Nikolaychuk v. Capital One

• Decision Date: 30 November 2020
• Docket Number: B303760
• Citation: Nikolaychuk v. Capital One, B303760 (Cal. App. Nov 30, 2020)
• Court: California Court of Appeals
• Parties: ALEXANDER NIKOLAYCHUK, Plaintiff and Appellant, v. CAPITAL ONE, NA et al., Defendants and Respondents.

ALEXANDER NIKOLAYCHUK, Plaintiff and Appellant, v. CAPITAL ONE, NA et al., Defendants and Respondents.

B303760

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR

November 30, 2020

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b).This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct.No.BC698251)

APPEAL from a judgment of the Superior Court of Los Angeles County, Elizabeth Allen White, Judge.Affirmed.

Law Office of Terrence J. Mix and Terrence J. Mix for Plaintiff and Appellant.

Severson & Werson, Jan T. Chilton for Defendants and Respondents.

INTRODUCTION

In 2011, defendant and respondentIntegrated Loan Services, Inc.(Integrated) held a nonjudicial foreclosure sale of real property that secured a deed of trust on which plaintiff and appellantAlexander Nikolaychuk had defaulted.Plaintiff's lender, ING, the predecessor in interest of defendant and respondentCapital One, N.A., purchased the property with a full credit bid of $1,060,642.44.In early 2012, ING issued a federal tax form, Form 1099-C, reporting to the Internal Revenue Service (IRS) that it had cancelled $688,750.00 in debt plaintiff owed on a recourse loan during the 2011 tax year.Plaintiff did not receive his copy of the Form 1099-C and did not file a 2011 tax return.

In 2015, plaintiff learned that the IRS was attempting to collect from him approximately $372,000 in overdue federal income taxes and penalties, based on the cancellation of debt ING reported on the Form1099-C.Plaintiff alleged that he suffered emotional distress.Plaintiff subsequently filed a 2011 tax return showing he owed no taxes, and the IRS ceased its collection efforts against him in 2017.Plaintiff asserted that his emotional distress abated at that time.

Plaintiff sued Integrated and Capital One in 2018.He alleged that Integrated negligently breached its trustee duties by failing to inform him the debt had been paid and provide him with a copy of the cancelled promissory note.Plaintiff alleged that Capital One's predecessor in interest, ING, engaged in fraud and negligently and intentionally inflicted emotional distress on him by furnishing false information on the Form1099-C.

Defendants moved for summary judgment or adjudication on numerous grounds, including the statute of limitations.The trial court issued a tentative ruling granting summary judgmenton alternative grounds.Essentially, it found that plaintiff could not establish damages because the errors on the Form 1099-C worked in his favor and he had failed to timely file a federal income tax return and report the cancelled debt to the IRS.At the hearing on the motion, the trial court denied plaintiff's request for additional time to address these issues, and adopted the tentative as its ruling.

Plaintiff now contends the court denied him due process of law by denying his request for additional time to address the issues in the tentative ruling.He further contends that the trial court's legal analyses, based primarily on federal tax law, were incorrect.In their joint response, defendants argue that plaintiff was not denied due process and that the court's analyses were correct.They also contend that even if the trial court's reasoning was incorrect, the judgment should be affirmed because the grounds they asserted in their motion for summary judgment compel judgment in their favor as a matter of law.We ordered supplemental briefing pursuant to Code of Civil Procedure section 437c, subdivision (m)(2)¹ to provide the parties with an opportunity to address the theories defendants raised in their summary judgment motion.

We affirm the judgment of the trial court.Plaintiff has not demonstrated prejudice resulting from the denial of his request for additional time, and defendants have shown they are entitled to summary judgment on plaintiff's claims.The causes of action for negligent and intentional infliction of emotional distress and breach of trustee duties are barred by the statute of limitations.Plaintiff has not demonstrated a triable issue of material fact as to the fraud cause of action.

FACTUAL BACKGROUND

The following facts are taken from the parties' summary judgment filings and are largely undisputed.Consistent with the standard of review applicable to orders granting summary judgment, we recite the facts in the light most favorable to plaintiff, the nonmoving party.(SeeHampton v. County of San Diego(2015)62 Cal.4th 340, 347.)

On or about November 1, 2007, plaintiff obtained an $880,000.00 loan from ING, the repayment of which was secured by a deed of trust recorded against a residential property in Tarzana.The property was severely damaged by a fire in February 2009.Plaintiff did not repair the property and subsequently ceased making payments on the loan.

At some point Integrated was substituted as trustee under the deed of trust.After recording notices of default and trustee's sale, Integrated sold the property at a nonjudicial foreclosure sale on or about May 17, 2011.ING purchased the property with a full credit bid of $1,060,642.44.²At the time of the sale, theunpaid principal balance on the loan was $880,000.The land (exclusive of the house) was appraised at $255,000 approximately two weeks later.ING sold the property to a third party in September 2011 for $340,000.

In January 2012, ING sent the IRS a Form 1099-C reporting that it had cancelled debt owed by plaintiff on June 30, 2011.³The Form 1099-C reported that ING cancelled $688,750.00 in debt⁴, and the fair market value of the property was $255,000.ING checked a box on the Form 1099-C indicating that plaintiff had been "personally liable" for the repayment ofthe debt; that is, that the loan was a recourse rather than a nonrecourse loan.During discovery, ING admitted that it knew that plaintiff did not owe any money after the May 17, 2011 foreclosure sale and that plaintiff was "not personally liable to ING on the Loan after the foreclosure sale by virtue of California's antideficiency laws."In other words, it knew that the representations it made on the Form 1099-C were inaccurate.

ING mailed a copy of the Form 1099-C to plaintiff at an address in Rancho Palos Verdes.It did not mail a copy to a Los Angeles address that plaintiff asked ING to use in 2010(plaintiff's parents' address).Plaintiff was living in Hawaii at the time and did not receive the Form1099-C.Plaintiff also did not file a 2011 federal income tax return.

In 2013, plaintiff moved from Hawaii to the Northern Mariana Islands, a U.S. territory.On or about June 24, 2013, the IRS mailed a letter to plaintiff at his parents' Los Angeles address, informing plaintiff that the IRS had not received his federal income tax return for 2011.⁵The letter included an attachment in which the IRS "figured your tax and proposed penalties based on the information your employers, banks, and other payers reported on forms W-2, W-2P, 1099, etc."According to that attachment, plaintiff owed $227,947.00 in federal income taxes, $72,896.96 in penalties, and $10,091.84 in interest, for a total of $310,935.80.The income on which the IRS calculated thetaxes due consisted entirely of the cancelled debt reported on the Form1099-C.

The IRS sent plaintiff a "Notice of Deficiency" at his parents' address on or about August 26, 2013.The Notice of Deficiency also asserted that plaintiff owed a total of $310,935.80.

Plaintiff stated during his deposition that he had never seen the June 24, 2013 letter or the Notice of Deficiency.He also "d[id]n't think" that his parents told him about either document.In a subsequent declaration, he clarified that he saw the documents "only after retaining my attorney" in early 2018.

In September 2015, plaintiff, who was still living in the Northern Mariana Islands, got a phone call from his father.Plaintiff's father told him "that he had recently learned from the IRS that I owed 'hundreds of thousands of dollars' in overdue taxes and interest."Plaintiff testified that he"began experiencing emotional distress" at this time."Believing that bankruptcy was his salvation,"plaintiff contacted a bankruptcy firm.On the firm's recommendation, plaintiff then contacted the IRS and asked the IRS to "send paperwork" to his parents' address.

In response to plaintiff's request, the IRS sent a "Reminder of overdue taxes for 2011" to plaintiff at his parents' Los Angeles address on or about October 5, 2015.According to that document, plaintiff owed $372,598.44 in taxes, penalties, and interest.Pursuant to a request made on October 14, 2015, the IRS also sent plaintiff a copy of the Form1099-C.Plaintiff testified that receipt of these documents exacerbated his emotional distress.

Plaintiff filed a bankruptcy petition on November 13, 2015.On or about December 28, 2015, plaintiffs' bankruptcy attorneysadvised him that "[r]ecent taxes" were "nondischargeable in bankruptcy."⁶Plaintiff"panicked" and decided to flee the country to evade the jurisdiction of the IRS.He moved to Lima, Peru in March 2016.The IRS subsequently filed a "Notice of Intent to Levy" his property.

In March 2017, plaintiff"consulted with a CPA [certified public accountant] in the United States and forwarded all [his] tax information to him for an opinion and, if appropriate, a tax return for the year 2011."On or about March 22, 2017, the CPA informed plaintiff that he did not owe any taxes for 2011 due to an exemption; the CPA prepared and filed a 2011 federal tax return for him.Plaintiff testified that he then felt "a major relief from the stress and pressure [he] had been experiencing."

On or about July 12, 2017, the IRS recorded a "Certificate of Release of Federal Tax Lien" with...