Parrish v. Avenatti CA2/6

Filed 3/14/22 Parrish v. Avenatti CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
WILLIAM PARRISH, 2d Civ. No. B311480
(Super. Ct. No. 18CV04106)
Plaintiff and Appellant, (Santa Barbara County)
v.
MICHAEL J. AVENATTI,
Defendant;
LISA STORIE-AVENATTI,
Objector and Respondent.
Plaintiff William Parrish has a money judgment against
defendant Michael J. Avenatti. He appeals a post-judgment
order of the superior court denying his motion for an order to
recover stock certificates previously issued to Avenatti. Another
judgment creditor, Lisa Storie-Avenatti (Storie) obtained a
judgment lien prior to Parrish’s judgment lien. The trial court
ruled Storie’s lien was prior to Parish’s lien. We affirm.
1
FACTS
Parrish retained the services of attorney Michael J.
Avenatti. Parrish loaned Avenatti $1.5 million. Avenatti did not
pay back the loan.
Parrish filed a civil action against Avenatti in the Santa
Barbara County Superior Court to recover the money Avenatti
owed. Avenatti defaulted and Parrish obtained a default
judgment. On June 22, 2020, Parrish filed a notice of judgment
lien with the Secretary of State against Avenatti in the amount of
$2,555,610.21.
Avenatti filed a dissolution of marriage action in the
Orange County Superior Court to dissolve the marriage with his
wife Storie. (Avenatti v. Storie-Aventatti, 2017, No. 17D009930
(“the dissolution action”).) Storie obtained a judgment against
Avenatti that included sums for child and spousal support. She
also obtained a “turnover order” against Avenatti for 100 percent
of the shares he owned in the company Seek Thermal, Inc. On
December 24, 2018, she filed a notice of judgment lien with the
Secretary of State against Avenatti in the amount of
$1,704,697.42.
Parrish attempted to satisfy his judgment by executing on
stock certificates owned by Avenatti. On June 11, 2020, he
obtained a writ of execution. A judgment levy was served on
Seek Thermal, Inc. The chief executive officer of the corporation
declared there were stock certificates of its company issued to
Avenatti: stock certificate No. 9, 150,000 shares of common
stock; and stock certificate No. 13, 45,840 shares of common stock
(the Avenatti certificates). The Santa Barbara County Sheriff
delivered these certificates to Parrish’s counsel. Parrish was not
able to satisfy his judgment with these certificates because the
2.
Santa Barbara County Sheriff did not hold a sheriff’s sale “due to
Covid-19 restrictions.”
On September 1, 2020, the Santa Barbara County Superior
Court granted Parrish’s motion to add Doppio, Inc. as a judgment
debtor. The court found that Avenatti was the “President of
Doppio.” “Avenatti, through Doppio, purchased 214,729 shares of
Tyrian Systems, Inc. Series B preferred stock,” and Avenatti
acknowledged receipt of those shares. The court pierced the
corporate veil and found that there was “a unity of interest
between Avenatti and Doppio,” and said that “inequitable results
will follow if the corporate separateness is respected.” It found
“Avenatti is the sole individual involved with Doppio.” It also
found: 1) “Avenatti has been criminally convicted in New York”;
2) he is “being prosecuted in two . . . federal cases”; and 3) he
“appears to be insolvent.”
In November 2020, Parrish filed a noticed motion under
California Uniform Commercial Code section 8112, subdivision
(e) to recover stock certificates in partial satisfaction of
judgment.1 He sought: 1) “an Order issuing a certificate of sale
to William Parrish for a credit bid on two certificates of the stock
of Seek Thermal issued in the name of judgment debtor Michael
Avenatti”; and 2) “an Order that one certificate of the stock of
Seek Thermal issued to judgment debtor Doppio, Inc. be deemed
lost and/or destroyed and that Seek Thermal shall cancel that
stock certificate and reissue it to William Parrish.”
Avenatti filed an opposition claiming that Storie obtained a
money judgment against him and her judgment lien was filed
All statutory references are to the California Uniform
1
Commercial Code unless otherwise stated.
3.
before Parrish’s judgment lien. He claimed those facts barred the
relief sought in Parrish’s motion.
The trial court found, “It is reasonable that before Parrish
can obtain an order against the Certificates arguably owned by
[Storie], she should be given notice and provided with an
opportunity to oppose the request.”
After service of the motion, Storie filed an opposition
stating she “does not consent to the jurisdiction of the Santa
Barbara Superior Court.” But Storie also objected to the merits
of Parrish’s motion and contended that her judgment lien from
the dissolution action involving Avenatti was entitled to priority
over Parrish’s lien because: 1) it was filed before Parrish’s, and
2) her judgment lien was for support obligations which have a
priority over Parrish’s lien stemming from his financial loan to
Avenatti. Storie also said that the court in the dissolution action
issued a turnover order that required Avenatti to turn over his
shares of stock to her, and that Parrish’s motion was an improper
attempt to make “an end-run around” that prior turnover order.
The trial court said it was “sympathetic with Parrish’s
plight,” but Storie’s “contentions are persuasive; they
predominate.” It found: 1) Storie’s lien “has priority as the
earlier-filed lien”; 2) it also has priority because it was for
“support obligations,” which is “a priority obligation which must
be paid first, before any other creditor.” The court said that
“Parrish cannot circumvent the Turnover Order” issued in the
dissolution action.
The trial court rejected Parrish’s claim that, if applicable,
the turnover order should only apply to the Avenatti certificates,
but not “the Doppio Certificate because it is not owned by
Avenatti.” It found this claim “is in direct contradiction of
4.
Parrish’s arguments in support of adding Doppio as a judgment
debtor.” “Parrish specifically sought to have Doppio added as a
judgment debtor due to the unity of interest between Avenatti
and Doppio. At a minimum, a determination of ownership of the
Doppio’s certificate should be made by the Orange County
Superior Court in the context of the dissolution action
considering the prior judgment, writs and orders concerning
Avenatti’s assets.”
DISCUSSION2
Abuse of Discretion
Parrish contends California law “enables a judgment
creditor to reach certificated securities which cannot be reached
by other legal process.” (Boldface omitted.)
Here Parrish filed a motion under section 8112, subdivision
(e), which provides, in relevant part, “A creditor whose debtor is
the owner of a certified security . . . is entitled to aid from a court
of competent jurisdiction . . . in satisfying the claim by means
allowed at law or in equity in regard to property that cannot
readily be reached by other legal process.” Under section 8112, a
trial court’s “ ‘decision to apply a credit in partial satisfaction of
the judgment is an exercise of the court’s equitable discretion.’ ”
(Ho v. Hsieh (2010) 181 Cal.App.4th 337, 345.) The trial court’s
“exercise of its equitable powers” involving satisfying judgments
with stock transfers is reviewed “under an abuse of discretion
standard of review.” (Ibid.)
Parrish contends section 8112 was enacted for his benefit
as a judgment lien creditor with an unsatisfied judgment against
Avenatti. But the statute is not so restricted. The trial court
2We grant Parrish’s request for judicial notice filed August
16, 2021.
5.
could reasonably find it applies to all judgment lien creditors
before the court with unsatisfied judgments against Avenatti,
and that includes Storie.
Application of section 8112 is easily exercised where a
single judgment creditor could show uncontested ownership of
the stock certificates. That is not the case here. Ownership is
contested; this proceeding involves the rights of two judgment
creditors; there is a prior pending action; the court in that prior
action had issued a stock turnover order; and there are competing
judgment liens with issues of priority. We consider these factors
in deciding whether the trial court abused its discretion. (Ho v.
Hsieh, supra, 181 Cal.App.4th at p. 345.)
The trial court found “[Storie’s] lien has priority as the
earlier-filed lien.” It also found “[Storie’s] judgment liens are
premised on support obligations. Support obligations are a
priority obligation which must be paid first, before any other
creditor.” The record supports the court’s factual findings.
Storie filed a notice of judgment lien for $1,704,697.42
against Avenatti with the Secretary of State on December 24,
2018. The judgment against Avenatti from the dissolution action
in the Orange County Superior Court included child support and
spousal support. That court also issued a January 25, 2019,
turnover order (Code Civ. Proc. § 699.040), which included “100%
of the shares owned by [Avenatti] in the company Seek Thermal,
Inc.”
Parrish filed a notice of judgment lien against Avenatti for
$2,555,610.21 with the Secretary of State on June 22, 2020.
Where two judgment lien creditors seek to satisfy their
judgments from the same property, the relevant issue is which
one has priority over the other. “California follows the ‘first in
6.
time, first in right’ system of lien priorities.” (Thaler v.
Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1099.)
“Other things being equal, different liens upon the same property
have priority according to the time of their creation . . . .” (Civ.
Code, § 2897.) “[A] creditor with a money judgment [may] create
a judgment lien on the debtor’s personal property by filing a
notice of judgment lien in the office of the Secretary of State.”
(Waltrip v. Kimberlin (2008) 164 Cal.App.4th 517, 529.)
“Accordingly, under section 2897, the first lien created
takes priority.” (Takehara v. H.C. Muddox Co. (1972) 8 Cal.3d
168, 171.) “[E]stablishing priority on the basis of time of creation
of the liens is determinative.” (Id. at p. 172, italics added.) Under
this system, “lienholders” do not “share pro rata in the
subsequent recovery.” (Id. at p. 173.) The trial court correctly
ruled Storie’s lien had priority as it was filed before Parrish’s
lien.
In addition, because Storie’s lien was for child and spousal
support, the trial court properly found that it had priority over
Parrish’s later lien. The priority for judgments involving support
orders over other debts is well established. (Heller Properties,
Inc. v. Rothschild (1970) 11 Cal.App.3d 705, 712; see also Fam.
Code, § 4011 [“Payment of child support ordered by the court
shall be made by the person owing the support payment before
payment of any debts owed to creditors”].) Code of Civil
Procedure section 699.510, subdivision (a) provides, in relevant
part, “The clerk of the court shall give priority to the application
for, and issuance of, writs of execution on orders or judgments for
child support and spousal support.” “A withholding order for
support has priority over any other earnings withholding order.”
(Id., § 706.030, subd. (c)(2).)
7.
The trial court also properly considered the impact of the
result Parrish sought on the turnover order previously issued by
the Orange County Superior Court in the dissolution action. It
said, “Parrish cannot circumvent the Turnover Order or [Storie’s]
superior judgment in an attempt to seize Avenatti’s property.”
The court found the Avenatti certificates and the Doppio
certificate involved Avenatti’s property. Consequently, “[a]t a
minimum, a determination of ownership” of both certificates
“should be made by the Orange County Superior Court in the
context of the dissolution action . . . .”
A trial court may properly elect to defer and not decide an
issue where there is another previously filed pending action with
concurrent jurisdiction over that same issue making it a more
appropriate forum to initially decide it. (Vargas v. Municipal
Court (1978) 22 Cal.3d 902; Scott v. Industrial Accident
Commission (1956) 46 Cal.2d 76, 81; Browne v. Superior Court
(1940) 16 Cal.2d 593, 597; California Union Ins. Co. v. Trinity
River Land Co. (1980) 105 Cal.App.3d 104, 108-109; Gorman v.
Superior Court (1937) 23 Cal.App.2d 173, 178.)
The trial court’s decision to defer a final ruling on the stock
ownership issue, in favor of allowing the Orange County court to
initially decide it, was reasonable because: 1) the dissolution
action was filed before the current case; 2) both cases involved a
common legal issue; 3) the Orange County court had issued a
stock turnover order; 4) Avenatti was a party in both cases; 5)
Parrish had not made a sufficient showing in support of his
motion; 6) Storie had judgment lien priority and was a party to
the dissolution action; and 7) giving initial deference to the
Orange County court would avoid a conflict with that court’s
orders, prevent a multiplicity of actions involving the same
8.
property (Scott v. Industrial Accident Commission, supra, 46
Cal.2d at p. 81; California Union Ins. Co. v. Trinity River Land
Co., supra, 105 Cal.App.3d at pp. 108-109; Cartwright v. Swoap
(1974) 40 Cal.App.3d 567, 571), and allow the court with the
primary jurisdiction over the issue of a spouse’s property to
decide the issue. (Askew v. Askew (1994) 22 Cal.App.4th 942,
961.)
Parrish contends the trial court erred by ruling that the
Doppio certificate could be the subject of an Orange County
court’s stock turnover order. He suggests that he made a
sufficient factual showing to demonstrate why the Orange
County court could not decide this issue. But this claim was
undermined by the trial court’s finding that Parrish had made
self-contradictory factual assertions about the ownership of this
property. We do not decide the credibility of the parties. That is
exclusively determined by the trial court. (White v. State Farm
Fire & Casualty Co. (1969) 272 Cal.App.2d 693, 695; Polk v. Polk
(1964) 228 Cal.App.2d 763, 775.) The trial court made sufficient
findings to support its decision.
Moreover, Parrish has not shown that the trial court’s
preference for allowing the Orange County court to initially
decide this issue was an abuse of discretion. The dissolution
court has jurisdiction to decide what stocks Avenatti owned (In re
Marriage of Connolly (1979) 23 Cal.3d 590, 598; Strohm v.
Strohm (1960) 182 Cal.App.2d 53, 57); and, after acquiring
jurisdiction, it is the preferred court, as opposed to other actions
or proceedings, to decide such issues. (Askew v. Askew, supra, 22
Cal.App.4th at p. 961.)
9.
Storie’s “Special Appearance” in This Case
Parrish contends Storie “appeared ‘specially,’ and expressly
objected to the trial court’s jurisdiction” over her. He claims the
trial court therefore should have only granted the relief he
requested.
Storie responds that the relevant issue was “the trial
court’s ability to rule on Parrish’s motion.”
A special appearance is a challenge to the court’s
jurisdiction over a party. But where the party claiming to appear
specially seeks affirmative relief that goes beyond a challenge to
the court’s jurisdiction, or raises claims on the merits, that
appearance is a general appearance. (Dial 800 v. Fesbinder
(2004) 118 Cal.App.4th 32, 52.) That party is then considered to
have waived its objections to the court’s jurisdiction. (Ibid.)
Parrish suggests his motion should be considered
uncontested because Storie objected to the trial court’s
jurisdiction over her. He claims she made only a special
appearance, was therefore not entitled to relief, and she could not
raise issues or present any evidence to support the court’s
findings on the merits in her favor. We disagree.
This was a contested motion with opposition evidence. The
court properly exercised its discretion to determine whether to
grant post-judgment equitable relief for Parrish. (Ho v. Hsieh,
supra, 181 Cal.App.4th at p. 345.)
Storie opposed Parrish’s motion on the merits and claimed
the trial court should rule that she had judgment lien priority
over him. Storie’s counsel filed a declaration and made a request
for judicial notice of the documents showing: 1) Storie’s lien
priority, and 2) Storie’s judgment lien was for child and spousal
support.
10.
By making these claims on the merits, the trial court could
reasonably infer Storie had waived her special appearance and
made a general appearance, and it could consider her opposition
issues and evidence in deciding equitable relief. (Dial 800 v.
Fesbinder, supra, 118 Cal.App.4th at p. 52; see also Ho v. Hsieh,
supra, 181 Cal.App.4th at p. 345.)
Parrish contends that because Storie designated her
opposition as a special appearance, and did not make an express
formal appearance and testify, the trial court was bound by
Storie’s designation that she had made only a special appearance,
and it was required to find that she “rejected the proceedings in
Santa Barbara County.”
We disagree. The trial court was not confined by the label
Storie selected and it did not need her formal express recognition
of its authority to conclude she made a general appearance. “[I]f
the moving party does not confine herself to the objection of lack
of jurisdiction over her person, but seeks affirmative relief on the
merits [as here], her application may be deemed a general
appearance regardless of its designation.” (In re Marriage of
Torres (1998) 62 Cal.App.4th 1367, 1381, italics added.) “ ‘A
general appearance occurs where a party, either directly or
through counsel, participates in an action in some manner which
recognizes the authority of the court to proceed. It does not
require any formal or technical act.’ ” (Dial 800 v. Fesbinder,
supra, 118 Cal.App.4th at p. 52, italics added.)
Parrish suggests Storie was a stranger to this case, she
could not seek relief based on her written opposition to his
motion, and she had “withdrawn from the fight” to protect her
property interests. Storie was not a stranger. By making a
general appearance, she became a party. (Fireman’s Fund Ins.
11.
Co. v. Sparks Construction, Inc. (2004) 114 Cal.App.4th 1135,
1150.) After being served, Storie responded on the merits to
Parrish’s motion and did not rely solely on her written opposition.
She also protected her property interests by filing a judgment
lien, obtaining a stock turnover order, seeking a second stock
turnover order in Orange County, and obtaining an order
preventing Parrish from making a stock transfer. Her opposition
in the trial court also contained relevant and uncontradicted
evidence of her judgment lien priority that supported her claims
before the trial court.
Parrish contends Storie could have initiated additional
procedures to protect her property interests. But the only
proceeding before the trial court was Parrish’s motion, and the
proper procedure to challenge it was to file an opposition.
Moreover, even aside from Storie’s opposition, Avenatti,
also a party, also filed an opposition to Parrish’s motion stating
grounds why granting Parrish’s motion would not lead to an
equitable result. He challenged Parrish’s claims. Parrish
contends the trial court should have rejected all the claims
Avenatti made because he was not credible. But credibility is
decided exclusively by the trial court. (Polk v. Polk, supra, 228
Cal.App.2d at p. 775.) Moreover, many of his claims were
supported by independent documentary evidence. Avenatti filed
a declaration and presented copies of judgment lien documents
showing Storie’s judgment lien priority over Parrish. The trial
court took judicial notice of the judgment liens and the turnover
order entered by the court in the dissolution action on January
25, 2019. Parrish has not shown an abuse of discretion.
(Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981; Ho v. Hsieh,
supra, 181 Cal.App.4th at p. 345.)
12.
We leave it to the Orange County Superior Court to decide
what effect our decision will have on its proceedings.
DISPOSITION
The order is affirmed. Costs on appeal are awarded in
favor of Storie.
NOT TO BE PUBLISHED.
GILBERT, P. J.
We concur:
YEGAN, J.
PERREN, J.
13.
Thomas P. Anderle, Judge
Superior Court County of Santa Barbara
______________________________
Cappello & Noël, A. Barry Cappello and Wendy D. Welkom
for Plaintiff and Appellant
No appearance for Defendant.
Macias Counsel Inc., Sean E. Macias; Shaw Koepke &
Satter and Jens B. Koepke for Objector and Respondent Lisa
Storie-Avenatti.
14.