Shin v. Superior Court

• Decision Date: 30 June 1994
• Docket Number: No. B079319,B079319
• Citation: 31 Cal.Rptr.2d 587,26 Cal.App.4th 542
• Court: California Court of Appeals Court of Appeals
• Parties: Dong Suk SHIN et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent; KOREA FIRST BANK, Real Party in Interest.

Page 587

31 Cal.Rptr.2d 587

26 Cal.App.4th 542

Dong Suk SHIN et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent;

KOREA FIRST BANK, Real Party in Interest.

No. B079319.

Court of Appeal, Second District, Division 4, California.

June 30, 1994.

As Modified on Denial of Rehearing July 29, 1994.

Review Denied Oct. 20, 1994.

[26 Cal.App.4th 543] Steven C. Kim, Los Angeles, for petitioners.

No appearance, for respondent.

Ervin, Cohen & Jessup, Jacob D. Lee, Steven A. Roseman and Victoria Worth, Beverly Hills, for real party in interest.

INTRODUCTION

CHARLES S. VOGEL, Associate Justice.

Korea First Bank (KFB) obtained a summary adjudication permitting it to obtain a judicial foreclosure and deficiency judgment against petitioners Dong Suk Shin, Byung Kook Cheon, and Jung Soon Cheon. Petitioners then applied to this court seeking a writ of mandate to vacate that ruling on the ground that KFB had violated the "one form of action" provision of CODE OF CIVIL PROCEDURE SECTION 726¹, subdivision (a) by obtaining a prejudgment attachment against Korean real property owned by petitioner Shin. We issued an alternative writ, stayed enforcement of the contested order, and set the matter for hearing. Having heard oral argument and reviewed the parties' pleadings, we grant the requested relief.

FACTUAL BACKGROUND

On June 14, 1990, in Los Angeles, California, KFB loaned $9,600,000. Petitioners signed a promissory note secured by a deed of trust on California real property. Petitioners defaulted on the promissory note by failing to make interest payments for August 15, 1991, and each month thereafter. KFB elected to accelerate the note and demanded On May 22, 1992, KFB commenced a judicial action in the Seoul Civil District Court, in Korea, and obtained a prejudgment attachment order which was recorded against real property in Korea owned by petitioner Shin.

payment of the full principal with interest and late charges totaling $10,263,341.66.

On June 2, 1992, KFB filed this action for judicial foreclosure and a deficiency judgment. ² Petitioners' answer generally denied the allegations of the complaint and alleged several affirmative defenses of no relevance to the issues before this court.

On March 17, 1993, KFB filed a motion for summary adjudication of issues to determine its right to foreclose on the California realty and to obtain a deficiency judgment. The motion was unopposed and granted. On June 8, 1993, KFB applied for a "writ of possession/sale/execution" to begin the foreclosure.

On June 15, 1993, petitioner Shin, with the benefit of new counsel, moved for reconsideration on the grounds he was not fluent in English and had not informed his prior counsel that KFB had placed a lien on his Korean property. The court granted the motion to reconsider, vacated its order for summary adjudication of issues, and permitted petitioners to file opposition to KFB's motion.

Petitioners' opposition consisted of evidence that KFB obtained a court order for a prejudgment attachment against Shin's real property in Korea. Based on that circumstance, petitioners contended that KFB had violated the provisions of section 726, subdivision (a) and effectively had waived its security interest in the California real property. In sum, petitioners' position was predicated on the premise that, by filing in a Korean court to protect its claim, KFB had exposed itself to the sanction imposed on creditors who pursue an "action" in violation of the "one form of action" rule. ³

On reconsideration, the court again granted on September 30, 1993, KFB's motion for summary adjudication finding that KFB's "creation of a claim of lien in Korea against defendant Dong Suk Shin's property located in Korea did not constitute an action in violation of Code of Civil Procedure, § 726."

DISCUSSION

I

The primary question before us may be plainly stated as follows: Did KFB violate section 726, subdivision (a) when it obtained from the Seoul Civil District Court a prejudgment attachment order against Shin's property in Korea prior to commencement of the present action for judicial foreclosure?

Section 726, subdivision (a) provides in relevant part as follows: "There can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property ... in accordance with the provisions of this chapter." In operation, the "one form of action" rule "applies to any proceedings or action by the beneficiary for the recovery of the debt, or enforcement of any right, secured by a mortgage or deed of trust. The only 'action' that is permitted is foreclosure; any other 'action' is a violation of the rule that invokes severe sanctions." (4 Miller & Starr, Cal. Real Estate (2d ed. 1989) Deeds of Trust and Mortgages, § 9:105, p. 348, emphasis added.)

Whether the filing in the Korean court constitutes an "action" within the proscription of section 726, subdivision (a) is governed by the definition of "action within the meaning of section 22." (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 998, 275 Cal.Rptr. 201, 800 P.2d 557.) Section 22 provides: "An action is an ordinary proceeding in a court of justice by which one party prosecutes another for the declaration, enforcement, or protection of a right, the redress or prevention of a wrong, or the punishment of a public offense."

On that point, KFB and petitioners produced declarations from their respective expert witnesses to explain the procedure and effect of KFB's application to the Korean According to KFB's expert witness, "KFB was allowed to record a lien on [Shin's] Property. Under the Korean Rules of Civil Procedure, the attachment and lien procedure is merely a provisional remedy which, upon a minimal showing, allows claimants to have their claims to real property recorded for purposes of giving notice to potential purchasers and lenders. This is strictly a provisional remedy which is allowed by Section 697 of the Korean Rules of Civil Procedure. The acquisition of the attachment order and the resulting recording of a lien, however, does not mean that KFB's claim to [Shin's] Property has been adjudicated by the court, or that, by virtue of having the lien recorded, KFB may assert any legal or equitable title to [Shin's] Property. Rather, it only means that KFB's claim to [Shin's] Property has been recorded ... to preserve KFB's priority if KFB should obtain a judgment against Dong Suk Shin some time in the future...." (Emphasis in original.)

court for a prejudgment attachment. Both expert witnesses were experienced and qualified attorneys licensed to practice before all courts of the Republic of Korea. Their declarations are in substantial agreement and confirm that KFB filed in the Seoul Civil District Court to obtain a "Pre-judgment Order of Attachment."

Although the declaration of KFB's expert witness assiduously avoids the term "action," it is clear KFB prosecuted its claim on the debt in a court of justice for the protection of its right to recover its claim evidenced by the $9,600,000 secured promissory note. It is also clear that KFB was required to make only a "minimal showing" that Shin was, in fact, indebted to KFB. Some discrepancy exists between the explanations of the respective experts as to whether KFB may proceed in the pending matter or whether it must follow up with another action to foreclose in the Seoul Civil District Court. That point is of no consequence because either way KFB invoked the jurisdiction of the Korean court to protect its claim with an involuntary lien. In other words, whether the Korean law involves a one-step or two-step process does not change the characterization of KFB's application to the Korean court as an action for judicial relief to protect its claim. The Korean action is literally within the operation of section 22.

KFB contends that the Korean action does not violate the "one form of action" rule because it did not proceed to judgment. "[I]t is not clear what conduct by the beneficiary constitutes an 'action' within the rule. [p] On the one extreme, the mere commencement of an action by the creditor that does not include a foreclosure of all the real property security is not in violation of the rule since the creditor may dismiss the action before judgment or amend the complaint to include a foreclosure of all of the security. On the other extreme, when the creditor recovers a personal money judgment against the debtor without first foreclosing all of the security, the sanctions of the 'one action' rule are applied, and the creditor loses the liens on all property not foreclosed in that action. [p] In between these two extremes, the decisions have not provided a clear definition of what conduct by the creditor will invoke the sanctions of the one-action rule." (4 Miller & Starr, Cal. Real Estate, supra, § 9:105, p. 348, emphasis in original & fns. omitted.) Here, the Korean action has not proceeded to judgment but it has not been dismissed and Shin's property remains encumbered by the attachment. Consequently, KFB's filing of a separate action lies somewhere in between the two extremes and must be evaluated according to existing case law and the policies which underlie California's "one form of action" rule.

KFB's expert witness aptly observes "Dong Suk Shin may have [a] difficult time selling or otherwise disposing of the Korean Property because of KFB's recording of the attachment Lien" and "the practical effect of the lien in the marketplace is such that no person on notice of the lien would likely purchase or lend against the Korean Property." This clearly demonstrates that KFB did more than merely commence an action. By commencement of the action in Korea, it obtained through a judicial proceeding an involuntary lien on additional assets of its borrower in order to increase the collateral over and above the value of the California real property, which was...