WVJP 2018-3 LP v. SR Capital LLC

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WVJP 2018-3 LP, Plaintiff and Appellant, v. SR CAPITAL LLC et al., Defendants and Respondents

B317658

California Court of Appeals, Second District, Third Division

August 23, 2023

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. 21STCV06658, Michael L. Stern, Judge. Affirmed.

Aires Law Firm, Timothy Carl Aires for Plaintiff and Appellant.

The Wagner Firm, Avi N. Wagner, Charissa Morningstar, and Jennifer N. Hinds for Defendants and Respondents.

LAVIN Acting P.J.

INTRODUCTION

Plaintiff and appellant WVJP 2018-3 LP (plaintiff), an assignee of a judgment against Robert Rechnitz, appeals from a judgment of dismissal entered after the trial court sustained without leave to amend the demurrer jointly filed by defendants and respondents Shlomo Rechnitz^[1] and SR Capital LLC (SR Capital) (together, the SR defendants). Plaintiff claimed that Shlomo through SR Capital, of which Shlomo is the sole owner and manager, transferred funds belonging to Robert to a bank account intended to hold the money beyond the reach of Robert's creditors. In its second amended complaint (SAC), plaintiff asserted a cause of action for conspiracy to hinder, delay, or defraud creditors. The court sustained the SR defendants' demurrer on the ground that plaintiff had inadequately pleaded facts supporting that Robert had any interest in the money transferred by the SR defendants and denied plaintiff leave to further amend.

We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff is an assignee of a $787,919.17 judgment against Robert. Before filing this lawsuit, plaintiff examined Shlomo Robert's nephew, in connection with the action in which the judgment was entered against Robert. Shlomo also produced documents in response to a subpoena served on him by plaintiff.

Plaintiff filed its original complaint against the SR defendants Marlene Springer Savage, Stanley Treitel, and Robert in February 2021. The complaint asserted one cause of action for conspiracy to hinder, delay, and defraud creditors. The court sustained a demurrer filed by the SR defendants but granted plaintiff leave to file a first amended complaint, following plaintiff's representation that it had obtained "records . . . pertaining to the [HWP Account], as well as evidence from other sources" that would permit it to sufficiently allege a claim. In May 2021, plaintiff filed its first amended complaint. The SR defendants again demurred arguing that the first amended complaint, like the original complaint, failed to allege any fraudulent transfer by Robert, any injury suffered by plaintiff, or the elements of a civil conspiracy as to the SR defendants. Plaintiff again contended that, if the demurrer were sustained, leave to amend should be granted because it had "obtained various records . . . pertaining to the [HWP account], as well as evidence from other sources" and thus "ha[d] access to ample facts sufficient to allege a common law tort arising out of [a] scheme to hinder, delay, or defraud creditors." The court sustained the demurrer to the first amended complaint but again granted plaintiff leave to amend.

In September 2021, plaintiff filed the SAC, the operative complaint on appeal. The SAC alleges that plaintiff is an assignee to a judgment creditor and has a claim against Robert, as debtor, based upon a civil judgment entered in August 2016 and amended in December 2016 in the Los Angeles Superior Court, in the sum of $787,919.17, with interest accruing at the rate of $215.81 per day. Robert is the uncle of Shlomo, who is the only officer, director, member, and manager with any actual or real authority over SR Capital.

In September 2016, Treitel and Savage (together, the HWP defendants) opened a checking account under the fictitious name Highland Wilshire Properties (the HWP account). The SAC alleges that, by the express agreement of the defendants, the purpose of the account was "to hold money in which [Robert] had an interest beyond the reach of his creditors in order to pay his personal expenses from time to time at his special instance and request." After the HWP account was opened, the HWP defendants, acting at Robert's direction, "received money in which [Robert] had an interest from entities controlled by [Shlomo], including, without limitation, [SR Capital]," and then used these funds to pay Robert's personal expenses. The HWP account was intended by the defendants to permit Robert "to use and enjoy money in which he had an interest while at the same time avoiding execution levy by Plaintiff . . . since the HWP [a]ccount was not a deposit account standing in the name of [Robert]," and in fact permitted him to do so.

The SAC alleges that, between December 2016 and November 2020, SR Capital transferred over $1.5 million to the HWP account via 66 transactions in amounts ranging from $5,000 to $250,000. The day before each of the transfers was made, Robert and Shlomo "agreed that [SR Capital] would transfer [the relevant amount] of [Robert's] money, which [SR Capital] held for his benefit with the knowledge and consent of its Manager, [Shlomo], to the HWP Account . . . for the express purpose of aiding [Robert] in an effort to hinder, delay, or defraud his creditors." The SR defendants had notice of the pendency of the judgment no later than October 22, 2019, by virtue of a Code of Civil Procedure section 708.120 examination order and civil subpoena duces tecum, but nevertheless continued to participate in the alleged conspiracy.

The SAC further alleges that, between January and November 2020, approximately $166,000 was withdrawn from the HWP account, via 237 transactions in amounts ranging from $3.14 to $9,620.75, for Robert's benefit. Among other things, the withdrawals went towards medical care, credit card bills, utilities bills, and insurance payments. Certain withdrawals also went to individuals, including Savage and others not named in this action, while others were made in cash.

The SAC alleges that the money laundering scheme does not have any indicia of a bona fide loan or series of loans because there is no promissory note or other instrument evidencing a promise to repay, no interest has been charged, no fixed schedule of repayments has been established, no collateral was given, no repayments have been made, Robert has no reasonable prospect of repaying any loans, and the parties have not conducted themselves as if the transactions were loans. It further alleges that the transactions were not gifts because, at his September 22, 2019, examination, Shlomo acknowledged that they were not gifts.^[2] The SAC does not plead facts explaining how Robert had an interest in or right to the money held by SR Capital and subsequently transferred to the HWP account, notwithstanding that Shlomo was the sole owner and manager of SR Capital.^[3]

The SAC asserts four causes of action: (1) damages for conspiracy to hinder, delay, or defraud creditors against all defendants; (2) "Relief Against Fraudulent Transactions Under the Uniform Voidable Transactions Act, Civil Code §3439 et seq." (UVTA) against all defendants; (3) "Creditor's Suit in Aid of Enforcement of Judgment Under Code of Civil Procedure §708.210 et seq." against the SR defendants; and (4) "Quia Timet [Constructive Trust, Equitable Lien, Resulting Trust, Injunction, Appointment Of Monitor]" against the SR defendants and Robert.

With respect to the first cause of action for conspiracy to defraud, plaintiff alleges: "Even assuming, without admission, that the money transferred through the Money Laundering Scheme was property of someone other than Defendant Robert Rechnitz before those transfers were made, once the money transfers were made, the money became the property exclusively of Defendant Robert Rechnitz since it was held in the HWP Account exclusively for his use and benefit." The SAC further alleges that, but for the defendants' actions, "the money in the HWP Account would have been subject to execution levy using traditional methods of judgment enforcement."

The SR defendants again demurred, arguing that the SAC did not remedy the failures of the prior complaints with respect to the first cause of action and that the additional causes of action impermissibly exceed the scope of the court's order granting leave to amend. Plaintiff argued that, if the demurrer was sustained, it should be given leave to amend the complaint a third time. However, plaintiff did not identify any new facts that would permit it to plead any of the causes of action asserted.

While the demurrer was pending, plaintiff filed a motion seeking leave to file a third amended complaint. The motion did not allege any new facts, but included the three causes of action that had been added to the SAC without prior leave of court and added a cause of action for "[a]ccounting." Plaintiff argued that these causes of action arose out of the same common nucleus of operative facts pleaded in the SAC and would "address this Court's concerns regarding lack of particularity in pleading, together with additional prayers for relief."

Several days later, the court issued its order sustaining the SR defendants' demurrer to the SAC. The court found that although plaintiff alleged "numerous instances of money going out of the HWP account, by date, payee (credit card company, utility company etc.) and amount from January 2020 to December 2020" and" 'an express agreement to use the account for Robert,'" plaintiff did not attach any writing substantiating any such agreement to the complaint. The court further found that "there continue to be inadequately pleaded facts how Robert 'had an interest' in the money that was placed in [the HWP] account" and that plaintiff continued to fail to...