Judge: Richard Y. Lee, Case: 2018-00991458, Date: 2022-08-22 Tentative Ruling

Request for Judicial Notice

The request for judicial notice of the moving parties is GRANTED pursuant to Evidence Code sections 452(d) and 452(h).

Motion to Enforce Court Order

The Motion to Enforce Court Order is DENIED.

Defendants Joseph L. Sanders, individually; Joseph L. Sanders as trustee of the Kae Kerley Family Trust dated September 18, 1997; and Joseph L. Sanders, as trustee of the Irrevocable Living Trust Agreement of Rose M. Sanders, dated June 1, 2010 (collectively, the “Sanders Defendants”) move to enforce this court’s March 14, 2022 order.

On April 8, 2021, this court entered default judgment in favor of Plaintiffs. Specifically, on the 12th cause of action for reformation of contract, default judgment was entered against Defendant American Bankers, LLC, Defendant Rick Floyd, and the Sanders Defendants. The judgment reformed two notes and deeds of trust to delete as void ab initio references to Defendant American Bankers, LLC, as lender and/or beneficiary; and to identify John Watcher and Mabel Watcher as the lender and/or beneficiary. (See 04/08/2021 Default Judgment at 3:24-6:19, Exhs. 1-4.)

On March 14, 2022, this court set aside the default judgment but only as to the Sanders Defendants. The court’s orders from March 14, 2022 left unchanged the default of the other defendants – American Bankers, LLC and Rick Floyd. 

By way of this motion, the Sanders Defendants now seek to remove John Watcher and Mabel Watcher as the lenders/beneficiaries on the two notes and deeds of trust reformed pursuant to this court’s April 8, 2021 default judgment.

As an initial matter, it does not appear that the bankruptcy stay (that issued when Defendant Joseph L. Sanders filed for chapter 11 bankruptcy) bars this proceeding. On 06/30/2022, the bankruptcy court lifted the automatic stay “for the limited purpose of allowing the Parties to file any papers they deem appropriate in connection with the Motion to Enforce the Court’s Order to Set Aside the Default Judgment, filed by the Debtor [John L. Sanders], and for the State Court to adjudicate the same.” (Stuart Decl. [ROA 707], Exh. 2.)

However, the court’s ruling from March 14, 2022 did not make any orders regarding the reformation of the notes or deeds of trust.  Nor would the court’s orders logically have done so since the reformation changed the lender and/or beneficiary from American Bankers, LLC, to John Watcher and Mabel Watcher.  The court’s ruling from March 14, 2022 only granted relief from default for the Sanders Defendants and left untouched the default of Defendants American Bankers, LLC and Rick Floyd. Therefore, the Sanders Defendants’ requested relief goes beyond the scope of this court’s March 14, 2022 orders.

Further, the Sanders Defendants do not identify which lender and/or beneficiary should be added in place of the Watchers. Because the court’s judgment voided ab initio the references to American Bankers as lender and/or beneficiary, Defendant’s requested relief would render the notes and deeds of trust without any identified lender and/or beneficiary—a legal nullity.

In addition, the Sanders Defendants fail to cite to any legal authority supporting their requested relief under these circumstances, and this court is aware of none.

Finally, the Plaintiffs have filed a notice of appeal of the Court’s order setting aside the Sanders Defendants’ default. Thus, the automatic stay on appeal prevents a judge from altering the appealed judgment or order by conducting other proceedings that may affect it, thereby causing the appeal to be futile. (Varian Medical Sys., Inc. v. Delfino (2005) 35 Cal.4th 180, 189; Cunningham v. Magidow (2013) 219 Cal.App.4th 298, 304.)  The purpose is to protect the appellate court’s jurisdiction by preserving the status quo until the appeal is decided, and this court is not inclined to disturb the status quo.

Plaintiffs shall give notice of this ruling.