Sunwest Bank v. Rafipoor

Filed 3/1/07 Sunwest Bank v. Rafipoor CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Dennis S. Choate, Judge. Reversed and remanded.

Lambert & Rogers and Michael D. Rogers for Plaintiff and Appellant.

Herbert N. Niermann for Defendant and Respondent.

Sunwest Bank (Sunwest) appeals from a postjudgment order that denied its motion for the sale of a dwelling to satisfy a money judgment against Mohammad Mike Rafipoor. Sunwest argues its judgment lien remained valid despite Rafipoors conveyance of the property to a corporation, and it was no defense that Rafipoor held title under a resulting trust for the corporation. We agree on the first point and conclude the trial court did not decide the second, so we reverse and remand for determination of the resulting trust issue.

* * *

Sunwest obtained a judgment against Rafipoor in April 2003. An abstract of judgment was recorded in Orange County on May 20, 2003. Meanwhile, Rafipoor purchased a condominium in Irvine. The deed to Rafipoor, and a deed of trust he executed to secure a loan from Countrywide Home Loans, Inc. (Countrywide), were both recorded on May 27, 2003. Rafipoor conveyed the condominium to OMM Investments, Inc. (OMM) by deed recorded on July 13, 2003. The Rafipoor/OMM conveyance stated that no transfer tax was due, claiming no consideration . . . principal to agent; grantee/grantor are the same parties holding the same proportionate interest. A preliminary title report obtained by Sunwest showed nothing of record that indicated OMM had paid off or assumed the Countrywide loan.

In April 2006, Sunwest moved for an order allowing it to sell the condominium. (We surmise that Sunwest previously had obtained a writ of execution and followed the statutory procedures for levying on real property. The writ is not in the record, but the register of actions in the superior court shows one was issued.)

An accompanying declaration from a Sunwest vice-president recited the facts set out above. It also stated that a search of the relevant records showed no homestead exemption had been recorded on the property. A declaration from Sunwests attorney attached a copy of OMMs registration as a foreign corporation. The registration was obtained from the internet site of the California Secretary of State, and it bears the following legend: This data is for information purposes only. Certification can only be obtained through the Sacramento office of the California Secretary of State. The registration showed OMM to be a Nevada corporation with a Laguna Beach mailing address. Rafipoor was listed as the president and registered agent with a Newport Beach address, and the registered office address was the same one given for Rafipoor.

Both Rafipoor and OMM opposed the motion on two grounds.[1] First, they argued Sunwest could not levy on property owned by OMM, since OMM was neither the judgment debtor nor its alter ego. Second, Rafipoor insisted he never had any interest in the condominium, and he took title only as a trustee under a resulting trust for the benefit of OMM, which paid the purchase price.

An opposing declaration was submitted by Hansen Kamci, OMMs director of operations, CFO, treasurer and secretary. Kamci said OMM was a real estate investment company that had put up the down payment for the condominium using funds raised from investors. None of the money came from Rafipoor. He declared OMM had asked Rafipoor to acquire the property individually in order to qualify for a lower interest rate on the loan needed to finance the purchase, claiming that doing so had saved the company one percentage point on the loan.

To show the source of the down payment, Kamci attached the closing statement for the purchase, OMMs bank statement for the month of closing, and copies of cancelled checks. The closing statement indicated the closing date was May 27, 2005. It showed OMM deposited a down payment of $15,000, Rafipoor deposited a down payment of $165,062.12, and the balance of the purchase price was financed by a loan. The bank statement showed a wire transfer by the bank of $165,062.12 on May 26, 2005, but not to whom it was made. There are two accompanying canceled checks for $15,000 each, both dated May 2, 2005 and payable to Fidelity National Title, the closing agent. Neither check states its purpose. Each bears handwritten numbers at the top that are hard to read, but neither appears to match up with the escrow number shown on the closing statement.

The trial court denied the motion on the ground that Rafipoor did not own the condominium. It explained [i]f the condominium belonged to Rafipoor it could be sold but it does not. Sunwest Bank should move against OMM as alter ego in the original case. . . [or] file a new suit in separate action.

Sunwest argues OMM took title to the property subject to its judgment lien, so it makes no difference that Rafipoor was no longer the owner. It is right.

When a creditor records an abstract of judgment with a county recorder, a judgment lien attaches to all interests in real property within the county that are subject to enforcement of a money judgment. (Code Civ. Proc.,  697.310, subd. (a), 697.340, subd. (a).)[2] After the judgment lien is created, it attaches to any later acquired interest in real property within the county when acquired, provided the interest is one on which a judgment lien may be created. ( 697.310, subd. (b).)

A debtors transfer of real property subject to a judgment lien does not defeat the lien. If an interest in real property that is subject to a judgment lien is transferred . . . without satisfying or extinguishing the judgment lien: [] (a) The interest transferred . . . remains subject to a judgment lien created pursuant to Section 697.310 in the same amount as if the interest had not been transferred . . . . ( 697.390, subd. (a).) Where property is transferred subject to a judgment lien, the money judgment may be enforced against the property in the same manner and to the same extent as if it had not been transferred . . . . ( 695.070, subd. (a).)

In this case, Sunwests May 20, 2003 recording of an abstract created a judgment lien that attached to the condominium later acquired by Rafipoor, who recorded his deed on May 27, 2003. When OMM acquired the property in July 2003, it took title subject to the judgment lien. Sunwest was entitled to enforce its judgment against the property in the hands of OMM.

OMM argues a judgment lien cannot be enforced against the property of a third party. But the argument ignores applicable law, and the flames of the two straw men it sets fire to cannot distract us from applying that law.

First, OMM contends an attachment lien is necessary to reach property in the hands of a third party, without citing any authority. The argument is made sans authority because there is none: It is wrong. The statutory scheme for enforcing a judgment lien does not depend upon an attachment lien.
The second argument is that a judgment lien does not reach the interest of a beneficiary of a trust, and OMM was the beneficiary of a resulting trust by virtue of having put up the money to acquire the property. In this argument, OMM has the law right, but it does not apply to this case.

A judgment lien does not reach the interest of a beneficiary of a trust. ( 697.340, subd. (a).) Rather, a judgment creditors remedy in such a case is a petition to the court having jurisdiction over the trust. ( 709.010.) But these rules apply to a situation not present here where the judgment debtor is the beneficiary of a trust and the creditor seeks to enforce the judgment against the beneficiarys interest in the trust. In this case, Rafipoor is the judgment debtor and he is not a trust beneficiary. Even if OMM is correct that a resulting trust arose, Rafipoor would be the trustee of the trust, not the beneficiary. So the rule that a judgment lien does not reach a beneficiarys interest in a trust has no bearing in this case. OMM acquired the property subject to the judgment lien.

II

Sunwest argues the court could not consider the resulting trust defense, because the only issue on a motion for sale is whether the dwelling is exempt. It is mistaken but that is not the end of the matter. While the issue can be considered, we do not believe it was. The trial court made no finding on the resulting trust defense and there is no indication it considered the question. Since this is a question of fact, we remand to the trial court to make that call in the first instance.

A creditor who seeks to sell the interest of a natural person in a dwelling must apply for an order of sale, which allows the court to determine whether the dwelling is subject to a homestead exemption. ( 704.740, subd. (a).) The application is made after levy on the property. The procedure to be followed is not germane to our decision, so we set it out in a footnote.[3]

On a judgment creditors application for an order of sale, the trial court may determine the debtors interest in the property levied upon (Schoenfeld v. Norberg (1970) 11 Cal.App.3d 755, 761), but it cannot consider whether a transfer after the judgment lien attached was a fraudulent conveyance. (Wells Fargo Bank v. PAL Investments, Inc. (1979) 96 Cal.App.3d 431, 437-438; Blue v. Superior Court (1956) 147 Cal.App.2d 278, 283-284.)

Schoenfeld v. Norberg, supra, 11 Cal.App.3d 755, explains both rules. Norberg obtained a judgment against Schoenfeld, procured a writ of execution, and levied on Schoenfelds residence. Schoenfeld sued to enjoin the sale, claiming the property was protected by the homestead exemption. Schoenfeld also argued the residence was held in joint tenancy with his wife, so only his share was available to satisfy the debt. Norberg contended it was community property and the entire interest was subject to execution to satisfy Schoenfelds debt. The trial court found the exemption was valid, the fair market value of the residence exceeded the exemption and all liens, and ordered a sale. But the court did not decide what interest Schoenfeld had in the residence whether it was a severable cotenancy or community property. (Id. at pp. 759-760.)

The court held it was error not to determine the debtors interest in the property to be sold. Otherwise, any execution sale would be hampered by the inability of any prospective bidder to ascertain what he was to bid on. (Schoenfeld v. Norberg, supra, 11 Cal.App.3d at p. 760.) It distinguished the fraudulent conveyance cases on the ground that a creditor confronting that problem had a choice. Under the fraudulent conveyance statutes, a creditor could challenge a transfer by the debtor by moving to set it aside or levying on the property conveyed. The court reasoned that it made sense to bar the issue on a motion for sale, since the fraudulent conveyance statute would be meaningless if the issue could be decided as well on a motion for sale. But where the issue is whether property held by husband and wife is joint tenancy or community, the trial court may make that determination and specify in the order the interest being sold. [Citation.] (Id. at p. 761.)

Wells Fargo Bank v. PAL Investments, Inc., supra, 96 Cal.App.3d 431, relied on by Sunwest, is distinguishable. It is one of the fraudulent conveyance cases.

After a judgment creditor moved for an order of sale, a third party intervened with a claim that its unrecorded deed of trust had priority over the judgment creditors lien. The court held it was error to decide the deed of trust was a fraudulent conveyance as to the creditor. Wells Fargo acknowledged Schoenfelds distinction, but followed the rule that a fraudulent conveyance claim cannot be heard on a motion for sale. Since there is no fraudulent conveyance claim here, Wells Fargo is inapt.

In the case at hand, the trial court may consider what interest, if any, Rafipoor had in the condominium before making an order for sale. We agree with the distinction made in Schoenfeld, and the courts rationale for allowing determination of a debtors interest in the property applies equally here. If a sale is ordered without deciding the resulting trust defense, the likely impact will be to dampen bidding, since prospective bidders will have no way of knowing what interest Rafipoor has in the property being sold. It may also lead to further litigation, should OMM pursue the resulting trust theory in an action against the purchaser. Both judicial economy and common sense point in the same direction the trial court may determine Rafipoors interest in the condominium prior to ordering a sale.

While the trial court could decide this issue, it did not. The court denied the motion solely on the ground that a creditor cannot levy against property in the hands of a third party. (OMM Investments owns the property not Rafipoor. If the condominium belonged to Rafipoor it could be sold but it does not.) A review of the transcript of the hearing on the motion reveals the court did not rule on the resulting trust defense, believing it did not have to address it. When Sunwest argued the court could not decide the resulting trust issue on a motion for sale, it deflected the point: Im more fundamental than that. . . . You want to sell this condo and there is a judgment against Rafipoor. But Rafipoor doesnt own the condo. OMM owns the condo. . . . If you had a judgment against OMM, wed sell the condo. Later, OMM argued for a resulting trust, but again the trial court declined to address the issue, saying that its tentative ruling was final. So whether to declare Rafipoor took title as trustee under a resulting trust is a matter that remains to be decided, and we must leave that to the trial court.[4]

The order appealed from is reversed, and the matter is remanded with directions to consider OMMs resulting trust defense and determine what interest, if any, Rafipoor had in the dwelling sought to be sold. Appellant is entitled to costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

OLEARY, J.

FYBEL, J.

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Analysis and review provided by Chula Vista Property line attorney.

[1] The opposing papers list OMM as a third party. There is a statutory procedure for levying on real property of a debtor that stands in the name of a third party, set out in the following paragraph. Nothing in the record indicates whether this procedure was followed.

A levy on real property is made when the levying officer records a writ of execution and notice of levy that describes the debtors interest in the property, in the county where the real property is located. If that interest stands in the name of a third party, the notice of levy must so indicate, and the county recorder must index the writ and notice in both names. (Code Civ. Proc.,  700.015, subd. (a).) The levying officer must then serve a copy of the notice and writ on the third party, and on one occupant of the property. (Id.,  700.015, subds. (b), (c).) A third party served with a writ of execution and notice of levy must deliver property within his possession or control to the levying officer unless the third person claims the right to possession of the property. (Code Civ. Proc.,  701.010, subd. (b)(1).)

[2] All subsequent statutory references are to the Code of Civil Procedure.

[3] When a judgment creditor applies for an order of sale of a dwelling, he must state whether the county tax assessors records show a homestead or disabled veterans exemption for the dwelling, whether the dwelling is a homestead, the amount of the exemption, and the existence and amount of all liens on the property. ( 704.760.) At the hearing, the creditor has the burden of proving the dwelling is not exempt if an exemption was recorded, and if not, the debtor bears the burden of proving the dwelling exempt. ( 704.780, subd. (a).) If the court determines the dwelling is exempt, it must determine the amount of the exemption and the fair market value of the property. A sale subject to the homestead exemption must be ordered unless the court finds the sale would not likely yield enough to pay any portion of the creditors judgment. If the court determines the dwelling is notexempt, it must likewise order a sale. ( 704.780, subd. (b).)

[4] Sunwest also contends the evidence is insufficient to establish a resulting trust, and it did not have a reasonable opportunity to conduct discovery on the issue. We leave it to the trial court on remand to decide whether to allow discovery if a proper application is made by Sunwest.