AAAG-California, LLC v. Kisana

553 F.Supp.3d 1042

AAAG-CALIFORNIA, LLC, Plaintiff,

v.Abdul R. KISANA, et al., Defendants.

Case No. 2:20-cv-00026

United States District Court, D. Utah.

Signed August 6, 2021

Benjamin J. VanderWerp, Pro Hac Vice, Gabriel E. Bedoya, Pro Hac Vice, Laura E. Biery, Honigman LLP, Detroit, MI, Jess M. Krannich, Pro Hac Vice, Mitchell M. Longson, Rebecca J. Rasmussen, Manning Curtis Bradshaw & Bednar PLLC, Salt Lake City, UT, for Plaintiff.

Sam Meziani, Goebel Anderson PC, Salt Lake City, UT, for Defendants Abdul R. Kisana, Specialized Sales and Leasing, Luxury Auto Group, Luxury Auto Collection.

P. Matthew Cox, Snow Christensen & Martineau, Salt Lake City, UT, for Defendant J. Morgan Philpot.

Jack Metcalf, Sandy, UT, Pro Se.

MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR TURNOVER AND TRANSFER OF VEHICLE TITLED IN THE NAME OF NATALIE PHILPOT

Howard C. Nielson, Jr., United States District Judge

On June 19, 2020, the Receiver moved for an order directing turnover and transfer of a 2015 BMW X3, VIN 5UXWY3C50F0E95418, titled in the name of Mrs. Natalie Philpot. See Dkt. No. 240. Magistrate Judge Bennett granted the Receiver's motion on February 18, 2021. See Dkt. No. 504. Mr. Morgan Philpot, Mrs. Philpot's husband, filed an objection to Judge Bennett's decision on March 4, 2021. See Dkt. No. 516. For the reasons below, the court overrules the objection and orders Mrs. Philpot to turnover and transfer the vehicle to the Receiver.

I.

In 2019, "Plaintiff AAAG California, an auction house located in Southern California, sent forty-three cars to the Defendant, Abdul R. Kisana, and his two Utah-based automobile dealerships"—Specialized Sales and Leasing, LLC., and Luxury Auto Group, LLC. Dkt. No. 61 at 1. Collectively, these Defendants have been referred to throughout this litigation as the Kisana Defendants. One of the 43 cars sent to the Kisana Defendants was the 2015 BMW X3 at issue here. See id. at 25. The Kisana Defendants never paid for these cars and, shortly before this litigation began, Mr. Kisana admitted "he was attempting to sell the inventory as quickly as possible in order to make it more difficult for AAAG to recover the vehicles." Id. at 4.

AAAG filed this lawsuit on January 15, 2020. See Dkt. No. 2. The court entered two temporary restraining orders against the Kisana Defendants, first on January 19, 2020, and then on January 23, 2020. See Dkt. Nos. 21, 30. On February 17, 2020, the court entered a preliminary injunction and a receivership order. See Dkt. Nos. 61, 62. The preliminary injunction enjoined the Kisana Defendants, as well as their

officers, agents, servants, employees, attorneys, and other persons in active concert or participation with them, ... from selling, transferring, or in any way disposing of any of the vehicles acquired from Plaintiff AAAG-California, LLC, identified by the VIN numbers included in the attached Exhibit A, as well as any and all documentation, communications, and any other evidence concerning these vehicles (including but not limited to any and all title documentation and any and all documentation and communications concerning the transfer, sale, or attempted sale or transfer of any of these vehicles).

Dkt. No. 61 at 23. The receivership order restrained "all persons and entities with direct or indirect control over any Receivership Property"—defined to include the 43 vehicles sent from AAAG to the Kisana Defendants—"from directly or indirectly transferring, setting off, receiving, changing, selling, pledging, assigning, liquidating, or otherwise disposing of or withdrawing such Receivership Property." Dkt. No. 62 at 2. This order also required the Kisana Defendants and their "past and/or present officers, directors, agents, managers, general and limited partners, trustees, attorneys, accountants and employees of the entity Receivership Defendants, as well as those acting in their place, ... to preserve and turn over to the Receiver forthwith all paper and electronic information of, and/or relating to, the Receivership Defendants and/or all Receivership Property." Id. at 5.

Mr. Philpot had notice of these orders as Defendant Jack Metcalf's attorney. Mr. Philpot, however, did "not turn[ ] over any information in his capacity [as a] registered agent for Specialized Sales or counsel for Receivership Defendants," despite the Receiver "submitt[ing] additional information requests to Mr. Philpot." Dkt. No. 166 at 24. "Mr. Philpot [also] failed to turnover Receivership Property to [the] Receiver and even attempted to sell one of the vehicles at issue in this litigation." Id. On June 19, 2020, the Receiver filed this motion for turnover and transfer after determining that the 2015 BMW X3—one of the 43 vehicles identified in the Receivership Order—was registered and titled to Mrs. Philpot. See Dkt. No. 240.

II.

The court will treat the Receiver's motion as a dispositive motion, and will thus treat Judge Bennett's order as a report and recommendation subject to de novo review. See FED. R. CIV. P. 72(b). In the proceedings before Judge Bennett, only Mr. Philpot—and not Mrs. Philpot—opposed the Receiver's motion. Judge Bennett concluded that because the vehicle belonged to Mrs. Philpot, Mr. Philpot lacked standing to oppose the motion. See Dkt. No. 504 at 4–8.

The court does not adopt Judge Bennett's standing analysis. As the Supreme Court has explained, it is "the party seeking judicial resolution" who must "show that he personally suffered some actual or threatened injury." Diamond v. Charles , 476 U.S. 54, 62, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986). Thus, for example, parties seeking judicial relief "in courts of first instance" must have standing, as must parties "seeking appellate review." Hollingsworth v. Perry , 570 U.S. 693, 705, 133 S.Ct. 2652, 186 L.Ed.2d 768 (2013).

Here, it is the Receiver who seeks judicial relief. And there is no dispute that he has standing to bring this motion: "federal law provides receivers a broad grant of authority to sue in federal court to enforce rights over receivership property." Klein v. Cornelius , 786 F.3d 1310, 1315 (10th Cir. 2015) (citing 28 U.S.C. § 754 ).

Courts generally do not require parties opposing judicial relief to demonstrate standing, however. To the contrary, courts routinely allow—and sometimes even appoint—amici to defend against lawsuits in the first instance or to defend judgments on appeal when those who would ordinarily defend decline to do so. See, e.g., United States v. Providence Journal Co. , 485 U.S. 693, 703–704, 108 S.Ct. 1502, 99 L.Ed.2d 785 (1988) (explaining that "if the Solicitor General declines to authorize a defense of the judgment ... it is well within this Court's authority to appoint an amicus curiae to file briefs and present oral argument in support of that judgment"). Because Mr. Philpot is not seeking relief in the first instance or appellate review, the court will not require him to demonstrate standing to oppose the Receiver's motion.

III.

The Receiver seeks to set aside the transfer of the 2015 BMW X3 under Utah Code Section 25-6-202(1), which provides that

A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation ... with actual intent to hinder, delay, or defraud any creditor of the debtor.

Although the parties agree that the vehicle was transferred by the Kisana Defendants, they disagree about whom the vehicle was transferred to. Although his position is not entirely consistent, Mr. Philpot appears to contend that he "was the initial transferee and Mrs. Philpot was a subsequent transferee." Dkt. No. 516 at 2–3; see also id. at 3 ("The vehicle was transferred from Specialized to Mr. Philpot, then to Mrs. Philpot. There is absolutely no evidence in the record that the transfer was between Specialized and Mrs. Philpot"); but see id. at 4 ("To pay the antecedent debt of the Defendants, the Defendant transferred the Vehicle to the Philpots. Then solely to Mrs. Philpot") (emphasis added). On the other hand, the Receiver contends that "Mrs. Philpot was transferred the BMW," Dkt. No. 240 at 2, and Judge Bennett concluded that "[t]here is no evidence that Mr. Philpot ever held title to the BMW or ever transferred it to Mrs. Philpot. The transfer occurred directly between Mr. Kisana (or one of the Defendant entities) and Mrs. Philpot," Dkt. No. 504 at 2. The court need not decide whether the vehicle was transferred to Mr. Philpot or Mrs. Philpot to resolve this motion, however. Based on the only evidence identified by the parties, the court concludes that regardless of which Philpot the vehicle was transferred to, a reasonable finder of fact would be required to find that the transfer of the vehicle by Mr. Kisana was made with actual intent to hinder, delay, or defraud his creditors.

Utah Code Section 25-6-202(2) enumerates specific factors to be considered, "among other factors," to "determine ‘actual intent.’ " Considering the evidence identified by the parties in light of these factors compels the conclusion that the transfer here was made with fraudulent intent.

First, if Mr. Philpot was the transferee, as he maintains, then the transfer "was to an insider." Id. § 25-6-202(2)(a). It is undisputed that Mr. Philpot was an "attorney who has served as counsel and registered agent for Defendants." Dkt. No. 240 at 2. Even if Mrs. Philpot was the transferee, Mr. Philpot asserts that the vehicle was transferred to her as partial compensation for services that he—an insider—had provided to the Kisana Defendants. If the purpose of the transfer was to compensate an insider, the court believes this purpose supports voiding the transfer, even if the actual transferee was not the insider.

Second, Mr. Philpot does not dispute that the transfer was not disclosed to the Receiver, and that the "Receiver learned of the transfer ... from his own...