Marriage of Shannahan CA4/1 (2015) · DecisionDepot
Marriage of Shannahan CA4/1
California Court of Appeal Mar 25, 2015 No. D064822Unpublished
Filed 3/25/15 Marriage of Shannahan CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
In re the Marriage of SARACIA and WILLIAM P. SHANNAHAN. D064822 SARACIA SHANNAHAN,
Respondent, (Super. Ct. No. D483710)
v.
WILLIAM P. SHANNAHAN,
Appellant;
KOLMAR, LLC,
Appellant.
APPEAL from an order of the Superior Court of San Diego County, Robert C.
Longstreth, Judge. Affirmed.
RSR Law Group and James Reynolds for Appellant William P. Shannahan.
Smylie & Van Dusen and Scott A. Smylie for Appellant Kolmar, LLC.
Stephen Temko; Janis Law Group and Dean T. Janis for Respondent Saracia
Shannahan.
William Shannahan (Husband) and Kolmar, LLC (Kolmar) (together Appellants)
appeal an order granting the motion of Saracia Shannahan (Wife) to enforce a marital
dissolution judgment against Husband and ordering the release to her of a portion of the
proceeds of the sale of certain real property being held in the trust account of Kolmar's
attorneys. On appeal, Appellants contend the trial court erred by: (1) ordering the release
of the property sale proceeds to Wife; (2) wrongly depriving Kolmar of a jury trial in
Wife's separate fraudulent conveyance action; and (3) finding Husband apparently
committed a fraud on the court. Based on our reasoning below, we affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
In 1970, Husband and Ivan Ankenbrandt acquired real property located at 202-204
Kolmar Street in La Jolla (Property). Each held title to an undivided 50 percent interest
as tenants in common.
In 1981, Husband conveyed his undivided 50 percent interest in the Property to
himself, as trustee of the 1981 Shannahan Separate Property Trust (Trust). In 1983,
Husband and Wife married. In 2004, they separated and Wife filed for dissolution of
their marriage.
In 2006, Ankenbrandt filed a partition action against Husband, apparently seeking
to force the sale of the Property and distribution of the sale proceeds. On July 1, 2006,
Husband, as trustee of the Trust, signed an operating agreement for the formation of
Kolmar as a limited liability company (LLC) in Nevada, but did not file articles of
organization for Kolmar with the Nevada Secretary of State until September 30, 2008.
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On September 24, 2007, Husband, as trustee of the Trust, signed a grant deed
(Deed) purporting to convey the Trust's interest in the Property to Kolmar. Also on
September 24, Husband, as trustee of the Trust, signed a document assigning a 50 percent
interest in Kolmar to Virginia Way, LP (VWLP). That assignment stated the agreed
value of the 50 percent interest in Kolmar was $300,000. On that date, Husband, as
trustee on behalf of the Trust and also as the general partner of VWLP, signed a
restatement of Kolmar's operating agreement.
On April 7, 2008, Husband's signature on the Deed was acknowledged by a notary
public. On April 8, Husband recorded the Deed with the San Diego County Recorder's
Office.
On August 29, 2008, a judgment of dissolution on reserved issues (Judgment) was
entered, awarding Wife about $3,000,000 against Husband.1 The Judgment confirmed
that the 50 percent interest in the Property was Husband's separate property. The court
reserved jurisdiction to enforce the Judgment.
On September 30, 2008, Husband filed articles of organization for Kolmar with
the Nevada Secretary of State. On October 10, the trial court issued written findings and
order after hearing (FOAH) based on an August 14 hearing before a privately
compensated temporary judge (Hon. Thomas Ashworth (Ret.)) and that judge's written
1 The judgment was based on the July 29, 2008, findings and orders of a privately compensated temporary judge. Those findings included a finding that Husband was the alter ego of VWLP and all other entities. On appeal, we affirmed that judgment for the most part, reversing only the court's denial of Wife's requests for attorney fees and sanctions. (Shannahan v. Shannahan (Dec. 1, 2010, D053701) [nonpub. opn.] (Shannahan I).)
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findings and order after hearing, signed on October 1. In the FOAH, the court granted
Wife's request for a judicial lien "against all assets in [Husband's] name," which lien was
to be in effect until the final division of the assets under the judgment of dissolution took
place. The FOAH also stated Wife's attorney was to prepare the written order and submit
it to the court and Husband's attorney for approval.
In December 2008, Kolmar signed escrow instructions to transfer its interest in the
Property through an Internal Revenue Code section 1031 exchange. In January 2009, the
Property was sold to a third party purchaser and the sale proceeds were held in escrow.
On June 10, 2009, counsel for Kolmar and Wife signed a stipulation for partial
distribution of proceeds from the sale of the Property, providing that the balance of the
sale proceeds after distributions made to Ankenbrandt and the referee would be
transferred to the attorney-client trust account of Kolmar's counsel and no distributions
from that trust account would be made without agreement of the parties or a court order.
In August 2009, Wife filed a fraudulent conveyance action against Husband and Kolmar,
arguing Husband's transfer of the Trust's interest in the Property to Kolmar was
fraudulent and intended to avoid Husband's liability under the Judgment.
In June 2012, Wife filed a motion to enforce the Judgment, seeking the release to
her of the Property sale proceeds held in the attorney-client trust fund of Kolmar's
counsel per the parties' stipulation. Wife argued that because Kolmar did not exist as an
LLC when Husband, on September 24, 2007, signed the Deed that purportedly
transferred the Trust's interest to Kolmar, the Deed was null and void and therefore those
sale proceeds should be considered to be the property of the Trust and, as a result, subject
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to enforcement of the Judgment. Kolmar opposed the motion, arguing that although its
articles of organization were not filed until September 30, 2008, it nevertheless existed as
a general partnership at the time Husband signed the Deed and therefore the Deed
effectively transferred the Trust's interest in the Property to it. Kolmar argued that
because on September 24, 2007, Husband assigned a 50 percent interest in Kolmar to
VWLP, Kolmar existed as a general partnership on that date. Kolmar also asserted that
on June 9, 2009 (one day before its counsel signed the stipulation to hold the sale
proceeds in his attorney-client trust account), a grant deed signed by Husband was
recorded pursuant to which Virginia Way, LLC (VWLP's successor entity) conveyed to
Kolmar a partial interest in certain Virginia Way real property purportedly in exchange
for an assignment of Kolmar's interest in the Property sale proceeds.
The trial court (San Diego County Superior Court Judge Lorna Alksne) heard
arguments of counsel on Wife's motion to enforce the Judgment and issued a minute
order granting Wife's motion, finding Wife obtained a judicial lien in August 2008 that
applied to the Trust's interest in the Property sale proceeds, and Husband's attempt to
transfer those proceeds to Kolmar was not valid because it had not been incorporated
(i.e., legally organized in the State of Nevada) prior to issuance of that judicial lien. After
Judge Alksne subsequently recused herself, San Diego County Superior Court Judge
Robert C. Longstreth issued an order on September 17, 2013, incorporating Judge
Alksne's findings and orders. The court found Wife's judicial lien obtained in August
2008 was valid, the funds held in the trust account were subject to that lien, and
Husband's attempt to transfer the Property to Kolmar was not valid because Kolmar was
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not incorporated (i.e., by filing of articles of organization) before Wife obtained the
judicial lien. Accordingly, the court ordered that the funds held in the trust account of
Kolmar's counsel in the amount of $1,232,210 be released to Wife to enforce the
Judgment. Kolmar timely filed a notice of appeal and Husband timely filed a notice of
cross-appeal.2
DISCUSSION
I
Presumption of Correctness
A trial court's judgment or order is presumed to be correct. In Denham v. Superior
Court (1970) 2 Cal.3d 557, the court stated:
"[I]t is settled that: 'A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown [by the appellant]. This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error.' " (Id. at p. 564.)
The burden is on the appellant to overcome the presumption of correctness and
show reversible error. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th
600, 610; Fundamental Investment etc. Realty Fund v. Gradow (1994) 28 Cal.App.4th
966, 971.) We generally will imply all findings necessary to support a judgment or order
when there is no statement of decision. (In re Marriage of Cohn (1998) 65 Cal.App.4th
923, 928.) Furthermore, " '[n]o rule of decision is better or more firmly established by
2 Because Husband's opening cross-appellant's brief simply joins in and incorporates Kolmar's opening appellant's brief, we consider their appellate arguments to be the same.
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authority, nor one resting upon a sounder basis of reason and propriety, than that a ruling
or decision, itself correct in law, will not be disturbed on appeal merely because given for
a wrong reason. If right upon any theory of the law applicable to the case, it must be
sustained regardless of the considerations which may have moved the trial court to its
conclusion.' " (D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19; see also
In re Marriage of Mathews (2005) 133 Cal.App.4th 624, 632; Estate of Beard (1999) 71
Cal.App.4th 753, 776.)
II
Enforcement Order
Appellants contend the trial court erred by ordering the release to Wife of the
Property sale proceeds held in the attorney-client trust account of Kolmar's counsel to
enforce, in part, the Judgment. Appellants assert the court erred by finding Husband's
transfer to Kolmar of the Trust's interest in the Property was not valid because Kolmar
had not been incorporated before Wife obtained her judicial lien in August 2008. They
argue that the Deed signed by Husband, as trustee of the Trust, on September 24, 2007,
validly conveyed to Kolmar the Trust's interest in the Property despite Kolmar's lack of
articles of organization because it was a general partnership at the time of that
conveyance.
We are not persuaded by Appellants' argument and affirm the trial court's
enforcement order, albeit on somewhat different reasoning than relied on by the court.
(D'Amico v. Board of Medical Examiners, supra, 11 Cal.3d at p. 19.) At the time of
Husband's purported conveyance on September 24, 2007, Kolmar did not exist as a
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limited liability company (LLC), general partnership, or other entity and therefore could
not accept delivery of the Deed. Absent a valid delivery of the Deed, Husband, as trustee
of the Trust, continued to hold title to the 50 percent interest in the Property, which
interest, and its portion of the subsequent sale proceeds, were subject to Wife's
enforcement of the Judgment.
Appellants concede that Kolmar did not exist as a valid limited liability company
(LLC) under the laws of the State of Nevada until it filed articles of organization on
September 30, 2008. Accordingly, Kolmar was not a valid LLC on September 24, 2007,
when Husband signed the Deed purporting to convey the Trust's interest in the Property
to it. Furthermore, contrary to Appellants' argument, we conclude Kolmar also was not a
valid general partnership at the time Husband signed the Deed and purportedly delivered
it to Kolmar on September 24, 2007.
On July 1, 2006, Husband, as trustee of the Trust, signed an operating agreement
for the formation of Kolmar as an LLC in Nevada, but did not file articles of organization
for Kolmar with the Nevada Secretary of State at that time. On September 24, 2007,
Husband, as trustee of the Trust, signed the Deed purporting to convey the Trust's interest
in the Property to Kolmar. Also on September 24, Husband, as trustee of the Trust,
signed a document purporting to assign a 50 percent interest in Kolmar to VWLP.
Importantly, however, that assignment stated the agreed value of the 50 percent interest
in Kolmar was $300,000. On that date, Husband, as trustee and on behalf of the Trust
and also as the general partner of VWLP, signed a restatement of Kolmar's operating
agreement.
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As Appellants assert, a general partnership under both California and Nevada law
is an association of two or more persons to carry on as co-owners of a business for profit.
Although we assume arguendo that at some time on September 24, 2007, a general
partnership was formed between Kolmar and VWLP based on Husband's signing a
document assigning to VWLP a 50 percent interest in Kolmar, that general partnership
could not have existed at the time Husband signed and purported to deliver the Deed to
Kolmar on that date. As Wife notes, the document by which Husband, as trustee of the
Trust, purported to assign a 50 percent interest in Kolmar to VWLP stated the agreed
value of that 50 percent interest in Kolmar was $300,000. However, there is nothing in
the record showing Kolmar owned or held title to any property or other assets prior to
September 24, 2007. Therefore, the only reasonable inference is that Kolmar attained its
total value of $600,000 by virtue of Husband's signing and purportedly delivering the
Deed to Kolmar that ostensibly conveyed to it the Trust's 50 percent interest in the
Property. Accordingly, the purported assignment to VWLP of a 50 percent interest in
Kolmar on September 24, 2007, could have occurred only after Husband had already
signed and purported to deliver the Deed to Kolmar. Otherwise, the value of a 50 percent
interest in Kolmar could not have been $300,000 as stated in the purported assignment.
Contrary to Appellants' argument, Husband's signing and purported delivery of the
Deed on September 24, 2007, did not occur simultaneously with Husband's signing the
document assigning to VWLP the 50 percent interest in Kolmar on that same date.
Because a general partnership between Husband, as trustee of the Trust, and VWLP
could not have been formed until after Husband signed the document assigning to VWLP
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the 50 percent interest in Kolmar, that purported general partnership could not have
existed at the time when Husband, earlier on September 24, 2007, signed and purported
to deliver to Kolmar the Trust's interest in the Property. Therefore, Husband's signing
and delivery of the Deed was, in effect, an attempted delivery to himself as trustee of the
Trust of that interest in the Property and therefore did not result in any change in the
holder of the title to that property interest.
Furthermore, as Wife asserts, cases have held that an attempted conveyance of real
property to a nonexistent entity is void. (See, e.g., Stone v. Jetmar Properties, LLC
(Minn.App. 2007) 733 N.W.2d 480, 486 [deeds cannot be delivered to nonexistent
entities such as "incipient" LLC's before their articles are filed] (Stone); Matter of
Hausman (N.Y. 2008) 51 A.D.3d 922, 923-924 ["As a general rule, a purported entity
which is not yet in legal existence cannot take title to real property [citations]. . . . In the
absence of a colorable attempt to comply with the statute governing the organization of
[LLC's] by filing, we cannot find that the LLC was a de facto entity capable of taking
title on the date the deed was executed [citations]."]; Julian v. Petersen (Utah App. 1998)
966 P.2d 878, 881 ["It is well-settled that an attempted conveyance of land to a
nonexisting entity is void."].) In Stone, the Minnesota appellate court stated:
"Under Minnesota law deeds cannot be delivered to nonexistent entities, whether the entities are natural or legal. . . . [T]he supreme court has held that because an organization was not a corporation de jure or de facto, it could not take title to real estate. [Citation.] We can find no basis in Minnesota law for delaying transfer of title to some indeterminate future date when the grantee might come into existence. In fact, 'many, but not all, courts have denied validity to deeds conveying property to corporations which are not incorporated at the time of conveyance.' [Citations.] According to these courts,
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'[t]he effective date of a deed is usually stated to be the date of delivery, and if at that time the corporation is "non-existent," the ordinary rule governs and the deed is treated as a nullity.' "3 (Stone, supra, 733 N.W.2d at p. 486.)
Stone rejected the application of cases from other jurisdictions that delayed the question
of delivery of a deed until the later time of incorporation because Stone did not have the
requisite intent to convey the property at that later date. (Id. at p. 487.) Accordingly,
Stone concluded:
"We see no reason to deviate from the 'ordinary rule' that a deed to an entity nonexistent at the time of conveyance is void. Limiting the question of delivery to the time of conveyance is not only consistent with Minnesota law, it is also a logical result given the ease of formal incorporation and organization. Allowing a form of future interest to vest in unorganized entities would be inconsistent with our public policy of encouraging legal organization." (Stone, supra, 733 N.W.2d at p. 487.)
We agree with Stone's reasoning and apply that reasoning to the facts in this case.
At the time of Husband's signing and purported delivery of the Deed on September 24,
2007, Kolmar did not exist as an LLC or other legal entity because it had not yet filed any
articles of organization with the Nevada Secretary of State and had not yet become a
general partnership between Husband, as trustee of the Trust, and VWLP. Because
Kolmar did not exist as a legal entity at that time, it could not accept delivery of the
Deed. (Civ. Code, §§ 1054 ["A grant takes effect, so as to vest the interest intended to be
transferred, only upon its delivery by the grantor."], 1056 ["A grant cannot be delivered
to the grantee conditionally."]; Stone, supra, 733 N.W.2d at p. 486.) Therefore, the Deed
3 In Minnesota, de facto corporations and de facto LLC's are not recognized under current law. (Stone, supra, 733 N.W.2d at p. 485.)
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is null and void and did not legally convey the Trust's interest in the Property to Kolmar.4
Instead, Husband, as trustee of the Trust, continued to hold that interest in the Property
and, after the Property's sale pursuant to the Internal Revenue Code section 1031
exchange, he acquired ownership of a portion of the proceeds from the sale. Because the
Trust's property was Husband's separate property and thus was subject to the Judgment,
Wife could, and properly did, file a motion to enforce the Judgment against those sale
proceeds being held in the attorney-client trust account of Kolmar's counsel and the trial
court properly granted that motion.
American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th
551, cited by Appellants, is factually inapposite to the facts in this case and does not
persuade us to reach a contrary conclusion. In Windridge, the court concluded the
plaintiff's failure to file a certificate of limited partnership before filing its action against
the defendant did not deprive it of the legal capacity to sue because it nevertheless existed
as a general partnership at the time it filed that action. (Id. at pp. 559-565.) In contrast,
in this case, as discussed above, there was no general partnership at the time Husband
signed and purported to deliver the Deed to Kolmar.
4 Because the facts in this case are inapposite to those in Luna v. Brownell (2010) 185 Cal.App.4th 668, we need not address its holding that a deed executed in anticipation of the creation of a trust, which is in fact created thereafter, may be valid between the grantor and grantee on the date the trust was formed. (Id. at p. 675.)
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III
Remaining Contentions
Because we dispose of this appeal on the above grounds, we need not, and do not,
address Appellants' remaining contentions. In any event, because the trial court's order
apparently will make Wife's fraudulent conveyance action moot, we need not address
Appellants' argument that the order had the effect of wrongly depriving Kolmar of a jury
trial in that fraudulent conveyance action. Furthermore, although Appellants complain
the trial court found, either implicitly or expressly, that Husband committed a fraud on
the court by allowing Kolmar's counsel to enter into a stipulation to hold the Property sale
proceeds in his attorney-client trust account when he (Husband) knew he had purported
to assign Kolmar's interest in those proceeds to Virginia Way, LLC, just one day before
its counsel signed that stipulation, we do not rely on that finding by the trial court in
disposing of this appeal and elect to not address that finding in this opinion.
DISPOSITION
The order is affirmed. Wife is entitled to her costs on appeal.
McDONALD, J. WE CONCUR:
BENKE, Acting P. J.
NARES, J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that a deed conveying real property to a nonexistent entity is void, meaning the property interest remained with the husband and was subject to the wife's judicial lien. Consequently, the trial court properly ordered the release of the sale proceeds to the wife to enforce the dissolution judgment.
Issues
Whether a deed conveying real property to an entity that had not yet filed articles of organization or formed a partnership is valid.
Whether the trial court erred in ordering the release of property sale proceeds held in a trust account to satisfy a marital dissolution judgment.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“It is well-settled that an attempted conveyance of land to a nonexisting entity is void.”
“At the time of Husband's signing and purported delivery of the Deed on September 24, 2007, Kolmar did not exist as an LLC or other legal entity because it had not yet filed any articles of organization”