Padilla v. Jakubaitis

1

CARLOS PADILLA III, Plaintiff and Respondent, v. FRANK JAKUBAITIS et al., Defendants and Appellants

G060709

California Court of Appeals, Fourth District, Third Division

December 20, 2022

NOT TO BE PUBLISHED

Appeal from an order of the Superior Court of Orange County, Super Ct. No. 30-2012-00553004 Theodore Howard, Judge. Affirmed. Respondent's Request for Judicial Notice. Denied. Appellants' Motion for Judicial Notice. Granted in part. Respondent's Request for Sanctions. Denied. Appellants' Evidentiary Objections. Denied.

Frank Jakubaitis and Tara Jakubaitis, in pro. per., for Defendants and Appellants.

Pacific Premier Law Group and Arash Shirdel for Plaintiff and Respondent.

OPINION

SANCHEZ, J.

INTRODUCTION

Both the present case and related case No. G060295 are appeals from orders denying motions made pursuant to Code of Civil Procedure section 473, subdivision (d) (section 473(d))^[1] to set aside or vacate judgments or orders. Here, Frank Jakubaitis and Tara Jakubaitis appeal from an order denying their motion to vacate "orders and judgments" obtained by a court-appointed receiver in 2014. Frank and Tara^[2]contend the orders and judgments are void because the receiver practiced law without a license by representing the receivership in propria persona when obtaining the orders.

We affirm. The receiver sought and obtained just two orders and no judgments. Frank and Tara lack standing to challenge the orders obtained by the receiver because the orders did not injuriously affect them. The receiver was not appointed for Frank or Tara, they are not the subject of the orders, and they have not been affected by their enforcement. In addition, the orders, if void, are not void on their face and therefore could not be challenged by a motion under section 437(d).

FACTS AND PROCEDURAL HISTORY

Underlying Litigation and Default Judgment

Padilla initiated this litigation in March 2012 by filing a complaint naming Frank, Tara, WeCosign, Inc. (WeCosign) and Tara Pacific, Inc. as defendants. The complaint asserted 34 causes of action ranging from breach of contract to fraud to violation of wage and hour laws and violations of federal and state securities laws. Padilla alleged Frank and Tara had failed to repay loans totaling $89,000; Frank, Tara, and WeCosign had failed to deliver to him 15 million shares of WeCosign stock for which he had invested $100,000; and WeCosign, Padilla's former employer, had failed to pay him wages and denied him meal and rest periods.

After the complaint was filed, the litigation took many twists and turns with several trips to the Court of Appeal and detours to the bankruptcy court. Relevant to this appeal are the following events.

Padilla filed a first amended complaint in August 2012. The first amended complaint alleged Frank was the alter ego of WeCosign. WeCosign Services, Inc. (WeCosign Services) was substituted as a defendant in place of defendant Doe 1 in February 2013. Eight months later, Padilla dismissed WeCosign Services from the complaint except for the 26th and 27th causes of action, both for fraudulent transfer.

In November 2013, a default judgment in the amount of $781,095.61 was entered against Frank. A panel of this court reversed that default judgment. (Padilla v Jakubaitis (Nov. 9, 2015, G051094) [nonpub.opn.].)

In March 2014, the trial court issued an order striking the answers of WeCosign and WeCosign Services and ordering the entry of their defaults. In May 2014, a default judgment was entered against WeCosign and WeCosign Services in the total amount $825,950.56 against WeCosign and the total amount of $958,956.84 against WeCosign Services.

Appointment of the Receiver

In April 2014, Padilla filed a motion to appoint a receiver for WeCosign. The trial court granted the motion and, by an order entered on May 21, 2014, appointed Patrick Bulmer of California Receivership Services as the receiver for both WeCosign and WeCosign Services. Bulmer is not an attorney.

An order appointing a receiver is appealable under Code of Civil Procedure section 904.1, subdivision (a)(7). (County of Sacramento v. Rawat (2021) 65 Cal.App.5th 858, 869.) The appellate record includes nothing to indicate that an appeal was taken from the order appointing Bulmer as the receiver for WeCosign and WeCosign Services.

Orders Obtained by the Receiver

On May 28, 2014, Bulmer filed an ex parte application to add "successor entities, PNC National, Inc....and PNC Services, Inc." to the receivership estate. The application also sought an order to show cause to "confirm the receivership," to "amend the judgment entered in the action" and to add PNC National and PNC Services as additional judgment debtors. Bulmer did not retain counsel: The application was made and signed by Bulmer as court-appointed receiver.

By order entered May 29, 2014, the trial court granted the application and ordered the receivership estate be amended to include the business assets and operations of PNC National, Inc., and PNC Services, Inc. The court issued an order for PNC National and PNC Services to show cause why they should not be added as judgment debtors and why the receivership should not be confirmed as to them. The order had been prepared by Bulmer and was submitted by him to the court.

A hearing was held on the order to show cause. Bulmer appeared on behalf of the receivership. After the hearing, Bulmer submitted a proposed order, which was adopted by the trial court. By that order, entered on June 20, 2014, the court stayed the matter as to PNC National because it had filed a chapter 7 bankruptcy petition and found that PNC Services was a successor entity to WeCosign and WeCosign Services. The default judgment was ordered amended to add PNC Services as an additional judgment debtor. The receivership was ordered confirmed as to PNC Services.

WeCosign ceased operating and filed a chapter 7 bankruptcy petition in June 2014. WeCosign Services also appeared as a debtor in WeCosign's bankruptcy petition. The bankruptcy case was closed in January 2015.

On June 19, 2014, Padilla, through his counsel, brought an ex parte application to expand the receivership to include an entity called Front Line Services, Inc. The next day, an order was entered granting the application.

In October 2015, Bulmer, as receiver, field a renewed motion to confirm the receivership as to PNC National, to authorize the sale of the receivership estate, and to apply the sale proceeds to satisfying the default judgment against WeCosign and WeCosign Services. The motion was not brought by counsel, but by the Bulmer as receiver, and was signed by him. Frank and Tara opposed the receiver's motion on the ground, among others, that Bulmer was not a licensed attorney and therefore could not represent the receivership in court. In January 2016, Padilla filed a joinder in the receiver's motion.

The trial court continued the receiver's motion to February 25, 2016, to allow the receiver to prepare and submit an accounting of the receivership and a detailed list of assets over which the receiver had taken control, and to cite authority that would allow the receiver to appear in court without counsel.

Bulmer did not appear at the hearing on February 25, 2016, and there is no record of him ever appearing or filing anything in court again. By minute order entered on the same date, the trial court denied the receiver's motion and denied Padilla's joinder in the motion. The minute order states, "Even if the Receiver can bring his own motion (which is dubious), the present motion fails to come close to the moving party's burden and lacks adequate evidence to support its assertions."

Frank and Tara submitted a complaint regarding Bulmer to the State Bar of California. They alleged the Bulmer had practiced law without a license by filing several motions on behalf of the receivership. The State Bar initiated an investigation and notified the district attorney in Butte County, where Bulmer resided, because the allegations could subject him to criminal prosecution. In August 2019, the State Bar closed the investigation because Bulmer had died.

Frank and Tara's Motion to Set Aside or Vacate Orders Obtained by the Receiver

In December 2019, Frank and Tara brought an ex parte application for an order shortening time to hear their motion (1) for dismissal of the action for fraud on the court, (2) to vacate the default judgment against WeCosign and WeCosign Services and (3) to vacate receivership proceedings and orders obtained by the receiver. The trial court denied the ex parte application.

Frank and Tara renewed their motion by dividing it into two motions under section 473(d). One motion was to set aside or vacate the default judgment against WeCosign and WeCosign Services. Denial of that motion is the subject of the related appeal. The other motion was to vacate receivership orders obtained by Bulmer, the subject of this appeal. In the motion to vacate receivership orders, Frank and Tara argued the orders obtained by Bulmer as receiver were void because he was not licensed to practice law and therefore could not appear and litigate matters on behalf of the receivership estate. Frank and Tara did not identify which orders were the subject of the motion.

The trial court denied the motion to vacate receivership orders. In a minute order entered on July 22, 2021, the court gave these reasons: "Defendants have not shown that they have standing to seek the relief requested here. [Citation.] Nor have they identified any alleged harm to the subject entities, or to the Receivership Estate, or even to themselves as shareholders. In addition, as the Reply concedes, corporate entities must be represented by counsel in court. [Citation.] Defenda...