish Co., a corporation and dba Santa Barbara Fishouse; Death Star LLC and dba Santa Barbara Fishouse, and all those acting in concert with any of them, or any of its officers, directors, shareholders, agents or employees, from selling, disposing, alienating, encumbering, mortgaging, leasing, renting, or otherwise altering, affecting, discharging or releasing any rights concerning or relating to the Liquor Licenses, or all of the same, at any time whatsoever;

“(9) Restraining, enjoining and prohibiting Defendants/Judgment Debtors Santa Barbara Shellfish Co., a corporation and dba Santa Barbara Fishouse; Death Star LLC and dba Santa Barbara Fishouse, and all those acting in concert with any of them, its agents, officers, and employees, and all those acting in active concert or participating with them, from interfering or otherwise undertaking acts to interfere with the conduct, duties and activities of the Receiver in undertaking his performance under and pursuant to the terms of the receivership order as may be granted.” (Notice of Motion, pp. 2-3.)

Although titled differently, plaintiff’s motion is really a motion for an order for appointment of a receiver.

The motion was served on defendants via mail on January 31, 2024. No oppositions or other responsive documents have been filed by defendants.

Analysis:

“The court may appoint a receiver to enforce the judgment where the judgment creditor shows that, considering the interests of both the judgment creditor and the judgment debtor, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.” (Code Civ. Proc., § 708.620, italics added.)

“(a) The judgment debtor’s interest in an alcoholic beverage license may be applied to the satisfaction of a money judgment only as provided in this section.

“(b) The court may appoint a receiver for the purpose of transferring the judgment debtor’s interest in an alcoholic beverage license that is transferable under Article 5 (commencing with Section 24070) of Chapter 6 of Division 9 of the Business and Professions Code, unless the judgment debtor shows in the proceeding to appoint a receiver that the amount of delinquent taxes described in Section 24049 of the Business and Professions Code and claims of creditors with priority over the judgment creditor pursuant to Section 24074 of the Business and Professions Code exceed the probable sale price of the license.

“(c) The receiver may exercise the powers of the licensee as necessary and in exercising such powers shall comply with the applicable provisions of Division 9 (commencing with Section 23000) of the Business and Professions Code and applicable regulations of the Department of Alcoholic Beverage Control. An application shall be filed to transfer the license to the receiver and a temporary retail permit shall be obtained during the pendency of the transfer.” (Code Civ. Proc., § 708.630, italics added.)

Although plaintiff is correct that there is no longer a prerequisite to the appointment of a receiver that a writ of execution has been returned unsatisfied or that the judgment debtor refuses to apply property in satisfaction of the judgment:

“California rigidly adheres to the principle that the power to appoint a receiver is a delicate one which is to be exercised sparingly and with caution. It is said by the state’s courts that the appointment of a receiver is ‘ “an extraordinary and harsh,” ’ and ‘ “delicate,” ’ and ‘ “drastic,” ’ remedy to be used ‘ “cautiously and only where less onerous remedies would be inadequate or unavailable. . . .” ’ [Citations.] And a party to an action should not be ‘ “subjected to the onerous expense of a receiver, unless . . . his appointment is obviously necessary to the protection of the opposite party. . . .” ’ [Citation.]” (Morand v. Superior Court (1974) 38 Cal.App.3d 347, 351.)

“Due to the “ ‘extraordinary’ ” nature of this remedy and the special costs it imposes, courts are strongly discouraged - although not strictly prohibited - from appointing a receiver unless the more intrusive oversight of a receiver is a “ ‘necessity’ ” because other, less intrusive remedies are either “ ‘ “inadequate or unavailable.” ’ ” [Citations.]” (Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App.5th 622, 628.)

“In light of the sheer number of enforcement mechanisms for collecting money judgments under the Enforcement of Judgments Law (which range from levies to liens to wage garnishment (§§ 695.010 et seq., 697.010 et seq., 699.010 et seq., 699.510 et seq., 706.020 et seq.) [citation], appointment of a receiver is rarely a “ ‘necessity’ ” and, as a consequence, “ ‘may not ordinarily be used for the enforcement of a simple money judgment.’ ” [Citations.] Instead, the appointment of a receiver to enforce a money judgment is reserved for “ ‘exceptional’ ” circumstances where the judgment creditor’s conduct makes a receiver necessary - and hence “ ‘proper.’ ” [Citations.] This occurs when the judgment debtor has frustrated the judgment creditor’s collection efforts through obfuscation or through otherwise contumacious conduct that has rendered feckless the panoply of less intrusive mechanisms for enforcing a money judgment. [Citation.]” (Ibid.)

Other than making a statement that defendants have made no effort to consensually satisfy the judgment, plaintiff has made no showing whatsoever that other enforcement mechanisms would be insufficient or that appointing a receiver is necessary to collect on a simple money judgment. As noted above, the judgment was only entered on December 6, 2023 (approximately 4 months ago). There is no evidence that defendants do not intend to satisfy the judgment or that they have engaged in actions that would frustrate plaintiff’s collection efforts.

The motion will be denied.