Judge Mitchell L. Beckloff, Case 22STCV34236 2023-04-21 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 22STCV34236, Date: 2023-04-21 Tentative Ruling

This action arises from a dispute over ownership and control of real property located at 5532 West 62nd Street in Los Angeles (the Property).

Plaintiff, RH Properties, seeks an order appointing a limited receiver to collect the rents, issues, and profits derived from the Property. Plaintiff also requests the receiver pay obligations arising from the Property. Defendant, Sandra McBeth, opposes the motion.[1]

Relevant to these proceedings is a decision from Division 2 of this district’s Court of Appeal, McBeth v. New Penn Financial, LLC, Court of Appeal case numbers B315965 and B317415. The Court of Appeal decision is final.

In the Court of Appeal decision, Defendant was represented by her counsel here. Thus, both Defendant and her counsel are aware of the Court of Appeal decision.

“In these consolidated appeals, plaintiff Sandra K. McBeth (McBeth) defaulted on a $682,500 residential loan secured by a deed of trust on a Ladera Heights property. The deed of trust was held by defendant The Bank of New York Mellon, formerly known as The Bank of New York as Trustees for the SWABS Asset-Backed Certificates Trust 2006-QH1 Mortgage PassThrough Certificates, Series 2006 QH1 (BNYM). The company servicing the loan for BNYM was defendant New Rez, LLC, formerly known as New Penn Financial, LLC, doing business as Shellpoint Mortgage Servicing (Shellpoint).

Shellpoint foreclosed on the property, and it was sold at auction. McBeth filed suit for, among other things, wrongful foreclosure. The trial court granted defendants’ summary judgment, concluding in part, the undisputed evidence showed McBeth failed to prove the threshold requirement that she owned or occupied the property during the relevant time period. McBeth retained new counsel and moved to set aside the judgment. The motion was denied. McBeth then filed notices of appeal from the judgment and the postjudgment order. We affirm.

McBeth and her husband borrowed $682,500 from Quality Home Loans in 2006. The loan was secured by a deed of trust on the Ladera Heights property, a single-family dwelling. The couple subsequently divorced, and McBeth retained the property. In 2010, the deed of trust was reassigned to BNYM with Shellpoint as BNYM’s service provider. In 2015, McBeth defaulted on the loan. She owed $638,262.79. Her two applications for a loan modification were denied. Her application for a short sale of the property was not completed. The nonjudicial foreclosure sale went forward in 2018, and BNYM purchased the property.

McBeth sued defendants for wrongful foreclosure, violating the unfair competition law, declaratory relief, injunctive relief, to set aside the sale, and to cancel the trust deed.”

Thus, Defendant’s action to set aside the nonjudicial foreclosure sale to The Bank of New York was unsuccessful. Defendant does not hold title to the Property at issue herein. She lost title to the Property through the nonjudicial foreclosure sale.

The appointment of a receiver is a drastic remedy, may involve unnecessary expense and hardship and courts carefully weigh the propriety of such appointment in exercising their discretion to appoint a receiver particularly if there is an alternative remedy.” (Hoover v. Galbraith (1972) 7 Cal.3d 519, 528.)

A receiver may not be appointed except in the classes of cases expressly set forth in the statutes. (Turner v. Superior Court (1977) 72 Cal. App. 3d 804, 811.) “Code of Civil Procedure section 564 contains a principal source of authority for trial courts to appoint receivers.” (Ibid.) “The requirements of Code of Civil Procedure section 564 are jurisdictional, and without a showing bringing the receiver within one of the subdivisions of that section the court's order appointing a receiver is void.” (Ibid.)

Plaintiff seeks the appointment of a receiver to “take possession, collect[] the rents, [and] pay the obligations” of the Property. (Motion 1:23-24.) Plaintiff contends Defendant who has no interest in the Property is collecting rents to which she is not entitled.

In support of its motion, Plaintiff argues it owns of the Property. Plaintiff states it obtained ownership of the Property after Defendant lost title to it in a nonjudicial foreclosure on July 6, 2018. (Ritvo Decl., ¶ 4.) Bank of New York Mellon (as trustee for certain asset-backed securities) purchased the property at the trustee’s sale. (Ritvo Decl., Ex. A.) Plaintiff provides a copy of a grant deed showing W M & Co, a California Corporation, purchased the Property from Bank of New York Mellon. (Ritvo Decl., ¶ 5, Exs. B, N.) The closing statement suggests the sales transaction closed thereby vesting title to the Property in W M & Co on or about December 27, 2021. On October 13, 2021, prior to W M & Co’s alleged purchase of the Property, W M & Co. assigned its purchase rights to the Property to Plaintiff for $85,500. (Ritvo Decl., ¶ 6, Ex. C.) Another grant deed recorded January 3, 2022, demonstrates W M & Co transferred the Property to Plaintiff. (Ritvo Decl., Ex. N.)

Plaintiff contends it has been paying the property tax bill and insurance premiums for the Property. Plaintiff reports it has not been able to obtain possession of the Property from Defendant. (Ritvo Decl., ¶¶ 7-9, 14, Exs. D-E, I.) Further, Plaintiff advises despite the Property generating income, Plaintiff is not receiving income on the Property and the loan on the Property became due on December 22, 2022. (Ritvo Decl., ¶¶ 16-20, 23-24, Ex. O.) Plaintiff seeks to refinance the loan on the Property. (Ritvo Decl., ¶ 25.)

The opposition contends Plaintiff—who has no demonstrated ownership interest in the Property—cannot prevail on its ownership claim over the Property. Defendant points to an unlawful detainer action between these parties in Los Angeles County Superior Court (22STUD00124), wherein the jury found for Defendant on possession of the Property and determined that Plaintiff does not own the Property with a special verdict form. (Opp., Ex. 2.) Plaintiff makes an argument that collateral estoppel applies based on the unlawful detainer action. (Opp. 4:20-22.)

The court notes Plaintiff has appealed the adverse judgment, and the judgment is not yet final.[2] (Notice of Appeal filed July 27, 2022, Case No. 22STUD00124.) Thus, the unlawful detainer has no preclusive effect today as there is no final judgment.

Plaintiff based its unlawful detainer action on title claims arising from Civil Code section 2924. (Opp., Ex. 1 [UD Complaint, ¶ 6].) Defendant does not analyze the elements of collateral estoppel or res judicata; as the burden of proving the affirmative defense is on Defendant, the court finds Defendant’s argument is not sufficiently developed in her papers.

Defendant suggests many issues exist with Plaintiff’s chain of title. When examined, however, the issues are not problematic. For example, the closing statement for the sale transaction between New York Bank Mellon and W M & Co/RH Properties indicates the total consideration paid as $1,312,500. (Ritvo Decl., Ex. B.) The grant deed from W M & Co to Plaintiff shows the transaction as a gift.[3] (Ritvo Decl., Ex. N.) The assignment agreement shows the sale price as $1,398,000 which is consistent with the assignment payment of $85,500 and the total consideration paid of $1,312,500. (Ritvo Decl., Ex. C.) Despite Defendant’s claims the documents do not appear to contain numerous inconsistencies and glaring irregularities.[4]

Ownership of the Property does not necessarily dictate the result herein. The court notes, however, Plaintiff has presented a chain of title showing it is vested with title. Consistent with Plaintiff’s evidence, as noted earlier, the Court of Appeal opinion in Court of Appeal Cases B315965 and 317415 (see Ritvo Decl., Ex. H) reveals Defendant lost a property in non-judicial foreclosure based on a loan owned by Bank of New York Mellon.[5] The Court of Appeal opinion notes Bank of New York Mellon purchased the Property at the non-judicial foreclosure sale. (Ritvo Decl., Ex. H.) Importantly, Defendant provides no evidence Defendant owns the Property. The jury verdict from the unlawful detainer action did not find Defendant owned the Property. (Oppo., Ex. 2.)

The issue is whether appointment of a receiver is necessary to protect the Property from harm, loss, destruction or misappropriation. (See Code Civ. Proc., § 564, subd. (b). Armbrust v. Armbrust (1946) 75 Cal.App.2d 272, 275.) A receiver is appropriate for the preservation of assets that are involved in the controversy between the parties. (Armbrust v. Armbrust, supra, 75 Cal.App.2d at 275.) If Defendant does not own the Property—which appears to be the case given record title and the Court of Appeal opinion—she is not entitled to collect rents, manage the Property and use the profits.

Even assuming Plaintiff must show its interest in the Property and the profits therefrom is probable, Plaintiff has done so here. (Opp. 5:3-4 [citing Code of Civ. Proc., § 564, subd. (b)(1)].)[6] The statutory scheme for the appointment of a receiver provides multiple grounds for appointing a receiver, including “where necessary to preserve the property or rights of any party.” (Code Civ. Proc., § 564, subd. (b)(9).) Plaintiff has sufficiently demonstrated the need for a receiver especially given the lack of evidence otherwise from Defendant.

The court finds on the evidence, the Property is generating rents. (Ritvo Decl., ¶¶ 17-18, Ex. K.) Defendant has offered no evidence otherwise.[7] The rents can be used to meet the Property’s obligations—mortgage, taxes and insurance. Plaintiff—who is responsible for the debt on the Property—has received no income from the Property. (Ritvo Decl., ¶ 16.) Plaintiff opines the fair rental value of the Property is $7,000 per month. (Ritvo Decl., ¶ 19.) As there is evidence the debt on the Property is secured by a deed of trust, and the loan is in default. (Ritvo Decl., ¶ 24.)

Despite Plaintiff’s alleged ownership of the Property, it is unable to take possession of the rents generated by it or maintain the Property. The rents are not being collected by Plaintiff. The court finds the rents are currently being removed and lost. A receiver will secure the Property, manage the rentals, collect the rents and pay obligations for the Property as they become due. The court finds appointment of a receiver is appropriate here to preserve the Property (including the rents) while this litigation is pending.

The court questions whether the Property generates sufficient funds to pay the receiver’s fees. Plaintiff has not nominated a receiver and the court cannot determine what hourly fee might be generated by a receiver.

Will Plaintiff guarantee payment of the receiver if there are insufficient funds from the rents to pay the receiver as well as meet all of the other obligations of the Property?

Defendant moved ex parte to exclude certain evidence submitted by Plaintiff in connection with its motion to appoint a receiver. Plaintiff filed evidentiary objections to the evidence submitted by Defendant to support her request. In turn, Defendant objected to Plaintiff’s objections based on the nature of the formatting. Defendant’s objection to the form of Plaintiff’s evidentiary objections is overruled.

Evidentiary Objections: While Plaintiff failed to number the objections, the court rules on them in sequence. The following objections are sustained: 1, 2, 4 through 14, 16, 17, 18, 20, 21, 24, 25 and 27. The following objections are overruled: 3 (the court notes the sentence does not appear to be complete), 19 and 26. The following objections are sustained in part: 15 (as to the third, fourth and fifth sentence only), 22 (except as to the penultimate sentence) and 23 (as to the second sentence). The court notes much of the evidence objected to is argument and improperly included in declarations.

The motion to exclude evidence is denied. The court finds the documents have been sufficiently authenticated. The issue from an evidentiary standpoint is the weight to be afforded the evidence.

Importantly, the appointment of a receiver is not dependent upon whether Plaintiff may lose the Property in foreclosure. While that issue is important, it is not determinative. Plaintiff has demonstrated it holds title to the Property. Defendant—who has no demonstrated interest in the Property—is exercising control over it. To the extent the Property is productive (or the receiver can make the Property productive), a receiver is warranted to protect the Property and its rents pending resolution of this litigation. Neither party will be harmed by an order that guarantees the Property and its profits are protected.

Accordingly, the motion for appointment of a receiver is granted. The court will discuss the details of the appointment (including the identity of the receiver) with the parties during argument. The court also intends to narrowly tailor the authority granted to the receiver in the order of appointment.

[1] Defendant filed her opposition brief one day late.

[2] On its own motion, the court takes judicial notice of Plaintiff’s notice of appeal.

[3] The grant deed does not appear to be inconsistent with the terms of the assignment between W M & Co and Plaintiff.

[4] Defendant indicates she has attached as Exhibit 4 to her opposition a deed of trust. Exhibit 4, however, is a fictitious business name statement. The court could not locate any deed of trust in any of Defendant’s exhibits.

[5] The court notes Defendant has offered no evidence of her alleged ownership interest in the Property.

[6] A motion for a receiver can be brought “in an action between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose right to or interest in the property or fund . . . is probable, and where it is shown that the property or fund is in danger of being lost, removed, or materially injured.” (Code Civ. Proc., § 564, subds. (b)(1) and (b)(9).)

[7] The Court of Appeal affirmed summary judgment in favor of Bank of New York Mellon (and other defendants) on grounds Defendant did not demonstrate a triable issue of material fact as to owner-occupancy of the Property.