Sunrise Fin., LLC v. Superior Court of San Diego Cnty.

• Decision Date: 07 February 2019
• Docket Number: D073772
• Citation: 243 Cal.Rptr.3d 623,32 Cal.App.5th 114
• Court: California Court of Appeals Court of Appeals
• Parties: SUNRISE FINANCIAL, LLC, et al., Petitioners, v. The SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent; Overland Direct, Inc., et al., Real Parties in Interest.

32 Cal.App.5th 114

243 Cal.Rptr.3d 623

SUNRISE FINANCIAL, LLC, et al., Petitioners,

v. The SUPERIOR COURT OF SAN DIEGO COUNTY, Respondent;Overland Direct, Inc., et al., Real Parties in Interest.

D073772

Court of Appeal, Fourth District, Division 1, California.

Filed February 7, 2019

The Leichter Firm, Kevin J. Leichter and Andrew E. Hewitt, Los Angeles, for Petitioners.

No appearance for Respondent.

Blanchard, Krasner & French, Kipp Williams and John F. Whittemore, La Jolla, for Real Parties in Interest.

HALLER, J.

In August 2017, San Diego County Superior Court Judge Joel Wohlfeil was assigned as the independent calendar judge to preside over a case brought by Overland Direct, Inc., and CTPC, LLC (collectively Overland) alleging defendants fraudulently induced Overland to assign security interests in various properties to certain defendants. In January 2018, Overland moved to transfer and consolidate its other cases involving similar fraud allegations, including one from the San Bernardino County Superior Court and one from the Los Angeles County Superior Court. ( Code Civ. Proc., § 403 ; Cal. Rules of Court, rule 3.500.)¹ Some defendants in the San Bernardino and Los Angeles cases were not already part of the San Diego County action, as they were third-party purchasers of properties located in these other counties. Over written opposition by these defendants, Judge Wohlfeil granted the transfer motion and ordered the San Bernardino and Los Angeles cases transferred to San Diego County Superior Court and consolidated with Overland's existing San Diego case.

Three of the defendants in the San Bernardino action (referred to as the Sunrise defendants)² then brought a section 170.6 challenge against Judge Wohlfeil. The court denied the challenge as untimely because the motion was filed more than 15 days after the Sunrise defendants appeared in the action by filing their opposition to Overland's section 403 transfer/consolidation motion.

The Sunrise defendants filed a writ petition challenging the denial of their section 170.6 motion. After staying the San Diego County Superior Court proceedings, we issued an order to show cause because section 170.6 rulings are not appealable and there did not appear to be any published authority on the precise issue. We then granted the parties' request that we defer ruling on the writ petition pending the resolution of various bankruptcy issues. After the bankruptcy issues were resolved, the parties completed their briefing on the section 170.6 issues and we conducted oral argument.

Based on our evaluation of the parties' arguments, the record, and the applicable law, we conclude the court properly found the Sunrise defendants' section 170.6 challenge was untimely because defendants filed the challenge more than 15 days after they made an appearance in the action by filing an opposition to the section 403 transfer/consolidation motion in Judge Wohlfeil's department. In reaching this conclusion, we are aware that section 170.6's time deadlines were not written with section 403 transfer motions in mind, and there are several plausible ways to interpret section 170.6 in this context. But we are satisfied our conclusion best effectuates the legislative intent when viewing the specific words of the statute and the statutory purpose and objectives.

FACTUAL AND PROCEDURAL BACKGROUND³

In 2007, Overland obtained $25 million in borrowed funds from certain lenders. Overland then used the funds to make secured real estate loans involving many different parcels of property located in several different counties. In about 2010, Overland allegedly defaulted on the $25 million debt obligation. The lenders hired Dan Tepper and his entity Esola Capital Investment, LLC (Esola) to evaluate the situation and perform an audit on the secured properties. Tepper then allegedly mispresented to Overland that the debt would be extinguished if Overland transferred its interests in the secured properties to Esola.

Overland agreed to do so and executed a series of recordable documents purportedly transferring its interest in these properties to Esola in trust for the lenders. These properties included: (1) property in San Diego County (the Cartwright property); (2) property in San Bernardino County (the Euclid property); and (3) property in Los Angeles County (the Friar property). Esola/Tepper then allegedly conducted foreclosure sales of these properties, and the properties were purchased by, or transferred to, various third parties. These third parties include the Sunrise defendants (who obtained interests in the San Bernardino Euclid property).

In December 2013, Overland filed their San Diego County complaint alleging intentional and negligent misrepresentation against Tepper and Esola (and one other defendant) pertaining to the Cartwright property. As later amended, Overland also sought to cancel instruments as to third parties who claimed interests in the property through Tepper/Esola.

Three years later, in June 2016, Overland filed the San Bernardino County Superior Court action, asserting similar fraud allegations against Tepper and Esola, and seeking to quiet title to the Euclid property against the Sunrise defendants and others.

Overland also filed a Los Angeles County Superior Court action based on the same fraud allegations against Tepper and Esola, and sought to quiet title to the Friar property against third parties who had obtained interests in that property.⁴

In April 2017, Overland amended the San Diego County complaint to add two defendants, Wells Fargo National Association, Inc., and A&S Park Boulevard, LLC. On August 11, 2017, A&S specially appeared and moved to dismiss the action for failure to serve the complaint within three years. Five days later, it filed a section 170.6 peremptory challenge against Superior Court Judge Eddie Sturgeon. Judge Sturgeon granted the motion and, in August 2017, Judge Wohlfeil was assigned as the independent calendar judge in the San Diego County action. Judge Wohlfeil later denied Wells Fargo and A&S's motion to dismiss.

On October 18, 2017, Overland filed an amended complaint adding various defendants to the San Diego action, including the Sunrise defendants. The Sunrise defendants specially appeared and moved to dismiss the action against them, arguing they were not properly served within three years after the action was filed and therefore the court had no jurisdiction over them. The court granted this motion, finding dismissal was mandatory under section 583.250.

Meanwhile, Overland had filed a petition with the Judicial Council to coordinate the San Diego action with its other actions, including the Los Angeles Friar action and the San Bernardino Euclid action. Overland filed the petition under rules applicable to the coordination of complex cases. (See §§ 404, 404.1; rule 3.520.)

In November 2017, the Chief Justice/Judicial Council Chair authorized the San Diego Superior Court to assign a superior court judge to sit as the coordination motion judge to determine whether the identified matters were complex and, if so, whether coordination of those actions was appropriate.

The presiding judge of the San Diego Superior Court appointed Judge Wohlfeil as the complex-case coordination motion judge.

After briefing, on January 18, 2018, Judge Wohlfeil denied the motion to coordinate under the complex case rules, finding the cases were not "complex" under the applicable statute. (See § 404; rule 3.400(a).) But the court said its "ruling [was] made without prejudice to [Overland's] ability to seek to transfer and consolidate the related pending actions" under noncomplex case rules.

Seven days later, Overland moved to transfer and consolidate the San Bernardino Euclid action and the Los Angeles Friar action with the San Diego action. Overland made the motion under section 403, which governs transfer of noncomplex cases that involve common factual and legal questions, and permits a court to consolidate cases "for trial pursuant to [s]ection 1048 without any further motion or hearing." ( § 403.) Rule 3.500 contains rules for noncomplex-case transfer proceedings, including requiring a noticed motion supported by a declaration and factual findings by the trial court. (Rule 3.500(b), (c), (d).)

On February 16, 2018, the Sunrise defendants filed an opposition to Overland's section 403 transfer/consolidation motion. The Sunrise defendants filed this opposition in the San Diego County action; their opposition papers contained the San Diego case caption and identified Judge Wohlfeil as the judge presiding over the matter. In their opposition, the Sunrise defendants urged Judge Wohlfeil to exercise his discretion to deny the motion based on their assertions that the factual circumstances in each action were different; the cases were at different litigation stages; and consolidation would substantially inconvenience the parties and witnesses.

Judge Wohlfeil presided over the hearing on the motion, which was attended by Overland's counsel and counsel for each of the defendants, including the Sunrise defendants. After considering the parties' arguments, on March 2, the court issued a minute order granting Overland's motion, stating: "[T]ransfers of the Friar and Euclid actions [are] warranted pursuant to section 403, and ... Rule 3.500(d). In addition, consolidation is proper pursuant to section 1048(a)." The court detailed its supporting findings, including that common factual and legal questions predominate; consolidation would be convenient and practical; a single fact finder would result in efficiency; the transfer and consolidation will preclude duplicative or inconsistent rulings; and the "San Diego Superior Court is uniquely familiar with the factual and legal issues involved given the prior lawsuits addressing the same or similar wrongful conduct." The court scheduled a March 15, 2019 trial date.

The next week, on March 8, 2018, the Sunrise defendants' counsel served on all parties a ...