Borges v. Farrar, F040810 (Cal. App. 11/20/2003)

• Decision Date: 20 November 2003
• Docket Number: F040810.
• Court: California Court of Appeals
• Parties: FRANK BORGES, Plaintiff and Respondent, v. GARY FARRAR, as Trustee in Bankruptcy, etc. et al., Defendants and Appellants.

Page 1

Unpublished Opinion

FRANK BORGES, Plaintiff and Respondent, v. GARY FARRAR, as Trustee in Bankruptcy, etc. et al., Defendants and Appellants.

F040810.

Court of Appeals of California, Fifth Appellate District, Placer.

Filed November 20, 2003.

APPEAL from a judgment of the Superior Court of Merced County, No. 127858, William T. Ivey, Judge.

Neumiller & Beardslee, Anthony L. Vignolo, Paul N. Balestracci and Clifford W. Stevens for Defendants and Appellants.

Allen, Polgar, Proietti & Fagalde, Gary B. Polgar, Salvador V. Navarrete and Donald J. Proietti for Plaintiff and Respondent.

OPINION

Buckley, J.

"Claim and delivery" is the name given to a provisional remedy that permits the plaintiff in an action for the recovery of personal property to take immediate possession of the property, through a writ of possession, pending a final judgment. (Code Civ. Proc., § 511.010 et seq.)¹ Possession acquired through claim and delivery is only provisional; actual title to the property, and the permanent right of possession, are determined by the judgment in the underlying action. Thus, a plaintiff who fails to recover judgment must return the property to the defendant, and/or pay any damages caused by the defendant's loss of possession. (§ 512.120.)

The property at issue in this case was a herd of more than 100 dairy cows used to secure two loans totalling $175,000. The loans were made by Frank Borges in 1994 and 1995 to John and Shawna Teicheira, husband and wife, who were then doing business as Teicheira Farms (collectively the Teicheiras). The Teicheiras defaulted on the loans, and Borges sued them for conversion and breach of contract. While the action was pending, Borges took possession of the herd through claim and delivery. But he failed during the next several years to actively prosecute the action itself. In the meantime, the Teicheiras had gone into bankruptcy. In 2001, upon a motion by the bankruptcy trustee, and without any opposition from Borges, the action was dismissed for failure to bring the matter to trial within five years. (§ 583.310.) The trustee then moved the following year to quash the writ of possession, in light of the dismissal of the underlying action, and to recover damages totalling some $186,000. The trial court denied the motion, and the trustee has appealed. We will conclude the motion to quash was untimely, and therefore affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

In October of 1994, Borges sold the Teicheiras 50 "mature Holstein dairy cows" for $70,000. The Teicheiras gave Borges a promissory note for this amount, and agreed to repay the money, at 10 percent interest, over the next five years. Toward that end, they assigned to Borges a portion of the monthly payments they expected to receive from the creamery (the Central Valley Dairymen's Association) that processed the milk from their dairy herd. The Teicheiras's obligation was secured by a lien in favor of Borges against the Teicheiras's entire herd "now owned or hereafter acquired."

In February of the following year, Borges sold the Teicheiras 50 more Holstein cows for $65,000, and loaned them an additional $ 40,000. The Teicheiras gave Borges a promissory note for $105,000, this time paying 12 percent interest, on terms very similar to those in the first sales agreement. Thus, the Teicheiras's debt to Borges was $175,000 at that point, and their payments were just short of $3,825 per month.

On December 20, 1995, Borges brought an action against the Teicheiras for breach of contract, conversion, and injunctive relief. The complaint alleged the Teicheiras had failed to make the last two monthly payments, and had sold some of the cows that served as collateral under the two sales agreements, without turning over the proceeds to Borges. The complaint sought damages in the amount of $160,000, plus interest. (The injunction presumably would prevent further sales of the cows.) The Teicheiras never answered the complaint.

Borges also sought claim and delivery of the Teicheiras's dairy herd (alleged to contain 180 mature Holsteins and eight heifers) by making an ex parte motion for a writ of possession. In support of the motion, Borges asserted the Teicheiras had recently suffered a "serious financial condition" that caused them not only to fall behind in their payments to him, and to sell some of his collateral, but that also left them without the means to properly feed and maintain what was left of the herd.² Borges also asserted the value of the remaining herd was less than the amount the Teicheiras still owed him. The court issued the writ on the condition Borges file an undertaking for $7,500.³ Borges did so, but before he could execute on the writ, the Teicheiras filed a chapter 12 bankruptcy petition, thereby invoking the automatic stay provisions of the Bankruptcy Code. (The undertaking was later released.)

On January 8, 1996, Borges filed a motion in the bankruptcy court for relief from the automatic stay. The court granted the motion on June 10th. It found that the value of the dairy herd (107 milking cows, 10 calves, and 20 to 22 dry cows) was $ 117,650; that the Teicheiras owed Borges approximately $147,000; that the Teicheiras therefore had no equity in the herd; that the average milk production per cow had fallen from nine to five gallons per day; and that the Teicheiras's proposed chapter 12 reorganization plan failed to make adequate provision for the care and feeding of the herd. Therefore, in addition to granting Borges relief from the stay, the court denied confirmation of the reorganization plan. Soon after, the Teicheiras converted the bankruptcy from chapter 12 (voluntary reorganization for family farmers) to chapter 7 (liquidation). Gary Farrar was appointed the chapter 7 trustee.

In its written order, the bankruptcy court granted Borges relief from the automatic stay "to retrieve his collateral, and to institute and prosecute any proceeding necessary to obtain such collateral, which is all that livestock located at [the Teicheiras's dairy farm in Merced]."

The following day, this time without filing an undertaking, Borges applied for and was granted a second ex parte order for a writ of possession, by which he then successfully took possession of the Teicheiras's entire herd.⁴ The herd consisted at the time of "118 head of Holstein and Jersey livestock," which by Borges's estimate were worth somewhere between $76,000 and $86,000, based on their "deteriorated condition." These figures, both the number of cows in the herd and their total value, were less than the bankruptcy court had found to exist when it granted Borges relief from the automatic stay.

Approximately a year later, in August of 1997, Borges filed a second motion in the bankruptcy court seeking relief from the automatic stay. Accepting the findings of the court in the prior proceeding — that Borges was owed about $147,000 and the herd was worth $117,650 — Borges requested relief from the stay in order to pursue a collection action for the difference against the Teicheiras's accumulated milk payments (a total of about $7,500) held by the Central Valley Dairymen's Association. Farrar (the chapter 7 bankruptcy trustee) opposed Borges's motion on the ground he had failed to perfect a claim against the milk payments. The court agreed and denied the motion.

So far as appears from the record, Borges made no further efforts to recover the rest of the money the Teicheiras owed him. Four more years passed, and on August 10, 2001, Farrar filed a motion to dismiss Borges's still-pending action for conversion and breach of contract (filed December 20, 1995) for failure to bring the case to trial within five years. (§ 583.310.) Borges did not oppose the motion, and the court issued an order dismissing the action on September 12, 2001. (See § 581d.) Borges did not appeal.

Five months later, on February 15, 2002, Farrar filed a motion to quash the writ of possession by which Borges had taken possession of the dairy herd from the Teicheiras's farm. (See §§ 512.020, subd. (b)(3)(iii); 512.120.) On the premise Borges no longer had the cows, Farrar sought, on behalf of the bankruptcy estate, to recover their reasonable value on the date they were taken, plus interest. According to an attached declaration by John Teicheira, there had been 140 mature cows (Holsteins and Jerseys), 12 heifers, and seven calves in the herd, having a total estimated value of $171,200. This amount, plus accrued interest, came to $268,384.30. Farrar also sought to recover the attorney fees he had incurred to bring the motion to quash.

Borges opposed the motion on two grounds. He maintained the court's dismissal of the underlying action deprived it of jurisdiction to make any further orders in the case. And he argued the bankruptcy court's order granting him relief from the automatic stay to prosecute an action to "retrieve his collateral" was, in effect, a final determination of his right to possession of the cows, and so was binding on the state court under the doctrine of res judicata. Borges also raised assorted evidentiary objections to John Teicheira's declaration, and the accompanying exhibits, pertaining to the amount of his damages. And Borges asked the court to sanction Farrar for filing a frivolous motion.

Finally, Borges asked the court, in the event it was inclined to grant the motion, to permit him to conduct discovery, to plead various defenses (e.g., estoppel, laches, and a failure to mitigate damages), and to present evidence.

Farrar filed a reply disputing the two grounds stated in Borges's opposition. As for damages, he agreed to accept the value of the herd as determined by the bankruptcy court ($117,650), and on that basis reduced his claim for damages to this amount plus interest, for a total of $186,176.23. He also renewed his request for attorney fees.

A hearing followed on March 28, 2002. It appears the parties submitted the matter on their...