Nat'l Fin. Lending, LLC v. Superior Court of San Diego Cnty., D064226
| Decision Date | 18 December 2013 |
| Docket Number | D064226 |
| Parties | NATIONAL FINANCIAL LENDING, LLC, Petitioner, v. THE SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent; BREWER CORPORATION et al., Real Parties in Interest. |
| Court | California Court of Appeals Court of Appeals |
CERTIFIED FOR PUBLICATION
(Super. Ct. No. 2007-00074230-CU-BC-CTL)
ORIGINAL PROCEEDINGS in mandate. William R. Nevitt, Jr., Judge. Petition denied.
Dale A. Martin; Law Offices of Jeffrey S. Benice and Jeffrey S. Benice for Petitioner.
No appearance for Respondent.
Lincoln, Gustafson & Cercos, Theodore R. Cercos; Law Offices of Murray M. Helm, Jr., Murray M. Helm, Jr.; Marks, Finch, Thornton & Baird, Jon F. Gauthier; Hoyt Law Firm, Kenneth C. Hoyt; Niddrie, Fish & Addams and David A. Niddrie for Real Parties in Interest.
In this writ proceeding, we deny a third party debtor's petition in which it challenges the trial court's order denying the debtor's Code of Civil Procedure1 section 170.6 peremptory challenge.
In the trial court, the plaintiff obtained a $2.8 million judgment against a defendant, a construction lender that failed to meets its commitment with respect to a condominium project in San Diego. The plaintiff has unsuccessfully attempted to satisfy the judgment through a myriad of postjudgment collection proceedings.
The third party debtor is controlled by the sole shareholder of the defendant construction lender and owes the defendant substantial amounts. The plaintiff alleges it served the third party with a notice of levy and that, nonetheless, the third party debtor thereafter paid the defendant more than $2 million in management fees.
The third party's payment to the defendant in part gave rise to the plaintiff's application to the trial court for appointment of a limited receiver. Following a contested hearing, the receiver was appointed. However, the defendant did not cooperate with the receiver, who then applied to the trial court for a clarification of his powers and access tobooks and records of the defendant and the closely-related third party debtor (). The defendant shortly thereafter filed for bankruptcy.
After the defendant filed its bankruptcy petition, the plaintiff filed a motion under section 701.020 to make the third party debtor liable for the money it transferred to the defendant.
Upon being served with the plaintiff's section 701.020 motion, the third party debtor filed a motion to quash service of the notice of levy of execution and a peremptory challenge under section 170.6. The trial court denied the challenge, and the third party debtor filed a timely petition for a writ of mandate. We issued an order to show cause as well as a stay of all further trial court proceedings.
As we explain, a motion under section 701.020, by which a judgment creditor seeks to impose liability for failure to honor a notice of levy, although it implicates substantial interests of third parties and gives rise to a separate adversary factfinding process, is nonetheless an incident to the underlying action and is not itself a separate special proceeding that will support a peremptory challenge under section 170.6. (See Avelar v. Superior Court (1992) 7 Cal.App.4th 1270, 1275-1276.) The same is true of NFL's motion to quash. Accordingly, because the trial judge had previously determined the judgment creditor's liability as a matter of fact, no parties, even those joined thereafter, had the right to a section 170.6 challenge.
Moreover, even if we considered the motion under section 701.020 as a special proceeding within the meaning of sections 23 and 170.6, it was based in substantial parton the same set of facts that gave rise to the plaintiff's earlier motion for appointment of a limited receiver and, as we explain, was therefore a continuation of that postjudgment proceeding. Because that proceeding included a disputed factual hearing, no party which thereafter was brought into the proceeding could bring a peremptory challenge under section 170.6.
In short, the third party debtor's section 170.6 challenge is barred either by the fact that the trial court resolved the judgment debtor's liability or by its determination to appoint a receiver.
This case arises out of the development of a luxury condominium project located at the north end of Balboa Park in San Diego and known as Mi Arbolito. Plaintiffs and real parties in interest, Brewer Corporation, Dynalectric Company, Brady Company/San Diego, Inc., and Division 8, Inc. (collectively the Brewer plaintiffs), are contractors who provided substantial amounts of material and work on the project. The underlying dispute arose because construction on the project stopped before the Brewer plaintiffs were paid in full for their material and work.
The Brewer plaintiffs sued both the developer, Mi Arbolito, LLC, and the construction lender, Point Center Financial, Inc. (PCF). Although Mi Arbolito, LLC filed for bankruptcy, the Brewer plaintiffs obtained a $2.7 million judgment against PCF.
PCF is wholly owned by Dan J. Harkey, who is also its president. According to a declaration Harkey filed in the trial court, PCF has been in business for more than 30 years. Harkey stated that National Financial Lending, LLC (NFL) is a California limited liability company that is managed by PCF and that he is NFL's designated agent for service of process. According to Harkey, NFL is composed of over 1300 members, one of which is PCF.
On April 26, 2012, the Brewer plaintiffs served NFL with notices of levy of execution totaling $2.2 million. The notices of levy were personally served on a person identified only as Jane Doe at offices PCF and NFL share. The proof of service states that Jane Doe refused to identify herself.
Some months after the notices of levy were served on NFL, the Brewer plaintiffs discovered that, notwithstanding the levies, NFL transferred $2.08 million it held to PCF.
After the Brewer plaintiffs discovered NFL's transfers to PCF, they moved to have a limited receiver appointed over PCF's assets. PCF contested the appointment of areceiver and, after conducting a factual hearing, the trial court determined a receiver was necessary.
The receiver had difficulty obtaining PCF records he believed he needed in order to fulfill his receivership obligations. While the receiver's motion to clarify his duties and authority was pending in the trial court, PCF filed a petition for bankruptcy. The Brewer plaintiffs then obtained partial relief from the automatic stay in the PCF bankruptcy that permitted them to pursue third party debtors of PCF, including NFL, for levy violations.
On June 17, 2013, the Brewer plaintiffs personally served NFL's agent for service of process, Dan Harkey, with a notice of its section 701.020 motion to impose liability on NFL for its violation of the April 2012 notices of levy.
On June 28, 2013, NFL responded to the section 701.020 motion by filing a motion to quash the notices of levy in which it argued that service of the notices on a Jane Doe at its offices was not valid.
Also on June 28, 2013, NFL filed a peremptory challenge to the trial judge presiding over the case under section 170.6. The trial judge denied the challenge on the grounds that neither the Brewer plaintiffs' motion under section 701.020 nor NFL's motion to quash are actions or special proceedings subject to section 170.6.
As we indicated at the outset, NFL filed a petition for a writ of mandate, and we issued an order to show cause and stay.
By its terms, section 170.6 applies in any "civil or criminal action or special proceeding of any kind or character." (§ 170.6, subd. (a)(1), italics added.) Under the statute any "party to, or an attorney appearing in, an action or proceeding" may file a motion to disqualify the judge before whom the action is pending if the motion is supported by an affidavit or statement under oath that simply declares the party or attorney believes the presiding judge in the action or proceeding is biased against the party, the attorney, or the interest of the party or the attorney. (§ 170.6, subd. (a)(2).) Upon presentation of such a motion and affidavit or statement under oath, the action or proceeding must be assigned to another judge. (§ 170.6, subd. (a)(3).)
In a case such as this, where a trial judge has been assigned for all purposes, a new party or attorney representing a new party must make the motion within 15 days of appearing. (§ 170.6, subd. (a)(2).) However, only one motion may be made for each side in any one action or special proceeding. (§ 170.6, subd. (a)(4).) Moreover, neither side in a proceeding may make a motion under section 170.6 after trial has commenced or the trial judge has resolved a disputed issue of fact relating to the merits. (§ 170.6, subd. (a)(2); Stephens v. Superior Court (2002) 96 Cal.App.4th 54, 60 (Stephens).) Importantly, these limitations apply even to third parties who are brought into an action or special proceeding after a challenge has been made or a factual issue has beendetermined. (See School Dist. of Okaloosa County v. Superior Court (1997) 58 Cal.App.4th 1126, 1135 [after challenge made]; Stephens, at p. 61.)
(Stephens, supra, 96 Cal.App.4th at pp. 61-62.) "At the same time, section 170.6 is designed to prevent abuse by parties that merely seek to delay a trial or obtain a more favorable judicial...
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