Adkisson's

Charging Orders

The Creditors' Primary Remedy Against A Debtor's

Interest In A Limited Liability Company Or Partnership

Caution state law variances!

 

The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more

 

Available for purchase at https://goo.gl/faZzY6

2018 - Arizona - Brown

 

Brown v. Sperber-Porter, 2018 WL 4184372 (D.Ariz., Aug. 24, 2018).

 

United States District Court, D. Arizona.

 

Rickman Brown, et al., Petitioners,

 

v.

 

Eva Sperber-Porter, et al., Respondents.

 

No. CV-16-02801-PHX-SRB

 

08/24/2018

 

REPORT AND RECOMMENDATION

 

*1 Petitioners/Judgment Creditors Rickman Brown, Jeff Ross, Evans, Sholz, Williams & Warncke LLC, and Ross and Orenstein LLC f/k/a Ross, Orenstein & Baudry LLC (collectively, “Petitioners”), and Respondents/Judgment Debtors Joseph Baldino and Helen Baldino, the Baldino Family Revocable Trust, and the Meridian Financial Corporation Profit Sharing & Retirement Trust (collectively, the “Baldino Debtors”), have filed a Stipulation Re: Pending Petitions for Charging Orders Against Baldino Debtors’ Interests in Mortgages Ltd. Opportunity Fund MP15 LLC and Mortgages Ltd. Opportunity Fund MP17 LLC. (Doc. 329.) As set forth below, the Court recommends the entry of the parties’ proposed stipulated charging orders.

 

Petitioners have filed petitions for charging orders against the interests of the Baldino Debtors in the Arizona limited liability companies registered as Mortgages Ltd. Opportunity Fund MP 15 LLC (“MP 15”) and Mortgages Ltd. Opportunity Fund MP 17 LLC (“MP 17”), and motions for orders to show cause why the Court should not grant the relief requested in the petitions for charging orders. (Docs. 167, 168.) The Court granted the motions for orders to show cause, ordered the Baldino Debtors to serve MP 15 and MP 17 with copies of the petitions for charging orders, and ordered the Baldino Debtors, MP 15, and MP 17 to show cause why the Court should not granted the relief requested in the petitions for charging orders. (Docs. 201, 235.) The Baldino Debtors responded to the order to show cause pertaining to the petition for a charging order against their interests in MP 17, and Petitioners filed a reply. (Doc. 213, 218.) The Baldino Debtors did not respond to the order to show cause pertaining to the petition for a charging order against their interests in MP 15.

 

On April 2, 2018, the Court held a hearing on the petition for a charging order pertaining to MP 17. (Doc. 245.) The parties requested a period of discovery on issues related to the petition and an evidentiary hearing. The parties agreed to submit a stipulated charging order against the Baldino Debtors’ interest in MP 15. The Court granted the request for a period of discovery, set a discovery schedule, and set an evidentiary hearing for July 10, 2018. (Doc. 247.) Petitioners subsequently filed several motions related to various discovery requests, and the Baldino Debtors filed a motion for relief from judgment under Rule 60 (the “Rule 60 motion”). (Docs. 256, 260, 287, 293.) The parties then filed a joint motion to vacate the discovery schedule and the evidentiary hearing until the Court ruled on the pending motions. (Doc. 300.) The Court granted the motion, vacated the July 10, 2018 evidentiary hearing, and ordered the parties to file a status report within seven days of a ruling on the Rule 60 motion. (Doc. 301.) The Court denied the Rule 60 motion on August 2, 2018. (Doc. 313.)

 

On August 22, 2018, the Court held a hearing on the pending motions, including the petitions for charging orders. At that hearing, the parties stated that they believed they had resolved most of the issues related to the petitions for charging orders, except the Baldino Debtors’ objections to a charging order against the interest of Meridian Financial Corporation Profit Sharing & Retirement Trust (“Meridian”) in MP 17. The parties also agreed that they had not completed discovery related to Meridian’s interest in MP 17. Petitioners stated that they would consider withdrawing the petition for a charging order against Meridian’s interest in MP 17, without prejudice to refiling after completing discovery. On August 23, 2018, Petitioners and the Baldino Debtors filed the pending stipulation addressing the pending petitions for charging orders against the Baldino Debtors’ interests in MP 15 and MP 17. (Doc. 329.)

 

*2 Based on the briefing on the petitions for charging orders (Docs. 167, 168, 213, 218), Ariz. Rev. Stat. sec. 29-655, the parties’ arguments at the April 2, 2018 and August 22, 2018 hearings, and the stipulation regarding the petitions for charging orders (Doc. 329), the Court finds that the petitions for charging orders against the Baldino Debtors’ interests in MP 15 and MP 17 should be granted and the parties’ stipulated proposed charging orders should be entered. The Court also finds that Petitioners’ petition for a charging order against Meridian’s interest in MP 17, which Petitioners have withdrawn, should be denied as moot and without prejudice to refiling after the parties complete discovery.

 

Accordingly,

 

IT IS RECOMMENDED that Petitioners’ petitions for charging orders (Docs. 167, 168) be GRANTED and that the Court enter charging orders against the Baldino Debtors’ interests in MP 15 and MP 17, as set forth in attachments A and B.

 

IT IS FURTHER RECOMMENDED that Petitioners’ petition for a charging order against Meridian’s interest in MP 17 (Doc. 168) be DENIED as moot and without prejudice to refiling.

 

This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1) of the Federal Rules of Appellate Procedure should not be filed until entry of the District Court’s judgment. The parties shall have fourteen days from the date of service of a copy of this recommendation within which to file specific written objections with the Court. See 28 U.S.C. sec. 636(b)(1); Fed. R. Civ. P. 6, 72. The parties have fourteen days within which to file a response to the objections. Failure to file timely objections to the Magistrate Judge’s Report and Recommendation may result in the acceptance of the Report and Recommendation by the District Court without further review. See United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir. 2003). Failure to file timely objections to any factual determinations of the Magistrate Judge may be considered a waiver of a party’s right to appellate review of the findings of fact in an order or judgment entered pursuant to the Magistrate Judge’s recommendation. See Fed. R. Civ. P. 72.

 

Dated this 24th day of August, 2018.

 

Editor’s Note: Tabular or graphical material not displayable at this time.

 

ATTACHMENT A

 

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

 

Rickman Brown, et al., No. CV-16-02801-PHX-SRB Petitioners,

 

CHARGING ORDER AGAINST THE INTERESTS OF THE BALDINO v. DEBTORS IN MORTGAGES LTD. OPPORTUNITY FUND MP 15 LLC

 

Eva Sperber-Porter, et al., Respondents.

 

Petitioners/Judgment Creditors Rickman Brown, Jeff Ross, Evans, Scholz, Williams & Warncke LLC, and Ross and Orenstein LLC f/k/a Ross, Orenstein & Baudry LLC (“Petitioners”) filed a petition with the Court on November 27, 2017, seeking a Charging Order against the interests of Respondents/Judgment Debtors Joseph Baldino and Helen Baldino, husband and wife (the “Baldinos”); The Baldino Family Revocable Trust, dated May 26, 1994, Joseph Baldino and Helen Baldino, trustees (the “Baldino Trust”); and The Meridian Financial Corporation Profit Sharing Plan & Retirement Trust, dated March 18, 1985, Joseph Baldino and Helen Baldino, trustees (collectively, with the Baldinos and the Baldino Trust, the “Baldino Debtors”) in the Arizona limited liability company registered as Mortgages Ltd. Opportunity Fund MP 15 LLC (“MP 15”), of which they are members. (Doc. 167.)

 

The Court issued its Order to Show Cause directing that the Baldino Debtors and MP 15 to show cause why the relief requested in the Petition should not be granted. Neither the Baldino Debtors nor MP 15 responded to the Order to Show Cause. The Court held hearings on the Petition on April 2 and August 22, 2018.

 

*3 The Court having considered the argument of counsel, the order to show cause, and the materials presented to the Court at the hearings on the order to show cause,

 

THE COURT FINDS:

 

1. Petitioners obtained a Judgment against the Baldino Debtors in this action on December 16, 2016 in the amount of $1,620,683.79.

 

2. Petitioners assert that the outstanding balance due on the underlying Judgment is the sum of $1,250,098.271 , as of August 10, 2018, plus interest and accrued costs, with interest accruing at the rate of 0.92 percent per annum. Respondents assert that the outstanding balance due on the underlying Judgment has been satisfied and have filed an Amended Rule 60(b)(5) Motion (Doc. 304) seeking a judicial determination of the same; and that Motion is pending.

 

1

 

This figure includes credit for the $205,558.43 the Court has ordered paid to Petitioners from the Court’s registry. (Order, Doc. 323).

 

3. The Baldino Debtors have interests in MP 15.

 

4. Under and pursuant to the provisions of A.R.S. sec. 29-655, Petitioners are entitled to an Order charging the interests of the Baldino Debtors in MP 15, with payment of the unsatisfied amount of the Judgment, including all contingent sums as they become non-contingent, effective ________________, 2018.

 

Therefore,

 

IT IS ORDERED:

 

1. Petitioners are hereby granted an Order charging the interests of the Baldino Debtors in MP 15, effective _____________, 2018, with payment of the unsatisfied amount of the Judgment.

 

2. MP 15, and the members and managers of MP 15, are ordered to refrain from paying any sums to the Baldino Debtors or their assignees on or after __________, 2018, until Petitioners’ Judgment is satisfied in full.

 

3. MP 15, and the members and managers of MP 15, are directed to pay to Petitioners any monies or profits due or to become due to the Baldino Debtors or their assignees on or after _______________, 2018. Payments are to be sent to Petitioners through their counsel of record in this matter.

 

ATTACHMENT B

 

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

 

Rickman Brown, et al., No. CV-16-02801-PHX-SRB Petitioners

 

CHARGING ORDER AGAINST THE INTERESTS OF THE BALDINO v. DEBTORS IN MORTGAGES LTD. OPPORTUNITY FUND MP 17

 

Eva Sperber-Porter, et al., Respondents.

 

Petitioners/Judgment Creditors Rickman Brown, Jeff Ross, Evans, Scholz, Williams & Warncke LLC, and Ross and Orenstein LLC f/k/a Ross, Orenstein & Baudry LLC (“Petitioners”) filed a petition with the Court on November 27, 2017, seeking a Charging Order against the interests of Respondents/Judgment Debtors Joseph Baldino and Helen Baldino, husband and wife (the “Baldinos”); The Baldino Family Revocable Trust, dated May 26, 1994, Joseph Baldino and Helen Baldino, trustees (the “Baldino Trust”); and The Meridian Financial Corporation Profit Sharing Plan & Retirement Trust, dated March 18, 1985, Joseph Baldino and Helen Baldino, trustees (collectively, with the Baldinos and the Baldino Trust, the “Baldino Debtors”) in the Arizona limited liability company registered as Mortgages Ltd. Opportunity Fund MP 17 LLC (“MP 17”), of which they are members. (Doc. 168.)

 

The Court issued its Order to Show Cause directing that the Baldino Debtors and MP 17 to show cause why the relief requested in the Petition should not be granted. The Baldino Debtors subsequently responded to the Order to Show Cause. The Court held hearings on the Petition on April 2 and August 22, 2018.

 

*4 The Court having considered the argument of counsel, the order to show cause, and the materials presented to the Court at the hearings on the order to show cause,

 

THE COURT FINDS:

 

1. Petitioners obtained a Judgment against the Baldino Debtors in this action on December 16, 2016 in the amount of $1,620,683.79.

 

2. Petitioners assert that the outstanding balance due on the underlying Judgment is the sum of $1,250,098.272 , as of August 10, 2018, plus interest and accrued costs, with interest accruing at the rate of 0.92 percent per annum. Respondents assert that the outstanding balance due on the underlying Judgment has been satisfied and have filed an Amended Rule 60(b)(5) Motion (Dkt. 304) seeking a judicial determination of the same; and that Motion is pending.

 

2

 

This figure includes credit for the $205,558.43 the Court has ordered paid to Petitioners from the Court’s registry. (Order, Doc. 323).

 

3. The Baldinos and Baldino Trust have interests in MP 17.

 

4. Under and pursuant to the provisions of A.R.S. sec. 29-655, Petitioners are entitled to an Order charging the interests of the Baldinos and the Baldino Trust in MP 17, with payment of the unsatisfied amount of the Judgment, including all contingent sums as they become non-contingent, effective ________________, 2018.

 

Therefore,

 

IT IS ORDERED:

 

1. Petitioners are hereby granted an Order charging the interests of the Baldinos and the Baldino Trust in MP 17, effective _____________, 2018, with payment of the unsatisfied amount of the Judgment.

 

2. MP 17, and the members and managers of MP 17, are ordered to refrain from paying any sums to the Baldinos, the Baldino Trust or their assignees on or after __________, 2018, until Petitioners’ Judgment is satisfied in full.

 

3. MP 17, and the members and managers of MP 17, are directed to pay to Petitioners any monies or profits due or to become due to the Baldinos, the Baldino Trust or their assignees on or after _______________, 2018. Payments are to be sent to Petitioners through their counsel of record in this matter.

 

C O M M O N      P A G E      F O O T E R

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More Articles On Charging Orders click here

 

THE CHARGING ORDER PRACTICE GUIDE BY JAY ADKISSON

 

The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more

 

Available for purchase at https://goo.gl/faZzY6

LAW REVIEW ARTICLES BY JAY ADKISSON

 

For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487

WEBSITE CONTENTS

 

Appeal - Issues relating to the appeal of a charging order

 

Bankruptcy - Treatment of the debtor/member's interest in bankruptcy

 

Compliance - Issues for the LLC and non-debtor members in complying with a charging order

 

Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute

 

Creditor Rights Restrictions - Limitations on creditors' management and informational rights

 

Economic Rights - Limitation of charging order and foreclosure to debtor's economic rights

 

Exclusivity - The charging order as the sole remedy available to creditors and exceptions

 

Exemptions - Available state and federal protections that may apply to charging orders

 

Foreclosure - Liquidation by judicial sale of the debtor's right to distributions

 

Information Rights - Creditors' ability to access information about the LLC

 

Intra-Member Disputes - Where one member obtains a charging order against another

 

Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs

 

Lien - The lien effect of a charging order and priority issues

 

Procedure - The procedure for obtaining a charging order and ancillary provisions

 

Receiver - The role of the receiver in charging order proceedings

 

Single-Member LLCs - Enforcing the judgment against an LLC with a sole member

 

Taxes - Tax issues relating to charging orders for all involved parties

 

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Additional Court Opinions About Charging Orders - Unsorted

 

OTHER INFORMATIONAL WEBSITES BY JAY ADKISSON

 

  • About Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances - https://jayadkisson.com/

 

  • Captive Insurance Companies - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business - https://captiveinsurancecompanies.com/

 

 

  • Collecting On A Judgment - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies - https://collectingonajudgment.com/

 

  • Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general - https://voidabletransactions.com/

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused - https://privateretirementplans.com/

 

  • Protected Series LLCs - An examination of the single most complex statutory legal structure yet created, with particular reference to the Uniform Protected Series Act of 2017 - https://protectedseriesact.com/

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues - https://calejl.com/

 

 

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© 2018 Jay D. Adkisson. All Rights Reserved. No claim to government works or the works of the Uniform Law Commission. The information contained in this website is for general educational purposes only, does not constitute any legal advice or opinion, and should not be relied upon in relation to particular cases. Use this information at your own peril; it is no substitute for the legal advice or opinion of an attorney licensed to practice law in the appropriate jurisdiction.  This site is https://chargingorder.com Contact: jay [at] jayad.com or by phone to 702-953-9617 or by fax to 877-698-0678.

 

Additional related sites: Voidable Transactions