Brown v. Zive

CHERIE BROWN, Plaintiff and Appellant, v. YOUVAL ZIVE et al., Defendants and Respondents.

B300415

California Court of Appeals, Second District, Seventh Division

November 16, 2021

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC475181, Malcolm Mackey, Judge. Reversed and remanded with instructions.

The Zabetian Firm, Arash H. Zabetian; JDR Law Inc. and John D Rowell for Plaintiff and Appellant.

Locke Lord, Daniel A. Solitro and Simon M. Feng for Defendant and Respondent Deutsche Bank National Trust Company.

Haeri & Zelli and Nedda Haeri for Defendant and Respondent Adi Perez.

PERLUSS, P. J.

Cherie Brown sued Youval Zive, Vaca Partnership, Pacific Holdings Phoenix Realty Investments, LLC (collectively Zive parties) and others for fraud, quiet title and related claims on December 13, 2011. On May 8, 2019 the trial court granted a motion to dismiss pursuant to Code of Civil Procedure sections 583.310 and 583.360, ^[1] finding Brown had failed to bring her lawsuit to trial within five years. On appeal Brown argues the court erred in finding this action was not subject to automatic stays arising out of the bankruptcy petitions of various defendants and failing to toll the mandatory five-year period as a result. We reverse and remand for further proceedings on the quiet title and fraudulent conveyance causes of action and direct the trial court to reconsider the motion to dismiss as to the fraud cause of action.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Real Estate Transaction and Foreclosure Proceedings

In January 2007 Brown purchased a home on Lankershim Boulevard in Los Angeles from Vaca Partnership. According to Brown Zive, the general partner of Vaca, had assured Brown he would arrange financing and handle the transaction for her. Prior to taking title to the property Brown executed an all-inclusive purchase money promissory note in favor of Zive for approximately $1 million with an interest rate of "7.2 (Variable) percent," which Brown alleged she signed at Zive's direction. The promissory note, executed in November 2006, provided for monthly payments of $3, 030 "or more," a $30, 000 principal payment on December 20, 2006 and a maturity date of March 1, 2008. The promissory note stated the principal amount included the balance due on two underlying promissory notes executed by Zive in favor of Washington Mutual Bank and secured by deeds of trust encumbering the Lankershim property. The original amounts of the underlying notes were $980, 000 and $46, 142. The promissory note was secured by a deed of trust encumbering the Lankershim property listing Zive as the beneficiary. In March 2008 Zive and Brown executed an addendum to the promissory note extending the maturity date to March 1, 2010 conditioned upon Brown's timely payments of $30, 000 to Zive on a specified schedule.

Brown alleges that, prior to 2009, she made payments on the promissory note by delivering to Zive and his associate Liat Menahem checks payable to the financial institution lenders on the underlying notes. Zive assured Brown he was delivering her payments to those financial institutions. Beginning in 2009, Brown alleges, Zive did not deliver her payments to the lenders but instead deposited them in his own bank account.

In early 2011 Zive, through his authorized agent, initiated nonjudicial foreclosure proceedings against Brown. A notice of default and election to sell was issued and recorded on January 25, 2011. The notice directed Brown to contact Pacific Holdings, of which Zive and Menahem are alleged to be owners and/or employees, to arrange for payment of the amount due. Notices of trustee's sale were recorded on July 1, 2011, July 5, 2011 and July 14, 2011. On September 7, 2011 Zive executed an assignment of deed of trust assigning all rights in the deed of trust to Phoenix Realty Investments LLC.

On September 14, 2011 a trustee's deed upon sale was recorded. The deed stated the Lankershim property had been sold at public auction to Phoenix Realty, the successful bidder at the trustee's sale. In late September 2011 Phoenix Realty filed unlawful detainer proceedings to evict Brown from the home. The verification of the unlawful detainer complaint was signed by Menahem on behalf of Phoenix Realty.

2. The Complaint and Demurrer

On December 13, 2011 Brown sued the Zive parties, Menahem and 50 Doe defendants for fraud, wrongful foreclosure and quiet title.^[2] The Zive parties and Menahem demurred.

On September 26, 2012 the court sustained the demurrer to the fraud cause of action without leave to amend against Zive, Vaca Partnership and Pacific Holdings.^[3] Leave to amend the fraud cause of action was granted as to Menahem and Phoenix Realty. The demurrer to the wrongful foreclosure cause of action was sustained against all defendants without leave to amend. The demurrer to the quiet title cause of action was overruled.

3. The First Amended Complaint and Demurrer Brown filed her first amended complaint on

October 18, 2012 alleging causes of action for fraud against Menahem, Phoenix Realty and the Doe defendants and quiet title against all defendants. On April 18, 2013 the trial court sustained the Zive parties' demurrer without leave to amend and entered an order of dismissal.

4. The Motion To Vacate the Dismissal and Second Amended Complaint

On August 21, 2013 Brown, representing herself, moved to vacate the dismissal on the basis of excusable neglect (§ 473, subd. (b)). The trial court granted the motion on September 11, 2013 over the defendants' opposition and granted leave to Brown to file a second amended complaint.

Brown filed the second amended complaint on October 30, 2013. In addition to the Zive parties and Menahem, Brown named two additional defendants, Lanker Partnership and H5 Dev. Partnership. The pleading alleged Zive was the majority owner and managing general partner of Lanker Partnership.

The fraud and quiet title causes of action in the second amended complaint remained substantially the same as in previous iterations of the pleading. Brown alleged generally that Menahem, Phoenix Realty and the Doe defendants had committed fraud by conspiring with Zive to misrepresent material facts concerning the financing and purchase of Brown's home; they had assisted one another in foreclosing on the home with knowledge of the fraudulent transactions; and Phoenix Realty had acquired title to the home with knowledge of the fraud perpetrated against Brown.

The quiet title cause of action, brought against all defendants except Menahem, alleged Brown was the equitable owner of the property, the trustee's deed upon sale purporting to transfer the property to Phoenix Realty was void and the defendants had no legal or equitable rights to the property.

The fraudulent transfer cause of action, alleged against Zive, Vaca Partnership, Menahem, Phoenix Realty, Lanker Partnership and H5 Dev., contained allegations not included in prior pleadings. Brown alleged a series of three fraudulent transfers: First, she alleged Zive had assigned his interest in the promissory note to Phoenix Realty for no consideration and caused Phoenix Realty to purchase Brown's home at the foreclosure sale in an effort to prevent any interest in the property from being used to satisfy any judgment Brown might obtain in Brown I.^[4] Second, after the jury verdict in Brown's favor in Brown I, but before judgment had been entered, Phoenix Realty transferred the property to Lanker Partnership without consideration to prevent the property from being used to satisfy the forthcoming judgment.^[5] Third, after judgment was entered in Brown I, Lanker Partnership transferred the property without consideration to H5 Dev. to further hinder Brown's collection efforts.^[6]

The Zive parties and Menahem demurred to the second amended complaint on December 3, 2013, and Brown filed an opposition on April 10, 2014. The trial court overruled the demurrer on April 23, 2014.

5. The Intervening Bankruptcies ^[7]

a. The Zive bankruptcy proceedings

On February 24, 2014, while the Zive parties' demurrer to the second amended complaint was pending, Zive filed a voluntary petition for relief under Chapter 13 of the United States Bankruptcy Code (Chapter 13). Zive filed a request for voluntary dismissal on April 9, 2014, and the case was dismissed on April 14, 2014. It does not appear that notice of the bankruptcy proceeding was filed in this action;^[8] nevertheless, no documents were filed in this case between the filing of Zive's bankruptcy petition and the request for dismissal.

Zive filed a second voluntary petition for relief under Chapter 13 on November 13, 2014 and filed a notice of the resulting automatic stay in these proceedings on December 19, 2014. The bankruptcy petition was dismissed on February 6, 2015 after Zive failed to appear at a meeting with creditors.

b. The Lanker Partnership bankruptcy proceeding

On July 12, 2015 Lanker Partnership filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (Chapter 11). The schedules filed in the bankruptcy proceeding identified the Lankershim property as property of Lanker Partnership.

On August 10, 2016 Brown, again represented by counsel, filed a notice of bankruptcy and automatic stay in this action informing the trial court of Lanker Partnership's bankruptcy proceeding and its claimed interest in the Lankershim property. The docket reflects that, on August 16, 2016, this action was placed on "special status" for a "Bankruptcy Stay."

On October 20, 2017 Brown filed a document titled "Notice that Action Remains Stayed," informing the court that "the bankruptcy stay with respect to defendant Lanker Partnership remains...