Textron Financial Corporation v. Gallegos

Filing 207

REPORT AND RECOMMENDATION recommending that SPE LO's request for a show-cause order be denied. Objections to R&R due by 7/17/2017. Signed by Magistrate Judge Andrew G. Schopler on 6/30/2017.(lrf)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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Textron Financial Corp.,

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Case No.: 15-cv-1678-LAB-AGS
Plaintiff,

v.

REPORT AND RECOMMENDATION
ON PLAINTIFF’S APPLICATION
FOR A SHOW-CAUSE ORDER

Michael S. Gallegos,

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Defendant.

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Defendant Michael Gallegos owes plaintiff nearly $22 million. While Gallegos

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claims poverty, plaintiff says that Gallegos is using his businesses to fund a posh lifestyle,

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including a $7 million mansion, luxury cars, and college expenses for two daughters. To

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help collect the debt, the Court assigned Gallegos’s interests in various businesses to

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plaintiff and warned Gallegos not to “evade payment.” (ECF No. 191, at 2.) Thereafter,

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Gallegos shuttled money from one of these businesses to another company he co-owns.

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That company—which was not listed in the assignment order—paid the lease on his

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personal Mercedes Benz.

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This shell game is proper, contends Gallegos, because no business covered by the

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assignment order directly paid him. And plaintiff is only entitled to such direct payments,

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or so the argument goes.1 Plaintiff finds this argument unconvincing and moves for a show-

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cause hearing to determine if Gallegos is in contempt.

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Gallegos’s actions are gravely troubling. His businesses appear to pay his expenses,

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yet he draws no salary, which would be subject to garnishment by creditors (and taxation).

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He should pay his debts or pay for his debt-dodging. But the current assignment order—

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agreed to jointly by the parties—may lay an imperfect foundation for criminal contempt

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on these facts. To eliminate any wiggle room, this Court recommends modifying that order

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as follows:

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AMENDED ASSIGNMENT ORDER

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1.

For purposes of this amended assignment order, the following definitions

apply:

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a.

Payment: A “payment” refers to the transfer of any thing of value

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(including but not limited to money, securities, valuables, and credit), except for a bona

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fide salary for defendant Michael Gallegos. The term “payment” includes both direct and

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indirect transfers.

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b.

Personal expenses: The term “personal expenses” includes expenses

for Gallegos himself as well as for his immediate family.
2.

Plaintiff SPE LO Holdings, LLC, is assigned Gallegos’s interests in any

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payment from any entity listed in the attached Appendix. SPE LO is entitled to any payment

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these entities make—or would otherwise make—that is: (a) directly to Gallegos; or (b) for

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Gallegos’s personal expenses; or (c) to any intermediary so that another may ultimately

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make a payment directly to Gallegos or for Gallegos’s personal expenses.

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3.

Gallegos must immediately report to SPE LO the amount and source of any

salary he is currently receiving. This is a continuing duty, so Gallegos must also

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Gallegos admits that one business improperly paid him $250 after his interest in
that payment was assigned to plaintiff, but claims it was due to a clerical error.
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immediately report any changes to his salary, such as a new salary source or any changed

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salary amount.

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4.

Gallegos shall not cause or encourage any entity listed in the attached

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Appendix to make a payment: (a) to him directly; or (b) for his personal expenses; or (c) to

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any intermediary so that another may ultimately make a payment directly to Gallegos or

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for Gallegos’s personal expenses.

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5.

If any entity listed in the attached Appendix fails to provide SPE LO a

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payment to which it is entitled as described above, Gallegos must immediately cause the

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assignment and transfer of that payment to SPE LO.

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6.

Gallegos must immediately provide each entity listed in the attached

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Appendix with a copy of this amended assignment order and inform each such entity of its

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obligation to immediately re-direct the payments described above to SPE LO.

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7.

Gallegos is warned that if he violates this or any other Court order, the case

may be referred to the U.S. Attorney’s Office for a criminal contempt prosecution.

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* * * * *
In light of the foregoing, this Court recommends that SPE LO’s request for a showcause order be DENIED.

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Within five calendar days of the District Judge’s adoption of the foregoing proposed

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amended assignment order or issuance of a different amended assignment order, Gallegos

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must file with this Court a notarized verification that he has read that amended assignment

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order in its entirety (including any Appendix), that he fully understands it, and that he

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agrees to obey it. That verification must be signed by Gallegos personally, under penalty

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of perjury, in the presence of a notary licensed in the state of California.

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Any objection to this report is due by July 17, 2017.
Dated: June 30, 2017

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APPENDIX
1. ABQ Hotel & Waterpark Investment, LLC
2. ABQ Hotel Investment, LLC
3. ABQ Hotel Ventures, LLC
4. Advent Hotel Management Corporation
5. Alameda Hotel Investment LLC
6. Amberly Hotel Investment, LLC
7. American Property Hospitality Management, LLC
8. American Property Hospitality
9. American Property Hotel II, LLC
10. American Property Hotel LLC
11. American Property Investments, LLC
12. American Property Investors – Alexis Park, LLC
13. American Property Investors – Reid Park, LLC
14. American Property Investors-ABQ, LLC
15. American Property Investors-Knoxville, LLC
16. American Property Investors, LLC
17. American Property Management Corp.
18. American Property--Management Corporation
19. AP/APMC Management, Limited Partnership
20. AP/APMC Management II, Limited Partnership
21. APHM Cancun Hotel Management, LLC
22. APHM Carlise, LLC
23. APHM FL Hotel Management, LLC
24. APHM Hotel Management, LLC
25. APHM NM Concessions, LLC
26. APHM Sunport, LLC
27. APMC Carlise Hotel Investors, LLC
28. APMC Concessions, Inc.
29. APMC Hotel Management, LLC
30. APMC International Hotel Management, LLC
31. APMC San Diego Hotel Management, LLC
32. Arroyo Grande Inn-Vestment, LLC
33. Arroyo Hotel, LLC
34. Armada Hotel Investment, LLC
35. Avenger Hotel Management, LLC
36. Bay Area Hotel Investment LLC
37. Canton Hotel Investment, LLC
38. Charleston Hotel Management Corporation
39. Charleston Hotel Management, LLC
40. Charleston Investment, LLC
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41. CRS Hotel Investment I, LLC
42. Coronado Hotel Management Corporation
43. Coronado Investment, LLC
44. Cumberland Hotel Management, LLC
45. Diamond Hotel Management, LLC
46. Downtown Hotel Investors, LLC
47. Downtown San Diego Hotel Investment, LLC
48. DSS Hotel Investment, LLC
49. Fine Hotels Limited Partnership
50. Front Street Hotel Investment, LLC
51. Galisteo Hotel Investment, LLC
52. Garden Hotel Investment, LLC
53. Gaudalupe Hotel Investment, LLC
54. Global Bancorp Commodities and Investments, Inc.
55. Grover Beach Inn-vestment, LLC
56. Grover Hotel, LLC
57. Harbor View Hotel Manager, LLC
58. Harbor View Hotel Ventures, LLC
59. Harbor View Investments
60. High Desert Hotel Investment, LLC
61. Jet Stream Hotel Management, LLC
62. Lamy Hotel Investment, LLC
63. Las Cruces Hotel Limited Partnership
64. Las Cruces Hotel Management Corp
65. Little Italy Hotel Investment LLC
66. LLJ Canton Vinters, LLC
67. LLJ Hotel Ventures 4, LLC
68. Market Avenue Hotel, LLC
69. Market Avenue LLC
70. Melbourne Beach Hotel LTD. Co. LLC
71. Melbourne Beach Hotel Management Corp.
72. Melbourne Beach Investment Ltd. Co.
73. Mid-Continent Hotel Management, LLC
74. Mountain Road Hotel Investment, LLC
75. Northside Hotel Investment, LLC
76. Old Town Hotel Investment, LLC
77. Pacific Pearl Hotel Management - ABQ, LLC
78. Pacific Pearl Hotel Management - Boerne, LLC
79. Pacific Pearl Hotel Management - Fort Myers, LLC
80. Pacific Pearl Hotel Management -La Jolla, LLC
81. Pacific Pearl Hotel Management - Las Vegas, LLC
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82. Pacific Pearl Hotel Management - Niagara, LLC
83. Pacific Pearl Hotel Management - San Diego, LLC
84. Pacific Pearl Hotel Management - SLC, LLC
85. Pacific Pearl Hotel Management - Wisconsin, LLC
86. Pacific Pearl Hotel Management, LLC
87. Pacific Pearl Hotel Mgmt - Canton, LLC
88. Pacific Pearl Hotel Mgmt - Niagara, LLC
89. Pacific Pearl Hotel Mgmt - NW, LLC
90. Pacific Pearl Hotel Mgmt - Ontario, LLC
91. Pacific Pearl Hotel Mgmt - Phoenix, LLC
92. Pacific Pearl Hotel Mgmt - Scottsdale, LLC
93. Pacific Pearl Hotel Mgmt - Tulsa, LLC
94. Pacific Pearl Hotels, LLC
95. Pan American Hotel Investment, LLC
96. Passaic Investment LLC
97. Picacho Hotel Investment LLC
98. Reid Park Investors, LLC
99. Rio Grande Hotel Investment, LLC
100. Rio Rico Resort Investment, LLC
101. Rock Around the World Management, LLC
102. Rosecrans Hotel Investment, LLC
103. San Antonio Hotel Investment-GP, LLC
104. San Antonio Hotel Investment-LP, LLC
105. San Diego Harbor View Investment, LLC
106. San Diego Hotel Investment LLC
107. Sangre De Cristo Hotel Investment LLC
108. Santa Fe Hotel Investment LLC
109. Santa Fe Picacho Hotel Management Corp.
110. Sassafras Hotel Investment, LLC
111. Sawmill Hotel Investment, LLC
112. St. Francis Hotel Investment, LLC
113. Stadium Hotel Investment, LLC
114. Tampa Hotel Investors LLC
115. Tucson Hotel Investors, LLC
116. UBB Investment LLC
117. Union City Hotel Management Corporation
118. Union City Hotel, LLC
119. Union City Investment, LLC
120. Wisconsin Dells Hotel Investment, LLC
121. Wisconsin Dells Investment, LLC
122. Yakima Hotel Investment LLC
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