In re Ashlock
| Decision Date | 27 October 2022 |
| Docket Number | F082179 |
| Parties | Estate of LONNIE LAMONT ASHLOCK, Deceased. v. CRABTREE SCHMIDT et al., Objectors and Appellants. GABRIEL ASHLOCK, as Administrator, etc., Petitioner and Respondent, |
| Court | California Court of Appeals |
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Stanislaus County. No. 445230 Timothy W. Salter, Judge. [*]
Crabtree Schmidt and Michael R. Dennis for Objectors and Appellants.
Freeman Firm and Thomas H. Keeling for Petitioner and Respondent.
This appeal concerns a probate court's resolution of a dispute over proceeds from the sale of an estate asset, to wit, a $4 million parcel of land. The estate had established ownership of the land in prior litigation under Probate Code section 850 et seq. and other statutes. The opposing litigant, Stacey Carlson (Stacey), was found to have a lien against the property by virtue of a deed of trust and promissory note with a face value of $215,875.
Notwithstanding her security interest in the property, Stacey owed the estate millions of dollars in surcharges, penalties, and attorney fees. During the pending sale of the property, the estate sought to levy upon Stacey's lien documents and sell them to partially satisfy its judgment against her. In response Stacey moved "for an order that the [note and deed of trust] be collected rather than sold." Although Stacey's motion was denied, the estate agreed that the face value of her lien (inclusive of accrued interest and fees) could be applied as a partial satisfaction of the judgment. Accordingly, the probate court ordered Stacey to execute a reconveyance of the deed of trust.
Next, Stacey's legal counsel, i.e., appellants herein, took steps to block the sale of the land by filing a separate lawsuit on their own behalf. It came to light that Stacey had ostensibly granted them a security interest in the promissory note and deed of trust to cover her legal bills. However, the attorneys' security interest was not documented until after the estate had already obtained a judgment lien against Stacey.
Further proceedings in the probate court led to the order from which this appeal is taken. The probate court ruled, inter alia, (1) the value of Stacey's lien was $424,117 (rounded) and (2) Stacey's attempt to grant a security interest to her attorneys was "presumed to be in fraud of creditors, and [no evidence] has been presented to overcome that presumption." The estate's judgment lien was found to have priority over any security interest Stacey's attorneys may have arguably acquired.
Appellants contend the probate court lacked authority to determine the value of Stacey's lien and the priority of rights as between their security interest and the estate's judgment lien. Appellants claim the dispositive issue is whether the probate court had in personam jurisdiction over them. We conclude the probate court's in rem jurisdiction encompassed issues regarding the estate's entitlement to proceeds from a court-ordered sale of an estate asset. Furthermore, Stacey was a party to the case and the one who placed those issues in dispute. The probate court did not need personal jurisdiction over her attorneys to determine whether the estate's judgment lien was superior to a putative encumbrancer claiming rights derived from and through Stacey's actions. The challenged order will be affirmed.
FACTUAL AND PROCEDURAL BACKGROUND
This is the fourth appeal in a consolidated probate matter involving Gabriel Ashlock (Gabriel) and Stacey, both of whom claimed entitlement to the estate of Gabriel's deceased father, Lonnie Lamont Ashlock. Stacey was represented in the probate court and prior appeals by attorney Robert W. Crabtree (Crabtree) of the law firm Crabtree Schmidt, a California partnership (Crabtree Schmidt).
We previously affirmed the probate court's findings on the merits of a trust dispute, a will contest, and claims against Stacey for breach of fiduciary duty and financial abuse of a dependent adult. (Estate of Ashlock (Mar. 14, 2019, F074969) [nonpub. opn.] (Ashlock I)) The proceedings in Ashlock I resulted in a judgment against Stacey in the amount of $365,152.92. This figure represented aggregate surcharges for her wrongful use of funds generated by an estate asset known as the Snelling Ranch. At the conclusion of Ashlock I, the probate court imposed a constructive trust on all real property Stacey had misappropriated, including the Snelling Ranch.
The Snelling Ranch is a 268-acre parcel located in Merced County. During the relevant time period, it contained approximately 190 acres of income-producing almond trees. Gabriel's father bought the property in 2005 for $1,417,500. Stacey, who was a real estate broker, facilitated the transaction and contributed money toward the purchase price. However, the Snelling Ranch was titled in the name of "Lonni L. Ashlock, a single man." In Ashlock I, it was determined that Stacy recorded a valid deed of trust against the property in 2008. The deed of trust was security for a promissory note in the amount of $215,875.
The promissory note identified Stacey as the payee. The deed of trust identified the trustee as "Investwest Properties" and the beneficiary as "Little Hills Ltd." As explained in Ashlock I, the names on the deed of trust were aliases. "Little Hills Ltd." was not a legal entity, and "Investwest Properties" was a fictitious business name associated with Stacey's broker's license.
The Ashlock I judgment was entered in October 2016. It was in favor of Gabriel individually and as administrator of his father's estate. We thus refer to Gabriel and the estate interchangeably.
On November 3, 2016, Gabriel filed a notice of judgment lien with the Secretary of State based on the Ashlock I judgment. This created a judgment lien against Stacey's personal property. (Code Civ. Proc, § 697.510; Bluxome Street Associates v. Fireman's Fund Ins. Co. (1988) 206 Cal.App.3d 1149, 1156.) Such liens generally remain effective "for five years from the date of filing." (§ 697.510, subd. (b).)[1]
On or about November 17, 2016, Stacey executed a document purporting to grant a security interest in her property to a law firm she had retained to appeal the Ashlock I judgment. The law firm, which was not Crabtree Schmidt, was eventually disqualified because of an ethical conflict. Independent of the disqualification, the document purporting to grant a security interest was later found to be "a sham" and "null and void." The probate court also found the document was "created to defraud creditors, mainly [Gabriel]."
On November 22, 2016, Stacey recorded a document with the Merced County Recorder's Office purporting to assign her promissory note to "Little Hills Ltd." Her attorneys would later say this was done to clarify that the beneficiary of the deed of trust and payee on the promissory note were one and the same.
In late 2016, Gabriel attempted to levy upon the promissory note and deed of trust. Stacey responded by obtaining the original documents from the probate court's case file, reportedly with Crabtree's assistance. She proceeded to re-record the documents and then shredded them. When asked why she destroyed them, she testified, "They had no value for me any longer." When pressed on the issue, Stacey said, "I didn't want [them] falling in the wrong hands." She later clarified it was her intention to prevent Gabriel from levying upon the documents and selling them "for pennies on the dollar" at an execution sale.
After learning Stacey had destroyed the lien documents, the probate court ordered copies of the same "be deemed duplicate originals" and "remain in the Court's file until further order." It also made a finding that Stacey destroyed the originals "to prevent [Gabriel] from obtaining them in the course of enforcing the judgment."
Stacey's admissions regarding the shredded documents were made during a judgment debtor's examination on February 1, 2017. As noted by Gabriel in briefing below, service of the order for an examination (OEX) created a separate lien on Stacey's personal property "for a period of one year from the date of the order unless extended or sooner terminated by the court." (Code Civ. Proc, § 708.110, subd. (d); accord, Shrewsbury Management, Inc. v. Superior Court (2019) 32 Cal.App.5th 1213, 1223.) Nevertheless, on February 2, 2017 (the day after the OEX), Crabtree Schmidt filed a UCC-1 financing statement with the Secretary of State claiming a security interest in multiple categories of Stacey's property, including "all promissory notes … and all rights to payment and performance."[2]
It appears Crabtree Schmidt's UCC-1 filing preceded execution of the actual security agreement by one day. In a document dated February 3, 2017, entitled "GRANT OF SECURITY INTEREST," Stacey granted Crabtree Schmidt a security interest "in and to all farm products, including without limitation, all (1) crops …, (2) all livestock …, (3) supplies used or produced in farming operations, (4) all products or proceeds of crops or livestock; all equipment, accounts, accounts receivable, chattel paper, instruments, including but not limited to all promissory notes, documents, investment property; any and all rights to payment and performance; general intangibles; all fixtures, all attachments, accessions, accessories, tools, parts and supplies …."
Stacey also attempted to foreclose on the deed of trust. On February 10, 2017, the probate court issued an order restraining her from proceeding with a foreclosure action. By that point, a dispute had arisen over whether the promissory note and deed of trust were estate assets or still belonged to Stacey.
During a hearing on February 28, 2017, Crabtree made the following statements on the...
To continue reading
Request your trial