Marriage of Abu-Assal

Filed 8/22/07 Marriage of Abu-Assal CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeals from two orders of the Superior Court of San Bernardino County, Kenneth G. Ziebarth, Temporary Judge (pursuant to Cal. Const., art. VI, 21), and from a judgment of the Superior Court of Riverside County, Gloria Connor Trask, Judge. Orders affirmed; judgment of the Superior Court of Riverside County reversed with directions.

Herbert N. Niermann for Appellants Lofty Abu-Assal et al. in G038661 and G038664.

Mirau, Edwards, Cannon, Lewin & Tooke and William P. Tooke for Defendant and Appellant in G038672.

Mundell, Odlum & Haws, Karl N. Haws, William P. Tooke; and Marc G. Reich for Respondent Michelle J. Abu-Assal in G038661.

Orrick, Herrington & Sutcliffe, Jeffrey D. Hermann, Steven A. Becker; and Marc G. Reich for Respondent Michelle J. Abu-Assal in G038664.

Robert P. Goe and Elizabeth A. LaRocque for Plaintiff and Respondent in G038672.

* * *

To paraphrase an old Marine Corps expression, this case has been FUBARed -- fouled up beyond all recognition. In this decision we will try to put it back on course.

I. Introduction to the Three

Consolidated Appeals

Before transferring them to this division of the Fourth District Court of Appeal, our colleagues in Division 2 wisely consolidated these three appeals because they constitute essentially one case -- a case that has gone on about eight years now and manifested itself in no less than four different trial-level courts and no less than five separate proceedings. (And still hasnt been authoritatively decided!)

The case about which we speak is the claim of the wife of a doctor that a certain item of real property (two contiguous parcels known in this litigation as the Riverside Property, which was operated as a pre-school until 2003) was community property in which she has an interest.

The four different trial-level courts that have dealt with the wifes claim, either directly or indirectly, are:

-- 1) The San Bernardino family court, where the doctor husband instituted divorce proceedings back in 1999 (SBFSS 44809). This family law proceeding ultimately gave rise to two of the three consolidated appeals (G038661 and G038664). This family law action also gave rise to the appointment of a receiver to take control of the Riverside Property, and the receiver, in August 2002, would later file, on his own behalf, a quiet title action concerning the property in San Bernardino Superior Court (SCVSS 93513). (Hence the family law action gave rise to two proceedings, SBFSS 44809 and SCVSS 93513.)

-- 2) The San Bernardino federal bankruptcy court where the doctor husband filed for bankruptcy in September 2002 (In re Maged L. Abu-Assal, Case No. RS-02-25648) -- that is, Husband filed for bankruptcy almost immediately after the receiver filed the quiet title action in San Bernardino Superior Court. The San Bernardino quiet title action was later removed to federal bankruptcy court, but the bankruptcy trustee, in December 2003, formally abandoned the Riverside Property, thus in effect returning the San Bernardino quiet title action back to the state court in San Bernardino.

-- 3) The San Bernardino federal court, where the wife filed a federal civil RICO action filed by the wife in February 2001 (EDCY 01-0153RT (SGLx)), based on the machinations of the doctor husbands family in allegedly conspiring to deprive her of the Riverside Property.

-- 4) A Riverside County state court quiet title action filed by an entity, Lido Property Investments, claiming that wife has absolutely no interest in the property (RIC 430870). The judgment against the wife in that quiet title action has given rise to the third of the consolidated appeal (G038672).

As if to underscore the fundamental interrelatedness of the consolidated appeals and the cases from which they arise, we should note at the outset that Lido Property Investments, the plaintiff in the Riverside quiet title action, has been found by a federal court to have been created by the husbands father and its vice-president is the husbands mother. Lido is an entity that traces its title back to a deed of trust given by the doctor husband to his mother.

Despite the ungainly proliferation of litigation, the actual task facing this court in these three consolidated appeals is not difficult. The two orders and the one judgment from which these appeals have been taken ultimately all turn on the question of whether a quitclaim deed signed by the wife in favor of the husband during the marriage concerning the Riverside Property, necessarily precludes the wife from having any interest in the property. (She signed the quitclaim deed in July 1997, about two years before the May 1999 petition for dissolution was filed.) As we explain below, the answer is no -- the quitclaim deed is not dispositive.

Thus we will affirm the two orders made by the family law court in San Bernardino, which have as their aim the preservation of whatever interest the wife might have in the property. We reverse the judgment of the Riverside quiet title action, which (incorrectly) purports to rule out any interest of the wifes in the Riverside Property.

II. The Parties

The doctor husband is Dr. Maged Abu-Assal, who worked as a neurosurgeon in the Loma Linda area during the marriage.

The wife is Michelle J. Abu-Assal. She married Maged in June 1982. (According to the petition, the marriage thus lasted from June 1982 to May 1999.)

However, this case also involves Mageds parents and several entities created and controlled by them, or by a friend of theirs, Dr. Abdel Hady M. Abdel Meniem (usually referred to in the briefs and record as Dr. Hady). Mageds father is Lofty Abu-Assal. His mother is Nadia Abu-Assal. Lofty, Nadia, or Dr. Hady control these entities: Golden Star Systems, Inc., Seniors Property Management, and Lido Property Investments. (Nadia is a vice-president of Lido and, according to a minute order in the federal RICO action, Lofty created Lido. The same minute order says that Lofty so controls Lidos ostensible president that the president signs documents without understanding their significance.)

At the outset, we face the problem, common in family law cases, of how to describe the parties. Courts usually settle on the use of first names, noting that no disrespect is meant; first names in such context are simply more convenient and reader-friendly. (E.g., In re Marriage of Seagondollar

139 Cal.App.4th 1116, 1119, fn. 1.)

Sometimes, however, litigation arising in a family context requires the use of generic descriptions in order to emphasize the relationship between the competing parties. (E.g., Corder v. Corder (July 23, 2007, S138666) 41 Cal.4th 644 [generally referring to contestants as Wife and Daughter].) Such treatment is particularly appropriate in these consolidated appeals, because, as becomes immediately apparent on examination of the relevant chronology and facts, this entire matter is essentially a divorce case run amok. We will therefore, except as context otherwise requires, refer to Maged from now on as Husband, Michelle as Wife, Lofty as Husbands Father and Nadia as Husbands Mother. Lofty and Nadia will be referred to collectively as the Parents and business entities created or controlled by them will be collectively referred to as the Parents Entities.

III. The Chronology

A. Pre-Divorce

As noted, Husband worked as a neurosurgeon during the marriage. He was well paid. Husband and Wifes 1992 joint tax return showed W-2 income of $1,085,500.

Husband acquired the Riverside Property in 1997 in a grant deed[1] from Inland Child Development Centers, Inc., the shareholders of which were Husbands Father and Husbands Mother. The deed granted the Riverside Property to Dr. Maged Lotfy Abu-Assal, a married man as his sole and separate property. The deed was dated March 7, 1997. It was recorded March 24, 1997.

Inland Child Development Centers would later file for chapter 11 bankruptcy. In that bankruptcy proceeding, Husbands declaration had this to say about his acquisition of the property: Earlier in 1997 I purchased pre-school property which was previously owned by the debtor, in order to preserve it from foreclosure. . . . I paid off the deeds of trust encumbering the property from my own resources, including a first and second deed of trust in favor of Hemet Federal Savings, and a third deed of trust in favor of Robert Jones through his heirs, Sandra Hazen and Debra Parker. The deed was transferred to me in March 1997. (Italics added.)

The balance of the declaration related how Husband had agreed to infuse $900,000 of new capital into Inland Child Development Centers, the source of which was from [his] own personal financial strength since he was a medical doctor with a substantial and respected practice which had furnished him with the ability to make these commitments to the debtor and to support my father and mother in their efforts to save the debtors property.

Husbands Mothers side of the acquisition is rather different. In a declaration she would file in 2006 in support of a motion for summary judgment in the Riverside quiet title action, she agreed that the property was in foreclosure at the time of Husbands acquisition, but asserted that Husband only held the property as a straw figure in trust for her since she had no credit. In relevant part her declaration read: In 1997, a default occurred under the first trust deed. The administrator of the estate [of Robert Jones, which held the first trust deed] commenced foreclosure proceedings. De Anza Bank agreed to offer a new loan that would take out the Joness trust deed thereby avoiding foreclosure. De Anza Bank required that the Riverside Property be held in my son Maged Abu-Assals (Maged) name and that he be the obligee under the loan, because he had credit and I did not.[2]

In late June 1997, that is, about three months after the receipt of the deed, Wife signed a quitclaim deed regarding the Riverside Property, ostensibly granting it to Husband as a married man as his sole and separate property. (Interestingly, though, the typed-in date of the quitclaim deed was February 28, 1997 -- that is, prior to the March 7, 1997 date of the deed by which Husband actually acquired the property from Inland Child Development Centers. The deed was recorded July 3, 1997.)

In this appeal, Wife makes no claim that her signature on the quitclaim deed was forged. (At least the date on a later second deed of trust given by the Husband to Husbands Mother concerning the property was forged, but that is getting ahead of ourselves.) However, Wife would later declare that she had no intention of relinquishing any community interest she had in the property. Rather, Husband had assured her that the document was necessary and a formality required by the bank. Further, Husband repeatedly assured her that the Riverside Property belonged to us, although his parents were involved in its business operations. (The statements made in the briefs of the Parents and the Parents Entities that Wife does not dispute the validity of the quitclaim deed are only correct if by dispute the validity one means does not question the authenticity of the signature. Wife most assuredly does dispute the validity of the quitclaim deed if by validity one means having a dispositive legal effect.)

B. May 1999: The Divorce

Husband filed a petition for dissolution of marriage on May 21, 1999. There were two minor children, Clair and Adrienne, then aged 9 and 5 respectively. The Riverside Property was not specifically included in Husbands attachment itemizing community property. Wifes response to the petition, however, included an attachment specifically listing the Riverside Property as a community asset.

Almost immediately the couple began fighting over the custody of the children.

Now we come to the forgery alluded to several paragraphs ago. On May 27, 1999 -- six days after the San Bernardino family law action was filed -- Husbands Mother recorded a deed of trust on the Riverside Property in which Husband purported to give Husbands Mother a deed of trust securing the payment of $500,000. Husband purportedly signed that deed of trust on April 1, 1997, that is, more than two years previously. But the notarization attesting to his signature of that date was by one D.E. Brierley, whose notary stamp stated a commission that expired May 5, 2002.

The commission expiration date on the stamp gave the game away. As notary Darryl Brierley would later admit in a deposition (taken December 2003) the date of Husbands signature could not possibly be genuine, because notary commissions are for periods of four years. Brierleys commissionfor the very stamp that he used for the supposed April 1997 deed of trust didnt even begin until 1998!

Though the fact of the forgery was easily established, that did not deter Husbands Mother from still declaring, in her 2006 declaration in support of summary judgment in the Riverside quiet title action, that in April 1997 Husband executed a note for $500,000 in Husbands Mother favor to protect her equity in the property while he had title. Here are the excerpts from Husbands Mothers declaration: On June 9, 1997, a deed of trust [in favor of De Anza Bank] securing payment of $350,000 was recorded. The pre-school operation made all of the payments under this loan, not Maged. In conjunction with this transaction Maged executed a secured straight note for the sum of $500,000.00 in my favor on April 1, 1997, in order to protect my equity in the property while he had title. On May 27, 1999, the corresponding deed of trust, dated April 1, 1997, was recorded. This note and deed of trust were given in recognition of the fact that Maged would be the title owner of the Riverside Property in order to obtain a new loan the amount of his indebtedness was far less than the fair market value of the Riverside Property. (In order words, since Husband was holding the property for his mother merely as a trustee, he gave his mother a note for the whole value of the property even though he never actually borrowed any money from her.)

The San Bernardino family law case quickly became every dependent-spouses attorneys nightmare, as Husband began transferring marital assets with abandon, despite the automatic restraining orders that come with dissolution petitions. By August 2000, a forensic accountant who would later be appointed by the court, CPA Jan R. Alexander, ascertained that Husband had transferred about $4.4 million directly from the couples personal checking account to various corporations which she could not trace.

C. February 2001: The Rico Action

The looting of the community estate prompted Wife to file a civil RICO action in federal court (Central District of California, Eastern Division, Case no. EDCY 01-0153RT (SGLx)) in late February 2001. The defendants included Husband, Husbands Mother, Husbands Father, the notary public Brierley, Inland Child Development Centers, Inc. and anyone claiming title to, among other specified parcels not issue in this appeal, the Riverside Property. The complaint alleged that the deed of trust given by Husband to Husbands mother on May 27, 1999 -- that is, the one whose date was altered to look as if it was given during and not after the marriage -- was a forgery.

Interestingly enough, a Federal Rule of Civil Procedure section 12(b)(6) motion filed in the federal RICO action by Husband and three commercial entities (Advanced Child Development Systems, NMA Investments, and Neurosurgicare Associates of Loma Linda) argued the superior court was already exercising in rem jurisdiction over the Riverside Property in the then-pending marital dissolution action. (Except that the 12(b)(6) motion got the county wrong. It said it was Pending before the Superior Court in Riverside County when it should have said San Bernardino County.)

The 12(b)(6) motion also made this statement, remarkable given later positions that would be taken by the parties: The Superior Court is exercising in rem jurisdiction over at least three of the real properties that are the subject of the plaintiffs federal complaint. Maged Abu-Assal [Husband] acknowledges that those three properties [of which the Riverside Property was one] are or were owned as community property with the plaintiff. The plaintiff could have raised all of the issues in this action in the marital dissolution action. (Italics added.)

In our request for supplemental briefing, we asked the parties what was the current status of the federal RICO action, and have learned that (1) Wife has a motion for summary adjudication scheduled for August 30 -- about a week after oral argument was heard in these consolidated appeals -- and (2) trial has been set in any event for November 13, 2007. The summary adjudication motion, according to the Wifes supplemental briefing, seeks to determine that [the Wife] is the 100% owner of the Riverside Property and that the Riverside 2nd Trust Deed and any subsequent transfers are void, invalid and set aside.

We will explain more about the Second Trust Deed in part III.K.1 of this opinion. We will cover the importance of the pending proceedings in federal court when we explain mootness in part IV.A.2.b. of this opinion.

D. 2002: A Receiver Is Appointed

In the Family Law Action

Meanwhile, during January 2002 in the San Bernardino family law case, Wife succeeded in obtaining an order specifically preventing Husband, either of his parents (both were named in the order), Lido Property Investments (also specifically named), and a couple of other entities, from transferring, selling, assigning, mortgaging (and related synonyms) the Riverside Property.

The summer of 2002 would see a flurry of activity in the San Bernardino family law case.

In July 2002, the San Bernardino family law court made an order appointing Marvin Reiter, a CPA, as receiver of the Riverside Property, with power to sell the property at fair market value.

In August 2002, that is, very quickly after receiving his appointment,

the receiver filed a separate civil action in San Bernardino Superior Court (the SCVSS 93513 in the caption) for declaratory relief, quiet title and accounting. The receiver squarely alleged that the Riverside Property was among several properties (none of the others are at issue in the appeals before us) that were all assets of the community estate arising from the marriage of Husband and Wife. The defendants in this action (which we will call the San Bernardino quiet title action, to be distinguished from the Riverside quiet title action) included: Husband, Wife, Husbands Father, Husbands Mother, Seniors Property Management, Nile Import and Export Corporation, Inland Child Development Centers, Advanced Child Development Systems, Tender Care Childrens Centers, Luxor Investment and Lido Property Investments.

(In its supplemental briefing, Lido makes much of the fact that neither the Parents nor any of the Parents Entities were joined to the San Bernardino family law action. It totally ignores the fact that Lido was made a defendant in the San Bernardino quiet title action which, if not formally consolidated with, has certainly been considered together with the San Bernardino family law action. (The trial court files are full of pleadings marked SBFSS 44809 and SCVSS 93513.))

E. Also 2002: Husbands Bankruptcy

1. The Removal of the San Bernardino

Quiet Title Action to Bankruptcy Court

in 2002

The month-by-month succession of events of the summer of 2002 continued into September, when Husband filed for bankruptcy. The bankruptcy trustees notice of removal asserted that the receivers lawsuit involved community property, hence involved assets of the bankruptcy estate.

2. And Its Return to

State Court in 2004

The Riverside Property appears to have been the locus of an operating pre-school into 2003. However, in December 2003, the bankruptcy court authorized the bankruptcy trustee to terminate operations at the pre-school and abandon the bankruptcy estates interest in the property. The order permitted interested parties to seek relief to re-open the school. Husbands Mother, apparently intending to re-open the pre-school, obtained that relief in March 2004, though she never did re-open the pre-school.

F. Mid-2004: A Foreclosure of the First

Trust Deed Prompts Reinstatement of the

Receiver In the San Bernardino

Family Law Action

1. The (Apparently Legitimate)

Lineage of the First Trust Deed

At this point in our narrative it is necessary to backtrack to events concerning the first mortgage on the property. It is undisputed that when Husband first acquired the property in 1997, De Anza National Bank held a $350,000 first trust deed on the property. Sometime afterwards, De Anza National Bank was acquired by the BYL Bank Group, which made First Bank and Trust successor in interest to De Anza National.

By April 2004, the original loan of $350,000 was in default. (This is not surprising given that the pre-school had been closed and the Riverside Property was not longer producing any income.) First Bank and Trust recorded a formal notice of default on the loan on April 23, 2004.

Each side responded differently to the default notice of April 2004. Just a few weeks after, in mid-May 2004, Wife filed an order to show cause in the San Bernardino family action asking that the court reinstate the appointment of a receiver for the property, and also asking the court to order the receiver to sell the property at the highest possible value. Husband, Husbands Father, Husbands Mother, and Seniors Property Management all opposed the motion. (Husband had different counsel than his parents and Seniors Property.)

The Parents evident strategy was to circumvent a battle in court by acquiring First Bank and Trusts interest in the property. So, on May 26, 2004, First Bank and Trust assigned to Husbands Father its interest in the original $350,000 loan to Husband.

The assignment merely stated it was made for value received. However, the details behind Husbands Fathers acquisition of the First Bank and Trusts first mortgage can be found in a declaration of Dr. Hady. (The declaration was attached as part of the opposition to a post-judgment enforcement order in Husbands bankruptcy case, which in turn was attached to a declaration submitted in opposition to a motion for an injunction preventing the foreclosure of the property, which we will describe a few paragraphs from now).

Here are the details of Husbands Fathers acquisition of the first trust deed as related by Dr. Hady: Husbands Mother requested through Husbands Father that Dr. Hady loan Husbands Mother money to help her pay off a bank that was foreclosing on the Riverside Property. More specifically about $292,000 was needed to buy the note on which First Bank and Trust was foreclosing. Further, Dr. Hady used his own money to purchase the First Bank & Trust note and deed of trust, although Husbands Father formed Golden Star Systems to act on Dr. Hadys behalf. Dr. Hady was plain about his intention to resell the property to Husbands Mother which would pay him back from its future operating proceeds.

Accordingly, on June 11, just a few weeks after the loan from Dr. Hady to Husbands Parents, Husbands Father assigned his newly-acquired interest in the Riverside Property, that is the note and deed of trust, to Golden Star Systems, whose president was Husbands Mother, and whose agent for service of process was Husbands Father.

2. A Receiver Is Reinstated and

Commences Marketing Efforts

Meanwhile, on the dissolution-litigation front, Wife prevailed in her motion to reinstate a receiver over the property. In July 2004, the court appointed Richard Halderman, Jr. as the receiver, with authority to sell the Riverside property. The receiver commenced efforts to market the property immediately, with an asking price of $675,000.

G. Latter 2004: The Battle to Foreclose.

Or Prevent Foreclosure.

With the appointment -- reinstatement would be a better word -- of the receiver, the battle now turned to the expected foreclosure of the original $350,000 first mortgage, now practically held by Husbands Parents and Dr. Hady, since it was still in default. Dr. Hady recognized that the property was now in the hands of a state court receiver and that receiver wanted to sell the property as is. Dr. Hady would tell the bankruptcy court in a declaration, however, that he was unconcerned because he intended that the note and first deed of trust he then held would be paid in full by any buyer, and vowed that he would not delay foreclosure of the property.

Knowing of Husbands Fathers recent acquisition of the first mortgage, Wife counterattacked by way of a motion in the San Bernardino family law action[3] to enjoin the pending foreclosure. One of Wifes arguments to enjoin the foreclosure, interestingly enough, was that the money which was used to fund the purchase of the note and deed of trust held by First Bank and Trust came from the community estate originally. That is, the money was part of the $4 million which Husband had looted from the community estate. Husbands Father, Husbands Mother, Golden Star, and Seniors Property all appeared to oppose the motion. Golden Star and Dr. Hady specially appeared to oppose the motion. All these parties were represented by their present counsel on appeal (Herbert Niermann).

The motion was continued into November 2004, when, mid-month, the judge in the San Bernardino family law action enjoined Husbands Father, Husbands Mother, Seniors Property Management, Golden Star Systems, and Dr. Hady, together with all their agents or anybody acting in concert or on their behalf, from foreclosing on the property. They were also enjoined from selling or attempting to sell the Riverside Property, creating any security interests or transferring any security interests in the Riverside Property, doing anything that would defeat wifes interest in the property, or otherwise interfering with the receivers marketing and sale of the property.

A formal order was filed November 29, 2004, and a conformed copy of the filed order was sent out to counsel for the Parents and Parent Parties that very day.[4] This injunction order was the subject of a notice of appeal filed January 26, 2005, and is one of the three consolidated appeals in the appellate proceeding before us (namely G038661).

H. April 2005: The Motion to Confirm a

Proposed Sale by the Receiver

Meanwhile, the receivers efforts proved fruitful. The receiver obtained no less than three offers at or above the $675,000. All offers were made, however, with the understanding that the court would authorize the sale at a court auction of the property, and the receiver proposed written bids be submitted to the court, minimum bid of $690,000. In late April 2005, therefore, Wife filed a motion to confirm the sale of the Riverside Property by the receiver. (While the Wife, as distinct from the receiver, brought the motion, the receiver clearly supported it, submitting his own declaration in support of the motion.)

The property had obviously been in litigation, which would normally ward off any bona fide third party buyers. The receivers solution was that the court authorize the sale free and clear of all liens or other claims, with any such liens or claims to attach to the proceeds of the sale.

The opposition of the Parents and Parent Parties focused on two things: (1) the fact that the court had yet to actually determine that the Riverside Property was in any part community; and (2) the (supposedly) preclusive effect of Wifes 1997 quitclaim deed. (The opposition acknowledged that by this time Husbands bankruptcy estate had no interest in the property.)

One of the Parents Parties was Lido Property Investment which, at the time Husband filed for bankruptcy, was record title-holder to the property. (More on Lidos title in part II.K.1. of this opinion, which is a few pages from now.) The opposition asserted that, upon abandonment of the property by the bankruptcy estate, it became the property of the title owner prior to the appointment of the receiver; the receiver could, after all, only take the property subject to existing liens and equities.

On top of that opposition, Lido Property filed its own a separate opposition to the motion (one of the attorneys representing it also now represents it in the related appeal from the Riverside quiet title judgment, Robert P. Goe), again emphasizing the theory that upon abandonment of the property by Husbands bankruptcy estate, the property went back to the record title holder, i.e., Lido.

I. Early May 2005: Stirrings Concerning a Possible

New Front in the War: Riverside

While the April 2005 motion to confirm the sale by the receiver was pending, Lido (represented by its new attorneys Benice and Goe) sought to open a new front in the war over the Riverside Property. On May 3, 2005, Lido filed a motion for leave to file suit against the receiver in Riverside Superior Court. (It is in her declaration in support of this motion that we learn that Husbands Mother is the vice-president of Lido. We also learn of her claim that she spent $400,000 remodeling the building on the property, though that was apparently just after she originally purchased the property in 1988, before it was transferred to Inland Child Development Centers, her own corporation, and the entity that would later transfer it to Husband.)

The motion for leave explicitly recognized that the receiver was an appropriate party to any quiet title action and that In most cases a claimant can obtain appropriate relief in the receivership action. However, the motion also seemed to acknowledge that that a civil suit was necessary because there was no pending Quiet Title action in the dissolution proceeding of Michelle. The motion evidenced no awareness of the San Bernardino quiet title suit that had already been filed by the receiver in 2002 (SVCSS 93513).

J. Mid-May 2005:

Meanwhile, the Confirmation Motion

Is Granted, and the Ensuing Order

Immediately Appealed

The motion for leave to sue the receiver in another county was scheduled to be heard on June 2, 2005. On May 5, 2005 -- about four weeks before that scheduled hearing -- the motion to confirm the sale of the property by the receiver was heard, and granted. A formal order was signed by the trial judge and filed May 13, 2005. The order recites that on May 5 the court conducted an auction sale of the property in open court. One Douglas Jacobs bid $686,000, and that sale was confirmed. The court ordered the proceeds to be deposited into an interest bearing account, with the matter of entitlement to the funds decided later.

This confirmation order was immediately appealed on May 19, 2005 by the Parents and the Parents Entities, including Lido, in a notice of appeal prepared by Herbert Niermann, their attorney from the beginning. This is the second appeal before us (G038664), and, like the first (G038661), is from an order of the San Bernardino family law court.

K. Late-May 2005: Lido Unilaterally Opens

A New Front in the War:

Riverside County Superior Court

Lido Property apparently did not wait for permission from the San Bernardino family law court to sue the receiver in a quiet title action in Riverside. On May 25, 2005 -- that is, in the immediate wake of the order confirming the sale and the appeal therefrom and about a week before the motion for leave which was scheduled on June 2 -- Lido Property filed a civil action for declaratory relief and quiet title against Wife and (ostensibly) two of the Parent Entities, Golden Star System and Seniors.

1. The (Apparently Illegitimate)

Lineage of the Second Trust Deed

The Riverside civil complaint brings us to the topic of Lidos title. As a preliminary matter, we note that the information in the record concerning Lidos title comes almost entirely from the declaration of Husbands Mother, which served as the basis for the statements of uncontroverted fact that supported Lidos eventual summary judgment motion in the Riverside County quiet title action.

The subject of Lidos title brings us back to that forged second trust deed that Husband gave to his mother in 1997. As it turns out, Lidos claim to title of the property stems from that document. That is, at least, the story as told in Husbands Mothers declaration, on which we will now elaborate:

After relating that Maged executed a secured straight note for the sum of $500,000 in [his mothers] favor on April 1, 1997, Husbands Mother said, On May 27, 1999, the corresponding deed of trust, dated April 1, 1997, was recorded. (The phrase corresponding deed of trust is an artful elision, obscuring the fact that the deed of trust could not possibly have been signed in 1997.) Husbands Mother then stated that, The note and deed of trust were given in recognition of the fact that while Maged would be the title owner of the Riverside Property in order to obtain a new loan the amount of his indebtedness was far less than the fair market value of the Riverside Property.

The narrative continues: Husbands Mother assigned her rights under that particular deed of trust to Seniors. (Of course, we remind readers: Seniors was her own company.) But there was a default under the second trust deed held by Seniors. So Seniors initiated nonjudicial foreclosure, which culminated in the recording of a trustees deed in its favor on June 20, 2002, and Seniors thereby acquired title. Then, In the meantime Lido acquired a deed of trust on the Riverside Property and began foreclosure. (The declaration does not say from whom Lido acquired its deed of trust, but, since we have already noted that Golden Star paid a bona fide first deed of trust holder for its interest in the property, we may assume for the moment that Lidos deed of trust was not the first deed of trust.) So Seniors gave its deed to Lido in lieu of foreclosure. Thus Lido now has fee title of record to the Riverside Property.

2. Lidos Claim As

Detailed in its Complaint

Now back to Lidos May 2005 Riverside quiet title complaint. In line with what Husbands Mother would later declare, the complaint asserted that Seniors had foreclosed against the Riverside Property on June 20, 2002, and then later, in 2004, Seniors issued Lido a deed of trust in lieu of foreclosure, making Lido title holder of the Riverside Property. It further asserted that the property was neither community property nor property of Wife: Rather, upon abandonment of the property by the bankruptcy trustee (which occurred on December 12, 2003), the property had reverted to Seniors, which then held title, and Seniors transferred it to Lido.

L. Middle 2005: The Battle

In Riverside Begins in Fits and Starts

Wife did not immediately answer Lidos complaint, basically because her attorney thought Lido was otherwise delayed ascertaining whether it needed permission to from the court-appointed receiver to file its own suit to quiet title. According to wifes counsel, Lidos counsel told Wifes counsel that he would contact Wifes counsels office to advise whether a response would be even be necessary. Despite that assurance, Lidos counsel took Wifes default.

Given such facts, one can easily guess how Wifes subsequent set-aside motion went.[5] Relief was granted in February 2006 and Wifes counsel immediately filed an answer in the Riverside quiet title action that included the affirmative defenses of another action pending, collateral estoppel and res judicata. It also asserted that Lido needed permission from the Receiver to bring the suit.

M. Latter 2005: A Judgment

in the San Bernardino

Family Law Action

One might well ask at this juncture -- what ever happened to Husband? By November 2005, the neurosurgeon who once pulled down over $1 million a year during the 1990s was now a fugitive from justice, or at least so a judgment in the family law action (SBFSS 44809) would declare.

We have skipped over the numerous contempt proceedings brought against Husband during the first three years of the family law litigation, but suffice to say the fugitive-from-justice description seems well supported by the record. He had already spent a month and a half in the local jail for failing to pay child support. The trial court file in the San Bernardino family law action (SBFSS 44809) for example contains this startling admission on a petition for writ of mandate filed by his attorney concerning one of these contempts: As the result of a findings of a previous contempt of court, the respondent [Maged] was incarcerated from October 1, 2002 until November 15, 2002. Therefore, he clearly had no income from his normal occupation as a board certified neurosurgeon during that period of time. And this as well: This courts own expert CPA, Jan Alexander, testified that as a result of the her investigation, she determined that the petitioner [Maged] signed 93 to 95% of the checks that transferred multiple millions of dollars to the Nile Entities and the child care centers prior to the later transfer of substantial sums to Swiss banks.

So it is not surprising, then, that when Wife finally obtained a judgment in the San Bernardino family law case, its language was very tough on Husband. Judge Ziebarth signed a judgment on reserved issues November 15, 2005. The judgment declared Husband to be a fugitive from justice whose conduct during the course of these proceedings had demonstrated that he is dishonest. There was also the risk he would take the children out of the United States.

And the family law judgment had a few things to say about Husbands Mother and Husbands Father as well: The court specifically finds that petitioners parents, Lofty Abu-Assal and Nadia Abu-Assal, have engaged in an ongoing course of conduct designed to deprive respondent-wife and the children of assets and income to which they were entitled and that they have demonstrated a remarkable lack of character. The court also finds that they represent a threat to their grandchildren in that they are a risk of facilitating their abduction from this jurisdiction. The court therefore finds that respondent-mother has a complete right to prevent the paternal grandparents from having any contact with the minor children.

Strong words, particularly in a formal judgment. But the judgment was not appealed by anyone.

Then again, the formal judgment did not include the San Bernardino quiet title action. That is, it only lists SBFSS 44809 in its caption, in which neither of Husbands Parents nor any of their Entities were ever joined. It does not list SVC93513, in which the Parents and the Parents Entities were parties.

The San Bernardino family law judgment did not attempt to itemize its disposition of community property. Rather, in an omnibus declaration based in large part on an explicit finding that Husband had hid assets from the Wife, the court ruled that all community property and separate property of either party not subject to the jurisdiction of the bankruptcy is awarded to respondent-wife including, but not limited to, any property dismissed from the jurisdiction of the Bankruptcy Court. (Italics added.) And, as we have seen, the bankruptcy court had already jettisoned the Riverside Property at issue here from the bankruptcy estate.

To get ahead of ourselves, the award by the San Bernardino family court of all of Husbands separate property to Wife does not expedite any issues in this appeal. If the Riverside Property indeed were Husbands separate property, then, setting the problem of the automatic restraining order aside, he had the right to alienate it prior to the divorce courts award of all his separate property to Wife. (And in any event the violation of the restraining order would not impact a BFP.)

Any other result would mean that no property received by anybody from a married person -- even that persons clearly separate property and even if the recipient were a BFP -- would ever be secure, because of the possibility that a later divorce court would award all of that persons separate property to the other spouse, who might then assert some sort of claim upon it.[6] So we can say for certain that the issue of whether the property was community, separate, or (as the Parents assert) trust property, remains for decision.

N. Spring 2006: The Parents

Strike Back With A Successful

Summary Judgment Motion

In the Riverside Quiet Title Case

In April 2006 the focus of the war shifted to the Parents new front Riverside, where plaintiff Lido brought a motion for summary judgment, based solely on the quitclaim deed executed on June 26, 1997 by Wife in favor of Husband. As we have noted above, the motion was supported almost entirely by the declaration of Husbands Mother, as vice-president of Lido. We have already related the substance of her declaration as it relates to Lidos title and her position that Husband only acquired the property as a trustee because he had credit, and his mother didnt.

The motion for summary judgment was heard in June 2006, and granted. The transcript of the oral argument leaves no doubt that the 1997 pre-divorce quitclaim deed signed by Wife was considered by the trial court to be absolutely dispositive: The court:  . . . .  There is no triable issue of fact. The undisputed facts show that Michelle transferred the property to Maged prior to the time of the -- prior to the time the dissolution was filed and obviously before any orders made by Family Law. The ensuing judgment declared that Wife has no right, title, estate, lien or interest of any kind in the real property.

O. Latter 2006: Now It is

Wifes Turn to Appeal

The Riverside quiet title judgment (entitled summary judgment quieting title as to any interest of defendant Michelle Abu-Assal) was filed on August 1, 2006. Wife filed a form notice of appeal on September 13, 2006, stating she appealed from the judgment or order in this case, which was entered on (date) and then her counsel had typed in July 26, 2006, by which he apparently meant the date that Judge Gloria Connor Trask signed the formal order granting summary judgment. (Judge Trask signed the formal quiet title judgment on August 7, 2006, interlineating out the word proposed in front of the title; the proposed judgment was thus file-stamped seven days before the judge signed it.) Wifes appeal from the Riverside quiet title action constitutes the last of the three consolidated appeals, G038672.

P. Spring 2007: The Receiver Counterattacks

in the San Bernardino Family Law Action

As noted, on our own motion this court obtained the trial court files in all three actions that have given rise to these consolidated appeals -- SBFSS 44809, SVCSS 93513, and RIC 430870. We take judicial notice of all three.

It turns out that the receiver appointed by the San Bernardino family law court did not take the Riverside quiet title judgment lying down. The receiver filed a motion which was heard in April 2007 for clarification of his authority. That motion resulted in an order signed April 9, 2007 by Judge John Pacheco (apparently the successor to Judge Ziebarth, who had been handling the matter as a retired judge) in the San Bernardino family law case (SBFSS 44809) stating that the receiver appointed by the San Bernardino family court is appointed receiver over Lidos rights, title, claims and interests in the Riverside Property, including having the power to cancel any documents concerning an otherwise unspecified sale by Lido of the Riverside Property.

Lido promptly filed a notice of appeal from the order of clarification on April 25, 2007. The order from the clarification motion was formally filed May 17, 2007, making the April 25, 2007 notice of appeal technically premature. But it was to no avail anyway, because on May 30, 2007 -- before the transfer to this division -- our colleagues in Division Two dismissed the appeal from the order of clarification as not from an appealable order. Then Lido filed a motion for reconsideration, arguing that this clarification expanded the receivers powers over all previous orders so as to include power to provide the Receiver with signatory rights over Lido. The reconsideration motion was denied June 21, 2007.

Lido fought back in the San Bernardino family law court with its own ex parte motion to replace the receiver, so as to protect Lidos interest in the property. It is at this point we learn more about that otherwise unspecified pending sale. Apparently (according to Lidos ex parte papers) in the wake of the Riverside quiet title judgment (which Lido incorrectly stated had not been appealed) Lido arranged to sell the Riverside Property to Family Services Association for $1.35 million -- and Lido at least (in contra-distinction to the position taken by the Parents and at least some of their Entities in the appeals from the injunction order and the order confirming sale) was willing to let the proceeds be held by some neutral party.

The receivers opposition asserted that Family Services in fact did not want to go through with the purchase even though the receiver was perfectly willing to consider offers to buy the property at a price higher than the confirmation order. Moreover, Lido had withdrawn its motion to replace the receiver. Further, Lido was preventing the receiver from obtaining physical access to the Riverside Property.

The last minute order in the San Bernardino file -- or at least the file at the time this court obtained it -- is dated July 12, 2007. It recites that the motion to terminate or replace the receiver was denied.

In the file in the Riverside quiet title action it appears that the receivers win in San Bernardino is now the subject of a post-appeal attempt to vacate the judgment in the Riverside quiet title action.

Specifically, the last document in volume 2 of RIC 430870 -- and the trial court only sent us two volumes -- is something entitled request for judicial notice in support of stipulation and [proposed] order vacating judgment and dismissing action. However, there doesnt appear to be any stipulation in the document (or any place in the file for that matter). It is merely a request by Wife for the court in Riverside to take judicial notice of three documents from the court in San Bernardino: The order in July 2002 appointing a receiver, the order in July 2004 re-appointing a receiver, and, finally, the May 17, 2007 (signed April 9, 2007) order clarifying that the receiver had power over Lido.

Q. Also in 2007: Consolidation and Processing

in the Court of Appeal

On Division Twos own motion, the three appeals were consolidated for purposes of oral argument and decision by Division Two of this District on February 9, 2007. The newly-consolidated appellate case was among those ordered transferred by the Supreme Court to this Division on May 16, 2007, in order to help alleviate that Divisions backlog. On our own motion, this court requested further briefing prior to oral argument so as to afford the parties the opportunity to express their views on the degree, if any, to which the judgment on reserved issues in the family law case might be binding on the Parents or the Parents Entities. (It isnt. They werent made parties to SBF44809.)

We also asked about the effect of the fact that the San Bernardino family court was the first court to be given the issue of Wifes interest, if any, in the Riverside Property, about the current status of the federal RICO action, and finally what about any possible legal implications from the fact that Husband gave his mother the second trust deed (from which, we can now add, Lidos title ultimately derives) after the divorce action commenced.

R. Fall 2007: The Case Will Not Stand Still;

Developments Just Prior

to Oral Argument

The parties have refused to stay still even in the month just before oral argument in this case.

Specifically, the receivers gambit of stipulating with Wife to vacate the Riverside quiet title judgment apparently worked -- at least temporarily. In Wifes supplemental reply to request for supplemental briefing, she informed this court that on August 6, 2007, just about two weeks prior to oral argument, Judge Trask (yes, the judge who determined that Wife had no interest in the property) signed and had filed a stipulation vacating the judgment and dismissing the action.

But the battle in the trial courts rages even as we write this opinion. In Lidos reply to the supplemental briefing, it asserted that it had successfully obtained an order shortening time to hear a motion to terminate the receiver (apparently in the San Bernardino family action), and that oral argument on that motion was set for August 20 -- two days before oral argument. Moreover, Lidos reply also noted that it was filing an ex parte motion for reconsideration of the stipulation which Judge Trask has just signed. As we explain below, however, it makes no difference what Judge Trask does in regard to the stipulation. It certainly wont moot the appeal from the Riverside quiet title action. (We later received a notice of ruling vacating the order of dismissal and reinstating the judgment!)

IV. Discussion

A. Appealability

As if this case isnt complex enough, it turns out that two of the three documents from which appeals are not so obviously appealable that we can skip the subject of appealability.

1. G038661

The appeal from the injunction order (G038661) is easy. The order appealed from clearly is an order granting an injunction -- it tells the Parents and the Parents Entities what they cant do. Orders granting injunctions are directly appealable under subdivision (a)(6) of section 904.1 of the Code of Civil Procedure.

2. G038672

a. The Problem of

What Precise Order

Is Being Appealed

The appeal from the Riverside quiet title judgment (G038672) is more complicated. The complexity arises because Wifes form notice of appeal is literally directed at a document entered on July 26, 2006, and no document exactly fits that description. The natural inference is, however, that the appeal is from the formal order granting the motion for summary judgment, which was indeed signed on July 26, 2006. The final judgment itself was, anomalously, filed on August 1 even though it wasnt signed by the trial judge until August 7.[7]

An order merely granting summary judgment is not a final appealable order from which an appeal may be taken. (See Francis v. Dun & Bradstreet, Inc. (1992) 3 Cal.App.4th 535, 538 [noting that purported appeal from order granting summary judgment was an attempt to appeal from a nonappealable order].)

However, in circumstances such as the present case, appellate courts have been directed not to dismiss the appeal, but to substantively construe the notice of appeal as directed at the eventually filed, final judgment. In Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 18, our Supreme Court held that an appellate court erred in dismissing an appeal from an order denying a motion for new trial -- a nonappealable order -- when it was reasonably clear what appellant was trying to appeal from, namely the appealable underlying judgment. This case is the same. It is reasonably clear that the appeal is directed at the judgment which resulted from the summary judgment motion, and there certainly has been no misleading of the responding parties to their prejudice -- they have treated the appeal as taken from the judgment as well.[8]

b. Mootness

i. The Receivers

Take Over of Lido

But now we come to the post-appellate event of the receivers having supposedly wrested control of Lido from Lido, so that whatever Lido might (or might not) have done with the Riverside Property is now in the control of the . . . receiver. We note that the receiver, acting supposedly its his capacity as controller of Lido, filed a stipulation to dismiss the Riverside quiet title action which was granted, but, even as we write, that stipulation resulted in both the dismissal of the case and the subsequent