Court Opinion

ID: 2789188
Source: CourtListenerOpinion
Date Created: 2015-03-25 19:02:41.655606+00
Date Added: 2024-06-11T12:04:41.707613
License: Public Domain

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                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

                                             2
      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).)

                                            3
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

                                              4
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

                                              5
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.

                                               6
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

                                              7
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.

                                              8
       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

                                             9
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,

                                                 10
          '[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.)

                                              11
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.)

                                                12
                                              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.

                                              13