Judge: Malcolm Mackey, Case: 19STCV29553, Date: 2022-12-08 Tentative Ruling

Case Number: 19STCV29553    Hearing Date: December 8, 2022    Dept: 55

HOPE AND TRUST TRADING, INC. v. SANATH, INC.                      19STCV29553

Hearing Date:  12/8/22,  Dept. 55

#9

MOTION TO VACATE VOID ORDER ENTERED OCTOBER 14, 2022 EXPUNGING CANCELLING LIENS WITHOUT NOTICE TO HOLDER AND PREJUDICIAL TO APPLICANT.

MOTION RE: FAIR VALUE HEARING; CLAIM OF EXEMPTION AND LIEN RIGHTS.

Notice:  Okay

Opposition

MP:  

Defendant ANKE CILING.

RP:  

Plaintiff.

Summary

On 8/20/19, Plaintiffs filed a Complaint alleging that, shortly after Plaintiffs’ purchase of the majority shares of Defendant California Medical Imaging, Inc. (CMI), Defendants foreclosed Plaintiff from all control and access to Defendant CMI’s and associated Defendant Sanaths' operations, along with all other aspects of the business, and Defendants refuse to acknowledge Plaintiffs’ majority shareholder status, and ousted Plaintiffs.

The causes of action are:

1) BREACH OF CONTRACT - WRITTEN

2) BREACH OF CONTRACT - ORAL

3) BREACH OF FIDUCIARY DUTY

4) FRAUD IN THE INDUCEMENT

5) FRAUD IN THE FACTUM

6) BREACH OF DUTY OF UNDIVIDED LOYALTY

7) OUSTER OF MAJORITY SHAREHOLDER

8) EMBEZZLEMENT

9) IDENTITY THEFT.

The Judgment was filed 4/13/21, for Plaintiffs, awarding $1,600,000.00 damages, $201,000 attorney’s fees and $800,000 punitive damages.

MP Positions

            Motion to Vacate Order

Moving party request the order entered 10/14/22 expunging or cancelling liens, on grounds including the following:

·         The 10/14/22 order expunging and cancelling second and third position Deeds of Trust, on Anke Ciling's property at 23120 Carancho Road, Temecula, is void.

·         The Deeds of Trust are held by a bona fide encumbrancer-- Karl Lowry-- who is not a party to this action and received no notice, such that the Court lacks jurisdiction.

·         Anke Ciling is at risk of losing her homestead equity in the Carancho Road Property, by virtue of an Order for Sale of Property entered by the Court 11/8/22, which sets a  foreclosure sale date of 1/25/23.

·         Cancellation of a trust deed must be through a separate quiet title action, where the lienholder and property owner are named as parties, have notice, and provided a fair opportunity to defend.

·         There has been no admissible evidence that Karl Lowry's liens are invalid.

Claim of Exemption

Moving party request a hearing on a claim of exemption from post-judgment enforcement, on grounds including the following:

·         A filed form Notice of Hearing on Claim of Exemption or in lieu of Third-Party Claim.

RP Positions

            Opposition to Motion to Vacate Order

Opposing party advocates denying vacation of the lien-cancelling order, for reasons including the following:

·         It is not necessary for the plaintiff give prior notice of the cancellation and, where the plaintiff has not received anything of value, there is no consideration to be restored to the defendant. See Watson v. Poore (1941) 18 Cal.2d 302, 315.

·         The Court has authority to grant such equitable relief as may be proper in an action to quiet title. California Code of Civil Procedure § 760.040(c). It has long been held that, upon proper proof, the Court can order an instrument delivered and canceled, and thereby remove clouds on title. See Crawford v. Summers (1936) 12 Cal.App.2d 533, 536.

·         By way of an analogous example, courts routinely remove liens in proceedings to expunge wrongful liens created by lis pendens. Because of the potential for abuse and injustice to the property owner, courts are authorized to remove, or expunge, such improper liens. See Shah v. McMahon (2007) 148 Cal.App.4th 526, 529.

·         Lowry did not lend the $450,000 to Judgment Debtor, and no evidence presented supports it.

·         The bank records filed by the applicant are illegible.

·         Judgment Debtor and Lowry’s scheme is nothing more than a conspiracy to commit a fraudulent transfer, and Judgment Debtor’s and Lowry’s actions presume fraudulent intent, and thereby the Lowy Liens should remain expunged / cancelled pursuant to California Code of Civil Procedure § 3439.04(a)(2)(A).

            Opposition to Claim of Exemption

·         Anke Ciling’s (“Judgment Debtor”) cursory Claim of Exemption is deficient and should be overruled.

·         It is Judgment Debtor’s burden to prove that her property is exempt, California Code of Civil Procedure § 484.070, and her Claim of Exemption fails to do so.

Tentative Ruling

The motion  to vacate the order of 10/14/22 is granted.

The ruling on the claim of exemption is deferred for hearing.

            Motion to Vacate

It is undisputed that the trust-deeds holder did not receive notice of this action or the 10/14/22 ex parte hearing, reportedly because the person could not be found to serve.

The Court’s independent research revealed no authority for post-judgment, ex parte expunging or cancelling a lien or deed of trust.  "A legal proposition asserted without apposite authority necessarily fails."  People v. Taylor (2004) 119 Cal.App.4th 628, 643.

“An action may be filed to cancel an instrument.”  12 Cal. Real Est. § 40:113 (4th ed.). [Emphasis added.]  Perhaps analogously, “the attorney must sue the client in an independent action to determine the lien's existence and to enforce it.”  Cal. Fam. L. Prac. § A.VIII.

“‘[C]ompliance with the statutory procedures for service of process is essential to establish personal jurisdiction.’”  Ellard v. Conway  (2001) 94 Cal.App.4th 540, 544.  Accord  Renoir v. Redstar Corp. (2004) 123 Cal. App. 4th 1145, 1152.

As for jurisdiction over a nonparty to cancel a lien, a case cited by Plaintiff is not fully supportive.  See   Watson v. Poore (1941) 18 Cal. 2d 302, 310  (noting lack of jurisdiction over the nonparty to the case).  Another cited case involved everyone as parties to the case, unlike here.  See  Shah v. McMahon (2007) 148 Cal. App. 4th 526, 528  (“The Shahs, who claim to be Russell Shaw's assignees under a purported real estate contract, sued McMahon …. They recorded three lis pendens against the property. McMahon moved to expunge the lis pendens.”). 

Further, there is no lis pendens or fraudulent-transfer case filed here, and so that law is inapplicable.

Assuming, arguendo, that notice was not required, there was no substantive basis to cancel or expunge the deeds of trust. The totality of evidence shows bona loans were made, and moving party’s declarations and exhibits are much more detailed than Plaintiff’s merely generalized and conclusory assertions.  Moving party’s filed declarations strongly support finding that bona fide loans were given. 

However, the bank records and verification page of the declaration of Karl Lowry, filed 11/21/22, are illegible, such that the Court cannot determine if the declaration is valid including being verified under California law, and dated, and if the bank records also support finding that loans were made.  “[C]ourts do not find compliance with section 2015.5 to be both substantial and sufficient unless all statutory conditions appear on the face of the declaration in some form.”  Kulshrestha v. First Union Commercial Corp. (2004) 33 Cal.4^th 601, 612.

            Claim of Exemption

The Court will defer the ruling until after a hearing.

“The exemption claimant bears the burden of proof at the hearing.”  Cal. Prac. Guide Enf. J. & Debt Ch.   § 6:906  (citing, e.g., CCP § 703.580(b); O'Brien v. AMBS Diagnostics, LLC (2016) 246 CA4th 942, 948.).

A homestead (or “dwelling”) exemption “does not apply where a lien other than an enforcement lien is being foreclosed—e.g., foreclosure under deed of trust or other consensual lien.”  Enf. J., supra, at  § 6:1013  (citing, e.g., CCP §§ 703.010(b), 704.940; Behniwal v. Mix (2007) 147 CA4th 621, 640.).  “An essential requirement of the ‘dwelling exemption’ is that the claimant reside on the property on the date the judgment creditor's lien attached and continuously thereafter.”  Enf. J., supra, at 6:1020  (citing, e.g., CCP § 704.710(c)).