Billmeyer v. Plaza Bank of Commerce, H011573

• Decision Date: 17 April 1995
• Docket Number: No. H011573,H011573
• Citation: 50 Cal.Rptr.2d 119,42 Cal.App.4th 1086
• Court: California Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 1187, 96 Daily Journal D.A.R. 2025 John BILLMEYER, as Trustee, etc., et al., Plaintiffs and Appellants, v. PLAZA BANK OF COMMERCE et al., Defendants and Respondents.

Page 119

50 Cal.Rptr.2d 119

42 Cal.App.4th 1086, 96 Cal. Daily Op. Serv. 1187,

96 Daily Journal D.A.R. 2025

John BILLMEYER, as Trustee, etc., et al., Plaintiffs and Appellants, v. PLAZA BANK OF COMMERCE et al., Defendants and Respondents.

No. H011573.

Court of Appeal, Sixth District, California.

April 17, 1995.

Morrissey Law Firm, Michael T. Morrissey, W. Bartley Anderson and Martin Occhipinti, Jr., San Jose, for Plaintiffs and Appellants.

Gray Cary Ware & Freidenrich, Peter M. Rehon, Lisa C. Roberts, and Shannon F. Fallon, Palo Alto, for Defendants and Respondents.

PREMO, Acting Presiding Justice.

Plaintiffs John Billmeyer, trustee for the bankruptcy estate of Coast Range Transport, Inc. (hereafter, Coast Range), and Dennis and Nancy Kendall sued defendants Plaza Bank of Commerce (now Comerica Bank-California) (hereafter, Plaza) and Pamela Bogle for losses allegedly caused by defendants' lending practices which forced Coast Range into bankruptcy. The trial court granted defendants' motion for summary judgment holding that (1) Billmeyer's claims were barred by res judicata (and federal exclusive jurisdiction principles), and (2) the Kendalls' claims were barred by the statute of limitations and standing principles. On appeal, plaintiffs dispute the trial court's application of the law. We affirm the judgment.

SCOPE OF REVIEW

The parties agree on the material facts. Defendants were therefore entitled to judgment if their contentions as to the applicability of the law are correct. (Pacific Auto. Ins. Co. v. Wolff (1977) 72 Cal.App.3d 537, 540, 140 Cal.Rptr. 164.)

BACKGROUND

The Kendalls owned Coast Range, a trucking business that they began in 1981. Plaza obtained Coast Range's banking business in 1986. In 1988, federal deregulation of the trucking business required those in the industry to cut costs to compete. Plaza assisted Coast Range in cost saving measures so as to prevent Coast Range's credit line loans from going into default. According to plaintiffs, Plaza's assistance was intrusive and restrictive. Coast Range defaulted on the loans. It filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in December 1988.

Coast Range's statement of financial affairs, filed in connection with the petition, listed Plaza as a secured creditor as to $190,000 and an unsecured creditor as to approximately $5,400. It did not indicate that these debts were contingent, unliquidated, or disputed as required by the bankruptcy rules if this was, in fact, the case. Nor did it disclose as an asset any claim or counterclaim against Plaza.

On March 2, 1989, the bankruptcy court ordered Plaza relieved from the automatic stay of proceedings against a bankruptcy debtor as the stay pertained to the personal property that secured Plaza's loans to Coast Range. The order authorized Plaza to proceed with "any and all actions and legal proceedings effecting [sic ] the Collateral," such as foreclosure, taking possession, and liquidation. The order described the collateral as: "All of the debtor's pre-petition accounts receivable, inventory, money, deposit accounts, equipment, vehicles, trailers, machinery, fixtures, office equipment, furniture, furnishings, tools, dies, jigs, general intangibles, and all proceeds therefrom." The order also expressly bound all parties to the bankruptcy proceeding, their heirs, assigns, and successors, including any trustee appointed in any converted or superseding bankruptcy case.

On June 8, 1989, the bankruptcy court ordered the case converted from Chapter 11 (reorganization) to Chapter 7 (liquidation). It appointed Billmeyer as trustee at some point.

On June 12, 1989, via stipulation between Plaza and Coast Range made before the case was converted, the bankruptcy court ordered a lien in favor of Plaza against the post-petition assets of Coast Range (chiefly accounts receivable) in consideration for certain post-petition payments made by Plaza on behalf of Coast Range. The court specified that the lien was of the same type already held by Plaza under its loan agreements with Coast Range. In this regard it found that Coast Range had defaulted under the terms of the loan agreements by failing to make loan payments and cure overdrafts, making a total amount due Plaza of $63,922.

On August 18, 1989, Plaza filed a proof of claim pursuant to the Bankruptcy Code setting forth a claim against Coast Range in the amount of $60,093.15. Coast Range made no objection to this claim, and the claim therefore became "allowed" by operation of law.

Also on August 18, 1989, Billmeyer filed a report of no distribution which asserted that Billmeyer had (1) neither received any property nor paid any money on account of the estate, and (2) made diligent inquiry into the whereabouts of property belonging to the estate and found no property available for distribution.

On February 9, 1990, the bankruptcy court approved Billmeyer's report and ordered the estate closed.

On May 2, 1990, Coast Range and the Kendalls filed this action alleging various causes of action, such as breach of the loan agreements and fraud, arising from the course of dealing between Coast Range and Plaza. The gist of the complaint focused upon alleged improper activities that served as the catalyst for the bankruptcy filing. ¹ Plaza successfully demurred to the bulk of the complaint on the basis that the claims belonged to the bankruptcy estate. The trial court granted the Kendalls leave to amend as to individual claims for interference with economic relationship, intentional infliction of emotional distress, and negligent infliction of emotional distress.

On December 7, 1990, upon Billmeyer's application, the bankruptcy court ordered the Chapter 7 case reopened. The application stated in total: "Comes now JOHN BILLMEYER, Trustee and respectfully represents: [p] Applicant was the duly appointed, qualified, and acting trustee of the estate of the above named debtor corporation. [p] That applicant files herewith his application to reopen the within proceedings. [p] There are no funds held in trust by applicant. [p] WHEREFORE, applicant prays for an order that the case be reopened and that the filing fee be waived."

On February 1, 1991, Billmeyer applied to the bankruptcy court for authorization to employ special counsel. The application asserted, in relevant part: "Among the creditors of the Debtor is Plaza Bank of Commerce.... A dispute has arisen between the Debtor and Plaza.... Debtor, through its authorized representatives, believes that it has suffered damages as a consequence of acts, representations or omissions of Plaza...." The application then recites that the Debtor and Trustee agreed to permit the employment of an attorney "to pursue litigation against Plaza" and the attorney had agreed "to represent the interest of the estate of the Debtor on the following conditions: [p] [contingency fee compensation terms]." It then continues that the debtor and trustee believe that the attorney is qualified to "effectively prosecute any claims against Plaza...." The attorney referred to was Coast Range's and the Kendalls' attorney who filed this action.

On March 28, 1991, the bankruptcy court ordered appointment of Coast Range's and the Kendalls' attorney as special counsel "in those matters regarding the dispute between the Debtor and Plaza...."

On October 9, 1991, Billmeyer and the Kendalls filed a second amended complaint in this proceeding. This complaint is the one at issue. It essentially resurrects the "lender liability" theories previously dismissed due to Coast Range's and the Kendalls' lack of standing and restates the Kendalls' individual claims.

BILLMEYER'S LENDER LIABILITY CLAIMS

Because of the Bankruptcy Code requirements to disclose the whole spectrum of a petitioner's financial affairs, "courts that have considered the effect of a debtor's failure to disclose a potential lender-liability lawsuit in a bankruptcy proceeding have universally held that the debtor is equitably estopped, judicially estopped or barred by res judicata ² from bringing the action after confirmation of the bankruptcy reorganization plan. [Citations.] [p] Those decisions rely primarily upon the well-established requirement that a debtor seeking the benefits of bankruptcy must fulfill the companion duty of fully disclosing and scheduling all property interests and rights so that the bankruptcy court and creditors can make an informed decision about the debtor's proposed reorganization plan." ³ (Littlefield v Union State Bank, supra, 500 N.W.2d at p. 883.)

"The federal doctrine of judicial estoppel precludes a party from asserting a position in a judicial proceeding which is inconsistent with a position previously successfully asserted by it in a prior proceeding. 'Thus, the "essential function and justification of judicial estoppel is to prevent the use of intentional self-contradiction as a means of obtaining unfair advantage in a forum provided for suitors seeking justice." [Citation.]' [Citation.] The primary purpose of the doctrine is not to protect the litigants, but to protect the integrity of the judiciary. [Citations.] The doctrine does not require reliance or prejudice before a party may invoke it." (Southmark v. Trotter, Smith & Jacobs (1994) 212 Ga.App. 454, 442 S.E.2d 265, 266-267.)

Here, there is no question that Coast Range failed to disclose its lender liability cause of action in its bankruptcy proceeding. Although Billmeyer notes that the bankruptcy proceeding in this case has been reopened, he also acknowledges that orders within a bankruptcy proceeding such as those confirming the sale of estate properties can be, in and of themselves, sufficient for issue preclusion purposes. (Matter of Baudoin (5th Cir.1993) 981 F.2d 736, 742, fn. 14.)

Billmeyer cites no authority contrary to the universal rule noted above. He merely poses what we distill as three arguments why issue preclusion should not apply...