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California Charging Order Statutes And Opinions

State StateCalifornia

California Charging Order

PROCEDURAL RULES:
- Cal.C.C.P. § 697.910. Application of article;
- Cal.C.C.P. § 699.720. Property not subject to execution:
- Cal.C.C.P. § 708.310. Money judgment against partner or member;
- Cal.C.C.P. § 708.320. Creation of lien on a judgment creditor’s interest in partnership or limited liability company; conditions; effect of issuing charging order.
GENERAL PARTNERSHIPS: Cal.Corp.Code § 16504. Use of transferable interest to satisfy judgment
LIMITED PARTNERSHIPS: Cal.Corp.Code § 15907.03. Rights of creditor of partner or transferee
LIMITED LIABILITY COMPANIES: Cal.Corp.Code § 17705.03. Charging order

PROCEDURAL RULES

Cal.C.C.P. § 697.910. Application of article

This article applies to liens created by any of the following:

(a) An examination proceeding as provided in Section 708.110, 708.120, or 708.205.

(b) A creditor’s suit as provided in Section 708.250.

Cal.C.C.P. § 699.720. Property not subject to execution

(a) The following types of property are not subject to execution:

(1) An alcoholic beverage license that is transferable under Article 5 (commencing with Section 24070) of Chapter 6 of Division 9 of the Business and Professions Code.

(2) The interest of a partner in a partnership or member in a limited liability company if the partnership or the limited liability company is not a judgment debtor. * * *

(b) Nothing in subdivision (a) affects or limits the right of the judgment creditor to apply property to the satisfaction of a money judgment pursuant to any applicable procedure other than execution.

Cal.C.C.P. § 708.310. Money judgment against partner or member

If a money judgment is rendered against a partner or member but not against the partnership or limited liability company, the judgment debtor’s interest in the partnership or limited liability company may be applied toward the satisfaction of the judgment by an order charging the judgment debtor’s interest pursuant to Section 15907.3, 16504, or 17705.03 of the Corporations Code.

Cal.C.C.P. § 708.320. Creation of lien on a judgment creditor’s interest in partnership or limited liability company; conditions; effect of issuing charging order

(a) A lien on a judgment debtor’s interest in a partnership or limited liability company is created by service of a notice of motion for a charging order on the judgment debtor and on either of the following:

(1) All partners or the partnership.

(2) All members or the limited liability company.

(b) If a charging order is issued, the lien created pursuant to subdivision (a) continues under the terms of the order. If issuance of the charging order is denied, the lien is extinguished.

GENERAL PARTNERSHIPS

Cal.Corp.Code § 16504. Use of transferable interest to satisfy judgment

(a) On application by a judgment creditor of a partner or of a partner’s transferee, a court having jurisdiction may charge the transferable interest of the judgment debtor to satisfy the judgment. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or that the circumstances of the case may require.

(b) A charging order constitutes a lien on the judgment debtor’s transferable interest in the partnership. The court may order a foreclosure of the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.

(1) By the judgment debtor.

(2) With property other than partnership property, by one or more of the other partners.

(3) With partnership property, by one or more of the other partners with the consent of all of the partners whose interests are not so charged.

(d) This chapter does not deprive a partner of a right under exemption laws with respect to the partner’s interest in the partnership.

(e) This section provides the exclusive remedy by which a judgment creditor of a partner or partner’s transferee may satisfy a judgment out of the judgment debtor’s transferable interest in the partnership.

Cal.Corp.Code § 16801. Conditions of dissolution or winding up of partnership business

A partnership is dissolved, and its business shall be wound up, only upon the occurrence of any of the following events: * * *

(6) On application by a transferee of a partner’s transferable interest, a judicial determination that it is equitable to wind up the partnership business after the expiration of the term or completion of the undertaking, if the partnership was for a definite term or particular undertaking at the time of the transfer or entry of the charging order that gave rise to the transfer.

LIMITED PARTNERSHIPS

Cal.Corp.Code § 15907.03. Rights of creditor of partner or transferee

(a) On application to a court of competent jurisdiction by any judgment creditor of a partner or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of a transferee. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the limited partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require to give effect to the charging order.

(b) A charging order constitutes a lien on the judgment debtor’s transferable interest. The court may order a foreclosure upon the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.

(1) by the judgment debtor;

(2) with property other than limited partnership property, by one or more of the other partners; or

(3) with limited partnership property, by the limited partnership with the consent of all partners whose interests are not so charged.

(d) This chapter does not deprive any partner or transferee of the benefit of any exemption laws applicable to the partner’s or transferee’s transferable interest.

(e) This section provides the exclusive remedy by which a judgment creditor of a partner or transferee may satisfy a judgment out of the judgment debtor’s transferable interest.

(f) No creditor of a partner shall have any right to obtain possession or otherwise exercise legal or equitable remedies with respect to the property of the limited partnership.

LIMITED LIABILITY COMPANIES

Cal.Corp.Code § 17705.03. Charging order

(a) On application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.

(b) To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subdivision (a), the court may do any of the following:

(1) Appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made.

(2) Make all other orders necessary to give effect to the charging order.

(3) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Section 17705.02.

(c) At any time before foreclosure under paragraph (3) of subdivision (b), the member or transferee whose transferable interest is subject to a charging order under subdivision (a) may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.

(d) At any time before foreclosure under paragraph (3) of subdivision (b), a limited liability company or one or more members whose transferable interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order.

(e) This title does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s transferable interest.

(f) This section provides the exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.

Cal.Corp.Code § 17701.12. Operating agreement; approval of amendment; effect on third parties and relationship to records effective on behalf of limited liability company * * *

(b) The obligations of a limited liability company and its members to a person in the person’s capacity as a transferee or dissociated member are governed by the operating agreement. Subject only to any court order issued under paragraph (2) of subdivision (b) of Section 17705.03 to effectuate a charging order, an amendment to the operating agreement made after a person becomes a transferee or dissociated member is effective with regard to any debt, obligation, or other liability of the limited liability company or its members to the person in the person’s capacity as a transferee or dissociated member. * * *

Cal.Corp.Code § 17704.04. Sharing of and right to distributions before dissolution; allocation of profits and losses

(a) Any distributions made by a limited liability company before its dissolution and winding up shall be among the members in accordance with the operating agreement. If the operating agreement does not otherwise provide, distributions shall be on the basis of the value, as stated in the required records when the limited liability company decides to make the distribution, of the contributions the limited liability company has received from each member, except to the extent necessary to comply with any transfer effective under Section 17705.02 and any charging order in effect under Section 17705.03. * * *

Cal.Corp.Code § 17706.02. Events causing dissociation

A person is dissociated as a member from a limited liability company when any of the following occur: * * *

(d) The person is expelled as a member by the unanimous consent of the other members because any of the following applies: * * *

(2) There has been a transfer of all of the person’s transferable interest in the limited liability company, other than either of the following:

(A) A transfer for security purposes.

(B) A charging order in effect under Section 17705.03 that has not been foreclosed.

California Charging Order Opinions

Orix Re Holdings, LLC v. Collier, 2025 WL 2683986 (C.D.Cal., August 20, 2025). California charging order

♦ This order from the U.S. District Court for the Central District of California granted Plaintiff Orix Re Holdings, LLC’s motion to enforce an $8,095,029.21 default judgment against Defendant Michael Collier. The judgment originated in Michigan based on Collier’s breach of loan guarantees. Orix sought a charging order and permission to foreclose on Collier’s interest in 1421 Kings Road, LLC (Kings Road LLC). Collier opposed the motion, claiming he no longer held an ownership interest, having assigned his 100% share to his wife’s family trust in February 2020. The court required Orix to present substantial evidence of Collier’s current ownership interest. The court found Collier’s claim contradicted by public records. Taking judicial notice of documents filed after the alleged assignment date (spanning 2020 through 2024), the court noted Collier repeatedly signed deeds of trust and statements of information as the "managing member" or "sole member" of Kings Road LLC. The court found this created "significant doubt" regarding the assignment's validity or legal effect. Finding that Orix met the burden of proof, the court granted the motion. It issued a charging order against Collier’s transferable interest in the LLC for the full unsatisfied judgment amount. Furthermore, the court authorized Orix to conduct a foreclosure sale (auction) of that interest, detailing specific procedures for the commercially reasonable sale, including notice requirements and strict cash/wire transfer rules for bidders. ♦

Saregama India, Ltd. v. Subramanian Aiyer, N.D.Cal. Case No. 23-MC-80172 (Nov. 29, 2023).

♦ None ♦

Prime Victor Int'l Ltd. v. Simulacra Corp., D.Nev. Case No. 23-MS-00014 (Nov. 29, 2023).

♦ The United States District Court for the District of Nevada issued a comprehensive charging order against Simulacra Corporation’s membership interest in Abyss Creations, LLC. Presided over by Chief District Judge Miranda M. Du, the court granted the motion to facilitate the satisfaction of an unpaid Final Judgment balance in accordance with Nevada Revised Statutes. The order establishes rigorous constraints on Abyss Creations, prohibiting it from making any disbursements, distributions, remuneration, or loans to Simulacra or any third party for Simulacra's benefit without explicit authorization. Furthermore, Abyss is barred from paying any of Simulacra's liabilities or engaging in capital acquisitions while the judgment remains outstanding. Specific tax provisions require Abyss to continue allocating all tax items, including profits and losses, to Simulacra, while prohibiting the issuance of tax schedules or forms to Prime Victor International Limited except as required for cash remittances. Simulacra is also prohibited from accepting any financial benefits from Abyss or transferring, encumbering, or modifying its equity interest in the entity without permission. Both parties must provide the court with monthly reports detailing the financial performance of Abyss and the specific income attributable to Simulacra. Most significantly, any funds or proceeds originally intended for Simulacra must be redirected and paid directly to Prime Victor International Limited until the debt is fully satisfied. Under the order, Prime Victor International Limited assumes the status of an assignee of the interest, granting it the right to receive economic distributions without assuming the underlying obligations or management roles of the member. The court emphasized that while this order charges the interest to secure the debt, it does not grant a foreclosure on Simulacra's interest in Abyss Creations, LLC. ♦

Fremont Bank v. Signorelli, 2023 WL 2505021 (N.D.Cal., Feb. 24, 2023).

♦ The United States District Court for the Northern District of California addressed a motion by Fremont Bank for a charging order against the interests of Signorelli Family, L.P. in two private equity funds, Pine Brook Capital Partners II, L.P. and PBCP Feeder, L.P. This matter stems from a 2018 breach of contract and written guaranty action regarding a defaulted business loan, which led to a 2019 summary judgment in favor of the bank totaling over nine hundred thousand dollars. By 2023, the outstanding judgment balance had grown to approximately one million dollars due to accrued interest and minimal payments. Following a series of collection challenges, including Robert J. Signorelli's failure to attend debtor examinations which resulted in a contempt finding, the bank moved to satisfy the judgment via the partnership interests. The legal standard for such an order is governed by Federal Rule of Civil Procedure 69(a) and California Code of Civil Procedure section 708.310, which requires evidence of a money judgment and the debtor's interest in a partnership. The bank presented substantial evidence of these interests, including testimony and account statements reflecting millions in capital contributions and ongoing cash distributions. The defendants eventually filed an untimely opposition, arguing that the charging order would deprive them of income necessary for their support, citing an exemption under California Code of Civil Procedure section 704.225. However, the court found the opposition meritless, noting that such exemptions are legally limited to natural persons and do not apply to entities like Signorelli Family, L.P. Because the bank met its burden and the defendants failed to provide a valid legal defense, Magistrate Judge Donna M. Ryu recommended granting the motion. This recommendation permits the bank to apply the transferable partnership interests toward the satisfaction of the significant outstanding debt.Text ♦

Textron Financial Corp. v. Spanish Springs II, LLC, 2022 WL 1296098 (C.D.Cal., April 6, 2022).

♦ United States Magistrate Judge Karen L. Stevenson issued an amended report and recommendation advising the District Court to grant an unopposed motion for a charging order. The motion, filed by assignee judgment creditor AKRO Real Estate Partners LLC, seeks to satisfy an outstanding judgment of $1,151,413.90 against judgment debtors John E. King and Carole King by charging their interests in seven specific limited liability companies. The underlying judgment, originally entered in 2010 for over $4.6 million and renewed in 2020, stems from a 2009 lawsuit involving the judicial foreclosure of a deed of trust and a breach of guaranty following a loan default by Spanish Springs II, LLC. Although an initial report and recommendation expressed concern over the sufficiency of evidence regarding the debtors' ownership interests, the assignee judgment creditor successfully augmented the record with supplemental evidence. This included proofs of service on authorized agents for six of the seven LLCs and documentation establishing John E. King as a manager and designated agent for the seventh entity, Oak Shores Group LLC. Under Federal Rule of Civil Procedure 69 and relevant California statutes, a charging order serves as a lien on a debtor's transferable interest, requiring the LLC to redirect distributions to the judgment creditor. Because the debtors and the affected LLCs failed to oppose the motion, and the creditor provided substantial evidence of the debtors' membership interests, the court concluded that the legal requirements for the order were met. Consequently, the magistrate judge recommends that the district judge charge the Kings' interests in Higuera Brew LLC, Nipomo Properties LLC, Oak Shores Group LLC, Shaffer Lane LLC, Hunter Ranch Golf Course LLC, SLO South Higuera LLC, and Spanish Vineyards LLC to satisfy the remaining debt. ♦

Single Box, LP v. Del Valle, 2022 WL 1694776 (C.D.Cal., April 6, 2022).

♦ The United States District Court for the Central District of California denied a motion by judgment creditors to appoint a receiver to seize income from two companies, PR Property Services LLC and PRP Commercial Real Estate Services Inc. The judgment creditors, who held a judgment exceeding four million dollars against Brett Del Valle and others, argued that a receiver was necessary because Del Valle was allegedly avoiding payment under existing charging orders by transferring company profits to other entities for his personal use. Despite various collection efforts that yielded only minimal recovery, the court characterized the appointment of a receiver as an extraordinary remedy to be used with extreme caution under California law. The court found that the creditors failed to demonstrate the clear necessity required for such a drastic measure, noting that their claims of obfuscation and bad faith were based primarily on unsupported speculation rather than concrete evidence. Specifically, the creditors offered no proof to rebut Del Valle's testimony that company profits were used for business expenses rather than personal bills. Additionally, the court observed that the creditors had not fully explored less severe legal remedies, such as enforcing the charging order already in place against PR Property LLC or initiating collection actions specifically against PRP Commercial Inc. The court also criticized the broad and ill-defined scope of the requested receivership, which would have empowered a receiver to oversee Del Valle's business activities regardless of the entity involved. Ultimately, because the judgment creditors did not prove that the debtor had frustrated collection through contumacious conduct or that other enforcement mechanisms were inadequate, District Judge Philip S. Gutierrez denied the motion, emphasizing that receiverships are rarely appropriate for the enforcement of simple money judgments without evidence of systemic subversion. ♦

Fremont Bank v. Signorelli, 2020 WL 13093882 (April 8, 2020).

♦ United States Magistrate Judge Donna M. Ryu issued a Report and Recommendation regarding the plaintiff's motion for an order charging the interest of Signorelli Family, L.P. in third-party STARJ Partners, LLC. The underlying litigation originally commenced in August 2018 when Fremont Bank initiated an action against Robert J. Signorelli, Kathryn R. Signorelli, and the Signorelli Family Partnership for breach of contract and breach of written guaranties after the defendants defaulted on a business loan agreement for one million dollars. In April 2019, Judge Haywood S. Gilliam, Jr. granted summary judgment in favor of Fremont Bank for nearly nine hundred sixty thousand dollars, yet the defendants failed to satisfy this legal obligation. To recover the debt, the bank moved for a charging order under Federal Rule of Civil Procedure 69(a) and California Code of Civil Procedure section 708.310. The court explained that while federal rules govern the execution of judgments, the procedural law of the forum state, California, dictates the specific process. Under California law, a charging order functions as a lien on a judgment debtor’s transferable interest in a partnership or limited liability company, requiring the entity to redirect distributions to the judgment creditor. Crucially, such an order does not permit the creditor to participate in management or exercise membership rights. Although Fremont Bank did not serve the motion on the third-party limited liability company, the magistrate judge determined that such service was not required for the issuance of the order itself under the provided statutory framework. The court ultimately found that Fremont Bank provided substantial evidence of the Partnership’s sixty-seven point five percent membership interest in STARJ Partners. Given this evidence and the defendants' lack of opposition, the court recommended granting the motion to assist in the satisfaction of the outstanding judgment. ♦

Red Lion Hotels Franchising, Inc. v. First Capital Real Estate Investments LLC, 2022 WL 298118 (E.D.Cal., Feb. 1, 2022).

♦ The United States District Court for the Eastern District of California addressed a motion filed by the plaintiff for an order charging the membership interests of the defendants and for an assignment order to satisfy a significant monetary judgment. The plaintiff, Red Lion Hotels Franchising, Inc., originally obtained a judgment for approximately 1.29 million dollars plus interest against defendants First Capital Real Estate Investments, Suneet Singal, and Majique Ladnier in the Eastern District of Washington following a dispute over franchise license agreements for the operation of three hotels. Having obtained a writ of execution in the California court, the plaintiff sought to reach assets controlled by Singal and Ladnier through two limited liability companies, First Capital Master Advisor, or FCMA, and SRS, LLC, which were held by the Ladnier-Singal Trust. Although Singal attempted to argue that the trust was irrevocable and thus protected from creditors, the court noted that previous court rulings and testimony from Ladnier confirmed the trust was valid and revocable. Applying California law and Federal Rule of Civil Procedure 69, the court found that a charging order was an appropriate remedy to apply the judgment debtors' interests in the limited liability companies toward the satisfaction of the debt. Furthermore, the court granted an assignment order after evaluating factors such as the amount remaining on the judgment and the nature of the assets involved, including a substantial loan payment obligation and corporate shares. The final order charged the membership interests of Singal and Ladnier in both entities, directing them to pay any distributions directly to the plaintiff. Additionally, the court assigned specific interests in a twenty-five million dollar loan payment and corporate shares to the plaintiff until the judgment is fully satisfied. ♦

Rice v. Downs, 2021 WL 6111750 (Cal.App., Distr. 2, Dec. 27, 2021).

♦ The California Court of Appeal addressed a dispute regarding the priority of competing claims to funds disbursed by a limited liability company (LLC). The litigation centered on a 450,000 dollar payment made by Triton Community Development LLC to the law firm Glaser Weil for legal services rendered to Triton’s sole managing member, William Rice. Gary Downs, who held an unsatisfied judgment against Rice, contended that this payment violated a charging order that directed Triton to pay Rice’s distributions to Downs instead. Glaser Weil argued that the payment was for Triton’s own contractual obligation as a co-obligor and was not a distribution to Rice. Furthermore, the firm asserted that its security interest in Rice's membership in Triton, which was perfected by a July 2019 UCC filing, took priority over Downs’ charging order lien obtained in October 2019. While the trial court acknowledged the potential priority of the security interest, it utilized its equitable authority to order Glaser Weil to disgorge the funds to Downs. On appeal, the court first affirmed that the payment was indeed a distribution subject to the charging order. It concluded that since Triton was Rice’s alter ego, disbursements made to satisfy his personal debts were distributions regardless of Triton’s status as a co-obligor. However, the court reversed the disgorgement order on the issue of lien priority. It held that Glaser Weil’s perfected security interest was senior to Downs’ later charging order under the general first-in-time rule. The court clarified that Downs' first unsuccessful charging order motion in 2018 did not establish priority because the resulting lien was extinguished when the motion was denied. Finding no equitable grounds to override statutory priority, the appellate court remanded the case for the trial court to determine the specific terms of Glaser Weil’s security interest. ♦

Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc., 2021 WL 388660 (Feb. 4, 2021).

♦ The California Court of Appeal reversed a trial court’s order appointing a receiver to collect a money judgment, holding that such an appointment constitutes an abuse of discretion when the record lacks evidence that judgment debtors frustrated collection efforts or that less intrusive methods were inadequate. Medipro had obtained a multi-million-dollar judgment against Certified and its founder, Christina Sy, for business torts and initially collected over four hundred thousand dollars through bank and hospital levies. When these collections ceased, Medipro moved for the appointment of a receiver to take control of Certified’s records and bank accounts, claiming the debtors were circumventing levies by billing under different names. However, the trial court struck Medipro’s evidence supporting these claims as hearsay and speculation. Despite this, the lower court granted the receivership. On appeal, the court emphasized that appointing a receiver is a drastic, harsh, and costly move that transfers property out of an owner's hands and must be exercised with extreme caution. The court noted that while statutes like Code of Civil Procedure section 708.620 allow for receivers, they are rarely a necessity for simple money judgments unless a debtor engages in obfuscation or contumacious conduct. In this case, Medipro failed to provide substantial evidence of such behavior, failing to prove that the slowdown in accounts was not simply due to the business decline Sy described. Additionally, Medipro had barely utilized other enforcement tools, such as interrogatories or debtor examinations. The appellate court concluded that allowing a receiver under these circumstances would improperly make this extraordinary remedy a routine part of collection. Consequently, the order and its subsidiary injunction were reversed because Medipro did not demonstrate the requisite necessity or exhaustion of standard legal remedies to justify such an intrusive measure. ♦

Blizzard Energy, Inc. v. Schaefers, 2021 WL 5366815 (Cal.App., Distr. 6, Nov. 18, 2021).

♦ The California Court of Appeal examined a trial court order that added BKS Cambria, LLC, as a judgment debtor to a 3.825 million dollar Kansas fraud judgment against Bernd Schaefers. Blizzard Energy had originally obtained the judgment in Kansas and subsequently registered it in California. Seeking to collect, Blizzard moved to amend the judgment under the doctrine of outside reverse veil piercing, asserting that the LLC was Schaefers' alter ego. The trial court granted the motion after finding that Schaefers used the LLC as his personal property by commingling funds, paying personal and separate business expenses from LLC accounts, and living rent-free on land owned by the entity. On appeal, the court first addressed jurisdictional and procedural challenges, concluding that the trial court maintained jurisdiction to amend the judgment despite a pending appeal because proceedings under the Sister State Money Judgments Act are special proceedings rather than civil actions, thus exempting them from certain automatic stays. The court further held that a charging order is not a creditor’s exclusive remedy against an LLC and that the act does not prevent adding a nonparty alter ego. While finding substantial evidence that Schaefers and the LLC shared a unity of interest, the appellate court ultimately reversed the order. The reversal was primarily based on the trial court's failure to properly weigh the equities regarding Schaefers' wife, Karin, who owns the remaining 50 percent of the LLC. The trial court had incorrectly assumed that Karin's interest was community property liable for the debt. However, the appellate court clarified that because the fraud occurred long after the couple's 1996 separation, the debt was Schaefers' separate obligation under California law. The case was remanded for the trial court to determine if reverse veil piercing would be inequitable to Karin as an innocent third party. ♦

Perez v. Dhillon, 2020 WL 1900447 (E.D.Cal., April 17, 2020).

♦ The United States District Court for the Eastern District of California considered an amended motion by plaintiff Alberto Perez to enforce a foreign judgment against defendant Rupinder Dhillon. The underlying judgment, which stems from a default in the District of Utah involving violations of the Fair Labor Standards Act and Title VII of the Civil Rights Act, awarded the plaintiff a total of $36,302.84. Perez sought a charging order against the defendant’s purported membership interest in an entity known as Hiway Farm, LLC, as well as a court order directing the company and its members to pay the outstanding debt. To establish the defendant's ownership interest, the plaintiff relied on public records identifying Dhillon as the LLC’s registered agent and a municipal staff report describing him as a property owner. However, Dhillon opposed the motion, submitting sworn declarations stating that he has never held a membership interest in the company and that his son is the sole owner and manager. He further clarified that his role as a registered agent was merely a matter of convenience. In its analysis, the court applied Federal Rule of Civil Procedure 69(a)(1), which dictates that supplementary proceedings must follow state law. Under the California Corporations Code, a charging order may be entered against a judgment debtor’s transferable interest in an LLC, but the plaintiff failed to provide reliable evidence that such an interest existed. The court found that registered agent status is not probative of membership and that the planning commission report was insufficient to prove ownership. Because the defendant corroborated his opposition with a grant deed and because the plaintiff failed to utilize available discovery tools to meet his burden of proof, the magistrate judge recommended that the motion to enforce the judgment be denied. ♦

MDQ, LLC v. Gilbert, Kelly, 2019 WL 948726 (Cal.App., Distr. 2, Feb. 27, 2019).

♦ TThe California Court of Appeal adjudicated a priority dispute within an interpleader action involving competing claims to distributions from limited liability companies. The conflict arose between Cleopatra Records, a judgment creditor with a recorded judgment lien, and the law firm Gilbert Kelly, which held an earlier assignment from the debtor, Floyd Mutrux. In April 2015, Mutrux irrevocably assigned a percentage of his economic rights in the MDQ entities to Gilbert Kelly to secure payment for legal services. Later that year, Cleopatra obtained a significant money judgment against Mutrux and a subsequent charging order that created a lien on his transferable interests. Gilbert Kelly contended its interest was an absolute transfer that preceded the judgment and therefore fell outside the reach of the charging order. However, the appellate court affirmed the trial court’s finding that the assignment created a security interest in personal property governed by Division 9 of the California Uniform Commercial Code (UCC). Under the UCC, security interests in payment intangibles generally require the filing of a financing statement for perfection against third parties. Because Gilbert Kelly did not file a UCC-1 statement, its interest remained unperfected. Applying Code of Civil Procedure section 697.590, the court held that Cleopatra’s perfected judgment lien was superior to Gilbert Kelly’s unperfected security interest despite the assignment occurring first. The court also upheld an order requiring Gilbert Kelly to bear the attorney fees and costs of the interpleader plaintiffs, ruling that the trial court had the discretionary authority to shift these costs to the claimant whose erroneous legal position necessitated the litigation. This decision underscores that parties seeking to protect assigned economic interests must comply with UCC perfection requirements to maintain priority over subsequent judgment creditors. ♦

Garcia v. Garcia, 2018 WL 2316522 (Cal.App. Distr. 5, Unpublished, May 22, 2018).

♦ The California Court of Appeal, Fifth District, addressed a dispute involving the foreclosure of economic interests in limited liability companies and subsequent allegations of breach of fiduciary duty. The plaintiffs defaulted on bank loans, leading to a judgment where the bank obtained a charging order and eventually foreclosed upon the plaintiffs' fifty percent economic interest in two family-owned companies managed by the defendant. After the foreclosure, the companies liquidated assets and distributed over five million dollars to the bank as the holder of the economic interests before dissolving. The plaintiffs sued, arguing they retained a separate right to their original capital contributions and accumulated capital accounts that should not have been transferred to the bank. They also alleged the manager breached his fiduciary duty by intentionally failing to make earlier distributions under the charging order, which they claimed precipitated the foreclosure and the liquidation of the businesses. The trial court dismissed the complaint without leave to amend and imposed sanctions for a related elder abuse lawsuit, ruling the claims were meritless. On appeal, the court held that under the Beverly-Killea Limited Liability Company Act, an economic interest includes the right to all distributions, including the return of capital; therefore, the plaintiffs retained no rights to their capital accounts once the bank foreclosed. However, the appellate court reversed the dismissal of the fiduciary duty claim regarding the failure to make distributions. It determined that a manager's discretionary decisions must be made in good faith and that the alleged failure to act in the best interests of the companies stated a valid cause of action. Consequently, the court also reversed the sanctions, directing the trial court to overrule the demurrer and allow the litigation to proceed. ♦

Curci Investments, LLC v. Baldwin, 14 Cal.App.5th 214 (Cal.App.Distr. 4, 2017).

♦ The California Court of Appeal considered whether a judgment creditor (Curci) could use “outside reverse veil piercing” to reach the assets of an LLC (JPB Investments LLC, or JPBI) to satisfy a multimillion-dollar personal judgment against its controlling member, real estate developer James P. Baldwin. Curci argued Baldwin effectively owned and controlled JPBI (99% interest; his wife held 1%) and used it to avoid collection—treating it like a personal bank account, stopping distributions after judgment, and extending repayment terms on large insider loans tied to family estate-planning entities without consideration—rendering ordinary remedies like a charging order ineffective. The trial court denied Curci’s motion, believing reverse veil piercing was unavailable in California under Postal Instant Press, Inc. v. Kaswa Corp. On appeal, the court held Postal Instant Press was distinguishable because it addressed corporations, not LLCs, and because key policy concerns (like harming innocent shareholders) were not present on these facts; it also reasoned that the LLC charging-order statute does not categorically bar reverse piercing. The court reversed the denial and remanded for the trial court to conduct a fact-specific alter-ego/veil-piercing analysis (including whether Curci lacks a plain, speedy, and adequate legal remedy) to decide whether JPBI should be added as a judgment debtor. ♦

Textron Financial Corp. v. Gallegos, C.D.Cal. Case No. 15cv1678 (Oct. 7, 2015).

♦ The United States District Court for the Southern District of California addressed a motion by SPE LO Holdings, the assignee of Textron Financial Corporation, seeking a charging order against Michael S. Gallegos membership interest in two limited liability companies, Pacific Pearl Hotels, LLC and Pacific Pearl Hotel Management, LLC. Textron held a judgment exceeding twenty-one million dollars against Gallegos but had recovered only a minute fraction of the debt. The plaintiff relied on California Secretary of State documents to establish Gallegos involvement with the LLCs, noting that he was explicitly listed as a manager in those public records. Gallegos opposed the motion on three primary grounds: the alleged inadmissibility of the government records, insufficient service of process on the LLCs, and the failure of the plaintiff to prove he held a membership interest in the entities. Regarding admissibility, District Judge Larry Alan Burns took judicial notice of the Secretary of State filings, asserting they are public records whose accuracy cannot be reasonably disputed. On the issue of service, the court clarified that under the California Code of Civil Procedure, a judgment creditor can obtain a charging order without making the LLC a party, and service by mail on the debtor and the LLC is legally sufficient. However, the court found that the evidence regarding Gallegos membership interest was insufficient to meet the required substantial evidence standard. The court highlighted that while the records confirmed Gallegos served as a manager, the California Corporations Code allows for LLCs to be managed by non-members. Because statements made in legal briefs do not constitute evidence and the plaintiff offered no other proof of membership, the court denied the motion without prejudice. To prevent the debtor from avoiding the order, the court authorized SPE LO to pursue postjudgment discovery to ascertain Gallegos membership status. ♦

Safeco Ins. Co. v. Raisch, Case No. C 11-05332 PSG (N.D.Cal., March 20, 2013).

♦ No synopsis ♦

Wayfarer Aviation, Inc. v. The Halsey McLean Minor Revocable Trust, No. C 10-00165 (N.D.Cal., Sept. 18, 2012).

♦ A charging order was issued on September 18, 2012, to ensure the satisfaction of a substantial judgment. The judgment creditor, Wayfarer Aviation, Inc., which now operates as WAI Liquidating Co., Inc., sought to collect a total of $608,619.55 from the defendant trust following a March 2011 judgment. Under the authority of the California Code of Civil Procedure and the California Corporations Code, the court granted a motion to charge the trust’s membership interests in several limited liability companies. These entities include Fox Ridge Farms Holdings, LLC; Fox Ridge Farms Management, LLC; Fox Ridge Investments, LLC; Minor Management Services, LLC; Minor/O'Brien Ventures I, L.L.C.; Minor Stables, LLC; and Minor Ventures, LLC. This judicial order creates a formal lien on the trust's assignable membership interests within these businesses. Consequently, the court ordered that all income, revenue, profits, or proceeds from these entities that would otherwise be distributed to the trust must instead be paid directly to Wayfarer until the judgment, including accrued interest and legal costs, is fully satisfied. To protect the creditor's rights, the trust is legally restrained from transferring, pledging, or alienating its interests in these companies without the court's prior approval. Additionally, the trust is required to provide Wayfarer with a comprehensive accounting of its membership interests and any funds due upon request. The order effectively diverts the trust's economic benefits from these specific LLCs to the creditor as part of the enforcement of the court's earlier financial judgment. ♦

Hellman v. Anderson, 233 Cal. App. 3d 840, 284 Cal. Rptr. 830 (Cal.App.Dist.3 08/26/1991).

♦ The California Court of Appeal addressed whether a judgment debtor's interest in a general partnership could be foreclosed upon and sold to satisfy a money judgment when non-debtor partners do not consent. The case involved judgment creditors seeking to enforce a debt of over 440,000 dollars against John B. Anderson by foreclosing on his eighty percent interest in Rancho Murieta Investors. Although the creditors had previously obtained a charging order, it failed to satisfy the judgment because the partnership generated no profits. The appellate court held that while a partner's right in specific partnership property is exempt from execution for individual debts, their interest in the partnership-defined as the right to share in profits and surplus-is personal property subject to enforcement. The court concluded that Corporations Code section 15028 implicitly authorizes foreclosure and sale of this charged interest, as the statute references redemption before foreclosure. Crucially, the court departed from the precedent set in Crocker National Bank v. Perroton, which required the consent of all non-debtor partners for such a sale. Instead, the court established that partner consent is not an absolute requirement. Instead, trial courts must determine whether foreclosure would unduly interfere with the partnership's business operations. Because the interest being sold is limited to profits and surplus and does not include management rights or specific assets, many foreclosures may not disrupt the business. The court reversed the trial court's foreclosure order and remanded the case for a factual finding on the potential for undue interference, placing the burden of proof on the debtor. This ruling clarifies that judgment creditors have a viable path to reach partnership interests even over the objections of other partners, provided the equitable balance does not tip toward significant business disruption. ♦