From Casetext: Smarter Legal Research

E. W. Bank v. King

California Court of Appeals, First District, Fourth Division
Jun 24, 2024
No. A165362 (Cal. Ct. App. Jun. 24, 2024)

Opinion

A165362

06-24-2024

EAST WEST BANK, Plaintiff and Appellant, v. JOHN E. KING and CAROLE D. KING, Defendants and Respondents; AKRO REAL ESTATE PARTNERS, LLC, Intervener and Respondent.


NOT TO BE PUBLISHED

San Francisco City &County Super. Ct. No. CGC10505989

BROWN, P. J.

Wolverine Endeavors VIII (Wolverine), as assignee of East West Bank, appeals from the trial court's order denying Wolverine's motions to enforce a judgment against John D. King and Carole E. King by obtaining charging and assignment orders against their interests in various limited liability companies (LLCs), partnerships, and corporations. The trial court denied the motions because, among other things, intervener AKRO Real Estate Partners, LLC (AKRO) had a prior lien on all of the Kings' property. Wolverine fails to demonstrate that it is entitled to reversal of the trial court's ruling, so we will affirm.

BACKGROUND

In 2009, Textron Financial Corporation obtained a money judgment against the Kings in federal court. The judgment was renewed in 2020 and was ultimately assigned to AKRO.

In 2011, East West Bank obtained a judgment against the Kings from San Francisco Superior Court. After the Kings partially satisfied it, the judgment was assigned to Wolverine and renewed.

In October 2021, AKRO sought to enforce the federal judgment by applying in San Luis Obispo Superior Court for a judgment debtor examination of John King under Code of Civil Procedure section 708.110. AKRO attached copies of an abstract of the federal judgment and the relevant assignment agreements. The trial court issued the order, and AKRO personally served John King with it in November 2021.

Undesignated statutory citations are to the Code of Civil Procedure.

In January 2022, Wolverine served the Kings with an order for its own debtor examinations, also issued by San Luis Obispo Superior Court. In February 2022, Wolverine filed a motion in the trial court below for an order charging the Kings' interests in various LLCs and asking the trial court to foreclose on and order the sale of those interests to pay the East West Bank judgment. The trial court granted AKRO leave to intervene. In April 2022, Wolverine filed a new motion for a charging order as well as two motions asking the court to order the Kings to assign distributions and income from certain real estate projects, LLCs, partnerships, and corporations to help satisfy the East West Bank judgment.

The trial court denied Wolverine's motions. It ruled that AKRO's lien on the Kings' property was prior to Wolverine's and found the payments due under AKRO's lien counseled against issuing additional assignment orders. It also noted, as to the requested assignment orders, that a charging order is the exclusive remedy against a debtor's interest in LLCs and that the Kings had no interest in or affiliation with many of the entities listed in Wolverine's second motion for an assignment order.

Wolverine appealed.

Wolverine's notice of appeal lists both the intervention order and the order denying its motions for a charging order and for assignment orders. But Wolverine's briefing challenges only the latter order. We treat Wolverine's appeal of the intervention order as abandoned.

DISCUSSION

"We presume the superior court's order to be correct and indulge all intendments and presumptions to support it regarding matters as to which the record is silent. [Citations.] As the appealing parties, defendants have the burden to affirmatively show error." (Phillips, Spallas &Angstadt, LLP v. Fotouhi (2011) 197 Cal.App.4th 1132, 1138.) We independently review pure questions of law, such as the interpretations of rules or statutes and relative priority of liens and claims on property. (Ibid.; Pou Chen Corp. v. MTS Products (2010) 183 Cal.App.4th 188, 192.)

Wolverine primarily attacks the validity of AKRO's lien based on its debtor examination order, recognizing that the trial court cited the priority of AKRO's lien as justifying the denial of all three of Wolverine's motions. Service of a debtor examination order "creates a lien on the personal property of the judgment debtor for a period of one year from the date of the order unless extended or sooner terminated by the court." (§ 708.110, subd. (d); see id., subd. (a).) "Other things being equal, different liens upon the same property have priority according to the time of their creation," except in situations not relevant to this appeal. (Civ. Code, § 2897 [exception in cases of bottomry and respondentia].) AKRO obtained its lien on the Kings' personal property in November 2021 by serving the Kings with its debtor examination order. Wolverine obtained its lien by serving its own debtor examination order in January 2022. In terms of timing, AKRO's lien therefore has priority over Wolverine's.

Wolverine does not dispute that the priority of AKRO's lien is a sufficient basis to deny its motions for assignment and charging orders. (See § 708.510, subd. (c)(2) [when deciding whether to issue an assignment order, trial court may consider, among other factors, "[p]ayments the judgment debtor is required to make or that are deducted in satisfaction of other judgments"]; Corp. Code, §§ 16504, subd. (a) [on application of judgment creditor, trial court "may charge the transferable interest of the judgment debtor [in a partnership] to satisfy the judgment," italics added], 17705.03, subd. (a) [on application of judgment creditor, trial court "may enter a charging order against the transferable interest of the judgment debtor" in an LLC, italics added].) Instead, Wolverine contends that the San Luis Obispo Superior Court never had jurisdiction to issue AKRO a debtor examination order on a federal judgment and AKRO therefore never obtained a valid lien on the Kings' personal property in the first place. Wolverine relies on the fact that the enforcement-of-judgment statutes prescribing the debtor examination order procedure allow a "judgment creditor" to apply for the order from the "proper court" (§ 708.110, subd. (a)) and define "judgment" for these purposes as "a judgment, order, or decree entered in a court of this state" (§ 680.230, italics added). (See § 680.110 [definitions in tit. 9, div. 1, ch. 1, which includes § 680.230, govern the interpretation of tit. 9, which contains § 708.110].) Wolverine asserts that a federal court is not a court of this state. Wolverine also points out that the statute on which the trial court relied, section 708.160, defines the "proper court" from which to request a debtor examination order and is therefore a form of venue statute.

We have no quarrel with Wolverine's interpretation of these statutes. On their face, they allow the issuance of a debtor examination order only to enforce judgments issued by California courts. If this were a direct appeal of the debtor examination order from the San Luis Obispo Superior Court, we would reverse it without hesitation. But it is not. Wolverine's argument is a collateral attack on that order, so a different standard applies, depending on which form of the protean concept of jurisdiction is at issue. (People v. American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660 (American Contractors) ["The term 'jurisdiction,' 'used continuously in a variety of situations, has so many different meanings that no single statement can be entirely satisfactory as a definition' "].)

"When a court lacks jurisdiction in a fundamental sense," meaning it lacks authority over the subject matter or the parties, "an ensuing judgment is void, and 'thus vulnerable to direct or collateral attack at any time.'" (American Contractors, supra, 33 Cal.4th at p. 660.) "When a court has fundamental jurisdiction, but acts in excess of its jurisdiction," meaning it" 'it has no "jurisdiction" (or power) to act except in a particular manner, or to give certain kinds of relief, or to act without the occurrence of certain procedural prerequisites,'" then the court's "act or judgment is merely voidable." (Id. at p. 661.) "Errors which are merely in excess of jurisdiction . . . are generally not subject to collateral attack once the judgment is final unless 'unusual circumstances were present which prevented an earlier and more appropriate attack.'" (Ibid.)

Wolverine fails to demonstrate that AKRO's debtor examination order is void, as opposed to merely voidable. It does not acknowledge the distinctions between void and voidable judgments and orders or direct and collateral attacks. Wolverine simply asserts that neither section 708.160 (which establishes the proper court for an application for a judgment debtor examination) nor any other California statute conferred subject matter jurisdiction on the San Luis Obispo Superior Court to enforce a federal judgment. But Wolverine does not offer any authority or reasoned argument supporting the claimed need for a specific statute conferring subject matter jurisdiction on a superior court. Wolverine, as the appellant, has the burden of affirmatively proving the trial court erred, and its cursory treatment of this issue does not suffice. (Orange County Water Dist. v. Sabic Innovative Plastics US, LLC (2017) 14 Cal.App.5th 343, 383 [" '" 'When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.'" [Citation.] "We are not bound to develop appellants' argument for them"' "].)

Wolverine does not suggest the San Luis Obispo Superior Court lacked personal jurisdiction over the Kings, so we need not discuss that aspect of fundamental jurisdiction.

If the San Luis Obispo Superior Court plainly lacked fundamental jurisdiction, we might reverse the trial court's order regarding the validity of AKRO's lien despite Wolverine's failure to develop its argument fully. But so far as we can determine from the parties' arguments here, the San Luis Obispo Superior Court did have subject matter jurisdiction. As AKRO notes, "California's superior courts are courts of general jurisdiction, 'which means they are generally empowered to resolve the legal disputes that are brought to them. (Cal. Const., art. VI, §§ 1, 10; see generally 20 Am.Jur.2d (2015) Courts, § 66, p. 464 ["Courts of general jurisdiction have the power to hear and determine all matters, legal and equitable, except insofar as these powers have been expressly denied."].)'" (California Gun Rights Foundation v. Superior Court (2020) 49 Cal.App.5th 777, 788.) The United States Constitution requires California courts to give full faith and credit to federal judgments. (Butcher v. Truck Ins. Exchange (2000) 77 Cal.App.4th 1442, 1453.) And federal courts appear to recognize that state and federal courts have concurrent authority to enforce federal judgments. (E.g., Meridian Investing, Etc. v. Suncoast Highland Corp. (5th Cir. 1980) 628 F.2d 370, 372-373; 12 Wright &Miller Federal Practice &Procedure (3d ed. 2024) § 3013 ["The fact that an action is pending in state court to enforce the federal court judgment does not preclude supplementary proceedings in aid of execution in the federal court"].)

These principles indicate that the San Luis Obispo Superior Court did not need to have specific statutory authority establishing subject matter jurisdiction to enforce a federal judgment that it is constitutionally obligated to recognize. Section 337.5, subdivision (b), which Wolverine relegates to a footnote, supports this conclusion, since it establishes a 10-year statute of limitations on an "action upon a judgment or decree of any court of the United States or of any state within the United States." The Legislature would not have established a statute of limitations for an action to enforce a federal judgment if California courts lacked the subject matter jurisdiction to entertain such an action in the first place.

Wolverine maintains in its reply brief that, with few exceptions, a court's jurisdiction is initiated through the filing of a complaint or petition, which AKRO did not do in the San Luis Obispo Court. But the only authority Wolverine cites for this argument is section 1913, which states in subdivision (a) that "the effect of a judicial record of a sister state is the same in this state as in the state where it was made, except that it can only be enforced in this state by an action or special proceeding." This statute refers to judgments of "a sister state," not federal courts, so by parity of reasoning with Wolverine's other arguments, it does not apply to federal judgments. Even assuming the statute does apply, Wolverine does not show that the failure to follow it renders an ensuing judgment or order void rather than voidable, notwithstanding the constitutional obligation to give full faith and credit to judgments from federal courts or other states. It seems far more likely that this statute provides a defense to direct enforcement of an out-of-state judgment by levy or other means, and that a judgment debtor can reasonably waive the defense when the debtor does not dispute the enforceability of the out-of-state judgment, as the Kings evidently did here.

Moreover, if a complaint or petition were the only thing necessary for the trial court to obtain subject matter jurisdiction over AKRO's request to enforce its federal judgment, Wolverine offers no reason why AKRO's application for a debtor examination order could not be liberally construed to satisfy that requirement. Contrary to Wolverine's assertion at oral argument that AKRO effectively walked into the San Luis Obispo County court and asked a judge for an order, AKRO completed a Judicial Council form titled "Application and Order for Appearance and Examination." AKRO also filed a declaration by its counsel in support of this application describing the federal judgment AKRO was attempting to enforce and setting forth the legal basis AKRO believed, albeit incorrectly, supported the issuance of a debtor examination order. Attached to this declaration were an abstract of the federal judgment and copies of the agreements assigning it to AKRO. Putting aside its label, AKRO's application papers plainly set forth facts supporting AKRO's claimed entitlement to relief. (See O'Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, 777 [a "complaint 'survives a general demurrer insofar as its states, however inartfully, facts disclosing some right to relief' "]; K.C. Multimedia, Inc. v. Bank of America Technology &Operations, Inc. (2009) 171 Cal.App.4th 939, 959 [when construing a complaint," 'we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context, and ignoring erroneous or confusing labels if the complaint pleads facts which would entitle the plaintiff to relief' "].)

Wolverine finally points out that the statute creating a simplified procedure for obtaining a California judgment based on an out-of-state judgment without the need for a full complaint does not apply to federal judgments. (§§ 1710.15, subd. (a) ["judgment creditor may apply for the entry of a judgment based on a sister state judgment by filing an application pursuant to Section 1710.20"], 1710.10, subd. (c) [" 'Sister state judgment' means that part of any judgment, decree, or order of a court of a state of the United States, other than California, which requires the payment of money," italics added].) Again, we do not disagree with Wolverine's statutory analysis. The model law enacted in every state but California and Vermont allows for registration of state and federal judgments in order to enforce them in state courts. (See West's U. Laws Ann. (2024) U. Enforcement of Foreign Judgments Act, § 1 ["In this Act 'foreign judgment' means any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit in this state"]; see also id., Editor's Note, Table of Jurisdictions Wherein the 1964 Act Has Been Adopted.) The Legislature deliberately made a different choice when it crafted its own legislation on this topic. (See Recommendation: Enforcement of Sister State Money Judgments (November 1973) 11 Cal. Law Revision Com. Rep. (1973) p. 461, reprinted in West's Ann. Code of Civ. Proc. (2024 ed.) foll. § 1710.10 [§ 1710.10, subd. (c) "is based on Section 1 of the revised Uniform Enforcement of Foreign Judgments Act of 1964. [Citation.] However, unlike the Uniform Act which applies to all state and federal judgments entitled to full faith and credit, Section 1710.10(c) applies only to judgments of sister state courts which require the payment of money," italics added]; People v. Martinez (2000) 22 Cal.4th 106, 129 [when Legislature adopts Law Revision Commission's proposal, its comments "are persuasive evidence of the Legislature's intent"].)

Nonetheless, the Legislature's exclusion of federal judgments from this registration procedure does not answer the question of whether AKRO's debtor examination order is void for lack of subject matter jurisdiction. Wolverine effectively concedes the point in its reply brief when it agrees with AKRO that superior courts are courts of general jurisdiction but states that the Legislature nonetheless regulates when and how a party may invoke a superior court's jurisdiction. If the Legislature merely regulates trial courts' subject matter jurisdiction, it does not create it. Noncompliance with the statutes governing debtor examinations or ministerial registration of judgments from out-of-state courts therefore does not implicate a trial court's fundamental jurisdiction and does not allow for a collateral attack on the San Luis Obispo Court's long-final debtor examination order.

We observe in closing that Wolverine's appeal rests entirely on its jurisdictional argument. Wolverine does not argue that any" 'unusual circumstances'" prevented an earlier and more appropriate attack on the finality of that order, such that its collateral attack here is appropriate. (See American Contractors, supra, 33 Cal.4th at p. 661.) For example, Wolverine did not assert, either in the trial court or in its appellate briefs, that it should be permitted to bring a collateral attack through this proceeding because it had no notice of the San Luis Obispo Superior Court's order. Indeed, Wolverine's counsel stated at oral argument that notice of the order was irrelevant and that even if Wolverine had received notice of AKRO's application for a debtor examination order, it would not have done anything to oppose it. Nor has Wolverine contended that AKRO and the Kings colluded or engaged in fraud when AKRO obtained the debtor examination order in the San Luis Obispo Superior Court. (See, e.g., Villarruel v. Arreola (1977) 66 Cal.App.3d 309, 318 [" 'A party . . . who has been prevented from obtaining a fair adversary hearing through extrinsic fraud or mistake may bring an equitable action to vacate the judgment....A stranger may maintain such an action if his interests have been adversely affected by the judgment' "].) We therefore have no reason to discuss here whether such theories or any others would have allowed Wolverine to avoid the effect of the San Luis Obispo Superior Court's order.

DISPOSITION

The trial court's orders are affirmed.

WE CONCUR: GOLDMAN, J. HITE, J. [*]

[*] Judge of the Superior Court of California, County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.


Summaries of

E. W. Bank v. King

California Court of Appeals, First District, Fourth Division
Jun 24, 2024
No. A165362 (Cal. Ct. App. Jun. 24, 2024)
Case details for

E. W. Bank v. King

Case Details

Full title:EAST WEST BANK, Plaintiff and Appellant, v. JOHN E. KING and CAROLE D…

Court:California Court of Appeals, First District, Fourth Division

Date published: Jun 24, 2024

Citations

No. A165362 (Cal. Ct. App. Jun. 24, 2024)