Cooper v. Leeper





Filed 5/19/11 Cooper v. Leeper CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

MARY E. COOPER, Plaintiff and Respondent, v. DAVID M. LEEPER, Individually and as Trustee, etc., Defendant and Appellant.

B220481 (Los Angeles County Super. Ct. No. EC045767)

APPEAL from a judgment of the Superior Court of Los Angeles County. Michael S. Mink, Judge. Affirmed as modified.
Law Office of Kent M. Bridwell and Kent M. Bridwell for Defendant and Appellant.
Law Office of Timothy P. Peabody and Timothy P. Peabody for Plaintiff and Respondent.
________________________

Defendant David M. Leeper in his individual capacity and as Trustee of the Louise Street Trust appeals judgment in favor of plaintiff Mary E. Cooper in her action for elder abuse. Leeper, an attorney, assisted Cooper in a quiet title action regarding her residence, and took a deed of trust to secure his professional fee. After Leeper foreclosed on Cooper’s home to satisfy his fee, a dispute arose over the amount owed under the language of the parties’ fee agreement. The trial court found Leeper committed elder abuse in seeking more than he was owed in the foreclosure sale. Leeper contends the trial court erred in admitting evidence in contravention of motions in limine, in finding that his proof of claim in Cooper’s bankruptcy proceedings was not res judicata concerning the amount owed, in finding he committed elder abuse, and in disregarding the rules of finality of trustee’s sales. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
1. Plaintiff’s Quiet Title Action and Fee Agreement with Leeper.
Plaintiff owned residential property on North Louise Street in Glendale (the Property). Plaintiff’s parents deeded the Property to her by grant deed in July 1986, but the deed was not recorded. Plaintiff had moved into the house when she was 18, and was 68 at the time she first met Leeper. Her parents owned the Property free and clear of liens.
In 1989, Ellen Bradford forged deeds purporting to transfer title of the property to a third party, and two deeds of trust were recorded against the property. The recordation of these deeds triggered a reassessment of the property, and plaintiff was unable to meet the increased property tax payments. In August 2000, the County of Los Angeles sold the property to John Carr at a tax auction. At the time there was approximately $70,000 in back taxes owed. Carr served plaintiff with a 30-day notice to quit, and Carr brought an unlawful detainer action against plaintiff.
Leeper^[1] first met plaintiff at the Property in September 2000. He came to her house and wanted to discuss the unlawful detainer action filed by Carr. Leeper told her he could take care of it for her, and she gave him all of the documents relating to the house, the background information on her parents’ deed to her, the transfer, and the increase in her taxes. Leeper contacted plaintiff because he discovered her house was listed in the tax auction sales book as delinquent in the payment of taxes. The county was holding excess proceeds from the sale, and Leeper believed he could get a commission for assisting plaintiff in obtaining the excess proceeds. Plaintiff believed that Leeper was very knowledgeable about the title issues pertaining to her house.
Leeper did not discuss an hourly fee with plaintiff. Later, they met at a restaurant and Leeper gave her a fee agreement to sign. Leeper told plaintiff she could “cross out” anything she did not like in the fee agreement. According to Leeper, he intended to charge her one-third of any recovery for his services, and although they initially discussed an $80,000 fee, it was changed to one-third of the appraised value of the property because plaintiff did not want to commit to $80,000 in fees. Plaintiff understood Leeper’s fee would be based upon a valuation of the house at $240,000, of which $80,000 would be one-third.
As entered into by the parties on October 9, 2000, the fee agreement provided that “[plaintiff] wishes to retain [Leeper] to file a claim/lawsuit to attempt to recover title to her home” as well as to seek any money due her, and to file and defend lawsuits, including Carr’s unlawful detainer claim. With respect to payment for Leeper’s services, the fee agreement provided that “[Leeper] is to receive one third (1/3) of the amount recovered in connection with this matter, from any source related to this matter. If [the Property] is recovered, free of any claim for taxes, penalties, interest, etc, then the fee would be (1/3) the appraised value at the time of recovery, minus expenses listed below, if the home is actually sold.” The fee agreement acknowledged, “if the contingency fee becomes due, [plaintiff] realizes that [she] will probably need to sell the [Property], although other options will be explored, depending on the final results of the case.”
On October 20, 2000, plaintiff recorded the deed to the Property she had received from her parents.
Leeper also asked plaintiff to sign a deed of trust securing the sum of $80,000. Leeper’s deed of trust was recorded December 20, 2000. Plaintiff claimed she did not want to give Leeper the deed of trust, but he told her she would be “‘out on the street’” if she did not sign it. Leeper denied he coerced her into signing it. He did not believe the deed of trust legally gave him an interest in the Property because at the time of its execution, plaintiff had lost the Property in the tax sale to Carr.
In October 2001, the parties executed a revised fee agreement because the first one was “messy.” The revised fee agreement provided that plaintiff had retained Leeper to “attempt to recover title” to the Property, and that he would be entitled to a fee of “one third (1/3) of the amount recovered in connection with this matter.”
In May 2002, Leeper obtained a judgment quieting title in the Property to plaintiff. However, plaintiff was unable to pay Leeper because it would have required her to sell the Property. Leeper was successful in getting the taxes reduced on the Property, although in February 2003 he advised her that because 12 years of back taxes were due, the Property could be included in the August 2003 tax auction.
2. Plaintiff’s Back Taxes and Chapter 13 Bankruptcy.
In March 2003, Leeper offered to assist plaintiff with the sale of the Property. At the time, he valued the house at approximately $400,000. In August 2003, he wrote her to advise her that $60,813.55 remained due in taxes, and that the Property could be “purchased at any time, even right now, for only the amount of the taxes due, by a qualified organization. This would leave you nothing.” Leeper again suggested he help her get the Property ready for sale. Apparently, the Property was scheduled to be sold at auction in August 2003, but no sale took place.^[2] Plaintiff’s house was again listed to be sold at auction in August 2005 tax auction, and Leeper offered to help.
Leeper filed a notice of default and election to sell under deed of trust in February 2006, stating that $231,860.79 was due as of February 13, 2006. On May 22, 2006, Leeper published a notice of trustee’s sale under deed of trust for June 8, 2006. One week before the sale of the Property, on June 2, 2006, plaintiff filed for bankruptcy under chapter 13.
Plaintiff filed for bankruptcy because she needed time to get a loan on the Property. On November 30, 2006, defendant filed a proof of claim in plaintiff’s bankruptcy case for $217,600, constituting “one-third of the net that debtor should receive for debtor’s residence.” The proof of claim asserted that an October 2005 appraisal of the Property valued it at $720,000. Plaintiff’s chapter 13 amended plan dated October 17, 2006 listed $81,000 in back taxes on the Property, and specified that she intended to sell the Property within six months of confirmation of her plan. Further, she was to commence an action in bankruptcy court to determine the validity, security, and extent of Leeper’s claim. Plaintiff’s plan provided that the chapter 13 trustee would hold funds from the sale of the Property sufficient to cover Leeper’s potential claim in the “amount of $250,000.” On January 22, 2007, plaintiff’s objection to the proof of claim was overruled.
During April 2007, plaintiff, with the assistance of her son Dr. Michael Cooper, was able to obtain a loan commitment for the Property of $420,000, but asserted she was unable to fund the loan because Leeper refused to provide the lender with a payoff demand. Leeper disputed that he received a payoff demand or that he refused to provide one, and contended he was not required to do so because the notice of sale had already been published. In May 2007, plaintiff’s attorney Warren L. Brown contacted Leeper regarding Leeper’s failure to send a beneficiary statement to the escrow. The loan did not fund.
In May 2007, plaintiff moved in the bankruptcy court for a determination of the secured status of Leeper’s claim. She asserted that Leeper’s claim was for $80,000, based upon an estimated value for the Property of $240,000 at the time of the fee agreement. On October 16, 2007, the bankruptcy court denied the motion as “moot for the reasons set forth on the record during the hearing on September 6, 2007.”^[3] Plaintiff’s bankruptcy case was dismissed on September 24, 2007.
3. Plaintiff’s Complaint, Leeper’s Foreclosure Sale.
On October 18, 2007, plaintiff filed an amended complaint stating nine causes of action (fraud, breach of contract, wrongful foreclosure, unfair business practices, conspiracy, intentional infliction of emotional distress, and elder abuse). Plaintiff sought an injunction to stop the foreclosure sale.^[4]
On October 23, 2007, plaintiff obtained an injunction staying the foreclosure sale upon posting of a $100,000 bond. Plaintiff was unable to post the bond.
Leeper’s trustee’s sale was held October 30, 2007. The Property sold for $313,300. Leeper (through his trust the Louise Street Trust) received $229,307.52 in proceeds from the sale. Plaintiff received $77,588.^[5]
4. Trial, Statement of Decision.
Defendant filed four motions in limine, two of which are relevant to this appeal.
Motion in limine no. 1 sought to exclude evidence that defendant did not give plaintiff a payoff demand notice because such a demand need not be given after the recordation of a notice of sale pursuant to Civil Code section 2943, subdivision (c). The court granted the motion.
Motion in limine no. 2 sought to exclude evidence submitted to contradict defendant’s proof of claim filed in plaintiff’s chapter 13 proceedings. Defendant wanted to preclude plaintiff from asserting that the valuation date of the property should be any time other than October 2005, the date defendant obtained an appraisal of the property valuing it at $720,000. Defendant argued that plaintiff was precluded by res judicata from asserting any different valuation based upon the proof of claim.
The court found two of the three elements of res judicata satisfied by the proof of claim, namely, that there was a final judgment (plaintiff’s objection to the proof of claim was overruled), and the parties were in privity. The court however, could not determine whether the issue decided was identical because defendant failed to submit a copy of plaintiffs’ objection to the proof of claim filed in the bankruptcy proceedings. The court denied the motion without prejudice.
A bench trial commenced July 20, 2009. At trial, Leeper took the position that he was entitled to one-third the appraised value of the property at the time of its sale, not the actual sale value. He acknowledged that the fee agreement made no provision for the parties to agree upon a value for the Property through a third party, such as an appraiser. Leeper believed both agreements provided that if the property was sold to satisfy his fees, he would recover one-third of the purchase price at a regular sale, not at a foreclosure sale; he interpreted this to mean his fee would be based on the recovery at the time his contract was completed. He believed the Property was worth $755,000.
The court found for plaintiff on her elder abuse claim because defendant made an improper demand for one-third of the value of the Property at the time of the foreclosure sale, based upon an appraisal Leeper obtained of between $755,000 and $760,000 in August 2007.^[6] The court concluded this constituted wrongful retention of the property of an elder person with intent to defraud. As a result, the court found that the amount of the lien to be paid Leeper was one-third the value of the Property at the time of the quiet title judgment on May 7, 2002. Although the court believed the fee the parties agreed on was $80,000 based on the statement in the deed of trust, the bankruptcy court’s allowance of Leeper’s claim of a lien for “‘one-third of the net that debtor should receive for debtor’s residence’” was res judicata.
The court rejected defendant’s arguments that the foreclosure sale constituted a final adjudication of the rights of the parties because plaintiff was not seeking to set aside the trustee’s sale, but sought damages based upon defendant’s wrongful and fraudulent appropriation of her personal property by providing the trustee with a false demand for payment. Although the court found defendant breached the fee agreement by instructing the trustee that defendant was entitled to receive one-third of the appraised value of the Property at the time of foreclosure in October 2007, plaintiff failed to present evidence of the value of the Property in May 2002, which was the date of “‘recovery’” for purposes of the fee agreement. Therefore, the court found for defendant on plaintiff’s breach of contract claim. The court awarded plaintiff $126,174.17 in compensatory damages on the elder abuse claim (the amount in excess of Leeper’s one-third share of the sale price of $313,000), interest from the date of the foreclosure sale to judgment, and attorney fees.
DISCUSSION
I. RES JUDICATA.
Defendant contends that the trial court incompletely applied the doctrine of res judicata because the amount plaintiff owed to him was conclusively determined in plaintiff’s bankruptcy by the allowance of his proof of claim. In plaintiff’s bankruptcy, the court recognized his claim to the extent it provided “a fee agreement for a claim of ‘one-third of the net that debtor should receive for debtor’s residence.’” (See Nathanson v. Hecker (2002) 99 Cal.App.4th 1158.) Thus, according to defendant, he was entitled to one-third of the sales price of the Property.
Res judicata has two aspects—claim preclusion and issue preclusion, also known as collateral estoppel. (Rice v. Crow (2000) 81 Cal.App.4th 725, 734.) Claim preclusion bars a party from relitigating the same cause of action, i.e., a claim based on the same primary rights, in a second suit. (Noble v. Draper (2008) 160 Cal.App.4th 1, 11; see Burdette v. Carrier Corp. (2008) 158 Cal.App.4th 1668, 1684.) “The doctrine [of res judicata] applies when 1) the issues decided in the prior adjudication are identical with those presented in the later action; 2) there was a final judgment on the merits in the prior action; and 3) the party against whom the plea is raised was a party or was in privity with a party to the prior adjudication. [Citation.] Even if the threshold requirements are established, res judicata will not be applied ‘if injustice would result or if the public interest requires that relitigation not be foreclosed. [Citations.]’ [Citation.]” (Citizens for Open Access etc. Tide, Inc. v. Seadrift Assn. (1998) 60 Cal.App.4th 1053, 1065.) Generally, the Ninth Circuit has held a bankruptcy court’s allowance or disallowance of a proof of claim in bankruptcy proceedings is entitled to res judicata effect. (Siegel v. Federal Home Loan Mortg. Corp. (9th Cir. 1998) 143 F.3d 525, 529.)
The corollary doctrine of collateral estoppel provides that a party to an action, or one in privity with a party, is barred from subsequently relitigating issues actually litigated and finally decided in a prior proceeding. (United States Golf Assn. v. Arroyo Software Corp. (1999) 69 Cal.App.4th 607, 615.) The issue decided in the prior proceeding must be identical with the one sought to be precluded. (Id. at p. 616.) The privity requirement is “essentially a shorthand statement that collateral estoppel is to be applied in a given case; there is no universally applicable definition of privity.” (Lynch v. Glass (1975) 44 Cal.App.3d 943, 947.) The concept refers “to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is ‘sufficiently close’ so as to justify application of the doctrine of collateral estoppel.” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 875.) The privity requirement is satisfied so long as the plaintiff’s legal interests are adequately represented in the prior action. “Privity is not defeated because the parties raise a different theory or cause of action in support of their rights of recovery.” (Evans v. Celotex Corp. (1987) 194 Cal.App.3d 741, 747.)
In Nathanson v. Hecker, supra, 99 Cal.App.4th 1158, a landlord filed a proof of claim in his former tenants’ chapter 11 bankruptcy proceedings for rent, property damage, and attorney fees in the sum of $200,000 based upon amounts sought in a state court breach of lease action that had been stayed by the bankruptcy proceedings. After a contested hearing, the bankruptcy court allowed the claim in the amount of $169,282.36. A month later, the bankruptcy court dismissed the debtors’ case; no plan of reorganization was ever filed, nor was the case converted to chapter 7. (Id. at p. 1161.) After dismissal, the landlord’s breach of lease action was returned to the civil active list and the court entered judgment for the landlord in the amount of the allowed proof of claim from the tenants’ bankruptcy proceedings. (Id. at pp. 1161–1162.) Nathanson affirmed, finding that the bankruptcy court’s allowance of the claim constituted a final judgment on the merits entitled to res judicata effect. (Id. at pp. 1163–1166.)
Here, although the allowance of defendant’s claim in plaintiff’s bankruptcy proceedings is res judicata for purposes of the claim that was raised and litigated in the bankruptcy, we conclude the doctrine of issue preclusion (collateral estoppel) more precisely applies to defendant’s argument here that the bankruptcy court previously decided the issue that he was entitled to a specific amount, namely, one-third of the appraised value of the property. We disagree that this issue was decided in the bankruptcy court in the manner defendant argues because he mischaracterizes what the bankruptcy court actually decided. Rather than providing for one-third the appraised value of the Property, Leeper’s allowed claim provided he should receive “one third the net” that plaintiff would receive for the Property. Therefore, the trial court correctly concluded defendant was entitled to one-third of the foreclosure sales price of $313,000.
II. ELDER ABUSE.
Defendant contends the trial court’s conclusion he committed elder abuse pursuant to Welfare and Institutions Code section 15610.30^[7] is not supported by substantial evidence. He contends the court did not find he exerted undue influence over plaintiff; further, the record would not support such a conclusion because plaintiff was strong-willed and not subject to such influence (she instructed him to dismiss two actions he had filed on her behalf, ignored his urging to refinance or sell the property and pay the taxes). He claimed the court erred in fixing May 7, 2002 as the date of recovery for purposes of his fees because he continued to perform work on her behalf after that date.
The elements of plaintiff’s claims for elder abuse are determined by statute, namely, the Elder Abuse and Dependent Adult Civil Protection Act (Elder Abuse Act) (Welf. & Inst. Code, § 15600 et seq.) The Elder Abuse Act was enacted to provide for the “private, civil enforcement of laws against elder abuse and neglect.” (Delaney v. Baker (1999) 20 Cal.4th 23, 33.) The statutory provisions governing financial elder abuse are not limited to mentally incompetent or physically impaired elders, or persons of limited financial means. An elder is defined solely as “any person residing in this state, 65 years of age or older.” (Welf. & Inst. Code, § 15610.27.)
The substantive law of elder abuse provides that financial abuse of an elder occurs when any person or entity takes, secretes, appropriates, or retains real or personal property of an elder adult to a wrongful use or with intent to defraud, or both. A wrongful use is defined as taking, secreting, appropriating, or retaining property in bad faith. Bad faith occurs where the person or entity knew or should have known that the elder had the right to have the property transferred or made readily available to the elder or to his or her representative. (Welf. & Inst. Code, § 15610.30.)
Few cases interpret the financial abuse provision of the elder abuse law, and those that do provide little guidance on this issue. Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 174–175 held that summary judgment had erroneously been granted to the defendants on a cause of action for financial elder abuse alleging that the defendants had secreted, appropriated or retained property to which an elder person was entitled by inducing the elder to transfer the property while concealing certain material facts from the elder. In Wood v. Jamison (2008) 167 Cal.App.4th 156, the appellate court held that an attorney and another man committed financial elder abuse when they colluded to persuade the elder to make an investment in the second man’s nightclub. In Zimmer v. Nawabi (E.D.Cal. 2008) 566 F.Supp.2d 1025, 1034, the court found that a mortgage broker that persuaded an elderly woman to refinance her home on terms inferior to those of her existing mortgage committed financial abuse.
Here, defendant is mistaken that undue influence is required to support a claim for elder abuse. As provided in Welfare and Institutions Code section 15610.30, subdivision (a)(1), a claim for elder abuse may be made where a person “[t]akes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.” (Italics added.) Defendant attempted to obtain from plaintiff, through the foreclosure sale, an excessive fee that was not warranted by the parties’ fee agreement. This quest for an excessive fee that was based on defendant’s attempt to rewrite the fee agreement constituted the taking of plaintiff’s property for a wrongful use.
Further, defendant argues that (1) the court failed to consider that he continued to provide services to plaintiff after May 2002, and the fee agreement contemplated more than recovery of the Property as the basis for Leeper’s fee, making May 2002 an improper date for calculation; (2) there was no evidence of the Property’s increase in value after that time such that Leeper should have been penalized for allegedly taking advantage of this increase; and (3) the court penalized Leeper because he did not obtain an appraisal in May 2002. We disagree with these arguments. First, Leeper presented no evidence that the parties contemplated he would receive an additional fee for services after May 2002 (the date of recovery of the Property), or any evidence of fees he incurred that were independent of and subsequent to recovery of the Property. Rather, Leeper’s interpretation of the date of “recovery” of the Property extended well beyond May 2002 until the date in October 2007 he foreclosed upon it—a construction of the fee agreement the trial court rejected and which Leeper does not contest on appeal. Second, the court did not penalize Leeper for increase in the value of the Property, but used the general trend of increase in the value of real estate at the time as evidence of Leeper’s wrongful motive. Third, as discussed above, Leeper was not entitled to the “appraised” value of the Property.
III. TRIAL COURT’S FACTUAL CONCLUSIONS.
Defendant contends the trial court erred in making certain factual findings. First, in finding that the purchaser at the auction evicted plaintiff from the Property; second, he did not receive $232,507.52 from the foreclosure sale, but received $229,307.52; and third, improperly focusing on Leeper’s refusal to respond to the request for a beneficiary’s demand.
First, whether plaintiff was evicted from the Property after the foreclosure sale is not relevant to our determination that the trial court did not err in finding Leeper committed elder abuse by seeking to obtain more money from plaintiff than he was entitled to receive under the fee agreement. The statement of decision establishes the trial court’s finding of elder abuse was based upon Leeper’s assertion at the foreclosure sale that he was entitled to one-third of the appraised value of the Property.
Second, defendant is correct that the amount defendant received from the foreclosure sale was $229,307.52, not $232,507.52 as set forth in the statement of decision. Respondent does not dispute this was the amount paid to defendant. This miscalculation resulted in an excess award to plaintiff of $3,200. The judgment must be modified to correct plaintiff’s compensatory damage award, and interest to plaintiff from the date of foreclosure to entry of judgment is recalculated at $22,443.75.
Third, the statement of decision establishes the trial court’s finding of elder abuse was not based upon Leeper’s refusal to respond to the beneficiary demand, but his improper assertion at the foreclosure sale that he was entitled to one-third of the appraised value of the Property.
IV. CONCLUSIVENESS OF TRUSTEE’S SALE.
Defendant contends that the court erred in awarding plaintiff damages because the trustee’s sale constituted the final adjudication of the rights between the borrower and lender. (See, e.g., Moeller v. Lien (1994) 25 Cal.App.4th 822, 831; Smith v. Allen (1968) 68 Cal.2d 93, 96.) Defendant argues the trial court mistakenly found the authorities not applicable because plaintiff was not seeking to set aside the trustee’s sale, but was seeking damages. We disagree.
Defendant is correct that, generally, the purchaser at a nonjudicial foreclosure sale receives title under a trustee’s deed free and clear of any right, title or interest of the trustor. (Moeller v. Lien, supra, 25 Cal.App.4th at p. 831.) A properly conducted nonjudicial foreclosure sale constitutes a final adjudication of the rights of the borrower and lender. (Smith v. Allen, supra, 68 Cal.2d at p. 96.) Once the trustee’s sale is completed, the trustor has no further rights of redemption. (Moeller, at p. 831.) “The purchaser at a foreclosure sale takes title by a trustee’s deed. If the trustee’s deed recites that all statutory notice requirements and procedures required by law for the conduct of the foreclosure have been satisfied, a rebuttable presumption arises that the sale has been conducted regularly and properly; this presumption is conclusive as to a bona fide purchaser.” (Ibid.)
However, plaintiff did not seek to set aside the foreclosure sale, to assert a right of redemption, or to contest whether the foreclosure sale was properly conducted. Instead, the gravamen of plaintiff’s action was the recovery of an excessive fee claimed by virtue of the parties’ fee agreement and the trust deed. Thus, defendant’s argument lacks merit.
DISPOSITION
The judgment of the superior court is affirmed as modified to award plaintiff the amount of $123,347.17 in compensatory damages, plus interest from October 30, 2007 at the rate of 10 percent per annum to entry of judgment in the sum of $22,443.75, and reasonable attorney fees pursuant to Welfare and Institutions Code section 15657.5, subdivision (a). Respondent is to recover her costs on appeal.
NOT TO BE PUBLISHED.

JOHNSON, J.

We concur:

ROTHSCHILD, Acting P. J.

CHANEY, J.

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