Matza v. Superior Court
Filed 10/18/12 Matza v. Superior Court CA1/3
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
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IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST
APPELLATE DISTRICT
DIVISION
THREE
SHERRIE
MATZA,
Petitioner,
v.
THE
SUPERIOR COURT OF SAN FRANCISCO COUNTY,
Respondent,
EDWARD J.
MURPHY, individually and as Trustee, etc., et al.,
Real Parties in Interest.
A136755
(City & County
of San Francisco
Super. Ct. Nos. CGC-06-457921,
CGC-06-456960, CGC-07-468399)
Petitioner
Sherri Matza and real parties in interest Edward Murphy and Michael Joseph
O’Donoghue were partners who jointly owned a multi-unit residential property
(the Faxon property). Matza and
O’Donoghue are both defendants and cross-complainants in Murphy v. Matza, San Francisco
Superior Court Case No. CGC-06-457921, which has been consolidated with
other cases below. Murphy’s complaint
against them sought the partition of the Faxon property and requested that the
ownership percentages of each of the three partners be determined. Among her affirmative defenses, Matza
asserted that she is entitled to an accounting of revenues and expenses during
Murphy’s management of the property.
O’Donoghue also raised affirmative defenses claiming that he is entitled
to a greater share of the property because of offsets. Both Matza and O’Donoghue also filed
cross-complaints seeking adjustments to Murphy’s share of the Faxon
property.
A
trial was held before an appointed referee, the Honorable Laurence D. Kay
(retired), who determined in a statement of decision issued January 26, 2011,
that Murphy held a 50 percent interest in the property and Matza and
O’Donoghue each owned a 25 percent interest.
Based on the referee’s statement of decision, Judge Karnow issued an
interlocutory judgment which assigned the ownership proportions to each of the
partners as determined by the referee, ordered that the Faxon property be sold,
appointed a sales referee, and provided that the proceeds be deposited into an
interest bearing account in the three partners’ names, subject to withdrawal
only upon further order of the referee.
The interlocutory judgment also stated:
“The referee retains jurisdiction to review the sale referee’s report on
the Faxon property sale and, following further hearing on claims of debits and
credits from the parties partnership involving the Faxon property and Geary
property, to order equitable adjustments that the referee considers just and
appropriate from the net sales proceeds
of the Faxon property that each party would be entitled to based on their
percentage interest as provided above.â€
The
property was marketed and sold by the sales referee; however, at an April 23,
2012 confirmation hearing, Matza and O’Donohue successfully overbid the
putative buyers’ offer and obtained the property for $2,021,750. They paid for the property with a $250,000
cash deposit, a “credit bid†of their combined 50 percent interest in the
property, and funds from a new loan.
This permitted them to obtain nearly $260,000 cash out of the
transaction in addition to the income derived from the property itself.
Murphy’s
share of the proceeds, approximately $822,000, is being held in escrow pending
further court order or stipulation of the parties. Accordingly, Murphy moved the lower court for
an order modifying the earlier order confirming sale of the real property. Specifically, he seeks to have his funds
available for a 1031 property exchange.
property he intends to acquire or any deadlines which must be met to do so, he
generally asserts he will suffer significant and irreversible
withheld. The escrow on the sale of the
Faxon property closed on June 22, 2012.
On
September 20, 2012, Judge Kahn granted Murphy’s motion for modification of the
order confirming the sale of real property.
The order directs the sales referee to instruct the title company to
transfer the money it is holding on behalf of Murphy to a 1031 exchange company
chosen by Murphy. The court, however,
stayed its own order for 20 days.
On
October 9, 2012, Matza filed her petition for a writ of mandate in this court
and requested an immediate stay to restrain the distribution of funds. That same day we stayed the distribution of
those funds, requested informal briefing on an expedited basis, and gave notice
pursuant to
36 Cal.3d 171, that if circumstances warranted, we might issue a peremptory
writ in the first instance. For the reasons
given below, we now do so and direct the superior court to issue a new and
different order as explained below.
DISCUSSION
I.
Basis to Modify Judge Karnow’s Interlocutory Judgment.
The language of the interlocutory
judgment is unambiguous: “
review the sale referee’s report on the Faxon property sale and
debits and credits from the parties
Faxon property and Geary property, to
order equitable adjustments that the referee considers just and appropriate
from the net sales proceeds of the
Faxon property that each party would be entitled to based on their percentage
interest as provided above.†(Italics added.)
In other words, there is to be a further hearing on the credit and debit
claims before the referee, who can then make appropriate adjustments to be paid
out of the proceeds from the sale of the Faxon property.
Although a superior court judge
generally has all the powers enumerated by the Code of Civil Procedure sections
872.010 et seq. (including the power to hear and determine motions, to order
equitable compensatory adjustments, and the power to order the appropriate
disbursement of sales proceeds), Judge Kahn lacked the authority to contravene
Judge Karnow’s interlocutory judgment and deprive Matza and O’Donoghue of the
opportunity to prove to the referee they are entitled to claimed adjustments. (See People v.
Goodwillie (2007) 147 Cal.App.4th 695, 713
[subject to limited exceptions, which are inapplicable here, one superior court
judge may not reconsider the prior ruling of another superior court
judge].) There is no indication, for
example, that Judge Karnow was unavailable when Judge Kahn modified the
judgment. Rather, the case was assigned
to Judge Karnow, but the motion to modify the order confirming the sale of real
property was brought in the law and motion department.
Furthermore, Judge Kahn articulated
no valid basis to deprive Matza and O’Donoghue of their opportunity to put on
evidence regarding the credits and debits they claim. The superior court’s analogy to attachment
proceedings is not persuasive. A writ of
attachment is a provisional remedy
which allows creditors to preserve the value of their potential judgment. It protects creditors holding unsecured
claims (or claims secured only by personal property) by creating a judicial
lien on the debtor’s property. It is
designed to protect a plaintiff’s priority from being subordinated to other
claims. (See Code Civ. Proc.,
§ 483.010, subd. (b).) It is, by
its nature, an ancillary proceeding.
(Code Civ. Proc., § 484.110, subd. (a).) Here, by contrast, the issue of the claimed
adjustments is an issue raised by the lawsuit itself. The money to which any adjustments may be
made is under the court’s control, so there is no need to protect Matza and
O’Donoghue’s claims from other potential creditors. Consequently, the attachment procedures
referenced by the superior court are inapposite.
II. Although
Equity Does Not Demand That Murphy Have Immediate Access to His Funds,
Considerations of Fairness Require That He Not Be Arbitrarily Precluded from
Using Them for a 1031 Property Exchange.
Murphy also argues that it is unfair
for Matza and O’Donoghue to have been allowed to benefit from their share of
the Faxon property by using it to purchase the property, while he is deprived
of the use of his funds and will suffer adverse tax consequences unless he is
promptly permitted access to them. We
see no inequity stemming from the fact that Matza and O’Donoghue already have
use of their funds while Murphy does not.
Either Murphy neglected to object to his former partners’ obtaining
credit for those funds for their purchase of the Faxon property or Murphy
simply has no claim that any part of the funds for which Matza and O’Donoghue
were credited are his. Matza and
O’Donoghue, on the other hand, do have such claims against Murphy and have
timely objected to his receiving those funds before their claims are
adjudicated. Thus, the parties’
positions are not comparable.
On the other hand, Murphy may well
be harmed if he is precluded from timely using his funds to effect his 1031
exchange. If they have viable claims, it
is incumbent on Matza and O’Donoghue to prosecute them in a timely manner.
III. The
Five-Year Statute Was Not Violated.
Murphy also contends that Matza and
O’Donoghue’s claims are forfeited because they failed to bring them to trial
within five years of bringing their respective cross-complaints. (See Code Civ. Proc., §§ 583.310,
583.360.) However, the affirmative defenses specified above raise the same
issue of potential adjustments to the proceeds as do the cross-complaints and
the trial on the complaint was begun within the five-year statutory
period. (See In re Marriage of Macfarlane & Lang (1992) 8 Cal.App.4th 247,
253-254 [Code of Civ. Proc., § 583.310 only requires that a trial be
commenced, not concluded, within five years]; Patapoff v. City of Los Angeles (1959) 171 Cal.App.2d 635 [where an
earlier trial determines a contested issue in a later trial, the later trial is
deemed to be partially tried for purposes of Code of Civ. Proc.,
§ 583.310].) Because the trial on
Murphy’s complaint began in a timely manner and the issue of the appropriate
adjustments was raised in that proceeding, dismissal of these claims pursuant
to Code of Civil Procedure section 583.310 is not warranted.
DISPOSITION
The
Palma procedure applies when
“petitioner’s entitlement to relief is so obvious that no purpose could
reasonably be served by plenary consideration of the issue†or because of
particular urgency. (See
29, 35; Lewis v. Superior Court (1999)
19 Cal.4th 1232, 1236-1237, 1240-1241.)
This case involves only straightforward legal issues and the looming
deadline to apply Murphy’s funds to a 1031 transfer creates special urgency.
Accordingly,
the superior court’s order modifying the order confirming the sale of real
property is vacated. Matza and
O’Donoghue are entitled to an opportunity to prove they are entitled to the
adjustments they claim. The superior
court is directed to issue a new order requiring all of Murphy’s funds held in
escrow, including accrued interest, be released to a 1031 exchange company of
Murphy’s choice on December 3, 2012, unless before that date (1) the referee
determines and the superior court confirms that specific adjustments to that
total amount should be made, or (2) the parties stipulate to the release of the
funds, in which case the funds shall be distributed by December 3, 2012, in
accordance with either the superior court’s new order or the parties’ stipulation,
whichever is applicable.
The
stay previously issued on October 9, 2012, is dissolved. This opinion is final as to this court
immediately. (Cal. Rules of Court, rule
8.490(b)(3).)
Each
party shall bear its own costs related to this petition.
_________________________
Pollak,
J.
We concur:
_________________________
McGuiness,
P. J.
_________________________
Siggins,
J.
A “1031 property exchange†is a “like-kind†exchange of property pursuant to
the provisions of 26 United States Code section 1031.
