Kertesz v. Ostrovsky

• Citation: 115 Cal.App.4th 369,8 Cal.Rptr.3d 907
• Decision Date: 28 January 2004
• Docket Number: No. G031373.,No. G030640.,G030640.,G031373.
• Court: California Court of Appeals
• Parties: Joseph J. KERTESZ et al., Plaintiffs and Appellants, v. Jerome E. OSTROVSKY, Defendant and Respondent.

8 Cal.Rptr.3d 907

115 Cal.App.4th 369

Joseph J. KERTESZ et al., Plaintiffs and Appellants, v. Jerome E. OSTROVSKY, Defendant and Respondent.

No. G030640.

No. G031373.

Court of Appeal, Fourth District, Division 3.

January 28, 2004.

[8 Cal.Rptr.3d 909]

[115 Cal.App.4th 371]

Law Offices of Michael G. York and Michael G. York, Newport Beach, for Plaintiffs and Appellants.

Law Offices of Ronald S. Cooper and Ronald S. Cooper, Costa Mesa, for Defendant and Respondent.

OPINION

SILLS, P.J.

Joseph J. Kertesz and 12 other plaintiffs (appellants) appeal from the order dismissing their first amended complaint after Jerome E. Ostrovsky's (respondent) demurrer to that complaint was sustained without leave to amend. The lower court found appellants' complaint was barred by the applicable statutes of limitations. We conclude that the limitations period was tolled by respondent's petition for bankruptcy and the resulting automatic stay and reverse the judgment of dismissal accordingly.

FACTUAL AND PROCEDURAL BACKGROUND

On July 31, 2001, appellants filed a complaint against respondent seeking an unpaid judgment in the amount of $120,000 plus interest that was entered against respondent on January 8, 1991. Respondent demurred to the complaint on the grounds it was barred by the statutes of limitations set forth in Code of Civil Procedure sections 337.5 and 683.050.

Appellants responded to the demurrer by filing a first amended complaint, and respondent's hearing on the demurrer was taken off calendar. The operative first amended complaint realleged that a judgment in appellants' favor in the amount of $120,000 was entered against respondent on January 8, 1991. The complaint alleged that judgment was final and had not been vacated, set aside, or modified.

As a new allegation, appellants asserted that on April 12, 1991, respondent filed chapter 7 proceedings in bankruptcy court. On August 13, 1991, appellants filed a complaint in the bankruptcy court contending the judgment was nondischargeable on the ground of fraud. The bankruptcy court ruled on August 10, 1992, that the judgment was nondischargeable and entered a judgment to that effect on August 14, 1992.

Again respondent demurred, again asserting the complaint was time barred by the applicable statutes of limitations. Respondent contended the automatic stay imposed under section 362(a) of title 11 of the United States Code (hereafter section 362(a)) did not operate to toll the statute of limitations on enforcement of judgments. Appellants filed opposition to the demurrer and the court entertained oral argument.

The court sustained respondent's demurrer without leave to amend, stating "Defendant Ostrovsky's demurrer to the first amended complaint is sustained without leave to amend. An action to renew the judgment under CCP §§ 683.050 would not have violated the stay resulting from Defendant Ostrovsky's bankruptcy. Barnett [v. Lewis] (1985) 170 CA3d [Cal.App.3d] 1079, 1092 164 East 72nd Street Corp. [v. Ismay] (1944) 65 CA2d [Cal.App.2d] 574, 576 . Therefore, no tolling occurred as a result of that stay and this action is time barred under the ten year period of CCP §§ 337.5(3). Ibid." The action was dismissed with prejudice.

In an abundance of caution, appellants appealed from the order of dismissal (G030640) and from the judgment of dismissal awarding respondent specific costs (G031373). Case Nos. G030640 and G031373 have been consolidated on appeal because they involve identical facts and issues and the same underlying case.

DISCUSSION

"On appeal from a dismissal after an order sustaining a demurrer, we review the order de novo, exercising our independent judgment about whether the complaint states a cause of action as a matter of law.... [Citations.] We deem to be true all material facts properly pled.... [Citation.] If no liability exists as a matter of law, we must affirm ... the judgment sustaining the demurrer." (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1501, 82 Cal.Rptr.2d 368.)

The principal question with which we are confronted is whether the automatic stay provisions of section 362(a) tolled appellants' new action on the judgment. With these rules in mind, we examine the operative complaint with regard to whether a cause of action has been established.

Period for Enforcement and Renewal of Judgments

Code of Civil Procedure section 683.020, which defines the period for enforceability of judgments, provides after the expiration of 10 years after the date of entry of a money judgment or a judgment for possession or sale of property the judgment may not be enforced. One way to preserve such a judgment is to file an application for renewal under the terms of Code of Civil Procedure sections 683.120 and 683.130 before the expiration of the 10-year enforceability period. Such application automatically renews the judgment for a period of 10 years. (Code Civ. Proc., § 683.120, subd. (b).) The parties agree that appellants did not file an application for renewal.

Alternatively, Code of Civil Procedure section 683.050 provides: "Nothing in this chapter limits any right the judgment creditor may have to bring an action on a judgment, but any such action shall be commenced within the period described by [Code of Civil Procedure] Section 337.5." Section 337.5, subdivision 3, prescribes a 10-year limitation for an "action upon a judgment or decree of any court of the United States or of any state within the United States." Thus, a new action on a judgment is subject to the 10-year statute of limitations set forth in Code of Civil Procedure section 337.5.

Here, the judgment was entered on January 8, 1991. The statute of limitations for an action on a judgment does not accrue until the judgment is final. The judgment is not final until the time within which to appeal the judgment has expired. (Turner v. Donovan (1942) 52 Cal.App.2d 236, 238, 126 P.2d 187.) Because no notice of entry of judgment was filed, the time to appeal was on or before 180 days after entry of judgment. (Cal. Rules of Court rule 2(a)(3).) One hundred eighty days after January 8, 1991, was July 7, 1991.¹

Thus, under Code of Civil Procedure section 337.5 any new action brought under Code of Civil Procedure section 683.050 had to have been filed by July 8, 2001. Appellants concede their action was filed on July 31, 2001, 10 years and 23 days after the judgment was final.

Appellants contend, however, the statute of limitations was tolled during the pendency of respondent's bankruptcy proceedings, which commenced April 12, 1991 [the parties do not inform the court of the date the bankruptcy proceedings terminated].

Title 11 United States Code Annotated Section 362(a)

Section 362(a) "provides for a broad stay of litigation, lien enforcement and other actions, judicial or otherwise, that are attempts to enforce or to collect prepetition claims. It also stays a wide range of actions that would affect or interfere with property of the estate, property of the debtor or property in the custody of the estate." (3 Collier on Bankruptcy (15th ed.1996) § 362.01, pp. 362-10, 362-11 (hereafter Collier).)

The legislative history of section 362(a) shows "Congress intended to give debtors `a breathing spell' from their creditors and to stop `all collection efforts, all harassment, and all foreclosure actions.' H.R.Rep. No. 95-595, 95th Cong., 2d Sess. (1978), reprinted in 1978 U.S.C.C.A.N. 5787, at 6296-97.... Accordingly, Section 362 is `extremely broad in scope' and `should apply to almost any type of formal or informal action against the debtor or the property of the estate.'" (Delpit v. C.I.R. (1994) 18 F.3d 768, 771.)

Exceptions to the stay are based on particular policy objectives, such as a need to regulate criminal penalties or to regulate harmful environmental behavior. (Collier, supra, § 362.01, p. 362-11.)

Section 362(a) imposes a stay on eight kinds of proceedings, including: "(1) the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;" (11 U.S.C. § 362(a)(1));

"(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;" (11 U.S.C. § 362(a)(2));

"(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;" (11 U.S.C. § 362(a)(3));

"(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title." (11 U.S.C. § 362(a)(6).)

Appellants contend whether a new action on a judgment is viewed as a continuation of an action against the debtor or the commencement of an action or proceeding, such an action falls squarely within the automatic stay provisions. As such the commencement of a new action on the judgment was stayed or tolled during respondent's bankruptcy proceeding. We agree.

Respondent raises two arguments as to why section 362(a) does not stay appellants' action. We reject each argument. Respondent first relies upon Barnett v Lewis (1985) 170 Cal.App.3d 1079, 217 Cal.Rptr. 80 (Barnett), for the proposition that the automatic stay provisions do not apply to the commencement of a new action on a judgment. Respondent's reliance on Barnett is misplaced.

In Barnett a minority shareholder petitioned the court for supervision of winding up proceedings of a mining company, Southwestern. On October 6 1971, the court ordered the sale by the corporation of its assets, with a portion of the proceeds to satisfy a claim by the majority shareholder, a portion to be held to cover a claim by the minority shareholder, and the remainder to be distributed to the shareholders. None of the...