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In re Turner, 204 B.R. 988, 97 Cal. Daily Op. Serv. 1887, 97 Daily Journal D.A.R. 3428 (9th Cir.BAP
(Cal.),Jan 02, 1997)
Former employee of Chapter 7 debtor brought nondischargeability proceeding, seeking determination that debt for
sexual harassment was nondischargeable as willful and malicious injury. Employee moved for summary judgment
based on collateral estoppel. The United States District Court for the Eastern District of California, Jane Dickson
McKeag, J., granted motion, and debtor appealed. The Bankruptcy Appellate Panel, Jellen, J., held that: (1) under
California collateral estoppel law, municipal judgment was not final, but (2) there was sufficient identity of issues to
support collateral estoppel.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(A) Judgments Conclusive in General
228k660.5 k. Void Judgments. Most Cited Cases
Void judgment cannot be given collateral estoppel effect.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2442 k. Determination and Relief; Conditions. Most Cited Cases
Bankruptcy judge may, in appropriate cases, retroactively annul automatic stay. Bankr.Code, 11 U.S.C.A. § 362.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(A) Judgments Conclusive in General
228k635 Courts or Other Tribunals Rendering Judgment
228k636 k. In General. Most Cited Cases
Principles of collateral estoppel apply in nondischargeability proceedings. Bankr.Code, 11 U.S.C.A. § 523(a).
51 Bankruptcy
51I In General
51I(A) In General
51k2002 k. Application of State or Federal Law in General. Most Cited Cases
Bankruptcy courts must look to state law to determine collateral estoppel effect of state court judgments. 28
U.S.C.A. § 1738.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(A) Judgments Conclusive in General
228k634 k. Nature and Requisites of Former Adjudication as Ground of Estoppel in General. Most Cited
Cases
For collateral estoppel under California law, (1) issue sought to be precluded from litigation must be identical to that
litigated in former proceeding, (2) issue must have been actually litigated in former proceeding, (3) issue must have
been necessarily decided in former proceeding, (4) **decision in former proceeding must have been final and on the
merits, and (5) party against whom preclusion is sought must be same as party to former proceeding, or in privity
with that party.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(A) Judgments Conclusive in General
228k650 k. Finality of Determination. Most Cited Cases
Generally, federal court judgments are considered final for collateral estoppel purposes, even when judgment is on
appeal.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(A) Judgments Conclusive in General
228k650 k. Finality of Determination. Most Cited Cases
**Under California law, pending appeal, trial court judgment is not final and will not be given res judicata effect.
West’s Ann.Cal.C.C.P. § 1049.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(B) Automatic Stay
51k2394 Proceedings, Acts, or Persons Affected
51k2395 k. Judicial Proceedings in General. Most Cited Cases
228 Judgment
228XVII Foreign Judgments
228k828 Effect of Judgments of State Courts in United States Courts
228k828.21 Particular Federal Proceedings
228k828.21(2) k. Bankruptcy. Most Cited Cases
California municipal court judgment did not become final, for collateral estoppel purposes, where Chapter 7 debtor
filed his petition before time ran out for him to appeal or move for a new trial, and debtor filed motion for new trial;
automatic stay tolled debtor’s right to request new trial or appeal. Bankr.Code, 11 U.S.C.A. §§ 108(b), 362(a)(1).
228 Judgment
228XVII Foreign Judgments
228k828 Effect of Judgments of State Courts in United States Courts
228k828.21 Particular Federal Proceedings
228k828.21(2) k. Bankruptcy. Most Cited Cases
There was sufficient identity of issues between state court verdict and willful and malicious injury discharge
exception to support collateral estoppel, though jury rendered general verdict against Chapter 7 debtor in employee’s
sexual harassment lawsuit; even negligent infliction of emotional distress cause of action alleged intentional
physical abuse of employee, resulting damage, and that debtor knew or should have known that actions would cause
employee severe emotional distress, which amounted to allegation that debtor negligently failed to realize that his
intentional wrongful act would cause emotional distress. Bankr.Code, 11 U.S.C.A. § 523(a)(6).
51 Bankruptcy
51X Discharge
51X(C) Debts and Liabilities Discharged
51X(C)5 Torts and Crimes
51k3374 Willful or Malicious Injury
51k3374(2) k. Willful, Deliberate, or Intentional Injury. Most Cited Cases
(Formerly 51k3355(1.10))
Discharge exception for “willful and malicious injury” does not require specific intent to injure; rather, creditor must
show (1) wrongful act done intentionally, (2) that necessarily produces harm, and (3) is without just cause or excuse.
Bankr.Code, 11 U.S.C.A. § 523(a)(6).
OPINION
The debtor appeals a bankruptcy court order granting the creditors’ motion for summary judgment on their
nondischargeability complaint under Bankruptcy Code § 523(a)(6) (willful and malicious injury) FN2. The
bankruptcy court grounded its ruling on the collateral estoppel effect of a prebankruptcy judgment. We REVERSE
and REMAND.
FACTS
Appellee Pamela L. Wright (“Wright”) is a former employee of the debtor, Richard L. Turner (“Turner”). Prior to
Turner’s chapter 7 petition, Wright filed a complaint against Turner in the California municipal court alleging that
Turner, while Wright’s employer, had trapped her in a car and subjected her to abusive physical behavior and sexual
advances. Wright’s complaint alleged five causes of action: assault, battery, false imprisonment, intentional
infliction of emotional distress, and negligent infliction of emotional distress.
Following trial, the jury came down with a general verdict awarding Wright general damages in the sum of $10,000
and punitive damages in the sum of $15,000. The jury made no findings, and its verdict did not specify the causes of
action on which it based its award.
On October 6, 1992, Turner filed his chapter 7 petition. Thereafter, on October 15, 1992, the municipal court entered
its judgment on the verdict (the “Municipal Judgment”). On October 23, 1992, Turner filed in the municipal court a
notice of intention to move for a new trial. On November 4, 1992, Wright and her municipal court counsel, appellee
Barr, Sinclair & Hill (the “Barr firm”), filed a motion in the municipal court seeking an award of attorneys’ fees
pursuant to California Government Code § 12965(b) (West 1996) FN3. The municipal court never heard or ruled on
Turner’s motion for a new trial, nor Wright’s motion for an award of attorneys’ fees.
Subsequently, Wright filed a complaint against Turner under § 523(a)(6) FN4 . Wright then moved for summary
judgment, based on the collateral estoppel effect of the jury verdict and Municipal Judgment. The bankruptcy court
granted the motion, and concurrently awarded Wright and the Barr firm attorneys’ fees pursuant to California
Government Code § 12965(b).
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual
debtor from any debt-
.....
6) for willful and malicious injury by the debtor to another entity or to the property of another entity;
The bankruptcy court held that the Municipal Judgment was final for collateral estoppel purposes notwithstanding
the automatic stay under § 362(a)(1) FN5 and the decision in *991 Ingersoll-Rand Financial Corp. v. Miller Mining
Co., 817 F.2d 1424 (9th Cir.1987). Ingersoll-Rand held that § 362(a)(1) stays appeals by the debtor of an adverse
judgment in a lawsuit originally brought against the debtor. Id. at 1426. The bankruptcy court reasoned that § 108(b)
FN6
provided Turner with an extended deadline to appeal the Municipal Judgment, which deadline had passed in the
absence of an appeal, and that this extended deadline “trumped” the tolling effect of § 362(a)(1)‘s stay of further
proceedings by Turner in the municipal court. Thus, according to the bankruptcy court, the Municipal Judgment
became final 60 days following the order for relief, by operation of § 108(b).
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title ...
operates as a stay, applicable to all entities, of-
(1) the commencement or continuation, including the issuance or employment of process, of a judicial,
administrative, or other action or proceeding against the debtor that was or could have been commenced before the
commencement of the case under this title, or to recover a claim against the debtor that arose before the
commencement of the case under this title;
(b) Except as provided in subsection (a) of this section, if applicable nonbankruptcy law, an order entered in a
nonbankruptcy proceeding, or an agreement fixes a period within which the debtor or an individual protected under
section 1201 or 1301 of this title may file any pleading, demand, notice, or proof of claim or loss, cure a default, or
perform any other similar act, and such period has not expired before the date of the filing of the petition, the trustee
may only file, cure, or perform, as the case may be, before the later of-
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the
case; or
The bankruptcy court also held that each cause of action of the municipal court complaint alleged facts sufficient to
exclude the debt from the discharge under § 523(a)(6), and that the general verdict therefore established facts for
collateral estoppel purposes sufficient to entitle Wright to summary judgment.
Some authority exists for the proposition that entry of a postbankruptcy judgment after a court has rendered a
prebankruptcy decision on the merits is a mere “ministerial act” that is not subject to the automatic stay. Rexnord
Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir.1994). In this circuit, however, the question of a “ministerial
act” exception remains open. Authority also exists for the proposition that § 362(a) is subject to an implied
exception for a “technical violation” that does not cause damage. See In re Brooks, 79 B.R. 479 (9th Cir. BAP
1987), aff’d, 871 F.2d 89 (9th Cir.1989). In *992In re Schwartz, 954 F.2d 569, 575 (9th Cir.1992) , the court of
appeals declined to rule on the validity of this possible exception.
I would recommend that you put it on your own pleading paper. Using these
forms cause crooked judges to think they are dealing with ignorant litigants
and brings out the crookedness in corrupt judicial officers. Putting it on your
own pleading paper evidences that you are an independent thinker looking
to prosecute any corruption and bring to justice a crooked judicial officer.
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Reply
David Chey show details 8:01 AM (1 minute ago)
to salessi
SHOULD EVERYTHING THAT HAS BEEN FILED BE ATTACHED OR JUST THE PAGE
WHICH IDENTIFIES THE CASE NUMBER ACCORDING TO CALIFORNIA LANDLORD
AND TENANT PRACTICE;
In re Schwartz, 954 F.2d 569, 69 A.F.T.R.2d 92-548, 92-1 USTC P 50,069, 26 Collier Bankr.Cas.2d 649, 22
Bankr.Ct.Dec. 845, Bankr. L. Rep. P 74,539 (9th Cir.(Wash.),Jan 22, 1992)
Good case
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(D) Enforcement of Injunction or Stay
51k2462 k. Validity of Acts in Violation of Injunction or Stay. Most Cited Cases
Violations of automatic stay are void, not voidable. Bankr.Code, 11 U.S.C.A. § 362
Debtors Russell and Linda Schwartz appeal from a Bankruptcy Appellate Panel (BAP) decision that an IRS tax
penalty assessed in violation of the Bankruptcy Code’s automatic stay provision is voidable but not void. We reverse
the judgment of the BAP.
BACKGROUND
The essential facts of this case are not in dispute. On February 25, 1983, the Schwartzes and their corporation, R.H.
Schwartz Construction Specialties, Inc., filed a Chapter 11 bankruptcy petition. On October 8, 1984, the IRS,
apparently unaware of the bankruptcy filing, assessed a 100% tax penalty, totaling $65,819.25, against Russell
Schwartz pursuant to 26 U.S.C. § 6672 (1988). The Schwartzes did not challenge the tax assessment within the
Chapter 11 bankruptcy and stipulated to their dismissal from the Chapter 11 bankruptcy on March 27, 1985.
In August 1987, the IRS filed a Federal Tax Lien with the King County Auditor pursuant to the penalty assessment.
The IRS claimed that the penalty had increased to $86,296.60. On October 8, 1987, the Schwartzes filed a Chapter
13 bankruptcy petition. The IRS filed a Proof of Claim in the Chapter 13 bankruptcy on February 19, 1988, alleging
that the Schwartzes owed the IRS $90,787.67 for the 1984 tax assessment.
The Schwartzes objected to the IRS claim. They argued that the tax assessment, which originally occurred during
their prior Chapter 11 bankruptcy, violated the automatic stay provision of the Bankruptcy Code and was therefore
void. The bankruptcy court agreed and ruled that the IRS tax assessment was void and without effect. The
government appealed to the BAP, which rejected the Schwartzes’ argument and reversed the judgment of the
bankruptcy court. In re Schwartz, 119 B.R. 207 (1990). The BAP held that acts in violation of the automatic stay are
voidable, not void. Because the tax assessment was not affirmatively challenged by the Schwartzes in the original
Chapter 11 bankruptcy, the BAP held that the assessment was valid and enforceable in the subsequent Chapter 13
bankruptcy. This appeal followed.
[1] The sole issue before us is whether creditor violations of the Bankruptcy *571 Code’s automatic stay provision
are void or simply voidable. If violations of the automatic stay are void, the IRS tax assessment made against the
Schwartzes in the Chapter 11 bankruptcy is without effect. If, however, such violations are merely voidable, the
assessment is valid because the Schwartzes made no attempt to have the assessment voided in the Chapter 11
bankruptcy. The issue in this appeal is one of law; we review the BAP’s conclusions of law de novo. In re Taylor,
884 F.2d 478, 480 (9th Cir.1989); In re 268 Ltd., 877 F.2d 804, 805 (9th Cir.1989).
It is undisputed that the IRS tax assessment violated the Bankruptcy Code’s automatic stay provision. 11 U.S.C. §
362(a)(4)-(6) (1988).FN1 **The Ninth Circuit has stated generally that violations of the automatic stay are “void”.
See, e.g., In re Shamblin, 890 F.2d 123, 125 (9th Cir.1989) ( “Judicial proceedings in violation of [the] automatic
stay are void.”); In re Stringer, 847 F.2d 549, 551 (9th Cir.1988) (“Any proceedings in violation of the automatic
stay in bankruptcy are void.”). Although Shamblin and Stringer suggest that violations of the automatic stay are void
and not merely voidable, the void/voidable distinction was not dispositive in those cases, and the Ninth Circuit has
not directly addressed the precise issue presented in this appeal. See Shamblin, 890 F.2d at 124-26 (debtor
affirmatively challenged and litigated potential automatic stay violation); Stringer, 847 F.2d at 550 (same).
(a) ... a petition filed under ... this title ... operates as a stay, applicable to all entities, of-
.....
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a
claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case
under this title;
11 U.S.C. § 362(a)(1) of the Bankruptcy Code automatically stays the commencement or continuation of judicial
proceedings against the debtor that were or could have been commenced before the bankruptcy petition was filed.
**Any proceedings in violation of the automatic stay in bankruptcy are void. Kalb v. Feuerstein, 308 U.S. 433, 438-
39, 60 S.Ct. 343, 345-46, 84 L.Ed. 370 (1940); 2 L. King, Collier on Bankruptcy ¶ 362.03 (15th ed. 1988).
It is undisputed that the IRS tax assessment violated the Bankruptcy Code’s automatic stay provision. 11 U.S.C. §
362(a)(4)-(6) (1988).FN1 **The Ninth Circuit has stated generally that violations of the automatic stay are “void”.
See, e.g., In re Shamblin, 890 F.2d 123, 125 (9th Cir.1989) ( “Judicial proceedings in violation of [the] automatic
stay are void.”); In re Stringer, 847 F.2d 549, 551 (9th Cir.1988) (“Any proceedings in violation of the automatic
stay in bankruptcy are void.”). Although Shamblin and Stringer suggest that violations of the automatic stay are void
and not merely voidable, the void/voidable distinction was not dispositive in those cases, and the Ninth Circuit has
not directly addressed the precise issue presented in this appeal. See Shamblin, 890 F.2d at 124-26 (debtor
affirmatively challenged and litigated potential automatic stay violation); Stringer, 847 F.2d at 550 (same).
(a) ... a petition filed under ... this title ... operates as a stay, applicable to all entities, of-
.....
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a
claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case
under this title;
[2][3] Our decision today clarifies this area of the law by making clear that violations of the automatic stay are void,
not voidable. See In re Williams, 124 B.R. 311, 316-18 (Bankr.C.D.Cal.1991) (recognizing that the Ninth Circuit
adheres to the rule that violations of the automatic stay are void and criticizing the BAP decision in this case).
Given the important and fundamental purpose of the automatic stay and the broad debtor protections of the
Bankruptcy Code, we find that Congress intended violations of the automatic stay to be void rather than voidable.
Nothing in the Code or the legislative history suggests that Congress intended to burden a bankruptcy debtor with an
obligation to fight off unlawful*572 claims.
[T]he fundamental importance of the automatic stay to the purposes sought to be accomplished by the Bankruptcy
Code requires that acts in violation of the automatic stay be void, rather than voidable.
Our conclusion is supported by the great weight of authority. The majority of courts have long stated that violations
of the automatic stay are void and of no effect. See, e.g., Kalb v. Feuerstein, 308 U.S. 433, 438, 60 S.Ct. 343, 345-
46, 84 L.Ed. 370 (1940);
The more important potential conflict with interpreting the automatic stay as voiding violations is provided by
section 549 of the Code. See, e.g., Sikes, 881 F.2d at 179 (court determining that § 549 is inconsistent with
automatic stay voiding violations). Section 549 allows the bankruptcy trustee to avoid certain authorized transfers
and all unauthorized transfers of estate property.FN2 **Section 549 includes a statute of limitation which requires the
trustee to commence an action to void a transfer either within two years of the transfer or before the close of the
case, whichever is earlier. 11 U.S.C. § 549(d). The Code’s definitions dictate that section 549 can apply to a wide
variety of transactions. “Transfer” is defined as “every mode, direct or indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with property or with an interest in property....” 11 U.S.C. § 101(50) (1988).
**Further, “property of the estate” includes all legal interests in property. 11 U.S.C. § 541 (1988).
(a) Except as provided in subsection (b) or (c) of this section, the trustee may avoid a transfer of property of the
estate-
(1) that occurs [made] after the commencement of the case; and
(2)(A) that is authorized only under section 303(f) or 542(c) of this title; or
Similarly, subsection 549(c)’s protection of good faith purchasers carves out an extremely specific and narrow
exception to the automatic stay when section 362 overlaps subsection 549(c). There is no reason to infer from this
narrow exception that violations of the automatic stay are not void.
By Collier
n3
3. See In re McCray, 342 B.R. 668 (Bankr. D.D.C. 2006).
Bad case
Mortgagee was not entitled to relief from automatic stay for cause in
order to foreclose on mortgaged property on theory that, because
debtor no longer held legal title to property after transferring deed
to nonoperative Pennsylvania corporation of which debtor was principal
shareholder, property was not an asset of bankruptcy estate since
debtor, by virtue of fact that he resided in property, had an
equitable interest in property that made automatic stay applicable. In
re Gallagher, Bkrtcy.E.D.Pa.1984, 43 B.R. 410. Bankruptcy 2424
[2][3][4] The decision to grant relief under § 362(d)(2), however, is not purely
discretionary, because the necessary conditions are defined with some precision. The
“court shall grant relief from the stay” if the two conditions specified in § 362(d)(2)
(A) and (B) are met. 11 U.S.C. § 362(d) (emphasis added). The decision must rest on
findings of fact which are, however, subject to a review under a clearly erroneous
standard. Bankruptcy Rule 8013. The Bankruptcy Court does have broad discretion in
determining the nature of the relief to be granted where the conditions of § 362(d)(2)
are satisfied. The court may terminate, annul, modify or merely condition the stay, as
it deems appropriate. 11 U.S.C. § 362(d).FN6
FN6. The highly subjective nature of the inquiry and response makes explicable the Mac
Donald court's characterization of the standard of review under § 362(d) generally as
one of abuse of discretion. Cf. Mac Donald, 755 F.2d at 716, 717 (not distinguishing
standards applicable to § 362(d)(1) and § 362(d)(2)).
The standard of review is not relevant since, as it explained below, this Court
concludes that the reference in § 362(d)(2) to “reorganization,” and the policies of
Chapter 13, preclude the application of that ground for relief from the stay in Chapter
13. Even if the section does apply, however, this Court finds that the property is
necessary to an effective rehabilitation of the debtor.
2. Analysis
[5] The Supreme Court in United Savings Ass'n of Texas v. Timbers of Inwood Forest
Assoc., Ltd., 484 U.S. 365, 372, 108 S.Ct. 626, 630, 98 L.Ed.2d 740 (1988) , addressed
the issue of what the creditor's interest in the property should be under 11 U.S.C. §
361.FN7 The Court interpreted § 506(a) as follows:
When adequate protection is required under section 362, 363, or 364 of this title of
an interest of an entity in property, such adequate protection may be provided by-
(1) requiring the trustee to make periodic cash payments to such entity, to the extent
that the stay under section 362 of this title, use, sale, or lease under section 363 of
this title or any grant of a lien under section 364 of this title results in a decrease
in the value of such entity's property;
(2) providing to such entity an additional or replacement lien to the extent that such
stay, use, sale, lease, or grant results in a decrease in the value of such entity's
interest in such property; or
(3) granting such other relief, other than entitling such entity to compensation
allowable under section 503(b)(1) of this title as an administrative expense, as will
result in the realization by such entity of the indubitable equivalent of such entity's
interest in such property.
In subsection (a) of the provision the creditor's “interest in property” obviously means
his security interest without taking account of his right to immediate possession of the
collateral on default. If the latter were included, the “value of such creditor's
interest” would increase, and the proportions of the claim that are secured and
unsecured would alter, as the stay continues-since the value of the entitlement to use
the collateral from the date of bankruptcy would rise with the passage of time.... The
phrase “value of such creditor's interest” in § 506(a) means “the value of the
collateral.”*825 We think, the phrase “value of such entity's interest” in § 361(1) and
(2), when applied to secured creditors, means the same.
Id. at 372, 108 S.Ct. at 630. The value of the property should be the same whether
being analyzed under § 506 or § 361. Therefore, the value of the creditor's interest
that must be adequately protected does not include the value of the mortgage insurance.
[6] Lomas also contends that Fischer has no equity in the condominium and that it is
not necessary to the reorganization. For this reason, argues Lomas, the Bankruptcy
Court should have made foreclosure possible by granting relief from the stay under §
362(d)(2). Courts are not in agreement whether § 362(d)(2)(B) applies to Chapter 13
relief. See In re Scott, 121 B.R. 605, 607-08 (E.D.Okla.Bankr.1990) (subsection does
apply to Chapter 13); but see In re Rhoades, 34 B.R. 164, 166-67 (D.Vermont Bankr.1983)
(subsection does not apply to Chapter 13); In re Feimster, 3 B.R. 11, 14
(N.D.Ga.Bankr.1979) (subsection does not apply to Chapter 13).
If the subsection applies, a debtor who has no equity in property which is not necessary
to consummate a Chapter 13 plan may be, through lift-stay actions, exposed to
involuntary dispossession of such property. The purpose, however, of Chapter 13 is to
enable individual debtors with regular incomes to develop and perform a plan for the
repayment of debts over an extended period of time. **The emphasis is on providing
individuals with regular incomes an alternative to liquidation. Hence, it is the
ability of the individual debtors to furnish the creditor with the value of his claim,
in the form of property or from current earnings, which is the key to the protection of
the creditor under a Chapter 13 plan. **Whether the collateral being retained by the
debtor is necessary to the subsistence or rehabilitation of the Chapter 13 debtor, or
whether the debtor has any equity in the collateral, are not factors of concern
applicable or relevant to Chapter 13 proceedings.
The court in Scott determined that this section did apply to Chapter 13. It stated:
“Since there is no specific section under Chapter 13 which will narrow the general
application § 103(a), we must find that it was intended to be applicable in Chapter 13.”
The Ninth Circuit has not yet faced this issue. This Court predicts that when it does
it will agree with the analysis in Rhoades. It would defeat the purpose of Chapter 13
in many instances if this section was found to apply. A Chapter 13 proceeding is not a
reorganization of a business entity and therefore should not require the same standards
as a Chapter 11 reorganization.
[7] In the alternative, the Court finds that the property in question is necessary to
an effective rehabilitation. The property under the Plan provides a positive cash flow
which is being applied to the Plan. The Plan pays the total secured claim and
approximately eight percent of the unsecured portion.
Therefore, the Bankruptcy Court's decision that Lomas was adequately protected and
relief from the automatic stay was unnecessary is AFFIRMED.
Reorganization of farm
I conclude that that inquiry has no place in a complaint for a relief from
stay proceeding because the statute does not suggest it. The inquiry
regarding the debtor's inability to effectuate a reorganization has relevance
in a motion to dismiss or convert hearing, which touches all creditors'
rights, but not here.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2421 k. Vacation, Continuance, Modification, or Dissolution in
General. Most Cited Cases
Bankruptcy statute providing that court shall grant relief from stay upon appropriate
showing is applicable in cases under Chapter 13. Bankr.Code, 11 U.S.C.A. § 362(d).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2439 Evidence
51k2439(2) k. Presumptions and Burden of Proof. Most
Cited Cases
Irrebuttable presumption arose that Chapter 13 debtor's home was necessary for his
effective reorganization, so as to preclude lifting of stay to allow mortgage
foreclosure to proceed based on debtor's lack of equity in property, where debtor's
primary purpose in filing his Chapter 13 petition was to save his home. Bankr.Code, 11
U.S.C.A. § 362(d)(2).
Creditor disputes the assumption that Debtor's home is necessary for survival and thus
for an effective reorganization by citing In re Kornhauser, 184 B.R. 425
(Bkrtcy.S.D.N.Y.1995). We decline to follow Kornhauser here, as it is a chapter 11
case, and the test applying § 362(d) to a case under chapter 13 is decidedly different
where the debtor's home is at issue. Again, there is an irrebuttable presumption that a
chapter 13 debtor's home is necessary for an effective reorganization. In re Garner,
supra at 371, Grundy National Bank v. Stiltner, supra at 596.
**Bankruptcy court could sua sponte deny creditor’s motion for relief
from stay, based on creditor’s failure to satisfy its initial burden
of production, even in absence of any motion by debtor challenging
sufficiency of creditor’s prima facie case. In re Anthem
Communities/RBG, LLC, Bkrtcy.D.Colo.2001, 267 B.R. 867. Bankruptcy
2442
**In context of motion for relief from stay, indirect defenses going
to offset amount of secured debt are not, unless by agreement of
parties, subject to full-scale trial on merits; issue is instead
limited to whether debtors have presented sufficient evidence of bona
fides of their claim for court to deny motion for relief from stay.
Matter of Shehu, Bkrtcy.D.Conn.1991, 128 B.R. 26. Bankruptcy 2440
**Party opposing creditor’s motion for relief from stay, and not
creditor itself, had burden of showing that security interest upon
which creditor sought to foreclose was not properly perfected in
accordance with state law. In re Allstar Bldg. Products, Inc., C.A.11
(Ala.) 1987, 834 F.2d 898. Bankruptcy 2439(3.1)
**Burden of proof on a motion for stay relief "for cause" shifts from
movant’s initial showing of "cause" to the party opposing the motion;
that is, party seeking stay relief must establish a prima facie case
of cause for relief, and, if this prima facie case is established,
burden shifts to debtor to prove cause does not exist. In re George,
Bkrtcy.S.D.Ga.2004, 315 B.R. 624. Bankruptcy 2439(2); Bankruptcy
2439(5.1)
**Moving party, to make out prima facie cause of relief from automatic
stay on ground of lack of adequate protection, must do more than
merely prove that it holds validly perfected security interest and
establish amount of debt and other allowable costs secured by its
claim, rather, movant must establish legal cause for relief. In re
Planned Systems, Inc., Bkrtcy.S.D.Ohio 1987, 78 B.R. 852. Bankruptcy
2439(1)
Grundy Nat. Bank v. Stiltner, 58 B.R. 593, 596 (W.D.Va.,Feb 28, 1986)
Good case
FN1. In effect, an irrebuttable presumption is created in a Chapter 13 case as to the debtor's home as
necessary to effective reorganization where the debtor's primary purpose in filing the Chapter 13 petition is
to save his home.
73 alr fed 324
Who is "party in interest" entitled to request relief from automatic stay provision of bankruptcy code of 1978
(11 U.S.C.A. § 362(d))
Is there a legal theory that the non bona fide purchaser is not the
real party in interest.
[The court in Re Comcoach Corp. (1983, CA2 NY) 698 F2d 571, 9 BCD 1439, 7 CBC2d 1191, CCH Bankr L Rptr
¶69034, 73 ALR Fed 317, held that a bank, holding a mortgage on a lessor’s property, was not a party in interest in a
bankruptcy proceeding filed by a lessee of the property, and could not seek to have the automatic stay vacated and
modified under § 362(d) so as to name the debtor a party defendant in a pending state foreclosure action on the
property. The court stated that when interpreting the meaning of terms such as "party in interest," it was governed by
the Bankruptcy Code’s purposes. One such purpose, the court said, is to convert the debtor’s estate into cash and
distribute it among the creditors; another is to provide a fresh start for the debtor. The court noted that the
bankruptcy courts were established to provide a forum wherein creditors and debtors could settle their disputes and
thereby effectuate the objectives of the statute. Necessarily, therefore, the court reasoned, the bank must be either a
creditor or a debtor to invoke the court’s jurisdiction, and it was neither. The court stated that support for its view
was found in the Bankruptcy Code’s legislative history, which suggested that, notwithstanding the use of the term
"party in interest," it was only creditors who could obtain relief from the automatic stay. The court stated that the
bank was not a creditor of the debtor since the bank had no right of payment from the debtor; that the debtor had no
obligation on the mortgage, and the debtor’s duty to pay rent on its lease ran only to the lessor, and not to the bank.
The court said, moreover, that the bank lacked any right to equitable relief against the debtor arising out of the
renter’s breach of performance giving rise to a right of payment. Accordingly, the court affirmed the district court’s
affirmance of the bankruptcy court’s denial of the bank’s request for relief from the stay.[8]
**Dismissing a complaint for relief from the automatic stay provision, the court, in Re Tour Train Partnership
(1981, BC DC Vt) 15 BR 401, 5 CBC2d 731, held that a corporation that had a judgment against one of the debtor’s
secured creditors was not a party in interest under § 362(d). The corporation was seeking to enforce the judgment
against the secured creditor, a railroad, by attaching goods of the railroad in possession of the debtor as trustee. The
corporation sought to have the automatic stay in favor of the debtor lifted so that it could proceed against the debtor
and obtain an order requiring the debtor to hold for the benefit of the corporation the amount of its judgment from
any distribution to the railroad under the latter’s allowed secured claim of $85,000. Noting that the corporation
admitted it was not a creditor of the debtor, the court declared that the purpose of the automatic stay is to protect the
property of the estate, the property of the debtor, or the property in the custody of the estate; that, furthermore, relief
from such stay is not intended to permit a nonparty to the proceeding to collect a judgment entered by a state court.
The court also pointed out that there were established prior liens against the property of the railroad that were
entitled to satisfaction before any payment was made to the railroad. The court stated that any distribution to the
railroad by the bankruptcy court should not be impaired by a claim of a creditor that held a judgment execution
subordinate to prior liens and that was obtained in violation of the automatic stay.[9] Thus, the court concluded, the
corporation was a stranger to the proceeding in that it had no direct interest in the subject matter at issue.]
"Real party in interest," such as could seek relief from stay applicable in debtor-mortgagor’s
bankruptcy case for purpose of pursuing its rights under mortgage and mortgage loan which had been
securitized, was trustee of securitization trust and not the servicing agent, so that even if bank continued
as servicer of mortgage loan following assignment, it was not real party in interest and was not a proper
party to file motion for stay relief. 11 U.S.C.A. § 362(d); Fed.Rules Bankr.Proc.Rules 4001, 7017, 9014,
11 U.S.C.A. In re Kang Jin Hwang, 396 B.R. 757 (Bankr. C.D. Cal. 2008).
Bank, as holder of mortgage note, which may even have retained servicing rights following
assignment of note to another entity, plainly had standing to move for relief from stay in order to enforce
note, even though it was not real party in interest following assignment. 11 U.S.C.A. § 362(d); Fed.Rules
Bankr.Proc.Rule 7017, 11 U.S.C.A.; Fed.Rules Civ.Proc.Rule 17(a)(1), 28 U.S.C.A. In re Kang Jin
Hwang, 396 B.R. 757 (Bankr. C.D. Cal. 2008).
While servicer of mortgage loan that it had previously transferred to other entity might have right, as
entity’s agent, to take steps to enforce mortgage on entity’s behalf by moving for relief from automatic
stay, it was not "real party in interest" and could not move for such relief in its own name, but only in
name of entity to which it had transferred mortgage loan. 11 U.S.C.A. § 362(d). In re Kang Jin Hwang,
393 B.R. 701 (Bankr. C.D. Cal. 2008).
Alleged servicing agent that failed to present any record evidence of its authority to enforce deed of
trust note or even as to who was holder of note, and whose own bankruptcy specialist imprecisely
declared that he was servicing loan for named entity, "its successors and/or assigns," failed to establish
that it had standing to pursue motion for relief from stay in order to enforce deed of trust, and stay relief
motion had to be denied for lack of standing and as not being prosecuted by "real party in interest." 11
U.S.C.A. § 362(d); Fed.Rules Bankr.Proc.Rules 4001, 7017, 9014, 11 U.S.C.A. In re Jacobson, 402 B.R.
359 (Bankr. W.D. Wash. 2009), as modified, (Mar. 10, 2009).
Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (U.S.Wis.,Jan 02, 1940)
Good case
Action by Ernest Newton Kalb and Margaret Kalb, his wife, against Henry Feuerstein and Helen Feuerstein, his
wife, for restoration of possession of a farm, for cancellation of a sheriff’s deed, and for removal of defendants from
the farm, and action by Ernest Newton Kalb against Roscoe R. Luce and others to recover damages for conspiracy to
deprive plaintiff of possession of his farm, for assault and battery, and for false imprisonment. Judgments dismissing
the complaints were affirmed by the Supreme Court of Wisconsin, 285 N.W. 431, and plaintiffs appeal.
Judgments in both cases reversed and causes remanded to the Supreme Court of Wisconsin.
228 Judgment
228XI Collateral Attack
228XI(A) Judgments Impeachable Collaterally
228k470 k. Judgments Presumed Valid in General. Most Cited Cases
Generally, a judgment by a court of competent jurisdiction bears a presumption of regularity and it is not thereafter
subject to collateral attack, but Congress, because its power over the subject of bankruptcy is plenary, may by
specific bankruptcy legislation create an exception to that principle and render judicial acts taken with respect to the
person or property of a debtor whom the bankruptcy law protects nullities and vulnerable collaterally.
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2060 Exclusive, Conflicting, or Concurrent Jurisdiction
51k2062 k. Bankruptcy Courts and State Courts. Most Cited Cases
(Formerly 51k213)
Although a Wisconsin county court had general jurisdiction over mortgage foreclosures under Wisconsin law, the
peremptory prohibition of the Frazier-Lemke Act enacted by Congress in the exercise of its supreme power over
bankruptcy denying to any state court jurisdiction over a petitioning farmer-debtor or his property rendered the
confirmation of a mortgage foreclosure sale and its enforcement without bankruptcy court’s consent beyond the
county court’s power and nullities subject to collateral attack. Laws Wis.1907, c. 234; Bankr.Act § 75, subs. n, o(2,
6), p, 11 U.S.C.A. § 203, subs. n, o(2, 6), p.
360 States
360I Political Status and Relations
360I(B) Federal Supremacy; Preemption
360k18.1 k. In General. Most Cited Cases
(Formerly 360k4.7, 360k4)
The states cannot, in the exercise of control over local laws and practice, vest state courts with power to violate the
supreme law of the land.
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2060 Exclusive, Conflicting, or Concurrent Jurisdiction
51k2062 k. Bankruptcy Courts and State Courts. Most Cited Cases
(Formerly 51k213)
The language and broad policy of the Frazier-Lemke Act conclusively show that Congress deprived a Wisconsin
county court of jurisdiction to continue or maintain in any manner mortgage foreclosure proceedings against farmer-
debtors without consent, after hearing, of bankruptcy court in which farmer-debtors’ petition was pending, and
hence confirmation of mortgage foreclosure sale, execution of sheriff’s deed, writ of assistance, and ejection of
farmer-debtors from their property, to the extent based upon county court’s actions, were all unlawful. Bankr.Act §
75, subs. n, o(2, 6), p, 11 U.S.C.A. § 203, subs. n, o(2, 6), p.
Congress, because its power over the subject of bankruptcy *439 is plenary, may by specific bankruptcy legislation
create an exception to that principle and render judicial acts taken with respect to the person or property of a debtor
whom the bankruptcy law protects nullities and vulnerable collaterally
a peremptory prohibition by Congress in the exercise of its supreme power over bankruptcy that no State court have
jurisdiction over a petitioning farmer-debtor or his property, would have rendered the confirmation of sale and its
enforcement beyond the County Court’s power and nullities subject to collateral attack.FN10The States cannot, in the
exercise of control over local laws and practice, vest State courts with power to violate the supreme law of the
land.FN11 **The Constitution grants Congress exclusive power to regulate bankruptcy and under this power
Congress can limit that jurisdiction which courts, State or Federal, can exercise over the person and property of a
debtor who duly invokes the bankruptcy law. If Congress has vested in the bankruptcy courts exclusive jurisdiction
over farmer-debtors and their property, and has by its Act withdrawn from all other courts all power under any
circumstances to maintain and enforce foreclosure proceedings against them, its Act is the supreme law of the land
which all courts-State and Federal-must observe
*440 [8][9] We think the language and broad policy of the Frazier-Lemke Act conclusively demonstrate that
Congress intended to, and did deprive the Wisconsin County Court of the power and jurisdiction to continue or
maintain in any manner the foreclosure proceedings against appellants without the consent after hearing of the
bankruptcy court in which the farmer’s petition was then pending.FN12
FN12 That a State court before which a proceeding is competently initiated may-by operation of supreme Federal
law-lose jurisdiction to proceed to a judgment unassailable on collateral attack is not a concept unknown to our
Federal system. See Moore v. Dempsey, 261 U.S. 86, 43 S.Ct. 265, 67 L.Ed. 543. Cf. Johnson v. Zerbst, 304 U.S.
458, 58 S.Ct. 1019, 82 L.Ed. 1461.
‘(p) The prohibitions * * * shall apply to all judicial or official proceedings in any court or under the direction of any
official, and shall apply to all creditors, public or private, and to all of the debtor’s property, wherever located. All
such property shall be under the sole jurisdiction and control of the court in bankruptcy, and subject to the payment
of the debtor farmer’s creditors, as provided for in (this section) section 75 of this Act.’(Italics supplied.)
Thus Congress repeatedly stated its unequivocal purpose to prohibit-in the absence of consent by the bankruptcy
court in which a distressed farmer has a pending petition-a mortgagee or any court from instituting, or maintaining if
already instituted, any proceeding against the farmer to sell under mortgage foreclosure, to confirm such a sale, or to
dispossess under it
This congressional purpose is more apparent in the light of the Frazier-Lemke Act’s legislative history. Clarifying
and altering the sweeping provisions for exclusive Federal jurisdiction in the original Act,FN13 Congress made several
important changes in 1935.FN14It was then that subsection (p) was amended so that the prohibitions in subsection (o)
of any steps against a farmer-debtor or his property once his petition is filed were made specifically applicable ‘to all
judicial or official proceedings*442 in any court or under the direction of any official, and * * * to all creditors,
public or private, and to all of the debtor’s property, wherever located. All such property shall be under the sole
jurisdiction and control of the court in bankruptcy, and subject to the payment of the debtor farmer’s creditors, as
provided for in (this section) Section 75 * * *.’
The Congressional purpose is similarly set out in the House Judiciary Committee’s Report: ‘The amendment to
subsection (n) in fact construes, interprets, and clarifies both subsections (n) and (o) of section 75. By reading
subsections (n) and (o) as now amended in this bill, it becomes clear **348 that it was the intention of Congress
when it passed section 75, that the farmer-debtor and all of his property should come under the jurisdiction of the
court of bankruptcy, and that the benefits of the act should extend to the farmer, prior to confirmation of sale, during
the period of redemption, and during a moratorium; and that no proceedings after the filing of the petition should be
instituted, or if instituted prior to the filing of the petition, should not be maintained in any court, or otherwise.’FN16
In harmony with the general plan of giving the farmer an opportunity for rehabilitation, he was relieved-after filing a
petition for composition and extension-of the necessity of litigation elsewhere and its consequent expense. This was
accomplished by granting the bankruptcy court exclusive jurisdiction of the petitioning farmer and all his property
with complete and self-executing statutory exclusion of all other courts.
The mortgagees who sought to enforce the mortgage after the petition was duly filed in the bankruptcy court, the
Walworth County Court that attempted to grant the mortgagees relief, and the sheriff who enforced the court’s
judgment, were all acting in violation of the controlling Act of Congress. Because that State court had been deprived
of all jurisdiction or power to proceed with the foreclosure, the confirmation of the sale, the execution of the
sheriff’s deed, the writ of assistance, and the ejection of appellants from their property-to the extent based upon the
court’s actions-were all without authority of law.
The judgments in both cases are reversed and the causes are remanded to the Supreme Court of Wisconsin for
further proceedings not inconsistent with this opinion.
See
federal_supremacy_preemption_digest
In re Stringer, 847 F.2d 549, 56 USLW 2695, 19 Collier Bankr.Cas.2d 233, 17 Bankr.Ct.Dec. 1169, Bankr.
L. Rep. P 72,297 (9th Cir.(Cal.),May 24, 1988)
Bad case
Following filing of petition in bankruptcy, state court granted motion of debtor’s ex-wife for increase in child
support, and debtor moved to have the child support modification order declared void. The Bankruptcy Court denied
the motion and was affirmed by the United States District Court for the Northern District of California, Thelton E.
Henderson, J. Debtor appealed. **The Court of Appeals, Sneed, Circuit Judge, held that: (1) modification of child
support order is not permitted by exemption from automatic stay in bankruptcy for “collection of alimony,
maintenance or support,” and (2) the exemption applies only to proceedings to collect support that has been awarded
by an order entered prior to the filing of petition in bankruptcy.
Reversed.
11 U.S.C. § 362(a)(1) of the Bankruptcy Code automatically stays the commencement or continuation of judicial
proceedings against the debtor that were or could have been commenced before the bankruptcy petition was filed.
Any proceedings in violation of the automatic stay in bankruptcy are void. Kalb v. Feuerstein, 308 U.S. 433, 438-39,
60 S.Ct. 343, 345-46, 84 L.Ed. 370 (1940);
(a) The commencement of a case under section 301, 302, or 303 of this
title creates an estate. Such estate is comprised of all the following
property, wherever located and by whomever held:
“A completed sale may be set aside on the same grounds that would
support an action to enjoin the sale (see §§7.25-7.38), unless the
property has been purchased by a BFP (see §7.65), in which case the
plaintiff may be limited to money damages. See Weingard v. Atlantic
Sav. & Loan Ass’n (1970) 1 C3d 806, 819, 83 CR 650.
See also §7.70. Justifications in reported cases for setting aside the
trustee sale include the following:
Assertions that no breach occurred or that the trustee did not have
power to foreclose. Hauger v. Gates (1954) 42 C2d 752, 269 P2d 609
(setoff equaled amount owed); Bank of America v. La Jolla Group II
(2005) 129 CA4th 706, 28 CR3d 825 (reinstatement of loan); System Inv.
Corp. v Union Bank (1971) 21 CA3d 137, 98 CR 735 (waiver of breach);
Saterstrom v. Glick Bros. Sash Door & Mill Co. (1931) 118 CA 379, 5
P2d 21 (void deed of trust); Van Noy v. Goldberg (1929) 98 CA 604, 277
P 538 (debt not matured).
...
In Saterstrom v. Glick Bros. Sash, Door & Mill Co., (1931) 118
Cal.App. 379, 383 [5 P.2d 21], the court held on a foreclosure sale on a
property conveyed, the sale and all proceedings under the deed of trust would
in a foreclosure proceeding under a deed of trust that where a “deed of trust being
void for lack of a sufficient description of the property conveyed, the sale and
all proceedings under the deed of trust would likewise be wholly ineffective and
void.”
held under a foreclosure sale on a deed of trust that is “void for a lack of
sufficient description of the property conveyed, the sale and all proceedings under
the deed of trust would likewise be wholly ineffective and void.”
held that a foreclosure proceeding under a deed of trust where, “The deed of
held under a foreclosure sale (of a property) on a deed of trust that is void for a
lack of sufficient description of the property conveyed, the sale and all
proceedings under the deed of trust would likewise be wholly ineffective and void.”
Would be a
wrongful foreclosure that did not comply with the statutory
restrictions on the power of sale
description of the property conveyed, the sale and all proceedings under the
p. 12-80 states,
debtor joint tenant, and the lien is only on the interest of that
291, 294, 70 Cal.Rptr. 923 (4th Dist. 1968) (rejected on other grounds
by Riddle v. Harmon, 102 Cal.App.3d 524, 162 Cal.Rptr. 530, 7
A.L.R.4th 1261 1st Dist. 1980)); Hamel v. Gootkin, 202 Cal.App.2d 27,
28-29, 20 Cal.Rptr.372 (2d. Dist. 1962); Ziegler v. Bonnell, 52
Cal.App.2d 217, 220, 126 P.2d 118 (1st Dist.
1942)”
in examining the legal and factual basis for setting aside trustee
sales
in examining the legal and factual basis for setting aside the
foreclosure sale
The sale was improperly held and that the trustee’s deed was
wrongfully executed, delivered and recorded in that there was absence
of a valid lien.
What newspaper was the sale advertised in? (looking for the
appropriate place, time and manner.)
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(7) k. Inadequacy of Price in Connection with
Other Objections. Most Cited Cases
Inaccurate description of property in notice of trustee’s sale, that appeared
to refer to land in addition to four-acre parcel containing residence that
was subject to deeds of trust securing loans, was “material irregularity”
relating to foreclosure sale, for purposes of California **law permitting
sale to be set aside if gross inadequacy of price were coupled with even
slight unfairness or irregularity; full description of property referred to
oil and gas rights and to particular conveyances relating to 40-acre parcel,
and bidders interested in smaller lot who would have researched described
plot would thus have been deterred from attending foreclosure sale.
Once
Is there a requirement to register the trust deed with the under UCC-1
with the Secretary of State?
Get certified copies of the lis pendens on title, at the Orange County
Clerk Recorder and in the Central Justice Center case file.
Get certified copies of the notice of stay filed in the Harbor Justice
Center, Newport Beach Facility
Nobody has standing to seek relief from stay because the Trust
Deed Is void.
Restoration of capacity cc 40
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(7) k. Inadequacy of Price in Connection
with Other Objections. Most Cited Cases
Inaccurate description of property in notice of trustee’s sale, that
appeared to refer to land in addition to four-acre parcel containing
residence that was subject to deeds of trust securing loans, was
“material irregularity” relating to foreclosure sale, for purposes of
California **law permitting sale to be set aside if gross inadequacy
of price were coupled with even slight unfairness or irregularity;
full description of property referred to oil and gas rights and to
particular conveyances relating to 40-acre parcel, and bidders
interested in smaller lot who would have researched described plot
would thus have been deterred from attending foreclosure sale.
[9] Finally, Rosner and Little argue that, as bona fide purchasers,
the foreclosure sale cannot be set aside because they had no actual or
constructive notice of Worcester’s suit against National Mortgage and
Trust Services, filed in June 1981, or of the misdescription of the
property contained in the foreclosure documents.FN12 This argument fails
under California law.
FN12. Rosner and Little also claim that under the “relation back
doctrine,” title taken at a foreclosure sale cannot be affected by
adverse claims or interests arising after the execution of the deed of
trust. Hohn v. Riverside County Flood Control and Water Conservation
Dist., 228 Cal.App.2d 605, 39 Cal.Rptr. 647 (1964). This doctrine only
applies to title taken at a valid foreclosure sale, and so is
inapplicable here. Id. at 613-14, 39 Cal.Rptr. at 652.
La Jolla Mortg. Fund v. Rancho El Cajon Associates, 18 B.R. 283, 8 Bankr.Ct.Dec. 1035 (Bankr.S.D.Cal.
Mar 11, 1982)
Holder of two notes secured by deeds of trust on single family residence filed complaint seeking relief from
automatic stay. The Bankruptcy Court, James W. Meyers, J., held that holder of notes was entitled to relief from
automatic stay, where debtor had no equity in property and failed to show that property was necessary to effective
reorganization.
Ordered accordingly.
Background: Creditor, whose efforts to obtain possession of Chapter 7 debtor’s residence through unlawful
detainer proceedings attendant to foreclosure were stayed when debtor filed his bankruptcy petition, filed motion for
stay relief, seeking injunctive and extraordinary “in rem” relief, including a ban on filing future bankruptcy petitions
by other persons to whom the subject property may be transferred, a ban on automatic stays in future cases, and an
order providing for the sheriff to evict debtor and any other occupants from the subject property notwithstanding a
future bankruptcy case.
Holdings: The Bankruptcy Court, Klein, J., held that:
(1) much of the relief requested by creditor was only available, if at all, through an adversary proceeding, and not by
way of a motion for relief from stay, and
(2) where a motion for stay relief also sought relief available only by adversary proceeding, the court would deem
the contested matter to be an adversary proceeding and require payment of the adversary proceeding filing fee.
So ordered.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2429 Necessity of Asset for Reorganization or Rehabilitation
51k2429(1) k. In General. Most Cited Cases
Bankruptcy 51 2442
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2442 k. Determination and Relief; Conditions. Most Cited Cases
Bankruptcy court’s authority to adjust the automatic stay is constrained by subsection (d) of the section of the
Bankruptcy Code governing the automatic stay, which delineates four bases for the court to grant stay relief, such as
by terminating, annulling, modifying, or conditioning such stay; those four bases are cause, lack of equity in
property not needed for an effective reorganization, failure timely to file a plan of reorganization or commence
monthly payments in a single asset real estate case, and certain instances of the filing of a petition as part of a
scheme to delay, hinder, and defraud creditors secured by interests in real property. 11 U.S.C.A. § 362(d).
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
While an “adversary proceeding” is essentially indistinguishable from a civil action, a “contested matter” is a motion
procedure susceptible of more expeditious resolution than an adversary proceeding, as, in a contested matter, the
pleading rules that entail complaint, answer, counterclaim, crossclaim, and third-party practice are dispensed with in
favor of a simple motion procedure. Fed.Rules Bankr.Proc.Rules 7001, 9014, 11 U.S.C.A.
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
Motion under the bankruptcy rule governing contested matters cannot be used to circumvent the requirement of an
adversary proceeding. Fed.Rules Bankr.Proc.Rule 9014, 11 U.S.C.A.
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
92 Constitutional Law
92XXVII Due Process
92XXVII(G) Particular Issues and Applications
92XXVII(G)25 Other Particular Issues and Applications
92k4478 k. Bankruptcy. Most Cited Cases
Where creditor, whose efforts to obtain possession of Chapter 7 debtor’s residence through unlawful detainer
proceedings attendant to foreclosure were stayed upon debtor’s bankruptcy filing, sought injunctive and
extraordinary “in rem” relief, including a ban on filing future bankruptcy petitions by other persons to whom the
subject property may be transferred, a ban on automatic stays in future cases, and an order providing for sheriff to
evict debtor and any other occupants from the subject property notwithstanding a future bankruptcy case, the relief
requested by creditor was only available, if at all, through an adversary proceeding, and not by way of a motion for
relief from stay; relief sought by creditor was not grounded on specific provisions of the Bankruptcy Code, but was
based upon the court’s general equity jurisdiction, and to the extent the relief affected third parties, due process
concerns virtually compelled the more formal process of an adversary proceeding. U.S.C.A. Const.Amend. 5; 11
U.S.C.A. § 362; Fed.Rules Bankr.Proc.Rule 7001(2, 7), 11 U.S.C.A.
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
While it is not permissible to seek adversary proceeding relief as part of a contested matter, the converse is not true;
there is no impediment to including a contested matter issue in an adversary proceeding. Fed.Rules
Bankr.Proc.Rules 7001, 9014, 11 U.S.C.A.
51 Bankruptcy
51II Courts; Proceedings in General
51II(A) In General
51k2127 Procedure
51k2128 k. Filing Fees. Most Cited Cases
Bankruptcy 51 2156
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
Where creditor’s motion for stay relief also sought relief available only by adversary proceeding, the bankruptcy
court would deem the contested matter to be an adversary proceeding and require payment of the adversary
proceeding filing fee. 11 U.S.C.A. § 362; Fed.Rules Bankr.Proc.Rules 4001(a)(1), 7001, 9014, 11 U.S.C.A
**c. [8:1145] Litigation in nonbankruptcy forum as "cause": Bankruptcy courts may, and sometimes must, abstain
from hearing disputes that are only tangentially related to the bankruptcy case. [See 28 USC § 1334(c); In re Tucson
Estates, Inc. (9th Cir. 1990) 912 F2d 1162, 1169; and discussion at ¶ 1:736 ff.]
Thus, abstention may constitute "cause" for lifting the stay to allow the action to proceed to judgment in a
nonbankruptcy forum (state court, federal district court, tax court, or any arbitration panel or administrative tribunal,
etc.). [See In re Universal Life Church, Inc. (ED CA 1991) 127 BR 453, 455]
(1) [8:1146] Compare--enforcement of resulting judgment stayed: Relief from the stay on this ground is usually
limited to permitting a pending proceeding to proceed to judgment (and possibly an appeal therefrom). Collection or
enforcement of the judgment, however, remains subject to the stay. Otherwise, the creditor could obtain the
equivalent of a preference. [See In re Neal (BC D ID 1994) 176 BR 30, 34; Matter of Rabin (BC D NJ 1985) 53 BR
529, 531; In re Humphreys Pest Control Co., Inc. (BC ED PA 1984) 35 BR 712, 714]
=> [8:1147] PRACTICE POINTER FOR CREDI-TORS: Any resulting judgment should be filed as a claim in the
bankruptcy case.
If a deadline for filing claims will expire before the nonbankruptcy action is reduced to judgment (or even filed), file
a proof of claim containing a liability estimate (usually in the same amount as prayed for in the complaint). The
claim can later be amended to conform to the amount of the judgment.
In fact, a plaintiff in litigation against the debtor should not necessarily seek relief from the stay. A trial in a
nonbankruptcy forum is usually more expensive for both debtor and plaintiff than liquidating the claim (e.g., by
having plaintiff file a claim in the bankruptcy case and then litigating any objection to the claim under 11 USC §
502; see Ch. 17).
[8:1148-1154] Reserved.
**3. [8:1230] Relief From Stay Where Debtor Lacks Equity and Property Not Needed for Reorganization (11
USC § 362 (d)(2)): Relief from the stay "shall" be granted with respect to an act against property if:
**• The debtor does not have an equity in the property; and
**• The property is not necessary to an effective reorganization. [11 USC § 362(d)(2)]
a. [8:1231] Chapter 11, 12 or 13 reorganizations: Where the debtor is given the opportunity to reorganize (Chapter 11,
12 or 13), **the court can grant relief from the stay under § 362(d)(2) provided both prongs of the test are met.
**Thus, when the property is needed for an effective reorganization, § 362(d)(2) relief from the stay will be denied
even if the debtor has no equity in the property. [La Jolla Mortg. Fund v. Rancho El Cajon Assocs. (BC SD CA
1982) 18 BR 382, 289-290; In re Elmore (BC CD CA 1988) 94 BR 670, 677; In re Dahlquist (BC ND AL 1983) 34
BR 476, 483--no § 362(d)(2) relief where debtors had no equity in livestock, crops, equipment and other farm
products but property needed for effective reorganization]
Compare--Chapter 7 liquidations: See ¶ 8:1291.
[8:1232] Reserved.
b. [8:1233] First prong of § 362(d)(2) test--"no equity" in property: The first prong of § 362(d)(2) requires a showing
that the debtor does not have "an equity" in the property that is subject to the movant’s interest. [See 11 USC §
362(d)(2)(A)]
(1) [8:1234] Movant’s burden: The party seeking relief from the stay has the burden of proving the debtor has no equity
in the property. [11 USC § 362(g)(1); see In re Bialac (9th Cir. 1983) 712 F2d 426, 432; Matter of Sutton (5th Cir.
1990) 904 F2d 327, 330; In re Dahlquist (BC D SD 1983) 34 BR 476, 481, 483]
(a) [8:1235] Including validity of movant’s lien: Although not expressly stated in § 362(g), the movant must also
establish the validity and perfection of its security interest and the amount of the debt and other allowable costs
secured by its claim. [In re Dahlquist, supra, 34 BR at 481]
(b) [8:1236] Compare--opposing party’s burden: The party opposing relief from the stay (i.e., debtor or trustee) has
the burden of proof on all other issues (e.g., that the property is needed for an effective organization). [11 USC §
362(g)(2); In re San Clemente Estates (BC SD CA 1980) 5 BR 605, 609; In re Dahlquist, supra, 34 BR at 481, 483;
see ¶ 8:1295 ff.]
(2) [8:1237] Proving "equity": "Equity" as used in § 362(d)(2)(A) is the property’s fair market value above all secured
claims (not just those of the moving party and superior lienholders)--i.e., the amount that can be realized from a sale
of the property for the benefit of the unsecured creditors. [See In re Mellor (9th Cir. 1984) 734 F2d 1396, 1400, fn.
2; Stewart v. Gurley (9th Cir. 1984) 745 F2d 1194, 1196; In re Faires (BC WD WA 1983) 34 BR 549, 551-552]
Consequently, to prove equity, the movant must establish the fair market value of the property, and the existence and
amount of its lien and all other liens on the property. Most courts will also take costs of sale into account (¶ 8:1275).
(a) [8:1238] "Fair market value": For relief from stay purposes, "fair market value" is the sum a willing buyer and
willing seller would agree to, given a reasonable period of time for the transaction. [See Matter of Sutton (5th Cir.
1990) 904 F2d 327, 329]
1) [8:1239] Calculated as of motion date: Fair market value is determined as of the date the motion for relief from the
stay is brought (rather than the date the bankruptcy petition was filed). [In re Paolino (BC ED PA 1986) 68 BR 416,
419]
2) [8:1240] Methods of proving fair market value: Fair market value may be proved by any admissible evidence.
a) [8:1241] Appraiser’s expert opinion: The most accurate method of proving fair market value is by expert testimony,
usually in the form of a declaration by a certified appraiser.
=> [8:1242] PRACTICE POINTER: Merely attaching an appraiser’s report to the pleadings is insufficient. To be
admissible, a proper foundation must be established. The usual method is to obtain a declaration from the appraiser
that states his or her qualifications and the scope of the appraisal performed, and to attach the report as an exhibit to
the appraiser’s declaration.
b) [8:1243] Broker’s expert opinion: For smaller properties, the declaration of a real estate broker who is familiar with
the area may suffice, although it generally is less persuasive than a qualified appraiser’s testimony.
c) [8:1244] Opinion evidence from financial institution employee: Movants who are financial institutions often use a
declaration from an in-house employee as to fair market value. If the employee is an appraiser and has examined the
property, there is foundation for the opinion. However, if the employee is merely a loan officer or records custodian,
his or her opinion may be objectionable for lack of foundation.
d) [8:1245] Property owner’s opinion: The property owner is qualified to give an opinion of value, and usually does so
through a declaration. If the debtor’s valuation testimony is uncontroverted, the court may accept it to support a
conclusion that there is equity in the property. [See In re Cooper (BC ED PA 1982) 22 BR 718, 719-720]
e) [8:1246] Circumstantial evidence: Fair market value can also be established by circumstantial evidence, such as
offers made by potential buyers or, conversely, by evidence that no offers have been made despite listing for several
months.
c. [8:1290] Second prong of § 362(d)(2) test--whether property "necessary to an effective reorganization": The
second prong of the § 362(d)(2) test for stay relief requires a showing that the property is "not necessary to an
effective reorganization" of the debtor. [11 USC § 362(d)(2)(B)]
(c) [8:1315] Application--debtor’s residence usually necessary to Chapter 13 reorganization: In a Chapter 13 case,
the debtor’s principal residence "is virtually always necessary to an effective reorganization ... If the home is not
saved, the Chapter 13 reorganization is not effective." (A rare exception is where confirmation of the Chapter 13
plan is delayed so long that there is "no effective reorganization in prospect"; see ¶ 8:1302.) [In re Elmore (BC CD
CA 1988) 94 BR 670, 677]
1) [8:1316] Compare--§ 362(d)(1) relief for "cause": Even when need for the home precludes relief under § 362(d)(2),
the secured creditor can still seek relief for "cause" under § 362(d)(1). See ¶ 8:1060 ff.
[8:1317-1319] Reserved.
Debtors’ major secured creditor filed motion for ex parte relief from stay, and an objection to venue. The
Bankruptcy Court, Peder K. Ecker, J., held that: (1) creditor bank was not entitled to relief from automatic stay on
ground of either lack of adequate protection, or that debtors **lacked equity in property and property was not
necessary for effective reorganization; (2) venue was proper in Nebraska; and (3) debtors failed to prove by
preponderance of evidence that venue should be retained in South Dakota.
Ordered accordingly.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2439 Evidence
51k2439(3) Creditor’s Burden
51k2439(3.1) k. In General. Most Cited Cases
(Formerly 51k2439(3), 51k2439(2), 51k217.5(5), 51k217(6))
Under either of two statutory tests for relief from automatic stay, creditor must establish validity and perfection of its
security interest and amount of debt and other allowable costs secured by its secured claim and must carry ultimate
burden of proof with respect to equity; debtor opposing relief from stay has burden on remaining issues.
Bankr.Code, 11 U.S.C.A. § 362(a), (d)(1, 2).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2439 Evidence
51k2439(5) Debtor’s or Trustee’s Burden
51k2439(7) k. Necessity for Reorganization or Rehabilitation. Most Cited Cases
(Formerly 51k2439(2), 51k659(1))
**When creditor demonstrates that debtor has no equity in subject property, burden of showing necessity of property
for effective reorganization, for purposes of resisting relief from automatic stay on that ground under Bankruptcy
Code subparagraph, shifts to debtor. Bankr.Code, 11 U.S.C.A. § 362(a), (d)(2).
**c. [8:1290] Second prong of § 362(d)(2) test--whether property "necessary to an effective reorganization": The
second prong of the § 362(d)(2) test for stay relief requires a showing that the property is "not necessary to an
effective reorganization" of the debtor. [11 USC § 362(d)(2)(B)]
(1) [8:1291] Inapplicable in Chapter 7 cases: Because Chapter 7 deals solely with liquidation, property is never
necessary to an effective reorganization in a Chapter 7 case. Thus, the sole requirement for granting § 362(d)(2)
relief in a Chapter 7 bankruptcy is that the debtor does not have an equity in the property (¶ 8:1233 ff.). [In re
Casgul of Nevada, Inc. (9th Cir. BAP 1982) 22 BR 65, 66; In re Preuss (9th Cir. BAP 1981) 15 BR 896, 897]
[8:1292-1294] Reserved.
(2) [8:1295] Debtor’s burden: When relief is sought under § 362(d)(2), the debtor has the burden of proving that:
• the property is necessary for an effective reorganization; and
• there is a reasonable possibility of a successful reorganization within a reasonable time. [11 USC § 362(g)(2); In re
Bonner Mall Partnership (9th Cir. 1993) 2 F3d 899, 902]
(a) [8:1296] "Necessary": Property is "necessary to an effective reorganization" if the debtor needs it (i) in the operation
of its business; or (ii) to formulate a Chapter 11 plan. [See In re Koopmans (BC D UT 1982) 22 BR 395, 407]
1) [8:1297] Effect of liquidating Chapter 11 plan? Courts disagree whether property "necessary to an effective
reorganization" can include property necessary for a liquidating Chapter 11 plan. [In re Koopmans, supra, 22 BR at
407--property may be necessary to liquidation; compare In re Associated Investors Joint Venture (BC CD CA 1988)
91 BR 555, 558-559--liquidation usually not an effective "reorganization" in single asset case where debtor has no
equity in property; Matter of Sandy Ridge Develop. Corp. (5th Cir. 1989) 881 F2d 1346, 1354, fn. 19 --property in
liquidation not necessary to "reorganization" where no evidence it would bring greater price if liquidated with other
property as a unified whole]
(b) [8:1298] "Effective reorganization": "Effective reorganization" under § 362(d)(2)(B) is interpreted to mean a
"reasonable possibility of a successful reorganization within a reasonable time." This requires "not merely a showing
that if there is conceivably to be an effective reorganization, this property will be needed for it; but that the property
is essential for an effective reorganization that is in prospect." [United Sav. Ass’n of Texas v. Timbers of Inwood
Forest Assocs., Ltd. (1988) 484 US 365, 375-376, 108 S.Ct. 626, 633 (dictum) (emphasis in original)]
1) [8:1299] Confirmable plan: "Effective reorganization" requires the debtor to demonstrate that the proposed plan is
capable of confirmation. Therefore, to a degree, this showing implicates consideration of the plan confirmation
standards of 11 USC § 1129. **[In re Building 62 Ltd. Partnership (BC D MA 1991) 132 BR 219, 222--although
not subject to same scrutiny as a confirmation hearing, debtor’s proposed plan must not be obviously unconfirmable]
**a) [8:1300] No need to show likelihood of confirmation: In a § 362(d) proceeding, the debtor need not demonstrate
that its plan actually will be confirmed; nor must the debtor put forth the kind of evidence required at a confirmation
hearing (see Ch. 11). Instead, the debtor need only produce some evidence that its plan could be confirmed by a
reasonable bankruptcy judge. [In re Bonner Mall Partnership (9th Cir. 1993) 2 F3d 899, 902, fn. 4]
2) [8:1301] Confirmable within near future: "Effective reorganization" also requires a showing that confirmation of
the proposed reorganization plan in the near future is within the realm of possibility. [In re Teresi (BC ED CA 1991)
134 BR 392, 398; see also Grundy Nat’l Bank v. Tandem Mining Corp. (4th Cir. 1985) 754 F2d 1436, 1440--stay in
case more than 2 years old ordered lifted if plan not proposed and approved within 60 days]
a) [8:1302] Effect of delay in proposing plan: Evidence that the debtor has not proposed a plan in months or years
since the filing or has proposed a plan that is not feasible or otherwise confirmable may amount to proof that there is
no realistic prospect for an effective reorganization. [See In re Sun Valley Newspapers, Inc. (9th Cir. BAP 1994) 171
BR 71, 73-74, 77; In re Sun Valley Ranches, Inc. (9th Cir. 1987) 823 F2d 1373, 1376; In re Bonner Mall
Partnership (9th Cir. 1993) 2 F3d 899, 917; and 11 USC § 1129 (discussed in Ch. 11)]
=> [8:1303] PRACTICE POINTER: Because the Code manifests a congressional policy favoring reorganization, it is
frequently difficult to obtain a finding early in the case that no effective reorganization is in prospect. (The
exception is where the debtor fails to submit any evidence that the debtor can and will propose a plan and that the
property in question is needed for that plan.)
However, the longer the case has been pending without a proposed or confirmed plan, the easier it is to obtain a
ruling that no effective reorganization is in prospect.
[8:1304-1314] Reserved.
**(c) [8:1315] Application--debtor’s residence usually necessary to Chapter 13 reorganization: In a Chapter 13
case, the debtor’s principal residence "is virtually always necessary to an effective reorganization ... If the home is
not saved, the Chapter 13 reorganization is not effective." (A rare exception is where confirmation of the Chapter 13
plan is delayed so long that there is "no effective reorganization in prospect"; see ¶ 8:1302.) [In re Elmore (BC CD
CA 1988) 94 BR 670, 677]
1) [8:1316] Compare--§ 362(d)(1) relief for "cause": Even when need for the home precludes relief under § 362(d)(2),
the **secured creditor can still seek relief for "cause" under § 362(d)(1). See ¶ 8:1060 ff.
[8:1317-1319] Reserved.
Debtors appealed from an order of the United States District Court for
the Northern District of California, Alfonso J. Zirpoli, J., reversing
the bankruptcy court’s order awarding the debtors attorney fees
incurred in opposing the creditors’ unsuccessful motion for relief
from the automatic stay. The Court of Appeals, Ferguson, Circuit
Judge, held that federal and not state law governed the substantive
issues involved in the creditors’ motion and, therefore, the
bankruptcy court should not have awarded attorney fees pursuant to a
California statute.
Affirmed
West Headnotes
[1] Bankruptcy 51 2435.1
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2435.1 k. In General. Most Cited Cases
(Formerly 51k2435, 51k659.5(4))
Stay litigation is limited to issues of lack of adequate protection,
debtor’s equity in property and necessity of property to effective
reorganization; validity of claim or contract underlying claim is not
litigated during hearing. Bankr.Code, 11 U.S.C.A. § 362(d).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2436 k. Set-Off and Counterclaim; Affirmative
Defenses. Most Cited Cases
(Formerly 51k217.5(5))
Action seeking relief from automatic stay is not assertion of claim
which would give rise to right or obligation to assert counterclaim.
Bankr.Code, 11 U.S.C.A. § 362(d).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2440 k. Hearing. Most Cited Cases
(Formerly 51k217.5(5))
State law governing contractual relationships is not considered in
automatic stay litigation. Bankr.Code, 11 U.S.C.A. § 362(d).
11 U.S.C. § 362(d).
FN2. Furthermore, when a party requests relief from the automatic stay
he is not necessarily seeking to foreclose under a contract. Such an
action could be brought by one seeking to proceed upon an alleged
personal injury claim against the debtor or a variety of other claims
not based on contract.
FN3. Although widely cited for this proposition, the Born court
acknowledged, however, that it was "not holding that a counterclaim or
affirmative defenses should never be tried and determined during the
trial of a complaint to modify the stay." In re Born, 10 B.R. at 50.
On creditor’s consolidated appeal from United States Bankruptcy Court for the District of Arizona, Robert G.
Mooreman, J., 16 B.R. 982, the Bankruptcy Appellate Panel, Elliott, J., 24 B.R. 580, reversed and remanded, and
appeal was taken. The Court of Appeals, Skopil, Circuit Judge, held that: (1) preforeclosure right of debtor, who had
one-sixth interest in surplus cash note, to redeem the entire note was a property right entitled to protection of
automatic stay provision, and (2) creditor was not entitled to have stay lifted as to the one-sixth interest in note since
it failed to establish that the debtor lacked equity in the note.
West Headnotes
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2424 k. Debtor’s Want of Interest or Equity. Most Cited Cases
(Formerly 51k659(1), 51k659.5(1))
Creditor is entitled to have stay lifted providing debtor does not have equity in the property and the property is not
necessary to an effective reorganization. Bankr.Code, 11 U.S.C.A. § 362(d)(2).
51 Bankruptcy
51V The Estate
51V(C) Property of Estate in General
51V(C)2 Particular Items and Interests
51k2545 k. Property Pledged or Encumbered; Redemption Rights. Most Cited Cases
(Formerly 51k143(5))
Preforeclosure right to redeem is a property right and constitutes part of the bankruptcy estate whether it stems from
ownership of entire underlying property or only a fractional share. Bankr.Code, 11 U.S.C.A. § 541.
11 U.S.C.A. § 362.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2439 Evidence
51k2439(3) Creditor’s Burden
51k2439(4) k. Lack of Equity. Most Cited Cases
(Formerly 51k217(6), 51k217.5(5))
Burden of proof on question of debtor’s lack of equity in property, for purposes of determining whether automatic
stay should be lifted, lies with the creditor. Bankr.Code, 11 U.S.C.A. § 362(g)(1).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2424 k. Debtor’s Want of Interest or Equity. Most Cited Cases
(Formerly 51k217.5(5), 51k217.5(4), 51k217(6))
Creditor’s foreclosure sale of five-sixths of a surplus cash note, in which debtor held the other one-sixth interest,
destroyed debtor’s preforeclosure right to redeem and since creditor failed to show that debtor had no equity in the
note creditor was not entitled to have automatic stay lifted. Bankr.Code, 11 U.S.C.A. § 362(a).
OVERVIEW
The Bialac family sold Arizona real estate to Harsh Building Co. (“HBC”), a subsidiary of appellee, Harsh
Investment Co. (“HIC”) in return for a “surplus cash” note (“note”) payable by HBC. From a default in a related
transaction, HIC obtained a state court judgment against five members of the Bialac family, jointly and severally.
The judgment also gave HIC a security interest in the note. Debtor-appellant James Bialac (“James”) is liable on
HIC’s judgment and owns a one-sixth interest in the note.
HIC gave notice that it intended to foreclose on the note. James filed his Chapter 11 bankruptcy petition. HIC
proceeded with the sale of the note. A five-sixth interest in the note was sold, with James’ one-sixth ownership
interest preserved.
James sought to have the sale set aside. HIC sought to have the automatic stay, 11 U.S.C. § 362, lifted as to James’
one-sixth interest in the note. The bankruptcy court, 16 B.R. 982, continued the automatic stay *428 and held that
the sale violated the stay. The Bankruptcy Appellate Panel (“BAP”), 24 B.R. 580, reversed both rulings. James
Bialac appeals.
James sought to have HIC’s foreclosure sale set aside by the bankruptcy court. Count One of his complaint alleged
that the foreclosure sale was not adequately noticed and was not conducted in a commercially reasonable manner.
Count Two alleged that the automatic stay of 11 U.S.C. § 362 was violated by the sale of the note, which terminated
James Bialac’s rights of redemption in the five-sixth portion of the note sold.
HIC counterclaimed, seeking to lift the stay as to James Bialac’s remaining one-sixth interest in the note to enable it
to foreclose on that as well.
The bankruptcy court held that the sale was conducted in a commercially reasonable manner and that notice of the
sale was satisfactory.FN4 The court then held the sale of the five-sixth interest in the note violated the automatic stay
of section 362. James Bialac’s undivided one-sixth interest *429 gave him a pre-foreclosure right to redeem the
entire note by paying the amount of the judgment. The court held this redemption right was a valuable property
right, entitled to the automatic stay provisions of section 362.
[1] Finally, the bankruptcy court considered HIC’s counterclaim seeking to lift the stay with respect to James’ one-
sixth interest in the note. A creditor is entitled to have the stay lifted providing (1) the debtor does not have an equity
in the property; and (2) the property is not necessary to an effective reorganization. 11 U.S.C. § 362(d)(2). The court
found that the value of the note was not, at the time, quantifiable. It could not be determined whether James had any
equity in the note. A separate action was proceeding. Final judgment in that action was necessary to determine the
present value of the note, and whether James had any equity in it. The court felt it improper to lift the stay where the
“side” litigation could establish an equity in the note. In addition, the court found the note necessary to an effective
reorganization. The court refused to lift the stay.
**The bankruptcy court voided the sale and reinstated James’ pre-foreclosure right to redeem the entire note. The
right was qualified. James was only given sixty days within which to pay the $460,000 due under the judgment. If he
failed to exercise his right to redeem, his right would be terminated and the foreclosure sale of the surplus cash note
would be reinstated.
HIC immediately sought a stay of the bankruptcy court’s order. James Bialac stood ready to redeem the note from
the judgment, but HIC would not accept. HIC sought a stay from the order so that it would not be compelled to
accept. The stay was granted, and HIC appealed to the Bankruptcy Appellate Panel of the Ninth Circuit.
The BAP reversed and remanded. With respect to James’ redemption right in the five-sixth portion of the note sold,
the BAP held that such rights, though valuable property rights, do not qualify for protection under the automatic stay
provisions of section 362. As to HIC’s counterclaim, the BAP held that the trial court did not make findings
sufficient to sustain its judgment that the automatic stay should continue as to the one-sixth interest in the note. The
case was remanded for further findings on James Bialac’s equity in the note.
ISSUES
1. Was James Bialac’s pre-foreclosure right to redeem the entire note a property right entitled to the protection of 11
U.S.C. § 362?
2. Was HIC entitled to have the stay lifted as to James Bialac’s one-sixth interest in the note because he lacks equity
in it and it is unnecessary to his Chapter 11 reorganization?
We conclude that James had a pre-foreclosure redemption right which covered the entire note.
Both the Bankruptcy Court and the BAP concluded that Bialac’s pre-foreclosure right to redeem the entire note was
an independent property right that became part of the bankruptcy estate under 11 U.S.C. § 541. Section 541 defines
property of the debtor which is to be considered part of the bankruptcy estate, and was intended to be broad and all-
inclusive:
[T]he estate is comprised of all legal or equitable interest [sic] 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, ... causes of action....
The instant case is distinguishable, in that here two aspects of the bankrupt’s property are implicated. First, and
primarily, James Bialac had a one-sixth undivided interest in the note. While the sale attempted to preserve this
interest, it would be more consistent with the best interests of the debtor and all creditors if the division of property
in which the debtor has a fractional interest is under the auspices of the trustee in bankruptcy. Second, the
redemption right was entirely cut off. Where prior to the foreclosure James could have paid $450,000 for a lien
against the entire note, he now must pay $300,000 to protect just his one-sixth interest in it.
Neither of these interests are within protections afforded by a literal interpretation of section 362, yet they should be
protected by the stay if the purposes of the Act, the orderly disposition of all property in which the debtor has some
interest, are to be achieved. See Texaco, Inc. v. Liberty National Bank and Trust Co. of Oklahoma City, 464 F.2d
389, 392-93 (10th Cir.1972). Section 362 should be given a broad meaning to include the kind of property involved
in this case. The BAP’s stated reason for cutting off the protections of section 362 in this case was because the line
has to be drawn somewhere. While that of course is true, the line should not be drawn where it might frustrate the
purposes of the Act.
There are exceptions to the automatic stay but none of them are
applicable to this case.
Good case
See Greenwald & Asimov, Cal. Practice Guide: Real Property Transactions (The
Rutter Group 2008) ¶ 11:193 (CAPROP Ch. 11-D);
Residential Capital v. Cal-Western Reconveyance Corp., 108 Cal.App.4th 807,
134 Cal.Rptr.2d 162, 03 Cal. Daily Op. Serv. 4081, 2003 Daily Journal D.A.R.
5175 (Cal.App. 4 Dist.,May 14, 2003)
“FN26. Section 2924‘s conclusive presumption language for BFP’s applies only
to challenges to statutory compliance with respect to default and sales
notices. In reaching this conclusion, we recognize that there is dictum that
suggests that the conclusive presumption under section 2924 applies across
the board to any claimed irregularities in the trustee’s sale. The court in
Moeller held that the presumption under section 2924 provides that the
trustee’s "sale has been conducted regularly and properly," and that, as
against a BFP, the presumption operates to prevent the trustor from
"attacking the validity of the sale." (Moeller, supra, 25 Cal.App.4th 822,
831, 30 Cal.Rptr.2d 777.) Cases following Moeller have similarly described
the conclusive presumption--applicable under section 2924 where the buyer is
a BFP who has received a trustee’s deed--as precluding any attack on the
trustee’s sale. (See Residential Capital v. Cal-Western Reconveyance Corp.
(2003) 108 Cal.App.4th 807, 817, 134 Cal.Rptr.2d 162 (Residential Capital )
[once trustee’s deed was delivered, "there was a conclusive presumption of
validity under section 2924"]; 6 Angels, Inc. v. Stuart-Wright Mortgage,
Inc. (2001) 85 Cal.App.4th 1279, 1286, 102 Cal.Rptr.2d 711 [same]; Angell v.
Superior Court (1999) 73 Cal.App.4th 691, 699-700, 86 Cal.Rptr.2d 657
[same].) To the extent that Buyer may construe these cases as describing
section 2924‘s presumption as precluding any attack on the foreclosure sale
as to a BFP--irrespective of whether the challenge relates to the Trustee’s
compliance with procedural requirements concerning the default and sale
notices--we decline to follow such interpretation. (See 4 Miller & Starr,
Cal. Real Estate, supra, Deeds of Trust § 10:211, p. 680 [section 2924
"presumption only applies to the propriety of the required notices, but it
does not apply to other requirements of the foreclosure process"].)”
Miller v. Cote, 127 Cal.App.3d 888, 179 Cal.Rptr. 753 (Cal.App. 4 Dist. Jan
14, 1982)
conflicting authorities
**Need of case on subject of inadequacy of sales price which voids sale, look
to Bernhard , Mortgage Trust Deed Practice, Greenwald & Asimov, Cal.
Practice Guide: Real Property Transactions (The Rutter Group 2008) ¶
6:535.18 (CAPROP CH. 6-i);
Mental capacity
The term ‘understanding’ denotes not the act of understanding but the
capacity or faculty of doing so. The expression ‘without
understanding’ denotes persons without that capacity. However, the
expression should not be understood in its literal and extreme sense
because even the most disabled person may have some degree of
understanding. Instead the expression as it applies to both executed
and executory contracts, refers to a person entirely without the
capacity to understand or comprehend such transactions [Jacks v. Estee
(1903) 139 Cal. 507, 511 [73 P. 247].
FN4 Jacks v. Estee, (1903) 139 Cal. 507, 512-513 [73 P.247, 249]
Good case;
Mattos v. Kirby, (1955) 133 Cal.App.2d 649, 653-654, [285 P.2d 56, 59]
Good case
capacity
Miller & Starr, California Real Estate 3D, Chapter 11. Recording and
Priorities, D. PRIORITY OF SPECIFIC INTERESTS, 8. Effect of a Lis
Pendens
[FN8] Arrow Sand & Gravel, Inc. v. Superior Court (1985) 38 Cal.3d
884, 888 [215 Cal.Rptr. 288, 700 P.2d 1290]; Bishop Creek Lodge v.
Scira (1996) 46 Cal.App.4th 1721, 1733 [54 Cal.Rptr.2d 745].
(At pp.873-874)
Ҥ13.22 E. Use in Federal Actions
Notice is:
2. Actual notice
A bona fide purchaser of land must acquire the property without actual
knowledge, or means of acquiring it, which is the equivalent of
knowledge, 1 and without notice, actual or constructive, 2 of a prior
conveyance 3 or the outstanding rights of third persons. 4 Thus in the
absence of actual notice of the prior contract or circumstances
sufficient to put the purchaser on inquiry as to the state of the
title, a subsequent purchaser takes title free and clear of any
interest of the prior purchaser. A bona fide purchaser’s standing is
not affected by knowledge acquired after recordation of his or
conveyance.5
California Real Estate Law And Practice, Mathew Bender, 2009, Volume
3, Chapter 82 Deeds And Recording, p. 82-12.2,
FN 31 Pellisier v. Title Guarantee & Trust Co. (1929) 208 Cal. 172
184-185 [280 P. 947]”
Pellissier v. Title Guarantee & Trust Co., 208 Cal. 172, 280 P. 947 (Cal.,
Sep 23, 1929)
Miller & Starr, California Real Estate 3D, Recording And Priorities, §
11:51, p. 138
Ҥ11:51 Notice as defeating bona fide status
[FN8] Gates Rubber Co. v. Ulman (1989) 214 Cal.App.3d 356, 365
[262 Cal.Rptr. 630].
See § 11:49 (bona fide purchase; definition).”
Miller & Starr, California Real Estate 3D, Recording And Priorities, §
11:58, p. 147
[FN2] Perry v. O’Donnell (9th Cir. 1984) 749 F.2d 1346, 1351.
[FN5] Williams v. Miranda (1958) 159 Cal.App.2d 143, 153 [323 P.2d
794]; Smith v. J.R. Newberry Co. (1913) 21 Cal.App. 432, 434 [131 P.
1055].
In Hart v. Erickson (1944) 63 Cal.App.2d 719, 722 [147 P.2d 414],
the wife orally agreed to convey a two-fifths interest in her separate
property to her husband in consideration for his care for her and the
property and his payment of the mortgage payments. The wife then
deeded the entire property to her nephew who had heard the wife
discuss the agreement with her husband. The nephew’s title was held to
be subject to the interest of the husband.
Also see Hill v. Den (1898) 121 Cal. 42, 45-46 [53 P. 642].
[FN6] Beverly Hills Nat. Bank & Trust Co. v. Seres (1946) 76
Cal.App.2d 255, 261-264 [172 P.2d 894] (The buyer saw a letter written
by the seller to a tenant promising him a five-year lease. The tenant
improved the premises in reliance on the letter. It was held that the
buyer’s interest was subject to the five-year lease on the theory of
equitable estoppel.)
Miller & Starr, California Real Estate 3D, Recording And Priorities, §
11:70, p. 177-178
At p.180
FN16 Christie v. Sherwood (1896) 113 Cal. 526, 530-532 [45 P. 820]
Also see Sanders v. Magill (1937) 9 Cal.2d 145, 153-154 [70 P.2d 159]
FN17
Fickbohm v. Knaust (1930) 103 Cal.App. 443, 446-447 [284 P.692].”
At p. 183,
[FN1] Chapman College v. Wagener (1955) 45 Cal.2d 796, 802 [291 P.2d
445]; Rauer v. Hertweck (1917) 175 Cal. 278, 282-283 [165 P. 946];
Mabb v. Stewart (1905) 147 Cal. 413, 421-422 [81 P. 1073]; Edwards-
Town, Inc. v. Dimin (1970) 9 Cal.App.3d 87, 92-93 [87 Cal.Rptr. 726];
Beab, Inc. v. First Western Bank & Trust Co. (1962) 204 Cal.App.2d
680, 689 [22 Cal.Rptr. 583]; Laukkare v. Abramson (1935) 9 Cal.App.2d
447, 449 [50 P.2d 478]; Nelson v. Nelson (1933) 131 Cal.App. 126, 132-
134 [20 P.2d 995]; Byers v. Doheny (1930) 105 Cal.App. 484, 493 [287
P. 988]; Fletcher v. Allen (1921) 51 Cal.App. 774, 778-779 [197 P.
952].
Law of reconveyance
1 Collier on Bankruptcy (L. King 15th ed. 1986) 3-15, 3-67 to 3-68
(hereinafter Collier )
By Collier
SUMMARY: Bankruptcy Code section 362(b)(22) provides that the automatic stay under
section 362(a)(3), subject to the provisions of section 362(l), does not apply to
the continuation of an eviction, unlawful detainer action, or similar proceeding
involving residential property in which the debtor resides as a tenant under a
lease or rental agreement if the lessor has obtained a judgment for possession of
such property against the debtor before the commencement of the bankruptcy case.
This Expert Commentary covers the circumstances under which the automatic stay does
not apply, the filing of a certification with the petition by the debtor that
negates the effect of section 362(b)(22) for at least a period of 30 days, the
filing of an objection by the lessor to the certification, and the inapplicability
of the automatic stay if the residential property eviction involved the
endangerment of the property or illegal drug use on the property.
...
The stay exception under subsection (b)(22) applies only if the prepetition
judgment for possession relates to rental property in which the debtor resides
under a lease or rental agreement. It does not apply, for example, to an eviction
judgment obtained by a purchaser of property at foreclosure who does not have a
lease or rental agreement with a debtor occupying the property. 3
...
3
. See In re McCray, 342 B.R. 668 (Bankr. D.D.C. 2006).”
Dated: December 28, 2007 ____________________________
Soon Chey
In pro per
(a)(1) The trustee under a trust deed upon real property or an estate for years
therein given to secure an obligation to pay money and conferring no other duties
upon the trustee than those which are incidental to the exercise of the power of
sale therein conferred, may be substituted by the recording in the county in which
the property is located of a substitution executed and acknowledged by: (A) all of
the beneficiaries under the trust deed, or their successors in interest, and the
substitution shall be effective notwithstanding any contrary provision in any trust
deed executed on or after January 1, 1968; or (B) the holders of more than 50
percent of the record beneficial interest of a series of notes secured by the same
real property or of undivided interests in a note secured by real property
equivalent to a series transaction, exclusive of any notes or interests of a
licensed real estate broker that is the issuer or servicer of the notes or
interests or of any affiliate of that licensed real estate broker.
Pro Value Properties, Inc. v. Quality Loan Service Corp., 170 Cal.App.4th
579, 88 Cal.Rptr.3d 381, 09 Cal. Daily Op. Serv. 929, 2009
In Pro Value Prperties, Inc., v. Quality Loan Service Corp., (2009) 170 Cal.App.4th
579, 581 [88 Cal.Rptr.3d 381] the court stated, “
Some time thereafter, QLS and FV-1, the beneficiary under the Deed of Trust,
realized that there was no recorded Substitution of Trustee naming QLS as trustee.
Consequently, both QLS and FV-1 determined that the Trustee’s Deed of Sale was
void.”
And,
“In August 2005, FV-1 filed this lawsuit, alleging causes of action for
cancellation of an instrument and declaratory relief. FV-1 named both QLS and Pro
Value as defendants. Pro Value cross-complained against FV-1 for breach of
contract, negligence and negligent misrepresentation, and against QLS for
negligence. ...
QLS moved for summary judgment as to FV-1’s complaint and Pro Value’s cross-
complaint. After hearing arguments on the motion on January 25, 2007, the trial
court ruled that the Trustee’s sale was void and that the Trustee’s Deed of Sale
which QLS issued to Pro Value was of no force or effect” (Pro Value Properties,
Inc., v. Quality Loan Service Corp., supra, 170 Cal.App.4th at p.582)
In In re Worcester, (1987) 811 F.2d 1224 (9th Cir. (Call.), the Court stated, If
the appellant, “Worcester has the right under California law to set aside a
foreclosure sale after the sale has taken place, after deeds have been recorded,
and after the property has been sold to a third party, then she has the right in
bankruptcy to do the same and that right is property of the estate. See 11 U.S.C. §
541(a)(1)(property of the estate includes ‘all legal and equitable interests of the
debtor in property’). If Worcester does have such a right under California law, we
are not powerless to enforce it, and we may grant Worcester relief to the same
extent California courts would in similar circumstances.
for her execution, she trusted him, and she did not carefully review
the documents. She simply believed that the documents were what
Young Chey represented them to be. If Plaintiff had known the true
nature of the documents, namely deeds she would not have signed them.
(d) On request of a party in interest and after notice and a hearing, the
court shall grant relief from the stay provided under subsection (a) of this
section, such as by terminating, annulling, modifying, or conditioning such
stay--
(4) with respect to a stay of an act against real property under subsection
(a), **by a creditor whose claim is secured by an interest in such real
property, if the court finds that the filing of the petition was part of a
scheme to delay, hinder, and defraud creditors that involved either--
**(A) transfer of all or part ownership of, or other interest in, such real
property without the consent of the secured creditor or court approval; or
(e)(1) Thirty days after a request under subsection (d) of this section for
relief from the stay of any act against property of the estate under
subsection (a) of this section, such stay is terminated with respect to the
party in interest making such request, unless the court, after notice and a
hearing, orders such stay continued in effect pending the conclusion of, or
as a result of, a final hearing and determination under subsection (d) of
this section. A hearing under this subsection may be a preliminary hearing,
or may be consolidated with the final hearing under subsection (d) of this
section. The court shall order such stay continued in effect pending the
conclusion of the final hearing under subsection (d) of this section if there
is a reasonable likelihood that the party opposing relief from such stay will
prevail at the conclusion of such final hearing. If the hearing under this
subsection is a preliminary hearing, then such final hearing shall be
concluded not later than thirty days after the conclusion of such preliminary
hearing, unless the 30-day period is extended with the consent of the parties
in interest or for a specific time which the court finds is required by
compelling circumstances.
(A) a final decision is rendered by the court during the 60-day period
beginning on the date of the request; or
(ii) by the court for such specific period of time as the court finds is
required for good cause, as described in findings made by the court.
(g) In any hearing under subsection (d) or (e) of this section concerning
relief from the stay of any act under subsection (a) of this section--
(1) the party requesting such relief has the burden of proof on the issue of
the debtor’s equity in property; and
(2) the party opposing such relief has the burden of proof on all other
issues.
**4. Relief From Stay Against Real Property Where Debtor’s Petition Filed to Delay, Hinder and Defraud
Creditors (11 USC § 362(d)(4))
a. [8:1320] Authorizes future in rem relief from stay: Provided the appropriate findings are made (¶ 8:1323), when
granting stay relief to a secured creditor with respect to the debtor’s real property, the court can enter an order
precluding the stay from arising as to that real property in future bankruptcy cases (even those filed by a different
debtor) for two years following entry of the order. This is referred to as "in rem" relief because it applies in future
bankruptcy cases affecting the real property in issue. [11 USC § 362(d)(4) (applicable to cases commenced on or
after 10/17/05)]
**Comment: Section 362(d)(4) is directed at debtors who, owing money on a loan secured by real property, in the
past filed multiple bankruptcy cases simply to obtain the benefit of the automatic stay to stall inevitable foreclosure
proceedings. Section 362(d)(4) is designed to preclude this practice by authorizing a court order that effectively
prevents the stay from arising as to that property in future bankruptcy cases.
(1) [8:1321] Recordation of § 362(d)(4) in rem order: Any federal, state, or local governmental unit that accepts
notices of interests or liens in real property "shall" accept any certified copy of a § 362(d)(4) in rem order for
indexing and recording. [11 USC § 362(d)(4)]
(2) [8:1321.1] Central District Forms: The Central District has adopted two optional local forms, down-loadable from
the Central District Web site (¶ 8:686):
• CD CA BC Local Form F 4001-1M.ER, "Extraordinary Relief Attachment," to be attached to relief from stay motions
where the moving party seeks in rem relief; and
• CD CA BC Local Form F 4001-1O.ER, "Extraordinary Relief Attachment," to be attached to the order granting in rem
relief from stay.
[8:1322] Reserved.
b. [8:1323] Required findings: Before § 362(d)(4) in rem relief can be granted, the court must find that the filing of the
debtor’s petition was part of "a scheme to delay, hinder, and defraud creditors" that involved either:
--transfer of all or part ownership of (or other interest in) the real property without the secured creditor’s consent or court
approval; or
--multiple bankruptcy filings affecting such real property. [11 USC § 362(d)(4)(A) & (B)]
Ordered accordingly.
West Headnotes
[1] Bankruptcy 51 3502.1
51 Bankruptcy
51XIV Reorganization
51XIV(A) In General
51k3502 Good Faith; Motive
51k3502.1 k. In General. Most Cited Cases
To determine whether debtor’s case is filed in good faith, bankruptcy courts
consider amalgam of factors rather than specific fact.
51 Bankruptcy
51XIV Reorganization
51XIV(A) In General
51k3502 Good Faith; Motive
51k3502.5 k. “Good Faith.”. Most Cited Cases
Test for determining if debtor’s case is filed in good faith is whether
debtor is attempting to unreasonably deter and harass creditors or is
attempting to effect speedy and efficient reorganization on feasible basis.
51 Bankruptcy
51XIV Reorganization
51XIV(A) In General
51k3502 Good Faith; Motive
51k3502.25 k. Frustration or Delay of Creditors. Most
Cited Cases
**Chapter 11 debtor’s bankruptcy case was filed for legitimate purpose, even
if genesis of case was dispute between debtor and federal government
regarding ownership of certain funds in Swiss bank account, where debtor’s
financial straights hampered his efforts to protect his claim to funds and
creditors were affected by debtor’s limited ability to contest ownership of
funds; case was not filed to deter and harass creditors unreasonably, but to
maximize value of bankruptcy estate.
These factors are more pertinent in single asset real estate cases, which are
distinguishable from a case that is driven by litigation such as Hakim’s.
b. Defraud
[12][13] Sunset cannot prevail under § 362(d)(4) unless, in addition to showing that D
& F engaged in a scheme to delay and hinder its creditors, it shows that D & F engaged
in a scheme to defraud its creditors. As with the “hinder and delay” element, the
filing of a bankruptcy case cannot alone constitute a scheme to defraud under § 362(d)
(4).
(a) Each district court may provide that any or all cases under title 11 and any or all proceedings arising under title
11 or arising in or related to a case under title 11 shall be referred to the bankruptcy judges for the district.
(b)(1) Bankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title
11, or arising in a case under title 11, referred under subsection (a) of this section, and may enter appropriate orders
and judgments, subject to review under section 158 of this title.
(B) allowance or disallowance of claims against the estate or exemptions from property of the estate, and estimation
of claims or interests for the purposes of confirming a plan under chapter 11, 12, or 13 of title 11 but not the
liquidation or estimation of contingent or unliquidated personal injury tort or wrongful death claims against the
estate for purposes of distribution in a case under title 11;
(C) counterclaims by the estate against persons filing claims against the estate;
(M) orders approving the use or lease of property, including the use of cash collateral;
(N) orders approving the sale of property other than property resulting from claims brought by the estate against
persons who have not filed claims against the estate;
(O) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or
the equity security holder relationship, except personal injury tort or wrongful death claims; and
(P) recognition of foreign proceedings and other matters under chapter 15 of title 11.
(3) The bankruptcy judge shall determine, on the judge’s own motion or on timely motion of a party, whether a
proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title
11. **A determination that a proceeding is not a core proceeding shall not be made solely on the basis that its
resolution may be affected by State law.
**(4) Non-core proceedings under section 157(b)(2)(B) of title 28, United States Code, shall not be subject to the
mandatory abstention provisions of section 1334(c)(2).
(5) The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court
in which the bankruptcy case is pending, or in the district court in the district in which the claim arose, as
determined by the district court in which the bankruptcy case is pending.
(c)(1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case
under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of
law to the district court, and any final order or judgment shall be entered by the district judge after considering the
bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party
has timely and specifically objected.
(2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the
parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and
determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.
(d) The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its
own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party,
so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both
title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
(e) If the right to a jury trial applies in a proceeding that may be heard under this section by a bankruptcy judge, the
bankruptcy judge may conduct the jury trial if specially designated to exercise such jurisdiction by the district court
and with the express consent of all the parties.
(b) In any civil action of which the district courts have original
jurisdiction founded solely on section 1332 of this title, the district
courts shall not have supplemental jurisdiction under subsection (a) over
claims by plaintiffs against persons made parties under Rule 14, 19, 20, or
24 of the Federal Rules of Civil Procedure, or over claims by persons
proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking
to intervene as plaintiffs under Rule 24 of such rules, when exercising
supplemental jurisdiction over such claims would be inconsistent with the
jurisdictional requirements of section 1332.
(2) the claim substantially predominates over the claim or claims over which
the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original
jurisdiction, or
(d) The period of limitations for any claim asserted under subsection (a),
and for any other claim in the same action that is voluntarily dismissed at
the same time as or after the dismissal of the claim under subsection (a),
shall be tolled while the claim is pending and for a period of 30 days after
it is dismissed unless State law provides for a longer tolling period.
(e) As used in this section, the term “State” includes the District of
Columbia, the Commonwealth of Puerto Rico, and any territory or possession of
the United States.
In re Eads, 135 B.R. 387, 930 26 Collier Bankr.Cas.2d 514, Bankr. L. Rep. P
74,403 (Bankr.E.D.Cal.,Dec 31, 1991)
JURISDICTION
Good case
at p. 352
FN5. The fact that the state action has been remanded to the state
court does not affect the bankruptcy court’s jurisdiction over the
proof of claim filed by Benedor. Thus, the bankruptcy court’s
determination that if Benedor did file a proof of claim it would have
jurisdiction over that claim, was not an erroneous conclusion of law.
Now, I want everyone on a level playing field but I’m not going to
give one side or the other a strategic advantage just for the sake of
reaching a resolution of this matter for the Court’s convenience; that
strikes me as being the most inappropriate thing I could possibly do.
CONCLUSION
FN6. Because the state action has been remanded back to the state
court, there is no need to reach the issue of whether Benedor has the
right to a jury trial on its state law cause of action. As to the
claim before the bankruptcy court, the law is clear that once Benedor
filed its proof of claim, it subjected itself to the bankruptcy
court’s equitable power and waived any right to a jury trial for the
resolution of disputes vital to the bankruptcy process of allowance
and disallowance of the claims, including the power of the bankruptcy
court to inquire into the validity of the claim. See Langenkamp v.
Culp, 498 U.S. 42, 44, 111 S.Ct. 330, 331, 112 L.Ed.2d 343 (1990);
Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58-59, 109 S.Ct. 2782,
2799, 106 L.Ed.2d 26 (1989); Katchen v. Landy, 382 U.S. 323, 329, 86
S.Ct. 467, 472, 15 L.Ed.2d 391 (1966); Germain v. Connecticut Nat’l
Bank, 988 F.2d 1323, 1329 (2d Cir.1993); In re Hooker Invs., Inc., 937
F.2d 833, 838 (2d Cir.1991).
”(2) The Abstention Motion Did Not Present a Live Controversy Over
Which the
Bankruptcy Court Could Assert Jurisdiction
[25][26] One of the threshold requirements for mandatory or
discretionary abstention, as set forth above, is that there must be a
‘proceeding’ from which the bankruptcy court can abstain. See In re
Hughes-Bechtol, Inc., 141 B.R. 946, 948-49 (Bankr.S.D.Ohio
1992)describing a noncore proceeding as ‘a proceeding filed in the
bankruptcy court alleging a cause of action....’).
And,
In re Tucson Estates, Inc., 912 F.2d 1162, Bankr. L. Rep. P 73,613 (9th Cir.(Ariz.) Aug 30, 1990)
Is not a Chapter 13 case where the personal residence is necessary for effective
In re Micro Design, Inc., 120 B.R. 363 (E.D.Pa. Aug 03, 1990)
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2052 k. Claims or Proceedings Against Estate or Debtor;
Relief from Stay. Most Cited Cases
**Creditors action to recover sums allegedly owing under equipment lease with
debtor was “core” proceeding, which bankruptcy court could finally decide. 28
U.S.C.A. § 157(b)(2)(B).
[8] Furthermore, the substance of the motion for relief is most doubtful.
Computerware is merely an unsecured creditor of the Debtor. As such, it bears
the heavy and possibly insurmountable burden of proving that the balance of
hardships tips significantly in favor of granting relief as against the
hardships to the Debtor in denying relief. See In re Ward, 837 F.2d 124, 128
(3d Cir.1988); In re FRG, Inc., 114 B.R. 75, 80 (E.D.Pa.1990); In re Metro
Transportation Co., 82 B.R. 351, 353 (Bankr.E.D.Pa.1988); and In re Ronald
Perlstein Enterprises, Inc., 70 B.R. 1005, 1009-10 (Bankr.E.D.Pa.1987).
Clearly, if unsecured creditors could easily obtain relief from the stay to
pursue their claims against debtors in other forums, rather than in the
bankruptcy claims process, much of the purpose for bankruptcy filings,
featuring a summary process for resolving claims, would be undermined.
Therefore, although we recommend that both actions are remanded to the CCP,
**Computerware is not entitled to have relief from the stay to pursue its
action against the Debtor. Computerware is obliged to file a proof of claim
in the Debtor’s bankruptcy case to pursue its claim against the Debtor,
allowing the amount of its claim to be decided by this court in the claims
process. See Clark, supra, 91 B.R. at 338, 342.
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2043 Core, Non-Core, or Related Proceedings in General;
Nexus
51k2043(2) k. Core or Non-Core Proceedings. Most Cited
Cases
(Formerly 51k293(1))
361 Statutes
361VI Construction and Operation
361VI(A) General Rules of Construction
361k187 Meaning of Language
361k195 k. Express Mention and Implied Exclusion. Most
Cited Cases
Statute enumerating core proceedings did not set categorical limits on
jurisdiction of bankruptcy courts over core proceedings, but rather, merely
enumerated examples of proceedings falling within bankruptcy court’s core
proceeding jurisdiction. 28 U.S.C.A. § 157(b)(2).
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2043 Core, Non-Core, or Related Proceedings in General;
Nexus
51k2043(2) k. Core or Non-Core Proceedings. Most Cited
Cases
(Formerly 51k293(1))
In construing bankruptcy court’s jurisdiction over particular action, crucial
consideration is not whether action falls within clause of statute listing
core proceedings, but rather, whether action was, in fact, core proceeding.
28 U.S.C.A. § 157(b)(1, 2)
[4][5] Section 157(b)(2) does not set categorical limits on the jurisdiction
of bankruptcy courts over core proceedings, but rather merely enumerates
examples of proceedings falling within a bankruptcy court’s core proceeding
jurisdiction. That Congress did not intend to limit the bankruptcy courts’
jurisdiction over core proceedings by enumerating examples of core
proceedings in § 157(b)(2) is apparent from the prefatory language of §
157(b)(2): “Core matters include, but are not limited to....” (emphasis
added). 28 U.S.C.A. § 157(b)(2) (West Supp.1987). Thus, in construing a
bankruptcy court’s jurisdiction over a particular action pursuant to § 157(b)
(1), the crucial consideration is not whether the action falls within one of
the clauses of § 157(b)(2), but rather whether the action is or is not in
fact a core proceeding. As explained later in this opinion, an action by a
trustee pursuant to § 544(b) to set aside a fraudulent conveyance is in fact
a core proceeding. See infra at p. 1307.
Even if the bankruptcy court’s § 157(b) jurisdiction over this case did turn
on construction of § 157(b)(2)(H), we have found no evidence that Congress
intended to restrict § 157(b)(2)(H) to federal fraudulent conveyance
proceedings. Not only does § 157(b)(2)(H) not distinguish between state and
federal fraudulent conveyance proceedings, the federal law of fraudulent
conveyance is essentially identical to the law of fraudulent conveyance
adopted by the states.FN2 Thus, for purposes of § 157(b)(2)(H), state
fraudulent conveyance proceedings are distinguishable from federal fraudulent
conveyance proceedings only by the fact that they are of state origin.
Congress has explicitly found that this is a distinction which, standing
alone, cannot serve as the basis for distinguishing core from non-core
proceedings: “A determination that a proceeding is not a core proceeding*1301
shall not be made solely on the basis that its resolution may be affected by
State law.” 28 U.S.C.A. § 157(b)(3) (West Supp.1987). In essence then the
explicit provisions of the bankruptcy statutes are contrary to the judicial
gloss Munn asks us to place on § 157(b)(2)(H).
FN2. Conveyances made for the purpose of defrauding creditors have long been
void at common law. The first major statutory codification of the common law
of fraudulent conveyances is that of 13 Elizabeth I Ch. 5 (1570). That
statute provided, in substance, that every conveyance made to the end,
purpose and intent to hinder, delay or defraud creditors is void. The Uniform
Fraudulent Conveyance Act, approved by the National Conference of
Commissioners on State Laws in 1918, is essentially a restatement of the
statute of 13 Elizabeth. States which have not adopted the Uniform Fraudulent
Conveyance Act or a similar version of the statute of 13 Elizabeth have
recognized the statute of 13 Elizabeth as part of the common law. 11 U.S.C. §
548 is aimed only at such conveyances as would be fraudulent and voidable
under common law or under the statute of 13 Elizabeth. Coder v. Arts, 213
U.S. 223, 242-43, 29 S.Ct. 436, 443-44, 53 L.Ed. 772 (1909) (applying
statutory predecessor of 11 U.S.C. § 548).
Chapter 7 trustee, after commencing state court action against former trustee
for his alleged negligence and breach of fiduciary duty, filed motion in
bankruptcy court for mandatory or discretionary abstention. The United States
Bankruptcy Court for the Central District of California, Lynne Riddle, J.,
denied motion, and appeal was taken. The Bankruptcy Appellate Panel, Marlar,
J., held that bankruptcy court did not have subject matter jurisdiction to
decide motion to abstain from hearing controversy that was currently pending
only in state court, and that had not yet been removed to bankruptcy forum.
Vacated.
U.S.C.A. § 1334(c)(2).
In re Lazar, 237 F.3d 967, 01 Cal. Daily Op. Serv. 383, 2001 Daily Journal
D.A.R. 491 (9th Cir.(Cal.),Jan 12, 2001)
B. Abstention
[16][17] The State Board also argues that the bankruptcy court erred by not
abstaining in the Mandamus Adversary, pursuant to 28 U.S.C. §§ 1334(c)(1) and
1334(c)(2). [FN16] In Security Farms v. International Brotherhood of
Teamsters, 124 F.3d 999 (9th Cir.1997), however, we noted that "[a]bstention
can exist only where there is a parallel proceeding in state court." Id. at
1009. Thus, we held that:
FN16. Because the Lazars filed their bankruptcy petition prior to October 22,
1994, the amendments made to § 1334 by the Bankruptcy Reform Act of 1994 do
not apply in this case. See Wynns v. Wilson (In re Wilson), 90 F.3d 347,
350 (9th Cir.1996) (noting that "the Bankruptcy Reform Act of 1994 applies
only in bankruptcy cases filed on or after October 22, 1994").
Section 1334(c) abstention should be read in pari materia with section 1452(b)
remand, so that [§ 1334(c) ] applies only in those cases in which there is a
related proceeding that either permits abstention in the interest of comity,
section 1334(c)(1), or that, by legislative mandate, requires it, section
1334(c)(2).
Id. at 1010. On March 22, 1996, the Trustee successfully removed the
Mandamus Adversary from state court, and, as a result, "[n]o other related
[state] proceeding thereafter exists." Id. Accordingly, because*982 there
is no pending state proceeding, §§ 1334(c)(1) and 1334(c)(2) are simply
inapplicable to this case. See id. at 1009-10. [FN17]
Res Judicata
terminology used.
92 Constitutional Law
92XXVII Due Process
92XXVII(E) Civil Actions and Proceedings
92k4007 Judgment or Other Determination
92k4012 k. Conclusiveness. Most Cited Cases
(Formerly 92k315)
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(C) Matters Concluded
228k713 Scope and Extent of Estoppel in General
228k713(1) k. In General. Most Cited Cases
Collateral estoppel may only be applied where due process requirements are
met.
*677 [1] As we explain below we adopt neither party’s view. Compromise has
long been favored. ( Rohrbacher v. Aitken (1904) 145 Cal. 485, 488, 78 P.
1054; Armstrong v. Sacramento Valley R. Co., supra, 179 Cal. 648, 650, 178 P.
546.) “[A] valid compromise agreement has many attributes of a judgment, and
in the absence of a showing of fraud or undue influence is decisive of the
rights of the parties thereto and operates as a bar to the reopening of the
original controversy.” ( Shriver v. Kuchel (1952) 113 Cal.App.2d 421, 425,
248 P.2d 35.)
Research ccp 1916 and also limited jurisdiction, fraud, as ground for
not being able to raise issue. As applied to fully and fairly.
Smith v. Exxon Mobil Oil Corp., 153 Cal.App.4th 1407, 64 Cal.Rptr.3d 69, 07
Cal. Daily Op. Serv. 9314, 2007 Daily Journal D.A.R. 11,903 (Cal.App. 1
Dist.,Aug 03, 2007)
[6] “Collateral estoppel applies when (1) the party against whom the plea is
raised was a party or was in privity with a party to the prior adjudication,
(2) there was a final judgment on the merits in the prior action and (3) the
issue necessarily decided in the prior adjudication is identical to the one
that is sought to be relitigated.” (Roos v. Red (2005) 130 Cal.App.4th 870,
879, 30 Cal.Rptr.3d 446, citing Coscia v. McKenna & Cuneo (2001) 25 Cal.4th
1194, 1201, 108 Cal.Rptr.2d 471, 25 P.3d 670.) Conceding that all three
factors are present in this case, Mobil emphasizes the equitable nature of
collateral estoppel and that even where the technical requirements are all
met, the doctrine is to be applied “only where such application comports with
fairness and sound public policy.” (Vandenberg v. Superior Court, supra, 21
Cal.4th at p. 835, 88 Cal.Rptr.2d 366, 982 P.2d 229; White Motor Corp. v.
Teresinski (1989) 214 Cal.App.3d 754, 763, 263 Cal.Rptr. 26; Sandoval v.
Superior Court (1983) 140 Cal.App.3d 932, 941, 190 Cal.Rptr. 29.)
[7] Mobil also stresses that the offensive use of collateral estoppel “is
more closely scrutinized than the defensive use of the doctrine.” (White
Motor Corp. v. Teresinski, supra, 214 Cal.App.3d at p. 763, 263 Cal.Rptr. 26;
see Parklane, supra, 439 U.S. at pp. 329-331, 99 S.Ct. 645.) Collateral
estoppel is used offensively when, as here, “the plaintiff seeks to foreclose
the defendant from litigating an issue the defendant has previously litigated
unsuccessfully in an action with another **74 party. Defensive use occurs
when a defendant seeks to prevent a plaintiff from asserting a claim the
plaintiff has previously litigated and lost against another defendant.”
(Parklane, at p. 326, fn. 4, 99 S.Ct. 645; see also Vestal, Preclusion/Res
Judicata Variables: Parties (1964-1965) 50 Iowa L.Rev. 27, 43-76) Although
some cases suggest that a trial court’s decision to allow the *1415 offensive
use of collateral estoppel is an exercise of discretion to which an appellate
court should give deference (see, e.g., Sandoval v. Superior Court, supra,
140 Cal.App.3d at p. 942, 190 Cal.Rptr. 29), the “ predominate view” in this
state is that “the trial court’s application of collateral estoppel is
reviewed de novo.” (Roos v. Red, supra, 130 Cal.App.4th at p. 878, 30
Cal.Rptr.3d 446, citing Groves v. Peterson (2002) 100 Cal.App.4th 659, 667,
123 Cal.Rptr.2d 164 and Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328,
1333, fn. 2, 93 Cal.Rptr.2d 635.)
[8] Respondents take the position that de novo review is appropriate with
respect to the presence of the three elements essential to collateral
estoppel (i.e., whether the necessary parties are the same or in privity,
there was previously a final judgment on the merits, and the issues are
identical) and to whether the prior proceeding was of a type that should be
given preclusive effect (see, e.g., Vandenberg v. Superior Court, supra, 21
Cal.4th at pp. 831-834, 88 Cal.Rptr.2d 366, 982 P.2d 229 [private arbitration
not given preclusive effect] ). They claim de novo review does not, however,
apply to a trial court’s determination of the “fairness” of applying
collateral estoppel, as to which respondents say the more deferential abuse
of discretion standard should apply. Respondents cite no authority for this
proposition, and in the circumstances of this case we decline to accept it.
While reasonable minds may differ as to the appropriateness of de novo review
of a trial court determination of the applicability of an equitable doctrine
that is made upon the basis of a factual inquiry and credibility assessment,
the facts bearing upon the propriety of applying estoppel in this case, none
of which involve questions of credibility, did not arise out of an
independent evidentiary inquiry and are entirely uncontested. The trial court
had no more information than is now before us and was in no better position
than we are to evaluate that information.
For example, with respect to the issue this case presents, we know that
collateral estoppel does not apply “when the party against whom the earlier
decision is asserted did not have a ‘full and fair opportunity’ to litigate
the claim or issue.” (Kremer v. Chemical Construction (1982) 456 U.S. 461,
480-481, 102 S.Ct. 1883, 72 L.Ed.2d 262.) The problem is that parties against
whom a verdict is returned commonly feel they were denied a “full and fair
opportunity” to litigate their claims and, because no trial is perfect, it is
usually not difficult for them to find a defect upon which to try to hang
their hats. It is easy to say that the “full and fair opportunity” necessary
to collateral estoppel is not that which is perfect, but not so easy to
distinguish imperfect proceedings which are nonetheless acceptable from those
which are not.
FN5. For example, it has been stated that “[i]n the final analysis ... an
equitable estoppel rests upon the facts and circumstances of the particular
case in which it is urged, considered in the framework of the elements,
requisites, and grounds of equitable estoppel, and consequently, any
attempted definition usually amounts to no more than a declaration of an
estoppel under those facts and circumstances. The cases themselves must be
looked to and applied by way of analogy rather than rule.” (28 Am.Jur.2d,
Estoppel & Waiver, § 27, p. 628.)
No case brought to our attention by the parties or that we can find has
addressed the question whether the inability of a defendant at a prior trial
to obtain the testimony of an assertedly crucial witness so unfairly denied
him a full opportunity to litigate his claim that he should not be
collaterally estopped from relitigating the matter.FN6 **The case law is not,
however, altogether unhelpful. The United States Supreme Court discussed the
factors that may have prevented a defendant from enjoying a full and fair
opportunity to litigate a claim at a prior trial in Parklane, supra, 439 U.S.
322, 99 S.Ct. 645, 58 L.Ed.2d 552 and Blonder-Tongue v. University of
Illinois Foundation (1971) 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788
(Blonder-Tongue ). In Parklane, the court posited the *1417 situation in
which the second action afforded the defendant procedural opportunities
unavailable in the first action that could readily cause a different result,
as where “the defendant in the first action was forced to defend in an
inconvenient forum and therefore was unable to engage in full scale discovery
or call witnesses.” (Parklane, at p. 331, fn. 15, 99 S.Ct. 645, italics
added.) Blonder-Tongue was a patent infringement case and the court
acknowledged that the unusual factual complexity of such litigation rendered
it inordinately difficult to determine whether a patentee had had a full and
fair chance to litigate the validity of **76 his patent in the earlier case.
Included among the important factors that needed to be considered, the court
said, is “ whether without fault of his own the patentee was deprived of
crucial evidence or witnesses in the first litigation.” (Blonder-Tongue, at
p. 333, 91 S.Ct. 1434.) Parklane and Blonder-Tongue, thus, both acknowledge
that the unavailability of a crucial witness or evidence at the prior
proceeding is a circumstance that may render it inappropriate to permit the
offensive use of collateral estoppel.
FN6. But see Continental Can Co. v. Hudson Foam Latex Prod., Inc. (1973) 123
N.J.Super. 364, 303 A.2d 97,reversed (1974) 129 N.J.Super. 426, 324 A.2d 60
(Continental Can ) discussed, post, at page 78, footnote 8.
Respondents are unimpressed with the foregoing authority. They point out that
collateral estoppel was deemed appropriate in Parklane, Blonder-Tongue*1418
and the other cases Mobil relies upon, and the issue in the other cases was
not the inability of the defendant to present crucial evidence or witnesses
at the earlier trial, but the fact that the prior proceeding was of a
different nature than the subsequent trial. (Kremer v. Chemical Construction
Corp., supra, 456 U.S. 461, 102 S.Ct. 1883 [ruling in prior administrative
proceeding entitled to preclusive effect in subsequent civil rights
proceeding]; Roos v. Red, supra, 130 Cal.App.4th 870, 30 Cal.Rptr.3d 446
[adjudication in prior bankruptcy proceeding given preclusive effect in
subsequent wrongful death suit]; Imen v. Glassford (1988) 201 Cal.App.3d 898,
247 Cal.Rptr. 514 [ruling in prior administrative proceeding given preclusive
effect in subsequent fraud action].) Finally, respondents claim, the
provision of the Restatement Mobil relies upon is inconsistent with
California law.
The fact that collateral estoppel was found applicable in Parklane, Blonder-
Tongueand the three other cases just cited is beside the point. Mobil does
not rely on those cases for anything more than the language contained in the
opinions emphasizing the equitable nature of collateral estoppel, the bar on
the offensive use of the doctrine when the defendant did not have a full and
fair opportunity to litigate his claim or issue at the earlier proceeding
and, in the case of Parklane and **77Blonder- Tongue, the indication that the
inability without fault of a defendant to produce important evidence or
witnesses at the prior trial is among the circumstances rendering issue
preclusion inappropriate.
Respondents say that “[j]ust as the heirs in Evans were collaterally estopped
from relitigating the issues even though they had new evidence which would
have been impossible to obtain in the prior litigation, [Mobil] is
collaterally estopped from relitigating the issues even though its previously
unavailable expert may now be available. Respondents mischaracterize Evans.
Preclusion was equitable in that case because the posttrial biopsy appeared
to be merely cumulative. As the appellate court stated, “[p]laintiffs have
not indicated what this biopsy showed and how it differed, if at all, from
the evidence adduced at the personal injury trial.” (Evans, supra, 194
Cal.App.3d at p. 747, 238 Cal.Rptr. 259.) Thus, to use the parlance of the
Restatement, the Evans plaintiffs failed to show that the new evidence “could
likely lead to a different result.” FN7
FN7. Our analysis assumes Evans, supra, 194 Cal.App.3d 741, 238 Cal.Rptr. 259
was correctly decided; but that assumption is questionable. It is true that,
as the Evans court said, “[a]n exception to estoppel cannot be grounded on
the alleged discovery of more persuasive evidence” (id. at p. 748, 238
Cal.Rptr. 259); however, a postmortem biopsy impossible to have obtained at
the prior trial is ordinarily powerful evidence of whether death was caused
by exposure to asbestos. The Evans opinion does not indicate what the biopsy
revealed nor describe the quality of the evidence of causation available and
presented by the plaintiffs at the earlier trial. The court’s conclusion that
estoppel was fairly applied can only be justified if the plaintiffs were
previously able to obtain and presented evidence that death was caused by
asbestos, and the biopsy did not provide substantially stronger evidence.
**78 The situation in the present case is very different. The relevant facts
consist entirely of representations set forth in a declaration submitted by
Mobil in opposition to respondents’ in limine motion to apply collateral
estoppel. The declarant, William H. Armstrong, a member of the law firm that
represented Mobil in the prior and subsequent trials, states as follows: “We
retained and disclosed Francis Weir, Ph.D., an industrial hygienist and
toxicologist, to render opinion testimony about the relative significance of
decedent’s various exposures to asbestos. Dr. Weir was prepared to opine that
decedent’s exposures at the Torrance refinery ... ranged from zero to
insignificantly *1420 small, and that Mr. Smith’s main asbestos exposures
occurred from his work with asbestos-containing transite pipe early in his
career (unrelated to any refinery work). He was also prepared to opine that
none of the reported refinery exposures would have created any reason for
concern about a health hazard based on knowledge available at the time, and
that Mobil’s conduct was well within a reasonable industrial hygiene
approach. As reflected in the transcript of [the pretrial hearing on] May 14,
2001, Dr. Weir was unable to testify due to the unexpected sudden death of
his only daughter on May 11, 2001 [while trial was in progress].... [¶] We
expected to use only one expert, i.e., Dr. Weir, to cover the points he was
prepared to address. When Dr. Weir became unavailable, no other disclosed or
retained expert was available to present that testimony. Although the trial
court (Judge Wick) was prepared to allow a substitute, the evidence was
ending, and Mr. Smith was dying, and no one was available on such short
notice.”
Respondents acknowledge that neither Mobil nor its counsel were in any way
responsible for Dr. Weir’s unavailability (compare Continental Can., supra,
123 N.J.Super. 364, 303 A.2d 97,reversed 129 N.J.Super. 426, 324 A.2d 60) FN8
and that no other witness for Mobil at the prior trial **79 addressed the
issues about which Dr. Weir was expected to testify. It is additionally clear
that those issues-causation, the applicable standard of care at the time, and
apportionment of fault-were all crucial issues. Mobil’s fortuitous inability,
through no fault of its own, to produce evidence on these crucial issues
makes it impossible to say that the prior trial provided it a full and fair
opportunity to present a defense. In the unusual and compelling circumstances
of this case, the trial court’s application of collateral estoppel was unfair
and must be set aside.
(a) The amount in controversy does not exceed twenty-five thousand dollars
($25,000). As used in this section, “amount in controversy” means the amount
of the demand, or the recovery sought, or the value of the property, or the
amount of the lien, that is in controversy in the action, exclusive of
attorneys’ fees, interest, and costs.
(b) The relief sought is a type that may be granted in a limited civil case.
(a) The relief granted to the plaintiff, if there is no answer, cannot exceed
that demanded in the complaint, in the statement required by Section 425.11,
or in the statement provided for by Section 425.115; but in any other case,
the court may grant the plaintiff any relief consistent with the case made by
the complaint and embraced within the issue. The court may impose liability,
regardless of whether the theory upon which liability is sought to be imposed
involves legal or equitable principles.
(b) Notwithstanding subdivision (a), the following types of relief may not be
granted in a limited civil case:
(1) Relief exceeding the maximum amount in controversy for a limited civil
case as provided in Section 85, exclusive of attorney’s fees, interest, and
costs.
The order granting summary judgment on May 12, 2009 is void, while
Title 11 U.S.C 362 was in force and effect.
and is void
Amended pleadings
Fre 702 testimony by experts, fre 803(4) hearsay exception state for
purposes of medical diagnosis or treatment
Rutter fed evid 8:291 attorneys are generally prohibited from taking
the witness stand to testify in a case they are litigating. U.S. v.
Edwards (9th Cir. 1998) 154 F.3d 915, 921
Judge Karen L. Robinson stated that she seeks additional points and
evidence on the issue of the purchaser at the trustee sale notice of
Soon Chey’s interest as precluding a bona fide purchaser
La Jolla also argues that its title is valid and cannot be disturbed even if
it were not a bona fide purchaser because a deed was delivered to it and was
recorded. “Once the trustee’s deed upon sale has been delivered with all the
recitals of statutory compliance and the recital of authority under the power
of sale,” La Jolla contends, “the deed cannot be ‘void’ as a matter of law.”
It also argues
**“A recital in the deed executed pursuant to the power of sale of compliance
with all requirements of law regarding the mailing of copies of notices or
the publication of a copy of the notice of default or the personal delivery
of the copy of the notice of *714 default or the posting of copies of the
notice of sale or the publication of a copy thereof shall constitute prima
facie evidence of compliance with these requirements and conclusive evidence
thereof in favor of bona fide purchasers and encumbrancers for value and
without notice.”(§ 2924.)
**There is no contention in this case that the foreclosure sale was not
properly noticed. The sale was improper because the loan was current and
therefore the beneficiary had no right to exercise the power of sale. No
statute creates a presumption-conclusive or otherwise-for any purchaser-bona
fide or otherwise-that any recitals in a trustee’s deed render effective a
sale that had no contractual basis.
Instead of under due process of law, or whether the property was duly
sold, whether a default had occurred or the trustee had the right to
sale.
Witkin Procedure
Res judicata may apply only when the prior judgment is valid; void
judgments cannot be res judicata [see **Balaam v. Perazzo (1931) 211
Cal. 375, 380-381, 295 P. 330 (holding that judgment in favor of
defendant quieting title against plaintiff and co-defendant was void
as against co-defendant who defaulted and was never served with
defendant’s answer); **California Nat. Supply Co. v. Flack (1920) 183
Cal. 124, 126, 190 P. 634 (holding that judgment rendered against
defunct corporation was void in action brought after forfeiture of
corporation’s charter)]. If a judgment is void only in part, the
judgment is res judicata to the extent that it is not void [see Lang
v. Lang (1920) 182 Cal. 765, 769, 190 P. 181 (holding that in default
judgment, any relief exceeding prayer is not entitled to res judicata
effect); **Ludwig v. Murphy (1904) 143 Cal. 473, 476, 77 P. 150 (prior
judgment was void to the extent it decreed a foreclosure,
notwithstanding its other possible conclusive effect)].
Thus, even when a judgment is final in the sense that it is free from
direct attack, it may be void and subject to collateral attack, and
thus not conclusive for purposes of res judicata [see Code Civ. Proc.
§ 1916 (judicial record may be impeached by evidence of want of
jurisdiction in court or judicial officer, of collusion between
parties, or of fraud in party offering record); see also Ch. 489,
Relief From Judgments and Orders ].
[d] Cases on Appeal
Pellissier v. Title Guarantee & Trust Co., 208 Cal. 172, 280 P. 947 (Cal.,
Sep 23, 1929)
Pellisier v. Title Guanrantee & Trust Co. (1929) 208 Cal. 172, 184
[280 P. 947] the court stated,
VOID JUDGEMENT
In re Gruntz, 202 F.3d 1074, 43 Collier Bankr.Cas.2d 921, 35 Bankr.Ct.Dec. 160, Bankr. L. Rep. P 78,102,
00 Cal. Daily Op. Serv. 909, 2000 Daily Journal D.A.R. 1337, 4 Cal. Bankr. Ct. Rep. 33 (9th Cir.(Cal.)
In In re Gruntz 202 F.3d 1074 (9th Cir. (Cal.) the court stated,
And,
“it would seem clear that the defendant in this action was not
entitled to urge upon the trial thereof or upon this appeal either the
validity of the judgment in the former action of Medley v. Perazzo as
against Brambilio Juarez” (Balaam v. Perazzo, supra, 211 Cal. at p.
381)
Witkin
Res judicata may apply only when the prior judgment is valid; void
judgments cannot be res judicata [see Balaam v. Perazzo (1931) 211
Cal. 375, 380-381, 295 P. 330 (holding that judgment in favor of
defendant quieting title against plaintiff and co-defendant was void
as against co-defendant who defaulted and was never served with
defendant’s answer); California Nat. Supply Co. v. Flack (1920) 183
Cal. 124, 126, 190 P. 634 (holding that judgment rendered against
defunct corporation was void in action brought after forfeiture of
corporation’s charter)]. If a judgment is void only in part, the
judgment is res judicata to the extent that it is not void [see Lang
v. Lang (1920) 182 Cal. 765, 769, 190 P. 181 (holding that in default
judgment, any relief exceeding prayer is not entitled to res judicata
effect); **Ludwig v. Murphy (1904) 143 Cal. 473, 476, 77 P. 150 (prior
judgment was void to the extent it decreed a foreclosure,
notwithstanding its other possible conclusive effect)].
Thus, even when a judgment is final in the sense that it is free from
direct attack, it may be void and subject to collateral attack, and
thus not conclusive for purposes of res judicata [see Code Civ. Proc.
§ 1916 (judicial record may be impeached by evidence of want of
jurisdiction in court or judicial officer, of collusion between
parties, or of fraud in party offering record); see also Ch. 489,
Relief From Judgments and Orders ].
[d] Cases on Appeal
confirmation hearing
Molsbergen v. U.S., 757 F.2d 1016, 53 USLW 2521, 1 Fed.R.Serv.3d 1051 (9th
Cir.(Cal.),Apr 09, 1985)
[1] In light of the liberal pleading policy embodied in Rule 8(e)(2), we hold
that a pleading should not be construed as an admission against another
alternative or inconsistent pleading in the same case under the circumstances
present here. Shipek v. United States, 752 F.2d 1352, 1356 (9th Cir. 1985).FN4
Thus, in this case, the district court should have examined counts one and
two of appellant’s complaint independently. Properly analyzed, count one of
appellant’s complaint alleges that subsequent to Mr. Molsbergen’s discharge,
the government learned of a risk to which it had exposed Mr. Molsbergen and
negligently failed to warn him of prospective harm.
Hearsay
The line between argument and evidence is blurred. Rutter Fed Evid
page 8C-13
Conclusory.
Federal Deposit Ins. Corp. v. New Hampshire Ins. Co., 953 F.2d 478 (9th
Cir.(Cal.),Dec 30, 1991)
[10] The Supreme Court instructed, in Celotex Corp. v. Catrett, 477 U.S. 317,
106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), that the nonmoving party need not
produce evidence “in a form that would be admissible at trial in order to
avoid summary judgment.” Id. at 324, 106 S.Ct. at 2553. The nonmoving party
is required, however, to go beyond the pleadings and “set forth specific
facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e).
Because New Hampshire failed to object to the admission of Exhibits F and H,
we may consider them in determining whether there is a genuine issue of
material fact in dispute, notwithstanding the fact that this evidence was
presented in a form that would not be admissible at trial.
[11] The grand jury indictment recites specific facts showing that Ramona’s
employees discovered that Molinaro committed the dishonest acts, alleged in
the amended complaint, during the term of the bond. **The portions of the
testimony presented in support of the summary judgment motion, and the
recitation of facts in the grand jury indictment, demonstrate that Ramona
employees, including Norm Marks, the loan officer, and Geraldine Balogh, a
director and employee, were aware of facts during the term of the bond that
would cause a reasonable person to assume that Molinaro was committing
dishonest acts.
Smended plan plan payments September 9, 2009 2:30 p.m. August 6, 2009,
11:00 A.M.
October 14, 2:30 September 3, 2009 11:00 341 A meeting amended plan
in file 25 days prior by August
(a) At any time after confirmation of the plan but before the
completion of payments under such plan, the plan may be modified, upon
request of the debtor, the trustee, or the holder of an allowed
unsecured claim, to--
(4) reduce amounts to be paid under the plan by the actual amount
expended by the debtor to purchase health insurance for the debtor
(and for any dependent of the debtor if such dependent does not
otherwise have health insurance coverage) if the debtor documents the
cost of such insurance and demonstrates that--
(B)(i) if the debtor previously paid for health insurance, the amount
is not materially larger than the cost the debtor previously paid or
the cost necessary to maintain the lapsed policy; or
(ii) if the debtor did not have health insurance, the amount is not
materially larger than the reasonable cost that would be incurred by a
debtor who purchases health insurance, who has similar income,
expenses, age, and health status, and who lives in the same
geographical location with the same number of dependents who do not
otherwise have health insurance coverage; and
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the
requirements of section 1325(a) of this title apply to any
modification under subsection (a) of this section.
(2) The plan as modified becomes the plan unless, after notice and a
hearing, such modification is disapproved.
(c) A plan modified under this section may not provide for payments
over a period that expires after the applicable commitment period
under section 1325(b)(1)(B) after the time that the first payment
under the original confirmed plan was due, unless the court, for
cause, approves a longer period, but the court may not approve a
period that expires after five years after such time.
In New Hampshire v. Maine (2001) 532 U.S. 742, 749 the Supreme Court
has stated that judicial estoppel is where, ”a party assumes a certain
position in a legal proceeding, and succeeds in maintaining that
position, he may not thereafter, simply because his interests have
changed, assume a contrary position, especially if it be to the
prejudice of the party who has acquiesced in the position formerly
taken by him.”
And,”
Absent success*751 in a prior proceeding, a party’s later inconsistent
position introduces no “risk of inconsistent court determinations,”
United States v. C.I.T. Constr. Inc., 944 F.2d 253, 259 (C.A. 1991),
and thus poses little threat to judicial integrity.” (New Hampshire
v. Maine, supra, 532 U.S at p.750)
“In, Stevens Tech. Services, Inc. v. SS Brooklyn, 885 F.2d 584 (9th
Cir.1989) we recently described the two competing views of judicial
estoppel. Under the majority view, judicial estoppel does not apply
unless the assertion inconsistent with the claim made in the
subsequent litigation ‘was adopted in some manner by the court in the
prior litigation.” Id. at 588. Under the minority view, judicial
estoppel can apply even when a party was unsuccessful in asserting its
position in the prior judicial proceeding, ‘if the court determines
that the alleged offending party engaged in ‘fast and loose’ behavior
which undermined the integrity of the court.” Id. at 589. Appellants’
claim of judicial estoppel fails under either test. Neither the Hawaii
courts nor the federal courts adopted Corey’s position. Nor is there
any indication that Corey is playing ‘fast and loose’ with the
judicial system. The district court found that Corey’s change of
position was occasioned by her realization that Ellis was not her
friend and had duped her. This finding is not clearly erroneous. See
Konstantinidis v. Chen, 626 F.2d 933, 939 (D.C.Cir.1980) (doctrine of
judicial estoppel ‘ ‘has never been applied where [the party’s]
assertions were based on fraud, inadvertence, or mistake’ ‘) (quoting
Johnson Serv. Co. v. Transamerica Ins. Co., 485 F.2d 164, 175 (5th
Cir.1973)).
25,
“MR. DUARTE: Your Honor, it’s here and this Court cannot really
litigate title, in that this – this case filed in Santa Ana, it’s a
property title claim and just – that’s just to build the foundation,
there’s nothing, your Honor, with the trust deed, deed of trust on
that.
line 6,
line 19,
“But, the Plaintiff here – I mean, the only remedy – the only
adequate remedy of law for us is possession, hour Honor.
And I refer to and incorporate the Reporter’s Transcript, page 90,
line 16,
(A) an executor;
(B) an administrator;
(C) a guardian;
(D) a bailee;
(F) a party with whom or in whose name a contract has been made for
another’s benefit; and
(2) Action in the Name of the United States for Another’s Use or
Benefit.When a federal statute so provides, an action for another’s
use or benefit must be brought in the name of the United States.
(3) Joinder of the Real Party in Interest.The court may not dismiss an
action for failure to prosecute in the name of the real party in
interest until, after an objection, a reasonable time has been allowed
for the real party in interest to ratify, join, or be substituted into
the action. After ratification, joinder, or substitution, the action
proceeds as if it had been originally commenced by the real party in
interest.
(2) for a corporation, by the law under which it was organized; and
(3) for all other parties, by the law of the state where the court is
located, except that:
(B) a committee;
(C) a conservator; or
Till v. Hartford Acc. & Indem. Co., 124 F.2d 405 (C.C.A.10 (Okla.),Dec 17,
1941)
211 Infants
211VII Actions
211k76 Guardian Ad Litem or Next Friend
211k77 k. In General. Most Cited Cases
A “guardian ad litem” is a special guardian, appointed by the court to defend
in behalf of an infant party, whereas a “next friend” is one who, without
being regularly appointed guardian, represents an infant plaintiff.
211 Infants
211VII Actions
211k76 Guardian Ad Litem or Next Friend
211k87 k. Failure to Procure Appointment. Most Cited Cases
Where automobile liability insurer instituted declaratory judgment action
against parties who had instituted state court actions against insured and
some of the state court actions had been brought by minors through their next
friends, who were made defendants in the declaratory judgment action and
appeared and filed answers in behalf of the minors, one of whom through his
next frien”d filed a cross-complaint, federal rule regarding appointment of
guardian ad litem was substantially complied with, and failure to appoint
guardians ad litem did not render declaratory judgment void. Fed.Rules
Civ.Proc. rule 17(c), 28 U.S.C.A.
At pp. 408-409
FN2. 31 C.J.,p. 1118, Sec. 262; Bouv. Law Dict., Rawle’s 3rd Rev., Vol. 1, p.
1390; Bunting v. Bunting, 87 N.J.Eq. 20, 99 A. 840, 841, 842; Schade v.
Connor, 84 Neb. 51, 120 N.W. 1012, 1015; Watts v. Hicks, 119 Ark. 621, 178
S.W. 924, 925; Crawford v. Amusement Syndicate Co., Mo. Sup., 37 S.W.2d 581,
584; Benson v. Birch, 139 Or. 459, 10 P.2d 1050, 1051.
[4] Here, the next friends were made parties defendant and appeared and filed
answers in behalf of the minors, and Shull, through his next friend, filed a
cross complaint. The next friends appeared and represented the minors at the
trial and the court found that the interests of the minors had been fully and
adequately represented and protected by their friends. Therefore, while not
technically appointed as guardians ad litem, the next friends did everything
for the minors they could have done had they been formally appointed. We
conclude that the requirements of Rule 17(c) were substantially*409 complied
with and that the failure to appoint guardians ad litem did not render the
judgment void.”
Roberts v. Ohio Cas. Ins. Co., 256 F.2d 35, 68 A.L.R.2d 747 (5th Cir.
(Tex.),Jun 03, 1958)
211 Infants
211VII Actions
211k76 Guardian Ad Litem or Next Friend
211k78 Necessity and Grounds for Appointment
211k78(1) k. In General. Most Cited Cases
(Formerly 170Ak113)
The federal rule does not make the appointment of a guardian ad litem
mandatory, but if court feels that infant’s interests are otherwise
adequately represented and protected, a guardian ad litem need not be
appointed, but the rule does not mean that a trial judge may ignore or
overlook such fundamental requirement for protection of infants. Fed.Rules
Civ.Proc. rule 17(c), 28 U.S.C.A.
211 Infants
211VII Actions
211k76 Guardian Ad Litem or Next Friend
211k78 Necessity and Grounds for Appointment
211k78(1) k. In General. Most Cited Cases
(Formerly 170Ak113)
Federal rule relating to appointment of guardian ad litem for infant means
(1) as a matter of proper procedure, court should usually appoint a guardian
ad litem; (2) but the court may, after weighing all the circumstances, issue
such order as will protect the minor in lieu of appointment of a guardian ad
litem; (3) and may even decide that such appointment is unnecessary, though
only after court has considered the matter and made a judicial determination
that infant is protected without a guardian. Fed.Rules Civ.Proc. rule 17(c),
28 U.S.C.A.
211 Infants
211VII Actions
211k76 Guardian Ad Litem or Next Friend
211k78 Necessity and Grounds for Appointment
211k78(1) k. In General. Most Cited Cases
(Formerly 170Ak113)
Where record disclosed that no one gave a thought to appointment of guardian
ad litem for minors in suit to set aside an award of Texas Industrial
Accident Board in their favor, until after judgment was rendered, and it was
apparently an oversight, the discretion lodged in trial judge under federal
rule for appointment of guardian ad litem was not intended to apply to such a
situation, so that judgment would be reversed and remanded, since orderly
administration of justice and procedural protection of minors require trial
judge to give due consideration to propriety of an infant’s representation by
guardian ad litem before he may dispense with necessity of appointing the
guardian. Fed.Rules Civ.Proc. rule 17(c), 28 U.S.C.A.; Vernon’s
Ann.Civ.St.Tex. art. 8307, § 5.
At pp. 38-39
Rule 17(c) does not make the appointment of a guardian ad litem mandatory. If
the court feels that the infant’s interests are otherwise adequately
represented and protected, a guardian ad litem need not be appointed. Wescott
v. United States Fidelity & Guaranty Co., 4 Cir., 1946, 158 F.2d 20. But the
rule does not mean that a trial judge may ignore or overlook such a
fundamental requirement for the protection of infants. We spell out the rule
to mean: (1) as a matter of proper procedure, the court should usually
appoint a guardian ad litem; (2) but the Court may, after weighing all the
circumstances, issue such order as will protect the minor in lieu of
appointment of a guardian ad litem; (3) and may even decide that such
appointment is unnecessary, though only after the Court has considered the
matter and made a judicial determination that the infant is protected without
a guardian. In Till v. Hartford Accident & Indemnity Co., 10 Cir., 1941, 124
F.2d 405, the Court found that a guardian ad litem was not necessary only
because the infant was represented through a next friend, the alter ego of a
guardian ad litem. In Zaro v. Strauss, 5 Cir., 1948, 167 F.2d 218, this Court
held that an attorney’s representation of an incompetent was insufficient to
satisfy the requirements of Rule 17(c).
[8] The record in this case shows that no one gave a thought to the
appointment of a guardian ad litem until after judgment was rendered below.
Apparently it was an oversight. We believe that the discretion lodged in the
trial judge in Rule 17(c) was not intended to apply to such a situation. The
orderly administration of justice and the procedural protection of minors
requires the trial judge to give due consideration to the propriety of an
infant’s representation by a guardian ad litem before he may dispense with
the necessity of appointing the guardian.
Zaro v. Strauss, 167 F.2d 218 (C.C.A.5 (Fla.),Apr 16, 1948) (NO. 12166)
**We, therefore, hold that while the judgment rendered was not null as one
rendered entirely without jurisdiction, it was voidable upon a showing such
as has been made here that defendant had a meritorious defense and was not
properly represented in the action. Quigley v. Cremin, Fla., 109 So. 312;
Olivera v. Grace, 19 Cal.2d 570, 122 P.2d 564, 140 A.L.R. 1328, and
Annotation 1336, et seq.; 44 C.J.S., Insane Persons, Sec. 151.
(g) Filing. Except for matters being heard on notice shortened under
LBR 9075-1, proof of service must be filed in the clerk’s office no
later than 5 days after service and the serving
party must bring a conformed copy to the hearing. If the proof or
acknowledgment of service is attached to the original document, it
must be attached as the last page of the document.
(h) Failure to File. The failure to prepare or file the proof of
service required by this rule does
not affect the validity of the service. The court may at any time
allow the proof of service
to be amended or supplied unless to do so would be prejudicial to the
rights of any party.
In re Mac Donald, 755 F.2d 715, Bankr. L. Rep. P 70,312 (9th Cir.(Cal.) Mar
12, 1985)
In re Universal Life Church, Inc., 127 B.R. 453, 71A A.F.T.R.2d 93-3576, 91-1 USTC P 50,172, Bankr. L.
Rep. P 74,002 (E.D.Cal.,Mar 25, 1991)
Internal Revenue Service (IRS) moved for relief from stay in order to allow prosecution of complex tax claim
against Chapter 11 debtor to proceed in state tax court. The United States Bankruptcy Court for the Eastern District
of California granted IRS’s motion for relief from stay, and debtor appealed. The District Court, Shubb, J., held that
IRS was properly granted relief from stay to allow state tax court action to proceed, given tax court’s special
expertise in resolving complex tax questions and its ability to effectively assess debtor’s tax liability in shortest
amount of time.
Affirmed.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2422.5 In General
51k2422.5(4) Particular Cases
51k2422.5(4.1) k. In General. Most Cited Cases
(Formerly 51k2422.5(4))
Internal Revenue Service (IRS) was properly granted relief from stay to allow prosecution of complex tax claim to
continue in state tax court, where tax court was within three weeks of trying case when debtor filed for bankruptcy,
tax court had special expertise in deciding contested tax issues, and there was no question but that tax court could
most effectively assess debtor’s liability in shortest amount of time. Bankr.Code, 11 U.S.C.A. § 362.
In 1985, appellant, Universal Life Church (“ULC”), filed a petition in the tax court seeking redetermination of
income tax deficiencies for the 1978, 1979, and 1980 tax years. Over a three year period, the trial date was
continued four times, finally resulting in a December 4, 1989, trial date. On November 24, 1989, less than two
weeks before the start of trial, ULC filed a motion seeking to amend its petition to permit the use of the installment
method of accounting.FN1 On November 29, 1989, the tax court denied the motion. The next day, ULC filed a
Chapter 11 petition in bankruptcy. The filing of the petition automatically stayed any further proceedings in tax
court.
On January 12, 1990, ULC filed a complaint in bankruptcy requesting a determination of federal tax liability for the
years 1978-1990.FN2 The Internal Revenue Service (“I.R.S.”) immediately filed a motion to lift the debtor’s
automatic stay to allow the prosecution of the tax claim to continue in tax court. On February 13, 1990, the
bankruptcy court ordered a modification of the automatic stay to permit the tax court to determine the liability for
the years 1978-1980. ULC noticed an appeal to this court on March 15, 1990.
FN2. Appellant acknowledges that it filed the complaint in bankruptcy with the hope that it could capture the
installment method of accounting it was denied on the eve of trial in tax court.
[3] Appellant essentially argues that by lifting the stay and sending the parties back to tax court to litigate the tax
liability for 1978-1980, ULC will lose $800,000 because the tax court’s ruling prevents it from using a more
favorable method of accounting. The I.R.S. will thus be favored over other creditors in contravention of bankruptcy
policy favoring equal treatment of creditors. Moreover, appellant argues, the bifurcation of the proceedings will
result in a disorderly determination of *455 creditor rights and potentially expose ULC to conflicting results.
Chapter 7 debtor’s former spouse moved for relief from stay in order to pursue state court divorce and battery
actions against debtor. The Bankruptcy Court, Alfred C. Hagan, J., held that automatic stay would be lifted, but only
to allow former wife to pursue battery action for determination of debtor’s liability and amount thereof.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2428 k. Claims of Nondischargeability. Most Cited Cases
Alleged nondischargeability of Chapter 7 debtor’s obligation to his former spouse in connection with claims asserted
by former spouse in pending state court actions was not “cause” for lifting stay to allow state court actions to
proceed; dischargeability question was one which could not be decided on motion for relief from stay, but only in
context of adversary proceeding. Bankr.Code, 11 U.S.C.A. §§ 362(d)(1), 523(a).
51 Bankruptcy
51II Courts; Proceedings in General
51II(B) Actions and Proceedings in General
51k2156 k. Nature and Form; Adversary Proceedings. Most Cited Cases
Dischargeability of debt must be determined in adversary proceeding, and may not be determined by motion.
Bankr.Code, 11 U.S.C.A. §§ 362(d)(1), 523(a); Fed.Rules Bankr.Proc.Rule 7001, 11 U.S.C.A.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2422.5 In General
51k2422.5(1) k. In General. Most Cited Cases
**Existence of more convenient forum may be “cause” for lifting automatic stay. Bankr.Code, 11 U.S.C.A. § 362(d)
(1).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2422.5 In General
51k2422.5(4) Particular Cases
51k2422.5(4.1) k. In General. Most Cited Cases
Automatic stay would be lifted as matter of judicial economy, to allow creditor to pursue battery claim against
Chapter 7 debtor in state court, where parties had already expended considerable effort and resources in state court,
state court was already familiar with facts of case, and no hardship to debtors would result from litigating matter in
state rather than in federal bankruptcy court; creditor would be granted relief from stay only to obtain determination
of debtor’s liability and extent of liability, and would not be granted relief to collect any judgment rendered in state
court proceeding. Bankr.Code, 11 U.S.C.A. § 523(d)(1).
In the divorce proceeding, the magistrate court denied Hainline’s request for alimony but awarded her $600.00 per
month plus medical expenses for the support of the parties’ minor child. In addition, the magistrate awarded
Hainline $25,763.02 as compensation for Hainline’s support of Neal during medical school. The magistrate court
identified this award as one of “equitable restitution”.
Neal appealed the award of equitable restitution to the Idaho District Court. The district court affirmed the award
and Neal appealed to the Idaho Supreme Court.
The debtors, Thomas Neal and Jill Neal (the “debtors”), filed their petition for voluntary relief pursuant to Chapter 7
of Title 11 of the United States Code on June 2, 1994, before either party had submitted briefs to the Idaho Supreme
Court. In their schedules, the debtors list Hainline’s claim for equitable restitution as liquidated and uncontested.
The debtors filed a motion to dismiss. The district court considered the evidence submitted by the parties and
otherwise treated the motion as one for summary judgment.
The district court granted the motion to dismiss. Hainline filed a motion for reconsideration which the district court
denied. Hainline appealed to the Idaho Court of Appeals which affirmed the district court. Hainline appealed to the
Idaho Supreme Court which held the district court correctly *32 dismissed Hainline’s claims for criminal
conversation and tortious interference with her marriage contract as well as her claims for intentional and or
negligent infliction of emotional distress. However, the Idaho Supreme Court reversed and remained the district
court’s holding on the battery claim.
Since the Idaho Supreme Court remanded the battery claim there have been no further proceedings on the claim in
state court due to the automatic stay.
In their schedules the debtors note the existence of the battery claim, but state that it is unliquidated and disputed.
The debtors do not estimate the amount of this claim.
Hainline has filed an adversary proceeding in this bankruptcy proceeding to determine the dischargeability of both
her battery claim and her claim for equitable restitution. In the adversary proceeding Hainline seeks:
that the Court determine that the battery debt owed by the Defendant to Plaintiff is nondischargeable, that the alimony
or equitable restitution debt owed by the Defendant to Plaintiff is nondischargeable, that the Court lift the stay so
that Plaintiff, her counsel and the District Court of the Fourth Judicial District of the State of Idaho, in and for the
County of Ada, can proceed with proceedings to determine the amount of the battery debt owed by Defendant to
Plaintiff and that the Court lift the stay so that Plaintiff, her counsel and the Idaho Supreme Court can continue with
proceedings before the Idaho Supreme Court to determine the nature of the debt owed by Defendant to Plaintiff
which is alluded to in Exhibit B, and the amount thereof, and so that the time for Plaintiff to file any additional
adversary proceedings and complaints in this bankruptcy proceeding because of the Idaho Supreme Court’s decision
may be extended until after entry of decision by the Idaho Supreme Court.
Hainline does not seek a determination by the bankruptcy court of Neal’s liability under state law, or the amount of
his liability on either her battery or her equitable restitution claim. Nor does she allege a total dollar amount of the
liability in either claim.
DISCUSSION
Hainline seeks relief from the automatic stay for “cause.” Section 362(d) provides in relevant part:
On request of a party in interest and after notice and a hearing, the court shall grant *33 relief from the stay provided
under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay-
(1) for cause, including lack of adequate protection of an interest in property of such party in interest.
11 U.S.C. § 362(d)(1).
There is rigid rule test for determining whether sufficient cause exists to modify an automatic stay. Rather, in resolving
motions for relief for “cause” from the automatic stay courts generally consider the policies underlying the
automatic stay in addition to the competing interests of the debtor and the movant.
American Airlines, Inc. v. Continental Airlines (In re Continental Airlines), 152 B.R. 420, 424 (Bankr.D.Del.1993).
[1][2] Hainline contends she should be granted relief from stay to pursue her battery and her equitable restitution
claims on the grounds both claims are nondischargeable. Determination of the dischargeability of a debt is an
adversary proceeding and may not be determined by a motion.FN3 The dischargeability of the claims has yet to be
determined. Accordingly, relief from stay can not be granted on the grounds of nondischargeability.
**An adversary proceeding is governed by the rules of this Part VII. It is a proceeding (1) to recover money or
property ... (6) to determine the dischargeability of a debt, ... or (10) to determine a claim or cause of action removed
under pursuant to 28 U.S.C. § 1452.
[3] Although a more convenient forum is not one of the enumerated grounds for relief from stay in Section 362(d),
the legislative history of the section suggests that such a forum is cause under section 362(d)(1):
[I]t will often be more appropriate to permit proceedings to continue in their place of origin, when no great prejudice
to the bankruptcy estate would result, in order to leave the parties to their chosen forum and to relieve the
bankruptcy court from any duties that may be handled elsewhere.
In re Johnson, 153 B.R. 49, 51 (Bankr.D.Idaho 1993), quoting S.Rep. No. 989, 95th Cong., 2d Sess. 50, reprinted
in 1978 U.S.C.C.A.N. 5787, 5836.
[4] Hainline contends she should be granted relief from stay to pursue the divorce proceeding. No useful purpose,
however, would be served by a continuation of the state court proceeding. The appeal before the Idaho Supreme
Court which Hainline wishes to pursue was brought by Neal for the purpose of disputing liability. The debtors have
admitted to liability for the claim. Hainline has neither filed nor proposed filing a cross appeal. Therefore, the most
favorable result Hainline could obtain on appeal is an affirmation of the magistrate’s award, a matter the debtors
have already conceded.
[5] Hainline’s stated purpose for pursuing the appeal is to “determine the nature of the award.” It is unclear whether
Hainline believes the Idaho Supreme Court should determine whether the award is in the nature of support or
whether she believes the Idaho Supreme Court will merely more fully explain the award. Whether an award is in the
nature of support for purposes of dischargeability under 11 U.S.C. § 523(a)(5) of alimony or support is a question of
federal law. Shaver v. Shaver, 736 F.2d 1314, 1315-16 (9th Cir.1984). **No purpose would therefore be served by
allowing further proceedings in state court. **Furthermore, such a proceeding would require the estate to expend
money for legal fees without substantially advancing the interests of either the debtors or Hainline. Accordingly,
Hainline’s motion for relief from stay is denied as to the divorce proceeding.
[6] Unlike the equitable restitution claim, however, in the tort proceeding both liability and the amount thereof are in
dispute. Accordingly, liability will have to be determined in either state or federal court.
The parties have already expended considerable effort and resources in the state district court. The state court is
already familiar with the facts in the matter. If the matter were brought in this bankruptcy proceeding, the parties
would have to expend *34 considerable time and effort duplicating their previous efforts in the state court
proceeding. No hardship to the debtors would result from litigating the matter in the state rather than the federal
courts.
Further, whether Neal is liable to Hainline on the battery claim is purely a matter of state law. No federal law is
involved.
Accordingly, in the interests of judicial economy, Hainline is granted relief from stay to pursue final resolution of
the battery claim in state court. The final decree or judgment rendered by the state court shall be determinative of the
amount Hainline’s claim for battery.
**Hainline is not granted relief from stay to collect any judgment rendered in the tort proceeding.
Creditors filed motion to lift automatic stay to permit continuation of two state court actions pending against Chapter
11 debtor for fraud and misrepresentation. The Bankruptcy Court, D. Joseph De Vito, J., held that creditors were
entitled to relief from automatic stay for cause.
Motion granted.
West Headnotes
Bankruptcy 51 2426
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2426 k. Fraud, Bad Faith, or Misconduct. Most Cited Cases
(Formerly 51k659.5(1))
Creditors were entitled to relief from automatic stay for cause to permit continuation of two state court actions
pending against Chapter 11 debtor for fraud and misrepresentation, as continuance of stay would cause great
prejudice to creditors in that debtor’s partner was codefendant in state actions, and no great prejudice to debtor’s
estate would result. Bankr.Code, 11 U.S.C.A. § 362(d)(1).
Lenz W. Gmelin (Gmelin), et al., seek relief from the automatic stay grounded in § 362[d] of the Bankruptcy Code
to permit continuation of two state court actions presently pending against the above debtor. On January 26, 1982,
the first action was filed by Gmelin, et al., against the debtor and Samuel Rosengarten, debtor’s business partner, in
the Superior Court of *530 New Jersey. On May 23, 1984, the second action was filed by Peter D. Nelson, et al.
(Nelson), against the same defendants, also in the Superior Court of New Jersey. Both actions are grounded in fraud
and misrepresentation relating to defendants’ solicitation of Gmelin and Nelson, et al., to invest in Master
Associates, a partnership formed to acquire and promote a motion picture film. Defendants were general partners in
that partnership.
The movants argue that the automatic stay should be lifted to prevent prejudice in repetitive litigation of identical
claims; that, absent consolidation, if the stay is not lifted, plaintiffs may be forced to litigate two state court actions
against Rosengarten and initiate an adversary proceeding against the debtor in the bankruptcy court.
Opposing the motion, the debtor argues that movants have failed to set forth grounds sufficient to permit relief from
the stay; that possible joint and several liability of state court defendants is an insufficient ground and, finally, that,
though the state court actions grounded in fraud may not be dischargeable in the debtor’s bankruptcy proceeding,
that fact is, similarly, insufficient to sustain the relief requested.
On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay... (1) for cause,
including the lack of adequate protection of an interest in property of such party in interest....”
An example of “cause” requiring the court to grant relief from the automatic stay is the lack of good faith in filing a
case under Chapter 11. See In re Victory Construction Co., 9 B.R. 549, 560 (Bankr.C.D.Ca.1981) order stayed, 9
B.R. 570, order vacated and remanded on other grounds, Hadley v. Victory Construction Co., 37 B.R. 222, 229
(Bankr. 9th Cir.1984); Accord Glassmanor Apartments Ltd. v. Corporation Deja Vu (In re Corporation Deja Vu), 34
B.R. 845, 850 (Bankr.D.Md.1983). In Victory the court defined “cause” as: “any reason cognizable to the equity
power and conscience of the court as constituting an abuse of the reorganization or rehabilitation process.” 9 B.R. at
560.
The discretionary right of the bankruptcy court to decide whether a state court proceeding against the debtor should
be permitted to continue is well settled. Transamerica Insurance Co. v. Olmstead (In re Olmstead), 608 F.2d 1365,
1367-68 (10th Cir.1979); Harris v. Fidelity and Deposit Co. (In re Harris), 7 B.R. 284, 286 (S.D.Fla.1980) . In
delineating the limits and nature of the “cause” standard, the Court looks to the legislative history of § 362, which, in
pertinent part, provides:
Subsection [d] requires the court, on request of a party in interest, to grant relief from the stay, such as by terminating,
annulling, modifying, or conditioning the stay, for cause. The lack of adequate protection of an interest in property
of the party requesting relief from the stay is one cause for relief, but is not the only cause. As noted above, a desire
to permit an action to proceed to completion in another tribunal may provide another cause. Other causes might
include the lack of any connection with or interference with the pending bankruptcy case. For example, a divorce or
child custody proceeding involving the debtor may bear no relation to the bankruptcy case. In that case, it should not
be stayed. A probate proceeding in which the debtor is the executor or administrator of another’s estate usually will
not be related to the bankruptcy case, and should not be stayed. Generally, proceedings*531 in which the debtor is a
fiduciary, or involving postpetition activities of the debtor, need not be stayed because they bear no relationship to
the purpose of the automatic stay, **which is debtor protection from his creditors. The facts of each request will
determine whether relief is appropriate under the circumstances.
H.R.Rep. No. 595, 95th Cong., 1st Sess. (1977) p. 343-44 (emphasis added); see also S.Rep. No. 989, 95th Cong.,
2d Sess. (1978) p. 52, U.S.Code Cong. & Admin.News 1978, p. 5787, 5838, 6300.
Undoubtedly the court will lift the stay for proceedings before specialized or nongovernmental tribunals to allow those
proceedings to come to a conclusion. Any party desiring to enforce an order in such a proceeding would thereafter
have to come before the bankruptcy court to collect assets. Nevertheless, it will often be more appropriate to permit
proceedings to continue in their place of origin, when no great prejudice to the bankruptcy estate would result, in
order to leave the parties to their chosen forum and to relieve the bankruptcy court from many duties that may be
handled elsewhere.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 91977) p. 341; S.Rep. No. 989, 95th Cong., 2d Sess. (1978) p. 50,
U.S.Code Cong. & Admin.News 1978, pp. 5836, 6297.
Decisional law has interpreted the above legislative history in several ways. In Olmstead, supra, the Circuit Court
held that the bankruptcy court was correct in deferring its determination of whether a debt was dischargeable until
another court liquidated the creditor’s claim, provided, however, that no prejudice to the debtor existed. 608 F.2d at
1367-68. In Holtkamp v. Littlefield (In re Holtkamp), 669 F.2d 505 (7th Cir.1982), in affirming the bankruptcy
court’s lifting of the automatic stay to permit a civil action to continue, the Circuit Court emphasized that
“[a]llowing the pending action to proceed merely determined Holtkamp’s [debtor’s] liability but did not change
Littlefield’s [creditor’s] status in relation to other creditors.” 669 F.2d at 508. In addition, the Circuit Court made the
following observations: **where the civil action is not connected, nor interfering with the bankruptcy proceeding, to
lift the stay would not thwart the underlying purpose of the automatic stay, namely to preserve the debtor’s estate
and to provide a systematic and equitable plan for repayment and reorganization; further, that the expertise of the
bankruptcy court was not necessary to a determination of the pending civil action; and, finally, that the interests of
judicial economy warranted lifting of the stay because of the imminence of the trial. 669 F.2d at 508-09.
The Court finds that “cause” exists for lifting the automatic stay allowing movants to continue the state court action.
The sole connection or interference the state court proceeding may have on the debtor’s bankruptcy proceeding will
occur when payments are made pursuant to the Chapter 11 plan, provided movants herein file proofs of claim.
Indeed, there would be greater interference with the debtor’s bankruptcy proceeding if the stay were not lifted, with
the matters pending in state court to be litigated in the bankruptcy court. The time required to resolve the state court
matters would delay the debtor’s opportunity to move other matters presently pending in this Court.
Because it appears that no great prejudice to the debtor’s bankruptcy estate would result, the Court finds that it is
more appropriate to permit continuance of the state court proceedings in their place of origin. It is clear that
movants’ claim will have to be liquidated either in state court or the bankruptcy court. In either instance, the debtor
will have to defend that action. It is unreasonable to presume that the continuance in the state court would subject
the debtor’s estate to a greater *532 expense. The cost of defending the state court action in the state court has not
been considered so prejudicial as to require continuance of the stay. In re McGraw, 18 B.R. 140, 142
(Bankr.W.D.Wis.1982); Hoenig v. Hoffman (In re Hoffman), 33 B.R. 937, 941 (Bankr.W.D.Okla.1983). It is
certainly possible that continuance of the stay would cause great prejudice to the movants. Because the debtor’s
partner is a codefendant in the state action, movants would be required to proceed against the debtor in the
bankruptcy court and against the debtor’s partner in the state court. See Hoffman, supra, 33 B.R. at 941.
Further, the Court finds that the expertise of the bankruptcy court is unnecessary in the state court action, essentially
one grounded in securities fraud. For all of the foregoing reasons, the doctrine of judicial economy is better served
by permitting the continuance of the action in the court of origin.
We turn, finally, to the burden of proof on the issue of “cause”, which lies with the debtor. 11 U.S.C. § 362[g][2].
See also, Hoffman, supra, 33 B.R. at 941. The Court finds that the debtor has not adequately met his burden. The
debtor only claims that continuance of the state court action would frustrate his attempt to effectuate a successful
reorganization. This argument is unpersuasive and insufficient to carry debtor’s burden of proof.
Movants have sufficiently set forth facts evidencing their allegation of cause. Thus, the Court grants their motion to
lift the stay permitting continuance of the state court proceedings, limited, however, to the entry of judgment.**Only
a liquidation of their claim is ordered, and any enforcement of the judgment, if rendered in their favor, is
impermissible at this time. Movants are directed to return to the bankruptcy court either to litigate the
nondischargeability issue or participate as creditors under debtor’s reorganization plan.
In re Humphreys Pest Control Co., Inc., 35 B.R. 712 (Bankr.E.D.Pa. Jan 06, 1984)
Unsecured creditor filed motion for relief from stay, seeking leave to pursue breach of warranty claims against
debtor in Louisiana state court forum. The Bankruptcy Court, David A. Scholl, J., held that: (1) creditor had initial
burden of showing good cause for relief from stay, and (2) creditor failed to satisfy initial burden of proof.
Motion denied.
The significant issue before the Court in this matter is the allocation of the burden of proof between the Moving
Party and the Debtor in a Motion seeking relief from the automatic stay pursuant to 11 U.S.C. § 362(d). Because
we believe that the Moving Party has an initial burden to establish cause for relief under § 362(d), irrespective of the
presence of 11 U.S.C. § 362(g)(2), and that the Moving Party has failed to meet that initial burden here, we shall
deny the Motion.
** We note that, in most of the cases in which unsecured creditors have been granted relief, two (2) factors have
coalesced: (1) the Debtor has engaged in some morally culpable conduct which the moving party seeks to undo in a
court action; and (2) the creditor does not seek to pursue assets of the estate or is prohibited from doing so, *838
although given relief to pursue certain remedies against the debtor. See In re Turner, 55 B.R. 498 (Bankr.N.D.Ohio
1985) (RICO action against Debtor in which creditors agreed to look only to bonding company for payment);
Humphreys, supra (insiders of Debtor accused of fraud and stay of execution on any judgment continued); In re
Larkham, 31 B.R. 273 (Bankr.D.Vt.1983) (Plaintiff entitled to proceed to obtain exclusively injunctive relief against
Debtor in discrimination suit).
[3] Several factors militate strongly against the allowance of any relief in this case--or in any but the most
extraordinary set of circumstances--where the moving party is an unsecured creditor. First is the need to maintain
all proceedings relevant to the debtor and his estate in a single forum convenient to the Debtor, particularly in a large
corporate Chapter 11 case, since subjection of the Debtor to cases in distant or diverse forums may prove disruptive
of the reorganization effort. We have noted that same principal in our previous decisions in other contexts. Cf. In
re T.D.M.A., Inc., 66 B.R. 992 (E.D.Pa., 1986) (ERISA claims must be resolved in bankruptcy claim procedure
rather than in arbitration otherwise mandated by statute); and In re American International Airways, Inc., Begier v.
Cleveland Pneumatic, 66 B.R. 642 (Bankr.E.D.Pa., 1986) (venue remains in bankruptcy court unless balance of
convenience weighs strongly in favor of party seeking transfer.) See also In re Leonard, 51 B.R. 53
(Bankr.D.D.C.1985) (relief from stay to pursue case in district court not allowed because court finds Debtor must
devote full-time energies to bankruptcy case); and In re General Oil Distributors, Inc., 33 B.R. 717
(Bankr.E.D.N.Y.1983) (creditor not permitted relief from stay to pursue Texas litigation against debtor filing
bankruptcy in New York).
[4] In the instant case, the Moving Party proposes to drag the Debtor into a distant forum, from Pennsylvania to
Louisiana, to pursue an action which, in light of the automatic stay, never should have been filed against the Debtor
in the first place and is, accordingly, void, see, e.g., Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370
(1940); Borg-Warner Acceptance Corp. v. Hall, 685 F.2d 1306, 1308 (11th Cir.1982), even if the stay had never
been invoked by the Debtor. See Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d
446 (3d Cir.1982). The Moving Party is not a secured party, it has made no allegation of morally culpable conduct
by the Debtor, and it has made no concessions to forego execution upon its judgment against the Debtor.
In sum, there is absolutely no merit to the Motion in issue, and it will be denied in an accompanying Order.
In re Plumberex Specialty Products, Inc., 311 B.R. 551 (Bankr.C.D.Cal.,Jun 07, 2004)
[3][4][5] Section 362(d)(1) directs the court to grant relief from the automatic stay upon a showing of “cause.” FN9
Although the term “cause” is not defined in the Code, courts in the Ninth Circuit have granted relief from the stay
under § 362(d)(1) when necessary to permit pending litigation to be concluded in another forum if the non-
bankruptcy suit involves multiple parties or is ready for trial. See, e.g., Christensen v. Tucson Estates, Inc. (In re
Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir.1990) (stating that “[w]here a bankruptcy court may abstain
from deciding issues in favor of an imminent state court trial involving the same issues, cause may exist for lifting
the stay *557 as to the state court trial”); Packerland Packing Co. v. Griffith Brokerage Co. ( In re Kemble), 776
F.2d 802, 807 (9th Cir.1985) (affirming an order lifting the stay to permit a creditor to pursue a conversion and
fraudulent conveyance action pending in the federal district court following a remand of the case by the appellate
court for a retrial on the damages issue); Santa Clara, 180 B.R. at 567 (affirming an order lifting the stay to allow
prosecution of a pending Title VII claim against the debtor in the federal district court). Section 362(a)‘s legislative
history supports this conclusion:
(d) On request of a party in interest and after notice and a hearing, the court shall grant relief from the
stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or
conditioning such stay-
(1) for cause, including the lack of adequate protection of an interest in property of such party in
interest,...
[6][7] The burden of proof on a motion to modify the automatic stay is a shifting one. FN10 Sonnax Indus., Inc. v. Tri
Component Prods. Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280, 1285 (2nd Cir.1990). To obtain relief from the
automatic stay, the party seeking relief must first establish a prima facie case FN11 that “cause” exists for relief under
§ 362(d)(1). Mazzeo v. Lenhart (In re Mazzeo), 167 F.3d 139, 142 (2nd Cir.1999); Duvar Apt., Inc. v. Fed. Deposit
Ins. Corp. (In re Duvar Apt., Inc.), 205 B.R. 196, 200 (9th Cir. BAP 1996); FSFG Serv. Corp. v. Kim (In re Kim), 71
B.R. 1011, 1015 (Bankr.C.D.Cal.1987). Once a prima facie case has been established, the burden shifts to the debtor
to show that relief from the stay is unwarranted. Sonnax, 907 F.2d at 1285; Duvar Apt., 205 B.R. at 200. If the
movant fails to meet its initial burden to demonstrate cause, relief from the automatic stay should be denied.
Spencer v. Bogdanovich ( In re Bogdanovich), 292 F.3d 104, 110 (2nd Cir.2002); Mazzeo, 167 F.3d at 142; Kim, 71
B.R. at 1015.
In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under
subsection (a) of this section-
(1) the party requesting such relief has the burden of proof on the issue of the debtor’s equity in property;
and
(2) the party opposing such relief has the burden of proof on all other issues.
11 U.S.C. § 362(g).
FN11. A prima facie case requires the movant to establish “a factual and legal right to the relief that it
seeks.” In re Elmira Litho, Inc., 174 B.R. 892, 902 (Bankr.S.D.N.Y.1994); see In re Planned Systems, Inc.,
78 B.R. 852, 859-60 (Bankr.S.D.Ohio 1987). See generally, 3 Collier on Bankruptcy ¶ 362.10, at 362-117
(Alan N. Resnick & Henry J. Sommers eds., 15th ed. rev.2003).
[8][9] Motions for stay relief are summary proceedings. Johnson v. Righetti (In re Johnson), 756 F.2d 738, 740 (9th
Cir.1985), cert. denied, 474 U.S. 828, 106 S.Ct. 88, 88 L.Ed.2d 72 (1985); Santa Clara, 180 B.R. at 566. Stay
litigation is confined to the issues of “ ‘lack of adequate protection, the debtor’s equity in the property, and the
necessity of the property to an effective reorganization of the debtor, *558 or the existence of other cause for relief
from the stay.’ ” Computer Communications, 824 F.2d at 729,quotingS.Rep. No. 95-989, at 55 (1978), reprinted in
1978 U.S.C.C.A.N. at 5841; see Johnson, 756 F.2d at 740 (stating that the “validity of the claim or contract
underlying the claim is not litigated during the hearing”); Wade v. State Bar of Arizona (In re Wade), 115 B.R. 222,
230 (9th Cir. BAP 1990), aff’d, 948 F.2d 1122 (9th Cir.1991) (stating that “the assertion of counterclaims in relief
from stay litigation is improper”). The decision whether to grant or deny stay relief is within the broad discretion of
the bankruptcy court. Santa Clara, 180 B.R. at 566.
In re Elmore, 94 B.R. 670, 20 Collier Bankr.Cas.2d 1589, 18 Bankr.Ct.Dec. 1097, Bankr. L. Rep. P 72,562
(Bankr.C.D.Cal.,Dec 14, 1988)
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2430 Adequate Protection
51k2430.5 Particular Creditors or Claimants
51k2430.5(2) k. Mortgagees. Most Cited Cases
Secured creditor was not entitled to relief from stay based on lack of adequate protection, though debtor had failed
to make postconfirmation mortgage payments, **in that property was not declining in value; overruling In re Kim,
71 B.R. 1011. Bankr.Code, 11 U.S.C.A. § 362(d)(1)
In re Pettit, 217 F.3d 1072, 36 Bankr.Ct.Dec. 91, Bankr. L. Rep. P 78,213, 24 Employee Benefits Cas. 2695,
00 Cal. Daily Op. Serv. 5475, 2000 Daily Journal D.A.R. 7317, 4 Cal. Bankr. Ct. Rep. 68 (9th Cir.(Cal.),Jul 06,
2000)
Facts are not similar. New York law is distinguished from California
regarding summary judgment
51 Bankruptcy
51V The Estate
51V(C) Property of Estate in General
51V(C)1 In General
51k2534 k. Effect of State Law in General. Most
Cited Cases
Although question of whether an interest claimed by debtor is
“property of the estate” is federal question, which is to be decided
by federal law, **bankruptcy courts must look to state law to
determine whether and to what extent debtor has any legal or equitable
interests in property as of commencement of case. Bankr.Code, 11
U.S.C.A. § 541(a).
The key facts of the case are different and the opinion is not
analagous
A comparison of these facts with the facts of this case shows that
they do not compare
That they are materially different from this case and that In re
Pettit is inapplicable, is not applicable
Kwan then cites in re Pettit but a close look at the material facts of
in re Pettit shows that they
“The trial resulted in a $1.8 million jury verdict in favor of the Trust Funds and judgment was entered on
**April 15, 1996. The award also entitled the Trust Funds to attorneys’ fees, for which they claimed an excess
of $1.2 million. The Pettits appealed the judgment, which this court recently affirmed in a published opinion. See
Local 159 v. Nor-Cal Plumbing, 185 F.3d 978 (9th Cir.1999).”
**Following the trial, the Pettits moved for **(1) judgment as a matter of law; **(2) a new trial; **(3) a stay of
execution pending appeal to the Ninth Circuit; and **(4) a reduction or waiver of the funds in the court’s registry
serving as judgment security which, because the district court permitted the Pettits to make two withdrawals for
legal fees before trial, totaled approximately $523,000 at the time of the verdict. **On May 21, 1996, the
district court denied all of the Pettits’ motions and **ordered the balance of the registry funds to be released to
the Trust Funds.
**Accordingly, Judge Illston immediately signed the order releasing the funds in the court registry to the Trust
Funds. **The “Order Directing Clerk’s Release of Funds,” **executed and filed on
May 21, 1996, provided that:
**A judgment having been entered on the jury’s verdict herein, the Clerk of the court is hereby directed to release
all funds being held on deposit in this action and to disburse said funds, including accrued interest, to the law firm of
McCarthy, Johnson & Miller as attorneys for the plaintiffs herein.
The order disbursing the funds executed and filed on May 21, 1996, which was a ministerial
act, came after the judgment was already entered on April 15, 1996
In Soon Chey’s case the order was stated to be signed on April 28 but filed by the clerk
after the Notice of Bankruptcy Stay was filed . In In re Pettit, the order, [**A judgment
having been entered on the jury’s verdict herein, the Clerk of the court is hereby directed to release all
funds being held on deposit in this action and to disburse said funds, including accrued interest, to the law firm of
McCarthy, Johnson & Miller as attorneys for the plaintiffs herein.]
directing release of registry funds was executed by judge and filed on the same day.
(In re Pettit , supra, 217 F.3d at p. 1076) and came after the judgment was entered on
April 15, 1996.
In Soon Chey’s case when the minute order was filed there was no judgment filed for
summary judgment. And a judgment after a minute order is not a ministerial act
because it triggers the ten day time to file a motion for reconsideration and the court can
change its decision on sua sponte under the authorization of Section 1008 of the Code
of Civil Procedure of the State of California.
Bankruptcy 51 2392
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(B) Automatic Stay
51k2392 k. Property and Claims Subject to Stay. Most Cited Cases
Bankruptcy 51 2547
51 Bankruptcy
51V The Estate
51V(C) Property of Estate in General
51V(C)2 Particular Items and Interests
51k2547 k. Property Held in Trust or Custody for Debtor; Deposits. Most Cited Cases
Even assuming that contingent interest that debtors possessed in registry funds which they had deposited with
district court, as judgment security, was not extinguished upon entry of adverse judgment against them, any interest
that debtors had was nevertheless extinguished prepetition, **when district court judge signed order directing that
registry funds be released to opposing parties, **though it was not until one day later, after debtors had filed their
bankruptcy petition, that clerk of district court actually issued check in accordance with **district court’s disbursal
order; clerk of court’s issuance of check was mere “ministerial act,” the absence of which was not sufficient to
preserve any interest of debtors in funds, such as would be protected by automatic stay. Bankr.Code, 11 U.S.C.A. §§
362(a), 541(a).
Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522 (2nd Cir.(N.Y.) Apr 07, 1994)
Interpreting and applying federal law to, “and, on July 1, 1993, RHI brought on a
motion by order to show cause for judgment under the Agreements.” (Id. at p. 524)
Applying federal law to a federal motion by order to show cause for judgment under
the Agreements, applying federal law for motion for summary judgment different than
applying California motion for summary judgment
Document of the minute order and its signature with the date of April 28, 2009
claiming to be signed on the date, was effective on the date that it was entered by
the clerk not the date April 28, 2009.
Confusing distinction between minute order and judgment. In Rexnord judgment was
entered by the clerk the day after the the oral pronouncement
The minute order with the date stating to be signed on April 28, 2009 but filed on
later
Minute order with the signature is valid the date that it is filed not the date
that the signature states that it was signed.
In In re Pettit signed order for release of funds was followed by action of clerk
to issue check according to order.
“**The clerk’s subsequent involvement was only to issue the check, which was not a discretionary act and was thus
purely ministerial
Unless the parties waive notice or the court orders otherwise, the party
prevailing on any motion must, within five days of the ruling, mail or
deliver a proposed order to the other party for approval as conforming to the
court’s order. Within five days after the mailing or delivery, the other
party must notify the prevailing party as to whether or not the proposed
order is so approved. The opposing party must state any reasons for
disapproval. Failure to notify the prevailing party within the time required
shall be deemed an approval. Code of Civil Procedure section 1013, relating
to service of papers by mail, does not apply to this rule.
The prevailing party must, upon expiration of the five-day period provided
for approval, promptly transmit the proposed order to the court together with
a summary of any responses of the other parties or a statement that no
responses were received.
This rule does not apply if the motion was unopposed and a proposed order was
submitted with the moving papers, unless otherwise ordered by the court.
In federal court the order is final on rendition, in state court the order is not
final on rendition.
Plaintiff sued defendant for defendant’s alleged breach of settlement agreement in failing to make payments due
under agreement. The United States District Court for the Southern District of New York, Robert P. Patterson, Jr., J.,
entered money judgment in favor of plaintiff, and defendant, who had filed for Chapter 11 relief prior to entry of
judgment by clerk of court, appealed. The Court of Appeals, Miner, Circuit Judge, held that: **(1) plaintiff did not
breach its implied duty of good faith and fair dealing by agreeing to extend time for payments under settlement
agreement only in exchange for release of other unrelated obligations; and **(2) **ministerial act of entry of
judgment by clerk of court did not constitute the “continuation of judicial proceeding” against debtor, such as would
violate automatic stay.
Affirmed.
West Headnotes
95 Contracts
95VI Actions for Breach
95k331 Pleading
95k332 Declaration, Complaint, or Petition in General
95k332(1) k. In General. Most Cited Cases
Under New York law, action for breach of contract requires proof of existence of contract, of performance of
contract by one party, of breach by other party, and of damages.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(D) Enforcement of Injunction or Stay
51k2462 k. Validity of Acts in Violation of Injunction or Stay. Most Cited Cases
Commencement or continuation of judicial action or proceeding in violation of automatic stay is void and without
vitality. Bankr.Code, 11 U.S.C.A. § 362(a)(1).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(B) Automatic Stay
51k2394 Proceedings, Acts, or Persons Affected
51k2395 k. Judicial Proceedings in General. Most Cited Cases
Simple, ministerial act of entry of judgment by clerk of court, in accordance with oral directions for entry of
judgment given by district judge prior to judgment debtor’s filing for Chapter 11 relief, did not constitute the
“continuation of judicial proceeding” in violation of automatic stay, though judgment debtor filed for bankruptcy
between time of trial judge’s oral pronouncement and entry of judgment by clerk. Bankr.Code, 11 U.S.C.A. § 362(a)
(1).
Defendant-appellant Maurice Bidermann appeals from a money judgment entered in the United States District Court
for the Southern District of New York (Patterson, J.) in favor of plaintiff-appellee Rexnord Holdings, Inc. (“RHI”)
in the amount of $12,989,312.64, the district court having found that Bidermann was in breach of his obligations
under a Settlement Agreement and a Stock Purchase Agreement (“Agreements”) dated November 25, 1991. The
Agreements represented the resolution of a contract action brought by RHI against Bidermann. The breach occurred
when Bidermann defaulted on a scheduled payment due under the provisions of the Agreements. On appeal,
Bidermann contends that the district court erred in directing judgment for RHI because there were genuine issues of
material fact concerning RHI’s breach of the Agreements and its lack of good faith. Bidermann also argues that the
judgment should be vacated because it was entered after the filing of his Chapter 11 bankruptcy petition, in violation
of the automatic stay provided by 11 U.S.C. § 362. For the reasons that follow, we affirm.
BACKGROUND
On August 1, 1991, RHI commenced an action against Bidermann in the United States District Court for the
Southern District*524 of New York for breach of contract for Bidermann’s failure to purchase securities of
Bidermann Industries U.S.A., Inc. from RHI. RHI originally had purchased the securities from Bidermann Industries
subject to an option agreement providing that Bidermann would buy back the securities upon the exercise of the
option by RHI. When RHI later sought to exercise the buy-back option, Bidermann refused to purchase the
securities.
The parties resolved their dispute by executing the Agreements. The Agreements required Bidermann to pay RHI
$22,571,748 in five installments: four payments in the amount of $5,000,000 each to be made on November 11,
1991, June 30, 1992, December 31, 1992 and June 30, 1993, and one final payment of $2,571,748 to be made on
December 30, 1993. The terms of the Agreements allowed Bidermann a grace period until the following payment
date before his failure to pay an installment would be an event of default under the Agreements. FN1 On November
26, 1991, the parties stipulated to an order of dismissal of RHI’s complaint. The Stipulation and Order of Dismissal
provided that the district court would retain jurisdiction for the purpose of enforcing the Agreements. The
Agreements provide that the district court “retains jurisdiction over the parties for the purpose of enforcing the
[Agreements]. Any proceeding with respect to or arising out of [the Agreements] by or between the parties hereto
shall be brought before the [district] court upon notice by personal service upon the attorneys for the parties.”
It is undisputed that Bidermann failed to remit the scheduled December 31, 1992 payment, but that this failure was
not deemed a default until June 30, 1993. Under the terms of the Agreements, RHI could accelerate the amounts due
or **“reduce its claim to judgment by any available judicial procedure” in the event of a default. The Agreements
also provided that the “remedies provided herein are cumulative and not exclusive of any remedies provided by law
or any other agreement.”
On June 28, 1993, Bidermann informed RHI and its CEO, Jeffrey Steiner, that he could not meet the impending
June 30 deadline for payment. Bidermann requested a 90-day moratorium on payments due under the Agreements to
allow him to complete refinancing efforts or at least the opportunity to make a good-faith partial payment of the
December 31, 1992 installment. On June 30, RHI allegedly informed Bidermann that it would not agree to the
moratorium unless Bidermann made certain concessions on other business and financial issues that were unrelated to
Bidermann’s obligations under the Agreements. Bidermann rejected this proposal and, on July 1, 1993, RHI brought
on a motion by order to show cause for judgment under the Agreements.
On that same day, RHI also effected service in France of orders attaching Bidermann’s principal assets there,
including shares of stock and bank accounts. These orders had been obtained ex parte by RHI from the Tribunal de
Grande Instance in Paris on June 11, 1993, but did not become effective until July 1, the day after Bidermann was
deemed in default of the Agreements. Also on July 1, RHI, ex parte, obtained from the district court an order of
attachment for Bidermann’s assets in the United States and served that order.
At a hearing that began at 2:30 p.m. on July 7, 1993, the district court heard arguments of counsel regarding the
entry of judgment in favor of RHI. In support of its motion, RHI had submitted on July 1, 1993 an affidavit, with
attached exhibits, subscribed by Donald Miller, Vice President and General Counsel of RHI. On July 7, 1993,
Bidermann submitted a memorandum of law in opposition to the motion for judgment, but failed to submit any
affidavits or documentary evidence. During the hearing, Bidermann’s counsel conceded the default, but argued that
RHI’s application for an ex parte order of attachment in France violated both the express provisions of the
Agreements and RHI’s implied obligations of good faith and fair dealing. Counsel also alleged that *525 RHI
sought to condition negotiations regarding the moratorium upon a waiver by Bidermann of certain rights in
unrelated transactions that he had with RHI and Steiner. **At the conclusion of the hearing, the district court stated:
“I’m going to order that judgment be entered in favor of [RHI] in the amount of $12,946,748 principal and accrued
interest.... So I’m going to endorse the original documents to that effect on this application.... I want to enter this
today.”
That same day, Bidermann’s counsel advised the district court and RHI by letter that Bidermann had commenced a
proceeding under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York by filing a petition at 3:18 in the afternoon, following the district court hearing. **The
following day, July 8, the money judgment was entered on the district court docket by the court clerk.FN2 This appeal
was taken following the entry of an order by the bankruptcy court modifying the automatic stay to permit
Bidermann to appeal from the district court’s judgment.
FN2. Although there is some confusion regarding whether the judgment was entered on July 7 or 8, **we assume
for the purpose of our discussion that the judgment was entered on July 8, after the filing of Bidermann’s Chapter 11
petition.
DISCUSSION
On appeal, Bidermann argues that the judgment of the district court directing payment to RHI for the total amount
owed under the Agreements should be vacated for two reasons. He first contends that there were genuine issues of
material facts that should have precluded the district court from summarily granting judgment and, second, that the
judgment is void because it was entered in contravention of the automatic stay that took effect when Bidermann
filed his bankruptcy petition. We consider each claim in turn.
1. Summary Judgment
[1][2][3] Although RHI’s motion was for entry of judgment upon Bidermann’s default under the Agreements, both
parties have agreed that the standard applicable to a motion for summary judgment under Rule 56 of the Federal
Rules of Civil Procedure should be applied.
Accordingly, we will review the district court’s grant of judgment under those standards for the purpose of deciding
this appeal. Summary judgment is appropriate “if the pleadings ... together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); accord Brown v.
E.F. Hutton Group, Inc., 991 F.2d 1020, 1030 (2d Cir.1993). Once the moving party properly supports its motion
for summary judgment, the non-moving party must establish a genuine issue of material fact in order to preclude a
grant of summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 106 S.Ct.
1348, 1355-56, 89 L.Ed.2d 538 (1986). “[T]he mere existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for summary judgment[.]” Anderson, 477 U.S. at 247-48,
106 S.Ct. at 2510. We review the grant of a motion for summary judgment de novo, see Peoples Westchester Sav.
Bank v. FDIC, 961 F.2d 327, 330 (2d Cir.1992), and conclude that it was proper in this case.
[4][5] Initially, we note that RHI established a prima facie right to summary judgment. A settlement agreement is to
be construed according to general principles of contract law. See City of Hartford v. Chase, 942 F.2d 130, 134 (2d
Cir.1991). Under New York law,FN3 an action for breach of contract requires proof of (1) a contract; (2) performance
of the contract by one party; (3) breach by the other party; and (4) damages. Bank Itec N.V. v. J. Henry Schroder
Bank & Trust Co., 612 F.Supp. 134, 137-38 (S.D.N.Y.1985). Here, it is manifest that there was a contract between
RHI and Bidermann and that RHI had performed its obligations thereunder. Moreover, RHI submitted the *526
affidavit of Miller, together with the Agreements, to establish that there was a breach by Bidermann and that RHI
was entitled to judgment for damages in the amount owed under the Agreements. Indeed, it is uncontroverted that
Bidermann was in default of his obligations under the Agreements. Therefore, it is clear that RHI established a
breach of contract by Bidermann under New York law.
FN3. The Agreements provide that New York law governs their construction and enforcement.
[6] Since RHI properly supported its motion, Bidermann then had the burden of showing that there was a genuine
issue of material fact to preclude summary judgment in favor of RHI. Bidermann, however, failed to submit
competent evidence to meet his burden. SeeFed.R.Civ.P. 56(e) (adverse party must respond to summary judgment
motion by affidavit or other appropriate evidence and failure to do so results in the entry of judgment if it otherwise
is appropriate). Accord Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986)
(Rule 56(e) requires that non-movant with burden of proof on dispositive issue oppose proper summary judgment
motion with any of the evidentiary materials-affidavit, depositions, answers to interrogatories and admissions-listed
in Rule 56(c)); Boruski v. United States, 803 F.2d 1421, 1428 (7th Cir.1986) (in submitting unverified memorandum
plaintiff failed to meet requirement of defeating summary judgment with counter-affidavits or other competent
evidentiary material); Brown v. Chaffee, 612 F.2d 497, 504 (10th Cir.1979) (once movant established prima facie
case for summary judgment, opponent must show by “affidavits or otherwise” that there is a genuine issue of fact).
Although Bidermann pointed to certain issues of fact in his memorandum of law and at oral argument, he failed to
provide evidentiary support for his contentions. See British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th
Cir.1978) (legal memoranda and oral argument are not evidence and cannot create issues of fact capable of defeating
otherwise valid motion for summary judgment); Smythe v. American Red Cross Blood Servs., 797 F.Supp. 147, 152
(N.D.N.Y.1992) (same); Paulson, Inc. v. Bromar, Inc., 775 F.Supp. 1329, 1332 (D.Haw.1991) (same). Since
Bidermann failed to offer competent evidence raising a genuine issue of material fact sufficient to preclude
summary judgment, entry of judgment in favor of RHI was proper.FN4
2. Automatic Stay
[10][11][12] Bidermann also argues that the judgment of the district court should not be given effect because it was
docketed after the filing of his Chapter 11 petition and thus was entered in violation of the automatic stay in
bankruptcy. Section 362 of the Bankruptcy Code provides that the filing of a bankruptcy petition creates an
automatic stay against “the commencement or continuation ... of a judicial, administrative, or other action or
proceeding against the debtor that was or could have been commenced before the commencement of the case.” 11
U.S.C. § 362(a)(1). The stay is effective immediately upon the filing of the petition, Shimer v. Fugazy (In re Fugazy
Express, Inc.), 982 F.2d 769, 776 (2d Cir.1992); Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194, 1204 (3d
Cir.1991), and any proceedings or actions described in section 362(a)(1) are void and without vitality if they occur
after the automatic stay takes effect, see 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc. (In re 48th St.
Steakhouse, Inc.), 835 F.2d 427, 431 (2d Cir.1987), cert. denied, 485 U.S. 1035, 108 S.Ct. 1596, 99 L.Ed.2d 910
(1988).
While the commencement or continuation of a judicial action or proceeding clearly is subject to the automatic stay
of section 362, we do not believe that the simple and “ministerial” act of the entry of a judgment by the court clerk
constitutes the continuation of a judicial proceeding under section 362(a)(1). See Savers Fed. Sav. & Loan Assoc. v.
McCarthy Constr. Co. ( In re Knightsbridge Dev. Co.), 884 F.2d 145, 148 (4th Cir.1989) (noting that, while court
must halt deliberations when bankruptcy intrudes, an arbitration award may be approved “as valid under the
[automatic] stay only if the panel decided it in word and deed before [the petition date], leaving for post-petition
achievement only the clerical act of recording the award”); *528Teachers Ins. & Annuity Ass’n v. Butler, 58 B.R.
1019, 1022 (S.D.N.Y.) (rejecting argument that entry of judgment was “void and of no legal force or effect” on
ground that filing of the signed judgment and entry on the docket by the clerk “was a purely ministerial act” that did
not violate the automatic stay of § 362), motion to stay granted in part and denied in part, 803 F.2d 61 (2d
Cir.1986). See also Heikkila v. Carver (In re Carver), 828 F.2d 463, 464 (8th Cir.1987) (rejecting debtor’s claim
that “routine certification” by clerk of court that debtor failed to redeem contract within redemption period was
“judicial proceeding” within meaning of § 362).
In the present case, the district court “So ordered” the entry of judgment and endorsed RHI’s motion papers to that
effect on July 7, prior to the filing of Bidermann’s bankruptcy petition later that afternoon. The judicial proceedings
were concluded at the moment the judge directed entry of judgment, a decision on the merits having then been
rendered. See Teacher’s Ins. & Annuity Ass’n v. Butler, 803 F.2d 61, 66 (2d Cir.1986) (judgment entered on docket
after automatic stay became effective nevertheless was final for res judicata purposes). The clerk’s subsequent entry
of the judgment, after the automatic stay became effective, therefore did not violate section 362(a)(1). See
Knightsbridge Dev. Co., 884 F.2d at 148 (section 362(a)(1) permits “rote post-petition activity” according to “plain
sense” of statute).
The authorities relied upon by Bidermann as suggesting that entry of judgment violates the automatic stay are
inapposite because the cases cited involve judicial decisions made after the filing of petitions in bankruptcy. Those
cases do not implicate mere ministerial acts performed by the clerk following the completion of the judicial
function. See, e.g., Ellis v. Consol. Diesel Elec. Corp., 894 F.2d 371, 372-73 (10th Cir.1990) (district court decision
granting summary judgment two weeks after bankruptcy petition was filed held invalid); Ellison v. Northwest Eng’g
Co., 707 F.2d 1310, 1311 (11th Cir.1983) (automatic stay provision barred appellate court from rendering decision
on case that had been briefed and argued prior to commencement of stay). Because the entry of a judgment on the
court docket is not the continuation of a judicial proceeding within the meaning of section 362(a)(1), the judgment
entered in this case was not entered in violation of the automatic stay and, accordingly, is valid.
“We agree with the court in ***258Kerns v. CSE Ins. Group, supra, 106
Cal.App.4th at page 389, 130 Cal.Rptr.2d 754, that "by eliminating the
distinction between a trial court’s action taken sua sponte and that made in
response to a litigant’s motion, the more recent cases such as Remsen and
Wozniak go too far toward eviscerating the clear jurisdictional language of
section 1008, essentially rendering the provisions of the statute
meaningless."
Such a construction would abrogate the provisions of section 1008 of the Code
of Civil Procedure.]
Ten Eyck v. Industrial Forklifts Co., 216 Cal.App.3d 540, 265 Cal.Rptr. 29
(Cal.App. 2 Dist.,Dec 12, 1989)
FN4. Section 668.5 states: “In those counties where the clerk of the court
places individual judgments in the file of actions and either [1] a microfilm
copy of the individual judgment is made, or [2] the judgment is entered in
the register of actions, or [3] into the court’s electronic data-processing
system, prior to the placement of the judgment in the file of actions, the
clerk shall not be required to enter judgments in a judgment book, and the
date of filing the judgment with the clerk shall constitute the date of its
entry.” (Emphasis added.)
Nor is the result any different under rule 2(b)‘s second alternative for
accomplishing entry of a judgment. We hold that the word “filing,” as used in
rule 2(b)‘s directive “The date of entry of a judgment shall be ... the date
of filing the judgment with the clerk pursuant to [section 668.5],” requires
only that the judgment be signed by the judge and file stamped by the clerk;
it does not require that the judgment be entered in the register of actions.
(a) Separate Document. Every judgment and amended judgment must be set
out in a separate document, but a separate document is not required
for an order disposing of a motion:
(4) for a new trial, or to alter or amend the judgment, under Rule 59;
or
(1) Without the Court’s Direction. Subject to Rule 54(b) and unless
the court orders otherwise, the clerk must, without awaiting the
court’s direction, promptly prepare, sign, and enter the judgment
when:
(2) Court’s Approval Required. Subject to Rule 54(b), the court must
promptly approve the form of the judgment, which the clerk must
promptly enter, when:
(B) the court grants other relief not described in this subdivision
(b).
(B) 150 days have run from the entry in the civil docket.
(d) Request for Entry. A party may request that judgment be set out in
a separate document as required by Rule 58(a).
(e) Cost or Fee Awards. Ordinarily, the entry of judgment may not be
delayed, nor the time for appeal extended, in order to tax costs
or award fees. But if a timely motion for attorney’s fees is made
under Rule 54(d)(2), the court may act before a notice of appeal
has been filed and become effective to order that the motion have
the same effect under Federal Rule of Appellate Procedure 4(a)(4)
as a timely motion under Rule 59.
In In Re Pettit 217 F.3d 1072, 1078 (9th Cir. (Cal.), Jul 06, 2000)
whether and to what extent the debtor has any legal or equitable
(1979).”
that made the order, to reconsider the matter and modify, amend,
or revoke the prior order. The party making the application shall
what judge, what order or decisions were made, and what new or
Pacific, Inc. v. Coldwell Banker & Co. (1981) 117 Cal.App.3d 248, 252-
253, 172 Cal.Rptr.597 (prior law of CCP 1008); see also Stratton v.
First Nat.Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1081-1082, 258
Cal.Rptr. 887)]”
And,
“On June 28, 1993, Bidermann informed RHI and its CEO, Jeffrey
Steiner, that he could not meet the impending June 30 deadline for
payment. Bidermann requested a 90-day moratorium on payments due under
the Agreements to allow him to complete refinancing efforts or at
least the opportunity to make a good-faith partial payment of the
December 31, 1992 installment. On June 30, RHI allegedly informed
Bidermann that it would not agree to the moratorium unless Bidermann
made certain concessions on other business and financial issues that
were unrelated to Bidermann’s obligations under the Agreements.
Bidermann rejected this proposal and, on July 1, 1993, RHI brought on
a motion by order to show cause for judgment under the Agreements.”
(Rexnord Holdings, Inc. v. Bidermann, supra, 21 F.3d 522 at p. 524)
default under the Agreements, both parties have agreed that the
In In Re Pettit 217 F.3d 1072, 1075 (9th Cir.(Cal.) Jul 06, 2000, the
court stated,”
The Pettits are debtors in a bankruptcy case pending before the United
Trust Funds, which are established under Section 302 of the Labor
bargaining agreement.”
“In 1987, the Trust Funds sued the Pettits in the United States
District Court for the Northern District of California for violations
judgment and remanded the matter for trial.” (In Re Pettit, supra, 217
F.3d 1075)
Trust Funds and judgment was entered on April 15, 1996. The award also
entitled the Trust Funds to attorneys’ fees, for which they claimed an
excess of $1.2 million. The Pettits appealed the judgment, which this
Following the trial, the Pettits moved for (1) judgment as a matter of
law; (2) a new trial; (3) a stay of execution pending appeal to the
district court permitted the Pettits to make two withdrawals for legal
verdict. On May 21, 1996, the district court denied all of the
F.3d at p. 1075)
“Judge Illston immediately signed the order releasing the funds in the
Release of Funds,’ executed and filed on May 21, 1996, provided that:
A judgment having been entered on the jury’s verdict herein, the Clerk
Because no one was available in the clerk’s office after the hearing,
counsel for the Trust Funds could not get a check for the registry
Hours after Judge Illston signed the order directing the clerk to
Pettit was filed at 8:49 p.m. on May 21, 1996, and the petition for
their corporation, North Bay Plumbing, was filed earlier in the day at
4:56 p.m. After filing the petitions, counsel for the Pettits notified
the Trust Funds’ counsel that the Pettits and North Bay had filed
attorney with McCarthy, Johnson, counsel for the Trust Funds, went to
the clerk’s office at the United States District Court for the
Funds’ order signed the day before by Judge Illston.” (In Re Pettit,
before the pending trial, it failed to take the next step and analyze
the property interests after judgment was entered against them. The
had in the registry funds was at the time the bankruptcy petitions
were filed. The Pettits did not file their bankruptcy petitions until
May 21, 1996, over a month after judgment was entered.” (In Re Pettit,
Credit Union (In re Soares), 107 F.3d 969, 973-74 (1st Cir.1997)
Bidermann, 21 F.3d 522, 527 (2nd Cir.1994) (holding that act of entry
of judgment by court clerk was ministerial act and did not violate
circuit and apply it to the case before us.” (In Re Pettit, supra 217
F.3d at p. 1080)
969, 974 (1st Cir.1997), the court cited,” (stating that In re Capgro
Leasing Assocs., 169 B.R. 305, 315-16 (Bankr.E.D.N.Y.1994) the court
where the judicial function has been completed and the clerk has
merely to perform the rote function of entering the judgment upon the
course of carrying out the core judicial function are not ministerial
automatic stay.”
“The Court finds that Judge LaBuda was performing a judicial function
*404 when he signed the judgment a month after the Debtors’ filed
See also Musso v. Otashko 468 F.3d 99, (2nd Cir.(N.Y.),Nov 06, 2006),
bankruptcy appellate panel, but the motion shall show why the relief,
condition the relief it grants under this rule on the filing of a bond
required.
County of Carson City, 303 F.3d 959, (9th Cir.(Nev.),Aug 26, 2002)
questions are raised and the balance of hardships tips in its favor.’
merits of the asserted claims and the harm or hardships faced by the
citizen.”
And
“A right to land, in its broadest sense, implies a right to the
possession” (Billings v. Hall, supra 7 Cal. at p. 7)
provides:
burden of proof.
have not shown evidence that negatived the joint tenancy of Soon Chey
and her deceased husband Young Chey or that Soon Chey would not be
balancing of the harms that she would not suffer the irreparable
injury and the greater harms. And that the property Property
Soon Chey will suffer the balance of the harms, the loss of personal residential
Cite the balance of the hardships used in motion for preliminary injunction.
Is there a necessity for file stamp in state court for minute order?
Beaudry Motor Co. v. Abko Props., Inc., 780 F.2d 751, 754-55 (9th Cir.1986)
(holding that a civil minute order that is prepared at the direction of the
district judge, noted in the docket, **file stamped, and ended with the
language “IT IS SO ORDERED” “clearly put plaintiff’s counsel on notice that
an order had been entered against his client” and satisfied Rule 58 despite
the lack of entry of a formal, separate document).
never a judgment
excellent case
**[11] Furthermore, a creditor has an affirmative duty to take steps to vacate any judgments signed and entered after
the filing of a bankruptcy petition in violation of the automatic stay. See Sucre, supra, at 348 (Upon learning of a
bankruptcy filing, a creditor has an affirmative duty to return the debtor to a status quo position as of the time of the
filing of the petition). See also In re Patti, 2001 WL 1188218 at *7 (Bankr.E.D.Pa. Sept. 14, 2001), in which a
creditor was held to have willfully violated the stay even though the action that constituted the violation was taken
by the New York State Court and not the creditor, because the creditor had an affirmative duty to vacate the New
York judgment signed and entered after the filing of a bankruptcy petition, and failed to do so. Sullivan County
maintains that it did not take any action to enforce its judgment, which the County does not dispute was entered
during the pendency of the Debtors’ first bankruptcy filing. On the other hand, Sullivan County did not provide this
Court with any evidence that it took action to vacate the judgment signed and entered in violation of the stay, despite
having an affirmative duty to do so.
[12][13] **The Court finds that Judge LaBuda was performing a judicial function *404 when he signed the
judgment a month after the Debtors’ filed their first bankruptcy proceeding. Signing a judgment constitutes the
continuation of a judicial proceeding against the debtor within the meaning of 11 U.S.C. § 362(a)(1). See In re
Capgro Leasing Assoc., 169 B.R. 305, 316 (Bankr.E.D.N.Y.1994). [FN4] Judicial actions taken against a debtor are
void ab initio, absent a relief from the automatic stay. See In re Patti, supra * 7; see also In re Best Payphones, Inc.,
279 B.R. 92, 97-98 (Bankr.S.D.N.Y.2002)(Bernstein, C.J.)(any proceedings or actions described in § 362(a)(1) are
void and without vitality if they occur after the automatic stay takes effect). As actions taken in violation of the
automatic stay are void, and not voidable, the Debtors do not have to reopen their prior Chapter 13 case to redress
the stay violation. See In re Prine, supra, at 612; D’Alfonso supra, at 508; In re Schwartz, supra at 571-2. The Court
holds that the judgment signed by Judge LaBuda after the filing of the petition was a violation of the automatic stay
and therefore a nullity. Furthermore, Sullivan County failed to take affirmative action to vacate the judgment signed
by the State Court judge in violation of the stay. Therefore, Sullivan County’s actions amounted to a willful
violation of the automatic stay, and Sullivan County is liable for any actual damages as well as Debtors’ attorney’s
fees. See 11 U.S.C. § 362(h). [FN5]
FN4. The Court recognizes that the entry of the judgment by the clerk might have been a mere "ministerial act" and
might not constitute the continuation of judicial proceeding pursuant to 11 U.S.C. § 362(a)(1). See Rexnord
Holdings, Inc. v. Bidermann, 21 F.3d 522 (2d Cir.1994).
Musso v. Ostashko, 468 F.3d 99, 56 Collier Bankr.Cas.2d 1785, Bankr. L. Rep. P 80,771 (2nd Cir.
(N.Y.),Nov 06, 2006)
If, then, one of the primary objects of government is to enable the citizen
to acquire, possess, and defend property, and this right has been guaranteed
by the Constitution, how can it be impaired by legislation? It will not be
denied that the Legislature*7 possesses uncontrolled power over the subject
of the remedy or process of her Courts, but when the remedy is so altered as
to affect the right, then it becomes a question, how far such legislation is
legitimate, the only question of difficulty being, in many cases, to draw the
line of demarkation between the right of property and the remedy. **A right
to land, in its broadest sense, implies a right to the possession, and the
profits accruing therefrom, since without the latter, the former can be of no
value.
Poplar Grove Planting and Refining Co., Inc. v. Bache Halsey Stuart, Inc.,
600 F.2d 1189, 28 Fed.R.Serv.2d 213 (5th Cir.(La.) Aug 20, 1979)
**** THIS DOCUMENT IS CURRENT THROUGH THE JUNE 2007 SUPPLEMENT ****
Bad outcome
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.1 k. In General. Most Cited Cases
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.21 k. Likelihood of Success, or Presence of
Substantial Questions, Combined with Other Elements. Most Cited Cases
Traditional equitable criteria for granting preliminary injunctive relief
are: strong likelihood of success on merits, possibility of irreparable
injury to plaintiff if preliminary relief is not granted, balance of
hardships favoring plaintiff, and advancement of public interest;
alternatively, court may issue preliminary injunction if moving party
demonstrates either combination of probable success on merits and possibility
of irreparable injury, or that serious questions are raised and balance of
hardships tips sharply in his favor.
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.21 k. Likelihood of Success, or Presence of
Substantial Questions, Combined with Other Elements. Most Cited Cases
Under test for propriety of preliminary injunctive relief, asking whether
serious questions are raised and balance of hardships tips sharply in favor
of moving party, even if balance of hardships tips decidedly in favor of
moving party, it must be shown as irreducible minimum that there is fair
chance of success on merits.
(1) That in light of this Court’s decision of September 20, 1982, 23 B.R. 276
(D.C.1982) ruling that the Bankruptcy Court did not have the authority to
appoint a Special Master for the disposition of product liability claims, and
recognizing that the Special Master’s only purpose was to formulate the
challenged Program, the appellants are likely to succeed on the merits of
their appeal challenging the Bankruptcy Court’s approval of the Program;
(2) That irreparable harm will result to appellants and the judicial system
from the continued implementation of a Program which may be determined to be
constitutionally impermissible;
(3) That no other parties will be substantially harmed by this Court’s stay,
maintaining the status quo for the next few days pending a decision on the
merits of the appeal; and
(4) That the public interest will be served by prohibiting all parties from
incurring additional expenses and further depleting the assets of the
Bankrupt’s estate through continued implementation of the challenged Program.
For the above reasons, the Stay is continued until October 1, 1982.
Soon Chey will suffer irreparable injury, loss of single family residential
property for which there is no pecuniary compensation for its loss.
Cite the balance of the hardships used in motion for preliminary injunction.
Winter v. Natural Resources Defense Council, Inc., 129 S.Ct. 365, 367 172
L.Ed.2d 249
**(a) The lower courts held that when a plaintiff demonstrates a strong
likelihood of success on the merits, a preliminary injunction may be entered
based only on a “possibility” of irreparable harm. **The “possibility”
standard is too lenient. This Court’s frequently reiterated standard requires
plaintiffs seeking preliminary relief to demonstrate that irreparable injury
is likely in the absence of an injunction.
Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867,
00 Cal. Daily Op. Serv. 1365, 2000 Daily Journal D.A.R. 1931 (9th Cir.(Cal.)
Feb 23, 2000)
Walczak v. EPL Prolong, Inc., 198 F.3d 725, 45 Fed.R.Serv.3d 296, 1999
Daily Journal D.A.R. 12,213 (9th Cir.(Cal.),Dec 03, 1999)
78 Civil Rights
78III Federal Remedies in General
78k1449 Injunction
78k1457 Preliminary Injunction
78k1457(2) k. Public Accommodations or Facilities. Most
Cited Cases
(Formerly 78k268)
High probability of success on the merits of claim, that rule restricting
access to portions of government building by persons wearing clothing
indicating biker organization affiliation violated First Amendment, warranted
preliminary injunctive relief; ban was unreasonable inasmuch as no evidence
showed existence of risks asserted, ban was not viewpoint neutral inasmuch as
no evidence showed it was not motivated by nature of the message, loss of
First Amendment freedoms constituted irreparable harm, and the public
interest supported protection of First Amendment activities. U.S.C.A.
Const.Amend. 1.
78 Civil Rights
78III Federal Remedies in General
78k1449 Injunction
78k1457 Preliminary Injunction
78k1457(2) k. Public Accommodations or Facilities. Most
Cited Cases
(Formerly 78k268)
High probability of success on the merits of claim, that rule restricting
access to portions of government building by persons wearing clothing
indicating biker organization affiliation violated First Amendment, warranted
preliminary injunctive relief; ban was unreasonable inasmuch as no evidence
showed existence of risks asserted, ban was not viewpoint neutral inasmuch as
no evidence showed it was not motivated by nature of the message, loss of
First Amendment freedoms constituted irreparable harm, and the public
interest supported protection of First Amendment activities. U.S.C.A.
Const.Amend. 1.
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.1 k. In General. Most Cited Cases
Preliminary injunctive relief is available to a party who demonstrates either
(1) a combination of probable success on the merits and the possibility of
irreparable harm, or (2) that serious questions are raised and the balance of
hardships tips in its favor.
[5] Injunction 212 138.15
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.15 k. Balancing Hardships or Equities. Most
Cited Cases
If the movant has a 100% probability of success on the merits, this alone
entitles it to reversal of a district court’s denial of a preliminary
injunction, without regard to the balance of the hardships.
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.12 k. Harm to Defendant or Third Parties;
Public Interest. Most Cited Cases
In cases where the public interest is involved, the district court, in
determining whether preliminary injunctive relief is warranted, must also
examine whether the public interest favors the plaintiff.
Students of California School for the Blind v. Honig, 736 F.2d 538, 18 Ed.
Law Rep. 260, 15 Fed. R. Evid. Serv. 1802 (9th Cir.(Cal.),Jun 29, 1984)
[3][4] We note as a threshold matter that the district court applied the
proper legal standard for granting a preliminary injunction. In its
Memorandum of Decision filed August 17, 1982, the district court found that
the appellants’ contentions raised serious questions regarding the seismic
safety of the Fremont facility and that the dangers to the students if they
remained at the facility decidedly outweighed the hardships the state
defendants would sustain if additional seismic tests were ordered. In this
circuit, a preliminary injunction is properly granted if the moving party has
demonstrated “either a combination of probable success on the merits and a
possibility of irreparable injury, or that serious questions are raised and
the balance of hardships tips sharply in the moving party’s favor.” Beltran
v. Myers, 677 F.2d 1317, 1320 (9th Cir.1982) (emphasis in original). The
“balance of hardships” is a critical element in justifying a preliminary
injunction, and the public interest is also an important factor strongly to
be considered. See Lopez v. Heckler, 725 F.2d at 1498 (citing extensive
authority).
Beltran v. Myers, 677 F.2d 1317, 1320 (9th Cir.(Cal.),May 25, 1982)
Balancing of harms
At p. 1322,
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)4 Proceedings
212k147 k. Evidence and Affidavits. Most Cited Cases
In order for plaintiff to succeed in motion for preliminary injunction, it is
not necessary that he prove his case with absolute certainty, but only that
he raise questions going to the merits so serious, substantial, difficult,
and doubtful as to make them fair grounds for litigation and for more
deliberate investigation.
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.6 k. Nature and Extent of Injury; Irreparable
Injury. Most Cited Cases
(Formerly 212k136(3))
“Irreparable injury” which must be shown in order to support granting of
preliminary injunction, is injury which is certain and great and which cannot
be compensated by award of money damages. Fed.Rules Civ.Proc. rule 65, 28
U.S.C.A.
Federal Ins. Co. v. County of Westchester, 921 F.Supp. 1136 (S.D.N.Y. Apr
08, 1996)
Without of bond
[2][3][4] Second, the Court concludes that the defendant is likewise not
entitled to a stay without bond under Fed.R.Civ.P. 62(d). In the familiar
formula of the Supreme Court, determination of whether an appellant is
entitled to a stay under Rule 62(d) requires the court to assess: “(1)
whether the stay applicant has made a strong showing that he is likely to
succeed on the merits; (2) whether the applicant will be irreparably injured
absent a stay; (3) whether issuance of the stay will substantially injure the
other parties interested in the proceeding; and (4) where the public interest
lies.” Hilton v. Braunskill, 481 U.S. 770, 776, 107 S.Ct. 2113, 2119, 95
L.Ed.2d 724 (1987). If an appellant qualifies for a stay under this four-part
test, the district court has some discretion to dispense with the further
requirement of a bond, see Morgan Guaranty, 702 F.Supp. at 65,supra; but the
Court need not reach this further issue here, for (as the Court preliminarily
indicated at the March 13 hearing) the County has failed to carry its burden
under the four-part test.
Morgan Guar. Trust Co. of New York v. Republic of Palau, 702 F.Supp. 60
(S.D.N.Y. Dec 09, 1988)
[5] Despite these advantages, however, the Second Circuit has recognized that
“an inflexible requirement for impressment of a lien and denial of a stay of
execution unless a supersedeas bond in the full amount of the judgment is
posted can in some circumstances be irrational, unnecessary, and self-
defeating, amounting to a confiscation of the judgment debtor’s property
without due process.” Texaco Inc. v. Pennzoil Co., 784 F.2d 1133, 1154 (2d
Cir.1986), rev’d on other grounds, 481 U.S. 1, 107 S.Ct. 1519, 95 L.Ed.2d 1
(1987). Accordingly, the district court has discretion to grant a stay of
judgment with no supersedeas bond or with only a partial supersedeas bond if
doing so does not unduly endanger the judgment creditor’s interest in
ultimate recovery. See id. at 1155; see, e.g., Miami Int’l Realty Co. v.
Paynter, 807 F.2d 871 (10th Cir.1986) ($500,000 malpractice insurance
proceeds placed in escrow and restrictions on transfer of assets to secure
$2.1 million judgment); Trans World Airlines, Inc. v. Hughes, 314 F.Supp. 94
(S.D.N.Y.1970) ($75 million bond to secure a judgment of $145,448,140); C.
Albert Sauter Co. v. Richard S. Sauter Co., 368 F.Supp. 501 (E.D.Pa.1973)
( $100,000 bond, stock placed in escrow, and restrictions imposed on
financial commitments to secure $1.2 million judgment).
did not establish facts, and or admissible evidence, according to the established
Federal Rules Evidence, to
failed to comply with the requirements of the law regulating the duty and
responsibility of an attorney at law.
The petitioners,
to place them in dispute, did not oppose or provide evidence to disprove the
points, authorities, and
defendants did not contest, provide evidence to disprove the points, or authorities
and evidence, and whose objection evidence that was requested by the
petitioner to be admitted, were overruled.
Of the underlying documents being void, I refer to and incorporate Exhibit “10,”
and referred to, “The first deed recorded on January 30, 1998, in the public
records of the County of Orange as instrument number 19980051462. A true and
correct certified copy of that deed is attached hereto as Exhibit ‘10,’ and
incorporated herein by this reference.” (Opposition To Relief From Stay Of Movant
at p.17, line 8) I refer to and incorporate Exhibit “11,” and referred to, “The
second deed was recorded on December 23, 2003, in the public records of the County
of Orange as instrument number 20030001508349. A true and correct certified copy
of that deed is attached hereto as Exhbit ‘11,’ and incorporated herein by this
reference. And I request the court to take judicial notice under the
authorization of rule 201 of the Federal Rules of Evidence. (Opposition To Relief
From Stay Of Movant at p.17, line 13)
And I refer to and incorporate Exhibit “12,” referred to, “The third deed was
recorded on October 3, 2005, in the public records of Orange County as instrument
number 2005000781940. A true and correct certified copy of that deed is attached
hereto as Exhibit ‘12,’ and incorporated herein by this reference. And I request
the court to take judicial notice under the authorization of rule 201 of the
Federal Rules of Evidence. (Opposition To Relief From Stay Of Movant at p.17, line
13)
And that at all times relevant to this action, Soon Chey held a joint tenancy
interest with the right of survivorship with her spouse, Young Chey Ph.D., now
deceased. And now holds the surviving joint tenant interest in the Property (at
the address 3741 Avenida Sausalito, Irvine, California 92606) from the date of May
17, 2007, the date of the death of Young Chey, and from the right of survivorship.
I refer to and incorporate Grant Deed of Young Chey and Soon Chey, establishing the
Joint Tenancy, recorded in the Official Records of Orange County, California on the
date of August 9, 1978, of which a true and correct certified copy is attached
hereto as Exhibit “1,” in the Opposition To Relief From Stay Of Movant and
incorporated herein by this reference. And I request the court to take judicial
notice under the authorization of Rule 201 of the Federal Rules of Evidence.
I refer to and incorporate the Corrected Affidavit of Death of Joint Tenant, Dated
October 7, 2008, which is re-recorded to correct the recording reference of
Document#: 2007000350252 Affidavit of Death to Grant Deed of Young Chey and Soon
Chey establishing the Joint Tenancy, recorded in the Official Records of Orange
County, California on the date of August 9, 1978, of which a true and correct copy
is attached hereto as Exhibit “2,” in the Opposition To Relief From Stay Of Movant,
and incorporated herein by this reference. And I request the court to take
judicial notice under the authorization of Rule 201 of the Federal Rules of
Evidence.
And in applying the rule of law to the facts of the case, the deeds being signed
without the capacity of the grantor, forged and when the grantor signs the document
and does not realize the nature of the instrument being executed and because of
fraud, he or she believes it to be some type of document other than a deed there is
fraud in the inception and:
“A void conveyance passes no title, *277 and cannot be made the foundation of a
good title even under the equitable doctrine of bona fide purchase.” (Gibson
v.Westoby, supra 115 Cal.App.2d at p. 276) In Trout v. Taylor (1934) Cal. 652,
656 [32 P.2d 968], the court held, “Numerous authorities have established the rule
that an instrument wholly void, such as an undelivered deed, a forged instrument,
or a deed in blank, cannot be made the foundation of a good title, even under the
equitable doctrine of bona fide purchase. (Promis v. Duke, 208Cal. 420 [281 Pac,
613]; Gould v. Wise, 97 Cal. 532 [32 Pac. 576, 33 Pac. 323]; Bardin v. Grace,
supra.) Consequently, the fact that defendant Archer acted in good
faith in dealing with persons who apparently held legal title, is not
in itself sufficient basis for relief.” And in Erickson v. Bohne, supra,
130 Cal.App.2d at p. 556, the court held “A void deed passes no title, and
cannot be made the foundation of a good title even under the equitable doctrine of
bona fide purchase.”
And that from contructive notice, actual notice, imputed, notice was not a bona
fide encumbrancer or a bona fide purchaser.
And,
“A completed sale may be set aside on the same grounds that would
property has been purchased by a BFP (see §7.65), in which case the
Assertions that no breach occurred or that the trustee did not have
power to foreclose. Hauger v. Gates (1954) 42 C2d 752, 269 P2d 609
breach); Saterstrom v. Glick Bros. Sash Door & Mill Co. (1931) 118 CA
...
before the sale was completed and a trustee’s deed delivered. Dimock
v. Emerald Props. (2000) 81 CA4th 868, 97 CR2d 255. But see Jones v.
First Am. Title Ins. Co. (2003) 107 CA4th 381, 131 CR2d 859 cited in
In Saterstrom v. Glick Bros. Sash, Door & Mill Co., (1931) 118
Cal.App. 379, 383 [5 P.2d 21], the court held under a foreclosure sale on a
property conveyed, the sale and all proceedings under the deed of trust would
And,
In In re Worcester, (1987) 811 F.2d 1224, 1228 (9th Cir. (Call.), the
Court stated, If the appellant, “Worcester has the right under California law to
set aside a foreclosure sale after the sale has taken place, after deeds have
been recorded, and after the property has been sold to a third party, then she
has the right in bankruptcy to do the same and that right is property of the
estate. See 11 U.S.C. § 541(a)(1)(property of the estate includes ‘all legal and
right under California law, we are not powerless to enforce it, and we may grant
circumstances.”
In In re Elmore, 94 B.R. 670 (Bankr.C.D.Cal., Dec 14, 1988) The court stated, a
“debtor’s principal residence in a Chapter 13 case is virtually always necessary
to an effective reorganization.”
“SUMMARY: Bankruptcy Code section 362(b)(22) provides that the automatic stay
under section 362(a)(3), subject to the provisions of section 362(l), does not
under a lease or rental agreement if the lessor has obtained a judgment for
possession of such property against the debtor before the commencement of the
bankruptcy case. This Expert Commentary covers the circumstances under which the
automatic stay does not apply, the filing of a certification with the petition by
the debtor that negates the effect of section 362(b)(22) for at least a period of
30 days, the filing of an objection by the lessor to the certification, and the
involved the endangerment of the property or illegal drug use on the property.
...
The stay exception under subsection (b)(22) applies only if the prepetition
judgment for possession relates to rental property in which the debtor resides
under a lease or rental agreement. It does not apply, for example, to an eviction
...
3
. See In re McCray, 342 B.R. 668 (Bankr. D.D.C. 2006).”
And
I refer to and incorporate the Bank Of The West, Deed Of Trust, a true and
correct copy is attached hereto as Exhibit “14,” in the Opposition To Relief From
Stay Of Movant and incorporated herein by this reference. And I request the court
to take judicial notice under the authorization of rule 201 of the Federal Rules of
Evidence.
a true and correct copy is attached hereto as Exhibit “15,” in the Opposition
To Relief From Stay Of Movant and incorporated herein by this reference. And I
request the court to take judicial notice under the authorization of rule 201 of
Sale, a true and correct copy is attached hereto as Exhibit “16,” in the Opposition
To Relief From Stay Of Movant and incorporated herein by this reference. And I
request the court to take judicial notice under the authorization of rule 201 of
California Corporation as for the beneficiary and the by North American Title
Company., As Agent.
act; new notice of sale, of the Civil Code of the State of California provides:
(a)(1) The trustee under a trust deed upon real property or an estate for years
therein given to secure an obligation to pay money and conferring no other duties
upon the trustee than those which are incidental to the exercise of the power of
which the property is located of a substitution executed and acknowledged by: (A)
all of the beneficiaries under the trust deed, or their successors in interest,
of a licensed real estate broker that is the issuer or servicer of the notes or
In Pro Value Properties, Inc., v. Quality Loan Service Corp., (2009) 170
the recordation of a Notice of Default. QLS was not the trustee named in the deed
Civil Code section 2934a. This it neglected to do. Pursuant to a recorded Notice
of Trustee Sale, QLS sold the Property to the highest bidder, Pro Value, on June
9, 2005 for $842,000. QLS issued a Trustee’s Deed of Sale to Pro Value, which was
subsequently recorded.
Some time thereafter, QLS and FV-1, the beneficiary under the Deed of
Trust, realized that there was no recorded Substitution of Trustee naming QLS as
trustee. Consequently, both QLS and FV-1 determined that the Trustee’s Deed of
And,
“In August 2005, FV-1 filed this lawsuit, alleging causes of action for
cancellation of an instrument and declaratory relief. FV-1 named both QLS and Pro
negligence. ...
QLS moved for summary judgment as to FV-1’s complaint and Pro Value’s
cross-complaint. After hearing arguments on the motion on January 25, 2007, the
trial court ruled that the Trustee’s sale was void and that the Trustee’s Deed of
Sale which QLS issued to Pro Value was of no force or effect” (Pro Value
Properties, Inc., v. Quality Loan Service Corp., supra, 170 Cal.App.4th at p.582)
To Relief From Stay Of Movant and he declares under penalty of perjury that has
went to the Orange County Clerk Recorder and that after searching their records he
could not find a recording for a substitution of trustee from First Santa Clara
WELLS FARGO BANK, did not contest, provide evidence to disprove the points,
In applying the rule of law to the facts of the case the Trustee’s Sale was
“A void conveyance
The Notice Of Motion And Motion For Relief From The Automatic Stay With Supporting
Declarations filed on June 4, 2009,
Reply To Debtor’s Opposition To Motion For Relief From The Automatic Stay filed on
June 26, 2009,
Supplemental Brief To Motion For Relief From The Automatic Stay filed on June 15,
2009,
Request For Judicial Notice In Support Of Supplemental Brief filed on July 15,
2009,
Reply To Debtor’s Supplemental Brief filed on July 22, 2009
Opposition to Relief From Stay Of Movant with Exhibits filed on June 16, 2009;
Proof Of Service Of The Opposition To Relief From Stay Of Movant filed on June 18,
2009.
Request For Judicial Notice Exhibit “5” Copy Of The Activity Of Daily Living Log
For The Date Of January 24, 1998, And The Integrated Health Service Notes Of The
Twin Palms Health Care Center Located At 11900 E. Artesia Boulevard, Artesia,
California 90701, Declaration Arnold N. Ling, M.D. Under The Authorization Of Rule
201 Of The Federal Rules Of Evidence filed on June 25, 2009; Additional Proof Of
Service Office Of The United States Trustee, 411 West Fourth Street, Suite 9041,
Santa Ana, California 92701-8000 filed on
June 26, 2009
Opposition To Relief From Stay Of Movant Supplemental filed on June 29, 2009,
Opposition To Relief From Stay Of Movant Supplemental filed on July 15, 2009,
Opposition To Relief From Stay Of Movant Reply To The Movant’s Supplemental Brief,
Soon Chey, David Chey filed on July 22, 2009,
Opposition To Relief From Stay Of Movant Reply To The Movant’s Supplemental Brief,
Soon Chey, David Chey Proof Of Service filed on July 23, 2009,
Opposition To Relief From Stay Of Movant Reply To The Movant’s Supplemental Brief
Soon Chey Proof Of Service filed on July 24, 2009,
Opposition To Relief From Stay Of Movant Reply To The Movant’s Supplemental Brief
David Chey Proof Of Service filed on July 24, 2009,
Request For Judicial Notice Exhibit Exhibit “35” Notice Of Stay Filed On 5/09/2009
Under The Authorization Of Rule 201 Of The Federal Rules Of Evidence David Chey
filed on July 27, 2009,
Request For Judicial Notice Exhibit Exhibit “36” Notice Of Bankruptcy, Filed On
4/30/2009 Under The Authorization Of Rule 201 Of The Federal Rules Of Evidence Soon
Chey filed on July 27, 2009,
Request For Judicial Notice Exhibit Exhibit “37” Notice Of Stay Filed On 5/09/2009
Under The Authorization Of Rule 201 Of The Federal Rules Of Evidence Soon Chey
filed on July 27, 2009,
were requested by the petitioner to be admitted under the authorization of Rule 201
of the Federal Rules of Evidence were overruled.
Would not be warranted within the scope of the Federal Rules of Evidence.
[6] Evidence 89
157k89 Most Cited Cases
To rebut presumption that mail is received by addressee in ordinary course of
mails when mail is properly addressed, stamped and deposited in appropriate
receptacle, something more than mere declaration of addressee alleging
nonreceipt is required.
[6] The Supreme Court has held that upon proof that mail is properly
addressed, stamped and deposited in an appropriate receptacle, it is presumed
to have been received by the addressee in the ordinary course of the mails.
Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 419, 76 L.Ed. 861
(1932). In order to rebut this presumption, something more than a mere
declaration of a creditor alleging non-receipt is required. For example,
the Ninth Circuit has held that the mailing presumption is rebutted when the
notice sent by certified mail was returned unclaimed. In re Carter, 511
F.2d 1203 (9th Cir.1975); See also Bucknum, 951 F.2d at 207 ("[m]ail that is
properly addressed, stamped and deposited into the mail is presumed to be
received by the addressee") (quoting Ricketts, 80 B.R. 495, 498-99 (9th Cir.
BAP 1987) (Jones, J., concurring)); In re Ricketts, 80 B.R. at 497 (holding
that if denial of receipt alone could rebut presumption that notice was
given, then the scheme of deadlines and bar dates under the Bankruptcy Code
would come unraveled). See generally, Barry Russell, Bankruptcy Evidence
Manual, § 301.8 (1994-95 ed.).
In re Kronemyer, 405 B.R. 915, 09 Cal. Daily Op. Serv. 7249, 2009 Daily
Journal D.A.R. 8502 (9th Cir.BAP (Cal.),May 27, 2009)
B. The Bankruptcy Court Did Not Abuse Its Discretion When It Granted Relief
From the Automatic Stay
[10][11] What constitutes "cause" for granting relief from the automatic
stay is decided on a case-by-case basis. Christensen v. Tucson Estates, Inc.
(In re Tucson Estates, Inc.), 912 F.2d 1162, 1166 (9th Cir.1990); see also
Piombo Corp. v. Castlerock Props. (In re Castlerock Props.), 781 F.2d 159,
163 (9th Cir.1986).
(2) "cause" did not exist to lift stay to allow creditor that had obtained
$2.1 million judgment against Chapter 11 debtor in patent infringement action
to prosecute debtor for its alleged contempt in selling another product,
other than that whose sale had been enjoined, which allegedly also infringed
on creditor’s patent.
Motion denied.
West Headnotes
51 Bankruptcy
51XIX Review
51XIX(B) Review of Bankruptcy Court
51k3784 k. Discretion. Most Cited Cases
Court of Appeals applies abuse of discretion standard to bankruptcy court’s
decision to abstain based on comity.
I. Standard of Review
Any instrument filed for record in the office of the county recorder
of the county where it is entitled to record and which is copied into
a book of record other than that designated by law, but which is
thereafter indexed in the proper book of indices, imparts notice of
its contents to all persons from the date of such indexing, and any
subsequent purchaser, mortgagee, lien-holder, and encumbrancer
purchases and takes with the same notice and effect as if the
instrument were copied or recorded in the proper book of record.
What is the minimum time between the notice of the trustee sale and
the date of the trustee sale under cc 2924 ? 20 days
Miller & Starr, California Real Estate 3D, Chapter 10, Section 10:8,
Substitution of trustee – statutory procedure,
p. 38, states,”
A substitution that is recorded after the notice of default is recorded but prior
to the notice of sale must be mailed prior to recordation to all persons to whom
the notice of default must be mailed. A copy must be mailed to the former trustee
of record and an affidavit must be attached to the recorded document of
substitution that it has been mailed as required. The requirements for mailing
are the same as for the mailing of the notice of default. 14
13
. Civ. Code, § 2934a, subd. (b)
13
. Civ. Code, § 2934a, subd. (b)
Miller & Starr, California Real Estate 3D, Section 10:181, Notice of
default-in general, p. 552, states,”
“(Civ. Code, [FN1] § 2934a, subd. (a).) By its terms the statute provides
that after such a substitution has been recorded, ‘the new trustee shall succeed to
all the powers, duties, authority, and title granted and delegated to the trustee
named in the deed of trust.’ (§ 2934a, subd. (a)(4).)”
And
Also on August 15, 1996, TD, acting on behalf of Calmco, recorded a notice
of default and election to sell. Consistent with statutory requirements, the notice
of default stated: ‘No sale date may be set until three months from the date this
notice of default may be recorded.’
Under the unambiguous terms of section 2934a, [FN2] subdivision (a)(4), the
recording of the substitution of trustee transferred to Calmco the exclusive *875
power to conduct a trustee’s sale. This plain reading of the statute is consistent
with the law as it existed before the predecessor statute was enacted in 1935 and
the power to substitute a trustee depended solely on the express provisions of a
deed of trust. (See Witter v. Bank of Milpitas (1928) 204 Cal. 570, 577-578 [269 P.
614]; Pacific S. & L. Co. v. N. American etc. Co. (1940) 37 Cal.App.2d 307, 309-
310 [99 P.2d 355 ].) " ‘ "Upon the appointment being made under the power, the new
trustee becomes vested, ipso facto, with the title to the trust premises and is
clothed with the same power as if he had been originally named ...." ‘ " (Witter v.
Bank of Milpitas, supra, 204 Cal. at p. 578.) *876” (Dimock v. Emerald
Properties LLC, supra, 81 Cal.App.4th pp. 874-876)
In applying this rule of law to the facts of the case, I refer to the date
of the signed Substitution of Trustee April 22, 2008 in which the trustee was
authorized to act. From April 22, 2008 to July 11, 2008 which is the date of the
Trustee Sale, is 80 days. This is not three months plus twenty days.
there simply cannot be at any given time more than one person with the power to
trustees, each one retaining the power to sell a borrower’s property.” (Dimock v.
Former trustees and all others who are not properly appointed and
serving trustee (see §§2.21-2.26) at the time of the step taken will
be unable to convey title and the sale will be ‘void’ and not just
‘voidable.’ See Dimock v. Emerald Props. (2000) 81 CA4th 868, 97 CR2d
255. In Dimock, the trustee service agent abandoned the notice of
default recorded by a substituted-in trustee when it discovered an
earlier notice of default recorded by the predecessor trustee.
Without nullifying documents installing the new trustee, the service
agent conducted a trustee sale and had the former trustee sign the
trustee’s deed. The court of appeal held that the sale was ‘void’ and
not just ‘voidable,’ because the former trustee had no power to convey
title at the time of sale.”
(2) Publication. A copy must be published once a week for ‘three consecutive
calendar weeks, the first publication at least 20 days before the date of the sale’
in a newspaper of general circulation in the city or judicial district ‘in which
the property or some part thereof is situated.’ (C.C. 2924f(b)(1); see Hotchkiss v.
Darling (1933) 130 C.A. 625, 626, 20 P.2d 343.)
A reading of the Successor Trustee paragraph, B of W. trust deed page 11, paragraph
9, shows,”
Successor Trustee. Lender, at Lender’s option, may from time to time appoint a
successor Trustee to any Trustee appointed under this Deed of Trust by an
instrument executed and acknowledged by Lender and recorded in the office of the
recorder of Orange County, State of California. The instrument shall contain, in
addition to all other matters required by state law, the names of the original
Lender, Trustee, and successor trustee, and the instrument shall be executed and
acknowledged by Lender or its successors in interest. The successor trustee,
without conveyance of the Property, shall succeed to all the title, power, and
duties conferred upon the Trustee in this Deed of Trust and by applicable law.
This procedure for substitution of Trustee shall govern to the exclusion of all
other provisions for substitution.”
Jones v. First American Title Ins. Co., 107 Cal.App.4th 381, 131
Cal.Rptr.2d 859, 03 Cal. Daily Op. Serv. 2651, 2003 Daily Journal D.A.R. 3355
(Cal.App. 2 Dist. Mar 25, 2003)
Case involved mutual mistake among the parties, in this case this was a
unilateral mistake.
This case was not a mutual mistake but a failure to follow follow
procedure.
U. S. Hertz, Inc. v. Niobrara Farms, 41 Cal.App.3d 68, 116 Cal.Rptr. 44 (Cal.App. 3 Dist. Jul 15, 1974)
On February 1, 1972, Niobrara executed two forms of substitution of trustees. In each substitution, **Title Insurance
and Trust Company (herein ‘Title Insurance’) was substituted as trustee in place of North American. One of the
substitutions was recorded in Butte County, the other in Tehama County.
**On February 1, 1972, Niobrara executed separate notices of default and election to sell the properties secured by
the respective deeds of trust to satisfy the obligations secured thereby. **The notices were recorded on February 8,
1972, in the respective counties of Butte and Tehama.
Miller v. Cote, 127 Cal.App.3d 888, 179 Cal.Rptr. 753 (Cal.App. 4 Dist.,Jan
14, 1982)
[3] The notice of default upon which appellants rely was defective in two
fundamental respects. First, even if respondents’ conduct had been an act
sufficient to trigger the “due on” clause, **the notice of default was
premature, thus shortening the statutorily prescribed period in which the
obligation could be reinstated. **Secondly, the default specified in the
notice was no default, and appellants are bound by their notice of default;
they cannot assert any ground of default other than that stated in the
notice. ( System Inv. Corp. v. Union Bank, supra, 21 Cal.App.3d at p. 153, 98
Cal.Rptr. 735; Tomczak v. Ortega (1966) 240 Cal.App.2d 902, 904, 50 Cal.Rptr.
20.)
This shortened the statutorily prescribed period and prejudice resulted. I refer
to and incorporate the sales contract of 3741 Avenida Sausalito showing that the
house was sold the day before the sale July 10, 2008
A void deed is a nullity and of no force and effect, prevails against a facially
valid deed. Even if the conditions which make it void are not apparent on its face.
In cancellation, although a deed may appear valid on its face, it is invalid and of
no force and effect.
In re Boyd is not applicable in that the facts of the case did not involve a void
deed.
In Little v. CFS Service Corp., 188 Cal.App.3d 1354, 233 Cal.Rptr. 923, the court,
stated,
“The word ‘void’ in its strictest sense, means that which has no force and effect,
is without legal efficacy, is incapable of being enforced by law, or has no legal
or binding force”
Little v. Cfs Service Corp., 188 Cal.App.3d 1354, 233 Cal.Rptr. 923
(Cal.App. 2 Dist. Jan 27, 1987)
Discussion
** "The word ‘void,’ in its strictest sense, means that which has no force
and effect, is without legal efficacy, is incapable of being enforced by law,
or has no legal or binding force, but frequently the word is used and
construed as having the more liberal meaning of ‘voidable."‘ (Black’s Law
Dict. (5th ed. 1979) p. 1411, col. 2.) "Voidable" is defined as "[t]hat which
may be avoided, or declared void; not absolutely void, or void in
itself ...." (Ibid.)
** Another term frequently used in cases dealing with sales under trust deeds
is " invalid," which is defined in Black’s as "Vain; inadequate to its
purpose; not of binding force or legal efficacy; lacking in authority or
obligation." (Id., at p. 739, col. 2.)
Irreparable injury
In re Vylene Enterprises, Inc., 968 F.2d 887, 27 Collier Bankr.Cas.2d 771,
23 Bankr.Ct.Dec. 236, Bankr. L. Rep. P 74,737 (9th Cir.(Cal.) Jun 29, 1992)
Rucker v. Davis, 237 F.3d 1113, 2001 Daily Journal D.A.R. 889 (9th Cir.
(Cal.),Jan 24, 2001)
212 Injunction
212IV Preliminary and Interlocutory Injunctions
212IV(A) Grounds and Proceedings to Procure
212IV(A)2 Grounds and Objections
212k138.1 k. In General. Most Cited Cases
To obtain a preliminary injunction, the moving party must show either (1) a
combination of probable success on the merits and the possibility of
irreparable harm, or (2) that serious questions are raised, and the balance
of hardships tips sharply in favor of the moving party.
Further, the instruction is based upon a faulty premise. (5) The recording of
a forged deed does not convey title. (Firato v. Tuttle, supra, 48 Cal.2d 136,
139; Bryce v. O’Brien, supra, 5 Cal.2d 615, 616; Trout v. Taylor, supra, 220
Cal. 652, 656; Fallon v. Triangle Management Services, Inc., supra, 169
Cal.App.3d 1103, 1105; Wutzke v. Bill Reid Painting Service, Inc., supra, 151
Cal.App.3d 36, 43-44.) *Thus, even if there were no obligation to establish
that Sanders had made material false representations to each of the purported
grantors, there would not have been a theft for the reason that the recording
of a false deed does not convey title. Nor does the filing of such a deed
combined with the redemption of the property by payment of back taxes convey
title. (Potter v. County of Los Angeles, supra, 251 Cal.App.2d 280, 286 [59
Cal.Rptr. 335]; 2 Ehrman, Taxing Cal. Property, supra, § 29.17 et seq.; see
Rev. & Tax. Code, § 4101 et seq.)
Make showing against every ground asserted for relief from stay
United States on behalf of Farmers Home Administration moved for relief from stay and abandonment in Chapter 13
case. The Bankruptcy Court, David W. Houston, III, J., held that: **(1) when debtor filed Chapter 13 petition 33
months after foreclosure sale had been concluded and trustee’s deed had been recorded, debtor had no legal rights in
mortgaged property under Mississippi law, and **(2) debtor could not reinstate payment obligations set forth in note
associated with mortgage, as debtor had lost all legal rights to property and any equitable rights to property were
extinguished by order of eviction, even though confirmation order was entered in Chapter 13 case without objection.
West Headnotes
51 Bankruptcy
51XVIII Individual Debt Adjustment
51k3704 Plan
51k3711 Curing Defaults
51k3711(4) k. Accelerated Maturity; Effect of Foreclosure. Most Cited Cases
Although filing of Chapter 13 bankruptcy case allows debtor to reinstate mortgage indebtedness, such right is
generally considered extinguished by prepetition foreclosure that has been fully consummated. Bankr.Code, 11
U.S.C.A. § 1301 et seq.
51 Bankruptcy
51V The Estate
51V(C) Property of Estate in General
51V(C)2 Particular Items and Interests
51k2545 k. Property Pledged or Encumbered; Redemption Rights. Most Cited Cases
When debtor filed Chapter 13 petition 33 months after foreclosure sale had been concluded and trustee’s deed had
been recorded, debtor had no legal rights in the property under Mississippi law. Bankr.Code, 11 U.S.C.A. § 1301 et
seq.
51 Bankruptcy
51XIX Review
51XIX(B) Review of Bankruptcy Court
51k3781 k. Moot Questions. Most Cited Cases
(Formerly 51k465)
Appeal by debtor from district court judgment reversing bankruptcy court and
holding that foreclosure sale effected valid transfer of debtor’s four-acre
parcel and residence would not be dismissed as moot on ground debtor failed
to obtain stay of foreclosure sale pending appeal; if debtor had right under
California law to set aside foreclosure sale after sale had taken place,
deeds had been recorded, and property had been sold to third party, she then
had right in bankruptcy to do same, and that right was property of the
estate, and Court of Appeals determined that debtor satisfied requirements
for setting aside foreclosure sale and was entitled to relief under
California law, so appeal was not moot.
51 Bankruptcy
51XIX Review
51XIX(B) Review of Bankruptcy Court
51k3785 Findings of Fact
51k3787 k. Particular Cases and Issues. Most Cited Cases
(Formerly 51k446(8.2))
District court properly reviewed bankruptcy court’s findings of both fact and
law de novo, on appeal from proceedings involving claim by debtor that
foreclosure sale should be set aside, which claim was “related” case, under
emergency rule which was in effect at time of district court proceedings.
51 Bankruptcy
51I In General
51I(C) Jurisdiction
51k2045 k. Particular Proceedings or Issues. Most Cited Cases
(Formerly 51k293(1))
Proceedings relating to validity of foreclosure sale of debtor’s property
involved only state-created rights, and were therefore “related” case rather
than “core proceedings”.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(7) k. Inadequacy of Price in Connection with
Other Objections. Most Cited Cases
Inaccurate description of property in notice of trustee’s sale, that appeared
to refer to land in addition to four-acre parcel containing residence that
was subject to deeds of trust securing loans, was “material irregularity”
relating to foreclosure sale, for purposes of California **law permitting
sale to be set aside if gross inadequacy of price were coupled with even
slight unfairness or irregularity; **full description of property referred to
oil and gas rights and to particular conveyances relating to 40-acre parcel,
and bidders interested in smaller lot who would have researched described
plot would thus have been deterred from attending foreclosure sale.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(8) k. Form of Remedy and Conditions Precedent.
Most Cited Cases
Under California law, debtor, who obtained loans secured by deeds of trust on
her residence and its four-acre lot, made valid tender of payment of
indebtedness required of one seeking to set aside foreclosure sale; debtor
expressed her willingness to tender amount owed through answer and
counterclaim requesting court to order appraisal and sale of part of real
property to recover its market value for benefit of creditors and remit
balance to debtor or allow debtor to redeem property, and tender was
“effective” under California law, even though debtor admitted she could not
borrow money and had none available, given fact land was worth many times
amount owed by debtor. West’s Ann.Cal.Civ.Code §§ 1493, 1495.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(8) k. Form of Remedy and Conditions Precedent.
Most Cited Cases
Fact that debtor who sought to set aside foreclosure sale did not have cash
immediately available to support her tender of payment of indebtedness owing
was not fatal under California law, which required one seeking to set aside
foreclosure sale to make valid and viable tender of payment of indebtedness
owing to cancel voidable sale under deed of trust. West’s Ann.Cal.Civ.Code §§
1493, 1495.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k538 k. Effect of Defects or Irregularities in Judgment,
Decree, or Sale. Most Cited Cases
**California relation back doctrine, providing that title at foreclosure sale
cannot be affected by adverse claims or interests arising after execution of
deed of trust, applied only to title taken at valid foreclosure sale.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k536 k. Bona Fide Purchasers. Most Cited Cases
Whether purchaser of debtor’s property at foreclosure sale or his transferee
knew of debtor’s action against mortgage company alleging fraud and breach of
fiduciary duty for arranging loans secured by deeds of trust that included
balloon payments was irrelevant in action **to set aside foreclosure sale on
basis that price paid was grossly inadequate and there was irregularity in
sale that contributed to inadequacy of price, under California law.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k536 k. Bona Fide Purchasers. Most Cited Cases
Purchaser of debtor’s property at foreclosure sale and his transferee had
constructive notice of misdescription of property which was to be subject of
sale, where deed of trust contained accurate description of property subject
to foreclosure, but notice of trustee’s sale, trustee’s deed to purchaser,
and purchaser’s deed to his transferee incorrectly stated that property
included another parcel, which had not been subject of deed of trust, and
investigation would have disclosed property misdescription.
Norma E. Worcester appeals from the decision of the district court validating
a California foreclosure sale of her residence and reversing a decision of
the bankruptcy court. The district court held that Worcester failed to
satisfy certain requirements under California law necessary to set aside a
foreclosure action. Specifically, the district court held that California law
required Worcester to tender payment of the amount necessary to redeem the
deed of trust at the time she filed suit to set aside the foreclosure sale,
and the court determined that she had failed to satisfy this requirement. The
district court also concluded that Worcester did not demonstrate that any
misdescription of the subject property resulted in prejudice to Worcester’s
interests at the foreclosure sale as mandated by the law of California.
In 1980, the balloon payments fell due and Worcester was unable to make them.
National Mortgage rejected the partial payments Worcester sent to them, and
Worcester and National Mortgage failed to reach any agreement on refinancing
the amount owed. In June 1981, Worcester filed suit against National
Mortgage, Trust Deed Diversified Services (Trust Services), and their
employees, alleging fraud and breach of fiduciary duty for arranging loans
for her that included balloon payments.
AND EXCEPTING THEREFROM A 25 PERCENT ROYALTY OF AND THE RIGHTS TO ALL OIL,
GAS OR OTHER HYDROCARBONS OR THE PROCEEDS THEREOF, WHICH MAY BE PRODUCED FROM
SAID PREMISES, AS SAID 25 PERCENT ROYALTY INTEREST IS RESERVED IN DEED
RECORDED OCTOBER 2, 1951 AS INSTRUMENT NO. 19523, IN BOOK 37329 PAGE 145, OF
OFFICIAL RECORDS, SUCH RESERVATION BEING IN FAVOR OF TERESA PASQUARO.
The parties agree that if the description had stated the “Southwest Quarter”
as opposed to the “Southwest Corner” it would accurately describe the 40-acre
parcel.
The foreclosure sale was held on February 5, 1982. The minimum bid price was
set at $14,026.53. Irving Rosner purchased the property for $14,975. There
were only two bidders at the auction. On February 12, 1982, Rosner filed an
unlawful detainer action against Worcester, and she answered on February 23.
On February 22, 1982, Rosner sold the property to William Little for
$130,000. An appraiser testified before the bankruptcy court that the parcel
was worth $240,000. In Re Worcester, 28 B.R. 910, 913 & n. 3
(Bankr.C.D.Cal.1983).
On June 3, 1982, the bankruptcy court granted Worcester’s motion for judgment
as to title to her 40-acre parcel, and on April 8, 1983, the bankruptcy court
ordered the foreclosure sale on the four-acre parcel set aside. Id. at 915.
Rosner and Little appealed to the district court. The district court, in an
unpublished order, reversed and entered judgment on May 25, 1984, holding
that the foreclosure sale effected a valid transfer of the four-acre parcel
and residence. Worcester filed her notice of appeal eleven days later, on
June 5, 1984.
III
[2] Appellees also argue that this appeal should be dismissed as moot because
Worcester failed to obtain a stay of the foreclosure sale pending appeal.
In Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421 (9th Cir.1985), we
adopted the Eleventh Circuit’s approach as to when a stay pending appeal is
required in order to prevent mootness. That circuit held in Sewanee Land,
Coal & Cattle, Inc. v. Lamb (In re Sewanee Land, Coal & Cattle, Inc.), 735
F.2d 1294 (11th Cir.1984), that, in certain circumstances, the failure to
obtain a stay renders an appeal moot. Mootness results when the court of
appeals becomes “powerless to grant the relief requested by the appellant.”
Id. at 1295 (quoting American Grain Association v. Lee-Vac, Ltd., 630 F.2d
245, 247 (5th Cir.1980)).
If Worcester has the right under California law to set aside a foreclosure
sale after the sale has taken place, after deeds have been recorded, and
after the property has been sold to a third party, then she has the right in
bankruptcy to do the same and that right is property of the estate. See11
U.S.C. § 541(a)(1) (property of the estate includes “all legal and equitable
interests of the debtor in property”). If Worcester does have such a right
under California law, we are not powerless to enforce it, and we may grant
Worcester relief to the same extent California courts would in similar
circumstances.
FN1. Rosner and Little also claim this appeal is moot under In re Madrid, 725
F.2d 1197 (9th Cir.1984). That case, which addressed the ability to set aside
a transfer under 11 U.S.C. § 548(a) and Nevada law, is inapposite.
FN2. Under Crist v. House & Osmonson, Inc., 7 Cal.2d 556, 61 P.2d 758 (1936),
in order to justify setting aside a foreclosure sale, the court must find
that the misdescription resulted in actual prejudice or was “of such a
substantial nature that prejudice [was] likely to result to the trustors.”
Id. at 559, 61 P.2d at 759.
[3][4] The district court properly determined that this conclusion of the
bankruptcy court was a “recommendation,” and therefore subject to de novo
review. Pursuant to the 1982 Emergency Rule, passed in the wake of the
Supreme Court’s decision in Northern Pipeline Construction Co. v. Marathon
Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) ,FN3 and
effective at the time of the district court proceedings,FN4 Worcester’s claim
to set aside the foreclosure sale was a “related” case. Thus the district
court properly reviewed the bankruptcy court’s findings of both fact and law
de novo.FN5 In reviewing the bankruptcy court’s determination of prejudice from
the misdescription, the district court reversed, finding that the phrase
“Southwest Corner” referred only to a point in space of infinitesimal size
and could not, therefore, be misleading. Although the district court found
the purchase price was “grossly inadequate,” the court concluded that there
was no material irregularity in the foreclosure sale and therefore no
prejudice to Worcester.
The California Supreme Court’s decision in Crist does not preclude our
conclusion that a material irregularity existed. The Crist requirement that
the misdescription by the inclusion of unencumbered property must cause
actual prejudice or it “must be of such a substantial nature that prejudice
is likely to result to the trustors” is met here. 7 Cal.2d at 559, 61 P.2d at
759. In addition, the parcel mistakenly included in this case is quite unlike
the one included in Crist: the latter was equivalent to one-nineteenth of the
property subject to the deed of trust and was practically worthless, 7 Cal.2d
at 560, 61 P.2d at 759; the former was ten times larger than the trust
property and may be worth in excess of one million dollars. 28 B.R. at 913.
[7] The district court held that Worcester could not succeed in her action to
set aside the foreclosure sale because “it seems to be totally clear that the
payment or tender must be made by the filing date either separately or in the
Complaint itself.... This requirement is absolute.” The district court erred
in concluding that Worcester did not make a valid tender as required under
California law. We hold that Worcester did meet the tender requirements of
sections 1493 and 1495 of the California Civil Code.FN6
FN6. Worcester asserts that the tender requirement is satisfied because she
has a right to an equitable setoff against the lenders as a result of her
state court fraud action against National Mortgage and Trust Services.
Worcester rests her argument on the California Supreme Court’s decision in
Hauger v. Gates, 42 Cal.2d 752, 269 P.2d 609 (1954). Hauger also involved an
action to set aside a foreclosure sale but the procedural posture of that
case was that of a motion to dismiss. Worcester correctly states that Hauger
stands for the proposition that a setoff can be used to satisfy the tender
requirement. Id. at 753, 269 P.2d at 610. We need not address the
applicability of Hauger since we find the tender requirement was satisfied
apart from Worcester’s alleged right to equitable setoff.
FN7. Worcester asked the court: “To order an appraisal and sale of a portion
of said real property to recover its market value for the benefit of
creditors and remit the balance to Debtor, or to allow the Debtor to redeem
said property.” Both these alternatives express Worcester’s willingness to
pay. See Copsey v. Sacramento Bank, 133 Cal. 659, 662, 66 P. 7, 9 (1901)
(offer to redeem must be made to set aside sale). Worcester’s offer to redeem
is an offer to tender the amount of indebtedness, as she offered $7,922 more
than the amount of her indebtedness.
To satisfy section 1495, Worcester must have been able to tender payment. The
district court concluded that since Worcester admitted she could not borrow
money and had none available, she was unable to tender payment. The
authorities upon which the district court apparently relied in reaching this
conclusion FN8 deal *1231 with situations in which no tender was made in the
pleadings,FN9 the debtor refused to pay,FN10 or improper conditions were placed
upon payment,FN11 all of which are distinguishable from the present case.
FN8. See1 H. Miller & M. Starr, Current Law of California Real Estate, §
3:125, at 549-50 & n. 16 (1975 & Supp. Oct. 1986), and authorities cited
therein.
FN9. See, e.g., Py v. Pleitner, 70 Cal.App.2d 576, 582, 161 P.2d 393, 396
(1945).
FN10. See, e.g., Shimpones v. Stickney, 219 Cal. 637, 649, 28 P.2d 673, 678
(1934).
FN11. See, e.g., Weiner v. Van Winkle, 273 Cal.App.2d 774, 78 Cal.Rptr. 761
(1969) (conditioned upon abandonment of claim for attorneys’ fees).
[8] The fact that Worcester did not have cash immediately available is not
fatal under California law. In Backus v. Sessions, 17 Cal.2d 380, 110 P.2d 51
(1941), the California Supreme Court held that the ability to tender existed
where the debtor had convertible assets and the mere ability to borrow. Id.
at 389-90, 110 P.2d at 56. Worcester’s request for the sale of her land for
the benefit of the creditors and her offer to redeem provide the certainty of
sufficient proceeds to satisfy the tender amount, and supplies no less
certainty than the mere ability to borrow which constituted ability to tender
in Backus.
The decision in Karlsen v. American Sav. & Loan Assoc., 15 Cal.App.3d 112, 92
Cal.Rptr. 851 (1971), is instructive. In Karlsen, the California Court of
Appeal held that tender was insufficient where it consisted of the borrower’s
hope that the lender would release part of the property covered by the deed,
that an identified prospective purchaser would buy this part of the property,
and that certain entities would agree to refinance the remaining debt that
would not be satisfied from the sale. It is noteworthy that the court in
Karlsen did not dispose of the borrower’s claim simply because the borrower
did not have the cash to redeem and so did not make a satisfactory tender.
Instead, the court evaluated the precise conditions of the borrower’s offer
before concluding the offer was an inadequate “substitute tender.” Id. at
118-20, 92 Cal.Rptr. at 854-56.
The Karlsen court’s criticisms of the borrower’s tender do not apply here.
First, the court noted that the tender proposed by the borrower would leave
the lender without a remedy, as the borrower conditioned tender upon the
lender’s releasing property from the deed of trust and thereby eliminated the
lender’s security interest. Id. at 120, 92 Cal.Rptr. at 856. In the present
case, however, no such conditions were placed upon the tender. In fact,
Worcester asked that a neutral entity, the bankruptcy court, sell the
property that was free of any deed of trust and distribute the proceeds to
the creditors. Second, the borrower in Karlsen did not make an “unqualified
and unconditional statement that [he would] do equity.” Id. at 119, 92
Cal.Rptr. at 855. In this case, however, Worcester made an unconditional
offer to redeem or repay with money from the sale. Finally, the Karlsen court
was concerned that nothing there “even remotely suggest[ed] Karlsen would
have the ability to comply” with any terms of payment. Id. Worcester, in
contrast, does not rely on the mere “hope” of the sale of land for a
sufficient sum and the ability to refinance a $125,000 debt, as Karlsen did.
Here, the land is worth many times the amount owed by Worcester. No
refinancing would be necessary.
[9] Finally, Rosner and Little argue that, as bona fide purchasers, the
foreclosure sale cannot be set aside because they had no actual or
constructive notice of Worcester’s suit against National Mortgage and Trust
Services, filed in June 1981, or of the misdescription of the property
contained in the foreclosure documents.FN12 This argument fails under
California law.
FN12. Rosner and Little also claim that under the “relation back doctrine,”
title taken at a foreclosure sale cannot be affected by adverse claims or
interests arising after the execution of the deed of trust. Hohn v. Riverside
County Flood Control and Water Conservation Dist., 228 Cal.App.2d 605, 39
Cal.Rptr. 647 (1964). This doctrine only applies to title taken at a valid
foreclosure sale, and so is inapplicable here. Id. at 613-14, 39 Cal.Rptr. at
652.
[10][11] Worcester seeks to set aside the sale on the grounds that the price
Rosner*1232 paid was grossly inadequate and there was an irregularity in the
sale that contributed to the inadequacy of the price. Sargent v. Shumaker,
193 Cal. at 129-30, 223 P. at 467 (1924); Whitman, 165 Cal.App.3d at 323, 211
Cal.Rptr. at 589. Whether Rosner or Little knew of Worcester’s earlier suit
is irrelevant in an action to set aside a foreclosure sale on this basis.
Rosner and Little’s claim that they had no constructive notice is disproven
by the record before us. The deed of trust contains an accurate description
of the property subject to foreclosure; the Notice of Trustee’s Sale, the
trustee’s deed to Rosner, and Rosner’s deed to Little, however, incorrectly
state that the property included the 40-acre parcel. An investigation of the
record pertaining to the 4-acre parcel would have shown that the deed of
trust under which the property was foreclosed and the deed from the trustee
did not describe the same property. Under California law, “one whose search
of the record would disclose a defective property description is charged with
the duty of further investigation and with knowledge of whatever it would
have disclosed.” Sieger v. Standard Oil Co., 115 Cal.App.2d 649, 657, 318
P.2d 479, 484 (1957) (citing Leonard v. Osburn, 169 Cal. 157, 161, 146 P.
530, 532 (1915); see alsoCal.Civ.Code §§ 18-19 (West 1982). Inquiry would
have disclosed that the Notice of Trustee’s Sale also misdescribed the
property subject to foreclosure and thereby put Rosner and Little on notice
that there was an irregularity in the sale that may have prejudiced Worcester
by discouraging buyers interested only in residential properties. In other
words, reasonable investigation would have revealed that Worcester had the
right to avoid the sale under Whitman.
[12] We therefore reverse the decision of the district court and remand the
case for entry of an appropriate order.FN13 See 28 B.R. at 916-17.
Facts of Boyd are distinguished in that it, did not involve and underlying void
deed that was the foreclosing deed. Boyd involved the application of Mississippi
law.
Relief From Stay For Cause Based On Abstention; and In re Tuscon Estates
In, Miller & Starr, California Real Estate 3D, Section 8:22, page 37 states,”
Person of unsound mind; adjudicated situations. 10 A person who has been adjudicated
to be of unsound mind cannot make any contract or conveyance, or delegate any
right, 11 and any conveyance by the grantor subsequent to the adjudication is void
and can be set aside even if the grantee is a bona fide purchaser or encumbrancer
without notice of the adjudication.”
In Miller & Starr, California Real Estate 3D, Section 11:12, page 43, states,”
Effect of a forgery
Effect of a recordation of a forged instrument. A forged document is totally void,
and no title or lien is created even if it is recorded. 1 The title or lien of a
bona fide purchaser based on a forged instrument in the chain of title is
unenforceable against the true owner of the property, even though the purchaser
relied on the public record. 2
1
See Section 8:53 (deeds; forgery)
2
See Section 8:53 (deeds; forgery)
And,
[FN1] Firato v. Tuttle (1957) 48 Cal.2d 136, 139 [308 P.2d 333] (deed of
reconveyance); Burns v. Ross (1923) 190 Cal. 269, 275 [212 P. 17] (assignment of
contract of sale); Cutler v. Fitzgibbons (1906) 148 Cal. 562, 563-564 [83 P. 1075];
Vaca Val. & C.L.R. Co. v. Mansfield (1890) 84 Cal. 560, 566 [24 P. 145] (blank deed
completed without authority); Handy v. Shiells (1987) 190 Cal.App.3d 512, 517 [235
Cal.Rptr. 543]; Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d
36, 43 [198 Cal.Rptr. 418]; Forte v. Nolfi (1972) 25 Cal.App.3d 656, 674 [102
Cal.Rptr. 455] (note and deed of trust); Kessler v. Bridge (Super. Ct. 1958) 161
Cal.App.2d Supp. 837, 841 [327 P.2d 241]; Shurger v. Demmel (1957) 148 Cal.App.2d
307, 309 [306 P.2d 497]; Crittenden v. McCloud (1951) 106 Cal.App.2d 42, 50 [234
P.2d 642]; Montgomery v. Bank of America Nat. Trust & Savings Ass’n (1948) 85
Cal.App.2d 559, 564 [193 P.2d 475]; Gioscio v. Lautenschlager (1937) 23 Cal.App.2d
616, 619-620 [73 P.2d 1230].
See 8A Am. Jur. Pleading and Practice Forms, Deeds §§ 41 et seq..
[FN2] Bryce v. O’Brien (1936) 5 Cal.2d 615, 616 [55 P.2d 488] (deed signed by
grantor in blank); Trout v. Taylor (1934) 220 Cal. 652, 656 [32 P.2d 968]; Cutler
v. Fitzgibbons (1906) 148 Cal. 562, 563-564 [83 P. 1075]; Meley v. Collins (1871)
41 Cal. 663, 676-679; Wutzke v. Bill Reid Painting Service, Inc. (1984) 151
Cal.App.3d 36, 43-44 [198 Cal.Rptr. 418].
Fraud in the inception. When a party is unaware of the nature of the instrument
being executed because of the fraud of the grantee or the beneficiary, there is
fraud in the inception and the document is void and cannot be relied on by a bona
fide purchaser. 2
2
See Section 8:55 (deeds; fraud)
Bank of America, N.A. v. La Jolla Group II, 129 Cal.App.4th 706, 28
Cal.Rptr.3d 825, 05 Cal. Daily Op. Serv. 4271, 2005 Daily Journal D.A.R. 5800
(Cal.App. 5 Dist. May 19, 2005)
In Bank of America, N.A. v. La Jolla Group II, 129 Cal.App.4th 706, 712 78
Cal.Rptr.3d 825, the court stated,”
And,
And,
There is no contention in this case that the foreclosure sale was not
properly noticed. The sale was improper because the loan was current
and therefore the beneficiary had no right to exercise the power of
sale. No statute creates a presumption-conclusive or otherwise-for any
purchaser-bona fide or otherwise-that any recitals in a trustee’s deed
render effective a sale that had no contractual basis.” (Bank of America,
N.A. v. La Jolla Group II, supra, 129 Cal.App.4th at pp. 714-715)
In re Fietz, 852 F.2d 455, Bankr. L. Rep. P 72,420 (9th Cir.(Cal.),Jul 21,
1988)
The usual articulation of the test for determining whether a civil proceeding
is related to bankruptcy is whether the outcome of the proceeding could
conceivably have any effect on the estate being administered in bankruptcy.
[citations omitted]. Thus, the proceeding need not necessarily be against the
debtor or against the debtor’s property. An action is related to bankruptcy
if the outcome could alter the debtor’s rights, liabilities, options, or
freedom of action (either positively or negatively) and which in any way
impacts upon the handling and administration of the bankrupt estate.
Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984) (emphasis in
original). The Fourth, Fifth and Eighth Circuits have adopted the Pacor
definition without modification. See Wood v. Wood (In re Wood), 825 F.2d 90,
93 (5th Cir.1987); Dogpatch Properties, Inc. v. Dogpatch U.S.A., Inc. (In re
Dogpatch, U.S.A., Inc.), 810 F.2d 782, 786 (8th Cir.1987); A.H. Robins Co.,
Inc. v. Piccinin (In re A.H. Robins Co., Inc.), 788 F.2d 994, 1002 n. 11 (4th
Cir.) (dicta), cert. denied, 479 U.S. 876, 107 S.Ct. 251, 93 L.Ed.2d 177
(1986).
The Second, Sixth and Seventh Circuits have adopted definitions similar to
the one announced in Pacor, but their formulations may deny jurisdiction in
cases where the dispute is “conceivably” related to the bankruptcy estate,
but that relationship is remote. See Turner v. Ermiger (In re Turner), 724
F.2d 338, 341 (2d Cir.1983); Kelley v. Nodine (In re Salem Mortgage Co.), 783
F.2d 626, 634 (6th Cir.1986); Elscint, Inc. v. First Wisconsin Fin. Corp. (In
re Xonics, Inc.), 813 F.2d 127 (7th Cir.1987).
[2] We conclude that the Pacor definition best represents Congress’s intent
to reduce substantially the time-consuming and expensive litigation regarding
a bankruptcy court’s jurisdiction over a particular proceeding. SeeH.Rep. No.
595, 95th Cong., 2d Sess., 43-48, reprinted in1978 U.S. Code Cong. & Admin.
News, 5787, 5963, 6004-08. The Pacor definition promotes another
congressionally-endorsed objective: the efficient and expeditious resolution
of all matters connected to the bankruptcy estate. See id. We therefore adopt
the Pacor definition quoted above.FN1 We reject any limitation on this
definition; to the extent that other circuits may limit jurisdiction where
the Pacor decision would not, we stand by Pacor. Applying the Pacor
definition to the facts at hand, we consider whether the outcome of Gordon’s
cross-claim conceivably could have affected the administration of Fietz’
bankruptcy estate when Gordon filed her cross-claim on July 14, 1983.FN2
FN1. We note that the bankruptcy judges in the Ninth Circuit have applied the
Pacor definition of relatedness. See National Acceptance Co. of Cal. v.
Levin, 75 B.R. 457, 458 (D.Ariz.1987); Taxel v. Commercebank (In re World
Financial Serv. Center, Inc.), 64 B.R. 980, 988 (Bankr.S.D.Cal.1986); Gennari
v. United States Dep’t of Treasury (In re Educators Inv. Corp.), 59 B.R. 910,
913 (Bankr.D.Nev.1986).
FN2. Subject matter jurisdiction should be determined as of the date that the
complaint, or in this case the cross-claim, was filed. See Nuclear Eng’g Co.
v. Scott, 660 F.2d 241, 248 (7th Cir.1981), cert. denied, 455 U.S. 993, 102
S.Ct. 1622, 71 L.Ed.2d 855 (1982); Gresham Park Community Org. v. Howell, 652
F.2d 1227, 1236 n. 25 (5th Cir. Unit B 1981). This is consistent with our
rule that diversity jurisdiction is determined as of the date the complaint
was filed. See Co-Efficient Energy Sys. v. CSL Indus., 812 F.2d 556, 557 (9th
Cir.1987); Mann v. City of Tucson, Dep’t of Police, 782 F.2d 790, 794 (9th
Cir.1986).
Goldie’s Bookstore, Inc. v. Superior Court of State of Cal., 739 F.2d 466,
469 (9th Cir.(Cal.),Aug 03, 1984)
**We concluded that Miofsky’s state proceeding was “private tort litigation”
not brought to “vindicate a vital state interest,”
CC 2924 Gross disparity between the purchaser’s price and the value of the property
combined with some (even slight) unfairness or irregularity
Show that time presecribed of thirty days plus twenty days is statutorily mandated
in the manner of the one day postponement in Whitman v. Transtate Title Co.
Whitman v. Transtate Title Co., 165 Cal.App.3d 312, 211 Cal.Rptr. 582
(Cal.App. 4 Dist.,Mar 06, 1985)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k360 k. Execution of Power and Conduct of Sale in General.
Most Cited Cases
Foreclosure procedure, being statutorily prescribed, must be strictly
complied with.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
While mere inadequacy of price, standing alone, will not justify setting
aside trustee’s sale, gross inadequacy of price coupled with even slight
unfairness or irregularities is sufficient basis for setting sale aside.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Purchase of property with value of at least $65,000 for $12,690 at trustee’s
sale pursuant to foreclosure of first deed of trust, coupled with trustee’s
refusal to grant statutory one-day postponement of sale requested by
purchaser of property under third deed of trust constituted sufficient
grounds for avoiding sales. West’s Ann.Cal.Civ.Code § 2924g.
“(a) All sales of property under the power of sale contained in any deed of
trust or mortgage shall be held in the county where such property or some
part thereof is situated, and shall be made at auction, to the highest
bidder, between the hours of 9 a.m. and 5 p.m. on any business day, Monday
through Friday.
“The sale shall commence at the time and location specified in the notice of
sale. Any postponement shall be announced at the time and location specified
in the notice of sale for commencement of such sale or pursuant to
subdivision (c)(1) herein.
“...
“(b) When the property consists of several known lots or parcels they shall
be sold separately unless the deed of trust or mortgage provides
otherwise; .... The trustor, if present at the sale, may also, unless the
deed of trust or mortgage otherwise provides, direct the order in which
property shall be sold, when such property consists of such several known
lots or parcels which may be sold to advantage separately, and the trustee
shall follow such direction....
“...
“(c)(1) There may be a postponement of the sale proceedings at any time prior
to the completion of the sale thereof at the discretion of the trustee, upon
instruction by the beneficiary to the trustee that the sale proceedings be
postponed, or upon the written request of the trustor provided the reason for
such request is to permit the trustor to obtain cash sufficient to satisfy
the obligation or bid at the sale. The trustor shall be entitled to make one
such request for postponement and any postponement made at the request of the
trustor shall be for a period not to exceed one business day.
“(2) The trustee shall postpone the sale upon the order of any court of
competent jurisdiction; or by operation of law; or by the mutual agreement,
whether oral or in writing, of any trustor and any beneficiary or any
mortgagor and any mortgagee. Any postponement pursuant to this paragraph
shall not be a postponement for purposes of determining the maximum number of
postponements permitted pursuant to this subdivision.”
[1] In the first place, the language in subdivision (c)(1) “at the discretion
of the trustee” is not a phrase modifying either “upon instruction by the
beneficiary to the trustee” or “upon the written request of the trustor.” The
words “at the discretion of the trustee” are separated from the words “upon
instruction by the beneficiary” by a comma indicating that “at the discretion
of the trustee” is one situation in which the sale may be postponed and that
“upon instruction by the beneficiary to the trustee that the sale proceedings
be postponed, or upon the written request of the trustor provided the reason
for such request is to permit the trustor to obtain cash sufficient to
satisfy the obligation or bid at the sale” are two additional situations in
which the sale may be postponed. Grammatically, the three situations,
separated by commas, constitute a series.
Were there any doubt about the matter it would be dissipated by referring to
the language of the same provision before section 2924g was rewritten in
1979. It read: “There may be a postponement of the sale proceedings at any
time prior to the completion of the sale thereof at the discretion of the
trustee, or if the beneficiary instructs the trustee to postpone the sale
proceedings.” Thus, the section as it formerly read specified two situations
in which there might be a postponement of the sale, one of which was “at any
time prior to the completion of the sale ... at the discretion of the
trustee.” (Stats.1972, ch. 1056, § 4, p. 1943.) As rewritten in 1979 and
amended in 1980, three situations are specified, one of which remained “at
any time prior to the completion of the sale ... at the discretion of the
trustee.” FN3
FN3. Section 2924g was again amended in 1984. (See Stats.1984, ch. 1730, § 4,
No. 14, West’s Cal.Legis. Service, p. 580.) The principal change made by the
1984 amendment was the addition of a requirement that the written request for
a statutory one-day postponement identify the source from which the funds are
being obtained. Neither the 1984 amendment nor the added requirement are at
issue, however, on this appeal.
*320 In connection with his argument that the granting of a request for the
statutory one-day postponement is discretionary with the trustee, plaintiff
appears to place some reliance on a statement found in 1 Miller & Starr,
Current Law of California Real Estate, § 3:117, at page 532: “As a general
rule, the decision to postpone the sale is within the sole discretion of the
trustee, and he can do so over the objections of any party if he considers it
necessary to protect the interests of the trustor and/or beneficiary.” (Fn.
omitted.) While we have little doubt of the accuracy of the quoted statement
in context, the authors of the treatise make it clear the statement does not
pertain to the situation at hand. They state within the same section on the
next succeeding page: “The trustee is required to follow the instructions of
the beneficiary, and in practice he usually does” (fn. omitted) and, even
more pointedly, at page 260 of the 1984 supplement to volume 1, the authors
state: “The trustee must postpone the sale when requested by the trustor for
one business day in order to allow him time to obtain cash to satisfy the
obligation ....” (Orig. emphasis.)
[3] The conclusion is inescapable that the granting of the statutory one-day
postponement upon proper request is mandatory, not discretionary with the
trustee.
[4] Pointing out that section 2924g gives the right to request the statutory
one-day postponement to the “trustor” and that Bernadine Wells was the
trustor of both the first and second deeds of trust, not Alvin Lee, plaintiff
contends Lee was not a person entitled under the statute to demand the
statutory one-day postponement. Plaintiff is of course correct that the
statute purports to give the right to demand the statutory one-day
postponement to *321 the “trustor,” but we do not agree that the term
“trustor” as used in subdivision (c)(1) was intended by the Legislator to
limit the right to demand such postponement solely to the original trustor.
We believe the term “trustor” as used in subdivision (c)(1) was intended to
include also the successor in interest to the original trustor who at the
time of the impending trustee’s sale is the owner of the property to be sold
at the trustee’s sale.
The manifest purpose of the statutory one-day postponement is to avoid the
loss or forfeiture of equity in the property by affording the owner of the
property scheduled to be sold a last opportunity to obtain funds with which
to pay off the indebtedness secured by the deed of trust under which the
trustee’s sale has been scheduled. At the inception of a deed of trust the
trustor is also the owner of the property. This may account for the
Legislature’s use of the word “trustor” in the statute but the Legislature
cannot have intended to limit the right to request the statutory one-day
postponement of sale to the person who was the owner at the time the trust
deed was created.
[5][6] It is common knowledge, and we take judicial notice of the fact, that
in California changes in the ownership of real property are frequent and that
in many foreclosures the original trustor no longer owns the property.
Indeed, in light of antideficiency legislation, the original trustor
frequently has no real interest in the property or the scheduled trustee’s
sale. The instant case, although perhaps not typical, is one in point.
Bernadine Wells, the original trustor, no longer has any ownership interest
in the property and in all likelihood would not have the slightest interest
in requesting a statutory one-day postponement of the sale. Alvin Lee, by
contrast, having purchased the property at the trustee’s sale under the third
deed of trust, was the owner of the property to be sold at the scheduled
trustee’s sale and was the successor in interest to Bernadine Wells as owner
of the property. His interest was the one to be served by the statutory
purpose of the prescribed one-day postponement and guided by that statutory
purpose, the term “trustor” is properly interpreted to afford him that right.
(Cf. § 2924c; Saucedo v. Mercury Sav. & Loan Assn. (1980) 111 Cal.App.3d 309,
314-315, 168 Cal.Rptr. 552 [nonassuming grantee may recover attorney fees
because of ownership of the property subject to the secured debt]; Munger v.
Moore (1970) 11 Cal.App.3d 1, 8, 89 Cal.Rptr. 323.) To limit the term
“trustor” to the original trustor would defeat the statutory purpose in many
if not most cases. The statutory purpose and objective is an important
determinant in the interpretation of a statute. ( Freedland v. Greco (1955)
45 Cal.2d 462, 467, 289 P.2d 463; Cal. Drive-In Restaurant Assn. v. Clark
(1943) 22 Cal.2d 287, 292, 140 P.2d 657.)
We conclude that the term “trustor” as used in section 2924g includes the
successor in interest to the original trustor who owns the property to be
sold at the scheduled trustee’s sale.
Plaintiff asserts that the trustee’s denial of Lee’s request for a statutory
one-day postponement was at most an irregularity; that a mere irregularity is
not a sufficient basis for setting aside a trustee’s sale to a bona fide
purchaser (cf. Taliaferro v. Crola (1957) 152 Cal.App.2d 448, 450, 313 P.2d
136); and that no summary judgment should have been granted Transtate in any
event because a triable issue of fact exists as to its real motive for
refusing to issue a trustee’s deed. In connection with the last point,
plaintiff observes that in proceeding to the trustee’s sale under the first
deed of trust immediately after completing the trustee’s sale under the
second deed of trust at which the Bermans purchased the property by
successfully bidding in their secured obligation, Transtate wiped out the
Bermans to whom they owed fiduciary duties under the second deed of trust.
[8][9] While mere inadequacy of price, standing alone, will not justify
setting aside a trustee’s sale, gross inadequacy of price coupled with even
slight unfairness or irregularity is a sufficient basis for setting the sale
aside. ( Winbigler v. Sherman (1917) 175 Cal. 270, 275, 165 P. 943; Lopez v.
Bell (1962) 207 Cal.App.2d 394, 398, 24 Cal.Rptr. 626; Foge v. Schmidt (1951)
101 Cal.App.2d 681, 683, 226 P.2d 73.) Here, the only evidence set forth in
the affidavits as to the value of the property is that the property had a
value of at least $65,000. **Plaintiff purchased the property for $12,690.
That gross inadequacy coupled with the trustee’s refusal to grant the
requested statutory one-day postponement constituted a more than sufficient
ground for avoiding the sales and for the summary judgment in favor of
defendants. And in the circumstances of this case, the motive of Transtate in
treating the trustee’s sales as invalid and refusing to issue a trustee’s
deed to plaintiff is irrelevant. Alvin Lee had the right to avoid the sales
and he elected to do so by seeking that relief in this action. The sales
being properly avoided as to him, Transtate’s motives are simply immaterial.
**590 Disposition
Affirmed.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k372 Title and Rights of Purchaser
266k372(3) k. Effect of Defects or Irregularities in
Proceedings. Most Cited Cases
Material mistake occurring when notices of nonjudicial foreclosure sale
identified only one of two defaulted notes secured by deed of trust was
substantial and justified trustee’s decision to abort sale upon discovery of
mistake after accepting bid from purchasers but before issuance of trustee’s
deed. West’s Ann.Cal.Civ.Code § 2924
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k376 k. Proceeds and Surplus. Most Cited Cases
Rebuttable presumption that beneficiary actually knew of all unpaid loan
payments on obligation owed to beneficiary and secured by the deed of trust
or mortgage subject to notice of default, assuming that it applied prior to
issuance of trustee’s deed, was rebutted by evidence of mistake in failing to
include one of two defaulted notes in notices of nonjudicial foreclosure
sale. West’s Ann.Cal.Civ.Code § 2924.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k372 Title and Rights of Purchaser
266k372(3) k. Effect of Defects or Irregularities in
Proceedings. Most Cited Cases
The general rule that the property is sold at the moment of acceptance of the
bid at nonjudicial foreclosure sale was not applicable when notice defect
rendered the sale void.
p. 700
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(7) k. Inadequacy of Price in Connection with
Other Objections. Most Cited Cases
Inaccurate description of property in notice of trustee’s sale, that appeared
to refer to land in addition to four-acre parcel containing residence that
was subject to deeds of trust securing loans, was “material irregularity”
relating to foreclosure sale, for purposes of California **law permitting
sale to be set aside if gross inadequacy of price were coupled with even
slight unfairness or irregularity; full description of property referred to
oil and gas rights and to particular conveyances relating to 40-acre parcel,
and bidders interested in smaller lot who would have researched described
plot would thus have been deterred from attending foreclosure sale.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k536 k. Bona Fide Purchasers. Most Cited Cases
Whether purchaser of debtor’s property at foreclosure sale or his transferee
knew of debtor’s action against mortgage company alleging fraud and breach of
fiduciary duty for arranging loans secured by deeds of trust that included
balloon payments was irrelevant in action **to set aside foreclosure sale on
basis that price paid was grossly inadequate and there was irregularity in
sale that contributed to inadequacy of price, under California law.
[11] Mortgages 266 536
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k536 k. Bona Fide Purchasers. Most Cited Cases
Purchaser of debtor’s property at foreclosure sale and his transferee had
constructive notice of misdescription of property which was to be subject of
sale, where deed of trust contained accurate description of property subject
to foreclosure, but notice of trustee’s sale, trustee’s deed to purchaser,
and purchaser’s deed to his transferee incorrectly stated that property
included another parcel, which had not been subject of deed of trust, and
investigation would have disclosed property misdescription.
[10][11] Worcester seeks to set aside the sale on the grounds that the price
Rosner*1232 paid was grossly inadequate and there was an irregularity in the
sale that contributed to the inadequacy of the price. Sargent v. Shumaker,
193 Cal. at 129-30, 223 P. at 467 (1924); Whitman, 165 Cal.App.3d at 323, 211
Cal.Rptr. at 589. Whether Rosner or Little knew of Worcester’s earlier suit
is irrelevant in an action to set aside a foreclosure sale on this basis.
Rosner and Little’s claim that they had no constructive notice is disproven
by the record before us. The deed of trust contains an accurate description
of the property subject to foreclosure; the Notice of Trustee’s Sale, the
trustee’s deed to Rosner, and Rosner’s deed to Little, however, incorrectly
state that the property included the 40-acre parcel. An investigation of the
record pertaining to the 4-acre parcel would have shown that the deed of
trust under which the property was foreclosed and the deed from the trustee
did not describe the same property. Under California law, “one whose search
of the record would disclose a defective property description is charged with
the duty of further investigation and with knowledge of whatever it would
have disclosed.” Sieger v. Standard Oil Co., 115 Cal.App.2d 649, 657, 318
P.2d 479, 484 (1957) (citing Leonard v. Osburn, 169 Cal. 157, 161, 146 P.
530, 532 (1915); see alsoCal.Civ.Code §§ 18-19 (West 1982). Inquiry would
have disclosed that the Notice of Trustee’s Sale also misdescribed the
property subject to foreclosure and thereby put Rosner and Little on notice
that there was an irregularity in the sale that may have prejudiced Worcester
by discouraging buyers interested only in residential properties. In other
words, reasonable investigation would have revealed that Worcester had the
right to avoid the sale under Whitman.
[12] We therefore reverse the decision of the district court and remand the
case for entry of an appropriate order.FN13 See 28 B.R. at 916-17.
Homestead Savings v. Darmiento, 230 Cal.App.3d 424, 281 Cal.Rptr. 367 (Cal.App. 2 Dist.,May 22, 1991)
**A sale is void where there is a notice defect and conclusive presumption language and recitals in the deed which
establish on its face the irregularity of the sale.
Lopez v. Bell, 207 Cal.App.2d 394, 24 Cal.Rptr. 626 (Cal.App. 2 Dist.,Sep 04, 1962)
Proceeding to set aside trustee’s sale for default in payment under power contained in deed of trust. The Superior
Court of Los Angeles County, Frank S. Balthis, J., sustained demurrer and appeal was taken from judgment
dismissing action. The District Court of Appeal, Lillie, J., held that **complaint filed by party in whom title to
property purchased by others was placed and who executed deed of trust and gave note to secure payments thereof
stated cause of action on theory that vendors had waived right to forfeit plaintiff’s interest by acceptance of seven
successive semi-annual payments after maturity without objection or protest.
Reversed.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(2) k. Grounds for Relief in General. Most Cited Cases
Gross inadequacy of bid at trustee’s sale made under power of sale contained in deed of trust coupled with some
irregularities will justify relief from sale.
[2] Nor should the sale be set aside because the final bid was assertedly inadequate. Indeed, plaintiffs concede that
mere inadequacy of price, however gross, is not alone enough ( Stafford v. Russell, 117 Cal.App.2d 326, 333, 255
P.2d 814), although they properly argue that gross inadequacy, coupled with some irregularities will justify relief. (
Winbigler v. Sherman, 175 Cal. 270, 275, 165 P. 943.) Thus, it is held in Winbigler that where the debtor-owner
belatedly learns of the sale and seeks a reasonable postponement to obtain the money needed, refusal by the trustee
may constitute unfairness which, coupled with an inadequate price, justifies setting aside of the **629 sale. Such a
situation is said to exist at bar; it will be considered in conjunction with the next and major point which is decisive
of this appeal.
[3][4][5][6][7][8] Since Boone v. Templeman, 158 Cal. 290, 110 P. 947, it has been settled law that the acceptance
by a vendor of payments which are past due under an executory contract constitutes a waiver of the right to forfeit
the purchaser’s interest by reasons of breaches which have accrued at or prior to the time when such payment was
made; accordingly he may not be again placed in default for the same delinquency until he has been allowed a
reasonable time to perform his contract. In such case, it is said, ‘the right of forfeiture is temporarily suspended until
the vendor has given notice of his intention to require strict performance in the future and the purchaser has a
reasonable time within which to perform his part of the contract.’ ( Harmon Enterprises, Inc. v. Vroman, 167
Cal.App.2d 517, 522, 334 P.2d 628, 631.) Otherwise stated, ‘Since the law looks unfavorably upon forfeitures,
waiver of the time clauseFN2 will be deemed to be a waiver of the forfeiture unless the time element is first re-
established by definite notice.’ ( Gonzalez v. Hirose, 33 Cal.2d 213, 216, 200 P.2d 793, 795.) The above principle
has been held applicable to obligations secured by deeds of trust. ( Bledsoe v. Pacific Ready Cut Homes, Inc., 92
Cal.App. 641, 645, 268 P. 697; see also Altman v. McCollum, 107 Cal.App.2d Supp. 847, 858, 236 P.2d 914.) But,
say defendants, plaintiffs’ pleading specifically alleges *399 the giving of written notice and demand for payment of
the instalment due on August 15-presumably they refer to the allegation, quoted earlier, that ‘on each of the
occasions when said semi-annual instalments fell due, the defendant wrote to the Bautistas requesting payment of
said payments * * *.’ We are satisfied, however, that the mere request for payment after the due date does not meet
the requirement mentioned in the cases above cited, namely, the giving of written notice (after acceptance of such
payment) that strict performance of the contract’s covenants will be necessary in the future. To be reasonably
definite, the notice should recite in substance that ‘unless payment was made on ‘a date fixed therefor, far enough in
the future to give the purchaser reasonable time and opportunity to comply with his contract by making the
payments, the contract will be terminated and forfeiture will take place.’ [Citations.]’ ( Lamont v. Ball, 93
Cal.App.2d 291, 293, 209 P.2d 9, 11.)
FN2. While it does not appear that the contract in the present action expressly provided that ‘time is of the essence,’
use of the precise expression is not always necessary to make it so. See Skookum Oil Co. v. Thomas, 162 Cal. 539,
545-546, 123 P. 363; Katemis v. Westerlind, 142 Cal.App.2d 799, 299 P.2d 383.
[9] This is not to say that defendants by proper pleading and proof may not ultimately establish what was expected
of them under the circumstances; but the sole question for present determination is the sufficiency of the facts to
constitute a cause of action. Although there are cases holding that the mere acceptance of one payment after its
maturity does not constitute a waiver of the right to declare a forfeiture (see citations in Boone v. Templeman, supra,
158 Cal. 290, 296, 110 P. 947), as in Boone, we have much more than this in the present case. Seven semi-annual
payments in succession, it is alleged, were accepted after maturity and without objection or protest of any kind.
Other facts are alleged which have a strong appeal to a court of equity. ‘We think from these facts a court might
infer a waiver of the conditions regarding forfeiture and time, and that they supported the general allegation of the
complaint that [defendants] had waived those conditions.’ ( Boone v. Templeman, supra, 296-297, 110 P. at page
950.) It was error, therefore, to sustain the demurrer to the complaint as last amended.
Foge v. Schmidt, 101 Cal.App.2d 681, 226 P.2d 73 (Cal.App. 1 Dist.,Jan 15, 1951)
Frank J. Foge brought action against Walter J. Schmidt and another to set aside a sale of plaintiff’s property to
defendant at a trustee’s sale to satisfy indebtedness under a third deed of trust. A judgment for plaintiff was entered
in the Superior Court in and for the City and County of San Francisco, Herbert C. Kaufman, J., and the defendants
appealed. The District Court of Appeal, Dooling, J., held that evidence failed to establish that trial court abused its
discretion in vacating the sale and ordering a new one to be held.
Judgment affirmed.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(7) k. Pleading and Proof. Most Cited Cases
Mere inadequacy of price, standing alone, will not justify setting aside a trustee’s sale to satisfy indebtedness under
deed of trust, but gross inadequacy of price coupled with even slight additional evidence of unfairness is sufficient to
authorize setting the sale aside.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(2) k. Grounds for Relief in General. Most Cited Cases
Whether particular facts justify setting aside a trustee’s sale to satisfy indebtedness under deed of trust rests very
largely in trial court’s discretion.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(7) k. Pleading and Proof. Most Cited Cases
Evidence failed to establish that trial court abused its discretion in setting aside a trustee’s sale of plaintiff’s property
to satisfy indebtedness under third deed of trust, **where evidence showed that sale price was grossly
disproportionate to the value of property, and further that plaintiff’s agent had made a higher bid for the property
which auctioneer refused because agent did not have cash in hand and that auctioneer refused to grant a continuance
of 10 or 15 minutes to permit plaintiff’s agent to secure the cash.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(7) k. Pleading and Proof. Most Cited Cases
Where plaintiff, in his complaint seeking to set aside a trustee’s sale of plaintiff’s property to satisfy indebtedness
under third deed of trust, offered to pay indebtedness secured by the third deed of trust, and such offer was refused
by defendant’s election to stand on the sale and to contest plaintiff’s right to have it set aside, and decree merely
vacated the sale and ordered a new one to be held, defendant could not be heard to assert on appeal that plaintiff
refused to do equity.
Defendants appeal from a judgment seting aside a sale of plaintiff’s property to them at a trustee’s sale to satisfy an
indebtedness under a third deed of trust. The court found that the property was worth at least $11,000 and that the
total indebtedness secured by it did not exceed $6,600. The property was bought by the trustee for slightly under
$700 for which, on the court’s finding, he secured property having a clear equity of at least $4,400. The facts thus
support the finding that the sale price was grossly disproportionate to the value of the property. The court found that
the plaintiff’s mother and a real estate agent who, the evidence showed, was acting for **74 plaintiff, each made a
bid of $750 for the property. Neither had the cash in hand and each asked for not over 10 or 15 minutes to go to a
bank to secure it which the auctioneer refused. The agent had brought a blank check executed by his firm and the
court found that there are many banks in the vicinity of the place of sale (in downtown San Francisco) which were
then open for business and that the agent could have obtained the cash to support his bid if his request had been
granted. On these facts the court found that the sale was unfairly conducted
*683 [1] While mere inadequacy of price, standing alone, will not justify setting aside such a sale, Stevens v. Plumas
Eureka Annex Mining Co., 2 Cal.2d 493, 41 P.2d 927, **gross inadequacy of price coupled with even slight
additional evidence of unfairness is sufficient to authorize setting the sale asider, Winbigler v. Sherman, 175 Cal.
270, 275, 165 P. 943; 25 Cal.Jur. 90-91.
We need go no further than the Winbigler case to support the finding of unfairness. In that case the owner, who had
learned of the proposed sale 30 minutes before, asked the auctioneer for a reasonable continuance to procure the
cash to make a bid. The auctioneer’s refusal coupled with inadequacy of price was held to make the sale voidable.
[2][3] Defendants seek to distinguish the Winbigler case on the ground that there the owner had not known of the
proposed sale in time to procure the cash. But whether the particular facts justify setting the sale aside rests very
largely in the trial court’s discretion, Humboldt Savings & Loan Society v. March, 136 Cal. 321, 323, 68 P. 968, and
we cannot say that under the facts of this case that discretion was abused. The denial of such a short delay as one
quarter of an hour or less when the agent acting on behalf of plaintiff had a check of his firm which he would readily
cash at a bank indicates a desire to secure the property for the trustee bidder on any technicality rather than one to
obtain the highest and best bid.
[4][5] Defendants point to the rule that an offer to pay the indebtedness is a prerequisite to a judgment vacating the
sale. Py v. Pleitner, 70 Cal.App.2d 576, 582, 161 P.2d 393. In his complaint plaintiff did offer to pay the
indebtedness. This offer was refused by defendant’s election to stand on the sale and to contest plaintiff’s right to
have it set aside. The decree merely vacates the sale and orders a new one to be held. Under the circumstances
defendants cannot be heard to assert on appeal that plaintiff refused to do equity.
Judgment affirmed.
Winbigler v. Sherman, 175 Cal. 270, 165 P. 943 (Cal.,Jun 04, 1917)
West Headnotes
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k352 Notice of Sale
266k354 k. Form and Requisites. Most Cited Cases
If a trust deed specified kind and manner of notice of sale, a sale without
giving notice as required would be invalid.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
**Where land is sold under a deed of trust, mere inadequacy of purchase price
will not invalidate the sale, although where inadequacy is gross very slight
additional evidence of unfairness or irregularity is sufficient to warrant
setting it aside.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k352 Notice of Sale
266k356 k. Publication or Other Constructive Notice. Most
Cited Cases
Where trust deed provided that trustee first publish notice of sale, etc.,
twice a week for four successive weeks in newspaper in city and county named,
notice of which last publication was on January 22d, for sale February 6th,
was sufficient, since it was not necessary that four weeks be next preceding,
and date fixed was not unreasonably remote.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
In action to require purchaser in a sale under a trust deed to convey
property to mortgagor on ground that sale was void, **inadequacy of
consideration, together with refusal of mortgagee and trustee to grant
reasonable postponement, held to warrant setting aside sale.
**944 *271 E. W. Forgy and John T. Jones, both of Los Angeles (Jones &
Weller, of Los Angeles, of counsel), for appellant.
H. C. Head, of Santa Ana (R. T. Walters and Ernest C. Griffith, both of Los
Angeles, of counsel), for respondent.
ANGELLOTTI, C. J.
This appeal was originally heard and decided by the District Court of Appeal
of the Second Appellate District, and an application for a hearing in this
court was subsequently granted.
The following statement as to the nature of the case, the action of the trial
court, and the appeals, is taken from the opinion of the district court of
appeal:
The finding just referred to is, however, assailed on the appeal from the
judgment and order denying a new trial as being without sufficient support in
the evidence. The deed of trust is set out in the statement on appeal, and a
reading thereof in connection with the findings of the trial court as to the
publication had shows that notice of the sale was published in all respects
as required thereby. So far as material this instrument provided:
‘Said trustee * * * shall first publish notice of the time and place of such
sale, with a description of the property to be sold, at least twice a week
for four successive weeks in some newspaper published in the city of Los
Angeles, county of Los Angeles, state of California.’
*273 The trial court found ‘that notices of said sale were published by said
trustee in the Los Angeles Daily Journal, a daily newspaper published in Los
Angeles county, Cal., twice a week for four weeks,’ specifying the date of
first and last publication. The last publication was on January 22, 1915, and
the day noted for the sale was February 6, 1915. Publication of notice in
accord with the requirements of the trust deed is thus shown. The point
appears to be that the publication **945 was not sufficient because not made
for the four weeks ‘next preceding the date’ of sale, and this appears to
have been the view of the learned trial judge. **But the trust deed, as we
have seen, contains no such requirement, calling simply for publication ‘at
least twice a week for four successive weeks.’Upon this point the District
Court of Appeal said:
‘Counsel for respondent have not referred to any decision holding that under
a trust deed in the form here presented the publications of the notice of
sale must be continued down to the very time of the sale; therefore, we may
be justified in assuming that there is no such decision. In addition to that,
however, we have examined some of the principal text-books and digests, and
we fail to find any declaration of law in support of respondent’s contention.
**The rule, of course, is that in executing a power of sale the trustee must
act in good faith and strictly follow the requirements prescribed by the
trust deed with respect to the manner of sale. The date fixed for the sale in
the present instance was not unreasonably remote from the period of
publication of the notices. The fact that it was a few days later than it
might have been after the beginning of publication of the notice was a fact
rather favorable than otherwise to the interests of the debtor.’
This result does not require a reversal, however, if the other findings
sufficiently support the judgment. The claim of respondent is substantially
that the gross inadequacy of price for which the land was sold by the
trustee, in connection with the circumstances found, sufficiently supports
the conclusion of the trial court that the sale was inequitable and
fraudulent, and that the purchaser should not be allowed to retain the
property. The findings of fact, which are conclusive upon us except as to the
provisions of the trust deed and a certain *274 letter hereinafter referred
to which are the only matters of evidence contained in the statement on
appeal, show the following facts: The notes of deceased secured by the trust
deed were given to Fairbanks-Morse & Co. for the aggregate amount of $536.65
in consideration of the agreement of the latter to furnish and install
certain pumping machinery on the land of deceased, a parcel of 15 acres in
Orange county. The deed of trust covered all of said land. The trustee under
the deed, Meyer, was at all times an employé of Fairbanks-Morse & Co. The
pumping machinery was installed, and after the first note, one for $100,
became due (October 1, 1914), **deceased made complaint that the same was
defective, and certain alterations were made therein by the vendor.
Apparently the machinery was still unsatisfactory, complaint being made as
late as the very day of sale. **In the meantime, Fairbanks-Morse & Co.
transferred the notes to defendant Sherman, who was a bill collector who had
theretofore collected bills and accounts for it. **The inference is that they
were transferred solely for purposes of collection. On or about December 21,
1914, Sherman caused the trustee to advertise the land for sale under the
trust deed. The first publication of notice was on December 31, 1914, the
sale being noticed for February 6, 1915, ‘at the west door of the courthouse
in the city of Los Angeles.’On January 6, 1915, Sherman wrote deceased as
follows, the letter being taken from the statement on appeal:
‘I have your letter of December 29th, and will say that I do not know
anything about troubles you speak of, regarding the pumping plant. That is a
matter that is between yourself and Fairbanks-Morse & Co. As to the trust
deed, I have instructed the trustee to start foreclosure proceedings, so
unless you care to pay the matter off at once, the same will be foreclosed in
due course of time.’
Deceased had no actual notice of the intended sale until about one-half hour
before the time fixed, when he went to the place of business of Fairbanks-
Morse & Co. for the purpose of negotiating with the latter about the alleged
defects in the machinery, and then and there for the first time learned of
the intended sale. **He at once went to Sherman and the trustee, and talked
with them about the matter, and requested a postponement of the sale for a
reasonable time to enable him to procure the money and pay the amount due.
The amount due, including expenses of sale, *275 was only $680.58, and the
actual value of the property was not less than $6,500, subject to a prior
mortgage for $1,500. The trust deed fully provided for and authorized
postponements of sale by the trustee. The request for a postponement was
denied, and the sale was made to Sherman, the only bidder, for $500, the
amount of his bid. Promptly after the sale deceased procured the necessary
money and offered to Sherman a sum sufficient to pay all amounts due,
including principal, interest, costs of sale and expenses, on condition that
Sherman recovery the property to him, and his offer was rejected. The trustee
executed his deed to Sherman. The price paid was not more than one-tenth the
actual value of the land, and was grossly inadequate. Another similar offer
was made by this plaintiff to Sherman before the commencement of this action,
and the same was refused. **It is further found upon these facts ‘that the
sale was inequitable and fraudulent.’
‘If the sale has been attended by any irregularity,*276 * * * if any undue
advantage has been taken to the prejudice of the owner of the property, or he
has been lulled into a false security; or, if the sale has been collusively,
or in any other manner, conducted for the benefit of the purchaser, and the
property has been sold at a greatly inadequate price, the sale may be set
aside, and the owner permitted to redeem.’
‘We think there can be no doubt under the authorities that where, in addition
to gross inadequacy of price, the purchaser has, in the language of the
United States Supreme Court, ‘been guilty of any unfairness or has taken any
undue advantage,’ resulting in such gross inadequacy and consequent injury to
the owner of the property, he will be deemed guilty of fraud warranting the
interposition of a court of equity in favor of the owner who is himself
without fault.’
**In the case at bar, there can be no doubt that there was gross inadequacy
of price. Property worth at least $5,000 was purchased for $500. The
purchaser was the nominal creditor, having a claim, including all expenses,
of only $680.58, secured many times over by this trust deed. Moreover, he was
apparently only an assignee of Fairbanks-Morse & Co. for purposes of
collection, its employé and representative. The trustee was an employé of the
same corporation. All parties knew that a dispute existed between deceased
and Fairbanks-Morse & Co. as to the adequacy of the pumping machinery
furnished in consideration of the giving of the notes, and that deceased was
endeavoring to obtain from the company some remedying of the alleged defects.
On the very day noted for the sale, without any actual notice that notice of
sale was being published, or that a time had been fixed therefor, he visited
the office of the company for that purpose. It was only then that he learned
of the proposed sale, only one-half hour before the time fixed. The letter
written to him on January 6, 1915, by Sherman was couched in such terms as to
convey to the mind of deceased that ‘foreclosure proceedings,’ as they were
termed therein, had not as yet been commenced, and, as substantially found by
the trial court, such proceedings would actually be commenced only ‘in due
course of time,’ and this, although a time for the sale had actually been
fixed and notice by publication actually commenced nearly a week before.
**Whether by design or otherwise it was well calculated to lead deceased *277
to believe that no proceeding for a sale, which would leave in him no right
of redemption and would effectually cut off all his rights in regard to his
property, had as yet been begun. It certainly tended to lull him into a false
security to this extent, if indeed the use of the term ‘foreclosure
proceedings’ did not convey to his mind the idea of proceedings of which
actual notice would be given him. Learning that such a sale was in fact
noticed only onehalf hour before the time fixed therefor, he requested of
both the purchaser and the trustee a postponement for a reasonable time to
enable him to procure the proportionately small amount of money to pay the
amount due. This request, perfectly reasonable under the circumstances and
one that could be granted without in the slightest degree prejudicing the
creditor in so far as the collection of the full amount due was concerned,
was refused, with the result that the whole property was sold to the creditor
for onetenth of its actual value. **We are of the opinion that under all the
circumstances the refusal of the creditor to consent to a postponement and of
the trustee to grant the same so savored of oppression and unfairness and an
apparent desire to acquire the property of deceased for a mere pittance that,
taken in connection with the gross inadequacy of price, it constitutes such
an irregularity in the proceedings as to sufficiently support the conclusion
and action of the trial court.
The judgment and the order denying a new trial and the order denying the
motion to vacate the conclusions of law and judgment and to enter another and
different judgment are affirmed.
A Plaintiff challenging the sale has the burden of proof on all issues
and must show injury by the alleged irregularity. See California trust
Co. v. Smead Inv. Co. (1935) 6 CA2d 432, 44 P2d 624; American Trust
Co. v. deAlbergaria (1932) 123 CA 76, 10 p2d 1016.
Scott v. Security Title Ins. & Guarantee Co. (1937) 9 C.2d 606, 72
P.2d 143 held that the trustee was not liable in damages to the
debtors where, because of failure to post notice, the first sale was
void, and later the value of the property depreciated so that a
deficiency judgment was entered against plaintiffs. The court observed
that there was no showing of fraud or failure to exercise due care.
The fact that the Bank of the West trust deed was void because the interspousal
transfer deed was void rendered the Bank Of The West trust deed void. And because
Soon Chey and from the date was the surviving joint tenant deprived the trustee of
the power to foreclose and rendered such sale invalid.
And at that point did not have a valid lien, deprived the trustee of power to
foreclose and rendered such sale invalid.
dehors: outside or beyond the bounds of, as in matters that are dehors the trial record or the
pages of a written agreement.
6 Angels, Inc. v. Stuart-Wright Mortgage, Inc., 85 Cal.App.4th 1279, 102
Cal.Rptr.2d 711, 01 Cal. Daily Op. Serv. 125, 2001 Daily Journal D.A.R. 129
(Cal.App. 2 Dist.,Jan 02, 2001)
[8] On appeal, the parties do not dispute that DMI intended to set the
opening bid at $100,000, but through a clerical error it mistakenly
instructed Mortgage Default Service to open with a bid of $10,000.
**However, California courts have long held that mere inadequacy of price,
absent some procedural irregularity that contributed to the inadequacy of
price or otherwise injured the trustor, is insufficient to set aside a
nonjudicial foreclosure sale. (Crofoot v. Tarman (1957) 147 Cal.App.2d 443,
446, 305 P.2d 56; Sargent v.. Shumaker (1924) 193 Cal. 122, 129-130, 223 P.
464.)
The owners then sought relief from the foreclosure sale. (**715Crofoot v.
Tarman, supra, 147 Cal.App.2d at p. 446, 305 P.2d 56.) At trial, Tarman
testified that he believed the property was worth between $40,000 and $50,000
on the date of the foreclosure sale, and the trial court concluded that its
value was " ‘not in excess of $50,000.’ " (Ibid.) On appeal, the court in
Crofoot noted that Tarman obtained the property for about $20,000 (including
sums paid to discharge liens). (Ibid.) Nonetheless, it concluded that the
owners were not entitled to relief from the sale, despite the inadequacy of
the sale price, because there were no procedural irregularities in the sale,
and **the secretary’s mistake was "dehors [FN3] the sale proceedings." (Id.
at p. 447, 305 P.2d 56; see also Lancaster Security Inv. Corp. v. Kessler
(1958) 159 Cal.App.2d 649, 652-656, 324 P.2d 634 [even though property valued
at between $50,000 and $60,000 was sold at a nonjudicial foreclosure sale for
$3,000, party who bought property from original trustor prior to sale is not
entitled to set aside sale because all statutory notice requirements for sale
were satisfied].)
FN3. The term "dehors" means "[o]ut of; without; beyond; foreign to;
unconnected with." (Black’s Law Dict. (6th ed.1990) p. 424, col. 2.)
Stevens v. Plumas Eureka Annex Mining Co., 2 Cal.2d 493, 41 P.2d 927 (Cal.
Feb 25, 1935)
HEADNOTES
Plumas Eureka Annex Mining Company made and executed in writing a lease
agreement by which there was leased to one Bourey mining property in Plumas
County. In and by the terms of the agreement, a sum of ten thousand dollars
was advanced, which amount defendant mining company agreed to pay. At the
same time there was executed a deed of trust made by the company as grantor,
F. J. Behneman and L. D. Byrne as trustees, and *495 J. A. Talbot as
beneficiary, to secure the performance of the terms and conditions of the
lease, which had, in the meantime, been assigned and transferred by Bourey to
said Talbot. Talbot thereafter filed a voluntary petition in bankruptcy,
listing among his assets the deed of trust executed by the mining company,
which deed of trust was sold by order of court, through the trustee in
bankruptcy, and was purchased by plaintiff, respondent here, for the sum of
$3,999.
The new owner of the deed of trust gave, filed and recorded a notice of
default in the performance of the terms and conditions of the lease and
option secured by the deed of trust, together with an election to sell the
property. The mining company thereupon commenced an action against the
respondent in the United States District Court, praying for a judgment
canceling, annulling and setting aside the deed of trust, and procured a
temporary injunction restraining the trustees from selling the property under
its terms. On the cause being brought to trial the court dismissed the case
and dissolved the injunction. By reason of the injunction, the time fixed for
the sale of the property had expired. The substituted trustee therefore again
advertised the property for sale, and the mining company commenced an action
in the Superior Court of the County of Plumas, in which county the property
was located, and obtained a restraining order enjoining the trustee from
proceeding with the sale. On return of the order to show cause, the
preliminary injunction was dissolved, and the action dismissed. The property
was then sold to the respondent. The appellant continued in possession of the
property, and this action to recover possession was thereupon brought by the
respondent. The defendant answered, seeking affirmative relief, and praying
that the sale of the property under notice of default, as provided in the
deed of trust, be set aside and canceled. Judgment was entered for the
plaintiff, from which the defendant mining company appeals.
(4) We find no substantial (in fact, not any) evidence to support appellant’s
contention that the trustee making the sale was guilty of fraud, or was so
biased and prejudiced against appellant as to conduct the sale wholly in
favor of and for the sole benefit and interest of the plaintiff. In the
absence of such evidence, we must assume that the sale was free from fraud.
The trustee, who was substituted for the trustees first designated in the
deed of trust, was the attorney for the plaintiff. He appears to have
strictly protected the interests of his client at all stages. The whole
transaction, the proceedings leading to, and the sale, were adversary.
Appellant was no doubt badly in need of funds. It could not meet the demands
of the deed of trust, or raise the amount required to prevent the sale to
plaintiff. It must suffer the consequences.
No default occurred.
At p. 9.
There were no itemized statements, to determine whether the beneficiary has made
any advances on default that would constitute recurring obligations
I sent a written letter to inform of the joint tenancy and also to request
information but I never received and return correspondence.
Costs are all uncertain, it does not state the date that they became due to be able
to determine if acceleration is accurate.
Ung v. Koehler, 135 Cal.App.4th 186, 37 Cal.Rptr.3d 311, 2005 Daily Journal
D.A.R. 14,883 (Cal.App. 1 Dist. Dec 28, 2005)
FN6. Section 2924c, subdivision (b)(1) also specifies the text of the notice
of right to cure and reinstatement that must be included in every notice of
default.
While section 2924 does not expressly require a beneficiary to state the
date on which the underlying obligation became due when recording a notice of
default, there are times when a beneficiary will need to state that date in
order to provide a complete description of the nature of the breach. The
beneficiary runs a clear legal risk of invalidity by omitting that date when
it is necessary for clarity. **A vague description of the breach, such as the
bare statement that "a payment was not made when due," fails to satisfy the
statutory purpose of placing the obligor on sufficient notice of the nature
of the breach to allow challenge or satisfaction. Further, unless the date on
which a required payment was due is stated in the notice, the notice might
not demonstrate that the breach is " ‘sufficiently **323 substantial in ...
nature to authorize the trustee or beneficiary to declare a default and
proceed with a foreclosure.’ " (Little v. Harbor Pacific Mortgage Investors,
supra, 175 Cal.App.3d at p. 720, 221 Cal.Rptr. 59, quoting Birkhofer v. Krumm
(1938) 27 Cal.App.2d 513, 523-524, 81 P.2d 609.)
But this still does not answer the Littles’ concerns. (3)Even if Harbor had
the right to pay off the first, the Littles were still entitled to sufficient
notice of the alleged breach. "A purpose of the required statement in the
notice of default is to afford the debtor an opportunity to cure the default
and obtain reinstatement of the obligation within three months after the
notice of default as provided in section 2924c of the Civil Code.
[Citation.]" ( System Inv. Corp. v. Union Bank (1971) 21 Cal.App.3d 137, 153
[98 Cal.Rptr. 735].) The debtor is to be given enough information so the
default can be cured. "[T]he statute is sufficiently complied with if the
notice of default contains a correct statement of some breach or breaches
sufficiently substantial in their nature to authorize the trustee or
beneficiary to declare a default and proceed with a foreclosure." ( Birkhofer
v. Krumm (1938) 27 Cal.App.2d 513, 523-524 [81 P.2d 609].)
Here the notice indicated "payment[s] had not been made of: The installment
of interest which became due September 15, 1980, and all subsequent
installments of interest, and delinquent taxes, if any, plus a late charge of
*721 $25.83 for each payment delinquent more than ten days." No mention was
made of the obligation on the first or any alleged deficiency. [FN6]
FN6 We do not, however, agree with the Littles’ further contention a second
notice is always required each time a payment is made. The purpose of the
statute is to put the debtor on notice as to which breaches the lienholder
wishes cured. It would be sufficient if the original notice includes a
specific reference to the obligation. Here, for example, the notice indicates
Harbor will look to the Littles for delinquent taxes, if any. Thus the notice
would have been sufficient if it had also indicated a reference to delinquent
payments, if any, on the first.
Section 2924c requires the notice must "[set] forth the nature of such
breach." The information contained in this notice did not comply with that
mandate. We conclude, therefore, the trial court abused its discretion in
granting summary judgment. Harbor improperly refused the Littles’ tender.
Brown v. Busch, 152 Cal.App.2d 200, 313 P.2d 19 (Cal.App. 3 Dist. Jul 01,
1957)
Statement by trustee that title was not insured was no unfair, because
it is not a duty under Section 2924, does not require it. As the law
provides
In view of the fact that the trustee was the Title Guaranty Company, it would
seem reasonable for them to inform all prospective buyers that the trustee at
this sale does not guarantee or warrant title. This is a mere statement of
the true significance of the trustee’s deed which carries no warranty of
title, but conveys only such title as the trustee received. The statement
does not appear to be untrue, unfair, fraudulent or misleading. The
disclosure by Attorney Brazier of certain indebtedness for irrigation
installations on the land, was necessary and proper in fairness to all
prospective purchasers.’ (7) The Supreme Court in Central Nat. Bank v. Bell,
5 Cal.2d 324, 328 [54 P.2d 1107], said: ‘It is no new doctrine in this state
that mere inadequacy of price is not sufficient ground for setting aside a
trustee’s sale legally conducted, in the absence of proof of some element of
fraud, unfairness or oppression by which the result is brought about.’
Block v. Tobin, 45 Cal.App.3d 214, 119 Cal.Rptr. 288 (Cal.App. 1 Dist. Feb
10, 1975)
The Court of Appeal reversed as to the cause of action for deceit, and
affirmed as to the other causes of action. The court held that plaintiffs
stated a cause of action for deceit under Civ. Code, § 1709, providing that
actionable deceit occurs if a material and knowingly false representation,
made with intent to induce action, causes reasonable and detrimental
reliance. The court rejected defendants’ argument that they could not have
formed an intention to defraud purchasers at the sale if, as alleged, they
had never really intended to sell the property at public auction. The court
held that the alleged deceit was the fraudulent announcement of the public
auction, not the making of false statements to induce the purchase of the
property. The court further held that plaintiffs were not entitled to recover
the difference between the fair market value and the price actually paid by
the beneficiary, since there was no allegation in the complaint that
plaintiffs would have been the successful bidders had the public auction
actually been held, and, therefore their allegations of compensatory damages
were effective only as to the amount allegedly incurred in preparing to bid.
Young Chey was the guarantor, was Bank of the West required to go
after Computer Sonics Incorporated first.
The terms of the trust deed only authorized First Santa Clara Corp to
record the notice of Default. ???
Notice of Default doesn’t state principal payment and when it was due?
This caused the confusion of not knowing whether the notice was given.
This is ambiguous
Miller & Starr, California Real Estate 3D, Chapter 12, Section 12:23, B. Joint
Tenancies,pp. 12-61 - 12-62, states,”
Death of a joint tenant. Whe one joint tenant dies, the entire estate automatically
belongs to the surviving joint tenant(s).5 This right attaches as a result of the
original grant that created the joint tenancy, and not as a result of the death of
a joint tenant.6 On the joint tenant’s death, the surviving joint tenant or tenants
continue in the ownership of the entire property, including the former title of the
deceased joint tenant.7 The interest of the deceased joint tenant passes to the
surviving joint tenant or tenants by operation of law.8
5
Grothe v. Cortlandt Corp., 11 Cal.App.4th 1313, 1317, 15 Cal.Rptr.2d 38 (4th
Dist. 1992); Estate of Blair, 199 Cal.App.3d 161, 167, 244 Cal.Rptr.627(4th Dist.
1988); Rupp v. Kahn, 246 Cal.App.2d 188, 196, 55 Cal.Rptr.108(2d Dist. 1966);
Ziegler v. Bonnell, 52 Cal.App.2d 217, 219-220, 126 P.2d 118(1st Dist. 1942).
6
In re Gurnsey’s Estate, 177 Cal. 211, 215, 170 P.402 (1918); Grothe v. Cortlandt
Corp., 11 Cal.App.4th 1313, 1317, 15 Cal.Rptr.2d 38 (4th Dist. 1992); Rupp v.
Kahn, 246 Cal.App.2d 188, 196, 55 Cal.Rptr.108(2d Dist. 1966); In re Moore’s
Estate 165 Cal.App.2d 455, 460, 332 P.2d 108 (1st Dist. 1958); Goldberg v.
Goldberg, 217 Cal.App.2d 623, 628, 32 Cal.Rptr. 93(2d Dist. 1963); In re Hobart’s
Estate, 82 Cal.App.2d 502, 507, 187 P.2d 105(1st Dist. 1947).
7
Siberell v. Siberell, 214 Cal. 767, 771, 7 P.2d 1003 (1932); De Witt v. City of
San Francisco, 2 Cal. 289, 297, 1852 WL 566 (1852); Cole v. Cole, 139 Cal.App.2d
691, 694, 294 P.2d 494 (2d Dist.1956); Plante v. Gray, 68 Cal.App.2d 582, 588, 157
P.2d 421 (2d Dist. 1945); Dando v. Dando, 37 Cal.App.2d 371, 372, 99 P.2d 561 (1st
Dist. 1940).
See also In re Moy’s Estate, 217 Cal.App.2d 24, 29, 31 Cal.Rptr. 374 (1st Dist.
1963)
8
Tenhet v. Boswell, 18 Cal.3d 150, 158, 133 Cal.Rptr. 10, 554 P.2d 330 (1976);
Estate of Gebert, 95 Cal.Ap.3d 370, 376, 157 Cal.Rptr. 46 (2d Dist. 1979); Estate
of Wilson, 64 Cal.App.3d 786, 791, 134 Cal.Rptr. 749 (5th Dist. 1976)”
And, Miller & Starr, California Real Estate 3D, Chapter 12, Section 12:31, B.
Joint Tenancies,pp. 12-80, states,”
Although the execution lien is recorded before the death of the debtor joint
tenant, and the lien is only on the interest of that joint tenant, if there is no
execution sale before the debtor’s death, an attempt to sell the debtor’s interest
after death is not effective because the interests of the deceased joint tenant
have already passed by right of survivorship to the surviving joint tenant. The
10
surviving joint tenant acquires the entire title, free and clear of the lien
10
Grothe v. Cortlandt Corp. 11 Cal.App.4th 1313, 1321, 15 Cal.Rptr.2d 38 (4th Dist.
1992); Clark v. Carter, 265 Cal.App.2d 291, 294, 70 Cal.Rptr. 923 (4th Dist. 1968)
(rejected on other grounds by Riddle v. Harmon, 102 Cal.App.3d 524, 162 Cal.Rptr.
530, 7 A.L.R.4th 1261 1st Dist. 1980)); Hamel v. Gootkin, 202 Cal.App.2d 27,
(a) Definitions
(1) the term “due-on-sale clause” means a contract provision which authorizes a
lender, at its option, to declare due and payable sums secured by the lender’s
security instrument if all or any part of the property, or an interest therein,
securing the real property loan is sold or transferred without the lender’s prior
written consent;
(2) the term “lender” means a person or government agency making a real property
loan or any assignee or transferee, in whole or in part, of such a person or
agency;
(3) the term “real property loan” means a loan, mortgage, advance, or credit sale
secured by a lien on real property, the stock allocated to a dwelling unit in a
cooperative housing corporation, or a residential manufactured home, whether real
or personal property; and
(4) the term “residential manufactured home” means a manufactured home as defined
in section 5402(6) of Title 42 which is used as a residence; and
(5) the term “State” means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Northern
Mariana Islands, American Samoa, and the Trust Territory of the Pacific Islands.
(b) Loan contract and terms governing execution or enforcement of due-on-sale
options and rights and remedies of lenders and borrowers; assumptions of loan rates
(2) Except as otherwise provided in subsection (d) of this section, the exercise by
the lender of its option pursuant to such a clause shall be exclusively governed by
the terms of the loan contract, and all rights and remedies of the lender and the
borrower shall be fixed and governed by the contract.
(c) State prohibitions applicable for prescribed period; subsection (b) provisions
applicable upon expiration of such period; loans subject to State and Federal
regulation or subsection (b) provisions when authorized by State laws or Federal
regulations
(1) In the case of a contract involving a real property loan which was made or
assumed, including a transfer of the liened property subject to the real property
loan, during the period beginning on the date a State adopted a constitutional
provision or statute prohibiting the exercise of due-on-sale clauses, or the date
on which the highest court of such State has rendered a decision (or if the highest
court has not so decided, the date on which the next highest appellate court has
rendered a decision resulting in a final judgment if such decision applies State-
wide) prohibiting such exercise, and ending on October 15, 1982, the provisions of
subsection (b) of this section shall apply only in the case of a transfer which
occurs on or after the expiration of 3 years after October 15, 1982, except that--
(A) a State, by a State law enacted by the State legislature prior to the close of
such 3-year period, with respect to real property loans originated in the State by
lenders other than national banks, Federal savings and loan associations, Federal
savings banks, and Federal credit unions, may otherwise regulate such contracts, in
which case subsection (b) of this section shall apply only if such State law so
provides; and
(B) the Comptroller of the Currency with respect to real property loans originated
by national banks or the National Credit Union Administration Board with respect to
real property loans originated by Federal credit unions may, by regulation
prescribed prior to the close of such period, otherwise regulate such contracts, in
which case subsection (b) of this section shall apply only if such regulation so
provides.
(2)(A) For any contract to which subsection (b) of this section does not apply
pursuant to this subsection, a lender may require any successor or transferee of
the borrower to meet customary credit standards applied to loans secured by similar
property, and the lender may declare the loan due and payable pursuant to the terms
of the contract upon transfer to any successor or transferee of the borrower who
fails to meet such customary credit standards.
(B) A lender may not exercise its option pursuant to a due-on-sale clause in the
case of a transfer of a real property loan which is subject to this subsection
where the transfer occurred prior to October 15, 1982.
(C) This subsection does not apply to a loan which was originated by a Federal
savings and loan association or Federal savings bank.
With respect to a real property loan secured by a lien on residential real property
containing less than five dwelling units, including a lien on the stock allocated
to a dwelling unit in a cooperative housing corporation, or on a residential
manufactured home, a lender may not exercise its option pursuant to a due-on-sale
clause upon--
(2) the creation of a purchase money security interest for household appliances;
(4) the granting of a leasehold interest of three years or less not containing an
option to purchase;
(6) a transfer where the spouse or children of the borrower become an owner of the
property;
(8) a transfer into an inter vivos trust in which the borrower is and remains a
beneficiary and which does not relate to a transfer of rights of occupancy in the
property; or
(e) Rules, regulations, and interpretations; future income bearing loans subject to
due-on-sale options
(1) The Federal Home Loan Bank Board, in consultation with the Comptroller of the
Currency and the National Credit Union Administration Board, is authorized to issue
rules and regulations and to publish interpretations governing the implementation
of this section.
(2) Notwithstanding the provisions of subsection (d) of this section, the rules and
regulations prescribed under this section may permit a lender to exercise its
option pursuant to a due-on-sale clause with respect to a real property loan and
any related agreement pursuant to which a borrower obtains the right to receive
future income.
(f) Effective date for enforcement of Corporation owned loans with due-on-sale
options
Federal Home Loan Bank Board regulations restricting the use of a balloon payment
shall not apply to a loan, mortgage, advance, or credit sale to which this section
applies.
Who is given the power of sale is authorized under the terms of the
trust deed. And the Civil Code Section 2924 et seq. are restrictive
statutes. Under the terms of the trust deed (and as what the law
permits) (and as what the law mandatorily requires)
restrict and regulate, are restrictive and regulative statutes
Who is given the power of sale is authorized under the terms of the
trust deed. And C.C. 2924 are statutes which restrict and regulate,
under the terms of the trust deed.
The Civil Code Section 2924 and exercise the power of sale has been defined by
decisional law.
In Garfinkle v. Superior Court (1978) 21 Cal.3d 268, 578 P.2d 925, 146
Cal.Rptr.208. the court stated as,
“In 1917, the Legislature impliedly recognized the validity of this contractual
remedy when, acting under its police power, it established certain minimum
standards for conducting nonjudicial foreclosures, by placing various restrictions
on the creditors’ exercise of the power of sale in order to protect the
trustor/debtor against forfeiture...
Since that time these statutory protections have been **932 expanded into a
comprehensive statutory scheme regulating in detail all aspects of the nonjudicial
foreclosure process. (See Smith v. Allen, supra, 68 Cal.2d 93, 96, 65 Cal.Rptr.
153, 436 P.2d 65.)
In Smith v. Allen (1968) 68 Cal.2d 93, 96 436 P.2d 65, 65 Cal.Rptr. 153 the court
stated, “On the other hand, the rights of a borrower and a lender upon a default
under a deed of trust are the subject of a comprehensive legislative scheme
designed to provide adequate protection to the borrower against forfeitures.
Thus, in order for a lender to realize upon his security through the exercise of a
power of sale contained in his deed of trust, he must record a notice of default,
and three months must elapse after the recording before a notice of sale is
published or posted. (Civ. Code, s 2924.)… and at least 20 days’ notice of the sale
must be given. (Civ.Code, s 2924;
In Garfinkle v. Superior Court (1978) 21 Cal.3d 268, 279 578 P.2d 925, 146
Cal.Rptr.208. the court stated,
And,
“these statutory regulations were enacted primarily for the benefit of the trustor
and for the greatest part limit the creditors’ otherwise unrestricted exercise of
the contractual power of sale upon default by the trustor.” (Garfinkle v. Superior
Court, supra, 21 Cal.3d at p. 279)
And,
And,
And
This is also clear from a reading of ample case law on trust deeds
Must first be authorized by contract
If the legislature wanted to make this clause apply independently it
[and then it provides the procedures for the exercise of the power of
sale]
Miller & Starr, California Real Estate 3D, Chapter 10, Deeds of Trust,
Section 10:2, page 16 states,
“title passes to the trustee under the deed of trust, 19 the trustee
only has title to the extent necessary for the execution of the trust,
20
”
And,
“Legal title passes to the trustee solely for the purpose of securing
the performance of the obligation, and the trustee receives only such
title as is necessary for the execution of its trust. 23 Until the
default occurs or the obligation is satisfied by the trustor, the
trustee’s title remains inactive. 24 (Id. at p. 16)
19
Bryant v. Hobart, 44 Cal.App.315, 317, 186 P.379 (1st Dist. 1919)
§20:3 (parties).
20
§10:4 (capacity and authority of trustee).
23
“[S]uch a [trust] deed, though in form a grant, is really only a
mortgage and does not convey the fee...[;] while the legal title
passes thereunder, and the trustees cannot be held to hold a mere
‘lien’ on the property, it is practically and substantially only a
mortgage with power of sale ... Except as to the trustees and those
holding under them, the trustor or his successor is treated by our law
as the holder of the legal title... The estate of the trustees
absolutely ceases upon the payment of the debt, [citation omitted]
leaving the whole title in the grantor in whom it was vested at the
execution of the trust deed, or his successors, and leaving nothing in
the trustees except the bare legal title of record, which can be
compelled to reconvey to the owner simply to make the record title
clear.” Bank of Italy Nat. Trust & Sav. Ass’n v. Bentley, 217 Cal.
644, 656-657, 20 P.2d 940 (1933)
24
§10:3 (parties), §10:4 (capacity and authority of trustee).
“(Civ. Code, [FN1] § 2934a, subd. (a).) By its terms the statute provides
that after such a substitution has been recorded, ‘the new trustee shall succeed
to all the powers, duties, authority, and title granted and delegated
And
the trustee of record in the place and stead of Commonwealth. The substitution
Also on August 15, 1996, TD, acting on behalf of Calmco, recorded a notice
notice of default stated: ‘No sale date may be set until three months from the
and the recording of the Calmco notice of default were mistakes. According to the
TD employee, at the time these documents were recorded TD did not know that it
foreclosure file already existed with respect to Dimock’s home. When a title
‘abandoned’ the Calmco file it had created to process the Dimock foreclosure and
instead proceeded with the foreclosure using its earlier Commonwealth file.
of default. However, other than abandoning its own file on the matter, TD did not
record any document which expressly abandoned or otherwise vacated the Calmco
notice of trustee’s sale which set September 18, 1996, as the date for a *873
*875 power to conduct a trustee’s sale. This plain reading of the statute is
consistent with the law as it existed before the predecessor statute was enacted
in 1935 and the power to substitute a trustee depended solely on the express
provisions of a deed of trust. (See Witter v. Bank of Milpitas (1928) 204 Cal.
570, 577-578 [269 P. 614]; Pacific S. & L. Co. v. N. American etc. Co. (1940) 37
Cal.App.2d 307, 309-310 [99 P.2d 355 ].) " ‘ "Upon the appointment being made
under the power, the new trustee becomes vested, ipso facto, with the title to
the trust premises and is clothed with the same power as if he had been
originally named ...." ‘ " (Witter v. Bank of Milpitas, supra, 204 Cal. at p.
578.) *876” (Dimock v. Emerald Properties LLC, supra, 81 Cal.App.4th pp. 874-876)
“there simply cannot be at any given time more than one person with the power to
the notion there could be multiple trustees with the power to convey.” ((Dimock v.
“Where such recitals appear on the face of a deed but the deed also sets forth
facts which are inconsistent with the recital of irregularity, the deed has been
found void on the basis that the deed showed that the recitals were not valid.
(Ibid., citing Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570, 576-577
In Little v. Cfs Servic Corp. (1987) 188 Cal.App.3d 1354, 1359, 233
“Where there has been a notice defect and conclusive presumption language in a deed
along with recitals as to the various postponements of a sale, the court has held
the sale void on the basis that the deed showed that proper notice could not have
been given. It has been held that the recitals of the postponement dates were
controlling rather than the recitals as to the regularity of the notice. (Holland
v. Pendleton Mtge. Co., supra., 61 Cal.App.2d 570, 576-577.) (Little v. Cfs Service
I refer to and incorporate the Bank Of The West, Deed Of Trust, a true and
correct copy is attached hereto as Exhibit “14,” in the Opposition To Relief From
Stay Of Movant and incorporated herein by this reference. And I request the
court to take judicial notice under the authorization of rule 201 of the Federal
Rules of Evidence.
I refer to and incorporate the Alliance Title Company, Notice Of Default,
a true and correct copy is attached hereto as Exhibit “15,” in the Opposition
To Relief From Stay Of Movant and incorporated herein by this reference. And I
request the court to take judicial notice under the authorization of rule 201 of
Sale, a true and correct copy is attached hereto as Exhibit “Numbered Last,” in the
Opposition To Relief From Stay Of Movant and incorporated herein by this reference.
And I request the court to take judicial notice under the authorization of rule 201
Trustee, a true and correct copy is attached hereto as Exhibit “Numbered Last,” in
the Movant’s Opposition To Debtors Request For Stay Pending Appeal and Request To
Take Judicial Notice, and incorporated herein by this reference. And I request
the court to take judicial notice under the authorization of rule 201 of the
Under the terms of the deed of trust only the trustee is authorized to
record a notice of default on a default of the trust deed
“Judicial Foreclosure. With respect to all or any part of the Real Property, Lender
shall have the right in lieu of foreclosure by power of sale to foreclose by
judicial foreclosure in accordance with and to the full extent provided by
California law.”
“POWER AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the powers
and obligations of Trustee are part of this Deed of Trust:
Trustee. Trustee shall meet all qualifications required for Trustee under
applicable law. In addition to the rights and remedies set forth above, with
respect to all or any part of the Property, the Trustee shall have the right to
foreclose by notice of sale, and Lender shall have the right to foreclose by
judicial foreclosure, in either case in accordance with and to the full extent
provided by applicable law.
Successor Trustee. Lender, at the Lender’s option, may from time to time appoint a
successor Trustee to any Trustee appointed under this Deed of Trust by an
instrument executed and acknowledged by Lender and recorded in the office of the
recorder of Orange County, State of California. The instrument shall contain, in
addition to all other matters required by state law, the names of the original
Lender, Trustee, and Trustor, the book and page where this Deed of Trust is
recorded, and the name and address of the successor trustee, and the instrument
shall be executed and acknowledged by Lender or its successors in interest. The
successor trustee, without conveyance of the Property, shall succeed to all the
title, power, and duties conferred upon the Trustee in this Deed of Trust and by
applicable law. This procedure for substitution of Trustee shall govern to the
exclusion of all other provisions for substitution.
Amendments. This Deed of Trust, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set forth
in this Deed of Trust. No alteration of or amendment to this Deed of Trust shall be
effective unless given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment.”
And in absence of the terms of the Deed of Trust, waiving the rights or privileges
that section 2953 does not allow to be waived. Or there being some specific statute
that would prohibit the term Or there being and amendment to these terms of the
Deed of Trust, given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment which authorizes the Lender to
record a notice of default.
In Mutual Building & Loan Ass’n of Pasadena v. Wiborg, (1943) 59 Cal.App.2d 325,
327-329, 139 P.2d 73, the Appellate Court of the State of California heard
an appeal where the question for determination was “whether the superior
court had jurisdiction to appoint a substitute trustee under a deed of
trust which reserves a joint power in **74 the trustor and the cestui que
trust to make a substitution, where they have not agreed upon a
substitution after the corporate trustee has merged with a kindred
corporation which inherited all the assets, powers and trusts of the
designated trustee.”
Title Guarantee & Trust Co., hereafter referred to as Title Guarantee, was named as
trustee in a deed of trust by respondent Wiborg, which instrument was given to
secure payment of a promissory note payable to appellant. [In its petition to the
superior court under sections 2287 and 2289, Civil Code, appellant recited the
present circumstances of the indebtedness and that on December 19, 1942, pursuant
to section 31b of the Bank Act, Gen.Laws 1937, Act 652, as well as under the
provisions of section 361 of the Civil Code, Title Guarantee became and is now
merged in respondent Title Insurance & Trust Company hereinafter designated Title
Insurance; that the separate, corporate existence of Title Guarantee then and there
ceased; that it surrendered its license to do a bank or trust business or any other
business, that Title Insurance claims that by operation of law as a result of the
merger, it became the trustee. The petition recited further that pursuant to the
provision of paragraph B-7 of the deed of trust it had demanded respondent Wiborg
to join with petitioner in the nomination and appointment of a substitute trustee
in the place of the Title Guarantee; that she had refused to do so; that by reason
of the foregoing facts, there is a vacancy as to the trusteeship under the deed of
trust; that the deed of trust does not provide a practical method of appointment of
a substitute trustee; that by reason of a merger of Title Guarantee with respondent
Title Insurance, by operation of law, Title Insurance became and now is the trustee
under the deed of trust.
The respondents demurred to the petition on the ground *328 that the court has no
jurisdiction or power to grant the relief prayed. Following an order sustaining the
demurrer, petitioner having declined to amend, a judgment of dismissal followed.
‘7. Trustor, or if said property shall have been transferred, the then record
owner, together with Beneficiary, may from time to time, by instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by each and recorded in the
office of the recorder of the county or counties where said property is situated,
shall be conclusive proof of proper substitution of such successor Trustee. * * *
The procedure herein provided for substitution of Trustees shall be exclusive of
all other provisions for substitution, statutory or otherwise.’
[1] Appellant insists that by virtue of the quoted paragraph that Title Insurance
is not substituted as trustee; that despite section 31b of the Bank Act the court
has the power, under sections 2287, 2289 of the Civil Code to act solely upon the
request of the beneficiary under the deed of trust and substitute a new trustee
under the doctrine that one who creates a trust may provide a method for filling
vacancies and for the appointment of substitute trustees. 26 Ruling Case Law 1278;
65 C.J. 575. It then proceeds to attempt to show that paragraph B-7 is the
exclusive procedure for effecting the appointment of a substitute trustee. Since
the deed of trust provides that a substitute trustee may be named by the trustor
‘together with beneficiary’ by a writing recorded in the office of the County
Recorder, it follows that if the trustor declines to join with the beneficiary, in
making a substitution there is no method by which to effect a substitution upon the
petition of the beneficiary alone or otherwise.”
The court stated,” There is no vacancy of the trusteeship. By virtue of the merger,
the separate corporate existence of Title Guarantee suffered the fate of all merged
corporations, to wit, they become a part of the muscle and the blood stream of the
mergee corporation, transfusing into the mergee all its rights and privileges. By
such act all rights and interests in and to all property are without further action
or deed vested in *329 the mergee which shall hold, enjoy and enforce the same in
its own right ‘as fully as the same was possessed, enjoyed and held’ by the
substituted trustee.” (Mutual Building & Loan Ass’n of Pasadena v. Wiborg, supra,
59 Cal.App.2d at pages 328-329)
And,
The court held, “Neither the reserved power of appointment by the parties nor
appellant’s wish to have the court exercise its power of appointment created a
vacancy. Nothing could have created a vacancy except the resignation or removal of
the trustee in the absence of an agreement on the part of the trustor and the
beneficiary to agree upon a substitution. Upon their failure so to agree the
present trustee remains in office and the superior court has no jurisdiction under
Sections 2287 and 2289, Civil Code, to make a substitution.
While paragraph B-7 makes its own procedure for substitution exclusive of all
others, such is not available in the absence of a concord of the cestui que trust
and the trustor. The necessity of their joinder in order to make a substitution
renders in-applicable section 2934a.”
In applying the rule of law to the facts of the case, under the terms of the Bank
Of The West Deed Of Trust, , First Santa Clara Corporation was conferred with the
sole authority to exercise the Foreclosure By Sale, power of sale in absence of
substitution.
In applying the rule of law to the facts of the case, under the terms of the Bank
Of The West Deed Of Trust, , First Santa Clara Corporation was conferred with the
sole authority to exercise the Foreclosure By Sale, power of sale in absence of
substitution.
In applying the rule of law to the facts of the case, under the terms of the Bank
Of The West Deed Of Trust, , First Santa Clara Corporation was conferred with the
sole authority to record the notice of default
Under the terms of the agreement, powers and obligation of trustee, only the
trustee shall cause to be filed for record a notice of default. And the trustee
under the terms of the Deed of Trust is First Santa Clara Corporation. Or unless
the Lender substituted in as the Trustee would the Lender be authorized under the
terms of the Deed of Trust to record a notice of default.
There can only be one trustee, since the trustee under the terms of the trust was
the only one that was authorized to record a notice of default
Under the plain wording of the statute only one entity can exercise the powers of
the trustee.
The trustee was only authorized under the terms of the trust. This caused the
requirement of or caused the requirement terms of the trust to be modified to
authorize the beneficiary to be able to record the notice of default substitution
of the agent for the trustee.
but prior to the notice of sale must be mailed prior to recordation to all persons
to whom the notice of default must be mailed. A copy must be mailed to the former
substitution that it has been mailed as required. The requirements for mailing
1, 2005, these were amended to (1) allow the substituted trustee to act before
recordation of the substitution (CC § 2934a(d) and (2) modify the required timing
are aware of the substitution (CC § 2934a(b), (c). See Stats 2004, ch 177, §5;
Senate Judiciary Committee Analysis of SB 1277 (Apr. 13, 2004). If the substitution
is executed (but not recorded) before or concurrently with the recordation of the
either event the substituted trustee is authorized to act as the trustee under the
2934a(d).”
provide notice to the trustor, the trustor’s successors, to junior lienors, other
interested persons, and notice to the world that there has been a default and of
the nature of the default. Its objective is also to inform the trust of the
default and the nature of the default so that the trustor has an opportunity
In addition, it establishes the minimum period within which the default can
Because of the importance of the notice to the protection of the rights and
strict compliance with the requirements of the statute. A trustee’s sale which is
12
based upon a defective notice of default is invalid.
The required manner of a trustee sale is that the sale must be conducted by
a properly appointed and serving trustee under the deed of trust at the time
of:
Former trustees and all others who are not properly appointed and serving
trustee (see §§2.21-2.26) at the time of the step taken will be unable to convey
title and the sale will be ‘void’ and not just ‘voidable.’ See Dimock v. Emerald
Props. (2000) 81 CA4th 868, 97 CR2d 255. In Dimock, the trustee service agent
conducted a trustee sale and had the former trustee sign the trustee’s deed. The
court of appeal held that the sale was ‘void’ and not just ‘voidable,’ because the
927606 dated July, 11, 2008, And the Real Estate Appraiser Qualifications of Kevin
Danson, a true and correct copy is attached hereto as Exhibit “Last” in the
Opposition To Relief From Stay Of Movant and incorporated herein by this reference.
And I request the court to take judicial notice under the authorization of rule 201
I refer to and incorporate the Trustee’s Deed Upon Sale, dated July 11, 2008
a true and correct copy is attached hereto as Exhibit “1,” in the Notice Of Motion
For Relief From The Automatic Stay and incorporated herein by this reference.
And I request the court to take judicial notice under the authorization of rule 201
Instructions for Soon Wha Chey and Abderraham Boukour, dated January 12, 2009.
Joint Escrow Instructions for Soon Wha Chey and Abderrahman Boukour on the date of
July 10, 2008 attached as Exhibit “Last” and incorporated herein by this reference.
And I request the court to take judicial notice under the authorization of Rule 201
On the grounds for setting aside a nonjudicial foreclosure sale courts have
“*248 [1][2] It is the general rule that courts have power to vacate a foreclosure
sale where there has been fraud in the procurement of the foreclosure decree or
where the sale has been improperly, unfairly or unlawfully conducted, or is tainted
by fraud, or where there has been such a mistake that to allow it to stand would be
competition are condemned, and inadequacy of price when coupled with other
circumstances of fraud may also constitute ground for setting aside the sale.”
“‘It is the general rule that courts have power to vacate a foreclosure sale where
there has been fraud in the procurement of the foreclosure decree or where the sale
*1098 where there has been such a mistake that to allow it to stand would be
15 Cal.2d at p. 248, 101 P.2d 77.) A debtor may apply to a court of equity to set
coupled with the inadequacy of price obtained at the sale, mean that it is
appropriate to invalidate the sale. (Sierra-Bay Fed. Land Bank Assn. v. Superior
Court (1991) 227 Cal.App.3d 318, 337; , 277 Cal.Rptr. 753 3 Witkin, Summary of
Cal. Law (9th ed.1987) Security Transactions in Real Property, § 149.) Here, there
was both unfairness and an inadequate price. The court had the power to vacate the
In Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 322, 211
Cal.Rptr. 582, the court stated, In “a trustee sale gross inadequacy of price
coupled with even slight unfairness or irregularity is sufficient basis for setting
the sale aside.”
In Sargent v. Shumaker, (1924) 193 Cal. 122, 129, 223 P. 464, the court
stated,“ It is well settled in this state that mere inadequacy of price, however
gross, is not in itself a sufficient ground for setting aside a sale legally made.
before the court will be justified in depriving the purchaser of his legal
authorize the granting of the relief. (Rauer v. Hertweck, 175 Cal.278, 165 Pac.
946; Winbigler v. Sherman, 175 Cal. 270, 165 Pac. 943;Back v. Losekamp, 179 Cal.
674, 179 Pac. 516; Odell v. Cox, 151 Cal. 70, 90 Pac. 194;
conjunction therewith will authorize a court to set aside the sale, we are of the
opinion that such irregularities, to have this effect, must have conduced to the
inadequacy of the price, or in some other way have contributed to the injury of the
plaintiff.”
In the Bank of Seoul & Trust Co. v, Marcione (1988) 198 Cal.App.3d 113, 119,
244 Cal.Rptr. 1, the court stated, “As Justice Kaufman has written, ‘While mere
inadequacy of price, standing alone, will not justify setting aside a trustee’s
sale, gross inadequacy of price coupled with even slight unfairness or irregularity
is a sufficient basis for setting the sale aside.’ (Whitman v. Transtate Title Co.
In Darden v. Reese 88 Cal.App.2d 904, 909, 200 P.2d 81, the court defined,
“Acts of oppression and unfairness which will justify vacating an execution sale
and oppression which operate to the prejudice of the judgment debtor or others
In applying this rule of law to the facts of the case, I refer to the date
of the signed Substitution of Trustee April 22, 2008 in which the trustee was
authorized to act. From April 22, 2008 to July 11, 2008 which is the date of
the Trustee Sale, is 80 days. This is not three months plus twenty days.
exercise all available rights including the right to sell the property before.
And the property of which at all relevant times, Plaintiff held a joint tenancy
interest with the right of survivorship with her spouse, Young Chey Ph.D., now
deceased. And now holds the surviving joint tenant interest in the Property from
the date of May 17, 2007, the date of the death of Young Chey, and from right of
survivorship, was sold the day before the trustee sale. [I refer to and
incorporate again the Opposition To Relief From Stay, filed on June 16, 2009,
Points And Authorities, Exhibits, And Declarations Of David Chey and Of Soon Chey
And Joint Escrow Instructions for Soon Wha Chey and Abderrahman Boukour on the date
of July 10, 2008 attached as Exhibit “Last” and incorporated herein by this
reference. And I request the court to take judicial notice under the authorization
“It appears from the record that in the month of January, 1922, plaintiff was the
owner of certain real property in Los Angeles, which she agreed to trade with
defendants for the 350 acres of land in Yolo county, above referred to. Pursuant to
said agreement, plaintiff executed and delivered to defendants a deed to her said
property, and defendants conveyed said Yolo county property to plaintiff. The whole
transaction appears to have been consummated by March 1, 1922, on which date the
deed to plaintiff was recorded. During the negotiations between said parties, it
*758 developed that there was outstanding a judgment against J. B. Harker, husband
theretofore been levied against the interest of said Harker in the Los Angeles
property involved in said trade, said property standing on the records at the time
of said levy in the name of plaintiff. For the purpose of protecting defendants
from the levy of said execution, a trust deed was executed by plaintiff and her
said husband, covering said Yolo county property, and containing the following
provision:
‘In the execution, delivery and acceptance of this trust deed it is expressly
understood and agreed between all parties hereto, that if the parties of the
first part pay said judgment or cause the said execution to be released from said
property first herein described, then the said note and this trust deed to become
And,
Defendants thereupon introduced in evidence the said trust deed and a deed from the
trustee named therein, and given pursuant to a sale had under the provisions
certified copy of the release of the levy of execution above referred to, dated
February 27, 1922. There is also testimony to the effect that the judgment under
which said execution was levied was satisfied September 30, 1922. The facts above
recited with reference to the release of the levy of the execution were found by
the court to be true. The court also found that said sale under the trust deed was
made after defendants knew that said execution had been released and the judgment
under which the same was levied had been satisfied.” (Harker v. Rickershauser,
The trustee’s deed does not refer in any manner or particular to the last-
mentioned provisions. It recites that ‘there has been a default in the payment of
money advanced in accordance with the provisions of said trust deed.’” (Harker v.
Rickershauser, supra, 94 Cal.App. at p.761)
“In the instant case the trust deed was given as security for the performance of
either of two acts upon the part of the trustor. It is admitted by both parties
that one of said acts, to wit, the release of the levy of execution, was performed
sixteen days from the date of the said trust deed, and the court found, upon
sufficient evidence, that the beneficiary knew of the *762 performance at or about
the date it took place. If, notwithstanding such knowledge, defendant proceeded to
have a sale made of the premises under such trust deed, this was palpable fraud
762)
“[7] In the instant case, plaintiff, in making out her case, rightly ignored the
trust deed, and simply proved the deed *765 to her from defendants. The trust deed
was void, and had been from and after February 27, 1922, and a trustee’s deed
Cal.App. at pp.764-765)
In applying the rule of law to the facts of the case BANK OF THE WEST, and
fraudulent sale.
From the time the substitution is filed for record, the new trustee
shall succeed to all the powers, duties, authority, and title granted
and delegated to the trustee named in the deed of trust.
Or: Only one of the elements it joins must be present for a standard
to be met
For kidnapping to occur, each of the three elements of the crime must
be met. Thus carrying someone from one location to another at the
person’s request would not be kidnapping because the first element,m
that the carrying be unlawful, would not be satisfied.
Reading the statute carefully will require you to pay close attention
to the words of the statute itself and the context of the subsection
in the overall statutory scheme. Only be reading carefully can you
properly interpret an apply it to your client’s case.
For all the previous evidence in the Opposition to Relief From Stay,
and then and are not first of all Bona Fide Encumbrancers only
applying to notice under BofA v. La Jolla, and actual, constructive,
imputed notice, Bona Fid Encumbrancers
I refer to and incorporate the Bank of the West, Deed Of Trust, a true
and correct copy is attached hereto as Exhibit “14,” in the
Opposition To Relief From Stay Of Movant, filed on June 16, 2009 and
incorporated herein by this reference. And I reqest the court to
take judicial notice under the authorization of rule 201 of the
Federal Rules of Evidence.
At p.
was conferred with the sole authority to exercise the power of sale,
in absence of a substitution
under the terms of the Bank of the West, Deed of Trust, and the
powers, duties, authority, and title,
had the sole authorization, under the terms of the deed of the trust,
had the sole authority
Under the powers, duties, title granted and delegated to the trustee
under the authorization of the terms of the trust, the
bond indenture
Definition
A written agreement between the issuer of a bond and his/her
bondholders, usually specifying interest rate, maturity date,
convertibility, and other terms. also called indenture.
Judgment affirmed.
West Headnotes
266 Mortgages
266X Foreclosure by Action
266X(B) Right to Foreclose and Defenses
266k414 k. Conditions Precedent. Most Cited Cases
Provision in bond indenture requiring bondholder to obtain permission of
holders of one-fourth of bonds before bringing foreclosure action is valid
**unless prohibited by some specific statute and unless fraud or collusion is
present, and constitutes a complete bar to foreclosure unless such permission
is given.
101 Corporations
101XIII Reincorporation and Reorganization
101k579 Liabilities for Debts and Acts of Original Corporation
101k579(4) k. Bonds, Mortgages, and Liens. Most Cited Cases
Provision in bond indenture under reorganization plan cancelling provision in
original indenture requiring bondholder to obtain permission of holders of
one-fourth of bonds before bringing foreclosure action did not give
bondholder not consenting to reorganization plan the right to foreclose
original indenture without having obtained such permission, where purpose of
bond indenture under reorganization plan was to put non-consenting
bondholders on a parity with the consenting bondholders so far as possible,
and indenture under reorganization plan contained a provision substantially
identical to cancelled provision.
101 Corporations
101XIII Reincorporation and Reorganization
101k579 Liabilities for Debts and Acts of Original Corporation
101k579(4) k. Bonds, Mortgages, and Liens. Most Cited Cases
Where bondholder does not consent to reorganization plan, and as to such
bondholder the provision in original bond indenture barring bondholder from
bringing foreclosure action without first having secured permission of
holders of one-fourth of bonds is not annulled by elimination of provision
from indenture under reorganization plan, or if annulled a similar provision
in indenture under reorganization plan is applicable, the Trust Indenture Act
does not require abolition of restriction on forfeiture. Trust indenture Act
of 1939, § 316(b), 15 U.S.C.A. § 77ppp(b); Civ.Code, § 1589.
266 Mortgages
266X Foreclosure by Action
266X(K) Judgment or Decree
266k485 Scope and Extent of Relief
266k486 k. In General. Most Cited Cases
Under statute providing that there can be but one form of action for recovery
of any debt or for enforcement of any right secured by mortgage on real or
personal property, a bondholder who was not entitled to foreclosure in her
suit to foreclose mortgage securing bonds could not obtain money judgment for
principal and interest due on bonds under prayer for other and further relief
contained in her complaint, in absence of allegation that security had become
valueless. Code Civ.Proc. § 726.
[11] Corporations 101 579(4)
101 Corporations
101XIII Reincorporation and Reorganization
101k579 Liabilities for Debts and Acts of Original Corporation
101k579(4) k. Bonds, Mortgages, and Liens. Most Cited Cases
**The provision in bond indenture under reorganization plan that right of
bondholder to receive payment of principal and interest on bond after due
dates or to institute suit for enforcement of payment should not be impaired
without consent of bondholder was not a waiver of statute providing that
there can be but one form of action for recovery of debt or enforcement of
any right secured by mortgage on real or personal property. Trust Indenture
Act of 1939, § 316(b), 15 U.S.C.A. § 77ppp(b); Code Civ.Proc. § 726; Civ.Code
§ 2953.
**784 *110 Crimmins, Kent, Draper, & Bradley, Martin Lalor Crimmins, Jr., and
Robert G. Taylor, all of San Francisco, for appellant.
Hall, Henry & Oliver, Chafee E. Hall, and Stephen McReavy, all of San
Francisco, for respondent.
McCutchen, Thomas, Matthew, Griffiths & Greene, Farnham P. Griffiths, and
Morris M. Doyle, all of San Francisco, for interveners-respondents.
Plaintiff, as the holder of overdue and unpaid bonds issued by the Palace
Hotel Company of San Francisco, brought this action to foreclose the mortgage
securing those bonds and for such other relief as the court might deem
proper. The holders of other bonds issued by the defendant company intervened
in opposition to plaintiff. The defendants and interveners interposed general
and special demurrers to the complaint. The demurrers were sustained with
leave to amend. Plaintiff declined to amend and stipulated that a judgment of
dimissal should be entered, subject to her right to appeal. Judgment of
dismissal was entered and plaintiff appeals.
The problems involved on this appeal arise out of the following facts:
In 1925 the defendant, Palace Hotel Company, issued bonds in the total amount
of $2,500,000. These bonds were in $1,000 denominations and had semi-annual
five per cent interest coupons attached. They were payable to bearer, or, if
registered, to the registered owner, and matured February 1, 1945. They are
referred to by the parties as the ‘1945 bonds.’ They were secured by a first
mortgage to defendant American Trust Company,*111 as trustee. This mortgage
is referred to as the ‘original mortgage.’ By its terms the Palace Hotel, and
the real property upon which it is located, were hypothecated to secure the
interest and principal of the bonds.
Plaintiff is the owner and holder of 63 of these 1945 bonds together with
certain interest coupons attached thereto. This constitutes about 2 1/2 per
cent of the 1945 issue. On February 1, 1945, the principal amount of
plaintiff’s bonds, together with the interest coupons attached, became or
**785 had become payable, but no part of the principal or interest
represented by the coupons had been paid.
After the default on the bonds, a plan of reorganization was submitted to the
holders of the 1945 bonds in June of that year. Under this plan of
reorganization the Palace Hotel Company and the trustee entered into a
mortgage of chattels and trust indenture, referred to as the ‘1945
indenture,’ and the 1945 bonds and original mortgage were amended as to the
bondholders who consented to the plan, to provide for a reduction of interest
to 4 per cent, and an extension of maturity to February 1, 1965.
The complaint alleges that ‘in excess of seventy-six (76) per cent of the
owners and holders of the then outstanding 1945 bonds did consent and agree’
to the reorganization. The 1945 indenture, attached to the complaint as an
exhibit, **recites that ‘the owners and holders of more than 84% in principal
amount of the 1945 Bonds outstanding’ have consented to the plan. The
interveners claim in their briefs, and appellant does not claim to the
contrary, that more than 93% of the holders of the outstanding bonds
consented, Neither the plaintiff, nor her predecessors, consented to this
plan of reorganization.
Although the complaint does not set forth as an exhibit the terms of the
original mortgage, it does attach a copy of one of the 1945 bonds. It appears
on the face of the bonds that they incorporated by reference the terms of the
original mortgage. In the trial court and on this appeal it was and is
admitted and conceded by all the parties involved that the *112 original
mortgage **in Article VII contained the following provision: ‘No holder of
any bond or coupon hereby secured shall have the right to institute any suit
or proceeding for the sale of the property subject to the lien hereof, or for
the foreclosure hereof, or for the appointment of a Receiver, or for any
other remedy hereunder, unless such holder previously shall have given to the
said Trustee written notice of the default of which he complains, nor unless
the holders of one-fourth ( 1/4 ) of the bonds hereby secured and then
outstanding shall have made written request to the said Trustee for such
action, or for action hereunder, and shall have given to the said Trustee a
reasonable opportunity to take such action, and the said Trustee shall have
neglected to take appropriate action thereon, nor unless they shall have
offered to the said Trustee adequate security and indemnity against all loss,
costs and liabilities to be incurred in the premises.’
In the trial court it was conceded that such provision was properly before
that court, and, it is conceded, that the legal effect of this provision
presents one of the key points on this appeal.
It is obvious that since plaintiff owns but 2 1/2 per cent of the unpaid
bonds, and since at least 84 per cent of the holders of such bonds consented
to the reorganization plan, Article VII, above quoted, is a complete bar to
this proceeding, if valid and if still effective. Plaintiff does not directly
challenge the validity of this provision, but contends that such provision is
no longer effective because it was expressly rescinded by the 1945 indenture.
In this connection plaintiff points out that the 1945 indenture, among other
things, purports to amend, cancel and annul several provisions of the
original mortgage, and contends, in particular, that the 1945 indenture
expressly cancelled, annulled and rescinded Article VII of the original
mortgage. Part I of the 1945 indenture is entitled ‘Amendment of Original
Mortgage.’ Subdivision 5 of Part I reads as follows: ‘Articles III to XVII,
inclusive, of the Original Mortgage shall be and are hereby cancelled,
annulled and rescinded and there shall be and are hereby substituted in lieu
thereof the following Articles III to XVIII, inclusive.’
**786 Respondents and interveners rely on two other provisions of the 1945
indenture expressly substituted for those cancelled, or purportedly
cancelled, by the above-quoted clause-Article X, section 10.19, and a portion
of Article XVIII, Part III.
**’(1) such holder shall previously have given to the Trustee written notice
of some existing default, as hereinbefore provided; and
**’(2) the holders of not less than twenty-five per cent (25%) in principal
amount of the Bonds at the time outstanding shall, after the right to
exercise such powers, or right of action, as the case may be, shall have
accrued, have requested the Trustee in writing to act; and
**’(3) such holder or holders shall have offered to the Trustee security and
indemnity satisfactory to them against the costs, expenses and liabilities to
be incurred therein or thereby; and
**’(4) the trustee shall have refused or neglected to comply with such
request for a period of sixty (60) days.
The portion of Article XVIII, Part III, relied upon by interveners and
respondents reads as follows: ‘* * * This Mortgage of Chattels and Trust
Indenture is not intended to, does not, and shall not be construed to affect,
impair, change or modify, in any manner or to any extent whatsoever, any of
the rights, powers or privileges of the holders of the 1945 Bonds; nor to
relieve the Company or **the Trustee from any duty or obligation to any
holder of the 1945 Bonds under the terms and provisions thereof or of the
Original Mortgage or said Chattel Mortgage dated December 7, 1933; nor to *114
grant to or confer upon **the Trustee or the holders of 1965 Bonds any rights
or powers as against any holder of 1945 Bonds not granted or conferred under
the provisions of the Original Mortgage or said Chattel Mortgage dated
December 7, 1933; provided, however, that, to the extent permitted by law,
all of the rights, provisions, benefits and remedies provided in this
Mortgage of Chattels and Trust Indenture in favor of the holders of any of
the outstanding bonds, including, but not limited to, the security and
benefits of the sinking fund provided for in the amended Article VI, the
benefits of the redemption provisions provided for in the amended Article V
and the waiver of the statute of limitations provided for in Section 7.17,
shall be available to and inure to the benefit of the holders of 1945 Bonds.’
[1] There can be no doubt that provisions such as those contained in Article
VII of the original mortgage, and Article **787 X, section 10.19 of the 1945
indenture, are valid **(unless prohibited by some specific statute and unless
fraud or collusion is present) and constitute a complete bar to the legal
enforcement of payment of the bonds or foreclosure of the security unless the
requisite percentage of bondholders join in the action. The Supreme Court in
Dietzel v. Anger, 8 Cal.2d 373, at page 375, 65 P.2d 803, at page 804, after
quoting a clause somewhat similar to those here involved, stated: ‘In so far
as these provisions relate to the trust indenture and deal with actions
involving the security, there is no doubt either as to their applicability or
their validity.’ In Lauinger v. Carrillo Building Co., 41 Cal.App.2d 660, 107
P.2d 287, less than 10 per cent of the bondholders attempted to foreclose a
bond indenture containing a 25 per cent clause similar to that contained in
Article VII. The bonds were in default and over 90 per cent of the
bondholders had consented to a deferment contract. A demurrer to the
complaint was sustained without leave to amend. In affirming the trial court,
the appellate court stated, 41 Cal.App.2d at page 662, 107 P.2d at page 289:
‘The validity of such provisions in a bond indenture can no longer be
questioned. We had occasion to so hold regarding *115 similar provisions in
Pacific States Savings & Loan Co. v. Hollywood Knickerbocker, Inc., 11
Cal.App.2d 56, 52 P.2d 1014. We there cited Rodman v. Richfield Oil Co. of
California, et al., 9 Cir., 66 F.2d 244, 249. * * * As to the validity of
these terms of the contract the Circuit Court quoted from Chicago D. &
Vincennes Railroad Co. v. Fosdick, 106 U.S. 47, 77, 1 S.Ct. 10, 27 L.Ed. 47,
as follows: ‘It is an agreement which the parties were at liberty to make.
**There is nothing in it illegal or contrary to public policy. And while it
is in the nature of a forfeiture, it is one against which, when it has taken
place according to the fair meaning of the parties, courts of equity will not
relieve. * * *’ As to the propriety of such a limitation upon the rights of
the minority the Circuit Court in the Rodman case, supra, 66 F.2d at page 250,
said: ‘We have already quoted Supreme Court decisions on the injustice of
permitting one or a few bondholders from circumventing the wishes of the
majority, by instituting proceedings for foreclosure when the majority are in
favor of deferring such suit. If the indenture gives a minority a right thus
to act-as does the indenture in the instant case-the provisions of that
document must be strictly adhered to; for, as we have seen, a stipulation for
foreclosure proceedings, even at the will of the majority, are ‘in the nature
of a penalty.’ A fortiori, a stipulation giving a minority the right to
authorize foreclosure may, in the language of the Vincennes case, be regarded
as ‘stricti juris.”‘
[5] Even if the 1945 indenture did cancel Article VII of the original
mortgage in favor of the non-consenters, then such non-consenters would be
subject to the substantially identical provision in the 1945 indenture
contained in Article XVIII and above quoted. Consenters could only foreclose
upon securing the consent of 25 per cent of the bondholders. Appellant cannot
accept the clause cancelling Article VII (Subdivision 5 of Part I of the 1945
indenture) as a contract between the Palace Hotel Company and consenters and
the trustee for the benefit of non-consenters, without accepting the
eliminating clause in toto. The eliminating clause, above quoted, after
cancelling certain provisions of the original mortgage (including Article
VII), replaces the eliminated articles with other sections. One of the
substituted provisions is section 10.19, which provides the same limitation
of foreclosures as was contained in the original mortgage. While a person may
accept the benefits of a contract made for his benefit, such acceptance
implies an acceptance of the obligations necessarily connected with the
contract. This fundamental principle is stated as follows in section 1589 of
the Civil Code: ‘A voluntary acceptance of the benefit of a transaction is
equivalent to a consent to all the obligations arising from it, so far as the
facts are known, or ought to be known, to the person accepting.’
Thus, appellant is faced with this dilemma-if Article VII of the original
mortgage is still effective, she is barred from bringing the action under
that section. If that Article was cancelled by the 1945 indenture as to non-
consenters, then section 10.19 of that indenture is applicable, and she may
not maintain the action under that section. Any other construction would
defeat the intent of the parties, and would result in putting non-consenters
not only in a more advantageous position than consenters, but would give the
holder of one bond who did not consent the right of **789 foreclosure, which
would defeat the entire purpose of the 1945 indenture.
The next major contention of appellant is that the 1945 indenture had to
qualify under the Trust Indenture Act of 1939, 15 U.S.C.A. § 77aaa et seq.,
which is admitted by respondent and interveners, and that under that statute
*118 the 1945 indenture was required to remove the restriction on foreclosure.
There is another section of the 1939 act which makes section 316(b)
inapplicable to any securities issued prior to 1939, and that is, section
304(a), 15 U.S.C.A. § 77ddd(a), which provides:
‘The provisions of this subchapter shall not apply to any of the following
securities: * * *
‘(3) any security which, prior to or within six months after the enactment of
this subchapter, has been sold or disposed of by the issuer or bona fide
offered to the public, but this exemption shall not apply to any new offering
of any such security by an issuer subsequent to such six months’.
[6] The bonds held by appellant were issued in 1925, so that they come within
the express exemption contained in section 304(a). The new 1965 bonds are,
admittedly, subject to the terms of the 1939 statute. That is undoubtedly the
reason why the 1945 trust indenture was executed, and why that indenture
amends the original mortgage, as to consenters, by including the consent
contained in Article XVIII above quoted. This is a complete answer to
appellant’s contentions in reference to section 316(b) of the Trust Indenture
Act of 1939. That section, whatever its proper interpretation, just has no
application to bonds issued in 1925.
[8] The last major contention of appellant is that if she is not entitled to
foreclosure of the original mortgage, she is at least entitled, in this
action, to a money judgment for the principal and interest due on her bonds,
under her prayer for ‘other and further’ relief contained in her complaint.
Assuming that under a prayer for ‘further relief’ in a foreclosure action a
trial court must grant a money judgment at law in such an equity action, if
such remedy is available, the present argument runs directly afoul of section
726 of the Code of Civil Procedure. That section provides: ‘There can be but
one form of action for the recovery of any debt, or the enforcement of any
right secured by mortgage upon real or personal property, which action must
be in accordance with the provisions of this chapter.’
Appellant argues that the 1939 statute was designed to require security
transactions, such as the 1945 indenture, to protect nonconsenting as well as
consenting bondholders. Therefore, the protection of section 10.19 extends to
both classes, and that section ‘constitutes a waiver of the effect of C.C.P.
726 by the expression of an inconsistent result. Indeed, in the absence of a
right in individual bondholders to foreclose, the provision must be construed
as authorizing a suit at law in order to effectuate the plain intent of
Congress.’ (App. Reply Br. p. 23.)
Respondents and interveners also contend, with some merit, that the complaint
was subject to several grounds of special demurrer, and that, since appellant
was given leave to amend and elected not to do so, the judgment entered on
the sustaining of the demurrer must be sustained. The disposition we have
made of the other points involved makes it unnecessary to consider these
points.
West Headnotes
228 Judgment
228IV By Default
228IV(B) Opening or Setting Aside Default
228k138 Right to Relief in General
228k138(2) k. Negligence in Suffering Default. Most
Cited Cases
Where defendant was not at home when summons and complaint were left at his
residence but he was advised 29 days before entry of default judgment that
such documents had been received at his residence, court did not abuse its
discretion in denying application, made within one year, to set aside default
judgment. West’s Ann.Code Civ.Proc. §§ 473, 473a.
228 Judgment
228IV By Default
228IV(B) Opening or Setting Aside Default
228k143 Excuses for Default
228k143(10) k. Mistake or Negligence of Counsel, in
General. Most Cited Cases
Where defendant in unlawful detainer action was advised 29 days before entry
of default judgment that copies of summons and complaint had been left at his
residence and defendant’s affidavit to vacate default judgment stated that
when he received documents he mailed them to his attorney who erroneously
believed that default had already been taken, court properly denied
defendant’s motion to vacate default judgment on ground of mistake,
inadvertence, surprise, and excusable neglect. West’s Ann.Code Civ.Proc. §
1161a; West’s Ann.Code Civ.Proc. §§ 473, 473a.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k333 k. Power as Authority for Sale in General. Most Cited
Cases
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k349 k. Mode of Sale. Most Cited Cases
Power of sale under deed of trust will be strictly construed and trustee must
act in good faith in exercising power and must follow requirements of deed
with respect to manner of sale.
302 Pleading
302V Demurrer or Exception
302k219 Operation and Effect of Decision on Demurrer
302k225 Amendment or Further Pleading After Demurrer Sustained
302k225(1) k. In General. Most Cited Cases
Trial court should not sustain demurrer without leave to amend where pleading
is merely defective for uncertainty.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Fraudulent nonperformance of a trustee’s duties under deed of trust
participated in or known by a buyer at sale may afford grounds in equity for
setting aside transaction so procured.
302 Pleading
302V Demurrer or Exception
302k219 Operation and Effect of Decision on Demurrer
302k225 Amendment or Further Pleading After Demurrer Sustained
302k225(1) k. In General. Most Cited Cases
Where deed of trust provided recital in any deed conveying property should be
conclusive proof of truthfulness thereof, and trustee’s deed stated that
trustee complied with law in giving notice of time and place of sale and in
mailing copies of notices of default, etc., complaint, which alleged that
trustee’s sale and deed given pursuant thereto were not made according to law
nor according to provisions of deed of trust could not be amended to state a
cause of action, and court did not err in sustaining a demurrer to complaint
without leave to amend. West’s Ann.Civ.Code, § 2953.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k374 k. Conveyance to Purchaser. Most Cited Cases
Deed of trust providing that recital in trustee’s deed of any matters or
facts shall be conclusive proof of the truthfulness thereof did not result in
waiver of rights or privileges conferred upon debtor by statutes establishing
procedures in exercise of powers of sale conferred by deeds of trust and did
not render trustee’s deed invalid. West’s Ann.Civ.Code, § 2953.
157 Evidence
157X Documentary Evidence
157X(D) Production, Authentication, and Effect
157k383 Conclusiveness and Effect
157k383(7) k. Private Contracts and Other Writings.
Most Cited Cases
By execution of deed of trust declaring that recital in trustee’s deed of any
fact or matter should be conclusive proof of truthfulness thereof, debtor
made trustee his agent with such powers that trustee could bind him,
notwithstanding he had not carried out provisions of trust, and as against
purchaser, who did not participate in or know of failure of trustee to
perform his duties, recital that trustee had been true to his trust was
binding upon debtor. West’s Ann.Civ.Code, § 2953.
**492 *209 Sefton & Gartland, San Francisco, for appellant.
[1] We shall treat, first, of the appeal in Pierson v. Fischer. The pertinent
facts therein, appearing in the record of proceedings to vacate the default
judgment, in addition to those given above, are these: Fischer defaulted in
meeting the obligations of his note and deed of trust, and notice of such
default was recorded. Three months thereafter demand was made upon the
trustee to sell the property. Notice of sale was published, posted and
mailed, the sale date being first set for October 9, 1951. The sale was
postponed seven times at Fischer’s request and during this period the
building inspector at Eureka was threatening to condemn the buildings on the
property by reason of their condition. February 13, 1952 the property was
sold to the Piersons for $72,300 and they were given the *211 trustee’s deed.
Six days thereafter Fischer filed for record an affidavit charging invalidity
in the sale for want of proper notice to him, stating therein that he
intended to bring an action to set aside the sale and was recording the
document to prevent resale to bona fide purchasers. About one month after the
sale, the Piersons served Fischer with a three-day notice to quit and five
days thereafter filed a complaint in unlawful detainer. This complaint named
Fischer’s former wife as a defendant, she having been a party to the deed of
trust, and in addition joined a Mr. and Mrs. Strong, who were related to
Fischer and to whom he had once conveyed the property. Efforts to serve
Fischer and the Strongs were successfully evaded. The former Mrs. Fischer
resided in Oregon. The trial court ordered the summons and complaint
constructively served upon each defendant ‘by publication in the Humboldt
Standard, a newspaper printed and published in Eureka, the publication to run
for one day.’No complaint is made, save as noted above, that, procedurally,
the requirements of constructive service were not complied with. Fischer
received a copy of the complaint and of the summons which required his
appearance in three days. Although when the documents were received at his
residence he was not there, yet he received notice of their arrival on April
20, 1952. On April 23rd he consulted an attorney, and on April 25th delivered
to him copies of summons and complaint. On April 22d the attorney for the
Piersons wrote the court clerk, returning the original process with proof of
service and requesting the entry of default. April 28th Fischer’s attorney
contacted the Piersons’ attorney and was told that the entry of default had
been requested, that no stipulation extending time would be made because of
the many indulgences already given to Fischer and that during the following
week application would be made for judgment. On April 30th Fischer received a
letter from his attorney stating he would not proceed without a retainer. No
appearance was made. Fischer employed other counsel. Judgment was entered May
19th, twenty-nine days after Fischer was first advised that summons and
complaint had been received at his residence.
Fischer contends that his first motion to set aside the default judgment
should have been granted, asserting that it was based upon Section 473a of
the Code of Civil Procedure, which provides that if from any cause a summons
in an action has not been personally served upon a defendant the court, upon
terms that are just, may allow such defendant to answer on the merits *212 if
application by made within one year. He says that when the application is
made under that section the court is without discretion to refuse relief. The
contention is untenable. Neither Section 473 nor Section 473a of the Code of
Civil **494 Procedure was designed to afford relief from judgments validly
entered upon constructive notice to those ‘who with full knowledge of such
service upon them, by reason of receipt of a copy of the summons and
complaint through the mail, remain inactive.’ Palmer v. Lantz, 215 Cal. 320,
324, 9 P.2d 821, 823; Gardner v. Gardner, 72 Cal.App.2d 270, 274, 164 P.2d
500; Boland v. All Persons, 160 Cal. 486, 490, 117 P. 547. The application
for relief addressed itself to the judicial discretion of the trial court and
upon the facts recited we hold that the court did not abuse its discretion in
denying Fischer’s request.
[2][3] Appellant contends further that his motion should have been granted
upon the ground that the order for publication was void, so that no service
whatever had been made upon him. In support of this contention he points out
that he was not residing in Eureka where the property was located and where
the publication was made and that more than one publication should have been
made. But the statutes have clearly recognized the necessity of prompt
judicial action in cases such as these. They give a defendant only three days
in which to appear. They give the action precedence over other civil actions.
And they commit to the trial court broad discretionary powers in selecting
the medium of publication and fixing the number of publications to be made.
Of course all presumptions must here be indulged in support of the orders
made by the trial court and we hold that the record here discloses no abuse
of discretion and must be upheld against the attacks here made.
[4] After the denial of his first motion for relief appellant filed a second
motion therefor. This motion was made on the ground that the entry of default
and of the default judgment constituted proceedings taken against appellant
through mistake, inadvertence, surprise and excusable neglect. The supporting
affidavit sets forth that the property involved was of such worth that
appellant’s equity therein was of the value of $75,000 and that he alone of
all the defendants was interested therein; that the mailed copy of summons
and complaint arrived at his house in Los Gatos on April 20, 1952, when he
was at Lakeport, that he thereafter mailed the documents to his attorney and
was by him on April 30th told that he already *213 was in default and that
proceedings would have to be taken to set that default aside; that he then
procured another attorney who, on June 24th, made such application. He
further avers, in effect, that his attorney had been misinformed by the
Piersons’ attorney and led to believe a default had already been entered,
which was not true (we note here that this conflicts with the opposing
affidavit of the Piersons’ attorney); that because of this misinformation,
he, appellant, was mistaken as to the status of the case, believing that the
default had already been entered when, in fact, it was not entered until May
5th; that he believed he had thirty days to answer, in which he was further
mistaken, but therein he relied upon his previous experience in lawsuits
which led him to believe that he did have such thirty days’ time. Here again
the second motion was addressed to the sound discretion of the trial court.
The showing, robbed of the claim of misinformation, presented a factual issue
which the trial court determined. The memorandum opinion of that court,
addressed to this second motion, shows that the court carefully considered
the entire situation and arrived at the conclusion that justice required the
judgment be permitted to stand. We hold upon the facts presented that the
trial court’s ruling must be upheld upon appeal.
Turning, now, to the second appeal in the action brought by Fischer against
the Piersons and others to set aside the trustee’s sale and declare void the
trustee’s deed, the following situation is presented: It was alleged in the
complaint that plaintiff had purchased the subject property and had given a
note secured by a deed of trust for a part of the purchase price. A copy of
that deed of trust was attached to the complaint and made a part thereof by
reference. It was alleged that the trustee had sold the property to the
Piersons and a copy of the trustee’s deed was likewise attached to the
complaint and made a part thereof by reference. It was then alleged **495
that said sale was not made according to law nor according to the provisions
of said deed of trust in this, that ‘no notice of said sale was either posted
or published, nor was said sale postponed to said date by public announcement
from any previous time fixed for sale; that the omission of said trustee to
post or publish the notice of sale or to publicly announce any postponement
thereof was calculated to and did prevent competitive bidding at the sale of
said property, and by reason of no competitive bids, the sum for which said
property was sold was far below the real and true value thereof.’*214 To this
complaint respondents demurred generally. Their claim that the pleading did
not state a cause of action against them rests upon certain provisions in the
deed of trust and in the trustee’s deed.
The deed of trust contains the following: ‘Trustee shall deliver to the
purchaser its deed conveying the property so sold, * * * The recital in any
such deed of any matters or facts, stated either specifically or in general
terms, or as conclusions of law or fact, shall be conclusive proof of the
truthfulness thereof.’The trustee’s deed contains the following language:
‘Said Trustee gave notice of the time and place of the sale of said property
in accordance with the laws of the State of California and the terms of said
Deed of Trust. Said Trustee complied with all of the provisions of law
regarding the mailing of copies of notices of default and of sale and with
all applicable provisions of law regarding the service and publication of the
notices of default. Said property was sold by said Trustee at public auction
on February 13, 1952, in the City of Eureka, County of Humboldt, in full
accordance with the laws of the State of California, and the terms of said
Deed of Trust. Said Grantees, being the highest bidders at such sale, became
the purchasers of said property and paid therefor to said Trustee the amount
bid, being Seventy Two Thousand Three Hundred and No/100 Dollars in lawful
money of the United States.’
‘The power of sale under a deed of trust will be strictly construed, and in
its execution the trustee must act in good faith and strictly follow the
requirements of the deed with respect to the manner of sale. The sale will be
scrutinized by courts with great care and will not be sustained unless
conducted with all fairness, regularity and scrupulous integrity. * * *’ (25
Cal.Jur., sec. 67, page 83.)
[6][7] As to sustaining demurrers without leave to amend, the rule has been
broadly stated as follows: ‘As a matter of sound public policy litigation
should be disposed of upon substantial rather than upon technical grounds,
and that the trial judge should not sustain a demurrer without leave to amend
where it is merely defective for uncertainty.’ Davis v. Wood, 61 Cal.App.2d
788, 789, 143 P.2d 740, 745; see, also, *215Wennerholm v. Stanford University
School of Medicine, 20 Cal.2d 713, 718, 720, 128 P.2d 522, 141 A.L.R. 1358.
However, if the recitals in the trustee’s deed are in fact conclusive as
between the parties to the deed of trust, then the complaint cannot be
amended to state a cause of action based upon any claimed failure of the
trustee to properly couduct the sale proceedings and the court did not err in
sustaining the demurrer without leave to amend. We are not unmindful of the
fact that fraudulent nonperformance of a trustee’s duties participated in or
known of by a buyer at the sale may afford grounds in equity for setting
aside a transaction so procured. But in this whole record there is no
suggestion that any fraud was practiced, nor, if fraud existed, that the
Piersons had any knowledge thereof. The case, therefore, turns upon the
conclusive character of these recitals. Such recitals have often received the
attention of appellate courts. In Bank of America, Nat. Trust & Savings Ass’n
v. McLaughlin etc. Co., 40 Cal.App.2d 620, 633, 105 P.2d 607, 614, recitals
which were to all intents and purposes identical with those we have here, and
which were based upon provisions **496 in a deed of trust that likewise, for
all practical purposes, was identical with the deed of trust here, the
appellate court upheld the ruling of the trial court directing a verdict for
the plaintiff therein after refusing to permit the defendant to offer
evidence tending to refute the recitals. The court said:
‘The appellant assigns error in the refusal of the trial court to receive
evidence tending to refute the recitals in the trustees’ deed on the ground
that appellant was concluded by those recitals. The deed of trust provided:
‘The recitals contained in any deed or deeds made pursuant to any sale of the
property hereunder setting forth matters or facts with reference to the
regularity or validity of said sale shall be conclusive proof of the
truthfulness thereof, and such deed or deeds shall be conclusive against the
Trustor and all other persons. The said matters or facts need not be stated
specifically but may be stated in general terms and in conclusions.’The
trustees’ deed contained a recital that the property was sold to the grantee
at the time, place, terms and conditions provided in the deed of trust ‘and
in all respects as provided by the law of the State of California’. The
appellant argues that though the deed of trust makes the recitals of
everything leading up to the sale conclusive, it does not make the recital
that a sale was actually held conclusive. For this reason the appellant
offered to prove that no sale was had. The language of the deed of trust is
not ambiguous. A matter or fact with *216 reference to the regularity or
validity of the sale would clearly embrace the fact of sale, and the recital
in the trustees’ deed that the property was ‘sold’ at the time and place
noticed will estop the claim that no sale was in fact made.’
In Central National Bank of Oakland v. Bell, 5 Cal.2d 324, 327, 54 P.2d 1107,
1109, the Supreme Court said:
‘The defendants on the trial endeavored to show that the notices required by
section 692, subd. 3, Code Civ.Proc., did not remain posted for twenty days
prior to the date of sale. The evidence was held inadmissible and excluded by
the court. The court did not err in its ruling. It is sufficient in this
respect to note that the trust deeds provided that, in event of sale
thereunder, the recitals in the trustees’ deeds, of default, request to sell,
publication, and posting of notice, postponements of sale, etc., should be
conclusive evidence of all such facts recited. In this action and on the
record before us the defendants were concluded by the recitals in the
trustees deeds.’
[8] The same ruling was made in Cobb v. California Bank, 6 Cal.2d 389, 57
P.2d 924. We hold that the trial court did not err in sustaining respondents’
demurrer without leave to amend.
[9][10] The argument is not sound, for the reason that the provisions in the
deed of trust here in question do not result in a waiver of the rights or
privileges conferred by the Civil Code sections referred to. Those sections,
speaking generally, establish certain procedures in the exercise of powers of
sale conferred by deeds of trust and in the remedies of the beneficiary. And
concerning all of them, appellant, by the instrument he executed, declared
that the recitals in a deed made by his trustee that all of the duties of the
trust respecting the sale had been complied with should bind him. In short,
he thereby made the **497 trustee his agent with such powers that *217 the
trustee could bind him, notwithstanding he had not carried out the provisions
of his trust. As the Supreme Court said in Mersfelder v. Spring, 139 Cal.
593, 595, 73 P. 452, 453: Such stipulations ‘in express terms to give the
trustee the authority to bind his principal by the mere execution of a deed
containing the prescribed recitals.’As against a purchaser who does not
participate in or know of the failure of the trustee to perform his duties,
the recital that he has been true to his trust binds the trustee’s principal
and such purchaser may rely upon those provisions in purchasing at the sale.
The motions to dismiss are denied; the judgments appealed from are affirmed.
California Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 44 P.2d 624
(Cal.App. 2 Dist. Apr 25, 1935)
(2) The defendant next contends that the court has inherent equitable power
to refuse to allow a deficiency judgment based on the forced sale price when
the sale is attended with any unfairness or is made under conditions which
would be inequitable or oppressive. The defendant cites no California cases
in this behalf. He cites cases of other jurisdictions in which the courts
have refused to approve sales under foreclosure judgments and executions
because of inadequacy of sale price where the inadequacy resulted from
mistake, misapprehension or inadvertence on the part of the interested
parties or of intending bidders. It is obvious, however, the refusal to
approve a sale and thus requiring a new or resale is quite another matter
from refusing a judgment after the sale has been completed. **Furthermore, in
the instant case no claim of mistake, misapprehension or inadvertence is made
by the defendant, nor is any claim made that the sale was attended with any
unfairness or that it was made under conditions which would be inequitable or
oppressive. We see nothing in the record which would amount to an abuse of
discretion on the part of the trial court.
(3) The defendant contends that the sale was accompanied with certain
irregularities. In this regard he claims that paragraph G.1. of the trust
deed required that when written declaration of default and demand for sale
was made to the trustee, the beneficiary should at the same time deliver to
the trustee the trust deed and the note. A second irregularity claimed by the
defendant was that the plaintiff, being the trustee as well as the owner, was
unauthorized to charge and collect, as it did, a trustee’s fee for conducting
the sale. As to the first alleged irregularity, it is our conclusion *435
that manual delivery of the note and deed of trust was not necessary-symbolic
delivery was sufficient. **There is no claim by the defendant that harm or
prejudice resulted to him from the symbolic delivery. **An irregularity, even
if one has occurred, is not sufficient to invalidate a trustee’s sale in the
absence of a claim that the irregularity operated to the injury of the owner.
(25 Cal. Jur. 91, and cases cited.) (4) With regard to the fees of the
trustee, the courts of this state have repeatedly held that there is no
impropriety in the payee of the note being also the trustee in the deed of
trust. (25 Cal. Jur. 19, and cases cited.) No claim is made by the defendant
that the fee charged was other than the customary fee in the community for
like services and the court found that the charge was a reasonable one. The
defendant’s contention is that the plaintiff could not collect a fee for
itself because it had become the owner of the note, but the plaintiff was the
trustee from the beginning of the transaction and it was one of the
agreements of the trust deed that in case of foreclosure sale the plaintiff
would be entitled to a trustee’s fee.
Finally the defendant contends that certain findings of the trial court were
unsupported by the evidence. We have examined into these conditions and find
that in each case the findings were supported by substantial evidence.
Judgment affirmed.
I had attempted multiple times to call Bank of the West and was never
returned any calls. Confusion as to who to communicate to. The
trustor and other third persons need to know the identity of the
trustee for obtaining information and tendering a reinstatement or
redemption. 8
(3a, 3b) Deeds of Trust § 35--Sale Under Power--Who May Convey-- Following
Substitution of New Trustee--Void Conveyance by *870 Former Trustee.
**Where the beneficiary of a deed of trust recorded a document that
substituted a new trustee for the former trustee, the new trustee had sole
power to convey the property, and therefore the former trustee’s conveyance
of the property to a new buyer after a foreclosure sale was void. **The
transaction was not merely voidable. The former trustee, who no longer had
title to the property, could not convey effective title. **Moreover, although
the deed of trust that the homeowner executed stated that a recital in a
trustee’s deed of any matters of fact shall be conclusive proof of the
truthfulness thereof, the deed that the former trustee gave to the new buyer
after the foreclosure sale contained no statement that the former trustee’s
power to act as trustee had survived any recorded substitution. Rather, the
deed merely conveyed to the new buyer "such interest as Trustee has in" the
homeowner’s property. The only factual recitals in the deed related to the
notice given to the homeowner and the conduct of the sale; there was no
representation as to whether a conflicting substitution of trustee had been
recorded. **Because there was no recital in the former trustee’s deed to the
new buyer that undermined the new trustee’s substitution, the deed to the new
buyer did not create any conclusive presumption that the former trustee
continued to act as trustee. Thus, in attacking the former trustee’s deed,
the homeowner was not required to rely upon equity in setting aside a merely
voidable deed. Rather, he could rely on the face of the record to show that
the former trustee’s deed was void.
Jones v. First American Title Ins. Co., 107 Cal.App.4th 381, 131
Cal.Rptr.2d 859, 03 Cal. Daily Op. Serv. 2651, 2003 Daily Journal D.A.R. 3355
(Cal.App. 2 Dist.,Mar 25, 2003)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k335 k. Right to Foreclose. Most Cited Cases
Mortgagors were not precluded from relying upon statute authorizing
mortgagors within three months of recording of notice of default under deed
of trust to pay entire amount due and thereby cure the default by provision
in deed of trust that factual recitals in trustee’s deed executed following
foreclosure sale “shall be conclusive proof of the truthfulness thereof”
**where trustee’s deed referred to recordation of notice of default and then
recited that “such default still existed at the time of sale” but there was
no substantial evidence to support such recital. West’s Ann.Civ.Code, § 2924c.
[3] Respondents make the contention that appellants are precluded from
relying upon section 2924c by the provision in the deed of trust that the
factual recitals in a trustee’s deed executed following a foreclosure sale
‘shall be conclusive proof of the truthfulness thereof.’
The trustee’s deed here refers to the recordation of the notice of default
and then recites that ‘Such default Still existed at the time of sale.’
(Emphasis added.) There is no substantial evidence to support this recital
and it cannot be upheld in this instance.
To accept this recital as being binding upon appellants would, under the
circumstances herein, be contrary to the public policy purpose behind Civil
Code, section 2953, which provides in pertinent part as follows: ‘Any express
agreement made or entered into by a borrower at the time of or in connection
with the making of or renewing of any loan secured by a deed of trust, * * *
whereby the borrower agrees to waive the rights, or privileges conferred upon
him by Section 2924, 2924b, (or) 2924c of the Civil Code * * * shall be void
and of no effect.’
Witter v. Bank of Milpitas, 204 Cal. 570, 269 P. 614 (Cal. Jul 18, 1928)
Hill v. Gibraltar Sav. & Loan Ass’n of Beverly Hills, 254 Cal.App.2d 241,
62 Cal.Rptr. 188 (Cal.App. 2 Dist. Sep 08, 1967)
Old case
The sale was held as scheduled at 11 a.m. on August 10, 1962. Plaintiff David
Hill and his attorney were present. The auctioneer, an officer of Security,
commenced the sale. Gibraltar, through its representatives, made an opening
bid of $20,955.38, which was the amount due under its note secured by the
first trust deed, including costs. At this point, Mr. Siegal, a third party
previously unknown to either plaintiffs or defendants, bid $21,000 and
qualified the bid by showing a cashier’s check in his hands in excess of the
amount bid. Thereafter, plaintiff bid the sum of $22,000, but when the
auctioneer asked him to show cash or a cashier’s check in that amount, he
produced a cashier’s check in the amount of only $20,955.38. The auctioneer
refused to accept the bid stating that he had not properly qualified it.
Plaintiff then informed the auctioneer that he held a second trust deed on
the property and asked that the sale be postponed for a ‘couple of hours’ in
order to give him time to secure the additional amount required to qualify
his bid. Siegal demanded that Security go ahead with the sale. No other
bidders were present. After consulting with a representative of Gibraltar,
who asked that the auctioneer proceed with the sale, the auctioneer refused
plaintiff’s request for a postponement and sold the property to Siegal for
the sum of $21,000.
The trial court concluded that under the circumstances Security had no duty
to postpone the sale.
[1][2] The questioned conduct of the trustee should be viewed keeping in mind
these principles: A sale under a deed of trust must be conducted in strict
compliance with the terms of the instrument containing the power of sale. (
**190Kleckner v. Bank of America, 97 Cal.App.2d 30, 33, 217 P.2d 28; 34
Cal.Jur.2d 130; 59 C.J.S. Mortgages s 572, p. 959.) The sale must be
conducted fairly, openly, with due diligence and with the exercise of sound
discretion on the part of the trustee, in order to protect the rights of all
interested persons and to obtain a reasonable price. ( *244Brown v. Busch,
152 Cal.App.2d 200, 204, 313 P.2d 19; Kleckner v. Bank of America, supra, 97
Cal.App.2d 30, 33, 217 P.2d 28; 34 Cal.Jur.2d 130-131; 59 C.J.S. Mortgages s
572, pp. 959-960; 90 A.L.R.2d 564.) The court in Kleckner, supra, stated (97
Cal.App.2d at pp. 33-34, 217 P.2d at p. 31): ‘It is the duty of a trustee,
once it has started, to continue with reasonable dispatch with a sale under a
trust deed; the terms being cash, the trustee is not required to hold up the
sale while sundry bidders leave the place to go to banks or elsewhere to get
cash. Such conduct of a sale could well result in confusion, in the dispersal
of bidders present, and in loss to persons represented by the trustee.’
Pacific States Savings & Loan Co. v. North American Bond & Mortg. Co., 37
Cal.App.2d 307, 99 P.2d 355 (Cal.App. 1 Dist.,Feb 15, 1940)
Action by the Pacific States Savings & Loan Company against the North
American Bond & Mortgage Company to quiet title, wherein defendant cross-
complained, asserting an interest as original trustee under a deed of trust.
From judgment denying any relief to plaintiff and adjudging that title was
vested in defendant, plaintiff appeals.
266 Mortgages
266I Requisites and Validity
266I(A) Nature and Essentials of Conveyances as Security
266k22 Parties
266k23 k. In General. Most Cited Cases
The trustor in a deed of trust and the lender may, by appropriate joint
action, substitute a new trustee in place of the original trustee named in
deed of trust.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k339 Persons Entitled to Execute Power
266k342 k. Appointment of New Trustee. Most Cited Cases
A “substitution of trustee” jointly executed and recorded by successor of
trustor and successor of lender was valid and effectively revoked powers of
original trustee and terminated any interest of original trustee in the
property, so that purchaser at sale conducted by substituted trustee acquired
title as against original trustee.
**355 *307 John L. Mace, of Los Angeles, for appellant.
SPENCE, Justice.
Plaintiff purchased certain real property at a sale conducted by Pacific
Auxiliary Corporation as the *308 substituted trustee under a deed of trust.
It brought this action to quiet title against the defendant corporation,
which was the original trustee under said deed of trust. The claim of the
defendant was based solely upon its alleged interest as such trustee. The
trial court entered judgment denying any relief to plaintiff and adjudging
that title to said real property was vested in defendant as such trustee.
Plaintiff appeals from said judgment.
The cause was tried upon stipulated facts. The plaintiff corporation and Olga
Rupp were respectively the successor in interest of the original lender and
the successor in interest of the original trustor. Said deed of trust did not
contain the provision frequently found in such deeds of trust permitting the
lender alone to substitute a new trustee. After the enactment in 1935 of
section 2934a of the Civil Code, plaintiff and said Olga Rupp jointly
executed and recorded a document entitled “Substitution of Trustee” and
complied with all the requirements of that section for the purpose of
substituting Pacific States Auxiliary Corporation as trustee under said deed
of trust. Said substituted trustee conducted the sale thereunder and
plaintiff became the purchaser. Thereafter said substituted trustee executed
and delivered to plaintiff a trustee’s deed to the property.
The trial court stated in its findings of fact and conclusions of law that it
found said substitution invalid first, because said section 2934a applied
only to deeds of trust “conferring no other duties upon the trustee than
those which are incidental to the *** power of sale therein conferred”,
whereas the deed of trust here “conferred another duty, to-wit: the duty of
reconveying the property when the note was paid”; and second, because said
section**356 became effective after the execution of said deed of trust and
was intended only to affect deeds of trust subsequently executed; and third,
because if given retroactive effect, it “would *309 amount to an interference
with the right of contract and the taking of property without due process of
law”.
Plaintiff contends that the trial court erred in declaring said substitution
invalid and in entering judgment in favor of defendant. **In our opinion this
contention must be sustained.
Plaintiff’s claim that the substitution was valid is based upon two grounds.
**The first ground is that said section 2934a is applicable to all deeds of
trust similar to the one under consideration regardless of the time of
execution of said deeds of trust and that the application thereof to deeds of
trust previously executed violates no constitutional rights. **The second
ground is that the substitution was made here by the joint action of the
successor of the trustor and the successor of the lender and that it was not
dependent upon said section 2934a for its validity. **We are of the opinion
that we may base our conclusion that the substitution was valid upon the
second ground above stated and that it is therefore unnecessary to discuss
the first ground.
The nature of the instruments called deeds of trust and the legal
consequences of the execution of such instruments have been frequently
discussed and the authorities were extensively reviewed in Bank of Italy Nat.
Trust & Sav. Ass’n v. Bentley, 217 Cal. 644, 20 P.2d 940.It has been said
that such deeds of trust are “an anomaly in our system” and that “in effect
they are mortgages with power to sell”. Hodgkins v. Wright, 127 Cal. 688,
692, 60 P. 431, 432.It further appears that the status of a trustee under
such a deed of trust is an anomalous one. While such a deed of trust takes
the form of a grant of title to the trustee, it is not always treated as a
“grant” but it is frequently treated as a mere “encumbrance”. Burns v.
Peters, 5 Cal.2d 619, 55 P.2d 1182.Such a deed of trust “carries none of the
incidents of ownership of the property, other than the right to convey upon
default on the part of the debtor in the payment of his debt”. MacLeod v.
Moran, 153 Cal. 97, 99, 94 P. 604, 605.Neither delivery to the trustee nor
the consent of the trustee is essential to the validity of such a deed of
trust (Burns v. Peters, supra; Smith v. Davis, 90 Cal. 25, 27 P. 26, 25
Am.St.Rep. 92; Huntoon v. Southern T. & C. Bank, 107 Cal.App. 121, 290 P. 86),
and doubt has been cast upon whether the trustee*310 is a trustee in the
strict sense of the word or is merely an agent appointed by the parties to
exercise the limited powers conferred upon him as such agent. In Ainsa v.
Mercantile Trust Co., 174 Cal. 504, at page 510, 163 P. 898, at page 900, the
court said, “A trustee under a deed of trust does not assume the important
obligations which are in some instances cast upon a trustee by operation of
law. An ordinary trust deed is little more than a mortgage with power to
convey.*** A trustee under an ordinary deed of trust is the common agent of
both parties and is required to act impartially.*** Some authorities hold
that he is not a trustee at all in a technical sense.”With respect to
foreclosure, it has been held that no constitutional right of the parties is
violated by the application of a statute, subsequently enacted, giving to the
lender the additional remedy of a judicial foreclosure ( Lincoln v. Superior
Court, 2 Cal.2d 127, 39 P.2d 405) and that the trustee “has no right to
complain if the beneficiary takes advantage of a statute allowing a judicial
foreclosure of the deed of trust”. Field v. Acres, 9 Cal.2d 110, 113, 69 P.2d
422, 424.
[1][2][3][4] While the courts of this state may be said to have adhered quite
generally to the so-called “title” theory rather than to the so-called “lien”
theory with respect to deeds of trust (see Bank of Italy Nat. Trust & Sav.
Ass’n v. Bentley, supra), it has never been held that the powers granted to
the trustee may not be revoked or that the interest, if any, of the trustee
in the property may not be terminated by the joint action of the trustor and
the lender. If we regard substance rather than form, it would seem that the
anomalous role of the so-called trustee under a deed of trust is more nearly
the role of a “common agent of both parties” and not that of a “trustee at
all in a technical sense”. If he be treated as a mere agent, his powers are
clearly revocable under familiar rules of agency (Civ.Code, sec. 2356), but
whether he be treated as a mere agent or as a trustee with the limited powers
conferred by the deed of trust, we are of the opinion that he possesses no
powers and no interest which are beyond the reach of the parties creating the
same, or of the successors in interest of such parties. In other words, we
are of **357 the view that the principal parties to the transaction, to-wit,
the trustor and the lender, or the successors of said parties, may by
appropriate joint action revoke *311 the trust entirely leaving the title to
the property in the trustor or his successor free of any trust or
encumbrance; that they may by appropriate joint action convey title to a
third person free of any trust or encumbrance; and that they may by
appropriate joint action substitute a new trustee in the place of the
original trustee named in the deed of trust. This view merely accords to said
principal parties the same measure of control over the transaction as have
the principal parties under a mortgage containing a power of sale. There
seems to be no sound reason, as between the principal parties and the
trustee, to deny to the principal parties that same measure of control. We
conclude that the substitution jointly executed and recorded by the successor
of the trustor and the successor of the lender was valid and that it
effectively revoked the powers of the defendant trustee and terminated any
interest of the defendant trustee in the property. It follows that judgment
should have been entered in favor of the plaintiff upon the stipulated facts.
The judgment is reversed with directions to the trial court to enter judgment
in favor of the plaintiff.
Bank of America Nat. Trust & Savings Ass’n v. Century Land & Water Co., 19 Cal.App.2d 194, 65 P.2d
109 (Cal.App. 2 Dist.,Feb 10, 1937)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Inadequacy of foreclosure sale price is not in itself sufficient ground for setting aside a sale legally made, but, if
price is palpably inadequate, slight irregularities in conjunction with sale authorize court to set it aside if such
irregularities have conduced to the inadequacy of price or in some other way contributed to injury of debtor.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k375 k. Deficiency and Personal Liability. Most Cited Cases
In absence of irregularities or oppression, fraud or unfairness, holder of note secured by trust deed was entitled to
deficiency judgment of difference between foreclosure sale price and indebtedness without deduction for difference
between reasonable market value of property and amount for which holder purchased property at foreclosure sale,
where note was executed prior to enactment of statute limiting amount of deficiency judgment.
Plaintiff held the promissory note of Century Land & Water Company, a duck hunting club, in the sum of $27,500,
executed August 25, 1930, and secured by a trust deed on real estate of the club. A number of the members of the
club indorsed the note and are joined as defendants with the maker of the note. Default was made in the payments on
the note, the trust deed was foreclosed, and the property which was made security was sold at public auction under
the terms of the trust deed for the sum of $8,500. Plaintiff bank was the owner and holder of the note, the trustee for
the property, and the only bidder at the sale. The purchase price was applied upon the amount due and the bank
thereupon sued for a deficiency. The court found that the land was of the reasonable market value of $16,000. The
trial court concluded that “the trustee made a profit **110 for itself in the sum of seven thousand five hundred
dollars ($7,500), for which profit it is accountable to the trustor and maker of the note, and said profit in the amount
of seven thousand five hundred dollars ($7,500) should be credited toward the principal amount of said deed of trust
and said promissory note described in the findings of fact herein as of the 14th day of January, 1935.” Plaintiff
appeals upon the *196 judgment roll, claiming that it is entitled to judgment for the additional sum of $7,500.
[1][2][3][4] Section 580a of the Code of Civil Procedure (as added by St.1933, p. 1672) is not applicable to the
present action, since the note was executed prior to the enactment of the section. California Trust Company v.
Smead Investment Co., 6 Cal.App.(2d) 432, 44 P.(2d) 624; Brown v. Ferdon, 5 Cal.(2d) 226, 54 P.(2d) 712.
Defendants attempt to uphold the judgment with a discussion of the general duties and obligations of a trustee. It has
been held that the trustee may also be the beneficiary and may become a purchaser at the sale. California Trust
Company v. Smead Investment Co., supra; 25 Cal.Jur. 19, and cases there cited. In this state inadequacy of price is
not in itself sufficient ground for setting aside a sale legally made. **If the price is palpably inadequate, slight
irregularities in conjunction with the sale might authorize the court to set it aside; but such irregularities to have this
effect “must have conduced to the inadequacy of the price, or in some other way have contributed to the injury of
the plaintiff.” Sargent v. Shumaker, 193 Cal. 122, 223 P. 464, 468. Since the appeal is upon the judgment roll, we
must look to the findings to determine if any irregularities exist. Nothing is contained therein which can be classified
as an irregularity or which indicates that there was any oppression, fraud, or unfairness. In the absence of such
findings plaintiff is entitled to judgment for the additional sum of $7,500.
None of the defendants, with the possible exception of defendant Merrill, have presented issues in the pleadings
which call for findings by the trial court on the subject of irregularities connected with the sale. Defendant Merrill
prosecutes a separate appeal from the judgment, and on that appeal we are this day filing an opinion reversing the
judgment as to defendant Merrill on a point having no bearing upon the issues raised by plaintiff’s appeal.
The judgment is modified, and the superior court is directed to enter judgment in favor of appellant and against
respondents other than respondent Merrill in accordance with the prayer of the complaint.
I. E. Associates v. Safeco Title Ins. Co., 39 Cal.3d 281, 702 P.2d 596, 216
Cal.Rptr. 438 (Cal.,Aug 01, 1985)
Miller & Starr, California Real Estate 3D, Chapter 10, Section 10:9,
Substitution of trustee – contractual procedure,
p. 40, states,”
Bennett v. Ukiah Fair Ass’n, 7 Cal.2d 43, 44-45, 59 P.2d 805 (1936)
Affirmed.
West Headnotes
390 Trusts
390III Appointment, Qualification, and Tenure of Trustee
390k169 Appointment and Succession of New Trustee
390k169(2) k. Provisions of Instrument Creating Trust. Most
Cited Cases
Where power is conferred by trust deed upon beneficiary, successor, assigns,
or other legal representatives, to appoint new trustees, the power may be
exercised by any holder or owner of deed of trust.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k339 Persons Entitled to Execute Power
266k342 k. Appointment of New Trustee. Most Cited Cases
Where trust deed provided that beneficiary could appoint new trustees,
assignee of beneficiary was entitled to appoint new trustees, and trustees
appointed by assignee were legal trustees.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k335 k. Right to Foreclose. Most Cited Cases
Under trust deed conveying realty as security for note, advertisement of
notice of sale 2 months and 11 days after recordation of notice of default,
and foreclosure 3 months and 3 days after recordation, were valid under
statute, since 90 days need not elapse between recordation of notice of
default and advertisement of sale, but only 90 days between notice of default
and sale. Civ.Code, § 692, and § 2924, as amended by St.1917, p. 300.
‘1. Under a deed of trust conveying real estate as security for a promissory
note, may advertisement of notice of sale begin two months and eleven days
after recordation of notice of default, and valid foreclosure sale thus be
made three months and three days after such recordation?
‘All the provisions of this instrument shall apply to and bind the legal
representatives, successors and assigns of each party hereto, respectively.’
[2] It is apparent that Herma Bennett, the beneficiary under the deed of
trust, was by its terms qualified to appoint the trustee, and the cross-
defendants herein named, having been duly appointed by the beneficiary, were
the legal trustees under the deed of trust.
Mutual Building & Loan Ass’n of Pasadena v. Wiborg, 59 Cal.App.2d 325, 139
P.2d 73
‘7. Trustor, or if said property shall have been transferred, the then
record owner, together with Beneficiary, may from time to time, by
instrument in writing, substitute a successor or successors to any
Trustee named herein or acting hereunder, which instrument, executed
and acknowledged by each and recorded in the office of the recorder of
the county or counties where said property is situated, shall be
conclusive proof of proper substitution of such successor Trustee. * *
* The procedure herein provided for substitution of Trustees shall be
exclusive of all other provisions for substitution, statutory or
otherwise.’
While paragraph B-7 makes its own procedure for substitution exclusive
of all others, such is not available in the absence of a concord of
the cestui que trust and the trustor. The necessity of their joinder
in order to make a substitution renders in-applicable section 2934a.
That section authorizes a substitution by the beneficiaries only. But
where by automatic succession resulting from a merger, the designated
trustee is absorbed by the corporate mergee, there is no power in the
court to divest the successor-trustee of its office and asset at the
caprice of the cestui que trust. There is nothing in the deed of trust
that would imply a desire on the part of the beneficiary and the
trustor either to declare a vacancy in event of a merger or to
supplant the mergee following the consolidation. An intention to do so
would have been declared as emphatically as was the reservation in the
deed of trust of the joint power to substitute. This was not done.
However, a power was reserved and it is not inconsistent with the
scheme provided by Sec. 31a of the Bank Act, Statutes 1913, page 152,
Deering’s General Laws of 1937, Act 652. Such power remains unimpaired
for the parties to appoint a substitute trustee after the merger of
the Title Guarantee with the Title Insurance. Mercantile Trust Co. v.
San Joaquin Agricultural Corp., supra. The provision of Section 31a
making the succession to the trusteeship automatic distinctly denies
to the superior court the power to make an appointment until the
dissolution or merger of the Title Insurance or until its resignation
or removal. Before or after such occurrence a substitution can be made
only by the joint act of the cestui que trust and the trustor.”
(Mutual Building & Loan Ass’n of Pasadena v. Wiborg, supra, 59
Cal.App.2d at pp. 330)
Miller & Starr, California Real Estate 3D, Chapter 12, Section 12:23, B. Joint
Tenancies,pp. 12-61 - 12-62, states,”
5
Grothe v. Cortlandt Corp., 11 Cal.App.4th 1313, 1317, 15 Cal.Rptr.2d 38 (4th
Dist. 1992); Estate of Blair, 199 Cal.App.3d 161, 167, 244 Cal.Rptr.627(4th Dist.
1988); Rupp v. Kahn, 246 Cal.App.2d 188, 196, 55 Cal.Rptr.108(2d Dist. 1966);
Ziegler v. Bonnell, 52 Cal.App.2d 217, 219-220, 126 P.2d 118(1st Dist. 1942).
6
In re Gurnsey’s Estate, 177 Cal. 211, 215, 170 P.402 (1918); Grothe v. Cortlandt
Corp., 11 Cal.App.4th 1313, 1317, 15 Cal.Rptr.2d 38 (4th Dist. 1992); Rupp v.
Kahn, 246 Cal.App.2d 188, 196, 55 Cal.Rptr.108(2d Dist. 1966); In re Moore’s
Estate 165 Cal.App.2d 455, 460, 332 P.2d 108 (1st Dist. 1958); Goldberg v.
Goldberg, 217 Cal.App.2d 623, 628, 32 Cal.Rptr. 93(2d Dist. 1963); In re Hobart’s
Estate, 82 Cal.App.2d 502, 507, 187 P.2d 105(1st Dist. 1947).
7
Siberell v. Siberell, 214 Cal. 767, 771, 7 P.2d 1003 (1932); De Witt v. City of
San Francisco, 2 Cal. 289, 297, 1852 WL 566 (1852); Cole v. Cole, 139 Cal.App.2d
691, 694, 294 P.2d 494 (2d Dist.1956); Plante v. Gray, 68 Cal.App.2d 582, 588, 157
P.2d 421 (2d Dist. 1945); Dando v. Dando, 37 Cal.App.2d 371, 372, 99 P.2d 561 (1st
Dist. 1940).
See also In re Moy’s Estate, 217 Cal.App.2d 24, 29, 31 Cal.Rptr. 374 (1st Dist.
1963)
8
Tenhet v. Boswell, 18 Cal.3d 150, 158, 133 Cal.Rptr. 10, 554 P.2d 330 (1976);
Estate of Gebert, 95 Cal.Ap.3d 370, 376, 157 Cal.Rptr. 46 (2d Dist. 1979); Estate
of Wilson, 64 Cal.App.3d 786, 791, 134 Cal.Rptr. 749 (5th Dist. 1976)”
And, Miller & Starr, California Real Estate 3D, Chapter 12, Section 12:31, B.
Joint Tenancies,pp. 12-80, states,”
Miller & Starr, California Real Estate 3D, Chapter 10, Section 10:181,
page 553
At p. 552
Garn act
(a) Definitions
(1) the term “due-on-sale clause” means a contract provision which authorizes
a lender, at its option, to declare due and payable sums secured by the
lender’s security instrument if all or any part of the property, or an
interest therein, securing the real property loan is sold or transferred
without the lender’s prior written consent;
(2) the term “lender” means a person or government agency making a real
property loan or any assignee or transferee, in whole or in part, of such a
person or agency;
(3) the term “real property loan” means a loan, mortgage, advance, or credit
sale secured by a lien on real property, the stock allocated to a dwelling
unit in a cooperative housing corporation, or a residential manufactured
home, whether real or personal property; and
(5) the term “State” means any State of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the
Northern Mariana Islands, American Samoa, and the Trust Territory of the
Pacific Islands.
(1) In the case of a contract involving a real property loan which was made
or assumed, including a transfer of the liened property subject to the real
property loan, during the period beginning on the date a State adopted a
constitutional provision or statute prohibiting the exercise of due-on-sale
clauses, or the date on which the highest court of such State has rendered a
decision (or if the highest court has not so decided, the date on which the
next highest appellate court has rendered a decision resulting in a final
judgment if such decision applies State-wide) prohibiting such exercise, and
ending on October 15, 1982, the provisions of subsection (b) of this section
shall apply only in the case of a transfer which occurs on or after the
expiration of 3 years after October 15, 1982, except that--
(A) a State, by a State law enacted by the State legislature prior to the
close of such 3-year period, with respect to real property loans originated
in the State by lenders other than national banks, Federal savings and loan
associations, Federal savings banks, and Federal credit unions, may otherwise
regulate such contracts, in which case subsection (b) of this section shall
apply only if such State law so provides; and
(B) the Comptroller of the Currency with respect to real property loans
originated by national banks or the National Credit Union Administration
Board with respect to real property loans originated by Federal credit unions
may, by regulation prescribed prior to the close of such period, otherwise
regulate such contracts, in which case subsection (b) of this section shall
apply only if such regulation so provides.
(2)(A) For any contract to which subsection (b) of this section does not
apply pursuant to this subsection, a lender may require any successor or
transferee of the borrower to meet customary credit standards applied to
loans secured by similar property, and the lender may declare the loan due
and payable pursuant to the terms of the contract upon transfer to any
successor or transferee of the borrower who fails to meet such customary
credit standards.
(B) A lender may not exercise its option pursuant to a due-on-sale clause in
the case of a transfer of a real property loan which is subject to this
subsection where the transfer occurred prior to October 15, 1982.
(C) This subsection does not apply to a loan which was originated by a
Federal savings and loan association or Federal savings bank.
(6) a transfer where the spouse or children of the borrower become an owner
of the property;
(8) a transfer into an inter vivos trust in which the borrower is and remains
a beneficiary and which does not relate to a transfer of rights of occupancy
in the property; or
(1) The Federal Home Loan Bank Board, in consultation with the Comptroller of
the Currency and the National Credit Union Administration Board, is
authorized to issue rules and regulations and to publish interpretations
governing the implementation of this section.
(f) Effective date for enforcement of Corporation owned loans with due-on-
sale options
Federal Home Loan Bank Board regulations restricting the use of a balloon
payment shall not apply to a loan, mortgage, advance, or credit sale to which
this section applies.
Does failure t
151,000.00/590,000.00 = .25
On hundred fifty one thousand dollars and a fair market value of five
hundred ninety thousand dollars is twenty five percent.
Miller & Starr, California Real Estate 3D, Chapter 10, Deeds of Trust,
Section 10:210, page 670
Courts will set aside a foreclosure sale when there has been fraud,
when the sale has been improperly, unfairly, or unlawfully conducted,
or when there has been such a mistake that it would be inequitable to
let it stand. 10
10
Bank of America Nat. Trust & Savings Ass’n v. Reidy, 15 Cal.2d 243,
248 101 P.2d 77 (1940); Whitman v. Transtate Title Co., 165 Cal.App.3d
312, 322-323, 211 Cal.Rptr. 582 (4th Dist. 1985); In re Worcester, 811
F.2d 1224, 1228, 16 Collier Bankr. Cas. 2d (MB) 589, Bankr. L. Rep.
(CCH) Paragraph 71637, 7 Fed R. Serv. 3d 733 (9th Cir. 1987)
See also Smith v. Williams, 55 Cal.2d 617, 621, 12 Cal.Rptr. 665, 361
P.2d 241 (1961); Stirton v. Pastor, 177 Cal.App.2d 232, 234, 2
Cal.Rptr. 135 (4th Dist. 1960); Brown v. Busch, 152 Cal.App.2d 200,
203-204, 313 P.2d 19 (3d Dist. 1957).
At p. 672
Bank of America Nat. Trust & Savings Ass’n v. Reidy, 15 Cal.2d 243, 101
P.2d 77 (Cal.,Mar 27, 1940)
*248 [1][2] It is the general rule that courts have power to vacate a
foreclosure sale where there has been fraud in the procurement of the
foreclosure decree or where the sale has been improperly, unfairly or
unlawfully conducted, or is tainted by fraud, or where there has been such a
mistake that to allow it to stand would be inequitable to purchaser and
parties. **Sham bidding and the restriction of competition are condemned, and
inadequacy of price when coupled with other circumstances of fraud may also
constitute ground for setting aside the sale. Haley v. Bloomquist, 204 Cal.
253, 268 P. 365; Dealey v. East San Mateo Land Co., 21 Cal.App. 39, 130 P.
1066; Bernheim v. Cerf, 123 Cal. 170, 55 P. 759; Packard v. Bird, 40 Cal. 378;
Goodenow v. Ewer, 16 Cal. 461, 76 Am.Dec. 540. **However, where on
foreclosure of a mortgage a deficiency judgment cannot be had, and that was
the situation confronting the bank (Reidy v. Young, supra), it is not unusual
for a mortgagee to make a bid for the property in the amount owing on the
debt. The sale is not rendered fraudulent by the fact that such bid exceeds
the value of the property at the time of sale and was made with the intent of
discouraging bidding or redemption by junior encumbrancers in the hope of
finally securing payment of the debt because of a rise in value of the
property in the future. So long as a bid is legitimately made, there is not
theory which requires the creditor to bid only a small amount, raising it by
degrees only to that required to meet competition. And the situation is not
altered where a pledgee of a mortgagee, acting in good faith for the best
interests of both, makes the same bid the mortgagee would himself have made.
Sargent v. Shumaker, 193 Cal. 122, 223 P. 464 (Cal.,Jan 30, 1924)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Mere inadequacy of price is not ground for setting aside a sale under power
in trust deed, but there must in addition be shown some element of fraud,
unfairness or oppression, though when the price is greatly disproportionate
to the value, very slight evidence of unfairness or irregularity will suffice.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(2) k. Grounds for Relief in General. Most Cited Cases
That the owner of land did not know of pending sale under trust deed,
standing alone, is no ground for setting aside the sale, no notice other than
provided by the statute being necessary.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Irregularity which, in connection with great inadequacy of price, will
warrant setting aside sale under trust deed, must affirmatively appear to
have contributed to such inadequacy; so the fact that the sale was made in an
inaudible tone and a hurried manner would not avail without showing that the
purchaser was thereby prevented from making the bids that he desired, or that
any other person was ready, able, and willing to bid, or was present.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Where the amount secured by trust deed had been delinquent for seven months,
and no good reason is apparent why the administrator of the deceased
landowner should not have expected and anticipated that the beneficiary bank
would enforce the trust deed, he not having been led to believe that it would
not do so by letter of its attorney, that it would take such necessary action
against the estate on the secured notes “as may be desirable,” and he not
having asked the bank for an extension of time or made effort to procure a
loan elsewhere with which to make payment, his ignorance of the sale, though
statutory notice had been given, coupled with “mere inadequacy of price,”
meaning simply an inequality between the value of the property and the price,
as distinguished from a price so insignificant as to amount to nothing, is
insufficient to warrant setting aside the sale, which was for a price
amounting to a third of the value of the property.
MYERS, J.
[1] It was the theory of the plaintiff, evidently concurred in by the learned
trial judge, that the trustee’s sale was utterly void because of the failure
to post notice thereof as required by law and by the provisions of the trust
deed. It is conceded that the notice of sale was duly published and for the
required length of time. It is conceded also that the notices thereof were
duly posted and for the required length of time in three public places within
the city of Calexico, within which the property was situated and was to be
sold and was sold. But it is respondent’s contention that the trustee was
required in addition thereto to post a fourth notice at the precise place
where the property was to be and was sold. This contention presents the most
important question involved upon this appeal.
The statute required (Civ. Code, § 2924), and the trust deed provided, that
notice of the proposed sale should be posted ‘in the manner and for a time
not less than that required by law for sales of real property upon
execution.’We are thus directed to section 692, Code of Civil Procedure,
which prescribes the manner of giving notice of sale under execution. As that
section existed at the time with which we are here concerned, it provided
that notice thereof must be given as follows:
‘1. In case of perishable property: By posting written notice of the time and
place of sale in three public places of the township or city where the sale
is to take place. * * *
We conclude, therefore, that in a case such as this, wherein the property was
to be sold in the same city in which it was situated, the law required the
posting of but three notices in three public places thereof.
[2] We come now to the question whether under the facts alleged, proved, and
found, the plaintiff was entitled to have the sale set aside on the ground of
irregularities in the conduct thereof, coupled with inadequacy of the
purchase price. As above stated, it was the evident view of the plaintiff and
of the trial judge that the sale was void for insufficient notice,*129 but
certain facts were alleged and found by the court which would be relevant to
an action to avoid the sale on the ground of constructive fraud, and
respondent contends that they are sufficient to sustain the judgment herein,
even though it be conceded that the notice of sale was duly given. It was
alleged in the second amended complaint and found by the court upon
sufficient evidence that the property was of the value of $25,000. It was
sold for $5,654.69, to which should be added perhaps an amount equal to the
aggregate liens against it for delinquent taxes and tax sales amounting to
some $1,300, together with an additional sum for taxes then unpaid, but not
yet delinquent. But adding all of these sums to the price actually paid it
still represented less than one-third of the actual value of the property,
and must, therefore, be said to have been clearly inadequate. There is
neither allegation nor finding herein of any actual fraud or fraudulent
intent upon the part of either of the defendants. That this omission was
intentional is evidenced, as we are told by counsel, by the further fact that
the trial judge in his written opinion filed herein expressly stated: ‘The
court finds that both purchaser and trustee acted in good faith. * * *’ We
are thus relegated to a consideration of the single question of constructive
fraud. It is well settled in this state that mere inadequacy of price,
however gross, is not in itself a sufficient ground for setting aside a sale
legally made. There must in addition be proof of some element of fraud,
unfairness or oppression before the court will be justified in depriving the
purchaser of his legal advantage. Where, however, the price obtained is
greatly disproportionate to the actual value, very slight evidence of
unfairness or irregularity will suffice to authorize the granting of the
relief. Rauer v. Hertweck, 175 Cal. 278, 165 Pac. 946; Winbigler v. Sherman,
175 Cal. 270, 165 Pac. 943; Back v. Losekamp, 179 Cal. 674, 179 Pac. 516;
Odell v. Cox, 151 Cal. 70, 90 Pac. 194; Baldwin v. Brown, 42 Cal. App. Dec.
368.FN1 The rule is stated in Odell v. Cox, supra, in the following language:
[3] The circumstance that the plaintiff did not know of the pending sale and
was not notified thereof by either of the defendants is not, standing alone,
of any importance herein. As this court said in Rauer v. Hertweck, supra:
‘There was no obligation upon them to give him any such notice. The statute
defines how notice of an execution sale must be given. To say that a sale may
be set aside because some other notice was not given would be to amend the
statute, and this we cannot, of course, do. When the officer conducting the
sale has done the acts prescribed by the Code, he has done his full duty. He
is not required to search for the debtor and give him any further notice than
that which the law exacts. Nor is any such duty imposed upon the judgment
creditor. Much less is one who may contemplate bidding at an execution sale
called upon to concern himself with the question whether the debtor has
actual knowledge of the proceeding.’
‘That said sale was not made at public auction, as provided by said trust
deed, in that the trustee did not announce said sale, or call for bids, in an
audible tone of voice, sufficient to enable persons in the immediate vicinity
of the place where said sale was held, to ascertain or know that the trustee
was selling the property herein described, and that said sale was conducted
in a hurried manner, to an extent which made it impossible for persons
present at the place of sale to bid *131 on said property, either en masse,
or in parcels.’
**468 It is not alleged in the complaint or found by the court that any other
person actually was present at the place of sale to bid on said property or
that any person was prevented from so doing either by the inaudible tone of
voice or the hurried manner in which the sale was conducted. It is neither
alleged nor found that there was any other person in existence who was ready,
able, and willing to bid on said property. These omissions become the more
significant when we reflect that the second amended complaint was not filed
until the trial had been had and concluded. Respondent now asserts that it
appears from the evidence that one Brown was present at the sale for the
purpose of bidding thereat, and would have bid the sum of $8,000 for one of
the properties included in the sale, but was prevented from so doing by
reason of the circumstances above mentioned. Appellants reply that it
conclusively appears from the evidence that Brown was neither ready, able,
nor willing to bid upon this property for the reason that it appears without
conflict that he was unable to make payment therefor, and that under the
terms of the trust deed the trustee was empowered to sell only ‘for cash in
gold coin of the United States.’Appellants confidently assert that, if the
trial court had found that any bidder was prevented from bidding at this sale
by reason of the irregularities complained of, such finding would have been
contrary to and wholly unsupported by the evidence. It is unnecessary for us
to so determine. It is sufficient to say for the purposes hereof that such a
finding would be in no way compelled or required by the evidence herein, and
‘it is not within the province of this court to infer from the findings
ultimate facts which would support the judgment when such facts do not
necessarily follow from the facts actually found.’ Rossini v. St. Paul, etc.,
Ins. Co., 182 Cal. 415, 421, 188 Pac. 564.
While it is true that, where the inadequacy of price is palpable and great,
slight irregularities in conjunction therewith will authorize a court to set
aside the sale, we are of the opinion that such irregularities, to have this
effect, **must have conduced to the inadequacy of the price, or in some other
way have contributed to the injury of the plaintiff. This conclusion is
indicated by the language commonly used in the statement of the rule. Thus in
the rule as stated in *132 Odell v. Cox, supra, we find the phrase “any
unfairness or * * * undue advantage’resulting in such gross inadequacy. * *
*’ (Italics added.) The same phraseology is found in the statement of the
rule in Winbigler v. Sherman, supra. The same thought is indicated in the
statement of the conclusion in Rauer v. Hertweck, supra, that--
‘If the inadequacy can be connected with or shown to result from any mistake,
accident. surprise, misconduct, fraud or irregularity, the sale will
generally be vacated, **unless the complainant was himself in fault, or the
rights of innocent third parties have became dependent upon the
sale.’(Italics added.)
‘Unless it is made to appear that a larger sum would have been realized from
the sale of the property if it had been sold in separate lots or parcels, or
that the sale of less than the whole tract would have brought sufficient to
satisfy the writ, the sale will not be set aside. Hudepohl v. Liberty Hill,
etc., Co., 94 Cal. 591, 28 Am. St. Rep. 149. In this case there is no
statement in defendant’s affidavits tending to show that the property would
have brought more if sold separately, or that the sale of less than the whole
would have satisfied the writ. On the contrary, the affidavits on the part of
defendant show without*133 contradiction that the property sold for its full
cash value, and that it would not have brought as much as it sold for if it
had been sold in separate lots. The only pretense of injury set forth in
defendant’s affidavit is that he was injured by said sale in one lot, because
it ‘tended to reduce the number of bidders,’ and because ‘it deprived affiant
of the right to redeem either of said colony lots separately.’
‘This is clearly insufficient. Defendant does not show that he could redeem,
or that he ever desired to or now desires to redeem, any part of said
property. Courts will not set aside a sale under foreclosure for light or
trivial reasons. It must appear that there has been a material departure from
the mandates of the decree, or the law governing such sales, to the injury of
the party applying to have the same set aside. Nor can injury be presumed
from mere irregularities.’
Assuming in the instant case that no bidder other than the defendant
Shumaker attended the sale for the purpose of bidding thereat, or would have
attended it under **469 any circumstances, then plaintiff could not
conceivably have been injured by the low tone of voice or hurried manner in
which the sale was conducted, if it was sufficiently audible and sufficiently
deliberate to enable Shumaker to make the bids he desired. If such was the
case, as we must assume under the findings, plaintiff could not have been
injured by these claimed irregularities. We are of the opinion that under
these circumstances they afforded no ground for relief. Appellants contend
that the findings to the effect that the sale was made in an inaudible tone
of voice and in a hurried manner are wholly contrary to and unsupported by
the evidence. In view of the conclusion just announced it is unnecessary to
consider this contention.
[6] As to the fourth claimed irregularity the plaintiff alleged and the court
found:
‘That on July 28, 1920, the International Bank through and by its attorney
informed the plaintiff in writing, that it, the said bank, would take such
necessary action against the estate on the notes secured by said trust deed
‘as may be desirable,’ and which notice was in reply to a letter written by
the plaintiff to the International Bank on the 20th day of July, 1920, in
which the plaintiff asked the said defendant*134 bank for an additional
length of time to pay the notes secured by said trust deed.’
Appellants assert that the concluding phrase of said finding, ‘in which the
plaintiff asked the said defendant bank for an additional length of time to
pay the notes secured by said deed of trust’ is wholly unsupported by the
evidence, and to this we agree. The above-quoted allegation in plaintiff’s
complaint was immediately followed by the allegation:
‘And which letter of July 28, 1920, written by the said bank to plaintiff,
caused the plaintiff to believe that the said bank would not proceed to sell
the property described in said Exhibit A. * * *’
This allegation was denied by the defendants, and the court made no finding
thereon. A consideration of the evidence upon this point makes it apparent
that if a finding had been made responsive to this issue it would have been
adverse to plaintiff’s contention. This leaves the situation wholly
inadequate to bring the case within the rule of Winbigler v. Sherman, supra,
relied upon by respondent, wherein it was said that by means of a somewhat
similar letter written by the holder of the note to the owner of the property
the latter had been ‘lulled into a false security.’ There is not the
slightest evidence herein that the letter here in question had any effect of
lulling the plaintiff into a false security. **On the contrary, he testified
that he couldn’t say whether he had ever received the letter or not. He was
then shown a copy of the letter and asked to state whether or not he had
received the original, and he replied: **’No; I don’t remember receiving that
letter.’
Odell v. Cox was not a case of ‘mere inadequacy of price’ coupled with
irregularities in the conduct of the sale. There were no such
irregularities.’ Every requirement of the law with respect to the conduct of
the sale was fully complied with. Neither was it a case of ‘mere inadequacy
of price,’ which means ‘simply an inequality in value between the subject-
matter and the price.’The price there bid was so insignificant as to amount
in practical effect to nothing at all. In the language of the court:
‘The amount bid, $26.50, when considered in connection with property having a
cash value of $2,000 in the market, was a mere nominal sum, and the purchaser
acquired this valuable property for practically nothing.’
This fact, which is iterated and reiterated throughout that opinion, was
evidently regarded as a controlling factor in that decision. That case may be
taken as authority for the conclusion that, where the purchase price at such
a sale is so small as to amount to practically nothing, the transaction may
be regarded in equity as no sale at all, but rather a device for obtaining
the debtor’s property without compensation, and may be relieved against at
the instance of an owner who was himself entirely without fault or negligence
and whose lack of knowledge was ‘entirely excussable.’ In the case at bar the
purchase price can by no means be regarded as merely nominal, however
disproportionate it may have ben to the real value of the property.
In each of the two cases last under consideration emphasis is placed upon
the circumstance that the debtor’s lack of knowledge that the sale was about
to take place was not due to his own fault or negligence. In Odell v. Cox,
which involved a sale under execution, the fact that the judgment debtor was
amply solvent was well known to the creditor, and the former had taken an
appeal from the judgment and filed a good and sufficient stay bond. But an
execution had been issued, without the debtor’s knowledge, between the time
of the entry of the judgment and the filing of the stay bond. The court said:
‘This lack of knowledge on his part was entirely excusable. Probably neither
he nor his attorneys had any reason to anticipate, in view of his solvency
and the appeal about to be taken, that an execution would be obtained to
enforce the judgment.’
‘The attempt to show unfairness in the sale comes down simply to this: That
the execution sale was regularly made upon due statutory notice, but that the
judgment debtor did not, in fact, know of the sale, and no one gave him
notice of it. He did, however, know that a judgment had been entered against
him, and must be deemed to have known that his property might be levied on at
any time. He failed to pay the judgment, and took no steps to protect his
property until many months after the entry of judgment. He then found that a
sale had been had, and that the time for redemption had expired. The
resulting loss can more properly be attributed to his neglect of his own
interests than to any unfairness on the part of the judgment creditor or the
purchasers.’
Haish v. Hall, 90 Cal.App. 547, 265 P. 1030 (Cal.App. 2 Dist.,Apr 02, 1928)
The Court of Appeal reversed, and remanded the matter to the trial court for
purposes of vacating its orders requiring the trustor to pay various sums to
various parties in order to have the property returned to him and to take any
other necessary actions. The court held that the trustor could not attack the
validity of the sale. There were no grounds for such an attack, since there
were no irregularities in the procedure. Also, the sale was to bona fide
purchasers for value and a trustee’s deed containing the required statutory
recitals was delivered. Thus, the sale was conclusively presumed to be valid
(Civ. Code, § 2924). The inadequacy of the sale price was not a ground for
setting aside the sale, since there were no irregularities in the proceedings
and the sale was to bona fide purchasers. And the fact that the trustor was
unaware that he had a right to postpone the sale for one day was not an
irregularity in the proceedings and was not a ground for setting aside the
sale. The court also held that the trial court erred in applying *823Civ.
Code, § 3275, so as to set aside the sale. It would be inconsistent with the
comprehensive and exhaustive statutory scheme regulating nonjudicial
foreclosures, which scheme includes a myriad of rules relating to notice and
right to cure, to incorporate another unrelated cure provision into such
foreclosure proceedings. Moreover, the statute is expressly applicable only
as between parties to a contract, and it contains no language evidencing an
intent to override the general rule protecting the sanctity of title of a
bona fide purchaser. (Opinion by Grignon, J., with Turner, P. J., and
Armstrong, J., concurring.)
[See 3 Witkin, Summary of Cal. Law (9th ed. 1987) Security Transactions in
Real Property, §§ 148, 149; 4 Miller & Starr, Cal. Real Estate (2d ed. 1989)
§ 9:154.]
Appellants Chun-Yen Lien and Fong T. Lien appeal from a judgment after a
court trial quieting title to real property in favor of respondent Henry G.
Moeller. Appellants were bona fide purchasers for value of certain real
property at a nonjudicial foreclosure sale. The trial court granted
respondent relief from forfeiture pursuant to Civil Code section 3275. It
ordered the nonjudicial foreclosure sale to be set aside and quieted title in
respondent on condition respondent reimburse appellants for the purchase
price, their other expenses, 10 percent interest, costs and attorney fees.
Appellants contend Civil Code section 3275 may not be applied against a bona
fide purchaser for value at a nonjudicial foreclosure sale, the trial court
abused its discretion in granting equitable relief and the reimbursement was
inadequate. [FN1] We reverse.
FN1 Respondent appeals conditionally from the orders requiring him to pay
money. Although respondent Henry G. Moeller is also an appellant by virtue of
his conditional appeal, for ease of reference, we refer to Moeller as
respondent in this opinion.
Procedural Background
On February 1, 1991, respondent sued American Securities Company, IMCO
Realty Services, Inc., Trustee’s Assistance Corporation and appellants to set
aside a trustee’s sale of a medical office condominium located in Torrance,
California, to cancel the trust deed, to quiet title and for an accounting.
On February 6, 1991, respondent filed a first amended complaint against IMCO,
American Securities, Sonoma Conveyancing Corporation, Trustee’s Assistance
and appellants asserting the following causes of action: (1) equitable action
to set aside trustee’s sale; (2) equitable action for cancellation of
trustee’s deed; (3) equitable action to quiet title; (4) action to recover
damages for breach of contract (promissory estoppel); (5) action to recover
damages for breach of contract (executed oral agreement); and (6) action to
recover damages for negligent misrepresentation. On May 1, 1991, a second
amended complaint was filed adding Wells Fargo Bank, N.A. as a defendant and
alleging three additional causes of action: (7) action to recover damages for
breach of duty to disclose facts; (8) action to recover damages for
constructive fraud; and (9) action to recover damages for breach of covenant
of good faith and fair dealing. On May 29, 1991, appellants cross-complained
against respondent for rent. [FN2]
FN2 Wells Fargo, IMCO, American Securities, Sonoma Conveyancing and Trustee’s
Assistance are not parties to this appeal.
Trial was commenced by the court on April 6, 1992, and taken under
submission on April 10, 1992. On April 13, 1992, the trial court rendered a
decision. Judgment was entered in favor of respondent cancelling the trust
*827 deed and quieting title in respondent on condition respondent pay
certain sums to appellants, Wells Fargo and IMCO by April 20, 1992.
Respondent tendered the sums in a timely fashion. Appellants rejected the
tender in order to preserve their right to appeal. The sums payable to Wells
Fargo and IMCO were deposited with the trial court in an interest-bearing
account pending the resolution of this appeal. In all other respects,
judgment was entered for defendants. Appellants appealed. Respondent appealed
conditionally from the orders requiring him to pay money to appellants, Wells
Fargo and IMCO.
Facts
In November 1979, respondent obtained a loan in the amount of $81,200 from
Wells Fargo secured by the medical office condominium. The remaining
principal amount of $72,600 became due and payable on November 5, 1989.
Respondent did not pay off the loan. He received two 90-day extensions of the
loan from Wells Fargo and continued to make the monthly payments. He did not
pay off the loan at the expiration of the extensions. Commencing in June
1990, Wells Fargo returned the monthly payments to respondent and began
foreclosure proceedings. On July 19, 1990, notice of default and 90-day
notice of foreclosure were served on respondent. Apparently, IMCO was Wells
Fargo’s foreclosure agent.
On January 10, 1991, respondent was informed that his appraisal did not
comply with federal regulations and he was required to deposit $1,500 for a
*828 bank appraisal. The foreclosure sale was continued to January 18, 1991.
On January 16, 1991, respondent requested the amount necessary to pay off the
loan and was informed the amount owing was $85,707.36. Respondent believed
this amount was excessive. Respondent testified that he asked for the amount
to be provided to him in writing; an unnamed Wells Fargo employee told
respondent she would do this and told respondent not to worry about the
foreclosure sale. This testimony was not credible and did not establish a
legally sufficient basis for reliance. Respondent neither deposited the
$1,500 appraisal sum nor paid off the loan.
On January 18, 1991, after confirming that neither amount had been received,
Wells Fargo authorized the foreclosure sale to go forward. Appellants, who
were speculators, bought the property at the foreclosure sale for $85,710,
the amount of the debt. Appellants were the sole bidders.
Respondent learned of the sale later that same day. Respondent obtained a
cashier’s check for the amount of the debt and sent the check to the
foreclosure agent. Apparently, respondent had available cash deposits in
another bank of $500,000. The check was received by IMCO on January 21, 1991,
and returned to respondent.
A trustee’s deed dated January 23, 1991, was recorded on January 30, 1991.
The deed contained the following language: "Beneficiary, as owner of the
obligations secured by said Deed of Trust executed and delivered to Trustee,
a written Declaration of Default and Demand for Sale. Default under said Deed
of Trust occurred as set forth in the Notice of Default and Election to Sell
Under Deed of Trust which was recorded in the office of the Recorder of said
county. Beneficiary made due and proper demand upon Trustee to sell said
property pursuant to the terms of said Deed of Trust. The posting and first
publication of the Notice of Trustee’s Sale of said property occur[r]ed not
less than three months from the recording of the Notice of Default and
Election to Sell Under Deed of Trust. Trustee executed its Notice of
Trustee’s Sale stating that it would sell, at public auction to the highest
bidder for cash, in lawful money of the United States, the real property
above described, which Notice of Trustee’s Sale duly fixed the time and place
of said sale as therein stated. [¶] All requirements of law regarding the
mailing, personal delivery and publication of copies of Notice of Default and
Election to Sell Under Deed of Trust and Notice of Trustee’s Sale, and the
posting of copies of Notice of Trustee’s Sale have been complied with."
Statement of Decision
The statement of decision included the following factual findings and legal
conclusions. Wells Fargo’s conduct in this matter did not constitute *829
negligence, bad faith, promissory estoppel or breach of a fiduciary duty.
Wells Fargo forbore from foreclosure for a total of 14 months and engaged in
no delinquencies or improprieties. The $1,500 appraisal fee was not
excessive. The payoff amount communicated to respondent was the correct
payoff amount.
Appellants were bona fide purchasers for value. There were no irregularities
in the sale.
FN3 Prior to its amendment in 1992, Civil Code section 2924g, subdivision (c)
(1) provided in pertinent part: "There may be a postponement of the sale
proceedings at any time prior to the completion of the sale thereof at the
discretion of the trustee, upon instruction by the beneficiary to the trustee
that the sale proceedings be postponed, or upon the written request of the
trustor, provided the reason for such request is to permit the trustor to
obtain cash sufficient to satisfy the obligation or bid at the sale and the
written request identifies the source from which the funds are being
obtained. The trustor shall be entitled to make one request for postponement
under this paragraph and any postponement made at the request of the trustor
shall be for a period not to exceed one business day." In 1992, the statute
was amended to delete the trustor’s entitlement to request a one-day
postponement of the sale. (Stats. 1992, ch. 351, § 4.)
Wells Fargo was not negligent, did not act in bad faith, was not estopped
from foreclosing and did not breach any fiduciary duty to respondent. Wells
Fargo engaged in no delinquencies or improprieties. There were no
irregularities in the foreclosure proceedings. Wells Fargo had no obligation
to accept respondent’s untimely tender of the amount due.
(8) Under these circumstances, respondent could not attack the validity of
the sale to appellants. First, there were no grounds for attacking the
validity of the sale, as there were no irregularities in the procedure.
Second, the sale was to bona fide purchasers for value and a trustee’s deed
containing the required statutory recitals was delivered. Thus, the sale was
conclusively presumed to be valid.
The fact that the sale price was only 25 percent of the value of the property
did not permit the sale to be set aside where there were no irregularities in
the proceedings and the sale was to a bona fide purchaser. The fact that
respondent was unaware he had a right to postpone the sale for one day was
not an irregularity in the proceedings and did not permit the sale to be set
aside. Even if respondent had known of his right to a one-day postponement,
had exercised that right and had tendered the amount due, and the trustee had
improperly rejected the tender, the sale could not have been properly set
aside against a bona fide purchaser for value.
Bank of Seoul & Trust Co. v. Marcione, 198 Cal.App.3d 113, 244 Cal.Rptr. 1
(Cal.App. 2 Dist.,Feb 01, 1988)
Reversed.
from an order sustaining the demurrer of defendants Conrad C., Lillian B.,
Eugene, and Geraldina Marcione without leave to amend and dismissing the
first amended complaint. We reverse.
STANDARD OF REVIEW
[1] In testing a complaint, a demurrer admits all material and issuable facts
properly pleaded. However, it does not admit contentions, deductions, or
conclusions of fact or law in the complaint. (Daar v. Yellow Cab Co. (1967)
67 Cal.2d 695, 713, 63 Cal.Rptr. 724, 433 P.2d 732; Serrano v. Priest (1971)
5 Cal.3d 584, 591, 96 Cal.Rptr. 601, 487 P.2d 1241.)
FACTS
Plaintiff’s first amended complaint alleged the following facts. **Chul Soo
and Kyung Sook Park owned improved real property in Burbank. **The Parks, on
September 3, 1980, to secure payment of the principal sum and interest
provided in an all-inclusive note, executed and delivered to defendants a
trust deed. **The trust deed conveyed the property to Service Escrow Company
as trustee, naming defendants as beneficiaries. **Later G.T. Service
Corporation was substituted as trustee.
Representatives of the Bank of Seoul attended, and were ready, able, and
willing to bid in excess of $200,000 for the property by a bank cashier’s
check. Only plaintiff and the Marciones attended the auction. Before
completing the sale, plaintiff’s representatives announced to G.T.’s crier,
“we *117 bid,” but the crier ignored them, denying plaintiff an opportunity
to specify its higher bid, and declared the property sold to the Marciones
for their credit bid of $107,348.63. The Marciones and G.T. Service
Corporation refused plaintiff’s immediate demand to reopen the bidding and
allow plaintiff to state a higher bid.
G.T. Services Corporation delivered and executed a trustee’s deed for the
property, recorded in the Los Angeles County Recorder’s Office on January 23,
1986. The fair market value of the property exceeded $330,000. At the time of
the sale, the Parks owed plaintiff over $200,000, secured by the property and
subordinate to the Marciones’ trust deed. Plaintiff, as junior lienholder,
had an equity interest in the property exceeding $130,000, and was entitled
to receive any surplus from the sale to the extent plaintiff’s equity was
more than the amount owed to defendants.
The first amended complaint stated four causes of action against defendants
Marcione: **1) to set aside the trustee sale; **2) to cancel the trustee’s
deed; **3) for damages for wrongful trustee’s sale; **4) for unjust
enrichment against defendants Marcione.
David v. Frost, 122 Cal.App. 750, 10 P.2d 504 (Cal.App. 2 Dist.,Apr 21,
1932)
Unclear case
Bank of America Nat. Trust & Savings Ass’n v. Century Land & Water Co., 19 Cal.App.2d 194, 65 P.2d
109 (Cal.App. 2 Dist. Feb 10, 1937)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k375 k. Deficiency and Personal Liability. Most Cited Cases
In absence of irregularities or oppression, fraud or unfairness, holder of note secured by trust deed was entitled to
deficiency judgment of difference between foreclosure sale price and indebtedness without deduction for difference
between reasonable market value of property and amount for which holder purchased property at foreclosure sale,
where note was executed prior to enactment of statute limiting amount of deficiency judgment. Code Civ.Proc. §
580a, as added by St.1933, p. 1672.
[1][2][3][4] Section 580a of the Code of Civil Procedure (as added by St.1933, p. 1672) is not applicable to the
present action, since the note was executed prior to the enactment of the section. California Trust Company v.
Smead Investment Co., 6 Cal.App.(2d) 432, 44 P.(2d) 624; Brown v. Ferdon, 5 Cal.(2d) 226, 54 P.(2d) 712.
Defendants attempt to uphold the judgment with a discussion of the general duties and obligations of a trustee. It has
been held that the trustee may also be the beneficiary and may become a purchaser at the sale. California Trust
Company v. Smead Investment Co., supra; 25 Cal.Jur. 19, and cases there cited. In this state inadequacy of price is
not in itself sufficient ground for setting aside a sale legally made. If the price is palpably inadequate, slight
irregularities in conjunction with the sale might authorize the court to set it aside; but such irregularities to have this
effect “must have conduced to the inadequacy of the price, or in some other way have contributed to the injury of
the plaintiff.” Sargent v. Shumaker, 193 Cal. 122, 223 P. 464, 468. Since the appeal is upon the judgment roll, we
must look to the findings to determine if any irregularities exist. Nothing is contained therein which can be classified
as an irregularity or which indicates that there was any oppression, fraud, or unfairness. In the absence of such
findings plaintiff is entitled to judgment for the additional sum of $7,500.
None of the defendants, with the possible exception of defendant Merrill, have presented issues in the pleadings
which call for findings by the trial court on the subject of irregularities connected with the sale. Defendant Merrill
prosecutes a separate appeal from the judgment, and on that appeal we are this day filing an opinion reversing the
judgment as to defendant Merrill on a point having no bearing upon the issues raised by plaintiff’s appeal.
The judgment is modified, and the superior court is directed to enter judgment in favor of appellant and against
respondents other than respondent Merrill in accordance with the prayer of the complaint.
California Trust Co. v. Smead Inv. Co., 6 Cal.App.2d 432, 44 P.2d 624
(Cal.App. 2 Dist. Apr 25, 1935)
Appeal from Superior Court, Los Angeles County; Frank M. Smith, Judge.
Action by the California Trust Company against the Smead Investment Company.
Judgment for plaintiff, and defendant appeals.
Affirmed.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k330 k. Statutory Provisions. Most Cited Cases
Statute limiting amount of deficiency judgment after sale of realty under
trust deed to difference between entire indebtedness to beneficiary and fair
market value of property at time of sale held inapplicable to action,
commenced after it became law, to recover deficiency in proceeds of sale on
foreclosure of trust deed executed before enactment thereof. Code Civ.Proc. §
580a.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k375 k. Deficiency and Personal Liability. Most Cited Cases
Rendition of judgment for deficiency after sale on foreclosure of trust deed
held not abuse of trial court’s discretion, even if sale price was
inadequate, especially in absence of any claim of mistake, misapprehension,
or inadvertence, unfairness attending sale, or making thereof under
inequitable or oppressive conditions. Code Civ.Proc. § 580a.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(2) k. Grounds for Relief in General. Most Cited Cases
**Irregularity is insufficient to invalidate trustee’s sale on foreclosure of
trust deed, in absence of claim that it operated to injury of owner of realty
sold.
(1) The principal contention of the defendant is that section 580a of the
Code of Civil Procedure applies to all such actions commenced subsequent to
its becoming law even though, as in this case, the trust deeds were executed
prior to its enactment. There is no merit in the defendant’s contention. This
court has succinctly stated its reasons for its position with regard thereto
in the case of Bennett v. Superior Court, 5 Cal. App. (2d) 13 [42 Pac. (2d)
80], Mr. Presiding Justice Albert Lee Stephens writing the opinion of the
court.
(2) The defendant next contends that the court has inherent equitable power
to refuse to allow a deficiency judgment based on the forced sale price when
the sale is attended with any unfairness or is made under conditions which
would be inequitable or oppressive. The defendant cites no California cases
in this behalf. He cites cases of other jurisdictions in which the courts
have refused to approve sales under foreclosure judgments and executions
because of inadequacy of sale price where the inadequacy resulted from
mistake, misapprehension or inadvertence on the part of the interested
parties or of intending bidders. It is obvious, however, the refusal to
approve a sale and thus requiring a new or resale is quite another matter
from refusing a judgment after the sale has been completed. **Furthermore, in
the instant case no claim of mistake, misapprehension or inadvertence is made
by the defendant, nor is any claim made that the sale was attended with any
unfairness or that it was made under conditions which would be inequitable or
oppressive. We see nothing in the record which would amount to an abuse of
discretion on the part of the trial court.
(3) The defendant contends that the sale was accompanied with certain
irregularities. In this regard he claims that paragraph G.1. of the trust
deed required that when written declaration of default and demand for sale
was made to the trustee, the beneficiary should at the same time deliver to
the trustee the trust deed and the note. A second irregularity claimed by the
defendant was that the plaintiff, being the trustee as well as the owner, was
unauthorized to charge and collect, as it did, a trustee’s fee for conducting
the sale. As to the first alleged irregularity, it is our conclusion *435
that manual delivery of the note and deed of trust was not necessary-symbolic
delivery was sufficient. **There is no claim by the defendant that harm or
prejudice resulted to him from the symbolic delivery. **An irregularity, even
if one has occurred, is not sufficient to invalidate a trustee’s sale in the
absence of a claim that the irregularity operated to the injury of the owner.
(25 Cal. Jur. 91, and cases cited.) (4) With regard to the fees of the
trustee, the courts of this state have repeatedly held that there is no
impropriety in the payee of the note being also the trustee in the deed of
trust. (25 Cal. Jur. 19, and cases cited.) No claim is made by the defendant
that the fee charged was other than the customary fee in the community for
like services and the court found that the charge was a reasonable one. The
defendant’s contention is that the plaintiff could not collect a fee for
itself because it had become the owner of the note, but the plaintiff was the
trustee from the beginning of the transaction and it was one of the
agreements of the trust deed that in case of foreclosure sale the plaintiff
would be entitled to a trustee’s fee.
Finally the defendant contends that certain findings of the trial court were
unsupported by the evidence. We have examined into these conditions and find
that in each case the findings were supported by substantial evidence.
Judgment affirmed.
Rowan v. Pedrotti, 138 Cal.App.2d 647, 292 P.2d 270 (Cal.App. 3 Dist. Jan
24, 1956)
Bad outcome
The court below gave judgment that defendant Stevinson was the owner of the
land in fee simple, and that he and the defendant Humboldt Savings & Loan
Society recover their costs of the appellants herein. **Stevinson’s claim is
based on a sheriff’s sale made on a decree of foreclosure in an action
brought by the Humboldt Savings & Loan Society against Elizabeth Ann March
and others in the superior court of San Joaquin county. That action was begun
on October 7, 1893, against the mortgagors alone, and a notice of the
pendency of the action was filed in the recorder’s office of said county on
the same day. On the 11th of October, 1893, the mortgagors, who were then the
owners of the land subject to the foreclosure proceeding, executed a deed
conveying to one George B. Sperry, a defendant herein, a certain parcel of
the mortgaged land, containing about 100 acres. This deed was recorded on
October 12, 1893, and Sperry immediately took possession of the land so
conveyed to him, and continued to occupy and possess the same until the time
of the foreclosure sale. The appellants each claim rights in the land based
on execution sales upon judgments rendered against one or more of the
mortgagors subsequently to the execution of the deed to Sperry, and prior to
the foreclosure sale. The plaintiff, in his complaint, does not mention this
foreclosure sale. **The cross-complaints of the defendants Graf and Benjamin
are bills in equity, seeking to set aside the sale upon the sole ground that
the same was not conducted in the manner directed in the decree of
foreclosure. The mortgage upon which the decree was based provided that, in
the event of foreclosure, the premises, at the option of the mortgagee, might
be sold in several parcels, or as a whole in one parcel. The decree of
foreclosure, which was entered upon December 13, 1894, directed that the
premises be sold ‘in one parcel, as a whole, and as one farm.’ The sale did
not take place until November 27, 1899. **The plaintiff in the foreclosure
suit, and several of the mortgagors therein, and also said Sperry, were
present at the sale. Sperry and the mortgagors present requested the sheriff
to offer the land in separate *557 parcels, first offering the portion of the
property not conveyed to Sperry by the deed above mentioned. The plaintiff
consented to this, and thereupon, in pursuance of this agreement, the sheriff
first offered the property remaining to the mortgagors after the conveyance
to Sperry, whereupon Sperry bid therefor the sum of $16,722, which was $80.50
in excess of the amount necessary to pay the mortgage debt, interest, and
costs. The court finds that the sum bid by Sperry was a fair and reasonable
price for the premises sold to him, and that the premises so sold to him were
not then of any greater value than the sum bid. Thereafter the sheriff’s deed
was made in pursuance of the sale to Sperry, and the defendant Stevinson has
since acquired all the interest of Sperry under the foreclosure sale, and
also his title to the 100 acres previously purchased by him from the
mortgagors. **It is not claimed by the appellants that there were any
fraudulent or unfair practices in connection with the foreclosure sale. **The
sole objection to the validity of the sale is that the sheriff disobeyed the
direction contained in the decree that the premises be sold as a whole and as
one farm.
**The only ground upon which they could calim that they were prejudiced would
be upon the theory that, if the whole tract had been sold together, it would
have brought more as a whole than it did upon the parcels being sold
separately, and that the surplus to which they would have been entitled would
have been somewhat increased. This, however, is no more than saying that the
price at which the property was sold was inadequate. It is well settled that
inadequacy of price alone is not a sufficient ground for setting aside a
foreclosure sale. Central Pacific R. R. Co. v. Creed, 70 Cal. 501, 11 Pac.
772; Smith v. Randall, 6 Cal. 47; Connick v. Hill, 127 Cal. 165, 59 Pac. 832;
Humboldt, etc., Soc. v. March, 136 Cal. 321, 68 Pac. 968; Anglo-Cal. Bank v.
Cerf (Cal.) 75 Pac. 902; Freeman on Ex. §§ 308, 309, 305; Kleber’s Void Jud.
Sales, §§ 355, 356, 357. **But even this ground is taken away by the finding
of the court that the property sold to Sperry by the sheriff was not worth at
the time more than he bid therefor, and the further finding that the entire
mortgaged premises were not at that time worth more than $22,000. A court
will not entertain proceedings to set aside a foreclosure sale, although
irregular, upon the sole ground, not that the price is inadequate, but that
possibly, if it had been sold in a different manner, it might, by some
fortuitous circumstance, have brought more than its actual value. **There is
no claim made that there was any peculiarity in the situation *559 of the two
parcels with respect to each other, of such character that their value, when
taken together, would exceed the sum of the values of each as a separate
farm. The circumstances indicate the contrary, and the court finds that the
manner of selling the premises in two parcels did not cause it to sell for
less than it otherwise would have brought. If there was anything that would
make the premises as a whole more valuable than when separated into two
parcels, it was incumbent on the appellants to allege and prove it. **An
irregular sale will not be set aside unless it is shown, either from the
nature of the irregularity itself, or from extrinsic facts, that injury was
caused thereby. Humboldt v. March, supra. If a sale had been made of the
whole tract, and its full value realized, the difference between the value of
this tract, as found by the court, and the value of the whole tract, would
have belonged to Sperry, and not to these appellants. Sperry, having been the
first purchaser, had the first right; and, if he had allowed his land to be
sold with the other, he would have been entitled, upon a division of the
surplus, to the entire amount which the court should find represented the
proceeds of his part of the property. The court did not err in refusing to
set aside the sale. The sale being valid, it is immaterial what rights the
appellants may have acquired from the mortgagors. They were all subject to
the decree of foreclosure and to the rights of Sperry, and were extinguished
by the foreclosure sale and the deed subsequently executed thereunder.
Humboldt Sav. & Loan Soc. v. March, 136 Cal. 321, 324, 68 P. 968 (Cal.,Apr
29, 1902)
**A party to an action cannot claim an absolute right to have such sale
vacated unless he shall show that he has sustained some injury by reason of
the irregularity.
Miller & Starr, California Real Estate 3D, Deeds Of Trust, Section
10:210, page 672 states the,
“sale can be set aisde where there is gross inadequacy of the price
paid at the sale, together with a slight irregularity, unfairness, or
fraud.” 17
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k512 k. Sale in Parcels or in Gross. Most Cited Cases
Where property was described in a mortgage as a quarter section of land, but
in fact consisted of a grape farm and four city lots, commissioners appointed
to sell the property under foreclosure decree and order of sale, following
the description in the mortgage, were not required to sell the vineyard
property in two separate parcels, it being divided only by an imaginary line,
but properly sold such property and each of the city lots as separate parcels.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k526 Confirmation
266k526(6) k. Proceedings. Most Cited Cases
Where a mortgagor opposed confirmation of sale on the ground that the
property was not sold in separate parcels, but it was shown that the property
sold for its full cash value, and **the only injury set forth in the
mortgagor’s affidavit was that the sale in one lot tended to reduce the
number of bidders, and deprived affiant of the right to redeem either parcel
separately, **but failed to allege that he could redeem or desired to do so,
the affidavit was insufficient to prevent confirmation.
266 Mortgages
266X Foreclosure by Action
266X(M) Sale
266k529 Opening or Vacating and Actions to Set Aside
266k529(5) k. Irregularities Affecting Sale. Most Cited
Cases
A sale of land under mortgage foreclosure will not be set aside because the
same was not sold in separate parcels, as required by the mortgagor, **unless
it is made to appear that a larger sum would have been realized from the sale
if the property had been offered in separate parcels, or that **the sale of
less than the whole tract would have been sufficient to satisfy the debt.
Appeal from order denying motion to set aside sale under a decree of
foreclosure. The mortgage to plaintiff described as part of the premises
mortgaged the following: ‘The northeast quarter of the southwest quarter of
section 33, in township 13 south, of range 21 east, Mount Diablo base and
meridian, together with one-fourth of one cubic foot of water from the Fresno
Canal and Irrigation Company’s canal, appurtenant to said land.’
On the day of the sale, and at the time and place named in the notice, and
before the sale, the defendants served a written demand upon the commissioner
that the real estate be sold in separate parcels, to wit: ‘The county or
vineyard property separately as lot one and lot two, block three, Nevada
Colony, Fresno county, California, together with one-eighth of one cubic foot
of water from the Fresno Canal and Irrigation Company’s canal, appurtenant to
said lots of land, a plat of which colony, showing this division of land of
said colony, with lots so numbered and divided, is recorded in the office of
the recorder of said Fresno county, and said property is generally known, by
its description as aforesaid, as colony lots; and also the Fresno city lots
also separately as lot 21, block 204; lot 22, block 204; lot 25, block 337;
and lot 26, block 337,-all in said city of Fresno.’ The property referred to
in said demand as the county or vineyard property as lot 1 and lot 2 is the
said northeast quarter of southeast quarter of section 33, described in the
decree and order of sale. The commissioners sold the property in five
separate lots, selling the lots in the city of Fresno separately, *489 but
sold the vineyard property in one parcel, as described in the decree and
order of sale. The court properly refused to set aside the sale.
The commissioner in selling the vineyard property followed the decree and
order of sale. It was his duty to do so. Hopkins v. Wiard, 72 Cal. 262, 13
Pac. 687; Heyman v. Babcock, 30 Cal. 367.
There was a conflict as to whether the land constituted one known parcel or
two separate known parcels. In such case the finding of the court below as
to such question of fact will not be disturbed here. Gleason v. Hill, 65
Cal. 18, 2 Pac. 413. In a motion of this kind, it must be made clearly to
appear that the land consisted of separate ‘known lots or parcels.’ Connick
v. Hill, 127 Cal. 165, 59 Pac. 832.
For the reasons given in the foregoing opinion, the order is affirmed.
Affirmed.
West Headnotes
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(1) k. In General. Most Cited Cases
Sale under trust deed, if irregular because postponed in defiance of
injunction, was voidable, not void.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(7) k. Pleading and Proof. Most Cited Cases
Party attacking voidable sale under trust deed must show injury to himself
from asserted irregularity.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k338 k. Restraining Exercise of Power. Most Cited Cases
Postponement of sale under trust deed until after dissolution of temporary
injunction held not to violate injunction restraining sale or “continuing”
sale.
Plaintiff sued in unlawful detainer to recover possession of real property
which it had purchased at a trustee’s sale. Plaintiff had judgment, and
defendant appealed, attacking the validity of the trustee’s sale. Respondent
has moved to dismiss the appeal upon the ground that a second sale gave it
clear title and that the questions raised on the appeal are therefore moot.
We do not pass on the motion to dismiss because we are satisfied that the
judgment must be affirmed.
The property is located in Contra Costa county, and was subject to a deed of
trust upon which default had occurred. Notice of sale under the terms of the
deed of trust was duly given, but before sale was made appellant went to the
Superior Court in San Francisco county and obtained a temporary injunction
restraining the trustees and those acting in its behalf from “selling or
attempting to sell, or continuing the sale” of the property. Pending hearing
of this injunction, respondent’s agent postponed the sale from the *78 day
set until December 10, 1929. On December 5 of that year the temporary
injunction was, after hearing in the San Francisco court, dissolved, and the
sale was made on December 10th. **Appellant was present at the time of the
sale, and does not attack it upon the ground of want of sufficient notice.
[1][2][3] The judgment must be affirmed for these reasons: The sale, if
irregular because postponed in defiance of the injunction, was voidable and
not void. Powell v. Bank of Lemoore, 125 Cal. 468, 472, 58 P. 83; 18 Cal.
Jur. p. 560. Being voidable at the most, appellant could attack the sale only
by offering to do equity. Humboldt Sav. Bank v. McCleverty, 161 Cal. 285,
290, 119 P. 82, where the conflicting rules are discussed and the California
rule is stated. This appellant has failed to do, and, his attack being
collateral, he is not entitled to equitable relief.
[4] **In any event, the party attacking such a sale must show injury to
himself from the asserted irregularity (25 Cal. Jur. 91; **1017Sargent v.
Shumaker, 193 Cal. 122, 132, 223 P. 464), and here, again, appellant has
failed in his proof.
But we should not be understood as implying that the sale under attack was
voidable or irregular. The injunction restrained the “continuing” of the sale
of the property until further order of the court. It did not restrain the
postponement of the date of sale. Respondent did not disobey the injunction
by the postponement until a date after the dissolution of the injunction. If
they had gone ahead with the sale or had continued to make the sale so that
the rights of the parties would have been changed pending the injunction,
appellant would have had ground for complaint. But their postponement of the
sale until after the dissolution of the injunction was in conformity with the
letter and spirit of the order as it kept the matters in statu quo, and we
are convinced that such was the only purpose of the court in issuing the
injunctive order.
speculation
1. the contemplation or consideration of some subject.
2. an instance of such activity.
3. a conclusion or opinion reached by such activity.
4. a conjecture or surmise; a guess. — speculator, n. — speculative,
adj.
Holdings: The Court of Appeal, Walsh, J., sitting under assignment, held that:
(1) borrowers failed to show triable issue of material fact as to service of
notice of sale;
(2) service of notice of sale was required to occur only upon expiration of
three months after recordation of notice of default;
**(3) premature notice did not invalidate sale;
(4) inaccuracy in date of default in default notice was not material; and
(5) borrowers were not entitled to continuance of hearing on summary judgment
motion.
Affirmed.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k183 k. In General. Most Cited Cases
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k185.2 Use of Affidavits
228k185.2(1) k. In General. Most Cited Cases
The pleadings determine the issues to be addressed by a summary judgment
motion, and the declarations filed in connection with such motion must be
directed to the issues raised by the pleadings.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k185 Evidence in General
228k185(6) k. Existence or Non-Existence of Fact Issue.
Most Cited Cases
A defendant moving for summary judgment meets its burden of showing that one
or more elements of the cause of action cannot be established by the
plaintiff by presenting affirmative evidence that negates an essential
element of plaintiff’s claim, or by submitting evidence that the plaintiff
does not possess, and cannot reasonably obtain, needed evidence supporting an
essential element of its claim.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(7) k. Pleading and Proof. Most Cited Cases
A nonjudicial foreclosure sale is presumed to have been conducted regularly
and fairly; one attacking the sale must overcome this common law presumption
by pleading and **proving an improper procedure and the resulting prejudice.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k185.3 Evidence and Affidavits in Particular Cases
228k185.3(15) k. Liens and Mortgages. Most Cited Cases
Defaulting borrowers failed to show triable issue of material fact as to
service of notice of sale, so as to defeat summary judgment motion, in their
action to set aside trustee’s nonjudicial foreclosure sale; borrowers failed
to rebut evidence that sale notice was properly served in accordance with
statutory requirements, and whether borrowers received actual notice was
immaterial. West’s Ann.Cal.Civ.Code § 2924b.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k352 Notice of Sale
266k354 k. Form and Requisites. Most Cited Cases
The defaulting trustor need not receive actual notice of the trustee’s
nonjudicial foreclosure sale so long as notice is provided to the trustor
that is in compliance with the statute. West’s Ann.Cal.Civ.Code § 2924b.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k185.2 Use of Affidavits
228k185.2(2) k. Purpose and Function. Most Cited Cases
The function of the pleadings in a motion for summary judgment is to delimit
the scope of the issues, while the function of the affidavits or declarations
is to disclose whether there is any triable issue of fact within the issues
delimited by the pleadings.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k183 k. In General. Most Cited Cases
A plaintiff opposing a summary judgment motion cannot bring up new, unpleaded
issues in his or her opposing papers.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k183 k. In General. Most Cited Cases
A plaintiff wishing to rely upon unpleaded theories to defeat summary
judgment must move to amend the complaint before the hearing.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k345 k. Time for Exercise of Power, and Limitations. Most
Cited Cases
After the notice of default is recorded, the trustee must wait three calendar
months before proceeding with the nonjudicial foreclosure sale. West’s
Ann.Cal.Civ.Code § 2924.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k352 Notice of Sale
266k354 k. Form and Requisites. Most Cited Cases
Any service of a notice of nonjudicial foreclosure sale must occur only upon
the expiration of three months after recordation of the notice of default.
West’s Ann.Cal.Civ.Code §§ 2924, 2924b2924f.
See 3 Witkin, Summary of Cal. Law (9th ed. 1987) Security Transactions in
Real Property, §§ 135-137; Greenwald & Asimov, Cal. Practice Guide: Real
Property Transactions (The Rutter Group 2004) ¶ 6:526 et seq. (CAPROP Ch. 6-
I); 4 Miller & Starr, Cal. Real Estate (3d ed. 2001) § 10:181 et seq.; Cal.
Jur. 3d, Deeds of Trust, § 282 et seq.
[19] Mortgages 266 354
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k352 Notice of Sale
266k354 k. Form and Requisites. Most Cited Cases
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(2) k. Grounds for Relief in General. Most Cited Cases
Trustee’s premature notice to defaulting borrowers of nonjudicial foreclosure
sale, mailed slightly before expiration of three months after recordation of
default notice, did not cause any injury to borrowers, even if sale price was
inadequate, and thus sale was not invalid; trustee’s deviation from statutory
notice requirements was slight, borrowers had notice of original sale date,
and trustee’s sale did not go forward until almost one year after date
noticed. West’s Ann.Cal.Civ.Code §§ 2924, 2924b2924f.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
A great disparity between the foreclosure price and the value of the
property, by itself, is insufficient to set aside a nonjudicial foreclosure
sale. West’s Ann.Cal.Civ.Code § 2924.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Mere inadequacy of price, absent some procedural irregularity that
contributed to the inadequacy of price or otherwise injured the trustor, is
insufficient to set aside a nonjudicial foreclosure sale. West’s
Ann.Cal.Civ.Code § 2924.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k335 k. Right to Foreclose. Most Cited Cases
Inaccuracy in date of default in trustee’s default notice was not material,
where notice properly stated nature of default and amount of default. West’s
Ann.Cal.Civ.Code §§ 2924, 2924b2924f.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k335 k. Right to Foreclose. Most Cited Cases
If one breach is correctly stated on a notice of mortgagor’s default, an
erroneous statement of other defaults does not invalidate the default notice.
West’s Ann.Cal.Civ.Code §§ 2924, 2924b2924f.
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k335 k. Right to Foreclose. Most Cited Cases
One of the signal purposes of the notice of default is to advise the trustor
of the amount required to cure the default. West’s Ann.Cal.Civ.Code §§ 2924,
2924b2924f.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k185 Evidence in General
228k185(5) k. Weight and Sufficiency. Most Cited Cases
Speculation is not evidence that can be utilized in opposing a motion for
summary judgment.
228 Judgment
228V On Motion or Summary Proceeding
228k182 Motion or Other Application
228k186 k. Hearing and Determination. Most Cited Cases
In their action to set aside trustee’s nonjudicial foreclosure sale,
borrowers were not entitled to continuance of hearing on opposing parties’
summary judgment motion; application did not contain requisite declaration
indicating essential facts that borrowers believed existed to oppose motion
and why those facts could not have been presented in opposition to motion,
there were no facts essential to disposition of motion that justified
continuance, and application presented no justification for failure to
commence use of appropriate discovery tools at earlier date. West’s
Ann.Cal.C.C.P. § 437c(h).
*81 Johnn and Margaret Knapp (Borrowers) lost their home through nonjudicial
foreclosure sale in November 2002, nearly one year after the original date
noticed for the sale. During the entire time that the foreclosure sale was
threatened, they did nothing to cure their default. Afterward, the buyer at
the trustee’s sale filed an action to evict Borrowers. Two weeks later,
Borrowers sued to set aside the trustee’s sale, claiming that the sale notice
was never served, as required under Civ The lender, trustee, and buyer sought
summary judgment in the action to set aside the foreclosure. They effectively
negated Borrowers’ claim that the sale notice was not served. Borrowers
opposed summary judgment by raising other claims-not alleged in their
complaint-that the foreclosure proceedings were irregular because of defects
in the default notice and sale notice. After affording Borrowers three
separate hearings and the opportunity (twice) to submit supplemental
briefing, the trial court granted summary judgment. The unlawful detainer
case proceeded to trial, and the buyer was awarded possession of the premises.
Borrowers now appeal, asserting various claims of error with respect to the
granting of summary judgment against them in their action to set aside the
foreclosure sale. They argue that the trial court failed to recognize the
existence of triable issues of material fact with respect to claimed
irregularities concerning both the default notice and sale notice served and
recorded by the trustee. Borrowers claim that, at minimum, the court should
have granted their request for a continuance of the summary judgment motion.
**5 After a de novo review of the record, we conclude that the sale notice
was served slightly prematurely, but that this minor procedural irregularity
was in no way prejudicial to Borrowers. They received adequate notice of the
trustee’s sale; indeed, they received nine days more than the 20-day notice
required under section 2924b, subdivision (b)(2). Accordingly, summary
judgment was proper and we affirm the judgment.
FACTS
The trustee’s sale took place on November 14, 2002. The Property was sold to
the highest bidder, John P. Doherty (Buyer), who paid $240,100.FN3 The
trustee’s deed-recorded November 25, 2002-included a recital that the Trustee
had “complied with all applicable statutory requirements of the State of
California,” including the recordation and mailing of the Default Notice and
Sale Notice.
PROCEDURAL HISTORY
Buyer filed an action for unlawful detainer against Borrowers on December 16,
2002, (case no. CV145234). He alleged that he acquired title to the Property
by a trustee’s deed after foreclosure sale. Buyer alleged further that he had
served on Borrowers the appropriate statutory three-day notice to quit, that
the time had elapsed, and that he demanded possession of the Property.
On December 30, 2002, Borrowers filed suit (complaint) seeking, among other
things, to set aside the trustee’s sale and to cancel the trustee’s deed
(case no. CV 145359). The complaint named Buyer, Trustee, and Lender as
defendants. Borrowers alleged that the trustee’s sale under**6 which Buyer
took *83 title to the Property was invalid because they were not served with
the Sale Notice as required by law. Borrowers sought equitable relief-an
order setting aside the trustee’s sale, an order canceling the trustee’s
deed, and an accounting of the amount owed by them under the loan from
Lender-or, in the alternative, money damages.
The court conducted three hearings in connection with the summary judgment
motions. The court’s tentative ruling at the time of the first hearing (on
July 24, 2003) was to grant summary judgment. After extended argument, the
court continued the matter for further hearing to consider a case cited by
Borrowers at the hearing, System Inv. Corp. v. Union Bank (1971) 21
Cal.App.3d 137, 98 Cal.Rptr. 735 (System Inv.). The parties submitted
supplemental briefs, and the court issued a supplemental tentative decision
reaffirming its prior tentative decision.
After further argument on August 1, 2003, the court continued the case for a
third hearing for the parties to brief a new legal argument raised by
Borrowers at the hearing concerning the Sale Notice. After supplemental
briefing and a third hearing, the court granted the motions for summary
judgment. A formal order granting the summary judgment motions was entered on
September 2, 2003.
The unlawful detainer case proceeded to trial on August 25, 2003. At its
conclusion, the court awarded Buyer possession of the Property and damages of
$40 per day from August 20, 2003, to the date of judgment. The court entered
judgment in the consolidated cases on September 3, 2003. Thereafter, pursuant
to Borrowers’ motion, the court stayed the judgment pending appeal, allowing
them to retain possession of the Property under certain conditions.
Borrowers filed a notice of appeal on November 3, 2003. The appeal from the
judgment was filed timely (Cal. Rules of Court, rule 2(a)(1)) and is a proper
subject for appellate review. (Code Civ. Proc., § 437c, subd. (m); see also
Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter
Group 2004) ¶ 10:384, p. 10-122.12 [order granting summary judgment not
itself appealable, but appeal lies from judgment entered on such order].)
Borrowers assert that the trial court erred in granting summary judgment for
a variety of reasons. These claims are as follows:
**1. There was an irregularity in the Sale Notice: it was mailed to Borrowers
prematurely (i.e., on a date that was not at least three months after
recordation of the Default Notice).
**2. There was a material irregularity in the Default Notice: the motion
papers disclosed a discrepancy between the actual date of Borrowers’ default
and the date identified in the Default Notice.
**3. As a matter related to the second claim, the court erred in failing to
grant a continuance of the motion to permit Borrowers discovery concerning
the alleged discrepancy in the Default Notice.
**8 4. There was a dispute as to whether Buyer was a bona fide purchaser.
**5. Buyer purchased the Property for less than one-half of its fair market
value.
**6. The trial court erred when it concluded that the irregularity in the
foreclosure sale procedure must be prejudicial in order to furnish a basis
for an action to set aside the sale.
[8] Notably absent is the only ground for invalidating the foreclosure sale
that was alleged in Borrowers’ complaint: Borrowers were not served with the
Sale Notice. In the context of our de novo review of the granting of summary
judgment, we will first consider the pleaded lack of service of the Sale
Notice *86 and will then address Borrowers’ other claims of error concerning
the Default Notice, Sale Notice, and denial of the request to continue the
hearing on the summary judgment motions.FN4
FN4. We do not reach the fourth and fifth claims of error. A nonjudicial
foreclosure sale is presumed to have been conducted regularly and fairly; one
attacking the sale must overcome this common law presumption “by pleading and
proving an improper procedure and the resulting prejudice.” (Miller & Starr,
Cal. Real Estate (3d ed.2000) § 10:211, p. 679.) If the trustee’s deed
contains a recital that all default and sale notices have been given, the
notice requirements are statutorily presumed to have been satisfied, which
presumption is conclusive as to a bona fide purchaser at the foreclosure
sale. (§ 2924.) Since we conclude, post, that Borrowers’ claims of error
concerning the Default Notice, Sale Notice, and continuance request are
without merit, we need not decide whether Buyer was a bona fide purchaser; it
is irrelevant in this instance whether the presumption that the trustee’s
sale was properly conducted was rebuttable or conclusive. Likewise, whether
Buyer purchased the Property at the trustee’s sale for less than one-half of
its fair market value is also immaterial, since we have concluded that there
were no prejudicial procedural irregularities with respect to the trustee’s
sale. (See fn. 12, post.) The sixth issue identified in the text-whether the
notice defect must be prejudicial to set aside the trustee’s sale-is
discussed in the context of Borrowers’ challenge to service of the Sale
Notice, in part III C(3), post.
A. Nonjudicial foreclosure
The manner in which the sale must be conducted is governed by section 2924g.
“The property must be sold at public auction to the highest bidder.
(Civ.Code, § 2924g, subd. (a); [citation].) [¶] ... [¶] As a general rule,
the purchaser at a nonjudicial foreclosure sale receives title under a
trustee’s deed free and clear of any right, title or interest of the trustor.
[Citation.] A properly conducted nonjudicial foreclosure sale constitutes a
final adjudication of the rights of the borrower and lender. [Citation.] Once
the trustee’s sale is completed, the trustor has no further rights of
redemption. [Citation.] [¶] The purchaser at a foreclosure sale takes title
by a trustee’s deed. If the trustee’s deed recites that all statutory notice
requirements and procedures required by law for the conduct of the
foreclosure have been satisfied, a rebuttable presumption arises that the
sale has been conducted regularly and properly; this presumption is
conclusive as to a bona fide purchaser. (Civ.Code, § 2924; [citation].)”
(Moeller, supra, 25 Cal.App.4th at pp. 830-831, 30 Cal.Rptr.2d 777.)
[10] Borrowers’ claim in equity to set aside the trustee’s sale alleged that
the statutory requirements for such sale were not met because the Sale Notice
was not served on them. The alternative cause of action for damages-which
incorporated all paragraphs of the first cause of action-was likewise based
upon the alleged lack of service of the Sale Notice.
Both of the motions established that the Sale Notice was served on Borrowers
on November 28, 2001, by certified or registered mail and by first *88 class
mail at the Property.FN5 In addition, Lender asserted that, contrary to the
allegations in the complaint, Borrowers actually received a copy of the Sale
Notice; **their bankruptcy counsel referred to the Sale Notice and attached
it to correspondence dated December 17, 2001 (i.e., 10 days before the
originally noticed sale date). On the face of the motion papers, the moving
parties/ defendants met their initial burden of negating one or more of the
essential elements of the causes of action in the complaint.**10 (See Guz,
supra, 24 Cal.4th at p. 334, 100 Cal.Rptr.2d 352, 8 P.3d 1089.) The burden
therefore shifted to Borrowers “to show that a triable issue of one or more
material facts exists as to that cause of action.” (Code Civ. Proc., § 437c,
subd. (p)(2).)
**FN5. The affidavit of mailing attached to the Sale Notice reflected a total
of ten mailings to Borrowers, collectively: (a) to 156 Las Colinas Drive,
Watsonville, CA 95076-0192 (four mailings [two by first class mail, two by
certified or registered mail] ); (b) to 156 Las Colinas Drive, Corralitos, CA
95076-0215 (four mailings [two by first class mail, two by certified or
registered mail] ); and (c) to 168 Madrona Rd., Boulder Creek, CA 95006-9616
(two mailings to Johnn Knapp only [one by first class mail, one by certified
or registered mail] ). The mailing to the Watsonville address is consistent
with the deed of trust executed in favor of Lender’s predecessor, which
listed the Property as being Borrowers’ address.
FN6. The record reflects that Borrowers’ only written opposition to Lender’s
summary judgment motion was a one-page pleading incorporating by reference
their opposition to Trustee’s motion. We assume this to have been the case
because the issues involved in Lender’s motion were substantially the same as
those in Trustee’s motion, a fact acknowledged by Borrowers at the second
hearing on the motions.
On the record before us, Borrowers did not raise a triable issue of material
fact in connection with the service of the Sale Notice. (Code Civ. Proc., §
437c, subd. (p)(2); see also Sangster v. Paetkau (1998) 68 Cal.App.4th 151,
162, 163, 80 Cal.Rptr.2d 66.) Even assuming that Borrowers raised a disputed
issue of fact-namely, whether they actually received the Sale Notice-this
issue was not a material one.
The motions established that the Sale Notice was properly served in
accordance with statutory requirements. Borrowers presented no evidence to
rebut this proper service. The response and supporting evidence to the effect
that they did not actually receive the Sale Notice, at best, raised an issue
of immaterial fact.FN7 Summary judgment-at least on the claims as they were
alleged in the complaint-was thus proper.
FN7. Because the trustor’s actual notice of the impending trustee’s sale is
not required under the foreclosure statutes, we need not resolve whether
Borrowers, in fact, received the Sale Notice. We note from the record that
there is significant evidence-unrebutted by any declaration from Borrowers-
that they did receive the Sale Notice: Borrowers’ bankruptcy counsel had a
copy of the notice in his possession at least 10 days before the date
originally noticed for the sale. It suffices that the evidence demonstrated
that the trustee mailed the Sale Notice to Borrowers as required under
section 2924b, subdivision (b)(2).
Borrowers claim that the Sale Notice was defective because it was mailed
prematurely:**11 it was mailed on **November 28, 2001, a date that was less
than three months after recordation of the Default Notice. They urge that
summary judgment was improper because of this “irregularity” in the service
of the Sale Notice.
Borrowers’ argument must be rejected for at least two reasons. **First, the
claim of defective service of the Sale Notice was not alleged in the
complaint. **Second, assuming arguendo that it is appropriate to consider the
contention, we conclude that: **(a) the Sale Notice was served slightly
prematurely; **(b) all other requirements of service, posting, publication
and recordation of the Sale Notice were satisfied; and **(c) Borrowers
suffered no prejudice from the premature service which could justify
invalidating the trustee’s sale.
The basis for invalidating the foreclosure sale, as alleged in the complaint,
was that the sale occurred “without [Trustee] having served a Notice of Sale
*90 of the Property upon Plaintiffs, which notice is required by law.” The
complaint did not allege that the sale was invalid because the service of the
Sale Notice was premature; indeed, such a claim would have been inconsistent
with the complaint’s allegation that the Sale Notice was not served.
[12][13][14][15][16] “ ‘The purpose of a summary judgment proceeding is to
permit a party to show that material factual claims arising from the
pleadings need not be tried because they are not in dispute.’ [Citation.]
‘The function of the pleadings in a motion for summary judgment is to delimit
the scope of the issues: the function of the affidavits or declarations is to
disclose whether there is any triable issue of fact within the issues
delimited by the pleadings.’ [Citations.] The complaint measures the
materiality of the facts tendered in a defendant’s challenge to the
plaintiff’s cause of action. [Citation.]” (FPI Development, Inc. v. Nakashima
(1991) 231 Cal.App.3d 367, 381, 282 Cal.Rptr. 508.) A “plaintiff cannot bring
up new, unpleaded issues in his or her opposing papers. [Citation.]”
(Government Employees Ins. Co. v. Superior Court (2000) 79 Cal.App.4th 95,
98-99, fn. 4, 93 Cal.Rptr.2d 820.)A plaintiff wishing “to rely upon unpleaded
theories to defeat summary judgment” must move to amend the complaint before
the hearing. (Leibert v. Transworld Systems, Inc. (1995) 32 Cal.App.4th 1693,
1699, 39 Cal.Rptr.2d 65; see also 580 Folsom Associates v. Prometheus
Development Co. (1990) 223 Cal.App.3d 1, 18, 272 Cal.Rptr. 227.)
**We conclude from a close reading of the complaint that the claim of
improper service of the Sale Notice was beyond the scope of the pleadings.
Furthermore, while Borrowers moved to amend the complaint, the proposed
amendment did not allege that the sale was invalid because the Sale Notice
was sent too early. Accordingly, the trial court could have properly rejected
this challenge as being beyond the scope of the pleadings. It is apparent,
however, that the court considered this challenge on its merits-either based
upon a liberal reading of the complaint, or because moving parties did not
object to Borrowers’ injection of an unpleaded theory in opposition to the
motions and thereby waived any objection. (See Stalnaker v. Boeing Co. (1986)
186 Cal.App.3d 1291, 1302, 231 Cal.Rptr. 323.) As discussed post, we address
Borrowers’ contention on its merits and conclude that summary judgment was
nonetheless proper.
[17] As noted, “[a]fter the notice of default is recorded, the trustee must
wait **12 three calendar months before proceeding with the sale.
[Citations.]” (Moeller, supra, 25 Cal.App.4th at p. 830, 30 Cal.Rptr.2d
777.)A power of sale under a mortgage or deed of trust may not be exercised
after breach by the mortgagor/trustor until (1) recordation of a proper
notice of default, and (2) “after the lapse of *91 the three months
[following such recordation] the mortgagee, trustee or other person authorized
to take the sale [has given] notice of sale, stating the time and place
thereof, in the manner and for a time not less than that set forth in Section
2924f.”(§ 2924.)
Section 2924f, subdivision (b) prescribes, inter alia, the contents of the
notice of sale, and sets forth certain requirements concerning the posting,
publication, and recordation of the notice. More specifically, at least 20
days before the sale, the notice of sale must be posted “in one public place
in the city where the property is to be sold, if the property is to be sold
in a city, or, if not, then in one public place in the judicial district in
which the property is to be sold ... [and] in a conspicuous place on the
property to be sold.”(§ 2924f, subd. (b)(1).) The statute also requires
publication of the notice in a newspaper of general circulation-in the city
where the property is situated or judicial district where the property is
located **if it is not located in a city-for three consecutive weeks, the
first publication occurring at least 20 days before the sale date. (Ibid.)
The notice of sale must also be recorded at least 14 days before the sale
date. (Ibid.)
[18] Borrowers contend that the above described statutory scheme requires
that any service of a notice of sale under section 2924b, subdivision (b)(2),
must occur only upon the expiration of three months after recordation of the
notice of default. The moving parties respond that the foreclosure statutes
do not require that the trustee wait for a full three months to serve the
notice of sale; the notice need only be served at least 20 days before the
sale date (which sale date is at least 20 days after the three-month period
expires).FN8 **We agree with Borrowers that the Civil Code requires that the
trustee wait until three months after the notice of default is recorded to
serve the notice of sale.
*92 Section 2924 requires the trustee to “give notice of sale” only “after
the lapse of the three months” following recordation of the notice of
default. (§ 2924.) The trustee “gives notice” under the foreclosure statutes
by recording, posting, publishing, and mailing the notice of sale. (See §§
2924b, subd. (b)(2), 2924f, subd. **13 (b)(1).) Clearly, in order to “give
notice” of the trustee’s sale, the trustee must wait for the expiration of
three months after recording the notice of default. (§ 2924; see also
(Moeller, supra, 25 Cal.App.4th at p. 830, 30 Cal.Rptr.2d 777) [“[a]fter the
3-month period has elapsed, a notice of sale must be published, posted and
mailed 20 days before the sale and recorded 14 days before the sale”].)
**Trustee here served the Sale Notice on Borrowers on November 28, 2002, a
date that was slightly less than three months after recordation of the
Default Notice. The Sale Notice, however, provided Borrowers with 29 days’
notice of the trustee’s sale. Thus, while the Sale Notice did not comply
fully with the three-month requirement under section 2924, **it provided more
than the 20 days’ notice mandated under section 2924b, subdivision (b)(2).
[19] Having determined that the Sale Notice was served prematurely, it
remains for us to decide whether this irregularity required denial of summary
judgment. Borrowers contend that the premature mailing of the Sale Notice-
coupled with the fact that the Property was sold (they claim) for far less
than its market value-raised a triable issue of fact concerning the validity
of the trustee’s sale. **They argue that prejudice from the procedural defect
need not *93 be shown, and that the defect need not have had an adverse
impact on the sales price. **Moving parties respond that, even if the Sale
Notice was mailed prematurely, Borrowers suffered no prejudice from this
minor procedural defect that would warrant setting aside the foreclosure sale.
The parties cite no cases that involve the precise question here: whether a
slight deviation from statutory notice requirements may invalidate a
foreclosure sale, where the trustee otherwise complies fully with the Civil
Code. **Stated otherwise, does the need for “strict compliance” with
foreclosure notice requirements recited in various cases FN9 mean that a
trustee’s sale must **14 be invalidated no matter how trivial the procedural
defect? **We answer this question in the negative.
FN9. See, e.g., System Inv., supra, 21 Cal.App.3d 137, 152-153, 98 Cal.Rptr.
735; Bisno v. Sax (1959) 175 Cal.App.2d 714, 720, 346 P.2d 814. Both cases-
cited by Borrowers-are readily distinguishable. In System Investment, there
were several significant defects that warranted setting aside the trustee’s
sale, including, inter alia, failure of the default notice to substantially
comply with section 2924b, **the beneficiary’s failure to reply to borrower’s
written inquiry regarding the **claimed default, and absence of service of
the default notice on required parties. (System Inv., supra, 21 Cal.App.3d at
pp. 153-154, 98 Cal.Rptr. 735.) Likewise, in **Bisno v. Sax, supra, 175
Cal.App.2d 714, 346 P.2d 814, **the court held that it was error to deny the
trustors’ request to enjoin the trustee’s sale; the equitable relief should
have been granted where trustors paid all outstanding amounts due-and the
beneficiary accepted such payments-so that the only default remaining at the
time of trial was due to acceleration of the entire indebtedness under the
note and deed of trust. (Id. at pp. 724-725, 730, 346 P.2d 814.) **The case
before us involves neither the occurrence of multiple, substantial defects
found in System Investment, **nor the trustor’s presale payment of the
outstanding obligation presented in Bisno v. Sax.
*94 Here, even assuming that the sale price was grossly inadequate, FN10 the
slight procedural irregularity in the service of the Sale Notice did not
cause any injury to Borrowers. They had notice of the original sale date; the
trustee’s sale did not go forward until almost one year after the date
noticed. There was no prejudicial procedural irregularity. Likewise, there
was no evidence that the premature service of the Sale Notice had any impact
whatsoever on the ultimate sales price.
FN10. Borrowers claimed that the Property had a fair market value of
$630,000, more than twice Buyer’s bid at the trustee’s sale. While the moving
parties challenged that claim, whether the price paid at foreclosure was
inadequate is irrelevant to the disposition of the summary judgment motions.
Because we conclude that there was no procedural irregularity that had any
prejudicial impact upon the foreclosure sale, any claim that the sales price
was inadequate does not raise a triable issue of material fact in Borrowers’
action to set aside the trustee’s sale. (See 4 Miller & Starr, Cal. Real
Estate, supra, § 10:210, p. 672.)
FN11. Under former section 2924g, subdivision (c)(1), the trustee, upon
trustor’s request before conclusion of the trustee’s sale, was required to
postpone the sale for one business day to afford the trustor the opportunity
to pay off the outstanding indebtedness. The court in Whitman rejected the
argument that this statute vested the trustee with discretion to grant or
deny such a postponement request by the trustor. (Whitman, supra, 165
Cal.App.3d at p. 320, 211 Cal.Rptr. 582.)
In Yates, the trustee-knowing that the borrower had died and that the public
administrator was the acting administrator of her estate-failed to give the
estate any notice of the decedent’s default. (Yates, supra, 25 Cal.App.4th at
p. 516, 32 Cal.Rptr.2d 53.) Based upon the complete absence of notice to the
administrator and a sale at a grossly inadequate price, the court set aside
the trustee’s sale. (Id. at pp. 522-523, 32 Cal.Rptr.2d 53.) Again, the facts
in Yates bear no resemblance to the case here, where Borrowers admittedly had
notice of the sale.
While no cases have expressly dealt with the issue we face here, courts have
rejected claims of deficient notice where no prejudice was suffered as a
result of the procedural irregularity. In one case, the Ninth Circuit
rejected the borrower’s claim that a foreclosure conducted under California
law was *95 invalid because notice of sale was sent to the wrong address.
(See Lehner v. United States (9th Cir.1982) 685 F.2d 1187 (Lehner ).) The
court reasoned: “[T]he record reveals clearly that she [the borrower] knew
the foreclosure sale was imminent. Her repeated efforts to delay the
impending sale attest to her knowledge.... She makes no suggestion that the
written notice would have supplied information not already known to her ...
nor did she allege that she never received actual notice of the foreclosure
sale. Her constitutional argument thus boils down to due process requiring
the meaningless formality of written (rather than oral) notice. [¶] We refuse
to elevate form over substance.” (Id. at pp. 1190-1191; see also Crummer v.
Whitehead (1964) 230 Cal.App.2d 264, 267-268, 40 Cal.Rptr. 826 [borrower’s
challenge to sale on basis that default notice not properly served on her
attorney rejected, where attorney actually received the notice].)
Here, the notice irregularity was far less significant than the procedural
defects that the courts held insufficient to invalidate the foreclosure sales
in Lehner, supra, and Crist, supra. The borrower in Lehner had no written
notice, yet the sale was upheld since the borrower’s actual notice negated
any claim of prejudice. (Lehner, supra, 685 F.2d at pp. 1190-1191.) In this
instance, Borrowers were provided notice of the trustee’s sale through
service of the Sale Notice to their address as listed on the deed of trust.
Further-irrespective of Borrowers claim that they did not actually receive
the Sale Notice-they had imputed knowledge of the trustee’s sale at least 10
days before the originally noticed sale date; their bankruptcy counsel had a
copy of the written notice as early as December 17, 2001. (See § 2332
[principal and agent deemed to have notice of “whatever either has notice of,
and ought, in good faith and the exercise of ordinary care and diligence, to
communicate to the other”]; see also Lazzarevich v. Lazzarevich (1952) 39
Cal.2d 48, 50, 244 P.2d 1 [client held to knowledge of what client’s attorney
knows and should communicate to him or her].) This afforded more than
adequate time to protect Borrowers’ interests, which they did, in fact,
protect-Borrowers’ bankruptcy caused multiple **16 postponements of the
foreclosure sale over a period of a number of months. (See also *964 Miller &
Starr, Cal. Real Estate, supra, § 10:199, p. 628 [absence of proper notice
waived where notice actually received “within an adequate time to protect his
or her interests at the sale”].) FN12
FN12. But see Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1361,
233 Cal.Rptr. 923, where the trustee’s sale was set aside because the sale
notice was not mailed to the trustor, junior lienor, or the judgment
creditor, which “lack of notice was clearly substantial and prejudicial.”
**Borrowers’ objection to the premature notice is, in effect, a criticism
that the trustee provided too much notice of the sale. **There is no evidence
that they were prejudiced by the premature mailing of the notice. Given the
fact that the trustee’s sale did not occur until almost a year after service
of the Sale Notice, it is difficult to imagine how Borrowers could claim any
prejudice.FN13
FN13. Borrowers argue further that the Sale Notice was invalid because it did
not contain a good faith estimate of the amount of the indebtedness. Although
mailed slightly before the expiration of three months after recordation of
the Default Notice, **there was no evidence that the Sale Notice contained
any material inaccuracies. **Borrowers presented no evidence that the Sale
Notice overstated the indebtedness. There was no evidence, for instance, that
a payment was made after the sale notice was mailed but before it was posted,
recorded, and published. **Indeed, it was undisputed that the last
installment payment was made nearly eight months before the mailing of the
Sale Notice. We thus reject Borrowers’ claim that the Sale Notice did not
provide a good faith estimate of the amount of the indebtedness.
Our conclusion that the premature mailing of the Sale Notice did not here
raise a triable issue of material fact concerning Borrowers’ challenge of the
trustee’s sale is also consonant with dicta in other California cases. In a
recent case involving a challenge to a trustee’s sale where there were no
notice irregularities, the appellate court noted: “ ‘As a general rule, there
is a common law rebuttable presumption that a foreclosure sale has been
conducted regularly and fairly.’ [Citations.] Accordingly, ‘[a] successful
challenge to the sale requires evidence of a failure to comply with the
procedural requirements for the foreclosure sale that caused prejudice to the
person attacking the sale.’ [Citation.] ... [T]he presumption must prevail
when the record lacks substantial evidence of a prejudicial procedural
irregularity. [Citation.]” (6 Angels, supra, 85 Cal.App.4th 1279, 1284, 102
Cal.Rptr.2d 711, first italics in original, second and third italics added;
accord, Residential Capital v. Cal-Western Reconveyance Corp. (2003) 108
Cal.App.4th 807, 819, 822, 134 Cal.Rptr.2d 162 [the question is whether
“there is a substantial defect in the statutory procedure that is prejudicial
to the interests of the trustor and claimants”].)
We thus conclude that the premature service of the Sale Notice here, even
coupled with an inadequate sales price-where the Trustee otherwise strictly
followed the statutory requirements for recording, posting, and publishing
the notice, and the notice was served on Borrowers more than the *97 required
20 days before the initial sale date-did not render the trustee’s sale
subject to attack. This holding is consistent with the above authorities, and
subserves the three purposes of the statutory scheme: “(1) to provide the
creditor/beneficiary with a quick, inexpensive and efficient remedy against a
defaulting debtor/trustor; (2) to protect the debtor/trustor from wrongful
loss of the property; and (3) to ensure that a properly conducted sale is
final between the parties and conclusive as to a bona fide purchaser.
[Citation.]” **17(Moeller, supra, 25 Cal.App.4th 822, 830, 30 Cal.Rptr.2d
777.) Therefore, Borrowers’ claim that the Sale Notice was served prematurely
did not create a triable issue of material fact requiring denial of summary
judgment.FN14
[22] Borrowers contend that summary judgment was improper because there was a
triable issue of fact as to the existence of a “material irregularity” in the
Default Notice. The claimed irregularity concerned a discrepancy between the
date listed Default Notice (Jul. 1, 2000) as the date of default and the
actual date of default. This assertion is founded upon the statement in the
declaration of Chomie Neil in support of Lender’s summary judgment motion
that Borrowers “fell into default under the loan in January of 2001 by
failing to make their monthly mortgage payments.” This “material defect” in
the notice (Borrowers assert) warranted denial of summary judgment.
Borrowers’ contention is without merit.
As was the case with Borrowers’ claim that the Sale Notice was served
prematurely, the assertion that the Default Notice was defective was beyond
the scope of the complaint. **Borrowers did not plead that the trustee’s sale
should be set aside because the Default Notice was defective. Likewise, the
proposed amendment to the complaint did not address this particular issue;
**instead, it alleged that the Default Notice “contained charges and demands
in excess of the actual amount owing.” Had Borrowers wished to raise the
unpleaded issue of a claimed material defect as to the date of default as
reflected in the Default Notice, they were required to move to amend before
the summary judgment hearing. (Leibert v. Transworld Systems, Inc., supra, 32
Cal.App.4th 1693, 1699, 39 Cal.Rptr.2d 65.)
*98 Although Borrowers’ position is unclear, we will assume that they claim
that this discrepancy in the Default Notice was embraced by the proposed
amendment that more generally claimed that the notice contained an
overstatement of the amount of default. It is apparent from the record that
the trial court, in fact, did consider the merits of Borrowers’ claim in
conjunction with their motion to amend. Nonetheless, even were this issue
properly before the court, it did not justify denial of summary judgment.
[23] Despite this inaccuracy as to the date of default, there was no evidence
presented that the Default Notice did not properly state the nature of the
default (failure to make installment payments and to pay late charges), or
the amount of the default ($38,011.40 as of Sept. 4, 2001). **“If one breach
is correctly stated, an erroneous statement of other defaults does not
invalidate the [default] notice.”(4 Miller & Starr, Cal. Real Estate, supra,
§ 10:183, p. 561, fn. omitted.) As stated in one case in which a challenge to
a foreclosure was rejected where the default notice accurately stated certain
*99 defaults but was inaccurate as to one of the installments for which an
extension was granted: “[T]he statute is sufficiently complied with if the
notice of default contains a correct statement of some breach or breaches
sufficiently substantial in their nature to authorize the trustee or
beneficiary to declare a default and proceed with a foreclosure. Since
reliance on these breaches is manifestly enough to authorize the proceeding,
the circumstance that erroneous statements may appear in the notice about
other breaches, which breaches, if they occurred, would only be cumulative so
far as their effect was concerned, may properly be treated as immaterial.”
(Birkhofer v. Krumm (1938) 27 Cal.App.2d 513, 523-524, 81 P.2d 609.)
[24] One of the signal purposes of the notice of default is to advise the
trustor of the amount required to cure the default. (4 Miller & Starr, Cal.
Real Estate, supra, § 10:183, p. 560.) There is no evidence that Borrowers
here were misled in any way by the Default Notice. **For instance, the fact
that the date of default was stated incorrectly in the Default Notice did not
cause Borrowers to act or fail to act in any way that resulted in their loss
of the Property.
**19 [25] Any suggestion by Borrowers that the Default Notice contained any
material misstatements-such as an overstatement of the amount of default-is
founded on nothing more than speculation. “Speculation, however, is not
evidence” that can be utilized in opposing a motion for summary judgment.
(Aguilar, supra, 25 Cal.4th 826, 864, 107 Cal.Rptr.2d 841, 24 P.3d 493; see
also Joseph E. Di Loreto, Inc. v. O’Neill (1991) 1 Cal.App.4th 149, 161, 1
Cal.Rptr.2d 636 [summary judgment opposition based on inferences “must be
reasonably deducible from the evidence, and not such as are derived from
speculation, conjecture, imagination, or guesswork”].) Borrowers’ opposition
to the summary judgment motions did not raise a triable issue of material
fact concerning any claimed irregularities in the Default Notice.FN16
FN16. Borrowers do not argue on appeal that the trial court abused its
discretion by denying their motion to amend the complaint. They are therefore
deemed to have waived any such challenge. (See Tiernan v. Trustees of Cal.
State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4, 188 Cal.Rptr.
115, 655 P.2d 317.)The proposed amendment alleged that the trustee’s sale was
invalid because the Default Notice contained excessive charges. There was no
refutation of Lender’s evidence-in the supplemental Neil declaration-that the
Default Notice contained no excessive charges. Therefore, since there was no
evidence to support the proposed amendment, the court appropriately exercised
its discretion by denying leave to amend. (Cf. Soderberg v. McKinney (1996)
44 Cal.App.4th 1760, 1773, 52 Cal.Rptr.2d 635 [leave to amend properly denied
where proposed amendment fails to state a cause of action].)
[26] One day before the deadline for opposing Trustee’s summary judgment
motion, Borrowers filed an ex parte application seeking various relief. Their
application-opposed by Lender-sought an order shortening time for service and
hearing on motions (a) to continue the August 25, 2003 trial date, (b) to
extend the deadline to serve expert witness disclosures,** (c) to compel
Lender to provide further responses to interrogatories, **(d) for leave to
shorten response time in connection with service of additional
interrogatories, and (e) for leave to amend Borrowers’ complaint and answer.
Borrowers also sought an order continuing the hearing on the summary judgment
motions; they requested that Trustee’s motion (set for July 24, 2003) be
continued to the same date as the hearing on Lender’s motion (Aug. 20,
2003).FN17 Although the record is sparse, the court apparently denied the
application to continue the Trustee’s motion, but granted Borrowers’
application to shorten time for service and hearing on their motions.FN18
FN17. The application requested that the two summary judgment motions be
heard “on the Wednesday prior to trial of this action.” Since trial was set
for August 25, 2003, we infer that the application sought a continuance of
the hearing on Trustee’s motion to August 20, 2003.
Even employing the standard under which continuance requests under Code of
Civil Procedure section 437c, subdivision (h) are liberally granted, we
conclude that the trial court did not abuse its discretion by denying
Borrowers’ request in this instance. **We reach this conclusion for at least
three reasons.
**First, the application did not contain the requisite declaration indicating
in good faith the essential facts that Borrowers believed existed to oppose
the motion and the reasons those facts could not be presented in opposition
to the motion. **The application did not identify the declarations they
sought or the discovery they needed to develop the essential facts to oppose
the motion. Instead, the application pointed to **(1) an alleged discrepancy
between the date of default as indicated in the Default Notice and as noted
in the Neil declaration in support of Lender’s motion, and **(2) Lender’s
responses to interrogatories that Borrowers claimed were inadequate. The
information sought in the interrogatories, however, had nothing to do with
the claimed discrepancy in the Default Notice.FN19 The declaration in support
of the application thus failed to satisfy the requirement that it show “facts
essential to justify opposition may exist.” (Code Civ. Proc., § 437c, subd.
(h); Roth v. Rhodes (1994) 25 Cal.App.4th 530, 548, 30 Cal.Rptr.2d 706.)
**Third, the application presented “no justification for the failure to have
commenced the use of appropriate discovery tools at an earlier date.” (FSR
Brokerage, Inc. v. Superior Court, supra, 35 Cal.App.4th at p. 76, 41
Cal.Rptr.2d 404.) Borrowers did not explain any failure to discover facts
relating to the motions. **For instance, to the extent that Borrowers in
their joint declaration indicated uncertainty as to the amount of the
delinquency prior to the sale, they could have easily requested this
information through basic discovery at the commencement of the case. They
provided no explanation for not having done so. Thus, while perhaps not
determinative (see Bahl v. Bank of America, supra, 89 Cal.App.4th 389, 397-
398, 107 Cal.Rptr.2d 270), Borrowers’ lack of diligence here was an
additional factor relevant to the court’s exercise of discretion in its
refusal to continue the summary judgment hearing. (FSR Brokerage, Inc. v.
Superior Court, supra, 35 Cal.App.4th at p. 76, 41 Cal.Rptr.2d 404; A & B
Painting & Drywall, Inc. v. Superior Court (1994) 25 Cal.App.4th 349, 356-
357, 30 Cal.Rptr.2d 418.)
For all of the above reasons, we conclude that the trial court did not abuse
its discretion by denying Borrowers’ application to continue the hearing on
Trustee’s summary judgment motion.
*103 DISPOSITION
Rauer v. Hertweck, 175 Cal. 278, 165 P. 946 (Cal.,Jun 04, 1917)
Bad outcome
Plaintiff did not have notice of the execution sale, but notice of the
sale was imputed to his attorney of record, And plaintiff stated that
the property was not sold in lots. Evidence didn’t show that the
property consisted of lots.
228 Judgment
228XI Collateral Attack
228XI(B) Grounds
228k500 Errors and Irregularities
228k504 Irregularities in Proceedings
228k504(3) k. Defects in Entry, Form, and Contents
of Judgment. Most Cited Cases
Where it does not appear that two defendants in action to set aside execution
sale of real estate had any unity of interest or claim making it improper to
render several judgments against them, it will be presumed on collateral
attack that they did not.
161 Execution
161XI Sale
161XI(A) Manner, Conduct, and Validity
161k229 Bids
161k230 k. In General. Most Cited Cases
No inference of impropriety is to be drawn from fact that attorneys for
judgment creditor informed one of purchasers at execution sale that sale was
to be had, and suggested that he bid.
161 Execution
161XI Sale
161XI(B) Opening or Vacating
161k251 Inadequacy of Price in Connection with Other
Objections
161k251(1) k. In General. Most Cited Cases
Mere inadequacy of price, however gross, is not sufficient ground for setting
aside an execution sale legally made, but there must, in addition, be proof
of some element of fraud, unfairness, or oppression, before a court will be
justified in depriving purchaser of his legal advantage.
This action was brought to set aside an execution sale of real estate. The
court below granted the motion of the defendants for a nonsuit, and thereupon
entered judgment in their favor. The plaintiff appeals from the judgment.
In October, 1910, one Webb brought an action against Rauer and others to
quiet his title to certain lands in Fresno county, and, in June, 1912,
obtained judgment against Rauer quieting his title, and for costs amounting
to $15.90. On December 19, 1912, an execution was issued on said judgment for
costs. The sheriff levied the writ upon a tract of real estate in Fresno
county, described as ‘Lot No. 7, Linda Vista Tract,’ belonging to Rauer, and
sold said tract on the 18th day of January, 1913, to Hertweck and Sparkman,
the defendants in this action, for the sum of $46. The sheriff duly made his
return on said sale, and, on the 20th day of January, 1914, issued his deed
to Hertweck and Sparkman, the purchasers at the execution sale. The complaint
alleges that on the day of the execution of the sheriff’s deed, and long
prior thereto, the plaintiff was the owner of the land so sold, and that the
same was worth between $100 and $150 per acre. He further alleges that he was
ignorant of the judgment against him, of the issuance of the writ of
execution, of the sale of the property, and of the issuance of the sheriff’s
deed, until about the 4th day of February, 1914; that no one ever notified
him of the proposed sale of his property, although the defendants in this
action, the attorneys for the judgment creditor, and the sheriff knew that
plaintiff’s residence was at the city of San Francisco. It is alleged **948
that the writ of execution was *280 issued and levied, and the sale made,
with the intent to prevent all knowledge thereof on the part of plaintiff
until after the sale and the issuance of the deed thereon, and that all said
acts were intentionally concealed from the plaintiff for the purpose of
depriving him of the whole of his land for a mere nominal sum. In addition,
it is alleged that the sheriff did not offer the land for sale in any smaller
parcel than the 20 acres.
What, then, does the proof in this case show with respect to the unfairness
of the sale? The plaintiff, Rauer, testified that he had no knowledge of the
judgment, or of the proceedings on execution. But it appears without dispute
that on June 21, 1921, 11 days after the entry of the judgment, Mr. H. M.
Anthony, the attorney representing him in the action of Webb v. Rauer (and
who also represents him here), filed, on behalf of Rauer, a notice of appeal
from said judgment, and an undertaking to support such appeal. These facts
furnish conclusive evidence that Rauer’s attorney had actual knowledge of the
entry of the judgment against his client, and such knowledge is, in law, the
knowledge of Rauer himself. 6 C. J. 638; Mabb v. Stewart, 147 Cal. 413, 81
Pac. 1073. Besides this, there is uncontradicted evidence that on June 17,
1912, the attorneys for Webb wrote to Rauer’s attorney, requesting payment of
the judgment for the costs; that they mailed him a copy of the bill of costs,
and received a letter of acknowledgment; and that, in October, 1912, they
again wrote him asking that his client pay the costs. Both requests for
payment were ignored. The execution was not taken out until two months after
the sending of the second letter.
The notice of sale was published and posted in strict conformity with the
requirements of section 692 of the Code of Civil Procedure, but no one gave
Rauer or his attorney personal notice that the sale was to take place. The
sheriff and the undersheriff testified that they knew who Rauer was, and
could have found his address. Hertweck, one of the defendants, had done
business with Rauer. He knew that Rauer’s place of business was in San
Francisco, and that he was reputed to be a man of means. Sparkman, the other
defendant,*282 had never heard of Rauer. He testified that he first heard of
the proposed sale of the land when one of the attorneys for Webb told him
that there was to be an execution sale, and asked him if he did not want to
bid.
It is argued that the complaint alleges, and the answer fails to deny, that
the defendants knew that the writ was issued, and the sale made, with the
intent to prevent knowledge thereof by the plaintiff, and to deprive him of
his land. We think the complaint, properly construed, does not charge that
the defendants knew of the alleged intent. But, in any event, the answer was
clearly designed to dissociate the defendants from any connection with the
purpose, which, so far as they could know, may have been entertained by
others, to take an unfair advantage of the plaintiff. This may fairly be
interpreted as a denial of any knowledge on their part of such purpose, and
it was apparently so treated at the trial.
The attempt to show unfairness in the sale comes down simply to this: That
the execution sale was regularly made *283 upon due statutory notice, but
that the judgment debtor did not, in fact, know of the sale, and no one gave
him notice of it. He did, however, know that a judgment had been entered
against him, and must be deemed to have known that his property might be
levied on at any time. He failed to pay the judgment, and took no steps to
protect his property until many months after the entry of judgment. He then
found that a sale had been had, and that the time for redemption had expired.
The resulting loss can more properly be attributed to his neglect of his own
interests than to any unfairness on the part of the judgment creditor of the
purchasers. The case presents none of the peculiar circumstances of
oppression or inequitable conduct which were held, in Odell v. Cox and in
Winbigler v. Sherman, to justify relief from a sale made for an inadequate
price.
[8] It is claimed that the sale was irregular because the land was not
offered in subdivisions. Assuming that the evidence shows that the sale was
made as claimed by the appellant, there is no evidence that the situation was
such as to require the sheriff to sell the land otherwise than as a whole.
Section 694 of the Code of Civil Procedure provides that:
The land is described in the record as ‘Lot No. 7 of the Linda Vista tract.’
There is nothing to indicate that it consisted of other known lots or
parcels. A sale in parcels was not therefore required. Gleason v. Hill, 65
Cal. 17, 2 Pac. 413; Connick v. Hill, 127 Cal. 165, 59 Pac. 832; Meux v.
Trezevant, 132 Cal. 487, 64 Pac. 848.
[9] Without regard to other possible answers to the contention, the rule
relied upon has no application to actions in which separate and independent
relief is sought against several defendants. The court may, under the express
provision of section 579 of the Code of Civil Procedure, render judgment
against one or more of the defendants, ‘leaving the action to proceed against
the others, whenever a several judgment is proper.’ Cole v. Roebling
Construction Co., 156 Cal. 443, 105 Pac. 255; Bell v. Staacke, 159 Cal. 193,
115 Pac. 221.
[10] It does not appear that the two defendants in the suit brought by Webb
had any unity of interest or claim making it improper to render several
judgments against them. On this collateral attack on the judgment, it will be
presumed that they did not.
[4][5][6] Nor can we agree with Jensen that the proper remedy was an action
for damages, not an order setting aside the sale. “It is the general rule
that courts have power to vacate a foreclosure sale where there has been
fraud in the procurement of the foreclosure decree or where the sale has been
improperly, unfairly or unlawfully conducted, or is tainted by fraud, or *1098
where there has been such a mistake that to allow it to stand would be
inequitable to purchaser and parties.” ( Bank of America etc. Assn. v. Reidy,
supra, 15 Cal.2d at p. 248, 101 P.2d 77.) A debtor may apply to a court of
equity to set aside a trust deed foreclosure on allegations of unfairness or
irregularity that, coupled with the inadequacy of price obtained at the sale,
mean that it is appropriate to invalidate the sale. (Sierra-Bay Fed. Land
Bank Assn. v. Superior Court (1991) 227 Cal.App.3d 318, 337; , 277 Cal.Rptr.
753 3 Witkin, Summary of Cal. Law (9th ed.1987) Security Transactions in Real
Property, § 149.) Here, there was both unfairness and an inadequate price.
The court had the power to vacate the sale and properly made that order.
Jose Realty Co. v. Pavlicevich, 164 Cal. 613, 130 P. 15 (Cal.,Jan 27, 1913)
266 Mortgages
266IX Foreclosure by Exercise of Power of Sale
266k369 Setting Aside Sale
266k369(3) k. Fraud and Inadequacy of Price. Most Cited Cases
Proof that mortgagee procured trustee to sell property by falsely
representing that there had been a default, and became the purchaser himself,
without the owners having any notice or knowledge of the sale, held to
justify setting aside the sale.
The proof showed that on November 30, 1909, one J. A. Cottle, being then the
owner of the land subject to a deed of trust by him previously made, conveyed
it to one A. E. House, and that on September 21, 1910, said House executed a
deed purporting to convey the land to the plaintiff. The defendant for answer
alleged that on November 30, 1909, Cottle executed a deed conveying the land
to a trustee, with power of sale, to hold the same as security for the
payment of a note from Cottle to Pavlicevich, dated October 18, 1909, payable
one year after date, for $3,300, with interest at 7 per cent. per year,
payable monthly, and providing that, if the interest was not so paid, the
payee might declare the whole sum due, of which declaration the maker waived
notice; that no interest was paid for the months of May, June, July, or
August, 1910, whereupon the defendant declared the whole sum due, and the
trustee, at defendant’s written request, and in the manner prescribed by the
terms of the power of sale, offered the land for sale for nonpayment of debt,
sold it to Pavlicevich, and in pursuance thereof, on September 20, 1910,
conveyed the land to Pavlicevich by deed, which was duly recorded on the same
day, whereby defendant became the owner of the premises.
The note declared that it was payable at the office of Will M. Beggs, in San
Jose. The deed to the trustee provided that, in any deed made by the trustee
under the power of sale, the recital in such deed of any matter of fact,
including the fact that default had been made in the payment of the note or
interest thereon, when due, should be conclusive proof of such fact against
Cottle, his heirs and assigns. The deed executed by the trustee to
Pavlicevich recited that the interest on said note was on August 24, 1910,
overdue and unpaid, and that Pavlicevich had elected to consider the
principal as *616 immediately due and payable, and had directed the trustee
to proceed, and that the first publication of the notice of sale was on
August 25, 1910. The plaintiff, on the trial, did not controvert any of these
statements, except the statement that the interest on the note, or any part
of it, was overdue at or prior to the giving of said notice of sale. Its
contention is that it had bought the title of Cottle, and had assumed the
payment of the note; that it was able and willing to pay it at the office of
Beggs at the time the respective monthly payments became due; and
consequently that, under the provisions of section 3130 of the Civil Code, it
was not in default. **It also claimed that the trustee’s sale was
fraudulently procured by Pavlicevich; the fraud consisting of his conduct in
giving the direction to the trustee to sell the land for default in payment
of interest, when, by reason of plaintiff’s ability and willingness to pay
the interest at the time it fell due at the place of payment, there was no
default.
It was not necessary for plaintiff to plead fraud in its complaint. The
trustee’s sale was set up by the defendant as a defense to the action of the
plaintiff. In such a case, proof of fraud, sufficient to avoid the trustee’s
sale and deed, was admissible without further pleading; it being matter in
avoidance of the defense set up in the answer. Moore v. Copp, 119 Cal. 433,
51 Pac. 630; Brooks v. Johnson, 122 Cal. 570, 55 Pac. 423; White v.
Stevenson, 144 Cal. 112, 77 Pac. 828; Wendling Co. v. Glenwood Co., 153 Cal.
415, 95 Pac. 1029; Peck v. Noee, 154 Cal. 354, 97 Pac. 865.
The court found that no interest was ever paid on the note for any month
after April, 1910, but that, at all times since that date, ‘the payor of said
note has had sufficient funds at said office for the purpose of paying said
interest,’ and that the defendant had never demanded the payment of said
interest. **Upon this finding, it made a conclusion of law that there was no
default in the payment of interest, and that the declaration by Pavlicevich
that the principal was due, and the sale and deed made in pursuance thereof,
were fraudulent and void. **There was also a general finding that the
plaintiff was the owner of the land, subject to the deed of trust executed by
Cottle, and that the interest which the defendant *617 claims, in addition to
the rights conferred by said deed of trust, is without right. The defendant
gave notice of intention to move for a new trial, stating that the motion was
to be made on the minutes of the court. The notice in effect specified that
the evidence was insufficient to justify the following findings: (1) That
plaintiff is the owner of the premises; (2) ‘that the interest which
defendant has in the premises is without right;’ (3) ‘that the money for the
payment of the interest on said note was at all times ready at the place of
payment.’Although these are not in the customary form for such specifications
of insufficiency, we think they are sufficient to present the question
whether or not the finding on the subject of the default in the interest
payments is sustained by the evidence.
It is admitted that the interest for the four months above specified has
never been paid. It is not claimed that Pavlicevich knew, or ever was
informed, that the plaintiff, or any *618 other person, had funds in the
hands of Beggs, or with any other person at his office or elsewhere, with
which to pay the interest, or that any money had been placed there for that
purpose. Pavlicevich testified that the loan to Cottle was made for him
through the agency of Beggs, to whom he had intrusted the money for that
purpose; that he demanded from Beggs in his office, about the 1st of June,
1910, the payment of the interest due on May 18, 1910; and that during the
months of May, June, July, and August, 1910, he went repeatedly to Beggs’
office to collect the interest, but failed to get it, and that Beggs never
offered to pay it. This, clearly, was ample evidence of the existence of a
default. In rebuttal, Beggs testified that he was the president of the Jose
Realty Company, and that in February, 1910, he told Pavlicevich that said
company had succeeded to the interest of Cottle in the property, and was to
look after the payment of the note and interest. He further testified that he
had advanced $8.50 for Pavlicevich to pay costs in a justice court suit, in
which he was attorney for Pavlicevich, and that Pavlicevich, in January,
1910, agreed that this advance might be adjusted the next time the interest
fell due on the note; that no interest was paid from that time until May 5th,
when he paid to Pavlicevich $57.75, being interest for three months ending
April 18th; that the $8.50 was not then adjusted or deducted; that
Pavlicevich, shortly afterwards, asked Beggs to find a purchaser for the
note, saying that he needed the money; that Beggs tried to do this, and that
there were several conversations between them about it; and that Pavlicevich
never demanded payment of the interest from him, or from anybody else in his
presence, or to his knowledge. There is no testimony that any person ever
offered to pay such interest. Beggs was then asked the question, ‘Did you
have funds at your office, or had any of the persons in charge of your
office, sufficient to pay the interest at any time had it been demanded?’ to
which he answered, ‘Yes, sir.’ This was all the evidence tending to show that
the plaintiff was able and willing to pay the interest at the office of Beggs.
The purpose of this evidence was to bring the case within the provisions of
section 3130 of the Civil Code, which reads as follows: ‘It is not necessary
to make a demand of payment upon the principal debtor in a negotiable
instrument in order *619 to charge him; but if the instrument is by its terms
payable at a specified place, and he is able and willing to pay it there at
maturity, such ability and willingness are equivalent to an offer of payment
upon his part.’Under this section, no demand was necessary in order to create
a default in payment. The latter clause of the section manifestly refers to
section 1500 of the Civil Code, which provides that: ‘An obligation for the
payment of money is extinguished by a due offer of payment, if the amount is
immediately deposited in the name of the creditor, with some bank of deposit
within this state, of good repute, and notice thereof is given to the
creditor.’Under this section it has been uniformly held that although such an
offer, when not followed by an immediate deposit, does not pay the debt, or
extinguish the obligation to pay it, yet, if the mere offer is duly made, the
effect is that there is at that time no breach of the promise to pay. Randol
v. Tatum, 98 Cal. 399, 33 Pac. 433; O’Conor v. Braly, 112 Cal. 37, 44 Pac.
305, 53 Am. St. Rep. 155; Knowles v. Murphy, 107 Cal. 115, 40 Pac. 111; Wolff
v. Canadian Co., 123 Cal. 543, 56 Pac. 453; Montgomery v. Tutt, 11 Cal. 318,
327.Section 3130, of course, cannot be complied with by a mere passive
ability and willingness. There must be an ability to pay, manifested by
providing funds at the place of payment in the hands of some person there
present, who is authorized to pay it on the debt and is willing to do so. If,
therefore, the plaintiff had placed sufficient money in the office of Beggs,
to be applied to the payment of this interest, in charge of some person there
who was authorized and directed to use it for that purpose, when demand was
there made, or if it had been in attendance there by its agent, with
sufficient money and authority to pay such interest, and had been able and
willing thereafter to pay it on demand, it would not have been in default for
nonpayment of interest, although the obligation to pay it would remain.
Montgomery v. Tutt, supra, 11 Cal. 318.
But the evidence does not show this to be the case. It merely shows that
Beggs, or **18 some other person in his office, had money enough to pay the
interest at any time, had it been demanded. It does not show that the money
belonged to the plaintiff, or that it had been provided or placed there by
the plaintiff, or any other person, for the purpose of paying this *620
interest, or that Beggs, or that any other person in his office, was willing
to pay it out on the interest, or had been authorized or instructed to do so,
or that any of them intended to do so if the interest had been demanded.
There was therefore no proof that ‘the payor of said note has had sufficient
funds at said office’ to pay the interest, or that the payor had sufficient
or any funds there ‘for the purpose of paying said interest’ as the findings
declare, or that the payor was ‘able and willing to pay it there,’ in the
sense necessary to constitute the equivalent of an offer to pay under section
3130, aforesaid. The proof in rebuttal was not sufficient to overcome the
positive proof of the defendant that the interest was not paid when due.
The judgment is vacated, and the order denying a new trial is reversed.
Appeal from Superior Court, Los Angeles County; Charles S. Burnell, Judge.
Action by A. Halden Jones and another against the Sierra Verdugo Water
Company and others. From a judgment for defendants on demurrer, plaintiffs
appeal. Affirmed.
Appellants claim that they are entitled to have the sale set aside under this
statement of the rule. They claim that the facts alleged by them in their
complaint do show that, in addition to inadequacy of price, there was fraud
and unfairness. But the accompanying fraud, unfairness, or oppression which
will suffice to make inadequacy of price a ground for setting aside a sale
must be such as accounts for and brings about the inadequacy of price. **The
rule is stated in Ruling Case Law as follows:
“It is not alleged that the sale in question was attended by any irregularity
on the part of the sheriff or the plaintiff in the writ, or that any mistake,
surprise, accident, misconduct, or fraud intervened, by which the inadequacy
of price was brought about. *** Mere inadequacy of price, not attended by
circumstances of fraud, misconduct, accident, mistake, or surprise tending to
influence the result, is not sufficient to invalidate such a sale. Otherwise
the mere lack of competitive bids, or the intervening of any like
circumstance whereby the price realized should be deemed inadequate, would be
sufficient to render questionable*264 the title obtained by sale under
execution.” (Italics ours.)
Goodenow v. Ewer, 16 Cal. 461, 1860 WL 983, 76 Am.Dec. 540 (Cal.,Oct Term
1860)
Ie. of mistake of law. Mistake of law of plaintiff not including the
vendee, as a party in the foreclosure suit which resulted that he only
purchased one-third not one-half of the property at issue.
One of two tenants in common mortgaged his estate, and subsequently the two
conveyed one-third of the whole estate to a third party. The mortgagee
foreclosed without making such vendee a party, and became the purchaser at
the foreclosure sale for the amount of his debt and costs, under a mistake,
supposing that he thereby acquired the vendee’s interest in the property. The
vendee afterwards acquired the remaining interest of the two tenants in
common. The mortgagee applied for a sale of the whole property, on the ground
that it was incapable of partition, and asked to be reimbursed out of the
proceeds to the extent of one-third of the amount paid, on the ground of his
mistake in bidding on the supposition that he acquired a title to one-half,
instead of only one-third, of the property. **Held that, his mistake being
one of law, he was not entitled to relief under the particular circumstances.
Bad outcome
(9) Although plaintiff had actual notice of the proposed trustee sale
prior to the date of sale and of necessity must be deemed to have had notice
of the person who had requested the trustee to sell, and appears to have had
actual knowledge of the identity of such person in view of his suit to enjoin
the sale (see Stafford v. Clinard, supra), yet he made no attempt to tender
any amount due under the note and trust deed until more than two years
thereafter, and then made *334 the alleged tender to the original payee of
the note and not to the assignee thereof. Plaintiff’s position is utterly
lacking in equity.
Taliaferro v. Crola, 152 Cal.App.2d 448, 313 P.2d 136 (Cal.App. 1 Dist. Jul
15, 1957)
Fraud
Countrywide v. U.S. 2007_wl_87827
Elements of fraud
Hernandez v. Downey Savings and Loan Ass’n, 2009 WL 704381 (S.D.Cal. Mar
17, 2009)
At p. 680
When the trustee’s deed contains recitals and the sale is voidable, a
trustor who challenges the validity fo the sale must prove that the
conclusive presumption is not applicable either because it does not
apply to the buyer since the buyer was the beneficiary, or because
there are grounds for equitable relief such as fraud, or because the
presumption does not apply to the third party buyer because the buyer
is not a bona fide purchaser.8 The trustor must also prove that he or
she has suffered some injury or has been prejudiced by the
irregularity in the proceedings.9
At p. 683
On the other hand, where the sale is void the trustor can avoid the
sale even where title is held by a bona fide purchaser. 20
20 Little v. Cfs Service Corp. 188 Cal.App.3d 1354, 1358, 1362, 233
Cal.Rptr. 923 (2d Dist. 1987) (whee sale is void it has no legal
effect or binding force and is incapable of being enforced); In re
Worcester, 811 F.2d 1224, 1231-1232, 16 Collier Bankr. Cas. 2d (MB)
589, Bankr. L. Rep. (CCH) Paragraph 71637, 7 Fed R. Serv. 3d 733 (9th
Cir. 1987); Whitman v. Transtate Title Co., 165 Cal.App.3d 312, 322-
323, 211 Cal.Rptr. 582 (4th Dist. 1985)
Wells Fargo is a criminal actor. The court must consistent with its
binding duties under the Code of Judicial Conduct
The court must consistient with its dutues under the Code of Judicial
Conduct and consistent with its duties to protect the people of the
State of California and the people of the United States, the
Constitution to enforce the law that is in force and effect.
Void sale held in placentia, newspaper publication must be in the in a
newspaper in the county meeting circulation requirements, judicial
district
And again First Alliance was not authorized to record the Notice of
the Sale. And under the law of Section 2924 of the Civil Code of the
State of California. Dimock v. Emerald. It is well settled,
To carry out the crime of filing a false deed in order to cover the
fact that the deed that they had was void.
In Whitman v. Transtate Title Co. (1985) 165 Cal.App.3d 312, 322, 211
Cal.Rptr. 582, the court stated,
Sargent v. Shumaker, 193 Cal. 122, 129, 223 P. 464 (Cal.,Jan 30, 1924)
**It is well settled in this state that mere inadequacy of price, however
gross, is not in itself a sufficient ground for setting aside a sale legally
made. There must in addition be proof of **some element of **fraud,
**unfairness or **oppression before the court will be justified in depriving
the purchaser of his legal advantage. **Where, however, the price obtained is
greatly disproportionate to the actual value, very slight evidence of
unfairness or irregularity will suffice to authorize the granting of the
relief. Rauer v. Hertweck, 175 Cal. 278, 165 Pac. 946; Winbigler v. Sherman,
175 Cal. 270, 165 Pac. 943; Back v. Losekamp, 179 Cal. 674, 179 Pac. 516;
Odell v. Cox, 151 Cal. 70, 90 Pac. 194;
And,
At p. 131,
(optional)
At p. 132
‘If the inadequacy can be connected with or shown to result from any mistake,
accident. surprise, misconduct, fraud or irregularity, the sale will
generally be vacated, unless the complainant was himself in fault, or the
rights of innocent third parties have became dependent upon the
sale.’(Italics added.)”
Bank of Seoul & Trust Co. v. Marcione, 198 Cal.App.3d 113, 119 244
Cal.Rptr. 1 (Cal.App. 2 Dist.,Feb 01, 1988)
Positive outcome
*248 [1][2] It is the general rule that courts have power to vacate a
foreclosure sale where there has been fraud in the procurement of the
foreclosure decree or where the sale has been improperly, unfairly or
unlawfully conducted, or is tainted by fraud, or where there has been such a
mistake that to allow it to stand would be inequitable to purchaser and
parties. **Sham bidding and the restriction of competition are condemned, and
inadequacy of price when coupled with other circumstances of fraud may also
constitute ground for setting aside the sale.
“It is the general rule that courts have power to vacate a foreclosure sale
where there has been fraud in the procurement of the foreclosure decree or
where the sale has been improperly, unfairly or unlawfully conducted, or is
tainted by fraud, or *1098 where there has been such a mistake that to allow
it to stand would be inequitable to purchaser and parties.” ( Bank of America
etc. Assn. v. Reidy, supra, 15 Cal.2d at p. 248, 101 P.2d 77.) A debtor may
apply to a court of equity to set aside a trust deed foreclosure on
allegations of unfairness or irregularity that, coupled with the inadequacy
of price obtained at the sale, mean that it is appropriate to invalidate the
sale. (Sierra-Bay Fed. Land Bank Assn. v. Superior Court (1991) 227
Cal.App.3d 318, 337; , 277 Cal.Rptr. 753 3 Witkin, Summary of Cal. Law (9th
ed.1987) Security Transactions in Real Property, § 149.) Here, there was both
unfairness and an inadequate price. The court had the power to vacate the
sale and properly made that order.
where a sale is made for a price greatly disproportionate to the value of the
property, courts will set aside the sale on very slight evidence of
unfairness or irregularity, “such irregularities, to have this effect, must
have conduced to the inadequacy of the price, or in some other way have
contributed to the injury of the plaintiff.” Sargent v. Shumaker, 193 Cal.
122, 131, 223 P. 464, 468. Nothing of that kind is shown here.
Prudential Ins. Co. of America v. Sly, 7 Cal.2d 728, 62 P.2d 740 (Cal.,Nov
24, 1936)
[6] Although defendant urges that the sale was for an inadequate price, in
proportion to the alleged value of the property, it is settled that, without
proof of fraud or other fault, such inadequacy does not avoid the sale.
Stevens v. Plumas Eureka Annex Mining Co., supra.
Castello v. Central Eureka Min. Co., 85 Cal.App.2d 772, 193 P.2d 968
(Cal.App. 1 Dist. Jun 02, 1948)
[p See 3 Witkin, Summary of Cal. Law (9th ed. 1987) Security Transactions in
Real Property, § § 139, 149; Greenwald & Asimov, Cal. Practice Guide: Real
Property Transactions (The Rutter Group 2004) ¶ 6:535 et seq. (CAPROP Ch. 6-
I); Cal. Jur. 3d, Deeds of Trust, § § 317, 318; Cal. Civil Practice
(Thomson/West 2003) Real Property Litigation, § 4:85 et seq.; 4 Miller &
Starr, Cal. Real Estate (3d ed. 2001) § § 210, 211.]
When the foreclosure sale was not held in compliance with the
statutory procedural requirements (Residential Capital v. Cal-Western
Reconveyance Corp., 108 Cal.App.4th 807, 823 134 Cal.Rptr.2d 162)
p. 580
All the requirements of the state’s foreclosure law have been met…
Only a slight irregularity will invalidate a sale if the bid is
grossly inadequate. Whitman v. Transtate Title Co. (1985) 16
Cal.App.3d 312, 211 Cal.Rptr.582
Gross disparity between sale price and property value, combined with
evidence of even slight unfairness or irregularity in the sale
process. See Stevens v. Plumas Eureka Annex Mining Co. (1935) 2 Cal.2d
493, 41 P.2d 927; Sargent v. Shumaker (1924) 193 Cal. 122, 223 P. 464;
Estate of Yates v. West End Fin. Corp., supra; Lopez v. Bell (1962)
207 Cal.App.2d 394, 24 Cal.Rptr. 626; Foge v. Schmidt (1951) 101
Cal.App.2d 681, 226 P.2d 73 (Miscommunication related to an agreement
for postponement of the foreclosure sale is not the type of
irregularity that justifies setting the sale aside. See Nguyen v.
Calhoun (2003) 105 Cal.App.4th 428, 129 Cal.Rptr.2d 436.)
-Has the movant shown by competent evidence that the debtor owes money
under the note or has otherwise failed to perform under the note or
deed of trust? See Fed R Evid 102, 104(a), 602, 801-802, 803(6);
American Express Travel Related Servs. Co. v. Vinhee (In re Vinhee)
(BAP 9th Cir 2005) 336 BR 437, 444
The only defense is that the sale was not conducted in compliance with
the terms of the statute (Civ. Code §§2924 et seq. and of the security
instrument. [Cheney v. Trauzettel (1937) 9 Cal.2d 158, 69 P.2d 832;
MCA, Inc. v. Universal Diversified Enterprises Corp. (1972), 2nd Dist)
27 Cal.App.3d 170, 103 Cal.Rptr. 522]”
There was fraud, unfairness, or failure to comply with the trust deed
provisions or statutory requirements [see, e.g. Whitman v. Transtate
Title Co. (1985) 165 Cal.Ap.3d 312, 322-323, 211 Cal.Rptr.582(failure
to comply with mandatory postponement requirement); Standley v. Knapp
(1931) 113 Cal.App.91, 97-102, 298 P. 109 (failure to properly post
notice of sale)]
A conjuntive rule is a rule that sets out a test with elements all of
which must be met.
From both the setting aside of execution sales and trustee sales.
Statutes are different the appellate courts have found that the
element of the equitable doctrine of setting aside the sale
sufficiently similar to apply the opinions from the execution sales.
To establish grounds
Cases 1 and 2 illustrate the parameters of the equitable doctrine
Have held that opinions from both execution sales and trustee sales
apply.
Legal principle
In rendering opinions on setting aside a nonjudicial foreclosure,
courts have applied opinions from both execution sales and trustee
sales.
Courts have rendered opinions applying those from both execution and
trustee sales
Have applied opinions from both execution sales and trustee sales
Courts have held that opinions from execution sales also apply
Have applied prior opinions from both execution sales and trustee
sales.
Courts have held opinions from execution sales are precedents for
nonjudicial foreclosure.
Apply
Winbigler v. Sherman, 175 Cal. 270, 165 P. 943 (Cal.,Jun 04, 1917)
‘Counsel for respondent have not referred to any decision holding that under
a trust deed in the form here presented the publications of the notice of
sale must be continued down to the very time of the sale; therefore, we may
be justified in assuming that there is no such decision. In addition to that,
however, we have examined some of the principal text-books and digests, and
we fail to find any declaration of law in support of respondent’s contention.
**The rule, of course, is that in executing a power of sale the trustee must
act in good faith and strictly follow the requirements prescribed by the
trust deed with respect to the manner of sale.
“Use whichever rule tells you which facts have legal significance. If the
substantive rule defines what facts are relevant and the procedural rule
tells the judge the only standard for analyzing those facts, then the
procedural rule really functions only as a gloss on the substantive rule.
In such case, use the substantive rule as your overall structure, simply
phrasing the issue with reference to the standard imposed by the procedural
rule.
“When you are dealing with a rule based primarily on a case, your most
important tools for ‘proving’ the rule are (1) describing what the court said
about the rule, (2) describing how the court applied the rule, (3) pointing
out relevant information about how the court did not apply the rule, (4)
pointing out any relevant facts the courts emphasized, and (5) describing the
policy considerations that support the rule. The value in each of these
tools is not simply reporting them, but rather in using them to make a point
about the rule.”
IX. Organizing the Discussion of Multiple Auithorities, II. Ordering
Authorities For An Analysis Primarily Requiring Statutory Construction, page
128,
“You have already learned that statutes are construed by case opinions. If
case authority has already told you what the statute means, then you can rely
on the case law to the extent of its precedential value. But what should you
do if no binding case law has construed this statute, at least not with
regard to your particular question? You will have to predict how a court
would construe it.
Where no binding case authority has construed a statute, judges decide what
the statute means primarily by considering (in rough order of importance):
(1) the text itself, (2) the intent of the legislature, (3) the policies
implicated by the possible interpretations, (4) the interpretation of any
governmental agencies charged with enforcement of the statute, and (5) the
opinions of other courts and respected commentators.
Neumann, Richard, Legal Reasoning and Legal Writing; Structure, Strategy, and
Style (3d ed., Aspen L. & Bus. 1998)
CONCLUSIONS OF LAW
[1] The party moving for relief from the automatic stay on a theory of lack
of equity in the property must make out a prima facie case by way of
competent evidence as to the essential elements required for relief,
including the value of the property and the claims against it. The
Bankruptcy Code spells out the moving party’s burden: "the party requesting
such relief has the burden of proof on the issue of the debtor’s equity in
property." 11 U.S.C. § 362(g)(1).
[3] Evidence on routine motions for relief from stay in this court is
generally taken on affidavits as permitted by Federal Rule of Civil Procedure
43(e) unless it appears that live testimony would be of assistance to the
trier of fact. [FN4] Local Rule 3. This enables the court to winnow the
genuine disputes of fact and law from the 2,500 "contested matters" under
Bankruptcy Rule 9014 that annually appear on its calendar. [FN5]
FN5. "Contested matters" are essentially items that call for the court to
determine questions of law and fact that are of a sufficiently
straightforward nature as to enable their resolution on a "short cause" basis
without offending requirements of due process.
The fact of accepting affidavits does not relax the fundamental mandates of
due process and does not excuse compliance with the requirement that evidence
be admissible pursuant to the Federal Rules of Evidence. Thus, the hearsay
rule, and its exceptions, remain applicable. Fed.R.Evid. 802-804. Hearsay
within hearsay is inadmissible unless each layer conforms with a hearsay
exception. Fed.R.Evid. 805.
[4] In addition to affidavits, this court often takes judicial notice of the
schedules filed in the case when the value of property is in issue. The
debtors’ schedules are a key document in a bankruptcy case and are executed
by debtors under penalty of perjury. Representations by a debtor in the
schedules as to such matters as the value of property, when offered against a
debtor, are eligible for treatment as admissions by a party-opponent.
Fed.R.Evid. 801(d)(2).
See
11_usc_362_necessity_for_reorganization_or_rehabilitation_real_propert
y_digest.
Pari materia:
Latin, Of the same matter; on the same subject.] The phrase used in
connection with two laws relating to the same subject matter that must
be analyzed with each other.
For example, the federal gift tax provisions supplement the federal
estate tax provisions. The two are in pari materia and must be read
together because the gift tax provisions were enacted to prevent the
avoidance of estate taxes
Utilize more thorough argument that trustee was not authorized to act/
Gross inadequacy of price combined with slight irregularity renders
the sale void. In the request for stay.
Amended Request For Stay August 20, 2009 contains refutation of WELLS
FARGO statement that they had substituted the trustee.
In Supplemental Brief to Motion For Relief From The Automatice Stay Miguel Duarte
stated, “at page 5 line 19, “Although Movant has requested the full transcripts
from the two hearings that encompassed Movant’s Motion For Summary Judgment that
transcripts have not yet been produced by the Superior Court. 2 Movant does however
have true and correct copies of their moving papers and Debtor’s opposition 3
(Request for Judicial Notice filed concurrently herewith, Ex. 10) Moreover, as an
officer of the Court, Movant’s counsel can testify to the fact that claims against
Movant’s title to the property were heard.
2
Transcripts of the both hearing’s that encompassed Movant’s Motion for Summary
Judgment have been ordered and should be available prior to the continued hearing.
3
Due to the voluminous nature of Debtor’s opposition to Movant’s Motion for
Summary Judgment, Movant will not be filing a copy of the Debtor’s opposition.”
And then in, Declaration Of Miguel Duarte In Support of Movant’s Supplemental Brief
To Motion For Relief From Stay, Mr. Miguel Duarte states under the penalty of
perjury at page 12, line 13, “I was also the attorney of record for the Movant in
the prior unlawful detainer matter where David and Soon Chey were defendants. In
that case Movant filed a Motion for Summary Judgment that was heard on March 13,
2009. After a rather lengthy hearing that included defendant’s claims of fraud the
Court stated Movant had purchased the property at a validly conducted trustee’s
sale.”
U.S. v. Dibble, 429 F.2d 598 (9th Cir.(Cal.) Jul 06, 1970)
U.S. v. Mooney, 315 F.3d 54, 60 Fed. R. Evid. Serv. 60 (1st Cir.(Me.),Dec 30, 2002)
[12] The defendant also argues that the district court misapplied Federal Rule of Evidence 702 by allowing the
government’s proffered handwriting expert to testify that the defendant was the author of several letters that
acknowledged his involvement in the burglary. The defendant does not contend that the expert’s testimony should
have been struck in its *62 entirety. Instead, he makes the more narrow argument that, although the reliability of the
expert’s methodology suffices to support testimony regarding the similarity and differences between the handwriting
on the letters and that of the defendant, the expert’s reliability cannot sustain the admission of his ultimate opinion
as to whether the defendant authored the letters. The district court disagreed, and we fail to see how the district court
abused its discretion in reaching its conclusion.
Under Rule 702, a qualified expert witness may testify “in the form of an opinion, or otherwise, if **(1) the
testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods,
and (3) the witness has applied the principles and methods reliably to the facts of the case.” Fed.R.Evid. 702. The
Supreme Court has held that this rule imposes a gate-keeping function on the trial judge to ensure that an expert’s
testimony “both rests on a reliable foundation and is relevant to the task at hand.” Daubert v. Merrell Dow Pharm.,
Inc., 509 U.S. 579, 597, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) ; see also Kumho Tire Co. v. Carmichael, 526 U.S.
137, 147-49, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999) (holding that Daubert applies not only to scientific testimony
but also to technical and other specialized expert testimony).
In Daubert, the Court identified four factors that may assist a trial court in determining the admissibility of an
expert’s testimony: **(1) whether the theory or technique can be and has been tested; **(2) whether the technique
has been subject to peer review and publication; **(3) the technique’s known or potential rate of error; and **(4) the
level of the theory or technique’s acceptance within the relevant discipline. 509 U.S. at 593-94, 113 S.Ct. 2786.
These factors, however, are not definitive or exhaustive, and the trial judge enjoys broad latitude to use other factors
to evaluate reliability. See Kumho Tire, 526 U.S. at 153, 119 S.Ct. 1167. Further, a trial judge’s decision to admit or
exclude expert testimony will be reversed only for abuse of discretion. See United States v. Diaz, 300 F.3d 66, 74
(1st Cir.2002) (citing Gen. Elec. v. Joiner, 522 U.S. 136, 138-39, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997)).
A review of the district court’s voir dire hearing on the admissibility of the handwriting expert’s proposed testimony
reveals that the judge did not abuse his discretion. **The expert testified that he and other forensic document
examiners employ the same methodology to analyze and compare a known individual’s handwriting samples to the
handwriting on the document at issue. **This methodology has been subject to general peer review through
published journals in the field. In addition, its accuracy has been tested, with one study concluding that certified
document examiners had a potential rate of error of 6.5%. The proffered expert indicated that he was certified by the
American Board of Forensic Document Examiners to apply this methodology. He also testified that he submitted to
proficiency tests twice a year, and that all of his work is reviewed and confirmed by at least one other document
examiner.
At the close of the hearing, the district judge concluded that the handwriting expert’s proposed testimony should be
admitted in its entirety because it was reliable and based upon valid technical and specialized knowledge. Finding
the Daubert factors relevant to his evaluation of the reliability of the expert’s testimony, the judge noted that all the
factors were met in this case. The judge also found persuasive the historical acceptance of handwriting testimony,
noting that the Federal Rules of Evidence specifically allow expert witnesses to authenticate *63 questioned
documents by comparing the handwriting on them to previously authenticated specimens. See Fed.R.Evid. 901(b)
(3).
[13] The defendant argues that the district court erred in admitting the expert’s opinion that the defendant was the
author of the incriminating letters. He contends that the field of handwriting analysis lacks sufficient standards and
testing to verify that analysts can accurately and definitively identify the author of a questioned document.
Specifically, he asserts that the discipline lacks a set standard regarding the number of handwriting similarities
required to make a “match,” and that the studies regarding its accuracy have been subject to criticism. The
defendant, however, misunderstands Daubert to demand unassailable expert testimony. As we previously have
explained,
Daubert does not require that the party who proffers expert testimony carry the burden of proving to the judge that
the expert’s assessment of the situation is correct....It demands only that the proponent of the evidence show that
the expert’s conclusion has been arrived at in a scientifically sound and methodologically reliable fashion.
Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77, 85 (1st Cir.1998).
We disagree with the defendant that another trial court’s decision regarding a different expert, United States v.
Hines, 55 F.Supp.2d 62 (D.Mass.1999), compels us to find that the district judge in this matter abused his discretion.
The Hines opinion, of course, has no binding effect. We are not faced here with the question of whether the district
court abused its discretion by excluding, as in Hines, opinion testimony by a handwriting expert. Nor do we know if
the “particular facts and circumstances of the particular case,” Kumho Tire, 526 U.S. at 158, 119 S.Ct. 1167,
distinguish Hines. V comparison testimony and the expert’s ultimate opinion on authorship were inevitably linked
because they were based on the same methodology. We find no abuse of discretion in that ruling.
[14] We also note that Rule 702 specifically allows qualified experts to offer their opinions, a testimonial latitude
generally unavailable to other witnesses. See Kumho Tire, 526 U.S. at 148, 119 S.Ct. 1167 (citing Daubert, 509 U.S.
at 592, 113 S.Ct. 2786). The rule affords experts this leeway on the “assumption that the expert’s opinion will have a
reliable basis in the knowledge and experience of his discipline.” Id. Accordingly, once a trial judge determines the
reliability of the proffered expert’s methodology and the validity of his reasoning, the expert should be permitted to
testify as to the inferences and conclusions he draws from it, and any flaws in his opinion may be exposed through
cross-examination or competing expert testimony. See Ruiz-Troche, 161 F.3d at 85 (citing Daubert, 509 U.S. at 590,
596, 113 S.Ct. 2786). The district judge did not abuse his discretion in admitting the expert’s ultimate opinion on
authorship.
**the trial judge must ensure that any and all scientific testimony or
evidence admitted is not only relevant, but reliable.
FN7. THE CHIEF JUSTICE “do[es] not doubt that Rule 702 confides to the judge
some gatekeeping responsibility,”
Kumho Tire Co., Ltd. v. Carmichael (1999) 526 U.S. 137, 152, 119 S.Ct.
1167
[5][6] The trial court must have the same kind of latitude in deciding how to
test an expert’s reliability, and to decide whether or when special briefing or
other proceedings are needed to investigate reliability, as it enjoys when it
decides whether or not that expert’s relevant testimony is reliable. Our opinion in
Joiner makes clear that a court of appeals is to apply an abuse-of-discretion
standard when it “review[s] a trial court’s decision to admit or exclude expert
testimony.” 522 U.S., at 138-139, 118 S.Ct. 512. That standard applies as much to
the trial court’s decisions about how to determine reliability as to its ultimate
conclusion. Otherwise, the trial judge would lack the discretionary authority
needed both to avoid unnecessary “reliability” proceedings in ordinary cases where
the reliability of an expert’s methods is properly taken for granted, and to
require appropriate proceedings in the less usual or more complex cases where cause
for questioning the expert’s reliability arises. Indeed, the Rules seek to avoid
“unjustifiable expense and delay” as part of their search for*153 153“truth” and
the “jus[t] determin[ation]” of proceedings. Fed. Rule Evid. 102.”
Millenkamp v. Davisco Foods Intern., Inc., 562 F.3d 971, 68 UCC Rep.Serv.2d
863, 09 Cal. Daily Op. Serv. 4480, 2009 Daily Journal D.A.R. 5327 (9th Cir.
(Idaho),Apr 14, 2009)
(1)
Pursuant to the standards set forth by *979Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993) ,
and Federal Rule of Evidence 702, the district court allowed Dr. Kertz’s
expert opinion that the milk permeate likely caused the calves’ illness. The
district court has discretion whether to hold a Daubert hearing in
determining whether to admit expert testimony. See In re Hanford Nuclear
Reservation Lit., 292 F.3d 1124, 1138 (9th Cir.2002). We review the district
court’s decision to admit Dr. Kertz’s testimony for an abuse of discretion.
Clausen v. M/V New Carissa, 339 F.3d 1049, 1055 (9th Cir.2003) (citing
Metabolife Int’l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir.2001)). We may
only reverse the district court, if our review leaves us with "a definite and
firm conviction that the district court committed a clear error of judgment
in admitting that testimony." Clausen, 339 F.3d at 1055 (citing SEC v.
Coldicutt, 258 F.3d 939, 941 (9th Cir.2001) ). We review the district court’s
decisions to admit Exhibits 25 and 18 for abuse of discretion. See Tritchler,
358 F.3d at 1155.
(a)
[5][6] Davisco argues that the district court erred by failing to hold a
Daubert hearing before admitting Dr. Kertz’s testimony and that the testimony
lacked foundation. We disagree. "District courts are not required to hold a
Daubert hearing before ruling on the admissibility of scientific evidence."
In re Hanford Nuclear Reservation Lit., 292 F.3d at 1138 (citing United
States v. Alatorre, 222 F.3d 1098, 1102 (9th Cir.2000)). Davisco deposed Dr.
Kertz. The parties provided the district court with briefing on his
scientific expertise and proposed testimony prior to trial. The district
court could properly determine that this information comprised an adequate
record from which the court could make its ruling. See Oddi v. Ford Motor
Co., 234 F.3d 136, 154 (3d Cir.2000) (deciding no abuse of discretion for
failure to hold an evidentiary hearing when district court had depositions
and affidavits of plaintiffs’ experts). In addition, Dr. Kertz testified as
to his credentials, prior to the district court’s ruling on the admissibility
of his opinion. Accordingly, we conclude that the district court conducted an
adequate inquiry before admitting Dr. Kertz’s testimony (despite not
conducting a separate Daubert hearing).
U.S. v. Prime, 431 F.3d 1147, 68 Fed. R. Evid. Serv. 1288, 2005 Daily
Journal D.A.R. 14,358 (9th Cir.(Wash.),Dec 14, 2005)
Prime moved in limine to exclude Storer’s expert testimony. The court held a
Daubert hearing where both sides were allowed to offer voluminous materials and
expert testimony regarding the reliability of the proposed testimony. Daubert v.
Merrell Dow Pharms., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993).
After careful consideration, the court denied the motion, see United States v.
Prime, 220 F.Supp.2d 1203 (W.D.Wash.2002), and Storer testified that, in her
opinion, Prime’s handwriting appeared on counterfeit money orders and other
incriminating documents. On appeal, Prime contends that the admission of expert
testimony regarding handwriting analysis was unreliable under Daubert, and thus the
court abused its discretion by allowing Storer to testify.
Handwriting Analysis
[2] In Daubert, the Supreme Court set forth the guiding principle that “under
[Federal Rule of Evidence 702] FN2 the trial *1152 judge must ensure that any and
all scientific testimony or evidence admitted is not only relevant, but reliable.”
509 U.S. at 589, 113 S.Ct. 2786. In order to assist the trial courts with this
task, the Court suggested a flexible, factor-based approach to analyzing the
reliability of expert testimony. Id. at 593-95, 113 S.Ct. 2786. Although not an
exclusive list, these factors include: **1) whether a method can or has been
tested; **2) the known or potential rate of error; 3) whether the methods have been
subjected to peer review; **4) whether there are standards controlling the
technique’s operation; and **5) the general acceptance of the method within the
relevant community. Id. at 593-94, 113 S.Ct. 2786.
FN2. “If scientific, technical, or other specialized knowledge will assist the
trier of fact to understand the evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience, training, or education, may
testify thereto in the form of an opinion or otherwise ...” FED. R. EVID. 702.
[7] In accordance with Kumho Tire, the broad discretion and flexibility given to
trial judges to determine how and to what degree these factors should be used to
evaluate the reliability of expert testimony dictate a case-by-case review rather
than a general pronouncement that in this Circuit handwriting analysis is reliable.
As the Supreme Court concluded,
we can neither rule out, nor rule in, for all cases and for all time the
applicability of the factors mentioned in Daubert, nor can we now do so for subsets
of cases categorized by category of expert or by kind of evidence. Too much depends
upon the particular circumstances of the particular case at issue.
Id. at 150, 119 S.Ct. 1167; see also United States v. Hankey, 203 F.3d 1160, 1168
(9th Cir.2000) (quoting Skidmore v. Precision Printing and Packaging, Inc., 188
F.3d 606, 618 (5th Cir.1999) (“Whether Daubert’s suggested indicia of reliability
apply to any given testimony depends on the nature of the issue at hand, the
witness’s particular expertise, and the subject of the testimony. It is a fact-
specific inquiry.”) (internal citations omitted)).
In this case, Storer was given 112 pages of writing known to be Prime’s, 114 pages
of Hiestand’s, and 14 pages of Hardy’s. She was then asked whether the handwriting
on 76 documents associated with the alleged conspiracy, such as envelopes, postal
forms, money orders, Post-it notes, express mail labels and postal box
applications, belonged to any of the co-conspirators.FN3 Storer “identified” Prime’s
handwriting on 45 of the documents.
FN3. Prime has not raised as an issue, and we have no reason to believe, that the
questioned writing samples were of insufficient length to support a valid analysis.
**Following the Daubert hearing, the district court issued a brief order
concluding that the proposed forensic document examination*1153 testimony was
reliable. After the conclusion of the trial, the district court issued a more
detailed Order Regarding Defendant’s Motion in Limine, which thoroughly and
specifically analyzed the reliability of Storer’s testimony with respect to each of
the Daubert factors. See Prime, 220 F.Supp.2d 1203.
The court also believed that Storer’s analysis in this case was reliable given the
“extensive” 112 pages containing Prime’s known handwriting.
2. Whether the technique has been subject to peer review and publication
The court cited to numerous journals where articles in this area subject
handwriting analysis to peer review by not only handwriting experts, but others in
the forensic science community. Additionally, the Kam study, see infra, which
evaluated the reliability of the technique employed by Storer of using known
writing samples to determine who drafted a document of unknown authorship, was both
published and subjected to peer review. The court also noted that the Secret
Service has instituted a system of internal peer review whereby each document
reviewed is subject to a second, independent examination.
In concluding that the type of handwriting analysis Storer was asked to perform had
an acceptable rate of error, the court relied on studies conducted by Professor
Moshe Kam of the Electrical and Computer Engineering Department at Drexel
University. Professor Kam’s studies demonstrated that expert handwriting analysts
tend to be quite accurate at the specific task Storer was asked to perform-
determining whether the author of a known writing sample is also the author of a
questioned writing sample. When the two samples were in fact written by the same
person, professional handwriting analysts correctly arrived at that conclusion 87%
of the time. On the other hand when the samples were written by different people,
handwriting analysts erroneously associated them no more than 6.5% of the time.
While Kam’s study demonstrates some degree of error, handwriting analysis need not
be flawless in order to be admissible. Rather, the Court had in mind a flexible
inquiry focused “solely on principles and methodology, not on the conclusions that
they generate.” Daubert, 509 U.S. at 595, 113 S.Ct. 2786. As long as the process
is generally reliable, any potential error can be brought to the attention of the
jury through cross-examination and the testimony of other experts.
The court recognized that although this area has not been completely standardized,
*1154 it is moving in the right direction. The Secret Service laboratory where
Storer works has maintained its accreditation with the American Society of Crime
Laboratory Directors since 1998, based on an external proficiency test.
Furthermore, the standard nine-point scale used to express the degree to which the
examiner believes the handwriting samples match was established under the auspices
of the American Society for Testing and Materials (“ASTM”). The court reasonably
concluded that any lack of standardization is not in and of itself a bar to
admissibility in court.
5. General acceptance
The court recognized the broad acceptance of handwriting analysis and specifically
its use by such law enforcement agencies as the CIA, FBI, and the United States
Postal Inspection Service.
Given the comprehensive inquiry into Storer’s proffered testimony, we cannot say
that the district court abused its discretion in admitting the expert handwriting
analysis testimony. The district court’s thorough and careful application of the
Daubert factors was consistent with all six circuits that have addressed the
admissibility of handwriting expert testimony, and determined that it can satisfy
the reliability threshold. See United States v. Crisp, 324 F.3d 261, 269-70 (4th
Cir.2003); United States v. Mooney, 315 F.3d 54, 63 (1st Cir.2002); United States
v. Jolivet, 224 F.3d 902, 906 (8th Cir.2000); United States v. Paul, 175 F.3d 906,
911 (11th Cir.1999); United States v. Jones, 107 F.3d 1147, 1161 (6th Cir.1997);
United States v. Velasquez, 64 F.3d 844, 850-52 (3d Cir.1995).”
(a) Effect of Erroneous Ruling.--Error may not be predicated upon a ruling which
admits or excludes evidence unless a substantial right of the party is affected,
and
(1) Objection.--In case the ruling is one admitting evidence, a timely objection
or motion to strike appears of record, stating the specific ground of objection, if
the specific ground was not apparent from the context; or
(2) Offer of Proof.--In case the ruling is one excluding evidence, the substance of
the evidence was made known to the court by offer or was apparent from the context
within which questions were asked.
Once the court makes a definitive ruling on the record admitting or excluding
evidence, either at or before trial, a party need not renew an objection or offer
of proof to preserve a claim of error for appeal.
(b) Record of Offer and Ruling.--The court may add any other or further statement
which shows the character of the evidence, the form in which it was offered, the
objection made, and the ruling thereon. It may direct the making of an offer in
question and answer form.
(c) Hearing of Jury.--In jury cases, proceedings shall be conducted, to the extent
practicable, so as to prevent inadmissible evidence from being suggested to the
jury by any means, such as making statements or offers of proof or asking questions
in the hearing of the jury.
(d) Plain Error.--Nothing in this rule precludes taking notice of plain errors
affecting substantial rights although they were not brought to the attention of the
court.
McKnight By and Through Ludwig v. Johnson Controls, Inc., 36 F.3d 1396, 1406, 40 Fed. R. Evid. Serv.
965, Prod.Liab.Rep. (CCH) P 14,079 (8th Cir.(Mo.) Sep 30, 1994)
157 Evidence
157XII Opinion Evidence
157XII(D) Examination of Experts
157k557 k. Experiments and Results Thereof. Most Cited Cases
Testimony of plaintiff’s expert that explosion of car battery was caused by manufacturing defect was admissible in
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157 Evidence
157XII Opinion Evidence
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Expert testimony that car battery was unreasonably dangerous was admissible in products liability suit arising out of
exploding battery; although testimony addressed ultimate issue, it was of little assistance to jury since expert had
testified about probability of leaks and combustibility of hydrogen gas.
“JCI next argues that the trial court erred in allowing Jacobson to testify as an expert without establishing a proper
foundation for his qualification as an expert or for the scientific basis of his conclusions under Federal Rules of
Evidence 702 and 703. McKnight argues that JCI failed to raise these issues at trial and, even assuming they were
raised, that there was more than sufficient foundation for Jacobson’s expert testimony.
After trial in this case, the Supreme Court of the United States addressed the standard for admitting expert testimony
under Rule 702 in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469
(1993). JCI and McKnight agree that Daubert now controls the question of admissibility of expert testimony.
In Daubert, the Court held that the widely applied test for admitting expert testimony only if it was “generally
accepted” within the scientific community was not consistent with Federal Rule of Evidence 702, or the other rules
addressing expert testimony. 509 U.S. at ----, 113 S.Ct. at 2794. The Court went on to point out the methods and
standards that should govern the trial court’s determination of whether to admit expert testimony. The Court held
that the trial court should first determine under Rule 104(a) whether the expert’s testimony rests on a reliable
foundation. Id. 509 U.S. at ----, 113 S.Ct. at 2796. The key question in that regard should be “whether the reasoning
or methodology underlying the testimony is scientifically valid and ... whether that reasoning or methodology
properly can be applied to the facts in issue.” Id.FN9
FN9. The Court then went on to point out particular inquiries that may help the trial court determine
whether there is a sufficient foundation. The Court ended with a section pointing out that its ruling would
not make for an expert “free-for-all” because the traditional means of attacking shaky but admissible
evidence, including vigorous cross-examination, presentation of stronger contrary evidence, and careful
instruction of the burden of proof keeps that type of evidence in check. The Court concluded by noting that
“[t]hese conventional devices, rather than wholesale exclusion under an uncompromising ‘general
acceptance’ test, are the appropriate safeguards where the basis of scientific testimony meets the standards
of Rule 702.” Daubert, 509 U.S. at ----, 113 S.Ct. at 2798.
Both parties contend that Daubert supports their position. McKnight argues that Daubert makes expert testimony
more readily admissible because it is no longer subject to the “general acceptance” standard. JCI argues that
Daubert requires the trial judge to be a gatekeeper for expert evidence by making a Rule 104(a) inquiry to determine
whether the foundation has been satisfied and that the district court failed to make these basic findings on the
foundation for Jacobson’s testimony.
[11] We need not reach this issue, however, because JCI failed to object to Jacobson’s *1407 testimony on the basis
that he was not qualified as an expert or that he lacked a scientific basis for his opinions. “Without an objection and
a proper request for relief, the matter is waived and will receive no consideration on appeal absent plain error.”
Owen v. Patton, 925 F.2d 1111, 1115 (8th Cir.1991). JCI argues strenuously that it did object to Jacobson’s
qualifications as an expert and the scientific basis for his opinions. The record does not support JCI’s assertions.
[12] JCI argues that it objected to both Jacobson’s qualifications and the scientific basis for his opinions in the
following statement:
If the Court please, the objection to this testing and the opinions concerning this testing goes to the foundation for
the testimony. The witness has said that the two batteries are substantially similar. And I submit to the Court that
when the witness is attempting to prove what he’s attempting to prove with these tests, and that is the exact fit of
plugs and caps in the holes, that the foundation must be more than that. What he’s trying to do here is to use a test
on a battery, for which a foundation hasn’t been laid sufficiently, to prove the ultimate issue in this case, and that
is a defect that gaps exist between the plugs and the walls. And I submit to the Court that a sufficient foundation
to use this battery in that way has not been laid in this case.
(Tr.Vol. III at 73.) This objection fails to raise any question about the scientific validity of the principles and
methodology underlying his testimony. See Daubert, 509 U.S. at ----, 113 S.Ct. at 2797. Likewise, this objection
fails to raise any question about whether his tests were the type relied upon by experts in the field to indicate JCI
was objecting to his testimony under Rule 703. An objection on one ground does not allow a party to argue on
appeal that the evidence should have been excluded on different grounds. Hale v. Firestone Tire & Rubber Co., 756
F.2d 1322, 1333-34 (8th Cir.1985) (Hale I ).
To the extent that JCI is arguing that the district court was required to exercise its gatekeeping authority over expert
testimony without an objection, we disagree. We have previously rejected a similar argument in United States v.
Bartley, 855 F.2d 547, 552 (8th Cir.1988). We find that the principles of Bartley apply equally in this case, and
accordingly we reject JCI’s argument as unpersuasive.
The only remaining question is whether the district court committed plain error in allowing this evidence into the
record. JCI has not argued for, nor do we find, plain error.”
courts_rules_of_court_operation_effect_in_general_digest.doc
106k85(1) k. In general.
U.S.,1941
Rules of practice and procedure are devised to promote the ends of justice,
not to defeat them, and orderly rules of procedure do not require sacrifice
of the rules of fundamental justice.Copr. (C) West 2008 No Claim to Orig.
U.S. Govt. Works
courts_rules__of_court_modification_amendment_suspension_or_disregard_of_rules_dige
st.doc
Since opinion evidence was admitted, since there was no evidence to disprove, that
evidence is deemed true.
The report establishes that Forenseic Document Examiner Eva Salzer used standard
forensic document examiner priniciples, methods and procedures
Board Certified Document Examiners apply ASTM methods and procedures, as Forensic
Document Examiner, Ms. Eva Salzer apply
Although the opinions of other district courts are not binding, the Court
recognizes that some district courts have adopted this approach. See, e.g.,
United States v. Rutherford, 104 F.Supp.2d 1190 (D.Neb.2000) (permitting
expert testimony about similarities in the handwritings but prohibiting
ultimate conclusions); United States v. Santillan, 1999 WL 1201765
(N.D.Cal.1999) (permitting expert testimony about similarities in the
handwritings but prohibiting ultimate conclusions); United States v. McVeigh,
1997 WL 47724 (D. Colo. Pre-Trial Trans. Feb 5, 1997) (permitting testimony
about "similarity in strokes and all of that sort of thing" but not
permitting an opinion about the identification of the handwriting unless the
Court has a "hearing about the validity of the science of handwriting
comparison to make an identification of the writer.").
The Court finds the approach of these district courts unpersuasive because
every circuit court to have considered the issue of handwriting testimony has
held that the expert’s ultimate opinion was admissible. See United States v.
Prime 431 F.3d 1147, 1154 (9th Cir.2005) (permitting ultimate opinion that
the defendant authored the note in question); United States v. Crisp, 324
F.3d 261, 269-70 (4th Cir.2003) (allowing ultimate opinion that defendant
authored the note); United States v. Mooney, 315 F.3d 54, 63 (1st Cir.2002)
(same); United States v. Jolivet, 224 F.3d 902, 906 (8th Cir.2000) (allowing
opinion that it was "likely" that the document contained the defendant’s
handwriting); United States v. Paul, 175 F.3d 906, 911 (11th Cir .1999)
(permitting expert testimony that the defendant wrote the extortion note);
United States v. Jones, 107 F.3d 1147, 1161 (6th Cir.1997) (allowing
testimony that signatures on various documents were the defendant’s).
Hospital and Medical Records admissible under the Business Records Exception To The
Hearsay Rule under Federal Rules Of Evidence 803
Joint tenancy deed under Federal Rules of Evidence 901(b)(7) Public Records or
Reports; Rule 44 of the Federal Rules of Civil Procedure
In re Cloud Nine, Ltd., 3 B.R. 202, 1 Collier Bankr.Cas.2d 445, 5
Bankr.Ct.Dec. 1377 (Bankr.D.N.M. Jan 31, 1980)
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2422 Cause; Grounds and Objections
51k2425 k. Individual Debt Adjustment Cases. Most Cited
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Automatic stay would not be lifted so as to allow creditors to proceed in
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and directed against creditors’ assets, but did not preclude creditor actions
against other parties who had not filed proceedings in the bankruptcy court.
Bankr.Code, 11 U.S.C.A. §§ 362, 1301.
Cite case which explains the definition of a parallel proceeding being a complaint
filed as an adversary proceeding in the bankruptcy case. In re General Carriers.
Circumstantial evidence of hospital records shows that Soon Chey was incapable of
signing the document. She was present in a locked medical facility. There were
no visitor’s passes issued for a visitor to visit her. There were no visitor’s
signed in authorized and noting their presence at the hospital [list the hospital
address at Artesia California] noted in the hospital visitation log, according to
the strict visitation policy. There were no day passes requested for and issued
that would allow her to leave the gravely disabled treatment facility didn’t have a
visitor’s pass. And the declaration by the notary states that it is signed at
Irvine, California.
There was no objection to the truth of the evidence
steal: 1a: to take or appropriate without right or leave and with intent to keep or
make use of wrongfully. b: to take away by force or unjust means.
In In re Elmore, 94 B.R. 670, 677, (Bankr.C.D.Cal. Dec 14, 1988), the court stated,”
In re Avila, 311 BR 81, 83, (Bankr ND Cal. 2004), the court held that for a chapter 13
petitioner, the property is necessary for effective reorganization if it provides income
to fund a chapter 13 plan.
C. Section 362(d)(2)
Section 362(d) provides two separate grounds upon which relief from stay may be sought. If relief from stay is not
available under section 362(d)(1), it may be sought on the alternative grounds provided in section 362(d)(2). To
obtain relief from stay under section 362(d)(2), a creditor must present evidence to make a prima facie case that (1)
the property is overencumbered, and (2) it is not necessary to an effective reorganization.
A debtor’s principal residence in a Chapter 13 case is virtually always necessary to an effective reorganization. The
vast majority of Chapter 13 cases filed in this district are filed by debtors like Elmore who are trying to save their
homes. If the home is not saved, the Chapter 13 reorganization is not effective. Thus a secured creditor rarely
qualifies for relief from stay under section 362(d)(2) in a Chapter 13 case.FN10
FN10. In the rare case where confirmation of the Chapter 13 plan is delayed for an extended period of time,
a secured creditor may qualify for relief from stay under section 362(d)(2) on the grounds that no effective
reorganization is in prospect within a reasonable period of time. See United Savings, 108 S.Ct. at 632.
In consequence, the Court is not usually called upon in a Chapter 13 relief from stay motion to consider whether the
debtor has any equity in the property. If an effective reorganization is in prospect, a Chapter 13 debtor is permitted
to keep the automatic *678 stay as to the residence or any other real property even though the debtor has no such
equity,FN11 unless there is cause to lift the stay.
FN11. The lack of equity may have an impact, however on whether an effective reorganization is possible,
or what shape it should take.
Lomas has not sought relief from stay under section 362(d)(2) in this case.
D. Other “Cause”
In addition to the lack of adequate protection, section 362(d)(1) permits relief from stay for other “cause”. Such
other cause is not defined in the Bankruptcy Code.FN12 This cause should provide the usual basis for relief from stay
in a Chapter 13 case after the confirmation of a plan.
FN12. The House Report for the Bankruptcy Code suggests several circumstances, apart from the lack of
adequate protection, that may provide cause for relief from stay:
[A] desire to permit an action to proceed to completion in another tribunal may provide another cause.
**Other causes might include the lack of any connection with or interference with the pending
bankruptcy case. For example, a divorce or child custody proceeding involving the debtor may bear no
relation to the bankruptcy case. In that case, it should not be stayed. A probate proceeding in which the
debtor is the executor or administrator of another’s estate usually will not be related to the bankruptcy
case, and should not be stayed. Generally, proceedings in which the debtor is a fiduciary, or involving
postpetition activities of the debtor, need not be stayed because they bear no relationship to the purpose
of the automatic stay, which is debtor protection from his creditors.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 343, reprinted in 1978 U.S.Code Cong. & Admin.News 5963,
6300. The report further notes, “The facts of each request will determine whether relief is appropriate
under the circumstances.” Id.
In re Elmore
Automatic stay hearings are not like unlawful detainer hearings where issue of
title are not litigated.
11 U.S.C. 362(d)
In re Bialac, 694 F.2d 625, 627, (9th Cir. Dec 13, 1982), the court stated,
“Bialac misunderstands the nature of a § 362(d) hearing. It is true that ‘the desired
expedition of stay litigation ... may not always be conducive to any final determination
of questions going to the merits which are so serious, substantial, difficult and
doubtful as to make them fair ground for litigation and thus for more deliberative
investigation.’ United Companies Financial Corp. v. Brantley, 6 B.R. 178, 187
(Bkrtcy.N.D.Fla.1980) (Citations omitted). When a debtor’s affirmative defenses and
counterclaims, however, directly involve the question of the debtor’s equity, they
should be heard in the stay proceeding.”
[7] The key determination as to whether or not any matter, claim or circumstance should
bear upon the amount of the creditor’s claim (and hence trigger resulting effects upon
the debtors’ equity, probable harm to and adequate protection for a creditor, as well
as, probable successful plan formulation) is whether such matter, claim or circumstance
directly or only indirectly relates to the amount of such creditor’s claim. If it
directly relates it should enter into the determination of the court in the exercise of
its discretion whether or not the injunction should be maintained or vacated or
modified.”
And,
“those based upon such matters as alleged violations of the statute of frauds which
would bar any recovery whatsoever on the specific debt itself; non-perfection of a
security interest which would bar any lien enforcement whatsoever on the debt itself; or
usury which would bar any recovery either to some extent or totally on the debt itself
depending upon the circumstances. Other such counterclaims or defenses might be based
upon a lack of consideration altogether, as distinguished from a failure of
consideration, or some circumstances of unconscionability which would bar recovery upon
the specific debt itself. These latter defenses or counterclaims strike at the very
heart of the specific debt amount itself which the creditor seeks to enforce by way of
his lien or the validity of the lien itself.” (United Companies Financial Corp. v.
Brantley, supra, 6 B.R. at p.185)
Creditor sought relief from automatic stay. The Bankruptcy Court, N. Sanders
Sauls, J., held that: (1) when affirmative defenses or counterclaims are
asserted which strike at the heart of the amount of the creditor’s claim or
the validity of the lien, court should give consideration to them in
determining whether or not the stay should remain in effect; (2) prohibition
against modification of a plan with respect to the terms of mortgage was not
applicable where the debt was secured by an assignment of a life insurance
policy as well as by the mortgage; and (3) interim rule providing for
expiration of the automatic stay 30 days after the holding of the hearing on
the stay is invalid.
Order accordingly.
228 Judgment
228XIV Conclusiveness of Adjudication
228XIV(C) Matters Concluded
228k723 Essentials of Adjudication
228k728 k. Incidental and Collateral Matters. Most
Cited Cases
Although the existence of affirmative defenses and possible counterclaims
could be raised and considered by court in exercising its discretion as to
whether to vacate or modify the automatic stay, no res judicata determination
of those collateral claims on the merits could result from the hearing on the
application for relief from the automatic stay. Bankr.Code, 11 U.S.C.A. § 362.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2430 Adequate Protection
51k2430.5 Particular Creditors or Claimants
51k2430.5(1) k. In General. Most Cited Cases
(Formerly 51k2430, 51k217.6(1), 51k217(7))
If, by reason of an alleged violation of a statute of frauds, usury,
unconscionability, lack of consideration, or other similar circumstances,
debt is unenforceable against the debtor, either in whole or in part, then,
to that extent, claim is not allowable and, to the extent it is not
allowable, it will not be a secured claim and thus will not require adequate
protection under the automatic stay provision of the Bankruptcy Code.
Bankr.Code, 11 U.S.C.A. §§ 362, 502(b)(1).
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2441 k. Discretion. Most Cited Cases
(Formerly 51k217.6(1), 51k217(7))
Key determination as to whether any matter or claim should bear upon the
amount of the creditor’s claim and thus have an effect on the debtor’s
equity, probable harm to an adequate protection for the creditor, and the
probable successful plan formulation, is whether the matter or claim directly
or only indirectly relates to the amount of the creditor’s claim; if it
directly relates, then it should enter into the determination of the court in
the exercise of its discretion as to whether the automatic stay should be
vacated or modified; if it is only indirectly related, it should not enter
into that consideration. Bankr.Code, 11 U.S.C.A. § 362.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2436 k. Set-Off and Counterclaim; Affirmative
Defenses. Most Cited Cases
(Formerly 51k217.5(5), 51k217(6))
Affirmative defenses or counterclaims based or grounded upon them, not
directly related to the specific debt should not be the subject of
consideration in determining whether relief from the automatic stay should be
granted; defenses and counterclaims related directly to the specific debt in
question should be the subject of appropriate consideration and stay relief
determinations. Bankr.Code, 11 U.S.C.A. § 362.
[11] Bankruptcy 51 2431
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2430 Adequate Protection
51k2431 k. What Constitutes, in General. Most Cited
Cases
(Formerly 51k217.6(1), 51k217(7))
When affirmative defenses or counterclaims are asserted which strike at the
heart of the amount of the creditor's claim or the validity of his lien,
those defenses or counterclaims directly effect the issue of equity and thus
the issues of harm and adequate protection for the creditor, as well as the
reasonable probability of any plan of reorganization, and the court should
give consideration to them in determining whether the stay should remain in
effect. Bankr.Code, 11 U.S.C.A. § 362.
51 Bankruptcy
51IV Effect of Bankruptcy Relief; Injunction and Stay
51IV(C) Relief from Stay
51k2435 Proceedings
51k2435.1 k. In General. Most Cited Cases
(Formerly 51k2435, 51k217.5(1), 51k217(6))
Debtor has several options available in stay relief litigation when there are
substantial questions directly related to the amount of creditor's debt or
the validity of the lien; debtor may either object to the creditor's claim,
if he has filed a claim, or may file a complaint for determination of the
extent and validity of the creditor's debt and lien or may file a
counterclaim or affirmative defense directly related to the specific debt or
may seek to remove from state court any pending foreclosure proceeding.
Bankr.Code, 11 U.S.C.A. § 362.
And,
those based upon such matters as alleged violations of the statute of frauds
which would bar any recovery whatsoever on the specific debt itself; non-
perfection of a security interest which would bar any lien enforcement
whatsoever on the debt itself; or usury which would bar any recovery either
to some extent or totally on the debt itself depending upon the
circumstances. Other such counterclaims or defenses might be based upon a
lack of consideration altogether, as distinguished from a failure of
consideration, or some circumstances of unconscionability which would bar
recovery upon the specific debt itself. These latter defenses or
counterclaims strike at the very heart of the specific debt amount itself
which the creditor seeks to enforce by way of his lien or the validity of the
lien itself.
At p. 187,
“To be sure, the desired expedition of stay litigation under the new law may
not always be conducive to any final determination of questions going to the
merits which are so serious, substantial, difficult and doubtful as to make
them fair ground for litigation and thus for more deliberative investigation.
1 Moore's Manual, s 10.07(2) (1979); 7 Moore's Federal Practice, P 65.04.
This, however, should not cause any undue consternation when such questions
are raised for the matter should proceed as any other injunction proceeding
under the established precepts relating to injunctive relief in federal
courts in accordance with Rule 65 of the Federal Rules of Civil Procedure. In
fact, the system is designed to follow the established federal pattern under
Rule 65. As stated in the legislative history to the new law (H.Rep. 95-595,
p. 344; S.Rep. 95-989, p. 55, U.S.Code Cong. & Admin.News 1978, pp. 5841,
6300):
“The filing of the petition which gives rise to the automatic stay is
similar to a temporary restraining order. The preliminary hearing is similar
to the hearing on a preliminary injunction, and the final hearing and order
is similar to a permanent injunction. The main difference lies in which
party must bring the issue before the court. While in the injunction
setting, the party seeking the injunction must prosecute the action, in
proceedings for relief from the automatic stay, the enjoined party must
move. The difference does not, however, shift the burden of proof.
Subsection (g) leaves that burden on the party opposing relief from the stay
(that is, on the party seeking continuance of the injunction) on the issue
of adequate protection.
At the expedited hearing under subsection (e), and at all hearings on relief
from the stay, the only issue will be the claim of the creditor and the lack
of adequate protection or existence of other cause for relief from the stay.
This hearing will not be the appropriate time at which to bring in other
issues, such as counterclaims against the creditor on largely unrelated
matters. Those counterclaims are not to be handled in the summary fashion
that the preliminary hearing under this provision will be. Rather, they will
be the subject of more complete proceedings by the trustees to recover
property of the estate or to object to the allowance of a claim. (H.Rep. 95-
595, p. 344.).
*188 ... However, this would not preclude the party seeking continuance of
the stay from presenting evidence on the existence of claims which the court
may consider in exercising its discretion. What is precluded is a
determination of such collateral claims on the merits at the hearing.
(S.Rep. 95-989, p. 55.)“
Court to continue automatic stay and motion to remand until complaint, adversary
proceeding, under TILA recission is determined.
While giving the debtor some breathing room, the automatic stay also ensures that the
assets of the debtor are not reduced or disturbed and protects the bankruptcy court’s
exclusive jurisdiction over the debtor and its property.