U.S. Bank v. Super.
Filed 3/26/13 U.S. Bank v. Super. Ct. CA4/3
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opinion has not been certified for publication or ordered published for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
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
U.S. BANK, N.A., as Trustee,
etc.,
Petitioner,
v.
THE SUPERIOR
COURT OF ORANGE
COUNTY,
Respondent;
BELLA TERRA OFFICE JV, LLC,
Real Party in Interest.
G046642
(Super. Ct. No. 30-2010-00353214)
O P I N I O N
Original proceedings;
petition for a writ of mandate to challenge an order of the Superior
Court of
County, Luis A. Rodriguez, Judge. Petition denied.
Perkins Coie, J. David
Larsen, Gabriel Liao, Vilma Palma-Solana and James D. DeRoche for Petitioner.
No appearance for
Respondent.
Friedman Law Group, J.
Bennett Friedman, Stephen F. Biegenzahn and Michael Sobkowiak for Real Party in
Interest.
*
* *
Introduction
Bella
Terra Office JV, LLC (Bella Terra), obtained a loan to acquire three office
buildings and two retail buildings in a retail center in Huntington
Beach (the Property).
Bella Terra executed a deed of trust in favor of the lender, granting it
a security interest in certain real and personal property. U.S. Bank, N.A., as Trustee for the
Registered Holders of ML-CFC Commercial Mortgage Trust 2007-7, Commercial
Mortgage Pass-Through Certificates Series 2007-7, acting by and through Midland
Loan Services, a division of PNC Bank, N.A., its Special Servicer (U.S. Bank),
is the successor to the lender who made the loan to Bella Terra to acquire the
Property. After Bella Terra defaulted on
the loan, a receiver was appointed to oversee the Property.
After
the U.S. Bank loan funded, but before Bella Terra defaulted on the loan, Bella
Terra made a separate loan to the owner of a parking structure adjacent to the
Property to pay for improvements to that structure. U.S. Bank claims a security interest in the
promissory note for the loan from Bella Terra.
In this proceeding, U.S. Bank requested the trial court to order
Bella Terra to turn over to the receiver the promissory note for the loan and
payments on that note. The court denied
the request, and this appeal followed.
We
resolve the serious questions regarding the appealability of the trial court’s
order by exercising our discretion to treat U.S. Bank’s appeal as a petition
for a writ of mandate. Both parties agree
we should treat the appeal as such a petition.
We deny writ relief because the promissory note in favor of Bella Terra,
evidencing the loan for improvements to the parking structure, does not fall
within the description of the collateral for the original loan made to Bella
Terra to purchase the Property.
Statement of Facts and Procedural History
In
May 2007, Bella Terra obtained a $105 million loan from Merrill Lynch
Mortgage Lending, Inc. (the U.S. Bank loan),
to acquire the Property. The U.S. Bank
loan was memorialized by a written loan
agreement and was secured by a deed of trust, assignment of leases and
rents and security agreement (the Deed of Trust). The Deed of Trust secures an interest in the
Property and in “[n]on-exclusive easements,†a term not defined in any
documents contained in the appellate record.
Through its ownership of the Property, Bella Terra acquired a majority
voting interest in One Pacific Plaza Association, a California nonprofit mutual
benefit corporation (One Pacific Plaza), which owns a parking lot and parking
structure adjacent to the Property; the parking lot and parking structure are
In
2007, after Bella Terra acquired the Property, the members of One
Pacific Plaza
determined capital improvements to the parking structure were necessary. Bella Terra agreed to lend over $680,000 to One
Pacific Plaza
(the One Pacific
Plaza loan). One Pacific
Plaza executed and delivered to
Bella Terra a promissory note evidencing the One
Pacific Plaza
loan (the Note).
In
November 2009, Bella Terra defaulted on the U.S. Bank loan. U.S. Bank filed a complaint for specific
performance and appointment of a receiver.
The court appointed a receiver to collect rents from the tenants of the
Property. U.S. Bank and Bella Terra
stipulated to allow the receiver to manage and sell the Property in partial
satisfaction of the U.S. Bank loan; the trial court approved the stipulation
and entered it as an order in September 2010.
The receiver moved for a court order authorizing the sale of the
Property. Ultimately, the trial court
granted the receiver’s motion, over the objection of Bella Terra, and
authorized the sale of the Property to GIV Bella Terra Investor, LLC (GIV).
After
the sale was authorized, but before it closed, the receiver became aware of the
existence of the One Pacific
Plaza loan. Bella Terra refused to provide the receiver
with the Note or any payments on the One
Pacific Plaza
loan made to Bella Terra since the receiver’s appointment. The receiver therefore filed an ex parte
application for an order requiring Bella Terra to turn over the Note and all
monies collected under it. After
supplemental briefing and a hearing, the trial court denied the application
(the turnover order). U.S. Bank timely
appealed.
The
sale of the Property to GIV was completed.
GIV entered into a consent and
assumption agreement with U.S. Bank, under which GIV released U.S. Bank and
others from any and all liabilities occurring prior to closing, known or
unknown, in connection with the sale and acquisition of the Property.
Discussion
I.
The
order from which U.S. Bank appeals is not a final judgment, and no judgment has
been entered since the turnover order was filed. It is “[t]he substance and effect of the
order, not its label or form, [that] determines whether it is appealable as a
final judgment.†(Joyce v. Black (1990) 217 Cal.App.3d 318, 321.) We consider whether the order has the
earmarks of a final judgment—that is, it leaves nothing for judicial
consideration, it is the only judicial ruling on the issue, and there is no
other opportunity to review the order by appeal. (Estate
of Miramontes-Najera (2004) 118 Cal.App.4th 750, 755; Joyce v. Black, supra, at
p. 321.)
In
this case, the order has some of the earmarks of a final judgment. Although the order does not dispose of the
entire action, it leaves nothing further for judicial consideration on the
issue whether the Note is collateral of U.S. Bank, and is the only judicial
ruling on that issue. However, nothing
would have prevented U.S. Bank from obtaining review of the order on appeal
from a final judgment. We conclude the
trial court’s order is not itself a final judgment.
U.S.
Bank argues the turnover order is appealable as a final determination on a
collateral matter. “When a court renders
an interlocutory order collateral to the main issue, dispositive of the rights
of the parties in relation to the collateral matter, and directing payment of
money or performance of an act, direct appeal may be taken.†(In re
Marriage of Skelley (1976) 18 Cal.3d 365, 368.) In supplemental briefing filed pursuant to an
order of this court, U.S. Bank and Bella Terra advised this court that the
dismissal of the underlying lawsuit is awaiting the trial court’s approval of
the receiver’s final accounting, which, in turn, is awaiting the resolution of
the issues raised by this appeal. We
cannot see how the matter can truly be collateral when the finalization of the
litigation depends on it.
In
this case, we exercise our discretion to treat the appeal as a petition for a
writ of mandate, in the interests of justice
and judicial economy. (
7 Cal.4th 725, 744-747.) The merits
of the issues have been fully briefed, and Bella Terra did not argue the lack
of appealability, thereby conceding we could consider the case on its
merits. (Indeed, in its supplemental
briefing, Bella Terra argues that if this court determines the turnover order
is not an appealable order, it should exercise discretion to treat the notice
of appeal as a petition for a writ of mandate.)
II.
and Mootness
Bella
Terra argues U.S. Bank does not have standing to pursue this writ proceeding
because it is not an aggrieved party.
(Code Civ. Proc., § 902.) An aggrieved party is one “whose rights or
interests are injuriously affected by the judgment. [Citations.]
Appellant’s interest ‘“must be immediate, pecuniary, and substantial and
not nominal or a remote consequence of the judgment.â€â€™ [Citation.]â€
(County of Alameda v. Carleson
(1971) 5 Cal.3d 730, 737.) Bella
Terra contends that U.S. Bank suffered no damage as a result of the denial of
the turnover order because it has no liability to GIV for the failure to
include the Note as part of the sale of the Property to GIV. Bella Terra argues the writ proceeding is
moot because U.S. Bank released all personal property claims against Bella
Terra when the sale to GIV was completed.
We conclude U.S. Bank has standing to pursue
this writ proceeding, and the proceeding is not moot, because the denial of the
turnover order affects U.S. Bank’s claimed security interests. When GIV assumed the U.S. Bank loan, U.S.
Bank continued to have a security interest in all secured property transferred
by the receiver to GIV. The consent and
assumption agreement specifically provides that U.S. Bank “shall continue to
have a security interest (and is hereby granted a security interest) in all
Collateral [(earlier defined as ‘all fixtures, personal property and other
property described in the Loan Documents’)] whether such Collateral is now
owned by [GIV] or is hereafter acquired by [GIV].†Therefore, if the Note is ultimately
transferred to GIV, U.S. Bank might have a security interest in it. This is a sufficient claimed interest to give
U.S. Bank standing to bring the writ petition, and means the writ proceeding is
not moot despite the completion of the sale of the Property.
III.
of Review
This
case involves a single issue of contract interpretation, and there are no
disputed facts; therefore, we review the matter de novo. (Dowling
v. Farmers Ins. Exchange (2012) 208 Cal.App.4th 685, 694;
Country Club v. Newport Beach Country Club, Inc. (2003) 109
Cal.App.4th 944, 955‑956.)
IV.
the Note Within the Deed of Trust’s Description of the Collateral for the U.S.
Bank Loan?
A. The
Deed of Trust
The
Deed of Trust gives U.S. Bank a security interest in the following property of
Bella Terra to secure the U.S. Bank loan:
“ . . . [Bella
Terra] does hereby irrevocably mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer, convey and grant a security interest to Trustee, its
successors and assigns, for the benefit of [U.S. Bank] and its successors
and assigns, the following property, rights, interests and estates now owned,
or hereafter acquired by [Bella Terra] (collectively, the ‘Property’):
“(a) Co-Tenancy
Agreement. . . . [;]
“(b) Land.
The real property described in Exhibit A attached hereto and made a part
hereof (the ‘Land’);
“(c) Additional Land. . . . ;
“(d) Improvements.
The buildings, structures, fixtures, additions, enlargements,
extensions, modifications, repairs, replacements and improvements now or
hereafter erected or located on the Land (collectively, the ‘Improvements’);
“(e) Easements. . . . ;[
“(f) Fixtures and Personal
Property. . . . ;
“(g) Leases and Rents. . . . ;
“(h) Insurance
Proceeds. . . . ;
“(i) Condemnation
Awards. . . . ;
“(j) Tax Certiorari. . . . ;
“(k) Rights. . . . ;
“(l) Agreements.
All agreements, contracts, certificates, instruments, franchises,
permits, licenses, plans, specifications and other documents, now or hereafter
entered into, and all rights therein and thereto, respecting or pertaining to
the use, occupation, construction, management or operation of the Land and any
part thereof and any Improvements or any business or activity conducted on the
Land and any part thereof and all right, title and interest of [Bella Terra]
therein and thereunder, including, without limitation, the right, upon the
happening of any default hereunder, to receive and collect any sums payable to
[Bella Terra] thereunder;
“(m) Intangibles. . . . ;
“(n) Accounts. . . . ;
“(o) Conversion. . . . ;
“(p) REA. . . . ; and
“(q) Other Rights.
Any and all other rights of [Bella Terra] in and to the items set forth
in subsections (a) through (p) above.â€
(Underscoring omitted.)
B. U.S.
Bank’s Argument That the Note Is Included in the Deed of Trust
The
parking structure is not part of the land, as defined in the Deed of
Trust. The term “Land†is defined as the
real property acquired by Bella Terra, i.e., the retail and office buildings it
purchased with the proceeds of the U.S. Bank loan, and “[n]on-exclusive
easements,†which, as we shall discuss post,
are not defined in any of the documents in the appellate record.
U.S.
Bank argues the Note constitutes collateral for the U.S. Bank loan under
section 1.1.(l) of article 1. under the Deed of Trust because it is an
after-acquired instrument “respecting or pertaining to the use, occupation,
construction, management or operation of the Land.†U.S. Bank’s argument is premised on the
assumption that the “[n]on-exclusive easements,†included in the definition of
the land in the Deed of Trust, are easements for ingress and egress of the
parking structure adjacent to the Property, which is used by the Property’s
tenants and patrons. There is no support
for this assumption in the appellate record, however, and U.S. Bank does not
cite to any document so stating. Indeed,
all of the documents referencing the Property acquired by Bella Terra describe
the easements as follows: “Non-exclusive
easements as more particularly described and set forth in†other recorded
documents; those recorded documents do not appear in the appellate record. Therefore, we have no evidence of the scope
of the easements, and whether they are, in fact, for ingress and egress of the
parking structure. Nor has U.S. Bank
shown that the easements for ingress and egress of the parking structure are
otherwise included in the description of “Land†under the Deed of Trust. It is the burden of the party challenging an
order on appeal to provide an adequate record to assess error. (Maria
P. v. Riles (1987) 43 Cal.3d 1281, 1295; Fladeboe v. American Isuzu Motors Inc. (2007) 150
Cal.App.4th 42, 58.) U.S. Bank has
failed to do so, and we could deny the petition on that ground alone.
Even
if we were to examine the merits of U.S. Bank’s arguments based on the
incomplete record before us, we would find no error. The definition of the land in the Deed of
Trust includes certain nonexclusive easements, which, for purposes of this
portion of the opinion, we will assume are easements for ingress and egress of
the parking structure. The question is
whether the Note “respect[s] or pertain[s] to the use, occupation,
construction, management or operation of†the nonexclusive easements to ingress
and egress of the parking structure.
We
conclude the Note evidencing the One Pacific Plaza loan to improve the parking
structure is not in respect to and does not pertain to Bella Terra’s use of easements
to enter or exit the parking structure.
The Note has no effect on Bella Terra’s right or ability to use its
nonexclusive easements. That the purpose
of the One Pacific Plaza loan was to make improvements to the parking structure
does not necessarily mean the Note is in respect to or pertains to the use of
easements to get in or out of the parking structure. Bella Terra had the right and the ability to
use its easements whether or not improvements to the parking structure were
made. Therefore, the Note, which
evidences the One Pacific Plaza loan made to fund improvements to the parking
structure, is not in respect to and does not pertain to the easements. As discussed ante, U.S. Bank’s argument has no support in the governing
documents.
U.S.
Bank argues the Note is in respect to or pertains to the Property itself,
excluding the nonexclusive easements, because “[i]n California, where most
employees and customers drive, it is not practical to lease an office or retail
building where no parking is available.â€
This argument stretches credulity almost to the breaking point. The Property also requires electricity to
operate; U.S. Bank’s argument, taken to its logical conclusion, would mean U.S.
Bank had rights of collateral in any promissory notes related to property on
which easements for power lines exist.
U.S.
Bank also argues the Note is in respect to or pertains to improvements on the
land because the One Pacific Plaza loan was made to fund improvements to the
parking structure. But the Deed of Trust
only creates a collateral interest in instruments respecting or pertaining to
the use of improvements; the Deed of Trust defines the improvements as “[t]he
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter erected
or located on the Land.†Even assuming
that the nonexclusive easements, referenced in the Deed of Trust as part of the
land, include easements to enter and exit the parking structure, the upgrades
to the parking structure are modifications, repairs, or improvements to the
structure itself, not the easements. The
easement has not undergone any changes or modifications, so section 1.1.(d) of
article 1. of the Deed of Trust is inapplicable.
U.S.
Bank further argues that Bella Terra is estopped from disputing the Note is
part of the collateral for the U.S. Bank loan because in both the loan
agreement and in Bella Terra’s operating agreement, Bella Terra agreed and
covenanted that it would not engage in any other business activities, acquire
assets other than the Property, or make any loans or advances until the U.S.
Bank loan was repaid. U.S. Bank contends
that because the loan documents evidence an intent that Bella Terra not acquire
any assets other than those used as collateral for the U.S. Bank loan,
the terms of the loan documents must become collateral. We disagree.
Any acquisition of assets or any business activities that violate the terms
of the loan documents may constitute a breach of contract and an act of
default. They do not transmute property
that is not otherwise collateral for the U.S. Bank loan.
Disposition
The
petition for a writ of mandate is denied.
Real party in interest shall recover
FYBEL,
J.
WE CONCUR:
MOORE, ACTING P. J.
ARONSON, J.
Terra and two affiliates; Bella Terra eventually assumed all of its affiliates’
obligations under the terms of the loan agreement and all related loan
documents. U.S. Bank succeeded to all of
Merrill Lynch Mortgage Lending’s rights under the loan agreement. We will refer only to Bella Terra and U.S.
Bank through the remainder of this opinion to avoid confusion.
name="_ftn2" title=""> [2] There is no argument by U.S. Bank that
article 1., section 1.1.(e) of the Deed of Trust is relevant to our analysis.
