First Federal Bank of California v. Dadlani

Filed 9/7/06 First Federal Bank of California v. Dadlani CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from a judgment of the Superior Court of Los Angeles County.

Brian F. Gasdia, Judge. Affirmed.

Epport, Richman & Robbins, LLP, and Steven N. Richman and Wendy K. Shapnick for Plaintiff and Appellant.

Law Offices of Lottie Cohen and Lottie Cohen for Defendant and Respondent.

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Plaintiff and appellant First Federal Bank of California appeals the trial court's order quashing service of its summons and complaint on Caroline Dadlani, a resident of the State of Florida. Finding no error, we affirm the order.

FACTUAL AND PROCEDURAL BACKGROUND

Respondent Caroline Dadlani is married to Umesh Dadlani, the president of Value Imports Company, Inc., a Florida corporation engaged in the import/export business ("Value Imports"). In 2003, Value Imports was doing business in California; the Dadlanis were residents of the state and owned as community property certain real and personal property, including a bank account.

In December 2003, appellant First Federal Bank (the "Bank") made a business loan to Value Imports in the original principal amount of $1,500,000. The loan matured on December 31, 2004; Mr. Dadlani personally guaranteed its repayment.

In August of 2004, the Dadlanis sold their California real property, closed their California bank account, and moved to Florida.

Value Imports did not repay the loan when it matured on December 31, 2004. On March 30, 2005, the Bank filed a complaint against Value Imports and Mr. Dadlani alleging various causes of action arising out of the loan transaction. In addition, the complaint "contained a cause of action for community property liability against" respondent. The Bank explains that "This cause of action was included since [respondent] had moved to Florida, which is not a community property state. [The Bank] may not be able to collect its Judgment in Florida unless it includes both" of the Dadlanis.

Respondent moved to quash service of the summons and complaint. The motion was based on the court's lack of personal jurisdiction over a Florida resident who lacked minimum contacts with the State of California. At the June 10, 2005 hearing on the motion, respondent cited an opinion of this District Court of Appeal, 11601 Wilshire Associates v. Grebow (1998) 64 Cal.App.4th 453, which she had not cited in her moving papers. The court took the motion under submission.

On June 13, 2005, the court granted the motion to quash, ruling that "minimum contacts do not exist" and citing 11601 Wilshire Associates v. Grebow (1998) 64 Cal.App.4th 453.[1] The Bank then filed a motion for reconsideration, arguing that it had not had the opportunity to distinguish 11601 Wilshire Associates v. Grebow. The court granted the motion for reconsideration, and thereafter affirmed its order granting the motion to quash.

The Bank appealed, contending that the trial court erred in concluding that respondent did not have sufficient minimum contacts in California to establish personal jurisdiction.

DISCUSSION

As the Bank acknowledges, in order to establish personal jurisdiction, "[t]he critical inquiry concerns the character of the defendant's activities within the forum state, whether the cause of action arises out of, or has substantial connection with, that activity, and upon balancing the convenience of the parties and interests of the state in assuming jurisdiction." (Kroopf v. Guffey (1986) 183 Cal.App.3d 1351, 1357, citing Cornelison v. Chaney (1976) 16 Cal.3d 143, 148.) "A state may exercise specific jurisdiction over a nonresident who purposefully avails himself or herself of forum benefits, because the state has a 'manifest interest' in providing its residents with a convenient forum for redressing injuries inflicted by out-of state actors." (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 447.) The Bank argues that respondent has sufficient minimum contacts with California because she lived in the state for four years and owned community property during that time.[2] From these facts the Bank concludes: "These activities within California are sufficient for the Superior Court to exercise personal jurisdiction over Caroline Dadlani. Moreover, these facts show that she is not being brought into the jurisdiction based on the unilateral activity of Umesh Dadlani, but rather based on her own activities in California."

It makes little sense to talk about respondent's forum-based "activities" which would warrant personal jurisdiction over respondent when the complaint does not allege, and the supposed cause of action is not grounded in, any activity at all on her part. Indeed, the Bank does not allege an injury "inflicted by an out-of-state actor." Rather, it relies solely on respondent's status as a property owner married to Mr. Dadlani, and the operation of Family Code section 910, which provides in part: "the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt." However, the Bank cites no case affirming personal jurisdiction over a non-resident citizen based on status alone. We agree with the trial court that respondent's status as a married property owner does not constitute forum-based activity upon which a finding of minimum contacts may be based.

Furthermore, we do not agree with the Bank's assertion that the merits of the complaint are of no concern, for the State of California has no interest in assuming jurisdiction over a non-resident on a non-existent cause of action.

11601 Wilshire Associates v. Grebow, supra, 64 Cal.App.4th 453 makes clear that a creditor "cannot state a cause of action against [a spouse with no personal liability] under Family Code section 910." In that case, plaintiff, the lessor under a lease, sued the wife of the guarantor of the lease, based solely on her husband's obligations as guarantor. The lessor maintained that the wife was liable on her husband's personal guaranty because she was married to the guarantor and, pursuant to Family Code section 910, she was responsible for his obligations to the extent of their community property. Like the Bank here, the lessor sued the wife not because she was personally liable on the guaranty, "but to facilitate its postjudgment recovery of money damages should it succeed on its claims against" the husband. The lessor was concerned that the husband could avoid the judgment by moving with his wife to a community property "state such as Arizona where execution on a foreign judgment against community property assets is permitted only if both spouses are expressly named as judgment debtors." (Id. at p. 456.) The appellate court concluded that, under these facts, the lessor could not state a cause of action against the wife.

We concur with the trial court's assessment that 11601 Wilshire Associates v. Grebow "is truly on all fours" with respect to the Bank's claim against respondent. That case makes clear that there is no cause of action in California for "community property liability." And California has no interest in requiring respondent to appear in California to answer a complaint, when the law of California unequivocally establishes that there is no merit to the Bank's lawsuit against respondent.

In sum, we agree with the trial court that the complaint fails to allege that respondent engaged in any forum-based activities which would warrant personal jurisdiction over her.

DISPOSITION

The order is affirmed.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ARMSTRONG, J.

I concur:

TURNER, P.J.

MOSK, J., Dissenting

I dissent.

Plaintiff's cause of action relates to defendant's former residency in the state of California. â€