Project No 33 LLC vs Fiore Management Inc et al

Case Number

23CV03719

Case Type

Hearing Date / Time

Fri, 02/27/2026 - 10:00

Nature of Proceedings

CMC; Motion: Instructions to Receiver Re Payment of Judgment

Tentative Ruling

For all reasons stated herein, intervenor Jason Welsh must submit a creditor’s claim as to his claims against the receivership estate. Receiver Ryan C. Baker shall instruct intervenor Welsh on the procedural steps needed to submit a creditor’s claim on or before May 29, 2026.

Background:

On August 25, 2023, plaintiff Project No. 33 LLC (Project 33), filed a verified complaint against defendants Fiore Management Inc. (Fiore) and Light Effect Apparel (Light Effect), setting forth three causes of action: (1) breach of contract (against Fiore and Light Effect); (2) appointment of receiver (against Fiore); and (3) claim and delivery (against Light Effect).

As alleged in the complaint:

Light Effect is a wholly owned subsidiary of Fiore created solely for the purpose of holding intellectual property rights associated with Fiore’s “Canndescent” brand of cannabis products (collectively, Light Effect and Fiore are referred to as Defendants). (See Compl., ¶¶ 10-11.)

On February 21, 2023, Project 33 and Defendants entered into a promissory note (the Promissory Note) under which Project 33 agreed to provide a loan up to $1 million to be repaid within 15 days of Project 33’s demand, or upon the occurrence of an “Event of Default,” or at the latest by February 21, 2025. (Compl., ¶¶ 13-14 & Exh. 1.)

In exchange, Defendants agreed to pledge certain collateral to secure their obligations to Project 33 which included a first priority, senior security interest in the intellectual property rights of Light Effect. (Id. at ¶ 15.)

Between March 14 and June 15, 2023, Project 33 wired a total of $975,985.62 to Fiore pursuant to the terms of the Promissory Note.

As of July 20, 2023, Fiore was insolvent. (Compl., ¶¶ 3, 18.) The insolvency of Fiore constitutes an “Event of Default” under the Promissory Note. (Id., ¶¶ 4, 19-20.)

Project 33 holds a significant portion of the secured and unsecured debt that comprises Fiore’s long-term liabilities which exceed $8 million and include the Promissory Note. (FAC, ¶ 2.)

Project 33 filed this action to appoint a receiver under Code of Civil Procedure section 564, to which Fiore and significant creditors agreed. (FAC, ¶ 6.)  

On September 1, 2023, plaintiff filed a stipulation (the Appointment Stipulation) for the appointment of Ryan C. Baker (Baker) as a general equity receiver over the operations and assets of Fiore (the Receivership Estate). 

On September 5, 2023, the Court entered an order (the September 5 Order) approving the Appointment Stipulation and appointing Baker as receiver.

The claims process described in the September 5 Order authorizes Baker, without further order of the Court, to “develop and initiate” a procedure to solicit claims from creditors of the Receivership Estate. (Sept. 5 Order, ¶ 6.) The September 5 Order directs Baker to “review and reconcile the purported creditors’ claims” and to “make a determination regarding whether to object to or approve a claim form.” Sept. 5 Order, ¶ 6(c).) Once the claim forms are reconciled, Baker must “seek Court approval of a plan of distribution.” (Sept. 5 Order, ¶ 6(e).)

On August 9, 2024, intervenor Jason Welsh (Welsh) settled a shareholder dispute with Fiore (Shareholder Settlement) in the matter Welsh v. Fiore Management Inc., Santa Barbara Superior Court case No. 22CV00597. (Jaske Decl., Ex. A.) The settling parties agreed that Welsh is entitled to a judgment against Fiore in the amount of $216,497. (Ibid.) The settling parties disagreed whether Welsh needs to file a creditor’s claim in this action or whether this amount should be paid immediately upon entry of judgment. (Ibid.) To resolve this issue, Welsh would intervene in this action and request a ruling on whether Welsh must file a creditor’s claim. (Ibid.)

On December 10, 2024, Welsh was granted leave to intervene in this action.

On January 1, 2025, the court modified (January 1 Modification) the September 5 Order to add language preventing Fiore’s investors, creditors, and lien holders from, without leave of court, “attempting to foreclose, forfeit, alter, or terminate any of Fiore’s interest in property, including, without limitation, the establishment, granting or perfection of any security interest, whether such acts are part of a judicial proceeding or otherwise with respect to property of the Receivership Estate.” (Jan. 1 Modification, ¶ 2, subd. (c).)

On August 8, 2025, judgment (Judgment) was entered against Fiore pursuant to the Shareholder Settlement in the amount of $216,497. (Jaske Decl., Ex. B.)

On September 3, 2025, Welsh filed this motion to resolve the issue of whether he needs to file a creditor’s claim to satisfy the Judgment. Welsh requests an order (1) instructing Baker to deposit into escrow $216,497 representing the amount of the Judgment and (2) determining whether Welsh must file a creditor’s claim in this action as a condition of payment. Baker opposes this motion on the grounds that there is currently insufficient cash within the Receivership Estate to place such funds into escrow and that Welsh should be required to file a creditor’s claim so that his claims may be evaluated along with the other creditors.

Analysis:

The appointment of a receiver is a provisional remedy designed to “preserve[] the status quo of property while litigation is pending.” (Southern California Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 925.) Code of Civil Procedure section 564, subdivision (b), provides that the court may appoint a receiver including where a plaintiff with a probable interest in property shows that the property is “in danger of being lost, removed, or materially injured,” a corporation is “is insolvent, or in imminent danger of insolvency,” and in “all other cases where necessary to preserve the property or rights of any party.” (Code Civ. Proc., § 564, subd. (b)(1), (5), (9).)

“The receiver has, under the control of the Court, power to bring and defend actions in his own name, as receiver; to take and keep possession of the property, to receive rents, collect debts, to compound for and compromise the same, to make transfers, and generally to do such acts respecting the property as the Court may authorize.” (Code Civ. Proc., § 568.) “The function of the receiver is to aid the court in preserving and managing the property involved in a particular lawsuit for the benefit of those to whom it can ultimately be determined to belong.” (City of Sierra Madre v. SunTrust Mortgage, Inc. (2019) 32 Cal.App.5th 648, 656-657.) “It is well settled that a trial court has broad discretion in its directions and approvals given to a receiver in respect to management of the property.” (Hillman v. Stults (1968) 263 Cal.App.2d 848, 876.)

The September 5 Order requires Baker to “interface with [Fiore’s] lenders and creditors to … administer the claims process” set forth in the September 5 Order. (Sept. 5 Order, ¶ 4(p).) The January 1 Modification precludes Welsh from enforcing the Judgment during the pendency of the ordered receivership in this action without leave of court. (Jan. 1 Modification, ¶ 2.)

Welsh has not provided any authority that would permit Baker to distribute funds equal to the Judgment into an escrow account when such funds do not currently exist on hand. According to a practice treatise: “Once a receiver has been appointed to take charge of the assets of a corporation, judgments subsequently obtained are not liens on the receivership assets. Such a judgment creditor has the status of a simple contract creditor, and the creditor’s claim will not be allowed as a priority lien.” (64 Fletcher, Cyclopedia of the Law of Corporations (2025), § 7910.)

Baker presents reasoned arguments that Welsh should be required to submit a creditor’s claim. As reported by Baker’s Receiver’s Report No. 26, as of November 30, 2025, there remained $127,330.27 of cash on hand in the Receivership Estate. (Receiver’s Report No. 26, p. 9, ll. 7-8.) The majority of these funds are earmarked for a $125,000 settlement with the City of Desert Hot Springs and other items. (Ibid.) The sale of Defendants’ business is still pending since the buyer has not yet closed the sale which requires the contribution of an additional $475,000 to the Receivership Estate. (Id. at p. 9, ll. 8-10 & ¶¶ 9-15.) Negotiations for closure appear to be ongoing. (Id. at p. 8, ll. 17-28.) Baker has not yet initiated the claims filing procedure pursuant to paragraph 6 of the September 5 Order because, among other reasons, this sale has not closed. (Opposition, p. 3, ll. 17-21.)

A receiver is required to act “for the benefit of all who may have an interest in the receivership property.” and to hold assets “for the court and not for the plaintiff or the defendant.” (Cal. Rules of Court, rule 3.1179(a)(2) & (3).) Based on these circumstances, the court will order that Welsh submit a creditor’s claim pertaining to the Judgment so that his claims may be evaluated with the other creditors.