Slaieh v. Simons

• Citation: 584 B.R. 28
• Decision Date: 16 January 2018
• Docket Number: Case No.: CV 17–1404–AB (FFMx)
• Parties: Nabeel Naiem SLAIEH and Joanne Fraleigh, Plaintiffs, v. Larry D. SIMONS, Defendant.
• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California

584 B.R. 28

Nabeel Naiem SLAIEH and Joanne Fraleigh, Plaintiffs,

v.Larry D. SIMONS, Defendant.

Case No.: CV 17–1404–AB (FFMx)

United States District Court, C.D. California.

Signed January 16, 2018

George A. Saba, Law Offices of George A. Saba, Corona, CA, for Plaintiffs.

Matthew W. Grimshaw, D. Edward Hays, David A. Wood, Marshack Hays LLP, Irvine, CA, for Defendant.

ORDER AFFIRMING BANKRUPTCY COURT'S DISMISSAL OF APPELLANT'S COUNTERCLAIMS [9]

ANDRÉ BIROTTE JR., UNITED STATES DISTRICT JUDGE

Before the Court is Appellants Nabeel Naiem Slaieh and Joanne Fraleigh's ("Appellants") appeal from the bankruptcy court's June 28, 2017 order granting with prejudice Defendant Larry D. Simons's Motion to Dismiss. (Dkt. No. 9; see also Defendant's Excerpts of Record ("DER") Ex. 177.) Having reviewed the parties' briefing and the record before the bankruptcy court, the June 28, 2017 order is AFFIRMED .

I. BACKGROUND

Appellant, the debtor in the underlying bankruptcy proceeding, filed a voluntary petition for relief under Chapter 7 of Title 11 of the United States Code on December 18, 2013. (DER Ex. 22.) That same day, the bankruptcy court appointed Larry D. Simons as Chapter 7 trustee ("Trustee") of Appellant's Estate. Among the assets in Appellant's bankruptcy Estate was his principal residence located at 40834 Baccarat Road, Temecula, California (the "Property"). (DER Ex. 22 at 35.)

Pursuant to his statutory duties to liquidate assets of the Estate, the Trustee marketed the Property for sale. See 11 U.S.C. § 704(a)(1). A buyer was found, and on April 6, 2016, the Trustee filed a Sale Motion with the bankruptcy court, seeking authority to sell the property for $635,000. (DER Ex. 97 at 3,512–3,898.) The bankruptcy court entered an order granting the Sale Motion on May 26, 2016. (DER Ex. 129 at 4,689–93.) Appellant appealed the Sale Order to the United States District Court and filed a motion to stay the case pending appeal in both the district court and the bankruptcy court. Both motions to stay were denied. (DER Exs. 137, 146.)

The appeal of the Sale Order was later dismissed for failure to prosecute.

On July 13, 2016, the United States Marshals Service posted a notice to vacate at the Property, instructing all occupants to vacate by July 20, 2016, at 12 p.m. (DER Ex. 148 at 7,058.) On July 19, 2016, Ms. Fraleigh, Appellant's wife, filed a complaint in the Superior Court of California, County of Riverside, for quiet title, declaratory and injunctive relief, and violation of California Business and Professions Code section 17200 et seq. (DER Ex. 148 at 7,022–7,124.) She also sought a temporary stay of the eviction proceedings. (Id. ) Ms. Fraleigh claimed that the sale could not proceed because Appellant transferred the Property to her via interspousal transfer deed, recorded on or about May 11, 2016. (Id. at 7,055–56.) In opposition, Trustee argued that this purported transfer was without the bankruptcy court's approval, and constituted an unauthorized post-petition transfer under 11 U.S.C. § 549. However, over the Trustee's objection, the state court entered a temporary stay of eviction. (Id. at 7,122.) The Trustee then removed the action to the bankruptcy court and filed an emergency motion to dissolve the temporary stay, which was granted on July 21, 2016. (DER Ex. 147 at 7,012–21; Ex. 150 at 7,254–55.)

Appellant and his family were subsequently evicted from the Property. Upon eviction, the Trustee discovered that various doors and windows had been removed from the Property; Appellant and Ms. Fraleigh were asked to return these items since they were part of the bankruptcy Estate and part of the realty being sold pursuant to the Sale Order. Appellant claims he and Ms. Fraleigh were not involved in the removal of these fixtures.

On August 23, 2016, the bankruptcy court issued an Order to Show Cause as to why Ms. Fraleigh and her attorney, Mr. Saba—who is also Appellant's attorney in the bankruptcy proceeding—should not be held in contempt for knowingly and willfully violating the automatic stay with their state court filings. (See DER Ex. 156 at 7,373–74.) After reviewing Ms. Fraleigh's and Mr. Saba's oppositions to the Order to Show Cause, the court determined sanctions were appropriate. The court imposed a fine of $39,205.49 and dismissed the state court action. (DER Ex. 158 at 7,387–95.)

On August 31, 2016, Trustee filed a Complaint against Appellant and Ms. Fraleigh. (DER Ex. 159 at 7,424–7,942.) In the Complaint, Trustee seeks a judgment for avoidance and recovery of the unauthorized post-petition transfers pursuant to 11 U.S.C. §§ 549, 550, 551. (Id. ) The Trustee alleges that the interspousal transfer deed was improper because it occurred post-petition without the bankruptcy court's approval or authorization. (Id. ) In response, Appellant and Ms. Fraleigh filed a motion to dismiss the Complaint for failure to state a claim. (See Simons v. Slaieh , Adv. No. 6:16–ap–01224–MH, Dkt. No. 4.) Thereafter, Ms. Fraleigh withdrew her initial motion to dismiss and filed a new motion alleging she was not personally served with the Complaint. (Id. at Dkt. Nos. 7, 8.) The bankruptcy court denied both Appellant's and Ms. Fraleigh's motions. (See id. at Dkt. Nos. 13, 16.)

On December 16, 2016, Appellant and Ms. Fraleigh filed their first counter complaint against Trustee, alleging: (1) breach of contract; (2) fraud and deceit; (3) extortion; (4) conversion; (5) defamation, slander per se ; (6) negligence; (7) breach of fiduciary duties; (8) violation of California Business and Professions Code § 17200 ; (9) intentional infliction of emotional distress; and, (11) wrongful eviction. (Appellant's Excerpts of Record ("AER") Ex. 1.) Two factual scenarios appear to form the basis of these claims. First, in May and June of 2016, counsel for Appellant and Trustee allegedly engaged in negotiations regarding the sale of the Property. According to Appellant, he offered to purchase the property for $435,000 and Trustee counter-offered to sell the property for $635,000. (AER Ex. 1 at 3.) Appellant contends he agreed to purchase the property for $635,000. (Id. ) Appellant further argues that Trustee then refused to sell him the Property for that price and demanded Ms. Fraleigh pay an additional $75,000 "to teach her a lesson" for filing the state court action discussed above. (Id. ; see also DER Ex. 164 at 8,051.) The second situation involved the enforcement of the bankruptcy court's Sale Order. After Appellant's unsuccessful appeal of the Sale Order, an eviction notice was posted on the Property. Following the determination of Ms. Fraleigh's state court action, the United States Marshals Service evicted Appellant and his family. According to Appellant, he was given thirty minutes to collect personal property, and about a week later, obtained permission to return and collect additional personal property. (See AER Ex. 1 at 7.) When he returned, he realized certain expensive items were missing. However, Appellant acknowledged that many doors and windows were missing prior to his eviction. (See id. ; see also DER Ex. 164 at 8,052–53.)

On January 17, 2017, Trustee moved to dismiss the first counter complaint asserting, among other things, that he and his professionals are entitled to quasi-judicial immunity for the acts alleged. (DER Ex. 159 at 7,396–8,002.) On January 18, 2017, Ms. Fraleigh voluntarily dismissed her counter complaint. (DER Ex. 164 at 8,050.) The court held a hearing on the motion on February 15, 2017. (Simons v. Slaieh , Adv. No. 6:16–ap–01224–MH, Dkt. No. 35.) Thereafter, on February 24, 2017, the court dismissed all of Appellant's claims with prejudice, except for the fifth claim for defamation and slander per se , which was dismissed without prejudice. (DER Ex. 164.) The court held that all of Appellant's claims were insufficiently pled, appellant lacked standing to assert certain claims, and that Trustee and his professionals were entitled to quasi-judicial immunity with regard to actions taken in relation to the sale of the Property. (Id. at 8,055–63.) The court gave Appellant until March 7, 2017, to file an amended counter complaint. (See id. at 8,048–71; Ex. 165 at 8,072–73.) Appellant filed his amended counter claims on March 3, 2017, alleging separate causes of action for slander, defamation, and intentional infliction of emotional distress. (DER Ex. 166 at 8,633–44.) Trustee subsequently filed a motion to dismiss the amended counterclaims, which the court granted on June 19, 2017. (DER Ex. 177.) In that order, the court explained that although Appellant had stated a prima facie claim for slander, the claim was barred by the doctrine of quasi-judicial immunity. (Id. at 8,753–55) Appellant's defamation claim was dismissed for lack of standing. As for Appellant's intentional infliction of emotional distress claim, the court noted it had already dismissed that claim with prejudice in the prior order. (Id. )

The bankruptcy court's June 19 order forms the basis of the instant appeal; however, Appellant's Opening Brief also challenges the court's dismissal of the causes of action in Appellant's original counter claim. (See Dkt. No. 9, Appellant's Opening Brief ("AOB").) The Court will discuss each of the counterclaims in turn.

II. LEGAL STANDARD

District courts have jurisdiction to hear appeals from, inter alia , "final judgments, order, and decrees" of the bankruptcy courts. 28 U.S.C. § 158(a)(1) ; see also Fed. R. Bankr. P. 8005. "When reviewing a decision of a bankruptcy court, a district court functions as an appellate court and applies the standards of review generally applied in federal courts of appeal." In re Guadarrama , 284 B.R. 463, 468 (C.D. Cal. 2002).

Appellate courts review de novo the grant of a Rule 12(b)(6) motion to dismiss. Knievel v. ESPN , 393 F.3d 1068, 1072 (9th Cir.2005). "When ruling on a motion to dismiss, we accept all factual allegations in the complaint as true and construe the pleadings in the light most...