Maximum Engineering v. Quinn Group
Filed 6/13/13 Maximum Engineering v. Quinn Group CA2/5
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
FIVE
MAXIMUM ENGINEERING, INC.,
Plaintiff and Appellant,
v.
QUINN GROUP, INC., et al.,
Defendants and Respondents.
B239220
(Los Angeles
County Super.
Ct.
No. BC458017)
APPEAL from
a judgment of the Superior Court
of
County, Richard Fruin, Judge.
Affirmed.
Law Office
of Sohaila Sagheb and Sohaila Sagheb for Plaintiff and Appellant.
Sedgwick
LLP, Steven D. Di Saia, Douglas J. Collodel, Daniel W. Bir, Mathew R.
Groseclose; Chapman Glucksman Dean Roeb & Barger, Craig A. Roeb, Ronald P.
Van and Lauren Kadish for Defendants and Respondents.
_________________________________
The trial
court granted summary judgment on the
basis that plaintiff and appellant Maximum Engineering, Inc., lacked standing
and was judicially estopped from bringing an action for breach of warranty
against defendants and respondents Quinn Group, Inc., and Caterpillar, Inc.,
because the warranty claim was not listed on Maximum’s schedule of assets in a
now-closed bankruptcy action. Motions
for reconsideration and to amend the complaint to add the former bankruptcy
trustee as a coplaintiff were denied.
Maximum
appeals from orders denying reconsideration and to amend the complaint and
granting summary judgment in favor of defendants.
the former trustee had standing to bring the action. We hold summary judgment was properly granted
on the ground that Maximum lacked standing to bring the action, the trial court
did not abuse its discretion in denying the motion for reconsideration, and the
former trustee also lacked standing because the bankruptcy case had been closed
and he had been discharged.
BACKGROUND
The Complaint
Maximum
filed a complaint seeking damages of $600,000 based on causes of action for
extended commercial warranty, and intentional interference with business
relations. Maximum alleged Quinn
refused to honor the warranty on its repair of an expensive piece of
construction equipment, and Quinn interfered with Maximum’s business relations
by threatening not to do business with anyone doing business with Maximum. Maximum alleged that Caterpillar refused to
repair the equipment pursuant to its extended service contract. Answers to the complaint were filed by
defendants.
Defendants’ Joint
Motion for Summary Judgment
Defendants
filed a joint motion for summary judgment, arguing Maximum lacked standing to
sue because Maximum filed for bankruptcy under chapter 11 in April 2009, the
case was converted to chapter 7, and was closed by the United States Bankruptcy
Court in February 7, 2011. Maximum
failed to state the warranty claims in the schedule of assets in both the
chapter 11 and chapter 7 proceedings. As
a separate basis for summary judgment, defendants argued Maximum should be
judicially estopped from pursuing its action against them due to its failure to
list the claim as an asset in the bankruptcy proceedings.
As
undisputed material facts, defendants established that Maximum’s claims were
based on conduct occurring in 2008. In
April 2009, Maximum filed for bankruptcy protection under chapter 11. The schedule of personal property (Schedule
B) in the chapter 11 proceeding makes no mention to warranty claims against
defendants. In September 2010, the
bankruptcy was converted to chapter 7, and again, Maximum failed to set forth
the warranty claims on Schedule B. In
February 2011, the case was closed by the bankruptcy court and the trustee was
discharged of his duties. In March 2011,
Maximum filed this action.
Maximum’s Opposition
to Summary Judgment
Maximum
opposed the summary judgment motion on the issue of standing by asserting that
the warranty claims had been disclosed during the course of the bankruptcy
proceedings to the bankruptcy court, the trustee, and the creditors. Maximum set forth the following disclosures
of its claim against defendants:
(1) Quinn’s claim against Maximum
was listed as disputed on Schedule F, putting creditors on notice that Maximum
claimed offsets against Quinn;
name="_ftnref2" title="">[2] (2) in
a Statement of Major Issues filed in April 2009, Maximum stated it “has a
warranty claim to litigate with Quinnâ€; (3)
bankruptcy counsel orally advised the trustee and creditors at the first
meeting of creditors that Maximum has “litigation claims with respect to
warranty and service issues†on the equipment and there will “be litigation
claims against Quinn Company and Caterpillar over thatâ€; (4) a status report filed in May 2009 does not
mention defendants by name, but explains the bankruptcy petition was filed in
part due to the failure of the equipment and resulting losses to Maximum;
(5) at a June 2009 status conference,
bankruptcy counsel told the bankruptcy court “we have two pieces of
litigation,†identifying one as “a breach of warranty claim on the Caterpillar
equipment, the maintenance of those by Quinn Company,†but the bankruptcy court
indicated it would abstain from hearing those actions, which it suggested be
filed in state court; (6) in opposing a
motion to dismiss the chapter 7 bankruptcy, Maximum attached the Statement of
Major Issues; and (7) after conversion
from chapter 11 to chapter 7, amended schedules were filed with the bankruptcy
court in November 2010, which again listed “the Quinn claim†on Schedule F.
Maximum
argued judicial estoppel did not apply because it had not taken inconsistent
positions in the bankruptcy court and
in the instant action. The warranty
claims had been disclosed, so no one was mislead, and the trustee abandoned the
claims by failing to pursue them.
Defendants
filed a joint reply and evidentiary objections.
Ruling on the Joint Motion for Summary Judgment
A hearing was held on the motion for summary judgment on
November 15, 2011. The trial court
issued a written ruling granting the joint motion for summary judgment on
November 18, 2011. The minute order
stated the court signed the order granting summary judgment and judgment
pursuant to Code of Civil Procedure section 437c, and ruled on objections to
Maximum’s evidence. The parties were
served by the court clerk. An amended
ruling granting summary judgment and judgment was filed on November 21,
2011.
The amended
ruling found that Maximum was required to disclose the warranty claims in the
bankruptcy proceedings, that it had failed to do so, and Maximum, “therefore,
is estopped and lacks standing to prosecute those claims for its own benefit
herein.†The ruling stated the trial
court had signed and serves the order granting summary judgment and judgment, also
serves rulings on defendant’s evidentiary objections. The court ruled Maximum failed to comply with
its duty to disclose its claim against defendants on Schedule B in the
bankruptcy proceeding. The mention of
the claims at various times during the bankruptcy proceedings did not satisfy
Maximum’s obligation to properly schedule assets. Maximum never listed its warranty claim and
never disclosed the purported $600,000 value of the claim, unfairly depriving
creditors of its value by seeking to keep the claim for its own benefit. There is no evidence the trustee in
bankruptcy knowingly abandoned the warranty claims.
The Motion for Reconsideration and to Amend the Complaint
On November 28, 2011, Maximum filed a motion for
reconsideration of the order granting summary judgment. Maximum simultaneously filed a motion for
leave to file an amended complaint adding Jerry Namba, the chapter 7 bankruptcy
trustee, as a coplaintiff. The motions
were supported by Namba’s declaration establishing that he was the chapter 7
trustee in Maximum’s bankruptcy action, and he did not know of the warranty
claims at the time he administered the estate.
Maximum did not list the warranty claims in Schedule B. Because he did not know about the warranty
claims, they remained property of the estate.
Namba intended to pursue the warranty claims in the current action filed
by Maximum. Maximum asserted Namba’s
involvement in the action was newly discovered evidence that supported both
reconsideration of the order granting summary judgment and the motion to amend
the complaint. Failure to grant the
motions would result in windfalls to defendants.
Defendants
opposed the motions. First, defendants
argued reconsideration was improper because judgment had been entered. Second, Maximum presented no valid grounds
for reconsideration.
Maximum
filed a reply, arguing it had not been given notice judgment had been entered,
because although the November 15, 2011 notice of entry of order indicated
judgment was signed, the notice of entry on the amended ruling dated November
18, 2011, made no reference to the judgment.
If not a proper motion for reconsideration, Maximum urged the trial court to consider the
request as a motion for new trial.
Maximum maintained that both it and the trustee had standing to pursue
the action.
Ruling on the Motions
for Reconsideration and to Amend the Complaint
The trial
court held a hearing on the motions on January 24, 2012. In its written ruling filed on February 9,
2012, the court stated it lacked jurisdiction to grant the motion for reconsideration
because judgment had been entered. But
even if considered as a motion for new trial, Maximum had failed to demonstrate
error in the granting of summary judgment.
Namba’s declaration shows the court’s ruling that the warranty claims
had not been abandoned by the trustee was correct because Namba declared he was
unaware of the warranty claims. It was
Maximum’s fault the claims were not disclosed in bankruptcy. Maximum lacks standing to assert the warranty
claim. The motion to amend was also
denied. No showing was made that the
bankruptcy stay remains in effect and there is no proof that Namba is currently
the trustee. The bankruptcy estate had
not been reopened. The claim must be submitted to the bankruptcy court before
it can be asserted in state court by a trustee.
DISCUSSION
I
PROPERLY GRANTED ON THE GROUND THAT MAXIMUM LACKED STANDING
The trial
court’s amended ruling granted summary judgment on two grounds: estoppel
“was not raised by the Motion for Summary Judgment, which motion was based
entirely on the concept of judicial estoppel due to intentional nondisclosure,
and therefore is not ripe for review.â€
Maximum’s only argument in its opening brief on appeal regarding the summary judgment ruling is that
summary judgment was improperly granted on the ground of estoppel.
Defendants
demonstrated in respondents’ brief that the issue of standing had been raised
in the motion for summary judgment. The
motion for summary judgment was brought on two grounds, the first of which was
that “Maximum lacks standing to pursue this action against Quinn and
Caterpillar as Maximum failed to identify this lawsuit in the chapter 11
(converted to 7) bankruptcy case.†In
their points and authorities, defendants specifically argued “Maximum lacks
standing to prosecute this lawsuit because it actively concealed this asset
during the two-year course of its bankruptcy proceeding.â€
In its
reply brief, Maximum does not attempt to refute defendants’ assertion that the
standing issue was raised in the trial court.
Maximum instead argues it had a right to cure the “standing issue†by
amending the complaint to include Namba as a coplaintiff.
By failing
to address standing, one of the two alternative grounds for summary judgment,
Maximum has forfeited the issue for purposes of appeal. (Christoff
v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125 [where
summary judgment was granted on various grounds, failure to discuss one of the
grounds forfeited the issue on appeal].)
On this basis alone, we affirm the order granting summary judgment. In any event, a brief review of the law
demonstrates the trial court correctly ruled that Maximum lacked standing and
summary judgment was properly granted.
“In a
bankruptcy proceeding, the ‘bankruptcy code place[s] an affirmative duty on
[the debtor] to schedule his assets and liabilities. [11 U.S.C.] § 521(1). If he fail[s] properly to schedule an asset,
including a cause of action, that asset continues to belong to the bankruptcy
estate and [does] not revert to [the debtor].
See Stein v. United Artists Corp., 691 F.2d 885, 893 (9th
Cir. 1982) (holding that only property “administered or listed in the bankruptcy
proceedings†reverts to the bankrupt); accord Hutchins v. IRS, 67
F.3d 40, 43 (3d Cir. 1995); Vreugdenhill v. Navistar [Intern. Transportation] Corp. [(8th
Cir. 1991)] 950 F.2d [524,] 526 . . . (holding that property is not abandoned
by operation of law unless the debtor “formally schedule[s] the
property before the close of the caseâ€).
[¶] “[T]he debtor has a duty to prepare
schedules carefully, completely, and accurately.†In re Mohring, 142 B.R. 389, 394
(Bankr.E.D.Cal.1992); accord In re Jones, 134 B.R. 274, 279
(N.D.Ill.1991); In re Baumgartner, 57 B.R. 513, 516
(Bankr.N.D.Ohio1986); In re Mazzola, 4 B.R. 179, 182
(Bankr.D.Mass.1980). . . .’
[Citation.]†(
Fish Co., Inc. (2011) 196 Cal.App.4th 554, 563-564.)
Because
Maximum did not list the warranty claims on Schedule B, they were not abandoned
by the trustee, and did not pass to Maximum by operation of law. “[I]n order for property to be abandoned by
operation of law pursuant to [United States Code] section 554(c), the
debtor must formally schedule the property before the close of the case. It is not enough that the trustee learns of
the property through other means; the property must be scheduled pursuant to [United
States Code] section 521(1). See 4 Collier on Bankruptcy,
para. 554.02[5] (1982).†(
Transportation Corp., supra, 950 F.2d at p. 526.)
It is
undisputed that Maximum never listed the warranty claims on Schedule B in the
bankruptcy court. Whatever passing mentions
were made of the claims are insufficient, as a matter of law, to establish that
the trustee abandoned the claims.
Because the claims remained the property of the bankruptcy estate, the
trial court properly granted summary judgment on the basis that Maximum had no
standing to bring the action. Our
resolution of the issue of standing negates any need to discuss the alternate
theory of estoppel.
II
Relying on
Namba’s declaration that he would pursue the warranty claims as trustee of the
bankruptcy estate, Maximum argues the trial court abused its discretion when it
denied its motion for reconsideration (which the court treated as a motion for
new trial) and also denied the motion to amend the complaint to add Namba as a
coplaintiff. Finding no abuse of
discretion, we reject the contentions.
A. The Motion for
Reconsideration
The trial court properly denied the motion for
reconsideration based on a lack of jurisdiction. The court observed that it had signed the
order granting summary judgment and
judgment in its order of November 18, 2011.
Once judgment is entered, the court has no jurisdiction to rule on a
motion for reconsideration. (
25 Cal.4th 826, 859, fn. 29; Sole Energy
Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 187, 192 (
denied.
B. Deeming the Motion for Reconsideration a
Motion for New Trial
A trial
court has discretion to treat a motion for reconsideration as a motion for new
trial. (Sole Energy, supra, 128
Cal.App.4th at p. 193.) Here, the trial
court considered the motion for reconsideration as a motion for new trial,
rejecting it on the merits. We therefore
address the issue as if reviewing a motion for new trial following the entry of
summary judgment and judgment.
An order
granting summary judgment may be challenged by a motion for a new trial on any
available statutory ground, including that there are triable issues of material
fact. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164
Cal.App.4th 1171, 1176.) Rulings on
are generally reviewed for an abuse
of discretion, but when the motion for new trial is
sought following summary judgment and the issue is whether triable issues of
material fact exist, we review the contention under the de novo standard of
review. (Ibid.)
The trial
court did not err in denying a new trial motion. As discussed above, Maximum failed, as a
standing to bring the action, which was not scheduled as required in bankruptcy
court.
Setting
aside the questionable assertion by Maximum that Namba’s declaration constitutes
newly discovered evidence as defined in Code of Civil Procedure section 657,
subdivision 4, it is readily apparent that the declaration was of no assistance
to Maximum. Maximum had opposed summary
judgment on the ground Namba had abandoned the warranty claims, but that
proposition was thoroughly refuted by Namba’s declaration. Namba’s declaration established that the
the bankruptcy proceeding, he was not aware of the claims, and did not abandon
them, contradicting the positions taken by Maximum in opposition to summary
judgment.
The motion
for reconsideration, if deemed a motion for new trial, provided no ground to
set aside the judgment. We therefore
turn to the motion to amend the complaint.
C. The Motion to Amend the Complaint to Add
Namba as a Coplaintiff
Maximum
argues the trial court had no discretion to deny its motion to amend the
complaint to add Namba as a coplaintiff.
Maximum insists it is entitled to continue as a coplaintiff because the
warranty claims are valued at $600,000, but creditor claims in bankruptcy are
only $350,000. Maximum reasons it is
entitled to any amount recovered in excess of the creditor’s claims.
The trial
court has discretion to allow amendment of a complaint to add the name of a
party. (Code Civ. Proc., § 473, subd.
(a)(1).) “‘It is axiomatic that a
sound discretion of the trial court. The exercise of that discretion
will not be disturbed on appeal absent a clear showing of abuse. More importantly, the discretion
to be exercised is that of the trial court, not that of the reviewing
court. Thus, even if the
instance, the trial court’s order will yet not be reversed unless, as a matter
of law, it is not supported by the record.’
(Martin v. Johnson (1979) 88 Cal.App.3d 595, 604.)†(Haley
v. Dow Lewis Motors, Inc., supra, 72 Cal.App.4th at p. 506.)
Maximum relies on a body of law
holding that where a plaintiff lacks standing because a cause of action is the
property of a bankruptcy estate, the trial court must grant a motion to amend a
complaint to allege the bankruptcy trustee as a new plaintiff with
standing. The pertinent law is
summarized in Cloud v. Northrop Grumman
Corp. (1998) 67 Cal.App.4th 995, 998-1000 (Cloud), in which an employee brought an action against several
defendants for violation of the Fair Employment and Housing Act. Prior to filing the employment action, the
employee had filed for chapter 7 bankruptcy protection but had not scheduled
the action as an asset. The employer
moved for judgment on the pleadings on the basis that the employee lacked
standing to assert the employment claim, which belonged to the bankruptcy
estate, and that the employee was judicially estopped from asserting the
claim. The employee filed a declaration
that she was in the process of amending her bankruptcy schedule of assets to reflect
the claim. The trial court granted the
motion for judgment on the pleadings without leave to amend. In granting the motion, the court did not
discuss the employee’s declaration that she was trying to schedule the claim.
The
lacked standing. The bankruptcy trustee
is the proper plaintiff to assert claims to property of the bankruptcy estate,
and “any causes of action previously possessed by that person become the
property of the bankrupt estate.†(
“Property that is neither abandoned nor administered by the bankruptcy
trustee remains property of the bankruptcy estate.†(Id.
at p. 1003.) Under Code of Civil
Procedure section 367, it is the general rule that every action be prosecuted
in the name of the real party in interest. The employee was not the real party
in interest, and thus lacked standing, but the trustee had standing to bring
the action. (Cloud, supra, at pp.
1004-1005.)
However,
the motion for judgment on the pleadings without leave to amend, because
amendment to add the trustee would not alter the facts to make them “‘wholly
different’†than the employee’s action.
(Cloud, supra, 67 Cal.App.4th at p. 1005, citing Klopstock v. Superior Court (1941) 17 Cal.2d 13, 19-22 (
[“In the case of a trustee in bankruptcy seeking to be substituted in, the
trial court lacks discretion not to allow the substitutionâ€].) Maximum contends these authorities are
controlling and the trial court had no discretion to deny the motion to amend
to add the trustee as a coplaintiff.
We disagree
with Maximum’s position. Unlike the
situation in Cloud, Maximum did not
oppose summary judgment on the ground that it would reopen the bankruptcy and
schedule the warranty claim. To the
contrary, Maximum was adamant that it owned the claim and that it had been
disclosed in the bankruptcy proceedings and abandoned by the trustee.
Moreover,
at the time of the motion for new trial, Namba was a stranger to the action who
had no standing. Namba had been
discharged as trustee one year before the trial court denied the motion for new
trial. The bankruptcy court stated in
its order of February 7, 2011, as follows:
“Since it appears that no further matters are required that his case
remain open, or that the jurisdiction of this court continue, it is ordered
that the Trustee is discharged from his/her duties in this case, his/her bond is
exonerated, and the case is closed.â€
Maximum fails to explain how Namba, the former trustee of a closed
bankruptcy estate, who had been discharged one year before the motion to amend
the complaint, had standing to join the action as a plaintiff. While Namba had standing to move to reopen
the bankruptcy estate, he “did not have, however, . . . authority to reappoint
himself as trustee. See In re Kissinger, . . .
2011 WL 2632856 at *2 (Bankr. W.D. Mich. June 28, 2011), citing 28
U.S.C. § 1930 along with appended text from The Bankruptcy Fee
Compendium.†(In re Trahan (Bankr.C.D.Ill.2011) 460 B.R. 207, 210, fn.
omitted.)
Maximum’s
bankruptcy action remained closed at the time of the motion to amend, no
attempt had been made to reopen the bankruptcy, nor had Namba sought to be
reappointed as trustee. Based on Namba’s
lack of authority, the trial court correctly ruled that Namba had no standing
to assert the warranty claim along with Maximum. (Compare Klosptock,
supra, 17 Cal.2d at pp. 19-20 [trial
court properly allowed substitution of the duly
authorized administratrix of an estate party as plaintiff].)
Apparently
attempting to cure the problem of Namba’s lack of standing, Maximum seeks to
augment the record on appeal with postjudgment documents issued by the
bankruptcy court. Specifically, Maximum
on December 31, 2012, filed a motion to augment the record on appeal, or in the
alternative, for judicial notice on appeal, of the following documents: (1)
Maximum’s motion to reopen the bankruptcy case and pursue litigation
against Quinn, supported by an amended Schedule B showing a litigation claim of
unknown value against Quinn and Caterpillar, filed June 5, 2012; (2) the bankruptcy court’s order of June 25,
2012, reopening Maximum’s bankruptcy case, with a finding that “the automatic
stay shall NOT be reinstatedâ€; (3)
Notice of appointment of Namba as trustee of the reopened case, dated
November 26, 2012; and (4) Namba’s application
to employ general counsel to assist in litigation. Defendants have objected to the motion.
We deny the
motion to augment the record.
Augmentation to include documents that were not considered or lodged
with the trial court is improper. (Cal.
Rules of Court, rule 8.155; People
v. Castillo (2010) 49 Cal.4th 145, 157-158.)
We also
deny the motion to take judicial notice of the bankruptcy court records. These documents refer to
the trial court entered its
appeal†on February 16, 2012. (
Cal.4th 4, 29, fn. 15.) “We are
therefore governed by the general rule that an appellate
court will consider only matters that were part of the
Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 813.) No exception to that rule is here applicable.
For this reason the requests for judicial
(Arnett v. Dal Cielo, supra, at
p. 29, fn. 15.)
“It has
long been the general rule and understanding that ‘an appeal reviews the
correctness of a judgment as of the time of its rendition, upon a record of
matters which were before the trial court for its consideration.’ (In re James V. (1979) 90 Cal.App.3d
300, 304.) This rule reflects an
‘essential distinction between the trial
and the appellate court . . . that it is the province of the trial court to
decide questions of fact and of the appellate court to decide questions of law
. . . .’ (Tupman v. Haberkern
(1929) 208 Cal. 256, 262-263.) The rule
promotes the orderly settling of factual questions and disputes in the trial
court, provides a meaningful record for review, and serves to avoid prolonged
delays on appeal. ‘Although appellate
courts are authorized to make findings of fact on appeal by Code of Civil
Procedure section 909 and rule 23 of the California Rules of Court, the
authority should be exercised sparingly.
[(1966)] 244 Cal.App.2d 434, 443.)
findings should be made. (Green
v. American Cas. Co. (1971) 17 Cal.App.3d 270, 273.)’ (Tyrone v. Kelley (1973) 9 Cal.3d 1,
13; see also In re Brittany H. (1988) 198 Cal.App.3d 533, 554.)†(In re
Zeth S. (2003) 31 Cal.4th 396, 405, emphasis added.)
Based upon
these settled principles of appellate review, the postjudgment documents from
Maximum’s reopened bankruptcy case may not be considered on appeal. We express no opinion on how, if at all, the
reopening of the bankruptcy affects the warranty claims against defendants.
The orders denying the motion for reconsideration,
treated as a motion for new trial, and the motion to amend the complaint are
affirmed. The order granting summary
judgment and the judgment are affirmed.
Costs on appeal are awarded to Quinn Group, Inc., and Caterpillar, Inc.
KRIEGLER, J.
We concur:
MOSK, Acting, P. J.
O’NEILL, J.
also purports to appeal from “all subsequent appealable and nonappealable
judgment and orders.â€
claim of $96,000 is shown on Schedule F as a “Business Debt.†A box on the claim used to indicate “if claim
is subject to offset†makes no mention of any offset or the warranty claim
against Quinn. On a separate list of “20
largest unsecured claims†Maximum indicated Quinn’s claim was “Disputed.â€
