Peterson v. California Reconveyance Co. CA6 ( 2016 )

Filed 5/2/16 Peterson v. California Reconveyance Co. CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
MARK PETERSON, H041356
(Santa Cruz County
Plaintiff and Appellant, Super. Ct. No. CV165101)
v.
CALIFORNIA RECONVEYANCE
COMPANY et al.,
Defendants and Respondents.
I. INTRODUCTION
Appellant Mark Peterson owned property in Capitola that was commonly known
and addressed as 206 Hollister Avenue 1, 2 and 3. The deed of trust for the adjacent
property owned by Greg R. Flowers stated that the address for Flowers’ property was
“206 Hollister Avenue 1.” When Flowers defaulted on his loan, respondents California
Reconveyance Company (California Reconveyance) and JP Morgan Chase Bank (Chase)
posted the foreclosure notices for Flowers’ property on Peterson’s adjacent property. The
foreclosure notices stated that the address for the property to be foreclosed upon was
“206 Hollister Avenue 1,” but included the correct legal description and assessor’s parcel
number for Flowers’ property.
Peterson brought the instant action against California Reconveyance and Chase to
quiet title and for injunctive and declaratory relief. Peterson also alleged that defendants
were liable for negligence and slander of title. The trial court granted defendants’ motion
for summary judgment on the grounds that Peterson lacked standing to bring this action
and each cause of action lacked merit as a matter of law.
For the reasons stated below, we determine that Peterson has standing and
summary adjudication of the causes of action for negligence and slander of title should be
denied. We will therefore reverse the judgment and direct the trial court to enter new
orders denying summary adjudication of those causes of action.
II. FACTUAL BACKGROUND
Our factual summary is drawn from the parties’ separate statements of fact and the
evidence they submitted in connection with the motion for summary judgment.
A. The Foreclosure Notices
In 2006, Peterson owned property in Capitola commonly known as 206 Hollister
Avenue. At that time, Peterson’s property included three cottages commonly known and
addressed as 206 Hollister Avenue 1, 2 and 3. The recorded description of the property is
“Lot 7 in Block X, as shown upon that certain Map entitled, ‘Capitola’, filed for record
in the Office of the County Recorder of Capitola City, County of Santa Cruz, State of
California, on April 26, 1888 in Map Book 10, Page 13, Santa Cruz County Records.”
(Boldface added.)
In 2007, the property adjacent to Peterson’s property was owned by Flowers. The
deed of trust recorded on July 31, 2007, indicates that Flowers refinanced the property
with a loan from Washington Mutual Bank and states that the property’s address is
“206 Hollister Avenue 1.” The deed of trust also contains the following legal description
of the property: “Lot 5, in Block X, as shown upon that certain map entitled, ‘Capitola’,
filed for record in the office of the County Recorder on April 26, 1888, in Map Book 10,
page 13, Santa Cruz County records.” (Boldface added.)
A notice of default and election to sell under deed of trust was recorded on
Flowers’ property by California Reconveyance on May 12, 2009. The notice of default
stated that Flowers had defaulted on his loan from Washington Mutual Bank that was
2
secured by a deed of trust on property described as “206 Hollister Avenue 1, Capitola,
CA 95010.” On August 18, 2009, California Reconveyance recorded a notice of trustee’s
sale, which stated that the street address of the property to be sold was “206 Hollister
Avenue 1, Capitola, CA 95010” and the legal description was “Lot 5, in Block X, as
shown upon that certain map entitled, ‘Capitola’, filed for record in the office of the
County Recorder on April 26, 1888, in Map Book 10, page 13, Santa Cruz County
Records.”
Sometime during the summer of 2009, the foreclosure notices for Flowers’
property, which stated a street address of 206 Hollister Avenue 1, were physically posted
on Peterson’s adjacent property. One of the cottages on Peterson’s property had a
commonly known street address of 206 Hollister Avenue 1. The foreclosure notices for
Flowers’ property were again physically posted on Peterson’s property in August 2012.
Flowers’ property and Peterson’s property had slightly different assessor’s parcel
numbers, as shown in the City of Capitola’s records. The assessor’s parcel number for
Peterson’s property is 036-125-09. The assessor’s parcel number for Flowers’ property
is 036-125-10.
On December 13, 2012, Mark Wheeler, the City of Capitola’s building official,
sent an email advising the relevant government agencies that the two properties had
different street addresses. Wheeler stated that the street address for the property with
assessor’s parcel number 036-125-09 (Peterson’s property) was 204 Hollister Avenue,
and the address for the property with assessor’s parcel number 036-125-10 (Flowers’
property) was 206 Hollister Avenue.
B. Peterson’s Bankruptcy Proceedings
On October 11, 2007, Peterson filed a Chapter 13 bankruptcy petition. Peterson’s
Chapter 13 bankruptcy proceeding was converted to a Chapter 7 bankruptcy proceeding
on March 12, 2010. Peterson filed his first amended schedules A and B in his Chapter 7
3
bankruptcy proceeding on May 25, 2010.1 The first amended schedules did not list the
instant lawsuit, which was filed in 2009, as an asset.
In June 2010 an order was filed in Peterson’s Chapter 7 bankruptcy proceeding
confirming the bankruptcy trustee’s abandonment of “affirmative claims asserted by the
Debtor or that may be asserted by the Debtor or his estate against any party associated
with a loan secured by a deed of trust on 206 Hollister Avenue, Capitola, California, in
favor of New Century Mortgage Corporation, Deutsche Bank National Trust Company,
and Carrington Mortgage Services, LLC [Peterson’s lenders].” The order did not
mention the instant lawsuit or any claim that Peterson might have against Flowers’
lenders arising from their posting of the foreclosure notices for Flowers’ property on
Peterson’s adjacent property in 2009.
A settlement agreement and mutual release was filed in Peterson’s Chapter 7
bankruptcy proceeding on September 5, 2012. The settlement agreement states that
Peterson was in default under the deed of trust recorded on property he owned
“commonly known as 206 Hollister Ave., Capitola, California” that had a legal
description of “Lot 7, in Block X, as shown upon that certain map entitled ‘Capitola’,
filed for record in the Office of the County Recorder of Capitola City, County of Santa
Cruz, State of California, on April 26, 1888, in Map Book 10, Page 13, Santa Cruz
County Records.”
Under the settlement agreement, the claim made against Peterson’s bankruptcy
estate by Carrington Mortgage Services LLC, for payment in full of all amounts due
under Peterson’s promissory note, was to be withdrawn upon the conveyance of the
property commonly known as 206 Hollister Avenue to Hollister Holdings I, LLC
1
“In a bankruptcy proceeding, the ‘bankruptcy code place[s] an affirmative duty
on [the debtor] to schedule his [or her] assets and liabilities. [11 U.S.C.] § 521(1).’ ”
(M & M Foods, Inc. v. Pacific American Fish Co., Inc. (2011) 196 Cal. App. 4th 554, 563
(M & M Foods).)
4
(Hollister Holdings) and upon specified payments to Deutsche Bank, among others. The
lenders who financed Hollister Holdings’ $700,000 purchase of Peterson’s property from
his bankruptcy estate obtained a preliminary title report, which did not reference any of
the recorded documents pertaining to the foreclosure of Flowers’ property.
Hollister Holdings recorded the grant deed for the property commonly known as
“206 Hollister Avenue, Units 1, 2 & 3, Capitola, CA 95010” on September 28, 2012.
The grant deed states that the Chapter 7 trustee for Peterson’s bankruptcy estate
transferred all rights, title, and interest in 206 Hollister Avenue, Units 1, 2, and 3, to
Hollister Holdings.
On December 7, 2012, Peterson was dismissed from the Chapter 7 bankruptcy
proceedings. In 2014, Peterson purchased the property commonly known as
“206 Hollister Avenue, Units 1, 2 & 3” from Hollister Holdings, as shown by the grant
deed recorded on May 20, 2014.
III. PROCEDURAL BACKGROUND
A. The Complaint
The operative complaint is the second amended complaint (the complaint). The
causes of action asserted against defendants California Reconveyance and Chase include
declaratory relief, injunctive relief, negligence, slander of title, and quiet title.
In the cause of action for declaratory relief, Peterson sought declarations that
the deed of trust securing Flowers’ property did not secure Peterson’s property at
206 Hollister Avenue 1 and that Chase could not foreclose on Peterson’s property.
Peterson also sought to enjoin the foreclosure sale under the deed of trust that had been
scheduled for September 15, 2009.
In the negligence cause of action, Peterson alleged that defendants had carelessly
drafted the deed of trust for Flowers’ property with an erroneous street address of
206 Hollister Avenue 1 and had posted the notice of trustee’s sale and notice of default
on the wrong property.
5
The cause of action for slander of title alleged that defendants had recklessly
recorded both an erroneous notice of default and an erroneous notice of trustee’s sale on
Peterson’s property, which was defamatory since neither Washington Mutual nor Chase
was the lender for Peterson’s Hollister Avenue property. Peterson sought to quiet his title
in 206 Hollister Avenue 1 because one or more of defendants had claimed an adverse
interest.
B. The Motion for Summary Judgment
Defendants filed a “renewed” motion for summary judgment, or, in the alternative,
summary adjudication in March 2014. Defendants acknowledged that their previous
motion for summary judgment was denied in 2012, but asserted that a renewed motion
was proper under Code of Civil Procedure section 437c, subdivision (f)(2)2 due to newly
discovered evidence.
The newly discovered evidence, according to defendants, was found in the records
of the City of Capitola and the County of Santa Cruz, which currently showed that the
street address used in the Flowers’ deed of trust—206 Hollister Avenue—was the
“official and legal street address” for Flowers’ property. Defendants also asserted that
there was new evidence showing that the documents recorded in connection with
Flowers’ loan had no effect on the loan obtained by Hollister Holdings to purchase
Peterson’s property from his bankruptcy estate.
On the merits, defendants contended that summary judgment should be granted
because Peterson lacked standing, for two reasons. First, defendants argued that since
Peterson had not listed the five causes of action in the instant lawsuit as an asset in his
bankruptcy schedules, and the bankruptcy trustee had not abandoned the claims, under
bankruptcy law only the trustee had standing to prosecute those causes of action. Second,
2
All further statutory references are to the Code of Civil Procedure unless
otherwise indicated.
6
defendants argued that Peterson lacked standing because title to the property had been
transferred from him to Hollister Holdings during bankruptcy proceedings in
September 2012.
Alternatively, defendants argued that each cause of action lacked merit. The cause
of action for declaratory relief could not lie, defendants asserted, because it was
undisputed that the Flowers’ deed of trust included the correct legal address and parcel
number for Flowers’ property, and therefore the Flowers’ deed of trust was sufficient to
describe the Flowers’ property to the exclusion of Peterson’s property.
As to the cause of action for negligence, defendants maintained that they owed no
duty to Peterson since he was not a borrower on Flowers’ loan. Defendants also argued
that they were not negligent because the Flowers’ deed of trust contained the correct legal
address and parcel number for Flowers’ property.
Similarly, defendants argued that the cause of action for slander of title failed
because the Flowers’ deed of trust did not constitute a false publication, since the deed of
trust included the correct legal description for Flowers’ property and did not impact the
decision of the lenders who had financed Hollister Holdings’ purchase of Peterson’s
property.
The cause of action for quiet title lacked merit, according to defendants, because
Peterson no longer had title to the property once it was transferred to Hollister Holdings.
Finally, defendants argued that the cause of action for injunctive relief failed because
there was no viable cause of action to support it.
C. Opposition to Motion for Summary Judgment
Peterson opposed the motion for summary judgment/adjudication on the primary
ground that the addresses for Flowers’ property and Peterson’s property are in dispute.
According to Peterson, the evidence showed that everyone, including City of Capitola
building official Wheeler, believed that the correct address for Peterson’s property was
7
206 Hollister Avenue, Units 1, 2, and 3, until Wheeler changed his mind and determined
in December 2012 that the address was 204 Hollister Avenue.
As to his standing to bring the instant action, Peterson argued that he had standing
as the current owner of the property and because he had been the functional owner as
Hollister Holdings’ sole member. Peterson also argued that his bankruptcy proceedings
did not affect his standing, since he had no obligation to list on his bankruptcy schedules
claims that accrued after his bankruptcy petition was filed. Peterson asserted that he filed
his bankruptcy petition in 2007, long before defendants recorded and posted erroneous
foreclosure notices on his property in 2009 and 2012. He also asserted that he had been
dismissed from his bankruptcy case and therefore he was in the same position as if he had
never filed a bankruptcy petition.
Regarding the merits, Peterson contended that the cause of action for slander had
merit, even if the addresses for the two properties were different. Peterson explained that
the physical posting on his property of the foreclosure notices for Flowers’ property
disparaged his property, thereby harming his ability to sell it. He further explained that
the slander of title cause of action had merit because “anything that publicizes to the
neighbor hood [sic] and general public that Defendants have the ability, and in fact are
moving to foreclose, is false.”
Finally, Peterson argued that the motion for summary judgment should be denied
because defendants had not shown that the evidence they claimed to be newly discovered
was not available before their first motion for summary judgment was filed in 2012.
8
D. Trial Court Order
The trial court granted the motion for summary judgment in its June 30, 2014
order. The court also issued several orders on defendants’ objections to Peterson’s
evidence.3 A judgment in defendants’ favor was entered on July 2, 2014.
The June 30, 2014 order included the trial court’s reasons for granting summary
judgment. As a threshold matter, the court found that there were newly discovered facts
or circumstances that justified the reassertion of defendant’s motion for summary
judgment, consisting of the government records showing that “the street address set forth
by Defendants in the subject Deed of Trust and related foreclosure documents is the
official and . . . commonly used address for the subject Property. This new fact is
material to the renewed motion.”
With regard to the merits, the trial court found that the undisputed material facts
showed that Peterson lacked standing because he had not disclosed in his bankruptcy
proceedings the five causes of action that he was asserting against defendants, and
therefore only the Chapter 7 bankruptcy trustee had standing to prosecute the causes of
action. The court also found that Peterson lacked standing because he was not the real
party in interest, since Hollister Holdings owned the subject property when the second
amended complaint was filed.
The trial court further determined that even if Peterson had standing, there was no
triable issue of material fact as to any cause of action. The court found that the testimony
of Wheeler was conclusive as to the official street addresses for the properties at issue.
Pursuant to Wheeler’s testimony, the official address for the property owned by
Peterson/Hollister Holdings is 204 Hollister Avenue and the official address for Flowers’
property is 206 Hollister Avenue. In addition, the court ruled that “[e]ven if the common
3
The trial court’s rulings on defendants’ objections to Peterson’s evidence have
not been challenged on appeal.
9
address was wrong, the property secured, the deed of trust and all foreclosure documents
also have a different legal descriptions and APN[4] from those of the Peterson/Hollister
Holdings property.”
IV. DISCUSSION
On appeal, Peterson contends that the summary judgment should be reversed
because the trial court erred in finding that he lacked standing and that Wheeler’s
testimony regarding the addresses of the subject properties barred his claims against
defendants. Peterson does not raise any issue as to the propriety of the renewed summary
judgment motion under section 437c, subdivision (f)(2). We will begin our evaluation
with the standard of review for an order granting summary judgment.
A. The Standard of Review
The standard of review for an order granting a motion for summary judgment is
de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 860 (Aguilar).) The
trial court’s stated reasons for granting summary judgment are not binding on the
reviewing court, “which reviews the trial court’s ruling, not its rationale. [Citation.]”
(Ramalingam v. Thompson (2007) 151 Cal. App. 4th 491, 498.)
In performing our independent review, we apply the same three-step process as the
trial court. “Because summary judgment is defined by the material allegations in the
pleadings, we first look to the pleadings to identify the elements of the causes of action
for which relief is sought.” (Baptist v. Robinson (2006) 143 Cal. App. 4th 151, 159
(Baptist).)
“We then examine the moving party’s motion, including the evidence offered in
support of the motion.” (Baptist, supra, 143 Cal.App.4th at p. 159.) A defendant moving
for summary judgment has the initial burden of showing that a cause of action lacks merit
4
“ ‘APN’—which stands for assessor’s parcel number—is a numerical identifier
associated with a particular piece of property for property tax assessment purposes.”
(Cafferkey v. City and County of San Francisco (2015) 236 Cal. App. 4th 858, 861.)
10
because one or more elements of the cause of action cannot be established or there is a
complete defense to that cause of action. (§ 437c, subd. (o); Aguilar, supra, 25 Cal.4th at
p. 850.)
If the defendant fails to make this initial showing, it is unnecessary to examine the
plaintiff’s opposing evidence and the motion must be denied. However, if the moving
papers make a prima facie showing that justifies a judgment in the defendant’s favor, the
burden shifts to the plaintiff to make a prima facie showing of the existence of a triable
issue of material fact. (§ 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th at p. 849.)
In determining whether the parties have met their respective burdens, “the court
must ‘consider all of the evidence’ and ‘all’ of the ‘inferences’ reasonably drawn
therefrom [citation], and must view such evidence [citations] and such inferences
[citations], in the light most favorable to the opposing party.” (Aguilar, supra, 25 Cal.4th
at p. 843.) “There is a triable issue of material fact if, and only if, the evidence would
allow a reasonable trier of fact to find the underlying fact in favor of the party opposing
the motion in accordance with the applicable standard of proof.” (Id. at p. 850,
fn. omitted.) Thus, a party “ ‘cannot avoid summary judgment by asserting facts based
on mere speculation and conjecture, but instead must produce admissible evidence raising
a triable issue of fact. [Citation.]’ [Citation.]” (Dollinger DeAnza Associates v. Chicago
Title Ins. Co. (2011) 199 Cal. App. 4th 1132, 1144-1145.)
Keeping the standard of review in mind, we will independently determine whether
the motion for summary judgment should have been granted, beginning with the issue of
standing.
B. Standing
1. Bankruptcy
Peterson contends that the trial court erred in determining that he lacks standing
because he failed to list his claims in the instant lawsuit as assets on his bankruptcy
schedules. He argues that under federal bankruptcy law, the conversion of a bankruptcy
11
proceeding from Chapter 13 to Chapter 7 results in the Chapter 7 bankruptcy estate
including only the property that existed at the time the Chapter 13 bankruptcy petition
was filed. Peterson maintains that since he filed his Chapter 13 bankruptcy petition in
2007, his causes of action arising from the 2009 and 2012 wrongful posting of
foreclosure notices are postpetition claims that were not assets of his Chapter 7
bankruptcy estate, and therefore he had no obligation to list them in his 2010 bankruptcy
schedules. Alternatively, Peterson contends that the dismissal of his Chapter 7
bankruptcy case in December 2012 resulted in the revesting in him of all bankruptcy
estate assets, included his claims against defendants, pursuant to 11 U.S.C. section 349,
subdivision (b)(3).
We requested and received supplemental briefing from the parties on this standing
issue. As we will discuss, we agree with Peterson that under the pertinent federal statutes
governing bankruptcy, his bankruptcy proceedings did not cause him to lack standing to
bring the instant action.
“As a general matter, upon the filing of a petition for bankruptcy, ‘all legal or
equitable interests of the debtor in property’ become the property of the bankruptcy estate
and will be distributed to the debtor’s creditors. [11 U.S.C.] § 541(a)(1).” (Rousey v.
Jacoway (2005) 544 U.S. 320, 325.) “The scope of section 541 is broad and ‘property’
includes causes of action. [Citation.]” (Haley v. Dow Lewis Motors, Inc. (1999) 72
Cal. App. 4th 497, 504 (Haley).)
In Harris v. Viegelahn (2015) __ U.S. __ [135 S. Ct. 1829] (Harris), the United
States Supreme Court discussed the differences between Chapter 13 and Chapter 7
bankruptcy estates. “Chapter 7 allows a debtor to make a clean break from his [or her]
financial past, but at a steep price: prompt liquidation of the debtor’s assets. When a
debtor files a Chapter 7 petition, his [or her] assets, with specified exemptions, are
immediately transferred to a bankruptcy estate. [11 U.S.C.] § 541(a)(1). . . . [W]hile a
Chapter 7 debtor must forfeit virtually all his [or her] prepetition property, he [or she] is
12
able to make a ‘fresh start’ by shielding from creditors his [or her] postpetition earnings
and acquisitions.” (Harris, supra, at p. __ [135 S.Ct. at p. 1835].)
“Chapter 13 works differently. A wholly voluntary alternative to Chapter 7,
Chapter 13 allows a debtor to retain his [or her] property if he [or she] proposes, and
gains court confirmation of, a plan to repay his [or her] debts over a three- to five-year
period. [11 U.S.C.] § 1306(b), § 1322, § 1327(b). Payments under a Chapter 13 plan are
usually made from a debtor’s ‘future earnings or other future income.’ [11 U.S.C.]
§ 1322(a)(1); [citation]. Accordingly, the Chapter 13 estate from which creditors may be
paid includes both the debtor’s property at the time of his [or her] bankruptcy petition,
and any wages and property acquired after filing. [11 U.S.C.] § 1306(a).” (Harris,
supra, __ U.S. at p. __ [135 S.Ct. at p. 1835].)
“Conversion from Chapter 13 to Chapter 7 does not commence a new bankruptcy
case. The existing case continues along another track, Chapter 7 instead of Chapter 13,
without ‘effect[ing] a change in the date of the filing of the petition.’ [11 U.S.C.]
§348(a).” (Harris, supra, __ U.S. at p. __ [135 S.Ct. at p. 1836].) Absent a bad faith
conversion, 11 U.S.C. § 348, subdivision (f)(1)(A) provides that “in a case converted
from Chapter 13, a debtor’s postpetition earnings and acquisitions do not become part of
the new Chapter 7 estate: [¶] “ ‘[P]roperty of the [Chapter 7] estate in the converted case
shall consist of property of the estate, as of the date of filing of the [initial Chapter 13]
petition, that remains in the possession of or is under the control of the debtor on the date
of conversion.’ ” (Harris, supra, at p. __ [135 S.Ct. at p. 1837].)
Regarding causes of action, the general rule is that “[w]here events that give rise
to a cause of action occur following the filing of the chapter 7 petition, that cause of
action is not property of the bankruptcy estate. [Citations.]” (Haley, supra, 72
Cal. App. 4th 497 at p. 504.) One exception is that a cause of action that arises
postpetition from the property of the bankruptcy estate is also considered property of the
Chapter 7 bankruptcy estate. (See 11 U.S.C. § 541, subd. (a)(6); Bostanian v. Liberty
13
Savings Bank (1997) 52 Cal. App. 4th 1075, 1084 (Bostanian); Haley, supra, at p. 505.)
This is because the bankruptcy estate’s property also includes “[p]roceeds, product,
offspring, rents, or profits of or from property of the estate, . . . .” (11 U.S.C. § 541,
subd. (a)(6); Bostanian, supra, at p. 1084.) A foreclosure action is considered “a product,
proceed, or offspring” of the debtor’s interest in his or her residence and is therefore
property of the bankruptcy estate. (Bostanian, supra, at p. 1084; accord, Haley, supra, at
p. 505.) Only the bankruptcy trustee has standing to prosecute a cause of action that is
the property of the bankruptcy estate. (Bostanian, supra, at p. 1081.)
Another rule governing bankruptcy proceedings is that the “ ‘bankruptcy code
place[s] an affirmative duty on [the debtor] to schedule his [or her] assets and liabilities.
[11 U.S.C.] § 521(1). If he [or she] fail[s] properly to schedule an asset, including a
cause of action, that asset continues to belong to the bankruptcy estate and [does] not
revert to [the debtor]. [Citations.]” (M & M Foods, supra, 196 Cal.App.4th at p. 563;
but see Wallick v. Period Homes (Ga.Ct.App. 2001) 555 S.E.2d 863, 866 [no authority
requires scheduling product or proceeds of bankruptcy estate property as an asset of
Chapter 7 estate].) Thus, “absent abandonment of the claim by the [bankruptcy] trustee,
a debtor out of possession has no standing to prosecute a cause of action which has
passed to the bankruptcy estate.” (Bostanian, supra, 52 Cal.App.4th at p. 1081.)
Since Peterson’s causes of action in the present case arose from his interest in real
property—the cottages on Hollister Avenue—that was property of the bankruptcy estate,
his causes of action were also property of his bankruptcy estate pursuant to federal
bankruptcy law. (See 11 U.S.C. § 541, subd. (a)(6); Bostanian, supra, 52 Cal.App.4th at
p. 1084; Haley, supra, 72 Cal.App.4th at p. 505.) Although Peterson did not list the
causes of action as assets in his bankruptcy schedules and the trustee did not abandon the
claims, we agree with Peterson that the causes of action nevertheless reverted to him
because his bankruptcy case was dismissed, rather than closed.
14
The difference between closing and dismissing a bankruptcy case was discussed
in Menk v. Lapaglia (In re Menk) (Bankr. 9th Cir. 1999) 241 B.R. 896 (Menk). “A
bankruptcy case is closed after the estate is fully administered and the court has
discharged the case trustee. 11 U.S.C. § 350(a); [citation].” (Id. at p. 911.) If there is
property remaining in the bankruptcy estate that was not scheduled and administered, the
property “retains its status as ‘property of the estate’ after closing. 11 U.S.C. § 554(d).”
(Ibid.)
“By way of contrast, dismissing a bankruptcy case has different and more
significant consequences than closing a case.” (Menk, supra, 241 B.R. at p. 912; see
11 U.S.C. § 349 [prescribing the effect of a dismissal].) “A dismissal, unless otherwise
ordered, ‘revests the property of the estate in the entity in which such property was vested
immediately before the commencement of the case under this title.’ (11 U.S.C.
§ 349(b)(3).)[5] This provision ‘obviously contemplates that on dismissal a bankrupt is
reinvested with the estate, subject to all encumbrances which existed prior to the
bankruptcy. After an order of dismissal, the debtor’s debts and property are subject to the
general laws, unaffected by bankruptcy concepts.’ [Citation.] ‘ “The basic purpose of
[11 U.S.C. § 349, subd. (b)(3)] is to undo the bankruptcy case, as far as practicable, and
to restore all property rights to the position in which they were found at the
commencement of the case.” ’ [Citations.]” (Circle Star Center Associates, L.P. v.
Liberate Technologies (2007) 147 Cal. App. 4th 1203, 1209, italics & fn. omitted.)
Therefore, “[u]nlike closing, . . . all property of the [bankruptcy] estate revests in
the entity in which such property was vested immediately before bankruptcy, regardless
of whether the property was scheduled. [Citation.]” (Menk, supra, 241 B.R. at p. 912;
5
11 U.S.C. § 349, subdivision (b)(3) provides: “Unless the court, for cause,
orders otherwise, a dismissal of a case other than under section 742 of this title [11 USCS
§ 742]-- [¶] . . . [¶] revests the property of the estate in the entity in which such property
was vested immediately before the commencement of the case under this title.”
15
accord, Crawford v. Franklin Credit Management Corp. (2d Cir. 2014) 758 F.3d 473,
484-485 (Crawford); Mackall v. JPMorgan Chase Bank, N.A. (Colo.Ct.App. 2014) 356
P.3d 946, 950-951; Norris v Brookshire Grocery Co. (Tex.Ct.App. 2012) 362 S.W.3d
226, 231-232; but see Kunica v. St. Jean Financial, Inc. (U.S.D.C. 1999) 233 B.R. 46,
53-55 [discharge of bankruptcy case not prerequisite for finding debtor lacks standing to
assert undisclosed claims post-bankruptcy].)
Since the record reflects that Peterson’s Chapter 7 bankruptcy case was dismissed
on December 7, 2012, the causes of action arising from his Hollister Avenue property
that were the property of the bankruptcy estate revested in Peterson by operation of law,
pursuant to 11 U.S.C. § 349, subdivision (b)(3), even though the causes of action were
not scheduled by Peterson and were not administered or abandoned by the bankruptcy
trustee. (See Crawford, supra, 758 F.3d at pp. 484-485.) Accordingly, Peterson’s
bankruptcy proceedings did not cause him to lack standing to bring the causes of action
asserted in the present case.
The decisions on which defendants rely for a contrary result are distinguishable
and do not aid defendants. In Gottlieb v. Kest (2006) 141 Cal. App. 4th 110, the appellate
court determined that a company was obligated to disclose its legal claims in its
Chapter 11 (11 U.S.C. § 1101 et seq.) bankruptcy case. (Id. at p. 136.) However, the
appellate court further determined that the debtor’s nondisclosure of its legal claims did
not bar a post-bankruptcy action asserting those claims. (Id. at pp. 120, 140-141.)
The M & M Foods decision, on which defendants also rely, involved a company’s
Chapter 7 bankruptcy. (M & M Foods, supra, 196 Cal.App.4th at p. 557.) The appellate
court stated that “ ‘ “[g]enerally speaking, a pre-petition cause of action is the property of
the Chapter 7 bankruptcy estate, and only the trustee in bankruptcy has standing to pursue
it.” [Citations.]’ ” (Id at p. 562, italics omitted.) The court also determined that where a
debtor fails to properly schedule a cause of action during bankruptcy proceedings, the
cause of action continues to belong to the bankruptcy estate and does not revert to the
16
debtor when the bankruptcy case is closed. (Id. at pp. 563-564.) Since the plaintiff,
M & M Foods, Inc., had not disclosed its prepetition claim against the defendant in its
bankruptcy disclosure schedules, and the claim was not abandoned by the bankruptcy
trustee, the appellate court ruled that M & M Foods, Inc. did not have standing to
arbitrate the claim. (Id. at p. 564.) The decision in M & M Foods has no application in
the present case since M & M Foods’ bankruptcy case was closed, not dismissed. (Id. at
p. 558.)
The decision in Bostanian is also procedurally distinguishable, since in that case
the plaintiffs’ Chapter 7 bankruptcy proceeding was pending and had not been either
closed or dismissed. (Bostanian, supra, 52 Cal.App.4th at pp. 1077-1079.) The
Bostanian court concluded that “plaintiffs’ [wrongful foreclosure] cause of action is
property of the bankruptcy estate. Further, there is no evidence the chapter 7 trustee has
abandoned the interest in this claim. Absent abandonment, plaintiffs have no standing to
pursue this appeal; the chapter 7 trustee is the real party in interest with standing to sue.”
(Id. at p. 1087.)
For these reasons, we find no merit in defendants’ contention that Peterson’s
bankruptcy proceedings caused him to lack standing to bring the instant action.
2. Ownership
Peterson also contends that the trial court erred in determining that he lacked
standing because he did not own the subject property at the time he filed his second
amended complaint in 2013. Since Peterson owned the property when defendants posted
the foreclosure notices in 2009 and 2012, Peterson argues that he has standing to bring
the instant lawsuit. We agree.
Section 367 provides the general rule regarding standing: “Every action must be
prosecuted in the name of the real party in interest, except as otherwise provided by
statute.” “[T]he real party in interest is the party who has title to the cause of action, i.e.,
17
the one who has the right to maintain the cause of action. [Citation.]” (Vaughn v. Dame
Construction Co. (1990) 223 Cal. App. 3d 144, 147 (Vaughn).)
“While ordinarily the owner of the real property is the party entitled to recover for
injury to the property, the essential element of the cause of action is injury to one’s
interests in the property—ownership of the property is not. It has been recognized in
many instances that one who is not the owner of the property nonetheless may be the real
party in interest if that person’s interests in the property are injured or damaged.
[Citations.]” (Vaughn, supra, 223 Cal.App.3d at p. 148.)
In other words, “ ‘[t]he cause of action for damages as a result of injury to
property, which was fully vested in plaintiff at the time of the injury, is personal
property—not real property.’ ” (Keru Investments, Inc. v. Cube Co. (1998) 63
Cal. App. 4th 1412, 1424.) For that reason, the transfer of title to property does not
transfer the prior owner’s cause of action arising from damage to the property to the new
owner. (Thoryk v. San Diego Gas & Electric Co. (2014) 225 Cal. App. 4th 386, 395.)
In this case, since the record reflects that the foreclosure notices for Flowers’ property
were erroneously posted on Peterson’s property during the summer of 2009 and in
August 2012, prior to the transfer of title to Hollister Holdings in September 2012, the
causes of action arising from the erroneous posting were vested in Peterson and he has
standing to prosecute them.
Having determined that Peterson has standing, we turn to his contention that the
trial court erred in granting summary adjudication of each of his five causes of action.
C. Declaratory Relief
In his cause of action for declaratory relief, Peterson states that he “desire[s] a
judicial determination of the right and responsibilities of the parties, specifically a
determination that the Deed of Trust does not secure 206 Hollister Avenue 1 and Chase
cannot foreclose on 206 Hollister Avenue 1.”
18
On appeal, Peterson argues that even assuming that the official address for his
property is 204 Hollister Avenue, as testified by City of Capitola building official
Wheeler, he “still can claim that he is entitled to declaratory relief—a declaration that the
Flowers-WaMu deed of trust is void.” Defendants respond that the cause of action lacks
merit as a matter of law because it is undisputed that the correct address for the Flowers’
property is 206 Hollister Avenue pursuant to Wheeler’s official act as the City of
Capitola building official.
We determine that the undisputed material facts show that Peterson is not entitled
to the declaratory relief he seeks. “Code of Civil Procedure section 1060 authorizes
‘[a]ny person . . . who desires a declaration of his or her rights or duties with respect to
another . . . in cases of actual controversy relating to the legal rights and duties of the
respective parties, [to] bring an original action . . . for a declaration of his or her rights
and duties . . . .’ (. . . § 1060, italics added.)” (Jenkins v. JPMorgan Chase Bank, N.A.
(2013) 216 Cal. App. 4th 497, 513 (Jenkins), disapproved on another ground in Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal. 4th 919, 939, fn. 13; see also Jolley v. Chase
Home Finance, LLC (2013) 213 Cal. App. 4th 872, 909.)
Thus, “[t]he purpose of a judicial declaration of rights in advance of an actual
tortious incident is to enable the parties to shape their conduct so as to avoid a breach.”
(Babb v. Superior Court (1971) 3 Cal. 3d 841, 848 (Babb).) Declaratory relief is therefore
a remedy that “ ‘operates prospectively, and not merely for the redress of past wrongs. It
serves to set controversies at rest before they lead to repudiation of obligations, invasion
of rights or commission of wrongs; in short, the remedy is to be used in the interests of
preventive justice, to declare rights rather than execute them.’ ” (Ibid., italics added.)
Peterson argues in his reply brief that he properly seeks “a declaration that
Defendants cannot foreclose on his property.” However, it is undisputed that the 2009
and 2012 foreclosure notices that were posted on Peterson’s property contained the
correct legal description for Flowers’ property (“Lot 5, in Block X, as shown upon that
19
certain map entitled, ‘Capitola’, filed for record in the office of the County Recorder on
April 26, 1888, in Map Book 10, page 13, Santa Cruz County Records”) and the correct
county assessor’s parcel number for Flowers’ property (036-125-10). It is also
undisputed that the foreclosure notices were recorded in connection with Flowers’ default
on his loan with defendants. Therefore, the record reflects that there is no actual, present
controversy between defendants and Peterson regarding any attempt by defendants to
foreclose on Peterson’s property, which undisputedly has a different legal description and
county assessor’s parcel number. (See Babb, supra, 3 Cal.3d at p. 848; Jenkins, supra,
216 Cal.App.4th at pp. 513-514.) The cause of action for declaratory relief accordingly
lacks merit as a matter of law.
For these reasons, we determine that the trial court did not err in granting
summary adjudication of the cause of action for declaratory relief.
D. Injunctive Relief
In the cause of action for injunctive relief, Peterson alleged that “Defendants have
commenced a foreclosure action under the Deed of Trust and have scheduled a non-
judicial sale for September 15, 2009” and sought to restrain defendants’ “wrongful
conduct.” On appeal, Peterson contends that the trial court erred in granting summary
adjudication because defendants’ posting of the foreclosure notices on his property shows
that they are wrongfully attempting to foreclose on his property and, therefore, the
foreclosure proceedings should be enjoined. Defendants disagree, arguing that Peterson
is not entitled to enjoin foreclosure of Flowers’ property since he has no interest in that
property.
We understand Peterson to seek an order enjoining defendants from foreclosing on
his property. However, under the rules generally governing injunctive relief, we again
find it determinative that the undisputed material facts show that defendants are not
attempting to foreclose on Peterson’s property.
20
“The ‘purpose of a prohibitory injunction is to prevent future harm to the applicant
by ordering the defendant to refrain from doing a particular act. [Citations.]
Consequently, injunctive relief lies only to prevent threatened injury and has no
application to wrongs that have been completed. [Citation.] It should neither serve as
punishment for past acts, nor be exercised in the absence of any evidence establishing the
reasonable probability the acts will be repeated in the future.’ [Citation.]” (Huntingdon
Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal. App. 4th
1228, 1266 (Huntingdon), italics omitted.)
We reiterate that it is undisputed that the 2009 and 2012 foreclosure notices that
were posted on Peterson’s property contained the correct legal description for Flowers’
property (“Lot 5, in Block X, as shown upon that certain map entitled, ‘Capitola’, filed
for record in the office of the County Recorder on April 26, 1888, in Map Book 10,
page 13, Santa Cruz County Records”) and the correct county assessor’s parcel number
for Flowers’ property (036-125-10). It is also undisputed that the foreclosure notices
were recorded in connection with Flowers’ default on his loan with defendants. Based on
these undisputed material facts, it is apparent that defendants are not attempting to
foreclose on Peterson’s property.
We therefore determine that absent any actual threat by defendants to foreclose on
Peterson’s property, summary adjudication of the cause of action for injunctive relief was
properly granted. (See Huntingdon, supra, 129 Cal.App.4th at p. 1266.)
E. Negligence
Peterson alleged in the negligence cause of action that defendants had carelessly
drafted the deed of trust for Flowers’ property with an erroneous street address of
206 Hollister Avenue 1 and posted the notice of trustee’s sale and notice of default on the
wrong property. He argues that summary adjudication of the negligence cause of action
should not have been granted because there are triable questions of fact as to “whether
[he] will be forced to sell his property as distressed property due to Defendants’ wrongful
21
posting of foreclosure notices on his property.” In addition, Peterson argues that
defendants have not shown that they were not negligent in drafting the deed of trust and
the foreclosure notices with the wrong street address.
Defendants respond that summary adjudication was properly granted because
Peterson “has not identified any actual harm caused by the posting of a Notice of Default
on his property, rather than on the Flowers Property.” Defendants also contend that since
the legal description in the foreclosure notices posted on his property contained the
correct legal description for Flowers’ property, “there is simply no negligent act or any
identified harm.”
Our resolution of the issue is governed by the standard of review for an order
granting summary adjudication. As we have discussed, a defendant moving for summary
judgment has the initial burden of showing that a cause of action lacks merit because one
or more elements of the cause of action cannot be established or there is a complete
defense to that cause of action. (§ 437c, subd. (o); Aguilar, supra, 25 Cal.4th at p. 850.)
We find that defendants have not shown that one or more elements of the cause of action
for negligence cannot be established, or that there is a complete defense to the cause of
action.
“To state a cause of action for negligence, a plaintiff must allege (1) the defendant
owed the plaintiff a duty of care, (2) the defendant breached that duty, and (3) the breach
proximately caused the plaintiff’s damages or injuries. [Citation.]” (Lueras v. BAC
Home Loans Servicing, LP (2013) 221 Cal. App. 4th 49, 62.) “Generally, each person has
a duty to exercise reasonable care in the circumstances and is liable to those injured by
the failure to do so. [Citation.]” (Avila v. Citrus Community College Dist. (2006) 38
Cal. 4th 148, 160 (Avila).)
Peterson’s negligence claim arises from defendants’ posting of the foreclosure
notices for Flowers’ property on Peterson’s property in 2009 and 2012. On appeal,
defendants concede that the foreclosure notices were “inadvertently” posted on
22
Peterson’s property. In their motion for summary adjudication, defendants made no
evidentiary showing regarding the circumstances that led to posting the foreclosure
notices on the wrong property. They argued only that the error was inadvertent because
both properties had the commonly known address of 206 Hollister Avenue. Defendants
therefore failed to meet their initial burden to show that they did not breach their duty to
exercise reasonable care under the circumstances. (See Avila, supra, 38 Cal.4th at
p. 160.)
Alternatively, defendants failed to make a sufficient evidentiary showing that
Peterson was not harmed by the erroneous posting of foreclosure notices on his property.
Although defendants’ evidence showed that Peterson’s property was sold during
bankruptcy proceedings to Hollister Holdings for $700,000, defendants did not show, for
example, that the price was fair market value or that Peterson’s interest in his property
was not otherwise harmed. Their primary argument is that Peterson has failed to show
that he sustained damage as a result of the erroneous posting. However, the burden did
not shift to Peterson to show he was damaged because defendants did not meet their
initial burden on summary adjudication to establish on the basis of undisputed facts that
Peterson was not damaged. (See Aguilar, supra, 25 Cal.4th at pp. 850, 854.)
For these reasons, we determine that summary adjudication of the cause of action
for negligence was improperly granted and we will direct the trial court to vacate the
order and enter a new order denying summary adjudication of the cause of action.
F. Slander of Title
In the cause of action for slander of title, Peterson alleged that defendants’
erroneous posting of foreclosure notices on his property in 2009 and 2012 was
defamatory because defendants were not his lenders and had asserted an interest in his
property that they did not possess. Peterson further alleged that the slander of title had
caused him to suffer damages, including diminution of the value of his property. He
argues on appeal that the trial court erred in granting summary adjudication of the cause
23
of action for slander of title because the posted foreclosure notices falsely implied that
defendants had a security interest in his property and were conducting a foreclosure sale,
thereby causing a loss of market value.
According to defendants, summary adjudication was properly granted because the
foreclosure notices posted on Peterson’s property did not constitute publication of a false
statement, since the notices stated the correct legal description of Flowers’ property.
Defendants also contend that Peterson cannot show a pecuniary loss due to the alleged
slander of title.
As we will discuss, we again find that defendants have not met their initial burden
on summary adjudication to show that one or more elements of the cause of action cannot
be established, or that there is a complete defense to the cause of action.
“ ‘The elements of a cause of action for slander of title are “(1) a publication,
(2) which is without privilege or justification, (3) which is false, and (4) which causes
direct and immediate pecuniary loss.” [Citations.]’ [Citation.]” (M.F. Farming, Co. v.
Couch Distributing Co., Inc. (2012) 207 Cal. App. 4th 180, 198, fn. & italics omitted
(M.F. Farming).) The element of publication does not require a recorded document.
(Id. at p. 198, fn. 5; see Phillips v. Glazer (1949) 94 Cal. App. 2d 673, 674 [slander of title
action based on posted sign].) “ ‘If the matter is reasonably understood to cast doubt
upon the existence or extent of another’s interest in land, it is disparaging to the latter’s
title where it is so understood by the recipient. [Citation.]’ [Citations.]” (M & F
Farming, supra, at p. 199.)
Here, defendants have not met their initial burden on summary adjudication to
make an evidentiary showing that the physical posting of Flowers’ foreclosure notices on
Peterson’s property did not disparage Peterson’s title to the property. (See M & F
Farming, supra, 207 Cal.App.4th at p. 199.) Specifically, defendants did not show on the
basis of undisputed facts that the posted foreclosure notices would not be reasonably
24
understood by passersby or other observers to indicate that Peterson was in default and
his property was going to be sold at a foreclosure sale.
We are also not convinced that defendants met their initial burden to show that
Peterson could not establish the element of pecuniary loss. “The main thrust of the cause
of action is protection from injury to the salability of property [citations], which is
ordinarily indicated by the loss of a particular sale, impaired marketability or depreciation
in value [citations].” (Sumner Hill Homeowners’ Assn., Inc. v. Rio Mesa Holdings, LLC
(2012) 205 Cal. App. 4th 999, 1030.) “ ‘However, it is not necessary to show that a
particular pending deal was hampered or prevented, since recovery may be had for the
depreciation in the market value of the property [citation].’ [Citation].” (M.F. Farming,
supra, 207 Cal.App.4th at p. 199.)
Here, defendants argue that Peterson “cannot show a pecuniary loss from the
alleged slander” because his alleged damages are speculative and unsupported. However,
to prevail on summary adjudication, the defendant has the burden to show “that the
plaintiff cannot establish at least one element of the cause of action by showing that the
plaintiff does not possess, and cannot reasonably obtain, needed evidence. . . .” (Aguilar,
supra, 25 Cal.4th at p. 854.) In their motion for summary adjudication, defendants did
not meet this burden, since there was no showing on the basis of undisputed facts that
Peterson did not possess and could not reasonably obtain evidence that his property had
impaired marketability or was diminished in value due to the erroneously posted
foreclosure notices.
Having determined that defendants did not meet their burden on summary
adjudication, we will direct the trial court to vacate its order granting summary
adjudication and to enter a new order denying summary adjudication of the cause of
action for slander of title.
25
G. Quiet Title
In his final cause of action, Peterson sought to quiet title in real property located at
206 Hollister Avenue 1 because defendants were claiming an adverse interest in the
property. Peterson contends that the trial court erred in granting summary adjudication of
this cause of action because defendants wrongfully posted foreclosure notices on his
property, including posting a notice of trustee’s sale after his attorney advised defendants
of their error in posting the foreclosure notices on the wrong property.
In response, defendants acknowledge that foreclosure notices were “mistakenly
placed” on Peterson’s property. However, they contend that they have never sought an
interest in Peterson’s property and therefore summary adjudication of the cause of action
for quiet title was properly granted.
A quiet title cause of action has two elements: (1) “the plaintiff is the owner and
in possession of the land,” and (2) “the defendant claims an interest therein adverse to
[the plaintiff].” (South Shore Land Co. v. Petersen (1964) 226 Cal. App. 2d 725, 740; see
also § 761.020.6) We agree with defendants that the undisputed evidence shows that they
have not claimed an adverse interest in Peterson’s property.
6
Section 761.020 provides: “The complaint shall be verified and shall include all
of the following: [¶] (a) A description of the property that is the subject of the action. In
the case of tangible personal property, the description shall include its usual location. In
the case of real property, the description shall include both its legal description and its
street address or common designation, if any. [¶] (b) The title of the plaintiff as to which
a determination under this chapter is sought and the basis of the title. If the title is based
upon adverse possession, the complaint shall allege the specific facts constituting the
adverse possession. [¶] (c) The adverse claims to the title of the plaintiff against which a
determination is sought. [¶] (d) The date as of which the determination is sought. If the
determination is sought as of a date other than the date the complaint is filed, the
complaint shall include a statement of the reasons why a determination as of that date is
sought. [¶] (e) A prayer for the determination of the title of the plaintiff against the
adverse claims.”
26
The evidence shows, as we have discussed, that the 2009 and 2012 foreclosure
notices that were posted on Peterson’s property contained the correct legal description for
Flowers’ property (“Lot 5, in Block X, as shown upon that certain map entitled,
‘Capitola’, filed for record in the office of the County Recorder on April 26, 1888, in
Map Book 10, page 13, Santa Cruz County Records”) and the correct county assessor’s
parcel number for Flowers’ property (036-125-10). It is also undisputed that the
foreclosure notices were recorded in connection with Flowers’ default on his loan with
defendants. These undisputed material facts show as a matter of law that defendants
were attempting to foreclose only on Flower’s property and have not claimed an adverse
interest in Peterson’s property.
For these reasons, we determine that the trial court properly granted summary
adjudication of the cause of action for quiet title.
V. DISPOSITION
The judgment is reversed and the matter is remanded to the trial court with
directions to (1) vacate its June 30, 2014 order granting summary adjudication of the
third cause of action for negligence and to enter a new order denying summary
adjudication of the third cause of action for negligence; and (2) vacate its June 30, 2014
order granting summary adjudication of the fifth cause of action for slander of title and to
enter a new order denying summary adjudication of the fifth cause of action for slander
of title. The parties shall bear their own costs on appeal.
27
___________________________________________
BAMATTRE-MANOUKIAN, J.
WE CONCUR:
__________________________
ELIA, ACTING P.J.
__________________________
MIHARA, J.