Olivia Villalovos vs James Balster et al

Case Number

24CV00259

Case Type

Hearing Date / Time

Fri, 01/17/2025 - 10:00

Nature of Proceedings

Appoint Receiver

Tentative Ruling

For all reasons discussed herein, the motion of plaintiff to appoint receiver is denied without prejudice.

Background: 

On January 18, 2024, plaintiff Olivia Villalovos filed a complaint alleging one cause of action for violation of Civil Code section 3439 et seq. against defendants James Balster (James) and Jodi Lee Balster (Jodi). (Note: Due to common surnames, the Court will refer to defendants by their first names to avoid confusion. No disrespect is intended.) As alleged or effectively alleged in the complaint:

James is plaintiff’s step-grandfather and Cecilia Balster (Cecilia) is plaintiff’s grandmother. (Compl., ¶ 8.) Jodi is the daughter of Cecilia. (Ibid.) Between 2000 and 2014, plaintiff was the victim of childhood sexual assault and other misconduct by James and Cecilia, which plaintiff reported to the authorities in February 2020. (Id. at ¶¶ 8-9.) Following a two year investigation, James was arrested and charged with felony sexual assault. (Id. at ¶ 9.) In November 2023, James was sentenced to 30 years in prison following a plea deal. (Ibid.)

On December 12, 2022, plaintiff filed as Santa Barbara Superior Court case number 22CV04861, a civil lawsuit against James and Cecilia arising from the childhood sexual abuse by James (the Doe Action). (Compl., ¶ 10.) On February 8, 2023, five days after the default of James was entered in the Doe Action on February 3, 2023, James conveyed to Jodi property owned by James and located at 5047 San Vicente Drive in Santa Barbara, California (the Property), without consideration and with the intent to hinder, delay, or defraud his creditors including plaintiff. (Id. at ¶¶ 10-13, 15 & Exh. 1.)

A court judgment by default (the default judgment) was entered against James in the Doe Action on January 8, 2024, in the amount of $10,000,524.10. (Compl., ¶ 14 & Exh. 2.) No amount of the judgment has been paid by James. (Id. at ¶ 14.) The Property is the only asset available to pay the default judgment entered against James in the Doe Action. (Id. at ¶¶ 12, 15, 16.)

The Court’s records reflect that on February 23, 2024, the Court ordered the Doe Action related to the present action. (See Feb. 23, 2024, Minute Order.)

On August 23, 2024, the Court entered a Minute Order granting the petition of plaintiff for an order under Civil Code section 1714.10, authorizing plaintiff to file a first amended complaint (the FAC) adding the law firm of Thyne Taylor Fox Howard, LLP (the Law Firm) as a defendant, and allegations of civil conspiracy based on the Law Firm’s purported aiding and abetting the alleged fraudulent transfer of the Property from James to Jodi.

Plaintiff filed the FAC on August 23, 2024, and on the same date, filed an amendment to the complaint substituting the Law Firm for defendant designated as Doe 1. The FAC includes the same or effectively the same allegations of the complaint further described above, and also alleges:

The Law Firm represents and has appeared on behalf of Cecilia in the Doe Action. (FAC, ¶¶ 18 & 20.) In the Doe Action, plaintiff alleges that James sexually molested plaintiff at Cecilia’s home, that Cecilia was aware of the molestation, and that Cecilia did nothing to stop the abuse. (Id. at  ¶ 14.) Plaintiff served James with the summons and complaint filed in the Doe Action on December 21, 2022. (Id. at ¶ 15.)

The Law Firm created the JL Balster Family Trust (the Trust) for James on December 28, 2022, and the Property was transferred to the Trust on the same date. (FAC, ¶¶ 16-17.) The Law Firm recorded the February 8, 2023, grant deed conveying the Property to Jodi on February 15, 2023, after the default of James was entered in the Doe Action. (Id. at ¶¶ 21-23.)

The Law Firm also represented Jodi in an action filed by the County of Santa Barbara Department of Child Support Services on August 22, 2023 (the County Action), in which a fraudulent transfer of the Property was alleged. (FAC, ¶¶ 24-25 & 27.) On December 6, 2023, the Law Firm filed a case management conference statement in the County Action stating that the Property was being sold. (Id. at ¶ 27.) On December 20, 2023, the Law Firm appeared in the County Action and represented to the Court that a judgment against James for child-support arrearages was satisfied from the proceeds of a sale of the Property, but did not inform the Court of the Doe Action or of the default judgment entered in that action. (Id. at ¶ 28 & Exh. 12.)

Notwithstanding the representations made by the Law Firm in the County Action, the official records of the County of Santa Barbara show that Jodi still owns the property. (FAC, ¶ 29.) The Property is the only asset available to plaintiff to satisfy the default judgment. (Id. at ¶ 58-59.)

On October 4, 2024, the Law Firm answered the FAC generally denying its allegations and asserting twenty-two affirmative defenses.

On October 9, 2024, Jodi filed her operative amended answer to the FAC, generally denying its allegations and asserting nineteen affirmative defenses.

On November 4, 2024, James answered the FAC, generally denying its allegations and asserting five affirmative defenses.

Plaintiff’s Motion To Appoint Receiver:

On October 4, 2024, plaintiff filed a motion for an order appointing a receiver to take over the management of the Property, to collect rents from the Property and distribute them to plaintiff, and to sell the Property and distribute the proceeds to plaintiff if plaintiff is successful in this action.

The motion is supported by a declaration of plaintiff’s counsel, Eric A. Woosley (Woosley), to which is attached a copy of a Zillow report that Woosley ran on the Property for the purpose of obtaining an estimate of its fair market value and rental income, and copies of relevant pages of the transcript of Jodi’s deposition which Woosley took in the Doe Action. (Woosley Decl., ¶¶ 3-4 & Exhs. 1-2.)

In the motion, plaintiff contends that the Zillow report shows that the Property is worth $2,075,400, with an estimated monthly rental of $8,171. (Memo at p. 3, ll. 6-7.) Jodi rents the Property and keeps the rental income which the Zillow report estimates at over $150,000. (Id. at p. 3, ll. 7-9 & p. 4, ll. 4-6.) Plaintiff asserts that the Property was the only significant asset of James, and that the Property rightfully belongs to her to satisfy the default judgment entered against James in the Doe Action. (Id. at p. 3, ll. 20-22 & p. 4, ll. 5-6.) According to plaintiff, the Law Firm conspired with James and Jodi to transfer the Property without consideration to prevent plaintiff from executing on the Property. (Id. at p. 3, ll. 22-25 & p. 4, ll. 1-3.)

For reasons discussed above and in the motion, plaintiff contends that a receiver is necessary to protect plaintiff’s interest in the Property and to preserve the value of the Property by preventing Jodi from selling the Property or allowing it to fall into disrepair.

The motion is opposed by Jodi. In support of her opposition, Jodi submits a declaration stating that due to various factors and circumstances and the inability of James to handle his finances, Jodi agreed to take over the management and ownership of various properties of James for the purpose of relieving James of his debts and preventing the loss of the properties. (Jodi Decl., ¶ 2.) Jodi took over the management of James’ properties in 2019 and 2020, and has dedicated years to renovating the homes. (Ibid.) Jodi estimates that it cost approximately $1 million to clear the debts of James and to restore the properties to a livable condition, and that Jodi initially spent approximately $20,000 of her own money on these efforts. (Ibid.)

Jodi further declares that on August 31, 2019, James executed a notarized “Family Transfer Grant Deed” for the Property, transferring title to the Property to Jodi. (Jodi Decl., ¶ 3.) Though James made multiple attempts to record this deed, he faced challenges due to missing information and an unwillingness to pay transfer fees. (Ibid.) James was unaware that the initial transfer was still valid and required a re-creation and re-signing for each submission. (Ibid.) Jodi, who was living out of state, could not assist James with the filing process and was not informed about the number of attempts made or the specific reasons for the failures, aside from James’ reluctance to incur any costs. (Ibid.)

On November 15, 2019, Jodi memorialized her discussions with James and their agreement that Jodi would take over the management and ownership of James’ properties in a “Lifetime Lease Agreement,” under which James could live at the Property rent-free. (Jodi Decl., ¶ 4.) James opted to create a trust for the transfer of the Property because it had originally been in a family trust when James inherited the Property in 2007. (Id. at ¶ 5.) This prior arrangement allowed for a fee free transfer, and James was attempting to replicate that scenario to avoid any associated costs. (Ibid.) Though Jodi attempted to explain to James that this strategy might not yield the intended savings, the reluctance of James to pay fees contributed to the challenges Jodi and James now face. (Ibid.)

Jodi has managed the Property as a rental premises since 2020. (Jodi Decl., ¶ 6.) Last year, Jodi filed a personal tax return for calendar year 2023, in which Jodi declared a net loss for the Property of approximately $100,000. (Ibid.) Jodi expects to declare a similar net loss for tax year 2024. (Ibid.)

Analysis:

A receiver may be appointed only on grounds specified by statute. (Marsch v. Williams (1994) 23 Cal.App.4th 238.) Relevant here based on the arguments presented by plaintiff in the motion, Code of Civil Procedure section 564, subdivision (b), permits the appointment of a receiver in a pending action where a plaintiff with a probable interest in or right to property or proceeds of property shows that the property is “in danger of being lost, removed, or materially injured”, and in “all other cases where necessary to preserve the property or rights of any party.” (Code Civ. Proc., § 564, subd. (b)(1) & (9); see also Turner v. Superior Court (1977) 72 Cal.App.3d 804, 811 [the “requirements of Code of Civil Procedure section 564 are jurisdictional”].)

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.) A trial court is vested with “a large measure of discretion” to appoint a receiver, and “in the absence of a clear showing of an abuse of that discretion, its action in either appointing or refusing to appoint a receiver will be upheld.” (Golden State Glass Corp. v. Superior Court (1939) 13 Cal.2d 384, 393 (Golden State Glass).)

The appointment of a receiver is a “drastic remedy” which “may involve unnecessary expense and hardship” requiring the court to “carefully weigh the propriety of such appointment in exercising [its] discretion to appoint a receiver particularly if there is an alternative remedy.” (Hoover v. Galbraith (1972) 7 Cal.3d 519, 528.) Though “the availability of other remedies does not, in and of itself, preclude the use of a receivership”, the court “must consider the availability and efficacy of other remedies in determining whether to employ the extraordinary remedy of a receivership.” (City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 745 (Daley).) “Ordinarily, if there is any other remedy, less severe in its results, which will adequately protect the rights of the parties, a court should not take property out of the hands of its owners.” (Golden State Glass, supra, 13 Cal.2d at p. 393.)

The Court’s records in this action demonstrate that on January 22, 2024, plaintiff filed a notice of recordation of a lis pendens on the Property. (Jan. 22, 2024, Notice Of Recording Of Lis Pendens.) “A lis pendens acts as a cloud against the property, effectively preventing sale or encumbrance until the litigation is resolved or the lis pendens is expunged.” (Amalgamated Bank v. Superior Court (2007) 149 Cal.App.4th 1003, 1011.) For these reasons, with respect to plaintiff’s assertion that the Property is in danger of being lost or removed, plaintiff’s interests appear to be adequately protected by the recordation of the lis pendens which provides a less drastic or severe remedy than the appointment of a receiver. Wholly absent from the motion is sufficient reasoned argument showing why the lis pendens fails to adequately protect plaintiff against loss or removal of the Property by Jodi while the litigation is pending.

To the extent plaintiff contends that the Property is in danger of being materially injured, the injury must “so depreciate its value that it would not thereafter afford adequate security” to plaintiff. (Title Ins. & Trust Co. v. California Development Co. (1912) 164 Cal. 58, 62.) Plaintiff offers insufficient information or evidence, apart from speculative, general, and conclusory assertions, to show that there exists actual, or the potential for, material injury to the Property by Jodi, or that Jodi has in some manner misappropriated, concealed, or diverted any rental income from the Property. (Sachs v. Killeen (1958) 165 Cal.App.2d 205, 214 [“continuous misappropriation and diversion” and “concealment” of profits sufficient to show assets were in danger of being lost or placed “beyond [plaintiff’s] reach” justifying the appointment of a receiver].) Moreover, if the Court were to credit plaintiff’s evidence, this evidence suggests that the Property has not depreciated in value and is capable of producing rental income.

Also absent from the motion is any reasoned discussion showing that other remedies are available to plaintiff, that plaintiff has pursued these remedies, or that plaintiff was not successful in pursuing these remedies. (Gold v. Gold (2003) 114 Cal.App.4th 791, 807-808 [appropriate cases for the appointment of a receiver include those where other remedies have been pursued without success].)

The appointment of a receiver in this action will result in a distinct disadvantage to Jodi. For all reasons discussed above, plaintiff has failed to show that the Property is in danger of loss or material injury, or that a reasonably certain benefit will result from the appointment of a receiver beyond that which the lis pendens or other available remedies may or do provide. Therefore, the Court finds that there does not exist in this case exceptional circumstances warranting the appointment of a receiver. (Daley, supra, 16 Cal.App.4th at pp. 744-745.) For this and all reasons further discussed above, the Court will deny the motion. The Court’s ruling herein is without prejudice to the filing of any future motion by plaintiff for other remedies, if procedurally and substantively appropriate.

Plaintiff asserts evidentiary objections to matters appearing in Jodi’s declaration. The Court has considered only that evidence which is admissible and relevant to the Court’s reasoning and analysis as further discussed above.