Rettner v. Shepherd

• Decision Date: 26 June 1991
• Docket Number: No. H004926,H004926
• Citation: 231 Cal.App.3d 943,282 Cal.Rptr. 687
• Court: California Court of Appeals Court of Appeals
• Parties: Bert RETTNER, Plaintiff and Respondent, v. Frank SHEPHERD, et al., Defendants and Appellants.

Page 687

282 Cal.Rptr. 687

231 Cal.App.3d 943

Bert RETTNER, Plaintiff and Respondent, v. Frank SHEPHERD, et al., Defendants and Appellants.

No. H004926.

Court of Appeal, Sixth District, California.

June 26, 1991.

As Modified on Denial of Rehearing

June 25, 1991.

[231 Cal.App.3d 945] Charles F. Oakley, Hayward, for defendants and appellants.

Marc L. Shea, Popelka, Allard, McCowan & Jones, San Jose, for plaintiff and respondent.

COTTLE, Associate Justice.

Defendants appeal, inter alia, from a postjudgment order establishing the sum owing on an existing judgment as $258,990.47. They claim the judgment has been satisfied in full and, in any event, plaintiff is barred by the one form of action rule (Code Civ.Proc., §§ 725a, 726) ¹ and the antideficiency statutes (§§ 580a, 580d) from further collection efforts. We agree. Accordingly, we shall reverse the court's postjudgment orders.

FACTS

All legal proceedings in this case, with the exception of a bankruptcy action discussed infra, took place in Santa Clara County Superior Court number 385637. Plaintiff Bert Rettner obtained a judgment in that action in 1979 against defendant Frank Shepherd. The amount of the judgment was $366,118.53. When Shepherd appealed, his brother William filed a surety undertaking.

On June 22, 1983, the First District Court of Appeal filed its opinion in this action affirming Rettner's judgment. Six weeks later, Frank and William transferred certain property they owned on Saratoga Avenue in San Jose to a newly formed corporation (Shasta) "in return for the issuance of stock and securities to them in equal shares and number of shares." The August 8, 1983, agreement memorializing the transfer recited that William would "make application for a land advance and construction loan secured by said real property. Funds are to be obtained for the purposes of paying the Retner [sic ] judgment against Frank C. Shepherd and to develop and build an office complex or other approved income producing improvements upon said real property as soon as possible." The grant deed transferring title to Shasta was notarized on August 17 and filed on August 25, 1983. The Court of Appeal's remittitur issued on August 23.

In September 1983, Rettner's former attorney, Dave Schachter, learned about the conveyance of the Saratoga Avenue property. He felt it was a fraudulent conveyance and threatened a motion in the instant lawsuit to set it aside. William testified at his deposition that he told Schachter the conveyance was not fraudulent and that as a sign of good faith the corporation would present a note and deed of trust against the Saratoga Avenue property to Rettner. He also testified he told Schachter he wanted to secure the judgment with a note and deed of trust, which "should take care of the judgment." He stated the note and deed of trust had been given in "satisfaction" of the judgment.

After this conversation, Schachter prepared a promissory note in which Shasta promised to pay the amount then owing on Rettner's judgment within the next 75 days. Among the recitals in the note were the following: "It is expressly agreed and understood by and between the parties hereto that the said sum of $518,065.85 promised herein represents the money judgment, together with interest and costs therein, awarded in favor of BERT RETTNER in that certain lawsuit entitled BERT RETTNER vs. FRANK SHEPHERD, which lawsuit was filed in the County of Santa Clara, State of California, bearing action number 385637. [p] It is further agreed and understood by and between the parties hereto that WILLIAM JM SHEPHERD and FRANK SHEPHERD are each jointly and severally liable for the entire amount of said judgment. [p] It is further agreed and understood by and between the parties hereto that Shasta Industries Corporation was formed by WILLIAM JM SHEPHERD and FRANK SHEPHERD for the purpose, among others, of securing financing on that certain piece of real property described in the Deed of Trust executed herewith, and paying from the amounts financed therein the sum of $518,065.85 as set forth in this promissory note." William signed the promissory note and deed of trust on behalf of Shasta on September 26, 1983.

Later that same day, Schachter obtained a judgment in this lawsuit against William on his surety undertaking in the amount of $518,065.85. When, 75 days later, Shasta failed to pay off the note as promised, Rettner caused a notice of default to be recorded. Rettner's new attorney, Marc Shea, also initiated other efforts to enforce the judgment. In April 1984, Shea recorded abstracts of judgment against both Frank and William and filed a notice of lien in an action in which Frank and William were suing a title insurer. He also filed a judgment lien on personal property with the Secretary of State. In May 1984, he requested the sheriff to levy upon Frank's real property and sought and obtained an order directing William to turn over stocks and bonds to the sheriff. He served William with an order for examination of judgment debtor, and when William failed to appear, he obtained a bench warrant for his appearance, which was stayed. In June 1984, he caused a notice of sale to be recorded on the Saratoga Avenue property.

William paid Rettner $20,000 in August and September 1984 to postpone the trustee's sale date on the Saratoga Avenue property. The parties agreed on October 9 and 10, 1984, to a new arrangement whereby: (1) Shasta would transfer title to the Saratoga Avenue property to Saratoga Regency Place, a newly formed limited partnership, whose general partner was Gavilan Development Company and whose limited partner was Shasta. William and Frank were limited partners; (2) Saratoga Regency Place would refinance the property, taking out a new first deed of trust for $377,000. Toward this end, Rettner would subordinate his position to the new lender; (3) The borrowed money would be used to pay off various judgment liens which were superior to Rettner's; and (4) Rettner would cancel the Shasta note in return for a partial payment in the amount of $145,000 and for a new note from Saratoga Regency Place in the amount of $404,555, secured by a deed of trust. The recital that William and Frank remained jointly and severally liable was not carried forward into the Saratoga Regency Place note.

The note called for the first $50,000 payment to be made on or before January 9, 1985. When that payment was not made, Rettner recorded a notice of default. On May 9, he recorded a notice of trustee's sale. The property was sold at the trustee's sale on August 13, 1985, to Rettner for his credit bid of $200,000. Rettner resold the property the following month for $950,000, subject to a first deed of trust in the amount of $377,000 and other encumbrances.

Rettner did not request a fair-value hearing (§§ 580a, 726) or file a complaint for the deficiency within three months of the foreclosure sale. However, Rettner's attorneys advised Frank and William on numerous occasions between 1984 and August 1985 that they would proceed against defendants for the balance owing on the judgment if the proceeds from the trustee's sale were insufficient to satisfy the judgment.

In April 1986, Rettner paid $11,767.92 to cure a default on other property owned by Frank. In August of that year, Rettner filed motions with the trial court: (1) to "set credit to judgments following deed of trust foreclosure; (capitalization omitted)" (2) for reimbursement of funds expended in April 1986 curing the default on Frank's other property; and (3) for reissuance of a 1984 writ of execution.

Due to discovery disputes, the motions were taken off calendar. They were renoticed in February 1988. On July 12, 1988, the trial court issued its order granting all three motions. William and Frank timely filed a notice of appeal on September 12, 1988.

On December 7, 1988, Frank filed a Chapter 13 petition with the United States Bankruptcy Court for the Northern District of California. Subsequently, Rettner filed a 'complaint to determine dischargeability and/or judgment' (capitalization omitted) in the bankruptcy court. Frank moved for summary judgment on Rettner's complaint, and Bankruptcy Judge Warren Moore granted the motion, holding as a matter of law that Rettner's judgment was satisfied. On June 9, 1989, Rettner filed a motion for reconsideration. However, before the motion could be heard, Judge Moore died. The judge who was assigned the motion noted that 'the orders made by Judge Moore on May 31 appear to be proper orders.' Nevertheless, he concluded that the 'issue ... whether the Rettner judgment has been extinguished ... ought to be decided on the merits by the state courts....' He further ordered: "If the state appellate court declines to hear the appeal on the merits, then the debtor shall immediately initiate proceedings to determine the validity of Rettner's claim, which shall be heard de novo by the bankruptcy court."

During the pendency of the bankruptcy action, this court dismissed Frank and William's appeal for failure to prosecute. We had not been told of and we were unaware of the bankruptcy filing. The bankruptcy court, however, was of the opinion that the proceedings in this appeal were automatically stayed by the filing of the bankruptcy petition. (See 11 U.S.C. § 362(a)(1).) After the second bankruptcy judge entered his order granting Rettner's motion for reconsideration, Rettner filed an ex parte application in this court to set aside our remittitur as it applied to Frank Shepherd. We requested additional briefing on numerous issues including whether there was legal authority for this court to recall its remittitur and whether any of the issues presented affected the dismissal of William Shepherd. William and Frank then filed their own ex parte application to set aside the remittitur and reopen their joint appeal. Rettner filed a letter response in which he argued, inter alia, that he did not believe...