Fant v. Standard Trust Deed Service Co.
Filed 11/26/07 Fant v. Standard Trust Deed Service Co. CS5
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
GARY FANT, Plaintiff and Appellant, v. STANDARD TRUST DEED SERVICE COMPANY, Defendant and Respondent. | F052072 (Super. Ct. No. 376050) O P I N I O N |
APPEAL from a judgment of the Superior Court of Stanislaus County. William A. Mayhew, Judge.
Andrew W. Shalaby for Plaintiff and Appellant.
Scheer & Imfeld, Michael D. Imfeld, Spencer P. Scheer and Austin D. Garner for Defendant and Respondent.
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Appellant, Gary Fant, challenges the grant of summary judgment in favor of respondent, Standard Trust Deed Service Company (STD), on Fants complaint for wrongful foreclosure and unfair business practices. According to Fant, STD unlawfully foreclosed on the subject property because the sale took place after five postponements whereas former Civil Code[1]section 2924g permits only three.[2]
However, postponements due to court order or a stay by operation of law are not considered postponements for purposes of determining the maximum number of postponements permitted before a new notice of sale is required. (Former 2924g, subd. (c)(2).) The trial court concluded that a bankruptcy filed by parties claiming an equitable interest in the subject property stayed the foreclosure sale at least twice by operation of law. Fant contends this was error.
As discussed below, both Fants judicial admissions and the undisputed facts demonstrate that the foreclosure was stayed by operation of law until the holder of the first deed of trust on the property obtained relief from the stay in the bankruptcy court. Accordingly, the trial court correctly ruled that the foreclosure sale did not violate the three postponement rule. The judgment will be affirmed.
BACKGROUND
In April 2002, Fant sold three parcels of real property, commonly known as 408, 412, and 416 Corson Avenue, to Benny Yadao, Procsy Yadao, and the Benny and Procsy Yadao Family Trust (Yadaos). As part of this transaction, Yadaos took title subject to a note in the amount of approximately $243,000 secured by a first deed of trust on 416 Corson Avenue in favor of HF Data. The consideration also included Fant taking a note in the approximate amount of $928,000 secured by a blanket deed of trust on all three parcels.
Yadaos stopped making payments on both notes. Fant recorded a notice of default and notice of sale. In response, Yadaos filed a complaint against Fant alleging various causes of action including the wrongful institution of foreclosure proceedings. HF Data also instigated foreclosure proceedings and scheduled a trustees sale. The trial court restrained both sales.
Following numerous hearings, both foreclosure sale stays were lifted. Fant foreclosed on his deed of trust on July 11, 2003. Yadaos filed an appeal arguing that various procedural errors required reversal of the order lifting the stay and that the foreclosure sale should not have taken place because their perfected appeal automatically stayed the trial courts order. This court affirmed the order lifting the stay in 2005. (Yadao v. Fant (Jan. 27, 2005, F043402) [nonpub. opn.].)
On July 9, 2003, HF Data sold its note to JAMKE, a California partnership. On July 10, 2003, JAMKE retained STD as the foreclosure trustee. The JAMKE foreclosure sale was scheduled for August 18, 2003.
On the day of the scheduled foreclosure sale Yadaos filed for bankruptcy. Yadaos claimed an equitable interest in 416 Corson Avenue as part of the bankruptcy estate. Yadaos were also in possession of the property and remained in possession until November 17, 2003.
STD hired Residential Services Validated Publications (RSVP) to announce the foreclosure sale of 416 Corson Avenue. RSVP hired two auctioneers, Dean Roots and Janis Seabrook, to cry the sale of the subject property, i.e., publicly announce the sale and any postponements at the courthouse steps.
On August 18, 2003, Roots cried the postponement of the sale until September 2, 2003. The reason given for the postponement was Beneficiary.
A second postponement until September 30, 2003, was cried by Seabrook on September 2. Again, the reason given was Beneficiary, although RSVP later altered the records to show the reason as Bankruptcy.
The third and fourth postponements of the sale, September 30 to October 30 and October 30 to November 10, 2003, were cried by Roots. The reason given for both postponements was Bankruptcy.
JAMKE filed a motion for relief from the automatic stay in the bankruptcy court. In its October 28, 2003, tentative ruling, the bankruptcy court determined that Fants pre-bankruptcy petition foreclosure on his second deed of trust was held while a state court injunction was in place because the formal order dissolving the injunction was never entered on the state court docket. Thus, the foreclosure sale was voidable by Yadaos. Nevertheless, because this foreclosure sale was not set aside or otherwise voided, the court concluded that 416 Corson Avenue was not part of the bankruptcy estate.
However, Yadaos were in possession of the property. Thus, by order filed October 30, 2003, the court granted JAMKEs motion and modified the automatic stay to permit JAMKE to take and exercise all necessary steps under California law to recover possession of the real property commonly known as 416 Corson Avenue, Modesto, California. The court further ruled that [t]he 10-day stay of Federal Rule of Bankruptcy Procedure 4001(a)(3) is not waived, however that period shall run concurrently with the 7-day period specified in California Civil Code 2924g(d).
On November 10, 2003, the sale was postponed for the fifth time until November 12. The reason specified for this postponement was Beneficiary. On November 12, Roots cried the sale and the property reverted to JAMKE for a full credit bid. Accordingly, as the junior lien holder, Fant lost his interest in 416 Corson Avenue.
Multiple state court actions in three counties have been filed by Fant and Yadaos arising from the JAMKE foreclosure. The operative pleading here is the second amended complaint in a Stanislaus County action filed by Fant against STD for wrongful foreclosure, negligence and unfair business practices. This complaint alleges that, after three postponements, STD was required to serve and publish a new notice of the foreclosure sale and that STDs failure to do so constitutes negligence and wrongful foreclosure. Fant also alleges that STD wrongfully and negligently failed to announce some of the five postponements as required by statute. Fant further claims that STDs practice of not re-noticing a foreclosure sale after more than three postponements is an unfair business practice in violation of Business and Professions Code section 17200, et seq.
STD moved for summary judgment on the ground that it conducted the foreclosure sale of 416 Corson Avenue in compliance with all applicable laws. STD argued that the sole issue in the case was whether at least two of the five postponements occurred while the sale was stayed by the bankruptcy. The trial court determined STD had demonstrated that it did not breach any duty owed to Fant and that the sale was properly postponed. Accordingly, the court entered judgment in STDs favor.
DISCUSSION
1. Standard of review.
A defendant who moves for summary judgment under Code of Civil Procedure section 437c, must either negate a necessary element of the plaintiffs cause of action or establish a complete defense to that cause of action. The moving party must demonstrate that a material question of fact requiring examination by the trial court does not exist under any possible hypothesis within the reasonable purview of the allegations of the complaint. If the moving defendant satisfies this obligation, the burden shifts to the plaintiff to produce evidence creating a triable issue of material fact. (Code Civ. Proc., 437c, subd. (o)(2); Brantley v.Pisaro (1996) 42 Cal.App.4th 1591, 1594.)
In evaluating the ruling under section 437c, the appellate court must assume the role of the trial court and reassess the merits of the motion. (Brantley v.Pisaro, supra, 42 Cal.App.4th at p. 1601.) In carrying out this function, the court applies the same three-step analysis required of the trial court. The appellate court first identifies the issues framed by the pleadings since it is these allegations to which the motion must respond. Second, the court determines whether the moving partys showing has satisfied its burden of proof and justifies a judgment in movants favor. When a summary judgment motion prima facie justifies a judgment, the third step is to determine whether the opposition demonstrates the existence of a triable, material fact. (Id. at p. 1602.)
2. The trial court properly disregarded allegations not pled in the complaint.
In opposing the summary judgment motion, Fant asserted that STD engaged in fraud or misconduct. According to Fant, one of JAMKEs owners, John Myrtakis, and STD devised a scheme whereby Myrtakis could acquire the property for a fraction of its market value by deterring potential bidders. Fant further argued that the foreclosure was unlawful because Myrtakis was the de facto trustee and thus the identity of the trustee who actually conducted the sale was not disclosed. Based on allegations regarding Myrtakiss misconduct, Fant claimed there was more than enough evidence for a trier of fact to conclude that STD willingly or negligently allowed itself to be used in an improper foreclosure sale.
However, Fants second amended complaint does not contain such allegations. Rather, the complaint states that STD was negligent and wrongfully foreclosed based on two alleged violations of former section 2924g. According to Fant, STD failed to announce some of the postponements as required by section 2924g, subdivision (d), and was required to give a new notice of sale following the first three postponements under section 2924g, subdivision (c). The unfair business practice cause of action arises solely from these two alleged statutory violations.
The pleadings set the boundaries of the issues to be resolved at summary judgment. (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648.) Accordingly, a plaintiffs opposing papers cannot bring up new, unpleaded issues to defeat an otherwise sufficient summary judgment motion. (Ibid.) Thus, a plaintiff wishing to rely upon unpleaded theories to defeat summary judgment must move to amend the complaint before the hearing. (Ibid.)
Fant did not move to amend his complaint to expand its scope beyond the alleged violations of former section 2924g. Therefore, the issues Fant raised in opposing the summary judgment motion that were outside the second amended complaint are immaterial. Accordingly, the trial court properly disregarded the allegations that Myrtakis should have been disclosed as the trustee, STD improperly altered its business records pertaining to the second postponement, and Myrtakis and STD acted in concert to deceive and trick Fant. Similarly, these allegations will be disregarded on appeal.[3] Therefore, as circumscribed by the second amended complaint, the only issue on appeal is whether at least two of the five postponements of the foreclosure sale were stayed by the bankruptcy. If so, STD complied with former section 2924g and is entitled to judgment in its favor on Fants second amended complaint.
3. The bankruptcy stayed the foreclosure sale on 416 Corson Avenue.
Former section 2924g, subdivision (c)(1), provides, in part:
There may be a maximum of three postponements of the sale proceedings pursuant to this subdivision. In the event that the sale proceedings are postponed three times, the scheduling of any further sale proceedings shall be preceded by the giving of a new notice of sale in the manner prescribed by Section 2924f.
As noted above, the foreclosure sale on 416 Corson Avenue was postponed five times. Fant argues that, because STD did not give a new notice of sale after three postponements, the foreclosure sale was unlawful as a matter of law.
However, under former section 2924g, subdivision (c)(2), the sale must be postponed when stayed by operation of law and such a postponement is not a postponement for purposes of determining the maximum number of postponements permitted pursuant to this subdivision . The automatic stay imposed by a bankruptcy filing arises by operation of law and thus none of the postponements during the period of the bankruptcy court stay are counted as postponements. (California Livestock Production Credit Assn. v. Sutfin (1985) 165 Cal.App.3d 136, 141.) Therefore, if the September 30 and October 30 postponements were required by the bankruptcy, the number of postponements did not exceed that permitted by former section 2924g, subdivision (c)(1).
Under title 11 United States Code section 362(a)(3), an automatic stay of any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate goes into effect upon the filing of a bankruptcy petition. All of the debtors property is part of the bankruptcy estate, including exempt property. (Sierra Switchboard Co. v. Westinghouse Elec. Corp. (9th Cir. 1986) 789 F.2d 705, 708.)
After the property comes into the estate, the debtor is permitted to exempt it. The court has jurisdiction to determine what property may be exempted. (Sierra Switchboard Co. v. Westinghouse Elec. Corp., supra, 789 F.2d at p. 708.) The purpose of this provision is to foster a debtors fresh start in bankruptcy. Exempting property removes that property from the bankruptcy estate and allows the debtor to keep it for his or her personal use. (In re Wright (Bankr. D. Ill. 1992) 156 B.R. 549, 554.) Accordingly, exempt property is not available for creditors.[4]
As noted above, when Yadaos filed their bankruptcy petition, they claimed an equitable interest in 416 Corson Avenue as part of the bankruptcy estate. This fact was not disputed by Fant. Property of the bankruptcy estate includes all legal, equitable or possessory interests of the debtor in property as of the commencement of the case. (Sierra Switchboard Co. v. Westinghouse Elec. Corp., supra, 789 F.2d at p. 707; In re Ramirez (9th Cir B.A.P. 1995) 183 B.R. 583, 587.) This phrase all legal or equitable interests of the debtor in property has been given the broadest possible interpretation. Accordingly, an equitable interest is not limited to a debtors equity in the property. (In re Brown (2d Cir. 1984) 734 F.2d 119, 123.) Further, a debtors legal or equitable interests encompass an interest that is strictly contingent. (Ibid.)
Whether an asset is property of the bankruptcy estate is a legal determination. The stay that attaches to bankruptcy estate property has broad application and thus covers at least some arguable property. (In re Chesnut (5th Cir. 2005) 422 F.3d 298, 303.) In the face of uncertainty or ambiguity, protection of arguable property is presumed. (Ibid.) Nevertheless, bankruptcy courts have broad discretion to lift stays and therefore are the proper forum for the vindication of creditor rights. (Ibid.) Accordingly, a creditor must seek a judicial determination of its right to proceed regarding any property in which the debtor claims an interest. (In re Taylor (9th Cir. 1989) 884 F.2d 478, 483.)
Thus, contrary to Fants position, the fact that Fant had legal title to the property is not determinative. Yadaos claim of an equitable interest in 416 Corson Avenue placed that property into the bankruptcy estate and triggered the automatic stay. Therefore, the two foreclosure postponements that were announced as due to bankruptcy, and took place after Yadaos filed for bankruptcy, did not count toward the maximum number of postponements allowed. The sale on those two occasions was stayed by operation of law.
The stay of the foreclosure sale remained in place until JAMKE, as a party in interest, sought, and was granted, relief from the stay in the bankruptcy court under title 11 United States Code section 362(d). In its tentative ruling, the court explained that one of the two reasons asserted by JAMKE for finding 416 Corson Avenue to not be part of the bankruptcy estate had merit and thus made its determination on that ground. The court concluded that, while the Fant foreclosure on 416 Corson Avenue was voidable, it was not set aside and thus was effective. Accordingly, the court determined that 416 Corson Avenue was not part of the bankruptcy estate. The court then modified the stay to permit JAMKE to take and exercise all necessary steps under California law to recover possession of 416 Corson Avenue. This order implied that JAMKE could proceed with the foreclosure. That would be the first step in taking possession of the property.
The bankruptcy court further held that the 10-day stay of Bankruptcy Rule 4001(a)(3) was not waived. That rule provides that an order granting relief from an automatic stay is stayed until the expiration of 10 days after the entry of the order, unless the court orders otherwise. The court would not have applied this rule if the automatic stay had not attached to 416 Corson Avenue. This bankruptcy court finding is res judicata and cannot be collaterally attacked. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109.)
After JAMKE obtained relief from the automatic stay, its foreclosure trustee, STD, was not required to serve, post, publish, or give any further notices of sale before proceeding with the foreclosure sale. (Tully v. World Savings & Loan Assn. (1997) 56 Cal.App.4th 654, 664.) The evidence is undisputed that STD followed the procedure for oral postponements. The five postponements were cried in accordance with section 2924g, subdivision (d). Since at least two of the postponements were required by operation of law, STD complied with former section 2924g, subdivision (c). A trustee under a deed of trust owes no duties to the trustor beyond those specified in the deed and the statutes. (I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 288.)
Moreover, based on an admission in his original complaint filed in Contra Costa County on July 11, 2005, Fant cannot now take the position that the Yadaos bankruptcy did not stay the foreclosure. In that complaint, Fant alleged
approximately 37 days after FANT foreclosed, YADAO filed bankruptcy, and the entire litigation matter, including the pending foreclosure by the first lender, were stayed. The Bankruptcy Court ultimately gave the lender leave from automatic stay to foreclose on title to the property, although the Court suggested on its order that there was uncertainty as to whom the owner of the property was. In a mass of jurisdictional confusion and complications a foreclosure ultimately took place on 416 Corson Avenueon November 13, 2003. (Italics added; original underscoring.)
A plaintiff cannot simply delete allegations without explanation to cure a defect in a cause of action. In such a case, the original defect infects the subsequent pleading. (Leong v. San Francisco Parking, Inc. (1991) 235 Cal.App.3d 827, 832, fn. 5.)
In sum, the undisputed facts, Fants allegation in prior litigation, and the bankruptcy courts October 30, 2003, order granting JAMKEs motion for relief from automatic stay, establish that at least two of the five postponements of the foreclosure sale on 416 Corson Avenue were required by operation of law. Accordingly, STDs failure to re-notice the foreclosure sale did not breach a duty owed to Fant. STD complied with the applicable statute. Since STD was not required to re-notice the sale after the automatic stay was lifted, its failure to do so did not constitute an unfair business practice. Fant has not demonstrated the existence of a triable issue of material fact. Thus, STD is entitled to judgment as a matter of law on Fants second amended complaint for wrongful foreclosure, negligence, and unfair business practices.[5]
4. Sanctions.
STD has requested this court to impose sanctions on Fant or his attorney for prosecuting a frivolous appeal. An appeal will be held frivolous only when it is either prosecuted for an improper motive or when it indisputably has no merit, i.e., when any reasonable attorney would agree that the appeal is totally and completely without merit. (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.) STD relies on the second ground. However, although it would behoove Fants counsel to research areas of the law with which he is not familiar, the appeal as a whole is not so utterly devoid of potential merit as to justify sanctions. Accordingly, STDs request is denied.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
_________________________
Levy, Acting P.J.
WE CONCUR:
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Hill, J.
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Kane, J.
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Analysis and review provided by Oceanside Property line attorney.
[1] Further statutory references are to the Civil Code unless otherwise indicated.
[2] Section 2924g, subdivision (c), was amended in 2005 to provide that there may be any number of postponements without a new notice of sale so long as the total period of time does not exceed 365 days.
[3] Fants request for judicial notice of newspaper articles submitted to support Fants allegations of wrongdoing by Myrtakis is denied as irrelevant and as an improper matter for judicial notice.
[4] Fant has requested this court to take judicial notice of the bankruptcy trustees February 24, 2004, motion for authorization to abandon litigation claims against Fant and others, the bankruptcy courts tentative ruling, and the order granting the motion. Both the motion and the tentative ruling note that Yadaos exempted the Fant state court lawsuit. Fant argues that this exemption is evidence that the automatic stay did not apply to 416 Corson Avenue. However, even assuming the exemption applied to the property itself rather than simply to the lawsuit, this fact is irrelevant. Exempt property is originally part of the bankruptcy estate and thus subject to the stay. With court approval, the property merely becomes exempt from claims of creditors. Fants judicial notice request is denied.
[5] Fants request for judicial notice in support of his reply brief is denied as the submitted documents are irrelevant to the pertinent issues on appeal. Fants motion for leave from appellate stay to motion superior court for relief is denied.
