Stansell v. Wells Fargo Bank
Filed 1/21/14 Stansell v.
Wells Fargo Bank CA2/5
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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.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 FIVE
BETSY A.
STANSELL,
Plaintiff and Appellant,
v.
WELLS FARGO
BANK, N.A. et al.,
Defendants and Respondents.
B246366
(Los
Angeles County
Super. Ct. No.
NC057306)
APPEAL
from a judgment of dismissal of the Superior
Court of the County of Los Angeles, Michele E. Flurer, Judge. Reversed and remanded with instructions.
Stansell
& Associates, Betsy A. Stansell, in pro. per., for Plaintiff and Appellant.
Severson
& Werson, Jan T. Chilton, Jon D. Ives for Defendants and Respondents.
INTRODUCTION
Plaintiff
and appellant Betsy Stansell (plaintiff) appeals from the trial court’s
judgment dismissing her first amended complaint, which judgment was based on the
trial court’s order sustaining the
demurrer of defendants and respondents (defendants)
amend. According to plaintiff, the
demurrer because the operative complaint
stated viable causes of action and the trial court abused its discretion when
it refused to grant her leave to amend.
We
hold that plaintiff lacks standing to pursue all of the claims in her pleading based
on events and conduct that occurred prior to the filing of her Chapter 7
bankruptcy petition. As for plaintiff’s
claims based upon the postpetition events and conduct, we hold that because the
distinction between prepetition and postpetition claims was not raised or
discussed in the trial court, plaintiff should be given an opportunity to amend
her complaint to state such claims. We
therefore reverse the judgment and remand the matter to the trial court with
instructions to enter a new order sustaining the demurrer and granting plaintiff
leave to amend her pleading to state claims based only on postpetition events
and conduct.
PROCEDURAL BACKGROUND
Prior
to filing this action in state court, plaintiff filed a Chapter 7 bankruptcy
petition on August
16, 2011.
The petition included a schedule of personal property. On December 19, 2011, the bankruptcy court entered a discharge of debtor order.
On
March 16, 2012, plaintiff filed this action.
plaintiff filed the operative first amended complaint asserting nine causes of
action against defendants based on a 2006 home loan, a 2009 modification of
that loan, and three failed attempts to procure another loan
or “set aside†a trustee’s sale of her home which secured her obligation under
the 2009 loan modification. On September 28, 2012, defendants filed a demurrer to the first amended complaint and a
request for judicial notice attaching, inter alia, copies of plaintiff’s
Chapter 7 bankruptcy petition and the subsequent discharge order.
for judicial notice. Following a hearing
on the demurrer,
title="">[4]
the trial court entered an order
name="_ftnref5" title="">[5] sustaining the demurrer
without leave to amend and a judgment of dismissal based thereon.
A. Standard of Review
“On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well
settled. We give the complaint a
reasonable interpretation, reading it as a whole and its parts in their
context. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126 [119 Cal.Rptr.2d 709, 45 P.3d
1171].) Further, we treat the demurrer
as admitting all material facts properly pleaded, but do not assume the truth
of contentions, deductions or conclusions of law. (Ibid.; Aubry v. Tri-City Hospital
Dist. (1992) 2 Cal.4th 962, 966-967 [9 Cal.Rptr.2d 92, 831 P.2d 317] (Aubry).) When a demurrer is sustained, we determine
whether the complaint states facts sufficient to constitute a cause of
action. (Zelig, supra, 27
Cal.4th at p. 1126.) And when it is
sustained without leave to amend, we decide whether there is a reasonable
possibility that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse. (Ibid.)†(City
of Dinuba v.
B. Standing
to Assert Prepetition Claims
Defendants
contend that because most of plaintiff’s claims are the property of the
bankruptcy estate, she lacks standing to pursue them. Although defendants did not raise the
standing issue in the trial court, we address it at the outset because
contentions based on lack of standing can be raised at any time, including for
the first time on appeal. “‘“[C]ontentions
based on a lack of standing involve jurisdictional challenges and may be raised
at any time in the proceeding.†(Common
Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 438 [261 Cal.Rptr. 574,
777 P.2d 610].)’†(Associated Builders and Contractors, Inc. v. San Francisco Airports Com.
(1999) 21 Cal.4th 352, 361.) “Lack
of standing, . . . is not waived by failure to timely object. (Parker v. Bowron [(1953)] 40 Cal.2d [344,] 351.) Indeed, lack of standing to sue can be raised
at any time, even for the first time on appeal.
(See Common Cause v. Board of Supervisors[, supra,] 49 Cal. 3d [at pp.]
438-439 [261 Cal.Rptr. 574, 777 P.2d 610].)â€
(Color-Vue, Inc. v. Abrams
(1996) 44 Cal.App.4th 1599, 1604)
of Bankruptcy Estate
“As
a general matter, upon the filing of a petition for bankruptcy, ‘all legal or
equitable interests of the debtor in property’ become the property of the
bankruptcy estate and will be distributed to the debtor’s creditors. [11 U.S.C.] section 541(a)(1).†(Rousey
v. Jacoway (2005) 544 U.S. 320,
325.) The Historical and Statutory Notes
for section 541 provide: “This section
defines property of the estate, and specifies what property becomes property of
the estate. The commencement of a
bankruptcy case creates an estate. [T]he
estate is comprised of all legal or equitable interest of the debtor in
property, wherever located, as of the commencement of the case. The scope of this paragraph is broad. It includes all kinds of property, including
tangible or intangible property, [and] causes
of action . . . .†(11 U.S.C.A.
§ 541, Revision Notes and Legislative Reports (1978 Acts), italics added.)
“In
the context of bankruptcy proceedings, it is well understood that ‘a trustee,
as the representative of the bankruptcy
estate, is the real party in interest, and is the only party with
standing to prosecute causes of action
belonging to the estate once the bankruptcy petition has been filed.’ Kane v. Nat’l Union Fire Ins. Co., 535
F.3d 380, 385 (5th Cir. 2008) (per curiam).
The commencement of Chapter 7 bankruptcy extinguishes a debtor’s legal
rights and interests in any pending litigation, and transfers those rights to
the trustee, acting on behalf of the bankruptcy
estate. See 11 U.S.C. §
541(a)(1) (indicating that a bankruptcy
estate includes ‘all legal or equitable interests of the debtor in
property’); id. § 323 (establishing the bankruptcy trustee as the
‘representative’ of the estate with the ‘capacity to sue and be sued’ on its
behalf). Thus, ‘[g]enerally speaking,
trustee in bankruptcy has standing to pursue it.’ (Parker
[v. Wendy’s Int’l, Inc. (11 Cir.
2004)] 365 F.3d [1268,] 1272; accord Turner v. Cook, 362 F.3d
1219, 1225-26 (9th Cir. 2004); Detrick v. Panalpina, Inc., 108 F.3d 529,
535 (4th Cir. 1997).†(
In
a bankruptcy proceeding, the “bankruptcy code place[s] an affirmative duty on
[the debtor] to schedule his assets and liabilities. [11 U.S.C.,] § 521(1). If he fail[s] properly to schedule an asset,
including a cause of action, that asset continues to belong to the bankruptcy
estate and [does] not revert to []the debtor].
See Stein v. United Artists Corp., 691 F.2d 885, 893 (9th Cir.
1982) (holding that only property ‘administered or listed in the bankruptcy
proceedings’ reverts to the bankrupt); accord Hutchins v. IRS, 67 F.3d
40, 43 (3d Cir. 1995); Vreugdenhill v. Navistar Int’l Transp. Corp., 950
F.2d 524, 526 (8th Cir. 1991) (holding that property is not abandoned by
operation of law unless the debtor ‘formally schedules the property before the
close of the case’).†(
936, 945.)
Here,
the vast majority of the claims asserted in the first amended complaint were
based upon prepetition events and conduct, such as, for example, alleged representations
made in connection with 2006 loan, the 2009 modification, and the three 2010
modification applications. Thus, those claims
became the property of the bankruptcy estate upon the filing of the petition,
and only the trustee has standing to assert them. Moreover, because plaintiff did not list the
claims based on prepetition events and conduct as her personal property in the
bankruptcy petition, those claims remained the property of the estate even
after the discharge order. Therefore,
plaintiff has no standing to pursue her claims based on prepetition events and
conduct.
Plaintiff
contends that her claims based upon prepetition events and conduct are not the
property of the bankruptcy estate because she did not discover the facts giving
rise to such claims until well after the bankruptcy petition had been filed
and, therefore, those claims had not “accrued†for statute of limitations
purposes at the time she filed the petition.
We disagree that plaintiff owns the prepetition claims.
The
issue of accrual of a cause of action and the issue of when the statute of
limitations begins to run for a particular cause of action “are two separate
and distinct issues aimed at very different problems.†(State
Farm Life Ins. Co. v. Swift (5th Cir. 1997) 129 F.3d 792, 796.) “Discovery is relevant to the determination of
when the statute of limitations begins to run, but it is not an element
necessary for the cause of action to accrue for purposes beyond the statute of
limitations.†(Id. at p. 798.) Therefore,
when determining whether a cause of action accrues for ownership purposes in a
bankruptcy proceeding, “[t]he time of discovery of the injury is not relevant
to [the] inquiry. A cause of action can
accrue for ownership purposes before the statute of limitations for that cause
of action has begun to run.†(
947.)
Based
on the foregoing authorities, plaintiff’s argument concerning delayed discovery
of her prepetition claims is irrelevant to the issue of whether those claims
had accrued for purposes of ownership under the bankruptcy law. Therefore, even assuming that plaintiff was
unaware of the facts giving rise to her claims based on prepetition conduct and
events, that delayed discovery does not alter the conclusion that those claims accrued
prior to the filing of the bankruptcy petition and were the property of the
bankruptcy estate.
Based on Postpetition Events
Plaintiff’s
first amended complaint did base certain claims, in part, on postpetition
events. For example, in her first cause
of action for fraud, plaintiff alleged that “[d]efendants further indicated in
writing on March
13, 2012, that plaintiff . . . withdrew her request for a
loan modification which was a false statement, and eliminated plaintiff from
modification programs.†And, in her
third cause of action for interference with prospective advantage, plaintiff
alleged that “[d]efendants further knew and were fully aware of a nationwide
United States Attorney General Settlement Agreement and Consent Judgment filed
with the Federal court on March 12, 2012 of which defendants were parties and
plaintiff and her mortgages are intended third party beneficiaries.â€
Those
two allegations were clearly based on postpetition events and conduct, such
that plaintiff has standing to pursue claims based upon them. But neither allegation, by itself, was
sufficient to state the cause of action in which it was included. As to the fraud cause of action, the first
amended complaint does not specify how plaintiff relied to her detriment on
defendants’ allegedly false written statement that she voluntarily withdrew her
request for a loan modification. As to
the interference with prospective advantage cause of action, the first amended
complaint did not specify how defendant tortuously interfered with the
prospective economic advantage that plaintiff allegedly had in the settlement
agreement and consent judgment. Because
neither allegation was sufficient to state the cause of action in which it was
included, the trial court properly sustained the demurrer to the first and third
causes of action to the extent those claims were based on postpetition events.
Plaintiff
contends that the trial court abused its discretion when it refused to grant
her an opportunity to amend her pleading.
“[L]eave to amend is
properly granted where resolution of the legal issues does not foreclose the
possibility that the plaintiff may supply necessary factual allegations. (E.g., People ex rel. Dept. of
Transportation v. Superior Court (1992) 5 Cal.App.4th 1480, 1486 [7 Cal.Rptr.2d
498].) If the plaintiff has not had an
opportunity to amend the complaint in response to the demurrer, leave to amend is liberally allowed as a matter of fairness, unless the complaint
shows on its face that it is incapable of amendment. (State of California v. Superior Court
(1984) 150 Cal.App.3d 848, 863-864 [197 Cal.Rptr. 914]; cf. Aubry v.
Tri-City Hospital Dist. [(1990)]
2 Cal.4th [962,] 971; Temescal Water Co. v. Department of Public Works
(1955) 44 Cal.2d 90, 107 [280 P.2d 1]; Virginia G. v. ABC Unified School
Dist. (1993) 15 Cal.App.4th 1848, 1852 [19 Cal.Rptr.2d 671]
Because the
standing issue was not before the trial court at the time it ruled on the
demurrer, the distinction between prepetition and postpetition events and conduct
was not raised or discussed. Thus,
plaintiff did not have an opportunity to propose amendments to the trial court
based on postpetition events and conduct.
Under these circumstances, fairness requires that plaintiff be granted leave
to amend her pleading based on postpetition events and conduct. Accordingly, we reverse the judgment of
dismissal and remand the matter to the trial court with instructions to enter
an order sustaining the demurrer and granting plaintiff leave to amend her
pleading to state causes of action based on postpetition events and conduct
DISPOSITION
The
judgment of dismissal is reversed and the matter is remanded to the trial court
with instructions to enter an order sustaining the demurrer and granting plaintiff
leave to amend her pleading to state claims based on postpetition events and
conduct only. No costs are awarded on
appeal.
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS
MOSK,
J.
I concur:
MINK, J.
>
I
respectfully dissent. I would affirm the
judgment of dismissal. All of the
pre-petition claims of plaintiff, Betsy A. Stansell, against defendants are
barred because she has no standing to pursue them. (Cusano
v. Klein (9th Cir. 2001) 264 F.3d 936, 945-947; Bostanian v. Liberty Savings Bank (1997) 52 Cal.App.4th 1075,
1080-1081.) Plaintiff has not set forth
any facts which would warrant reversal of the judgment to allow her to allege
post-petition misconduct. Every argument
in the opening brief relates to pre-petition conduct by defendants. The opening brief fails to articulate any
basis for post-petition claims against defendants. Plaintiff’s burden is spell out in her brief
how she would amend the first amended complaint. (Cooper
v. Leslie Salt Co. (1969) 70 Cal.2d 627, 636-637; People ex rel. Brown v. Powerex Corp. (2007) 153 Cal.App.4th 93,
112.)
Plaintiff
has failed to spell out how she would amend her first amended complaint. The opening brief concludes: “Based on the foregoing law, facts, evidence
and argument, and because of the heavy weight of the irreparable harm to
Appellant by the loss of her home to foreclosure, Appellant respectfully
requests this Court of Appeal vacate the final judgment, with orders to the
trial court to allow [Appellant] leave to amend all causes of action, and if so
warranted, order rescission of the original mortgage contract based on the fact
that the contract is void, as are all subsequent contracts obtained by
fraudulent concealment of the fact of a void initial mortgage. [The] [r]escission requested include[s] [an]
offset to Appellant of sums paid based on the original amount borrowed, and no
offset to Respondents due to unclean hands.â€
At no point does plaintiff seek to allege post-petition misconduct by
defendants nor otherwise identified how she would amend the first amended
complaint. Therefore, I would affirm the
judgment.
TURNER,
P. J.
name="_ftn1" title="">[1] The
defendants and respondents are Wells Fargo Bank, N.A., dba America’s Servicing Company and Deutsche Bank
National Trust Company as Trustee for Morgan Stanley ABS Capital I Inc. Trust
2006-HE3.
name="_ftn2" title="">[2] The
original complaint is not included in the appellant’s appendix. We requested the trial court file which
contains, inter alia, the original complaint and an August 31, 2012, minute
order explaining that the hearing on defendant’s demurrer to that pleading was
taken off calendar because plaintiff had filed a first amended complaint.
