The opinion
Filed 11/16/21 Brown v. Zive CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
CHERIE BROWN, B300415
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC475181)
v.
YOUVAL ZIVE et al.,
Defendants and
Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Malcolm Mackey, Judge. Reversed and
remanded with instructions.
The Zabetian Firm, Arash H. Zabetian; JDR Law Inc. and
John D. Rowell for Plaintiff and Appellant.
Locke Lord, Daniel A. Solitro and Simon M. Feng for
Defendant and Respondent Deutsche Bank National Trust
Company.
Haeri & Zelli and Nedda Haeri for Defendant and
Respondent Adi Perez.
Cherie Brown sued Youval Zive, Vaca Partnership, Pacific
Holdings, Phoenix Realty Investments, LLC (collectively Zive
parties) and others for fraud, quiet title and related claims on
December 13, 2011. On May 8, 2019 the trial court granted a
motion to dismiss pursuant to Code of Civil Procedure
sections 583.310 and 583.360,1 finding Brown had failed to bring
her lawsuit to trial within five years. On appeal Brown argues
the court erred in finding this action was not subject to automatic
stays arising out of the bankruptcy petitions of various
defendants and failing to toll the mandatory five-year period as a
result. We reverse and remand for further proceedings on the
quiet title and fraudulent conveyance causes of action and direct
the trial court to reconsider the motion to dismiss as to the fraud
cause of action.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Real Estate Transaction and Foreclosure
Proceedings
In January 2007 Brown purchased a home on Lankershim
Boulevard in Los Angeles from Vaca Partnership. According to
Brown, Zive, the general partner of Vaca, had assured Brown he
would arrange financing and handle the transaction for her.
Prior to taking title to the property Brown executed an all-
inclusive purchase money promissory note in favor of Zive for
approximately $1 million with an interest rate of “7.2 (Variable)
percent,” which Brown alleged she signed at Zive’s direction. The
promissory note, executed in November 2006, provided for
monthly payments of $3,030 “or more,” a $30,000 principal
1 Statutory references are to this code unless otherwise
stated.
2
payment on December 20, 2006 and a maturity date of
March 1, 2008. The promissory note stated the principal amount
included the balance due on two underlying promissory notes
executed by Zive in favor of Washington Mutual Bank and
secured by deeds of trust encumbering the Lankershim property.
The original amounts of the underlying notes were $980,000 and
$46,142. The promissory note was secured by a deed of trust
encumbering the Lankershim property listing Zive as the
beneficiary. In March 2008 Zive and Brown executed an
addendum to the promissory note extending the maturity date to
March 1, 2010 conditioned upon Brown’s timely payments of
$30,000 to Zive on a specified schedule.
Brown alleges that, prior to 2009, she made payments on
the promissory note by delivering to Zive and his associate Liat
Menahem checks payable to the financial institution lenders on
the underlying notes. Zive assured Brown he was delivering her
payments to those financial institutions. Beginning in 2009,
Brown alleges, Zive did not deliver her payments to the lenders
but instead deposited them in his own bank account.
In early 2011 Zive, through his authorized agent, initiated
nonjudicial foreclosure proceedings against Brown. A notice of
default and election to sell was issued and recorded on
January 25, 2011. The notice directed Brown to contact Pacific
Holdings, of which Zive and Menahem are alleged to be owners
and/or employees, to arrange for payment of the amount due.
Notices of trustee’s sale were recorded on July 1, 2011,
July 5, 2011 and July 14, 2011. On September 7, 2011 Zive
executed an assignment of deed of trust assigning all rights in
the deed of trust to Phoenix Realty Investments LLC.
3
On September 14, 2011 a trustee’s deed upon sale was
recorded. The deed stated the Lankershim property had been
sold at public auction to Phoenix Realty, the successful bidder at
the trustee’s sale. In late September 2011 Phoenix Realty filed
unlawful detainer proceedings to evict Brown from the home.
The verification of the unlawful detainer complaint was signed by
Menahem on behalf of Phoenix Realty.
2. The Complaint and Demurrer
On December 13, 2011 Brown sued the Zive parties,
Menahem and 50 Doe defendants for fraud, wrongful foreclosure
and quiet title.2 The Zive parties and Menahem demurred.
On September 26, 2012 the court sustained the demurrer to
the fraud cause of action without leave to amend against Zive,
Vaca Partnership and Pacific Holdings.3 Leave to amend the
2 The original complaint also named Yoseph Ovadia as a
defendant. He was not included in the operative second amended
complaint.
3 The trial court’s ruling was based, in part, on the fact that
18 months prior to filing her complaint in this action Brown had
sued Zive, Vaca Partnership and Pacific Holdings for fraud,
negligent misrepresentation, failure to disclose seller financing,
legal malpractice and breach of fiduciary duty. The court found
the allegations in the complaint in this action were almost
identical to the allegations in the prior lawsuit and were
therefore barred by section 430.10, subdivision (c).
Brown’s earlier action proceeded to trial in 2013 on the
failure to disclose seller financing cause of action. The jury found
in favor of Brown and awarded her $392,500 in damages. Our
colleagues in Division Five affirmed the judgment but reduced
the damage award to $325,283. The court also reversed the trial
court’s order granting nonsuit on the fraud claim and remanded
4
fraud cause of action was granted as to Menahem and Phoenix
Realty. The demurrer to the wrongful foreclosure cause of action
was sustained against all defendants without leave to amend.
The demurrer to the quiet title cause of action was overruled.
3. The First Amended Complaint and Demurrer
Brown filed her first amended complaint on
October 18, 2012 alleging causes of action for fraud against
Menahem, Phoenix Realty and the Doe defendants and quiet title
against all defendants. On April 18, 2013 the trial court
sustained the Zive parties’ demurrer without leave to amend and
entered an order of dismissal.
4. The Motion To Vacate the Dismissal and Second
Amended Complaint
On August 21, 2013 Brown, representing herself, moved to
vacate the dismissal on the basis of excusable neglect (§ 473,
subd. (b)). The trial court granted the motion on
September 11, 2013 over the defendants’ opposition and granted
leave to Brown to file a second amended complaint.
Brown filed the second amended complaint on October 30,
2013. In addition to the Zive parties and Menahem, Brown
named two additional defendants, Lanker Partnership and
H5 Dev. Partnership. The pleading alleged Zive was the majority
owner and managing general partner of Lanker Partnership.
for retrial on that cause of action. (Brown v. Zive (Apr. 16, 2015,
B250561) [nonpub. opn.] (Brown I).) On remand the fraud cause
of action was tried to a jury, which found in favor of Brown and
awarded $25,000 in damages. Judgment was entered on
December 3, 2018.
5
The fraud and quiet title causes of action in the second
amended complaint remained substantially the same as in
previous iterations of the pleading. Brown alleged generally that
Menahem, Phoenix Realty and the Doe defendants had
committed fraud by conspiring with Zive to misrepresent
material facts concerning the financing and purchase of Brown’s
home; they had assisted one another in foreclosing on the home
with knowledge of the fraudulent transactions; and Phoenix
Realty had acquired title to the home with knowledge of the
fraud perpetrated against Brown.
The quiet title cause of action, brought against all
defendants except Menahem, alleged Brown was the equitable
owner of the property, the trustee’s deed upon sale purporting to
transfer the property to Phoenix Realty was void and the
defendants had no legal or equitable rights to the property.
The fraudulent transfer cause of action, alleged against
Zive, Vaca Partnership, Menahem, Phoenix Realty, Lanker
Partnership and H5 Dev., contained allegations not included in
prior pleadings. Brown alleged a series of three fraudulent
transfers: First, she alleged Zive had assigned his interest in the
promissory note to Phoenix Realty for no consideration and
caused Phoenix Realty to purchase Brown’s home at the
foreclosure sale in an effort to prevent any interest in the
property from being used to satisfy any judgment Brown might
obtain in Brown I.4 Second, after the jury verdict in Brown’s
favor in Brown I, but before judgment had been entered, Phoenix
Realty transferred the property to Lanker Partnership without
4 As discussed, the complaint in Brown I was filed in
June 2010 and the assignment to Phoenix Realty and subsequent
foreclosure sale took place in September 2011.
6
consideration to prevent the property from being used to satisfy
the forthcoming judgment.5 Third, after judgment was entered in
Brown I, Lanker Partnership transferred the property without
consideration to H5 Dev. to further hinder Brown’s collection
efforts.6
The Zive parties and Menahem demurred to the second
amended complaint on December 3, 2013, and Brown filed an
opposition on April 10, 2014. The trial court overruled the
demurrer on April 23, 2014.
5. The Intervening Bankruptcies 7
a. The Zive bankruptcy proceedings
On February 24, 2014, while the Zive parties’ demurrer to
the second amended complaint was pending, Zive filed a
voluntary petition for relief under Chapter 13 of the United
States Bankruptcy Code (Chapter 13). Zive filed a request for
voluntary dismissal on April 9, 2014, and the case was dismissed
on April 14, 2014. It does not appear that notice of the
5 The jury returned its verdict in Brown I in early May 2013.
The transfer of the property from Phoenix Realty to Lanker
Partnership took place on May 21, 2013. Judgment was entered
in Brown I on June 13, 2013.
6 The record does not contain information regarding the date
of the alleged transfer to H5 Dev. However, as is crucial to the
issues on appeal, it is undisputed Lanker Partnership owned the
property as of the filing of its bankruptcy petition in 2015.
7 Deutsche Bank requested we take judicial notice of
five documents filed in the Zive, Vaca Partnership and
Lanker Partnership bankruptcy proceedings. Because those
documents are either already in the record and/or are not
necessary to our resolution of the appeal, we deny the request.
7
bankruptcy proceeding was filed in this action;8 nevertheless, no
documents were filed in this case between the filing of Zive’s
bankruptcy petition and the request for dismissal.
Zive filed a second voluntary petition for relief under
Chapter 13 on November 13, 2014 and filed a notice of the
resulting automatic stay in these proceedings on
December 19, 2014. The bankruptcy petition was dismissed on
February 6, 2015 after Zive failed to appear at a meeting with
creditors.
b. The Lanker Partnership bankruptcy proceeding
On July 12, 2015 Lanker Partnership filed a voluntary
petition for relief under Chapter 11 of the United States
Bankruptcy Code (Chapter 11). The schedules filed in the
bankruptcy proceeding identified the Lankershim property as
property of Lanker Partnership.
On August 10, 2016 Brown, again represented by counsel,
filed a notice of bankruptcy and automatic stay in this action
informing the trial court of Lanker Partnership’s bankruptcy
proceeding and its claimed interest in the Lankershim property.
The docket reflects that, on August 16, 2016, this action was
placed on “special status” for a “Bankruptcy Stay.”
On October 20, 2017 Brown filed a document titled “Notice
that Action Remains Stayed,” informing the court that “the
bankruptcy stay with respect to defendant Lanker Partnership
remains in effect and this matter remains stayed.”
On October 24, 2017 counsel for the Zive parties sent a
letter to Brown’s counsel stating, “The bankruptcy of Lanker is
8 A notice of Zive’s bankruptcy filing and resulting automatic
stay of proceedings was filed in Brown I.
8
still ‘pending,’ therefore, the automatic stay prevents the court
from taking further action (other than continuances). [¶] Please
confirm that this is your understanding of the nature of the case.”
Two days later the Zive parties filed a document titled “Notice of
Bankruptcy Pending,” in which they informed the trial court,
“[T]he related bankruptcy action of Lanker Partnership . . . is
still pending” and, as a result, requested the trial court continue
trial in this matter for at least six months.
On June 7, 2018 the bankruptcy court granted Lanker
Partnership’s motion to dismiss its bankruptcy proceeding and
dismissed the action.
On July 10, 2018 Brown filed an ex parte application to
continue the trial date in this case to allow for discovery she had
been unable to conduct while the bankruptcy stays were in effect.
Brown stated, “This matter has been repeatedly stayed as a
result of . . . Youval Zive filing two petitions for bankruptcy, as
well as bankruptcy filings by Lanker Partners[ship] . . . .”
The docket reflects the special status due to the bankruptcy
stay was extinguished on August 3, 2018.
c. The Vaca Partnership bankruptcy proceeding
On January 11, 2018, while the Lanker Partnership
bankruptcy proceeding was ongoing, Vaca Partnership filed a
voluntary petition for relief under Chapter 11. The bankruptcy
court granted the trustee’s motion to dismiss the petition, and the
case was dismissed on March 5, 2018.
6. Amendments To Substitute Doe Defendants
On August 7, 2015 Brown filed form amendments to the
complaint substituting Deutsche Bank National Trust Company,
9
Adi Perez and Erik Imas in place of three Doe defendants.9 Perez
and Imas are the owners of Lanker Partnership. Deutsche Bank
appears to be the successor in interest to the holder of one of the
notes executed by Zive and secured by the Lankershim property.
7. The Motion To Dismiss
On April 3, 2019 the Zive parties moved to dismiss this
action pursuant to sections 583.310 and 583.360 on the ground
Brown had failed to bring the lawsuit to trial within five years,
even as extended by the Zive and Vaca Partnership bankruptcies.
The Zive parties argued the Lanker Partnership bankruptcy did
not toll the five-year deadline because the second amended
complaint named “Lanker Partners” as a defendant rather than
Lanker Partnership. Further, even if Lanker Partnership had
been a party to the action, the Zive parties argued, any stay
resulting from that bankruptcy proceeding would apply only to
the bankruptcy debtor and not to the other defendants.
On April 16, 2019 Deutsche Bank filed a notice of joinder in
the motion to dismiss. Perez also joined in the motion during the
hearing on May 8, 2019.
After hearing argument the trial court granted the motion
to dismiss the case, agreeing with the Zive parties, Deutsche
Bank and Perez’s position that the “bankruptcy stays only tolled
the five-year period as to the bankrupt parties, and there was a
9 Brown also filed a form amendment substituting Quality
Loan Service Corporation in place of a Doe defendant. Quality
Loan filed a declaration of nonmonetary status pursuant to Civil
Code section 2924l, stating it had been named solely in its
capacity as trustee and not due to any acts or omissions on its
part. Brown did not object to the declaration, and it appears
Quality Loan Service has not participated in the litigation.
10
possibility of trial as to codefendants, during the five-year period
limit to get to trial.” The court dismissed the complaint with
prejudice in its entirety. An order of dismissal was entered on
May 16, 2019 and a judgment on July 2, 2019.
8. Brown’s Motion for Reconsideration
On June 3, 2019, before judgment had been entered, Brown
filed a motion for reconsideration pursuant to section 1008,
arguing she had learned after the motion to dismiss hearing that
Lanker Partnership had purportedly transferred the Lankershim
property in April 2019. Brown also argued the five-year limit for
the claims against Deutsche Bank and Perez did not begin to run
until they were added by amendment to the complaint. Brown
argued she had not been able to raise this issue in her opposition
to the motion to dismiss because the joinders by Deutsche Bank
and Perez had not put her on notice of their position.
The Zive parties, Deutsche Bank and Perez 10 opposed the
motion for reconsideration, arguing Brown had failed to present
any new or different facts that could not have been submitted
prior to the court’s ruling, nor would the purportedly new facts
necessitate a different outcome.
The motion for reconsideration was denied on
August 29, 2019.
10 In his declaration in support of his opposition, Perez stated,
“Soon after I was named as a defendant in this action, the matter
was stayed due to a Chapter 11 Bankruptcy filling [sic] around
the middle of 2016. The Chapter 11 Bankruptcy was dismissed
on June 7, 2018.”
11
DISCUSSION
1. Sections 583.310 and 583.340 and the Standard of
Review
Section 583.310 provides, “An action shall be brought to
trial within five years after the action is commenced against the
defendant.” In computing the five-year period within which an
action must be brought to trial, however, “there shall be excluded
the time during which any of the following conditions existed: [¶]
(a) The jurisdiction of the court to try the action was suspended.
[¶] (b) Prosecution or trial of the action was stayed or enjoined.
[¶] (c) Bringing the action to trial, for any other reason, was
impossible, impracticable, or futile.” (§ 583.340.) Dismissal is
mandatory if the requirements of section 583.310 are not met and
an exception provided by statute does not apply. (§ 583.360,
subd. (b); Gaines v. Fidelity National Title Ins. Co. (2016)
62 Cal.4th 1081, 1090 (Gaines); see McDonough Power
Equipment Co. v. Superior Court (1972) 8 Cal.3d 527, 530.)
“[I]in construing these provisions the policy favoring trial
or other resolution on the merits is generally to be preferred over
the policy requiring dismissal for failure to prosecute.” (Dowling
v. Farmers Ins. Exchange (2012) 208 Cal.App.4th 685, 693; see
§ 583.130 [“the policy favoring trial or other disposition of an
action on the merits [is] generally to be preferred over the policy
that requires dismissal for failure to proceed with reasonable
diligence in the prosecution of an action in construing the
provisions of this chapter”].) Accordingly, the tolling provisions of
section 583.340 must be liberally construed. (Dowling, at p. 693.)
The interpretation of section 583.340 and any relevant
federal bankruptcy statutes are questions of law, which we
review de novo. (See Gaines, supra, 62 Cal.4th at p. 1100 [trial
12
court’s conclusions of law in applying section 583.340 are
reviewed de novo]; In re Marriage of Vaughn (2018)
29 Cal.App.5th 451, 455-456 [interpretation of federal
bankruptcy statutes is a question of law subject to independent
review]; Tanguilig v. Neiman Marcus Group, Inc. (2018)
22 Cal.App.5th 313, 324 [trial court’s interpretation of
section 583.340 is reviewed de novo].) To the extent the trial
court’s order is based on its evaluation of factual matters relating
to whether the prosecution of the action was impossible,
impracticable or futile under section 583.340, subdivision (c), we
review that ruling for abuse of discretion. (See Gaines, at
p. 1100; Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th
717, 731 (Bruns).)
2. The Trial Court Erred in Dismissing the Quiet Title and
Fraudulent Conveyance Causes of Action
a. Relevant federal bankruptcy law
“Upon the filing of a bankruptcy proceeding, federal
bankruptcy law imposes an automatic stay on all state and
federal proceedings outside the bankruptcy court against the
debtor and the debtor’s property. [Citations.]” “‘The automatic
stay is self-executing and is effective upon filing the bankruptcy
petition. [Citation.]’ [Citation.] Section 362(a)(3) of title 11 of
the United States Code provides for an automatic stay of ‘any act
to obtain possession of property of the estate or of property from
the estate or to exercise control over property of the estate.’”
(Shaoxing County Huayue Import & Export v. Bhaumik (2011)
191 Cal.App.4th 1189, 1196; accord, Kertesz v. Ostrovsky (2004)
115 Cal.App.4th 369, 373 [section 362(a) “stays a wide range of
actions that would affect or interfere with property of the estate,
property of the debtor or property in the custody of the estate”].)
13
“‘Section 362 is “extremely broad in scope” and “should apply to
almost any type of formal or informal action against the debtor or
the property of the estate.”’” (Kertesz, at p. 374.)
“The purpose of the automatic stay ‘“is to give the debtor a
breathing spell from his creditors, to stop all collection efforts,
harassment and foreclosure actions. [Citations.] The automatic
stay also prevents piecemeal diminution of the debtor’s estate.”’”
(Cavanagh v. California Unemployment Ins. Appeals Bd. (2004)
118 Cal.App.4th 83, 90; accord, In re Levine (C.D.Cal. 2018)
583 B.R. 231, 235 [“the automatic stay helps ensure the orderly
distribution of estate property in a way that will maximize the
benefit to creditors”].)
b. The Lanker Partnership bankruptcy stayed the quiet
title and fraudulent conveyance causes of action
The parties dispute whether the automatic stay triggered
by the Lanker Partnership bankruptcy applied to the other
defendants in this lawsuit and, therefore, whether the time the
stay was in place should have been excluded from the trial court’s
calculation of the five-year period under section 583.340,
subdivision (b).
Absent any extensions or exclusions, the five-year period in
which Brown was required to proceed to trial terminated on
December 13, 2016. However, the period after the case had been
dismissed and before the trial court vacated that dismissal
(146 days)11 must be excluded, as it was impossible for Brown to
11 The order of dismissal was entered on April 18, 2013, and
the motion to vacate the dismissal was granted on
September 11, 2013.
14
have proceeded during that time.12 That exclusion extended the
expiration of the five-year period to May 8, 2017.
The Lanker Partnership bankruptcy proceeding was filed
on July 12, 2015 and dismissed on June 7, 2018, resulting in an
automatic stay of 1,061 days. If the Lanker Partnership
bankruptcy stayed this action, as Brown contends, the resulting
expiration of the five-year period for Brown to bring the case to
trial concluded on April 3, 2020, making the dismissal under
section 583.310 almost one year premature.13
The trial court’s finding the Lanker Partnership
bankruptcy stay did not apply here was based solely on its
determination the bankruptcy stay applied to actions against the
debtor only and not to actions against the non-debtor
12 Deutsche Bank and Perez do not directly address Brown’s
argument the time between the case’s dismissal and
reinstatement must be excluded from the five-year period’s
calculation. Given that the dismissal ended the litigation (at
least temporarily), there can be no reasonable argument against
excluding that time pursuant to section 583.340, subdivision (c).
(See Howard v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th
424, 438 [“there are some circumstances in which it can be said
almost invariably that [tolling for impossibility] applies. Such is
the case when a default judgment has been entered in favor of
the plaintiff, effectively bringing the litigation to a standstill”].)
13 Given our conclusion the Lanker Partnership bankruptcy
stay applied to the quiet title and fraudulent conveyance causes
of action and is dispositive in determining the issue on appeal as
to those claims, we need not determine whether or to what extent
the Zive and Vaca Partnership bankruptcy stays may have also
extended the five-year period.
15
codefendants.14 The trial court was correct that “the general rule
is that bankruptcy stays only toll the five-year period as to the
bankrupt.” (Santa Monica Hospital Medical Center v. Superior
Court (1988) 203 Cal.App.3d 1026, 1036.) However, the plain
language of the statute is broader than the general rule might
suggest: The automatic stay applies to all actions against or
seeking possession of debtor property. (See 11 U.S.C. § 362(a)(2)
& (3).) This is true for lawsuits against non-debtor defendants,
even those in which the debtor is not a party. (See In re Levine,
supra, 583 B.R. at p. 237 [automatic bankruptcy stay applied to
bank’s action against non-debtor where debtor had interest in
real property sought by bank; “Bank cannot take enforcement
actions against the Real Properties without also affecting the
bankruptcy estate’s property rights. Accordingly, the Real
Properties fall entirely within the scope of the automatic stay”];
In re Franco (Bankr. D.N.M. 2017) 574 B.R. 730, 740 [action
seeking to quiet title in mineral rights against debtor and others
was subject to automatic stay]; In re Saint Vincents Catholic
Medical Centers of New York (S.D.N.Y. 2011) 449 B.R. 209, 217
[“the automatic stay provision is not limited solely to actions
against the debtor, but rather bars actions . . . even against third-
parties that would have an adverse impact on the property of the
estate”].)
Here, Brown’s quiet title cause of action alleged, “[N]one of
the defendants . . . had any right to title or interest in the subject
14 Even presuming this analysis were correct, it is not clear
on what basis the claims against Lanker Partnership could have
been dismissed pursuant to section 583.310 given that the trial
court appeared to agree the action had been stayed as to Lanker
Partnership.
16
property and no right to entertain any rights of ownership” and
sought “a judicial declaration that the title to the Property is
vested in plaintiff alone.” The fraudulent conveyance cause of
action alleged Lanker Partnership had received the property as
part of a scheme to hinder Brown from collecting on a judgment
and sought “[a]voidance of the purported transfers of the
Property to [Phoenix Realty and Lanker Partnership] and H5,”
an “injunction against further disposition of the Property or its
proceeds,” and that Brown “be allowed to levy execution of the
judgment in [Brown I] on the Property.” Given that Lanker
Partnership listed the Lankershim property as an asset in its
bankruptcy filings, there can be no doubt these two causes of
action fall squarely within the Bankruptcy Code’s prohibition of
proceedings against, or to obtain possession of, a debtor’s
property.15 In fact, none of the defendants objected to Brown’s
repeated filings from 2016 to 2018 informing the trial court this
action was stayed in its entirety due to the Lanker Partnership’s
15 As discussed, neither Deutsche Bank nor Perez addressed
the bankruptcy stay’s applicability to actions involving the
debtor’s property, but they instead focus their arguments on the
improbable claim Lanker Partnership is not a defendant in the
action because it was not correctly named in the caption of the
second amended complaint (although it was properly identified in
the body of the pleading) and because Brown did not have the
trial court’s permission to add a new party to the second amended
complaint (although the court rejected that argument in ruling on
the demurrer to the second amended complaint). Regardless,
whether Lanker Partnership is a party to the proceeding is not
relevant to the analysis whether the action is stayed because it
seeks property of a bankruptcy estate. (See In re Levine, supra,
583 B.R. at p. 237.)
17
bankruptcy proceeding, and the Zive parties’ attorney recognized
the stay in a letter to counsel and subsequent filing in 2017.
Even Perez’s declaration submitted in 2019 recognized the
matter had been stayed.16 Accordingly, the automatic
bankruptcy stay applied to those causes of action and the length
of time the stay was in effect should have been excluded by the
trial court from its calculation of the five-year period in which
Brown was required to bring the case to trial.
3. Remand Is Necessary for the Trial Court To Reconsider
the Motion To Dismiss Regarding the Fraud Cause of
Action17
a. Section 583.340, subdivision (c)
“Under 583.340(c), the trial court must determine what is
impossible, impracticable, or futile ‘in light of all the
16 While Brown did not argue estoppel in opposition to the
motion to dismiss or on appeal, the defendants’ apparent prior
recognition of the automatic stay certainly undermines their
arguments in favor of dismissal.
17 The record reflects the second amended complaint alleged
fraud against Menahem, Phoenix Realty and the Doe defendants,
which includes Deutsche Bank and Perez because they were
substituted for Doe defendants. The demurrer to the second
amended complaint was overruled. In the appellant’s opening
brief Brown states the fraud cause of action was alleged against
only Menahem and Phoenix Realty. During oral argument,
Brown’s counsel stated the fraud claim was no longer at issue in
the case. The dismissal pursuant to section 583.310 refers to the
second amended complaint in its entirety and does not
distinguish among the causes of action. If in fact the fraud cause
of action has been eliminated, the trial court will have no need to
reconsider the motion to dismiss on remand.
18
circumstances in the individual case, including the acts and
conduct of the parties and the nature of the proceedings
themselves. [Citations.] The critical factor in applying these
exceptions to a given factual situation is whether the plaintiff
exercised reasonable diligence in prosecuting his or her case.’
[Citations.] A plaintiff’s reasonable diligence alone does not
preclude involuntary dismissal; it is simply one factor for
assessing the existing exceptions of impossibility,
impracticability, or futility. [Citation.]” “Determining whether
the subdivision (c) exception applies requires a fact-sensitive
inquiry and depends ‘on the obstacles faced by the plaintiff in
prosecuting the action and the plaintiff’s exercise of reasonable
diligence in overcoming those obstacles.’ [Citation.]
‘“[I]mpracticability and futility” involve a determination of
“‘excessive and unreasonable difficulty or expense,’” in light of all
the circumstances of a particular case.’” (Bruns, supra,
51 Cal.4th at pp. 730-731; see also Howard v. Thrifty Drug &
Discount Stores (1995) 10 Cal.4th 424, 438.)
In determining whether a cause of action is impossible,
impracticable or futile the trial court must consider “a great
variety of factors, including, among others, the expense,
complexity, and quantity of the evidentiary duplication that
severance would entail, the potential problems that inconsistent
judicial determinations would produce, and the degree of
hardship or prejudice to the defendants occasioned by the delay.”
(Brunzell Constr. Co. v. Wagner (1970) 2 Cal.3d 545, 554, fns.
omitted; accord, Dowling v. Farmers Ins. Exchange, supra,
208 Cal.App.4th at p. 698.)
“The plaintiff bears the burden of proving the
circumstances justifying application of section 583.340,
19
subdivision (c)’s exception for impossibility, impracticability or
futility.” (Martinez v. Landry’s Restaurants, Inc. (2018)
26 Cal.App.5th 783, 794; accord, Bruns, supra, 51 Cal.4th at
p. 731.) “[A] condition of impossibility, impracticability, or
futility need not take the plaintiff beyond the five-year deadline
to be excluded; it will be excluded even if the plaintiff has a
reasonable time remaining after the period to bring the case to
trial.” (Gaines, supra, 62 Cal.4th at p. 1101.) However, the
plaintiff must establish a causal connection between the claimed
circumstances of impracticability and the failure to proceed to
trial. (Ibid.; see De Santiago v. D & G Plumbing, Inc. (2007)
155 Cal.App.4th 365, 372; Tamburina v. Combined Ins. Co. of
America (2007) 147 Cal.App.4th 323, 328.)
“‘The question of impossibility, impracticability, or futility
is best resolved by the trial court, which “is in the most
advantageous position to evaluate these diverse factual matters
in the first instance.”’” (Gaines, supra, 62 Cal.4th at p. 1100 &
fn. 8.) Accordingly, as discussed, we review for an abuse of
discretion the trial court’s determination not to exclude periods
during which plaintiff contends it was impossible, impracticable
or futile to bring the action to trial within the meaning of
section 583.340, subdivision (c). (Gaines, at p. 1100 & fn. 8.)
b. The trial court erred by failing to consider the
potential impact of the Lanker Partnership bankruptcy
on the fraud cause of action
To reiterate, in the second amended complaint Brown
alleged generally that Menahem, Phoenix Realty, Deutsche Bank
and Perez committed fraud by misrepresenting material facts in
connection with Brown’s purchase of the Lankershim property
and then foreclosed on the property with knowledge of the
20
fraudulent transaction. As a result, Brown alleged, she suffered
economic and noneconomic damages and sought compensatory
and punitive damages. Accordingly, the fraud cause of action did
not directly seek possession of the Lankershim property and
therefore was not subject to the automatic stay triggered by the
Lanker Partnership bankruptcy. The trial court did not err in
failing to exclude the Lanker Partnership bankruptcy stay from
its calculation of the five-year period pursuant to section 583.340,
subdivision (b), in relation to the fraud claim.
However, this does not end the analysis. “A circumstance
that does not qualify for automatic tolling under
section 583.340(b) may nonetheless be excludable from the
five-year period if the circumstance makes it ‘impossible,
impracticable, or futile’ to bring the action to trial.” (Gaines,
supra, 62 Cal.4th at p. 1100.) Brown argues, albeit in a
conclusory fashion, that it would have been impracticable to try
any of her claims against the defendants while Lanker
Partnership claimed title to the property in its ongoing
bankruptcy proceeding.
Because the trial court found as a matter of law that the
bankruptcy stay did not apply, it failed to consider whether
section 583.340, subdivision (c)’s exception for impracticability
applied to a separate trial on the fraud cause of action due to
duplicative expenses and possibly inconsistent legal rulings or
factual findings. It is appropriate for the trial court to consider
those issues in the first instance.18 (See Dowling v. Farmers Ins.
18 Because we reverse on the quiet title and fraudulent
conveyance causes of action and remand for the trial court to
reconsider the motion to dismiss as to the fraud cause of action,
21
Exchange, supra, 208 Cal.App.4th at p. 699 [remanding for trial
court to “exercise its discretion by deciding whether the
particular circumstances of this case, common legal questions
and practical realities made it impracticable or futile to bring this
case to trial”].)
DISPOSITION
The judgment and order granting the motion to dismiss are
reversed, and the cause remanded with directions to enter a new
order denying the motion to dismiss as to the causes of action for
quiet title and fraudulent conveyance, to reconsider the motion as
to the cause of action for fraud and for further proceedings not
inconsistent with this opinion. Brown is to recover her costs on
appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
we need not reach Brown’s argument the court erred in denying
her motion for reconsideration.
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