Abdallah v. United Savings Bank

• Decision Date: 22 February 1996
• Docket Number: No. A067126,A067126
• Parties: , 96 Cal. Daily Op. Serv. 1976, 96 Daily Journal D.A.R. 3323 Fred ABDALLAH et al., Plaintiffs and Appellants, v. UNITED SAVINGS BANK et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

Page 286

51 Cal.Rptr.2d 286

43 Cal.App.4th 1101, 96 Cal. Daily Op. Serv. 1976,

96 Daily Journal D.A.R. 3323

Fred ABDALLAH et al., Plaintiffs and Appellants, v. UNITED SAVINGS BANK et al., Defendants and Respondents.

No. A067126.

Court of Appeal, First District, Division 4, California.

Feb. 22, 1996.

As Modified on Denial of Rehearing March 22, 1996.

Review Denied May 15, 1996.

Richard E. Roby, Law Offices of Richard E. Roby, San Francisco, for Appellants.

Law Offices of Christopher Lee, Christopher Lee, Janina M. Elder, San Francisco, for Respondents, United Savings Bank and Sharon Keane.

Patric J. Kelly, Duane W. Shewaga, Adleson, Hess, Christensen & Kelly, Campbell, for Respondent, Standard Trust Deed Service Company.

HANLON, Associate Justice.

Appellants Fred Abdallah, Soloman Abdallah and Alice Ovadia appeal from judgments of dismissal in favor of respondents United Savings Bank, Sharon Keane and Standard Trust Deed Service after respondents' demurrers to appellants' complaint were sustained without leave to amend, and from post-judgment orders requiring appellants to pay respondents' attorney's fees. We affirm the judgments and the fee orders.

I. FACTUAL AND PROCEDURAL BACKGROUND

On August 19, 1980, appellants Soloman Abdallah and Alice Ovadia, and Ms. Ovadia's late husband, Abraham Ovadia, executed a promissory note in favor of United for $79,650, secured by a deed of trust on their property at 101 Wool Street in San Francisco. In 1989, after defaulting on the note, the Ovadias commenced three bankruptcy cases which forestalled foreclosure under the deed of trust. The first two cases were dismissed for failure to file plans and other documents required by the Bankruptcy Code. In December 1989, shortly after Ms. Ovadia filed a third bankruptcy petition that affected the property, United moved for relief from the automatic stay to proceed with the foreclosure.

The motion was supported by the declaration of respondent Keane, a United officer, stating that the note was over $27,000 in arrears, representing 21 delinquent monthly payments plus various fees. An amended notice of the motion was served on Ms. Ovadia on December 14, 1989, and the motion was heard in bankruptcy court on December 20. Ms. Ovadia appeared at the hearing along with her son, appellant Fred Abdallah.

Fred Abdallah asserted that United's declaration contained "fraudulent statements," and that United had "harassed and intimidated" Ms. Ovadia because she did not speak English. However, he had no proof of any payments on the note for which United had not accounted, and he made no affirmative response when the court asked him whether any such proof would be forthcoming. After listening to Fred Abdallah, and remarking that the Ovadias had "very much ... abuse[d]" the bankruptcy process, the court granted relief from the stay.

The written order terminating the automatic stay was filed in the bankruptcy court on December 20. The order stated that United could proceed immediately with the foreclosure, "notwithstanding section 2924g of the California Civil Code." The property was sold under the deed of trust on December 21, the day after the bankruptcy court hearing, to Kland Company, Inc. for $138,200. The order terminating the automatic stay was not entered in the bankruptcy court's docket until December 28.

Fred Abdallah has stated that, "almost immediately" after the sale, he sought legal counsel to pursue any claims appellants might have had against United, Standard or Kland in connection with the foreclosure. Until Fred Abdallah met appellants' present counsel in June of 1993, every attorney he consulted on the matter advised him that appellants had no recourse.

In December 1992, appellants in propria persona sued United, Standard and Kland in federal court. Appellants' counsel filed an amended complaint on their behalf in the federal action in June of 1993, seeking to set aside the trustee's sale, and asserting causes of action against United, Standard, and Kland for fraud, breach of contract, conspiracy, and a RICO violation. The federal case was dismissed on December 15, 1993.

The district court dismissed the RICO claim with prejudice, on the ground that appellants had effectively admitted they could not satisfy the racketeering element of the claim, and dismissed the other claims without prejudice. The court granted United's request for sanctions against appellants' counsel, based inter alia on counsel's statements at the hearing on the motion to dismiss, which the court interpreted as a concession that the RICO claim was added "to increase settlement leverage without a good faith basis for the claim." Appellants have appealed to the Ninth Circuit from the order dismissing their RICO claim, and their counsel has appealed to the Ninth Circuit from the order for sanctions.

Appellants commenced their action against respondents herein on December 15, 1993. Their first amended complaint filed on April 11, 1994, included causes of action for fraud, breach of contract, conspiracy, and a RICO violation. The complaint alleged that Fred Abdallah owned a legal and equitable interest in the property at issue, and that he had acted as appellants' agent in dealing with respondents. The complaint prayed for attorney's fees in connection with the fraud, breach of contract and RICO causes of action. Respondents filed demurrers to the first amended complaint in May of 1994.

Standard's demurrer was sustained without leave to amend on June 24, 1994, and a judgment dismissing Standard was filed on July 5, 1994. On July 14, 1994, the court filed an order sustaining United and Keane's demurrer to the fraud and RICO causes of action without leave to amend, sustaining their demurrer to the breach of contract cause of action with leave to amend, and overruling their demurrer to the conspiracy cause of action. Appellants filed a second amended complaint against United and Keane on July 26, 1994.

On August 12, 1994, the court ordered appellants to pay Standard's attorney's fees in the sum of $11,278.10. On September 20, 1994, the court sustained United and Keane's demurrer to the second amended complaint without leave to amend, and a judgment in their favor was filed on October 4, 1994. On October 28, 1994, appellants were ordered to pay United and Keane's attorney's fees in the amount of $24,225.

II. DISCUSSION

A. Judgments of Dismissal

Appellants' many arguments with respect to the dismissals of their case fall into four categories: (1) claims that United and Keane acted improperly in connection with United's motion for relief from the automatic stay in the bankruptcy court; (2) claims that the property was improperly sold in violation of the automatic stay; (3) claims that Standard acted improperly, apart from violating the stay, in connection with the foreclosure and distribution of the sale proceeds; and (4) claims relating to the RICO cause of action. Each set of arguments will be dealt with in turn.

The allegations of impropriety associated with United's motion for relief from the stay include claims that United failed to properly account for payments under the note, and that Keane's declaration in support of the motion was otherwise fraudulent. Appellants also assert that United violated rules of procedure governing the motion, including rules requiring advance notice of the specific relief sought, and submission of a proposed order on the motion. However, all of these claims could have been raised in the proceedings on the motion. Accordingly, they are barred under the doctrine of res judicata by the order on the motion, which was not appealed, and was not modified or set aside in the bankruptcy court. (See Levy v. Cohen (1977) 19 Cal.3d 165, 172, 137 Cal.Rptr. 162, 561 P.2d 252 [such orders are final for purposes of res judicata]; Estate of Hilton (1988) 199 Cal.App.3d 1145, 1168, 245 Cal.Rptr. 491 [federal order has same effect in California court as it would have in federal court]; United States v. Alky Enterprises, Inc. (1st Cir.1992) 969 F.2d 1309, 1314 [res judicata bars relitigation of issues which could have been raised in the prior action].)

Appellants contend that Standard violated the automatic stay when it sold the property, and that United violated the stay when it accepted proceeds from the sale. Appellants argue that the order terminating the stay did not become effective until it was entered in the bankruptcy court's docket on December 28, 1989, and thus that the December 21 sale was held while the stay was still in effect. This argument is based on the rule of construction set forth at section 102, subdivision (6) of the Bankruptcy Code, which states that " 'order for relief' means entry of an order for relief." (11 U.S.C.A. § 102, subd. (6) [italics added].)

Appellants further argue that the bankruptcy court's order violated Civil Code section 2924g insofar as it "immediately terminated" the stay as to United and directed that, notwithstanding this statute, United could, "after filing this Order with the Court, proceed immediately" with the foreclosure. This argument is based on Civil Code section 2924g, subdivision (d), which provides that if a trustee's sale is stayed by operation of law, "the sale shall be conducted no sooner than seven days after the earlier of (1) dismissal of the action or (2) expiration or termination of the injunction, restraining order, or stay (which required postponement of the sale), whether by entry of an order by a court of competent jurisdiction, operation of law, or otherwise, unless the injunction, restraining order, or subsequent order expressly directs the conduct of the sale within that seven-day period." As appellants read this statute, no order for relief from the stay can be effective prior to its entry, and they submit that the bankruptcy court exceeded its jurisdiction by purporting to order relief from the stay upon filing, rather than entry, of the order. Appell...