Akhlaghpour v. Orantes

• Decision Date: 13 December 2022
• Docket Number: B308644
• Citation: 86 Cal.App.5th 232,302 Cal.Rptr.3d 286
• Parties: Mehri AKHLAGHPOUR, Plaintiff and Appellant, v. Giovanni ORANTES, et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

86 Cal.App.5th 232

302 Cal.Rptr.3d 286

Mehri AKHLAGHPOUR, Plaintiff and Appellant,

v.Giovanni ORANTES, et al., Defendants and Respondents.

B308644

Court of Appeal, Second District, Division 7, California.

Filed December 13, 2022

Law Offices of Farrah Mirabel and Farrah Mirabel, Newport Beach, for Plaintiff and Appellant.

Lewis Brisbois Bisgaard & Smith, Raul L. Martinez and Kenneth C. Feldman, Los Angeles, for Defendants and Respondents.

HOWARD, J.^*

INTRODUCTION

Mehri (Mary) Akhlaghpour filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code (Chapter 11) amid multiple client claims against her for fraud, embezzlement and misappropriation. After she settled the claims against her, the bankruptcy court dismissed the bankruptcy case. Akhlaghpour then, without seeking leave from the bankruptcy court, sued her court-approved bankruptcy counsel for malpractice in state court. The superior court sustained bankruptcy counsel's demurrer to Akhlaghpour's first amended complaint without leave to amend and entered a judgment dismissing the lawsuit with prejudice.

On appeal, Akhlaghpour contends the superior court erred in concluding that it lacked jurisdiction under the Barton doctrine, derived from Barton v. Barbour (1881) 104 U.S. 126, 26 L.Ed. 672 ( Barton ) and its progeny, which requires, before filing a lawsuit against officers appointed or approved by the court, obtaining leave from the bankruptcy court that appointed or approved them. The Barton doctrine did require Akhlaghpour to obtain leave from the bankruptcy court for claims arising out of bankruptcy counsel's court-approved representation of her as a debtor in possession. However, the Barton doctrine did not require Akhlaghpour to obtain leave to file claims arising out of bankruptcy counsel's representation after the bankruptcy court appointed a Chapter 11 trustee and Akhlaghpour was no longer a debtor in possession. Because Akhlaghpour has demonstrated a reasonable possibility that she can amend her complaint to state a cause of action, and because the trial court's dismissal with prejudice would preclude her even from later seeking leave from the bankruptcy court to refile, we reverse the judgment, and affirm in part and reverse in part the trial court's rulings, with directions to grant Akhlaghpour leave to file a second amended complaint.

FACTUAL AND PROCEDURAL HISTORY

1. Akhlaghpour's Chapter 11 Bankruptcy Petition, Approval of General Insolvency Counsel, Appointment of Trustee, and Dismissal of Petition

Akhlaghpour, a tax preparer with two financial services corporations, faced judgments and claims filed against her by former clients alleging various forms of financial fraud. She owed a $650,000 settlement from one lawsuit, and another court had issued a tentative damages award for $1,164,780.28 in favor of another client. Akhlaghpour owned some assets, including five rental properties. Concerned about how she would handle the judgments against her, Akhlaghpour consulted Giovanni Orantes and Luis Solorzano of The Orantes Law Firm (collectively, Orantes) about filing for bankruptcy. One week after her consultation, on October 11, 2017, Orantes filed a Chapter 11 petition for Akhlaghpour.

Approximately one month after filing the petition, on November 7, 2017, Orantes sought approval to serve as Akhlaghpour's general insolvency counsel. The bankruptcy court granted the motion and approved Orantes on January 5, 2018.

Twenty days after the bankruptcy court approved Orantes as counsel, on January 25, 2018, it granted a motion filed by the Office of the United States Trustee to appoint a trustee. The bankruptcy court made the trustee appointment because of the suspicious timing of six questionable promissory notes, in the total amount of $1,164,750, secured by Akhlaghpour's real properties, and executed by her in favor of a lender known as "Emymac." The Emymac liens were recorded on October 10, 2017, one day before Akhlaghpour filed the bankruptcy petition. Appointment of the trustee took effect on or around February 2, 2018.

On April 13, 2018, Akhlaghpour filed a motion to dismiss the bankruptcy petition, which the trustee opposed. The bankruptcy court denied the motion to dismiss, concluding that "prejudice to creditors ... would result from the dismissal of this case, when the debtor has not sufficiently explained how she can and will pay the claims of her creditors following dismissal, in accordance with the priority scheme set forth in the Bankruptcy Code."

In April and May 2018, the bankruptcy court approved the trustee's motions to sell Akhlaghpour's real properties. By October 2018, the trustee had sold Akhlaghpour's five rental properties to pay creditors. Akhlaghpour ultimately settled all of her creditors’ claims, with the settlements approved by the bankruptcy court on September 28, 2018.

On October 25, 2018, the trustee and Akhlaghpour filed a joint motion to dismiss the bankruptcy case due to satisfactory resolution of the claims. On December 4, 2018, the bankruptcy court granted the motion to dismiss. Three days later it approved Orantes's unopposed fee application pursuant to 11 U.S.C. section 330, for Orantes's services rendered from October 11, 2017 to February 6, 2018.

2. Akhlaghpour's Malpractice Action Against Orantes , Orantes's Demurrer, and the Superior Court's Order Sustaining the Demurrer

On December 27, 2019, nearly one year after the dismissal of her bankruptcy case, Akhlaghpour sued Orantes for legal malpractice and other claims in state court. Akhlaghpour's first amended complaint contained causes of action for professional negligence, breach of written and oral contract, breach of fiduciary duty, intentional and negligent misrepresentation, conversion, unjust enrichment, and equitable indemnity.

Akhlaghpour alleged that Orantes's conduct before and during the bankruptcy proceeding fell below the standard of care: filing her Chapter 11 petition without due diligence and without providing "in-depth" credit consulting for her, misrepresenting or omitting significant debts and claims in the petition, "throwing [her] under the bus" in her opposition to the motion for appointment of a trustee by declaring Orantes was not involved in the Emymac transactions, failing to seek dismissal of her petition before the motion for appointment of a trustee or prior to the trustee incurring significant costs, and neglecting settlement negotiations and documents. Certain of Akhlaghpour's allegations appear to concern Orantes's conduct after the trustee appointment on February 2, 2018: "Not filing a motion to dismiss much sooner than April 2018," jeopardizing settlement negotiations (which occurred during the trustee's appointment), "[f]ailing to file a motion to dismiss prior to Trustee incurring substantial costs," failing to seek credit from the trustee for sales of furniture, and filing an untimely and unhelpful joint motion with the trustee noticed for November 15, 2018.

Orantes demurred to the first amended complaint on the grounds that the Barton doctrine and res judicata barred Akhlaghpour's claims, and that Akhlaghpour lacked standing to pursue her claims because claims arising before and during the bankruptcy belong to the bankruptcy estate unless scheduled and abandoned by the trustee. Akhlaghpour opposed, arguing the Barton doctrine did not apply, that no statute required her to obtain leave, that she had no knowledge of the claims for res judicata purposes at the time the court considered the fee application (due to Orantes's fraud), and that a debtor in possession has standing to sue, relying on an informal exchange with the trustee to suggest the trustee had abandoned the malpractice claims. Akhlaghpour requested leave to amend her complaint to allege facts demonstrating that the Barton doctrine did not apply.

The superior court sustained the demurrer without leave to amend based on the Barton doctrine, finding it lacked jurisdiction to adjudicate Akhlaghpour's complaint. It did not reach the res judicata or standing issues. The court entered a judgment of dismissal with prejudice on September 17, 2020.

Akhlaghpour timely appealed.

DISCUSSION

1. Standard of Review

" ‘In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory.’ " ( Mathews v. Becerra (2019) 8 Cal.5th 756, 768, 257 Cal.Rptr.3d 2, 455 P.3d 277 ; accord, T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162, 226 Cal.Rptr.3d 336, 407 P.3d 18.) "A judgment of dismissal after a demurrer has been sustained without leave to amend will be affirmed if proper on any grounds stated in the demurrer, whether or not the court acted on that ground." ( Carman v. Alvord (1982) 31 Cal.3d 318, 324, 182 Cal.Rptr. 506, 644 P.2d 192.) We accept as true all well-pleaded factual allegations but not conclusions of fact or law. ( Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 395, 247 Cal.Rptr.3d 632, 441 P.3d 881 ; accord, Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (2016) 1 Cal.5th 994, 1010, 209 Cal.Rptr.3d 280, 382 P.3d 1116.) We review questions of law de novo. (See Schrage v. Schrage (2021) 69 Cal.App.5th 126, 151, 284 Cal.Rptr.3d 279 [standing is a question of law]; Samara v. Matar (2017) 8 Cal.App.5th 796, 803, 214 Cal.Rptr.3d 346, affd. (2018) 5 Cal.5th 322, 234 Cal.Rptr.3d 446, 419 P.3d 924 [the applicability of claim preclusion or issue preclusion is a question of law]; McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1478, 49 Cal.Rptr.3d 227 [absent conflicting evidence, the question of jurisdiction is a question of law].)

When " ‘there is a reasonable possibility that the defect can be cured by amendment,’ " a superior court abuses its discretion by sustaining a demurrer without leave to amend. ( Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100, 171 Cal.Rptr.3d 189, 324...