Judge: Helen Zukin, Case: 21STCV23459, Date: 2023-03-14 Tentative Ruling
Case Number: 21STCV23459 Hearing Date: March 14, 2023 Dept: 207
Background
This case arises from the sale of real property located at
2478 Glyndon Avenue, Los Angeles, CA 90291. Defendant Allstar Financial
Services, Inc., the lender on a loan secured by the property, sought to sell
the property at a non-judicial foreclosure sale. Plaintiff Sunrise Projects,
LLC (“Sunrise”) claims it was the highest bidder for the property under the
provisions of a recently enacted statutory scheme which changes the procedures
for certain non-judicial foreclosure sales as codified by the Legislature at
Civil Code § 2924m. The property and Defendant Allstar’s attempted sale have
given rise to multiple lawsuits which have been consolidated in whole or in
part with this action.
Sunrise’s operative pleading is the First Amended Complaint
filed August 5, 2021, in Case Number 21SMCV00756 asserting causes of action
against Defendant Allstar for quiet title and declaratory relief. Defendant
Allstar now moves for summary judgment, or, alternatively, summary adjudication
as to every cause of action asserted by Sunrise and Sunrise’s claim for
attorney’s fees. Sunrise opposes Allstar’s motion.
Objections to Evidence
Sunrises’ objections to the Declaration of Alfred Haberstroh
and exhibits submitted by Allstar are OVERRULED.
Allstar’s objections to Sunrise’s Additional Separate
Statement of Undisputed Material Facts are OVERRULED.
Summary Judgment Standard
Motions for summary judgment are governed by Code Civ. Proc. §
437c, which allows a party to “move for summary judgment in an action or
proceeding if it is contended that the action has no merit or that there is no
defense to the action or proceeding.” (C.C.P. § 437c(a)(1).) The function of a
motion for summary judgment or adjudication is to allow a determination as to
whether an opposing party cannot show evidentiary support for a pleading or
claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001)
25 Cal.4th 826, 843.) Code Civ. Proc. § 437c(c) “requires the trial judge to
grant summary judgment if all the evidence submitted, and ‘all inferences
reasonably deducible from the evidence’ and uncontradicted by other inferences
or evidence, show that there is no triable issue as to any material fact and
that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7
Cal.App.4th 1110, 1119.) “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.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991)
231 Cal. App. 3d 367, 381-382.) Courts “liberally construe the evidence in
support of the party opposing summary judgment and resolve doubts concerning
the evidence in favor of that party.” (Dore
v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)
As to each
claim as framed by the complaint, the defendant moving for summary judgment
must satisfy the initial burden of proof by presenting facts to negate an
essential element, or to establish a defense. (C.C.P. § 437c(p)(2); Scalf v. D. B. Log Homes, Inc. (2005)
128 Cal.App.4th 1510, 1520.) Courts “liberally construe the evidence in support
of the party opposing summary judgment and resolve doubts concerning the
evidence in favor of that party.” (Dore
v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.) Once the defendant
has met that burden, the burden shifts to the plaintiff to show that a triable
issue of one or more material facts exists as to that cause of action or a
defense thereto. To establish a triable issue of material fact, the party opposing
the motion must produce substantial responsive evidence. (C.C.P. § 437c(p)(2); Sangster v. Paetkau (1998) 68
Cal.App.4th 151, 166.)
Summary Adjudication Standard
A party may move for summary adjudication as to one or more
causes of action, affirmative defenses, claims for damages, or issues of duty
if that party contends there is no merit to the cause of action, defense, or
claim for damages, or there is no duty owed. (See CCP §437c(f)(1).) “A motion
for summary adjudication shall be granted only if it completely disposes of a
cause of action, an affirmative defense, a claim for damages, or an issue of
duty.” (Ibid.) A party moving for summary
adjudication bears the burden of persuasion that there are no triable issues of
material facts. Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826,
850.
In analyzing motions for summary
adjudication, the court must “view the evidence in the light most favorable to
the opposing party and accept all inferences reasonably drawn therefrom.” (Hinesley v. Oakshade Town
Center (2005) 135 Cal.App.4th 289, 294; Dore v. Arnold Worldwide, Inc.
(2006) 39 Cal.4th 384, 389 (Courts “liberally construe the evidence in support
of the party opposing summary judgment and resolve doubts concerning the
evidence in favor of that party”).) A motion for summary adjudication must be
denied where the moving party's evidence does not prove all material facts,
even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164
Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v.
Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).
Analysis
1. Applicability
of Civil Code section 2924m
As a threshold matter, the parties dispute whether Civil
Code § 2924m applies to this property and Allstar’s foreclosure sale. Section
2924m is a recently enacted statute which changes the procedures for non-judicial
foreclosures. Prior to the new statute, the delivery
of the trustee’s deed to a bona fide purchaser was conclusive and the buyer
took free and clear of any other claims. Section 2924m changes that. With
regard to sales of properties having one to four residential units, the sale is
not immediately final. Rather, the sale only becomes final after 15 days unless
an eligible bidder, as defined by the statute, submits a notice of intent to
bid an amount exceeding the highest bid at the sale. An eligible bidder then
has an additional 30 days to submit a formal bid with a tender of payment by
cash or cashier’s check.
The legislative history of section
2924m is undisputed. The parties recognize section 2924m was enacted as a
remedial statute to address an anticipated wave of mortgage defaults following
the job loss and financial fallout from the Covid-19 pandemic. The Legislature
enacted section 2924m in an attempt to prevent history from repeating, noting
that the 2007-2010 foreclosure crises led to a significant decline in
homeownership rates as a result of the widespread of entry of institutional
investors into the rental market who were able to capitalize on foreclosure
sales to easily obtain properties. (See Allstar Ex. 31.) Section 2924m
thus gives certain classes of potential purchasers preferential treatment in
that it allows them to meet or exceed the highest bid at a foreclosure sale. As
noted, section 2924m was only recently enacted by the Legislature and thus
there are currently no opinions from the Court of Appeal or California Supreme
Court interpreting the statute or its requirements. The question of whether
section 2924m applies to the subject property and associated foreclosure sale
is thus a matter of first impression for the Court.
At the time of the foreclosure
sale, the subject property contained a residential property in the process of
what Allstar characterizes as construction but which Sunrise deems remodeling.
Regardless of the specific term used, the property was in the process of being
converted from a single story residence to a two story single family home with
an additional residential structure being added to the property. Allstar
claims—and Sunrise does not appear to dispute—the property was uninhabitable at
the time of the foreclosure, though various components of the structure had
been inspected and approved by the city as part of the conversion process.
Allstar argues section 2924m must
be interpreted to not apply to residences which are in the process of being
constructed but are currently uninhabitable. Thus, Allstar contends, because
none of the structures on the property are presently inhabitable it does not
meet the requirements of section 2924m, which only applies to property which
contains one to four residential units. In other words, Allstar asserts the
phrase “residential units” as used in section 2924m(c) should be construed to
mean “residential units which are presently habitable.” Allstar points to other
provisions of the Civil Code which contain express language stating they apply
to property on which residential units are to be constructed in the future.
(Civ. Code §§ 2924.5, 1941.1(d), 1916.5(b)(1).) Allstar claims if the
Legislature intended section 2924m to apply to properties currently under
construction, it thus would have explicitly stated so. Sunrise argues Allstar’s
proposed interpretation of section 2924m would run contrary to the intended
purpose of the statute as it would narrow the application of the statute to
properties which contain fully habitable residences and exclude properties
which are currently undergoing construction, remodeling, or redevelopment.
In interpreting section 2924m, the
Court is guided first by the language of the statute itself and the directive
to give effect to the intent of the Legislature as apparent from the
legislative history of the statute. “The primary duty of a court when
interpreting a statute is to give effect to the intent of the Legislature, so
as to effectuate the purpose of the law. [Citation.] To determine intent,
courts turn first to the words themselves, giving them their ordinary and
generally accepted meaning. [Citation.] If the language permits more than one
reasonable interpretation, the court then looks to extrinsic aids, such as the
object to be achieved and the evil to be remedied by the statute, the
legislative history, public policy, and the statutory scheme of which the
statute is a part. [Citation.] … Ultimately, the court must select the
construction that comports most closely with the apparent intent of the
Legislature, with a view to promoting rather than defeating the general purpose
of the statute, and it must avoid an interpretation leading to absurd
consequences. [Citation.]” (In re Luke W. (2001) 88 Cal.App.4th 650,
655.)
Section 2924m defines certain
classes of eligible bidders. One of these categories of eligible bidders are
prospective owner-occupants. In support of its interpretation, Allstar points
to section 2924m(a)(1) which defines a “prospective owner-occupant” as a
natural person who “will occupy the property as their primary residence within
60 days of the trustee’s deed being recorded.” Allstar argues this shows the
Legislature intended section 2924m to apply only to properties which are
currently habitable. The Court notes Sunrise does not claim to have been an
eligible bidder as a prospective owner-occupant, but instead claims eligibility
under section 2924m(a)(3)(D).
While section 2924m has been
further amended, at the time of the subject foreclosure sale at issue here,
section 2924m(a)(3)(F) defined eligible bidders under the statute to include “A
limited liability company in which the managing member is an eligible nonprofit
corporation based in California whose primary activity is the development and
preservation of affordable rental housing.” The language of section
2924m(a)(3)(F) does not contain any habitability requirement analogous to the
one contained in section 2924m(a)(1). This suggests the Legislature intended
different standards to apply to the different classes of eligible bidders under
the statute. The Legislature clearly knew how to impose a habitability
requirement on all bidders if that was its intention. The imposition of such a
requirement only on prospective owner-occupants under subdivision (a)(1),
suggests the Legislature did not intend to restrict other categories of
eligible bidders from utilizing section 2924m to acquire properties presently
under construction or redevelopment.
The Court finds the intent of
section 2924m would not be served by reading a blanket habitability requirement
into the statute. Such a requirement would necessarily decrease the number of
properties subject to the statute and thereby render the statute less effective
at achieving the remedial results sought by the Legislature in enacting it. The
Court thus declines to read a habitability requirement into section 2924m(c)
through the use of the phrase “residential units.” The Court thus finds Allstar
has failed to show section 2924m did not apply to the subject foreclosure sale
as a matter of law. It is undisputed the property previously satisfied the
requirements of section 2924m(c) and contained one single story residential
unit. The redevelopment of that unit into a two-story structure, while
currently incomplete, does not take the property beyond the ambit of section
2924m. The Court therefore DENIES Allstar’s motion for summary judgment or
adjudication based on the non-applicability of section 2924m.
2. Sunrise’s
Status as an Eligible Bidder
Allstar argues that even if
section 2924m applies to the subject property, it is entitled to summary
judgment on Sunrise’s claims because Sunrise cannot establish it was an
eligible bidder under the statute. As discussed above, Sunrise claims to be an
eligible bidder as a nonprofit corporation under section 2924m(a)(3)(F). Under
this subdivision, “A limited liability company in which the managing member is
an eligible nonprofit corporation based in California whose primary activity is
the development and preservation of affordable rental housing” is deemed to be
an eligible bidder under the statute. Allstar argues Sunrise cannot establish
it satisfied these requirements as of April 18, 2021, the deadline for Sunrise
to submit its complete bid under section 2924m.
Sunrise is a Wyoming limited
liability company which registered to do business in California on April 5,
2021. (UMF No. 16.) On April 21, 2021, Sunrise filed a Statement of Information
with the California Secretary of State identifying its managing member as Be
Big Affordable Housing, LLC (“Be Big LLC”). (UMF No. 17.) On May 28, 2021,
Sunrise filed another Statement of Information identifying its managing member
as Be Big Affordable Housing, Inc. (“Be Big Inc.”). (UMF No. 19.) It is
undisputed Be Big LLC is not registered to do business in California. (UMF No.
18.) Be Big Inc., however, registered to do business in California on January
11, 2021. (UMF No. 20.) Be Big Inc. subsequently filed a Statement of
Information with the Secretary of State on April 29, 2021. (UMF No. 21.)
Allstar appears to advance two
arguments. First, Allstar argues Be Big LLC should be deemed to have been
Sunrise’s managing member on April 18, 2021. As it is undisputed Be Big LLC was
not registered to do business in California at that time, Allstar contends
Sunrise cannot establish it met the requirements of section 2924m(a)(3)(F) to
be deemed an eligible bidder on the property. Allstar has not presented
evidence indicating an entity with the name Be Big LLC ever acted as Sunrise’s
managing member. Given Sunrise’s subsequent Statements of Information
identified its managing member as Be Big Inc., it appears the designation of Be
Big LLC in Sunrise’s April 21, 2021, Statement of Information was a clerical or
typographical error. (Sunrise Exs. 4-5.) The Court thus rejects the argument
that Be Big LLC’s lack of registration in California is fatal to Sunrise’s
claims under section 2924m.
Allstar’s second argument concerns
the status of Be Big Inc. Citing Corporations Code § 6210, Allstar argues Be
Big Inc. had 90 days to file a Statement of Information as measured from the
date it first registered to do business in California. Because Be Big Inc.
first registered on January 11, 2021, the deadline for it to file its Statement
of Information was April 11, 2021. As set forth above, it is undisputed Be Big
Inc. did not file a Statement of Information until April 29, 2021, and thus
missed the 90 days deadline imposed by Corporations Code § 6210. Allstar argues
Be Big Inc. was thus not properly registered to do business in California as of
April 18, 2021.
In response, Sunrise points to
Corporations Code § 6810(a) as indicating a corporation’s registration is not
automatically invalidated by the failure to timely file a Statement of Information
as required by section 6210. Section 6810(a) provides:
Upon the
failure of a corporation to file the statement required by Section 6210, the
Secretary of State shall provide a notice of that delinquency to the
corporation. The notice shall also contain information concerning the
application of this section, and advise the corporation of the penalty imposed
by Section 19141 of the Revenue and Taxation Code for failure to timely file
the required statement after notice of delinquency has been provided by the
Secretary of State. If, within 60 days after providing the notice of
delinquency, a statement pursuant to Section 6210 has not been filed by the
corporation, the Secretary of State shall certify the name of the corporation
to the Franchise Tax Board.
Under section 6810, the Franchise
Tax Board can impose a penalty against a corporation which fails to timely file
a Statement of Information after the Secretary of State provides notice of the
failure and gives the corporation a 60 day grace period to cure this failure.
Nothing in section 6810 indicates Be Big Inc.’s corporate status in California
was suspended by its failure to timely file a Statement of Information by April
11, 2021.
It appears to be uncontested that
Be Big Inc. is a nonprofit public benefit corporation organized under
Corporations Code § 5110 et seq. Section 6810, governing the failure of such
entities to file Statements of Information stands in stark contrast to
Corporations Code § 2205. Section 2205, applying to other corporate entities,
expressly provides for suspension of a corporation’s status for failure to file
Statements of Information. No analogous statutory provision applies to
nonprofit public benefit corporations, suggesting Be Big Inc.’s corporate
status was not impacted by its failure to timely file its initial Statement of
Decision.
Allstar points out section 2924m
has been subsequently amended to change the definition of eligible bidder. It
is undisputed Sunrise would not qualify as an eligible bidder under the current
statutory language. However, Allstar also acknowledges the revisions to section
2924m do not apply retroactively, and thus the Court is tasked only with
determining whether Sunrise qualified under the statute as an eligible bidder
as the statute existed at the time the bid was made. While the Legislature
subsequently intended to narrow the definition of eligible bidders, this does
not lead the Court to conclude Sunrise does not meet the statutory definition
in April 2021.
The Court thus finds Allstar has
failed to show Be Big Inc.’s failure to file an initial Statement of
Information by April 11, 2021, or by April 18, 2021, suspended or otherwise
negated Be Big Inc.’s January 11, 2021, registration to do business in
California for the purposes of determining whether it was an eligible bidder
under Civil Code § 2924m(a)(3)(F).
As Allstar’s motion for summary
judgment or adjudication as to Sunrise’s causes of action for quiet title and
declaratory relief is premised on the inapplicability of section 2924m and
Sunrise’s inability to establish it was an eligible bidder under that statute.
As the Court has rejected Allstar’s arguments on those points, its motion for
summary judgment or adjudication on those claims is DENIED.
3. Attorney’s
Fees
Allstar also moves for summary
adjudication of Sunrise’s claim for attorney’s fees, arguing Sunrise has not
established any viable basis for such an award. Allstar’s motion is
procedurally improper and is DENIED. Code Civ. Proc. § 437c(f)(1) permits a
party to move for summary adjudication of causes of action, affirmative
defenses, issues of duties, or claims for damages “as specified in Section 3294
of the Civil Code.” (C.C.P. § 437c(f)(1).) Civil Code section 3294 concerns
claims for punitive damages. Thus, a motion for summary adjudication under
section 437c(f)(1) may only challenge a claim for punitive damages, not any
claim for damages.
Under Code Civ. Proc. § 437c(t) “a
party may move for summary adjudication of a legal issue or a claim for damages
other than punitive damages” only if certain prerequisites are met. (C.C.P. §
437c(t).) These requirements include the filing of a joint stipulation by the
parties whose claims are put at issue by the motion. (C.C.P. § 437c(t)(1).)
This stipulation must be filed before the motion for summary adjudication is
filed and must include a “A declaration from each stipulating party that the
motion will further the interest of judicial economy by decreasing trial time
or significantly increasing the likelihood of settlement.” (C.C.P. §
437c(t)(1)(A)(ii).) The Court must then determine whether to permit the filing
or not. (C.C.P. § 437c(t)(2).)
Allstar has not demonstrated it
has complied with the requirements of section 437c(t) in seeking summary
adjudication of Sunrise’s claim for attorney’s fees. Allstar’s motion for
summary adjudication of this claim is DENIED.
Conclusion
Allstar’s motion for summary judgment, or, alternatively,
summary adjudication is DENIED.