Judge: Michael E. Whitaker, Case: 21SMCV01637, Date: 2024-05-15 Tentative Ruling

Case Number: 21SMCV01637    Hearing Date: May 15, 2024    Dept: 207

TENTATIVE RULING

BACKGROUND

On October 6, 2021, Plaintiffs and Judgment Creditors Jeremy Golan and Tammy Golan (“Plaintiffs”) filed suit against Defendants and Judgment Debtors Craig Linch (“Linch”) and Real Property Masters, LLC (“Real Property”) (collectively, “Defendants”) alleging three causes of action for (1) to set aside fraudulent transfers pursuant to Code of Civil Procedure section 3439 et seq.; (2) conspiracy to defraud judgment creditor; and (3) unjust enrichment.  The complaint alleges a dispute arose between Plaintiffs and Linch, which was litigated in the Superior Court, County of Los Angeles, Case number 18SMCV00216, resulting in a judgment against Linch in the amount of $376,180.56 on January 22, 2021.  (Complaint ¶¶ 6-7.)

Plaintiffs further allege that Linch subsequently fraudulently transferred the title to his real property, located in Malibu, for no consideration to Defendant Real Property, an entity Linch owns, while Linch continues to live there, in order to shield the property from Plaintiffs.  (Complaint ¶¶ 2-3, 8.)

On January 27, 2023, Default Judgment was entered against Defendants in favor of Plaintiffs in the amount of $450,865.68. 

On January 4, 2024, Plaintiffs filed an ex parte application for an order for the sale of the dwelling.  On January 8, the Court set an order to show cause why the application for sale of dwelling should not be granted for February 20, 2024.

On February 15, 2024, third party creditor US Construction Law (“USCL”) filed an ex parte application to stay, vacate, or transfer this action under exclusive concurrent jurisdiction. 

USCL asserts that an action against Linch is currently pending in the Superior Court, County of San Diego (Case No. 37-2019-0005150090CU-OR-CTL) regarding Linch’s alleged fraudulent transfer of a house and a condominium in Malibu, including the property at issue in this action.  USCL further claims that it has a higher priority lien and Plaintiffs have a junior lien vis-à-vis the subject property.  Further, USCL asserts that Plaintiffs received actual notice of its superior lien by virtue of the Lis Pendens served in connection with the San Diego County action.  USCL also contends that Plaintiffs copied the complaint and lis pendens from the San Diego case nearly verbatim. 

At the hearing on February 16, 2024, the Court permitted the parties to provide additional briefing, and continued the hearing to March 1, 2024, with additional points and authorities, if any, to be filed by February 26 and additional replies to be filed by February 28, with courtesy copies delivered to the Court. 

Plaintiffs’ counsel filed a notice of ruling, erroneously indicating that the ex parte hearing was continued to April 1, instead of March 1, but correctly noting the supplemental briefing deadlines.  On March 1, 2024, there were no appearances by Plaintiffs’ counsel or Counsel for USCL, so the Court continued the hearing date to May 15, 2024, with supplemental opposition papers due by April 24, 2024, and supplemental replies due by May 8.

Plaintiffs oppose the application to stay, vacate, or transfer, and note that if they had been previously aware of the San Diego action, they would have included the other properties that are subject to that action in this action.  USCL opposes the OSC re Application for Sale of Dwelling.  No further replies have been filed.

LEGAL STANDARDS

1.     SALE OF DWELLING

Code of Civil Procedure section 704.740, subdivision (a) provides: “Except as provided in subdivision (b), the interest of a natural person in a dwelling may not be sold under this division to enforce a money judgment except pursuant to a court order for sale obtained under this article and the dwelling exemption shall be determined under this article.”  Subdivision (b) does not apply here.  Section 704.750, subdivision (a) provides:

Promptly after a dwelling is levied upon (other than a dwelling described in subdivision (b) of Section 704.740), the levying officer shall serve notice on the judgment creditor that the levy has been made and that the property will be released unless the judgment creditor complies with the requirements of this section. Service shall be made personally or by mail. Within 20 days after service of the notice, the judgment creditor shall apply to the court for an order for sale of the dwelling and shall file a copy of the application with the levying officer. If the judgment creditor does not file the copy of the application for an order for sale of the dwelling within the allowed time, the levying officer shall release the dwelling.

            “Upon the filing of the application by the judgment creditor, the court shall set a time and place for hearing and order the judgment debtor to show cause why an order for sale should not be made in accordance with the application.  The time set for hearing shall be not later than 45 days after the application is filed or such later time as the court orders upon a showing of good cause.”  (Code Civ. Proc., § 704.770, subd. (a).)

2.     EXCLUSIVE CONCURRENT JURISDICTION

“The rule of exclusive concurrent jurisdiction provides that when two or more courts have subject matter jurisdiction over a dispute, the court that first asserts jurisdiction assumes it to the exclusion of the others.”  (Lofton v. Wells Fargo Home Mortgage (2014) 230 Cal.App.4th 1050, 1062.)  “It makes no matter whether the parties to the various actions and the remedies sought are not precisely the same.”  (Ibid.)  It is sufficient so long as the issues are the same and both suits arise out of the same transaction[s] or events.  (Ibid.)

“Jurisdiction in this context refers to a mandatory procedural rule, not to authority over the subject matter or parties in a fundamental sense.”  (Consumer Advocacy Group, Inc. v. ExxonMobil Corp. (2008) 168 Cal.App.4th 675, 682 (hereafter Consumer).)  In other words, failure to comply does not make subsequent proceedings void.  (Id. at p. 683.)  Rather, the purpose of the rule is “not so much to protect the rights of parties as to protect the rights of Courts of coordinate jurisdiction to avoid conflict of jurisdiction, confusion and delay in the administration of justice.”  (Ibid.)

Exclusive concurrent jurisdiction does not require absolute identity of the parties, causes of action, or remedies in the two actions, so long as the court in the first action has the power to determine all issue sand grant all relief.  (County of Siskiyou v. Superior Court (2013) 217 Cal.App.4th 83, 89 (hereafter Siskiyou).)  The rule does not apply, however, when neither court has the power to bring all the parties before it or to order all relief sought.  (In re B.S. Jr. (2009) 172 Cal.App.4th 183, 191.)  The issues in both proceedings must also be substantially the same and the individual suits must have the potential to result in conflicting judgments.  (Siskiyou, supra, 217 Cal.App.4th at p. 91.)

“The rule of exclusive concurrent jurisdiction is a rule of policy and countervailing policies may make the rule inapplicable.”  (People ex rel. Garamendi v. American Autoplan, Inc. (1993) 20 Cal.App.4th 760, 770.)  Moreover, the rule should not be rigidly applied in a manner that unfairly rewards the winner of the “race to the courthouse,” especially where multiple suits were filed essentially simultaneously.  (Williams v. Superior Court (2007) 147 Cal.App.4th 36, 53.)

The issue of exclusive concurrent jurisdiction “should be raised by demurrer where the issue appears on the face of the complaint and by answer where factual issues must be resolved.”  (People ex rel. Garamendi v. American Autoplan, Inc. (1993) 20 Cal.App.4th 760, 771.)  “After it has been raised by answer, the party asserting the application of the rule may obtain a trial court ruling on the issue by a motion to dismiss or abate or a motion for summary judgment.”  (Ibid.)  If the party asserting application of the rule does not properly raise it by demurrer, answer, or motion to dismiss, stay, or transfer, the court in the later-filed action retains jurisdiction to rule on the merits of that action.  (Id. at pp. 773-774.)

ANALYSIS

1.     EXCLUSIVE CONCURRENT JURISDICTION

            Taking the issue of exclusive concurrent jurisdiction first, although the rule is mandatory, it also has very specific procedural requirements.  Specifically, the issue must be raised by demurrer or answer, and if raised by answer, must thereafter be raised by a motion to dismiss or abate or a motion for summary judgment.  (People ex rel. Garamendi v. American Autoplan, Inc. (1993) 20 Cal.App.4th 760, 771.) 

            Here, the issue was not raised by demurrer or answer.  Nor does USCL have standing to raise the issue, as USCL is not a party to this lawsuit, nor has USCL moved to intervene in this lawsuit.

            Moreover, the purpose of the rule is not to protect the parties’ interests, but rather to safeguard the right of courts to coordinate jurisdiction to avoid conflict, confusion, and delay in the administration of justice.  (Consumer, supra, 168 Cal.App.4th at p. 682.)  As judgment was already entered in this action over a year ago, the request does the opposite.  Due to the passage of time, the Court no longer has jurisdiction to set aside or vacate the judgment that has been entered.  In fact, the request has added to the confusion and delayed the sale of the property – an outcome that both Plaintiffs and USCL desire.

            Furthermore, Plaintiffs have accounted for USCL’s senior lien in the amount of $150,000 in making their request.  (See Verified Application for Order for Sale of Dwelling at ¶ 12.d.)  USCL’s dispute arises because of the attorneys’ fees USCL has incurred in connection with the San Diego County action, which USCL contends should also come out of the proceeds of the sale, depleting the equity to the point where Plaintiffs will recover nothing.  (Declaration of Sean P. Reynolds, Feb. 15, 2024, at ¶ 14 [listing attorneys’ fees and costs in excess of $742,000.)

            Ultimately, because the issue of exclusive concurrent jurisdiction was not raised by answer or demurrer, and because USCL lacks standing to bring the instant motion to stay, vacate, or transfer, the Court denies USCL’s request.

2.     PLAINTIFFS’ APPLICATION FOR SALE OF DWELLING

The judgment creditor’s application shall be made under oath, shall describe the dwelling, and shall contain all of the following:

(a) A statement whether or not the records of the county tax assessor indicate that there is a current homeowner’s exemption or disabled veteran’s exemption for the dwelling and the person or persons who claimed any such exemption.

(b) A statement, which may be based on information and belief, whether the dwelling is a homestead and the amount of the homestead exemption, if any, and a statement whether or not the records of the county recorder indicate that a homestead declaration under Article 5 (commencing with Section 704.910) that describes the dwelling has been recorded by the judgment debtor or the spouse of the judgment debtor.

(c) A statement of the amount of any liens or encumbrances on the dwelling, the name of each person having a lien or encumbrance on the dwelling, and the address of such person used by the county recorder for the return of the instrument creating such person’s lien or encumbrance after recording.

(d) A statement that the judgment is based on a consumer debt, as defined in subdivision (a) of Section 699.730, or that the judgment is not based on a consumer debt, and if the judgment is based on a consumer debt, whether the judgment is based on a consumer debt that was secured by the debtor’s principal place of residence at the time it was incurred or a statement indicating which of the exemptions listed in subdivision (b) of Section 699.730 are applicable. If the statement indicates that paragraph (7) of subdivision (b) is applicable, the statement shall also provide the dollar amount of the original judgment on which the lien is based. If there is more than one basis, the statement shall indicate all bases that are applicable.

(Code Civ. Proc., § 704.760.)

Here, Plaintiffs’ application for sale of dwelling satisfies all procedural requirements of Code of Civil Procedure section 704.760.  And although USCL does not have standing in this action, USCL’s opposition to the Order to Show Cause does not demonstrate that any of the procedural or substantive requirements have not been met.  In fact, both Plaintiffs and USCL seek the same outcome – that the property be sold to pay the judgment creditor lienholders. 

Therefore, the Court Orders the sale of the dwelling.

3.     SANCTIONS

USCL seeks sanctions pursuant to Code of Civil Procedure sections 435-437, 128.5, and 128.7 for Plaintiffs’ “bad faith” in litigating this action.  Sections 435-437 pertain only to procedural rules for moving to strike a pleading, but do not address sanctions. 

Code of Civil Procedure section 128.5 provides, “A trial court may order a party, the party's attorney, or both, to pay the reasonable expenses, including attorney's fees, incurred by another party as a result of actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay.”  (Code Civ. Proc., § 128.5, subd. (a) (emphasis added.))

As a threshold matter, and as discussed above, USCL is not a party to this action.

Moreover, USCL has not demonstrated bad faith.  Although USCL promulgates a theory that Plaintiffs filed this action in bad faith and knowingly omitted naming or serving USCL, possibly in concert with the noteholder on the property, Wilmington Trust National Association, as Trustee, Plaintiffs’ counsel has provided a declaration, indicating that he was unaware of the San Diego County action until February 15, 2024, when served with USCL’s ex parte application to stay, vacate, or transfer, and that had counsel been aware of it, he would have advised his client to pursue the condominium property as well.  (Declaration of Joshua P. Friedman, Feb. 15, 2024, at ¶ 11.) 

The Court finds Plaintiffs’ counsel’s declaration credible.  Although the senior lien came up on the title search, the San Diego lawsuit would not have necessarily surfaced.  Counsel for USCL declared that the lis pendens it filed and recorded on September 24, 2019 provides notice of USCL’s May 15, 2019 abstract of judgment.  (Declaration of Sean P. Reynolds, April 24, 2024, at ¶ 9.)

And although Plaintiffs’ counsel was in communication with USCL’s counsel in connection with USCL’s attempt to set aside or vacate the judgment in Plaintiffs’ underlying case against Linch in June 2023, Plaintiffs’ counsel declares he was under the impression that USCL’s counsel was retained for the limited purpose of attempting settlement and attempting to set aside the judgment in Plaintiffs’ underlying case, and USCL’s counsel did not respond to Plaintiffs’ counsel’s email correspondence.  (Friedman Decl., Feb. 15, 2024, at ¶¶ 4-8.)

Therefore, the Court finds sanctions are inappropriate both because Section 128.5 does not permit the recovery of attorneys’ fees by a non-party to the litigation, and because USCL has not demonstrated Plaintiffs’ bad faith.

CONCLUSION AND ORDER

For the foregoing reasons, the Court denies non-party USCL’s request to stay, vacate, or transfer, and denies USCL’s request for sanctions and grants Plaintiffs’ application for an order for sale of dwelling, and orders the property to be sold.

Plaintiffs shall prepare and file a proposed Order in conformance with the Court’s ruling on or before May 29, 2024.  Further, Plaintiff’s shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith.   

DATED:  May 15, 2024                                                         ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court